[Federal Register Volume 63, Number 127 (Thursday, July 2, 1998)]
[Proposed Rules]
[Pages 36194-36197]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-17564]


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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. 63, No. 127 / Thursday, July 2, 1998 / 
Proposed Rules  

[[Page 36194]]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 958

[Docket No. FV97-958-2 PR]


Onions Grown in Certain Designated Counties in Idaho, and Malheur 
County, Oregon, and Imported Onions; Proposed Increase in Grade 
Requirement for White Onions

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This rule would increase the minimum grade requirement for 
white onion varieties handled under the Idaho-Eastern Oregon onion 
marketing order from U.S. No. 2 or U.S. Commercial to U.S. No. 1. The 
marketing order regulates the handling of onions produced in certain 
designated counties in Idaho, and Malheur County, Oregon, and is 
administered locally by the Idaho-Eastern Oregon Onion Committee 
(Committee). This rule would improve the marketing of white onions and 
increase returns to producers, as well as provide consumers with higher 
quality onions. As provided under section 8e of the Agricultural 
Marketing Agreement Act of 1937, the proposed increase in the minimum 
grade requirement would also apply to all imported varieties of white 
onions.

DATES: Comments must be received by August 31, 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 made available for public 
inspection in the Office of the Docket Clerk during regular business 
hours.

FOR FURTHER INFORMATION CONTACT: Robert J. Curry, Northwest Marketing 
Field Office, Marketing Order Administration Branch, Fruit and 
Vegetable Programs, AMS, USDA, 1220 SW Third Avenue, room 369, 
Portland, Oregon 97204-2807; telephone: (503) 326-2724, Fax: (503) 326-
7440; and George J. 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 proposal is issued under Marketing 
Agreement No. 130 and Marketing Order No. 958, both as amended (7 CFR 
part 958), regulating the handling of onions grown in certain 
designated counties in Idaho, and Malheur County, Oregon, 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.''
    This proposed rule is also issued under section 8e of the Act, 
which provides that whenever certain specified commodities, including 
onions, are regulated under a Federal marketing order, imports of these 
commodities into the United States are prohibited unless they meet the 
same or comparable grade, size, quality, or maturity requirements as 
those in effect for the domestically produced commodities.
    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 would 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 date of the entry of the ruling.
    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. This proposal invites comments on 
an increase in the minimum grade requirement for white onion varieties 
grown in the defined production area and handled under order authority. 
This proposed rule, unanimously recommended by the Committee at its 
June 19, 1997, meeting, would require that all white onion varieties 
handled be U.S. No. 1 grade. The current regulations allow the handling 
of white onions of U.S. No. 2, U.S. Commercial, and U.S. No. 1 grades. 
As provided under section 8e of the Agricultural Marketing Agreement 
Act of 1937, the proposed increase in the minimum grade requirements 
would also apply to all imported varieties of white onions.
    Sections 958.51 and 958.52 of the order provide authority for the 
establishment and modification of regulations applicable to the 
handling of particular grades of onions. Section 958.328(a)(1) 
establishes the grade requirements for white onions handled subject to 
the Idaho-Eastern Oregon onion marketing order. Such grade requirements 
are based on the U.S. Standards for Grades of Onions (Other than 
Bermuda-Granex-Grano and Creole Types) (7 CFR part 51.2830 et seq.), or 
the U.S. Standards for Grades of Bermuda-Granex-Grano Type Onions (7 
CFR part 51.3195 et seq.). Currently, these handling regulations 
require that white onion varieties shall be (1) U.S.

