Rules and Regulations. Final rule

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BILLING CODE 3410-34-P DEPARTMENT OF AGRICULTURE Agricultural Marketing Service 7 CFR Part 929 [Docket No. AMS-FV-06-0174; FV06-929-1 FR] Cranberries Grown in the States of Massachusetts, et al.; Increased Assessment Rate AGENCY: Agricultural Marketing Service, USDA. ACTION: Final rule. SUMMARY: This rule increases the assessment rate established for the Cranberry Marketing Committee (Committee) for the 2006-2007 fiscal year and subsequent fiscal years from $0.18 to $0.28 per barrel.

Authorization to assess cranberry handlers enables the Committee to incur expenses that are reasonable and necessary to administer the program. The Committee locally administers the marketing order which regulates the handling of cranberries grown in the States of Massachusetts, Rhode Island, Connecticut, New Jersey, Wisconsin, Michigan, Minnesota, Oregon, Washington, and Long Island in the State of New York. The fiscal year began September 1, 2006, and ends August 31, 2007. The assessment rate will remain in effect indefinitely unless modified, suspended, or terminated.

DATES: *Effective Date:* This rule becomes effective March 30, 2007. FOR FURTHER INFORMATION CONTACT: Patricia A. Petrella or Kenneth G. Johnson, DC Marketing Field Office, Fruit and Vegetable Programs, AMS, USDA, Unit 155, 4700 River Road, Riverdale, Maryland 20737; telephone:

(301)734-5243, Fax:

(301)734-5275, or E-mail at *Patricia.Petrella@usda.gov* or *Kenneth.Johnson@usda.gov* . Small businesses may request information on complying with this regulation by contacting Jay Guerber, Marketing Order Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence Avenue, SW, STOP 0237, Washington, DC 20250-0237; telephone:

(202)720- 2491, Fax:

(202)720-8938, or e-mail: *Jay.Guerber@usda.gov* . SUPPLEMENTARY INFORMATION: This final rule is issued under Marketing Agreement and Order No. 929, as amended (7 CFR part 929), regulating the handling of cranberries produced in the States of Massachusetts, Rhode Island, Connecticut, New Jersey, Wisconsin, Michigan, Minnesota, Oregon, Washington, and Long Island in the State of New York, hereinafter referred to as the “order.” The order is effective under the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the “Act.” The Department of Agriculture

(USDA)is issuing this rule in conformance with Executive Order 12866. This final rule has been reviewed under Executive Order 12988, Civil Justice Reform. Under the marketing order now in effect, cranberries are subject to assessments. Funds to administer the order are derived from such assessments. It is intended that the assessment rate as issued herein will be applicable to all assessable cranberries beginning September 1, 2006, and continue until amended, suspended, or terminated. This rule will not preempt any State or local laws, regulations, or policies, unless they present an irreconcilable conflict with this rule. 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 file with the USDA a petition stating that the order, any provision of the order, or any obligation imposed in connection with the order is not in accordance with law and request a modification of the order or to be exempted therefrom. Such handler is afforded the opportunity for a hearing on the petition. After the hearing the USDA would rule on the petition. The Act provides that the district court of the United States in any district in which the handler is an inhabitant, or has his or her principal place of business, has jurisdiction to review the USDA's ruling on the petition, provided an action is filed not later than 20 days after the date of the entry of the ruling. This final rule increases the assessment rate established for the 2006-2007 and subsequent fiscal years from $0.18 to $0.28 per barrel of cranberries. The proposed rule inadvertently referred to the proposed increase as a “per pound” increase rather than a “per barrel” increase two times in the SUPPLEMENTARY INFORMATION section. The proposed regulatory text was correct in the proposed rule. The inadvertent errors are corrected in this document. The cranberry marketing order provides authority for the Committee, with approval of USDA, to formulate an annual budget of expenses and collect assessments from handlers to administer the program. The members of the Committee are producers and handlers of cranberries. They are familiar with the Committee's needs and with the costs for goods and services in their local area and are thus in a position to formulate an appropriate budget and assessment rate. The assessment rate is formulated and discussed in a public meeting. Thus, all directly affected persons have an opportunity to participate and provide input. Authority to fix the rate of assessment to be paid by each handler and to collect such assessment appears in § 929.41 of the order. In addition, § 929.45 of the order provides that the Committee, with the approval of the USDA, may establish or provide for the establishment of production research, marketing research, and market development projects designed to assist, improve, or promote the marketing, distribution, consumption, or efficient production of cranberries. The expense of such projects is paid from funds collected pursuant to § 929.41 (Assessments), or from such other funds as approved by the USDA. For the 2001-2002 fiscal year, the Committee recommended, and USDA approved, an assessment rate of $0.18 per barrel of cranberries handled that would continue in effect from fiscal period to fiscal period unless modified, suspended, or terminated by USDA upon recommendation and information submitted by the Committee or other information available to USDA. The Committee met on August 28, 2006, and recommended 2006-2007 expenditures of $3,522,062 and an assessment rate of $0.28 per barrel of cranberries. The Committee passed the assessment rate increase by a vote of 12 to 2. Those not supporting the recommendation wanted a lesser increase. In comparison, last year's budgeted expenses were $2,612,265. The assessment rate of $0.28 is $0.10 higher than the rate currently in effect. The Committee recommended the $0.10 per barrel increase to cover increased costs. The Committee has expanded its contributions to the export market development program from $50,000 in 1999 to $480,000 in 2006. The Committee has increased funding of the export market development program as target markets have expanded from two in 1999 (Japan and Germany), to five in 2006 (Japan, Germany, Mexico, France and Australia) with contingency plans to expand activities regionally within Europe and in South Korea. According to the Committee, cranberries and cranberry products going into export markets have steadily increased from 10 percent of the annual cranberry production during the 1999-2000 fiscal period to approximately 24 percent of the annual production in the 2005-2006 fiscal period. In order to expand and maintain activities within the target markets, the Committee has used funds from its reserve account to meet the costs of educating consumers and the trade industry. Since the last increase published in the **Federal Register** on February 14, 2002, at 67 FR 6843, the assessment rate has not been increased to compensate for increases in the costs of goods and services, costs contributable to increasing the Committee membership and to pay back funds taken from the reserve for the expanding export market development program. As a result, the reserve has continued to decrease until it is at a point where the Committee is unable to meet the order's reserve funding requirements or balance its budget without an increase in assessments and/or cutback in program activities. The Committee recommended the assessment rate increase to continue to expand the generic export market development program and have sufficient funding to meet its operational expenses. Without this increase, the Committee would have to curtail expansion of the export market development and promotion program. All cranberry handlers regulated under the marketing order will pay the proposed assessment rate. However, certain organic handlers may be exempt from paying assessments for market promotion activities pursuant to 7 CFR 900.700. The major expenditures recommended by the Committee for the 2006-2007 fiscal year include $500,000 for domestic promotion, $480,000 for export promotion, $154,116 for personnel, $103,500 for meetings, and $107,527 for administrative expenses. Budgeted expenses for major items in 2005-2006 were $488,225 for domestic promotion, $147,420 for personnel, $105,500 for meetings, and $116,542 for administrative expenses. The Committee recommended an increased assessment rate to generate larger revenue to meet its operational and export promotion expenses and keep its reserves at an acceptable level. In deriving the recommended assessment rate, the Committee determined assessable cranberry production for the upcoming fiscal period at 6,506,000 barrels. Therefore, total assessment income for the 2006-2007 fiscal year is estimated at $1,821,680 (6,506,000 barrels x $0.28). This amount plus $1,767,600 from USDA's Foreign Agricultural Service's Market Access Program

(MAP)and adequate funds in the reserve and interest income will be adequate to cover budgeted expenses. Funds in the reserve (approximately $541,122) will be kept within the approximately one fiscal period's expenses as recommended by the Committee consistent with § 929.42(a) of the order. The assessment rate established in this rule will continue in effect indefinitely unless modified, suspended, or terminated by USDA upon recommendation and other information submitted by the Committee or other available information. Although the assessment rate will be effective for an indefinite period, the Committee will continue to meet prior to or during each fiscal period to recommend a budget of expenses and consider recommendations for modification of the assessment rate. The dates and times of Committee meetings are available from the Committee or the USDA. Committee meetings are open to the public and interested persons may express their views at these meetings. USDA will evaluate Committee recommendations and other available information to determine whether modification of the assessment rate is needed. Further rulemaking will be undertaken as necessary. The Committee's 2006-2007 budget and those for subsequent fiscal periods will be reviewed and, as appropriate, approved by the USDA. Final Regulatory Flexibility Analysis Pursuant to requirements set forth in the Regulatory Flexibility Act (RFA), the Agricultural Marketing Service

