Dairy Product Mandatory Reporting, 34175-34184 [E8-13550]

Agencies

• Agricultural Marketing Service
• DEPARTMENT OF AGRICULTURE

[Federal Register Volume 73, Number 117 (Tuesday, June 17, 2008)]
[Rules and Regulations]
[Pages 34175-34184]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-13550]



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Federal Register / Vol. 73, No. 117 / Tuesday, June 17, 2008 / Rules 
and Regulations

[[Page 34175]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 1170

RIN 0581-AC66
[Doc. AMS-DA-07-0047; DA-06-07]


Dairy Product Mandatory Reporting

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This final rule adopts amendments to the Dairy Product 
Mandatory Reporting Program that was established on August 2, 2007 on 
an interim final basis. The Dairy Market Enhancement Act of 2000, and 
certain provisions of the Farm Security and Rural Investment Act of 
2002, amended the Agricultural Marketing Act of 1946 to provide for 
timely, accurate, and reliable market information to facilitate more 
informed marketing decisions and promote competition in the dairy 
product manufacturing industry.

DATES: Effective Date: June 22, 2008.

FOR FURTHER INFORMATION CONTACT: For information relevant to this final 
rule: (a) Concerning dairy product price data collection, reporting and 
verification contact John R. Mengel, Chief Economist, USDA/AMS/Dairy 
Programs, Office of the Chief Economist, STOP 0229-Room 2753, 1400 
Independence Ave., SW., Washington, DC 20250-0229, (202) 720-4664; (b) 
concerning dairy products storage data collection and reporting contact 
Dan Kerestes, Chief, Livestock Branch, USDA/NASS, STOP 2053-Room 6435, 
1400 Independence Ave., SW., Washington, DC 20250-2053, (202) 720-3570.

SUPPLEMENTARY INFORMATION: This final rule is a statutory requirement 
pursuant to the Agricultural Marketing Act of 1946 [7 U.S.C. 1621 et 
seq.], as amended November 22, 2000, by Public Law 106-532, 114 Stat. 
2541, and further amended May 13, 2002, by Public Law 107-171, 116 
Stat. 207. The Agricultural Marketing Act of 1946 and its amendments 
are hereinafter referred to as the ``Act.''
    The provisions of the interim final rule were published in the 
Federal Register on July 3, 2007 (72 FR 36341), and became effective on 
August 2, 2007. The interim final rule states that comments were to be 
submitted on or before September 4, 2007. On November 2, 2007, a 
Federal Register notice was issued to reopen the comment period whereby 
comments were to be submitted on or before December 3, 2007 (72 FR 
62105). The U.S. Department of Agriculture (USDA) has reviewed and 
considered all of the comments submitted in a timely manner for this 
final rule.
    Background: The Act provides for and accordingly, the interim final 
rule established, a Dairy Product Mandatory Reporting Program that: (1) 
Requires persons engaged in manufacturing dairy products to provide to 
USDA certain information including the price, quantity, and moisture 
content, where applicable, of dairy products sold by the manufacturer; 
and (2) requires manufacturers and other persons storing dairy products 
to report to USDA information on the quantity of dairy products stored. 
Under the interim final rule, the National Agricultural Statistics 
Service (NASS) collects such information. This final rule, in 
accordance with the Act, maintains these requirements. Any manufacturer 
that processes and markets less than 1 million pounds of the applicable 
dairy products per calendar year is exempt from these reporting 
requirements as specified in (1) of this paragraph.
    NASS began publishing cheddar cheese price data in 1997. It began 
publishing butter, nonfat dry milk (NFDM), and dry whey price data in 
1998. Currently, NASS publishes cheddar cheese, butter, dry whey, and 
NFDM prices on a weekly basis. USDA has collected and reported stock 
data on a voluntary basis for butter and cheese since 1916, for NFDM 
since 1930, and for dry whey since 1975. Stock information on specific 
cheeses, salted and unsalted butter, anhydrous milkfat, butter oil, 
nonfat dry milk and dry whey is now collected and published on a 
monthly basis.
    The Act, as amended, provides USDA with the authority needed to 
make the reporting of dairy product price and stock information 
mandatory. No additional commodities are included under this rule. The 
Act also provides that USDA shall take such actions as it considers 
necessary to verify the accuracy of the information submitted or 
reported. With more complete and accurate information, USDA and the 
dairy industry can be confident that reported dairy product prices and 
inventories are more precise indicators of supply and demand 
conditions.
    The Agricultural Marketing Service (AMS) has implemented a plan to 
verify the price information submitted by reporting entities to NASS. 
Each reporting entity may report for a single dairy plant or it may 
report for more than one dairy plant, depending upon how the business 
is structured. During the first year of verification, AMS planned to 
visit all of the reporting entities eligible to file reports at least 
once. AMS visited all of the reporting entities within the first five 
months of implementation. In subsequent years, AMS plans to visit 
larger entities that account for 80 percent of the yearly reported 
product volume of each specified dairy product at least once annually. 
AMS plans to visit one-half of entities that account for the remaining 
20 percent each year, visiting each such entity at least once every 
other year.
    During each visit, AMS will review applicable sales transactions 
records for at least the four most recent weeks. In some cases AMS may 
review sales records for longer periods of up to 2 years. AMS will 
verify that sales transactions agree with information reported to NASS 
and that there are no applicable sales transactions that are not 
reported to NASS. This final rule includes noncompliance, appeals, and 
enforcement procedures. These procedures are carried out by AMS.
    AMS requested comments on all aspects of the reporting 
requirements, the reporting specifications, and the verification 
program. AMS has reviewed all timely comments received and has 
considered these comments in developing this final rule.

[[Page 34176]]

Executive Order 12866: Regulatory Planning and Review

    This final rule has been determined not to be ``significant'' for 
purposes of Executive Order 12866 and therefore has not been reviewed 
by the Office of Management and Budget. A cost benefit analysis 
prepared for the interim final rule is available at https://
www.ams.usda.gov/dairy/.

Executive Order 12988: Civil Justice Reform

    This final rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. This rule is not intended to have a retroactive 
effect. This rule will not preempt any State or local laws, 
regulations, or policies unless they present an irreconcilable conflict 
with this rule. There are no administrative procedures which must be 
exhausted prior to any judicial challenge to the provisions of this 
rule.

