Browse: Departments   Dates   Agencies  

DEPARTMENT OF AGRICULTURE

Western Area Power Administration

CFR Citation: 7 CFR Part 1221

Docket ID: [Docket No. AMS-LS-07-0056, LS-07-02]

NOTICE: Part IV

DOCUMENT ACTION: Final rule.

SUBJECT CATEGORY: Sorghum Promotion, Research, and Information Order

DATES: Effective May 7, 2008. Collection of assessments and appropriate reporting will begin on July 1, 2008.

DOCUMENT SUMMARY: This rule establishes an industry-funded promotion, research, and information program for sorghum, which includes but is not limited to, grain sorghum, sorghum forage, sorghum hay, sorghum haylage, sorghum billets, and sorghum silage. For the purpose of clarity, the term sorghum means all the above mentioned types of sorghum unless specifically identified otherwise. The Sorghum Promotion, Research, and Information Order (Order) is implemented under the authority of the Commodity Promotion, Research, and Information Act of 1996 (Act). The Order will establish a national Sorghum Promotion, Research, and Information Board (Board) comprised initially of 13 sorghum producers. Producers and importers will pay assessments based on the value of the sorghum they produce or import. A referendum will be conducted 3 years after assessments begin to determine if sorghum producers and importers favor the program.

SUMMARY: Agriculture Department, Agricultural Marketing Service,

SUPPLEMENTAL INFORMATION

This Order is issued pursuant to the Act of 1996 (7 U.S.C. 74117425) enacted April 4, 1996, hereafter referred to as the Act. A proposed Order was published November 23, 2007 [72 FR 65842].

Executive Order 12988

This final rule has been reviewed under Executive Order 12988, Civil Justice Reform. It is not intended to have retroactive effect. Section 524 of the Act provides that the Act shall not affect or preempt any other Federal or State law authorizing promotion or research relating to an agricultural commodity.

Under Section 519 of the Act, a person subject to the Order may file a petition with the Secretary of Agriculture (Secretary) stating that the Order, any provision of the Order, or any obligation imposed in connection with the Order is not established in accordance with the law, and may request a modification of the Order or an exemption from the Order. Any petition filed challenging the Order, any provision of the Order, or any obligation imposed in connection with the Order, shall be filed within 2 years after the effective date of the Order, provision, or obligation subject to challenge in the petition. The petitioner will have the opportunity for a hearing on the petition. Thereafter, the Secretary will issue a ruling on the petition. The Act provides that the district court of the U.S. for any district in which the petitioner resides or conducts business shall have the jurisdiction to review a final ruling on the petition if the petitioner files a complaint for that purpose not later than 20 days after the date of the entry of the Secretary's final ruling.

Executive Order 13132

This final rule has been reviewed under Executive Order 13132, Federalism. This Order directs agencies to construe, in regulations and otherwise, a Federal statute to preempt State law only when the statute contains an express preemption provision. Section 524 of the Act provides that the Act shall not affect or preempt any other Federal or State law authorizing promotion or research relating to an agricultural commodity.

Six States currently have Statelegislated sorghum research and promotion programs. In accordance with the Act, this final rule will not preempt any of these Statelegislated programs. Further, section 1221.112(j) of the final Order provides for an annual allocation to State programs based on the State's proportional contribution of total assessments collected by the national sorghum checkoff program.

In 2005 and 2006, representatives of the six Statelegislated sorghum promotion programs were among other sorghum industry representatives who met with AMS representatives to discuss the possibility of implementing a national sorghum checkoff program. State program representatives participated in the development of the provisions of the proposed Order during these meetings and through direct communication with the National Sorghum Producers (NSP) during the drafting of its proposal.

Not only were the States informed throughout the development of the national sorghum checkoff program, they were instrumental in the sorghum industry's decision to institute a national sorghum checkoff program. In addition to receiving support from NSP and the U.S. Grains Council, an organization that is dedicated to expanding export opportunities and markets for sorghum and sorghum products, industry and producer organizations from four of the largest grain sorghum production States: Kansas, Nebraska, Texas, and Oklahoma expressed their support for the proposed Order. New Mexico, a producer of grain sorghum and sorghum silage, also expressed support. Within these States, the following organizations indicated their interest in establishing the program: The Texas Grain Sorghum Board; the Texas Grain Sorghum Association; the Kansas Grain Sorghum Producers Association; the Kansas Grain Sorghum Commission; the Nebraska Grain Sorghum Producers Association; the Oklahoma Grain Sorghum Association; and the New Mexico Grain Sorghum Association.

Executive Order 12866

This final rule has been determined not significant for purposes of Executive Order 12866 and therefore has not been reviewed by the Office of Management and Budget (OMB).

Regulatory Flexibility Act

In accordance with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601612), USDA is required to examine the impact of this rule on small entities. The purpose of the RFA is to fit regulatory actions to the scale of businesses subject to such actions so that small businesses will not be disproportionately burdened.

The Act authorizes generic programs of promotion, research, and information for agricultural commodities. Congress found that it is in the national public interest and vital to the welfare of the agricultural economy of the United States to maintain and expand existing markets and develop new markets and uses for agricultural commodities through industryfunded, Governmentsupervised, commodity promotion programs.

The Order is intended to develop and finance, through assessments, an effective and coordinated program of promotion, research, and information to maintain and expand the markets for sorghum. While the Order will impose certain reporting and recordkeeping requirements on persons subject to the Order, the information required under the Order can generally be compiled from records currently maintained.

Under the Order, first handlers will remit assessments collected from
[[Page 25399]]
producers to the Board. First handlers will also be required to keep records and provide information to the Board that it deems necessary. Currently, first handlers already complete and maintain the same or similar information for existing State sorghum and soybean programs, as well as for the Soybean Checkoff Program (7 CFR part 1220). Reporting forms will require the minimum information necessary to fulfill the intent of the Act. Such records and reports will be retained for 2 years beyond the fiscal year of their applicability. First handlers will also be required to make available, to the Secretary, their books and records in order to determine compliance with the Order.

