[Federal Register Volume 71, Number 37 (Friday, February 24, 2006)]
[Rules and Regulations]
[Pages 9427-9430]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-1717]



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  Federal Register / Vol. 71, No. 37 / Friday, February 24, 2006 / 
Rules and Regulations  

[[Page 9427]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 948

[Docket No. FV05-948-1 FRA]


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

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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

SUMMARY: This rule relaxes the minimum grade requirement for certain 
potatoes handled under the Colorado potato marketing order, Area No. 2. 
The Colorado Potato Administrative Committee, Area No. 2 (Committee), 
the agency responsible for local administration of the marketing order, 
recommended this rule. This rule changes the minimum grade from U.S. 
No. 1 to U.S. Commercial for varieties of long, red-skinned, yellow 
fleshed potatoes 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. The change is 
intended to provide potato handlers with more marketing flexibility, 
growers with increased returns, and consumers with a greater supply of 
small specialty potatoes.

EFFECTIVE DATE: This final rule becomes effective February 27, 2006.

FOR FURTHER INFORMATION CONTACT: Teresa Hutchinson, Northwest Marketing 
Field Office, Marketing Order Administration Branch, Fruit and 
Vegetable Programs, AMS, USDA; 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 final 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.''
    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 relaxes the minimum grade requirement from U.S. No. 
1 to U.S. Commercial for all varieties of long, red-skinned, yellow 
fleshed potatoes produced in Colorado 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 
change was recommended by the Committee on October 20, 2005, with 12 
members in favor and one opposed. The member voting against the change 
felt that the minimum grade for all small potatoes should continue to 
be U.S. No. 1. This member is opposed to having grading exceptions for 
any variety of potato. The Committee believes that this change will 
facilitate the marketing of Area No. 2 Colorado potatoes and improve 
grower returns.
    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. 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.
    The Committee's initial recommendation, made on August 19, 2004, 
was to relax the minimum grade requirement 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-inch minimum diameter to 1\3/4\-inch maximum diameter. This 
change was recommended by the Committee with nine members in favor and 
four opposed. The members voting against the change believed that the 
minimum grade for all small potatoes should continue to be U.S. No. 1.
    This initial recommendation led to a proposed rule being published 
in the

[[Page 9428]]

Federal Register on May 6, 2005 (70 FR 23942), with comments being 
invited until July 5, 2005. The comment period was reopened until 
September 12, 2005, in a document published on August 22, 2005 (70 FR 
48903), for the purpose of receiving additional input. Five comments 
were received during the reopened comment period. All of these comments 
opposed the relaxation of the grade requirement because of the 
potentially negative impact on the quality of imported round, red-
skinned varieties of potatoes. Under section 980.1 of the import 
regulations, the initially proposed grade change would have applied to 
all imported round, red-skinned potatoes of the same size categories 
during the months of October through June. All of the commenters 
expressed concern that lower quality imported round, red-skinned 
potatoes would adversely affect the domestic market.
    The Committee met on October 20, 2005, to consider the comments 
received regarding the previously issued proposed rule, as well as 
other information received from the Colorado potato industry. After 
much discussion, the Committee recommended that the rule be modified to 
reflect that the relaxed grade requirement would only apply to long, 
red-skinned, yellow fleshed potato varieties.
    Because this final rule is limited to all varieties of long, red-
skinned, yellow fleshed potatoes, imported round, red-skinned potato 
varieties will not be affected. Under Sec.  980.1, imported long type 
potatoes must meet the grade, size, quality, and maturity requirements 
of Marketing Order No. 945 (Idaho-Eastern Oregon potatoes) throughout 
the entire year.
    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 all 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.
    Recently, however, demand has increased for varieties of long, red-
skinned, yellow fleshed small potatoes, which often command premium 
prices compared to larger size A potatoes (1\7/8\-inch and larger). 
With the growing demand for this type of small specialty potato, some 
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 order. Growers and handlers have had requests from their 
customers for long, red-skinned, yellow fleshed varieties of small 
potatoes that grade U.S. Commercial or better. The Committee believes 
that this action will help handlers in Area No. 2 meet their buyers' 
needs.
    Committee statistics show that approximately 65 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 requirement to allow long, red-skinned, 
yellow fleshed potato varieties that are size B and those 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 of this 
type of small specialty potato would be available to meet increasing 
demand, and thus help increase returns to growers. Not only would more 
small long, red-skinned, yellow fleshed potatoes enter the market, 
these small specialty potatoes typically sell for a premium price in 
today's marketplace.
    The Committee believes that by allowing small long, red-skinned, 
yellow fleshed 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 10 percent.
    Although facing an increasing demand, the market for small long, 
red-skinned, yellow fleshed potatoes is a minor segment of the market 
served by the Area No. 2 production area. As a consequence, the 
Committee believes that this type of small specialty potato does not 
compete directly with the predominant large potatoes produced in this 
area, and that the relaxation of the grade requirement would not 
adversely effect the overall Area No. 2 potato market.

