[Federal Register Volume 61, Number 104 (Wednesday, May 29, 1996)]
[Proposed Rules]
[Pages 26956-26979]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-13383]




[[Page 26955]]


_______________________________________________________________________

Part II





Department of Agriculture





_______________________________________________________________________



Agricultural Marketing Service



_______________________________________________________________________



7 CFR Part 930



Tart Cherries Grown in the States of Michigan, New York, Pennsylvania, 
Oregon, Utah, Washington, and Wisconsin; Secretary's Decision and 
Referendum Order on the Proposed Marketing Agreement and Order; 
Proposed Rule

  Federal Register / Vol. 61, No. 104 / Wednesday, May 29, 1996 / 
Proposed Rules  

[[Page 26956]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 930

[Docket No. AO-370-A5; FV93-930-2]


Tart Cherries Grown in the States of Michigan, New York, 
Pennsylvania, Oregon, Utah, Washington, and Wisconsin; Secretary's 
Decision and Referendum Order on the Proposed Marketing Agreement and 
Order

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule and referendum order.

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SUMMARY: This decision proposes the issuance of a marketing agreement 
and order for tart cherries grown in certain designated States and 
provides growers and processors the opportunity to vote in a referendum 
to determine if they favor the proposed order. For the purposes of this 
document, the term ``Cherries'' refers to all tart/sour cherry 
varieties grown in the proposed production area, which consists of the 
States of Michigan, New York, Pennsylvania, Oregon, Utah, Washington, 
and Wisconsin. The proposed order would authorize volume regulation, 
grade, size, and maturity regulations, and mandatory inspection. It 
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, and would be financed by 
assessments on handlers of tart cherries grown in the production area. 
A primary objective of this program would be to improve producer 
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: The referendum shall be conducted from June 12, 1996, through 
July 10, 1996. The representative period for the purpose of the 
referendum herein ordered is July 1, 1995, through May 31, 1996.

FOR FURTHER INFORMATION CONTACT:

(1) R. Charles Martin or Kenneth G. Johnson, Marketing Order 
Administration Branch, Fruit and Vegetable Division, AMS, USDA, P.O. 
Box 96456, room 2523-S, Washington, D.C. 20090-6456; telephone: 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 
S.W. 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]; 
Recommended Decision and Opportunity to File Written Exceptions to the 
Proposed Marketing Agreement and Order, issued November 20, 1995, and 
published in the Federal Register on November 29, 1995 (60 FR 61292). 
The reopening of the comment period to file written exceptions to the 
proposed marketing agreement and order was issued on December 27, 1995, 
and published in the Federal Register on January 2, 1996 (61 FR 21).
    This administrative 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 to review the Secretary's 
ruling on the petition, provided an action is filed not later than 20 
days after the date of the entry of the ruling.

Preliminary Statement

    This proposed marketing agreement and order was formulated on the 
record of a public hearing held December 15-17, 1993, in Grand Rapids, 
Michigan; January 13, 1994, in Provo, Utah; February 15-17, 1994, in 
Portland, Oregon; January 12-13, 1995, in Portland, Oregon; and January 
18-19, 1995, in Grand Rapids, Michigan. These multiple hearing sessions 
were held to consider a proposed marketing agreement and order 
regulating the handling of tart cherries grown in the proposed 
production area. The hearing was held 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). Approximately 40 
witnesses, including tart cherry growers, handlers, and economists, 
testified in support of the order. Growers and handlers mainly from the 
States of Oregon and Washington testified in opposition to the proposed 
order and asked to have Oregon and Washington excluded from 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, USDA determined that the hearing should be 
reopened to clarify some provisions. USDA wanted to obtain additional 
information and clarification concerning: (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 
12-13, 1995, in Portland, Oregon, and January 18-19, 1995 in Grand 
Rapids, Michigan. At the conclusion of the Michigan hearing, the 
deadline for filing post-hearing briefs was set at March 17, 1995. Ten 
briefs were filed following the first briefing period and seven briefs 
were filed following the second briefing period.
    The proponents testified that severely fluctuating tart cherry 
prices are

[[Page 26957]]

inherently harmful to growers and consumers. It was contended that the 
proposed marketing order would improve grower returns by strengthening 
consumer demand through volume control and quality assurance 
mechanisms.
    Upon the basis of evidence introduced at the hearing and the record 
thereof, the Administrator of the Agricultural Marketing Service (AMS) 
on November 29, 1995, filed with the Hearing Clerk, U. S. Department of 
Agriculture, a recommended decision with the opportunity for written 
exceptions by December 29, 1995. Subsequently, the USDA received three 
requests to provide more time to analyze the recommended decision and 
prepare and file written comments. Based on these requests the USDA 
reopened the comment period until January 16, 1996.
    There were 29 exceptions received on the proposed order. Seven 
exceptions support the order as proposed, 4 support the order with 
minor modifications, 2 support the order with substantial 
modifications, 15 oppose the order, and 1 recommends only a minor 
technical clarification. Exceptions were received from: Richard 
DeRuiter, Michigan tart cherry processor; Senator Mark Hatfield, 
Congressional Representatives Peter DeFazio, Jim Bunn, Ron Wyden, 
Elizabeth Furse, and Wes Cooley, all from the State of Oregon; Mark L. 
Schrepel, Oregon tart cherry grower and processor; William R. Sherman, 
Burnette Foods, Inc., Michigan grower/processor; Randy Hageman, General 
Manager, Milne Fruit Products; Rick Jacobson, NORPAC Foods; Christian 
Schlect, President, Northwest Horticultural Council; Mark Riley, 
Michigan tart cherry grower; Terry Dorsing, President, Washington Tart 
Cherry Products, Inc.; Ray, Jim, Mildred and Mary Schultz, Michigan 
tart cherry growers; Philip Walker, Oregon tart cherry grower; Thomas 
A. Facer, Vice-President Agricultural Services, Comstock Michigan Fruit 
Division; Lee W. Schrepel, Chair, Oregon Tart Cherry Association; Bruce 
Andrews, Director, Oregon Department of Agriculture; the Department of 
Justice, Anti-Trust Division; Claude A. Rowley, Manager, Payson Fruit 
Growers; David Frank, Fruit Belt Canning, Co. Inc.; Norman R. 
Veliquette, President, Great Lakes Packing Company; Dean Kleckner, 
President, American Farm Bureau Federation; Forest P. Johnson, Michigan 
tart cherry grower; Ken Guise, Executive Vice-President, Chief 
Operating Officer, Knouse Foods Cooperative, Inc.; Kenneth T. Morrison, 
President, Cherry Growers, Inc.; David White, President, Chain O'Lakes 
Fruit Growers Association; Randy G. Harmson, General Manager, Michigan 
Agricultural Cooperative Marketing Association, Inc.; Jack Laurie, 
President, Michigan Farm Bureau; Teryl R. Roper, Associate Professor 
and Extension Fruit Specialist, University of Wisconsin; Gene A. 
Veliquette, Michigan tart cherry grower, President, Shoreline Fruit, 
Inc.; Ian A. MacKay, CPA, American Institute of Certified Public 
Accountants; and the Cherry Marketing Institute (CMI), the proponent 
group.
    The issues raised in the exceptions are discussed in the Findings 
and Conclusions.
    Small Business Consideration and Paperwork Reduction Act: In 
accordance with the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), 
AMS 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 
less than $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 45,000 acres in 1986, to more than 50,000 acres in 1990.
    Record evidence also 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, 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 addressed in this proposed 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 USDA crop 
forecast, available usually

[[Page 26958]]

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 since 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 record keeping 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 would 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 effected 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 20 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 read and sign 
the marketing agreement.
    In compliance with Office of Management and Budget (OMB) 
regulations (5 CFR Part 1320), which implement the Paperwork Reduction 
Act of 1995 (Pub. L. 104-13), the information collection and record 
keeping requirements contained in the proposed rule specific to the 
ballot material to be used in conducting the referendum have been 
approved by OMB on a temporary basis and have been assigned OMB number 
0581-0177. An expiration date of September 1996 has been established 
for this temporary OMB approval. A complete package of information and 
collection requirements contained in this proposed rule will be 
submitted, for approval, to OMB at a later date. Those requirements 
would not become effective prior to OMB review. Interested persons 
would be provided 60 days to comment on : (1) whether the proposed 
collection of information is necessary for the functioning of the 
proposed tart cherry marketing order program and USDA'S oversight of 
that program; (2) the accuracy of the collection burden estimate and 
the validity of methodology and assumptions used in estimating the 
burden on respondents; (3) ways to enhance the quality, utility, and 
clarity of the information requested; and (4) ways to minimize the 
burden, including use of automated or electronic technologies. Any 
record keeping 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 record keeping 
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. After 
reviewing the record AMS determined that direct or indirect costs 
imposed under the marketing order regulation would not be 
proportionately greater on small handlers than on large handlers, or 
conversely, that any projected order benefits would not be 
proportionately smaller for small handlers than for large handlers.
    The record evidence indicates that the proposed order may impose 
some additional costs and requirements on handlers, but those costs are 
insignificant and are directly proportional to the size of the 
regulated handlers. The evidence also indicates 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 benefit of 
producers. The evidence also indicates that handlers 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. Small handlers and 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, AMS has 
determined that the issuance of this proposed rule and referendum order 
would not have a significant economic impact on a substantial number on 
small entities.
    The material issues presented on the record are:
    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 will 
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 marketing 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 definition of terms used therein which are necessary and 
incidental to attain the declared policy and objectives of the order 
and the Act;
    (b) The establishment, composition, maintenance, procedures, powers 
and duties of a committee that shall be the local administrative agency 
for assisting the Secretary in the administration of the marketing 
order;
    (c) The authority to incur expenses and the procedure to levy 
assessments on handlers to obtain revenue for paying such expenses;

[[Page 26959]]

    (d) The authority to establish or provide for the establishment of 
production, processing and marketing research and marketing development 
projects, including paid advertising;
    (e) The authority to establish regulations that would require 
minimum quality and inspection requirements applicable to cherries to 
be handled;
    (f) The authority to establish regulations that would provide for a 
volume control program;
    (g) The establishment of requirements for handler reporting and 
record keeping;
    (h) The requirement of compliance with all provisions of the order 
and with any regulations issued under it; and
    (i) Additional terms and conditions as set forth in section 930.81 
through section 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 section 930.92 through section 930.94 that are common to 
marketing agreements only.

