[Federal Register Volume 74, Number 12 (Wednesday, January 21, 2009)]
[Rules and Regulations]
[Pages 3412-3420]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-1139]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Parts 925 and 944

[Doc. No. AMS-FV-06-0184; FV03-925-1 IFR]


Grapes Grown in a Designated Area of Southeastern California and 
Imported Table Grapes; Change in Regulatory Periods

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Interim final rule with request for comments.

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SUMMARY: This rule revises the regulatory period when minimum grade, 
size, quality, and maturity requirements apply to southeastern 
California grapes under Marketing Order No. 925 (order), and to 
imported grapes under the table grape import regulation, from April 20 
through August 15 of each year to April 10 through July 10 of each 
year. The order regulates the handling of grapes grown in a designated 
area of southeastern California and is administered locally by the 
California Desert Grape Administrative Committee (Committee). The 
change to the regulatory period beginning date is needed to ensure that 
imported table grapes marketed in competition with domestic grapes are 
subject to the grade, size, quality, and maturity requirements of the 
order. Section 8e of the Agricultural Marketing Agreement Act of 1937 
(Act) provides authority for such change. The change to the regulatory 
period ending date is needed to realign the regulatory period with 
current shipping trends for grapes in the order's production area. This 
rule also clarifies the maturity (soluble solids) requirements for 
southeastern California and imported Flame Seedless variety grapes.

DATES: Effective Date: January 24, 2009; comments received by March 23, 
2009, will be considered prior to issuance of a final rule.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this rule. Comments must be sent to the Docket Clerk, 
Marketing Order Administration Branch, Fruit and Vegetable Programs, 
AMS, USDA, 1400 Independence Avenue, SW., STOP 0237, Washington, DC 
20250-0237; Fax: (202) 720-8938; or 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.regulations.gov. All comments submitted in response to this rule 
will be included in the record and will be made available to the 
public. Please be advised that the identity of the individuals or 
entities submitting the comments will be made public on the Internet at 
the address provided above.

FOR FURTHER INFORMATION CONTACT: Barry Broadbent, 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 E-mail: [email protected]; or Kurt Kimmel, 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 E-mail: [email protected].
    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 Marketing Order No. 925 (7 CFR part 925), regulating the 
handling of grapes grown in a designated area of southeastern 
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.''
    This rule is also issued under section 8e of the Act, which 
provides that whenever certain specified commodities, including table 
grapes, 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. The table 
grape import regulation is specified in Sec.  944.503 (7 CFR part 
944.503).
    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 action 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.
    There are no administrative procedures that must be exhausted prior 
to any judicial challenge to the provisions of import regulations 
issued under section 8e of the Act.

Introduction

    This rule revises the beginning and ending dates of the regulatory 
period when minimum grade, size, quality, and maturity requirements 
apply to southeastern California grapes under Marketing Order No. 925 
(order), and to imported grapes under the table grape import 
regulation. The revised regulatory period also applies to pack and 
container requirements issued under the order. The previous regulatory 
period for both domestic and

[[Page 3413]]

