[Federal Register Volume 69, Number 144 (Wednesday, July 28, 2004)]
[Proposed Rules]
[Pages 44975-44981]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-17271]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
 ========================================================================
 

  Federal Register / Vol. 69, No. 144 / Wednesday, July 28, 2004 / 
Proposed Rules  

[[Page 44975]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 920

[Docket No. FV04-920-1 PR]


Kiwifruit Grown in CA; Relaxation of Pack and Container 
Requirements

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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

SUMMARY: This rule invites comments on revisions to pack and container 
requirements currently prescribed for California kiwifruit under the 
California kiwifruit marketing order (order). The order regulates the 
handling of kiwifruit grown in California and is administered locally 
by the Kiwifruit Administrative Committee (Committee). This rule would 
add a new size designation to the allowable size designations for packs 
of kiwifruit; revise the standard packaging requirements to require 
volume filled containers of kiwifruit designated by weight to hold 
19.8-pounds (9-kilograms) net weight of kiwifruit, unless such 
containers hold less than 15 pounds or more than 35 pounds net weight 
of kiwifruit; require the quantity statement to be indicated in terms 
of both ``count'' and ``size'' for all kiwifruit packed into cell 
compartments, cardboard fillers, or molded trays; and exempt all 
varieties of kiwifruit from the ``tightly packed'' standard pack 
requirement. This rule is expected to help handlers compete more 
effectively in the marketplace, better meet the needs of retailers, 
reduce handler packing costs, and to improve handler and grower 
returns.

DATES: Comments must be received by August 12, 2004.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this proposal. Comments must be sent to the Docket Clerk, 
Marketing Order Administration Branch, Fruit and Vegetable Programs, 
AMS, USDA, 1400 Independence Avenue SW., STOP 0237, Washington, DC 
20250-0237; Fax: (202) 720-8938, 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: Rose Aguayo, California Marketing 
Field Office, Marketing Order Administration Branch, Fruit and 
Vegetable Programs, AMS, USDA, 2202 Monterey Street, suite 102B, 
Fresno, California 93721; telephone: (559) 487-5901, Fax: (559) 487-
5906; or George Kelhart, Technical Advisor, Marketing Order 
Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 
Independence Avenue SW., STOP 0237, Washington, DC 20250-0237; 
telephone: (202) 720-2491, Fax: (202) 720-8938.
    Small businesses may request information on complying with this 
regulation by contacting Jay Guerber, Marketing Order Administration 
Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence 
Avenue SW., STOP 0237, Washington, DC 20250-0237; telephone: (202) 720-
2491, Fax: (202) 720-8938, or e-mail: [email protected].

SUPPLEMENTARY INFORMATION: This proposal is issued under Marketing 
Order No. 920 as amended (7 CFR part 920), regulating the handling of 
kiwifruit grown in California, hereinafter referred to as the 
``order.'' The order is effective under the Agricultural Marketing 
Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter 
referred to as the ``Act.''
    The Department of Agriculture (USDA) is issuing this rule in 
conformance with Executive Order 12866.
    This proposal has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule is not intended to have retroactive effect. 
This proposal will not preempt any State or local laws, regulations, or 
policies, unless they present an irreconcilable conflict with this 
rule.
    The Act provides that administrative proceedings must be exhausted 
before parties may file suit in court. Under section 608c(15)(A) of the 
Act, any handler subject to an order may file with USDA a petition 
stating that the order, any provision of the order, or any obligation 
imposed in connection with the order is not in accordance with law and 
request a modification of the order or to be exempted therefrom. A 
handler is afforded the opportunity for a hearing on the petition. 
After the hearing USDA would rule on the petition. The Act provides 
that the district court of the United States in any district in which 
the handler is an inhabitant, or has his or her principal place of 
business, has jurisdiction to review USDA's ruling on the petition, 
provided an action is filed not later than 20 days after the date of 
the entry of the ruling.
    This proposed rule invites comments on revisions to pack and 
container requirements currently prescribed for California kiwifruit 
under the order. This rule would: (1) Add a new size designation to the 
allowable size designations for packs of kiwifruit; (2) revise the 
standard packaging requirements to require volume filled containers of 
kiwifruit designated by weight to hold 19.8-pounds (9-kilograms) net 
weight of kiwifruit, unless such containers hold less than 15 pounds or 
more than 35 pounds net weight of kiwifruit; (3) require the quantity 
statement to be indicated in terms of both ``count'' and ``size'' for 
all kiwifruit packed into cell compartments, cardboard fillers, or 
molded trays; and (4) exempt all varieties of kiwifruit from the 
``tightly packed'' standard pack requirement. The Committee recommended 
these changes at its March 10, 2004, meeting. This rule is expected to 
help handlers compete more effectively in the marketplace, better meet 
the needs of retailers, reduce handler packing and costs, and to 
improve handler and grower returns.

Additional Numerical Count Size Designation

    Under the terms of the order, fresh market shipments of kiwifruit 
grown in California are required to be inspected and meet grade, size, 
maturity, pack, and container requirements.
    Section 920.52 authorizes the establishment of pack requirements. 
Section 920.302(a)(4) of the order's administrative rules and 
regulations specifies pack requirements for fresh shipments of 
California kiwifruit.

