[Federal Register Volume 64, Number 37 (Thursday, February 25, 1999)]
[Rules and Regulations]
[Pages 9265-9268]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-4727]
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Rules and Regulations
Federal Register
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Federal Register / Vol. 64, No. 37 / Thursday, February 25, 1999 /
Rules and Regulations
[[Page 9265]]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 930
[Docket No. FV99-930-1 IFR]
Tart Cherries Grown in the States of Michigan, New York,
Pennsylvania, Oregon, Utah, Washington, and Wisconsin; Additional
Option for Handler Diversion and Receipt of Diversion Credits
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Interim final rule with request for comments.
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SUMMARY: This interim final rule adds a 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 by
placing them in an inventory reserve. Under this additional method,
handlers will be allowed to obtain diversion certificates when
marketable finished tart cherry products are accidentally destroyed at
a handler's facility. In addition, this rule removes a paragraph in the
regulations which limits diversion credit for exempted products to one
million pounds each crop year. The order regulates the handling of tart
cherries grown in the States of Michigan, New York, Pennsylvania,
Oregon, Utah, Washington, and Wisconsin and is administered locally by
the Cherry Industry Administrative Board (Board).
DATES: Effective February 26, 1999; comments received by April 26,
1999, 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, Fruit
and Vegetable Programs, AMS, USDA, room 2525-S, P.O. Box 96456,
Washington, DC 20090-6456, Fax # (202) 720-5698 or E-mail:
moabdocket__clerk@usda.gov. 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.
FOR FURTHER INFORMATION CONTACT: Patricia A. Petrella or Kenneth G.
Johnson, Marketing Order Administration Branch, F&V, AMS, USDA, room
2530-S, P.O. Box 96456, Washington, DC 20090-6456, telephone: (202)
720-2491. Small businesses may request information on compliance 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, P.O. Box 96456, room 2525-S, Washington, DC 20090-
6456; telephone (202) 720-2491; Fax: (202) 720-5698, or E-mail:
Jay__N__Guerber@usda.gov. You may also view the marketing agreements
and orders small business compliance guide at the following website:
http://www.ams.usda.gov/fv/moab.html.
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 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 or 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 adds a method of handler diversion to the
regulations for the 1998-99 crop year beginning July 1, 1998 through
June 30, 1999, and subsequent crop years. It also removes a provision
from the regulation which limits diversion credit for exempted products
to one million pounds for each 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 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 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 the Secretary's
ruling on the petition, provided an action is filed not later than 20
days after date of the entry of the ruling.
This rule provides for an additional method of handler diversion.
Handler diversion is authorized under section 930.59 of the order and,
when volume regulation is in effect, handlers may fulfill restricted
percentage requirements by diverting cherries or cherry products.
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 current crop is not expected to fill
demand. Under certain circumstances, such cherries may also be used for
charity, experimental purposes, nonhuman use, and other approved
purposes.
Section 930.59(b) of the order provides for the designation of
allowable forms of handler diversion. These include: uses exempt under
section 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 section 930.58;
or other uses, including diversion by destruction of the cherries
[[Page 9266]]
at the handler's facilities as provided for in section 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. At-plant diversion of cherries takes place at the
handler's facility prior to placing cherries into the processing line.
This is to ensure that the cherries diverted were not simply an
undesirable or unmarketable product of processing. The additional
method for handler diversion for finished tart cherry products
accidentally destroyed should not be confused with at-plant diversion
as previously mentioned.
The Board has unanimously recommended that handlers should receive
diversion credit when marketable, finished cherry products are
accidentally destroyed at a handler's facility. For the purposes of
this rule, products will be considered destroyed if they sustain damage
which renders them unacceptable in normal market channels. For example,
finished, marketable cherry products could be accidentally destroyed in
a fire, explosion, or freezer malfunction. In order to receive
diversion credit under this added option, the Board recommended that
the cherry products must: (1) Be owned by the handler at the time of
accidental destruction; (2) be a marketable product at the time of
processing; (3) be included in the handler's end of the year handler
plan; and (4) have been assigned a Raw Product Equivalent (RPE) by the
handler to determine the volume of cherries. In addition, the
accidental destruction, as well as the disposition of the cherries must
be verified by either a USDA inspector or Board agent or employee.
