[Federal Register Volume 69, Number 131 (Friday, July 9, 2004)]
[Rules and Regulations]
[Pages 41383-41385]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-15584]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 930

[Docket No. FV03-930-6 IFR]


Tart Cherries Grown in the States of Michigan, et al.; Additional 
Option for Handler Diversion

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Interim final rule with request for comments.

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SUMMARY: This rule adds another method of handler diversion to the 
regulations under the Federal tart cherry marketing order (order). 
Handlers handling cherries harvested in a regulated district may 
fulfill any restricted percentage requirement when volume regulation is 
in effect by diverting cherries or cherry products rather than placing 
them in an inventory reserve. Under this additional method, handlers 
will be allowed to obtain diversion credit for diverting tart cherries, 
after processing, that may not be acceptable for the finished products 
manufactured by the handler. Currently, such diversion must take place 
prior to processing. This action was unanimously recommended by the 
Cherry Industry Administrative Board (Board), the body which locally 
administers the marketing order. The marketing order regulates the 
handling of tart cherries grown in the States of Michigan, New York, 
Pennsylvania, Oregon, Utah, Washington, and Wisconsin.

DATES: Effective July 12, 2004; comments received by September 7, 2004, 
will be considered prior to issuance of a final rule.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this action. Comments must be sent to the Docket Clerk, 
Fruit and Vegetable Programs, AMS, USDA, 1400 Independence Avenue, SW., 
STOP 0237, Washington, DC 20250-0237; fax: (202) 720-8938, e-mail: 
[email protected], or Internet: http://www.regulations.gov. All 
comments should reference the docket number and the date and page 
number of this issue of the Federal Register and will be made available 
for public inspection in the Office of the Docket Clerk during regular 
business hours or can be viewed at: http://www.ams/usda.gov/fv/moab/html.

FOR FURTHER INFORMATION CONTACT: Patricia A. Petrella or Kenneth G. 
Johnson, Marketing Order Administration Branch, Fruit and Vegetable 
Programs, AMS, USDA, Suite 2A04, Unit 155, 4700 River Road, Riverdale, 
MD 20737, telephone: (301) 734-5243, or Fax: (301) 734-5275; or George 
Kelhart, Technical Advisor, Marketing Order Administration Branch, 
Fruit and Vegetable Programs, AMS, USDA, 1400 Independence Avenue, SW., 
STOP 0237, Washington, DC 20250-0237; telephone: (202) 720-2491, or 
fax: (202) 720-8938.
    Small businesses may request information on complying with this 
regulation, or obtain a guide on complying with fruit, vegetable, and 
specialty crop marketing agreements and orders by contacting Jay 
Guerber, Marketing Order Administration Branch, Fruit and Vegetable 
Programs, AMS, USDA, 1400 Independence Avenue, SW., STOP 0237, 
Washington, DC 20250-0237; telephone: (202) 720-2491, fax: (202) 720-
5698, or e-mail: [email protected].