Findings and Conclusions and Rulings on Exceptions

    The material issues, findings and conclusions, rulings, and general 
findings and determinations included in the Recommended Decision set 
forth in the November 29, 1995, issue of the Federal Register [60 FR 
61292] are hereby approved and adopted subject to the following 
additions and modifications:
    Based upon the exceptions filed by Department of Justice, Anti-
trust Division (DOJ), and Mr. Lee Schrepel, the findings and 
conclusions in material issue number 2 of the Recommended Decision 
concerning the question of whether 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 are 
amended by adding the following eight paragraphs after the last 
paragraph (60 FR 61297) to read as follows:
    In its exception to the Recommended Decision, DOJ urged USDA to 
reject the proponents' request for a marketing order for tart cherries. 
DOJ contended that the proposed marketing order is not by any means a 
``national solution'' for any existing problems in the tart cherry 
industry, and its implementation would harm the public. DOJ asserts 
there is no reliable evidence to show that the proposed marketing order 
would produce supply or price stability and it should not be issued. In 
addition, DOJ cited two areas of disagreement with the Recommended 
Decision. DOJ stated that: (1) The tart cherry industry does not 
require regulation based on the evidence presented at the hearing; and 
(2) the proposed marketing order would not stabilize tart cherry prices 
or supplies.
    In regard to its first concern, DOJ stated that growers and 
handlers who prefer to protect against fluctuating prices may do so by 
using any one of the numerous market mechanisms that already exist for 
that purpose. DOJ stated that these mechanisms are far superior to 
government regulation for reducing risk because they help producers 
deal with fluctuating supplies without artificially inflating prices. 
As previously stated, the market mechanisms suggested by DOJ are 
currently available to the industry. The marketing order is another 
tool for the industry to use in stabilizing supplies. Marketing orders 
do not exist to the exclusion of other market mechanisms. However, as 
the record shows, those mechanisms have not been effective in dealing 
with the production variability problems faced by the industry.
    In regard to its second concern, DOJ contended that the finding 
that the proposed marketing order would contribute to orderly marketing 
conditions and, therefore, effectuate the declared policy of the Act, 
is without support in the record. The agency stated that USDA relied 
heavily on the testimony of Dr. Forker, who testified on price 
stability. It is DOJ's position that Dr. Forker's conclusions on price 
stability are wrong and that he improperly manipulated the data to 
reach a desired result. In addition, in his exception, Mr. Lee Schrepel 
also objected to USDA relying on the evidence presented by Dr. Forker.
    As previously stated, USDA believes that the proponents have 
demonstrated a need for a tart cherry marketing order. The record 
supports the argument that the industry has suffered since the 
termination of the prior order. A proposed order was developed to 
correct the situation with the goal of increasing grower returns and 
bringing supplies in line with demand. Authority for volume control 
regulation which would only be used when the market warrants it, is 
included in the order. Record evidence supports the need for the 
marketing order. Evidence presented at the hearing did not offer a 
basis for discrediting Dr. Forker. Dr. Forker is a recognized expert in 
his field and there was no persuasive evidence presented at the hearing 
which would refute his testimony. In addition, USDA did not rely solely 
on Dr. Forker. It considered all the testimony and analyzed the record 
in its entirety in arriving at its findings and conclusions.
    In Mr. Schrepel's exception, he stated that USDA has discounted any 
and all arguments that reporting and record keeping requirements will 
be significantly greater for Oregon producers and processors, and that 
their subsequent costs and benefits of operating under the marketing 
order are proportionately and significantly different than expected to 
be experienced in larger producing districts. Mr. Schrepel also 
contends that smaller producing States (i.e., Pennsylvania and Oregon) 
have not been producing the reports that will be needed under the 
marketing order, and therefore it will be an added burden on small 
handlers to submit such reports to the Board under the marketing order.
    Handlers from the smaller producing areas testified that reporting 
to the Board would not be unduly burdensome. They normally keep such 
records in conducting their business operations and therefore could 
easily compile the information for use under the marketing order. In 
addition, handlers in districts which are not volume regulated (e.g., 
the smaller producing states) would have fewer reporting and record 
keeping requirements than those handlers in regulated districts since 
they would not be maintaining reserve pools and reporting on storage 
and disposition. Such requirements would stay reduced as long as that 
district's production remains below the trigger amount for volume 
regulation.
    The record evidence also supports the premise that small growers 
and handlers would have the most to benefit from implementation of the 
marketing order because such growers and handlers have been going out 
of business over most of the last 8 years due to low cherry prices. 
Since the order would help increase grower returns, this should 
increase the buffer between success and failure.
    Based on the above discussion, the exceptions by DOJ and Mr. 
Schrepel are denied.
    Based upon the exceptions filed by Mr. Dorsing, Mr. Hageman, Mr. 
Mark Schrepel, and Mr. Lee Schrepel, the findings and conclusions in 
material issue number 3 of the Recommended Decision concerning the 
definition of the production area and the commodity to be covered are 
amended by adding the following six paragraphs after the last paragraph 
(60 FR 61299) to read as follows:
    The exception filed by Mr. Dorsing stated that the States of 
Washington and Oregon should not be included in the proposed marketing 
order. Mr. Dorsing

[[Page 26960]]

indicated that 1995 production figures for the State of Washington show 
that over 90 percent of the tart cherry production went to juice 
concentrate. He contended that the majority of producers in Washington 
and Oregon produce their cherries for use in juice concentrate rather 
than canned or frozen products. Mr. Dorsing also stated that the juice 
characteristics of the Northwest tart cherry are unique in character 
and juice companies are finding that the characteristics of Northwest 
juice concentrate meet their required specifications. He also stated 
that Northwest production is not adding to the ``glut'' in the packed 
product industry, since the Northwest is primarily a juice concentrate 
industry. Mr. Dorsing stated further that the Northwest tart cherry 
industry pays for its own storage, develops its own markets and does 
its own promotion and advertising. Thus, there is nothing to be gained 
by the Northwest being included in the tart cherry marketing order. In 
addition, Mr. Dorsing requested that each State be allowed to vote 
separately for inclusion in the marketing order.
    The exception filed by Mr. Hageman opposed the proposed marketing 
order. He stated that the order would unnaturally inflate grower prices 
to nearly double the current level. He also asked that Washington and 
Oregon be excluded from coverage under the proposed marketing order. 
The reason given was that Washington and Oregon account for 6.5 percent 
of the 1990-1994 total U.S. production and that, during the same time 
period, less than 20 percent of the Washington and Oregon production 
entered the five plus one canned and frozen product line. This would 
indicate that less than 1.5 percent of the nation's supply of five plus 
one stock was produced in the Northwest. It was argued by Mr. Hageman 
that the Northwest industry is dependent on the juice concentrate and 
puree market which does not compete with the five plus one market. Mr. 
Hageman also requested a State-by-State referendum.
    The exception filed by Mr. Mark Schrepel stated that any proposed 
order should not include the State of Oregon, and that the Act appears 
not to include cherries for canning or freezing if they originated in 
Oregon or Washington. Mr. Schrepel believes that no Oregon grower or 
processor supports the order. He also requested a State-by-State 
referendum.
    The exception filed by Mr. Lee Schrepel indicated that one of the 
reasons the proposed order should exclude Washington and Oregon is 
because the Northwest has distinctive production and marketing 
characteristics. Further, it is Mr. Schrepel's contention that 
successful marketing orders depend on the support of affected producers 
and handlers. According to him, the unanimous opposition of Oregon 
producers and handlers and near unanimous opposition by Washington 
producers and handlers demonstrate the lack of this essential element. 
Mr. Schrepel also requested voting by a State-by-State referendum.
    As previously stated, to exclude any portion of the proposed 
production area would tend to defeat the purpose of the proposed order 
and could depress prices of the regulated cherries. Contrary to Mr. 
Schrepel's suggestion, Oregon and Washington cherries for freezing or 
canning are not excluded from coverage under the Act. Record evidence 
supports the position that the oversupply situation in the U.S. is a 
national problem. In addition, the juice concentrate market in areas 
such as Oregon and Washington can be impacted by production in other 
areas. Therefore, the entire industry needs to work together to 
alleviate the problem. Also, the record evidence supports the argument 
that the Northwest has the greatest potential to expand tart cherry 
producing acreage, thereby further benefiting from the proposed order 
in the event of increased production. Therefore, the Northwest should 
be included in the production area under the proposed order and the 
requests to exclude Oregon and Washington from the proposed production 
area are denied.
    In regard to the requests to conduct a State-by-State referendum to 
determine who should be covered under the proposed tart cherry order, 
such requests are denied. The Act requires that all producers and 
processors in the proposed production area should vote in a referendum 
on the promulgation of an order. There is no authority for State by 
State voting.
    Based upon the exception filed by CMI, the findings and conclusions 
in material issue number 5(a) of the Recommended Decision concerning 
the commodity to be covered are amended by adding the following 
paragraph after the sixth paragraph (60 FR 61300) to read as follows:
    CMI stated that the definition of cherries should be modified to 
correct the misspelling of a species name and to include the words ``or 
hybrids of'' to the cherry definition. Adding these words would correct 
and clarify the definition. Therefore, CMI's exception is adopted 
herein.
    Based upon the exceptions filed by CMI, Mr. Morrison, and Mr. 
Facer, the findings and conclusions in material issue number 5(b) of 
the Recommended Decision concerning the establishment, composition, 
maintenance, procedures, powers and duties of the Board are amended by 
adding the following eight paragraphs after the 73rd paragraph in 
material issue number 5(b) (60 FR 61307) to read as follows:
    In its exception, it was CMI's contention that the order should be 
modified to require that, in order for the Board to adopt preliminary 
or final free and restricted percentages for any crop year, at least 11 
Board members from districts that would be subject to volume regulation 
vote in the affirmative on any such action. CMI also wanted this 
requirement to apply if there are modifications to the marketing policy 
under section 930.50(f). In addition, CMI argued that since the 
Recommended Decision contains a Board voting requirement of two-thirds 
of the entire Board rather than a majority of the Board, as originally 
proposed, this modification is necessary because it is important that a 
clear majority of those who are going to be regulated agree with the 
determination before volume regulation can go into effect. It was also 
CMI's concern that the unregulated districts could somehow influence 
the decision to impose volume regulation when such regulation is a 
possibility under the optimum supply formula. Eleven votes out of 13 is 
approximately 85 percent of the votes from the volume regulated 
districts. CMI suggested that this voting requirement apply to 
recommendations made under sections 930.50(b), 930.50(d) and 930.50(f).
    In his exception, Mr. Morrison argued that Board members from 
nonregulated districts should not be allowed to vote on matters 
concerning regulation of the crop or the timing on the release of the 
primary pool.
    Throughout this formal rulemaking process, it has been expressed 
that the oversupply situation in the U.S. is a national problem, and 
that the entire industry should work together to alleviate the problem 
by participating in the proposed marketing order. Although USDA 
understands CMI's concerns, they are overstated, since the proposed 
order provisions concerning the marketing policy and issuance of volume 
regulations contain a number of procedural steps which, in many 
respects, make them self-executing. Also, it is the Secretary, and not 
the Board, who issues the volume regulations and sets the final free 
and restricted percentages. Therefore, as

