Olives Grown in California; Increased Assessment Rate, 39374-39377 [2023-12769]

Agencies

• Agricultural Marketing Service
• DEPARTMENT OF AGRICULTURE

[Federal Register Volume 88, Number 116 (Friday, June 16, 2023)]
[Proposed Rules]
[Pages 39374-39377]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-12769]


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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. 88 , No. 116 / Friday, June 16, 2023 / 
Proposed Rules

[[Page 39374]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 932

[Doc. No. AMS-SC-22-0094]


Olives Grown in California; Increased Assessment Rate

AGENCY: Agricultural Marketing Service, Department of Agriculture 
(USDA).

ACTION: Proposed rule.

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SUMMARY: This proposed rule would implement a recommendation from the 
California Olive Committee to increase the assessment rate established 
for the 2023 fiscal year and subsequent fiscal years. The proposed 
assessment rate would remain in effect indefinitely unless modified, 
suspended, or terminated.

DATES: Comments must be received by July 17, 2023.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this proposed rule. Comments may be sent to the Docket 
Clerk, Market Development Division, Specialty Crops Program, AMS, USDA, 
1400 Independence Avenue SW, STOP 0237, Washington, DC 20250-0237. 
Comments may be sent to the Docket Clerk electronically by Email: 
[email protected] 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 can 
be viewed at: https://www.regulations.gov. All comments submitted in 
response to this proposed 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: Jeremy Sasselli, Marketing Specialist, 
or Gary Olson, Chief, Western Region Branch, Market Development 
Division, Specialty Crops Program, AMS, USDA; Telephone: (559) 487-5901 
or Email: [email protected] or [email protected].
    Small businesses may request information on complying with this 
regulation by contacting Richard Lower, Market Development Division, 
Specialty Crops Program, AMS, USDA, 1400 Independence Avenue SW, STOP 
0237, Washington, DC 20250-0237; Telephone: (202) 720-8085, 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. 932, as amended (7 CFR part 932), regulating the handling of 
olives grown in California. Part 932 (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 
California Olive Committee (Committee) locally administers the Order 
and is comprised of producers and handlers of olives operating within 
the area of production and may have one public member.
    The Agricultural Marketing Service (AMS) is issuing this proposed 
rule in conformance with Executive Orders 12866 and 13563. 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. This action falls within 
a category of regulatory actions that the Office of Management and 
Budget (OMB) exempted from Executive Order 12866 review.
    This proposed rule has been reviewed under 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 rule is 
unlikely to have substantial direct effects on one or more Indian 
tribes, on the relationship between the Federal Government and Indian 
tribes, or on the distribution of power and responsibilities between 
the Federal Government and Indian tribes.
    This proposed rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. Under the Order now in effect, California olive 
handlers are subject to assessments. Funds to administer the Order are 
derived from such assessments. It is intended that the proposed 
assessment rate would be applicable to all assessable olives beginning 
on January 1, 2023, 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 AMS, 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 and all directly affected persons have an opportunity 
to participate and provide input.
    This proposed rule would increase the assessment rate from $16 per 
ton of assessed olives, the rate that was established for the 2022 and 
subsequent fiscal years, to $35 per ton of assessed olives for the 2023 
and subsequent fiscal years. The proposed higher rate is the

[[Page 39375]]

result of the significantly lower crop size in 2022 (fruit that is 
marketed over the course of the 2023 fiscal year) and the need to 
maintain the Committee's financial reserve.
    The Committee met on December 13, 2022, and unanimously recommended 
2023 fiscal year expenditures of $1,154,412 and an assessment rate of 
$35 per ton of assessed olives. In comparison, last year's budgeted 
expenditures were $1,245,085. The proposed assessment rate of $35 is 
$19 higher than the rate currently in effect. Producer receipts show a 
yield of 19,912 tons of assessable olives from the 2022 crop year, 
which is substantially less than the quantity of olives harvested in 
the 2021 crop year, in which 46,359 tons of assessable olives were 
produced.
    Olives harvested in 2022 will be marketed over the course of the 
2023 fiscal year, which begins on January 1, 2023. The 19,912 tons of 
assessable olives from the 2022 crop would generate $696,920 in 
assessment revenue at the proposed assessment rate. The balance of 
funds needed to cover budgeted expenditures would come from interest 
income, Federal grants, and the Committee's financial reserve. The 2023 
fiscal year assessment rate increase would be appropriate to ensure the 
Committee has sufficient revenue to fund the recommended 2023 fiscal 
year budgeted expenditures. Funds in the reserve are expected to remain 
within the Order's requirement of no more than approximately one fiscal 
year's budgeted expenses.
    The Order has a fiscal year and a crop year that are independent of 
each other. The crop year is a 12-month period that begins on August 1 
of each year and ends on July 31 of the following year. The fiscal year 
is the 12-month period that begins on January 1 and ends on December 31 
of each year. Olives are an alternate-bearing crop, with a large crop 
(2021) followed by a small crop (2022). For this assessment rate 
proposed rule, the actual 2022 crop year receipts are used to determine 
the assessment rate for the 2023 fiscal year.
    The major expenditures recommended by the Committee for the 2023 
fiscal year include $547,700 for program administration, $193,000 for 
marketing activities, $325,712 for research, and $88,000 for 
inspection. Budgeted expenses for these items during the 2022 fiscal 
year were $538,700, $284,000, $379,485, and $42,900, respectively.
    The assessment rate recommended by the Committee resulted from 
consideration of anticipated fiscal year expenses, actual olive tonnage 
received by handlers during the 2022 crop year, and the amount in the 
Committee's financial reserve. Income derived from handler assessments 
and other revenue sources is expected to be adequate to cover budgeted 
expenses. The assessment rate proposed in this rulemaking would 
continue in effect indefinitely unless modified, suspended, or 
terminated by AMS 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 
fiscal 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 AMS. 
Committee meetings are open to the public and interested persons may 
express their views at these meetings. AMS 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 
fiscal years would be reviewed and, as appropriate, approved by AMS.

