[Federal Register Volume 66, Number 147 (Tuesday, July 31, 2001)]
[Rules and Regulations]
[Pages 39409-39413]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-18953]


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

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 930

[Docket No. FV01-930-5 IFR]


Tart Cherries Grown in the States of Michigan, et al.; Suspension 
of Provisions Under the Federal Marketing Order for Tart Cherries

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Interim final rule with request for comments.

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

[[Page 39410]]

SUMMARY: This rule suspends a provision in the Federal tart cherry 
marketing order (order) to allow handlers to receive diversion credit 
for exporting juice and juice concentrate to countries other than 
Canada and Mexico. The provision to be suspended does not allow 
diversion credit for domestic shipments of tart cherry juice or juice 
concentrate. The Cherry Industry Administrative Board (Board) 
unanimously recommended this action to allow handlers of tart cherries 
to maintain and possibly expand market opportunities for juice and 
juice concentrate products in export outlets. The Board is responsible 
for local administration of the marketing order which regulates the 
handling of tart cherries grown in Michigan, New York, Pennsylvania, 
Oregon, Utah, Washington, and Wisconsin.

DATES: Effective August 1, 2001. Comments received by August 30, 2001, 
will be considered prior to issuance of a final rule.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this rule. Comments must be sent to the Docket Clerk, Fruit 
and Vegetable Programs, AMS, USDA, room 2525-S, P.O. Box 96456, 
Washington, DC 20090-6456; Fax: (202) 720-8938; or E-mail: 
[email protected]. Comments should reference the docket number 
and the date and page number of this issue of the Federal Register and 
will be available for public inspection in the Office of the Docket 
Clerk during regular business hours.

FOR FURTHER INFORMATION CONTACT: Patricia A. Petrella or Kenneth G. 
Johnson, Marketing Order Administration Branch, Fruit and Vegetable 
Programs, AMS, USDA, Suite 2AO4, Unit 155, 4700 River Road, Riverdale, 
Maryland 20737, telephone: (301) 734-5243, Fax: (301) 734-5275 or 
George Kelhart, Technical Advisor, Marketing Order Administration 
Branch, Fruit and Vegetable Programs, AMS, USDA, room 2525-S, P.O. Box 
96456, Washington, DC 20090-6456; telephone: (202) 720-2491, Fax: (202) 
720-8938.
    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) 720-8938, or E-mail: 
[email protected].

SUPPLEMENTARY INFORMATION: This rule is issued under Marketing 
Agreement and Order No. 930, both as amended (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.'' The marketing 
agreement and order are effective under the Agricultural Marketing 
Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter 
referred to as the ``Act.''
    The Department of Agriculture (Department) is issuing this rule in 
conformance with Executive Order 12866.
    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule is not intended to have retroactive effect. 
This rule will not preempt any State or local laws, regulations, or 
policies, unless they present an irreconcilable conflict with this 
rule.
    The Act provides that administrative proceedings must be exhausted 
before parties may file suit in court. Under section 608c(15)(A) of the 
Act, any handler subject to an order may file with the Secretary a 
petition stating that the order, any provision of the order, or any 
obligation imposed in connection with the order is not in accordance 
with law and request a modification of the order or to be exempted 
therefrom. Such 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.
    The order authorizes the use of volume regulation. In years when 
volume regulation is implemented to stabilize supplies, a certain 
percentage of the cherry crop is required to be set aside as restricted 
tonnage, and the balance may be marketed freely as free tonnage. The 
restricted tonnage is required to be maintained in handler-owned 
inventory reserve pools. Under Sec. 930.59, Handler diversion 
privilege, handlers in regulated districts may fulfill any restricted 
percentage requirements by diverting cherries or cherry products in 
programs approved by the Board. One form of diversion which the Board 
may authorize is the use of cherries for exempt purposes under 
Sec. 930.62. That section states that the Board, with the approval of 
the Secretary, may exempt from various requirements of the order (such 
as assessments, and reserve pool obligation) cherries used for certain 
purposes such as experimental use or new market development. Section 
930.162 of the regulations under the order contains various approved 
forms of exemption and the procedure for applying for, and obtaining, 
exempt use approval from the Board as well as diversion credit. One of 
the exempt uses authorized by regulation is the use of cherries or 
cherry products in the development of export markets (other than Canada 
and Mexico) provided that such products do not include juice or juice 
concentrate. When recommending provisions of the order, the industry 
considered Canada and Mexico to be premium markets for tart cherries, 
not outlets for which exemptions and diversion certificates should be 
given. The industry also was concerned about transshipments of lower 
priced cherries because of their close proximity to the United States 
and the primary domestic market. Thus, Canada and Mexico are excluded 
as eligible countries for the development of export markets.
    The Board held a meeting on March 20, 2001, and unanimously 
recommended that the provision prohibiting handlers from receiving 
diversion credit through use of juice and juice concentrate be 
suspended from the order. However, the Board recommended that the 
suspension be only applicable to exports.
    During the order promulgation process, producers and handlers from 
Oregon and Washington (Northwest), expressed concern that juice and/or 
juice concentrate could be established by the Board as a use eligible 
for diversion credit. Some handlers in the Northwest processed all or 
the majority of their cherries into juice/juice concentrate. At that 
time, this was the Northwest's primary product and handlers in the 
Northwest would not be subject to volume regulation. Northwest 
producers and handlers were concerned that the juicing and 
concentrating of surplus or restricted cherries by handlers in 
regulated districts (Michigan, New York, and Utah) would oversupply the 
Northwest's juice market with low-quality, low-priced product. Record 
testimony indicated that cherries produced in the Northwest have a high 
brix (sugar content) level desirable for juice/juice concentrate which 
produces a high quality product. Because of these concerns, the 
provision preventing the issuance of diversion credit for tart cherry 
juice and juice concentrate were included in the order in 1996 to 
protect the juice market for tart cherry