[[Page 36195]]

No. 2 or U.S. Commercial, 1 inch minimum to 2 inches maximum diameter; 
or (2) U.S. No. 2 or U.S. Commercial, if not more than 30 percent of 
the lot is comprised of onions of U.S. No. 1 quality, and at least 1\1/
2\ inches minimum diameter; or (3) U.S. No. 1, at least 1\1/2\ inches 
minimum diameter. The regulations further specify that none of these 
three categories may be commingled in the same bag or other container.
    This proposed rule would require that all bags or other containers 
of white onion varieties shipped subject to order requirements be 
either: (1) U.S. No. 1, 1 inch minimum to 2 inches maximum diameter; or 
(2) U.S. No. 1, at least 1\1/2\ inches minimum diameter. Commingling of 
these two categories would not be allowed. Current exemptions under the 
order for special purpose shipments in section 958.328(e), and 
shipments qualifying for a minimum quantity exemption in section 
958.328(g), would continue to apply when applicable.
    The Committee justification for its recommendation indicated that 
shipments of U.S. No. 2 and U.S. Commercial grade white onions have had 
a negative impact on producer returns and have been a factor in 
decreasing this industry's share of the fresh domestic white onion 
market. In addition, the Committee stated that consumers of white 
onions traditionally demand a quality product and that U.S. No. 2 and 
U.S. Commercial grade white onions have poor consumer acceptance.
    The Committee stated that producers seldom profit from U.S. No. 2 
or U.S. Commercial grade white onion sales, and as a consequence, 
common business practice for many is to discard such onions as culls 
following harvest. Based upon comments made by handlers and receivers 
of white onions, the Committee reported that shipments of low quality 
U.S. No. 2 and U.S. Commercial grade white onions have a depressing 
influence on the price of the higher quality U.S. No. 1 grade white 
onions. The Free-on-Board (FOB) price for U.S. No. 2 white onions 
usually runs about one-half the FOB price on U.S. No. 1 white onions 
reflecting the weak demand for U.S. No. 2 white onions in fresh 
markets. Moreover, over the last several years there has been increased 
competition from white onions grown in Nevada, Washington, Colorado, 
and Utah. The quality produced and marketed from those States is 
excellent. Thus, a higher grade for white onions grown in Idaho-Eastern 
Oregon should help this industry compete more effectively and increase 
demand through stronger confidence in the quality of Idaho-Eastern 
Oregon white onions.
    Between the 1986/87 and the 1996/97 marketing seasons, an annual 
average of 336,000 hundredweight of white onions, representing 3.9 
percent of the total of all onion varieties, has been shipped from the 
Idaho-Eastern Oregon production area. The annual average of all Idaho-
Eastern Oregon onion shipments for this period, including white, 
yellow, and red onion varieties, is 9,517,500 hundredweight. During the 
same period of time, shipments of Idaho-Eastern Oregon U.S. No. 2 white 
onions averaged 3,807 hundredweight per year, or approximately an 
annual average of 1.2 percent of white Idaho-Eastern Oregon onion 
shipments and an annual average of .04 percent of all Idaho-Eastern 
Oregon onion shipments. The majority, or nearly 99 percent, of the 
white onions shipped from this production area are U.S. No. 1 grade. 
Onions from the Idaho-Eastern Oregon production area are shipped 
throughout most of the year. Most Idaho-Eastern Oregon white onions are 
marketed during the months of September, October, and November, with 