Regulatory Flexibility Act

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA) (5 U.S.C. 601-612), AMS considered the economic impact of 
this final rule on small entities and determined that the rule would 
not have a significant economic impact on a substantial number of small 
entities. The purpose of the RFA is to fit regulatory actions to the 
scale of businesses subject to such actions in order that small 
businesses will not be unduly or disproportionately burdened.
    Small businesses in the dairy product manufacturing \1\ industry 
have been defined by the Small Business Administration (SBA) as those 
processors employing not more than 500 employees. For purposes of 
determining a processor's size, if the plant is part of a larger 
company operating multiple plants that collectively exceed the 500-
employee limit, the plant will be considered a large business even if 
the local plant has fewer than 500 employees. There are approximately 
98 dairy product manufacturers and 110 manufacturers and other persons 
storing dairy products that would be subject to the provisions of this 
rule. According to U.S. Census Bureau Statistics of U.S. Businesses, 
there were 1,110 dairy manufacturing firms in the United States in 
2004. Of these businesses, 1,017 firms had fewer than 500 employees and 
93 firms had greater than 500 employees.
---------------------------------------------------------------------------

    \1\ North American Industry Classification System (NAICS) code 
3115.
---------------------------------------------------------------------------

    Therefore, few of the manufacturers and persons affected by this 
final rule are small businesses under the criteria established by the 
SBA. Those manufacturers that process and market less than 1 million 
pounds of the applicable dairy products annually are exempted from 
price reporting by this final rule, and most of the entities that would 
be subject to mandatory reporting already report this information to 
NASS. The annual cost to manufacturers reporting product prices is 
estimated at $381 per plant. As discussed in the Paperwork Reduction 
Act section below, AMS believes the records that would be required to 
be maintained under this final rule are already being maintained for at 
least 2 years as part of the normal course of business. Thus, there 
would be no additional burden or cost associated with the maintenance 
of these records. Therefore, the final rule will not have a significant 
economic impact on a substantial number of small entities.

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act (44 U.S.C. Chapter 
35), reporting and recordkeeping requirements that are utilized to 
collect the information required by the Act have been approved by the 
Office of Management and Budget (OMB). The OMB control number for the 
Dairy Products Prices questionnaire and the Dairy Products 
questionnaire is 0535-0020. The OMB control number for the Cold Storage 
questionnaire is 0535-0001.
    The primary function of NASS is to provide timely, accurate, and 
useful statistics in service to U.S. agriculture. Estimates of milk 
production, production and storage of manufactured dairy products, and 
prices of milk and dairy products are integral parts of this function. 
Milk and dairy statistics are used by USDA to help administer Federal 
programs and are used by the dairy industry in planning, pricing, and 
projecting supplies of milk and milk products.
    Neither the interim final rule nor this final rule changes the 
current method and frequency of data collection utilized by NASS. Data 
collection of Dairy Products Prices is conducted weekly to collect 
sales transactions data for the previous week. Manufacturers are 
provided a supply of report forms for the products they are to report. 
The dairy product manufacturer completes the forms with information, 
including the manufacturer's name, address, plant location, quantities 
sold, and prices (or dollars received) for cheddar cheese, butter, dry 
whey, and NFDM. Manufacturers report to NASS by facsimile or electronic 
data reporting.
    The monthly Dairy Products questionnaire is mailed each month to 
manufacturers of dairy products. Manufacturers report to NASS the name, 
address, production, stocks, and shipments data for a wide variety of 
dairy products, including nonfat dry milk and dry whey. Reporting 
entities report to NASS by facsimile, phone, or mail.
    The monthly Cold Storage questionnaire is mailed each month to 
manufacturers and other entities storing stocks of a wide variety of 
refrigerated agricultural commodities, including butter, cheese, and 
similar products. Manufacturers and other entities report to NASS the 
name, address, and stocks on hand at the end of the month. Reporting 
entities report to NASS by facsimile, phone, mail, or electronic data 
reporting.
    This final rule continues implementation of recordkeeping 
requirements established under the interim final rule and authorized by 
the Act. Under this regulation, each person required to report 
information to USDA shall maintain, and make available to USDA, on 
request, original contracts, agreements, receipts, and other records 
associated with the sale or storage of any dairy products during the 2-
year period beginning on the date of the creation of the records. AMS 
has consulted with several entities that are required to maintain 
records under this rule. According to the entities consulted, the 
necessary records are already being maintained for at least 2 years as 
part of the normal course of business. Therefore, there would be no 
additional burden or cost associated with the maintenance of these 
records.
    The reliability of prices announced by NASS is dependent on the 
accuracy of the reports submitted by manufacturers. To verify that the 
data submitted to NASS for the Dairy Products Prices report is 
accurate, all manufacturers required to submit questionnaires will be 
subject to a verification procedure conducted by AMS. Failure on the 
part of manufacturers or other entities to comply with the data 
collection and recordkeeping requirements could lead to enforcement 
action, including the levying of civil penalties provided under section 
273 of the Act, as amended [7 U.S.C. 1637b], against the violating 
person or entity.
    Except as otherwise directed by the Secretary of Agriculture or the 
U.S. Attorney General for enforcement purposes, no officer, employee, 
or agent of the United States shall make available to the public 
information, statistics, or documents obtained from or submitted by any 
person under the Act other than

[[Page 34177]]

in a manner that ensures confidentiality is preserved regarding the 
identity of persons, including parties to a contract and proprietary 
business information. All report forms include a statement that 
individual reports are kept confidential.
    With respect to the application of the Privacy Act of 1974 (5 
U.S.C. 552a) to the maintenance of records required by the Act, the 
Dairy Products Prices survey population consists of agribusinesses. 
Data collected by this survey relates to agribusinesses' dealings and 
not those of individuals. Records maintained at business sites for 
verification of information reported to NASS include contracts, 
agreements, receipts and other material related to sales of specific 
dairy products. No records about individuals are maintained by NASS for 
this survey, and AMS believes that none would be part of these 
maintained business papers.

Summary of Changes in the Final Rule From the Interim Final Rule

    All substantive changes in this final rule from the interim final 
rule concern reporting requirements and specifications pertaining to 
the Dairy Products Prices report. Changes are as follows:
    (1) Products that are produced under faith-based close supervision 
and are marketed at a higher price than the manufacturer's wholesale 
market price for the basic commodity (for example, kosher products 
produced with a rabbi on site who is actively involved in supervision 
of the production process) are excluded in the reporting 
specifications.
    (2) With the interim final rule, dairy products sold under the 
Dairy Export Incentive Program (DEIP) were included in the reporting 
specifications. DEIP sales or other premium-assisted sales are excluded 
in reporting specifications with this final rule.
    (3) Products certified as organic by USDA-accredited certifying 
agents are excluded in the reporting specifications with this final 
rule.
    (4) With the interim final rule the grade requirements stated that 
each product to be reported was to be of a certain grade. The final 
rule indicates that each product to be reported must only meet certain 
grade standards.
    (5) The interim final rule indicates that transportation charges 
are to be excluded from the reported price for each commodity. The 
final rule clarifies that each sale shall be reported either f.o.b. 
plant if the product is ``shipped out'' from the plant or f.o.b. 
storage facility location if the product is ``shipped out'' from a 
storage facility. In calculating the total dollars received or dollars 
per pound, the reporting entity shall neither add transportation 
charges incurred at the time the product is ``shipped out'' or after 
the product is ``shipped out'' nor deduct transportation charges 
incurred before the product is ``shipped out.''
    (6) The interim final rule excludes clearing charges in the 
reporting specifications. The final rule specifies that in calculating 
the total dollars received or dollars per pound, the reporting entity 
shall not deduct brokerage fees or clearing charges paid by the 
manufacturer.
    (7) This final rule specifies that the verification and 
noncompliance procedures are pursuant to section 273(b)(1)(A)(i) of the 
Act.
    (8) This final rule specifies the time by which dairy product 
manufacturers must report on all dairy products sold. Manufacturers 
must report by noon on Wednesday on all products sold during the seven 
days ending with the previous Saturday.
    (9) Changes have been made in the organization or content of some 
sections for greater clarity.

