[Federal Register Volume 64, Number 37 (Thursday, February 25, 1999)]
[Rules and Regulations]
[Pages 9265-9268]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-4727]



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 Rules and Regulations
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  Federal Register / Vol. 64, No. 37 / Thursday, February 25, 1999 / 
Rules and Regulations  

[[Page 9265]]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 930

[Docket No. FV99-930-1 IFR]


Tart Cherries Grown in the States of Michigan, New York, 
Pennsylvania, Oregon, Utah, Washington, and Wisconsin; Additional 
Option for Handler Diversion and Receipt of Diversion Credits

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Interim final rule with request for comments.

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SUMMARY: This interim final rule adds a method of handler diversion to 
the regulations under the Federal tart cherry marketing order (order). 
Handlers handling cherries harvested in a regulated district may 
fulfill any restricted percentage requirement when volume regulation is 
in effect by diverting cherries or cherry products rather than by 
placing them in an inventory reserve. Under this additional method, 
handlers will be allowed to obtain diversion certificates when 
marketable finished tart cherry products are accidentally destroyed at 
a handler's facility. In addition, this rule removes a paragraph in the 
regulations which limits diversion credit for exempted products to one 
million pounds each crop year. The order regulates the handling of tart 
cherries grown in the States of Michigan, New York, Pennsylvania, 
Oregon, Utah, Washington, and Wisconsin and is administered locally by 
the Cherry Industry Administrative Board (Board).

DATES: Effective February 26, 1999; comments received by April 26, 
1999, 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) 720-5698 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: Patricia A. Petrella or Kenneth G. 
Johnson, Marketing Order Administration Branch, F&V, AMS, USDA, room 
2530-S, P.O. Box 96456, Washington, DC 20090-6456, telephone: (202) 
720-2491. 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, DC 20090-
6456; telephone (202) 720-2491; Fax: (202) 720-5698, or E-mail: 
Jay__N__G[email protected]. You may also view the marketing agreements 
and orders small business compliance guide at the following website: 
http://www.ams.usda.gov/fv/moab.html.

SUPPLEMENTARY INFORMATION: This rule is issued under Marketing 
Agreement and Order No. 930 (7 CFR part 930) regulating the handling of 
tart cherries grown in the States of Michigan, New York, Pennsylvania, 
Oregon, Utah, Washington, and Wisconsin, hereinafter referred to as the 
``order.'' This 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 or USDA) is issuing this 
rule in conformance with Executive Order 12866.
    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule adds a method of handler diversion to the 
regulations for the 1998-99 crop year beginning July 1, 1998 through 
June 30, 1999, and subsequent crop years. It also removes a provision 
from the regulation which limits diversion credit for exempted products 
to one million pounds for each crop year. 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 date of the entry of the ruling.
    This rule provides for an additional method of handler diversion. 
Handler diversion is authorized under section 930.59 of the order and, 
when volume regulation is in effect, handlers may fulfill restricted 
percentage requirements by diverting cherries or cherry products. 
Volume regulation is intended to help the tart cherry industry 
stabilize supplies and prices in years of excess production. The volume 
regulation provisions of the order provide for a combination of 
processor owned inventory reserves and grower or handler diversion of 
excess tart cherries. Reserve cherries may be released for sale into 
commercial outlets when the current crop is not expected to fill 
demand. Under certain circumstances, such cherries may also be used for 
charity, experimental purposes, nonhuman use, and other approved 
purposes.
    Section 930.59(b) of the order provides for the designation of 
allowable forms of handler diversion. These include: uses exempt under 
section 930.62; contribution to a Board approved food bank or other 
approved charitable organization; acquisition of grower diversion 
certificates that have been issued in accordance with section 930.58; 
or other uses, including diversion by destruction of the cherries

[[Page 9266]]

