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Code · REGISTER · 2006-09-13 · SECURITIES AND EXCHANGE COMMISSION · Notices

Notices. Amendment 2

34,070 words·~155 min read·/register/2006/09/13/06-7497

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BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-54407; File No. SR-NYSE-2005-43] Self-Regulatory Organizations; New York Stock Exchange LLC.; Order Approving Proposed Rule Change and Amendment No. 1 Thereto to Rule 607 Relating to the Classification of Arbitrators as Public or Industry September 6, 2006. I. Introduction On June 17, 2005, the New York Stock Exchange, Inc. (“NYSE” or the “Exchange”) filed with the Securities and Exchange Commission (“SEC” or “Commission”), pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 a proposed rule change to amend Rule 607 relating to the classification of arbitrators as public or industry.
On August 4, 2005, the Exchange filed Amendment No. 1 to the proposed rule change. 3 In this amendment, the Exchange stated that the rule change will become effective 90 days following the publication of this order in the **Federal Register** . The NYSE will update and reclassify arbitrators during this time period. The proposed rule change was published for comment in the **Federal Register** on August 29, 2005, 4 and the Commission received 38 comments on the proposal. 5 The majority of commenters are lawyers that represent investors in arbitrations.
This order approves the proposed rule change as amended. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 In Amendment No. 1, which supplemented the original filing, the Exchange modified the implementation date for the proposed rule change and clarified certain aspects of the filing. 4 *See* Exchange Act Release No. 52314 (Aug. 22, 2005), 70 FR 51104 (Aug. 29, 2005). 5 Several commenters filed letters regarding the amendments to Exchange Rule 607 in connection with the proposed change to NASD Rule 10308 (NASD 2005-094), which also governs non-public/industry and public arbitrators.
The NYSE and the Commission have identified letters in response to both rule filings that address the proposed changes to NYSE Rule 607. *See* letters from Bradford D. Kaufman, Esq., Greenberg Traurig, dated Oct. 7, 2005 (“Kaufman”); Jonathan W. Evans, Esq., Jonathan W. Evans & Associates, dated Sept. 21, 2005 (“Evans”); L. Jerome Stanley, dated Sept. 20, 2005 (“Stanley”); Thomas D. Mauriello, Law Offices of Thomas D. Mauriello, dated Sept. 20, 2005 (“Mauriello”); William P. Torngren, Law Offices of William P.
Torngren, dated Sept. 20, 2005 (“Torngren”); Jason R. Doss, Page Perry, LLC, dated Sept. 20, 2005 (“Doss”); Brian M. Greenman, Esq., dated Sept. 20, 2005 (“Greenman”); Teresa M. Gillis, Shustak, Jalil & Heller, dated Sept. 20, 2005 (“Gillis”); Susan N. Perkins, Esq., dated Sept. 20, 2005 (“Perkins”); Charles C. Mihalek, Esq. and Steven M. McCauley, Esq., Charles Mihalek, P.S.C., dated Sept. 20, 2005 (“Mihalek”); Steven J. Gard, Esq., Gard, Smiley, Bishop & Dovin LLP, dated Sept. 20, 2005 (“Gard”);
Scott L. Silver, Blum & Silver, LLP., dated Sept. 20, 2005 (“Silver”); Mitchell S. Ostwald, Esq., Law Offices of Mitchell S. Ostwald, dated Sept. 20, 2005 (“Ostwald”); Joel A. Goodman, Esq., Goodman & Nekvasil, P.A., dated Sept. 20, 2005 (“Goodman”); Alan C. Friedberg, Pendleton, Friedberg, Wilson & Hennessey, P.C., dated Sept. 19, 2005 (“Friedberg”); Debra G. Speyer, Law Offices of Debra G. Speyer, dated Sept. 19, 2005 (“Speyer”); Harvey H. Eckart, Eckart & Leonetti, P.A., dated Sept. 19, 2005 (“Eckart”);
G. Mark Brewer, Esq., Brewer Carlson, LLP, dated Sept. 19, 2005 (“Brewer”); Steve A. Buchwalter, first letter dated Sept. 19, 2005 and second letter dated Sept. 13, 2005 (“Buckwalter”); Royal B. Lea, III, Esq., Bingham & Lea, and Randall A. Pulman, Esq., Pulman, Bresnahan & Pullen, LLP, dated Sept. 19, 2005 (“Lea”); Richard P. Ryder, Securities Arbitration Commentator, Inc., dated Sept. 19, 2005 (“Ryder”); Eliot Goldstein, Esq., dated Sept. 19, 2005 (“Goldstein”); Philip M. Aidikoff, Aidikoff & Uhl, dated Sept. 16, 2005 (“Aidikoff”);
Bruce E. Baldinger, Esq., Baldinger & Levine, L.L.C., dated Sept. 16, 2005 (“Baldinger”); Henry D. Fellows, Jr., Fellows Johnson & La Briola, LLP, dated Sept. 16, 2005 (“Fellows”); Rosemary J. Shockman, Public Investors Arbitration Bar Association, dated Sept. 15, 2005 (“PIABA”); James D. Keeney, dated Sept. 15, 2005 (“Keeney”); Bill Fynes, dated Sept. 15, 2005 (“Fynes”); Jay A. Salamon, Hermann, Cahn & Schneider LLP, dated Sept. 14, 2005 (“Salamon”); Jorge A. Lopez, Esq., Law Offices of Jorge A.
Lopez, P.A., dated Sept. 14, 2005 (“Lopez”); Steven B. Caruso, Esq., Maddox Hargett & Caruso, P.C., dated Sept. 14, 2005 (“Caruso”); Scott C. Ilgenfritz, dated Sept. 14, 2005 (“Ilgenfritz”); Tracey Pride Stoneman, Tracey Pride Stoneman, P.C., dated Sept. 14, 2005 (“Stoneman”); Michael J. Willner, Miller Faucher and Cafferty LLP, dated Sept. 13, 2005 (“Willner”); Richard M. Layne, Layne & Lewis, LLP, dated Sept. 13, 2005 (“Layne”); Michael Knoll, Esq., Law Offices of Michael Knoll, dated Sept. 13, 2005 (“Knoll”);
John J. Miller, Law Offices of John J. Miller, P.C., dated Sept. 13, 2005 (“Miller”); and Seth E. Lipner, Professor of Law, Zicklin School of Business Baruch College and Member, Deutsch & Lipner, dated Sept. 8, 2005 (“Lipner”). II. Description of the Proposal Arbitration panels for disputes involving customers or non-members in which the damages are alleged to exceed $25,000 are comprised of three arbitrators: Two public arbitrators and one from the securities industry. A customer or non-member also may request at least a majority of arbitrators from the securities industry.
Exchange Rule 607(a)(2) currently classifies an arbitrator as from the securities industry if he or she:
(1)Is, or within the past five years was, associated with certain entities related to the securities industry (or retired from, or spent a substantial part of his or her career with such an entity);
(2)is an attorney or other professional who devoted 20 percent or more of his or her work effort to securities industry clients within the past two years; or
(3)is registered under the Commodity Exchange Act, or is a member of a registered futures association or any commodity exchange or is associated with any such person. Exchange Rule 607(a)(3) currently classifies an arbitrator who is not from the securities industry as a public arbitrator. However, a person cannot be classified as a public arbitrator if he or she has a spouse or household member who is associated with certain entities related to the securities industry. The NYSE is concerned that some arbitrators currently classified as public have affiliations with entities that have securities industry ties such as banks, insurance companies, mutual funds, holding companies and asset management firms. In an effort to enhance investor confidence in the NYSE arbitration forum, and in order to further ensure that persons serving as public arbitrators do not have ties to the securities industry or related firms, the Exchange proposed to amend Rule 607. The proposed amendments would:
(1)Expand the list of entities engaged in the securities business by adding certain membership categories not previously specifically mentioned (but, nevertheless, contemplated by the current rule), and by adding a catch-all for any “other organization engaged in the securities business;” 6
(2)preclude any individual who is associated with any entity that controls, is controlled by, or is under common control with an entity on the expanded list from being classified as a public arbitrator; and
(3)preclude any individual from being classified as a public arbitrator who has an immediate family member associated with an entity on the expanded list. The amendment would also define which persons are included within the term “immediate family member.” 6 These organizations would include any entity engaging in securities transactions, including banks and other financial institutions. Telephone conversation among Karen Kupersmith, Director of Arbitration, NYSE; Lourdes Gonzalez, Assistant Chief Counsel—Sales Practices, SEC; and Michael Hershaft, Special Counsel, SEC (July 26, 2006). In order to ensure the integrity of the classification of public arbitrators, the Exchange will update and reclassify arbitrators in compliance with the amended rule if approved. III. Summary of Comments The Commission received 38 letters on the proposal. 7 Several commenters believed that the changes proposed were laudatory. 8 Many, nonetheless, viewed the proposed amendments as insufficient to address what they considered as an arbitration process that is unfair to investors. Their concern generally centered in three areas:
(1)The inclusion of any industry arbitrators on arbitration panels;
(2)the criteria for qualifying as a public arbitrator; and
(3)the desire to harmonize NYSE and NASD rules on this issue. 9 7 *See* footnote 5. 8 *See, e.g.* , Ilgenfritz, Stoneman, Buchwalter, Willner, and PIABA. 9 *See* Ryder . Inclusion of Industry Arbitrators The majority of commenters expressed the view that the mandatory inclusion of arbitrators from the securities industry on arbitration panels creates an unfair burden for investors seeking redress, and stated that arbitration panels should be comprised only of individuals with no ties to the securities industry. 10 A number of commenters maintained that the mandatory inclusion of securities industry arbitrators creates a perception, rightly or wrongly, that the process is unfair and biased against investors. Their suggestion was to eliminate the securities industry arbitrator. 11 One commenter opined that, in cases where special expertise is important, the securities industry arbitrator becomes a de facto expert witness, providing the public arbitrators with his or her opinion in secret, and depriving investors of due process because they and their counsel would have notice of or a chance to rebut the opinion. 12 10 *See, e.g.* , Willner, Caruso, Knoll, PIABA, Ilgenfritz, Buchwalter, Mauriello, Torngren, Aidikoff, Doss, Brewer, Lea, Speyer, Keeney, Stanley, Layne, Baldinger, Eckart, and Fellows. 11 *See, e.g.* , Torngren and Lewis. 12 *See* Willner. Criteria for Public Arbitrators Several commenters also stated that the proposed rule change would not adequately preclude persons with ties to the securities industry from meeting the definition of public arbitrator. 13 Currently, Rule 607(a)(2)(iv) permits an attorney, accountant or other professional to serve as a public arbitrator if that person has devoted less than 20 percent of his or her work to securities industry clients within the last two years. 14 13 *See, e.g.* , Evans, Caruso, Lipner and Lopez. 14 Several commenters explicitly or implicitly cited to NASD Rule 10308(a)(5)(A)(iv), which prohibits an attorney, accountant or other professional whose firm derived 10 percent or more of its annual revenue in the past two years from securities activities instead of the NYSE limitation. *See, e.g.* , PIABA, Stoneman, Buchwalter, Salamon, and Keeney. Some commenters favored amending the definition of public arbitrator to exclude all attorneys, accountants or other professionals who have represented the securities industry. 15 One commenter stated that arbitrators with industry ties have an “inherent bias” in favor of the industry, and noted that the rule currently allows persons with industry bias, such as an attorney with ties to the securities industry, to serve on panels “under the guise of being public.” 16 Another commenter maintained that attorneys with industry ties who serve as public arbitrators would have a vested interest in keeping monetary awards low. 17 15 *See, e.g.* , Evans and Caruso. 16 *See* Lopez. 17 *See* Lipner. Harmonizing NYSE and NASD Rules One commenter expressed concern that the proposed rule change would “differ significantly” from the Uniform Code of Arbitration (“UCA”) classification rule, and stated that the NYSE rule change and NASD's proposal to amend its rule on the same subject should have been “brought to the Commission with the same text after being vetted by [the Securities Industry Conference on Arbitration (“SICA”)].” 18 In this commenter's view, the SEC should “at least compel” the NYSE and NASD to develop “identical solutions” to this issue. 19 18 *See* Ryder. 19 *Id* . In particular, this highlighted the differences in who would be considered an “immediate family member” under each rule. While the NYSE rule would exclude immediate family members of associated persons, the NASD rule would exclude immediate family members of all control-related parties. In addition, the NYSE definition of immediate family member would include in-laws, while the NASD definition would not. Moreover, the NASD include step-relatives, while the NYSE rule would not. Finally, while the NYSE definition of “control” would not extend to the immediate family of the “control-related parties,” the NASD's definition would. IV. NYSE Response to Comments Responding to commenters' concerns, the NYSE noted that securities industry arbitrators add value to the arbitration process. 20 It also stated that, as the administrator of a neutral forum, it believes public investors, non-members and members should have input into procedures by which arbitrators are appointed. Moreover, NYSE is a member of SICA, and it will continue to consider any rule changes regarding panel compositions that SICA may adopt to the UCA. 20 *See* Letter from Mary Yeager, NYSE, to Katherine A. England, SEC, dated June 5, 2006 (“Yeager”). The NYSE also stated that the 20 percent limitation on the securities activities of public arbitrators allows individuals that have minimal ties to the securities industry to serve as arbitrators. In its view a complete bar on professionals with any ties to the securities industry could also prohibit professionals who primarily represent public investors from serving on arbitration panels. Acknowledging commenters' concerns regarding ties public arbitrators have to the securities industry, the NYSE also indicated that it will review the definition of public arbitrator to address persons whose firms receive a percentage of revenue derived from securities industry clients. NYSE stated that it will propose a separate rule amendment to prohibit certain individuals from serving as public arbitrators if their firms receive a certain percentage of revenue from securities industry clients, which would be similar to the current restrictions in NASD Rule 10308. In addressing the specific differences between its proposed rule change and the rule change proposed by NASD, the NYSE stated that it defined “immediate family” and “control” to ensure that people with perceived ties to the securities industry would not be defined as public arbitrators, while avoiding eliminating from the arbitrator pool individuals with minimal ties to the securities industry. Finally, the NYSE stated that alternatives to panel composition and the method by which arbitrators are classified are beyond the scope of this rule filing. It therefore declined to address these issues at this time. 21 The NYSE also stated that it is prepared to discuss those issues at the appropriate time. 22 21 *Id* . 22 *Id* . V. Discussion and Commission Findings After careful review, the Commission finds that the proposed rule change, as amended, is consistent with the Act and, in particular, with section 6(b)(5) of the Act, which requires, among other things, that the NYSE's rules be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. 23 23 15 U.S.C. 78f(b)(5). The Commission believes that the proposed rule change will promote the public interest by limiting certain people who have ties to the securities industry from serving as public arbitrators. In particular, by expanding the list of entities engaged in the securities business and companies they control, the rule will further limit the industry ties the public arbitrator may have. The new definition of “immediate family member” should have a similar result. 24 24 Section 19(b)(2) of the Act requires the Commission to approve a proposed rule change if it finds that the proposed rule change is consistent with the requirements of the Act, and the applicable rules and regulations thereunder. This standard does not require the NYSE, NASD or SICA rules to be identical. The Commission appreciates the comments suggesting the elimination of securities industry arbitrators, and the further restriction on persons who have any ties to the securities industry from serving as public arbitrators. While these comments are beyond the scope of this rule filing, they raise important questions regarding the arbitration process. We understand that SICA is actively considering proposals from its membership regarding these issues. We note that the NYSE has stated it will review any rule regarding panel composition that SICA adopts to the UCA, and that it will propose a separate amendment further limiting the definition of public arbitrator. VI. Conclusion *It is therefore ordered* , pursuant to section 19(b)(2) of the Act 25 that the proposed rule change (SR-NYSE-2005-43), as amended, be, and hereby is, approved. 25 15 U.S.C. 78s(b)(2). 26 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 26 J. Lynn Taylor, Assistant Secretary. [FR Doc. E6-15187 Filed 9-12-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-54408; File No. SR-DTC-2006-12] Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to the LENS Service September 6, 2006. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 notice is hereby given that on July 28, 2006, the Depository Trust Company (“DTC”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared primarily by DTC. DTC filed the proposed rule change pursuant to Section 19(b)(3)(A) of the Act 2 and Rule 19b-4(f)(4) 3 thereunder so that the proposal was effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 15 U.S.C. 78s(b)(3)(A). 3 17 CFR 240.19b-4(f)(4). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The proposed rule change will discontinue the posting of Asset-Backed Security notices on DTC's LENS system. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, DTC included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. DTC has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. 4 4 The Commission has modified the text of the summaries prepared by DTC. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In 1991, DTC created the LENS service to reduce the amount of paper that participants received in connection with DTC's distribution of legal and other notices. Participants consequently could access such notices through DTC's proprietary PTS 3270 terminal network. 5 In 2000, DTC enhanced this process by making the LENS service available over the Internet. 6 Benefits of the LENS service include:
(a)Reducing distribution costs that are born by participants and
(b)allowing for other enhancements relating to notice distribution, including:
(i)The identification of CUSIP numbers,
(ii)participants' ability to search by CUSIP,
(iii)participant access to a computer record of past notices with automatic order capability, and
(iv)equitable billing ( *e.g.* a participant only pays for those notices that it orders). 5 Securities Exchange Act Release No. 29291 (June 12, 1991), 56 FR 28190 (June 19, 1991) [File No. SR-DTC-91-08]. 6 Securities Exchange Act Release No. 34-43964 (Feb. 14, 2001), 66 FR 1190 (Feb. 22, 2001) [File No. SR-DTC-2000-18]. Recently, DTC has studied whether additional enhancements and efficiencies can be brought to the LENS service in terms of the value to participants of the information provided them through LENS and the associated costs. As part of this process, DTC reviewed a current practice relating to the posting of Asset-Backed Security (“ABS”) notices on LENS. 7 Such ABS notices are now generally available over the Internet on the agents' Web sites and have been retrieved by DTC and posted on LENS at considerable expense. In light of the accessibility of ABS notices from other sources and the expense incurred by DTC in retrieving the information, DTC consulted with many of the participants with current subscriptions to the ABS portion of LENS and learned that DTC's posting of this information on LENS is of limited value versus the alternative of participants being able to obtain much of the information directly from agents' Web sites. 7 ABS notices provide investment and financial information specific to a respective ABS ( *e.g.* , monthly principal and interest factors, credit worthiness, etc.). Therefore, DTC will no longer post ABS notices on LENS. DTC will distribute an Important Notice to its participants to notify them of this change to the LENS service and inform participants as to how they may obtain DTC's assistance in obtaining ABS information. DTC believes that the proposed rule change is consistent with the requirements of Section 17A of the Act 8 and the rules and regulations thereunder because it controls costs associated with a service provided by DTC and therefore does not significantly affect the respective rights or obligations of DTC or persons using this service. 8 15 U.S.C. 78q-1. B. Self-Regulatory Organization's Statement on Burden on Competition DTC does not believe that the proposed rule change will have any impact or impose any burden on competition. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others DTC has not solicited or received written comments relating to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 9 and Rule 19b-4(f)(4) 10 thereunder because it effects a change in an existing service of DTC that does not adversely affect the safeguarding of securities or funds in DTC's control or for which DTC is responsible and does not significantly affect DTC's or its participants' respective rights or obligations. At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 9 15 U.S.C. 78s(b)(3)(A). 10 17 CFR 240.19b-4(f)(4). IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/ sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File No. SR-DTC-2006-12 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File No. SR-DTC-2006-12. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/ sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C 552, will be available for inspection and copying in the Commission's Public Reference Section, 100 F Street, NE., Washington, DC 20549. Copies of such filing also will be available for inspection and copying at DTC's principal office and on DTC's Web site at *http://www.dtc.org/impNtc/mor/index.html* . All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submission should refer to File No. SR-DTC-2006-12 and should be submitted on or before October 4, 2006. For the Commission by the Division of Market Regulation, pursuant to delegated authority. 11 11 17 CFR 200.30-3(a)(12). J. Lynn Taylor, Assistant Secretary. [FR Doc. E6-15191 Filed 9-12-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-54411; File No. SR-NASD-2004-171] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Order Approving Proposed Rule Change Relating to Rule 2340 Concerning Customer Account Statements September 7, 2006. I. Introduction On November 2, 2004, the National Association of Securities Dealers, Inc. (“NASD”), filed with the Securities and Exchange Commission (“SEC” or “Commission”), pursuant to section 19(b)(1) 1 of the Securities Exchange Act of 1934 (“Act”) 2 and Rule 19b-4 thereunder, 3 a proposed rule change to amend NASD Rule 2340, which relates to customer account statements. On February 2, 2005, NASD filed Amendment No. 1 to the proposed rule change. 4 The proposed rule change, as amended, was published for comment in the **Federal Register** on February 16, 2005. 5 The Commission received fifteen comment letters in response to the proposed rule change. 6 This order approves the proposed rule change, as amended. 1 15 U.S.C. 78s(b)(1). 2 15 U.S.C. 78a *et seq.* 3 17 CFR 240.19b-4. 4 In Amendment No. 1, NASD changed the proposed effective date from 30 days following Commission approval to 180 days following Commission approval, and changed the reference to “each customer” to “the customer” in the sentence proposed to be added as the second sentence to paragraph