Discussion of Comments

    The interim final rule solicited comments to be submitted to USDA 
on or before September 4, 2007. During this initial 60-day comment 
period, 19 comment submissions were received: 6 from dairy cooperative 
associations, 4 from federations of dairy cooperative associations, 3 
from producer associations, 3 from proprietary dairy manufacturers, 1 
from a dairy manufacturer association, and 2 from individuals. After 
reviewing comments received, USDA determined that additional 
information from interested parties would be helpful. On November 2, 
2007, a Federal Register notice was issued to reopen the comment period 
for an additional 30 days. USDA specifically solicited comments 
concerning the issues of product specifications, minimum transaction 
volumes, kosher dairy products, and products produced from cows not 
treated with recombinant bovine somatotropin (rBST). USDA was concerned 
that for the initial comment period some commenters may have limited 
their comments to the issues of forward-priced contracts and 
verification. During the extended 30-day comment period, 10 comment 
submissions were received: 2 from dairy cooperative associations, 2 
from federations of dairy cooperative associations, 1 from a producer 
association, 1 from a dairy manufacturer association, and 4 from 
individuals. USDA has reviewed and considered all of the comments 
submitted in a timely manner for this final rule.
    The following discussion is based upon USDA consideration of all 
comments received concerning the interim final rule and other 
considerations. The discussion concerns reporting requirements and 
specifications for the Dairy Products Prices survey.

1. Forward-Priced Contracts

    Under the interim final rule, forward pricing sales (sales in which 
the selling price was set [not adjusted] 30 or more days before the 
transaction was completed) are excluded from reporting specifications.
    The issue of forward-priced contracts is the issue discussed at 
greatest length and by the greatest number of commenters. All comments 
concerning the issue focus upon sales of nonfat dry milk (NFDM). None 
of the commenters argues for including forward-priced contracts in the 
reporting specifications for the other dairy products.
    Positions taken by commenters on the issue are essentially as 
follows:
    a. Include forward-priced contracts for NFDM.
    b. Include contracts for export sales of NFDM that are shipped 
within 90 days of contract execution.
    c. Include contracts for domestic or export sales of NFDM that are 
shipped within 90 days of contract execution.
    d. Make no changes.
    e. In addition to excluding forward-priced contracts for which the 
selling price is set 30 or more days before the transaction was 
completed from reporting specifications, also exclude contracts that 
reference a defined prices series, plus or minus a basis, entered into 
more than 30 days before delivery.
    Supporters of including forward-priced contracts in NFDM price 
reporting argue that the current exclusion of forward-priced contracts 
discourages exports because almost all NFDM exports are through 
contracts with shipments more than 30 days after execution. Therefore, 
the vast majority of export sales are excluded from NASS reporting. 
DairyAmerica, Inc., states, ``The proposed NASS sample that leaves out 
critical supply and demand for milk represented by the export market 
raises the question of `unbiasedness'. * * * '' DairyAmerica contends 
that if fixed-priced contracts were included in the reporting 
requirements, Class IV milk prices would more closely align with the 
majority of sales of NFDM. It claims that this would reduce risks for 
NFDM producers. It points out that there is no

[[Page 34178]]

effective futures market for NFDM at this time. Other supporters of 
including forward-priced contracts in NFDM price reporting include 
California Dairies, Inc., and the Alliance of Western Milk Producers.
    Fonterra Co-operative Group Limited provides a discussion of 
contracts used for the international dairy market. Fonterra points out 
that due to certification procedures, regulatory requirements, etc., a 
seller in the international market does not have complete control of 
the timeframe for delivery. Fonterra describes spot, medium-term, and 
long-term export contracts. An export contract for ``immediate'' 
delivery can take 1 to 2 months to complete. A medium-term contract 
typically covers 3 months but usually takes about 5 months from the 
time of contract to the time of the last invoice date. A long-term 
contract is typically for 6 months but may be as long as 12 months.
    National Milk Producers Federation (NMPF) advocates extending the 
time period of reporting NFDM sales from 30 days to 90 days in 
recognition of growth of NFDM exports and the requirements for export 
sales. NMPF notes that effective and liquid futures contracts exist for 
Class III milk (which are often used as hedge instruments for cheese 
prices) and butter. However, the same is not the case for NFDM. The 
extension of the time period as proposed by NMPF would only apply to 
export contracts. NMPF states that limiting the reporting time period 
to 90 days will ensure that forward-priced export contracts do not have 
a disproportionate effect on Federal order pricing. Land O'Lakes, Inc., 
(LOL) and Dairylea Cooperative, Inc., support NMPF's position. Western 
United Dairymen also proposes extending the time of reporting from 30 
to 90 days, but it does not specify that the extension would apply to 
exports only.
    Supporters of the current 30-day limit assert that the current 
policy better reflects the current market price. International Dairy 
Foods Association (IDFA) states, ``The inclusion of sales in which the 
price was set more than 30 days in advance of the actual transaction 
would mean including survey data based on expectations of today's 
market environment, not the actual current market environment itself.'' 
Dean Foods contends that including forward-priced contracts could 
result in a market distortion related to Class II products. According 
to Dean Foods, at times it may be advantageous to manufacture Class II 
products from NFDM rather than from Class II milk since the spot NFDM 
price in the domestic market place would not necessarily be in 
alignment with the Class IV price or Class II price. With respect to 
NFDM futures markets, Leprino Foods Company states, ``Although there 
are likely additional factors, we believe that the historic practice of 
certain nonfat manufacturers of including long-term contracts in prices 
reported and used in establishing the underlying milk prices have 
substantially limited the establishment of viable nonfat dry milk 
futures.'' Other supporters of the current regulation include 
Nestl[eacute] USA and an individual commenter.
    Dairy Producers of New Mexico (DPNM) advocates the current 30-day 
limit reporting exclusion and also the exclusion of forward contracts 
that reference a defined price series plus or minus a basis. It 
contends that inclusion of such contracts in reporting leads to 
circularity in pricing and does not provide accurate information 
concerning spot prices for dairy products.
    This final rule maintains the current reporting exclusion for 
forward pricing sales (sales in which the selling price was set [not 
adjusted] 30 or more days before the transaction was completed). IDFA's 
argument has merit: ``The inclusion of sales in which the price was set 
more than 30 days in advance of the actual transaction would mean 
including survey data based on expectations of today's market 
environment, not the actual current market environment itself.''
    This final rule does not exclude from reporting specifications 
forward contracts that reference a defined price series plus or minus a 
basis. Information is not readily available to indicate that there is 
any significant problem with bias caused by circularity in the 
reporting of such forward contracts.

