[Federal Register Volume 60, Number 229 (Wednesday, November 29, 1995)]
[Proposed Rules]
[Pages 61292-61329]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-28631]




[[Page 61291]]

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Part II





Department of Agriculture





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Agricultural Marketing Service



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7 CFR Part 930



Cherries (Tart) Grown in Michigan et al.; Proposed Rule

  Federal Register / Vol. 60, No. 229 / Wednesday, November 29, 1995 / 
Proposed Rules  

[[Page 61292]]


DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 930

[Docket No. AO-370-A5; FV93-930-1]


Tart Cherries Grown in the States of Michigan, New York, 
Pennsylvania, Oregon, Utah, Washington, and Wisconsin; Recommended 
Decision and Opportunity To File Written Exceptions to the Proposed 
Marketing Agreement and Order

AGENCY: Agricultural Marketing Service, USDA.

Action: Proposed rule.

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SUMMARY: This recommended decision proposes the issuance of a marketing 
agreement and order (order) for tart cherries grown in certain 
designated states. The proposed order and agreement would authorize 
volume regulation, grade, size, and maturity regulations, and mandatory 
inspection. The proposed order would also authorize production, 
processing, and marketing research and promotion projects, including 
paid advertising. The order would be administered by an 18 member 
administrative board consisting of 17 growers and handlers and one 
public member. The order would be financed through assessments on 
handlers of tart cherries grown in the production area. A primary 
objective of this program would be to improve grower returns by 
strengthening consumer demand through volume control and quality 
assurance mechanisms. Tart cherry producers and processors would vote 
in a referendum to determine if they favor issuance of the proposed 
marketing order.

DATES: Comments must be received by December 29, 1995.

ADDRESSES: Four copies of all comments should be sent to the Hearing 
Clerk, United States Department of Agriculture, Room 1079, South 
Building, Washington, DC 20250-9200. All written comments will be made 
available for public inspection at the Office of the Hearing Clerk 
during regular business hours.

FOR FURTHER INFORMATION CONTACT: (1) R. Charles Martin or Kenneth G. 
Johnson, Marketing Order Administration Branch, Fruit and Vegetable 
Division, Room 2523-S, AMS, USDA, PO Box 96456, Washington, DC 20090-
6456; telephone number (202) 720-5053, FAX: (202) 720-5698.
    (2) Robert Curry, Northwest Marketing Field Office, Marketing Order 
Administration Branch, Fruit and Vegetable Division, AMS, USDA, 1220 SW 
Third Avenue, Room 369, Portland, Oregon 97204; telephone: (503) 326-
2725, FAX: (503) 326-7440.

SUPPLEMENTARY INFORMATION:

Prior Documents in This Proceeding

    Notice of Hearing, issued on November 30, 1993, and published in 
the Federal Register on November 30, December 23, 1993, and January 31, 
1994 (58 FR 63108, 58 FR 68065, and 59 FR 4259, respectively). The 
notice reopening the hearing was issued on December 5, 1994, and 
published in the Federal Register on December 8, 1994 (59 FR 63273).
    This action is governed by the provisions of sections 556 and 557 
of title 5 of the United States Code and is therefore excluded from the 
requirements of Executive Order 12866.
    The marketing agreement and order proposed herein have been 
reviewed under Executive Order 12778, Civil Justice Reform. They are 
not intended to have retroactive effect. If adopted, the proposed 
agreement and order would not preempt any State or local laws, 
regulations, or policies, unless they present an irreconcilable 
conflict with the proposal.
    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 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.

Preliminary Statement

    Notice is hereby given of the filing with the Hearing Clerk of this 
recommended decision with respect to a proposed marketing agreement and 
order regulating the handling of tart cherries grown in the States of 
Michigan, New York, Pennsylvania, Oregon, Utah, Washington, and 
Wisconsin. This recommended decision is issued pursuant to the 
provisions of the Agricultural Marketing Agreement Act of 1937, as 
amended (7 U.S.C. 601-674), hereinafter referred to as the Act, and the 
applicable rules of practice and procedure governing the formulation of 
marketing agreements and marketing orders (7 CFR Part 900).
    The proposed marketing agreement and order are based on the record 
of a public hearing held December 15-17, 1993, in Grand Rapids, 
Michigan; January 10-11, 1994, in Rochester, New York; January 13, 
1994, in Provo, Utah; February 15-17, 1994, in Portland, Oregon; 
January 9-10, 1995, in Grand Rapids, Michigan; and January 12-13, 1995, 
in Portland, Oregon. These multiple hearing sessions were held to 
receive evidence on marketing order proposals from growers, handlers, 
processors and other interested parties located throughout the proposed 
production area.
    At the conclusion of the February 1994 hearing in Oregon, the 
deadline for filing post-hearing briefs was set at April 29, 1994. The 
deadline for filing post-hearing briefs was subsequently extended to 
May 31, 1994. However, based on a review of the hearing evidence and 
post hearing briefs, the Department of Agriculture (USDA) determined 
that the hearing should be reopened to clarify some provisions. The 
USDA wanted to obtain additional information and clarification on the 
following: (1) The States that should be regulated under the order; (2) 
the economic impact of the proposed order on small and large 
businesses; (3) whether the expected program benefits would exceed 
costs, especially for growers, handlers and consumers; and (4) how 
certain provisions would be implemented under the proposed marketing 
order. The hearing was reopened and held January 9-10, 1995, in Grand 
Rapids, Michigan and January 12-13, 1995 in Portland, Oregon. At the 
conclusion of the Oregon hearing, the deadline for filing post-hearing 
briefs was set at March 17, 1995.
    Ten briefs were filed following the first briefing period. These 
briefs were from the U.S. Department of Justice, Anti-Trust Division 
(DOJ), Ray Schultz of Schultz's Fruitland, Ridgecrest Fruit 
Corporation, Smeltzer Orchard Co., Northwest Food Processors 
Association, American Farm Bureau Federation, Laughlin Orchards, Inc., 
Oregon Tart Cherry Association, Fruithill Inc., and the Cherry 
Marketing Institute.
    Seven briefs were filed following the second briefing period. These 
were filed by Knouse Foods Cooperative, Inc. (Knouse), Shoreline Fruit, 
Inc., Oregon Tart Cherry Association, DeRuiter Farms, Inc., Milne Fruit 
Products, Cherry Marketing Institute, and DOJ. 

[[Page 61293]]
The briefs are discussed throughout the following document where 
relevant.
    The tart cherry industry's previous Federal Marketing Order began 
in 1971. It covered the States of Michigan, New York, Wisconsin, 
Pennsylvania, Ohio, Virginia, West Virginia, and Maryland. In a 
continuance referendum conducted March 10-20, 1986, 64 percent of all 
cherry producers and 83 percent of all cherry handlers voted. Of those 
voting, 51 percent of the producers and 56 percent of the handlers 
favored terminating the cherry marketing order. Producers favoring 
termination represented 45 percent of the production volume represented 
in the referendum, while handlers favoring termination represented 40 
percent of the processed volume represented.
    Given the lack of producer and handler support for that tart cherry 
order, it was determined that it no longer fulfilled the Act's 
objective, and was terminated April 30, 1987.

Small Business Consideration

    In accordance with the Regulatory Flexibility Act (5 U.S.C. 601 et 
seq.), the Administrator of the Agricultural Marketing Service has 
considered the economic impact of this action on small entities. The 
record indicates that there are approximately 1,600 growers of tart 
cherries and 75 handlers who process cherries in the production area 
proposed to be regulated. Small agricultural service firms have been 
defined by the Small Business Administration (SBA) (13 CFR 121.601) as 
those whose annual receipts are less than $5,000,000, and small 
agricultural producers as those having annual receipts of $500,000. The 
majority of the tart cherry handlers and producers may be classified as 
small entities.
    For practical purposes, there is no fresh market for tart cherries. 
Processors dry, freeze, can, juice, or puree pitted tart cherries. 
Market use averages are: 56 percent of the product becomes industrial 
grade frozen cherries; 16 percent goes into consumer-size cans of pie 
filling; 8 percent is used for commercial pie filling; 10 percent 
becomes juice concentrate; 2 percent is dried; and 8 percent goes into 
water packs.
    Since 1971, there has been a marked transformation in the 
processing industry's structure. Currently, 75 percent of the crop is 
processed by farmer-owned cooperatives or grower-owned processing 
facilities; whereas in 1971, a substantial volume was processed by 
independent handlers. Processors, through their sales agents, market in 
all U.S. markets and export to Europe and Asia. There are no discrete 
regional markets where cherries from a particular district could have a 
particular advantage, beyond nominal differences in transportation 
costs, which can often be overcome by price discounting.
    The record evidence shows that economic adversity has caused more 
than 21 percent of Michigan's growers to withdraw from tart cherry 
farming. There were 1,183 Michigan commercial growers in 1986, compared 
to 933 in 1992. In 1992, Michigan growers had an average production of 
238,000 pounds with 19 percent of those growers averaging 800,000 
pounds, accounting for 66 percent of the total Michigan production. In 
states other than Michigan, there has also been a general decline in 
the number of commercial growers since 1986. There are fewer growers in 
other States besides Michigan, but the number of bearing acres has 
increased from 4.5 million in 1986, to more than 5 million in 1990.
    Record evidence indicates that the demand for red tart cherries is 
inelastic at high and low levels of production, and relatively elastic 
in the middle range. At the extremes, during times of very low and very 
high production, different factors become operational. In very short 
crop years, such as 1991, there is limited but sufficient exclusive 
demand for cherries that can cause processor prices to double and 
grower prices to triple. In the event of large crops, there seems to be 
no price low enough to expand sales beyond about 275 million pounds of 
raw fruit in a single year.
    Since 1982, annual sales have averaged 230 million pounds. Under 
the proposed order, total returns to growers could be increased by 
restricting supplies of red tart cherries available for sale by 
handlers during large crop years. Also, the alternate production 
characteristics of the tart cherry industry provide an opportunity to 
increase growers' total earnings by converting the excess production of 
large crop years into storable products that could constitute reserve 
pools. These pools would be liquidated in a year when the available 
supplies are short.
    One of the main concerns of this recommended order is the short 
term annual variation in supply which is attributable to climatic 
factors that neither growers nor processors can control, and which 
leads to chaotic marketing conditions. Such climatic factors can result 
in highly unpredictable annual crop sizes, causing gluts and shortages 
of tart cherries. When gluts occur, large carryin inventories can 
decrease processor and grower prices, regardless of the anticipated 
size of the oncoming year's crop. Many sales are consummated with large 
buyers well before the current crop year's supply and demand situation 
is clear (based on what can best be described as ``Anticipated 
Supply'', i.e., the sum of the carryin inventory and the United States 
Department of Agriculture crop forecast, available usually late in 
June, weeks before the actual crop harvest.)
    These large, unrestricted carryin inventories and crop estimates 
can play a dominant role in setting the tone of the market in a given 
year. The proposed order is intended to lessen the impact of these 
inventories and estimates by establishing an ``optimum supply,'' 
thereby reducing price swings to growers and buyers, and ultimately 
resulting in a stabilization and enhancement of the market.
    The order would impose some reporting and record keeping 
requirements on handlers. Handler testimony indicated that the expected 
burden that would be imposed with respect to these requirements would 
be negligible. Most of the information that would be reported to the 
Board is already compiled by handlers for other uses and is readily 
available. Reporting and recordkeeping requirements issued under 
comparable marketing order programs impose an average annual burden on 
each regulated handler of about one hour. It is reasonable to expect 
that a comparable burden may be imposed under this proposed marketing 
order on the estimated 75 handlers of tart cherries. With respect to 
growers, they testified at the hearing that information required to be 
submitted to the Board for grower diversion is already collected and 
available from growers.
    The Act requires that, prior to the issuance of a marketing order 
for tart cherries, a referendum be conducted among affected producers 
and processors to determine if they favor issuance of the order. The 
ballot material that would be used in conducting the referendum would 
be submitted to and approved by OMB before it is used. It is estimated 
that it would take an average of 10 minutes for each of the 
approximately 1,600 tart cherry growers and 75 tart cherry processors 
to complete the ballots. Additionally, it has been estimated that it 
would take approximately ten minutes for each handler to complete the 
marketing agreement.
    Therefore, in compliance with Office of Management and Budget (OMB) 
regulations (5 CFR part 1320) which implement the Paperwork Reduction 

[[Page 61294]]
Act of 1995 (Pub. L. 104-13), the information collection and 
recordkeeping requirements that may be imposed by this order would be 
submitted to OMB for approval. Those requirements would not become 
effective prior to OMB review. Any recordkeeping and reporting 
requirements imposed would be evaluated against the potential benefits 
to be derived and it is expected that any added burden resulting from 
increased reporting and recordkeeping would not be significant when 
compared to those anticipated benefits derived from administration of 
the order.
    The purpose of the RFA is to fit regulatory and informational 
requirements to the size and scale of the business entities in a manner 
that is consistent with the objectives of the rule and applicable 
statutes. The proposed marketing order provisions have been carefully 
reviewed and every effort has been made to eliminate any unnecessary 
costs or requirements. As discussed in the RFA, Congress' intent, among 
other objectives, was to direct agencies to identify the need for any 
``special accommodation'' (e.g., exemption or relaxation) on regulated 
small entities (i.e., handlers) because, in the past, some Federal 
regulatory and reporting requirements imposed unnecessary and 
disproportionately burdensome demands on small businesses. Thus, the 
AMS closely reviewed the record evidence and could not find any 
evidence to suggest that any direct or indirect costs imposed under the 
marketing order regulation would be proportionately greater on small 
handlers than on large handlers, or conversely, that any projected 
order benefits would be proportionately smaller for small handlers than 
for large handlers.
    The record evidence indicated that the order may impose some 
additional costs and requirements on handlers, but those costs are 
insignificant and are directly proportional to the sizes of the 
regulated handlers. The record evidence also indicated that, given the 
severe economic conditions and unstable markets facing the majority of 
the industry, the benefits to small (as well as large) handlers are 
likely to be greater than would accrue under the alternatives to the 
order proposed herein, namely no marketing order, or an order without 
the proposed combination of volume controls and other order 
authorities.
    The record evidence indicates that the proposed order would be 
instrumental in providing expanding markets and sales, and raising and 
stabilizing prices of tart cherries, primarily for the primary benefit 
of producers, but the evidence also indicates that, since handlers 
(including cooperatives that market the crops of their producer 
members) market the producers' crops, they would benefit as well. While 
the level of such benefits to handlers is difficult to quantify, it is 
also clear the provisions of the proposed order are designed to benefit 
small entities. For example, the record evidence indicated that small 
handlers (and small producers) are more likely to be minimally 
capitalized than large entities, and are less likely to survive without 
the stability the proposed order would provide.
    Accordingly, based on the information discussed above and in the 
following discussion, it is determined that the marketing order would 
not have a significant economic impact on a substantial number of small 
entities.

Material Issues

    The material issues presented on the record of the hearing are as 
follows:
    1. Whether the handling of tart cherries grown in the proposed 
production area is in the current of interstate or foreign commerce, or 
directly burdens, obstructs, or affects such commerce;
    2. Whether the economic and marketing conditions are such that they 
justify a need for a Federal marketing agreement and order which would 
tend to effectuate the declared policy of the Act;
    3. What the definition of the production area and the commodity to 
be covered by the order should be;
    4. What the identity of the persons and the marketing transactions 
to be regulated should be; and
    5. What the specific terms and provisions of the order should be, 
including:
    (a) The definitions of terms used therein which are necessary and 
incidental to attain the declared objectives and policy of the Act and 
order;
    (b) The establishment, composition, maintenance, procedures, powers 
and duties of a Cherry Industry Administrative Board (Board) that would 
be the local administrative agency for assisting the Secretary in the 
administration of the order;
    (c) The authority to incur expenses and the procedure to levy 
assessments on handlers to obtain revenue for paying such expenses;
    (d) The authority to establish or provide for the establishment of 
production, processing and marketing research and market development 
projects, including paid advertising;
    (e) The authority to establish regulations that would require 
minimum quality and inspection requirements;
    (f) The authority to establish regulations that would provide for a 
volume control program;
    (g) The authority to establish other regulations and procedures 
necessary and incidental to the administration of the order;
    (h) The establishment of requirements for handler reporting and 
recordkeeping;
    (i) The requirement of compliance with all provisions of the order 
and with any regulations issued under it; and
    (j) Additional terms and conditions as set forth in Sec. 930.81 
through Sec. 930.91 of the Notice of Hearing published in the Federal 
Register of November 30, 1993, which are common to all marketing 
agreements and orders, and other terms and conditions published at 
Sec. 930.92 through Sec. 930.94 that are common to marketing agreements 
only.

Findings and Conclusions

    The following proposed findings and conclusions on the material 
issues are based on the record of the hearing.
    1. The record indicates that the handling of tart cherries grown in 
the States of Michigan, New York, Pennsylvania, Oregon, Utah, 
Washington, and Wisconsin is in the current of interstate or foreign 
commerce or directly burdens, obstructs or affects such commerce. The 
proposed production area is discussed in material issue no. 3.
    Red tart cherries, also known as red sour cherries, are grown in 
commercially significant amounts in these seven states: Michigan, New 
York, Utah, Pennsylvania, Oregon, Washington, and Wisconsin. Between 
1988 and 1992, Michigan, New York, and Utah accounted for 90 percent of 
the United States' production, with Michigan producing 71 percent of 
the total industry product. Pennsylvania, Oregon, Washington, and 
Wisconsin's current tart cherry production averages 9 percent of the 
total. One handler handles all of Pennsylvania's production, while a 
substantial portion of Oregon and Washington's production is marketed 
almost entirely in those states as cherry juice concentrate. Colorado, 
which is excluded from the proposed marketing order because of its 
consistently small production, has averaged only 1.3 million pounds of 
cherries annually since 1986.
    Handlers, through their sales agents, market in all U.S. markets 
and in exports to Europe and Asia. For example, Michigan cherries are 
sold in 

[[Page 61295]]
every State except Maine, Idaho, and Alaska, as well as in Asia, 
Australia, and Europe.
    Record evidence shows that any handling of tart cherries in market 
channels, including intrastate shipments, exerts an influence on all 
other handling of such cherries and vice versa. Therefore, because such 
handling directly burden, obstruct, or affect such commerce, all 
handling of tart cherries grown in the proposed production area should 
be covered by the order, and an order for tart cherries is supported by 
evidence in the record of hearing.
    2. The proponents have demonstrated that there is a need for a 
marketing order for tart cherries. The proponents testified that the 
following conditions currently exist in the industry: (1) Large 
variations in annual supplies of tart cherries; (2) significant 
fluctuations in prices to farmers with gross receipts being below the 
industry's costs in seven of the last eight years; (3) disruptive 
variations in the price of cherries to food manufacturers; and (4) 
concomitant difficulties in developing both domestic and export 
markets.
    Large variations in annual supply tend to lead to disorderly 
marketing. The proponents testified that a recent study at Michigan 
State University of annual variation in production of major 
horticultural crops indicates that the average production of tart 
cherries fluctuated to a greater extent than any other crop, including 
almonds, hazelnuts, and raisins. These are other storable commodities 
that have Federal marketing order programs. The fluctuations in 
production are due mainly to climatic factors over which neither 
growers nor processors have any control. In recent history, tart cherry 
production increased by 63 percent from 1986 to 1987 and by 82 percent 
from 1991 to 1992. These surges in production are far beyond the 
capability of the market to absorb. The result is not only the 
production year impact of depressed grower prices during the production 
year, but large carryover inventories which can depress prices for the 
next three to five years. The proponents provided an example as 
follows: Production averaged about 242 million pounds in 1988 and 1989 
following the 1987 surge in production of 359 million pounds, yet 
grower prices only averaged 16.7 cents per pound during the period, 
which is well below the estimated cost of production of 20 cents per 
pound. The inventory carryin did not reach tolerable levels until July 
1, 1991. The mere presence of these large carryin inventories had a 
depressing effect on processor and grower prices.
    As a result of these fluctuations in price, growers receive less 
income for their tart cherries. Several growers testified that they 
are, in most years, unable to recoup their production costs of tart 
cherries. Also, very few new growers have entered the tart cherry 
industry because the initial investment in an orchard is substantial 
and yields little or no income for the first five years. In addition, 
cherry trees have a commercially productive life of 15 to 20 years, 
which means they are treated as a long term investment. Thus, it is not 
economically sound to plant and/or uproot cherry trees in response to 
changing supply or demand conditions. Further, while some growers have 
diversified their holdings to include other crops, record evidence 
shows that most growers do not have other viable economic alternatives 
for their land, due to the unsuitability of the land for crops for 
which additional demand exists. This most often results in the 
continued maintenance of and/or replanting of tart cherry trees.
    In the crop years 1986 through 1993, tart cherry production ranged 
from a high of 359 million pounds in 1987 to a low of 189.9 million 
pounds in 1991. The price per pound to tart cherry growers ranged from 
a low of 7.3 cents in 1987 to a high of 46.4 cents in 1991. These 
problems of wide supply and price fluctuation in the tart cherry 
industry are national in scope and impact. Tart cherry growers 
testified about the hardships they have endured over the seven years 
since the demise of the prior Federal tart cherry marketing order. 
Growers testified that the average prices of 12 to 17 cents per pound 
which they received do not come close to covering the costs of 
production for the vast majority of tart cherry growers. There was 
testimony that production costs for most growers range between 20 to 22 
cents per pound, which is well above average prices received.
    Proponents testified that small growers and processors would have 
the most to gain from implementation of a marketing order because such 
growers and handlers have been going out of business over most of the 
last eight years due to low tart cherry prices. They also testified 
that, since an order would help increase grower returns, this should 
increase the buffer between success and failure because small growers 
and handlers tend to be less capitalized than larger ones. One Michigan 
grower testified that his family operates a 184 acre fruit farm and 
about one-half of their annual farm production comes from tart 
cherries. While the value of the farm is $450,000 (includes value of 
land, $15 per fruit tree, and $55,000 for depreciated equipment), their 
tart cherry crop has returned a negative $1,240 per year, on average, 
over the past seven years. There are no funds left for the grower's 
labor and no return on the grower's investment. This grower has only 
been able to stay in business because of the income from other crops 
such grower produces and off-farm income.
    Another grower testified that some growers do not own harvesting 
equipment. In most years, all the money such growers earn from their 
cherries is spent on hiring someone else to harvest their cherries. To 
further demonstrate economic difficulties faced by the tart cherry 
industry, a representative from a cooperative testified that, in 1994, 
the cooperative was unable to make a monthly payment to growers because 
of the large crop and the necessary storage and interest costs that the 
cooperative incurred. One Michigan grower testified that in 1985, there 
were 2,000 tart cherry growers; today (1995), due to the economic 
hardships, there are 1,190 growers.
    The prior order had a grower owned reserve pool that was controlled 
by the Board. The Board had the authority to establish prices for sales 
of reserve pool cherries to handlers. There were often disagreements on 
the Board as to what price should be established for reserve pool 
cherries. One reason for the demise of the order was that the price the 
Board established for reserve pool cherries was often higher than 
cherries being sold into the marketplace. Therefore, the reserve was 
not disposed of and continued to grow into a large, high priced 
surplus. Proponents testified that the proposed order should have a 
limit on the volume of cherries which could be stored in the inventory 
reserve. They also testified that handlers, and not the Board, should 
be responsible for pricing and selling the reserve once it is released. 
This would provide an incentive to handlers to place good quality 
cherries into the reserve, avoiding a previous problem of some handlers 
placing low quality cherries into the reserve--cherries which handlers 
did not have to repurchase when reserve cherries were offered for sale. 
Based on such considerations, the proponents believe that the proposed 
order would work significantly better than the previous order.
    An economist for the proponents testified that tart cherry growers 
and handlers would benefit from the proposed order and that consumers 
would benefit from the order's stabilization of supplies and prices. 
When supplies and prices are stabilized, manufacturers should more 
readily 

[[Page 61296]]
develop new tart cherry containing products, thereby increasing the 
availability of new products and permitting retailers to introduce new 
and increased numbers of tart cherry products as part of their regular 
year-round product lines. Consumers would not be expected to have to 
pay more for tart cherry products because much of the anticipated 
favorable impact on grower returns would be absorbed by tart cherry 
processors and others in the manufacturing and distribution channels.
    The USDA's evaluation of the record shows that fluctuating tart 
cherry prices are inherently harmful to growers and consumers. If the 
peaks of grower prices were lowered and the production troughs reduced 
slightly through the operation of the order, consumer prices over a 
period of years could actually be slightly lower, and additional cherry 
supplies and products could be made available.
    The proponents testified that tart cherry growers could anticipate 
an average return of ten cents more per pound under the proposed 
marketing order. An economist for the proponents testified that had the 
order been in effect for the years 1974 through 1991, grower prices 
would have increased by an average of ten cents per pound with the 
year-to-year price variation decreased by 33 cents. If handlers had 
passed on the cost of the proposed assessment for order operation 
(approximately .75 cents per pound) to growers, growers would still 
have received an increase of at least an additional nine cents per 
pound. Thus, the proponents testified that the beneficial effects of 
the proposed order would outweigh any related costs.
    An economist for the proponents testified that the benefit/cost 
ratio for handlers and processors is also favorable, although less so 
than for tart cherry growers. The witness testified that their prices 
would increase, but less in percentage terms than grower prices. Also, 
volatility in prices and supplies would be significantly reduced. For 
the period analyzed by the proponent's witness (1974 through 1991), the 
handler/processor price would have been expected to have increased an 
average of four cents per pound and the price variation from year to 
year would have been reduced by approximately ten percent. It was 
argued that, if the price is increased, handlers/processors would have 
additional financial resources to develop and expand markets, thereby 
increasing the demand for tart cherries and tart cherry products.
    The proponents testified that the benefit/cost ratio for consumers 
under the proposed order would be slightly positive and, to the extent 
that market supplies and prices are more stable and product development 
occurs, consumers should benefit. This is because most increases in 
grower prices would not be likely to be passed on to the consumer, and 
consumers would benefit with more stable tart cherry prices and 
supplies. Even if handlers and processors were to pass on some 
percentage of increased grower prices, consumers would not be likely to 
notice major differences in the prices that they would have to pay for 
products that contain tart cherries compared to what they might have 
paid if an order had not been functional. As in most processed consumer 
food products, the cost of the primary food commodity ingredient 
represents a relatively small portion of the consumer price. The 
proponents estimated the cost of tart cherries in a cherry pie 
represented about nine percent of the total cost. Therefore, if the 
presence of an order increased grower prices by ten cents, this could 
result in a one cent increase in the cost of the ingredient at the 
retail level. The potential retail price impact of the order would 
represent a very minor change compared to the wide year to year 
fluctuations in grower and processor prices. It is, therefore, unlikely 
that the operation of an order would have much, if any, impact on the 
pricing strategies of retail operators or the average retail price. 
Furthermore, most of the evidence of how grocery stores and food 
service establishments price their products implies that they do not 
tie the retail price to the cost of the basic raw food ingredient. Two 
economists that testified at the hearing agreed with an analysis 
prepared by Mr. Bruce Marion (The Organization and Performance of the 
U.S. Food System) that states ``consumer prices in grocery stores and 
particularly in food service markets largely do not reflect 
fluctuations in cherry supplies.'' Thus, just because there is a price 
increase to the grower, that increase would not necessarily be passed 
on to the consumer that buys the cherry pie.
    The proponents testified that large swings in prices to food 
manufacturers inhibit the industry's ability to expand the usage of 
tart cherries. Manufacturers are reluctant to make product development 
or marketing investments in products whose supply and price are 
capricious. The record evidence shows that a major national fast food 
retailer discontinued making cherry pies for its fast food restaurants 
because it could not be guaranteed a consistent supply of and stable 
price for tart cherries.
    In its brief, DOJ indicated that growers and handlers can hedge 
against fluctuating prices by using the free market mechanisms 
available. For example, handlers may store low-priced tart cherries for 
sale in the future when prices are higher, diversify crops, enter into 
long-term contracts with buyers, or make more extensive use of frost 
control systems. The Department stated that the proponents ignored 
these options and never explained why they cannot thus protect 
themselves from fluctuating prices. However, the evidence showed that 
some handlers have already tried withholding product from the market. 
Persons at the hearing testified that this is a regular practice among 
some handlers, although it has not proven to be beneficial, since 
handlers acting alone or in small numbers cannot successfully 
ameliorate the current production variability problem. Growers 
testified that they have diversified somewhat, but tart cherries 
require specific growing conditions and substantial investment, so it 
is difficult for growers to further diversify. Land currently devoted 
to tart cherry production may be suitable for other tree crops such as 
apples and pears. However, there is little to no demand for additional 
supplies of these commodities and costs to convert to such crops are 
substantial. As there are often no profitable alternative uses for 
their land resources, Michigan, Utah, and Wisconsin growers' principal 
crop is often tart cherries. Some growers in other States have been 
able to diversify their crops and regard tart cherries as a minor crop, 
or have additional alternative uses for their land. However, the bulk 
of the production is not in these States.
    DOJ took the position that the proposed marketing order should be 
rejected because the order would increase consumer prices, artificially 
limit supplies, and result in the destruction of substantial portions 
of the tart cherry crop. Instead, growers, processors, buyers, and 
consumers should continue to participate in a free market for tart 
cherries. Free markets best determine optimal production and price 
levels and are often the most efficient way to supply all types of 
goods and services. Regulation should be substituted for a free market 
only where exceptional circumstances exist. It was further argued by 
DOJ in its brief that the record established that the tart cherry 
industry is a competitive marketplace. Every year hundreds of growers 
sell their crop to numerous processors who sell processed cherry 
products to many buyers. The Department stated that entry to the 
industry is easy and market information 

