[Federal Register Volume 67, Number 57 (Monday, March 25, 2002)]
[Rules and Regulations]
[Pages 13560-13563]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-7107]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 989

[Docket No. FV02-989-3 FIR]


Raisins Produced From Grapes Grown in California; Extension of 
Redemption Date for Unsold 2001 Diversion Certificates

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, an interim final rule that extended the deadline 
for raisin handlers to redeem diversion certificates issued under the 
2001 raisin diversion program (RDP). The deadline is specified under 
the Federal marketing order for California raisins (order). The order 
regulates the handling of raisins produced from grapes grown in 
California and is administered locally by the Raisin Administrative 
Committee (RAC). This action gave producers additional time to sell 
their certificates to handlers and thus be compensated for diverting 
their 2001 production, which is the intent of the RDP.

EFFECTIVE DATE: Effective April 24, 2002.

FOR FURTHER INFORMATION CONTACT: Maureen T. Pello, Senior Marketing 
Specialist, California Marketing Field Office, Marketing Order 
Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 2202 
Monterey Street, suite 102B, Fresno, California 93721; telephone: (559) 
487-5901, Fax: (559) 487-5906; or George Kelhart, Technical Advisor, 
Marketing Order Administration Branch, Fruit and Vegetable Programs, 
AMS, USDA, 1400 Independence Avenue, SW STOP 0237, Washington, DC 
20250-0237; 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, 1400 Independence 
Avenue, SW STOP 0237, Washington, DC 20250-0237; telephone: (202) 720-
2491, Fax: (202) 720-5698, or E-mail: [email protected].

SUPPLEMENTARY INFORMATION: This rule is issued under Marketing 
Agreement and Order No. 989 (7 CFR part 989), both as amended, 
regulating the handling of raisins produced from grapes grown in 
California, 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.''
    The USDA is issuing this rule in conformance with Executive Order 
12866.
    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule continues in effect an interim final rule 
that extended the deadline for handlers to redeem diversion 
certificates issued under the 2001 RDP for Natural (sun-dried) Seedless 
(NS) raisins. The deadline was extended from December 17, 2001, to 
January 18, 2002, and applied only to certificates unsold by producers 
to handlers as of December 18, 2001. This rule will not preempt any 
State or local laws, regulations, or policies, unless they present an 
irreconcilable conflict with this rule.

[[Page 13561]]

    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 not later than 20 days after the date of 
the entry of the ruling.
    This rule continues in effect an interim final rule that extended 
the deadline for handlers to redeem diversion certificates issued under 
the 2001 NS RDP. The deadline was extended from December 17, 2001, to 
January 18, 2002, and applied only to certificates unsold by producers 
as of December 18, 2001. This action gave producers additional time to 
sell their certificates to handlers and thus be compensated for 
diverting their 2001 production, which is the intent of the RDP. This 
action was recommended by the RAC at a meeting on December 11, 2001, by 
a near unanimous vote of 36 in favor, 2 opposed (believed the RAC 
should adhere to the current deadline), and 1 abstained. All 
certificates were redeemed by January 18, 2002.

Volume Regulation Provisions

    The order provides authority for volume regulation designed to 
promote orderly marketing conditions, stabilize prices and supplies, 
and improve producer returns. When volume regulation is in effect, a 
certain percentage of the California raisin crop may be sold by 
handlers to any market (free tonnage) while the remaining percentage 
must be held by handlers in a reserve pool (reserve) for the account of 
the RAC. Reserve raisins are disposed of through various programs 
authorized under the order. For example, reserve raisins may be sold by 
the RAC to handlers for free use or to replace part of the free tonnage 
they exported; carried over as a hedge against a short crop the 
following year; or may be disposed of in other outlets not competitive 
with those for free tonnage raisins, such as government purchase, 
distilleries, or animal feed. Net proceeds from sales of reserve 
raisins are ultimately distributed to producers.

