00-7413. Over-Order Price Regulation

AGENCY:

Northeast Dairy Compact Commission.

ACTION:

Final rule.

SUMMARY:

The Northeast Dairy Compact Commission amends the over-order price regulation to make technical amendments to certain definitions and to change certain dates of required action. The amendments are necessary to conform the over-order price regulation to similar regulations recently reformed by the United States Department of Agriculture regarding milk marketed in the New England states. These amendments will ensure continuity of regulatory definitions and compliance dates in the New England milk market. The Commission also amends the definition of producer to specify every December since 1996 as a condition of qualification.

EFFECTIVE DATE:

May 1, 2000.

ADDRESSES:

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 [phone], or by facsimile at [phone].

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. Authorization of the Compact was extended until September 30, 2001 in the Consolidated Appropriations Act for Fiscal Year 2000, Pub. L. 106-113, 115 Stat. 1501, November 29, 1999.

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 and 1999, 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.

On November 29, 1999, the President signed into law the Consolidated Appropriations Act, 2000 (Pub. L. 106-113, 115 Stat. 1501.) That Act required the United States Secretary of Agriculture to immediately implement certain reforms to the federal milk order regulations. The required regulation was published in the Federal Register on December 17, 1999, implementing and amending the final rule that was initially published on September 1, 1999.^[4]

On January 12, 2000, the Commission issued a notice of proposed rulemaking to consider amendments to the Compact Over-order Price Regulation that would bring the Commission's regulations into conformity with the reformed federal milk market order regulations and provide consistency and uniformity in definitions and compliance dates for regulated entities in the New England milk market and to amend the definition of producer.^[5] The Commission held a public hearing to receive testimony on the proposed amendments on February 2, 2000 and additional comments and exhibits were accepted until 5:00 PM on February 16, 2000. The Commission held a deliberative meeting on March 1, 2000, pursuant to 7 CFR 1361.8, to consider the testimony and comments received and to deliberate and act on the proposed amendments. The Commission hereby amends the Over-order Price Regulation to make technical amendments to certain definitions and to change certain dates of required action and to amend the definition of producer to specify every December since 1996 as a condition of qualification.

II. Summary of Amendments and Analysis of Issues and Comments

The Commission held a duly noticed public hearing on February 2, 2000, however, no one appeared to testify. The Commission received one letter of comment that generally supported the proposed amendments to the Over-order Price Regulation.^[6]

The Commission amends the definition of producer in section 1301.11 to change the qualification condition from “December 1996, December 1997 and December 1998” to “every December since 1996.” This language clarifies the future application of this condition, without necessitating annual rulemaking proceedings.

The Commission also amends definitions in Part 1301 sections 1301.9, 1301.10, 1301.14 and 1301.17 to conform to recent amendments to definitions in the federal market order regulations. The amendment to section 1301.9, the definition of handler, brings that section into conformity with the federal amendment to the definition of handler in 7 CFR 1000.9 by adding certain milk brokers to the definition. The amendment to section 1301.10, the definition of producer-handler, brings that section into conformity with the definition of the same term in 7 CFR 1001.10, through uniform reformatting of the definition and changing the minimum from 300 quarts per day to 150,000 pounds per month. Similarly, the amendments to section 1301.14, fluid milk products (adds eggnog and changes descriptive terms for various products, such as skim milk) and section 1301.17, cooperative association (includes federation of cooperatives) bring those definitions into conformity with the reformed federal regulations at 7 CFR 1000.15 and 1000.18, respectively.

The amendment to Part 1304 section 1304.1, deletes eggnog from the list in subsection (b)(4)(iv), in conformity with the new federal regulation at 7 CFR 1000.40(b)(2)(iv), reclassifying eggnog from Class II to Class I. The amendment to Part 1305 section 1305.1 changes the reference to the federal Class I price from the prior regulation reference to Zone 1, Class 1 to the reformed reference in 7 CFR 1000.52 to the Class I Price for Suffolk County, Massachusetts.