2. Electronic Data Collection by AMS

    NMPF lists reasons as to why AMS, rather than NASS, should have 
full responsibility for mandatory dairy product reporting. According to 
NMPF, AMS is better suited for regulatory enforcement, and AMS staff is 
better equipped to collect and verify consistent data from milk plants. 
NMPF states that AMS staff employees generally have more dairy 
expertise and usually have longer tenure than NASS employees. NMPF 
believes that coordination of the data collection and the verification 
would be improved if AMS handled both functions. Since AMS has 
experience with electronic reporting through its mandatory livestock 
reporting program, NMPF asserts that AMS is better suited to implement 
electronic reporting for dairy products.
    IDFA also asserts that AMS should be responsible for data 
collection and that the data should be collected electronically. IDFA 
contends that if AMS were to collect the data electronically at a 
national level, timeliness of reporting would be improved and 
conflicting information from NASS offices in different States would be 
eliminated. Dairylea Cooperative also advocates that AMS collect the 
data electronically.
    This rule makes no changes with respect to responsibilities or 
methods for data collection. The Secretary of Agriculture has delegated 
NASS, an agency with data collection as its primary mission, as the 
USDA agency with price reporting responsibilities for the Mandatory 
Dairy Product Reporting Program.

3. More Frequent Verification

    New York Farm Bureau is concerned that the frequency of 
verification visits in the proposed rule may not be sufficient to 
guarantee accurate and timely verification. It does not propose a 
specific time period for the frequency of visits. IDFA supports the AMS 
plan to visit all of the entities eligible to file reports at least 
once during the first year. However, it urges AMS to follow up with 
quarterly visits to any entities that have been found to have reported 
incorrectly.
    AMS planned to visit all entities eligible to report in the first 
year at least once. AMS visited all of the reporting entities within 
the first five months of the Mandatory Dairy Product Reporting Program 
implementation. Some reporting entities have been visited more than 
once. AMS plans to visit large entities that account for 80 percent of 
the yearly reported product volume of each specified dairy product at 
least once annually. AMS plans to visit one-half of the remaining 
entities each year, visiting each such entity at least once every other 
year. This does not preclude additional visits if necessary.

4. Organic Product Exclusion

    IDFA, NMPF, and Dean Foods propose that organic products be 
excluded from the surveys because they receive higher wholesale market 
prices reflecting additional costs that are not representative of the 
products in the broader market. Dean Foods is more specific than IDFA 
or NMPF, stating that ``Certified Organic'' products should be 
excluded. No comments were received advocating the inclusion of organic 
products in price reporting.

[[Page 34179]]

    This final rule excludes products certified as organic by USDA-
accredited certifying agents in the reporting specifications because 
such products command higher prices, reflecting consumers' perception 
that such products are of higher value than similar products.

5. Coordination of Price Reporting With the California Department of 
Food and Agriculture (CDFA)

    Both NMPF and DairyAmerica encourage USDA to take steps to align 
price data, methodology, and timing with that of CDFA. While NMPF 
encourages broad cooperation with CDFA concerning alignment of all 
class prices, DairyAmerica's comments are limited to considerations of 
NFDM price reporting.
    DairyAmerica's submission of comments includes testimony from a 
recent CDFA hearing concerning NFDM price reporting. CDFA conducted a 
public hearing on August 28, 2007, to consider revisions to weekly and 
monthly NFDM price reporting for the California Weighted Average Price 
(CWAP). On October 17, 2007, CDFA issued a final decision regarding the 
CWAP (https://www.cdfa.ca.gov/dairy/dairy_hear_finalresults_
Aug07.html). The decision became effective on October 26, 2007.
    AMS has reviewed testimony from the CDFA hearing in its 
deliberations for this final rule. As DairyAmerica acknowledges, ``* * 
* AMS cannot simply agree to operate its system based upon 
California.'' USDA must make decisions based upon its own program 
objectives, consideration and judgment of the issues, and comments.

6. Transaction-Size Thresholds

    The typical sales unit for dairy products included in the Dairy 
Products Prices survey is 40,000 pounds. IDFA recommends setting a 
transaction-size threshold of 40,000 pounds for products to be reported 
for the Dairy Products Prices survey. It points out that dairy 
contracts for the Chicago Mercantile Exchange (CME) are based upon this 
typical size unit. Similarly, NMPF proposes that USDA set transaction-
size thresholds for reporting sales, claiming that products distributed 
in smaller lots have added value and cost. However, NMPF states that 
any decision to establish transaction thresholds should be considered 
very carefully to ensure that no important product volumes are omitted 
from reporting and to avoid efforts by manufacturers ``to reorganize 
distribution to evade reporting.'' NMPF suggests that USDA consider a 
threshold of 30,000 pounds for each product included in the survey.
    USDA has not included transaction-size thresholds in this final 
rule. An objective of the survey is to obtain a broad measure of basic 
dairy commodity prices across the U.S. There is concern that a 
significant number of plants may be excluded from reporting if 
thresholds are established. Also, there is concern, as expressed by 
NMPF, that some reporting entities could ``reorganize distribution to 
evade reporting.'' Furthermore, adding transaction-size thresholds to 
the reporting specifications could add an unnecessary reporting burden 
for some reporting entities due to the necessity of keeping separate 
sales totals for transactions that meet thresholds and those that do 
not.

7. High-Heat and Fortified NFDM

    According to LOL, the costs and pricing arrangements for high-heat 
NFDM closely resemble those of low-heat and medium-heat NFDM. LOL 
asserts that including high-heat NFDM in the reporting specifications 
would result in greater alignment with the CWAP. DairyAmerica also 
proposes including high-heat NFDM in the reporting specifications and 
also would include fortified NFDM.
    This final rule continues exclusions for high-heat and fortified 
NFDM in the reporting specifications. Observation of prices reported in 
USDA Dairy Market News indicates that prices for high-heat NFDM are 
generally higher than those for low and medium-heat NFDM. Adding value 
to NFDM through fortification also would result in a higher price 
generally than that of the basic commodity.

