[Federal Register Volume 63, Number 216 (Monday, November 9, 1998)]
[Rules and Regulations]
[Pages 60209-60212]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-29937]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Parts 916 and 917

[Docket No. FV98-916-2 FIR]


Nectarines and Peaches Grown in California; Relaxation of Quality 
Requirements for Fresh Nectarines and Peaches

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: The Department of Agriculture (Department) is adopting, as a 
final rule, without change, the provisions of an interim final rule 
relaxing ``CA Utility'' quality requirements for California nectarines 
and peaches for the remainder of the 1998 season. The ``CA Utility'' 
quality requirements are based on minimum quality requirements 
established under the California Agricultural Code, with a limitation 
on the amount of fruit meeting U.S. No. 1 or higher grade requirements 
that may be present in each container marked ``CA Utility.'' The 
interim final rule increased that percentage to not more than 40 
percent except that at least one-quarter of the fruit grading U.S. No. 
1 in such containers must have non-scoreable blemishes. A non-scoreable 
blemish is a defect that does not cause fruit to fail U.S. No. 1 grade 
requirements. This rule continues in effect this relaxation for the 
remainder of the 1998 season. This rule allows more U.S. No. 1 
nectarines and peaches to be packed in containers marked ``CA 
Utility.'' The added packing flexibility provided by this rule is 
expected to benefit growers, handlers, and consumers.

EFFECTIVE DATE: November 10, 1998.

FOR FURTHER INFORMATION CONTACT: Terry Vawter, Marketing Specialist, or 
Kurt J. Kimmel, Regional Manager, California Marketing Field Office, 
Marketing Order Administration Branch, 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, 
or obtain a guide on complying with fruit, vegetable, and specialty 
crop marketing agreements and orders by contacting: Jay Guerber, 
Marketing Order Administration Branch, Fruit and Vegetable Programs, 
AMS, USDA, P.O. Box 96456, Room 2525-S, Washington, D.C. 20090-6456; 
telephone: (202) 720-2491, Fax: (202) 205-6632, or E-mail: 
Jay__N__G[email protected]. You may view the marketing agreement and 
order small business compliance guide at the following web site: http:/
/www.ams.usda.gov/fv/moab.html.

SUPPLEMENTARY INFORMATION: This rule is issued under Marketing 
Agreement Nos. 124 and 85, and Marketing Order Nos. 916 and 917 (7 CFR 
Parts 916 and 917) regulating the handling of nectarines and peaches 
grown in California, respectively, hereinafter referred to as the 
``orders.'' The orders are effective under the Agricultural Marketing 
Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter 
referred to as the Act.
    The Department is issuing this rule in conformance with Executive 
Order 12866.
    This rule has been reviewed under Executive Order 12866, 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 continues in effect, for the remainder of the 1998 
season, the modification to the orders' administrative rules and 
regulations relaxing the ``CA Utility'' quality requirement by allowing 
more U.S. No. 1 grade nectarines and peaches in containers marked ``CA 
Utility.'' Prior to the publication of an interim final rule (63 FR 
50461, September 22, 1998), the term ``CA Utility'' meant that not more 
than 30 percent of the nectarines and peaches in any container could 
meet or exceed the requirements of the U.S. No. 1 grade, and that the 
fruit meet other specified requirements. The interim final rule 
increased that percentage to 40 percent except that at least one-
quarter of the fruit grading U.S. No. 1 in such containers must have 
non-scoreable blemishes. A non-scoreable blemish is a defect that will 
not cause the fruit to fail to meet the requirements of U.S. No. 1. 
This relaxation is in effect for the remainder of the 1998 season only, 
and allows more No. 1 grade fruit to be packed as ``CA Utility'' 
quality.
    The Nectarine Administrative Committee (NAC) and Peach Commodity 
Committee (PCC) (committees) met on September 15, 1998, to discuss this 
relaxation. At that time, the NAC voted without opposition to recommend 
the increased percentage of U.S. No. 1 nectarines with non-scoreable 
blemishes. The PCC voted with eight in favor and one opposed to 
recommend a similar change. The member opposed believed that it was too 
late in the season to make such a change, that such a change would 
disadvantage those who had already

