[Federal Register Volume 60, Number 229 (Wednesday, November 29, 1995)]
[Proposed Rules]
[Pages 61292-61329]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-28631]
[[Page 61291]]
_______________________________________________________________________
Part II
Department of Agriculture
_______________________________________________________________________
Agricultural Marketing Service
_______________________________________________________________________
7 CFR Part 930
Cherries (Tart) Grown in Michigan et al.; Proposed Rule
Federal Register / Vol. 60, No. 229 / Wednesday, November 29, 1995 /
Proposed Rules
[[Page 61292]]
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 930
[Docket No. AO-370-A5; FV93-930-1]
Tart Cherries Grown in the States of Michigan, New York,
Pennsylvania, Oregon, Utah, Washington, and Wisconsin; Recommended
Decision and Opportunity To File Written Exceptions to the Proposed
Marketing Agreement and Order
AGENCY: Agricultural Marketing Service, USDA.
Action: Proposed rule.
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SUMMARY: This recommended decision proposes the issuance of a marketing
agreement and order (order) for tart cherries grown in certain
designated states. The proposed order and agreement would authorize
volume regulation, grade, size, and maturity regulations, and mandatory
inspection. The proposed order would also authorize production,
processing, and marketing research and promotion projects, including
paid advertising. The order would be administered by an 18 member
administrative board consisting of 17 growers and handlers and one
public member. The order would be financed through assessments on
handlers of tart cherries grown in the production area. A primary
objective of this program would be to improve grower returns by
strengthening consumer demand through volume control and quality
assurance mechanisms. Tart cherry producers and processors would vote
in a referendum to determine if they favor issuance of the proposed
marketing order.
DATES: Comments must be received by December 29, 1995.
ADDRESSES: Four copies of all comments should be sent to the Hearing
Clerk, United States Department of Agriculture, Room 1079, South
Building, Washington, DC 20250-9200. All written comments will be made
available for public inspection at the Office of the Hearing Clerk
during regular business hours.
FOR FURTHER INFORMATION CONTACT: (1) R. Charles Martin or Kenneth G.
Johnson, Marketing Order Administration Branch, Fruit and Vegetable
Division, Room 2523-S, AMS, USDA, PO Box 96456, Washington, DC 20090-
6456; telephone number (202) 720-5053, FAX: (202) 720-5698.
(2) Robert Curry, Northwest Marketing Field Office, Marketing Order
Administration Branch, Fruit and Vegetable Division, AMS, USDA, 1220 SW
Third Avenue, Room 369, Portland, Oregon 97204; telephone: (503) 326-
2725, FAX: (503) 326-7440.
SUPPLEMENTARY INFORMATION:
Prior Documents in This Proceeding
Notice of Hearing, issued on November 30, 1993, and published in
the Federal Register on November 30, December 23, 1993, and January 31,
1994 (58 FR 63108, 58 FR 68065, and 59 FR 4259, respectively). The
notice reopening the hearing was issued on December 5, 1994, and
published in the Federal Register on December 8, 1994 (59 FR 63273).
This action is governed by the provisions of sections 556 and 557
of title 5 of the United States Code and is therefore excluded from the
requirements of Executive Order 12866.
The marketing agreement and order proposed herein have been
reviewed under Executive Order 12778, Civil Justice Reform. They are
not intended to have retroactive effect. If adopted, the proposed
agreement and order would not preempt any State or local laws,
regulations, or policies, unless they present an irreconcilable
conflict with the proposal.
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 Secretary 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 requesting 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, the Secretary 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 in equity to review the
Secretary's ruling on the petition, provided a bill in equity is filed
not later than 20 days after the date of the entry of the ruling.
Preliminary Statement
Notice is hereby given of the filing with the Hearing Clerk of this
recommended decision with respect to a proposed marketing agreement and
order regulating the handling of tart cherries grown in the States of
Michigan, New York, Pennsylvania, Oregon, Utah, Washington, and
Wisconsin. This recommended decision is issued pursuant to the
provisions of the Agricultural Marketing Agreement Act of 1937, as
amended (7 U.S.C. 601-674), hereinafter referred to as the Act, and the
applicable rules of practice and procedure governing the formulation of
marketing agreements and marketing orders (7 CFR Part 900).
The proposed marketing agreement and order are based on the record
of a public hearing held December 15-17, 1993, in Grand Rapids,
Michigan; January 10-11, 1994, in Rochester, New York; January 13,
1994, in Provo, Utah; February 15-17, 1994, in Portland, Oregon;
January 9-10, 1995, in Grand Rapids, Michigan; and January 12-13, 1995,
in Portland, Oregon. These multiple hearing sessions were held to
receive evidence on marketing order proposals from growers, handlers,
processors and other interested parties located throughout the proposed
production area.
At the conclusion of the February 1994 hearing in Oregon, the
deadline for filing post-hearing briefs was set at April 29, 1994. The
deadline for filing post-hearing briefs was subsequently extended to
May 31, 1994. However, based on a review of the hearing evidence and
post hearing briefs, the Department of Agriculture (USDA) determined
that the hearing should be reopened to clarify some provisions. The
USDA wanted to obtain additional information and clarification on the
following: (1) The States that should be regulated under the order; (2)
the economic impact of the proposed order on small and large
businesses; (3) whether the expected program benefits would exceed
costs, especially for growers, handlers and consumers; and (4) how
certain provisions would be implemented under the proposed marketing
order. The hearing was reopened and held January 9-10, 1995, in Grand
Rapids, Michigan and January 12-13, 1995 in Portland, Oregon. At the
conclusion of the Oregon hearing, the deadline for filing post-hearing
briefs was set at March 17, 1995.
Ten briefs were filed following the first briefing period. These
briefs were from the U.S. Department of Justice, Anti-Trust Division
(DOJ), Ray Schultz of Schultz's Fruitland, Ridgecrest Fruit
Corporation, Smeltzer Orchard Co., Northwest Food Processors
Association, American Farm Bureau Federation, Laughlin Orchards, Inc.,
Oregon Tart Cherry Association, Fruithill Inc., and the Cherry
Marketing Institute.
Seven briefs were filed following the second briefing period. These
were filed by Knouse Foods Cooperative, Inc. (Knouse), Shoreline Fruit,
Inc., Oregon Tart Cherry Association, DeRuiter Farms, Inc., Milne Fruit
Products, Cherry Marketing Institute, and DOJ.
[[Page 61293]]
The briefs are discussed throughout the following document where
relevant.
The tart cherry industry's previous Federal Marketing Order began
in 1971. It covered the States of Michigan, New York, Wisconsin,
Pennsylvania, Ohio, Virginia, West Virginia, and Maryland. In a
continuance referendum conducted March 10-20, 1986, 64 percent of all
cherry producers and 83 percent of all cherry handlers voted. Of those
voting, 51 percent of the producers and 56 percent of the handlers
favored terminating the cherry marketing order. Producers favoring
termination represented 45 percent of the production volume represented
in the referendum, while handlers favoring termination represented 40
percent of the processed volume represented.
Given the lack of producer and handler support for that tart cherry
order, it was determined that it no longer fulfilled the Act's
objective, and was terminated April 30, 1987.
Small Business Consideration
In accordance with the Regulatory Flexibility Act (5 U.S.C. 601 et
seq.), the Administrator of the Agricultural Marketing Service has
considered the economic impact of this action on small entities. The
record indicates that there are approximately 1,600 growers of tart
cherries and 75 handlers who process cherries in the production area
proposed to be regulated. Small agricultural service firms have been
defined by the Small Business Administration (SBA) (13 CFR 121.601) as
those whose annual receipts are less than $5,000,000, and small
agricultural producers as those having annual receipts of $500,000. The
majority of the tart cherry handlers and producers may be classified as
small entities.
For practical purposes, there is no fresh market for tart cherries.
Processors dry, freeze, can, juice, or puree pitted tart cherries.
Market use averages are: 56 percent of the product becomes industrial
grade frozen cherries; 16 percent goes into consumer-size cans of pie
filling; 8 percent is used for commercial pie filling; 10 percent
becomes juice concentrate; 2 percent is dried; and 8 percent goes into
water packs.
Since 1971, there has been a marked transformation in the
processing industry's structure. Currently, 75 percent of the crop is
processed by farmer-owned cooperatives or grower-owned processing
facilities; whereas in 1971, a substantial volume was processed by
independent handlers. Processors, through their sales agents, market in
all U.S. markets and export to Europe and Asia. There are no discrete
regional markets where cherries from a particular district could have a
particular advantage, beyond nominal differences in transportation
costs, which can often be overcome by price discounting.
The record evidence shows that economic adversity has caused more
than 21 percent of Michigan's growers to withdraw from tart cherry
farming. There were 1,183 Michigan commercial growers in 1986, compared
to 933 in 1992. In 1992, Michigan growers had an average production of
238,000 pounds with 19 percent of those growers averaging 800,000
pounds, accounting for 66 percent of the total Michigan production. In
states other than Michigan, there has also been a general decline in
the number of commercial growers since 1986. There are fewer growers in
other States besides Michigan, but the number of bearing acres has
increased from 4.5 million in 1986, to more than 5 million in 1990.
Record evidence indicates that the demand for red tart cherries is
inelastic at high and low levels of production, and relatively elastic
in the middle range. At the extremes, during times of very low and very
high production, different factors become operational. In very short
crop years, such as 1991, there is limited but sufficient exclusive
demand for cherries that can cause processor prices to double and
grower prices to triple. In the event of large crops, there seems to be
no price low enough to expand sales beyond about 275 million pounds of
raw fruit in a single year.
Since 1982, annual sales have averaged 230 million pounds. Under
the proposed order, total returns to growers could be increased by
restricting supplies of red tart cherries available for sale by
handlers during large crop years. Also, the alternate production
characteristics of the tart cherry industry provide an opportunity to
increase growers' total earnings by converting the excess production of
large crop years into storable products that could constitute reserve
pools. These pools would be liquidated in a year when the available
supplies are short.
One of the main concerns of this recommended order is the short
term annual variation in supply which is attributable to climatic
factors that neither growers nor processors can control, and which
leads to chaotic marketing conditions. Such climatic factors can result
in highly unpredictable annual crop sizes, causing gluts and shortages
of tart cherries. When gluts occur, large carryin inventories can
decrease processor and grower prices, regardless of the anticipated
size of the oncoming year's crop. Many sales are consummated with large
buyers well before the current crop year's supply and demand situation
is clear (based on what can best be described as ``Anticipated
Supply'', i.e., the sum of the carryin inventory and the United States
Department of Agriculture crop forecast, available usually late in
June, weeks before the actual crop harvest.)
These large, unrestricted carryin inventories and crop estimates
can play a dominant role in setting the tone of the market in a given
year. The proposed order is intended to lessen the impact of these
inventories and estimates by establishing an ``optimum supply,''
thereby reducing price swings to growers and buyers, and ultimately
resulting in a stabilization and enhancement of the market.
The order would impose some reporting and record keeping
requirements on handlers. Handler testimony indicated that the expected
burden that would be imposed with respect to these requirements would
be negligible. Most of the information that would be reported to the
Board is already compiled by handlers for other uses and is readily
available. Reporting and recordkeeping requirements issued under
comparable marketing order programs impose an average annual burden on
each regulated handler of about one hour. It is reasonable to expect
that a comparable burden may be imposed under this proposed marketing
order on the estimated 75 handlers of tart cherries. With respect to
growers, they testified at the hearing that information required to be
submitted to the Board for grower diversion is already collected and
available from growers.
The Act requires that, prior to the issuance of a marketing order
for tart cherries, a referendum be conducted among affected producers
and processors to determine if they favor issuance of the order. The
ballot material that would be used in conducting the referendum would
be submitted to and approved by OMB before it is used. It is estimated
that it would take an average of 10 minutes for each of the
approximately 1,600 tart cherry growers and 75 tart cherry processors
to complete the ballots. Additionally, it has been estimated that it
would take approximately ten minutes for each handler to complete the
marketing agreement.
Therefore, in compliance with Office of Management and Budget (OMB)
regulations (5 CFR part 1320) which implement the Paperwork Reduction
[[Page 61294]]
Act of 1995 (Pub. L. 104-13), the information collection and
recordkeeping requirements that may be imposed by this order would be
submitted to OMB for approval. Those requirements would not become
effective prior to OMB review. Any recordkeeping and reporting
requirements imposed would be evaluated against the potential benefits
to be derived and it is expected that any added burden resulting from
increased reporting and recordkeeping would not be significant when
compared to those anticipated benefits derived from administration of
the order.
The purpose of the RFA is to fit regulatory and informational
requirements to the size and scale of the business entities in a manner
that is consistent with the objectives of the rule and applicable
statutes. The proposed marketing order provisions have been carefully
reviewed and every effort has been made to eliminate any unnecessary
costs or requirements. As discussed in the RFA, Congress' intent, among
other objectives, was to direct agencies to identify the need for any
``special accommodation'' (e.g., exemption or relaxation) on regulated
small entities (i.e., handlers) because, in the past, some Federal
regulatory and reporting requirements imposed unnecessary and
disproportionately burdensome demands on small businesses. Thus, the
AMS closely reviewed the record evidence and could not find any
evidence to suggest that any direct or indirect costs imposed under the
marketing order regulation would be proportionately greater on small
handlers than on large handlers, or conversely, that any projected
order benefits would be proportionately smaller for small handlers than
for large handlers.
The record evidence indicated that the order may impose some
additional costs and requirements on handlers, but those costs are
insignificant and are directly proportional to the sizes of the
regulated handlers. The record evidence also indicated that, given the
severe economic conditions and unstable markets facing the majority of
the industry, the benefits to small (as well as large) handlers are
likely to be greater than would accrue under the alternatives to the
order proposed herein, namely no marketing order, or an order without
the proposed combination of volume controls and other order
authorities.
The record evidence indicates that the proposed order would be
instrumental in providing expanding markets and sales, and raising and
stabilizing prices of tart cherries, primarily for the primary benefit
of producers, but the evidence also indicates that, since handlers
(including cooperatives that market the crops of their producer
members) market the producers' crops, they would benefit as well. While
the level of such benefits to handlers is difficult to quantify, it is
also clear the provisions of the proposed order are designed to benefit
small entities. For example, the record evidence indicated that small
handlers (and small producers) are more likely to be minimally
capitalized than large entities, and are less likely to survive without
the stability the proposed order would provide.
Accordingly, based on the information discussed above and in the
following discussion, it is determined that the marketing order would
not have a significant economic impact on a substantial number of small
entities.
Material Issues
The material issues presented on the record of the hearing are as
follows:
1. Whether the handling of tart cherries grown in the proposed
production area is in the current of interstate or foreign commerce, or
directly burdens, obstructs, or affects such commerce;
2. Whether the economic and marketing conditions are such that they
justify a need for a Federal marketing agreement and order which would
tend to effectuate the declared policy of the Act;
3. What the definition of the production area and the commodity to
be covered by the order should be;
4. What the identity of the persons and the marketing transactions
to be regulated should be; and
5. What the specific terms and provisions of the order should be,
including:
(a) The definitions of terms used therein which are necessary and
incidental to attain the declared objectives and policy of the Act and
order;
(b) The establishment, composition, maintenance, procedures, powers
and duties of a Cherry Industry Administrative Board (Board) that would
be the local administrative agency for assisting the Secretary in the
administration of the order;
(c) The authority to incur expenses and the procedure to levy
assessments on handlers to obtain revenue for paying such expenses;
(d) The authority to establish or provide for the establishment of
production, processing and marketing research and market development
projects, including paid advertising;
(e) The authority to establish regulations that would require
minimum quality and inspection requirements;
(f) The authority to establish regulations that would provide for a
volume control program;
(g) The authority to establish other regulations and procedures
necessary and incidental to the administration of the order;
(h) The establishment of requirements for handler reporting and
recordkeeping;
(i) The requirement of compliance with all provisions of the order
and with any regulations issued under it; and
(j) Additional terms and conditions as set forth in Sec. 930.81
through Sec. 930.91 of the Notice of Hearing published in the Federal
Register of November 30, 1993, which are common to all marketing
agreements and orders, and other terms and conditions published at
Sec. 930.92 through Sec. 930.94 that are common to marketing agreements
only.
Findings and Conclusions
The following proposed findings and conclusions on the material
issues are based on the record of the hearing.
1. The record indicates that the handling of tart cherries grown in
the States of Michigan, New York, Pennsylvania, Oregon, Utah,
Washington, and Wisconsin is in the current of interstate or foreign
commerce or directly burdens, obstructs or affects such commerce. The
proposed production area is discussed in material issue no. 3.
Red tart cherries, also known as red sour cherries, are grown in
commercially significant amounts in these seven states: Michigan, New
York, Utah, Pennsylvania, Oregon, Washington, and Wisconsin. Between
1988 and 1992, Michigan, New York, and Utah accounted for 90 percent of
the United States' production, with Michigan producing 71 percent of
the total industry product. Pennsylvania, Oregon, Washington, and
Wisconsin's current tart cherry production averages 9 percent of the
total. One handler handles all of Pennsylvania's production, while a
substantial portion of Oregon and Washington's production is marketed
almost entirely in those states as cherry juice concentrate. Colorado,
which is excluded from the proposed marketing order because of its
consistently small production, has averaged only 1.3 million pounds of
cherries annually since 1986.
Handlers, through their sales agents, market in all U.S. markets
and in exports to Europe and Asia. For example, Michigan cherries are
sold in
[[Page 61295]]
every State except Maine, Idaho, and Alaska, as well as in Asia,
Australia, and Europe.
Record evidence shows that any handling of tart cherries in market
channels, including intrastate shipments, exerts an influence on all
other handling of such cherries and vice versa. Therefore, because such
handling directly burden, obstruct, or affect such commerce, all
handling of tart cherries grown in the proposed production area should
be covered by the order, and an order for tart cherries is supported by
evidence in the record of hearing.
2. The proponents have demonstrated that there is a need for a
marketing order for tart cherries. The proponents testified that the
following conditions currently exist in the industry: (1) Large
variations in annual supplies of tart cherries; (2) significant
fluctuations in prices to farmers with gross receipts being below the
industry's costs in seven of the last eight years; (3) disruptive
variations in the price of cherries to food manufacturers; and (4)
concomitant difficulties in developing both domestic and export
markets.
Large variations in annual supply tend to lead to disorderly
marketing. The proponents testified that a recent study at Michigan
State University of annual variation in production of major
horticultural crops indicates that the average production of tart
cherries fluctuated to a greater extent than any other crop, including
almonds, hazelnuts, and raisins. These are other storable commodities
that have Federal marketing order programs. The fluctuations in
production are due mainly to climatic factors over which neither
growers nor processors have any control. In recent history, tart cherry
production increased by 63 percent from 1986 to 1987 and by 82 percent
from 1991 to 1992. These surges in production are far beyond the
capability of the market to absorb. The result is not only the
production year impact of depressed grower prices during the production
year, but large carryover inventories which can depress prices for the
next three to five years. The proponents provided an example as
follows: Production averaged about 242 million pounds in 1988 and 1989
following the 1987 surge in production of 359 million pounds, yet
grower prices only averaged 16.7 cents per pound during the period,
which is well below the estimated cost of production of 20 cents per
pound. The inventory carryin did not reach tolerable levels until July
1, 1991. The mere presence of these large carryin inventories had a
depressing effect on processor and grower prices.
As a result of these fluctuations in price, growers receive less
income for their tart cherries. Several growers testified that they
are, in most years, unable to recoup their production costs of tart
cherries. Also, very few new growers have entered the tart cherry
industry because the initial investment in an orchard is substantial
and yields little or no income for the first five years. In addition,
cherry trees have a commercially productive life of 15 to 20 years,
which means they are treated as a long term investment. Thus, it is not
economically sound to plant and/or uproot cherry trees in response to
changing supply or demand conditions. Further, while some growers have
diversified their holdings to include other crops, record evidence
shows that most growers do not have other viable economic alternatives
for their land, due to the unsuitability of the land for crops for
which additional demand exists. This most often results in the
continued maintenance of and/or replanting of tart cherry trees.
In the crop years 1986 through 1993, tart cherry production ranged
from a high of 359 million pounds in 1987 to a low of 189.9 million
pounds in 1991. The price per pound to tart cherry growers ranged from
a low of 7.3 cents in 1987 to a high of 46.4 cents in 1991. These
problems of wide supply and price fluctuation in the tart cherry
industry are national in scope and impact. Tart cherry growers
testified about the hardships they have endured over the seven years
since the demise of the prior Federal tart cherry marketing order.
Growers testified that the average prices of 12 to 17 cents per pound
which they received do not come close to covering the costs of
production for the vast majority of tart cherry growers. There was
testimony that production costs for most growers range between 20 to 22
cents per pound, which is well above average prices received.
Proponents testified that small growers and processors would have
the most to gain from implementation of a marketing order because such
growers and handlers have been going out of business over most of the
last eight years due to low tart cherry prices. They also testified
that, since an order would help increase grower returns, this should
increase the buffer between success and failure because small growers
and handlers tend to be less capitalized than larger ones. One Michigan
grower testified that his family operates a 184 acre fruit farm and
about one-half of their annual farm production comes from tart
cherries. While the value of the farm is $450,000 (includes value of
land, $15 per fruit tree, and $55,000 for depreciated equipment), their
tart cherry crop has returned a negative $1,240 per year, on average,
over the past seven years. There are no funds left for the grower's
labor and no return on the grower's investment. This grower has only
been able to stay in business because of the income from other crops
such grower produces and off-farm income.
Another grower testified that some growers do not own harvesting
equipment. In most years, all the money such growers earn from their
cherries is spent on hiring someone else to harvest their cherries. To
further demonstrate economic difficulties faced by the tart cherry
industry, a representative from a cooperative testified that, in 1994,
the cooperative was unable to make a monthly payment to growers because
of the large crop and the necessary storage and interest costs that the
cooperative incurred. One Michigan grower testified that in 1985, there
were 2,000 tart cherry growers; today (1995), due to the economic
hardships, there are 1,190 growers.
The prior order had a grower owned reserve pool that was controlled
by the Board. The Board had the authority to establish prices for sales
of reserve pool cherries to handlers. There were often disagreements on
the Board as to what price should be established for reserve pool
cherries. One reason for the demise of the order was that the price the
Board established for reserve pool cherries was often higher than
cherries being sold into the marketplace. Therefore, the reserve was
not disposed of and continued to grow into a large, high priced
surplus. Proponents testified that the proposed order should have a
limit on the volume of cherries which could be stored in the inventory
reserve. They also testified that handlers, and not the Board, should
be responsible for pricing and selling the reserve once it is released.
This would provide an incentive to handlers to place good quality
cherries into the reserve, avoiding a previous problem of some handlers
placing low quality cherries into the reserve--cherries which handlers
did not have to repurchase when reserve cherries were offered for sale.
Based on such considerations, the proponents believe that the proposed
order would work significantly better than the previous order.
An economist for the proponents testified that tart cherry growers
and handlers would benefit from the proposed order and that consumers
would benefit from the order's stabilization of supplies and prices.
When supplies and prices are stabilized, manufacturers should more
readily
[[Page 61296]]
develop new tart cherry containing products, thereby increasing the
availability of new products and permitting retailers to introduce new
and increased numbers of tart cherry products as part of their regular
year-round product lines. Consumers would not be expected to have to
pay more for tart cherry products because much of the anticipated
favorable impact on grower returns would be absorbed by tart cherry
processors and others in the manufacturing and distribution channels.
The USDA's evaluation of the record shows that fluctuating tart
cherry prices are inherently harmful to growers and consumers. If the
peaks of grower prices were lowered and the production troughs reduced
slightly through the operation of the order, consumer prices over a
period of years could actually be slightly lower, and additional cherry
supplies and products could be made available.
The proponents testified that tart cherry growers could anticipate
an average return of ten cents more per pound under the proposed
marketing order. An economist for the proponents testified that had the
order been in effect for the years 1974 through 1991, grower prices
would have increased by an average of ten cents per pound with the
year-to-year price variation decreased by 33 cents. If handlers had
passed on the cost of the proposed assessment for order operation
(approximately .75 cents per pound) to growers, growers would still
have received an increase of at least an additional nine cents per
pound. Thus, the proponents testified that the beneficial effects of
the proposed order would outweigh any related costs.
An economist for the proponents testified that the benefit/cost
ratio for handlers and processors is also favorable, although less so
than for tart cherry growers. The witness testified that their prices
would increase, but less in percentage terms than grower prices. Also,
volatility in prices and supplies would be significantly reduced. For
the period analyzed by the proponent's witness (1974 through 1991), the
handler/processor price would have been expected to have increased an
average of four cents per pound and the price variation from year to
year would have been reduced by approximately ten percent. It was
argued that, if the price is increased, handlers/processors would have
additional financial resources to develop and expand markets, thereby
increasing the demand for tart cherries and tart cherry products.
The proponents testified that the benefit/cost ratio for consumers
under the proposed order would be slightly positive and, to the extent
that market supplies and prices are more stable and product development
occurs, consumers should benefit. This is because most increases in
grower prices would not be likely to be passed on to the consumer, and
consumers would benefit with more stable tart cherry prices and
supplies. Even if handlers and processors were to pass on some
percentage of increased grower prices, consumers would not be likely to
notice major differences in the prices that they would have to pay for
products that contain tart cherries compared to what they might have
paid if an order had not been functional. As in most processed consumer
food products, the cost of the primary food commodity ingredient
represents a relatively small portion of the consumer price. The
proponents estimated the cost of tart cherries in a cherry pie
represented about nine percent of the total cost. Therefore, if the
presence of an order increased grower prices by ten cents, this could
result in a one cent increase in the cost of the ingredient at the
retail level. The potential retail price impact of the order would
represent a very minor change compared to the wide year to year
fluctuations in grower and processor prices. It is, therefore, unlikely
that the operation of an order would have much, if any, impact on the
pricing strategies of retail operators or the average retail price.
