[Federal Register Volume 63, Number 49 (Friday, March 13, 1998)]
[Rules and Regulations]
[Pages 12396-12401]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-6618]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Parts 966 and 980

[Docket No. FV98-966-1 FR]


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

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This final rule increases the minimum grade requirements for 
Florida and imported tomatoes. The grade requirements are changed from 
U.S. No. 3 to U.S. No. 2. The change in grade requirements will 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.

EFFECTIVE DATE: March 30, 1998.

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) 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, P.O. Box 
96456, Washington, DC 20090-6456; telephone (202) 720-2491, Fax: (202) 
205-6632.

SUPPLEMENTARY INFORMATION: This final rule 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 rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule is not intended to have retroactive effect. 
This final 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 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

[[Page 12397]]

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 
regulation 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). Through February 3, 
1998, such tomatoes had to 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 were required to grade at least a U.S. No. 2, while 
tomatoes in the larger size designations were only required to grade 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 increases 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 eliminates 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 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). After evaluating all comments received, the 
Department issued a final rule on December 30, 1997, implementing the 
recommended size increase and size designation changes. That final rule 
was published on January 5, 1998, with the changes effective on 
February 4, 1998 (63 FR 139).
    The changes in that final rule require tomatoes to be at least 2\9/
32\ inches in diameter, and sized with proper equipment in one or more 
of the following ranges of diameters (63 FR 139; January 5, 1998). 
These size designations and diameter ranges are not the same as those 
specified in Sec. 51.1859 of the standards.

------------------------------------------------------------------------
                                                       Inches    Inches 
                  Size designation                     minimum   maximum
                                                      diameter  diameter
------------------------------------------------------------------------
6 x 7 (Formerly Medium).............................   2\9/32\  2\19/32\
6 x 6 (Formerly Large)..............................  2\17/32\  2\27/32\
5 x 6 (Formerly Extra Large)........................  2\25/32\  ........
------------------------------------------------------------------------

    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 will improve the marketing of Florida and foreign produced 
tomatoes, and protect the entire market from the price depressing 
effects of poorer quality tomatoes from both domestic and foreign 
supply sources. 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. This is 
expected to benefit the marketers of both Florida and imported 
tomatoes.
    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

[[Page 12398]]

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 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 
will 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 action increases the minimum 
grade for domestic tomato shipments, this increase will apply 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.
    Beginning February 4, 1998, and until the effective date of this 
final rule import requirements specify that all lots with a minimum 
diameter of 2\19/32\ 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\19/32\ inches 
in diameter is required to grade at least U.S. No. 2. This final rule 
changes these requirements 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 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 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. Accordingly, the 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. 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 final rule will have small entity orientation, and will 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 final 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 recommend changes in 
the minimum grade requirements for tomatoes grown in the defined 
production area and handled under the order. This final rule increases 
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 
grade increase must 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 U.S. No. 
3 grade tomato 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 1996-97 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 million. 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

[[Page 12399]]

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 action 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 will 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 will include 
possible losses because handlers will no longer be able to ship U.S. 
No. 3 grade tomatoes outside of the regulated area, as defined in the 
marketing order. However, these losses also are expected to be minimal 
because tomatoes lower in quality than U.S. No. 2 could continue to be 
shipped within the regulated area, or shipped for processing.
    Foreign tomato shippers also have alternative markets for lower 
grade tomatoes which should lessen any losses as a result of this 
action. That is, foreign tomatoes lower in grade than U.S. No. 2 could 
be marketed in locations other than the United States.
    Additionally, the marketplace price and quality benefits expected 
for Florida growers and handlers as a result of this action will also 
benefit exporters and importers of tomatoes. Consumers will 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.
    Mexico is the largest exporter of tomatoes to the United States. 
Over the last 10 years, Mexican exports to the United States averaged 
32,527,000 containers of 25 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 32,752,000 containers of 25 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 
108,577,000 containers of 25 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 contacted a few tomato importers 
concerning imports. The importers indicated that they will not have 
undue difficulty meeting the higher grade requirements. Also, 
Department fresh products inspectors at the Port of Nogales, Arizona, 
the port where 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 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 will 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 were invited to submit information on the regulatory and 
informational impacts of this action on small businesses. One comment 
on the regulatory impacts of this action was received from a handler of 
Florida tomatoes and is discussed below.
    The proposed rule regarding this action was published in the 
Federal Register on December 18, 1997 (62 FR 66312). Interested persons 
were invited to submit written comments until January 20, 1998. Copies 
of the proposed rule were faxed and mailed to all known interested 
persons. Also, the rule was made available through the Internet by the 
Office of the Federal Register. A total of 11 comments were received.
    Seven favorable comments were received. One comment was received 
from a voluntary agricultural cooperative association of Florida tomato 
producers representing about 90 percent of the total volume of tomatoes 
produced under the marketing order each year. Another comment was 
received from a cooperative agricultural association composed of first 
handlers of fresh Florida tomatoes grown in Central and South Florida. 
An association representing the interests of fruit and vegetable 
growers throughout Florida also supported the proposed grade increase. 
A comment was received from the Commissioner of the Florida Department 
of Agriculture and Consumer Services supporting the