(a)of Rule 2340. 5 Securities Exchange Act Release No. 51181 (Feb. 10, 2005), 70 FR 7990 (Feb. 16, 2005) (“Notice”). 6 *See* letter dated February 17, 2005 from Christopher Charles, President, Wulff, Hansen & Co. (“Wulff, Hansen”); email dated April 21, 2005 from Geraldine Genco (“Genco”); eight letters (dated February 28, 2005 from Lisa Roth, President, ComplianceMax Financial, LLC, dated March 2, 2005 from Candy J. Lee, NCM, CFP, President, Financial Services International Corp., dated March 7, 2005 from Rod P. Michel, World Trade Financial Corporation, dated March 4, 2005 from Robert L. Savage, President, Leonard Securities, Inc., dated March 7, 2005 from Robert J. Schoen, President, Quest Securities, Inc., dated March 2, 2005 from Matthew S. Merwin, CFP, President, FMN Capital Corporation, dated March 7, 2005 from Warner Griswold, Chief Operating Officer, Green Street Advisors, Inc., and dated March 11, 2005 from Craig Biddick, President, Mission Securities Corporation) that were versions of a form letter that the National Association of Independent Broker Dealers posted on its website and encouraged its members to submit (“NAIBD”); letter dated March 2, 2005 from John Miller (“Miller”); letter dated March 9, 2005 from Rosemary J. Shockman, President, Public Investors Arbitration Bar Association (“PIABA”); letter dated March 8, 2005 from Andrew C. Small, General Counsel, Scottrade, Inc. (“Scottrade”); letter dated March 9, 2005 from John Polanin, Jr., Chairman, Self Regulation and Supervisory Practices Committee, Securities Industry Association (“SIA”); and letter dated April 4, 2005 from Josephine Wang, General Counsel, Securities Investor Protection Corporation (“SIPC”). II. Description of the Proposal and Comment Summary A. Description Currently, clearing firms may include language in customer account statements advising customers to immediately report to the firm any discrepancies in balances or positions. However, these advisories may not necessarily direct customers to report discrepancies in writing, nor are the advisories required to be included on customer account statements. In 2001, the U.S. General Accounting Office (“GAO”) recommended, among other things, that self-regulatory organizations (“SROs”), such as NASD, seek to inform investors that they should document any unauthorized trading in their accounts in writing. 7 Written documentation is important because, in the event a firm goes into liquidation, SIPC and the trustee generally will assume that the firm's records are accurate unless the customer can prove otherwise. 8 7 See GAO, *Securities Investor Protection: Steps Needed to Better Disclose SIPC Policies to Investors* , GAO-01-653 (May 25, 2001). *See also* GAO-03-811 (July 11, 2003); GAO-04-848R Follow-Up on SIPC (July 9, 2004). GAO has since been renamed the Government Accountability Office. 8 SIPC advises investors who discover an error in a confirmation or statement to immediately bring the error to the attention of their brokerage firm in writing and to keep a copy of any such writing. *See* SIPC, “Documenting Unauthorized Trading” (available at *http://www.sipc.org/how/unauthorized.cfm* ); SIPC, “How SIPC Protects You” (available at *http://www.sipc.org/how/brochure.cfm* ). Consistent with GAO's recommendation, the proposed rule change would amend NASD Rule 2340 to require general securities firms to include in monthly account statements an advisory indicating that a customer should report promptly any inaccuracy or discrepancy in its account to its clearing firm and (if it is a different firm) its introducing firm. The advisory statement also would inform customers that any oral communications should be re-confirmed in writing to further protect customers' rights, including rights under SIPA. The proposed disclosure requirement would not impose any limitation on a customer's right to raise concerns regarding inaccuracies or discrepancies in his or her account at any time, either in writing or orally. Further, a customer's failure to promptly raise such concerns, either in writing or orally, would not preclude a customer from reporting an inaccuracy or discrepancy in his or her account during any SIPC liquidation of his or her brokerage or clearing firm. 9 9 *See* Notice at 70 FR 7991. The NYSE has proposed a similar rule change. *See* initial proposed rule change and Amendment No. 1 thereto in File No. SR-NYSE-2005-09 (available on the NYSE's Web site). The 180-day delay in the rule's effectiveness requested in Amendment No. 1 to the proposal is intended to give NASD member firms time to make necessary changes to their customer documentation and systems. B. Comment Summary The Commission received fifteen comments in response to the proposed rule change. 10 Four commenters generally supported the proposal. 11 Eleven generally opposed it. 12 10 *See* footnote 6, *supra* . 11 Genco; Scottrade; SIA; and SIPC. 12 Miller, NAIBD (eight commenters submitted letters based on the NAIBD form letter), PIABA, and Wulff, Hansen. Wulff, Hansen suggested abandoning the proposal or, in the alternative, modifying it to require the new advisory statement only at account opening and annually thereafter, to reduce printing costs and other burdens. Impact on Investors Three commenters argued that the proposal could lead to claims that customers who do not promptly report errors or document them in writing would give up rights to assert claims against brokerage firms, or that brokerage firms could misuse the proposed advisory statement by arguing that customers who fail to follow it are barred from bringing claims. 13 13 Miller, PIABA, and Wulff, Hansen. Miller recommended clarifying that a customer's failure to make a report does not limit the customer's right to raise concerns regarding account inaccuracies or discrepancies at any time, including during a SIPC liquidation. PIABA also recommended clarifying that the proposed additional statement shall not be used to defend against a customer claim. Contact Information Four commenters suggested that the advisory statement direct customers to address reports to a specific area within a firm where responses could be managed and supervised, rather than to an address or phone number that might cause a report to be received initially by the registered representative handling the account of the customer making the report. 14 14 Genco, Miller, PIABA, and SIPC. Miller also recommended that the statement identify a person at a clearing firm to whom errors should be reported, if the clearing and introducing firms for the account are different. Including Advisory Statement on Confirmations Three commenters suggested requiring that the proposed advisory statement be included not only in account statements, but also in trade confirmations. 15 15 Miller, PIABA, and SIPC. Miller and PIABA also suggested requiring that the statement be presented in bold type. PIABA recommended requiring that the statement be presented in plain language on the first page of account statements. Scope of Statement Two commenters believed that the proposed statement is overbroad and suggested narrowing it to apply only to unauthorized trades. 16 16 Miller and PIABA. Role of Clearing Firms Two commenters sought clarification as to the role clearing firms would have in connection with disputed transactions. 17 17 Genco and NAIBD. For example, Genco asked whether the proposal is intended to require clearing firms to escalate a complaint to the proper party in the executing firm. Method of Delivering Notice One commenter recommended amending the proposal to allow brokers to deliver the proposed advisory statement “with” (rather than “in”) account statements, which the commenter believes would better accommodate certain click-through processes for delivering regulatory disclosures to customers. 18 18 Scottrade. Time for Reporting Discrepancies Two commenters recommended setting a specified period within which investors should report discrepancies to avoid customer abuses, such as using post-settlement market information to undo transactions. 19 19 NAIBD and SIPC. Level Playing Field One commenter maintained that the proposal would subject brokerage firms to a standard not applicable to commercial banks. 20 20 Wulff, Hansen. Similar NYSE Proposal One commenter 21 recommended that, in the interest of regulatory consistency, the proposal be conformed to a similar proposed NYSE rule change. 22 21 SIA. 22 *See* footnote 9, *supra* . III. Discussion and Findings The Commission finds that the proposed rule change is consistent with the Act, and in particular, with section 15A(b)(6) of the Act, 23 which requires, among other things, that NASD rules must be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. The Commission believes that the proposed rule change is consistent with the provision of the Act noted above because it will help investors understand procedures for preserving their rights in the event of erroneous or unauthorized transactions in their accounts. 23 15 U.S.C. 78o-3(b)(6). While the Commission believes that the proposal would improve NASD's current customer account disclosure requirements, we believe that the disclosure would be more beneficial to investors if it required NASD members to include on account statements both introducing and clearing firm contact information sufficient to allow investors to timely report unauthorized transactions or other account discrepancies to both firms (if the firms are different). We believe such disclosure would be consistent with current Commission guidance on this issue. 24 We also believe that such disclosure would address the concerns of some commenters that the current proposal could be enhanced to ensure that a customer's concern is delivered to the most appropriate person at the firm. 25 The Commission therefore encourages NASD to issue a Notice to Members regarding the proposed change to Rule 2340 that reminds member firms of their current obligations with respect to customer account statements. 26 24 *See* Securities Exchange Act Release No. 31511 (Nov. 24, 1992), 57 FR 56973 (Dec. 2, 1992) (amending the SEC's net capital rule and explaining the staff's interpretation that to avoid more stringent capital requirements under the rule, an introducing firm must have in place a clearing agreement with a registered broker-dealer that, among other things, contains “the name and telephone number of a responsible individual at the clearing firm whom a customer can contact with inquiries regarding the customer's account.”). *See also* NYSE Interpretation Handbook at 4105 (carrying organization phone number may appear on the back of the customer account statement, but, if so, it must be in “bold” or “highlighted” text). 25 *See* footnote 14, *supra* . 26 *See* footnote 24, *supra* . IV. Conclusion *It is therefore ordered* , pursuant to section 19(b)(2) of the Act 27 that the proposed rule change (SR-NASD-2004-171), as amended, be, and hereby is, approved, 28 effective 180 days from the date of this order. NASD has committed to announce the effective date of the proposed rule change in a Notice to Members to be published no later than 30 days following approval of the proposal. 27 15 U.S.C. 78s(b)(2). 28 In approving this proposed rule change, the Commission notes that it has considered the proposed rule change's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). In particular, the Commission considered and granted NASD's request to delay effectiveness of the proposal by 180 days to allow NASD member firms sufficient time to implement the change required by the proposal. 29 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 29 Jill M. Peterson, Assistant Secretary. [FR Doc. E6-15186 Filed 9-12-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-54409; File No. SR-OCC-2006-13] Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to a Name Change of a Board Committee and of a Securities Market September 6, 2006. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 notice is hereby given that on July 17, 2006, The Options Clearing Corporation (“OCC”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which items have been prepared primarily by OCC. OCC filed the proposed rule change pursuant to section 19(b)(3)(A) of the Act 2 whereby the proposal was effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 15 U.S.C. 78s(b)(3)(A)(ii). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The proposed rule change reflects the renaming of OCC's Membership/Margin Committee to the Membership/Risk Committee and of Nasdaq National Market to the Nasdaq Global Market. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, OCC included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. OCC has prepared summaries, set forth in sections (A), (B), and
(C)below, of the most significant aspects of such statements. 3 3 The Commission has modified parts of these statements.
(A)Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change The purpose of the proposed rule change is to reflect that OCC has renamed the Membership/Margin Committee to the Membership/Risk Committee and that Nasdaq has renamed the Nasdaq National Market to the Nasdaq Global Market. OCC believes that the proposed rule change is consistent with the purposes and requirements of section 17A of the Act because it reflects the appropriate titles of an OCC Board committee and a securities marketplace. The rule change is not inconsistent with the existing by-laws and rules of OCC, including those proposed to be amended.
(B)Self-Regulatory Organization's Statement on Burden on Competition OCC does not believe that the proposed rule change would impose any burden on competition.
(C)Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were not and are not intended to be solicited with respect to the proposed rule change, and none have been received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to section 19(b)(3)(A)(iii) of the Act 4 and Rule 19b-4(f)(4) 5 promulgated thereunder because the proposal effects a change in an existing service of OCC that
(A)does not adversely affect the safeguarding of securities or funds in the custody or control of OCC or for which it is responsible and
(B)does not significantly affect the respective rights or obligations of OCC or persons using the service. At any time within sixty days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 4 15 U.S.C. 78s(b)(3)(A)(iii). 5 17 CFR 240.19b-4(f)(4). IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ) or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-OCC-2006-13 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-OCC-2006-13. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Section, 100 F Street, NE., Washington, DC 20549. Copies of such filing also will be available for inspection and copying at the principal office of OCC and on OCC's Web site at *http://www.optionsclearing.com.* All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-OCC-2006-13 and should be submitted on or before October 4, 2006. 6 17 CFR 200.30-3(a)(12). For the Commission by the Division of Market Regulation, pursuant to delegated authority. 6 J. Lynn Taylor, Assistant Secretary. [FR Doc. E6-15189 Filed 9-12-06; 8:45 am] BILLING CODE 8010-01-P SMALL BUSINESS ADMINISTRATION [Disaster Declaration #10525 and #10526] New Jersey Disaster Number NJ-00004 AGENCY: U.S. Small Business Administration. ACTION: Amendment 2. SUMMARY: This is an amendment of the Presidential declaration of a major disaster for the State of New Jersey (FEMA-1653-DR), dated 07/07/2006. *Incident:* Severe Storms and Flooding. *Incident period:* 06/23/2006 through 07/10/2006. *Effective Date:* 09/06/2006. *Physical Loan Application Deadline Date:* 09/11/2006. *EIDL Loan Application Deadline Date:* 04/09/2007. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, National Processing And Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street, Suite 6050, Washington, DC 20416. SUPPLEMENTARY INFORMATION: The notice of the President's major disaster declaration for the State of New Jersey, dated 07/07/2006, is hereby amended to extend the deadline for filing applications for physical damages as a result of this disaster to 09/11/2006. All other information in the original declaration remains unchanged. (Catalog of Federal Domestic Assistance Numbers 59002 and 59008) Cheri L. Cannon, Acting Associate Administrator for Disaster Assistance. [FR Doc. E6-15211 Filed 9-12-06; 8:45 am] BILLING CODE 8025-01-P DEPARTMENT OF STATE [Public Notice 5544] Bureau of Political-Military Affairs: Directorate of Defense Trade Controls; Notifications to the Congress of Proposed Commercial Export Licenses SUMMARY: Notice is hereby given that the Department of State has forwarded the attached Notifications of Proposed Export Licenses to the Congress on the dates indicated pursuant to sections 36(c) and 36(d) and in compliance with section 36(f) of the Arms Export Control Act (22 U.S.C. 2776). DATES: *Effective Date:* As shown on each of the 28 letters. FOR FURTHER INFORMATION CONTACT: Ms. Susan M. Clark, Acting Director, Office of Defense Trade Controls Licensing, Directorate of Defense Trade Controls, Bureau of Political-Military Affairs, Department of State
(202)663-2023. SUPPLEMENTARY INFORMATION: Section 36(f) of the Arms Export Control Act mandates that notifications to the Congress pursuant to sections 36(c) and 36(d) must be published in the **Federal Register** when they are transmitted to Congress or as soon thereafter as practicable. April 3, 2006. Hon. J. Dennis Hastert, *Speaker of the House of Representatives.* Dear Mr. Speaker: Pursuant to Section 36(d) of the Arms Export Control Act, I am transmitting, herewith, certification of a proposed retransfer of defense articles or services involving major defense equipment
(MDE)in amount of $14,000,000 or more. The transaction contained in the attached certification involves the retransfer of four hundred thirty-one
(431)YPR-765 vehicles and 555 TOW 71E1B missiles to Egypt from the Royal Netherlands Army (RNLA). The United States Government is prepared to license the export of this item having taken into account political, military, economic, human rights and arms control considerations. More detailed information is contained in the formal certification which, though unclassified, contains business information submitted to the Department of State by the applicant, publication of which could cause competitive harm to the United States firm concerned. Sincerely, Jeffrey T. Bergner, *Assistant Secretary Legislative Affairs.* Enclosure: Transmittal No. DDTC 058-05. April 4, 2006. Hon. J. Dennis Hastert, *Speaker of the House of Representatives.* Dear Mr. Speaker: Pursuant to Section 36(c) and
(d)of the Arms Export Control Act, I am transmitting, herewith, certification of a proposed manufacturing license agreement involving the manufacture of significant military equipment and the export of defense articles or defense services sold commercially under a contract in the amount of $50,000,000 or more. The transaction contained in the attached certification involves the manufacture in the United States of the Russian RD-180 two-chamber rocket motors for use on Atlas launch vehicles, including the USAF Evolved Expandable Launch Vehicle. The United States Government is prepared to license the export of this item having taken into account political, military, economic, human rights and arms control considerations. More detailed information is contained in the formal certification which, though unclassified, contains business information submitted to the Department of State by the applicant, publication of which could cause competitive harm to the United States firm concerned. Sincerely, Jeffrey T. Bergner, *Assistant Secretary Legislative Affairs.* Enclosure: Transmittal No. DDTC 057-05. April 7, 2006. Hon. J. Dennis Hastert, *Speaker of the House of Representatives.* Dear Mr. Speaker: Pursuant to Section 36(c) of the Arms Export Control Act, I am transmitting, herewith, certification of a proposed technical assistance agreement and a manufacturing license agreement for manufacture and export of defense articles or defense services sold commercially under a contract in the amount of $100,000,000 or more. The transaction contained in the attached certification involves the export of technical data, defense services and hardware Turkey to support the sale, operations, maintenance and retrofit of S-70B Helicopters for the Republic of Turkey. The United States Government is prepared to license the export of these items having taken into account political, military, economic, human rights and arms control considerations. More detailed information is contained in the formal certification, which, though unclassified, contains business information submitted to the Department of State by the applicant, publication of which could cause competitive harm to the United States firm concerned. Sincerely, Jeffrey T. Bergner, *Assistant Secretary Legislative Affairs.* Enclosure: Transmittal No. DTC 001-06. April 7, 2006. Hon. J. Dennis Hastert, *Speaker of the House of Representatives.* Dear Mr. Speaker: Pursuant to Section 36(c) and 36(d) of the Arms Export Control Act, I am transmitting, herewith, certification of a proposed multi-contract effort for manufacture and export of defense articles or defense services sold commercially in the amount of $100,000,000 or more. The transaction contained in the attached certification involves the export of technical data, defense services and hardware to Canada to support the sale, and in-service support of 28 H-92 Helicopters for the Canadian Navy. The United States Government is prepared to license the export of these items having taken into account political, military, economic, human rights and arms control considerations. More detailed information is contained in the formal certification which, though unclassified, contains business information submitted to the Department of State by the applicant, publication of which could cause competitive harm to the United States firm concerned. Sincerely, Jeffrey T. Bergner, *Assistant Secretary Legislative Affairs.* Enclosure: Transmittal No. DDTC 002-06. April 10, 2006. Hon. J. Dennis Hastert, *Speaker of the House of Representatives.* Dear Mr. Speaker: Pursuant to Section 36(c) of the Arms Export Control Act, I am transmitting, herewith, certification of a proposed license for the export of defense articles or defense services sold commercially under a contract in the amount of $50,000,000 or more. The transaction contained in the attached certification involves the export of technical data, defense services, and hardware for training in counterterrorism, crisis response, dignitary protection and force protection for the Iraqi Ministry of Interior in support of Operation Iraqi Freedom. The United States Government is prepared to license the export of these items having taken into account political, military, economic, human rights and arms control considerations. More detailed information is contained in the formal certification which, though unclassified, contains business information submitted to the Department of State by the applicant, publication of which could cause competitive harm to the United States firm concerned. Sincerely, Jeffrey T. Bergner, *Assistant Secretary Legislative Affairs.* Enclosure: Transmittal No. DTC 072-05. May 11, 2006. Hon. J. Dennis Hastert, *Speaker of the House of Representatives.* Dear Mr. Speaker: Pursuant to Section 36(c) of the Arms Export Control Act, I am transmitting, herewith, certification of a proposed license for the export of defense articles or defense services sold commercially under a contract in the amount of $50,000,000 or more. The transaction contained in the attached certification involves the export of defense services, technical data and defense articles for the manufacture in the Republic of Korea of F-15 wings, forward fuselage and adapter shape assemblies for return to the United States for final assembly. The United States Government is prepared to license the export of these items having taken into account political, military, economic, human rights and arms control considerations. More detailed information is contained in the formal certification which, though unclassified, contains business information submitted to the Department of State by the applicant, publication of which could cause competitive harm to the United States firm concerned. Sincerely, Jeffrey T. Bergner, *Assistant Secretary Legislative Affairs.* Enclosure: Transmittal No. DTC 071-05. May 11, 2006. Hon. J. Dennis Hastert, *Speaker of the House of Representatives.* Dear Mr. Speaker: Pursuant to Section 36(c) of the Arms Export Control Act, I am transmitting, herewith, certification of a proposed authorization for the sale of significant military equipment sold commercially under contract in the amount of $100,000,000 or more. The transaction contained in the attached certification involves the sale and transfer of ownership of the AMC-23 commercial communications satellite from a U.S. company to a company in the United Kingdom. The satellite was successfully launched December 28, 2005 and is currently in orbit. The United States Government is prepared to license the export of these items having taken into account political, military, economic, human rights and arms control considerations. More detailed information is contained in the formal certification which, though unclassified, contains business information submitted to the Department of State by the applicant, publication of which could cause competitive harm to the United States firm concerned. Sincerely, Jeffrey T. Bergner, *Assistant Secretary Legislative Affairs.* Enclosure: Transmittal No. DTC 073-05. May 11, 2006. Hon. J. Dennis Hastert, *Speaker of the House of Representatives.* Dear Mr. Speaker: Pursuant to Section 36(c) of the Arms Export Control Act, I am transmitting, herewith, certification of a proposed authorization for the export of significant military equipment in the amount of $50,000,000 or more. The transaction contained in the attached certification involves the export of one
(1)commercial communications satellite to international waters for the purpose of launch on the Sea Launch platform and to transfer ownership in orbit to a U.S. company. The United States Government is prepared to license the export of these items having taken into account political, military, economic, human rights and arms control considerations. More detailed information is contained in the formal certification which, though unclassified, contains business information submitted to the Department of State by the applicant, publication of which could cause competitive harm to the United States firm concerned. Sincerely, Jeffrey T. Bergner, *Assistant Secretary Legislative Affairs.* Enclosure: Transmittal No. DTC 007-06. May 11, 2006. Hon. J. Dennis Hastert, *Speaker of the House of Representatives.* Dear Mr. Speaker: Pursuant to Section 36(c) of the Arms Export Control Act, I am transmitting, herewith, certification of a proposed license for the export of defense articles or defense services sold commercially under a contract in the amount of $50,000,000 or more. The transaction contained in the attached certification involves the export of technical data, defense services, and hardware to Australia, Canada and Malaysia for design, production and pre-launch/post-launch support of the MEASAT-1R commercial communications satellite and associated ground system for Malaysia. The United States Government is prepared to license the export of these items having taken into account political, military, economic, human rights and arms control considerations. More detailed information is contained in the formal certification which, though unclassified, contains business information submitted to the Department of State by the applicant, publication of which could cause competitive harm to the United States firm concerned. Sincerely, Jeffrey T. Bergner, *Assistant Secretary Legislative Affairs.* Enclosure: Transmittal No. DTC 013-06. May 15, 2006. Hon. J. Dennis Hastert, *Speaker of the House of Representatives.* Dear Mr. Speaker: Pursuant to Section 36(c) of the Arms Export Control Act, I am transmitting, herewith, certification of a proposed license for the export of defense articles or defense services sold commercially under a contract in the amount of $50,000,000 or more. The transaction contained in the attached certification involves the export to Algeria and Spain of technical data, hardware and assistance related to a United Information and Telecommunications Network Project (RUNITEL) for the Algerian Ministry of National Defense. The United States Government is prepared to license the export of these items having taken into account political, military, economic, human rights and arms control considerations. More detailed information is contained in the formal certification which, though unclassified, contains business information submitted to the Department of State by the applicant, publication of which could cause competitive harm to the United States firm concerned. Sincerely, Jeffrey T. Bergner, *Assistant Secretary Legislative Affairs.* Enclosure: Transmittal No. DTC 039-05. May 15, 2006. Hon. J. Dennis Hastert, *Speaker of the House of Representatives.* Dear Mr. Speaker: Pursuant to Section 36(c) of the Arms Export Control Act, I am transmitting, herewith, certification of a proposed license for the export of defense articles or defense services sold commercially under a contract in the amount of $50,000,000 or more. The transaction contained in the attached certification involves the export of technical data, defense services and hardware to Israel for the manufacture of F/A-18 A/B/C/D Series aircraft landing gear parts and components. The United States Government is prepared to license the export of these items having taken into account political, military, economic, human rights and arms control considerations. More detailed information is contained in the formal certification which, though unclassified, contains business information submitted to the Department of State by the applicant, publication of which could cause competitive harm to the United States firm concerned. Sincerely, Jeffrey T. Bergner, *Assistant Secretary Legislative Affairs.* Enclosure: Transmittal No. DTC 005-06. May 15, 2006. Hon. J. Dennis Hastert, *Speaker of the House of Representatives.* Dear Mr. Speaker: Pursuant to Section 36(c) and