Furthermore, most of the evidence of how grocery stores and food
service establishments price their products implies that they do not
tie the retail price to the cost of the basic raw food ingredient. Two
economists that testified at the hearing agreed with an analysis
prepared by Mr. Bruce Marion (The Organization and Performance of the
U.S. Food System) that states ``consumer prices in grocery stores and
particularly in food service markets largely do not reflect
fluctuations in cherry supplies.'' Thus, just because there is a price
increase to the grower, that increase would not necessarily be passed
on to the consumer that buys the cherry pie.
The proponents testified that large swings in prices to food
manufacturers inhibit the industry's ability to expand the usage of
tart cherries. Manufacturers are reluctant to make product development
or marketing investments in products whose supply and price are
capricious. The record evidence shows that a major national fast food
retailer discontinued making cherry pies for its fast food restaurants
because it could not be guaranteed a consistent supply of and stable
price for tart cherries.
In its brief, DOJ indicated that growers and handlers can hedge
against fluctuating prices by using the free market mechanisms
available. For example, handlers may store low-priced tart cherries for
sale in the future when prices are higher, diversify crops, enter into
long-term contracts with buyers, or make more extensive use of frost
control systems. The Department stated that the proponents ignored
these options and never explained why they cannot thus protect
themselves from fluctuating prices. However, the evidence showed that
some handlers have already tried withholding product from the market.
Persons at the hearing testified that this is a regular practice among
some handlers, although it has not proven to be beneficial, since
handlers acting alone or in small numbers cannot successfully
ameliorate the current production variability problem. Growers
testified that they have diversified somewhat, but tart cherries
require specific growing conditions and substantial investment, so it
is difficult for growers to further diversify. Land currently devoted
to tart cherry production may be suitable for other tree crops such as
apples and pears. However, there is little to no demand for additional
supplies of these commodities and costs to convert to such crops are
substantial. As there are often no profitable alternative uses for
their land resources, Michigan, Utah, and Wisconsin growers' principal
crop is often tart cherries. Some growers in other States have been
able to diversify their crops and regard tart cherries as a minor crop,
or have additional alternative uses for their land. However, the bulk
of the production is not in these States.
DOJ took the position that the proposed marketing order should be
rejected because the order would increase consumer prices, artificially
limit supplies, and result in the destruction of substantial portions
of the tart cherry crop. Instead, growers, processors, buyers, and
consumers should continue to participate in a free market for tart
cherries. Free markets best determine optimal production and price
levels and are often the most efficient way to supply all types of
goods and services. Regulation should be substituted for a free market
only where exceptional circumstances exist. It was further argued by
DOJ in its brief that the record established that the tart cherry
industry is a competitive marketplace. Every year hundreds of growers
sell their crop to numerous processors who sell processed cherry
products to many buyers. The Department stated that entry to the
industry is easy and market information
[[Page 61297]]
is readily available. It was the Department's position that the
proponents did not offer any facts that there is market failure in the
tart cherry industry that might be addressed through government
regulation. Instead, they merely complained about fluctuating tart
cherry prices while proposing that the order would stabilize tart
cherry prices by restricting supply. With respect to the proponents'
claim that fluctuations are inherently harmful to growers and
consumers, DOJ argued that fluctuating prices provide growers and
consumers with valuable signals which reflect changes in the market
over time. Responses by growers and consumers to these signals assure
resources are allocated efficiently in the tart cherry industry. The
Department opined that volume control regulations would distort these
signals and result in inefficient production and lost consumption
opportunities of cherries for consumers.
It was DOJ's position that the proponents' economic model presented
at the hearing ignores the basic laws of supply and demand and that the
model fails to incorporate the effect of increased plantings induced by
the higher prices which would be brought on by volume controls.
According to DOJ, the proponents' model rendered simulated results that
are unreliable because the methodology ignores the supply decisions of
growers and the demand decisions of consumers that determine prices and
price variability in the real world.
The market signals discussed by DOJ are available now to growers
and handlers. However, they have been unable to effectively respond to
them because of the large fluctuations in production. If prices
received were to encourage additional production, record evidence shows
that there is limited land available to effectuate such increases.
Also, growers cannot immediately respond to increased prices. Record
evidence shows that it takes approximately five years to receive a
commercial cherry crop from newly planted trees. New trees are also a
large financial investment for growers, an additional disincentive to
increased plantings.
If volume control regulations were established, the regulations
would set forth the quantity of cherries that could be marketed.
Opportunities for reserve releases would allow the industry to deal
with demand increases and ensure a stabilized supply to the
marketplace. The order would not establish prices.
In years of excessive production, growers would have additional
options to control their costs and income. There would be less of an
incentive to deliver poor quality cherries simply to obtain some return
on their investment and, given reduced pressures to deliver cherries at
all costs, decisions concerning retiring marginal producing acreage,
replanting, or economic abandonment of poor quality production could be
made on sounder economic terms. Keeping such poor quality cherries off
the market should also improve returns for all growers.
If a marketing order were established, cultural practices currently
available to growers would remain and growers would be expected to
utilize them through market based decisions. For example, orchard
planning, which includes removing old trees and replanting new trees,
would need to continue to ensure continued viability of commercially
significant acreage. However, if growers discover a substitutable crop,
the order would not prevent them from converting tart cherry acreage to
that crop.
With regard to forward contracting, as mentioned by DOJ, handlers
testified that this type of mechanism could possibly decrease the wide
swings in prices and has been utilized to some extent. Forward
contracting would not be prohibited under the proposed marketing order.
However, record evidence indicates that forward contracting, in and of
itself, has been ineffective as a tool to manage supplies or
significantly reduce the price variability experienced in the industry.
The proposed order is designed to bring supplies in line with
demand, thereby increasing grower returns. It is a tool the industry
could use to alleviate a widespread problem in the industry, one which
has not been effectively dealt with by the economic mechanisms DOJ has
identified. The ``real world'' has resulted in significant losses to
tart cherry growers in seven of the last eight years.
In a brief submitted on behalf of the Oregon Tart Cherry
Association, Mr. Lee Schrepel contended that the proponents failed to
offer convincing evidence that the benefits derived from the proposed
order would exceed the costs for participants in an equitable manner.
Mr. Schrepel stated that the record shows that Oregon growers are
likely to bear comparatively greater costs than other districts
proposed to be regulated under the order. Any potential increase in
grower prices would be tempered by inventory reserves which would tend
to depress the market. There is no evidence to support Mr. Schrepel's
contention that Oregon would bear greater costs than the other
districts. Inventory reserves would be held off the market and slowly
released when needed. Order imposed mechanisms would prevent their
release until they are needed in the market, preventing the exact type
of market depression unregulated carryovers now cause. Mr. Schrepel's
other concerns have been addressed under material issue number 5(c).
The preponderance of the evidence presented at the hearing supports
a Federal marketing order for tart cherries. The proponents have
demonstrated that there is need for regulation in order to bring
supplies in line with demand. The use of a marketing order could
increase demand for tart cherries through price stability, market
research and new market development opportunities. Also, the proposed
order could increase returns to growers which is one of the objectives
of the Act.
In view of the foregoing, and based on the record of the
proceeding, it is concluded that current economic and marketing
conditions justify a need for a marketing order for tart cherries grown
in Michigan, New York, Pennsylvania, Oregon, Utah, Washington, and
Wisconsin. The order would meet many needs of the industry and would
tend to effectuate the declared policy of the Act.
3. A definition of the term ``production area'' should be included
in the order to delineate the area proposed to be regulated. Such
definition should include the States of Michigan, New York,
Pennsylvania, Oregon, Utah, Washington, and Wisconsin.
The area defined in the proposed order comprises what is generally
recognized as the major tart cherry producing States within the United
States. The States included are not, to the most part, contiguous, and
therefore do not generally share the same climatic conditions. However,
the defined production area does generally share the same cultural,
production, processing, and distribution characteristics with respect
to tart cherries, although differences in technology and transportation
costs are evident. The State of Michigan leads in volume produced with
approximately 68 percent of the 48,454 bearing U.S. acres of tart
cherries reported in 1993, as well as approximately 60 percent of all
known producers. During the same year, Utah was reported as having the
second highest production with approximately eight percent of the
bearing acreage and 12 percent of the producers. New York had seven
percent of the bearing acreage and 13 percent of the producers,
Wisconsin had six percent of both the acreage and the producers, Oregon
had four percent of the acreage and three
[[Page 61298]]
percent of the producers, Washington also had four percent of the
nation's acreage but less than one percent of the producers, and
Pennsylvania had three percent of both the bearing acreage and the
producers.
During the hearing process, considerable testimony was received
pertaining to the proposed scope of the production area under the
order. Most of the testimony was centered around the question of
whether the States of Washington and Oregon should be included in the
definition of the production area. The subject of removing any or all
of the States of Michigan, New York, Pennsylvania, Utah, and Wisconsin
from the proposed order was not broached during the hearing process,
other than in testimony made against issuance of any marketing order
for tart cherries.
Hearing evidence indicates that the primary issues encompassing the
question of whether Oregon and Washington should be included within the
proposed marketing order pertain to prices received by producers, the
geographic scope of markets as they relate to particular forms of
processed tart cherries, and whether competition is international,
national, or regional in scope. The issue of regional responsibility
for the current surplus of bearing tart cherry acreage was also raised
during the hearing.
Lee Schrepel, representing the Oregon Tart Cherry Growers
Association, testified that there is no meaningful relationship between
the small tart cherry crop in Oregon and nationwide producer prices. He
also stated that the market for processed tart cherries in the States
of Oregon and Washington is substantially different from the rest of
the U.S. market. The different processed forms of tart cherries
generally include frozen, canned, brined, dehydrated, pureed, and juice
concentrated products. Mr. Schrepel, as well as other producers and
processors from Oregon and Washington testified that, whereas the
majority of U.S. tart cherries are processed into frozen and canned
forms, a significant proportion of Pacific Northwest cherries are
processed into what is generally termed as secondary market forms, such
as brined, dehydrated, juice concentrate, and pureed cherries.
Testimony was received that these secondary, and in some cases,
specialized, forms are marketed to a large extent in ``niche'' markets
that have little or no relation to the national market for frozen and
canned cherries. Some examples of ``niche'' markets provided during the
hearing included wine, dried specialty fruit, and specialty juices.
Moreover, opponents to inclusion of Oregon and Washington in the
proposed order testified that a majority of their frozen and canned
product is marketed on the West Coast or into export markets,
specifically Japan, rather than to markets east of the Rocky Mountains.
Further testimony indicated that Pacific Northwest tart cherries are
often higher in color and Brix, or sugar content, than cherries from
other producing States. While purportedly not of great importance in
the freezing and canning of tart cherries, these characteristics are
valued in the concentrate business. As a consequence of these
differences, it was argued that competition between the Pacific
Northwest and other tart cherry producing regions has not been, nor
will be, significant.
While it is true that a notable portion of the Pacific Northwest
crop is marketed in secondary forms, a viable argument was not
presented that demonstrated that this isolates the majority of such
crop from other markets, either nationally or internationally. To the
contrary, evidence presented during the hearing by Dr. Olan Forker of
Cornell University shows that, nationally, producer prices move in the
same direction and in similar amounts. This analysis, based upon
statistical information presented throughout the hearing process, shows
a definite national correlation or link in the prices received by all
tart cherry producers. This correlation further indicates that the
markets available to producers for fresh tart cherries grown for
processing are national in scope.
In partial response to testimony that the Pacific Northwest States
largely produce tart cherries for markets other than the primary frozen
packed market, such as the juice concentrate market, proponents of the
proposed order testified that increasing supplies of juice concentrate
from Michigan and from Eastern Europe would, in time, undermine that
market. Proponents testified that the resulting price erosion in the
juice concentrate market would force both Oregon and Washington to move
increasingly into the primary freezing and canning market. Indeed,
record testimony suggests that marketing trends in the State of
Washington are already moving in this direction.
Hearing evidence further indicates that the end-use, or consumer
market, is also national in scope. For example, consumers in any
location are not likely to differentiate between a can of pie cherries
grown and processed in the Pacific Northwest and one originating from
the Midwest or East.
Pacific Northwest producers and processors advocating exclusion
from the proposed order contended that their regions have not
contributed to the tart cherry over-supply situation, and therefore
should not be held responsible for alleviating the problem. This
testimony indicated that the Oregon and Washington industries have
managed to consistently market all tart cherries produced. Moreover, it
was testified that statistical evidence shows that Oregon has
experienced a reduction in tart cherry acreage in recent years, thus
reflecting a form of independent supply control without the use of
complex federal regulations. Opponents to the inclusion of Oregon and
Washington specifically, and the proposed order generally, insisted
that the national over-supply problem is largely caused by the Michigan
industry and therefore should be borne by it alone. Opponents testified
that both Oregon and Washington together annually contribute an amount
equal to seven percent of the nation's tart cherry stocks and are thus
too small to have a significant impact on national supply.
Nonetheless, evidence supports the position that the over-supply
situation in the U.S. is a national problem. Since the tart cherry
industry is national in scope, evidence indicates that the entire
industry should work together to alleviate the problem, regardless of
any current localized over-planting of tart cherry trees. Although it
is acknowledged that the Pacific Northwest has not contributed
significantly to the over-supply problem, this area has the potential
in the future to expand its production, notwithstanding inclusion or
exclusion from the proposed order. Regardless of the question of
supply, any region capable of significantly increasing bearing acreage,
such as Oregon and Washington, would benefit from the provisions of the
proposed order and thus should be included in the program. Testimony
supports the proponents' opinion that, if excluded, the Oregon and
Washington tart cherry industries could be characterized as ``free-
rider'' States and could thus contribute to inequities within the
national tart cherry industry rather than to a national solution. The
majority of testimony from individuals from States other than Oregon,
including producers and processors representing approximately half of
the production from the State of Washington, overwhelmingly supported
inclusion of all seven states within the defined production area.
It was testified at the hearing that the proposed order ignores the
fact that both Montana and Colorado produce tart
[[Page 61299]]
cherries. It was contended that if States such as Oregon and Washington
must be included in the proposed order, then Montana and Colorado
should be as well. Evidence presented at the hearing showed, however,
that bearing acreage and production in Montana and Colorado is
insignificant and will likely remain insignificant. Therefore, Montana
and Colorado should be excluded from the production area at this time.
Opponents to the proposed inclusion of the Pacific Northwest in the
order asserted that climatic and general production characteristic
differences in the various tart cherry producing areas are significant
enough to warrant exclusion of Oregon and Washington from the order. It
is true that climatic differences in the various regions can be quite
significant--they are even quite different between the producing
regions in Oregon and Washington. However, there is insufficient
evidence to show that climate, or cultural practices for that matter,
have a significant effect on the various regions with respect to
pricing or markets.
To create orderly marketing conditions through volume regulations
with the goal of achieving parity prices should require that all
significant tart cherry producing areas in the United States be
included under the proposed order, since all would be competing in the
same market. To exclude any portion of the proposed production area, as
defined, would tend to defeat the purpose of the proposed order and
could result in depressed prices of the regulated tart cherries. All
territory included within the boundaries of the production area
constitutes the smallest regional production area that is practicable,
and thus consistent with carrying out the declared policy of the Act.
The production area, therefore, should be defined as hereinafter set
forth.
4. The term ``handler'' should be defined to identify the persons
who would be subject to regulation under the order. Such term should
apply to any person who handles cherries or causes cherries to be
handled for his or her own account. The term is also used to identify
those persons who are eligible to vote for, and serve as, handler
members and alternate handler members on the Board. Such term should
apply to any person who first performs any of the activities within the
scope of the term ``handle'' as hereinafter defined. Record evidence
indicates that the term should also include growers that deliver
cherries to a handler but keep title of the cherries and pay to have
them processed. This is referred to in the industry as custom
processing. Evidence supports the position that the grower would be
performing a handler function by retaining the right to sell the
product and should therefore be covered under the definition of
handler. The definition of the term ``Handler'' identifies persons who
would be responsible for meeting the requirements of the order,
including paying assessments and submitting reports and maintaining
inventory reserves.
The term ``handle'' should be defined in the order to establish the
specific functions that would place tart cherries in the current of
commerce within the production area or between the production area and
any point outside thereof, and to provide a basis for determining which
functions are subject to regulation under authority of the marketing
order.
The record indicates that the term ``handle'' should include the
acts of processing cherries by brining, canning, concentrating,
freezing, dehydrating, pitting, pressing or pureeing cherries, or in
any other way, converting cherries commercially into a processed
product. The definition also includes diverting cherries at the
handler's plant and acquiring grower diversion certificates under the
marketing order. Diversion will be discussed in material issue 5(f).
However, the term ``handle'' shall not include the brining, canning,
concentrating, freezing, dehydrating, pitting, pressing or the
converting, in any other way, of cherries into a processed product for
home use and not for resale. The term also does not include: (1) The
transportation within the production area of cherries from the orchard
where grown to a processing facility located within such area for
preparation for market; (2) the delivery of cherries to a processing
facility for such preparation; (3) the sale or transportation of
cherries by a producer to a handler of record within the production
area; and (4) the sale of cherries in the fresh market in an unpitted
condition. In the first three cases, the tart cherries have not been
prepared for market nor are they in their existing condition being
transported to market. The sale of fresh unpitted cherries should not
be regulated because there are very few sales into this market.
Testimony presented at the hearing by Mr. Schrepel stated that the
terms hot pack, pie filling and culls should be added to the definition
of handle. The term ``handle'' as proposed includes these terms since
hot pack and pie filling are canned products. Mr. Schrepel stated that
he wanted these terms added to make the definition more explicit.
However, it would be redundant to include these terms in the
definition.
5. (a) Certain terms should be defined for the purpose of
specifically designating their applicability and limitations whenever
they are used in the order. The definition of terms discussed below is
necessary and incidental to attain the declared policy and objectives
of the order and Act.
``Secretary'' should be defined to mean the Secretary of
Agriculture of the United States, or any officer, or employee of the
United States Department of Agriculture who has been or who may be
delegated the authority to act for the Secretary.
``Act'' should be defined to mean the Agricultural Marketing
Agreement Act of 1937, as amended (7 U.S.C. 601-674). This is the
statute under which the proposed regulatory program would be operative,
and this definition avoids the need to refer to the citation throughout
the order.
``Board'' should be defined to mean the administrative agency known
as the Cherry Industry Administrative Board established under the
provisions of the marketing order. Such a board is authorized by the
Act, and this definition is merely to avoid the necessity of repeating
the full name each time it is used. The Board is discussed in detail in
material issue 5(b).
``Crop Year'' should be defined to mean the annual period that tart
cherries are harvested and marketed. Record evidence indicated that the
harvesting and marketing cycle for tart cherries begins in July.
Therefore, ``Crop Year'' should be defined as the 12-month period
beginning on July 1 and ending on June 30 of each year. Volume control
regulations are implemented based on upcoming crop year forecasts and
reports of final crop delivered to handlers. With the approval of the
Secretary, the Board also has the authority to change the crop year if
another period is found to be more appropriate. The proponents
testified that a change would be necessary if a new variety of tart
cherry was developed that would have an earlier harvest cycle.
The term ``Cherries'' should be defined to specify the commodity
covered by the proposed order and to which the terms and provisions of
the marketing order would be applicable. The record indicates that
``Cherries'' means all tart/sour cherry varieties grown in the
production area classified as Prunus cerasus, Prunus cerasus by Prunus
avium, or Prunus cerasus by Prunus fruticosa. Record evidence
[[Page 61300]]
indicated that the definition should not include Prunus avium, which is
the sweet cherry variety. The proponents testified that in order to
embrace the activities that are taking place in plant breeding
programs, the definition should include all the varieties as proposed
under the ``Cherries'' definition. These varieties are grown throughout
the proposed production area.
``Department'' or ``USDA'' should be defined to mean the United
States Department of Agriculture which is the governmental body
responsible for oversight of Federal marketing orders and agreements.
``District'' should be defined to mean each subdivision of the
production area described in the marketing order. The district
delineations defined would be important for the purposes of Board
nominations and implementation of volume control provisions. Testimony
indicated that authority should be provided to allow the Board to
recommend to the Secretary the establishment of other districts or
addition of other districts, as may be necessary, through informal
rulemaking procedures. Therefore the definition of ``district''
contains such authority. This term is further discussed under material
issue no. 3.
The term ``Fiscal period'' should be defined to mean the 12-month
period for which the Board would plan the use of its funds. This period
should be established to allow sufficient time prior to the time tart
cherries are first marketed for the Board to organize and develop its
budget for the ensuing season. However, it should also be set to
minimize the incurring of expenses during a fiscal period prior to the
time assessment income is available to defray such expense.
The Notice of Hearing proposed that ``fiscal period'' mean the 12-
month period beginning on July 1 and ending on June 30 of the following
year. Record evidence indicates that the harvesting and marketing cycle
for tart cherries grown in the production area begins in July and ends
in August. The fiscal period should coincide with the tart cherry crop
year, because the industry typically plans its operation on this basis.
Hearing testimony supported the fiscal period being established for a
12-month period beginning on July 1 and ending on June 30 of the
following year.
However, based on future experience, it may be desirable to
establish a fiscal period other than one ending on June 30. Thus,
authority should be included in the order to provide for the
establishment of a different fiscal period if recommended by the Board
and approved by the Secretary through informal rulemaking procedures.
In any event, the beginning date of any new fiscal period should be
sufficiently in advance of the harvesting season to permit the
committee to formulate its marketing policy and perform other
administrative functions. Also, it should be recognized that if at some
future date there is a change in the fiscal period, such change would
result in a transition period being more or less than 12 months. For
example, the Board may decide to change the fiscal period from
beginning on July 1 through June 30 to August 1 through July 31. If
that occurred, the fiscal period would be longer in one year running
from July 1 through July 31 of the following year, to incorporate the
new fiscal period.
The term ``Free market tonnage percentage cherries'' should be
defined to mean that portion of cherries handled in a crop year which
are free to be marketed in commercial outlets under any volume
regulation established under the order. Testimony indicated that the
definition was taken from volume control formulas under other
established marketing order programs.
The term ``grower'' should be synonymous with ``producer'' and
should be defined to identify those persons who are eligible to vote
for, and serve as, grower members and alternate grower members on the
Board and those who may vote in any referendum. The term should mean
any person engaged in a proprietary capacity in the production of tart
cherries for market within the production area. The term ``grower''
should not include a person who produces cherries to be marketed
exclusively for the fresh market in an unpitted condition. Each
business unit (such as a corporation or partnership) should be
considered a single grower and should have a single vote in nomination
proceedings and referenda. The term ``grower'' should include any
person who owns or shares in the ownership of tart cherries such as a
landowner landlord, tenant, or sharecropper. A person who rents and
produces tart cherries resulting in that person's ownership of all or
part of the tart cherries produced in that land should also be
considered a grower.
Also, any person who owns land which that person does not farm, but
as rental for such land obtains ownership of a portion of the tart
cherries produced thereon, should be regarded as a grower for that
portion of the tart cherries received as rent. The tenant on such land
should be regarded as a grower for the remaining portion produced on
such land.
A joint venture is one whereby several persons contribute resources
to a single endeavor to produce and market a tart cherry crop. In such
venture, one party may be the farmer who contributes one or more
factors such as labor, time, production facilities or cultural skills,
and the other party may be a handler who contributes money and
cultural, harvesting, and marketing supervision. Normally, a husband
and wife operation would be considered a partnership. Any individual,
partnership, family enterprise, organization, estate, or other business
unit currently engaged in the production of tart cherries for market
would be considered a grower under the marketing order, and would be
entitled to vote in referenda and Board nominations. Each party would
have to have title to at least part of the crop produced, electing its
disposition, and receiving the proceeds therefrom. This control would
come from owning and farming land producing tart cherries, payment for
farming services performed, or a landlord's share of the crop for the
use of the producing land. A landlord who only receives cash for the
land would not be eligible to vote. A business unit would be able to
cast only one vote regardless of the number and location of its farms,
but each legal entity would be entitled to vote.
``Person'' should be defined to mean an individual, partnership,
corporation, association, or any other business unit. This definition
is the same as that contained in the Act.
``Primary inventory reserve'' should be defined to mean that
portion of handled cherries that are placed into inventory in
accordance with any restricted percentage established under the volume
control provisions of the marketing order. Testimony indicated that
handlers would be responsible for maintaining the reserve and selling
the reserve once it is released by the Board into certain outlets. The
Board would reimburse handlers for the inspection of the primary
inventory reserve. The Board could also establish quality requirements
that cherries may need to meet before they are placed in an inventory
reserve. Testimony supported that handlers could place tart cherries in
the primary inventory reserve in any processed form.
``Secondary inventory reserve'' should be defined to mean any
portion of handled cherries voluntarily placed into inventory by a
handler under the volume control provisions of the order. This
definition is used to define the additional option handlers may use in
the event free and restricted percentages are announced by the Board.
The secondary inventory reserve is a handler
[[Page 61301]]
selected option and all expenses of such reserve are borne by the
handler.
The term ``Restricted percentage cherries'' should be defined to
mean that proportion of cherries handled in a crop year which must be
withheld from marketing in normal commercial outlets in that crop year
under a volume regulation established under the marketing order. Such
cherries would be either placed into a primary or secondary inventory
reserve or diverted in accordance with the diversion provisions of the
marketing order. Testimony indicated that the Board would be
responsible for evaluating supply and demand conditions and
recommending to the Secretary, if necessary, the implementation of
volume control percentages.
The term ``sales constituency'' should be defined to mean a common
marketing organization or brokerage firm or individual representing a
group of handlers or growers. The record indicates, that in this case,
the largest single sales constituency currently in the industry is
Cherry Central, Inc.