The Commission amends Part 1306 sections 1306.1 and 1306.2 to remove the existing minimum of a daily average of 300 quarts to the new federal minimum of 150,000 pounds per month as codified at 7 CFR 1000.8(d)(4).

The amendments in Parts 1305, 1307 and 1308 sections 1305.2, 1307.2, 1307.3, 1307.4, 1307.7, 1307.9 and 1308.1 change the prescribed dates for required action to conform to the new dates used under the federal market order reform regulations for similar required activities. The amendments change the dates required for: (1) announcing the over-order obligation (from the 5th of the month to the 23rd); (2) issuing statements (from the 15th to the 13th); (3) for making payments (including adjustments and administrative assessments) to the producer-settlement fund (from the 18th to the 15th) and (4) for issuing payments (including adjustments) from the fund (from the 20th to the 16th).

The amendment to Part 1307 section 1307.8 conforms to the federal regulation at 7 CFR 1000.78 by changing the language regarding charges on overdue accounts to include funds due to both the producer-settlement fund and the administrative assessment fund and includes the new requirement that all interest accrues to the administrative assessment fund. The only comment received opposed the part of this amendment that provides that late charges accrue to the Commission's administrative fund.^[7] The Commission carefully considered the commenter's analysis. However, the Commission notes that the amount of money involved is so small as to not affect the producer price and that the costs to enforce late payments can be significant. Therefore, the Commission determines that accrual of late charges to the administrative fund is appropriate under all the circumstances.

The Commission also adds a new section at Part 1307 section 1307.9, in conformance with the federal regulation at 7 CFR 1000.90, specifying that if a required date falls on a weekend or holiday, the action is required on the next business day.

III. Summary and Explanation of Findings

Article V, Section 12 of the Compact directs the Commission to make four findings of fact before an amendment of the Over-order Price Regulation can become effective. Each required finding is discussed below.

a. Whether the Public Interest Will Be Served by the Amendments to the Over-Order Price Regulation

The first finding considers whether the amendments to the Compact Over-order Price Regulation serve the public interest. The Commission determines that the public interest is served by conforming the definitions and compliance dates in the Over-order Price Regulation with the definitions of the same terms and compliance dates for similar actions under the federal milk market order regulations to ensure uniformity and continuity for regulated entities in the New England Milk Market.

The Commission also determines that the public interest is served by amending the definition of producer to specify every December since 1996 as a condition of qualification. This amendment simply keeps the qualification condition current, without requiring annual rulemaking to update the definition.

b. The Impact on the Price Level Needed To Assure a Sufficient Price to Producers and an Adequate Local Supply of Milk

The amendments to the Compact Over-order Price Regulation adopted in this rulemaking proceeding are related to the administration of the Over-order Price Regulation and do not affect the local supply of milk or price received by producers.

c. Whether the Major Provisions of the Order, Other Than Those Fixing Minimum Milk Prices, Are in the Public Interest and Are Reasonably Designed To Achieve the Purposes of the Order

The Commission concludes that, for the same reasons identified in the first finding, the amendments adopted in this rulemaking proceeding are in the public interest. The Commission further concludes that the Over-order Price Regulation, as hereby amended, remains in the public interest in the manner contemplated by this finding.

d. Whether the Terms of the Proposed Amendments Are Approved by Producers

The fourth finding, requires the determination of whether the amendment has been approved by producer referendum pursuant to Article V, Section 13 of the Compact. In this final rule, as in the previous final rules, the Commission makes this finding premised upon certification of the results of the producer referendum. The procedure for the producer referendum and certification of the results is set forth in 7 CFR Part 1371.

