[Federal Register Volume 63, Number 77 (Wednesday, April 22, 1998)]
[Rules and Regulations]
[Pages 20019-20023]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-10658]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 930
[Docket No. FV97-930-5 FIR]
Tart Cherries Grown in the States of Michigan, New York,
Pennsylvania, Oregon, Utah, Washington, and Wisconsin; Issuance of
Grower Diversion Certificates
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Final rule.
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SUMMARY: The Department of Agriculture (Department) is adopting, as a
final rule, with an appropriate modification to reflect a change in a
certificate redemption date, an interim final rule establishing terms
and conditions for the issuance of grower diversion certificates by the
Cherry Industry Administrative Board (Board) under the marketing order
for tart cherries. Handlers may use such certificates in order to
satisfy their restricted percentage amounts when volume regulations are
issued by the Secretary. Tart cherry handlers in Oregon, Pennsylvania,
Washington and Wisconsin (Districts 5, 6, 8, and 9) are not subject to
volume regulation at this time because these districts do not currently
produce adequate tonnage to trigger such regulation under the order.
Effective Date: May 22, 1998.
FOR FURTHER INFORMATION CONTACT: Patricia A. Petrella or Kenneth G.
Johnson, Marketing Order Administration Branch, F&V, AMS, USDA, room
2525-S, P.O. Box 96456, Washington, DC 20090-6456, telephone: (202)
720-2491, Fax: (202) 720-5698. Small businesses may request information
on compliance with this regulation by contacting: Jay Guerber,
Marketing Order Administration Branch, Fruit and Vegetable Programs,
AMS, USDA, P.O. Box 96456, room 2525-S, Washington, DC 20090-6456;
telephone (202) 720-2491; Fax: (202) 720-5698.
SUPPLEMENTARY INFORMATION: This rule is issued under Marketing
Agreement and Order No. 930 (7 CFR Part 930), regulating the handling
of tart cherries grown in the States of Michigan, New York,
Pennsylvania, Oregon, Utah, Washington, and Wisconsin, hereinafter
referred to as the ``order.'' This marketing agreement and order are
effective under the Agricultural Marketing Agreement Act of 1937, as
amended (7 U.S.C. 601-674), hereinafter referred to as the ``Act.''
The Department is issuing this rule in conformance with Executive
Order 12866.
This rule has been reviewed under Executive Order 12988, Civil
Justice Reform. Under the marketing order provisions now in effect,
preliminary free and restricted percentages for tart cherries acquired
by handlers during the 1997 crop year were established by the Board
during its June 26-27, 1997, meeting. Final free and restricted
percentages were recommended by the Board to the Secretary during its
September 11-12, 1997, meeting and a proposed rule setting the final
free and restricted percentages for the 1997-98 crop year at 55 percent
and 45 percent, respectively. Final action concerning the final free
and restricted percentages is being published separately in the Federal
Register. This finalization of an interim final rule provides for the
issuance of diversion certificates to growers for cherries diverted
during the 1997 crop year. This rule will not preempt any State or
local laws, regulations, or policies, unless they present an
irreconcilable conflict with this rule.
The Act provides that administrative proceedings must be exhausted
before parties may file suit in court. Under section 608c(15)(A) of the
Act, any handler subject to an order may file
[[Page 20020]]
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 request a modification of the order or
to be exempted therefrom. A handler is afforded the opportunity for a
hearing on the petition. After the hearing the Secretary will rule on
the petition. The Act provides that the district court of the United
States in any district in which the handler is an inhabitant, or has
his or her principal place of business, has jurisdiction to review the
Secretary's ruling on the petition, provided an action is filed not
later than 20 days after the date of the entry of the ruling.
This rule finalizes an interim final rule which provided for the
issuance of diversion certificates to growers in volume regulated
districts under the tart cherry marketing order for the 1997 crop year
(July 1997 through June 1998). The order became effective September 25,
1996, and the initial Board was appointed in December 1996. The Board
held meetings in January, February, March and June 1997, to consider
its start-up costs and establish rules and regulations to implement the
order authorities. At its meetings, the Board unanimously recommended
that the regulations be forwarded to the Department for appropriate
action.
In discussions, during its meetings, concerning volume regulation
for the 1997 crop year, the Board considered guidelines and procedures
for grower diversion. Growers in the States which would be subject to
volume regulation were sent information about the Board's discussions
and recommendations. A majority of the growers (approximately 700 out
of 1,220) indicated interest in the diversion program, and in the
districts which would be subject to volume regulation, a number of them
voluntarily chose to divert cherries based on information disseminated
by the Board concerning its deliberations and recommendations. The
Board, during its meetings, continued considering various provisions of
the order, such as those pertaining to optimum supply, and making
recommendations which included recommended guidelines for grower
diversion.