Verification would be accomplished by having a USDA inspector or Board
employee witness the disposition of the destroyed product. For the
purpose of proper control and oversight, the measures recommended by
the Board are considered to be appropriate.
At the Board meeting, there was a discussion that accidents may
occur at a handler's facility after the processing of cherries has
taken place. Freezers have collapsed and malfunctioned rendering the
finished product unmarketable. The Board noted that one of the goals of
the volume regulation program is to control the flow of marketable
fruit in the marketplace. Therefore, it was the Board's recommendation
that finished marketable products accidentally destroyed should be
allowed diversion credit.
The Board also specifically mentioned an incident that had occurred
in the industry where a handler's finished goods were accidentally
destroyed. In this incident, the handler's finished cherry products
were stacked in containers on pallets in a freezer. A pallet broke and
the stacked containers of cherry products toppled over and damaged the
interior walls of the freezer rendering it inoperable. The cherries
were unmarketable due to the contamination of the product as a result
of the damaged freezer. This created a financial hardship for the
handler. If diversion credit is allowed in cases of accidental
destruction of products, such hardship could be avoided. For example,
additional tonnage to meet any restricted percentage obligation amounts
would not need to be obtained.
Handlers wishing to obtain diversion certificates for finished tart
cherry products which are accidentally destroyed must apply for such
diversion certificates and sign an agreement that disposition of the
destroyed product will take place under the supervision of USDA's
Processed Products Branch inspectors or Board inspectors. This will
allow the Board to verify that finished product was unmarketable and
that it was disposed of.
Once diversion is satisfactorily accomplished, handlers will
receive diversion certificates stating the weight of cherries diverted.
Such diversion certificates can be used to satisfy handlers' restricted
percentage obligations.
In addition, this rule removes a paragraph in the regulations which
limits diversion credit for exempted products to one million pounds
each crop year. Currently, section 930.159 provides for diversion
credit of up to one million pounds of exempted products each crop year.
Exempted products can include products used in new product development
and new market development. Exempted products can also include those
that are used to expand the use of new or different products or the
sales of existing products, or those that are exported to countries
other than Canada, Mexico, and Japan, provided that, such cherry
products can not include juice or juice concentrate.
The supplementary information in the rulemaking which implemented
section 930.159 on January 6, 1998, (63 FR 399; interim final rule) and
April 22, 1998, (63 FR 20012; final rule), states that during its
deliberations, the Board discussed its view that allowing diversion
credit for exempt uses would provide adequate flexibility for
individual handlers to ship cherries. The Board, however, recommended
providing some restriction on the absolute volume of such allowable
diversions until more experience with the program had been obtained,
and that restriction was set at one million pounds. The one million
pound limit on exempted product did not apply to those products
receiving export diversions. The Board also indicated that it would be
continuing to review the issue of what limits to impose on exempted
products.
During the 1997 season, 2.7 million pounds of exempted products for
new market and product development received diversion credit. In recent
seasons, sales to export markets have risen dramatically. In 1997,
export sales of 61.1 million pounds represented 379 percent of 1994
sales (16.1 million pounds). There was also an increase in export sales
to those destinations exempt from volume regulation (countries other
than Canada, Japan, and Mexico), rising from 12.2 million pounds to
48.7 million pounds. In view of the dynamics taking place in the cherry
industry, and particularly the expanding markets and opportunities, the
Board does not believe that the one million pound exemption should be
continued. The removal of the one million pound limitation on exempted
products should continue to encourage the further development of new
markets and new tart cherry products and should have no detrimental
affect. Therefore, section 930.159(f) of the regulations is removed.
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
initial 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.
[[Page 9267]]
Marketing orders issued pursuant to the Act, and rules 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 order and approximately 1,220 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 121.601) 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 $500,000. The majority of handlers
and producers of tart cherries may be classified as small entities.