Raisin Diversion Program

    The RDP is another program concerning reserve raisins authorized 
under the order and may be used as a means for controlling 
overproduction. Authority for the program is provided in Sec. 989.56 of 
the order. Paragraph (e) of that section provides authority for the RAC 
to establish, with the approval of USDA, such rules and regulations as 
may be necessary for the implementation and operation of an RDP. 
Accordingly, additional procedures and deadlines are specified in 
Sec. 989.156.
    Pursuant to these sections, the RAC must meet by November 30 each 
crop year to review raisin data, including information on production, 
supplies, market demand, and inventories. If the RAC determines that 
the available supply of raisins, including those in the reserve pool, 
exceeds projected market needs, it can decide to implement a diversion 
program, and announce the amount of tonnage eligible for diversion 
during the subsequent crop year. Producers who wish to participate in 
the RDP must submit an application to the RAC prior to December 20. The 
RAC conducts a lottery if the tonnage applied far exceeds what has been 
allotted. RAC staff then notifies producers whether they have been 
accepted into the program.
    Approved producers curtail their production by vine removal or some 
other means established by the RAC. Such producers receive a 
certificate the following fall from the RAC which represents the 
quantity of raisins diverted. Producers sell these certificates to 
handlers who pay producers for the free tonnage applicable to the 
diversion certificate minus the established harvest cost for the 
diverted tonnage. Handlers redeem the certificates by presenting them 
to the RAC by December 15 (Monday, December 17, 2001, for the 2001 RDP 
since December 15 fell on a Saturday) and paying an amount equal to the 
established harvest cost plus payment for receiving, storing, 
fumigating, handling, and inspecting the tonnage represented on the 
certificate. The RAC then gives the handler raisins from the prior 
year's reserve pool in an amount equal to the tonnage represented on 
the diversion certificate. The new crop year's volume regulation 
percentages are applied to the diversion tonnage acquired by the 
handler (as if the handler had bought raisins directly from a 
producer).

2001 NS Diversion Program

    The 2000-01 California NS raisin crop was the largest on record 
with final deliveries of raisins from producers to handlers totaling 
432,616 tons. This compares to the 10-year average of 344,303 tons. 
With this large crop, 203,330 tons of NS raisins were set aside in a 
reserve pool. Of that reserve tonnage, 89,076 tons were ultimately 
allocated to a diversion program. As of December 1, 2001, 70,529 tons 
of diversion certificates had been acquired by handlers. It was 
reported at the December 11, 2001, RAC meeting, by RAC staff that the 
status of about 2,000 tons of 2001 diversion certificates was unknown.

RAC Recommendation

    The RAC met on December 11, 2001, and addressed a concern expressed 
by some producers with the 2001 RDP. Some producers were having trouble 
selling their 2001 diversion certificates to handlers. There was 
concern that some certificates may remain unsold and unredeemed by the 
December 15 deadline (or Monday, December 17, 2001, for the 2001 RDP 
since December 15 fell on a Saturday). Several reasons were mentioned 
as to why this was occurring. The California raisin industry as a whole 
is experiencing a severe economic downturn. Two short crops in 1998 and 
1999 along with other factors caused producer prices to drop 
drastically for the 2000 crop, marking the first time in about 13 years 
that prices had fallen. The value of handler inventories has likewise 
fallen which has contributed to handler difficulties in securing 
financing to purchase diversion certificates from producers. In 
addition, some handlers do not need any more raisins to meet their 
market needs. In some instances, producers tried to negotiate a premium 
price for their certificates with handlers.
    After deliberating various options (discussed in the following 
section of this rule regarding the Regulatory Flexibility Analysis), 
the RAC recommended extending the deadline for handlers to redeem 2001 
diversion certificates from December 17, 2001, to January 18, 2002. The 
extension applied only to 2001 certificates unsold by producers as of 
December 18, 2001. Producers still holding certificates had to have the 
certificates verified and stamped appropriately by the RAC by December 
21, 2001, to indicate that such certificates were valid until January 
18, 2002. Handlers could then purchase these certificates from 
producers and redeem them for 2000-01 crop reserve raisins following 
prescribed procedures

[[Page 13562]]

in Sec. 989.156(k). This action gave producers still holding 
certificates additional time to sell their certificates to handlers, 
and gave handlers additional time to secure financing to purchase the 
certificates from producers and redeem them with the RAC. All 
certificates were redeemed by January 18, 2002. Thus, producers will be 
compensated for diverting their 2001 production, which is the intent of 
the RDP. Section 989.156(k) was changed accordingly for the 2001 RDP 
only.

