[Federal Register Volume 59, Number 218 (Monday, November 14, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-28113]


[[Page Unknown]]

[Federal Register: November 14, 1994]


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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service

7 CFR Parts 905 and 944

[Docket No. FV94-905-2-FR]

 

Oranges, Grapefruit, Tangerines, and Tangelos Grown in Florida; 
and Fruits, Import Regulations (Grapefruit); Higher Grade Requirements 
for Florida-Grown and Imported Red and White Seedless Grapefruit

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This final rule increases the minimum grade requirements for 
Florida-grown and imported fresh red and white seedless grapefruit to 
U.S. No. 1, from the current minimum grade requirement of Improved No. 
2 External--U.S. No. 1 Internal. This rule improves the quality of 
fresh domestic, export, and import shipments of seedless grapefruit and 
is in the interest of producers, handlers, and consumers of such fruit.

EFFECTIVE DATE: This final rule becomes effective November 25, 1994.

FOR FURTHER INFORMATION CONTACT: Mark Kreaggor, Marketing Order 
Administration Branch, Fruit and Vegetable Division, AMS, USDA, P.O. 
Box 96456, room 2523-S, Washington, DC 20090-6456; telephone: 202-720-
2431; or William G. Pimental, Southeast Marketing Field Office, USDA/
AMS, P.O. Box 2276, Winter Haven, Florida 33883; telephone: 813-299-
4770.