In addition to paying assessments, producers and importers will have a reporting and recordkeeping burden. This burden relates to producers and importers who will seek nomination to serve on the Board, request an organic exemption, request a refund of assessments paid, or vote in a nationwide referendum. The Order requires producers and importers to keep records and to provide information to the Board or the Secretary when requested and to keep records to qualify for a refund. However, it is not anticipated that producers will be required to regularly submit assessment and other related information to the Board. Information may be obtained through an audit of producers' records to confirm information provided by first handlers or as part of the Board's compliance program.

When seeking nominations to serve on the Board, producers will be required to complete two forms that would be submitted to the Secretary.

Any producer paying assessments may request a refund of assessments paid by submitting an application to the Board. Refunds will be made only if the program is not approved in referendum.

With regard to imports of sorghum, U.S. Customs and Border Protection (Customs) will collect and remit assessments from importers to the Board. Customs will also provide information to the Board regarding the value and volume of imported sorghum, and therefore it is not anticipated that importers will have any regular reporting burden. The Order requires importers to keep records and to provide information to the Board or the Secretary, when requested, and to keep records to qualify for a refund. Information may be obtained through an audit of importers' records to confirm information provided by Customs or as part of the Board's compliance program.

Importers will have similar reporting and recordkeeping requirements as producers concerning nominations to serve on the Board, organic exemptions, refunds of assessments paid, or referendums.

The Small Business Administration (SBA) [13 CFR 121.201] defines small agricultural service businesses as those whose annual receipts are less than $6.5 million. According to the National Agricultural Statistics Service (NASS) 2002 Census of Agriculture, there are 22 grain sorghum producing States and approximately 3,000 wholesale grain merchants who will be considered first handlers under the Order, in these 22 States. By calculating the average values of product sold by grain merchants in each of the 22 grain sorghum producing States, one can determine that 16 States have wholesale grain industries where, on average, the wholesalers each sold in excess of $6.5 million per year. This gives a rough approximation that as many as 73 percent of wholesale grain elevators in grain sorghum producing States may have annual sales in excess of $6.5 million and therefore are determined not to be small businesses.

Based upon data collected from State sorghum boards, NSP estimates that approximately 1,150 first handlers of grain sorghum will be affected. This number represents the number of wholesale grain merchants who buy grain sorghum of the 3,000 wholesale grain merchants approximated. Although State promotion, research, and information programs do not currently exist for sorghum forage, sorghum hay, sorghum haylage, sorghum billets, or sorghum silage, NSP estimates that approximately 700 first handlers of these products will be affected. This was determined through discussions with State sorghum promotions program representatives and State organizations representing sorghum producers. We assume that some of these 700 first handlers will be small businesses.

Under SBA criteria, importers of sorghum are considered agricultural service businesses. The Order defines an importer as a person who imports more than 1,000 bushels of grain sorghum, or 5,000 tons of sorghum forage, sorghum hay, sorghum haylage, sorghum billets, or sorghum silage during a calendar year.

At present, a relatively small amount of grain sorghum is imported into the United States, and the exact number of sorghum importers who will be affected by the proposed Order is not known. It is believed that most grain sorghum imports are related to sorghum seed breeding activities at the present time. For the purpose of this RFA, we therefore will assume that some importers are small businesses.

For 2005, United States International Trade Commission (USITC) database reports indicate that there were 24,549 bushels of grain sorghum imported, valued at $96,800. Based upon 2005 NASS data, this total would equal approximately 0.01 percent of the value of the domestic grain sorghum crop. In 2006, USITC database reports indicate that there were 2,547 bushels of grain sorghum imported, valued at $46,000. Using 2006 NASS data, this would again equal approximately 0.01 percent of the value of the domestic grain sorghum crop. Using data from USITC reports for JanuaryAugust 2007, the amount of grain sorghum imported is currently 75,497 bushels, valued at $374,000. Based upon NASS projections for the upcoming marketing year, grain sorghum imports would equal approximately 0.02 percent of the value of the 2007 domestic grain sorghum crop.

The SBA defines small agricultural producers as those having annual receipts of not more than $750,000 annually. According to the NASS 2002 Census of Agriculture, the average grain sorghum farm size is 204 acres. The USDA Economic Research Service's (ERS) Feed Grains Data Base Yearbook Tables indicate that for 2002 the weighted average farm price for grain sorghum was $2.32 per bushel and that, on average, 50.6 bushels per acre were produced. Based on these figures, the average value of grain sorghum produced would be $23,948. Accordingly, most grain sorghum producers subject to this Order are determined to be small businesses.

Sufficient data are not available to make similar calculations for the burden of assessments on sorghum forage, sorghum hay, sorghum haylage, sorghum billets, sorghum silage and sorghum seed producers. For the purpose of this RFA, we will assume that these producers are small businesses.

ERS' report Feed Outlook, August 14, 2007, forecasted grain sorghum production of 475 million bushels in 2007, making it the largest production year since 2001. If this level of production were realized, the proposed Board would collect $9.4 million in assessments on grain sorghum. While ERS does not provide a production forecast for sorghum silage, NASS reports that 4,642,000 tons of sorghum silage was produced in 2006. NASS does not estimate the value of sorghum silage, but at $18 per ton, an estimate provided by NSP, the Board would collect approximately $2.9 million from
[[Page 25400]]
sorghum silage. Were production and prices to remain at these record levels, the Board could collect approximately $12.3 million from domestic production of grain and silage sorghum and $2,244 from imported grain sorghum.

An estimate of the grain sorghum assessments that would have been paid by producers in 2002 can be calculated by multiplying the average farm size (204 acres) by the average production (50.6 bushels per acre) by the price received ($2.32 per bushel) by the proposed grain sorghum assessment rate of 6 tenths of one percent of the value of the grain sorghum (0.006). The burden to each farm can be estimated to be approximately $144 for 2002. In this example, the year 2002 was selected because it is the most recent NASS Census of Agriculture reporting farm size.

Sufficient data are not available to make a more accurate forecast of assessment collections on sorghum forage, sorghum hay, sorghum haylage, sorghum billets, and sorghum silage production. In addition to sorghum first handlers, importers, and producers, there are other entities affected by the Order. State, regional and national organizations representing sorghum producers and importers will have a role in the Order. There will be some burden on producer organizations that want to participate in the program by becoming certified to make nominations to the Board. USDA estimates that two organizations within each State will request certification.

