[Federal Register Volume 64, Number 18 (Thursday, January 28, 1999)]
[Proposed Rules]
[Pages 4353-4356]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-1993]
[[Page 4353]]
=======================================================================
-----------------------------------------------------------------------
NORTHEAST DAIRY COMPACT COMMISSION
7 CFR Parts 1307 and 1308
Over-Order Price Regulation
AGENCY: Northeast Dairy Compact Commission.
ACTION: Proposed rule; notice of hearing.
-----------------------------------------------------------------------
SUMMARY: The Northeast Dairy Compact Commission proposes to amend the
method for determining the amount of the administrative assessment
charged to milk handlers. The proposed rule would give the Commission
discretion, in any given month, to waive the administrative assessment
entirely, or to set the rate at an amount less than the current flat
rate of 3.2c per hundredweight of fluid milk. The Commission's goal is
to maintain a reserve account in the range of 80% to 120% of four-
months operating expenses, as determined to be necessary in the budget
approved by the Commission. However, his range would not be binding on
the Commission and the Commission would at all times retain discretion
whether to waive the administrative assessment or to set the rate at an
amount less than 3.2 cents. The Commission also invites comments on
whether the rule should be amended to permit the Commission to adjust
the administrative assessment upward, from the current rate of 3.2c, in
exceptional circumstances and, if so, what exceptional circumstances
would justify such an adjustment. Finally, the Commission proposes to
promulgate a new rule that would require handlers to make payment to
the Compact Commission by electronic funds transfer, if the total
amount due is greater than $25,000.
DATES: A public hearing will be held on March 3, 1999 at 9 a.m. Sworn
and notarized written testimony, comments and exhibits may be submitted
until 5 p.m. on March 17, 1999.
ADDRESSES: The public hearing will be held at Tuck Library, Chubb
Auditorium, 30 Park Street, Concord, New Hampshire. Mail, or deliver,
sworn and notarized testimony, comments and exhibits to: Northeast
Dairy Compact Commission, 34 Barre Street, Suite 2, Montpelier, Vermont
05602.
FOR FURTHER INFORMATION CONTACT: Kenneth M. Becker, Executive Director,
Northeast Dairy Compact Commission at the above address or by telephone
at (802) 229-1941, or by facsimile at (802) 229-2028.
SUPPLEMENTARY INFORMATION:
I. Background
The Northeast Dairy Compact Commission (``Commission'') was
established under authority of the Northeast Interstate Dairy Compact
(``Compact''). The Compact was enacted into law by each of the six
participating New England states as follows: Connecticut--Pub. L. 93-
320; Maine--Pub. L. 89-437, as amended, Pub. L. 93-274; Massachusetts--
Pub. L. 93-370; New Hampshire--Pub. L. 93-336; Rhode Island--Pub. L.
93-106; Vermont--Pub. L. 93-57. In accordance with Article I, Section
10 of the United States Constitution, Congress consented to the Compact
in Pub. L. 104-127 (FAIR Act), Section 147, codified at 7 U.S.C. 7256.
Subsequently, the United States Secretary of Agriculture, pursuant to 7
U.S.C. 7256(1), authorized implementation of the Compact.
Pursuant to its rulemaking authority under Article V, Section 11 of
the Compact, the Commission concluded an informal rulemaking process
and voted to adopt a compact over-order price regulation on May 30,
1997.\1\ The Commission subsequently amended and extended the compact
over-order price regulation.\2\ In 1998, the Commission further amended
specific provisions of the over-order price regulation.\3\ The current
compact over-order price regulation is codified at 7 CFR Chapter XIII.
---------------------------------------------------------------------------
\1\ 62 FR 29626 (May 30, 1997)
\2\ 62 FR 62810 (Nov. 25, 1997)
\3\ 63 FR 10104 (Feb. 27, 1998); 63 FR 46385 (Sept. 1, 1998);
and 63 FR 65517 (Nov. 27, 1998).
---------------------------------------------------------------------------
On November 27, 1998, the Commission issued a notice of proposed
rulemaking proceedings on several subjects and issues, including
whether the amount of, or method for determining, the administrative
assessment should be amended.\4\ The Commission held a public hearing
to receive testimony on December 11, 1998 in Boxborough, Massachusetts
and comments were received until 5 p.m. on December 31, 1998.
---------------------------------------------------------------------------
\4\ 63 FR 65563 (Nov. 27, 1998).