[[Page 61297]]
is readily available. It was the Department's position that the 
proponents did not offer any facts that there is market failure in the 
tart cherry industry that might be addressed through government 
regulation. Instead, they merely complained about fluctuating tart 
cherry prices while proposing that the order would stabilize tart 
cherry prices by restricting supply. With respect to the proponents' 
claim that fluctuations are inherently harmful to growers and 
consumers, DOJ argued that fluctuating prices provide growers and 
consumers with valuable signals which reflect changes in the market 
over time. Responses by growers and consumers to these signals assure 
resources are allocated efficiently in the tart cherry industry. The 
Department opined that volume control regulations would distort these 
signals and result in inefficient production and lost consumption 
opportunities of cherries for consumers.
    It was DOJ's position that the proponents' economic model presented 
at the hearing ignores the basic laws of supply and demand and that the 
model fails to incorporate the effect of increased plantings induced by 
the higher prices which would be brought on by volume controls. 
According to DOJ, the proponents' model rendered simulated results that 
are unreliable because the methodology ignores the supply decisions of 
growers and the demand decisions of consumers that determine prices and 
price variability in the real world.
    The market signals discussed by DOJ are available now to growers 
and handlers. However, they have been unable to effectively respond to 
them because of the large fluctuations in production. If prices 
received were to encourage additional production, record evidence shows 
that there is limited land available to effectuate such increases. 
Also, growers cannot immediately respond to increased prices. Record 
evidence shows that it takes approximately five years to receive a 
commercial cherry crop from newly planted trees. New trees are also a 
large financial investment for growers, an additional disincentive to 
increased plantings.
    If volume control regulations were established, the regulations 
would set forth the quantity of cherries that could be marketed. 
Opportunities for reserve releases would allow the industry to deal 
with demand increases and ensure a stabilized supply to the 
marketplace. The order would not establish prices.
    In years of excessive production, growers would have additional 
options to control their costs and income. There would be less of an 
incentive to deliver poor quality cherries simply to obtain some return 
on their investment and, given reduced pressures to deliver cherries at 
all costs, decisions concerning retiring marginal producing acreage, 
replanting, or economic abandonment of poor quality production could be 
made on sounder economic terms. Keeping such poor quality cherries off 
the market should also improve returns for all growers.
    If a marketing order were established, cultural practices currently 
available to growers would remain and growers would be expected to 
utilize them through market based decisions. For example, orchard 
planning, which includes removing old trees and replanting new trees, 
would need to continue to ensure continued viability of commercially 
significant acreage. However, if growers discover a substitutable crop, 
the order would not prevent them from converting tart cherry acreage to 
that crop.
    With regard to forward contracting, as mentioned by DOJ, handlers 
testified that this type of mechanism could possibly decrease the wide 
swings in prices and has been utilized to some extent. Forward 
contracting would not be prohibited under the proposed marketing order. 
However, record evidence indicates that forward contracting, in and of 
itself, has been ineffective as a tool to manage supplies or 
significantly reduce the price variability experienced in the industry.
    The proposed order is designed to bring supplies in line with 
demand, thereby increasing grower returns. It is a tool the industry 
could use to alleviate a widespread problem in the industry, one which 
has not been effectively dealt with by the economic mechanisms DOJ has 
identified. The ``real world'' has resulted in significant losses to 
tart cherry growers in seven of the last eight years.
    In a brief submitted on behalf of the Oregon Tart Cherry 
Association, Mr. Lee Schrepel contended that the proponents failed to 
offer convincing evidence that the benefits derived from the proposed 
order would exceed the costs for participants in an equitable manner. 
Mr. Schrepel stated that the record shows that Oregon growers are 
likely to bear comparatively greater costs than other districts 
proposed to be regulated under the order. Any potential increase in 
grower prices would be tempered by inventory reserves which would tend 
to depress the market. There is no evidence to support Mr. Schrepel's 
contention that Oregon would bear greater costs than the other 
districts. Inventory reserves would be held off the market and slowly 
released when needed. Order imposed mechanisms would prevent their 
release until they are needed in the market, preventing the exact type 
of market depression unregulated carryovers now cause. Mr. Schrepel's 
other concerns have been addressed under material issue number 5(c).
    The preponderance of the evidence presented at the hearing supports 
a Federal marketing order for tart cherries. The proponents have 
demonstrated that there is need for regulation in order to bring 
supplies in line with demand. The use of a marketing order could 
increase demand for tart cherries through price stability, market 
research and new market development opportunities. Also, the proposed 
order could increase returns to growers which is one of the objectives 
of the Act.
    In view of the foregoing, and based on the record of the 
proceeding, it is concluded that current economic and marketing 
conditions justify a need for a marketing order for tart cherries grown 
in Michigan, New York, Pennsylvania, Oregon, Utah, Washington, and 
Wisconsin. The order would meet many needs of the industry and would 
tend to effectuate the declared policy of the Act.
    3. A definition of the term ``production area'' should be included 
in the order to delineate the area proposed to be regulated. Such 
definition should include the States of Michigan, New York, 
Pennsylvania, Oregon, Utah, Washington, and Wisconsin.
    The area defined in the proposed order comprises what is generally 
recognized as the major tart cherry producing States within the United 
States. The States included are not, to the most part, contiguous, and 
therefore do not generally share the same climatic conditions. However, 
the defined production area does generally share the same cultural, 
production, processing, and distribution characteristics with respect 
to tart cherries, although differences in technology and transportation 
costs are evident. The State of Michigan leads in volume produced with 
approximately 68 percent of the 48,454 bearing U.S. acres of tart 
cherries reported in 1993, as well as approximately 60 percent of all 
known producers. During the same year, Utah was reported as having the 
second highest production with approximately eight percent of the 
bearing acreage and 12 percent of the producers. New York had seven 
percent of the bearing acreage and 13 percent of the producers, 
Wisconsin had six percent of both the acreage and the producers, Oregon 
had four percent of the acreage and three 

[[Page 61298]]
percent of the producers, Washington also had four percent of the 
nation's acreage but less than one percent of the producers, and 
Pennsylvania had three percent of both the bearing acreage and the 
producers.
    During the hearing process, considerable testimony was received 
pertaining to the proposed scope of the production area under the 
order. Most of the testimony was centered around the question of 
whether the States of Washington and Oregon should be included in the 
definition of the production area. The subject of removing any or all 
of the States of Michigan, New York, Pennsylvania, Utah, and Wisconsin 
from the proposed order was not broached during the hearing process, 
other than in testimony made against issuance of any marketing order 
for tart cherries.
    Hearing evidence indicates that the primary issues encompassing the 
question of whether Oregon and Washington should be included within the 
proposed marketing order pertain to prices received by producers, the 
geographic scope of markets as they relate to particular forms of 
processed tart cherries, and whether competition is international, 
national, or regional in scope. The issue of regional responsibility 
for the current surplus of bearing tart cherry acreage was also raised 
during the hearing.
    Lee Schrepel, representing the Oregon Tart Cherry Growers 
Association, testified that there is no meaningful relationship between 
the small tart cherry crop in Oregon and nationwide producer prices. He 
also stated that the market for processed tart cherries in the States 
of Oregon and Washington is substantially different from the rest of 
the U.S. market. The different processed forms of tart cherries 
generally include frozen, canned, brined, dehydrated, pureed, and juice 
concentrated products. Mr. Schrepel, as well as other producers and 
processors from Oregon and Washington testified that, whereas the 
majority of U.S. tart cherries are processed into frozen and canned 
forms, a significant proportion of Pacific Northwest cherries are 
processed into what is generally termed as secondary market forms, such 
as brined, dehydrated, juice concentrate, and pureed cherries. 
Testimony was received that these secondary, and in some cases, 
specialized, forms are marketed to a large extent in ``niche'' markets 
that have little or no relation to the national market for frozen and 
canned cherries. Some examples of ``niche'' markets provided during the 
hearing included wine, dried specialty fruit, and specialty juices. 
Moreover, opponents to inclusion of Oregon and Washington in the 
proposed order testified that a majority of their frozen and canned 
product is marketed on the West Coast or into export markets, 
specifically Japan, rather than to markets east of the Rocky Mountains. 
Further testimony indicated that Pacific Northwest tart cherries are 
often higher in color and Brix, or sugar content, than cherries from 
other producing States. While purportedly not of great importance in 
the freezing and canning of tart cherries, these characteristics are 
valued in the concentrate business. As a consequence of these 
differences, it was argued that competition between the Pacific 
Northwest and other tart cherry producing regions has not been, nor 
will be, significant.
    While it is true that a notable portion of the Pacific Northwest 
crop is marketed in secondary forms, a viable argument was not 
presented that demonstrated that this isolates the majority of such 
crop from other markets, either nationally or internationally. To the 
contrary, evidence presented during the hearing by Dr. Olan Forker of 
Cornell University shows that, nationally, producer prices move in the 
same direction and in similar amounts. This analysis, based upon 
statistical information presented throughout the hearing process, shows 
a definite national correlation or link in the prices received by all 
tart cherry producers. This correlation further indicates that the 
markets available to producers for fresh tart cherries grown for 
processing are national in scope.
    In partial response to testimony that the Pacific Northwest States 
largely produce tart cherries for markets other than the primary frozen 
packed market, such as the juice concentrate market, proponents of the 
proposed order testified that increasing supplies of juice concentrate 
from Michigan and from Eastern Europe would, in time, undermine that 
market. Proponents testified that the resulting price erosion in the 
juice concentrate market would force both Oregon and Washington to move 
increasingly into the primary freezing and canning market. Indeed, 
record testimony suggests that marketing trends in the State of 
Washington are already moving in this direction.
    Hearing evidence further indicates that the end-use, or consumer 
market, is also national in scope. For example, consumers in any 
location are not likely to differentiate between a can of pie cherries 
grown and processed in the Pacific Northwest and one originating from 
the Midwest or East.
    Pacific Northwest producers and processors advocating exclusion 
from the proposed order contended that their regions have not 
contributed to the tart cherry over-supply situation, and therefore 
should not be held responsible for alleviating the problem. This 
testimony indicated that the Oregon and Washington industries have 
managed to consistently market all tart cherries produced. Moreover, it 
was testified that statistical evidence shows that Oregon has 
experienced a reduction in tart cherry acreage in recent years, thus 
reflecting a form of independent supply control without the use of 
complex federal regulations. Opponents to the inclusion of Oregon and 
Washington specifically, and the proposed order generally, insisted 
that the national over-supply problem is largely caused by the Michigan 
industry and therefore should be borne by it alone. Opponents testified 
that both Oregon and Washington together annually contribute an amount 
equal to seven percent of the nation's tart cherry stocks and are thus 
too small to have a significant impact on national supply.
    Nonetheless, evidence supports the position that the over-supply 
situation in the U.S. is a national problem. Since the tart cherry 
industry is national in scope, evidence indicates that the entire 
industry should work together to alleviate the problem, regardless of 
any current localized over-planting of tart cherry trees. Although it 
is acknowledged that the Pacific Northwest has not contributed 
significantly to the over-supply problem, this area has the potential 
in the future to expand its production, notwithstanding inclusion or 
exclusion from the proposed order. Regardless of the question of 
supply, any region capable of significantly increasing bearing acreage, 
such as Oregon and Washington, would benefit from the provisions of the 
proposed order and thus should be included in the program. Testimony 
supports the proponents' opinion that, if excluded, the Oregon and 
Washington tart cherry industries could be characterized as ``free-
rider'' States and could thus contribute to inequities within the 
national tart cherry industry rather than to a national solution. The 
majority of testimony from individuals from States other than Oregon, 
including producers and processors representing approximately half of 
the production from the State of Washington, overwhelmingly supported 
inclusion of all seven states within the defined production area.
    It was testified at the hearing that the proposed order ignores the 
fact that both Montana and Colorado produce tart 

[[Page 61299]]
cherries. It was contended that if States such as Oregon and Washington 
must be included in the proposed order, then Montana and Colorado 
should be as well. Evidence presented at the hearing showed, however, 
that bearing acreage and production in Montana and Colorado is 
insignificant and will likely remain insignificant. Therefore, Montana 
and Colorado should be excluded from the production area at this time.
    Opponents to the proposed inclusion of the Pacific Northwest in the 
order asserted that climatic and general production characteristic 
differences in the various tart cherry producing areas are significant 
enough to warrant exclusion of Oregon and Washington from the order. It 
is true that climatic differences in the various regions can be quite 
significant--they are even quite different between the producing 
regions in Oregon and Washington. However, there is insufficient 
evidence to show that climate, or cultural practices for that matter, 
have a significant effect on the various regions with respect to 
pricing or markets.
    To create orderly marketing conditions through volume regulations 
with the goal of achieving parity prices should require that all 
significant tart cherry producing areas in the United States be 
included under the proposed order, since all would be competing in the 
same market. To exclude any portion of the proposed production area, as 
defined, would tend to defeat the purpose of the proposed order and 
could result in depressed prices of the regulated tart cherries. All 
territory included within the boundaries of the production area 
constitutes the smallest regional production area that is practicable, 
and thus consistent with carrying out the declared policy of the Act. 
The production area, therefore, should be defined as hereinafter set 
forth.
    4. The term ``handler'' should be defined to identify the persons 
who would be subject to regulation under the order. Such term should 
apply to any person who handles cherries or causes cherries to be 
handled for his or her own account. The term is also used to identify 
those persons who are eligible to vote for, and serve as, handler 
members and alternate handler members on the Board. Such term should 
apply to any person who first performs any of the activities within the 
scope of the term ``handle'' as hereinafter defined. Record evidence 
indicates that the term should also include growers that deliver 
cherries to a handler but keep title of the cherries and pay to have 
them processed. This is referred to in the industry as custom 
processing. Evidence supports the position that the grower would be 
performing a handler function by retaining the right to sell the 
product and should therefore be covered under the definition of 
handler. The definition of the term ``Handler'' identifies persons who 
would be responsible for meeting the requirements of the order, 
including paying assessments and submitting reports and maintaining 
inventory reserves.
    The term ``handle'' should be defined in the order to establish the 
specific functions that would place tart cherries in the current of 
commerce within the production area or between the production area and 
any point outside thereof, and to provide a basis for determining which 
functions are subject to regulation under authority of the marketing 
order.
    The record indicates that the term ``handle'' should include the 
acts of processing cherries by brining, canning, concentrating, 
freezing, dehydrating, pitting, pressing or pureeing cherries, or in 
any other way, converting cherries commercially into a processed 
product. The definition also includes diverting cherries at the 
handler's plant and acquiring grower diversion certificates under the 
marketing order. Diversion will be discussed in material issue 5(f). 
However, the term ``handle'' shall not include the brining, canning, 
concentrating, freezing, dehydrating, pitting, pressing or the 
converting, in any other way, of cherries into a processed product for 
home use and not for resale. The term also does not include: (1) The 
transportation within the production area of cherries from the orchard 
where grown to a processing facility located within such area for 
preparation for market; (2) the delivery of cherries to a processing 
facility for such preparation; (3) the sale or transportation of 
cherries by a producer to a handler of record within the production 
area; and (4) the sale of cherries in the fresh market in an unpitted 
condition. In the first three cases, the tart cherries have not been 
prepared for market nor are they in their existing condition being 
transported to market. The sale of fresh unpitted cherries should not 
be regulated because there are very few sales into this market.
    Testimony presented at the hearing by Mr. Schrepel stated that the 
terms hot pack, pie filling and culls should be added to the definition 
of handle. The term ``handle'' as proposed includes these terms since 
hot pack and pie filling are canned products. Mr. Schrepel stated that 
he wanted these terms added to make the definition more explicit. 
However, it would be redundant to include these terms in the 
definition.
    5. (a) Certain terms should be defined for the purpose of 
specifically designating their applicability and limitations whenever 
they are used in the order. The definition of terms discussed below is 
necessary and incidental to attain the declared policy and objectives 
of the order and Act.
    ``Secretary'' should be defined to mean the Secretary of 
Agriculture of the United States, or any officer, or employee of the 
United States Department of Agriculture who has been or who may be 
delegated the authority to act for the Secretary.
    ``Act'' should be defined to mean the Agricultural Marketing 
Agreement Act of 1937, as amended (7 U.S.C. 601-674). This is the 
statute under which the proposed regulatory program would be operative, 
and this definition avoids the need to refer to the citation throughout 
the order.
    ``Board'' should be defined to mean the administrative agency known 
as the Cherry Industry Administrative Board established under the 
provisions of the marketing order. Such a board is authorized by the 
Act, and this definition is merely to avoid the necessity of repeating 
the full name each time it is used. The Board is discussed in detail in 
material issue 5(b).
    ``Crop Year'' should be defined to mean the annual period that tart 
cherries are harvested and marketed. Record evidence indicated that the 
harvesting and marketing cycle for tart cherries begins in July. 
Therefore, ``Crop Year'' should be defined as the 12-month period 
beginning on July 1 and ending on June 30 of each year. Volume control 
regulations are implemented based on upcoming crop year forecasts and 
reports of final crop delivered to handlers. With the approval of the 
Secretary, the Board also has the authority to change the crop year if 
another period is found to be more appropriate. The proponents 
testified that a change would be necessary if a new variety of tart 
cherry was developed that would have an earlier harvest cycle.
    The term ``Cherries'' should be defined to specify the commodity 
covered by the proposed order and to which the terms and provisions of 
the marketing order would be applicable. The record indicates that 
``Cherries'' means all tart/sour cherry varieties grown in the 
production area classified as Prunus cerasus, Prunus cerasus by Prunus 
avium, or Prunus cerasus by Prunus fruticosa. Record evidence 

[[Page 61300]]
indicated that the definition should not include Prunus avium, which is 
the sweet cherry variety. The proponents testified that in order to 
embrace the activities that are taking place in plant breeding 
programs, the definition should include all the varieties as proposed 
under the ``Cherries'' definition. These varieties are grown throughout 
the proposed production area.
    ``Department'' or ``USDA'' should be defined to mean the United 
States Department of Agriculture which is the governmental body 
responsible for oversight of Federal marketing orders and agreements.
    ``District'' should be defined to mean each subdivision of the 
production area described in the marketing order. The district 
delineations defined would be important for the purposes of Board 
nominations and implementation of volume control provisions. Testimony 
indicated that authority should be provided to allow the Board to 
recommend to the Secretary the establishment of other districts or 
addition of other districts, as may be necessary, through informal 
rulemaking procedures. Therefore the definition of ``district'' 
contains such authority. This term is further discussed under material 
issue no. 3.
    The term ``Fiscal period'' should be defined to mean the 12-month 
period for which the Board would plan the use of its funds. This period 
should be established to allow sufficient time prior to the time tart 
cherries are first marketed for the Board to organize and develop its 
budget for the ensuing season. However, it should also be set to 
minimize the incurring of expenses during a fiscal period prior to the 
time assessment income is available to defray such expense.
    The Notice of Hearing proposed that ``fiscal period'' mean the 12-
month period beginning on July 1 and ending on June 30 of the following 
year. Record evidence indicates that the harvesting and marketing cycle 
for tart cherries grown in the production area begins in July and ends 
in August. The fiscal period should coincide with the tart cherry crop 
year, because the industry typically plans its operation on this basis. 
Hearing testimony supported the fiscal period being established for a 
12-month period beginning on July 1 and ending on June 30 of the 
following year.
    However, based on future experience, it may be desirable to 
establish a fiscal period other than one ending on June 30. Thus, 
authority should be included in the order to provide for the 
establishment of a different fiscal period if recommended by the Board 
and approved by the Secretary through informal rulemaking procedures. 
In any event, the beginning date of any new fiscal period should be 
sufficiently in advance of the harvesting season to permit the 
committee to formulate its marketing policy and perform other 
administrative functions. Also, it should be recognized that if at some 
future date there is a change in the fiscal period, such change would 
result in a transition period being more or less than 12 months. For 
example, the Board may decide to change the fiscal period from 
beginning on July 1 through June 30 to August 1 through July 31. If 
that occurred, the fiscal period would be longer in one year running 
from July 1 through July 31 of the following year, to incorporate the 
new fiscal period.
    The term ``Free market tonnage percentage cherries'' should be 
defined to mean that portion of cherries handled in a crop year which 
are free to be marketed in commercial outlets under any volume 
regulation established under the order. Testimony indicated that the 
definition was taken from volume control formulas under other 
established marketing order programs.
    The term ``grower'' should be synonymous with ``producer'' and 
should be defined to identify those persons who are eligible to vote 
for, and serve as, grower members and alternate grower members on the 
Board and those who may vote in any referendum. The term should mean 
any person engaged in a proprietary capacity in the production of tart 
cherries for market within the production area. The term ``grower'' 
should not include a person who produces cherries to be marketed 
exclusively for the fresh market in an unpitted condition. Each 
business unit (such as a corporation or partnership) should be 
considered a single grower and should have a single vote in nomination 
proceedings and referenda. The term ``grower'' should include any 
person who owns or shares in the ownership of tart cherries such as a 
landowner landlord, tenant, or sharecropper. A person who rents and 
produces tart cherries resulting in that person's ownership of all or 
part of the tart cherries produced in that land should also be 
considered a grower.
    Also, any person who owns land which that person does not farm, but 
as rental for such land obtains ownership of a portion of the tart 
cherries produced thereon, should be regarded as a grower for that 
portion of the tart cherries received as rent. The tenant on such land 
should be regarded as a grower for the remaining portion produced on 
such land.
    A joint venture is one whereby several persons contribute resources 
to a single endeavor to produce and market a tart cherry crop. In such 
venture, one party may be the farmer who contributes one or more 
factors such as labor, time, production facilities or cultural skills, 
and the other party may be a handler who contributes money and 
cultural, harvesting, and marketing supervision. Normally, a husband 
and wife operation would be considered a partnership. Any individual, 
partnership, family enterprise, organization, estate, or other business 
unit currently engaged in the production of tart cherries for market 
would be considered a grower under the marketing order, and would be 
entitled to vote in referenda and Board nominations. Each party would 
have to have title to at least part of the crop produced, electing its 
disposition, and receiving the proceeds therefrom. This control would 
come from owning and farming land producing tart cherries, payment for 
farming services performed, or a landlord's share of the crop for the 
use of the producing land. A landlord who only receives cash for the 
land would not be eligible to vote. A business unit would be able to 
cast only one vote regardless of the number and location of its farms, 
but each legal entity would be entitled to vote.
    ``Person'' should be defined to mean an individual, partnership, 
corporation, association, or any other business unit. This definition 
is the same as that contained in the Act.
    ``Primary inventory reserve'' should be defined to mean that 
portion of handled cherries that are placed into inventory in 
accordance with any restricted percentage established under the volume 
control provisions of the marketing order. Testimony indicated that 
handlers would be responsible for maintaining the reserve and selling 
the reserve once it is released by the Board into certain outlets. The 
Board would reimburse handlers for the inspection of the primary 
inventory reserve. The Board could also establish quality requirements 
that cherries may need to meet before they are placed in an inventory 
reserve. Testimony supported that handlers could place tart cherries in 
the primary inventory reserve in any processed form.
    ``Secondary inventory reserve'' should be defined to mean any 
portion of handled cherries voluntarily placed into inventory by a 
handler under the volume control provisions of the order. This 
definition is used to define the additional option handlers may use in 
the event free and restricted percentages are announced by the Board. 
The secondary inventory reserve is a handler 

