[Federal Register Volume 63, Number 108 (Friday, June 5, 1998)]
[Proposed Rules]
[Pages 30655-30658]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-15001]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 920

[Docket No. FV98-920-2 PR]


Kiwifruit Grown in California; Temporary Suspension of an 
Inspection Requirement

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This rule invites comments on the temporary suspension of an 
inspection requirement for kiwifruit covered under the California 
kiwifruit marketing order. The marketing order regulates the handling 
of kiwifruit grown in California, and is administered locally by the 
Kiwifruit Administrative Committee (Committee). Currently, 
certification of any kiwifruit which is inspected and certified as 
meeting grade, size, quality, or maturity requirements in effect under 
the marketing order is valid until December 31 of the current fiscal 
year or 21 days from the date of inspection, whichever is later. Any 
kiwifruit not shipped before the end of this certification period must 
be reinspected and recertified before shipping. This rule would 
temporarily suspend this provision for the 1998-99 fiscal year and 
would enable handlers to ship kiwifruit without the necessity for 
reinspection and recertification and the costs associated with such 
requirements. This temporary

[[Page 30656]]

suspension was unanimously recommended by the Committee and is expected 
to reduce handler costs and to increase grower returns, while 
continuing to provide consumers with the same high quality fruit as is 
available under current requirements.

DATES: Comments must be received by July 6, 1998.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this proposal. Comments must be sent to the Docket Clerk, 
Fruit and Vegetable Programs, AMS, USDA, Room 2525-S, P.O. Box 96456, 
Washington, DC 20090-6456; Fax: (202) 205-6632. All comments should 
reference the docket number and the date and page number of this issue 
of the Federal Register and will be available for public inspection in 
the Office of the Docket Clerk during regular business hours.

FOR FURTHER INFORMATION CONTACT: Rose Aguayo, Marketing Specialist, 
California Marketing Field Office, Fruit and Vegetable Programs, 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, 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 proposal is issued under Marketing 
Order No. 920 (7 CFR part 920), as amended, regulating the handling of 
kiwifruit grown in California, hereinafter referred to as the 
``order.'' The order is 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.
    This proposal invites comments on the temporary suspension of an 
inspection requirement for kiwifruit covered under the California 
kiwifruit marketing order. This rule would temporarily suspend the 
current limitation of the inspection certificate validation period and 
would enable handlers to ship kiwifruit without the necessity for 
reinspection and recertification. The rule would be in effect for the 
1998-99 fiscal year.
    Section 920.55 of the order requires that prior to handling any 
variety of California kiwifruit, such kiwifruit shall be inspected by 
the Federal or Federal-State Inspection Service (inspection service) 
and certified as meeting the applicable grade, size, quality, or 
maturity requirements in effect pursuant to Sec. 920.52 or Sec. 920.53. 
Section 920.55 also provides authority for the establishment through 
the order's administrative rules and regulations of a period prior to 
shipment during which inspections must be performed.
    Section 920.155 of the order's administrative rules and regulations 
prescribes that the certification of grade, size, quality, and maturity 
of kiwifruit pursuant to Sec. 920.52 or Sec. 920.53 during each fiscal 
year is valid until December 31 of such year or 21 days from the date 
of inspection, whichever is later. Any inspected kiwifruit to be 
shipped after the certification period lapses is required to be 
reinspected and recertified before shipping.
    At its meeting on February 11, 1998, the Committee unanimously 
recommended suspending Sec. 920.155 for the 1998-99 fiscal year. The 
Committee made this recommendation in an effort to reduce the 
additional costs of reinspection. In recent years, after cultural and 
post-harvest expenses have been paid, many kiwifruit growers have lost 
money or merely recovered their production costs with little or no 
profit. Because storage and handling operations have improved in the 
industry, and as a result of a fruit ripening program being utilized by 
the industry, the Committee believes it may no longer be necessary to 
have fruit reinspected to provide consumers with a high quality 
product. The recommended suspension is for a one-year period so the 
effects can be evaluated. The Committee further recommended that this 
suspension be in effect no later than September 1, 1998, to enable 
handlers to make operational decisions in time for the 1998 harvest and 
shipping season.
    When the order was promulgated, authority was included to limit the 
length of time inspection certificates would be valid. This authority 
was provided because the condition of kiwifruit can change while it is 
held in cold storage. The current inspection requirements are intended 
to help ensure that all fruit meets order requirements prior to 
shipment.
    The industry has estimated that approximately 30 percent of the 
inspected kiwifruit is subject to reinspection each year at a cost of 
approximately $0.03 per tray equivalent (a tray equivalent being 7 
pounds of kiwifruit), and that a minimal amount, approximately 1 
percent, of reinspected fruit fails to meet order requirements.
    Although the inspection service has not yet established the 1998-99 
inspection rates, based on the past season's rates, total reinspection 
costs for the industry are expected to be approximately $50,000 for the 
1998-99 fiscal year.
    Handlers would like to reduce handling costs and believe that they 
can do so by conducting their own reinspection of fruit before 
shipment, when necessary. The Committee believes that consumers would 
be provided with the same high quality fruit as available under current 
reinspection requirements. Handlers have continually upgraded their 
cold storage and handling operations, resulting in fewer fruit 
condition problems. In recent seasons, improved storage facilities have 
resulted in fewer storage-related condition problems, such as black 
sooty mold. In addition, processing and packing equipment utilized by 
handlers has improved in recent years, resulting in less damage to 
fruit in the handling process, thus resulting in fewer condition 
problems. Finally, the industry's ripening program has resulted in 
earlier seasonal shipments and a decreased amount of inspected fruit 
remaining in cold storage