---------------------------------------------------------------------------
On January 13, 1999, the Commission held its deliberative meeting,
pursuant to 7 CFR 1361.8, to consider all oral and written comments
received at the public hearing and the additional comments received by
the Commission's published comment deadline of December 31, 1998, and
to deliberate and act on the proposed subjects and issues rulemaking
regarding whether the amount of, or method for determining, the
administrative assessment should be amended.\5\
---------------------------------------------------------------------------
\5\ 64 FR 533 (Jan. 5, 1999).
---------------------------------------------------------------------------
Based on the oral testimony and written comments and exhibits
received in that proceeding, the Commission proposes to amend the
method for determining the amount of the administrative assessment
charged to milk handlers.\6\ The proposed rule would give the
Commission discretion, in any given month, to waive the administrative
assessment entirely, or to set the rate at an amount less than the
current flat rate of 3.2 cents per hundredweight of fluid milk. The
waiver or reduction would be based on the Commission's reserves and
expenses. The Commission's goal is to maintain a reserve account in the
range of 80% to 120% of four-months operating expenses, as determined
to be necessary in the budget approved by the Commission. However, this
range would not be binding on the Commission and the Commission would
at all times retain discretion whether to waive the administrative
assessment or to set the rate at an amount less than 3.2 cents. The
Commission would welcome public comments on these proposals. The
Commission also invites comments on whether the rule should be amended
to permit the Commission to adjust the administrative assessment
upward, from the current rate of 3.2 cents, in exceptional
circumstances and, if so, what exceptional circumstances would justify
such an adjustment.
---------------------------------------------------------------------------
\6\ The current administrative assessment regulation is
published at 7 CFR part 1308.
---------------------------------------------------------------------------
In addition to the proposed amendments to the administrative
assessment, the Commission also proposes to promulgate a new rule that
would require handlers to make payment to the Compact Commission by
electronic funds transfer, if the total amount due is greater than
$25,000.
II. Summary and Analysis of Issues and Comments
Administrative Assessment
The Commission received oral and written testimony and comment from
the Commission's Regulations Administrator, Carmen Ross, and eight
commenters in the subjects and issues rulemaking proceeding regarding
whether the amount of, or method for determining, the administrative
assessment should be amended.\7\
---------------------------------------------------------------------------
\7\ Carmen L. Ross, Transcript (``Tr.'') at 4; Charles Arbing,
Tr. at 30; Diane Bothfeld Tr. at 54 and Written Comment (``WC'') at
32; Leon J. Berthiaume, WC 13; Robert D. Wellington, WC 16; Edward
W. Gallagher, WC 18; Sally J. Beach, WC 21; Michael L. Altman, WC
25; and Leon Graves, WC 34.
---------------------------------------------------------------------------
Mr. Ross testified that the Compact authorizes the Commission to
impose an assessment on milk handlers to cover
[[Page 4354]]
the costs of the administration and enforcement of the over-order price
regulation. The Compact also requires the Commission to establish a
reserve for the ongoing operating expenses.\8\ Mr. Ross explained that
the current regulation requires handlers of Class I milk products
disposed of in the regulated area to pay their pro rata share of the
expenses of the administration and enforcement of the over-order price
regulation. The current administrative assessment is a flat rate of 3.2
cents per hundredweight and results in a variance in income of up to
13% per month.\9\
---------------------------------------------------------------------------
\8\ Ross, Tr. at 5; See also, Compact Article IV, Section 10 (9)
and Article VII, Section 18(a).
\9\ Ross, Tr. at 5-6.
---------------------------------------------------------------------------
The Commission regulation is, in all material respects, the same as
corresponding provisions of the Federal Order # 1
regulations.10
---------------------------------------------------------------------------
\10\ Ross, Tr. at 6-8.
---------------------------------------------------------------------------
Under the Compact, like Federal Order #1, the handler is
responsible for making payments of the administrative assessment.
Under the Compact, like Federal Order #1, the handler is responsible
for payment to the pool. Both the Compact and the Federal Order # 1
regulate handlers of fluid milk products disposed of in the
regulated area, and define ``handler'' to cover operator's of pool
plants, partially regulated plants, cooperative associations and
others who receive and distribute fluid milk products.11
---------------------------------------------------------------------------
\11\ Ross, Tr. at 6.
---------------------------------------------------------------------------
Mr. Ross explained that under the Federal Market Order # 1
regulation, ``the Federal Market Order (Administrator) can, when
conditions warrant it, reduce or even waive the administrative
assessment.'' 12 Under Federal Market Administrator
Instruction #207, the United States Department of Agriculture Dairy
Division recommends that budgeted operating reserves be maintained
within a range of 80% to 120% of the designated reserve level.
13
---------------------------------------------------------------------------
\12\ Ross, Tr. at 8.