(b) Pursuant to the Act, it is desirable to establish an agency to
administer the order locally as an aid to the Secretary in carrying out
the declared policy of the Act and to provide for effective and
efficient operation of the order. The establishment and membership of a
Board is addressed in Sec. 930.20 of the proposed order. The record
shows that the Board should consist of 18 members, including one public
member. Seventeen members should be growers or handlers of tart
cherries, or individuals involved in both the growing and handling of
tart cherries. One member should be selected from the general public.
Each member should have an alternate possessing the same qualifications
as the member.
For the purpose of Board representation, the order should provide
that the production area be divided into nine districts. The record
indicates that the 17 industry members of the Board should be composed
of growers and handles from within each district as follows: (1) Two
grower members and two handler members from District 1, which would
consist of that portion of the State of Michigan that is North of a
line drawn along the northern boundary of Mason County and extended
east to Lake Huron; (2) Three grower and handler members from District
2, which would consist of that portion of the State of Michigan that is
South of District 1 and North of a line drawn along the southern
boundary of Allegan County and extended east to Lake St. Clair. The
number of grower and handler representatives in District 2 would
alternate each full term of the Board. For example, evidence indicated
that during the initial three-year term of the proposed Board, District
2 would be represented by two handler members and one grower member.
During the second three-year term, District 2 would be represented by
two grower members and one handler member. This would thus alternate
for each succeeding term of office; (3) One grower member and one
handler member from District 3, which would consist of that portion of
the State of Michigan not included in Districts 1 and 2; (4) One grower
member and one handler member from each of Districts 4 and 7, which
would consist of the states of New York and Utah, respectively; and (5)
One grower member or handler member from each of Districts 5, 6, 8, and
9, which would consist of the states of Oregon, Pennsylvania,
Washington, and Wisconsin, respectively. The districts were developed
based on the actual cherry production in those areas.
The order should provide that the Board positions for Districts 5,
6, 8, and 9 could be filled by individuals who are either growers or
handlers of tart cherries, or by individuals involved in both the
growing and handling of tart cherries. Furthermore, should any one of
Districts 5, 6, 8, and 9 become subject to volume regulation under
Sec. 930.52(a), the Board should be realigned by the Secretary to
provide that such district be represented by at least one grower member
and one handler member rather than just one or the other.
The order should provide that, within any district represented by
multiple seats, not more than one Board member may be elected from a
single sales constituency. As addressed earlier, sales constituency is
defined in Sec. 930.16 to mean ``a common marketing organization or
brokerage firm or individual representing a group of handlers or
growers.'' However, there should be no prohibition on the number of
Board representatives from differing districts that may be elected from
a single sales constituency which may have operations in more than one
district.
The proponents testified that a limit to the total number of Board
members from a single sales constituency should not be warranted, with
the condition that there is no more than one such member from each
district. The proponents suggested that it would be desirable to have
Board membership reflect any potential industry affiliation with a
single sales constituency. The proponents also testified that the
single largest sales constituency in the tart cherry industry, Cherry
Central, Inc., could possibly gain up to five seats on the Board under
current industry conditions, but was doubtful that Board domination by
such sales constituency would ever occur.
Testimony was received that the order should prohibit any sales
constituency from gaining a majority of the seats on the Board. The
record indicates that the order, as currently proposed, would prevent
any single sales constituency from gaining a majority of the Board
positions. With nine districts, any single sales constituency would
have the maximum potential of nine members on the Board.
The Board should elect a chairperson, vice-chairperson, and any
other officers it may find appropriate from among its members at its
first meeting and annually thereafter. Testimony supports the position
that all such officers should be voting members of the Board.
Upon recommendation of the Board and approval of the Secretary,
reestablishment of districts or subdivisions of districts, and the
distribution of grower and handler representation within any district
or subdivisions thereof, is provided for in proposed Sec. 930.21. Any
such recommended change is subject to the provisions of Sec. 930.23, as
well as to consideration by the Board of the relative levels of
production of tart cherries within each district, and the relative
importance of new concentrations of tart cherry production within the
overall production area. Prior to any such recommendation, the Board
should also consider how the efficiency of marketing order
administration is effected by geographic location of areas of
production, as well as whether shifts in cherry production within the
production area have occurred. The Board should also take into
consideration any changing of the roles, or functions, of growers and
handlers as it pertains to the production and handling of tart
cherries. Any changes in the proportion of growers to handlers that may
occur, as well as any other relevant factors, should also be considered
by the Board before making any recommendations for redistribution or
reestablishment.
Proposed Sec. 930.22 provides that the term of office of Board
members and their respective alternates should be three fiscal years.
Approximately one-third of the Board terms should end each year. As
defined earlier, fiscal year should mean the period beginning on July 1
and ending on June 30, or such other period as the Board may recommend
and the Secretary approve. The record indicates that the term of office
should begin on July 1, the
[[Page 61302]]
beginning of the marketing year for the tart cherry crop.
The length of the terms of those initial industry Board members who
represent districts with more than one seat would be staggered so that
all of the members' terms would not expire at the same time. The
initial term of offices for the nine members and their respective
alternates from Districts 1, 2, and 3 should be established so that
one-third of such initial members and alternates would serve for a one
year term, one-third would serve for a two year term, and one-third
would serve for a three year term. It is also provided that one-half of
the initial four members and respective alternates from Districts 4 and
7 would serve for one year, and one-half would serve for two years.
Under the terms of the proposed order, the initial four members and
four alternates from Districts 5, 6, 8, and 9 would all serve their
full three year terms. Determination of which of the initial members
and alternate members from Districts 1, 2, 3, 4, and 7 would serve for
one year, two years, or three years would be by lot.
It was proposed by the proponents that the term of office of the
public member and alternate public member should be for one fiscal year
only. The proponents testified that to limit the term of the public
member and alternate public member to one fiscal year would provide the
industry members of the Board with the ability to quickly and easily
replace such public members should Board expectations not be met.
An alternative proposal received during testimony favored a two-
year term of office for all Board members and alternate members,
inclusive of the public member and alternate public member. The
justification provided in support of a two-year term of office was that
Board members would gain sufficient experience within a two year time
period and that a third year would not add significant benefit to
either the members or the Board.
The preponderance of evidence, however, supports a three-year term
because it would give members sufficient time to become familiar with
Board operations and enable them to make meaningful contributions at
Board meetings. Furthermore, a three-year term would enable
establishment of a rotation so that approximately one-third of the
Board membership would terminate each year. Such staggered terms would
lend continuity to the Board by insuring that some experienced members
would be on the Board at all times.
Insufficient supporting evidence was provided for the proposition
that, while industry members and alternate members should serve three-
year terms, the public member and alternate public member should be
limited to a one-year term. To maintain the continuity that is afforded
the Board by industry members serving for three years, it logically
follows that the public member should also serve for three years. If
the public member and alternate would only serve one-year terms that
are dependent on the Board's annual review, and nomination to the Board
requires a \2/3\ majority vote, the public member and alternate could
feel pressured to always vote with the majority of the Board members.
Record evidence supports public representation on the Board, and just
as three-year grower and handler member terms offer many advantages to
the Board, the tart cherry industry, and the members themselves, so
would three-year public member terms. Therefore, the order should
provide that the terms for all members be three years in duration.
Approximately one-third of the total Board membership should terminate
each year. The public member and alternate public member would both
serve their full three-year terms initially and thereafter.
To prevent unnecessary vacancies from occurring on the Board, the
order should provide that members and alternates shall serve in such
capacity for the term of office, or portion thereof, for which they are
selected and have qualified, and until their respective successors are
selected and have qualified. However, so that there is continual
turnover in membership and infusion of new ideas, the order should
provide that the grower and handler members, and their respective
alternates, may not serve more than two consecutive three-year terms on
the Board.
The proponents proposed that there should be no limit on the number
of consecutive terms the public member and alternate public member
could serve on the Board. Just as testimony offered by the proponents
indicated that a one-year term of office for the public member and
alternate public member would provide the Board with the flexibility to
quickly replace such members should they prove inadequate, the
proponents also argued that unlimited tenure would provide the Board
with the flexibility of maintaining the public member and alternate
public member indefinitely should such be desired.
However, there was insufficient evidence offered during the hearing
process to support a Board membership with differing tenure
requirements. A two-term tenure requirement for the public member and
alternate public member would offer the Board the same infusion of new
ideas from the public perspective that is provided from the industry
perspective by continual turnover in grower and handler membership. The
order, therefore, should provide that all members of the Board be
restricted to serving no more that two consecutive three-year terms.
Any initial term lasting less than three years should not be counted
towards this six-year tenure limitation.
After serving two consecutive terms, Board members should be
eligible to serve as alternates, but should be ineligible to serve as
members for a period of at least one year. Conversely, alternate
members should be eligible to serve as Board members after serving two
consecutive terms as alternate members, but should be ineligible to
again serve as alternate members for a period of at least one year. The
alternate member's term of office should coincide with that of the
position's member.
The effective date of the order, if issued, may not coincide with
the specified beginning date of the terms of office of Board members
and alternates. Therefore, a provision is necessary to adjust the
initial terms of office. To accomplish this, the order should provide
that if the initial fiscal period is less than six months in duration,
that is beginning after January 1, then the tolling of time for the
initial term of office would not begin until the following July 1.
Similarly, if the initial fiscal period is for a duration of between 6
and 12 months, then the tolling of time for the initial term of office
would begin on the prior July 1.
As an example, if an order were promulgated in May of 1996, and in
the event that the initial members are selected prior to July 1, 1996,
the initial terms of office could be adjusted as follows: the initial
one-year term would not end on June 30, 1996, but would continue until
June 30, 1997. The two-year and three-year terms would end on June 30,
1998, and June 30, 1999, respectively. However, if the initial members
should start their terms of office between July 1, 1995, and February
1, 1996, the initial one-year term would end on June 30, 1996. The two-
year and three-year terms would end on June 30, 1997 and June 30, 1998,
respectively.
For the proposed Board to function, a mechanism is required by
which members and alternate members may be nominated, elected, and
appointed by the Secretary. Section 930.23 of the proposed order
provides for a nomination and election procedure using petition forms
and election ballots
[[Page 61303]]
and utilizing the U.S. Postal Service, or such other means as the
Secretary may determine.
Proposed Sec. 930.29 establishes the eligibility criteria for
membership on the Board. Each of the grower members and alternate
grower members of the Board should be tart cherry growers or officers
or employees of tart cherry growers. Likewise, each of the handler
members and alternate handler members of the Board should be tart
cherry handlers or officers or employees of tart cherry handlers. The
proposed order further maintains that, to be eligible to serve on the
Board, each of these handlers, or officers or employees of handlers,
must own or lease, and operate a tart cherry processing facility in the
district for which nominated to serve. A person who is a grower and
handler in the industry (grower/handler) could serve as either a grower
or handler member or alternate grower or handler member on the Board.
To be eligible to participate in the nomination and election
process, the order should provide that an individual be a grower or a
handler of tart cherries or a duly authorized officer or employee of a
tart cherry grower or handler. To discourage potential duplication,
eligible growers and handlers would only participate in the nomination
and election process in the district where they produce or handle tart
cherries. Since it is possible for a tart cherry grower to have
production in more than one district and a handler to have handling
facilities in more than one district, the proposed order provides that
such growers and handlers must choose which district they wish to
participate in. The record indicates that neither growers nor handlers
would be allowed to participate in the nomination and election process
in more than one district during a single fiscal period.
Furthermore, the order should restrict growers and handlers from
participating in the nomination process in one district and the
election process in a second district during the same election cycle.
However, if growers or handlers with operations in more than one
district do not participate in the nomination process but do
participate in the election process, they should be authorized to
select the district in which they wish to vote. To help ensure that
proper administration of the nomination and election process is
maintained, it is reasonable for the order to require such growers and
handlers to notify the Secretary or the Board of their choice of
districts prior to participation in the process.
In order that a grower's name appear on an election ballot, the
individual's name must first be submitted to the Board on a nomination
petition form. Such petition form would contain the signatures of at
least five eligible growers other than the nominee in order to be
accepted. The order should provide that petitions for Board membership
by growers from District 8 (Washington State) must be signed by two
eligible growers other than the nominee. This differs from the
procedure used in other districts because there are relatively few tart
cherry growers in Washington. It would be reasonable to conclude that
should the number of tart cherry growers in Washington significantly
increase in the future, this provision could be revised, through
informal rulemaking, to more closely approximate requirements in the
other districts.
Similarly, in order that a handler's name appear on an election
ballot in any district, the nominee's name should be submitted on a
petition form signed by at least one other eligible handler. In
districts where either a grower or a handler may be elected to the
single position (initially Districts 5, 6, 8, and 9), both growers and
handlers may be nominated for the single seat.
Testimony supported the inclusion of an order provision that would
restrict individuals who are growers, but who may be regulated as
handlers while having some or all of their tart cherries custom packed,
to participating in the nomination and election process as growers
rather than as handlers. Hearing evidence supports the provision that,
for purposes of nominations and elections, such grower-handlers not
owning or leasing and operating their own packing facilities be
identified as growers.
At the hearing, witnesses supported adding a public member to the
Board. While the influence of consumers would be implicitly present in
the deliberations of the grower and handler Board members, and all
meetings would be public, the appointment of a public member would
offer many advantages. One such advantage would afford the industry an
opportunity to discuss its problems and concerns with someone without
an economic interest in the tart cherry industry.
The public member and alternate public member should not be
permitted to have a direct financial interest in the production,
processing, financing, buying, packing, or marketing of tart cherries
except as a consumer; nor be a director, officer, or employee of any
firm so engaged. Such public members should be willing to devote
sufficient time to regularly attend Board activities and to familiarize
themselves with the background and economics of the industry, as well
as with the provisions of the proposed order. Testimony indicated that
the public member and alternate public member could, for example, be
individuals who are retired food industry executives or are associated
with an academic institution. The Board, once formed, could decide what
further qualifications, if any, the public member and alternate public
member should possess.
During the nomination process, tart cherry growers and handlers in
each district would have an opportunity to nominate eligible
individuals for the public member and alternate public member positions
on the Board. Record evidence indicates that this would be accomplished
in the same manner that grower and handler members are nominated. All
eligible growers and handlers in each district would have the
opportunity to submit the name of a nominee for both the public member
and the alternate public member on a petition form provided by the
Board or the Secretary. At one of its first meetings following initial
appointment and every three years thereafter, Board members would
elect, by at least a two-thirds majority of the entire Board, the
public member and alternate public member. The Board members would vote
for the public member and alternate public member from the list of
nominees received from tart cherry growers and handlers. If such
nominations are not made, the Board should have the authority to
nominate qualified individuals for subsequent election. The persons
elected by the Board to fill the public member and alternate public
member positions would then be subject to appointment by the Secretary.
A procedure should be in place that provides adequate time for the
nomination and election process to be completed and appointments made
by the Secretary prior to the beginning of the next term of office.
Thus it is reasonable that the Board should announce and solicit
nominations at least 180 days before the expiration of the current term
of office. Furthermore, a requirement that the nomination petition form
be returned to the Board not less than 120 days prior to the then
current term's expiration would provide adequate time to complete the
election of industry members. Such a procedure would help ensure that
appointments by the Secretary are made in time to seat the new Board by
the beginning of the next term.
Once the completed petition forms are returned, the Board would
distribute ballots containing the names of all eligible grower and
handler nominees by district via the U.S. Postal Service, or
[[Page 61304]]
such other means as the Board may recommend and the Secretary approve,
to all eligible growers and handlers. Hearing evidence indicates that,
in Districts 1, 2, 3, 4, and 7, growers would be permitted to vote only
for grower members and alternate grower members, and handlers would be
permitted to vote only for handler members and alternate handler
members. In Districts 5, 6, 8, and 9, where the single seat on the
Board may be either a handler or a grower, both growers and handlers
may vote regardless of whether the nominees are producers or handlers
of tart cherries. In this situation, the member could be a grower and
the alternate member could be a handler or vice versa or both.
The Board should have the ability to modify these provisions of the
proposed order, or to specify more detailed nomination and election
procedures. Consequently, the order should contain provision for the
Board, with the approval of the Secretary, to establish rules and
regulations necessary and incidental to the administration of the
nomination and election process. The order should further provide that
the Secretary or the Board may administer the nomination and election
process as outlined herein.
Once affirmed, the nomination and election results should be
presented to the Secretary for appointment pursuant to Sec. 930.24.
Following the Board's submission of the nomination and election results
to the Secretary, the Secretary would appoint the grower and handler
members and alternate members on the basis of representation provided
for in Sec. 930.20. The order should also authorize the Secretary to
appoint the public member and alternate public member once elected by
the newly appointed Board.
In the case of the initial Board, the Secretary would conduct
meetings to nominate initial Board members. All producers of record in
the production area would receive notice of the meetings in sufficient
time to enable them to attend. Nominations should be received and voted
upon at these meetings. Handlers nominations would be accomplished in
the same way.
The order should provide for appointment by the Secretary of
members and alternates of the Board. The tart cherry growers and
handlers should have the responsibility for recommending nominees to
the Secretary for appointment. The nomination and election procedure
outlined in the order would provide a means of making available to the
Secretary the names of prospective members and alternates selected by
the industry under the order to serve on the Board. The Secretary
should have the authority to appoint the industry and public members
and alternate members to the Board, notwithstanding the list of
nominees submitted.
In the event the nomination and election process has not been
completed within the time and in the manner specified in the order, the
Secretary should have the authority to appoint members and alternates
without regard to nominations, in accordance with proposed Sec. 930.25.
Such appointment should be from qualified persons as provided in the
order.
Each person to be appointed by the Secretary as a member or as an
alternate member of the Board should, prior to appointment, qualify by
advising the Secretary on a form provided by the Board or the Secretary
that such person agrees to serve in the position for which nominated.
The information requested on the form would be incidental to the
qualifications of each position and would thus provide the Secretary
with the information required to complete the appointment process.
Proposed Sec. 930.27 states that the order should provide a method
for promptly filling any vacancies on the Board for unexpired terms of
office. There may be vacancies caused by the death, removal,
resignation, or disqualification of a member or alternate. The order
should provide that the Secretary shall be authorized to name a
successor to fill an unexpired term from the most recent list of
nominations for the Board, from a nomination and election process
specifically held to fill the vacancy and made in the same manner as
provided for in Sec. 930.23, or from other qualified individuals.
Qualification and appointment should be made on the basis of
Sec. 930.20 or any redistribution or reestablishment made pursuant to
Sec. 930.21.
Proposed Sec. 930.28 states that an alternate member of the Board
should act in the place and stead of the regular member during the
absence of such member. It continues by adding that an alternate member
would not be eligible to serve at a meeting of the Board if the member
is in attendance. In the event of the death, removal, resignation, or
disqualification of a member, an alternate member would act for the
regular member until a successor of such member is appointed. This
would ensure that all portions of the production area are adequately
represented in the conduct of the Board's business and that the
continuity of Board operation is not interrupted. In the event both a
member and the respective alternate member are unable to attend a
meeting of the Board, no other member or alternate member would be
eligible to serve in that position. Witnesses testified that a member
and alternate member are nominated and elected to represent a specific
constituency, and that an arrangement that allows another member, even
if from the same district, to sit in such position would not best serve
the industry. The order should also provide that alternate members have
the same qualifications as their respective members.
The Board, under proposed Sec. 930.30, should be given those
specific powers that are set forth in section 608c(7)(C) of the Act.
Such powers are necessary for an administrative agency, such as the
Board, to carry out its proper functions. The Board would administer
the order in accordance with its terms and provisions and would
recommend rules and regulations necessary to effectuate the terms and
provisions thereof. The Board should also have the power to investigate
complaints of violations to the order and forward such information to
the Secretary, and to recommend to the Secretary appropriate amendments
to this part.
The Board's duties as set forth in Sec. 930.31 of the proposed
order are necessary for the discharge of its responsibilities. These
duties are similar to those typically specified for administrative
agencies under other programs of this nature. They pertain to specific
activities authorized under the order, such as investigating and
compiling information regarding tart cherry marketing conditions, and
to the general operation of the order including hiring employees,
appointing officers, and keeping records of all Board transactions. The
order should delineate Board duties as follows:
(1) The Board should select any officers, including a chairperson
and vice-chairperson, necessary for its proper function, and should
define the duties of such officers. Other officers might include
secretary, treasurer, parliamentarian, or such other officers deemed
helpful to the efficient operation of the Board.
(2) The Board should employ or contract with such persons or agents
as it finds necessary, and should determine the duties and compensation
of such persons or agents. This provides the Board with the ability to
organize for the purpose of conducting its day-to-day business. A
typical staffing arrangement could include a general manager who
reports directly to the Board, and field and office support staff
deemed necessary for efficient operation. In some cases, additional
staff dedicated to
[[Page 61305]]
order compliance would be useful to the Board.
(3) Whenever committees or subcommittees are deemed necessary or
advisable, the Board should appoint members or other industry
representatives to serve on such committees or subcommittees. These may
be producers, handlers, consultants, or other persons who are not
members of the Board but who possess some knowledge or could serve the
Board in some unique way. Thus, the provisions authorizing the board to
appoint subcommittees should include authority for the Board to appoint
persons to serve on special subcommittees or as consultants to regular
subcommittees, even though they are not members of the Board. Actions
recommended by any subcommittee should be subject to the approval of
the Board.
(4) The Board should adopt bylaws and establish other rules,
including rules of conduct and administration, which are necessary to
carry out its duties and responsibilities. These could include rules
relating to parliamentary procedures for the conduct of meetings and
rules governing Board member and staff compensation for expenses
incurred while performing their normal duties.
(5) Prior to the beginning of each fiscal period, the Board should
submit a budget of such fiscal period to the Secretary. Each such
budget should be accompanied by a report explaining the items appearing
therein, as well as a recommendation for an assessment rate for the
forthcoming fiscal period.
(6) The Board should keep minutes, books, and records which clearly
reflect all of its meetings, acts and transactions. These minutes,
books, and records would be subject to examination at any time by the
Secretary or an authorized agent or representative of the Secretary.
Minutes of all Board meetings, as well as all subcommittee meetings,
should be recorded in a minutes book, or similar record. Minutes would
assist in answering questions at a later date, and avoid confusion as
to what transpired at a given meeting. In order for the record to be
complete, minutes should include motions, whether passing or failing,
votes, important points of discussion, and all resolutions. Copies of
the minutes should be furnished to the Secretary and to all members and
alternate members as early as possible following each meeting.
(7) The Board should prepare periodic statements of its financial
operations and ensure that copies of each financial statement are made
available to growers and handlers for examination at the office of the
Board. Copies of such statements should also be provided to the
Secretary.
(8) The Board should have its books audited by a certified public
accountant at least once each fiscal period, and at such other times as
the Board may find necessary or as the Secretary may request. This
audit would normally follow the conclusion of each marketing year. The
audit report should show the receipt and expenditures of funds
collected pursuant to this part. A copy of this report should be made
available to the Secretary, as well as at the principal office of the
Board for inspection by handlers and growers. Confidential or
proprietary information should be removed from the audit report before
making it available to handlers and growers.
(9) Should it be necessary, the Board should act as an intermediary
between the Secretary and any grower or handler. This provides that any
problems arising at either level can be dealt with in an efficient and
orderly manner.
(10) The Board should have the duty to investigate and assemble
data on the growing, handling, and marketing of tart cherries. Such
data would provide information necessary for the Board to make proper
recommendations and to otherwise perform its duties. During the
investigation and assembly of data, the Board should acquire
information concerning producing acreage and the estimated production
of tart cherries on an ongoing basis. Thorough knowledge of growing and
harvesting conditions in each of the districts, including information
on weather, problems with pests, and new and innovative cultural
practices, would be helpful to the Board when making decisions
pertaining to quality and volume regulations. Information should be
obtained pertaining to the volume of fresh and processed tart cherries
in the possession of producers and handlers. With such growing,
harvesting, and supply information and knowledge of past, current and
projected demand patterns, the Board would be better equipped to make
regulatory recommendations to the Secretary.
(11) Whenever the Board provides notice of meetings to its members,
the same notice should be provided to the Secretary. This would apply
to all meetings of the Board and any of its designated subcommittees.
The Secretary should have ample notice of these meetings in order to
exercise the supervisory responsibilities provided by law. With the
exception of certain meetings held for personnel or compliance
purposes, all such meetings are open to the public. Therefore, all
meeting notices should receive widespread distribution. In order for
the Secretary to properly exercise oversight authority over the order
and its administration, all information relating to the marketing of
cherries and the various activities of the Board must be made
available.
(12) The Board should submit such available information as the
Secretary may request.
(13) The Board should investigate compliance with the provisions of
this part. This would include development of a comprehensive plan, to
be reviewed and approved by the Board and the Secretary on an annual
basis, that contains sound and effective methods for preventing and
detecting violations of the order and assurances that responsible staff
are following the prescribed procedures.
(14) The Board should be responsible for developing and submitting
an annual marketing policy to the Secretary for approval. The marketing
policy should contain the optimum supply of tart cherries for the crop
year established pursuant to Sec. 930.50 and recommend any such action
necessary to achieve such optimum supply. The marketing policy should
include an explanation of the marketing problems expected to exist
during the season, as well as an explanation of how the regulations
recommended by the Board, if any, would be used in an effort to correct
or change marketing conditions.
(15) The Board should implement such quantity regulations as are
called for by the marketing policy and approved by the Secretary,
including the release of any inventory reserve.
(16) The Board should provide thorough communications to growers
and handlers regarding its activities and respond to any industry
inquiries about its activities.
(17) The Board should oversee the collection of assessments levied
under this part.