Pursuant to 7 CFR § 1371.3 and the referendum procedure certified by the Commission, a referendum was held during the period of March 10 through March 20, 2000. All producers who were producing milk pooled in Federal Order #1 for consumption in New England, during December 1999, the representative period determined by the Commission, were deemed eligible to vote. Ballots were mailed to these producers on or before March 10, 2000 by the Federal Market Order #1 Market Administrator. The ballots included an official summary of the Commission's action. Producers were notified that, to be counted, their ballots had to be returned to the Commission offices by 5:00 p.m. on March 20, 2000. The ballots were opened and counted in the Commission offices on March 21, 2000 under the direction and supervision of Commissioner Robert Starr, designated “Referendum Agent.”

Eleven Cooperative Associations were notified of the procedures necessary to block vote by letter dated March 3, 2000. Cooperatives were required to provide prior written notice of their intention to block vote to all members on a form provided by the Commission, and to certify to the Commission that (1) timely notice was provided, and (2) that they were qualified under the Capper-Volstead Act. Cooperative Associations were further notified that the Cooperative Association block vote had to be received in the Commission office by 5:00 p.m. on March 20, 2000. Certified and notarized notification to its members of the Cooperative's intent to block vote or not to block vote had to be mailed by March 14, 2000 with notice mailed to the Commission offices no later than March 16, 2000.

Notice

On March 21, 2000, the duly authorized referendum agent verified all ballots according to procedures and criteria established by the Commission. The ballots cast were reviewed and counted. A total of 3982 ballots were mailed to eligible producers. All producer ballots and cooperative block vote ballots received by the Commission were opened and counted. Producer ballots and cooperative block vote ballots were verified or disqualified based on criteria established by the Commission, including timeliness, completeness, appearance of authenticity, appropriate certifications by cooperative associations and other steps taken to avoid duplication of ballots. Ballots determined by the referendum agent to be invalid were marked “disqualified” with a notation as to the reason.

Block votes cast by Cooperative Associations were then counted. Producer votes against their cooperative associations block vote were then counted for each cooperative association. These votes were deducted from the cooperative association's total and were counted appropriately. Ballots returned by cooperative members who cast votes in agreement with their cooperative block vote were disqualified as duplicative of the cooperative block vote.

Votes of independent producers not members of any cooperative association were then counted.

The referendum agent then certified the following for the ballot on the amendments:

A total of 3,982 ballots were mailed to eligible producers.

A total of 3064 ballots were returned to the Commission.

A total of 42 ballots were disqualified—late, incomplete or duplicate.

A total of 3022 ballots were verified.

A total of 3015 verified ballots were cast in favor of the amendments.

A total of 7 verified ballots were cast in opposition to the amendments.

Accordingly, notice is hereby provided that of the 3022 verified ballots cast, 99.8%, or 3015, a minimum of two-thirds were in the affirmative.

Therefore, the Commission concludes that the terms of the amendments are approved by producers.

IV. Required Findings of Fact

Pursuant to Compact Article V, Section 12, the Compact Commission hereby finds:

(1) That the public interest continues to be served by establishment of minimum milk prices to dairy farmers under Article IV, as hereby amended.

(2) That the previously established level price of $16.94 (Zone 1) to dairy farmers under Article IV, is unaffected by these amendments, and will continue to assure that producers supplying the New England market receive a price sufficient to cover their costs of production and will elicit an adequate supply of milk for the inhabitants of the regulated area and for manufacturing purposes.

(3) That the major provisions of the order, other than those fixing minimum milk prices, are and continue to be in the public interest and are reasonably designed to achieve the purposes of the order.

(4) That the terms of the proposed amendments are approved by producers pursuant to a producer referendum required by Article V, Section 13.

List of Subjects in 7 CFR Parts 1301, 1304, 1305, 1306, 1307 and 1308

• Milk Price support programs

Codification in Code of Federal Regulations

For reasons set forth in the preamble, the Northeast Dairy Compact Commission amends 7 CFR Parts 1301, 1304, 1305, 1306, 1307 and 1308 as follows:

PART 1301—DEFINITIONS

1. The authority citation for Part 1301 continues to read as follows:

Authority: 7 U.S.C. 7256.