[[Page 61301]]
selected option and all expenses of such reserve are borne by the 
handler.
    The term ``Restricted percentage cherries'' should be defined to 
mean that proportion of cherries handled in a crop year which must be 
withheld from marketing in normal commercial outlets in that crop year 
under a volume regulation established under the marketing order. Such 
cherries would be either placed into a primary or secondary inventory 
reserve or diverted in accordance with the diversion provisions of the 
marketing order. Testimony indicated that the Board would be 
responsible for evaluating supply and demand conditions and 
recommending to the Secretary, if necessary, the implementation of 
volume control percentages.
    The term ``sales constituency'' should be defined to mean a common 
marketing organization or brokerage firm or individual representing a 
group of handlers or growers. The record indicates, that in this case, 
the largest single sales constituency currently in the industry is 
Cherry Central, Inc.
    (b) Pursuant to the Act, it is desirable to establish an agency to 
administer the order locally as an aid to the Secretary in carrying out 
the declared policy of the Act and to provide for effective and 
efficient operation of the order. The establishment and membership of a 
Board is addressed in Sec. 930.20 of the proposed order. The record 
shows that the Board should consist of 18 members, including one public 
member. Seventeen members should be growers or handlers of tart 
cherries, or individuals involved in both the growing and handling of 
tart cherries. One member should be selected from the general public. 
Each member should have an alternate possessing the same qualifications 
as the member.
    For the purpose of Board representation, the order should provide 
that the production area be divided into nine districts. The record 
indicates that the 17 industry members of the Board should be composed 
of growers and handles from within each district as follows: (1) Two 
grower members and two handler members from District 1, which would 
consist of that portion of the State of Michigan that is North of a 
line drawn along the northern boundary of Mason County and extended 
east to Lake Huron; (2) Three grower and handler members from District 
2, which would consist of that portion of the State of Michigan that is 
South of District 1 and North of a line drawn along the southern 
boundary of Allegan County and extended east to Lake St. Clair. The 
number of grower and handler representatives in District 2 would 
alternate each full term of the Board. For example, evidence indicated 
that during the initial three-year term of the proposed Board, District 
2 would be represented by two handler members and one grower member. 
During the second three-year term, District 2 would be represented by 
two grower members and one handler member. This would thus alternate 
for each succeeding term of office; (3) One grower member and one 
handler member from District 3, which would consist of that portion of 
the State of Michigan not included in Districts 1 and 2; (4) One grower 
member and one handler member from each of Districts 4 and 7, which 
would consist of the states of New York and Utah, respectively; and (5) 
One grower member or handler member from each of Districts 5, 6, 8, and 
9, which would consist of the states of Oregon, Pennsylvania, 
Washington, and Wisconsin, respectively. The districts were developed 
based on the actual cherry production in those areas.
    The order should provide that the Board positions for Districts 5, 
6, 8, and 9 could be filled by individuals who are either growers or 
handlers of tart cherries, or by individuals involved in both the 
growing and handling of tart cherries. Furthermore, should any one of 
Districts 5, 6, 8, and 9 become subject to volume regulation under 
Sec. 930.52(a), the Board should be realigned by the Secretary to 
provide that such district be represented by at least one grower member 
and one handler member rather than just one or the other.
    The order should provide that, within any district represented by 
multiple seats, not more than one Board member may be elected from a 
single sales constituency. As addressed earlier, sales constituency is 
defined in Sec. 930.16 to mean ``a common marketing organization or 
brokerage firm or individual representing a group of handlers or 
growers.'' However, there should be no prohibition on the number of 
Board representatives from differing districts that may be elected from 
a single sales constituency which may have operations in more than one 
district.
    The proponents testified that a limit to the total number of Board 
members from a single sales constituency should not be warranted, with 
the condition that there is no more than one such member from each 
district. The proponents suggested that it would be desirable to have 
Board membership reflect any potential industry affiliation with a 
single sales constituency. The proponents also testified that the 
single largest sales constituency in the tart cherry industry, Cherry 
Central, Inc., could possibly gain up to five seats on the Board under 
current industry conditions, but was doubtful that Board domination by 
such sales constituency would ever occur.
    Testimony was received that the order should prohibit any sales 
constituency from gaining a majority of the seats on the Board. The 
record indicates that the order, as currently proposed, would prevent 
any single sales constituency from gaining a majority of the Board 
positions. With nine districts, any single sales constituency would 
have the maximum potential of nine members on the Board.
    The Board should elect a chairperson, vice-chairperson, and any 
other officers it may find appropriate from among its members at its 
first meeting and annually thereafter. Testimony supports the position 
that all such officers should be voting members of the Board.
    Upon recommendation of the Board and approval of the Secretary, 
reestablishment of districts or subdivisions of districts, and the 
distribution of grower and handler representation within any district 
or subdivisions thereof, is provided for in proposed Sec. 930.21. Any 
such recommended change is subject to the provisions of Sec. 930.23, as 
well as to consideration by the Board of the relative levels of 
production of tart cherries within each district, and the relative 
importance of new concentrations of tart cherry production within the 
overall production area. Prior to any such recommendation, the Board 
should also consider how the efficiency of marketing order 
administration is effected by geographic location of areas of 
production, as well as whether shifts in cherry production within the 
production area have occurred. The Board should also take into 
consideration any changing of the roles, or functions, of growers and 
handlers as it pertains to the production and handling of tart 
cherries. Any changes in the proportion of growers to handlers that may 
occur, as well as any other relevant factors, should also be considered 
by the Board before making any recommendations for redistribution or 
reestablishment.
    Proposed Sec. 930.22 provides that the term of office of Board 
members and their respective alternates should be three fiscal years. 
Approximately one-third of the Board terms should end each year. As 
defined earlier, fiscal year should mean the period beginning on July 1 
and ending on June 30, or such other period as the Board may recommend 
and the Secretary approve. The record indicates that the term of office 
should begin on July 1, the 

[[Page 61302]]
beginning of the marketing year for the tart cherry crop.
    The length of the terms of those initial industry Board members who 
represent districts with more than one seat would be staggered so that 
all of the members' terms would not expire at the same time. The 
initial term of offices for the nine members and their respective 
alternates from Districts 1, 2, and 3 should be established so that 
one-third of such initial members and alternates would serve for a one 
year term, one-third would serve for a two year term, and one-third 
would serve for a three year term. It is also provided that one-half of 
the initial four members and respective alternates from Districts 4 and 
7 would serve for one year, and one-half would serve for two years. 
Under the terms of the proposed order, the initial four members and 
four alternates from Districts 5, 6, 8, and 9 would all serve their 
full three year terms. Determination of which of the initial members 
and alternate members from Districts 1, 2, 3, 4, and 7 would serve for 
one year, two years, or three years would be by lot.
    It was proposed by the proponents that the term of office of the 
public member and alternate public member should be for one fiscal year 
only. The proponents testified that to limit the term of the public 
member and alternate public member to one fiscal year would provide the 
industry members of the Board with the ability to quickly and easily 
replace such public members should Board expectations not be met.
    An alternative proposal received during testimony favored a two-
year term of office for all Board members and alternate members, 
inclusive of the public member and alternate public member. The 
justification provided in support of a two-year term of office was that 
Board members would gain sufficient experience within a two year time 
period and that a third year would not add significant benefit to 
either the members or the Board.
    The preponderance of evidence, however, supports a three-year term 
because it would give members sufficient time to become familiar with 
Board operations and enable them to make meaningful contributions at 
Board meetings. Furthermore, a three-year term would enable 
establishment of a rotation so that approximately one-third of the 
Board membership would terminate each year. Such staggered terms would 
lend continuity to the Board by insuring that some experienced members 
would be on the Board at all times.
    Insufficient supporting evidence was provided for the proposition 
that, while industry members and alternate members should serve three-
year terms, the public member and alternate public member should be 
limited to a one-year term. To maintain the continuity that is afforded 
the Board by industry members serving for three years, it logically 
follows that the public member should also serve for three years. If 
the public member and alternate would only serve one-year terms that 
are dependent on the Board's annual review, and nomination to the Board 
requires a \2/3\ majority vote, the public member and alternate could 
feel pressured to always vote with the majority of the Board members. 
Record evidence supports public representation on the Board, and just 
as three-year grower and handler member terms offer many advantages to 
the Board, the tart cherry industry, and the members themselves, so 
would three-year public member terms. Therefore, the order should 
provide that the terms for all members be three years in duration. 
Approximately one-third of the total Board membership should terminate 
each year. The public member and alternate public member would both 
serve their full three-year terms initially and thereafter.
    To prevent unnecessary vacancies from occurring on the Board, the 
order should provide that members and alternates shall serve in such 
capacity for the term of office, or portion thereof, for which they are 
selected and have qualified, and until their respective successors are 
selected and have qualified. However, so that there is continual 
turnover in membership and infusion of new ideas, the order should 
provide that the grower and handler members, and their respective 
alternates, may not serve more than two consecutive three-year terms on 
the Board.
    The proponents proposed that there should be no limit on the number 
of consecutive terms the public member and alternate public member 
could serve on the Board. Just as testimony offered by the proponents 
indicated that a one-year term of office for the public member and 
alternate public member would provide the Board with the flexibility to 
quickly replace such members should they prove inadequate, the 
proponents also argued that unlimited tenure would provide the Board 
with the flexibility of maintaining the public member and alternate 
public member indefinitely should such be desired.
    However, there was insufficient evidence offered during the hearing 
process to support a Board membership with differing tenure 
requirements. A two-term tenure requirement for the public member and 
alternate public member would offer the Board the same infusion of new 
ideas from the public perspective that is provided from the industry 
perspective by continual turnover in grower and handler membership. The 
order, therefore, should provide that all members of the Board be 
restricted to serving no more that two consecutive three-year terms. 
Any initial term lasting less than three years should not be counted 
towards this six-year tenure limitation.
    After serving two consecutive terms, Board members should be 
eligible to serve as alternates, but should be ineligible to serve as 
members for a period of at least one year. Conversely, alternate 
members should be eligible to serve as Board members after serving two 
consecutive terms as alternate members, but should be ineligible to 
again serve as alternate members for a period of at least one year. The 
alternate member's term of office should coincide with that of the 
position's member.
    The effective date of the order, if issued, may not coincide with 
the specified beginning date of the terms of office of Board members 
and alternates. Therefore, a provision is necessary to adjust the 
initial terms of office. To accomplish this, the order should provide 
that if the initial fiscal period is less than six months in duration, 
that is beginning after January 1, then the tolling of time for the 
initial term of office would not begin until the following July 1. 
Similarly, if the initial fiscal period is for a duration of between 6 
and 12 months, then the tolling of time for the initial term of office 
would begin on the prior July 1.
    As an example, if an order were promulgated in May of 1996, and in 
the event that the initial members are selected prior to July 1, 1996, 
the initial terms of office could be adjusted as follows: the initial 
one-year term would not end on June 30, 1996, but would continue until 
June 30, 1997. The two-year and three-year terms would end on June 30, 
1998, and June 30, 1999, respectively. However, if the initial members 
should start their terms of office between July 1, 1995, and February 
1, 1996, the initial one-year term would end on June 30, 1996. The two-
year and three-year terms would end on June 30, 1997 and June 30, 1998, 
respectively.
    For the proposed Board to function, a mechanism is required by 
which members and alternate members may be nominated, elected, and 
appointed by the Secretary. Section 930.23 of the proposed order 
provides for a nomination and election procedure using petition forms 
and election ballots 

[[Page 61303]]
and utilizing the U.S. Postal Service, or such other means as the 
Secretary may determine.
    Proposed Sec. 930.29 establishes the eligibility criteria for 
membership on the Board. Each of the grower members and alternate 
grower members of the Board should be tart cherry growers or officers 
or employees of tart cherry growers. Likewise, each of the handler 
members and alternate handler members of the Board should be tart 
cherry handlers or officers or employees of tart cherry handlers. The 
proposed order further maintains that, to be eligible to serve on the 
Board, each of these handlers, or officers or employees of handlers, 
must own or lease, and operate a tart cherry processing facility in the 
district for which nominated to serve. A person who is a grower and 
handler in the industry (grower/handler) could serve as either a grower 
or handler member or alternate grower or handler member on the Board.
    To be eligible to participate in the nomination and election 
process, the order should provide that an individual be a grower or a 
handler of tart cherries or a duly authorized officer or employee of a 
tart cherry grower or handler. To discourage potential duplication, 
eligible growers and handlers would only participate in the nomination 
and election process in the district where they produce or handle tart 
cherries. Since it is possible for a tart cherry grower to have 
production in more than one district and a handler to have handling 
facilities in more than one district, the proposed order provides that 
such growers and handlers must choose which district they wish to 
participate in. The record indicates that neither growers nor handlers 
would be allowed to participate in the nomination and election process 
in more than one district during a single fiscal period.
    Furthermore, the order should restrict growers and handlers from 
participating in the nomination process in one district and the 
election process in a second district during the same election cycle. 
However, if growers or handlers with operations in more than one 
district do not participate in the nomination process but do 
participate in the election process, they should be authorized to 
select the district in which they wish to vote. To help ensure that 
proper administration of the nomination and election process is 
maintained, it is reasonable for the order to require such growers and 
handlers to notify the Secretary or the Board of their choice of 
districts prior to participation in the process.
    In order that a grower's name appear on an election ballot, the 
individual's name must first be submitted to the Board on a nomination 
petition form. Such petition form would contain the signatures of at 
least five eligible growers other than the nominee in order to be 
accepted. The order should provide that petitions for Board membership 
by growers from District 8 (Washington State) must be signed by two 
eligible growers other than the nominee. This differs from the 
procedure used in other districts because there are relatively few tart 
cherry growers in Washington. It would be reasonable to conclude that 
should the number of tart cherry growers in Washington significantly 
increase in the future, this provision could be revised, through 
informal rulemaking, to more closely approximate requirements in the 
other districts.
    Similarly, in order that a handler's name appear on an election 
ballot in any district, the nominee's name should be submitted on a 
petition form signed by at least one other eligible handler. In 
districts where either a grower or a handler may be elected to the 
single position (initially Districts 5, 6, 8, and 9), both growers and 
handlers may be nominated for the single seat.
    Testimony supported the inclusion of an order provision that would 
restrict individuals who are growers, but who may be regulated as 
handlers while having some or all of their tart cherries custom packed, 
to participating in the nomination and election process as growers 
rather than as handlers. Hearing evidence supports the provision that, 
for purposes of nominations and elections, such grower-handlers not 
owning or leasing and operating their own packing facilities be 
identified as growers.
    At the hearing, witnesses supported adding a public member to the 
Board. While the influence of consumers would be implicitly present in 
the deliberations of the grower and handler Board members, and all 
meetings would be public, the appointment of a public member would 
offer many advantages. One such advantage would afford the industry an 
opportunity to discuss its problems and concerns with someone without 
an economic interest in the tart cherry industry.
    The public member and alternate public member should not be 
permitted to have a direct financial interest in the production, 
processing, financing, buying, packing, or marketing of tart cherries 
except as a consumer; nor be a director, officer, or employee of any 
firm so engaged. Such public members should be willing to devote 
sufficient time to regularly attend Board activities and to familiarize 
themselves with the background and economics of the industry, as well 
as with the provisions of the proposed order. Testimony indicated that 
the public member and alternate public member could, for example, be 
individuals who are retired food industry executives or are associated 
with an academic institution. The Board, once formed, could decide what 
further qualifications, if any, the public member and alternate public 
member should possess.
    During the nomination process, tart cherry growers and handlers in 
each district would have an opportunity to nominate eligible 
individuals for the public member and alternate public member positions 
on the Board. Record evidence indicates that this would be accomplished 
in the same manner that grower and handler members are nominated. All 
eligible growers and handlers in each district would have the 
opportunity to submit the name of a nominee for both the public member 
and the alternate public member on a petition form provided by the 
Board or the Secretary. At one of its first meetings following initial 
appointment and every three years thereafter, Board members would 
elect, by at least a two-thirds majority of the entire Board, the 
public member and alternate public member. The Board members would vote 
for the public member and alternate public member from the list of 
nominees received from tart cherry growers and handlers. If such 
nominations are not made, the Board should have the authority to 
nominate qualified individuals for subsequent election. The persons 
elected by the Board to fill the public member and alternate public 
member positions would then be subject to appointment by the Secretary.
    A procedure should be in place that provides adequate time for the 
nomination and election process to be completed and appointments made 
by the Secretary prior to the beginning of the next term of office. 
Thus it is reasonable that the Board should announce and solicit 
nominations at least 180 days before the expiration of the current term 
of office. Furthermore, a requirement that the nomination petition form 
be returned to the Board not less than 120 days prior to the then 
current term's expiration would provide adequate time to complete the 
election of industry members. Such a procedure would help ensure that 
appointments by the Secretary are made in time to seat the new Board by 
the beginning of the next term.
    Once the completed petition forms are returned, the Board would 
distribute ballots containing the names of all eligible grower and 
handler nominees by district via the U.S. Postal Service, or 

[[Page 61304]]
such other means as the Board may recommend and the Secretary approve, 
to all eligible growers and handlers. Hearing evidence indicates that, 
in Districts 1, 2, 3, 4, and 7, growers would be permitted to vote only 
for grower members and alternate grower members, and handlers would be 
permitted to vote only for handler members and alternate handler 
members. In Districts 5, 6, 8, and 9, where the single seat on the 
Board may be either a handler or a grower, both growers and handlers 
may vote regardless of whether the nominees are producers or handlers 
of tart cherries. In this situation, the member could be a grower and 
the alternate member could be a handler or vice versa or both.
    The Board should have the ability to modify these provisions of the 
proposed order, or to specify more detailed nomination and election 
procedures. Consequently, the order should contain provision for the 
Board, with the approval of the Secretary, to establish rules and 
regulations necessary and incidental to the administration of the 
nomination and election process. The order should further provide that 
the Secretary or the Board may administer the nomination and election 
process as outlined herein.
    Once affirmed, the nomination and election results should be 
presented to the Secretary for appointment pursuant to Sec. 930.24. 
Following the Board's submission of the nomination and election results 
to the Secretary, the Secretary would appoint the grower and handler 
members and alternate members on the basis of representation provided 
for in Sec. 930.20. The order should also authorize the Secretary to 
appoint the public member and alternate public member once elected by 
the newly appointed Board.
    In the case of the initial Board, the Secretary would conduct 
meetings to nominate initial Board members. All producers of record in 
the production area would receive notice of the meetings in sufficient 
time to enable them to attend. Nominations should be received and voted 
upon at these meetings. Handlers nominations would be accomplished in 
the same way.
    The order should provide for appointment by the Secretary of 
members and alternates of the Board. The tart cherry growers and 
handlers should have the responsibility for recommending nominees to 
the Secretary for appointment. The nomination and election procedure 
outlined in the order would provide a means of making available to the 
Secretary the names of prospective members and alternates selected by 
the industry under the order to serve on the Board. The Secretary 
should have the authority to appoint the industry and public members 
and alternate members to the Board, notwithstanding the list of 
nominees submitted.
    In the event the nomination and election process has not been 
completed within the time and in the manner specified in the order, the 
Secretary should have the authority to appoint members and alternates 
without regard to nominations, in accordance with proposed Sec. 930.25. 
Such appointment should be from qualified persons as provided in the 
order.
    Each person to be appointed by the Secretary as a member or as an 
alternate member of the Board should, prior to appointment, qualify by 
advising the Secretary on a form provided by the Board or the Secretary 
that such person agrees to serve in the position for which nominated. 
The information requested on the form would be incidental to the 
qualifications of each position and would thus provide the Secretary 
with the information required to complete the appointment process.
    Proposed Sec. 930.27 states that the order should provide a method 
for promptly filling any vacancies on the Board for unexpired terms of 
office. There may be vacancies caused by the death, removal, 
resignation, or disqualification of a member or alternate. The order 
should provide that the Secretary shall be authorized to name a 
successor to fill an unexpired term from the most recent list of 
nominations for the Board, from a nomination and election process 
specifically held to fill the vacancy and made in the same manner as 
provided for in Sec. 930.23, or from other qualified individuals. 
Qualification and appointment should be made on the basis of 
Sec. 930.20 or any redistribution or reestablishment made pursuant to 
Sec. 930.21.
    Proposed Sec. 930.28 states that an alternate member of the Board 
should act in the place and stead of the regular member during the 
absence of such member. It continues by adding that an alternate member 
would not be eligible to serve at a meeting of the Board if the member 
is in attendance. In the event of the death, removal, resignation, or 
disqualification of a member, an alternate member would act for the 
regular member until a successor of such member is appointed. This 
would ensure that all portions of the production area are adequately 
represented in the conduct of the Board's business and that the 
continuity of Board operation is not interrupted. In the event both a 
member and the respective alternate member are unable to attend a 
meeting of the Board, no other member or alternate member would be 
eligible to serve in that position. Witnesses testified that a member 
and alternate member are nominated and elected to represent a specific 
constituency, and that an arrangement that allows another member, even 
if from the same district, to sit in such position would not best serve 
the industry. The order should also provide that alternate members have 
the same qualifications as their respective members.
    The Board, under proposed Sec. 930.30, should be given those 
specific powers that are set forth in section 608c(7)(C) of the Act. 
Such powers are necessary for an administrative agency, such as the 
Board, to carry out its proper functions. The Board would administer 
the order in accordance with its terms and provisions and would 
recommend rules and regulations necessary to effectuate the terms and 
provisions thereof. The Board should also have the power to investigate 
complaints of violations to the order and forward such information to 
the Secretary, and to recommend to the Secretary appropriate amendments 
to this part.
    The Board's duties as set forth in Sec. 930.31 of the proposed 
order are necessary for the discharge of its responsibilities. These 
duties are similar to those typically specified for administrative 
agencies under other programs of this nature. They pertain to specific 
activities authorized under the order, such as investigating and 
compiling information regarding tart cherry marketing conditions, and 
to the general operation of the order including hiring employees, 
appointing officers, and keeping records of all Board transactions. The 
order should delineate Board duties as follows:
    (1) The Board should select any officers, including a chairperson 
and vice-chairperson, necessary for its proper function, and should 
define the duties of such officers. Other officers might include 
secretary, treasurer, parliamentarian, or such other officers deemed 
helpful to the efficient operation of the Board.
    (2) The Board should employ or contract with such persons or agents 
as it finds necessary, and should determine the duties and compensation 
of such persons or agents. This provides the Board with the ability to 
organize for the purpose of conducting its day-to-day business. A 
typical staffing arrangement could include a general manager who 
reports directly to the Board, and field and office support staff 
deemed necessary for efficient operation. In some cases, additional 
staff dedicated to 

[[Page 61305]]
order compliance would be useful to the Board.
    (3) Whenever committees or subcommittees are deemed necessary or 
advisable, the Board should appoint members or other industry 
representatives to serve on such committees or subcommittees. These may 
be producers, handlers, consultants, or other persons who are not 
members of the Board but who possess some knowledge or could serve the 
Board in some unique way. Thus, the provisions authorizing the board to 
appoint subcommittees should include authority for the Board to appoint 
persons to serve on special subcommittees or as consultants to regular 
subcommittees, even though they are not members of the Board. Actions 
recommended by any subcommittee should be subject to the approval of 
the Board.
    (4) The Board should adopt bylaws and establish other rules, 
including rules of conduct and administration, which are necessary to 
carry out its duties and responsibilities. These could include rules 
relating to parliamentary procedures for the conduct of meetings and 
rules governing Board member and staff compensation for expenses 
incurred while performing their normal duties.
    (5) Prior to the beginning of each fiscal period, the Board should 
submit a budget of such fiscal period to the Secretary. Each such 
budget should be accompanied by a report explaining the items appearing 
therein, as well as a recommendation for an assessment rate for the 
forthcoming fiscal period.
    (6) The Board should keep minutes, books, and records which clearly 
reflect all of its meetings, acts and transactions. These minutes, 
books, and records would be subject to examination at any time by the 
Secretary or an authorized agent or representative of the Secretary. 
Minutes of all Board meetings, as well as all subcommittee meetings, 
should be recorded in a minutes book, or similar record. Minutes would 
assist in answering questions at a later date, and avoid confusion as 
to what transpired at a given meeting. In order for the record to be 
complete, minutes should include motions, whether passing or failing, 
votes, important points of discussion, and all resolutions. Copies of 
the minutes should be furnished to the Secretary and to all members and 
alternate members as early as possible following each meeting.
    (7) The Board should prepare periodic statements of its financial 
operations and ensure that copies of each financial statement are made 
available to growers and handlers for examination at the office of the 
Board. Copies of such statements should also be provided to the 
Secretary.
    (8) The Board should have its books audited by a certified public 
accountant at least once each fiscal period, and at such other times as 
the Board may find necessary or as the Secretary may request. This 
audit would normally follow the conclusion of each marketing year. The 
audit report should show the receipt and expenditures of funds 
collected pursuant to this part. A copy of this report should be made 
available to the Secretary, as well as at the principal office of the 
Board for inspection by handlers and growers. Confidential or 
proprietary information should be removed from the audit report before 
making it available to handlers and growers.
    (9) Should it be necessary, the Board should act as an intermediary 
between the Secretary and any grower or handler. This provides that any 
problems arising at either level can be dealt with in an efficient and 
orderly manner.
    (10) The Board should have the duty to investigate and assemble 
data on the growing, handling, and marketing of tart cherries. Such 
data would provide information necessary for the Board to make proper 
recommendations and to otherwise perform its duties. During the 
investigation and assembly of data, the Board should acquire 
information concerning producing acreage and the estimated production 
of tart cherries on an ongoing basis. Thorough knowledge of growing and 
harvesting conditions in each of the districts, including information 
on weather, problems with pests, and new and innovative cultural 
practices, would be helpful to the Board when making decisions 
pertaining to quality and volume regulations. Information should be 
obtained pertaining to the volume of fresh and processed tart cherries 
in the possession of producers and handlers. With such growing, 
harvesting, and supply information and knowledge of past, current and 
projected demand patterns, the Board would be better equipped to make 
regulatory recommendations to the Secretary.
    (11) Whenever the Board provides notice of meetings to its members, 
the same notice should be provided to the Secretary. This would apply 
to all meetings of the Board and any of its designated subcommittees. 
The Secretary should have ample notice of these meetings in order to 
exercise the supervisory responsibilities provided by law. With the 
exception of certain meetings held for personnel or compliance 
purposes, all such meetings are open to the public. Therefore, all 
meeting notices should receive widespread distribution. In order for 
the Secretary to properly exercise oversight authority over the order 
and its administration, all information relating to the marketing of 
cherries and the various activities of the Board must be made 
available.
    (12) The Board should submit such available information as the 
Secretary may request.
    (13) The Board should investigate compliance with the provisions of 
this part. This would include development of a comprehensive plan, to 
be reviewed and approved by the Board and the Secretary on an annual 
basis, that contains sound and effective methods for preventing and 
detecting violations of the order and assurances that responsible staff 
are following the prescribed procedures.
    (14) The Board should be responsible for developing and submitting 
an annual marketing policy to the Secretary for approval. The marketing 
policy should contain the optimum supply of tart cherries for the crop 
year established pursuant to Sec. 930.50 and recommend any such action 
necessary to achieve such optimum supply. The marketing policy should 
include an explanation of the marketing problems expected to exist 
during the season, as well as an explanation of how the regulations 
recommended by the Board, if any, would be used in an effort to correct 
or change marketing conditions.
    (15) The Board should implement such quantity regulations as are 
called for by the marketing policy and approved by the Secretary, 
including the release of any inventory reserve.
    (16) The Board should provide thorough communications to growers 
and handlers regarding its activities and respond to any industry 
inquiries about its activities.
    (17) The Board should oversee the collection of assessments levied 
under this part.
    (18) For the development and conduct of activities, including 
research and promotion activities, the Board should have the authority 
to enter into contracts or agreements. Such contracts or agreements 
would pertain to the rendering of services required by the order and 
for the payment of the cost of such services with funds collected under 
the authority of this part. Any contracts or agreements entered into 
pursuant to this paragraph should provide that contractors submit to 
the Board a plan and a budget, that the plan or project be submitted to 
the Secretary for approval, and that the contractor shall maintain 
accurate records of all 