(18) For the development and conduct of activities, including
research and promotion activities, the Board should have the authority
to enter into contracts or agreements. Such contracts or agreements
would pertain to the rendering of services required by the order and
for the payment of the cost of such services with funds collected under
the authority of this part. Any contracts or agreements entered into
pursuant to this paragraph should provide that contractors submit to
the Board a plan and a budget, that the plan or project be submitted to
the Secretary for approval, and that the contractor shall maintain
accurate records of all
[[Page 61306]]
transactions. Such an agreement should also specify that the contractor
make periodic reports to the Board of its activities and funds received
and expended or any other reports required by the Board or the
Secretary. It should also clearly indicate that the Board or the
Secretary may periodically audit the records of the contracting party
as they pertain to the agreement.
(19) Pending the expenditure of funds as set forth in the annual
budget, the Board should have the authority to invest funds collected
through assessments as well as income generated by such assessments.
Any investments made should be in accordance with applicable
Departmental policies. The Board should maximize income opportunities
while not putting the funds at risk.
(20) The Board, with the Secretary's approval, may establish
standards and grade requirements for cherries produced for frozen and
canned cherry products. Prior to making such recommendations, the Board
should poll all handlers that would be affected by such regulations to
obtain a consensus as to if, when, and how standards and grade
requirements might be implemented. The Board, with the Secretary's
approval, could establish a requirement for mandatory inspection
pursuant to Sec. 930.44.
After review of the requirement for the Board to poll handlers on
how the standards and grade requirements might be implemented, the USDA
is deleting such requirement from the proposed order. The Board, which
is comprised of grower and handler members, has the responsibility of
representing the growers or handlers from the district in which such
member was represented to serve. It is the Board's responsibility to
develop recommendations and/or rules and regulations to implement the
sections in the proposed marketing order. Therefore, it is not
necessary for the Board to poll handlers on this issue since handlers
are represented by members on the Board.
An opponent to this provision testified that this section should be
deleted from the proposed order. It was the opponent's position that
the market should be allowed to function on utilization of
relationships between handlers and buyers and use of the current USDA
standards and specifications. However, the preponderance of the
testimony supports the authority to authorize the Board to recommend to
the Secretary standards or grade requirements in order to provide a
consistent quality cherries to be processed into cherry products.
(21) The Board should be able to borrow funds necessary to
administer its responsibilities and obligations under this part. Any
such transaction should be subject to the Secretary's approval and
should not exceed one fiscal period's budget. The Board should normally
be required to pay any borrowed funds back within the same fiscal
period.
(22) With the Secretary's approval, the Board should establish
rules and procedures relative to the administration of this order. Such
rules and procedures should be consistent with the provisions of this
subpart and necessary for efficient operation of the order and to
accomplish the purposes of the Act.
The duties listed in proposed Sec. 930.31 are reasonable and
necessary if the Board is to function in the manner prescribed under
the Act and the order. It should be recognized that the duties
specified are not necessarily all-inclusive, and it may develop that
there are other duties that the Board may need to perform which are
incidental to, and not inconsistent with, these specified duties.
As set forth in proposed Sec. 930.32, the order should specify a
procedure for the Board to conduct its meetings. Conflicting testimony
was received during the hearing process pertaining to the number of
Board members that should constitute a quorum, as well as to the number
of favorable votes required of Board members to pass any
recommendations by the Board. The proponents proposed that 12 members,
or their alternates acting in their stead, should constitute a quorum.
Further, the proponents proposed that for any action of the Board to
pass, a simple majority of those present should concur. For example, if
the minimum number of 12 Board members, the proposed quorum, were
present at a meeting, seven members could conceivably carry a
recommendation for regulatory action. The proponent argued that a
general voting procedure requiring a higher degree of support for
regulatory and administrative Board actions would potentially allow
minority district representatives to boycott meetings and thereby
disrupt the Board's ability to recommend rules and regulations to the
Secretary. This proposal excluded Board action taken to elect the
public member and alternate public member, however, in which case
affirmation by at least two-thirds of the entire Board was proposed.
During the hearing process, an amendment to Sec. 930.32 was offered
by Mr. Lee Schrepel proposing that (1) a quorum consist of at least 14
members, (2) any action approved by the Board would not be effective
upon any district affected by such action unless a simple majority of
the Board members from such district also approved the action, and (3)
actions involving enactment of volume control, implementation of
assessments, inspection, grading, procedural considerations and
district representation should require a two-thirds affirmative vote of
the entire Board.
In support of his proposed amendments, Mr. Schrepel testified that
a quorum requirement of less than 14 Board members could potentially
allow a single sales constituency to dominate the Board. He also
indicated that the rights and responsibilities of all participants
should be protected and that any regulations recommended by the Board
not be imposed on a segment of the industry that objects to such
regulations.
As indicated earlier, a single sales constituency would have a
maximum potential representation on the Board of nine members.
Therefore no such sales constituency could dominate the Board if the
quorum requirement is less than 14 members, because, as discussed
hereinafter the voting requirement for an action to pass should be two-
thirds of the entire board. The proponents testified that they
anticipate that most of the members would be present for full Board
meetings. The proposal that each district must ratify any action by the
Board should also not be adopted. Such a proposal is synonymous with
requiring Board unanimity on any action and could cripple the
effectiveness of the order.
However, Mr. Schrepel's third recommendation is a sound one.
Therefore, the order should provide that 12 members of the Board,
including alternates acting for absent members, should constitute a
quorum and any action by the Board should require that two-thirds of
the entire Board support such action. A voting procedure requiring the
consensus of at least a two-thirds majority of the entire Board is
similar to many of the other fruit, vegetable and specialty crop
marketing orders now in effect. Such a voting procedure helps ensure
that the industry majority supports any action of the Board and that
minority interests are addressed.
If Board membership is increased in the future due to Districts 5,
6, 8, or 9 becoming permanently regulated as proposed in
Sec. 930.20(e), the order should authorize a like increase of the
quorum requirement through implementing regulations. For example, if
District 5 picked up one seat on the
[[Page 61307]]
Board in the future, the Board would increase to 19 members. The quorum
requirement, in this example, would subsequently be increased from 12
to 13. The quorum would be maintained at a level equal to two-thirds of
the total Board membership.
Since the production area encompasses several states and spans the
entire width of the country, it is reasonable that the Board be
provided with the authority to recommend to the Secretary rules and
regulations pertaining to the conduct of simultaneous meetings of
groups of its members assembled at different locations. There may be
times, due to inclement weather or similar situations, when the Board
is unable to assemble at one location. Therefore, the proposed order
should also provide for Board meetings conducted via telephone or some
other means of communications. To eliminate potential confusion or
misunderstanding that may arise when the Board meets at multiple
locations, all such votes cast by the Board should be promptly
confirmed in writing.
All meetings of the Board should be open to the public with the
exception of special meetings held in executive session for
consideration of personnel or certain compliance matters, or such other
matters that the Secretary may approve. The Board should establish a
means of providing advanced notice of meetings to tart cherry growers
and handlers as well as other interested parties.
Board members and alternates will necessarily incur some expense
while on Board business. Reasonable expenses, which may include those
associated with travel, meals, and lodging, should be reimbursed to
members while attending Board meetings or performing other duties under
the order, in accordance with proposed Sec. 930.33. It is also
reasonable that the public member and alternate public member, in
addition to reimbursement for incurred expenses, should receive
compensation for time served at meetings and while performing other
Board authorized duties. The public members and alternate members
should be compensated while performing Board authorized duties because
attending Board meetings may take them from their normal place of
employment, one not associated with the tart cherry industry.
Therefore, the order should provide that, except for the public member
and alternate public member who shall receive such compensation as the
Board may establish and the Secretary may approve, the members of the
Board, and alternates when acting as members, shall serve without
compensation but shall be reimbursed for necessary and reasonable
expenses as authorized by the Board. The Board at its discretion may
request the attendance of one or more alternates at any or all
meetings, notwithstanding the expected or actual presence of the
respective member(s), and may pay their expenses as aforesaid. The
Board may also request nonmembers to attend Board or subcommittee
meetings to present an issue of interest to the Board or subcommittee.
In this case, the Board should be authorized to pay such individuals'
expenses for attending such meetings.
(c) As noted under Sec. 930.31(e), the Board should be required to
prepare a budget showing estimates of income and expenditures necessary
for the administration of the marketing order during each fiscal year.
The budget, including an analysis of its component parts, should be
submitted to the Secretary sufficiently in advance of each fiscal
period to provide for the Secretary's review and approval. The
submitted budget should include a recommendation to the Secretary of a
rate of assessment designed to secure all or part of the income
required for such fiscal year.
The Board should be authorized under Sec. 930.40 of the proposed
order to incur such expenses as the Secretary finds are reasonable and
likely to be incurred during each fiscal year. Such a provision is
necessary to assure the maintenance and functioning of the Board, and
to enable the Board to perform its duties in accordance with the
provisions of the order. Necessary expenses would include, but would
not be limited to, such administrative items as employee salaries and
benefits; establishment of an office and equipping such office;
telephone and mail services; and such business and travel related costs
for the Board staff as transportation, lodging, and food. As discussed
previously, expenses incurred by Board members in attending Board
meetings should be a reimbursable expense as well. Other administrative
expenses would include those related to inspection and marketing order
compliance.
In addition, the order should authorize the Board to incur expenses
related to production and processing research, market research and
development, and promotional activities, including paid advertising,
designed to assist, improve, or promote the efficient production,
processing, marketing, distribution, and consumption of cherries.
The proponents testified it would be unlikely, in the foreseeable
future, that any activity under Sec. 930.48 would be initiated by the
Board unless the current high level of research and promotion activity
sponsored by the Cherry Marketing Institute and the New York Cherry
Board tapers off. The proponents estimated that producers representing
approximately 94 percent of tart cherry production on a national scale
are currently financing various production research, development and
promotional projects through assessments to these two organizations.
The proponents thus testified that it would be unnecessary and
redundant for the Board to finance similar activities while such a
relatively high level of activity exists, but recommended including the
authority for such future activity in the order.
The proposed order should state that expenses incurred due to any
approved administrative costs and authorized research, development, and
promotion projects could occur on an ongoing basis throughout the
fiscal period.
With the Secretary's approval, the Board, under proposed
Sec. 930.41, should be authorized to levy annual assessments upon
handlers to cover administrative costs and the costs of any research,
development and promotion activities undertaken pursuant to Sec. 930.48
that the Board recommends and the Secretary approves. However, as noted
earlier, the proponents indicated that it would be highly unlikely that
the Board would initiate recommendations for research, development, or
promotion related assessments while a high percentage of tart cherry
producers are financing such activities through other organizations. It
would be reasonable to expect the Board to ensure that handlers in each
district are well informed of the assessment rate and how such
assessment rate would be allocated among the various approved expenses.
During each fiscal period, the Board would assess each handler on
all cherries handled, unless subject to certain authorized exemptions,
that handler's pro rata share of the administrative expenses, as well
as any research, development and promotion expenses. Assessments should
be calculated on the basis of pounds of cherries handled. However, the
order should provide that the formula adopted by the Board and approved
by the Secretary for determining the rate of assessment should
compensate for differences in the number of pounds of cherries utilized
for various cherry products. For example, the proponents testified that
high value products such as frozen, canned or dried cherries would be
assessed one amount and the
[[Page 61308]]
low value products such as juice concentrate and puree would be
assessed one half of the assessed amount of the high value product.
Testimony supported exempting any handler from paying assessments
on cherries diverted as provided in Sec. 930.59. This exemption from
assessment would also include cherries represented by grower diversion
certificates issued pursuant to Sec. 930.58(b)(2) and acquired by
handlers, and those cherries devoted to exempt uses under Sec. 930.62.
In addition to administrative, research, development and promotion
expenses, the proponents proposed that assessments be collected from
all handlers in all districts to cover the costs of storing the primary
inventory reserve. The proponents recommended that all handlers,
whether regulated or non-regulated, pay storage cost assessments.
Alternative proposals were also received into evidence recommending
that such storage cost assessments not be levied. Considerable
testimony was received throughout the hearing process concerning this
issue.
The proponents testified that the entire industry would benefit
from increased cherry prices during periods when a volume regulation is
in effect, and not just the handlers and growers in the regulated
districts. The proponents emphasized that non-regulated districts would
be able to market one hundred percent of their marketable crop while
the regulated districts would be required to withhold a determined
amount of their marketable cherries from the market. The proponents
argued that to excuse the non-regulated districts from paying for a
portion of the regulated district's storage expenses would burden
regulated handlers not only with such tangible costs, but also with the
intangible cost of withholding product from the market. Therefore, in
order to thus distribute the costs associated with the potential
increase in the grower price of cherries, the proponents proposed that
all districts, regulated or not, be assessed for annual storage costs.
However, opponents to the establishment of a storage cost
assessment noted that, while the non-regulated districts do indeed have
the opportunity to market one hundred percent of their crop, they enjoy
such benefit primarily because they are producing less than the amount
that would trigger volume regulation in their district, are not
contributing to the oversupply situation, and have demonstrated the
ability to market all of their crop. Opponents to the proposed storage
assessment argued that such a proposal merely provides a subsidy for
those districts responsible for the oversupply situation.
Testimony received during the hearing process indicated that the
cost of storage varies with different processed cherry products. For
example, the costs associated with the storage of frozen product would
generally run higher than the costs associated with the storage of
canned, pureed, concentrated and dried product. Testimony also
indicated that the cost differential between freezer storage and dry
storage is considerable, with the cost of storing frozen product
approximately twice that of storing non-frozen product. However, to
effectuate the proponent's provision, storage assessments would have to
be levied on all handlers such that the full cost of storage would be
covered. Thus, under a storage assessment as proposed, handlers putting
product into the lower cost, non-frozen storage packs would, to some
degree, also be subsidizing handlers packing for freezer storage.
The preponderance of testimony supports the levying of assessments
for administrative, research, development and promotion purposes on all
handlers, but does not adequately justify the additional burden of an
assessment designed to distribute individually assumed costs of storage
to the entire cherry industry. Each regulated handler utilizing storage
because of an established primary reserve should be independently
responsible for any costs associated with such storage. Such an
arrangement should also have the effect of increasing the efficiency of
storing product since each handler, responsible for carrying the entire
cost associated with storing their own product, would seek the most
cost-effective storage facilities, would pack the cherry product in a
form, frozen or non-frozen, that best matches his or her own individual
economic situation, or could choose to divert the cherries into an
approved exempt channel.
The proponents did not adequately show why it would be equitable
for all handlers to share the cost of storing product when only a
portion of them would be utilizing storage, how each producer or
handler would benefit economically or practically from such an
arrangement, nor why it would be cost effective for the Board or the
assessed handlers to be burdened with the costs of administering such
an assessment.
Sufficient evidence was not received to indicate that handlers
would not be unduly burdened with the increased costs of reporting and
record keeping that are directly attributable to a storage assessment,
nor that the Board should sustain expenses associated with the
administration of a storage assessment.
The marketing order should contain the authority for the Board to
incur administrative expenses and such expenses related to approved
research, development, and promotion activities, as well as the
authority for the Board to levy assessments on all handlers to cover
such expenses. The order should not, however, authorize the Board to
incur expenses nor levy assessments for any costs associated with the
storage of reserve cherries. The Board should be authorized to pay
inspection costs for reserve cherries from assessments collected from
all handlers for the administration of the order.
The rate of assessment should be established by the Secretary on
the basis of the Board's recommendation and other available
information. However, in the event that an assessment rate is
established which does not generate sufficient income to pay for the
approved expenses, the Board should be authorized to recommend to the
Secretary an increase in the rate of assessment in order to secure
sufficient funds. The Secretary may approve an assessment rate
increase, and such increase should be applicable to all tart cherries
handled during the fiscal year to which that assessment rate applies.
The Board should be authorized to accept advance payment of
assessments so that it may pay expenses which become due before
assessment income is normally received. This would give the Board more
flexibility in paying obligated expenses, particularly in the first
part of a fiscal year before assessment funds are received.
The Board should also be able to borrow money to meet
administrative expenses that would be incurred before assessment income
is sufficient to defray such expenses. However, the Board should not
borrow money to pay obligations if sufficient funds already exist in
the Board's reserve fund or in other Board accounts.
If a handler does not pay any assessment by the date it is due, the
order should provide that the late assessment may be subject to a late
payment charge or an interest charge, or both, at rates set by the
Board with the Secretary's approval. Such charges should be set at
rates established to cover additional costs that may be incurred by the
Board in attempting to collect overdue assessments, and should
encourage timely payments. The period in which payments would be
considered late, and late payment or interest charges incurred, should
be recommended by the Board and approved by the Secretary.
[[Page 61309]]
If, at the end of a fiscal period, the assessments collected are in
excess of expenses incurred, such excess should be established as a
reserve or refunded pro rata to the handlers, under proposed
Sec. 956.42. The Board should be authorized to carry over excess
assessment income into the following fiscal period as a reserve. If
such excess income is not carried over as a reserve, handlers should be
entitled to a refund proportionate to the assessments each handler
paid. The proposed order should indicate that the amount held in
reserve for administrative, research, development and promotion
expenses should be held at or below an amount equal to approximately
one year's operational expenses.
One purpose of the reserve fund would be to provide stability in
the administration of the order in the case of a short crop. Also,
establishing a reserve should minimize the necessity of the Board
borrowing money at the beginning of a fiscal year or raising an
assessment rate during a season of less than anticipated production.
Reserve funds could also be used to cover necessary liquidation
expenses in the event the order is terminated. Upon such termination,
any funds not needed to defray liquidation expenses should be disposed
of as determined by the Secretary. To the extent possible, however,
these funds should be returned pro rata to the handlers from whom they
were collected.
All funds collected by the Board through assessments or any other
provision of the order should be used only for the purposes set forth
in the order. The Secretary should at all times have authority to
require the Board, its members and alternates, and its employees and
agents to account for all receipts, disbursements, and property and
records of the Board. Likewise, when any of the above individuals
ceases to act in his or her official position, that person should
account for all receipts, disbursements, property or records of the
Board for which such person has been responsible. In the event the
order is terminated or becomes inoperative, the Board should appoint,
with the approval of the Secretary, one or more trustees for holding
records, funds or other property of the Board.
(d) Under proposed Sec. 930.48, the order should authorize the
Board to establish and provide for the establishment of production
research, marketing research and development, and marketing promotion
projects, including paid advertising, designed to assist, improve, or
promote the marketing, distribution, consumption, or efficient
production and processing of tart cherries. Funding for these programs
should come from any authorized receipts of the Board including
assessment income, voluntary contributions and miscellaneous income
such as interest.
The Board should have the authority to initiate new production and
marketing research projects, as well as to contribute to research which
may currently be taking place.
As discussed previously, marketing order proponents testified that
this authority would not be used unless existing State programs for
these purposes were terminated or their operations suspended.
Currently, Michigan, Utah, Wisconsin, and New York have assessment
programs of $10 to $15 per ton that are paid by growers to support the
Cherry Marketing Institute (CMI) and the New York Cherry Board. The CMI
represents growers in Michigan, Utah, and Wisconsin. Both the New York
Cherry Board and CMI conduct substantial domestic generic promotion
programs for tart cherries. At this time the tart cherry industry does
not support any brand advertising. These activities are supported only
by the various finished product manufacturers.
The States of Washington, Oregon, and Pennsylvania have no state
programs at this time to authorize assessments for this purpose. The
proponents testified that about 94 percent of the tart cherry industry
is now supporting marketing and production research and development,
and promotion under the various state organizations.
The record indicates that some of the primary responsibilities of
the CMI are to fund projects relating to: short-term production
research directed at improving current horticultural practices; long-
term research directed at developing new varieties of cherries with
increased market appeal and greater resistance to pests and climate
factors; domestic promotion activities covering food service and
consumer markets; export development in Japan, Korea, and Taiwan; new
product applications; and nutritional evaluations. These are also
examples of the types of programs that could be implemented under the
marketing order. When this authority is utilized the assessments would
be collected, pursuant to Sec. 930.41(a).
The record does not indicate the amount of assessment funds that
may be allotted for research and promotion programs. The Board should
have the responsibility to determine the amount of funds spent on each
program each year. Such determination should be based on the needs of
the industry each year. The amount of funds to be spent on research and
promotion programs would be included in the annual budget required to
be submitted to the Secretary for review and approval.
All research and promotion projects to be conducted under the order
in a given fiscal period should be required to be submitted by the
Board to the Secretary for approval prior to being undertaken. Further,
the Board should be required to report at least annually on the
progress of each project and at the conclusion of each project. Such
reports should be made to the Secretary.
The proponents did not provide specific testimony on paid
advertising authority. However, the record supports the proposition
that such authority should be added to allow the Board to implement
such a program in the future, if necessary. Therefore, the authority is
proposed to be contained in the order.
(e) In accordance with proposed Sec. 930.44, the Board should have
the authority to recommend regulations to the Secretary regarding
minimum quality and inspection requirements. Also, the Board should be
authorized to recommend to the Secretary the amendment, modification,
termination, or suspension of any regulation issued under this part,
when deemed necessary.
Recent technological improvements in the industry have enabled
processors to install sophisticated equipment to reduce pit counts and
improve color sorting. As the technology improves further, the Board
should have the authority to respond by adopting additional quality
standards for cherries, especially as to pit count. The proponents
testified that any regulation that could be implemented to cause a
reduction of the pit counts in cherries consumed by the public would be
beneficial to growers and consumers. The proponents further testified
that the sale of poor quality cherries creates image and marketing
problems for the entire tart cherry industry, both domestically and
internationally. Therefore, the Board should have the authority to
implement quality regulations so that the industry can provide a
consistent, quality product to consumers.
Marketing order proponents proposed that when quality control
regulations are implemented, no handler should be allowed to process
cherries into manufactured products or sell manufactured products in
the current of commerce unless the cherries used in such products meet
the applicable requirements. The inspection and
[[Page 61310]]
certification of tart cherries would be carried out by USDA. The
proponents testified that cherries should be required to be inspected
again if they are regraded, resorted, repackaged or in any way further
prepared for market. This would be done to cover those situations where
a handler may need to repackage or resort a product that was already
packaged and inspected for a client. This provision is a safety valve
designed to prevent poor quality product from entering the channels of
commerce.
The Board should also have the authority to recommend to the
Secretary such standards of grade, quality or condition of cherries to
be placed in the inventory reserve. This would insure the quality of
the inventory reserve once it is released to the handlers and sold in
the marketplace.
After obtaining inspection and certification of tart cherries, a
handler would be required to submit a copy of the inspection
certificate to the Board. The Board, with the approval of the
Secretary, should have the authority to establish rules and regulations
to implement the provisions of this section.
An opponent offered testimony concerning Sec. 930.44 providing
exemptions for very small handlers and specialty packs for which
grading may be inappropriate. The Board should establish a fixed cost
per pound that small handlers would pay for inspection. The opponent
testified that handlers that handle less than one million pounds of
cherries per year should be exempt from the proposed order regulations,
if implemented. One million pounds was chosen because these handlers
would be severely burdened with providing personnel to comply with
reporting requirements under a marketing order.
The preponderance of the testimony supports providing authority for
minimum quality and inspection regulations. Also, several witnesses
testified that the burden for handlers would not be severe. The
information required to be submitted to the Board under a marketing
order would be similar to information already available to handlers.
Therefore, this provision would remain as proposed.
(f) In accordance with proposed section 930.50, whenever the Board
believes that regulations issued pursuant to section 930.51 regarding
free and restricted percentages would be appropriate, it should have
the authority to recommend such regulations to the Secretary. The
proponents have testified that the proposed volume control regulations
would result in a supply management program which would compensate for
the extremely erratic natural production cycles of tart cherries and
which would provide the market with a more stable supply of tart
cherries. Record evidence shows that a major flaw in the previous tart
cherry order was that the process used to establish the marketing
policy was prone to too much subjective decision-making by the Board
which led to non-uniform policies and political skirmishes. The
proponents therefore sought to develop a more objective system that is
less subject to outside influences and is more market driven.
Marketing Policy
Record evidence indicates that a volume control program should
entail several steps. Section 930.50 of the proposed marketing order
states that the Board would meet on or before July 1 of each crop year.
At this meeting, the Board would review sales data, inventory data,
current crop forecasts and market conditions in order to establish an
``optimum supply'' level for the crop year. The proponents testified
that the USDA forecast is the most accurate estimate available at that
time to use in the marketing policy calculations. The optimum supply
represents the desirable volume of tart cherries that should be
available for sale in the coming crop year for both buyers and sellers.
The optimum supply would be calculated as 100 percent of the average
sales of the prior three years, plus a desirable carryout inventory
that would not exceed 20 million pounds. In addition, there should be
authority, through informal rulemaking, to adjust the 20 million pound
desirable carryout figure upward, if necessary. Record evidence shows
that the 20 million pound figure is based on a historical pattern of
the amount needed in inventory for the industry to operate. Once the
optimum supply is calculated, it would be announced to the industry by
the Board. Testimony showed that this could be done as early as May or
June but definitely by July 1.
After the calculation of the optimum supply, the Board would
establish preliminary free and restricted percentages. This would be
done on or about July 1 of each crop year. Subsequently, as discussed
below, the Board may also establish interim percentages and recommend
final percentages to the Secretary. Evidence indicates that when the
Board computes preliminary and interim percentages, or when it
determines final percentages for recommendation to the Secretary, it
should also consider the following factors: (1) The estimated total
production of tart cherries; (2) the estimated size of the crop to be
handled; (3) the expected general quality of such cherry production;
(4) the expected carryover as of July 1 of canned and frozen cherries
and other cherry products; (5) the expected demand conditions for
cherries in different market segments; (6) supplies of competing
commodities; (7) an analysis of economic factors having a bearing on
the marketing of cherries; (8) the estimated tonnage held by handlers
in primary or secondary inventory reserves; and (9) any estimated
release of primary or secondary inventory reserve cherries during the
crop year.
