[Federal Register Volume 63, Number 19 (Thursday, January 29, 1998)]
[Rules and Regulations]
[Pages 4368-4372]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-2122]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 989

[Docket No. FV97-989-3 FIR]


Raisins Produced From Grapes Grown in California; Modifications 
to the Raisin Diversion Program

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: The Department of Agriculture (Department) is adopting, as a 
final rule, without change, the provisions of an interim final rule 
modifying the raisin diversion program (RDP) currently authorized under 
the Federal marketing order for California raisins. The marketing order 
regulates the handling of raisins produced from grapes grown in 
California and is administered locally by the Raisin Administrative 
Committee (Committee). Under the RDP, producers are issued certificates 
representing reserve raisins for voluntarily reducing their raisin 
production in order to bring raisin supplies more closely in line with 
market needs. Producers may then sell these certificates to handlers, 
who, in turn, can redeem the certificates for reserve raisins. This 
rule continues in effect various modifications to the diversion program 
to improve compliance and bring the program in line with current 
industry practices. Improving compliance with the RDP helps ensure 
equity among all producers who participate in the program, and helps 
maintain the integrity of the RDP.

EFFECTIVE DATE: March 2, 1998.

FOR FURTHER INFORMATION CONTACT: Maureen T. Pello, Marketing 
Specialist, California Marketing Field Office, Marketing Order 
Administration Branch, F&V, AMS, USDA, 2202 Monterey Street, suite 
102B, Fresno, California 93721; telephone: (209) 487-5901, Fax: (209) 
487-5906; or George Kelhart, Technical Advisor, Marketing Order 
Administration Branch, Fruit and Vegetable Programs, AMS, USDA, room 
2525-S, PO Box 96456, Washington, DC 20090-6456; telephone: (202) 720-
2491, Fax: (202) 205-6632. 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, PO Box 96456, Washington, DC 20090-6456; telephone: (202) 
720-2491, Fax: (202) 205-6632.

SUPPLEMENTARY INFORMATION: This rule is issued under Marketing 
Agreement and Order No. 989, both as amended (7 CFR part 989), 
regulating the handling of raisins produced from grapes grown in 
California, 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 is issuing this rule in conformance with Executive 
Order 12866.
    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule is not intended to have retroactive effect. 
This rule 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

[[Page 4369]]

