[Federal Register Volume 68, Number 144 (Monday, July 28, 2003)]
[Rules and Regulations]
[Pages 44191-44196]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-19131]



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  Federal Register / Vol. 68, No. 144 / Monday, July 28, 2003 / Rules 
and Regulations  

[[Page 44191]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 920

[Docket No. FV03-920-1 FR]


Kiwifruit Grown in California; Relaxation of Pack Requirements

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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

SUMMARY: This rule revises pack requirements currently prescribed for 
California kiwifruit under the California kiwifruit marketing order 
(order). The order regulates the handling of kiwifruit grown in 
California and is administered locally by the Kiwifruit Administrative 
Committee (Committee). This rule removes the requirement that the count 
must equal three times the size designation for shipments in volume 
filled containers in which the quantity is specified by count; 
continues to suspend, for the 2003-04 season, the standard packaging 
requirement that requires volume filled containers of kiwifruit 
designated by weight to hold 22-pounds (10-kilograms) net weight of 
kiwifruit, unless such containers hold less than 10-pounds or more than 
35-pounds net weight of kiwifruit; and exempts the ``Hort16A'' 
kiwifruit variety from the ``tightly packed'' standard pack 
requirement. These changes were recommended by the Committee and are 
expected to help handlers compete more effectively in the marketplace, 
better meet the needs of retailers, and to improve grower returns.

EFFECTIVE DATE: This final rule becomes effective July 29, 2003.

FOR FURTHER INFORMATION CONTACT: Rose Aguayo, 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 final rule is issued under Marketing 
Order No. 920 as amended (7 CFR part 920), regulating the handling of 
kiwifruit 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 final 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.
    This final rule revises pack requirements currently prescribed for 
California kiwifruit under the order. This rule: (1) Removes the 
requirement that the count must equal three times the size designation 
for shipments in volume filled containers in which the quantity is 
specified by count; (2) continues to suspend, for the 2003-04 season, 
the standard packaging requirement that requires volume filled 
containers of kiwifruit designated by weight to hold 22-pounds (10-
kilograms) net weight of kiwifruit, unless such containers hold less 
than 10-pounds or more than 35-pounds net weight of kiwifruit; and (3) 
exempts the ``Hort16A'' kiwifruit variety from the ``tightly packed'' 
standard pack requirement. The Committee recommended these changes at 
its March 12, 2003, meeting. This rule is expected to help handlers 
compete more effectively in the marketplace, better meet the needs of 
retailers, and to improve grower returns.

Volume Filled Containers Designated by Count

    Under the terms of the order, fresh market shipments of kiwifruit 
grown in California are required to be inspected and meet grade, size, 
maturity, pack, and container requirements.
    Section 920.52(a)(1) and (3) of the order authorizes the 
establishment of pack requirements for California kiwifruit.
    Section 920.302(a)(4) of the order's administrative rules and 
regulations outlines specific pack requirements for fresh shipments of 
California kiwifruit.
    Section 920.302(a)(4)(iv) provides that for volume filled 
containers in which the quantity is specified by count, the count must 
equal three times the size designation in accordance with tolerances 
specified in 7 CFR 51.2328(c)(2) of the U.S. Standards for Grades of 
Kiwifruit (Grade Standards). For example, if the fruit has a size 
designation of ``30'' marked on the container, then three times the 
size designation or 90 kiwifruit must be packed into the container and 
the container must be marked with ``90 count.''
    During the early 1990's handlers packed kiwifruit into several 
styles of containers: trays, bins, consumer packs, and volume filled 
containers. (Volume filled containers are those in which kiwifruit are 
loosely packed without cell

[[Page 44192]]