SUPPLEMENTARY INFORMATION: This rule is issued under Marketing 
Agreement and Order No. 930 (7 CFR part 930), regulating the handling 
of tart cherries produced in the States of Michigan, New York, 
Pennsylvania, Oregon, Utah, Washington, and Wisconsin, hereinafter 
referred to as the ``order.'' The order is effective under the 
Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-
674), hereinafter referred to as the ``Act.''
    The Department of Agriculture (USDA) is issuing this rule in 
conformance with Executive Order 12866.
    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule will not preempt any State or local laws, 
regulations, or policies, unless they present an irreconcilable 
conflict with this rule.
    The Act provides that administrative proceedings must be exhausted 
before parties may file suit in court. Under section 608c(15)(A) of the 
Act, any handler subject to an order may file with the Secretary 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 exempt 
therefrom. Such handler is afforded the opportunity for a hearing on 
the petition. After the hearing, the Secretary 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 in equity to review 
the Secretary's ruling on the petition, provided an action is filed not 
later than 20 days after the date of the entry of the ruling.
    Handler diversion is authorized under Sec.  930.59 of the order 
and, when volume regulation is in effect, handlers may fulfill 
restricted percentage requirements by diverting cherries or cherry 
products into authorized outlets. Volume regulation is intended to help 
the tart cherry industry stabilize supplies and prices in years of 
excess production. The volume regulation provisions of the order 
provide for a combination of processor owned inventory reserves and 
grower or handler diversion of excess tart cherries. Reserve cherries 
may be released for sale into commercial outlets when the free 
percentage portion of the regulated crop is not expected to fill 
demand.
    Section 930.59(b) of the order provides for the designation of 
allowable forms of handler diversion. These include: uses exempt under 
Sec.  930.62; contribution to a Board approved food bank or other 
approved charitable organization; acquisition of grower diversion 
certificates that have been issued in accordance with Sec.  930.58; or 
other uses, including diversion by destruction of the cherries at the 
handler's facilities as provided for in Sec.  930.59(c).
    Section 930.159 of the rules and regulations under the order allows 
handlers to divert cherries by destruction of the cherries at the 
handler's facility. Currently, at-plant diversion of cherries takes 
place at the handler's facility prior to placing

[[Page 41384]]

cherries into the processing line. However, experience has shown that 
this limitation places a burden on handlers regulated under this order.
    To remove this burden, the Board unanimously recommended that 
handlers be allowed to divert and receive diversion credit for tart 
cherries after processing that may not be acceptable for the finished 
products they manufacture. With the capability to divert such cherries 
after processing, but before the finished product is completed, 
handlers would have an incentive to remove the lower quality processed 
cherries from the lot, meet their restricted obligation requirements, 
and improve the quality of their products. Improvement in the quality 
of tart cherries and tart cherry products would benefit producers, 
handlers, and consumers.
    This action is intended to provide handlers more flexibility in 
meeting their restricted obligation requirements. The ability to 
perform at-plant diversion after placing the cherries into the 
processing line, but before a finished product is completed, will 
benefit all handlers. This action is expected to especially benefit 
handlers who only process one product. In many instances, these 
handlers are small.
    This rule would allow a handler who processes only five plus one 
cherries (25 pounds of tart cherries with 5 pounds of sugar added) to 
fulfill his/her restricted percentage obligation (in a volume regulated 
year) by diverting at-plant, lower quality wholesome fruit from his/her 
five plus one processing line. Currently, the diversion must take place 
prior to processing and handlers that process one product may be forced 
to divert their good quality tart cherries with the lower quality 
wholesome cherries, or divert cherries by some other approved method. 
Handlers processing more than one product also would be able to take 
advantage of the additional method of at-plant diversion.
    Diversion may also be accomplished by handlers donating cherries to 
charitable organizations, utilizing cherries in exempt outlets, or 
redeeming grower diversion certificates obtained from growers who have 
diverted cherries by non-harvest, and who have been issued diversion 
certificates by the Board in accordance with rules and regulations 
governing the issuance of grower diversion certificates (Sec.  
930.158).
    The Board reported that during the 2001-2002 crop year that the 
inventory reserve contained 44.3 percent frozen products, 11.3 percent 
waterpack, 15.2 percent piefill, 28 percent juice and juice 
concentrate, and 1.2 percent other products. These percentages show 
that frozen products, and juice and juice concentrate make up most of 
the reserve quantities.
    Pursuant to Sec.  930.159(b), handlers electing to divert cherries 
or cherry products must first notify the Board and submit a plan for 
approval. Such notification and plan must include an agreement that 
diversion will take place under the supervision of the USDA Processed 
Products Inspection Service or Board employee inspectors, and that the 
costs of such supervision are to be paid by the handler. USDA 
inspectors supervise the diversion of cherries or finished products at 
the current hourly rate under USDA's inspection fee schedule (7 CFR 
54.42). Board employees supervise diversion at the same payment rate.
    Once diversion is satisfactorily accomplished, handlers receive 
diversion certificates stating the weight of cherries diverted. Such 
diversion certificates can be used to satisfy handlers' restricted 
percentage obligations. Cherries and finished cherry products which 
have been diverted are not be subject to assessments.