at the handler's facilities as provided for in section 930.59(c).
    Section 930.159 of the rules and regulations under the order allows 
handlers to divert cherries by destruction of the cherries at the 
handler's facility. At-plant diversion of cherries takes place at the 
handler's facility prior to placing cherries into the processing line. 
This is to ensure that the cherries diverted were not simply an 
undesirable or unmarketable product of processing. The additional 
method for handler diversion for finished tart cherry products 
accidentally destroyed should not be confused with at-plant diversion 
as previously mentioned.
    The Board has unanimously recommended that handlers should receive 
diversion credit when marketable, finished cherry products are 
accidentally destroyed at a handler's facility. For the purposes of 
this rule, products will be considered destroyed if they sustain damage 
which renders them unacceptable in normal market channels. For example, 
finished, marketable cherry products could be accidentally destroyed in 
a fire, explosion, or freezer malfunction. In order to receive 
diversion credit under this added option, the Board recommended that 
the cherry products must: (1) Be owned by the handler at the time of 
accidental destruction; (2) be a marketable product at the time of 
processing; (3) be included in the handler's end of the year handler 
plan; and (4) have been assigned a Raw Product Equivalent (RPE) by the 
handler to determine the volume of cherries. In addition, the 
accidental destruction, as well as the disposition of the cherries must 
be verified by either a USDA inspector or Board agent or employee. 
Verification would be accomplished by having a USDA inspector or Board 
employee witness the disposition of the destroyed product. For the 
purpose of proper control and oversight, the measures recommended by 
the Board are considered to be appropriate.
    At the Board meeting, there was a discussion that accidents may 
occur at a handler's facility after the processing of cherries has 
taken place. Freezers have collapsed and malfunctioned rendering the 
finished product unmarketable. The Board noted that one of the goals of 
the volume regulation program is to control the flow of marketable 
fruit in the marketplace. Therefore, it was the Board's recommendation 
that finished marketable products accidentally destroyed should be 
allowed diversion credit.
    The Board also specifically mentioned an incident that had occurred 
in the industry where a handler's finished goods were accidentally 
destroyed. In this incident, the handler's finished cherry products 
were stacked in containers on pallets in a freezer. A pallet broke and 
the stacked containers of cherry products toppled over and damaged the 
interior walls of the freezer rendering it inoperable. The cherries 
were unmarketable due to the contamination of the product as a result 
of the damaged freezer. This created a financial hardship for the 
handler. If diversion credit is allowed in cases of accidental 
destruction of products, such hardship could be avoided. For example, 
additional tonnage to meet any restricted percentage obligation amounts 
would not need to be obtained.
    Handlers wishing to obtain diversion certificates for finished tart 
cherry products which are accidentally destroyed must apply for such 
diversion certificates and sign an agreement that disposition of the 
destroyed product will take place under the supervision of USDA's 
Processed Products Branch inspectors or Board inspectors. This will 
allow the Board to verify that finished product was unmarketable and 
that it was disposed of.
    Once diversion is satisfactorily accomplished, handlers will 
receive diversion certificates stating the weight of cherries diverted. 
Such diversion certificates can be used to satisfy handlers' restricted 
percentage obligations.
    In addition, this rule removes a paragraph in the regulations which 
limits diversion credit for exempted products to one million pounds 
each crop year. Currently, section 930.159 provides for diversion 
credit of up to one million pounds of exempted products each crop year. 
Exempted products can include products used in new product development 
and new market development. Exempted products can also include those 
that are used to expand the use of new or different products or the 
sales of existing products, or those that are exported to countries 
other than Canada, Mexico, and Japan, provided that, such cherry 
products can not include juice or juice concentrate.
    The supplementary information in the rulemaking which implemented 
section 930.159 on January 6, 1998, (63 FR 399; interim final rule) and 
April 22, 1998, (63 FR 20012; final rule), states that during its 
deliberations, the Board discussed its view that allowing diversion 
credit for exempt uses would provide adequate flexibility for 
individual handlers to ship cherries. The Board, however, recommended 
providing some restriction on the absolute volume of such allowable 
diversions until more experience with the program had been obtained, 
and that restriction was set at one million pounds. The one million 
pound limit on exempted product did not apply to those products 
receiving export diversions. The Board also indicated that it would be 
continuing to review the issue of what limits to impose on exempted 
products.
    During the 1997 season, 2.7 million pounds of exempted products for 
new market and product development received diversion credit. In recent 
seasons, sales to export markets have risen dramatically. In 1997, 
export sales of 61.1 million pounds represented 379 percent of 1994 
sales (16.1 million pounds). There was also an increase in export sales 
to those destinations exempt from volume regulation (countries other 
than Canada, Japan, and Mexico), rising from 12.2 million pounds to 
48.7 million pounds. In view of the dynamics taking place in the cherry 
industry, and particularly the expanding markets and opportunities, the 
Board does not believe that the one million pound exemption should be 
continued. The removal of the one million pound limitation on exempted 
products should continue to encourage the further development of new 
markets and new tart cherry products and should have no detrimental 
affect. Therefore, section 930.159(f) of the regulations is removed.

