[Federal Register Volume 63, Number 171 (Thursday, September 3, 1998)]
[Rules and Regulations]
[Pages 46861-46866]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-23711]



 ========================================================================
 Rules and Regulations
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains regulatory documents 
 having general applicability and legal effect, most of which are keyed 
 to and codified in the Code of Federal Regulations, which is published 
 under 50 titles pursuant to 44 U.S.C. 1510.
 
 The Code of Federal Regulations is sold by the Superintendent of Documents. 
 Prices of new books are listed in the first FEDERAL REGISTER issue of each 
 week.
 
 ========================================================================
 

  Federal Register / Vol. 63, No. 171 / Thursday, September 3, 1998 / 
Rules and Regulations  

[[Page 46861]]


-----------------------------------------------------------------------

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 920

[Docket No. FV98-920-4 IFR]


Kiwifruit Grown in California; Relaxation of Pack Requirements

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Interim final rule with request for comments.

-----------------------------------------------------------------------

SUMMARY: This rule relaxes the pack requirements prescribed 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). This rule 
increases the size variation tolerance for Size 42 kiwifruit and 
increases the maximum number of fruit per 8-pound sample for Sizes 42 
through 30. In addition, it suspends, for the 1998-99 season, the 
minimum net weight requirements for kiwifruit packed in containers with 
cell compartments, cardboard fillers, or molded trays. These changes 
were unanimously recommended by the Committee and are expected to 
reduce handler packing costs, increase producer returns, and enable 
handlers to compete more effectively in the marketplace.

DATES: This document is effective September 4, 1998. The suspension of 
Sec. 920.302(a)(4)(iii) is effective September 4, 1998, through July 
31, 1999. Comments received prior to November 2, 1998, will be 
considered prior to issuance of a final rule.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this rule. 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; or E-mail: 
[email protected]. 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: Rose M. Aguayo, 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, 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 rule is issued under Marketing Order 
No. 920, as amended (7 CFR part 920), 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 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 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 rule increases the size variation tolerance for Size 42 
kiwifruit and increases the maximum number of fruit per 8-pound sample 
for Sizes 42 through 30. In addition, it suspends, for the 1998-99 
season, the minimum net weight requirements for kiwifruit packed in 
containers with cell compartments, cardboard fillers, or molded trays. 
These changes were unanimously recommended by the Committee and are 
expected to reduce handler packing costs, increase producer returns, 
and enable handlers to compete more effectively in the marketplace.
    Under the terms of the order, fresh market shipments of kiwifruit 
grown in California are required to be inspected and meet grade, size, 
maturity, pack, and container requirements. Section 920.52 authorizes 
the establishment of pack requirements. Section 920.302(a)(4) of the 
order's administrative rules and regulations outlines pack requirements 
for fresh shipments of California kiwifruit.
    Section 920.302(a)(4)(ii) provides pack requirements for kiwifruit 
packed in cell compartments, cardboard fillers, or molded trays and 
includes a table that specifies numerical size designations and size 
variation tolerances. It also provides pack requirements for kiwifruit 
packed in bags, volume fill, or bulk containers, and includes a 
separate table that specifies numerical size designations and size 
variation tolerances. Paragraph (a)(4)(ii) also provides that not more 
than 10 percent, by count, of the containers in any lot and not more 
than 5 percent, by count, of kiwifruit in any one container (except 
that for Size 42 kiwifruit, the tolerance, by count, in any one 
container, may not be more than 10 percent, and except that for Size 45 
kiwifruit, the tolerance by count, in any one container, may not be 
more than 25

[[Page 46862]]