compartments, cardboard fillers, or molded trays). Volume filled 
containers were designated by size and also either net weight or count. 
It was a customary industry practice to pack the equivalent of three 
single layer trays into a volume filled container and to specify the 
quantity of the kiwifruit placed into the volume filled container by 
count.
    In 1993, the Committee recommended and the USDA established a pack 
requirement under the order's administrative rules and regulations 
which specified that for shipments in volume filled containers in which 
the quantity was specified by count, the count must equal three times 
the size designation in accordance with tolerances specified in 7 CFR 
51.2328(c)(2) of the Grade Standards, (58 FR 43243, April 16, 1993). 
This requirement was established to ensure that volume filled 
containers designated by size and count held a consistent number of 
kiwifruit.
    During the 1993-94 season handlers realized that it was more labor 
intensive and more expensive to pack volume filled containers 
designated by count than by net weight. They also realized that the 
difference in the average FOB values for each type of volume filled 
container was negligible. Retailers were unwilling to pay a higher 
price for volume filled containers designated by count and handlers 
were unwilling to pack these more labor-intensive and more expensive 
containers, if they could not recoup the extra handling costs. As a 
result, the amount of kiwifruit packed into volume filled containers 
designated by count and size declined to 2 percent during the 1995-96 
season. While kiwifruit handlers have not used volume filled containers 
designated by count and size since the 1995-96 season, they continue to 
use volume filled containers designated by net weight and size.
    Recently, retailers have requested new, smaller containers of 
kiwifruit designated by count and size. Some handlers in the industry, 
including those that are packing a new variety, ``Hort16A'', want the 
flexibility to pack these smaller containers of kiwifruit. These 
handlers are currently unable to meet retailer requests for smaller 
volume filled containers of kiwifruit, as the order's administrative 
rules and regulations require the count to equal three times the size 
designation in volume filled containers in which the quantity is 
specified by count. For example, if a retailer requests containers of 
Size 20 fruit with 50 kiwifruit in each container, the handler will not 
be able to meet the retailer's requirements because the order's 
administrative rules and regulations require that 60 kiwifruit (a count 
equal to three times the size designation) be packed into the 
container.
    Thus, the Committee, at its March 12, 2003, meeting, unanimously 
recommended removing this requirement as it is obsolete and no longer 
meets the industry's needs. This relaxation in pack requirements is 
expected to enable handlers to compete more effectively in the 
marketplace and to improve grower returns.

Continued Suspension of Standard Packaging Requirement for Volume 
Filled Containers Designated by Weight

    Section 920.52(a)(3) of the order authorizes the establishment of 
weight requirements for containers of California kiwifruit.
    Section 920.302(a)(4) of the order's administrative rules and 
regulations outlines pack requirements for fresh shipments of 
California kiwifruit.
    Prior to the issuance of an interim final rule on August 22, 2002 
(67 FR 54327), Sec.  920.302 (a)(4)(v) specified that all volume filled 
containers of kiwifruit designated by weight had to hold 22-pounds (10-
kilograms) net weight of kiwifruit unless such containers hold less 
than 10-pounds or more than 35-pounds net weight of kiwifruit. This 
standard packaging requirement was unanimously recommended by the 
Committee and established under the order's administrative rules and 
regulations by a final rule issued on October 25, 1994, (59 FR 53563).
    During the 1994-95 season 52 percent of the total crop was packed 
into volume filled containers. The percentage of the total crop packed 
into volume filled containers increased to 85 percent during the 2001-
02 season. In 2001-02, imports from the Northern hemisphere (Greece, 
Italy, and France) totaled approximately 17 percent of the U.S. market 
share. The majority of imported kiwifruit was shipped in 19.8-pound (9-
kilogram) net weight volume filled containers, whereas the order 
limited California handlers to 22-pound (10-kilogram) net weight volume 
filled containers. Retailers do not differentiate between imported 
19.8-pound (9-kilogram) and 22-pound (10-kilogram) net weight volume 
filled containers from California. Because buyers pay the same price 
for each container, the effect is not favorable for California 
handlers.
    At its April 9, 2002, meeting, the Committee unanimously 
recommended and the USDA approved suspending the standardized packaging 
requirement of 22-pounds (10-kilograms) net weight for volume filled 
containers for the 2002-03 season. This suspension was implemented by 
an interim final rule published on August 22, 2002 (67 FR 54327) and 
will be in effect until July 31, 2003. This was made final on November 
21, 2002 (67 FR 76140).
    To date during the 2002-03 season, handlers shipped 85 percent of 
the crop in volume filled containers (73 percent in 22-pounds (10-
kilograms) net weight volume filled containers, 12 percent in 19.8-
pounds (9-kilograms) net weight containers, and less than 1 percent in 
volume filled containers of other weights).
    At its March 12, 2003, meeting, the Committee discussed three 
options for volume filled containers: (1) Establishing a standard 
packaging requirement of 19.8-pounds (9-kilograms) net weight, (2) 
reestablishing a standard packaging requirement of 22-pounds (10-
kilograms) net weight and (3) continuing the suspension of the 
standardized packaging requirement for the 2003-04 season, thus 
allowing flexibility to pack any net weight volume filled container. In 
its deliberations, the Committee discussed grower returns and the 
ability to meet buyer's preferences for alternate containers. Committee 
members mentioned that 10 percent more containers could be packed if 
the standard were set at 19.8-pounds (9-kilograms) net weight. Others 
mentioned that the increased number of containers will not offset the 
increased handler costs of packing more, smaller containers and could 
result in decreased grower returns. Many retailers do not differentiate 
between 19.8-pounds (9-kilograms) net weight volume filled containers 
and 22-pounds (10-kilograms) net weight volume filled containers and 
pay the same price for each. Thus, packaging 19.8-pounds (9-kilograms) 
net weight containers may not be beneficial for growers and handlers.
    The Committee also discussed reestablishing the 22-pounds (10-
kilograms) net weight container standard packaging requirement. Some 
Committee members believe that increased flexibility benefits growers 
and handlers, as handlers are able to meet buyer's preferences for 
alternate containers. Before making the change permanent, the Committee 
needs to gather more data to further evaluate the benefits of 
suspending standard pack requirements for another season, the 2003-04 
season.
    The majority of the Committee members agreed that the suspension of 
the standard packaging requirement for volume filled containers by net 
weight should be continued for the 2003-04 season. Of the twelve 
members present,