8. Dairy Export Incentive Program (DEIP) or Other Premium-Assisted 
Sales

    DairyAmerica claims that DEIP sales should continue to be reported, 
asserting that excluding DEIP sales in the reporting specifications 
would be in conflict with the policy decision of Congress to support 
exports with taxpayer dollars. DairyAmerica claims that if DEIP sales 
were to be excluded from the reporting specifications, prices paid for 
milk through the Federal order system would not be reflective of the 
commodity prices of products sold through DEIP. This situation 
increases the risk that the manufacturers engaged in DEIP sales will 
suffer loss. For the same reasons, DairyAmerica asserts that export 
assistance sales through the voluntary industry program, Cooperatives 
Working Together (CWT) program, should be reported.
    Leprino asserts that the timeliness criteria for reporting DEIP 
sales should be the same as for any other dairy products that meet the 
reporting specifications. It asserts the same rationale as for other 
sales: DEIP sales for which the sale price was established greater than 
30 days prior to ship date may not be reflective of current market 
conditions.
    With this final rule, all DEIP sales or other premium-assisted 
sales, such as export assistance sales through the CWT program, are 
excluded from the reporting specifications. Before mandatory reporting 
became effective, DEIP sales were included in reporting specifications 
to encourage voluntary reporting by manufacturers that wanted DEIP 
sales to be included. Since reporting is now mandatory, this is no 
longer a consideration. As pointed out by Leprino, DEIP contracts 
entered into more than 30 days before date of shipment may not be 
reflective of current market conditions. Furthermore, DEIP sales or 
other premium-assisted sales include bonuses paid by third parties. 
Export bonuses are frequently based upon market averages of domestic 
and international commodity prices that may or may not be reflective of 
the actual needs of the two parties to reach a sales agreement.

9. Commodity Credit Corporation (CCC) Purchases Under the Milk Price 
Support Program and Related Programs

    DairyAmerica asserts that CCC sales must continue to be reportable 
in order to avoid the risk that Federal order minimum prices would fall 
below support levels.
    CCC purchases under the Milk Price Support Program and related 
programs continue to be included in the reporting specifications under 
this final rule. Including CCC purchases provides a broader survey that 
more accurately reflects market conditions.

10. Intra-Company Sales

    Reporting specifications exclude intra-company sales. DairyAmerica 
supports this policy in general because such sales may not represent a 
true market price. However, DairyAmerica asserts that its sales, as a 
federation of dairy cooperatives, between a member and that member's 
wholly-owned subsidiary should be reportable. It argues that these 
sales are arms-length transactions. DairyAmerica states that its 
corporate structure requires it to maximize revenue for its members and 
that it cannot favor one member of the federation over another.
    This final rule continues the exclusion of intra-company sales, 
even if those sales are to wholly-owned subsidiaries through a 
federation of

[[Page 34180]]

dairy cooperatives. Although a federation of dairy cooperatives may 
have rules that all sales will be at market prices, it may not be 
possible to verify through the federation and manufacturer books and 
records that such intra-company sales are arms-length transactions.

11. Enforcement

    DPNM asserts that manufacturers who misreport to NASS should have 
greater liability than stated in the interim final rule. DPNM proposes 
that a handler that misreports prices be held responsible to account to 
various producer settlement funds for any shortfalls that occur due to 
the misreporting. Dairylea proposes that USDA be held responsible for 
shortfalls in dairy producer income that result from misreporting of 
prices.
    The Act is clear concerning the civil penalty for noncompliance 
with a cease and desist order relative to specified unlawful acts. The 
Act states, ``If the [district] court finds that the person violated 
the order, the person shall be subject to a civil penalty of not more 
than $10,000 for each offense.'' Since the Act does not provide for the 
redress proposed by either DPNM or Dairylea, this final rule does not 
include the enforcement proposals by DPNM or Dairylea.

12. Products Labeled or Contracted as Sourced From Cows Not Treated 
With Recombinant Bovine Somatotropin (rBST):

    NMPF lists reasons that it believes products sourced from milk from 
cows not treated with rBST should be included in reporting 
specifications. According to USDA Animal and Plant Health Inspection 
Service, only 15 percent of dairy herds include cows treated with rBST. 
Many products are made from such milk even if not marketed as such. 
Marketing of such products is increasing, and NMPF asserts that 
excluding them would compromise the survey. Manufacturers may have 
mixed sales (some from cows treated with rBST and some with cows not 
treated with rBST), complicating reporting and verification. 
Furthermore, NMPF claims that it would be inappropriate for USDA to 
define, categorize, and verify labeling of such products.
    Three individuals submitted comments in support of including 
products labeled or contracted as sourced from cows not treated with 
rBST in the reporting specifications. Two of the individuals assert 
that excluding such products would undervalue milk prices paid to dairy 
farmers.
    LOL urges AMS to exclude products labeled as sourced from cows not 
treated with rBST in the reporting specifications. LOL claims that 
producers who discontinue using rBST have a significant drop in milk 
production, and it claims that the opportunity costs of discontinuing 
use of rBST are $1.00 to $1.50 per hundredweight. Therefore, LOL 
asserts that these producers should receive premiums. Excluding such 
products would in part help to share these premiums with only those 
producers who forego the benefits of using rBST. In the future, if 
products labeled as sourced from cows not treated with rBST become more 
common, LOL would support including such products in the surveys.
    IDFA urges USDA to exclude products labeled or contracted as 
sourced from cows not treated with rBST, claiming that such products 
are value-added products rather than commodity products.
    The final rule does not exclude products labeled or contracted as 
sourced from cows not treated with rBST. Further, USDA does not have 
information to indicate that there are substantial price premiums for 
such products, and the sales volumes of such products are unknown.

13. Kosher Products

    NMPF points out that nearly all butter and nonfat dry milk, and 
most dry whey production is kosher, by some standard. The same can be 
said for a substantial amount of cheese. NMPF asserts that there are 
many kosher standards and that it would be improper for USDA to rule 
based upon those standards. LOL and two individual commenters support 
including all kosher products in the reporting specifications.
    DairyAmerica advocates a very narrow exclusion of only a specially 
supervised form of kosher designated as ``Cholov Yisroel,'' a kosher 
designation that requires close rabbinical supervision from the farm 
through the dairy product manufacturing process. It states that this 
type of kosher product should not be reportable, or the extra cost 
element for this type of kosher designation should be deducted. IDFA 
urges USDA to exclude kosher products from the reporting specifications 
if the contract requires the products to be certified as kosher under 
direct rabbinical supervision.
    Since the final rule is concerned with capturing prices for basic 
commodities, it attempts to exclude value-added products from the price 
surveys. For kosher products, care is taken in the final rule to use a 
standard that is neither too broad nor too narrow. Excluding all 
products meeting the least stringent kosher standards would be too 
broad since such products are commonplace and the added market value is 
insignificant. This final rule only excludes products manufactured 
under close rabbinical supervision and marketed at a higher price than 
the manufacturer's wholesale market price for the basic commodity.
    It is possible that reporting issues will arise concerning dairy 
products that are manufactured to meet certain faith-based standards 
other than kosher requirements. For example, Islamic Halal has certain 
production requirements for dairy products. For this reason, this final 
rule excludes any dairy products produced under any faith-based close 
supervision that are marketed at a higher price than the manufacturer's 
wholesale market price for the basic commodity.