The Regulatory Flexibility Act and Effects on Small Businesses

    The Agricultural Marketing Service (AMS) has considered the 
economic impact of this action on small entities and has prepared this 
initial regulatory flexibility analysis. The Regulatory Flexibility Act 
(RFA) would allow AMS to certify that regulations do not have a 
significant economic impact on a substantial number of small entities. 
However, as a matter of general policy, AMS' Fruit and Vegetable 
Programs (Programs) no longer opt for such certification, but rather 
perform regulatory flexibility analyses for any rulemaking that would 
generate the interest of a significant number of small entities. 
Performing such analyses shifts the Programs' efforts from determining 
whether regulatory flexibility analyses are required to the 
consideration of regulatory options and economic or regulatory impacts.
    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.

[[Page 9267]]

Marketing orders issued pursuant to the Act, and rules 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 40 handlers of tart cherries who are 
subject to regulation under the order and approximately 1,220 producers 
of tart cherries in the regulated area. Small agricultural service 
firms, which includes handlers, 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. The majority of handlers 
and producers of tart cherries may be classified as small entities.
    The principal demand for tart cherries is in the form of processed 
products. Tart cherries are dried, frozen, canned, juiced and pureed. 
During the period 1993/94 through 1997/98, approximately 89 percent of 
the U.S. tart cherry crop, or 281.1 million pounds, was processed 
annually. Of the 281.1 million pounds of tart cherries processed, 63 
percent was frozen, 25 percent canned and 4 percent utilized for juice. 
The remaining 8 percent was dried or assembled into juice packs.
    The Board reported that for the 1997-98 crop year 48.7 million 
pounds of cherries received export diversion and 7.1 million pounds 
were diverted at handlers' facilities.
    Section 930.59 of the tart cherry marketing order provides 
authority for handler diversion. Handlers handling cherries harvested 
in a regulated district may fulfill any restricted percentage 
requirement in full or in part through diversion of cherries or cherry 
products in a program approved by the Board, rather than placing 
cherries in an inventory reserve. Handlers can divert by destruction of 
the cherries at the handler's facility, making charitable donations and 
selling cherry products in exempt outlets or by redeeming grower 
diversion certificates obtained from growers who have diverted cherries 
by non-harvest, and who have been issued diversion certificates by the 
Board. This rule will provide for handler diversion certificates in 
cases where marketable, finished tart cherry products are accidentally 
destroyed and thus rendered unacceptable in the marketplace. Such 
diversion certificates can be used to satisfy the handler's restricted 
percentage obligation. This enables handlers to either place cherries 
into an inventory reserve or select the diversion option most 
advantageous to their particular business operation. Providing such 
diversion allows handlers to minimize processing and storage costs 
associated with meeting restricted percentage obligations. Such cost 
savings may also be passed on to growers and consumers. Thus, this 
amendment accomplishes the purposes of the order and the Act, one of 
which is to increase grower returns and stabilize supplies with demand.
    The impact of this rule will be beneficial to growers and handlers. 
Allowing this additional diversion option, will prevent financial 
hardships if marketable finished tart cherry products are destroyed by 
accident. An alternative to this rule would be to not grant diversion 
credit for such products. However, this is not in the best interest of 
the industry. The marketing order's volume regulation feature was 
designed to increase grower returns by stabilizing supplies with 
demand. Providing for handler diversion is one of the mechanisms 
employed to accomplish this goal. Handlers may divert cherries by 
destroying them at their facility. Therefore, allowing diversion credit 
for products which are accidentally destroyed, will not be inconsistent 
with the overall regulatory scheme.
    In addition, this rule removes a paragraph in the regulations which 
limits diversion credit for exempted products to one million pounds 
each crop year. Currently, section 930.159 provides for diversion 
credit of up to one million pounds of exempted products each crop year, 
with the exception of exported products for the 1997 season. The Board 
had recommended providing some restriction on the absolute volume of 
such allowable diversions until more experience with the program has 
been obtained. The one million pound limitation for exempted products 
did not apply to diversion credit for exports for the 1997 season. The 
Board continued reviewing the issue of what limits, if any, to impose 
on exempted products.
    During the 1997 season, 2.7 million pounds of exempted products for 
new market and product development received diversion credit. In recent 
seasons, sales to export markets have risen dramatically. In 1997, 
export sales of 61.1 million pounds represented 379 percent of 1994 
sales (16.1 million pounds). There was also an increase in export sales 
to those destinations exempt from volume regulation (countries other 
than Canada, Japan, and Mexico), rising from 12.2 million pounds to 
48.7 million pounds. In view of the dynamics taking place in the cherry 
industry, and particularly the expanding markets and opportunities, the 
Board does not believe that the one million pound exemption should be 
continued. The removal of the one million pound limitation on exempted 
products should continue to encourage the further development of new 
markets and new tart cherry products and should have no detrimental 
affect. Therefore, section 930.159(f) of the regulations is removed. 
This action will provide more flexibility to handlers by allowing them 
to expand markets and new product opportunities.
    In compliance with Office of Management and Budget (OMB) 
regulations (5 CFR Part 1320) which implement the Paperwork Reduction 
Act of 1995 (44 U.S.C. Chapter 35), the information collection and 
recordkeeping requirements imposed by this order have been previously 
approved by OMB and assigned OMB Number 0581-0177. Included in the OMB 
approval is the Handler Reserve Plan and Final Pack Report which 
handlers must submit to utilize at-plant and exempt use diversion and 
the requirements for other reports related to handler diversion and 
handlers meeting their restricted percentage obligations. Handlers 
applying for diversion credit for marketable finished tart cherry 
products accidentally destroyed do not have to submit an additional 
Handler Plan and Pack Report to the Board. Handlers can make changes in 
their previously submitted Handler Plan and Final Pack Report to 
account for product accidentally destroyed.
    Accordingly, this rule will not impose any additional recordkeeping 
requirements on either small or large tart cherry 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 which duplicate, overlap or conflict with this 
rule.
    The Board's meetings were widely publicized throughout the tart 
cherry industry and all interested persons were invited to attend them 
and participate in Board deliberations. Like all Board meetings, the 
September 1998 meeting was a public meeting and all entities, both 
large and small, were able to express their views on these issues. The 
Board itself is composed of 18 members, of which 17 members are growers 
and handlers and one represents the public. Also, the Board has a 
number of appointed committees to review certain issues and make 
recommendations.
    The Board considered alternatives to its recommendations. These 
included