The order in section 930.50 provides the method of establishing an
optimum supply level of cherries for the crop year. The optimum supply
consists of a free percentage amount which a handler may sell and a
restricted percentage amount, when warranted, which will have to be
withheld from the market. Based on the optimum supply level, the Board
establishes preliminary free and restricted percentages. Preliminary
percentages were established by the Board on July 2, 1997, pursuant to
Section 930.50(b) of the order, using Department estimates of the
upcoming crop. Preliminary free and restricted percentages of 66 and 34
percent, respectively, were announced to the industry in accordance
with section 930.50(h) of the order. No later than September 15, after
harvest and processing of the crop have been completed, the Board is
required to compute, and recommend to the Secretary, final free and
restricted percentages based on actual crop amounts. After receiving
the Board's recommendation, the Secretary designates the final free and
restricted percentages through the informal rulemaking process if the
Secretary finds that designating such percentages would tend to
effectuate the declared policy of the Act. For this season, the
proposed free and restricted percentages are 55 percent and 45 percent,
respectively, as published in the January 21, 1998, Federal Register
(63 FR 3048). A final action concerning the final free and restricted
percentages is being published separately in the Federal Register. The
difference between any final free market tonnage percentage designated
by the Secretary and 100 percent would be the final restricted
percentage. A handler can satisfy restricted percentage obligations
established by regulation by holding restricted percentage cherries in
an inventory reserve that the handler maintains, by redeeming grower
diversion certificates, or by diverting cherries.
Section 930.58 of the tart cherry marketing order provides
authority for voluntary grower diversion. Growers can divert all or a
portion of their cherries which otherwise, upon delivery to a handler,
would become restricted percentage cherries. Growers may be issued
diversion certificates by the Board stating the weight of cherries
diverted. The grower may then present the certificate to a handler in
lieu of actual cherries. The handler can apply the weight of cherries
represented by the certificate against the handler's restricted
percentage amount.
The Board recommended rules and regulations specifying the
guidelines for the grower diversion program. First, the Board
recommended that any grower desiring to divert in the orchard would
first need to apply to the Board. The application would include the
name, address, phone number and a statement signed by the grower
agreeing to abide by all the rules and regulations for diversion. In
addition, the grower would be required to provide maps of such grower's
orchard.
The Board recommended two types of in-orchard diversion for the
1997-98 crop year. These are random row diversion, in which orchard
rows are randomly chosen by the Board, using a computer program, to be
left unharvested, and whole block diversion, in which a whole definable
orchard block is left unharvested. Trees below a certain age (in this
rule, six years or less) would not qualify for diversion, since these
trees are not yet in full production.
The Board recommended that all grower diversion certificates must
be redeemed with handlers by November 1. After November 1, grower
diversion certificates would not be valid. It was intended that
diversion certificates be used within the same crop year that they were
issued, as if a crop had been produced. The November 1 date would allow
handlers adequate time to meet their restricted percentage amounts
after final percentages had been established. However, due to the fact
this is a new program in its first year of operation, the November 1
deadline was extended to February 5, 1998 (See the handler diversion
regulation published January 6, 1998, 63 FR 399). A conforming
modification is made in this rule by removing the reference to the
November 1 deadline.
The Board also recommended guidelines concerning random row and
whole block diversion and compliance procedures for growers to follow
under the grower diversion program.
This crop year a number of growers voluntarily diverted cherries
based on preliminary free and restricted percentages which had been
announced by the Board and on recommendations concerning diversion
which the Board made to the Secretary. One hundred twenty of them
received diversion certificates. The interim rule and this finalization
provides for the issuance of grower diversion certificates by the Board
subject to certain specified terms and conditions. In order to receive
a certificate, a grower must show, to the satisfaction of the Board,
that cherries were in fact diverted. This may be accomplished in a
number of ways. Information about the grower's production must be
submitted to the Board. In addition, the grower must agree to allow the
Board to confirm reported diversion figures by allowing a Board
compliance officer to visit the grower's orchard.
After obtaining the necessary information concerning diversion by a
grower, the Board would issue a diversion certificate. The diversion
[[Page 20021]]
certificate would be issued for an amount equal to the estimated volume
of cherries diverted by the grower.
