[Federal Register Volume 62, Number 243 (Thursday, December 18, 1997)]
[Proposed Rules]
[Pages 66312-66315]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-33004]


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 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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  Federal Register / Vol. 62, No. 243 / Thursday, December 18, 1997 / 
Proposed Rules  

[[Page 66312]]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 966 and 980

[Docket No. FV98-966-1 PR]


Tomatoes Grown in Florida and Imported Tomatoes; Proposed Rule to 
Change Minimum Grade Requirements

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This proposal would increase the minimum grade requirements 
for Florida and imported tomatoes. The grade requirements would be 
changed from U.S. No. 3 to U.S. No. 2. The proposed rule would help the 
Florida tomato industry meet domestic market needs, increase returns to 
producers, and provide consumers with higher quality tomatoes. 
Application of the increased grade requirements to imported tomatoes is 
required under section 8e of the Agricultural Marketing Agreement Act 
of 1937.

DATES: Comments must be received by January 20, 1998.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this proposal. Comments must be sent in triplicate to the 
Docket Clerk, Fruit and Vegetable Programs, AMS, USDA, room 2525-S, 
P.O. Box 96456, Washington, DC 20090-6456; Fax: (202) 720-5698. All 
comments should reference the docket number and the date and page 
number of this issue of the Federal Register and will be made available 
for public inspection in the Office of the Docket Clerk during regular 
business hours.

FOR FURTHER INFORMATION CONTACT: Christian Nissen, Southeast Marketing 
Field Office, Marketing Order Administration Branch, Fruit and 
Vegetable Programs, AMS, USDA, 301 Third Street, N.W., Suite 206, 
Winter Haven, Florida 33881; telephone: (941) 299-4770, Fax: (941) 299-
5169; or George Kelhart, Marketing Order Administration Branch, Fruit 
and Vegetable Programs, AMS, USDA, room 2525-S, P.O. Box 96456, 
Washington, DC 20090-6456; telephone (202) 720-2491, Fax: (202) 720-
5698. Small businesses may request information on compliance with this 
regulation by contacting Jay Guerber, Marketing Order Administration 
Branch, Fruit and Vegetable Programs, AMS, USDA, room 2525-S, P.O. Box 
96456, Washington, DC 20090-6456; telephone (202) 720-2491, Fax: (202) 
720-5698.

SUPPLEMENTARY INFORMATION: This proposal is issued under Marketing 
Agreement No. 125 and Marketing Order No. 966, both as amended (7 CFR 
part 966), regulating the handling of tomatoes grown in certain 
designated counties in Florida, hereinafter referred to as the 
``order.'' The marketing agreement and order are effective under the 
Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-
674), hereinafter referred to as the ``Act.''
    The Department of Agriculture (Department) is issuing this rule in 
conformance with Executive Order 12866.
    This proposal has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule is not intended to have retroactive effect. 
This proposal will not preempt any State or local laws, regulations, or 
policies, unless they present an irreconcilable conflict with this 
rule.
    The Act provides that administrative proceedings must be exhausted 
before parties may file suit in court. Under section 608c(15)(A) of the 
Act, any handler subject to an order may file with the Secretary a 
petition stating that the order, any provision of the order, or any 
obligation imposed in connection with the order is not in accordance 
with law and request a modification of the order or to be exempted 
therefrom. A handler is afforded the opportunity for a hearing on the 
petition. After the hearing the Secretary would rule on the petition. 
The Act provides that the district court of the United States in any 
district in which the handler is an inhabitant, or has his or her 
principal place of business, has jurisdiction to review the Secretary's 
ruling on the petition, provided an action is filed not later than 20 
days after the date of the entry of the ruling.
    Section 8e of the Act specifies that whenever certain specified 
commodities, including tomatoes, are regulated under a Federal 
marketing order, imports of those commodities must meet the same or 
comparable grade, size, quality, and maturity requirements as those in 
effect for the domestically produced commodity. There are no 
administrative procedures which must be exhausted prior to any judicial 
challenge to the provisions of import regulations issued under section 
8e of the Act.
    Under the order, tomatoes produced in the production area and 
shipped to fresh market channels outside the regulated area are 
required to meet grade, size, inspection, and container requirements. 
These requirements are specified in Sec. 966.323 of the handling 
regulations issued under the order. These requirements apply during the 
period October 10 through June 15 each year. The regulated area 
includes the portion of the State of Florida which is bounded by the 
Suwannee River, the Georgia border, the Atlantic Ocean, and the Gulf of 
Mexico. That is, the entire State of Florida, except the panhandle. The 
production area is part of the regulated area. Specialty packed red 
ripe tomatoes, yellow meated tomatoes, and single and double layer 
place packed tomatoes are exempt from container net weight 
requirements.
    Under Sec. 966.323, all tomatoes, except for pear shaped, paste, 
cherry, hydroponic, and greenhouse tomatoes, must be inspected as 
specified in the United States Standards for Grades of Fresh Tomatoes 
(7 CFR part 51.1855 through 51.1877; standards). Such tomatoes also 
must be at least 2 \8/32\ inches in diameter, and sized with proper 
equipment in one or more of the following ranges of diameters.

