[Federal Register Volume 61, Number 60 (Wednesday, March 27, 1996)]
[Rules and Regulations]
[Pages 13385-13386]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7437]



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 Rules and Regulations
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  Federal Register / Vol. 61, No. 60 / Wednesday, March 27, 1996 / 
Rules and Regulations  

[[Page 13385]]


DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 46

[Docket No. FV93-353]
RIN 0581-AB28


Regulations (Other Than Rules of Practice) Under the Perishable 
Agricultural Commodities Act, 1930 (PACA)

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: The Department of Agriculture is revising the Regulations 
(other than Rules of Practice) Under the Perishable Agricultural 
Commodities Act (PACA) to include oil-blanched frozen fruits and 
vegetables as a commodity covered under the PACA. This rule will grant 
dealers in frozen oil-blanched products the same rights afforded 
dealers whose frozen product is water-blanched.

EFFECTIVE DATE: April 26, 1996.

FOR FURTHER INFORMATION CONTACT: J.R. Frazier, Assistant Chief, PACA 
Branch, Room 2095-So., Fruit and Vegetable Division, Agricultural 
Marketing Service, U.S. Department of Agriculture, Washington, DC 
20250, Phone (202) 720-4180.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This final rule is issued under the Perishable Agricultural 
Commodities Act (7 U.S.C. 499 et. seq.), as amended, hereinafter 
referred to as the ``PACA.'' The Department of Agriculture is issuing 
this final rule in conformance with Executive Order 12866.

Executive Order 12778

    This final rule has been reviewed under Executive Order 12778, 
Civil Justice Reform. It is not intended to have retroactive effect. 
This final rule will not preempt any State or local laws, regulation, 
or policies, unless they present an irreconcilable conflict with this 
rule. There are no administrative procedures which must be exhausted 
prior to any judicial challenge to the provisions of this rule.

Regulatory Flexibility Act

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA), (5 U.S.C. 601 et seq.), the Administrator of the 
Agricultural Marketing Service (AMS) has certified that this action 
will not have a significant economic impact on a substantial number of 
small entities.
    The purpose of the RFA is to fit regulatory actions to the scale of 
business subject to such actions in order that small businesses will 
not be unduly or disproportionately burdened. This is an action that is 
brought about at the request of the frozen fruit and vegetable industry 
and would benefit producers and small businesses that process and 
supply frozen fruits and vegetables by making available to them new 
remedies under the PACA.
    This rule extends PACA coverage to include frozen fruits and 
vegetables that are oil-blanched, especially frozen french fried potato 
products. Under previous regulations, suppliers of these commodities 
suffered considerable financial losses because oil-blanched products 
were excluded by regulation from PACA coverage. This rule grants 
dealers in frozen oil-blanched products the same rights afforded 
dealers whose frozen product is water- blanched.
    It is therefore not unduly or disproportionately burdensome on 
small businesses and in fact, rectifies the previous situation in which 
processors and suppliers were closed out of remedies with respect to 
oil-blanched product.
    The PACA establishes a code of fair trading by prohibiting certain 
unfair practices in the marketing of fresh or frozen fruits and 
vegetables. The law requires that parties fulfill their contractual 
obligations including prompt pay, and provides a forum wherein persons 
who suffer damages can recover their losses.
    The PACA also impresses a statutory trust for the benefit of unpaid 
sellers or suppliers on all perishable agricultural commodities 
received by a commission merchant, dealer or broker and all inventories 
of food or other products derived from the sale of such commodities or 
products. Sellers who preserve their eligibility are entitled to 
payment ahead of other creditors, from trust assets, of money owed on 
past due accounts.
    Information submitted to this Agency by the Frozen Potato Products 
Institute indicates that frozen potato products represent the largest 
single frozen commodity shipped in the United States. This information 
further indicates that potatoes cannot be economically frozen and 
shipped long distances unless they first undergo oil blanching. As 
pointed out by the American Frozen Food Institute, oil blanching, like 
water and steam blanching inactivates enzymes without cooking the 
product. Water and steam blanched frozen fruits and vegetables are 
covered under the current regulations, oil-blanched frozen fruits and 
vegetables are not. To exclude such a substantial portion of the frozen 
food industry is inconsistent with the intent of the PACA to protect 
dealers in fresh or frozen fruits and vegetables.
    Retailers who buy in interstate or foreign commerce must obtain a 
PACA license if they buy more than $230,000 of fruits and vegetables 
during a calendar year. Including oil-blanched product in the 
calculation of the $230,000 exemption may result in a marginal increase 
in retailers becoming subject to PACA, requiring them to purchase a 
PACA license at an annual cost of $400. However, the license fee for 
retailers is being phased out under the provisions of the Perishable 
Agricultural Commodities Act Amendments of 1995. By calendar year 1999, 
retailers will no longer be obligated to pay license fees though they 
must still be licensed. A marginal increase in the number of retailers 
subject to the PACA, is not significant compared to the benefits 
derived in the industry by including these commodities under the PACA.
    The proposed rule was published in the Federal Register (59 FR 
35487) on July 12, 1994. On September 12, 1994, Notice was given in the 
Federal Register (59 FR 46772) re-opening the comment period. That 
notice provided another comment period which ended October 12, 1994. 
Ten comments were received,

