[Federal Register Volume 64, Number 210 (Monday, November 1, 1999)]
[Rules and Regulations]
[Pages 58763-58766]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-28373]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 981
[Docket No. FV99-981-4 IFR]
Almonds Grown in California; Revisions to Requirements Regarding
Credit For Promotion and Advertising Activities
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Interim final rule with request for comments.
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SUMMARY: This rule revises the requirements regarding credit for
promotion and advertising activities prescribed under the
administrative rules and regulations of the California almond marketing
order (order). The order regulates the handling of almonds grown in
California and is administered locally by the Almond Board of
California (Board). The order is funded through the collection of
assessments from almond handlers. Under the terms of the order's
regulations, handlers may receive credit towards their assessment
obligation for certain expenditures for marketing promotion activities,
including paid advertising. This rule revises the requirements
regarding the activities for which handlers may receive such credit by
allowing maximum credit for promoting almond products, under certain
conditions. The changes are intended to encourage and support almond
product development and thus increase the demand for almonds. The
changes also clarify existing regulations.
DATES: This interim final rule becomes effective November 2, 1999;
comments received by January 3, 2000 will be considered prior to
issuance of a final rule.
ADDRESSES: Interested persons are invited to submit written comments
concerning this rule. Comments must be sent to the Docket Clerk, Fruit
and Vegetable Programs, AMS, USDA, room 2525-S, P.O. Box 96456,
Washington, DC 20090-6456; Fax: (202) 720-5698 or E-mail:
moab.docketclerk@usda.gov. All comments should reference the docket
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.
FOR FURTHER INFORMATION CONTACT: Martin Engeler, Assistant Regional
Manager, California Marketing Field Office, Marketing Order
Administration Branch, F&V, AMS, USDA, 2202 Monterey Street, suite
102B, Fresno, California 93721; telephone: (559) 487-5901, Fax: (559)
487-5906; or George Kelhart, Technical Advisor, Marketing Order
Administration Branch, Fruit and Vegetable Programs, AMS, USDA, room
2525-S, P.O. Box 96456, Washington, DC 20090-6456; telephone: (202)
720-2491, Fax: (202) 720-5698. Small businesses may request information
on complying with this regulation by contacting Jay Guerber, Marketing
Order Administration Branch, Fruit and Vegetable Programs, AMS, USDA,
P.O. Box 96456, room 2525-S, Washington, DC 20090-6456; telephone (202)
720-2491, Fax: (202) 720-5698, or E-mail: Jay.Guerber@usda.gov.
SUPPLEMENTARY INFORMATION: This rule is issued under Marketing Order
No. 981, as amended (7 CFR part 981), regulating the handling of
almonds grown in California, hereinafter referred to as the ``order.''
The marketing 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 Department of Agriculture (Department) is issuing this rule in
conformance with Executive Order 12866.
This rule has been reviewed under Executive Order 12988, Civil
Justice Reform. This rule is not intended to have retroactive effect.
This rule will not preempt any State or local laws, regulations, or
policies, unless they present an irreconcilable conflict with this
rule.
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 the Secretary 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. A handler is afforded the opportunity for a hearing on the
petition. After the hearing the Secretary 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 the Secretary's
ruling on the petition, provided an action is filed not later than 20
days after the date of the entry of the ruling.
This rule revises the requirements regarding credit for promotion
and advertising activities prescribed under Sec. 981.441 of the
administrative rules and regulations of the order. The order is funded
through the collection of assessments from almond handlers. Under the
terms of the order's regulations, handlers may receive credit towards
their assessment obligation for certain expenditures for marketing
promotion activities, including paid advertising. This rule revises the
requirements regarding the activities for which handlers may receive
such credit by allowing maximum credit for promoting almond products,
under certain conditions. The changes also clarify existing
regulations. The changes are intended to encourage and support almond
product development and thus increase the demand for almonds. This rule
was unanimously recommended by the Board at a meeting on July 12, 1999,
with additional justification approved via facsimile vote during the
week of August 30, 1999.
The order provides authority for the Board to incur expenses for
administering the order and to collect assessments from handlers to
cover these expenses. Section 981.41(a) provides authority for the
Board to conduct marketing promotion projects, including projects
involving paid advertising. Section 981.41(c) allows the Board to
credit a handler's assessment obligation with all or a portion of his
or her direct expenditures for marketing promotion, including paid
advertising, that promotes the sale of almonds, almond products, or
their uses. Section 981.41(e) allows the Board to prescribe rules and
regulations regarding such credit for market promotion, including paid
advertising activities. Those regulations are prescribed in
Sec. 981.441.