Record evidence indicates that preliminary free and restricted
percentages should then be calculated in the following manner. The
Board would deduct the carryin inventory from the optimum supply figure
(adjusted to raw fruit equivalent) and divide that figure by the
current year's USDA crop forecast. The carryin inventory figure
reflects the amount of cherries that handlers actually have in
inventory. If the resulting quotient is 100 percent or more, the Board
should establish a preliminary free market tonnage percentage of 100
percent. If the quotient is less than 100 percent, the Board should
establish a preliminary free market tonnage percentage equivalent to
the quotient, rounded to the nearest whole percent, with the complement
being the preliminary restricted percentage. The Board would be
responsible for announcing these percentages to the industry in an
expedited manner. If a restricted percentage is announced, each handler
would be responsible for setting aside a portion of tart cherries which
that particular handler handled.
If necessary, the Board should be able to modify the preliminary
free and restricted percentages to adjust to the actual pack occurring
in the industry. The Board may adjust the percentages between July 1
and September 15 of the crop year. However, the optimum supply could
not be adjusted. Record evidence shows that the Board would review
weekly production reports to determine if it is necessary to adjust the
preliminary percentages. If interim percentages are established, the
Board would be responsible for announcing them quickly to the industry.
Timely announcement would be crucial since the proponents testified
that these percentages could be adjusted as often as once per week.
Finally, no later than September 15 of each crop year, the Board
would recommend the establishment of final free and restricted
percentages to the Secretary. At this time, the Board would
[[Page 61311]]
have available actual production and delivery figures to review to make
any needed adjustments to the percentages. The Secretary would
establish the final free and restricted percentages through the
informal rulemaking process. These percentages would release the tart
cherries necessary to achieve the optimum supply figure calculated
earlier. The difference between any final free market tonnage
percentage designated by the Secretary and 100 percent would be the
final restricted percentage.
An example of the marketing policy calculations is discussed below.
The USDA crop forecast for the example is 256 million pounds and the
optimum supply is 263 million pounds. The total industry carryin is 40
million pounds. The total production in the regulated districts is 233
million pounds. For this example, the average sales of the prior three
years is 243 million pounds, and added to it is a 20 million pound
desirable carryout, which equals an optimum supply of 263 million
pounds. The preliminary percentages would then be calculated by
deducting the carryin from the optimum supply to equal a free tonnage
of 223 million pounds. The free tonnage would then be deducted from the
USDA crop forecast. This would result in a requirement for a 33 million
pound inventory reserve. The free and restricted percentages would only
apply to those handlers in the regulated districts. Therefore, the
percentages would be calculated by dividing the restricted tonnage
volume by the regulated district production (233 million pounds would
be divided into 33 million pounds to obtain the restricted percentage).
This would result in a preliminary free percentage of 86 percent and a
restricted percentage of 14 percent for those districts that are being
regulated.
Illustration
1. Average movement is based on a three year rolling average of
sales and movement, plus a desirable carryout of up to 20 million
pounds. For example, if tart cherry sales for 1992-1994 had been,
respectively:
1992--243 million pounds
1993--245 million pounds
1994--241 million pounds
The average movement for the 1992-94 three year period would have
been 243 million pounds. Adding a carryout of 20 million pounds
produces an Optimum Supply Formula (OSF) of 263 million pounds.
2. Annually, deduct the free carryin inventory from the optimum
supply. This would provide the tonnage requirement from current year
production to meet market needs. In this illustration, if OSF is 263
million pounds and the carryin inventory is 40 million pounds, the free
tonnage requirement for this year's crop would be 223 million pounds
(263 million - 40 million).
3. Thus, using an initial estimated production of 256 million
pounds, with 223 million pounds required, processors in the regulated
districts would have to set-aside or divert 33 million pounds. Assuming
for this illustration that the regulated districts produced 233 million
of the industry's total of 256 million pounds, handlers would have a
restricted tonnage set-aside of 14 percent (33 million/233 million).
This would result in a preliminary free percentage of 86 percent.
Once harvest begins in late August or early September, the Board
would be able to obtain better information on the final volume of
product being packaged and adjust the percentages using actual figures.
The Board could calculate and announce interim free and restricted
percentages between July 1 and September 15 based on this new
information.
No later than September 15, the Board would compute the final free
and restricted percentages. At that time, the Board would recommend the
percentages to the Secretary to establish them through the informal
rulemaking process. For this example, we would use the crop year free
tonnage of 223 million pounds calculated from the previous example. If
the final crop year estimate is 296 million pounds and the final
production for the regulated States is 256 million pounds, the final
percentages would be calculated by deducting the current crop year free
tonnage from the 296 million pound final crop estimate to equal a 73
million pound inventory reserve. The 73 million pound inventory reserve
would be divided by the Regulated districts final production of 256
million pounds. This would equate to a 33 percent restricted percentage
and a 66 percent free tonnage. Since 73 million pounds is above the 50
million pound maximum allowable in the inventory reserve, handlers
would have to divert 23 million pounds or establish a secondary
reserve.
The proponents testified that the Board should be able to modify
its marketing policy in the event of a national emergency, crop
failure, or other major change in economic conditions. This would
provide a type of ``escape hatch'' should market conditions change so
drastically from what Board projections or from historical patterns on
which the marketing policy outlined in this order is based. The
Department agrees with this recommendation. The Board would be required
to hold a meeting, and file a report with the Secretary within 5 days
which shall show such modification and the basis therefor. For example,
the Board could file a report with the Secretary that would request
that the Board be allowed to release more or all the cherries, from any
established inventory reserve, than what was established under the
marketing policy formula. This could be done if a weather disaster was
experienced during the harvest season in one of the production
districts under the marketing order. The Board could therefore
recommend that the free and restricted percentages not apply for that
current crop year, lower the restricted percentage, or release more
reserve cherries to the industry.
The proponents testified that the Board should recognize growers
that cooperatively form a national bargaining agency in order to
enhance their chances for a higher price for their cherries. In
recognition of such organization, the Board should be able to release
less than 100 percent of the free market tonnage for sale if a grower
price had not been set. However, it would be required to release at
least 65 percent of the total free market tonnage by September 1. This
would allow handlers to make marketing plans, sales, and contractual
agreements in order to market the new crop in a timely fashion. If no
grower price is established by September 1, the Board must thereafter
release all of the free market tonnage. However, after further review
of this issue, the USDA has determined that such a provision should not
be contained in the marketing order. Record evidence does not
adequately explain how such a provision would work or what the benefits
to growers would be. Also, the record does not contain adequate
information relating to the composition, function, or the limits and
bounds of a bargaining agency. Therefore, this provision should not be
adopted in the proposed marketing order.
Inventory Reserve
The proposed order provides that if restricted percentages are
established, handlers would be required to set aside a portion of
cherries handled. Testimony at the hearing indicated that a handler
could fulfill such restricted percentage amount by either establishing
an inventory reserve or by diversion of product. There would be two
types of inventory reserve--a
[[Page 61312]]
primary and secondary inventory reserve. The inventory reserve would be
the sole property of the handlers who place products into the reserve.
The proponents testified that this represents a significant improvement
over ownership of the reserve by growers under the previous order. It
is the proponent's view that handler ownership should help market
forces determine the sales of released reserve cherries. Record
evidence shows that handlers should be able to place cherries in their
inventory reserve in any processed form. This would include
individually quick frozen (IQF), canned product, frozen 5 plus 1 (25
pounds of cherries to 5 pounds of sugar), concentrated juice, dried
product, etc. It was explained at the hearing that handlers would make
individual business decisions as to the processed form in which they
would wish to store their inventory reserve. This would allow maximum
flexibility for handlers in meeting their restricted percentage
requirements and storing inventory reserve cherries.
The proponents testified that, at the end of the processing season
during which there is volume control, a regulated handler would be
required to have an established inventory reserve and/or have proof of
diversion of that handler's total restricted percentage requirement. It
would not matter whether that handler actually processed and packed
such inventory reserve cherries, or whether the handler purchased the
cherries from a different handler within the regulated area and stored
them at that location, as long as proper documentation is provided to
the Board.
The proponents also testified that authority should be added to the
order to allow a grace period for handlers to set up their inventory
reserves after the processing season. This would allow handlers to
appropriately document cherries that are being placed in the inventory
reserve and to compile any applicable diversion certificates. In the
proponents brief, a grace period of 30 days was specified. The Board,
with the approval of the Secretary, would be able to establish rules
and regulations to provide guidelines for handlers in complying with
any restricted tonnage requirements. In view of the foregoing, these
proposals relative to the industry reserve should be adopted and are
included in this decision as proposed.
In addition, the record supports order authority for a handler
bonding requirement. This would be another mechanism by which handlers
would be able to comply with the restricted tonnage percentage, if
established. The Board would establish a date by which the inventory
reserve must be established by each regulated handler. A bonding
requirement would allow that date to be deferred if the handler obtains
a bond equivalent to the value of the cherries such handler would have
placed in the inventory reserve. Testimony did not provide details as
to how this particular provision would be applied. However, the USDA is
including the provision in the proposed language. The bonding
requirement is similar to authority under other marketing order
programs. The Board, with the approval of the Secretary, could develop
rules and regulations which provide guidelines to implement the bonding
authority.
The proposed order should require that the maximum percentage of
restricted cherries which may be established as a primary inventory
reserve not exceed 50 million pounds. Handlers should also be
authorized to establish individual inventory reserves in excess of the
50 million pounds that would be classified as a secondary reserve. The
proponents testified that the 50 million pound cap would help prevent
an exceedingly large reserve from having a dampening effect on the
market for tart cherries. Also, a very large inventory reserve would
cost more to store over an extended period of time. A larger reserve
may not be sold in time to offset the high investment of storing the
reserve.
A witness testified and offered an alternative of 75 million pounds
as the inventory reserve cap instead of the proposed 50 million pound
cap. The witness testified that 75 million pounds would work better.
Because of lack of testimony to support this alternative, the 50
million pound cap would remain as proposed by the proponents.
Inventory Reserve--General
Once a restricted percentage is established, each handler could
establish an inventory reserve to meet such handler's restricted
percentage. As previously discussed, handlers would be able to place
cherries in any form in the reserve. Each handler's reserve portion
would be computed by taking the sum of the multiplication of the
weights of cherries in each lot of cherries the handler handled during
the fiscal period by the restricted percentage. Rules and regulations
would establish the manner in which processed products would be
converted to raw fruit equivalents for each type of storable product.
The record indicates that a handler's equity in the primary
inventory reserve could be transferred to another person. A handler
could elect to do this if such handler has no storage area remaining to
store a primary inventory reserve. A handler would have to notify the
Board if this authority is to be utilized. In addition, handlers would
be encouraged to have written agreements with growers who deliver
cherries to them. Such agreements could include provisions describing
how the restricted percentage cherries delivered to the handler would
be handled and what share, if any, the grower would have in the
eventual sale of any inventory reserve cherries. Such agreements could
also cover grower reimbursement for the sale of primary inventory
reserve cherries.
Testimony at the hearing indicated that the Board could require
reserve cherries to meet certain standards of grade, quality, or
condition. All unprocessed cherries would be inspected by the USDA
prior to placing them in an inventory reserve. A certificate of such
inspection would show the name and address of the handler, the number
and type of containers in the lot, the grade of the product, the
location where the lot is stored, identification marks, and a
certification that the cherries meet the prescribed standard.
All inspection costs of inventory reserve cherries would be paid by
the Board. The USDA considered modifying this provision to provide that
inspection costs be paid by the individual handler placing cherries in
the inventory reserve. This would then be similar to the modification
to the proposed order regarding storage costs to be paid by the
regulated handler rather than by a separate storage assessment on all
handlers. However, after further examination of the record, the USDA
has determined that the industry as a whole would benefit by providing
quality standards for cherries to be placed in the inventory reserve
and later released to be sold in the marketplace. The proponents
offered testimony that setting quality standards for inventory reserve
cherries would be a benefit to the entire industry. Therefore, it would
be appropriate for the Board to pay for inspection. The inspection
costs would be paid from the administrative assessment fund.
The record does not indicate any specific quality standard for the
inventory reserve. Thus, it should be the Board's responsibility to
establish, with the approval of the Secretary, such quality standards.
Promptly after inspection and certification, each handler would submit
a copy of the certificate of inspection to the Board.
A witness testified that inspection on the inventory reserve should
not be
[[Page 61313]]
required. The witness stated that tentative industry committees made up
of pie fill, juice and IQF processors could propose different
regulations to ascertain the quality of the product in the inventory
reserve without requiring inspection. The preponderance of the
testimony supports inspection of cherries placed in the inventory
reserve, if recommended by the Board and approved by the Secretary.
Inspection of the inventory reserve would ensure good quality product
is placed into the reserve and is still of good quality when released
and sold from the reserve. Therefore, the witness's proposal is not
included in the proposed order.
Record evidence indicates that it would be the individual handler's
responsibility to rotate cherries placed in the inventory reserves by
putting new cherries in and taking old cherries out. Rotating cherries
in the inventory reserve is not a requirement under the order. However,
it would benefit the industry if it is done. This would insure that
good quality cherries are being released when inventory reserve
cherries are sold. Handlers would be required to notify the Board of
any changes in lot numbers, etc., when inventory is rotated and provide
proof of inspection of cherries used to produce the storable product.
Since rotation is voluntary by each handler, the type of storage chosen
would impact on how frequently rotation is required. Generally, the
cost of inspecting cherries to be rotated into reserve inventories
should be borne by the Board. However, the Board should have the
authority, subject to the approval of the Secretary, to limit the
number of inspections of cherries to be rotated into inventory reserves
for which the Board would be financially liable.
Handlers would be responsible for holding inventory reserve
cherries until released by the Board. So that such release is equitably
apportioned, the Board would set the quantity to be taken out of each
particular handler's reserve. Handlers would not be required to market
such cherries immediately upon release from the reserve. Once released,
the cherries could be marketed at appropriate times depending on each
handler's marketing plan. Handlers would not be allowed to forward
contract or, in any other way, market reserve cherries before receiving
an official release from the Board.
The proponents testified that if a secondary reserve is
established, all costs of that reserve, including inspection costs,
should be paid by the individual handler. The record indicates that a
secondary reserve established by a handler would be an option for a
handler to consider when the reserve is above the 50 million pound cap.
Therefore, the handler should assume all the responsibility of a
secondary reserve since there are other options (redeeming grower
diversion certificates, diverting at the handler's processing facility,
etc.) handlers could use to meet their diversion requirement.
All other requirements established to operate the primary reserve
should apply to a secondary reserve established by an individual
handler. These could include quality standards for inventory reserve
cherries and inventory reserve releases.
A witness testified by offering an alternative proposal to the
proponent's proposal. That proposal would eliminate the secondary
reserve. The witness testified that there are many market factors which
dictate against putting up a large reserve. For example, handlers would
have to consider the costs of storing a large reserve. This proposal is
not included in the proposed order because a secondary reserve is an
option the handler could choose. If a handler does not want to pay for
storage costs of a secondary reserve, the handler could choose to
divert at the plant or redeem grower diversion certificates.
Reserve Releases
Record evidence indicates that the volume control provisions should
provide for opportunities for the primary inventory reserve to be
released throughout the year to handlers that are in regulated
districts. No cherries should be released from the secondary reserve
until all cherries in any primary inventory reserve have been released.
A witness testified that single districts should be allowed to
release inventory reserve cherries when they are needed to satisfy a
specific market. If such a release occurs in one district, those
cherries could be sold into that market. Other districts who have
inventory reserve released could not sell their cherries into those
markets. After review of this modification the USDA has determined that
such a modification would not be equitable to all handlers. Also, there
was no additional testimony as to how such a provision would operate in
the industry. Therefore, such a modification is not included in the
proposed order.
The proposed marketing order specifies four possible releases of
primary inventory reserves under Secs. 930.50 (g) and (j) and
930.55(a).
The first, under proposed Sec. 930.50(g), would release up to an
additional 10 percent (above the optimum supply level) of the average
of the prior three years sales if such inventory is available in the
primary inventory reserve. The proponents proposed that this release
would take place after all handlers had been polled and deemed it
advisable to release additional cherries into the market for market
expansion. The proponents testified that handlers would be polled as
quickly as possible and the Board would make the final decision on the
release based on the handler vote. The USDA would be informed of the
outcome of the voting process. The proponents also testified that this
release would be up to an additional 10 percent of the optimum supply
and could take place a couple of times a year to reach the 10 percent
total.
After review of this proposal, the USDA has revised this reserve
release mechanism to more closely follow USDA policy guidelines. As
proposed by the proponents, the polling of handlers to determine the
release of up to 10 percent would be difficult to administer and
inconsistent with the Secretary's Guidelines for Fruit, Vegetable, and
Specialty Crop Marketing Orders (Guidelines). The Guidelines state
that, under volume control programs, primary markets should have
available a quantity equal to 110 percent of recent years' sales in
those outlets before the Secretary would approve secondary market
allocation or pooling. This is to assure plentiful supplies for
consumers and for market expansion while retaining the mechanism for
dealing with burdensome supply situations.
The proponents' proposal is revised by requiring the additional 10
percent to be made available to handlers, without a polling mechanism.
However, for this release only, individual handlers would be able to
decide if they need the additional tonnage and inform the Board so that
their reserve cherries may be released to them. Those handlers not
desiring the additional inventory would not have it released to them.
This revision would be consistent with the Guidelines, which were
discussed at the hearing, since the tonnage would be required to be
made available to the industry, but actual release of inventories would
be based on individual handlers projected needs and situations.
The second release, under Sec. 930.50(j), would occur in years when
the expected availability from the current crop plus expected carryin
inventory does not fulfill the targeted availability of 100 percent of
the average annual sales in the prior three years plus the desirable
carryout (optimum supply). The Board would release, not later than
November
[[Page 61314]]
1 of the current crop year, such volume from the inventory reserve.
This release would be made to all handlers holding primary inventory
reserve and is a required release to be made by the Board if the above
conditions are met and inventory reserve cherries are available. This
provision would assure that inventory reserves would be utilized to
stabilize supplies available on the market. In this case, handlers
would be required to accept the released inventory reserve cherries, if
available, for their own use. Under these circumstances, most handlers
would want more cherries because the current supply is not available to
fulfill demand. Testimony at the hearing indicated that reserve
inventories released to handlers could be sold into any market as free
tonnage cherries. In addition, any secondary inventory reserve cherries
could be released if the release of the total primary inventory reserve
does not bring total available supplies up to the optimum supply level.
The third release of the reserve is proposed under Sec. 930.54(a)
which would allow the Board to recommend to the Secretary a release of
a portion or all of the primary (and secondary) inventory reserve. In
order to make this release, the Board would need to determine that the
total available supplies for use in normal commercial outlets do not
equal the amount needed to meet the demand in such outlets. This could
happen if there was a tart cherry crop loss in Europe or a significant
U.S. blueberry or other competing crop loss. In these instances, more
tart cherries could be made available to supply the unexpected demand
caused by such crop losses.
The proponents also proposed the authority under Sec. 930.54(b),
for the Board to establish, through informal rulemaking, circumstances
in which an individual handler may sell any or all of their inventory
reserve cherries into the following markets: Charitable uses; state
government, USDA or other non-military federal agency purchases, any
experimental purposes, and any nonhuman use, including animal feed.
This provision would allow the Board to specify when handlers can sell
inventory reserve cherries into these outlets.
After review of this proposal the USDA is deleting this provision
from the proposed order. The Board should not be placed in the position
of deciding whether inventory reserve cherries should be released to
individual handlers for specific sales. Handlers would be able to sell
cherries into these outlets by using their free tonnage cherries or
cherries that are released to them from the inventory reserve. The
Board could address this issue under the exempted use provision
(Sec. 930.62). The Board is authorized to expand the list of exempted
uses, therefore the Board could specify those outlets that handlers can
sell reserve cherries into after notifying the Board. For the above
reasons the USDA has deleted this portion of the proposal and modified
Sec. 930.62 as discussed above.
Diversion--General
Handlers would be allowed to choose to meet their restricted
percentage obligation by placing cherries in the primary inventory
reserve or diverting the cherries, or a combination of both. Record
evidence shows that cherries could be diverted either by the grower at
the orchard or by the handler at the processing plant. Handlers and
growers choosing to divert would save production, cultural, processing,
storing and inspection costs.
A grower could choose to divert if such grower's crop is of poor
quality due to hail damage or some other climatic condition. By
choosing to divert the poor quality crop, the grower could be provided
income from redeemed diversion certificates. In addition, poor quality
fruit would be kept off the market.
Handlers choosing to divert would save processing, storage and
secondary reserve inspection costs if they divert cherries at the
plant. The handler could choose the best cherries to process, and
divert the less desirable cherries or contribute them to a Board
approved food bank. The specifics of both proposed diversion programs
are discussed below.
Grower Diversion
There are no order provisions which would require a grower to
divert tart cherries. Grower diversion would be completely voluntary.
Growers could choose to divert because they have an abundance of low
value, poor quality cherries or they are unable to find a processor
willing to process some or all of their cherries because of a large
crop. Before choosing to divert, the grower would most likely evaluate
the harvesting and other cultural costs that could be saved by
diverting and locate a handler that would be willing to redeem such
grower's diversion certificate. Record evidence indicated that a
portion of the production of growers choosing to divert would be left
unharvested until the cherries are too ripe to be of commercial use.
Growers who elect to divert their cherries and who wish to obtain
diversion certificates (explained below) would have to file an
application with the Board for such diversion to be approved. The
proponents stated that rules and regulations would need to be
promulgated to implement provisions for diverting cherries by growers.
These regulations could include: (1) The form and content of
applications and agreements including provisions for supervision and
compensation for such supervision by the Board; and (2) provisions for
mapping procedures to identify growers' production and acreage
locations. The proponents testified that diversion certificates should
only be valid for one crop year. This would allow the Board to account
for all cherries produced in the crop year and, since diverted cherries
count as delivered cherries for marketing policy calculations, would
allow the Board to calculate accurate preliminary and final
percentages. The proponents also testified that the diversion program
would be easier to administer if the diversion certificates were
redeemed in the same crop year in which they were issued. However, the
proponents testified that the Board should be able, through informal
rulemaking, to develop rules that would apply to possible circumstances
in which diversion certificates might be able to be carried forward
into the next crop year.
Growers wishing to divert all or a portion of their crop could be
required to submit maps to the Board that specify the area(s) where
cherries would be left unharvested. Several growers testified at the
hearing that most growers have maps of their orchards and that it would
not be an undue burden to submit that information to the Board. Once
the Board approves a grower's application for diversion and verifies
diversion of the cherries, the Board would issue a diversion
certificate to the diverting grower. The diversion certificate would
specify the amount of cherries that were diverted. The grower could
then take the diversion certificate to a handler to be redeemed. A
handler could redeem the certificate for cash, by paying higher prices
for nondiverted cherries, or through other financial arrangements
between the two parties. Any such arrangements between growers and
handlers concerning diversion certificates would not be part of the
marketing order. Such decisions could vary among individual growers and
handlers and among growers and handlers in different regions of the
regulated area.
As an example, if a handler normally receives 1,000 tons of
cherries and a restricted percentage of 20 percent is established, that
handler would expect
[[Page 61315]]
to have to place 200 tons of cherries into the primary reserve. If the
handler receives grower diversion certificates (which are treated as
though they are actual cherries delivered), the volume of cherries
required to be placed into reserve could be reduced. Thus, if the
handler received 1,000 tons of cherries, with 50 tons represented by
diversion certificates, and a restricted percentage of 20 percent is
established, the actual tonnage required to be stored in the primary
reserve would be 150 tons (200 tons minus the 50 tons of diverted
cherries). Handlers would value certificates to the extent they could
reduce their operating costs through the selective use of the best
quality cherries available for initial delivery and/or the avoidance of
processing and storage costs for reserve cherries. Handlers could also
receive higher prices for processed products made from the best quality
cherries. This would create opportunities for individual growers and
handlers to arrive at different financial arrangements depending on the
quality of the cherries available for delivery, whether contractual
obligations exist for all or a portion of the grower's crop, the
processing capacity of the handler, the size of the crop which exceeds
market demands, individual handler's financial situations, etc.
Handlers may want to limit the volume of the primary inventory
reserve that they would be responsible for and therefore, could request
their growers to divert cherries in the orchard rather than at the
processing plant. Nonharvest of the cherries would be considerably
cheaper than incurring the costs of picking, cooling and hauling
cherries to the handler's facility. A handler might also consider
redeeming grower diversion certificates if they could receive and
handle a larger volume of better quality cherries from other growers.
The proponents also testified that diversion certificates should be
issued to growers in the event an act of nature damaged or destroyed
what would otherwise have been a deliverable crop. In the event of a
disaster, growers are faced with the very tough decision of whether to
harvest a heavily damaged, and usually poor quality, crop, and deliver
it to a handler for processing, or to leave the crop unharvested. By
leaving the crop unharvested, the grower would have no income from the
crop. However, harvesting the crop could result in a considerable
quantity of poor quality fruit making its way into marketing channels
and could add needlessly to the grower's costs. In addition, poor
quality cherries in the marketplace could depress market prices for all
cherries. The proponents testified that issuing a grower diversion
certificate to growers with damaged cherries could increase grower
income, which is one of the purposes of the Act and the order. Record
evidence supported that this should be limited solely to otherwise
harvestable fruit that was damaged by acts of nature. For example, in
the event of an early frost, preventing the initial setting of the
cherries and resulting in no crop to harvest, this provision would not
apply. Special precautions are expected to be taken by the Board to
ensure that harvestable cherries were in fact not harvested, and were
subsequently shaken on the ground or otherwise permanently removed from
the market. The proponents testified that the Board may want to
supervise some types of grower diversion. Additionally, the proponents
testified that such unharvested fruit would be calculated in computing
the final free and restricted percentages. Unharvested fruit for which
diversion certificates are issued should also be used in the
calculations in the marketing policy because such fruit would have been
harvested if not diverted.