[[Page 61306]]
transactions. Such an agreement should also specify that the contractor 
make periodic reports to the Board of its activities and funds received 
and expended or any other reports required by the Board or the 
Secretary. It should also clearly indicate that the Board or the 
Secretary may periodically audit the records of the contracting party 
as they pertain to the agreement.
    (19) Pending the expenditure of funds as set forth in the annual 
budget, the Board should have the authority to invest funds collected 
through assessments as well as income generated by such assessments. 
Any investments made should be in accordance with applicable 
Departmental policies. The Board should maximize income opportunities 
while not putting the funds at risk.
    (20) The Board, with the Secretary's approval, may establish 
standards and grade requirements for cherries produced for frozen and 
canned cherry products. Prior to making such recommendations, the Board 
should poll all handlers that would be affected by such regulations to 
obtain a consensus as to if, when, and how standards and grade 
requirements might be implemented. The Board, with the Secretary's 
approval, could establish a requirement for mandatory inspection 
pursuant to Sec. 930.44.
    After review of the requirement for the Board to poll handlers on 
how the standards and grade requirements might be implemented, the USDA 
is deleting such requirement from the proposed order. The Board, which 
is comprised of grower and handler members, has the responsibility of 
representing the growers or handlers from the district in which such 
member was represented to serve. It is the Board's responsibility to 
develop recommendations and/or rules and regulations to implement the 
sections in the proposed marketing order. Therefore, it is not 
necessary for the Board to poll handlers on this issue since handlers 
are represented by members on the Board.
    An opponent to this provision testified that this section should be 
deleted from the proposed order. It was the opponent's position that 
the market should be allowed to function on utilization of 
relationships between handlers and buyers and use of the current USDA 
standards and specifications. However, the preponderance of the 
testimony supports the authority to authorize the Board to recommend to 
the Secretary standards or grade requirements in order to provide a 
consistent quality cherries to be processed into cherry products.
    (21) The Board should be able to borrow funds necessary to 
administer its responsibilities and obligations under this part. Any 
such transaction should be subject to the Secretary's approval and 
should not exceed one fiscal period's budget. The Board should normally 
be required to pay any borrowed funds back within the same fiscal 
period.
    (22) With the Secretary's approval, the Board should establish 
rules and procedures relative to the administration of this order. Such 
rules and procedures should be consistent with the provisions of this 
subpart and necessary for efficient operation of the order and to 
accomplish the purposes of the Act.
    The duties listed in proposed Sec. 930.31 are reasonable and 
necessary if the Board is to function in the manner prescribed under 
the Act and the order. It should be recognized that the duties 
specified are not necessarily all-inclusive, and it may develop that 
there are other duties that the Board may need to perform which are 
incidental to, and not inconsistent with, these specified duties.
    As set forth in proposed Sec. 930.32, the order should specify a 
procedure for the Board to conduct its meetings. Conflicting testimony 
was received during the hearing process pertaining to the number of 
Board members that should constitute a quorum, as well as to the number 
of favorable votes required of Board members to pass any 
recommendations by the Board. The proponents proposed that 12 members, 
or their alternates acting in their stead, should constitute a quorum. 
Further, the proponents proposed that for any action of the Board to 
pass, a simple majority of those present should concur. For example, if 
the minimum number of 12 Board members, the proposed quorum, were 
present at a meeting, seven members could conceivably carry a 
recommendation for regulatory action. The proponent argued that a 
general voting procedure requiring a higher degree of support for 
regulatory and administrative Board actions would potentially allow 
minority district representatives to boycott meetings and thereby 
disrupt the Board's ability to recommend rules and regulations to the 
Secretary. This proposal excluded Board action taken to elect the 
public member and alternate public member, however, in which case 
affirmation by at least two-thirds of the entire Board was proposed.
    During the hearing process, an amendment to Sec. 930.32 was offered 
by Mr. Lee Schrepel proposing that (1) a quorum consist of at least 14 
members, (2) any action approved by the Board would not be effective 
upon any district affected by such action unless a simple majority of 
the Board members from such district also approved the action, and (3) 
actions involving enactment of volume control, implementation of 
assessments, inspection, grading, procedural considerations and 
district representation should require a two-thirds affirmative vote of 
the entire Board.
    In support of his proposed amendments, Mr. Schrepel testified that 
a quorum requirement of less than 14 Board members could potentially 
allow a single sales constituency to dominate the Board. He also 
indicated that the rights and responsibilities of all participants 
should be protected and that any regulations recommended by the Board 
not be imposed on a segment of the industry that objects to such 
regulations.
    As indicated earlier, a single sales constituency would have a 
maximum potential representation on the Board of nine members. 
Therefore no such sales constituency could dominate the Board if the 
quorum requirement is less than 14 members, because, as discussed 
hereinafter the voting requirement for an action to pass should be two-
thirds of the entire board. The proponents testified that they 
anticipate that most of the members would be present for full Board 
meetings. The proposal that each district must ratify any action by the 
Board should also not be adopted. Such a proposal is synonymous with 
requiring Board unanimity on any action and could cripple the 
effectiveness of the order.
    However, Mr. Schrepel's third recommendation is a sound one. 
Therefore, the order should provide that 12 members of the Board, 
including alternates acting for absent members, should constitute a 
quorum and any action by the Board should require that two-thirds of 
the entire Board support such action. A voting procedure requiring the 
consensus of at least a two-thirds majority of the entire Board is 
similar to many of the other fruit, vegetable and specialty crop 
marketing orders now in effect. Such a voting procedure helps ensure 
that the industry majority supports any action of the Board and that 
minority interests are addressed.
    If Board membership is increased in the future due to Districts 5, 
6, 8, or 9 becoming permanently regulated as proposed in 
Sec. 930.20(e), the order should authorize a like increase of the 
quorum requirement through implementing regulations. For example, if 
District 5 picked up one seat on the 

[[Page 61307]]
Board in the future, the Board would increase to 19 members. The quorum 
requirement, in this example, would subsequently be increased from 12 
to 13. The quorum would be maintained at a level equal to two-thirds of 
the total Board membership.
    Since the production area encompasses several states and spans the 
entire width of the country, it is reasonable that the Board be 
provided with the authority to recommend to the Secretary rules and 
regulations pertaining to the conduct of simultaneous meetings of 
groups of its members assembled at different locations. There may be 
times, due to inclement weather or similar situations, when the Board 
is unable to assemble at one location. Therefore, the proposed order 
should also provide for Board meetings conducted via telephone or some 
other means of communications. To eliminate potential confusion or 
misunderstanding that may arise when the Board meets at multiple 
locations, all such votes cast by the Board should be promptly 
confirmed in writing.
    All meetings of the Board should be open to the public with the 
exception of special meetings held in executive session for 
consideration of personnel or certain compliance matters, or such other 
matters that the Secretary may approve. The Board should establish a 
means of providing advanced notice of meetings to tart cherry growers 
and handlers as well as other interested parties.
    Board members and alternates will necessarily incur some expense 
while on Board business. Reasonable expenses, which may include those 
associated with travel, meals, and lodging, should be reimbursed to 
members while attending Board meetings or performing other duties under 
the order, in accordance with proposed Sec. 930.33. It is also 
reasonable that the public member and alternate public member, in 
addition to reimbursement for incurred expenses, should receive 
compensation for time served at meetings and while performing other 
Board authorized duties. The public members and alternate members 
should be compensated while performing Board authorized duties because 
attending Board meetings may take them from their normal place of 
employment, one not associated with the tart cherry industry. 
Therefore, the order should provide that, except for the public member 
and alternate public member who shall receive such compensation as the 
Board may establish and the Secretary may approve, the members of the 
Board, and alternates when acting as members, shall serve without 
compensation but shall be reimbursed for necessary and reasonable 
expenses as authorized by the Board. The Board at its discretion may 
request the attendance of one or more alternates at any or all 
meetings, notwithstanding the expected or actual presence of the 
respective member(s), and may pay their expenses as aforesaid. The 
Board may also request nonmembers to attend Board or subcommittee 
meetings to present an issue of interest to the Board or subcommittee. 
In this case, the Board should be authorized to pay such individuals' 
expenses for attending such meetings.
    (c) As noted under Sec. 930.31(e), the Board should be required to 
prepare a budget showing estimates of income and expenditures necessary 
for the administration of the marketing order during each fiscal year. 
The budget, including an analysis of its component parts, should be 
submitted to the Secretary sufficiently in advance of each fiscal 
period to provide for the Secretary's review and approval. The 
submitted budget should include a recommendation to the Secretary of a 
rate of assessment designed to secure all or part of the income 
required for such fiscal year.
    The Board should be authorized under Sec. 930.40 of the proposed 
order to incur such expenses as the Secretary finds are reasonable and 
likely to be incurred during each fiscal year. Such a provision is 
necessary to assure the maintenance and functioning of the Board, and 
to enable the Board to perform its duties in accordance with the 
provisions of the order. Necessary expenses would include, but would 
not be limited to, such administrative items as employee salaries and 
benefits; establishment of an office and equipping such office; 
telephone and mail services; and such business and travel related costs 
for the Board staff as transportation, lodging, and food. As discussed 
previously, expenses incurred by Board members in attending Board 
meetings should be a reimbursable expense as well. Other administrative 
expenses would include those related to inspection and marketing order 
compliance.
    In addition, the order should authorize the Board to incur expenses 
related to production and processing research, market research and 
development, and promotional activities, including paid advertising, 
designed to assist, improve, or promote the efficient production, 
processing, marketing, distribution, and consumption of cherries.
    The proponents testified it would be unlikely, in the foreseeable 
future, that any activity under Sec. 930.48 would be initiated by the 
Board unless the current high level of research and promotion activity 
sponsored by the Cherry Marketing Institute and the New York Cherry 
Board tapers off. The proponents estimated that producers representing 
approximately 94 percent of tart cherry production on a national scale 
are currently financing various production research, development and 
promotional projects through assessments to these two organizations. 
The proponents thus testified that it would be unnecessary and 
redundant for the Board to finance similar activities while such a 
relatively high level of activity exists, but recommended including the 
authority for such future activity in the order.
    The proposed order should state that expenses incurred due to any 
approved administrative costs and authorized research, development, and 
promotion projects could occur on an ongoing basis throughout the 
fiscal period.
    With the Secretary's approval, the Board, under proposed 
Sec. 930.41, should be authorized to levy annual assessments upon 
handlers to cover administrative costs and the costs of any research, 
development and promotion activities undertaken pursuant to Sec. 930.48 
that the Board recommends and the Secretary approves. However, as noted 
earlier, the proponents indicated that it would be highly unlikely that 
the Board would initiate recommendations for research, development, or 
promotion related assessments while a high percentage of tart cherry 
producers are financing such activities through other organizations. It 
would be reasonable to expect the Board to ensure that handlers in each 
district are well informed of the assessment rate and how such 
assessment rate would be allocated among the various approved expenses.
    During each fiscal period, the Board would assess each handler on 
all cherries handled, unless subject to certain authorized exemptions, 
that handler's pro rata share of the administrative expenses, as well 
as any research, development and promotion expenses. Assessments should 
be calculated on the basis of pounds of cherries handled. However, the 
order should provide that the formula adopted by the Board and approved 
by the Secretary for determining the rate of assessment should 
compensate for differences in the number of pounds of cherries utilized 
for various cherry products. For example, the proponents testified that 
high value products such as frozen, canned or dried cherries would be 
assessed one amount and the 

[[Page 61308]]
low value products such as juice concentrate and puree would be 
assessed one half of the assessed amount of the high value product.
    Testimony supported exempting any handler from paying assessments 
on cherries diverted as provided in Sec. 930.59. This exemption from 
assessment would also include cherries represented by grower diversion 
certificates issued pursuant to Sec. 930.58(b)(2) and acquired by 
handlers, and those cherries devoted to exempt uses under Sec. 930.62.
    In addition to administrative, research, development and promotion 
expenses, the proponents proposed that assessments be collected from 
all handlers in all districts to cover the costs of storing the primary 
inventory reserve. The proponents recommended that all handlers, 
whether regulated or non-regulated, pay storage cost assessments. 
Alternative proposals were also received into evidence recommending 
that such storage cost assessments not be levied. Considerable 
testimony was received throughout the hearing process concerning this 
issue.
    The proponents testified that the entire industry would benefit 
from increased cherry prices during periods when a volume regulation is 
in effect, and not just the handlers and growers in the regulated 
districts. The proponents emphasized that non-regulated districts would 
be able to market one hundred percent of their marketable crop while 
the regulated districts would be required to withhold a determined 
amount of their marketable cherries from the market. The proponents 
argued that to excuse the non-regulated districts from paying for a 
portion of the regulated district's storage expenses would burden 
regulated handlers not only with such tangible costs, but also with the 
intangible cost of withholding product from the market. Therefore, in 
order to thus distribute the costs associated with the potential 
increase in the grower price of cherries, the proponents proposed that 
all districts, regulated or not, be assessed for annual storage costs.
    However, opponents to the establishment of a storage cost 
assessment noted that, while the non-regulated districts do indeed have 
the opportunity to market one hundred percent of their crop, they enjoy 
such benefit primarily because they are producing less than the amount 
that would trigger volume regulation in their district, are not 
contributing to the oversupply situation, and have demonstrated the 
ability to market all of their crop. Opponents to the proposed storage 
assessment argued that such a proposal merely provides a subsidy for 
those districts responsible for the oversupply situation.
    Testimony received during the hearing process indicated that the 
cost of storage varies with different processed cherry products. For 
example, the costs associated with the storage of frozen product would 
generally run higher than the costs associated with the storage of 
canned, pureed, concentrated and dried product. Testimony also 
indicated that the cost differential between freezer storage and dry 
storage is considerable, with the cost of storing frozen product 
approximately twice that of storing non-frozen product. However, to 
effectuate the proponent's provision, storage assessments would have to 
be levied on all handlers such that the full cost of storage would be 
covered. Thus, under a storage assessment as proposed, handlers putting 
product into the lower cost, non-frozen storage packs would, to some 
degree, also be subsidizing handlers packing for freezer storage.
    The preponderance of testimony supports the levying of assessments 
for administrative, research, development and promotion purposes on all 
handlers, but does not adequately justify the additional burden of an 
assessment designed to distribute individually assumed costs of storage 
to the entire cherry industry. Each regulated handler utilizing storage 
because of an established primary reserve should be independently 
responsible for any costs associated with such storage. Such an 
arrangement should also have the effect of increasing the efficiency of 
storing product since each handler, responsible for carrying the entire 
cost associated with storing their own product, would seek the most 
cost-effective storage facilities, would pack the cherry product in a 
form, frozen or non-frozen, that best matches his or her own individual 
economic situation, or could choose to divert the cherries into an 
approved exempt channel.
    The proponents did not adequately show why it would be equitable 
for all handlers to share the cost of storing product when only a 
portion of them would be utilizing storage, how each producer or 
handler would benefit economically or practically from such an 
arrangement, nor why it would be cost effective for the Board or the 
assessed handlers to be burdened with the costs of administering such 
an assessment.
    Sufficient evidence was not received to indicate that handlers 
would not be unduly burdened with the increased costs of reporting and 
record keeping that are directly attributable to a storage assessment, 
nor that the Board should sustain expenses associated with the 
administration of a storage assessment.
    The marketing order should contain the authority for the Board to 
incur administrative expenses and such expenses related to approved 
research, development, and promotion activities, as well as the 
authority for the Board to levy assessments on all handlers to cover 
such expenses. The order should not, however, authorize the Board to 
incur expenses nor levy assessments for any costs associated with the 
storage of reserve cherries. The Board should be authorized to pay 
inspection costs for reserve cherries from assessments collected from 
all handlers for the administration of the order.
    The rate of assessment should be established by the Secretary on 
the basis of the Board's recommendation and other available 
information. However, in the event that an assessment rate is 
established which does not generate sufficient income to pay for the 
approved expenses, the Board should be authorized to recommend to the 
Secretary an increase in the rate of assessment in order to secure 
sufficient funds. The Secretary may approve an assessment rate 
increase, and such increase should be applicable to all tart cherries 
handled during the fiscal year to which that assessment rate applies.
    The Board should be authorized to accept advance payment of 
assessments so that it may pay expenses which become due before 
assessment income is normally received. This would give the Board more 
flexibility in paying obligated expenses, particularly in the first 
part of a fiscal year before assessment funds are received.
    The Board should also be able to borrow money to meet 
administrative expenses that would be incurred before assessment income 
is sufficient to defray such expenses. However, the Board should not 
borrow money to pay obligations if sufficient funds already exist in 
the Board's reserve fund or in other Board accounts.
    If a handler does not pay any assessment by the date it is due, the 
order should provide that the late assessment may be subject to a late 
payment charge or an interest charge, or both, at rates set by the 
Board with the Secretary's approval. Such charges should be set at 
rates established to cover additional costs that may be incurred by the 
Board in attempting to collect overdue assessments, and should 
encourage timely payments. The period in which payments would be 
considered late, and late payment or interest charges incurred, should 
be recommended by the Board and approved by the Secretary.

[[Page 61309]]

    If, at the end of a fiscal period, the assessments collected are in 
excess of expenses incurred, such excess should be established as a 
reserve or refunded pro rata to the handlers, under proposed 
Sec. 956.42. The Board should be authorized to carry over excess 
assessment income into the following fiscal period as a reserve. If 
such excess income is not carried over as a reserve, handlers should be 
entitled to a refund proportionate to the assessments each handler 
paid. The proposed order should indicate that the amount held in 
reserve for administrative, research, development and promotion 
expenses should be held at or below an amount equal to approximately 
one year's operational expenses.
    One purpose of the reserve fund would be to provide stability in 
the administration of the order in the case of a short crop. Also, 
establishing a reserve should minimize the necessity of the Board 
borrowing money at the beginning of a fiscal year or raising an 
assessment rate during a season of less than anticipated production.
    Reserve funds could also be used to cover necessary liquidation 
expenses in the event the order is terminated. Upon such termination, 
any funds not needed to defray liquidation expenses should be disposed 
of as determined by the Secretary. To the extent possible, however, 
these funds should be returned pro rata to the handlers from whom they 
were collected.
    All funds collected by the Board through assessments or any other 
provision of the order should be used only for the purposes set forth 
in the order. The Secretary should at all times have authority to 
require the Board, its members and alternates, and its employees and 
agents to account for all receipts, disbursements, and property and 
records of the Board. Likewise, when any of the above individuals 
ceases to act in his or her official position, that person should 
account for all receipts, disbursements, property or records of the 
Board for which such person has been responsible. In the event the 
order is terminated or becomes inoperative, the Board should appoint, 
with the approval of the Secretary, one or more trustees for holding 
records, funds or other property of the Board.
    (d) Under proposed Sec. 930.48, the order should authorize the 
Board to establish and provide for the establishment of production 
research, marketing research and development, and marketing promotion 
projects, including paid advertising, designed to assist, improve, or 
promote the marketing, distribution, consumption, or efficient 
production and processing of tart cherries. Funding for these programs 
should come from any authorized receipts of the Board including 
assessment income, voluntary contributions and miscellaneous income 
such as interest.
    The Board should have the authority to initiate new production and 
marketing research projects, as well as to contribute to research which 
may currently be taking place.
    As discussed previously, marketing order proponents testified that 
this authority would not be used unless existing State programs for 
these purposes were terminated or their operations suspended. 
Currently, Michigan, Utah, Wisconsin, and New York have assessment 
programs of $10 to $15 per ton that are paid by growers to support the 
Cherry Marketing Institute (CMI) and the New York Cherry Board. The CMI 
represents growers in Michigan, Utah, and Wisconsin. Both the New York 
Cherry Board and CMI conduct substantial domestic generic promotion 
programs for tart cherries. At this time the tart cherry industry does 
not support any brand advertising. These activities are supported only 
by the various finished product manufacturers.
    The States of Washington, Oregon, and Pennsylvania have no state 
programs at this time to authorize assessments for this purpose. The 
proponents testified that about 94 percent of the tart cherry industry 
is now supporting marketing and production research and development, 
and promotion under the various state organizations.
    The record indicates that some of the primary responsibilities of 
the CMI are to fund projects relating to: short-term production 
research directed at improving current horticultural practices; long-
term research directed at developing new varieties of cherries with 
increased market appeal and greater resistance to pests and climate 
factors; domestic promotion activities covering food service and 
consumer markets; export development in Japan, Korea, and Taiwan; new 
product applications; and nutritional evaluations. These are also 
examples of the types of programs that could be implemented under the 
marketing order. When this authority is utilized the assessments would 
be collected, pursuant to Sec. 930.41(a).
    The record does not indicate the amount of assessment funds that 
may be allotted for research and promotion programs. The Board should 
have the responsibility to determine the amount of funds spent on each 
program each year. Such determination should be based on the needs of 
the industry each year. The amount of funds to be spent on research and 
promotion programs would be included in the annual budget required to 
be submitted to the Secretary for review and approval.
    All research and promotion projects to be conducted under the order 
in a given fiscal period should be required to be submitted by the 
Board to the Secretary for approval prior to being undertaken. Further, 
the Board should be required to report at least annually on the 
progress of each project and at the conclusion of each project. Such 
reports should be made to the Secretary.
    The proponents did not provide specific testimony on paid 
advertising authority. However, the record supports the proposition 
that such authority should be added to allow the Board to implement 
such a program in the future, if necessary. Therefore, the authority is 
proposed to be contained in the order.
    (e) In accordance with proposed Sec. 930.44, the Board should have 
the authority to recommend regulations to the Secretary regarding 
minimum quality and inspection requirements. Also, the Board should be 
authorized to recommend to the Secretary the amendment, modification, 
termination, or suspension of any regulation issued under this part, 
when deemed necessary.
    Recent technological improvements in the industry have enabled 
processors to install sophisticated equipment to reduce pit counts and 
improve color sorting. As the technology improves further, the Board 
should have the authority to respond by adopting additional quality 
standards for cherries, especially as to pit count. The proponents 
testified that any regulation that could be implemented to cause a 
reduction of the pit counts in cherries consumed by the public would be 
beneficial to growers and consumers. The proponents further testified 
that the sale of poor quality cherries creates image and marketing 
problems for the entire tart cherry industry, both domestically and 
internationally. Therefore, the Board should have the authority to 
implement quality regulations so that the industry can provide a 
consistent, quality product to consumers.
    Marketing order proponents proposed that when quality control 
regulations are implemented, no handler should be allowed to process 
cherries into manufactured products or sell manufactured products in 
the current of commerce unless the cherries used in such products meet 
the applicable requirements. The inspection and 

[[Page 61310]]
certification of tart cherries would be carried out by USDA. The 
proponents testified that cherries should be required to be inspected 
again if they are regraded, resorted, repackaged or in any way further 
prepared for market. This would be done to cover those situations where 
a handler may need to repackage or resort a product that was already 
packaged and inspected for a client. This provision is a safety valve 
designed to prevent poor quality product from entering the channels of 
commerce.
    The Board should also have the authority to recommend to the 
Secretary such standards of grade, quality or condition of cherries to 
be placed in the inventory reserve. This would insure the quality of 
the inventory reserve once it is released to the handlers and sold in 
the marketplace.
    After obtaining inspection and certification of tart cherries, a 
handler would be required to submit a copy of the inspection 
certificate to the Board. The Board, with the approval of the 
Secretary, should have the authority to establish rules and regulations 
to implement the provisions of this section.
    An opponent offered testimony concerning Sec. 930.44 providing 
exemptions for very small handlers and specialty packs for which 
grading may be inappropriate. The Board should establish a fixed cost 
per pound that small handlers would pay for inspection. The opponent 
testified that handlers that handle less than one million pounds of 
cherries per year should be exempt from the proposed order regulations, 
if implemented. One million pounds was chosen because these handlers 
would be severely burdened with providing personnel to comply with 
reporting requirements under a marketing order.
    The preponderance of the testimony supports providing authority for 
minimum quality and inspection regulations. Also, several witnesses 
testified that the burden for handlers would not be severe. The 
information required to be submitted to the Board under a marketing 
order would be similar to information already available to handlers. 
Therefore, this provision would remain as proposed.
    (f) In accordance with proposed section 930.50, whenever the Board 
believes that regulations issued pursuant to section 930.51 regarding 
free and restricted percentages would be appropriate, it should have 
the authority to recommend such regulations to the Secretary. The 
proponents have testified that the proposed volume control regulations 
would result in a supply management program which would compensate for 
the extremely erratic natural production cycles of tart cherries and 
which would provide the market with a more stable supply of tart 
cherries. Record evidence shows that a major flaw in the previous tart 
cherry order was that the process used to establish the marketing 
policy was prone to too much subjective decision-making by the Board 
which led to non-uniform policies and political skirmishes. The 
proponents therefore sought to develop a more objective system that is 
less subject to outside influences and is more market driven.