imported grapes was April 20 through August 15 of each year. The 
Committee, which locally administers the order, unanimously recommended 
changing the date when the order's requirements expire to July 10 of 
each year, because few grapes are normally shipped after that date. 
Additionally, the Desert Grape Growers League of California (League) 
requested that USDA change the beginning date of the regulatory period 
for imported table grapes from April 20 to April 1. The League 
requested this change to ensure that grapes imported prior to the 
beginning of the regulatory period, but marketed during the regulatory 
period in competition with domestically produced grapes, meet the 
California grape order's grade, size, quality, and maturity 
requirements. After much consideration, USDA has determined that a 
beginning regulatory period date of April 10 will adequately address 
the League's concerns and is consistent with the provisions of the Act.
    This rule also changes the ending date of the regulatory period for 
imported grapes to July 10, because few grapes are shipped after that 
date. The rule also clarifies the maturity (soluble solids) 
requirements for southeastern California and imported Flame Seedless 
variety grapes.
    Section 925.52(a)(2) of the grape marketing order provides 
authority to limit the handling of any grade, size, quality, maturity, 
or pack of grapes differently for different varieties, or any 
combination of the foregoing during any period or periods. Section 
925.55 provides for mandatory inspection for all grapes handled 
pursuant to Sec.  925.52 of the order. Section 925.304 of the order's 
administrative rules and regulations prescribes the period during which 
grapes are handled pursuant to regulation.
    Current requirements under the marketing order require grapes 
shipped during the regulatory period to be at least U.S. No. 1 Table, 
as set forth in the United States Standards for Grades of Table Grapes 
(European or Vinifera type) (7 CFR 51.880 through 51.914) (Standards), 
or meet the requirements of the U.S. No. 1 Institutional grade, except 
for the tolerance percentage for bunch size. The tolerance is 33 
percent instead of 4 percent as is required to meet the U.S. No. 1 
Institutional grade.
    Grapes meeting the institutional quality requirements may be marked 
``DGAC No. 1 Institutional'' but shall not be marked ``Institutional 
Pack.'' Grapes of the Flame Seedless and Perlette varieties are 
required to meet the ``other varieties'' standard for berry size (ten-
sixteenths of an inch).
    In addition, fresh shipments of grapes from the marketing order 
area are required to meet the minimum maturity requirements for table 
grapes as specified in the California Code of Regulations (3 CCR 
1436.12). Grapes of the Flame Seedless variety shall be considered 
mature if the juice meets or exceeds 16.5 percent soluble solids, or 
contains not less than 15 percent soluble solids and the soluble solids 
are equal to or in excess of 20 parts to every part acid contained in 
the juice in accordance with applicable sampling and testing procedures 
specified in the California Code of Regulations.
    The foregoing requirements also apply to imported table grapes, 
under the authority of section 8e of the Act, during the regulatory 
period established in Sec.  944.503(a)(3). Prior to this action, the 
regulatory period for imported grapes began April 20 and extended 
through August 15 of each year, the same as the period delineated in 
the marketing order for domestic grapes. This rule revises the 
regulatory period established in the import regulations for imported 
grapes to April 10 through July 10 of each year. Again, this period 
mirrors the period set by the marketing order for domestic regulation.
    The ending date of the regulatory period is being changed from 
August 15 to July 10 to more accurately reflect the production season 
of grapes produced within the marketing order production area. Recent 
production history shows the majority of the grapes produced in the 
production area are shipped prior to July 10. Regulating after that 
date is unjustified, both economically and logistically, for the small 
quantity of grapes that are produced.
    Additionally, the beginning date of the regulatory period is being 
changed from April 20 to April 10 of each year to respond to the 
marketing and technology changes that have occurred within the imported 
grape industry. Improvements in cold storage technology have enabled 
large quantities of imported grapes to be imported prior to the 
beginning of the marketing order regulatory period, when the order 
requirements come into effect, and subsequently be held in cold storage 
for long periods of time. This can potentially allow the stored product 
to be marketed after the start of the regulatory period in competition 
with regulated, domestically produced grapes. Establishing an earlier 
beginning regulatory period date for the marketing order will ensure 
that imported table grapes marketed in competition with domestically 
produced table grapes meet the minimum marketing order quality 
standards.
    Marketing order regulation is intended to protect the interests of 
both the producers and consumers of agricultural commodities covered 
under the Act. A USDA/ERS report discussed the purposes and benefits of 
quality and condition standards (USDA, Economic Research Service, 
Agricultural Economic Report Number 707, ``Federal Marketing Orders and 
Federal Research and Promotion Programs, Background for 1995 Farm 
Legislation'', by Steven A. Neff and Gerald E. Plato, May 1995). The 
basic rationale for such standards is that only satisfied customers are 
repeat customers. Thus, quality standards help ensure that consumers 
are presented a product that is of a consistent quality, helps create 
buyer confidence, and contributes to stable market conditions. When 
consumers purchase satisfactory quality grapes, they are likely to 
purchase grapes again, and inspection helps ensure a quality product. 
It is anticipated that this action will improve the orderly marketing 
of grapes and benefit producers and consumers of grapes.

Changing the Date When Domestic and Imported Table Grape Regulations 
Expire

    Prior to this action, Sec.  925.304 of the order specified a 
regulatory period of April 20 through August 15 when minimum grade, 
size, quality, and maturity requirements apply to grapes grown in 
southeastern California. A final rule published on March 20, 1987, (52 
FR 8865) established the regulatory period to promote the orderly 
marketing of grapes.
    The Committee met on November 14, 2002, and unanimously recommended 
modifying Sec.  925.304 of the order to change the date when minimum 
grade, size, quality, and maturity requirements expire to July 10, 
rather than August 15. The Committee met again on December 12, 2002, 
and clarified that the proposed regulatory period should also apply to 
pack and container requirements under the order.
    Since 1987, the amount of grapes handled in the production area 
after July 10 has generally decreased as older vineyards, which 
typically produce late season varieties, have been removed. For the 
years 2000-2008, almost 99 percent of the approximately 7.3 million 18-
pound lugs of grapes grown annually in the production area were handled 
during the period April 20 to July 10. On average, just over one 
percent of these grapes were harvested and marketed during the period 
July 11 to August 15. The Committee believes that ending regulatory 
requirements on July 10 will benefit handlers and producers