Initial Regulatory Flexibility Analysis

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA) (5 U.S.C. 601-612), 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, and the rules issued thereunder, are unique in 
that they are brought about through group action of essentially small 
entities acting on their own behalf.
    There are approximately 800 producers of olives in the production 
area and 2 handlers subject to regulation under the Order. Small 
agricultural producers of olives are defined by the Small Business 
Administration (SBA) as those having annual olive receipts of less than 
$3.5 million (NAICS code 111339, Other Noncitrus Fruit Farming), and 
small agricultural service firms are defined as those whose annual 
receipts are less than $34 million (NAICS code 115114, Postharvest Crop 
Activities) (13 CFR 121.201).
    Because of the large year-to-year variation in California olive 
production, it is helpful to use two-year averages of seasonal average 
grower price when undertaking calculations relating to average grower 
revenue. The National Agricultural Statistics Service (NASS) reported 
season average grower prices of olives utilized for canning for 2020 
and 2021 of $1,060 and $1,110 per ton, respectively, with a two-year 
average price of $1,085.
    The appropriate quantities to consider are the annual assessable 
olive quantities, which were 19,912 tons in 2022 and 43,336 tons in 
2021, with two-year average production of 31,624 tons. Multiplying 
31,624 tons by the two-year average grower price of $1,085 yields a 
two-year average crop value of $34.312 million. Dividing the crop value 
by the number of olive producers (800) yields calculated annual average 
revenue per producer of $42,890, much less than SBA's size standard of 
$3.5 million. Thus, the majority of olive producers may be classified 
as small entities.
    Dividing the $34.312 million average crop value by 2 (the number of 
handlers) equals $17.156 million, which is the annual average olive 
crop value processed by each of the 2 handlers over the two-year 
period. Subtracting $17.156 million average crop value from the large 
handler size threshold of $34 million yields a difference of $16.844 
million. Dividing the $16.844 million difference by $17.156 average 
crop value processed by each of the handlers yields an average 
manufacturing margin of 98 percent to be considered large handlers. A 
key question is whether 98 percent is a reasonable estimate of a 
manufacturing margin for the olive canning process.
    A review of economic literature on canned food manufacturing 
margins found no recent published estimates. A series of Economic 
Research Service reports on cost components of farm to retail price 
spreads, published in the late 1970s and early 1980s, found that 
margins above crop value for a canned vegetable product were in the 
range of 76 to 85 percent. These margins are somewhat below the 
computed margin estimate of 98 percent to reach the $34 million SBA 
threshold to be a large, canned olive handler. Although the studies are 
not recent, key observations are that canning technology has not 
changed significantly in that time period, but canning costs may have 
risen somewhat. Therefore, the conclusion to be drawn from these 
computations is that the two handlers are slightly below the large 
handler threshold of $34 million in annual canned olive sales, using 
two-year average data, and assuming that the 2 handlers are about the 
same size.