Marketing Policy

    Record evidence indicates that a volume control program should 
entail several steps. Section 930.50 of the proposed marketing order 
states that the Board would meet on or before July 1 of each crop year. 
At this meeting, the Board would review sales data, inventory data, 
current crop forecasts and market conditions in order to establish an 
``optimum supply'' level for the crop year. The proponents testified 
that the USDA forecast is the most accurate estimate available at that 
time to use in the marketing policy calculations. The optimum supply 
represents the desirable volume of tart cherries that should be 
available for sale in the coming crop year for both buyers and sellers. 
The optimum supply would be calculated as 100 percent of the average 
sales of the prior three years, plus a desirable carryout inventory 
that would not exceed 20 million pounds. In addition, there should be 
authority, through informal rulemaking, to adjust the 20 million pound 
desirable carryout figure upward, if necessary. Record evidence shows 
that the 20 million pound figure is based on a historical pattern of 
the amount needed in inventory for the industry to operate. Once the 
optimum supply is calculated, it would be announced to the industry by 
the Board. Testimony showed that this could be done as early as May or 
June but definitely by July 1.
    After the calculation of the optimum supply, the Board would 
establish preliminary free and restricted percentages. This would be 
done on or about July 1 of each crop year. Subsequently, as discussed 
below, the Board may also establish interim percentages and recommend 
final percentages to the Secretary. Evidence indicates that when the 
Board computes preliminary and interim percentages, or when it 
determines final percentages for recommendation to the Secretary, it 
should also consider the following factors: (1) The estimated total 
production of tart cherries; (2) the estimated size of the crop to be 
handled; (3) the expected general quality of such cherry production; 
(4) the expected carryover as of July 1 of canned and frozen cherries 
and other cherry products; (5) the expected demand conditions for 
cherries in different market segments; (6) supplies of competing 
commodities; (7) an analysis of economic factors having a bearing on 
the marketing of cherries; (8) the estimated tonnage held by handlers 
in primary or secondary inventory reserves; and (9) any estimated 
release of primary or secondary inventory reserve cherries during the 
crop year.
    Record evidence indicates that preliminary free and restricted 
percentages should then be calculated in the following manner. The 
Board would deduct the carryin inventory from the optimum supply figure 
(adjusted to raw fruit equivalent) and divide that figure by the 
current year's USDA crop forecast. The carryin inventory figure 
reflects the amount of cherries that handlers actually have in 
inventory. If the resulting quotient is 100 percent or more, the Board 
should establish a preliminary free market tonnage percentage of 100 
percent. If the quotient is less than 100 percent, the Board should 
establish a preliminary free market tonnage percentage equivalent to 
the quotient, rounded to the nearest whole percent, with the complement 
being the preliminary restricted percentage. The Board would be 
responsible for announcing these percentages to the industry in an 
expedited manner. If a restricted percentage is announced, each handler 
would be responsible for setting aside a portion of tart cherries which 
that particular handler handled.
    If necessary, the Board should be able to modify the preliminary 
free and restricted percentages to adjust to the actual pack occurring 
in the industry. The Board may adjust the percentages between July 1 
and September 15 of the crop year. However, the optimum supply could 
not be adjusted. Record evidence shows that the Board would review 
weekly production reports to determine if it is necessary to adjust the 
preliminary percentages. If interim percentages are established, the 
Board would be responsible for announcing them quickly to the industry. 
Timely announcement would be crucial since the proponents testified 
that these percentages could be adjusted as often as once per week.
    Finally, no later than September 15 of each crop year, the Board 
would recommend the establishment of final free and restricted 
percentages to the Secretary. At this time, the Board would 

[[Page 61311]]
have available actual production and delivery figures to review to make 
any needed adjustments to the percentages. The Secretary would 
establish the final free and restricted percentages through the 
informal rulemaking process. These percentages would release the tart 
cherries necessary to achieve the optimum supply figure calculated 
earlier. The difference between any final free market tonnage 
percentage designated by the Secretary and 100 percent would be the 
final restricted percentage.
    An example of the marketing policy calculations is discussed below. 
The USDA crop forecast for the example is 256 million pounds and the 
optimum supply is 263 million pounds. The total industry carryin is 40 
million pounds. The total production in the regulated districts is 233 
million pounds. For this example, the average sales of the prior three 
years is 243 million pounds, and added to it is a 20 million pound 
desirable carryout, which equals an optimum supply of 263 million 
pounds. The preliminary percentages would then be calculated by 
deducting the carryin from the optimum supply to equal a free tonnage 
of 223 million pounds. The free tonnage would then be deducted from the 
USDA crop forecast. This would result in a requirement for a 33 million 
pound inventory reserve. The free and restricted percentages would only 
apply to those handlers in the regulated districts. Therefore, the 
percentages would be calculated by dividing the restricted tonnage 
volume by the regulated district production (233 million pounds would 
be divided into 33 million pounds to obtain the restricted percentage). 
This would result in a preliminary free percentage of 86 percent and a 
restricted percentage of 14 percent for those districts that are being 
regulated.

Illustration

    1. Average movement is based on a three year rolling average of 
sales and movement, plus a desirable carryout of up to 20 million 
pounds. For example, if tart cherry sales for 1992-1994 had been, 
respectively:

1992--243 million pounds
1993--245 million pounds
1994--241 million pounds

    The average movement for the 1992-94 three year period would have 
been 243 million pounds. Adding a carryout of 20 million pounds 
produces an Optimum Supply Formula (OSF) of 263 million pounds.
    2. Annually, deduct the free carryin inventory from the optimum 
supply. This would provide the tonnage requirement from current year 
production to meet market needs. In this illustration, if OSF is 263 
million pounds and the carryin inventory is 40 million pounds, the free 
tonnage requirement for this year's crop would be 223 million pounds 
(263 million - 40 million).
    3. Thus, using an initial estimated production of 256 million 
pounds, with 223 million pounds required, processors in the regulated 
districts would have to set-aside or divert 33 million pounds. Assuming 
for this illustration that the regulated districts produced 233 million 
of the industry's total of 256 million pounds, handlers would have a 
restricted tonnage set-aside of 14 percent (33 million/233 million). 
This would result in a preliminary free percentage of 86 percent.
    Once harvest begins in late August or early September, the Board 
would be able to obtain better information on the final volume of 
product being packaged and adjust the percentages using actual figures. 
The Board could calculate and announce interim free and restricted 
percentages between July 1 and September 15 based on this new 
information.
    No later than September 15, the Board would compute the final free 
and restricted percentages. At that time, the Board would recommend the 
percentages to the Secretary to establish them through the informal 
rulemaking process. For this example, we would use the crop year free 
tonnage of 223 million pounds calculated from the previous example. If 
the final crop year estimate is 296 million pounds and the final 
production for the regulated States is 256 million pounds, the final 
percentages would be calculated by deducting the current crop year free 
tonnage from the 296 million pound final crop estimate to equal a 73 
million pound inventory reserve. The 73 million pound inventory reserve 
would be divided by the Regulated districts final production of 256 
million pounds. This would equate to a 33 percent restricted percentage 
and a 66 percent free tonnage. Since 73 million pounds is above the 50 
million pound maximum allowable in the inventory reserve, handlers 
would have to divert 23 million pounds or establish a secondary 
reserve.
    The proponents testified that the Board should be able to modify 
its marketing policy in the event of a national emergency, crop 
failure, or other major change in economic conditions. This would 
provide a type of ``escape hatch'' should market conditions change so 
drastically from what Board projections or from historical patterns on 
which the marketing policy outlined in this order is based. The 
Department agrees with this recommendation. The Board would be required 
to hold a meeting, and file a report with the Secretary within 5 days 
which shall show such modification and the basis therefor. For example, 
the Board could file a report with the Secretary that would request 
that the Board be allowed to release more or all the cherries, from any 
established inventory reserve, than what was established under the 
marketing policy formula. This could be done if a weather disaster was 
experienced during the harvest season in one of the production 
districts under the marketing order. The Board could therefore 
recommend that the free and restricted percentages not apply for that 
current crop year, lower the restricted percentage, or release more 
reserve cherries to the industry.
    The proponents testified that the Board should recognize growers 
that cooperatively form a national bargaining agency in order to 
enhance their chances for a higher price for their cherries. In 
recognition of such organization, the Board should be able to release 
less than 100 percent of the free market tonnage for sale if a grower 
price had not been set. However, it would be required to release at 
least 65 percent of the total free market tonnage by September 1. This 
would allow handlers to make marketing plans, sales, and contractual 
agreements in order to market the new crop in a timely fashion. If no 
grower price is established by September 1, the Board must thereafter 
release all of the free market tonnage. However, after further review 
of this issue, the USDA has determined that such a provision should not 
be contained in the marketing order. Record evidence does not 
adequately explain how such a provision would work or what the benefits 
to growers would be. Also, the record does not contain adequate 
information relating to the composition, function, or the limits and 
bounds of a bargaining agency. Therefore, this provision should not be 
adopted in the proposed marketing order.

Inventory Reserve

    The proposed order provides that if restricted percentages are 
established, handlers would be required to set aside a portion of 
cherries handled. Testimony at the hearing indicated that a handler 
could fulfill such restricted percentage amount by either establishing 
an inventory reserve or by diversion of product. There would be two 
types of inventory reserve--a 

[[Page 61312]]
primary and secondary inventory reserve. The inventory reserve would be 
the sole property of the handlers who place products into the reserve. 
The proponents testified that this represents a significant improvement 
over ownership of the reserve by growers under the previous order. It 
is the proponent's view that handler ownership should help market 
forces determine the sales of released reserve cherries. Record 
evidence shows that handlers should be able to place cherries in their 
inventory reserve in any processed form. This would include 
individually quick frozen (IQF), canned product, frozen 5 plus 1 (25 
pounds of cherries to 5 pounds of sugar), concentrated juice, dried 
product, etc. It was explained at the hearing that handlers would make 
individual business decisions as to the processed form in which they 
would wish to store their inventory reserve. This would allow maximum 
flexibility for handlers in meeting their restricted percentage 
requirements and storing inventory reserve cherries.
    The proponents testified that, at the end of the processing season 
during which there is volume control, a regulated handler would be 
required to have an established inventory reserve and/or have proof of 
diversion of that handler's total restricted percentage requirement. It 
would not matter whether that handler actually processed and packed 
such inventory reserve cherries, or whether the handler purchased the 
cherries from a different handler within the regulated area and stored 
them at that location, as long as proper documentation is provided to 
the Board.
    The proponents also testified that authority should be added to the 
order to allow a grace period for handlers to set up their inventory 
reserves after the processing season. This would allow handlers to 
appropriately document cherries that are being placed in the inventory 
reserve and to compile any applicable diversion certificates. In the 
proponents brief, a grace period of 30 days was specified. The Board, 
with the approval of the Secretary, would be able to establish rules 
and regulations to provide guidelines for handlers in complying with 
any restricted tonnage requirements. In view of the foregoing, these 
proposals relative to the industry reserve should be adopted and are 
included in this decision as proposed.
    In addition, the record supports order authority for a handler 
bonding requirement. This would be another mechanism by which handlers 
would be able to comply with the restricted tonnage percentage, if 
established. The Board would establish a date by which the inventory 
reserve must be established by each regulated handler. A bonding 
requirement would allow that date to be deferred if the handler obtains 
a bond equivalent to the value of the cherries such handler would have 
placed in the inventory reserve. Testimony did not provide details as 
to how this particular provision would be applied. However, the USDA is 
including the provision in the proposed language. The bonding 
requirement is similar to authority under other marketing order 
programs. The Board, with the approval of the Secretary, could develop 
rules and regulations which provide guidelines to implement the bonding 
authority.
    The proposed order should require that the maximum percentage of 
restricted cherries which may be established as a primary inventory 
reserve not exceed 50 million pounds. Handlers should also be 
authorized to establish individual inventory reserves in excess of the 
50 million pounds that would be classified as a secondary reserve. The 
proponents testified that the 50 million pound cap would help prevent 
an exceedingly large reserve from having a dampening effect on the 
market for tart cherries. Also, a very large inventory reserve would 
cost more to store over an extended period of time. A larger reserve 
may not be sold in time to offset the high investment of storing the 
reserve.
    A witness testified and offered an alternative of 75 million pounds 
as the inventory reserve cap instead of the proposed 50 million pound 
cap. The witness testified that 75 million pounds would work better. 
Because of lack of testimony to support this alternative, the 50 
million pound cap would remain as proposed by the proponents.

Inventory Reserve--General

    Once a restricted percentage is established, each handler could 
establish an inventory reserve to meet such handler's restricted 
percentage. As previously discussed, handlers would be able to place 
cherries in any form in the reserve. Each handler's reserve portion 
would be computed by taking the sum of the multiplication of the 
weights of cherries in each lot of cherries the handler handled during 
the fiscal period by the restricted percentage. Rules and regulations 
would establish the manner in which processed products would be 
converted to raw fruit equivalents for each type of storable product.
    The record indicates that a handler's equity in the primary 
inventory reserve could be transferred to another person. A handler 
could elect to do this if such handler has no storage area remaining to 
store a primary inventory reserve. A handler would have to notify the 
Board if this authority is to be utilized. In addition, handlers would 
be encouraged to have written agreements with growers who deliver 
cherries to them. Such agreements could include provisions describing 
how the restricted percentage cherries delivered to the handler would 
be handled and what share, if any, the grower would have in the 
eventual sale of any inventory reserve cherries. Such agreements could 
also cover grower reimbursement for the sale of primary inventory 
reserve cherries.
    Testimony at the hearing indicated that the Board could require 
reserve cherries to meet certain standards of grade, quality, or 
condition. All unprocessed cherries would be inspected by the USDA 
prior to placing them in an inventory reserve. A certificate of such 
inspection would show the name and address of the handler, the number 
and type of containers in the lot, the grade of the product, the 
location where the lot is stored, identification marks, and a 
certification that the cherries meet the prescribed standard.
    All inspection costs of inventory reserve cherries would be paid by 
the Board. The USDA considered modifying this provision to provide that 
inspection costs be paid by the individual handler placing cherries in 
the inventory reserve. This would then be similar to the modification 
to the proposed order regarding storage costs to be paid by the 
regulated handler rather than by a separate storage assessment on all 
handlers. However, after further examination of the record, the USDA 
has determined that the industry as a whole would benefit by providing 
quality standards for cherries to be placed in the inventory reserve 
and later released to be sold in the marketplace. The proponents 
offered testimony that setting quality standards for inventory reserve 
cherries would be a benefit to the entire industry. Therefore, it would 
be appropriate for the Board to pay for inspection. The inspection 
costs would be paid from the administrative assessment fund.
    The record does not indicate any specific quality standard for the 
inventory reserve. Thus, it should be the Board's responsibility to 
establish, with the approval of the Secretary, such quality standards. 
Promptly after inspection and certification, each handler would submit 
a copy of the certificate of inspection to the Board.
    A witness testified that inspection on the inventory reserve should 
not be 

[[Page 61313]]
required. The witness stated that tentative industry committees made up 
of pie fill, juice and IQF processors could propose different 
regulations to ascertain the quality of the product in the inventory 
reserve without requiring inspection. The preponderance of the 
testimony supports inspection of cherries placed in the inventory 
reserve, if recommended by the Board and approved by the Secretary. 
Inspection of the inventory reserve would ensure good quality product 
is placed into the reserve and is still of good quality when released 
and sold from the reserve. Therefore, the witness's proposal is not 
included in the proposed order.
    Record evidence indicates that it would be the individual handler's 
responsibility to rotate cherries placed in the inventory reserves by 
putting new cherries in and taking old cherries out. Rotating cherries 
in the inventory reserve is not a requirement under the order. However, 
it would benefit the industry if it is done. This would insure that 
good quality cherries are being released when inventory reserve 
cherries are sold. Handlers would be required to notify the Board of 
any changes in lot numbers, etc., when inventory is rotated and provide 
proof of inspection of cherries used to produce the storable product. 
Since rotation is voluntary by each handler, the type of storage chosen 
would impact on how frequently rotation is required. Generally, the 
cost of inspecting cherries to be rotated into reserve inventories 
should be borne by the Board. However, the Board should have the 
authority, subject to the approval of the Secretary, to limit the 
number of inspections of cherries to be rotated into inventory reserves 
for which the Board would be financially liable.
    Handlers would be responsible for holding inventory reserve 
cherries until released by the Board. So that such release is equitably 
apportioned, the Board would set the quantity to be taken out of each 
particular handler's reserve. Handlers would not be required to market 
such cherries immediately upon release from the reserve. Once released, 
the cherries could be marketed at appropriate times depending on each 
handler's marketing plan. Handlers would not be allowed to forward 
contract or, in any other way, market reserve cherries before receiving 
an official release from the Board.
    The proponents testified that if a secondary reserve is 
established, all costs of that reserve, including inspection costs, 
should be paid by the individual handler. The record indicates that a 
secondary reserve established by a handler would be an option for a 
handler to consider when the reserve is above the 50 million pound cap. 
Therefore, the handler should assume all the responsibility of a 
secondary reserve since there are other options (redeeming grower 
diversion certificates, diverting at the handler's processing facility, 
etc.) handlers could use to meet their diversion requirement.
    All other requirements established to operate the primary reserve 
should apply to a secondary reserve established by an individual 
handler. These could include quality standards for inventory reserve 
cherries and inventory reserve releases.
    A witness testified by offering an alternative proposal to the 
proponent's proposal. That proposal would eliminate the secondary 
reserve. The witness testified that there are many market factors which 
dictate against putting up a large reserve. For example, handlers would 
have to consider the costs of storing a large reserve. This proposal is 
not included in the proposed order because a secondary reserve is an 
option the handler could choose. If a handler does not want to pay for 
storage costs of a secondary reserve, the handler could choose to 
divert at the plant or redeem grower diversion certificates.

Reserve Releases

    Record evidence indicates that the volume control provisions should 
provide for opportunities for the primary inventory reserve to be 
released throughout the year to handlers that are in regulated 
districts. No cherries should be released from the secondary reserve 
until all cherries in any primary inventory reserve have been released.
    A witness testified that single districts should be allowed to 
release inventory reserve cherries when they are needed to satisfy a 
specific market. If such a release occurs in one district, those 
cherries could be sold into that market. Other districts who have 
inventory reserve released could not sell their cherries into those 
markets. After review of this modification the USDA has determined that 
such a modification would not be equitable to all handlers. Also, there 
was no additional testimony as to how such a provision would operate in 
the industry. Therefore, such a modification is not included in the 
proposed order.
    The proposed marketing order specifies four possible releases of 
primary inventory reserves under Secs. 930.50 (g) and (j) and 
930.55(a).
    The first, under proposed Sec. 930.50(g), would release up to an 
additional 10 percent (above the optimum supply level) of the average 
of the prior three years sales if such inventory is available in the 
primary inventory reserve. The proponents proposed that this release 
would take place after all handlers had been polled and deemed it 
advisable to release additional cherries into the market for market 
expansion. The proponents testified that handlers would be polled as 
quickly as possible and the Board would make the final decision on the 
release based on the handler vote. The USDA would be informed of the 
outcome of the voting process. The proponents also testified that this 
release would be up to an additional 10 percent of the optimum supply 
and could take place a couple of times a year to reach the 10 percent 
total.
    After review of this proposal, the USDA has revised this reserve 
release mechanism to more closely follow USDA policy guidelines. As 
proposed by the proponents, the polling of handlers to determine the 
release of up to 10 percent would be difficult to administer and 
inconsistent with the Secretary's Guidelines for Fruit, Vegetable, and 
Specialty Crop Marketing Orders (Guidelines). The Guidelines state 
that, under volume control programs, primary markets should have 
available a quantity equal to 110 percent of recent years' sales in 
those outlets before the Secretary would approve secondary market 
allocation or pooling. This is to assure plentiful supplies for 
consumers and for market expansion while retaining the mechanism for 
dealing with burdensome supply situations.
    The proponents' proposal is revised by requiring the additional 10 
percent to be made available to handlers, without a polling mechanism. 
However, for this release only, individual handlers would be able to 
decide if they need the additional tonnage and inform the Board so that 
their reserve cherries may be released to them. Those handlers not 
desiring the additional inventory would not have it released to them. 
This revision would be consistent with the Guidelines, which were 
discussed at the hearing, since the tonnage would be required to be 
made available to the industry, but actual release of inventories would 
be based on individual handlers projected needs and situations.
    The second release, under Sec. 930.50(j), would occur in years when 
the expected availability from the current crop plus expected carryin 
inventory does not fulfill the targeted availability of 100 percent of 
the average annual sales in the prior three years plus the desirable 
carryout (optimum supply). The Board would release, not later than 
November 

[[Page 61314]]
1 of the current crop year, such volume from the inventory reserve. 
This release would be made to all handlers holding primary inventory 
reserve and is a required release to be made by the Board if the above 
conditions are met and inventory reserve cherries are available. This 
provision would assure that inventory reserves would be utilized to 
stabilize supplies available on the market. In this case, handlers 
would be required to accept the released inventory reserve cherries, if 
available, for their own use. Under these circumstances, most handlers 
would want more cherries because the current supply is not available to 
fulfill demand. Testimony at the hearing indicated that reserve 
inventories released to handlers could be sold into any market as free 
tonnage cherries. In addition, any secondary inventory reserve cherries 
could be released if the release of the total primary inventory reserve 
does not bring total available supplies up to the optimum supply level.
    The third release of the reserve is proposed under Sec. 930.54(a) 
which would allow the Board to recommend to the Secretary a release of 
a portion or all of the primary (and secondary) inventory reserve. In 
order to make this release, the Board would need to determine that the 
total available supplies for use in normal commercial outlets do not 
equal the amount needed to meet the demand in such outlets. This could 
happen if there was a tart cherry crop loss in Europe or a significant 
U.S. blueberry or other competing crop loss. In these instances, more 
tart cherries could be made available to supply the unexpected demand 
caused by such crop losses.
    The proponents also proposed the authority under Sec. 930.54(b), 
for the Board to establish, through informal rulemaking, circumstances 
in which an individual handler may sell any or all of their inventory 
reserve cherries into the following markets: Charitable uses; state 
government, USDA or other non-military federal agency purchases, any 
experimental purposes, and any nonhuman use, including animal feed. 
This provision would allow the Board to specify when handlers can sell 
inventory reserve cherries into these outlets.
    After review of this proposal the USDA is deleting this provision 
from the proposed order. The Board should not be placed in the position 
of deciding whether inventory reserve cherries should be released to 
individual handlers for specific sales. Handlers would be able to sell 
cherries into these outlets by using their free tonnage cherries or 
cherries that are released to them from the inventory reserve. The 
Board could address this issue under the exempted use provision 
(Sec. 930.62). The Board is authorized to expand the list of exempted 
uses, therefore the Board could specify those outlets that handlers can 
sell reserve cherries into after notifying the Board. For the above 
reasons the USDA has deleted this portion of the proposal and modified 
Sec. 930.62 as discussed above.

Diversion--General

    Handlers would be allowed to choose to meet their restricted 
percentage obligation by placing cherries in the primary inventory 
reserve or diverting the cherries, or a combination of both. Record 
evidence shows that cherries could be diverted either by the grower at 
the orchard or by the handler at the processing plant. Handlers and 
growers choosing to divert would save production, cultural, processing, 
storing and inspection costs.
    A grower could choose to divert if such grower's crop is of poor 
quality due to hail damage or some other climatic condition. By 
choosing to divert the poor quality crop, the grower could be provided 
income from redeemed diversion certificates. In addition, poor quality 
fruit would be kept off the market.
    Handlers choosing to divert would save processing, storage and 
secondary reserve inspection costs if they divert cherries at the 
plant. The handler could choose the best cherries to process, and 
divert the less desirable cherries or contribute them to a Board 
approved food bank. The specifics of both proposed diversion programs 
are discussed below.

Grower Diversion

    There are no order provisions which would require a grower to 
divert tart cherries. Grower diversion would be completely voluntary. 
Growers could choose to divert because they have an abundance of low 
value, poor quality cherries or they are unable to find a processor 
willing to process some or all of their cherries because of a large 
crop. Before choosing to divert, the grower would most likely evaluate 
the harvesting and other cultural costs that could be saved by 
diverting and locate a handler that would be willing to redeem such 
grower's diversion certificate. Record evidence indicated that a 
portion of the production of growers choosing to divert would be left 
unharvested until the cherries are too ripe to be of commercial use. 
Growers who elect to divert their cherries and who wish to obtain 
diversion certificates (explained below) would have to file an 
application with the Board for such diversion to be approved. The 
proponents stated that rules and regulations would need to be 
promulgated to implement provisions for diverting cherries by growers. 
These regulations could include: (1) The form and content of 
applications and agreements including provisions for supervision and 
compensation for such supervision by the Board; and (2) provisions for 
mapping procedures to identify growers' production and acreage 
locations. The proponents testified that diversion certificates should 
only be valid for one crop year. This would allow the Board to account 
for all cherries produced in the crop year and, since diverted cherries 
count as delivered cherries for marketing policy calculations, would 
allow the Board to calculate accurate preliminary and final 
percentages. The proponents also testified that the diversion program 
would be easier to administer if the diversion certificates were 
redeemed in the same crop year in which they were issued. However, the 
proponents testified that the Board should be able, through informal 
rulemaking, to develop rules that would apply to possible circumstances 
in which diversion certificates might be able to be carried forward 
into the next crop year.
    Growers wishing to divert all or a portion of their crop could be 
required to submit maps to the Board that specify the area(s) where 
cherries would be left unharvested. Several growers testified at the 
hearing that most growers have maps of their orchards and that it would 
not be an undue burden to submit that information to the Board. Once 
the Board approves a grower's application for diversion and verifies 
diversion of the cherries, the Board would issue a diversion 
certificate to the diverting grower. The diversion certificate would 
specify the amount of cherries that were diverted. The grower could 
then take the diversion certificate to a handler to be redeemed. A 
handler could redeem the certificate for cash, by paying higher prices 
for nondiverted cherries, or through other financial arrangements 
between the two parties. Any such arrangements between growers and 
handlers concerning diversion certificates would not be part of the 
marketing order. Such decisions could vary among individual growers and 
handlers and among growers and handlers in different regions of the 
regulated area.
    As an example, if a handler normally receives 1,000 tons of 
cherries and a restricted percentage of 20 percent is established, that 
handler would expect 

[[Page 61315]]
to have to place 200 tons of cherries into the primary reserve. If the 
handler receives grower diversion certificates (which are treated as 
though they are actual cherries delivered), the volume of cherries 
required to be placed into reserve could be reduced. Thus, if the 
handler received 1,000 tons of cherries, with 50 tons represented by 
diversion certificates, and a restricted percentage of 20 percent is 
established, the actual tonnage required to be stored in the primary 
reserve would be 150 tons (200 tons minus the 50 tons of diverted 
cherries). Handlers would value certificates to the extent they could 
reduce their operating costs through the selective use of the best 
quality cherries available for initial delivery and/or the avoidance of 
processing and storage costs for reserve cherries. Handlers could also 
receive higher prices for processed products made from the best quality 
cherries. This would create opportunities for individual growers and 
handlers to arrive at different financial arrangements depending on the 
quality of the cherries available for delivery, whether contractual 
obligations exist for all or a portion of the grower's crop, the 
processing capacity of the handler, the size of the crop which exceeds 
market demands, individual handler's financial situations, etc.
    Handlers may want to limit the volume of the primary inventory 
reserve that they would be responsible for and therefore, could request 
their growers to divert cherries in the orchard rather than at the 
processing plant. Nonharvest of the cherries would be considerably 
cheaper than incurring the costs of picking, cooling and hauling 
cherries to the handler's facility. A handler might also consider 
redeeming grower diversion certificates if they could receive and 
handle a larger volume of better quality cherries from other growers.
    The proponents also testified that diversion certificates should be 
issued to growers in the event an act of nature damaged or destroyed 
what would otherwise have been a deliverable crop. In the event of a 
disaster, growers are faced with the very tough decision of whether to 
harvest a heavily damaged, and usually poor quality, crop, and deliver 
it to a handler for processing, or to leave the crop unharvested. By 
leaving the crop unharvested, the grower would have no income from the 
crop. However, harvesting the crop could result in a considerable 
quantity of poor quality fruit making its way into marketing channels 
and could add needlessly to the grower's costs. In addition, poor 
quality cherries in the marketplace could depress market prices for all 
cherries. The proponents testified that issuing a grower diversion 
certificate to growers with damaged cherries could increase grower 
income, which is one of the purposes of the Act and the order. Record 
evidence supported that this should be limited solely to otherwise 
harvestable fruit that was damaged by acts of nature. For example, in 
the event of an early frost, preventing the initial setting of the 
cherries and resulting in no crop to harvest, this provision would not 
apply. Special precautions are expected to be taken by the Board to 
ensure that harvestable cherries were in fact not harvested, and were 
subsequently shaken on the ground or otherwise permanently removed from 
the market. The proponents testified that the Board may want to 
supervise some types of grower diversion. Additionally, the proponents 
testified that such unharvested fruit would be calculated in computing 
the final free and restricted percentages. Unharvested fruit for which 
diversion certificates are issued should also be used in the 
calculations in the marketing policy because such fruit would have been 
harvested if not diverted.
    There was considerable discussion on the record concerning equity 
of this provision and the effect on the marketing policy. Also, one of 
the parties stated in his brief that the practice allowed under the 
proponents proposal grants a document of potential economic value in 
exchange for something of no value--cherries which are unmarketable 
because of damage of some kind. It was therefore, argued that, in no 
case should diversion certificates be granted for other than mature, 
harvestable cherries.
    The Board would be required to ensure that diversion credit is not 
given to growers whose fruit was destroyed before it set and/or matured 
on the tree. Diversion credit would only be given to growers whose 
harvestable fruit was damaged or destroyed due to tornadic winds, 
floods, etc.
    The proponents also testified that diversion credit could be given 
for fruit damaged or destroyed prior to full maturity that is not 
likely to enter the stream of commerce as defined under the proposed 
marketing order. However, counting this ``destroyed, but to be 
diverted'' cherries as though they were actually produced would result 
in a more restrictive inventory reserve percentage, applicable to all 
handlers. This would occur because the destroyed but diverted fruit 
would be counted in the final delivery figures used in computing the 
final and restricted percentages. If the final crop figure is 
increased, it would result in a more restrictive percentage. This 
provision would create a form of crop insurance for growers which is 
inconsistent with these types of programs. Therefore, the proponent's 
proposal to grant diversion credit to growers for such unharvestable 
fruit is not included in the language of this recommended decision.
    The USDA is including amendatory language that would recommend 
growers notify the Board if they are unable to redeem their diversion 
certificates. The Board could act as a clearinghouse and inform 
handlers that diversion certificates are available for redemption. The 
Board could recommend rules and regulations to specify the details of 
this provision. One such provision may be to include a date by which 
all growers must inform the Board that they have certificates remaining 
to redeem. The Board would then be able to assist growers in locating 
handlers willing to redeem their diversion certificates. However, the 
Board has no authority to require handlers to redeem certificates or 
establish prices or pricing guidelines for diversion certificates.

