[Federal Register: June 17, 2008 (Volume 73, Number 117)]
[Rules and Regulations]
[Page 34175-34184]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17jn08-1]
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Rules and Regulations
Federal Register
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[[Page 34175]]
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 1170
RIN 0581-AC66
[Doc. AMS-DA-07-0047; DA-06-07]
Dairy Product Mandatory Reporting
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Final rule.
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SUMMARY: This final rule adopts amendments to the Dairy Product
Mandatory Reporting Program that was established on August 2, 2007 on
an interim final basis. The Dairy Market Enhancement Act of 2000, and
certain provisions of the Farm Security and Rural Investment Act of
2002, amended the Agricultural Marketing Act of 1946 to provide for
timely, accurate, and reliable market information to facilitate more
informed marketing decisions and promote competition in the dairy
product manufacturing industry.
DATES: Effective Date: June 22, 2008.
FOR FURTHER INFORMATION CONTACT: For information relevant to this final
rule: (a) Concerning dairy product price data collection, reporting and
verification contact John R. Mengel, Chief Economist, USDA/AMS/Dairy
Programs, Office of the Chief Economist, STOP 0229-Room 2753, 1400
Independence Ave., SW., Washington, DC 20250-0229, (202) 720-4664; (b)
concerning dairy products storage data collection and reporting contact
Dan Kerestes, Chief, Livestock Branch, USDA/NASS, STOP 2053-Room 6435,
1400 Independence Ave., SW., Washington, DC 20250-2053, (202) 720-3570.
SUPPLEMENTARY INFORMATION: This final rule is a statutory requirement
pursuant to the Agricultural Marketing Act of 1946 [7 U.S.C. 1621 et
seq.], as amended November 22, 2000, by Public Law 106-532, 114 Stat.
2541, and further amended May 13, 2002, by Public Law 107-171, 116
Stat. 207. The Agricultural Marketing Act of 1946 and its amendments
are hereinafter referred to as the ``Act.''
The provisions of the interim final rule were published in the
Federal Register on July 3, 2007 (72 FR 36341), and became effective on
August 2, 2007. The interim final rule states that comments were to be
submitted on or before September 4, 2007. On November 2, 2007, a
Federal Register notice was issued to reopen the comment period whereby
comments were to be submitted on or before December 3, 2007 (72 FR
62105). The U.S. Department of Agriculture (USDA) has reviewed and
considered all of the comments submitted in a timely manner for this
final rule.
Background: The Act provides for and accordingly, the interim final
rule established, a Dairy Product Mandatory Reporting Program that: (1)
Requires persons engaged in manufacturing dairy products to provide to
USDA certain information including the price, quantity, and moisture
content, where applicable, of dairy products sold by the manufacturer;
and (2) requires manufacturers and other persons storing dairy products
to report to USDA information on the quantity of dairy products stored.
Under the interim final rule, the National Agricultural Statistics
Service (NASS) collects such information. This final rule, in
accordance with the Act, maintains these requirements. Any manufacturer
that processes and markets less than 1 million pounds of the applicable
dairy products per calendar year is exempt from these reporting
requirements as specified in (1) of this paragraph.
NASS began publishing cheddar cheese price data in 1997. It began
publishing butter, nonfat dry milk (NFDM), and dry whey price data in
1998. Currently, NASS publishes cheddar cheese, butter, dry whey, and
NFDM prices on a weekly basis. USDA has collected and reported stock
data on a voluntary basis for butter and cheese since 1916, for NFDM
since 1930, and for dry whey since 1975. Stock information on specific
cheeses, salted and unsalted butter, anhydrous milkfat, butter oil,
nonfat dry milk and dry whey is now collected and published on a
monthly basis.
The Act, as amended, provides USDA with the authority needed to
make the reporting of dairy product price and stock information
mandatory. No additional commodities are included under this rule. The
Act also provides that USDA shall take such actions as it considers
necessary to verify the accuracy of the information submitted or
reported. With more complete and accurate information, USDA and the
dairy industry can be confident that reported dairy product prices and
inventories are more precise indicators of supply and demand
conditions.
The Agricultural Marketing Service (AMS) has implemented a plan to
verify the price information submitted by reporting entities to NASS.
Each reporting entity may report for a single dairy plant or it may
report for more than one dairy plant, depending upon how the business
is structured. During the first year of verification, AMS planned to
visit all of the reporting entities eligible to file reports at least
once. AMS visited all of the reporting entities within the first five
months of implementation. In subsequent years, AMS plans to visit
larger entities that account for 80 percent of the yearly reported
product volume of each specified dairy product at least once annually.
AMS plans to visit one-half of entities that account for the remaining
20 percent each year, visiting each such entity at least once every
other year.
During each visit, AMS will review applicable sales transactions
records for at least the four most recent weeks. In some cases AMS may
review sales records for longer periods of up to 2 years. AMS will
verify that sales transactions agree with information reported to NASS
and that there are no applicable sales transactions that are not
reported to NASS. This final rule includes noncompliance, appeals, and
enforcement procedures. These procedures are carried out by AMS.
AMS requested comments on all aspects of the reporting
requirements, the reporting specifications, and the verification
program. AMS has reviewed all timely comments received and has
considered these comments in developing this final rule.
[[Page 34176]]
Executive Order 12866: Regulatory Planning and Review
This final rule has been determined not to be ``significant'' for
purposes of Executive Order 12866 and therefore has not been reviewed
by the Office of Management and Budget. A cost benefit analysis
prepared for the interim final rule is available at http://
www.ams.usda.gov/dairy/.
Executive Order 12988: Civil Justice Reform
This final rule has been reviewed under Executive Order 12988,
Civil Justice Reform. This rule is not intended to have a retroactive
effect. This rule will not preempt any State or local laws,
regulations, or policies unless they present an irreconcilable conflict
with this rule. There are no administrative procedures which must be
exhausted prior to any judicial challenge to the provisions of this
rule.
Regulatory Flexibility Act
Pursuant to requirements set forth in the Regulatory Flexibility
Act (RFA) (5 U.S.C. 601-612), AMS considered the economic impact of
this final rule on small entities and determined that the rule would
not have a significant economic impact on a substantial number of small
entities. The purpose of the RFA is to fit regulatory actions to the
scale of businesses subject to such actions in order that small
businesses will not be unduly or disproportionately burdened.
Small businesses in the dairy product manufacturing \1\ industry
have been defined by the Small Business Administration (SBA) as those
processors employing not more than 500 employees. For purposes of
determining a processor's size, if the plant is part of a larger
company operating multiple plants that collectively exceed the 500-
employee limit, the plant will be considered a large business even if
the local plant has fewer than 500 employees. There are approximately
98 dairy product manufacturers and 110 manufacturers and other persons
storing dairy products that would be subject to the provisions of this
rule. According to U.S. Census Bureau Statistics of U.S. Businesses,
there were 1,110 dairy manufacturing firms in the United States in
2004. Of these businesses, 1,017 firms had fewer than 500 employees and
93 firms had greater than 500 employees.