[[Page 60210]]

shipped ``CA Utility'' fruit in 1998, and that more study and analysis 
of the situation was needed.
    Sections 916.52 and 917.41 of the orders authorize the 
establishment of grade and quality requirements for nectarines and 
peaches, respectively. Prior to the 1996 season, Sec. 916.356 of the 
order's rules and regulations required nectarines to meet a modified 
U.S. No. 1 grade. Specifically, nectarines were required to meet U.S. 
No. 1 grade requirements, except there was a slightly tighter 
requirement for scarring and a more liberal allowance for misshapen 
fruit. Under Sec. 917.459 of the order's rules and regulations prior to 
the 1996 season, peaches were also required to meet the requirements of 
a U.S. No. 1 grade, except there was a more liberal allowance for open 
sutures that were not ``serious damage.''
    The minimum grade, size, and maturity requirements in Sec. 916.356 
applicable to shipments of California nectarines apply during the 
period April 1 through October 31 each year. The minimum grade, size, 
and maturity requirements in Sec. 917.459 applicable to shipments of 
California peaches apply during the period April 1 through November 23 
each year.
    Since the 1996 shipping season, the nectarine and peach regulations 
have allowed ``CA Utility'' quality to be shipped during the regulatory 
periods. Utility quality is a lower-quality fruit than U.S. No. 1.
    Containers marked as ``CA Utility'' must be inspected by the 
Federal or Federal-State Inspection Service and certified as meeting 
the ``CA Utility'' quality requirements. Part of the inspection process 
is to evaluate containers of fruit in accordance with the requirements 
of the U.S. Standards for Grades of Nectarines, the U.S. Standards for 
Grades of Peaches, and the orders. In conducting inspections, 
inspectors are required to evaluate various blemishes. Some blemishes 
are serious or severe enough to be ``scored'' as defects which are 
damaging to the grade of the fruit, while some other blemishes are not 
serious or severe enough to affect the grade of the fruit. In the first 
instance, the blemishes are termed ``scoreable'' defects; and in the 
second instance, the blemishes are termed ``non-scoreable.'' It was the 
recommendation of the committees that such non-scoreable blemishes must 
be present on at least one-quarter of the 40 percent of the fruit 
grading U.S. No. 1 in boxes marked ``CA Utility.''
    While containers marked ``CA Utility'' fruit are subject to relaxed 
quality requirements, all other requirements of the orders must be met.
    In addition to the grade requirements, Secs. 916.350 and 917.442 
require each package or container of nectarines and peaches, 
respectively, shipped which meets the requirements of ``CA Utility,'' 
to be conspicuously marked with the words ``CA Utility'' on a visible 
display panel.
    Through August 31 of the 1998 season, shipments of ``CA Utility'' 
quality nectarines and peaches averaged about 4 percent of total 
shipments. In prior seasons, utility quality shipments have been less 
than 2 percent. The increase this season has been attributed to quality 
problems resulting from heavy early season rains. Also, hail storms 
later during the season damaged some fruit and rendered it unsalable, 
while some fruit sustained only moderate scarring. This was especially 
true for nectarines, whose smooth skin does not provide the same 
protection as the fuzzy exterior of peaches.
    Preliminary studies conducted by the NAC and PCC indicate that some 
consumers, retailers, and foreign buyers found the lower-quality fruit 
acceptable in some markets. Shipments of ``CA Utility'' nectarines 
represented 1.1 percent of all nectarine shipments, or approximately 
210,000 boxes in 1996. In 1997, shipments of ``CA Utility'' nectarines 
