03-18778. Dried Prunes Produced in California; Temporary Suspension of the Mandatory Outgoing Prune Inspection and Quality Requirements, and Modification of the Undersized Prune Disposition Requirements Under the Marketing Order; and Suspension of ...

AGENCY:

Agricultural Marketing Service, USDA.

ACTION:

Interim final rule with request for comments.

SUMMARY:

This rule suspends the outgoing prune inspection and quality requirements under the California Dried Prune Marketing Order (Order) and its administrative rules and regulations, and the prune import regulation, for a three-year period, and modifies the Order's undersized prune disposition requirements. The Order regulates the handling of dried prunes produced in California and is administered locally by the Prune Marketing Committee (Committee). Suspension of the outgoing inspection and quality requirements, and import regulation provisions will ensure relief from these regulations. During the three-year suspension period the industry will consider developing and implementing outgoing inspection and finished product grade standards more consistent with current industry needs.

DATES:

Effective August 1, 2003 through July 31, 2006, except for the amendments to § 993.150 (g)(2) and (g)(3), which are effective August 1, 2003. Comments received by September 22, 2003 will be considered prior to issuance of a final rule.

ADDRESSES:

Interested persons are invited to submit written comments concerning this rule. Comments must be sent to the Docket Clerk, Marketing Order Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence Avenue SW., Stop 0237, Washington, DC 20250-0237; Fax: [phone]; or E-mail: [e-mail]. All comments should reference the docket number and the date and page number of this issue of the Federal Register and will be made available for public inspection in the Office of the Docket Clerk during regular business hours, or can be viewed at: http://www.ams.usda.gov/​fv/​moab.html.

FOR FURTHER INFORMATION CONTACT:

Richard P. Van Diest, Marketing Specialist, California Marketing Field Office, Marketing Order Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 2202 Monterey Street, suite 102B, Fresno, California 93721; telephone: [phone], Fax: [phone]; or George Kelhart, Technical Advisor, Marketing Order Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence Avenue SW., STOP 0237, Washington, DC 20250-0237; telephone: [phone], or Fax: [phone].

Small businesses may request information on complying with this regulation by contacting Jay Guerber, Marketing Order Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence Avenue SW., STOP 0237, Washington, DC 20250-0237; telephone [phone], Fax: [phone], or E-mail: [e-mail].

SUPPLEMENTARY INFORMATION:

This rule is issued under Marketing Agreement and Order No. 993 (7 CFR part 993), both as amended, regulating the handling of dried prunes produced in California, hereinafter referred to as the “order.” The order is effective under the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the “Act.”

The Department of Agriculture (Department) is issuing this rule in conformance with Executive Order 12866.

This rule has been reviewed under Executive Order 12988, Civil Justice Reform. This rule is not intended to have retroactive effect. This rule will not preempt any State or local laws, regulations, or policies, unless they present an irreconcilable conflict with this rule. The Act provides that administrative proceedings must be exhausted before parties may file suit in court. Under section 608c(15)(A) of the Act, any handler subject to an order may file with USDA a petition stating that the order, any provision of the order, or any obligation imposed in connection with the order is not in accordance with law and request a modification of the order or to be exempted therefrom. A handler is afforded the opportunity for a hearing on the petition. After the hearing, USDA would rule on the petition. The Act provides that the district court of the United States in any district in which the handler is an inhabitant, or has his or her principal place of business, has jurisdiction to review USDA's ruling on the petition, provided an action is filed not later than 20 days after the date of the entry of the ruling.

This rule suspends the outgoing prune inspection and quality requirements in the order and its administrative rules and regulations, and the prune import regulation for a three-year period, and modifies the undersized prune disposition requirements. These changes will be effective with the start of the new crop year on August 1, 2003. The order regulates the handling of dried prunes produced in California and is administered locally by the Prune Marketing Committee (Committee). The Committee unanimously recommended suspension of the outgoing inspection, and outgoing prune quality requirements at meetings held on April 3, and May 1, 2003, because it is the quickest way to ensure relief from these regulations. During the three-year suspension period, the industry will consider developing and implementing outgoing inspection and finished product grade standards that are more in line with current industry needs. As discussed below, suspension of the prune import regulation is required under section 8e of the Act.

Marketing Order Authority To Modify and Suspend

Section 993.50(g) states in part: “rules and regulations to insure proper disposition of the [undersized] prunes shall be established by the Committee with the approval of the Secretary.”

Section 993.90(a) states in part: “The Secretary shall terminate or suspend the operation of any or all of the provisions of this subpart, whenever he finds that such provisions do not tend to effectuate the declared policy of the act.”