Shortly after the effective date of this Order, USDA will publish a notice in the Federal Register announcing that it will accept applications for certification of organizations to participate in the nomination of Board members pursuant to criteria in section 1221.107. Certified organizations will be required to resubmit applications for certification periodically. It is anticipated that this will occur every 5 years.

Additionally, there will be a burden on State sorghum producer organizations requesting qualification by the Secretary to receive funding from the Board pursuant to section 1221.112(j). Only one organization within each State will be qualified by the Secretary to receive funding from the Board, and preference will be given to existing State legislated sorghum promotion organizations. Organizations will be required to submit an application for qualification to the Secretary pursuant to section 1221.128. It is estimated that one organization will be qualified per State although it is not required that each State have a qualified organization. Qualified organizations receiving funding through the Order will be required to resubmit applications for qualification periodically. It is anticipated that this will occur every 5 years.

While the exact number of certified and qualified organizations is not known, nonetheless their membership, to a great extent, are producers who are largely small entities, and, when applicable, importers who we assume some of which are small entities.

The Act provides authority to tailor a program according to the individual needs of an industry. Section 514 of the Act provides for orders applicable to producers, first handlers, and other persons in the marketing chain as appropriate. Provision is made for permissive terms in an order in Section 516 of the Act and authorizes an order to provide for coverage of research, promotion, and information activities to expand, improve, or make more efficient the marketing or use of an agricultural commodity in both domestic and foreign markets; provision for reserve funds; and provision for credits for generic and branded activities. In addition, Section 518 of the Act provides for a referendum to ascertain approval of an order to be conducted either prior to its going into effect or within 3 years after assessments first begin under the order. An order also may provide for its approval in a referendum to be based upon (1) a majority of those persons voting; (2) persons voting for approval who represent a majority of the volume of the agricultural commodity; or (3) a majority of those persons voting for approval who also represent a majority of the volume of the agricultural commodity. Section 515 of the Act provides for establishment of a board from among producers, first handlers, and others in the marketing chain as appropriate.

This Order includes provisions for a delayed referendum. Approval will be based upon the majority of those persons voting for approval who were engaged in the production or importation of sorghum during the representative period established by the Secretary.

We have not identified any relevant Federal rules that are currently in effect that duplicate, overlap, or conflict with this rule.

Paperwork Reduction Act

In accordance with OMB regulation (5 CFR part 1320) that implements the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35) (PRA), AMS has submitted to OMB a new information collection that has been assigned OMB control number 05810246.

Abstract: The information collection requirements in the request are essential to carry out the intent of the Act.

Under the Order, first handlers will be required to collect assessments from producers, file reports with, and submit assessments to the Board. While the Order will impose certain recordkeeping requirements on first handlers, information required under the Order can be compiled from records currently maintained. Such records must be retained for at least 2 years beyond the marketing year of their applicability. Each first handler will be responsible for the collection of assessments and remittance of the assessments to the Board. It is anticipated that the bulk of assessments will be submitted to the Board by first handlers who purchase sorghum. A producer will be considered a first handler when that person markets sorghum of their own production directly to a consumer.

The Order's provisions have been carefully reviewed, and every effort has been made to minimize any unnecessary recordkeeping costs or requirements.

The forms on which information is to be collected require the minimum information necessary to effectively carry out the requirements of the Order. Such information can be supplied without data processing equipment or outside technical expertise. In addition, there are no additional training requirements for individuals filling out reports and remitting assessments to the Board. The forms are designed to be simple and easy to understand and place as small a burden as possible on the person required to file the information.

The timing and frequency of collecting information are intended to meet the needs of the industry, while minimizing the amount of work necessary to fill out the required reports. In addition, the information to be included on these forms is not available from other sources because such information relates specifically to individual producers and first handlers who are subject to the provisions of the Act. Therefore, there is no practical method for collecting the required information without the use of these forms.

For the purpose of estimating the cost of reporting and recordkeeping, $18.55 is used, which is the mean hourly earnings of first line supervisors and managers of farming, fishing, and forestry workers as obtained from the U.S. Department of Labor Bureau of Labor Statistics National Compensation Survey of Occupational Wages. [[Page 25401]]

Information collection requirements include:
(1) Background Information Form (OMB Form No. 05050001).

Estimate of Burden: Public reporting for this collection of information is estimated to average 0.5 hours per response for each producer or importer nominated to serve on the Board.

Respondents: Producers and importers.

Estimated Number of Respondents: (26 for initial nominations to the Board, 8 in the second year, 10 in the third year, and 8 in the fourth year, sequencing 8, 10 and 8 annually, thereafter).

Estimated Number of Responses per Respondent: 0.33.

Estimated Total Annual Burden on Respondents: 4.29 hours for the initial nominations to the Sorghum Board and sequencing 1.3, 1.6, and 1.3 annually thereafter.

Total Cost: (Number of respondents x responses per respondent x $18.55) $79.58 initial, and sequencing $24.12, $29.68, and $24.12 annually thereafter.
(2) Requirement to Maintain Records Sufficient to Verify Reports Submitted Under the Order.

Estimate of Burden: Public recordkeeping burden for keeping this information is estimated to average 0.1 hour per record keeper maintaining such records.

Recordkeepers: Producers, importers, and first handlers.

Estimated Number of Recordkeepers: 35,050.

Estimated Total Recordkeeping Hours: (Number of recordkeepers x 0.1 hours) 3,502 hours.

Total Cost: (Number of record keepers x 0.1 hour per record keeper x $18.55) $64,962.

(3) Remittance Form by Each First Handler.

Estimate of Burden: Public reporting burden for this collection of information is estimated to average 0.25 hour per first handler.

Respondents: First handlers.

Estimated Number of Respondents: (1,150 first handlers of grain plus 700 first handlers of silage and hay) 1,850.

Estimated Number of Responses per Respondent: 12.

Estimated Total Annual Burden on Respondents: (Number of first handlers x total number of reports x 0.25 hour per report) 5,550 hours.

Total Cost: (5,550 hours x $18.55) $102,952.50.

(4) Application for Refund Form.

Estimate of Burden: Public reporting burden for this collection of information is estimated to average 0.167 hour per response.

Respondents: Producers and importers.

Estimated Number of Respondents: (25 percent of 33,200 total producers) 8,300.