[[Page 44193]]

eight voted for this change and four voted against it. Opponents of 
this recommendation preferred standard packaging, but could not agree 
whether the 22-pound (10-kilogram) or 19.8-pound (9-kilogram) net 
weight containers should be the standard. The majority of the Committee 
believes that handlers and growers will benefit by being able to meet 
buyer's preferences for alternate containers. Small and large growers 
and handlers are expected to continue benefiting from this change. This 
suspension will be in effect until July 31, 2004.

Standard Pack ``tightly packed'' Requirement

    Section 920.52(a)(2) of the order authorizes the establishment of 
grade standards.
    Section 920.302(a)(1) of the order's administrative rules and 
regulations states the minimum grade shall be at least KAC No. 1 
quality.
    Section 920.302(b) defines the term KAC No. 1 quality as kiwifruit 
that meets the requirements of U.S. No. 1 grade as defined in 7 CFR 
51.2335 through 51.2340 of the Grade Standards, except that the 
kiwifruit shall be ``not badly misshapen'' and an additional 7 percent 
tolerance is provided for ``badly misshapen'' fruit. Section 51.2338(a) 
of the Grade Standards defines standard pack requirements, requires 
containers to be well filled; and requires the contents to be tightly 
packed, but not excessively or unnecessarily bruised by overfilling or 
oversizing.
    The Grade Standard's ``tightly packed'' provisions were established 
under the order to ensure that the ``Hayward'' variety (the predominant 
kiwifruit variety produced in the production area) fits tightly into 
the tray-liner cups (55 FR 42179, October 18, 1990). Kiwifruit that is 
packed tightly into the cups of the tray-liners is less subject to 
movement and therefore less damage.
    Recently, a new kiwifruit cultivar, the Actinidia chinensis 
``Hort16A'' has been introduced in California and is expected to be 
harvested and sold commercially during the 2003-04 season. The 
``Hort16A'' is referred to as a ``gold'' variety because the internal 
flesh is a yellow to gold color when fully mature. The ``Hort16A'' 
kiwifruit is more susceptible to bruising and injury and has a 
protrusion on the blossom end, referred to as a ``beak.'' Therefore, 
the ``Hort16A'' must be handled differently than the ``Hayward'' 
variety. Care must be taken during the packing process to protect the 
beak. To minimize damage, the ``Hort16A'' is packed into a special 
shallow molded tray with a notch for the beak. The ``Hort16A'' 
kiwifruit, when packed in this shallow tray, may not meet the ``tightly 
packed'' requirement for standard pack under the Grade Standards.
    Therefore, the Committee, at its March 12, 2003, meeting, 
unanimously recommended an exemption for all ``gold'' kiwifruit 
varieties from the order's ``tightly packed'' requirement. However, the 
``Hort16A'' with its unique ``beak'' is currently the only known 
commercially produced ``gold'' kiwifruit. Because it is not known 
whether other ``gold'' kiwifruit varieties will experience the same 
difficulty in meeting the ``tightly packed'' standard pack requirement, 
this final rule limits the exemption to the ``Hort16A'' variety.
    This change is expected to enable handlers to be more competitive 
in the marketplace and to provide consumers with higher quality 
``Hort16A'' kiwifruit.

