[Federal Register Volume 71, Number 218 (Monday, November 13, 2006)]
[Rules and Regulations]
[Pages 66095-66098]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-19078]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 930

[Docket No. FV06-930-1 FIR]


Tart Cherries Grown in the States of Michigan, et al.; Change in 
Certain Provisions/Procedures Under the Handling Regulations for Tart 
Cherries

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: The Department of Agriculture (USDA) is adopting, as a final 
rule, with a change, an interim final rule removing volume limitations 
on new product development, new market development and market expansion 
activities to facilitate such activities; allowing handlers to receive 
diversion credit for the voluntary destruction of finished, marketable 
products that have deteriorated in condition to provide handlers more 
flexibility; adding a procedure to keep Cherry Industry Administrative 
Board (Board) representation in line with current district production 
levels; and revising grower application and mapping procedures under 
the grower diversion program to make the process less burdensome. These 
changes are intended to improve the operation of the marketing order 
and to increase the demand for tart cherries and tart cherry products. 
The changes were unanimously recommended by the Board, the body that 
locally administers the marketing order. The marketing order regulates 
the handling of tart cherries grown in the States of Michigan, New 
York, Pennsylvania, Oregon, Utah, Washington, and Wisconsin.

EFFECTIVE DATE: December 13, 2006.

FOR FURTHER INFORMATION CONTACT: Patricia A. Petrella or Kenneth G. 
Johnson, Marketing Order Administration Branch, Fruit and Vegetable 
Programs, AMS, USDA, Unit 155, 4700 River Road, Riverdale, MD 20737; 
Telephone: (301) 734-5243, or Fax: (301) 734-5275.
    Small businesses may request information on complying with this 
regulation by contacting Jay Guerber, Marketing Order Administration 
Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence 
Avenue, SW., STOP 0237, Washington, DC 20250-0237; Telephone: (202) 
720-2491, Fax: (202) 720-8938, or e-mail: [email protected].

SUPPLEMENTARY INFORMATION: This rule is issued under Marketing 
Agreement and Order No. 930 (7 CFR part 930), regulating the handling 
of tart cherries produced in the States of Michigan, New York, 
Pennsylvania, Oregon, Utah, Washington, and Wisconsin, hereinafter 
referred to as the ``order.'' The order is effective under the 
Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-
674), hereinafter referred to as the ``Act.''
    The Department of Agriculture (USDA) is issuing this rule in 
conformance with Executive Order 12866.
    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule 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 exempt 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 in equity to review USDA's ruling on the 
petition, provided an action is filed not later than 20 days after the 
date of the entry of the ruling.
    This rule continues in effect changes to Sec.  930.162, Exemptions, 
that removed volume limitations on new product development, new market 
development, and market expansion activities utilized by handlers to 
earn diversion credits to meet restricted percentage regulation 
withholding requirements. Handler diversion is authorized under Sec.  
930.59 of the order and, when volume regulation is in effect, handlers 
may fulfill restricted percentage requirements by diverting cherries or 
cherry products rather than placing tart cherries in an inventory 
reserve. Volume regulation is intended to help the tart cherry industry 
stabilize supplies and prices in years of excess production. Volume 
regulation percentages are in effect for the 2005-2006 crop year (71 FR 
1915, January 12, 2006). This rule also continues in effect an action 
that allowed handlers to receive diversion credit for the voluntary 
destruction of finished marketable product; added a procedure to keep 
Board representation in line with district production levels; and 
revised grower application and mapping procedures.
    Section 930.62 provides that the Board, with the approval of the 
Secretary, may exempt from the provisions of Sec. Sec.  930.41 
(Assessments), 930.44 (Quality control), 930.51 (Issuance of volume 
regulations), 930.53 (Modification, suspension, or termination of 
regulations), and 930.55 through 930.57 (Reserve regulations) cherries 
which are diverted in accordance with Sec.  930.59. According to Sec.  
930.62, cherries that are diverted in accordance with Sec.  930.59 may 
be used for new product development and new market development, used 
for experimental purposes, or used for any other purpose designated by 
the Board, including cherries processed into products for markets for 
which less than 5 percent of the preceding 5-year average production of 
cherries were utilized.
    Section 930.162 specifies procedures for obtaining approval for 
exempt uses which include new product development, new market 
development, and market expansion. Currently, these provisions specify 
volume limitations for these exempt uses. The limitations are specified 
in Sec.  930.162(b)(1) which states that once total industry 
utilization for a new product exceeds 2 percent of the 5-year average 
production of tart cherries, the product shall no longer be considered 
under development and not be eligible for a new product development 
exemption. The maximum