(d)of the Arms Export Control Act, I am transmitting, herewith, certification of a proposed manufacturing license agreement for the manufacture of significant military equipment abroad and license for the export of defense articles or defense services sold commercially under a contract in the amount of $100,000,000 or more. The transaction contained in the attached certification involves the export of technical data, defense services and hardware to Italy to support the manufacture and servicing of CH-47C helicopter, composite blades, parts and ground support equipment for end-use in Egypt, Italy, Morocco, and the United Arab Emirates. The United States Government is prepared to license the export of these items having taken into account political, military, economic, human rights and arms control considerations. More detailed information is contained in the formal certification which, though unclassified, contains business information submitted to the Department of State by the applicant, publication of which could cause competitive harm to the United States firm concerned. Sincerely, Jeffrey T. Bergner, *Assistant Secretary Legislative Affairs.* Enclosure: Transmittal No. DTC 012-06. May 17, 2006. Hon. J. Dennis Hastert, *Speaker of the House of Representatives.* Dear Mr. Speaker: Pursuant to Section 36(c) and
(d)of the Arms Export Control Act, I am transmitting, herewith, certification of a proposed manufacturing license agreement for the manufacture of significant military equipment abroad and the export of defense articles or defense services in the amount of $100,000,000 or more. The transaction contained in the attached certification involves the export to the United Kingdom of technical data and defense services for the manufacture of Model 2093 Minehunting Sonar System for the end-use in Australia, Belgium, Canada, Finland, France, Germany, Greece, India, Italy, Japan, the Netherlands, Portugal, Saudi Arabia, Spain, South Korea, Taiwan, Thailand, Turkey, United Arab Emirates, United Kingdom, and the United States. The United States Government is prepared to license the export of these items having taken into account political, military, economic, human rights and arms control considerations. More detailed information is contained in the formal certification which, though unclassified, contains business information submitted to the Department of State by the applicant, publication of which could cause competitive harm to the United States firm concerned. Sincerely, Jeffrey T. Bergner, *Assistant Secretary Legislative Affairs.* Enclosure: Transmittal No. DTC 006-06. May 17, 2006. Hon. J. Dennis Hastert, *Speaker of the House of Representatives.* Dear Mr. Speaker: Pursuant to Section 36(c) of the Arms Export Control Act, I am transmitting, herewith, certification of a proposed license for the export of defense articles or defense services sold commercially under a contract in the amount of $50,000,000 or more. The transaction contained in the attached certification involves the export of technical data, defense services, and hardware to Mexico for the manufacture and assembly of filter connectors which offer electromagnetic interference
(EMI)and electromagnetic pulse
(EMP)protection for sensitive circuits used in military electronic systems. The United States Government is prepared to license the export of these items having taken into account political, military, economic, human rights and arms control considerations. More detailed information is contained in the formal certification which, though unclassified, contains business information submitted to the Department of State by the applicant, publication of which could cause competitive harm to the United States firm concerned. Sincerely, Jeffrey T. Bergner, *Assistant Secretary Legislative Affairs.* Enclosure: Transmittal No. DTC 015-06. May 18, 2006. Hon. J. Dennis Hastert, *Speaker of the House of Representatives.* Dear Mr. Speaker: Pursuant to Section 36(c) and
(d)of the Arms Export Control Act, I am transmitting, herewith, certification of a proposed manufacturing license agreement for the manufacture of significant military equipment abroad and license for the export of defense articles or defense services sold commercially under contract in the amount of $100,000,000 or more. The transaction contained in the attached certification involves the amendment of a current manufacturing license agreement with Germany for the manufacture of tank fire control systems for end-use by the governments of Austria, Belgium, Canada, Denmark, France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, Norway, the Netherlands, Spain, Sweden, Switzerland, Thailand, Turkey and the United Kingdom. The United States Government is prepared to license the export of these items having taken into account political, military, economic, human rights and arms control considerations. More detailed information is contained in the formal certification which, though unclassified, contains business information submitted to the Department of State by the applicant, publication of which could cause competitive harm to the United States firm concerned. Sincerely, Jeffrey T. Bergner, *Assistant Secretary Legislative Affairs.* Enclosure: Transmittal No. DTC 064-05. May 23, 2006. Hon. J. Dennis Hastert, *Speaker of the House of Representatives.* Dear Mr. Speaker: Pursuant to Section 36(c) of the Arms Export Control Act, I am transmitting, herewith, certification of a proposed authorization for the export of significant military equipment in the amount of $100,000,000 or more. The transaction contained in the attached certification involves the export of three
(3)DIRECT TV commercial communications satellites to international waters for the purpose of launch on the Sea Launch platform and to transfer ownership in orbit to a U.S. company. The United States Government is prepared to license the export of these items having taken into account political, military, economic, human rights and arms control considerations. More detailed information is contained in the formal certification which, though unclassified, contains business information submitted to the Department of State by the applicant, publication of which could cause competitive harm to the United States firm concerned. Sincerely, Jeffrey T. Bergner, *Assistant Secretary Legislative Affairs.* Enclosure: Transmittal No. DTC 074-05. June 2, 2006. Hon. J. Dennis Hastert, *Speaker of the House of Representatives.* Dear Mr. Speaker: Pursuant to Section 36(c) &
(d)of the Arms Export Control Act, I am transmitting, herewith, certification of a proposed manufacturing license agreement for the manufacture of significant military equipment abroad and the export of defense articles or defense services in the amount of $50,000,000 or more. The transaction contained in the attached certification involves the transfer to Israel of technical data, defense services and hardware for the manufacture of the MOD II and MOD IIC GYROFLEX® Gyro and Accelerometer as part of a Land Navigation System
(LANS)for sale to various countries and for incorporation into the Japanese PAC-3 Patriot Missile Upgrade. The United States Government is prepared to license the export of these items having taken into account political, military, economic, human rights and arms control considerations. More detailed information is contained in the formal certification which, though unclassified, contains business information submitted to the Department of State by the applicant, publication of which could cause competitive harm to the United States firm concerned. Sincerely, Jeffrey T. Bergner, *Assistant Secretary Legislative Affairs.* Enclosure: Transmittal No. DTC 009-06. June 7, 2006. Hon. J. Dennis Hastert, *Speaker of the House of Representatives.* Dear Mr. Speaker: Pursuant to Section 36(c) and
(d)of the Arms Export Control Act, I am transmitting, herewith, certification of a proposed manufacturing license agreement involving the manufacture abroad of significant military equipment, and the export of defense articles or defense services sold commercially under contract in the amount of $100,000,000 or more. The transaction contained in the attached certification involves the export of technical data, defense services, and hardware to Japan for the manufacture of sporting rifles for sale in the United States and Canada. The United States Government is prepared to license the export of these items having taken into account political, military, economic, human rights and arms control considerations. More detailed information is contained in the formal certification which, though unclassified, contains business information submitted to the Department of State by the applicant, publication of which could cause competitive harm to the United States firm concerned. Sincerely, Jeffrey T. Bergner, *Assistant Secretary Legislative Affairs.* Enclosure: Transmittal No. DTC 062-05. June 20, 2006. Hon. J. Dennis Hastert, *Speaker of the House of Representatives.* Dear Mr. Speaker: Pursuant to Section 36(c) of the Arms Export Control Act, I am transmitting, herewith, certification of a proposed technical assistance agreement the export of defense articles or defense services in the amount of $50,000,000 or more. The transaction contained in the attached certification involves the export of technical data, defense services and hardware to Israel for the development, production and installation of equipment for the Israeli Digital Army Program
(DAP)for end-use by the Israeli Ministry of Defense. The United States Government is prepared to license the export of these items having taken into account political, military, economic, human rights and arms control considerations. More detailed information is contained in the formal certification which, though unclassified, contains business information submitted to the Department of State by the applicant, publication of which could cause competitive harm to the United States firm concerned. Sincerely, Jeffrey T. Bergner, *Assistant Secretary Legislative Affairs.* Enclosure: Transmittal No. DTC 059-05. 20, 2006. Hon. J. Dennis Hastert, *Speaker of the House of Representatives.* Dear Mr. Speaker: Pursuant to Section 36(d) of the Arms Export Control Act, I am transmitting, herewith, certification of a proposed manufacturing license agreement for the manufacture of significant military equipment abroad. The transaction contained in the attached certification involves the transfer of technical data, assistance and manufacturing know-how to Germany for the manufacture, refurbishment, repair, modification and upgrade of the AIM-9L and AIM-9M Missile. The United States Government is prepared to license the export of these items having taken into account political, military, economic, human rights and arms control considerations. More detailed information is contained in the formal certification which, though unclassified, contains business information submitted to the Department of State by the applicant, publication of which could cause competitive harm to the United States firm concerned. Sincerely, Jeffrey T. Bergner, *Assistant Secretary Legislative Affairs.* Enclosure: Transmittal No. DTC 016-06. June 22, 2006. Hon. J. Dennis Hastert, *Speaker of the House of Representatives.* Dear Mr. Speaker: Pursuant to Section 36(c) of the Arms Export Control Act, I am transmitting, herewith, certification of a proposed authorization for the export of significant military equipment in the amount of $50,000,000 or more. The transaction contained in the attached certification involves the export of eight
(8)commercial communications satellites to Italy for integration and testing and further export to Kazakhstan and Russia for launch. This notification is for the export of the satellites only. The launch services have been approved under two separate Technical Assistance Agreements. Transfer of ownership will be made once the satellites are in orbit to a U.S. company. The United States Government is prepared to license the export of these items having taken into account political, military, economic, human rights and arms control considerations. More detailed information is contained in the formal certification which, though unclassified, contains business information submitted to the Department of State by the applicant, publication of which could cause competitive harm to the United States firm concerned. Sincerely, Jeffrey T. Bergner, *Assistant Secretary Legislative Affairs.* Enclosure: Transmittal No. DTC 017-06. June 26, 2006. Hon. J. Dennis Hastert, *Speaker of the House of Representatives.* Dear Mr. Speaker: Pursuant to Section 36(c) &
(d)of the Arms Export Control Act, I am transmitting, herewith, certification of proposed export authorizations for the manufacture of significant military equipment abroad and the export of defense articles or defense services in the amount of $100,000,000 or more. The transaction contained in the attached certification involves the export of technical data, defense services and hardware to Japan for the Japanese Patriot PAC-3 missile assembly and manufacturing program. The United States Government is prepared to license the export of these items having taken into account political, military, economic, human rights and arms control considerations. More detailed information is contained in the formal certification which, though unclassified, contains business information submitted to the Department of State by the applicant, publication of which could cause competitive harm to the United States firm concerned. Sincerely, Jeffrey T. Bergner, *Assistant Secretary Legislative Affairs.* Enclosure: Transmittal No. DTC 023-06. June 22, 2006. Hon. J. Dennis Hastert, *Speaker of the House of Representatives.* Dear Mr. Speaker: Pursuant to Section 36(c) of the Arms Export Control Act, I am transmitting, herewith, certification of a proposed license for the export of firearms sold commercially under contract in the amount of $1,000,000 or more. The transaction contained in the attached certification involves the export of 800 LMT 5.56mm Select Fire rifles, 900 spare barrels and 5,000 spare magazines to the Hashemite Kingdom of Jordan. The United States Government is prepared to license the export of these items having taken into account political, military, economic, human rights and arms control considerations. More detailed information is contained in the formal certification which, though unclassified, contains business information submitted to the Department of State by the applicant, publication of which could cause competitive harm to the United States firm concerned. Sincerely, Jeffrey T. Bergner, *Assistant Secretary Legislative Affairs.* Enclosure: Transmittal No. DTC 004-06. July 28, 2006. Hon. J. Dennis Hastert, *Speaker of the House of Representatives.* Dear Mr. Speaker: Pursuant to Section 36(c) of the Arms Export Control Act, I am transmitting, herewith, certification of a proposed license for the export of defense articles or defense services sold commercially under a contract in the amount of $50,000,000 or more. The transaction contained in the attached certification involves the export of technical data, defense services, and hardware to Singapore for the sale of F-15SG aircraft to the Government of Singapore. The United States Government is prepared to license the export of these items having taken into account political, military, economic, human rights and arms control considerations. More detailed information is contained in the formal certification which, though unclassified, contains business information submitted to the Department of State by the applicant, publication of which could cause competitive harm to the United States firm concerned. Sincerely, Jeffrey T. Bergner, *Assistant Secretary Legislative Affairs.* Enclosure: Transmittal No. DTC 024-06. July 28, 2006. Hon. J. Dennis Hastert, *Speaker of the House of Representatives.* Dear Mr. Speaker: Pursuant to Section 36(c) of the Arms Export Control Act, I am transmitting, herewith, certification of a proposed manufacturing license agreement for the export of defense articles or defense services sold commercially under a contract in the amount of $50,000,000 or more. The transaction contained in the attached certification involves the transfer of technical data, defense services, hardware and manufacturing know-how to Mexico for the manufacture, inspection and testing of electrical wiring harnesses, power generators, bellows and sensors used on launch and space vehicles, and on turbine engines powering military aircraft and tanks. The United States Government is prepared to license the export of these items having taken into account political, military, economic, human rights and arms control considerations. More detailed information is contained in the formal certification which, though unclassified, contains business information submitted to the Department of State by the applicant, publication of which could cause competitive harm to the United States firm concerned. Sincerely, Jeffrey T. Bergner, *Assistant Secretary Legislative Affairs.* Enclosure: Transmittal No. DTC 027-06. July 28, 2006. Hon. J. Dennis Hastert, *Speaker of the House of Representatives.* Dear Mr. Speaker: Pursuant to Section 36(c) of the Arms Export Control Act, I am transmitting, herewith, certification of a proposed license for the export of defense articles or defense services sold commercially under contract in the amount of $100,000,000 or more. The transaction contained in the attached certification involves the export of defense services, technical data and defense articles for development of the Combat System Core for the S-80A Submarine for end use by the Spanish Navy. The United States Government is prepared to license the export of these items having taken into account political, military, economic, human rights and arms control considerations. More detailed information is contained in the formal certification which, though unclassified, contains business information submitted to the Department of State by the applicant, publication of which could cause competitive harm to the United States firm concerned. Sincerely, Jeffrey T. Bergner, *Assistant Secretary, Legislative Affairs.* Enclosure: Transmittal No. DTC 032-06. July 28, 2006. Hon. J. Dennis Hastert, *Speaker of the House of Representatives.* Dear Mr. Speaker: Pursuant to Section 36(c) of the Arms Export Control Act, I am transmitting, herewith, certification of a proposed license for the export of defense articles or defense services sold commercially under contract in the amount of $100,000,000 or more. The transaction contained in the attached certification involves the export of technical data, defense services and hardware to the United Kingdom for the upgrade of the WAH-64 Apache Attack Helicopter with the Arrowhead® Modernized Target Acquisition Designation Sight/Pilot Night Vision Sensor (M-TADS/PNVS TM ) and TADS Electronic display and Control (TEDAC). The United States Government is prepared to license the export of these items having taken into account political, military, economic, human rights and arms control considerations. More detailed information is contained in the formal certification which, though unclassified, contains business information submitted to the Department of State by the applicant, publication of which could cause competitive harm to the United States firm concerned. Sincerely, Jeffrey T. Bergner, *Assistant Secretary, Legislative Affairs.* Enclosure: Transmittal No. DTC 042-06. July 28, 2006. Hon. J. Dennis Hastert, *Speaker of the House of Representatives.* Dear Mr. Speaker: Pursuant to Section 36(c) of the Arms Export Control Act, I am transmitting, herewith, certification of a proposed license for the export of defense articles or defense services sold commercially under contract in the amount of $100,000,000 or more. The transaction contained in the attached certification involves the export of technical data, defense services and hardware to Japan for the manufacture of various parts and components for the F-15 Environmental Control System (ECS). The United States Government is prepared to license the export of these items having taken into account political, military, economic, human rights and arms control considerations. More detailed information is contained in the formal certification which, though unclassified, contains business information submitted to the Department of State by the applicant, publication of which could cause competitive harm to the United States firm concerned. Sincerely, Jeffrey T. Bergner, *Assistant Secretary, Legislative Affairs.* Enclosure: Transmittal No. DTC 044-06. Dated: September 6, 2006. Susan M. Clark, Acting Director, Office of Defense Trade Controls Licensing, Department of State. [FR Doc. E6-15190 Filed 9-12-06; 8:45 am] BILLING CODE 4710-25-P DEPARTMENT OF STATE [Public Notice 5515] Shipping Coordinating Committee; Notice of Meeting The Shipping Coordinating Committee
(SHC)will conduct an open meeting at 1 p.m. on Wednesday, September 20, 2006, in Room 6303 of the United States Coast Guard Headquarters Building, 2100 2nd Street, SW., Washington, DC 20593-0001. The primary purpose of the meeting is to begin preparations for the 50th Session of the International Maritime Organization
(IMO)Sub-Committee on Stability and Load Lines and on Fishing Vessels Safety to be held at the International Coffee Organization in London, England from April 30th to May 4th 2007. The primary matters to be considered include: —Development of explanatory notes for harmonized SOLAS Chapter II-1; —Revision of the Intact Stability Code; —Safety of small fishing vessels; —Development of options to improve effect on ship design and safety of the 1969 TM Convention; —Guidelines for uniform operating limitations on high-speed craft; —Revision of resolution A.266 (VIII); —Review of SPS Code. Members of the public may attend this meeting up to the seating capacity of the room. Interested persons may seek information by writing to Mr. Paul Cojeen, Commandant (G-PSE), U.S. Coast Guard Headquarters, 2100 Second Street, SW., Room 1308, Washington, DC 20593-0001 or by calling
(202)372-1372. Due to rigorous scheduling difficulties the Advisory Committee regrets the delay in publication of this notice. Dated: September 8, 2006. Michael E. Tousley, Executive Secretary, Shipping Coordinating Committee, Department of State. [FR Doc. E6-15256 Filed 9-12-06; 8:45 am] BILLING CODE 4710-09-P DEPARTMENT OF THE TREASURY Submission for OMB Review; Comment Request September 7, 2006. The Department of the Treasury has submitted the following public information collection requirement(s) to OMB for review and clearance under the Paperwork Reduction Act of 1995, Public Law 104-13. Copies of the submission(s) may be obtained by calling the Treasury Bureau Clearance Officer listed. Comments regarding this information collection should be addressed to the OMB reviewer listed and to the Treasury Department Clearance Officer, Department of the Treasury, Room 11000, 1750 Pennsylvania Avenue, NW. Washington, DC 20220. DATES: Written comments should be received on or before October 13, 2006 to be assured of consideration. Internal Revenue Service
(IRS)*OMB Number:* 1545-0142. *Type of Review:* Extension. *Title:* Underpayment of Estimated Tax by Corporations. *Form:* 2220. *Description:* Form 2220 is used by corporations to determine whether they are subject to the penalty for underpayment of estimated tax and, if so, the amount of the penalty. The IRS uses Form 2220 to determine if the penalty was correctly computed. *Respondents:* Businesses or other for-profit institutions. *Estimated Total Burden Hours:* 23,633,634 hours. *OMB Number:* 1545-1359. *Type of Review:* Extension. *Title:* Information Reporting by Passport and Permanent Residence Applicants. *Description:* The regulation requires applicants for passports and permanent residence status to report certain tax information on the applications. The regulations are intended to give the Service notice of non-filers and of persons with foreign source income not subject to normal withholding, and to notify such persons of their duty to file U.S. tax returns. *Respondents:* Individuals or households. *Estimated Total Burden Hours:* 750,000 hours. *OMB Number:* 1545-0935. *Type of Review:* Revision. *Title:* U.S. Income Tax Return of a Foreign Sales Corporations (FSC); Schedule P, Transfer Price or Commission. *Form:* 1120-FSC. *Description:* Form 1120-FSC is filed by foreign corporations that have elected to be FSCs or small FSCs. The FSC uses Form 1120-FSC to report income and expenses and to figure its tax liability. IRS uses Form 1120-FSC and Schedule P (Form 1120-FSC) to determine whether the FSC has correctly reported its income and expenses and figured its tax liability correctly. *Respondents:* Businesses or other for-profit institutions. *Estimated Total Burden Hours:* 1,089,500 hours. *OMB Number:* 1545-0956. *Type of Review:* Extension. *Title:* Annual Return of One-Participant (Owners and Their Spouses) Retirement Plan. *Form:* 5500-EZ. *Description:* Form 5500-EZ is an annual return filed by a one-participant or one-participant and spouse pension plan. The IRS uses this data to determine if the plan appears to be operating properly as required under the law or whether the plan should be audited. *Respondents:* Businesses or other for-profit institutions. *Estimated Total Burden Hours:* 6,770,000 hours. *Clearance Officer:* Glenn P. Kirkland, Internal Revenue Service, Room 6516, 1111 Constitution Avenue, NW., Washington, DC 20224,
(202)622-3428. *OMB Reviewer:* Alexander T. Hunt, Office of Management and Budget, Room 10235, New Executive Office Building, Washington, DC 20503,
(202)395-7316. Robert Dahl, Treasury PRA Clearance Officer. [FR Doc. E6-15207 Filed 9-12-06; 8:45 am] BILLING CODE 4830-01-P DEPARTMENT OF THE TREASURY Office of Foreign Assets Control Additional Designation of Individual and Entities Pursuant to Executive Order 13224 AGENCY: Office of Foreign Assets Control, Treasury. ACTION: Notice. SUMMARY: The Treasury Department's Office of Foreign Assets Control (“OFAC”) is publishing the name of one newly-designated individual and two entities whose property and interests in property are blocked pursuant to Executive Order 13224 of September 23, 2001, “Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten To Commit, or Support Terrorism.” DATES: The designation by the Secretary of the Treasury of one individual and two entities identified in this notice, pursuant to Executive Order 13224, is effective on September 7, 2006. FOR FURTHER INFORMATION CONTACT: Assistant Director, Compliance Outreach & Implementation, Office of Foreign Assets Control, Department of the Treasury, Washington, DC 20220, tel.: 202/622-2490. SUPPLEMENTARY INFORMATION: Electronic and Facsimile Availability This document and additional information concerning OFAC are available from OFAC's Web site ( *www.treas.gov/ofac* ) or via facsimile through a 24-hour fax-on-demand service, tel.: 202/622-0077. Background On September 23, 2001, the President issued Executive Order 13224 (the “Order”) pursuant to the International Emergency Economic Powers Act, 50 U.S.C. 1701-1706, and the United Nations Participation Act of 1945, 22 U.S.C. 287c. In the Order, the President declared a national emergency to address grave acts of terrorism and threats of terrorism committed by foreign terrorists, including the September 11, 2001, terrorist attacks in New York, Pennsylvania, and at the Pentagon. The Order imposes economic sanctions on persons who have committed, pose a significant risk of committing, or support acts of terrorism. The President identified in the Annex to the Order, as amended by Executive Order 13268 of July 2, 2002, 13 individuals and 16 entities as subject to the economic sanctions. The Order was further amended by Executive Order 13284 of January 23, 2003, to reflect the creation of the Department of Homeland Security. Section 1 of the Order blocks, with certain exceptions, all property and interests in property that are in or hereafter come within the United States or the possession or control of United States persons, of:
(1)Foreign persons listed in the Annex to the Order;
