[Federal Register Volume 68, Number 18 (Tuesday, January 28, 2003)]
[Rules and Regulations]
[Pages 4079-4085]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-1965]



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  Federal Register / Vol. 68, No. 18 / Tuesday, January 28, 2003 / 
Rules and Regulations  

[[Page 4079]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 989

[Docket No. FV03-989-1 IFR]


Raisins Produced From Grapes Grown in California; Modifications 
to the Raisin Diversion Program

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Interim final rule with request for comments.

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

SUMMARY: This rule modifies the requirements of the raisin diversion 
program (RDP) 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). The changes are intended to 
provide the RAC with additional flexibility when implementing a RDP, 
and provide opportunity for all producers to participate in a program. 
The changes include adding an additional date by which the RAC can 
increase the tonnage allotted to a RDP; adding authority for the RAC to 
limit the amount of tonnage allotted to vine removal; modifying the 
application of the production cap for spur pruners under a RDP; adding 
authority for the RAC to condition a vine removal program with a 
producer's agreement not to replant and to compensate the RAC for 
damages if replanting occurs; revising the requirements for 
prioritizing and allocating tonnage for spur pruners under a RDP; 
allowing partial production units to be included in a RDP and adding 
authority for the RAC to specify provisions to maintain the integrity 
of the program; and specifying in the regulations the approval of a 
program's provisions by the Department.

DATES: Effective: January 29, 2003. Comments received by March 31, 
2003, 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, 
Marketing Order Administration Branch, Fruit and Vegetable Programs, 
AMS, USDA, 1400 Independence Avenue SW, STOP 0237, Washington, DC 
20250-0237; Fax: (202) 720-8938, or e-mail: [email protected]. 
All comments should reference the docket number and the date and page 
number of this issue of the Federal Register and will be made available 
for public inspection in the Office of the Docket Clerk during regular 
business hours, or can be viewed at: http://www.ams.usda.gov/fv/moab.html.

FOR FURTHER INFORMATION CONTACT: 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 Ronald L. Cioffi, Chief, 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.''
    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 not later than 20 days after the date of 
the entry of the ruling.
    This rule modifies the administrative rules and regulations 
regarding the RDP specified under the order. The changes are designed 
to provide the RAC with additional flexibility when implementing a RDP, 
and provide the opportunity for all producers to participate in a 
program. The changes are as follows: Add an additional date by which 
the RAC can increase the tonnage allotted to a RDP; add authority for 
the RAC to limit the amount of tonnage allocated for vine removal; 
modify application of the production cap for spur pruners under a RDP; 
adding authority for the RAC to condition a vine removal program with a 
producer's agreement not to replant and to compensate the RAC for 
damages if replanting occurs; revise the requirements for prioritizing 
and allocating tonnage for spur pruners under a RDP; and allow partial 
production units to be included in a RDP and allow the RAC to specify 
provisions to maintain the integrity of the program.

[[Page 4080]]

    These regulatory changes were recommended by the RAC at meetings on 
October 15, and December 12, 2002, by a near unanimous vote. A member 
voting no expressed concern with the definition of partial production 
unit as proposed by the RAC.
    Given the above changes, appropriate revisions are made to the text 
of Sec.  989.156 to include specific references to approval of USDA for 
a program's provisions.

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 reserve pool equity holders.

Raisin Diversion Program

    The RDP is another program concerning reserve raisins authorized 
under the order and may be used, as a means for bringing supplies into 
closer balance with market needs. 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 and deadlines 
are specified in Sec.  989.156.
    Pursuant to these sections, the RAC must meet during the 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. Under the current 
regulations, 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.

RAC Recommendation

    The California raisin and grape industries continue to be plagued 
by burdensome supplies and severe economic conditions. Industry members 
have been reviewing various options to help address some of these 
concerns. The RAC also has been reviewing options to help the industry 
address these issues through the marketing order. The RAC proposed some 
requirements for a 2003 RDP at a meeting on October 15, 2002. 
Additional revisions were proposed by the RAC's Executive Committee on 
October 24, and November 4 and 26, 2002. The RAC met on December 12, 
2002, to review the Executive Committee's changes and proposed program. 
The RAC ultimately recommended specific changes to the order's 
regulations regarding the RDP that could apply to any future RDP. The 
changes are designed to provide the RAC with additional flexibility 
when implementing a RDP, and provide opportunity for all producers to 
participate in a program. The changes are described in the following 
paragraphs.