SUPPLEMENTARY INFORMATION: This final rule is issued under Marketing 
Agreement and Marketing Order No. 905 [7 CFR Part 905] regulating the 
handling of oranges, grapefruit, tangerines, and tangelos grown in 
Florida, 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.
    This final rule is also issued under section 8e [7 U.S.C. Section 
608e-1] of the Act. Section 8e of the Act provides that whenever 
specified commodities, including grapefruit, are regulated under a 
Federal marketing order, imports of these commodities into the United 
States are prohibited unless they meet the same or comparable grade, 
size, quality, or maturity requirements as those in effect for the 
domestically produced commodities. Section 8e also provides that 
whenever two or more marketing orders regulate the same commodity 
produced in different areas of the United States, the Secretary shall 
determine which area the imported commodity is in most direct 
competition with and apply regulations based on that area to the 
imported commodity. The Secretary has determined that grapefruit 
imported into the United States are in most direct competition with 
grapefruit grown in Florida regulated under the order, and has found 
that the minimum grade and size requirements for imported grapefruit 
should be the same as those established for grapefruit under the order.
    The Department of Agriculture (Department) is issuing this final 
rule in conformance with Executive Order 12866.
    This final rule has been reviewed under Executive Order 12778, 
Civil Justice Reform. This rule is not intended to have retroactive 
effect. This rule would 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 8c(15)(A) of the 
Act, any handler subject to an order may file with the Secretary a 
petition stating that the order, any provision of the order, or any 
obligation imposed in connection with the order is not in accordance 
with law and requesting a modification of the order or to be exempted 
therefrom. A handler is afforded the opportunity for a hearing on the 
petition. After the hearing, the Secretary would rule on the petition. 
The Act provides that the district court of the United States in any 
district in which the handler is an inhabitant, or has his or her 
principal place of business, has jurisdiction in equity to review the 
Secretary's ruling on the petition, provided a bill in equity is filed 
not later than 20 days after the date of the entry of the ruling.
    There are no administrative procedures which must be exhausted 
prior to any judicial challenge to the provisions of import regulations 
issued under section 8e of the Act.
    Pursuant to the requirements set forth in the Regulatory 
Flexibility Act (RFA), the Administrator of the Agricultural Marketing 
Service (AMS) has considered the economic impact of this action on 
small entities.
    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. Import regulations issued under 
the Act are based on those established under Federal marketing orders.
    There are about 100 Florida citrus handlers subject to regulation 
under the order covering oranges, grapefruit, tangerines, and tangelos 
grown in Florida, about 11,970 producers of these citrus fruits in 
Florida, and about 25 grapefruit importers. Small agricultural service 
firms, which include grapefruit handlers and importers, have been 
defined by the Small Business Administration [13 CFR 121.601] as those 
having annual receipts less than $5,000,000, and small agricultural 
producers are defined as those whose annual receipts are less than 
$500,000. A minority of these handlers and a majority of these 
producers and importers may be classified as small entities.
    The Citrus Administrative Committee (committee) met on June 21, 
1994, and recommended the regulatory changes for Florida citrus. The 
committee meets prior to and during each season to review the handling 
regulations effective on a continuous basis for each citrus fruit 
regulated under the order. Committee meetings are open to the public, 
and interested persons may express their views at these meetings. The 
Department reviews committee recommendations and information, as well 
as information from other sources, and determines whether modification, 
suspension, or termination of the handling regulations would tend to 
effectuate the declared policy of the Act.
    Section 905.306 [7 CFR 905.306] specifies minimum grade 
requirements for different varieties of fresh Florida-grown grapefruit, 
as authorized by Sec. 905.52 [7 CFR 905.52] of the order. Section 
905.306 specifies such grade requirements in Table I of paragraph (a) 
for domestic markets (fruit shipped from the production area to any 
point outside thereof in the 48 contiguous States and the District of 
Columbia of the United States), and in Table II of paragraph (b) for 
export markets (fruit shipped from any point in the 48 contiguous 
States and the District of Columbia of the United States to any 
destination).
    This rule amends Sec. 905.306 by revising the entries for 
grapefruit in Table I and in Table II, effective September 1, 1994. 
Under the final rule, the minimum grade requirements for domestic and 
export shipments of Florida-grown red and white seedless grapefruit 
will be increased to U.S. No. 1, from the current minimum grade 
