[Federal Register Volume 68, Number 18 (Tuesday, January 28, 2003)]
[Rules and Regulations]
[Pages 4085-4090]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-1964]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 989

[Docket No. FV02-989-5 FIR]


Raisins Produced From Grapes Grown in California; Additional 
Opportunity for Participation in 2002 Raisin Diversion Program

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: The Department of Agriculture (USDA) is adopting, as a final 
rule, with change, an interim final rule that allowed producers an 
additional opportunity to participate in the 2002 raisin diversion 
program (RDP). The RDP is authorized 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 was 
intended to help reduce the burdensome oversupply affecting the 
California raisin industry.

EFFECTIVE DATE: January 29, 2003.

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) 720-8938.
    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) 720-8938, 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.''
    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. A 
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.
    A 2002 RDP for Natural (sun-dried) Seedless (NS) raisins was 
established in November 2001. A total of 54,086 tons of 2001 crop 
reserve raisins was allocated to the program. This rule continues in 
effect a rule that allowed producers an additional opportunity to 
participate in the 2002 RDP. An additional 25,000 tons of 2001 crop 
reserve raisins was allocated to the RDP. The additional program 
applied to producers who agreed to remove vines from production, and 
was intended to help the industry reduce its burdensome oversupply. The 
action was recommended by the RAC at a meeting on May 30, 2002, by a 
vote of 45 in favor, 1 opposed (member opposed because the program did 
not provide for a moratorium on replanting), and 1 abstained.

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 a RDP. 
Accordingly, additional procedures are specified in Sec.  989.156.

[[Page 4086]]

    Pursuant to these sections, the RAC must meet 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 wishing to participate in 
the RDP must submit an application to the RAC. The RAC conducts a 
lottery if the tonnage applied for 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 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).

Initial 2002 NS Diversion Program

    On November 28, 2001, the RAC met and reviewed data relating to the 
quantity of reserve raisins and anticipated market needs. With a 2001-
02 NS crop estimated at 359,341 tons, and a computed trade demand 
(comparable to market needs) of 235,850 tons, the RAC projected a 
reserve pool of 123,491 tons of NS raisins. With such a large 
anticipated reserve, the RAC announced that 45,182 tons of NS raisins 
would be eligible for diversion under the initial 2002 RDP. The RAC 
increased this amount to 54,086 tons at a meeting on January 11, 2002.
    Of the 54,086 tons, 49,086 tons were made available to approved 
producers who submitted applications to the RAC by December 20, 2001, 
with producers who planned to remove vines receiving priority over 
those who planned to curtail (abort) production through spur pruning or 
other means. Section 989.156(d) requires the RAC to give priority to 
applicants who agree to remove vines. Another 5,000 tons were made 
available to approved producers who submitted applications to the RAC 
from December 21, 2001, through May 1, 2002, and planned to remove 
vines. Authority for this additional opportunity for vine removal is 
provided in Sec.  989.156(s).
    Harvest costs for the initial RDP were announced by the RAC at $340 
per ton, and a production cap of 2.0 tons per acre was established for 
the program. The production cap limits the yield per acre that a 
producer can claim. The 2.0-ton per acre production cap was established 
in an interim final rule that was published in the Federal Register on 
March 15, 2002 (67 FR 11555). A final rule was published on May 14, 
2002 (67 FR 34383).
    Under the initial RDP, the RAC received applications from producers 
accounting for 40,788 tons of raisins that would be removed from 
production by spur pruning vines, and 7,704 tons of raisins that would 
be removed from production by removing vines. Using the production cap 
of 2.0 tons per acre, about 3,850 acres should be removed from 
production through vine removal (7,704 tons divided by 2.0 tons per 
acre). The following is a summary of the tonnage allocated and 
participation in the initial 2002 RDP:

