[Federal Register Volume 66, Number 9 (Friday, January 12, 2001)]
[Proposed Rules]
[Pages 2838-2850]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-949]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
 ========================================================================
 

  Federal Register / Vol. 66, No. 9 / Friday, January 12, 2001 / 
Proposed Rules  

[[Page 2838]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 929

[Docket No. FV00-929-7 PR]


Cranberries Grown in the States of Massachusetts, Rhode Island, 
Connecticut, New Jersey, Wisconsin, Michigan, Minnesota, Oregon, 
Washington and Long Island in the State of New York; Reformulation of 
Sales History Calculations for the 2001-2002 Crop Year

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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

SUMMARY: This rule invites comments on revisions to the sales history 
calculations currently prescribed under the producer allotment 
provisions under the cranberry marketing order (order). The order 
regulates the handling of cranberries produced in 10 States, and is 
administered locally by the Cranberry Marketing Committee (Committee). 
This rule would modify the current sales history formula in order to 
apportion in the most equitable manner among producers cranberries made 
available for disposition by handlers in the event volume regulations 
are recommended for the 2001-2002 season. This rule would also clarify 
the exemption provisions under the volume regulation provisions for 
fresh cranberries, modify the outlets for excess cranberries and 
reinstate the dates for the Committee to notify growers and handlers of 
their allotments.

DATES: Comments must be received by February 12, 2001.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this proposal. Comments must be sent to the Docket Clerk, 
Marketing Order Administration Branch, 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, or can be viewed at: http://www.ams.usda.gov/fv/moab.html.

FOR FURTHER INFORMATION CONTACT: Kathleen M. Finn or Anne M. Dec, 
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) 720-5698.
    Small businesses may request information on complying with this 
regulation 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: [email protected].

SUPPLEMENTARY INFORMATION: This proposal is issued under Marketing 
Order No. 929, as amended (7 CFR part 929), regulating the handling of 
cranberries grown in Massachusetts, Rhode Island, Connecticut, New 
Jersey, Wisconsin, Michigan, Minnesota, Oregon, Washington and Long 
Island in the State of New York, 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.''

Question and Answer Overview

What Is the Intent of This Proposal?

    Concerns were raised during the 2000-2001 producer allotment volume 
regulation period that growers with newer acreage (acreage planted 
within the last 5 years) could experience a larger crop reduction than 
the average allotment restricted percentage. Existing allotment 
percentage calculations are based on averaging growers' sales 
histories. Calculation of the sales histories does not factor in 
variables and does not provide any adjustment for new acres as they 
rapidly increase production during the first several harvests. 
Therefore, growers can be impacted differently depending on their 
particular situation.
    The proposed method in this rule would provide additional sales 
history for growers with newer acreage to account for increasing yields 
for each year up to the fifth year. A Committee meeting is scheduled 
for February 5, 2001, to discuss volume regulation for the 2001-2002 
season.

Who Would Be Impacted by This Proposed Rule?

    All cranberry growers in the production area who planted acreage in 
1995 or later would be impacted by this proposal. In addition to their 
actual sales histories, these growers would receive additional sales 
history for the newer acreage to account for increasing yields of that 
acreage.
    For example, a grower with one acre planted in 1998 would have an 
actual sales history assigned to that acreage based on average sales 
off that acreage. In addition to the actual sales history, the acreage 
would be assigned an additional 183 barrels to account for increased 
production. A table appears in this document which shows additional 
sales history assigned to acreage planted in 1995 or later.

How Were the Additional Sales History Numbers Developed?

    The additional sales histories were assigned by using a formula 
based on average yields per acre for acreage planted and harvested over 
the past 5 years. USDA conducted a survey to determine what average 
yields per acre have been.
    Using these average yields, an average sales history was calculated 
for acreage planted in a specific year. Subtracting the average sales 
history from the expected yield from that acreage results in the 
additional barrels assigned to that acreage.

What Would Change With the Fresh Fruit Exemption?

    The intent of the fresh fruit exemption in the 2000-2001 volume 
regulation was to only exempt cranberries going to retail outlets as 
fresh cranberries. Questions arose as to what constitutes ``fresh'' 
cranberries under the regulations.
    The Committee developed and recommended a more specific definition 
of fresh cranberries so that the intent would be clear for future 
volume regulations if fresh cranberries are again recommended for 
exemption. This

[[Page 2839]]

proposed rule clarifies that sales of packed-out cranberries intended 
for sale to consumers in fresh form would be exempt from volume 
regulations. The proposal further clarifies the definition by stating 
that fresh cranberries are also sold dry (either dry picked or dried 
after water picking) in bulk boxes, generally weighing 30 pounds. If 
fresh cranberries are diverted into processing outlets, the exemption 
does not apply.
    The proposal also recommends that sales histories be calculated 
separately for fresh and processed cranberries. Under this proposal, if 
fresh fruit is exempt from volume regulation, fresh sales would be 
subtracted from a grower's sales history. Whether to exempt fresh 
cranberries from a 2001-2002 volume regulation would be discussed and 
recommended at the February 5, 2001, Committee meeting if volume 
regulations are recommended.

Executive Orders 12866 and 12998

    The Department of Agriculture (Department) is issuing this rule in 
conformance with Executive Order 12866.
    This proposal has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule is not intended to have retroactive effect. 
This proposal 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.

Introduction

    This proposal invites comments on revisions to the formula for 
calculating sales histories under the producer allotment program 
currently prescribed under the order. This rule would modify the 
current sales history formula to be more equitable to growers in the 
event volume regulations are recommended for the 2001-2002 season. This 
rule would also clarify the exemption provisions under the volume 
regulation provisions for fresh cranberries, modify the outlets for 
excess cranberries by broadening the scope of research and development 
projects that could be classified as exempt outlets and reinstate the 
dates for the Committee to notify growers and handlers of the 
allotments. The rule was unanimously recommended by the Committee at a 
meeting on August 28, 2000.
    The U.S. cranberry industry is experiencing an oversupply 
situation. Recent increases in acreage and yields have resulted in 
greater supplies, while demand has remained fairly constant. The result 
has been increasing inventories and reduced grower returns.
    In considering ways to cope with the oversupply, the Committee 
recommended using volume controls (in the form of producer allotments) 
for the 2000-2001 crop year. A final rule establishing a marketable 
quantity and allotment percentage was issued on July 3, 2000, and 
published in the July 11, 2000, issue of the Federal Register (65 FR 
42598) to apply to the 2000-2001 crop year. The final rule also revised 
procedures for calculating growers' sales histories, exempted fresh and 
organically-grown cranberries from the volume regulation, defined State 
average yield per acre, increased the barrels per acre for determining 
a commercial crop, revised the Committee review procedures for re-
determination of sales histories, and suspended the date by which the 
Committee notifies growers of their annual allotment. These actions 
were based primarily upon the recommendations of the Committee and 
comments received in response to the proposed rule.
    This was the first time the sales history method of the producer 
allotment provisions of the order have been used since these provisions 
were added to the order in 1992. Many growers, particularly those with 
acreage 4 years old or less, have indicated that the current method of 
sales history calculation resulted in a much larger crop reduction from 
their acreage than the 15 percent reduction established by the July 11, 
2000, final rule because of more production on their acreage than their 
sales histories indicated.
    The order provides that after a year of volume regulation, a new 
sales history shall be calculated for each grower using a formula 
determined by the Committee (and approved by the Secretary). The 
Committee recommendation to revise the formula discussed in this 
proposal specifically addresses growers' concerns regarding the most 
equitable manner of apportioning among producers the quantities of 
cranberries made available for disposition by handlers. This method 
would provide additional sales history for growers with newer acreage 
to account for increasing yields for each growing year up to the fifth 
year.