percent) may fail to meet the requirements of this paragraph.
    Section 920.302(a)(4)(iii) provides requirements for fruit packed 
in containers with cell compartments, cardboard fillers, or molded 
trays and requires that specific minimum net weights per size 
designation be met.
    Section 920.302(a)(4)(iv) establishes a maximum number of fruit per 
8-pound sample for each numerical count size designation for fruit 
packed in bags, volume fill, or bulk containers.
    The amount of kiwifruit supplied to the domestic market by 
California handlers has declined 22 percent, since the 1992-93 season. 
In addition, producer prices have steadily declined in spite of a 
continuous increase in the U.S. per capita consumption of kiwifruit. 
When the order was implemented in 1984, the average Free-on-Board (FOB) 
value was $1.14 per pound. This average has steadily decreased to $0.53 
per pound for the 1997-98 season. The Committee reviewed FOB values and 
determined that the average FOB value for the 1992-93 season through 
the 1997-98 season was $0.55 per pound. To address these concerns, the 
industry held several industry-wide planning sessions during May and 
June 1998.
    The Committee subsequently met on July 8, 1998, and unanimously 
recommended modifying the pack regulations under Sec. 920.302 as 
follows:
    (1) Increase the size variation tolerance, from 10 percent, by 
count, in any one container, to 25 percent, by count, for Size 42 
kiwifruit;
    (2) Increase the maximum number of fruit per 8-pound sample for 
Sizes 42, 39, 36, 33, and 30 of kiwifruit packed in bags, volume fill, 
or bulk containers; and
    (3) Temporarily suspend, for the 1998-99 season, the minimum net 
weight requirements for kiwifruit packed in containers with cell 
compartments, cardboard fillers, or molded trays.

Increase in Size Variation Tolerance for Size 42 Kiwifruit

    Currently, a size variation tolerance of \1/4\-inch (6.4 mm) 
difference is allowed between the widest and narrowest kiwifruit in any 
Size 42 container utilizing cell compartments, cardboard fillers, or 
molded trays and a \3/8\-inch (9.5 mm) size variation difference is 
allowed between the widest and narrowest kiwifruit packed in a Size 42 
bag, volume fill, or bulk container. Not more than 10 percent, by 
count, of the containers in any lot and not more than 5 percent, by 
count, of kiwifruit in any container may fail to meet the established 
size variations for Sizes 39 and larger.
    Prior to the 1996-97 season, handlers were experiencing difficulty 
meeting the size variation tolerances for Sizes 42 and 45 kiwifruit 
because it is difficult to separate the round, narrow fruit from the 
flatter, broader fruit. Weight sizers will not separate this fruit 
because the fruit may weigh exactly the same yet be of different shapes 
requiring them to be packed into different boxes in order to stay 
within the size variation requirements. This sizing problem occurs 
mostly in 40 series fruit where size variations are often indiscernible 
to the eye and calipers are needed to detect differences. Fruit packed 
in the 40 series consistently provides lower returns to California 
producers than larger sized fruit and also is the most costly to pack.
    The Committee determined that the best way to address the sizing 
problem was to increase the size variation tolerance, by count, in any 
one container, for Sizes 42 and 45 kiwifruit. Section 920.302(a)(4) of 
the order's administrative rules and regulations was revised by a final 
rule issued September 19, 1997 (52 FR 49128), to include a provision 
that increased the size variation tolerance, by count, in any one 
container, from 5 percent to 10 percent for Size 42 kiwifruit. That 
rule also increased the size variation tolerance, by count, for Size 45 
kiwifruit from 10 percent, by count, to 25 percent, by count.
    During the 1997-98 season, the increased size variation tolerances 
for Sizes 42 and 45 benefitted the industry by easing the packing 
burden and reducing costs, while maintaining uniform looking boxes of 
fruit desired by customers.
    Since the 1997-98 harvest, the industry held several industry-wide 
planning sessions and considered ways to reduce handler packing costs, 
increase producer returns, and enable handlers to compete more 
effectively in the marketplace.
    The three recommendations to relax packing requirements made by the 
Committee on July 8, 1998, were the final result of these discussions. 
The recommendation to increase the size variation tolerance for Size 42 
fruit from 10 percent, by count, to 25 percent, by count, was made 
because the Committee realized that increasing the number of fruit in 
an 8-pound sample for Size 42 fruit would make it difficult for 
handlers to meet the established size variation requirements. 
Increasing the size variation tolerance for Size 42 fruit will ease the 
handler packing burden by adding several more pieces of fruit to the 8-
pound sample, and will reduce handler packing costs.
    Additionally, increasing the size variation tolerance for Size 42 
from 10 percent, by count, to 25 percent, by count, will increase the 
number of kiwifruit that may exceed the \3/8\-inch size variation 
requirement in bags, volume fill, or bulk containers. When applied to a 
22-pound volume fill container, this increase in the size variation 
tolerance will allow approximately 37 pieces of fruit out of 146 to 
exceed the \3/8\-inch tolerance versus 15 pieces of fruit per 22-pound 
volume fill container at the current 10 percent tolerance level.
    Very little Size 42 kiwifruit is packed in single layer containers 
with cell compartments, cardboard fillers, or molded trays. However, 
Size 42 fruit is packed in 3-layer containers with cell compartments, 
cardboard fillers, or molded trays. Increasing the size variation 
tolerance to 25 percent, by count, will allow approximately 31 pieces 
of fruit out of 126 to exceed the \1/4\-inch tolerance versus the 12 
pieces of fruit per 3-layer container at the current 10 percent 
tolerance level. Increasing the size variation tolerance for Size 42 
fruit will reduce packing costs.
    The Committee expects that increasing the size variation tolerance 
for Size 42 kiwifruit will reduce packing costs because the additional 
tolerance will make it easier to pack round and flat Size 42 fruit 
without slowing down the packing line. The Committee anticipates that 
producer returns will increase as a portion of the fruit previously 
packed as Size 45 will be able to be packed as Size 42. Approximately 
75 percent of all California kiwifruit is shipped in 22-pound volume 
fill containers. Retailers pay approximately $1.14 more for a 22-pound 
volume fill container of Size 42 fruit than for a similar container of 
Size 45 fruit. Lastly, the Committee expects this change to benefit the 
industry by providing retailers and consumers with uniform containers 
of kiwifruit.