[[Page 3414]]

by reducing the costs associated with mandatory inspection.
    Under section 8e of the Act, minimum grade, size, quality, and 
maturity requirements for table grapes imported into the United States 
are established under Table Grape Import Regulation 4 (7 CFR 944.503) 
(import regulation). Section 944.503(a)(3) of the import regulation 
specifies the regulatory period when imported grapes are subject to 
minimum requirements. The change to the order's regulatory period 
expiration date requires a corresponding change to expiration date of 
the regulatory period for imported table grapes.
    It is expected that the earlier end to the regulatory period for 
domestic and imported grapes will benefit handlers, producers, and 
importers, because the regulatory burden on these entities will be 
reduced.

Changing the Beginning of the Regulatory Period for Domestic and 
Imported Table Grapes

    In January 2003, the League requested that USDA change the 
beginning date of the regulatory period for imported table grapes from 
April 20 to April 1, and provided information in support of that 
request. The League contended that, in prior years, grapes not subject 
to marketing order requirements were imported prior to the start of the 
regulatory period and were subsequently marketed during the regulatory 
period in competition with domestically produced grapes subject to the 
California grape order's grade, size, maturity, and quality 
requirements. The League further contended that there would be no 
adverse effect on the availability and prices of grapes if the 
beginning of the regulatory period for imports were changed to April 1.
    After much consideration, including the League's proposal and 
comments received by USDA concerning the proposed change, USDA is 
establishing with this rule an April 10 beginning date of the 
regulatory period for imported grapes.
    USDA is authorized by Section 608e(b)(1) of the Act to extend 
marketing order requirements for a period, not to exceed 35 days, 
during which the order requirements would be effective for an imported 
commodity during any year, if USDA determines that the additional 
period of time is necessary to effectuate the purposes of the Act and 
to ensure that imports marketed during the regulatory period meet the 
grade, size, quality, or maturity requirements of the marketing order 
applicable to domestic production. Further, section 608e(b)(2) of the 
Act provides that in making such a determination, USDA shall consider, 
through notice and comment procedures:
    (A) To what extent, during the previous year, imports of a 
commodity that did not meet the requirements of a marketing order 
applicable to such commodity were marketed in the United States during 
the period that such marketing order requirements were in effect for 
available domestic commodities (or would have been marketed during such 
time if not for any additional period established by the Secretary);
    (B) If the importation into the United States of such commodity 
did, or was likely to, avoid the grade, size, quality, or maturity 
standards of a seasonal marketing order applicable to such commodity 
produced in the United States; and
    (C) The availability and price of commodities of the variety 
covered by the marketing order during any additional period the 
marketing order requirements are to be in effect.
    In its request, the League presented arguments and data that 
support the claim that unregulated imported grapes have been and likely 
will continue to be in the market in competition with grapes subject to 
regulation, that the presence of such grapes may result in an avoidance 
of the marketing order requirements, and that expanding the marketing 
order regulatory period to ensure that imported and domestic grapes 
marketed during the regulatory period meet minimum marketing order 
quality standards will have minimal impact on the price and 
availability of grapes.
    Current market mechanisms for imported grapes dictate that product 
is either immediately shipped directly to retail markets or diverted 
for holding in cold storage facilities. Improved cold storage 
technology allows importers to divert imported grapes from normal 
marketing channels for up to 60 days after their arrival at a U.S. 
port. The practice of importing grapes into the U.S. prior to the start 
date of the regulatory period, holding them in cold storage, and 
subsequently releasing them into the market after the regulatory period 
has begun may result in the avoidance of the marketing order 
regulation. Revising the start of the regulatory period to April 10 
will reduce the likelihood that uninspected grapes that are imported 
prior to the start of regulation are marketed during the regulatory 
period.
    Exporting countries export many high quality grapes to the U.S. 
prior to April 20. Those same countries have the capability of 
exporting grapes which will consistently meet the minimum requirements 
of the import regulation. There is no expectation that an earlier 
beginning date for regulation will cause a shortage of grapes in the 
market. An earlier beginning date will help to ensure that grapes being 
imported and marketed during the regulatory period meet minimum 
requirements prior to being allowed to be marketed in the U.S.
    It is expected that uniform high quality product consistently in 
the market will encourage repeat purchases of imported and domestic 
grapes, which should benefit producers, handlers, importers, and 
consumers of grapes.
    The U.S. Census Bureau indicates that on average for the years 
2000-2008, 68 million 18-pound lugs of grapes were imported into the 
United States. The two main countries exporting to the United States 
were Chile, with average exports of 51 million 18-pound lugs (76 
percent of the total), and Mexico, with 14 million 18-pound lugs (21 
percent of the total). The remaining three percent came from various 
other countries.
    Total grape imports for the February through April period in the 
years 2000-2008 averaged 44 million 18-pound lugs. Of this amount, 97 
percent came from Chile and the remaining percentage came from various 
other countries.
    Information from USDA's Market News Service (Market News) for 2000-
2008 shows that the Port of Philadelphia (where historically the 
greatest percentage of Chilean table grapes enter the United States) 
received an average of 20 million 18-pound lugs of imported Chilean 
grapes during the February 1 to April 19 period, with approximately 30 
percent (6 million) of these 20 million 18-pound lugs arriving between 
April 1 and April 19. Market News import statistics for the 2008 
shipping season show that 18.82 million lugs of grapes were imported 
from Chile into Philadelphia from February 1 to April 19, with 28 
percent (5.26 million) arriving between April 1 and April 19. After the 
April 20 start of the regulatory period, shipments dropped off 
dramatically and ended completely by June 4.
    Fresh grapes imported prior to the beginning of the regulatory 
period are not subject to mandatory inspection but may be inspected on 
a voluntary basis. USDA's Fresh Products Branch, Fruit and Vegetable 
Programs (Fresh Products), is responsible for the performance of those 
voluntary inspections and compiles the inspection results data. 
Approximately 10 percent of the table grapes imported in during

