Increased Assessment Rate: Tomatoes Grown in Florida

Tomatoes Grown in Florida; Increased Assessment Rate

Supplementary Information

This action, pursuant to 5 U.S.C. 553, amends regulations issued to carry out a marketing order as defined in 7 CFR 900.2(j). This rulemaking is issued under Marketing Agreement No. 125 and Marketing Order No. 966, as amended (7 CFR part 966), regulating the handling of tomatoes grown in Florida. Part 966 referred to as "the Order" is effective under the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the "Act." The Committee locally administers the Order and is comprised of producers of fresh tomatoes operating within the area of production.

The Agricultural Marketing Service (AMS) is issuing this rulemaking in conformance with Executive Orders 12866, 13563, and 14094. Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. Executive Order 14094 reaffirms, supplements, and updates Executive Order 12866 and further directs agencies to solicit and consider input from a wide range of affected and interested parties through a variety of means. This action falls within a category of regulatory actions that the Office of Management and Budget (OMB) exempted from Executive Order 12866 review.

This rulemaking has been reviewed under Executive Order 13175-Consultation and Coordination with Indian Tribal Governments, which requires agencies to consider whether their rulemaking actions would have Tribal implications. AMS has determined that this rulemaking is unlikely to have substantial direct effects on one or more Indian Tribes, on the relationship between the Federal Government and Indian Tribes, or on the distribution of power and responsibilities between the Federal Government and Indian Tribes.

This rulemaking has been reviewed under Executive Order 12988-Civil Justice Reform. Under the Order now in effect, Florida tomato handlers are subject to assessments. Funds to administer the Order are derived from such assessments. It is intended that the assessment rate will be applicable to all assessable tomatoes for the 2023-2024 fiscal period, and continue until amended, suspended, or terminated.

The Act provides that administrative proceedings must be exhausted before parties may file suit in court. Under section 8c(15)(A) of the Act (7 U.S.C. 608c(15)(A)), any handler subject to an order may file with the U.S. Department of Agriculture (USDA) a petition stating that the order, any provision of the order, or any obligation imposed in connection with the order is not in accordance with law and request a modification of the order or to be exempted therefrom. Such handler is afforded the opportunity for a hearing on the petition. After the hearing, USDA would rule on the petition. The Act provides that the district court of the United States in any district in which the handler is an inhabitant, or has his or her principal place of business, has jurisdiction to review USDA's ruling on the petition, provided an action is filed not later than 20 days after the date of the entry of the ruling.

This rulemaking increases the assessment rate for Florida tomatoes handled under the Order from $0.025 per 25-pound container or equivalent, the rate established for the 2017-2018 and subsequent fiscal periods, to a rate of $0.035 per 25-pound container or equivalent for the 2023-2024 and subsequent fiscal periods.

Sections 966.41 and 966.42 authorize the Committee, with the approval of AMS, to formulate an annual budget of expenses and collect assessments from handlers to administer the program. The members are familiar with the Committee's needs and with the costs of goods and services in their local area and are able to formulate an appropriate budget and assessment rate. The assessment rate is formulated and discussed in a public meeting, and all directly affected persons have an opportunity to participate and provide input.

For the 2017-2018 and subsequent fiscal periods, the Committee recommended, and AMS approved, an assessment rate of $0.025 per 25-pound container or equivalent of Florida tomatoes within the production area. That rate continues in effect from fiscal period to fiscal period until modified, suspended, or terminated by AMS upon recommendation and information submitted by the Committee or other information available to AMS.

The Committee met on September 20, 2023, and unanimously recommended 2023-2024 fiscal period expenditures of $1,155,764 and an assessment rate of $0.035 per 25-pound container or equivalent of Florida tomatoes handled for the 2023-2024 and subsequent fiscal periods. In comparison, last fiscal period's budgeted expenditures were $1,156,773. The assessment rate of $0.035 per 25-pound container or equivalent is $0.01 higher than the rate currently in effect. The Committee has used financial reserves in previous seasons to help pay for budgeted expenses. Increasing the assessment rate will allow the Committee to replenish and maintain their financial reserves at the desired level of $250,000. The Committee projects handler receipts of approximately 22,000,000 25-pound containers or equivalent of assessable Florida tomatoes for the 2023-2024 fiscal period, an increase from the 21,815,350 containers handled for the 2022-2023 fiscal period.

The major expenditures recommended by the Committee for the 2023-2024 fiscal period include $350,000 for research; $340,000 for education and promotions; and $277,393 for management and staff. By comparison, budgeted expenses for these items during the 2022-2023 fiscal period were $350,000; $330,000; and $274,105, respectively.