\13\ Market Administrator Instruction #207, WC at 3-11.
---------------------------------------------------------------------------
Some commenters 14 suggested that the Commission waive
or reduce the administrative assessment in months in which there is no
producer pool. Conversely, other commenters 15 concluded
that the administrative assessment should be charged in all months,
regardless of whether there is a Compact producer pool in a particular
month, to ensure adequate funding of the Commission's other functions.
Mr. Ross testified, that the Commission has responsibilities in
addition to running the pool. In particular, he stated that it is
imperative that the Compact Commission continues to monitor the Compact
pool because the handlers still have to report and producers may be
qualified in and out of the pool, even in months when the federal price
is above the Compact minimum price and there is no Compact producer
pool.16 Accordingly, the Commission does not agree that the
administrative assessment should be tied to whether there is a producer
pool in a particular month.
---------------------------------------------------------------------------
\14\ Arbing, Tr. at 31-32; Bothfeld, Tr. at 55; Berthiaume, WC
at 14; and Graves, WC at 34.
\15\ Wellington, WC at 16-17; Gallagher, WC at 20; and Beach, WC
at 22.
\16\ Ross, Tr. at 24-25.
---------------------------------------------------------------------------
Many commenters 17 encouraged the Commission to amend
the administrative assessment regulation to allow the flexibility to
adjust the assessment rate, as needed and appropriate, to meet the
Commission's expenses, and to waive or reduce the assessment when the
Commission operating reserves permit it. For example, Mr. Arbing
testified that the Commission should waive the administrative
assessment in months in which the Commission has sufficient
reserves.18 He testified that he would support a methodology
that allowed the Commission discretion to waive or adjust the
assessment depending on the reserves and expenses of the
Commission.19 He further testified that he would consider
four months operating reserves, based on the budget approved by the
Commission, to be an appropriate level for a reserve fund.20
Other commenters also recommended that the Commission establish
adequate reserves based on the Commission's budget.21
---------------------------------------------------------------------------
\17\ Arbing, Tr. at 31; Bothfeld, Tr. at 55; Berthiaume, WC at
14; Wellington, WC at 16; Gallagher, WC at 20; and Graves, WC at 34.
\18\ Arbing, Tr. at 31.
\19\ Arbing, Tr. at 53-54.
\20\ Arbing, Tr. at 38, 40-41.
\21\ Bothfeld, Tr. at 55; Berthiaume, WC at 14; Wellington, WC
at 16; Gallagher, WC at 20; and Graves, WC at 34.
---------------------------------------------------------------------------
The Commission concludes that these commenters 22 raise
valid points and, therefore, proposes to amend the method for
determining the amount of the administrative assessment charged to milk
handlers, without regard to whether there is a producer pool in a given
month. The proposed rule would give the Commission discretion, in any
given month, to waive the administrative assessment entirely, or to set
the rate at an amount less than the current flat rate of 3.2 cents per
hundredweight of fluid milk. The waiver or reduction would be based on
the Commission's reserves and expenses. The Commission's goal is to
maintain a reserve account in the range of 80% to 120% of four-months
operating expenses, as determined to be necessary in the budget
approved by the Commission. This range, however, would not be binding
on the Commission and the Commission would at all times retain
discretion whether to waive or set a lower rate for the administrative
assessment. The Commission also is considering an additional amendment
that would give the Commission discretion to adjust the administrative
assessment upward, from the current rate of 3.2 cents, in exceptional
circumstances and, if so, what exceptional circumstances would justify
such an adjustment.
---------------------------------------------------------------------------
\22\ Arbing, Tr. at 31, 38, 40-41(re: importance to processors
to waive the administrative assessment when the Commission has
adequate reserves); and Bothfeld, Tr. at 55, Berthiaume, WC at 14,
Wellington, WC at 16, Gallagher, WC at 20, Beach, WC at 22, Graves,
WC at 34 (re: in support of the Commission having the flexibility to
waive or reduce the administrative assessment rate when the
operating reserves permit it)
---------------------------------------------------------------------------
One commenter 23 offered several arguments related to
the Commission's use of the funds generated by the administrative
assessment. This commenter argues that section 18 of the Compact only
permits the Commission to assess and use the administrative assessment
for the direct costs of administering the producer pool, i.e.
computation and announcement of the over-order price, pursuant to 7 CFR
part 1305, and the computation and announcement of the producer price,
pursuant to 7 CFR part 1306, and the receipt and distribution of monies
from the producer-settlement fund.24 This commenter asks the
Commission to amend its regulations to conform to this narrow
interpretation of the Compact.25
---------------------------------------------------------------------------
\23\ Altman, WC at 26.