Increasing the Maximum Number of Fruit per 8-Pound Sample

    Currently, under the rules and regulations, kiwifruit packed in 
bags, volume fill, or bulk containers, must not exceed the maximum 
number of fruit per an 8-pound sample per numerical count size 
designation.
    The Committee determined that increasing the maximum number of 
fruit per 8-pound sample for Sizes 42 through 30 will increase the 
number of fruit packed in each bag, volume-fill, or bulk container and 
will help lessen the sizing differences between California

[[Page 46863]]

and imported kiwifruit. The Committee believes that lessening the size 
differences should help California handlers compete more effectively in 
the marketplace.
    The Committee unanimously recommended increasing the maximum number 
of fruit per 8-pound sample as shown in the following chart:

------------------------------------------------------------------------
                                             Maximum number of fruit per
     Tray equivalency size designation              8 pound sample      
------------------------------------------------------------------------
21.........................................  22                         
25.........................................  27                         
27/28......................................  30                         
30.........................................  33 (32)*                   
33.........................................  36 (35)*                   
36.........................................  42 (40)*                   
39.........................................  48 (45)*                   
42.........................................  53 (50)*                   
45.........................................  55                         
------------------------------------------------------------------------
* Prior number of fruit per 8-pound sample.                             

    This chart is commonly referred to as the ``Size Designation 
Chart'' in the industry. Increasing the maximum number of fruit per 8-
pound sample will allow some smaller-sized fruit to be packed into a 
larger-size category. This rule allows three more pieces of fruit to be 
packed per 8-pound sample in Sizes 42 and 39, two more pieces of fruit 
to be packed in Size 36, and one more piece of fruit to be packed in 
Sizes 33 and 30. It also reduces the percentage of fruit packed in the 
40 series and increases the percentage of fruit packed in sizes 39 and 
36, which are the preferred sizes by U.S. retail. Thus, handlers will 
be better able to meet the needs of buyers, because kiwifruit sells by 
the piece, and buyers desire as much fruit in each container as the 
container can comfortably hold. This change does not affect the minimum 
size and will not allow fruit currently considered as ``undersized'' to 
be packed. The Committee further believes that increasing the maximum 
number of fruit in the 8-pound sample will help lessen the sizing 
differences between California and imported kiwifruit. Lessening the 
size differences should help California handlers compete more 
effectively in the marketplace.