Additional Date for Increasing the RDP Tonnage

    With the exception of the 2002-03 crop year, Sec.  989.56(a) of the 
order and Sec.  989.156(a)(1) of the regulations specify that the RAC 
must announce the quantity of tonnage allotted to a RDP on or before 
November 30 of each crop year. Section 989.156(a)(1) specifies further, 
with the exception of the 2002-03 crop year, that the RAC may announce 
an increase in the tonnage eligible for a RDP on or before January 15 
of each crop year. The November 30-deadline in the order was suspended, 
and the November 30 and January 15 dates in the regulations were 
extended for the 2002-03 crop year to dates specified by the RAC (67 FR 
71072; November 29, 2002) to allow time for review and modification of 
the RAC's proposed RDP changes.
    The RAC recommended that the regulations be modified to allow the 
RAC an additional opportunity to increase the tonnage eligible for a 
RDP on or before May 1 of each crop year subsequent to 2002-03. This 
will allow the RAC the opportunity to allocate additional tonnage to a 
RDP in years when raisin deliveries may be slow, or when additional 
reserve raisins may be available later during the crop year. Section 
989.156(a)(1) is modified accordingly.

Limit on Tonnage Allocated for Vine Removal

    Section 989.156(h)(1) specifies that the RAC may limit a RDP to 
vine removal only. This requirement will remain unchanged by this rule. 
However, the RAC proposed having the ability to cap, or limit, the 
amount of tonnage allocated to a RDP for vine removal. For example, the 
RAC may allocate 100,000 tons to a RDP, of which 50,000 tons would be 
allotted for vine removal only. Under this scenario, the remaining 
50,000 tons would be available for spur pruners (or producers who opted 
to reduce their production by methods other than vine removal). As 
described later in this rule, the RAC recommended revising the 
regulations to allow for the allocation of tonnage to spur pruners pro 
rata to all who applied. Imposing a cap on vine removers would ensure 
that a certain amount of tonnage would be available for a spur prune 
program. This additional requirement is specified in Sec.  
989.156(a)(2).

Additional Agreement for Vine Removers Who Replant

    This RAC recommended that authority be added for the RAC to 
condition a vine removal program with

[[Page 4081]]

a producer's agreement not to replant and to compensate the RAC for 
damages if replanting occurs. Producers who agree to remove vines, but 
replant within a specified number of years (maximum of 5 crop years), 
as determined by the RAC, with the approval of USDA, must agree to 
compensate the RAC for appropriate damages for the tonnage specified in 
the applicable diversion certificate. The payment of damages would be 
appropriate because replanting would cause serious damage to a RDP and 
the raisin industry. The RAC contemplates that a 5-year restriction on 
replanting would be included as a feature of a 2003 RDP for NS raisins. 
This would remove acreage from production for at least 8 crop years 
because it takes about 3 years for a new vineyard to have significant 
production. Adding this requirement to a RDP is expected to help the 
industry reduce its burdensome oversupply.
    Accordingly, the producer application for a 2003 RDP has been 
modified to condition a vine removal program with a producer's 
agreement not to replant. Producers who elect to participate in a RDP 
and later replant will be required to compensate the RAC for damages at 
a rate per ton to be determined by the RAC and approved by USDA for the 
tonnage specified on the diversion certificate. Funds collected by the 
RAC for such damages will be deposited in the reserve pool applicable 
to the particular diversion program and be distributed to the equity 
holders in that pool. If a determination is made by the Committee that 
a producer violated the agreement not to replant and is subject to 
damages, the producer may appeal the Committee's decision in accordance 
with paragraph (m) of Sec.  989.156.