represented 1.1 percent of all nectarine shipments, or approximately 
230,000 boxes. Shipments of ``CA Utility'' peaches represented 1.9 
percent of all peach shipments, or 366,000 boxes in 1996. In 1997, 
shipments of ``CA Utility'' peaches represented 1.0 percent of all 
peach shipments, or approximately 217,000 boxes. By contrast, shipments 
of ``CA Utility'' nectarines represented 4.0 percent of all nectarine 
shipments, or approximately 694,881 boxes by August 31 of the 1998 
season. Shipments of ``CA Utility'' peaches represented 4.0 percent of 
all peach shipments, or approximately 544,065 boxes by August 31 of the 
1998 season.
    The interim final rule amended Secs. 916.356 and 917.459 by 
revising paragraph (a)(1) under each section to allow not more than 40 
percent U.S. No. 1 grade fruit to be packed in containers marked as 
``CA Utility'' except that at least one-quarter of the fruit grading 
U.S. No. 1 in such container must have non-scoreable blemishes. This 
final rule continues in effect that revision.
    At the September 15, 1998, committee meetings, comments supporting 
the recommendation were made by handlers who had experienced incidents 
where the percentage of U.S. No. 1 fruit contained in their ``CA 
Utility'' boxes was found to be higher than permitted by the orders' 
rules and regulations. In those instances, they were forced to repack 
the boxes, move blemished fruit to boxes containing all U.S. No. 1 
fruit, or discard or donate the fruit.
    At least one handler complained that the fruit with non-scoreable 
blemishes was unsightly in the type of U.S. No. 1 box he offered to the 
marketplace and to his customers. His preference was to place the fruit 
with non-scoreable blemishes in boxes marked ``CA Utility.'' The 
limitation of not more than 30 percent U.S. No. 1 fruit in boxes marked 
``CA Utility'' became a greater hindrance as the season progressed. The 
handler also noted that an unseasonable morning rain in late summer 
caused dark stains on the skin of nectarines, rendering them unsuitable 
for inclusion in his U.S. No. 1 boxes. He preferred including such 
fruit in the ``CA Utility'' boxes, but doing so caused the ``CA 
Utility'' boxes to contain more than the 30 percent U.S. No. 1 fruit 
permissible.
    A niche market exists for utility quality fruit and the relaxation 
provided by the interim final rule presented an opportunity for 
handlers to market somewhat better quality ``CA Utility'' fruit to meet 
demand. Allowing ten percent more U.S. No. 1 grade fruit to be packed 
as ``CA Utility'' quality requirements allowed more fruit to be 
marketed as ``CA Utility'' if handlers prefer to do so. ``CA Utility'' 
quality fruit is generally made available at lower prices to especially 
benefit lower-income consumers.
    Some committee members initially continued to support limiting the 
amount of U.S. No. 1 grade fruit that can be included in a utility pack 
to 30 percent of the total in any container to maintain distinct 
differences between U.S. No. 1 containers and ``CA Utility'' 
containers. However, after further discussion, it was agreed that a 
greater percentage of U.S. No. 1 in a ``CA Utility'' container would 
not be confusing if such fruit were also blemished. It was, therefore, 
agreed that an additional 10 percent U.S. No. 1 would be permitted 
except that every piece of fruit in that 10 percent must possess a non-
scoreable blemish. This relaxation is in effect for the remainder of 
the 1998 season. Boxes marked ``CA Utility'' should be clearly distinct 
from boxes containing U.S. No. 1 grade. Failure to provide a clear 
distinction could cause confusion in the marketplace and would not meet 
the goal of providing low-cost fruit to low-income consumers. It was 
the opinion of the committees that this relaxation would not cause 
confusion among buyers.

