Watermelon Research and Promotion Plan; Increased Assessment Rate

• Published date: 09 July 2024
• Citation: 89 FR 56234
• Pages: 56234-56237
• FR Document: 2024-14937
• Section: Proposed rules
• Issuer: Agricultural Marketing Service,Agriculture Department

Federal Register, Volume 89 Issue 131 (Tuesday, July 9, 2024)

[Federal Register Volume 89, Number 131 (Tuesday, July 9, 2024)]
                [Proposed Rules]
                [Pages 56234-56237]
                From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
                [FR Doc No: 2024-14937]
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                Proposed Rules Federal Register
                ________________________________________________________________________
                This section of the FEDERAL REGISTER contains notices to the public of
                the proposed issuance of rules and regulations. The purpose of these
                notices is to give interested persons an opportunity to participate in
                the rule making prior to the adoption of the final rules.
                ========================================================================
                Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 /
                Proposed Rules
                [[Page 56234]]
                DEPARTMENT OF AGRICULTURE
                Agricultural Marketing Service
                7 CFR Part 1210
                [Doc. No. AMS-SC-24-0020]
                Watermelon Research and Promotion Plan; Increased Assessment Rate
                AGENCY: Agricultural Marketing Service, USDA.
                ACTION: Proposed rule.
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                SUMMARY: This proposed rulemaking would implement a recommendation from
                the National Watermelon Promotion Board to increase the assessment rate
                from six cents per hundredweight to nine cents per hundredweight.
                Domestic watermelon producers of 10 acres or more and domestic first
                handlers of watermelons would each pay four and a half cents per
                hundredweight, and importers of 150,000 pounds or more annually of
                watermelons would pay nine cents per hundredweight. This proposed
                rulemaking would also amend current regulatory language to correct non-
                substantive and typographical errors.
                DATES: Comments must be received by August 8, 2024.
                ADDRESSES: Interested persons are invited to submit written comments
                concerning this proposed rulemaking. Comments may be mailed to the
                Docket Clerk, Market Development Division, Specialty Crops Program,
                Agricultural Marketing Service, U.S. Department of Agriculture, 1400
                Independence Avenue SW, Room 1406-S, STOP 0244, Washington, DC 20250-
                0237; submitted by Email: SM.USDA.MRP.AMS .[email protected]; or via
                internet at https://www.regulations.gov. Comments should reference the
                document number and the date and page number of this issue of the
                Federal Register. Comments submitted in response to this proposed
                rulemaking will be included in the record and will be made available to
                the public and can be viewed at: https://www.regulations.gov. Please be
                advised that the identity of the individuals or entities submitting the
                comments will be made public on the internet at the address provided
                above.
                FOR FURTHER INFORMATION CONTACT: William Hodges, Marketing Specialist,
                Market Development Division, Specialty Crops Program, AMS, USDA, 1400
                Independence Avenue SW, Room 1406-S, STOP 0244, Washington, DC 20250-
                0244; Telephone: (443) 571-8456; or Email: [email protected].
                SUPPLEMENTARY INFORMATION: This proposed rulemaking affecting the
                Watermelon Research and Promotion Plan (7 CFR part 1210) (Plan) is
                authorized by the Watermelon Research and Promotion Act (7 U.S.C. 4901-
                4916) (Act).
                Executive Orders 12866, 13563 and 14094 The Agricultural Marketing Service (AMS) is issuing this proposed
                rulemaking in conformance with Executive Orders 12866, 13563, and
                14094. Executive Orders 12866 and 13563 direct agencies to assess all
                costs and benefits of available regulatory alternatives and, if
                regulation is necessary, to select regulatory approaches that maximize
                net benefits (including potential economic, environmental, public
                health and safety effects, distributive impacts, and equity). Executive
                Order 13563 emphasizes the importance of quantifying both costs and
                benefits, reducing costs, harmonizing rules, and promoting flexibility.