Application of Production Cap

    Under a RDP, the reserve tonnage allocated to a program becomes 
part of the following year's supply. For example, if 100,000 tons of 
2002-03 reserve raisins were allocated to a RDP, that tonnage would be 
issued to RDP producers in the fall of 2003 in the form of certificates 
from the RAC. The certificates represent actual raisins. The 100,000 
tons would then be included in the 2003-04 crop estimate. A higher crop 
estimate reduces the free tonnage percentage. Since producers are paid 
by handlers for their free tonnage raisins, a lower free tonnage 
percentage reduces producer returns. The industry has had concerns with 
the impact of large diversion programs on the following year's free 
tonnage percentage.
    As a result, the RAC recommended that the concern about large RDP's 
adversely impacting the following year's free tonnage percentage be 
addressed through application of the production cap. A production cap 
is a limit on the yield per acre that is permitted under a RDP. Section 
989.56(a) specifies that the RAC must announce the production cap at 
the same time it announces a RDP for the crop year. The section 
specifies further that the production cap shall equal 2.75 tons per 
acre, unless it is lowered by the RAC, with approval of the Secretary.
    The RAC proposed that it have the flexibility to limit the 
production cap to a percentage of the yield per acre for production 
units on which producers agree to spur prune (or curtail production by 
methods other than vine removal) to lessen the adverse effects a large 
RDP would have on the following year's free tonnage percentage. For 
example, the RAC could specify that the production cap applicable to 
2003 spur pruners would equal the lesser of 2.75 tons per acre, or 80 
percent of the 2002 yield per acre on that production unit. The 
following table illustrates this further.

------------------------------------------------------------------------
                                        Application of  production cap
     2002 yield  per acre (tons                     (tons)
------------------------------------------------------------------------
5.0................................  2.75 (2.75 cap)
4.0................................  2.75 (2.75 cap)
3.5................................  2.75 (2.75 cap)
3.4375.............................  2.75 (both 80% and 2.75)
3.2................................  2.56 (80% cap)
3.0................................  2.4 (80% cap)
2.5................................  2.0 (80% cap)
2.0................................  1.6 (80% cap)
1.5................................  1.2 (80% cap)
1.0................................  0.8 (80% cap)
------------------------------------------------------------------------

    Participants who agree to remove vines would not be subject to the 
percentage limit on the production cap because of the effectiveness of 
vine removal in reducing production capacity. However, such 
participants would remain subject to the established production cap. 
This additional flexibility is specified in Sec.  989.156(a)(2).

Allocation of Tonnage for Spur Pruners (Includes Methods of Diversion 
Other Than Vine Removal)

    Section 989.156(d) currently requires that, if reserve tonnage 
exists after the allocation of diversion tonnage has been made to all 
eligible producer applicants who agree to remove vines, a lottery shall 
be held to allocate remaining tonnage. The RAC recommended that it have 
the flexibility to allocate such tonnage either pro rata to remaining 
applicants or by a lottery for complete production units to remaining 
applicants if a minimal amount of tonnage remains. Allocating tonnage 
pro rata would provide the opportunity for all producers to participate 
in a spur prune program. Accordingly, Sec. Sec.  989.156(a)(2) and 
989.156(d) is modified to incorporate this option.

Inclusion of Partial Production Units

    As described above, the RAC contemplates future RDP's where the 
tonnage allotted to applicants who agree to spur prune vines (or divert 
production using a method other than vine removal) may be done on a pro 
rata basis. Such producers would remove only a portion of a production 
unit, or a ``partial'' unit.
    In 1997, the RAC recommended that partial production units no 
longer be accepted into the RDP, and Sec.  989.156 was modified 
accordingly (62 FR 60764; November 13, 1997). This action was taken 
because the RAC had concerns that some producers were removing weak 
vines in a production unit and getting credit under a RDP for an 
inflated amount of tonnage.
    To implement the RAC's proposal for allocating tonnage on a pro-
rata basis to applicants who agree to spur prune their vines, and help 
maintain integrity of the program, the RAC recommended that a partial 
production unit must have two permanent, contiguous (natural or man-
made) boundaries. This would eliminate the ability for producers to 
select certain rows of weak vines and artificially inflate the tonnage 
on their unit. This definition is added to paragraph (o) of Sec.  
989.156. Additionally, the words ``or portion thereof'' are added to 
paragraphs (h) and (i) of Sec.  989.156 to indicate that partial units 
may be included in a RDP.
    Finally, the RAC recommended that it be given the authority to 
specify provisions for a partial production unit to maintain the 
integrity of the program. For example, the RAC indicated that it might 
want to specify that only a certain corner of each vineyard may be 
accepted into a spur-prune RDP to further alleviate the problem of a 
producer choosing the weakest corner of his/her vineyard, and to help 
maintain the integrity of the RDP. Accordingly, paragraph (a) of Sec.  
989.156 is modified to reflect that the RAC may limit a program that is 
applicable to partial production units by specifying the portion of the 
production units that can be diverted, or like provisions to maintain 
the integrity of the program.

Initial 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.