Minimum Net Weight Requirements

    Currently, fruit packed in containers with cell compartments, 
cardboard fillers, or molded trays are required to meet the minimum net 
weight requirements as shown in the following chart:

------------------------------------------------------------------------
                                                             Minimum net
                                                              weight of 
                Count designation of fruit                      fruit   
                                                              (Pounds)  
------------------------------------------------------------------------
34 or larger..............................................         7.5  
35 to 37..................................................         7.25 
38 to 40..................................................         6.875
41 to 43..................................................         6.75 
44 and smaller............................................         6.5  
------------------------------------------------------------------------

    Prior to the 1989-90 season, tray weights were voluntary and 73.5 
percent of the crop was packed in trays. During the 1989-90 season, 
tray weights were mandated, as there were many new packers involved in 
the kiwifruit packing process and stricter regulations were viewed as 
necessary to provide uniform container weights by size. However, since 
that season less and less fruit has been tray packed.
    During the 1997-98 season, only 15.5 percent of the crop was packed 
into molded trays (singles and three-layers) and less than 1 percent of 
this fruit was rejected for failure to meet minimum tray weights. As a 
consequence, the Committee believes that minimum tray weight 
requirements may no longer be necessary to maintain uniformity in the 
marketplace. It further believes that suspension of this requirement 
will help reduce tray pack packing costs for both large and small 
handlers. Therefore, the Committee unanimously recommended that minimum 
net weights for kiwifruit packed in cell compartments, cardboard 
fillers, or molded trays be temporarily suspended for the 1998-99 
season. The recommended suspension is for one season so the effects of 
the suspension can be evaluated. The Committee further recommended that 
this suspension begin no later than September 20, 1998, to enable 
handlers to make operational decisions in time for the 1998-99 harvest 
and shipping season. The 1998-99 season ends July 31, 1999.

Initial Regulatory Flexibility Analysis

    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 
receipts of at least $5,000,000. This figure excludes 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 the kiwifruit handlers and 
producers may be classified as small entities.
    This rule increases the size variation tolerance for Size 42 
kiwifruit and increases the maximum number of fruit per 8-pound sample 
for Sizes 42 through 30. In addition, it suspends, for the 1998-99 
season, the minimum net weight requirements for kiwifruit packed in 
containers with cell compartments, cardboard fillers, or molded trays. 
These changes were unanimously recommended by the Committee and are 
expected to reduce handler packing costs, increase producer returns, 
and enable handlers to compete more effectively in the marketplace.
    Under the terms of the order, fresh market shipments of kiwifruit 
grown in California are required to be inspected and meet grade, size, 
maturity, pack, and container requirements. Section 920.52 authorizes 
the establishment of pack requirements. Section 920.302(a)(4) of the 
order's administrative rules and regulations outlines pack requirements 
for fresh shipments of California kiwifruit.
    Section 920.302(a)(4)(ii) provides pack requirements for kiwifruit 
packed in cell compartments, cardboard fillers, or molded trays and 
includes a table that specifies numerical size designations and size 
variation tolerances. It also provides pack requirements for kiwifruit 
packed in bags, volume fill, or bulk containers, and includes a 
separate table that specifies numerical size designations and size 
variation tolerances. Paragraph (a)(4)(ii) provides that not more than 
10 percent, by count, of the containers in

[[Page 46864]]

any lot and not more than 5 percent, by count, of kiwifruit in any one 
container (except that for Size 42 kiwifruit, the tolerance, by count, 
in any one container, may not be more than 10 percent, and except that 
for Size 45 kiwifruit, the tolerance, by count, in any one container, 
may not be more than 25 percent) may fail to meet the requirements of 
this paragraph.
    Section 920.302(a)(4)(iii) provides requirements for fruit packed 
in containers with cell compartments, cardboard fillers, or molded 
trays and requires that specific minimum net weights per size 
designation be met.
    Section 920.302(a)(4)(iv) establishes a maximum number of fruit per 
8-pound sample for each numerical count size designation for fruit 
packed in bags, volume fill, or bulk containers.
    The amount of kiwifruit supplied to the domestic market by 
California handlers has declined 22 percent since the 1992-93 season. 
In addition, producer prices have steadily declined, in spite of a 
continuous increase in the U.S. per capita consumption of kiwifruit. 
When the order was implemented in 1984, the average Free-on-Board (FOB) 
value was $1.14 per pound. This average has steadily decreased to $0.53 
per pound for the 1997-98 season. The Committee reviewed FOB values and 
determined that the average FOB value for the 1992-93 season through 
the 1997-98 season was $0.55 per pound. To address these concerns, the 
industry held several industry-wide planning sessions during May and 
June 1998.
    The Committee subsequently met on July 8, 1998, and unanimously 
recommended modifying Sec. 920.302 of the order's administrative rules 
and regulations to make the following changes:
    (1) Increase the size variation tolerance, from 10 percent, by 
count, in any one container, to 25 percent, by count, for Size 42 
kiwifruit;
    (2) Increase the maximum number of fruit per 8-pound sample for 
Sizes 42, 39, 36, 33, and 30 of kiwifruit packed in bags, volume fill, 
or bulk containers; and
    (3) Temporarily suspend, for the 1998-99 season, the minimum net 
weight requirements for kiwifruit packed in containers with cell 
compartments, cardboard fillers, or molded trays.