[[Page 26961]]

previously discussed in the Recommended Decision, all actions by the 
Board, including volume regulation issues, should continue to require a 
two-thirds affirmative vote of the entire Board to pass. Therefore, 
CMI's and Mr. Morrison's exceptions are denied.
    Mr. Facer requested that only regulated districts be allowed to 
vote on the release of the primary reserve. This is not necessary nor 
is it supported by the record. As previously stated the situation that 
exists in the industry is a national problem, therefore, all members 
that represent the tart cherry industry in the Board should vote in all 
matters. The reserve would be released by the Board when certain 
conditions exist. For example, proposed section 930.50(g) would 
release, to all handlers, 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. 
Therefore, Mr. Facer's exception is denied.
    Based upon the exception filed by CMI and Mr. Lee Schrepel, the 
findings and conclusions in material issue number 5(b) of the 
Recommended Decision concerning the establishment, composition, 
maintenance, procedures, powers and duties of the Board are amended by 
adding the following three paragraphs after the fourth paragraph (60 FR 
61301) to read as follows:
    Questions and recommendations regarding order language concerning 
the Board membership limitation on sales constituencies in proposed 
Sec. 930.20(f) were raised by both Mr. Lee Schrepel and CMI. It was Mr. 
Schrepel's concern that a single sales constituency could potentially 
gain control of the Board and he asked that not more than 30 percent of 
the Board be allowed to be affiliated (even remotely) in any manner 
with a single sales constituency. However, a 30 percent limitation is 
not adequately supported by the record. CMI's concern was that if a 
grower who sells cherries through a number of different processors is 
nominated for membership to the Board in a district, all of those 
processors but one would then be prevented from having grower 
representation on the Board. According to CMI, this would be true even 
if the grower sold a very small amount of cherries to a particular 
handler on a one-time basis. As proposed by CMI, this concern can be 
addressed by considering the sales constituency to which the grower 
delivers the majority of his or her cherries to be the grower's sales 
constituency for nomination and representation purposes.
    Concerns regarding sales constituencies and Board representation 
have been raised from the beginning of this rulemaking process. That is 
one of the reasons that USDA decided to impose a two-thirds voting 
requirement instead of a simple majority, and added a provision 
requiring the consensus of at least two-thirds of the entire Board to 
pass any action by the Board (see page 61306 of the Recommended 
Decision). The record is clear that the major reason Sec. 930.20(f) 
generated so much discussion was the perception among some of the 
participants at the hearing sessions that the Board could become 
controlled by a single constituency, and the interests of those growers 
and handlers not associated with such constituency would not receive 
proper attention or could be ignored altogether. Additions and changes 
to Sec. 930.20(f) were suggested by Mr. Lee Schrepel and CMI, and 
although these have merit, they are not dispositive of the main issue, 
i.e., control of the Board by a single interest group.
    When the question of adding further restrictions to Sec. 930.20(f) 
arose early in the rulemaking proceeding, CMI indicated that it was 
unlikely that any single sales constituency could gain control of the 
Board, and that theoretical projections of such possibilities are not 
realistic. Furthermore, it was pointed out by CMI that the Secretary 
could effectively enforce the limitations contemplated by 
Sec. 930.20(f) without modifying its language because the ultimate 
decision of whom to appoint to the Board lies with the Secretary. 
Therefore, in light of such requirements, and clear record evidence 
that the purpose of Sec. 930.20(f) is to achieve a fair and balanced 
Board representation, USDA will not add additional limitations to 
Sec. 930.20(f), but, instead, will add language to more clearly express 
the purpose of that section. In addition, the Secretary could issue 
regulations to implement the section, if necessary.
    Based upon the exception filed by Mr. Lee Schrepel, the findings 
and conclusions in material issue number 5(b) of the Recommended 
Decision concerning the establishment, composition, maintenance, 
procedures, powers and duties of the Board are amended by adding the 
following two paragraphs after the 30th paragraph (60 FR 61303) to read 
as follows:
    In Mr. Lee Schrepel's exception, he stated that the testimony by 
the proponent made it clear that its intent is to maintain control of 
the Board's public member. It was Mr. Schrepel's view that the proposed 
marketing order still has no provisions to prevent the Board from 
appointing Board members. Mr. Schrepel argued that the public member 
should be appointed at the sole discretion of the Secretary, without 
the advice or consent of the Board.
    The Secretary has discretion in appointing members and alternate 
members to the Board, including the public member. The appointments can 
be made from Board nominees or other qualified individuals. In the case 
of the public member and such member's alternate, the Secretary is 
relying on the Board to nominate and elect eligible individuals. As was 
previously stated in the Recommended Decision, such individuals would 
then be subject to appointment by the Secretary. This procedure is 
similar to the selection of public members and alternates on other 
marketing order committees. Therefore, Sec. 930.24 is modified to 
clarify the selection and appointment procedure.
    Based upon the exceptions filed by Mr. Facer, Mr. Guise, Mr. Lee 
Schrepel and CMI, the findings and conclusions in material issue number 
5(b) of the Recommended Decision concerning the establishment, 
composition, maintenance, procedures, powers and duties of the Board 
are amended by adding the following six paragraphs after the 27th 
paragraph (60 FR 61303) to read as follows:
    The exception filed by Mr. Facer stated that the responsibilities 
and authority of the Board relating to its ability to assess the 
industry for research, development, promotion and advertising are too 
broadly described. Also, the Board composition includes too much 
representation from the nonregulated districts.
    USDA relies on the marketing order committees and boards to 
recommend rules and regulations concerning their particular industries. 
Marketing order committees and boards are comprised of industry grower 
and handler members and are experienced in the industry's operations 
and should be capable of evaluating the industry's needs. It is for the 
Secretary to determine whether rules recommended by committees or 
boards should be issued. Board composition was recommended by the 
proponent group to provide fair and equitable representation to the 
entire industry based on the relative levels of production of cherries 
in the various producing districts. It was the proponents' position 
that all States covered under the order should be represented on the 
Board in order to keep them informed of the Board's activities. In 
addition, all States covered under the marketing order have the 
potential to become regulated States in the future. Mr. Facer's 
exception is therefore denied.