[[Page 4082]]

Accordingly, AMS has prepared this initial regulatory flexibility 
analysis.
    The purpose of the RFA is to fit regulatory actions to the scale of 
business subject to such actions in order that small businesses will 
not be unduly or disproportionately burdened. Marketing orders issued 
pursuant to the Act, and rules issued thereunder, are unique in that 
they are brought about through group action of essentially small 
entities acting on their own behalf. Thus, both statutes have small 
entity orientation and compatibility.
    There are approximately 20 handlers of 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.
    The California Agriculture Statistics Service (CASS) has forecast 
the 2002 production of raisin variety grapes at 2,550,000 tons (green). 
This is a relatively high level of production. The record high 
production occurred in 2000, at 2,921,000 tons (green).
    Producers market raisin variety grapes in the fresh market (table), 
wine or juice market (crush), or dry them into raisins. Typically, 67 
percent of the crop is dried for raisins, 20 percent crushed for wine 
and juice, and the remaining 13 percent of the crop is utilized in 
fresh and canned sales. These outlets provide a hedge for producers 
attempting to minimize risk from bad weather (rain) or a depressed 
market (concentrate, wine, or raisins).
    The industry's estimate for all variety raisin production, as of 
October 4, 2002, is 446,449 dried tons (407,996 tons for NS). This will 
be the third consecutive year that raisin production has been above 
400,000 tons. Combined domestic and export demand (shipments) is 
estimated at approximately 300,000 tons. These levels of production, 
combined with stable demand have resulted in a large build-up of free 
and reserve carryin inventories.
    The RAC reports that 48,749 tons of NS raisins are currently being 
held in the reserve pool from the 2001 crop. In addition, 153,152 free 
tons are held by handlers in inventories. With current total dried 
production estimated at 446,449 tons, and combined free and reserve 
inventories at 201,901 tons, the industry has over 600,000 tons of 
raisins.
    This type of surplus situation leads to serious marketing problems. 
Handlers compete against each other in an attempt to sell more raisins 
to reduce inventories and to market their crop. This situation puts 
downward pressure on producers' prices and incomes.
    In addition, it has been reported that the wineries offered $65 a 
ton for green NS raisins for crushing. In recent years, wineries have 
typically offered prices ranging from $164 to $200 per ton. The wine 
price for NS grapes was lowered to $125 per ton in 2000 and fell to 
$85.70 per ton in 2001. This has resulted in more raisin variety grapes 
being dried for raisins, which has added to the surplus situation in 
the raisin market.
    Typically, 500,000 tons of raisin variety grapes are delivered to 
the wineries for crushing. In 2001, this volume decreased to 261,000 
tons. The 2002 crop year deliveries for crushing are expected to remain 
low.
    Surplus situations are often the result of increased bearing acres, 
which are encouraged by high prices. However, bearing acres for raisin 
variety grapes have fallen from 280,000 acres in 2000 to 273,000 acres 
in 2002. In addition, 27,000 acres were idle due to the raisin 
diversion program. The increased raisin production is largely the 
result of producers deciding to dry more grapes for raisins due to the 
low crush prices and increased yields. The RAC hopes to utilize the RDP 
to help alleviate the industry's oversupply. The RAC's recommended 
changes are designed to add flexibilities to the RDP, and provide the 
opportunity for all producers to participate in a program. The overall 
impact of a RDP with the recommended flexibility is expected to impact 
small and large entities positively by reducing the industry's 
production capacity, and by bringing supplies in closer balance with 
market needs.
    This rule revises 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. Specifically, this rule revises the requirements of a RDP to: Add 
an additional date by which the RAC can increase the tonnage allotted 
to a RDP; add authority for the RAC to limit the amount of tonnage 
allocated for vine removal; modify application of the production cap 
for spur pruners under a RDP; adding authority for the RAC to condition 
a vine removal program with a producer's agreement not to replant and 
to compensate the RAC for damages if replanting occurs; revise the 
requirements for prioritizing and allocating tonnage for spur pruners 
under a RDP; allow partial production units to be included in a RDP and 
add authority for the RAC to specify provisions to maintain the 
integrity of the program; and specifying in the regulations the 
approval of a RDP's provisions by USDA. Authority for these changes is 
provided in Sec.  989.56(e) of the order.
    Regarding the impact of this action on affected entities, these 
changes are designed to provide the RAC with additional flexibility 
when implementing a RDP. Adding the May 1 date whereby the RAC may 
increase the tonnage allotted to a RDP would give more producers an 
opportunity to participate in the program. The changes regarding the 
way tonnages are allocated under a program (cap on vine removal that 
would allow a specified amount of tonnage available for spur pruners, 
and allocating spur prune tonnage pro rata to all applicants) are 
intended to provide the opportunity for all producers to participate at 
some level in a RDP. Thus, all producers could potentially have the 
opportunity to earn some income for curtailing their production.
    With regard to cost, based on past RDP's, the RAC estimates that 
compliance and verification costs associated with a RDP average about 
$150 per production unit. Using an estimate of 1.25 production units 
per RDP producer application, if all 4,500 producers participated in a 
RDP, there could potentially be about 5,625 production units in a 
program. Thus, using the $150 per unit figure, compliance and 
verification costs for the program could average about $843,750. The 
overall impact of the changes is difficult to quantify. However, if a 
RDP implemented using the increased flexibility helps bring supplies 
into balance with market needs over time, the benefits for both small 
and large entities would be positive. When supplies and market needs 
are in balance, experience has shown that producers and handlers both 
benefit, regardless of size.
    Regarding alternatives to the RAC's recommendation, the industry 
has been considering various options and programs to help alleviate the 
severe economic conditions adversely