------------------------------------------------------------------------
                                                      Inches     Inches 
                 Size designation                    minimum    maximum 
                                                     diameter   diameter
------------------------------------------------------------------------
Medium............................................   2 \8/32\  2 \17/32\
Large.............................................  2 \16/32\  2 \25/32\
Extra large.......................................  2 \24/32\           
------------------------------------------------------------------------

    These size designations and diameter ranges are the same as 
specified in Sec. 51.1859 of the standards. All tomatoes in the Medium 
size designation are required to grade at least a U.S. No. 2, while 
tomatoes in the larger size designations are only required to grade

[[Page 66313]]

at least a U.S. No. 3. Section 966.52 of the order provides authority 
for the establishment and modification of regulations applicable to the 
handling of particular grades, sizes, and size designations of 
tomatoes.
    This rule would increase the minimum grade requirements from U.S. 
No. 3 to U.S. No. 2 for all tomatoes regardless of size. This change in 
grade requirements was recommended by the Florida Tomato Committee 
(Committee) on September 5, 1997, by a vote of 10 in favor and 2 
opposed. The grade requirement change would eliminate shipments of U.S. 
No. 3 grade tomatoes from the regulated area. The opponents of this 
change stated that there were good markets for U.S. No. 3 tomatoes in 
years of short supply, and when crop quality was down due to adverse 
weather conditions. The members in favor countered stating that during 
normal seasons U.S. No. 3 grade tomatoes comprised a small share of 
total shipments and that such shipments had a price depressing effect 
on the higher quality tomatoes shipped during those seasons.
    At the same meeting, the Committee unanimously recommended an 
increase in the diameter size requirement for Florida tomatoes from 2 
\8/32\ inches to 2 \9/32\ inches, that the size designations of Medium, 
Large, and Extra Large be changed to numeric size designations of 
6 x 7, 6 x 6, and 5 x 6, respectively, and that the diameter size 
ranges for the designated sizes be increased slightly. These size 
ranges are different from those specified in Sec. 51.1859 of the 
standards. The proposed minimum size and size designation changes were 
addressed in a separate rulemaking action. That action was published in 
the Federal Register on October 6, 1997 (62 FR 52047). Interested 
persons were invited to submit written comments until October 16, 1997. 
Subsequently, the period for comments was reopened until November 5, 
1997, by a document published in the Federal Register on October 22, 
1997 (62 FR 54809).
    Based on an analysis of markets and demands of buyers, the 
Committee believes that increasing the minimum grade from U.S. No. 3 to 
U.S. No. 2 would improve the marketing of Florida tomatoes, and help 
the industry protect its markets from foreign competition. The increase 
in grade requirements is expected to prevent low-quality tomatoes from 
reaching the marketplace, and improve the overall quality of tomatoes 
in fresh market channels.
    Tomatoes grading U.S. No. 3 must be well developed, may be 
misshapen, and cannot be seriously damaged by sunscald (7 CFR 51.1858). 
Tomatoes grading U.S. No. 2 have to be well developed, reasonably well-
formed, and free from sunscald (7 CFR 51.1857). Sunscald is an injury 
which usually occurs on the sides or upper half of the tomato, but may 
occur wherever the rays of the sun strike most directly. Sunscald 
results in the formation of a whitish, shiny, blistered area on the 
tomato. The affected tissue gradually collapses, forming a slight 
sunken area that may become pale yellow, and wrinkle or shrivel as the 
tomato ripens. This detracts from the overall quality of the tomato.
    The difference between tomatoes grading U.S. No. 3 and U.S. No. 2 
with regard to development, shape, and sunscald is especially 