Handler Diversion

    The other form of diversion would be by handlers at their 
processing facilities. Handlers in a regulated district could fulfill 
any restricted percentage requirement by voluntarily diverting cherries 
in an approved program rather than placing cherries in an inventory 
reserve. If the primary inventory reserve has reached its maximum 
volume limitation, handlers would either have to establish a secondary 
inventory reserve, divert the restricted percentage cherries, or 
utilize a combination of the two.
    The uses eligible for diversion could take any of the following 
forms, if recommended by the Board and approved by the Secretary. These 
would be uses exempt under the order, contribution to a Board approved 
food bank or other approved charitable organization, acquisition of 
grower diversion certificates, or other uses, including diversion of 
the cherries at the handler's facility. Record evidence shows that 
handlers could choose which, and whose, cherries to divert. Those 
decisions would likely be made on quality considerations, but could 
also be impacted by prior contractual arrangements with their growers. 
A handler electing to divert cherries would first need to notify the 
Board. The notification would describe in detail the manner in which 
the handler proposes to divert the cherries, 

[[Page 61316]]
including, if the diversion is to be by means of destruction of the 
cherries, a detailed description of the means of destruction and the 
disposition of such cherries. This type of description would be 
necessary to ensure that the cherries were not marketed in any form. 
Any notification of diversion would contain an agreement that the 
proposed diversion is to be supervised by the Board and that the costs 
of diversion will be paid by the handler. The proponents testified that 
uniform fees for supervision should be established by regulation.

Exempt Use Diversion

    The diversion of cherries for exempt uses would first need to be 
approved by the Board. Tart cherries could be exempted from certain 
order provisions if they are diverted in accordance with the order; 
used for new product and/or new market development; or used for 
experimental purposes or for other uses designated by the Board, 
including processing into products for markets utilizing less than 5 
percent of the preceding 5 year average production of cherries. The 
list of exemptions could be expanded, with the approval of the 
Secretary, through the informal rulemaking process. The Board may also 
want to provide that handlers can sell reserve cherries in existing 
inventory reserves into specific outlets if handlers first notify the 
Board. This would allow handlers to dispose of inventory reserve 
cherries if their individual economic situations make continued storage 
unfeasible, but would prevent such cherries from interfering with 
normal commercial markets for free market tonnage cherries. The 
application for exempt usage would show the uses to which the diverted 
cherries would be put and contain an agreement that the diversion would 
be carried out under the supervision of the Board, with the cost of 
diversion to be paid by the applicant. The applicant would be notified 
of the Board's approval or disapproval.
    Upon receiving verification of an approved diversion, the Board 
would issue to the diverting handler a handler diversion certificate. 
The diversion certificate would show the quantity of cherries diverted 
by such handler. Such a certificate would satisfy any restricted 
percentage or diversion requirement up to the inspected weight of the 
cherries involved. Such diversion would reduce that handler's 
processing, storage, and inspection costs. For example, if a handler 
receives and processes 1,000 tons of cherries and a restricted 
percentage of 20 percent is established, the handler would have to 
place 200 tons of processed cherries into the primary inventory 
reserve. If the handler diverts 100 tons of cherries before processing, 
the required volume of restricted inventory reserve would be reduced to 
100 tons.
    The proponents took no position on what other exempt uses the Board 
may establish. However, handlers from Oregon and Washington expressed 
concern that juice concentrate could be established by the Board as a 
use eligible for diversion credit. Some handlers in Washington and 
Oregon process all or the majority of their cherries into juice 
concentrate. There is a wide selection of concentrators available in 
that area and there was testimony that cherries produced in Washington 
and Oregon have a high brix (sugar content) level desirable for juice 
concentrate. Testimony showed that small businesses in that area could 
be unduly burdened if the Board decided to allow diversion credit for 
juice concentrate as this could cause an artificially induced increase 
in the volume of juice concentrate in the marketplace, lowering prices 
for all such products. Therefore, the evidence presented on this issue 
has persuaded the USDA to modify the proposed provision to prohibit the 
use of juice concentrate for diversion credit.

Determination of Districts Subject to Volume Regulation

    The order should provide for the establishment of districts for the 
purposes of volume regulations. The proponents testified in support of 
their proposal, that upon adoption of this order, districts subject to 
volume regulation would be those districts in which the average annual 
production of cherries over the prior three years exceeded 15 million 
pounds. Record evidence shows that Michigan, Utah and New York would be 
regulated States at this time. Using the proposed 15 million pound 
minimum production figure, Oregon, Pennsylvania, Washington and 
Wisconsin would not be regulated at this time. Handlers in districts 
not subject to volume regulation would not be subject to annual 
restricted percentages, except to the extent they might handle cherries 
grown in a regulated district. In such case, the handler would treat a 
portion of the cherries from the regulated district as restricted 
percentage cherries, just as if the handler were in a regulated 
district.
    The proponents further testified in support of their proposal that 
districts not currently meeting the production requirement of 15 
million pounds should automatically be subject to regulation in the 
marketing year in which the production of cherries in the district is 
projected to exceed 150 percent of the average production experienced 
in 1989 through 1992. This period reflects a normal production cycle 
for tart cherries. This period could be changed with approval of the 
Secretary through the informal rulemaking process. This provision is 
designed to catch surges in production that occasionally occur in order 
to more equitably distribute the burden of controlling burdensome 
supplies. Proponents testified that, while a district may not 
historically be a large producer and thus not warrant permanent volume 
regulation, producing over 50 percent more than its historical average 
warrants a district's becoming subject to volume regulation, albeit on 
a temporary basis.
    It was also the proponents' position that if a district's 
production exceeds 150 percentum of the base period as a result of 
increased capacity to produce (i.e., increased bearing acreage), then 
beginning with the next crop year such district should be permanently 
subject to volume regulation. However, if a district, over a rolling 
three-year period following the year of subjection to regulation, drops 
below the 150 per centum trigger, such district would become 
unregulated again.
    After review of the proponent's proposal concerning the trigger for 
regulation and the testimony and other record evidence concerning this 
issue, the Department has determined it would be overly complicated for 
the Board to administer and possibly inequitable to handlers and 
growers. Proponents testified that it is not the intent to regulate 
States with smaller production volumes (e.g., Pennsylvania, Oregon) 
because when one State's production is up the other State's production 
is likely to be down. The smaller States' aggregate volume is not a 
critical amount when compared to the total volume of tart cherries 
produced. Proponents stated that a purpose of the proposed order was to 
make sure that when smaller producing States (e.g., Washington, Oregon, 
Wisconsin) expand production, they do not take advantage of the system 
and become free riders. The proponents also testified that some 
districts could be regulated even though they have less than 15 million 
pounds annual production if they exceed the 150 percent trigger 
mechanism. For example, if Wisconsin's production for the 1989 through 
1992 period is 7 million, 5 million, 8 million and 9 million pounds, 
respectively, the average for those four years would be 7.25 million 
pounds. Then 7.25 would 

[[Page 61317]]
be multiplied by 150 percent to equal about 11 million pounds. If 
Wisconsin produced 11.5 million pounds in a specific year, Wisconsin 
would be regulated under the order, even though Wisconsin did not 
exceed the 15 million pound level.
    The USDA crop estimate is not released until late June. Thus, the 
Board may not be able to provide adequate notice to handlers in 
districts that were not regulated from the initial promulgation of the 
order that they would be subject to volume control regulations that 
could be announced on July 1. The record indicated that some districts 
have been experiencing earlier harvesting dates than other districts 
and therefore, handlers and growers would not know in time that they 
were to become a regulated district. In addition, there could also be 
confusion and concern in the industry if districts can meet one of the 
criteria and not the other criteria and still be regulated.
    Since the larger producing districts are the major concern for 
volume regulation purposes, the USDA is revising this provision by 
deleting the 150 per centum trigger mechanism for determining districts 
subject to volume regulation. Therefore, the criteria that a district 
would have to meet to become regulated under the volume control 
provisions of the order would be to exceed an average annual production 
of cherries over the prior three years of 15 million pounds. This 
provision would be much easier to administer and cause less confusion. 
It is also desirable for the district not to be subject to volume 
regulations until the crop year after the three year average production 
exceeds the 15 million pound level. This would allow adequate notice to 
be given to handlers that they would subsequently be subject to volume 
regulations. For example, if a previously unregulated district's 
average annual production of cherries over the prior three years was 18 
million pounds at the conclusion of the 1997 crop year, that district 
would be subject to volume regulations during the 1998 crop year.
    The USDA is also modifying the proposal for determining when 
regulated districts would not be subject to volume regulation. The USDA 
has revised this provision to provide that when a district drops below 
the 15 million pound three year average production figure, that 
district would not be regulated. It is desirable for a provision to be 
included in the order to discontinue regulation in a district when 
production capacity has decreased or actual production has suffered due 
to some type of hardship that has significantly affected production in 
that district. This determination should be made after the close of the 
crop year and would apply to the next year's crop. These modifications 
were supported by record testimony.
    The proponents testified that a disaster relief clause should be 
included to exempt a regulated district from regulation in a year in 
which production in that district drops to less than one-half of its 
maximum annual processed production for the previous five years. This 
provision is included in the proposed marketing order to help relieve 
such district from the burdens of the order in a year in which its 
processors and growers were already suffering from a severely short 
crop. Thus, if the central Michigan district's maximum production 
during the previous five year period was 80 million pounds, and in the 
next year only 30 million pounds were produced and supplies from other 
districts exceeded the optimum supply, the central Michigan district 
would not be regulated. The above modifications have been made to the 
proposed order.
    A witness provided an alternative to the 15 million pound 
production level for determining when a district would become 
regulated. The witness testified that 20 million pounds should be used 
because it provides a cushion before regulation would occur. However, 
the preponderance of the testimony supported a 15 million pound 
production level. Therefore, the 20 million level is not adopted. In 
addition, the proponents proposed under Sec. 930.63 that the Board 
should have the authority to recommend to the Secretary expansion of 
the production area if such new area's average annual production of 
cherries reaches at least five million pounds over a three-year period. 
The provision also provides for nomination, election, appointment, 
acceptance, and other matters concerning Board membership. After review 
of this proposal, the USDA is deleting this provision from the proposed 
order. The Board has the power under Sec. 930.30(d) to recommend to the 
Secretary amendments to the marketing order dealing with any issue. 
During a formal rulemaking process to expand the production area, the 
issues dealing with Board representation, quorum, voting requirements 
and etc. would be addressed. Also, the proposed provision requires that 
the Board cannot consider expansion of the production area until such 
new area's average annual production of cherries reaches at least five 
million pounds over a three-year period. The Board may want to expand 
the production area even though such new area has not reached the above 
level. Therefore, Sec. 930.63 is deleted from the proposed order.
    (g) The Board should have the authority, under proposed 
Sec. 930.70, with the approval of the Secretary, to require that first 
handlers submit to the Board such reports and information as the Board 
may need to perform its functions and fulfill its responsibilities 
under the order. In the normal course of business, tart cherry handlers 
collect and record information that may be needed by the Board. 
Witnesses expressed the belief that the reporting requirements that may 
be imposed under the proposed order would not constitute an undue 
burden on handler businesses.
    Reports would be needed by the Board for such purposes as 
collecting assessments; compiling statistical data for use in 
evaluating marketing research and development projects; promotional 
activities; making recommendations for production research; making 
recommendations for volume control regulations; and determining whether 
handlers are complying with order requirements. The record evidence 
indicates that, to the extent necessary for the Board to perform its 
functions, handlers would probably need to provide information showing 
weekly production data, monthly sales and inventory data, and other 
such information, including the volume of any cherries placed in or 
released from a primary or secondary inventory reserve or diverted. 
This should not be construed as a complete list of information the 
Board might require, nor should it be assumed that all of the above 
would be necessary for the proper conduct of its operations under the 
order. Therefore, the Board should have the authority, with the 
approval of the Secretary, to require each handler to furnish such 
information as it finds necessary to perform its duties under the 
order.
    Each handler should be required to maintain such records of tart 
cherries acquired, handled, diverted or sold, or otherwise disposed of 
as may be necessary to verify the reports that the handler submits to 
the Board. All such records should be maintained for at least two years 
after the termination of the fiscal year in which the transaction 
occurred. The order should provide the authority for the Secretary and 
authorized employees of the Board to have access to handlers' premises 
to examine those records pertaining to matters within the purview of 
the order. This provision would enable verification of compliance with 
requirements of the order.

[[Page 61318]]

    All reports and records submitted for Board use by handlers would 
be required to remain confidential and be disclosed only as authorized 
by the Secretary, except as required by law. Such reports should become 
part of the committee and Secretary's records. However, the Board 
should be authorized to release composite information from any or all 
reports. Such composite information could be helpful to the Board and 
to the industry in planning operations under the order and in promoting 
the order. Any release of composite information should not disclose the 
identity of the persons furnishing the information or any person's 
individual operation.
    (h) No handler should be permitted to handle tart cherries except 
in conformity with the provisions of this part, as set forth in 
proposed section 930.80. If the program is to be effective, compliance 
with its requirements is essential.
    In accordance with proposed section 930.83, the order should 
provide that the Secretary conduct a periodic referendum every six 
years with the initial referendum conducted within six years of the 
effective date of the marketing order.
    The Secretary of Agriculture has determined that continuance 
referenda are an effective means for ascertaining whether producers 
favor continuance of marketing order programs. The Act provides that 
the Secretary shall terminate a marketing order whenever, through the 
conduct of a referendum, it is indicated that a majority of all 
producers favor termination and such majority produced more than 50 
percent of the commodity for market during a representative period.
    Since less than 50 percent of all producers usually participate in 
a referendum, it is difficult to determine overall producer support or 
opposition to termination of an order. Thus, to provide a basis for 
determining whether producers favor continuance of the order, a 
provision for continuance referenda should be included. Continuance 
should be based upon the affirmative vote of either two-thirds of the 
producers voting or an affirmative vote of the producers of two-thirds 
of the volume of tart cherries represented in the referendum.
    The Act requires that in the promulgation of a marketing order, at 
least two-thirds of the producers voting, by number or volume 
represented in the referendum, must favor the issuance of the order. 
Continuance referenda should be based on the same standard of industry 
support. This requirement is considered adequate to measure producers' 
support to continue the marketing order. The Secretary would consider 
termination of the order if less than two-thirds of the producers 
voting in the referendum or producers of less than two-thirds of the 
volume of tart cherries represented in the referendum favor 
continuance. In evaluating the merits of continuance versus 
termination, the Secretary should not only consider the results of the 
referendum but also should consider all other relevant information 
concerning the operation of the order and the relative benefits and 
disadvantages to producers, handlers, and consumers in order to 
determine whether continued operation of the order would tend to 
effectuate the declared policy of the Act.
    The Secretary's ``Guidelines for Fruit, Vegetable, and Specialty 
Crop Marketing Orders'' provide for periodic referenda to allow 
producers the opportunity to indicate their support for or rejection of 
a marketing order. It is the position of the Department that periodic 
referenda ensure that marketing order programs continue to be 
accountable to producers and processors, obligate producers and 
processors to evaluate their programs periodically, and involve them 
more closely in their operation. The record evidence supports these 
goals.
    In any event, section 608(C)(16)(B) of the Act requires the 
Secretary to terminate the order whenever the Secretary finds that the 
majority of all producers favor termination, and that such majority 
produced more than 50 percent of the commodity for market.
    In addition to producer approval for the promulgation of a order, 
the Act provides that no order shall be effective for cherries for 
canning or freezing unless the Secretary determines that the issuance 
of such order is approved or favored by processors who, during a 
representative period, have frozen or canned more than 50 percentum of 
the total volume of cherries. Processors should also vote in 
continuance referenda. The same criteria for promulgation would apply 
to continuance referenda for processors.
    (i) The provisions of proposed Secs. 930.84 through 930.94 of the 
order as contained in the Notice of Hearing and hereinafter set forth, 
are common to marketing agreements and orders now operating. All such 
provisions are necessary to effectuate the other provisions of the 
marketing order and marketing agreement and to effectuate the declared 
policy of the Act. The record evidence supports inclusion of each such 
provision as proposed in the Notice of Hearing. These provisions, which 
are applicable to both the marketing agreement and the marketing order, 
are identified by section number and heading as follows: Sec. 930.84 
Proceedings after termination; Sec. 930.85 Effect of termination or 
amendment; Sec. 930.86 Duration of immunities; Sec. 930.87 Agents; 
Sec. 930.88 Derogation; Sec. 930.89 Personal liability; Sec. 930.90 
Separability; and Sec. 930.91 Amendments. Those provisions applicable 
to the marketing agreement only are: Sec. 930.92 Counterparts; 
Sec. 930.93 Additional parties; and Sec. 930.94 Order with marketing 
agreement.
    Miscellaneous conforming and clarifying changes have also been 
made.

Rulings on Proposed Findings and Conclusions

    Briefs, proposed findings and conclusions, and the evidence in the 
record were considered in making the findings and conclusions set forth 
in this recommended decision. To the extent that the suggested findings 
and conclusions filed by interested persons are inconsistent with the 
findings and conclusions of this recommended decision, the requests to 
make such findings or to reach such conclusions are denied.

General Findings

    (1) The marketing agreement and order, as hereby proposed, and all 
of the terms and conditions thereof, would tend to effectuate the 
declared policy of the Act;
    (2) The marketing agreement and order, as hereby proposed, regulate 
the handling of tart cherries grown in the States of Michigan, New 
York, Pennsylvania, Oregon, Utah, Washington, and Wisconsin in the same 
manner as, and are applicable only to, persons in the respective 
classes of commercial and industrial activity specified in the 
marketing agreement and order upon which a hearing has been held;
    (3) The marketing agreement and order, as hereby proposed, are 
limited in their application to the smallest regional production area 
which is practicable, consistent with carrying out the declared policy 
of the Act, and the issuance of several orders applicable to 
subdivision of the production area would not effectively carry out the 
declared policy of the Act; and
    (4) All handling of tart cherries grown in the States of Michigan, 
New York, Pennsylvania, Oregon, Utah, Washington, and Wisconsin as 
defined in the proposed marketing agreement and order, is in the 
current of interstate or foreign commerce or directly burdens, 
obstructs, or affects such commerce.

[[Page 61319]]

    1. Title 7, chapter IX is proposed to be amended by adding part 930 
to read as follows:

PART 930--TART CHERRIES GROWN IN MICHIGAN, NEW YORK, PENNSYLVANIA, 
OREGON, UTAH, WASHINGTON AND WISCONSIN

Subpart--Order Regulating Handling

Definitions

Sec.

930.1  Act.
930.2  Board.
930.3  Cherries.
930.4  Crop year.
930.5  Department or USDA.
930.6  District.
930.7  Fiscal period.
930.8  Free market tonnage percentage cherries.
930.9  Grower.
930.10  Handle.
930.11  Handler.
930.12  Person.
930.13  Primary inventory reserve.
930.14  Production area.
930.15  Restricted percentage cherries.
930.16  Sales constituency.
930.17  Secondary inventory reserve.
930.18  Secretary.

Administrative Body

930.20  Establishment and membership.
930.21  Reestablishment.
930.22  Term of office.
930.23  Nomination and election.
930.24  Appointment.
930.25  Failure to nominate.
930.26  Acceptance.
930.27  Vacancies.
930.28  Alternate members.
930.29  Eligibility for membership on Cherry Industry Administrative 
Board.
930.30  Powers.
930.31  Duties.
930.32  Procedure.
930.33  Expenses and compensation.

Expenses and Assessments

930.40  Expenses.
930.41  Assessments.
930.42  Accounting.

Quality Control

930.44  Quality Control.

Research, Market Development and Promotion

930.48  Research, Market Development and Promotion.

Regulations

930.50  Marketing policy.
930.51  Issuance of volume regulations.
930.52  Establishment of districts subject to volume regulations.
930.53  Modification, suspension, or termination of regulations.
930.54  Prohibition on the use or disposition of inventory reserve 
cherries.
930.55  Primary inventory reserves.
930.56  Off-premise inventory reserve.
930.57  Secondary inventory reserve.
930.58  Grower diversion privilege.
930.59  Handler diversion privilege.
930.60  Equity holders.
930.61  Handler compensation.
930.62  Exemptions.
930.63  Deferment of restricted obligation.

Reports and Records

930.70  Reports.
930.71  Records.
930.72   Verification of reports and records.
930.73  Confidential information.

Miscellaneous Provisions

930.80  Compliance.
930.81  Right of the Secretary.
930.82  Effective time.
930.83  Termination.
930.84  Proceedings after termination.
930.85  Effect of termination or amendment.
930.86  Duration of immunities.
930.87  Agents.
930.88  Derogation.
930.89  Personal liability.
930.90  Separability.
930.91  Amendments.
930.92  Counterparts.
930.93  Additional parties.
930.94  Order with marketing agreement.

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

Subpart--Order Regulating Handling

Definitions


Sec. 930.1  Act.

    Act means Public Act No. 10, 73d Congress (May 12, 1933), as 
amended, and as reenacted and amended by the Agriculture Marketing 
Agreement Act of 1937, as amended (48 Stat. 31, as amended, 68 Stat. 
906, 1047; 7 U.S.C. 601, et seq.).


Sec. 930.2  Board.

    Board means the Cherry Industry Administrative Board established 
pursuant to Sec. 930.20.


Sec. 930.3  Cherries.

    Cherries means all tart/sour cherry varieties grown in the 
production area classified botanically as Prunus cerasus, Prunus 
cerasas by Prunus avium, or Prunus cerasas by Prunus fruticosa.


Sec. 930.4  Crop year.

    Crop year means the 12-month period beginning on July 1 of any year 
and ending on June 30 of the following year, or such other period as 
the Board, with the approval of the Secretary, may establish.


Sec. 930.5  Department or USDA.

    Department or USDA means the United States Department of 
Agriculture.


Sec. 930.6  District.

    District means one of the subdivisions of the production area 
described in Sec. 930.20(c), or such other subdivisions as may be 
established pursuant to Sec. 930.21, or any subdivision added pursuant 
to Sec. 930.63.


Sec. 930.7  Fiscal period.

    Fiscal period is synonymous with fiscal year and means the 12-month 
period beginning on July 1 of any year and ending on June 30 of the 
following year, or such other period as the Board, with the approval of 
the Secretary, may establish: Provided, that the initial fiscal period 
shall begin on the effective date of this part.


Sec. 930.8  Free market tonnage percentage cherries.

    Free market tonnage percentage cherries means that proportion of 
cherries handled in a crop year which are free to be marketed in normal 
commercial outlets in that crop year under any volume regulation 
established pursuant to Sec. 930.50 or Sec. 930.51 and, in the absence 
of a restricted percentage being established for a crop year pursuant 
to Sec. 930.50 or Sec. 930.51, means all cherries received by handlers 
in that crop year.


Sec. 930.9  Grower.

    Grower is synonymous with ``producer'' and means any person who 
produces cherries to be marketed in canned, frozen, or other processed 
form and who has a proprietary interest therein: Provided that, the 
term ``grower'' shall not include a person who produces cherries to be 
marketed exclusively for the fresh market in an unpitted condition.


Sec. 930.10  Handle.

    Handle means the process to brine, can, concentrate, freeze, 
dehydrate, pit, press or puree cherries, or in any other way convert 
cherries commercially into a processed product, or divert cherries 
pursuant to Sec. 930.59 or obtain grower diversion certificates issued 
pursuant to Sec. 930.58, or otherwise place cherries into the current 
of commerce within the production area or from the area to points 
outside thereof: Provided, that the term ``handle'' shall not include:
    (a) The brining, canning, concentrating, freezing, dehydration, 
pitting, pressing or the converting, in any other way, of cherries into 
a processed product for home use and not for resale; or
    (b) The transportation within the production area of cherries from 
the orchard where grown to a processing facility located within such 
area for preparation for market; or
    (c) The delivery of such cherries to such processing facility for 
such preparation; or 

[[Page 61320]]

    (d) The sale or transportation of cherries by a grower to a handler 
of record within the production area; and
    (e) The sale of cherries in the fresh market in an unpitted 
condition.


Sec. 930.11  Handler.

    Handler means any person who first handles cherries or causes 
cherries to be handled.


Sec. 930.12  Person.

    Person means an individual, partnership, corporation, association, 
or any other business unit.


Sec. 930.13  Primary inventory reserve.

    Primary inventory reserve means that portion of handled cherries 
that are placed into handlers' inventories in accordance with any 
restricted percentage established pursuant to Sec. 930.50 or 
Sec. 930.51.


Sec. 930.14  Production area.

    Production area means the States of Michigan, New York, 
Pennsylvania, Oregon, Utah, Washington and Wisconsin.


Sec. 930.15 Restricted percentage cherries.

    Restricted percentage cherries means that proportion of cherries 
handled in a crop year which must be either placed into handlers' 
inventories in accordance with Sec. 930.56 or Sec. 930.58 or otherwise 
diverted in accordance with Sec. 930.60 and thereby withheld from 
marketing in normal commercial outlets under any volume regulation 
established pursuant to Sec. 930.50 or Sec. 930.51.