The Department implemented several Board-recommended changes to the
regulations regarding the criteria that must be met in order for
handlers to receive credit for their promotional activities in July
1999 (64 FR 41023, July 29, 1999). However, the Department did not
implement one Board recommendation concerning credit for promoting
almond products at that time because of concerns regarding the lack of
specified criteria to be used in reviewing claims and concerns about
the claims review process. The Board and its staff reconsidered the
issue, further developed the concept, and submitted a revised
recommendation addressing the Department's concerns.
[[Page 58764]]
This rule implements the revised recommendation.
Current regulations crediting handlers' promotion of almond
products limit any such credit to the portion of the product weight
represented by almonds, or the handler's actual payment, whichever is
less. This limitation, as specified in Sec. 981.441(e)(iv), was
included because it was believed that while promoting almond products
was important, such activity might also promote and increase sales of
other ingredients in the product. Therefore, the amount of credit
handlers could receive was established at less than the maximum of
66\2/3\ percent. This maximum level is specified in Sec. 981.441(a).
The almond industry has historically been one of rapid growth.
Recent years have been no exception, as almond acreage has increased
substantially in the last decade. When coupled with increasing yields,
production is expected to achieve record levels in coming years. The
industry is faced with the prospect of selling these larger crops at a
profitable return to producers. In order to achieve this, it is
recognized that consumption and demand for almonds must be increased.
Because a substantial portion of almonds are used as ingredients, an
important method of increasing almond consumption is through increasing
the consumption of almond products.
The current regulations allowing only partial credit for promotion
of all almond products are believed to have created a disincentive for
handlers to develop, create and promote almond products. Therefore, the
Board recommended and the Department is implementing revised
regulations to allow maximum credit-back to handlers for promoting
almond products, under certain conditions.
After the effective date of this interim final rule, handlers will
be able to receive credit against their assessment obligations in an
amount not to exceed 66\2/3\ percent of their proven expenditures for
qualified activities for promotion of almond products. In order to
receive this level of credit, the product must be owned or distributed
by the handler and such ownership or distributorship must be stated on
the package. Handler ownership or distributorship is required in order
to eliminate the possible occurrence of utilizing industry funds to
promote businesses outside the almond industry.
In addition, the product must display the handler's brand, or the
words ``California Almonds'' on the primary, face label. This
requirement is intended to ensure that the clear intent is to promote
the consumption and use of California almonds, which is the basic
requirement for all promotion under the almond order.
Under the rule, maximum credit is not allowed for promotion of
mixed nut products. In the case of mixed nuts, and for other
promotional activities of almond products that do not meet the
aforementioned criteria, the amount of credit allowed continues to be
the lesser of 66\2/3\ percent of the handler's actual payment or that
portion of the product weight represented by almonds. Mixed nuts do not
qualify for the maximum credit because the thrust of eligible credit-
back promotion activities is to promote the consumption and use of
California almonds, not other nuts. Also, many almond handlers are
involved in handling and marketing other nuts, and almond funds could
possibly be used to promote other nut industries and other nuts.
Therefore, mixed nuts continue to be subject to the reduced level of
credit-back based on the portion of the product weight represented by
almonds. Accordingly, appropriate changes have been made to
Sec. 981.441(e)(4).
Finally, this rule adds specific language to the introductory text
of Sec. 981.441(e)(4) clarifying that no promotion of almonds or almond
products shall be eligible for credit-back if the promotion results in
price discounting of the handler's product. An example of price
discounting is as follows. A retail store routinely places
advertisements in a local newspaper for various products in an attempt
to attract customers. The advertisement includes a handler's almonds.
The handler makes arrangements with the retailer to pay for the
advertisement. In essence, this ``discounts'' the price of the product
to the retailer. While these types of arrangements occur, it is not the
intent of promotion under the almond order to subsidize such activities
through the credit-back program. Price discounting has not been allowed
under the program, and this rule adds specific language to the
regulations for clarity.
The Board recommended that this rule be applied retroactively to
August 1, 1999. This would allow the revised regulations to apply to
all promotional activities conducted from the beginning of the 1999-
2000 crop year forward. The crop year began August 1, 1999, and ends
July 31, 2000. Section 981.441 specifies the procedures that the Board
follows in granting credit and billing handlers. The effective date of
the rule is one day after publication in the Federal Register, and the
provisions of this revised regulation will be applied at that time.
Handler activities were conducted under program parameters in effect
prior to the effective date of this interim final rule. Therefore,
those parameters for activities conducted prior to this rule's
effective date should be followed. Accordingly, handlers promoting
products containing almonds prior to the effective date of this rule
will be eligible to receive Credit-Back based on the portion of the
product weight represented by almonds, or the handler's actual payment,
whichever is less. For activities conducted on or after the effective
date of this rule, the activities must meet the revised criteria, and
handlers will be eligible to receive Credit-Back at the maximum of
66\2/3\ percent for promoting almond products, if the percent for
promoting almond products, if the activities meet the revised criteria
in this rule. Submission of documentation should continue to be made in
accordance with the provisions of the regulations as amended by the
final rule that appeared in the July 29, 1999, Federal Register at 64
FR 41023.
