(a) The skim milk and butterfat required to be reported by each marketer as set forth in section 21.20 of this Part shall be classified each month pursuant to the provisions of sections 21.31 through 21.34. If any of the water contained in the milk from which a product is made is removed before the product is utilized or disposed of by a marketer, the pounds of skim milk used or disposed of in such product shall be considered an amount equivalent to the nonfat milk solids contained in such products plus all the water originally associated with such solids.

(b) Skim milk and butterfat contained in receipts of bulk concentrated fluid milk and nonfluid milk products that are reconstituted for fluid use shall be assigned to Class I use, up to the reconstituted portion of labeled reconstituted fluid milk products, on a pro rata basis (except for any Class I use of specific concentrated receipts that is established by the marketer) prior to any assignments under section 21.34 of this Part. Any remaining skim milk and butterfat in concentrated receipts shall be assigned to uses under section 21.34 of this Part on a pro rata basis, unless a specific use of such receipts is established by the marketer.

(c) Skim milk and butterfat contained in bulk inventory of fluid milk and fluid cream products at the end of the month at a plant other than a pool plant shall be classified to the lowest class of utilization at the plant or to such classification assigned by a Federal Milk Marketing Order.