Increase in Size Variation Tolerance for Size 42 Kiwifruit

    Currently, a size variation tolerance of \1/4\-inch (6.4 mm) 
difference is allowed between the widest and narrowest kiwifruit in any 
Size 42 container utilizing cell compartments, cardboard fillers, or 
molded trays and a \3/8\-inch (9.5 mm) size variation difference is 
allowed between the widest and narrowest kiwifruit packed in a Size 42 
bag, volume fill, or bulk container. Not more than 10 percent, by 
count, of the containers in any lot and not more than 5 percent, by 
count, of kiwifruit in any container may fail to meet the established 
size variations for Sizes 39 and larger.
    Prior to the 1996-97 season, handlers were experiencing difficulty 
meeting the size variation tolerances for Sizes 42 and 45 kiwifruit 
because it is difficult to separate the round, narrow fruit from the 
flatter, broader fruit. Weight sizers will not separate this fruit 
because the fruit may weigh exactly the same yet be of different shapes 
requiring them to be packed into different containers in order to stay 
within the size variation requirements. This sizing problem occurs 
mostly in 40 series fruit where size variations are often indiscernible 
to the eye and calipers are needed to detect differences. Fruit packed 
in the 40 series consistently provides lower returns to California 
producers than larger sized fruit and also is the most costly to pack.
    The Committee determined that the best way to address the sizing 
problem was to increase the size variation tolerance, by count, in any 
one container, for Sizes 42 and 45 kiwifruit. Section 920.302(a)(4) of 
the order's administrative rules and regulations was revised by a final 
rule issued September 19, 1997 (52 FR 49128) to include a provision 
that increased the size variation tolerance, by count, in any one 
container, from 5 percent to 10 percent for Size 42 kiwifruit. That 
rule also increased the size variation tolerance, by count, for Size 45 
kiwifruit from 10 percent, by count, to 25 percent, by count.
    During the 1997-98 season, the increased size variation tolerances 
for Sizes 42 and 45 benefitted the industry by easing the packing 
burden and reducing costs, while maintaining uniform looking boxes of 
fruit desired by customers.
    Since the 1997-98 harvest, the industry has held several industry-
wide planning sessions and considered ways to reduce handler packing 
costs, increase producer returns, and enable handlers to compete more 
effectively in the marketplace. The three recommendations to relax pack 
requirements made by the Committee on July 8, 1998, were the final 
result of these discussions. The recommendation to increase the size 
variation tolerance for Size 42 fruit from 10 percent, by count, to 25 
percent, by count, was made because the Committee realized that 
increasing the number of fruit in an 8-pound sample for Size 42 fruit 
would make it difficult to meet the established size variation 
requirements. Increasing the size variation tolerance for Size 42 fruit 
will ease the packing burden created by adding several more pieces of 
fruit to the 8-pound sample, and will reduce handler packing costs.
    Additionally, increasing the size variation tolerance for Size 42 
from 10 percent, by count, to 25 percent, by count, will increase the 
number of kiwifruit that may exceed the 3/8-inch (9.5 mm) size 
variation requirement in bags, volume fill, or bulk containers. When 
applied to a 22-pound volume fill container, this increase in the size 
variation tolerance will allow approximately 37 pieces of fruit out of 
146 to exceed the 3/8-inch (9.5 mm) tolerance versus 15 pieces of fruit 
per 22-pound volume fill container at the current 10 percent tolerance 
level.
    Very little Size 42 kiwifruit is packed in single layer containers 
with cell compartments, cardboard fillers, or molded trays. However, 
Size 42 fruit is packed in 3-layer containers with cell compartments, 
cardboard fillers, or molded trays. Increasing the size variation 
tolerance to 25 percent, by count, will allow approximately 31 pieces 
of fruit out of 126 to exceed the 1/4-inch (6.4 mm) tolerance versus 
the 12 pieces of fruit per 3-layer container at the current 10 percent 
tolerance level.
    The impact of this change on producers and handlers is expected to 
be beneficial for all levels of business, but especially beneficial for 
small businesses. Often times, the very small packing operations have 
older, outdated sizing equipment which makes it difficult to size 
kiwifruit as precisely as to what the order's rules and regulations 
require. More hand labor is required in order to ``fine tune'' the 
sizing process. More hand labor slows the packing line and increases 
packing costs.
    The Committee expects that increasing the size variation tolerance 
for Size 42 kiwifruit will reduce packing costs because the additional 
tolerance will make it easier to pack round and flat Size 42 fruit 
without slowing down the packing line. Additionally, the Committee 
expects producer returns to increase as a portion of the fruit 
previously packed as Size 45 will be able to be packed as Size 42. 
Approximately 75 percent of all kiwifruit is shipped in 22-pound volume 
fill containers. Retailers pay approximately $1.14 more for a 22-pound 
volume fill container of Size 42 fruit than for a similar container of 
Size 45 fruit. Lastly, the Committee expects