History of the Marketing Order

    The cranberry industry has operated under a Federal marketing order 
since 1962. The order's primary regulatory authority is volume 
regulation. At that time, production was trending sharply upward, due 
primarily to improving yields, and demand was not keeping pace. The 
intent of the program was to limit the volume of cranberries available 
for marketing in fresh market outlets in the United States and Canada, 
and in all processing outlets, to a quantity reasonably in balance with 
the demand in such outlets. This method of controlling volume was the 
``withholding'' provisions whereby ``free'' and ``restricted'' 
percentages would be established. Growers deliver all contracted 
cranberries to their respective handlers. Free cranberries could be 
marketed by handlers in any outlet, while restricted berries would have 
to be withheld from handling and, if possible, diverted by handlers to 
noncompetitive markets. The withholding program has not been used since 
1971.
    The order was amended in 1968 to authorize another form of volume 
regulation--producer allotments. The intent was to discourage new 
plantings and allow growers to remove surplus berries in a more 
economical manner, by reducing their production to approximate the 
marketable quantity or by leaving excess berries unharvested. 
Production had continued to increase, and the industry was reluctant to 
recommend a sufficient restricted percentage under the withholding 
regulations. Under the producer allotment program, growers were issued 
base quantities. Base quantity was the quantity of cranberries equal to 
a grower's established cranberry acreage multiplied by such grower's 
average per acre sales made from the acreage during a representative 
period. If the allotment base program were activated, each handler 
would be allowed to acquire for normal marketing only a certain 
percentage of each grower's base quantity. This authority was used to 
establish a regulation for the 1977-78 season, but that regulation was 
subsequently rescinded.
    In 1992, the producer allotment provisions were amended to change 
the

[[Page 2840]]

method of calculating growers' annual allotments from the base quantity 
method to a sales history method. Under this amendment, a grower's 
sales history is calculated based on a grower's actual sales, expressed 
as an average of the best 4 of the previous 6 years of sales. There 
were concerns that base quantities did not accurately reflect actual 
levels of sales because as growers' acreage increased or decreased, the 
base quantity did not change. It was concluded that basing allotments 
on actual sales off acreage would be a more realistic and practical way 
to determine annual allotments. These provisions were never used until 
the 2000-2001 season.

Producer Allotment Order Provisions

    Section 929.49 of the order currently provides that if the 
Secretary finds from the recommendation of the Committee or from other 
available information, that limiting the quantity of cranberries 
purchased from or handled on behalf of growers during a crop year would 
tend to effectuate the declared policy of the Act, the Secretary shall 
determine and establish a marketable quantity for that year. In 
addition, the Secretary would establish an allotment percentage, which 
shall equal the marketable quantity divided by the total of all 
growers' sales histories. Handlers cannot handle cranberries unless 
they are covered by a grower's annual allotment.
    Section 929.48 of the order provides for computing growers' sales 
histories to be used in calculating allotment percentages under 
Sec. 929.49. Sales history is defined in Sec. 929.13 as the number of 
barrels of cranberries established for a grower by the Committee. The 
Committee updates growers' sales histories each season. The Committee 
accomplishes this by using information submitted by the grower on a 
production and eligibility report filed with the Committee. The order 
sets forth that a grower's sales history is established by computing an 
average of the best 4 years' sales out of the last 6 years' sales for 
those growers with existing acreage. For growers with 4 years or less 
of commercial sales history, the sales history would be calculated 
(prior to the 2000-01 volume regulation) by averaging all available 
years of such grower's sales. A new sales history for a grower with no 
sales history is calculated by using the State average yield per acre 
or the total estimated commercial sales, whichever is greater. This 
section also provides the authority for calculating new sales histories 
for growers after each crop year where a volume regulation was 
established using a formula established by the Committee (and approved 
by the Secretary).
    Section 929.46 of the order requires the Committee to develop a 
marketing policy each year prior to May 1. In its marketing policy, the 
Committee projects expected supply and market conditions for the 
upcoming season, including an estimate of the marketable quantity 
(defined as the number of pounds of cranberries needed to meet total 
market demand and to provide for an adequate carryover into the next 
season).
    Section 929.59 defines excess cranberries as cranberries withheld 
by handlers after all unused allotment has been allocated. This 
provision also provides for handlers to notify the Committee by January 
1 of a written plan to dispose of excess cranberries and to dispose of 
them by March 1. Section 929.61 of the order provides the authority for 
establishing outlets for excess cranberries.
    Section 929.58 of the order provides for relieving from any or all 
requirements of the order the handling of cranberries in such minimum 
quantities as the Committee, with the approval of the Secretary, may 
prescribe. The exemption for fresh and organically-grown cranberries 
was implemented in 2000 under the authority in this section.

2000-2001  Volume Regulation

    To address the serious oversupply situation being experienced by 
the industry, the Committee recommended volume control for the 2000-
2001 season (September 1, 2000 to August 31, 2001). The Committee 
determined that the best method of volume control would be the producer 
allotment program, which provides for an annual marketable quantity and 
allotment percentage. The final rule establishing the volume regulation 
was issued on July 3, 2000, and published in the July 11, 2000, issue 
of the Federal Register (65 FR 42598). The marketable quantity for the 
2000-2001 crop year was established at 5.468 million barrels.
    The allotment percentage equals the marketable quantity divided by 
the total of all growers' sales histories. Total growers' sales 
histories were set by the Committee at 6.432 million barrels. Using the 
formula established under the order (5.468 million barrels divided by 
6.432 million barrels), the annual allotment percentage was set at 85 
percent. Section 929.250 of the regulations set forth the above 
mentioned marketable quantity and allotment percentage.
    Section 929.104 of the regulations sets forth the noncommercial and 
noncompetitive outlets for excess cranberries during a year of volume 
regulation. For the 2000-2001 season, the outlets for excess 
cranberries are: (1) Foreign countries, except Canada; (2) charitable 
institutions; (3) any nonhuman food use; and (4) research and 
development projects dealing with dehydration, radiation, freeze 
drying, or freezing of cranberries, for the development of foreign 
markets.
    Section 929.148 defines State average yield. Section 929.48(a)(5) 
sets forth that a sales history for a grower who has no history of 
sales associated with such grower's acreage be computed by the 
Committee using the total estimated commercial sales from the cranberry 
acreage or the State average yield per acre multiplied by the grower's 
cranberry producing acreage, whichever is greater. For the 2000-2001 
crop year volume regulation, the State average yield was defined as the 
yield per State for the year 1997 or the average of the best 4 years 
average yield per State out of the last 6 years, whichever is greater.
    Section 929.149 sets forth the methods for sales history 
determinations for the 2000-2001 year of volume regulation. This 
regulation specified that for growers with 5 years of sales history, a 
sales history is computed using an average of the highest 4 years of 
sales. For growers with 6 or more years of sales history, a sales 
history is computed using an average of the highest 4 of the most 
recent 6 years of sales. If these growers also have newer acreage with 
4 years of sales history or less, and these growers provided the 
Committee with credible information which allowed the Committee to 
segregate the sales history of the newer acreage, then that acreage is 
treated in the same manner as acreage of a grower with 4 years or less 
of sales history. For a grower with 4 years or less of sales history, 
the sales history is computed using the highest sales season. Sales 
history for new acreage with no history of sales (for both new and 
existing growers) is computed using the estimated commercial sales or 
State average yield, whichever is greater.
    Section 929.158 exempts sales of fresh and organically-grown fruit 
from the volume regulation. Handlers were required to qualify for the 
exemption by filing with the Committee the amount of fresh or organic 
cranberry sales on a grower acquisition listing form. In addition, to 
receive an exemption for organic cranberry sales, the cranberries must 
have been certified by a third party organic certifying organization 
acceptable to the Committee.

[[Page 2841]]

    Section 929.107 defines ``commercial crop.'' For the 2000-2001 
volume regulation, the number of barrels constituting a commercial crop 
was increased from 15 to 50 barrels per acre. This change assisted 
growers who harvested cranberries for the first time in 1999. These 
growers qualified for a new sales history determination if they 
produced less than 50 barrels per acre.
    Section 929.125 sets forth appeal procedures for growers to request 
a redetermination of their sales histories. Growers, dissatisfied with 
their sales history determinations, requested a review of the 
determinations by following a specified procedure. The grower first 
filed the appeal with the appeals subcommittee within 30 days after 
receipt of the Committee's determination of sales history. The grower, 
if dissatisfied with the subcommittee's decision could further appeal 
to the Secretary, whose decision was final.
    The way sales histories were calculated for the 2000-2001 crop year 
were based on the concerns and comments regarding fairness and equity, 
which were raised during the rulemaking proceeding. The revised 
procedures for calculating sales histories were expected to result in 
an increase in the marketable quantity recommended by the Committee. It 
was determined that they were necessary in order to allocate allotment 
among growers in the most equitable manner.