noticeable in smaller sized tomatoes, but also noticeable in larger 
sized tomatoes. U.S. No. 3 grade tomatoes are generally of very poor 
quality, and are not desired by the consumer.
    The Committee indicated that when tomatoes of this quality are 
offered for sale to consumers in a normal season these tomatoes have an 
adverse affect on the demand and sale of other Florida tomatoes. The 
increase in grade requirements is expected to improve the quality of 
the tomato packs shipped from Florida.
    The proponents of the change indicated that the marketplace is 
changing and that the Florida industry has been shipping fewer U.S. No. 
3 grade tomatoes than it had in past seasons in response to those 
changes. During the last three shipping seasons, the quantity of U.S. 
No. 3 grade tomatoes shipped as a percentage of total shipments ranged 
from a low of 4.4 percent to a high of 7.6 percent.
    At the meeting, the Committee discussed whether eliminating U.S. 
No. 3 tomatoes would diminish the quality of the U.S. No. 2 grade pack 
by handlers trying to commingle more U.S. No. 3 grade as U.S. No. 2 
grade. The proponents acknowledged that some of the tomatoes currently 
being sold at the U.S. No. 3 grade could be reworked to make U.S. No. 2 
grade. They stated, however, that they were interested in eliminating 
the true U.S. No. 3 grade which in normal seasons has tended to detract 
from the overall pack and depress prices for higher quality tomatoes.
    The proposed grade increase is expected to improve the overall 
tomato pack, provide consumers with the quality of tomatoes desired, 
and, thus, encourage repeat purchases. In other words, the new grade 
requirements would allow handlers to respond better to market 
preferences which is expected to benefit producers and handlers of 
Florida tomatoes.
    Section 8e of the Act requires that when certain domestically 
produced commodities, including tomatoes, are regulated under a Federal 
marketing order, imports of that commodity must meet the same or 
comparable grade, size, quality, or maturity requirements for the 
domestically produced commodity. The current import regulations are 
specified in 7 CFR 980.212. Similar to the order, regulations apply 
during the period October 10 through June 15 when the Florida handling 
requirements are in effect. Because this proposal would increase the 
minimum grade for domestic tomato shipments, this increase would be 
applicable to imported tomatoes.
    Florida tomatoes must be packed in accordance with three specified 
size designations, and tomatoes falling into different size 
designations may not be commingled in a single container. These pack 
restrictions do not apply to imported tomatoes. Because pack 
requirements do not apply, different sizes of imported tomatoes may be 
commingled in the same container.
    Current import requirements specify that all lots with a minimum 
diameter of 2\17/32\ inches and larger shall meet at least a U.S. No. 3 
grade. All other tomatoes shall meet at least a U.S. No. 2 grade. Any 
lot with more than 10 percent of its tomatoes less than 2\17/32\ inches 
in diameter is required to grade at least U.S. No. 2. This proposed 
rule would change these requirements to reflect the size and size 
designation changes proposed in the October 6 and 22, 1997, issue of 
the Federal Register by requiring all lots of imported tomatoes to 
grade at least U.S. No. 2, regardless of size.
    This change is expected to benefit the marketers of both Florida 
and imported tomatoes by providing consumers with the higher quality 
tomatoes they desire. The Department has contacted a few tomato 
importers concerning imports. The importers indicated that they will 
not have difficulty meeting the U.S. No. 2 grade requirements. Thus, 
the Department believes that the proposed increase will not limit the 
quantity of imported tomatoes or place an undue burden on exporters, or 
importers of tomatoes. The expected increase in customer satisfaction 
should benefit all tomato importers regardless of size.
    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA), the Agricultural Marketing Service (AMS) has considered the 
economic impact of this action on small entities.