                Executive Order 14094 reaffirms, supplements, and updates Executive
                Order 12866 and further directs agencies to solicit and consider input
                from a wide range of affected and interested parties through a variety
                of means. This proposed rulemaking is not a significant regulatory
                action within the meaning of Executive Order 12866. Accordingly, this
                action has not been reviewed by the Office of Management and Budget
                under sec. 6 of the Executive order.
                Executive Order 13175 This proposed action has been reviewed in accordance with the
                requirements of Executive Order 13175, Consultation and Coordination
                with Indian Tribal Governments, which requires agencies to consider
                whether their rulemaking actions would have Tribal implications. AMS
                has determined that this proposed rulemaking is unlikely to have
                substantial direct effects on one or more Indian Tribes, or the
                relationship between the Federal Government and Indian Tribes, or on
                the distribution of power and responsibilities between the Federal
                Government and Indian Tribes.
                Executive Order 12988 This proposal has been reviewed under Executive Order 12988, Civil
                Justice Reform. It is not intended to have retroactive effect. The Act
                provides that it shall not affect or preempt any other Federal or State
                law authorizing promotion or research relating to an agricultural
                commodity. Under sec. 1650 of the Act (7 U.S.C. 4909), a person may file a
                written petition with the Secretary of Agriculture (Secretary) if they
                believe that the Plan, any provision of the Plan, or any obligation
                imposed in connection with the Plan, is not in accordance with the law.
                In any petition, the person may request a modification of the Plan or
                an exemption from the Plan. The petitioner will have the opportunity
                for a hearing on the petition. Afterwards, an Administrative Law Judge
                (ALJ) will issue a decision. If the petitioner disagrees with the ALJ's
                ruling, the petitioner has 30 days to appeal to the Judicial Officer,
                who will issue a ruling on behalf of the Secretary. If the petitioner
                disagrees with the Secretary's ruling, the petitioner may file, within
                20 days, an appeal in the U.S. District Court for the district where
                the petitioner resides or conducts business.
                Background Under the Plan, the National Watermelon Promotion Board (Board)
                administers a nationally coordinated program of research, development,
                advertising, and promotion designed to strengthen the position of
                watermelons in the marketplace, and to establish, maintain, and expand
                markets for watermelons. To administer the program, Sec. Sec. 1210.328
                and 1210.341 of the Plan authorize the Board, with the approval of AMS,
                to formulate an annual budget of expenses and collect assessments on
                domestic producers growing 10 acres or more of watermelons, domestic
                first handlers of watermelons, and importers of 150,000 or more pounds
                of watermelons per year. The Board is familiar with both the
                [[Page 56235]]
                program's needs and the rising costs of research and promotion
                initiatives and are able to formulate an appropriate budget and
                assessment rate. Currently, in accordance with the Plan, domestic watermelon
                producers of 10 acres or more and domestic first handlers of
                watermelons each pay three cents per hundredweight, and importers of
                150,000 pounds or more annually of watermelons pay six cents per
                hundredweight. The Plan specifies that handlers are responsible for
                collecting and submitting both the producer and handler assessments to
                the Board, reporting their handling of watermelons, and maintaining
                records necessary to verify their reporting(s). Importers are
                responsible for payment of assessments to the Board on watermelons
                imported into the United States through the U.S. Customs Service and
                Border Protection. The current assessment rate for watermelon
                producers, handlers, and importers was established in 2008. The Board recommended increasing the current assessment rate to
                address inflation's impact on buying power while maintaining its
                competitiveness in the marketplace.