[[Page 66096]]

duration of any new product credit activity is three years from the 
first date of shipment.
    Section 930.162(b)(2) regarding new market development and market 
expansion specifies the annual industry-wide maximum diversion credit 
volume at 10 million pounds RPE (Raw Product Equivalent) of cherry 
products for all expansion activities which is allocated pro rata among 
participating handlers.
    When these limitations were added, the Board believed that these 
markets should be developed slowly. However, it now believes that these 
limitations are a disincentive to new product, market development, and 
market expansion activities involving large quantities. If a handler's 
new product activity involves moving 8 million pounds of exempt tart 
cherries, and 2 percent of the 5-year average production is 5 million 
pounds, the handler would only receive 5 million pounds of diversion 
credit, not 8 million pounds. The Board now believes that this 
unnecessarily restricts these handler activities and that handlers 
should receive diversion credit for the full diversion amount to 
stimulate handler interest and facilitate new product development 
activities.
    With respect to new market development and market expansion 
activities, if the same handler had a pro rata allocation representing 
20 percent of the industry-wide 10 million pound limitation for all 
handlers participating in these activities, this handler would only 
receive diversion credit for 1.6 million pounds, not 8 million pounds. 
The Board believes that this provision should be removed to facilitate 
handler interest in new market development and market expansion.
    To facilitate these activities, the Board recommended that the 
volume limitations be removed from paragraphs (b)(1) and (b)(2) of 
Sec.  930.162 to foster further handler interest in new product, new 
market development, and market expansion activities. This is expected 
to result in an increase in demand for tart cherries and tart cherry 
products. The time limitation for new product development will remain 
in effect.
    As previously stated in this document, handler diversion is 
authorized under Sec.  930.59. Section 930.159 of the rules and 
regulations under the order allows handlers to divert cherries by 
destruction of the cherries at the handler's facility. At-plant 
diversion of cherries takes place prior to placing cherries into the 
processing line to ensure that the cherries diverted were not simply an 
undesirable or unmarketable byproduct of processing. Handlers also can 
receive diversion credit for finished, marketable tart cherry products 
that were accidentally destroyed. Finished, marketable cherry products 
might be accidentally destroyed in a fire, explosion, or because of a 
freezer malfunction.
    Handlers sometimes voluntarily destroy finished, marketable cherry 
products if the cherry products sustain a loss of condition that 
renders them unacceptable for use in normal market channels (free 
tonnage outlets). To permit handlers to recover some of their costs 
incurred in acquiring, processing, and storing such cherries, the Board 
unanimously recommended that the at-plant diversion procedures be 
broadened so handlers can receive diversion credit for the voluntary 
destruction of such cherries. The handler would not have to purchase 
additional cherries to meet his/her restricted percentage obligation, 
but could simply use the diversion credit received for the voluntarily 
destroyed product.
    To receive diversion credit under this added option, the Board 
recommended that the cherry products meet similar criteria as 
accidentally destroyed marketable product. That is, such cherry 
products must: (1) Be owned by the handler at the time of the voluntary 
destruction; (2) be a marketable product at the time of processing; (3) 
be included in the handler's end of year handler plan; and (4) have 
been assigned a Raw Product Equivalent (RPE) by the handler to 
determine the volume of cherries. In addition, the condition and the 
voluntary destruction as well as the disposition of the finished tart 
cherry product must be verified by a USDA inspector or a Board agent or 
employee.
    Handlers wishing to obtain diversion certificates for finished tart 
cherry products that are voluntarily destroyed must apply for such 
diversion certificates and sign an agreement that disposition of the 
destroyed product will take place under the supervision of USDA's 
Processed Products Branch inspectors or Board inspectors. This will 
allow the Board to verify that the finished product was marketable, but 
sustained a loss of condition, and that it was disposed of properly.
    Once diversion is satisfactorily accomplished, handlers will 
receive diversion certificates from the Board stating the weight of 
cherries diverted. Such diversion certificates can be used to satisfy a 
handler's restricted percentage obligation.
    Section 930.158 provides that growers, in districts subject to 
volume regulation, may voluntarily divert their tart cherry production. 
Growers may then offer their diversion certificates to handlers for 
their use in meeting their restricted percentage obligation. The four 
types of grower diversion are: Random row, whole block, partial block, 
and in-orchard tank diversion. This action changes the procedures for 
grower mapping under the grower diversion program. Currently, under 
Sec.  930.158 growers that wish to divert cherries using methods other 
than in-orchard tank must file maps every year if they intend to 
participate in the voluntary grower diversion program. Growers applying 
for diversion must sign a Grower Diversion Application which states 
that the grower agrees to comply with the regulations established for 
the tart cherry diversion program. Each map must contain the grower's 
name and number assigned by the Board, the grower's address, the block 
name or number when appropriate, the location of the orchard or 
orchards, and other information which may be necessary to accomplish 
the desired diversion.
    Growers then inform the Board what type of diversion will be used: 
Random row, partial block, whole block or in-orchard tank diversion. 
Growers who have filed a Grower Diversion Application but have not 
submitted an orchard map with the Board can only participate in in-
orchard tank diversion activities.
    The Board has recommended that the original map and application 
have an ongoing, continuing effect. Annual resubmissions of the map and 
application would no longer be required. Growers will only submit an 
application and map if they are participating in the grower diversion 
program for the first time. Growers would need only to submit a new 
orchard map if he/she added a new block of trees or changed the orchard 
layout differently from the map previously submitted to the Board. This 
action will slightly decrease reporting burdens on growers 
participating in the grower diversion program.
    This action continues in effect a revision to the provisions to 
Sec.  930.120 for reallocating Board representation. Currently, Sec.  
930.20 allocates producer and handler representation on the Board based 
upon the previous 3-year average production of each district in the 
production area. When the production level in a district reaches 
various specified thresholds, the number of representatives from that 
district either increases or decreases: districts with production up to 
and including 10 million pounds shall have one member; districts with 
production greater than 10 million and up to and including 40