Estimated Number of Responses per Respondent: 6.

Estimated Total Annual Burden: (8,300 producers x 6 reports per year x 0.167 hour per report) 8,317 hours.

Total Cost: (8,317 hours x $18.55) $154,280.

(5) Application for Certification of Organizations.

Estimate of Burden: Public reporting burden for this collection of information is estimated to average 0.5 hour per response.

Respondents: National, State, or regional sorghum associations or organizations.

Estimated Number of Respondents: (Two organizations certified in each of 22 sorghum producing States) 44.

Estimated Number of Responses per Respondent: (Estimating recertification every 5 years) 0.2.

Estimated Total Annual Burden: (44 organizations x 0.2 responses x 0.5 hour per response) 4.4 hours.

Total Cost: (4.4 hours x $18.55) $81.62.

(6) Application for Qualification of Organizations.

Estimate of Burden: Public reporting burden for this collection of information is estimated to average 0.5 hour per response.

Respondents: State associations or organizations.

Estimated Number of Respondents: (1 organization certified in each of 22 sorghum producing States) 22.

Estimated Number of Responses per Respondent: (Estimating requalification every 5 years) 0.2.

Estimated Total Annual Burden: (22 organizations x 0.2 responses x 0.5 hour per response) 2.2 hours.

Total Cost: $40.81.
(7) Nominations for Appointments to the Sorghum Board Form.

Estimate of Burden: Public reporting burden for this collection of information is estimated to average 0.5 hour per response.

Respondents: National, State, or regional sorghum associations and organizations.

Estimated Number of Respondents: (Certified organizations) 22.

Estimated Number of Responses per Respondent: one per year.

Estimated Total Annual Burden: (22 organizations x 1 response x 0.5 hour per response) 11 hours.

Total Cost: (11 hours x $18.55) $204.

(8) Organic Exemption Form.

Estimate of Burden: Public recordkeeping burden for this collection of information is estimated to average 0.5 hour per exemption form.

Respondents: Producers and importers.

Estimated Number of Respondents: 10.

Estimated Number of Responses per Respondent: (Annual exemption application required) 1.0.

Estimated Total Annual Burden on Respondents: 5.0 hour.

Total Cost: (5 hours x $18.55) $92.75.

(9) Referendum Ballot.

Estimate of Burden: Public recordkeeping burden for this collection of information is estimated to average 0.1 hour per referendum ballot.

Respondents: Producers and importers.

Estimated Number of Respondents: 8,300.

Estimated Number of Responses per Respondent: (Estimating referendums every 5 years) 0.2.

Estimated Total Annual Burden on Respondents: 166 hours.

Total Cost: (166 hours x $18.55) $3,079.30.

In the proposed rule published November 23, 2007, [72 FR 65842] comments were invited on: (a) Whether the proposed collection of information is necessary for the proper performance of functions of the proposed Order and the USDA's oversight of the program, including whether the information will have practical utility; (b) the accuracy of USDA's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumption used; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on those who are to respond, including the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology.

No separate comments were received regarding the information collection section. However, one comment was received concerning recordkeeping and is discussed in the comment section.

Background

NSP submitted a draft Order to USDA on December 28, 2006, along with letters of support from nine industry organizations. These letters represented producer organizations from five sorghum producing States, NSP, and the U.S. Grains Council.

According to NSP, a national promotion, sorghum checkoff program will allow the industry to address a number of production and marketing problems it currently faces. Three main
[[Page 25402]]
problems currently affecting sorghum producers are as follows: Lack of yield improvement and technology; aggressive market competition; and lagging ethanol research. The sorghum industry has declined in recent years in both production and acreage.

State grain sorghum promotion, research, and information programs currently exist in Kansas, Texas, Nebraska, Oklahoma, Louisiana, and Arkansas. These promotion, research, and information programs are based on volumetric assessments, so as volumes of grain sorghum change, so do the promotion, research, and information assessments. This variability leads to sporadic research funding. Also, State programs cannot generate a sufficient scale of funding to effectuate large coordinated research programs.

The national sorghum checkoff program addresses both of these concerns.

The assessment provisions of the Order are based on value, so variability of funding will lessen. Also, the revenue generated by a national sorghum checkoff program is anticipated to reach levels that can adequately fund large coordinated research programs in sorghum.

The proponent requested that the implementation referendum be conducted within 3 years after assessments begin, which is consistent with the provisions of the Act. Approval will be based upon a majority of eligible persons voting for approval who have engaged in the production or importation of sorghum during the representative period established by the Secretary.

The program will be administered by a 13member Board appointed by the Secretary from industry nominations. The Board will recommend to the Secretary the assessment rate, programs and projects, budgets, and any rules and regulations that might be necessary for the
administration of the program. The Board will consist of five producers nominated from the State with the largest production, three from the State with the second largest production, one from the State with the third largest production, and four producers to serve as atlarge representatives, among which two representatives are appointed from States other than the top three sorghum producing States.

Importers will be entitled to one seat if the value of assessments collected on imported sorghum reaches or exceeds the production of the State with the third largest sorghum production. Currently, imports of grain sorghum are very limited and not at a value that would trigger the provision of appointing an importer representative to serve on the Board. For example, Nebraska was the third largest producer of grain sorghum in 2006 at approximately 19,200,000 bushels. Imports of grain sorghum in 2006, according to USITC data, were 2,547 bushels.

For the purpose of establishing the initial Board, USDA grain sorghum production data will be used to determine the top three grain sorghum producing States. Section 515(3) of the Act provides for periodic reapportionment of the Board. The Act provides that at least once every 5 years, but not more frequently than once every 3 years the Board shall review the geographical distribution of the production of the agricultural commodity covered by the Order including the quantity or value. If warranted, the Board will recommend reapportionment of the Board membership.

The key to understanding reapportionment in the Order is the definition of production. For the purpose of reapportionment under Section 1221.100 of the Order, production means the total assessments collected by the Board during the last 5 crop years, excluding the high and low years.

Section 1221.100(f) of the Order specifically uses the term production and does not refer to a quantity such as ``bushels'' harvested per acre. The intent of this is to use assessment collections as the basis for reapportionment.