Reformulation of Sales History Calculations for the 2001-2002 Crop 
Year

    The Committee had been discussing the possible use of volume 
regulation during the 2000-2001 season for over a year. In its 
deliberations, concerns were voiced about the potential inequities that 
could result when calculating sales histories. Because sales histories 
are based on an average of past years' sales, newer growers could be 
restricted to a greater extent than more established growers. This is 
because a cranberry bog does not reach full capacity until several 
years after being planted. Using an average of early years' sales 
(which are low) can result in sales histories below future sales 
potential. A more established grower, on the other hand, would have a 
sales history more reflective of his or her production capacity.
    The Committee and the Department gave much thought to the most 
equitable method of determining sales histories within the scope of the 
order. The final rule on volume regulation for the 2000 crop year was 
as flexible as the order would allow in alleviating the differential 
impact of the volume regulation on growers.
    The marketing order provides for recalculating the method for 
determining sales histories, should volume regulation be recommended 
for the 2001-2002 season. Specifically, Sec. 929.48(a)(3) states that a 
new sales history shall be calculated for each grower after each crop 
year during which a volume regulation has been established using a 
formula determined by the Committee with the approval of the Secretary.
    The amendment subcommittee met several times to develop a better 
method of assigning sales histories for newer acreage for future volume 
regulations. One method discussed was the British Columbia Marketing 
Committee's method of determining sales histories in years of volume 
regulation that would add sales history to reflect future production on 
newer acres. Conceptually, this method specifically addresses the 
situations encountered with newer acres that were experienced this year 
domestically. It was suggested by the Committee that this method could 
be adopted for future years of volume regulation.
    The new method of calculating sales histories is intended to 
address problems associated with using a grower's actual sales history 
without taking into account anticipated production when calculating 
allotment percentages. Ideally, in a year of volume regulation, all 
growers' actual crops would be reduced by the same percentage. Because 
of uncertainties in making crop predictions, allotment percentage 
calculations are based on averaging growers' sales histories. 
Calculation of these sales histories does not factor in variables and 
does not provide any adjustment for new acres as they rapidly increase 
production during the first several harvests. Therefore, growers can be 
impacted differently depending on their particular situation. The 
result is that sales histories for growers with a significant number of 
acres being harvested for the first, second, third, and fourth time can 
be well below what the average crop for these growers is expected to be 
during the next harvest. The restriction percentages for these growers 
in a year of volume regulation could therefore exceed the average 
allotment restriction percentage. The method proposed in this rule 
addresses that issue by minimizing the differential impact among 
growers with newer acreage.
    One of the primary concerns associated with the 2000 crop year 
volume regulation was that many growers with a combination of both 
older and newer acreage were not in a position to take advantage of the 
regulation which provides that growers with acreage 4 years old or 
younger could use the highest year as his or her sales history. For the 
more established grower, all sales from all acreage were combined, 
regardless of the age of the acreage. The average of the best 4 years 
of sales out of the last 6 years was used as that grower's sales 
history. Although the regulations allowed these growers to provide 
credible evidence to support yields from newer acres, not all growers 
were in a position to do this. The method of calculating sales 
histories proposed in this rule would specifically resolve this issue 
because the grower would not have to segregate his or her acreage to 
receive additional sales history. The grower would merely have to know 
the year the acreage was planted and report such information to the 
Committee annually. The revised formula in this proposal would provide 
a specified amount of additional sales history based on USDA and 
industry analysis of cranberry production. The amount of such 
additional sales history would depend on the year of planting. This 
would provide a direct solution to this issue.
    The British Columbia method of calculating sales history is based 
on acreage up to 4 years old. Once the acreage reaches its fifth 
harvest, the calculation of sales history shifts into a method of 
determining sales history using the best 4 out of the most recent 5 or 
6 years. Once cranberry acreage reaches full maturity, it is expected 
that the average of the best 4 out of 6 years would provide a realistic 
history of sales. In discussing these proposed amendments, the 
subcommittee was concerned that shifting from the formula for newer 
acreage to the mature acreage formula after only 4 years could cause a 
dramatic change in calculation of sales histories. Specifically, 
growers' sales histories could drop significantly. The subcommittee 
determined it would be more equitable to use the newer acreage method 
up to 5 years so that the transition into the method of calculating 
sales histories based on the best of 4 years for mature acreage would 
not cause growers' sales histories to fluctuate significantly.
    The first step in developing the method proposed in this rule is to 
determine industry wide average yields for acreage based on the year of 
planting. These figures would be used in determining additional sales 
histories under the new formula. An industry survey conducted several 
years ago for crop forecasting estimated average yields for new acreage 
to be 80, 130,

[[Page 2842]]

180, and 230 barrels per acre in the first, second, third and fourth 
harvests, respectively. The subcommittee was concerned that this data 
could be outdated because cultural practices in the industry have 
changed and new varieties have been planted which have increased yields 
per acre. In addition, there were concerns about differing first year 
production between growers who choose to harvest the first year after 
planting and those that choose to harvest the second year after 
planting. A grower who waits an additional year is doing so in 
anticipation of a greater yield. For example, a grower who harvests the 
first year after planting may only yield about 50-75 barrels an acre in 
the first harvest, where a grower who waits an additional year could 
yield about 100-175 barrels per acre in the first harvest. Because 
there could be a wide variance in these yields, the subcommittee 
believed that developing a single set of averages to simultaneously 
accommodate the two scenarios would produce a wide variance and too 
much of a differential impact among these growers. The subcommittee 
believed these situations should be considered separately to minimize 
the differential impact. Therefore, the subcommittee recommended that 
the method developed should take into account different harvesting 
times by basing the averages on the year planted.
    Although there was agreement that this methodology would be the 
best course of action for future producer allotment volume regulations, 
the subcommittee was still concerned that the actual yield averages may 
not be true today. The subcommittee enlisted the help of the Department 
in conducting a survey to determine what average yields per acre would 
be today.
    The Department worked with cranberry handlers in assembling data. 
Handlers were asked to provide information on growers' yield per acre 
for yearly harvests made 1, 2, 3, 4 and 5 years after planting, 
respectively, for acres harvested over the past 5 years. The handlers 
were also asked to indicate which varieties were planted, specifying 
the proportion of total new acreage dedicated to each variety.
    Two large handlers supplied detailed information relative to 
harvested acres. To supplement this information, data was gathered from 
the numerous appeals filed this year from growers who delivered 
cranberries to other handlers. This additional data collection was 
accomplished to broaden the scope of the industry data used in the 
analysis.
    In many cases, it was not possible to determine the varieties of 
the cranberries reported. Review of the data indicated that the Stevens 
variety was the most prevalent variety, but because the varieties could 
not be definitively segregated, no distinction was made in the analysis 
regarding variety.
    The data combined grower information from all cranberry producing 
regions, as well as data for all varieties and years of birth (original 
date of planting). The data was analyzed to determine what an average 
grower, growing in average conditions, would experience in terms of 
yield per acre if he/she planted new acreage and then harvested it 5 
consecutive years thereafter.
    The results were divided into two categories: Group A--growers 
harvesting for the first time 1 year after planting, and Group B--
growers waiting 2 years before the first harvest. The data included the 
first harvest and four subsequent harvest yields for groups A and B, 
respectively, and was analyzed to determine the average yields and 
rates of increase in yields over the first 5 harvests for each grower/
bog category.
    The analysis of yield progression over the first 5 harvests for 
groups A and B revealed significant differences in first harvest 
yields, but supported the conclusion that yield progression rates for 
subsequent years were comparable for subsequent harvests. Based on this 
observation, yield rates and expected yield/sales histories were 
averaged based on the sample size from each group. These averages are 
50, 131, 197, 227 and 250 barrels per acre for acres harvested the 
first, second, third, fourth and fifth year after planting, 
respectively.
    Since these numbers are based on average yields for the sample 
groups, it is reasonable to conclude that the yields of approximately 
50 percent of the growers impacted by this proposal would be higher 
than the average. To accommodate as many growers as possible, it was 
agreed to adjust the averages upward by 25 barrels which would result 
in growers receiving a higher amount of additional sales history under 
the proposed formula. This would also assure that first harvests 
(acreage with no sales history) which were provided the State average 
yield as a sales history in the 2000 crop year would receive a 
comparable sales history under this proposal. The average expected 
yields for each year, increased by 25 barrels would be 75, 156, 222, 
252 and 275 barrels per acre for acres harvested the first, second, 
third, fourth and fifth year after planting, respectively.
    These yield figures recommended by the subcommittee were 
incorporated into the proposed formula for determining the additional 
sales history per acre that growers would be provided. This would apply 
to acreage planted in 1995 or later. Sales histories for established 
acreage would continue to be based on an average of the highest 4 
years.
    For growers whose acreage has 5 years or less of sales history and 
was planted in 1995 or later, the sales history would be computed using 
the average of all available years to get actual sales history. In 
addition to the actual sales history, such growers would be provided 
additional sales history to account for increased production in a year 
of volume regulation. The additional sales history would be calculated 
using the figures in Table 1.

