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(a) Each producer-handler and each handler making payments pursuant to § 1060.62(b) shall make reports to the market administrator at such time and in such manner as the market administrator may prescribe:

(b) Each handler pursuant to § 1060.10 (c) shall report to the market administrator in detail and on forms prescribed by the market administrator on or before the 7th day after the end of each month the quantities of skim milk and butterfat in producer milk delivered to each pool plant in such month and all other producer milk for which it is a handler;

(c) Each handler who receives milk from producers, payment for which is to be made to a cooperative association pursuant to § 1060.80 (b), shall report to such cooperative association with respect to each such producer, on forms approved by the market administrator, as follows:

(1) On or before the 20th day of the month, the total pounds of milk received during the first 15 days of the month;

(2) On or before the seventh day after the end of the month:

(1) The pounds per shipment, the total pounds of milk and the average butterfat test of milk received from such producer during the month;

(ii) The amount or rate and nature of any deductions; and

(iii) The amount of any payments to such producer pursuant to § 1060.86.

CLASSIFICATION OF MILK

§ 1060.40 Skim milk and butterfat to be classified.

(a) The skim milk and butterfat which are required to be reported pursuant to § 1060.35 and § 1060.37(b) shall be classified each month by the market administrator pursuant to the provisions of §§ 1060.41 through 1060.46; and

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(b) If any water contained in the milk from which a product is made is removed before the product is utilized or disposed of by the handler, the pounds of skim milk utilized or disposed of in such product shall be considered to be a quantity equivalent to the nonfat milk solids contained in such product plus all the water originally associated with such solids. § 1060.41 Classes of utilization.

Subject to the conditions set forth in §§ 1060.42 through 1060.46, the classes of utilization shall be as follows:

(a) Class I milk. Class I milk shall be all skim milk (including that used to produce reconstituted skim milk) and butterfat:

(1) Disposed of in the form of a fluid milk product except:

(i) Fluid milk products classified as Class II pursuant to paragraph (b) (2) and (3) of this section;

(ii) Fluid milk products which are fortified with nonfat milk solids shall be Class I in an amount equal only to the weight of an equal volume of an unfortified product of the same butterfat content;

(2) Contained in inventory of packaged fluid milk products on hand at the end of the month; and

(3) Not accounted for as Class II milk: (b) Class II milk. Class II milk shall be:

(1) Skim milk and butterfat used to produce any product other than a fluid milk product:

(2) Skim milk and butterfat disposed of:

(1) For livestock feed; or

(ii) Dumped after prior notification to and opportunity for verification by the market administrator;

(3) The weight of skim milk in any fortified fluid milk product in excess of the pounds classified as Class I milk pursuant to paragraph (a) (1) (ii) of this section;

(4) In inventory of bulk fluid milk products on hand at the end of the month;

(5) Skim milk and butterfat, respectively, in actual shrinkage at each pool plant allocated pursuant to § 1060.42 (b) (1) but not in excess of:

(i) Two percent of producer milk except that received from a handler pursuant to § 1060.10 (c) or diverted pursuant to § 1060.16 to a nonpool plant;

(ii) Plus 1.5 percent of milk received in bulk tank lots from other pool plants;

(iii) Plus 1.5 percent of producer milk received from a handler pursuant to § 1060.10 (c), except that if the handler operating the pool plant files notice with the market administrator that the purchase of such milk is on the basis of farm tests and weights determined by farm bulk tank calibrations, the applicable percentage shall be two percent;

(iv) Plus 1.5 percent of milk received in bulk tank lots from other order plants exclusive of the quantity for which Class II utilization was requested by the opera.tors of both plants;

(v) Plus 1.5 percent of milk in bulk tank lots from unregulated supply plants, exclusive of the quantity for which Class II utilization was requested by the handler;

(vi) Less 1.5 percent of milk in bulk tank lots transferred from pool plants to other plants; and

(vii) Plus 0.5 percent of milk received by a cooperative handler pursuant to § 1060.10 (b) and (c) from producers as determined by farm tests and weights measured by farm bulk tank calibrations, unless the exception in subparagraph (5) (iii) of this paragraph applies; and

(6) Skim milk and butterfat in shrinkage allocated pursuant to § 1060.42(b) (2).

§ 1060.42 Shrinkage.