[[Page 26962]]

    The exceptions filed by Mr. Ken Guise, Mr. Lee Schrepel and CMI 
requested that the proposed order be modified to correct the handler 
nomination petition process for District 6. Currently, only one handler 
exists in District 6, which covers the State of Pennsylvania (Knouse 
Foods Cooperative, Inc.). The Recommended Decision provided that for a 
handler to be nominated for election to the Board, the handler would 
have to obtain the signature of at least one handler, other than the 
nominee, from the nominee's district who is eligible to vote in the 
referendum. Under this procedure, Mr. Guise and CMI point out that 
since there is no other handler in District 6 except Knouse Foods, such 
handler would be denied the opportunity to be nominated for election to 
the Board and District 6 would never be represented by a handler 
representative unless another handler were to start operating in that 
District.
    CMI stated that this result is wholly unintended by the proponent 
and requests that the USDA modify section 930.23(b)(2) to require that 
when nominating handler members to the Board, the petition form be 
signed by a handler other than the nominee shall not apply in any 
District where less than two handlers are eligible to vote.
    Mr. Schrepel requested that the same procedures developed for 
Pennsylvania also apply to Washington and Oregon, since they have very 
few handlers. The modification proposed by the proponents would also 
address Mr. Lee Schrepel's concerns since the modification would apply 
to any District that has less than two handlers.
    Mr. Guise's, Mr. Lee Schrepel's and CMI's exception on this issue 
is therefore adopted in this Secretary's Decision and appropriate 
changes are made in section 930.23(b)(2).
    Based upon the exception filed by Mr. Lee Schrepel, the findings 
and conclusions in material issue number 5(b) of the Recommended 
Decision concerning the establishment, composition, maintenance, 
procedures, powers and duties of the Board are amended by adding the 
following paragraph after the 33rd paragraph (60 FR 61304) to read as 
follows:
    Mr. Lee Schrepel requested that the procedures for electing 
alternate members to the Board be more clearly detailed in the order. 
The proposed order provides under section 930.23 that each member and 
alternate member would be nominated and elected separately. The Board 
has the authority to recommend rules and regulations to effectuate such 
authority and specify more detailed procedures in regard to the 
nomination process. Therefore, Mr. Schrepel's exception is denied.
    Based upon the exception filed by Mr. Lee Schrepel, the findings 
and conclusions in material issue number 5(b) of the Recommended 
Decision concerning the establishment, composition, maintenance, 
procedures, powers and duties of the Board are amended by adding the 
following paragraph after the 35th paragraph (60 FR 61304) to read as 
follows:
    In his exception, Mr. Schrepel stated that USDA has submitted 
contradictatory language regarding the nomination process. He claimed 
that USDA appears to be advancing it's own interests of fast tracking 
the proposal, if promulgated, by conducting nomination meetings in the 
districts and allowing growers and handlers to vote for members and 
alternate members at these meetings. USDA is not fast tracking such a 
proposal. If the Secretary determines that conducting nomination 
meetings and voting at these meetings would be the best method of 
completing the process in a timely manner, then such method should be 
used. Should the proposed order receive the required level of grower 
and processor support in the referendum, USDA intends to conduct 
meetings to nominate and elect the initial Board members and alternate 
members using petition forms and election ballots as provided by 
Sec. 930.23. Therefore, Mr. Schrepel's exception is denied.
    In Mr. Lee Schrepel's exception, he indicated that there was an 
error in proposed section 930.22 regarding Board members' terms of 
office. The current proposed order specifies that 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 
and one-third of such members and alternate members shall serve two 
fiscal years. The latter reference to two fiscal years should be 
changed to three fiscal years to be consistent with the record 
evidence. Mr. Schrepel is correct and his exception is adopted herein 
by revising the order language.
    Based upon the exceptions filed by Mr. MacKay and Mr. Lee Schrepel, 
the findings and conclusions in material issue number 5(b) of the 
Recommended Decision concerning the establishment, composition, 
maintenance, procedures, powers and duties of the Board are amended by 
adding the following three paragraphs after the 51st paragraph (60 FR 
61305) to read as follows:
    In Mr. Lee Schrepel's exception, he stated that in section 
930.31(h), the reference to disbursement of all funds, including the 
payment of storage to handlers, should not be included in that 
particular section. USDA does not intend for the Board to utilize 
assessments to pay for the storage of any cherries or cherry products. 
The proponent's proposal to collect assessments from handlers for 
storage of primary inventory reserve cherries was removed by the USDA 
in the Recommended Decision. Therefore, such language referencing 
storage assessments should not be contained in the proposed order. This 
has been an oversight and such language shall be removed. Therefore, 
Mr. Schrepel's exception is adopted.
    The exception filed by Mr. MacKay requested that the proposed 
marketing order be modified under the area of duties of the Board to 
include that the Board's financial statements be prepared in accordance 
with generally accepted accounting principles and to be audited by a 
certified public accountant. Currently, the proposed order provides 
that the Board cause its books to be audited by a certified public 
accountant. Mr. MacKay requested USDA to clarify in the final order 
whether the term ``books'' refers to the Board's financial statements 
and clarify the basis for the financial statement presentation 
(generally accepted accounting principles).
    The term ``books'' does refer to the Board's financial statements. 
The modification to change the term ``books'' to ``financial 
statements'' is incorporated in this document. However, the 
modification to clarify the basis for the financial statement 
presentation (generally accepted accounting principles) is denied. The 
Fruit and Vegetable Division's Marketing Agreement and Order Operation 
Manual specifies the types of financial statement presentations to be 
used in committee audits. This manual is used by all marketing order 
committees and is a policy document issued by USDA. It is not feasible 
to place such language in the order, since in the future, USDA could 
change the basis for financial statement presentation for all marketing 
order committees to use. If such a change occurred, the marketing order 
would have to be amended, which can be a costly process. Therefore, 
such a modification is denied. Thus, Mr. MacKay's exception is 
partially denied.
    Based upon the exception filed by Mr. Lee Schrepel, the findings 
and conclusions in material issue number 5(c) of the Recommended 
Decision concerning the authority to incur expenses and the procedure 
to levy assessments on handlers to obtain revenue for paying such 
expenses are

[[Page 26963]]

amended by adding the following paragraph after the seventh paragraph 
(60 FR 61308) to read as follows:
    In his exception, Mr. Lee Schrepel contended that a built-in limit 
on the authority to level assessments should be established. Mr. 
Schrepel proposed that this authority be capped at no more than 5 
percent of the average field price for the season. He suggested that 
this limit could be adjustable through modification at continuance 
referendum time or more frequently. Under the order, the tart cherry 
industry assessment rate would be dependent on meeting administrative 
and other expenses and would be necessarily influenced by the volume of 
the crop. The assessment rate would be established through informal 
rulemaking which would require a Board recommendation and an 
opportunity for public comment. Mr. Schrepel did not specify why 5 
percent of the average field price for the season would be a reasonable 
limit, and record evidence does not contain support for such a cap. 
However, if the marketing order is implemented, the Board could adopt 
such a cap as a guideline when recommending the assessment rate. 
Therefore, Mr. Schrepel's exception is denied.
    Based upon the exception filed by Mr. Lee Schrepel, the findings 
and conclusions in material issue number 5(c) of the Recommended 
Decision concerning the authority to incur expenses and the procedure 
to levy assessments on handlers to obtain revenue for paying such 
expenses are amended by adding the following two paragraphs after the 
eighth paragraph (60 FR 61308) to read as follows:
    In Mr. Lee Schrepel's exception, he stated that it is not equitable 
to exempt from assessment those cherries which are diverted in 
accordance with proposed sections 930.58 and 930.59.
    Pursuant to section 930.62, cherries would be exempt from 
assessments if they are diverted according to section 930.59. Product 
diverted by handlers would not be entering normal market channels, 
therefore assessments should not be levied. Mr. Schrepel does not point 
to any evidence in the record to support his exception concerning 
assessment of diverted cherries. Conversely, record testimony amply 
supported exempting diverted cherries, since they are not entering 
normal market channels. Therefore, Mr. Schrepel's exception is denied.
    Based upon the exceptions filed by Mr. Mark Schrepel and Mr. 
Morrison, the findings and conclusions in material issue number 5(c) of 
the Recommended Decision concerning the authority to incur expenses and 
the procedure to levy assessments on handlers to obtain revenue for 
paying such expenses are amended by adding the following three 
paragraphs after the eighth paragraph (60 FR 61308) to read as follows:
    In Mr. Mark Schrepel's exception, he stated that he is concerned 
about provisions within the proposal that would add expense and 
hardship to growers. Mr. Schrepel contended that handlers should not be 
assessed under this marketing order program if handlers are not in a 
regulated district. He further stated that handlers in unregulated 
districts should not be assessed for any expenses accrued by the Board 
since handlers who divert are not assessed on diverted product.
    As supported by record evidence, all growers and handlers in the 
States proposed to be covered under the marketing order, including 
those not subject to volume regulation, would enjoy the benefits 
provided by the marketing order (i.e., improved grower returns and 
increased consumption of tart cherries). Therefore, all handlers should 
be assessed for the administrative costs of the order. Also, handlers 
who enter cherries into normal market channels who choose to divert 
some of their cherries would still be assessed for the cherries that 
enter normal market channels. Therefore, Mr. Schrepel's exception is 
denied.
    In Mr. Morrison's exception, he stated that further effort needs to 
be made to make sure that growers understand that the cost of holding 
and processing the reserve can be passed on to growers by their 
handlers. It is true that some handlers may pass such costs on to their 
growers, either directly or indirectly. Under the former order, which 
was based on a grower pool, growers were directly assessed storage and 
processing costs for reserve pool cherries. However, this proposed 
order is based on a handler pool. Therefore, it does not contain 
authority to assess growers for such costs. Because of this difference, 
Mr. Morrison's recommendation to somehow emphasize that storing and 
processing costs can be passed on to growers is denied.
    Based upon the exception filed by Mr. Lee Schrepel, the findings 
and conclusions in material issue number 5(d) of the Recommended 
Decision concerning the authority to provide for the establishment of 
production, processing and marketing research and market development 
projects, including paid advertising, are amended by adding the 
following paragraph after the sixth paragraph (60 FR 61309) to read as 
follows:
    Mr. Lee Schrepel questioned whether the handlers in States that 
have State marketing order programs should be exempted from paying 
assessments on research and marketing development to the Federal 
marketing order. Mr. Schrepel stated that there should only be one 
assessment, a Federal or state assessment, not both. There is no 
current proposal to exempt handlers from paying these assessments if 
they are in a State that has a State marketing order program. The 
record evidence did indicate 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 
growers are financing such activities through other organizations. The 
record evidence does not contain support for Mr. Schrepel's proposal, 
therefore, his exception is denied.
    Based upon the exceptions filed by Mr. Frank, Mr. Morrison, Mr. 
Facer, and Mr. Lee Schrepel, the findings and conclusions in material 
issue number 5(e) of the Recommended Decision concerning the authority 
to establish regulations that would require minimum quality and 
inspection requirements are amended by adding the following six 
paragraphs after the seventh paragraph (60 FR 61310) to read as 
follows:
    In Mr. Frank's exception, he stated that sections 930.44 (a) and 
(b) are ambiguous and do not spell out what form of inspection would be 
required (raw product or finished product). He also stated that any 
inspection of free tonnage cherries should be a decision by a handler 
and growers that deliver cherries to such handler. This should not be a 
decision by an administrative body such as the Board. Local weather 
conditions could affect a small geographic area, thereby causing damage 
in a localized area rather than the entire production area under the 
proposed order. This also interferes with a handler's decision on what 
quality such handler feels could be marketed. Mr. Frank suggested that 
the above mentioned sections be deleted from the proposed marketing 
order.
    Mr. Morrison also filed an exception that stated that only the 
quality of cherries placed in the reserve should be regulated. This 
would be the same as the prior order. Also, Mr. Morrison stated that 
the Board should not regulate the raw product grade.
    In Mr. Facer's exception, he stated that although the order 
requires inspection of primary reserve tart cherries, there is no 
official quality standards for some products. Therefore,

