[Federal Register Volume 69, Number 157 (Monday, August 16, 2004)]
[Rules and Regulations]
[Pages 50265-50269]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-18614]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 905

[Docket No. FV04-905-2 IFR]


Oranges, Grapefruit, Tangerines, and Tangelos Grown in Florida; 
Exemption for Shipments of Tree Run Citrus

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Interim final rule with request for comments.

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SUMMARY: This rule exempts shipments of small quantities of tree run 
citrus from the rules and regulations under the Florida citrus 
marketing order (order). The order regulates the handling of oranges, 
grapefruit, tangerines, and

[[Page 50266]]

tangelos grown in Florida and is administered locally by the Citrus 
Administrative Committee (Committee). Under this rule, shipments of 
tree run citrus are exempt from grade, size, and assessment 
requirements under the order. Producers can ship 150 1\3/5\ bushel 
boxes, per variety, per shipment of their own citrus free from order 
regulations, not to exceed 3,000 boxes per variety, per season. The 
Committee believes this action may be a way to increase fresh market 
shipments, develop new markets, and improve grower returns.

DATES: Effective August 17, 2004; comments received by October 15, 2004 
will be considered prior to issuance of a final rule.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this rule. Comments must be sent to the Docket Clerk, 
Marketing Order Administration Branch, Fruit and Vegetable Programs, 
AMS, USDA, 1400 Independence Avenue SW., STOP 0237, Washington, DC 
20250-0237; Fax: (202) 720-8938, or E-mail: [email protected]; 
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: Cathy Harding, Southeast Marketing 
Field Office, Marketing Order Administration Branch, Fruit and 
Vegetable Programs, AMS, USDA, 799 Overlook Drive, Suite A, Winter 
Haven, Florida 33884-1671; telephone: (863) 324-3375, Fax: (863) 325-
8793; 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 rule is issued under Marketing 
Agreement No. 84 and Marketing Order No. 905, both as amended (7 CFR 
part 905), regulating the handling of oranges, grapefruit, tangerines, 
and tangelos grown in Florida, hereinafter referred to as the 
``order.'' The order is effective under the Agricultural Marketing 
Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter 
referred to as the ``Act.''
    The Department of Agriculture (USDA) is issuing this rule in 
conformance with Executive Order 12866.
    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule is not intended to have retroactive effect. 
This rule will not preempt any State or local laws, regulations, or 
policies, unless they present an irreconcilable conflict with this 
rule.
    The Act provides that administrative proceedings must be exhausted 
before parties may file suit in court. Under section 608c(15)(A) of the 
Act, any handler subject to an order may file with USDA a petition 
stating that the order, any provision of the order, or any obligation 
imposed in connection with the order is not in accordance with law and 
request a modification of the order or to be exempted therefrom. 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 rule exempts shipments of small quantities of tree run citrus 
free from the grade, size, and assessment requirements under the order. 
Tree run fruit is quality citrus picked and boxed in the field and 
taken directly to market without being graded or sized. By providing 
this exemption, producers can ship 150 1\3/5\ bushel boxes per variety, 
per shipment, of their own citrus free from order regulations. Total 
shipments cannot exceed 3,000 boxes per variety, per season. The 
Committee believes this action may be a way to increase fresh market 
shipments, develop new markets, and improve grower returns. This action 
was recommended unanimously by the Committee at its meeting on June 15, 
2004.
    Section 905.80 of the order provides authority for the Committee to 
exempt certain types of shipments from regulation. Exemptions can be 
implemented for types of shipments of any variety in such minimum 
quantities, or for such purposes as the Committee, with the approval of 
USDA, may specify. No assessment is levied on fruit so shipped. The 
Committee shall, with the approval of USDA, prescribe such rules, 
regulations, or safeguards as it deems necessary to prevent varieties 
handled under the provisions of this section from entering channels of 
trade for other than the purposes authorized by this section.
    Section 905.149 of the order's rules and regulations defines grower 
tree run citrus and outlines the procedures to be used for growers to 
apply to the Committee to ship their own tree run citrus exempt from 
grade, size, and assessment requirements. The provisions were 
originally established just for the 2002-03 season, then extended for 
the 2003-04 season. During the 2003-04 season, growers were allowed to 
ship a maximum of 150 1\3/5\ bushel boxes per variety, per shipment, up 
to a seasonal total of 3,000 boxes per variety of their tree run fruit 
free from order requirements.
    For the past two seasons, the Committee has utilized the provisions 
of Sec.  905.149 on an annual basis. Rather than making this 
recommendation each year, the Committee recommended that the provisions 
of Sec.  905.149 be established on a continuous basis. However, growers 
must receive approval from the Committee before they can utilize this 
exemption.
    According to Florida Department of Citrus (FDOC) regulation 20-
35.006, ``Tree run grade is that grade of naturally occurring sound and 
wholesome citrus fruit which has not been separated either as to grade 
or size after severance from the tree.'' Also, FDOC regulation 20-
62.002 defines wholesomeness as fruit free from rot, decay, sponginess, 
unsoundness, leakage, staleness, or other conditions showing physical 
defects of the fruit. By definition, this fruit is handled by the 
grower and bypasses normal handler operations. Prior to implementation 
of the exemption, all tree run citrus had to meet all requirements of 
the marketing order, as well as State of Florida Statutes and Florida 
Department of Citrus regulations. Even with this rule, tree run citrus 
must continue to meet applicable State of Florida Statutes and Florida 
Department of Citrus regulations, including inspection and any 
container marking requirements. However, growers will be able to pick, 
box, and ship directly to buyers, and avoid the costs incurred when 
citrus is handled by packinghouses.
    During the season prior to the utilization of Sec.  905.149, small 
producers of Florida citrus expressed concerns about problems incurred 
when trying to sell their citrus. These concerns