Sec. 930.16  Sales constituency.

    Sales constituency means a common marketing organization or 
brokerage firm or individual representing a group of handlers or 
growers.


Sec. 930.17  Secondary inventory reserve.

    Secondary inventory reserve means any portion of handled cherries 
voluntarily placed into inventory by a handler under Sec. 930.58.


Sec. 930.18  Secretary.

    Secretary means the Secretary of Agriculture of the United States, 
or any officer or employee of the U.S. Department of Agriculture to 
whom authority has heretofore been delegated, or to whom authority may 
hereafter be delegated, to act in the Secretary's stead.

Administrative Body


Sec. 930.20  Establishment and membership.

    (a) There is hereby established a Cherry Industry Administrative 
Board (Board) consisting of 18 members. Seventeen of these members 
shall be qualified growers and handlers selected pursuant to this part, 
each of whom shall have an alternate having the same qualifications as 
the member for whom the person is an alternate. The remaining member of 
the Board shall be a public member who, along with his or her 
alternate, shall be elected by the Board from the general public.
    (b) District representation on the Board shall be as follows:

------------------------------------------------------------------------
                                         Grower                 Handler 
               District                  members                members 
------------------------------------------------------------------------
1....................................       2                      2    
2....................................       1                      2    
3....................................       1                      1    
4....................................       1                      1    
5....................................       1      or              1    
6....................................       1      or              1    
7....................................       1                      1    
8....................................       1      or              1    
9....................................       1      or              1    
------------------------------------------------------------------------

    (c) Upon the adoption of this part, the production area shall be 
divided into the following described subdivisions for purposes of this 
section:

    District 1--Northern Michigan: that portion of the State of 
Michigan which is north of a line drawn along the northern boundary 
of Mason County and extended east to Lake Huron.
    District 2--Central Michigan: that portion of the State of 
Michigan which is south of District 1 and north of a line drawn 
along the southern boundary of Allegan County and extended east to 
Lake St. Clair.
    District 3--Southern Michigan: That portion of the State of 
Michigan not included in Districts 1 and 2.
    District 4--The State of New York.
    District 5--The State of Oregon.
    District 6--The State of Pennsylvania.
    District 7--The State of Utah.
    District 8--The State of Washington.
    District 9--The State of Wisconsin.

    (d) The ratio of grower to handler representation in District 2 
shall alternate each time the term of a Board member from the 
representative group having two seats expires. During the initial 
period of the order, the ratio shall be as designated in paragraph (b) 
of this section.
    (e) Board members from Districts 5, 6, 8 and 9 may be either grower 
or handler members and will be nominated and elected as outlined in 
Sec. 930.23. If District 5, 6, 8, and/or 9 becomes subject to volume 
regulation under Sec. 930.52(a), then the Board shall be reestablished 
by the Secretary to provide such District(s) with at least one grower 
and one handler seat on the Board and such seats shall be filled 
according to the provisions of Sec. 930.23.
    (f) In those districts having more than one seat on the Board, not 
more than one Board member from that district may be elected from a 
single sales constituency. There is, however, no prohibition on the 
number of Board members from differing districts that may be elected 
from a single sales constituency which may have operations in more than 
one district. However, as provided in Sec. 930.23, a handler may only 
nominate Board members and vote in one district.
    (g) Subject to the approval of the Secretary, the Board shall at 
its first meeting and annually thereafter elect from among any of its 
members a chairperson and a vice-chairperson and may elect other 
appropriate officers.


Sec. 930.21  Reestablishment.

    Districts, subdivisions of districts, and the distribution of 
representation among growers and handlers within a respective district 
or subdivision thereof, or among the subdivision of districts, may be 
reestablished by the Secretary, subject to the provisions of 
Sec. 930.23, based upon recommendations by the Board. In recommending 
any such changes, the Board shall consider:
    (a) The relative importance of producing areas,
    (b) Relative production,
    (c) The geographic locations of producing areas as they would 
affect the efficiency of administration of this part,
    (d) Shifts in cherry production within the districts and the 
production area,
    (e) Changes in the proportion and role of growers and handlers 
within the districts, and
    (f) Other relevant factors.


Sec. 930.22  Term of office.

    The term of office of each member and alternate member of the Board 
shall be for three fiscal years: Provided that, of the nine initial 
members and alternates from the combination of Districts 1, 2 and 3, 
one-third of such initial members and alternates shall serve only one 
fiscal year, one-third of such members and alternates shall serve only 
two fiscal years, one-third of such members and alternates shall serve 
only two fiscal years; and one-half of the initial members and 
alternates from Districts 4 and 7 shall serve only one fiscal year, and 
one-half of such initial members and alternates shall serve two fiscal 
years (determination of which of the initial members and their 
alternates shall serve for 1 fiscal year, 2 fiscal years, and 3 fiscal 
years shall be by lot). Members and alternate members shall serve in 
such capacity for the portion of the term of office for which they are 
selected and have qualified until their respective successors are 
selected, have qualified and are appointed. The consecutive terms of 
office of grower, handler and public members and 

[[Page 61321]]
alternate members shall be limited to two 3-year terms, excluding any 
initial term lasting less than 3 years. The term of office of a member 
and alternate member for the same seat shall be the same. If this part 
becomes effective on a date such that the initial fiscal period is less 
than six months in duration, then the tolling of time for purposes of 
this subsection shall not begin until the beginning of the first 12-
month fiscal period.


Sec. 930.23  Nomination and election.

    (a) Nomination and election of initial and successor members and 
alternate members of the Board shall be conducted through petition 
forms and election ballots distributed to all eligible growers and 
handlers via the U.S. Postal Service or other means, as determined by 
the Secretary. Similar petition forms and election ballots shall be 
used for both members and alternate members and any requirements for 
election of a member shall apply to the election of an alternate.
    (b) Nomination:
    (1) In order for the name of a grower nominee to appear on an 
election ballot, the nominee's name must be submitted with a petition 
form, to be supplied by the Secretary or the Board, which, except in 
District 8, contains at least five signatures of growers, other than 
the nominee, from the nominee's district who are eligible to vote in 
the referendum. Grower petition forms in District 8 must be signed by 
only two growers, other than the nominee, from the nominee's district.
    (2) In order for the name of a handler nominee to appear on an 
election ballot, the nominee's name must be submitted with a petition 
form, to be supplied by the Secretary or the Board, which contains the 
signature of at least one handler, other than the nominee, from the 
nominee's district who is eligible to vote in the referendum.
    (3) Only growers, including duly authorized officers or employees 
of growers, who are eligible to serve as grower members of the Board 
shall participate in the nomination of grower members and alternate 
grower members of the Board. No grower shall participate in the 
submission of nominees in more than one district during any fiscal 
period. If a grower produces cherries in more than one district, that 
grower may select in which district he or she wishes to participate in 
the nominations and election process and shall notify the Secretary or 
the Board of such selection. A grower may not participate in the 
nomination process in one district and the election process in a second 
district in the same election cycle.
    (4) Only handlers, including duly authorized officers or employees 
of handlers, who are eligible to serve as handler members of the Board 
shall participate in the nomination of handler members and alternate 
handler members of the Board. No handler shall participate in the 
selection of nominees in more than one district during any fiscal 
period. If a handler handles cherries in more than one district, that 
handler may select in which district he or she wishes to participate in 
the nominations and election process and shall notify the Secretary or 
the Board of such selection. A handler may not participate in the 
nominations process in one district and the elections process in a 
second district in the same election cycle. If a person is a grower and 
a grower-handler only because some or all of his or her cherries were 
custom packed, but he or she does not own or lease and operate a 
processing facility, such person may vote only as a grower.
    (5) In Districts 5, 6, 8 and 9, both growers and handlers may be 
nominated for the district's Board seat. Grower and handler nominations 
must follow the petition procedures outlined in paragraphs (b)(1) and 
(b)(2) of this section.
    (6) All eligible growers and handlers in all districts may submit 
the names of the nominees for the public member and alternate public 
member of the Board.
    (7) After the appointment of the initial Board, the Secretary or 
the Board shall announce at least 180 days in advance when a Board 
member's term is expiring and shall solicit nominations for that 
position in the manner described in this section. Nominations for such 
position should be submitted to the Secretary or the Board not less 
than 120 days prior to the expiration of such term.
    (c) Election:
    (1) After receiving nominations, the Secretary or the Board shall 
distribute ballots via the U.S. Postal Service or other means, as 
determined by the Secretary, to all eligible growers and handlers 
containing the names of the nominees by district for the respective 
seats on the Board, excluding the public voting member seat. The 
ballots will clearly indicate that growers and handlers may only rank 
or otherwise vote for nominees in their own district.
    (2) Except as provided in paragraph (c)(4) of this section, only 
growers, including duly authorized officers or employees of growers, 
who are eligible to serve as grower members of the Board shall 
participate in the election of grower members and alternate grower 
members of the Board. No grower shall participate in the election of 
Board members in more than one district during any fiscal period. If a 
grower produces cherries in more than one district, the grower must 
vote in the same district in which he or she chose to participate in 
the nominations process under paragraph (b)(3) of this section. 
However, if the grower did not participate in the nominations process, 
he or she may select in which district he or she wishes to vote and 
shall notify the Secretary or the Board of such selection.
    (3) Except as provided in paragraph (c)(4) of this section, only 
handlers, including duly authorized officers or employees of handlers, 
who are eligible to serve as handler members of the Board shall 
participate in the election of handler members and alternate handler 
members of the Board. No handler shall participate in the election of 
Board members in more than one district during any fiscal period. If a 
handler does handle cherries in more than one district, he or she must 
vote in the same district in which the handler elected to participate 
in the nominations process under paragraph (b)(4) of this section. 
However, if a handler did not participate in the nominations process, 
that handler may select in which district he or she chooses to vote and 
shall notify the Secretary or the Board of such selection. If a person 
is a grower and a grower-handler only because some or all of his or her 
cherries were custom packed, but he or she does not own or lease and 
operate a processing facility, such person may vote only as a grower.
    (4) In Districts 5, 6, 8 and 9, growers and handlers may vote for 
either the grower or handler nominee(s) for the single seat allocated 
to those districts.
    (d) The members of the Board appointed by the Secretary pursuant to 
Sec. 930.24 shall, at the first meeting and whenever necessary 
thereafter, by at least a two-thirds vote of the entire Board, select 
individuals to serve as the public member and alternate public member 
of the Board from the list of nominees received from growers and 
handlers pursuant to paragraph (b) of this section or from other 
persons nominated by the Board. The persons selected shall be subject 
to appointment by the Secretary under Sec. 930.24.
    (e) The Board, with the approval of the Secretary, may establish 
rules and regulations necessary and incidental to the administration of 
this section.


Sec. 930.24  Appointment.

    The selection of nominees made pursuant to elections conducted 
under Sec. 930.23(c) shall be submitted to the Secretary in a format 
which indicates the nominees by district, with the nominee receiving 
the highest number 

[[Page 61322]]
of votes at the top and the number of votes received being clearly 
indicated. The Secretary shall appoint from those nominees or from 
other qualified individuals, the grower and handler members of the 
Board and an alternate for each such member on the basis of the 
representation provided for in Sec. 930.20 or as provided for in any 
reapportionment or reestablishment undertaken pursuant to Sec. 930.21. 
The Secretary shall also appoint the public member and the alternate 
public member elected by the Board pursuant to Sec. 930.23(d).


Sec. 930.25  Failure to nominate.

    If nominations are not made within the time and in the manner 
prescribed in Sec. 930.23, the Secretary may, without regard to 
nominations, select the members and alternate members of the Board on 
the basis of the representation provided for in Sec. 930.20 or as 
provided for in any reestablishment undertaken pursuant to Sec. 930.21.


Sec. 930.26  Acceptance.

    Each person to be appointed by the Secretary as a member or as an 
alternate member of the Board shall, prior to such appointment, qualify 
by advising the Secretary that he/she agrees to serve in the position 
for which nominated for selection.


Sec. 930.27  Vacancies.

    To fill any vacancy occasioned by the failure of any person 
appointed as a member or as an alternate member of the Board to 
qualify, or in the event of the death, removal, resignation, or 
disqualification of any member or alternate member of the Board, a 
successor for the unexpired term of such member or alternate member of 
the Board shall be appointed by the Secretary from the most recent list 
of nominations for the Board made by growers and handlers, from 
nominations made by the Board, or from other qualified individuals. Any 
nominations made by the Board to fill a vacancy must be received by the 
Secretary within 90 days of the effective date of the vacancy. Board 
members wishing to resign from the Board must do so in writing to the 
Secretary.


Sec. 930.28  Alternate members.

    An alternate member of the Board, during the absence of the member 
for whom that member serves as an alternate, shall act in the place and 
stead of such member and perform such other duties as assigned. 
However, if a member is in attendance at a meeting of the Board, an 
alternate member may not act in the place and stead of such member. In 
the event of the death, removal, resignation, or disqualification of a 
member, the alternate shall act for the member until a successor for 
such member is appointed and has qualified.


Sec. 930.29  Eligibility for membership on Cherry Industry 
Administrative Board.

    (a) Each grower member and each grower alternate member of the 
Board shall be a grower, or an officer or employee of a grower, in the 
district for which nominated or appointed.
    (b) Each handler member and each handler alternate member of the 
Board shall be a handler, or an officer or employee of a handler, who 
owns, or leases, and operates a cherry processing facility in the 
district for which nominated or appointed.
    (c) The public member and alternate public member of the Board 
shall be prohibited from having any financial interest in the cherry 
industry and shall possess such additional qualifications as may be 
established by regulation.


Sec. 930.30  Powers.

    The Board shall have the following powers:
    (a) To administer this part in accordance with its terms and 
provisions;
    (b) To make rules and regulations to effectuate the terms and 
provisions of this part;
    (c) To receive, investigate, and report to the Secretary complaints 
of violations of this part; and
    (d) To recommend to the Secretary amendments to this part.


Sec. 930.31  Duties.

    The Board shall have, among others, the following duties:
    (a) To select such officers, including a chairperson and vice-
chairperson, as may be necessary, and to define the duties of such 
officers and the duties of the chairperson and the vice-chairperson;
    (b) To employ or contract with such persons or agents as the Board 
deems necessary and to determine the duties and compensation of such 
persons or agents;
    (c) To select such committees and subcommittees as may be 
necessary;
    (d) To adopt bylaws and to adopt such rules for the conduct of its 
business as it may deem advisable;
    (e) To submit to the Secretary a budget for each fiscal period, 
prior to the beginning of such period, including a report explaining 
the items appearing therein and a recommendation as to the rates of 
assessments for such period;
    (f) To keep minutes, books, and records which will reflect all of 
the acts and transactions of the Board and which shall be subject to 
examination by the Secretary;
    (g) To prepare periodic statements of the financial operations of 
the Board and to make copies of each statement available to growers and 
handlers for examination at the office of the Board;
    (h) To cause its books to be audited by a certified public 
accountant at least once each fiscal year and at such times as the 
Secretary may request. Such audit shall include an examination of the 
receipt of assessments and the disbursement of all funds, including the 
payment of storage or other costs to handlers. The Board shall provide 
the Secretary with a copy of all audits and shall make copies of such 
audits, after the removal of any confidential individual grower or 
handler information that may be contained in them, available to growers 
and handlers for examination at the offices of the Board.
    (i) To act as intermediary between the Secretary and any grower or 
handler with respect to the operations of this part;
    (j) To investigate and assemble data on the growing, handling, and 
marketing conditions with respect to cherries;
    (k) To apprise the Secretary of all Board meetings in a timely 
manner;
    (l) To submit to the Secretary such available information as the 
Secretary may request;
    (m) To investigate compliance with the provisions of this part;
    (n) To develop and submit an annual marketing policy for approval 
by the Secretary containing the optimum supply of cherries for the crop 
year established pursuant to Sec. 930.50 and recommending such 
action(s) necessary to achieve such optimum supply;
    (o) To implement volume regulations established under Sec. 930.50 
and issued by the Secretary under Sec. 930.51, including the release of 
any inventory reserves;
    (p) To provide thorough communication to growers and handlers 
regarding the activities of the Board and to respond to industry 
inquiries about Board activities;
    (q) To oversee the collection of assessments levied under this 
part;
    (r) To enter into contracts or agreements with such persons and 
organizations as the Board may approve for the development and conduct 
of activities, including research and promotion activities, authorized 
under this part or for the provision of services required by this part 
and for the payment of the cost thereof with funds collected through 
assessments pursuant 

[[Page 61323]]
to Sec. 930.41 and income from such assessments. Contracts or 
agreements for any plan or project shall provide that:
    (1) The contractors shall develop and submit to the Board a plan or 
project together with a budget(s) which shall show the estimated cost 
to be incurred for such plan or project;
    (2) Any contract or agreement for a plan or project and any plan or 
project adopted by the Board shall only become effective upon approval 
by the Secretary; and
    (3) Every such contracting party shall keep accurate records of all 
of its transactions and make periodic reports to the Board of 
activities conducted and an accounting for funds received and expended, 
and such other reports as the Secretary or the Board may require. The 
Secretary or employees of the Board may audit periodically the records 
of the contracting party.
    (s) Pending disbursement consistent with its budget, to invest, 
with the approval of the Secretary, and in accordance with applicable 
Departmental policies, funds collected through assessments authorized 
under Sec. 930.41 and income from such assessments;
    (t) To establish standards or grade requirements for cherries for 
frozen and canned cherry products, subject to the approval of the 
Secretary;
    (u) To borrow such funds, subject to the approval of the Secretary 
and not to exceed the expected expenses of one fiscal year, as are 
necessary for administering its responsibilities and obligations under 
this part; and
    (v) To establish, with the approval of the Secretary, such rules 
and procedures relative to administration of this subpart as may be 
consistent with the provisions contained in this subpart and as may be 
necessary to accomplish the purposes of the Act and the efficient 
administration of this subpart.


Sec. 930.32  Procedure.

    (a) Twelve members of the Board, including alternates acting for 
absent members, shall constitute a quorum. For any action of the Board 
to pass, at least two-thirds of the entire Board must vote in support 
of such action.
    (b) The Board may provide through its own rules and regulations, 
subject to approval by the Secretary, for simultaneous meetings of 
groups of its members assembled at different locations and for votes to 
be conducted by telephone or other means of communication. Votes so 
cast shall be promptly confirmed in writing.
    (c) All meetings of the Board are open to the public, although the 
Board may hold portions of meetings in executive session for the 
consideration of certain business. The Board will establish, with the 
approval of the Secretary, a means of advanced notification of growers 
and handlers of Board meetings.


Sec. 930.33  Expenses and compensation.

    Except for the public member and alternate public member who shall 
receive such compensation as the Board may establish and the Secretary 
may approve, the members of the Board, and alternates when acting as 
members, shall serve without compensation but shall be reimbursed for 
necessary and reasonable expenses, as approved by the Board, incurred 
by them in the performance of their duties under this part. The Board 
at its discretion may request the attendance of one or more alternates 
at any or all meetings, notwithstanding the expected or actual presence 
of the respective member(s), and may pay the expenses of such 
alternates.

Expenses and Assessments


Sec. 930.40  Expenses.

    The Board is authorized to incur such expenses as the Secretary 
finds are reasonable and likely to be incurred for its maintenance and 
functioning and to enable it to exercise its powers and perform its 
duties in accordance with the provisions of this part. The funds to 
cover such expenses shall be acquired by the levying of assessments as 
provided in Sec. 930.41.


Sec. 930.41  Assessments.

    (a) An assessment may be levied upon handlers annually under this 
part to cover the administrative costs of the Board, costs of 
inspection, and any research, development and promotion activities 
initiated by the Board under Sec. 930.48.
    (b) Each part of an assessment intended to cover the costs of each 
activity in paragraph (a) of this section, must be identified and 
approved by the Board and the Secretary, and any notification or other 
statement regarding assessments provided to handlers must contain such 
information.
    (c) As a pro rata share of the administrative, inspection, 
research, development, and promotion expenses which the Secretary finds 
reasonable and likely to be incurred by the Board during a fiscal 
period, each handler shall pay to the Board assessments on all cherries 
handled, as the handler thereof, during such period: Provided, a 
handler shall be exempt from any assessment on the tonnage of handled 
cherries that are diverted according to Sec. 930.59 which includes 
cherries represented by grower diversion certificates issued pursuant 
to Sec. 930.58(b)(2) and acquired by handlers and those cherries 
devoted to exempt uses under Sec. 930.62.
    (d) The Secretary, after consideration of the recommendation of the 
Board, shall fix the rate of assessment to be paid by each handler 
during the fiscal period in an amount designed to secure sufficient 
funds to cover the expenses which may be approved and incurred during 
such period or subsequent period as provided in paragraph (c) of this 
section. At any time during or after the fiscal period, the Secretary 
may increase the rate of assessment in order to secure sufficient funds 
to cover any later finding by the Secretary relative to the expenses 
which may be incurred. Such increase shall be applied to all cherries 
handled during the applicable fiscal period. In order to provide funds 
for the administration of the provisions of this part during the first 
part of a fiscal period before sufficient operating income is available 
from assessments, the Board may accept the payment of assessments in 
advance, and may borrow money for such purposes.
    (e) Assessments not paid within a time prescribed by the Board may 
be made subject to interest or late payment charges, or both. The 
period of time, rate of interest, and late payment charge will be as 
recommended by the Board and approved by the Secretary: Provided, that 
when interest or late payment charges are in effect, they shall be 
applied to all assessments not paid within the prescribed period of 
time.
    (f) Assessments will be calculated on the basis of pounds of 
cherries handled: Provided, that the formula adopted by the Board and 
approved by the Secretary for determining the rate of assessment will 
compensate for differences in the number of pounds of cherries utilized 
for various cherry products and the relative market values of such 
cherry products.
    (g) The Board, with the approval of the Secretary, may establish 
rules and regulations necessary and incidental to the administration of 
this section.


Sec. 930.42  Accounting.

    (a) If, at the end of a fiscal period, the assessments collected 
are in excess of expenses incurred, the Board, with the approval of the 
Secretary, may carry over all or any portion of such excess into 
subsequent fiscal periods as a reserve. Such reserve funds may be used 
to cover any expenses authorized by this part; and to cover necessary 
expenses of liquidation in the event of termination of this part. If 
any such excess is not retained in a reserve, it shall be refunded 
proportionately to the 

[[Page 61324]]
handlers from whom the excess was collected. Without an additional 
reserve level approved by the Secretary, the amount held in reserve may 
not exceed approximately one year's operational expenses. Upon 
termination of this part, any funds not required to defray the 
necessary expenses of liquidation shall be disposed of in such a manner 
as the Secretary may determine to be appropriate: Provided, that to the 
extent practicable, such funds shall be returned pro rata to the 
persons from whom such funds were collected.
    (b) All funds received by the Board pursuant to the provisions of 
this part shall be used solely for the purpose specified in this part 
and shall be accounted for in the manner provided in this part. The 
Secretary may at any time require the Board and its members to account 
for all receipts and disbursements.

Quality Control


Sec. 930.44  Quality control.

    (a) Quality standards. The Board may establish, with the approval 
of the Secretary, such minimum quality and inspection requirements 
applicable to cherries as will contribute to orderly marketing or be in 
the public interest. If such requirements are adopted, no handler shall 
process cherries into manufactured products or sell manufactured 
products in the current of commerce unless such cherries and/or such 
cherries used in the manufacture of products meet the applicable 
requirements as evidenced by certification acceptable to the Board. The 
Board, with the approval of the Secretary, may establish rules and 
regulations necessary and incidental to the administration of this 
section.
    (b) Inspection and certification. Whenever the handling of any 
cherries requires inspection pursuant to this part, each handler who 
handles cherries shall cause such cherries to be inspected by the 
appropriate division of the Department, and certified by it as meeting 
the applicable requirements of such regulation: Provided, that 
inspection and certification shall be required for cherries which 
previously have been so inspected and certified only if such cherries 
have been regraded, resorted, repackaged, or in any other way further 
prepared for market. Promptly after inspection and certification, each 
such handler shall submit, or cause to be submitted, to the Board a 
copy of the certificate of inspection issued with respect to such 
cherries.

Research, Market Development and Promotion


Sec. 930.48  Research, market development and promotion.

    The Board, with the approval of the Secretary, may establish or 
provide for the establishment of production and processing research, 
market research and development, and/or promotional activities, 
including paid advertising, designed to assist, improve or promote the 
efficient production and processing, marketing, distribution, and 
consumption of cherries subject to this part. The expense of such 
projects shall be paid from funds collected pursuant to this part and 
the income from such funds.

Regulations


Sec. 930.50  Marketing policy.