                            Initial 2002 RDP
------------------------------------------------------------------------
                                                          Applications
                                   Allotted tonnage      from producers
------------------------------------------------------------------------
Dec. 20 Deadline..............  49,086 tons (vine       40,788 tons
                                 removal and spur        (spur prune);
                                 prune, with priority    6,896 tons
                                 for vine removal).      (vine removal)
May 1 Deadline................  5,000 tons (vine        808 tons (vine
                                 removal only).          removal).
    Total.....................  54,086 tons...........  40,788 tons
                                                         (spur prune);
                                                         7,704 tons
                                                         (vine removal).
------------------------------------------------------------------------

RAC Recommendation

    The RAC met on May 30, 2002, and recommended adding an additional 
opportunity for producers to participate in the 2002 NS RDP in view of 
the oversupply situation affecting the California raisin industry. 
Specifically, the RAC allocated an additional 25,000 tons of 2001 NS 
reserve raisins to the program. The additional program applied to 
producers who agreed to remove vines, and included a bonus for 
participating producers. Producers received a diversion certificate 
from the RAC equal to 1.5 times the creditable fruit weight of the 
raisins produced on the production unit (up to a maximum of 3 tons per 
acre). For example, if an applicant's verified production was 1.7 tons 
per acre, the applicant received credit for 2.55 tons per acre (1.7 
tons times 1.5). If an applicant's verified production was 2.5 tons per 
acre, the applicant received credit for 3.0 tons per acre (2.0 tons 
times 1.5). Authority for the RAC to issue diversion certificates in an 
amount greater than the creditable fruit weight produced on the 
production unit is provided in Sec.  989.56(c) of the order. The bonus 
was intended to encourage participation in the program.
    The additional opportunity to participate in the 2002 RDP was 
available to producers who did not participate in the initial 2002 
program (``new participants''), and to approved participants in the 
initial 2002 RDP who curtailed their production by spur pruning their 
vines (``early season spur pruners''). Producers wishing to participate 
in the program had to file an application with the RAC by July 8, 2002. 
Priority was given to new participants. If the production applied for 
had exceeded the 25,000 tons added to the program, a lottery would have 
been held to allocate the tonnage among the applicants, pursuant to 
applicable procedures specified in Sec.  989.156(d). Under the 
additional opportunity program, the RAC received applications from 
producers accounting for an estimated 2,265 acres and 5,920 tons of 
raisins that would be removed from production by removing vines.
    Harvest costs for the additional opportunity program for ``early 
season spur pruners'' remained at $340 per ton, while harvest costs for 
new participants were $100 per ton. Because harvest costs are deducted 
from the payment producers receive from handlers for their diversion 
certificates, a reduction

[[Page 4087]]

in harvest costs results in a larger payment to producers for the 
certificates. The reduction in harvest costs for new participants and 
resulting increased payment was intended to take into account in 
producing a 2002 crop up to time of removal. the the cultural and some 
harvest costs incurred by such producers.
    Under the additional opportunity program, vines had to either be 
removed, or chain sawed at the base by July 31, 2002. RAC staff 
verified that the vines had been removed or adequately chain sawed. RAC 
staff later re-inspected vines that had been chain sawed to ensure that 
the remainder of the vine had been removed.
    Accordingly, a new paragraph (u) was added to Sec.  989.156 
specifying the provisions of the additional opportunity program with 
applicable time frames. In addition, necessary conforming changes were 
made to paragraphs (a), (q), and (s) of Sec.  989.156.
    The interim final rule stated that, when redeeming certificates for 
2001 raisin handlers would pay the RAC the harvest cost plus payment 
for bins and for receiving, storing, fumigating, and handling the 
reserve raisins. The Committee believed that RDP certificates should be 
treated like ``raisins'', and handlers should pay the same as if they 
had to buy raisins directly from producers. Bin rental is included in 
the cost of raisins bought directly from producers and the Committee 
believed that this cost should be included in the cost of raisins 
bought through the RDP. The bin payment was set at $20. However, some 
Committee members believed that this fee contributed to handler delays/
reluctance in buying 2001 RDP certificates for 2000-01 reserve pool 
raisins from producers. To avoid this in purchasing 2002 RDP 
certificates for 2001-02 reserve pool raisins, the Committee on August 
14, 2002, unanimously voted to waive the $20 per ton bin fee.