[[Page 4083]]

impacting both raisin producers and handlers. Industry groups outside 
of the RAC are seeking financial assistance under section 32 of the Act 
of August 24, 1935 (7 U.S.C. 612c). The RAC also has a subcommittee 
that is reviewing long-term solutions to help the industry that would 
require formal rulemaking changes to the marketing order. RAC members 
have been seeking short-term solutions available through the existing 
order, or slight modifications thereto. Thus, the RAC recommended 
changes are designed to add flexibilities to the RDP and provide the 
potential for all producers to participate in a program. The RAC hopes 
to utilize the RDP to help alleviate the industry's oversupply 
situation.
    The RAC and Executive Committee did consider options to some of the 
features recommended by the RAC. One option concerned an alternative to 
application of the production cap. That is, specifying that producers 
who agreed to spur prune their vines would have to spur prune an 
additional percentage of their acreage that would not be reflected on 
their diversion certificates. However, the order does not provide 
authority for the application of a ``multiplier'' in this fashion to 
vineyards that were spur pruned. The RAC ultimately proposed that it 
have the flexibility to limit the production cap to a percentage of the 
yield per acre for production units on which producers agree to spur 
prune (or curtail production by methods other than vine removal).
    At its meetings, the Executive Committee also considered other 
dates besides May 1 whereby the RAC could increase the tonnage allotted 
to a RDP. An April date was contemplated, but not proposed because 
industry members would rather be past the threat of an April frost 
before making a decision whether to add tonnage to a RDP. Thus, the May 
1 date was deemed appropriate and ultimately proposed by the RAC.
    There was some discussion by industry members about partial 
production units. Some members questioned whether authority for partial 
units should be added back into the order's regulations, and some 
questioned whether a partial unit should be required to have two 
permanent, contiguous boundaries. There was also concern that a 
producer could spur prune a corner of his/her vineyard, redesign his/
her trellacing system to provide for significantly increased yields, 
and contribute to future oversupplies. After much discussion, the 
majority of RAC members concurred with allowing partial production 
units in a RDP, and limiting such a unit to one that has two permanent, 
contiguous boundaries.
    This rule does not add measurably 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 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, this action was reviewed by the RAC's Administrative 
Issues Subcommittee October 7 and 15, and December 10 and 12, 2002, by 
the RAC's Executive Committee on October 24, and November 4 and 26, 
2002, and by the RAC on October 7 and 15, and December 12, 2002. All of 
these meetings where this action was deliberated were public meetings 
widely publicized throughout the raisin industry. All interested 
persons were invited to attend the meetings and participate in the 
industry's deliberations. Finally, all interested persons are invited 
to submit information on the regulatory and informational impact of 
this action on small businesses.
    A small business guide on complying with fruit, vegetable, and 
specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/fv/moab.html. Any questions about the compliance 
guide should be sent to Jay Guerber at the previously mentioned address 
in the FOR FURTHER INFORMATION CONTACT section.
    A 60-day comment period is provided to allow interested persons to 
respond to this rule. Any comments received will be considered prior to 
finalization of this rule.
    After consideration of all relevant material presented, including 
the RAC's recommendation, and other information, it is found that this 
interim final rule, as hereinafter set forth, 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) This rule provides the RAC with additional 
flexibility when implementing a RDP; (2) this rule needs to be in place 
as soon as possible so that these requirements can be in place for a 
2003 RDP, and the RAC and all potential participants can plan 
accordingly. (3) this action was recommended by a near unanimous vote 
of the RAC and producer participation in a RDP is voluntary; and (4) a 
60-day comment period is provided and all comments received will be 
considered in finalizing this rule.