[[Page 44976]]

    Section 920.302(a)(4)(ii)(B) provides that kiwifruit packed in 
individual consumer packages, bags, volume filled, or bulk containers, 
may not vary more than \1/2\-inch in diameter for size designations 30 
or larger.
    Section 920.302(a)(4)(iii) contains a table commonly referred to as 
the ``Size Designation Chart''. This chart specifies numerical count 
size designations and the maximum number of fruit per 8-pound sample 
for each numerical count size designation for fruit packed in 
individual consumer packages, bags, volume filled, or bulk containers.
    In 1985, the Committee recommended and the USDA approved 
establishment of the first numerical count size designation chart by 
publishing a final rule in the Federal Register on September 9, 1985 
(50 FR 36567). This regulation established size designation 49 defined 
as a maximum of 64 pieces of fruit in an 8-pound sample, as the minimum 
size. It also established four other size designations and required 
that kiwifruit packed in bags, volume filled, or bulk containers be 
``fairly uniform in size.'' At that time, ``fairly uniform in size'' 
meant that size designation 30 or larger could not vary more than \1/2\ 
inch in diameter, size designations 33 and 36 could not vary more than 
\3/8\ of an inch, and size designations 39 and smaller could not vary 
more than \1/4\ inch in diameter. Diameter was defined to mean the 
greatest dimension measured at right angles to a line from stem to 
blossom end; with some tolerances provided.
    Over the years, numerical count size designations have been added, 
removed, and the maximum number of fruit per numerical count size 
designation has been revised to accommodate new packaging and changing 
market conditions. The Committee recommended and the USDA approved 
revisions to the size designation chart by publishing the following 
interim and final rules in the Federal Register: August 16, 1993 (58 FR 
43243); September 2, 1994 (59 FR 45617); September 3, 1998 (63 FR 
46861); December 1, 1988 (53 FR 48513); July 29, 1999 (64 FR 41010); 
October 29, 2001 (66 FR 1413); March 14, 2002 (67 FR 11396); and August 
22, 2002 (67 FR 54327).
    In recent years, many California growers have increased the size of 
California kiwifruit through various cultural practices. During the 
2003-2004 season, growers produced a crop with unusually large sizes. 
Handlers experienced difficulty staying within the size variation 
tolerance allowed for the largest size, size 20. Kiwifruit larger than 
size 20 had to be blended into the size 20 designation, as there was no 
larger size designation established for the 2003-04 season. This 
blending required handlers to take special care to stay within the size 
variation tolerance and reduced the uniformity of the pack size. 
Handlers also incurred additional costs in meeting the requirements.
    Thus, the Committee, at its March 10, 2004, meeting, unanimously 
recommended adding size designation 18, defined as a maximum of 25 
pieces of fruit per 8-pound sample, to the size designation chart. This 
proposed change would provide handlers with a total of eleven numerical 
count size designations as follows:

                         Size Designation Chart
------------------------------------------------------------------------
                                                               Column 2
                                                               maximum
                                                              number of
                 Column 1 size designation                   fruit per 8
                                                                pound
                                                                sample
------------------------------------------------------------------------
18*........................................................           25
20.........................................................           27
23.........................................................           30
25.........................................................           32
27/28......................................................           35
30.........................................................           39
33.........................................................           43
36.........................................................           46
39.........................................................           49
42.........................................................           53
45.........................................................          55
------------------------------------------------------------------------
*New size designation is in bold.

    Additionally, for clarification, the title ``Size Designation 
Chart'' would be added to the top of the chart.
    The new size designation is expected to ease packing requirements, 
by allowing handlers to stay within size variances for larger sized 
fruit and is expected to improve handler and grower returns, as larger-
sized fruit commands higher prices. This action would not affect import 
requirements.

Standardization of Packaging Requirement for Volume Filled Containers 
Designated by Net Weight

    Section 920.52(a)(3) of the order authorizes the establishment of 
weight requirements for containers of California kiwifruit.
    Section 920.302(a)(4) of the order's administrative rules and 
regulations outlines pack requirements for fresh shipments of 
California kiwifruit.
    In a volume filled container, fairly uniform size kiwifruit are 
loosely packed without cell compartments, cardboard fillers, or molded 
trays. Handlers may ship volume filled containers marked with either 
the appropriate count (number of pieces of fruit) or net weight (total 
weight of pieces of fruit in the container). Handler shipments are 
based upon the preference of the receiver.
    In 1994, the Committee unanimously recommended and USDA established 
standard packaging for certain volume filled containers designated by 
weight (59 FR 53563, October 25, 1994). At that time 52 percent of the 
total crop was packed into volume filled containers. The percentage of 
the total crop packed into volume filled containers increased to 85 
percent during the 2001-02 season.
    In 2001-02, imports from the Northern hemisphere (Greece, Italy, 
and France) totaled approximately 17 percent of the U.S. market share. 
The majority of imported kiwifruit was shipped in 19.8-pound (9-
kilogram) volume filled containers; whereas the order limited 
California handlers to 22-pound (10-kilogram) net weight volume filled 
containers. With the 22-pound provisions, handlers could not meet buyer 
demands for other types of packaging.
    In an effort to meet buyer demands for other types of packaging, 
the standardized packaging requirement of 22-pounds (10-kilograms) net 
weight for certain volume filled containers was suspended for the 2002-
2003 and 2003-2004 seasons. These suspensions were implemented by an 
interim final rule published on August 22, 2002 (67 FR 54327); a final 
rule on November 21, 2002 (67 FR 76140); and another final rule 
published in the Federal Register on July 28, 2003 (68 FR 44191). The 
suspension published on July 28, 2003 is in effect until July 31, 2004. 
Additionally, the final rule published on July 28, 2003 (68 FR 44191) 
removed a pack requirement in Sec.  920.302(a)(4)(iv) and paragraph 
(a)(4)(v) was redesignated as paragraph (a)(4)(iv).
    However, during the 2002-2003 and 2003-2004 seasons, since handlers 
and retailers were not limited to a specific net weight for volume 
filled containers designated by weight, some confusion appeared in the 
marketplace. Without a specific net weight for volume filled 
containers, more than one net weight was packed by handlers.
    In an effort to determine the best means of ensuring more orderly 
marketing, a survey of kiwifruit handlers and growers was conducted 
during the 2003-2004 season. The survey results clearly showed that the 
industry favored establishment of a standardized packaging requirement 
for volume filled containers of kiwifruit designated by weight to hold 
19.8-pound (9-kilograms) net weight of kiwifruit, unless such 
containers hold