[[Page 39411]]

producers and handlers in the Northwest.
    However, use of juice and juice concentrate for export was allowed 
under the exemption provisions for the 1997-1998 season. The 1997-1998 
season was the first season of operation for this order and its 
provisions were new to the industry and complex to administer. Handlers 
new to the order provision had shipped or contracted to ship tart 
cherry juice or juice concentrate to eligible countries with the 
intention of applying for diversion certificates. If those handlers had 
been prohibited from receiving diversion certificates for those sales, 
the handlers would have incurred severe financial difficulties. Thus, 
the provision against exports of juice and juice concentrate was 
suspended for the 1997-1998 season.
    The Northwest tart cherry industry, specifically in Washington, is 
changing. Washington handlers are now producing 5 + 1 cherries (25 
pounds of cherries to 5 pounds of sugar) in addition to packing juice 
and juice concentrate. According to the industry, the situation facing 
compliance with volume regulations, if necessary, for the 2001-2002 
season is of significant concern for all regulated handlers and 
Washington handlers in particular. It is quite likely that the primary 
inventory reserve will be full at the onset of the harvest for the 
2001-2002 crop year. The primary inventory reserve has a maximum limit 
of 50 million pounds of restricted cherries. If this reserve is full, 
the only reserve option for regulated handlers is a secondary reserve. 
A secondary reserve is an option for a handler when the primary reserve 
is above the 50 million pound limit. However, from a practical 
standpoint, a secondary reserve is not a reasonable option. Handlers 
establishing secondary reserves are responsible for all costs of that 
reserve, including inspection costs. This could prove costly for 
handlers establishing secondary reserves as no cherries can be released 
from the secondary reserve until all cherries in the primary reserve 
have been released. Handlers, in order to meet restricted percentage 
requirements, would have to consider options other than using inventory 
reserves. Diversion options are available to handlers. In-orchard 
diversion of cherries takes place when cherries are not harvested and 
left in the orchard. 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. According to the 
Board, export diversion would probably be the most preferred of the 
options. However, this option would not be available to handlers if the 
current limitation on exports of juice and/or juice concentrate 
continues. Products that sell in the export markets are mostly hot-pack 
(canned), dried, IQF (Individually Quick Frozen), juice or concentrate. 
Five plus one (5 + 1) cherries do not generally sell in export markets. 
This type of processed product contains sugar and is subject to 
increased tariffs when exported.
    Tart cherry handlers in Washington produce only a few products. As 
previously mentioned, they produce juice and juice concentrate and 5 + 
1 products. Without the ability to export juice and/or juice 
concentrate for diversion credit, Washington handlers could have 
difficulty in meeting their restricted percentage requirements. The 
suspension of the provision in Sec. 930.59 of the order that prevent 
handlers from receiving diversion credit for juice and juice 
concentrate will allow Washington handlers as well as other handlers in 
volume regulated districts to receive diversion credit for such 
shipments. This will enable handlers to increase sales to new markets 
and fulfill their restricted reserve obligation for the 2001-2002 crop 
year.
    The Board recommended that the proviso in Sec. 930.59 concerning 
the exclusion of juice and concentrate products be suspended insofar as 
it applies to exports. In order to accomplish the intent of the Board's 
recommendation, the whole proviso needs to be suspended. Diversion 
credit may be granted for uses which fall under the exemptions in 
Sec. 930.62 of the order. The regulations in Sec. 930.162 implement the 
authority in the order concerning exempt uses and contain the terms and 
conditions under which diversion credit may be approved. Consistent 
with the Board's recommendation, the regulation will be amended to 
reflect the intent that exempt use approval, and diversion credit in 
the case of juice and juice concentrate will only be allowed for 
exports to countries other than Canada and Mexico.