requirement of Improved No. 2 External--U.S. No. 1 Internal, beginning 
with 1994-95 season shipments.
    The current minimum size requirements for Florida-grown red and 
white seedless grapefruit for both domestic and export shipments remain 
unchanged under this rule. Also, the current minimum grade and size 
requirements for Florida-grown red and white seeded grapefruit for both 
domestic and export shipments remain unchanged.
    This rule removes entries for seeded pink grapefruit and seedless 
pink grapefruit in Table I and in Table II of Sec. 905.306. Such 
removal is necessary because such pink grapefruit were reclassified as 
red grapefruit and the entries in such Tables for pink grapefruit were 
changed to red grapefruit by a final rule published in the Federal 
Register [55 FR 41659, October 15, 1990], but such changes were not 
incorporated in the Code of Federal Regulations.
    The committee recommended that the minimum grade requirements for 
domestic and export market shipments of fresh Florida-grown red and 
white seedless grapefruit be increased, as specified. The committee 
reports that it expects that the higher minimum grade requirements will 
result in better quality Florida-grown red and white seedless 
grapefruit being shipped to the fresh market, and that such fruit 
should receive greater consumer support and increased consumer demand 
resulting in improved grower returns. The consumer demand for such 
grapefruit should be strengthened because consumers prefer the higher 
quality grapefruit which this rule requires be shipped.
    Minimum grade requirements under the order are designed to provide 
fresh markets with fruit of accepTable grade and maturity, thereby 
maintaining consumer confidence in fresh Florida-grown grapefruit. This 
contributes to sTable marketing conditions.
    The higher grade requirements for Florida-grown red and white 
seedless grapefruit are based on the committee's assessment of the 
prospective crop and market conditions for the 1994-95 season Florida-
grown seedless grapefruit crop. The requirements are designed to enable 
Florida grapefruit shippers to ship red and white seedless grapefruit 
to the domestic and export markets consistent with anticipated demand 
in those markets.
    Processing outlets are an important market for Florida-grown 
seedless grapefruit, with nearly one-half of the seedless grapefruit 
crop produced in Florida normally utilized in processing. Any 
grapefruit which do not meet the proposed higher grade requirements 
could be utilized in processing outlets.
    The committee reports that it expects that more red and white 
seedless grapefruit will be produced in Florida during the 1994-95 
season than last season. The committee also expects that supplies of 
fresh Florida-grown red and white seedless grapefruit meeting the 
higher grade requirements will adequately meet consumer demand during 
the entire 1994-95 season. The Florida seedless grapefruit shipping 
season normally begins in September and continues until the following 
July, but occasionally begins in late August.
    This rule is designed to establish and maintain orderly marketing 
conditions in the United States for fresh Florida-grown red and white 
seedless grapefruit in the interest of producers, handlers, and 
consumers, and is expected to increase returns to Florida grapefruit 
producers.
    Under the order, handlers may ship up to 15 standard packed cartons 
(12 bushels) of fruit per day exempt from grade and size requirements. 
Fruit shipped in gift packages which are individually addressed and not 
for resale, and fruit shipped for animal feed are also exempt from 
grade and size requirements under specific conditions. Also, fruit 
shipped to commercial processors for conversion into canned or frozen 
products or into a beverage base are not subject to the handling 
requirements under the order.
    Minimum grade and size requirements for grapefruit imported into 
the United States are currently in effect under Sec. 944.106 [7 CFR 
944.106]. This rule amends Sec. 944.106 by revising paragraph (a) and 
the Table in that section by modifying the entries for imported red and 
white seedless grapefruit. This increases the minimum grade 
requirements for such grapefruit to U.S. No. 1, from the current 
minimum grade requirement of Improved No. 2 External--U.S. No. 1 
Internal. The higher grade requirements for imported red and white 
seedless grapefruit are the same as those in this rule under 
Sec. 905.306 for red and white seedless grapefruit grown in Florida.
    The current minimum size requirements for imported red and white 
seedless grapefruit remains unchanged under this rule. Also, the 
current minimum grade and size requirements for imported red and white 
seeded grapefruit remain unchanged.
    This rule reflects the committee's and the Department's appraisal 
of the need to increase the minimum grade requirements for fresh 
Florida-grown red and white seedless grapefruit, as specified. The 
Department's view is that this rule will have a beneficial impact on 
Florida producers and handlers of fresh seedless grapefruit, since it 
enables such producers and handlers to make available those grades of 
grapefruit needed to meet consumer needs consistent with 1994-95 season 
crop and market conditions.