                Board Recommendation To Adjust the Assessment Rate This proposed rulemaking would amend Sec. 1210.515 of the Plan by
                increasing the assessment rate from six cents per hundredweight to nine
                cents per hundredweight. The assessment on domestic watermelon
                producers of 10 acres or more and domestic first handlers of
                watermelons would increase from three cents per hundredweight to four
                and a half cents per hundredweight, and the assessment on importers of
                150,000 pounds or more annually of watermelons would increase from six
                cents per hundredweight to nine cents per hundredweight. The Board discussed this recommendation over several months at
                various State and regional watermelon association meetings in addition
                to presenting at a public town hall meeting on February 23, 2024, at
                the National Watermelon Association's (NWA) annual convention. The
                Board sent out postcards to all industry contacts in their database to
                invite them to the NWA town hall meeting and provide information on the
                proposed assessment increase. The Board met on February 24, 2024, and
                voted unanimously to propose the assessment increase from six cents to
                nine cents per hundredweight of watermelons. Board members present for
                the vote represented domestic producers and first handlers, as well as
                importers. From 2008 to 2023, according to the Board, the United States
                experienced inflation of 43.7%, which equates to 2.3% when compounded
                annually. This dollar devaluation translates to a loss in buying power
                of roughly 30% since the previous assessment increase was instituted in
                2008. The erosion of buying power and continued inflationary pressure
                on funds limit the Board's research and promotion activities. The
                proposed change would further support the Board's goal of a balanced
                budget beginning in 2025, while still allowing for increased research
                and promotion of watermelon across the Board's communication,
                marketing, foodservice, and research committees. Section 1210.341 of the Plan states, in part, that in the case of
                an importer, the assessment shall be equal to the combined rate for
                domestic producers and handlers and shall be paid by the importer at
                the time of entry of the watermelons into the United States.
                Accordingly, with the proposed increased assessment rate of nine cents
                per hundredweight, domestic watermelon producers of 10 acres or more
                and domestic first handlers of watermelons would each pay four and a
                half cents per hundredweight, and importers of 150,000 pounds or more
                annually of watermelons would pay nine cents per hundredweight. This
                proposed increase is consistent with sec. 1647(f) of the Act that
                permits changes in the assessment rate through notice and comment
                procedures. Section 1210.341(b) of the Plan states that assessment
                rates shall be fixed by the Secretary in accordance with sec. 1647(f)
                of the Act. Further, not more than one assessment on a producer,
                handler, or importer may be collected on any lot of watermelons.
                Accordingly, if this proposed rulemaking was finalized, Sec.
                1210.515(a) of the Plan would be revised to reflect the recommendation
                of the Board as it relates to assessments.
                Amend Current Regulatory Language This proposed rulemaking also includes proposed changes to Sec.
                1210.515(b) of the Plan to amend language and make non-substantive
                corrections to the text. These proposed edits are administrative
                changes and would not have an impact on the assessment rate. The
                proposed edits would: amend the misspelling of ``scheudle'' to
                ``schedule''; amend ``U.S. Customs Service (USCS)'' to ``U.S. Customs
                Service and Border Protection (Customs)''; amend ``USCS'' to
                ``Customs'' and amend ``of any other'' to ``or any other''. The
                proposal would also add clarifying language and amend ``may submit the
                Board'' to ``may submit to the Board''.
                Initial Regulatory Flexibility Act and Paperwork Reduction Act Pursuant to requirements set forth in the Regulatory Flexibility
                Act (RFA) [5 U.S.C. 601 et seq.], AMS has considered the economic
                impact of this action on the small producers, handlers, and importers
                that would be affected by this proposed rulemaking. The purpose of the
                RFA is to fit regulatory action to scale on businesses subject to such
                action so that small businesses will not be disproportionately
                burdened. Domestic producers of less than 10 acres of watermelons are exempt
                from this program. Importers of less than 150,000 pounds of watermelons
                per year are also exempt. According to the Board, there are
                approximately 429 producers, 121 first handlers, and 183 importers who
                are subject to the provisions of the Plan. The Small Business Administration (SBA) defines, in 13 CFR part
                121, small agricultural producers of watermelons as those having annual
                receipts equal to or less than $3.75 million [NAICS code 111219--Other
                Vegetable (except Potato) and Melon Farming] and small agricultural
                service firms (handlers and importers) as those having annual receipts
                equal to or less than $34.0 million [NAICS code -111514--Postharvest
                Crop Activities (except Cotton Ginning)]. Under these definitions, the
                majority of the producers, handlers, and importers that would be
                affected by this proposed rulemaking would be considered small
                entities. This conclusion is based on following computations and data,
                using the current Board assessment rate of six cents per hundredweight. For 2023, National Agricultural Statistics Service (NASS) reported
                a season average producer price per pound of $0.214. The Board
                estimated the Freight on Board (FOB) price to be $0.284 for both
                importers and handlers in 2023. The Board reported that 2023
                assessments received from domestic entities totaled $2.247 million,
                with equal proportions of $1.1235 million coming from producers and
                handlers. Dividing $1.1235 million by half of the current assessment
                rate of $0.06 per hundredweight, as producers and handlers evenly split
                the assessment, yields an estimate of total producer pounds assessed of
                3,745.0 million ($1.1235 million divided by $0.0003 per pound).