At the current assessment rate of $0.025, the expected 22,000,000 25-pound containers or equivalent of assessable Florida tomatoes would generate $550,000 in assessment revenue (22,000,000 multiplied by $0.025 assessment rate). By increasing the assessment rate by $0.01 to $0.035, assessment income should generate $770,000 in assessment revenue (22,000,000 multiplied by $0.035 assessment rate) for the 2023-2024 fiscal period. This amount should be appropriate to ensure the Committee has sufficient revenue, along with an anticipated $265,501 in funds awarded through the Foreign Agricultural Service Market Access Program and $129,071 in other income, to fully fund its recommended 2023-2024 fiscal period budgeted expenditures, while maintaining financial reserves at around $250,000.

The Committee derived the recommended assessment rate by considering anticipated fiscal period expenses, expected shipments of Florida tomatoes, anticipated grant funds, and the amount of funds available in financial reserve. Income derived from handler assessments ($770,000), Foreign Agricultural Service Market Access Program grants ($265,501), and other sources including administrative and interest income ($129,071), should be adequate to cover budgeted expenses ($1,155,764). Funds available in the financial reserve (currently about $241,000) will be kept within the maximum permitted by the Order (approximately one fiscal period's expenses as authorized in § 966.44).

The assessment rate will continue in effect indefinitely unless modified, suspended, or terminated by AMS upon recommendation and information submitted by the Committee or other available information.

Although this assessment rate will be in effect for an indefinite period, the Committee will continue to meet prior to or during each fiscal period to recommend a budget of expenses and consider recommendations for modification of the assessment rate. The dates and times of Committee meetings are available from the Committee or AMS. Committee meetings are open to the public and interested persons may express their views at these meetings. AMS will evaluate Committee recommendations and other available information to determine whether modification of the assessment rate is needed. Further rulemaking will be undertaken as necessary. The Committee's 2023-2024 fiscal period budget, and those for subsequent fiscal periods, will be reviewed and, as appropriate, approved by AMS.

Final Regulatory Flexibility Analysis

Pursuant to requirements set forth in the Regulatory Flexibility Act (RFA) (5 U.S.C. 601-612), AMS has considered the economic impact of this rulemaking on small entities. Accordingly, AMS has prepared this final regulatory flexibility analysis.

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. Marketing orders issued pursuant to the Act, and the rules issued thereunder, are unique in that they are brought about through group action of essentially small entities acting on their own behalf.

There are 38 handlers of Florida tomatoes subject to regulation under the Order and approximately 50 producers of Florida tomatoes in the production area. At the time this analysis was prepared, the Small Business Administration (SBA) defined small agricultural producers of tomatoes as those having annual receipts of less than $3,500,000 (NAICS code 111339, Other Non-citrus Fruit Farming), and small agricultural service firms as those whose annual receipts are less than $34,000,000 (NAICS code 115114, Postharvest Crop Activities) (13 CFR 121.201).

According to data from the AMS Market News Tomato Fax Report, the average price for fresh Florida tomatoes for the 2022-2023 season was approximately $21.94 per 25-pound container, with total shipments of around 21,815,350 25-pound containers. Based on the average terminal market price and shipment information, the number of handlers, and assuming a normal distribution, the majority of tomato handlers have estimated average annual receipts of significantly less than $34,000,000 ($21.94 multiplied by 21,815,350 containers equals $478,628,779, divided by 38 handlers equals $12,595,494 per handler).

In addition, based on data from the National Agricultural Statistics Service (NASS), the average price producers received for fresh Florida tomatoes at the point of first sale during the 2022-2023 season was approximately $11.08 per 25-pound container, with total shipments of around 21,815,350 containers. Using the average price producers received and shipment information, the number of producers, and assuming a normal distribution, the majority of producers have estimated average annual receipts greater than $3.5 million ($11.08 multiplied by 21,815,350 containers equals $241,714,078, divided by 50 producers equals $4,834,282 per producer). Thus, a majority of producers of Florida tomatoes may be classified as large entities, while a majority of handlers may be classified as small entities.

This rulemaking will increase the assessment rate collected from handlers for the 2023-2024 and subsequent fiscal periods from $0.025 to $0.035 per 25-pound container or equivalent of Florida tomatoes. The Committee unanimously recommended 2023-2024 fiscal period expenditures of $1,155,764 and an assessment rate of $0.035 per 25-pound container or equivalent of Florida tomatoes. The assessment rate of $0.035 is $0.01 higher than the current rate. The Committee expects industry to handle 22,000,000 25-pound containers or equivalent of Florida tomatoes during the 2023-2024 fiscal period. Thus, the $0.035 rate per 25-pound container or equivalent should provide $770,000 in assessment income (22,000,000 containers multiplied by $0.035). The Committee expects to use an anticipated $265,501 in funds awarded through the Foreign Agricultural Service Market Access Program and $129,071 in other sources to cover remaining expenses. Income derived from handler assessments, Foreign Agricultural Service Market Access Program grants, and other sources including member fees and interest income, should be adequate to cover budgeted expenses.