Pursuant to requirements set forth in the Regulatory Flexibility
Act (RFA), the Agricultural Marketing Service (AMS) has considered the
economic impact of this action 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
business subject to such actions in order that small businesses will
not be unduly or disproportionately burdened. Marketing orders issued
pursuant to the Act, and rules issued thereunder, are unique in that
they are brought about through group action of essentially small
entities acting on their own behalf. Thus, both statutes have small
entity orientation and compatibility.
There are approximately 105 handlers of California almonds who are
subject to regulation under the order and approximately 6,000 almond
producers in the regulated area. Small agricultural service firms have
been defined by the Small Business Administration (13 CFR 121.601) as
those having annual receipts of less than $5,000,000, and small
agricultural producers are defined as those having annual receipts of
less than $500,000.
Based on the most current data available, about 54 percent of the
handlers ship under $5,000,000 worth of almonds and 46 percent ship
over $5,000,000 worth on an annual basis. In addition, based on
acreage, production, and grower prices reported by the National
Agricultural Statistics Service, and the total number of almond
growers, the average annual grower revenue is approximately $195,000.
In view of the foregoing, it can be
[[Page 58765]]
concluded that the majority of handlers and producers of California
almonds may be classified as small entities.
This rule revises the requirements regarding credit for promotion
and advertising activities prescribed under Sec. 981.441 of the
administrative rules and regulations of the order, and clarifies the
intent of one aspect of the existing regulations. The order is funded
through the collection of assessments from almond handlers. Under the
terms of the order's regulations, handlers may receive credit towards
their assessment obligation for certain expenditures for marketing
promotion activities, including paid advertising. This rule revises the
requirements regarding the activities for which handlers may receive
such credit by allowing maximum credit for promoting almond products,
under certain conditions. The revisions also clarify existing
regulations regarding disallowing promotional activities that result in
price discounting. The changes are intended to encourage and support
almond product development and thus increase the demand for almonds.
Current regulations concerning crediting handlers' promotion of
almond products limit any such credit to the portion of the product
weight represented by almonds, or the handler's actual payment,
whichever is less. This limitation was included because it was believed
that while promoting almond products was important, such activity may
also promote and increase sales of other ingredients in the product.
Therefore, the amount of credit handlers could receive was established
at less than the maximum of 66\2/3\ percent. It is now believed that
the potential for increasing demand for almonds by providing incentive
through allowing maximum credit alleviates the prior concerns regarding
promoting other ingredients.
Regarding the impact of this rule on affected entities, the changes
specified herein regarding credit for product development are designed
to provide incentive to almond handlers to create, develop, and promote
almond products. Almonds are widely used as ingredients in other
products, thus an important method of increasing almond consumption and
demand is through increasing sales of almond products. Handlers in the
almond industry will be rewarded for their innovation in developing
almond products, while the entire industry will benefit from the
resulting increased demand. Thus, the impact on all growers and
handlers in the almond industry is expected to be positive. This is an
additional tool for the industry to use to increase demand for their
product in the face of increasing supplies.
The changes regarding price discounting clarify that handlers can
not receive credit-back for promotional activities that result in price
discounting of product. This activity has not been allowed under the
regulations as it does not meet the intent of the program; the changes
merely clarify the existing regulations. Disallowing price discounting
results in a more efficient and effective use of industry promotion
funds.
Alternatives to the changes were considered. One alternative was to
leave the regulations as they currently exist. However, this does not
address the issue of providing incentive and encouragement to handlers
to promote almond products. Another alternative was to allow maximum
credit only for new or unique products, with the Board to determine
what products fit that description. This alternative was initially
recommended by the Board but was not implemented by the Department
because of concerns regarding the lack of specified criteria to be used
in reviewing claims, and concerns about the claims review process. A
third alternative considered was to allow maximum credit-back for all
promotions concerning almond products. However, it was determined that
certain criteria should be applied to product promotions to meet the
intent of the program, for the following reasons. To receive maximum
credit-back, the product must be owned or distributed by the handler,
to ensure that credit is not granted for promoting products or
businesses outside the almond industry. Packages must be labeled with
the handler's name or the words ``California Almonds'' to help ensure
the intent is to promote the consumption and use of California almonds,
which is the basic requirement for all promotion under the order. Mixed
nuts are subject to a reduced level of credit-back because handlers are
and can be involved in handling and marketing other nuts, and if
maximum credit were allowed, this could result in almond industry funds
being used to promote other nut industries and other nuts. Moreover,
the thrust of eligible credit-back promotion activities is to promote
the consumption of California almonds, not other nuts, and it would not
be appropriate to give mixed nut products the full 66\2/3\ credit.