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 the 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 46 handlers of California kiwifruit subject 
to regulation under the marketing order and approximately 300 growers 
in the production area. Small agricultural service firms are defined by 
the Small Business Administration (13 CFR 121.201) as those whose 
annual receipts are less than $5,000,000, and small agricultural 
producers are defined as those whose annual receipts are less than 
$750,000. None of the 46 handlers subject to regulation have annual 
kiwifruit sales of at least $5,000,000. In addition, six growers 
subject to regulation have annual sales exceeding $750,000. Therefore, 
a majority of the kiwifruit handlers and growers may be classified as 
small entities.
    This final rule revises pack requirements prescribed under the 
California kiwifruit order. This rule: (1) Removes the requirement that 
the count must equal three times the size designation for shipments in 
volume filled containers in which the quantity is specified by count; 
(2) continues to suspend, for the 2003-04 season, the standard 
packaging requirement that requires volume filled containers of 
kiwifruit designated by weight to hold 22-pounds (10-kilograms) net 
weight of kiwifruit, unless such containers hold less than 10-pounds or 
more than 35-pounds net weight of kiwifruit; and (3) exempts the 
``Hort16A'' kiwifruit variety from the ``tightly packed'' standard pack 
requirement.
    The Committee recommended these changes at its March 12, 2003, 
meeting. These changes are expected to help handlers compete more 
effectively in the marketplace, better meet the needs of retailers, and 
to improve grower returns. Authority for these actions is provided in 
Sec.  920.52 of the order.

Volume Filled Containers Designated by Count

    Section 920.302(a)(4) of the order's administrative rules and 
regulations outlines specific pack requirements for fresh shipments of 
California kiwifruit.
    Section 920.302(a)(4)(iv) of the order's administrative rules and 
regulations provides that for volume filled containers in which the 
quantity is specified by count, the count must equal three times the 
size designation in accordance with tolerances specified in the Grade 
Standards listed in 7 CFR 51.2328(c)(2). For example, if the fruit has 
a size designation of ``30'' marked on the container, then three times 
the size designation or 90 kiwifruit must be packed into the container 
and the container must be marked with ``90 count.''
    During the early 1990's handlers packed kiwifruit into several 
styles of containers: trays, bins, consumer packs, and volume filled 
containers. Volume filled containers were designated by size and also 
by either net weight or count. It was a customary industry practice to 
pack the equivalent of three single layer trays into a volume filled 
container and to specify the quantity of the kiwifruit placed into the 
volume filled container as the count.
    In 1993, the Committee recommended and the USDA established a pack 
requirement under the order's administrative rules and regulations 
which specified that for shipments in volume filled containers in which 
the quantity is specified by count, the count must equal three times 
the size designation in accordance with tolerances specified in 7 CFR 
51.2328(c)(2) of the Grade Standards, (58 FR 43243, April 16, 1993). 
This requirement was established to ensure

[[Page 44194]]