[[Page 39376]]

    In a large crop year, one or both handlers could be considered 
large handlers, depending on the proportion of the olive crop that each 
of the handlers processed. For example, the 2021 quantity of assessable 
olives was 43,336 tons, and half of that quantity was 21,668 tons. 
Multiplying that tonnage by the average grower price of $1,085 per ton 
yields a crop value per handler estimate of $23.51 million. To reach 
the $34 million size threshold would mean canning costs of at least 
$10.49 million, which would be a manufacturing margin of 45 percent 
($10.49/$23.51)--well below the range of canning margins shown above.
    The contrasting examples presented here show that in terms of 
canned olive sales, the processors can be viewed as either being above 
or below the SBA large handler size threshold, depending on the 
assumptions used in alternative calculations.
    This proposal would increase the assessment rate collected from 
handlers for the 2023 and subsequent fiscal years from $16 to $35 per 
ton of assessable olives. The Committee unanimously recommended 2023 
expenditures of $1,154,412 and an assessment rate of $35 per ton. The 
recommended assessment rate of $35 is $19 higher than the 2022 rate. 
The quantity of assessable olives harvested in the 2022 crop year was 
19,912 tons, as compared to 46,359 tons in 2021. Olives are an 
alternate-bearing crop, with a large crop (2021) followed by a small 
crop (2022). Income derived from the $35 per ton assessment rate, along 
with interest income, Federal grants, and funds from the authorized 
reserve, should be adequate to meet this fiscal year's budgeted 
expenditures.
    The Committee's financial reserve is projected to be sufficient to 
partially fund 2023 fiscal year budgeted expenditures and remain within 
the requirements of Sec.  932.40(a)(2) of the Order. The major 
expenditures recommended by the Committee for the 2023 fiscal year 
include $547,700 for program administration, $193,000 for marketing 
activities, $325,712 for research, and $88,000 for inspection. Budgeted 
expenses for these items during the 2022 fiscal year were $538,700, 
$284,000, $379,485, and $42,900 respectively. The Committee deliberated 
on many of the expenses, weighed the relative value of various programs 
or projects, and decreased the budgeted expenses for research and 
marketing activities, while increasing the budget for administration 
and inspection program costs. Overall, the 2023 fiscal year budget of 
$1,154,412 is $90,673 less than the $1,245,085 budgeted for the 2022 
fiscal year.
    Prior to arriving at this budget and assessment rate, the Committee 
considered information from various sources including the Committee's 
Executive, Marketing, Inspection, and Research Subcommittees. Alternate 
expenditure levels were discussed by these groups, based upon the 
relative value of various projects to the olive industry and the 
decreased olive production. The assessment rate of $35 per ton of 
assessable olives was derived by considering anticipated expenses, the 
relatively low volume of assessable olives, the current balance in the 
monetary reserve, and additional pertinent factors.
    A review of NASS information indicates that the average producer 
price for the 2021 crop year, the most recent crop year surveyed by 
NASS, was $851 per ton. The quantity of assessable olives harvested 
during the 2022 crop year was 19,912 tons, which makes estimated total 
producer revenue $16,945,112 ($851 multiplied by 19,912 tons). 
Therefore, utilizing the assessment rate of $35 per ton, the assessment 
revenue for the 2023 fiscal year as a percentage of estimated total 
producer revenue is expected to be approximately 4.1 percent ($35 
multiplied by 19,912 tons divided by $16,945,112 multiplied by 100).
    This proposed action would increase the assessment obligation 
imposed on handlers. Assessments are applied uniformly on all handlers, 
and some of the 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 are widely publicized throughout the 
production area. The olive industry and all interested persons are 
invited to attend the meetings and participate in Committee 
deliberations on all issues. Like all Committee meetings, the December 
13, 2022, meeting was a public meeting and all entities, both large and 
small, were able to express views on this issue. In addition, 
interested persons are invited to submit comments on this proposed 
rule, including the regulatory and information collection impacts of 
this action on small businesses.
    After consideration of all relevant material presented, including 
the information and recommendations submitted by the Committee and 
other available information, AMS has determined that this proposed rule 
is consistent with and will effectuate the purposes of the Act.
    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 OMB and assigned OMB No. 0581-0178 Vegetable and 
Specialty Crops. No changes in those requirements as a result of this 
action are necessary. 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 California olive 
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.
    AMS has not identified any relevant Federal rules that duplicate, 
overlap, or conflict with this action.
    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. A 30-day comment period is provided to allow interested 
persons to respond to this proposed rule. All written comments timely 
received will be considered before a final determination is made on 
this proposed rule.

List of Subjects in 7 CFR Part 932

    Marketing agreements, Olives, Reporting and recordkeeping 
requirements.

    For the reasons set forth in the preamble, the Agricultural 
Marketing Service proposes to amend 7 CFR part 932 as follows:

PART 932--OLIVES GROWN IN CALIFORNIA

0
1. The authority citation for 7 CFR part 932 continues to read as 
follows:

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

0
2. Section 932.230 is revised to read as follows:

[[Page 39377]]

Sec.  932.230  Assessment rate.

    On and after January 1, 2023, an assessment rate of $35 per ton is 
established for California olives.

Erin Morris,
Associate Administrator, Agricultural Marketing Service.
[FR Doc. 2023-12769 Filed 6-15-23; 8:45 am]
BILLING CODE P