[[Page 3415]]

the period April 1-19, 2008 were voluntarily inspected.
    The grapes that are voluntarily inspected and fail to meet the 
Standards are not prohibited from entering into the channels of 
commerce in the U.S. By contrast, imported grapes that fail import 
quality requirements during the regulatory period must be reworked to 
meet the minimum requirements before being marketed in the U.S. 
Otherwise, failing product must be exported, destroyed, or utilized in 
processed products.
    Under normal marketing conditions, imported grapes move directly 
through distribution channels into retail markets. However, when the 
supply of imported product exceeds demand, the imported grapes can be 
put into cold storage until the market is ready to absorb them. The 
length of time the grapes remain in storage likely has a negative 
effect the quality of the grapes.
    Studies of table grape importer storage behavior performed by 
SURRES, a division of the Applied Technology Corporation, and the 
College of Business and Management, University of Maryland, indicate 
that importers use their storage capability extensively during the 
March-April time frames and that storage periods in the 30 to 60 day 
range are not uncommon at this time of year. Thus, the utilization of 
cold storage facilities in this manner creates a mechanism whereby 
grapes imported prior to the April 20 start of the regulatory period 
(product which is not subject to the marketing order requirements) may 
be held over in cold storage and subsequently enter the market after 
April 20, in competition with grapes that have passed inspection and 
met or exceeded the marketing order and import requirements.
    Market News reports of commodity movement for the years 2000-2008 
show that grape imports decrease dramatically soon after the start of 
the regulatory period. The amount of grapes imported during the 
regulatory period cannot account for the substantial quantity of 
imported grapes consistently present in the market in May and, 
sometimes, into June. Since few grapes are imported early in the 
regulatory period, many of the imported grapes available during the 
regulatory period have entered the country prior to the beginning of 
the regulatory period and have been held in cold storage and marketed 
during the regulatory period.
    The Market News terminal market reports generally indicate that 
marginal quality and condition grapes command dramatically reduced 
prices in the market. In addition, those same reports indicate that 
grapes of better quality and condition tend to receive higher prices.
    The April 10 regulatory period beginning date is being implemented 
to ensure that imported and domestic grapes marketed during the 
regulatory period meet the minimum marketing order quality standards. 
This action is expected to reduce the quantity of unregulated imported 
grapes marketed during the regulatory period and to provide consumers 
with higher quality grapes on a more consistent basis. Experience has 
shown that an improvement in product quality results in increased 
acceptance in the marketplace and translates into more frequent 
purchases. USDA expects domestic producers and handlers of southeastern 
California grapes, and exporters and importers of foreign-produced 
grapes to benefit from this action through stabilized marketing 
conditions and prices. The regulatory period change is anticipated to 
benefit the producers and marketers of both domestic and imported 
grapes, as well as grape consumers.