[[Page 12400]]

proposed grade increase. These commenters supported the belief that 
increasing the minimum grade requirements from U.S. No. 3 to U.S. No. 2 
will help increase customer satisfaction, improve demand, and improve 
the overall quality of tomatoes in the market.
    The Committee also submitted a favorable comment. In its comment, 
the Committee mentioned that the statement in the proposed rule at 
column one on page 66313 of the Federal Register (62 FR 66313; December 
18, 1997) stating that ``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.'' misleads and confuses the reader. The Committee asserted 
that the proposed rule is not intended to limit and, in fact, would not 
protect the Florida tomato industry from foreign competition. The 
proposal is designed to protect the entire market from the price 
depressing effect of poorer quality tomatoes from both domestic and 
foreign supply sources and would provide a better product for the 
consumer. Accordingly, this statement has been clarified in the final 
rule. The Committee also suggested that the use of 25 pound and 25,000 
pound equivalents in different parts of the proposed rule could confuse 
the reader, and suggested that only 25 pound equivalents be used 
because this is the common standard used by the Florida industry. 
Appropriate modifications have been made in response to these suggested 
changes.
    Another favorable comment was received from a national 
confederation of Mexican vegetable growers indicating that the increase 
in requirements for minimum grade to U.S. No. 2 will help improve the 
overall quality of tomatoes in the market and will contribute to better 
marketing and increase the growers' income.
    A final favorable comment was received from a trade association 
representing over 100 distributors, shippers, brokers, and affiliated 
companies who are directly involved with the receipt, handling, and 
sale of perishable agricultural commodities grown in the Republic of 
Mexico. This comment supported the proposal to increase the minimum 
grade requirement to U.S. No. 2, but expressed the belief that the 
proposed change does not tighten quality restrictions enough. The trade 
association requested the Department to establish a minimum grade of 85 
percent U.S. No. 1.
    The trade association stated that it strongly agrees that the 
presence of U.S. No. 3 tomatoes in the marketplace hurts grower 
returns. The comment pointed out that tomatoes grading U.S. No. 2 are 
of poor cosmetic quality and this discourages many shoppers from buying 
tomatoes. The comment noted that with the rapid expansion of the 
availability and affordability of greenhouse-grown tomatoes, field 
grown tomatoes are now in direct competition for shelf-space and 
consumer demand with greenhouse tomatoes. The comment stated that if 
the intent of the proposed rule is to have a positive effect in the 
marketplace by providing a strong price base for the industry, the 
minimum grade requirement should be tightened to 85 percent U.S. No. 1 
or better.
    It would not be appropriate to act upon this recommended change at 
this time. The recommended change is more restrictive than proposed. 
Because of this, AMS believes that further review and analysis is 
needed and that notice and comment rulemaking should be used before 
implementation. Also, this recommended change has been sent to the 
Committee for future consideration.
    Four opposition comments were received. These comments were from 
handlers of Florida tomatoes, and an import broker. The Florida 
handlers stated that this past fall, as well as several occasions last 
season, overall tomato demand and price allowed them to pack and sell 
all of their U.S. No. 3 grade tomatoes above the minimum price in 
effect for Mexican grown tomatoes through the settlement of a trade 
action brought against Mexico. One of these handlers indicated that had 
the grade increase been implemented earlier, it would have caused an 
economic loss to farms in Florida, as they were able to sell all of the 
U.S. No. 3 tomatoes they packed. Another handler stated that the 
elimination of U.S. No. 3 grade tomatoes would reduce the overall grade 
due to commingling of the product, and that the proposal was a step 
backward in competing with their international competitors. All three 
of the Florida handlers pointed out that there is currently a mechanism 
in place under a tomato growers exchange that would remove U.S. No. 3 
grade tomatoes from the market under a certain pricing structure. 
However, not all Florida production would be covered by this mechanism 
at all times. The import broker indicated that there was a market for 
lower priced imported U.S. No. 3 grade tomatoes.
    As indicated earlier, in making its recommendation the Committee 
discussed leaving the grade requirements unchanged. However, after 
discussing the merits of this alternative, the majority of the 
Committee members agreed that the grade increase was necessary to 
improve pack appearance and effectively compete in a market whose 
buyers are requesting higher quality product. These members 
acknowledged that U.S. No. 3 tomatoes could be important to the market 
in years of short supply and lower than normal quality resulting from 
adverse weather conditions. They 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.
    Opposition commenters may have been able to market their U.S. No. 3 
grade tomatoes because a small market exists for such tomatoes. 
However, the Committee made its recommendation because it believes that 
higher quality and the expansion of consumer demand are keys to 
improving the tomato industry in the long term. When short term quality 
problems occur due to adverse weather or other causes and sufficient 
supplies of U.S. No. 2 or better grade tomatoes are not available to 
meet market needs, appropriate action could be taken to address such 
problems. The Committee could meet and request the Department to 
implement emergency rulemaking which would allow handlers to ship 
tomatoes lower than U.S. No. 2 grade.
    The proponents of the change on the Committee acknowledged that 
some of the tomatoes currently being sold at the U.S. No. 3 grade level 
could be reworked to make U.S. No. 2 grade. However, they indicated 
that they were interested in eliminating the true U.S. No. 3 grade 
which has depressed the market for better quality tomatoes in normal 
seasons.
    Most of the commenters requested that the proposed grade increase 
be implemented as soon as possible. The need for prompt implementation 
is appropriate because Florida handlers are more than half-way through 
the 1997-98 shipping season, and they want to accrue the benefits 
anticipated. Moreover, the comment from the trade association 
representing importers requested prompt action stating that there is 
little modification that must be made to existing packing equipment 
that would result in unusual additional expenditures for importers or 
packers. However, sufficient time must be provided for the Florida and 
import tomato industries to comply with the new grade requirement and 
to allow tomatoes already picked and packed, and certified as U.S. No. 
3 grade to be shipped. Further, handlers and