[[Page 66314]]

Accordingly, the AMS has prepared this initial regulatory flexibility 
analysis.
    The purpose of the RFA is to fit regulatory actions to the scale of 
business subject to such actions in order that small businesses will 
not be unduly or disproportionately burdened. Marketing orders issued 
pursuant to the Act, and rules issued thereunder, are unique in that 
they are brought about through group action of essentially small 
entities acting on their own behalf. Thus, both statutes have small 
entity orientation and compatibility. Import regulations issued under 
the Act are based on those established under Federal marketing orders 
which regulate the handling of domestically produced products. Thus, 
this proposed rule would have small entity orientation, and would 
impact both small and large business entities in a manner comparable to 
those rules issued under marketing orders.
    There are approximately 65 handlers of Florida tomatoes who are 
subject to regulation under the order and approximately 75 tomato 
producers in the regulated area. In addition, at least 170 importers of 
tomatoes are subject to import regulations and would be affected by 
this proposed rule. Small agricultural service firms have been defined 
by the Small Business Administration (SBA) (13 CFR 121.601) as those 
having annual receipts of less than $5,000,000, and small agricultural 
producers are defined as those having annual receipts of less than 
$500,000.
    Committee data indicates that approximately 20 percent of the 
Florida handlers handle 80 percent of the total volume shipped outside 
the regulated area. Based on this information, the shipment information 
for the 1996-97 season, and the 1996-97 season average price of $7.97 
per 25 pound equivalent carton, the majority of handlers would be 
classified as small entities as defined by the SBA. The majority of 
producers of Florida tomatoes also may be classified as small entities. 
Moreover, the Department believes that most importers may be classified 
as small entities.
    Under Sec. 966.52 of the Florida tomato marketing order, the 
Committee, among other things, has authority to increase the minimum 
grade requirements for tomatoes grown in the defined production area 
and handled under the order. This proposed rule would increase the 
minimum grade from U.S. No. 3 to U.S. No. 2. As provided under section 
8e of the Agricultural Marketing Agreement Act of 1937, the proposed 
grade increase would apply to imported tomatoes.
    The Committee recommended the grade increase to improve the 
marketing of Florida tomatoes and follow the recent industry trend of 
shipping higher grade tomatoes. This trend is in response to a strong 
consumer demand for such tomatoes. The Committee noted that a tomato 
can be unattractive and still meet the requirements of the U.S. No. 3 
grade, and that this can have a negative impact on the market for 
higher quality tomatoes.
    According to the Committee, when supplies are not short or crop 
quality is not lowered due to adverse weather conditions, U.S. No. 3 
grade tomatoes comprise a small share of total shipments. During the 
last three shipping seasons, the quantity of U.S. No. 3 grade shipped 
as a percentage of total shipments ranged from a low of 4.4 percent to 
a high of 7.6 percent. Thus, the increase in the minimum grade 
requirements is not expected to significantly impact the total number 
of Florida shipments. It is, however, expected to have a positive 
effect in the marketplace by providing a strong price base for the 
industry. As mentioned earlier, the Committee believes that U.S. No. 
3's have a price depressing effect on higher grade shipments.
    According to the Committee, during the 1996-1997 season, about 47.9 