This rule imposes no additional reporting or recordkeeping
requirements on either small or large almond handlers. In accordance
with the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), the
information collection requirements that are contained in this rule
have been previously approved by the Office of Management and Budget
(OMB) and have been assigned OMB No. 0581-0071. 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. Finally, the Department has not identified any
relevant Federal rules that duplicate, overlap or conflict with this
rule.
Additionally, the Board meeting was widely publicized throughout
the almond industry and all interested persons were invited to attend
the meeting and participate in Board deliberations. Like all Board
meetings, the July 12, 1999, meeting was a public meeting and all
entities, both large and small, were able to express their views on
this issue. The Board itself is composed of 10 members, of which 5 are
producers and 5 are handlers.
Also, the Board has a number of appointed committees to review
certain issues and make recommendations to the Board. The Board formed
a task force in July 1998 to review its credit-back advertising
program. The task force met periodically during the following months to
review the program and consider appropriate changes. The task force
presented its recommendations to the Board's Public Relations and
Advertising Committee on November 13, 1998, and that committee
presented its recommendations to the Board on December 2, 1998, and
March 5, 1999. The Department subsequently implemented all of the
Board's recommended changes, except for those relating to almond
products. The Board again recommended the changes associated with
almond products on July 12, 1999, and its Public Relations and
Advertising Committee and staff developed further clarification and
justification for those changes which were approved by a Board
facsimile vote during the week of August 30, 1999. All of these
meetings were open to the public, and both large and small entities
were able to participate and express their views. Finally, interested
persons are invited to submit information on the regulatory and
informational impacts of this action on small businesses.
A small business guide on complying with fruit, vegetable and
specialty crop marketing agreements and orders may be viewed at the
following website: http://www.ams.usda.gov/fv/moab/.html. Any questions
about the compliance guide should be sent to Jay Guerber at the
previously mentioned
[[Page 58766]]
address in the FOR FURTHER INFORMATION CONTACT section.
After consideration of all relevant matter presented, including the
information and recommendation submitted by the Board and other
available information, it is hereby found that this rule, as
hereinafter set forth, will tend to effectuate the declared policy of
the Act.
This rule invites comments on a change to the credit-back
promotional requirements prescribed under the California almond
marketing order. Any comments received will be considered prior to
finalization of this rule.
Pursuant to 5 U.S.C. 553, it is also found and determined upon good
cause that it is impracticable, unnecessary, and contrary to the public
interest to give preliminary notice prior to putting this rule into
effect and that good cause exists for not postponing the effective date
of this rule until 30 days after publication in the Federal Register
because: (1) The almond crop year began on August 1, 1999, and this
rule should be in effect as closely as possible to that time so
handlers can avail themselves of the additional opportunities for
receiving promotional credit; (2) these changes were unanimously
recommended by the Board and interested persons had an opportunity to
provide input; (3) handlers are aware of these changes which were
recommended at a public meeting; and (4) a 60-day comment period is
provided for in this rule and any comments received will be considered
prior to finalization of this rule.
List of Subjects in 7 CFR Part 981
Almonds, Marketing agreements, Nuts, Reporting and recordkeeping
requirements.
For the reasons set forth in the preamble, 7 CFR part 981 is
amended as follows:
PART 981--ALMONDS GROWN IN CALIFORNIA
1. The authority citation for 7 CFR part 981 continues to read as
follows:
Authority: 7 U.S.C. 601-674.
2. In Sec. 981.441, the introductory text of paragraph (e)(4) and
paragraph (e)(4)(iv) are revised and a new paragraph (e)(4)(v) is added
to read as follows:
Sec. 981.441 Credit for market promotion activities, including paid
advertising.
* * * * *
(e) * * *
(4) Credit-Back shall be granted for those qualified activities
specified below, except that Credit-Back will not be allowed in any
case for travel expenses, or for any promotional activities that result
in price discounting.
* * * * *
(iv) Except as otherwise provided in paragraph (e)(4)(v) of this
section, when products containing almonds are promoted, the amount
allowed for Credit-Back shall reflect that portion of the product
weight represented by almonds, or the handler's actual payment,
whichever is less: Provided, That, except for mixed nut products, the
amount of Credit-Back for qualified promotional activities for products
containing almonds shall be granted at 66\2/3\ percent of proven
expenditures, if the product is owned or distributed by the handler and
such ownership or distributorship is stated on the package: Provided
Further, That to receive any level of credit, the product must display
the handler's name, the handler's brand, or the words ``California
Almonds'' on the primary, face label.
(v) When products containing almonds are promoted prior to November
2, 1999, the amount allowed for Credit-Back shall reflect that portion
of the product weight represented by almonds, or the handler's actual
payment, whichever is less.
* * * * *
Dated: October 25, 1999.
Robert C. Keeney,
Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 99-28373 Filed 10-29-99; 8:45 am]
BILLING CODE 3410-02-P