Outgoing Grade and Size Regulations

The order currently mandates outgoing inspections and outgoing prune quality, size, and labeling requirements of California produced prunes by California prune handlers to verify such prunes meet quality requirements. These requirements are based on the U.S. Standards for Grades of Dried Prunes and marketing order grade standards. The objective of the inspection, grade, size, and labeling requirements is to ensure that only prunes of acceptable quality and size enter the domestic and foreign markets for human consumption, thereby ensuring consumer satisfaction, increasing sales, and improving returns to producers. While the industry continues to believe that quality is an important factor in maintaining sales, the Committee believes that the costs associated with existing minimum grade, size, and labeling standards may exceed the benefits accrued from such requirements at this time.

Prune Import Regulations

Section 8e of the Agriculture Marketing Agreement Act of 1937 (Act) provides that when certain domestically produced commodities, including prunes, are regulated under a Federal marketing order, imports of that commodity must meet the same or comparable grade, size, quality, and maturity requirements. Section 999.200 contains the prune import regulations that are comparable to the domestically produced prune outgoing quality and size requirements. Since this rule suspends the outgoing quality and size requirements for domestically produced prunes for three years, these requirements must be suspended in the import regulations during this period as well.

U.S. imports of dried prunes are insignificant compared to U.S. production. In 2002, while the U.S. produced 158,000 tons of dried prunes, only 616 tons were imported. In that year, the domestically produced tonnage was over 250 times as large as the imported tonnage. In 2001, 204 tons were imported, but the U.S. produced 150,000 tons. Production was 735 times as large as imports.

In recent years, about 90 percent of U.S. imports of dried prunes have come from Argentina. Other countries that export to the U.S. include Chile, France, Mexico, Iran, and Turkey.

Undersized Prune Disposition Regulations

The prune administrative rules and regulations currently require handlers to have a third party inspection of each lot of undersized prunes prior to shipment into nonhuman outlets or other disposition. Under § 993.51 of the Order, inspections are performed by the Dried Fruit Association of California. These requirements also require handlers to submit to the Committee comprehensive documentation verifying that they have satisfied their undersized prune obligation.

The prune administrative rules and regulations also currently limit the quantities of larger size that can be used to meet a handler's undersized disposition obligation. While the Committee plans to continue to restrict the shipment of undersized prunes into human consumption outlets, the Committee believes that the costs associated with the inspection and documentation of the disposal of undersized prunes may exceed the benefits. To reduce the cost and time for handlers to file reports and verify the disposition of undersized prunes through inspection, the Committee unanimously recommended removing the inspection requirements, and simplifying the documentation required from handlers to satisfy their undersized obligation as well as removing the limits on the weights of larger prunes that can be used to meet undersized obligations.

Background and Action Taken

California prune handlers are currently selling prunes in many forms to customers throughout the world. The majority of these sales involve sizing or processing the prunes to more stringent specifications than required under the order. Retail and wholesale buyers often visit handlers' plants in California to verify specification and quality procedures, which tend to be more stringent than the minimum outgoing quality requirements mandated in the marketing order. Handlers continue to improve the quality and outgoing inspection procedures to target the specific customer and market demands. Almost all prunes sold for consumption in the United States as prunes are pitted and packaged in consumer bags and canisters targeting much higher standards than those mandated by the marketing order.

Current procedures require detailed administrative notating and reporting of defect information, large numbers of line inspectors at handler plants, and tracking and segregating lots and bins of fruit to comply with the order. As a result, handlers incur significant amounts of time and money on the inspection process. Also, almost all fruit is inspected by international buyers upon receipt, and is accepted or rejected based on the fruits' condition at the time of that review, regardless of any prior inspection process or certification. Further, prunes produced in other countries must meet customer specifications and inspection criteria.

Because of increased foreign competition that sells quality processed fruit, shifting consumer demand from natural condition to processed prunes, and increasingly competitive specifications that have left the minimum marketing order standards no longer reflect current industry needs. The Committee believes that California prune handlers must reduce all unnecessary costs in order to remain competitive with imported fruit and to profitably sell fruit in international markets.

The mandatory outgoing inspections focus on cosmetic defects or defects that tend to be removed through steaming, pitting, or juicing the fruit. While the industry once sold primarily unprocessed prunes, consumer demand has changed and some processing is invariably required, leaving the outgoing inspection criteria inapplicable and out-dated.

With regard to import requirements, section 8e of the Act requires import regulations to be comparable to the domestic regulations, not more restrictive. Since this rule suspends outgoing grade and size regulations for domestically produced prunes, and substantially relaxes the disposition and verification requirements on undersized prunes under the order, the import regulation must be suspended as well.