Final Regulatory Flexibility Analysis

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA), the Agricultural Marketing Service (AMS) has considered the 
economic impact of this action on small entities. Accordingly, AMS has 
prepared this final 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 California raisins who are 
subject to regulation under the order and approximately 4,500 raisin 
producers in the regulated area. Small agricultural firms are defined 
by the Small Business Administration (13 CFR 121.201) as those having 
annual receipts of less that $5,000,000, and small agricultural 
producers are defined as those having annual receipts of less than 
$750,000. Thirteen of the 20 handlers subject to regulation have annual 
sales estimated to be at least $5,000,000, and the remaining 7 handlers 
have sales less than $5,000,000. No more than 7 handlers, and a 
majority of producers, of California raisins may be classified as small 
entities.
    This rule continues to revise Secs. 989.156(k) of the order's rules 
and regulations regarding the RDP. Under an RDP, producers receive 
certificates from the RAC for curtailing their production to reduce 
burdensome supplies. The certificates represent diverted tonnage. 
Producers sell the certificates to handlers who, in turn, redeem the 
certificates with the RAC for raisins from the prior year's reserve 
pool. This rule continues in effect an interim final rule that extended 
the deadline for handlers to redeem 2001 diversion certificates with 
the RAC from December 17, 2001, to January 18, 2002, and applied only 
to certificates unsold by producers to handlers as of December 18, 
2001. All certificates were redeemed by January 18, 2002. Authority for 
this action is provided in Sec. 989.56(e) of the order.
    Regarding the impact of this action on affected entities, producers 
who curtailed 2001 production and had trouble selling their diversion 
certificates to handlers had additional time to sell their certificates 
to handlers. Handlers pay producers for the free tonnage applicable to 
the diversion certificate minus the established harvest cost for the 
diverted tonnage. For the 2001 RDP, the industry average free tonnage 
price applied to diversion certificates was $854 per ton, and 
applicable harvest costs as established by the RAC were $340 per ton. 
Preliminary volume regulation percentages for the 2001-02 crop were 
announced by the RAC at 56 percent free and 44 percent reserve. Thus, 
using these figures, if a producer was issued a certificate for 100 
tons of raisins, he/she would be paid $138.24 per ton by the handler, 
or a total of $13,824 (($854 per ton  x  100 tons  x  .56) minus (100 
tons  x  $340 per ton harvest cost)). Extending the deadline gave 
producers additional time to sell their certificates and earn some 
income for not producing a 2001 crop.
    Regarding the impact of this action on handlers, handlers 
experiencing financial difficulty had additional time to arrange for 
financing through likely extending lines of credit with financial 
institutions. Handlers pay producers for the free tonnage applicable to 
the diversion certificate minus the $340 per ton harvest cost. Handlers 
redeem the certificates for 2000-01 crop NS reserve raisins and pay the 
RAC the $340 per ton harvest cost, plus payment for bins ($20 per ton) 
and for receiving, storing, fumigating, handling (currently totaling 
$46 per ton) and inspecting (currently $9.00 per ton) the tonnage 
represented on the certificate (or a total of $415 per ton). In the 
above example, the handler would redeem the 100-ton certificate with 
the RAC, pay the RAC $41,500 ($415 per ton  x  100 tons), and receive 
44 tons (.44  x  100 tons) of raisins from the 2000-01 reserve pool.
    In addition, the $41,500 in the above example paid by the handler 
to the RAC would be allocated to the 2000-01 reserve pool and be used 
to pay remaining pool expenses or be distributed to 2000-01 reserve 
pool equity holders (producers). Thus, all such equity holders could 
potentially benefit from this action.
    Several alternatives to the recommended action were considered by 
the RAC and/or by the RAC's Administrative Issues Subcommittee. It was 
proposed that the RAC purchase unsold diversion certificates from 
producers. However, the order currently provides no authority for this. 
In addition, there are concerns as to how this would impact future 
raisin diversion programs, in particular, whether the integrity of the 
RDP could be maintained.
    It was also proposed that a late fee be added to handlers' costs 
for redeeming diversion certificates after December 17, 2001. However, 
the order provides no authority for such a late charge. Another option 
considered was to take no action and adhere to the December deadline. 
Some industry members believe that there is no guarantee that producers 
can sell their harvested crop each season, and there should likewise be 
no ``guarantee'' that producers can sell their diversion certificates.
    There was also consideration of other extension dates besides 
January 18, 2002. However, after much deliberation, the majority of RAC 
members believe that extending the deadline to January 18, 2002, was 
the best solution to this situation. This date gives the RAC sufficient 
time before it recommends final volume regulation percentages to ensure 
that all redeemed diversion certificates are properly reported as 2001 
acquisitions by handlers and included in the 2001-02 crop estimate.
    This rule imposes no additional reporting or recordkeeping 
requirements on either small or large raisin handlers. In accordance 
with the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), the 
information collection requirement referred to in this rule (i.e., the 
application) has been approved by the Office of Management and Budget 
(OMB) under OMB Control No. 0581-0178. 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. Finally, USDA has not identified any relevant Federal rules 
that duplicate, overlap, or conflict with this rule.
    Further, the RAC's meeting on December 11, 2001, and the RAC's 
Administrative Issues Subcommittee meeting on December 5, 2001, where 
this action was deliberated were all public meetings widely publicized 
throughout the raisin industry. All interested persons were invited to 
attend the meetings and participate in the industry's deliberations.
    An interim final rule concerning this action was published in the 
Federal Register on December 19, 2001 (66 FR

