[Federal Register Volume 69, Number 82 (Wednesday, April 28, 2004)]
[Proposed Rules]
[Pages 23330-23367]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-9424]



[[Page 23329]]

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Part III





Department of Agriculture





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Agricultural Marketing Service



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7 CFR Part 929



Cranberries Grown in the States of Massachusetts, Rhode Island, 
Connecticut, New Jersey, Wisconsin, Michigan, Minnesota, Oregon, 
Washington, and Long Island in the State of New York; Recommended 
Decision and Opportunity to File Written Exceptions to Proposed 
Amendment of Marketing Agreement and Order No. 929; Proposed Rule

  Federal Register / Vol. 69, No. 82 / Wednesday, April 28, 2004 / 
Proposed Rules  

[[Page 23330]]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 929

[Docket Nos. AO-341-A6; FV02-929-1]


Cranberries Grown in the States of Massachusetts, Rhode Island, 
Connecticut, New Jersey, Wisconsin, Michigan, Minnesota, Oregon, 
Washington, and Long Island in the State of New York; Recommended 
Decision and Opportunity To File Written Exceptions to Proposed 
Amendment of Marketing Agreement and Order No. 929

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule and opportunity to file exceptions.

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SUMMARY: This recommended decision invites written exceptions on 
proposed amendments to the marketing agreement and order for 
cranberries grown in Massachusetts, Rhode Island, Connecticut, New 
Jersey, Wisconsin, Michigan, Minnesota, Oregon, Washington, and Long 
Island in the State of New York. The amendments were proposed by the 
Cranberry Marketing Committee (Committee), which is responsible for 
local administration of the order, and other interested parties 
representing independent growers and handlers. The proposed amendments 
would: Revise the volume control provisions; Add authority for paid 
advertising; Authorize the Committee to reestablish districts within 
the production area and reapportion grower membership among the various 
districts; Clarify the definition of handle; and incorporate 
administrative changes. The proposed amendments are intended to improve 
the operation and functioning of the cranberry marketing order program.

DATES: Written exceptions must be filed by May 28, 2004.

ADDRESSES: Written comments should be filed with the Hearing Clerk, 
U.S. Department of Agriculture, room 1081-S, Washington, DC 20250-9200, 
FAX number (202) 720-9776. Four copies of all written exceptions should 
be submitted and they should reference the docket numbers and the date 
and page number of this issue of the Federal Register, or you may send 
your comments by the electronic process available at Federal 
eRulemaking portal at http://www.regulations.gov. Comments can be 
viewed at: http://www.ams.usda.gov/fv/moab.html.

FOR FURTHER INFORMATION CONTACT: Kathleen M. Finn, Marketing Order 
Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 
Independence Avenue, SW., STOP 0237, Washington, DC 20250-0237; 
telephone: (202) 720-2491, or Fax: (202) 720-8938. Small businesses may 
request information on compliance 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.

SUPPLEMENTARY INFORMATION: Prior documents in this proceeding: Notice 
of Hearing issued on April 23, 2002, and published in the May 1, 2002, 
issue of the Federal Register (67 FR 21854); Secretary's Decision on 
partial amendments issued on December 4, 2003, and published in the 
December 12 issue of the Federal Register (68 FR 69343).
    This administrative action is governed by the provisions of 
sections 556 and 557 of title 5 of the United States Code and, 
therefore, is excluded from the requirements of Executive Order 12866.

Preliminary Statement

    Notice is hereby given of the filing with the Hearing Clerk of this 
recommended decision with respect to the proposed amendment of 
Marketing Agreement and Order No. 929, regulating the handling of 
cranberries in 10 States (hereinafter referred to as the order), and 
the opportunity to file written exceptions thereto. Copies of this 
decision can be obtained from Kathleen Finn whose address is listed 
above.
    This action is issued pursuant to the provisions of the 
Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601 
et seq.), hereinafter referred to as the ``Act,'' and the applicable 
rules of practice and procedure governing the formulation of marketing 
agreements and orders (7 CFR part 900).
    The proposed amendment of Marketing Agreement and Order No. 929 is 
based on the record of a public hearing held in Plymouth, Massachusetts 
on May 20 and 21, 2002; in Bangor, Maine on May 23, 2002; in Wisconsin 
Rapids, Wisconsin on June 3 and 4, 2002; and in Portland, Oregon on 
June 6, 2002. Notice of this hearing was published in the Federal 
Register on May 1, 2002. The notice of hearing contained numerous 
proposals submitted by the Committee, other interested parties and one 
proposed by the Agricultural Marketing Service (AMS). A Secretary's 
Decision and Referendum Order on 6 of the proposals determined 
necessary to be expedited was published in the Federal Register on 
December 12, 2003. This action recommends amendments on the remainder 
of the proposals.
    The proposed amendments included in this proceeding would: 
Authorize the Committee to reestablish districts within the production 
area and reapportion grower membership among the various districts; 
simplify criteria considered and set forth more appropriate dates in 
establishing the Committee's marketing policy; revise the formula for 
calculating sales histories under the producer allotment program in 
Sec.  929.48; allow compensation of sales history for catastrophic 
events that impact a grower's crop; remove specified dates relating to 
when information is required to be filed by growers/handlers in order 
to issue annual allotments; clarify how the Committee allocates unused 
allotment to handlers; allow growers who decide not to grow a crop 
flexibility in deciding what to do with their allotment; allow growers 
to transfer allotment during a year of volume regulation; authorize the 
implementation of the producer allotment and withholding programs in 
the same year; require specific dates for recommending volume 
regulation; add specific authority to exempt fresh, organic or other 
forms of cranberries from order provisions; allow for greater 
flexibility in establishing other outlets for excess cranberries; 
update and streamline the withholding volume control provisions; modify 
the buy-back provisions under the withholding volume control 
provisions; add authority for paid advertising under the research and 
development provision of the order; modify the definition of handle to 
clarify that transporting fresh cranberries to foreign countries is 
considered handling and include the temporary cold storage or freezing 
of withheld cranberries as an exemption from handling; relocate some 
reporting provisions to a more suitable provision and streamline the 
language relating to verification of reports and records; and Delete an 
obsolete provision from the order relating to preliminary regulation.
    The Fruit and Vegetable Programs of AMS proposed to allow such 
changes as may be necessary to the order, if any of the proposed 
amendments are adopted, so that all of the order's provisions conform 
to the effectuated amendments.
    Five proposed amendments are not being recommended for adoption and 
are discussed in this decision.
    Thirty-two witnesses testified at the hearing. These witnesses 
represented cranberry growers and handlers in States currently covered 
by the order

[[Page 23331]]

and in Maine. Some witnesses supported the proposed amendments, while 
others were opposed to the recommended changes or suggested 
modifications to them.
    At the conclusion of the hearing, the Administrative Law Judge 
fixed August 9, 2002, as the final date for interested persons to file 
proposed findings and conclusions or written arguments and briefs based 
on the evidence received at the hearing on proposal numbers 1, 3, 7 and 
13. The Administrative Law Judge fixed September 13, 2002, as the final 
date for interested persons to file proposed findings and conclusions 
or written arguments and briefs based on evidence received at the 
hearing on all other proposals. This briefing period was extended until 
September 20, 2002. A total of 17 briefs were filed, of which 7 related 
to the proposals being addressed in this decision.
    The Committee filed a brief in support of its proposed amendments. 
Stephen L. Lacey, attorney for Clement Pappas & Company and Cliffstar 
Corporation, filed a brief in support of his and other proposals, in 
opposition to some proposals or suggestions for modifications. Linda 
and Paul Rinta filed a brief in support of many proposals and 
suggesting modification to others. The Cape Cod Cranberry Growers' 
Association (CCCGA) filed a brief opposing one proposal, supporting 
others, and suggesting modifications to others. All discussions in 
briefs pertaining to the proposals being recommended in this decision 
have been considered.

Introduction

    The U.S. cranberry industry is experiencing an oversupply 
situation. Recent increases in acreage and yields have resulted in 
greater supplies, while demand has remained fairly constant. The result 
has been building inventories and reduced grower returns.
    The cranberry industry has operated under a Federal marketing order 
since 1962. The order's primary regulatory authority is volume 
regulation. At that time, production was trending sharply upward, due 
primarily to improving yields, and demand was not keeping pace. The 
intent of the program was to limit the volume of cranberries available 
for marketing in fresh market outlets in the United States and Canada, 
and in all processing outlets, to a quantity reasonably in balance with 
the demand in such outlets. This method of controlling volume was the 
``withholding'' provisions whereby ``free'' and ``restricted'' 
percentages would be established. Growers would deliver all contracted 
cranberries to their respective handlers. Free cranberries could be 
marketed by handlers in any outlet, while restricted berries would have 
to be withheld from handling and, if possible, diverted by handlers to 
noncompetitive markets. The withholding program has not been used since 
1971.
    The order was amended in 1968 to authorize another form of volume 
regulation--producer allotments. The intent was to discourage new 
plantings and allow growers to remove surplus berries in a more 
economical manner, by reducing their production to approximate the 
marketable quantity or by leaving excess berries unharvested.
    Production had continued to increase, and the industry was 
reluctant to recommend a sufficient restricted percentage under the 
withholding regulations. Under the producer allotment program, growers 
were issued base quantities. Base quantity was the quantity of 
cranberries equal to a grower's established cranberry acreage 
multiplied by such grower's average per acre sales made from the 
acreage during a representative period. If the allotment base program 
were activated, each handler would be allowed to acquire for normal 
marketing only a certain percentage of each grower's base quantity. 
This authority was used to establish a regulation for the 1977-78 
season, but that regulation was subsequently rescinded.
    In 1992, the producer allotment provisions were amended to change 
the method of calculating growers' annual allotments from the base 
quantity method to a sales history method. Under this amendment, a 
grower's sales history is calculated based on a grower's actual sales, 
expressed as an average of the best 4 of the previous 6 years of sales. 
There were concerns that base quantities did not accurately reflect 
actual levels of sales because as growers' acreage increased or 
decreased, the base quantity did not change. It was concluded that 
basing allotments on actual sales off acreage would be a more realistic 
and practical way to determine annual allotments. These provisions were 
first used in the 2000-2001 season and again in 2001-2002. No volume 
regulations were implemented in 2002-2003.
    In recent years, the Committee has been considering ways in which 
the marketing order could be improved to better address the oversupply 
situation. Although the regulations implemented for volume regulation 
were as flexible as the order would allow, the Committee believed there 
were improvements that could be made through the amendment process. The 
Committee appointed an amendment subcommittee to analyze the marketing 
order and make recommendations to the Committee on proposed amendments. 
The subcommittee considered the volume control provisions as well as 
other provisions of the order, such as Committee structure, production 
area, and promotion authorities. The Committee's proposals are the 
result of years of discussions on improvements to the marketing order. 
In addition, other interested parties included proposed amendments in 
the proceeding.

Material Issues

    The material issues of record addressed in this decision are as 
follows:

Administrative Body

    (1) Whether to authorize the Committee to reestablish districts 
within the production area and reapportion grower membership among the 
various districts.

Volume Regulations

    (2) Whether to simplify criteria considered and set forth more 
appropriate dates in establishing the Committee's marketing policy.
    (3) Whether to revise the formula for calculating sales histories 
under the producer allotment program in Sec.  929.48. The revision 
includes providing additional sales history to compensate growers for 
expected production on newer acres. This proposed change to Sec.  
929.48 would also: allow for more flexibility in recommending changes 
to the formula; and add authority for segregating fresh and processed 
sales.
    (4) Whether to allow compensation of sales history for catastrophic 
events that impact a grower's crop.
    (5) Whether to remove specified dates relating to when information 
is required to be filed by growers/handlers in order to issue annual 
allotments.
    (6) Whether to clarify how the Committee allocates unused allotment 
to handlers.
    (7) Whether to authorize growers who choose not to grow a crop 
during a year of volume regulation to not assign their allotment to 
their handler.
    (8) Whether to allow growers to transfer allotment during a year of 
volume regulation.
    (9) Whether to authorize the implementation of the producer 
allotment and withholding programs in the same year.
    (10) Whether to require the Committee to recommend volume 
regulations by specified dates.
    (11) Whether to add specific authority to exempt fresh, organic or 
other forms of cranberries from order provisions.

[[Page 23332]]

    (12) Whether to allow for greater flexibility in establishing other 
outlets for excess cranberries. This includes whether to clearly define 
what countries are authorized for foreign development with excess 
cranberries and whether to establish a limit on foreign markets 
eligible for shipments of excess berries.
    (13) Whether to update and streamline the withholding volume 
control provisions.
    (14) Whether to revise the buy-back provisions under the 
withholding provisions, including allowing growers to be compensated if 
any funds are returned to handlers by the Committee.
    (15) Whether to incorporate a handler marketing pool or buy-back 
provisions under the producer allotment program to allow handlers 
without surplus access to cranberries to meet customer needs.
    (16) Whether to authorize an exemption from order provisions for 
the first 1,000 barrels of cranberries produced by each grower.

Production Area

    (17) Whether to add Maine, Delaware and the entire State of New 
York to the production area.

Paid Advertising

    (18) Whether to add authority for paid advertising under the 
research and development provision of the order.

Definition of Cranberry

    (19) Whether to add the species Vaccinium oxycoccus to the 
definition of cranberry.

Definition of Handle

    (20) Whether to modify the definition of handle to clarify that 
transporting fresh cranberries to foreign countries is considered 
handling and include the temporary cold storage or freezing of withheld 
cranberries as an exemption from handling.

Reporting Requirements

    (21) Whether to relocate some reporting provisions to a more 
suitable provision and streamline the language relating to verification 
of reports and records.

Deletion of Obsolete Provision

    (22) Whether to delete an obsolete provision from the order 
relating to preliminary regulation.

Findings and Conclusions

    The following findings and conclusions on the material issues are 
based on evidence presented at the hearing and the record thereof.

Material Issue Number 1--Reestablishment of Districts and 
Reapportionment of Committee Membership Among Districts

    The order should be amended to add authority to reestablish the 
geographic districts set up for purposes of grower representation on 
the Committee and to reapportion membership among those districts.
    Section 929.20 of the order establishes the Cranberry Marketing 
Committee, comprised of 13 growers and 1 public member. Grower 
membership is allocated among two groups--growers affiliated with the 
major cooperative marketing organization and all other growers. One 
grower member represents the production area-at-large, while the 
remaining grower members are apportioned among four districts as shown 
below.

------------------------------------------------------------------------
                                                                  No. of
                            District                              grower
                                                                 members
------------------------------------------------------------------------
1--Massachusetts, Rhode Island, and Connecticut................        4
2--New Jersey and New York.....................................        2
3--Wisconsin, Michigan, and Minnesota..........................        4
4--Oregon and Washington.......................................        2
------------------------------------------------------------------------

    Currently, there is no authority under the order to reestablish the 
districts or to reapportion membership among the districts. Testimony 
indicated that adding such authority would allow the Committee to 
address, in a timely fashion, situations wherein changes are needed to 
the districts' makeup to more appropriately align the districts or the 
representation of the districts. Adding this authority would allow the 
Committee to recommend changes to be made through informal rulemaking 
rather than through an order amendment.
    The Committee manager testified that before any recommendations 
could be made by the Committee regarding reestablishment of districts 
or reapportionment of membership, several criteria should be 
considered. The criteria to be considered would be: (1) The relative 
volume of cranberries produced in each district; (2) the relative 
number of cranberry producers within each district; (3) cranberry 
acreage within each district; and (4) other relevant factors.
    This proposed amendment would allow the Committee to recommend 
realigning district boundaries (for example, moving a State from one 
district into another); to modify the number of districts; and to 
change the number of grower members to represent each district. The 
four criteria established would need to be considered prior to any 
Committee recommendation.
    This proposed amendment would not allow an increase or decrease in 
the total number of members on the Committee. It also would not allow 
increases or decreases in the total number of members allotted to each 
group (growers affiliated with the major cooperative marketing 
organization and other growers).
    An opponent of adding this authority testified that if this 
provision were adopted, unnecessary discord would occur in the 
industry. He provided an example using current independent grower 
membership. Growers not affiliated with the major cooperative are now 
allocated two members from District 1, one member from District 2, two 
members from District 3, and one member from District 4. The witness 
envisioned a situation where independent representatives from Wisconsin 
could want an additional seat on the Committee for their district based 
on volume produced and independent representatives from Massachusetts 
could want an additional seat for their district based on the number of 
growers in that district. It would take a Committee vote to recommend 
such an action, which would require a super majority of votes to pass 
(11 of 14 members if the public member chose to vote, 10 of 13 members 
otherwise). He testified that the decision would ultimately be made by 
members representing the major cooperative because the non major 
cooperative members would be split on their votes. He did not believe 
it would be fair to the group representing other than the major 
cooperative if the major cooperative decided which district is entitled 
to an additional independent seat. A Committee motion on this issue 
could polarize the members, he testified.
    The witness testified that the current district makeup and 
allocation of membership is well thought out and well reasoned. He 
believed that any needs that arise to modify districts should be 
accomplished through the formal amendment process, where growers can 
vote in a referendum on this issue. He further testified that the 
industry structure does not change rapidly as evidenced by the last 
amendment on establishing districts, which occurred in 1978.
    At the hearing, one witness testified that he believed that adding 
this authority would allow the Committee to add States not currently 
regulated under the order through informal rulemaking if the Committee 
determined it

[[Page 23333]]

necessary. This is not true. Any change in the production area would 
require an amendment of Sec.  929.4 of the order through the formal 
amendment process. Adding this authority would not allow the Committee 
to expand the production area.
    As an example of redistricting, there was much testimony on the 
significance of the State of New Jersey relative to the States of 
Wisconsin and Massachusetts. Some believe it is not equitable to 
provide a separate district and two seats to New Jersey based on the 
number of growers and volume of production in that State. While it has 
been determined that current Committee representation is reasonable, 
this situation could change in the future. The Committee should have 
the authority to recommend a modification in the district structure, 
either by increasing or decreasing the number of districts, reassigning 
geographic regions among the districts, or reallocating membership 
among the districts, without having to amend the order. The Committee 
would recommend the change to USDA and notice and comment rulemaking 
would determine if changes are warranted.
    A witness stressed the importance of having the experience and 
knowledge on the Committee from every growing area. Because the 
industry is spread out across the United States, the educational aspect 
of representatives reporting Committee activities to growers in their 
district is critical, he testified. Although this witness supported 
modifying districts by order amendment, he was concerned with the 
smaller districts not having representation and the Committee not being 
able to address the problem quickly.
    Record evidence supports adding the authority to reestablish 
districts and reapportion membership among the districts. This 
authority would give the Committee greater flexibility in responding to 
changes in grower demographics and district significance in the future. 
It is possible that if this amendment is adopted, the larger districts 
may attempt to attain an additional seat. Since the total number of 
seats on the Committee cannot be altered (except through amendment of 
the order), the only way to accomplish this would be to transfer a seat 
from another district or to eliminate a district and combine the States 
in that district with another district. Any recommendation to modify 
the districts or representation would need a Committee vote and USDA 
approval. Since all Committee actions require a super majority vote to 
pass, recommendations to change the districts would require support 
from both groups, including the major cooperative. These voting 
requirements were established to ensure that all Committee 
recommendations are supported by a majority of the industry, regardless 
of affiliation. A vote on district makeup would be no different than 
any other issue the Committee considers.
    In addition to a Committee recommendation, notice and comment 
rulemaking would be necessary to implement any modifications in 
district representation on the Committee. All growers and handlers 
would be provided the opportunity to comment on the Committee 
recommendation before it was adopted. USDA considers all comments 
before issuing a final rule. Therefore, it is concluded that growers 
would have ample opportunity to be heard on issues concerning Committee 
representation.
    Changes in industry structure could occur more quickly in the 
future than they have in the past. For this reason, it is deemed 
important that the Committee be provided the flexibility to address any 
changes in industry demographics by reestablishing districts and 
reapportioning membership.
    Record evidence supports adding the authority to reestablish 
districts and reapportion Committee membership among the districts. 
Therefore, a new Sec.  929.28 is proposed to be added to the order.

Material Issue Number 2--Development of Marketing Policy

    Section 929.46 should be revised to simplify the criteria required 
to be considered in the Committee's annual marketing policy and 
eliminate obsolete dates.
    Section 929.46 of the order requires the Committee to develop a 
marketing policy each year as soon as practicable after August 1. In 
its marketing policy, the Committee projects expected supply and market 
conditions for the upcoming season. The marketing policy should be 
adopted before any recommendation for regulation, as it serves to 
inform USDA and the industry, in advance of the marketing of the crop, 
of the Committee's plans for regulation and the bases therefore. 
Handlers and growers could then plan their operations in accordance 
with the marketing policy. Additionally, the marketing policy is useful 
to the Committee and USDA when specific regulatory action is being 
considered, since it would provide basic information necessary to the 
evaluation of such regulation.
    Currently, Sec.  929.46(b) states that as soon as practicable after 
August 1 of each crop year and prior to making any recommendations for 
a producer allotment or withholding program, the Committee shall submit 
a marketing policy which considers nine criteria. The nine criteria 
include: (1) The estimated total production of cranberries; (2) the 
expected general quality of the crop; (3) the estimated carryover, as 
of September 1, of frozen cranberries and other cranberry products; (4) 
the expected demand conditions for cranberries in different market 
outlets; (5) supplies of competing commodities; (6) trend and level of 
consumer income; (7) the recommended desirable total marketable 
quantity of cranberries, including an adequate carryover into the 
following crop year; (8) any volume regulation expected to be 
recommended by the Committee during the crop year; and (9) other 
factors having a bearing on the marketing of cranberries. The Committee 
proposed that numbers 5, 6 and 8 be deleted.
    The proponents testified that there are really no directly 
competing commodities for cranberries since they are a fresh seasonal 
item for holiday use. Also, cranberry juice competes for shelf space, 
but the competition is between the branded companies and private label 
companies rather than with other types of juices. The trend and level 
of consumer income is another criterion that the Committee does not 
believe is of much value to consider. Proponents testified that there 
are different cranberry products available at different price levels 
that can be purchased by consumers depending on their wishes. Other 
factors are more important to consumers, however, in making food 
choices. Consumers may buy cranberry products based on health related 
issues, for example. The proponents recommended that these two items be 
deleted from the marketing policy criteria. However, the Committee may 
consider any factors it deems relevant under the language that allows 
the Committee to consider ``other factors having a bearing on the 
marketing of cranberries.''
    With regard to criterion number 8, no testimony was given in 
support of deleting this item. However, the record supports that the 
Committee's marketing policy should be adopted prior to any 
recommendation for volume regulation, and should serve as the 
justification for such recommendation. Therefore, it should be removed 
as a criterion to be considered in recommending a marketing policy.
    The Committee also proposed revising the dates by which the 
Committee must estimate the marketable quantity necessary to establish 
a producer

[[Page 23334]]

allotment program and the date by which the Committee shall submit its 
marketing policy to USDA for consideration. Currently, Sec.  929.46(a) 
states the Committee shall estimate the marketable quantity for the 
following crop year each year prior to May 1. Section 929.46(b) states 
that as soon as practicable after August 1 of each crop year, and prior 
to making any recommendation for regulation, the Committee shall submit 
to USDA its marketing policy.
    The proponents testified that May 1 is too late for cranberry 
producers to make informed decisions on the steps they may want to take 
if a producer allotment regulation were to be recommended based on the 
marketing policy. Witnesses testified that producers need to know the 
Committee's intentions as early as possible in the year so they can 
make decisions on whether or not to grow a crop, flood their bogs, and 
consider cultural practices that could save the producers money. For 
example, a producer may want to apply less fertilizer, herbicides, or 
pesticides to curtail production in the event of the implementation of 
a producer allotment program. The earlier that the decision is made by 
the Committee, the more information the producer has to plan for the 
necessary cultural practices for the upcoming crop. For these reasons, 
the Committee proposed that recommendations for producer allotment 
regulations be made no later than March 1.
    Record testimony also establishes, however, that a withholding 
regulation would not have to be recommended quite as early in the year 
because such a regulation is imposed on handler acquisitions of 
cranberries rather than on the amount handlers can purchase from their 
growers. In the event such a regulation were contemplated, the 
marketing policy could be submitted later when more accurate 
information about the upcoming crop were available.
    The dates by which recommendations for the different types of 
volume regulations must be made are being recommended for inclusion in 
Sec.  929.51, Recommendations for regulation. This recommendation is 
discussed later as Material Issue Number 10.
    The Committee also proposed that the Committee be required to 
forward its marketing policy for the following crop year prior to 
August 31. Currently, Sec.  929.46(b) states that the marketing policy 
must be submitted to USDA after August 1 of each crop year. Although 
the August 31 date would allow the Committee to evaluate information 
that comes available in mid-August, it is inconsistent with the 
recommendation that any producer allotment regulation be recommended 
prior to March 1.
    USDA is recommending that Sec.  929.46 be amended by deleting both 
dates that currently appear in that section and by modifying the 
criteria to be considered in recommending a marketing policy as 
proposed by the Committee. The marketing policy would be submitted 
along with any recommendations for a producer allotment and/or a 
withholding regulation.