    The proposed rule concerning this action was published in the 
September 9, 1994, Federal Register [59 FR 46361], with a 15-day 
comment period ending September 23,1994. Nine comments were received, 
five in support and four in opposition to the proposed rule.
    The comments in favor of implementing the higher grade as set forth 
in the proposed rule were submitted by Mr. W. Cody Estes of the Indian 
River Citrus League, Mr. Bobby F. McKown of Florida Citrus Mutual, Mr. 
Gregory P. Nelson of DNE World Fruit Sales, Mr. Bernard A. Egan of 
Bernard Egan and Company, and Mr. David Milwood of Golden River Fruit 
Co. Their comments reiterated the arguments made in the proposed rule.
    Mr. Estes stated in his comment that the presence on the market of 
Improved No. 2 External grade grapefruit during times of abundant 
supplies of grapefruit does not result in greater volumes of fresh 
fruit movement. He sees its presence dragging down the price and 
movement of better quality fruit to the point that very little price 
differential exists between the price for U.S. No. 1 and Improved No. 2 
External. Mr. Estes further stated that better quality grapefruit will 
stimulate demand, and that increasing production levels will ensure 
ample supplies for consumers. Mr. McKown stated he favored the higher 
grade requirement because it will improve the quality and strengthen 
demand for fresh domestic and export shipments of seedless grapefruit 
and benefit citrus growers, packers and the industry as a whole.
    Both Mr. Nelson and Mr. Egan expressed strong support for 
increasing the grade requirements. They believe that higher minimum 
grade requirements will prevent unsightly and misshapen fruit from 
entering the fresh market and depressing demand and prices for Florida 
grapefruit.
    Mr. Milwood stated that higher grade requirements will result in 
marketing and packing the best fruit available. This will benefit 
Florida growers by enhancing the image of Florida grapefruit in the 
domestic market. His position is that the industry must improve its 
image in order to compete with other fruit available to the consumer. 
He states that having No. 2's in the market place will only reduce the 
price for U.S. No. 1's and bring down prices to unacceptable levels for 
all Florida growers. Mr. Milwood also stated that throughout the 
1980's, there was a need for U.S. No. 2 grapefruit due to devastating 
freezes and limited crop sizes. Mr. Milwood's impression is that the 
situation has changed. With the forecast for larger crops, he believes 
the industry must improve its image in order to be competitive in the 
market place.
    Comments in opposition to implementing the higher grades as set 
forth in the proposed rule were submitted by Mr. J. Richard Graves, 
Jr., of Graves Brothers Company, Mr. Theodore R. Bolema of the United 
States Department of Justice (DOJ) and Mr. James Crockett of United 
Citrus Marketing.
    Mr. Graves commented that in his view the rule which changes grade 
standards will prove economically disastrous for Indian River area 
grapefruit growers. In his opinion, it will result in limiting the 
shipment of Improved No. 2 External Florida seedless grapefruit and 
prevent certain customers and consumers from buying Florida grapefruit. 
He states that there is a fresh fruit market for these grades of 
grapefruit.
    In actuality, the average quality of grapefruit is rising and the 
higher minimum grade requirement is an attempt to keep up with the 
quality change. Although interseasonal variations in quality make it 
difficult to estimate the effect of the higher minimum grade 
requirement, the total quantity of grapefruit that could meet the new 
grade is approximately 94 percent. With the expectation of a grapefruit 
crop 8 percent larger than last year, consumers will not be noticeably 
affected, and supplies might even be larger than in the 1993/94 season. 
Thus, consumers will not find shortages or high prices for Florida 
grapefruit as a result of this action.
    In addition, it is the view of a majority of committee members, 
which is made up of growers, that shipments of lower grade grapefruit 
have been poorly received by consumers. The committee contends there is 
a need for premium quality grapefruit in the market place. They pointed 
out that some customers prefer and will purchase only high quality 
produce. This group stated that having U.S. No. 2's in the market will 
only reduce the price of U.S. No. 1 grapefruit. In recent seasons, 
prices for Florida grapefruit marketed fresh have been depressed, 
falling from a season average of over $8.50 per box in 1990 and 1991 to 
less than $5.00 per box in 1992, the lowest since the early 1980's. 
Grower prices for 1993/94 averaged slightly more than $6.00 per box in 
1993.
    Mr. Graves forwarded a memorandum from Mr. Robert E. Barber, Jr., 
on the ``Estimated Impact of Proposed Changes in U.S. Grade Standards 
for Fresh Grapefruit''. In his memorandum, Mr. Barber analyzes the 
economic impact of raising minimum grades for Florida grapefruit to 
U.S. No. 1.
    Mr. Barber argues that the higher minimum grade standards are 
economically risky because of the impact upon the overall revenues 
generated by Florida's grapefruit crop. His theory is that shipping 