[[Page 50267]]

included increasing production costs, limited returns, and the 
availability of markets. For some growers, there is limited demand for 
the variety of citrus they produce or they do not produce much volume. 
Consequently, they have difficulty getting packinghouses to pack their 
fruit. These problems, along with market conditions, have driven a fair 
number of small citrus growers out of the citrus industry.
    According to Florida Agricultural Statistics Service, from 1998-99 
to 2002-03, fresh grapefruit sales have dropped 22 percent and fresh 
orange shipments are down 11 percent. This means fewer cartons are 
being packed. This can cause problems for varieties that may be out of 
favor with handlers and consumers, or for a particular variety of fruit 
where there may be a glut on the market. As a result, packinghouses do 
not wish to become over stocked with fruit which is difficult to market 
and, therefore, will not pack less popular minor varieties of fruit or 
fruit that is in oversupply. Packinghouses do not want to pack what 
they cannot sell. These factors have caused wholesome fruit to be 
shipped to processing plants or left on the tree.
    When citrus cannot be sold into the fresh market, it can be sold to 
the processing plants. However, the prices received are considerably 
lower. During the last seven seasons, only the 1999-2000 season 
produced on-tree returns for processed grapefruit that exceeded one 
dollar per box. Over the period from 1998-99 through 2002-03, the 
differential between fresh prices and processed prices has averaged 
$4.43 per box for grapefruit and $2.20 per box for oranges. Hence, many 
growers would prefer to ship to the fresh market.
    In addition, the costs associated with growing for the fresh market 
are greater than the costs for growing for the processed market. While 
the costs of growing for the fresh market have been increasing, in many 
cases the returns to the grower have been decreasing. The cost of 
picking, packing, hauling, and associated handling costs for fresh 
fruit is sometimes greater than the grower's return on the fruit. In 
some cases, where the cost of harvesting exceeds the returns to the 
grower or the grower cannot find a buyer for the fruit, economic 
abandonment can occur. According to information from the National 
Agricultural Statistics Service, the seasons of 1995-96, 1996-97, 1997-
98, and 2000-01 had an average economic abandonment of two million 
boxes or more of red seedless grapefruit alone.
    As a result, growers are looking for other outlets for their fruit 
in an effort to increase returns. Some growers believe secondary 
markets exist which are not currently being supplied that would provide 
additional outlets for their citrus. They think niche markets exist 
that could be profitable and want the opportunity to continue servicing 
them. They believe they can ship quality fruit directly to out-of-state 
markets and that it would be well received.
    These growers contend tree run citrus does not need a minimum grade 
and size to be marketable, and that they can supply quality fruit to 
secondary markets not served by packed fruit. However, they believe 
they need to bypass normal handler operations and the associated costs 
for it to be profitable.
    To address these concerns, the Committee recommended for the past 
two season that producers be allowed to ship small quantities of their 
own production directly to the market exempt from order requirements. 
The exemption was established on an annual basis for the 2002-03 season 
[68 FR 4361, January 29, 2003] and for the 2003-04 season [68 FR 68717, 
December 10, 2003]. The exemption for the 2003-04 season expired July 
31, 2004.
    The Committee recommended this exemption on a yearly basis for the 
past two seasons to determine its effect and how fruit shipped under 
the exemption was received on the market. The Committee was interested 
in whether markets existed that packed fruit was not supplying. They 
also wanted an indication of the number of growers interested in 
utilizing the exemption and the volume of citrus shipped under the 
exemption. In addition, the Committee wanted information regarding any 
compliance issues or any impact on competitive outlets.
    During the 2003-04 season, 101 growers were approved to ship under 
the exemption. Approximately 40 growers actually used the exemption, 
shipping a total of nearly 16,000 1-3/5-bushel boxes of oranges, 
grapefruit, tangerines, and tangelos. This is an increase from 23 
growers shipping approximately 4,500 boxes during the 2002-03 season. 
Those producers who took advantage of the exemption believe that the 
program was successful. They were able to sell their fruit and supply 
markets not already supplied by traditional packers. Growers also 
believe more markets exist. They think with time, they can identify 
additional markets. Thus, growers want to continue have the opportunity 
to supply these markets.
    The Committee had agreed that following the 2003-04 season they 
would review the information provided by growers who applied for and 
used the tree run exemption to determine if the exemption should be 
continued. In the June 15, 2004, meeting, the Committee discussed this 
issue, and considered the impact and benefits of the exemption. The 
Committee also reviewed a letter in support of the exemption from 
Florida Citrus Mutual, a large grower organization.
    The Committee believes that markets have been developed and that 
tree run fruit will continue to be sold primarily to non-competitive, 
niche markets, such as farmers' markets, flea markets, roadside stands, 
and similar outlets and will not compete with non-exempt fruit shipped 
under the order. Fruit is sold in similar markets within the state, and 
such markets have been successful. Continuing this exemption allows 
growers to sell directly to similar markets outside of the state, 
supplying markets that might not otherwise be supplied. The Committee 
believes this action will allow the industry to service more non-
traditional markets and may be a way to increase fresh market shipments 
and to develop new markets. Consequently, the Committee voted 
unanimously to extend the tree run exemption on a continuous basis.
    Growers will continue to be required to apply to the Committee, on 
the ``Grower Tree Run Certificate Application'' form provided by the 
Committee, for an exemption to ship tree run citrus fruit to interstate 
markets. On this form, the grower must provide their name; address; 
phone number; legal description of the grove; variety of citrus to be 
shipped; and the approximate number of boxes produced in the specified 
grove. The grower must also certify that the fruit to be shipped comes 
from the grove owned by the grower applicant. The application form will 
be submitted to the Committee manager and reviewed for completeness and 
accuracy. The manager will also verify the information provided. After 
the application has been reviewed, the manager will notify the grower 
applicant in writing whether the application is approved or denied.
    Once the grower has received approval for their application for 
exemption and begins shipping fruit, a ``Report of Shipments Under 
Grower Tree Run Certificate'' form, also provided by the Committee, 
must be completed for each shipment. On this form, the grower will 
provide the location of the grove, the amount of fruit shipped, the 
shipping date, and the type of transportation used to ship the fruit,