[[Page 44977]]

less than 15 pounds or more than 35 pounds net weight of kiwifruit.
    Accordingly, the Committee, on March 10, 2004, unanimously 
recommended revising the standard packaging requirements for volume 
filled containers of kiwifruit designated by weight to hold 19.8-pounds 
(9-kilograms) net weight of kiwifruit, unless such containers hold less 
than 15 pounds or more than 35 pounds net weight of kiwifruit.
    This recommended change would allow the industry to compete more 
effectively in the market place with its foreign competition, allow 
continued packing of the new variety of kiwifruit in 14-pound 
containers, and would improve grower returns. This action would not 
affect import requirements.

Container Marking Requirements

    Section 920.52 authorizes the establishment of pack, and container 
requirements for California kiwifruit.
    Section 920.303 of the order's administrative rules and regulations 
outlines specific container marking requirements for fresh shipments of 
California kiwifruit.
    Section 920.303(c)(1) provides that the quantity statement shall be 
indicated in terms of count for kiwifruit packed in cell compartments, 
cardboard fillers, or molded trays, and the contents shall conform to 
the count.
    Historically, the industry and buyers have associated count (number 
of pieces of fruit) with fruit size designations (maximum number of 
pieces of fruit in an 8-pound sample). Molded trays were originally 
designed in the early 1980's to accommodate fruit of the corresponding 
size from the numerical count size designation chart. For example, 
count 36 trays (trays that held 36 pieces of fruit) would accommodate 
size designation 36 fruit.
    As previously mentioned, numerous changes have been made to the 
size designation chart over the years. Other changes have included 
removal of the minimum tray weight requirements (66 FR 39270; July 30, 
2001), and the addition of the new molded tray inserts with smaller cup 
sizes. Currently, handlers can pack five sizes of fruit (33, 36, 39, 
42, and 45) into three tray counts (33, 36, and 39), with the tray 
weighing as little as 5 pounds. These differences may cause confusion 
in the marketplace, especially if buyers assume that count is 
equivalent to size.
    Thus, the Committee, at its March 10, 2004, meeting, recommended 
that both ``count'' and ``size'' be marked on containers with cell 
compartments, cardboard fillers, or molded trays. Under this 
recommendation, containers would be marked with the size of the fruit 
as specified in the size designation chart and the number of pieces of 
fruit in the box. For example, a tray marked with size designation 45 
and could hold 36 pieces of fruit. Retailers would be able to clearly 
discern the number of pieces of fruit packed into the container and the 
size of that fruit. Of the eleven members present, ten voted for this 
change, and one voted against it. The sole opponent of this 
recommendation believes that requiring both ``count'' and ``size'' to 
be marked on containers of California kiwifruit would impose additional 
inspection requirements on California handlers. This member believes 
that this recommendation would place the California handler at a 
disadvantage in competing against imported kiwifruit, as importers do 
not have to comply with container marking requirements.
    In its deliberations, the Committee discussed inspection 
requirements. Committee members mentioned that currently inspectors 
count the number of fruit in the container. Others mentioned that 
requiring the quantity statement to be indicated in terms of both 
``count'' and ``size'' for all kiwifruit packed into cell compartments, 
cardboard fillers, or molded trays would require inspectors to also 
verify the size markings. An analysis of inspection costs indicates 
there would likely be an overall increase for the industry of 1.5 
percent or about $2,529. Handlers in the industry contract with the 
USDA Inspection Service to perform either a block or an in-line 
inspection. Inspectors that perform in-line inspection inspect the 
fruit at the time of packing, whereas, block inspections occur after 
the fruit has been packed, just prior to shipment. The additional costs 
would be incurred by handlers who use the block inspection method for 
their initial inspections, and those handlers who have fruit 
reinspected prior to shipment. The block inspection method is used for 
13 percent of initial inspections and for all reinspections. In recent 
seasons, in-line inspections accounted for 87 percent of all initial 
inspections. Reinspections are required if fruit is restyled or 
repacked.
    The Committee believes that marking both ``count'' and ``size'' on 
containers would eliminate possible confusion in the market place. This 
action would not affect import requirements.