The Regulatory Flexibility Act and Effects on Small Businesses

    The Agricultural Marketing Service (AMS) has considered the 
economic impact of this action on small entities and has prepared this 
initial regulatory flexibility analysis. The Regulatory Flexibility Act 
(RFA) would allow AMS to certify that regulations do not have a 
significant economic impact on a substantial number of small entities. 
However, as a matter of general policy, AMS' Fruit and Vegetable 
Programs (Programs) no longer 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 900 producers of tart cherries in the 
production area and approximately 40 handlers subject to regulation 
under the marketing order. Small agricultural producers have been 
defined by the Small Business Administration (13 CFR 121.201) as those 
having annual receipts less than $500,000, and small agricultural 
service firms are defined as those whose annual receipts are less than 
$5,000,000. The majority of tart cherry producers and handlers may be 
classified as small entities.
    Data from the National Agricultural Statistics Service (NASS) 
states that for 1999, tart cherry utilization for juice, wine, or 
brined uses was 34.5 million pounds for all districts covered under the 
order. The total processed amount for 1999 was 252.3 million pounds. 
Juice, wine, and brined tart cherries represented about 14 percent of 
the total processed crop, and about 10 percent over the last three 
seasons (1997 through 1999).
    This rule suspends a provision in the order to allow handlers to 
receive diversion credit for exporting tart cherry juice and juice 
concentrate to certain eligible countries. The Board met on March 20, 
2001, and unanimously recommended that the provision prohibiting 
handlers from receiving diversion credit through use of juice and juice 
concentrate be suspended from the order. However, the Board recommended 
that the suspension be only applicable to exports.
    During the order promulgation process, producers and handlers from 
Oregon and Washington (Northwest), expressed concern that juice and/or 
juice concentrate could be established

[[Page 39412]]

by the Board as a use eligible for diversion credit. Some handlers in 
the Northwest processed all or the majority of their cherries into 
juice/juice concentrate. At that time, this was the Northwest's primary 
product and handlers in the Northwest would not be subject to volume 
regulation. Northwest producers and handlers were concerned that the 
juicing and concentrating of surplus or restricted cherries by handlers 
in regulated districts (Michigan, New York, and Utah) would oversupply 
the Northwest's juice market with low-quality, low-priced product. 
Record testimony indicated that cherries produced in the Northwest have 
a high brix (sugar content) level desirable for juice/juice concentrate 
which produces a high quality product. Because of these concerns, the 
provision preventing the issuance of diversion credit for tart cherry 
juice and juice concentrate were included in the order in 1996 to 
protect the juice market for tart cherry producers and handlers in the 
Northwest. In the long run, it is anticipated that all businesses, 
whether large or small, will benefit from this suspension action 
because market growth will be increased for tart cherry products, 
grower returns will be improved, and less fruit will be abandoned in-
orchard or at-plant by producers and handlers. Moreover, all regulated 
handlers will be allowed to participate in export markets and have 
access to diversion credits.
    According to the industry, the situation facing compliance with 
volume regulations, if necessary, for the 2001-2002 season is of 
significant concern for all regulated handlers and Washington handlers 
in particular. It is quite likely that the primary inventory reserve 
will be full at the onset of the harvest for the 2001-2002 crop year. 
The primary inventory reserve has a maximum limit of 50 million pounds 
of restricted cherries. If this reserve is full, the only reserve 
option for regulated handlers is a secondary reserve. A secondary 
reserve is an option for a handler when the primary reserve is above 
the 50 million pound limit. However, from a practical standpoint, a 
secondary reserve is not a reasonable option. Handlers establishing 
secondary reserves are responsible for all costs of that reserve, 
including inspection costs. This could prove costly for handlers 
establishing secondary reserves as no cherries can be released from the 
secondary reserve until all cherries in the primary reserve have been 
released. Handlers, in order to meet restricted percentage 
requirements, would have to consider options other than using inventory 
reserves. Diversion options are available to handlers. In-orchard 
diversion of cherries takes place when cherries are not harvested and 
left in the orchard. 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. According to the 
Board, export diversion would probably be the most preferred of the 
options. However, this option would not be available to handlers if the 
current limitation on exports of juice and/or juice concentrate 
continues. The suspension of the order provision that prevents handlers 
from receiving diversion credit for juice and juice concentrate will 
allow Washington handlers as well as other handlers in volume regulated 
districts to receive diversion credit for such shipments. To be 
consistent with the Board's intent, the regulation would prevent the 
use of juice or juice concentrate for exempt use or diversion credit in 
the domestic market. This will enable handlers to increase sales to new 
markets and fulfill their restricted reserve obligation for the 2001-
2002 crop year. Industry estimates are that in Washington State alone, 
this suspension would affect up to 4,200 tons of juice/juice 
concentrate products, with an estimated value of $1.5 to $2.5 million 
dollars.
    One alternative to this relaxation would be to continue the status 
quo. However, this would not be favorable to cherry producers and 
handlers as they would be forced to either destroy tons of cherries in-
orchard or at-plant, or incur costly storage fees for maintaining a 
secondary reserve.
    This action imposes no additional reporting or 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 sector agencies. In addition, the Department has not 
identified any relevant Federal rules that duplicate, overlap, or 
conflict with this 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 0581-0177.
    The Board's meeting was publicized and all Board members and 
alternate Board members, representing both large and small entities, 
were invited to attend the meeting and participate in Board 
deliberations. The Board itself is composed of 18 members, of which 17 
members are growers and handlers and one represents the public. Also, 
the Board has a number of appointed committees to review certain issues 
and make recommendations.
    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 the 
following website: 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.
    This rule invites comments on suspending language in the provisions 
in the order to allow handlers to receive diversion credit for 
exporting juice and juice concentrate to countries other than Canada 
and Mexico. All comments received will be considered in finalizing this 
interim final rule.
    After consideration of all relevant material presented, including 
the information and recommendation submitted by the Board and other 
available information, it is hereby found that the provision suspended 
does not tend to effectuate the declared policy of the Act, while the 
additional regulatory amendments are necessary to implement the 
suspension, and, therefore, will tend to effectuate the declared policy 
of the Act.
    Pursuant to 5 U.S.C. 553, it is also found and determined upon good 
cause that it is impracticable, unnecessary, and contrary to the public 
interest to give preliminary notice prior to putting this rule into 
effect, and that good cause exists for not postponing the effective 
date of this rule until 30 days after publication in the Federal 
Register because: (1) The 2001-2002 crop year begins July 1, 2001, and 
this rule needs to be effective as soon as possible in order to allow 
the industry to take advantage of the export opportunity; (2) the Board 
unanimously recommended this change at a public meeting and interested 
persons had an opportunity to provide input; and (3) this interim final 
rule provides a 30-day comment period, and all comments timely received 
will be considered prior to finalization of this rule. In view of the 
above, a thirty day comment period is deemed appropriate.