that volume filled containers designated by size and count held a 
consistent number of kiwifruit.
    During the 1993-94 season handlers realized it was more labor 
intensive and more expensive to pack volume filled containers by count 
than by net weight. They also realized that the difference in the 
average FOB values for each type of volume filled container was 
negligible. Retailers were unwilling to pay a higher price for volume 
filled containers designated by count and handlers were unwilling to 
pack these more labor-intensive and more expensive containers, if they 
could not recoup the extra handling costs. As a result, the amount of 
kiwifruit packed into volume filled containers designated by count and 
size declined to 2 percent during the 1995-96 season. While kiwifruit 
handlers have not used volume filled containers designated by count and 
size since the 1995-96 season, they continue to use volume filled 
containers packed by net weight and size designation.
    Recently, retailers have requested new, smaller containers of 
kiwifruit designated by count and size. Some kiwifruit handlers in the 
industry, including those that are packing a new variety, ``Hort16A'', 
want the flexibility to pack these smaller containers of kiwifruit. 
These handlers are currently unable to meet retailer's requests for 
smaller volume filled containers of kiwifruit, as the order's 
administrative rules and regulations require the count to equal three 
times the size designation in volume filled containers in which the 
quantity is specified by count. For example, if a retailer requests 
containers of Size 20 fruit with 50 kiwifruit in each container, the 
handler will not be able to meet the retailer's requirements because 
the order's administrative rules and regulations require that 60 pieces 
of fruit (a count equal to three times the size designation) be packed 
into the container.
    Thus, the Committee, at its March 12, 2003, meeting, unanimously 
recommended removing the requirement as it is obsolete and no longer 
meets the industry's needs. The Committee discussed alternatives to 
this change, including not removing this requirement from the order's 
administrative rules and regulations, but concluded that small and 
large growers and handlers will benefit from this change. This change 
will not affect volume filled containers packed by net weight and is 
expected to help handlers compete more effectively in the marketplace 
and to improve grower returns.

Continued Suspension of Standard Packaging for Volume Filled Containers 
Designated by Weight

    Section 920.302(a)(4) of the order's administrative rules and 
regulations outlines pack requirements for fresh shipments of 
California kiwifruit.
    Prior to the issuance of an interim final rule on August 22, 2002 
(67 FR 54327), Sec.  920.302(a)(4)(v) specified that all volume filled 
containers of kiwifruit designated by weight shall hold 22-pounds (10-
kilograms) net weight of kiwifruit unless such containers hold less 
than 10-pounds or more than 35-pounds net weight of kiwifruit. This 
standard packaging requirement was unanimously recommended by the 
Committee and established under the order's administrative rules and 
regulations by a final rule issued on October 25, 1994, (59 FR 53563).
    During the 1994-95 season, 52 percent of the total crop was packed 
into volume filled containers. The percentage of the total crop packed 
into volume filled containers increased to 85 percent during the 2001-
02 season. In 2001-02, imports from the Northern hemisphere (Greece, 
Italy, and France) totaled approximately 17 percent of the U.S. market 
share. The majority of imported kiwifruit was shipped in 9.8-pound (9-
kilogram) net weight volume filled containers, whereas the order 
limited California handlers to 22-pound (10-kilogram) net weight volume 
filled containers. Retailers do not differentiate between imported 
19.8-pound (9-kilogram) and 22-pound (10-kilogram) net weight volume 
filled containers from California. Because buyers pay the same price 
for each container, the effect is not favorable for California 
handlers.
    At its April 9, 2002, meeting, the Committee, unanimously 
recommended and the USDA approved suspending the standardized packaging 
requirement of 22-pounds (10-kilograms) net weight for volume filled 
containers for the 2002-03 season. This suspension was implemented by 
an interim final rule published on August 22, 2002 (67 FR 54327) and 
will be in effect until July 31, 2003. This was made final on November 
21, 2002 (67 FR 76140). To date, relaxation of these packaging 
requirements during the 2002-03 season enabled handlers to ship 73 
percent of the crop in 22-pound (10-kilogram) net weight volume filled 
containers, 12 percent of the crop in 19.8-pound (9-kilogram) net 
weight containers and less than 1 percent in volume filled containers 
of other weights.
    The Committee concluded that while suspending the standard 
packaging requirements for the 2002-03 season had enabled handlers to 
compete more effectively in the marketplace, it needs to gather more 
data to further evaluate the benefits of suspended standard pack 
requirements for another season, the 2003-04.
    Therefore, the majority of the Committee members agreed that the 
suspension of the standard packaging requirement for volume filled 
containers by net weight should be continued for the 2003-04 season. Of 
the twelve members present, eight voted for this change, and four voted 
against it. Opponents of this recommendation preferred standard 
packaging, but could not agree whether the 22-pound (10-kilogram) or 
the 19.8-pound (9-kilogram) net weight container should be the 
standard. Small and large growers and handlers are expected to benefit 
from the continued suspension of the standard packaging requirements. 
The majority of the Committee believes that handlers and growers will 
benefit by being able to meet buyer's preferences for alternate 
containers. This suspension will be in effect until July 31, 2004.
    The Committee discussed alternatives to this change including 
reinstating the 22-pound (10-kilogram) net weight standard packaging 
requirement for the 2003-04 season. Committee members also suggested 
two other alternatives. One alternative was to establish a standard 
packing requirement that will require volume filled containers of 
kiwifruit designated by weight to hold 19.8-pounds (9 kilograms) net 
weight of kiwifruit, unless such containers hold less than 10-pounds or 
more than 35-pounds net weight of kiwifruit. The other alternative 
suggested was to establish a standard packing requirement that requires 
volume filled containers of kiwifruit designated by weight to hold 
19.8-pounds (9-kilograms) net weight of kiwifruit, unless such 
containers hold less than 15-pounds or more than 35-pounds net weight 
of kiwifruit. The Committee did not adopt these suggestions, as it 
believes that continuing the suspension of the standard packaging 
requirement of 22-pounds (10-kilograms) net weight for volume filled 
containers of kiwifruit designated by weight will allow handlers the 
flexibility to meet buyer container preferences and to increase sales. 
Further, the majority of the Committee believes that establishing 
standard packaging requirements for volume filled containers of 
kiwifruit packed by net weight may negatively impact grower returns.