14. Cost Add-Ons

    Dairylea proposes that ``AMS allow for dairy product manufacturing 
cost of production surcharges--determined through a regulated process--
to be reported in the pricing survey. These USDA determined cost 
increases should be allowed to be passed on from a manufacturer to the 
marketplace, without it impacting the Federal Order class prices.''
    Consideration of Dairylea's cost add-ons proposal in this informal 
rulemaking is not appropriate. Dairylea provided the same proposal in 
its testimony at a hearing concerning Class III and IV prices (Federal 
milk marketing order hearing; Indianapolis, Indiana; April 11, 2007, 
Tr. page 1966; exhibit 53). USDA is considering Dairylea's proposal in 
formal rulemaking with respect to that hearing.

15. Expansion of the Scope of Data Collection and Reporting

    DPNM proposes that the Dairy Product Mandatory Reporting Program be 
expanded to include the volume of milk and milk components acquired by 
the plant, the prices paid for milk and milk components acquired by the 
plant, the volume of milk products produced at the plant, the value of 
the milk products produced at the plant, and, alternatively, the costs 
and yields associated with making reported products.
    DPNM proposes that these items be collected and reported in order 
to help USDA make better decisions with respect to make allowances and 
yield factors. DPNM notes that the Act uses the phrase ``information 
concerning the price, quantity, and moisture content of

[[Page 34181]]

dairy products'' in the description of information to be obtained. 
Using a broad perspective of the word ``concerning,'' DPNM asserts that 
USDA has authority to collect the additional information proposed.
    This final rule does not add data collection as proposed by DPNM. 
Collection of such information is beyond the scope of the Act.

16. Product f.o.b. Points

    The interim final rule states that sales shall be reported f.o.b. 
processing plant or storage location. Leprino claims that pricing 
f.o.b. storage center is inappropriate because such pricing results in 
a price with a different location value than that of the plant. It 
further claims that costs to ship products to storage centers are not 
included in Federal order make allowance calculations; therefore, such 
costs should not be included in the survey prices. It proposes that the 
price reported should be reduced by the cost of transporting products 
to storage centers.
    With this final rule, AMS continues the policy of requiring sales 
to be reported f.o.b. reporting plant or storage center without 
adjustment for transportation to storage facilities prior to sale. 
While pricing f.o.b. storage center may reflect a location value that 
is different than that which exists at the manufacturing plant, 
reducing the price by some unspecified transportation cost, which may 
or may not be consistent with the product value, is inappropriate. The 
pricing at f.o.b. storage facility would presumably be competitive with 
prices of competitors in the surrounding area. Reporting a price 
reduced by the transporting of the product to the storage center may 
understate the wholesale value of the product at that location and 
time.
    The interim final rule indicates that transportation charges are to 
be excluded from the reported price for each commodity. This exclusion 
is not intended to apply to transportation costs from the manufacturer 
to a storage facility before the product is sold. The final rule 
clarifies that each sale shall be reported either f.o.b. plant if the 
product is ``shipped out'' from the plant or f.o.b. storage facility 
location if the product is ``shipped out'' from a storage facility. In 
calculating the total dollars received or dollars per pound, the 
reporting entity shall neither add transportation charges incurred at 
the time the product is ``shipped out'' or after the product is 
``shipped out'' nor deduct transportation charges incurred before the 
product is ``shipped out.''

17. Grade A Dry Whey

    Leprino states that Grade A dry whey should continue to be excluded 
because it is a premium product. This final rule agrees and continues 
the exclusion for Grade A dry whey.

18. Inclusion of Products That Are Not Graded

    Questions have arisen concerning the reporting of products that are 
not graded by authorities stated in the reporting specifications but 
that meet grade standards. Most dairy products for the Dairy Products 
Prices survey are not actually graded but meet the grade standards of 
authorities designated in the reporting specifications. For greater 
clarification the wording of the final rule has been changed to clarify 
that products that meet grade standards, as determined by the 
manufacturer, are to be reported.

19. Exemptions

    One individual submitted comments proposing that mandatory 
reporting regulations not be ``implemented except as they would apply 
to truly industrial level dairy production.'' The commenter does not 
define a level of production to be considered as ``truly industrial.'' 
Stating concerns about compliance costs, the individual proposes that a 
cost-benefit analysis be performed for different levels of production 
for manufacturers before the regulation is implemented.
    According to the cost-benefit analysis, the annual cost to 
manufacturers reporting product prices is estimated at $381 per plant. 
Even for a small plant, such reporting costs would not be expected to 
be prohibitive. Concerning the maintaining of records, AMS has 
consulted with several reporting entities and has found that 
manufacturers already maintain records for at least 2 years as required 
by the final rule. With the interim final rule, AMS invited comments on 
whether all entities subject to the rule maintain the necessary records 
for at least 2 years. No such comments were received.
    Under this final rule, manufacturers who process and market less 
than 1 million pounds of the applicable dairy products per year are 
exempt from price reporting requirements.

20. Brokerage Fees and Clearing Charges

    Practically all firms that buy or sell products have marketing 
expenses. These marketing expenses are figured into the selling prices 
negotiated between buyers and sellers. These expenses often take the 
form of internal expenses, such as salaries paid to sales people. They 
could also take the form of fees paid to third parties, such as 
brokerage fees, clearing charges, etc. To maintain consistency, none of 
the marketing expenses, whether internal expenses or fees paid to third 
parties, should be deducted from the prices reported to NASS. While the 
interim final rule excluded clearing charges from the reporting 
specifications for each product, this final rule specifies that in 
calculating the total dollars received or dollars per pound, the 
reporting entity shall not deduct brokerage fees or clearing charges 
paid by the manufacturer.

Effective Date

    The availability of accurate market data for all market 
participants is extremely important. Buyers and seller of the basic 
dairy commodities, and indeed, the buyers and sellers of all dairy 
products depend on the accuracy of the prices affected by this final 
rule to provide them a sense of the current supply and demand 
conditions in the dairy sector. Improvements in the quality of price 
information of the basic dairy commodities--butter, cheddar, cheese, 
nonfat dry milk, and dry whey--were made by the interim final rule. 
This final rule makes certain amendments which further enhance the 
quality of such price information. For this reason, good cause is found 
that this rule will be effective the Sunday after publication in the 
Federal Register.

List of Subjects in 7 CFR Part 1170

    Dairy products, Reporting and recordkeeping requirements, Cheese, 
Butter, Whey, Nonfat dry milk.