Clarification of Maturity Requirements

    This action also revises Sec.  944.503(a)(1)(ii) to clarify that 
imported Flame Seedless variety grapes shall be considered mature if 
the juice meets or exceeds 16.5 percent soluble solids, or contains not 
less than 15 percent soluble solids and the soluble solids are equal to 
or in excess of 20 parts to every part acid contained in the juice in 
accordance with applicable sampling and testing procedures specified in 
the California Code of Regulations (3 CCR 1436.3, 1436.5, 1463.6, 
1436.7, 1436.12, and 1436.17). Previously, this subparagraph did not 
include the 16.5 percent option for meeting maturity requirements. In 
addition, obsolete language specifically regarding requirements in 
effect only in 1998 is removed from paragraph (a)(1). These same 
requirements are already in effect for grapes shipped from southeastern 
California under Marketing Order No. 925.

Initial Regulatory Flexibility Impact Analysis

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA) (5 U.S.C. 601-612), the Agricultural Marketing Service (AMS) 
has considered the economic impact of this rule on small entities. 
Accordingly, AMS has prepared this initial regulatory flexibility 
analysis.
    The purpose of the RFA is to fit regulatory actions to the scale of 
business subject to such actions in order that small businesses will 
not be unduly or disproportionately burdened. Marketing orders issued 
pursuant to the Act, and the rules issued thereunder, are unique in 
that they are brought about through group action of essentially small 
entities acting on their own behalf. Thus, both statutes have small 
entity orientation and compatibility. Import regulations issued under 
the Act are comparable to those established under Federal marketing 
orders.
    There are approximately 14 handlers of southeastern California 
grapes who are subject to regulation under the order and about 50 grape 
producers in the production area. In addition, there are approximately 
123 importers of grapes. Small agricultural service firms are defined 
by the Small Business Administration (13 CFR 121.201) as those having 
annual receipts of less than $7,000,000, and small agricultural 
producers are defined as those whose annual receipts are less than 
$750,000. Nine of the 14 handlers subject to regulation have annual 
grape sales of less than $7 million. Based on data from the National 
Agricultural Statistics Service (NASS) and the Committee, the average 
crop value for 2008 is about $53,040,000. Dividing this figure by the 
number of producers (50) yields an average annual producer revenue 
estimate of about $1,060,800, which is above the SBA threshold of 
$750,000. Based on the foregoing, it may be concluded that a majority 
of grape handlers and none of the producers may be classified as small 
entities. The average importer receives $2.8 million in revenue from 
the sale of grapes. Therefore, we believe that the majority of these 
importers may also be classified as small entities.

Summary of Changes

    This rule revises the regulatory periods when minimum grade, size, 
quality, and maturity requirements apply to grapes grown in 
southeastern California under the order, and to imported grapes under 
the table grape import regulation. The revised regulatory period also 
applies to pack and container requirements issued under the order. 
Prior to this action, the regulatory period for both domestic and 
imported grapes was April 20 through August 15 of each year.
    The California Desert Grape Administrative Committee, which locally 
administers the order for grapes grown in a designated area of 
southeastern California, unanimously recommended changing the date when 
these requirements expire for grapes grown in California to July 10. 
Moving the ending date of the regulatory period forward is in the 
interest of table grape

[[Page 3416]]

handlers and producers. The Desert Grape Growers League of California 
requested that the beginning date of the regulatory period for imported 
grapes be changed from April 20 to April 1 and provided information to 
support its request. The League proposed this regulatory period change 
to reduce the quantity of unregulated imported grapes that are marketed 
during the regulatory period in competition with regulated grapes. The 
League believes that regulating product quality to meet minimum 
standards will result in increased acceptance of grapes in the 
marketplace, and is expected to translate into more frequent purchases 
on the part of the consumer.
    After publishing a proposed rule and receiving comments, USDA has 
subsequently determined that changing the beginning date of the 
regulatory period to April 10, as opposed to the April 1 date requested 
by the League, adequately addresses the League's concerns and is 
consistent with the provisions of the Act.
    In addition, this action revises regulatory language in the grape 
import regulations to clarify maturity requirements on imported Flame 
Seedless variety grapes. Prior to this rule, the regulation did not 
include the 16.5 percent option for meeting maturity requirements that 
is already in effect for grapes shipped from southeastern California 
under Marketing Order No. 925.