During the three-year suspension period, the industry will have the opportunity to consider developing and implementing more appropriate finished product grade standards through amendments to the order and administrative rules and regulations.

At its May 1, 2003, meeting, the Committee unanimously recommended suspension of all outgoing inspection, outgoing quality, size, and labeling requirements in the marketing order and the administrative rules and regulations for three years, beginning with the start of the new crop year on August 1, 2003. The suspension of these provisions will reduce some administrative costs.

This interim final rule suspends in their entirety §§ 993.50(a) through (f) and 993.97 Exhibit A—Part II of the order, and §§ 993.150(a) and (b), 993.150(d) through (g)(1), 993.515, 993.516, 993.517, 993.518 of the administrative rules and regulations, as well as § 999.200 of the import regulation. Portions of §§ 993.50(g) and 993.51 of the order, and portions of §§ 993.601 of the administrative rules and regulations are also suspended. These sections of the order and administrative rules and regulations pertain to the various requirements of the outgoing inspection, outgoing quality, size, and labeling requirements, and import regulation provisions.

Prune handlers oppose the current undersized prune regulations because they are costly to meet. Undersized prunes have marginal value as cattle feed or use in tobacco products (about $40-$45 per ton), and the costs of completing the required Committee paperwork and having them inspected by the DFA of California may exceed the revenue received. The industry is now also less concerned about the minimal amount of poor quality undersized prunes. Supplies of undersized prunes are now lower because of the recent tree pull programs and growers field sizing programs to drop small prune plums in the orchard, rather than deliver them to handlers.

The Committee chose to recommend removal of the limits on the quantities of larger-sized prunes that can be used to meet a handler's undersized weight disposition obligation, and the requirement for inspection of the undersized prunes and certification of handlers' receipt of usage, because these changes will eliminate certain inspection costs and reduce Committee and handler administration costs.

At the April 3, 2003, meeting, the Committee unanimously recommended modification of the undersized prune disposition provisions in the marketing order and the administrative rules and regulations, beginning with the start of the new crop year on August 1, 2003. The modification of these provisions will reduce some committee and handler administrative costs.

This interim final rule removes § 993.150(g)(2)(i), § 993.150(g)(2)(iii), and § 993.150(g)(2)(iv) in the administrative rules and regulations. Portions of § 993.150(g)(3) are amended.

Initial Regulatory Flexibility Analysis

Pursuant to requirements set forth in the Regulatory Flexibility Act (RFA), the Agricultural Marketing Service (AMS) has considered the economic impact of this action on small entities. Accordingly, AMS has prepared this initial regulatory flexibility analysis.

The purpose of the RFA is to fit regulatory actions to the scale of business subject to such actions in order that small businesses will not be unduly or disproportionately burdened. Marketing orders issued pursuant to the Act, and rules 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.

Industry Profile

There are approximately 1,205 producers of dried prunes in the production area and approximately 21 handlers subject to regulation under the marketing order. Small agricultural producers are defined by the Small Business Administration (13 CFR 121.201) as those having annual receipts of less than $750,000 and small agricultural service firms are defined as those having annual receipts of less than $5,000,000.

Eight of the 21 handlers (38 percent) shipped over $5,000,000 worth of dried prunes and could be considered large handlers by the Small Business Administration. Thirteen of the 21 handlers (62 percent) shipped less than $5,000,000 worth of dried prunes and could be considered small handlers. An estimated 32 producers, or less than 3 percent of the 1,205 total producers, would be considered large growers with annual incomes over $750,000. The majority of handlers and producers of California dried prunes may be classified as small entities.

In addition, there are an estimated 30 importers and one third-party entity that performs inspections under the order. USDA does not have precise information on these entities, but believes that the majority of the importers and the inspection agency are small entities.

Summary of Rule Change

This rule suspends the outgoing prune inspection and outgoing prune quality requirements under the order and the administrative rules and regulations, and the prune import provisions for a three-year period, and modifies the undersized prune disposition requirements. These changes will be effective with the start of the new crop year on August 1, 2003, for three years. In the absence of additional rulemaking, the suspended requirements will come back into effect at the end of the three-year period.

The industry chose suspension of the outgoing inspection, outgoing prune quality and size and labeling requirements, because suspension is the quickest way to ensure relief from these regulations. During the three-year suspension period, the industry will have the opportunity to consider developing and implementing more effective finished product grade standards through amendments to the order and administrative rules and regulations. It also will have an opportunity to decide whether these requirements should be terminated.