[[Page 50268]]

along with the vehicle license number. The grower must supply the Road 
Guard Station with a copy of the grower certificate report for each 
shipment, and provide a copy of the report to the Committee. This 
report will enable the Committee to maintain compliance. Failure to 
comply with these requirements may result in the cancellation of a 
grower's certificate.
    This rule does not affect the provision that handlers may ship up 
to 15 standard packed cartons (12 bushels) of fruit per day exempt from 
regulatory requirements. Fruit shipped in gift packages that are 
individually addressed and not for resale, and fruit shipped for animal 
feed are also exempt from handling requirements under specific 
conditions. Also, fruit shipped to commercial processors for conversion 
into canned or frozen products or into a beverage base are not subject 
to the handling requirements under the order.
    Section 8e of the Act requires that whenever grade, size, quality, 
or maturity requirements are in effect for certain commodities under a 
domestic marketing order, including citrus, imports of that commodity 
must meet the same or comparable requirements. This rule does not 
change the minimum grade and size requirements under the order. 
Therefore, no change is necessary in the citrus import regulations as a 
result of this action.

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 11,000 producers of Florida citrus in the 
production area and approximately 75 handlers subject to regulation 
under the marketing order. Small agricultural producers are defined by 
the Small Business Administration (SBA) as those having annual receipts 
of less than $750,000, and small agricultural service firms are defined 
as those whose annual receipts are less than $5,000,000 (13 CFR 
121.201).
    Based on industry and Committee data, the average annual f.o.b. 
price for fresh Florida oranges, grapefruit, tangerines, and tangelos 
during the 2003-04 season was approximately $8.69 per 4/5 bushel 
carton, and total fresh shipments for the 2003-04 season where around 
52 million cartons of oranges, grapefruit, tangerines, and tangelos. 
Twenty handlers handled approximately 66 percent of Florida's citrus 
shipments in 2003-04. Considering the average f.o.b. price, at least 55 
percent of the orange, grapefruit, tangerine, and tangelo handlers 
could be considered small businesses under SBA's definition. Therefore, 
the majority of Florida citrus handlers may be classified as small 
entities. The majority of Florida citrus producers may also be 
classified as small entities.
    This rule establishes the provisions of Sec.  905.149 of the rules 
and regulations on a continuous basis. This rule exempts shipments of 
small quantities of tree run citrus from the grade, size, and 
assessment requirements under the order. Growers must receive approval 
from the Committee before they can use this exemption. The Committee 
believes this action may be a way to increase fresh market shipments, 
develop new markets, and improve grower returns. Authority for this 
action is provided in Sec.  905.80(e).
    According to a study by the University of Florida--Institute of 
Food and Agricultural Sciences, production costs for the 2001-02 season 
ranged from $1.71 per box for processed oranges to $2.41 per box for 
grapefruit grown for the fresh market. The average packing charge for 
oranges is approximately $6.50 per box, for grapefruit the charge is 
approximately $5.75 per box, and for tangerines the charge can be as 
high as $9 per box. Sending fruit to a packinghouse can be cost 
prohibitive, especially for the small grower. This rule may provide an 
additional outlet for fruit that might otherwise be forced into the 
processing market or left on the tree altogether. For the 2003-04 
season, this exemption accounted for additional fresh shipments 
totaling over 32,000 cartons.