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 date of the entry of the ruling.
    This rule continues in effect modifications to the raisin diversion 
program currently authorized under the Federal marketing order for 
California raisins. Under the RDP, producers are issued certificates 
representing reserve raisins for voluntarily reducing their raisin 
production in order to bring raisin supplies more closely in line with 
market needs. Producers may then sell these certificates to handlers, 
who, in turn, can redeem the certificates for reserve raisins. This 
rule makes various modifications to the RDP to improve compliance and 
bring the RDP in line with current industry practices. Improving 
compliance with the RDP helps ensure equity among all producers who 
participate in the program, and helps maintain the integrity of the 
RDP.
    The Federal marketing order for California raisins provides 
authority for volume regulation designed to promote orderly marketing 
conditions, stabilize prices and supplies, and improve producer 
returns. When volume regulation is in effect, a certain percentage of 
the raisin crop may be sold by handlers to any market (free tonnage) 
while the remaining percentage of the crop must be held by handlers in 
a reserve pool (or reserve) for the account of the Committee. Reserve 
pool raisins are disposed through certain programs authorized under the 
order. For example, reserve raisins may be sold by the Committee to 
handlers for sale to any market; exported to authorized countries; 
carried over as a hedge against a short crop the following year; or may 
be disposed of in other outlets not competitive with those for free 
tonnage raisins, such as government purchase, distilleries, or animal 
feed. The RDP is another program concerning reserve pool raisins 
authorized under the order, and may be used as a means for controlling 
overproduction. The RDP is described in the following paragraphs.
    Pursuant to Sec. 989.56 of the order, the Committee meets by 
November 30 of each crop year to review raisin data, including 
information on production, supplies, market demand, and inventories. If 
the Committee determines that the available supply of raisins, 
including those in the reserve pool, exceeds projected market needs, it 
can decide to implement a diversion program, and announce the amount of 
tonnage eligible for diversion during the subsequent crop year. 
Producers who wish to participate in the RDP must submit an application 
to the Committee. Such producers then curtail their production by vine 
removal or some other means established by the Committee and receive a 
certificate from the Committee which represents the quantity of raisins 
diverted. Producers sell these certificates to handlers who pay 
producers for the free tonnage applicable to the diversion certificate 
minus the established harvest cost for the diverted tonnage. Handlers 
redeem the certificates by presenting them to the Committee and paying 
an amount equal to the established harvest cost plus payment for 
receiving, storing, fumigating, handling, and inspecting the tonnage 
represented on the certificate. The Committee then gives the handler 
raisins from the reserve pool in an amount equal to the tonnage 
represented by the diversion certificate.
    Section 989.156 of the order's administrative rules and regulations 
prescribes additional procedures for the RDP. At a meeting on August 
14, 1997, the Committee unanimously recommended that various changes be 
made to these additional RDP procedures to improve compliance and bring 
the RDP in line with current industry practices.
    The first change to the RDP recommended by the Committee concerns 
references throughout Sec. 989.156 to partial production units. Such 
references are contained in paragraphs (d), (h)(2), (h)(3), (i), 
(s)(1), and (s)(3) of Sec. 989.156. As defined in Sec. 989.156(o), a 
production unit is a clearly defined geographic area with permanent 
boundaries (either natural or man-made). For example, a production unit 
could be 30 acres of raisins surrounded by a permanent road on two 
sides and permanent fencing on the other two sides.
    Partial production units have been allowed under the RDP in past 
years. For instance, in the 30-acre production unit example, three rows 
of vines from that unit could qualify as a partial production unit 
under the RDP. Under Sec. 989.156(s)(3) of the order's administrative 
rules and regulations, the determination of the tonnage allowed for 
acreage removed for such a partial unit would be computed by 
multiplying the previous year's tonnage produced and verified on the 
entire unit by the ratio of the acreage removed divided by the acreage 
contained in the total production unit. However, the Committee is 
concerned that some producers may be removing weak vines in a 
production unit and getting credit under the RDP for an inflated amount 
of tonnage. In the 30-acre example, a producer could have an average 
past production of 2.2 tons of raisins on the entire unit, remove three 
rows of low-producing vines that averaged only 1.5 tons of raisins per 
acre, and get credit in the RDP for 2.2 tons of raisins per acre. 
Although Sec. 989.56(a) of the order specifies a cap of 2.75 tons of 
raisins per acre for an approved production unit (which can be changed 
through informal rulemaking), the Committee is still concerned that 
actual production on a partial unit could be inflated.
    Thus, the Committee recommended that partial production units no 
longer be accepted as part of the RDP. This change will help ensure 
that producers who participate in an RDP do not receive credit for an 
inflated amount of tonnage and gain a financial advantage over other 
producers. This change will help ensure equity among all producers who 
participate in the program, and help maintain the integrity of the RDP.
    In addition, the Committee believes that this change will improve 
the accuracy of the amount of tonnage accepted into the RDP. When an 
RDP is established, a quantity of raisins equivalent to the amount 
diverted would be made available in the subsequent crop year from the 
prior year's reserve. This RDP diverted tonnage from the reserve is 
included in the Committee's marketing policy computations for that year 
and subject to free and reserve percentages. Thus, it is important for 
the Committee to have as accurate a figure as possible for RDP tonnage. 
The Committee believes that not allowing partial production units into 
the RDP will improve the accuracy of this figure. Appropriate changes 
have been made to the applicable paragraphs to implement this 
recommended change.
    According to Committee staff, most of the RDP applications over the 
years have been for full production units. The partial unit authority 
has typically been used by a producer desiring to receive credit under 
the RDP for a few weak rows of vines, which usually amounts to less 
than an acre. Thus, this change is not expected to adversely impact RDP 
participants.
    The second change recommended by the Committee concerns paragraph 
(g) of Sec. 989.156 regarding procedures to verify whether producers 
under the RDP are curtailing their production. This section