point revenues for Florida grapefruit would increase due to the 
restriction in volume of shipments that would occur under higher grade 
requirements.
    Mr. Barber postulates that the gains in fresh market value could be 
more than offset by an anticipated drop in revenues for processed 
grapefruit resulting from the reallocation of fruit from the fresh 
market to the processed market.
    Mr. Barber's conclusions are not in line with current Florida 
Citrus Commission projections. In fact, this season's volume of 
grapefruit is expected to be 8 percent larger than in the 1993-94 
season. In recent seasons, more than 30 percent of the Florida 
grapefruit crop was exported, with Western Europe and Japan being key 
markets. However, export demand has been weak because of economic 
recessions in these markets. It is not expected that this situation 
will change appreciably in the 1994/95 season. The soft export demand 
coupled with the larger crop mean that higher minimum grade 
requirements will not have an impact on domestic availability of 
grapefruit compared to last season.
    Mr. Graves states that the higher grade requirements will make 
Florida grapefruit shippers noncompetitive with Texas grapefruit 
shippers. However, Texas grapefruit shippers have also proposed to 
increase the minimum quality requirements for Texas grapefruit. The 
increase would be from the current minimum grade requirement of U.S. 
No. 2 to Texas Choice.
    Mr. Bolema of the DOJ contends that the restriction on grapefruit 
shipments offers no long term benefits to consumers or producers. Mr. 
Bolema also contends that the higher minimum grade requirements will 
artificially restrict the supply of fresh grapefruit.
    Based on current crop forecast, the Department believes that there 
will be more than enough U.S. No. 1 fruit to meet consumer demand.
    Additionally, Mr. Bolema asserts that the increased grower profits 
will not be sustainable in the long run, because any artificially 
raised returns to producers will provide incentives for inefficient new 
grapefruit production. Mr. Bolema argues further that this new 
inefficient production will increase producer costs and erode grower 
profits until producer returns revert to the pre-restriction level.
    According to National Agricultural Statistics Service forecasts, 
the production of grapefruit will increase in the 1994-95 and 
subsequent seasons and because of this, there is a need to increase the 
demand for Florida fresh market grapefruit. An increase in the general 
level of quality is associated with an increase in demand; increased 
sales at higher prices would mean greater returns to growers.
    The Department's position is that higher minimum grade requirements 
will have the effect of stabilizing prices for grapefruit by providing 
consistent quality to consumers. In addition, a survey conducted by 
``The Packer,'' a trade newspaper, demonstrated that higher quality 
leads to larger purchases of fruit by consumers. Also, Dr. Robert Behr, 
Economic and Market Research Director of the Florida Department of 
Citrus is preparing a report on grapefruit quality; this study, which 
is expected to be completed in the Spring of 1995, will provide the 
committee additional information it can use to modify the quality 
requirements under the Federal marketing order, so the preferences of 
consumers can be better served.
    Mr. Crockett stated that while well intended, higher minimum grade 
requirements for Florida grapefruit will be a blatant restraint on free 
trade. He stated that it is the customer or ``market'' that sets the 
price for grapefruit.
    This rule is an attempt to increase the demand for Florida 
grapefruit. There is the potential to raise returns to growers; based 
on the supposition that higher grade requirements mean better looking 
fruit that can be sold at higher prices.
    This rule reflects the Department's appraisal of the need to 
increase the grade requirements for imported red and white seedless 
grapefruit, to ensure that such fruit meets the same higher grade 
requirements for Florida-grown red and white seedless grapefruit, 
consistent with the Act.
    After thoroughly analyzing the comments received and other 
available information, the Department has concluded that this final 
rule is appropriate.
    In accordance with section 8e of the Act, the United States Trade 
Representative has concurred with the issuance of this final rule.
    Based on the above, the Administrator of the AMS has determined 
that this rule will not have a significant economic impact on a 
substantial number of small entities.
    After consideration of all relevant matter presented, including the 
information and recommendations submitted by the committee and other 
available information, it is hereby found that this rule, as 
hereinafter set forth, will tend to effectuate the declared policy of 
the Act.
    It is further found that good cause exists for not postponing the 
effective date of this rule until 30 days after publication in the 
Federal Register [5 U.S.C. 533] because this rule should be implemented 
as soon as possible since the shipping season began in early September. 
Further, handlers are aware of this rule which was recommended at 
public meetings. Also, a 15-comment period was provided in the proposed 
rule.

