[Federal Register Volume 69, Number 173 (Wednesday, September 8, 2004)]
[Rules and Regulations]
[Pages 54193-54199]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-20415]



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  Federal Register / Vol. 69, No. 173 / Wednesday, September 8, 2004 / 
Rules and Regulations  

[[Page 54193]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 920

[Docket No. FV04-920-1 FR]


Kiwifruit Grown in California; Relaxation of Pack and Container 
Requirements

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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

SUMMARY: This rule revises 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 adds a new size 
designation to the allowable size designations for packs of kiwifruit; 
revises 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; requires 
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 exempts 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.

EFFECTIVE DATE: September 9, 2004.

FOR FURTHER INFORMATION CONTACT: Terry Vawter, California Marketing 
Field Office, Marketing Order Administration Branch, Fruit and 
Vegetable Programs, AMS, USDA, 2202 Monterey Street, suite 102B, 
Fresno, California 93721; telephone: (559) 487-5901, Fax: (559) 487-
5906; or George Kelhart, Technical Advisor, Marketing Order 
Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 
Independence Avenue SW., STOP 0237, Washington, DC 20250-0237; 
telephone: (202) 720-2491, Fax: (202) 720-8938.
    Small businesses may request information on complying with this 
regulation by contacting Jay Guerber, Marketing Order Administration 
Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence 
Avenue SW., STOP 0237, Washington, DC 20250-0237; telephone: (202) 720-
2491, Fax: (202) 720-8938, or E-mail: [email protected].

SUPPLEMENTARY INFORMATION: This final rule is issued under Marketing 
Order No. 920 as amended (7 CFR part 920), regulating the handling of 
kiwifruit grown in California, hereinafter referred to as the 
``order.'' The order is effective under the Agricultural Marketing 
Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter 
referred to as the ``Act.''
    The Department of Agriculture (USDA) is issuing this rule in 
conformance with Executive Order 12866.
    This final rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. This rule is not intended to have retroactive 
effect. This rule will not preempt any State or local laws, 
regulations, or policies, unless they present an irreconcilable 
conflict with this rule.
    The Act provides that administrative proceedings must be exhausted 
before parties may file suit in court. Under section 608c(15)(A) of the 
Act, any handler subject to an order may file with USDA a petition 
stating that the order, any provision of the order, or any obligation 
imposed in connection with the order is not in accordance with law and 
request a modification of the order or to be exempted therefrom. A 
handler is afforded the opportunity for a hearing on the petition. 
After the hearing USDA would rule on the petition. The Act provides 
that the district court of the United States in any district in which 
the handler is an inhabitant, or has his or her principal place of 
business, has jurisdiction to review USDA's ruling on the petition, 
provided an action is filed not later than 20 days after the date of 
the entry of the ruling.
    This final rule revises pack and container requirements currently 
prescribed for California kiwifruit under the order. This rule: (1) 
Adds a new size designation to the allowable size designations for 
packs of kiwifruit; (2) revises 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) requires 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) exempts 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, and 
reduce packing costs. This rule is also expected 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.
    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

[[Page 54194]]

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. Some tolerances were 
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 
change provides handlers with a total of eleven numerical count size 
designations as follows:

                         Size Designation Chart
------------------------------------------------------------------------
                                                             Column 2
                                                          maximum number
                Column 1 size designation                 of 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.

    Additionally, for clarification, the title ``Size Designation 
Chart'' is 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 does 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, as published in the Federal Register on October 25, 1994 (59 FR 
53563). 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 the 2001-02 season, 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 in the Federal Register 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 in the Federal 
Register on July 28, 2003 was in effect until July 31, 2004. 
Additionally, the final rule published in the Federal Register 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, the committee conducted a survey of kiwifruit handlers and 
growers 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 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 is expected to allow the industry to 
compete more effectively in the marketplace with its foreign

[[Page 54195]]

competition, allow continued packing of the new variety of kiwifruit in 
14-pound containers, and may improve grower returns. This action does 
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, published in the 
Federal Register on July 30, 2001 (66 FR 39270), 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 will 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 
could hold 36 pieces of fruit. Retailers can clearly discern the number 
of pieces of fruit packed into the container and the size of that 
fruit. Of the eleven members present at that meeting, ten voted for 
this change, and one voted against it. The one member who voted against 
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 and 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 eliminates possible confusion in the marketplace. This 
action does 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 (standards), except that the kiwifruit shall be ``not badly 
misshapen,'' and an additional 7 percent tolerance is provided for 
``badly misshapen.'' In addition, the ``Hort16A'' variety of kiwifruit 
is exempt from the ``tightly packed'' standard as defined in Sec.  
51.2338(a) of the standards.
    The 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) fit 
tightly into the tray-liner cups, as published in the Federal Register 
on October 18, 1990 (55 FR 42179). 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 sold commercially. The ``Hort16A'' variety is 
currently packed into a special shallow molded tray with a notch for 
the beak, which minimizes damage to the fruit. This variety, when 
packed in the shallow tray, may not meet the ``tightly packed'' 
requirement for standard pack under the 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 filled'' requirement. This exemption was implemented 
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 
eliminating the ``tight-fill'' requirement. 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 
tightly fits into the cup of the molded tray to prevent damage to the 
fruit and to meet buyer demands for uniformly-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

[[Page 54196]]

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 does 
not affect import requirements.