[[Page 12401]]

exporters need to adjust their sorting and packing lines to meet the 
higher grade requirement. Therefore, the Department has decided that 
the effective date of this action should be March 30, 1998. This period 
of time is reasonable and consistent with the provisions of the Act, 
and will allow both the domestic and imported tomato industries 
sufficient time to adjust to the new grade requirement and to ship 
commodity that is already picked and packed.
    In view of all the foregoing, the Department has concluded that the 
increase in the minimum grade requirement from U.S. No. 3 to U.S. No. 2 
will advance the interests of the Florida and foreign tomato industries 
and should be implemented.
    In accordance with section 8e of the Act, the United States Trade 
Representative has concurred with the issuance of this final rule.
    After consideration of all relevant matter presented, including the 
information and recommendation submitted by the Committee and other 
available information, and the comments received, it is hereby found 
that this rule, as hereinafter set forth, will tend to effectuate the 
declared policy of the Act.
    Pursuant to 5 U.S.C. 553, it is also found that good cause exists 
for not postponing the effective date of this action until 30 days 
after publication in the Federal Register because: (1) Florida tomato 
handlers are aware of this action, which was discussed at various 
industry and association meetings and was recommended by a majority of 
the Committee; (2) the Committee meeting was a public meeting and all 
interested parties had an opportunity to provide input; (3) the grade 
increase needs to be in place as soon as possible to cover the balance 
of the 1997-98 shipping season which ends in June; and (4) an adequate 
amount of time has been provided for handlers and importers to adjust 
their packing and sorting lines to meet the higher grade requirement.

List of Subjects

7 CFR Part 966

    Marketing agreements, Reporting and recordkeeping requirements, 
Tomatoes.

7 CFR Part 980

    Food grades and standards, Imports, Marketing agreements, Onions, 
Potatoes, Tomatoes.

    For the reasons set forth in the preamble, 7 CFR parts 966 and 980 
are amended as follows:
    1. The authority citation for 7 CFR parts 966 and 980 continues to 
read as follows:

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

PART 966--TOMATOES GROWN IN FLORIDA

    2. In Sec. 966.323, paragraph(a)(1) is revised 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.

PART 980--VEGETABLES; IMPORT REGULATIONS

    3. In Sec. 980.212, paragraph (b)(1) is revised 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 \9/32\ 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: March 9, 1998.
Robert C. Keeney,
Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 98-6618 Filed 3-12-98; 8:45 am]
BILLING CODE 3410-02-P