05-12623. Almonds Grown in California; Revision to Requirements Regarding Credit for Promotion and Advertising

AGENCY:

Agricultural Marketing Service, USDA.

ACTION:

Interim final rule with request for comments.

SUMMARY:

This rule revises the requirements regarding credit for promotion and advertising activities 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 order, 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. The changes will expand the credit allowed for certain promotional activities, and help to clarify and simplify the current regulations.

DATES:

Effective August 1, 2005; comments received by August 26, 2005 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, Marketing Order Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence Avenue, SW., STOP 0237, Washington, DC 20250-0237; Fax: [phone], E-mail: [e-mail], or Internet: http://www.regulations.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, or can be viewed at: http://www.ams.usda.gov/​fv/​moab.html.

FOR FURTHER INFORMATION CONTACT:

Maureen T. Pello, Senior Marketing Specialist, California Marketing Field Office, Marketing Order Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 2202 Monterey Street, Suite 102B, Fresno, California 93721; Telephone: [phone], Fax: [phone]; or George Kelhart, Technical Advisor, Marketing Order Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence Avenue, SW., STOP 0237, Washington, DC 20250-0237; Telephone: [phone], Fax: [phone].

Small businesses may request information on complying with this regulation by contacting Jay Guerber, Marketing Order Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence Avenue, SW., STOP 0237, Washington, DC 20250-0237; Telephone: [phone], Fax: [phone], or E-mail: [e-mail].

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 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 (USDA) 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 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.

This rule revises the requirements regarding credit for promotion and advertising activities prescribed under the administrative rules and regulations of the order. Under the order, 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. The changes will expand the credit allowed for certain promotional activities, and help to clarify and simplify the current regulations. This action was unanimously recommended by the Board at a meeting on May 12, 2005.

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 § 981.441. The Board recommended the following changes to those regulations.

Increasing Credit for Internet Promotion Activities

Section 981.441(e)(4)(ii)(K) allows handlers to receive credit against their assessment obligation for the development and use of Web site activities on the Internet for advertising and public relations purposes. The allowable credit is currently limited to $5,000 per year, and no credit is given for costs regarding E-commerce (which is equivalent to opening a store).

The Board recommended increasing the credit allowed for Internet promotional activities from $5,000 to $20,000 per year, adding credit for E-commerce (except for administration costs), and clarifying that no credit would be given to Intranet (inter-office communication network). The Board determined that administration costs associated with E-commerce such as online payments and processing fees do not directly promote almonds and should thus be excluded from reimbursement under the program. This action would expand the allowable credit and activities concerning Web sites and thus provide handlers more flexibility. Section 981.441(e)(4)(ii)(K) is revised accordingly.

Clarification Regarding Final Reimbursement Claims

In order for handlers to receive credit against their assessment obligation for their own promotional expenditures, the Board must determine that such expenditures meet applicable requirements. Handlers must submit claims with appropriate documentation to the Board. Credit may be granted in the form of a payment from the Board, or as an offset to the Board's assessment if activities are conducted and documented to the satisfaction of the Board within certain time frames throughout the crop year.

Section 981.441(e)(6)(iv) currently requires handlers to submit a statement of all outstanding credit-back commitments in full to the Board as of the close of the crop year (July 31) within 15 days after the crop year ends (August 15). Additionally, handlers must submit final claims pertaining to such outstanding commitments to the Board within 76 days after the crop year ends (October 15).

The Board recommended adding language to this section to clarify that final claims must be submitted “with all required elements,” which includes invoices, proof of payment, and similar documentation. This will allow Board staff to process the final claims for a crop year and complete the necessary accounting functions to close the books for that crop year in a timely manner. Other comparable deadlines throughout the credit-back regulations contain this language. This addition will help to facilitate program administration. Section 981.441(e)(6)(iv) is revised accordingly.

Removal of Obsolete Language

Section 981.441 contains language throughout the section that refers to the 1998-99 crop year only. The Board recommended removing this language to help clarify and simplify the regulation. Section 981.441 is revised accordingly.

Initial Regulatory Flexibility Analysis

Pursuant to requirements set forth in the Regulatory Flexibility Act (RFA), the Agricultural Marketing Service (AMS) has considered the economic impact of this 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 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 the 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 6,000 producers of almonds in the production area and approximately 115 handlers subject to regulation under the marketing order. Small agricultural producers are defined by the Small Business Administration (13 CFR 121.201) as those having annual receipts of less than $750,000, and small agricultural service firms are defined as those whose annual receipts are less than $6,000,000.

Data for the most recently completed crop year indicate that about 48 percent of the handlers shipped over $6,000,000 worth of almonds and about 52 percent of the handlers shipped under $6,000,000 worth of almonds. In addition, based on production and grower price data reported by the California Agricultural Statistics Service (CASS), and the total number of almond growers, the average annual grower revenue is estimated to be approximately $261,248. Based on the foregoing, the majority of handlers and producers of almonds may be classified as small entities.