List of Subjects in 7 CFR Part 989

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


    For the reasons set forth in the preamble, 7 CFR part 989 is 
amended as follows:

PART 989--RAISINS PRODUCED FROM GRAPES GROWN IN CALIFORNIA

    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, paragraphs (a), (d), (h)(2) and (3), (i), and 
(o) are revised to read as follows:


Sec.  989.156  Raisin diversion program.

    (a)(1) Quantity to be diverted.
    On or before November 30 of each crop year, the Committee, with the 
approval of the Secretary, shall announce the quantity of raisins 
eligible for a raisin diversion program: Provided, That, for the 2003 
diversion program, this date may be extended by the Committee to a 
later date within the 2002-03 crop year. On or before January 15 of 
each crop year, the Committee, with the approval the Secretary, may 
announce an increase in the tonnage eligible for a raisin diversion 
program: Provided, That, for the 2002 Natural (sun-dried) Seedless 
raisin diversion program, the Committee may announce an increase in the 
quantity of tonnage eligible for the program later than January 15: And 
provided further, That, for the 2003 and subsequent raisin diversion 
programs, the Committee, with the approval of the Secretary, may 
announce an increase in the tonnage eligible for a raisin diversion 
program on or before May 1 of each crop year. The quantity eligible for 
diversion may be announced for any of the following varietal types of 
raisins: Natural (sun-dried) Seedless, Muscat (including other raisins 
with seeds), Sultana, Zante

[[Page 4084]]