There was considerable discussion on the record concerning equity
of this provision and the effect on the marketing policy. Also, one of
the parties stated in his brief that the practice allowed under the
proponents proposal grants a document of potential economic value in
exchange for something of no value--cherries which are unmarketable
because of damage of some kind. It was therefore, argued that, in no
case should diversion certificates be granted for other than mature,
harvestable cherries.
The Board would be required to ensure that diversion credit is not
given to growers whose fruit was destroyed before it set and/or matured
on the tree. Diversion credit would only be given to growers whose
harvestable fruit was damaged or destroyed due to tornadic winds,
floods, etc.
The proponents also testified that diversion credit could be given
for fruit damaged or destroyed prior to full maturity that is not
likely to enter the stream of commerce as defined under the proposed
marketing order. However, counting this ``destroyed, but to be
diverted'' cherries as though they were actually produced would result
in a more restrictive inventory reserve percentage, applicable to all
handlers. This would occur because the destroyed but diverted fruit
would be counted in the final delivery figures used in computing the
final and restricted percentages. If the final crop figure is
increased, it would result in a more restrictive percentage. This
provision would create a form of crop insurance for growers which is
inconsistent with these types of programs. Therefore, the proponent's
proposal to grant diversion credit to growers for such unharvestable
fruit is not included in the language of this recommended decision.
The USDA is including amendatory language that would recommend
growers notify the Board if they are unable to redeem their diversion
certificates. The Board could act as a clearinghouse and inform
handlers that diversion certificates are available for redemption. The
Board could recommend rules and regulations to specify the details of
this provision. One such provision may be to include a date by which
all growers must inform the Board that they have certificates remaining
to redeem. The Board would then be able to assist growers in locating
handlers willing to redeem their diversion certificates. However, the
Board has no authority to require handlers to redeem certificates or
establish prices or pricing guidelines for diversion certificates.
Handler Diversion
The other form of diversion would be by handlers at their
processing facilities. Handlers in a regulated district could fulfill
any restricted percentage requirement by voluntarily diverting cherries
in an approved program rather than placing cherries in an inventory
reserve. If the primary inventory reserve has reached its maximum
volume limitation, handlers would either have to establish a secondary
inventory reserve, divert the restricted percentage cherries, or
utilize a combination of the two.
The uses eligible for diversion could take any of the following
forms, if recommended by the Board and approved by the Secretary. These
would be uses exempt under the order, contribution to a Board approved
food bank or other approved charitable organization, acquisition of
grower diversion certificates, or other uses, including diversion of
the cherries at the handler's facility. Record evidence shows that
handlers could choose which, and whose, cherries to divert. Those
decisions would likely be made on quality considerations, but could
also be impacted by prior contractual arrangements with their growers.
A handler electing to divert cherries would first need to notify the
Board. The notification would describe in detail the manner in which
the handler proposes to divert the cherries,
[[Page 61316]]
including, if the diversion is to be by means of destruction of the
cherries, a detailed description of the means of destruction and the
disposition of such cherries. This type of description would be
necessary to ensure that the cherries were not marketed in any form.
Any notification of diversion would contain an agreement that the
proposed diversion is to be supervised by the Board and that the costs
of diversion will be paid by the handler. The proponents testified that
uniform fees for supervision should be established by regulation.
Exempt Use Diversion
The diversion of cherries for exempt uses would first need to be
approved by the Board. Tart cherries could be exempted from certain
order provisions if they are diverted in accordance with the order;
used for new product and/or new market development; or used for
experimental purposes or for other uses designated by the Board,
including processing into products for markets utilizing less than 5
percent of the preceding 5 year average production of cherries. The
list of exemptions could be expanded, with the approval of the
Secretary, through the informal rulemaking process. The Board may also
want to provide that handlers can sell reserve cherries in existing
inventory reserves into specific outlets if handlers first notify the
Board. This would allow handlers to dispose of inventory reserve
cherries if their individual economic situations make continued storage
unfeasible, but would prevent such cherries from interfering with
normal commercial markets for free market tonnage cherries. The
application for exempt usage would show the uses to which the diverted
cherries would be put and contain an agreement that the diversion would
be carried out under the supervision of the Board, with the cost of
diversion to be paid by the applicant. The applicant would be notified
of the Board's approval or disapproval.
Upon receiving verification of an approved diversion, the Board
would issue to the diverting handler a handler diversion certificate.
The diversion certificate would show the quantity of cherries diverted
by such handler. Such a certificate would satisfy any restricted
percentage or diversion requirement up to the inspected weight of the
cherries involved. Such diversion would reduce that handler's
processing, storage, and inspection costs. For example, if a handler
receives and processes 1,000 tons of cherries and a restricted
percentage of 20 percent is established, the handler would have to
place 200 tons of processed cherries into the primary inventory
reserve. If the handler diverts 100 tons of cherries before processing,
the required volume of restricted inventory reserve would be reduced to
100 tons.
The proponents took no position on what other exempt uses the Board
may establish. However, handlers from Oregon and Washington expressed
concern that juice concentrate could be established by the Board as a
use eligible for diversion credit. Some handlers in Washington and
Oregon process all or the majority of their cherries into juice
concentrate. There is a wide selection of concentrators available in
that area and there was testimony that cherries produced in Washington
and Oregon have a high brix (sugar content) level desirable for juice
concentrate. Testimony showed that small businesses in that area could
be unduly burdened if the Board decided to allow diversion credit for
juice concentrate as this could cause an artificially induced increase
in the volume of juice concentrate in the marketplace, lowering prices
for all such products. Therefore, the evidence presented on this issue
has persuaded the USDA to modify the proposed provision to prohibit the
use of juice concentrate for diversion credit.
Determination of Districts Subject to Volume Regulation
The order should provide for the establishment of districts for the
purposes of volume regulations. The proponents testified in support of
their proposal, that upon adoption of this order, districts subject to
volume regulation would be those districts in which the average annual
production of cherries over the prior three years exceeded 15 million
pounds. Record evidence shows that Michigan, Utah and New York would be
regulated States at this time. Using the proposed 15 million pound
minimum production figure, Oregon, Pennsylvania, Washington and
Wisconsin would not be regulated at this time. Handlers in districts
not subject to volume regulation would not be subject to annual
restricted percentages, except to the extent they might handle cherries
grown in a regulated district. In such case, the handler would treat a
portion of the cherries from the regulated district as restricted
percentage cherries, just as if the handler were in a regulated
district.
The proponents further testified in support of their proposal that
districts not currently meeting the production requirement of 15
million pounds should automatically be subject to regulation in the
marketing year in which the production of cherries in the district is
projected to exceed 150 percent of the average production experienced
in 1989 through 1992. This period reflects a normal production cycle
for tart cherries. This period could be changed with approval of the
Secretary through the informal rulemaking process. This provision is
designed to catch surges in production that occasionally occur in order
to more equitably distribute the burden of controlling burdensome
supplies. Proponents testified that, while a district may not
historically be a large producer and thus not warrant permanent volume
regulation, producing over 50 percent more than its historical average
warrants a district's becoming subject to volume regulation, albeit on
a temporary basis.
It was also the proponents' position that if a district's
production exceeds 150 percentum of the base period as a result of
increased capacity to produce (i.e., increased bearing acreage), then
beginning with the next crop year such district should be permanently
subject to volume regulation. However, if a district, over a rolling
three-year period following the year of subjection to regulation, drops
below the 150 per centum trigger, such district would become
unregulated again.
After review of the proponent's proposal concerning the trigger for
regulation and the testimony and other record evidence concerning this
issue, the Department has determined it would be overly complicated for
the Board to administer and possibly inequitable to handlers and
growers. Proponents testified that it is not the intent to regulate
States with smaller production volumes (e.g., Pennsylvania, Oregon)
because when one State's production is up the other State's production
is likely to be down. The smaller States' aggregate volume is not a
critical amount when compared to the total volume of tart cherries
produced. Proponents stated that a purpose of the proposed order was to
make sure that when smaller producing States (e.g., Washington, Oregon,
Wisconsin) expand production, they do not take advantage of the system
and become free riders. The proponents also testified that some
districts could be regulated even though they have less than 15 million
pounds annual production if they exceed the 150 percent trigger
mechanism. For example, if Wisconsin's production for the 1989 through
1992 period is 7 million, 5 million, 8 million and 9 million pounds,
respectively, the average for those four years would be 7.25 million
pounds. Then 7.25 would
[[Page 61317]]
be multiplied by 150 percent to equal about 11 million pounds. If
Wisconsin produced 11.5 million pounds in a specific year, Wisconsin
would be regulated under the order, even though Wisconsin did not
exceed the 15 million pound level.
The USDA crop estimate is not released until late June. Thus, the
Board may not be able to provide adequate notice to handlers in
districts that were not regulated from the initial promulgation of the
order that they would be subject to volume control regulations that
could be announced on July 1. The record indicated that some districts
have been experiencing earlier harvesting dates than other districts
and therefore, handlers and growers would not know in time that they
were to become a regulated district. In addition, there could also be
confusion and concern in the industry if districts can meet one of the
criteria and not the other criteria and still be regulated.
Since the larger producing districts are the major concern for
volume regulation purposes, the USDA is revising this provision by
deleting the 150 per centum trigger mechanism for determining districts
subject to volume regulation. Therefore, the criteria that a district
would have to meet to become regulated under the volume control
provisions of the order would be to exceed an average annual production
of cherries over the prior three years of 15 million pounds. This
provision would be much easier to administer and cause less confusion.
It is also desirable for the district not to be subject to volume
regulations until the crop year after the three year average production
exceeds the 15 million pound level. This would allow adequate notice to
be given to handlers that they would subsequently be subject to volume
regulations. For example, if a previously unregulated district's
average annual production of cherries over the prior three years was 18
million pounds at the conclusion of the 1997 crop year, that district
would be subject to volume regulations during the 1998 crop year.
The USDA is also modifying the proposal for determining when
regulated districts would not be subject to volume regulation. The USDA
has revised this provision to provide that when a district drops below
the 15 million pound three year average production figure, that
district would not be regulated. It is desirable for a provision to be
included in the order to discontinue regulation in a district when
production capacity has decreased or actual production has suffered due
to some type of hardship that has significantly affected production in
that district. This determination should be made after the close of the
crop year and would apply to the next year's crop. These modifications
were supported by record testimony.
The proponents testified that a disaster relief clause should be
included to exempt a regulated district from regulation in a year in
which production in that district drops to less than one-half of its
maximum annual processed production for the previous five years. This
provision is included in the proposed marketing order to help relieve
such district from the burdens of the order in a year in which its
processors and growers were already suffering from a severely short
crop. Thus, if the central Michigan district's maximum production
during the previous five year period was 80 million pounds, and in the
next year only 30 million pounds were produced and supplies from other
districts exceeded the optimum supply, the central Michigan district
would not be regulated. The above modifications have been made to the
proposed order.
A witness provided an alternative to the 15 million pound
production level for determining when a district would become
regulated. The witness testified that 20 million pounds should be used
because it provides a cushion before regulation would occur. However,
the preponderance of the testimony supported a 15 million pound
production level. Therefore, the 20 million level is not adopted. In
addition, the proponents proposed under Sec. 930.63 that the Board
should have the authority to recommend to the Secretary expansion of
the production area if such new area's average annual production of
cherries reaches at least five million pounds over a three-year period.
The provision also provides for nomination, election, appointment,
acceptance, and other matters concerning Board membership. After review
of this proposal, the USDA is deleting this provision from the proposed
order. The Board has the power under Sec. 930.30(d) to recommend to the
Secretary amendments to the marketing order dealing with any issue.
During a formal rulemaking process to expand the production area, the
issues dealing with Board representation, quorum, voting requirements
and etc. would be addressed. Also, the proposed provision requires that
the Board cannot consider expansion of the production area until such
new area's average annual production of cherries reaches at least five
million pounds over a three-year period. The Board may want to expand
the production area even though such new area has not reached the above
level. Therefore, Sec. 930.63 is deleted from the proposed order.
(g) The Board should have the authority, under proposed
Sec. 930.70, with the approval of the Secretary, to require that first
handlers submit to the Board such reports and information as the Board
may need to perform its functions and fulfill its responsibilities
under the order. In the normal course of business, tart cherry handlers
collect and record information that may be needed by the Board.
Witnesses expressed the belief that the reporting requirements that may
be imposed under the proposed order would not constitute an undue
burden on handler businesses.
Reports would be needed by the Board for such purposes as
collecting assessments; compiling statistical data for use in
evaluating marketing research and development projects; promotional
activities; making recommendations for production research; making
recommendations for volume control regulations; and determining whether
handlers are complying with order requirements. The record evidence
indicates that, to the extent necessary for the Board to perform its
functions, handlers would probably need to provide information showing
weekly production data, monthly sales and inventory data, and other
such information, including the volume of any cherries placed in or
released from a primary or secondary inventory reserve or diverted.
This should not be construed as a complete list of information the
Board might require, nor should it be assumed that all of the above
would be necessary for the proper conduct of its operations under the
order. Therefore, the Board should have the authority, with the
approval of the Secretary, to require each handler to furnish such
information as it finds necessary to perform its duties under the
order.
Each handler should be required to maintain such records of tart
cherries acquired, handled, diverted or sold, or otherwise disposed of
as may be necessary to verify the reports that the handler submits to
the Board. All such records should be maintained for at least two years
after the termination of the fiscal year in which the transaction
occurred. The order should provide the authority for the Secretary and
authorized employees of the Board to have access to handlers' premises
to examine those records pertaining to matters within the purview of
the order. This provision would enable verification of compliance with
requirements of the order.
[[Page 61318]]
All reports and records submitted for Board use by handlers would
be required to remain confidential and be disclosed only as authorized
by the Secretary, except as required by law. Such reports should become
part of the committee and Secretary's records. However, the Board
should be authorized to release composite information from any or all
reports. Such composite information could be helpful to the Board and
to the industry in planning operations under the order and in promoting
the order. Any release of composite information should not disclose the
identity of the persons furnishing the information or any person's
individual operation.
(h) No handler should be permitted to handle tart cherries except
in conformity with the provisions of this part, as set forth in
proposed section 930.80. If the program is to be effective, compliance
with its requirements is essential.
In accordance with proposed section 930.83, the order should
provide that the Secretary conduct a periodic referendum every six
years with the initial referendum conducted within six years of the
effective date of the marketing order.
The Secretary of Agriculture has determined that continuance
referenda are an effective means for ascertaining whether producers
favor continuance of marketing order programs. The Act provides that
the Secretary shall terminate a marketing order whenever, through the
conduct of a referendum, it is indicated that a majority of all
producers favor termination and such majority produced more than 50
percent of the commodity for market during a representative period.
Since less than 50 percent of all producers usually participate in
a referendum, it is difficult to determine overall producer support or
opposition to termination of an order. Thus, to provide a basis for
determining whether producers favor continuance of the order, a
provision for continuance referenda should be included. Continuance
should be based upon the affirmative vote of either two-thirds of the
producers voting or an affirmative vote of the producers of two-thirds
of the volume of tart cherries represented in the referendum.
The Act requires that in the promulgation of a marketing order, at
least two-thirds of the producers voting, by number or volume
represented in the referendum, must favor the issuance of the order.
Continuance referenda should be based on the same standard of industry
support. This requirement is considered adequate to measure producers'
support to continue the marketing order. The Secretary would consider
termination of the order if less than two-thirds of the producers
voting in the referendum or producers of less than two-thirds of the
volume of tart cherries represented in the referendum favor
continuance. In evaluating the merits of continuance versus
termination, the Secretary should not only consider the results of the
referendum but also should consider all other relevant information
concerning the operation of the order and the relative benefits and
disadvantages to producers, handlers, and consumers in order to
determine whether continued operation of the order would tend to
effectuate the declared policy of the Act.
The Secretary's ``Guidelines for Fruit, Vegetable, and Specialty
Crop Marketing Orders'' provide for periodic referenda to allow
producers the opportunity to indicate their support for or rejection of
a marketing order. It is the position of the Department that periodic
referenda ensure that marketing order programs continue to be
accountable to producers and processors, obligate producers and
processors to evaluate their programs periodically, and involve them
more closely in their operation. The record evidence supports these
goals.
In any event, section 608(C)(16)(B) of the Act requires the
Secretary to terminate the order whenever the Secretary finds that the
majority of all producers favor termination, and that such majority
produced more than 50 percent of the commodity for market.
In addition to producer approval for the promulgation of a order,
the Act provides that no order shall be effective for cherries for
canning or freezing unless the Secretary determines that the issuance
of such order is approved or favored by processors who, during a
representative period, have frozen or canned more than 50 percentum of
the total volume of cherries. Processors should also vote in
continuance referenda. The same criteria for promulgation would apply
to continuance referenda for processors.
(i) The provisions of proposed Secs. 930.84 through 930.94 of the
order as contained in the Notice of Hearing and hereinafter set forth,
are common to marketing agreements and orders now operating. All such
provisions are necessary to effectuate the other provisions of the
marketing order and marketing agreement and to effectuate the declared
policy of the Act. The record evidence supports inclusion of each such
provision as proposed in the Notice of Hearing. These provisions, which
are applicable to both the marketing agreement and the marketing order,
are identified by section number and heading as follows: Sec. 930.84
Proceedings after termination; Sec. 930.85 Effect of termination or
amendment; Sec. 930.86 Duration of immunities; Sec. 930.87 Agents;
Sec. 930.88 Derogation; Sec. 930.89 Personal liability; Sec. 930.90
Separability; and Sec. 930.91 Amendments. Those provisions applicable
to the marketing agreement only are: Sec. 930.92 Counterparts;
Sec. 930.93 Additional parties; and Sec. 930.94 Order with marketing
agreement.
Miscellaneous conforming and clarifying changes have also been
made.
Rulings on Proposed Findings and Conclusions
Briefs, proposed findings and conclusions, and the evidence in the
record were considered in making the findings and conclusions set forth
in this recommended decision. To the extent that the suggested findings
and conclusions filed by interested persons are inconsistent with the
findings and conclusions of this recommended decision, the requests to
make such findings or to reach such conclusions are denied.
General Findings
(1) The marketing agreement and order, as hereby proposed, and all
of the terms and conditions thereof, would tend to effectuate the
declared policy of the Act;
(2) The marketing agreement and order, as hereby proposed, regulate
the handling of tart cherries grown in the States of Michigan, New
York, Pennsylvania, Oregon, Utah, Washington, and Wisconsin in the same
manner as, and are applicable only to, persons in the respective
classes of commercial and industrial activity specified in the
marketing agreement and order upon which a hearing has been held;
(3) The marketing agreement and order, as hereby proposed, are
limited in their application to the smallest regional production area
which is practicable, consistent with carrying out the declared policy
of the Act, and the issuance of several orders applicable to
subdivision of the production area would not effectively carry out the
declared policy of the Act; and
(4) All handling of tart cherries grown in the States of Michigan,
New York, Pennsylvania, Oregon, Utah, Washington, and Wisconsin as
defined in the proposed marketing agreement and order, is in the
current of interstate or foreign commerce or directly burdens,
obstructs, or affects such commerce.
[[Page 61319]]
1. Title 7, chapter IX is proposed to be amended by adding part 930
to read as follows:
PART 930--TART CHERRIES GROWN IN MICHIGAN, NEW YORK, PENNSYLVANIA,
OREGON, UTAH, WASHINGTON AND WISCONSIN
Subpart--Order Regulating Handling
Definitions
Sec.
930.1 Act.
930.2 Board.
930.3 Cherries.
930.4 Crop year.
930.5 Department or USDA.
930.6 District.
930.7 Fiscal period.
930.8 Free market tonnage percentage cherries.
930.9 Grower.
930.10 Handle.
930.11 Handler.
930.12 Person.
930.13 Primary inventory reserve.
930.14 Production area.
930.15 Restricted percentage cherries.
930.16 Sales constituency.
930.17 Secondary inventory reserve.
930.18 Secretary.
Administrative Body
930.20 Establishment and membership.
930.21 Reestablishment.
930.22 Term of office.
930.23 Nomination and election.
930.24 Appointment.
930.25 Failure to nominate.
930.26 Acceptance.
930.27 Vacancies.
930.28 Alternate members.
930.29 Eligibility for membership on Cherry Industry Administrative
Board.
930.30 Powers.
930.31 Duties.
930.32 Procedure.
930.33 Expenses and compensation.
Expenses and Assessments
930.40 Expenses.
930.41 Assessments.
930.42 Accounting.
Quality Control
930.44 Quality Control.
Research, Market Development and Promotion
930.48 Research, Market Development and Promotion.
Regulations
930.50 Marketing policy.
930.51 Issuance of volume regulations.
930.52 Establishment of districts subject to volume regulations.
930.53 Modification, suspension, or termination of regulations.
930.54 Prohibition on the use or disposition of inventory reserve
cherries.
930.55 Primary inventory reserves.
930.56 Off-premise inventory reserve.
930.57 Secondary inventory reserve.
930.58 Grower diversion privilege.
930.59 Handler diversion privilege.
930.60 Equity holders.
930.61 Handler compensation.
930.62 Exemptions.
930.63 Deferment of restricted obligation.
Reports and Records
930.70 Reports.
930.71 Records.
930.72 Verification of reports and records.
930.73 Confidential information.
Miscellaneous Provisions
930.80 Compliance.
930.81 Right of the Secretary.
930.82 Effective time.
930.83 Termination.
930.84 Proceedings after termination.
930.85 Effect of termination or amendment.
930.86 Duration of immunities.
930.87 Agents.
930.88 Derogation.
930.89 Personal liability.
930.90 Separability.
930.91 Amendments.
930.92 Counterparts.
930.93 Additional parties.
930.94 Order with marketing agreement.
Authority: 7 U.S.C. 601-674.
Subpart--Order Regulating Handling
Definitions
Sec. 930.1 Act.
Act means Public Act No. 10, 73d Congress (May 12, 1933), as
amended, and as reenacted and amended by the Agriculture Marketing
Agreement Act of 1937, as amended (48 Stat. 31, as amended, 68 Stat.
906, 1047; 7 U.S.C. 601, et seq.).
Sec. 930.2 Board.
Board means the Cherry Industry Administrative Board established
pursuant to Sec. 930.20.
Sec. 930.3 Cherries.
Cherries means all tart/sour cherry varieties grown in the
production area classified botanically as Prunus cerasus, Prunus
cerasas by Prunus avium, or Prunus cerasas by Prunus fruticosa.
Sec. 930.4 Crop year.
Crop year means the 12-month period beginning on July 1 of any year
and ending on June 30 of the following year, or such other period as
the Board, with the approval of the Secretary, may establish.
Sec. 930.5 Department or USDA.
Department or USDA means the United States Department of
Agriculture.
Sec. 930.6 District.
District means one of the subdivisions of the production area
described in Sec. 930.20(c), or such other subdivisions as may be
established pursuant to Sec. 930.21, or any subdivision added pursuant
to Sec. 930.63.
Sec. 930.7 Fiscal period.
Fiscal period is synonymous with fiscal year and means the 12-month
period beginning on July 1 of any year and ending on June 30 of the
following year, or such other period as the Board, with the approval of
the Secretary, may establish: Provided, that the initial fiscal period
shall begin on the effective date of this part.
Sec. 930.8 Free market tonnage percentage cherries.
Free market tonnage percentage cherries means that proportion of
cherries handled in a crop year which are free to be marketed in normal
commercial outlets in that crop year under any volume regulation
established pursuant to Sec. 930.50 or Sec. 930.51 and, in the absence
of a restricted percentage being established for a crop year pursuant
to Sec. 930.50 or Sec. 930.51, means all cherries received by handlers
in that crop year.
Sec. 930.9 Grower.
Grower is synonymous with ``producer'' and means any person who
produces cherries to be marketed in canned, frozen, or other processed
form and who has a proprietary interest therein: Provided that, the
term ``grower'' shall not include a person who produces cherries to be
marketed exclusively for the fresh market in an unpitted condition.
Sec. 930.10 Handle.
Handle means the process to brine, can, concentrate, freeze,
dehydrate, pit, press or puree cherries, or in any other way convert
cherries commercially into a processed product, or divert cherries
pursuant to Sec. 930.59 or obtain grower diversion certificates issued
pursuant to Sec. 930.58, or otherwise place cherries into the current
of commerce within the production area or from the area to points
outside thereof: Provided, that the term ``handle'' shall not include:
(a) The brining, canning, concentrating, freezing, dehydration,
pitting, pressing or the converting, in any other way, of cherries into
a processed product for home use and not for resale; or
(b) The transportation within the production area of cherries from
the orchard where grown to a processing facility located within such
area for preparation for market; or
(c) The delivery of such cherries to such processing facility for
such preparation; or
[[Page 61320]]
(d) The sale or transportation of cherries by a grower to a handler
of record within the production area; and
(e) The sale of cherries in the fresh market in an unpitted
condition.
Sec. 930.11 Handler.
Handler means any person who first handles cherries or causes
cherries to be handled.
Sec. 930.12 Person.
Person means an individual, partnership, corporation, association,
or any other business unit.
Sec. 930.13 Primary inventory reserve.
Primary inventory reserve means that portion of handled cherries
that are placed into handlers' inventories in accordance with any
restricted percentage established pursuant to Sec. 930.50 or
Sec. 930.51.
Sec. 930.14 Production area.
Production area means the States of Michigan, New York,
Pennsylvania, Oregon, Utah, Washington and Wisconsin.
Sec. 930.15 Restricted percentage cherries.
Restricted percentage cherries means that proportion of cherries
handled in a crop year which must be either placed into handlers'
inventories in accordance with Sec. 930.56 or Sec. 930.58 or otherwise
diverted in accordance with Sec. 930.60 and thereby withheld from
marketing in normal commercial outlets under any volume regulation
established pursuant to Sec. 930.50 or Sec. 930.51.