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\1\ North American Industry Classification System (NAICS) code
3115.
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Therefore, few of the manufacturers and persons affected by this
final rule are small businesses under the criteria established by the
SBA. Those manufacturers that process and market less than 1 million
pounds of the applicable dairy products annually are exempted from
price reporting by this final rule, and most of the entities that would
be subject to mandatory reporting already report this information to
NASS. The annual cost to manufacturers reporting product prices is
estimated at $381 per plant. As discussed in the Paperwork Reduction
Act section below, AMS believes the records that would be required to
be maintained under this final rule are already being maintained for at
least 2 years as part of the normal course of business. Thus, there
would be no additional burden or cost associated with the maintenance
of these records. Therefore, the final rule will not have a significant
economic impact on a substantial number of small entities.
Paperwork Reduction Act
In accordance with the Paperwork Reduction Act (44 U.S.C. Chapter
35), reporting and recordkeeping requirements that are utilized to
collect the information required by the Act have been approved by the
Office of Management and Budget (OMB). The OMB control number for the
Dairy Products Prices questionnaire and the Dairy Products
questionnaire is 0535-0020. The OMB control number for the Cold Storage
questionnaire is 0535-0001.
The primary function of NASS is to provide timely, accurate, and
useful statistics in service to U.S. agriculture. Estimates of milk
production, production and storage of manufactured dairy products, and
prices of milk and dairy products are integral parts of this function.
Milk and dairy statistics are used by USDA to help administer Federal
programs and are used by the dairy industry in planning, pricing, and
projecting supplies of milk and milk products.
Neither the interim final rule nor this final rule changes the
current method and frequency of data collection utilized by NASS. Data
collection of Dairy Products Prices is conducted weekly to collect
sales transactions data for the previous week. Manufacturers are
provided a supply of report forms for the products they are to report.
The dairy product manufacturer completes the forms with information,
including the manufacturer's name, address, plant location, quantities
sold, and prices (or dollars received) for cheddar cheese, butter, dry
whey, and NFDM. Manufacturers report to NASS by facsimile or electronic
data reporting.
The monthly Dairy Products questionnaire is mailed each month to
manufacturers of dairy products. Manufacturers report to NASS the name,
address, production, stocks, and shipments data for a wide variety of
dairy products, including nonfat dry milk and dry whey. Reporting
entities report to NASS by facsimile, phone, or mail.
The monthly Cold Storage questionnaire is mailed each month to
manufacturers and other entities storing stocks of a wide variety of
refrigerated agricultural commodities, including butter, cheese, and
similar products. Manufacturers and other entities report to NASS the
name, address, and stocks on hand at the end of the month. Reporting
entities report to NASS by facsimile, phone, mail, or electronic data
reporting.
This final rule continues implementation of recordkeeping
requirements established under the interim final rule and authorized by
the Act. Under this regulation, each person required to report
information to USDA shall maintain, and make available to USDA, on
request, original contracts, agreements, receipts, and other records
associated with the sale or storage of any dairy products during the 2-
year period beginning on the date of the creation of the records. AMS
has consulted with several entities that are required to maintain
records under this rule. According to the entities consulted, the
necessary records are already being maintained for at least 2 years as
part of the normal course of business. Therefore, there would be no
additional burden or cost associated with the maintenance of these
records.
The reliability of prices announced by NASS is dependent on the
accuracy of the reports submitted by manufacturers. To verify that the
data submitted to NASS for the Dairy Products Prices report is
accurate, all manufacturers required to submit questionnaires will be
subject to a verification procedure conducted by AMS. Failure on the
part of manufacturers or other entities to comply with the data
collection and recordkeeping requirements could lead to enforcement
action, including the levying of civil penalties provided under section
273 of the Act, as amended [7 U.S.C. 1637b], against the violating
person or entity.
Except as otherwise directed by the Secretary of Agriculture or the
U.S. Attorney General for enforcement purposes, no officer, employee,
or agent of the United States shall make available to the public
information, statistics, or documents obtained from or submitted by any
person under the Act other than
[[Page 34177]]
in a manner that ensures confidentiality is preserved regarding the
identity of persons, including parties to a contract and proprietary
business information. All report forms include a statement that
individual reports are kept confidential.
With respect to the application of the Privacy Act of 1974 (5
U.S.C. 552a) to the maintenance of records required by the Act, the
Dairy Products Prices survey population consists of agribusinesses.
Data collected by this survey relates to agribusinesses' dealings and
not those of individuals. Records maintained at business sites for
verification of information reported to NASS include contracts,
agreements, receipts and other material related to sales of specific
dairy products. No records about individuals are maintained by NASS for
this survey, and AMS believes that none would be part of these
maintained business papers.
Summary of Changes in the Final Rule From the Interim Final Rule
All substantive changes in this final rule from the interim final
rule concern reporting requirements and specifications pertaining to
the Dairy Products Prices report. Changes are as follows:
(1) Products that are produced under faith-based close supervision
and are marketed at a higher price than the manufacturer's wholesale
market price for the basic commodity (for example, kosher products
produced with a rabbi on site who is actively involved in supervision
of the production process) are excluded in the reporting
specifications.
(2) With the interim final rule, dairy products sold under the
Dairy Export Incentive Program (DEIP) were included in the reporting
specifications. DEIP sales or other premium-assisted sales are excluded
in reporting specifications with this final rule.
(3) Products certified as organic by USDA-accredited certifying
agents are excluded in the reporting specifications with this final
rule.
(4) With the interim final rule the grade requirements stated that
each product to be reported was to be of a certain grade. The final
rule indicates that each product to be reported must only meet certain
grade standards.
(5) The interim final rule indicates that transportation charges
are to be excluded from the reported price for each commodity. The
final rule clarifies that each sale shall be reported either f.o.b.
plant if the product is ``shipped out'' from the plant or f.o.b.
storage facility location if the product is ``shipped out'' from a
storage facility. In calculating the total dollars received or dollars
per pound, the reporting entity shall neither add transportation
charges incurred at the time the product is ``shipped out'' or after
the product is ``shipped out'' nor deduct transportation charges
incurred before the product is ``shipped out.''
(6) The interim final rule excludes clearing charges in the
reporting specifications. The final rule specifies that in calculating
the total dollars received or dollars per pound, the reporting entity
shall not deduct brokerage fees or clearing charges paid by the
manufacturer.
(7) This final rule specifies that the verification and
noncompliance procedures are pursuant to section 273(b)(1)(A)(i) of the
Act.