[[Page 4370]]

currently specifies that committees of industry persons may be 
established to serve as agents of the Committee in assuring producer 
compliance with the RDP. These groups of industry persons may be 
furnished approved RDP applications and are to advise the Committee on 
the progress of the diversion within a particular district.
    Such industry committees have been utilized during only one season 
since the inception of the RDP in 1985. Committee staff has assumed the 
functions of monitoring producer diversion and assuring program 
compliance. Thus, the Committee recommended that reference to these RDP 
industry committees be removed from Sec. 989.156(g) of the order's 
administrative rules and regulations. This change brings RDP procedures 
in line with current industry practices.
    A third change to the RDP recommended by the Committee concerns 
paragraph (h) of Sec. 989.156 regarding compliance. Paragraph (h)(1) of 
Sec. 989.156 currently specifies that an approved applicant must remove 
or spur-prune vines to preclude grapes from being produced and 
harvested on the production unit involved in the program: Provided, 
That vine removal may be the only acceptable means of diversion in some 
seasons as determined by the Committee. If the Committee 
representatives or agents determine that there is an average of more 
than four bunches per vine remaining on a properly spur-pruned 
production unit, the producer must be notified in writing and given 2 
weeks to remove such bunches.
    The Committee recommended that this section be modified to remove 
the impression that spur-pruning is the only acceptable method of 
diverting the crop, other than removing the vines altogether. Other 
methods such as spraying with certain substances should also be 
allowed. Producers should be allowed to remove and destroy the bunches 
of grapes by whatever method they choose in order to receive a 
diversion certificate. The Committee also recommended that the word 
``acceptable'' in the first sentence in Sec. 989.156(h)(1) be removed 
because it is not necessary. In addition, the Committee recommended 
that the section be modified to strengthen the requirement regarding 
producer notification of noncompliance with the RDP. Specifically, 
Committee staff must notify producers ``immediately by certified 
mail,'' in writing, and give producers 2 weeks to remove extra bunches. 
The Committee believes that this added language will strengthen 
producer compliance with the RDP.
    The Committee also recommended that paragraph (h)(3) of 
Sec. 989.156 concerning failure to divert be revised to specify that 
any producer who has more than one production unit and fails to divert 
on an approved production unit may be denied the opportunity to 
participate in the next RDP on all of that producer's production units. 
The current provisions specify that the producer should be denied 
participation, and not the specific production unit. However, the 
provisions have been interpreted so that producers only have been 
denied the opportunity to participate in the next RDP on the unit that 
was not properly diverted, not all of that producer's units. The 
clarification will eliminate the confusion and is expected to provide 
producers more incentive to remain in compliance with the RDP because 
the clarified provisions specify that the failure to comply could mean 
denial to participate on any of that producer's production units in the 
next RDP. Thus, this provision is expected to strengthen producer 
compliance with the RDP which will help ensure that the integrity of 
the program is maintained.
    The fourth change to the RDP recommended by the Committee concerns 
paragraph (o) of Sec. 989.156. This section defines a production unit. 
As previously mentioned, a production unit is a clearly defined 
geographic area with permanent boundaries (either natural or man-made). 
Under the RDP, producers must be able to document to the Committee the 
previous year's production data for that specific area by means of 
sales receipts or other delivery or transfer documents which indicate 
the creditable fruit weight delivered to handlers from that specific 
area. Additional criteria are specified for new production units and 
existing units that may have been transferred to another producer.
    The Committee believes that additional information may be necessary 
in some cases to verify the appropriate production figure to apply to a 
production unit. There have been concerns that some producers have 
inflated their production units under past RDP's by reporting 
statistics showing higher than actual raisin production. For example, 
since diversion certificate tonnage is based on the tons of raisins 
delivered per acre during the prior year, producers could inflate their 
tonnage by acquiring raisins from another source and adding them to 
deliveries from their production units, thereby receiving credit for a 
greater amount of raisins than actually produced on the acreage. By 
inflating yield figures, producers could receive diversion certificates 
equal to more raisins from the reserve pool than they actually would 
have produced from those production units.
    Thus, the Committee recommended that authority be added to 
paragraph (o) of Sec. 989.156 authorizing Committee staff to request 
additional documentation to substantiate the tonnage of raisins 
produced on any known production unit. This documentation may include 
information such as tray count, employee payroll records, prior years' 
production for all production units, and insurance records. This 
information is maintained by producers in the normal course of 
business. Such information for approved production units, in addition 
to producers' other known production units, will give Committee staff 
another tool to ensure producer compliance with the RDP so that the 
integrity of the program is maintained.
    This rule also continues to make minor changes to remove obsolete 
language in paragraph (s)(1) in Sec. 989.156. That paragraph makes two 
references to provisions particular to the 1985 calendar year which 
marked the inception of the RDP. Certain parameters regarding dates 
particular to 1985 were incorporated into the order's administrative 
rules and regulations that are no longer necessary. Thus, those two 
references have been removed.
    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. Accordingly, AMS has 
prepared this final 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.
    There are approximately 20 handlers of California raisins who are 
subject to regulation under the order and approximately 4,500 raisin 
producers in the regulated area. Small agricultural service firms have 
been defined by the Small Business Administration (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. No more than 8 handlers, and a majority of 
producers, of California raisins may be classified as small entities. 
Twelve of the 20 handlers