\24\ Altman, WC at 26-30.
\25\ Altman, WC at 30.
---------------------------------------------------------------------------
The implication of this argument is that the commenter does not
view the Commission as authorized to use the administrative assessment
funds for administration and enforcement of any other regulation or
provision of the Compact. Some of the Commission activities authorized
by these other regulations and Compact provisions include
rulemaking,26 prescribing and verifying handler's reports
(which are the basis for the administration of the over-order
price),27 determining the qualification of
producers,28 classifying milk,29 providing an
exemption process for regulated persons,30 to meet and
[[Page 4355]]
conduct business,31 enforcing the Compact and over-order
price regulation,32 and conducting and administering the
activities authorized by Articles I, II, IV or VII of the Compact.
---------------------------------------------------------------------------
\26\ 7 CFR 1300.1 and 7 CFR parts 1361 and 1371 and Compact
Article V.
\27\ 7 CFR 1300.1, 7 CFR Part 1303 and Compact Article VI.
\28\ 7 CFR 1301.11.
\29\ 7 CFR part 1304.
\30\ 7 CFR part 1381, Compact Article VI, Section 16.
\31\ Compact Article III.
\32\ Compact Article VI.
---------------------------------------------------------------------------
The Commission respectfully disagrees with this commenter's narrow
interpretation of its authority as being contrary to both the letter
and the spirit of the Compact. The Compact charges the Commission with
the broad mission of taking ``such steps as are necessary to assure the
continued viability of dairy farming in the northeast, and to assure
consumers of an adequate, local supply of pure and wholesome milk.''
Compact Article I, Section 1. In addition to the activities authorized
by the Compact cited above, the Compact specifically authorizes the
Commission to adopt a compact over-order price regulation, and permits
that regulation to include ``an assessment for the specific purpose of
their administration.'' Compact Article VII, Section 18(a). The Compact
further states that any price regulation may include ``[o]ther
provisions and requirements as the commission may find are necessary or
appropriate to effectuate the purposes of this compact and to provide
for the payment of fair and equitable minimum prices to producers.''
Compact Article IV, Section 10 (11). The Compact also requires the
regulations to ``provide for establishment of a reserve for the
commission's ongoing operating expenses.'' Compact, Article VII,
Section 18(a). The Commission has promulgated regulations at 7 CFR
Chapter XIII to effectuate its obligations and responsibilities under
the Compact. The Commission is responsible for the administration and
enforcement of each of the individual regulations that constitute the
Northeast Dairy Compact Over-order Price Regulation, not only those
selected regulations identified by the commenter.
Finally, three commenters,33 asked the Commission to
consider amending the regulations to eliminate the over-order
obligation and administrative assessment on raw skim milk that is sold
in bulk to other processing plants who further process and bottle that
milk. The Commission considered the concerns expressed by these
commenters, but declines to propose the requested amendments at this
time. The Commission notes that the present Compact regulations are, in
all material respects, identical to the Federal Order # 1 regulations
in the treatment of the raw skim milk that is sold for further
processing.
---------------------------------------------------------------------------
\33\ Bothfeld, Tr. at 55-59; Berthiaume, WC at 14-15; and Beach,
WC at 22.
---------------------------------------------------------------------------
The Northeast Dairy Compact Commission has considered all the
testimony and comments provided and proposes to amend the method for
determining the amount of the administrative assessment charged to milk
handlers. The proposed rule would give the Commission discretion, in
any given month, to waive the administrative assessment entirely or to
set the rate at an amount less than the current flat rate of 3.2 cents
per hundredweight of fluid milk. The waiver or reduction would be based
on the Commission's reserves and expenses.
Method of Payment and Charges on Overdue Accounts
The Commission also proposes to add a new regulation which would
require that handlers make payment of the over-order obligation and
administrative assessment to the Commission by electronic transfer of
funds if the aggregate total due for the month is greater than $25,000.
The Commission seeks to add this rule in order to best ensure the
efficient and timely transfer of funds into the producer-settlement
fund and the corresponding timely distribution of funds from the
producer-settlement fund. Based on the experience of the Commission in
administering the producer-settlement fund, most handlers already use
electronic transfer of funds. The Commission also uses electronic
transfer of funds for distribution to handlers of monies from the
producer-settlement fund.