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 Sec.  989.156 of the order's rules 
and regulations regarding the RDP. Under a 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. A 2002 RDP for NS raisins was established in November 2001, and 
54,086 tons of 2001 crop reserve raisins were allocated to the program. 
This rule continues in effect a rule that allowed producers an 
additional opportunity to participate in the 2002 RDP in view of the 
oversupply situation affecting the California raisin industry. An 
additional 25,000 tons of 2001 crop reserve raisins was allocated to 
the RDP. The additional program applied to producers who agreed to 
remove vines from production, and was intended to help the industry 
reduce its burdensome oversupply. Under the program, the RAC received 
applications from producers accounting for an estimated 2,265 acres, 
and 5,920 tons of raisins that would be removed from production. 
Authority for this action is provided in Sec.  989.56(e) of the order.
    Regarding the impact of this action on affected entities, the 
additional opportunity program was intended to help the industry as a 
whole reduce its burdensome oversupply. The California raisin industry 
has experienced successive crop years of high production. The 10-year 
average for deliveries of NS raisins to handlers is 344,303 tons. NS 
raisin deliveries for the 2000 crop year were 432,616 tons, and 
deliveries for the 2001 crop year were 377,328 tons. As previously 
stated, the initial RDP removed about 3,850 acres from production. It 
is estimated that the additional opportunity program removed another 
2,265 acres from production, for a combined total of about 6,115 acres, 
which helped the industry reduce its oversupply.
    Regarding the impact of this action on producers, the program 
provided producers an additional opportunity to earn some income for 
removing their vineyards from production. Participating producers 
received a bonus for removing their vines. They received a diversion 
certificate from the RAC equal to 1.5 times the creditable fruit weight 
of the raisins produced on the production unit (up to a maximum of 3 
tons per acre). Producers will sell their certificates to handlers and 
be paid for the free tonnage applicable to the diversion certificate 
minus the harvest cost for the diverted tonnage. Applicable harvest 
costs for the additional RDP were announced by the RAC at $100 per ton 
for ``new participants'' (producers who did not participate in the 
initial 2002 RDP), and $340 per ton for ``early season spur pruners'' 
(approved participants in the initial 2002 RDP who curtailed production 
by spur pruning their vines).
    Regarding the impact on handlers, handlers will redeem certificates 
for 2001 crop NS raisins and pay the RAC the applicable harvest cost 
($100 per ton for new vine pull participants, and $340 per ton for 
early season spur pruners) plus and for receiving, storing, fumigating, 
handling ($46 per ton), and inspecting ($9.00 per ton). The program 
will return $155 per ton for new participant certificates, and $395 per 
ton for remaining certificates to the 2001 NS reserve pool. A bin fee, 
which has been one of the charges has been dropped because of delays in 
purchases of RDP certificates. Such income to the reserve pool could be 
used to pay remaining pool expenses or be distributed to 2001 NS 
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. There was discussion at the meeting regarding whether the 
program should include a moratorium on replanting. At the time, there 
was no authority for a moratorium on replanting. Some members expressed 
concern that producers may remove their vines and replant with new 
systems that produce higher yields, thereby contributing to more 
oversupply. At the time, there was no authority for a moratorium on 
replanting.

