[Federal Register Volume 70, Number 87 (Friday, May 6, 2005)]
[Proposed Rules]
[Pages 23942-23945]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-9110]


 ========================================================================
 Proposed Rules
                                                 Federal Register
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 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.
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 

  Federal Register / Vol. 70, No. 87 / Friday, May 6, 2005 / Proposed 
Rules  

[[Page 23942]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 948

[Docket No. FV05-948-1 PR]


Irish Potatoes Grown in Colorado; Relaxation of Handling 
Regulation for Area No. 2 and Certain Imported Potatoes

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule with request for comments.

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

SUMMARY: This rule would relax the minimum grade requirements for 
potatoes handled under the Colorado potato marketing order, Area No. 2. 
This rule was recommended by the Colorado Potato Administrative 
Committee for Area No. 2 (Committee), the agency responsible for the 
local administration of the marketing order. For all potato varieties 
produced in Area No. 2 measuring from 1\1/2\-inch minimum diameter to 
2\1/4\-inch maximum diameter (size B), and from 1-inch minimum diameter 
to 1\3/4\-inch maximum diameter, this rule changes the minimum grade 
from U.S. No. 1 to U.S. Commercial. This rule also would relax the 
minimum grade requirements between October 1 through June 30 of each 
year for imported red-skinned round type potatoes of the same size 
categories under the import regulations as required by section 8e of 
the Agricultural Marketing Agreement Act of 1937. The changes are 
intended to provide potato handlers and importers with more marketing 
flexibility, growers with increased returns, and consumers with a 
greater supply of small potatoes, and to bring the section 8e potato 
import regulation into conformity with the marketing order.

DATES: Comments must be received by July 5, 2005.

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; 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: Teresa Hutchinson, Northwest Marketing 
Field Office, Marketing Order Administration Branch, Fruit and 
Vegetable Programs, AMS, USDA, 1220 SW., Third Avenue, Suite 385, 
Portland, Oregon 97204; telephone: (503) 326-2724, Fax: (503) 326-7440; 
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 proposed rule is issued under Marketing 
Agreement No. 97 and Marketing Order No. 948, both as amended (7 CFR 
part 948), regulating the handling of Irish potatoes grown in Colorado, 
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.''
    This proposed rule also is issued under section 8e of the Act, 
which provides that whenever certain specified commodities, including 
potatoes, are regulated under a Federal marketing order, imports of 
these commodities into the United States are prohibited unless they 
meet the same or comparable grade, size, quality, or maturity 
requirements as those in effect for the domestically produced 
commodities. Section 8e also provides that whenever two or more 
marketing orders regulating the same commodity produced in different 
areas of the United States are concurrently in effect, a determination 
must be made as to which of the areas produces the commodity in most 
direct competition with the imported commodity. Imports must meet the 
same or comparable requirements established for that particular area. 
The requirements for red-skinned round type potatoes imported from 
October 1 through June 30 are based on the Colorado Area No. 2 
marketing order requirements.
    The Department of Agriculture (USDA) is issuing this rule in 
conformance with Executive Order 12866.
    This proposed rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. This rule would not have retroactive effect. This 
rule would 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 Sec.  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. Section 608c(15)(B) 
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.
    There are no administrative procedures which must be exhausted 
prior to any judicial challenge to the provisions of import regulations 
issued under section 8e of the Act.
    This rule would relax the minimum grade requirements from U.S. No. 
1 to U.S. Commercial for all Colorado Area No. 2 potato varieties 
measuring from 1\1/2\-inch minimum diameter to 2\1/4\-inch maximum 
diameter (size B), and from 1-

[[Page 23943]]