0
For the reasons set forth in the preamble, Title 7, subtitle B, chapter 
X is amended by revising part 1170, to read as follows:

PART 1170--DAIRY PRODUCT MANDATORY REPORTING

Sec.
1170.1 Secretary.
1170.2 Act.
1170.3 Person.
1170.4 Dairy products.
1170.5 Manufacturer.
1170.6 Store.

Dairy Product Reporting Programs

1170.7 Reporting requirements.
1170.8 Price reporting specifications.
1170.9 Price reporting exemptions.
1170.10 Storage reporting specifications.
1170.11 Records.
1170.12 Confidential information.

Verification and Enforcement

1170.13 Verification of reports.
1170.14 Noncompliance procedures.

[[Page 34182]]

1170.15 Appeals.
1170.16 Enforcement.

    Authority: 7 U.S.C. 1637-1637b, as amended by Pub. L. 106-532, 
114 Stat. 2541 and Pub. L. 107-171, 116 Stat. 207.


Sec.  1170.1  Secretary.

    Secretary means the Secretary of Agriculture of the United States 
or any other officer or employee of USDA to whom authority has been 
delegated.


Sec.  1170.2  Act.

    Act means the Agricultural Marketing Act of 1946, 7 U.S.C. 1621 et 
seq., as amended by the Dairy Market Enhancement Act of 2000, Public 
Law 106-532, 114 Stat. 2541, and the Farm Security and Rural Investment 
Act of 2002, Public Law 107-171, 116 Stat. 207.


Sec.  1170.3  Person.

    Person means an individual, partnership, corporation, association, 
or any other business unit.


Sec.  1170.4  Dairy products.

    Dairy Products means:
    (a) Manufactured dairy products that are used by the Secretary to 
establish minimum prices for Class III and Class IV milk under a 
Federal milk marketing order issued under section 8c of the 
Agricultural Adjustment Act (7 U.S.C. 608c), reenacted with amendments 
by the Agricultural Marketing Agreement Act of 1937; and
    (b) Substantially identical products designated by the Secretary in 
this Part.


Sec.  1170.5  Manufacturer.

    Manufacturer means any person engaged in the business of buying 
milk in commerce for the purpose of manufacturing dairy products in one 
or more locations.


Sec.  1170.6  Store.

    (a) Store means to place cheese or butter in a warehouse or 
facility which is artificially cooled to a temperature of 50 degrees 
Fahrenheit or lower and hold these dairy products for 30 days or more; 
or
    (b) Store means to place nonfat dry milk or dry whey in a 
manufacturing plant, packaging plant, distribution point, or shipment 
in transit.

Dairy Product Reporting Programs


Sec.  1170.7  Reporting requirements.

    (a) All dairy product manufacturers, with the exception of those 
who are exempt as described in Sec.  1170.9, shall submit a report to 
National Agricultural Statistics Service (NASS) by noon on Wednesday of 
all products sold as specified in Sec.  1170.8 during the seven days 
ending with the previous Saturday. If a Federal holiday falls on a 
Tuesday or Wednesday, NASS will contact manufacturers via e-mail or 
phone concerning the applicable report deadline. The report is to be 
submitted on the appropriate forms supplied by NASS and shall indicate 
the name, address, plant location(s), quantities sold, total sales 
dollars or dollars per pound for the applicable products, and the 
moisture content where applicable. Each sale shall be reported for the 
time period when the transaction is completed, i.e. the product is 
``shipped out'' and title transfer occurs. Each sale shall be reported 
either f.o.b. plant if the product is ``shipped out'' from the plant or 
f.o.b. storage facility location if the product is ``shipped out'' from 
a storage facility. In calculating the total dollars received or 
dollars per pound, the reporting entity shall neither add 
transportation charges incurred at the time the product is ``shipped 
out'' or after the product is ``shipped out'' nor deduct transportation 
charges incurred before the product is ``shipped out.'' In calculating 
the total dollars received or dollars per pound, the reporting entity 
shall not deduct brokerage fees or clearing charges paid by the 
manufacturer.
    (b) Manufacturers or other persons storing dairy products are 
required to report, on a monthly basis, stocks of dairy products (as 
defined in Sec.  1170.4) on hand, on the appropriate forms supplied by 
the NASS. The report shall indicate the name, address, and stocks on 
hand at the end of the month for each storage location.


Sec.  1170.8  Price reporting specifications.

    The following are the reporting specifications for each dairy 
product:
    (a) Specifications for Cheddar Cheese Prices:
    (1) Variety: Cheddar cheese.
    (2) Style: 40-pound blocks or 500-pound barrels.
    (3) Moisture Content:
    (i) 40-pound blocks: Moisture content is not reported. Exclude 
cheese that will be aged.
    (ii) 500-pound barrels: Report weighted average moisture content of 
cheese sold. NASS will adjust price to a benchmark of 38.0 percent 
based on standard moisture adjustment formulas. Exclude cheese with 
moisture content exceeding 37.7 percent.
    (4) Age: Not less than 4 days or more than 30 days on date of sale.
    (5) Grade:
    (i) 40-pound blocks: Product meets Wisconsin State Brand or USDA 
Grade A or better standards.
    (ii) 500-pound barrels: Product meets Wisconsin State Brand or USDA 
Extra Grade or better standards.
    (6) Color:
    (i) 40-pound blocks: colored and within the color range of 6-8 on 
the National Cheese Institute color chart.
    (ii) 500-pound barrels: white.
    (7) Packaging:
    (i) 40-pound blocks: Price should reflect cheese wrapped in a 
sealed, airtight package in corrugated or solid fiberboard containers 
with a reinforcing inner liner or sleeve. Exclude all other packaging 
costs from the reported price.
    (ii) 500-pound barrels: Exclude all packaging costs from the 
reported price.
    (8) Exclude: Intra-company sales, resales of purchased cheese, 
forward pricing sales (sales in which the selling price was set [not 
adjusted] 30 or more days before the transaction was completed), cheese 
produced under faith-based close supervision and marketed at a higher 
price than the manufacturer's wholesale market price for the basic 
commodity (for example, kosher cheese produced with a rabbi on site who 
is actively involved in supervision of the production process), sales 
under the Dairy Export Incentive Program or other premium-assisted 
sales (for example, export assistance sales through the Cooperatives 
Working Together program), and cheese certified as organic by a USDA-
accredited certifying agent.
    (b) Specifications for Butter Prices:
    (1) Variety: 80 percent butterfat, salted, fresh or storage.
    (2) Grade: Product meets USDA Grade AA standards.
    (3) Packaging: 25-kilogram and 68-pound box sales.
    (4) Exclude: Unsalted and Grade A butter, intra-company sales, 
resales of purchased butter, forward pricing sales (sales in which the 
selling price was set [not adjusted] 30 or more days before the 
transaction was completed), butter produced under faith-based close 
supervision and marketed at a higher price than the manufacturer's 
wholesale market price for the basic commodity (for example, kosher 
butter produced with a rabbi on site who is actively involved in 
supervision of the production process), sales under the Dairy Export 
Incentive Program or other premium-assisted sales (for example, export 
assistance sales through the CWT program), and butter certified as 
organic by a USDA-accredited certifying agent.
    (c) Specifications for Dry Whey Prices:
    (1) Variety: Edible nonhygroscopic.
    (2) Age: No more than 180 days.
    (3) Grade: Product meets USDA Extra Grade standards.