Material Issue Number 3--Revision of Sales History

Calculations

    Section 929.48 of the order should be amended to change the way 
sales histories are calculated, provide more flexibility in making any 
further changes to the calculations, and authorize separate sales 
histories to be calculated for fresh and processed sales.
    Section 929.49 of the order authorizes cranberry volume controls in 
the form of producer allotment regulations. That section provides that 
if USDA finds from a Committee recommendation or from other available 
information, that limiting the quantity of cranberries that can be 
purchased from or handled on behalf of growers during a crop year would 
tend to effectuate the declared policy of the Act, USDA shall determine 
and establish a marketable quantity for that year. (Marketable quantity 
is defined as the number of pounds of cranberries needed to meet total 
market demand and to provide for an adequate carryover into the next 
season.)
    USDA would also establish an allotment percentage that is equal to 
the marketable quantity divided by the total of all growers' sales 
histories. The allotment percentage would then be applied to each 
grower's individual sales history to derive each grower's annual 
allotment. Handlers could not handle cranberries unless they are 
covered by a grower's annual allotment.
    Section 929.48 of the order provides for computing growers' sales 
histories. Sales history is defined in Sec.  929.13 as the number of 
barrels of cranberries established for a grower by the Committee. The 
Committee updates growers' sales histories each season. The Committee 
accomplishes this by using information submitted by the grower on a 
production and eligibility report filed with the Committee. The order 
sets forth that a grower's sales history is established by computing an 
average of the best 4 years' sales (out of the most recent 6 years) for 
those growers with existing acreage. For growers with 4 years or less 
of commercial sales history, the sales history is calculated by 
averaging all available years of such grower's sales. A new sales 
history for a grower with no sales history is calculated by using the 
State average yield per acre or the total estimated commercial sales, 
whichever is greater. This section also provides the authority for 
calculating new sales histories for growers after each crop year where 
a volume regulation was established using a formula recommended by the 
Committee and approved by USDA.
    In recent years, cranberry production has exceeded market demand, 
resulting in building inventories and dramatic declines in grower 
prices. In 2000, the Committee recommended the use of a producer 
allotment volume regulation to bring supplies more in line with demand. 
A marketable quantity of 5.468 million barrels was established for the 
2000-01 season, implemented through an allotment percentage of 85 
percent. Many growers, particularly those with acreage 4 years old or 
less, indicated that the method of sales history calculation placed 
them at a disadvantage because they realized more production on their 
acreage than their sales history indicated. At that time, it was 
determined that approximately 30 percent of all cranberry acreage was 
planted in 1995 or later. With the volume of new acres within the 
industry, many growers were affected.
    Because sales histories are based on an average of past years' 
sales, newer growers could be restricted to a greater extent than more 
established growers. This is because a cranberry bog does not reach 
full capacity until several years after being planted. Using an average 
of early years' sales (which are low) can result in sales histories 
below future sales potential. A more established grower, on the other 
hand, would have a sales history more reflective of his or her 
production capacity.
    In recommending volume regulations for the 2000 season, the 
Committee considered the most equitable method of determining sales 
histories within the scope of the order. The final rule on volume 
regulation for the 2000 crop year was as flexible as the order would 
allow in alleviating the differential impact of the volume regulation 
on growers.
    The Committee determined that something needed to be done to 
address concerns associated in the 2000 crop year with growers with 
newer acreage. As stated previously, there is authority under the order 
for calculating new sales histories for growers after each crop year 
where a volume regulation is established using a formula recommended by 
the Committee and

[[Page 23335]]

approved by USDA. In light of this authority, the Committee and USDA 
gave much thought to the most equitable method of determining sales 
histories in the event volume regulation was recommended in 2001. The 
method established specifically addressed growers' concerns by 
providing a more equitable determination of their sales histories. The 
method developed was based on industry and USDA analysis of average 
yields for acreage at different stages of growth. The method provides 
additional sales history for growers with newer acres to account for 
increased yields for each growing year up to the fifth year by 
factoring in appropriate adjustments to reflect rapidly increasing 
production during initial harvests. The adjustments were in the form of 
additional sales histories based on the year of planting.
    The modified method of calculating sales histories was expected to 
address concerns associated with using a grower's actual sales history 
without taking into account anticipated production when calculating 
annual allotments. Ideally, in a year of volume regulation, all 
growers' actual crops would be reduced by the same percentage. Because 
of uncertainties in making crop predictions, annual allotment 
calculations based on averaging growers' sales histories alone does not 
provide any adjustment for new acres as they rapidly increase 
production during the first several harvests. Therefore, growers can be 
impacted differently depending upon their particular situation. The 
result is that sales histories for growers with a significant number of 
acres being harvested for the first, second, third, or fourth time can 
be below what the average crop for these growers is expected to be 
during the next harvest. The restriction percentages for these growers 
in a year of volume regulation could therefore exceed the average 
allotment restriction percentage. The method recommended by the 
Committee for the 2001-2002 season addressed that issue by minimizing 
the differential impact among growers with newer acreage.
    The revised formula provided a specified amount of additional sales 
history for newer acreage based on USDA and industry analysis of 
cranberry production. The amount of such additional sales history 
depended on the year of planting. Also, the formula took into account 
different harvesting times for first year harvests by basing first year 
averages on the year planted.
    The Committee recommended this method at its August 28, 2000, 
Committee meeting. The recommendation was set forth in a proposed rule 
published in the Federal Register on January 12, 2001, (66 FR 2838) 
with a comment period ending February 12, 2001.
    At a Committee meeting on February 5, 2001, concerns were raised 
that the proposed formula would give an unfair advantage to growers who 
only had acres with 1 to 3 years of sales history (as opposed to 
growers with mature acres combined with new or replanted acres). The 
Committee believed that these growers would be provided an adjusted 
sales history in excess of average yields. The Committee recommended 
that the proposal be modified to be more equitable to all growers by 
providing that growers with acreage with 1 to 3 years of sales 
histories divide their total sales by 4 instead of all available years 
and then be provided additional sales history in accordance with the 
formula for adjusting sales history.
    At the February 2, 2001 meeting, the Committee also recommended 
using regulation again to continue the effort to restore economic 
health to the cranberry industry. The modification to the sales history 
calculations was incorporated into the proposed rule for volume 
regulation published in the Federal Register on May 14, 2001 (66 FR 
24291) and was finalized with a publication in the Federal Register on 
June 27, 2001 (66 FR 34332). The marketable quantity for the 2001-2002 
crop year was set at 4.6 million barrels and the allotment percentage 
was designated at 65 percent.
    Specifically, the calculation of sales histories for the 2001-02 
season were as follows:
    For each grower with acreage with 7 or more years of sales history, 
a new sales history was computed using an average of the highest 4 of 
the most recent 7 years of sales. If the grower had acreage with 6 
years sales history, a new sales history was computed by averaging the 
highest 4 of the 6 years. If the grower had acreage with 5 years of 
sales history and such acreage was planted prior to 1995, a new sales 
history was computed by averaging the highest 4 of the 5 years.
    For growers whose acreage had 5 years of sales history and was 
planted in 1995 or later, the sales history was computed by averaging 
the highest 4 of the 5 years and was adjusted with additional sales 
history in accordance with the formula. For growers whose acreage had 4 
years of sales history, the sales history was computed by averaging all 
4 years and was adjusted with additional sale history in accordance 
with the formula. For growers whose acreage had 1 to 3 years of sales 
history, the sales history was computed by dividing the total years 
sales by 4 and was adjusted with additional sales history in accordance 
with the formula.
    For growers with acreage with no sales history or for the first 
harvest of replanted acres, the sales history was 75 barrels per acre 
for acres planted or re-planted in 2000 and first harvested in 2001 and 
156 barrels per acre for acres planted or re-planted in 1999 and first 
harvested in 2001.
    In addition to the sales history for growers, additional sales 
history was assigned to growers specified above with acreage planted in 
1995 or later. The additional sales histories depending on the date the 
acreage was planted are shown in Table 1.

     Table 1.--Additional Sales History Assigned to Acreage in 2001
------------------------------------------------------------------------
                                                            Additional
                                                            2001 sales
                      Date planted                          history per
                                                               acre
------------------------------------------------------------------------
1995....................................................              49
1996....................................................             117
1997....................................................             157
1998....................................................             183
1999....................................................             156
2000....................................................              75
------------------------------------------------------------------------

    The Committee did not recommend volume regulations for the 2002-
2003 crop year. The authority to use a new formula to calculate sales 
histories for growers is only applicable after a crop year where a 
volume regulation is established. Therefore, the next time the 
Committee recommends volume regulation, the Committee will not be able 
to use the formula developed for the 2001-2002 crop year. Sales history 
calculations would have to be accomplished using the best 4 out of 6 
crop years, and no additional sales histories could be assigned to 
newer acreage.
    The Committee's proposed amendment to Sec.  929.48 would add to 
that section the formula for calculating sales histories that was used 
for the 2001-2002 crop year. In addition, the proposed amendments to 
this section include allowing more flexibility in recommending changes 
to the formula, adding authority to calculate fresh and processed 
cranberry sales histories separately, and modifying the way growers' 
sales histories can be adjusted to compensate for catastrophic events 
that impact growers' crops. This material issue will discuss all 
proposed

[[Page 23336]]

amendments to this section except for adjusting growers' sales 
histories to compensate for catastrophic events. That issue will be 
discussed in Material Issue Number 4.

Sales History Formula

    The sales history formula used in the 2001-2002 crop year was 
specific to that particular season. The Committee developed generic 
language to include in Sec.  929.48 that uses the principles of the 
2001-02 formula, but can be applied to future crop years.
    Under the proposed amendment, sales histories would be computed by 
the Committee in the following manner:
    For growers with acreage with 6 or more years of sales history, the 
sales history would be computed using an average of the highest 4 of 
the most recent 6 years of sales. For growers with 5 years of sales 
history for acreage planted or replanted 2 years prior to the first 
harvest on that acreage, the sales history would be computed by 
averaging the highest 4 of the 5 years.
    For growers with 5 years of sales history from acreage planted or 
replanted 1 year prior to the first harvest on that acreage, the sales 
history would be computed by averaging the highest 4 of the 5 years, 
and would be adjusted to provide additional sales history to compensate 
for increased production on the newer acreage. For growers with 4 years 
or less of sales history, the sales history would be computed by 
dividing the total sales from that acreage by 4, and would be adjusted 
to provide additional sales history to compensate for increased 
production on the newer acreage. These two groups of growers would be 
provided with additional sales history using a formula x=(a-b)c. The 
letter ``x'' constitutes the additional number of barrels to be added 
to the grower's sales history. The value ``a'' is the expected yield 
for the forthcoming year harvested acreage as established by the 
Committee. The value ``b'' is the total sales from the acreage as 
established by the Committee. The value ``c'' is the number of acres 
planted or replanted in the specified year. For acreage with 5 years of 
sales history: ``a'' would equal the expected yield for the forthcoming 
sixth year harvested acreage (as established by the Committee); ``b'' 
would equal an average of the most recent 4 years of expected yields 
(as established by the Committee); and ``c'' would equal the number of 
acres with 5 years of sales history.
    For growers with acreage having no sales history, or the first 
harvest of replanted acres, the sales history would be the average 
first year yield (depending on whether the first harvest is 1 or 2 
years after planting or replanting) as established by the Committee, 
multiplied by the number of acres.
    There are several variables in the Committee's proposed sales 
history formula that would have to be established through the informal 
rulemaking process prior to using the formula. These relate to the 
adjustments for newer acreage. Specifically, in the formula x=(a-b)c, 
the values of a and b would have to be established by the Committee. 
The value of c would be an actual acreage number, and x would be a 
computed value.
    It is likely the Committee would use the results of the analysis 
performed prior to the 2001 season to set these values. However, 
appropriate adjustments could be made if better information becomes 
available in the future. Rulemaking to modify these numbers would be 
undertaken as necessary, and need not be done every year.
    The Committee's proposed amendment of Sec.  929.48 also provides 
that a new sales history would be calculated for each grower, after 
each crop year, using the above formula or another formula as 
determined by the Committee and approved by USDA. The proposed 
amendment further provides that the Committee, with USDA approval, may 
adopt regulations to alter the number and identity of years to be used 
in computing sales histories, including the number of years to be used 
in computing the average.
    The Committee manager testified that Sec.  929.48, as currently 
written, restricted the Committee from being able to make the best 
calculations of sales histories for the 2000-2001 crop year. With that 
section authorizing a new formula to calculate sales histories after a 
year of volume regulation, the Committee was able to develop a more 
equitable system of calculating sales histories for the 2001-02 crop 
year. However, the Committee did not recommend a producer allotment 
regulation for the 2002-2003 crop year, and as a consequence, the 
method of calculating sales histories reverts back to the method in 
which initial sales histories were calculated in 2000-2001.
    The Committee manager testified that theory and practical 
application do not always coincide, and that as situations change, the 
Committee needs the opportunity to modify the regulations to correspond 
to industry practices, within the scope of order authority. He stated 
that with changing circumstances in the future, the Committee may want 
to consider calculating sales histories using different inputs. The 
proposed amendment is flexible enough to allow the Committee to modify 
how sales histories are calculated depending upon grower and handler 
practices while still maintaining the fundamental effectiveness of a 
producer allotment program.
    Testimony indicated that providing the Committee with the 
flexibility to recommend changes to the formula may allow some 
producers, particularly those with newer or replanted acreage, to 
deliver additional fruit. This would improve returns to newer growers, 
as the recalculation of sales histories is most critical during periods 
when a producer allotment regulation has been established. Allowing 
growers additional sales history to recognize expected increases in 
yields on newer acres would provide these growers with a sales history 
more reflective of their actual sales potential.
    A witness testified that a 20 percent reduction in sales history 
under volume regulation (through an allotment percentage of 80 percent) 
for growers with new acreage might actually reduce these growers' crops 
by 40 percent or more if most of their acreage is new. An example used 
was a grower with three years of harvests from one acre. In the first 
year he harvested 50 barrels, in the second year 90 barrels, and in the 
third year 130 barrels. His sales history would be an average of those 
years or 90 barrels. If a 20 percent volume regulation were implemented 
the next year, his allotment would be 72 barrels (80 percent of 90 
barrels). There would not be sufficient sales history built up on that 
acre to allow for the fact that it could yield 250 barrels in the year 
of volume regulation. If this grower harvested 250 barrels and could 
only sell 72, a 20 percent volume regulation would be 70 percent to 
this grower.
    The intent of the revised method is to predict what the production 
of new acreage would be during the upcoming year so that the crop 
reduction for growers with new acreage is similar to that of growers 
who do not have new acreage.
    Some growers believed the revised formula was too restrictive while 
others thought it was not restrictive enough. A grower opposed to this 
method of computing sales histories testified that providing additional 
sales histories to newer growers encourages more production. She 
testified that because of strong prices, many new growers entered the 
cranberry business between 1990 and 1997 without looking at the long-
range impact. This increase in acreage is what caused the current 
oversupply situation. This witness

[[Page 23337]]

believed that it was each grower's responsibility to guard against this 
impact. Growers should not be rewarded with additional sales history 
for making unwise business decisions.
    The record indicates that in developing this method, the Committee 
assembled yield data on over 10,000 cranberry acres to understand what 
yields are typical for new acreage over the first 5 years after 
planting. This data provided the basis for establishing the sales 
history formula used for the 2001 season. This data also demonstrated 
the need for this change.
    USDA worked with cranberry handlers in assembling data. Handlers 
were asked to provide information on growers' yield per acre for yearly 
harvests made 1, 2, 3, 4 and 5 years after planting for acres harvested 
over the past 5 years. The handlers were also asked to indicate which 
varieties were planted, specifying the proportion of total new acreage 
dedicated to each variety.
    Two large handlers supplied detailed information relative to 
harvested acres. To supplement this information, data was also gathered 
from growers who delivered cranberries to other handlers. This 
additional data collection was accomplished to broaden the scope of the 
industry data used in the analysis.
    The data combined grower information from all cranberry producing 
regions, as well as data for all varieties and years of birth (original 
date of planting). The data was analyzed to determine what an average 
grower, growing in average conditions, would experience in terms of 
yield per acre if he or she planted new acreage and then harvested it 5 
consecutive years thereafter.
    The results were divided into two categories: Group A (growers 
harvesting for the first time 1 year after planting) and Group B 
(growers waiting 2 years before the first harvest). The data included 
the first harvest and four subsequent harvest yields for groups A and 
B, respectively, and was analyzed to determine the average yields and 
rate of increase in yields over the first 5 harvests for each grower/
bog category.
    The analysis of yield progression over the first 5 harvests for 
groups A and B revealed significant differences in first harvest 
yields, but supported the conclusion that yield progression rates for 
subsequent years were comparable. Based on this observation, yield 
rates and expected yield/sales histories were averaged based on the 
sample size from each group. These averages were 50, 131, 197, 227 and 
250 barrels per acre for acres harvested the first, second, third, 
fourth and fifth year after planting, respectively.
    Since these numbers are based on average yields for the sample 
groups, it is reasonable to conclude that the yields of approximately 
50 percent of the growers impacted by this proposal would be higher 
than the average. To accommodate as many growers as possible, it was 
agreed to adjust the averages upward by 25 barrels which would result 
in growers receiving a higher amount of additional sales history under 
the formula. This would also assure that first harvests (acreage with 
no sales history) which were provided the State average yield as a 
sales history in the 2000 crop year would receive a comparable sales 
history for 2001. The average expected yields for each year, increased 
by 25 barrels, were 75, 156, 222, 252 and 275 barrels per acre for 
acres harvested the first, second, third, fourth and fifth year after 
planting, respectively.
    These yield figures were incorporated into the formula for 
determining the additional sales history per acre that growers would be 
provided, and were applied to acreage planted in 1995 or later.
    In addition to the actual sales history, such growers were provided 
additional sales history to account for expected increased production 
in the forthcoming year.
    The formula was a tool used to make an appropriate adjustment in 
sales histories for growers harvesting young acreage, which was not yet 
producing at optimal capacity. The formula was based on industry data 
from all growing areas and from all sizes of growing operations, and 
used a higher than mid range of this data.
    USDA does not agree that new plantings would be encouraged by 
adding this authority to the order or that growers are being rewarded 
for making poor business decisions. Incorporating this method into the 
order would address equity concerns expressed during the volume 
regulations implemented in 2000 and 2001. The formula used in the 2001 
season was an improvement from the formula used in 2000. However, the 
way the current order language is written, this improved method cannot 
be used the next time volume regulations are implemented because the 
revised formula can only be implemented after a year of volume 
regulation. The formula would compensate growers for anticipated 
production on recently planted acres that do not have sales histories 
reflective of current production potential. Accommodating the new 
acreage is an important element in any attempt to equitably implement a 
producer allotment volume regulation.
    The proposal would also authorize the Committee, with USDA 
approval, to adopt recommendations to alter the number and identity of 
years to be used in computing sales histories, including the number of 
years to be used in computing the average. This would allow the 
Committee to have the flexibility to address unforeseen events that 
occur that would make it appropriate to modify the number of years used 
in computing sales histories.
    Record evidence supports amending Sec.  929.48 by changing the way 
sales histories are calculated as proposed by the Committee and 
allowing for more flexibility in recommending changes to the sales 
history formula. Therefore, this proposal is recommended for adoption.

Calculations of Fresh and Processed Cranberry Sales Histories

    The Committee also proposed that sales histories, starting with the 
crop year following adoption of this amendment, should be calculated 
separately for fresh and processed cranberries. In a year an allotment 
percentage is set, that percentage would be applied only to a grower's 
processed sales history if fresh fruit is exempt from regulation (as it 
was in the recent 2 years of regulation). If fresh fruit was not exempt 
from volume regulation, the allotment percentage would be applied to a 
grower's total sales history (fresh and processed combined).
    As proposed, the amount of fresh fruit sales history may be 
calculated based on either the delivered weight of the barrels paid for 
by the handler (excluding trash and unusable fruit) or on the weight of 
the fruit paid for by the handler after cleaning and sorting for the 
retail market. Handlers using the former calculation would allocate 
delivered fresh fruit subsequently used for processing to growers' 
processing sales. Fresh fruit sales history, in whole or in part, may 
be added to processed fruit sales history with the approval of the 
Committee in the event that the grower's fruit does not qualify as 
fresh fruit at delivery.
    Testimony revealed that this proposal would address some of the 
inequities experienced in the last two volume regulations. Fresh and 
organic fruit were exempt from the 2000 and 2001 volume regulations 
under the authority of Sec.  929.58 which provides that the Committee 
may relieve from any or all order requirements cranberries in such 
minimum quantities as the Committee, with the approval of USDA, may 
prescribe. It was determined that fresh and organic fruit did not 
contribute to

[[Page 23338]]

the surplus. Fresh cranberry sales constituted less than 5 percent of 
the cranberry market. Organically grown cranberries comprised an even 
smaller portion of the total crop, about 1,000 barrels sold annually. 
All fresh and organically grown cranberries could be marketed and did 
not compete with the processed market. For this reason, the Committee 
recommended that fresh and organically grown cranberries be exempt from 
volume regulations.
    In both years, fresh fruit sales were deducted from sales histories 
and each grower's sales history represented processed sales only. In 
2000, concerns were expressed that this exemption would give an unfair 
advantage to some cranberry processors (those that did not handle fresh 
fruit) and to their growers. Because of the timing of the rulemaking, 
it was decided by the Committee not to recommend any additional changes 
to the fresh fruit exemption for 2000. However, the Committee would 
consider the way fresh fruit is handled under a volume regulation in 
future years. In 2001, the fresh fruit exemption was still recommended 
to be deducted from sales histories but the exemption was clarified so 
that fresh fruit was handled as it was intended by the Committee.
    In addition, in both years of volume regulation, in the event that 
the growers' fruit did not qualify as fresh fruit at delivery, the 
sales from that fruit were added to the growers' processed fruit sales 
histories. Testimony indicated that in the fresh fruit industry, there 
are instances when growers deliver fresh fruit that fails the handler's 
fresh fruit specifications and therefore is converted to processing 
fruit. In this case, the fruit not used as fresh would be applied to 
that grower's processed fruit sales history.
    It is possible that exempting fresh fruit from volume regulation 
may not be appropriate in future years. Testimony indicated that 
because of the exemption from volume regulation, there was an increase 
in the amount of fresh fruit produced. Many growers took advantage of 
the exemption and sold fresh fruit when they normally would not. A 
fresh fruit handler testified that many handlers had more fresh fruit 
than could be sold. The price fell from 1999 to 2000 and remained 
stable for 2001.
    For this reason and to have sales histories more reflective of 
actual sales, the Committee is recommending that the Committee begin 
calculating separate sales histories for fresh and processed sales. 
Testimony revealed that this proposal would address the inequities 
experienced in the last two volume regulations.
    Testimony indicated the reason for incorporating language 
specifying that the amount of fresh fruit sales history may be 
calculated based on either the delivered weight of the barrels paid for 
by the handler (excluding trash and unusable fruit) or on the weight of 
the fruit paid for by the handler after cleaning and sorting for the 
retail market was because handlers process growers' fruit differently. 
For example, the major cooperative accounts for fresh fruit on a 
delivered basis. A major cooperative grower delivering 1,000 barrels of 
fresh fruit would be paid for 1,000 barrels of fresh fruit. Samples are 
taken at delivery and premiums are paid based on quality. On the basis 
of its packed out and sold fresh fruit, the cooperative assigns a fresh 
fruit sales history back through to its growers proportional to their 
original deliveries.
    Independent handlers pay growers for fruit on a packed out basis 
and pay their growers based on their individual pack outs. If a grower 
delivers 1,000 barrels to an independent handler, and the pack out is 
80 percent, the grower would be credited with 800 barrels of fresh 
fruit and 200 barrels of processed fruit.
    It is not the intent of this proposal to force handlers to change 
the way they do business with their growers. Therefore, this language 
acknowledges the different ways handlers pack fruit and allows them to 
continue to do so.
    The Committee would calculate the sales histories on fresh and 
processed sales separately every year, not just in years of volume 
regulation.
    Record evidence supports modifying the formula for calculating 
sales histories, allowing for more flexibility in recommending changes 
to the formula, and adding authority for segregating fresh and 
processed sales. Therefore, it is recommended that these amendments to 
Sec.  929.48 be adopted.

Material Issue Number 4--Catastrophic Events That Impact Growers' Sales 
Histories

    The order should be amended to allow more liberal adjustments in 
growers' sales histories when they lose production due to catastrophic 
events.
    The order currently provides in Sec.  929.48(a)(4) that if a grower 
has no commercial sales from such grower's cranberry acreage for three 
consecutive crop years due to forces beyond the grower's control, the 
Committee shall compute a level of commercial sales for the fourth year 
for that acreage using an estimated production, obtained by crediting 
the grower with the average sales from the preceding 3 years during 
which sales occurred. Any and all relevant factors regarding the 
grower's lost production may be considered by the Committee prior to 
establishing a sales history for such acreage.
    During the two recent seasons when volume regulations were in 
place, the Committee appointed an appeals subcommittee for growers who 
were dissatisfied with their sales histories as calculated by the 
Committee. Growers could appeal if they believed the figures used in 
the sales history calculation were incorrect or if they believed the 
calculation was incorrectly performed by Committee staff.
    Testimony revealed that in 2001, there was only one situation that 
actually met the 3 years of no production criteria. A grower's acreage 
in Massachusetts was destroyed from chemical contamination not of his 
doing and this grower was compensated with additional sales history.
    The Committee's proposal would provide more flexibility in this 
provision by authorizing the Committee to recommend rules and 
regulations to adjust a grower's sales history to compensate for 
catastrophic events that impact a growers' crop for more than 2 years. 
At the hearing, Committee witnesses modified their proposal to make 
this provision more flexible by removing the requirement that a 
grower's crop had to be impacted for more than 2 years.
    The Committee manager testified that growers do experience 
catastrophic events and forces beyond their control that do not totally 
destroy their ability to produce a portion of their crop. Using the 
current criteria of a total loss for 3 concurrent years, few growers, 
if any, would ever qualify for such an adjustment.
    According to the record, there were many growers who had situations 
where their crop was not totally destroyed for 3 consecutive years, but 
the losses incurred negatively impacted their sales history. The 
Committee was unable to authorize any adjustments.
    A grower testified that his crop was impacted by the State of 
Wisconsin Department of Natural Resources (DNR) land that borders on 
his property. The DNR applied a chemical on a high heat day that spread 
across the grower's property. This situation destroyed a good 
percentage of his marsh, and dramatically impacted his crop for two 
years. The Committee was unable to adjust his sales history because it 
was not a total loss that impacted his crop for 3 consecutive years.
    Under this proposal, this grower could have been provided with 
additional sales history to compensate him for his losses. 
Specifically, this grower produced 20,000 barrels of

[[Page 23339]]

cranberries and his allotment was 9,000 barrels. The 2001-02 volume 
regulation thus had a greater impact on him than on other growers.
    If the language was kept at more than 2 years of loss as originally 
proposed by the Committee, this grower would still not have been 
provided with additional sales history. This is one of the reasons the 
Committee recommended removing the more than 2-year requirement and 
leaving it to the Committee's discretion to establish guidelines 
through the rulemaking process to determine if the grower should be 
provided additional sales history. The reason the Committee included 
the more than 2 years restriction initially was because sales histories 
are based on the best 4 out of 6 years. A grower's calculation of 
initial sales history would allow the 2 lowest years to be excluded in 
the calculation. The Committee thought this would cover any situation 
involving 1 or 2 years of losses. However, the Committee believes 
unique situations could occur where the losses on a grower's crop for 
even a single year could warrant an adjustment to that grower's sales 
history.
    Other discussions at the hearing on this proposal pertained to what 
would constitute a ``catastrophic'' event. The Committee recommended 
changing the terminology from the current language which states 
``forces beyond the growers' control'' to ``catastrophic events'' 
because they wanted to ensure that normal agricultural problems that 
occur, such as long periods of rain that may have a detrimental impact 
on a grower's crop or hail damage, would not be situations where 
growers would be entitled to additional sales histories. It was 
testified that excessive rain or hail is an event that is beyond a 
grower's control, but it may not be a catastrophic event. Some of these 
situations would be covered by crop insurance, so the grower is already 
being compensated for his loss.
    Testimony indicated that the intent of the proposal is to allow the 
Committee to recommend, through informal rulemaking, specific 
determinations of what catastrophic events would entitle growers to 
adjustments in their sales histories. The regulation should benefit 
growers by allowing them to understand what situations would entitle 
them to such adjustments. It could also help reduce the number of 
appeals filed and reduce administrative time and expenses in reviewing 
appeals.
    Testimony also indicated that each case should be reviewed and 
considered on its own merits (within guidelines established through the 
rulemaking process) and that less than a 100 percent loss can 
significantly impact a grower's sales history. The proposed amendment 
addresses this situation by not requiring a grower to have suffered a 
total crop loss before being eligible for an adjustment in his or her 
sales history.
    Testimony indicated that the proposed amendment would have a 
positive impact on producers, as the Committee would be in a position 
to compensate growers who experienced losses due to catastrophic 
events. The Committee would recommend procedures and guidelines to be 
followed in each year a volume regulation is implemented.
    Allowing the Committee to make such recommendations through 
informal rulemaking would provide the flexibility to ensure the best 
interests of the growers are being served.
    Record evidence supports allowing adjustments in sales histories 
for catastrophic events that impact a grower's crop. The procedures and 
guidelines would be recommended by the Committee and approved by USDA. 
Therefore, the addition of paragraph (e) to Sec.  929.48 is recommended 
to be adopted.