Standard Pack ``Tightly Packed'' Requirement

    Section 920.52(a)(2) of the order authorizes the establishment of 
grade standards.
    Section 920.302(a)(1) of the order's administrative rules and 
regulations states the minimum grade shall be at least KAC No. 1 
quality.
    Section 920.302(b) defines the term KAC No. 1 quality as kiwifruit 
that meets the requirements of U.S. No. 1 grade as defined in 7 CFR 
51.2335 through 51.2340 of the United States Standards for Grades of 
Kiwifruit (Grade Standards), except that the kiwifruit shall be ``not 
badly misshapen'' and an additional 7 percent tolerance is provided for 
``badly misshapen,'' and except that the ``Hort16A'' variety of 
kiwifruit is exempt from the ``tightly packed'' standard as defined in 
Sec.  51.2338(a) of the Grade Standards.
    The Grade Standards define standard pack requirements, require 
containers to be well filled, and require the contents to be tightly 
packed, but not excessively or unnecessarily bruised by overfilling or 
oversizing for fruit packed in cell compartments, cardboard fillers, or 
molded trays. This is commonly referred to in the industry as the 
``tight-fill'' requirement.
    In 1990, these ``tight-fill'' provisions were established in Sec.  
920.302(b) to ensure that ``Hayward'' variety kiwifruit (the 
predominant kiwifruit variety produced in the production area) fits 
tightly into the tray-liner cups (55 FR 42179, October 18, 1990). Some 
kiwifruit handlers believe that kiwifruit packed tightly into the cups 
of the tray-liners are less subject to movement and therefore less 
damage.
    A new kiwifruit cultivar, the Actinidia chinensis ``Hort16A,'' 
commonly referred to as ``gold'' kiwifruit, was recently introduced in 
California and is being harvested and sold commercially. To minimize 
damage, the ``Hort16A'' is packed into a special shallow molded tray 
with a notch for the beak. The ``Hort16A'' kiwifruit, when packed in 
this shallow tray, may not meet the ``tightly packed'' requirement for 
standard pack under the Grade Standards. Therefore, on March 12, 2003, 
the Committee unanimously recommended and USDA subsequently approved an 
exemption for all ``gold'' kiwifruit varieties from the order's 
``tightly packed'' requirement. This exemption was implemented by a 
final rule published in the Federal Register on July 28, 2003 (68 FR 
44191).
    During the last several years, the value of the ``tight-fill'' 
requirement has decreased due to manufacturer changes in the shape and 
cuts of the molded trays.
    Thus, the Committee, at its March 10, 2004, meeting, recommended 
eliminating the ``tight-fill'' requirement. The majority of the 
Committee members

[[Page 44978]]

agreed that the tight-fill requirement is no longer necessary, as they 
believe handlers would continue to pack fruit that is tightly fit into 
the cup of the molded tray to prevent damage to the fruit and to meet 
buyer demands for uniform sized kiwifruit packs. Of the eleven members 
present, ten voted for this change. The one member voting against this 
recommendation preferred keeping the ``tight-fill'' requirement, 
because he believes that handlers would be disadvantaged in the market 
place by loose packs. The Committee discussed leaving the ``tight-
fill'' requirement in place, but concluded that elimination of the 
``tight-fill'' pack requirement would relax handler pack and inspection 
requirements, and increase handler and grower returns. This action 
would not affect import requirements.

Initial Regulatory Flexibility Analysis

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA), the Agricultural Marketing Service (AMS) has considered the 
economic impact of this action on small entities. Accordingly, AMS has 
prepared this initial regulatory flexibility analysis.
    The purpose of the RFA is to fit regulatory actions to the scale of 
business subject to such actions in order that small businesses will 
not be unduly or disproportionately burdened. Marketing orders issued 
pursuant to the Act, and the rules issued thereunder, are unique in 
that they are brought about through group action of essentially small 
entities acting on their own behalf. Thus, both statutes have small 
entity orientation and compatibility.
    There are approximately 45 handlers of California kiwifruit subject 
to regulation under the marketing order and approximately 270 growers 
in the production area. Small agricultural service firms are defined by 
the Small Business Administration (13 CFR 121.201) as those whose 
annual receipts are less than $5,000,000, and small agricultural 
producers are defined as those whose annual receipts are less than 
$750,000. None of the 45 handlers subject to regulation have annual 
kiwifruit sales of at least $5,000,000. In addition, six growers 
subject to regulation have annual sales exceeding $750,000. Therefore, 
a majority of the kiwifruit handlers and growers may be classified as 
small entities.
    This proposed rule invites comments on revisions to pack 
requirements prescribed under the California kiwifruit order. This rule 
would: (1) Add a new size designation to the allowable size 
designations for packs of kiwifruit; (2) revise the standard packaging 
requirements to require volume filled containers of kiwifruit 
designated by weight to hold 19.8-pounds (9-kilograms) net weight of 
kiwifruit, unless such containers hold less than 15 pounds or more than 
35 pounds net weight of kiwifruit; (3) require the quantity statement 
to be indicated in terms of ``count'' and ``size'' for kiwifruit packed 
in cell compartments, cardboard fillers, or molded trays; and (4) 
exempt all varieties of kiwifruit from the ``tightly packed'' standard 
pack requirement. The Committee recommended these changes at its March 
10, 2004, meeting. These changes are expected to help handlers compete 
more effectively in the marketplace, better meet the needs of 
retailers, and to improve grower returns.
    Authority for these actions is provided in Sec.  920.52 of the 
order.