The Order uses this definition since it best accounts for the difference in geographic regions found in the sorghum belt where sorghum prices vary widely. Furthermore, NASS does not report pricing for sorghum forage, sorghum hay, sorghum haylage, sorghum billets, and sorghum silage, so the Board assessment records will provide a method to track the value of all types of sorghum. Using the assessment collections will permit the Board to analyze sorghum production in a consistent manner and base reapportionment decisions on a value as provided for in the Act.

The Order establishes an assessment in section 1221.116 that will be paid by sorghum producers and importers. The assessment will be collected and remitted to the Board by first handlers. The term producer is defined in the proposal as any person who is engaged in the production and sale of sorghum in the United States and who owns or shares the ownership and risk of loss of the sorghum.

Importer is defined as any person importing more than 1,000 bushels of grain sorghum; or 5,000 tons of sorghum forage, sorghum hay, sorghum haylage, sorghum billets, or sorghum silage into the United States in a calendar year as a principal or as an agent, broker, or consignee of any person who produces or purchases sorghum outside of the United States for sale in the United States, and who is listed as the importer of record for such sorghum. First handler is defined as the first person who buys or takes possession (excluding a common or contract carrier of sorghum owned by another) of more than 1,000 bushels of grain sorghum; or 5,000 tons of sorghum forage, sorghum hay, sorghum haylage, sorghum billets, or sorghum silage from producers in a calendar year for marketing. The term first handler includes a producer who markets sorghum of the producer's own production directly to consumers. It may also mean the Commodity Credit Corporation (CCC) in any case in which sorghum is pledged as collateral for a loan issued under any CCC price support loan program and the sorghum is forfeited by the producer in lieu of loan repayment.

The definition of first handler is constructed so that any commercial grain elevator will meet the requirement of the definition by buying more than the minimum amount of grain sorghum in a calendar year and therefore will assess all grain sorghum purchased. The definition of first handler is designed to exclude small cattle feeding operations and dairies that would buy less than 1,000 bushels of grain sorghum or 5,000 tons of sorghum forage, sorghum hay, sorghum haylage, sorghum billets, or sorghum silage. The Order does not have a de minimis clause applicable to producers, but it does define first handler and importer in a way as to exclude very small entities.

As mentioned above, the approximately 1,850 first handlers of sorghum will collect and remit assessments to the Board. First handlers will remit assessments to the Board on a monthly basis along with a report detailing the volume of sorghum on which assessments were collected as well as identifying the State in which the sorghum was produced. Information regarding the origin of the sorghum's production is necessary so that the Board can make recommendations to USDA regarding reapportionment of its membership.

Section 1221.119 of the Order provides for refunds. Any producer or importer from whom an assessment is collected and remitted to the Board, or who pays an assessment directly to the Board, through the announcement of the results of the implementing referendum, [[Page 25403]]
upon failure of the referendum will then have the right to receive from the Board a refund of assessments paid. Any producer or importer requesting a refund will be required to submit an application on the prescribed form to the Board within 60 days from the date the assessments were paid by such producer or importer, but no later than the date the results of the required referendum are announced by the Secretary. Section 1221.112(j) provides for an allocation of a portion of all assessments collected to be made available to qualified State sorghum producer organizations. Each year the Board will establish an allocation amount of no less than 15 percent but no more than 25 percent of the total assessments collected on all sorghum available for any fiscal period, less the expenses incurred by the Secretary for administration and supervision of the Order. The funds can be made available for use by qualified sorghum producer organizations pursuant to section 1221.128 for State programs of generic promotion, research, and information. Amounts allocated by the Board for State generic promotion, research, and information programs will be based on requests submitted to the Board by qualified sorghum producer organizations. An important aspect of the availability of an allocation to a qualified State organization is that the organization will not automatically receive a 1525 percent allocation. Each year the qualified organizations will have to submit requests for the funds, which can be for no more than their allocated amount. A detailed plan describing projects with budgets would be a part of this request to demonstrate that the allocation will be used in a way consistent with the Act and Order.

An example of how an allocation amount could be determined is as follows:

A particular qualified State organization contributes 40 percent of the total assessments collected by the Board for the previous annual fiscal period. Total assessments collected less the USDA expenses for the previous fiscal period were $12,300,000. The Board has set the allocation amount at 25 percent. The qualified organization representing that State may submit requests up to $1,230,000 ($12,300,000 x 40 percent x 25 percent).

The Order provides for exemptions from assessments under specific conditions. Any importer of less than and including 1,000 bushels of grain sorghum; or 5,000 tons of sorghum forage, sorghum hay, sorghum haylage, sorghum billets, or sorghum silage per calendar year may claim an exemption from the assessment required under section 1221.116. An importer desiring an exemption must apply to the Board for a certificate of exemption and certify that the importer will import less than the above stated quantities of sorghum. The Board will then issue a certificate of exemption and the importers who receive a certificate of exemption will be eligible for reimbursement of assessments collected by Customs. The Board may require persons receiving an exemption from assessments to provide to the Board reports on the disposition of exempt sorghum and, in the case of importers, proof of payment of assessments.

A producer or importer who operates under an approved National Organic Program (NOP) (7 CFR part 205) system plan; produces only products that are eligible to be labeled as 100 percent organic under the NOP may be exempt from the payment of assessments. The producer or importer must submit a request to the Board annually as long as the producer continues to be eligible for the exemption.

The Order is summarized as follows: Sections 1221.1 through 1221.32 of the Order define certain terms such as producer, handler, and importer which are used in the Order.

Sections 1221.100 through 1221.111 include provisions relating to the Board. These provisions cover establishment and membership, nominations nominee's agreement to serve, appointment, term of office, vacancies, removal, certification of organizations, procedure, compensation and reimbursement, powers and duties, and prohibited activities.

Section 1221.112 through 1221.120 covers expenses and assessments. Sections 1221.112 through 1221.115 include provisions relating to budget and expenses, financial statements, operating reserve, and investment of funds. Section 1221.116 through 1221.120 include provisions related to assessments and specify assessment rates, and the imposition of late payment charges. Also included are provisions for exemptions, refund, escrow accounts, refunds, and procedures for obtaining a refund. Section 1221.116 was changed by AMS in the proposed rule to specify that if Customs does not collect an assessment from an importer, the importer is responsible for paying the assessment to the Board.