For random row diversion, such estimated volume is calculated by
applying the percentage of the grower's production diverted to the
actual average volume per acre of cherries produced and harvested. For
example, Grower A farms 1,000 acres and elects to divert 20 percent of
the harvestable acreage (200 acres). The grower harvests the remaining
800 acres and obtains 6,400,000 pounds of cherries, which represents a
yield per acre of 8,000 pounds. Such grower would receive a diversion
certificate for 1,600,000 pounds of cherries (8,000 lbs multiplied by
the 20 percent of the total acreage diverted; in this instance, 200
acres).
For whole block diversion, the weight of a harvested sample of 5
percent of each block, provided by the grower, is used to calculate the
total volume of diverted cherries to be credited on the diversion
certificate. For example, Grower B farms 1,000 acres and elects to
whole block divert a 200 acre block. If the 5 percent of the harvested
trees in the block diverted yield 80,000 pounds of cherries, the grower
receives a diversion certificate for 1,600,000 pounds (80,000 pounds
divided by 5 percent (.05) yields 1,600,000 pounds). The rest of the
block is unharvested.
After receiving a certificate from the Board, the grower may offer
the certificate to a handler to be redeemed. Based upon the
recommendations of the Board, guidelines and procedures for grower
diversion for 1998 and subsequent seasons will be established through
another rulemaking action.
The Regulatory Flexibility Act and Effects on Small Businesses
The Agricultural Marketing Service (AMS) has considered the
economic impact of this action on small entities and has prepared this
final regulatory flexibility analysis. The Regulatory Flexibility Act
(RFA) would allow AMS to certify that regulations do not have a
significant economic impact on a substantial number of small entities.
However, as a matter of general policy, AMS' Fruit and Vegetable
Programs (Programs) no longer opt for such certification, but rather
perform regulatory flexibility analyses for any rulemaking that would
generate the interest of a significant number of small entities.
Performing such analyses shifts the Programs' efforts from determining
whether regulatory flexibility analyses are required to the
consideration of regulatory options and economic impacts.
The purpose of the RFA is to fit regulatory actions to the scale of
business subject to such actions in order that the small businesses
will not be unduly or disproportionately burdened. Marketing orders
issued pursuant to the Act, and the rules issued thereunder, are unique
in that they are brought about through group action of essentially
small entities acting on their own behalf. Thus, both statutes have
small entity orientation and compatibility.
There are approximately 1,220 producers of tart cherries in the
production area and approximately 40 handlers subject to regulation
under the marketing order. Small agricultural producers have been
defined by the Small Business Administration (13 CFR 121.601) as those
having annual receipts less than $500,000, and small agricultural
service firms are defined as those whose annual receipts are less than
$5,000,000. The majority of tart cherry producers and handlers may be
classified as small entities.
One comment was received concerning the regulatory flexibility
analysis. The commenter argued that AMS has provided no economic
analysis concerning the interim rule, did not consider any
alternatives, and did not provide a pre-rule opportunity to comment. We
disagree. An initial regulatory flexibility analysis was performed in
the interim rule and alternatives considered were discussed. It was
also explained why the rule was issued as an interim final.
Section 930.58(b) authorizes the Board to issue diversion
certificates to growers in volume regulated districts under the tart
cherry marketing order if cherries are diverted according to terms and
conditions specified in the order, or according to such other terms and
conditions that the Board, with the approval of the Secretary, may
establish. The tart cherry marketing order was promulgated on September
25, 1996, and the Board met several times in 1997 to recommend rules
and regulations to implement the order authorities. The Board is
required under the order to review its marketing policy on or before
July 1 and then make recommendations to the Secretary for volume
regulation, if such regulation is deemed necessary. The Board met June
26-27, 1997, to review sales data, inventory data, crop forecasts and
market conditions in order to establish an optimum supply volume which
is then used in calculating a preliminary free market tonnage. The
Board established and announced the optimum supply level and
preliminary free and restricted percentages for the 1997-98 crop year
as required by the order. On September 11-12, 1997, the Board reviewed
its marketing policy and previous recommendations and recommended final
free market tonnage and restricted tonnage percentages of 55 and 45
percent, respectively. A proposed rule setting these percentages for
the 1997-98 crop year was published in the Federal Register on January
21, 1998, (63 FR 3048). Final action concerning the final free and
restricted percentage is being published separately in the Federal
Register.
The impact of this rule is beneficial to growers. Grower diversion
is one of the methods under the order that a handler can utilize to
meet any such handler's restricted percentage. Growers may voluntarily
choose to divert because they have cherries that do not meet expected
quality standards, or because they are unable to find a processor
willing to process some or all of their cherries. Before choosing to
divert, the grower will most likely evaluate the harvesting and other
cultural costs that will be saved by diverting and locate a handler
that will be willing to redeem such grower's diversion certificate.