(2)foreign persons determined by the Secretary of State, in consultation with the Secretary of the Treasury, the Secretary of the Department of Homeland Security and the Attorney General, to have committed, or to pose a significant risk of committing, acts of terrorism that threaten the security of U.S. nationals or the national security, foreign policy, or economy of the United States;
(3)persons determined by the Secretary of the Treasury, in consultation with the Secretary of State, the Secretary of the Department of Homeland Security and the Attorney General, to be owned or controlled by, or to act for or on behalf of those persons listed in the Annex to the Order or those persons determined to be subject to subsection 1(b), 1(c), or 1(d)(i) of the Order; and
(4)except as provided in section 5 of the Order and after such consultation, if any, with foreign authorities as the Secretary of State, in consultation with the Secretary of the Treasury, the Secretary of the Department of Homeland Security and the Attorney General, deems appropriate in the exercise of his discretion, persons determined by the Secretary of the Treasury, in consultation with the Secretary of State, the Secretary of the Department of Homeland Security and the Attorney General, to assist in, sponsor, or provide financial, material, or technological support for, or financial or other services to or in support of, such acts of terrorism or those persons listed in the Annex to the Order or determined to be subject to the Order or to be otherwise associated with those persons listed in the Annex to the Order or those persons determined to be subject to subsection 1(b), 1(c), or 1(d)(i) of the Order. On September 7, 2006, the Secretary of the Treasury, in consultation with the Secretary of State, the Secretary of the Department of Homeland Security, the Attorney General, and other relevant agencies, designated, pursuant to one or more of the criteria set forth in subsections 1(b), 1(c) or 1(d) of the Order, one individual and two entities whose property and interests in property are blocked pursuant to Executive Order 13224. *The list of additional designees follows:* 1. Al-Shami, Husayn (a.k.a. AL-SHAMI, Haj Husayn; a.k.a. Al-Shamy, Husayn; a.k.a. Ashami, Husayn; a.k.a. Shaimi, Husayn; a.k.a. Shamai, Husayn; a.k.a. Shamy, Husayn), Lebanon; DOB 1948; alt. DOB 1954; alt. DOB 1960 2. Bayt Al-Mal (a.k.a. Bayt Al-Mal Lil Muslimeen), Sidon, Lebanon; Harat Hurayk, Beirut, Lebanon; Burj al-Barajinah, Lebanon; Tyre, Lebanon; Al-Nabatiyah, Lebanon; Ba'albak, Lebanon; Hirmil, Lebanon 3. Yousser Company for Finance And Investment, Lebanon Dated: September 7, 2006. Adam J. Szubin, Director, Office of Foreign Assets Control. [FR Doc. E6-15206 Filed 9-12-06; 8:45 am] BILLING CODE 4811-37-P DEPARTMENT OF THE TREASURY Internal Revenue Service Open Meeting of the Small Business/Self Employed—Taxpayer Burden Reduction Committee of the Taxpayer Advocacy Panel AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Notice. SUMMARY: An open meeting of the Small Business/Self Employed—Taxpayer Burden Reduction Committee of the Taxpayer Advocacy Panel will be conducted (via teleconference). The TAP will be discussing issues pertaining to increasing compliance and lessening the burden for Small Business/Self Employed individuals. DATES: The meeting will be held Tuesday, October 3, 2006. FOR FURTHER INFORMATION CONTACT: Marisa Knispel at 1-888-912-1227 or 718-488-3557. SUPPLEMENTARY INFORMATION: Notice is hereby given pursuant to Section 10(a)(2) of the Federal Advisory Committee Act, 5 U.S.C. App.
(1988)that an open meeting of the Small Business/Self Employed—Taxpayer Burden Reduction Committee of the Taxpayer Advocacy Panel will be held Tuesday, October 3, 2006 from 3:30 p.m. ET to 4:30 p.m. ET via a telephone conference call. If you would like to have the TAP consider a written statement, please call 1-888-912-1227 or 718-488-3557, or write to Marisa Knispel, TAP Office, 10 Metro Tech Center, 625 Fulton Street, Brooklyn, NY 11201. Due to limited conference lines, notification of intent to participate in the telephone conference call meeting must be made with Marisa Knispel. Ms. Knispel can be reached at 1-888-912-1227 or 718-488-3557, or post comments to the Web site: *http://www.improveirs.org.* The agenda will include the following: Various IRS issues. Dated: August 31, 2006. John Fay, Acting Director, Taxpayer Advocacy Panel. [FR Doc. E6-15120 Filed 9-12-06; 8:45 am] BILLING CODE 4830-01-P DEPARTMENT OF THE TREASURY Internal Revenue Service Open Meeting of the Area 7 Taxpayer Advocacy Panel (Including the States of Alaska, California, Hawaii, and Nevada) AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Notice. SUMMARY: An open meeting of the Area 7 committee of the Taxpayer Advocacy Panel will be conducted (via teleconference). The Taxpayer Advocacy Panel
(TAP)is soliciting public comments, ideas, and suggestions on improving customer service at the Internal Revenue Service. The TAP will use citizen input to make recommendations to the Internal Revenue Service. DATES: The meeting will be held Monday, September 25, 2006. FOR FURTHER INFORMATION CONTACT: Dave Coffman at 1-888-912-1227, or 206-220-6096. SUPPLEMENTARY INFORMATION: Notice is hereby given pursuant to Section 10(a)(2) of the Federal Advisory Committee Act, 5 U.S.C. App.
(1988)that an open meeting of the Area 7 Taxpayer Advocacy Panel will be held Monday, September 25, 2006 from 2 p.m. Pacific Time to 3:30 p.m. Pacific Time via a telephone conference call. The public is invited to make oral comments. Individual comments will be limited to 5 minutes. If you would like to have the TAP consider a written statement, please call 1-888-912-1227 or 206-220-6096, or write to Dave Coffman, TAP Office, 915 2nd Avenue, MS W-406, Seattle, WA 98174 or you can contact us at *http://www.improveirs.org.* Due to limited conference lines, notification of intent to participate in the telephone conference call meeting must be made with Dave Coffman. Mr. Coffman can be reached at 1-888-912-1227 or 206-220-6096. *The agenda will include the following:* Various IRS issues. Dated: August 31, 2006. John Fay, Acting Director, Taxpayer Advocacy Panel. [FR Doc. E6-15124 Filed 9-12-06; 8:45 am] BILLING CODE 4830-01-P DEPARTMENT OF VETERANS AFFAIRS [OMB Control No. 2900-0335] Proposed Information Collection Activity: Proposed Collection; Comment Request AGENCY: Veterans Health Administration, Department of Veterans Affairs. ACTION: Notice. SUMMARY: The Veterans Health Administration
(VHA)is announcing an opportunity for public comment on the proposed collection of certain information by the agency. Under the Paperwork Reduction Act
(PRA)of 1995, Federal agencies are required to publish notice in the **Federal Register** concerning each proposed collection of information, including each proposed extension of a currently approved collection, and allow 60 days for public comment in response to the notice. This notice solicits comments on the information needed to determine a veteran's dental treatment needs, and the fees associated for these services. DATES: Written comments and recommendations on the proposed collection of information should be received on or before November 13, 2006. ADDRESSES: Submit written comments on the collection of information to Ann Bickoff, Veterans Health Administration (193E1), Department of Veterans Affairs, 810 Vermont Avenue, NW., Washington, DC 20420 or e-mail *ann.bickoff@mail.va.gov.* Please refer to “OMB Control No. 2900-0335” in any correspondence. FOR FURTHER INFORMATION CONTACT: Ann Bickoff at
(202)273-8310. SUPPLEMENTARY INFORMATION: Under the PRA of 1995 (Public Law 104-13; 44 U.S.C. 3501-21), Federal agencies must obtain approval from the Office of Management and Budget
(OMB)for each collection of information they conduct or sponsor. This request for comment is being made pursuant to Section 3506(c)(2)(A) of the PRA. With respect to the following collection of information, VHA invites comments on:
(1)Whether the proposed collection of information is necessary for the proper performance of VHA's functions, including whether the information will have practical utility;
(2)the accuracy of VHA's estimate of the burden of the proposed collection of information;
(3)ways to enhance the quality, utility, and clarity of the information to be collected; and
(4)ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or the use of other forms of information technology. *Title:* Dental Record Authorization and Invoice for Outpatient Services, VA Form 10-2570d. *OMB Control Number:* 2900-0335. *Type of Review:* Extension of a currently approved collection. *Abstract:* VA Form 10-2570d is essential to the proper administration of VA outpatient fee dental program. The associated instructions make it possible to communicate with clarity the required procedures, peculiarities, and precautions associated with VA authorizations for contracting with private dentists for the provision of dental treatment for eligible veteran beneficiaries. Since most of the veterans who are authorized fee dental care are geographically inaccessible to VA dental clinics, it is necessary to request information as to the veteran's oral condition, treatment needs and the usual customary fees for these services from the private fee dentist whom the veteran has selected. The form lists the dental treatment needs of the veteran patient, the cost to VA to provide such services, and serves as an invoice for payment. VA uses the data collected to verify the veteran's eligibility to receive dental benefits. *Affected Public:* Business and other for profit. *Estimated Total Annual Burden:* 4,153 hours. *Estimated Average Burden Per Respondent:* 20 minutes. *Frequency of Response:* On occasion. *Estimated Number of Respondents:* 12,460. Dated: August 24, 2006. By direction of the Secretary. Denise McLamb, Program Analyst, Records Management Service. [FR Doc. E6-15098 Filed 9-12-06; 8:45 am] BILLING CODE 8320-01-P 71 177 Wednesday, September 13, 2006 Presidential Documents Title 3— The President Proclamation 8048 of September 8, 2006 National Historically Black Colleges and Universities Week, 2006 By the President of the United States of America A Proclamation Education is the cornerstone of a prosperous and hopeful Nation. By providing a quality education, Historically Black Colleges and Universities (HBCUs) help students achieve their dreams and realize the promise of America. During National Historically Black Colleges and Universities Week, we recognize the significant contributions of HBCUs and underscore our commitment to helping these distinguished institutions in the pursuit of educational excellence. Our Nation’s Historically Black Colleges and Universities are places of higher learning and achievement that prepare new generations of Americans to become responsible leaders in their communities and around the world. HBCUs enable students to gain the skills necessary to compete for the jobs of the 21st century. My Administration is dedicated to ensuring the continued success of HBCUs and securing the constitutional guarantees of liberty and equality to all Americans. The President’s Board of Advisors on Historically Black Colleges and Universities has worked to help these institutions benefit from Federal programs, obtain private-sector support for their endowments, and build partnerships to strengthen faculty development and cooperative research. In addition, the HBCU Capital Financing Program provides HBCUs with access to funds for the repair, renovation, and construction of educational resources and facilities. During National Historically Black Colleges and Universities Week, we celebrate the enduring importance of HBCUs, and resolve to continue to support their critical mission. NOW, THEREFORE, I, GEORGE W. BUSH, President of the United States of America, by virtue of the authority vested in me by the Constitution and laws of the United States, do hereby proclaim September 10 through September 16, 2006, as National Historically Black Colleges and Universities Week. I call upon public officials, educators, librarians, and all the people of the United States to observe this week with appropriate programs, ceremonies, and activities in recognition of the vital contributions of HBCUs. IN WITNESS WHEREOF, I have hereunto set my hand this eighth day of September, in the year of our Lord two thousand six, and of the Independence of the United States of America the two hundred and thirty-first. GWBOLD.EPS [FR Doc. E6-15292 Filed 9-12-06; 8:45 am] Billing code 3195-01-P 71 177 Wednesday, September 13, 2006 Proposed Rules Part II Department of Agriculture Agricultural Marketing Service 7 CFR Parts 1005 and 1007 Milk Marketing Orders—Tentative Partial Decision in the Appalachian and Southeast Marketing Areas; Proposed Rule DEPARTMENT OF AGRICULTURE Agricultural Marketing Service 7 CFR Parts 1005 and 1007 [Docket No. AO-388-A17 and AO-366-A46; DA-05-06] Milk in the Appalachian and Southeast Marketing Areas; Tentative Partial Decision and Opportunity to File Written Exceptions on Proposed Amendments to Tentative Marketing Agreements and to Orders AGENCY: Agricultural Marketing Service, USDA. ACTION: Proposed rule; tentative partial decision. SUMMARY: This document is the tentative partial decision proposing to adopt on an interim final and emergency basis amendments to the transportation credit balancing fund provisions of the Appalachian and Southeast milk marketing orders. Specifically, this document would establish a variable mileage rate factor using a fuel cost adjustor to determine the transportation credit payments of both orders, increase the maximum transportation credit assessment rate for both orders and establish a zero diversion limit standard on all milk receiving transportation credits in both orders. Other proposals concerning producer milk provisions and establishing transportation credit provisions on intra-market order movements of milk within the Appalachian and Southeast marketing areas will be addressed in a separate decision to be issued soon. This decision requires determining if producers approve the issuance of the amended orders on an interim basis. DATES: Comments must be submitted on or before November 13, 2006. ADDRESSES: Comments (six copies) should be filed with the Hearing Clerk, United States Department of Agriculture, STOP 9200—Room 1031, 1400 Independence Avenue, SW., Washington, DC 20250-1031. You may send your comments by the electronic process available at the Federal eRulemaking portal: *http://www.regulations.gov* or by submitting comments to *amsdairycomments@usda.gov.* Reference should be made to the title of action and docket number. FOR FURTHER INFORMATION CONTACT: Gino Tosi, Associate Deputy Administrator, USDA/AMS/Dairy Programs, Order Formulation and Enforcement Branch, STOP 0231—Room 2971, 1400 Independence Avenue, SW., Washington, DC 20250-0231,
(202)690-1366, e-mail address: *gino.tosi@usda.gov.* SUPPLEMENTARY INFORMATION: This tentative partial decision proposes to adopt amendments that would:
(1)Establish a variable transportation credit mileage rate factor which uses a fuel cost adjustor in both orders,
(2)increase the Appalachian order's maximum transportation credit assessment rate to $0.15 per hundredweight
(cwt)and the Southeast order's maximum transportation credit assessment rate to $0.20 per cwt and
(3)establish a zero diversion limit standard on eligible Class I milk receiving transportation credits in both orders. This administrative action is governed by the provisions of Sections 556 and 557 of Title 5 of the United States Code and, therefore, is excluded from the requirements of Executive Order 12866. The amendments to the rules proposed herein have been reviewed under Executive Order 12988, Civil Justice Reform. They are not intended to have a retroactive effect. If adopted, the proposed amendments would not preempt any state or local laws, regulations, or policies, unless they present an irreconcilable conflict with this rule. The Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674) (the Act), provides that administrative proceedings must be exhausted before parties may file suit in court. Under Section 608c(15)(A) of the Act, any handler subject to an order may request modification or exemption from such order by filing with the Department of Agriculture (Department) 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 the law. A handler is afforded the opportunity for a hearing on the petition. After a hearing, the Department 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 its principal place of business, has jurisdiction in equity to review the Department's ruling on the petition, provided a bill in equity is filed not later than 20 days after the date of the entry of the ruling. Regulatory Flexibility Act and Paperwork Reduction Act In accordance with the Regulatory Flexibility Act (5 U.S.C. 601 *et seq.* ), the Agricultural Marketing Service has considered the economic impact of this action on small entities and has certified that this proposed rule would not have a significant economic impact on a substantial number of small entities. For the purpose of the Regulatory Flexibility Act, a dairy farm is considered a “small business” if it has an annual gross revenue of less than $750,000, and a dairy products manufacturer is a “small business” if it has fewer than 500 employees. For the purposes of determining which dairy farms are “small businesses,” the $750,000 per year criterion was used to establish a marketing guideline of 500,000 pounds per month. Although this guideline does not factor in additional monies that may be received by dairy producers, it should be an inclusive standard for most “small” dairy farmers. For purposes of determining a handler'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. During January 2006, the time of the hearing, there were 3,055 dairy farmers pooled on the Appalachian order (Order 5). For the Southeast order (Order 7), 3,367 dairy farmers were pooled on the order. Of these, 2,889 dairy farmers in Order 5 (or 95 percent) and 3,218 dairy farmers in Order 7 (or 96 percent) were considered small businesses. During January 2006, there were a total of 37 plants associated with the Appalachian order (22 fully regulated plants, 11 partially regulated plants, 2 producer-handler and 2 exempt plants). A total of 51 plants were associated with the Southeast order (31 fully regulated plants, 9 partially regulated plants and 12 exempt plants). The number of plants meeting the small business criteria under the Appalachian and Southeast orders were 9 (or 24 percent) and 18 (or 35 percent), respectively. The proposed amendments adopted in this tentative final decision would amend the transportation credit provisions of the Appalachian and Southeast orders. The Appalachian and Southeast orders contain provisions for a transportation credit balancing fund. To partially offset the costs of transporting supplemental milk into each marketing area to meet fluid milk demand at distributing plants during the months of July through December, handlers are charged an assessment year-round to generate revenue used to make payments to qualified handlers. The proposed amendments would establish a variable mileage rate factor that would be adjusted monthly by changes in the price of diesel fuel (a fuel cost adjustor) as reported by the Department of Energy for paying claims from the transportation credit balancing funds of the Appalachian and Southeast orders. Currently, the mileage rate of both orders is fixed at 0.35 cents per cwt per mile. The proposed amendments would increase the maximum rates of the assessments for the Appalachian and Southeast orders. Specifically, the maximum assessment rate for the Appalachian order would be increased by 5.5 cents per cwt from the current 9.5 cents per cwt to 15 cents per cwt. The maximum assessment rate for the Southeast order would be increased by 10 cents per cwt to 20 cents per cwt. The increase in each order's maximum transportation credit assessment rate is intended to minimize the proration and depletion of each order's transportation credit balancing fund during those months when supplemental milk is needed to service the fluid needs of both marketing areas. The increases in the maximum assessment rates for the Appalachian and Southeast orders adopted in this decision are necessary due to, primarily, expected higher mileage reimbursement rates arising from escalating fuel costs and the transporting of milk over longer distances and, secondarily, the expected continuing need to rely on supplemental milk supplies arising from declining local milk production in the marketing areas. The proposed amendments also would amend the producer milk provisions of the Appalachian and Southeast orders by eliminating the current ability to pool diverted milk associated with supplemental milk receiving a transportation credit payment. While this tentative partial decision does not specifically adopt the Dean Foods Company proposal (published in the hearing notice as Proposal 4), the Department agrees with the need to limit diverted milk pooled on the order made possible by supplemental milk eligible to receive transportation credits. Currently, the Appalachian and Southeast orders provide transportation credits on supplemental shipments of milk for Class I use provided the milk was from a dairy farmer who was not defined as a “producer” under the orders during more than 2 of the immediately preceding months of February through May and not more than 50 percent of the milk production of the dairy farmer, in aggregate, was received as producer milk under the order during those 2 months and whose milk is produced on a farm not located within the specified marketing areas of either order. The provisions of each order provide the Market Administrator the discretionary authority to adjust the 50 percent milk production standard to assure orderly marketing and efficient handling of milk in the marketing areas. The proposed amendments would be applied to all Appalachian and Southeast order handlers and producers—both consist of large and small businesses. The proposed amendments will affect all supplemental producers and handlers equally regardless of their size. Accordingly the proposed amendments should not have a significant economic impact on a substantial number of small entities. The Agricultural Marketing Service 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. This notice does not require additional information collection that needs clearance by the Office of Management and Budget
(OMB)beyond currently approved information collection. The primary sources of data used to complete the forms are routinely used in most business transactions. Forms require only a minimal amount of information that can be supplied without data processing equipment or a trained statistical staff. Thus, the information collection and reporting burden is relatively small. Requiring the same reports for all handlers does not significantly disadvantage any handler that is smaller than the industry average. Interested parties are invited to submit comments on the probable regulatory and informational impact of this proposed rule on small entities. Also, parties may suggest modifications of this proposal for the purpose of tailoring their applicability to small businesses. Prior Documents in This Proceeding *Notice of Hearing:* Issued December 22, 2005; published December 28, 2005 (70 FR 76718). Preliminary Statement Notice is hereby given of the filing with the Hearing Clerk of this tentative partial decision with respect to proposed amendments to the tentative marketing agreements and the orders regulating the handling of milk in the Appalachian and Southeast marketing areas. This notice is issued pursuant to the provisions of the Agricultural Marketing Agreement Act
(AMAA)and the applicable rules of practice and procedure governing the formulation of marketing agreements and marketing orders (7 CFR Part 900). Interested parties may file written exceptions to this decision with the Hearing Clerk, U.S. Department of Agriculture, STOP 9200—Room 1031, 1400 Independence Avenue, SW., Washington, DC 20250-9200, by November 13, 2006. Six
(6)copies of these exceptions should be filed. All written submissions made pursuant to this tentative partial decision will be made available for public inspection at the Office of the Hearing Clerk during regular business hours (7 CFR 1.27(b)). The hearing notice specifically invited interested persons to present evidence concerning the probable regulatory and informational impact of the proposals on small businesses. Some evidence was received that specifically addressed these issues, and some of the evidence encompassed entities of various sizes. A public hearing was held upon proposed amendments to the marketing agreement and the orders regulating the handling of milk in the Appalachian and Southeast marketing areas. The hearing was held, pursuant to the provisions of the Agricultural Marketing Agreement Act of 1937 (AMAA), as amended (7 U.S.C. 601-674), and the applicable rules of practice and procedure governing the formulation of marketing agreements and marketing orders (7 CFR Part 900). The proposed amendments set forth below are based on the record of a public hearing held in Louisville, Kentucky, on January 10-12, 2006, pursuant to a notice of hearing issued December 22, 2005, published December 28, 2005 (70 FR 76718). The material issues on the record of hearing relate to: 1. Transportation Credits A. Establishing a variable mileage rate factor. B. Increasing the maximum assessment rates. C. Establishing diversion limit standards. 2. Determination of emergency marketing conditions. Findings and Conclusions This tentative partial decision specifically adopts on an interim basis, proposals published in the hearing notice as Proposals 3, 1 and certain objectives of Proposal 4. Proposal 3 seeks to establish a variable mileage rate factor using a fuel cost adjustor. Proposal 1 seeks to increase the maximum transportation credit assessment rates for both orders. The intent of Proposal 4 is to discourage the volume of milk pooled by diversions by reducing the amount of transportation credits a handler could receive. A complete discussion and findings on these three proposals appears after the summaries of testimony. Proposal 2, seeking to establish an intra-market transportation credit provision for both the Appalachian and Southeast orders and Proposal 5, seeking to reduce the volume of milk diverted to an out-of-area plant, will be addressed in a separate decision to be issued soon. Therefore, no further references to Proposals 2 and 5 will be made in this decision. The following findings and conclusions on the material issues are based on evidence presented at the hearing and the record thereof: 1. Transportation Credits A. Establishing a Variable Mileage Rate Factor A proposal, published in the hearing notice as Proposal 3, which seeks to establish a variable mileage reimbursement rate factor
(MRF)that uses a fuel cost adjustor in the transportation credit payment provisions in both the Appalachian and Southeast orders should be adopted immediately. The orders currently provide for a fixed mileage rate of 0.35 cents per cwt per mile. The proposal was offered by Dairy Farmers of America, Inc., (DFA). DFA is a dairy farmer member-owned Capper-Volstead cooperative with 12,800 member farmers whose milk is pooled throughout the Federal order system, including the Appalachian and Southeast orders. A witness appearing on behalf of Southern Marketing Agency, Inc.
