[Federal Register Volume 66, Number 225 (Wednesday, November 21, 2001)]
[Rules and Regulations]
[Pages 58359-58362]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-29115]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 930

[Docket No. FV01-930-5 FIR]


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: Final rule.

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SUMMARY: The Department of Agriculture (USDA) is adopting, as a final 
rule, without change, the provisions of an interim final rule 
suspending 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 suspended provision 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.

EFFECTIVE DATE: December 21, 2001.

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 (USDA) is issuing this rule in 
conformance with Executive Order 12866.
    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule 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 USDA 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 USDA 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 USDA's ruling on the petition, 
provided an action is filed no 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 
USDA, may exempt from various requirements of the order (such as 
assessments, and reserve pool obligations) 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 prior to the 
issuance of the interim final rule was 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. The interim final rule modified this section to make 
exports of juice or juice concentrate to countries other than Canada 
and Mexico an exempt use. 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

[[Page 58360]]

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 tart cherry industry'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.
    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 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 
previous limitation on exports of juice and/or juice concentrate had 
continued. 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 previously 
prevented 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 was 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 was 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 
final regulatory flexibility analysis. The Regulatory Flexibility Act 
(RFA) allows AMS to certify that regulations do not have a significant 
economic impact on a substantial number of small entities. However, as 
a matter of general policy, AMS' Fruit and Vegetable Programs 
(Programs) no longer opts for such certification, but rather performs 
regulatory flexibility analyses for any rulemaking that would generate 
the interest of a significant number of small entities.
    Performing such analyses shifts the Programs' efforts from 
determining whether regulatory flexibility analyses are required to the 
consideration of regulatory options and economic or regulatory impacts.
    The purpose of the RFA is to fit regulatory actions to the scale of 
business subject to such actions in order that small businesses will 
not be unduly or disproportionately burdened. Marketing orders issued 
pursuant to the

[[Page 58361]]

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 $750,000, and small agricultural 
service firms are defined as those whose annual receipts are less than 
$5,000,000. The standard for producers was changed from $500,000 to 
$750,000 after the interim final rule was issued. 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 continues in effect the suspension of 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 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 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 
previous limitation on exports of juice and/or juice concentrate had 
continued. The continued 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 
prevents 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 have been to continue the 
status quo. However, this would not be favorable to cherry producers 
and handlers as they would have been 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, USDA 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 19 members, of which 18 
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.
    An interim final rule concerning this action was published in the 
Federal Register on July 31, 2001. Copies of the rule were mailed by 
the Board's staff to all Board members and handlers. In

[[Page 58362]]

addition, the rule was made available through the Internet by the 
Office of the Federal Register and USDA. That rule provided for a 30-
day comment period which ended August 30, 2001. One comment was 
received.
    The comment was received from a tart cherry handler who supports 
the suspension, but is critical of the rule's timing. The effective 
date of this action was August 1, 2001. This date fell during harvest 
in some production areas and at the completion of harvest in other 
areas. The commenter is concerned that, for this season, all areas of 
production cannot take advantage of the expansion of exempt products 
available for export and diversion credit equitably. The commenter 
states that simply making such rule effective 30 days prior to harvest 
or 20 days after harvest would allow growers and handlers to be treated 
more equitably.
    The interim final rule relaxed requirements on meeting restricted 
obligations in seasons with volume regulation, and USDA believed that 
the benefits anticipated should be made available to the industry as 
soon as possible. The relaxation has now been available since August 1, 
2001, of the 2001/2002 season, and should be available to the industry 
for future seasons. Therefore, timing will no longer be an issue.
    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.
    After consideration of all relevant material presented, including 
the information and recommendation submitted by the Committee, the 
comment received, 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.

List of Subjects in 7 CFR Part 930

    Marketing agreements, Reporting and recordkeeping requirements, 
Tart cherries.

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

    Accordingly, the interim final rule amending 7 CFR part 930 which 
was published at 66 FR 39409 on July 31, 2001, is adopted as a final 
rule without change.

    Dated: November 15, 2001.
A. J. Yates,
Acting Administrator, Agricultural Marketing Service.
[FR Doc. 01-29115 Filed 11-20-01; 8:45 am]
BILLING CODE 3410-02-P