                Dividing the total pounds assessed quantity by 429 producers yields an
                average assessed pounds per producer estimate of 8.73 million.
                [[Page 56236]]
                Multiplying the annual assessed pounds per producer estimate of 8.73
                million pounds by the 2023 NASS season average producer price per pound
                of $0.214 yields an average annual watermelon sales receipts per
                producer estimate of $1.87 million. This is well below the SBA small
                producer size threshold of $3.75 million. With an equal proportion of annual domestic assessments coming from
                handlers, the total handler pounds assessed is also 3,745.0 million.
                Dividing total handler pounds assessed by 121 handlers yields an
                average assessed pounds per handler estimate of 30.95 million pounds.
                Multiplying this estimate of annual assessed pounds per handler of
                30.95 million pounds by the season average handler price per pound of
                $0.284, provided by the Board, yields an estimate of average annual
                watermelon sales receipts per handler of $8.79 million. This is well
                below the SBA small handler size threshold of $34.0 million. The Board reported that assessments received from importers totaled
                $1.196 million in 2023. Dividing $1.196 million by the current
                assessment rate of $0.06 per hundredweight ($0.0006 per pound) yields
                an estimate of total importer pounds assessed of 1,993.3 million.
                Dividing the total pounds assessed by the number of importers, 183,
                yields an average assessed pounds per importer estimate of 10.89
                million. Multiplying this estimate of annual assessed pounds per
                importer of 10.89 million pound by the season average importer price
                per pound of $0.284 yields an estimate of average annual watermelon
                sales receipts per importer of $3.09 million. This is well below the
                SBA small importer size threshold of $34.0 million. Assuming normal
                distributions, the majority of producers, handlers, and importers would
                be classified as small businesses according to SBA size standards. Under the current Plan, domestic watermelon producers of 10 acres
                or more and domestic first handlers of watermelon each pay a mandatory
                assessment rate of three cents per hundredweight, and importers of more
                than 150,000 pounds or more annually of watermelons pay an assessment
                of six cents per hundredweight. Assessments under the program are used
                by the Board to finance promotion, research, and educational programs
                designed to increase consumer demand for watermelons in the United
                States and international markets. The six cents per hundredweight
                assessment rate on watermelons became effective when the Plan was
                amended in January 2008, which was the only time that the Board
                increased the assessment rate since the inception of the program in
                1989. The Plan is administered by the Board under the U.S. Department
                of Agriculture (USDA) supervision. According to the Board, additional revenue is required to sustain
                and expand the promotional, research, and communications programs. The
                Board approved the proposed assessment rate increase at its February
                24, 2024, meeting. This proposed increase is consistent with sec.