Final Regulatory Flexibility Analysis

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA), the Agricultural Marketing Service (AMS) has considered the 
economic impact of this action on small entities. Accordingly, AMS has 
prepared this final regulatory flexibility analysis.
    The purpose of the RFA is to fit regulatory actions to the scale of 
business subject to such actions in order that small businesses will 
not be unduly or disproportionately burdened. Marketing orders issued 
pursuant to the Act, and the rules issued thereunder, are unique in 
that they are brought about through group action of essentially small 
entities acting on their own behalf. Thus, both statutes have small 
entity orientation and compatibility.
    There are approximately 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 rule revises pack requirements prescribed under the California 
kiwifruit order. This rule: (1) Adds a new size designation to the 
allowable size designations for packs of kiwifruit; (2) revises 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) requires 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) exempts 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 
change provides handlers with a total of eleven numerical count size 
designations as follows:

                         Size Designation Chart
------------------------------------------------------------------------
                                                             Column 2
                                                          maximum number
                Column 1 size designation                 of 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.

    Additionally, for clarification, the title ``Size Designation 
Chart'' will 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 provides an additional pack option to 
handlers and might help 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

[[Page 54197]]

18. Packing 4,000 tray equivalents (te) 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 does 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, as published in the Federal Register on October 25, 1994 (59 FR 
53563). 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 in the Federal Register 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 in the Federal 
Register on July 28, 2003, was in effect until July 31, 2004. 
Additionally, the final rule published in the Federal Register 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, the committee conducted a survey of kiwifruit handlers and 
growers 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 of 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.
    Finally, 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 will allow the industry to compete more 
effectively in the market place with its foreign competition, to 
continue packing the new variety of kiwifruit in 14-pound containers, 
and is expected to improve grower returns. This change does 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 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

[[Page 54198]]

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.
    Finally, 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 will 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 will 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 any confusion in the 
marketplace and does 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 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 standards.
    The 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'' variety 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 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 revision relaxes 
handler pack and inspection requirements, and may increase handler and 
grower returns. This revision does not impact import regulations, as 
pack and container requirements are not regulated under import 
regulations.
    This final rule relaxes pack and container requirements under the 
kiwifruit order. Accordingly, these actions will not impose any 
additional reporting or recordkeeping requirements on either small or 
large kiwifruit handlers. As with all Federal marketing order programs, 
reports and forms are periodically reviewed to reduce information 
requirements and duplication by industry and public sectors.

[[Page 54199]]

    As noted in the initial regulatory flexibility analysis, 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 standards (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 were invited to submit information on the regulatory 
and informational impacts of this action on small businesses, as 
requested in the proposed rule.
    A proposed rule concerning this action was published in the Federal 
Register on July 28, 2004 (69 FR 44975). Copies of the rule were 
provided to all committee members and kiwifruit handlers. The rule was 
also made available through the Internet by USDA and the Office of the 
Federal Register. A 15-day comment period, which ended on August 12, 
2004, was provided to allow interested persons to respond to the 
proposal. No comments were received; and, thus, no changes will be made 
to the rule as proposed.
    A small business guide on complying with fruit, vegetable, and 
specialty crop marketing agreements and orders may be viewed at http://www.ams.usda.gov/fv/moab.html. Any questions about the compliance guide 
should be sent to Jay Guerber at the previously mentioned address in 
the FOR FURTHER INFORMATION CONTACT section.
    After consideration of all relevant matters presented, including 
the information and recommendation of the committee and other available 
information, it is hereby found that this rule, as hereinafter set 
forth, will tend to effectuate the declared policy of the Act.
    It is further found that good cause exists for not postponing the 
effective date of this rule until 30 days after publication in the 
Federal Register (5 U.S.C. 553) because shipments of 2004 crop 
kiwifruit are expected to begin in early September and these changes 
should be effective by that time. Moreover, prompt implementation will 
provide handlers time to plan accordingly.

List of Subjects in 7 CFR Part 920

    Kiwifruit, Marketing agreements, Reporting and recordkeeping 
requirements.

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

PART 920--KIWIFRUIT GROWN IN CALIFORNIA

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

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


Sec.  920.302  [Amended]

0
2. 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.

    (a) * * *
    (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
                Column 1 size designation                 of 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.
* * * * *

0
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: September 2, 2004.
A.J. Yates,
Administrator, Agricultural Marketing Service.
[FR Doc. 04-20415 Filed 9-7-04; 8:45 am]
BILLING CODE 3410-02-P