Marketing Order Regulating the Handling of Spearmint Oil Produced in the Far West; Increased Assessment Rate, 25010-25012 [2019-11207]

Agencies

• Agricultural Marketing Service
• DEPARTMENT OF AGRICULTURE

[Federal Register Volume 84, Number 104 (Thursday, May 30, 2019)]
[Proposed Rules]
[Pages 25010-25012]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-11207]


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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.

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Federal Register / Vol. 84, No. 104 / Thursday, May 30, 2019 / 
Proposed Rules

[[Page 25010]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 985

[Doc. No. AMS-SC-19-0026; SC19-985-2 PR]


Marketing Order Regulating the Handling of Spearmint Oil Produced 
in the Far West; Increased Assessment Rate

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would implement a recommendation from the 
Far West Spearmint Oil Administrative Committee (Committee) to increase 
the assessment rate established for the 2019-2020 and subsequent 
marketing years. The assessment rate would remain in effect 
indefinitely unless modified, suspended, or terminated.

DATES: Comments must be received by July 1, 2019.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this proposed rule. Comments must be sent to the Docket 
Clerk, Marketing Order and Agreement Division, Specialty Crops Program, 
AMS, USDA, 1400 Independence Avenue SW, STOP 0237, Washington, DC 
20250-0237; Fax: (202) 720-8938; or internet: https://www.regulations.gov. Comments should reference the document number and 
the date and page number of this issue of the Federal Register and will 
be available for public inspection in the Office of the Docket Clerk 
during regular business hours, or can be viewed at: https://www.regulations.gov. All comments submitted in response to this rule 
will be included in the record and will be made available to the 
public. 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: Barry Broadbent, Senior Marketing 
Specialist, or Gary Olson, Regional Director, Northwest Marketing Field 
Office, Marketing Order and Agreement Division, Specialty Crops 
Program, AMS, USDA; Telephone: (503) 326-2724, Fax: (503) 326-7440, or 
Email: [email protected] or [email protected]. Small 
businesses may request information on complying with this regulation by 
contacting Richard Lower, Marketing Order and Agreement Division, 
Specialty Crops Program, AMS, USDA, 1400 Independence Avenue SW, STOP 
0237, Washington, DC 20250-0237; Telephone: (202) 720-2491, Fax: (202) 
720-8938, or Email: [email protected].

SUPPLEMENTARY INFORMATION: This action, pursuant to 5 U.S.C. 553, 
proposes to amend regulations issued to carry out a marketing order as 
defined in 7 CFR 900.2(j). This proposed rule is issued under Marketing 
Order No. 985, as amended (7 CFR part 985), regulating the handling of 
spearmint oil produced in the Far West. Part 985 (referred to as the 
``Order'') is effective under the Agricultural Marketing Agreement Act 
of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the 
``Act.'' The Committee locally administers the Order and is comprised 
of spearmint oil producers operating within the area of production, and 
a public member.
    The Department of Agriculture (USDA) is issuing this proposed rule 
in conformance with Executive Orders 13563 and 13175. This proposed 
rule falls within a category of regulatory actions that the Office of 
Management and Budget (OMB) exempted from Executive Order 12866 review. 
Additionally, because this proposed rule does not meet the definition 
of a significant regulatory action, it does not trigger the 
requirements contained in Executive Order 13771. See OMB's Memorandum 
titled ``Interim Guidance Implementing Section 2 of the Executive Order 
of January 30, 2017, titled `Reducing Regulation and Controlling 
Regulatory Costs' '' (February 2, 2017).
    This proposed rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. Under the Order now in effect, Far West spearmint 
oil handlers are subject to assessments. Funds to administer the Order 
are derived from such assessments. It is intended that the assessment 
rate would be applicable to all assessable spearmint oil for the 2019-
2020 marketing year, and continue until amended, suspended, or 
terminated.
    The Act provides that administrative proceedings must be exhausted 
before parties may file suit in court. Under section 608c(15)(A) of the 
Act, any handler subject to an order may file with USDA a petition 
stating that the order, any provision of the order, or any obligation 
imposed in connection with the order is not in accordance with law and 
request a modification of the order or to be exempted therefrom. Such 
handler is afforded the opportunity for a hearing on the petition. 
After the hearing, USDA would rule on the petition. The Act provides 
that the district court of the United States in any district in which 
the handler is an inhabitant, or has his or her principal place of 
business, has jurisdiction to review USDA's ruling on the petition, 
provided an action is filed not later than 20 days after the date of 
the entry of the ruling.
    The Order provides authority for the Committee, with the approval 
of USDA, to formulate an annual budget of expenses and collect 
assessments from handlers to administer the program. The members are 
familiar with the Committee's needs and with the costs of goods and 
services in their local area and can formulate an appropriate budget 
and assessment rate. The assessment rate is formulated and discussed in 
a public meeting where all directly affected persons have an 
opportunity to participate and provide input.
    This proposed rule would increase the assessment rate from $0.09 to 
$0.10 per pound of Far West spearmint oil handled for the 2019-2020 and 
subsequent marketing years. The proposed higher rate is necessary to 
cover most of the Committee's 2019-2020 marketing year budgeted 
expenditures. The Committee has had to draw from its monetary reserve 
to partially fund program activities during the last five marketing 
years and is expected to do so again for the 2019-2020 marketing year 
because of a one-time $45,000 expense to update the Committee's 
electronic recordkeeping system. However, the Committee believes that 
drawing from reserves to fund operations on an on-going basis is