The market administrator shall allocate shrinkage over a handler's receipts at each pool plant as follows:

(a) Compute the total shrinkage of skim milk and butterfat, respectively, for each handler at each plant; and

(b) Prorate the resulting amounts among the receipts of skim milk and butterfat contained in:

(1) The net quantity of producer milk and other milk specified in § 1060.41 (b) (5) (except milk diverted to a nonpool plant pursuant to § 1060.15); and

(2) Other source milk exclusive of that specified in § 1060.41(b) (5). § 1060.44

Transfers.

Skim milk or butterfat in the form of a fluid milk product shall be classified:

(a) At the utilization indicated by the transferee and transferor handlers in their reports pursuant to § 1060.35, otherwise as Class I milk, if transferred from a pool plant to another pool plant subject in either event to the following conditions:

(1) The skim milk or butterfat so assigned to either class shall be limited to

the amount thereof remaining in such class in the transferee plant after computations pursuant to § 1060.46 (a) (9) and the corresponding step of § 1060.46 (b);

(2) If the transferor handler received during the month other source milk to be allocated pursuant to § 1060.46 (a) (4) and the corresponding step of § 1060.46 (b), the skim milk and butterfat so transferred shall be classified so as to allocate the least possible Class I utilization to such other source milk; and

(3) If the transferor handler received during the month other source milk to be allocated pursuant to § 1060.46 (a) (8) or (9) and the corresponding steps of § 1060.46(b), the skim milk and butterfat so transferred up to the total of such receipts shall not be classified as Class I milk to a greater extent than would be applicable to a like quantity of such other source milk received at the transferee plant, if such classification would change the classification of producer milk on the market or the classification of such other source milk received by the transferor handler during the month;

(b) As Class I milk, if transferred from a pool plant to a producer-handler or to an exempt government institution as defined in § 1060.60;

(c) As Class I if transferred from a pool plant in packaged form to a nonpool plant that is neither an other order plant nor a producer-handler plant;

(d) As Class I milk, if transferred or diverted to a nonpool plant that is neither an other order plant nor a producer-handler plant and is located more than 300 miles by shortest highway distance as determined by the market administrator, from the nearer of the city halls of Fargo or Grand Forks, N. Dak., except that cream so transferred may be classified as Class II if the handler claims classification of such cream in Class II in his report pursuant to § 1060.35, the handler tags the container of such cream as for manufacturing purposes only (and so noticed on invoice), and the handler gives the market administrator sufficient notice to allow him to verify the shipment;

(e) As Class I milk if transferred or diverted in bulk to a nonpool plant that is neither an other order plant nor a producer-handler plant and is not more than 300 miles by shortest highway distance as determined by the market administrator from the nearer of the city halls of

Fargo or Grand Forks, N. Dak., unless the requirements of subparagraphs (1) and (2) of this paragraph are met, in which case the skim milk and butterfat so transferred or diverted shall be classified in accordance with the assignment resulting from subparagraph (3) of this paragraph:

(1) The transferring or diverting handler claims classification pursuant to the assignment set forth in subparagraph (3) of this paragraph in his report submitted to the market administrator pursuant to § 1060.35 for the month within which such transaction occurred;

(2) The operator of such nonpool plant maintains books and records showing the utilization of all skim milk and butterfat received at such plant which are made available if requested by the market administrator for the purpose of verification; and

(3) The skim milk and butterfat so transferred or diverted shall be classified on the basis of the following assignment of utilization at such nonpool plant in excess of receipts of packaged fluid milk products from all pool plants and other order plants;

(i) Any Class I utilization disposed of on routes in the marketing area shall be first assigned to the skim milk and butterfat in the fluid milk products so transferred or diverted from pool plants, next pro rata to receipts from other order plants and thereafter to receipts from dairy farmers who the market administrator determines constitute regular sources of supply of Grade A milk for such nonpool plant;

(ii) Any Class I utilization disposed of on routes in the marketing area of another order issued pursuant to the Act shall be first assigned to receipts from plants fully regulated by such order, next pro rata to receipts from pool plants and other order plants not regulated by such order, and thereafter to receipts from dairy farmers who the market administrator determines constitute regular sources of supply for such nonpool plant;

(iii) Class I utilization in excess of that assigned pursuant to subdivisions (i) and (ii) of this subparagraph shall be assigned first to remaining receipts from dairy farmers who the market administrator determines constitute the regular source of supply for such nonpool plant and Class I utilization in excess of such receipts shall be assigned

pro rata to unassigned receipts at such nonpool plant from all pool and other order plants;

