Over-Order Price Regulation

[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]]

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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.

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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.
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    \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).
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    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.
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    \4\ 63 FR 65563 (Nov. 27, 1998).
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    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\
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    \5\ 64 FR 533 (Jan. 5, 1999).
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    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.
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    \6\ The current administrative assessment regulation is 
published at 7 CFR part 1308.
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    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\
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    \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.
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    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\
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    \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.
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    The Commission regulation is, in all material respects, the same as 
corresponding provisions of the Federal Order # 1 
regulations.10
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    \10\ Ross, Tr. at 6-8.
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    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
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    \11\ Ross, Tr. at 6.
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    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
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    \12\ Ross, Tr. at 8.
    \13\ Market Administrator Instruction #207, WC at 3-11.
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    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.
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    \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.
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    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
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    \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.
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    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.
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    \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)
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    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
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    \23\ Altman, WC at 26.
    \24\ Altman, WC at 26-30.
    \25\ Altman, WC at 30.
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    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

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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.
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    \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.
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    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.
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    \33\ Bothfeld, Tr. at 55-59; Berthiaume, WC at 14-15; and Beach, 
WC at 22.
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    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.

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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