(8) This final rule specifies the time by which dairy product
manufacturers must report on all dairy products sold. Manufacturers
must report by noon on Wednesday on all products sold during the seven
days ending with the previous Saturday.
(9) Changes have been made in the organization or content of some
sections for greater clarity.
Discussion of Comments
The interim final rule solicited comments to be submitted to USDA
on or before September 4, 2007. During this initial 60-day comment
period, 19 comment submissions were received: 6 from dairy cooperative
associations, 4 from federations of dairy cooperative associations, 3
from producer associations, 3 from proprietary dairy manufacturers, 1
from a dairy manufacturer association, and 2 from individuals. After
reviewing comments received, USDA determined that additional
information from interested parties would be helpful. On November 2,
2007, a Federal Register notice was issued to reopen the comment period
for an additional 30 days. USDA specifically solicited comments
concerning the issues of product specifications, minimum transaction
volumes, kosher dairy products, and products produced from cows not
treated with recombinant bovine somatotropin (rBST). USDA was concerned
that for the initial comment period some commenters may have limited
their comments to the issues of forward-priced contracts and
verification. During the extended 30-day comment period, 10 comment
submissions were received: 2 from dairy cooperative associations, 2
from federations of dairy cooperative associations, 1 from a producer
association, 1 from a dairy manufacturer association, and 4 from
individuals. USDA has reviewed and considered all of the comments
submitted in a timely manner for this final rule.
The following discussion is based upon USDA consideration of all
comments received concerning the interim final rule and other
considerations. The discussion concerns reporting requirements and
specifications for the Dairy Products Prices survey.
1. Forward-Priced Contracts
Under the interim final rule, forward pricing sales (sales in which
the selling price was set [not adjusted] 30 or more days before the
transaction was completed) are excluded from reporting specifications.
The issue of forward-priced contracts is the issue discussed at
greatest length and by the greatest number of commenters. All comments
concerning the issue focus upon sales of nonfat dry milk (NFDM). None
of the commenters argues for including forward-priced contracts in the
reporting specifications for the other dairy products.
Positions taken by commenters on the issue are essentially as
follows:
a. Include forward-priced contracts for NFDM.
b. Include contracts for export sales of NFDM that are shipped
within 90 days of contract execution.
c. Include contracts for domestic or export sales of NFDM that are
shipped within 90 days of contract execution.
d. Make no changes.
e. In addition to excluding forward-priced contracts for which the
selling price is set 30 or more days before the transaction was
completed from reporting specifications, also exclude contracts that
reference a defined prices series, plus or minus a basis, entered into
more than 30 days before delivery.
Supporters of including forward-priced contracts in NFDM price
reporting argue that the current exclusion of forward-priced contracts
discourages exports because almost all NFDM exports are through
contracts with shipments more than 30 days after execution. Therefore,
the vast majority of export sales are excluded from NASS reporting.
DairyAmerica, Inc., states, ``The proposed NASS sample that leaves out
critical supply and demand for milk represented by the export market
raises the question of `unbiasedness'. * * * '' DairyAmerica contends
that if fixed-priced contracts were included in the reporting
requirements, Class IV milk prices would more closely align with the
majority of sales of NFDM. It claims that this would reduce risks for
NFDM producers. It points out that there is no
[[Page 34178]]
effective futures market for NFDM at this time. Other supporters of
including forward-priced contracts in NFDM price reporting include
California Dairies, Inc., and the Alliance of Western Milk Producers.
Fonterra Co-operative Group Limited provides a discussion of
contracts used for the international dairy market. Fonterra points out
that due to certification procedures, regulatory requirements, etc., a
seller in the international market does not have complete control of
the timeframe for delivery. Fonterra describes spot, medium-term, and
long-term export contracts. An export contract for ``immediate''
delivery can take 1 to 2 months to complete. A medium-term contract
typically covers 3 months but usually takes about 5 months from the
time of contract to the time of the last invoice date. A long-term
contract is typically for 6 months but may be as long as 12 months.
National Milk Producers Federation (NMPF) advocates extending the
time period of reporting NFDM sales from 30 days to 90 days in
recognition of growth of NFDM exports and the requirements for export
sales. NMPF notes that effective and liquid futures contracts exist for
Class III milk (which are often used as hedge instruments for cheese
prices) and butter. However, the same is not the case for NFDM. The
extension of the time period as proposed by NMPF would only apply to
export contracts. NMPF states that limiting the reporting time period
to 90 days will ensure that forward-priced export contracts do not have
a disproportionate effect on Federal order pricing. Land O'Lakes, Inc.,
(LOL) and Dairylea Cooperative, Inc., support NMPF's position. Western
United Dairymen also proposes extending the time of reporting from 30
to 90 days, but it does not specify that the extension would apply to
exports only.
Supporters of the current 30-day limit assert that the current
policy better reflects the current market price. International Dairy
Foods Association (IDFA) states, ``The inclusion of sales in which the
price was set more than 30 days in advance of the actual transaction
would mean including survey data based on expectations of today's
market environment, not the actual current market environment itself.''
Dean Foods contends that including forward-priced contracts could
result in a market distortion related to Class II products. According
to Dean Foods, at times it may be advantageous to manufacture Class II
products from NFDM rather than from Class II milk since the spot NFDM
price in the domestic market place would not necessarily be in
alignment with the Class IV price or Class II price. With respect to
NFDM futures markets, Leprino Foods Company states, ``Although there
are likely additional factors, we believe that the historic practice of
certain nonfat manufacturers of including long-term contracts in prices
reported and used in establishing the underlying milk prices have
substantially limited the establishment of viable nonfat dry milk
futures.'' Other supporters of the current regulation include
Nestl[eacute] USA and an individual commenter.
Dairy Producers of New Mexico (DPNM) advocates the current 30-day
limit reporting exclusion and also the exclusion of forward contracts
that reference a defined price series plus or minus a basis. It
contends that inclusion of such contracts in reporting leads to
circularity in pricing and does not provide accurate information
concerning spot prices for dairy products.
This final rule maintains the current reporting exclusion for
forward pricing sales (sales in which the selling price was set [not
adjusted] 30 or more days before the transaction was completed). IDFA's
argument has merit: ``The inclusion of sales in which the price was set
more than 30 days in advance of the actual transaction would mean
including survey data based on expectations of today's market
environment, not the actual current market environment itself.''
This final rule does not exclude from reporting specifications
forward contracts that reference a defined price series plus or minus a
basis. Information is not readily available to indicate that there is
any significant problem with bias caused by circularity in the
reporting of such forward contracts.