The principal demand for tart cherries is in the form of processed
products. Tart cherries are dried, frozen, canned, juiced and pureed.
During the period 1993/94 through 1997/98, approximately 89 percent of
the U.S. tart cherry crop, or 281.1 million pounds, was processed
annually. Of the 281.1 million pounds of tart cherries processed, 63
percent was frozen, 25 percent canned and 4 percent utilized for juice.
The remaining 8 percent was dried or assembled into juice packs.
The Board reported that for the 1997-98 crop year 48.7 million
pounds of cherries received export diversion and 7.1 million pounds
were diverted at handlers' facilities.
Section 930.59 of the tart cherry marketing order provides
authority for handler diversion. Handlers handling cherries harvested
in a regulated district may fulfill any restricted percentage
requirement in full or in part through diversion of cherries or cherry
products in a program approved by the Board, rather than placing
cherries in an inventory reserve. Handlers can divert by destruction of
the cherries at the handler's facility, making charitable donations and
selling cherry products in exempt outlets or by redeeming grower
diversion certificates obtained from growers who have diverted cherries
by non-harvest, and who have been issued diversion certificates by the
Board. This rule will provide for handler diversion certificates in
cases where marketable, finished tart cherry products are accidentally
destroyed and thus rendered unacceptable in the marketplace. Such
diversion certificates can be used to satisfy the handler's restricted
percentage obligation. This enables handlers to either place cherries
into an inventory reserve or select the diversion option most
advantageous to their particular business operation. Providing such
diversion allows handlers to minimize processing and storage costs
associated with meeting restricted percentage obligations. Such cost
savings may also be passed on to growers and consumers. Thus, this
amendment accomplishes the purposes of the order and the Act, one of
which is to increase grower returns and stabilize supplies with demand.
The impact of this rule will be beneficial to growers and handlers.
Allowing this additional diversion option, will prevent financial
hardships if marketable finished tart cherry products are destroyed by
accident. An alternative to this rule would be to not grant diversion
credit for such products. However, this is not in the best interest of
the industry. The marketing order's volume regulation feature was
designed to increase grower returns by stabilizing supplies with
demand. Providing for handler diversion is one of the mechanisms
employed to accomplish this goal. Handlers may divert cherries by
destroying them at their facility. Therefore, allowing diversion credit
for products which are accidentally destroyed, will not be inconsistent
with the overall regulatory scheme.
In addition, this rule removes a paragraph in the regulations which
limits diversion credit for exempted products to one million pounds
each crop year. Currently, section 930.159 provides for diversion
credit of up to one million pounds of exempted products each crop year,
with the exception of exported products for the 1997 season. The Board
had recommended providing some restriction on the absolute volume of
such allowable diversions until more experience with the program has
been obtained. The one million pound limitation for exempted products
did not apply to diversion credit for exports for the 1997 season. The
Board continued reviewing the issue of what limits, if any, to impose
on exempted products.
During the 1997 season, 2.7 million pounds of exempted products for
new market and product development received diversion credit. In recent
seasons, sales to export markets have risen dramatically. In 1997,
export sales of 61.1 million pounds represented 379 percent of 1994
sales (16.1 million pounds). There was also an increase in export sales
to those destinations exempt from volume regulation (countries other
than Canada, Japan, and Mexico), rising from 12.2 million pounds to
48.7 million pounds. In view of the dynamics taking place in the cherry
industry, and particularly the expanding markets and opportunities, the
Board does not believe that the one million pound exemption should be
continued. The removal of the one million pound limitation on exempted
products should continue to encourage the further development of new
markets and new tart cherry products and should have no detrimental
affect. Therefore, section 930.159(f) of the regulations is removed.
This action will provide more flexibility to handlers by allowing them
to expand markets and new product opportunities.