[[Page 30657]]

beyond the maximum time for which an inspection certificate is valid.
    The Committee believes that eliminating the reinspection 
requirement would not have a negative impact on any aspect of the 
industry; however, it wishes to approach this issue with caution. Thus, 
the Committee recommended temporarily suspending Sec. 920.155 for the 
1998-99 fiscal year as a ``pilot test,'' so it can evaluate the results 
after the season. The Committee expects this action to reduce handler 
costs by $50,000, resulting in increased grower returns, while 
continuing to provide consumers with the same high quality fruit as is 
available under current reinspection requirements.
    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 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 the 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 60 handlers of California kiwifruit subject 
to regulation under the marketing order and approximately 450 producers 
in the production area. Small agricultural producers are defined by the 
Small Business Administration (13 CFR 121.601) as those whose annual 
receipts are less than $500,000, and small agricultural service firms 
are defined as those whose annual receipts are less than $5,000,000. 
One of the 60 handlers subject to regulation has annual kiwifruit sales 
of at least $5,000,000, excluding receipts from any other sources. The 
remaining 59 handlers have annual receipts less than $5,000,000, 
excluding receipts from other sources. In addition, 10 of the 450 
producers subject to regulation have annual sales of at least $500,000, 
excluding receipts from any other sources. The remaining 440 producers 
have annual sales less than $500,000, excluding receipts from any other 
sources. Therefore, a majority of handlers and producers are classified 
as small entities.
    This proposal invites comments on the temporary suspension of an 
inspection requirement for kiwifruit covered under the California 
kiwifruit marketing order. This rule would temporarily suspend the 
current limitation of the inspection certificate validation period and 
would enable handlers to ship kiwifruit without the necessity for 
reinspection and recertification. The rule would be in effect for the 
1998-99 fiscal year.
    Section 920.55 of the order requires that prior to handling any 
variety of California kiwifruit, such kiwifruit shall be inspected by 
the inspection service and certified as meeting the applicable grade, 
size, quality, or maturity requirements in effect pursuant to 
Sec. 920.52 or Sec. 920.53. Section 920.55 also provides authority for 
the establishment through the order's administrative rules and 
regulations of a period prior to shipment during which inspections must 
be performed.
    Section 920.155 of the order's administrative rules and regulations 
prescribes that the certification of grade, size, quality, and maturity 
of kiwifruit pursuant to Sec. 920.52 or Sec. 920.53 during each fiscal 
year is valid until December 31 of such year or 21 days from the date 
of inspection, whichever is later. Any inspected kiwifruit to be 
shipped after the certification period lapses is required to be 
reinspected and recertified before shipping.
    At its meeting on February 11, 1998, the Committee unanimously 
recommended suspending Sec. 920.155 for the 1998-99 fiscal year. The 
Committee made this recommendation in an effort to reduce the 
additional costs of reinspection. In recent years, after cultural and 