Material Issue Number 5--Remove Specified Dates Relating To Issuance of 
Annual Allotments

    Section 929.49, Marketable quantity, allotment percentage, and 
annual allotment, should be revised by removing specified dates 
relating to the issuance of annual allotment; clarifying the provision 
related to calculation of the allotment percentage; and updating 
information growers need to submit to the Committee to receive annual 
allotments.
    Currently, Sec.  929.49 provides that when a producer allotment 
regulation is implemented, USDA will establish an allotment percentage 
equal to the marketable quantity divided by the total of all growers' 
sales histories. The allotment percentage is then applied to each 
grower's sales history to determine that individual's annual allotment. 
All growers must file an AL-1 form with the Committee on or before 
April 15 of each year in order to receive their annual allotments. The 
Committee is required to notify each handler of the annual allotment 
that can be handled for each grower whose crop will be delivered to 
such handler on or before June 1.
    Proponents testified that the Committee's experience during the 
2000 and 2001 crop years has proven that maintaining a specified date 
by which growers are to file a form to qualify for their allotment and 
for the Committee to notify handlers of their growers' annual 
allotments has been difficult. The proposed amendment would delete the 
specified dates and allow a more appropriate date by which growers are 
to file forms and the Committee is to notify handlers of their growers' 
annual allotments to be established through informal rulemaking. The 
Committee would like to establish dates that the industry can 
realistically meet each season when a volume regulation is implemented. 
Because volume regulation was not recommended until the end of March, 
growers had difficulty in submitting the required reports in a timely 
manner. Additionally, the rulemaking process to establish the allotment 
percentage had not been completed by June 1. Therefore, the Committee 
was unable to notify handlers of their growers' allotment by the 
specified deadline. For these reasons, the Committee should have the 
flexibility to recommend other dates to USDA for approval that can 
realistically be met by the industry and serve the purposes of the 
marketing order. With this proposed amendment, reasonable filing dates 
could be established in line with the timing of the recommendation and 
establishment of volume regulation.
    The Committee also recommended clarifying the explanation of how an 
allotment percentage is calculated. Currently, Sec.  929.49(b) states 
that such allotment percentage shall equal the marketable quantity 
divided by the total of all growers' sales histories. It does not 
specify that ``all growers'' sales histories' includes the sales 
histories calculated for new growers. The Committee has proposed in 
this amendment proceeding that sales histories given to new growers 
each season (growers that have no prior sales history) should also be 
included in the calculation of the allotment percentage. Section 
929.48(a)(5) as proposed would provide that the Committee compute a 
sales history for a grower who has no history of sales associated with 
such grower's cranberry acreage during a crop year when a volume 
regulation has been established, by taking the average of the first 
year yields as established by the Committee and multiplying it by the 
number of acres. During the two recent years of volume regulation, new 
growers' sales histories were included in the calculation of the 
allotment percentage. The amendment is merely a clarification to ensure 
that total sales histories are used in this calculation.
    The Committee also proposed revising the information required to be 
submitted by growers to qualify for an annual allotment. Currently, 
Sec.  929.49(d) provides that the Committee shall require all growers 
to qualify for allotment by filing with the Committee,

[[Page 23340]]

on or before April 15 each crop year, a form wherein growers include 
the following information: (1) The location of their cranberry 
producing acreage from which their annual allotment will be produced; 
(2) the amount of acreage which will be harvested; (3) changes in 
location, if any, of annual allotment; and (4) such other information, 
including a copy of any lease agreement, as is necessary for the 
Committee to administer the order. Such information is gathered by the 
Committee on a form specified as the AL-1 form.
    The proposed amendment would modify the criteria by only requiring 
pertinent information to be required by growers on the AL-1 form. 
Record evidence showed that growers are assigned a grower number and 
the amount of acreage on which cranberries are being produced is 
maintained. However, the proponents testified that the location of the 
cranberry producing acreage is not maintained. Therefore, the Committee 
does not see the need to collect this information on the form. The form 
also asks about changes in location, if any, of their annual allotment 
including the lease agreement. Annual allotment is linked to a grower's 
cranberry producing acreage and, since the acreage cannot be moved from 
one location to another, information on changes in location is not 
relevant. Therefore, the Committee has proposed that the information 
required to be submitted by growers be revised by deleting the 
information that the Committee does not need to operate a producer 
allotment program. Other information that is currently requested 
(including identifying the handler(s) to whom the grower will assign 
their allotment) would remain unchanged.
    The modifications proposed by the Committee add flexibility and 
clarity to the order and are therefore recommended for adoption.

Material Issue Number 6--Clarify How the Committee Allocates Unused 
Allotment to Handlers

    Section 929.49 should be amended to clarify the method by which the 
Committee allocates unused allotment to handlers having excess 
cranberries. Specifically, the Committee would be required to make such 
a distribution in a way that is proportional to each handler's total 
allotment.
    Currently under the producer allotment volume regulation features 
of the order, Sec.  929.49(g) provides that handlers who receive more 
cranberries than the sum of their growers' annual allotments have 
``excess cranberries'' and shall notify the Committee. Handlers who 
have remaining unused allotment are ``deficient'' and shall notify the 
Committee. The Committee is required to equitably distribute unused 
allotment to all handlers having excess cranberries.
    This provision of the order allows handlers to handle additional 
cranberries by providing them with unused allotment. During years of a 
producer allotment volume regulation program, handlers cannot handle 
cranberries unless those berries are covered by an allotment.
    The proponents testified that there has been a debate in the 
industry on the interpretation of what equitable distribution means and 
how it should be accomplished. To add specificity, the Committee 
proposed replacing the words ``equitably distribute'' with 
``proportional to each handler's total allotment''.
    The proponents further testified that the distribution of unused 
allotment would only be to those handlers who have excess fruit and are 
in need of allotment to cover that fruit. Such handlers would then 
receive any available allotment in proportion to the amount such 
handler handles. Record evidence indicated that if handlers had excess 
fruit and needed allotment from the Committee, they would receive up to 
the amount they needed to cover that excess fruit. Allotment would only 
be distributed proportionately to handlers when there are more requests 
for unused allotment than available unused allotment.
    This proposed amendment is supported by record evidence and is 
recommended for adoption.

Material Issue Number 7--Growers Who Do Not Produce a Crop During a 
Year of Regulation and Assignment of Their Allotment

    Section 929.49 should be amended to eliminate the requirement that 
growers assign any unused allotment to their handlers under certain 
circumstances.
    As previously discussed, each year a producer allotment regulation 
is in place, each cranberry grower receives an annual allotment. This 
allotment represents the volume of that grower's cranberries that can 
be handled.
    Currently, Sec.  929.49(f) requires growers who do not produce 
cranberries equal to their computed annual allotment to transfer their 
unused allotment to such growers' handlers. The handlers are then 
required to equitably allocate the unused allotment to growers who 
deliver excess cranberries to such handlers. Unused allotments 
remaining after all such transfers have occurred are then transferred 
to the Committee.
    The proponents testified that one concern of growers was what 
happens to a grower's annual allotment if the grower decides not to 
grow a crop during a year of volume regulation. Currently, such growers 
have no alternative but to transfer their allotments to their 
contracted handlers. The handlers, in turn, can reallocate those 
growers' annual allotments among growers delivering excess cranberries 
to that handler. Growers felt that the annual allotments are based on 
their sales and that they should have more control over what happens to 
their unused annual allotment. Further, they believed that their 
decision not to grow a crop in a year of oversupply should not result 
in other growers being able to deliver a greater portion of their 
crops. This dilutes the effectiveness of the allotment regulation.
    Concerns were raised at the hearing regarding the contractual 
arrangements that growers may have with their handlers, and how this 
amendment could affect those arrangements. The proponents testified 
that this amendment is not intended to encroach on private contractual 
arrangements between growers and handlers. Such arrangements fall 
outside the scope of the order.
    One grower testified that if a grower does not want to transfer the 
allotment to his or her handler, it should be given back to the 
Committee and the Committee should be accountable for all the allotment 
that is available. It was supported that growers who do not choose to 
grow a crop should not be required to transfer such allotment to their 
handler.
    The hearing testimony did not explain what happens to the allotment 
if a grower does not grow a crop and does not transfer the allotment to 
such grower's handler. It was suggested that the Committee should have 
informal rulemaking authority to further define what would happen to 
such allotment.
    The concept of allowing growers to choose whether or not to assign 
unused allotment to their handlers was not opposed at the hearing. The 
modification proposed by the Committee is recommended for adoption.

Material Issue Number 8--Transfers of Allotment

    Section 929.50 of the order should be amended to allow growers to 
transfer their allotments during a year of a producer allotment volume 
regulation, and to provide that a sales history remain with the lessor 
when there is a total or partial lease of cranberry acreage to another 
grower.

[[Page 23341]]

    As previously discussed, in years of a producer allotment volume 
regulation, an allotment percentage is established and is applied to 
each grower's sales history to determine that grower's allotment. A 
grower's allotment represents the amount of cranberries a handler may 
purchase from or handle for that grower. A complete discussion of how 
growers' sales histories are calculated is contained in the findings 
and conclusions regarding Material Issue No. 3.
    Currently, Sec.  929.50, Transfers, does not allow the direct 
transfer of allotment between growers. What it does provide is that in 
the event cranberry acreage is sold or leased, the sales history 
associated with that acreage is transferred to the buyer or lessor. 
Therefore, the only option available to a grower to accomplish a 
transfer of allotment (aside from purchasing additional acreage) is to 
complete a lease agreement with another grower. Section 929.50 also 
provides that growers who lease their acreage must file a lease 
agreement with the Committee before the Committee recognizes it. The 
Committee will not recognize such lease agreement until the Committee 
is in receipt of a completed lease form. Total and partial leases of 
cranberry acreage require the lessor to transfer the appropriate sales 
history associated with the acreage being leased.
    The Committee manager testified that during 2000 and 2001, when 
producer allotment volume regulations were implemented, a grower who 
wanted to obtain more allotment from another grower to cover barrels 
harvested from his or her acreage had to enter into a short-term lease 
agreement. Such a legal agreement had to be filed with the Committee. 
Usually this agreement was just for 30 to 60 days in duration, just to 
allow growers to transfer sales history (and, indirectly, allotment) to 
one another.
    The Committee manager testified that many of these lease agreements 
were initiated during the two years of volume regulation and created a 
burden on the Committee staff as well as on the growers involved. The 
Committee staff had to process the transfers, keep track of the 
transfers, and then reverse the transfers within a relatively short 
period of time. Also, the Committee staff had to recalculate the 
allotment available to each handler since it may have changed when 
growers' sales histories and allotments are recalculated under the 
lease agreement. A problem many growers did not consider at the time 
these transfers were taking place is that the sales history transferred 
from one grower to another is combined with that second grower's sales 
history. The allotment percentage is then applied to that grower's 
total sales history. This may not result in as much additional 
allotment as that grower expected. Witnesses testified that this 
revised process would not affect growers' sales history calculations 
since allotment would be transferred, not sales histories.
    Record evidence showed that this complex transfer process is 
necessary because there is no method currently available under the 
order for direct transfers of allotment among growers. The proposed 
amendment would allow a simple transfer of allotment between growers.
    Under this proposed amendment, growers delivering to the same 
handler could transfer allotments among themselves freely. Growers 
delivering to different handlers who wish to transfer allotment would 
have to receive prior consent in writing from the respective handlers, 
and provide documentation to that effect to the Committee prior to the 
transfer of allotment. Record evidence shows that the requirement for 
handler notification and consent is necessary so that handlers know how 
much allotment they will have available during the crop year.
    To ensure that the Committee is aware of allotment transfers, 
growers would be required to file appropriate forms with the Committee 
by such date as the Committee may determine. The Committee manager 
testified that such form would likely include such information as the 
name of the two growers involved in the transfer, the amount of 
allotment being transferred, and the handler or handler(s) to whom the 
growers deliver their crops.
    The Committee manager also testified that the Committee should be 
informed by August 1 of the transfer. This date would be 30 days prior 
to the beginning of the crop year and would allow the Committee staff 
to complete the required paperwork on the transferred allotment. One 
witness testified, however, that growers should be able to transfer 
allotment through harvest. Growers should be allowed to transfer 
through harvest because they would not know until harvest how much 
unused allotment they would have available or how much additional 
allotment they would need. The witness suggested a modification to 
change the deadline for transfers from August 1 to December 1.
    USDA is modifying the Committee's proposal. The order should 
provide that the date by which allotment transfers must be completed be 
established through informal rulemaking. The Committee needs to 
evaluate whether a later date would be administratively feasible to 
accomplish and consider the needs of the growers in determining this 
date. No opposing testimony was presented on this proposed amendment. 
Therefore, this portion of the proposal is recommended with a 
modification.
    With regard to lease agreements, the Committee manager testified 
that currently, the lessor and lessee must provide written details 
regarding the lease to the Committee. The lessee then reports and is 
credited with the sales from the leased acreage during the lease 
period. Sales from leased acreage are calculated to determine the 
lessee's new sales history. At the end of the lease period, barring 
renewal, the cranberry acreage and all sales history associated with 
that leased acreage reverts back to the lessor or the owner. The sales 
history includes all sales history accumulated during the lease period 
attributable to the leased acreage. The lessee would be required to 
notify the handler or handlers to whom they are delivering the sales 
from the leased acreage to be credited to the lessor. It would be the 
responsibility of the lessor to ensure that the handler receiving the 
cranberries from the leased acreage is correctly crediting the lessor 
with the appropriate sales figures.
    The manager testified that most leases are a temporary situation, 
and therefore, most of the grower paperwork is unnecessary because 
eventually the sales history attributable to the leased acreage would 
revert back to the lessor or the owner of the acreage. Thus, this 
proposed amendment provides that in cases where acreage is leased, the 
sales history associated with that acreage would remain with the 
landowner. However, the amount of allotment that would be transferred 
to the lessor could be a part of the lease agreement between the 
parties involved.
    There was no opposition testimony on this proposal. This proposed 
amendment would simplify the process for transfers of allotment and is 
recommended for adoption.

Material Issue Number 9--Authorizing Producer Allotment and Withholding 
Programs in the Same Year

    Section 929.52, Issuance of regulations, should be amended to 
authorize the implementation of the producer allotment and withholding 
programs in the same year. Currently, that section provides that USDA 
may regulate the volume of cranberries that may be handled in a crop 
year by either fixing free and restricted percentages (withholding) or 
by establishing an allotment percentage (producer allotment).

[[Page 23342]]

    The record evidence is that that Public Law 107-76, enacted on 
November 28, 2001, amended the Agricultural Marketing Agreement Act of 
1937 by adding the following provision to section 8c(1): ``The 
Secretary is authorized to implement a producer allotment program and a 
handler withholding program under the cranberry marketing order in the 
same crop year through informal rulemaking based on a recommendation 
and supporting economic analysis submitted by the Cranberry Marketing 
Committee. Such recommendation and analysis shall be submitted by the 
Committee no later than March 1 of each year.''
    Therefore, this proposed amendment is intended to bring the 
marketing order into conformity with the Act. The Committee manager 
testified that operating both programs during the same year would 
likely serve as a safety valve. Since the producer allotment program 
would be implemented early in the year prior to harvest, it could be 
set too low. A withholding program could therefore be implemented to 
take additional fruit off the market. The withholding regulation could 
also be suspended later in the year if it was deemed to be unnecessary.
    One witness testified that he was in favor of the amendment but was 
not clear how both forms of volume regulation would operate in the same 
year of regulation. The Committee would have to address how these two 
programs should be used together in a given year. This is an area that 
could be explored in the economic analysis the Committee would need to 
submit in support of such a recommendation for regulation, and would 
assist USDA in its review of that recommendation.
    This proposed amendment would bring the order into conformity with 
the enabling statute. Thus, it is being recommended for adoption.

Material Issue Number 10--Dates for Recommending Volume Regulations

    Section 929.51 of the order should be amended to provide deadlines 
for Committee recommendations for volume regulations. Specifically, if 
only one type of volume regulation were recommended, a producer 
allotment regulation would have to be recommended by March 1 each year, 
and a withholding program would have to be recommended before August 
31. However, in the event the Committee determines it desirable to 
recommend both a producer allotment and withholding regulation, such a 
recommendation would have to be made by March 1. Currently, Sec.  
929.51 does not specify any certain dates by which the Committee must 
make a recommendation to USDA for volume regulation of the upcoming 
crop.
    As previously discussed, to implement both types of volume 
regulations during the same year, the Act requires such a Committee 
recommendation prior to March 1. This deadline is proposed to be added 
to Sec.  929.51 rather than to Sec.  929.52 as proposed by the 
Committee. There are no dates specified in the marketing order by which 
the Committee must recommend a handler withholding or producer 
allotment regulation when only one type of volume regulation is chosen.
    The Committee manager testified that recommending a producer 
allotment program prior to March 1 would be beneficial to growers. 
Growers have indicated they need to know as soon as possible whether 
the Committee is going to recommend a regulation, since a producer 
allotment program permits handlers to acquire only a portion of their 
growers' crops. The Committee's decision influences whether growers 
decide to cut back on purchases of chemicals and fertilizer or to take 
acreage out of production. The later the decision is made, the greater 
the chances are that growers will already have started working on 
preparing their bogs to produce a full crop. Therefore, it is in the 
best interest of the growers to have a Committee recommendation for a 
producer allotment program prior to March 1.
    The witness further testified that the Committee would hold its 
regularly scheduled winter meeting in February, at which time the 
Committee would review the most current information on the upcoming 
crop.
    It was also testified and supported that the March 1 date should be 
flexible to allow for unforeseen circumstances that could arise that 
could prevent the Committee from estimating the marketable quantity 
prior to that date. Proponents testified that the Committee may not be 
able to reach a consensus by that date and may need more time to review 
the current situation within the industry. Although the March 1 
deadline would apply in most years, USDA is recommending that Sec.  
929.51 include a provision that an exception could be made when 
unforeseen circumstances preclude the Committee from making an informed 
recommendation that early in the year. This modification is consistent 
with record testimony and the Committee's brief.
    Regarding the handler withholding program, the Committee's original 
proposal indicated that such a regulation should be made as soon as 
possible after August 1. The record supports a modification--that free 
and restricted percentages should be recommended no later than August 
31.
    The Committee manager testified that the Committee, prior to August 
31, should recommend a handler withholding program. This would provide 
the Committee staff ample time to prepare reports based on handler 
inventory reports through July 31. The Committee could then meet at its 
summer meeting (typically held in August) and review the most complete 
and accurate information available to make a decision on the 
implementation of such program.
    Some concerns were raised at the hearing that establishing a 
program at the required dates would make the percentages inflexible to 
crop conditions as they occur. However, any established regulation 
could be modified, suspended, or terminated pursuant to Sec.  929.53 as 
crop or market conditions necessitate such action.
    Therefore, the Committee's proposal, with appropriate 
modifications, is recommended for adoption.

Material Issue Number 11--Exemptions From Regulations

    Section 929.58 of the order should be amended to add authority to 
exempt fresh, organic or other types or forms of cranberries from any 
or all regulatory requirements imposed under the order.
    Currently, Sec.  929.58 provides authority for USDA to relieve from 
any or all requirements under the order, the handling of cranberries in 
such minimum quantities as the Committee may recommend. In 2000 and 
2001, the Committee recommended the implementation of producer 
allotment volume regulations. In both years, an exemption from the 
volume regulations was provided for fresh and organic cranberries. It 
was determined that such fruit comprised a small portion of the crop, 
did not compete directly with processing fruit cranberries, and did not 
add materially to the industry surplus of fruit.
    Under current production and marketing practices, there is a 
distinction between cranberries for fresh market and those for 
processing markets. Cranberries intended for fresh fruit outlets are 
grown and harvested differently. Fresh cranberries are dry picked while 
cranberries used for processing are water picked, the bog is flooded 
and the cranberries that rise to the top are harvested. Dry picking is 
a more labor intensive and expensive form of harvesting. Some cranberry 
bogs are designated as ``fresh fruit'' bogs and

[[Page 23343]]

are grown and harvested accordingly. Only the lower quality fruit from 
a fresh bog goes to processing outlets. Organic cranberries are a 
growing niche market and it was believed that regulating them could 
have had an adverse effect on the production and marketing of this 
product.
    In 2000, the first time a volume regulation was implemented in 
nearly 35 years, fresh and organic fruit was exempt from that 
regulation. The industry experienced an increase in fresh fruit 
production because of the exemption. This was caused by processed fruit 
growers changing to fresh fruit production. Also, the intent of the 
fresh fruit exemption in the 2000-01 volume regulation was to only 
exempt cranberries going to retail outlets as fresh cranberries, and 
questions arose as to what constituted ``fresh'' under the regulations.
    Therefore, the Committee recommended this change to the exemption 
provision to clarify the current language and provide guidelines for 
the specific forms and types of cranberries that can be exempted. The 
Committee manager testified at the hearing that the different forms or 
types of cranberries might include cranberries sold as packed-out fresh 
fruit and/or organically grown cranberries sold as fresh or processed 
fruit.
    The witness also testified that extending a minimum exemption to 
particular forms or types of cranberries during a period when a 
regulation was in effect would ensure that sufficient fruit would be 
available to meet current demand, and would encourage the industry to 
develop new markets. The amendment, however, would not limit the 
different forms or types of cranberries the Committee could consider in 
its marketing policy. Such recommendation for exempting cranberries 
from volume regulations would take place in the Committee's 
deliberations for volume regulation and could be accomplished through 
informal rulemaking.
    The Committee manager testified that the types of cranberries could 
be extended to include different varieties of cranberries. For example, 
the witness testified that the Stevens variety of cranberries could be 
exempted if circumstances warranted such an exemption.
    The Committee would also determine what particular regulations the 
exemption would apply to. For example, for the 2000 and 2001 seasons, 
fresh and organic cranberries were exempt only from the volume 
regulation provisions, but handlers still had to file reports and pay 
assessments on those cranberries. The Committee could make a 
recommendation to exempt specific types or forms of cranberries from 
any or all of the other regulations in effect under the marketing 
order.
    Therefore, this decision recommends that the exemption provision in 
Sec.  929.58 be modified to clarify the current language and provide 
that specific forms and types of cranberries can be exempted from any 
or all regulatory requirements. There was no opposition testimony 
presented on this issue.

