04-23417. Tart Cherries Grown in the States of Michigan, et al.; Additional Option for Handler Diversion

AGENCY:

Agricultural Marketing Service, USDA.

ACTION:

Final rule.

SUMMARY:

The Department of Agriculture (Department) is adopting, as a final rule, without change, an interim rule that added another method of handler diversion to the regulations under the Federal tart cherry marketing order (order). Handlers handling cherries harvested in a regulated district may fulfill any restricted percentage requirement when volume regulation is in effect by diverting cherries or cherry products rather than placing them in an inventory reserve. Under this additional method, handlers will be allowed to obtain diversion credit for diverting tart cherries, after processing, that may not be acceptable for the finished products manufactured by the handler. This action was unanimously recommended by the Cherry Industry Administrative Board (Board), the body which locally administers the marketing order. The marketing order regulates the handling of tart cherries grown in the States of Michigan, New York, Pennsylvania, Oregon, Utah, Washington, and Wisconsin.

DATES:

Effective November 19, 2004.

FOR FURTHER INFORMATION CONTACT:

Patricia A. Petrella or Kenneth G. Johnson, Marketing Order Administration Branch, Fruit and Vegetable Programs, AMS, USDA, Suite 6C02, Unit 155, 4700 River Road, Riverdale, MD 20737, telephone: [phone], or 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, or obtain a guide on complying with fruit, vegetable, and specialty crop marketing agreements and orders 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. 930 (7 CFR part 930), regulating the handling of tart cherries produced in the States of Michigan, New York, Pennsylvania, Oregon, Utah, Washington, and Wisconsin, 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 (USDA) is issuing this rule in conformance with Executive Order 12866.

This rule has been reviewed under Executive Order 12988, Civil Justice Reform. 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 the 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 exempt therefrom. Such 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 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.

Handler diversion is authorized under § 930.59 of the tart cherry marketing order and, when volume regulation is in effect, handlers may fulfill restricted percentage requirements by diverting cherries or cherry products into authorized outlets. Volume regulation is intended to help the tart cherry industry stabilize supplies and prices in years of excess production. The volume regulation provisions of the order provide for a combination of processor owned inventory reserves and grower or handler diversion of excess tart cherries. Reserve cherries may be released for sale into commercial outlets when the free percentage portion of the regulated crop is not expected to fill demand.

Section 930.59(b) of the order provides for the designation of allowable forms of handler diversion. These include: Uses exempt under § 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 § 930.58; or other uses, including diversion by destruction of the cherries at the handler's facilities as provided for in § 930.59(c).

Section 930.159 of the rules and regulations under the order allows handlers to divert cherries by destruction of the cherries at the handler's facility. Currently, at-plant diversion of cherries takes place at the handler's facility prior to placing cherries into the processing line. However, experience has shown that this limitation places a burden on handlers regulated under this order.

To remove this burden, the Board unanimously recommended that handlers be allowed to divert and receive diversion credit for tart cherries after processing that may not be acceptable for the finished products they manufacture. With the capability to divert such cherries after processing, but before the finished product is completed, handlers would have an incentive to remove the lower quality processed cherries from the lot, meet their restricted obligation requirements, and improve the quality of their products. Improvement in the quality of tart cherries and tart cherry products would benefit producers, handlers, and consumers.

This action continues to provide handlers more flexibility in meeting their restricted obligation requirements. The ability to perform at-plant diversion after placing the cherries into the processing line, but before a finished product is completed, will benefit all handlers. This action is expected to especially benefit handlers who only process one product. In many instances, these handlers are small.

This rule continues to allow a handler who processes only five plus one cherries (25 pounds of tart cherries with 5 pounds of sugar added) to fulfill his/her restricted percentage obligation (in a volume regulated year) by diverting at-plant, lower quality wholesome fruit from his/her five plus one processing line. Previously, the diversion took place prior to processing and handlers that processed one product were forced to divert their good quality tart cherries with the lower quality wholesome cherries, or divert cherries by some other approved method. Handlers processing more than one product also are able to take advantage of the additional method of at-plant diversion.

Diversion may also be accomplished by handlers donating cherries to charitable organizations, utilizing cherries in exempt outlets, or redeeming grower diversion certificates obtained from growers who have diverted cherries by non-harvest, and who have been issued diversion certificates by the Board in accordance with rules and regulations governing the issuance of grower diversion certificates (§ 930.158).

The Board reported that during the 2001-2002 crop year, the inventory reserve contained 44.3 percent frozen products, 11.3 percent waterpack, 15.2 percent piefill, 28 percent juice and juice concentrate, and 1.2 percent other products. These percentages show that frozen products, juice and juice concentrate make up most of the reserve quantities.

Pursuant to § 930.159(b), handlers electing to divert cherries or cherry products must first notify the Board and submit a plan for approval. Such notification and plan must include an agreement that diversion will take place under the supervision of the USDA Processed Products Inspection Service or Board employees, and that the costs of such supervision are to be paid by the handler. USDA inspectors supervise the diversion of cherries or finished products at the current hourly rate under USDA's inspection fee schedule (7 CFR 54.42). Board employees supervise diversion at the same payment rate.

