[Federal Register Volume 64, Number 118 (Monday, June 21, 1999)]
[Rules and Regulations]
[Pages 33005-33009]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-15625]
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Rules and Regulations
Federal Register
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Federal Register / Vol. 64, No. 118 / Monday, June 21, 1999 / Rules
and Regulations
[[Page 33005]]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 930
[Docket No. FV99-930-1 FIR]
Tart Cherries Grown in the States of Michigan, et al.; Additional
Option for Handler Diversion and Receipt of Diversion Credits
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Final rule.
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SUMMARY: The Department of Agriculture (Department) is adopting, as a
final rule, with a change, the provisions of an interim final rule
adding 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 are allowed to obtain diversion
certificates when marketable finished tart cherry products owned by
them are accidentally destroyed. In addition, this rule continues in
effect the removal of a paragraph in the regulations which limited
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).
EFFECTIVE DATE: June 22, 1999.
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.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 continues to allow handlers to obtain
diversion credit for finished marketable tart cherry products owned by
them which are accidentally destroyed during the 1998-99 crop year
(July 1, 1998, through June 30, 1999), and subsequent crop years. It
also continues the removal of a provision from the regulation which
limited 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 the date of the entry of the ruling.
This rule continues in effect an additional method of handler
diversion involving marketable finished tart cherry products which are
accidentally destroyed. 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; contributions to a Board approved food bank or other
approved charitable organization; acquisitions of grower diversion
certificates that have been issued in accordance with section 930.58;
or other uses, including diversion by destruction of the cherries 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
[[Page 33006]]
handler diversion for finished tart cherry products accidentally
destroyed should not be confused with at-plant diversion.
The Board unanimously recommended that handlers should receive
diversion credit when marketable, finished cherry products are
accidentally destroyed. For the purposes of this rule, products will be
considered destroyed if they sustain damage which renders them
unacceptable for use in normal market channels. For example, finished,
marketable cherry products could be accidentally destroyed in a fire,
explosion, or through freezer malfunction. 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 now unmarketable cherry
product, must be verified by either a USDA inspector or Board agent or
employee. For the purpose of proper control and oversight, the measures
recommended by the Board are considered 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.
Handlers wishing to obtain diversion certificates for finished tart
cherry products owned by them which are accidentally destroyed must
allow the disposition of the destroyed product to take place under the
supervision of USDA's Processed Products Branch inspectors or a Board
agent or employee. This will allow the Board to verify that the
accidentally destroyed finished product was unmarketable and that it
was disposed of properly.
Once diversion is satisfactorily accomplished, handlers receive
diversion certificates from the Board stating the weight of cherries
diverted. Such diversion certificates can be used to satisfy handlers'
restricted percentage obligations.
In addition, this rule continues in effect the removal of a
paragraph in the regulations which limited diversion credit for
exempted products to one million pounds each crop year. Prior to the
issuance of the interim final rule, section 930.159 provided for
diversion credit of up to one million pounds of exempted products each
crop year. Exempted products include products used in new product
development and new market development. Exempted products also include
those that were 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, but such cherry products do 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), stated 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 for exempted product did not apply to those products
receiving export diversions for the 1997-98 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 did 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. Therefore, the removal of section
930.159(f) continues in effect.
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
final regulatory flexibility analysis. The Regulatory Flexibility Act
(RFA) allows 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 opts for such certification, but rather performs
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. 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 900 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 were frozen, 25 percent were canned, and 4 percent were
utilized for juice. The remaining 8 percent were dried or assembled
into juice packs.
The Board reported that for the 1997-98 crop year handlers received
export diversion certificates for 48.7 million
[[Page 33007]]
pounds of cherries 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 continues to provide for handler diversion
certificates in cases where marketable, finished tart cherry products
are accidentally destroyed, and thus, rendered unacceptable for the
marketplace. Such diversion certificates can be used to satisfy the
handler's restricted percentage obligation.