[[Page 4371]]

subject to regulation have annual sales estimated to be at least 
$5,000,000, and the remaining 8 handlers have sales less than 
$5,000,000, excluding receipts from any other sources.
    This rule continues to modify the RDP currently authorized under 
Sec. 989.56 of the Federal marketing order for California raisins. 
Under the RDP, the Committee issues diversion certificates to producers 
who have removed grapes in accordance with Sec. 989.156 to reduce 
raisin production and bring raisin supplies more closely in line with 
market needs. Such certificates represent an amount of reserve tonnage 
raisins equal to the amount of raisins diverted. Diversion certificates 
may be submitted by producers to handlers. Handlers may then redeem 
such certificates for reserve pool raisins from the Committee. This 
rule continues to make various modifications to Sec. 989.156 of the 
order's administrative rules and regulations concerning the RDP. The 
changes include: Removing authority for the diversion of partial 
production units in an RDP; removing authority for committees of 
industry persons to assist the Committee in compliance efforts; 
clarifying that spur-pruning is not the only acceptable method of 
aborting a crop; and making other changes to strengthen compliance with 
the RDP.
    Regarding the impact of this rule on affected entities, the changes 
are designed to either improve compliance with the RDP, or are 
administrative in nature to bring the RDP in line with current industry 
practices. None of the changes concerning compliance are expected to 
increase the cost of administering the RDP. Also, because most of the 
producer applications over the years have been for full production 
units, rather than for partial production units, discontinuance of 
partial production units as part of the RDP is not expected to increase 
appreciably costs to producers. Moreover, the addition of other methods 
of diversion, like chemical application, should have a positive affect. 
The changes are intended to ensure equity among all those participating 
in the RDP and to maintain the integrity of the program. Thus, the 
changes are expected to be equally beneficial to all affected entities 
who are adhering to the requirements of the program, regardless of 
size.
    Other alternatives to the RDP procedures were considered by the 
raisin industry prior to the Committee's recommendation. The Committee 
has an appointed Amendment Subcommittee and Working Group which held 
several public meetings throughout the year to consider changes to the 
RDP and other order provisions. One alternative considered was to leave 
the RDP procedures unchanged. However, the Committee concluded that the 
changes established by this rule were necessary to improve the RDP and 
better accomplish program objectives. The Working Group also considered 
adding to the rules and regulations a scale that would correlate 
production ranges with an appropriate production cap for each range, to 
help ensure that participating producers did not receive credit for an 
inflated amount of tonnage and gain a financial advantage over other 
participants. Another related option concerned modifying the rules and 
regulations to specify that the production cap should be based on a 5-
year rolling average of production per acre with a maximum of 2.75 tons 
per acre. However, Committee staff indicated that data concerning total 
industry production on a per acre basis was not available, and the 
Working Group decided not to recommend these changes.
    The Working Group also considered adding guidelines to the RDP 
procedures for hardship cases where producers have been denied 
participation in an RDP. For example, there have been cases in past 
seasons where producers have submitted an application to participate in 
an RDP, curtailed production, and then been denied a certificate from 
Committee staff because such producers did not satisfy the terms of the 
RDP (i.e., could not document their previous year's production). Under 
the current rules and regulations, such producers have the option of 
appealing such a decision to the Committee and ultimately the 
Department. After some deliberation, the Working Group decided not to 
change this appeal process by trying to specify various ``what if'' 
scenarios in the rules and regulations. The group believed it was best 
to address each such situation on a case-by-case basis. Ultimately, the 
full Committee concluded that the changes to the RDP previously 
discussed were appropriate at this time.
    Regarding any additional reporting or recordkeeping requirements, 
this rule continues to allow Committee staff to request additional 
information from producers participating in an RDP to verify 
production. However, such information will only be requested on a case-
by-case basis for use as a compliance tool when the information 
submitted on a producer's application concerning a unit's production is 
significantly greater than past production on the unit, production on 
neighboring units, or the industry norm, or when Committee staff is 
unable to verify production based on submitted documentation. For 
instance, if a producer had multiple production units of similar size, 
and the production on the unit to be diverted was significantly 
different than the others, the Committee wants its staff to be 
authorized to request additional information such as that mentioned to 
verify the accuracy of the producer application. Additional information 
may also be needed in cases where the production on a unit to be 
diverted is significantly different from that of neighboring production 
units. As a third example, if information obtained from weigh tags and 
other delivery documents provided to the Committee did not correspond 
to the production figure indicated on the producer's application, 
Committee staff may request additional information.
    This rule requires no new forms and the number of producers for 
which additional information may be requested is expected to be small. 
According to the Committee staff, only about 5-10 percent of producer 
applications raise questions for which additional information may be 
needed. During the industry's diversion program in 1996 which provided 
for only vine removal (as opposed to allowing spur pruning), 66 
producers participated. In 1995's program, which provided for spur 
pruning and vine removal, 778 producers participated.
    Using the 778 participation figure and the 10 percent figure for 
questionable applications, a total of 78 producer applicants might need 
to provide additional information. The Committee staff estimated that 
it will take each of these participants about 10 minutes to compile, 
package, and submit this information. Thus, the time taken by the 78 
participants as a group will total about 13 hours, and this time is 
currently approved under OMB No. 0581-0178 by the Office of Management 
and Budget (OMB) in accordance with the Paperwork Reduction Act of 1995 
(44 U.S.C. Chapter 35).
    The industry is currently implementing a diversion program for 
Zante Currant raisins for the 1997-98 season. The Department is 
monitoring producer reporting under the current diversion program.
    This rule does not impose a reporting burden above that currently 
approved for small and large raisin producers. As with all Federal 
marketing order programs, reports and forms are periodically reviewed 
to reduce information requirements and duplication by industry and 
public sectors. In addition, the Department has not identified any 
relevant Federal rules