significant additional volume through February. Preliminary information 
pertaining to the 1998/99 shipping season indicates that the FOB price 
for onions this season could average $13.10 per hundredweight.
    As mentioned earlier, section 8e of the Act requires that when 
certain domestically produced commodities, including onions, are 
regulated under a Federal marketing order, imports of that commodity 
must meet the same or comparable grade, size, quality, or maturity 
requirements. Section 8e also provides that whenever two or more 
marketing orders regulating the same commodity produced in different 
areas of the United States are concurrently in effect, a determination 
must be made as to which of the areas produces the commodity in most 
direct competition with the imported commodity. Imports must then meet 
the requirements established for that particular area.
    Grade, size, quality, and maturity regulations have been issued 
regularly under both Marketing Order No. 958 and Marketing Order No. 
959, which regulates the handling of onions grown in South Texas, since 
the marketing orders were established. The current import regulation 
specifies that import requirements for onions are to be based on the 
seasonal categories of onions grown in both marketing order areas. The 
import regulation specifies that imported onions must meet the 
requirements of the Idaho-Eastern Oregon onion marketing order during 
the period June 5 through March 9 and the South Texas onion marketing 
order during the period March 10 through June 4 each season. This 
proposal would change the import requirements for the period June 5 
through March 9 of each marketing year to provide that all imported 
white onion varieties must be U.S. No. 1 grade. While no changes are 
required in the language of section 980.117, all white onion varieties 
imported during this period would be required to meet the modified 
grade requirement.
    White onions are imported into the United States throughout the 
year from a number of different countries. By far the largest source of 
all imported onions is Mexico. Mexican white onions enter the United 
States from November through July, with the heaviest volumes moving 
during the months of December through April. The annual average volume 
of all Mexican onions imported into the United States between 1986 and 
1996 was 3,333,150 hundredweight, while the annual average volume for 
all imported onions from all sources during the same period was 
4,040,004 hundredweight.
    Other sources of imported onions are Canada, Chile, New Zealand, 
France, Guatemala, Belgium, Morocco, and the Netherlands. In 1996 and 
1997, imports from Canada totaled 654,728 hundredweight and 498,950 
hundredweight, imports from Chile totaled 139,927 hundredweight and 
85,914 hundredweight, and those from New Zealand totaled 13,007 
hundredweight and 20,172 hundredweight. During those two years, onion 
imports from France totaled 82,034 hundredweight and 102,956 
hundredweight, imports from Guatemala were 32,540 hundredweight and 
32,474 hundredweight, imports from Belgium totaled 1,565 hundredweight 
and 2,386 hundredweight, Moroccan imports totaled 287 hundredweight and 
948 hundredweight, and imports from the Netherlands during 1996 and 
1997 totaled 26,852 and 26,544 hundredweight, respectively.
    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA), the Agricultural Marketing Service (AMS) has considered the 
economic impact this action would have on small entities. 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