[[Page 60211]]

    Data on recent production and shipments of California nectarines 
and peaches appear to indicate that ``CA Utility'' quality fruit can be 
marketed successfully without interfering with sales of higher quality 
fruit. In fact, some handlers noted that they used the ``CA Utility'' 
box as a ``safety net.'' Fruit which was not good enough to meet their 
own criteria for packing in U.S. No. 1 boxes could be better utilized 
in boxes of ``CA Utility.'' The advent of ``CA Utility'' quality 
requirements has given handlers the increased flexibility to improve 
the overall appearance of their U.S. No. 1 shipments.
    For these reasons, the NAC and PCC recommended, for the remainder 
of the 1998 season, that the percentage of U.S. No. 1 nectarines and 
peaches permitted in containers marked as ``CA Utility'' quality be 
increased from 30 percent to 40 percent except that at least one-
quarter of the fruit grading U.S. No. 1 in such containers must have 
non-scoreable blemishes. This relaxation remains in effect for the 
remainder of the 1998 season. The committees also voted to review the 
percentages during the winter.
    Pursuant to the requirements set forth in the Regulatory 
Flexibility Act (RFA), the Agricultural Marketing Service (AMS) has 
considered the economic impact of this action on small entities. 
Accordingly, AMS has prepared this final regulatory flexibility 
analysis.
    The purpose of the RFA is to fit regulatory actions to the scale of 
business subject to such actions in order that small businesses will 
not be unduly or disproportionately burdened. Marketing orders issued 
pursuant to the Act, and rules issued thereunder, are unique in that 
they are brought about through group action of essentially small 
entities acting on their own behalf. Thus, both statutes have small 
entity orientation and compatibility.
    There are approximately 300 California nectarine and peach handlers 
subject to regulation under the orders covering nectarines and peaches 
grown in California, and about 1,800 producers of these fruits in 
California. Small agricultural service firms, which include handlers, 
are defined by the Small Business Administration [13 CFR 121.601] as 
those whose annual receipts are less than $5,000,000. Small 
agricultural producers have been defined as those having annual 
receipts of less than $500,000. A majority of these handlers and 
producers may be classified as small entities.
    Under Secs. 916.356 and 917.459 of the orders, grade and size 
requirements are established for fresh shipments of California 
nectarines and peaches, respectively. Such requirements are in effect 
during the period April 1 through October 31 each year for nectarines, 
and April 1 through November 23 for peaches. The interim final rule 
relaxed, for the remainder of the 1998 season only, the definition of 
``CA Utility'' quality for California nectarines and peaches. The ``CA 
Utility'' quality requirements are based on minimum quality 
requirements established under the California Agricultural Code, with a 
limitation on the amount of fruit meeting U.S. No. 1 or higher grade 
requirements that may be contained in the utility pack. Prior to the 
publication of the interim final rule, the ``CA Utility'' quality 
requirement permitted not more than 30 percent of the nectarines or 
peaches in any container to meet or exceed the requirements of a U.S. 
No. 1. The interim final rule increased that percentage to not more 
than 40 percent except that at least one-quarter of the fruit grading 
U.S. No. 1 in such container must have non-scoreable blemishes. A non-
scoreable blemish is a defect that does not cause the fruit to fail to 
meet U.S. No. 1 grade requirements. This rule continues this relaxation 
and is expected to benefit growers, handlers, and consumers.
    Since the 1996 shipping season, the nectarine and peach regulations 
have allowed ``CA Utility'' quality fruit to be shipped during the 
regulatory periods. Prior to the 1996 season, Sec. 916.356 of the 
order's rules and regulations required nectarines to meet a modified 
U.S. No. 1 grade. Specifically, nectarines were required to meet U.S. 
No. 1 grade requirements, except there was a slightly tighter 
requirement for scarring and a more liberal allowance for misshapen 
fruit. Under Sec. 917.459 of the order's rules and regulations prior to 
the 1996 season, peaches were also required to meet the requirements of 
a U.S. No. 1 grade, except there was a more liberal allowance for open 
sutures that were not ``serious damage.'' ``CA Utility'' quality is a 
lower-quality fruit than U.S. No. 1 and has been regulated since its 
inception in the 1996 season. Through August 31 of the 1998 season, 
shipments of utility quality for both nectarines and peaches have 
averaged about 4 percent of total shipments. In prior seasons, utility 
quality shipments have been in the 1 to 2 percent range. The increase 
so far this season is mostly attributed to quality problems resulting 
from heavy early season rains.
    A niche market exists for ``CA Utility'' quality fruit and the 
relaxation provided by the interim final rule presented an opportunity 
for handlers to market somewhat better quality ``CA Utility'' fruit to 
meet demand.
    According to comments made at the meeting on September 15, 1998, 
changing the requirements to allow additional U.S. No. 1 fruit to be 
packed in ``CA Utility'' containers did not disadvantage those handlers 
who had already finished for the season. Those handlers were able to 
put fruit grading U.S. No. 1 into their U.S. No. 1 containers. Since 
they would have likely wanted to pack such fruit in these containers to 
receive the higher return anticipated for U.S. No. 1 fruit, they have 
not been harmed economically. Therefore, no harm was done by 
implementing this relaxation that late in the season.
    Therefore, the NAC and PCC recommended changing the ``CA Utility'' 
quality at their September 15, 1998, meetings by modifying the 
percentage of U.S. No. 1 fruit in each box. The committees also voted 
to review the percentages during the winter.
    In Secs. 916.350 and 917.442 of the orders regulating nectarines 
and peaches, respectively, lower-quality nectarines and peaches were 
authorized for shipment as ``CA Utility'' as an experiment for the 1996 
season only. Such authorization was continued during the 1997 and 1998 
seasons. The interim final rule increased the percentage of U.S. No. 1 
nectarines and peaches which could be packed in a container marked ``CA 
Utility'' for the remainder of the 1998 season except that the fruit 
grading U.S. No. 1 must have a specified percentage of non-scoreable 
blemishes.
    During the 1996 season, the Department authorized the shipment of 
nectarines and peaches which were of a lower quality than the minimum 
permitted for previous seasons. During 1996, there were approximately 
210,000 boxes of nectarines and approximately 366,000 boxes of peaches 
packed as ``CA Utility,'' or 1.1 percent and 1.9 percent of fresh 
shipments, respectively. During 1997, there were approximately 230,000 
boxes of nectarines and 217,000 boxes of peaches packed as ``CA 
Utility,'' or 1.1 percent and 1.0 percent of fresh shipments, 
respectively. By contrast, shipments of ``CA Utility'' nectarines 
represented 4.0 percent of all nectarine shipments, or approximately 
694,881 boxes by August 31 of the 1998 season. Shipments of ``CA 
Utility'' peaches represented 4.0 percent of all peach shipments, or 
approximately 544,065 boxes by August 31 of the 1998 season. Continued 
availability of ``CA Utility'' quality fruit with the increased 
percentage of non-scoreable defects is expected to have a positive 
impact on producers, handlers, and consumers by