million 25 pound equivalents were shipped from Florida. Of that amount, 
only 4.9 percent were U.S. No. 3 grade. The value of all sales during 
that season totaled about $381.4. The value of the U.S. No. 3 grade 
tomatoes totaled about $16.6 million, or about 4.4 percent of total 
sales during that season. In 1995-96, the total of all tomatoes shipped 
was 47.3 million 25 pound equivalents. The U.S. No. 3 grade portion was 
7.9 percent. That season, the value of all sales totaled about $369.7 
million, and the U.S. No. 3's comprised 7.6 percent of the total value. 
The percentages for the 1994-95 season were similar with U.S. No. 3's 
making up about 6.8 percent of the total shipments, and the sales value 
of the U.S. No. 3 grade making up about 6.1 percent of the total value. 
That season, total industry shipments totaled about 55.5 million 25 
pound equivalents, and the total value was about $388.3 million.
    The Committee also noted that a recent voluntary elimination of 
U.S. No. 3 grade by the industry had been successful in strengthening 
the market and in supporting grower returns. This proposal is expected 
to continue those successes. Without an increase in grade requirements, 
the Committee believes that an erosion of market confidence and 
producer returns could occur.
    The raising of the minimum grade from U.S. No. 3 to U.S. No. 2 is 
expected to impact all handlers uniformly, whether small or large, 
because all handlers, regardless of size, currently pack about the same 
percentage of U.S. No. 3 grade tomatoes. The benefits of the higher 
prices resulting from eliminating the U.S. No. 3's will be distributed 
evenly among all handlers, and are expected to be greater than the 
minimal costs expected to be incurred.
    Direct costs to the industry associated with the minimum grade 
requirement increase would include sorting and packing line adjustments 
to operate under the new requirements. These costs are expected to be 
minimal relative to the benefits expected. Other costs would include 
possible losses from tomatoes not meeting the U.S. No. 2 grade 
requirements. These losses also are expected to be minimal when 
compared to marketplace benefits expected, and the fact that tomatoes 
lower in quality than U.S. No. 2 could continue to be shipped within 
the regulated area, as defined in the marketing order, or shipped for 
processing.
    This proposal is expected to similarly impact importers of tomatoes 
as far as the grade increase is concerned. That is, tomatoes lower in 
grade than U.S. No. 2 could be marketed outside the United States. 
Additionally, the marketplace price and quality benefits expected for 
Florida growers and handlers as a result of this proposal would also 
benefit exporters and importers of tomatoes. Consumers would also 
benefit as a result of the higher quality product available in the 
marketplace. As mentioned earlier, the benefits of this rule are not 
expected to be disproportionately greater or lesser for small entities 
than for large entities.
    The Committee discussed alternatives to this recommendation, 
including leaving the grade requirements unchanged. However, after 
thoroughly discussing the issue the majority of the Committee members 
agreed that the grade increase was necessary to improve pack appearance 
and effectively compete in the present market. During the discussion, 
most Committee members acknowledged that U.S. No. 3 grade tomatoes 
could be important to the market in years of short supply and lower 
than normal quality resulting from adverse weather conditions. However, 
those members also pointed out that during normal seasons U.S. No. 3 
tomatoes were not popular in the marketplace, and that the lower grade 
had a price depressing effect on better grade tomatoes.