    (a) Optimum supply. On or about July 1 of each crop year, the Board 
shall hold a meeting to review sales data, inventory data, current crop 
forecasts and market conditions in order to establish an optimum supply 
level for the crop year. The optimum supply volume shall be calculated 
as 100 percent of the average sales of the prior three years to which 
shall be added a desirable carryout inventory not to exceed 20 million 
pounds or such other amount as the Board, with the approval of the 
Secretary may establish. This optimum supply volume shall be announced 
by the Board in accordance with paragraph (h) of this section.
    (b) Preliminary percentages. On or about July 1 of each crop year, 
the Board shall establish a preliminary free market tonnage percentage 
which shall be calculated as follows: from the optimum supply computed 
in subsection (a), the Board shall deduct the carryin inventory to 
determine the tonnage requirements (adjusted to a raw fruit equivalent) 
for the current crop year which will be divided by the current year 
USDA crop forecast. If the resulting number is positive, this would 
represent the estimated over-production which would need to be the 
restricted percentage tonnage. This restricted percentage tonnage would 
then be divided by the sum of the USDA crop forecast for the regulated 
districts to obtain the percentages for the regulated districts. The 
Board shall establish a preliminary restricted percentage equal to the 
quotient, rounded to the nearest whole number, with the compliment 
being the preliminary free tonnage percentage. If subtracting the 
current crop year requirement, computed in the first sentence from the 
current USDA crop forecast, results in a negative number, the Board 
shall establish a preliminary free tonnage of 100 percent with a 
preliminary restricted percentage of zero. The Board shall announce 
these preliminary percentages in accordance with paragraph (h) of this 
section.
    (c) Interim percentages. Between July 1 and September 15 of each 
crop year, the Board may modify the preliminary free market tonnage and 
restricted percentages to adjust to the actual pack occurring in the 
industry. The Board shall announce any interim percentages in 
accordance with paragraph (h) of this section.
    (d) Final percentages. No later than September 15 of each crop 
year, the Board shall review actual production during the current crop 
year and make such adjustments as are necessary between free and 
restricted tonnage to achieve the optimum supply and recommend such 
final free market tonnage and restricted percentages to the Secretary 
and announce them in accordance with paragraph (h) of this section. The 
difference between any final free market tonnage percentage designated 
by the Secretary and 100 percent shall be the final restricted 
percentage. With its recommendation, the Board shall report on its 
consideration of the factors in paragraph (e) of this section.
    (e) Factors. When computing preliminary and interim percentages, or 
determining final percentages for recommendation to the Secretary, the 
Board shall give consideration to the following factors:
    (1) The estimated total production of cherries;
    (2) The estimated size of the crop to be handled;
    (3) The expected general quality of such cherry production;
    (4) The expected carryover as of July 1 of canned and frozen 
cherries and other cherry products;
    (5) The expected demand conditions for cherries in different market 
segments;
    (6) Supplies of competing commodities;
    (7) An analysis of economic factors having a bearing on the 
marketing of cherries;
    (8) The estimated tonnage held by handlers in primary or secondary 
inventory reserves;
    (9) Any estimated release of primary or secondary inventory reserve 
cherries during the crop year.
    (f) Modification. In the event the Board subsequently deems it 
advisable to modify its marketing policy, because of national 
emergency, crop failure, or other major change in economic conditions, 
it shall hold a meeting for that purpose, and file a report thereof 

[[Page 61325]]
with the Secretary within 5 days (exclusive of Saturdays, Sundays, and 
holidays) after the holding of such meeting, which report shall show 
the Board's recommended modification and the basis therefor.
    (g) Reserve tonnage to sell as free tonnage. In addition, the Board 
shall make available tonnage equivalent to an additional 10 percent, if 
available, of the average sales of the prior 3 years for market 
expansion. Handlers can determine if they need the additional tonnage 
and inform the Board so that reserve cherries may be released to them. 
Handlers not desiring the additional tonnage would not have it released 
to them.
    (h) Publicity. The Board shall promptly give reasonable publicity 
to growers and handlers of each meeting to consider a marketing policy 
or any modification thereof, and each such meeting shall be open to 
them and to the public. Similar publicity shall be given to growers and 
handlers of each marketing policy report or modification thereof, filed 
with the Secretary and of the Secretary's action thereon. Copies of all 
marketing policy reports shall be maintained in the office of the 
Board, where they shall be made available for examination. The Board 
shall notify handlers, and give reasonable publicity to growers, of its 
computation of the optimum supply, preliminary percentages, and interim 
percentages and shall notify handlers of the Secretary's action on 
final percentages by registered or certified mail.
    (i) Restricted percentages. Restricted percentage requirements 
established under paragraphs (b), (c) or (d) of this section may be 
fulfilled by handlers by either establishing an inventory reserve in 
accordance with Sec. 930.55 or Sec. 930.57 or by diversion of product 
in accordance with Sec. 930.59. In years where required, the Board 
shall establish a maximum percentage of the restricted quantity which 
may be established as a primary inventory reserve such that the total 
primary inventory reserve does not exceed 50 million pounds. Handlers 
will be permitted to divert (at plant or with grower-diversion 
certificates) as much of the restricted percentage requirement as they 
deem appropriate, but may not establish a primary inventory reserve in 
excess of the percentage established by the Board for restricted 
cherries. In the event handlers wish to establish inventory reserve in 
excess of this amount, they may do so, in which case it will be 
classified as a secondary inventory reserve and will be regulated 
accordingly.
    (j) Inventory reserve release. In years when inventory reserve 
cherries are available and when the expected availability of cherries 
from the current crop plus expected carryin inventory does not fulfill 
the optimum supply, the Board shall release not later than November 1st 
of the current crop year such volume from the inventory reserve as will 
satisfy the optimum supply.
    (k) The Board, with the approval of the Secretary, may establish 
rules and regulations necessary and incidental to the administration of 
this section.


Sec. 930.51  Issuance of volume regulations.

    (a) Whenever the Secretary finds, from the recommendation and 
supporting information supplied by the Board, that to designate final 
free market tonnage and restricted percentages for any cherries 
acquired by handlers during the crop year will tend to effectuate the 
declared policy of the Act, the Secretary shall designate such 
percentages. Such regulation designating such percentage shall fix the 
free market tonnage and restricted percentages, totaling 100 percent, 
which shall be applied in accordance with section Sec. 930.55, 
Sec. 930.57 and Sec. 930.59 to cherries grown in regulated districts, 
as determined under Sec. 930.52, and handled during such fiscal period.
    (b) The Board shall be informed immediately of any such regulation 
issued by the Secretary, and the Board shall promptly give notice 
thereof to handlers.
    (c) That portion of a handler's cherries that are restricted 
percentage cherries is the product of the restricted percentage imposed 
under paragraph (a) of this section multiplied by the tonnage of 
cherries, originating in a regulated district, handled, including those 
diverted according to Sec. 930.59, by that handler in that fiscal year. 
Therefore, while diverted cherries, including those represented by 
grower diversion certificates, may be exempt from assessment under 
Sec. 930.41, they must be counted when computing restricted percentage 
requirements.
    (d) The Board, with the approval of the Secretary, shall develop 
rules and regulations which shall provide guidelines for handlers in 
complying with any restricted tonnage requirements, including, but not 
limited to, a grace period of at least 30 days to segregate and 
appropriately document any tonnage they wish to place in the inventory 
reserve and to assemble any applicable diversion certificates.


Sec. 930.52  Establishment of districts subject to volume regulations.

    (a) Upon adoption of this part, the districts subject to any volume 
regulations implemented in accordance with this part shall be those 
districts in which the average annual production of cherries over the 
prior three years has exceeded 15 million pounds. Districts not meeting 
the 15 million pound test at the time of order promulgation which 
subsequently become subject to volume regulation shall not be regulated 
until the next crop year after exceeding the 15 million pound average 
production requirement.
    (b) Handlers in districts which are not subject to volume 
regulation would only be so regulated to the extent that they handled 
cherries which were grown in a district subject to regulation as 
specified in paragraph (a) of this section. In such a case, the handler 
must place in inventory reserve pursuant to Sec. 930.55 or Sec. 930.57 
or divert pursuant to Sec. 930.59 the required restricted percentage of 
the crop originating in the regulated district.
    (c) Handlers in districts not meeting the production requirement in 
a given year would not be subject to volume regulation in the next crop 
year.
    (d) Any district producing a crop which is less than 50 percent of 
the maximum average annual processed production in that district in the 
previous five years would be exempt from any volume regulation if, in 
that year, a restricted percentage is established.
    (e) The Board, with the approval of the Secretary, may establish 
rules and regulations necessary and incidental to the administration of 
this section.


Sec. 930.53  Modification, suspension, or termination of regulations.

    (a) In the event the Board at any time finds that, by reason of 
changed conditions, any volume regulations issued pursuant to 
Sec. 930.51 should be modified, suspended, or terminated, it shall so 
recommend to the Secretary.
    (b) Whenever the Secretary finds, from the recommendations and 
information submitted by the Board or from other available information, 
that a volume regulation issued pursuant to Sec. 930.51 should be 
modified, suspended or terminated with respect to any or all shipments 
of cherries in order to effectuate the declared policy of the Act, the 
Secretary shall modify, suspend, or terminate such regulation.


Sec. 930.54  Prohibition on the use or disposition of inventory reserve 
cherries.

    (a) Release of primary and secondary inventory reserve cherries. 
Except as provided in Sec. 930.50 and paragraph (b) of this section, 
cherries that are placed in inventory reserve pursuant to the 
requirements of Sec. 930.50, Sec. 930.51, Sec. 930.55, or Sec. 930.57 
shall not be used 

[[Page 61326]]
or disposed of by any handler or any other person: Provided, that if 
the Board determines that the total available supplies for use in 
normal commercial outlets do not at least equal the amount, as 
estimated by the Board, needed to meet the demand in such outlets, the 
Board shall recommend to the Secretary and provide such justification 
that, during such period as may be recommended by the Board and 
approved by the Secretary, a portion or all of the primary and/or 
secondary inventory reserve cherries shall be released for such use.


Sec. 930.55  Primary inventory reserves.

    (a) Whenever the Secretary has fixed the free market tonnage and 
restricted percentages for any fiscal period, as provided for in 
Sec. 930.51(a), each handler in a regulated district shall place in his 
or her primary inventory reserve for such period, at such time, and in 
such manner, as the Board may prescribe, or otherwise divert, according 
to Sec. 930.60, a portion of the cherries acquired during such period.
    (b) The form of the cherries, frozen, canned in any form, dried, or 
concentrated juice, placed in the primary inventory reserve is at the 
option of the handler. Except as may be limited by Sec. 930.50(i) or as 
may be permitted pursuant to Sec. 930.59 and Sec. 930.62, such 
inventory reserve portion shall be equal to the sum of the products 
obtained by multiplying the weight or volume of the cherries in each 
lot of cherries acquired during the fiscal period by the then effective 
restricted percentage fixed by the Secretary: Provided, that in 
converting cherries in each lot to the form prescribed by the Board, 
the inventory reserve obligations shall be adjusted in accordance with 
uniform rules adopted by the Board in terms of raw fruit equivalent.
    (c) Inventory reserve cherries shall meet such standards of grade, 
quality, or condition as the Board, with the approval of the Secretary, 
may establish. All such cherries shall be inspected by the Department. 
A certificate of such inspection shall be issued which shall show, 
among other things, the name and address of the handler, the number and 
type of containers in the lot, the grade of the product, the location 
where the lot is stored, identification marks (can codes or lot stamp), 
and a certification that the cherries meet the prescribed standards. 
Promptly after inspection and certification, each such handler shall 
submit, or cause to be submitted, to the Board, at the place designated 
by the Board, a copy of the certificate of inspection issued with 
respect to such cherries.
    (d) Handlers shall be compensated for inspection costs incurred on 
cherries placed in the primary inventory reserve. All reporting of 
cherries placed in, rotated in and out, or released from an inventory 
reserve shall be in accordance with rules and procedures established by 
the Board, with the approval of the Secretary. The Board could, with 
the approval of the Secretary, also limit the number of inspections of 
reserve cherries being rotated into inventory reserves for which the 
Board would be financially liable.
    (e) Except as provided in Sec. 930.54, handlers may not sell 
inventory reserve cherries prior to their official release by the 
Board. Handlers may rotate cherries in their inventory reserves with 
prior notification to the Board. All cherries rotated into the 
inventory reserve must meet the applicable inspection requirements.


Sec. 930.56  Off-premise inventory reserve.

    Any handler may, upon notification to the Board, arrange to hold 
inventory reserve, of his or her own production or which was purchased, 
on the premises of another handler or in an approved commercial storage 
facility in the same manner as though the inventory reserve were on the 
handler's own premises.


Sec. 930.57  Secondary inventory reserve.

    (a) In the event the inventory reserve established under 
Sec. 930.55 of this part is at its maximum volume, and the Board has 
announced, in accordance with Sec. 930.50, that volume regulation will 
be necessary to maintain an orderly supply of quality cherries for the 
market, handlers in a regulated district may elect to place in a 
secondary inventory reserve all or a portion of the cherries the volume 
regulation would otherwise require them to divert in accordance with 
Sec. 930.60.
    (b) Should any handler in a regulated district exercise his or her 
right to establish a secondary inventory reserve under paragraph (a) of 
this section, all costs of maintaining that reserve, as well as 
inspection costs, will be the responsibility of the individual handler.
    (c) The secondary inventory reserve shall be established in 
accordance with Secs. 930.55 (b) and (c) and such other rules and 
regulations which the Board, with the approval of the Secretary, may 
establish.
    (d) The Board shall retain control over the release of any cherries 
from the secondary inventory reserve. No cherries may be released from 
the secondary reserve until all cherries in any primary inventory 
reserve established under Sec. 930.55 have been released. Any release 
of the secondary inventory reserve shall be in accordance with the 
annual marketing policy and with Sec. 930.54.


Sec. 930.58  Grower diversion privilege.

    (a) In general. Any grower may voluntarily elect to divert, in 
accordance with the provisions of this section, all or a portion of the 
cherries which otherwise, upon delivery to a handler, would become 
restricted percentage cherries. Upon such diversion and compliance with 
the provisions of this section, the Board shall issue to the diverting 
grower a grower diversion certificate which such grower may deliver to 
a handler, as though there were actual harvested cherries.
    (b) Eligible diversion. Grower diversion certificates shall be 
issued to growers only if the cherries are diverted in accordance with 
the following terms and conditions or such other terms and conditions 
that the Board, with the approval of the Secretary, may establish. 
Diversion may take such of the following forms which the Board, with 
the approval of the Secretary, may designate: Uses exempt under 
Sec. 930.63; nonhuman food uses; or other uses, including diversion by 
leaving such cherries unharvested.
    (1) Application/mapping. The Board, with the approval of the 
Secretary, shall develop rules and regulations providing for the 
diversion of cherries by growers. Such regulations may include, among 
other things:
    (i) The form and content of applications and agreements relating to 
the diversion, including provisions for supervision and compensation;
    (ii) provisions for mapping areas in which cherries will be left 
unharvested.
    (2) Diversion certificate. If the Board approves the application it 
shall so notify the applicant and conduct such supervision of the 
applicant's diversion of cherries as may be necessary to assure that 
the cherries have been diverted. After the diversion has been 
accomplished, the Board shall issue to the diverting grower a diversion 
certificate stating the weight of cherries diverted. Where diversion is 
carried out by leaving the cherries unharvested, the Board shall 
estimate the weight of cherries diverted on the basis of such uniform 
rule prescribed in rules and regulations as the Board, with the 
approval of the Secretary, may recommend to implement this section.


Sec. 930.59  Handler diversion privilege.

    (a) In general. Handlers handling cherries harvested in a regulated 
district may fulfill any restricted percentage requirement in full or 
in part by voluntarily diverting cherries or cherry 

[[Page 61327]]
products in a program approved by the Board, rather than placing 
cherries in an inventory reserve. Upon such diversion and compliance 
with the provisions of this section, the Board shall issue to the 
diverting handler a handler diversion certificate which shall satisfy 
any restricted percentage or diversion requirement to the extent of the 
Board or Department inspected weight of the cherries diverted.
    (b) Eligible diversion. Handler diversion certificates shall be 
issued to handlers only if the cherries are diverted in accordance with 
the following terms and conditions or such other terms and conditions 
that the Board, with the approval of the Secretary, may establish. Such 
diversion may take place in any of the following forms which the Board, 
with the approval of the Secretary, may designate: uses exempt under 
Sec. 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 Sec. 930.58; or 
other uses, including diversion by destruction of the cherries at the 
handler's facilities: Provided, that diversion may not be accomplished 
by converting cherries into juice or juice concentrate.
    (1) Notification. The handler electing to divert cherries through 
means specified in this section or other approved means (not including 
uses exempt under Sec. 930.62), shall first notify the Board of such 
election. Such notification shall describe in detail the manner in 
which the handler proposes to divert cherries including, if the 
diversion is to be by means of destruction of the cherries, a detailed 
description of the means of destruction and ultimate disposition of the 
cherries. It shall also contain an agreement that the proposed 
diversion is to be carried out under the supervision of the Board and 
that the cost of such supervision is to be paid by the handler. Uniform 
fees for such supervision shall be established by the Board, pursuant 
to rules and regulations approved by the Secretary.
    (2) Application. The handler electing to divert cherries by 
utilizing an exemption under Sec. 930.62 shall first apply to the Board 
for approval of such diversion; no diversion should take place prior to 
such approval. Such application shall describe in detail the uses to 
which the diverted cherries will be put. It shall also contain an 
agreement that the proposed diversion is to be carried out under the 
supervision of the Board and that the cost of such supervision is to be 
paid by the applicant. The Board shall notify the applicant of the 
Board's approval or disapproval of the submitted application.
    (3) Diversion certificate. The Board shall conduct such supervision 
of the handler's diversion of cherries under paragraph (b)(1) or under 
paragraph (b)(2) of this section as may be necessary to assure that the 
cherries are diverted. After the diversion has been accomplished, the 
Board shall issue to the diverting handler a handler diversion 
certificate indicating the weight of cherries which may be used to 
offset any restricted percentage requirement.


Sec. 930.60  Equity holders.

    (a) Inventory reserve ownership. The inventory reserve shall be the 
sole property of the handlers who place products into the inventory 
reserve. A handler's equity in the primary inventory reserve may be 
transferred to another person upon notification to the Board.
    (b) Agreements with growers. Individual handlers are encouraged to 
have written agreements with growers who deliver their cherries to the 
handler as to how any restricted percentage cherries delivered to the 
handler will be handled and what share, if any, the grower will have in 
the eventual sale of any inventory reserve cherries.
    (c) Rulemaking authority. The Board, with the approval of the 
Secretary, may adopt rules and regulations necessary and incidental to 
the administration of this section.


Sec. 930.61  Handler compensation.

    Each handler handling cherries from a regulated district that is 
subject to volume regulations shall be compensated by the Board for 
inspection relating to the primary inventory reserve as the Board may 
deem to be appropriate. The Board, with the approval of the Secretary, 
may establish such rules and regulations as are necessary and 
incidental to the administration of this section.


Sec. 930.62  Exemptions.

    The Board, with the approval of the Secretary, may exempt from the 
provisions of Sec. 930.41, Sec. 930.51, Sec. 930.53, and Sec. 930.55 
through Sec. 930.57 cherries: Diverted in accordance with Sec. 930.59; 
used for new product and new market development; used for experimental 
purposes or for any other use designated by the Board, including 
cherries processed into products for markets for which less than 5 
percent of the preceding 5-year average production of cherries were 
utilized. The Board, with the approval of the Secretary, shall 
prescribe such rules, regulations, and safeguards as it may deem 
necessary to ensure that cherries handled under the provisions of this 
section are handled only as authorized.


Sec. 930.63  Deferment of restricted obligation.

    (a) Bonding. The Board, with the approval of the Secretary, may 
require handlers to secure bonds on deferred inventory reserve tonnage. 
Handlers may, in order to comply with the requirements of Secs. 930.50 
and 930.51 and regulations issued thereunder, secure bonds on 
restricted percentage cherries to temporarily defer the date that 
inventory reserve cherries must be held to any date requested by the 
handler. This date shall be not later than 60 days prior to the end of 
that crop year. Such deferment shall be conditioned upon the voluntary 
execution and delivery by the handler to the Board of a written 
undertaking within thirty (30) days after the Secretary announces the 
final restricted percentage under Sec. 930.51. Such written undertaking 
shall be secured by a bond or bonds with a surety or sureties 
acceptable to the Board that on or prior to the acceptable deferred 
date the handler will have fully satisfied the restricted percentage 
amount required by Sec. 930.51.
    (b) Rulemaking authority. The Board, with the approval of the 
Secretary, may adopt rules and regulations necessary and incidental to 
the administration of this section.

Reports and Records


Sec. 930.70  Reports.

    (a) Weekly production, monthly sales, and inventory data. Each 
handler shall, upon request of the Board, file promptly with the Board, 
reports showing weekly production data; monthly sales and inventory 
data; and such other information, including the volume of any cherries 
placed in or released from a primary or secondary inventory reserve or 
diverted, as the Board shall specify with respect to any cherries 
handled by the handler. Such information may be provided to the Board 
members in summary or aggregated form only without any reference to the 
individual sources of the information.
    (b) Other reports. Upon the request of the Board, with the approval 
of the Secretary, each handler shall furnish to the Board such other 
information with respect to the cherries acquired, handled, stored and 
disposed of by such handler as may be necessary to enable the Board to 
exercise its powers and perform its duties under this part. 

[[Page 61328]]

    (c) Protection of proprietary information. Under no circumstances 
shall any information or reports be made available to the Board members 
or others which will reveal the proprietary information of an 
individual handler.


Sec. 930.71  Records.

    Each handler shall maintain such records of all cherries acquired, 
handled, stored or sold, or otherwise disposed of as will substantiate 
the required reports and as may be prescribed by the Board. All such 
records shall be maintained for not less than two years after the 
termination of the fiscal year in which the transactions occurred or 
for such lesser period as the Board may direct with the approval of the 
Secretary.


Sec. 930.72  Verification of reports and records.

    For the purpose of assuring compliance and checking and verifying 
the reports filed by handlers, the Secretary and the Board, through its 
duly authorized agents, shall have access to any premises where 
applicable records are maintained, where cherries are received, stored, 
or handled, and, at any time during reasonable business hours, shall be 
permitted to inspect such handlers premises and any and all records of 
such handlers with respect to matters within the purview of this part.


Sec. 930.73  Confidential information.

    All reports and records furnished or submitted by handlers to the 
Board and its authorized agents which include data or information 
constituting a trade secret or disclosing trade position, financial 
condition, or business operations of the particular handler from whom 
received, shall be received by and at all times kept in the custody and 
under the control of one or more employees of the Board or its agent, 
who shall disclose such information to no person other than the 
Secretary.

Miscellaneous Provisions


Sec. 930.80  Compliance.

    Except as provided in this part, no person may handle cherries, the 
handling of which has been prohibited by the Secretary under this part, 
and no person shall handle cherries except in conformity with the 
provisions of this part and the regulations issued hereunder. No person 
may handle any cherries for which a diversion certificate has been 
issued other than as provided in Sec. 930.58(b) and Sec. 930.59(b).


Sec. 930.81  Right of the Secretary.

    Members of the Board (including successors and alternates), and any 
agents, employees, or representatives thereof, shall be subject to 
removal or suspension by the Secretary at any time. Each regulation, 
decision, determination, or other act of the Board shall be subject to 
the Secretary's disapproval at any time. Upon such disapproval, the 
disapproved action of the Board shall be deemed null and void, except 
as to acts done in reliance thereon or in accordance therewith prior to 
such disapproval by the Secretary.


Sec. 930.82  Effective time.

    The provisions of this part, and of any amendment thereto, shall 
become effective at such time as the Secretary may declare, and shall 
continue in force until terminated, or suspended.


Sec. 930.83  Termination.

    (a) The Secretary may, at any time, terminate any or all of the 
provisions of this part by giving at least 1 day's notice by means of a 
press notice or in any other manner in which the Secretary may 
determine.
    (b) The Secretary shall terminate or suspend the operation of any 
or all of the provisions of this part whenever the Secretary finds that 
such provisions do not tend to effectuate the declared policy of the 
Act.
    (c) The Secretary shall terminate the provisions of this part 
whenever the Secretary finds by referendum or otherwise that such 
termination is favored by a majority of the growers and processors: 
Provided, that such majority has, during the current fiscal year, 
produced or canned and frozen more than 50 percent of the volume of the 
cherries which were produced or processed within the production area. 
Such termination shall become effective on the last day of June 
subsequent to the announcement thereof by the Secretary.
    (d) The Secretary shall conduct a referendum within the month of 
March of every sixth year after the effective date of this part to 
ascertain whether continuation of this part is favored by the growers 
and processors. The Secretary may terminate the provisions of this part 
at the end of any fiscal period in which the Secretary has found that 
continuance is not favored by a majority of growers and processors who, 
during a representative period determined by the Secretary, have been 
engaged in the production or processing of tart cherries in the 
production area. Such termination shall be announced on or before the 
end of the fiscal period.
    (e) The provisions of this part shall, in any event, terminate 
whenever the provisions of the Act authorizing them cease to be in 
effect.


Sec. 930.84  Proceedings after termination.

    (a) Upon the termination of the provisions of this part, the then 
functioning members of the Board shall, for the purpose of liquidating 
the affairs of the Board, continue as trustees of all the funds and 
property then in its possession, or under its control, including claims 
for any funds unpaid or property not delivered at the time of such 
termination.
    (b) The said trustees shall:
    (1) Continue in such capacity until discharged by the Secretary;
    (2) From time to time account for all receipts and disbursements 
and deliver all property on hand, together with all books and records 
of the Board and of the trustees, to such person as the Secretary may 
direct; and
    (3) Upon the request of the Secretary, execute such assignments or 
other instruments necessary or appropriate to vest in such person full 
title and right to all of the funds, property, and claims vested in the 
Board or in the trustees pursuant to this part.
    (c) Any person to whom funds, property, and claims have been 
transferred or delivered, pursuant to this section, shall be subject to 
the same obligations imposed upon the Board and upon the trustees.


Sec. 930.85  Effect of termination or amendment.

    Unless otherwise expressly provided by the Secretary, the 
termination of this part or of any regulation issued pursuant to this 
part, or the issuance of any amendment to either thereof, shall not:
    (a) Affect or waive any right, duty, obligation, or liability which 
shall have risen or which may thereafter arise in connection with any 
provision of this part or any regulation issued thereunder; or
    (b) Release or extinguish any violation of this part or any 
regulation issued thereunder; or
    (c) Affect or impair any rights or remedies of the Secretary or any 
other person with respect to any such violation.


Sec. 930.86  Duration of immunities.

    The benefits, privileges, and immunities conferred upon any person 
by virtue of this part shall cease upon its termination, except with 
respect to acts done under and during the existence of this part.


Sec. 930.87  Agents.

    The Secretary may, by designation in writing, name any officer or 
employee of the United States, or name any agency or division in the 
U.S. Department of 

[[Page 61329]]
Agriculture, to act as the Secretary's agent or representative in 
connection with any provisions of this part.


Sec. 930.88  Derogation.

    Nothing contained in this part is, or shall be construed to be, in 
derogation or in modification of the rights of the Secretary or of the 
United States :
    (a) To exercise any powers granted by the Act or otherwise; or
    (b) In accordance with such powers, to act in the premises whenever 
such action is deemed advisable.


Sec. 930.89  Personal liability.

    No member or alternate member of the Board and no employee or agent 
of the Board shall be held personally responsible, either individually 
or jointly with others, in any way whatsoever, to any person for errors 
in judgment, mistakes, or other acts, either of commission or omission, 
as such member, alternate member, employee, or agent, except for acts 
of dishonesty, willful misconduct, or gross negligence.


Sec. 930.90  Separability.

    If any provision of this part is declared invalid or the 
applicability thereof to any person, circumstance, or thing is held 
invalid, the validity of the remainder of this part or the 
applicability thereof to any other person, circumstance, or thing shall 
not be affected thereby.


Sec. 930.91  Amendments.

    Amendments to this subpart may be proposed, from time to time, by 
the Board or by the Secretary.

Marketing Agreement


Sec. 930.92  Counterparts.

    This agreement may be executed in multiple counterparts and when 
one counterpart is signed by the Secretary, all such counterparts shall 
constitute, when taken together, one and the same instrument as if all 
signatures were contained in one original.


Sec. 930.93  Additional parties.

    After the effective date thereof, any handler may become a party to 
this agreement if a counterpart is executed by such handler and 
delivered to the Secretary. This agreement shall take effect as to such 
new contracting part at the time such counterpart is delivered to the 
Secretary, and the benefits, privileges, and immunities conferred by 
this agreement shall then be effective as to such new contracting 
party.


Sec. 930.94  Order with marketing agreement.

    Each signatory hereby requests the Secretary to issue, pursuant to 
the Act, an order providing for regulating the handling of tart 
cherries in the same manner as is provided for in this agreement.

    Dated: November 20, 1995.
Lon Hatamiya,
Administrator.
[FR Doc. 95-28631 Filed 11-21-95; 11:11 am]
BILLING CODE 3410-02-P