[[Page 36196]]

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.
    There are approximately 35 handlers of Idaho-Eastern Oregon onions 
who are subject to regulation under the order and approximately 260 
onion producers, including approximately 80 producers of white onions, 
in the regulated area. In addition, approximately 150 importers of 
onions are subject to import regulations and could be affected by this 
proposed rule. 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. Approximately 90 percent of the handlers and 70 percent of 
the producers of Idaho-Eastern Oregon white onions may be classified as 
small entities. Although it is not known how many importers of white 
onions may be classified as small entities, it can be assumed that a 
number of the 150 importers could be classified as such.
    This proposal invites comments on an increase in the minimum grade 
requirement for white onion varieties grown in the defined production 
area and handled under order authority. This proposed rule, unanimously 
recommended by the Committee at its June 19, 1997, meeting, would 
require that all white onion varieties handled be U.S. No. 1 grade. The 
current regulations allow the handling of U.S. No. 2 grade and U.S. 
Commercial grade white onions as well. As provided under section 8e of 
the Agricultural Marketing Agreement Act of 1937, the proposed increase 
in the minimum grade requirement would also apply to all imported 
varieties of white onions.
    At the meeting the Committee discussed the impact of this proposal 
on handlers and producers in terms of cost. The Committee stated that 
producers seldom profit from U.S. No. 2 or U.S. Commercial grade white 
onion sales, and as a consequence, common business practice for many is 
to discard such onions as culls following harvest.
    Based upon comments made by handlers and receivers of white onions, 
the Committee reported that shipments of low quality U.S. No. 2 and 
U.S. Commercial grade white onions have a depressing influence on the 
price of the higher quality U.S. No. 1 grade white onions. The Free-on-
Board (FOB) price for U.S. No. 2 white onions usually runs about one-
half the FOB price on U.S. No. 1 white onions reflecting the weak 
demand for U.S. No. 2 white onions in fresh markets. Moreover, over the 
last several years there has been increased competition from white 
onions grown in Nevada, Washington, Colorado, and Utah. The quality 
produced and marketed from those States is excellent. Thus, a higher 
grade for white onions grown in Idaho-Eastern Oregon should help this 
industry compete more effectively and increase demand through stronger 
confidence in the quality of Idaho-Eastern Oregon white onions. 
Preliminary information pertaining to the 1998-99 shipping season 
indicates that the FOB price for onions this season could average 
$13.10 per hundredweight.
    While this proposed rule may impose some additional costs on 
handlers and producers, the costs are expected to be minimal, and would 
be offset by the benefits of the proposal. This proposal is expected to 
similarly impact importers of white onions. The Committee believes that 
this proposed modification would benefit consumers, producers, and 
handlers. The benefits of this rule are not expected to be 
disproportionately greater or lesser for small entities than for large 
entities.
    As alternatives to the proposal, the Committee discussed leaving 
the regulations as currently issued and using voluntary methods to 
solve the problem. Both alternatives were rejected. The prevailing 
opinion was that market confidence and producer income would continue 
to erode without the implementation of this proposal. The majority of 
Committee members stated that voluntary measures had not been effective 
in the past.
    Section 8e of the Act requires that when certain domestically 
produced commodities, including onions, are regulated under a Federal 
marketing order, imports of that commodity must meet the same or 
comparable grade, size, quality, or maturity requirements. Section 8e 
also provides that whenever two or more marketing orders regulating the 
same commodity produced in different areas of the United States are 
concurrently in effect, the Secretary shall determine which of the 
areas produces the commodity in more direct competition with the 
imported commodity. Imports must then meet the requirements established 
for the particular area.
    Grade, size, quality, and maturity regulations have been issued 
regularly under both Marketing Order No. 958 and Marketing Order No. 
959, which regulates the handling of onions grown in South Texas, since 
the orders were established. The current import regulation specifies 
that import requirements for onions are to be based on the seasonal 
categories of onions grown in both marketing order areas. The import 
regulations specify that imported onions must meet the requirements of 
the Idaho-Eastern Oregon onion order during the period June 5 through 
March 9 each season and the South Texas onion order during the period 
March 10 through June 4 each season. This proposal would change the 
import requirements for the period June 5 through March 9 of each 
marketing year to provide that all imported white onion varieties must 
be U.S. No. 1 grade.
    This action would not impose any additional reporting or 
recordkeeping 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 Idaho-Eastern Oregon onion industry and all interested 
persons were invited to attend the meeting and participate in Committee 
deliberations on all issues. Like all Committee meetings, the June 19, 
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.
    An advance notice of proposed rulemaking with request for public 
comment was published in the Federal Register (63 FR 5472) on February 
3, 1998. A 60-day comment period was provided to allow interested 
persons the opportunity to comment on the volume and grade of imported 
white onions, as well as other aspects of the potential grade increase, 
including its probable regulatory and economic impact on small business 
entities. Copies of the notice were faxed and mailed to the Committee 
office, which in turn notified Committee and Idaho-Eastern Oregon onion 
industry members of the recommendation. The Department also provided 
copies of the notice to the administrative offices of the Walla Walla 
Sweet Onion Committee, the South Texas Onion Committee, and the Vidalia 
Onion Committee, as well as to

[[Page 36197]]