[[Page 25011]]

not a sustainable strategy moving forward. The Committee believes that 
increasing the continuing assessment rate would allow the Committee to 
better fund its 2019-2020 budgeted expenses and fully fund its budgeted 
expenses for the 2020-2021 and subsequent marketing years.
    The Committee met on March 1, 2019, and unanimously recommended 
2019-2020 marketing year expenditures of $272,850 and an assessment 
rate of $0.10 per pound of spearmint oil handled. In comparison, last 
year's budgeted expenditures were $233,800. The proposed assessment 
rate of $0.10 is $0.01 higher than the $0.09 rate currently in effect. 
The Committee recommended the assessment rate increase because 
expenditures have exceeded assessment revenue in the previous five 
marketing years and financial reserves have been reduced to 
approximately $180,000. Even with an assessment rate increase, monetary 
reserves are expected to be further reduced during the 2019-2020 
marketing year to approximately $130,000 but should stabilize at that 
level for the 2020-2021 and subsequent marketing years.
    The major expenditures recommended by the Committee for the 2019-
2020 marketing year include $169,000 for contracted administration by 
Ag Association Management, $45,000 for software/website maintenance, 
$30,850 for administrative expenses, $15,000 for Committee expenses, 
and $13,000 for market research and development projects. In 
comparison, major expenses for the 2018-2019 marketing year included 
$169,000 for contracted administration, $5,000 for software/website 
maintenance, $35,300 for administrative expenses, $17,500 for Committee 
expenses, and $12,000 for market research and development projects.
    The assessment rate recommended by the Committee was derived by 
considering anticipated expenses, expected spearmint oil sales, and the 
amount of funds available in the authorized reserve. Income derived 
from handler assessments of $220,500 (2,205,000 million pounds of 
spearmint oil at $0.10 per pound), along with $1,650 in interest income 
and $50,700 from reserve funds, would be adequate to cover budgeted 
expenses of $272,850. Funds in the reserve (estimated to be $180,561 at 
the beginning of the 2019-2020 marketing year) would be kept within the 
maximum permitted by Sec.  927.42(a) and would not exceed the expenses 
of approximately one marketing year.
    The assessment rate proposed in this rule would continue in effect 
indefinitely unless modified, suspended, or terminated by USDA upon 
recommendation and information submitted by the Committee or other 
available information.
    Although this assessment rate would be in effect for an indefinite 
period, the Committee would continue to meet prior to or during each 
marketing year to recommend a budget of expenses and consider 
recommendations for modification of the assessment rate. The dates and 
times of Committee meetings are available from the Committee or USDA. 
Committee meetings are open to the public and interested persons may 
express their views at these meetings. USDA would evaluate Committee 
recommendations and other available information to determine whether 
modification of the assessment rate is needed. Further rulemaking would 
be undertaken as necessary. The Committee's budget for subsequent 
marketing years would be reviewed and, as appropriate, approved by 
USDA.