(SMA)and Dairy Cooperative Marketing Association, Inc.
(DCMA)testified in support of Proposal 3. SMA and DCMA are marketing agencies-in-common operating in the southeast region of the country. Members of SMA include Arkansas Dairy Cooperative Association; Dairy Farmers of America, Inc.; Dairymen's Marketing Cooperative, Inc.; Lone Star Milk Producers, Inc.; and Maryland & Virginia Milk Cooperative Association, Inc. Members of DCMA include Zia Milk Producers Association; Select Milk Producers Association; Cooperative Milk Producers Association, Inc.; and Southeast Milk, Inc. Dairylea Cooperative, Inc. also requested that the witness testify on their behalf and in support of Proposal 3. The SMA witness testified that the southeastern region of the United States is experiencing declining milk production while the population and demand for fluid milk are increasing. As a result, the witness stated that the Appalachian and Southeast marketing areas must continually seek supplemental supplies of milk from outside their normal milksheds. The witness added that the volume of supplemental milk needed to meet demands that cannot be met by local production, and the distances from where the supplemental milk is obtained continues to increase. The witness explained that these marketing conditions result in payments to handlers from the transportation credit balancing funds being depleted at a rate faster than the rate they are assessed. The SMA witness presented monthly fuel cost data for the United States and nine U.S. sub-regions from the Energy Information Administration of the United States Department of Energy (EIA). Relying on EIA data, the witness asserted that the cost of diesel fuel has escalated sharply in recent years. According to the witness, the national average diesel fuel price in mid-1997 was reported to be approximately $1.15 to $1.17 per gallon while the national average diesel fuel price in mid-2005 was reported to be $2.20 to $2.50 per gallon. The witness emphasized that these current diesel fuel prices are much higher than the prices that existed when the transportation credit provisions were first implemented in 1996 and amended in 1997. The SMA witness noted that the cost of hauling has also increased in recent years. Relying on EIA data, the SMA witness estimated the cost of hauling to be in the range of $1.75 to $1.80 per loaded mile in 1997, whereas the cost in 2005 was about $2.35 per loaded mile. As diesel fuel costs have increased, the witness explained, so have other costs such as equipment, insurance and labor. The SMA witness emphasized that there have been no adjustments made to the MRF of the transportation credit provisions since they were last amended in 1997. The witness recounted that the original mileage rate was reduced by five percent, from 0.37 cents per cwt per mile to 0.35 cents per cwt per mile in 1997. The SMA witness explained that in 1997, approximately 94 to 95 percent of the transportation costs on supplemental milk were covered by transportation credit balancing fund payments. The witness reiterated that since no adjustments have been made to the orders' transportation credit reimbursement rate since 1997, the percentage of hauling costs covered by the transportation credits today are substantially less than those in 1997. According to the SMA witness, the current use of a fixed mileage rate is not responsive to changes in hauling costs. The witness explained that Proposal 3 would compute a variable transportation credit mileage rate per cwt per mile that would adjust with changes in the cost of diesel fuel. The witness stressed the importance and need to keep information on hauling costs current by using independent fuel cost data. The witness stated that hauling cost rates, adjusted for changes in fuel costs, are common in industry. The SMA witness illustrated components used to calculate the proposed variable MRF. According to the witness, a monthly average diesel fuel price, a reference diesel fuel price, an average mile-per-gallon truck fuel use, a reference hauling cost per loaded mile and a reference load size are the components needed to calculate the proposed variable MRF. Using EIA data for the United States and nine U.S. sub-regions, the SMA witness explained that using the Lower Atlantic and Gulf Coast EIA regions in computing the monthly mileage rates would be reflective of the Appalachian and Southeast marketing areas. Relying on EIA data, the witness explained that the Lower Atlantic region is comprised of the states of Virginia, West Virginia, North Carolina, South Carolina, Georgia and Florida. Similarly, the witness added, the Gulf Coast region is comprised of Alabama, Mississippi, Arkansas, Louisiana, Texas and New Mexico. According to the witness, of the nine sub-regions described by the EIA, the Lower Atlantic and Gulf Coast regions best reflect the Appalachian and Southeast marketing areas geographically. The witness also noted that according to EIA data, the diesel fuel costs for these two regions are among the lowest reported nationally. In establishing a reference diesel fuel price for the proposed transportation credit mileage rate calculation, the SMA witness relied on EIA retail diesel fuel prices for the time period of October to November 2003. During that period, the witness said, diesel fuel prices averaged $1.48 per gallon nationally and ranged from $1.42 per gallon in the Lower Atlantic to $1.43 per gallon in the Gulf Coast EIA regions. Due to the relatively little fluctuation of diesel fuel prices during October to November 2003, the witness was of the opinion that this period is a fair and conservative timeframe on which to establish a reference diesel fuel price. The witness concluded by suggesting $1.42 per cwt per mile should be used as the reference diesel price. The SMA witness submitted a random selection of actual milk hauler bills as the basis for computing a reference hauling cost component of the proposed MRF. According to the witness, actual origination and destination points, miles moved, and rates and fuel surcharges per loaded mile were depicted on each hauling bill. For the month of October 2005, the witness stated that hauling costs ranged from $1.89 to $2.70 per loaded mile, with the average being $2.48 per loaded mile. In order to be consistent with the timeframe used for the reference diesel price, the witness submitted selected milk hauling bills from October to November 2003 as the basis for determining the reference hauling cost. The witness testified that for this time period the simple average hauling rate charged per loaded mile in the Southeast was $1.9332 and $1.8913, respectively, and averaged $1.9122. Accordingly, the witness offered that the average hauling rate of $1.91 per loaded mile become the reference hauling cost used in calculating the MRF. The SMA witness provided data compiled by the United States Department of Transportation (USDOT) on combination truck fuel economy. According to the witness, the USDOT data show that the average miles traveled per gallon for a combination truck in 2002 was 5.2 miles per gallon. The witness was of the opinion that the dairy industry fuel economy is similar as it ranges between 5.0 to 6.0 miles per gallon. Accordingly, the witness advocated using a 5.5 miles per gallon fuel consumption rate in computing the proposed MRF. The witness also testified that a 5,600 gallon tanker at its fullest can carry 48,160 pounds of milk. Therefore, the witness explained, 48,000 should be the reference load size used in calculating the MRF. The SMA witness summarized that Proposal 3 calculates a variable monthly MRF by using:
(1)EIA data from a base period defined as October and November 2003,
(2)hauling cost of $1.91 per loaded mile,
(3)a reference diesel fuel rate of $1.42 per gallon,
(4)a fuel economy of 5.5 miles per gallon and
(5)a load size of 48,000 pounds. The SMA witness explained that the proposed mileage rate would be calculated by averaging the four most recent weeks of retail on-highway diesel prices for both the Lower Atlantic and Gulf Coast, as reported by the EIA that are available prior to each order's announcement of the Advance Class milk prices. According to the witness, the proposed mileage rate would then be computed and included in each orders' announcement of Advanced Class milk prices that are announced publicly on the Friday on or before the 23rd of the current month. The SMA witness stressed that the proposed mileage rate computation reflects less than the actual cost of hauling for various reasons. The witness asserted that the proposed mileage rate is based on costs of hauling from 2003, rather than a more current timeframe, and therefore would only reflect changes in the cost of diesel fuel since that time. The witness also reiterated that the proposed mileage rates would only apply to milk used in Class I shipped directly from farms to plants that exceeds 85 miles. The SMA witness was of the opinion that transportation costs will continue to increase and that adopting the proposed changes to the transportation credit provisions will avoid exhausting the transportation credit balancing fund before costs are reimbursed. The SMA witness asserted that they were incurring substantial losses in supplying supplemental milk for Class I use to the Appalachian and Southeast marketing areas. The witness indicated that hauling costs in supplying supplemental milk reach over $15 million annually. Six DFA farmer-members testified in support of Proposal 3. According to these witnesses, it is the cooperative members of SMA who are acting as handlers to supply the supplemental fluid milk needs of both marketing areas. According to the witnesses, this results in additional costs that are absorbed by the dairy farmer members of the cooperatives that comprise SMA. The witnesses argued that hauling costs and the distance supplemental milk must be hauled continues to increase. The six DFA dairy farmer witnesses were of the opinion that Proposal 3 is a reasonable solution to deal with the continued production decline and population driven demand increase in the southeastern region of the United States. The witnesses were of the opinion that using a fuel adjustor that moves up and down with changes in the cost of diesel fuel would more adequately cover the costs of transporting supplemental milk in the marketing areas. A post-hearing brief submitted by DFA, and supported by SMA, reiterated support for adopting a fuel cost adjustor. A post-hearing brief was submitted on behalf of Arkansas Dairy Cooperative Association
(ADCA)in support of Proposal 3. According to ADCA, their members' milk does not usually qualify for transportation credit payments because their milk is typically pooled on the Southeast and Central orders year-round. However, ADCA noted that their members are impacted by the cost of hauling supplemental milk into the southeast because of their membership in a marketing agency-in-common. A post-hearing brief was submitted on behalf of Dairymen's Marketing Cooperative, Inc.
(DMCI)in support of Proposal 3. The brief emphasized that as fuel costs continue to increase, the Class I differential surface becomes more outdated and unable to reflect the costs of moving milk. A post-hearing brief was submitted on behalf of Lone Star Milk Producers (Lone Star) in support of Proposal 3 because it would establish updated mileage rates for making payments from the transportation credit balancing funds. The brief stated that the hauling cost factor used to develop the mileage rate for the transportation credit balancing fund has not been updated since the mid 1990's and is inadequate. A post-hearing brief submitted by Maryland & Virginia Milk Producers Cooperative Association, Inc. (Maryland & Virginia) reiterated support for the adoption of Proposal 3. A post-hearing brief was submitted on behalf of South East Dairy Farmers Association (SEDFA). The brief expressed support for a variable mileage rate based on the changes in the cost of diesel fuel. The brief stated that the industry uses a consistent fuel economy estimate of 5.0 to 6.0 miles per gallon when calculating expected milk transportation costs. The brief stressed that the extreme rise in diesel fuel prices in recent months has made the adoption of Proposal 3 critical for producers who incur the cost of hauling milk to the market. A dairy farmer who supplies milk to Dean Foods Company
(Dean)testified in support of the intent of Proposal 3. The witness stated that a dynamic mileage rate that adjusts to the energy markets is better than a static factor that is unable to change with changes in energy costs. A dairy farmer who markets milk to Dean through Dairy Marketing Service
(DMS)testified in favor of Proposal 3. The witness stated that using a variable MRF derived from a source outside of the dairy industry such as the USDOT would help decrease the chances of industry manipulating what information should be used in calculating a MRF. A witness appearing on behalf of Southeast Milk, Inc.
(SMI)testified in support of Proposal 3. SMI is a dairy marketing cooperative with approximately 300 dairy farmer members in Florida, Georgia, Alabama and Tennessee. The SMI witness stated that relying on cost indexes of other government agencies determined on a national scale makes the data less subject to manipulation by any given industry. A witness testified on behalf of Dean in support of Proposal 3. According to the witness Dean owns and operates 8 plants regulated by the Appalachian marketing area and 10 plants regulated by the Southeast marketing area. The Dean witness agreed with the benefit of using an adjustor in determining the MRF to reflect changes in fuel prices over time. However, the witness also was of the opinion that the MRF should be reduced by 95 percent in order to be consistent with the Secretary's past decisions that transportation credits do not encourage the uneconomic movement of milk or inefficiencies. The Dean witness testified that there is a need for supplemental supplies of milk for the marketing areas and that supplying such milk presents challenges. Nevertheless, the witness was of the opinion and expressed concern for the continuing and potential abuse of transportation credits. The witness asserted that current order provisions allow supplemental milk to receive transportation credits when such milk is not demanded. Moreover, the witness stressed that there is no assurance that transportation credit balancing fund payments would flow to the dairy farmer members of the cooperatives acting as handlers located in the two marketing areas regardless of their status as independent or cooperative members. A post-hearing brief submitted on behalf of Dean reiterated support for Proposal 3, indicating that disorderly marketing conditions exist because the milk supply in the Southeastern United States is deficit and the cost of supplying the market is not borne equally. A witness appearing on behalf of Land O'Lakes, Inc.