Section 1221.221 through 1221.223 covers programs, plans, and projects detailing the types of activities to be engaged by the Board. Also covered are provisions for an independent evaluation and the protection of patents, copyrights, inventions, trademarks, information, publications, and product formulations derived from assessment funded activities.

Section 1221.124 through 1221.127 includes provisions for reporting requirements on first handlers and importers; books and records; use of information; and the confidential treatment of all personally identifiable information obtained from books and records of persons subject to the Order.

Section 1221.128 covers the qualification by the Secretary of State organizations that would be eligible to receive funding from the Board. Section 1221.128 was changed by AMS in the proposed rule by adding paragraph (e) to express the primary considerations in determining the qualification of an organization to receive funding.

Sections 1221.129 through 1221.138 discusses the rights of the Secretary; referenda; suspension or termination; proceeding after termination; effects of termination or amendment; personal liability; separability; amendments; rules and regulations; and OMB numbers.

The changes suggested by the commenters are discussed below, along with changes made by USDA upon further review. Also, USDA has made other miscellaneous changes for the purpose of clarity and accuracy. For the readers' convenience, the discussion of comments is organized by topic headings.

Comments

USDA published a proposed Order on November 23, 2007 [72 FR 65849] with a request for comments on the proposal to be received by January 22, 2008. USDA received 215 timely comments on the proposed Order. Five comments were received after the close of the comment period. No new issues were raised by these comments. Twentythree of the comments were from State and national organizations representing producers or providing agricultural related services from the States of Arkansas, Nebraska, Kansas, Texas, Oklahoma, and Colorado. One of these organizations represents itself as the largest importer of sorghum into the United States. Five of these organizations submitted comments in opposition to the proposed Order. One hundred sixtyseven comments were submitted by producers in support of the proposed Order from the States of Arkansas, Colorado, Kansas, Texas, New Mexico, South Dakota, Nebraska, and Missouri. Twentytwo producers submitted comments opposing the proposal in part or in whole.
[[Page 25404]]

Supporting Comments

One hundred thirtyseven comments identified the pooling of resources as a significant benefit of a national mandatory sorghum checkoff program. Several of these comments cited the Soybean and Cotton Checkoff programs as successful farmer funded selfhelp programs that have contributed substantially to the benefit of their respective industries. These comments stressed that for sorghum to remain a viable rotation crop, a national sorghum checkoff program must be implemented.

Some comments addressed funded research as a resulting benefit of establishing a national mandatory sorghum checkoff program.

Eight comments, in support of the proposal, specifically identified the proposed funding allocation to States as an appropriate way to help support State level research and promotion initiatives while emphasizing the financial strength of a national sorghum checkoff program.

One hundred twelve comments, in support of the proposal, identified weed control as an area where a national sorghum checkoff program could fund major research. Comments from producers and large and small production States specifically mentioned shatter cane and other grasses as important areas of weed control research that could be performed by the national sorghum checkoff program.

Sixtyfour comments addressed the need for national level research relating to the development of cellulosic ethanol production. These comments were submitted by producers of both grain and forage type sorghums.

Sixtyeight comments suggested that research into improving sorghum yields has been historically underfunded, especially when compared to the tremendous amount of resources devoted by private companies into corn and soybean yield research. These comments were submitted by producers from large and small production States.

Twenty comments specifically mentioned that a national sorghum checkoff program could more effectively fund sorghum breeding and genetics programs. Some of these comments suggested that improved varieties would encourage greater planted acreage and production, which would expand and stabilize sorghum markets.

Twentysix comments, in favor of the proposal, specifically mentioned that a national sorghum checkoff program could address the issues of developing new markets, domestic and foreign, for grain sorghum.

Assessment Rate Cap

Seventytwo supporting comments recommended changing text in section 1221.116, Assessments, to clarify that the assessment rates on grain and silage may not be raised above a cap of 1 percent. These comments suggest changing the text in section 1221.116 so that the maximum modification of the assessment rate would be 0.4 percent of net market value in 1221.116(c)(1) and 0.65 percent of net market value in 1221.116(c)(2). This would cap the assessment rates for all sorghum at 1 percent of net market value. We agree that a clarification is appropriate. However, USDA has changed section 1221.116(c)(1), section 1221.116(c)(2), and section 1221.116(e) so that the Order reflects the intent of the original submission by the proponent. The cap for the assessment rates at 1 percent of the net market value will appear only in section 1221.116(e). Further, any change in the assessment rates must be promulgated through regulations approved by the Secretary. Other Changes for Consistency With NSP Submission

Several supportive commenters recommended five changes to the regulatory text in the Order to make the text consistent with the intent of the original submission of the proponent and to correct miscellaneous grammatical errors.

The comments recommended changing 1221.104(c)(5) by adding ``at large national representatives shall also have their staggered terms assigned by the Secretary''; removing an unnecessary semicolon from 1221.117; correcting a section reference in 1221.123 from 1221.131 to 1221.132; changing an ``or'' to ``and'' in 1221.130(b)(3) so that a petition for a referendum would require 10 percent of eligible producers and importers (A similar change was also supported by an organization that opposes the proposal); adding ``and Importers'' to 1221.130(c) to reflect that both producers and importers, who are eligible, may vote in referendums. These changes have merit and have been made in the final rule.

Opposing Comments

Twentytwo comments from producers and five comments from organizations were submitted opposing the implementation of the proposal or portions thereof. A number of topics were discussed. Board Membership

Five organizations, opposing the proposal, submitted comments regarding Board membership and asserted that the proposed Board structure favors the largest production States. Further, that the largest production State would control 40 percent of the Board's membership. They believe that this would allow the largest production States to influence the spending of resources for promotion and research to the exclusion of small production States.

One commenter suggested that as an alternative to creating a national sorghum checkoff program, the sorghum industry should continue under the current system of State legislated and voluntary State level sorghum checkoff programs and be encouraged to establish a coordinating checkoff board comprised of State programs.

One commenter recommended adoption of a method of apportionment that would prevent any State from having more than 25 percent of Board seats. One commenter noted that the Board would have broad powers under 1221.112 and 1221.116 and that the interest of small production States would not be represented under the proposed Board structure.