Material Issue Number 12--Outlets for Excess Cranberries

    Section 929.61 of the order should be amended to broaden the scope 
of noncommercial and noncompetitive outlets authorized as outlets for 
excess cranberries.
    Under the order, the producer allotment program provides for 
limiting the amount of the total crop that can be marketed for normal 
commercial uses. If a producer allotment program were implemented, USDA 
would establish an allotment percentage that would equal the marketable 
quantity divided by the total of all growers' sales histories. The 
allotment percentage would be applied to each grower's individual sales 
history to derive each grower's annual allotment. Handlers cannot 
handle cranberries unless they are covered by a grower's annual 
allotment.
    Handlers who receive more cranberries than are covered by their 
growers' annual allotments have excess cranberries. The Committee is 
required to equitably distribute any unused allotment it receives to 
those handlers who have excess cranberries.
    Section 929.59 defines excess cranberries as cranberries withheld 
by handlers after all unused allotment has been allocated. It also 
provides for handlers to notify the Committee by January 1 of a written 
plan to dispose of excess cranberries and to dispose of them by March 
1.
    There is no need to limit the volume of cranberries that may be 
marketed in noncommercial and noncompetitive outlets. Section 929.61 of 
the order designates outlets for handlers to dispose of excess 
cranberries. Specifically, the provision establishes noncommercial 
outlets as charitable institutions and research and development 
projects approved by USDA for the development of foreign and domestic 
markets, including, but not limited to, dehydration, radiation, freeze 
drying, or freezing of cranberries. Noncompetitive outlets are 
established under Sec.  929.61 as any nonhuman food use (animal feed) 
and foreign markets, except Canada. Canada is excluded because 
significant sales of cranberries to Canada could result in 
transshipment back to the United States of the cranberries exported 
there. This could disrupt the U.S. market, contrary to the intent of 
the volume regulation.
    To ensure that excess cranberries diverted to the specified outlets 
do not enter normal marketing channels, certain safeguard provisions 
are established under Sec.  929.61. These provisions require handlers 
to provide documentation to the Committee to verify that the excess 
cranberries were actually used in a noncommercial or noncompetitive 
outlet. This section also provides that the storage and disposition of 
all excess cranberries withheld from handling shall be subject to the 
supervision and accounting control of the Committee. In addition, the 
Committee, with USDA approval, may establish as needed rules and 
regulation for the implementation and operation of this section.
    Under the final rule establishing and implementing the 2000 volume 
regulation, regulations pertaining to excess cranberries were 
established under Sec.  929.104. These regulations include all outlets 
mentioned in Sec.  929.61. The Committee recommended foreign markets be 
excluded as outlets for excess cranberries because the industry is 
actively selling cranberries in at least 54 foreign countries today. 
When foreign markets were listed as potential outlets for excess 
cranberries, cranberry exports were not as significant to the industry 
as they are today. However, it was determined that because excess 
cranberries could not be ``handled'' and fresh cranberries were exempt 
from the 2000 volume regulation, this recommendation was deemed 
unnecessary. However, USDA revised Sec.  929.104 to clarify that excess 
cranberries cannot be processed and sent to foreign markets.
    In the 2001 volume regulation, the provisions on outlets for excess 
cranberries were modified to broaden the scope of research and 
development projects authorized as outlets for excess cranberries. It 
was determined by the Committee that the provision from the 2000 volume 
regulation regarding research and development projects was too 
restrictive and could exclude some outlets for excess cranberries that 
could be deemed noncommercial and noncompetitive. The Committee 
unanimously recommended modifying paragraph (a)(4) of Sec.  929.104 to 
state that any research and development projects approved by the 
Committee would be eligible as outlets for excess cranberries. This 
provided more flexibility in determining if a specific project could

[[Page 23344]]

be considered noncompetitive or noncommercial. Research and development 
projects were not limited to dehydration, radiation, freeze-drying, or 
freezing of cranberries for the development of foreign markets.
    The Committee proposed amending Sec.  929.61 to provide more 
flexibility in establishing outlets for excess cranberries if volume 
regulations are recommended and implemented in the future. Testimony 
revealed that adoption of this proposal would provide the Committee, 
with USDA's approval, the ability to recognize and authorize the use of 
additional or new noncommercial and/or noncompetitive outlets for 
excess cranberries through informal rulemaking.
    Mr. Gregory Gitter, representing a Wisconsin cooperative, also 
proposed amending Sec.  929.61. His proposal recommended that foreign 
markets only be authorized as outlets for excess cranberries in 
countries whose total annual consumption is less than the equivalent of 
20,000 barrels of cranberries and/or cranberry products. According to 
his testimony, the purpose of the proposal is to expand noncompetitive 
outlets for excess cranberries by clearly defining in what countries 
excess cranberries can be used. In this regard, Mr. Gitter testified 
that this specific information would allow handlers to better manage 
their marketing strategies of excess cranberries.
    In support of the Committee's proposal, the Committee manager 
testified that the current provisions did not allow the Committee the 
ability to recognize and authorize the use of additional or new 
noncommercial or noncompetitive outlets during the last two volume 
regulations. During the 2001 regulation, some handlers suggested 
outlets to dispose of their excess cranberries, which could have been 
deemed noncommercial or noncompetitive, but were not allowed based on 
the current provisions.
    The provisions regarding noncommercial outlets are currently 
restricted to only charitable institutions and research and development 
projects approved by USDA for the development of foreign and domestic 
markets, including, but not limited to, dehydration, radiation, freeze-
drying, or freezing of cranberries. The provisions regarding 
noncompetitive outlets are restricted to any nonhuman food use and 
foreign markets, except Canada.
    The Committee's proposal would expand the noncommercial outlet 
provisions by specifying charitable institutions and research and 
development projects, but not limiting the authority to these outlets. 
For noncompetitive outlets, the Committee's proposal would expand the 
provisions by specifying nonhuman food uses and ``other outlets 
established by the Committee with USDA approval.'' The Committee 
manager testified that there could be new and unforeseen noncommercial 
and noncompetitive outlets that are not available or even exist today. 
Testimony indicated that these changes would allow the Committee 
flexibility in making recommendations for these outlets.
    There was no opposition testimony regarding the Committee's 
proposal to expand the outlets for disposition of excess cranberries. 
Testimony did relate to the procedures the Committee uses in approving 
these outlets. For the 2001 volume regulation, the Committee developed 
guidelines for deciding whether specific research and promotion 
projects or foreign market development proposals were noncompetitive or 
noncommercial and therefore, authorized for use for excess cranberries. 
A review panel was established consisting of Committee staff and USDA 
personnel. It was determined that Committee members or any other 
industry member should not be a part of the review panel for 
confidentiality reasons.
    Testimony reflected that the method used in 2001 to review these 
proposals to determine whether they should be approved as outlets for 
excess cranberries could be improved. It was testified at the hearing 
that the intent of the Committee's proposal is to provide latitude to 
the Committee in developing guidelines and in determining the best 
method of review. This would be accomplished by informal regulation. If 
this proposal is adopted, and a producer allotment volume regulation is 
recommended, the Committee would include in its recommendation for 
volume regulation, guidelines for reviewing proposals for disposal of 
excess cranberries.
    Different safeguard procedures may be appropriate for different 
outlets for excess cranberries as some outlets are well defined and 
documentation is required to verify the excess cranberries were 
disposed of in such outlets. For example, excess cranberries being 
given to a charitable organization could be easily documented by the 
organization receiving the excess cranberries. In addition, cranberries 
being disposed of as animal feed could be easily documented.
    Mr. Gitter stated that his proposal to expand the noncompetitive 
outlets for excess cranberries would clearly define what countries are 
open for foreign development by specifying a minimum number of barrels 
of annual consumption in that country required before an outlet is 
considered competitive. Mr. Gitter's proposal would base the 
determination of what constitutes a competitive market on the annual 
consumption of cranberries in each foreign country. If a country's 
consumption exceeded 20,000 barrels, it would be considered a 
competitive market and not authorized as an outlet for excess 
cranberries. Mr. Gitter testified that 20,000 barrels may be too high a 
number, but that some specific minimum number should be required.
    The Committee manager testified that data relative to annual 
consumption in foreign countries is not available. The Committee 
collects information from handlers on the countries where cranberries 
are shipped and the quantities sold. In some cases, he testified, the 
cranberries are transshipped to other countries.
    The Committee manager testified that the Committee's proposal 
provides flexibility not available under Mr. Gitter's proposal by 
authorizing the Committee to develop guidelines for research and 
development projects for excess cranberries at the time the volume 
regulation is recommended. The desired results of Mr. Gitter's proposal 
can be achieved by adopting the Committee's proposal. Mr. Gitter was 
concerned that allowing the Committee to make this determination does 
not provide the detail needed prior to the beginning of the season.
    Based on record evidence, Sec.  929.61 should be amended to expand 
the outlets authorized for excess cranberries. There was no testimony 
provided at the hearing that opening new markets with excess 
cranberries should not be done. However, defining noncompetitive 
markets as those markets having an annual consumption of less than 
20,000 barrels of cranberries or cranberry products would not be an 
effective way of determining whether a market is competitive. 
Information on annual consumption in foreign countries is not currently 
available.
    Additionally, the record revealed that there are many more factors 
that need to be considered when determining if a market is competitive. 
The development of new and foreign markets requires significant 
investment of time and money prior to achieving significant sales. Some 
foreign markets may never achieve the equivalent of 20,000 barrels of 
sales. New foreign markets are unfamiliar with cranberries and 
cranberry products in general, and it takes several years to work with 
processors and consumers to establish a

[[Page 23345]]

foundation on which to build a profitable and sustainable market. A 
witness testified that allowing sporadic disposal of excess cranberries 
in years of volume regulation in markets where others have been 
investing for years would create havoc in those markets, probably 
permanently damaging those emerging markets.
    The record revealed that during volume regulations in recent years, 
some companies emerged to take possession of growers' excess 
cranberries with no payment, but with the promise to share profits, if 
any, from foreign sales. A witness testified that low-cost cranberries 
offered in overseas markets compete with allotment cranberries for the 
same markets. Even if the low-cost cranberries are sold in a market 
devoid of cranberries, transshipment to established markets is 
possible.
    It is not the intent of this proposal to restrict sales to foreign 
markets. Foreign markets are one area where growth is occurring and 
demand is increasing. Exports of cranberries have increased from 
184,000 barrels in 1988 to 824,000 barrels in 2000. This provision only 
applies to excess cranberries resulting from a producer allotment 
volume regulation. Any handler is allowed to compete in any market at 
any time with allotment cranberries or free market cranberries.
    Because competitive markets can change from season to season and 
new and different research ideas can be devised, the Committee should 
develop guidelines at the time a producer allotment volume regulation 
is recommended. Considerable expense can be involved in developing 
markets and planning research and development projects. Therefore, the 
Committee should define as specifically as possible noncompetitive and 
noncommercial outlets eligible for use with excess cranberries.
    For the above reasons, Sec.  929.61 should be amended to broaden 
the scope of activities authorized as outlets for excess cranberries.

Material Issue Number 13--General Withholding Provisions

    Section 929.54 of the order, which sets forth the general 
parameters pertaining to withholding regulations, should be amended to 
more closely reflect current production and handling practices.
    When the cranberry order was promulgated in 1962, volume regulation 
authority was limited to ``withholding'' regulations. Under this form 
of regulation, free and restricted percentages are established, based 
on market needs and anticipated supplies. The free percentage is 
applied to handlers' acquisitions of cranberries in a given season. A 
handler may market free percentage cranberries in any chosen manner, 
while restricted berries must be withheld from handling.
    The withholding provisions of the order were used briefly over 
three decades ago. The industry has since developed a second method of 
regulation--producer allotments--designed to overcome the difficulties 
encountered with the application of withholding regulations. Although 
the cranberry industry has not used the authority for withholding 
regulations in quite some time, the record evidence supports 
maintaining this tool for possible future use. However, substantive 
changes in industry practices have rendered current withholding 
provisions in need of revision.
    The record shows that at the time the withholding provisions were 
designed, the cranberry industry was much smaller, producing and 
handling much lower volumes of fruit than it does now. In 1960, 
production was about 1.3 million barrels; by 1999, a record 6.3 million 
barrels were grown. A much higher percentage of the crop was marketed 
fresh--about 40 percent in the early 1960's versus less than 10 percent 
in recent years.
    Changes in harvesting and handling procedures have been made so the 
industry is better able to process higher volumes of cranberries. Forty 
years ago, virtually all cranberries were harvested dry, and water 
harvesting was in an experimental stage of development. Water 
harvesting is currently widespread in certain growing regions; 
cranberries harvested under this method must be handled immediately as 
they are subject to rapid deterioration.
    In the early 1960's, handlers acquired some cranberries that had 
been ``screened'' to remove extraneous material that was picked up with 
the berries as they were being harvested, and ``unscreened'' berries 
from which the extraneous material (including culls) had not been 
removed. The handler cleaned some of the unscreened berries immediately 
upon receipt, while others were placed in storage and screened just 
prior to processing.
    Paragraph (a) of Sec.  929.54 provides, in part, that when a 
withholding regulation is implemented, the restricted percentage will 
be applied to the volume of ``screened'' berries acquired by handlers. 
Since the term ``screening'' is obsolete, the Committee proposed 
eliminating all references to that term. To accomplish this, the 
Committee recommended deleting a substantial portion of Sec.  
929.54(a). The Committee's proposed revision to this paragraph (as set 
forth in the Notice of Hearing) failed to indicate, however, how the 
restricted percentage would be applied.
    Testimony indicates that it remains the intent of the industry to 
apply the withholding regulations to the quantity of marketable 
cranberries acquired by handlers; culls and other extraneous material 
that are normally discarded during the handling process should not be 
used to meet a handler's withholding obligation. However, the record 
also indicates that cleaning and processing practices differ somewhat 
among the various handling facilities, and there may not be a single, 
most efficient means of determining what portion of handlers' receipts 
constitutes marketable cranberries. It may not be economical, for 
example, to apply the restricted percentage to cranberries only after a 
truckload of berries has been dumped and run through the entire 
processing line. USDA is therefore recommending a modification to Sec.  
929.54(a) to provide that any restricted percentage be applied to the 
volume of marketable cranberries acquired by each handler. The manner 
in which the marketable volume would be calculated would need to be 
developed and set forth through the informal rulemaking process. This 
would entail a Committee recommendation and approval by USDA.
    Section 929.54 also currently provides that withheld cranberries 
must meet such quality standards as recommended by the Committee and 
established by USDA. That section further provides that the Federal or 
Federal-State Inspection Service will inspect such cranberries and 
certify that they meet the prescribed quality standards. The intent of 
these provisions is, again, to ensure that the withholding regulations 
reduce the volume of cranberries in the marketplace by not allowing 
culls to be used to meeting withholding obligations. The inspection and 
certification process is also meant to assist the Committee in 
monitoring the proper disposition of restricted cranberries, thereby 
ensuring handler compliance with any established withholding 
requirements.
    The need for inspection and certification of withheld cranberries, 
and the agency that would be responsible for those activities, were 
subject to much debate at the hearing. Several witnesses stated that 
the inspection and certification of withheld cranberries would be cost 
prohibitive, particularly since most withheld berries would have to 
subsequently be dumped,

[[Page 23346]]

therefore generating no revenue for growers or handlers. Witnesses also 
expressed concern that inspection requirements could inordinately slow 
down handling operations. There was also discussion of potential 
differential impacts of such requirements because some handling 
facilities operate in ways that lend themselves to more efficient 
methods of pulling representative samples (for inspection purposes) 
than others.
    The preponderance of evidence is that the authority for imposing 
inspection and certification requirements be permissive rather than 
mandatory. While such requirements may be needed to effectively 
implement a withholding program, alternative safeguards could be 
developed by the industry to achieve its objectives at lower costs. 
Section 929.54 is proposed to be amended accordingly.
    Another area of some discussion was designation of the agency that 
would be conducting any required inspection and certification 
activities. The Committee had recommended (as proposed in the Notice of 
Hearing) that its staff be used to perform such functions. It supported 
this recommendation at the hearing by stating this may be a more cost 
effective manner of monitoring implementation of a withholding program.
    Witnesses at the hearing objected, however, stating the Committee 
does not currently have sufficient staff with the requisite expertise 
to provide such services in a timely manner. These witnesses also 
speculated that it might be more expensive for the industry to hire and 
train its own personnel to perform this function than to utilize 
currently available services of the Federal or Federal-State Inspection 
Service. Finally, witnesses expressed the belief an independent, third 
party inspection agency would have more credibility than staff hired by 
the industry.
    In its brief, the Committee recommended that the Federal or 
Federal-State Inspection Service be retained as the agency responsible 
for any required inspection and certification. USDA is accepting this 
recommendation.
    In its proposal to streamline the provisions of Sec.  929.54, the 
Committee inadvertently eliminated two items that it did not support at 
the hearing.
    The first of these currently appears in the introductory text of 
paragraph (a) of Sec.  929.54. The inadvertently deleted text states 
that the withholding requirements do not apply to any lot of 
cranberries acquired by a handler for which the withholding obligation 
had already been met by another handler. The purpose of this provision 
is to allow transfers of free percentage cranberries among handlers 
without subjecting those berries to the restricted percentage more than 
once. The record shows that handler transfers occur quite frequently in 
the cranberry industry and, thus, this provision is still needed.
    The second item appears in paragraph (b) of Sec.  929.54, and 
provides that the Committee, with approval of USDA, shall prescribe the 
manner in which handlers must comply with their withholding 
obligations, and the date or dates by which handlers must comply with 
those obligations. The record evidence that this provision is also 
still needed and should be retained.

Material Issue Number 14--Buy-Back Provisions Under the Handler 
Withholding Program

    Section 929.56 of the order, which sets forth provisions for 
handlers to buy back withheld cranberries under a withholding 
regulation, should be amended to: (1) Allow direct handler to handler 
buy-back arrangements; (2) add criteria the Committee needs to consider 
in establishing buy-back prices; (3) revise the handler payment 
schedule; and (4) provide that if the Committee cannot purchase free 
cranberries to replace restricted fruit requested to be released under 
the buy back provisions, the money deposited by the requesting handler 
will be refunded to that handler.
    As discussed under the previous Material Issue Number 13, one 
method of volume regulation authorized under the order is referred to 
as the handler withholding program. Under such regulations, free and 
restricted percentages are established. These percentages are applied 
to handlers' acquisitions, with the handlers being required to withhold 
from handling their restricted cranberries.
    Section 929.56 of the order, entitled ``Special provisions relating 
to withheld (restricted) cranberries,'' sets forth procedures under 
which handlers may have their restricted cranberries released to them. 
These provisions are commonly referred to in the industry as the buy-
back provisions.
    Under the current buy-back provisions, a handler can request the 
Committee to release all or a portion of his or her restricted 
cranberries for use as free cranberries. The handler request has to be 
accompanied by a deposit equal to the fair market value of those 
cranberries. The Committee then attempts to purchase cranberries in an 
amount equal to the amount of free cranberries from other handlers. 
Cranberries so purchased by the Committee are transferred to the 
restricted percentage and disposed of by the Committee in outlets that 
are noncompetitive to outlets for free cranberries. The provision that 
each handler deposit a fair market price with the Committee for each 
barrel of cranberries released and that the Committee use such funds to 
purchase an equal amount or as nearly an equal amount as possible of 
free cranberries is designed to ensure that the percentage of berries 
withheld from handling remains at the quantity established by the 
withholding regulation for the crop year.
    The Committee has the authority to determine the fair market price 
for the release of restricted cranberries. The money deposited with the 
Committee by handlers requesting release of their restricted 
cranberries is the only money the Committee has available for acquiring 
free cranberries. Thus, the amount deposited must be equal to the then 
current market price or the Committee will have insufficient funds to 
purchase a like quantity of free cranberries.
    The Committee is required to release the restricted cranberries 
within 72 hours of receipt of a proper request (including the deposit 
of a fair market value). The record shows that this release was made 
automatic so that handlers would be able to plan their operations, and 
very little delay would be encountered.
    If the Committee is unable to purchase free berries to replace 
restricted cranberries that are released under these provisions, the 
funds deposited with the Committee are required to be returned to all 
handlers in proportion to the volume withheld by each handler.
    The withholding provisions of the order have not been used in many 
years. In recent years, when volume regulations were deemed necessary, 
the Committee chose to recommend producer allotment regulations rather 
than withholding regulations. Nevertheless, the evidence supports 
retaining the withholding provisions of the order in the event they are 
needed in the future. However, the cranberry industry has identified 
several portions of the order pertaining to the withholding program, 
including those relating to buy-back, that need to be updated to meet 
current industry needs.
    The Committee recommended amending Sec.  929.56 to authorize direct 
buy-back arrangements between handlers. Under this modification, a 
handler would not have to go through the Committee to have his or her 
restricted berries released. Instead, that

[[Page 23347]]

handler could arrange for the purchase of another handler's free 
cranberries directly. All terms of the deal, including the price paid, 
would be between the two parties involved and would not be limited by 
the Committee. The Committee recommended this change to add flexibility 
to the order. It could offer a more efficient method of buying back 
cranberries, since no Committee administrative costs would be incurred. 
Handlers would have the option of using this method, or they could buy 
back their berries through the Committee, as is currently provided.
    There was no objection to this modification at the hearing, and it 
is being recommended for adoption.
    There are four criteria currently listed in Sec.  929.56 that the 
Committee needs to consider in establishing a fair market price under 
the buy-back program. These include prices at which growers are selling 
their cranberries to handlers; prices at which handlers are selling 
fresh berries to dealers; prices at which cranberries are being sold to 
processors; and prices at which the Committee has purchased free 
berries to replace released restricted berries.
    The Committee recommended adding a fifth criterion to the list--the 
prices at which handlers are selling cranberry concentrate. A Wisconsin 
grower/handler proposed adding growers' costs of production as an 
additional criterion. The level of both of these items appear generally 
known in the industry and appear to be relevant criteria to take into 
consideration in recommending a fair market value. Thus, it is being 
proposed that they be added to Sec.  929.56.
    Under the current buy-back provisions, handlers are required to 
deposit with the Committee the full market value of the berries they 
are asking to be released. The Committee proposed a different payment 
schedule so that handlers would not have to make a large payment of 
cash prior to the sale of their restricted cranberries. The Committee 
proposed that 20 percent of the total amount should be paid at the time 
of the request, with an additional 10 percent due each month 
thereafter. There were no objections to this revision expressed at the 
hearing.
    However, in its brief, the Committee modified its proposal to 
provide that 20 percent of the total amount would be due at the time of 
the request, with the balance to be due within 60 days. The Committee's 
brief provided no compelling argument for this change, and there was no 
opportunity for other parties to express their opinions on this payment 
schedule. Thus, this decision recommends including in the order the 
payment plan originally proposed by the Committee. However, this 
payment plan could be revised through general rulemaking authority 
contained in Sec.  929.56. Any such revisions would require a Committee 
recommendation and USDA approval.
    As previously discussed, releases by the Committee of withheld 
berries are currently required to be virtually automatic. In its 
proposed amendment of the buy-back provisions, the Committee 
recommended that no release be granted unless the Committee was able to 
purchase free berries to replace those being bought back. Under this 
scenario, if the Committee was unable to purchase the free berries, it 
would refund the money received from the requesting handler, and the 
request would be denied.
    The Committee manager testified that this change is necessary to 
maintain an appropriate volume of cranberries in the marketplace. If 
withheld berries are released for handling, and no free berries are 
purchased to replace them, more cranberries would be available than the 
Committee deemed appropriate. This would obviate the effectiveness of 
the volume regulation and result in lower grower returns.
    Several handlers objected to this portion of the Committee's 
proposal. They indicated that it would unduly limit handlers' abilities 
to fill their customers' needs.
    It would also unduly delay any decisions on handlers' requests for 
releases of their restricted berries.
    Those opposed to this change also testified that there should be 
free cranberries available for purchase. This is because handlers with 
inventories (which are free from regulation) would have an economic 
incentive to use those inventories to fill current orders, and sell 
current year's cranberries to the Committee for its disposal. It was 
also pointed out that if the Committee were not able to purchase 
unrestricted fruit, that would be an indication that either the market 
had improved or that the original free percentage determination was 
incorrect. Handlers with additional sales opportunities should not be 
placed at a disadvantage because of these situations.
    USDA concurs that the Committee's recommendation could unduly 
restrict handlers' opportunities for buying back their restricted 
fruit. As such, this change is not being recommended for adoption.
    One additional proposal to amend Sec.  929.56 was received. Stephen 
L. Lacey, on behalf of two cranberry handlers, proposed changing the 
refund provisions in the buy-back program. If the Committee is unable 
to purchase free berries under the buy-back system, it is currently 
required to refund the money to all handlers proportional to the amount 
each handler withheld under regulation. Mr. Lacey recommended that the 
money be returned to the handler who deposited it to be distributed to 
the growers whose fruit was sold. He stated it would be unfair to 
penalize growers whose fruit was sold by handlers not being able to pay 
them for that fruit because that money went to other handlers' growers.
    USDA believes that Mr. Lacey's arguments have merit. Additionally, 
this change could provide an incentive for handlers to make available 
free cranberries for purchase to replace restricted cranberries that 
are released under the buy-back provisions. For these reasons, USDA is 
recommending adoption of this proposal.
    Section 929.56 is being recommended for amendment as described 
above.

Material Issue Number 15--Handler Marketing Pool and Buy-Back Under the 
Producer Allotment Program

    The order should not be amended to include the establishment of a 
handler marketing pool or buy-back under the producer allotment 
provisions of the order.
    Stephen L. Lacey, on behalf of Clement Pappas and Company, Inc., 
and Cliffstar Corporation, proposed adding a new Sec.  929.47 to the 
order establishing a handler marketing pool as part of the marketable 
quantity in any crop year in which a producer allotment regulation is 
effectuated. As a modification of this proposal, a Massachusetts 
handler recommended adding buy-back provisions to the producer 
allotment program as well.
    Under Mr. Lacey's proposal, in any crop year in which a producer 
allotment regulation were recommended, a Handler Marketing Pool would 
be established. Handlers determined to be in surplus would have to 
contribute fruit to the pool, and handlers determined to be deficit 
would have access to those cranberries in the pool. The Committee would 
determine which handlers are in surplus and which handlers are in 
deficit based on a formula that would appear in the order. The order 
would also contain provisions relating to pool pricing and payment 
terms.
    In support of the proposal, Mr. Lacey testified that during the 
2000 and 2001 volume regulations, concerns were raised about the 
effects volume controls could have on handlers that do not maintain 
inventories of cranberries. He testified that the surplus that 
necessitated volume regulations was

[[Page 23348]]

held by two entities, and the regulations put the remaining, non-
surplus handlers at a significant competitive disadvantage because they 
experienced difficulty in securing product from the surplus handlers to 
fill their customers' needs.
    With one exception, Mr. Lacey's proposal is identical to the 
language that was drafted by the amendment subcommittee, which 
attempted to develop a recommendation for a handler marketing pool. The 
difference is the section on pricing. Mr. Lacey's proposal would allow 
non-surplus handlers to purchase pool cranberries at a price equal to 
the price that handler is paying its growers for the current crop.
    In volume regulation discussions over the last 2 years, concerns 
were raised that the current producer allotment provisions place 
handlers who do not have inventories at a disadvantage. Because some 
handlers do not maintain inventories, the restricted percentage does 
not provide enough fruit for them to meet their market demands and 
maintain market share. Although handler-to-handler purchases are a 
normal business practice (with or without a volume regulation), a 
producer allotment restriction increases the need for handlers to 
purchase from handlers with inventories to maintain market share. Some 
handlers believe this places them in a vulnerable position, needing 
more fruit than normal from their competitors.
    The purpose of the handler marketing pool would be to provide 
cranberries to those handlers who do not have a surplus in years of 
volume regulation. Some witnesses suggested the existence of such a 
mechanism would help to build industry consensus for volume regulation 
and for the appropriate marketable quantity which would help facilitate 
the use of volume regulation when needed. As proposed, the volume of 
cranberries in the pool would be included within the marketable 
quantity, not be in addition to the marketable quantity. If the pool 
cranberries were in addition to the marketable quantity, the 
effectiveness of the volume regulation would be decreased.
    Regarding payment terms, the proposal would require handlers 
acquiring cranberries from the pool to deposit an initial payment of 
$5.00 per barrel with the Committee within 30 days of receipt of 
product. Subsequent payments would be made every 60 days in the amount 
specified by the Committee based on handler payments to growers. Full 
payment would be made by August 31 of the following year. The Committee 
would make immediate payments to the surplus handlers.
    The proposed amendment would allow the Committee to collect 
information necessary to verify prices. Mr. Lacey testified that the 
pricing mechanism would ensure that non-surplus handlers would not be 
competitively harmed by a volume regulation, and would help maintain 
the prices paid to growers that deliver to these handlers. In addition, 
this pricing mechanism would establish a fair price to handlers 
purchasing cranberries and the growers that produced the cranberries.
    Mr. Lacey discussed activities of the amendment subcommittee, which 
began discussions on ways to improve the volume regulations in February 
2001. Discussed were the concepts of adding buy-back provisions to the 
producer allotment program (similar to those currently existing under 
the withholding provisions) or establishing a handler marketing pool. 
In additional subcommittee meetings in 2001, consensus was reached for 
the subcommittee to focus its efforts on establishing a fruit-based 
handler marketing pool within the marketable quantity. At an August 
2001 teleconference meeting, concerns were raised about the pricing 
mechanism and whether it would afford handlers access to cranberries at 
below market rates.
    As a result of these concerns, the subcommittee did not forward the 
amendment proposal for consideration by the full Committee. 
Nevertheless, the full Committee did consider a motion to include the 
handler marketing pool with the Committee's proposed amendments at an 
August 27, 2001, meeting, which motion was rejected.
    According to Mr. Lacey, there is overwhelming support from 
handlers, growers and the public member for the concept of a handler 
marketing pool. In addition, he testified that the information 
necessary to administer the program is already collected by the 
Committee in connection with its marketing policy report.
    Mr. Lacey testified that the proposal would not raise costs to 
producers, handlers or USDA. It would require the Committee to 
undertake additional efforts to administer the marketing pool, and any 
costs associated with this effort would be paid from assessment funds. 
Mr. Lacey further testified that the proposal would, over time, improve 
producer returns by ensuring stability in the industry and help prevent 
further consolidation at the handler level.
    A Massachusetts independent handler testified in support of the 
handler marketing pool. He also proposed adding a buy-back provision 
under the producer allotment program similar to the provisions under 
the handler withholding program. He testified that he would support 
adopting one or the other or both of these provisions, as long as the 
cranberries he has cleaned, frozen and put in the freezer are made 
available to him.
    In support of the handler marketing pool, this handler testified 
that this proposal is essential to make any allotment volume regulation 
a fair and reasonable regulation. Some handlers are smaller than others 
and some have inventories while others do not. He testified that these 
differences among handlers must be recognized and without this 
provision, the allotment option, as opposed to the withholding option, 
would remain as it presently exists, the lesser of two evils. He 
further testified that a handler marketing pool with a fair pricing 
formula would dramatically alter the existing environment where 
consensus in unachievable. According to his testimony, this proposal 
would alleviate the many difficulties experienced in garnering support 
for a volume regulation.
    This handler testified that if the handler marketing pool concept 
is rejected, the entire amendment process would have failed to address 
the real issues that keep the industry polarized. He recommended a 
modification to the proposal's pricing provisions. He suggesting adding 
to the paragraph on pool pricing that the handlers purchasing from the 
pool would pay the price that they are paying their growers, or the 
average price that all handlers purchasing from the pool are paying 
their growers, whichever is higher. He believed adding this language 
would avoid the possibility of handlers manipulating their pool price 
by not paying their growers a reasonable price.
    Regarding this handler's proposal to add a buy-back provision under 
the producer allotment program, he testified that this would further 
improve the allotment option and do so in a way that would generate 
industry-wide support. The proposed provision would allow handlers to 
buy back excess cranberries delivered by their growers. The proposed 
buy-back mechanics of the producer allotment program would be identical 
to the provisions under the withholding (as previously discussed under 
Material Issue Number 14). The same pricing formula would apply to 
purchases of cranberries as is set forth in the handler marketing pool 
proposal.
    This handler stated that there would not be an incentive for 
growers to deliver fruit over their allotment