(LOL)testified in support of Proposal 3. LOL is a dairy cooperative with over 4,000 dairy farmer member-owners who are pooled on six Federal Orders. The witness stated that their member's milk located in the Northeast and Midwest have provided supplemental supplies to both the Appalachian and Southeast marketing orders for the past 10 years. According to the witness, LOL is a continuous supplemental milk supplier to the Appalachian and Southeast orders and has higher costs hauling milk. The witness asserted that basing the MRF on changes in diesel fuel prices would be responsive to costs actually experienced by the handlers who move milk into these two deficit markets. A post-hearing brief submitted by LOL reiterated support for the adoption of Proposal 3. The brief said that in order to fulfill the supplemental milk needs of the two marketing areas, milk is sourced from 28 states, which demonstrates the distance milk must travel has further increased adding to the justification of why Proposal 3 should be adopted. An independent dairy farmer from New Market, Tennessee, testified in opposition to any changes to the Appalachian or Southeast marketing orders. The witness testified that additional government intervention in moving milk was not necessary and that supply and demand should be relied upon to dictate what services are needed. The witness asserted that amending the orders as proposed would change the way milk is moved and that would hinder efficient milk hauling. The witness also was of the opinion that there is no assurance transportation credits received for supplying supplemental milk would truly reach the market's producers. The witness expressed concerns that the proposed increases in the transportation credit rate could affect producer decisions and producer blend prices. A witness testified on behalf of the Kentucky Dairy Development Council (KDDC). KDDC is a member-based organization that represents approximately 1,360 dairy farmers in Kentucky. KDDC did not state support or opposition for the proposals presented at the hearing. The witness was of the opinion that noncompetitive pricing is discouraging milk production in the southeastern United States. The witness stated the opinion that farm milk prices in Kentucky and in the Southeastern states have eroded and that KDDC was opposed to any Federal Order changes which would further erode farm prices. The witness did testify in support of changes to the orders that would strengthen the position of dairy farmers in Kentucky and in other Southeastern states. A post-hearing brief was submitted by KDDC in support of Proposal 3 even though no specific position was taken on proposals considered during the hearing. The brief said that Proposal 3 would benefit Kentucky dairy farmers by providing assistance in recovering market service costs. B. Increasing the Maximum Assessment Rate A proposal, published in the hearing notice as Proposal 1, offered by DFA, that seeks to increase the maximum transportation credit balancing fund assessment rates for the Appalachian and Southeast orders should be adopted immediately. Specifically, this proposal would increase the maximum transportation credit balancing fund assessment rate in the Appalachian order by $0.055 per cwt on Class I milk so that the maximum rate of assessment would be $0.15 per cwt. The Southeast order maximum assessment rate would be increased by $0.10 per cwt so that the maximum rate of assessment would be $0.20 per cwt. A witness appearing on behalf of DCMA and SMA testified in support of Proposal 1. As previously described in testimony regarding Proposal 3, the SMA witness said that the current transportation credit provisions provide for collecting a maximum transportation credit assessment to handlers on all Class I milk for the Appalachian and Southeast marketing areas year-round. While the Market Administrator has the discretion to waive the maximum transportation credit assessments if deemed necessary, the SMA witness explained that the Market Administrator of each order collected the maximum assessments in 2004 and 2005. However, the witness said that the collected assessments in both orders had been insufficient to pay the requested credits necessitating the proration of payments from the transportation credit balancing fund. The SMA witness stated that even with the November 1, 2005, implementation of the most recent transportation credit assessment increase of 3 cents per cwt for both orders, the assessment rate will likely not be able to ensure payments from the transportation credit balancing funds on all milk eligible to receive payment. The SMA witness estimated that the transportation credit assessment rate for the Appalachian order for 2004 would have needed to be $0.0889 per cwt and $0.0953 per cwt for all of 2005 in order to cover all of the transportation credits requested. The witness also estimated that the Southeast area transportation credit assessment rate would needed to have been $0.1318 per cwt and $0.1246 per cwt in 2004 and 2005, respectively, to cover all requested credits. The witness also noted that the transportation credits requested for both the Appalachian and Southeast marketing orders for the months of July, September and October of 2005 exceeded the transportation credits requested in all of 2004. The witness said that this also demonstrates that increased volumes of supplemental milk were transported from locations located farther from the marketing areas. The witness said that the reason the Market Administrators' prorated payments from the transportation credit balancing funds was because the rate of assessments exceeded collections. The witness was of the opinion that this occurred because more supplemental milk was sourced from more distant locations. Relying on Market Administrator data, the witness concluded that only 55 percent of the actual cost of transporting supplemental milk was covered by the transportation credit payments in the Appalachian Order and only 39 percent of the actual cost was covered for the Southeast Order in 2004. The witness estimated that for 2005, only 53 percent and 43 percent of the actual hauling costs for supplemental milk would be covered for the Appalachian and Southeast orders respectively. In explaining the need for the adoption of Proposal 3, the SMA witness reiterated that the combined effect of higher mileage hauling rates and supplemental milk being hauled from more distant locations resulted in a smaller portion of actual transportation costs being funded with transportation credits than in 1997. The witness was of the opinion that transportation costs will continue to increase thus making it necessary to again increase the assessment rate. Further illustrating the need to increase the maximum transportation credit assessment rate, the SMA witness related that if a transportation credit reimbursement rate of 0.46 cents per cwt per mile had been in place rather than the current rate of 0.35 cents per cwt per mile, the Appalachian order would have required an assessment of $0.133 per cwt in 2004 in order to prevent the proration of transportation credit claims, and 2005 would have required an assessment of $0.1415 per cwt. Similarly, the witness stated for the Southeast order, the assessment rate would have needed to have been $0.1927 per cwt for 2004 and $0.1869 per cwt for 2005. The SMA witness testified that the differing rates of transportation credit balancing fund assessments proposed for the Appalachian and Southeast orders reflect the differing costs of supplying supplemental milk into each marketing area. The witness stated that while the transportation credit assessment was waived for 2 months during 2002 and 2003, assessments were not waived for the Southeast order. The witness asserted that while both orders rely on some of the same sources for supplemental milk, the Appalachian marketing area receives most of its milk from the more northern Mid-Atlantic States while the Southeast marketing area receives most of its supplemental milk from States located to the west and southwest of the marketing area. Further, the witness added that different assessment rates are warranted for the two orders because supplemental milk moves greater distances to service the Southeast market than it does to service the Appalachian market. The six DFA dairy farmer witnesses that testified in support of Proposal 3 also testified in support for increasing the transportation credit assessments for both orders. The witnesses were of the opinion that the assessment increases would generate funds needed to maintain a sufficient transportation credit fund balance to pay eligible claims. In addition, the witnesses were of the opinion that the orders' current location adjustments are not able to reflect the rapidly increasing costs of transporting milk from where it is located to where it is needed. Similarly, the witnesses stated that over-order premiums cannot be commanded from the market to offset rapidly increasing transportation costs. The six DFA dairy farmer witnesses were also of the opinion that the intent of increasing the transportation credit assessment rates was a reasonable solution to mitigate continued production declines and the increasing demand for milk in the southeastern United States by a growing population. The witnesses added that higher fuel costs and longer hauling distances from which to obtain supplemental milk supplies are costing the markets' producers. When producers go out of business, the witnesses related, the gap between supply and demand widens thereby increasing the cost of supplying the market with supplemental milk. Post-hearing briefs submitted by DFA reiterated the position and testimony by SMA in support of increasing the transportation credit assessment rates immediately. A post-hearing brief was submitted on behalf of Select Milk Producers, Inc. (Select) and Continental Dairy Products, Inc. (Continental) in support of Proposal 1. Select's members are located in New Mexico, Texas, Kansas and Oklahoma, and Continental's members are located in Indiana, Michigan and Ohio. The brief stated that both cooperatives supply the Appalachian and Southeast marketing areas with supplemental milk. The brief stated support for testimony given at the hearing by proponents for increasing the transportation credit assessment rates of the two orders. The brief also stated that while the proposals under consideration will not fix long-term marketing and transportation problems, Proposal 1 should be adopted in conjunction with the Department considering alternative approaches in an effort to correct the milk deficit problems in the southeast region of the United States. The Select/Continental brief expressed the opinion that blend prices, not Class I prices, provide the economic incentive to supply milk to a marketing area. The brief stated that when producers in a large marketing area share the same blend price the incentive to move milk within the large marketing area is greatly diminished. In addition, the brief indicated that the pricing of diverted milk ignores the true relative value of milk to the market where pooled which results in milk being pooled that is not available to meet the Class I needs of the market. A post-hearing brief was submitted on behalf of South East Dairy Farmers Association (SEDFA). The brief expressed support for Proposal 1 as published in the hearing notice. SEDFA represents cooperative and independent producers who are normal and supplemental milk suppliers and are located in and outside of the Appalachian and Southeast marketing areas. The SEDFA brief asserted that whether milk is produced within or outside of the two marketing areas, the cost of moving Class I supplemental milk should be borne by the marketplace. The brief stated that while the percent reimbursement of actual hauling costs is much lower than in 1997, the amount of supplemental milk being brought into the marketing areas is increasing. The brief concluded that because reimbursement of actual hauling cost is smaller, the higher costs not reimbursed has fallen disproportionately to producers. The brief agreed with Lone Star and Maryland & Virginia that the 3-cent increase in the transportation credit assessments implemented in November 2005 would be insufficient to cover expected transportation credit claims during 2006. A witness appearing on behalf of DFA testified in support of Proposal 1. The witness testified that the pay prices for cooperative producers in the southeast region of the country (Tennessee, Louisiana, Missouri, Virginia, North Carolina, South Carolina and Alabama) between January through June 2005 for DFA cooperative members ranged from $0.25 per cwt below the blend price to $0.30 per cwt above the blend price with the majority being at about $0.20 per cwt above the blend price. The witness indicated that over-order premiums paid to producers ranged from $0.10 to $0.90 per cwt above the blend price and were similar to the pay price of their competitors in these areas who are not DFA members. A witness appearing on behalf of LOL testified in support of Proposal 1. The LOL witness agreed with other proponents that the transportation credit balancing fund for both orders has been insufficient to support transportation credit payments. While the witness supported the transportation credit assessment increases effective in November 2005, the witness did not think that this would be sufficient to reimburse future claims. A post-hearing brief submitted by LOL reiterated their support for the adoption of Proposal 1. The brief indicated that the southeast region of the country is not able to fulfill Class I demands during any season of the year and must rely on supplemental supply from about 28 States outside the Appalachian and Southeast marketing areas. The brief noted that transportation credits installed in the southeastern region in 1996 were based on recognition that the region's Class I needs could only be met by supplemental milk from dairy farms located outside of the region. A witness testifying on behalf of Dean expressed cautious support for increasing the transportation credit assessment rates of the two orders because the availability of additional credits needs to be balanced with a consideration for abuses and undesired results. The witness was of the opinion that handlers who receive such credits also are pooling milk on the orders through the diversion process that does not actually serve the market's Class I needs. A post-hearing brief submitted on behalf of Dean agreed with proponents of Proposal 1 that disorderly marketing conditions exist. The brief stated that the southeast area's milk supply is deficit and the cost of supplying the market is not borne equally. A witness testified on behalf of SMI in opposition to Proposal 1. The witness characterized transportation credits as a subsidy and was of the opinion that subsidizing the transportation of milk produced outside of the marketing areas results in economic disincentives for local milk production and incentives for milk from outside the two marketing areas to replace local supplies. The witness noted that when transportation credits were first adopted in 1996, the average Class I utilization of the southeast region was in the mid-80 percent range. Since the implementation of transportation credits, the witness contrasted the Class I utilization noting that it had fallen to the 60 percent range. It was the opinion of the witness that transportation credit provisions are contributing to the declining milk production in the two marketing areas. The SMI witness testified that transportation credits should be eliminated. As an alternative, the witness suggested
(1)establishing a method by which Class I prices could be adjusted based on more regional marketing conditions,
(2)adopting a base-excess plan,
(3)increasing the current Class I differential level and
(4)any other provisions that would encourage local milk production. A Kentucky dairy farmer testified in opposition to Proposal 1. The witness argued that providing transportation credits devalues local milk, results in lower prices to local producers, and is a cause of the declining milk production in the two marketing areas. The witness expressed concern that Proposal 1 will provide for more milk located outside the marketing areas the opportunity to be pooled on the orders even though that milk is not delivered to either marketing area on a daily basis as is the locally produced milk. According to the witness, local producers are not able to receive the full value for local production because transportation credits give producers located far from the marketing areas price advantages. The witness concluded by stating that pooling milk located outside of both marketing areas does not represent Class I use and this milk should not be pooled on the Appalachian or Southeast orders. A dairy farmer witness who supplies milk to Dean testified in opposition to Proposal 1. The witness viewed increasing assessment rates on transportation credits as detrimental to dairy farmers located in the Appalachian and Southeast marketing areas who regularly supply the Class I needs of the market. The witness was of the opinion that Proposal 1 lacks safeguards on the amount of additional milk that could be pooled on the orders by diversions. The witness said this additional pooled milk would unnecessarily lower the blend price received by producers and essentially result in out-of-area milk supplies becoming less expensive relative to milk produced in-area. As a consequence, the witness said local in-area producers will be forced out of business because of lower prices thereby further increasing the need for additional out-of-area supplemental milk supplies to meet the Class I needs of the marketing areas. The witness suggested that instead of providing additional transportation credits, a review of the level of Class I differentials and a review of diversions and touch-base provisions should be considered in another hearing. An independent dairy farmer from New Market, Tennessee, testified against making any changes to the Appalachian and Southeast marketing orders including the adoption of Proposal 1. In addition to the witness' testimony regarding Proposal 3 already described, the witness was of the opinion that additional government intervention to provide for the increasing transportation credit assessment rate was not necessary and that supply and demand forces should dictate what services are needed. The witness asserted that amending the orders as proposed would change the way milk is transported and would hinder efficient handling of milk. The witness was of the opinion that there would be no assurance that the transportation credits would benefit the producers who were pooled on the two orders and incurred the additional costs of servicing the Class I market. A dairy farmer who also markets milk to Dean through DMS testified in opposition to Proposal 1. The witness said that local producers of the Appalachian and Southeast marketing areas are unable to supply all the fluid milk needs of the two marketing areas because local milk production in these areas is declining. The witness suggested that if Proposal 1 were adopted, the accounting of the total transportation costs of all milk movements should be supplied to the Market Administrators and be made available for public inspection. The witness also suggested making changes to the level of adjustments of milk prices by location (location adjustments) as an alternative to increasing the transportation credit assessment rate. The witness said if location adjustments were changed, the pooling standards for both orders would also need to be adjusted. Specifically, the witness suggested increasing the number of days' production needed to touch base or increasing the performance standards of the orders. A post-hearing brief submitted by the Kentucky Dairy Development Council
(KDDC)supported Proposal 1 even though they did not state their position at the hearing. The brief noted that increasing the transportation credit assessment rate would benefit Kentucky dairy farmers by providing assistance in recovering costs associated with serving the market. C. Establishing Diversion Limit Standards A proposal submitted by Dean Foods, published in the hearing notice as Proposal 4, seeks to reduce a handler's ability to utilize transportation credits to help broaden the number of producers who touch base. The intent of the proposal is to limit the pooling of additional surplus milk on the orders through the diversion process. Currently, large volumes of milk are being pooled through diversions on the Appalachian and Southeast orders from locations distant from the marketing areas. While Proposal 4 would provide incentives to limit the pooling of milk through the diversion process, it would do so indirectly by limiting the payment of transportation credits. This decision chooses to directly limit diversions by establishing a zero diversion limit on milk that receives transportation credits. A witness appearing on behalf of Dean testified in support of Proposal 4 while also expressing cautious support for the proposed transportation credit assessment increase (Proposal 1). The witness was of the opinion that handlers supplying supplemental milk to the two marketing areas receive a financial benefit from pooling diverted milk on the orders but maintained that such milk does not serve the fluid market. The witness explained that while the diverted milk typically does not serve the two markets, it is nevertheless pooled on the two orders because the blend prices are higher than what this milk could receive if pooled on other Federal orders. The Dean witness testified that the establishment of large marketing orders has created new marketing problems. According to the witness, when the Federal order system had a larger number of smaller markets, each order's marketwide pools were small. Markets with large populations relative to associated milk, the witness explained, had higher Class I utilizations and higher blend prices to attract supplemental milk supplies. Markets with significant supplies of milk and smaller populations, the witness related, had lower Class I utilizations and producers pooled in those markets were provided with the economic incentive to look for higher returns in markets with higher blend prices. The witness further explained that smaller marketing areas limited the size of the Class I market and in turn limited how much milk could be pooled by diversion. The witness said that not only were smaller orders effective in limiting a handler's ability to pool milk through diversions, but smaller orders also had disincentives to pooling diverted milk. According to the witness, the relative value of diverted milk was tied to its distance from the market. The Dean witness also testified that the Class I price surface adopted during Federal milk order reform changed the relative relationship of milk value to its distance from the market. According to the witness, the location value of diverted milk prior to reform was based on adjusting milk value based on the distance to an order's pricing point. The witness said this resulted in each plant having a different location adjustment value to its milk receipts depending on the order on which its receipts were pooled. The witness explained that the further milk was located from the order's pricing point, the less likely that such milk would be pooled as diversions. The Dean witness expressed concern that no longer valuing milk relative to the order on which it is pooled had a material effect on the value of pooling milk located far from the market by diversion. The witness was of the opinion that the flatter Class I price surface, with fixed differential levels by county, places a value on milk that is not reflective of its value to the marketing order where pooled and has made it economically desirable to pool milk located far from the market by the diversion process. The witness was also of the opinion that this served to provide the incentive for pooling distant milk by diversions. The Dean witness testified that even though there are closer milk supplies, distant milk is being pooled on both orders and asserted that transportation credits amplify the pooling of milk on the orders which does not service the Class I needs of the markets. The witness was of the opinion that pooling distant milk by diversions are clearly disorderly marketing conditions for the two markets. According to the witness, when such milk is pooled, local farmers who are consistently serving the Class I needs of the markets receive a needlessly lower blend price. According to the Dean witness, the objective of Proposal 4 is to modify the receipt of transportation credits depending on a handler's specific service to the Class I need of the markets and to lower the payment of transportation credits to those handlers who have higher levels of diversions. The witness stated that the current reimbursement rate of transportation credits is the same for each handler regardless of the level of its relative service to the fluid market. The witness explained that when a handler delivers 100 percent of its receipts to a pool distributing plant, it receives transportation credits at the same rate as a handler delivering only the minimum volume needed to meet the pooling qualifications. The witness related that the handlers only meeting the minimum pooling standards are then able to divert milk which is not available to the market. Additionally, the witness indicated that adjusting a handler's receipt of transportation credits in this way will maintain and help extend the transportation credit balancing funds. The Dean witness acknowledged the need for balancing because distributing plants do not typically need to receive milk every day of the week. However, the witness asserted that not limiting diversions undermines the purpose of the Federal order system. The witness explained that their proposed 30 percent diversion limit on supplemental milk seeking transportation credits was reasonable because a distributing plant typically receives milk for five days per week. The need to divert milk for two days per week, the witness explained, justifies the 30 percent diversion limit. The Dean witness explained that based on data provided by the Market Administrator, there are handlers in both orders who receive transportation credits and who divert significantly more pounds of milk than the orders need to balance the Class I demands of pool distributing plants. A post-hearing brief submitted on behalf of Dean reiterated support for the adoption of Proposal 4 provided that Proposals 1 and 3 are adopted. The brief stated that Proposal 4, when adopted with Proposals 1 and 3, would tend to limit the abuse of transportation credits on supplemental milk for Class I use because Proposal 4 sets a cap on the receipt of transportation credits by handlers. The brief also stressed that the adoption of Proposal 4 would exercise some control over how much milk would be pooled on the orders through the diversion process. A dairy farmer who supplies milk to Dean testified in support of Proposal 4. The witness agreed with Dean and other opponents that orders should only pool the milk of producers who truly serve the Class I needs of the market; otherwise revenue essentially leaves the two marketing areas. According to the witness, this loss of revenue leads to the area's dairy farmers exiting the industry and further reduces the availability of local milk supplies. The witness said that the result is the need for acquiring more milk produced from far outside the marketing areas. The witness was of the opinion that it is the shipments of supplemental milk into the marketing areas that provide the ability to pool milk by diversion when it is not available to the market. A witness from SMI testified in support of Proposal 4 provided Proposals 1 and 3 are adopted. A Kentucky dairy producer testified in support of Proposal 4 and said that supplemental milk receiving transportation credits should have some limits on the amount of additional milk that can be pooled by diversions. The witness was of the opinion that transportation credits give producers located outside the marketing areas a price advantage because their diverted milk receives the blend price of the orders. A witness appearing on behalf of LOL testified in opposition to Proposal 4. The witness noted that transportation credits were established to attract supplemental milk and to partially offset the cost of hauling supplemental milk into the deficit markets. The witness explained that the orders' specify conditions that must be met for being eligible to receive transportation credit payments. The current transportation credit provisions, the witness said, already limit payments for supplemental milk from outside the marketing areas to the milk of dairy farmers who are not defined as “producers” under the orders. The witness also said that payments are limited to Class I pounds and are not made on the first 85 miles of hauling milk from farms to the plant that receives supplemental milk. The LOL witness stressed that additional limitations would do nothing to encourage the delivery of needed supplemental milk into the marketing areas during the short production months. The witness was of the opinion that if the intent is to change the diversion limits of the orders, those changes should be addressed