[[Page 46865]]

this change will benefit the industry by providing retailers and 
consumers with uniform containers of kiwifruit.

Increasing the Maximum Number of Fruit per 8-Pound Sample

    Currently, under the rules and regulations, kiwifruit packed in 
bags, volume fill, or bulk containers, must not exceed the maximum 
number of fruit per an 8-pound sample per numerical count size 
designation.
    The Committee determined that increasing the maximum number of 
fruit per 8-pound sample for Sizes 42 through 30 will increase the 
number of fruit packed in each bag, volume-fill, or bulk container and 
will help lessen the sizing differences between California and imported 
kiwifruit. The Committee believes lessening the size differences should 
help California handlers compete more effectively in the marketplace.
    The Committee unanimously recommended increasing the maximum number 
of fruit per 8-pound sample as shown in the following chart:

------------------------------------------------------------------------
                                             Maximum number of fruit per
     Tray equivalency size  designation             8 pound sample      
------------------------------------------------------------------------
21.........................................  22                         
25.........................................  27                         
27/28......................................  30                         
30.........................................  * 33 (32)                  
33.........................................  * 36 (35)                  
36.........................................  * 42 (40)                  
39.........................................  * 48 (45)                  
42.........................................  * 53 (50)                  
45.........................................  55                         
------------------------------------------------------------------------
* Prior number of fruit per 8-pound sample.                             

    This chart is commonly referred to as the ``Size Designation 
Chart'' in the industry. Increasing the maximum number of fruit per 8-
pound sample will allow some smaller-sized fruit to be packed into a 
larger-size category. This rule allows three more pieces of fruit to be 
packed per 8-pound sample in Sizes 42 and 39, two more pieces of fruit 
to be packed in Size 36, and one more piece of fruit to be packed in 
Sizes 33 and 30. It also reduces the percentage of fruit packed in the 
40 series and increases the percentage of fruit packed in sizes 39 and 
36, which are the preferred sizes by U.S. retail. Thus, handlers will 
be better able to meet the needs of buyers because kiwifruit sells by 
the piece and buyers desire more fruit in each container. This change 
does not affect the minimum size and will not allow fruit currently 
considered as ``undersized'' to be packed. The Committee believes 
increasing the maximum number of fruit in the 8-pound sample will help 
lessen the sizing differences between California and imported 
kiwifruit. Lessening the size differences should help California 
handlers compete more effectively in the marketplace.
    The increase in the maximum number of fruit per 8-pound sample is 
not so significant that consumers or retailers will notice a visual 
size difference in the fruit being offered. The California Kiwifruit 
Commission, which administers a State program utilized to promote 
kiwifruit grown in California, has conducted kiwifruit sizing studies 
over the past 4 years. These studies show that there is only an average 
of \3/32\-inch to \4/32\-inch difference in fruit length between sizes, 
and \2/32\-inch to \3/32\-inch difference in fruit width. These 
differences are indistinguishable to the eye.
    Further, the 1998-99 crop is expected to approximate the 1997-98 
crop. The Committee estimated that utilizing the new size designations 
will yield the California kiwifruit industry $32,106,395 in FOB value 
versus the $30,931,451 received for the 1997-98 season. This is an 
additional $1.17 million in FOB value for the 1998-99 season.
    The Committee anticipates that these changes will equally benefit 
small and large businesses, enable handlers to compete more effectively 
in the marketplace, and help increase producer returns.