Additional Numerical Count Size Designation

    Under the terms of the order, fresh market shipments of kiwifruit 
grown in California are required to be inspected and meet grade, size, 
maturity, pack, and container requirements.
    Section 920.302(a)(4) of the order's administrative rules and 
regulations specifies pack requirements for fresh shipments of 
California kiwifruit.
    Section 920.302(a)(4)(ii)(B) provides that kiwifruit packed in 
individual consumer packages, bags, volume fill, or bulk containers, 
may not vary more than \1/2\-inch in diameter for size designations 30 
or larger.
    Section 920.302(a)(4)(iii) contains a table commonly referred to as 
the ``Size Designation Chart''. This chart specifies numerical count 
size designations and the maximum number of fruit per 8-pound sample 
for each numerical count size designation for fruit packed in 
individual consumer packages, bags, volume filled, or bulk containers.
    In 1985, the Committee recommended and the USDA approved 
establishment of the first numerical count size designations by 
publishing a final rule in the Federal Register on September 9, 1985 
(50 FR 36567). This regulation established size designation 49 defined 
as a maximum of 64 pieces of fruit in an 8-pound sample, as the minimum 
size. It also established four other size designations and required 
that kiwifruit packed in bags, volume filled, or bulk containers be 
``fairly uniform in size.'' At that time, ``fairly uniform in size'' 
meant that size designation 30 or larger could not vary more than \1/2\ 
inch in diameter, size designations 33 and 36 could not vary more than 
\3/8\ of an inch, and size designations 39 and smaller could not vary 
more than \1/4\ inch in diameter. Diameter was defined to mean the 
greatest dimension measured at right angles to a line from stem to 
blossom end; with some tolerances provided.
    Over the years, numerical count size designations have been added, 
deleted, and the maximum number of fruit per numerical count size 
designation has been revised to accommodate new packaging and changing 
market conditions. The Committee recommended and the USDA approved 
revisions to the size designation chart by publishing the following 
interim and final rules in the Federal Register: August 16, 1993 (58 FR 
43243); September 2, 1994 (59 FR 45617); September 3, 1998 (63 FR 
46861); December 1, 1988 (53 FR 48513); July 29, 1999 (64 FR 41010); 
October 29, 2001 (66 FR 1413); March 14, 2002 (67 FR 11396); and August 
22, 2002 (67 FR 54327).
    In recent years, many California growers have increased the size of 
California kiwifruit through various cultural practices. During the 
2003-2004 season, growers produced a crop with unusually large sizes. 
Handlers experienced difficulty staying within the size variation 
tolerance allowed for the largest size, size designation 20. Kiwifruit 
larger than size 20 had to be blended into the size 20 designation, as 
there was no larger size designation established for the 2003-04 
season. This blending requires handlers to take special care to stay 
within the size variation tolerance and reduces the uniformity of the 
pack size.
    Thus, the Committee, at its March 10, 2004, meeting, unanimously 
recommended adding size designation 18, defined as a maximum of 25 
pieces of fruit per 8-pound sample, to the size designation chart. This 
proposed change would provide handlers with a total of eleven numerical 
count size designations as follows:

                         Size Designation Chart
------------------------------------------------------------------------
                                                               Column 2
                                                               maximum
                                                              number of
                 Column 1 size designation                   fruit per 8
                                                                pound
                                                                sample
------------------------------------------------------------------------
18*........................................................           25
20.........................................................           27
23.........................................................           30
25.........................................................           32
27/28......................................................           35
30.........................................................           39
33.........................................................           43
36.........................................................           46
39.........................................................           49
42.........................................................           53
45.........................................................          55
------------------------------------------------------------------------
*New size designation is in bold.


[[Page 44979]]

    Additionally, for clarification, the title ``Size Designation 
Chart'' would be added to the top of the chart.
    The Committee discussed alternatives to this change including not 
adding size 18 to the order's administrative rules and regulations, but 
concluded that this change would provide an additional pack option to 
handlers and increase handler and grower returns. Almost 10 percent 
(over 4,000 tray equivalents) of the fruit packed as size 20 as of 
March 31, 2004, could have been packed as the new proposed size 18. 
Packing 4,000 tray equivalents as size 18 could have increased grower 
returns approximately 5 cents per pound more than size 20 kiwifruit 
(4000 te x 7 pounds/te equals 28,000 pounds x $.05 FOB per pound equals 
$1,400). This change would not affect import requirements.

Standardization of Packaging Requirement for Volume Filled Containers 
Designated by Weight