The Board discussed alternatives to its recommendation to issue
grower diversion certificates for the 1997 crop year. The Board
considered not issuing grower diversion certificates for the 1997 crop
year but believed this action would serve the economic interests of
both growers and handlers.
The Board also discussed limiting the blocks to be diverted to no
less than 5 acre blocks, but felt that this would have an adverse
impact on small growers that produce on less than 5 acre blocks.
Therefore, the Board recommended not restricting the size of orchard
blocks which could be diverted.
This rule does not contain any reporting or recordkeeping
requirements in addition to those already considered or approved during
the order promulgation proceeding. The only written information
requested from a grower choosing to divert cherries for 1997 is an
orchard map and the grower's final production volume. Since growers
maintain this information as part of their normal farming operations,
it takes approximately 10 minutes to prepare a map and less than a
minute to total the final production volume.
In compliance with Office of Management and Budget (OMB)
regulations (5 CFR part 1320) which implement the Paperwork Reduction
Act of 1995 (Pub. L. 104-13), the information collection and
recordkeeping requirements have been previously approved by OMB and
assigned OMB Number 0581-0177.
As with all Federal marketing order programs, reports and forms are
[[Page 20022]]
periodically reviewed to reduce information requirements and
duplication by industry and public sectors. In addition, the Department
has not identified any relevant Federal rules that duplicate, overlap
or conflict with this rule.
The Board's meetings were widely publicized throughout the tart
cherry industry and all interested persons were invited to attend the
meetings and participate in Board deliberations. All Board meetings
were open to the public and all entities, both large and small, were
able to express their views on these issues. The Board itself is
composed of 18 members, of which 17 members are growers and handlers
and one represents the public. Also, the Board has a number of
appointed committees to review certain issues and make recommendations
to the Board.
An interim final rule concerning this action was issued by the
Department on August 18, 1997, and published in the Federal Register
(62 FR 44881) on August 25, 1997. Copies of the rule were mailed by the
Board's staff to all Board members, and tart cherry handlers. Finally,
the rule was made available through the Internet by the Office of the
Federal Register.
A 30-day comment period was provided to allow interested persons to
respond to the interim final rule. One comment from a person
representing an industry organization was received during the comment
period in response to the rule.
In addition to that portion of the comment concerning the
regulatory flexibility analysis, the commenter raised a variety of
issues concerning and complaining about this rulemaking and the tart
cherry program. We disagree with this comment. This rulemaking action
is consistent with the Agricultural Marketing Agreement Act of 1937 and
the tart cherry marketing order and other applicable law.
First, the commenter stated that the interim final rule violates
the Administrative Procedure Act. The commenter stated that the Board
recommended the proposal several months prior to the issuance of the
rule, and the issuance is well after harvest. The commenter further
stated that the Agricultural Marketing Service (AMS) based its decision
making on this rule on additional information that AMS has kept secret,
and that AMS has not demonstrated ``good cause'' for its failure to
provide a 30 day delayed effective date.
The Board has worked diligently along with USDA in discussing and
formulating rules and regulations to implement authorities under this
new marketing order. It met January, February, March, June, and
September of 1997, and recommended rulemaking actions at various
meetings. However, since this is a new program, these recommendations
needed to be discussed at more than one meeting, and in some instances,
modified. Growers were aware of the procedures being recommended for
participation in a grower diversion program. As a result, many of them
were voluntarily diverting cherries with the anticipation that rules
would be forthcoming and that they would be able to obtain diversion
certificates. An interim final rule with an opportunity for comment
(30-day comment period) was issued. The comments have been reviewed and
are addressed in this rulemaking. With regard to the comment regarding
``secret'' information, there is no basis for such statement. AMS has,
and will continue to conduct the tart cherry program as it does for all
other marketing order programs with required and appropriate public
promulgation. AMS considers all relevant information which may have a
bearing on the tart cherry marketing order program conducted under the
authority of the Agricultural Marketing Agreement Act of 1937.
Second, the commenter objected to the November 1, 1997, deadline
for providing diversion certificates to the Board in order to meet
reserve obligations. The commenter also stated that USDA has not acted
on any of the percentage recommendations made at the June and September
meetings. Final free and restricted percentages were proposed by the
Secretary on January 21, 1998 (63 FR 3048). Final action concerning the
final free and restricted percentage is being published separately in
the Federal Register. Also, the November 1 deadline for handlers to
redeem grower diversion certificates was extended to February 5, 1998,
by the handler diversion regulation published on January 6, 1998 (63 FR
399).
Third, the commenter stated that growers were sent information, the
content of which was not specified, about the 1997 diversion program.