[[Page 44195]]

Standard Pack ``tightly packed'' Requirement

    Section 920.302(a)(1) of the order's administrative rules and 
regulations states the minimum grade shall be at least KAC No. 1 
quality.
    Section 920.302(b) defines the term KAC No. 1 quality as kiwifruit 
that meets the requirements of U.S. No. 1 grade as defined in 7 CFR 
51.2335 through 51.2340 of the Grade Standards, except that the 
kiwifruit shall be ``not badly misshapen'' and an additional 7 percent 
tolerance is provided for badly misshapen fruit. Section 51.2338(a) of 
the Grade Standards defines standard pack requirements, requires 
containers to be well filled; and requires the contents to be tightly 
packed, but not excessively or unnecessarily bruised by overfilling or 
oversizing.
    The Grade Standard's ``tightly packed'' provisions were established 
in the order to ensure that the ``Hayward'' variety (the predominant 
kiwifruit produced in the production area) fits tightly into the tray-
liner cups (55 FR 42179, October 18, 1990). Kiwifruit that is packed 
tightly into the cups of the tray-liners is less subject to movement 
and therefore less damage.
    As previously mentioned, a new kiwifruit cultivar, the Actinidia 
chinensis ``Hort16A'' has recently been introduced in California and is 
expected to be harvested and sold commercially during the 2003-04 
season. The ``Hort16A'' is referred to as a ``gold'' variety because 
the internal flesh is a yellow to gold color when fully mature. The 
``Hort16A'' kiwifruit is more susceptible to bruising and injury and 
has a protrusion on the blossom end, referred to as a ``beak.'' 
Therefore, the ``Hort16A'' must be handled differently than the 
``Hayward'' variety. Care must be taken during the packing process to 
protect the beak. To minimize damage, the ``Hort16A'' is packed into a 
special shallow molded tray with a notch for the beak. The ``Hort16A'' 
kiwifruit, when packed in this shallow tray, may not meet the ``tightly 
packed'' requirement for standard pack under the Grade Standards.
    Therefore, the Committee, at its March 12, 2003, meeting, 
unanimously recommended an exemption for all ``gold'' kiwifruit 
varieties from the order's ``tightly packed'' requirement. However, the 
``Hort16A'' with its unique ``beak'' is currently the only known 
commercially produced ``gold'' kiwifruit. Because it is not known 
whether other ``gold'' kiwifruit varieties will experience the same 
difficulty in meeting the ``tightly packed'' standard pack requirement, 
this rule limits the exemption to the ``Hort16A'' variety.
    This change is expected to enable handlers to be more competitive 
in the marketplace and to provide consumers with higher quality 
``Hort16A'' kiwifruit.
    The Committee discussed alternatives to this change, including 
exempting all kiwifruit packs from the ``tightly packed'' requirement, 
but did not adopt this suggestion because eliminating the requirement 
for the ``Hayward'' variety is unnecessary and ``tightly packed'' is 
still a pack standard desired by the industry for the vast majority of 
kiwifruit currently packed in California. It is anticipated that within 
the next 5 to 10 years more than 1,000 acres of ``Hort16A'' will be 
planted in California with production exceeding one million tray 
equivalents (one tray equivalent equals approximately 7 pounds). Small 
and large growers and handlers are expected to benefit from this 
change. These changes are expected to help handlers compete more 
effectively in the marketplace and to improve grower returns.
    These changes relax pack requirements under the kiwifruit order. 
Accordingly, these actions will not impose any additional reporting or 
recordkeeping requirements on either small or large kiwifruit handlers. 
As with all Federal marketing order programs, reports and forms are 
periodically reviewed to reduce information requirements and 
duplication by industry and public sector agencies.
    As noted in the initial regulatory flexibility analysis, USDA has 
not identified any relevant Federal rules that duplicate, overlap, or 
conflict with this final rule. However, as previously stated, 
California kiwifruit must meet the ``tight-fill'' requirements, as 
specified in the U.S. Standards for Grade of Kiwifruit (7 CFR 51.2335 
through 51.2340) issued under the Agricultural Marketing Agreement Act 
of 1946 (7 U.S.C. 1621 through 1627).
    In addition, the Committee's meeting was widely publicized 
throughout the kiwifruit industry and all interested persons were 
invited to attend the meeting and participate in Committee 
deliberations on all issues. Like all Committee meetings, the March 12, 
2003, meeting, was a public meeting and all entities, both large and 
small, were able to express their views on these issues.
    A proposed rule concerning this action was published in the Federal 
Register on June 23, 2003 (68 FR 37097). Copies of the rule were mailed 
or sent via facsimile to all Committee members and kiwifruit handlers. 
Finally, the rule was made available through the Internet by the Office 
of the Federal Register and USDA. A 15-day comment period ending July 
8, 2003, was provided to allow interested persons to respond to the 
proposal. No comments were 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 matter presented, including the 
information and recommendation submitted by the Committee 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.
    It is further found that good cause exists for not postponing the 
effective date of this rule until 30 days after publication in the 
Federal Register (5 U.S.C. 553) because the fiscal period for kiwifruit 
begins on August 1, 2003, and these relaxations should be made as soon 
as possible. Further, handlers are aware of this rule, which was 
recommended at a public meeting. Also, a 15-day comment period was 
provided for in the proposed rule and no comments were received.