To address this issue, the apportionment method suggested by the commenter distributes Board seats using a combination of representation assigned to the top five production States and dividing the remainder of sorghum production areas into four regions. States and regions would then be allotted representation based on the value production. States or regions with production valued at less than $75 million would get one member. States of regions with production valued between $75 million and $225 million would receive two members, and States or regions with production valued above $225 million would receive three members. Importers would receive membership using the same criteria based on the value of imported product. Under this system the size of the Board would expand and contract as acreage and crop prices change, and a five year average of crop value would be calculated annually to determine Board membership.

Other commenters reviewed this alternative representation mechanism and offered comments regarding its merits. These comments noted that under the alternative representation mechanism, the number of Board members would continue to increase as sorghum production increases thus potentially leading to an overly large board and increased administrative costs associated with travel and Board meetings. These commenters also suggested that the alternative representation plan does not
[[Page 25405]]
substantially contribute to minimizing majority membership for the largest production States.

The alternative apportionment method suggested by the commenter is significantly different from the proposal and has not been subject to public comment. Nonetheless, USDA believes that a board comprised of 13 members is an appropriate and reasonable size for the anticipated revenue of the national sorghum checkoff program. Further, based on review of the comments, grain sorghum production is heavily concentrated in three States. Based on 2007 NASS production data, three States account for 79 percent of the total United States production. Therefore, USDA believes it reasonable to have Board representation reflect this production. Additionally, under the representation mechanism proposed in the Order, certified organizations are responsible for the submission of qualified nominees from all geographic areas to fill atlarge positions for nomination and appointment to the Board by the Secretary. Also, representation on the Board will be reviewed at least once every five years and the Board may recommend to the Secretary that representation be altered to reflect any change in geographical distribution of domestic sorghum production. Sorghum imported into the United States will also be reviewed. Board members are appointed by the Secretary and are expected to make decisions that would benefit the entire sorghum industry. Therefore, USDA is finalizing this section as proposed.

Allocation of Assessments to States

Several opposing commenters stated that the ``passback'' allocation (section 1221.112(j) is too small and recommended an increase to 50 percent citing the Beef Promotion and Research Order and the Soybean Promotion, Research, and Consumer Information Order as examples. Other commenters suggested that the funding allocation should be automatically provided to States at 50 percent. Several commenters asserted that the proposal's funding allocation provision will not provide adequate funding to maintain State checkoff programs given different research needs in small production States. Several of these opposing commenters suggested that research needs are different in small production States because grain sorghum utilization varies among small States. They asserted that small production States are interested in weed control research and verification and not interested in breeding programs or ethanol research. Further, they stated that without proper representation on the Board, combined with loss of individual assessment funding, they believed research vital to their interest will go unfunded. They contended, their assessments would go to fund research that would not benefit small production States, and university researchers in small production States would lose funding. They noted that other national programs, such as the Soybean Promotion, Research, and Consumer Information Order in particular, have implemented programs that left State programs at least as well off after implementation of the national program.

As previously noted, eight comments, in support of the proposal, specifically identified the proposed funding allocation to States as an appropriate way to help support State level research and promotion initiatives while emphasizing the financial strength of a national sorghum checkoff program.

Seven supportive commenters rebutted these comments opposed to the proposed State funding allocation. Several of the supporting commenters noted that the State funding allocation was not intended to be a funding mechanism for State checkoff boards but, rather a method to fund promotion and research initiatives specific to States that are not currently addressed by national promotion and research initiatives. Some commenters noted that, currently, State checkoffs are responsible for costs associated with collecting assessments while under the proposal they would have no such costs because the national Board would collect assessments. These commenters suggested that, in addition to the State funding allocation, these qualified State programs could apply for and receive additional funding from the Board on a project byproject basis.

One supportive commenter responding to the opposing comments on State funding allocation stated that the commenter had visited personally with a number of university researchers regarding the State funding allocation. This commenter stated that these researchers had no reservation competing on a national level for research funding and that in doing so felt that the research proposals with the most merit would rise to priority and receive funding. Other supportive commenters noted that while the Beef Promotion and Research Order and the Soybean Promotion, Research, and Consumer Information Order retain 50 percent of assessments, other checkoffs do not.

The Lamb Promotion, Research, and Information Order and Blueberry Promotion, Research, and Information Order provide no funding allocation back to States. The Cotton Research and Promotion Order, the oldest program, passes back 5 percent to States and the Peanut Promotion, Research, and Information Order currently returns 20 percent to States. The National Pork Promotion, Research, and Consumer Information Order, on average, returns about 16 percent to States.

While several existing national checkoff programs provide varying degrees of funding to State research, promotion, and information efforts, some of these programs have percentages established by statute while other programs have percentages established in their order's provisions. The proposed Order provided for an annual allocation to State programs based on a State's proportional contribution of total assessments collected by the national sorghum checkoff program. The allocation amount would be no less than 15 percent but no more than 25 percent of total assessments collected. We believe that the provision provides for a reasonable allocation for State generic programs while maintaining an appropriate level of funding for the national program. Also, a 50 percent funding allocation should be subject to public comment. Further, the national program does not preempt existing State checkoff programs. Thus, States are not precluded from establishing or continuing a State checkoff program in addition to a national sorghum checkoff Program. Accordingly, these suggestions are not adopted. Referendum

A number of opposing commenters stated they were against a delayed referendum. Some commenters cited their organization's policies that state that commodity checkoff programs should be approved by producer referendum prior to implementation or change of a program. Other commenters suggested that no one should be subject to assessment without the opportunity to vote in a referendum beforehand.

A number of supporting commenters reviewed the opposing comments regarding the delayed referendum and submitted additional comments. These commenters stated that accurately identifying all sorghum producers who would be eligible to vote in the referendum is not possible prior to the collection of assessments, thereby making it impractical to conduct an upfront referendum. Other commenters cited that it would be problematic and impractical to conduct an upfront referendum due to the significant expense of a referendum when there are
[[Page 25406]]

no funds available to reimburse USDA for the expense.

Section 518 of the Act provides for both required referenda and optional referenda for determining whether persons covered by an order favor the order. The Act provides for an optional referendum procedure that authorizes an upfront referendum for which, USDA has historically required the proponent industry to post a bond well in advance of an order's effective date to cover all costs associated with development of an order as well as referendum expenses.