Changing the Ending of the Regulatory Period for Domestic and Imported 
Grapes

    Section 925.52(a)(2) of the grape order provides authority to limit 
the handling of any grade, size, quality, maturity or pack of grapes 
differently for different varieties, or any combination of the 
foregoing during any period or periods.
    Section 925.304 of the order's administrative rules and regulations 
stipulates the regulatory period, most recently April 20 through August 
15, when minimum grade, size, quality, and maturity requirements apply 
to grapes grown in southeastern California under the order. A final 
rule published on March 20, 1987, (52 FR 8865) established that 
regulatory period to promote the orderly marketing of grapes.
    Grape handlers in the production area shipped and marketed an 
average of 7.3 million 18-pound lugs of grapes annually from 2000-2008. 
Approximately 99 percent of those grapes were shipped and marketed 
during the period April 20 to July 10. At least 14 varieties are grown 
in the production area regulated under the order and marketed in major 
U.S. market areas. The four major varieties are Flame Seedless, 
Perlettes, Thompson Seedless, and Sugraone.
    Since 1987, the amount of grapes handled after July 10 has 
decreased, and, in the period 2000-2008, the amount of grapes handled 
after July 10 constituted just slightly more than 1 percent of the 
grapes produced in the production area. The Committee met on November 
14, 2002, and unanimously recommended modifying Sec.  925.304 of the 
order's administrative rules and regulations to advance the date when 
minimum grade, size, quality, and maturity requirements expire to July 
10, rather than August 15. The Committee met again on December 12, 
2002, and clarified that the proposed regulatory period should also 
apply to pack and container requirements under the order.
    The amount of grapes handled in the production area after July 10 
of each year has generally decreased as older vineyards, which 
typically produce late season varieties, have been removed. During the 
past 3 years, approximately 99 percent of the grapes grown in the 
production area were handled during the period April 20 through July 
10.
    Grapes handled after July 10 tend to bring much lower prices than 
early season grapes. For example, in the 2003 season that followed the 
Committee recommendation, early season Flame Seedless grapes had an 
average FOB price of $13.85 to $23.85 while end-of-season Flame 
Seedless grapes brought an average FOB price of $11.85 to $12.85 per 
18-pound lug. In 2008, early season Flame Seedless prices averaged 
$22.95 to $28.95 while the late season prices averaged $11.95 per 18-
pound lug.
    Additionally, inspection costs for grapes handled after July 10 are 
higher, as inspection fees are proportionate to the volume of grapes 
inspected. Thus, this shortened regulatory period is expected to 
benefit handlers and producers.
    The Committee considered other regulatory period alternatives that 
would more adequately reflect the end of the harvest for the domestic 
production area but still ensure shipments of higher quality grapes. 
For example, one suggestion was to change the ending date of the 
regulatory period for grapes grown in the designated area of 
southeastern California to July 1 or July 5. This suggestion was not 
adopted because the Committee believes that July 10 is more reflective 
of the end of the season. Approximately one percent of grapes are 
shipped from the production area after July 10, but the industry felt 
that commercial quantities of grapes may still be shipped before that 
date and was not supportive of an earlier ending date.
    Section 8e of the Act specifies that whenever certain specified 
commodities, including table grapes, are regulated under a Federal 
marketing order, imports of that commodity into the United States are 
prohibited unless they meet the same or comparable grade, size, 
quality, and maturity requirements as those in effect for the 
domestically produced commodity. Minimum grade, size, quality, and 
maturity requirements for table grapes imported into the United States 
are established under Table Grape Import Regulation 4 (7 CFR 944.503) 
(import regulation).
    Section 944.503(a)(3) of the import regulation specifies the 
regulatory period during which imported grapes are subject to 
regulation. Prior to this rule, the regulatory period was April 20 to 
August 15 of each year. Since this action will change the expiration 
date of the regulatory period for the California production area to 
July 10, a corresponding change to the regulatory period for imported 
table grapes is required under section 8e of the Act.