[[Page 13563]]

65423). Copies of the rule were mailed by RAC staff to all RAC members 
and alternates, the Raisin Bargaining Association, handlers and 
dehydrators. In addition, the rule was made available through the 
Internet by the Office of the Federal Register and USDA. That rule 
provided for a 15-day comment period that ended on January 3, 2002. One 
comment was received.
    The commenter opposed extending the redemption deadline, expressing 
concern with changing the rules to accommodate a few producers while 
the majority of producers were able to sell their certificates by the 
December deadline. The commenter, who is also a handler, also expressed 
concern that the extension would apply to producers who had tried to 
negotiate a premium price for their diversion certificates. The 
commenter stated that, in such instances, it released the producers 
from their sales contract.
    Similar concerns regarding producers who tried to negotiate a 
premium price for their diversion certificates with handlers were 
raised at the RAC meeting by RAC members as well. However, other 
reasons were given at the meeting as to why some producers were having 
trouble selling their certificates. As stated earlier in this rule, the 
California raisin industry as a whole is experiencing a severe economic 
downturn. Two short crops in 1998 and 1999 along with other factors 
caused producer prices to drop drastically for the 2000 crop, marking 
the first time in about 13 years that prices had fallen. The value of 
handler inventories has likewise fallen which has contributed to 
handler difficulties in securing financing to purchase diversion 
certificates from producers. In addition, some handlers do not need any 
more raisins to meet their market needs. In light of the unusual 
circumstances currently facing the California raisin industry, the 
majority of RAC members favored extending the deadline until January 
18, 2002. The intent of the RDP is to divert tonnage and reduce 
supplies, while providing some compensation to producers. Extending the 
deadline resulted in redemption of all certificates, thus helping to 
achieve the program's intent.
    The commenter also expressed concern that the RAC's statistical 
report regarding acquisitions of diversion certificates did not appear 
to reconcile with the RAC staff's report on the status of all diversion 
certificates. Such a discrepancy would not adversely affect this 
rulemaking, but may raise compliance issues.
    Accordingly, no changes will be made to the rule, based on the 
comment received.
    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.
    After consideration of all relevant material presented, including 
the information and recommendation submitted by the RAC, the comment 
received, and other available information, it is hereby found that 
finalizing this interim final rule, as hereinafter set forth, will tend 
to effectuate the declared policy of the Act.

List of Subjects in 7 CFR Part 989

    Grapes, Marketing agreements, Raisins, Reporting and recordkeeping 
requirements.

PART 989--RAISINS PRODUCED FROM GRAPES GROWN IN CALIFORNIA

    Accordingly, the interim final rule amending 7 CFR part 989 which 
was published at 66 FR 65423 on December 19, 2001, is adopted as a 
final rule without change.

    Dated: March 18, 2002.
A.J. Yates,
Administrator, Agricultural Marketing Service.
[FR Doc. 02-7107 Filed 3-22-02; 8:45 am]
BILLING CODE 3410-02-P