    Section 920.302(a)(4) of the order's administrative rules and 
regulations outlines pack requirements for fresh shipments of 
California kiwifruit.
    In a volume filled container, fairly uniform size kiwifruit are 
loosely packed without cell compartments, cardboard fillers, or molded 
trays. Handlers may ship volume filled containers marked by either the 
appropriate count (number of pieces of fruit) or net weight (total 
weight of pieces of fruit in the container). Handler shipments are 
based upon the preference of the receiver.
    In 1994, the Committee unanimously recommended and USDA established 
standard packaging for certain volume filled containers designated by 
weight (59 FR 53563, October 25, 1994). At that time 52 percent of the 
total crop was packed into volume filled containers. The percentage of 
the total crop packed into volume filled containers increased to 85 
percent during the 2001-02 season.
    In 2001-02, imports from the Northern Hemisphere (Greece, Italy, 
and France) totaled approximately 17 percent of the U.S. market share. 
The majority of imported kiwifruit was shipped in 19.8-pound (9-
kilogram) volume filled containers; whereas the order limited 
California handlers to 22-pound (10-kilogram) net weight volume filled 
containers. With the 22-pound provisions, handlers could not meet buyer 
demands for other types of packaging.
    In an effort to meet buyer demands for other types of packaging, 
the standardized packaging requirement of 22-pounds (10-kilograms) net 
weight for certain volume filled containers was suspended for the 2002-
2003 and 2003-2004 seasons. These suspensions were implemented by an 
interim final rule published on August 22, 2002 (67 FR 54327); a final 
rule published on November 21, 2002 (67 FR 76140); and another final 
rule published in the Federal Register on July 28, 2003 (68 FR 44191). 
The suspension published on July 28, 2003, is in effect until July 31, 
2004. Additionally, the final rule published on July 28, 2003 (68 FR 
44191) removed a pack requirement in Sec.  920.302(a)(4)(iv) and 
paragraph (a)(4)(v) was redesignated as paragraph (a)(4)(iv). The 
provisions removed required containers to hold a quantity of kiwifruit 
equal to 3 times the size designation marked on the container. For 
example, if a container was marked as ``size 33,'' the container had to 
hold 99 pieces of fruit.
    However, during the 2002-2003 and 2003-2004 seasons, since handlers 
were not limited to a specified net weight for volume fill containers, 
some confusion appeared in the market place. Without a specific net 
weight for volume filled containers, more than one net weight was 
packed by handlers.
    In an effort to determine the best means of ensuring more orderly 
marketing, a survey of kiwifruit handlers and growers was conducted 
during the 2003-2004 season. The survey results clearly showed that the 
industry favored establishment of standardized packaging requirement 
for volume filled containers of kiwifruit designated by weight to hold 
19.8-pound (9-kilograms) net weight of kiwifruit, unless such 
containers hold less than 15 pounds or more than 35 pounds net weight 
of kiwifruit.
    Thus, the Committee, on March 10, 2004, unanimously recommended 
revising the standard packaging requirements for volume filled 
containers of kiwifruit designated by weight to hold 19.8-pounds (9-
kilograms) net weight of kiwifruit, unless such containers hold less 
than 15 pounds or more than 35 pounds net weight of kiwifruit.
    The Committee discussed alternatives to the recommended change, 
including removing the standardized volume fill net weight requirement 
from the order's administrative rules and regulations but did not adopt 
this alternative, as it believes that a standardized volume fill is 
necessary to achieve orderly marketing of California kiwifruit.
    The Committee also discussed establishing a standard packing 
requirement that would require volume filled containers of kiwifruit 
designated by weight to hold 19.8-pounds (9 kilograms) net weight of 
kiwifruit, unless such containers hold less than 10-pounds or more than 
35-pounds net weight of kiwifruit. The Committee did not adopt this 
suggestion, as it believes that it is important to accommodate the 
``Hort16A'' variety which is packed in a 14-pound volume filled 
container.
    Lastly, the Committee discussed reinstating the 22-pound (10-
kilogram) net weight standard packaging requirement for volume filled 
containers. The Committee calculated that utilizing a 19.8-pound (9-
kilo) net weight standard volume fill pack would increase the cost of 
packaging by 10 percent, generate approximately 10 percent more total 
volume filled boxes than the 22-pound standard; would increase the 
grower return by 20 percent, thereby offsetting the 10 percent increase 
in packaging costs; and would better serve the industry.
    This recommended change would allow the industry to compete more 
effectively in the market place with its foreign competition, continue 
packing the new variety of kiwifruit in 14-pound containers, and 
improve grower returns. This change would not affect import 
requirements.

Container Marking Requirements

    Section 920.303 of the order's administrative rules and regulations 
outlines specific container marking requirements for fresh shipments of 
California kiwifruit.
    Section 920.303(c)(1) provides that the quantity shall be indicated 
in terms of count for kiwifruit packed in cell compartments, cardboard 
fillers, or molded trays, and the contents shall conform to the count.
    Historically, the industry and buyers have associated count (number 
of pieces of fruit) with fruit size designations (maximum number of 
pieces of fruit in an 8-pound sample). Molded trays were originally 
designed in the early 1980's to accommodate fruit of the corresponding 
size from the numerical count size designation chart. For example, 
count 36 trays (trays that held 36 pieces of fruit) would accommodate 
size designation 36 fruit.
    As previously mentioned, numerous changes have been made to the 
size designation chart over the years. Other changes have included 
removal of the minimum tray weight requirements (66 FR 39270; July 30, 
2001), and the addition of the new molded tray inserts with smaller cup 
sizes. Currently, handlers can pack five sizes of fruit (33, 36, 39, 
42, and 45) into three tray counts (33, 36, and 39), with the tray 
weighing as little as 5 pounds. These differences may cause confusion 
in the market