post-harvest expenses have been paid, many kiwifruit growers have lost 
money or merely recovered their production costs with little or no 
profit. Also, because storage and handling operations have improved in 
the industry, and as a result of a fruit ripening program being 
utilized by the industry, the Committee believes it may no longer be 
necessary to have fruit reinspected to provide consumers with a high 
quality product. The recommended suspension is for a one-year period so 
the effects can be evaluated. The Committee further recommended that 
this suspension be in effect no later than September 1, 1998, to enable 
handlers to make operational decisions in time for the 1998 harvest and 
shipping season.
    When the order was promulgated, authority was included to limit the 
length of time inspection certificates would be valid. This authority 
was provided because the condition of kiwifruit can change while it is 
held in cold storage. The current inspection requirements are intended 
to help ensure that all fruit meets order requirements prior to 
shipment.
    The industry has estimated that approximately 30 percent of the 
inspected kiwifruit is subject to reinspection each year at a cost of 
approximately $0.03 per tray equivalent (a tray equivalent being 7 
pounds of kiwifruit), and that a minimal amount, approximately 1 
percent, of reinspected fruit fails to meet order requirements.
    Although the inspection service has not yet established the 1998-99 
inspection rates, based on the past season's rates, total reinspection 
costs for the industry are expected to be approximately $50,000 for the 
1998-99 fiscal year.
    Handlers would like to reduce handling costs and believe that they 
can do so by conducting their own reinspection of fruit before 
shipment, when necessary. The Committee believes that consumers would 
be provided with the same high quality fruit as available under current 
reinspection requirements. Handlers have continually upgraded their 
cold storage and handling operations, resulting in fewer fruit 
condition problems. In recent seasons, improved storage facilities have 
resulted in fewer storage-related condition problems, such as black 
sooty mold. In addition, processing and packing equipment utilized by 
handlers has improved in recent years, resulting in less damage to 
fruit in the handling process, thus resulting in fewer fruit condition 
problems. Finally, the industry's ripening program has resulted in 
earlier seasonal shipments and a decreased amount of inspected fruit 
remaining in cold storage beyond the maximum time for which an 
inspection certificate is valid.
    The Committee believes that eliminating the reinspection 
requirement would not have a negative impact on any aspect of the 
industry; however, it wishes to approach this issue with caution. Thus, 
the Committee recommended temporarily suspending Sec. 920.155 for the 
1998-99 fiscal year as a ``pilot test,'' so it can evaluate the results 
after the season. The Committee expects this action to reduce handler 
costs by $50,000, resulting in increased grower returns, while 
continuing to provide consumers with the same high quality fruit as is 
available under current reinspection requirements.
    The 1998-99 kiwifruit crop is estimated to be 10 to 12 million tray 
equivalents (a tray equivalent being equal to 7 pounds). Based on 
recent experience, approximately 30 percent of the inspected kiwifruit 
is subject to reinspection. At the current estimates