inch minimum diameter to 1\3/4\-inch maximum diameter. These changes 
were recommended by the Committee on August 19, 2004, with nine members 
in favor and four against. The four members who voted against the 
change felt that the minimum grade for small potatoes should continue 
to be U.S. No. 1. The Committee believes that the changes would 
facilitate the marketing of Area No. 2 Colorado potatoes and improve 
grower returns. As provided under section 8e of the Act, the grade 
changes also would apply to all red-skinned round type imported 
potatoes of the same size categories during the months of October 
through June.
    Section 948.22 authorizes the issuance of grade, size, quality, 
maturity, pack, and container regulations for potatoes grown in the 
production area. Section 948.21 further authorizes the modification, 
suspension, or termination of regulations issued pursuant to Sec.  
948.22.
    Section 948.40 provides that whenever the handling of potatoes is 
regulated pursuant to Sec. Sec.  948.20 through 948.24, such potatoes 
must be inspected by the Federal-State Inspection Service, and 
certified as meeting the applicable requirements of such regulations.
    Grade regulations specific to the handling of potatoes grown in 
Area No. 2 are contained in Sec.  948.386 of the order's handling 
regulations, whereas relevant import regulations are contained in Sec.  
980.1 and Sec.  980.501 of the vegetable import regulations. Section 
948.4 of the order defines the counties included in Area No. 2, which 
is commonly known as the San Luis Valley. The State of Colorado is 
divided into three areas for marketing order purposes. Currently, only 
Area No. 2 and Area No. 3 are active.
    For many years, consumer demand for small fresh market potatoes was 
relatively soft in comparison to larger sizes. Size B and smaller 
potatoes were often discarded or fed to livestock. Grade and size 
regulations were developed to keep lower quality small potatoes out of 
the fresh market. At that time, the Committee believed that small 
potatoes, sold at a great discount, eroded the price for large 
potatoes. By requiring small potatoes to grade U.S. No. 1 or better, 
the Committee believed that high quality small potatoes would not have 
an adverse affect on the market for larger potatoes.
    Within the past several years, however, demand has increased for 
small potatoes, which often command premium prices compared to larger 
size A potatoes (1\7/8\-inch and larger). With the growing demand for 
small potatoes, growers and handlers are concerned that they will not 
be able to supply this market, because only U.S. No. 1 or better grade 
can be shipped under the marketing order. Growers and handlers have had 
requests from their customers for additional small potatoes that grade 
U.S. Commercial or better. This action would help handlers in Area No. 
2 meet their buyers' needs.
    Committee statistics show that approximately 75 percent of the 
entire potato crop in Area No. 2 grades U.S. No. 1 or better. However, 
the percentage of Size B and smaller potatoes meeting U.S. No. 1 grade 
is only about 50 percent. The reason for the lower percentage of 
smaller potatoes is because several potato defects are scored based on 
the percentage of surface area affected on the individual potato. For 
example, a cut on a large potato may not affect a large enough surface 
area to be a scorable defect, but the same size cut would be scorable 
on a smaller potato. Under such circumstances, it would be much harder 
for a small potato to meet the U.S. No. 1 grade than it would for a 
large potato. The U.S. Commercial grade allows a slightly higher 
percentage of total defects than the U.S. No. 1 grade.
    By changing the grade requirements to allow size B potatoes and 
potatoes measuring from 1-inch minimum diameter to 1\3/4\-inch maximum 
diameter to meet U.S. Commercial grade or better, the Committee 
believes more small potatoes would be available to meet increasing 
demand, and thus help increase returns to growers. Not only would more 
small potatoes enter the market, small potatoes typically sell for a 
premium price in today's marketplace.
    The Committee believes that by allowing small potatoes to meet the 
more relaxed U.S. Commercial grade instead of U.S. No. 1 grade, 
available volume for sale into the fresh market could increase by about 
25 percent.
    Although facing an increasing demand, the market for small potatoes 
is a minor segment of the market served by the Area No. 2 production 
area. As a consequence, the Committee believes that the smaller 
potatoes do not compete directly with the predominant large potatoes 
produced in this area, and that the relaxation of the grade 
requirements would not adversely effect the overall Area No. 2 potato 
market.
    As mentioned earlier, section 8e of the Act provides that when 
certain domestically produced commodities, including potatoes, are 
regulated under a Federal marketing order, imports of that commodity 
must meet the same or comparable grade, size, quality, and maturity 
requirements. Section 8e also provides that whenever two or more 
marketing orders regulating the same commodity produced in different 
areas of the United States are concurrently in effect, a determination 
must be made as to which of the areas produces the commodity in most 
direct competition with the imported commodity. Imports must meet the 
requirements established for that particular area.
    Grade, size, quality, and maturity regulations have been issued 
regularly under marketing order Nos. 945 (Idaho-Eastern Oregon 
potatoes), 948 (Colorado potatoes, Area No. 2 and Area No. 3), 947 
(Oregon-California potatoes), 946 (Washington potatoes), and 953 
(Southeastern potatoes), since the marketing orders were established. 
Section 980.1 of the vegetable import regulations specifies that import 
requirements for potatoes are to be based on the seasonal categories of 
potatoes produced in all marketing order areas. In that regard, 
imported red-skinned round type potatoes must meet the requirements of 
the Area No. 2 Colorado potato marketing order during the months of 
October through the following June and the Washington potato marketing 
order during the months of July through September.
    USDA's Foreign Agricultural Service reports that Canada has been 
the major source of fresh potato imports into the United States during 
1999 through 2003. Imports totaled 276,955 metric tons in 1999, 228,023 
metric tons in 2000, 221,303 metric tons in 2001, 281,891 metric tons 
in 2002, and 288,035 metric tons in 2003. During the five-year period, 
minor quantities of potatoes also were imported from The Netherlands, 
Costa Rica, Dominican Republic, Japan, Brazil, Ecuador, India, United 
Kingdom, Columbia, Fiji, and Jamaica. Imports from these sources 
represented less than 5 percent of the total imports. We do not have 
statistics on what portion of these potatoes are red-skinned.