2. Amend § 1301.9 to revise paragraph (e) to read as follows:

§ 1301.9

Handler.

Handler means:

* * * * *

(e) Any person who does not operate a plant but who engages in the business of receiving fluid milk products for resale and distributes to retail or wholesale outlets packaged fluid milk products received from any plant described in paragraph (a), (b) or (c) of this section. Any person who as a broker negotiates a purchase or sale of fluid milk products or fluid cream products from or to any pool, partially regulated or nonpool plant, and any person who by purchase or direction causes milk of producers to be picked up at the farm and/or moved to a plant. Persons who qualify as handlers only under this paragraph are not subject to the payment provisions of §§ 1307.3 and 1308.1.

3. Revise § 1301.10 to read as follows:

§ 1301.10

Producer-handler.

Producer-handler means a person who:

(a) Operates a dairy farm and a distributing plant from which there is monthly route disposition in the regulated area during the month;

(b) Receives milk solely from own farm production or receives milk that is fully subject to the pricing and pooling provisions of any Federal order;

(c) Receives at its plant or acquires for route disposition no more than 150,000 pounds of fluid milk products from handlers fully regulated under any Federal order. This limitation shall not apply if the producer-handler's own farm production is less than 150,000 pounds during the month;

(d) Disposes of no other source milk as Class I milk except by increasing the nonfat milk solids content of the fluid milk products; and

(e) Provides proof satisfactory to the compact commission that the care and management of the dairy animals and other resources necessary to produce all Class I milk handled (excluding receipts from handlers fully regulated under any Federal order) and the processing and packaging operations are the producer-handler's own enterprise and at its own risk.

4. Amend section 1301.11 to revise paragraphs (b) introductory text and (b) (1) to read as follows:

§ 1301.11

Producer.

Producer means:

* * * * *

(b) A dairy farmer who produces milk outside of the regulated area that is moved to a pool plant, provided that on more than half of the days on which the handler caused milk to be moved from the dairy farmer's farm in every December since 1996, all of that milk was physically moved to a pool plant in the regulated area. Or: to be considered a qualified producer, on more than half of the days on which the handler caused milk to be moved from the dairy farmer's farm during the current month and for five (5) months subsequent to July of the preceding calendar year, all of that milk must have moved to a pool plant, provided that the total amount of milk at a pool plant eligible to qualify producers who did not qualify in every December since 1996, shall not exceed the total bulk receipts of fluid milk products less:

(1) Producers receipts as described in paragraph (a) of this section and producer receipts as described in paragraph (b) of this section who are qualified based on every December since 1996;

* * * * *

5. Revise section 1301.14 to read as follows:

§ 1301.14

Fluid milk product.

(a) Except as provided in paragraph (b) of this section fluid milk product means any milk products in fluid or frozen form containing less than nine percent butterfat, that are intended to be used as beverages. Such products include, but are not limited to: Milk, fat-free milk, low fat milk, light milk, reduced fat milk, milk drinks, eggnog and cultured buttermilk, including any such beverage products that are flavored, cultured, modified with added nonfat milk solids, sterilized, concentrated or reconstituted. As used in this Part, the term concentrated milk means milk that contains not less than 25.5 percent, and not more than 50 percent, total milk solids.

(b) The term fluid milk product shall not include:

(1) Plain or sweetened evaporated milk/skim milk, sweetened condensed milk /skim milk, formulas especially prepared for infant feeding or dietary use (meal replacement) that are packaged in hermetically-sealed containers, any product that contains by weight less than 6.5 percent nonfat milk solids, and whey; and

(2) The quantity of skim milk equivalent in any modified product specified in paragraph (a) of this section that is greater than an equal volume of an unmodified product of the same nature and butterfat content.

6. Revise section 1301.17 to read as follows:

§ 1301.17

Cooperative association.