(AMS)has considered the economic impact of this action on small entities. Accordingly, AMS has prepared this final regulatory flexibility analysis. The purpose of the RFA is to fit regulatory actions to the scale of business subject to such actions in order that small businesses will not be unduly or disproportionately burdened. Marketing orders issued pursuant to the Act, and rules thereunder, are unique in that they are brought about through group action of essentially small entities acting on their own behalf. Thus, both statutes have small entity orientation and compatibility. There are approximately 50 handlers of cranberries who are subject to regulation under the cranberry marketing order and approximately 1250 producers of cranberries in the regulated area. Small agricultural service firms, which includes handlers, are defined by the Small Business Administration (13 CFR 121.201) as those having annual receipts of less than $6,500,000, and small agricultural producers are defined as those having annual receipts of less than $750,000. The majority of producers and handlers of cranberries under the order are considered small entities under SBA's standards. The principal demand for cranberries is in the form of processed products. Cranberries are dried, frozen, canned, and juiced. During the 2001-2002 fiscal year through the 2005-2006 fiscal year, approximately 91 percent of the U.S. cranberry crop, or 5.4 million barrels, was processed annually. Based on National Agricultural Statistics Service data, acreage in the United States devoted to cranberry production has leveled off over the last several crop years. Bearing acres have declined slightly from a high of 39,600 acres in the 2003-2004 fiscal year to 39,100 in the 2005-2006 fiscal year. Wisconsin and Massachusetts lead the nation in cranberry acreage, with approximately 81 percent of the total, and production also at approximately 81 percent of the total U.S. cranberry crop each year. This rule increases the assessment rate established for the Committee and collected from handlers for the 2006-2007 fiscal period and subsequent periods from $0.18 to $0.28 per barrel of cranberries. The Committee discussed continuing the existing assessment rate, but concluded that it needed the additional funds to devote to its export market development and promotion program and replenish its financial reserve which would be funded through assessments. This action increases the assessment obligation imposed on handlers. While assessments impose some additional costs on handlers, the costs are uniform on all handlers. Some of the additional costs may be passed on to producers. However, these costs will be offset by the benefits derived by the operation of the marketing order. In addition, the Committee's meeting was widely publicized throughout the cranberry industry and all interested persons were invited to attend the meeting and participate in Committee deliberations on all issues. Like all Committee meetings, all entities, both large and small, were able to express views on this issue. Finally, interested persons are invited to submit information on the regulatory and informational impacts of this action on small businesses. This rule will impose no additional reporting or recordkeeping requirements on either small or large cranberry handlers. As with all Federal marketing order programs, reports and forms are periodically reviewed to reduce information requirements and duplication by industry and public sector agencies. The AMS is committed to complying with the E-Government Act, to promote the use of the Internet and other information technologies to provide increased opportunities for citizen access to Government information and services, and for other purposes. USDA has not identified any relevant Federal rules that duplicate, overlap, or conflict with this rule. As mentioned previously, a proposed rule was published in the **Federal Register** on January 16, 2007 (72 FR 1678). Copies of the proposed rule were mailed or sent via facsimile to all Committee members and handlers. Finally, the proposed rule was made available through the Internet, USDA and the Office of the Federal Register. A 30-day comment period ending February 15, 2007, was provided to allow interested persons to respond to the proposal. Four comments were received. One supported and three opposed the proposal. The commenter in support for the assessment rate increase stated that the increase is needed to help fund the Committee's operations and to help increase consumer awareness of cranberries. Three comments were received (two from growers and one from a grower-handler) in opposition to the proposed assessment rate increase. One of the commenters opposed the proposal because he did not believe a $.10 per barrel increase in the assessment rate will have a meaningful increase on the demand for cranberries. The commenter also stated that it is inequitable to force U.S. growers to spend another $.10 per barrel while growers in Canada and Chile pay nothing. Finally, this commenter stated that it is impossible to justify an increase in the assessment rate for advertising when cranberry supply and demand are projected to be in balance. Another commenter opposed the proposal based on his contention that he already spends a sum of money on branded advertising with a major cranberry cooperative. The last commenter felt that the assessment rate increase was an excessive and unjustified expense. In response to these comments, the $.10 per barrel increase is not specifically for export promotional activities but to provide the Committee with funds for its operational expenses. As previously stated, the assessment rate has not been increased since 2002. Since that time, there have been increases in the costs of goods and services, costs contributable to increasing Committee membership and to pay back funds taken from the reserve for the export market development program. The increase in the assessment rate is needed to generate larger revenue for the Committee to meet its expenses and keep its reserves at an acceptable level. Without the increase, the Committee will have to curtail its operational expenses including the export market development and promotion program that has <sup>[K1]</sup> been funded by assessments and MAP funds for the past several years. With regard to the equitability of some handlers paying the increased assessment rate while others pay no assessments, all cranberry handlers regulated under the marketing order will have to pay the increased assessment rate. Certain organic handlers are exempt from paying assessments on market promotion activities. However, handlers not regulated under the marketing order (such as those handlers in Canada or Chile) are not subject to its provisions and thus, do not have to pay assessments. Lastly, in regards to the commenter who already pays for branded advertising, we note that those advertisements promote a specific brand of cranberries and cranberry products. The Committee's domestic and export promotion programs are generic and were developed to promote the qualities of cranberries and cranberry products for the entire cranberry industry. Both the generic and branded promotion of cranberries and cranberry products reach new markets/customers and increase demand for cranberries. Under the marketing order, the assessment obligation is imposed on handlers. While assessments impose some additional costs on handlers, the costs are uniform on all handlers. Some of the additional costs may be passed on to producers. However, we believe that these costs are offset by the benefits derived by the operation of the marketing order. Accordingly, no changes will be made to this rule based on the comments received. A small business guide on complying with fruit, vegetable, and specialty crop marketing agreements and orders may be viewed at the following Web site: *http://www.ams.usda.gov/fv/moab.html.* Any questions about the compliance guide should be sent to Jay Guerber at the previously mentioned address in the FOR FURTHER INFORMATION CONTACT section. After consideration of all relevant material presented, including the information and recommendation submitted by the Committee and other available information, it is hereby found that this rule, as hereinafter set forth, will tend to effectuate the declared policy of the Act. Pursuant to 5 U.S.C. 553, it is also found and determined that good cause exists for not postponing the effective date of this rule until 30 days after publication in the **Federal Register** because the 2006-2007 fiscal period began September 1, 2006, and the marketing order requires that the rate of assessment for each fiscal period apply to all assessable cranberries handled during such fiscal period. Further, handlers are aware of this action which was recommended by the Committee at a public meeting. Also, a 30-day comment period was provided for in the proposed rule. List of Subjects in 7 CFR Part 929 Cranberries, Marketing agreements, Reporting and recordkeeping requirements. For the reasons set forth in the preamble, 7 CFR part 929 is amended as follows: PART 929—CRANBERRIES GROWN IN THE STATES OF MASSACHUSETTS, RHODE ISLAND, CONNECTICUT, NEW JERSEY, WISCONSIN, MICHIGAN, MINNESOTA, OREGON, WASHINGTON, AND LONG ISLAND IN THE STATE OF NEW YORK 1. The authority citation for 7 CFR part 929 continues to read as follows: Authority: 7 U.S.C. 601-674. 2. Section 929.236 is revised to read as follows: § 929.236 Assessment rate. On and after September 1, 2006, an assessment rate of $.28 per barrel is established for cranberries. Dated: March 23, 2007. Lloyd C. Day, Administrator, Agricultural Marketing Service. [FR Doc. E7-5791 Filed 3-28-07; 8:45 am] BILLING CODE 3410-02-P DEPARTMENT OF AGRICULTURE Agricultural Marketing Service 7 CFR Part 948 [Docket No. AMS-FV-06-0181; FV06-948-2 FIR] Irish Potatoes Grown in Colorado; Modification of the Handling Regulation for Area No. 2 AGENCY: Agricultural Marketing Service, USDA. ACTION: Final rule. SUMMARY: The Department of Agriculture

(USDA)is adopting, as a final rule, without change, an interim final rule modifying the grade and maturity requirements for potatoes handled under the Colorado potato marketing order, Area No. 2. The marketing order regulates the handling of Irish potatoes grown in Colorado and is administered locally by the Colorado Potato Administrative Committee, Area No. 2 (Committee). This rule continues in effect the action that relaxed the minimum grade requirement from U.S. No. 1 grade to U.S. Commercial grade for all Area No. 2 potato varieties, other than round, red-skinned varieties, measuring from 1 1/2 -inch minimum diameter to 2 1/4 -inch maximum diameter (size B), and 1-inch minimum diameter to 1 3/4 -inch maximum diameter. This rule also continues in effect the action that changed the date minimum maturity requirements are implemented from August 25 to August 1 of each year. These changes are intended to facilitate the handling and marketing of Colorado Area No. 2 potatoes. DATES: *Effective Date:* April 30, 2007. FOR FURTHER INFORMATION CONTACT: Teresa Hutchinson or Gary Olson, Northwest Marketing Field Office, Marketing Order Administration Branch, Fruit and Vegetable Programs, AMS, USDA; Telephone:

(503)326-2724, Fax:

(503)326-7440, or E-mail: *Teresa.Hutchinson@usda.gov* or *GaryD.Olson@usda.gov.* Small businesses may request information on complying with this regulation by contacting Jay Guerber, Marketing Order Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence Avenue SW, STOP 0237, Washington, DC 20250-0237; Telephone:

(202)720-2491, Fax:

(202)720-8938, or E-mail: *Jay.Guerber@usda.gov.* SUPPLEMENTARY INFORMATION: This rule is issued under Marketing Agreement No. 97 and Marketing Order No. 948, both as amended (7 CFR part 948), regulating the handling of Irish potatoes grown in Colorado, hereinafter referred to as the “order.” The order is effective under the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the “Act.” USDA is issuing this rule in conformance with Executive Order 12866. This rule has been reviewed under Executive Order 12988, Civil Justice Reform. This rule is not intended to have retroactive effect. This rule will not preempt any State or local laws, regulations, or policies, unless they present an irreconcilable conflict with this rule. 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 file with USDA a petition stating that the order, any provision of the order, or any obligation imposed in connection with the order is not in accordance with law and request a modification of the order or to be exempted therefrom. A handler is afforded the opportunity for a hearing on the petition. After the hearing USDA would rule on the petition. The Act provides that the district court of the United States in any district in which the handler is an inhabitant, or has his or her principal place of business, has jurisdiction to review USDA's ruling on the petition, provided an action is filed not later than 20 days after the date of the entry of the ruling. This rule adopts the interim rule that changed the minimum grade requirement for certain potatoes handled under the order and also changed the minimum maturity requirement implementation date. Specifically, this regulating action changed the minimum grade requirement from U.S. No. 1 grade to U.S. Commercial grade for all varieties of Area No. 2 potatoes, other than round, red-skinned potatoes, measuring from 1 1/2 -inch minimum diameter to 2 1/4 -inch maximum diameter (size B), and from 1-inch minimum diameter to 1 3/4 -inch maximum diameter. Furthermore, the implementation date for the minimum maturity requirement was changed from August 25 to August 1 of each year. These changes were recommended by the Committee at a meeting held on August 10, 2006. Section 948.22 authorizes the issuance of grade, size, quality, maturity, pack, and container regulations for potatoes grown in the production area. Section 948.21 authorizes an area committee to recommend to the Secretary modifications, suspension, or termination of regulations issued pursuant to § 948.22. Section 948.40 provides that whenever the handling of potatoes is regulated pursuant to §§ 948.20 through 948.24, such potatoes must be inspected by the Federal-State Inspection Service, and certified as meeting the applicable requirements of such regulations. Under the order, the State of Colorado is divided into three areas of regulation for marketing order purposes. These include: Area 1, commonly known as the Western Slope and consisting of Routt, Eagle, Pitkin, Gunnison, Hinsdale, La Plata Counties, and all counties west thereof; Area 2, commonly known as San Luis Valley, consists of Sanguache, Huerfano, Las Animas, Mineral, Archuleta Counties, and all counties south thereof; and, Area 3, which consists of the remaining counties in the State of Colorado not included in Area 1 or 2. The order currently regulates the handling of potatoes in Areas 2 and 3 only; regulation for Area 1 is currently not active. Grade, size, and maturity regulations specific to the handling of potatoes grown in Area No. 2 are contained in § 948.386 of the order. For many years, consumer demand for small fresh market potatoes was relatively soft in comparison to demand for larger size potatoes. Size B and smaller potatoes were often discarded or fed to livestock. Grade and size regulations were developed to keep lower quality small potatoes out of the fresh market. At that time, the Committee believed that small potatoes, sold at a great discount, eroded the price for large potatoes. By requiring small potatoes to grade U.S. No. 1 or better, the Committee believed that high quality small potatoes would not have an adverse affect on the market for larger potatoes. Recently, however, demand has increased for small potatoes, which often command premium prices compared to larger size A potatoes (1 7/8 -inch and larger). With the growing demand for small potatoes, producers and handlers are concerned that they will not be able to supply this market if only U.S. No. 1 or better grade can be shipped under the order. The Colorado Area No. 2 potato industry has received requests from customers for additional small potatoes that grade U.S. Commercial or better. This action assists Area No. 2 handlers in meeting their buyers' needs. Committee statistics show that approximately 62 percent of the entire potato crop in Area No. 2 grades U.S. No. 1 or better. However, the percentage of Size B and smaller potatoes meeting U.S. No. 1 grade is only about 50 percent. The reason for the lower percentage of smaller potatoes is that potato defects are scored based on the percentage of surface area affected on the individual potato. Because Size B and smaller potatoes have less surface area, any defect inspected comprises a larger part of the total surface being scored relative to larger sized potatoes. For example, a cut on a large potato may not affect a large enough surface area to be a scorable defect, but the same size cut would be scorable on a smaller potato. Under such circumstances, it would be much harder for a small potato to meet the U.S. No. 1 grade than it would for a large potato. The U.S. Commercial grade allows a slightly higher percentage of total defects than the U.S. No. 1 grade. By changing the grade requirement to allow size B potatoes and potatoes measuring from 1-inch minimum diameter to 1 3/4 -inch maximum diameter (commonly referred to as “creamers” by the potato industry) to meet U.S. Commercial grade or better, the Committee believes more small potatoes would be available to meet increasing demand, and thus help increase returns to producers. Not only would more small potatoes enter the market, small potatoes typically sell for a premium price in today's marketplace. This change does not affect round, red-skinned potato varieties in the size B and 1-inch minimum diameter to 1 3/4 -inch maximum diameter size, which would continue to meet U.S. No. 1 grade or better. The majority of round, red-skinned potato varieties produced in Area No. 2 supply the food service or restaurant market. This market demands high quality (U.S. No. 1 or better) round, red-skinned potatoes. Therefore, the Committee recommended that the grade requirement for varieties of round, red-skinned potatoes in these size categories remain U.S. No. 1 grade or better. The Committee believes that by allowing small potatoes to meet the more relaxed U.S. Commercial grade instead of U.S. No. 1 grade, available volume for sale into the fresh market could increase by about 23 percent. Although facing an increasing demand, the market for small potatoes is a minor segment of the market served by the Area No. 2 production area. As a consequence, the Committee believes that the smaller potatoes do not compete directly with the predominant large potatoes produced in this area, and that the relaxation of the grade requirement would not adversely effect the overall Area No. 2 potato market. This final rule also adopts from the interim rule the change in the minimum maturity requirement implementation date from August 25 to August 1. The specified ending date of October 31 for the minimum maturity requirement remains unchanged, as do the actual minimum maturity requirements that U.S. No. 2 grade potatoes are not more than “moderately skinned” and that all other grades are not more than “slightly skinned” (as defined in the U.S. Standards for Grades of Potatoes). The Committee recommended that the implementation date be moved to August 1 due to the increased use of early maturing potato varieties in this area of Colorado and earlier harvest requirements. Since the skin on most potato varieties has not substantially “set”, or toughened, early in the season, potato skins have a tendency to more easily scrape off during harvest and the subsequent handling and packing process. By having the maturity requirements in place at the beginning of harvest, there is added assurance that a quality product will reach the consumer. Final Regulatory Flexibility Analysis Pursuant to requirements set forth in the Regulatory Flexibility Act (RFA), the Agricultural Marketing Service