[[Page 23349]]

because they would not be paid for any deliveries over their allotment. 
Growers' only incentive to exceed their allotment would be to help 
their handler maintain its market share. He further stated that it is 
in the growers' best interests to allow non-surplus handlers to buy 
cranberries back even though the growers are not compensated. It was 
unclear under this proposal who would be responsible for cleaning, 
processing and storage charges for excess cranberry deliveries. This 
handler believed that because growers would not be compensated for any 
excess cranberry deliveries, there would only be a minimal amount of 
excess cranberries to buy back.
    As an example of how the producer allotment program negatively 
impacted his business, the handler testified that during the last 
volume regulation, his company lost a large customer to a Canadian 
handler because his company was no longer able to be a reliable 
supplier. Although the relationship continued, sales to the customer 
went from 200,000 gallons of concentrate to 50,000 gallons. He does not 
believe the volume regulation should drive customers out of the 
country. He also testified that the smaller handlers, although not 
small businesses under the SBA definition, are at a distinct 
disadvantage when competing with the larger volume handlers.
    Regarding this handler's proposal to add buy-back provisions under 
the producer allotment program, he testified that to be consistent, 
similar provisions should be in place under both the withholding and 
the producer allotment programs.
    A Massachusetts grower testified that although he was not opposed 
to a buy-back provision or a handler marketing pool, he believed that 
there should also be a provision guaranteeing the grower reasonable 
returns. He testified that during the last two volume regulations, the 
focus has been on handlers fighting for market share, and little 
attention was given to growers. He further testified that if there is 
going to be a pool for handlers to be able to have access to 
cranberries to compete with one another, the growers should be 
guaranteed the cost of production.
    A Wisconsin handler in opposition had two main objections to the 
handler marketing pool as proposed. He testified that the definition of 
a handler's ``needs'' should be based on purchases from growers of 
domestic cranberries rather than basing the needs on a percentage of 
prior years' sales. He believes this definition favors handlers that do 
not purchase all their cranberries from growers.
    As an example, he discussed a handler that would purchase 50,000 
barrels of cranberries from growers and 200,000 barrels from other 
handlers. This handler's needs would be defined as 250,000 barrels. If 
a volume regulation were implemented, only the 50,000 barrels would be 
subject to the allotment, and that handler would be considered in 
deficit and authorized to purchase a minimum of 200,000 barrels from 
the marketing pool.
    This would encourage handlers to not purchase directly from growers 
because their needs would be better met with purchases from the 
marketing pool. This handler testified that the proposal is clearly an 
attempt to limit a handler's risk of entering contracts with growers, 
and to reward the handler for not entering contracts with growers. This 
proposal, as written, would have the potential to seriously reduce the 
competitive marketplace for grower fruit, thus depressing prices paid 
to growers. It would also discourage normal handler-to-handler 
purchases, because the deficit handler would wait and buy cranberries 
from the pool at a lower price.
    The handler testified that the proposal is especially troublesome 
in light of the fact that the industry clearly acknowledges that the 
international supply of fruit is expected to exceed annual sales for 
the next few years. The proposal would devastate individual growers 
because it would insulate any handler from having to directly compete 
for grower fruit by offering better prices or terms because they would 
be protected by the marketing pool. This handler would support the 
proposal if the calculation of need used a maximum need number as the 
number of barrels directly purchased from growers in the production 
area. As in the example provided, the handler who purchases 50,000 
barrels from growers and 200,000 from handlers would have its need 
limited to 50,000 barrels.
    In addition, he believed that the pricing mechanism should be 
linked to the market price for cranberries during the year of volume 
regulation rather than what handlers are paying their growers. He did 
not believe it was equitable to allow a handler to purchase cranberries 
from the marketing pool at a price that could be lower than what the 
surplus handler paid its growers. As an example, he testified that his 
company can sell cranberries to Tropicana Company for $20 per barrel, 
but could have to sell to a competitor handler for $17, if that is what 
that handler paid its growers.
    This handler further testified that the handler marketing pool 
concept is potentially highly detrimental to growers and highly 
beneficial to handlers that choose to contract directly from growers 
for less fruit than their needs. He believes that if this proposal were 
adopted, handlers would be encouraged to make fewer contracts with 
growers and buy their cranberries directly from the pool. Also, buyers 
(or second handlers) would be encouraged to purchase a minimal amount 
of fruit from growers, so they can become a handler and have access to 
the pool.
    Based on record evidence, the order should not be amended to 
include a handler marketing pool. Conceptually, the handler marketing 
pool showed promise in addressing the concerns of some handlers. 
However, an effective means of establishing a pool under the producer 
allotment program has not been presented.
    Opponents of this proposal discussed relevant flaws in how this 
pool would be implemented in an effective manner. The pricing mechanism 
of the pool is a major concern. In addition, the methodology used to 
determine a handler's status, whether surplus or deficit, is 
problematic.
    As previously indicated, one handler suggested that a handler buy-
back provision be added to the producer allotment program in order to 
be consistent with the handler withholding program. However, including 
a buy-back provision under the producer allotment program would be 
counterproductive.
    The withholding method of volume regulation is applied at the 
handler level. Growers deliver to their handler everything they grow. 
Free and restricted percentages are applied to each handler's 
acquisitions of cranberries. Because handlers apply the percentage 
after delivery, the restricted cranberries are in the possession of the 
handlers and available to be sold.
    The intent under the producer allotment program is to discourage 
production at the grower level so that less fruit is delivered to 
handlers. Establishing a buy-back under a producer allotment program is 
problematic for that reason. If growers believed that some of their 
excess fruit would eventually be bought back, increased production 
could be encouraged, defeating the purpose of the program. Even if the 
growers were not paid for any deliveries in excess of their allotment, 
handlers could encourage them to deliver excess cranberries.
    If buy-back provisions were added to the producer allotment 
program, handlers and growers whose deliveries exceed their allotment 
are rewarded, and the handlers who comply with the

[[Page 23350]]

allotment are at a detriment. Although the Massachusetts handler 
testified that only a minimal amount of cranberries would be excess, it 
would set the stage for growers to be encouraged to deliver in excess 
of their allotment, defeating the purpose of the program. Encouraging 
growers to deliver excess cranberries with no compensation to assist 
their handler in maintaining market share is contrary to the objectives 
of a producer allotment volume regulation.
    Therefore, the proposal to add buy back provisions under the 
producer allotment program is not being accepted.
    During the discussions at the subcommittee level, there was never 
industry consensus on the pricing mechanism for cranberry purchases 
from the pool. Some handlers believed the price should be set at the 
same price they pay their growers. Some growers believed this price 
would give handlers an incentive to pay them less as testified by one 
grower. Growers believe the price should be set to reflect the cost of 
production. Some believed the price should be set at fair market value 
at the time of purchase, including recovery costs for cleaning, 
shipping, storage, etc. Without resolution of this issue and 
cohesiveness from all segments of the industry, the handler marketing 
pool concept would not work.
    The volume regulation authority of the order is intended to address 
industry oversupply problems and enhance grower returns on an industry-
wide basis.
    Regarding foreign cranberry production, volume regulation can only 
be imposed on cranberries grown in the production area. The impact of 
foreign competition is also an item that may be taken into 
consideration prior to recommending volume regulation.
    For the above reasons, record evidence does not support adding a 
handler marketing pool or buy-back provisions under the producer 
allotment program.

Material Issue Number 16--Grower Exemption

    The order should not be amended to allow the first 1,000 barrels of 
each grower's production to be exempt from regulations issued under the 
order.
    A Massachusetts grower proposed an amendment to the order to 
authorize an exemption from order provisions for the first 1,000 
barrels of cranberries produced by each grower. This proposal appeared 
in the Notice of Hearing, although it was subsequently withdrawn by the 
grower who submitted it. Nevertheless, two witnesses testified on the 
proposed amendment at the hearing.
    One witness testified in favor of the proposal. He believed it 
would offer relief to small cranberry growers who are facing difficult 
economic circumstances.
    The Committee manager testified in opposition to the proposal. 
Based on his review of the 1999 crop, which was the last crop not 
regulated, if the exemption was in place 510 farm units out of a total 
of 1,124 farm units would have been totally exempted from the volume 
regulation. The witness testified that these farm units represented 
203,778 barrels of cranberries that would have been exempt from the 
producer allotment volume regulation.
    The Committee manager also testified that within the Ocean Spray 
cooperative, 35 percent of its members are growers that produce less 
than 1,000 barrels. In Massachusetts alone, the number is 50 percent, 
and in Wisconsin, 90 percent of the cooperative's growers produce less 
than 1,000 barrels. The witness also testified that handlers that 
handle a large number of small growers' cranberries would receive more 
relief from such an exemption than handlers that handle the fruit of 
larger growers. A particular handler would not be regulated at all if 
all the growers delivered less than 1,000 barrels of their production 
from their individual farm units. The witness also was concerned that 
growers could split their farm units into units that produce 1,000 
barrels or less so that all of their production would be exempt. For 
example, if a grower produces 2,000 barrels, such grower could split 
his or her farm unit and have two farms that produce 1,000 barrels each 
to take advantage of the exemption.
    Record evidence does not support the amendment as proposed. This 
exemption could result in such a magnitude of fruit being unregulated 
that any volume control program would be rendered ineffective. This 
proposal could have the effect of requiring growers that produce more 
than 1,000 barrels--roughly half of the grower population--to hold back 
more of their fruit to meet the increased allotment percentage that 
would be required as a result of the exemption. Additionally, the 
proposal could provide an incentive for growers to reorganize their 
businesses so that all of their production would be exempt.
    For the above reasons, USDA recommends that the proposed amendment 
to exempt the first 1,000 barrels of each grower's production should 
not be adopted.

Material Issue Number 17--Expansion of Production Area

    The production area should not be expanded to include the States of 
Maine, Delaware and the entire State of New York.
    The marketing order and its rules and regulations apply only to 
cranberries grown in the production area, as defined in Sec.  929.4 of 
the order. Currently, the production area is defined to include the 
States of Massachusetts, Rhode Island, Connecticut, New Jersey, 
Wisconsin, Michigan, Minnesota, Oregon, Washington, and Long Island in 
the State of New York.
    The marketing order was promulgated in 1962. The order's primary 
regulatory authority is volume regulation, but it also provides for 
research and promotion activities to promote the consumption of 
cranberries and increase demand. The order also provides the authority 
to collect and disseminate information on industry statistics to 
benefit the entire industry.
    Currently, cranberries are produced in 12 States, but the vast 
majority of farms and production are concentrated in Massachusetts, New 
Jersey, Oregon, Washington, and Wisconsin. Massachusetts was the number 
one producing State until 1990, when Wisconsin took over the lead. 
Since 1995, Wisconsin has been the top producing State. Together, both 
States account for over 80 percent of cranberry production. Average 
farm size for cranberry production is very small. The average across 
all producing States is about 33 acres. Wisconsin's average is twice 
the U.S. average, at 66.5 acres, and New Jersey averages 83 acres. 
Average farm size is below the U.S. average for Massachusetts (25 
acres), Oregon (17 acres) and Washington (14 acres).
    Small cranberry growers dominate in all States: 84 percent of 
growers in Massachusetts harvest 10,000 or fewer barrels of 
cranberries, while another 3.8 percent harvest fewer than 25,000 
barrels. In New Jersey, 62 percent of growers harvest less than 10,000 
barrels, and 10 percent harvest between 10,000 and 25,000 barrels. More 
than half of Wisconsin growers raise less than 10,000 barrels, while 
another 29 percent produce between 10,000 and 25,000 barrels. Similar 
production patterns exist in Washington and Oregon.
    Evidence produced at the hearing indicated that there are 39 
growers in Maine and approximately 265 producing acres. Testimony 
indicated that one producer in Maine produces 75 percent of Maine's 
production on 111 acres. The remaining 38 growers thus have combined 
acreage of 154 acres, or

[[Page 23351]]

an average of 4 acres apiece. This is substantially below the average 
of the major producing States of Wisconsin (66.5 acres) and 
Massachusetts (25 acres). The range of acreage for the remaining Maine 
growers is from 1 to 5 acres bogs, averaging about 110 barrels per 
farm.
    In 2000, 9,000 barrels were harvested in Maine compared with 18,000 
barrels in 2001. This represents a very small proportion of total U.S. 
production of 5.6 million barrels in 2000 (0.2 percent) and of 5.4 
million barrels in 2001 (0.3 percent).
    There are 2 growers in New York and 1 grower in Delaware 
commercially producing cranberries. Combined, these two States have 
less acreage and production than the totals in Maine, and are thus of 
less consequence in the scheme of the total domestic industry.
    According to testimony received at the hearing, most Maine 
cranberries were utilized in the processed markets until 1999. There is 
no juice market for Maine cranberries, and most processed cranberries 
are used in the ingredient market. At the time of the hearing, it was 
estimated that about 20 percent of Maine production was used in the 
fresh market, primarily in Maine and New Hampshire. Maine handlers 
source additional cranberries from Canadian rather than U.S. growers 
due to transportation costs, the value of the dollar, and trade-off 
agreements with blueberry handlers in Canada.
    For many years, the cranberry industry enjoyed increasing demand 
for cranberry products, primarily due to the success of cranberry 
juice-based drinks. This situation encouraged additional production. 
While production capacity increased dramatically, demand leveled off. 
This has resulted in supplies outpacing demand, high levels of 
inventories, and dramatic drops in grower prices. Grower prices rose 
from $8.83 per barrel in 1960 to a peak level of $65.90 per barrel in 
1996. By 1998, grower prices had decreased to $36.60 per barrel, and 
returns for the 2000 crop year were only $19.60 per barrel, well below 
the cost of production, which ranges from $15 to $45 per barrel. This 
situation led to the Committee recommending, and USDA establishing, 
volume regulations for the 2000 and the 2001 crops.
    The record indicates that domestic growers, including those in 
Maine, benefited from the volume controls under the order. Grower 
returns in Maine were estimated at $12 in 2000 and $23 in 2001. A 
grower testified that the increase in grower returns was directly 
related to the volume regulation under the order in 2001.
    Proponents testified that all cranberries produced in the U.S. are 
connected and compete for markets. It was expressed by proponents that 
cranberry growers share a common bond relative to the decline in prices 
and increasing returns to growers will take a concentrated effort by 
the entire industry. It was further testified that production from 
unregulated areas flows freely into the marketplace, which counteracts 
the Committee's ability to establish and maintain equilibrium. 
Proponents also expressed the opinion that all growers benefit from the 
operation of the marketing order and, thus, all should share the burden 
of regulation necessary to restore economic health to the industry.
    Opponents testified that States with insignificant production 
should be exempt from the marketing order. One opponent recommended 
having a State threshold of 500 acres or 50,000 barrels of production 
before inclusion under the marketing order. If there were several non-
regulated States producing 50,000 barrels of cranberries annually, this 
could have a significant negative impact on the regulated States.
    Maine is a relatively new cranberry growing State. Testimony 
indicated that the maximum number of years producers have been growing 
cranberries is 10 years, with many growers just beginning to grow 
cranberries in the last 3 years. The average yield per acre in Maine is 
only 60 barrels. This compares with average yields in the major 
producing States of 186 barrels in Wisconsin and 133 barrels in 
Massachusetts.
    Testimony indicated that Maine has the potential to increase its 
acreage from the current 265 acres to 2,000 acres. At 2,000 acres, 
Maine would represent about 13 percent of the total U.S. acreage of 
15,100 acres. However, with current yields, Maine production would 
still be less than one-half of one percent of the U.S. total.
    Although Maine's current production represents 0.3 percent of total 
domestic production, proponents of expanding the production area 
claimed that the potential for increased production and more efficient 
yields exists. It was further testified that growers and handlers in 
the regulated States would have an incentive to develop acreage in 
Maine if it is not included under the order.
    Opponents testified that given the state of the industry, new 
cranberry acreage in Maine is not likely. In addition, opponents 
testified that strict environmental regulations and associated costs 
would deter development of any additional acreage. Anyone wanting to 
develop new bogs would elect to develop them in Canada before Maine 
because of the environmental restrictions and climate. It was further 
testified that yields would not increase dramatically because of the 
climatic conditions in Maine.
    Certain aspects of growing cranberries in Maine are restrictive and 
the climatic conditions may not be ideal for growing cranberries. It 
would be risky financially to develop and plant new bogs in any great 
degree given the current oversupply situation.
    To help stabilize market supply and demand conditions, volume 
regulation was introduced under the order in 2000, marking the first 
time in over 30 years that such regulation was implemented. Volume 
regulation was again implemented in 2001. No volume regulations were 
recommended in 2002. Proponents of expanding the production area 
testified that production in non-regulated areas diminishes the 
effectiveness of volume regulation. It was testified that growers in 
non-regulated areas benefit from the sacrifice of those in the 
regulated area. In addition, recommending volume regulations is very 
controversial for regulated producers and handlers, partly because of 
non-regulated production. If all U.S. growers were regulated, it was 
testified that there would be more grower support for a volume 
regulation.
    If Maine was included in the production area, the allotment 
percentage established under a producer allotment volume regulation 
would not change because that State produces such small volumes of 
cranberries. Thus, there would be no benefit to regulated growers to 
including production of Maine growers at the current time.
    Additionally, Maine growers testified that any volume regulation 
would have a negative impact on Maine growers because they are mostly 
newer acres not in full production. These growers believed that they 
would be at a disadvantage in the allocation of sales histories. 
Proponents testified that many acres were planted in the production 
area at the same time Maine was planting, and the current order 
provides adjustments in sales histories for growers with newer acreage 
and growers with no sales histories.
    Opponents testified that Maine cranberries are superior, and 
premium prices are received for cranberries grown in Maine. One grower 
cited a study that showed Maine cranberries have a higher sugar content 
than other cranberries. Another grower testified that testing on Maine 
cranberries demonstrates it is a superior product,

[[Page 23352]]

probably due to the younger bogs and less pollution in Maine. A 
Committee witness countered by testifying that if Maine shipped their 
cranberries to the Massachusetts wholesale market, they would not 
receive a premium price. Growers testified that Maine's economy would 
be further damaged if Maine cranberries were included under the 
marketing order. Washington County--accounting for most of Maine's 
production--has the lowest income and highest unemployment in Maine. 
Testimony revealed that Washington County is designated a Federal HUB 
zone or depressed area.
    Proponents testified that Maine benefits from the domestic and 
foreign generic promotion sponsored by the Committee and should 
contribute to those promotions. The additional revenue generated from 
assessing Maine handlers would allow for increased promotion funds. 
However, the additional revenue to be expected from regulating Maine 
cranberries would be minimal (18,000 barrels times the assessment rate 
of 18 cents a barrel would yield assessment income of only $3,240).
    Additionally, opponents testified that Maine does not benefit from 
promotion of juice and/or concentrate since no Maine production is used 
for juice and/or concentrate. Testimony indicated that Maine does not 
want to fund out-of-State companies in the juice market. Further, 
growers testified that generic promotion could actually harm the Maine 
industry because much has been done to establish Maine products as 
unique. A grower testified that a generic promotion would put the Maine 
branding program in jeopardy as funds used to promote ``the Maine 
mystique'' would be diminished. The Maine Growers Association collects 
a voluntary assessment of $.20 per barrel. These funds are used for 
promoting Maine products, including cranberries.
    Proponents also testified that the Committee would have access to 
more information on cranberry imports, acquisitions, and dispositions 
if the production area were expanded. This would enable the Committee 
to more accurately establish its marketing policy.
    Currently, the Committee has no access to data on foreign cranberry 
imports into Maine and New York, and it has had no success in 
requesting this information voluntarily. In October 1999, authority was 
granted to USDA to collect information from processors and handlers 
outside the production area. It also allows collection of information 
on cranberry imports. However, to implement this authority, the order 
need not be amended for this reason. Additionally, opponents testified 
that Maine growers would continue to provide production information to 
the National Agricultural Statistics Services.
    The Act requires that a marketing order be limited in its 
application to the smallest regional production area practicable. USDA 
finds that expanding the production area under the cranberry marketing 
order would be contrary to the Act at this time. Production in the 
areas proposed to be added to the current production area is so minimal 
that their inclusion under the order would have no impact on the level 
of volume regulation that may need to be imposed to reduce oversupply 
situations. Additionally, little additional assessment revenue would be 
generated for generic promotion purposes, and information collection 
needs could be accomplished through other means.
    For the above reasons, USDA concludes that the definition of 
production area should not be revised to include the States of Maine, 
Delaware and New York.

Material Issue Number 18--Adding Authority for Paid Advertising

    Section 929.45 of the order, Research and development, should be 
amended to add authority for the Committee to fund paid advertising.
    Currently, Sec.  929.45 authorizes the Committee, with the approval 
of USDA, to participate in production research, marketing research, and 
market development projects designed to assist, improve, or promote the 
marketing, distribution, consumption, or efficient production of 
cranberries. There is no specific authority for the Committee to fund 
paid advertising.
    The Act lists specific commodities for which paid advertising may 
be conducted under marketing order programs. Until recently, the Act 
did not include cranberries in that list. The record shows that 
authority to allow paid advertising for cranberries was added to the 
Act by Public Law 106-78, Agricultural Appropriation Bill, signed on 
October 22, 1999.
    As previously discussed in this decision, the domestic cranberry 
industry has recently been experiencing an oversupply situation. 
Increases in cranberry production have exceeded growth in demand for 
cranberries and cranberry products. One marketing order tool the 
industry has used to help cope with the current situation is volume 
control through producer allotment regulations.
    The Committee has also engaged in promotion activities designed to 
increase demand for cranberries. For example, in recent years the 
Committee has participated in USDA's Foreign Agricultural Service's 
Market Access Program (MAP). Under this program, industry funds are 
augmented by USDA funds to promote the use of domestic products in 
overseas markets. The record shows that the Committee's export 
promotion program has resulted in increased foreign sales.
    Additionally, at the time of the hearing, the Committee was in the 
process of developing a domestic promotion program. The Committee 
believes that expanding demand will benefit growers and handlers in the 
industry.
    The Committee proposed adding paid advertising authority to the 
order to provide it with another tool to promote the consumption of 
cranberries in its export and domestic programs. Currently, paid 
advertising of cranberries is limited to branded advertising by 
individual handlers or processors in the industry. The Committee would 
like to use assessments or other available funding sources (such as MAP 
funds) for paid advertising as a component of its promotion programs to 
meet its stated objectives of increasing demand and consumption of 
cranberries and cranberry products. There may be opportunities, for 
example, to use paid advertising as a means of providing consumers with 
relevant information on the health-related benefits of cranberries.
    There was no opposition expressed to this Committee proposal. For 
the above reasons, it is recommended that Sec.  929.45 be amended by 
adding authority for paid advertising.

Material Issue Number 19--Definition of Cranberries

    Section 929.5 of the order should not be amended to revise the 
definition of ``cranberries.''
    The order's provisions, including volume regulations, assessments, 
and reporting requirements, apply to all cranberries grown in the 
production area. Currently, Sec.  929.5 defines cranberries to mean all 
varieties of the fruit Vaccinium macrocarpon, known as cranberries, 
grown in the production area.
    The Committee proposed that the genus and species Vaccinium 
oxycoccus be added to the definition of cranberries. Vaccinium 
oxycoccus, also known as European cranberry, grows wild in Europe, 
Canada, and some parts of the United States. The record evidence 
established that it is not commercially produced in the United States. 
During shortfalls in domestic

[[Page 23353]]

production, the industry has imported Vaccinium oxycoccus to use in 
cranberry products.
    The Committee recommended adding Vaccinium oxycoccus to the 
definition of cranberries so that the Committee could obtain 
information on the quantity of that species handlers acquire. This 
would enable the Committee to make better marketing decisions in 
recommending such things as volume regulations, and keep data separate 
from the regulated species of cranberry during years of volume 
regulation. The record shows that there is no intent to subject this 
species to marketing order requirements (such as volume controls) other 
than those relating to reporting.
    Witnesses testified that this change would make the marketing order 
definition consistent with the Food and Drug Administration's (FDA) 
definition of cranberry, which includes Vaccinium macrocarpon and 
Vaccinium oxycoccus. Witnesses however, do not agree with the FDA 
definition because the two varieties are distinctly different in 
flavor, appearance and acid content. Some witnesses testified that the 
industry should work with FDA to change its definition rather than 
change the marketing order definition. Further, concerns were raised 
that inclusion of the term in the definition would legitimize Vaccinium 
oxycoccus fruit as ``true'' cranberries, which is not the Committee's 
or the domestic industry's intent.
    Currently, Sec.  929.105 of the rules and regulations in effect 
under the order requires handlers to report to the Committee the total 
quantity of cranberries and Vaccinium oxycoccus cranberries the 
handlers acquire and the amount they have in inventory. This 
information is required to be submitted to the Committee on a quarterly 
basis. Witnesses acknowledged through testimony that the needed 
information regarding Vaccinium oxycoccus is and can be obtained 
through these reports.
    The evidence supported that the Committee is able to obtain the 
information intended under this proposal through current provisions. 
With the regulations already in place requiring handlers to report all 
receipts and dispositions of Vaccinium oxycoccus, and the lack of the 
need to regulate such variety, the definition of cranberries should 
remain as it is.
    Record evidence does not support amending the marketing order to 
change the definition of ``cranberries,'' and the proposed amendment is 
not being recommended for adoption.