[[Page 4088]]

    There was some discussion at the meeting about the impact of adding 
an additional 25,000 tons of 2001 crop NS reserve raisins to the 2002 
supply. Through the order's mathematical formula for volume regulation, 
additional 2002 supply will reduce the 2002 free tonnage percentage. 
This could reduce returns for producers since producers are paid a 
field price for the free tonnage percentage of their crop. There was 
some consideration of allowing handlers to redeem a portion of their 
certificates for 2001 reserve raisins and a portion for 2002 crop 
reserve raisins. However, the current order only provides authority for 
handlers to redeem certificates for reserve raisins from the prior crop 
year.
    There was also discussion at the meeting about giving smaller 
producers some priority in the program. For example, the program could 
have allowed 2 days for producers with production units of 80 acres to 
apply, and then the program could have been opened up to other 
applicants. However, this was not recommended over a program providing 
the same opportunity to all eligible producers.
    This rule does not measurably add to the current burden on 
reporting or recordkeeping requirements for 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 RDP application) has been approved 
previously 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 May 30, 2002, where this action was 
deliberated was a public meeting widely publicized throughout the 
raisin industry. All interested persons were invited to attend the 
meeting and participate in the industry's deliberations.
    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.
    Additionally, the interim final rule published in the Federal 
Register on June 24, 2002 (67 FR 42471) inadvertently omitted the last 
three sentences in the regulatory text in paragraph (a)(1) of Sec.  
989.156. Those sentences were included in another interim final rule 
published on November 29, 2002 (67 FR 71072). The November 2002 interim 
final rule made additional revisions to paragraphs (a) and (s) of Sec.  
989.156 as they originally appeared in the June 2002 interim final 
rule.
    Committee staff mailed copies of the interim final rule to all 
Committee 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 July 9, 
2002. Five comments were received.
    A raisin producer who had participated in the early season RDP and 
curtailed production by removing vines wanted to be compensated at the 
same rate as producers under the late season RDP, and another wanted to 
receive the 1.5 ton bonus for each ton of creditable fruit weight 
removed. Under the early season RDP, harvest costs were announced by 
the RAC at $340 per ton, a production cap of 2.0 tons per acre was 
established for the program, and producers received a diversion 
certificate from the RAC equal to the creditable fruit weight removed 
(up to a maximum of 2 tons per acre). Under the late season RDP, for 
vine removal only, producers received a diversion certificate from the 
RAC equal to 1.5 times the creditable fruit weight of the raisins 
produced on the production unit removed (up to a maximum of 3 tons per 
acre). This bonus was included as a condition of the late season RDP to 
encourage more vine removals. This was a reasonable addition given the 
industry's excess production capacity, and the oversupply situation 
currently burdening the industry.
    In addition, harvest costs for the late season program were $100 
per ton where new participants were involved and $340 in the case of 
``early season spur pruners'' who decided to remove vines under the 
late season program. Because harvest costs are deducted from the 
payment producers receive from handlers for their diversion 
certificates, a reduction in harvest costs results in a larger payment 
to producers for the certificates. As already mentioned, the reduction 
in harvest costs for new participants and resulting increased payment 
was intended to take into account the cultural and some harvest costs 
incurred by such producers in producing a 2002 crop up to the time of 
removal.
    Two letters each signed by two raisin producers, who also handle 
raisins, were submitted by their attorney. These commenters opposed the 
late season RDP.
    They contend that this program will harm the industry, that it 
lacks economic merit, and that it conflicts with both the letter and 
spirit of the raisin marketing order.
    They stated that their equity in the 2001 reserve pool (the pool 
from which handlers purchasing RDP certificates will obtain raisins) 
will be reduced severely because of USDA's agreement to sell 2001 
reserve pool raisins to farmers for $100 per ton at the rate of 3 tons 
per acre (the conditions of the late season RDP) versus $340 per ton at 
the rate of 2 tons per acre under the early season RDP. The commenters 
point out that Sec.  989.67(d)(1) of raisin marketing order requires 
reserve tonnage raisins to be sold to handlers at prices and in a 
manner intended to maximize producer returns and achieve maximum 
disposition of such raisins by the time reserve tonnage raisins from 
the subsequent crop year are available.
    Under the early season RDP, producers curtailing production through 
vine removal or other approved means received a diversion certificate 
equal to the quantity of raisins diverted up to a maximum of 2 tons per 
acre. Handlers purchasing certificates will pay the producer for the 
free tonnage applicable to the diversion certificate minus a $340 per 
ton harvest cost for the diverted tonnage. New participants in the late 
season RDP received a diversion certificate equal to 1.5 times the 
tonnage diverted (up to a maximum of 3 tons per acre). Authority to 
issue diversion certificates in an amount greater than the creditable 
fruit weight produced on the production unit is specified in paragraph 
(c) of Sec.  989.56. In this case, handlers will pay the producer for 
the free tonnage applicable to the diversion certificate for the 
diverted tonnage minus the $100 per ton harvest cost fixed for late 
season RDP harvest costs. This means that producers selling diversion 
certificates with the $100 per ton harvest cost will receive more money 
per ton than those selling certificates with the $340 per ton cost. The 
reduced harvest costs for late season RDP participants were intended to 
recognize the cultural and some harvest costs such producers incurred 
in producing a 2002 crop up to the time of removal. This difference in 
payments is reasonable for this program.
    The amount of money per ton generated for 2001 reserve pool equity