the World Trade Organization. In addition, the Committee's meetings 
were widely publicized throughout the Idaho-Eastern Oregon onion 
industry and all interested persons were invited to attend and 
participate on all issues. A copy of the notice was also made available 
on the Internet by the U.S. Government Printing Office.
    Five comments were received. Four of the comments are supportive of 
the Committee's recommendation. The Idaho-Eastern Oregon Onion 
Committee reaffirmed its unanimous recommendation in favor of 
increasing the minimum grade for white onions from U.S. No. 2 or U.S. 
Commercial to U.S. No. 1. The South Texas Onion Committee, 
administering Marketing Order No. 959, expressed its support of the 
recommended modification as well. The South Texas Onion Committee 
commented that by the time the South Texas industry enters the market 
in March of each year, the market is flooded with inferior quality 
white onions from both Mexico and Idaho-Eastern Oregon, and that the 
onion industries and consumers would benefit from the minimum grade 
increase. The minimum grade requirement for white onion varieties 
handled under the South Texas marketing order is a modified U.S. No. 1 
grade. The proposed rule would increase the minimum grade requirement 
for Idaho-Eastern Oregon onions, with the two minimum grade 
requirements becoming more similar.
    Also commenting in favor of the Committee's recommendation were a 
South Texas onion handler and an association representing Texas onion 
handlers as well as importers of Mexican onions. Both commentators are 
located in Mission, Texas. The handler commented that the recommended 
modification would allow the South Texas industry the necessary 
confidence to continue to produce onions for a market free from the 
negative consumer reaction associated with poor quality white onions. 
The association also added its support of the recommended minimum grade 
increase. The association stated that it has within its membership 
approximately 21 South Texas handlers of onions, most of whom also 
import onions from Mexico. The commenter added that the association has 
numerous members who only handle imported produce, including white 
onions. The commenter noted further that in the modern competitive 
produce market, consumers must be provided with the best quality 
products available.
    A comment was also received from the European Commission, Brussels, 
Belgium, on behalf of the European Community. That comment stated that 
the proposal aims at increasing the minimum diameter size requirement 
for imported onions from 2.54 to 2.79 centimeters for the period June 5 
through March 9 of each year, and objected to such action. However, the 
Committee had recommended increasing the minimum grade for Idaho-
Eastern Oregon white onions and white onions imported during the period 
June 5 through March 9 from U.S. No. 2 to U.S. No. 1. However, the 
recommendation did not include a modification to the minimum diameter 
size itself, which continues to be 1 inch or 2.54 centimeters.
    In conjunction with the issuance of the advance notice and request 
for comment, the Texas Cooperative Inspection Program monitored white 
onions imported from Mexico during the period December 1, 1997, through 
March 9, 1998. This process was conducted at the request of the AMS to 
determine the quantity of imported white onions potentially impacted by 
the Committee's recommendation. An analysis of the information provided 
by the Inspection Program indicates that approximately 98 percent of 
the white onions imported from Mexico during the test period met U.S. 
No. 1 grade. The balance of the imported white onions during this 
period either met U.S. Commercial grade or failed to meet the minimum 
of U.S. No. 2 grade. There were no U.S. No. 2 grade white onions 
imported from Mexico during this period. During the test period, a 
total of 1,006,279 50-pound containers were offered for importation. A 
total of 948,069 50-pound containers graded U.S. No. 1, 11,427 50-pound 
containers graded U.S. Commercial, and 10,783 50-pound containers 
failed to meet the current minimum grade requirement of U.S. No. 2.
    The Department has not identified any relevant Federal rules that 
duplicate, overlap, or conflict with this rule.
    A 60-day comment period is provided to allow interested persons the 
opportunity to respond to this proposal. All written comments timely 
received will be considered before a final determination is made on 
this matter.

List of Subjects in 7 CFR Part 958

    Marketing agreements, Onions, Reporting and recordkeeping 
requirements.

    For the reasons set forth in the preamble, 7 CFR part 958 is 
proposed to be amended as follows:

PART 958--ONIONS GROWN IN CERTAIN DESIGNATED COUNTIES IN IDAHO, AND 
MALHEUR COUNTY, OREGON

    1. The authority citation for 7 CFR part 958 continues to read as 
follows:

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

    2. Section 958.328 is amended by revising paragraph (a)(1) to read 
as follows:


Sec. 958.328  Handling Regulations.

* * * * *
    (a)(1) Grade and size requirements. (i) White varieties shall be 
either:
    (A) U.S. No. 1, 1 inch minimum to 2 inches maximum diameter; or
    (B) U.S. No. 1, at least 1\1/2\ inches minimum diameter.
    (ii) Neither of these two categories of onions may be commingled in 
the same bag or other container.
* * * * *
    Dated: June 26, 1998.
Eric M. Forman,
Acting Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 98-17564 Filed 7-1-98; 8:45 am]
BILLING CODE 3410-02-P