[[Page 66315]]

    Mexico is the largest exporter of tomatoes to the United States. 
Over the last 10 years, Mexican exports to the United States averaged 
32,527 containers of 25,000 pound equivalents per season (October 5-
July 5) and comprised about 99 percent of all imported tomatoes to the 
United States during that time. Total imports during that period 
averaged 32,752 containers of 25,000 pound equivalents (October 5-July 
5). Some of the imports from Mexico may have been transhipped to 
Canada. Small quantities of tomatoes are imported from Caribbean Basin 
countries. Domestic shipments for the past 10 years averaged 108,577 
containers of 25,000 pound equivalents (October 5-July 5). Florida 
shipments comprised about 48 percent of the total shipments for the 
same period. This information is from AMS Market News Branch data that 
most closely approximates the Florida shipping season.
    The grade increase is expected to benefit the marketers of both 
Florida and imported tomatoes by providing consumers with higher 
quality tomatoes. The Department has contacted a few tomato importers 
concerning imports. The importers indicated that they would not have 
undue difficulty meeting the higher grade requirements. Also, 
Department fresh products inspectors at the Port of Nogales, Arizona, 
the port were most Mexican produced tomatoes enter the United States, 
estimated that only 2 to 3 percent of the total tomato imports from 
Mexico were U.S. No. 3 grade. The remainder were U.S. No. 2 grade and 
higher. Thus, the Department believes that the proposed increase will 
not limit the quantity of imported tomatoes or place an undue burden on 
exporters, or importers of tomatoes. The expected increase in customer 
satisfaction and more positive marketplace atmosphere resulting from 
providing the desired quality should benefit all tomato importers 
regardless of size.
    This action would not impose any additional reporting or record 
keeping requirements on either small or large handlers. As with all 
Federal marketing order programs, reports and forms are periodically 
reviewed to reduce information requirements and duplication by industry 
and public sector agencies.
    The Department has not identified any relevant Federal rules that 
duplicate, overlap or conflict with this proposed rule.
    In addition, the Committee's meeting was widely publicized 
throughout the Florida tomato industry and all interested persons were 
invited to attend the meeting and participate in Committee 
deliberations on all issues. Like all Committee meetings, the September 
5, 1997, meeting was a public meeting and all entities, both large and 
small, were able to express views on this issue. Finally, interested 
persons are invited to submit information on the regulatory and 
informational impacts of this action on small businesses.
    In accordance with section 8e of the Act, the United States Trade 
Representative has concurred with the issuance of this proposed rule.
    A 30-day comment period is provided to allow interested persons to 
respond to this proposal. Florida tomato handlers began shipping 
tomatoes in October. Thirty days is deemed appropriate because this 
rule, if adopted, needs to be in place as soon as possible to cover as 
much of the 1997-98 shipping season as feasible. In addition, handlers 
need time to adjust their sorting and packing line equipment to meet 
the higher grade requirements. Florida tomato handlers are aware of 
this issue, which has been widely discussed at various industry and 
association meetings and was recommended by a majority of the 
Committee. All comments received in a timely manner will be considered 
prior to finalization of this rule.

List of Subjects in 7 CFR Parts 966 and 980

    Marketing agreements, Reporting and recordkeeping requirements, 
Tomatoes.

    For the reasons set forth in the preamble, 7 CFR parts 966 and 980 
are proposed to be amended as follows:

PART 966--TOMATOES GROWN IN FLORIDA

PART 980--VEGETABLES; IMPORT REGULATIONS

    1. The authority citation for 7 CFR parts 966 and 980 continue to 
read as follows:

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

    2. Section 966.323 is amended by revising paragraph (a)(1) to read 
as follows:


Sec. 966.323  Handling regulation.

* * * * *
    (a) Grade, size, container, and inspection requirements--(1) Grade. 
Tomatoes shall be graded and meet the requirements specified for U.S. 
No. 1, U.S. Combination, or U.S. No. 2 of the U.S. Standards for Grades 
of Fresh Tomatoes. When not more than 15 percent of the tomatoes in any 
lot fail to meet the requirements of U.S. No. 1 grade and not more than 
one-third of this 15 percent (or 5 percent) are comprised of defects 
causing very serious damage including not more than 1 percent of 
tomatoes which are soft or affected by decay, such tomatoes may be 
shipped and designated as at least 85 percent U.S. No. 1 grade.
 * * * * *
    3. Section 980.212 is amended by revising paragraph (b)(1) to read 
as follows:


Sec. 980.212  Import regulations; tomatoes.

* * * * *
    (b) * * *
    (1) From October 10 through June 15 of each season, tomatoes 
offered for importation shall be at least 2 8/32 inches in diameter. 
Not more than 10 percent, by count, in any lot may be smaller than the 
minimum specified diameter. All lots of tomatoes shall be at least U.S. 
No. 2 grade.
* * * * *

    Dated: December 12, 1997.
Eric M. Forman,
Acting Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 97-33004 Filed 12-17-97; 8:45 am]
BILLING CODE 3410-02-P