This rule revises the § 981.441 of the order's administrative rules and regulations regarding credit-back promotion and advertising. Under the order, handlers may receive credit towards their assessment expenditures for marketing promotion activities, including paid advertising. This rule increases the credit allowed for Internet promotion activities from $5,000 to $20,000 per year, adds credit for E-commerce (excluding administration), and clarifies that final reimbursement claims submitted to the Board by handlers for a crop year must include all applicable documentation. Additionally, this rule removes obsolete language from the regulations that was applicable to the 1998-99 crop year.

Regarding the impact of this rule on affected entities, it is estimated that, for the 2003-04 crop year, about 18 percent of the industry's handlers participated in the credit-back program administered under the order. Increasing the credit allowed for Internet promotion activities and adding credit for E-commerce will provide additional opportunities for handlers. The changes to specify that handlers must submit final claims with all required elements will help to facilitate program administration. Finally, removing obsolete language will clarify and simplify the regulations.

Regarding alternatives, the Board formed a task force that met on January 26, March 1, and April 1, 2005, to review the credit-back regulations. The task force considered several changes to the regulations, including whether handlers should receive credit for travel to trade shows, sponsorships, and sweepstakes. The task force also reviewed a handbook that Board staff developed to facilitate administration of the credit-back regulations. The task force's recommendations were reviewed by the Board's Public Relations and Advertising Committee on May 11, 2005, and by the full Board on May 12, 2005. Ultimately, the Board decided that the changes discussed herein are warranted at this time.

This action imposes no additional reporting or recordkeeping requirements on either small or large California 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 and assigned OMB No. 0581-0178. 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, USDA has not identified any relevant Federal rules that duplicate, overlap, or conflict with this rule.

Additionally, the meetings were widely publicized throughout the California almond industry and all interested persons were invited to attend the meetings and participate in deliberations on all issues. Like all task force, committee and Board meetings, those meetings held on January 26, March 1, April 1, May 11, and May 12 were all public meetings and all entities, both large and small, were able to express views on this issue. 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: http://www.ams.usda.gov/​fv/​moab.html. Any questions about the compliance guide should be sent to Jay Guerber at the previously mentioned address in the for further information contact section.

This rule invites comments on changes to the credit-back regulations under the California almond marketing order. Any comments received will be considered prior to finalization of this rule.

After consideration of all relevant material 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.

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) This action needs to be in effect by August 1, 2005, the start of the 2005-06 crop year; (2) handlers are aware of this action which was unanimously recommended by the Board at a public meeting; (3) this action expands the opportunities for handlers to receive credit towards their assessment obligation for certain promotional expenditures which they conduct; and (4) this interim final rule provides a 60-day comment period, and all comments timely 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. Section 981.441 is amended by:

A. Revising the second sentence in paragraph (a);

B. Revising the first sentence in paragraph (b);

C. Revising paragraph (e)(4)(ii)(K);

D. Revising the first sentence in paragraph (e)(6)(ii);

E. Revising the second sentence in paragraph (e)(6)(iv); and

F. Removing paragraph (e)(4)(v) to read as follows:

§ 981.441

Credit for market promotion activities, including paid advertising.

(a) * * * Credit will be granted either in the form of a payment from the Board, or as an offset to that portion of the assessment if activities are conducted and documented to the satisfaction of the Board at least 2 weeks prior to the Board's first and second assessment billings, and at least 3 weeks prior to the Board's third and fourth assessment billings in a crop year. * * *

(b) The portion of the handler assessment for which credit may be received under this section will be billed, and is due and payable, at the same time as the portion of the handler assessment used for the Board's administrative expenses, unless the handler(s) conduct and document activities at least 2 weeks prior to the first and second assessment billings and 3 weeks prior to the third and fourth assessment billings. * * *

* * * * *

(e) * * *

(4) * * *

(ii) * * *

(K) Development and use of web-site on the Internet for advertising and public relations purposes, including E-commerce (mail ordering through the Internet): Provided, That Credit-Back shall be limited to $20,000 per year for such activities, and no credit shall be given for costs for E-commerce administration, Extranet (restricted Web sites within the Internet), Intranet (inter-office communication network), or portions of a web-site that target the farming or grower trade.

(iii) * * *

(iv) * * *

(5) * * *

(6) * * *

(ii) Handlers may receive credit against their assessment obligation up to the advertising amount of the assessment installment due: Provided, That handlers submit the required documentation for a qualified activity at least 2 weeks prior to the mailing of the Board's first and second assessment notices, and at least 3 weeks prior to the mailing of the Board's third and fourth assessment notices in a crop year. * * *

(iii) * * *

(iv) * * * Final claims pertaining to such commitments outstanding must be submitted with all required elements within 76 days after the close of that crop year. * * *

* * * * *

Dated: June 20, 2005.

Kenneth C. Clayton,

Acting Administrator, Agricultural Marketing Service.