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

[[Page 23944]]

behalf. Thus, both statutes have small entity orientation and 
compatibility.
    Import regulations issued under the Act are based on regulations 
established under Federal marketing orders which regulate the handling 
of domestically produced products.
    There are approximately 95 handlers of Colorado Area No. 2 potatoes 
subject to regulation under the order and approximately 230 producers 
in the regulated production area. In addition, based on the most recent 
information available, approximately 168 importers of potatoes are 
subject to import regulations and may be affected by this rule. Small 
agricultural service firms are defined by the Small Business 
Administration (13 CFR 121.201) as those having annual receipts of less 
than $6,000,000, and small agricultural producers are defined as those 
having annual receipts of less than $750,000.
    During the 2003-2004 marketing year, 17,125,898 hundredweight of 
Colorado Area No. 2 potatoes were inspected under the order and sold 
into the fresh market. Based on an estimated average f.o.b. price of 
$6.75 per hundredweight, the Committee estimates that 90 Area No. 2 
handlers or about 96 percent had annual receipts of less than 
$6,000,000.
    In addition, based on information provided by the National 
Agricultural Statistics Service, the average grower price for Colorado 
fall potatoes for 2003 was $4.55 per hundredweight. The average annual 
grower revenue for the 230 Colorado Area No. 2 potato growers is 
therefore calculated to be approximately $338,795. In view of the 
foregoing, the majority of the Colorado Area No. 2 potato growers and 
handlers may be classified as small entities. Although it is not known 
how many importers of potatoes may be classified as small entities, we 
believe that many of the 168 importers can be classified as such.
    This rule would relax grade requirements implemented under Colorado 
marketing order Area 2 from U.S. No. 1 grade to U.S. Commercial grade 
for all potato varieties measuring from 1\1/2\-inch minimum diameter to 
2\1/4\-inch maximum diameter (size B) and from 1-inch minimum diameter 
to 1\3/4\-inch maximum diameter. As provided under section 8e of the 
Act, these changes would also apply to all imported red-skinned round 
type potatoes of the same size categories between October 1 through 
June 30 of each year. While no changes would be required in the 
language of Sec.  980.1, all imported red-skinned round type potatoes 
in these size categories October 1 through June 30 would be required to 
meet the requirements of U.S. Commercial grade or better rather than 
U.S. No. 1 grade or better.
    Authority for this action is contained in Sec. Sec.  948.21, 
948.22, 948.40, and 948.386. Relevant import regulations are contained 
in Sec.  980.1 and Sec.  980.501 of the vegetable import regulations.
    Regarding the impact of this rule on affected entities, relaxing 
the grade requirements for these small potatoes is expected to benefit 
handlers, importers, and growers. By relaxing the minimum grade 
requirements for small potatoes, a potentially greater quantity of 
potatoes would meet the order's handling regulations and the import 
regulations. This could translate into an increased market for these 
small potatoes and greater returns for handlers, importers, and 
growers.
    As small potatoes have grown in popularity with consumers, the 
market demand has outpaced the quantity of small, high quality potatoes 
available from Area No. 2. The Committee believes that a relaxation in 
the grade requirements would increase the available supply of small 
potatoes. The small potato market is a minor segment of the potato 
market served by the Area No. 2 production area. As such, the Committee 
believes that these small potatoes do not compete directly with most of 
the potatoes produced in this area and that the relaxation of the grade 
requirements would not adversely effect the overall Area No. 2 potato 
market.
    Based on Committee records, about half the handlers ship all of the 
size B and smaller potatoes grown in Area No. 2. Committee records also 
indicate that during the 2003-2004 season, approximately 165,000 