Currant, Monukka, and Other Seedless raisins. At the same time, the 
Committee, with the approval of the Secretary, shall determine and 
announce to producers, handlers, and the cooperative bargaining 
association(s) the allowable harvest cost to be applicable to such 
diversion tonnage. The factors to be reviewed by the Committee in 
determining allowable harvest costs shall include but not be limited 
to: Costs for picking, turning, rolling, boxing, paper trays, vineyard 
terracing, hauling to the handler, and crop insurance.
    (2) Additional provisions.
    For any crop year's diversion program, the Committee, with the 
approval of the Secretary, may:
    (i) Limit the entire program to production units on which producers 
agree to remove vines;
    (ii) Limit a portion of the program to production units on which 
producers agree to remove vines;
    (iii) Limit the production cap to a percentage (less than or equal 
to 100 percent) of the yield per acre of the specific production unit 
for production units on which producers agree to divert production by 
methods other than vine removal;
    (iv) Limit participation in a vine removal program to producer's 
who agree not to replant vines for a period not to exceed 5 years and 
who agree to compensate the Committee for appropriate damages if vines 
are replanted. Damages collected by the Committee pursuant to this 
subparagraph shall be deposited in the reserve pool fund of the reserve 
pool applicable to the particular diversion program and be distributed 
to the equity holders in that pool. If a determination is made by the 
Committee that a producer violated the agreement not to replant and is 
subject to damages, the producer may appeal the Committee's decision in 
accordance with paragraph (m) of this section;
    (v) Specify how tonnage available to producers who agree to divert 
production by means other than through vine removal will be allotted, 
either pro-rata to remaining applicants, or by lottery to remaining 
applicants for complete production units if a minimal amount of tonnage 
remains; and/or
    (vi) Limit a program that is applicable to partial production units 
by specifying the portion of the production units that can be diverted, 
or like provisions to maintain the integrity of the program.
    Additional provisions provided pursuant to this paragraph shall be 
announced at the time the tonnage available for that season's diversion 
program is announced.
* * * * *
    (d) Priority of applications and allocation of tonnage.
    (1) Those producer applications indicating that the vines on the 
producing units will be removed shall receive first priority over other 
applications when reserve tonnage under the program is to be allocated.
    (2) Pursuant to paragraphs (a)(2)(i) and (a)(2)(ii) of this 
section, if the entire program, or a portion of the program, is limited 
to production units on which producers agree to remove vines, and the 
production volume in such vine removal applications exceeds the amount 
of diversion tonnage available for vine removal, a lottery will be held 
to allocate such vine removal tonnage among the respective applicants.
    (3) Remaining tonnage available under a diversion program, after 
that allocated to producer applications indicating that the vines of 
the producing units will be removed, shall be allocated by the 
Committee either:
    (i) pro-rata to remaining applicants; or
    (ii) to remaining applicants by a lottery for complete production 
units, if a minimal amount of tonnage remains.
    In conducting any lottery under this section, the Committee may 
group producer applications on a handler-by-handler basis, and separate 
lotteries will be held for each group. The diversion tonnage of raisins 
available for each such group in each lottery may not exceed the 
percentage of total handler acquisitions acquired by the group's 
handler during the previous crop year. If diversion tonnage exists 
after such group lotteries, such remaining diversion tonnage may be 
allocated by one lottery of all remaining producer applications.
* * * * *
    (h) * * *
    (2) Period of diversion. An approved applicant must remove the 
grapes, or vines, indicated on the application within the production 
unit, or portion thereof, designated within the application not later 
than June 1 of the crop year in which a diversion program is 
implemented. Producers who remove the vines on a production unit after 
August 15 may qualify for a diversion program for that crop year if a 
diversion program is announced and if diversion on that unit and vine 
removal after August 15 can be documented and verified.
    (3) Failure to divert. Any raisin producer who does not take the 
necessary measures to remove the grapes on an approved production unit, 
or portion thereof, by June 1, or any raisin producer who has indicated 
the removal of vines or the intent to remove the vines and who does not 
remove such vines on an approved production unit by June 1, shall not 
be issued a diversion certificate, may be subject to liquidated damages 
and interest charges as provided in paragraph (q) of this section, may 
be subject to an injunctive action under the Act, and may be denied the 
opportunity to participate in the next diversion program, when 
implemented: Provided: That any producer who has more than one 
production unit and fails to divert on an approved production unit or 
portion thereof may be denied the opportunity to participate on all of 
that producer's production units, in the next diversion program. For 
spur-pruned vines, this date may be extended 2 weeks from the date of 
the inspection of a producer's vineyard if more than 4 bunches on spur-
pruned vines are present at the time of inspection.
    (i) Issuance of certificates. When preliminary percentages are 
announced, the Committee shall issue diversion certificates to those 
approved applicants who have removed grapes in accordance with this 
section. Such certificates shall represent an amount of reserve tonnage 
raisins equal to the amount of raisins diverted from the production 
unit(s), or portion(s) thereof, specified in the producer application, 
or additional quantity granted by the Committee when vines are diverted 
through vine removal or any other means established by the Committee, 
with the approval of the Secretary. If, prior to issuance of a 
certificate, the Committee is notified by an approved applicant that 
such applicant's interest in the production unit(s), or portion(s) 
thereof, involved in the program has been transferred to another 
person, the Committee may substitute the transferee for the applicant 
provided the transferee agrees to comply with the provisions of this 
section.
* * * * *
    (o) Production units.
    (1) For the purpose of the raisin diversion program, a production 
unit is a clearly defined geographic area with permanent boundaries 
(either natural or man-made). A producer must be able to document to 
the Committee the previous year's production data for that specific 
area by means of sales receipts or other deliveries or transfer 
documents which indicate the creditable fruit weight delivered to 
handlers from that specific area. If the information submitted by 
producers on the application concerning a unit's

[[Page 4085]]

production is significantly greater than past production on the unit, 
production on neighboring units, or the industry norm, or the 
production is unable to be verified based on submitted documentation, 
the Committee may request additional documentation such as tray count, 
payroll records, prior years' production, and insurance records to 
substantiate the tonnage of raisins produced on all production units 
that such applicant controls or owns. Producers would not be precluded 
from submitting other information substantiating production if those 
producers desired. A new production unit will not be eligible for the 
raisin diversion program until at least 1 year's production has been 
grown and is documented. An existing production unit, transferred to a 
new or expanding producer, is eligible for the raisin diversion program 
as soon as the previous year's production can be properly documented.
    (2) For purposes of the raisin diversion program, a partial 
production unit must have two permanent, contiguous boundaries (either 
natural or man-made).
* * * * *

    Dated: January 23, 2003.
A.J. Yates,
Administrator, Agricultural Marketing Service.
[FR Doc. 03-1965 Filed 1-23-03; 5:09 pm]
BILLING CODE 3410-02-P