(AMS)has considered the economic impact of this action on small entities. Accordingly, AMS has prepared this final regulatory flexibility analysis. The purpose of the RFA is to fit regulatory actions to the scale of business subject to such actions in order that small businesses will not be unduly or disproportionately burdened. Marketing orders issued pursuant to the Act, and the rules issued thereunder, are unique in that they are brought about through group action of essentially small entities acting on their own behalf. Thus, both statutes have small entity orientation and compatibility. There are approximately 80 handlers of Colorado Area No. 2 potatoes subject to regulation under the order and approximately 200 producers in the regulated production area. Small agricultural service firms are defined by the Small Business Administration (13 CFR 121.201) as those having annual receipts of less than $6,500,000, and small agricultural producers are defined as those having annual receipts of less than $750,000. During the 2005-2006 marketing year, 17,213,202 hundredweight of Colorado Area No. 2 potatoes were inspected under the order and sold into the fresh market. Based on an estimated average f.o.b. price of $11.45 per hundredweight, the Committee estimates that 73 Area No. 2 handlers, or about 91 percent, had annual receipts of less than $6,500,000. In view of the foregoing, the majority of Colorado Area No. 2 potato handlers may be classified as small entities. In addition, based on information provided by the National Agricultural Statistics Service, the average producer price for Colorado fall potatoes for 2005 was $9.25 per hundredweight. The average annual fresh potato revenue for each of the 200 Colorado Area No. 2 potato producers is therefore calculated to be approximately $796,112. Consequently, on average, the majority of the Area No. 2 Colorado potato producers may not be classified as small entities. Excluding round, red-skinned potato varieties, this rule continues in effect the action that relaxed the minimum grade requirement from U.S. No. 1 grade to U.S. Commercial grade for Area No. 2 potatoes measuring from 1 1/2 -inch minimum diameter to 2 1/4 -inch maximum diameter (size B), and 1-inch minimum diameter to 1 3/4 -inch maximum diameter. This rule also continues in effect the action that changed the date minimum maturity requirements are implemented from August 25 to August 1 of each year. Authority for this action is contained in §§ 948.21, 948.22, 948.40, and 948.386. Since the grade relaxation is expected to benefit producers, handlers and consumers, any potential impact from this action would be positive. By allowing these small potatoes to meet U.S. Commercial grade or better, a potentially greater quantity of potatoes will meet the order's handling regulation. This is expected to translate into an increased market for small potatoes and thus greater returns for handlers and producers and more product choice for consumers. Further, small potatoes are a minor segment of the potato market served by the Area No. 2 production area. As such, the Committee believes that small potatoes do not compete directly with most of the potatoes produced in this area and that the grade requirement relaxation will not adversely effect the overall Area No. 2 potato market. Based on Committee records, roughly half of Area No. 2 handlers ship size B and smaller potatoes. Committee records also indicate that during the 2004-2005 fiscal period approximately 165,000 hundredweight (less than 1 percent of the total shipments) of size B and smaller were inspected and shipped. As a result of this rule, the Committee estimates that the marketable supply of size B and smaller potatoes will increase by 23 percent and add 37,950 hundredweight to the marketable supply of Area No. 2 potatoes. As previously noted, this relaxation does not affect round, red-skinned potatoes in the same size categories. These potatoes will continue to pack-out as U.S. No. 1 grade or better to satisfy the quality conscious food service and restaurant markets. The action that changed the minimum maturity requirement implementation date to August 1 merely updated the regulations so that they are in-line with current cultural practices. Thus, any impact from this change on the producers, handlers, and consumers of Colorado potatoes is expected to be positive since assurance is being added that quality product—a product without undue skinning—will be packed and shipped into the market. The Committee supports the concept that a quality product promotes consumer confidence, thereby helping to protect producer returns. After discussing possible alternatives to this rule, the Committee determined that a relaxation in the grade requirement to U.S. Commercial grade or better for certain small potatoes would sufficiently meet the industry's current needs. The relaxation in the grade requirement for the affected small potatoes is expected to provide the greatest benefit to the industry by augmenting the developing market for these potatoes and thereby increasing producer returns. During its deliberations, the Committee also considered relaxing the grade requirement for small, round, red-skinned potato varieties. However, food service and restaurant market segments have a preference for round, red-skinned potatoes and demand high quality potatoes (U.S. No. 1 grade or better). The Committee, therefore, found that there were no other viable alternatives for the grade change except as recommended. Lastly, the maturity requirement implementation date change merely brings the regulations in-line with current cultural practices, and therefore, the Committee did not consider further alternatives to this recommended change. AMS is committed to complying with the E-government Act, to promote the use of the Internet and other information technologies to provide increased opportunities for citizen access to Government information and services, and for other purposes. This rule will not impose any additional reporting or recordkeeping requirements on either small or large potato handlers. As with all Federal marketing order programs, reports and forms are periodically reviewed to reduce information requirements and duplication by industry and public sector agencies. In addition, as noted in the initial regulatory flexibility analysis, USDA has not identified any relevant Federal rules that duplicate, overlap, or conflict with this rule. Further, the Committee's meeting was widely publicized throughout the Colorado potato industry and all interested persons were invited to attend the meeting and participate in Committee deliberations. Like all Committee meetings, the August 10, 2006, meeting was a public meeting and all entities, both large and small, were able to express their views on this issue. An interim final rule concerning this action was published in the **Federal Register** on December 27, 2006 (71 FR 77583). Committee staff sent copies of the rule to all Committee members and Area No. 2 handlers. In addition, the rule was made available through the Internet by USDA and the Office of the Federal Register. That rule provided for a 60-day comment period which ended February 26, 2007. One comment was received. The commenter stated that regulations were necessary, but believed that all potatoes should have the same requirements. However, the Committee believes that there are specific markets for certain varieties of potatoes, so requirements should be specific to the variety of potato. For example, some varieties of potatoes are better suited for the fresh market than the French fry or processed potato market. Furthermore, marketing order 948, Area No. 2, only regulates the handling of potatoes grown in Area No. 2 of Colorado, and not other U.S. potato producing areas. A small business guide on complying with fruit, vegetable, and specialty crop marketing agreements and orders may be viewed at: *http://www.ams.usda.gov/fv/moab.html.* Any questions about the compliance guide should be sent to Jay Guerber at the previously mentioned address in the FOR FURTHER INFORMATION CONTACT section. After consideration of all relevant material presented, including the Committee's recommendation, and other information, it is hereby found that finalizing the interim final rule, without change, as published in the **Federal Register** (71 FR 77583, December 27, 2006), will tend to effectuate the declared policy of the Act. List of Subjects in 7 CFR Part 948 Marketing agreements, Potatoes, Reporting and recordkeeping requirements. PART 948—IRISH POTATOES GROWN IN COLORADO Accordingly, the interim final rule amending 7 CFR part 948 which was published at 71 FR 77583 on December 27, 2006, is adopted as a final rule without change. Dated: March 23, 2007. Kenneth C. Clayton, Acting Administrator, Agricultural Marketing Service. [FR Doc. E7-5817 Filed 3-28-07; 8:45 am] BILLING CODE 3410-02-P DEPARTMENT OF AGRICULTURE Agricultural Marketing Service 7 CFR Part 985 [Docket Nos. AMS-FV-06-0188; FV07-985-1 FR] Marketing Order Regulating the Handling of Spearmint Oil Produced in the Far West; Salable Quantities and Allotment Percentages for the 2007-2008 Marketing Year AGENCY: Agricultural Marketing Service, USDA. ACTION: Final rule. SUMMARY: This rule establishes the quantity of spearmint oil produced in the Far West, by class that handlers may purchase from, or handle for, producers during the 2007-2008 marketing year, which begins on June 1, 2007. This rule establishes salable quantities and allotment percentages for Class 1 (Scotch) spearmint oil of 886,667 pounds and 45 percent, respectively, and for Class 3 (Native) spearmint oil of 1,062,336 pounds and 48 percent, respectively. The Spearmint Oil Administrative Committee (Committee), the agency responsible for local administration of the marketing order for spearmint oil produced in the Far West, recommended these limitations for the purpose of avoiding extreme fluctuations in supplies and prices to help maintain stability in the spearmint oil market. DATES: Effective Date: This final rule becomes effective June 1, 2007. FOR FURTHER INFORMATION CONTACT: Susan M. Hiller, Marketing Specialist, or Gary D. Olson, Regional Manager, Northwest Marketing Field Office, Marketing Order Administration Branch, Fruit and Vegetable Programs, AMS, USDA; Telephone:

(503)326-2724; Fax:

(503)326-7440; or E-mail: *Susan.Hiller@usda.gov* or *GaryD.Olson@usda.gov.* Small businesses may request information on complying with this regulation by contacting Jay Guerber, Marketing Order Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence Avenue, SW., STOP 0237, Washington, DC 20250-0237; Telephone:

(202)720-2491, Fax:

(202)720-8938, or E-mail: *Jay.Guerber@usda.gov.* SUPPLEMENTARY INFORMATION: This final rule is issued under Marketing Order No. 985 (7 CFR part 985), as amended, regulating the handling of spearmint oil produced in the Far West (Washington, Idaho, Oregon, and designated parts of Nevada and Utah), hereinafter referred to as the “order.” This order is effective under the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the “Act.” The Department of Agriculture