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 88 handlers of Colorado Area No. 2 potatoes 
subject to regulation under the order and approximately 230 producers 
in the regulated production area. 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 2004-2005 marketing year, 17,626,974 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 83 Area No. 2 
handlers or about 94 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 2004 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 $348,708. In view of the 
foregoing, the majority of the Colorado Area No. 2 potato growers and 
handlers may be classified as small entities.
    This final rule relaxes the grade requirement implemented under the 
order from U.S. No. 1 grade to U.S. Commercial grade for all long, red-
skinned, yellow fleshed 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-inch minimum diameter to 1\3/4\-inch maximum diameter.
    Authority for this action is contained in Sec. Sec.  948.21, 
948.22, 948.40, and 948.386.
    Regarding the impact of this rule on affected entities, this 
relaxation of the

[[Page 9429]]

grade requirement for small long, red-skinned, yellow fleshed varieties 
of potatoes is expected to benefit handlers and growers. Through this 
relaxation of the minimum grade requirement for this type of small 
specialty potato, a potentially greater quantity of potatoes will meet 
the order's handling regulations. This could translate into an 
increased market for small long, red-skinned, yellow fleshed potatoes 
and greater returns for handlers and growers.
    As small long, red-skinned, yellow fleshed varieties of potatoes 
have grown in popularity with consumers, the market demand has outpaced 
the quantity of these small, high quality potatoes available from Area 
No. 2. The Committee believes that this relaxation in the grade 
requirement will increase the available supply of small, long, red-
skinned, yellow fleshed varieties of potatoes. These small specialty 
potatoes are a minor segment of the potato market served by the Area 
No. 2 production area. As such, the Committee believes that these small 
long, red-skinned, yellow fleshed potato varieties do not compete 
directly with most of the potatoes produced in this area and that the 
relaxation of the grade requirement will 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 2004-2005 fiscal period, approximately 165,000 
hundredweight (less than 1 percent) of size B and smaller were 
inspected and shipped. The Committee estimates that the marketable 
supply of size B and smaller long, red-skinned, yellow fleshed potato 
varieties will increase approximately 10 percent and add about 16,500 
hundredweight to the marketable supply. The Committee anticipates that 
the greater quantity of small long, red-skinned, yellow fleshed 
varieties of potatoes will expand Area No. 2's market share, increase 
the supply of potatoes available for consumers, and increase grower 
returns.
    After discussing possible alternatives to this rule and reviewing 
the comments received in regards to the first proposed rule (70 FR 
23942, May 6, 2005; and 70 FR 48903, August 22, 2005), the Committee 
determined that a relaxation in the grade requirement to U.S. 
Commercial grade for small long, red-skinned, yellow fleshed potatoes 
will sufficiently meet the industry's current needs. The relaxation in 
the grade requirement for this type of small specialty potato will 
provide the greatest benefit to the industry by augmenting the 
developing market for these potatoes and thereby increase grower 
returns.
    The first proposal would have allowed all varieties of small 
potatoes produced in Area No. 2 to meet U.S. Commercial grade, 
including round, red-skinned potato varieties. Under the import 
regulations, round, red-skinned potatoes are required to meet the 
grade, size, quality, and maturity requirements of the Area No. 2 
Colorado potato marketing order from October through June. Thus, under 
the first proposal, all imported round, red-skinned potatoes would have 
been allowed into the U.S. as U.S. Commercial grade during this period. 
Commenters expressed concern that such a relaxation of the grade 
requirement for small round, red-skinned potatoes could potentially 
have a negative impact on the quality of imported round, red-skinned 
potatoes. They were concerned that lower quality imported round, red-
skinned potatoes would adversely affect the domestic market. However, 
this final rule will only relax the grade requirement for long, red-
skinned, yellow fleshed potato varieties and, therefore, will not 
change the grade requirement for round, red-skinned potatoes or for any 
imported round, red-skinned potatoes during the months of October 
through June.
    This action will not impose any additional reporting or 
recordkeeping requirements on either small or large potato handlers. 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.
    As noted in the initial regulatory flexibility analysis, USDA has 
not identified any relevant Federal rules that duplicate, overlap, or 
conflict with this rule.
    In addition, the Committee's meetings were widely publicized 
throughout the Colorado potato industry and all interested persons were 
invited to attend the meetings and participate in Committee 
deliberations. Like all Committee meetings, the August 19, 2004, and 
the October 20, 2005, meetings were public meetings and all entities, 
both large and small, were able to express their views on this issue.
    A proposed rule concerning the Committee's amended action was 
published in the Federal Register on December 22, 2005 (70 FR 75981). 
Copies of the rule were mailed or sent via facsimile to all Committee 
members. Finally, the rule was made available through the Internet by 
USDA and the Office of the Federal Register. A 15-day comment period 
ending January 6, 2005, was provided to allow interested persons to 
respond to the proposal. No comments were received.
    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 matter presented, including the 
information and recommendation submitted by 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 handlers are already shipping 
potatoes from the 2005-2006 crop and handlers want to take advantage of 
the relaxation as soon as possible. Further, handlers are aware of this 
rule, which was recommended at a public meeting. In addition, this rule 
replaces a previously proposed rule. Affected entities were allowed to 
provide input during the previous comment periods and all comments were 
considered in the preparation of this rule. Finally, an additional 15-
day comment period was provided for in the second proposed rule and no 
comments were received.

List of Subjects in 7 CFR Part 948

    Marketing agreements, Potatoes, Reporting and recordkeeping 
requirements.

0
For the reasons set forth in the preamble, 7 CFR part 948 is amended as 
follows:

PART 948--IRISH POTATOES GROWN IN COLORADO

0
1. The authority citation for 7 CFR part 948 continues to read as 
follows:

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

0
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. No. 1 or better grade: Provided, 
That varieties of long, red-skinned, yellow fleshed potatoes shall 
grade U.S. Commercial or better.
    (4) All varieties. 1-inch minimum diameter to 1\3/4\-inch maximum 
diameter, if U.S. No. 1 or better grade: Provided, That varieties of 
long, red-

[[Page 9430]]

skinned, yellow fleshed potatoes shall grade U.S. Commercial or better.
* * * * *

    Dated: February 17, 2006.
Lloyd C. Day,
Administrator, Agricultural Marketing Service.
[FR Doc. 06-1717 Filed 2-23-06; 8:45 am]
BILLING CODE 3410-02-P