2. Electronic Data Collection by AMS
NMPF lists reasons as to why AMS, rather than NASS, should have
full responsibility for mandatory dairy product reporting. According to
NMPF, AMS is better suited for regulatory enforcement, and AMS staff is
better equipped to collect and verify consistent data from milk plants.
NMPF states that AMS staff employees generally have more dairy
expertise and usually have longer tenure than NASS employees. NMPF
believes that coordination of the data collection and the verification
would be improved if AMS handled both functions. Since AMS has
experience with electronic reporting through its mandatory livestock
reporting program, NMPF asserts that AMS is better suited to implement
electronic reporting for dairy products.
IDFA also asserts that AMS should be responsible for data
collection and that the data should be collected electronically. IDFA
contends that if AMS were to collect the data electronically at a
national level, timeliness of reporting would be improved and
conflicting information from NASS offices in different States would be
eliminated. Dairylea Cooperative also advocates that AMS collect the
data electronically.
This rule makes no changes with respect to responsibilities or
methods for data collection. The Secretary of Agriculture has delegated
NASS, an agency with data collection as its primary mission, as the
USDA agency with price reporting responsibilities for the Mandatory
Dairy Product Reporting Program.
3. More Frequent Verification
New York Farm Bureau is concerned that the frequency of
verification visits in the proposed rule may not be sufficient to
guarantee accurate and timely verification. It does not propose a
specific time period for the frequency of visits. IDFA supports the AMS
plan to visit all of the entities eligible to file reports at least
once during the first year. However, it urges AMS to follow up with
quarterly visits to any entities that have been found to have reported
incorrectly.
AMS planned to visit all entities eligible to report in the first
year at least once. AMS visited all of the reporting entities within
the first five months of the Mandatory Dairy Product Reporting Program
implementation. Some reporting entities have been visited more than
once. AMS plans to visit large entities that account for 80 percent of
the yearly reported product volume of each specified dairy product at
least once annually. AMS plans to visit one-half of the remaining
entities each year, visiting each such entity at least once every other
year. This does not preclude additional visits if necessary.
4. Organic Product Exclusion
IDFA, NMPF, and Dean Foods propose that organic products be
excluded from the surveys because they receive higher wholesale market
prices reflecting additional costs that are not representative of the
products in the broader market. Dean Foods is more specific than IDFA
or NMPF, stating that ``Certified Organic'' products should be
excluded. No comments were received advocating the inclusion of organic
products in price reporting.
[[Page 34179]]
This final rule excludes products certified as organic by USDA-
accredited certifying agents in the reporting specifications because
such products command higher prices, reflecting consumers' perception
that such products are of higher value than similar products.
5. Coordination of Price Reporting With the California Department of
Food and Agriculture (CDFA)
Both NMPF and DairyAmerica encourage USDA to take steps to align
price data, methodology, and timing with that of CDFA. While NMPF
encourages broad cooperation with CDFA concerning alignment of all
class prices, DairyAmerica's comments are limited to considerations of
NFDM price reporting.
DairyAmerica's submission of comments includes testimony from a
recent CDFA hearing concerning NFDM price reporting. CDFA conducted a
public hearing on August 28, 2007, to consider revisions to weekly and
monthly NFDM price reporting for the California Weighted Average Price
(CWAP). On October 17, 2007, CDFA issued a final decision regarding the
CWAP (http://www.cdfa.ca.gov/dairy/dairy_hear_finalresults_
Aug07.html). The decision became effective on October 26, 2007.
AMS has reviewed testimony from the CDFA hearing in its
deliberations for this final rule. As DairyAmerica acknowledges, ``* *
* AMS cannot simply agree to operate its system based upon
California.'' USDA must make decisions based upon its own program
objectives, consideration and judgment of the issues, and comments.
6. Transaction-Size Thresholds
The typical sales unit for dairy products included in the Dairy
Products Prices survey is 40,000 pounds. IDFA recommends setting a
transaction-size threshold of 40,000 pounds for products to be reported
for the Dairy Products Prices survey. It points out that dairy
contracts for the Chicago Mercantile Exchange (CME) are based upon this
typical size unit. Similarly, NMPF proposes that USDA set transaction-
size thresholds for reporting sales, claiming that products distributed
in smaller lots have added value and cost. However, NMPF states that
any decision to establish transaction thresholds should be considered
very carefully to ensure that no important product volumes are omitted
from reporting and to avoid efforts by manufacturers ``to reorganize
distribution to evade reporting.'' NMPF suggests that USDA consider a
threshold of 30,000 pounds for each product included in the survey.
USDA has not included transaction-size thresholds in this final
rule. An objective of the survey is to obtain a broad measure of basic
dairy commodity prices across the U.S. There is concern that a
significant number of plants may be excluded from reporting if
thresholds are established. Also, there is concern, as expressed by
NMPF, that some reporting entities could ``reorganize distribution to
evade reporting.'' Furthermore, adding transaction-size thresholds to
the reporting specifications could add an unnecessary reporting burden
for some reporting entities due to the necessity of keeping separate
sales totals for transactions that meet thresholds and those that do
not.
7. High-Heat and Fortified NFDM
According to LOL, the costs and pricing arrangements for high-heat
NFDM closely resemble those of low-heat and medium-heat NFDM. LOL
asserts that including high-heat NFDM in the reporting specifications
would result in greater alignment with the CWAP. DairyAmerica also
proposes including high-heat NFDM in the reporting specifications and
also would include fortified NFDM.
This final rule continues exclusions for high-heat and fortified
NFDM in the reporting specifications. Observation of prices reported in
USDA Dairy Market News indicates that prices for high-heat NFDM are
generally higher than those for low and medium-heat NFDM. Adding value
to NFDM through fortification also would result in a higher price
generally than that of the basic commodity.
8. Dairy Export Incentive Program (DEIP) or Other Premium-Assisted
Sales
DairyAmerica claims that DEIP sales should continue to be reported,
asserting that excluding DEIP sales in the reporting specifications
would be in conflict with the policy decision of Congress to support
exports with taxpayer dollars. DairyAmerica claims that if DEIP sales
were to be excluded from the reporting specifications, prices paid for
milk through the Federal order system would not be reflective of the
commodity prices of products sold through DEIP. This situation
increases the risk that the manufacturers engaged in DEIP sales will
suffer loss. For the same reasons, DairyAmerica asserts that export
assistance sales through the voluntary industry program, Cooperatives
Working Together (CWT) program, should be reported.
Leprino asserts that the timeliness criteria for reporting DEIP
sales should be the same as for any other dairy products that meet the
reporting specifications. It asserts the same rationale as for other
sales: DEIP sales for which the sale price was established greater than
30 days prior to ship date may not be reflective of current market
conditions.