[[Page 26964]]

such inspection will be impractical, irrelevant and of no economic 
benefit.
    In Mr. Lee Schrepel's exception, he stated that the Board should 
not be empowered to require the inspection of all cherries entering the 
stream of commerce.
    As previously stated, the proponents testified that as technology 
increases, the Board should have the authority to adopt quality 
standards for cherries, especially those concerning pit count. If 
quality standards are recommended by the Board and implemented by the 
Secretary, no handler would 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. Before recommending quality regulation, the record 
evidence shows that it was the intent of the proponents that the Board 
would obtain an industry consensus before making a recommendation to 
USDA on this issue. Any such regulation would be issued by the 
Secretary through informal rulemaking which would allow an opportunity 
for comment.
    Without additional Board action, only inventory reserve cherries 
would be inspected, prior to placing them in the reserve. It is 
imperative to maintain the quality of the reserve so that only good 
quality cherries are released to handlers to be sold in the 
marketplace. Therefore, based on the above discussion on the record 
evidence, Mr. Frank's, Mr. Morrison's, Mr. Facer's, and Mr. Lee 
Schrepel's exceptions are denied.
    Based upon the exception filed by Mr. Lee Schrepel, the findings 
and conclusions in material issue number 5(e) of the Recommended 
Decision concerning the authority to establish regulations that would 
require minimum quality and inspection requirements are amended by 
adding the following two paragraphs after the 4th paragraph (60 FR 
61310) to read as follows:
    In Mr. Schrepel's exception, he stated that the cost of inspecting 
new cherries to be rotated into the reserve and removing older cherries 
out of the reserve should be at the expense of the handler. Such action 
as this, undertaken by or at the convenience of the affected handler 
for the benefit of the handler or some other party, should not be the 
expense of the industry.
    As previously stated, rotating cherries in the reserve is not a 
requirement. However, it would benefit the industry if it were done. 
This would insure that good quality cherries are being released when 
inventory reserve cherries are sold. The Board will have the authority 
to limit the number of inspections of cherries to be rotated into 
inventory for which the Board would be financially liable. In order to 
establish such limits, the Board would make a recommendation to the 
Secretary and informal rulemaking would be conducted. Based on the fact 
that the record evidence supports including this authority it will 
remain in the order. Therefore, Mr. Lee Schrepel's exception is denied.
    Based upon the exception filed by Mr. Lee Schrepel, the findings 
and conclusions in material issue number 5(e) of the Recommended 
Decision concerning the authority to establish regulations that would 
require minimum quality and inspection requirements are amended by 
adding the following two paragraphs after the third paragraph (60 FR 
61310) to read as follows:
    The exception filed by Mr. Lee Schrepel stated that there should be 
no reimbursement of inspection costs for quality inspections for any 
reserve or free market cherries. Also, requirements for reinspection 
are inappropriate unless such cherries are part of the primary reserve.
    The record evidence indicates that quality control inspections 
would be paid for by handlers. However, inspections of primary reserve 
cherries should be paid for by the Board. As previously stated, this 
would insure that only good quality cherries would be available for 
release from the reserve into the marketplace. This benefits all in the 
industry. In regard to reinspection, cherries would only be reinspected 
if they were regraded, resorted, repackaged or any other way further 
prepared for market. This would be done if a handler had to repackage a 
product that was already packaged for a client. This provision is a 
safety valve to prevent poor quality product entering the marketplace. 
New crop cherries would be inspected prior to being placed in the 
primary reserve. The record evidence supports the above provisions, 
therefore, Mr. Lee Schrepel's exception is denied.
    Based upon the exceptions filed by CMI, the findings and 
conclusions in material issue number 5(e) of the Recommended Decision 
concerning the authority to establish regulations that would require 
minimum quality and inspection requirements are amended by adding the 
following paragraph after the seventh paragraph (60 FR 61310) to read 
as follows:
    CMI's exception stated that the proponent wishes to make it clear 
that the Board would exercise its powers with regard to the 
establishment of quality standards and inspection requirements in a 
manner consistent with the establishment of quality standards under the 
prior order. Producers and handlers were comfortable with the way that 
the Board under the prior order instituted inspection requirements. The 
proponents expect the new Board would operate in the same manner, 
although they recognize that there are obvious significant differences 
between the two orders. In addition, such quality regulations would be 
implemented through the informal rulemaking process which would require 
a Board vote and opportunity for the public to comment.
    Based upon the exception filed by Mr. Harmson, the findings and 
conclusions in material issue number 5(f) of the Recommended Decision 
concerning the authority to establish volume regulation provisions 
under the proposed order are amended by adding the following two 
paragraphs after the 15th paragraph (60 FR 61311) to read as follows:
    In an exception filed by Mr. Harmson, he stated that the provision 
that would allow the Board to acknowledge a national bargaining agency 
on behalf of growers should not be deleted from the proposed order. 
Bargaining associations are a form of group action in agriculture that 
contributes greatly to the economic well being of growers and adds an 
important dimension to representation of their interests in the 
marketplace.
    As previously stated, the record evidence did not adequately 
explain how such a provision would work or what the benefits would be 
to growers. Also, the record evidence did not define the functions of a 
national bargaining association as related to the proposed marketing 
order. Therefore, Mr. Harmson's exception is denied.
    Based upon the exception filed by Mr. Lee Schrepel, the findings 
and conclusions in material issue number 5(f) of the Recommended 
Decision concerning the authority to establish volume regulation 
provisions under the proposed order are amended by adding the following 
two paragraphs after the 23rd paragraph (60 FR 61312) to read as 
follows:
    The exception filed by Mr. Lee Schrepel stated that ownership of 
the primary or secondary reserve should not be allowed to be 
transferred, but remain with the handler who had the initial reserve 
obligation.
    Record evidence supported authorizing the transfer of a handler's 
equity in the primary reserve to another person. As previously stated, 
a handler may need to do this if, for example, such handler does not 
have the storage