Material Issue Number 20--Clarification of the Definition of Handle

    The order should be amended to clarify the definition of handle 
that appears in Sec.  929.10. This definition serves to identify those 
activities that are subject to regulation under the order.
    Currently, the definition of handle specifies, in part, that handle 
means to sell, consign, deliver, or transport fresh cranberries or in 
any other way to place fresh cranberries in the current of commerce 
within the production area or between the production area and any point 
outside thereof in the United States or Canada.
    The Committee proposed modifying this language to clarify that the 
transporting of fresh cranberries to foreign markets other than Canada 
is also considered handling. According to testimony, the current 
language could be confusing as it could be construed that handling of 
fresh cranberries is only applicable to movement within the production 
area, the United States and Canada. However, the Committee manager 
testified that fresh cranberries are exported to many foreign countries 
including the United Kingdom, Germany and Japan. Placing fresh 
cranberries into the current of commerce within these and other foreign 
countries would constitute handling. The Committee proposal merely 
clarifies this language to avoid any confusion in the definition of 
handle. There was no opposition testimony on this proposed change.
    In addition, the definition of handle currently excludes from 
handling, the cold storage or freezing of excess cranberries for the 
purpose of temporary storage during periods when an annual allotment 
percentage is in effect prior to their disposal. Section 929.10 does 
not currently exclude the temporary cold storage or freezing of 
withheld cranberries when a withholding provision is in effect.
    The Committee proposed including the cold storage or freezing of 
withheld cranberries as an exemption from handling for the purpose of 
temporary storage during periods when withholding provisions are in 
effect prior to their disposal. The Committee manager testified that 
handlers should be allowed to temporarily use cold storage or freezing 
of restricted cranberries when a handler withholding regulation is in 
effect just as the authority exists for excess cranberries under a 
producer allotment. The period in which handlers could temporarily use 
cold storage or freezing storage of either excess and/or restricted 
cranberries could not exceed the date set by the Committee (with USDA 
approval) for the disposition of excess and/or withheld cranberries. 
There was no opposition testimony to this proposal.
    Record evidence supports modifying the definition of handle to 
clarify that handling includes the placing fresh cranberries within the 
stream of commerce to markets within the United States, as well as to 
all foreign countries. In addition, record evidence supports adding an 
exemption from handling for the temporary freezing or cold storage of 
restricted cranberries under a handler withholding program.
    USDA is recommending that Sec.  929.10 be amended as proposed by 
the Committee.

Material Issue Number 21--Reporting Requirements

    Currently under the order, there is a reference to a reporting 
requirement for growers under Sec.  929.48, Sales History. The 
reporting requirement specifies that growers shall file a report with 
the Committee by January 15 of each crop year, indicating the total 
acreage harvested, the total commercial cranberry sales in barrels from 
such acreage, and the amount of any new or renovated acreage planted, 
and to allow the committee to compute a sales history for each grower.
    Section 929.62 currently includes reporting requirements for 
handlers. The requirements include reports relating to handler 
inventories, receipts, amount of cranberries handled, withheld and 
other reports deemed necessary.
    Section 929.64 sets forth that the Committee shall have access to 
handler records for the purpose of assuring compliance and checking and 
verifying records and reports filed by handlers.
    The Committee proposed moving the grower reporting requirements to 
Sec.  929.62, Reports, in order to maintain all reporting functions of 
growers and handlers in one section of the order for ease of 
referencing. In addition, the Committee proposed adding more specific 
requirements under the grower reporting provisions. The Committee 
proposed modifying grower reporting requirements by: Having the grower 
specify whether their acreage is owned or leased; Having the grower 
specify the amount of acreage either in production, but not harvested 
or taken out of production and the reason(s) why; Changing the word 
renovated acreage to replanted acreage; Having the grower specify the 
name of the handler(s) to whom commercial cranberry sales were made; 
and Having the grower supply

[[Page 23354]]

such other information as may be needed for implementation and 
operation of this section.
    Under the handler reporting requirements, the Committee recommended 
changing the word ``handler'' to ``person'' under the inventory 
reporting requirement. The reason for this was because of legislation 
enabling USDA to require persons engaged in the handling or importation 
of cranberries or cranberry products to provide information on 
acquisitions, inventories, and dispositions of cranberries and 
cranberry products. The Committee's intent was to broaden the scope of 
the entities required to report certain information.
    The Committee also recommended deleting a paragraph relating to 
handlers reporting of withheld cranberries when a withholding volume 
regulation is in effect. The reason specified for this deletion was 
that the paragraph requiring handlers to file reports on the quantity 
of cranberries handled would cover the reporting of withheld 
cranberries as well as excess cranberries under a producer allotment 
program.
    The Committee's proposed changes to Sec.  929.64, Verification of 
Reports, are to simplify and clarify the language as to the Committee's 
authority to have access to any handler's premises where records are 
maintained for the purpose of assuring compliance and checking and 
verification of records and reports filed by handlers. The Committee 
believed this proposal to be administrative in nature as no changes are 
being proposed to the current regulations or requirements contained in 
the marketing order regarding the checking and verifying of handle 
records.
    There was no opposition testimony on the changes to the reporting 
requirements as proposed by the Committee. However, USDA is modifying 
some of the proposals.
    The grower reporting requirements should be moved to the section of 
the order relative to reports. This will allow them to be located 
easily. Expanding the requirements to include additional information 
would ensure that the Committee staff is provided with appropriate 
information to accomplish its mission. In addition, because of the 
changes being recommended in how sales histories are computed and in 
authorizing growers to transfer their sales histories to other growers, 
more information from growers is necessary, such as planting dates and 
whether the acreage is leased or owned. This will assist the Committee 
in assembling the most accurate information as possible. The addition 
of language requiring such other information as may be needed for 
implementation and operation of this section will allow additional 
reporting requirements to be recommended if any unforeseen need arises.
    Orders with producer allotment programs are unique in that specific 
information is needed from growers in order to implement a program. 
Under the cranberry order, growers benefit from reporting the 
information by being provided accurate and timely sales histories that 
reflect their production and allow equitable allotments to be 
determined on their acreage during years of volume regulation. The 
failure of growers to file these reports could be detrimental to them 
in the event volume regulations are implemented.
    Therefore, record evidence supports relocating the grower reporting 
requirements to the reporting requirements section of the order and 
expanding the information needed from growers. This proposal is 
recommended for adoption.
    The Committee's proposal to change the word ``handler'' to 
``person'' is not being recommended. The reason the Committee proposed 
the change was due to legislation expanding the data collection 
requirements for cranberries and cranberry products. Regulations 
regarding this legislation are being developed apart from the order. 
Any regulations adopted from this legislation would include appropriate 
reporting requirements for those impacted by the regulations. This 
proposed change is, therefore, unnecessary and is not being recommended 
for adoption.
    The Committee proposal to delete the paragraph relating to 
handlers' reporting of cranberries withheld under a withholding volume 
regulation is not being recommended. However, a modification is being 
recommended. The Committee's reason for deleting this paragraph was 
that the handler requirement for reporting quantities of cranberries 
handled would cover this instance. Withheld cranberries under a 
withholding provision as well as excess cranberries under a producer 
allotment program are not allowed to be handled. Therefore, there 
should be specific requirements for handlers to report these 
quantities. The current language in that section, however, only relates 
to withheld cranberries and should also include excess cranberries. 
Therefore, USDA is recommending retaining that paragraph in this 
section but modifying it to include that handlers are required to 
report information on the quantities of excess cranberries as well as 
withheld cranberries. Record evidence supports this modification.
    The Committee also proposed adding a paragraph under this provision 
authorizing that the committee may establish, with the approval of the 
Secretary, rules and regulations for the implementation and operation 
of this section. This paragraph is being recommended to allow the 
Committee to develop and recommend rules and regulations needed to 
implement these provisions.
    Any additional reporting requirements resulting from adoption of 
this proposed amendment would be submitted to the Office of Management 
and Budget prior to implementation.
    The Committee proposal to simplify and clarify the language 
relating to verification of reports is being recommended. This is an 
administrative change and should be made.

Material Issue Number 22--Deletion of Obsolete Provision

    The order should be amended to delete Sec.  929.47, as it is 
obsolete.
    Section 929.47, entitled Preliminary Regulation, refers to base 
quantity, which is a term that is no longer used under the marketing 
order. The order was amended in 1992 to improve the producer allotment 
program to base annual allotments on sales histories rather than base 
quantities. This section is obsolete, serves no purpose, and therefore 
should be removed from the order.

Small Business Considerations

    Pursuant to the requirements set forth in the Regulatory 
Flexibility Act (RFA), AMS has considered the economic impact of this 
action on small entities. 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 so that small businesses will not be 
unduly or disproportionately burdened. Marketing orders and amendments 
thereto are unique in that they are normally brought about through 
group action of essentially small entities for their own benefit. Thus, 
both the RFA and the Act are compatible with respect to small entities.
    Small agricultural producers have been defined by the Small 
Business Administration (SBA) (13 CFR 121.201) as those having annual 
receipts of less than $750,000. Small agricultural service firms, which 
include handlers regulated under the order, are defined as those with 
annual receipts of less than $5,000,000.
    Interested persons were invited to present evidence at the hearing 
on the probable regulatory and informational

[[Page 23355]]

impact of the proposed amendments on small businesses. The record 
indicates that these amendments could result in additional regulatory 
requirements being imposed on some cranberry growers and handlers. 
Overall benefits are expected to exceed costs.
    The record indicates that there are about 20 handlers currently 
regulated under Marketing Order No. 929. In addition, the record 
indicates that there are about 1,250 producers of cranberries in the 
current production area.
    Based on recent years' price and sales levels, AMS finds that 
nearly all of the cranberry producers and some of the handlers are 
considered small under the SBA definition. In 2001, a total of 34,300 
acres were harvested with an average U.S. yield per acre of 156.2 
barrels. Grower prices in 2001 averaged $22.90 per barrel. Using these 
figures, average total annual grower receipts for 2001 are estimated at 
$153,375 per grower. However, there are some growers whose estimated 
sales would exceed the $750,000 threshold. Thus, the consequences of 
this decision would apply almost exclusively to small entities.
    Five handlers handle over 97 percent of the cranberry crop. Using 
Committee data on volumes handled, AMS has determined that none of 
these handlers qualify as small businesses under SBA's definition. The 
remainder of the crop is marketed by about a dozen grower-handlers who 
handle their own crops. Dividing the remaining 3 percent of the crop by 
these grower-handlers, all would be considered small businesses.
    This decision proposes that the order be amended: (1) To authorize 
the Committee to reestablish districts within the production area and 
reapportion grower membership among the various districts; (2) to 
simplify criteria considered and set forth more appropriate dates in 
establishing the Committee's marketing policy; (3) to revise the 
formula for calculating sales histories under the producer allotment 
program in Sec.  929.48, which includes providing additional sales 
history to compensate growers for expected production on younger acres. 
This proposed changed to Sec.  929.48 would also allow for more 
flexibility in recommending changes to the formula and add authority 
for segregating fresh and processed sales; (4) to allow compensation of 
sales history for catastrophic events that impact a grower's crop; (5) 
to remove specified dates relating to when information is required to 
be filed by growers/handlers in order to issue annual allotments; (6) 
to clarify how the Committee allocates unused allotment to handlers; 
(7) to allow growers to decide whether to assign allotment if no crop 
is produced; (8) to allow growers to transfer allotment during a year 
of volume regulation; (9) to authorize the implementation of the 
producer allotment and withholding programs in the same year; (10) to 
set dates by which volume regulations must be recommended; (11) to add 
specific authority to exempt fresh, organic or other forms of 
cranberries from order provisions; (12) to allow for greater 
flexibility in establishing other outlets for excess cranberries; (13) 
to update and streamline the withholding volume control provisions; 
(14) to modify the withholding volume regulations by allowing growers 
to be compensated under the buy-back provisions if any funds are 
returned to the handler by the Committee; (15) to add authority for 
paid advertising under the research and development provision of the 
order; (16) to modify the definition of handle to clarify that 
transporting fresh cranberries to foreign countries is considered 
handling and include the temporary cold storage or freezing of withheld 
cranberries as an exemption from handling; (17) to relocate some 
reporting provisions to a more suitable provision and streamline the 
language relating to verification of reports and records; and (18) to 
delete an obsolete provision from the order relating to preliminary 
regulation.
    This decision does not recommend for adoption the following 
proposed amendments: (1) To incorporate a handler marketing pool or 
buy-back provisions under the producer allotment program; (2) to 
authorize an exemption from order provisions for the first 1,000 
barrels of cranberries produced by each grower; (3) to add Maine, 
Delaware and the entire State of New York to the production area; (4) 
to add the species Vaccinium oxycoccus to the definition of cranberry.

Historical Trends and Near Term Outlook

    The cranberry industry has operated under a Federal marketing order 
since 1962. For many years, the industry enjoyed increasing demand for 
cranberry products, primarily due to the success of cranberry juice-
based drinks. This situation encouraged additional production. Between 
1960 and 1999, production increased from 1.34 million barrels (one 
barrel equals 100 pounds of cranberries) to a record 6.3 million 
barrels. This represents a 370 percent increase from 1960 and a 17-
percent gain from the 1998 crop year. Production in the 2000 crop year 
declined to 5.6 million barrels and to 5.4 million barrels in 2001, due 
to the use of volume control by the industry and a decrease in yields 
in some production areas due to adverse weather conditions during the 
growing season.
    Production increased for each of the five major producing States 
from 1960 to 2001. In 1995, Wisconsin surpassed Massachusetts to become 
the largest producing State. Production in all States is highly 
variable. This variation in production is mainly due to the variation 
in yields, which is influenced by weather in each of the producing 
States. The variation in production is one of the primary reasons the 
industry likes to carry out a reasonable volume of inventory into the 
next crop year to insure against a short crop.
    Cranberries are produced in at least 10 States, but the vast 
majority of farms and production are concentrated in Massachusetts, New 
Jersey, Oregon, Washington, and Wisconsin. Area harvested for the U.S. 
has increased from 21,140 acres in 1960 to 34,300 acres in 2001. Most 
of this increase has come from Wisconsin, where area harvested has 
increased from 4,200 acres in 1960 to 15,100 acres in 2001. Currently, 
Wisconsin has the highest amount of area harvested at 15,100 acres, 
followed by Massachusetts with 12,200, New Jersey with 3,100 acres, 
Oregon with 2,300 acres, and Washington with 1,600 acres. Total U.S. 
area harvested has declined from a peak of 37,500 in 1999 to 34,300 
acres in 2001. This decline is likely due to the surplus situation the 
industry has experienced over the last several crop years. 
Massachusetts has traditionally had the largest area harvested. 
However, in 1998, Wisconsin became the State with the largest area 
harvested. Since 1998, Wisconsin area harvested has continued to 
increase, while Massachusetts area harvested has declined. Together, 
both States account for over 80 percent of cranberry production.
    Average farm size for cranberry production is very small. The 
average across all producing States is about 27 acres. Wisconsin's 
average is twice the U.S. average, at 56 acres, and New Jersey averages 
66 acres. Average farm size is below the U.S. average for Massachusetts 
(20 acres), Oregon (13 acres) and Washington (11 acres).
    Yields are highly variable from year to year and yields have been 
increasing over time. For the U.S., yields have more than doubled from 
the 1960's to the 2000's. Increasing yields suggest that cranberry 
growers have become more productive. Over the last five crop years 
(1997-2001), Wisconsin has had the highest yield at 185.9 barrels per 
acre,

[[Page 23356]]

followed by New Jersey with an average yield of 154.0 barrels per acre, 
then Oregon with an average yield of 151.2 barrels per acre, then 
Massachusetts with an average yield of 133.2 barrels per acre, and then 
Washington with an average yield of 104.1 barrels per acre.
    While production capacity continues to rise, demand has leveled 
off. Per capita consumption of fresh cranberries has remained stable 
ranging from 0.07 to 0.10 pounds per person. The per capita consumption 
of processed cranberries increased to 1.70 pounds per person in 1994. 
In 1994, total domestic production was 4,682,000 barrels, while total 
sales increased to 4,692,507 barrels. This increase in sales and per 
capita consumption, accompanied by increasing grower prices provided 
further incentives for growers to increase plantings and productivity. 
However, after 1994, sales of processed cranberries began to stagnate. 
Stagnant sales of processed cranberry products continued until 2000. In 
the 2000 crop year, per capita consumption of processed cranberries 
increased to 1.87 pounds and sales of processed cranberries increased 
to over 5 million barrels for the first time.
    About 92 percent of the cranberry crop is processed, with the 
remainder sold as fresh fruit. In the 1950's and early 1960's, fresh 
production was considerably higher than it is today, and in many years, 
constituted as much as 25 to 50 percent of total production. Fresh 
production began to decline in the 1980's, while processed utilization 
and output soared as cranberry juice products became popular. Today, 
fresh fruit claims only about 8 percent of total production. Three of 
the top five States produce cranberries for fresh sales. New Jersey and 
Oregon produce fruit for processed products only. There has been 
tremendous growth in processed cranberries, while the fresh market has 
remained relatively stable.
    When supply is greater than demand, inventories are carried over 
into the next crop year. Carryin inventories are reported by the 
Committee. In many agricultural industries, modest levels of 
inventories are believed to be desirable in situations of a late 
harvest or a disastrous production year. From 1987 through 1997, annual 
carryin inventories were relatively stable, averaging 1.1 million 
barrels. Beginning with the 1998 crop, carryin inventories exceeded 2 
million barrels. For the 2000 crop year, carryin inventories exceeded 4 
million barrels. Large and increasing inventories provide an indication 
of how far supply is outpacing demand. Larger inventories, beginning in 
1997, have resulted in prices paid to growers dropping dramatically.
    From 1974 through 1996, prices trended up. Prices increased from 
$11.00 per barrel in 1974 to $65.90 per barrel in 1996. Since 1996, 
prices have decreased. Prices reached a recent low of $17.20 per barrel 
in 1999. In 2001, prices are reported at $22.90 per barrel. The period 
of increasing prices provided an incentive for producers to expand 
planted acres and to increase yields. The price decline over the past 
several crop years is due to the surplus situation which resulted from 
the increase in planted acreage and yields and the lack of significant 
sales increases to keep pace with increased production.
    Grower prices do not vary greatly among the five major producing 
States. This provides an indication that domestic market forces 
similarly impact all U.S. cranberry growers. Further evidence that 
prices for the five producing States follow very similar movements is 
provided by computing the correlation coefficient for the five 
producing States from 1960 to 2001. Correlation is a statistical 
measure, which shows how variables are related and a figure of 1.0 
would mean perfect correlation. The price correlation among the five 
States is greater than 0.97.
    Real prices are derived by deflating the actual (nominal) prices by 
a price index (Prices Received by Farmers All Farm Products Index 1990-
92=100). Real prices have the effects of inflation removed. Real prices 
show whether there has been any change in a commodity's price behavior 
absent the effects of inflation. Real cranberry prices reached a peak 
in 1997. Currently, real prices have fallen to levels similar to the 
mid 1970's.
    The value of production increased dramatically from 1960, reaching 
a peak of $350 million in 1997. In 2000, the value of production fell 
below $100 million for the first time since 1980. Between 1997 and 
2001, growers lost 69 percent of the value of production due to the 
surplus situation. The value of production has declined in all of the 
major producing States.
    With most agricultural commodities, there is a pronounced inverse 
relationship between production and prices. When production is high, 
prices are generally low and when production is low, prices are 
generally high. From 1960 through 1996, prices and production are 
positively correlated (the correlation coefficient is 0.93). However, 
beginning in 1997, as production continued to increase, prices started 
to decline and continued to decline as production increased in crop 
years 1998 and 1999. Starting in 1996, supply began to outpace demand, 
ultimately resulting in declining prices.
    To help stabilize market supply and demand conditions, volume 
regulation was introduced in 2000 and again in 2001, marking the first 
time in 30 years that such regulations were implemented. Crop sizes in 
2000 and 2001 have been reduced by the use of the producer allotment 
program, which limits the amount of product that a producer can deliver 
to a handler. Reduced crop sizes for these two crop years, combined 
with increased sales and USDA purchases, have resulted in a reduction 
of inventories.
    In an industry such as cranberries, where the product can be stored 
for long periods of time, volume control is a method that can be used 
to reduce supplies so that they are more in line with market needs. 
Large inventories are costly to maintain and, with the outlook for 
continued high production levels, these inventories are difficult to 
market. Producers may not receive full payment for cranberries 
delivered to storage for several years, and storage costs are deducted 
from their final payment.
    The demand for cranberries is inelastic. A producer allotment 
program results in a decrease in supply because producers can only 
deliver a certain portion of their past sales history. With an 
inelastic demand, a small shift (decrease) in the supply curve results 
in relatively large impacts on grower prices. An allotment program 
results in increasing grower prices and grower revenues.
    The level of unsold inventory, the current capacity to produce in 
excess of expected demand, and continuing low grower prices have 
resulted in the industry debating various alternatives under their 
marketing order.

Reestablishment of Districts and Reapportionment of Grower Membership 
Among the Districts

    The proposed amendment to authorize the Committee to reestablish 
and/or reapportion districts would give the Committee greater 
flexibility in responding to changes in grower demographics and 
district significance in the future. This authority would allow the 
Committee to recommend changes through informal rulemaking rather than 
through an order amendment. The proposal includes specific criteria to 
be considered prior to making any recommendations.
    This proposed authority does not change the districts. It only 
authorizes the Committee to recommend changes more efficiently. No 
additional administrative costs are anticipated

[[Page 23357]]

with this proposed amendment. This proposal should be favorable to both 
large and small entities.

Development of Marketing Policy

    Section 929.46 of the order requires the Committee to develop a 
marketing policy each year as soon as practicable after August 1. In 
its marketing policy, the Committee projects expected supply and market 
conditions for the upcoming season. The marketing policy should be 
adopted before any recommendation for regulation, as it serves to 
inform USDA and the industry, in advance of the marketing of the crop, 
of the Committee's plans for regulation and the bases therefore. 
Handlers and growers can then plan their operations in accordance with 
the marketing policy.
    The Committee is currently required to consider nine criteria in 
developing its marketing policy. The criteria include such items as 
expected production, expected demand conditions, and inventory levels. 
This rule recommends removing criteria not considered to be relevant in 
making a decision on the need for volume regulation.
    The marketing order section of the order also states that the 
Committee must estimate the marketable quantity necessary to establish 
a producer allotment program by May 1, and must submit its marketing 
policy to USDA after August 1. These dates are inconsistent with the 
dates by which the Committee must recommend a volume regulation (if one 
or both are deemed necessary) for the upcoming crop. USDA is 
recommending that both dates be removed.
    These changes are non-substantive in nature. They remove 
unnecessary criteria and obsolete dates from the order. As such, they 
will have no economic impact on growers or handlers.

Sales History Calculations Under the Producer Allotment Program

    The proposed amendment to modify the method for calculating sales 
histories would provide growers with additional sales histories to 
compensate them for expected increases in yields on newer acres during 
a year of volume regulation, which would result in sales histories more 
reflective of actual sales. This proposed amendment would also allow 
more flexibility in recommending changes to the formula and add the 
authority to calculate fresh and processed cranberries separately.
    The proposed amendment to the sales history calculations would 
benefit a majority of growers, especially growers who planted some or 
all of their acreage within the previous 5 years. The proposal would 
also help ensure that growers with mature acres who also have newer 
acreage and growers with only newer acres are treated equitably.
    During the 2000 volume regulation, many growers, particularly those 
with acreage 4 years old or less, indicated that the method of sales 
history calculation placed them at a disadvantage because they realized 
more production on their acreage than their sales history indicated. 
With the volume of new acres within the industry, this would affect 
many growers.
    The Committee determined that something needed to be done to 
address the concerns associated in the 2000 crop year with growers with 
newer acreage. The Committee discussed other alternatives to this 
method. One suggestion was to allow growers with newer acreage to add a 
percentage of the State average yield to their sales history each year 
up to the fourth year. The example presented was that acreage being 
harvested for the second time during a year of volume regulation would 
receive a sales history that was 25 percent of the State average yield, 
a third year harvest would receive 50 percent of State average yield, 
and a fourth year harvest would receive 75 percent of State average 
yield. Although this method would address some of the problems 
experienced in 2000, it was determined that the method established by 
this action would be a simpler and more practical method for growers to 
obtain the most realistic sales history.
    This action addresses grower concerns regarding determination of 
their sales histories. The method provides additional sales history for 
growers with newer acres to account for increased yields for each 
growing year up to the fifth year by factoring in appropriate 
adjustments to reflect rapidly increasing production during initial 
harvests. The adjustments are in the form of additional sales histories 
based on the year of planting.
    An appeals process would be in place for growers to request a 
redetermination of their sales histories. For the 2000-2001 volume 
regulation, over 250 appeals were received by the appeals subcommittee 
(the first level of review for appeals). In 2001-2002, a total of 49 
appeals were filed. The decrease in appeals filed was a direct result 
of the formula for calculating sales histories that was implemented in 
2001. This proposed amendment represents a generic version of the 
formula that was used in 2001.
    This proposal, if adopted, would not impose any immediate 
regulations on large or small growers and handlers. It would only 
modify the formula for calculating sales histories in the event volume 
regulations are implemented in the future. Adopting this proposal would 
benefit small businesses by allowing them more flexibility in receiving 
a more equitable sales history if volume regulations are recommended 
and implemented in future years. If this proposal is adopted, growers 
and handlers would know specifically how sales histories would be 
calculated so that they can be informed and make business decisions 
well ahead of the future season.
    The proposal also includes that sales histories, starting with the 
crop year following adoption of this amendment, would be calculated 
separately for fresh and processed cranberries. Fresh and organic fruit 
were exempt from the 2000 and 2001 volume regulations because it was 
determined that they did not contribute to the surplus. In both years, 
fresh fruit sales were deducted from sales histories and each grower's 
sales history represented processed sales only. To have sales histories 
more reflective of sales, the Committee proposed calculating separate 
sales histories for fresh and processed cranberries. Also, in future 
years, fresh cranberry sales could contribute to the surplus. This 
proposed change would make sales history calculations more equitable.
    These changes will have a positive effect on all growers and 
handlers because they will result in a more equitable allocation of the 
marketable quantity among growers. The proposal would be favorable to 
both large and small entities.