Changing the Beginning of the Regulatory Period for Imported Grapes

    The U.S. Census Bureau indicates that on average, for the years 
2000-2008, 68 million 18-pound lugs of grapes were imported into the 
United States. The majority of these grapes are imported prior to April 
20. Only grapes imported during the regulatory period are required to 
be inspected and to comply with the same minimum grade, size, quality, 
and maturity requirements as the domestic marketing order.
    The League requested that the beginning date of the regulatory 
period for imported grapes be advanced from April 20 to April 1, and 
submitted information to support its request to USDA for review and 
evaluation. After much consideration, USDA determined that changing the 
beginning date of the regulatory period to April 10 adequately 
addresses the League's concerns and is consistent with the provisions 
of the Act. The beginning date of the marketing order regulatory period 
is also being changed to keep the import and domestic regulatory period 
dates the same.
    The authority for changing the beginning date of the regulatory 
period for imports is specified in Sec.  608e(b) of the Act. These 
provisions allow the Secretary to extend import requirements for a 
period, not to exceed 35 days, during which the import requirements 
would be effective for the imported

[[Page 3417]]

commodity. To change the beginning date, USDA must consider the 
following: (1) For the prior year, whether imports of grapes that did 
not meet import requirements were marketed in the United States during 
the period that such import requirements were in effect; (2) whether 
imported grapes did or were likely to avoid such import requirements; 
and (3) whether there would be any adverse effect on the availability 
and prices of grapes if the regulatory period for imports was changed.
    The League contends that such an action is needed to ensure that 
grapes imported into the United States prior to the beginning of the 
regulatory period, but marketed when the regulation is in effect, meet 
marketing order grade, size, quality, and maturity requirements.
    Grape importers use cold storage extensively during the months of 
March and April. Storage periods in the 30-60 day range are not 
uncommon at this time of year. Much of the imported product available 
in the market during the regulatory period is believed to have been 
shipped prior to the beginning of the regulatory period and held in 
such facilities before shipping to terminal markets.
    On average, 68.0 million 18-pound lugs of grapes were imported into 
the United States at all ports during each of the years 2000 to 2008. 
During each of those years, there was a significant decrease in imports 
after the April 20 beginning of the regulatory period. Approximately 3 
million 18-pound lugs of imported grapes arrive each week of the 
shipping season prior to the April 20 beginning date of regulation. 
After April 20, shipments drop dramatically and usually cease 
altogether by May 31.
    Market News reports show that shipments of imported Chilean grapes 
in 2008 mirror the pattern of previous years. An average of 3.25 
million 18-pound lugs of grapes were imported each week of the season 
leading up to the April 20 start of regulation. For the week following 
the April 20 start date, shipments dropped to approximately 750,000 
lugs per week. In the weeks that followed, shipments were 430,000 lugs, 
372,000 lugs, and 78,000 lugs. Shipments continued to decrease to 
statistically insignificant quantities, ceasing completely after June 
4, 2008.
    Fresh Products data indicates that from 2004-2007, less than one 
percent of imported Chilean grapes were subject to inspection during 
the regulatory period, confirming that only limited quantities of 
Chilean grapes are imported after the import regulation takes effect. 
The majority of imports from Mexico are imported during the May-July 
period of each year subject to the import regulation requirements.
    Market News terminal market reports for grapes for the years 2000-
2008 indicate that imported table grapes are in the domestic market 
during May and June and that they compete with regulated grapes that 
are required to be inspected and certified as meeting minimum quality 
requirements. Given the small quantity of grapes imported during the 
early part of the regulatory period, it is presumed that the imported 
grapes available in the market during that time were imported prior to 
the start of the regulatory period and held over in cold storage.
    USDA's Economic Research Service (ERS) studies indicate that low 
quality commodities can adversely affect the market for shippers of 
acceptable quality products. Quality requirements are typically used to 
cultivate a positive image of a consistent and reliable supplier of 
high-quality product. This results in consumer goodwill that 
strengthens demand and boosts producer prices. (USDA, Economic Research 
Service, Agricultural Economic Report Number 629, ``Federal Marketing 
Orders for Fruits, Vegetables, Nuts, and Specialty Crops'' by Nicholas 
J. Powers, March 1990; USDA, Economic Research Service, ``Criteria for 
Evaluating Federal Marketing Orders: Fruits, Vegetables, Nuts, and 
Specialty Commodities'' by Leo C. Polopolus, Hoy F. Carman, Edward V. 
Jesse, and James D. Shaffer, December 1986).
    The presence of lower quality product in the marketplace, from any 
source, weakens demand for all products of that type. Market research 
and experience shows that consumers often purchase other commodities in 
place of the commodity with which they have had a bad quality 
experience. Decreasing demand ultimately has a negative effect on 
grower, handler, exporter, and importer returns.
    The ERS report also discusses the purposes of quality standards. 
The basic rationale for such standards is that only satisfied customers 
are repeat customers. When consumers have a good quality experience, 
they make repeat purchases. Thus, quality standards help ensure that 
consumers are presented product that is of a known level of quality. It 
is in the interest of the grape industry to maintain consumer 
confidence by consistently offering high-quality product.
    According to the League, table grapes shipped from some countries 
exporting to the United States must meet minimum inspection 
requirements on a year-round basis when their product is exported to 
both the European Union and Canada. Hence, a change in the effective 
date to April 10 should not dramatically adversely affect the 
availability of imported table grapes in the U.S. market, as the 
exporting countries have the ability to supply high quality table 
grapes. As an example, during the period April 1-19, 2004, FOB prices 
for imported grapes in U.S. markets ranged from $8 to $26 per package, 
depending on the date, condition, and size of the grapes. During the 
same period, Canadian FOB prices for imported grapes ranged from $12.03 
to $33.98 and European Union prices ranged from $8 to $22 depending on 
the date, condition, and size of the grapes.
    Better quality grapes tend to command higher prices. The increase 
in revenue could offset the added inspection costs of 3.8 cents per box 
for imported grapes checked at dockside. In 2000-2008, less than 1 
percent of Chilean grapes required mandatory inspection. However, if 
inspection in these years had been mandatory as of April 10, about 7 
percent would have been required to be inspected. It is anticipated 
that grape prices will be slightly higher as the quality level of 
grapes offered to consumers is increased.
    Inspection fees will now be applicable to grapes imported during 
the April 10-19 period. These fees vary, depending on such factors as 
the location of the inspection, the size of the load to be inspected, 
and whether there are multiple commodities to be inspected. Current 
inspection fees for imported grapes are 3.8 cents per package when 
inspected at dockside. When the inspection is performed at a location 
other than dockside, the fees range from $69 to $151 per car lot 
(approximately 45,000 pounds), depending on the number of packages in 
the load. (See http://www.ams.usda.gov/AMSv1.0/ams.fetchTemplateData.do?template=TemplateA&navID=FreshProductInspectionService&rightNav1=FreshProductInspectionService&topNav=&leftNav=&page=FreshFVGrading&resultType=&acct=freshgrdcert for inspection fee 
information).
    With prices for imported grapes ranging from $6 to mostly $44 per 
package, depending on the month, condition, and size of the grapes, 
inspection fees are anticipated to be less than 1 percent of the value 
of the grapes imported during this period of time.
    The benefits and costs associated with changing the dates when 
grade, size, quality, and maturity requirements apply to grapes grown 
in a designated area of southeastern California and to