The major expenditures recommended by the Committee for the 2023-2024 fiscal period include $350,000 for research; $340,000 for education and promotions; and $277,393 for management and staff. By comparison, budgeted expenses for these items during the 2022-2023 fiscal period were $350,000; $330,000; and $274,105, respectively.

The Committee unanimously recommended increasing the assessment rate after drawing down financial reserves in previous seasons. The Committee desires to maintain a financial reserve of around $250,000, and without increasing the assessment rate, the Committee will not be able to maintain financial reserves at this level. The Committee estimates production for the 2023-2024 fiscal period to be 22,000,000 25-pound containers or equivalent of Florida tomatoes. At the current assessment rate, assessment income should equal $550,000 (22,000,000 containers multiplied by $0.025). By increasing the assessment rate by $0.01, assessment income should be $770,000 (22,000,000 containers multiplied by $0.035). This amount, along with Foreign Agricultural Service Market Access Program grants, and other income, should provide sufficient funds to meet anticipated 2023-2024 fiscal period expenses, while maintaining financial reserves at around $250,000.

Prior to arriving at this budget and assessment rate, the Committee considered maintaining the current assessment rate of $0.025. However, the Committee would need to further draw down reserves to meet its expenses. The Committee members did not want to utilize additional funds from reserves to meet 2023-2024 fiscal period expenses. Consequently, the alternative of maintaining the current assessment rate was rejected.

A review of historical and preliminary information pertaining to the upcoming fiscal period indicates the average grower price for the 2023-2024 season should be approximately $11.00 per 25-pound container of tomatoes or equivalent. Therefore, the estimated assessment revenue for the 2023-2024 crop year as a percentage of total grower revenue should be about 0.32 percent ($0.035 divided by $11.00 multiplied by 100).

This action increases the assessment obligation imposed on Florida tomato handlers. Assessments are applied uniformly on all handlers, and some of the costs may be passed on to producers. However, these costs are expected to be offset by the benefits derived from the operation of the Order.

The Committee's meetings are widely publicized throughout the Florida tomato industry and all interested persons are invited to attend the meeting and participate in Committee deliberations on all issues. Like all Committee meetings, the September 20, 2023, meeting was a public meeting and all entities, both large and small, were able to express views on this issue. Finally, interested persons were invited to submit comments on this rulemaking, including the regulatory and informational impacts of this action on small businesses.

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35), the Order's information collection requirements have been previously approved by OMB and assigned OMB No. 0581-0178 Vegetable and Specialty Crops. No changes in those requirements would be necessary as a result of this rulemaking. Should any changes become necessary, they would be submitted to OMB for approval.

This rulemaking will not impose any additional reporting or recordkeeping requirements on either small or large Florida tomato handlers. As with all Federal marketing order programs, reports and forms are periodically reviewed to reduce information requirements and duplication by industry and public sector agencies.

AMS is committed to complying with the E-Government Act, to promote the use of the internet and other information technologies to provide increased opportunities for citizen access to Government information and services, and for other purposes.

AMS has not identified any relevant Federal rules that duplicate, overlap, or conflict with this rulemaking.

A proposed rule concerning this action was published in the Federal Register on March 7, 2024 (89 FR 16471). Copies of the proposed rule were provided to all Florida tomato handlers. The proposal was also made available through the internet by USDA and the Office of the Federal Register. A 30-day comment period ending April 8, 2024, was provided for interested persons to respond to the proposal. AMS received three comments during the comment period. Two commentors supported the action and one commenter did not address the merits of the proposed rule. Accordingly, AMS made no changes to the rule as proposed.

A small business guide on complying with fruit, vegetable, and specialty crop marketing agreements and orders may be viewed at: https://www.ams.usda.gov/rules-regulations/moa/small-businesses. Any questions about the compliance guide should be sent to Richard Lower at the previously mentioned address in the FOR FURTHER INFORMATION CONTACT section.

After consideration of all relevant material presented, including the information and recommendations submitted by the Committee and other available information, AMS has determined that this rulemaking is consistent with and will effectuate the purposes of the Act.

For the reasons set forth in the preamble, the Agricultural Marketing Service amends 7 CFR part 966 as follows:

Part 966 Tomatoes Grown in Florida