                             Table 1.--Additional Sales History Assigned to Acreage
----------------------------------------------------------------------------------------------------------------
                                                                                               Additional 2001
                   Date planted                    Expected 2001 yield     Average sales      sales history per
                                                        (bbl/acre)      history  (bbl/acre)    acre  (bbl/acre)
----------------------------------------------------------------------------------------------------------------
1995.............................................                  275                  226                   49
1996.............................................                  275                  158                  117
1997.............................................                  252                   95                  157
1998.............................................                  222                   39                  183
1999.............................................                  156                    0                  156
2000.............................................                   75                    0                   75
----------------------------------------------------------------------------------------------------------------


[[Page 2843]]

    The manner in which the additional sales history numbers were 
arrived at are as follows. The expected yields per acre in 2001 would 
be assigned for each year of planting from 1995 to 2000 (see second 
column in Table 1). The average yields per acre established by the 
Committee are totaled (depending upon the number of years of 
production) and the sum is divided by 4 to obtain an average (see third 
column in Table 1--average sales history). Using the years 1995 through 
1999, the average yields per acre are 75, 156, 222, 252 and 275. This 
average is then subtracted from the expected yield of the acreage in 
2001. The difference is the additional sales history for acreage 
planted in a specified year (see fourth column in Table 1).
    For example, acres planted in 1997 and harvested in 1999 would have 
2 years of production (1999 and 2000--first harvest occurring 2 years 
after planting). Estimated yields on that acreage, as established by 
the Committee, would be 156 and 222 barrels, respectively. These 
numbers totaled and divided by 4 equal an average sales history on that 
acreage of 95 barrels. Expected yield in 2001 on acreage planted in 
1997 is 252 barrels. Subtracting the average from the expected yield 
(252 minus 95) results in 157 barrels. This would be the additional 
sales history per acre assigned to this acreage, i.e., 157 barrels per 
acre would be added to the grower's actual sales history which would be 
computed by averaging all available years harvested.
    Because yield levels are comparable after the first year of harvest 
regardless whether first harvest occurred 1 or 2 years after planting, 
the subcommittee opted to base the formula on acres first harvested 2 
years after planting. Based on the industry data analyzed, 
approximately two-thirds of growers first harvest 2 years after 
planting. The formula still takes into account growers who harvest for 
the first time 1 or 2 years after planting.
    The proposed calculation represents a realistic number of 
additional barrels per acre that growers would be provided to account 
for increased production on newer acres. The new expected yield/sales 
histories are believed to more accurately reflect U.S. grower yields as 
the data used represents actual yields for new bogs planted in the 
United States over the past 5 years in all parts of the production 
area. It is estimated that the data pool represented roughly 60-65 
percent of production area growers having newly planted acreage. 
Expected yield/sales histories were re-calculated while maintaining the 
integrity of first harvest yield differences. Additional sales history 
would still be provided to growers based on the age of their acres.
    The formula is a tool used to make an appropriate adjustment in 
sales histories for growers harvesting young acreage which is not yet 
producing at optimal capacity. The formula is based on industry data 
collected by USDA. It is important to note that these are only averages 
used to determine how much additional sales histories growers would be 
provided.
    To illustrate how this method would work, a few examples follow:

Example 1--Grower With Only Newer Acreage all First Harvested 2 
Years After Planting

    A grower has a total of 20 acres with the following sales history:

                                        Actual Deliveries From 1998-2000
----------------------------------------------------------------------------------------------------------------
                                                          Sales (in barrels)
             # Acres                 Planted   ---------------------------------------    Actual sales history
                                                    1998         1999         2000
----------------------------------------------------------------------------------------------------------------
10...............................         1996        1,000        1,750        1,900
5................................         1997  ...........          520        1,000
5................................         1998  ...........  ...........          500
                                  ----------------------------------------------------
    Total........................  ...........        1,000        2,270        3,400
                                                                                       2,223.33 barrels.
----------------------------------------------------------------------------------------------------------------

    The actual sales history for these 20 acres for 2001 would be 
2,223.33 barrels (total annual sales divided by all available years, or 
3). Because the acreage was planted in 1995 or later, this grower would 
receive additional sales history to reflect expected yields on newer 
acres in 2001.
    In accordance with the formula as set forth in proposed 
Sec. 929.149(b) of the regulations, this grower would receive an 
additional 117 barrels per acre for acreage planted in 1996 (10 acres 
x  117 = 1,170), 157 barrels per acre for the 5 acres planted in 1997 
(5 acres  x  157 = 785) and 183 barrels per acres for the 5 acres 
planted in 1998 (5 acres  x  183 = 915 for a total of 2,870 barrels of 
additional sales history. Added to the grower's actual sales history, 
the total sales history for the year 2001 for this grower's 20 acres 
would be 5,093.33 barrels. The only information needed to provide the 
additional sales history to this grower would be the date of planting.

Example 2--Grower With Newer Acres With Sales History and New Acres 
With No Sales History

    A grower has a total of 15 acres with the following sales history:

                                                            Actual Deliveries From 1997-2000
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                  Sales (in barrels)
            # Acres                         Planted            --------------------------------------------------------       Actual sales history
                                                                    1997          1998          1999          2000
--------------------------------------------------------------------------------------------------------------------------------------------------------
10............................  1996                                     750         1,000         1,800         2,400
5.............................  2000..........................  ............  ............  ............             0
                               ----------------------------------------------------------------------------------------
    Total.....................  ..............................           750         1,000         1,800         2,400
                                                                                                                        1,487.5 barrels
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 2844]]

    The actual sales history for these 15 acres for 2001 would be 
1,487.5 barrels. Because the acreage was planted in 1995 or later, this 
grower would receive additional sales history to reflect expected 
yields on newer acres in 2001.
    In accordance with the formula as set forth in proposed 
Sec. 929.149(b) of the regulations, this grower would receive an 
additional 117 barrels per acre for acreage planted in 1996 (10 acres 
x  117=1,170), 75 barrels for the 5 acres planted in 2000 (5 acres  x  
75=375) for a total of 1,545 barrels of additional sales history. Added 
to the grower's actual sales history, the total sales history for the 
year 2001 for this grower's 15 acres would be 3,032.5 barrels. The only 
information needed to provide the additional sales history to this 
grower would be the date of planting.

Example 3--Grower with established acres and newer acres.

    A grower has a total of 60 acres with the following sales history:

                                                            Actual Deliveries From 1995-2000
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                 Sales (in barrels)                              Actual
               #Acres                            Planted            ---------------------------------------------------------------------------   sales
                                                                               1995             1996      1997      1998      1999      2000     history
--------------------------------------------------------------------------------------------------------------------------------------------------------
50..................................  1993.........................  7,500..................     8,000     6,200     8,800     5,909     8,200
10..................................  1996.........................  .......................  ........  ........       500     1,800     2,400
                                     ----------------------------------------------------------------------------------------------------------
    Total...........................  .............................  7,500..................     8,000     6,200     9,300     7,700    10,600
                                     ----------------------------------------------------------------------------------------------------------
    Best 4 of 6.....................  .............................  .......................     8,000  ........     9,300     7,700    10,600     8,900
                                                                                                                                                 barrels
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The actual sales history for these 60 acres for 2001 would be 8,900 
barrels. Because 10 of the acres were planted after 1995, this grower 
would receive additional sales history (for these 10 acres) to reflect 
expected yields on newer acres in 2001.
    In accordance with the formula as set forth in proposed 
Sec. 929.149(b) of the order's regulations, this grower would receive 
an additional 117 barrels per acre for acreage planted in 1996 (10 
acres  x  117=1,170) for a total of 1,170 barrels of additional sales 
history. Added to the grower's actual sales history, the total sales 
history for the year 2001 for this grower's 60 acres would be 10,070 
barrels. The only information needed to provide the additional sales 
history to this grower would be the date of planting.
    The actual production from the 10 newer acres is already included 
in past sales history. The 1,170 additional barrels are added to sales 
history to account for the increased production from the newer acres 
expected in 2001. In this example and in Example 1, the production from 
the newer acres was broken out of the total production to illustrate 
how the method works. In actual practice, it would not be necessary to 
have this information. The only data needed are the dates of planting. 
This information would be collected annually by the Committee.
    Six years of sales history was used in this example. As discussed 
later in this document, the Committee has recommended that growers can 
choose the best 4 out of the last 7 crops for 2001 sales history 
calculations.