(iv) To the extent that Class I utilization is not so assigned to it the skim milk and butterfat so transferred or diverted shall be classified as Class II milk;

(v) If any skim milk or butterfat is transferred to a second nonpool plant under this paragraph, the same conditions of audit, classification and allocation shall apply;

(f) As follows, if transferred to an other order plant in excess of receipts from such plant in the same category as described in subparagraph (1), (2), or (3) of this paragraph:

(1) If transferred in packaged form, classification shall be in the classes to which allocated as a fluid milk product under the other order;

(2) If transferred in bulk form, classification shall be in the classes to which allocated as a fluid milk product under the other order (including allocation under the conditions set forth in subparagraph (3) of this paragraph);

(3) If the operators of both the transferor and transferee plants so request in the reports of receipts and utilization filed with their respective market administrators, transfers in bulk form shall be classified as Class II to the extent of the Class II utilization (or comparable utilization under such other order) available for such assignment pursuant to the allocation provisions of the transferee order;

(4) If information concerning the classification to which allocated under the other order is not available to the market administrator for purposes of establishing classification pursuant to this paragraph, classification shall be as Class I subject to adjustment when such information is available;

(5) For purposes of this paragraph, if the transferee order provides for more than two classes of utilization, skim milk and butterfat allocated to a class consisting primarily of fluid milk products shall be classified as Class I and skim milk and butterfat allocated to other classes shall be classified as Class II; and

(6) If the form in which any fluid milk product is transferred to another order plant is not defined as a fluid milk product under such other order, classification shall be in accordance with the provisions of § 1060.41.

[32 F.R. 13703, Sept. 30, 1967, as amended at 34 F.R. 18659, Nov. 22, 1969]

§ 1060.45 Computation of skim milk and butterfat in each class.

For each month the market administrator shall correct for mathematical and for other obvious errors the reports of receipts and utilization submitted pursuant to § 1060.35 by each handler and shall compute the pounds of skim milk and butterfat in each class at all pool plants of such handler. Allocation pursuant to § 1060.46 and computation of obligations pursuant to § 1060.70 shall be based upon the combined utilization so computed.

§ 1060.46

Allocation of skim milk and butterfat classified.

After making the computations pursuant to § 1060.45, the market administrator shall determine the classification of producer milk for each handler as follows:

(a) Skim milk shall be allocated in the following manner:

(1) Subtract from the total pounds of skim milk in Class II the pounds of skim milk classified as Class II pursuant to § 1060.41(b) (5);

(2) Subtract from the pounds of skim milk in each class the pounds of skim milk in fluid milk products received in packaged form from other order plants, except that to be subtracted pursuant to subparagraph (4)(v) of this paragraph, as follows:

(i) From Class II milk, the lesser of the pounds remaining or 2 percent of such receipts; and

(ii) From Class I milk, the remainder of such receipts;

(3) Subtract from the remaining pounds of skim milk in Class I, the pounds of skim milk in inventory of packaged fluid milk products on hand at the beginning of the month;

(4) Subtract in the order specified below from the pounds of skim milk remaining in each class, in series beginning with Class II, the pounds of skim milk in each of the following:

(i) Other source milk in a form other than that of a fluid milk product;

(ii) Receipts of fluid milk products (except filled milk) for which Grade A certification is not established, and receipts of fluid milk products from unidentified sources;

(iii) Receipts of fluid milk products from a producer-handler, as defined under this or any other Federal order, and from exempt institutions as defined in § 1060.60 (b);

(iv) Receipts of reconstituted skim milk in filled milk from unregulated supply plants; and

(v) Receipts of reconstituted skim milk in filled milk from other order plants which are regulated under an order providing for individual handler pooling, to the extent that reconstituted skim milk is allocated to Class I at the transferor plant;

(5) Subtract, in the order specified below, from the pounds of skim milk remaining in Class II, but not in excess of such quantity:

(i) The pounds of skim milk in receipts of fluid milk products from an unregulated supply plant that were not subtracted pursuant to subparagraph (4) (iv) of this paragraph;