(USDA)is issuing this rule in conformance with Executive Order 12866. This final rule has been reviewed under Executive Order 12988, Civil Justice Reform. Under the marketing order now in effect, salable quantities and allotment percentages may be established for classes of spearmint oil produced in the Far West. This final rule establishes the quantity of spearmint oil produced in the Far West, by class, which may be purchased from or handled for producers by handlers during the 2007-2008 marketing year, which begins on June 1, 2007. This rule will not preempt any State or local laws, regulations, or policies, unless they present an irreconcilable conflict with this rule. 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 file with USDA a petition stating that the order, any provision of the order, or any obligation imposed in connection with the order is not in accordance with law and request a modification of the order or to be exempted therefrom. A handler is afforded the opportunity for a hearing on the petition. After the hearing USDA would rule on the petition. The Act provides that the district court of the United States in any district in which the handler is an inhabitant, or has his or her principal place of business, has jurisdiction to review USDA's ruling on the petition, provided an action is filed not later than 20 days after the date of the entry of the ruling. Pursuant to authority in §§ 985.50, 985.51, and 985.52 of the order, the Committee, with all eight members present, met on October 4, 2006, and recommended salable quantities and allotment percentages for both classes of oil for the 2007-2008 marketing year. The Committee unanimously recommended the establishment of a salable quantity and allotment percentage for Scotch spearmint oil of 886,667 pounds and 45 percent, respectively. For Native spearmint oil, the Committee unanimously recommended the establishment of a salable quantity and allotment percentage of 1,062,336 pounds and 48 percent, respectively. This final rule limits the amount of spearmint oil that handlers may purchase from, or handle for, producers during the 2007-2008 marketing year, which begins on June 1, 2007. Salable quantities and allotment percentages have been placed into effect each season since the order's inception in 1980. The U.S. production of Scotch spearmint oil is concentrated in the Far West, which includes Washington, Idaho, and Oregon and a portion of Nevada and Utah. Scotch spearmint oil is also produced in the Midwest states of Indiana, Michigan, and Wisconsin, as well as in the States of Montana, South Dakota, North Dakota, and Minnesota. The production area covered by the marketing order currently accounts for approximately 71 percent of the annual U.S. sales of Scotch spearmint oil. When the order became effective in 1980, the Far West had 72 percent of the world's sales of Scotch spearmint oil. While the Far West is still the leading producer of Scotch spearmint oil, its share of world sales is now estimated to be about 43 percent. This loss in world sales for the Far West region is directly attributed to the increase in global production. Other factors that have played a significant role include the overall quality of the imported oil and technological advances that allow for more blending of lower quality oils. Such factors have provided the Committee with challenges in accurately predicting trade demand for Scotch oil. This, in turn, has made it difficult to balance available supplies with demand and to achieve the Committee's overall goal of stabilizing producer and market prices. The marketing order has continued to contribute to price and general market stabilization for Far West producers. The Committee, as well as spearmint oil producers and handlers attending the October 4, 2006, meeting, estimated that the 2006-2007 producer price of Scotch oil would be $13.00 to $14.00 per pound. However, there is very little forward contracting being done at the present time. This producer price is approaching the cost of production for most producers as indicated in a study from the Washington State University Cooperative Extension Service (WSU), which estimates production costs to be between $13.50 and $15.00 per pound. However, this study was completed in 2001 and fuel costs alone have doubled in price. This low level of producer returns has caused an overall reduction in acreage. When the order became effective in 1980, the Far West region had 9,702 acres of Scotch spearmint. The Committee estimates that the 2005-2006 acreage of Scotch spearmint was about 6,137 acres. Based on the reduced Scotch spearmint acreage, the Committee estimates that production for the 2005-2006 marketing season will be about 712,539 pounds. The Committee recommended the 2007-2008 Scotch spearmint oil salable quantity (886,667 pounds) and allotment percentage (45 percent) utilizing sales estimates for 2007-2008 Scotch spearmint oil as provided by several of the industry's handlers, as well as historical and current Scotch spearmint oil sales levels. The Committee is estimating that about 875,000 pounds of Scotch spearmint oil, on average, may be sold during the 2007-2008 marketing year. When considered in conjunction with the estimated carry-in of 18,029 pounds of oil on June 1, 2007, the recommended salable quantity of 886,667 pounds results in a total available supply of Scotch spearmint oil next year of about 904,696 pounds. The recommendation for the 2007-2008 Scotch spearmint oil volume regulation is consistent with the Committee's stated intent of keeping adequate supplies available at all times, while attempting to stabilize prices at a level adequate to sustain the producers. Furthermore, the recommendation takes into consideration the industry's desire to compete with less expensive oil produced outside the regulated area. Although Native spearmint oil producers are facing market conditions similar to those affecting the Scotch spearmint oil market, the market share is quite different. Over 90 percent of the U.S. production of Native spearmint is produced within the Far West production area. Also, most of the world's supply of Native spearmint is produced in the United States. The supply and demand characteristics of the current Native spearmint oil market, combined with the stabilizing impact of the marketing order, have kept the price relatively steady. The average price for the five year period ending in 2005 is $9.38, which is $0.34 lower than the average price for the ten year period (1996-2005) of $9.72. The Committee considers these levels too low for the majority of producers to maintain viability. The WSU study referenced earlier indicates that the cost of producing Native spearmint oil ranges from $10.26 to $10.92 per pound. Similar to Scotch, the low level of producer returns has also caused an overall reduction in Native spearmint acreage. When the order became effective in 1980, the Far West region had 12,153 acres of Native spearmint. The Committee estimates that the 2005-2006 acreage of Native spearmint was about 7,688 acres. Based on the reduced Native spearmint acreage, the Committee estimates that production for the 2005-2006 marketing season will be about 999,920 pounds. The Committee recommended the 2007-2008 Native spearmint oil salable quantity (1,062,336 pounds) and allotment percentage (48 percent) utilizing sales estimates for 2007-2008 Native spearmint oil as provided by several of the industry's handlers, as well as historical and current Native spearmint oil sales levels. The Committee is estimating that about 1,141,667 pounds of Native spearmint oil, on average, may be sold during the 2007-2008 marketing year. When considered in conjunction with the estimated carry-in of 119,057 pounds of oil on June 1, 2007, the recommended salable quantity of 1,062,336 pounds results in a total available supply of Native spearmint oil next year of about 1,181,393 pounds. The Committee's method of calculating the Native spearmint oil salable quantity and allotment percentage continues to primarily utilize information on price and available supply as they are affected by the estimated trade demand. The Committee's stated intent is to make adequate supplies available to meet market needs and improve producer prices. The Committee believes that the order has contributed extensively to the stabilization of producer prices, which prior to 1980 experienced wide fluctuations from year to year. According to the National Agricultural Statistics Service, for example, the average price paid for both classes of spearmint oil ranged from $4.00 per pound to $11.10 per pound during the period between 1968 and 1980. Prices since the order's inception, the period from 1980 to 2005, have generally stabilized at an average price of $9.84 per pound for Native spearmint oil and $12.72 per pound for Scotch spearmint oil. The Committee based its recommendation for the proposed salable quantity and allotment percentage for each class of spearmint oil for the 2007-2008 marketing year on the information discussed above, as well as the data outlined below.

(1)Class 1 (Scotch) Spearmint Oil

(A)Estimated carry-in on June 1, 2007—18,029 pounds. This figure is the difference between the revised 2006-2007 marketing year total available supply of 818,029 pounds and the estimated 2006-2007 marketing year trade demand of 800,000 pounds.

(B)Estimated trade demand for the 2007-2008 marketing year—875,000 pounds. This figure is based on input from producers at five Scotch spearmint oil production area meetings held in September 2006, as well as estimates provided by handlers and other meeting participants at the October 4, 2006, meeting. The average estimated trade demand provided at the five production area meetings was 880,000 pounds, whereas the estimated handler trade demand ranged from 850,000 to 900,000 pounds. The average of sales over the last five years was 754,269 pounds.

(C)Salable quantity required from the 2007-2008 marketing year production—856,971 pounds. This figure is the difference between the estimated 2007-2008 marketing year trade demand (875,000 pounds) and the estimated carry-in on June 1, 2007 (18,029 pounds).

(D)Total estimated allotment base for the 2007-2008 marketing year—1,970,370 pounds. This figure represents a one-percent increase over the revised 2006-2007 total allotment base. This figure is generally revised each year on June 1 due to producer base being lost due to the bona fide effort production provisions of § 985.53(e). The revision is usually minimal.

(E)Computed allotment percentage—43.5 percent. This percentage is computed by dividing the required salable quantity by the total estimated allotment base.

(F)Recommended allotment percentage—45 percent. This recommendation is based on the Committee's determination that the computed 43.5 percent would not adequately supply the potential 2007-2008 market.

(G)The Committee's recommended salable quantity—886,667 pounds. This figure is the product of the recommended allotment percentage and the total estimated allotment base.

(H)Estimated available supply for the 2007-2008 marketing year—904,696 pounds. This figure is the sum of the 2007-2008 recommended salable quantity (886,667 pounds) and the estimated carry-in on June 1, 2007 (18,029 pounds).

(2)Class 3 (Native) Spearmint Oil

(A)Estimated carry-in on June 1, 2007—119,057 pounds. The Committee's estimated carry-in reflects anticipated increases to the salable quantity and allotment percentage that may be needed to meet demand in 2006-2007.

(B)Estimated trade demand for the 2007-2008 marketing year—1,141,667 pounds. This figure is based on input from producers at the six Native spearmint oil production area meetings held in September 2006, as well as estimates provided by handlers and other meeting participants at the October 4, 2006, meeting. The average estimated trade demand provided at the six production area meetings was 1,141,667 pounds, whereas the average handler estimate was 1,183,000 pounds.

(C)Salable quantity required from the 2007-2008 marketing year production—1,022,610 pounds. This figure is the difference between the estimated 2007-2008 marketing year trade demand (1,141,667 pounds) and the estimated carry-in on June 1, 2007 (119,057 pounds).

(D)Total estimated allotment base for the 2007-2008 marketing year—2,213,200 pounds. This figure represents a one percent increase over the revised 2006-2007 total allotment base. This figure is generally revised each year on June 1 due to producer base being lost due to the bona fide effort production provisions of § 985.53(e). The revision is usually minimal.

(E)Computed allotment percentage—46.2 percent. This percentage is computed by dividing the required salable quantity by the total estimated allotment base.

(F)Recommended allotment percentage—48 percent. This is the Committee's recommendation based on the computed allotment percentage, the average of the computed allotment percentage figures from the six production area meetings (46.4 percent), and input from producers and handlers at the October 4, 2006, meeting.

(G)The Committee's recommended salable quantity—1,062,336 pounds. This figure is the product of the recommended allotment percentage and the total estimated allotment base.

(H)Estimated available supply for the 2007-2008 marketing year—1,181,393 pounds. This figure is the sum of the 2007-2008 recommended salable quantity (1,062,336 pounds) and the estimated carry-in on June 1, 2007 (119,057 pounds). The salable quantity is the total quantity of each class of spearmint oil, which handlers may purchase from, or handle on behalf of producers during a marketing year. Each producer is allotted a share of the salable quantity by applying the allotment percentage to the producer's allotment base for the applicable class of spearmint oil. The Committee's recommended Scotch and Native spearmint oil salable quantities and allotment percentages of 886,667 pounds and 45 percent, and 1,062,336 pounds and 48 percent, respectively, are based on the Committee's goal of maintaining market stability by avoiding extreme fluctuations in supplies and prices, and the anticipated supply and trade demand during the 2007-2008 marketing year. The salable quantities are not expected to cause a shortage of spearmint oil supplies. Any unanticipated or additional market demand for spearmint oil, which may develop during the marketing year, can be satisfied by an increase in the salable quantities. Both Scotch and Native spearmint oil producers who produce more than their annual allotments during the 2007-2008 marketing year may transfer such excess spearmint oil to producers with spearmint oil production less than their annual allotment, or put it into the reserve pool until November 1, 2007. This regulation is similar to regulations issued in prior seasons. Costs to producers and handlers resulting from this rule are expected to be offset by the benefits derived from a stable market and improved returns. In conjunction with the issuance of this final rule, USDA has reviewed the Committee's marketing policy statement for the 2007-2008 marketing year. The Committee's marketing policy statement, a requirement whenever the Committee recommends volume regulations, fully meets the intent of § 985.50 of the order. During its discussion of potential 2007-2008 salable quantities and allotment percentages, the Committee considered:

(1)The estimated quantity of salable oil of each class held by producers and handlers;

(2)the estimated demand for each class of oil;

(3)the prospective production of each class of oil;

(4)the total of allotment bases of each class of oil for the current marketing year and the estimated total of allotment bases of each class for the ensuing marketing year;

(5)the quantity of reserve oil, by class, in storage;

(6)producer prices of oil, including prices for each class of oil; and

(7)general market conditions for each class of oil, including whether the estimated season average price to producers is likely to exceed parity. Conformity with the USDA's “Guidelines for Fruit, Vegetable, and Specialty Crop Marketing Orders” has also been reviewed and confirmed. The establishment of these salable quantities and allotment percentages will allow for anticipated market needs. In determining anticipated market needs, consideration by the Committee was given to historical sales, as well as changes and trends in production and demand. This rule also provides producers with information on the amount of spearmint oil that should be produced for the 2007-2008 season in order to meet anticipated market demand. Final Regulatory Flexibility Analysis Pursuant to requirements set forth in the Regulatory Flexibility Act (RFA), the Agricultural Marketing Service