The commenter further stated that any such advance information
highlights AMS's failure to follow the APA's mandatory procedures for
reasoned decision making. Information pertaining to the grower
diversion program being recommended by the Board was distributed by the
Board. This was discussed in the interim final rule that was published
concerning grower diversion. Further, the grower diversion program is
voluntary. A number of growers chose to divert cherries in anticipation
of receiving diversion certificates. Regulations concerning the program
were adopted and issued as an interim final rule and are being made
final in this action.
Fourth, the commenter stated that the rule disallowing cherries
from trees six years or younger from the diversion program is entirely
arbitrary; that the concept behind diversion is keeping pounds of
marketable cherries off the market, and has nothing to do with trees.
Allowing the use of trees which are not yet bearing cherries or which
are just beginning to bear cherries in calculating diversion amounts
would result in figures which are not representative of a grower's true
production. Information used to arrive at the age of trees eligible for
diversion came from record testimony and from the National Agricultural
Statistics Service (NASS), which only counts trees in its statistical
reports that are six years and older.
Fifth, the commenter stated that a key component of the Final Order
implementing the marketing order was that the order not be used as a
form of ``crop insurance'' for cherries which are not marketable, and
that the interim rule contains no assurance that diverted cherries are
marketable. The diversion program should not be and is not a crop
insurance program for unmarketable cherries. The diversion program for
the 1997-98 crop year provides that growers can divert all or a portion
of their cherries which otherwise, upon delivery to a handler, would
become restricted percentage cherries. To receive grower diversion
certificates, growers must also agree to allow the Board to confirm
that diversion of such cherries has actually taken place. Diverted
production is measured based on the amount equal to the estimated
volume of cherries diverted by the grower. The grower must agree to
allow a Board compliance officer to visit the grower's orchard to
ensure that diversion requirements are satisfied. The issue of
unmarketable cherries will be further considered when diversion rules
for the 1998-99 and the following crop years are drafted.
Sixth, the commenter stated that there is no sufficient guarantee
of compliance and that the Board has not adopted a compliance plan as
part of its annual marketing policy. The commenter also stated that the
5 percent sample size provided by the grower could be weighted with
``lead'' cherries therefore abusing the system. Grower diversion for
the 1997-98 crop year was sampled and measured under the supervision of
Board compliance staff. Therefore, before issuing certificates, the
Board
[[Page 20023]]
should know whether diversion requirements are met. The Board has
recommended an improved sampling method to be in place for the 1998-99
crop year and subsequent seasons. The Department is also continuing to
work with the Board to further develop and refine the compliance plan
for the tart cherry marketing order for future seasons.
Finally, the commenter questioned the composition of the Board and
whether some members should be disqualified. The Board was properly
nominated in accordance with USDA and order procedures, and selected on
December 20, 1996. Concerns that have been raised about the composition
of the Board and questions about the eligibility of certain members to
serve on the Board are being reviewed by the Department and will be
addressed separately.
Accordingly, no changes are made to the rule as drafted in the
interim final rule, based on the comment received. However, as
discussed, this rule does delete the certificate redemption date in
Sec. 930.100(a).
After consideration of all relevant material presented, including
the Board's recommendation, and other information, it is found that
this final rule as hereinafter set forth, will tend to effectuate the
declared policy of the Act.
List of Subjects in 7 CFR Part 930
Cherries, Marketing agreements, Reporting and recordkeeping
requirements.
Accordingly, the interim final rule amending 7 CFR 930 which was
published at 62 FR 44881 on August 25, 1997, is adopted as a final rule
with the following changes:
PART 930--TART CHERRIES GROWN IN THE STATES OF MICHIGAN, NEW YORK,
PENNSYLVANIA, OREGON, UTAH, WASHINGTON, AND WISCONSIN
1. The authority citation for 7 CFR part 930 continues to read as
follows:
Authority: 7 U.S.C. 601-674.
2. In Sec. 930.100, paragraph (a) is revised to read as follows:
Sec. 930.100 Grower diversion certificates.
(a) In accordance with paragraph (b) of this section, the Board
may, for the 1997 crop year, issue diversion certificates to growers,
in districts subject to volume regulation (Northwest Michigan, Central
Michigan, New York, and Utah) who have voluntarily elected to divert in
the orchard all or a portion of their 1997 tart cherry production which
otherwise, upon delivery to handlers, would become restricted
percentage cherries. Growers may offer the diversion certificate to
handlers in lieu of delivering cherries.
* * * * *
Dated: April 16, 1998.
Robert C. Keeney,
Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 98-10658 Filed 4-21-98; 8:45 am]
BILLING CODE 3410-02-P