Catastrophic Events That Impact Growers' Sales Histories

    The proposed amendment would provide more flexibility in the 
provision under the sales history calculations that compensates growers 
with additional sales histories for losses on acreage due to forces 
beyond the grower's control.
    The current provisions require that if a grower has no commercial 
sales from acreage for 3 consecutive crop years due to forces beyond 
the grower's control, the Committee shall compute a level of commercial 
sales for the fourth year for that acreage using an estimated 
production. The record revealed that this provision was too stringent 
as evidenced by only one grower meeting these criteria in two years of 
volume regulation.
    The proposal would authorize the Committee to recommend rules and

[[Page 23358]]

regulations to allow for adjustments of a grower's sales history to 
compensate for catastrophic events that impact a grower's crop. The 
Committee would recommend procedures and guidelines to be followed in 
each year a volume regulation is implemented. The proposed amendment 
would have a positive impact on both large and small growers as the 
Committee would be in a position to compensate more growers who 
experienced losses due to catastrophic events than the current order 
provides.

Remove Specified Dates Relating to Issuing Annual Allotments

    The order currently provides that when a producer allotment 
regulation is implemented, USDA establishes an allotment percentage 
equal to the marketable quantity divided by the total of all growers' 
sales histories. The allotment percentage is then applied to each 
grower's sales history to determine that individual's annual allotment. 
All growers must file an AL-1 form with the Committee on or before 
April 15 of each year in order to receive their annual allotments. The 
Committee is required to notify each handler of the annual allotment 
that can be handled for each grower whose crop will be delivered to 
such handler on or before June 1.
    Experience during the 2000 and 2001 crop years has proven that 
maintaining a specified date by which growers are to file a form to 
qualify for their allotment and for the Committee to notify handlers of 
their growers' annual allotments has been difficult. This proposed 
change would delete the specified dates and allow the Committee to 
determine, with the approval of USDA, more appropriate dates by which 
growers are to file forms and the Committee is to notify handlers of 
their growers' annual allotments. The Committee would like to have 
established dates that the industry can realistically meet each season 
when a volume regulation is implemented.
    Because volume regulation was not recommended until the end of 
March during 2000 and 2001, growers had difficulty in submitting the 
required reports in a timely manner. Additionally, the rulemaking 
process to establish the allotment percentage had not been completed by 
June 1. Therefore, the Committee was unable to notify handlers of their 
growers' allotment by the specified deadline. With this proposed 
amendment, dates could be established in line with the timing of the 
recommendation and establishment of volume regulation. Allowing the 
Committee to set dates that can realistically be met by the industry 
would better serve the purposes of the marketing order. Thus, this 
modification should benefit the entire industry, both large and small 
entities.
    The Committee also recommended clarifying the explanation of how an 
allotment percentage is calculated. Currently, Sec.  929.49(b) states 
that such allotment percentage shall equal the marketable quantity 
divided by the total of all growers' sales histories. It does not 
specify that ``all growers' sales histories'' includes the sales 
histories calculated for new growers. This rule proposes a 
clarification to ensure that total sales histories (including those of 
new growers) are used in this calculation. To the extent this 
clarification makes the terms of the order easier to understand, it 
should benefit cranberry growers and handlers.
    This rule also proposes revising the information to be submitted by 
growers to qualify for an annual allotment. Currently, all growers must 
qualify for allotment by filing with the Committee a form including the 
following information: (1) The location of their cranberry producing 
acreage from which their annual allotment will be produced; (2) the 
amount of acreage which will be harvested; (3) changes in location, if 
any, of annual allotment; and (4) such other information, including a 
copy of any lease agreement, as is necessary for the Committee to 
administer the order. Such information is gathered by the Committee on 
a form specified as the AL-1 form.
    The proposed amendment would modify these criteria by not including 
information that is not pertinent. Currently, growers are assigned a 
grower number and the amount of acreage on which cranberries are being 
produced is maintained. The location of the cranberry producing acreage 
is not maintained. Therefore, there is no need to specify this 
information on the form. It is also unnecessary to include changes in 
location, if any, of growers' annual allotment including the lease 
agreement. Annual allotment is linked to a grower's cranberry producing 
acreage and, since the acreage cannot be moved from one location to 
another, information on changes in location is not relevant.
    Therefore, the information to be submitted by growers is being 
recommended for revision by removing the information that the Committee 
does not need to operate a producer allotment program. Other 
information that is currently requested (including identifying the 
handler(s) to whom the grower will assign his or her allotment) would 
remain unchanged.
    The AL-1 form was modified (and approved by OMB) prior to the 2001 
volume regulation. At that time, the Committee did not include this 
information on the form. Therefore, there is no reporting burden change 
as a result of this amendment. This change removes the unnecessary 
information from the order language.

Clarify How the Committee Allocates Unused Allotment to Handlers

    The proposed amendment would change the method by which the 
Committee allocates unused allotment to handlers having excess 
cranberries to proportional distribution of each handler's total 
allotment.
    Currently under the producer allotment volume regulation features 
of the order, section 929.49(h) provides that handlers who receive 
cranberries more than the sum of their growers' annual allotments have 
``excess cranberries'' and shall notify the Committee. Handlers who 
have remaining unused allotment are ``deficient'' and shall notify the 
Committee. The Committee shall equitably distribute unused allotment to 
all handlers having excess cranberries.
    The proponents testified that there has been a debate in the 
industry on the interpretation of what equitable distribution means and 
how it should be accomplished. To add specificity, the Committee 
proposed replacing the words ``equitably distribute'' with 
``proportional to each handler's total allotment''.
    The proponents testified that the distribution of unused allotment 
would only be given to those handlers who have excess fruit and are in 
need of allotment to cover that fruit. Allotment is only distributed 
proportionately to handlers when there are more requests for unused 
allotment than available unused allotment. In this situation, handlers 
would then receive the allotment in proportion to the volume of 
cranberries they handle.
    This amendment would have a positive impact on large and small 
handlers since handlers may be able to acquire the additional allotment 
they need for their excess berries than they would have under the 
current provisions.

Growers' Assignment of Allotment if No Crop Is Produced

    The proposed amendment to authorize growers who choose not to 
produce a crop in years of volume regulation to not assign their 
allotment to their handler would provide growers with flexibility to 
decide what happens with their unused allotment. Currently,

[[Page 23359]]

the order requires the allotment to go to the handlers.
    Prior to implementing this provision, the Committee would consider 
what would happen to the unused allotment and recommend, with USDA 
approval, implementing regulations. This amendment would benefit 
growers who choose not to grow a crop by providing them with input into 
the allocation of that allotment. This proposal should be favorable to 
both large and small growers.

Transfers of Allotment During Years of Volume Regulation

    The proposed amendment would allow growers to transfer allotment 
during a year of volume regulation and allow the sales history to 
remain with the lessor when there is a total or partial lease of 
cranberry acreage to another grower. Currently, growers are not allowed 
to transfer allotment to other growers. The only option available to 
growers to accomplish a transfer of allotment is to complete a lease 
agreement between the two growers. This involves filing paperwork, 
including signed leases and only transferring the sales history, not 
the allotment. Many of the lease agreements were initiated during the 
two years of volume regulation and created a burden on Committee staff. 
It also made recalculations of growers sales histories difficult.
    This proposal would simplify the process for growers by authorizing 
growers to transfer all or part of his or her allotment to another 
grower. Safeguards are in place to ensure that the transferred 
allotment remains with the same handler unless consent is provided by 
both handlers. In addition, the Committee may establish dates by which 
transfers may take place.
    This proposal would be beneficial to both large and small growers 
as it provides flexibility in transferring allotment.

Implementing Both Forms of Volume Regulation in the Same Year

    The proposal to require authorizing both forms of volume regulation 
in the same year was proposed in accordance with an amendment to the 
Act in November 2001. The amendment specified that USDA is authorized 
to implement a producer allotment program and a handler withholding 
program in the same crop year through informal rulemaking based on a 
recommendation and supporting economic analysis submitted by the 
Committee. If such recommendation is made by the Committee, it must be 
made no later than March 1 of each year. The amendment would provide 
additional flexibility to the Committee when considering its marketing 
policy each year.
    This proposal should be favorable to both large and small entities.

Dates for Recommending Volume Regulation

    The proposal to require the Committee to recommend a producer 
allotment program by March 1 each year would allow growers to alter 
their cultural practices in an efficient manner in the event that a 
producer allotment is implemented. Growers have indicated that they 
need to know as soon as possible whether the Committee is going to 
recommend a regulation since a producer allotment program requires 
growers to only deliver a portion of their crop. The Committee's 
decision influences whether growers can cut back on purchases of 
chemicals, fertilizer or possibly take acreage out of production. This 
can result in growers' savings. The later the decision is made, the 
chances are growers will have already invested these costs on their 
acreage.
    The proposal to require the Committee to recommend a handler 
withholding program by August 31 each year would provide the Committee 
staff with ample time to prepare reports based on handler inventory 
reports and crop projection data received from the National 
Agricultural Statistics Service (NASS). Because the withholding program 
does not impact grower deliveries, this date is more appropriate for 
making an informed decision on whether to recommend this type of 
program.
    Another proposal would authorize both forms of volume regulation to 
be implemented each year in accordance with an amendment to the Act 
authorizing such proposal. The amendment states that if both forms of 
volume regulation are recommended, it should be done by March 1. 
Therefore, this proposed amendment would require that if both forms of 
regulation are recommended in the same year that it be recommended by 
March 1. The same reasoning for recommending a producer allotment alone 
would apply to this proposed requirement. Growers need to know as soon 
as possible if production costs can be mitigated if a producer 
allotment is recommended. All growers, both large and small, should 
benefit from this change.

Exemptions From Order Provisions

    The proposed amendment recommending that specific authority be 
added to exempt fresh, organic or other forms of cranberries from order 
provisions would clarify the current language and provide guidelines 
for the specific forms or types of cranberries that could be exempted.
    Fresh and organic cranberries were exempted from the 2000 and 2001 
volume regulations under the minimum quantity exemption authority of 
the order. This proposal would merely clarify that authority in the 
order to ensure that fresh and organic and other forms of cranberries 
could be exempted if warranted in the future. This proposal should be 
beneficial to large and small entities.

Expand Outlets for Excess Cranberries

    The proposed amendment to the outlets for excess cranberries 
provisions would broaden the scope of noncommercial and noncompetitive 
outlets for excess cranberries. Adoption of this proposal would provide 
the Committee, with USDA's approval, the ability to recognize and 
authorize the used of additional or new noncommercial and/or 
noncompetitive outlets for excess cranberries through informal 
rulemaking.
    Because competitive markets can change from season to season and 
new and different research ideas can be devised, the Committee would 
develop guidelines each year a volume regulation is recommended that 
would be used in determining appropriate outlets for excess 
cranberries. This would benefit growers and handlers by providing 
flexibility in determining outlets. This proposal would be particularly 
useful in determining which foreign markets can be used as outlets for 
excess cranberries. Foreign markets are one area where growth is 
occurring and demand is increasing. Exports of cranberries have 
increased from 184,000 barrels in 1988 to 824,000 barrels in 2000. Both 
large and small entities should benefit from this proposal.

General Withholding Provisions

    Section 929.54 of the order sets forth the general parameters 
pertaining to withholding regulations. Under this form of regulation, 
free and restricted percentages are established, based on market needs 
and anticipated supplies. The free percentage is applied to handlers' 
acquisitions of cranberries in a given season. A handler may market 
free percentage cranberries in any chosen manner, while restricted 
berries must be withheld from handling.
    The withholding provisions of the order were used briefly over 
three decades ago. Although the cranberry industry has not used the 
authority for

[[Page 23360]]

withholding regulations in quite some time, the record evidence 
supports maintaining this tool for possible future use. However, 
substantive changes in industry practices have rendered current 
withholding provisions in need of revision. Thus, this decision 
recommends updating and streamlining those provisions.
    The record shows that at the time the withholding provisions were 
designed, the cranberry industry was much smaller, producing and 
handling much lower volumes of fruit than it does now. In 1960, 
production was about 1.3 million barrels; by 1999, a record 6.3 million 
barrels were grown. A much higher percentage of the crop was marketed 
fresh--about 40 percent in the early 1960's versus less than 10 percent 
in recent years.
    Changes in harvesting and handling procedures have been made so the 
industry is better able to process higher volumes of cranberries. Forty 
years ago, virtually all cranberries were harvested dry, and water 
harvesting was in an experimental stage of development. Water 
harvesting is currently widespread in certain growing regions; 
cranberries harvested under this method must be handled immediately as 
they are subject to rapid deterioration.
    In the early 1960's, handlers acquired some cranberries that had 
been ``screened'' to remove extraneous material that was picked up with 
the berries as they were being harvested, and ``unscreened'' berries 
from which the extraneous material (including culls) had not been 
removed. The handler cleaned some of the unscreened berries immediately 
upon receipt, while others were placed in storage and screened just 
prior to processing.
    The order currently provides that when a withholding regulation is 
implemented, the restricted percentage will be applied to the volume of 
``screened'' berries acquired by handlers. Since the term ``screening'' 
is obsolete, all references to that term are being deleted.
    The order also currently provides that withheld cranberries must 
meet such quality standards as recommended by the Committee and 
established by USDA. The Federal or Federal-State Inspection Service 
must inspect such cranberries and certify that they meet the prescribed 
quality standards. The intent of these provisions is, again, to ensure 
that the withholding regulations reduce the volume of cranberries in 
the marketplace by not allowing culls to be used to meeting withholding 
obligations. The inspection and certification process is also meant to 
assist the Committee in monitoring the proper disposition of restricted 
cranberries, thereby ensuring handler compliance with any established 
withholding requirements.
    The need for inspection and certification of withheld cranberries 
is not as great today as in the past. Additionally, it could be costly, 
particularly since most withheld berries would subsequently be dumped, 
generating no revenue for growers or handlers. The inspection process 
could also inordinately slow down handling operations, and there could 
be differential impacts of such requirements because some handling 
facilities operate in ways that lend themselves to more efficient 
methods of pulling representative samples (for inspection purposes) 
than others.
    Removing the requirements for mandatory inspection and 
certification requirements would allow the industry to develop 
alternative safeguards to achieve its objectives at lower cost. While 
the inspection process may be deemed the best method by the Committee, 
this proposal provides flexibility by allowing the Committee to 
consider other, less costly alternatives.
    Eliminating the mandatory inspection under the withholding program 
and deleting obsolete terminology would make the program more flexible 
for the industry and allow the Committee to operate more efficiently. 
As such, this amendment should benefit cranberry growers and handlers 
by providing an additional tool they could use in times of cumbersome 
oversupply.

Buy-Back Provisions Under the Handler Withholding Program

    Section 929.56 of the order, entitled ``Special provisions relating 
to withheld (restricted) cranberries,'' sets forth procedures under 
which handlers may have their restricted cranberries released to them. 
These provisions are commonly referred to in the industry as the buy-
back provisions.
    Under the current buy-back provisions, a handler can request the 
Committee to release all or a portion of his or her restricted 
cranberries for use as free cranberries. The handler request has to be 
accompanied by a deposit equal to the fair market value of those 
cranberries. The Committee then attempts to purchase as nearly an equal 
amount of free cranberries from other handlers. Cranberries so 
purchased by the Committee are transferred to the restricted percentage 
and disposed of by the Committee in outlets that are noncompetitive to 
outlets for free cranberries. The provision that each handler deposit a 
fair market price with the Committee for each barrel of cranberries 
released and that the Committee use such funds to purchase an equal 
amount or as nearly an equal amount as possible of free cranberries is 
designed to ensure that the percentage of berries withheld from 
handling remains at the quantity established by the withholding 
regulation for the crop year.
    The Committee has the authority to establish a fair market price 
for the release of restricted cranberries under the buy-back program. 
The money deposited with the Committee by handlers requesting release 
of their restricted cranberries is the only money the Committee has 
available for acquiring free cranberries. Thus, the amount deposited 
must be equal to the then current market price or the Committee will 
have insufficient funds to purchase a like quantity of free 
cranberries.
    The Committee is required to release the restricted cranberries 
within 72 hours of receipt of a proper request (including the deposit 
of a fair market value). This release was made automatic so that 
handlers would be able to plan their operations, and very little delay 
would be encountered.
    If the Committee is unable to purchase free berries to replace 
restricted cranberries that are released under these provisions, the 
funds deposited with the Committee are required to be returned to all 
handlers in proportion to the volume withheld by each handler.
    This rule proposes authorizing direct buy-back between handlers. 
With this option, a handler would not have to go through the Committee 
to have his or her restricted berries released. Instead, that handler 
could arrange for the purchase of another handler's free cranberries 
directly. All terms, including the price paid, would be between the two 
parties involved and would not be prescribed by the Committee. This 
change would add flexibility to the order and could offer a more 
efficient method of buying back cranberries. Also, no Committee 
administrative costs would be incurred. Handlers would have the option 
of using this method, or they could buy back their berries through the 
Committee, as is currently provided.
    There are four criteria the Committee needs to consider in 
establishing a fair market price under the buy-back program for 
purchasing restricted cranberries. These include prices at which 
growers are selling their cranberries to handlers; prices at which 
handlers are selling fresh berries to dealers; prices at which 
cranberries are being sold to processors; and prices at

[[Page 23361]]

which the Committee has purchased free berries to replace released 
restricted berries.
    This action proposes adding two criteria to the list--the prices at 
which handlers are selling cranberry concentrate and growers' costs of 
production. Both of these items are relevant to consider in determining 
a fair market value. Consideration of these criteria by the Committee 
would benefit handlers.
    Under the current buy-back provisions, handlers are required to 
deposit with the Committee the full market value of the berries they 
are asking to be released. This decision proposes a different payment 
schedule so that handlers would not have to make a large cash payment 
prior to the sale of their restricted cranberries. Twenty percent of 
the total amount would be due at the time of the request, with an 
additional 10 percent due each month thereafter. This change would 
facilitate handlers buying back their restricted berries by reducing 
the costs of such a venture. Thus, handlers should benefit.
    If the Committee is unable to purchase free berries under the buy-
back system, it is currently required to refund the money back to all 
handlers proportionate to the amount each handler withheld under 
regulation. USDA is proposing a modification that would provide that 
the money be returned to the handler who deposited it for distribution 
to the growers whose fruit was sold. This should benefit growers whose 
fruit was sold. Additionally, this change could provide an incentive 
for handlers to make available free cranberries for purchase to replace 
restricted cranberries that are released under the buy-back provisions. 
For these reasons, this change should benefit the cranberry industry.

Paid Advertising

    The proposal to add authority for paid advertising under the 
research and development provisions of the order would provide the 
Committee the flexibility to use paid advertising to assist, improve, 
or promote the marketing, distribution, and consumption of cranberries 
in either its export or domestic programs. The authority for 
authorizing paid advertising under the cranberry marketing order was 
added to the Act in October, 1999.
    If a paid advertising program is recommended by the Committee, it 
could entail an increase in assessments to administer the program, 
which would have an impact on handlers. According to testimony, it is 
the Committee's intent to use paid advertising sparingly as a means to 
provide consumers with relevant information to the health-related 
benefits of cranberries. Paid advertising authority is viewed as an 
additional tool available to the Committee to meet its objectives of 
increasing demand and consumption of cranberries and cranberry 
products. It is anticipated that any additional costs incurred to all 
handlers, both large and small, would be outweighed by the benefits of 
increasing demand for cranberries. Any paid advertising program and 
increase of assessment must proceed through notice and comment 
rulemaking before it is implemented.

Definition of Handle

    The proposal to modify the definition of handle under the order 
would clarify that the transporting of fresh cranberries to foreign 
markets other than Canada is also considered handling. This proposed 
change would merely clarify language.
    The proposal would also modify the definition by including the cold 
storage or freezing of withheld cranberries as an exemption from 
handling for the purpose of temporary cold storage during periods when 
withholding provisions are in effect prior to their disposal. The 
provision already applies this exemption to excess cranberries under 
the producer allotment program and it was determined that handlers 
could benefit from this provision under a withholding program as well. 
This would benefit large and small handlers by allowing temporary 
storage of withheld cranberries, which could be critical during a 
withholding volume regulation.

Reporting Requirements

    The proposal to modify the reporting requirements would relocate a 
paragraph on a grower reporting requirement to the section on Reports 
for ease of referencing and is only administrative in nature.
    The proposal would also add more specific information under the 
grower reporting provisions to incorporate additional information 
necessary from growers if the sales history and transfer of allotment 
proposals are adopted. This will assist the Committee in assembling the 
most accurate and effective information as possible. Orders with 
producer allotment programs are unique in that specific information is 
needed from growers in order to implement a program. Both large and 
small growers benefit from reporting the information by being provided 
accurate and timely sales histories that reflect their production and 
allow equitable allotments to be determined on their acreage during 
years of volume regulation. The failure of growers to file these 
reports could be detrimental to them in the event volume regulations 
are implemented. Any additional reporting requirements resulting from 
adoption of this proposed amendment would be submitted to the Office of 
Management and Budget prior to implementation.
    The proposal would also include that handlers report on the 
quantities of excess cranberries as well as withheld cranberries. This 
is a clarification and administrative in nature. The proposal would 
also simplify and clarify the provision on verification of reports. The 
proposal should be favorable to large and small growers.

Obsolete Provision

    The proposal to delete an obsolete provision relating to 
preliminary regulation is administrative in nature and is being 
recommending for adoption. There would be no impact on growers or 
handlers.

Proposed Amendments Not Recommended For Adoption in This Decision

    Five proposed amendments are not being recommended for adoption. 
Therefore, there would be no economic impact resulting from these 
proposals.
    The proposed amendments not recommended would have: (1) 
Incorporated a handler marketing pool and/or buy-back provisions to the 
producer allotment program (Material Issue 15); (2) authorized an 
exemption from order provisions for the first 1,000 barrels of 
cranberries produced by each grower (Material Issue 16); (3) expanded 
the production area to include the States of Maine and Delaware and the 
entire State of New York (Material Issue 17); and (4) modified the 
definition of cranberry by adding the species Vaccinium oxycoccus to 
the definition (Material Issue 19).

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1980 (44 U.S.C. 
35), the reporting and recordkeeping provisions that would be generated 
by the proposed amendments would be submitted to the Office of 
Management and Budget (OMB).
    None of the changes, if implemented, would generate any reporting 
burden to growers or handlers.
    Many of the changes have no reporting ramifications if they are 
established. As examples, adding the authority for redistricting and 
reapportionment of the Committee,

[[Page 23362]]

changing the deadlines for filing volume regulations, or adding the 
authority for paid advertising would not create any additional 
reporting requirements.
    Some of the proposed amendments would not generate any reporting 
burdens by amendment of the order alone. If these authorities were 
added to the order, reporting burdens would occur at the time 
regulations were established to activate the order authority. Examples 
of these amendments are those that impact the two forms of volume 
regulations. If a producer allotment volume regulation were 
implemented, regulations would be needed to set forth any forms of 
cranberries exempt from the volume regulation or what outlets (and 
appropriate safeguards) would be established for excess cranberries. 
Also, at the time of recommendation, the process for making adjustments 
for catastrophic events would need to be recommended by the Committee. 
In these instances, the reporting burdens, if any, would not exist 
until the volume regulation was in place. In addition, if a handler 
withholding volume regulation is established, additional reporting 
burdens may be necessary to cover the handler-to-handler buy-back 
program.
    Reporting burdens that would be immediately generated by these 
amendments are the grower reporting requirements. However, prior to the 
2001 volume regulation, the Committee modified the AL-1 form to 
accommodate needed requirements for implementing the producer allotment 
volume regulation.
    Specifically, the way growers' sales histories were calculated that 
is being recommended to be added to the order was used in the 2001 
volume regulation. The AL-1 form was modified at that time (and 
approved by OMB) to include the additional information required, such 
as year of planting and year of first harvest.
    Likewise, growers are already reporting fresh and processed sales 
separately on form GSAR-1. This information was included on the form 
prior to the 2001 volume regulation to accommodate the regulations.
    The amendment to remove dates regarding issuance of annual 
allotments does not require a modification of the form as no dates are 
specified on the form.
    Therefore, there would be no modification to reporting and 
recordkeeping burdens generated from these proposed amendments. Current 
information collection requirements for part 929 are approved by OMB 
under OMB number 0581-0189.
    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.
    USDA has not identified any relevant Federal rules that duplicate, 
overlap or conflict with this proposed rule. These amendments are 
designed to enhance the administration and functioning of the marketing 
order to the benefit of the industry.
    Committee meetings regarding these proposals as well as the hearing 
dates were widely publicized throughout the cranberry industry, and all 
interested persons were invited to attend the meetings and the hearing 
and participate in Committee deliberations on all issues. All Committee 
meetings and the hearing were public forums and all entities, both 
large and small, were able to express views on these issues. Finally, 
interested persons are invited to submit information on the regulatory 
and informational impacts of this action on small businesses.
    A 30-day comment period is provided to allow interested persons to 
respond to this proposal. Thirty days is deemed appropriate so that 
this rulemaking may be completed prior to the 2005-2006 season. All 
written exceptions timely received will be considered and a grower 
referendum will be conducted before these proposals are implemented.

Civil Justice Reform

    The amendments proposed herein have been reviewed under Executive 
Order 12988, Civil Justice Reform. They are not intended to have 
retroactive effect. If adopted, the proposed amendments would not 
preempt any State or local laws, regulations, or policies, unless they 
present an irreconcilable conflict with the amendments.
    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 date of the 
entry of the ruling.

Rulings on Briefs of Interested Persons

    Briefs, proposed findings and conclusions, and the evidence in the 
record were considered in making the findings and conclusions set forth 
in this recommended decision. To the extent that the suggested findings 
and conclusions filed by interested persons are inconsistent with the 
findings and conclusions of this recommended decision, the requests to 
make such findings or to reach such conclusions are denied.