(SBA)(13 CFR 121.201) as those having annual receipts of less than $6,500,000, and small agricultural producers are defined as those having annual receipts of less than $750,000. Based on the SBA's definition of small entities, the Committee estimates that 2 of the 8 handlers regulated by the order could be considered small entities. Most of the handlers are large corporations involved in the international trading of essential oils and the products of essential oils. In addition, the Committee estimates that 19 of the 58 Scotch spearmint oil producers and 21 of the 90 Native spearmint oil producers could be classified as small entities under the SBA definition. Thus, a majority of handlers and producers of Far West spearmint oil may not be classified as small entities. The Far West spearmint oil industry is characterized by producers whose farming operations generally involve more than one commodity, and whose income from farming operations is not exclusively dependent on the production of spearmint oil. A typical spearmint oil-producing operation has enough acreage for rotation such that the total acreage required to produce the crop is about one-third spearmint and two-thirds rotational crops. Thus, the typical spearmint oil producer has to have considerably more acreage than is planted to spearmint during any given season. Crop rotation is an essential cultural practice in the production of spearmint oil for weed, insect, and disease control. To remain economically viable with the added costs associated with spearmint oil production, most spearmint oil producing farms fall into the SBA category of large businesses. Small spearmint oil producers generally are not as extensively diversified as larger ones and as such are more at risk from market fluctuations. Such small producers generally need to market their entire annual allotment and do not have the luxury of having other crops to cushion seasons with poor spearmint oil returns. Conversely, large diversified producers have the potential to endure one or more seasons of poor spearmint oil markets because income from alternate crops could support the operation for a period of time. Being reasonably assured of a stable price and market provides small producing entities with the ability to maintain proper cash flow and to meet annual expenses. Thus, the market and price stability provided by the order potentially benefit the small producer more than such provisions benefit large producers. Even though a majority of handlers and producers of spearmint oil may not be classified as small entities, the volume control feature of this order has small entity orientation. This final rule establishes the quantity of spearmint oil produced in the Far West, by class that handlers may purchase from, or handle for, producers during the 2007-2008 marketing year. The Committee recommended this rule to help maintain stability in the spearmint oil market by avoiding extreme fluctuations in supplies and prices. Establishing quantities to be purchased or handled during the marketing year through volume regulations allows producers to plan their spearmint planting and harvesting to meet expected market needs. The provisions of §§ 985.50, 985.51, and 985.52 of the order authorize this rule. Instability in the spearmint oil sub-sector of the mint industry is much more likely to originate on the supply side than the demand side. Fluctuations in yield and acreage planted from season-to-season tend to be larger than fluctuations in the amount purchased by buyers. Demand for spearmint oil tends to be relatively stable from year-to-year. The demand for spearmint oil is expected to grow slowly for the foreseeable future because the demand for consumer products that use spearmint oil will likely expand slowly, in line with population growth. Demand for spearmint oil at the farm level is derived from retail demand for spearmint-flavored products such as chewing gum, toothpaste, and mouthwash. The manufacturers of these products are by far the largest users of mint oil. However, spearmint flavoring is generally a very minor component of the products in which it is used, so changes in the raw product price have no impact on retail prices for those goods. Spearmint oil production tends to be cyclical. Years of large production, with demand remaining reasonably stable, have led to periods in which large producer stocks of unsold spearmint oil have depressed producer prices for a number of years. Shortages and high prices may follow in subsequent years, as producers respond to price signals by cutting back production. The significant variability is illustrated by the fact that the coefficient of variation (a standard measure of variability; “CV”) of Far West spearmint oil production from 1980 through 2005 was about 0.24. The CV for spearmint oil grower prices was about 0.14, well below the CV for production. This provides an indication of the price stabilizing impact of the marketing order. Production in the shortest marketing year was about 49 percent of the 26-year average (1.842 million pounds from 1980 through 2005) and the largest crop was approximately 167 percent of the 26-year average. A key consequence is that in years of oversupply and low prices the season average producer price of spearmint oil is below the average cost of production (as measured by the Washington State University Cooperative Extension Service.) The wide fluctuations in supply and prices that result from this cycle, which was even more pronounced before the creation of the marketing order, can create liquidity problems for some producers. The marketing order was designed to reduce the price impacts of the cyclical swings in production. However, producers have been less able to weather these cycles in recent years because of the decline in prices of many of the alternative crops they grow. As noted earlier, almost all spearmint oil producers diversify by growing other crops. In an effort to stabilize prices, the spearmint oil industry uses the volume control mechanisms authorized under the order. This authority allows the Committee to recommend a salable quantity and allotment percentage for each class of oil for the upcoming marketing year. The salable quantity for each class of oil is the total volume of oil that producers may sell during the marketing year. The allotment percentage for each class of spearmint oil is derived by dividing the salable quantity by the total allotment base. Each producer is then issued an annual allotment certificate, in pounds, for the applicable class of oil, which is calculated by multiplying the producer's allotment base by the applicable allotment percentage. This is the amount of oil for the applicable class that the producer can sell. By November 1 of each year, the Committee identifies any oil that individual producers have produced above the volume specified on their annual allotment certificates. This excess oil is placed in a reserve pool administered by the Committee. There is a reserve pool for each class of oil that may not be sold during the current marketing year unless USDA approves a Committee recommendation to make a portion of the pool available. However, limited quantities of reserve oil are typically sold to fill deficiencies. A deficiency occurs when on-farm production is less than a producer's allotment. In that case, a producer's own reserve oil can be sold to fill that deficiency. Excess production (higher than the producer's allotment) can be sold to fill other producers' deficiencies. All of this needs to take place by November 1. In any given year, the total available supply of spearmint oil is composed of current production plus carry-over stocks from the previous crop. The Committee seeks to maintain market stability by balancing supply and demand, and to close the marketing year with an appropriate level of carryout. If the industry has production in excess of the salable quantity, then the reserve pool absorbs the surplus quantity of spearmint oil, which goes unsold during that year, unless the oil is needed for unanticipated sales. Under its provisions, the order may attempt to stabilize prices by

(1)limiting supply and establishing reserves in high production years, thus minimizing the price-depressing effect that excess producer stocks have on unsold spearmint oil, and

(2)ensuring that stocks are available in short supply years when prices would otherwise increase dramatically. The reserve pool stocks grown in large production years are drawn down in short crop years. An econometric model was used to assess the impact that volume control has on the prices producers receive for their commodity. Without volume control, spearmint oil markets would likely be over-supplied, resulting in low producer prices and a large volume of oil stored and carried over to the next crop year. The model estimates how much lower producer prices would likely be in the absence of volume controls. The Committee estimated the trade demand for the 2007-2008 marketing year for both classes of oil at 2,016,667 pounds, and that the expected combined carry-in will be 137,086 pounds. This results in a combined salable quantity needed of 1,879,581 pounds. Therefore, with volume control, sales by producers for the 2007-2008 marketing year will be limited to 1,949,003 pounds (the recommended salable quantity for both classes of spearmint oil). The recommended salable percentages, upon which 2007-2008 producer allotments are based, are 45 percent for Scotch and 48 percent for Native. Without volume controls, producers would not be limited to these allotment levels, and could produce and sell additional spearmint. The econometric model estimated a $1.45 decline in the season average producer price per pound (from both classes of spearmint oil) resulting from the higher quantities that would be produced and marketed without volume control. The Far West producer price for both classes of spearmint oil was $10.20 for 2005, which is below the average of $10.83 for the period of 1980 through 2005, based on National Agricultural Statistics Service data. The surplus situation for the spearmint oil market that would exist without volume controls in 2007-2008 also would likely dampen prospects for improved producer prices in future years because of the buildup in stocks. The use of volume controls allows the industry to fully supply spearmint oil markets while avoiding the negative consequences of over-supplying these markets. The use of volume controls is believed to have little or no effect on consumer prices of products containing spearmint oil and will not result in fewer retail sales of such products. The Committee discussed alternatives to the recommendations contained in this rule for both classes of spearmint oil. The Committee discussed and rejected the idea of recommending that there not be any volume regulation for both classes of spearmint oil because of the severe price-depressing effects that would occur without volume control. The Committee considered various alternative levels of volume control for Scotch spearmint oil, including increasing the percentage to a less restrictive level, or decreasing the percentage. After considerable discussion the Committee unanimously determined that 886,667 pounds and 45 percent would be the most effective salable quantity and allotment percentage, respectively, for the 2007-2008 marketing year. The Committee also considered various alternative levels of volume control for Native spearmint oil. After considerable discussion the Committee unanimously determined that 1,062,336 pounds and 48 percent would be the most effective salable quantity and allotment percentage, respectively, for the 2007-2008 marketing year. As noted earlier, the Committee's recommendation to establish salable quantities and allotment percentages for both classes of spearmint oil was made after careful consideration of all available information, including:

(1)The estimated quantity of salable oil of each class held by producers and handlers;

(2)the estimated demand for each class of oil;

(3)the prospective production of each class of oil;

(4)the total of allotment bases of each class of oil for the current marketing year and the estimated total of allotment bases of each class for the ensuing marketing year;

(5)the quantity of reserve oil, by class, in storage;

(6)producer prices of oil, including prices for each class of oil; and

(7)general market conditions for each class of oil, including whether the estimated season average price to producers is likely to exceed parity. Based on its review, the Committee believes that the salable quantity and allotment percentage levels recommended will achieve the objectives sought. Without any regulations in effect, the Committee believes the industry would return to the pronounced cyclical price patterns that occurred prior to the order, and that prices in 2007-2008 would decline substantially below current levels. As stated earlier, the Committee believes that the order has contributed extensively to the stabilization of producer prices, which prior to 1980 experienced wide fluctuations from year-to-year. National Agricultural Statistics Service records show that the average price paid for both classes of spearmint oil ranged from $4.00 per pound to $11.10 per pound during the period between 1968 and 1980. Prices have been consistently more stable since the marketing order's inception in 1980, with an average price for the period from 1980 to 2005 of $12.72 per pound for Scotch spearmint oil and $9.84 per pound for Native spearmint oil. During the period of 1998 through 2005, however, large production and carry-in inventories have contributed to prices below the 26-year average, despite the Committee's efforts to balance available supplies with demand. Prices have ranged from $8.00 to $11.00 per pound for Scotch spearmint oil and between $9.10 and $10.00 per pound for Native spearmint oil. The 2005 Native price exceeded the 26-year average by $0.16. Producers stated, however, that fuel cost increases more than offset the price increase. According to the Committee, the recommended salable quantities and allotment percentages are expected to achieve the goals of market and price stability. As previously stated, annual salable quantities and allotment percentages have been issued for both classes of spearmint oil since the order's inception. Accordingly, this action will not impose any additional reporting or recordkeeping requirements on either small or large spearmint oil producers or handlers. As with all Federal marketing order programs, reports and forms are periodically reviewed to reduce information requirements and duplication by industry and public sector agencies. The AMS is committed to complying with the E-Government Act, to promote the use of the Internet and other information technologies to provide increased opportunities for citizen access to Government information and services, and for other purposes. As noted in the initial regulatory flexibility analysis, USDA has not identified any relevant Federal rules that duplicate, overlap, or conflict with this final rule. In addition, the Committee's meeting was widely publicized throughout the spearmint oil industry and all interested persons were invited to attend the meeting and participate in Committee deliberations on all issues. Like all Committee meetings, the October 4, 2006, meeting was a public meeting and all entities, both large and small, were able to express views on this issue. A proposed rule concerning this action was published in the **Federal Register** on January 22, 2007 (71 FR 2639). Copies of the rule were provided to Committee staff, which in turn made it available to spearmint oil producers, handlers, and other interested person. Finally, the rule was made available through the Internet by the Office of the Federal Register and USDA. A 30-day comment period ending February 21, 2007, was provided to allow interested persons to respond to the proposal. No comments were received. A small business guide on complying with fruit, vegetable, and specialty crop marketing agreements and orders may be viewed at: *http://www.ams.usda.gov/fv/moab.html* . Any questions about the compliance guide should be sent to Jay Guerber at the previously mentioned address in the FOR FURTHER INFORMATION CONTACT section. After consideration of all relevant matter presented, including the information and recommendation submitted by the Committee and other available information, it is hereby found that this rule, as hereinafter set forth, will tend to effectuate the declared policy of the Act. List of Subjects in 7 CFR Part 985 Marketing agreements, Oils and fats, Reporting and recordkeeping requirements, Spearmint oil. For the reasons set forth in the preamble, 7 CFR part 985 is amended as follows: PART 985—MARKETING ORDER REGULATING THE HANDLING OF SPEARMINT OIL PRODUCED IN THE FAR WEST 1. The authority citation for 7 CFR part 985 continues to read as follows: Authority: 7 U.S.C. 601-674. 2. A new § 985.226 is added to read as follows: Note: This section will not appear in the Code of Federal Regulations. § 985.226 Salable quantities and allotment percentages—2007-2008 marketing year. The salable quantity and allotment percentage for each class of spearmint oil during the marketing year beginning on June 1, 2007, shall be as follows:

(a)*Class 1 (Scotch) oil* —a salable quantity of 886,667 pounds and an allotment percentage of 45 percent.