[[Page 60212]]

permitting more nectarines and peaches to be shipped into fresh market 
channels, without adversely impacting the market for higher quality 
fruit.
    The committees considered several alternatives at the meeting. One 
alternative was to leave the percentage of U.S. No. 1 nectarines and 
peaches permitted in ``CA Utility'' containers unchanged. It was 
determined that alternative would not address the problem which faced 
the industry. The NAC and PCC also considered increasing the 30 percent 
U.S. No. 1 tolerance to not more than 40 percent or to not more than 50 
percent, but determined that such a relaxation could render ``CA 
Utility'' boxes less distinctive from U.S. No. 1 and create confusion 
in the marketplace. Another alternative included a requirement that at 
least 90 percent of the individual fruits in all boxes marked with ``CA 
Utility'' possess defects. Such a requirement would create a box of 
fruit which would be distinct from U.S. No. 1 due to a greater number 
of defects present. However, this alternative was determined to be 
unacceptable because it represented too radical a change of ``CA 
Utility'' quality given the emergency nature of the recommendation. 
This alternative failed to offer a sound basis for comparison with the 
requirement of not more than 30 percent U.S. No. 1 because it did not 
reference the U.S. No. 1 grade. Such comparison may be necessary as the 
committees continue to study marketplace reaction to changes in quality 
requirements of ``CA Utility.''
    This action does not impose any additional reporting and 
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. In accordance with 
the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), the 
information collection requirements that are contained in Parts 916 and 
917 have been previously approved by the Office of Management and 
Budget (OMB) and have been assigned OMB Nos. 0581-0072 and 0581-0080, 
respectively.
    The Department has not identified any relevant Federal rules that 
duplicate, overlap, or conflict with this rule. However, as previously 
stated, nectarines and peaches under the orders have to meet certain 
requirements set forth in the standards issued under the Agricultural 
Marketing Act of 1946 (7 U.S.C. 1621 through 1627). Standards issued 
under the Agricultural Marketing Act of 1946 are otherwise voluntary.
    In addition, the committees' meetings were widely publicized 
throughout the nectarine and peach industries and all interested 
parties were invited to attend the meetings and participate in 
committee deliberations on all issues. Like all committee meetings, the 
September 15, 1998, meetings were public meetings and all entities, 
both large and small, were able to express views on these issues. The 
committees themselves are composed of producers, the majority of whom 
are small entities.
    An interim final rule concerning this action was published in the 
Federal Register on September 22, 1998. Copies of the rule were made 
available to all committee members and nectarine and peach handlers by 
the committees' staff. The rule was also made available through the 
Internet by the Office of the Federal Register. That rule provided for 
a 15-day comment period which ended October 7, 1998. No comments were 
received.
    After consideration of all relevant matter presented, including the 
information and recommendations submitted by the committees, and other 
available information, it is hereby found that finalizing the interim 
final rule, without change, as published in the Federal Register (63 FR 
50461, September 22, 1998) will tend to effectuate the declared policy 
of the Act.
    It is further found that good cause exists for not postponing the 
effective date of this rule until 30 days after publication in the 
Federal Register (5 U.S.C. 553) because the changes made to the 
regulations were to relax the ``California Utility'' quality 
requirements for California nectarines and peaches for the remainder of 
the 1998 season and the season has ended or will end shortly for these 
commodities. Accordingly, this rule should be made final as soon as 
possible. Also, a 15-day comment period was provided for in the interim 
final rule and no comments were received.

List of Subjects

7 CFR Part 916

    Marketing agreements, Nectarines, Reporting and recordkeeping 
requirements.

7 CFR Part 917

    Marketing agreements, Peaches, Pears, Reporting and recordkeeping 
requirements.

PART 916--NECTARINES GROWN IN CALIFORNIA

    Accordingly, the interim final rule amending 7 CFR part 916 which 
was published at 63 FR 50461 on September 22, 1998, is adopted as a 
final rule without change.

PART 917--FRESH PEARS AND PEACHES GROWN IN CALIFORNIA

    Accordingly, the interim final rule amending 7 CFR part 917 which 
was published at 63 FR 50461 on September 22, 1998, is adopted as a 
final rule without change.

    Dated: November 4, 1998.
Robert C. Keeney,
Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 98-29937 Filed 11-6-98; 8:45 am]
BILLING CODE 3410-02-P