[[Page 26965]]

area to store the primary reserve. Therefore, Mr. Schrepel's exception 
is denied.
    Based upon the exception filed by CMI, the findings and conclusions 
in material issue number 5(f) of the Recommended Decision concerning 
the authority to establish volume regulation provisions under the 
proposed order are amended by adding the following paragraph after the 
seventh paragraph (60 FR 61311) to read as follows:
    In CMI's exception, it stated that section 930.50(b) governing the 
application of the optimum supply formula in calculating preliminary 
free and restricted percentages was altered from the proponents' 
proposal. The proponents' proposal provided that tonnage requirements 
for the current crop year should be subtracted from the current year 
USDA crop forecast. The Recommended Decision provided that these 
numbers should be divided. This calculation would not work properly and 
is an inadvertent error by USDA. Therefore, it will be corrected in the 
amendatory language and CMI's exception is adopted.
    Based upon the exception filed by CMI, the findings and conclusions 
in material issue number 5(f) of the Recommended Decision concerning 
the authority to establish volume regulation provisions under the 
proposed order are amended by adding the following paragraph after the 
67th paragraph (60 FR 61316) to read as follows:
    The exception filed by CMI indicated that section 930.52(d) should 
be corrected and clarified by removing the word ``maximum'' in the 
phrase ``maximum average annual processed production'' since this 
phrase is ambiguous and lacks clear meaning. One can either have a 
maximum annual production or an average annual production over the last 
five years, but not both. Therefore, section 930.52(d) should be 
modified by removing the word ``maximum'' and simply permit a district 
to drop out of volume regulation when its current crop is 50 percent 
less than the average crop processed over the prior five years. CMI's 
exception is adopted herein.
    Based upon the exceptions filed by Mr. Rowley, Mr. Morrison, CMI, 
Mr. Mark Schrepel, and Mr. Lee Schrepel, the findings and conclusions 
in material issue number 5(f) of the Recommended Decision concerning 
the authority to establish volume regulation provisions under the 
proposed order are amended by adding the following eight paragraphs 
after the 59th paragraph (60 FR 61315) to read as follows:
    The exception filed by Mr. Rowley stated that he was very concerned 
that the Recommended Decision did not authorize cherries used for 
drying as a diversion outlet. Mr. Rowley stated that his company had 
spent over $1,500,000 to develop dried cherries and dried cherry 
products. He believes that it would be grossly unfair that unregulated 
States could sell all their dried cherry products and he could not 
since dried cherries is not a diversion outlet.
    Mr. Mark Schrepel's exception expressed concern that export would 
be prohibited as an exempt use or diversion outlet.
    Mr. Morrison's exception requested that diversion credit be allowed 
for juice, exports and dried cherries. Mr. Morrison stated that 
companies have invested substantial sums to develop new markets and 
expand current markets dealing with juice, export and dried cherries. 
In CMI's exception, it requested that the USDA modify section 930.62 to 
include dried cherries that are exported, and cherries that are 
converted to juice.
    Under section 930.59 of the proposed order, handler diversion can 
take place by several methods, including uses exempt under section 
930.62. Section 930.62 provides that diverted cherries used for 
specific purposes may be exempt from certain provisions of the 
marketing order. These include exemption from assessment and volume 
control provisions.
    Dried cherries or cherries designated for export can be exempted 
under Sec. 930.62 from certain order provisions or can be allowed to 
qualify as diversion outlets under Sec. 930.59. As specified under 
section 930.62, the Board can also designate other exempt uses. If the 
Board choose to designate export or dried cherries as an exempted use 
under Sec. 930.62, export and dried cherries could also be specified as 
an eligible diversion outlet. Thus, such uses requested by the 
exceptions for diversion credit are not prohibited under the marketing 
order, except for cherries converted to juice or juice concentrate.
    As previously discussed, record evidence supports the proposition 
that cherries converted to juice or juice concentrate cannot be used as 
an eligible diversion outlet. The arguments raised in the exceptions 
did not overcome the evidence in the record indicating that cherries 
converted to juice or juice concentrate cannot be used as an eligible 
diversion. This is mainly because of the possibility of oversupplies 
damaging the juice market already established by cherry producers and 
handlers in Oregon and Washington.
    In addition, CMI's exception requested USDA to modify section 
930.59(d) to clarify that the prohibition of juice or juice concentrate 
as an eligible handler diversion only prohibits the conversion of 
diverted cherries to juice or concentrate. CMI requested that the use 
of juice or juice concentrate for sales in export markets be eligible 
for diversion credit. As previously discussed, the prohibition of juice 
or juice concentrate for diversion credit, discussed in the Recommended 
Decision (60 FR 61316), would also apply to sales of juice or juice 
concentrate in export markets. This prohibition on diversion credit, 
however, does not preclude the export of free tonnage cherries that 
have been converted to juice or juice concentrate. Therefore, CMI's 
exception is denied.
    Finally, Mr. Lee Schrepel's exception stated that there was an 
error in section 930.58(b) which referenced section 930.63 as exempted 
uses. Section 930.62 is the section in the marketing order that 
specifies the exempt uses. Therefore, section 930.58(b) should be 
corrected.
    Based upon the exceptions filed by Mr. Frank and Mr. Facer, the 
findings and conclusions in material issue number 5(f) of the 
Recommended Decision concerning the authority to establish volume 
regulation provisions under the proposed order are amended by adding 
the following paragraph after the 68th paragraph (60 FR 61317) to read 
as follows:
    In Mr. Frank's exception, he stated that tart cherries is a 
national crop and the oversupply is a national problem. Therefore, 
Washington, Oregon, Wisconsin and Pennsylvania should not be exempt 
from participating in the marketing order. These States comprise 17 
percent of the total bearing acreage. Mr. Frank states that this is not 
an insignificant amount and to exempt these States from participating 
in the marketing order is not fair or right. In Mr. Facer's exception, 
he stated that he opposed the 15 million pound requirement tart cherry 
producing areas would have to meet to become regulated under the order. 
All tart cherry producing areas should be included or there should not 
be a marketing order. The above-mentioned States are not exempt from 
the marketing order. If the proposed order becomes effective, they 
would not be regulated under the order's proposed volume regulation 
because they do not meet the 15 million pound criteria. Should they 
meet the criteria in the future, they would become regulated. Handlers 
in all States would pay assessments for the administration of the 
order. The record evidence does not warrant volume

[[Page 26966]]

regulation in the States discussed by Mr. Frank or Mr. Facer, at this 
time. Therefore, Messrs. Frank's and Facer's exceptions are denied.
    Based upon the exception filed by Mr. Facer, the findings and 
conclusions in material issue number 5(f) of the Recommended Decision 
concerning the authority to establish volume regulation provisions 
under the proposed order are amended by adding the following two 
paragraphs after the 23rd paragraph (60 FR 61312) to read as follows:
    Mr. Facer expressed a concern that the proposed order would not 
protect individual producers' investments in processing/marketing 
cooperatives. He stated that many producers have made substantial 
investments in cooperatives to market their production while other 
producers have no such investments. It is his contention that the order 
will make all producers equal, allowing each to market the same portion 
of his/her crop.
    The proposed order does not regulate producers. The order regulates 
only handlers of tart cherries. If a volume regulation is implemented, 
handlers would have to decide how to market their product, whether to 
withhold the required reserve or divert product, or both. Independent 
handlers and cooperatives would be making similar decisions concerning 
tart cherries to those they have made in the past when faced with 
overproduction. Such decisions would include identifying which 
producers' cherries to purchase, and which of those to utilize in 
various products and markets. The proposed marketing order is intended 
to bring supplies in line with current demand, thereby increasing 
returns to growers. Therefore, Mr. Facer's exception is denied.
    Based upon the exception filed by Mr. Lee Schrepel, the findings 
and conclusions in material issue number 5(f) of the Recommended 
Decision concerning the authority to establish volume regulation 
provisions under the proposed order are amended by adding the following 
two paragraphs after the 20th paragraph (60 FR 61312) to read as 
follows:
    Mr. Lee Schrepel's exception stated that the Board, even with the 
concurrence of the Secretary, should never have authority to modify the 
50 million pound primary reserve limit. If a modification occurs, it 
should involve a proposal of modification to the Secretary followed by 
a comment period and State-by-State voting.
    The record evidence supports the 50 million pound level specified 
in section 930.50(i). If the Board recommended a change to the 50 
million pound level, it would have to be implemented through the formal 
rulemaking process which would require a public hearing and eventually 
a favorable vote by growers and processors to implement such change. 
State-by-State voting is not authorized under the Act nor is it 
supported by the record.
    Based upon the exception filed by CMI, the findings and conclusions 
in material issue number 5(f) of the Recommended Decision concerning 
the authority to establish volume regulation provisions under the 
proposed order are amended by adding the following paragraph after the 
16th paragraph (60 FR 61311) to read as follows:
    The exception filed by CMI stated that there was an inconsistency 
in section 930.55(b) of the proposed order. The record evidence 
supported the concept that handlers could place cherries in any form in 
the inventory reserve. Handlers would have the option of choosing what 
form of inventory they wish to store. However, proposed section 
930.55(b) states that the form to be used would be prescribed by the 
Board. This statement is inconsistent with the record evidence. 
Therefore, CMI's exception is adopted and appropriate modifications are 
made in section 930.55(b).
    Based upon the exception filed by CMI, the findings and conclusions 
in material issue number 5(f) of the Recommended Decision concerning 
the authority to establish volume regulation provisions under the 
proposed order are amended by adding the following paragraph after the 
15th paragraph (60 FR 61311) to read as follows:
    The exception filed by CMI stated that section 930.53 should also 
apply to the modification, suspension, or termination of quality 
regulations along with volume regulations. This change would clarify 
the Board's responsibility to monitor crop and market conditions and 
recommend changes to existing regulations as necessary. Therefore, 
CMI's exception is adopted and appropriate modifications to section 
930.53 have been made.
    Based upon the exception filed by Mr. Lee Schrepel, the findings 
and conclusions in material issue number 5(f) of the Recommended 
Decision concerning the authority to establish volume regulation 
provisions under the proposed order are amended by adding the following 
paragraph after the 12th paragraph (60 FR 61311) to read as follows:
    In Mr. Lee Schrepel's exception, he stated that the reference to 
the harvest season beginning in August (used as part of an 
illustration) was incorrect. Mr. Schrepel stated that the harvest 
season actually begins in mid-June and runs through mid-August. Mr. 
Schrepel's exception is correct.
    Based upon the exception filed by Mr. Lee Schrepel, the findings 
and conclusions in material issue number 5(f) of the Recommended 
Decision concerning the authority to establish volume regulation 
provisions under the proposed order are amended by adding the following 
paragraph after the 52nd paragraph (60 FR 61314) to read as follows:
    The exception filed by Mr. Lee Schrepel stated that grower 
diversion credit should not be given for fruit that is storm damaged. A 
diversion credit may be a marketable commodity, an item of value, and 
no such value should be accrued for unmarketable cherries. USDA did not 
include the proponents' proposal to authorize diversion credit for 
unharvestable or unmarketable fruit. The record evidence supported the 
proposition that growers should be allowed to receive diversion credit 
for marketable, harvestable fruit, even if some portion of such fruit 
was damaged by storm winds or floods. USDA has determined that the 
grower diversion program contained in the Recommended Decision could 
benefit the industry and believes that this finding is consistent with 
Mr. Schrepel's exception.
    Based upon the exceptions filed by CMI and Mr. Lee Schrepel, the 
findings and conclusions in material issue number 5(f) of the 
Recommended Decision concerning the authority to establish volume 
regulation provisions under the proposed order are amended by adding 
the following 10 paragraphs after the 68th paragraph (60 FR 61317) to 
read as follows:
    The exception filed by CMI stated that since USDA modified the 
provisions under section 930.52, the section may not now provide 
authority to subject additional districts to volume regulation once the 
initial group of volume regulated districts is established at the time 
of promulgation. CMI also proposes a new section 930.52 to replace 
section 930.52 that was published in the Recommended Decision. CMI 
objected to USDA removing a 150 percent trigger provision which would 
make districts that had a surge in production subject to volume 
control. USDA determined that such an additional criteria would be 
complicated for the Board to administer and possibly inequitable to 
growers and handlers.
    CMI stated that, since the 150 percent trigger was removed from the 
proposal, the potential now exists for having up to 25 million pounds 
of unregulated