    This rule will not impose any additional costs on the grower. It 
will have the opposite effect of providing growers the opportunity to 
reduce the costs associated with having fruit handled by a 
packinghouse. This action will allow growers to ship small quantities 
of their tree run citrus directly into interstate commerce exempt from 
the order's grade, size, and assessment requirements and their related 
costs. With this action, growers will be able to reduce handling costs 
and use those savings toward developing additional markets not serviced 
by the traditional packinghouses. This regulation will help growers by 
providing another outlet for their fruit. This will benefit all growers 
regardless of size, but it is expected to have a particular benefit for 
small growers who need additional revenue to meet operating costs.
    The Committee considered one alternative to this action. The 
possible alternative was to not continue the exemption. However, the 
Committee believes the exemption provides other possible outlets for 
fruit and may help increase returns to growers. Therefore, this 
alternative was rejected.
    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
Chapter 35), the information collection requirements contained in this 
rule have been previously approved by the Office of Management and 
Budget (OMB) and assigned OMB No. 0581-0189. USDA has not identified 
any relevant Federal rules that duplicate, overlap or conflict with 
this rule. 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.
    The Committee's meeting was widely publicized throughout the citrus 
industry and all interested persons were invited to attend the meeting 
and participate in Committee deliberations. Like all Committee 
meetings, the June 15, 2004, meeting was a public meeting and all 
entities, both large and small, were able to express their views on 
this issue. 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.
    This rule invites comments on exempting small-quantity shipments of 
tree run citrus free from grade, size, and assessment requirements 
under the order. Any comments received will be considered prior to 
finalization of this rule.
    After consideration of all relevant material presented, including 
the Committee's recommendation, and other information, it is found that 
this interim final rule, as hereinafter set

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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 good cause exists for not postponing the effective date of 
this rule until 30 days after publication in the Federal Register. This 
rule needs to be in place before September 20, 2004, to cover as many 
shipments during the 2004-05 season as possible. Also, growers can 
begin making plans on how to utilize the exemption. In addition, 
growers and handlers are aware of this rule, which was recommended at a 
public meeting. Also, a 60-day comment period is provided for in this 
rule and any comments received will be considered prior to 
finalization.

List of Subjects in 7 CFR Part 905

    Grapefruit, Marketing agreements, Oranges, Reporting and 
recordkeeping requirements, Tangelos, Tangerines.


0
For the reasons set forth in the preamble, 7 CFR part 905 is amended as 
follows:

PART 905--ORANGES, GRAPEFRUIT, TANGERINES, AND TANGELOS GROWN IN 
FLORIDA

0
1. The authority citation for 7 CFR part 905 continues to read as 
follows:

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


Sec.  905.149  [Amended]

0
2. Section 905.149 is amended by:
0
A. Removing in paragraph (d) ``July 31, 2004'' and adding the words 
``the end of the fiscal period'' in its place.

0
B. Removing paragraph (f)(3) and redesignating paragraphs (f)(4), 
(f)(5), and (f)(6), as paragraphs (f)(3), (f)(4), and (f)(5), 
respectively.

    Dated: August 10, 2004.
A.J. Yates,
Administrator, Agricultural Marketing Service.
[FR Doc. 04-18614 Filed 8-13-04; 8:45 am]
BILLING CODE 3410-02-P