[[Page 44980]]

place, especially if buyers assume that count is equivalent to size.
    Thus, committee at its March 10, 2004, meeting recommended that 
both ``count'' and ``size'' be marked on containers with cell 
compartments, cardboard fillers, or molded trays. The Committee 
discussed several alternatives to this change. The first alternative 
considered was to reinstitute tray weights. The Committee felt this 
requirement would be too restrictive as it would dictate what size 
fruit had to be packed into a specific tray and that this might result 
in handlers having to repack kiwifruit that did not meet established 
minimum tray weight requirements. They were concerned that 
reinstituting minimum tray weights might result in increased handler 
costs.
    The second alternative discussed by the Committee was to regulate 
the size of the molded cup. However, the Committee determined that 
regulating the size of the molded cup would not be feasible at this 
time and could result in higher packing costs.
    Lastly, the Committee discussed not changing the container marking 
requirements to include both ``count'' and ``size'' for kiwifruit 
packed in cell compartments, cardboard fillers, or molded trays. 
However, the Committee agreed that it was important to specify both 
``count'' and ``size'' to ensure that fruit size was clearly specified. 
Under this recommendation, containers would be marked with the size of 
the fruit as specified in the size designation chart and the number of 
pieces of fruit in the box. For example, a tray marked with size 
designation 45 and could hold 36 pieces of fruit. Retailers would be 
able to clearly discern the number of pieces of fruit packed into the 
container and the size of that fruit. Of the eleven members present, 
ten voted for this change. The one member voting against this 
recommendation believes that requiring both ``count'' and ``size'' to 
be marked on containers of California kiwifruit would result in 
additional inspection requirements and increased inspection costs for 
California handlers. This member believes that this recommendation 
would place California handlers at a disadvantage in competing against 
imported kiwifruit, as importers do not have to comply with container 
marking requirements.
    In its deliberations, the Committee discussed inspection 
requirements. Committee members mentioned that currently inspectors 
count the number of fruit in the container. Others mentioned that 
requiring the quantity statement to be indicated in terms of both 
``count'' and ``size'' for all kiwifruit packed into cell compartments, 
cardboard fillers, or molded trays would require inspectors to also 
verify the size markings.
    An analysis of inspection costs indicates that there would likely 
be an overall increase for the industry of 1.5 percent or about $2,529. 
Handlers in the industry contract with the USDA Inspection Service to 
perform either a block or an in-line inspection. Inspectors that 
perform in-line inspection inspect the fruit at the time of packing, 
whereas, block inspections occur after the fruit has been packed, just 
prior to shipment. The additional costs would be incurred by handlers 
who use the block inspection method for their initial inspections, and 
those handlers who have fruit reinspected prior to shipment. The block 
inspection method is used for 13 percent of initial inspections and for 
all reinspections. In recent seasons, in-line inspections accounted for 
87 percent of all initial inspections. Reinspections are required if 
fruit is restyled or repacked.
    Additionally, the Committee mentioned that the recommended change 
does not mandate that the ``count'' and the ``size'' be the same, as a 
tray marked with size designation 45 could still hold count 36 fruit 
and still weigh as little as 5 pounds.
    This change is expected to eliminate possible confusion in the 
marketplace and would not affect import requirements. Standard Pack 
``Tightly Packed'' Requirement.
    Section 920.302(a)(1) of the order's administrative rules and 
regulations states the minimum grade shall be at least KAC No. 1 
quality.
    Section 920.302(b) defines the term KAC No. 1 quality as kiwifruit 
that meets the requirements of U.S. No. 1 grade as defined in 7 CFR 
51.2335 through 51.2340 of the Grade Standards, except that the 
kiwifruit shall be ``not badly misshapen'' and an additional 7 percent 
tolerance is provided for badly misshapen fruit and except that the 
``Hort16A'' variety of kiwifruit is exempt from the ``tightly packed'' 
standard as defined in Sec.  51.2338(a) of the Grade Standards.
    The Grade Standards define standard pack requirements, require 
containers to be well filled, and require the contents to be tightly 
packed, but not excessively or unnecessarily bruised by overfilling or 
oversizing for fruit packed in cell compartments, cardboard fillers, or 
molded trays. This is commonly referred to in the industry as the 
``tight-fill'' requirement.
    These ``tight-fill'' provisions were established under the order to 
ensure that the ``Hayward'' variety (the predominant kiwifruit variety 
produced in the production area) fits tightly into the tray-liner cups 
(55 FR 42179, October 18, 1990). Some kiwifruit handlers believe that 
kiwifruit packed tightly into the cups of the tray-liners are less 
subject to movement and therefore less damage.
    A new kiwifruit cultivar, the Actinidia chinensis ``Hort16A,'' 
commonly referred to as ``gold'' kiwifruit, was recently introduced in 
California and is being harvested and sold commercially. To minimize 
damage, the ``Hort16A'' is packed into a special shallow molded tray 
with a notch for the beak. The ``Hort16A'' kiwifruit, when packed in 
this shallow tray, may not meet the ``tightly packed'' requirement for 
standard pack under the Grade Standards. Therefore, on March 12, 2003, 
the Committee unanimously recommended an exemption for all ``gold'' 
kiwifruit varieties from the order's ``tightly packed'' requirement. 
This recommendation was implemented by USDA through a final rule 
published in the Federal Register on July 28, 2003 (68 FR 44191).
    During the last several years, the value of the ``tight-fill'' 
requirement has decreased due to manufacturer changes in the shape and 
cuts of the molded trays.
    Thus, the Committee, at its March 10, 2004, meeting, recommended 
that the ``tight-fill'' requirement be eliminated. The majority of the 
Committee members agreed that the tight-fill requirement is no longer 
necessary, as they believe handlers would continue to pack fruit that 
is tightly fit into the cup of the molded tray to prevent damage to the 
fruit and to meet buyer demands for uniform sized kiwifruit packs. Of 
the eleven members present, ten voted for this change. The one member 
voting against this recommendation preferred keeping the ``tight-fill'' 
requirement, because he believes that handlers would be disadvantaged 
in the market place by loose packs.
    The Committee discussed leaving the ``tight-fill'' requirement in 
place, but concluded that handlers would continue to pack fruit that is 
tightly fit into the cup of the molded tray to prevent damage to the 
fruit and to meet buyer demands for uniform sized kiwifruit packs 
without the ``tight-fill'' pack requirement. This change would relax 
handler pack and inspection requirements, and increase handler and 
grower returns. This recommended change would not impact import 
regulations, as pack and container requirements are not regulated under 
import regulations.
    This proposed rule would relax pack and container requirements 
under the