Cooperative association means any cooperative marketing association of producers which the Secretary of Agriculture of the United States determines is qualified under the provisions of the Capper-Volstead Act, has full authority in the sale of milk of its members and is engaged in marketing milk or milk products for its members. A federation of two or more cooperatives incorporated under the laws of any state will be considered a cooperative association if all member cooperatives meet the requirements of this section.

PART 1304—CLASSIFICATION OF MILK

1. The authority citation for Part 1304 continues to read as follows:

Authority: 7 U.S.C. 7256.

2. Amend section 1304.1 to revise paragraph (b)(4)(iv) to read as follows:

§ 1304.1

Classification of milk.

* * * * *

(b) * * *

(4) * * *

(iv) Custards, puddings, pancake mixes, buttermilk biscuit mixes, coatings, batter and similar products;

* * * * *

PART 1305—CLASS PRICE

1. The authority citation for Part 1305 continues to read as follows:

Authority: 7 U.S.C. 7256.

2. Amend section 1305.1 to revise paragraph (b)(2) to read as follows:

§ 1305.1

Compact over-order class I price and compact over-order obligation.

* * * * *

(b) * * *

(2) Deduct Class I Price for Suffolk County, Massachusetts.

* * * * *

3. Revise section 1305.2 to read as follows:

§ 1305.2

Announcement of compact over-order class I price and compact over-order obligation.

The compact commission shall announce publicly on or before the 23rd day of each month the Class I over-order price and the compact over-order obligation for the following month.

PART 1306—COMPACT OVER-ORDER PRODUCER PRICE

1. The authority citation for Part 1306 continues to read as follows:

Authority: 7 U.S.C. 7256.

2. Revise section 1306.1 to read as follows:

§ 1306.1

Handler's value of milk for computing basic over-order producer price.

For the purpose of computing the basic over-order producer price, the compact commission shall determine for each month the value of milk of each handler with respect to each of the handler's pool plants and of each handler described in § 1301.9(d) of this chapter with respect to milk that was not received at a pool plant, as directed in this section. Any pool plant that does not exceed 150,000 pounds of disposition in the compact regulated area in the month shall not be subject to the compact over-order obligation. The total assessment for each handler is to be calculated by multiplying the pounds of Class I fluid milk products as determined pursuant to § 1304.1(a) of this chapter by the compact over-order obligation.

3. Revise § 1306.2 to read as follows:

§ 1306.2

Partially regulated plant operator's value of milk for computing basic over-order producer price.

For the purpose of computing the basic over-order producer price, the compact commission shall determine for each month the value of milk disposition in the regulated area by the operator of a partially regulated plant as directed in this section. Any partially regulated plant that does not exceed 150,000 of disposition in the compact regulated area in the month shall not be subject to the compact over-order obligation. The total assessment for each handler is to be calculated by multiplying the pounds of Class I fluid milk products as determined pursuant to § 1304.1(a) of this chapter by the compact over-order obligation.

PART 1307—PAYMENTS FOR MILK

1. The authority citation for Part 1307 continues to read as follows:

Authority: 7 U.S.C. 7256.

2. Revise the introductory text of § 1307.2 to read as follows:

§ 1307.2

Handlers' producer-settlement fund debits and credits.

On or before the 13th day after the end of the month, the compact commission shall render a statement to each handler showing the amount of the handler's producer-settlement fund debit or credit, as calculated in this section.

* * * * *

3. Revise 1307.3 to read as follows:

§ 1307.3

Payments to and from the producer-settlement fund.

(a) On or before the 15th day after the end of the month, each handler shall pay to the compact commission the handler's producer-settlement fund debit for the month as determined under Sec. 1307.2(a).

(b) On or before the 16th day after the end of the month, the compact commission shall pay to each handler the handler's producer-settlement fund credit for the month as determined under Sec. 1307.2(b). If the unobligated balance in the producer-settlement fund is insufficient to make such payments, the compact commission shall reduce uniformly such payments and shall complete them as soon as the funds are available.