(b)*Class 3 (Native) oil* —a salable quantity of 1,062,336 pounds and an allotment percentage of 48 percent. Dated: March 23, 2007. Lloyd C. Day, Administrator, Agricultural Marketing Service. [FR Doc. E7-5811 Filed 3-28-07; 8:45 am] BILLING CODE 3410-02-P FEDERAL ELECTION COMMISSION 11 CFR Part 111 [Notice 2007-7] Best Efforts in Administrative Fines Challenges AGENCY: Federal Election Commission. ACTION: Final Rules and Transmittal of Rules to Congress. SUMMARY: The Federal Election Commission is revising its regulations to amend four aspects of its Administrative Fines Program (“AFP”), a streamlined process through which the Commission assesses civil money penalties for late filers and non-filers under the Federal Election Campaign Act of 1971, as amended (“FECA”). First, the Commission is revising its rules regarding the permissible grounds for challenging a proposed civil money penalty by clarifying the scope of the defense based on factual errors. Second, the Commission is incorporating a defense for political committees that demonstrate that they used their best efforts to file reports timely. Third, the Commission is revising its rules regarding its final determinations to clarify when the Commission finds that no violation has occurred. Lastly, the rules are being amended to explain that the Commission's statement of reasons for its final decision in an AFP matter usually consists of the reasons set forth by the Commission's reviewing officer as adopted by the Commission. The supplementary information that follows provides further information. EFFECTIVE DATE: April 30, 2007. FOR FURTHER INFORMATION CONTACT: Mr. J. Duane Pugh Jr., Acting Assistant General Counsel, or Ms. Margaret G. Perl, Attorney, 999 E Street, NW., Washington, DC 20463,

(202)694-1650 or

(800)424-9530. SUPPLEMENTARY INFORMATION: Through the AFP, the Commission may assess a civil money penalty for a violation of the reporting requirements of 2 U.S.C. 434(a) (such as not filing or filing late) without using the traditional enforcement procedures reserved for more serious violations under 2 U.S.C. 437g. *See* 2 U.S.C. 437g(a)(4)(C). 1 Congress intended the Commission to process these straightforward violations through a “simplified procedure” that would ease the enforcement burden on the Commission. *See* H.R. Rep. No. 106-295, at 11-12 (1999). The rules governing the AFP create a streamlined procedure that balances the respondent's rights to notice and opportunity to be heard with the need to operate the AFP in an expeditious manner without undue administrative burden. *See* Explanation and Justification for Final Rule on Administrative Fines, 65 FR 31787, 31788 (May 19, 2000) (“ *Admin Fines E&J* ”). 2 1 The AFP applies to violations of the reporting requirements by political committees and their treasurers. *See* 11 CFR 111.30. 2 The AFP is set to expire on December 31, 2008. *See* Pub. L. No. 109-115, sec. 721, 119 Stat. 2396, 2493-94 (2005); *Final Rule on Extension of Administrative Fines Program,* 70 FR 75717 (Dec. 21, 2005) (extending the sunset date in 11 CFR 111.30 to Dec. 31, 2008). When the Commission finds reason to believe (“RTB”) that a political committee and its treasurer (“respondents”) violated the reporting requirements, the respondents may challenge the finding and the proposed civil money penalty only for certain specified reasons. *See* revised 11 CFR 111.35. The Commission's reviewing officer considers the challenge and forwards a recommendation to the Commission. *See* 11 CFR 111.36(e). After considering the challenge, the reviewing officer's recommendation, and any subsequent comments from the respondent regarding the recommendation, the Commission makes a final determination. *See* revised 11 CFR 111.37. The Commission assesses civil money penalties based on published penalty schedules set forth in 11 CFR 111.43. Respondents may challenge the Commission's final determination in U.S. District Court. *See* 2 U.S.C. 437g(a)(4)(C)(iii); 11 CFR 111.38. In *Lovely* v. *FEC,* 307 F. Supp. 2d 294 (D. Mass. 2004), a political committee challenged a civil money penalty assessed by the Commission through the AFP. The political committee argued that it had used its best efforts to file the report in question and that this constituted a valid and complete defense under FECA's “best efforts” provision in 2 U.S.C. 432(i). *See Lovely,* 307 F. Supp. 2d at 299. Section 432(i) provides that “[w]hen the treasurer of a political committee shows that best efforts have been used to obtain, maintain, and submit the information required by this Act for the political committee, any report or any records of such committee shall be considered in compliance with [FECA].” 2 U.S.C. 432(i). 3 The *Lovely* court concluded that the plain language of FECA requires the Commission to consider the “best efforts” defense in the AFP, and that the record in the *Lovely* case did not establish whether the Commission had considered that defense. *See Lovely,* 307 F. Supp. 2d at 300-01. The court remanded the case to the Commission for further proceedings. *See id.* at 301. On remand, the Commission determined that the political committee had failed to show it used best efforts to file timely and confirmed the earlier imposition of the civil money penalty. *See Statement of Reasons in Administrative Fines Case 549* (Oct. 4, 2005), available at *http://www.fec.gov/law/law_rulemakings.shtml* under the heading “Best Efforts in Administrative Fines Challenges.” 3 The Commission had long interpreted the “best efforts” safe harbor to be limited to political committees' obligation to report certain substantive information that may be beyond the control of the committees to obtain. *See* 11 CFR 104.7 (defining “best efforts” for purposes of obtaining and submitting contributor information). The Commission is currently considering in a separate proceeding whether to revise its application of this provision in enforcement matters outside the scope of the AFP. *See Proposed Statement of Policy Regarding Treasurer's Best Efforts to Obtain, Maintain, and Submit Information as Required by the Federal Election Campaign Act,* 71 FR 71084 (Dec. 8, 2006). The Commission anticipates issuing a final policy statement this year. Although the *Lovely* decision did not directly challenge the AFP rules, and did not affect the validity of 11 CFR 111.35 or the Commission's consideration of any other AFP matters, the Commission opted to open a rulemaking by publishing a Notice of Proposed Rulemaking on December 8, 2006, to seek public comment on proposed revisions to the AFP based on the court's concerns. *See Notice of Proposed Rulemaking for Best Efforts in Administrative Fines Challenges,* 71 FR 71093 (Dec. 8, 2006) (“ *NPRM* ”). The Commission received two comments, which are available at *http://www.fec.gov/law/law_rulemakings.shtml* under the heading “Best Efforts in Administrative Fines Challenges.” 4 One comment made several recommendations as to how the Commission could further clarify the “best efforts” defense by incorporating the business management concept of “best practices” regarding corporate operation, financial controls, risk prevention and risk assessment, while the other comment was not relevant to this rulemaking. 4 The Internal Revenue Service did not comment on the *NPRM.* After consideration of the relevant comment, the Commission has decided to revise its rules governing the AFP in four ways, as described below:

(1)Clarifying the scope of the “factual errors” defense;

(2)incorporating a “best efforts” defense for challenges to RTB findings;

(3)clarifying when the Commission may find that no violation has occurred in an AFP matter; and

(4)explaining the procedure for issuing Commission statements of reasons for AFP final determinations. These changes address the concerns raised by the *Lovely* court and provide greater clarity regarding permissible grounds for challenging an RTB finding. The revisions are substantially similar to those proposed in the *NPRM.* Under the Administrative Procedure Act, 5 U.S.C. 553(d), and the Congressional Review of Agency Rulemaking Act, 5 U.S.C. 801(a)(1), agencies must submit final rules to the Speaker of the House of Representatives and the President of the Senate and publish them in the **Federal Register** at least 30 calendar days before they take effect. The final rules that follow were transmitted to Congress on March 23, 2007. Explanation And Justification I. Revised 11 CFR 111.35—Respondent Challenges to Reason To Believe Finding or Proposed Civil Money Penalty Revised section 111.35 sets forth the requirements for AFP respondents' challenges to RTB findings and proposed civil money penalties. Revised section 111.35(a) is clarified so that it applies only to respondents that seek to challenge an RTB finding or proposed civil money penalty. 5 The Commission is reorganizing and clarifying section 111.35 so that respondents may easily identify the basis for challenges in the AFP. *See* revised 11 CFR 111.35(b). 5 The revisions to section 111.35(a) did not alter the basic timing requirement that a respondent must file a challenge with the Commission within forty

(40)days of when the Commission issues its reason to believe finding. *See* revised 111.35(a); *Admin Fines E&J,* 65 FR at 31789. A. Revised 11 CFR 111.35(b)(1)—Changes to the “Factual Errors” Defense The *NPRM* sought comment on proposed clarifications to the “factual errors” defense and asked whether the regulation should include examples of the types of factual errors that would suffice as grounds for challenging an RTB finding. *See NPRM,* 71 FR at 71094. The comment did not address this issue. The Commission has decided to revise the rule regarding the “factual errors” defense as proposed in the *NPRM,* except for stylistic changes. The revised rule states that the facts alleged to be in error must be facts upon which the Commission relied in its RTB finding. *See* revised 11 CFR 111.35(b)(1). Thus, a respondent may not challenge an RTB finding based on factual errors that are irrelevant to the Commission's actual RTB finding, such as errors in the RTB finding regarding individual names or titles of committee staff. The revised rule provides two examples of the type of factual errors that would properly support a challenge: the respondent was not required to file the report in question, and the respondent did in fact timely file as described in 11 CFR 100.19. *See* revised 11 CFR 111.35(b)(1). For example, a political committee that is not subject to electronic filing requirements could challenge an RTB finding and proposed civil money penalty under section 111.35(b)(1) by showing that the paper copy was filed on time and the Commission relied on the factual error that the committee was required instead to file electronically. *See* 11 CFR 104.18(a). As referenced in the rule's second example, Commission rules currently state that certain reports are “timely filed” if they are deposited as registered or certified mail with the U.S. Post Office, as Priority Mail or Express Mail through the U.S. Post Office, or with an overnight delivery service to be delivered the next business day with a postmark no later than 11:59 p.m. EST on the filing date. *See* 11 CFR 100.19(b). Thus, a respondent who is not required to file electronically could challenge an RTB finding based on evidence that it deposited the report in the proper manner pursuant to section 100.19(b) on the filing date, even if the Commission did not receive the report because of a delivery failure by the U.S. Post Office or other delivery service. The Commission emphasizes that the revisions to section 111.35(b)(1) do not create any new “factual errors” defenses, but simply recognize the types of errors that the Commission has accepted previously as a defense in the AFP. B. Revised 11 CFR 111.35(b)(3)—“Best Efforts” Defense The *NPRM* also sought comment on whether to replace the “extraordinary circumstances” defense in the prior rule with a “best efforts” defense for challenging an RTB finding based upon 2 U.S.C. 432(i). *See NPRM,* 71 FR at 71094-95 and former 11 CFR 111.35(b)(1)(iii). The comment generally supported the idea of a “best efforts” defense. The Commission has decided to adopt the *Lovely* court's interpretation of 2 U.S.C. 432(i) and to incorporate a “best efforts” defense into the AFP. It appears in revised 11 CFR 111.35(b)(3) and is the same as the proposed rule, except for the changes noted below. The “best efforts” defense in the revised rule completely replaces the prior “extraordinary circumstances” defense because the two defenses are largely coextensive. The Commission reiterates its policy determination, as stated in the initial rulemaking for the AFP, that respondents' defenses in the AFP should be limited because the complete and timely disclosure of the political committee's financial activity is a “cornerstone of campaign finance law.” *See Admin Fines E&J,* 65 FR at 31789. The *Lovely* court recognized that the Commission could “refine by regulation what best efforts means in the context of submitting a report.” *Lovely* , 307 F. Supp. 2d at 300. In exercising its authority to interpret how to incorporate a “best efforts” defense into the AFP rules, the Commission is mindful of the statutory terms chosen by Congress. As also explained by the Commission in its statement of reasons in the *Lovely* case after remand, section 432(i) creates a safe harbor for treasurers who demonstrate that best efforts have been used to submit reports required by FECA. “Best” is an adjective of the superlative degree. Therefore, best efforts requires more than “some” or “good” efforts. Section 432(i)'s use of the phrase “best efforts,” instead of a “good faith” standard, means that an AFP respondent cannot rely upon the state of mind of the committee's treasurer or staff to claim this defense. 6 Instead, the Commission's revised rule at 11 CFR 111.35(b)(3), which sets forth the “best efforts” defense, focuses on actions taken by the respondent committee or treasurer to comply with reporting deadlines. 6 *See Statement of Reasons in Administrative Fines Case 549* (Oct. 4, 2005). The “best efforts” defense is described in the revised rule as a two-part test. The AFP respondent must demonstrate that:

(1)The respondent was prevented from filing in a timely manner by “reasonably unforeseen circumstances that were beyond the control” of the respondent; and