[[Page 30658]]

for the 1998-99 crop, that would amount to 3.0 to 3.6 million tray 
equivalents requiring reinspection. The 1998-99 reinspection fees have 
not yet been established by the inspection service, however, utilizing 
the 1997-98 rates ($0.032 per tray/volume fill/count fill container, 
$0.047 per 3 layer/master container, and $0.0047 per pound for bins), 
it is estimated that the 1998-99 costs for reinspection would be around 
$42,000. Adding mileage and overtime fees charged by the inspection 
service would result in total annual costs for reinspection for the 
1998-99 fiscal year of approximately $50,000.
    The Committee discussed a number of alternatives to this rule, 
including making inspection certificates valid to January 31, or 
modifying the reinspection process by requiring inspection for 
condition only, but it was determined that neither of these 
alternatives would reduce reinspection costs. The Committee also 
discussed the possibility of reducing the sample size from the current 
one-half of 1 percent; however, the inspection service advised the 
Committee that further reduction of the sample size would jeopardize 
the integrity of the inspection.
    Another alternative discussed was the elimination of in-line 
inspections altogether, but this was determined to be unacceptable to 
the industry. Use of in-line inspection allows handlers to be assured 
that the fruit is making grade at the time of packing. Any problems 
that may exist can be identified immediately and corrected, thus 
avoiding the additional costs of repacking at the time of shipment.
    The Committee also considered increasing the use of inspection 
waivers as a means to lower costs. However, the Committee could not 
reach a consensus on an acceptable and equitable means to increase the 
issuance of waivers throughout the industry, and, thus, it was 
determined to be an unacceptable alternative to this proposal.
    As another possibility, the Committee discussed alternative 
inspection methods. It was decided that they would not be a viable 
option at this time.
    Following discussion of these alternatives, the Committee concluded 
that temporarily suspending Sec. 920.155 would be in the best interest 
of the industry at this time, as it is expected to save as much as 
$50,000 in reinspection fees and to increase grower returns, while 
continuing to provide consumers with the same high quality fruit as 
provided under current reinspection requirements.
    This action would not impose any additional reporting or 
recordkeeping requirements on either small or large kiwifruit 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 rule.
    The Committee's February 11, 1998, meeting was widely publicized 
throughout the kiwifruit industry and all interested persons were 
invited to attend the meeting and participate in Committee 
deliberations on all issues. Like all Committee meetings, the February 
11, 1998, meeting was a public meeting and all entities, both large and 
small, were able to express views on this issue. The Committee itself 
is composed of 12 members. Two of these members are handlers and 
producers, 9 are producers only, and one is a public member. The 
majority of the Committee members are small entities. In addition, a 
survey on the options of eliminating or keeping the reinspection 
requirement was mailed to all growers and handlers of California 
kiwifruit. Of the 485 surveys mailed, 159 were returned to the 
Committee by the deadline of February 6, 1998, for a response rate of 
33 percent. Growers accounted for 77 percent of the total surveys 
returned by the deadline, and of those, 67 percent were in favor of 
eliminating reinspection. Finally, interested persons are invited to 
submit information on the regulatory and informational impacts of this 
action on small businesses.
    A 30-day comment period is provided to allow interested persons to 
respond to this proposal, including any regulatory and informational 
impacts of this action on small businesses. Thirty days is deemed 
appropriate because: (1) The industry would like the changes proposed 
in this rule to be in place by September 1 to provide sufficient time 
to plan for the upcoming marketing season; and (2) this action was 
unanimously recommended by the Committee at a public meeting and is not 
expected to be controversial. All written comments received within the 
comment period will be considered before a final determination is made 
on this matter.

List of Subjects in 7 CFR Part 920

    Kiwifruit, Marketing agreements, Reporting and recordkeeping 
requirements.

    For the reasons set forth in the preamble, 7 CFR part 920 is 
proposed to be amended as follows:

PART 920--KIWIFRUIT GROWN IN CALIFORNIA

    1. The authority citation for 7 CFR part 920 continues to read as 
follows:

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


Sec. 920.155  [Suspended]

    2. In Part 920, Sec. 920.155 is suspended in its entirety effective 
August 1, 1998, through July 31, 1999.

    Dated: May 29, 1998.
Sharon Bomer Lauritsen,
Acting Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 98-15001 Filed 6-4-98; 8:45 am]
BILLING CODE 3410-02-P