Sec. 930.16 Sales constituency.
Sales constituency means a common marketing organization or
brokerage firm or individual representing a group of handlers or
growers.
Sec. 930.17 Secondary inventory reserve.
Secondary inventory reserve means any portion of handled cherries
voluntarily placed into inventory by a handler under Sec. 930.58.
Sec. 930.18 Secretary.
Secretary means the Secretary of Agriculture of the United States,
or any officer or employee of the U.S. Department of Agriculture to
whom authority has heretofore been delegated, or to whom authority may
hereafter be delegated, to act in the Secretary's stead.
Administrative Body
Sec. 930.20 Establishment and membership.
(a) There is hereby established a Cherry Industry Administrative
Board (Board) consisting of 18 members. Seventeen of these members
shall be qualified growers and handlers selected pursuant to this part,
each of whom shall have an alternate having the same qualifications as
the member for whom the person is an alternate. The remaining member of
the Board shall be a public member who, along with his or her
alternate, shall be elected by the Board from the general public.
(b) District representation on the Board shall be as follows:
------------------------------------------------------------------------
Grower Handler
District members members
------------------------------------------------------------------------
1.................................... 2 2
2.................................... 1 2
3.................................... 1 1
4.................................... 1 1
5.................................... 1 or 1
6.................................... 1 or 1
7.................................... 1 1
8.................................... 1 or 1
9.................................... 1 or 1
------------------------------------------------------------------------
(c) Upon the adoption of this part, the production area shall be
divided into the following described subdivisions for purposes of this
section:
District 1--Northern Michigan: that portion of the State of
Michigan which is north of a line drawn along the northern boundary
of Mason County and extended east to Lake Huron.
District 2--Central Michigan: that portion of the State of
Michigan which is south of District 1 and north of a line drawn
along the southern boundary of Allegan County and extended east to
Lake St. Clair.
District 3--Southern Michigan: That portion of the State of
Michigan not included in Districts 1 and 2.
District 4--The State of New York.
District 5--The State of Oregon.
District 6--The State of Pennsylvania.
District 7--The State of Utah.
District 8--The State of Washington.
District 9--The State of Wisconsin.
(d) The ratio of grower to handler representation in District 2
shall alternate each time the term of a Board member from the
representative group having two seats expires. During the initial
period of the order, the ratio shall be as designated in paragraph (b)
of this section.
(e) Board members from Districts 5, 6, 8 and 9 may be either grower
or handler members and will be nominated and elected as outlined in
Sec. 930.23. If District 5, 6, 8, and/or 9 becomes subject to volume
regulation under Sec. 930.52(a), then the Board shall be reestablished
by the Secretary to provide such District(s) with at least one grower
and one handler seat on the Board and such seats shall be filled
according to the provisions of Sec. 930.23.
(f) In those districts having more than one seat on the Board, not
more than one Board member from that district may be elected from a
single sales constituency. There is, however, no prohibition on the
number of Board members from differing districts that may be elected
from a single sales constituency which may have operations in more than
one district. However, as provided in Sec. 930.23, a handler may only
nominate Board members and vote in one district.
(g) Subject to the approval of the Secretary, the Board shall at
its first meeting and annually thereafter elect from among any of its
members a chairperson and a vice-chairperson and may elect other
appropriate officers.
Sec. 930.21 Reestablishment.
Districts, subdivisions of districts, and the distribution of
representation among growers and handlers within a respective district
or subdivision thereof, or among the subdivision of districts, may be
reestablished by the Secretary, subject to the provisions of
Sec. 930.23, based upon recommendations by the Board. In recommending
any such changes, the Board shall consider:
(a) The relative importance of producing areas,
(b) Relative production,
(c) The geographic locations of producing areas as they would
affect the efficiency of administration of this part,
(d) Shifts in cherry production within the districts and the
production area,
(e) Changes in the proportion and role of growers and handlers
within the districts, and
(f) Other relevant factors.
Sec. 930.22 Term of office.
The term of office of each member and alternate member of the Board
shall be for three fiscal years: Provided that, of the nine initial
members and alternates from the combination of Districts 1, 2 and 3,
one-third of such initial members and alternates shall serve only one
fiscal year, one-third of such members and alternates shall serve only
two fiscal years, one-third of such members and alternates shall serve
only two fiscal years; and one-half of the initial members and
alternates from Districts 4 and 7 shall serve only one fiscal year, and
one-half of such initial members and alternates shall serve two fiscal
years (determination of which of the initial members and their
alternates shall serve for 1 fiscal year, 2 fiscal years, and 3 fiscal
years shall be by lot). Members and alternate members shall serve in
such capacity for the portion of the term of office for which they are
selected and have qualified until their respective successors are
selected, have qualified and are appointed. The consecutive terms of
office of grower, handler and public members and
[[Page 61321]]
alternate members shall be limited to two 3-year terms, excluding any
initial term lasting less than 3 years. The term of office of a member
and alternate member for the same seat shall be the same. If this part
becomes effective on a date such that the initial fiscal period is less
than six months in duration, then the tolling of time for purposes of
this subsection shall not begin until the beginning of the first 12-
month fiscal period.
Sec. 930.23 Nomination and election.
(a) Nomination and election of initial and successor members and
alternate members of the Board shall be conducted through petition
forms and election ballots distributed to all eligible growers and
handlers via the U.S. Postal Service or other means, as determined by
the Secretary. Similar petition forms and election ballots shall be
used for both members and alternate members and any requirements for
election of a member shall apply to the election of an alternate.
(b) Nomination:
(1) In order for the name of a grower nominee to appear on an
election ballot, the nominee's name must be submitted with a petition
form, to be supplied by the Secretary or the Board, which, except in
District 8, contains at least five signatures of growers, other than
the nominee, from the nominee's district who are eligible to vote in
the referendum. Grower petition forms in District 8 must be signed by
only two growers, other than the nominee, from the nominee's district.
(2) In order for the name of a handler nominee to appear on an
election ballot, the nominee's name must be submitted with a petition
form, to be supplied by the Secretary or the Board, which contains the
signature of at least one handler, other than the nominee, from the
nominee's district who is eligible to vote in the referendum.
(3) Only growers, including duly authorized officers or employees
of growers, who are eligible to serve as grower members of the Board
shall participate in the nomination of grower members and alternate
grower members of the Board. No grower shall participate in the
submission of nominees in more than one district during any fiscal
period. If a grower produces cherries in more than one district, that
grower may select in which district he or she wishes to participate in
the nominations and election process and shall notify the Secretary or
the Board of such selection. A grower may not participate in the
nomination process in one district and the election process in a second
district in the same election cycle.
(4) Only handlers, including duly authorized officers or employees
of handlers, who are eligible to serve as handler members of the Board
shall participate in the nomination of handler members and alternate
handler members of the Board. No handler shall participate in the
selection of nominees in more than one district during any fiscal
period. If a handler handles cherries in more than one district, that
handler may select in which district he or she wishes to participate in
the nominations and election process and shall notify the Secretary or
the Board of such selection. A handler may not participate in the
nominations process in one district and the elections process in a
second district in the same election cycle. If a person is a grower and
a grower-handler only because some or all of his or her cherries were
custom packed, but he or she does not own or lease and operate a
processing facility, such person may vote only as a grower.
(5) In Districts 5, 6, 8 and 9, both growers and handlers may be
nominated for the district's Board seat. Grower and handler nominations
must follow the petition procedures outlined in paragraphs (b)(1) and
(b)(2) of this section.
(6) All eligible growers and handlers in all districts may submit
the names of the nominees for the public member and alternate public
member of the Board.
(7) After the appointment of the initial Board, the Secretary or
the Board shall announce at least 180 days in advance when a Board
member's term is expiring and shall solicit nominations for that
position in the manner described in this section. Nominations for such
position should be submitted to the Secretary or the Board not less
than 120 days prior to the expiration of such term.
(c) Election:
(1) After receiving nominations, the Secretary or the Board shall
distribute ballots via the U.S. Postal Service or other means, as
determined by the Secretary, to all eligible growers and handlers
containing the names of the nominees by district for the respective
seats on the Board, excluding the public voting member seat. The
ballots will clearly indicate that growers and handlers may only rank
or otherwise vote for nominees in their own district.
(2) Except as provided in paragraph (c)(4) of this section, only
growers, including duly authorized officers or employees of growers,
who are eligible to serve as grower members of the Board shall
participate in the election of grower members and alternate grower
members of the Board. No grower shall participate in the election of
Board members in more than one district during any fiscal period. If a
grower produces cherries in more than one district, the grower must
vote in the same district in which he or she chose to participate in
the nominations process under paragraph (b)(3) of this section.
However, if the grower did not participate in the nominations process,
he or she may select in which district he or she wishes to vote and
shall notify the Secretary or the Board of such selection.
(3) Except as provided in paragraph (c)(4) of this section, only
handlers, including duly authorized officers or employees of handlers,
who are eligible to serve as handler members of the Board shall
participate in the election of handler members and alternate handler
members of the Board. No handler shall participate in the election of
Board members in more than one district during any fiscal period. If a
handler does handle cherries in more than one district, he or she must
vote in the same district in which the handler elected to participate
in the nominations process under paragraph (b)(4) of this section.
However, if a handler did not participate in the nominations process,
that handler may select in which district he or she chooses to vote and
shall notify the Secretary or the Board of such selection. If a person
is a grower and a grower-handler only because some or all of his or her
cherries were custom packed, but he or she does not own or lease and
operate a processing facility, such person may vote only as a grower.
(4) In Districts 5, 6, 8 and 9, growers and handlers may vote for
either the grower or handler nominee(s) for the single seat allocated
to those districts.
(d) The members of the Board appointed by the Secretary pursuant to
Sec. 930.24 shall, at the first meeting and whenever necessary
thereafter, by at least a two-thirds vote of the entire Board, select
individuals to serve as the public member and alternate public member
of the Board from the list of nominees received from growers and
handlers pursuant to paragraph (b) of this section or from other
persons nominated by the Board. The persons selected shall be subject
to appointment by the Secretary under Sec. 930.24.
(e) The Board, with the approval of the Secretary, may establish
rules and regulations necessary and incidental to the administration of
this section.
Sec. 930.24 Appointment.
The selection of nominees made pursuant to elections conducted
under Sec. 930.23(c) shall be submitted to the Secretary in a format
which indicates the nominees by district, with the nominee receiving
the highest number
[[Page 61322]]
of votes at the top and the number of votes received being clearly
indicated. The Secretary shall appoint from those nominees or from
other qualified individuals, the grower and handler members of the
Board and an alternate for each such member on the basis of the
representation provided for in Sec. 930.20 or as provided for in any
reapportionment or reestablishment undertaken pursuant to Sec. 930.21.
The Secretary shall also appoint the public member and the alternate
public member elected by the Board pursuant to Sec. 930.23(d).
Sec. 930.25 Failure to nominate.
If nominations are not made within the time and in the manner
prescribed in Sec. 930.23, the Secretary may, without regard to
nominations, select the members and alternate members of the Board on
the basis of the representation provided for in Sec. 930.20 or as
provided for in any reestablishment undertaken pursuant to Sec. 930.21.
Sec. 930.26 Acceptance.
Each person to be appointed by the Secretary as a member or as an
alternate member of the Board shall, prior to such appointment, qualify
by advising the Secretary that he/she agrees to serve in the position
for which nominated for selection.
Sec. 930.27 Vacancies.
To fill any vacancy occasioned by the failure of any person
appointed as a member or as an alternate member of the Board to
qualify, or in the event of the death, removal, resignation, or
disqualification of any member or alternate member of the Board, a
successor for the unexpired term of such member or alternate member of
the Board shall be appointed by the Secretary from the most recent list
of nominations for the Board made by growers and handlers, from
nominations made by the Board, or from other qualified individuals. Any
nominations made by the Board to fill a vacancy must be received by the
Secretary within 90 days of the effective date of the vacancy. Board
members wishing to resign from the Board must do so in writing to the
Secretary.
Sec. 930.28 Alternate members.
An alternate member of the Board, during the absence of the member
for whom that member serves as an alternate, shall act in the place and
stead of such member and perform such other duties as assigned.
However, if a member is in attendance at a meeting of the Board, an
alternate member may not act in the place and stead of such member. In
the event of the death, removal, resignation, or disqualification of a
member, the alternate shall act for the member until a successor for
such member is appointed and has qualified.
Sec. 930.29 Eligibility for membership on Cherry Industry
Administrative Board.
(a) Each grower member and each grower alternate member of the
Board shall be a grower, or an officer or employee of a grower, in the
district for which nominated or appointed.
(b) Each handler member and each handler alternate member of the
Board shall be a handler, or an officer or employee of a handler, who
owns, or leases, and operates a cherry processing facility in the
district for which nominated or appointed.
(c) The public member and alternate public member of the Board
shall be prohibited from having any financial interest in the cherry
industry and shall possess such additional qualifications as may be
established by regulation.
Sec. 930.30 Powers.
The Board shall have the following powers:
(a) To administer this part in accordance with its terms and
provisions;
(b) To make rules and regulations to effectuate the terms and
provisions of this part;
(c) To receive, investigate, and report to the Secretary complaints
of violations of this part; and
(d) To recommend to the Secretary amendments to this part.
Sec. 930.31 Duties.
The Board shall have, among others, the following duties:
(a) To select such officers, including a chairperson and vice-
chairperson, as may be necessary, and to define the duties of such
officers and the duties of the chairperson and the vice-chairperson;
(b) To employ or contract with such persons or agents as the Board
deems necessary and to determine the duties and compensation of such
persons or agents;
(c) To select such committees and subcommittees as may be
necessary;
(d) To adopt bylaws and to adopt such rules for the conduct of its
business as it may deem advisable;
(e) To submit to the Secretary a budget for each fiscal period,
prior to the beginning of such period, including a report explaining
the items appearing therein and a recommendation as to the rates of
assessments for such period;
(f) To keep minutes, books, and records which will reflect all of
the acts and transactions of the Board and which shall be subject to
examination by the Secretary;
(g) To prepare periodic statements of the financial operations of
the Board and to make copies of each statement available to growers and
handlers for examination at the office of the Board;
(h) To cause its books to be audited by a certified public
accountant at least once each fiscal year and at such times as the
Secretary may request. Such audit shall include an examination of the
receipt of assessments and the disbursement of all funds, including the
payment of storage or other costs to handlers. The Board shall provide
the Secretary with a copy of all audits and shall make copies of such
audits, after the removal of any confidential individual grower or
handler information that may be contained in them, available to growers
and handlers for examination at the offices of the Board.
(i) To act as intermediary between the Secretary and any grower or
handler with respect to the operations of this part;
(j) To investigate and assemble data on the growing, handling, and
marketing conditions with respect to cherries;
(k) To apprise the Secretary of all Board meetings in a timely
manner;
(l) To submit to the Secretary such available information as the
Secretary may request;
(m) To investigate compliance with the provisions of this part;
(n) To develop and submit an annual marketing policy for approval
by the Secretary containing the optimum supply of cherries for the crop
year established pursuant to Sec. 930.50 and recommending such
action(s) necessary to achieve such optimum supply;
(o) To implement volume regulations established under Sec. 930.50
and issued by the Secretary under Sec. 930.51, including the release of
any inventory reserves;
(p) To provide thorough communication to growers and handlers
regarding the activities of the Board and to respond to industry
inquiries about Board activities;
(q) To oversee the collection of assessments levied under this
part;
(r) To enter into contracts or agreements with such persons and
organizations as the Board may approve for the development and conduct
of activities, including research and promotion activities, authorized
under this part or for the provision of services required by this part
and for the payment of the cost thereof with funds collected through
assessments pursuant
[[Page 61323]]
to Sec. 930.41 and income from such assessments. Contracts or
agreements for any plan or project shall provide that:
(1) The contractors shall develop and submit to the Board a plan or
project together with a budget(s) which shall show the estimated cost
to be incurred for such plan or project;
(2) Any contract or agreement for a plan or project and any plan or
project adopted by the Board shall only become effective upon approval
by the Secretary; and
(3) Every such contracting party shall keep accurate records of all
of its transactions and make periodic reports to the Board of
activities conducted and an accounting for funds received and expended,
and such other reports as the Secretary or the Board may require. The
Secretary or employees of the Board may audit periodically the records
of the contracting party.
(s) Pending disbursement consistent with its budget, to invest,
with the approval of the Secretary, and in accordance with applicable
Departmental policies, funds collected through assessments authorized
under Sec. 930.41 and income from such assessments;
(t) To establish standards or grade requirements for cherries for
frozen and canned cherry products, subject to the approval of the
Secretary;
(u) To borrow such funds, subject to the approval of the Secretary
and not to exceed the expected expenses of one fiscal year, as are
necessary for administering its responsibilities and obligations under
this part; and
(v) To establish, with the approval of the Secretary, such rules
and procedures relative to administration of this subpart as may be
consistent with the provisions contained in this subpart and as may be
necessary to accomplish the purposes of the Act and the efficient
administration of this subpart.
Sec. 930.32 Procedure.
(a) Twelve members of the Board, including alternates acting for
absent members, shall constitute a quorum. For any action of the Board
to pass, at least two-thirds of the entire Board must vote in support
of such action.
(b) The Board may provide through its own rules and regulations,
subject to approval by the Secretary, for simultaneous meetings of
groups of its members assembled at different locations and for votes to
be conducted by telephone or other means of communication. Votes so
cast shall be promptly confirmed in writing.
(c) All meetings of the Board are open to the public, although the
Board may hold portions of meetings in executive session for the
consideration of certain business. The Board will establish, with the
approval of the Secretary, a means of advanced notification of growers
and handlers of Board meetings.
Sec. 930.33 Expenses and compensation.
Except for the public member and alternate public member who shall
receive such compensation as the Board may establish and the Secretary
may approve, the members of the Board, and alternates when acting as
members, shall serve without compensation but shall be reimbursed for
necessary and reasonable expenses, as approved by the Board, incurred
by them in the performance of their duties under this part. The Board
at its discretion may request the attendance of one or more alternates
at any or all meetings, notwithstanding the expected or actual presence
of the respective member(s), and may pay the expenses of such
alternates.
Expenses and Assessments
Sec. 930.40 Expenses.
The Board is authorized to incur such expenses as the Secretary
finds are reasonable and likely to be incurred for its maintenance and
functioning and to enable it to exercise its powers and perform its
duties in accordance with the provisions of this part. The funds to
cover such expenses shall be acquired by the levying of assessments as
provided in Sec. 930.41.
Sec. 930.41 Assessments.
(a) An assessment may be levied upon handlers annually under this
part to cover the administrative costs of the Board, costs of
inspection, and any research, development and promotion activities
initiated by the Board under Sec. 930.48.
(b) Each part of an assessment intended to cover the costs of each
activity in paragraph (a) of this section, must be identified and
approved by the Board and the Secretary, and any notification or other
statement regarding assessments provided to handlers must contain such
information.
(c) As a pro rata share of the administrative, inspection,
research, development, and promotion expenses which the Secretary finds
reasonable and likely to be incurred by the Board during a fiscal
period, each handler shall pay to the Board assessments on all cherries
handled, as the handler thereof, during such period: Provided, a
handler shall be exempt from any assessment on the tonnage of handled
cherries that are diverted according to Sec. 930.59 which includes
cherries represented by grower diversion certificates issued pursuant
to Sec. 930.58(b)(2) and acquired by handlers and those cherries
devoted to exempt uses under Sec. 930.62.
(d) The Secretary, after consideration of the recommendation of the
Board, shall fix the rate of assessment to be paid by each handler
during the fiscal period in an amount designed to secure sufficient
funds to cover the expenses which may be approved and incurred during
such period or subsequent period as provided in paragraph (c) of this
section. At any time during or after the fiscal period, the Secretary
may increase the rate of assessment in order to secure sufficient funds
to cover any later finding by the Secretary relative to the expenses
which may be incurred. Such increase shall be applied to all cherries
handled during the applicable fiscal period. In order to provide funds
for the administration of the provisions of this part during the first
part of a fiscal period before sufficient operating income is available
from assessments, the Board may accept the payment of assessments in
advance, and may borrow money for such purposes.
(e) Assessments not paid within a time prescribed by the Board may
be made subject to interest or late payment charges, or both. The
period of time, rate of interest, and late payment charge will be as
recommended by the Board and approved by the Secretary: Provided, that
when interest or late payment charges are in effect, they shall be
applied to all assessments not paid within the prescribed period of
time.
(f) Assessments will be calculated on the basis of pounds of
cherries handled: Provided, that the formula adopted by the Board and
approved by the Secretary for determining the rate of assessment will
compensate for differences in the number of pounds of cherries utilized
for various cherry products and the relative market values of such
cherry products.
(g) The Board, with the approval of the Secretary, may establish
rules and regulations necessary and incidental to the administration of
this section.
Sec. 930.42 Accounting.
(a) If, at the end of a fiscal period, the assessments collected
are in excess of expenses incurred, the Board, with the approval of the
Secretary, may carry over all or any portion of such excess into
subsequent fiscal periods as a reserve. Such reserve funds may be used
to cover any expenses authorized by this part; and to cover necessary
expenses of liquidation in the event of termination of this part. If
any such excess is not retained in a reserve, it shall be refunded
proportionately to the
[[Page 61324]]
handlers from whom the excess was collected. Without an additional
reserve level approved by the Secretary, the amount held in reserve may
not exceed approximately one year's operational expenses. Upon
termination of this part, any funds not required to defray the
necessary expenses of liquidation shall be disposed of in such a manner
as the Secretary may determine to be appropriate: Provided, that to the
extent practicable, such funds shall be returned pro rata to the
persons from whom such funds were collected.
(b) All funds received by the Board pursuant to the provisions of
this part shall be used solely for the purpose specified in this part
and shall be accounted for in the manner provided in this part. The
Secretary may at any time require the Board and its members to account
for all receipts and disbursements.
Quality Control
Sec. 930.44 Quality control.
(a) Quality standards. The Board may establish, with the approval
of the Secretary, such minimum quality and inspection requirements
applicable to cherries as will contribute to orderly marketing or be in
the public interest. If such requirements are adopted, no handler shall
process cherries into manufactured products or sell manufactured
products in the current of commerce unless such cherries and/or such
cherries used in the manufacture of products meet the applicable
requirements as evidenced by certification acceptable to the Board. The
Board, with the approval of the Secretary, may establish rules and
regulations necessary and incidental to the administration of this
section.
(b) Inspection and certification. Whenever the handling of any
cherries requires inspection pursuant to this part, each handler who
handles cherries shall cause such cherries to be inspected by the
appropriate division of the Department, and certified by it as meeting
the applicable requirements of such regulation: Provided, that
inspection and certification shall be required for cherries which
previously have been so inspected and certified only if such cherries
have been regraded, resorted, repackaged, or in any other way further
prepared for market. Promptly after inspection and certification, each
such handler shall submit, or cause to be submitted, to the Board a
copy of the certificate of inspection issued with respect to such
cherries.
Research, Market Development and Promotion
Sec. 930.48 Research, market development and promotion.
The Board, with the approval of the Secretary, may establish or
provide for the establishment of production and processing research,
market research and development, and/or promotional activities,
including paid advertising, designed to assist, improve or promote the
efficient production and processing, marketing, distribution, and
consumption of cherries subject to this part. The expense of such
projects shall be paid from funds collected pursuant to this part and
the income from such funds.
Regulations
Sec. 930.50 Marketing policy.
(a) Optimum supply. On or about July 1 of each crop year, the Board
shall hold a meeting to review sales data, inventory data, current crop
forecasts and market conditions in order to establish an optimum supply
level for the crop year. The optimum supply volume shall be calculated
as 100 percent of the average sales of the prior three years to which
shall be added a desirable carryout inventory not to exceed 20 million
pounds or such other amount as the Board, with the approval of the
Secretary may establish. This optimum supply volume shall be announced
by the Board in accordance with paragraph (h) of this section.
(b) Preliminary percentages. On or about July 1 of each crop year,
the Board shall establish a preliminary free market tonnage percentage
which shall be calculated as follows: from the optimum supply computed
in subsection (a), the Board shall deduct the carryin inventory to
determine the tonnage requirements (adjusted to a raw fruit equivalent)
for the current crop year which will be divided by the current year
USDA crop forecast. If the resulting number is positive, this would
represent the estimated over-production which would need to be the
restricted percentage tonnage. This restricted percentage tonnage would
then be divided by the sum of the USDA crop forecast for the regulated
districts to obtain the percentages for the regulated districts. The
Board shall establish a preliminary restricted percentage equal to the
quotient, rounded to the nearest whole number, with the compliment
being the preliminary free tonnage percentage. If subtracting the
current crop year requirement, computed in the first sentence from the
current USDA crop forecast, results in a negative number, the Board
shall establish a preliminary free tonnage of 100 percent with a
preliminary restricted percentage of zero. The Board shall announce
these preliminary percentages in accordance with paragraph (h) of this
section.
(c) Interim percentages. Between July 1 and September 15 of each
crop year, the Board may modify the preliminary free market tonnage and
restricted percentages to adjust to the actual pack occurring in the
industry. The Board shall announce any interim percentages in
accordance with paragraph (h) of this section.
(d) Final percentages. No later than September 15 of each crop
year, the Board shall review actual production during the current crop
year and make such adjustments as are necessary between free and
restricted tonnage to achieve the optimum supply and recommend such
final free market tonnage and restricted percentages to the Secretary
and announce them in accordance with paragraph (h) of this section. The
difference between any final free market tonnage percentage designated
by the Secretary and 100 percent shall be the final restricted
percentage. With its recommendation, the Board shall report on its
consideration of the factors in paragraph (e) of this section.