[[Page 66097]]

million pounds shall have 2 members; and districts with production 
greater than 40 million pounds and up to and including 80 million 
pounds shall have 3 members; and districts with production greater than 
80 million pounds shall have 4 members.
    The Board recommended that in the event that a district's 3-year 
average production decreases to a level requiring a reduction in 
membership on the Board, representation of the district shall be 
determined by: (1) Agreement of the elected members and alternate 
members of the specific district; or (2) if an agreement cannot be 
reached, the members and alternates having the shortest amount of time 
remaining in their terms of office would be removed from the Board. 
However, the Board's recommendation required modification.
    Because the Secretary of Agriculture (Secretary) has sole authority 
to remove and select persons who can serve on the Board, it would not 
be appropriate to give direct responsibility to current Board members 
in a specific district to determine who is removed from the Board when 
production levels decrease. Accordingly, when a district is faced with 
losing Board representation, the regulations will require the members 
of the specific district to make a recommendation to the Board as to 
who should be removed from the Board, and the Board will then submit 
its recommendation to the Secretary for approval.
    In the event a district's 3-year average production increases such 
that it warrants additional seats on the Board, the seats shall be 
allocated following the criteria in Sec.  930.20(b)(5). Nomination and 
selection of members to fill the additional seats would follow the 
procedures specified in Sec. Sec.  930.23 and 930.24.
    In addition, Sec.  930.158(a) was revised to delete obsolete dates 
in that section and Sec.  930.158(b) was revised to clarify the 
requirement to submit a map for random-row diversion use.