Once diversion is satisfactorily accomplished, handlers receive diversion certificates stating the weight of cherries diverted. Such diversion certificates can be used to satisfy handlers' restricted percentage obligations. Cherries and finished cherry products that have been diverted are not subject to assessments.

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 or regulatory impacts.

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.

There are approximately 40 handlers of tart cherries who are subject to regulation under the tart cherry marketing order and approximately 900 producers of tart cherries in the regulated area. Small agricultural service firms, which includes handlers, have been defined by the Small Business Administration (13 CFR 121.201) as those having annual receipts of less than $5,000,000, and small agricultural producers are defined as those having annual receipts of less than $750,000. A majority of the producers and handlers are considered small entities under SBA's standards.

Board and subcommittee meetings are widely publicized in advance and are held in a location central to the production area. The meetings are open to all industry members (including small business entities) and other interested persons who are encouraged to participate in the deliberations and voice their opinions on topics under discussion. Thus, Board recommendations can be considered to represent the interests of small business entities in the industry.

The Board reported that during the 2001-2002 crop year, the inventory reserve contained 44.3 percent frozen products, 11.3 percent waterpack, 15.2 percent piefill, 28 percent juice and juice concentrate, and 1.2 percent other products. These percentages show that frozen products, juice and juice concentrate make up most of the reserve quantities.

The Board unanimously recommended this additional method for diversion credit to allow handlers to divert product after processing that may not be acceptable for the finished products manufactured by the handler. As discussed earlier, this action continues to provide handlers more flexibility in meeting their restricted obligation requirements and is expected to be particularly helpful to handlers who produce only one product. In many instances, the one-product handlers in the tart cherry industry are small.

Handlers that process juice concentrate and other products can more easily meet their restricted obligation requirements by juicing and processing lower quality wholesome product and placing it in the inventory reserve. Handlers that only have the ability to process products requiring higher quality fruit like five plus one cherries have to put this fruit into the inventory reserves, or take advantage of other diversion options available under the order.

To sell more of their higher quality products, some handlers purchase cherries or diversion credit certificates from other handlers to meet their restricted obligation requirements. The added flexibility provided by this action will help all handlers, and is expected to especially benefit the one-product handlers who will be able to sell more of their higher quality cherries in finished product form.

Producers also are expected to benefit from the implementation of this action. Currently, producers can use in-orchard tank diversion, in which cherries harvested into tanks are measured, calculated then diverted in the orchard. This method of diversion, however, removes both good and lesser quality fruit. Under the Board's recommendation, producers could deliver all of their fruit to handlers and the good quality fruit would be sorted and the poor quality fruit diverted or dumped. Producers would be paid for the good quality fruit. According to the Board, growers are paid on a quality point basis relative to the quality of the fruit delivered. This action would continue to provide producers with more consistent income proportionate to the quality of the fruit delivered to handlers and with discretion to reduce orchard diversion. As such, producers can be more selective in complying with the grower diversion process.

The principal demand for tart cherries is in the form of processed products. Tart cherries are dried, frozen, canned, juiced, and pureed. Data from the National Agricultural Statistics Service (NASS) states that during the period 1995/96 through 2002/03, approximately 92 percent of the U.S. tart cherry crop, or 285.7 million pounds, was processed annually. Of the 285.7 million pounds of tart cherries processed, 58 percent was frozen, 30 percent was canned, and 12 percent was utilized for juice.

With regard to alternatives, the Board felt that the recommendation was the only solution to providing handlers additional flexibility in meeting their restricted obligation requirements.

USDA has not identified any relevant Federal rules that duplicate, overlap, or conflict with this regulation.

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.

There are some reporting, recordkeeping, and other compliance requirements under the marketing order. The reporting and recordkeeping burdens are necessary for compliance purposes and for developing statistical data for maintenance of the program. The forms require information which is readily available from handler records and which can be provided without data processing equipment or trained statistical staff. As with other, similar marketing order programs, reports and forms are periodically studied to reduce or eliminate duplicate information collection burdens by industry and public sector agencies. This rule does not change those requirements.

An interim final rule concerning this action was published in the Federal Register on July 9, 2004. Copies of the rule were mailed by the Board's staff to all Board members and tart cherry handlers. In addition, the Office of the Federal Register and USDA made the rule available through the Internet. That rule provided for a 60-day comment period which ended September 7, 2004. No comments were received.

After consideration of all relevant material presented, including the Board's recommendation, and other information, it is found that finalizing the interim final rule, without change, as published in the Federal Register (69 FR 41383, July 9, 2004) will tend to effectuate the declared policy of the Act.

List of Subjects in 7 CFR Part 930

• Marketing agreements
• Reporting and recordkeeping requirements
• Tart cherries

PART 930—TART CHERRIES GROWN IN THE STATES OF MICHIGAN, NEW YORK, PENNSYLVANIA, OREGON, UTAH, WASHINGTON, AND WISCONSIN

Accordingly, the interim final rule amending 7 CFR part 930 which was published at 69 FR 41383 on July 9, 2004, is adopted as a final rule without change.

Dated: October 14, 2004.

A.J. Yates,

Administrator, Agricultural Marketing Service.