(2)the respondent filed the report in question no later than 24 hours after the end of the reasonably unforeseen circumstances preventing the timely filing. *See* revised 11 CFR 111.35(b)(3). The Commission believes this test is straightforward and should be easy for respondents to understand and document in their written responses. The final rule differs slightly from the proposed rule, which would have stated that the respondent must be prevented from filing in a timely manner by “unforeseen” circumstances. The Commission is making this change to emphasize that the “best efforts” defense is an objective test, which uses a reasonable person standard and does not depend upon the committee's treasurer or staff's subjective ability to foresee a particular circumstance. The examples included in the rule in 11 CFR 111.35(c) and (d), described below, illustrate how this defense operates as an objective test. Under the first part of the defense, the respondent bears the burden of showing that the reasonably unforeseen circumstances in fact *prevented* the timely and proper filing of the required report. The *NPRM* requested public comment regarding whether the Commission should apply a “but for” or “contributing factor” test for determining whether a respondent was prevented from timely filing under the rule. *See NPRM,* 71 FR at 71095. The comment did not address this issue. The Commission has decided that this rule requires a strict causal relationship between the circumstances described in the challenge (such as a natural disaster) and the respondent's inability to file the report timely. It is not sufficient for reasonably unforeseen circumstances to make it merely more difficult than usual for the respondent to file on time. The circumstance must cause the respondent to be *unable* to file in a timely and proper manner, despite the respondent attempting to use all available methods of filing. “Best efforts” is a high standard set by FECA, and the Commission reminds respondents that there are multiple ways for a committee to file required reports properly and timely. *See, e.g.,* 11 CFR 100.19(b) (political committees not required to file electronically may file on paper by hand delivery, first class, registered, certified, Priority or Express U.S. Mail, or overnight delivery service); 11 CFR 104.18 (mandatory electronic filings accepted through the Commission's filing system via internet, modem, or by submission of diskette or CD). If the respondent is prevented from using one method of filing by a problem (such as a technical problem with the Commission's modems), the respondent cannot claim the “best efforts” defense if it did not attempt to use other available methods to file timely (such as submission on a diskette or CD). 7 Therefore, to satisfy the “best efforts” defense, a respondent must demonstrate that it attempted to use all available methods to file, but that timely filing by each method was *prevented* by the reasonably unforeseen circumstances beyond the control of the respondent. 7 The Commission's guidance and instructions to political committees required to file electronically makes clear that if a report is successfully uploaded and accepted by the Commission, a confirmation receipt (including a validation number) is immediately sent to the committee via e-mail, fax or both. If a committee does not receive such a receipt, the committee should not assume the filing was received and should contact the Commission's technical support personnel. *See, e.g.* , “Frequently Asked Questions About Electronic Filing,” *available at http://www.fec.gov/support/faq_filing.shtml* (last visited Mar. 16, 2007); “Common Electronic Filing Mistakes,” *available at http://www.fec.gov/elecfil/mistakes.shtml* (last visited Mar. 16, 2007). The direct causal link between the reasonably unforeseen circumstances and the ability of the respondent to file the report also underlies the second part of the test for the “best efforts” defense. A respondent must show that the report was properly filed no later than 24 hours after the resolution of the circumstances preventing the timely filing. When the situation (such as a problem with Commission computers) is resolved, the Act's high standard of “best efforts” requires that the respondent file the report within a reasonably short period of time. The *NPRM* requested public comment regarding whether the 24-hour period in the proposed rule was appropriate for the “best efforts” defense. *See NPRM,* 71 FR at 71095. The comment did not address this issue. The Commission has determined that a 24-hour period best serves the interest in disclosure of the information as soon as practicable after the circumstances preventing the timely disclosure are resolved. C. Examples of Circumstances Under the “Best Efforts” Defense To provide further guidance to respondents regarding the scope of the “best efforts” defense, the revised rule includes examples of circumstances that will be considered “reasonably unforeseen and beyond the control of the respondent,” and examples of circumstances that will *not* be considered “reasonably unforeseen and beyond the control of the respondent.” *See* revised 11 CFR 111.35(c) and (d). The comment argued that the rule should not be limited to examples of defenses that would be unacceptable under the new “best efforts” defense, but should also include examples of defenses that would meet the new defense to provide guidance to committees and treasurers. The revised rule provides such illustrations. The examples of defenses in the revised rule are the same as proposed in the *NPRM,* except as noted otherwise below. Both sets of examples in revised section 111.35(c) and

(d)are non-exhaustive lists and should not be read to override the general requirements of the defense in revised section 111.35(b)(3) as discussed above. 1. Revised 11 CFR 111.35(c)—Reasonably Unforeseen Circumstances Beyond Respondents' Control Revised section 111.35(c) provides three examples of circumstances that the Commission will consider “reasonably unforeseen and beyond the control” of the respondent under a “best efforts” defense. The first example is that a failure of Commission computers or Commission-provided software, despite the respondent seeking technical assistance, caused the respondent's untimely electronic filing. *See* revised 11 CFR 111.35(c)(1). This example is similar to the example in the prior rules, in which a failure of Commission computers satisfied the “extraordinary circumstances” defense. *See* former 11 CFR 111.35(b)(4)(iv); *Admin Fines E&J,* 65 FR at 31790 (“Any failure of the Commission's system that prevents committees from filing their reports when due would be recognized as an extraordinary circumstance beyond the respondents' control.”). 8 The revised rule differs from the proposed rule by including the respondent's seeking technical assistance as part of the example. Consistent with the prior defense based on Commission computer failures, the revised example clarifies that political committees must use all Commission resources available to aid with electronic filing, such as technical support manuals and personnel, before a respondent will be considered “prevented” from timely filing by Commission computer or software failures. Thus, any failure of Commission computers, servers, filing system or Commission-provided software of sufficient severity that it results in a respondent being unable to file, despite the respondent seeking assistance from the Commission's technical support personnel, is a reasonably unforeseen circumstance beyond the respondent's control. 8 In order to satisfy the prior “extraordinary circumstances” defense, the failure of Commission computers had to last at least 48 hours. *See* former 11 CFR 111.35(b)(1)(iii). The new “best efforts” defense does not contain any minimum time period for the “reasonably unforeseen circumstances that were beyond the control” of the respondent. *See* revised 11 CFR 111.35(b)(3). The second example in revised section 111.35(c)(2) is a “widespread disruption of information transmissions over the Internet not caused by any failure of the Commission's or respondent's computer systems or Internet service provider.” This example covers circumstances in which technological problems at a third-party hub or information transfer location, rather than the Commission's or respondent's computer systems, caused widespread communication failures on the Internet that left the respondent unable to send, or the Commission unable to receive, an electronically filed report. This failure to transmit information must occur irrespective of any failures of the Commission's or respondent's computer systems or Internet service providers. If a respondent demonstrates such a widespread disruption of information transmissions occurred, the Commission will consider it “reasonably unforeseen circumstances that were beyond the control” of the respondent. As with all the examples in revised section 111.35(c)(2), the respondent bears the burden of showing that these reasonably unforeseen circumstances *in fact prevented* the respondent from filing timely, despite attempts to file by any available alternative methods permitted under Commission regulations. 9 This example has been refined from the proposed rule to clarify the types of transmission failures contemplated. 9 The Commission's electronic filing manuals detail step-by-step instructions for the various methods of acceptable electronic filing via the Internet, modem, or by saving the report to a diskette or CD. *See, e.g.* , “FECFile User Manual for Candidate Committees,” *available at http://www.fec.gov/elecfil/authorized_manual/manual.shtml* (last visited Mar. 16, 2007). The final example in the rule states that a “[s]evere weather or other disaster-related incident” is a reasonably unforeseen circumstance beyond the control of the respondent. *See* revised 11 CFR 111.35(c)(3). Under the prior rule, the Commission deemed certain weather conditions (lasting more than 48 hours) met the “extraordinary circumstances” test, explaining that “natural disasters where a committee's office is located in the disaster area and the committee cannot timely file a report because of lack of electricity or flooding or destruction of committee records” would satisfy the defense. *See* previous 11 CFR 111.35(b)(1)(iii); *Admin Fines E&J,* 65 FR at 31790. The revised rule permits such severe weather-related events occurring at the respondent's or Commission's location to form the basis for a “best efforts” defense. The Commission is not defining with specificity the level of severity for weather or other disaster-related incidents in revised section 111.35(c)(3) because a respondent's challenge must show that the weather or disaster-related incident *in fact prevented* the respondent from filing timely. Given that the effects upon the respondent of each weather or disaster-related incident will vary, the Commission will evaluate the particular facts contained in individual challenges, instead of mandating such details in a rule of general application. 2. Revised 11 CFR 111.35(d)—Circumstances That Are Not Reasonably Unforeseen or Beyond Respondents' Control Revised section 111.35(d) includes a non-exhaustive list of circumstances that are *not* considered “reasonably unforeseen and beyond the control” of the respondent, and will not support a “best efforts” finding. *See* revised 11 CFR 111.35(d)(1) through (6). All but two of these examples are drawn from the list of events that did not constitute “extraordinary circumstances” under the Commission's prior rule: Negligence; delays caused by committee vendors or contractors; illness, inexperience or unavailability (including death) of the treasurer or other staff; and committee computer, software or Internet service provider failures. *Compare* revised 11 CFR 111.35(d)(1) through

(4)*with* former 11 CFR 111.35(b)(4). One example concerns Internet service provider failures. *See* revised 11 CFR 111.35(d)(4). The proposed rule described this example as failures of committee computers or software. The final rule also includes Internet service provider failures. Because many Internet service providers are available, a failure limited to one provider is not a defense for late filing or not filing. The revised rule adds two examples to this list based upon the Commission's experience with respondent challenges in the AFP: A failure to know filing dates and a failure to use Commission software properly. *See* revised 11 CFR 111.35(d)(5) and (6). Under the revised rule, a respondent's challenge will not succeed if its “best efforts” defense is based on any of these circumstances as the cause of the failure to file timely. The Commission notes that the examples in revised section 111.35(d) are not exhaustive, but are illustrative of the types of situations that are not reasonably unforeseen *and* beyond the respondent's control. The Commission strongly encourages all political committees to name assistant treasurers and have additional staff available so that their ability to file reports on time will not be compromised due to the unavailability or inexperience of the treasurer or other staff. *See Final Rules on Administrative Fines* , 68 FR 12572, 12573 (Mar. 17, 2003) (adding staff “inexperience” and “unavailability” as examples of circumstances that will not be considered “extraordinary” under former 11 CFR 111.35(b)(4)(iii)). The Commission's implementation of the “best efforts” defense set forth in this revised rule serves as a proxy for the factual investigation of a respondent's internal practices regarding filing of reports that would ordinarily be necessary to determine whether such practices were sufficient to constitute best efforts. The comment argued that the Commission should conduct a full examination of the business models and management procedures of each committee to determine whether the committee implemented proper back-up systems and other measures reflecting management “best practices” in the relevant industry to reduce the risk of a late filing. However, such an investigation would be resource-intensive for the Commission, burdensome for the respondent, and inappropriate in the AFP, which is a streamlined procedure created by Congress to alleviate the Commission's enforcement burden for routine and minor filing violations. Absent reasonably unforeseen circumstances that were beyond the control of the respondent, the Commission sees no reason why political committees cannot file reports on time. 10 Thus, the Commission's implementation of the “best efforts” defense appropriately incorporates a statutory “best efforts” standard, while taking into account the unique streamlined nature of the AFP. 10 *See Admin Fines E&J* , 65 FR at 31790 (stating that political committees should be aware of their reporting duties and noting that the Commission makes efforts to send reminders of deadlines and political committees have ample time from the end of the reporting period to the filing deadline to prepare and file reports). D. Revised 11 CFR 111.35(e)—Factual Basis for Challenge The Commission is adding paragraph

(e)to 11 CFR 111.35 to require that the respondent's written response must detail the factual basis supporting its challenge. Furthermore, respondents must provide supporting documentation for their challenges. The comment did not address this provision, which is identical to the proposed rule. The three defenses specified in sections 111.35(b)(1) through