With this final rule, all DEIP sales or other premium-assisted
sales, such as export assistance sales through the CWT program, are
excluded from the reporting specifications. Before mandatory reporting
became effective, DEIP sales were included in reporting specifications
to encourage voluntary reporting by manufacturers that wanted DEIP
sales to be included. Since reporting is now mandatory, this is no
longer a consideration. As pointed out by Leprino, DEIP contracts
entered into more than 30 days before date of shipment may not be
reflective of current market conditions. Furthermore, DEIP sales or
other premium-assisted sales include bonuses paid by third parties.
Export bonuses are frequently based upon market averages of domestic
and international commodity prices that may or may not be reflective of
the actual needs of the two parties to reach a sales agreement.
9. Commodity Credit Corporation (CCC) Purchases Under the Milk Price
Support Program and Related Programs
DairyAmerica asserts that CCC sales must continue to be reportable
in order to avoid the risk that Federal order minimum prices would fall
below support levels.
CCC purchases under the Milk Price Support Program and related
programs continue to be included in the reporting specifications under
this final rule. Including CCC purchases provides a broader survey that
more accurately reflects market conditions.
10. Intra-Company Sales
Reporting specifications exclude intra-company sales. DairyAmerica
supports this policy in general because such sales may not represent a
true market price. However, DairyAmerica asserts that its sales, as a
federation of dairy cooperatives, between a member and that member's
wholly-owned subsidiary should be reportable. It argues that these
sales are arms-length transactions. DairyAmerica states that its
corporate structure requires it to maximize revenue for its members and
that it cannot favor one member of the federation over another.
This final rule continues the exclusion of intra-company sales,
even if those sales are to wholly-owned subsidiaries through a
federation of
[[Page 34180]]
dairy cooperatives. Although a federation of dairy cooperatives may
have rules that all sales will be at market prices, it may not be
possible to verify through the federation and manufacturer books and
records that such intra-company sales are arms-length transactions.
11. Enforcement
DPNM asserts that manufacturers who misreport to NASS should have
greater liability than stated in the interim final rule. DPNM proposes
that a handler that misreports prices be held responsible to account to
various producer settlement funds for any shortfalls that occur due to
the misreporting. Dairylea proposes that USDA be held responsible for
shortfalls in dairy producer income that result from misreporting of
prices.
The Act is clear concerning the civil penalty for noncompliance
with a cease and desist order relative to specified unlawful acts. The
Act states, ``If the [district] court finds that the person violated
the order, the person shall be subject to a civil penalty of not more
than $10,000 for each offense.'' Since the Act does not provide for the
redress proposed by either DPNM or Dairylea, this final rule does not
include the enforcement proposals by DPNM or Dairylea.
12. Products Labeled or Contracted as Sourced From Cows Not Treated
With Recombinant Bovine Somatotropin (rBST):
NMPF lists reasons that it believes products sourced from milk from
cows not treated with rBST should be included in reporting
specifications. According to USDA Animal and Plant Health Inspection
Service, only 15 percent of dairy herds include cows treated with rBST.
Many products are made from such milk even if not marketed as such.
Marketing of such products is increasing, and NMPF asserts that
excluding them would compromise the survey. Manufacturers may have
mixed sales (some from cows treated with rBST and some with cows not
treated with rBST), complicating reporting and verification.
Furthermore, NMPF claims that it would be inappropriate for USDA to
define, categorize, and verify labeling of such products.
Three individuals submitted comments in support of including
products labeled or contracted as sourced from cows not treated with
rBST in the reporting specifications. Two of the individuals assert
that excluding such products would undervalue milk prices paid to dairy
farmers.
LOL urges AMS to exclude products labeled as sourced from cows not
treated with rBST in the reporting specifications. LOL claims that
producers who discontinue using rBST have a significant drop in milk
production, and it claims that the opportunity costs of discontinuing
use of rBST are $1.00 to $1.50 per hundredweight. Therefore, LOL
asserts that these producers should receive premiums. Excluding such
products would in part help to share these premiums with only those
producers who forego the benefits of using rBST. In the future, if
products labeled as sourced from cows not treated with rBST become more
common, LOL would support including such products in the surveys.
IDFA urges USDA to exclude products labeled or contracted as
sourced from cows not treated with rBST, claiming that such products
are value-added products rather than commodity products.
The final rule does not exclude products labeled or contracted as
sourced from cows not treated with rBST. Further, USDA does not have
information to indicate that there are substantial price premiums for
such products, and the sales volumes of such products are unknown.
13. Kosher Products
NMPF points out that nearly all butter and nonfat dry milk, and
most dry whey production is kosher, by some standard. The same can be
said for a substantial amount of cheese. NMPF asserts that there are
many kosher standards and that it would be improper for USDA to rule
based upon those standards. LOL and two individual commenters support
including all kosher products in the reporting specifications.
DairyAmerica advocates a very narrow exclusion of only a specially
supervised form of kosher designated as ``Cholov Yisroel,'' a kosher
designation that requires close rabbinical supervision from the farm
through the dairy product manufacturing process. It states that this
type of kosher product should not be reportable, or the extra cost
element for this type of kosher designation should be deducted. IDFA
urges USDA to exclude kosher products from the reporting specifications
if the contract requires the products to be certified as kosher under
direct rabbinical supervision.
Since the final rule is concerned with capturing prices for basic
commodities, it attempts to exclude value-added products from the price
surveys. For kosher products, care is taken in the final rule to use a
standard that is neither too broad nor too narrow. Excluding all
products meeting the least stringent kosher standards would be too
broad since such products are commonplace and the added market value is
insignificant. This final rule only excludes products manufactured
under close rabbinical supervision and marketed at a higher price than
the manufacturer's wholesale market price for the basic commodity.
It is possible that reporting issues will arise concerning dairy
products that are manufactured to meet certain faith-based standards
other than kosher requirements. For example, Islamic Halal has certain
production requirements for dairy products. For this reason, this final
rule excludes any dairy products produced under any faith-based close
supervision that are marketed at a higher price than the manufacturer's
wholesale market price for the basic commodity.
14. Cost Add-Ons
Dairylea proposes that ``AMS allow for dairy product manufacturing
cost of production surcharges--determined through a regulated process--
to be reported in the pricing survey. These USDA determined cost
increases should be allowed to be passed on from a manufacturer to the
marketplace, without it impacting the Federal Order class prices.''
Consideration of Dairylea's cost add-ons proposal in this informal
rulemaking is not appropriate. Dairylea provided the same proposal in
its testimony at a hearing concerning Class III and IV prices (Federal
milk marketing order hearing; Indianapolis, Indiana; April 11, 2007,
Tr. page 1966; exhibit 53). USDA is considering Dairylea's proposal in
formal rulemaking with respect to that hearing.