Official Notice of Technical, Scientific or Other Matters
Pursuant to the Commission regulations, 7 CFR 1361.5(g)(5), the
Commission hereby gives public notice that it may take official notice,
at the public hearing March 3, 1999, or afterward, of relevant facts,
statistics, data, conclusions, and other information provided by or
through the United States Department of Agriculture, including, but not
limited to, matters reported by the National Agricultural Statistics
Service, the Market Administrators, the Economic Research Service, the
Agricultural Marketing Service and information, data and statistics
developed and maintained by the Departments of Agriculture of the
States or Commonwealth within the Compact regulated area.
The Commission will also receive into the record of this rulemaking
proceeding the entire record, including the public hearing transcript
and written comments and submissions, of the subjects and issues
rulemaking proceeding regarding whether the amount of, or method for
determining, the administrative assessment should be amended.
Public Participation in Rulemaking Proceedings
The Commission seeks and encourages oral and written testimony and
comments from all interested persons regarding these proposed rules.
The Commission continues to benefit from the valuable insights and
active participation of all segments of the affected community
including consumers, processors and producers in the development and
administration of the Over-order Price Regulation.
Date, Time and Location of the Public Hearing
The Northeast Dairy Compact Commission will hold a public hearing
at 9 a.m. on March 3, 1999 at the Tuck Library, Chubb Auditorium, 30
Park Street, Concord, New Hampshire.
Request for Pre-filed Testimony and Written Comments
Pursuant to the Commission rules, 7 CFR 1361.4, any person may
participate in the rulemaking proceeding independent of the hearing
process by submitting written comments or exhibits to the Commission.
Comments and exhibits may be submitted at any time before 5 p.m. on
March 17, 1999.
Please note: Comments and exhibits will be made part of the
record of the rulemaking proceeding only if they identify the
author's name, address and occupation, and if they include a sworn
and notarized statement indicating that the comment and/or exhibit
is presented based upon the author's personal knowledge and belief.
Facsimile copies will be accepted up until the 5 p.m. deadline, but
the original must then be sent by ordinary mail.
The Commission is requesting pre-filed testimony from any
interested person. Pre-filed testimony must include the name, address
and occupation of the witness and a sworn notarized statement
indicating that the testimony is presented based upon the author's
personal knowledge and belief. Pre-filed testimony must be received in
the Commission office no later than 5 p.m. February 22, 1999 to insure
distribution to Commission members prior to the public hearing.
Pre-filed testimony, comments and exhibits should be sent to:
Northeast Dairy Compact Commission, 34 Barre Street, Suite 2,
Montpelier, Vermont 05602 or by facsimile to (802) 229-2028.
[[Page 4356]]
List of Subjects in 7 CFR Parts 1307 and 1308
Milk.
Codification in Code of Federal Regulations
For reasons set forth in the preamble, the Northeast Dairy Compact
Commission proposes to amend 7 CFR parts 1307 and 1308 as follows:
PART 1307--PAYMENTS FOR MILK
1. The authority citation for part 1307 continues to read as
follows:
Authority: 7 U.S.C. 7256
Sec. 1307.4 [Redesignated as Sec. 1307.5]
2. Section 1307.4 is redesignated Sec. 1307.5.
3. A new Sec. 1307.4 is added to read as follows:
Sec. 1307.4 Method of payment.
If the combined total of the handler's producer-settlement fund
debit for the month as determined under Sec. 1307.2(a) and the
handler's obligation for the month as determined under Sec. 1308.1 of
this chapter is greater than $25,000, then the handler must make
payment to the compact commission by electronic transfer of funds on or
before the 18th day after the end of the month.
PART 1308--ADMINISTRATIVE ASSESSMENT
1. The authority citation for part 1308 continues to read as
follows:
Authority: 7 U.S.C. 7256.
2. Section 1308.1 is amended by revising the introductory text to
read as follows:
Sec. 1308.1 Assessment for pricing regulations adminstration.
On or before the 18th day after the end of the month, each handler
shall pay to the compact commission his pro rata share of the expense
of administration of this pricing regulation. The payment shall be at
the rate of 3.2 cents per hundredweight. The Commission may waive, or
set the rate at an amount less than 3.2 cents, pursuant to Sec. 1308.2.
The payment shall apply to:
* * * * *
3. A new Sec. 1308.2 is added to read as follows:
Sec. 1308.2 Method to waive or change the administration assessment.
The compact commission may waive or change the assessment for
pricing regulation administration to maintain the operating reserve in
the range of 80% to 120% of four months operating expenses, as
determined in the budget approved by the commission. The compact
commission will announce, pursuant to Sec. 1305.2 of this chapter, the
waiver or change in rate of assessment.
Dated: January 22, 1999.
Kenneth M. Becker,
Executive Director.
[FR Doc. 99-1993 Filed 1-27-99; 8:45 am]
BILLING CODE 1650-01-P