hundredweight (less than 1 percent) of size B and smaller were 
inspected and shipped. If this proposed change in the minimum grade 
requirements is implemented, the Committee estimates that the 
marketable supply of size B and smaller potatoes would increase at 
least 25 percent and add about 41,250 hundredweight to the marketable 
supply. The Committee anticipates that the greater quantity of small 
potatoes would expand Area No. 2's market share, increase the supply of 
potatoes available for consumers, and increase grower returns.
    The Committee considered several alternatives to the proposed 
relaxation in grade requirements for small sized potatoes. Prior to the 
August 19, 2004, meeting, the Committee mailed a survey to all Area No. 
2 Colorado potato growers requesting recommendations on grade and size 
requirements. The consensus among the responding growers indicated that 
the majority preferred U.S. Commercial as a minimum grade for these two 
size categories.
    After reviewing the results of the survey, the Committee discussed 
the merits of taking no action--thereby leaving the grade requirement 
at U.S. No. 1 grade or better--or adopting U.S. Commercial grade or 
U.S. No. 2 grade as a minimum requirement for the two size categories. 
The Committee felt that leaving the minimum grade at U.S. No. 1 would 
not have provided additional potatoes to supply the increasing market 
demand. In regards to the merits of U.S. Commercial grade as a minimum 
versus U.S. No. 2 grade, the Committee concurred with the industry that 
a U.S. No. 2 grade minimum would be too much of a relaxation due to 
quality considerations.
    After discussing the alternatives, the Committee determined that a 
relaxation in the grade requirements to U.S. Commercial grade or better 
for small potatoes would provide the greatest benefit to the industry 
by augmenting the developing market for small potatoes and increasing 
grower returns.
    This rule would not impose any additional reporting or 
recordkeeping requirements on either small or large potato handlers or 
importers. 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. In addition, USDA 
has not identified any relevant Federal rules that duplicate, overlap, 
or conflict with this rule.
    The Committee's meeting was widely publicized throughout the 
Colorado potato industry and all interested persons were invited to 
attend the meeting and participate in Committee deliberations. Like all 
Committee meetings, the August 19, 2004, meeting was a public meeting 
and all entities, both large and small, were able to express their 
views on this issue. In addition, the World Trade Organization and 
known importers of potatoes will be notified of this proposed action. 
Finally, interested persons are invited to submit information on the 
regulatory and informational impacts of this proposed rule 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 a proposed change to the handling 
regulations prescribed under the

[[Page 23945]]

Colorado potato marketing order and the potato import regulations. Any 
comments received will be considered prior to finalization of this 
rule.
    In accordance with section 8e of the Act, the United States Trade 
Representative has concurred with the issuance of this rule.

List of Subjects in 7 CFR Part 948

    Marketing agreements, Potatoes, Reporting and recordkeeping 
requirements.

    For the reasons set forth in the preamble, 7 CFR part 948 is 
proposed to be amended as follows:

PART 948--IRISH POTATOES GROWN IN COLORADO

    1. The authority citation for 7 CFR part 948 continues to read as 
follows:

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

    2. In Sec.  948.386, paragraphs (a)(3) and (a)(4) are revised to 
read as follows:


Sec.  948.386  Handling regulation.

* * * * *
    (a) * * *
    (3) All varieties. Size B, if U.S. Commercial grade or better.
    (4) All varieties. 1-inch minimum diameter to 1\3/4\-inch maximum 
diameter, if U.S. Commercial grade or better.
* * * * *

    Dated: May 3, 2005.
Kenneth C. Clayton,
Acting Administrator, Agricultural Marketing Service.
[FR Doc. 05-9110 Filed 5-5-05; 8:45 am]
BILLING CODE 3410-02-P