15. Expansion of the Scope of Data Collection and Reporting
DPNM proposes that the Dairy Product Mandatory Reporting Program be
expanded to include the volume of milk and milk components acquired by
the plant, the prices paid for milk and milk components acquired by the
plant, the volume of milk products produced at the plant, the value of
the milk products produced at the plant, and, alternatively, the costs
and yields associated with making reported products.
DPNM proposes that these items be collected and reported in order
to help USDA make better decisions with respect to make allowances and
yield factors. DPNM notes that the Act uses the phrase ``information
concerning the price, quantity, and moisture content of
[[Page 34181]]
dairy products'' in the description of information to be obtained.
Using a broad perspective of the word ``concerning,'' DPNM asserts that
USDA has authority to collect the additional information proposed.
This final rule does not add data collection as proposed by DPNM.
Collection of such information is beyond the scope of the Act.
16. Product f.o.b. Points
The interim final rule states that sales shall be reported f.o.b.
processing plant or storage location. Leprino claims that pricing
f.o.b. storage center is inappropriate because such pricing results in
a price with a different location value than that of the plant. It
further claims that costs to ship products to storage centers are not
included in Federal order make allowance calculations; therefore, such
costs should not be included in the survey prices. It proposes that the
price reported should be reduced by the cost of transporting products
to storage centers.
With this final rule, AMS continues the policy of requiring sales
to be reported f.o.b. reporting plant or storage center without
adjustment for transportation to storage facilities prior to sale.
While pricing f.o.b. storage center may reflect a location value that
is different than that which exists at the manufacturing plant,
reducing the price by some unspecified transportation cost, which may
or may not be consistent with the product value, is inappropriate. The
pricing at f.o.b. storage facility would presumably be competitive with
prices of competitors in the surrounding area. Reporting a price
reduced by the transporting of the product to the storage center may
understate the wholesale value of the product at that location and
time.
The interim final rule indicates that transportation charges are to
be excluded from the reported price for each commodity. This exclusion
is not intended to apply to transportation costs from the manufacturer
to a storage facility before the product is sold. The final rule
clarifies that each sale shall be reported either f.o.b. plant if the
product is ``shipped out'' from the plant or f.o.b. storage facility
location if the product is ``shipped out'' from a storage facility. In
calculating the total dollars received or dollars per pound, the
reporting entity shall neither add transportation charges incurred at
the time the product is ``shipped out'' or after the product is
``shipped out'' nor deduct transportation charges incurred before the
product is ``shipped out.''
17. Grade A Dry Whey
Leprino states that Grade A dry whey should continue to be excluded
because it is a premium product. This final rule agrees and continues
the exclusion for Grade A dry whey.
18. Inclusion of Products That Are Not Graded
Questions have arisen concerning the reporting of products that are
not graded by authorities stated in the reporting specifications but
that meet grade standards. Most dairy products for the Dairy Products
Prices survey are not actually graded but meet the grade standards of
authorities designated in the reporting specifications. For greater
clarification the wording of the final rule has been changed to clarify
that products that meet grade standards, as determined by the
manufacturer, are to be reported.
19. Exemptions
One individual submitted comments proposing that mandatory
reporting regulations not be ``implemented except as they would apply
to truly industrial level dairy production.'' The commenter does not
define a level of production to be considered as ``truly industrial.''
Stating concerns about compliance costs, the individual proposes that a
cost-benefit analysis be performed for different levels of production
for manufacturers before the regulation is implemented.
According to the cost-benefit analysis, the annual cost to
manufacturers reporting product prices is estimated at $381 per plant.
Even for a small plant, such reporting costs would not be expected to
be prohibitive. Concerning the maintaining of records, AMS has
consulted with several reporting entities and has found that
manufacturers already maintain records for at least 2 years as required
by the final rule. With the interim final rule, AMS invited comments on
whether all entities subject to the rule maintain the necessary records
for at least 2 years. No such comments were received.
Under this final rule, manufacturers who process and market less
than 1 million pounds of the applicable dairy products per year are
exempt from price reporting requirements.
20. Brokerage Fees and Clearing Charges
Practically all firms that buy or sell products have marketing
expenses. These marketing expenses are figured into the selling prices
negotiated between buyers and sellers. These expenses often take the
form of internal expenses, such as salaries paid to sales people. They
could also take the form of fees paid to third parties, such as
brokerage fees, clearing charges, etc. To maintain consistency, none of
the marketing expenses, whether internal expenses or fees paid to third
parties, should be deducted from the prices reported to NASS. While the
interim final rule excluded clearing charges from the reporting
specifications for each product, this final rule specifies that in
calculating the total dollars received or dollars per pound, the
reporting entity shall not deduct brokerage fees or clearing charges
paid by the manufacturer.
Effective Date
The availability of accurate market data for all market
participants is extremely important. Buyers and seller of the basic
dairy commodities, and indeed, the buyers and sellers of all dairy
products depend on the accuracy of the prices affected by this final
rule to provide them a sense of the current supply and demand
conditions in the dairy sector. Improvements in the quality of price
information of the basic dairy commodities--butter, cheddar, cheese,
nonfat dry milk, and dry whey--were made by the interim final rule.
This final rule makes certain amendments which further enhance the
quality of such price information. For this reason, good cause is found
that this rule will be effective the Sunday after publication in the
Federal Register.
List of Subjects in 7 CFR Part 1170
Dairy products, Reporting and recordkeeping requirements, Cheese,
Butter, Whey, Nonfat dry milk.
0
For the reasons set forth in the preamble, Title 7, subtitle B, chapter
X is amended by revising part 1170, to read as follows:
PART 1170--DAIRY PRODUCT MANDATORY REPORTING
Sec.
1170.1 Secretary.
1170.2 Act.
1170.3 Person.
1170.4 Dairy products.
1170.5 Manufacturer.
1170.6 Store.
Dairy Product Reporting Programs
1170.7 Reporting requirements.
1170.8 Price reporting specifications.
1170.9 Price reporting exemptions.
1170.10 Storage reporting specifications.
1170.11 Records.
1170.12 Confidential information.
Verification and Enforcement
1170.13 Verification of reports.
1170.14 Noncompliance procedures.
[[Page 34182]]
1170.15 Appeals.
1170.16 Enforcement.
Authority: 7 U.S.C. 1637-1637b, as amended by Pub. L. 106-532,
114 Stat. 2541 and Pub. L. 107-171, 116 Stat. 207.
Sec. 1170.1 Secretary.
Secretary means the Secretary of Agriculture of the United States
or any other officer or employee of USDA to whom authority has been
delegated.
Sec. 1170.2 Act.
Act means the Agricultural Marketing Act of 1946, 7 U.S.C. 1621 et
seq., as amended by the Dairy Market Enhancement Act of 2000, Public
Law 106-532, 114 Stat. 2541, and the Farm Security and Rural Investment
Act of 2002, Public Law 107-171, 116 Stat. 207.