[[Page 39413]]

List of Subjects in 7 CFR Part 930

    Marketing agreements, Reporting and recordkeeping requirements, 
Tart cherries.

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

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

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

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


Sec. 930.59  (Suspended in part)

    2. In Sec. 930.59, paragraph (b), the words ``: Provided, That 
diversion may not be accomplished by converting cherries into juice or 
juice concentrate'' are suspended indefinitely.
    3. In Sec. 930.162, paragraphs (a), (b)(3), and (c)(3) are revised 
to read as follows:


Sec. 930.162  Exemptions.

    (a) General. Tart cherries which are used for the purpose of new 
product development, for new market development, for development of 
export markets, for experimental purposes, for export to countries 
other than Canada, and Mexico, or which are donated to charitable 
organizations may be granted an exemption by the Board and will be 
exempt from Secs. 930.41, 930.44, 930.51, 930.53, and Secs. 930.55 
through 930.57, subject to the following terms and conditions. Tart 
cherry juice and juice concentrate products are not eligible for exempt 
use/diversion credit in domestic markets. Only tart cherry juice and 
juice concentrate products for export can receive exempt use/diversion 
credit. Any information received of a confidential and/or proprietary 
nature included in this application will be protected from disclosure 
pursuant to Sec. 930.73 of the order.
    (b) * * *
    (3) Development of export markets. The sale of cherries or cherry 
products, including the development of sales for new or different tart 
cherry products or the expansion of sales for existing tart cherry 
products, to countries other than Canada, and Mexico.
* * * * *
    (c) * * *
    (3) When applying to the Board for an exemption for the development 
of export markets for tart cherries or cherry products (including juice 
and juice concentrate) in countries other than Canada and Mexico, 
including the expansion of sales in existing export markets, handlers 
must detail the nature of their product, specify whether such product 
differs from current products being sold in export markets, and 
estimate the anticipated short and long term sales volumes for the 
requested exemption.
* * * * *

    Dated: July 25, 2001.
Kenneth C. Clayton,
Acting Administrator, Agricultural Marketing Service.
[FR Doc. 01-18953 Filed 7-30-01; 8:45 am]
BILLING CODE 3410-02-P