(3)(factual error, miscalculation of civil money penalty, and best efforts) are the only permissible grounds for challenging the Commission's RTB finding or proposed civil money penalty, and a respondent's written response must be based on one of these grounds to be considered by the reviewing officer and the Commission. Respondents bear the burden of showing that a permissible defense is satisfied. 11 11 The Commission considers affidavits more persuasive evidence than unsworn statements submitted in support of the respondent's challenge. II. Revised 11 CFR 111.37—Commission Review of Respondent's Challenge and Reviewing Officer's Recommendation A. Revised 11 CFR 111.37(b)—Commission Finding That No Violation Has Occurred Revised section 111.37 sets forth procedures regarding the Commission's final determination for AFP matters upon receipt of the respondent's challenge and the reviewing officer's recommendation. *See* revised 11 CFR 111.37(a) through (d). The *NPRM* sought comment on proposed revisions to section 111.37(b) regarding Commission determinations that no violation has occurred where the RTB finding is based on a factual error, and where the respondent demonstrated it used best efforts to file timely. *See NPRM* , 71 FR at 71095. The comment did not address these rules. The Commission is revising section 111.37(b) to clarify that the existence of factual errors or a finding of best efforts are complete defenses. Thus, if one of these defenses is satisfied, the Commission will conclude that no violation of FECA has occurred. Please note that the defense based on an incorrect basis for calculating the civil money penalty (section 111.35(b)(2)) is a defense only as to the amount of the civil money penalty and does not serve as a basis for a finding of no violation under the AFP. B. Revised 11 CFR 111.37(d)—Commission Statement of Reasons in AFP Final Determinations The *NPRM* sought comment on proposed revisions to section 111.37(d) to make clear that the reasons for the reviewing officer's recommendation regarding the challenge, unless modified or rejected by the Commission, will serve as the Commission's statement of reasons regarding the final determination in the AFP matter. 12 See NPRM, 71 FR at 71095. This proposed revision addresses the *Lovely* court's concerns that it was unclear what constituted the statement of reasons for the Commission's final determination in that matter. The comment did not address this issue. 12 These revisions do not affect any statements of reasons the Commissioners may issue in enforcement matters under review. The Commission is revising section 111.37(d) to indicate that, unless otherwise indicated by the Commission, the statement of reasons for the Commission's final determination in an AFP matter consists of the reasons provided by the reviewing officer for the recommendation, if approved by the Commission. *See Lovely* , 307 F. Supp. 2d at 301 (stating that the Commission's “adoption of a reviewing officer's recommendation may suffice in some circumstances”). Statements setting forth additional or different reasons may also be issued. The revised rule also recognizes that the Commission may modify or reject the reviewing officer's recommendation in whole or in part. *See* 11 CFR 111.37(d). In such cases, the Commission will indicate the grounds for its action and it or individual Commissioners may issue one or more statements of reasons. Former section 111.37(d) provided that the Commission could determine that a violation of 2 U.S.C. 434(a) had occurred, but waive the civil money penalty because the respondent demonstrated the existence of “extraordinary circumstances” under former section 111.35(b)(1)(iii). *See* former 11 CFR 111.37(d). As discussed above, the Commission is removing the “extraordinary circumstances” defense and replacing it with a “best efforts” defense in revised section 111.35(b)(3). Under 2 U.S.C. 432(i), if the Commission determines that the treasurer used best efforts in compliance with this rule, there is no violation of FECA and the Commission will so notify the respondent pursuant to revised section 111.37(b). *See* revised 11 CFR 111.37(b). Therefore, the Commission need not retain the former section 111.37(d). Certification of No Effect Pursuant to 5 U.S.C. 605(b) (Regulatory Flexibility Act) The Commission certifies that the attached final rules will not have a significant economic impact on a substantial number of small entities. The basis for this certification is that any individuals and not-for-profit entities affected by these rules are not “small entities” under 5 U.S.C. 601(6). The definition of “small entity” does not include individuals, and classifies a not-for-profit enterprise as a “small organization” if it is independently owned and operated and not dominant in its field. 5 U.S.C. 601(4). The rules apply to all types of political committees and their treasurers. State political party committees are not independently owned and operated because they are not financed and controlled by a small identifiable group of individuals, and they are affiliated with the larger national political party organizations. In addition, the State political party committees representing the Democratic and Republican parties have a major controlling influence within the political arena of their State and are thus dominant in their field. District and local party committees are generally considered affiliated with the State committees and need not be considered separately. To the extent that any State party committees representing minor political parties or any other political committees might be considered “small organizations,” the number that would be affected by this rule is not substantial. Furthermore, any separate segregated funds affected by these rules are not-for-profit political committees that do not meet the definition of “small organization” because they are financed by a combination of individual contributions and financial support for certain expenses from corporations, labor organizations, membership organizations, or trade associations, and therefore are not independently owned and operated. Most of the other political committees affected by these rules are not-for-profit committees that do not meet the definition of “small organization.” Most political committees are not independently owned and operated because they are not financed by a small identifiable group of individuals. Most political committees rely on contributions from a large number of individuals to fund the committees' operations and activities. The final rules also do not impose any additional restrictions or increase the costs of compliance for respondents within the AFP. Instead, the final rules provide additional defenses available to political committees and their treasurers, thereby potentially increasing the number of situations in which the Commission assesses no civil money penalty. Moreover, these rules apply only in the AFP, where penalties are proportionate to the amount of a political committee's financial activity. Any political committee meeting the definition of “small entity” would be subject to lower fines than larger committees with more financial activity. Therefore, the final rules will not have a significant economic impact on a substantial number of small entities. List of Subjects in 11 CFR Part 111 Administrative practice and procedures, Elections, Law enforcement. For the reasons set out in the preamble, the Federal Election Commission is amending subchapter A of chapter I of Title 11 of the *Code of Federal Regulations* as follows: PART 111—COMPLIANCE PROCEDURE (2 U.S.C. 437g, 437d(a)) 1. The authority citation for part 111 is revised to read as follows: Authority: 2 U.S.C. 432(i), 437g, 437d(a), 438(a)(8); 28 U.S.C. 2461 nt. 2. Section 111.35 is revised to read as follows: § 111.35 If the respondent decides to challenge the alleged violation or proposed civil money penalty, what should the respondent do?

(a)To challenge a reason to believe finding or proposed civil money penalty, the respondent must submit a written response to the Commission within forty

(40)days of the Commission's reason to believe finding.

(b)The respondent's written response must assert at least one of the following grounds for challenging the reason to believe finding or proposed civil money penalty:

(1)The Commission's reason to believe finding is based on a factual error including, but not limited to, the committee was not required to file the report, or the committee timely filed the report in accordance with 11 CFR 100.19;

(2)The Commission improperly calculated the civil money penalty; or

(3)The respondent used best efforts to file in a timely manner in that:

(i)The respondent was prevented from filing in a timely manner by reasonably unforeseen circumstances that were beyond the control of the respondent; and

(ii)The respondent filed no later than 24 hours after the end of these circumstances.

(c)Circumstances that will be considered reasonably unforeseen and beyond the control of respondent include, but are not limited to:

(1)A failure of Commission computers or Commission-provided software despite the respondent seeking technical assistance from Commission personnel and resources;

(2)A widespread disruption of information transmissions over the Internet not caused by any failure of the Commission's or respondent's computer systems or Internet service provider; and

(3)Severe weather or other disaster-related incident.

(d)Circumstances that will not be considered reasonably unforeseen and beyond the control of respondent include, but are not limited to:

(1)Negligence;

(2)Delays caused by committee vendors or contractors;

(3)Illness, inexperience, or unavailability of the treasurer or other staff;

(4)Committee computer, software or Internet service provider failures;

(5)A committee's failure to know filing dates; and

(6)A committee's failure to use filing software properly.

(e)Respondent's written response must detail the factual basis supporting its challenge and include supporting documentation. 3. In section 111.37, paragraphs

(b)and

(d)are revised to read as follows: § 111.37 What will the Commission do once it receives the respondent's written response and the reviewing officer's recommendation?

(b)If the Commission, after reviewing the reason to believe finding, the respondent's written response, and the reviewing officer's written recommendation, determines by an affirmative vote of at least four

(4)of its members, that no violation has occurred (either because the Commission had based its reason to believe finding on a factual error or because the respondent used best efforts to file in a timely manner) or otherwise terminates its proceedings, the Commission shall authorize the reviewing officer to notify the respondent by letter of its final determination.

(d)When the Commission makes a final determination under this section, the statement of reasons for the Commission action will, unless otherwise indicated by the Commission, consist of the reasons provided by the reviewing officer for the recommendation, if approved by the Commission, although statements setting forth additional or different reasons may also be issued. If the reviewing officer's recommendation is modified or not approved, the Commission will indicate the grounds for its action and one or more statements of reasons may be issued. Dated: March 22, 2007. Robert D. Lenhard, Chairman, Federal Election Commission. [FR Doc. E7-5730 Filed 3-28-07; 8:45 am] BILLING CODE 6715-01-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 13 [Docket No. FAA-2006-26477] FAA Civil Penalty Adjudication Web Site AGENCY: Federal Aviation Administration (FAA), DOT. ACTION: Final rule; technical amendment. SUMMARY: The FAA has a Web site that provides access to many documents relating to the agency's administrative adjudication of civil penalty cases. Currently, the address provided in the regulations for the civil penalty adjudication Web site is incorrect. In this rulemaking, we are amending the regulations to substitute the correct Web site address. DATES: This rule is effective on March 29, 2007. FOR FURTHER INFORMATION CONTACT: Sheila Skojec, Office of the Chief Counsel, Adjudication Branch, 800 Independence Avenue, SW., Washington, DC, 20591; telephone 202/385-8228. SUPPLEMENTARY INFORMATION: Background The FAA assesses civil penalties for violations of certain provisions of the Federal aviation statute and the Federal hazardous materials transportation statute. The rules of practice in 14 CFR 13.16 and 14 CFR part 13, subpart G (14 CFR 13.201-13.235) govern these proceedings involving the adjudication of civil penalties. The agency has a Web site containing documents relating to the agency's adjudication of civil penalties. These documents include decisions and orders issued by the Administrator, indexes of decisions, contact information for the Hearing Docket and the administrative law judges, the rules of practice, and other information. We recently discovered that the address for the Web site set forth in 14 CFR 13.210 is incorrect. As a result, we are amending the rules to correct this problem. This Rulemaking FAA Civil Penalty Adjudication Web Site. We are amending section 13.210 to correct the Web site address for the FAA civil penalty adjudication Web site. The correct address is: *http://www.faa.gov/about/office_org/headquarters_offices/agc/pol_adjudication/AGC400/Civil_Penalty.* Procedural Matters In general, under the Administrative Procedure Act (APA), 5 U.S.C. 553, agencies must publish regulations for public comment and give the public at least 30 days notice before adopting regulations. There is an exception to these requirements if the agency for good cause finds that notice and public comment are impracticable, unnecessary, or contrary to the public interest. In this case, the FAA finds that notice and comment requirements are unnecessary due to the administrative nature of the change. It is in the public interest for the Rules of Practice to provide the correct address for the civil penalty adjudication Web site as soon as possible. List of Subjects in 14 CFR Part 13 Administrative practice and procedure, Air transportation, Aviation safety, Hazardous materials transportation, Investigations, Law enforcement, Penalties. The Amendments Accordingly, the Federal Aviation Administration amends part 13 of the Federal Aviation Regulations as follows: PART 13—INVESTIGATIVE AND ENFORCEMENT PROCEDURES 1. The authority section for part 13 continues to read as follows: Authority: 18 U.S.C. 6002; 28 U.S.C. 2461 (note); 49 U.S.C. 106(g), 5121-5128, 40113-40114, 44103-44106, 44702-44703, 44709-44710, 44713, 46101-46111, 46301, 46302 (for a violation of 49 U.S.C. 46504), 46304-46316, 46318, 46501-46502, 46504-46507, 47106, 47107, 47111, 47122, 47306, 47531-47532; 49 CFR 1.47. 2. Amend § 13.210 by revising paragraphs (e)(2) to read as follows: § 13.210 Filing of documents.

(e)* * *

(1)* * *

(2)Decisions and orders issued by the Administrator in civil penalty cases, indexes of decisions, contact information for the FAA Hearing Docket and the administrative law judges, the rules of practice, and other information are available on the FAA civil penalty adjudication Web site at: *http://www.faa.gov/about/office_org/headquarters_offices/agc/pol_adjudication/AGC400/Civil_Penalty.* Issued in Washington, DC on March 23, 2007. Rebecca MacPherson, Assistant Chief Counsel for Regulations. [FR Doc. 07-1524 Filed 3-28-07; 8:45 am]

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