Sec. 1170.3 Person.
Person means an individual, partnership, corporation, association,
or any other business unit.
Sec. 1170.4 Dairy products.
Dairy Products means:
(a) Manufactured dairy products that are used by the Secretary to
establish minimum prices for Class III and Class IV milk under a
Federal milk marketing order issued under section 8c of the
Agricultural Adjustment Act (7 U.S.C. 608c), reenacted with amendments
by the Agricultural Marketing Agreement Act of 1937; and
(b) Substantially identical products designated by the Secretary in
this Part.
Sec. 1170.5 Manufacturer.
Manufacturer means any person engaged in the business of buying
milk in commerce for the purpose of manufacturing dairy products in one
or more locations.
Sec. 1170.6 Store.
(a) Store means to place cheese or butter in a warehouse or
facility which is artificially cooled to a temperature of 50 degrees
Fahrenheit or lower and hold these dairy products for 30 days or more;
or
(b) Store means to place nonfat dry milk or dry whey in a
manufacturing plant, packaging plant, distribution point, or shipment
in transit.
Dairy Product Reporting Programs
Sec. 1170.7 Reporting requirements.
(a) All dairy product manufacturers, with the exception of those
who are exempt as described in Sec. 1170.9, shall submit a report to
National Agricultural Statistics Service (NASS) by noon on Wednesday of
all products sold as specified in Sec. 1170.8 during the seven days
ending with the previous Saturday. If a Federal holiday falls on a
Tuesday or Wednesday, NASS will contact manufacturers via e-mail or
phone concerning the applicable report deadline. The report is to be
submitted on the appropriate forms supplied by NASS and shall indicate
the name, address, plant location(s), quantities sold, total sales
dollars or dollars per pound for the applicable products, and the
moisture content where applicable. Each sale shall be reported for the
time period when the transaction is completed, i.e. the product is
``shipped out'' and title transfer occurs. Each sale shall be reported
either f.o.b. plant if the product is ``shipped out'' from the plant or
f.o.b. storage facility location if the product is ``shipped out'' from
a storage facility. In calculating the total dollars received or
dollars per pound, the reporting entity shall neither add
transportation charges incurred at the time the product is ``shipped
out'' or after the product is ``shipped out'' nor deduct transportation
charges incurred before the product is ``shipped out.'' In calculating
the total dollars received or dollars per pound, the reporting entity
shall not deduct brokerage fees or clearing charges paid by the
manufacturer.
(b) Manufacturers or other persons storing dairy products are
required to report, on a monthly basis, stocks of dairy products (as
defined in Sec. 1170.4) on hand, on the appropriate forms supplied by
the NASS. The report shall indicate the name, address, and stocks on
hand at the end of the month for each storage location.
Sec. 1170.8 Price reporting specifications.
The following are the reporting specifications for each dairy
product:
(a) Specifications for Cheddar Cheese Prices:
(1) Variety: Cheddar cheese.
(2) Style: 40-pound blocks or 500-pound barrels.
(3) Moisture Content:
(i) 40-pound blocks: Moisture content is not reported. Exclude
cheese that will be aged.
(ii) 500-pound barrels: Report weighted average moisture content of
cheese sold. NASS will adjust price to a benchmark of 38.0 percent
based on standard moisture adjustment formulas. Exclude cheese with
moisture content exceeding 37.7 percent.
(4) Age: Not less than 4 days or more than 30 days on date of sale.
(5) Grade:
(i) 40-pound blocks: Product meets Wisconsin State Brand or USDA
Grade A or better standards.
(ii) 500-pound barrels: Product meets Wisconsin State Brand or USDA
Extra Grade or better standards.
(6) Color:
(i) 40-pound blocks: colored and within the color range of 6-8 on
the National Cheese Institute color chart.
(ii) 500-pound barrels: white.
(7) Packaging:
(i) 40-pound blocks: Price should reflect cheese wrapped in a
sealed, airtight package in corrugated or solid fiberboard containers
with a reinforcing inner liner or sleeve. Exclude all other packaging
costs from the reported price.
(ii) 500-pound barrels: Exclude all packaging costs from the
reported price.
(8) Exclude: Intra-company sales, resales of purchased cheese,
forward pricing sales (sales in which the selling price was set [not
adjusted] 30 or more days before the transaction was completed), cheese
produced under faith-based close supervision and marketed at a higher
price than the manufacturer's wholesale market price for the basic
commodity (for example, kosher cheese produced with a rabbi on site who
is actively involved in supervision of the production process), sales
under the Dairy Export Incentive Program or other premium-assisted
sales (for example, export assistance sales through the Cooperatives
Working Together program), and cheese certified as organic by a USDA-
accredited certifying agent.
(b) Specifications for Butter Prices:
(1) Variety: 80 percent butterfat, salted, fresh or storage.
(2) Grade: Product meets USDA Grade AA standards.
(3) Packaging: 25-kilogram and 68-pound box sales.
(4) Exclude: Unsalted and Grade A butter, intra-company sales,
resales of purchased butter, forward pricing sales (sales in which the
selling price was set [not adjusted] 30 or more days before the
transaction was completed), butter produced under faith-based close
supervision and marketed at a higher price than the manufacturer's
wholesale market price for the basic commodity (for example, kosher
butter produced with a rabbi on site who is actively involved in
supervision of the production process), sales under the Dairy Export
Incentive Program or other premium-assisted sales (for example, export
assistance sales through the CWT program), and butter certified as
organic by a USDA-accredited certifying agent.
(c) Specifications for Dry Whey Prices:
(1) Variety: Edible nonhygroscopic.
(2) Age: No more than 180 days.
(3) Grade: Product meets USDA Extra Grade standards.
[[Page 34183]]
(4) Packaging or container: 25-kilogram bag, 50-pound bag, tote, or
tanker.
(5) Exclude: Sales of Grade A dry whey, intra-company sales,
resales of purchased dry whey, forward pricing sales (sales in which
the selling price was set [not adjusted] 30 or more days before the
transaction was completed), dry whey produced under faith-based close
supervision and marketed at a higher price than the manufacturer's
wholesale market price for the basic commodity (for example, kosher dry
whey produced with a rabbi on site who is actively involved in
supervision of the production process), premium-assisted sales, and dry
whey certified as organic by a USDA-accredited certifying agent.
(d) Specifications for the Nonfat Dry Milk Prices:
(1) Variety: Non-fortified.
(2) Age: No more than 180 days.
(3) Grade: Product meets USDA Extra Grade or USPH\2\ Grade A
standards.
---------------------------------------------------------------------------
\2\ USPH refers to the US Department of Health and Human
Services--Public Health Service/Food and Drug Administration.