[[Page 4089]]

holders from the late season RDP for new participants would be $155 per 
ton, and $395 per ton for early season RDP participants, and early 
season spur pruners who decided to remove vines during the late season 
RDP. Handlers will redeem certificates for 2001 NS raisins and pay RAC 
the applicable harvest cost ($100 per ton for new participants, and 
$340 per ton for early season spur pruners and vine removers) plus 
payment for receiving, storing, fumigating, handling ($46 per ton), and 
inspecting ($9 per ton).
    The difference between the two amounts for 2001 reserve pool equity 
holders is $240 per ton. This reduction in returns to the 2001 reserve 
pool equity holders from the new participant late season RDP versus the 
early season RDP participants and early season spur pruners who decided 
to remove vines during the late season RDP was considered by RAC and 
determined to be reasonable under the circumstances. Under the late 
season RDP, RAC received applications from producers accounting for an 
estimated 2,265 acres and 5,920 tons of raisins that would be removed 
from production by removing vines. The RAC had approved 25,000 tons for 
this program.
    Moreover, some in the industry believe that vine removals are 
needed now, rather than later, to start bringing production more 
closely in line with market needs. As the two producer/handlers stated, 
the industry needs to remove permanently 100,000 acres over time to 
align production with current market needs.
    The two producer/handlers also mentioned that the reserve is 
supposed to fulfill the ``orderly marketing'' objective of the Act and 
marketing order by being available in case the new crop is 
substantially reduced by drought or post-harvest rain. They state that 
the 2001 crop reserve raisins could be worth much more in the event 
California were to experience a disastrous heat wave prior to or 
disastrous rain during harvest. Because of this, these two commenters 
ask USDA not to allow the RAC to implement a program (under the guise 
of reducing long-run supply) that risks market chaos and unreasonable 
fluctuations in supplies and prices. They state that it is improper to 
use the marketing order tools to protect a massive over-production 
situation from normal corrective market forces, especially when all of 
the cost of this waste falls on the existing equity holders in the 2001 
reserve pool. However, the late season RDP was intended to assist in 
bringing supplies into closer balance with demand, and as such, was a 
proper use of this marketing order tool.
    These commenters also allege that the late season RDP is intended 
to support a handler's plan to finance improved trellis systems and per 
acre yields, and would encourage marginal producers to stay in the 
raisin business by helping to finance their transition to upgraded 
trellis systems that will nearly double existing per-acre yields. They 
contend that this program will even be more devastating to traditional 
raisin producers if producers who intended to sell fresh grapes into 
the winery or as table grapes participate in the late season RDP.
    The two producer/handlers further contend that the industry's 
productive capacity will naturally decline overtime without the RDP 
program. The RAC's primary goal in recommending the late season vine 
removal RDP was to speedup and facilitate needed production capacity 
reductions. Given the industry's poor economic condition, and 
difficulties many in the industry are experiencing in obtaining 
operating funds from lending institutions, wholesale replanting on land 
from which grape vines have been removed under the RDP by current 
raisin producers, non-traditional raisin producers such as winery and 
table grape producers, and other investors outside the raisin industry 
would appear unlikely.
    The two producer/handlers also believe that vine removal without at 
least a 5-year moratorium on replanting grape vines on that acreage 
will not be successful. The current supply and marketing problems, and 
financial difficulties facing the industry, may lessen interest in 
replanting the acreage from which vines have been removed with new 
grape varieties. Further, there is no authority for a replanting 
moratorium in the 2002 Raisin Diversion Program.