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 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 40 handlers of tart cherries who are 
subject to regulation under the tart cherry marketing order and 
approximately 900 producers of tart cherries in the regulated area. 
Small agricultural service firms, which includes handlers, have been 
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. A majority of the producers and handlers of tart cherries 
under the order are considered small entities under SBA's standards.
    The principal demand for tart cherries is in the form of processed 
products. Tart cherries are dried, frozen, canned, juiced, and pureed. 
During the period 2000/2001 through 2004/2005, approximately 93.4 
percent of the U.S. tart cherry crop, or 216.8 million pounds, was 
processed annually. Of the 216.8 million pounds of tart cherries 
processed, 59 percent was frozen, 28 percent was canned, and 13 percent 
was utilized for juice and other products.
    Based on National Agricultural Statistics Service data, acreage in 
the United States devoted to tart cherry production has been trending 
downward. Bearing acreage has declined from a high of 50,050 acres in 
1987/88 to 36,950 acres in 2004/2005. This represents a 26 percent 
decrease in total bearing acres. Michigan leads the nation in tart 
cherry acreage with 73 percent of the total and produces about 70 
percent of the U.S. tart cherry crop each year.
    This action continues in effect a rule that removed volume 
limitations on market expansion activities used by handlers to earn 
diversion credits to meet their restricted volume obligations; allowed 
handlers to earn diversion credits when they voluntarily destroy 
finished marketable products that have been damaged or deteriorated in 
condition in some manner; revised grower application/mapping procedures 
under the grower division program to make the procedures less 
burdensome; and added a procedure regarding the reallocation of Board 
representation to reflect current district production levels. These 
changes to the marketing order are authorized under Sec. Sec.  930.62, 
930.59, 930.58, and 930.20, respectively.
    It is expected that the benefits resulting from this rulemaking 
will impact both small and large handlers positively by helping them 
increase market demand and by improving the operation of the marketing 
order. It also will benefit producers by making the in-orchard 
diversion application/mapping procedures less burdensome and improve 
the operation of the program.
    Regarding alternatives, the Board discussed leaving the provisions 
unchanged, but determined that the changes were a more viable course of 
action. The program improvements expected to result because of these 
changes will positively impact producers and handlers under the 
marketing order, regardless of size.
    USDA has not identified any relevant Federal rules that duplicate, 
overlap, or conflict with this regulation.
    USDA has determined that this action will have a small impact on 
the reporting and recordkeeping requirements imposed under the tart 
cherry marketing order. 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 accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
Chapter 35), the information collection and recordkeeping requirements 
that are contained in this rule have been previously approved by the 
Office of Management and Budget (OMB) under OMB No. 0581-0177, Tart 
Cherries Grown in the States of Michigan, New York, Pennsylvania, 
Oregon, Utah, Washington, and Wisconsin, M.O. No. 930.
    This rule, which changes procedures for growers submitting 
applications and maps, will result in a slight decrease in reporting 
and recordkeeping requirements on growers who participate in the 
voluntary diversion program. In addition, a slight increase in 
reporting and recordkeeping requirements for handlers who voluntarily 
destroy tart cherry products would be within the current information 
collection burden approved by OMB.
    Reporting and recordkeeping requirements are necessary for 
compliance purposes and for developing statistical data for maintenance 
of the program. The forms require information which is readily 
available from handler records and which can be provided without data 
processing equipment or trained statistical staff. As with other, 
similar marketing order programs, reports and forms are periodically 
studied to reduce or eliminate duplicate information collection burdens 
by industry and public sector agencies.
    AMS is committed to compliance with the E-Government Act, to 
promote

[[Page 66098]]