Authority to suspend these provisions of the marketing order and administrative rules and regulations is provided in § 993.90(a) of the order. Authority to modify the disposition requirements and procedures of undersized prunes in the administrative rules and regulations is provided in §§ 993.50(g) and 993.52 of the order. Authority for the import regulation is in section 8e of the Act.

Impact of Regulation

Regarding the impact of this rule on affected entities, this action could reduce the reporting and recordkeeping burden on California prune handlers and reduce the Committee's and handlers' administrative costs. Also, this action would reduce the number of inspections performed by the inspection agency under the order. The Committee estimates that 21 California prune handlers would be subject to these provisions and to filing the handler reports. Also under the prune import regulations, it is estimated that as many as 10 importers would file forms applicable to the import regulations. The handler annual burden to file these reports is 70.04 hours, and the respondent annual burden to file reports under the import regulations is 6.05 hours. Thus, there is a potential to reducing the annual handler and importer reporting burden by 76.09 hours during the suspension period. The benefits of this interim final rule are expected to be available to all prune handlers and importers, regardless of their size of operation.

The forms affected by this rule are as follows: (1) Form PMC 2.2, Application for Permission to Dispose of Substandard Prunes; (2) Form PMC 2.6, Statement of Proposed Disposition of Substandard Prunes; (3) Form PMC 4.72A, Foreign Export—Notice of Substandard Prunes for Manufacturing Purposes; (4) Form PMC 4.72B, Foreign Export—Notice of Usage of Substandard Prunes for Manufacturing Purposes; (5) Form PMC 2.21, Application for Permission to Dispose of Undersized Prunes for Non-Human Usage; (6) Form PMC 4.71A, User's Receipt of Dried Undersized Prunes for Non-Human Usage; (7) Form PMC 4.71B, User's Certificate of Non-Human Usage of Dried Undersized Prunes; (8) Form PMC 2.63, Statement of Proposed Disposition of Undersized Prunes; (9) Form FV-170, Prune Form No. 1; and (10) Form FV-171, Prune Form No. 2.

It should be noted that if the Committee determines that these suspensions are having an unfavorable impact on the industry, it could meet and recommend rescinding the suspensions.

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), the information collection requirements being suspended by this rule were previously approved by the Office of Management and Budget, under OMB No. 0581-0178. As with all Federal marketing order programs, reports and forms are periodically reviewed to reduce information requirements and duplication by industry and public sector agencies. Finally, the Department has not identified any relevant Federal rules that duplicate, overlap or conflict with this rule.

Alternatives Considered

The Committee and industry members discussed at the Committee's April 3, 2003, and May 1, 2003, meetings different alternatives to these actions. The Committee discussed the possibility of suspending the total Federal prune marketing order, but its benefit in other areas is recognized by the industry. Another alternative discussed was to suspend all mandatory inspections (both incoming and outgoing inspections), but many on the Committee and in the industry deemed this action too extreme. Another alternative discussed was to exempt handlers from the inspection requirements if they could demonstrate that the automation of their plant assured consistent delivery of higher quality prunes, but this would not be practicable. Another alternative considered was a two-year suspension of the undersized prune regulation. This was opposed because it would increase the domestic salable tonnage and would add to the industry's oversupply.

The Committee's April 3, 2003, and May 1, 2003, meetings where the outgoing inspection, outgoing prune quality, size, and labeling requirement issues were deliberated were public meetings and widely publicized throughout the prune industry. At the April 3, 2003, meeting, the Committee recommended removing the limits on quantity of larger-sized that could be used to meet handler undersized obligations and eliminating of the DFA of California undersized prune inspection and certification of receipt of usage. This was because it will reduce costs, including inspection fees and other Committee costs associated with mandatory inspection, and the reporting burden resulting from the inspection requirements.

All interested persons were invited to attend the meetings and participate in the industry's deliberations. Finally, interested persons are invited to submit information on the regulatory and informational impacts of these changes on small businesses.

A small business guide on complying with fruit, vegetable, and specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/​fv/​moab.html. Any questions about the compliance guide should be sent to Jay Guerber at the previously mentioned address in the FOR FURTHER INFORMATION CONTACT section.

The Office of the U.S. Trade Representative has reviewed this interim final rule and concurs with its issuance.

A 60-day comment period is provided to allow interested persons to respond to this rule. All written comments timely received will be considered before a final determination is made on this matter. After consideration of all relevant material presented, including the Committee's recommendation, and other information, it is found that the provisions being suspended would not tend to effectuate the declared policy of the Act during the three-year period, and that the provisions being amended would tend to effectuate the declared policy of the Act effective August 1, 2003.