The Regulatory Flexibility Act and Effects on Small Businesses

    The Agricultural Marketing Service (AMS) has considered the 
economic impact of this action on small entities and has prepared this 
initial regulatory flexibility analysis. The Regulatory Flexibility Act 
(RFA) would allow AMS to certify that regulations do not have a 
significant economic impact on a substantial number of small entities.
    However, as a matter of general policy, AMS' Fruit and Vegetable 
Programs (Programs) no longer opt for such certification, but rather 
perform regulatory flexibility analyses for any rulemaking that would 
generate the interest of a significant number of small entities. 
Performing such analyses shifts the Programs' efforts from determining 
whether regulatory flexibility analyses are required to the 
consideration of regulatory options and economic or regulatory impacts.
    The purpose of the RFA is to fit regulatory actions to the scale of 
business subject to such actions in order that small businesses will 
not be unduly or disproportionately burdened. Marketing orders issued 
pursuant to the Act, and rules issued thereunder, are unique in that 
they are brought about through group action of essentially small 
entities acting on their own behalf. Thus, both statutes have small 
entity orientation and compatibility.
    There are approximately 40 handlers of tart cherries who are 
subject to regulation under the tart cherry marketing order and 
approximately 900 producers of tart cherries in the regulated area. 
Small agricultural service firms, which includes handlers, have been 
defined by the Small Business Administration (13 CFR 121.201) as those 
having annual receipts of less than $5,000,000, and small agricultural 
producers are defined as those having annual receipts of less than 
$750,000. A majority of the producers and handlers are considered small 
entities under SBA's standards.
    Board and subcommittee meetings are widely publicized in advance 
and are held in a location central to the production area. The meetings 
are open to all industry members (including small business entities) 
and other interested persons who are encouraged to participate in the 
deliberations and voice their opinions on topics under discussion. 
Thus, Board recommendations can be considered to represent the 
interests of small business entities in the industry.
    The Board reported that during the 2001-2002 crop year that the 
inventory reserve contained 44.3 percent frozen products, 11.3 percent 
waterpack, 15.2 percent piefill, 28 percent juice and juice 
concentrate, and 1.2 percent other products. These percentages show 
that frozen products, and juice and juice concentrate make up most of 
the reserve quantities.
    The Board unanimously recommended this additional method for 
diversion credit to allow handlers to divert product after processing 
that may not be acceptable for the finished products manufactured by 
the handler. As discussed earlier, this action provides handlers more 
flexibility in meeting their restricted obligation requirements and is 
expected to be particularly helpful to handlers who produce only one 
product. In many instances, the one product handlers in the tart cherry 
industry are small.
    Handlers that process juice concentrate and other products can more 
easily meet their restricted obligation requirements by juicing and 
processing lower quality wholesome product and placing it in the 
inventory reserve. Handlers that only have the ability to process 
products requiring higher quality fruit, like five plus one cherries 
have to put this fruit into the inventory reserves, or take advantage 
of other diversion options available under the order.
    To sell more of their higher quality products, some handlers 
purchase cherries or diversion credit certificates from other handlers 
to meet their restricted obligation requirements. The

[[Page 41385]]