Minimum Net Weight Requirements

    Currently, fruit packed in containers with cell compartments, 
cardboard fillers, or molded trays are required to meet the minimum net 
weight requirements as shown in the following chart:

------------------------------------------------------------------------
                                                             Minimum net
                                                              weight of 
                Count designation of fruit                      fruit   
                                                              (Pounds)  
------------------------------------------------------------------------
34 or larger..............................................         7.5  
35 to 37..................................................         7.25 
38 to 40..................................................         6.875
41 to 43..................................................         6.75 
44 and smaller............................................         6.5  
------------------------------------------------------------------------

    Prior to the 1989-90 season, tray weights were voluntary and 73.5 
percent of the crop was packed in trays. During the 1989-90 season, 
tray weights were mandated, as there were many new packers involved in 
the kiwifruit packing process and stricter regulations were viewed as 
necessary to provide uniformity in tray weights. However, since that 
season less and less fruit has been packed in tray style packs.
    During the 1997-98 season, only 15.5 percent of the crop was packed 
into molded trays (singles and three-layers) and less than 1 percent of 
this fruit was rejected for failure to meet minimum tray weights. As a 
consequence, the Committee believes that minimum tray weight 
requirements may no longer be needed to assure uniform container 
weights in the marketplace. It further believes that suspension of this 
requirement will help reduce packing costs for both large and small 
handlers. Therefore, the Committee unanimously recommended that the 
minimum net weights for kiwifruit packed in cell compartments, 
cardboard fillers, or molded trays be temporarily suspended for the 
1998-99 season. The recommended suspension is for one season so the 
effects can be evaluated. The Committee further recommended that the 
suspension begin no later than September 20, 1998, to enable handlers 
to make operational decisions in time for the 1998-99 harvest and 
shipping season. The 1998-99 season ends July 31, 1999.
    Packing costs for handlers for a 22-pound volume fill container 
range from approximately $0.25 to $0.75 per container. It is 
anticipated that the potential cost savings per 22-pound volume fill 
container will be around $0.01. The crop estimate for the 1998-99 
season is 2,705,000, 22-pound volume fill container equivalents. It is 
estimated that the three recommended changes could result in a 
potential savings in packing costs for handlers of approximately 
$27,000 during the 1998-99 season. The Committee and the Federal-State 
Inspection Service determined that these changes will not result in a 
reduction in inspection costs as the inspection process is essentially 
the same.
    There is wide-spread agreement in the industry for the need to 
relax pack requirements. The Committee considered other alternatives to 
relaxing packing requirements but determined that these suggestions 
will not adequately address the industry's problems.
    One suggestion was to suspend all pack requirements and to make all 
pack requirements voluntary. Another suggestion was to terminate the 
order. The Committee did not adopt these suggestions because it 
believes they will result in a vast array of packs without uniformity, 
and that this will cause disorderly marketing and confusion in the 
marketplace. The Committee wants to maintain the reputation California 
has established for uniformly packed containers of kiwifruit to prevent 
such problems.
    Another suggestion presented was that the size markings should be 
based