State Average Yield Provisions

    Section 929.48(a)(5) of the order sets forth that a new sales 
history for a grower with no sales history is calculated by using the 
State average yield per acre or the total estimated commercial sales, 
whichever is greater.
    For the 2000-2001 crop year, the State average yield is defined as 
the average State yields for the year 1997 or the average of the best 4 
years out of the last 6 years, whichever is greater. This calculation 
is similar to that used to compute sales history for more established 
growers (an average of the best 4 years out of the last 6 years), and 
would average out seasonal variations in yields. However, if estimated 
commercial sales are greater than what is computed above, the Committee 
would use the estimated commercial sales.
    To take into account the differences among the States, the 
Committee recommended calculating the average yield for each State 
using the best 4 of the last 6 years, and comparing it to the average 
yield for that State in 1997. The higher of the two figures for each 
State was used to calculate new sales histories for new growers. A new 
Sec. 929.148 was added to the order's rules and regulations to set 
forth this calculation.
    The formula for recalculating sales histories set forth in this 
proposal provides a yield for acres with no sales history based on 
analysis of industry data. For acreage expected to be harvested for the 
first time in the year of a volume regulation, the sales history would 
be 75 barrels for acres harvested the first year after planting and 156 
barrels for acres harvested the second year after planting. These 
yields are based on averages of expected yields from acreage of that 
age plus an additional 25 barrels and are more in line with actual 
yields than the current system of providing the State average yield, 
which is considered high for harvests the first year after planting. 
Under the current system, growers forfeit any unused allotment. 
However, in actual practice, this forfeiture is difficult to monitor. 
The proposed method provides a simpler, more realistic approach to 
acreage with no sales history.
    Therefore, since under the new formula, a definition of State 
average yield is unnecessary, this proposal would remove Sec. 929.148 
from the rules and regulations.

Definition of Commercial Crop

    The final rule on the volume regulation changed the number of 
barrels that defines a commercial crop under the marketing order from 
15 to 50 barrels per acre. Calculations of sales histories are based on 
``commercial'' cranberry sales. Section 929.107 defines commercial crop 
as acreage that has a sufficient density of growing vines to produce at 
least 50 barrels per acre without replanting or renovation. Acreage 
producing less than 50 barrels per acre will not be considered to 
produce a commercial crop.
    The intent of this provision was to assist growers who harvested 
cranberries for the first time in 1999. These growers qualified for a 
new sales history determination for the 2000 crop year if they produced 
less than 50 barrels per acre in 1999.
    A full commercial cranberry crop is usually not harvested until 3 
or 4 years

[[Page 2845]]

after being planted. Production is usually limited during the first 
year, with increases in subsequent years until full capacity is 
reached. This rule change allowed growers who produced less than 50 
barrels per acre in 1999, to be eligible to receive as a sales history 
the determination for growers with no sales history on such acreage 
(which is the State average yield or the grower's estimated commercial 
sales, whichever is greater). This change was intended to benefit 
growers who had very low yields per acre for their first year of 
production.
    The new calculation of sales histories set forth in this proposal 
would also make unnecessary the need addressed by Sec. 929.107. For 
acreage expected to be harvested for the first time in the year of a 
volume regulation, under this proposal, the sales history would be 75 
barrels per acre for acres planted in 2000 and 156 barrels per acre for 
acres planted in 1999. No determinations would be necessary as to how 
many barrels were produced on the acreage in previous years.
    The Committee would still need to determine the acreage reported as 
first coming into production in the year of volume regulation is viable 
planted acreage. For example, if a grower reports that 50 acres of 
cranberries planted in 1999 are going to be harvested for the first 
time in 2001, the Committee would need to verify that this acreage 
exists and that the vines are sufficient enough to provide a crop. 
Since the definition of commercial crop is not necessary if this 
proposal is implemented, Sec. 929.107, Basis for determining cranberry 
acreage, would be removed from the rules and regulations.

Change in the Number of Years Used in Computing Sales Histories

    Paragraph (a)(1) of Sec. 929.48 of the order sets forth that sales 
histories are computed using the best 4 out of 6 years of growers' 
sales. Paragraph (a)(2) of the same section states that the Committee, 
with the approval of the Secretary, may alter the number and identity 
of years to be used in computing subsequent sales histories.
    At amendment subcommittee meetings and full Committee meetings, the 
impact of using the year of volume regulation in future calculations of 
sales histories was discussed. The Committee was concerned that sales 
off acreage in a year of volume regulation could be unusually low and 
if that year was used in calculating sales histories for the next year, 
it could lower some growers sales histories to unrealistic rates.
    This proposal is intended to allow the year of volume regulation to 
be dropped from future sales history calculations if that year was 
unusually low. Adding an additional year from which growers' highest 4 
years of sales can be chosen provides a greater opportunity for growers 
to maintain a sales history more reflective of their actual sales.
    Therefore, paragraph (a) of Sec. 929.149 is proposed to be modified 
to indicate sales histories shall be computed using an average of the 
highest 4 of the most recent 7 years of sales.

Fresh and Organic Fruit Exemption

    Fresh and organically-grown fruit are exempt from the 2000-01 
volume regulation pursuant to Sec. 929.58 of the order which provides 
that the Committee may relieve from any or all requirements cranberries 
in such minimum quantities as the Committee, with the approval of the 
Secretary, may prescribe. Section 929.158 specifies the exemption for 
fresh and organically-grown fruit.
    Fresh fruit accounts for about 4.7 percent of the total production. 
Organically-grown cranberries comprise an even smaller portion of the 
total crop than fresh cranberries, about 1,000 barrels.
    Under current marketing practices, there is a distinction between 
cranberries for fresh market and those for processing markets. 
Cranberries intended for fresh fruit outlets are grown and harvested 
differently. When cranberries are water picked for processing, the bog 
is flooded, the cranberries are ``reeled off'' the vines with 
harvesting equipment designed for water picking that beats the berries 
off the vines and the cranberries that rise to the top are harvested. 
In the State of Wisconsin, cranberries for fresh market are water 
picked but harvested with special equipment designed to remove the 
fruit gently as opposed to the reels used to knock fruit from the vines 
when processed fruit is harvested. In addition, water picked 
cranberries intended for fresh markets are subjected to a drying 
process to ensure quality. ``Wet'' cranberries (cranberries that are 
water picked and not dried with special drying equipment) are not used 
for fresh market retail sales. For these reasons, conversion from a 
processed grower to a fresh grower in one season is difficult.
    Fresh and organic cranberries are small, but important segments of 
the overall cranberry market, and do not currently contribute to the 
oversupply situation. Because there is adequate demand for these 
products, restricting the volume of fresh cranberries that can be sold 
profitably was not recommended for the 2000-2001 volume regulation. It 
was discussed at subcommittee and Committee meetings that fresh fruit 
production requires special cultural practices that need to be 
implemented to transition the cranberry vines from processed fruit 
production to fresh fruit production. The exemption for fresh 
cranberries was intended to apply to cranberries packed in consumer 
packaging, such as cellophane bags for supermarkets. Any cranberries 
sorted out from fresh and converted to processing counted against that 
grower's allotment.
    Although the intent of the fresh fruit exemption in the 2000-01 
volume regulation was to only exempt cranberries going to retail 
outlets as fresh cranberries, questions arose as to what constitutes 
``fresh'' under the regulations. For example, some growers expressed 
the desire to sell large bulk bins of wet cranberries to supermarkets. 
There was at least one report in 2000 of bulk wet cranberry sales to a 
retail outlet. This was not contrary to the provisions of the 2000 
regulation, but it is not what was intended by the Committee. The 
Committee was concerned that wet cranberries sold in bulk bins would 
experience serious quality problems for retailers and consumers and 
thus, have a negative impact on the fresh marketplace. Another example 
is that some growers wanted to sell their excess cranberries as fresh 
cranberries to foreign markets, and it was anticipated that foreign 
customers could have an economic incentive to process the berries and 
sell in direct competition with regulated cranberries in foreign 
markets. This also was not the intent of the current regulation.
    The subcommittee developed a more specific definition of fresh 
cranberries so that the intent would be clear for future volume 
regulations if fresh cranberries are again recommended for exemption. 
The proposed Sec. 929.158(a) clarifies that sales of packed-out 
cranberries intended for sale to consumers in fresh form would be 
exempt from volume regulations. The definition is further clarified to 
say that fresh cranberries are also sold dry (either dry picked or 
dried after water picking) in bulk boxes, generally weighing less than 
30 pounds. If fresh cranberries are diverted into processing outlets, 
the exemption does not apply.
    The Committee further recommended that growers be required to 
notify the Committee of their intent to sell fresh fruit in quantities 
over 300 barrels. It is not intended that small quantities be subject 
to the regulation. Also, the subcommittee indicated that ``pick-your-
own'' operations would be covered under the fresh fruit exemption.