added flexibility provided by this action will help all handlers, and 
is expected to especially benefit the one-product handlers who will be 
able to sell more of their higher quality cherries in finished product 
form.
    Producers also are expected to benefit from the implementation of 
this action. Currently, producers can use in-orchard tank diversion, in 
which cherries harvested into tanks are measured, calculated then 
diverted in the orchard. This method of diversion, however, removes 
both good and lesser quality fruit. Under the Board's recommendation, 
producers could deliver all of their fruit to handlers and the good 
quality fruit would be sorted and the poor quality fruit diverted or 
dumped. Producers would be paid for the good quality fruit. According 
to the Board, growers are paid on a quality point basis relative to the 
quality of the fruit delivered. This action would provide producers 
with more consistent income proportionate to the quality of the fruit 
delivered to handlers and with discretion to reduce orchard diversion. 
As such, producers can be more selective in complying with the grower 
diversion process.
    The principal demand for tart cherries is in the form of processed 
products. Tart cherries are dried, frozen, canned, juiced, and pureed. 
Data from the National Agricultural Statistics Service (NASS) states 
that during the period 1995/96 through 2002/03, approximately 92 
percent of the U.S. tart cherry crop, or 285.7 million pounds, was 
processed annually. Of the 285.7 million pounds of tart cherries 
processed, 58 percent was frozen, 30 percent was canned, and 12 percent 
was utilized for juice.
    With regard to alternatives, the Board felt that the recommendation 
was the only solution to providing handlers addtitional flexibility in 
meeting their restricted obligation requirements.
    USDA has not identified any relevant Federal rules that duplicate, 
overlap, or conflict with this regulation.
    In compliance with Office of Management and Budget (OMB) 
regulations (5 CFR part 1320) which implement the Paperwork Reduction 
Act of 1995 (Pub. L. 104-13), the information collection and 
recordkeeping requirements have been previously approved by OMB and 
assigned OMB Number 0581-0177.
    There are some reporting, recordkeeping, and other compliance 
requirements under the marketing order. The reporting and recordkeeping 
burdens are necessary for compliance purposes and for developing 
statistical data for maintenance of the program. The forms require 
information which is readily available from handler records and which 
can be provided without data processing equipment or trained 
statistical staff. As with other, similar marketing order programs, 
reports and forms are periodically studied to reduce or eliminate 
duplicate information collection burdens by industry and public sector 
agencies. This rule does not change those requirements.
    This rule invites comments on adding another method of handler 
diversion to the regulations under the Federal tart cherry marketing 
order. Any comments received will be considered prior to finalization 
of this rule.
    After consideration of all relevant material presented, including 
the Board's recommendation, and other information, it is found that 
this interim final rule, as hereinafter set forth, will tend to 
effectuate the declared policy of the Act.
    Pursuant to 5 U.S.C. 553, it is also found and determined upon good 
cause that it is impracticable, unnecessary, and contrary to the public 
interest to give preliminary notice prior to putting this rule into 
effect and that good cause exists for not postponing the effective date 
of this rule until 30 days after publication in the Federal Register 
because: (1) The tart cherry crop year begins July 1 and this action 
needs to be implemented so handlers can take advantage of this 
opportunity for the upcoming season; (2) the Board unanimously 
recommended this action at a public meeting and interested parties had 
an opportunity to provide input; and (3) this rule provides a 60-day 
comment period and any comments received will be considered prior to 
finalization of this rule.

List of Subjects in 7 CFR Part 930

    Marketing agreements, Reporting and recordkeeping requirements, 
Tart cherries.


0
For the reasons set forth in the preamble, 7 CFR part 930 is amended to 
read as follows:

PART 930--TART CHERRIES GROWN IN THE STATES OF MICHIGAN, NEW YORK, 
PENNSYLVANIA, OREGON, UTAH, WASHINGTON, AND WISCONSIN

0
1. The authority citation for 7 CFR part 930 continues to read as 
follows:

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

0
2. Section 930.159 is amended by revising paragraph (c) to read as 
follows:


Sec.  930.159  Handler diversion.

* * * * *
    (c) At-plant diversion. Diversion by disposal at-plant may take 
place prior to placing the cherries into the processing line, or after 
processing, but before a finished product is manufactured. Such 
diversion will take place under the supervision of USDA Inspection 
Service or Board employee inspectors. USDA inspectors or Board 
employees or Board agents will supervise diversion of cherry products 
at-plant at the current hourly rate under USDA's inspection fee 
schedule (7 CFR 52.42).
* * * * *

    Dated: July 1, 2004.
A.J. Yates,
Administrator, Agricultural Marketing Service.
[FR Doc. 04-15584 Filed 7-8-04; 8:45 am]
BILLING CODE 3410-02-P