[[Page 9268]]

not granting diversion credit and continuing to impose limitations on 
the volume of exempted product receiving diversion credit. However, 
this was determined as not being in the best interest of the industry.
    This rule invites comments on granting handlers diversion credit 
for accidentally destroyed marketable finished tart cherry products, 
and removing the one million pound limitation on exempted products. 
Also, 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 Board'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.
    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 60 days after publication in the Federal Register 
because: (1) This rule relaxes requirements by providing an additional 
opportunity for handlers to receive diversion credit and fulfill such 
handler's restricted obligation; (2) the Board needs this rule to be in 
place for the 1998-99 crop year beginning July 1, 1998, through June 
30, 1999, so handlers can take advantage of this option; (3) the Board 
unanimously recommended this change 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 930

    Marketing agreements, Reporting and recordkeeping requirements, 
Tart cherries.

    For the reasons set forth in the preamble, 7 CFR part 930 is 
amended as follows:

PART 930--TART CHERRIES GROWN IN THE STATES OF MICHIGAN, NEW YORK, 
PENNSYLVANIA, OREGON, UTAH, WASHINGTON, AND WISCONSIN

    1. The authority citation for 7 CFR part 930 continues to read as 
follows:

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

    2. In section 930.159 paragraph (a) is revised, paragraph (f) is 
removed, paragraph (d) is redesignated as paragraph (e), paragraph (e) 
is redesignated as paragraph (f), and a new paragraph (d) is added to 
read as follows:


Sec. 930.159  Handler diversion.

    (a) Methods of diversion. Handlers may divert cherries by redeeming 
grower diversion certificates, by destroying cherries at handlers' 
facilities (at-plant), by diverting cherry products accidentally 
destroyed at a handlers' facility, by donating cherries or cherry 
products to charitable organizations or by using cherries or cherry 
products for exempt purposes under Sec. 930.162, including export to 
countries other than Canada, Mexico and Japan. Once diversion has taken 
place, handlers will receive diversion certificates stating the weight 
of cherries diverted. Diversion credit may be used to fulfill any 
restricted percentage requirement in full or in part. Any information 
of a confidential and/or proprietary nature included in this 
application would be held in confidence pursuant to Sec. 930.73 of the 
order.
* * * * *
    (d) Diversion of finished products. Handlers may be granted 
diversion credit for diverting finished tart cherry products 
accidentally destroyed at a handler's facility. In order to receive 
diversion credit under this added option the cherry products must be 
owned by the handler at the time of accidental destruction, be a 
marketable product at the time of processing, be included in the 
handler's end of the year handler plan, and have been assigned a Raw 
Product Equivalent (RPE) by the handler to determine the volume of 
cherries. In addition, the accidental destruction and disposition of 
the product must be verified by either a USDA inspector or Board agent 
or employee who witnesses the disposition of the accidentally destroyed 
product. Products will be considered destroyed if they sustain damage 
which renders them unacceptable in normal market channels.
* * * * *
    Dated: February 19, 1999.
Robert C. Keeney,
Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 99-4727 Filed 2-24-99; 8:45 am]
BILLING CODE 3410-02-P