4. Revise section 1307.5 paragraph (a) to read as follows:

§ 1307.5

Payments to producers.

(a) For milk received during the month, payment shall be made so that it is received by each producer no later than the day after the payment date required in section 1307.3(b). Each handler shall make payment to each producer for the milk received from him during the month at not less than the basic over-order producer price per hundredweight computer under Sec. 1306.3. If the handler has not received full payment for the compact commission under Sec. 1307.3(b) by the date payments are due under this paragraph, he may reduce pro rata his payments to producers by an amount not to exceed such underpayment. Such payments shall be completed after receipt of the balance due from the compact commission by the next following date for making payments under this paragraph.

* * * * *

5. Revise section 1307.7 to read as follows:

§ 1307.7

Adjustment of accounts.

(a) Whenever the compact commission verification of a handler's reports or payments discloses an error in payments to or from the compact commission under Sec. 1307.3 or Sec. 1308.1, the compact commission shall promptly issue to the handler a charge bill or a credit, as the case may be, for the amount of the error. Adjustment charge bills issued during the period beginning with the 10th day of the prior month and ending with the 9th day of the current month shall be payable by the handler to the compact commission on or before the 15th day of the current month. Adjustment credits issued during that period shall be payable by the compact commission to the handler on or before the 16th day of the current month.

(b) Whenever the compact commission's verification of a handler's payments discloses payment to a producer or a cooperative association of an amount less than is required by Sec. 1307.4, the handler shall make payment of the balance due the producer not later than the 16th day after the end of the month in which the handler is notified of the deficiency.

6. Revise section 1307.8 to read as follows:

§ 1307.8

Charges on overdue accounts.

Any unpaid obligation due the compact commission from a handler pursuant to the provisions of 7 CFR parts 1307 and 1308 shall be increased 1.0 percent each month beginning with the day following the date such obligation was due under the regulation. Any remaining amount due shall be increased at the same rate on the corresponding day of each succeeding month until paid. The amounts payable pursuant to this section shall be computed monthly on each unpaid obligation and shall include any unpaid charges previously computed pursuant to this section. The late charges shall accrue to the administrative assessment fund. For the purpose of this section, any obligation that was determined at a date later than prescribed by 7 CFR parts 1307 and 1308 because of a handler's failure to submit a report to the compact commission when due shall be considered to have been payable by the date it would have been due if the report had been filed when due.

7. Add a new section 1307.9 to read as follows:

§ 1307.9

Dates.

If a date required for payment contained in 7 CFR parts 1307 and 1308 falls on a Saturday, Sunday, or national holiday, such payment will be due on the next day that the compact commission office is open for public business.

PART 1308—ADMINISTRATIVE ASSESSMENT

1. The authority citation for Part 1308 continues to read as follows:

Authority: 7 U.S.C. 7256.

2. Revise the introductory text of section 1308.1 to read as follows:

§ 1308.1

Assessment for pricing regulations administration.

On or before the 15th 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 payment shall apply to:

* * * * *

Dated: March 21, 2000.

Kenneth M. Becker,

Executive Director.

Footnotes

1.  62 FR 29626 (May 30, 1997).

2.  62 FR 62810 (Nov. 25, 1997).

3.  See, e.g., 63 FR 10104 (Feb. 27, 1998); 63 FR 46385 (Sept. 1, 1998); 63 FR 65517 (Nov. 27, 1998); 64 FR 23532 (May 3, 1999); and 64 FR 34511 (June 28, 1999).

4.  64 FR 70868 (Dec. 17, 1999); 64 FR 47898 (Sept. 1, 1999).

5.  65 FR 1825 (Jan. 12, 2000).

6.  Robert Wellington, Written Comments (hereinafter “WC”) at 1.

7.  Wellington, WC at 1.