(a) For which the handler requests Class II utilization; or

(b) The pounds of skim milk in receipts which are in excess of the pounds of skim milk determined by subtracting from 125 percent of the pounds of skim milk remaining in Class I milk (exclusive of transfers between pool plants of the same handler) the sum of the pounds of skim milk in producer milk, receipts of fluid milk products from pool plants of other handlers, and receipts of fluid milk products in bulk from other order plants that were not subtracted pursuant to subparagraph (4) (v) of this paragraph;

and

(ii) The pounds of skim milk in receipts of fluid milk products in bulk from an other order plant that were not subtracted pursuant to subparagraph (4) (v) of this paragraph, in excess of similar transfers to such plant, if Class II utilization was requested by the operator of such plant and the transferee handler but not in excess of the pounds of skim milk remaining in Class II milk;

(6) Subtract from the pounds of skim milk remaining in each class, in series beginning with Class II, the pounds of skim milk in inventory of fluid milk products in bulk on hand at the beginning of the month;

(7) Add to the remaining pounds of skim milk in Class II milk the pounds subtracted pursuant to subparagraph (1) of this paragraph;

(8) Subtract from the pounds of skim milk remaining in each class, pro rata to such quantities, the pounds of skim milk in receipts of fluid milk products from unregulated supply plants which

were not subtracted pursuant to subparagraphs (4) (iv) or (5) (i) of this paragraph;

(9) Subtract from the pounds of skim milk remaining in each class, in the following order, the pounds of skim milk in receipts of fluid milk products in bulk from other order plant(s), in excess in each case of similar transfers to the same plant, which were not subtracted pursuant to subparagraphs (4) (v) or (5) (ii) of this paragraph;

(i) In series beginning with Class II, the pounds determined by multiplying the pounds of such receipts by the larger of the percentage of estimated Class II utilization of skim milk announced for the month by the market administrator pursuant to § 1060.32(1) or the percentage that Class II utilization remaining is of the total remaining utilization of skim milk of the handler; and

(ii) From Class I milk, the remaining pounds of such receipts;

(10) Subtract from the pounds of skim milk remaining in each class the pounds of skim milk received in fluid milk products from pool plants of other handlers according to the classification assigned pursuant to § 1060.44 (a); and

(11) If the pounds of skim milk remaining in both classes exceed the pounds of skim milk in producer milk, subtract such excess from the pounds of skim milk remaining in each class in series beginning with Class II. Any amount so subtracted shall be known as "overage";

(b) Butterfat shall be allocated in accordance with the procedure outlined for skim milk in paragraph (a) of this section; and

(c) Combine the amounts of skim milk and butterfat determined pursuant to paragraphs (a) and (b) of this section into one total for each class and determine the weighted average butterfat content of producer milk in each class. [34 F.R. 18659, Nov. 22, 1969]

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times the Chicago butter price for the month. The resulting price shall be rounded to the nearest full cent. For the purpose of computing Class I prices from the effective date hereof through April 1969, the basic formula price shall not be less than $4.33.

[32 F.R. 13703, Sept. 30, 1967, as amended at 33 F.R. 6522, Apr. 30, 1968]

§ 1060.51 Class prices.

Subject to the provisions of §§ 1060.52 and 1060.53, the minimum class prices per hundredweight of milk for the month shall be as follows:

(a) Class I price. The price for Class I milk shall be the basic formula price for the preceding month plus $1.10, and plus 20 cents.

(b) Class II price. The price for Class II milk shall be the basic formula price. [32 F.R. 13703, Sept. 30, 1967, as amended at 34 F.R. 14823, Sept. 26. 19691

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For milk containing more or less than 3.5 percent butterfat, the class prices for the month pursuant to § 1060.51 shall be increased or decreased, respectively, for each one-tenth percent butterfat at a rate rounded to the nearest one-tenth cent determined as follows:

(a) Class I price. Multiply the Chicago butter price for the preceding month by 0.120;

(b) Class II price. Multiply the Chicago butter price for the month by 0.115.

§ 1060.53 Location differentials to handlers.

(a) For producer milk received at a pool plant or diverted to a nonpool plant located outside the base zone and classified as Class I milk or assigned Class I location adjustment credit pursuant to paragraph (b) of this section and for other source milk for which a location adjustment is applicable, the price computed pursuant to § 1060.51 (a) shall be adjusted 1.2 cents for each 10 road miles or fraction thereof that such plant is located beyond the perimeter of the base

zone.

(b) For the purposes of calculating such adjustments:

(1) All distances shall be by shortest hard-surfaced highways and/or allweather-roads, as determined by the market administrator;

(2) The adjustment pursuant to this section shall be added to the Class I price if the plant is located in North or South Dakota and shall be subtracted

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