General Findings

    The findings hereinafter set forth are supplementary to the 
findings and determinations which were previously made in connection 
with the issuance of the marketing agreement and order; and all said 
previous findings and determinations are hereby ratified and affirmed, 
except insofar as such findings and determinations may be in conflict 
with the findings and determinations set forth herein.
    (1) The marketing agreement and order, as amended, and as hereby 
proposed to be further amended, and all of the terms and conditions 
thereof, would tend to effectuate the declared policy of the Act;
    (2) The marketing agreement and order, as amended, and as hereby 
proposed to be further amended, regulate the handling of cranberries 
grown in the production area in the same manner as, and are applicable 
only to, persons in the respective classes of commercial and industrial 
activity specified in the marketing agreement and order upon which a 
hearing has been held;
    (3) The marketing agreement and order, as amended, and as hereby 
proposed to be further amended, are limited in their application to the 
smallest regional production area which is practicable, consistent with 
carrying out the declared policy of the Act, and the issuance of 
several orders applicable to subdivisions of the production area would 
not effectively carry out the declared policy of the Act;
    (4) The marketing agreement and order, as amended, and as hereby 
proposed to be further amended, prescribe, insofar as practicable, such 
different terms applicable to different parts of the production area as 
are necessary to give due recognition to the differences in the 
production and marketing of cranberries grown in the production area; 
and
    (5) All handling of cranberries grown in the production area as 
defined in the

[[Page 23363]]

marketing agreement and order, as amended, and as hereby proposed to be 
further amended, is in the current of interstate or foreign commerce or 
directly burdens, obstructs, or affects such commerce.

List of Subjects in 7 CFR Part 929

    Cranberries, Marketing agreements, Reporting and recordkeeping 
requirements.

Recommended Amendment of the Marketing Agreement and Order

    For the reasons set out in the preamble, 7 CFR part 929 is proposed 
to be amended as follows:

PART 929--CRANBERRIES GROWN IN THE STATES OF MASSACHUSETTS, RHODE 
ISLAND, CONNECTICUT, NEW JERSEY, WISCONSIN, MICHIGAN, MINNESOTA, 
OREGON, WASHINGTON, AND LONG ISLAND IN THE STATE OF NEW YORK

    1. The authority citation for 7 CFR part 929 continues to read as 
follows:

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

    2. Amend Sec.  929.10 by revising paragraphs (a)(2) and (b)(4) to 
read as follows:


Sec.  929.10  Handle.

    (a) * * *
    (2) To sell, consign, deliver, or transport (except as a common or 
contract carrier of cranberries owned by another person) fresh 
cranberries or any other way to place fresh cranberries in the current 
of commerce within the production area or between the production area 
and any point outside thereof.
    (b) * * *
    (4) The cold storage or freezing of excess or restricted 
cranberries for the purpose of temporary storage during periods when an 
annual allotment percentage and/or a handler withholding program is in 
effect prior to their disposal, pursuant to Sec. Sec.  929.54 or 
929.59.
    3. Add a new Sec.  929.28 to read as follows:


Sec.  929.28  Redistricting and reapportionment.

    (a) The committee, with the approval of the Secretary, may 
reestablish districts within the production area and reapportion 
membership among the districts. In recommending such changes, the 
committee shall give consideration to:
    (1) The relative volume of cranberries produced within each 
district.
    (2) The relative number of cranberry producers within each 
district.
    (3) Cranberry acreage within each district.
    (4) Other relevant factors.
    (b) The committee may establish, with the approval of the 
Secretary, rules and regulations for the implementation and operation 
of this section.
    4. Revise Sec.  929.45 to read as follows:


Sec.  929.45  Research and development.

    (a) The committee, with the approval of the Secretary, may 
establish or provide for the establishment of production research, 
marketing research, and market development projects, including paid 
advertising, designed to assist, improve, or promote the marketing, 
distribution, consumption, or efficient production of cranberries. The 
expense of such projects shall be paid from funds collected pursuant to 
Sec.  929.41, or from such other funds as approved by the Secretary.
    (b) The committee may, with the approval of the Secretary, 
establish rules and regulations as necessary for the implementation and 
operation of this section.
    5. Revise Sec.  929.46 to read as follows:


Sec.  929.46  Marketing policy.

    Each season prior to making any recommendation pursuant to Sec.  
929.51, the committee shall submit to the Secretary a report setting 
forth its marketing policy for the crop year. Such marketing policy 
shall contain the following information for the current crop year:
    (a) The estimated total production of cranberries;
    (b) The expected general quality of such cranberry production;
    (c) The estimated carryover, as of September 1, of frozen 
cranberries and other cranberry products;
    (d) The expected demand conditions for cranberries in different 
market outlets;
    (e) The recommended desirable total marketable quantity of 
cranberries including a recommended adequate carryover into the 
following crop year of frozen cranberries and other cranberry products;
    (f) Other factors having a bearing on the marketing of cranberries.


Sec.  929.47  [Removed]

    6. Remove Sec.  929.47.
    7. Revise Sec.  929.48 to read as follows:


Sec.  929.48  Sales history.

    (a) A sales history for each grower shall be computed by the 
committee in the following manner:
    (1) For growers with acreage with 6 or more years of sales history, 
the sales history shall be computed using an average of the highest 
four of the most recent six years of sales.
    (2) For growers with 5 years of sales history from acreage planted 
or replanted 2 years prior to the first harvest on that acreage, the 
sales history is computed by averaging the highest 4 of the 5 years.
    (3) For growers with 5 years of sales history from acreage planted 
or replanted 1 year prior to the first harvest on that acreage, the 
sales history is computed by averaging the highest 4 of the 5 years and 
shall be adjusted as provided in paragraph (a)(6) of this section.
    (4) For a grower with 4 years or less of sales history, the sales 
history shall be computed by dividing the total sales from that acreage 
by 4 and shall be adjusted as provided in paragraph (a)(6).
    (5) For growers with acreage having no sales history, or for the 
first harvest of replanted acres, the sales history will be the average 
first year yields (depending on whether first harvested 1 or 2 years 
after planting or replanting) as established by the committee and 
multiplied by the number of acres.
    (6) In addition to the sales history computed in accordance with 
paragraphs (a)(3) and (4) of this section, additional sales history 
shall be assigned to growers using the formula x=(a-b)c. The letter 
``x'' constitutes the additional number of barrels to be added to the 
grower's sales history. The value ``a'' is the expected yield for the 
forthcoming year harvested acreage as established by the committee. The 
value ``b'' is the total sales from that acreage as established by the 
committee divided by four. The value ``c'' is the number of acres 
planted or replanted in the specified year. For acreage with five years 
of sales history: a = the expected yield for the forthcoming sixth year 
harvested acreage (as established by the committee); b = an average of 
the most recent 4 years of expected yields (as established by the 
committee); and c = the number of acres with 5 years of sales history.
    (b) A new sales history shall be calculated for each grower after 
each crop year, using the formulas established in paragraph (a) of this 
section, or such other formula(s) as determined by the committee, with 
the approval of the Secretary.
    (c) The committee, with the approval of the Secretary, may adopt 
regulations to change the number and identity of years to be used in 
computing sales histories, including the number of years to be used in 
computing the average. The committee may establish, with the approval 
of the Secretary, rules and

[[Page 23364]]

regulations necessary for the implementation and operation of this 
section.
    (d) Sales histories, starting with the crop year following adoption 
of this part, shall be calculated separately for fresh and processed 
cranberries. The amount of fresh fruit sales history may be calculated 
based on either the delivered weight of the barrels paid for by the 
handler (excluding trash and unusable fruit) or on the weight of the 
fruit paid for by the handler after cleaning and sorting for the retail 
market. Handlers using the former calculation shall allocate delivered 
fresh fruit subsequently used for processing to growers' processing 
sales. Fresh fruit sales history, in whole or in part, may be added to 
process fruit sales history with the approval of the committee in the 
event that the grower's fruit does not qualify as fresh fruit at 
delivery.
    (e) The committee may recommend rules and regulations, with the 
approval of the Secretary, to adjust a grower's sales history to 
compensate for catastrophic events that impact the grower's crop.
    8. Revise Sec.  929.49 to read as follows:


Sec.  929.49  Marketable quantity, allotment percentage, and annual 
allotment.

    (a) Marketable quantity and allotment percentage. If the Secretary 
finds, from the recommendation of the committee or from other available 
information, that limiting the quantity of cranberries purchased from 
or handled on behalf of growers during a crop year would tend to 
effectuate the declared policy of the Act, the Secretary shall 
determine and establish a marketable quantity for that crop year.
    (b) The marketable quantity shall be apportioned among growers by 
applying the allotment percentage to each grower's sales history, 
established pursuant to `` 929.48. Such allotment percentage shall be 
established by the Secretary and shall equal the marketable quantity 
divided by the total of all growers' sales histories including the 
estimated total sales history for new growers. Except as provided in 
paragraph (g) of this section, no handler shall purchase or handle on 
behalf of any grower cranberries not within such grower's annual 
allotment.
    (c) In any crop year in which the production of cranberries is 
estimated by the committee to be equal to or less than its recommended 
marketable quantity, the committee may recommend that the Secretary 
increase or suspend the allotment percentage applicable to that year. 
In the event it is found that market demand is greater than the 
marketable quantity previously set, the committee may recommend that 
the Secretary increase such quantity.
    (d) Issuance of annual allotments. The committee shall require all 
growers to qualify for such allotment by filing with the committee a 
form wherein growers include the following information:
    (1) The amount of acreage which will be harvested;
    (2) A copy of any lease agreement covering cranberry acreage;
    (3) The name of the handler(s) to whom their annual allotment will 
be delivered;
    (4) Such other information as may be necessary for the 
implementation and operation of this section.
    (e) On or before such date as determined by the committee, with the 
approval of the Secretary, the committee shall issue to each grower an 
annual allotment determined by applying the allotment percentage 
established pursuant to paragraph (b) of this section to the grower's 
sales history.
    (f) On or before such date as determined by the committee, with the 
approval of the Secretary, in which an allotment percentage is 
established by the Secretary, the committee shall notify each handler 
of the annual allotment that can be handled for each grower whose total 
crop will be delivered to that handler. In cases where a grower 
delivers a crop to more than one handler, the grower must specify how 
the annual allotment will be apportioned among the handlers.
    (g) Growers who do not produce cranberries equal to their computed 
annual allotment shall transfer their unused allotment to such growers' 
handlers. The handler shall equitably allocate the unused annual 
allotment to growers with excess cranberries who deliver to such 
handler. Unused annual allotment remaining after all such transfers 
have occurred shall be reported and transferred to the committee by 
such date as established by the committee with the approval of the 
Secretary.
    (h) Handlers who receive cranberries more than the sum of their 
growers' annual allotments have ``excess cranberries,'' pursuant to 
Sec.  929.59, and shall so notify the committee. Handlers who have 
remaining unused allotment pursuant to paragraph (g) of this section 
are ``deficient'' and shall so notify the committee. The committee 
shall allocate unused allotment to all handlers having excess 
cranberries, proportional to each handler's total allotment.
    (i) Growers who decide not to grow a crop, during any crop year in 
which a volume regulation is in effect, may choose not to assign their 
allotment to a handler.
    (j) The committee may establish, with the approval of the 
Secretary, rules and regulations necessary for the implementation and 
operation of this section.
    9. Revise Sec.  929.50 to read as follows:


Sec.  929.50  Transfers of sales histories and annual allotments.

    (a) Leases and sales of cranberry acreage.
    (1) Total or partial lease of cranberry acreage. When total or 
partial lease of cranberry acreage occurs, sales history attributable 
to the acreage being leased shall remain with the lessor.
    (2) Total sale of cranberry acreage. When there is a sale of a 
grower's total cranberry producing acreage, the committee shall 
transfer all owned acreage and all associated sales history to such 
acreage to the buyer. The seller and buyer shall file a sales transfer 
form providing the committee with such information as may be requested 
so that the buyer will have immediate access to the sales history 
computation process.
    (3) Partial sale of cranberry acreage. When less than the total 
cranberry producing acreage is sold, sales history associated with that 
portion of the acreage being sold shall be transferred with the 
acreage. The seller shall provide the committee with a sales transfer 
form containing, but not limited to the distribution of acreage and the 
percentage of sales history, as defined in Sec.  929.48(a)(1), 
attributable to the acreage being sold.
    (4) No sale of cranberry acreage shall be recognized unless the 
committee is notified in writing.
    (b) Allotment transfers. During a year of volume regulation, a 
grower may transfer all or part of his/her allotment to another grower. 
If a lease is in effect the lessee shall receive allotment from lessor 
attributable to the acreage leased. Provided, That the transferred 
allotment shall remain assigned to the same handler and that the 
transfer shall take place prior to a date to be recommended by the 
Committee and approved by the Secretary. Transfers of allotment between 
growers having different handlers may occur with the consent of both 
handlers.
    (c) The committee may establish, with the approval of the 
Secretary, rules and regulations, as needed, for the implementation and 
operation of this section.
    10. Revise Sec.  929.51 to read as follows:


Sec.  929.51  Recommendations for regulation.

    (a) Except as otherwise provided in paragraph (b) of this section, 
if the

[[Page 23365]]

committee deems it advisable to regulate the handling of cranberries in 
the manner provided in Sec.  929.52, it shall so recommend to the 
Secretary by the following appropriate dates:
    (1) An allotment percentage regulation must be recommended by no 
later than March 1;
    (2) A handler withholding program must be recommended by not later 
than August 31. Such recommendation shall include the free and 
restricted percentages for the crop year;
    (3) If both programs are recommended in the same year, the 
Committee shall submit with its recommendation an economic analysis to 
the USDA prior to March 1 of the year in which the programs are 
recommended.
    (b) An exception to the requirement in paragraph (a)(1) of this 
section may be made in a crop year in which, due to unforeseen 
circumstances, a producer allotment regulation is deemed necessary 
subsequent to the March 1 deadline.
    (c) In arriving at its recommendations for regulation pursuant to 
paragraph (a) of this section, the committee shall give consideration 
to current information with respect to the factors affecting the supply 
of and demand for cranberries during the period when it is proposed 
that such regulation should be imposed. With each such recommendation 
for regulation, the committee shall submit to the Secretary the data 
and information on which such recommendation is based and any other 
information the Secretary may request.
    11. Revise Sec.  929.52 to read as follows:


Sec.  929.52  Issuance of regulations.

    (a) The Secretary shall regulate, in the manner specified in this 
section, the handling of cranberries whenever the Secretary finds, from 
the recommendations and information submitted by the committee, or from 
other available information, that such regulation will tend to 
effectuate the declared policy of the Act. Such regulation shall limit 
the total quantity of cranberries which may be handled during any 
fiscal period by fixing the free and restricted percentages, applied to 
cranberries acquired by handlers in accordance with Sec.  929.54, and/
or by establishing an allotment percentage in accordance with Sec.  
929.49.
    (b) The committee shall be informed immediately of any such 
regulation issued by the Secretary, and the committee shall promptly 
give notice thereof to handlers.
    12. Revise Sec.  929.54 to read as follows:


Sec.  929.54  Withholding.

    (a) Whenever the Secretary has fixed the free and restricted 
percentages for any fiscal period, as provided for in Sec.  929.52(a), 
each handler shall withhold from handling a portion of the cranberries 
acquired during such period. The withheld portion shall be equal to the 
restricted percentage multiplied by the volume of marketable 
cranberries acquired. Such withholding requirements shall not apply to 
any lot of cranberries for which such withholding requirement 
previously has been met by another handler in accordance with Sec.  
929.55.
    (b) The committee, with the approval of the Secretary, shall 
prescribe the manner in which, and date or dates during the fiscal 
period by which, handlers shall have complied with the withholding 
requirements specified in paragraph (a) of this section.
    (c) Withheld cranberries may meet such standards of grade, size, 
quality, or condition as the committee, with the approval of the 
Secretary, may prescribe. The Federal or Federal-State Inspection 
Service shall inspect all such cranberries. A certificate of such 
inspection shall be issued which shall include the name and address of 
the handler, the number and type of containers in the lot, the location 
where the lot is stored, identification marks (including lot stamp, if 
used), and the quantity of cranberries in such lot that meet the 
prescribed standards. Promptly after inspection and certification, each 
such handler shall submit to the committee a copy of the certificate of 
inspection issued with respect to such cranberries.
    (d) Any handler who withholds from handling a quantity of 
cranberries in excess of that required pursuant to paragraph (a) of 
this section shall have such excess quantity credited toward the next 
fiscal year's withholding obligation, if any--provided that such credit 
shall be applicable only if the restricted percentage established 
pursuant to Sec.  929.52 was modified pursuant to Sec.  929.53; to the 
extent such excess was disposed of prior to such modification; and 
after such handler furnishes the committee with such information as it 
prescribes regarding such withholding and disposition.
    (e) The Committee, with the approval of the Secretary, may 
establish rules and regulations necessary and incidental to the 
administration of this section.
    13. Revise Sec.  929.56 to read as follows:


Sec.  929.56  Special provisions relating to withheld (restricted) 
cranberries.

    (a) A handler shall make a written request to the committee for the 
release of all or part of the cranberries that the handler is 
withholding from handling pursuant to Sec.  929.54(a). Each request 
shall state the quantity of cranberries for which release is requested 
and shall provide such additional information as the committee may 
require. Handlers may replace the quantity of withheld cranberries 
requested for release as provided under either paragraph (b) or (c) of 
this section.
    (b) The handler may contract with another handler for an amount of 
free cranberries to be converted to restricted cranberries that is 
equal to the volume of cranberries that the handler wishes to have 
converted from his own restricted cranberries to free cranberries.
    (1) The handlers involved in such an agreement shall provide the 
committee with such information as may be requested prior to the 
release of any restricted cranberries.
    (2) The committee shall establish guidelines to ensure that all 
necessary documentation is provided to the committee, including but not 
limited to, the amount of cranberries being converted and the 
identities of the handlers assuming the responsibility for withholding 
and disposing of the free cranberries being converted to restricted 
cranberries.
    (3) Cranberries converted to replace released cranberries may be 
required to be inspected and meet such standards as may be prescribed 
for withheld cranberries prior to disposal.
    (4) Transactions and agreements negotiated between handlers shall 
include all costs associated with such transactions including the 
purchase of the free cranberries to be converted to restricted 
cranberries and all costs associated with inspection (if applicable) 
and disposal of such restricted cranberries. No costs shall be incurred 
by the committee other than for the normal activities associated with 
the implementation and operation of a volume regulation program.
    (5) Free cranberries belonging to one handler and converted to 
restricted cranberries on the behalf of another handler shall be 
reported to the committee in such manner as prescribed by the 
committee.
    (c) Except as otherwise directed by the Secretary, as near as 
practicable to the beginning of the marketing season of each fiscal 
period with respect to which the marketing policy proposes regulation 
pursuant to Sec.  929.52(a), the committee shall determine the amount 
per barrel each handler shall deposit with the committee for it to 
release to him, in accordance with this section, all or part of the 
cranberries he is withholding; and the committee shall

[[Page 23366]]

give notice of such amount of deposit to handlers. Such notice shall 
state the period during which such amount of deposit shall be in 
effect. Whenever the committee determines that, by reason of changed 
conditions or other factors, a different amount should therefore be 
deposited for the release of withheld cranberries, it shall give notice 
to handlers of the new amount and the effective period thereof. Each 
determination as to the amount of deposit shall be on the basis of the 
committee's evaluation of the following factors:
    (1) The prices at which growers are selling cranberries to 
handlers,
    (2) The prices at which handlers are selling fresh market 
cranberries to dealers,
    (3) The prices at which cranberries are being sold for processing 
in products,
    (4) The prices at which handlers are selling cranberry concentrate,
    (5) The prices the committee has paid to purchase cranberries to 
replace released cranberries in accordance with this section, and
    (6) The costs incurred by growers in producing cranberries.
    (7) Each request for release of withheld cranberries shall include, 
in addition to all other information as may be prescribed by the 
committee, the quantity of cranberries the release is requested and 
shall be accompanied by a deposit (a cashier's or certified check made 
payable to the Cranberry Marketing Committee) in an amount equal to the 
twenty percent of the amount determined by multiplying the number of 
barrels stated in the request by the then effective amount per barrel 
as determined in this paragraph (c).
    (8) Subsequent deposits equal to, but not less than, the ten 
percent of the remaining outstanding balance shall be payable to the 
committee on a monthly basis commencing on January 1, and concluding by 
no later than August 31 of the fiscal period.
    (9) If the committee determines such a release request is properly 
filled out, is accompanied by the required deposit, and contains a 
certification that the handler is withholding such cranberries, it 
shall release to such handler the quantity of cranberries specified in 
his request.
    (d) Funds deposited for the release of withheld cranberries, 
pursuant to paragraph (c) of this section, shall be used by the 
committee to purchase from handlers unrestricted (free percentage) 
cranberries in an aggregate amount as nearly equal to, but not in 
excess of, the total quantity of the released cranberries as it is 
possible to purchase to replace the released cranberries.
    (e) All handlers shall be given an equal opportunity to participate 
in such purchase of unrestricted (free percentage) cranberries. If a 
larger quantity is offered than can be purchased, the purchases shall 
be made at the lowest price possible. If two or more handlers offer 
unrestricted (free percentage) cranberries at the same price, purchases 
from such handlers shall be in proportion to the quantity of their 
respective offerings insofar as such division is practicable. The 
committee shall dispose of cranberries purchased as restricted 
cranberries in accordance with Sec.  929.57. Any funds received by the 
committee for cranberries so disposed of, which are in excess of the 
costs incurred by the committee in making such disposition, will accrue 
to the committee's general fund.
    (f) In the event any portion of the funds deposited with the 
committee pursuant to paragraph (c) of this section cannot, for reasons 
beyond the committee's control, be expended to purchase unrestricted 
(free percentage) cranberries to replace those withheld cranberries 
requested to be released, such unexpended funds shall, after deducting 
expenses incurred by the committee, be refunded to the handler who 
deposited the funds. The handler shall equitably distribute such refund 
among the growers delivering to such handler.
    (g) Inspection for restricted (withheld) cranberries released to a 
handler is not required.
    (h) The committee may establish, with the approval of the 
Secretary, rules and regulations for the implementation of this 
section. Such rules and regulations may include, but are not limited 
to, revisions in the payment schedule specified in paragraphs (c)(7) 
and (c)(8) of this section.
    14. Revise Sec.  929.58 to read as follows:


Sec.  929.58  Exemptions.

    (a) Upon the basis of the recommendation and information submitted 
by the committee, or from other available information, the Secretary 
may relieve from any or all requirements pursuant to this part the 
handling of cranberries in such minimum quantities as the committee, 
with the approval of the Secretary, may prescribe.
    (b) Upon the basis of the recommendation and information submitted 
by the committee, or from other available information, the Secretary 
may relieve from any or all requirements pursuant to this part the 
handling of such forms or types of cranberries as the committee, with 
the approval of the Secretary, may prescribe. Forms of cranberries 
could include cranberries intended for fresh sales or organically grown 
cranberries.
    (c) The committee, with the approval of the Secretary, shall 
prescribe such rules, regulations, and safeguards as it may deem 
necessary to ensure that cranberries handled under the provisions of 
this section are handled only as authorized.
    15. Revise Sec.  929.61 to read as follows:


Sec.  929.61  Outlets for excess cranberries.

    (a) Noncommercial outlets. Excess cranberries may be disposed of in 
noncommercial outlets that the committee finds, with the approval of 
the Secretary, meet the requirements outlined in paragraph (c) of this 
section. Noncommercial outlets include, but are not limited to:
    (1) Charitable institutions; and
    (2) Research and development projects.
    (b) Noncompetitive outlets. Excess cranberries may be sold in 
outlets that the committee finds, with the approval of the Secretary, 
are noncompetitive with established markets for regulated cranberries 
and meet the requirements outlined in paragraph (c) of this section. 
Noncompetitive outlets include but are not limited to:
    (1) Any nonhuman food use; and
    (2) Other outlets established by the committee with the approval of 
the Secretary.
    (c) Requirements. The handler disposing of or selling excess 
cranberries into noncompetitive or noncommercial outlets shall meet the 
following requirements, as applicable:
    (1) Charitable institutions. A statement from the charitable 
institution shall be submitted to the committee showing the quantity of 
cranberries received and certifying that the institution will consume 
the cranberries;
    (2) Research and development projects. A report shall be given to 
the committee describing the project, quantity of cranberries 
contributed, and date of disposition;
    (3) Nonhuman food use. Notification shall be given to the committee 
at least 48 hours prior to such disposition;
    (4) Other outlets established by the committee with the approval of 
the Secretary. A report shall be given to the committee describing the 
project, quantity of cranberries contributed, and date of disposition.
    (d) The storage and disposition of all excess cranberries withheld 
from handling shall be subject to the supervision and accounting 
control of the committee.
    (e) The committee, with the approval of the Secretary, may 
establish rules and

[[Page 23367]]

regulations for the implementation and operation of this section.
    16. Revise Sec.  929.62 to read as follows:


Sec.  929.62  Reports.

    (a) Grower report. Each grower shall file a report with the 
committee by January 15 of each crop year, or such other date as 
determined by the committee, with the approval of the Secretary, 
indicating the following:
    (1) Total acreage harvested and whether owned or leased.
    (2) Total commercial cranberry sales in barrels from such acreage.
    (3) Amount of acreage either in production, but not harvested or 
taken out of production and the reason(s) why.
    (4) Amount of new or replanted acreage coming into production.
    (5) Name of the handler(s) to whom commercial cranberry sales were 
made.
    (6) Such other information as may be needed for implementation and 
operation of this section.
    (b) Inventory. Each handler engaged in the handling of cranberries 
or cranberry products shall, upon request of the committee, file 
promptly with the committee a certified report, showing such 
information as the committee shall specify with respect to any 
cranberries and cranberry products which were held by them on such date 
as the committee may designate.
    (c) Receipts. Each handler shall, upon request of the committee, 
file promptly with the committee a certified report as to each quantity 
of cranberries acquired during such period as may be specified, and the 
place of production.
    (d) Handling reports. Each handler shall, upon request of the 
committee, file promptly with the committee a certified report as to 
the quantity of cranberries handled during any designated period or 
periods.
    (e) Withheld and excess cranberries. Each handler shall, upon 
request of the committee, file promptly with the committee a certified 
report showing, for such period as the committee may specify, the total 
quantity of cranberries withheld from handling or held in excess, in 
accordance with Sec. Sec.  929.49 and 929.54, the portion of such 
withheld or excess cranberries on hand, and the quantity and manner of 
disposition of any such withheld or excess cranberries disposed of.
    (f) Other reports. Upon the request of the committee, with the 
approval of the Secretary, each handler shall furnish to the committee 
such other information with respect to the cranberries and cranberry 
products acquired and disposed of by such person as may be necessary to 
enable the committee to exercise its powers and perform its duties 
under this part.
    (g) The committee may establish, with the approval of the 
Secretary, rules and regulations for the implementation and operation 
of this section.
    17. Revise Sec.  929.64 to read as follows:


Sec.  929.64  Verification of reports and records.

    The committee, through its duly authorized agents, during 
reasonable business hours, shall have access to any handler's premises 
where applicable records are maintained for the purpose of assuring 
compliance and checking and verifying records and reports filed by such 
handler.

    Dated: April 21, 2004.
A.J. Yates,
Administrator, Agricultural Marketing Service.
[FR Doc. 04-9424 Filed 4-27-04; 8:45 am]
BILLING CODE 3410-02-P