List of Subjects

7 CFR Part 905

    Grapefruit, Marketing agreements, Oranges, Reporting and 
recordkeeping requirements, Tangelos, Tangerines.

7 CFR Part 944

    Avocados, Food grades and standards, Grapefruit, Grapes, Imports, 
Kiwifruit, Limes, Olives, Oranges.

    For the reasons set forth in the preamble, 7 CFR Parts 905 and 944 
are amended as follows:

PART 905--ORANGES, GRAPEFRUIT, TANGERINES, AND TANGELOS GROWN IN 
FLORIDA

    1. The authority citation for 7 CFR Parts 905 and 944 continues to 
read as follows:

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

    2. Section 905.306 is amended by revising the entries in Table I of 
paragraph (a) and in Table II of paragraph (b) for ``seeded, except 
red'' grapefruit, ``seeded, red'' grapefruit, ``seedless, except red'' 
grapefruit, and ``seedless, red'' grapefruit; and by removing the 
entries for ``seeded, except pink'' grapefruit, ``seeded, pink'' 
grapefruit, ``seedless, except pink'' grapefruit, and ``seedless, 
pink'' grapefruit to read as follows:


Sec. 905.306  Orange, grapefruit, tangerine and tangelo regulation.

    (a) * * *

                                 Table I                                
------------------------------------------------------------------------
                                                                Minimum 
                                               Minimum grade    diameter
     Variety (1)       Regulation period(2)         (3)         (inches)
                                                                  (4)   
------------------------------------------------------------------------
                                                                        
                              * * * * * * *                             
GRAPEFRUIT                                                              
                                                                        
                              * * * * * * *                             
Seeded, except red...  On and after 09/01/   U.S. No. 1......   3\12/16\
                        94.                                             
Seeded, red..........  On and after 09/01/   U.S. No. 1......   3\12/16\
                        94.                                             
Seedless, red........  11/07/94-11/23/94...  Improved No. 2      3\5/16\
                                              External, U.S.            
                                              No. 1 Internal.           
                       11/24/94-11/12/95...  U.S. No. 1......    3\5/16\
                       On and after 11/13/   U.S. No. 1......    3\9/16\
                        95.                                             
Seedless, except red.  On and after 09/01/   U.S. No. 1......    3\9/16\
                        94.                                             
                                                                        
                              * * * * * * *                             
------------------------------------------------------------------------

    (b) * * *

                                Table II                                
------------------------------------------------------------------------
                                                                Minimum 
                         Regulation period     Minimum grade    diameter
     Variety (1)                (2)                 (3)         (inches)
                                                                  (4)   
------------------------------------------------------------------------
                                                                        
                              * * * * * * *                             
GRAPEFRUIT                                                              
                                                                        
                              * * * * * * *                             
Seeded, except red...  On and after 09/01/   U.S. No. 1......    3\9/16\
                        94.                                             
Seeded, red..........  On and after 09/01/   U.S. No. 1......    3\9/16\
                        94.                                             
Seedless, except red.  On and after 09/01/   U.S. No. 1......    3\5/16\
                        94.                                             
Seedless, red........  On and after 09/01/   U.S. No. 1......    3\5/16\
                        94.                                             
                                                                        
                              * * * * * * *                             
------------------------------------------------------------------------

* * * * *


PART 944--FRUITS; IMPORT REGULATIONS

    3. Section 944.106 is amended by revising paragraph (a), and by 
redesignating the second appearing paragraph (h) as paragraph (i) to 
read as follows:


Sec. 944.106  Grapefruit import regulation.

    (a) Pursuant to Section 8e [7 U.S.C. 608e-1] of the Agricultural 
Marketing Agreement Act of 1937, as amended [7 U.S.C. 601-674], and 
Part 944--Fruits; Import Regulations, the importation into the United 
States of any grapefruit is prohibited unless such grapefruit meet the 
following minimum grade and size requirements for each specified 
grapefruit classification:

----------------------------------------------------------------------------------------------------------------
                                                                                                      Minimum   
      Grapefruit classification                 Regulation period               Minimum grade        diameter   
                                                                                                     (inches)   
----------------------------------------------------------------------------------------------------------------
Seeded..............................  On and after 09/01/94...............  U.S. No. 1..........        3\12/16\
Seedless, red.......................  11/07/94-11/23/94...................  Improved No. 2               3\5/16\
                                                                             External, U.S. No.                 
                                                                             1 Internal.                        
                                      11/24/94-11/12/95...................  U.S. No. 1..........         3\5/16\
                                      On and after 11/13/95...............  U.S. No. 1..........         3\9/16\
Seedless, except red................  On and after 09/01/94...............  U.S. No. 1..........         3\9/16\
----------------------------------------------------------------------------------------------------------------

* * * * *
    Dated: November 8, 1994.
Martha B. Ransom,
Acting Deputy Director, Fruit and Vegetable Division.
[FR Doc. 94-28113 Filed 11-9-94; 11:20 am]
BILLING CODE 3410-02-P