Pursuant to 5 U.S.C. 553, it is also found and determined upon good cause that it is impracticable, unnecessary, and contrary to the public interest to give preliminary notice prior to putting this rule into effect and that good cause exists for not postponing the effective date of this rule until 30 days after publication in the Federal Register because: (1) The Committee recommended that the rule be implemented at the beginning of the new crop year, August 1, 2003; (2) this rule relaxes certain requirements in the order and the administrative rules and regulations; (3) the Committee unanimously recommended these changes at a public meeting and interested parties had an opportunity to provide input; and (4) a 60-day comment period is provided and all comments received will be considered prior to finalization of this rule.

List of Subjects

7 CFR Part 993

• Marketing agreements
• Plums
• Prunes
• Reporting and recordkeeping requirements

7 CFR Part 999

• Dates
• Filberts
• Food grades and standards
• Imports
• Nuts
• Prunes
• Raisins
• Reporting and recordkeeping requirements
• Walnuts

For the reasons set forth in the preamble, 7 CFR parts 993 and 999 are amended as follows:

1. The authority citation for 7 CFR parts 993 and 999 continues to read as follows:

Authority: 7 U.S.C. 601-674.

PART 993—DRIED PRUNES PRODUCED IN CALIFORNIA

2. In § 993.50:

a. Paragraphs (a), (b), (c), (d), (e), and (f) are suspended in their entirety effective August 1, 2003, through July 31, 2006.

b. Paragraph (g) is amended by suspending the words “, and reasonably comparable in size, to” in the third sentence; suspending the fourth and fifth sentences in their entirety; and suspending the words “Any such tolerance, together with any” and “and that such prunes are reasonably comparable to the undersized prunes so received,” in the sixth sentence, effective August 1, 2003, through July 31, 2006.

3. Section 993.51 is amended by suspending the words “, and before shipping or disposing” and “or the pack specifications, including labeling,” in the first sentence, effective August 1, 2003, through July 31, 2006.

4. In § 993.97, section II pertaining to minimum standards for processed prunes is suspended in its entirety effective August 1, 2003, through July 31, 2006.

5. In § 993.150:

a. Paragraphs (a), (b), (d), (e), and (f) are suspended in their entirety effective August 1, 2003, through July 31, 2006.

b. Paragraph (g) is amended by suspending paragraph (g)(1) in its entirety effective August 1, 2003, through July 31, 2006, and by removing paragraphs (g)(2)(i), (g)(2)(iii), and (g)(2)(iv) in their entirety effective August 1, 2003.

c. Paragraph (g)(2)(ii) is redesignated as paragraph (g)(2)(i) and revised as follows effective August 1, 2003:

§ 993.150

Disposition of prunes by handlers.

* * * * *

(g) * * *

(2) * * *

(i) Documentation of shipment or other disposition. For each quantity of undersized prunes so shipped or otherwise disposed of, the handler shall promptly forward to the Committee one copy of the applicable bill of lading, truck receipt, or related documentation of disposition which shall show: (a) The name of the consignee; (b) the destination by name and address of the person designated to receive the prunes; (c) the date of shipment or other disposition; (d) the net weight of the prunes; and (e) identification of the prunes as undersized prunes.

d. Paragraphs (g)(3)(i) and (g)(3)(ii) are revised effective August 1, 2003, to read as follows:

§ 993.150

Disposition of prunes by handlers.

* * * * *

(g) * * *

(3) * * *

(i) Undersized French prunes. Whenever an undersized regulation specifies an opening for French prunes, any quantity of any size of French prunes disposed of by a handler in compliance with § 993.50(g) shall satisfy a handler's undersized disposition.

(ii) Undersized non-French prunes. Whenever an undersized regulation specifies an opening for non-French prunes, any quantity of any size of non-French prunes disposed of by a handler in compliance with § 993.50(g) shall satisfy a handler's undersized disposition.

§ 993.150

Disposition of prunes by handlers.

6. Sections 993.515, 993.516, 993.517, and 993.518 are suspended in their entirety effective August 1, 2003, through July 31, 2006.

7. In § 993.601(a) the words, “and outgoing”, “and the minimum standards which handlers’ shipments or other final dispositions of prunes are required to meet pursuant to § 993.50(a)”, “IIC(3)”, and “IIC(6)” are suspended effective August 1, 2003, through July 31, 2006.

PART 999—SPECIALTY CROPS; IMPORT REGULATIONS

8. Section 999.200 is suspended in its entirety effective August 1, 2003, through July 31, 2006.

Dated: July 16, 2003.

A.J. Yates,

Administrator, Agricultural Marketing Service.