Handler diversion options enable handlers to either place cherries
into an inventory reserve or select the diversion option most
advantageous to their particular business operation. The diversion
options allow 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
action continues to accomplish the purposes of the order and the Act by
providing a means of increasing grower returns and stabilizing supplies
with demand.
The impact of this rule will be beneficial to growers and handlers
regardless of size. Continuing the additional diversion option will
prevent financial hardships when 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, and this action
broadens handler diversion options. Moreover, handlers may divert
cherries by destroying them at their plants/facilities. Therefore,
allowing diversion credit for products which are accidentally
destroyed, is consistent with the overall regulatory scheme established
by the marketing order.
In addition, this rule continues in effect the removal of a
paragraph in the regulations which limited diversion credit for
exempted products to one million pounds each crop year. Previously,
section 930.159 provided 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 exempted product
diversions until more experience with the program had been obtained.
The one million pound limitation for exempted products did not apply to
diversion credit for exports for the 1997-98 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. Therefore, continuing the removal
of the limitation 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 marketing order issues and
make recommendations.
The Board considered alternatives to its recommendations. These
included not granting diversion credit and continuing to impose
limitations on the volume of exempted product receiving diversion
credit. However, these alternatives were determined as not being in the
best interest of the industry.
An interim final rule concerning this action was published in the
Federal Register on February 25, 1999 (64 FR 9265). Copies of the rule
were mailed by the Board's staff to all Board members and cherry
handlers. In addition, the rule was made available through the Internet
by the Office of the Federal Register. That rule provided a 60-day
comment period which ended April 26, 1999. One comment was received
from a tart cherry association representing tart cherry growers and
processors in the State of Oregon.
The commenter asked several questions about the additional handler
diversion option, and expressed the view that Board meetings are not
well publicized. These comments are addressed below.
The commenter first asked whether the additional diversion option
concerning accidentally destroyed tart cherry products applied to
cherries harvested during the Summer of 1998
[[Page 33008]]
and whether such application is equitable.
The regulation applies to finished products accidentally destroyed
during the 1998-99 crop year (July 1, 1998, through June 30, 1999), and
thereafter. The interim final rule was effective February 6, 1999, and
making the rule applicable to the whole crop year is not inequitable.
Only handlers in volume regulated districts are eligible to receive
diversion credit. Allowing a handler to receive diversion credit for
accidentally destroyed product satisfies part, or all, of the handler's
restricted obligation and is consistent with the concept of volume
regulation. The goal of volume regulation is to bring supplies in line
with market needs, strengthen market conditions, and to increase grower
returns.
The commenter also asked whether handlers with insurance who were
compensated for their accidental loss would be eligible for diversion
credit. Under this regulation, an insurance settlement received by a
handler for product loss or damage does not prevent the handler from
obtaining diversion credit.
Another issue raised by the commenter concerns the term ``handler's
facility'' as it relates to obtaining diversion credit for product
which is accidentally destroyed at a handler's facility. In this
regard, the commenter raised questions about product accidentally
destroyed while in a facility leased by a handler or in storage at a
public cold storage warehouse. The commenter also asked whether the
diversion credit applies to accidentally destroyed cherries before
processing on the handler's premises, or to cherries or product
destroyed while en route to a handler's facility. The diversion option
in this regulation is intended to apply to finished marketable cherry
products that are owned by a handler and are accidentally destroyed. It
does not apply to cherries before processing which are accidentally
destroyed.
The interim final rule published February 25, 1999 (64 FR 9265),
stated that finished marketable product accidentally destroyed at a
handler's facility may be granted diversion credit. It was the Board's
intent that diversion credit be granted for finished marketable
product, when the product is owned by the handler at time of accidental
destruction. The physical location of the finished product at the time
of accidental destruction is not a determining factor. Because of the
commenter's questions, the Department has modified the regulatory
provisions to clarify the Board's intent. That is, handlers can receive
diversion credit for accidentally destroyed finished marketable product
as long as the product is owned by the handler at the time of
destruction.