Initial Regulatory Flexibility Act

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA) (5 U.S.C. 601-612), the Agricultural Marketing Service (AMS) 
has considered the economic impact of this proposed rule on small 
entities. Accordingly, AMS has prepared this initial regulatory 
flexibility analysis.
    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. Marketing orders issued 
pursuant to the Act are unique in that they are brought about through 
group action of essentially small entities acting on their own behalf.
    There are approximately 33 producers and 90 producers of Scotch and 
Native spearmint oil, respectively, in the regulated production area 
and approximately 8 spearmint oil handlers subject to regulation under 
the Order. Small agricultural service firms are defined by the Small 
Business Administration (SBA) as those having annual receipts of less 
than $7,500,000, and small agricultural producers are defined as those 
having annual receipts of less than $750,000 (13 CFR 121.201).
    The Committee reported that recent producer prices for spearmint 
oil range from $15.50 to $18.00 per pound. The National Agricultural 
Statistics Service (NASS) reported that the 2017 U.S. season average 
spearmint oil producer price per pound was $16.20 (NASS has not 
released data for 2018). Multiplying $16.20 per pound by 2016-2017 
spearmint oil utilization of 2,186,751 million pounds yields a crop 
value estimate of about $35.4 million. Total 2016-2017 spearmint oil 
utilization, reported by the Committee, is 621,236 pounds and 1,565,515 
pounds for Scotch and Native spearmint oil, respectively.
    Given the accounting requirements for the volume regulation 
provisions of the Order, the Committee maintains accurate records of 
each producer's production and sales. Using the $16.20 average 
spearmint oil price, and Committee production data for each producer, 
the Committee estimates that 11 of the 33 Scotch spearmint oil 
producers and 34 of the 90 Native spearmint oil producers could be 
classified as small entities under the SBA definition.
    There is no third party or governmental entity that collects and 
reports spearmint oil prices received by spearmint oil handlers. 
However, the Committee estimates an average spearmint oil handling 
markup at approximately 20 percent of the price received by producers. 
Multiplying 1.20 by the 2016 producer price of $16.20 yields a handler 
f.o.b. price per pound estimate of $19.44.
    Multiplying this handler f.o.b price by spearmint oil utilization 
of 2,186,751 pounds results in an estimated handler-level spearmint oil 
value of $42.5 million. Dividing this figure by the number of handlers 
(8) yields estimated average annual handler receipts of about $5.3 
million, which is below the SBA threshold for small agricultural 
service firms.
    Furthermore, using confidential data on pounds handled by each 
handler, and the abovementioned estimated handler price per pound, the 
Committee reported that it is likely that at least two of the eight 
handlers had 2017-2018 marketing year spearmint oil sales value that 
exceeded the SBA threshold.
    Therefore, in view of the foregoing, the majority of producers of 
spearmint oil may be classified as large entities and the majority of 
handlers of spearmint oil may be classified as small entities.
    This proposed rule would increase the assessment rate collected 
from handlers for the 2019-2020 and subsequent marketing years from 
$0.09 to $0.10 per pound of spearmint oil handled. The Committee 
unanimously recommended 2019-2020 marketing year expenditures of 
$272,850 and the $0.10 per pound assessment rate. The proposed 
assessment rate of $0.10 is $0.01 higher than the rate for the 2018-
2019 marketing year. The Committee

[[Page 25012]]