[[Page 26967]]

production. In a market of 250 million pounds, this amounts to 10 
percent of unregulated production annually and an additional 10 percent 
could have a substantial impact upon markets and prices. CMI states 
that this emphasizes the need to have realistic production triggers. 
Also, CMI disagrees with USDA's conclusion that the dual triggers (150 
percent and 15 million pounds) would somehow cause confusion and 
concern that a district could meet one criteria and not the other and 
still be regulated. CMI contends that the rules pertaining to the 15 
million pound criteria and the 150 percent trigger are clear on the 
record, and therefore are not confusing.
    CMI has proposed modifications to section 930.52 which would 
provide that: (1) Upon promulgation, those districts potentially 
subject to any imposed volume regulation would be those in which the 
average annual production of cherries over the prior three years, 
measured on a total production basis, has exceeded 15 million pounds of 
cherries and that handlers in districts not meeting this 15 million 
pound requirement at the time of order promulgation shall become 
subject to any volume regulation implemented in accordance with this 
part in the crop year that follows any three-year period in which the 
15 million pound average production requirement is exceeded in that 
district; (2) If total production data is unavailable for a district, 
the Board would adjust the 15 million pound trigger upward or downward 
by a factor accounting for the historical difference between the total 
production and total utilization; and (3) When a district hits the 15 
million pound trigger, it would be subject to regulation in the next 
crop year and remain regulated until the crop year following that in 
which its production drops below 15 million pounds over any three-year 
period subsequent to the year in which it hit the original 15 million 
pound threshold.
    Regarding modification number one, USDA is adopting CMI's 
exception. This would clarify the intent and meaning of section 930.52 
which should provide that after the initial regulation of districts 
that meet the 15 million pound test, additional districts may become 
regulated in the future.
    Regarding modification number two, USDA is not adopting this 
exception. Such factors as proposed by CMI would be confusing and 
difficult to administer. If the order is promulgated, information 
needed to calculate each State's production would be collected under 
the marketing order. The marketing order provides for information 
collection from handlers that can be used for this purpose.
    Finally, the third modification is also denied. This modification 
would lock a State in to being regulated for three years once it 
reaches the 15 million pound threshold. This was not the intent of 
USDA's modification to the Recommended Decision to delete the 150 
percent trigger mechanism. USDA intended that States would become 
regulated in the year subsequent to when they reach 15 million pounds 
(computed as a rolling average of a three year period). Also, States 
would become unregulated in the year subsequent to when they fell below 
the 15 million pounds. The production of each State or district would 
be reviewed annually to determine if they would be regulated or not 
regulated in the upcoming crop year. Therefore, CMI's exception is 
denied on this issue.
    In Mr. Lee Schrepel's exception, he stated that the Board should 
not have the authority to modify the 15 million pound requirement for 
volume regulation. If the Board decided to recommend modification of 
the 15 million pound level, such modification would have to be 
implemented through formal rulemaking procedures. This would require a 
public hearing and a favorable vote by growers and processors to 
implement such change.
    Mr. Schrepel further stated that the proposal should be modified to 
facilitate that this trigger (15 million pound requirement) for 
imposition of volume regulations increase whenever it falls below 8 
percent of the optimum supply. There is no support in the record for 
such proposition. Also, Mr. Schrepel did not specify why 8 percent was 
chosen and how this provision would work, therefore, his exception is 
denied.
    Mr. Schrepel also requested clarification of when districts would 
become permanently regulated; would it be contingent upon the average 
of the previous three seasons? As previously discussed, no district 
would be regulated unless that district continued to have production 
above the 15 million pound requirement. Each year, the production of 
each district (based on a rolling 3-year average) would be evaluated to 
determine if such district would be regulated in the upcoming crop 
year.
    Mr. Schrepel also requested that USDA specify the source of data 
for application of the trigger. USDA believes that the proponents 
intended that the Board use post-harvest production figures from each 
district. The Board can also obtain this information from USDA data and 
handler reports.
    Based upon the exception filed by Mr. Lee Schrepel, the findings 
and conclusions in material issue number 5(f) of the Recommended 
Decision concerning the authority to establish volume regulation 
provisions under the proposed order are amended by adding the following 
paragraph after the 19th paragraph (60 FR 61312) to read as follows:
    Mr. Lee Schrepel's exception stated under section 930.63(a) that 
referenced ``60 days prior to the end of the crop year'' appears to be 
open to interpretation by the reader. USDA disagrees with this 
statement. Crop year is defined under the marketing to mean the 12-
month period beginning on July 1 of any year and ending on June 30 of 
the following year. Therefore, 60 days prior to the end of the crop 
year would mean April 30. Mr. Schrepel's exception is denied.
    Based upon the exception filed by Mr. Lee Schrepel, the findings 
and conclusions in material issue number 5(h) of the Recommended 
Decision concerning the additional terms and conditions which are 
common to all marketing orders are amended by adding the following five 
paragraphs after the sixth paragraph (60 FR 61318) to read as follows:
    Mr. Lee Schrepel's exception stated that a continuance referendum 
every sixth year is not frequent enough. The industry should be able to 
petition the Secretary to hold a continuance referendum more 
frequently.
    The record evidence supported the conduct of a continuance 
referendum at least every six years among growers and processors in the 
industry to determine if they favor continuance of the order. This is 
also consist with Departmental guidelines that endorse a continuance 
referendum every six years. The Secretary is not prevented from holding 
a continuance referendum at an earlier date if such referendum is 
deemed necessary. Therefore, Mr. Schrepel's exception is denied.
    Mr. Schrepel also stated that the standards or criteria should be 
as stringent for continuance of the order as it is for the initial 
promulgation. As was indicated in the Recommended Decision, it was 
contemplated that the criteria for continuance of the order would be 
based on a two-thirds affirmative vote by number or volume represented 
in the referendum. This standard would be similar to the promulgation 
standard. In any event, the Secretary would still have discretionary 
authority in deciding whether to continue the order. Therefore, Mr. 
Schrepel's exception is denied.