the use of the Internet and other information technologies to provide 
increased opportunities for citizen access to Government information 
and services, and for other purposes.
    An interim final rule concerning this action was published in the 
Federal Register on April 5, 2006 (71 FR 16982). Copies of the rule 
were mailed by the Board's staff to all Board members and tart cherry 
handlers. In addition, the rule was made available through the Internet 
by USDA and the Office of the Federal Register. That rule provided for 
a 60-day comment period which ended June 5, 2006. Two comments were 
received. One comment was received from a tart cherry grower and the 
other comment was from the Executive Director of the Board.
    The comment from the grower supported USDA's modification to the 
Board's recommendation concerning the authority of the Secretary to 
remove or select members of the Board. The Board had recommended that 
current Board members in a specific district determine who is removed 
from the Board when production levels decrease. USDA modified the 
recommendation so it stated that when a district falls below the 
threshold level, members from the district should make a recommendation 
to the Board. The Board would then submit its recommendation to the 
Secretary for approval. The commenter agreed with this modification.
    The comment from the Executive Director of the Board concerned two 
issues contained in the interim final rule: (1) Grower mapping 
requirements; and (2) reallocating Board representation. With respect 
to the first issue, the commenter urges USDA to remove the requirement 
now included in Sec.  930.158(b) that if a grower decides not to 
participate in the grower diversion program for a year, the grower must 
inform the Board of his/her non-participation. USDA agrees that this 
requirement is not necessary for the operation of the grower diversion 
program. As such, this requirement is being deleted from Sec.  
930.158(b).
    The second issue the Executive Director addressed concerned the 
reallocation of Board membership. The commenter asserted that the 
recommendation of the Board, concerning reallocation, should be adopted 
without the USDA modification that the Secretary will make the final 
decision based on a Board recommendation. The Board's recommendation, 
however, did not take into account the Secretary's sole authority to 
remove and select persons to serve on the Board. As previously 
discussed, it would not be appropriate to give direct responsibility to 
current Board members in a specific district to determine who is 
removed from the Board when production levels decrease. Therefore, the 
commenter's second suggestion is not adopted in this rule.
    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 material presented, including 
the Board's recommendation, and other information, it is found that 
finalizing the interim final rule, with a change, as published in the 
Federal Register (71 FR 16982, April 5, 2006) will tend to effectuate 
the declared policy of the Act.

List of Subjects in 7 CFR Part 930

    Marketing agreements, Reporting and recordkeeping requirements, 
Tart cherries.


0
For the reasons set forth in the preamble, 7 CFR part 930 is amended as 
follows:

PART 930--TART CHERRIES GROWN IN THE STATES OF MICHIGAN, NEW YORK, 
PENNSYLVANIA, OREGON, UTAH, WASHINGTON, AND WISCONSIN

0
Accordingly, the interim final rule amending 7 CFR part 930 which was 
published at 71 FR 16982 on April 5, 2006, is adopted as a final rule 
with the following change.

PART 930--TART CHERRIES GROWN IN THE STATES OF MICHIGAN, NEW YORK, 
PENNSYLVANIA, OREGON, UTAH, WASHINGTON, AND WISCONSIN

0
1. The authority citation for part 930 continues to read as follows:

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


0
2. In Sec.  930.158, the introductory text of paragraph (b) is revised 
to read as follows:


Sec.  930.158  Grower diversion and grower diversion certificates.

* * * * *
    (b) Application and mapping for diversion. Any grower desiring to 
divert cherries using methods other than in-orchard tank shall submit a 
map of the orchard or orchards to be diverted, along with a completed 
Grower Diversion Application, to the Board by April 15 of each crop 
year. The application includes a statement which must be signed by the 
grower which states that the grower agrees to comply with the 
regulations established for a tart cherry diversion program. Each map 
shall contain the grower's name and number assigned by the Board, the 
grower's address, block name or number when appropriate, location of 
orchard or orchards and other information which may be necessary to 
accomplish the desired diversion. On or before July 1, the grower 
should inform the Board of such grower's intention to divert in-orchard 
and what type of diversion will be used. The four types of diversion 
are random row diversion, whole block diversion, partial block 
diversion and in-orchard tank diversion. A grower who informs the Board 
about the type of diversion he or she wishes to use by July 1 can elect 
to use any diversion method or combination of diversion methods. Only 
random row or in-orchard tank diversion methods may be used if the 
Board is not so informed by July 1. Trees that are four years or 
younger do not qualify for diversion. Annual resubmissions of either 
the map or application will no longer be required. Growers will only 
submit a new application and map if they are participating in the 
grower diversion program for the first time. Growers will need only to 
submit a new orchard map if he/she adds a new block of trees to the 
orchard or changes the orchard layout differently from the map 
previously submitted to the Board.
* * * * *

    Dated: November 7, 2006.
Lloyd C. Day,
Administrator, Agricultural Marketing Service.
 [FR Doc. E6-19078 Filed 11-9-06; 8:45 am]
BILLING CODE 3410-02-P