estimates that the industry will handle 2,205,000 pounds of spearmint 
oil during the 2019-2020 marketing year. Thus, the $0.10 per pound rate 
should provide $220,500 in assessment income. Income derived from 
handler assessments, and $1,650 of interest income, would be adequate 
to cover most of the budgeted expenses. Given the budgeted one-time 
$45,000 expense to upgrade the Committee's electronic recordkeeping 
system, the Committee anticipates needing to draw $50,700 from its 
monetary reserve in the 2019-2020 marketing year to fully fund all its 
budgeted expenses. However, the Committee expects that assessment 
revenue will completely cover budgeted expenses for the 2020-2021 and 
subsequent marketing years.
    The major expenditures recommended by the Committee for the 2019-
2020 marketing year include $169,000 for contracted administration by 
Ag Association Management, $45,000 for software/website maintenance, 
$30,850 for administrative expenses, $15,000 for Committee expenses, 
and $13,000 for market research and development projects. Budgeted 
expenses for these items in the 2018-2019 marketing year were $169,000, 
$5,000, $35,300, $17,500, and $12,000, respectively.
    The proposed higher assessment rate is necessary to cover most of 
the Committee's 2019-2020 marketing year budgeted expenditures. The 
Committee has had to draw from its monetary reserve to partially fund 
program activities during the previous five marketing years and expects 
to draw $50,700 from the reserve in the 2019-2020 marketing year to 
fund a one-time $45,000 upgrade to its electronic recordkeeping system. 
However, the Committee believes that drawing from its financial reserve 
to fund operations on an on-going basis is not a sustainable strategy. 
Increasing the continuing assessment rate would allow the Committee to 
fully fund budgeted expenses, and replenish its financial reserve, 
beginning in the 2020-2021 marketing year.
    Prior to arriving at this budget and assessment rate, the Committee 
considered maintaining the current assessment rate of $0.09 per pound. 
However, leaving the assessment rate unchanged would not have generated 
enough revenue to meet the Committee's 2019-2020 marketing year 
budgeted expenses and would have required the Committee to deplete its 
financial reserve to a fiscally dangerous level. Based on estimated 
shipments, the recommended assessment rate of $0.10 per pound of 
spearmint oil should provide $220,500 in assessment income. The 
Committee determined assessment revenue would be adequate to cover most 
of the budgeted expenditures for the 2019-2020 marketing year and all 
of the Committee's budgeted expenditures for the 2020-2021 and 
subsequent marketing years. Moving forward, any excess funds would be 
used to replenish the Committee's monetary reserve. Reserve funds would 
be kept within the amount authorized in the Order.
    A review of historical information and preliminary information 
pertaining to the upcoming marketing year indicates that the average 
producer price for the 2019-2020 season should be approximately $15.50-
18.00 per ton of spearmint oil. Therefore, the estimated assessment 
revenue for the 2019-2020 marketing year as a percentage of total 
producer revenue would be between 0.55 and 0.65 percent.
    This proposed action would increase the assessment obligation 
imposed on handlers. While assessments impose some additional costs on 
handlers, the costs are minimal and uniform on all handlers. Some of 
the additional costs may be passed on to producers. However, these 
costs would be offset by the benefits derived by the operation of the 
Order.
    The Committee's meetings were widely publicized throughout the Far 
West Spearmint Oil industry. All interested persons were invited to 
attend the meetings and participate in Committee deliberations on all 
issues. Like all Committee meetings, the March 1, 2019, meeting was a 
public meeting and all entities, both large and small, were able to 
express views on this issue. Interested persons are invited to submit 
comments on this proposed rule, including the regulatory and 
information collection impacts of this action on small businesses.
    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
Chapter 35), the Order's information collection requirements have been 
previously approved by the OMB and assigned OMB No. 0581-0178, 
Specialty Crops. No changes in those requirements would be necessary 
because of this action. Should any changes become necessary, they would 
be submitted to OMB for approval.
    This proposed rule would not impose any additional reporting or 
recordkeeping requirements on either small or large Far West spearmint 
oil handlers. As with all Federal marketing order programs, reports and 
forms are periodically reviewed to reduce information requirements and 
duplication by industry and public sector agencies.
    AMS is committed to complying with the E-Government Act, to promote 
the use of the internet and other information technologies to provide 
increased opportunities for citizen access to Government information 
and services, and for other purposes.
    USDA has not identified any relevant Federal rules that duplicate, 
overlap, or conflict with this proposed rule.
    A small business guide on complying with fruit, vegetable, and 
specialty crop marketing agreements and orders may be viewed at: https://www.ams.usda.gov/rules-regulations/moa/small-businesses. Any questions 
about the compliance guide should be sent to Richard Lower at the 
previously mentioned address in the FOR FURTHER INFORMATION CONTACT 
section.

List of Subjects in 7 CFR Part 985

    Marketing agreements, Oils and fats, Reporting and recordkeeping 
requirements, Spearmint oil.

    For the reasons set forth in the preamble, 7 CFR part 985 is 
proposed to be amended as follows:

PART 985--MARKETING ORDER REGULATING THE HANDLING OF SPEARMINT OIL 
PRODUCED IN THE FAR WEST

0
1. The authority citation for part 985 continues to read as follows:

    Authority: 7 U.S.C. 601-674.

0
2. Section 985.141 is revised to read as follows:


Sec.  985.141  Assessment rate.

    On and after June 1, 2019, an assessment rate of $0.10 per pound is 
established for Far West spearmint oil. Unexpended funds may be carried 
over as a reserve.

    Dated: May 23, 2019.
Bruce Summers,
Administrator, Agricultural Marketing Service.
[FR Doc. 2019-11207 Filed 5-29-19; 8:45 am]
BILLING CODE 3410-02-P