    These commenters also suggested that USDA convene an industry 
summit to explore the various economic issues facing the California 
raisin industry. USDA stands ready to assist the industry in improving 
the marketing order and marketing order operations, and helping the 
industry overcome its current oversupply and financial problems.
    Taking into account the forgoing, USDA continues to be of the view 
that the late season RDP as reflected in this action is consistent with 
the provisions of the marketing order and the Act.
    A final comment was received from an official of a lending 
institution that has an extensive portfolio of agricultural loans for 
various commodities, including raisins, in California. The commenter 
urged the RAC and USDA to make changes to the RDP vine removal 
application to adequately protect lenders in any vine removal or 
diversion program. According to the commenter, the current terms and 
conditions do not go far enough in ensuring that the producer applicant 
informs the lender of the producers planned participation. The 
commenter requested that such changes be made as soon as possible, but 
recognized that it was too late to implement such changes for the 2002 
RDP.
    Section 989.156(b) describes the application that producers must 
complete and submit to the RAC to participate in a RDP. The current 
application procedures, among other things, indicate that the 
producer's application must state that all persons with an equity 
interest in the raisins produced from the grapes grown on the 
production unit identified on the application must consent to the 
filing of the application. As mentioned before, the representative of 
an association of lending institutions believed that the current 
requirement of obtaining consent from all persons having an equity 
interest in the raisins produced from grapes grown on the production 
unit identified did not go far enough in protecting the interests of 
lending institutions. The commenter mentioned that the lending 
institution might not have an equity interest in the raisins produced, 
but might have an equity interest in the vines on the production unit 
on which the grapes were produced, or the land, as security for the 
loan.
    To address the commenter's concern and further clarify the 
application process, the certification has been broadened to assure 
that all such persons are given an opportunity to consent to the 
producer's participation in the RDP. Section 989.156(b) is modified 
accordingly.
    The modification to the RDP application has no additional impact on 
producers and handlers. It simply requires producers to certify that 
all persons with an equity interest in the raisins, vines, or land on 
which the grapes were produced have been given the opportunity to 
consent to the producer's participation in the RDP.
    After consideration of all relevant material presented, including 
the information and recommendations submitted by the RAC, the comments 
received, and other available information, it is hereby found that this 
rule, as hereinafter set forth, will tend to effectuate the declared 
policy of the Act.

[[Page 4090]]

    Pursuant to 5 U.S.C. 553, it is also found and determined that good 
cause exists for not postponing the effective date of this rule until 
30 days after publication in the Federal Register because the 2002 
Raisin Diversion Program is well underway and this action should be 
made effective as soon as possible.

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 67 FR 42471 on June 24, 2002, is adopted as a final 
rule with the following change:
    1. The authority citation for 7 CFR part 989 continues to read as 
follows:

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


    2. In Sec.  989.156, paragraph (b)(6) is revised as follows:


989.156  Raisin diversion program.

* * * * *
    (b) * * *
    (6) A statement that all persons with an equity interest in the 
grapes in the production unit to be diverted, in the vines, or the land 
on which the grapes were produced consent to the filing of the 
application.
* * * * *

    Dated: January 23, 2003.
A.J. Yates,
Administrator, Agricultural Marketing Service.
[FR Doc. 03-1964 Filed 1-23-03; 5:09 pm]
BILLING CODE 3410-02-P