in a separate hearing. A post-hearing brief submitted by LOL reiterated opposition to Proposal 4. The brief reiterated the positions given at the hearing. The brief also stated that Proposal 4 improperly assumes that all handlers supplying supplemental milk have equal access to distributing plants and that distributing plants Class I use of milk is the same as the Class I utilization of the two markets. A witness appearing on behalf of SMA also testified in opposition to Proposal 4. The SMA witness stated that there is some rational basis for the intent limiting transportation credits to a handler who diverts more milk to nonpool plants above reasonable levels. However, the witness was of the opinion that it is the touch-base and diversion limit standards of the orders that already provide sufficient safeguards to pooling milk not needed for Class I use. According to the witness, adoption of the proposal would disproportionately place burdens on market participants. The SMA witness explained that it is difficult to establish specific diversion limits on supplemental milk as contained in Proposal 4 because of individual differences in the balancing needs of each distributing plant, noting that these needs continually change. The witness emphasized that there are difficulties in balancing pool distributing plants of the orders year-round and suppliers sometimes have no control over factors that may alter balancing needs. The witness noted that some of SMA's purchase agreements for supplemental milk included arrangements where transportation credit payments are paid directly to the cooperative acting as the supplier. In this regard, the witness expressed concern that providing a separate diversion limit on milk receiving transportation credit payments would unfairly penalize them when a distributing plant overestimates its need for supplemental milk. The witness stated that extreme variations in daily, weekly and monthly deliveries to pool distributing plants occur. Relying on Market Administrator data for January 2004 through October 2005 that showed the ratio of the highest delivery day to the lowest delivery, the witness concluded that a 30 percent reserve factor would not have been sufficient to cover distributing plant balancing needs. The SMA witness also was of the opinion that Proposal 4 would give an advantage to pool distributing plant operators to the detriment of cooperatives who in their capacity as handlers are supplying supplemental milk. The witness said that while cooperatives handle the majority of supplemental milk for the orders, they may receive little or no transportation credit payments under Proposal 4. According to the witness, a diversion limit could only benefit handlers located nearer to the marketing areas. A post-hearing brief was submitted on behalf of ADCA in opposition to Proposal 4. The brief stressed that the seasonality of production in the southeastern region is the highest in the country and means that a greater reserve of milk must be assured. The brief concluded that Proposal 4 would create inequities between handlers supplying supplemental milk and encourage uneconomic movements of milk. A post-hearing brief was submitted on behalf of DMCI in opposition to Proposal 4. The brief asserted that there are too many unanswered questions about how Proposal 4 would be applied. The brief stated that a distributing plant's reserve milk needs are an individual business decision and should only be limited by the order's pooling provisions. A post-hearing brief submitted by DFA and other SMA members reiterated their opposition to Proposal 4. The brief noted that there are many months when a 30 percent diversion limit is insufficient to cover balancing needs. Therefore, if Proposal 4 were implemented, the brief said, it could disproportionately affect different supplemental supplies and distributing plants in the marketing areas. A post-hearing brief was submitted on behalf of Lone Star in opposition to Proposal 4. The brief opposed the adoption of Proposal 4 because it would establish a “one-size-fits-all” or single diversion limit for all Class I handlers. The brief noted that a distributing plant's reserve milk needs are individual decisions of the plant in response to its customer base and seasonal changes in demand. The brief was of the opinion that the orders already provide diversion limit standards and touch-base requirements that are some of the strictest in the Federal order system. Findings/Discussion The issue before the Department in this decision is to consider changes to the transportation credit provisions of the Appalachian and Southeast milk marketing orders. Transportation credit provisions have been a feature of the current orders (and their predecessor orders) since 1996. The need for transportation credit provisions arose from a consistent need to import milk from considerable distances to the marketing areas during certain months of the year when milk local production in the areas was not sufficient to meet Class I demands. Transportation credit provisions provide payments to handlers to cover a portion of the costs of hauling supplemental milk supplies into the Appalachian and Southeast marketing areas during the months of July through December—a time period during which supplemental milk is needed to meet the demand for Class I milk at distributing plants. The transportation credit provisions are designed to distinguish between producers who are supplying the markets on these orders from producers who are *not* supplying the markets on these orders. The milk of producers who are located outside of the marketing areas and who are not considered “producers” of the order are eligible to receive transportation credits. The record reveals that the Appalachian and especially the Southeast marketing areas are chronically unable to meet Class I demands. Local milk production relative to demand has declined and is expected to continue declining. Consequently, local milk production is not always able to fulfill the Class I needs of the markets which necessitates the need for supplemental milk from distant locations. As local milk production has eroded, the volume of supplemental milk needed for fluid use and the distance from the marketing areas that supplemental supplies are obtained has been increasing, especially for the Southeast marketing area. These combined factors have caused the transportation credit balancing fund
(TCBF)to be insufficient in covering requested transportation credit payments in the past. The TCBF will likely not be able to cover future requested payments unless the amendments contained in the decision also are adopted. While both marketing areas are able to supply the Class I needs of their respective markets during the spring “flush” months without the need for transportation credits, the record clearly indicates that both orders are not able to fully supply their fluid needs with local production during the last 6 months of the year. The chronic shortage of milk for fluid uses during this time period has worsened over time, especially in the Southeast marketing area. Evidence shows that the trend of declining production relative to demand will increase the need for supplemental milk supplies and is likely to continue into the foreseeable future. Variable Mileage Rate Factor—a Fuel Cost Adjustor Based on record evidence, this tentative partial decision finds that the MRF used to determine the payment of transportation credits should include a fuel cost adjustor as proposed in DFA's Proposal 3. The original fixed mileage rate for both orders was 0.37 cents per cwt per mile when the transportation credit provisions were first established in 1996. The computation of the transportation credit payments was based on the total miles supplemental milk was shipped from its point of origination to its destination—the receiving pool distributing plant. In 1997, several amendments were made to the transportation credit provisions of the orders that included a reduction of the mileage rate from 0.37 cents per cwt per mile to the current 0.35 cents per cwt per mile. Additional amendments made in 1997 to the transportation credit provisions included excluding the first 85 miles supplemental milk was hauled from farms in determining the total miles shipped. Additionally, the amendments eliminated the use of the producer settlement fund of the orders as a source of revenue for the payment of transportation credits on supplemental milk when the TCBF was unable to pay net transportation credit claims. No other amendments have been made to the MRF used in the transportation credit provisions since 1997. Proposal 3 adjusts the MRF by changes in the cost of diesel fuel. Specifically, a monthly average diesel fuel price, a reference diesel fuel price, an average mile-per-gallon truck fuel use, a reference hauling cost per loaded mile and a reference load size are all component factors needed to determine the variable MRF to be used in the calculation of payments from the TCBF. The EIA data for the United States and nine U.S. sub-regions are a reliable and reasonable data source to establish certain components needed for determining a variable MRF. The data are representative of diesel fuel prices in the Appalachian and Southeast marketing orders and can be relied upon as a basis to make adjustments to the MRF. Reliance on EIA data that is independent and unbiased will make determination of the MRF objective and uniformly applicable to all handlers. Proposal 3 suggested the use of the Lower Atlantic and Gulf Coast EIA regions in the computation of monthly mileage rates for the Appalachian and Southeast orders is reasonable. The record reveals that not only do the Lower Atlantic and Gulf Coast regions best reflect the Appalachian and Southeast marketing areas geographically, but also that the diesel fuel prices for these two regions are among the lowest in the country. Hence, it is appropriate to utilize these geographic defined data sets in the mileage rate calculations. The record reveals that fuel prices and other factors impacting hauling prices have increased greatly since the establishment of transportation credits. Specifically, the record indicates that current diesel fuel prices exceed those prices that prevailed when transportation credit provisions were first implemented in 1996 and amended in 1997. The national average diesel fuel prices in mid-1997 were reported to be approximately $1.15 to $1.17 per gallon, while the national average diesel fuel price in mid-2005 was reported to be $2.20 to $2.50 per gallon. Additionally, while diesel fuel prices have increased, all other costs impacting hauling costs also have increased. According to the record, EIA data indicates that the hauling costs ranged from $1.75 to $1.80 per loaded mile in 1997 to about $2.35 per loaded mile in January 2006. Establishing a reference diesel fuel price for the MRF calculation using the EIA retail diesel fuel prices from the time period of October to November 2003 is reasonable. According to the EIA data, national average diesel fuel costs during this period demonstrated price stability relative to any other time between 1997 and 2005. From October to November 2003, national diesel fuel prices fluctuated by only 0.1 cents. Specifically, diesel fuel prices averaged $1.48125 per gallon in October 2003 and $1.48225 per gallon in November 2003. Similarly, the record shows that for both the Lower Atlantic and Gulf Coasts, diesel fuel prices ranged from $1.4210 to $1.43075 per gallon between October and November 2003. The stability of diesel fuel prices during October to November 2003 supports this time period as a reasonable point to use in determining a reference diesel fuel price. Therefore, the record supports using $1.42 per gallon as the reference diesel price in the MRF calculation. Evidence submitted by SMA provides a basis for determining a reference average hauling cost per loaded mile as a component for determining the MRF. The evidence consisted of data randomly selected from actual hauler bills paid to cooperatives during October and November 2003 and for October and November 2005. The record supports utilizing hauling cost data from October and November 2003 as a basis for computing the reference hauling cost in the MRF consistent with the time frame used for the reference diesel price. The randomly selected hauling bills depict actual origination and destination points of the milk hauled, miles traveled, and the rates and fuel surcharges per loaded mile for each bill. For the month of October 2005, the data indicate that hauling costs ranged from $1.89 to $2.70 per loaded mile, with an average cost of $2.48 per loaded mile. Data also show that the simple average hauling rate charged per loaded mile in the Southeast marketing area was $1.9332 and $1.8913 in October and November 2003, respectively, with a two-month simple average cost of $1.9122 per loaded mile. Therefore, it is reasonable to conclude that a reference hauling rate of $1.91 per loaded mile be used as a component in the MRF calculations. 1 1 It should be noted that as a result of the Emergency Hurricane hearing held for the Appalachian, Florida and Southeast marketing orders during the fall of 2004, a reasonable haul rate used to determine how handlers would be compensated for the transportation costs of extraordinary movements of milk was established for a temporary time period. Specifically, a maximum of $2.25 per loaded mile hauling rate was established. Another component needed in the calculation of the MRF is the average number of miles traveled per gallon of fuel used in transporting milk. Data regularly maintained by the United States Department of Transportation on combination truck fuel economy indicates the average miles per gallon for a combination truck in 2002 was 5.2 miles per gallon and in 2003 was 5.1 miles per gallon. The record also reveals testimony that the dairy industry typically estimates fuel economy at between 5.0-6.0 miles per gallon. Therefore, because 5.5 miles per gallon is the median point and to promote efficiencies, the record finds that a 5.5-mile per gallon fuel consumption rate is reasonable and should be used to compute the MRF. The record also supports using 48,000 pounds as a reasonable reference load size for determining the MRF. Data reveal that a 5,600 gallon tanker truck at its fullest capacity can carry 48,160 pounds of milk. Therefore, using 48,000 pounds as the reference load size component is appropriate for calculating the MRF. Proposal 3 would calculate the MRF by averaging the four most recent weeks of weekly retail on-highway diesel prices for both the Lower Atlantic and Gulf Coast, as reported by the EIA. Record evidence supports announcing the monthly MRF at the same time as Advanced Class Prices on or before the 23rd of the current month. This way, handlers will know in advance the rate at which transportation credits will be paid. Table 1 shows an example of the calculation of the MRF to be used in the transportation credit provisions: Table 1.—Example of the Calculation of the Transportation Credit Mileage Rate Factor
(MRF)for July 2006 1 EIA weekly retail on-highway diesel fuel prices 2 Lower Atlantic Gulf Coast 5/29/2006 2.815 2.798 6/5/2006 2.825 2.805 6/12/2006 2.866 2.848 6/19/2006 2.867 2.859 Monthly average diesel fuel price 3 $2.835 per gallon Reference diesel fuel price − $1.420 per gallon Fuel price difference 4 $1.415 per gallon Reference truck fuel use ÷ 5.5 miles per gallon Fuel cost adjustment factor 5 $0.257 per loaded mile Reference haul cost + $1.910 per loaded mile Fuel-adjustment haul cost 6 $2.167 per loaded mile Reference load size ÷ 48,000 pounds July 2006 Mileage Rate Factor 7 $0.00451 dollars per cwt per mile 1 To have been announced on June 23, 2006, with the Announcement of Advanced Class Prices. 2 Dollars per gallon. Reported every Monday by the Energy Information Administration of the U.S. Department of Energy. 3 Calculated by rounding down to three decimal places the average of the four most recent weeks of retail on-highway diesel fuel prices for the Lower Atlantic and Gulf Coast EIA regions combined prior to the Advanced Class Price announcement. 4 Calculated by subtracting the reference diesel fuel price of $1.42 per gallon from the calculated average diesel fuel price for the month. 5 Calculated by dividing the fuel price difference by 5.5 miles per gallon fuel use and rounding down to three decimal places. 6 Calculated by adding fuel cost adjustment factor for the month to the reference haul cost of $1.91 per loaded mile. 7 Calculated by dividing the fuel-adjusted haul cost by the number of hundredweights (cwt's) on the reference load size (48,000 pounds = 480 cwt's) and rounding down to five decimal places. Concern exists that relying on a variable MRF may result in reimbursing the total, rather than a portion, of the hauling costs on supplemental milk. In this regard, a variable MRF that is consistent and reflective of the original intent of the transportation credit provisions of the Appalachian and Southeast orders is necessary. As already discussed, approximately 94 to 95 percent of the total transportation costs on supplemental milk were covered by the TCBF payments for both orders in 1997. However, the record reveals that for 2005, 53 percent and 42 percent of the total transportation costs for the Appalachian and Southeast orders, respectively, were covered by TCBF payments. It is not possible to predetermine the percent of the total transportation costs that will be reimbursed by TCBF payments due to a number of unknown variables. However, the transportation credit provisions already contain precautionary measures for how the MRF is calculated. The record indicates that reference diesel fuel prices and reference hauling costs per loaded mile are components of the mileage rate calculation and are based on 2003 data that are much more current than the data considered and adopted in 1997 establishing a fixed mileage rate. It should also be noted that the current and proposed mileage rate are used to reimburse only the pounds of Class I milk shipped, and not total producer milk shipped. This provides an important safeguard against paying excessive transportation credit payments. Finally, current transportation credit provisions do not include the first 85 miles that supplemental milk is shipped from farms in determining the total miles shipped. This feature also plays a part against safeguard to excessive transportation credit payments. As discussed earlier in this decision, transportation credit provisions of the Appalachian and Southeast orders were originally established to partially offset the cost of transporting supplemental milk supplies into each marketing area to meet fluid milk demands. The transportation credit assessment rates have been increased twice in an effort to ensure that the TCBF would be sufficient to meet the expected claims. When first established for the Appalachian, Southeast and predecessor orders (Orders 5, 7, 11 and 46), the maximum transportation credit assessment charged to Class I handlers was $0.06 per cwt for each order. The first increase was adopted in 1997 by raising the maximum assessment by $0.005 per cwt for the Appalachian order and by $0.01 per cwt for the Southeast order. The second increase in the maximum assessment rates for both orders became effective in November 2005. The maximum assessment rates for both orders were increased by 3 cents per cwt from $0.065 to the current rate of $0.095 per cwt for the Appalachian order and from $0.070 to $0.10 per cwt for the Southeast order. The hearing record reveals that the Appalachian order was able to pay all transportation credit claims for every month since implementation through September 2004. For the remainder of 2004, the Appalachian Market Administrator began prorating the transportation credit payments. As discussed earlier in this decision, the Southeast order has prorated the transportation credit payments since 2001. Specifically, the record shows that for the Appalachian order 41, 39 and 43 percent of the transportation credit claims were paid in October, November and December of 2004, respectively. Likewise for the Southeast order, only 86, 21, 26, 28 and 47 percent of the claims were paid for the months of August through December of 2004, respectively. 90 percent and 31 percent of the claims were paid from the Appalachian order in September and October of 2005, respectively. Similarly, the record reveals that for the Southeast order, only 41 percent and 23 percent of the claims were paid for the same time periods in 2005. Despite the assessment rate increase that became effective November 2005, evidence indicates that only 58 percent of the transportation credit claims for the Appalachian order were paid and only 40 percent of the claims for the Southeast order were paid during November of 2005. Table 2 below illustrates the percent paid from the TCBF for the Appalachian and Southeast orders: Table 2.—Percent of Transportation Credits Paid Percent of transportation credits paid Appalachian marketing area FO 5 Southeast marketing area FO 7 Jul 04 100.0 100.0 Aug 04 100.0 85.5 Sep 04 100.0 21.4 Oct 04 40.6 26.3 Nov 04 39.0 28.4 Dec 04 42.8 47.0 Jul 05 100.0 100.0 Aug 05 100.0 100.0 Sep 05 89.6 41.3 Oct 05 30.6 23.1 Nov 05 * 58.0 40.3 *Effective November 1, 2005, the transportation credit assessment rates were increased by 3 cents for the Appalachian and Southeast orders. Source: Appalachian and Southeast Market Administrator data. Maximum Assessment Rates The record demonstrates that at the current transportation credit mileage rate of 0.35 cents per cwt per mile, the TCBF assessments for Appalachian and Southeast marketing areas have been insufficient to pay all transportation credit claims, especially during the time when payment of credits are most needed. Preventing the proration of the transportation credit reimbursement payments would have required that the assessment rates be higher than they are currently. Evidence submitted by the SMA witness showed that the maximum transportation credit assessment rate for the Appalachian order would have needed to be $0.0889 and $0.0953 per cwt for 2004 and 2005, respectively. Similarly, evidence by the SMA witness suggested that the assessment rate for the Southeast order would have needed to be $0.1318 and $0.1246 per cwt for 2004 and 2005, respectively. Such evidence further supports the need to increase the transportation credit assessment rates. The adoption of the variable MRF that would be calculated and adjusted with changes in diesel fuel prices (as presented in Proposal 3) will most likely increase the current mileage rate of 0.35 cents per cwt per mile. Relying on EIA data, the record reveals that applying the calculated mileage rates to the months of July through December 2005 would have resulted in transportation credit mileage rates ranging from 0.432 to 0.461 cents per cwt per mile for both orders. If a transportation credit mileage reimbursement rate of 0.46 cents per cwt per mile had been in place rather than the current rate of 0.35 cents per cwt, the maximum transportation credit assessments needed for the Appalachian order to assure that the TCBF covered all claims would had to have been $0.133 and $0.1415 per cwt for 2004 and 2005, respectively. The Southeast order would have needed a maximum transportation credit assessment rate of $0.1927 and $0.1869 per cwt for 2004 and 2005, respectively. This analysis supports concluding that increasing the current Appalachian order maximum transportation credit assessment rate by 5.5 cents per cwt and the Southeast order maximum assessment rate by 10 cents per cwt is warranted. The proposed increase in the maximum transportation credit assessment rate for the Southeast order is greater than the amount for the Appalachian marketing area. The record reveals that the Appalachian and Southeast marketing areas experience differing costs in supplying supplemental milk to meet Class I needs. As previously noted, transportation credit assessments have, in the past, been waived in the Appalachian order. This has not been the case for the Southeast order. The transportation credit reimbursement on claims for the Southeast order have been prorated at greater rates than those of the Appalachian order in 2004 and is reflective of higher costs in supplying supplemental milk to the Southeast marketing area. The Appalachian marketing area receives the majority of its supplemental milk supplies from the northern, Mid-Atlantic States. The Southeast marketing area receives the majority of its supply from the Midwest and southwestern states. The location of supplemental milk supplies for the Southeast marketing area tends to be at a farther distance from the marketing area than for the Appalachian marketing area. Accordingly, the record supports increasing the maximum transportation credit assessments for both marketing areas by different amounts. Precautionary measures are currently provided in the transportation credit provisions such that the rate of assessments beyond actual handler claims is unlikely. The transportation credit provisions provide the Market Administrators the authority to reduce or waive assessments as necessary to maintain sufficient fund balances to pay the transportation credits requested. Therefore, increasing the maximum transportation credit assessment rates will not result in an accumulation of funds beyond what is needed to pay transportation credit claims and no additional precautionary measures are necessary beyond those currently provided. The record supports concluding that local milk production is expected to continue declining within both marketing areas and will result in an even greater reliance on supplemental milk to meet the fluid milk needs of the markets. Record evidence shows a constant increase in both the volume and distance that supplemental milk supplies are obtained, especially for the Southeast marketing area. As such, it is reasonable that future transportation credit claims will increase. In this regard, it is important to prevent exhausting the TCBF before the payment of claims on supplemental milk. Doing so is consistent with the fundamental purposes of the transportation credit provisions. Therefore, the adoption of Proposal 1, as proposed by DFA, will tend to better assure that the rate of assessments will keep pace with the payments from the TCBF. Diversion Limit Standard for Supplemental Milk The intent of a proposal offered by Dean, published in the hearing notice as Proposal 4, seeks to provide a method to limit the amount of additional milk being pooled by diversion on the Appalachian and Southeast orders. As proposed, Dean's proposal would change the amount of transportation credits paid on eligible supplemental milk depending on the amount of milk delivered to plants other than pool distributing plants—this includes diversions to plants located outside of the marketing areas and deliveries to pool supply plants. Simply put, the greater the volume of diversions, the lower the amount of transportation credits paid. In this regard, Dean's proposal attempts to provide an incentive to limit diversions *indirectly* by reducing transportation credits paid on supplemental milk. This decision agrees with the need to limit pooling diverted milk on the orders that is linked to supplemental milk deliveries to distributing plants. Rather than attempt to create disincentives to pooling diverted milk indirectly, this decision addresses the issue *directly* by adopting a zero diversion limit standard on supplemental milk deliveries to distributing plants that receives transportation credits. The record reveals that the volume of supplemental milk needed to serve the Class I needs of the marketing areas has grown over time and is expected to continue growing. Supplemental milk is representing a greater percentage of the Southeast market's total Class I utilization. The record reveals that for the months of July through December, supplemental milk accounted for 16 percent of total Class I utilization in 2004. For 2005, such supplemental milk as a percent of total Class I utilization increased to 19 percent. In addition, the record indicates that, for the Southeast marketing area, the monthly weighted average distance supplemental milk eligible to receive transportation credits traveled ranged from 578 to 627 miles during July through December 2000. During July through November 2005, the weighted average distance increased and ranged from 682 to 755 miles. The amount of supplemental milk receiving transportation credits during 2005 was nearly 686 million pounds, 541 million pounds during 2004, and 363 million pounds during 2000. This represents an 89 percent increase in the amount of supplemental milk receiving transportation credits in 2005 since 2000, and a 27 percent increase since 2004. For the Southeast order, the record reveals that total diversions at locations outside of the Appalachian and Southeast marketing areas totaled 883.4 million pounds in 2004. Total diversions outside of the marketing areas for 2005, not including the months of November and December, was 965.6 million pounds, an increase of 9.3 percent from 2004. Such data for November and December 2005 was not contained in the record. For the months of January through June, when transportation credits *are not* available, total diversions outside the marketing areas increased almost 18 percent from 2004 to 2005. During the