[[Page 44981]]

kiwifruit order. Accordingly, these actions would not impose any 
additional reporting or recordkeeping requirements on either small or 
large kiwifruit handlers. As with all Federal marketing order programs, 
reports and forms are periodically reviewed to reduce information 
requirements and duplication by industry and public sectors.
    USDA has not identified any relevant Federal rules that duplicate, 
overlap, or conflict with this proposed rule. However, as previously 
stated, California kiwifruit must meet the ``tight-fill'' requirements, 
as specified in the U.S. Standards for Grade of Kiwifruit (7 CFR 
51.2335 through 51.2340) issued under the Agricultural Marketing Act of 
1946 (7 U.S.C. 1621 through 1627).
    In addition, the Committee's meeting was widely publicized 
throughout the kiwifruit industry and all interested persons were 
invited to attend the meeting and participate in Committee 
deliberations on all issues. Like all Committee meetings, the March 12, 
2003, meeting, was a public meeting and all entities, both large and 
small, were able to express their views on these issues. Finally, 
interested persons are invited to submit information on the regulatory 
and informational impacts of this action on small businesses.
    A small business guide on complying with fruit, vegetable, and 
specialty crop marketing agreements and orders may be viewed at http://www.ams.usda.gov/fv/moab.html. Any questions about the compliance guide 
should be sent to Jay Guerber at the previously mentioned address in 
the FOR FURTHER INFORMATION CONTACT section.
    A 15-day comment period is provided to allow interested persons to 
respond to this proposal. Fifteen-days is deemed appropriate because 
this rule should be in place by September 10, 2004, as the shipping 
season is expected to begin early this season and these changes, if 
adopted, should be made as soon as possible. All written comments 
timely received will be considered before a final determination is made 
on this matter.

List of Subjects in 7 CFR Part 920

    Kiwifruit, Marketing agreements, Reporting and recordkeeping 
requirements.
    For the reasons set forth in the preamble, 7 CFR part 920 is 
proposed to be amended as follows:

PART 920--KIWIFRUIT GROWN IN CALIFORNIA

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

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


Sec.  920.302  [Amended]

    2. In Sec.  920.302, paragraphs (a)(4)(iii), (a)(4)(iv), and (b) 
are revised to read as follows:


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

* * * * *
    (4) * * *
    (iii) When kiwifruit is packed in individual consumer packages, 
bags, volume fill or bulk containers, the following table specifying 
the size designation and maximum number of fruit per 8-pound sample is 
to be used:

                         Size Designation Chart
------------------------------------------------------------------------
                                                               Column 2
                                                               maximum
                                                              number of
                 Column 1 size designation                   fruit per 8
                                                                pound
                                                                sample
------------------------------------------------------------------------
18.........................................................           25
20.........................................................           27
23.........................................................           30
25.........................................................           32
27/28......................................................           35
30.........................................................           39
33.........................................................           43
36.........................................................           46
39.........................................................           49
42.........................................................           53
45.........................................................           55
------------------------------------------------------------------------

    (iv) All volume fill containers of kiwifruit designated by weight 
shall hold 19.8-pounds (9-kilograms) net weight of kiwifruit unless 
such containers hold less than 15 pounds or more than 35 pounds net 
weight of kiwifruit.
    (b) Definitions. The term KAC No. 1 quality means kiwifruit that 
meets the requirements of the U.S. No. 1 grade as defined in the United 
States Standards for Grades of Kiwifruit (7 CFR 51.2335 through 
51.2340) except that the kiwifruit shall be ``not badly misshapen,'' 
and an additional tolerance of 7 percent is provided for kiwifruit that 
is ``badly misshapen,'' and except that all varieties of kiwifruit are 
exempt from the ``tightly packed'' standard as defined in Sec.  
51.2338(a) of the U.S. Standards for Grades of Kiwifruit. The terms 
fairly uniform in size and diameter mean the same as defined in the 
U.S. Standards for Grades of Kiwifruit.
* * * * *
    3. In Sec.  920.303, paragraph (c)(1) is revised to read as 
follows:


Sec.  920.303  Container marking regulations.

* * * * *
    (c) * * *
    (1) The quantity shall be indicated in terms of count and size for 
kiwifruit packed in cell compartments, cardboard fillers, or molded 
trays, and the contents shall conform to the count.

    Dated: July 23, 2004.
A.J. Yates,
Administrator, Agricultural Marketing Service.
[FR Doc. 04-17271 Filed 7-27-04; 8:45 am]
BILLING CODE 3410-02-P