List of Subjects in 7 CFR Part 920

    Kiwifruit, Marketing agreements, Reporting and recordkeeping 
requirements.

0
For the reasons set forth in the preamble, 7 CFR part 920 is amended as 
follows:

PART 920--KIWIFRUIT GROWN IN CALIFORNIA

0
1. The authority citation for 7 CFR part 920 continues to read as 
follows:

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


Sec.  920.302  [Amended]

0
2. Section 920.302 is amended as follows:
0
a. Paragraph (a)(4)(iv) is removed;
0
b. Paragraph (a)(4)(v) is redesignated as paragraph (a)(4)(iv);
0
c. The existing suspension of newly designated paragraph (a)(4)(iv) is 
extended until July 31, 2004;
0
d. Paragraph (b) is revised to read as follows:


Sec.  920.302  Grade, size, pack, and container regulations.

* * * * *

[[Page 44196]]

    (b) Definitions. The term KAC No. 1 quality means kiwifruit that 
meets the requirements of the U.S. No. 1 grade as defined in the United 
States Standards for Grades of Kiwifruit (7 CFR 51.2335 through 
51.2340) except that the kiwifruit shall be ``not badly misshapen,'' 
and an additional tolerance of 7 percent is provided for kiwifruit that 
is ``badly misshapen,'' and except that the ``Hort16A'' variety of 
kiwifruit is exempt from the ``tightly packed'' standard as defined in 
Sec.  51.2338(a) of the U.S. Standards for Grades of Kiwifruit. The 
terms fairly uniform in size and diameter mean the same as defined in 
the U.S. Standards for Grades of Kiwifruit.
* * * * *

    Dated: July 23, 2003.
Kenneth C. Clayton,
Acting Administrator, Agricultural Marketing Service.
[FR Doc. 03-19131 Filed 7-25-03; 8:45 am]
BILLING CODE 3410-02-P