                1647(f) of the Act that permits changes in the assessment rate through
                notice and comment procedures. Section 1210.341(b) of the Plan states
                that assessment rates shall be fixed by the Secretary in accordance
                with sec. 1647(f) of the Act. Section 1210.515(a) of the Plan currently
                states that an assessment of three cents per hundredweight shall be
                levied on all watermelons produced, and on all watermelons first
                handled for consumption as human food. It also states that an
                assessment of six cents per hundredweight shall be levied on
                watermelons imported into the United States for consumption as human
                food. Further, not more than one assessment on a producer, handler, or
                importer may be collected on any lot of watermelons. Under this
                proposal, Sec. 1210.515(a) of the Plan would be revised to increase
                the assessment rate from six cents to nine cents per hundredweight. The
                proposal would increase the assessment rate of three cents per
                hundredweight to four and a half cents per hundredweight to be levied
                on all watermelons produced, and on all watermelons first handled for
                consumption as human food in the United States and increase the
                assessment rate from six cents to nine cents per hundredweight to be
                levied on all watermelons imported into the United States for ultimate
                consumption as human food. The Board contracted with an independent industry analyst to
                conduct an inflation impact analysis using the Consumer Price Index
                (CPI) published by the U.S. Bureau of Labor Statistics. The base year
                for the analysis was 2008, the year of the last assessment rate
                increase, and the analysis extended through April 2023. The CPI was
                211.080 in January 2008 and 303.363 in April 2023. Dividing 303.363 by
                211.080 yields a ratio of 1.437, or an increase of 43.7 percent. This
                inflation rate equates to 2.3% when compounded annually. Dividing the
                Board's average annual revenue throughout this period of $3,024,721 by
                the CPI change ratio of 1.437 yields a figure of $2,104,601. This
                decline of $920,120 shows the budget's reduced buying power of roughly
                30 percent since the previous assessment increase. This reduction in
                buying power due to inflation has had a significant impact on the
                industry's ability to compete for market share. The cost of media
                services, research programs, promotional opportunities, as well as
                general administrative costs and fees paid to USDA have continually
                risen. USDA's AMS oversight costs were budgeted at $105,000 in 2008,
                compared to $147,000 for 2023. It is AMS policy that all research and
                promotion programs be charged in a fair and equitable manner.
                Assessments collected have not kept pace with these increasing costs.
                Movement and sales of watermelon continue to grow, however, that growth
                has not outpaced the negative effects of inflation. Armada Corporate Intelligence conducted a five-year return on
                investment (ROI) study for the Board from 2017-2021, to determine the
                impact of Board activities on the demand for watermelons. The resultant
                ROI for the Board's promotional endeavors is approximately 19:1, which
                displays that the activities of the Board have a significant positive
                impact on the watermelon industry. For further details, the study is
                located at https://www.watermelon.org/press-releases/watermelon-board-announces-significant-positive-impact-for-watermelon-industry-with-191-roi/. Armada Corporate Intelligence's 2021 econometric analysis is
                aligned with prior economic studies developed for the Board, including
                Dr. Harry Kaiser of Cornell University's 2017 analysis.\1\
                --------------------------------------------------------------------------- \1\ https://www.watermelon.org/wp-content/uploads/2020/01/Econometric-Evaluation.pdf.
                --------------------------------------------------------------------------- With the proposed increase assessment, the financial commitment of
                the US watermelon industry for research and promotion activity would
                increase approximately 50% in current dollars. For example, if we apply
                the proposed assessment increase to 2023, in which collections totaled
                $3,442,105, the increase in assessments collected would have been
                approximately $1,721,053. The Board plans to use the additional funds
                to expand promotion and research activities, maintain operating
                reserves, and to address inflation's impact on buying power. The Board estimates the proposed nine cents per hundredweight
                adjustment to the assessment rate would increase the cost to watermelon
                producers and handlers from $12 per truckload of watermelons to $18 per
                truckload of watermelons each. Similarly, the adjusted assessment rate
                will increase the cost to watermelon importers from $24 a truckload to
                $36 a truckload. This is based on a 40,000-
                [[Page 56237]]
                pound net weight of watermelons per truckload. Prior to its recommendation to increase the assessment rate, the
                Board considered three alternative options. First, the Board considered
                maintaining the current assessment rate of six cents per hundredweight.