[[Page 34183]]

    (4) Packaging or container: 25-kilogram bag, 50-pound bag, tote, or 
tanker.
    (5) Exclude: Sales of Grade A dry whey, intra-company sales, 
resales of purchased dry whey, forward pricing sales (sales in which 
the selling price was set [not adjusted] 30 or more days before the 
transaction was completed), dry whey produced under faith-based close 
supervision and marketed at a higher price than the manufacturer's 
wholesale market price for the basic commodity (for example, kosher dry 
whey produced with a rabbi on site who is actively involved in 
supervision of the production process), premium-assisted sales, and dry 
whey certified as organic by a USDA-accredited certifying agent.
    (d) Specifications for the Nonfat Dry Milk Prices:
    (1) Variety: Non-fortified.
    (2) Age: No more than 180 days.
    (3) Grade: Product meets USDA Extra Grade or USPH\2\ Grade A 
standards.
---------------------------------------------------------------------------

    \2\ USPH refers to the US Department of Health and Human 
Services--Public Health Service/Food and Drug Administration.
---------------------------------------------------------------------------

    (4) Packaging or container: 25-kilogram bag, 50-pound bag, tote, or 
tanker.
    (5) Exclude: Nonfat dry milk manufactured using high heat process, 
sales of instant nonfat dry milk, sales of dry buttermilk products, 
intra-company sales, resales of purchased nonfat dry milk, forward 
pricing sales (sales in which the selling price was set [not adjusted] 
30 or more days before the transaction was completed), nonfat dry milk 
produced under faith-based close supervision and marketed at a higher 
price than the manufacturer's wholesale market price for the basic 
commodity (for example, kosher nonfat dry milk produced with a rabbi on 
site who is actively involved in supervision of the production 
process), sales under the Dairy Export Incentive Program or other 
premium-assisted sales, and nonfat dry milk certified as organic by a 
USDA-accredited certifying agent.


Sec.  1170.9  Price reporting exemptions.

    (a) Any manufacturer that processes and markets less than 1 million 
pounds of cheddar cheese per calendar year is exempt from reporting 
cheddar cheese sales as specified in Sec.  1170.8(a).
    (b) Any manufacturer that processes and markets less than 1 million 
pounds of butter per calendar year is exempt from reporting butter 
sales as specified in Sec.  1170.8(b).
    (c) Any manufacturer that processes and markets less than 1 million 
pounds of dry whey per calendar year is exempt from reporting dry whey 
sales as specified in Sec.  1170.8(c).
    (d) Any manufacturer that processes and markets less than 1 million 
pounds of nonfat dry milk per calendar year is exempt from reporting 
nonfat dry milk sales as specified in Sec.  1170.8(d).


Sec.  1170.10  Storage reporting specifications.

    (a) Cold Storage Report:
    (1) Reporting universe: All warehouses or facilities, artificially 
cooled to a temperature of 50 degrees Fahrenheit or lower, where dairy 
products generally are placed and held for 30 days or more. Excluded 
are stocks in refrigerated space maintained by wholesalers, jobbers, 
distributors, and chain stores; locker plants containing individual 
lockers; and frozen food processors whose inventories are turned over 
more than once a month.
    (2) Products required to be reported:
    (i) Natural cheese, domestic and foreign made, including barrel and 
cheese to be processed; American type cheeses, (cheddar, Monterey, 
Colby, etc.), including government owned stocks; Swiss; other natural 
cheese types (brick, mozzarella, Muenster, Parmesan, etc.). Exclude 
processed cheese.
    (ii) Salted and unsalted butter, anhydrous milkfat (AMF), butter 
oil, including government owned stocks.
    (b) Dairy Products Report:
    (1) Reporting universe: All manufacturing plants.
    (2) Products required to be reported:
    (i) Nonfat dry milk.
    (ii) Dry whey.


Sec.  1170.11  Records.

    Each person required to report information to the Secretary shall 
maintain, and make available to the Secretary, on request, original 
contracts, agreements, receipts, and other records associated with the 
sale or storage of any dairy products during the 2-year period 
beginning on the date of the creation of the records.


Sec.  1170.12  Confidential information.

    Except as otherwise directed by the Secretary or the Attorney 
General for enforcement purposes, no officer, employee, or agent of the 
United States shall make available to the public information, 
statistics, or documents obtained from or submitted by any person in 
compliance with the Dairy Product Mandatory Reporting program other 
than in a manner that ensures that confidentiality is preserved 
regarding the identity of person, including parties to a contract, and 
proprietary business information.

Verification and Enforcement


Sec.  1170.13  Verification of reports.

    For the purpose of assuring compliance and verification, records 
and reports required to be filed by manufacturers or other persons 
pursuant to section 273(b)(1)(A)(i) of the Act, the Agricultural 
Marketing Service, through its duly authorized agents, shall have 
access to any premises where applicable records are maintained, where 
dairy products are produced or stored, and at any time during 
reasonable business hours shall be permitted to inspect such 
manufacturer or person, and any original contracts, agreements, 
receipts, and other records associated with the sale of any dairy 
products.


Sec.  1170.14  Noncompliance procedures.

    (a) When the Secretary becomes aware that a manufacturer or person 
may have willfully delayed reporting of, or failed or refused to 
provide, accurate information pursuant to section 273(b)(1)(A)(i) of 
the Act, the Secretary may issue a cease and desist order.
    (b) Prior to the issuance of a cease and desist order, the 
Secretary shall provide notice and an opportunity for an informal 
hearing regarding the matter to the manufacturer or person involved.
    (c) The notice shall contain the following information:
    (1) That the issuance of a cease and desist order is being 
considered;
    (2) That the reasons for the proposed cease and desist order in 
terms sufficient to put the person on notice of the conduct or lack 
thereof upon which the notice is based;
    (3) That within 30 days after receipt of the notice, the 
manufacturer or person may submit, in person, in writing, or through a 
representative, information and argument in opposition to the proposed 
cease and desist order; and
    (4) That if no response to the notice is received within the 30 
days after receipt of the notice, that a cease and desist order may be 
issued immediately.
    (d) If a manufacturer or person requests a hearing, the hearing 
should be held at a location and time that is convenient to the parties 
concerned, if possible. The hearing will be held before the Deputy 
Administrator, Dairy Programs, Agricultural Marketing Service, or a 
designee. The manufacturer or person may be represented. Witnesses may 
be ca