In compliance with Office of Management and Budget (OMB)
regulations (5 CFR Part 1320) which implement the Paperwork Reduction
Act of 1995 (44 U.S.C. Chapter 35), the information collection and
recordkeeping requirements imposed by this order have been previously
approved by OMB and assigned OMB Number 0581-0177. Included in the OMB
approval is the Handler Reserve Plan and Final Pack Report which
handlers must submit to utilize at-plant and exempt use diversion and
the requirements for other reports related to handler diversion and
handlers meeting their restricted percentage obligations. Handlers
applying for diversion credit for marketable finished tart cherry
products accidentally destroyed do not have to submit an additional
Handler Plan and Pack Report to the Board. Handlers can make changes in
their previously submitted Handler Plan and Final Pack Report to
account for product accidentally destroyed.
Accordingly, this rule will not impose any additional recordkeeping
requirements on either small or large tart cherry handlers. As with all
Federal marketing order programs, reports and forms are periodically
reviewed to reduce information requirements and duplication by industry
and public sectors. In addition, the Department has not identified any
relevant Federal rules which 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 them
and participate in Board deliberations. Like all Board meetings, the
September 1998 meeting was a public meeting 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.
The Board considered alternatives to its recommendations. These
included
[[Page 9268]]
not granting diversion credit and continuing to impose limitations on
the volume of exempted product receiving diversion credit. However,
this was determined as not being in the best interest of the industry.
This rule invites comments on granting handlers diversion credit
for accidentally destroyed marketable finished tart cherry products,
and removing the one million pound limitation on exempted products.
Also, interested persons are invited to submit information on the
regulatory and informational impacts of this action on small
businesses.
After consideration of all relevant material presented, including
the Board's recommendation, and other information, it is found that
this interim final rule, as hereinafter set forth, will tend to
effectuate the declared policy of the Act.
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 60 days after publication in the Federal Register
because: (1) This rule relaxes requirements by providing an additional
opportunity for handlers to receive diversion credit and fulfill such
handler's restricted obligation; (2) the Board needs this rule to be in
place for the 1998-99 crop year beginning July 1, 1998, through June
30, 1999, so handlers can take advantage of this option; (3) the Board
unanimously recommended this change at a public meeting and interested
parties had an opportunity to provide input; and (4) this rule provides
a 60-day comment period and any comments received will be considered
prior to finalization of this rule.
List of Subjects in 7 CFR Part 930
Marketing agreements, Reporting and recordkeeping requirements,
Tart cherries.
For the reasons set forth in the preamble, 7 CFR part 930 is
amended as follows:
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 section 930.159 paragraph (a) is revised, paragraph (f) is
removed, paragraph (d) is redesignated as paragraph (e), paragraph (e)
is redesignated as paragraph (f), and a new paragraph (d) is added to
read as follows:
Sec. 930.159 Handler diversion.
(a) Methods of diversion. Handlers may divert cherries by redeeming
grower diversion certificates, by destroying cherries at handlers'
facilities (at-plant), by diverting cherry products accidentally
destroyed at a handlers' facility, by donating cherries or cherry
products to charitable organizations or by using cherries or cherry
products for exempt purposes under Sec. 930.162, including export to
countries other than Canada, Mexico and Japan. Once diversion has taken
place, handlers will receive diversion certificates stating the weight
of cherries diverted. Diversion credit may be used to fulfill any
restricted percentage requirement in full or in part. Any information
of a confidential and/or proprietary nature included in this
application would be held in confidence pursuant to Sec. 930.73 of the
order.
* * * * *
(d) Diversion of finished products. Handlers may be granted
diversion credit for diverting finished tart cherry products
accidentally destroyed at a handler's facility. In order to receive
diversion credit under this added option the cherry products must be
owned by the handler at the time of accidental destruction, be a
marketable product at the time of processing, be included in the
handler's end of the year handler plan, and have been assigned a Raw
Product Equivalent (RPE) by the handler to determine the volume of
cherries. In addition, the accidental destruction and disposition of
the product must be verified by either a USDA inspector or Board agent
or employee who witnesses the disposition of the accidentally destroyed
product. Products will be considered destroyed if they sustain damage
which renders them unacceptable in normal market channels.
* * * * *
Dated: February 19, 1999.
Robert C. Keeney,
Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 99-4727 Filed 2-24-99; 8:45 am]
BILLING CODE 3410-02-P