The Act allows for a referendum to be conducted up to three years after the effective date of the Order. This allows all persons subject to the Order a sufficient amount of time to observe the management and functioning of the new program before making a decision regarding its continuation. Further, the Order provides an opportunity to request and receive a refund of assessments if the initial referendum fails. Accordingly, USDA is finalizing the Order with the delayed referendum requirement. Prior to the referendum, USDA will issue regulations for public comment regarding the process in which the referendum will be conducted.

First Handlers

A number of comments and requests for clarification were made regarding first handlers and their role in the sorghum promotion, research, and information program. Among the topics raised were: Reimbursement payments to first handlers for cost associated with collections; economic impact analysis; redefining first handlers; recording the State of origin of sorghum; first handler representation on the Board; clarifying the time of assessment collection; and clarification of the date of sale.

Payments to First Handlers

A commenter stated the commenter's belief that first handlers would bear the burden of implementing the checkoff and, therefore requested that USDA consider reimbursing first handlers up to 10 percent of sorghum checkoff assessments collected to offset the direct costs incurred in collecting, submitting, and maintaining records for the national sorghum promotion, research, and information program. While first handlers are subject to the Order, the Act does not provide for such reimbursement of administrative expenses to first handlers or anyone else in the marketing chain. Accordingly, USDA does not accept this proposed change.

Definition of First Handler

A commenter suggested that the definition of first handler be changed because 1,000 bushels is too low of a limit to exclude a handler from their obligation to pay the assessment. This commenter also suggested that grain buyers may not know at the beginning of the year how much sorghum they will buy, thus placing them in the position of either refunding assessments if they don't reach the 1,000 bushel limit or assessing afterthefact once they reach the trigger. Either way, the commenter suggested, that this would cause an undue burden on the handler.

We disagree. The definition of first handler is constructed so that every commercial grain elevator, under current industry practices, would exceed the threshold since they typically buy more than the minimum threshold amount of sorghum in a calendar year. Therefore, all sorghum purchased by first handlers would be assessed.

The definition of first handler is designed to exclude small cattle feeding operations and dairies that would buy less than 1,000 bushels of grain sorghum or 5,000 tons of sorghum forage, sorghum hay, sorghum haylage, sorghum billets, or sorghum silage. According to NASS data, the average U.S. sorghum production in 2007 was 74.2 bushels per acre. Any commercial grain elevator that purchases 13.5 acres of sorghum will have met the definition. According to the NASS' 2002 Census of Agriculture, the average grain sorghum farm size was 204 acres. If a commercial grain elevator has even one grain sorghum producing customer, they would likely meet the limit more than 15 times over. Accordingly, USDA believes that the 1,000 bushel limit is appropriate and will not burden commercial grain buyers. Accordingly, this suggestion to change the definition of first handler is not adopted. State of Origin of Sorghum

A commenter suggested that the requirement for first handlers to keep records of the State of Origin of their sorghum purchases is a burden that is not part of their regular course of business. This requirement is essential to the Board's determination of
representation, which is based on assessment collections for each State. The information is also needed in identifying the appropriate State to receive funding allocations. A similar requirement is part of the Soybean Promotion, Research, and Consumer Information Order's recordkeeping requirements as well as other State programs and has not proven to be a substantial burden. The burden estimated under this program is minimal and necessary for carrying out the provisions of the Order. Accordingly, this comment is not adopted.

First Handler Representation on Board

A commenter criticized the lack of representation of first handlers on the Board stating that first handlers deserved representation because of the disproportionate economic impact they will incur as a result of implementing the checkoff. We disagree. The program's effect on first handlers is not unreasonable. Further, the representation provisions of the Order are appropriate as they afford representation to those persons who pay the assessments. Accordingly, this comment is not adopted.

Time of Assessment Collection

A commenter asked for clarification of the term handled as it relates to the timing of the assessment collection. While the collection of assessments is on handled sorghum the assessment occurs at the time the producer sells the sorghum and the net market value is established. Also, the commenter suggested that the wording of section 1221.124(1) be changed to clarify that records would only be required for sorghum bushels on which assessments have been collected. We disagree. The information required in subparagraph (a)(1) is needed by the Board to carry out its responsibilities under the Order. Accordingly, no change is made as a result of this comment. Date of Sale

A commenter asked for clarification of the date of sale. The commenter suggested that in the context of the grain trade, a better term might be date of settlement which would reflect the date when the assessment is deducted from the producer's payment in fulfillment of a contract. USDA believes that this comment has merit, but also believes that a more appropriate term would be date on which assessments were paid. Therefore, USDA is changing 1221.125(b)(5) to read as follows: ``(5) date on which assessments were paid; and''. Further, this change makes the term consistent with 1221.124(4). The commenter also suggested making a similar change in section 1221.116. However, USDA does not believe any change is necessary in this section.
[[Page 25407]]
Miscellaneous Comments

Nomination and Appointment

Two commenters, one in support and one in opposition to the Order, expressed concern that USDA removed a paragraph of text from the original submission that would have allowed the Board to make adjustments in procedures for the nomination to, appointment to, or representation on the Board without amending the Order. This sentence would have been included in 1221.100(f) at the end of the paragraph. The Order provides for a review every five years of sorghum production and importation to determine whether there is equitable representation on the Board. However, given the organization and structure of the Board, rulemaking is appropriate and necessary to make such adjustments. Accordingly, no changes are made as a result of these comments.

Assessment Remittance

Several commenters requested that USDA consider changing the assessment remittance requirement from monthly to quarterly. An appropriate remittance schedule is critical to the Board's functioning. While no change is made to the final rule, USDA, in consultation with the Board, will review this issue after the program has been fully implemented. Consequently, unless otherwise prescribed in future regulations, assessments are due by the 15th of the following month in which assessments are collected.

Freezing of Assessment Rate

A commenter suggested that the assessment rate be frozen for a period of th

FOR FURTHER INFORMATION CONTACT Kenneth R. Payne, Chief, Marketing Programs Branch; Telephone: (202) 7201115; Fax: (202) 7201125, or E mail Kenneth.Payne@usda.gov.

Your Ad Here

Your Ad Here