(e) Factors. When computing preliminary and interim percentages, or
determining final percentages for recommendation to the Secretary, the
Board shall give consideration to the following factors:
(1) The estimated total production of cherries;
(2) The estimated size of the crop to be handled;
(3) The expected general quality of such cherry production;
(4) The expected carryover as of July 1 of canned and frozen
cherries and other cherry products;
(5) The expected demand conditions for cherries in different market
segments;
(6) Supplies of competing commodities;
(7) An analysis of economic factors having a bearing on the
marketing of cherries;
(8) The estimated tonnage held by handlers in primary or secondary
inventory reserves;
(9) Any estimated release of primary or secondary inventory reserve
cherries during the crop year.
(f) Modification. In the event the Board subsequently deems it
advisable to modify its marketing policy, because of national
emergency, crop failure, or other major change in economic conditions,
it shall hold a meeting for that purpose, and file a report thereof
[[Page 61325]]
with the Secretary within 5 days (exclusive of Saturdays, Sundays, and
holidays) after the holding of such meeting, which report shall show
the Board's recommended modification and the basis therefor.
(g) Reserve tonnage to sell as free tonnage. In addition, the Board
shall make available tonnage equivalent to an additional 10 percent, if
available, of the average sales of the prior 3 years for market
expansion. Handlers can determine if they need the additional tonnage
and inform the Board so that reserve cherries may be released to them.
Handlers not desiring the additional tonnage would not have it released
to them.
(h) Publicity. The Board shall promptly give reasonable publicity
to growers and handlers of each meeting to consider a marketing policy
or any modification thereof, and each such meeting shall be open to
them and to the public. Similar publicity shall be given to growers and
handlers of each marketing policy report or modification thereof, filed
with the Secretary and of the Secretary's action thereon. Copies of all
marketing policy reports shall be maintained in the office of the
Board, where they shall be made available for examination. The Board
shall notify handlers, and give reasonable publicity to growers, of its
computation of the optimum supply, preliminary percentages, and interim
percentages and shall notify handlers of the Secretary's action on
final percentages by registered or certified mail.
(i) Restricted percentages. Restricted percentage requirements
established under paragraphs (b), (c) or (d) of this section may be
fulfilled by handlers by either establishing an inventory reserve in
accordance with Sec. 930.55 or Sec. 930.57 or by diversion of product
in accordance with Sec. 930.59. In years where required, the Board
shall establish a maximum percentage of the restricted quantity which
may be established as a primary inventory reserve such that the total
primary inventory reserve does not exceed 50 million pounds. Handlers
will be permitted to divert (at plant or with grower-diversion
certificates) as much of the restricted percentage requirement as they
deem appropriate, but may not establish a primary inventory reserve in
excess of the percentage established by the Board for restricted
cherries. In the event handlers wish to establish inventory reserve in
excess of this amount, they may do so, in which case it will be
classified as a secondary inventory reserve and will be regulated
accordingly.
(j) Inventory reserve release. In years when inventory reserve
cherries are available and when the expected availability of cherries
from the current crop plus expected carryin inventory does not fulfill
the optimum supply, the Board shall release not later than November 1st
of the current crop year such volume from the inventory reserve as will
satisfy the optimum supply.
(k) The Board, with the approval of the Secretary, may establish
rules and regulations necessary and incidental to the administration of
this section.
Sec. 930.51 Issuance of volume regulations.
(a) Whenever the Secretary finds, from the recommendation and
supporting information supplied by the Board, that to designate final
free market tonnage and restricted percentages for any cherries
acquired by handlers during the crop year will tend to effectuate the
declared policy of the Act, the Secretary shall designate such
percentages. Such regulation designating such percentage shall fix the
free market tonnage and restricted percentages, totaling 100 percent,
which shall be applied in accordance with section Sec. 930.55,
Sec. 930.57 and Sec. 930.59 to cherries grown in regulated districts,
as determined under Sec. 930.52, and handled during such fiscal period.
(b) The Board shall be informed immediately of any such regulation
issued by the Secretary, and the Board shall promptly give notice
thereof to handlers.
(c) That portion of a handler's cherries that are restricted
percentage cherries is the product of the restricted percentage imposed
under paragraph (a) of this section multiplied by the tonnage of
cherries, originating in a regulated district, handled, including those
diverted according to Sec. 930.59, by that handler in that fiscal year.
Therefore, while diverted cherries, including those represented by
grower diversion certificates, may be exempt from assessment under
Sec. 930.41, they must be counted when computing restricted percentage
requirements.
(d) The Board, with the approval of the Secretary, shall develop
rules and regulations which shall provide guidelines for handlers in
complying with any restricted tonnage requirements, including, but not
limited to, a grace period of at least 30 days to segregate and
appropriately document any tonnage they wish to place in the inventory
reserve and to assemble any applicable diversion certificates.
Sec. 930.52 Establishment of districts subject to volume regulations.
(a) Upon adoption of this part, the districts subject to any volume
regulations implemented in accordance with this part shall be those
districts in which the average annual production of cherries over the
prior three years has exceeded 15 million pounds. Districts not meeting
the 15 million pound test at the time of order promulgation which
subsequently become subject to volume regulation shall not be regulated
until the next crop year after exceeding the 15 million pound average
production requirement.
(b) Handlers in districts which are not subject to volume
regulation would only be so regulated to the extent that they handled
cherries which were grown in a district subject to regulation as
specified in paragraph (a) of this section. In such a case, the handler
must place in inventory reserve pursuant to Sec. 930.55 or Sec. 930.57
or divert pursuant to Sec. 930.59 the required restricted percentage of
the crop originating in the regulated district.
(c) Handlers in districts not meeting the production requirement in
a given year would not be subject to volume regulation in the next crop
year.
(d) Any district producing a crop which is less than 50 percent of
the maximum average annual processed production in that district in the
previous five years would be exempt from any volume regulation if, in
that year, a restricted percentage is established.
(e) The Board, with the approval of the Secretary, may establish
rules and regulations necessary and incidental to the administration of
this section.
Sec. 930.53 Modification, suspension, or termination of regulations.
(a) In the event the Board at any time finds that, by reason of
changed conditions, any volume regulations issued pursuant to
Sec. 930.51 should be modified, suspended, or terminated, it shall so
recommend to the Secretary.
(b) Whenever the Secretary finds, from the recommendations and
information submitted by the Board or from other available information,
that a volume regulation issued pursuant to Sec. 930.51 should be
modified, suspended or terminated with respect to any or all shipments
of cherries in order to effectuate the declared policy of the Act, the
Secretary shall modify, suspend, or terminate such regulation.
Sec. 930.54 Prohibition on the use or disposition of inventory reserve
cherries.
(a) Release of primary and secondary inventory reserve cherries.
Except as provided in Sec. 930.50 and paragraph (b) of this section,
cherries that are placed in inventory reserve pursuant to the
requirements of Sec. 930.50, Sec. 930.51, Sec. 930.55, or Sec. 930.57
shall not be used
[[Page 61326]]
or disposed of by any handler or any other person: Provided, that if
the Board determines that the total available supplies for use in
normal commercial outlets do not at least equal the amount, as
estimated by the Board, needed to meet the demand in such outlets, the
Board shall recommend to the Secretary and provide such justification
that, during such period as may be recommended by the Board and
approved by the Secretary, a portion or all of the primary and/or
secondary inventory reserve cherries shall be released for such use.
Sec. 930.55 Primary inventory reserves.
(a) Whenever the Secretary has fixed the free market tonnage and
restricted percentages for any fiscal period, as provided for in
Sec. 930.51(a), each handler in a regulated district shall place in his
or her primary inventory reserve for such period, at such time, and in
such manner, as the Board may prescribe, or otherwise divert, according
to Sec. 930.60, a portion of the cherries acquired during such period.
(b) The form of the cherries, frozen, canned in any form, dried, or
concentrated juice, placed in the primary inventory reserve is at the
option of the handler. Except as may be limited by Sec. 930.50(i) or as
may be permitted pursuant to Sec. 930.59 and Sec. 930.62, such
inventory reserve portion shall be equal to the sum of the products
obtained by multiplying the weight or volume of the cherries in each
lot of cherries acquired during the fiscal period by the then effective
restricted percentage fixed by the Secretary: Provided, that in
converting cherries in each lot to the form prescribed by the Board,
the inventory reserve obligations shall be adjusted in accordance with
uniform rules adopted by the Board in terms of raw fruit equivalent.
(c) Inventory reserve cherries shall meet such standards of grade,
quality, or condition as the Board, with the approval of the Secretary,
may establish. All such cherries shall be inspected by the Department.
A certificate of such inspection shall be issued which shall show,
among other things, the name and address of the handler, the number and
type of containers in the lot, the grade of the product, the location
where the lot is stored, identification marks (can codes or lot stamp),
and a certification that the cherries meet the prescribed standards.
Promptly after inspection and certification, each such handler shall
submit, or cause to be submitted, to the Board, at the place designated
by the Board, a copy of the certificate of inspection issued with
respect to such cherries.
(d) Handlers shall be compensated for inspection costs incurred on
cherries placed in the primary inventory reserve. All reporting of
cherries placed in, rotated in and out, or released from an inventory
reserve shall be in accordance with rules and procedures established by
the Board, with the approval of the Secretary. The Board could, with
the approval of the Secretary, also limit the number of inspections of
reserve cherries being rotated into inventory reserves for which the
Board would be financially liable.
(e) Except as provided in Sec. 930.54, handlers may not sell
inventory reserve cherries prior to their official release by the
Board. Handlers may rotate cherries in their inventory reserves with
prior notification to the Board. All cherries rotated into the
inventory reserve must meet the applicable inspection requirements.
Sec. 930.56 Off-premise inventory reserve.
Any handler may, upon notification to the Board, arrange to hold
inventory reserve, of his or her own production or which was purchased,
on the premises of another handler or in an approved commercial storage
facility in the same manner as though the inventory reserve were on the
handler's own premises.
Sec. 930.57 Secondary inventory reserve.
(a) In the event the inventory reserve established under
Sec. 930.55 of this part is at its maximum volume, and the Board has
announced, in accordance with Sec. 930.50, that volume regulation will
be necessary to maintain an orderly supply of quality cherries for the
market, handlers in a regulated district may elect to place in a
secondary inventory reserve all or a portion of the cherries the volume
regulation would otherwise require them to divert in accordance with
Sec. 930.60.
(b) Should any handler in a regulated district exercise his or her
right to establish a secondary inventory reserve under paragraph (a) of
this section, all costs of maintaining that reserve, as well as
inspection costs, will be the responsibility of the individual handler.
(c) The secondary inventory reserve shall be established in
accordance with Secs. 930.55 (b) and (c) and such other rules and
regulations which the Board, with the approval of the Secretary, may
establish.
(d) The Board shall retain control over the release of any cherries
from the secondary inventory reserve. No cherries may be released from
the secondary reserve until all cherries in any primary inventory
reserve established under Sec. 930.55 have been released. Any release
of the secondary inventory reserve shall be in accordance with the
annual marketing policy and with Sec. 930.54.
Sec. 930.58 Grower diversion privilege.
(a) In general. Any grower may voluntarily elect to divert, in
accordance with the provisions of this section, all or a portion of the
cherries which otherwise, upon delivery to a handler, would become
restricted percentage cherries. Upon such diversion and compliance with
the provisions of this section, the Board shall issue to the diverting
grower a grower diversion certificate which such grower may deliver to
a handler, as though there were actual harvested cherries.
(b) Eligible diversion. Grower diversion certificates shall be
issued to growers only if the cherries are diverted in accordance with
the following terms and conditions or such other terms and conditions
that the Board, with the approval of the Secretary, may establish.
Diversion may take such of the following forms which the Board, with
the approval of the Secretary, may designate: Uses exempt under
Sec. 930.63; nonhuman food uses; or other uses, including diversion by
leaving such cherries unharvested.
(1) Application/mapping. The Board, with the approval of the
Secretary, shall develop rules and regulations providing for the
diversion of cherries by growers. Such regulations may include, among
other things:
(i) The form and content of applications and agreements relating to
the diversion, including provisions for supervision and compensation;
(ii) provisions for mapping areas in which cherries will be left
unharvested.
(2) Diversion certificate. If the Board approves the application it
shall so notify the applicant and conduct such supervision of the
applicant's diversion of cherries as may be necessary to assure that
the cherries have been diverted. After the diversion has been
accomplished, the Board shall issue to the diverting grower a diversion
certificate stating the weight of cherries diverted. Where diversion is
carried out by leaving the cherries unharvested, the Board shall
estimate the weight of cherries diverted on the basis of such uniform
rule prescribed in rules and regulations as the Board, with the
approval of the Secretary, may recommend to implement this section.
Sec. 930.59 Handler diversion privilege.
(a) In general. Handlers handling cherries harvested in a regulated
district may fulfill any restricted percentage requirement in full or
in part by voluntarily diverting cherries or cherry
[[Page 61327]]
products in a program approved by the Board, rather than placing
cherries in an inventory reserve. Upon such diversion and compliance
with the provisions of this section, the Board shall issue to the
diverting handler a handler diversion certificate which shall satisfy
any restricted percentage or diversion requirement to the extent of the
Board or Department inspected weight of the cherries diverted.
(b) Eligible diversion. Handler diversion certificates shall be
issued to handlers only if the cherries are diverted in accordance with
the following terms and conditions or such other terms and conditions
that the Board, with the approval of the Secretary, may establish. Such
diversion may take place in any of the following forms which the Board,
with the approval of the Secretary, may designate: uses exempt under
Sec. 930.62; contribution to a Board approved food bank or other
approved charitable organization; acquisition of grower diversion
certificates that have been issued in accordance with Sec. 930.58; or
other uses, including diversion by destruction of the cherries at the
handler's facilities: Provided, that diversion may not be accomplished
by converting cherries into juice or juice concentrate.
(1) Notification. The handler electing to divert cherries through
means specified in this section or other approved means (not including
uses exempt under Sec. 930.62), shall first notify the Board of such
election. Such notification shall describe in detail the manner in
which the handler proposes to divert cherries including, if the
diversion is to be by means of destruction of the cherries, a detailed
description of the means of destruction and ultimate disposition of the
cherries. It shall also contain an agreement that the proposed
diversion is to be carried out under the supervision of the Board and
that the cost of such supervision is to be paid by the handler. Uniform
fees for such supervision shall be established by the Board, pursuant
to rules and regulations approved by the Secretary.
(2) Application. The handler electing to divert cherries by
utilizing an exemption under Sec. 930.62 shall first apply to the Board
for approval of such diversion; no diversion should take place prior to
such approval. Such application shall describe in detail the uses to
which the diverted cherries will be put. It shall also contain an
agreement that the proposed diversion is to be carried out under the
supervision of the Board and that the cost of such supervision is to be
paid by the applicant. The Board shall notify the applicant of the
Board's approval or disapproval of the submitted application.
(3) Diversion certificate. The Board shall conduct such supervision
of the handler's diversion of cherries under paragraph (b)(1) or under
paragraph (b)(2) of this section as may be necessary to assure that the
cherries are diverted. After the diversion has been accomplished, the
Board shall issue to the diverting handler a handler diversion
certificate indicating the weight of cherries which may be used to
offset any restricted percentage requirement.
Sec. 930.60 Equity holders.
(a) Inventory reserve ownership. The inventory reserve shall be the
sole property of the handlers who place products into the inventory
reserve. A handler's equity in the primary inventory reserve may be
transferred to another person upon notification to the Board.
(b) Agreements with growers. Individual handlers are encouraged to
have written agreements with growers who deliver their cherries to the
handler as to how any restricted percentage cherries delivered to the
handler will be handled and what share, if any, the grower will have in
the eventual sale of any inventory reserve cherries.
(c) Rulemaking authority. The Board, with the approval of the
Secretary, may adopt rules and regulations necessary and incidental to
the administration of this section.
Sec. 930.61 Handler compensation.
Each handler handling cherries from a regulated district that is
subject to volume regulations shall be compensated by the Board for
inspection relating to the primary inventory reserve as the Board may
deem to be appropriate. The Board, with the approval of the Secretary,
may establish such rules and regulations as are necessary and
incidental to the administration of this section.
Sec. 930.62 Exemptions.
The Board, with the approval of the Secretary, may exempt from the
provisions of Sec. 930.41, Sec. 930.51, Sec. 930.53, and Sec. 930.55
through Sec. 930.57 cherries: Diverted in accordance with Sec. 930.59;
used for new product and new market development; used for experimental
purposes or for any other use designated by the Board, including
cherries processed into products for markets for which less than 5
percent of the preceding 5-year average production of cherries were
utilized. The Board, with the approval of the Secretary, shall
prescribe such rules, regulations, and safeguards as it may deem
necessary to ensure that cherries handled under the provisions of this
section are handled only as authorized.
Sec. 930.63 Deferment of restricted obligation.
(a) Bonding. The Board, with the approval of the Secretary, may
require handlers to secure bonds on deferred inventory reserve tonnage.
Handlers may, in order to comply with the requirements of Secs. 930.50
and 930.51 and regulations issued thereunder, secure bonds on
restricted percentage cherries to temporarily defer the date that
inventory reserve cherries must be held to any date requested by the
handler. This date shall be not later than 60 days prior to the end of
that crop year. Such deferment shall be conditioned upon the voluntary
execution and delivery by the handler to the Board of a written
undertaking within thirty (30) days after the Secretary announces the
final restricted percentage under Sec. 930.51. Such written undertaking
shall be secured by a bond or bonds with a surety or sureties
acceptable to the Board that on or prior to the acceptable deferred
date the handler will have fully satisfied the restricted percentage
amount required by Sec. 930.51.
(b) Rulemaking authority. The Board, with the approval of the
Secretary, may adopt rules and regulations necessary and incidental to
the administration of this section.
Reports and Records
Sec. 930.70 Reports.
(a) Weekly production, monthly sales, and inventory data. Each
handler shall, upon request of the Board, file promptly with the Board,
reports showing weekly production data; monthly sales and inventory
data; and such other information, including the volume of any cherries
placed in or released from a primary or secondary inventory reserve or
diverted, as the Board shall specify with respect to any cherries
handled by the handler. Such information may be provided to the Board
members in summary or aggregated form only without any reference to the
individual sources of the information.
(b) Other reports. Upon the request of the Board, with the approval
of the Secretary, each handler shall furnish to the Board such other
information with respect to the cherries acquired, handled, stored and
disposed of by such handler as may be necessary to enable the Board to
exercise its powers and perform its duties under this part.
[[Page 61328]]
(c) Protection of proprietary information. Under no circumstances
shall any information or reports be made available to the Board members
or others which will reveal the proprietary information of an
individual handler.
Sec. 930.71 Records.
Each handler shall maintain such records of all cherries acquired,
handled, stored or sold, or otherwise disposed of as will substantiate
the required reports and as may be prescribed by the Board. All such
records shall be maintained for not less than two years after the
termination of the fiscal year in which the transactions occurred or
for such lesser period as the Board may direct with the approval of the
Secretary.
Sec. 930.72 Verification of reports and records.
For the purpose of assuring compliance and checking and verifying
the reports filed by handlers, the Secretary and the Board, through its
duly authorized agents, shall have access to any premises where
applicable records are maintained, where cherries are received, stored,
or handled, and, at any time during reasonable business hours, shall be
permitted to inspect such handlers premises and any and all records of
such handlers with respect to matters within the purview of this part.
Sec. 930.73 Confidential information.
All reports and records furnished or submitted by handlers to the
Board and its authorized agents which include data or information
constituting a trade secret or disclosing trade position, financial
condition, or business operations of the particular handler from whom
received, shall be received by and at all times kept in the custody and
under the control of one or more employees of the Board or its agent,
who shall disclose such information to no person other than the
Secretary.
Miscellaneous Provisions
Sec. 930.80 Compliance.
Except as provided in this part, no person may handle cherries, the
handling of which has been prohibited by the Secretary under this part,
and no person shall handle cherries except in conformity with the
provisions of this part and the regulations issued hereunder. No person
may handle any cherries for which a diversion certificate has been
issued other than as provided in Sec. 930.58(b) and Sec. 930.59(b).
Sec. 930.81 Right of the Secretary.
Members of the Board (including successors and alternates), and any
agents, employees, or representatives thereof, shall be subject to
removal or suspension by the Secretary at any time. Each regulation,
decision, determination, or other act of the Board shall be subject to
the Secretary's disapproval at any time. Upon such disapproval, the
disapproved action of the Board shall be deemed null and void, except
as to acts done in reliance thereon or in accordance therewith prior to
such disapproval by the Secretary.
Sec. 930.82 Effective time.
The provisions of this part, and of any amendment thereto, shall
become effective at such time as the Secretary may declare, and shall
continue in force until terminated, or suspended.
Sec. 930.83 Termination.
(a) The Secretary may, at any time, terminate any or all of the
provisions of this part by giving at least 1 day's notice by means of a
press notice or in any other manner in which the Secretary may
determine.
(b) The Secretary shall terminate or suspend the operation of any
or all of the provisions of this part whenever the Secretary finds that
such provisions do not tend to effectuate the declared policy of the
Act.
(c) The Secretary shall terminate the provisions of this part
whenever the Secretary finds by referendum or otherwise that such
termination is favored by a majority of the growers and processors:
Provided, that such majority has, during the current fiscal year,
produced or canned and frozen more than 50 percent of the volume of the
cherries which were produced or processed within the production area.
Such termination shall become effective on the last day of June
subsequent to the announcement thereof by the Secretary.
(d) The Secretary shall conduct a referendum within the month of
March of every sixth year after the effective date of this part to
ascertain whether continuation of this part is favored by the growers
and processors. The Secretary may terminate the provisions of this part
at the end of any fiscal period in which the Secretary has found that
continuance is not favored by a majority of growers and processors who,
during a representative period determined by the Secretary, have been
engaged in the production or processing of tart cherries in the
production area. Such termination shall be announced on or before the
end of the fiscal period.
(e) The provisions of this part shall, in any event, terminate
whenever the provisions of the Act authorizing them cease to be in
effect.
Sec. 930.84 Proceedings after termination.
(a) Upon the termination of the provisions of this part, the then
functioning members of the Board shall, for the purpose of liquidating
the affairs of the Board, continue as trustees of all the funds and
property then in its possession, or under its control, including claims
for any funds unpaid or property not delivered at the time of such
termination.
(b) The said trustees shall:
(1) Continue in such capacity until discharged by the Secretary;
(2) From time to time account for all receipts and disbursements
and deliver all property on hand, together with all books and records
of the Board and of the trustees, to such person as the Secretary may
direct; and
(3) Upon the request of the Secretary, execute such assignments or
other instruments necessary or appropriate to vest in such person full
title and right to all of the funds, property, and claims vested in the
Board or in the trustees pursuant to this part.
(c) Any person to whom funds, property, and claims have been
transferred or delivered, pursuant to this section, shall be subject to
the same obligations imposed upon the Board and upon the trustees.
Sec. 930.85 Effect of termination or amendment.
Unless otherwise expressly provided by the Secretary, the
termination of this part or of any regulation issued pursuant to this
part, or the issuance of any amendment to either thereof, shall not:
(a) Affect or waive any right, duty, obligation, or liability which
shall have risen or which may thereafter arise in connection with any
provision of this part or any regulation issued thereunder; or
(b) Release or extinguish any violation of this part or any
regulation issued thereunder; or
(c) Affect or impair any rights or remedies of the Secretary or any
other person with respect to any such violation.
Sec. 930.86 Duration of immunities.
The benefits, privileges, and immunities conferred upon any person
by virtue of this part shall cease upon its termination, except with
respect to acts done under and during the existence of this part.
Sec. 930.87 Agents.
The Secretary may, by designation in writing, name any officer or
employee of the United States, or name any agency or division in the
U.S. Department of
[[Page 61329]]
Agriculture, to act as the Secretary's agent or representative in
connection with any provisions of this part.
Sec. 930.88 Derogation.
Nothing contained in this part is, or shall be construed to be, in
derogation or in modification of the rights of the Secretary or of the
United States :
(a) To exercise any powers granted by the Act or otherwise; or
(b) In accordance with such powers, to act in the premises whenever
such action is deemed advisable.
Sec. 930.89 Personal liability.
No member or alternate member of the Board and no employee or agent
of the Board shall be held personally responsible, either individually
or jointly with others, in any way whatsoever, to any person for errors
in judgment, mistakes, or other acts, either of commission or omission,
as such member, alternate member, employee, or agent, except for acts
of dishonesty, willful misconduct, or gross negligence.
Sec. 930.90 Separability.
If any provision of this part is declared invalid or the
applicability thereof to any person, circumstance, or thing is held
invalid, the validity of the remainder of this part or the
applicability thereof to any other person, circumstance, or thing shall
not be affected thereby.
Sec. 930.91 Amendments.
Amendments to this subpart may be proposed, from time to time, by
the Board or by the Secretary.
Marketing Agreement
Sec. 930.92 Counterparts.
This agreement may be executed in multiple counterparts and when
one counterpart is signed by the Secretary, all such counterparts shall
constitute, when taken together, one and the same instrument as if all
signatures were contained in one original.
Sec. 930.93 Additional parties.
After the effective date thereof, any handler may become a party to
this agreement if a counterpart is executed by such handler and
delivered to the Secretary. This agreement shall take effect as to such
new contracting part at the time such counterpart is delivered to the
Secretary, and the benefits, privileges, and immunities conferred by
this agreement shall then be effective as to such new contracting
party.
Sec. 930.94 Order with marketing agreement.
Each signatory hereby requests the Secretary to issue, pursuant to
the Act, an order providing for regulating the handling of tart
cherries in the same manner as is provided for in this agreement.
Dated: November 20, 1995.
Lon Hatamiya,
Administrator.
[FR Doc. 95-28631 Filed 11-21-95; 11:11 am]
BILLING CODE 3410-02-P