Finally, the commenter disagreed with the statement that Board
meetings are widely publicized throughout the tart cherry industry and
all interested persons are invited to attend them and participate in
Board deliberations. The commenter stated that the Board office seems
to communicate only through the ``The Fruit Growers News'' in the
Michigan area or through direct mail to Board participants. The
commenter mentioned that he was a member of the Board, and did not know
if many of the things he received from the Board office go to all
growers or handlers or just to the Board members and alternates.
The Board has and will continue to take appropriate action to
provide broad notice of upcoming meetings to all handlers and Board
members and alternate members. The Board sends meeting notices to all
Board members and several tart cherry organizations throughout the
production area. In fact, the Board sends a newsletter to all growers
and handlers of record in the production area which further publicizes,
among other things, upcoming Board meetings.
The commenter also mentioned that participation in Board meetings
is challenging to all growers because a majority of them are held in
Michigan, and that travel is extremely expensive from the west coast
and very time consuming. The commenter also stated that the Board has
not considered holding meetings at major hub city airports that are
more accessible, and less expensive. According to the commenter, this
situation limits the level of involvement by, and consideration for,
smaller industry participants, such as the small, remote, and the
independent members of the tart cherry industry.
On the matter of Board meeting location, the Board has to consider
the cost of travel for all Board members because it pays travel
expenses for all of its members. It is a considerable expense to the
Board to hold the meetings outside of Michigan since 16 members and
alternates of the 18 member Board are from the State of Michigan. The
Board realizes the time spent in travel by Board members and producers
and handlers throughout the production area. To make attendance at
Board meetings easier while properly managing travel costs, the Board
has made a commitment to hold the June 1999 marketing policy meeting in
Michigan and the September 1999 marketing policy meeting in Washington.
The Board is also considering holding meetings outside the Michigan
districts to allow producers and handlers to attend the meetings and
cut down on travel time for those not located in Michigan. Recently,
producer meetings were held in Pasco, Washington and Rochester, New
York, to inform growers about proposed amendments to the order and the
activities of the Board.
Based on the comments and the questions received, the limitation on
the location of the accidental destruction is being removed. In the
first sentence of paragraph (a), the phrase ``at a handlers' facility''
following the words ``by diverting cherry products accidentally
destroyed'' is removed from this regulation. Also, removed in the first
sentence of paragraph (d), is the phrase ``at a handler's facility''
following the words ``Handlers may be granted diversion credit for
diverting finished tart cherry products accidentally destroyed''. The
removal of the these phrases is intended to clarify the intent of the
regulation. In addition, to clarify the period of applicability,
wording has been added to the regulation indicating that it applies to
finished products accidentally destroyed during the 1998-99 crop year
(July 1, 1998, through June 30, 1999), and thereafter.
After consideration of all relevant material presented, including
the Board's recommendation, the comment received, and other
information, it is found that finalizing this interim final rule, with
modifications, as published in the Federal Register (64 FR 9265), will
tend to effectuate the declared policy of the Act.
Pursuant to 5 U.S.C. 553, it is also found and determined 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 continues to relax requirements by providing an additional
opportunity for handlers to receive diversion credit and meet their
restricted obligations; and (2) the clarifications made to the
provisions should be effective promptly to effectively carry out this
program.
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:
[[Page 33009]]
PART 930--TART CHERRIES GROWN IN THE STATES OF MICHIGAN, NEW YORK,
PENNSYLVANIA, OREGON, UTAH, WASHINGTON, AND WISCONSIN
Accordingly, the interim final rule amending 7 CFR part 930 which
was published at 64 FR 9265 on February 25, 1999, is adopted as a final
rule with the following change:
1. The authority citation for 7 CFR part 930 continues to read as
follows:
Authority: 7 U.S.C. 601-674.
2. In Sec. 930.159 paragraphs (a) and (d) are revised 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, 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 finished tart cherry products that are
accidentally destroyed during the 1998-1999 crop year (July 1, 1998,
through June 30, 1999), and thereafter. To receive diversion credit
under this 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: June 14, 1999.
Eric M. Forman,
Acting Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 99-15625 Filed 6-18-99; 8:45 am]
BILLING CODE 3410-02-P