[[Page 2846]]

    No modifications were recommended for organically grown 
cranberries. Therefore, organically grown cranberries would be exempt 
from future volume regulations if recommended by the Committee (and 
approved by the Secretary). Such cranberries would need to be certified 
as organic by a third party organic certifying organization acceptable 
to the Committee. Handlers would qualify for the exemptions by filing 
the amount of fresh and organic cranberry sales on the grower 
acquisition listing form.
    It was also recommended that a new paragraph (e) be added to 
Sec. 929.149 regarding the fresh fruit exemption. This paragraph 
proposes that sales histories be calculated separately for fresh and 
processed cranberries. This recommendation also would specify that in 
the event a grower's fruit does not qualify as fresh fruit, the fresh 
fruit sales history, in whole or in part, be added to the processed 
fruit sales history with the approval of the Committee. This was 
recommended by the Committee so that sales histories would be more 
reflective of actual sales, especially if fresh fruit sales are exempt 
in the future. Section 929.62(c) of the order specifies that handlers 
must file certified reports with the Committee as to the quantities of 
cranberries handled during designated periods. Handlers have been 
reporting this information and would continue to report this 
information in accordance with that provision.
    The decision to exempt either fresh or organic cranberries from any 
volume regulation would be discussed and recommended by the Committee 
at the same time volume regulation is being considered. If fresh or 
organic cranberries were not recommended for exemption, these 
provisions would not apply.

Outlets for Excess Cranberries

    The purpose of the producer allotment program is to limit the 
amount of the total crop that can be marketed for normal commercial 
uses. There is no need to limit the volume of cranberries that may be 
marketed in noncommercial or noncompetitive outlets. Thus, in 
accordance with Sec. 929.61, handlers are allowed to dispose of excess 
cranberries in certain designated noncommercial outlets. That section 
of the order provides that noncommercial outlets may include charitable 
institutions and research and development projects for market 
development purposes. Noncompetitive outlets may include any nonhuman 
food use (animal feed) and foreign markets, except Canada. Canada is 
excluded because significant sales of cranberries to Canada could 
result in transshipment back to the United States of the cranberries 
exported there. This could disrupt the U.S. market, contrary to the 
intent of the volume regulation.
    To ensure that excess cranberries diverted to the specified outlets 
do not enter normal marketing channels, certain safeguard provisions 
are established under Sec. 929.61. These provisions require handlers to 
provide documentation to the Committee to verify that the excess 
cranberries were actually used in a noncommercial or noncompetitive 
outlet. In the case of nonhuman food use, a handler would be required 
to notify the Committee at least 48 hours prior to disposition so that 
the Committee staff would have sufficient time to be available to 
observe the disposition of the cranberries.
    In the final rule establishing and implementing the 2000-2001 
volume regulation, Sec. 929.104 specified the noncommercial and 
noncompetitive outlets for excess cranberries as: (1) Foreign 
countries, except Canada; (2) Charitable institutions; (3) Any nonhuman 
food use; and (4) Research and development projects dealing with 
dehydration, radiation, freeze drying, or freezing of cranberries, for 
the development of foreign markets. This regulation also specified that 
excess cranberries cannot be handled, i.e. converted into canned, 
frozen, or dehydrated cranberries or other cranberry products by any 
commercial process.
    The amendment subcommittee discussed that the provision regarding 
research and development projects was too restrictive and could exclude 
some outlets for excess cranberries that could be deemed noncommercial 
and noncompetitive. At the August 28 Committee meeting, it was 
unanimously recommended to modify paragraph (a)(4) of Sec. 929.104 to 
state that research and development projects approved by the Committee 
would be eligible as outlets for excess cranberries. This would provide 
more flexibility in determining if a specific project could be 
considered noncompetitive or noncommercial. The Committee would review 
the activity and make that determination. Research and development 
projects would not have to be limited to dehydration, radiation, freeze 
drying, or freezing of cranberries for the development of foreign 
markets.
    Therefore, this proposal would modify Sec. 929.104 to broaden the 
scope of research and development projects authorized for excess 
cranberries.

Reinstatement of Allotment Notification Date

    Section 929.49 of the order provides that in any year in which an 
allotment percentage is established by the Secretary, the Committee 
must notify growers of their annual allotment by June 1. That section 
also requires the Committee to notify each handler of the annual 
allotments for that handler's growers by June 1.
    The June 1 deadline was suspended in the final rule of the volume 
regulation for the 2000-2001 crop year to allow adequate time for 
interested parties to comment on the proposed rule and for the 
Department to give due consideration to the comments received and issue 
a final rule.
    This proposal would reinstate the June 1 deadline. It was discussed 
at the Committee meeting that it is critical to have a deadline should 
volume regulations again be recommended and implemented. The Committee 
would even prefer the deadline date to be May 1. However, any other 
date would need to be accomplished through formal rulemaking.
    Therefore, this rule proposes reinstating the deadline date of June 
1 in Sec. 929.49 of the order. If volume regulations are recommended 
next year, the Committee intends to make its recommendation at an 
earlier date than last year so that growers have the opportunity to 
better prepare for the producer allotment program.

Regulatory Flexibility Act and Effects on Small Businesses

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA), the Agricultural Marketing Service (AMS) has considered the 
economic impact of this action and alternatives considered 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 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 20 handlers of cranberries who are subject 
to regulation under the order and approximately 1,100 producers of 
cranberries in the regulated area. Small agricultural service firms are 
defined by the Small Business Administration (13

[[Page 2847]]

CFR 121.201) 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.
    Of the 1,100 cranberry growers, between 86 and 95 percent are 
estimated to have sales equal to or less than $500,000. Since 1997, the 
industry has seen the value of production decrease by 69 percent. Fewer 
than 60 growers are estimated to have had sales in excess of $500,000 
in 1999. Thus, the majority of producers of cranberries may be 
classified as small entities. The impact of this proposal would apply 
to all growers harvesting cranberry acreage in the production area 
planted in 1995 or later.
    Six major handlers handle over 97 percent of the crop. Using 
Committee data on volumes handled, AMS has determined that none of 
these handlers qualify as small businesses under SBA's definition. The 
remainder of the crop is marketed by about a dozen grower-handlers who 
handle their own crops. All of these grower-handlers would be 
considered small businesses.
    This proposal invites comments on revisions to the formula for 
calculating sales histories under the producer allotment program 
currently prescribed under the order. This rule would modify the 
current sales history formula in order to achieve the most equitable 
manner of apportioning among producers cranberries made available for 
disposition by handlers in the event volume regulations are recommended 
for the 2001-2002 season. This rule would also clarify the exemption 
provisions under the volume regulation provisions for fresh 
cranberries, modify the outlets for excess cranberries and reinstate 
the date for the Committee to notify growers and handlers of the 
allotments. The proposal was unanimously recommended by the Committee 
at a meeting on August 28, 2000.
    The revisions to sales history calculations would benefit a 
majority of growers, and would be especially beneficial to newer 
growers who planted acreage in 1995 or later. The modification of the 
exemption for fresh cranberry sales would clarify the intent of the 
exemption already in place. The proposed change to the outlets for 
excess cranberries would broaden the scope of the research and 
development projects authorized as outlets for excess cranberries. The 
reinstatement of the June 1 allotment notification date would only undo 
the suspension of that date that was imposed last year when it became 
impractical for the Committee to notify growers of their allotments by 
that date. In the event volume regulations are implemented next season, 
these proposed changes would have a positive effect on all growers and 
handlers because they would provide additional allotment to newer 
acreage, allow for more options in research and development and 
simplify and clarify the present regulations.