time period of July through October, when transportation credits *are* available, such diversions increased over 27 percent from 2004 to 2005. It is reasonable, given the trend of the data, that the percentage increase from 2004 would have been greater than 27 percent if data had been available for the months of November and December 2005. It is reasonable to conclude that diversions outside the Appalachian and Southeast marketing areas are most likely be attributed to supplemental milk eligible to receive transportation credits. The record reveals that for the Southeast marketing area, the 27 percent increase in the amount of milk receiving transportation credits from 2004 through 2005 corresponds with the 27 percent increase of diversions outside the marketing areas between 2004 and 2005. It is also reasonable to conclude from the record that it is in the interests of the handler supplying supplemental milk, and in this case, cooperatives in their capacity as handlers, to maximize the value of diversions. Doing so would require pooling the maximum amount of diverted milk to the closest location from where supplemental milk was sourced. Therefore, relying on data provided by the Market Administrator for the Southeast marketing area, for the months when transportation credits are available, the calculated total maximum diverted pounds associated with supplemental milk would have totaled over 178 million pounds in 2004 and over 226 million pounds in 2005. On the basis of these calculations, an estimate of diversions attributed to supplemental milk is 64 percent of total diversions for both 2004 and 2005, ranging from 56 percent to 77 percent of the total known diversions outside the marketing areas. The contribution from diversions associated with supplemental milk to total outside diversions is nearly three times greater than the contribution of the supplemental milk to Class I utilization. As previously discussed, for 2004 and 2005, supplemental milk represented about 15.9 and 19 percent, respectively, of total Class I utilization. However, estimated diversions attributable to supplemental milk represent approximately 64 percent of total diversions. Clearly, not only do transportation credits offset the costs of hauling supplemental milk to the markets, they also contribute to pooling much more milk on the orders through the diversion process. For the Appalachian order, data contained in the record is much more limited on determining the diversions arising from supplemental milk that is eligible to receive transportation credits. What can be reasonably concluded is that the pooling of diverted milk that is linked to supplemental milk is not nearly the magnitude of such pooled diversions as on the Southeast order. For the Appalachian order, evidence indicates that total diversions at locations outside of the Appalachian and Southeast marketing areas, for the time period of January through June, increased by 64.4 percent from 2004 to 2005. Total diversions from the time period of July through November, when transportation credits are available, decreased over 20 percent from 2004 to 2005. For the Appalachian order, only two month data—October and November 2005—is available to estimate the maximum diversions that could be associated with to supplemental milk. Relying on Appalachian Market Administrator data, it is estimated that the maximum diversions from milk eligible to receive transportation credits during October and November 2005 to be approximately 34 percent and 28 percent, respectively, of the total diversions at locations outside the Appalachian and Southeast marketing areas. Supplemental milk on the Appalachian order for October and November 2005 is estimated to be approximately 19 percent and 16 percent, respectively, of the total Class I milk pooled. Pooling diversions of this milk differs from pooling diverted milk that is part of regular supply of milk of the marketing area. Pooling diverted milk, made possible by supplemental milk eligible to receive transportation credits, allows more milk to be pooled on the order than normal. Pooling of this milk is different than pooling milk that is part of the regular supply for the marketing area. The difference is that producers of milk eligible to receive transportation credits *are not* a part of the regular and consistent supply of milk that serves the Class I needs of the markets. These producers are, therefore, supplemental suppliers of milk to the Appalachian and Southeast marketing areas. Transportation credit qualifying criteria *excludes* the milk of producers who are regularly pooled on the orders. Pooling diverted milk arising from supplemental milk receiving transportation credits not only offsets the intended benefit of increasing the supply of milk for fluid uses, it also lowers blend prices. Higher blend prices provide important economic signals: The incentive
(1)to continue supplying the markets,
(2)to increase local production and
(3)to attract the milk of producers to become regular and consistent suppliers. The lower blend prices received by producers who regularly supply the markets relative to producers who supply supplemental milk send contradictory pricing signals. Lower blend prices do not send the proper price signals to local producers to increase local production or to continue supplying the Class I needs of the markets, and the signal to attract a regular and consistent milk supply from other producers is negated. The availability of transportation credits on supplemental milk provides a platform to pool additional diverted milk at locations distant to the marketing areas. Milk diverted from supplemental producers is more likely to be diverted at locations far from the marketing areas. The record reveals that suppliers of the supplemental milk to the Appalachian and Southeast marketing areas pool diverted milk at locations as far away as California and Utah. Supplemental milk suppliers benefit in three ways:
(1)Receiving reimbursement for costs of transporting milk to the deficit markets,
(2)receiving cost savings from the diverted milk not transported to the marketing areas and
(3)receiving higher blend prices on the diverted milk that would have otherwise been pooled on a different order with a typically lower blend price. The pooling of milk that is not part of the regular and consistent supply of milk which serves the Class I needs of the market is contradictory to the intent of an order's pooling standards and provisions. The pooling standards of the orders serve to identify the milk of producers who regularly and consistently serve the Class I needs of the marketing areas. Pooling milk that is available but not immediately needed for Class I use is provided through diversion limit standards. Diversion limit standards provide the criteria in determining how much additional milk can be pooled on the orders. Diverted milk in this context reflects the legitimate reserve supply of milk available to serve the Class I needs of the marketing areas and, therefore, receives the blend of the orders. Since implementation of Federal milk order reform, there have been many formal rulemakings that amended orders to more properly identify the milk of producers which should and should not be pooled on the orders. The milk of producers who are the consistent and reliable suppliers in serving the Class I needs of the market should have their milk pooled. This foundation principle of orderly marketing in milk marketing orders is essentially disregarded for 6 months every year because the orders allow the pooling of diverted milk from producers who are specifically identified as not being “producers” under either of the orders. The lowering of blend prices by pooling such diverted milk is an unintended outcome not foreseen when the transportation credit provisions of the Appalachian and Southeast orders were implemented and amended. As the blend prices are reduced so is the incentive for local milk production. The markets become less capable of supplying their own Class I needs and supplemental milk supplies needed to meet Class I needs are not likely to be supplied without reliance on additional transportation credits. The pooling of diverted milk associated to supplemental milk would seem to offer substantial benefits to cooperative suppliers. The record reveals that when transportation credits were first implemented, well over 90 percent of hauling costs were offset while today about 45 percent is reimbursed. This clearly represents a burden that is borne by the cooperatives who are supplying supplemental milk. Pooling diverted milk at locations far from the marketing areas based on supplemental milk eligible to receive transportation credits would provide additional revenue to help offset hauling costs not covered by the current assessment rate. This diverted milk receives the blend price of the order on which it is pooled. The benefit is that the blend price received on such diverted milk on either the Appalachian or Southeast order, as the case may be, is historically higher than the price the milk would otherwise receive. As presented above, this decision adopts a variable mileage rate factor, which will reimburse hauling costs at a level more reflective of actual costs, in addition to a significantly higher transportation credit assessment. To the extent that it is necessary to offset the higher costs of transporting supplemental milk, the adoption of a variable MRF and the increase in the assessment rates should significantly reduce or eliminate the need to seek generating revenue to offset hauling costs at the expense of producers of the two marketing areas who are regularly and consistently supplying milk for the Class I needs. Accordingly, this decision finds that the pooling of diverted milk arising from supplemental milk supplies receiving transportation credits needlessly results in the unwarranted lowering of the blend price to producers whose milk regularly and consistently supplies the Class I needs of the Appalachian and Southeast marketing area. Such milk is not part of the reliable and consistent supply of milk serving the Class I needs of the two markets and is not available for such service. Pooling this milk on the orders is indicative of disorderly marketing. Consequently, such milk should not be pooled on the orders. Accomplishing this intent necessitates adoption of a zero diversion limit standard on supplemental milk supplies receiving transportation credits. 2. Determination of Emergency Marketing Conditions Evidence presented at the hearing and in post-hearing briefs establishes that current transportation credits of the Appalachian and Southeast orders are inadequate to meet current and expected future needs into the foreseeable future. Adopting a variable MRF by which to reimburse the suppliers of supplemental milk is needed due to the escalating fuel costs, coupled with the declining milk production in the southeastern United States that makes supplemental milk needs necessary to meet the fluid needs of the markets. The increases in the maximum rates of assessment for the Appalachian and Southeast orders adopted in this decision are necessary to sufficiently cover the transportation credit balancing fund payments. Conversely, the blend price received by producers who are regularly and consistently serving the Class I needs of the Appalachian and Southeast marketing areas is being unnecessarily eroded by pooling diverted milk that is associated with supplemental milk supplies eligible to receive transportation credits. Additionally, the need for immediate action per dairy producer approval is warranted because the current transportation credit provisions will be inadequate to meet the fluid needs of the marketing areas and the need of supplies to recover a higher percentage of costs associated with providing supplemental milk during the months of July through December of 2006. Consequently, it is determined that emergency marketing conditions exist to omit the issuance of a recommended decision. The record clearly establishes a basis as noted above for amending the orders on an interim basis. The opportunity to file written exceptions to the proposed amended orders remains. In view of these findings, an interim final rule amending the order will be issued as soon as the procedures are completed to determine the approval of producers. Rulings on Proposed Findings and Conclusions Briefs, proposed findings and conclusions were filed on behalf of certain interested parties. These briefs, proposed findings and conclusions, and the evidence in the record were considered in making the findings and conclusions set forth above. To the extent that the suggested findings and conclusions filed by interested parties are inconsistent with the findings and conclusions set forth herein, the claims to make such findings or reach such conclusions are denied for the reasons previously stated in this decision. General Findings The findings and determinations hereinafter set forth supplement those that were made when the Appalachian and Southeast orders was first issued and when they were amended. The previous findings and determinations are hereby ratified and confirmed, except where they may conflict with those set forth herein. The following findings are hereby made with respect to the aforesaid marketing agreement and order:
(a)The interim marketing agreement and the order, as hereby proposed to be amended, and all of the terms and conditions thereof, will tend to effectuate the declared policy of the Act;
(b)The parity prices of milk as determined pursuant to section 2 of the Act are not reasonable with respect to the price of feeds, available supplies of feeds, and other economic conditions that affect market supply and demand for milk in the marketing area, and the minimum prices specified in the interim marketing agreement and the order, as hereby proposed to be amended, are such prices as will reflect the aforesaid factors, ensure a sufficient quantity of pure and wholesome milk, and be in the public interest; and
(c)The interim marketing agreement and the order, as hereby proposed to be amended, will regulate the handling of milk in the same manner as, and will be applicable only to persons in the respective classes of industrial and commercial activity specified in, the marketing agreement upon which a hearing has been held. Interim Marketing Agreement and Interim Order Amending the Order Annexed hereto and made a part hereof are two documents—an Interim Marketing Agreement regulating the handling of milk and an Interim Order amending the order regulating the handling of milk in the Appalachian and Southeast marketing areas, which have been decided upon as the detailed and appropriate means of effectuating the foregoing conclusions. It is hereby ordered, that this entire tentative partial decision and the interim orders and the interim marketing agreements annexed hereto be published in the **Federal Register** . Determination of Producer Approval and Representative Period The month of June 2006 is hereby determined to be the representative period for the purpose of ascertaining whether the issuance of the order, as amended and as hereby proposed to be amended, regulating the handling of milk in the Appalachian and Southeast marketing areas is approved or favored by producers, as defined under the terms of the order as hereby proposed to be amended, who during such representative period were engaged in the production of milk for sale within the aforesaid marketing area. List of Subjects in 7 CFR Parts 1005 and 1007 Milk marketing order. Dated: September 1, 2006. Lloyd C. Day, Administrator, Agricultural Marketing Service. Interim Order Amending the Order Regulating the Handling of Milk in the Appalachian and Southeast Marketing Areas This interim order shall not become effective until the requirements of § 900.14 of the rules of practice and procedure governing proceedings to formulate marketing agreements and marketing orders have been met. Findings and Determinations The findings and determinations hereinafter set forth supplement those that were made when the order was first issued and when it was amended. The previous findings and determinations are hereby ratified and confirmed, except where they may conflict with those set forth herein.
(a)*Findings.* A public hearing was held upon certain proposed amendments to the tentative marketing agreement and to the order regulating the handling of milk in the Appalachian and Southeast marketing areas. The hearing was held pursuant to the provisions of the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), and the applicable rules of practice and procedure (7 CFR Part 900). Upon the basis of the evidence introduced at such hearing and the record thereof, it is found that:
(1)The said order as hereby amended, and all of the terms and conditions thereof, will tend to effectuate the declared policy of the Act;
(2)The parity prices of milk, as determined pursuant to section 2 of the Act, are not reasonable in view of the price of feeds, available supplies of feeds, and other economic conditions which affect market supply and demand for milk in the aforesaid marketing area. The minimum prices specified in the order as hereby amended are such prices as will reflect the aforesaid factors, insure a sufficient quantity of pure and wholesome milk, and be in the public interest; and
(3)The said order as hereby amended regulates the handling of milk in the same manner as, and is applicable only to persons in the respective classes of industrial or commercial activity specified in, a marketing agreement upon which a hearing has been held. Order Relative to Handling *It is therefore ordered,* that on and after the effective date hereof, the handling of milk in the Appalachian and Southeast marketing areas shall be in conformity to and in compliance with the terms and conditions of the order, as amended, and as hereby amended, as follows: The authority citation for 7 CFR parts 1005 and 1007 continues to read as follows: Authority: 7 U.S.C. 601-674, and 7253. PART 1005—MILK IN THE APPALACHIAN MARKETING AREA 1. Section 1005.13 is amended by revising paragraphs (d)(3) and (d)(4) to read as follows: § 1005.13 Producer milk.
(d)* * *
(3)The total quantity of milk diverted during the month by a cooperative association shall not exceed 25 percent during the months of July through November, January, and February, and 40 percent during the months of December and March through June, of the producer milk that the cooperative association caused to be delivered to, and physically received at, pool plants during the month, excluding the total pounds of bulk milk received directly from producers meeting the conditions as described in § 1005.82(c)(2)(ii) and (iii), and for which a transportation credit is requested;
(4)The operator of a pool plant that is not a cooperative association may divert any milk that is not under the control of a cooperative association that diverts milk during the month pursuant to paragraph
(d)of this section. The total quantity of milk so diverted during the month shall not exceed 25 percent during the months of July through November, January, and February, and 40 percent during the months of December and March through June, of the producer milk physically received at such plant(or such unit of plants in the case of plants that pool as a unit pursuant to § 1005.7(d)) during the month, excluding the quantity of producer milk received from a handler described in § 1000.9(c) and excluding the total pounds of bulk milk received directly from producers meeting the conditions as described in § 1005.82(c)(2)(ii) and (iii), and for which a transportation credit is requested; 2. Section 1005.81 is revised to read as follows: § 1005.81 Payments to the transportation credit balancing fund.
(a)On or before the 12th day after the end of the month (except as provided in § 1000.90), each handler operating a pool plant and each handler specified in § 1000.9(c) shall pay to the market administrator a transportation credit balancing fund assessment determined by multiplying the pounds of Class I producer milk assigned pursuant to § 1005.44 by $0.15 per hundredweight or such lesser amount as the market administrator deems necessary to maintain a balance in the fund equal to the total transportation credits disbursed during the prior June January period, after adjusting the transportation credits disbursed during the prior Juney-January period to reflect any changes in the current mileage rate versus the mileage rate(s) in effect during the prior June January period. In the event that during any month of the June-January period the fund balance is insufficient to cover the amount of credits that are due, the assessment should be based upon the amount of credits that would had been disbursed had the fund balance been sufficient.
(b)The market administrator shall announce publicly on or before the 23rd day of the month (except as provided in § 1000.90) the assessment pursuant to paragraph
(a)of this section for the following month. 3. Section 1005.82 is amended by revising paragraphs (d)(2)(ii) and (d)(3)(iv) to read as follows: § 1005.82 Payments from the transportation credit balancing fund.
(d)* * *
(2)* * *
(ii)Multiply the number of miles so determined by the mileage rate for the month computed pursuant to § 1005.83(a)(6);
(3)* * *
(iv)Multiply the remaining miles so computed by the mileage rate for the month computed pursuant to § 1005.83(a)(6); 4. Add a new § 1005.83 to read as follows: § 1005.83 Mileage rate for the transportation credit balancing fund.
(a)The market administrator shall compute a mileage rate each month as follows:
(1)Compute the simple average rounded down to three decimal places for the most recent 4 four weeks of the Diesel Price per Gallon as reported by the Energy Information Administration of the United States Department of Energy for the Lower Atlantic and Gulf Coast Districts combined.
(2)From the result in paragraph (a)(1) in this section subtract $1.42 per gallon;
(3)Divide the result in paragraph (a)(2) of this section by 5.5, and round down to three decimal places to compute the fuel cost adjustment factor;
(4)Add the result in paragraph (a)(3) of this section to $1.91;
(5)Divide the result in paragraph (a)(4) of this section by 480;
(6)Round the result in paragraph (a)(5) of this section down to five decimal places to compute the mileage rate.
(b)The market administrator shall announce publicly on or before the 23rd day of the month (except as provided in § 1000.90) the mileage rate pursuant to paragraph
(a)of this section for the following month. PART 1007—MILK IN THE SOUTHEAST MARKETING AREA 5. Section 1007.13 is amended by revising paragraphs (d)(3) and (d)(4) to read as follows: § 1007.13 Producer milk.
(d)* * *
(3)The total quantity of milk diverted during the month by a cooperative association shall not exceed 33 percent during the months of July through December, and 50 percent during the months of January through June, of the producer milk that the cooperative association caused to be delivered to, and physically received at, pool plants during the month; excluding the total pounds of bulk milk received directly from producers meeting the conditions as described in § 1007.82(c)(2)(ii) and (iii), and for which a transportation credit is requested;
(4)The operator of a pool plant that is not a cooperative association may divert any milk that is not under the control of a cooperative association that diverts milk during the month pursuant to paragraph
(d)of this section. The total quantity of milk so diverted during the month shall not exceed 33 percent during the months of July through December, or 50 percent during the months of January through June, of the producer milk physically received at such plant (or such unit of plants in the case of plants that pool as a unit pursuant to § 1007.7(e)) during the month, excluding the quantity of producer milk received from a handler described in § 1000.9(c) and excluding the total pounds of bulk milk received directly from producers meeting the conditions as described in § 1007.82(c)(2)(ii) and (iii), and for which a transportation credit is requested; 6. Section 1007.81 is revised to read as follows: § 1007.81 Payments to the transportation credit balancing fund.
(a)On or before the 12th day after the end of the month (except as provided in § 1000.90), each handler operating a pool plant and each handler specified in § 1000.9(c) shall pay to the market administrator a transportation credit balancing fund assessment determined by multiplying the pounds of Class I producer milk assigned pursuant to § 1007.44 by $0.20 per hundredweight or such lesser amount as the market administrator deems necessary to maintain a balance in the fund equal to the total transportation credits disbursed during the prior June-January period, after adjusting the transportation credits disbursed during the prior June-January period to reflect any changes in the current mileage rate versus the mileage rate(s) in effect during the prior June-January period. In the event that during any month of the June-January period the fund balance is insufficient to cover the amount of credits that are due, the assessment should be based upon the amount of credits that would had been disbursed had the fund balance been sufficient.
(b)The market administrator shall announce publicly on or before the 23rd day of the month (except as provided in § 1000.90) the assessment pursuant to paragraph
(a)of this section for the following month. 7. Section 1007.82 is amended by revising paragraphs (d)(2)(ii) and (d)(3)(iv) to read as follows: § 1007.82 Payments from the transportation credit balancing fund.
(d)* * *
(2)* * *
(ii)Multiply the number of miles so determined by the mileage rate for the month computed pursuant to § 1007.83(a)(6);
(3)* * *
(iv)Multiply the remaining miles so computed by the mileage rate for the month computed pursuant to § 1007.83(a)(6); 8. Add a new § 1007.83 to read as follows: § 1007.83 Mileage rate for the transportation credit balancing fund.
(a)The market administrator shall compute mileage rate each month as follows:
(1)Compute the simple average rounded down to three decimal places for the most recent 4 weeks of the Diesel Price per Gallon as reported by the Energy Information Administration of the United States Department of Energy for the Lower Atlantic and Gulf Coast Districts combined.
(2)From the result in paragraph (a)(1) in this section subtract $1.42 per gallon;
(3)Divide the result in paragraph (a)(2) of this section by 5.5, and round down to three decimal places to compute the fuel cost adjustment factor;
(4)Add the result in paragraph (a)(3) of this section to $1.91;
(5)Divide the result in paragraph (a)(4) of this section by 480;
(6)Round the result in paragraph (a)(5) of this section down to five decimal places to compute the MRF.
(b)The market administrator shall announce publicly on or before the 23rd day of the month (except as provided in § 1000.90) the mileage rate pursuant to paragraph
(a)of this section for the following month. Marketing Agreement Regulating the Handling of Milk in the Appalachian and Southeast Marketing Areas The parties hereto, in order to effectuate the declared policy of the Act, and in accordance with the rules of practice and procedure effective thereunder (7 CFR part 900), desire to enter into this marketing agreement and do hereby agree that the provisions referred to in paragraph I hereof, as augmented by the provisions specified in paragraph II hereof, shall be and are the provisions of this marketing agreement as if set out in full herein. I. The findings and determinations, order relative to handling, and the provisions of §§ 1005.1 to 1005.86 and 1007.1 to 1007.86 all inclusive, of the order regulating the handling of milk in the Upper Midwest marketing area (7 CFR Part 1030) which is annexed hereto; and II. The following provisions: Record of milk handled and authorization to correct typographical errors.
(a)Record of milk handled. The undersigned certifies that he/she handled during the month of ____ 2006, ____ hundredweight of milk covered by this marketing agreement.
(b)Authorization to correct typographical errors. The undersigned hereby authorizes the Deputy Administrator, or Acting Deputy Administrator, Dairy Programs, Agricultural Marketing Service, to correct any typographical errors which may have been made in this marketing agreement. Effective date. This marketing agreement shall become effective upon the execution of a counterpart hereof by the Department in accordance with § 900.14(a) of the aforesaid rules of practice and procedure. In Witness Whereof, The contracting handlers, acting under the provisions of the Act, for the purposes and subject to the limitations herein contained and not otherwise, have hereunto set their respective hands and seals. Signature By
(Name)(Title) (Address)
(Seal)Attest [FR Doc. 06-7497 Filed 9-6-06; 8:45 am]
Connectionstraces to 14
8 references not yet in our index
  • 17 CFR 240.19
  • Pub. L. 104-13
  • 50 USC 1701-1706
  • 44 USC 3501-21
  • 7 USC 601-674
  • 7 CFR 900
  • 7 CFR 1.27(b)
  • 7 CFR 1030
Citation graph
cites case law
Notices
Amendment 2
U.S.C.§ 78s
U.S.C.§ 78f
C.F.R.§ 200.30-3
U.S.C.§ 78q–1
U.S.C.§ 552
U.S.C.§ 78a
U.S.C.§ 78o–3
U.S.C.§ 78c
U.S.C.§ 2776
Cite17 CFR 240.19
Pub. L.Pub. L. 104-13
Cite50 USC 1701-1706
Cites 22 · showing 12Cited by 0 across 0 sources
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