                However, with no increase to the assessment rate, the Board determined
                many research and promotion programs would be reduced or eliminated to
                balance the budget. Consequently, the alternative of maintaining the
                current assessment rate was rejected. The second alternative considered by the Board was a two-cent
                increase to the assessment rate, raising the assessment rate from six
                cents per hundredweight to eight cents per hundredweight. This would
                allow the Board to operate with a balanced budget beginning in 2025, in
                addition to increasing investment in Board promotions. However, the
                Board decided against supporting a two-cent increase as inflationary
                pressure may further limit operations of the Board in coming years. The third alternative considered by the Board was a tiered increase
                of the assessment rate with a two-cent increase effective on January 1,
                2025, for a rate of eight cents per hundredweight, and an additional
                one-cent increase effective on January 1, 2026, for a rate of nine
                cents per hundredweight. This option to spread the assessment increase
                over a prolonged period was considered, but the Board ultimately
                decided against this alternative to avoid confusion with concurrent
                annual assessment adjustments. This proposed rulemaking would also include administrative changes
                to Sec. 1210.515(b) of the Plan to correct non-substantive and
                typographical errors. These administrative changes would have no impact
                on the assessment rate. This proposed rulemaking would not impose additional recordkeeping
                requirements on first handlers, producers, or importers of watermelons.
                Producers of fewer than 10 acres of watermelon and importers of less
                than 150,000 pounds of watermelon annually are exempt. There are no
                Federal rules that duplicate, overlap, or conflict with this proposed
                rulemaking. In accordance with the Office of Management and Budget
                (OMB) regulation [5 CFR part 1320] which implements the Paperwork
                Reduction Act of 1995 [44 U.S.C. chapter 35], the information
                collection and recordkeeping requirements that are imposed by the Plan
                have been approved previously under OMB control number 0581-0093. This
                proposed rulemaking would not result in a change to the information
                collection and recordkeeping requirements previously approved. AMS performed this initial Regulatory Flexibility Analysis
                regarding the impact of this proposed amendment to the Plan on small
                entities, and we invite comments concerning potential effects of this
                amendment on small businesses. AMS has determined this proposed rulemaking is consistent with the
                Act and would effectuate its purposes. A 30-day comment period is provided to allow interested persons to
                respond to this proposal. All written comments received in response to
                this proposed rulemaking by the date specified will be considered prior
                to finalizing this action.
                List of Subjects in 7 CFR Part 1210 Administrative practice and procedure, Advertising, Agricultural
                research, Consumer information, Marketing agreements, Reporting and
                recordkeeping requirements, Watermelons. For the reasons set forth in the preamble, the Agricultural
                Marketing Service proposes to amend 7 CFR part 1210 as follows:
                PART 1210--WATERMELON RESEARCH AND PROMOTION PLAN
                0
                1. The authority citation for part 1210 continues to read as follows: Authority: 7 U.S.C. 4901-4916 and 7 U.S.C. 7401.
                0
                2. Amend Sec. 1210.515 by revising paragraphs (a) and (b) to read as
                follows:
                Sec. 1210.515 Levy of assessments. (a) An assessment of four and a half cents per hundredweight shall
                be levied on all watermelons produced for ultimate consumption as human
                food, and an assessment of four and a half cents per hundredweight
                shall be levied on all watermelons first handled for ultimate
                consumption as human food. An assessment of nine cents per
                hundredweight shall be levied on all watermelons imported into the
                United States for ultimate consumption as human food at the time of
                entry in the United States. (b) The import assessment shall be uniformly applied to imported
                watermelons that are identified by the numbers 0807.11.30 and
                0807.11.40 in the Harmonized Tariff Schedule of the United States or
                any other number used to identify fresh watermelons for consumption as
                human food. The U.S. Customs Service and Border Protection (Customs)
                will collect assessments on such watermelons at the time of entry and
                will forward such assessment as per the agreement between Customs and
                USDA. Any importer or agent who is exempt from payment of assessments
                may submit to the Board adequate proof of the volume handled by such
                importer for the exemption to be granted.
                * * * * *
                Erin Morris,
                Associate Administrator, Agricultural Marketing Service.
                [FR Doc. 2024-14937 Filed 7-8-24; 8:45 am]
                BILLING CODE P