Industry Profile

    Cranberries are produced in 10 States, but the vast majority of 
farms and production is concentrated in Massachusetts, New Jersey, 
Oregon, Washington, and Wisconsin. Massachusetts was the number one 
producing State until 1990, when Wisconsin took over the lead. Since 
1995, Wisconsin has been the top producing State. Both States account 
for over 80 percent of cranberry production. The industry has operated 
under a Federal marketing order since 1962.
    Average farm size for cranberry production is very small. The 
average across all producing States is about 33 acres. Wisconsin's 
average is twice the U.S. average, at 66.5 acres, and New Jersey 
averages 83 acres. Average farm size is below the U.S. average for 
Massachusetts (25 acres), Oregon (17 acres) and Washington (14 acres).
    Small cranberry growers dominate in all States: 84 percent of 
growers in Massachusetts harvest 10,000 or fewer barrels of 
cranberries, while another 3.8 percent harvest fewer than 25,000 
barrels. In New Jersey, 62 percent of growers harvest less than 10,000 
barrels, and 10 percent harvest between 10,000 and 25,000 barrels. More 
than half of Wisconsin growers raise less than 10,000 barrels, while 
another 29 percent produce between 10,000 and 25,000 barrels. Similar 
production patterns exist in Washington and Oregon.
    Over 90 percent of the cranberry crop is processed, with the 
remainder sold as fresh fruit. In the 1950s and early 1960s, fresh 
production was considerably higher than it is today, and in many years, 
constituted as much as 25-50 percent of total production. Fresh 
production began to decline in the 1980s, while processed utilization 
and output soared as cranberry juice products became popular. Today, 
fresh fruit claims only about 5-6 percent of total production. 
(Typically, ``shrinkage'' absorbs the remaining 3 percent of 
production.) Three of the top five States produce cranberries for fresh 
sales.

Impact of Reformulating Sales History Calculations

    The U.S. cranberry industry is experiencing an oversupply 
situation. Recent increases in acreage and yields have resulted in 
greater supplies, while demand has remained fairly constant. The result 
has been building excess inventories and reduced grower returns.
    In considering ways to cope with the oversupply, the Committee 
recommended using volume controls (in the form of producer allotments) 
for the 2000-2001 crop year. A final rule establishing a marketable 
quantity and allotment percentage was issued on July 3, 2000, and 
published in the July 11, 2000, issue of the Federal Register (65 FR 
42598) to apply to the 2000-2001 crop year.
    This is the first time the sales history method of a producer 
allotment has been used since these provisions were added to the order 
in 1992. Cranberry bearing acres continue to increase. Many growers, 
particularly those with acreage 4 years old or less, indicated that the 
current method of sales history calculation placed them at a 
disadvantage because of more production on their acreage than their 
sales histories indicate. It is estimated that approximately 30 percent 
of all cranberry acreage was planted in 1995 or later. With the volume 
of new acres within the industry, this would affect many growers.
    The Committee had been discussing the possible use of volume 
regulation for over a year. In its deliberations, concerns were voiced 
about the most equitable way of calculating sales histories. Because 
sales histories are based on an average of past years' sales, newer 
growers would be differently situated than more established growers 
when it comes to calculating sales histories. This is because a 
cranberry bog does not reach full capacity until several years after 
being planted. Using an average of early years' sales (which are low) 
can result in a sales history below future sales potential. A more 
established grower, on the other hand, would have a sales history more 
reflective of his or her production capacity.
    The Committee and the Department gave much thought to the most 
equitable method of determining sales histories within the scope of the 
order. The final rule on volume regulation for 2000-01 was as flexible 
as the order would allow in alleviating the differential impact of the 
volume regulation on growers.
    After a year of volume regulation, the Committee is provided the 
authority to calculate new sales histories for growers. Specifically, 
Sec. 929.48(a)(3) sets forth that a new sales history shall be 
calculated for each grower after each crop year, during which a volume 
regulation has been established, using a

[[Page 2848]]

formula determined by the Committee, with the approval of the 
Secretary.
    The amendment subcommittee met several times to develop a better 
method to assign sales history for newer acreage. They recommended 
using a modified version of the British Columbia Marketing Committee's 
method of determining sales histories in years of volume regulation. 
This method adds sales history to reflect future production on newer 
acres. Conceptually, this method addresses the situations encountered 
with newer acres that were experienced this year domestically. It was 
proposed to adopt this method for future years of volume regulation.
    The Committee recommendation to revise the formula would 
specifically address growers' concerns by providing a more equitable 
determination of their sales histories. The recommended method would 
provide additional sales history for growers with newer acreage to 
account for increased yields for each growing year up to the fifth year 
by factoring in appropriate adjustments to reflect rapidly increasing 
production during initial harvests. The adjustments would be in the 
form of additional sales histories based on the year of planting as 
shown in the following table.

         Table 2.--Additional Sales History Assigned to Acreage
------------------------------------------------------------------------
                                                              Additional
                                                              2001 sales
                        Date planted                         history per
                                                                 acre
------------------------------------------------------------------------
1995.......................................................           49
1996.......................................................          117
1997.......................................................          157
1998.......................................................          183
1999.......................................................          156
2000.......................................................           75
------------------------------------------------------------------------

    The Committee discussed other alternatives to this method. One 
suggestion was to allow growers with newer acreage to add a percentage 
of the State average yield to their sales history each year up to the 
fourth year. The example presented was that acreage being harvested for 
the second time during a year of volume regulation would receive a 
sales history that was 25 percent of the State average yield, a third 
year harvest would receive 50 percent of State average yield, a fourth 
year harvest would receive 75 percent of State average yield. Although 
this method would address some of the problems experienced this year, 
it was determined that the method proposed would be the simpler and 
more practical method for growers to obtain the most realistic sales 
history.
    The Committee determined that something needed to be done to 
address the concerns associated in the 2000 crop year with growers with 
newer acreage. As stated previously, an appeals process was established 
for growers to request a redetermination of their sales histories. For 
the 2000-2001 volume regulation, a total of 247 appeals were received 
by the appeals subcommittee (the first level of review for appeals) and 
these appeals demonstrated the majority of issues that impacted growers 
during the volume regulation. Most of these issues would be addressed 
by this proposal. The major categories of appeals were as follows:
    1. Growers who provided credible evidence to allow the Committee to 
segregate the sales histories of newer acreage so that the sales 
histories of the newer acreage could be computed using the highest 
sales season. The formula proposed in this rule would provide 
additional sales history to these acres without segregating the sales 
off these acres. Under this method, their sales histories would more 
accurately reflect actual sales.
    2. Growers with acreage 4 years old or less that stated that using 
the highest sales season still did not provide a realistic sales 
history. Under this proposal, these growers would be provided 
additional sales history to account for the increases in production of 
newer acres.
    3. Growers with acreage harvested in 1999 with a sales history much 
lower than anticipated yields on the 2000 crop. These growers requested 
the Committee to apply the State average yield on this acreage. Under 
this proposal, these growers would be provided additional sales history 
to account for the increases in production of newer acres. The 
additional sales history would be provided based on the year the 
acreage was planted.
    4. Growers with acreage with no sales history requesting higher 
estimated sales than the State average yield. Acreage with no sales 
history anticipating first harvest in the year of volume regulation 
would receive a sales history based on the year of planting. It is 
expected that there will be growers who anticipate higher yields than 
the sales history provided by this formula. However, the yield rates 
arrived at were based on analysis of industry data and adjusted up 25 
barrels to accommodate as many growers as possible.
    5. Growers with a variety of issues relating to weather related 
damage on acreage, miscalculations of sales histories, etc. It would be 
expected appeals of this nature would still be filed and handled on a 
case-by-case basis.
    If this proposal is finalized and volume regulation is recommended 
and implemented next year, the bases for most of the appeals filed in 
the 2000 crop year would no longer exist. The appeals subcommittee 
chairman estimated that over 80 percent of the appeals filed this year 
would not have been filed if the Committee was able to implement this 
formula for the 2000-01 season.
    As stated previously, fewer than 60 of the approximate 1,100 
growers are estimated to have sales in excess of $500,000. Also, 
approximately 30 percent of all cranberry acreage was planted in 1995 
or later. Since 86 to 95 percent of cranberry growers may be classified 
as small businesses, it can be estimated that this proposal would 
impact mostly small businesses.
    Finally, this proposal, if finalized, would not impose any 
immediate regulations on growers or handlers. It only modifies the 
formula for calculating sales histories in the event volume regulations 
are implemented in the future. Implementing this proposed rule would 
benefit small businesses by allowing them more flexibility in receiving 
a more equitable sales history if volume regulations are recommended 
and implemented in future years. In addition, one of the primary 
reasons for this proposal being made at this time is to provide growers 
and handlers with advanced notice of the change in calculations to 
sales history determinations so that they can be informed and make 
decisions well ahead of the future season.
    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 addition, the 
Department has not identified any relevant Federal rules that 
duplicate, overlap or conflict with this proposed rule.
    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 0581-0103.
    There are some reporting and recordkeeping and other compliance 
requirements under the marketing order. The reporting and recordkeeping 
burdens are necessary for compliance purposes and for the developing