[[Page 13386]]
six in favor and four opposed to the proposed rule.
    Three commentors representing retailers and wholesale grocers 
opposed the rule claiming that it would expand the PACA program.
    It is true that the rule does expand the PACA program to a product 
line that is not currently covered, but only because the current 
regulations restrict the application of the meaning of ``perishable 
agricultural commodity'' as provided in the Act. Oil-blanched product 
is well within the definition of a perishable agricultural commodity as 
defined by the statute and is consistent with the industry view of the 
scope of the Act and the nature of the product. Including oil-blanched 
frozen fruits and vegetables does not unduly or disproportionately 
burden retailers. With this final rule, all sales of potato products, 
whether to wholesale distributors, or retailers, would be covered by 
the term ``perishable agricultural commodity.'' Further, retailers 
would be less likely than other dealers to be affected by the rule 
because frozen oil-blanched product would be a small portion of their 
total business. However, continuing to exclude (frozen french fried 
potatoes) the largest single frozen commodity in the United States 
poses substantial risk to farmers, shippers, and processors who are 
extending credit without the trust protection the Act affords to other 
dealers.
    Another commentor representing a major restaurant chain opposed the 
proposed rule because he thought the change might bring restaurants 
under the jurisdiction of the PACA, and argued that therefore, the 
economic impact of the rule has been underestimated. Restaurants 
traditionally have not been considered subject to the PACA by USDA or 
Congress unless the buying arm of the restaurant is a separate legal 
entity, and is buying for and/or reselling the product to another 
entity. Since restaurants are not subject to the PACA, this change in 
the regulation will not impact restaurants.
    For the reasons stated, we are not making any changes to this final 
rule based on the above comments.
    The commentors in favor of the proposal claimed that frozen 
potatoes cannot be shipped practically and commercially without being 
oil-blanched and that extending PACA to cover these products would 
protect processors and shippers and enhance the protection to farmers. 
They also pointed out that incorporating oil-blanched products into the 
regulations was consistent with the current policy of including water-
blanched and steam-blanched product and would streamline the 
administration of PACA because it would no longer be necessary to 
distinguish oil-blanched from water or steam-blanched products. They 
also claimed that the proposed rule would improve marketing efficiency, 
thereby benefitting consumers and the potato industry.
    After thoroughly analyzing the comments received and all other 
available information, the Department has concluded that issuing this 
rule is appropriate.
    Based on the above, the Administrator of the AMS has determined 
that the issuance of this final rule will not have a significant 
economic effect on a substantial number of small entities.
    After consideration of all relevant material presented, the 
comments received, and other available information, it is found that 
this regulation, as hereinafter set forth, will tend to effectuate the 
declared policy of the Act.

List of Subjects in 7 CFR Part 46

    Agricultural commodities, Brokers, Penalties, Reporting and 
recordkeeping requirements.

    For the reasons set forth in the preamble, 7 CFR Part 46 of the 
Code of Federal Regulations is amended as follows:

PART 46--REGULATIONS (OTHER THAN RULES OF PRACTICE) UNDER THE 
PERISHABLE AGRICULTURAL COMMODITIES ACT, 1930

    1. The authority citation for part 46 continues to read as follows:

    Authority: Sec. 15, 46 Stat. 537; 7 U.S.C. 499o.

    2. In section 46.2, paragraph (u) is revised to read as follows:


Sec. 46.2  Definitions.

* * * * *
    (u) Fresh fruits and fresh vegetables include all produce in fresh 
form generally considered as perishable fruits and vegetables, whether 
or not packed in ice or held in common or cold storage, but do not 
include those perishable fruits and vegetables which have been 
manufactured into articles of food of a different kind or character. 
The effects of the following operations shall not be considered as 
changing a commodity into a food of a different kind or character: 
Water, steam, or oil blanching, chopping, color adding, curing, 
cutting, dicing, drying for the removal of surface moisture; 
fumigating, gassing, heating for insect control, ripening and coloring; 
removal of seeds, pits, stems, calyx, husk, pods, rind, skin, peel, et 
cetera; polishing, precooling, refrigerating, shredding, slicing, 
trimming, washing with or without chemicals; waxing, adding of sugar or 
other sweetening agents; adding ascorbic acid or other agents used to 
retard oxidation; mixing of several kinds of sliced, chopped, or diced 
fruits or vegetables for packaging in any type of containers; or 
comparable methods of preparation.
* * * * *
    Dated: March 20, 1996.
Lon Hatamiya,
Administrator.
[FR Doc. 96-7437 Filed 3-26-96; 8:45 am]
BILLING CODE 3410-02-P