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that duplicate, overlap, or conflict with this rule.
    Further, the Committee's meeting was widely publicized throughout 
the raisin industry and all interested persons were invited to attend 
the meeting and participate in Committee deliberations. Like all 
Committee meetings, the August 14, 1997, meeting was a public meeting 
and all entities, both large and small, were able to express their 
views on this issue.
    Also, the Committee has a number of appointed subcommittees to 
review certain issues and make recommendations to the Committee. As 
previously mentioned, the Committee's Amendment Working Group met 
throughout the year at public meetings to discuss various changes to 
the raisin order, including the recommended changes to the RDP. The 
Working Group made its recommendations concerning revisions to the RDP 
to the Amendment Subcommittee on August 7, 1997. The Amendment 
Subcommittee in turn made its recommendations to the full Committee on 
August 14, 1997. All of these meetings were public meetings and both 
large and small entities were able to participate and express their 
views.
    As stated earlier and in accordance with the Paperwork Reduction 
Act of 1995 (44 U.S.C. Chapter 35), the information collection 
requirements contained in this rule have been previously approved by 
the Office of Management and Budget (OMB) and have been assigned OMB 
No. 0581-0178.
    An interim final rule concerning this action was published in the 
Federal Register on November 13, 1997. Copies of the rule were mailed 
by the Committee's staff to all raisin handlers. In addition, the rule 
was made available through the Internet by the Office of the Federal 
Register. That rule provided for a 60-day comment period which ended on 
January 12, 1998. Interested persons were also invited to submit 
information on the information and regulatory impact of the rule. No 
comments were received.
    After consideration of all relevant material presented, including 
the Committee's recommendation, and other information, it is found that 
finalizing this interim final rule, as published in the Federal 
Register (62 FR 60764; November 13, 1997), will tend to effectuate the 
declared policy of the Act.

List of Subjects in 7 CFR Part 989

    Grapes, Marketing agreements, Raisins, Reporting and recordkeeping 
requirements.

PART 989--RAISINS PRODUCED FROM GRAPES GROWN IN CALIFORNIA

    Accordingly, the interim final rule amending 7 CFR part 989 which 
was published at 62 FR 60764 on November 13, 1997, is adopted as a 
final rule without change.

    Dated: January 23, 1998.
Robert C. Keeney,
Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 98-2122 Filed 1-28-98; 8:45 am]
BILLING CODE 3410-02-P