[[Page 2849]]

statistical data for maintenance of the program. The forms require 
information that is readily available from handler and grower records 
and which can be provided without data processing equipment or trained 
statistical staff.
    This proposed rule would necessitate reconfiguring one form 
currently approved by OMB. The form is entitled CMC-AL 1, Growers 
Notice of Intent to Produce and Qualify for Annual Allotment. Growers 
are required to supply the Committee with information relative to their 
cranberry acreage in order to qualify for an annual allotment. The 
information includes how many existing and new acres would be producing 
cranberries in the following season and who would be handling the 
cranberries. The estimated time for 1,285 growers to complete this form 
is 20 minutes, once a year for total burden hours of 424.05. If this 
proposed rule is implemented, the Committee would reconfigure this form 
to ensure that information relative to this proposal would be included, 
particularly the date of planting of the acreage. The burden hours of 
the form would not change and the reconfigured form would be submitted 
to OMB to replace the current form.

Opportunity for Public Participation in the Rulemaking Process

    The Committee's meetings were widely publicized throughout the 
cranberry industry and all interested persons were invited to attend 
the meeting and participate in Committee deliberations on all issues. 
Like all Committee meetings, the August 28, 2000, meeting as well as 
the amendment subcommittee meetings were public meetings and all 
entities, both large and small, were able to express views on this 
issue. Finally, interested persons are invited to submit information on 
the regulatory and informational impacts of this action on small 
businesses.
    A small business guide on complying with fruit, vegetable, and 
specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/fv/moab.html. Any questions about the compliance 
guide should be sent to Jay Guerber at the previously mentioned address 
in the FOR FURTHER INFORMATION CONTACT section.
    A 30-day comment period is provided to allow interested persons to 
respond to this proposal. Thirty days is deemed appropriate because the 
Committee meets in February of 2001, to consider volume regulation. All 
written comments timely received will be considered before a final 
determination is made on this matter.

List of Subjects in 7 CFR Part 929

    Cranberries, Marketing agreements, Reporting and recordkeeping 
requirements.

    For the reasons set forth in the preamble, 7 CFR part 929 is 
proposed to be amended as follows:

PART 929--CRANBERRIES GROWN IN THE STATES OF MASSACHUSETTS, RHODE 
ISLAND, CONNECTICUT, NEW JERSEY, WISCONSIN, MICHIGAN, MINNESOTA, 
OREGON, WASHINGTON, AND LONG ISLAND IN THE STATE OF NEW YORK

    1. The authority citation for 7 CFR part 929 continues to read as 
follows:

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


Sec. 929.49  [Amended]

    2. In paragraph (d) of Sec. 929.49, the suspension of the phrase 
``On or before June 1'' is removed.
    3. In paragraph (e) of Sec. 929.49, the suspension of the phrase 
``On or before June 1 of any year in which an allotment percentage is 
established by the Secretary'' is removed.
    4. Section 929.104, paragraph (a)(4), is revised to read as 
follows:


Sec. 929.104  Outlets for excess cranberries.

    (a) * * *
    (4) Research and development projects approved by the committee 
dealing with the development of foreign and domestic markets, 
including, but not limited to dehydration, radiation, freeze drying, or 
freezing of cranberries.
* * * * *


Sec. 929.148  [Removed]

    5. Section 929.148 is removed.
    6. Section 929.149 is revised to read as follows:


Sec. 929.149  Determination of sales history.

    A sales history for each grower shall be computed by the committee 
in the following manner.
    (a) For each grower with acreage with 7 or more years of sales 
history, a new sales history shall be computed using an average of the 
highest 4 of the most recent 7 years of sales. If the grower has 
acreage with 6 years sales history, a new sales history shall be 
computed by averaging the highest 4 of the 6 years. If the grower has 
acreage with 5 years of sales history and such acreage was planted 
prior to 1995, a new sales history shall be computed by averaging the 
highest 4 of the 5 years.
    (b) For growers whose acreage has 5 years or less of sales history 
and was planted in 1995 or later, the sales history shall be computed 
using the average of all available years and shall be adjusted as 
provided in paragraph (d).
    (c) For growers with acreage with no sales history or for the first 
harvest of replanted acres, the sales history will be 75 barrels per 
acre for acres planted or re-planted in 2000 and first harvested in 
2001 and 156 barrels per acre for acres planted or re-planted in 1999 
and first harvested in 2001.
    (d) In addition to the sales history computed in accordance with 
paragraphs (a) and (b) of this section, additional sales history shall 
be assigned to growers with acreage planted in 1995 or later. The 
additional sales histories depending on the date the acreage is planted 
are shown in Table 1.

          Table 1.-Additional Sales History Assigned to Acreage
------------------------------------------------------------------------
                                                              Additional
                                                              2001 sales
                        Date planted                         history per
                                                                 acre
------------------------------------------------------------------------
1995.......................................................           49
1996.......................................................          117
1997.......................................................          157
1998.......................................................          183
1999.......................................................          156
2000.......................................................           75
------------------------------------------------------------------------

    (e) Sales histories shall be calculated separately for fresh and 
processed cranberries. Fresh fruit sales history, in whole or in part, 
may be added to process fruit sales history with the approval of the 
committee in the event that the grower's fruit does not qualify as 
fresh fruit at delivery.
    7. Section 929.158 is revised to read as follows:


Sec. 929.158  Exemptions.

    If fresh and organically-grown cranberries are exempted from the 
volume regulation as recommended by the Committee and approved by the 
Secretary, the following provisions to these exemptions shall apply:
    (a) Sales of packed-out cranberries intended for sales to consumers 
in fresh form shall be exempt from volume regulation provisions. Fresh 
cranberries are also sold dry in bulk boxes generally weighing less 
than 30 pounds. Fresh cranberries intended for retail markets are not 
sold wet. If any such fresh cranberries are diverted into processing 
outlets, the exemption no longer applies. Growers who intend to handle 
fresh fruit shall notify the committee of their intent to sell over 300 
barrels of fresh fruit.
    (b) Sales of organically-grown cranberries are exempt from volume 
regulation provisions. In order to

[[Page 2850]]

receive an exemption for organic cranberry sales, such cranberries must 
be certified as such by a third party organic certifying organization 
acceptable to the committee.
    (c) Handlers shall qualify for the exemptions in paragraphs (a) and 
(b) of this section by filing the amount of packed-out fresh or organic 
cranberry sales on the grower acquisition form.

    Dated: January 5, 2001.
Robert C. Keeney,
Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 01-949 Filed 1-11-01; 8:45 am]
BILLING CODE 3410-02-P