[[Page 46866]]

on the number of pieces of fruit per pound. The Committee did not adopt 
this suggestion because it believes such marking practices would 
continue to cause inconsistencies in the marketplace. The Committee 
considered a suggestion to lower the minimum maturity requirement, but 
determined that the current minimum maturity requirement of 6.5 percent 
soluble solids was appropriate and should remain unchanged.
    Another suggestion presented was to reduce the number of size 
designations. Some Committee members thought that fewer size 
designations might lessen confusion in the marketplace. The Committee 
did not adopt this suggestion because retailers are familiar with the 
various size designations utilized by handlers and have not expressed 
concerns with the number of size designations.
    After considering these alternatives, the Committee recommended 
increasing the size variation tolerance for Size 42 kiwifruit, 
increasing the maximum number of fruit per 8-pound sample for Sizes 42 
through 30, and suspending, for the 1998-99 season, the minimum tray 
weight requirements for kiwifruit packed in cell compartments, 
cardboard fillers, or molded trays. The Committee expects these 
relaxations to pack requirements to reduce handler packing costs, 
increase producer returns, and enable handlers to compete more 
effectively in the marketplace.
    These changes address the marketing and shipping needs of the 
kiwifruit industry and are in the interest of handlers, producers, 
buyers, and consumers. The impact of these changes on producers and 
handlers is expected to be beneficial for all levels of business.
    This rule will 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 sectors. In addition, the Department has not identified any 
relevant Federal rules that duplicate, overlap, or conflict with this 
rule.
    Further, the Committee's meeting was widely publicized throughout 
the kiwifruit industry and all interested persons were invited to 
attend the meeting and participate in Committee deliberations. Like all 
Committee meetings, the July 8, 1998, meeting was a public meeting and 
all entities, both large and small, were able to express their views on 
this issue. The Committee itself is composed of 12 members. Three of 
these members are handlers and producers, eight are producers only, and 
one is a public member. The majority of the Committee members are small 
entities.
    Finally, interested persons are invited to submit information on 
the regulatory and informational impacts of this action on small 
businesses.
    After consideration of all relevant material presented, including 
the Committee's recommendation, and other information, it is found that 
this interim final rule, as hereinafter set forth, will tend to 
effectuate the declared policy of the Act.
    This rule invites comments on a relaxation of two pack requirements 
and the suspension of the minimum net weight requirements currently 
prescribed under the California kiwifruit marketing order. Any comments 
received will be considered prior to finalization of this rule.
    Pursuant to 5 U.S.C. 553, it is also found and determined upon good 
cause that it is impracticable, unnecessary, and contrary to the public 
interest to give preliminary notice prior to putting this rule into 
effect and that good cause exists for not postponing the effective date 
of this rule until 30 days after publication in the Federal Register 
because: (1) This rule relaxes pack requirements; (2) the 1998-99 
harvest is expected to begin the end of September, and this rule should 
be in effect before that time so producers and handlers can make plans 
to operate under the relaxed requirements; (3) the Committee 
unanimously recommended these changes at a public meeting and 
interested parties had an opportunity to provide input; and (4) this 
rule provides a 60-day comment period and any comments received will be 
considered prior to finalization of this rule.

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 
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.

    2. Section 920.302 is amended by suspending paragraph (a)(4)(iii) 
effective September 4, 1998, through July 31, 1999, and revising the 
last sentence of paragraph (a)(4)(ii), and the table in paragraph 
(a)(4)(iv) to read as follows:


Sec. 920.302  Grade, size, pack, and container regulations.

    (a)* * *
    (4)* * *
    (ii)* * * Not more than 10 percent, by count of the containers in 
any lot and not more than 5 percent, by count, of kiwifruit in any 
container, (except that for Sizes 42 and 45 kiwifruit, the tolerance, 
by count, in any one container, may not be more than 25 percent) may 
fail to meet the requirements of this paragraph.
* * * * *
    (iv) * * *

------------------------------------------------------------------------
                                                                Column 2
                                                                maximum 
                                                               number of
          Column 1 numerical count size designation            fruit per
                                                                8-pound 
                                                                 sample 
------------------------------------------------------------------------
21...........................................................         22
25...........................................................         27
27/28........................................................         30
30...........................................................         33
33...........................................................         36
36...........................................................         42
39...........................................................         48
42...........................................................         53
45...........................................................         55
------------------------------------------------------------------------

* * * * *
    Dated: August 28, 1998.
Robert C. Keeney,
Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 98-23711 Filed 9-2-98; 8:45 am]
BILLING CODE 3410-02-P