---------------------------------------------------------------------------
(4) Packaging or container: 25-kilogram bag, 50-pound bag, tote, or
tanker.
(5) Exclude: Nonfat dry milk manufactured using high heat process,
sales of instant nonfat dry milk, sales of dry buttermilk products,
intra-company sales, resales of purchased nonfat dry milk, forward
pricing sales (sales in which the selling price was set [not adjusted]
30 or more days before the transaction was completed), nonfat dry milk
produced under faith-based close supervision and marketed at a higher
price than the manufacturer's wholesale market price for the basic
commodity (for example, kosher nonfat dry milk produced with a rabbi on
site who is actively involved in supervision of the production
process), sales under the Dairy Export Incentive Program or other
premium-assisted sales, and nonfat dry milk certified as organic by a
USDA-accredited certifying agent.
Sec. 1170.9 Price reporting exemptions.
(a) Any manufacturer that processes and markets less than 1 million
pounds of cheddar cheese per calendar year is exempt from reporting
cheddar cheese sales as specified in Sec. 1170.8(a).
(b) Any manufacturer that processes and markets less than 1 million
pounds of butter per calendar year is exempt from reporting butter
sales as specified in Sec. 1170.8(b).
(c) Any manufacturer that processes and markets less than 1 million
pounds of dry whey per calendar year is exempt from reporting dry whey
sales as specified in Sec. 1170.8(c).
(d) Any manufacturer that processes and markets less than 1 million
pounds of nonfat dry milk per calendar year is exempt from reporting
nonfat dry milk sales as specified in Sec. 1170.8(d).
Sec. 1170.10 Storage reporting specifications.
(a) Cold Storage Report:
(1) Reporting universe: All warehouses or facilities, artificially
cooled to a temperature of 50 degrees Fahrenheit or lower, where dairy
products generally are placed and held for 30 days or more. Excluded
are stocks in refrigerated space maintained by wholesalers, jobbers,
distributors, and chain stores; locker plants containing individual
lockers; and frozen food processors whose inventories are turned over
more than once a month.
(2) Products required to be reported:
(i) Natural cheese, domestic and foreign made, including barrel and
cheese to be processed; American type cheeses, (cheddar, Monterey,
Colby, etc.), including government owned stocks; Swiss; other natural
cheese types (brick, mozzarella, Muenster, Parmesan, etc.). Exclude
processed cheese.
(ii) Salted and unsalted butter, anhydrous milkfat (AMF), butter
oil, including government owned stocks.
(b) Dairy Products Report:
(1) Reporting universe: All manufacturing plants.
(2) Products required to be reported:
(i) Nonfat dry milk.
(ii) Dry whey.
Sec. 1170.11 Records.
Each person required to report information to the Secretary shall
maintain, and make available to the Secretary, on request, original
contracts, agreements, receipts, and other records associated with the
sale or storage of any dairy products during the 2-year period
beginning on the date of the creation of the records.
Sec. 1170.12 Confidential information.
Except as otherwise directed by the Secretary or the Attorney
General for enforcement purposes, no officer, employee, or agent of the
United States shall make available to the public information,
statistics, or documents obtained from or submitted by any person in
compliance with the Dairy Product Mandatory Reporting program other
than in a manner that ensures that confidentiality is preserved
regarding the identity of person, including parties to a contract, and
proprietary business information.
Verification and Enforcement
Sec. 1170.13 Verification of reports.
For the purpose of assuring compliance and verification, records
and reports required to be filed by manufacturers or other persons
pursuant to section 273(b)(1)(A)(i) of the Act, the Agricultural
Marketing Service, through its duly authorized agents, shall have
access to any premises where applicable records are maintained, where
dairy products are produced or stored, and at any time during
reasonable business hours shall be permitted to inspect such
manufacturer or person, and any original contracts, agreements,
receipts, and other records associated with the sale of any dairy
products.
Sec. 1170.14 Noncompliance procedures.
(a) When the Secretary becomes aware that a manufacturer or person
may have willfully delayed reporting of, or failed or refused to
provide, accurate information pursuant to section 273(b)(1)(A)(i) of
the Act, the Secretary may issue a cease and desist order.
(b) Prior to the issuance of a cease and desist order, the
Secretary shall provide notice and an opportunity for an informal
hearing regarding the matter to the manufacturer or person involved.
(c) The notice shall contain the following information:
(1) That the issuance of a cease and desist order is being
considered;
(2) That the reasons for the proposed cease and desist order in
terms sufficient to put the person on notice of the conduct or lack
thereof upon which the notice is based;
(3) That within 30 days after receipt of the notice, the
manufacturer or person may submit, in person, in writing, or through a
representative, information and argument in opposition to the proposed
cease and desist order; and
(4) That if no response to the notice is received within the 30
days after receipt of the notice, that a cease and desist order may be
issued immediately.
(d) If a manufacturer or person requests a hearing, the hearing
should be held at a location and time that is convenient to the parties
concerned, if possible. The hearing will be held before the Deputy
Administrator, Dairy Programs, Agricultural Marketing Service, or a
designee. The manufacturer or person may be represented. Witnesses may
be called by either party.
(e) The Deputy Administrator, Dairy Programs, Agricultural
Marketing Service, or a designee will make a decision on the basis of
all the
[[Page 34184]]
information in the administrative record, including any submission made
by the manufacturer or person. The decision of whether a cease and
desist order should be issued shall be made within 30 days after
receipt of any information and argument submitted by the manufacturer
or person. The cease and desist order shall be final unless the
affected manufacturer or person requests a reconsideration of the order
to the Administrator, Agricultural Marketing Service, within 30 days
after the date of the issuance of the order.
Sec. 1170.15 Appeals.
If the cease and desist order is confirmed by the Administrator,
Agricultural Marketing Service, the manufacturer or person may appeal
the order in the appropriate United States District Court not later
than 30 days after the date of the confirmation of the order.
Sec. 1170.16 Enforcement.
(a) If a person subject to the Dairy Product Mandatory Reporting
program fails to obey a cease and desist order after the order has
become final and unappealable, or after the appropriate United States
district court has entered a final judgment in favor of the
Administrator, Agricultural Marketing Service, the United States may
apply to the appropriate United States district court for enforcement
of the order.
(b) If the court determines that the cease and desist order was
lawfully made and duly served and that the manufacturer or person
violated the order, the court shall enforce the order.
(c) If the court finds that the manufacturer or person violated the
cease and desist order, the manufacturer or person shall be subject to
a civil penalty of not more than $10,000 for each offense.
Dated: June 10, 2008.
Lloyd C. Day,
Administrator, Agricultural Marketing Service.
[FR Doc. E8-13550 Filed 6-16-08; 8:45 am]
BILLING CODE 3410-02-P