[[Page 26968]]

    Mr. Schrepel also stated that section 930.91 should include 
provisions for the initiation of an amendment from a source within the 
industry other than the Board. Mr. Schrepel stated that incidents may 
occur and the Board may not choose to act on a matter that may be of 
considerable importance to an industry segment. The language in section 
930.91 is standard language which is found in other orders and does not 
preclude anyone from recommending amendments.
    The Secretary relies on the Board to make recommendations that are 
important to the welfare of the industry. If one segment of the 
industry is concerned about an issue, it should be brought to the Board 
to be addressed. Any person can submit recommendations to the Secretary 
for consideration. If the Secretary does conclude that formal 
rulemaking is necessary based on a Board recommendation or other 
recommendations, other persons will also have the opportunity to submit 
proposals. In addition, the Secretary may propose amendments, even in 
the absence of outside recommendations. Therefore, Mr. Schrepel's 
exception is denied.
    In addition, to the exceptions filed and discussed above, CMI filed 
an exception that included some typographical errors in the amendatory 
language of the proposed order. Those changes are adopted in the 
amendatory language below. They are:
    (1) Section 930.11--Add the words ``for his or her own account'' at 
the end of the definition.
    (2) Section 930.15--cross sectional references are incorrect that 
refer to the primary and secondary reserve.
    (3) Section 930.17--cross sectional reference is incorrect that 
refers to the primary and secondary reserve.
    (4) Section 930.25--the phrase ``reapportionment or'' should be 
added to make this section consistent with other changes that were 
made.
    (5) Section 930.51--A comma and the word ``this'' were left out of 
the proposal.
    (6) Section 930.55(a)--cross sectional reference is incorrect that 
refers to equity holders.
    (7) Section 930.57(a)--cross sectional reference is incorrect that 
refers to equity holders.
    (8) Section 930.58(b)--cross sectional reference is incorrect that 
refers to exemptions.
    (9) Section 930.58(b)(i)--add an ``and'' at the end of the 
paragraph.
    (10) Section 930.60--Change ``sole property'' to sole 
responsibility.''
    Also, in his exception, Mr. Lee Schrepel pointed out some 
typographical errors and omissions of words in the Recommended 
Decision. They are: (1) the dates of the Grand Rapids, Michigan hearing 
session were incorrectly listed (60 FR 61292) and should be changed 
from January 9 and 10, 1995, to January 18 and 19, 1995, respectively; 
(2) in the description of small agricultural producers as those 
entities having annual receipts of less than $500,000 (60 FR 61293), 
the words ``less than'' were inadvertently omitted and should be added; 
and, (3) the listings of U.S. bearing acreage of tart cherries (60 FR 
61293) in 1986 and 1990 were incorrectly stated and should be changed 
from 4.5 million and 5 million, respectively, to 45,000 and 50,000, 
respectively.
    USDA has modified sections 70(c) to make that provision consistent 
with authorities provided under this proposed order and other Federal 
marketing orders. In addition, where necessary, USDA has made minor 
conforming changes to ensure that all sections of this part accurately 
reflect the modifications adopted in this decision.

Rulings on Exceptions

    In arriving at the findings and conclusions and the regulatory 
provisions of this decision, the exceptions to the Recommended Decision 
were carefully considered in conjunction with the record evidence. To 
the extent that the findings and conclusions and the regulatory 
provisions of this decision are at variance with the exceptions, such 
exceptions are denied.

Marketing Agreement and Order

    Annexed hereto and made a part hereof is the document entitled 
``Order Regulating the Handling of Tart Cherries Grown in the States of 
Michigan, New York, Pennsylvania, Oregon, Utah, Washington, and 
Wisconsin.'' This document has been decided upon as the detailed and 
appropriate means of effectuating the foregoing findings and 
conclusions.
    It is hereby ordered, That this entire decision be published in the 
Federal Register.

Referendum Order

    It is hereby directed that a referendum be conducted in accordance 
with the procedure for the conduct of referenda (7 CFR 900.400) to 
determine whether the issuance of the annexed order regulating the 
handling of tart cherries grown in the States of Michigan, New York, 
Pennsylvania, Oregon, Utah, Washington, and Wisconsin is approved or 
favored by growers and processors, as defined under the terms of the 
order, who, during the representative period were engaged in the 
production or processing of tart cherries in the proposed production 
area.
    The representative period for the conduct of such referendum is 
hereby determined to be July 1, 1995, through May 31, 1996.
    The agents of the Secretary to conduct such referendum are hereby 
designated to be Gary D. Olson and Robert J. Curry, Marketing Order 
Administration Branch, Fruit and Vegetable Division, AMS, USDA, 1220 
S.W. Third Avenue, room 369, Portland, Oregon 97204; telephone 503-326-
2724, FAX 503-326-7440.

List of Subjects in 7 CFR Part 930

    Marketing agreements, Tart cherries, Reporting and recordkeeping 
requirements.

    Dated: May 22, 1996.
Shirley R. Watkins,
Deputy Assistant Secretary, Marketing and Regulatory Programs.

Order Regulating the Handling of Tart Cherries Grown in the States of 
Michigan, New York, Pennsylvania, Oregon, Utah, Washington, and 
Wisconsin 1
---------------------------------------------------------------------------

    \1\ This order shall not become effective unless and until the 
requirements of section 900.14 of the rules of practice and 
procedure governing proceedings to formulate marketing agreements 
and marketing orders have been met.
---------------------------------------------------------------------------

    Findings and determinations upon the basis of the record. Pursuant 
to the provisions of the Agricultural Marketing Agreement Act of 1937, 
as amended (7 U.S.C. 601 et seq.), and the applicable rules of practice 
and procedure effective thereunder (7 CFR part 900), a public hearing 
was held upon 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.
    Upon the basis of the evidence introduced at such hearing and the 
record thereof, it is found that:
    (1) The marketing agreement and order, and all of the terms and 
conditions thereof, will tend to effectuate the declared policy of the 
Act;
    (2) The marketing agreement and order regulate the handling of tart 
cherries grown in the production area 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 hearings have been held;

[[Page 26969]]

    (3) The marketing agreement and order 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 subdivisions of 
the production area would not effectively carry out the declared policy 
of the Act;
    (4) There are no differences in the production and marketing of 
tart cherries produced in the production area which make necessary 
different terms and provisions applicable to different parts of such 
area; and
    (5) All handling of tart cherries grown in the production area is 
in the current of interstate or foreign commerce or directly burdens, 
obstructs, or affects such commerce.

Order Relative to Handling

    It is therefore ordered, That on and after the effective date 
hereof, all handling of tart cherries grown in the States of Michigan, 
New York, Pennsylvania, Oregon, Utah, Washington, and Wisconsin, shall 
be in conformity to, and in compliance with, the terms and conditions 
of the said order, as follows:
    The provisions of the proposed marketing agreement and order 
contained in the Recommended Decision issued by the Administrator on 
November 20, 1995, and published in the Federal Register on November 
29, 1995 [60 FR 61292], as revised herein, shall be and are the terms 
and provisions of this agreement and order. Sections 930.92 through 
930.94 apply only to the proposed marketing agreement and not the 
proposed order.
    Title 7, Chapter IX is proposed to be amended by adding part 930 to 
read as follows:

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

Subpart A--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.

Subpart B--[Reserved]

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

Subpart A--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 cerasas, or hybrids of 
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

[[Page 26970]]

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.
    (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.
    (c) The delivery of such cherries to such processing facility for 
such preparation.
    (d) The sale or transportation of cherries by a grower to a handler 
of record within the production area.
    (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 for his or her own account.


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. 930.55 or Sec. 930.57 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. 930.57.


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 Secs. 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 order to achieve a fair and balanced representation on the 
Board, and to prevent any one sales constituency from gaining control 
of the Board, not more than one Board member may be from, or affiliated 
with, a single sales constituency in those districts having more than 
one seat on the Board. 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 or grower 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

[[Page 26971]]

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 
three 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, or 3 fiscal years, in 
both instances, 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 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 6 
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) Forms and ballots. 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. The 
requirement that the petition form be signed by a handler other than 
the nominee shall not apply in any District where less than two 
handlers are eligible to vote.
    (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

[[Page 26972]]

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 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 public member and alternate public member is nominated 
by the Board pursuant to Sec. 930.23(d) and shall also be subject to 
appointment by the Secretary. The Secretary shall appoint from nominees 
by the Board or from other qualified individuals the public member and 
the alternate public member.


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 reapportionment or 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 financial statements to be audited by a certified 
public accountant at least once each fiscal year

[[Page 26973]]

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. 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 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

[[Page 26974]]

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 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 USDA, 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 paragraph (a) of this section, 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 subtracted 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

[[Page 26975]]

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; and
    (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 
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 paragraph (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 this 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 in which handlers 
shall be 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. Handlers in districts not meeting the 15 million pound 
requirement at the time of order promulgation shall become subject to 
volume regulation implemented in accordance with this part in the crop 
year that follows any three-year period in which the 15 million pound 
average

[[Page 26976]]

production requirement is exceeded in that district.
    (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 
described in paragraph (a) of this section 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 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 regulations issued pursuant to Secs. 930.44 or 
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 regulation issued pursuant to Secs. 930.44 or 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 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. 930.59, 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 chosen by the handler, 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 USDA. 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. 930.59.
    (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

[[Page 26977]]

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. 930.62; nonhuman food uses; or other uses, including diversion by 
leaving such cherries unharvested.
    (c) Application/mapping. The Board, with the approval of Secretary, 
shall develop rules and regulations providing for the diversion of 
cherries by growers. Such regulations may include, among other things: 
(1) The form and content of applications and agreements relating to the 
diversion, including provisions for supervision and compensation; and 
(2) provisions for mapping areas in which cherries will be left 
unharvested.
    (d) 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 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.
    (c) 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.
    (d) 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.
    (e) Diversion certificate. The Board shall conduct such supervision 
of the handler's diversion of cherries under paragraph (c) or under 
paragraph (d) 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 responsibility 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. 940.44, 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.

[[Page 26978]]

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.
    (c) Protection of proprietary information. Under no circumstances 
shall any information or reports be made available to the Board 
members, or to any person designated by the Board or by the Secretary, 
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

[[Page 26979]]

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;
    (b) Release or extinguish any violation of this part or any 
regulation issued thereunder;
    (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 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 to exercise any powers granted by the Act or otherwise, 
or, 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.


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.

Subpart B--[Reserved]

    Dated: May 22, 1996.
Shirley R. Watkins,
Deputy Assistant Secretary, Marketing and Regulatory Programs.
[FR Doc. 96-13383 Filed 5-24-96; 8:45 am]
BILLING CODE 3410-02-P