[[Page 3418]]

imported grapes under the grape import regulation is not expected to be 
disproportionately larger or smaller for small importers than for large 
importers, nor for small handlers or producers than for larger 
entities.
    A number of alternatives to an April 10 regulatory period start 
date were considered prior to this action, including leaving the April 
20 beginning date of the regulatory period unchanged, and setting an 
earlier beginning date (April 1 per the League's request).
    There is clear evidence that the April 20 start date has allowed 
unregulated imported grapes to compete in the marketplace with 
regulated grapes, negatively impacting domestic producers and handlers. 
Maintaining the status quo in relation to the regulatory period start 
date was not deemed to be a viable option.
    An April 1 regulatory period start date, as originally proposed by 
the League, would certainly have addressed the problem, but may have 
also created some unintended consequences. The imported grape industry 
felt that an April 1 start date would have created undue economic 
hardship for the industry and may have ultimately resulted in curtailed 
shipments.
    The April 10 regulatory period start date addresses the concerns of 
the domestic grape industry, while not excessively burdening the 
imported grape industry. An April 10 beginning date is expected to 
improve the quality of imported and domestic grapes available to 
consumers, lessen the chances of unregulated imported grapes being in 
the market during the regulatory period in competition with regulated 
grapes, and, ultimately, be in the best interest of all grape handlers, 
producers, importers, and consumers.
    This action will not impose any additional reporting or 
recordkeeping requirements on either small or large grape 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.
    AMS is committed to compliance with the E-Government Act, to 
promote 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.
    In addition, USDA has not identified any relevant Federal rules 
that duplicate, overlap, or conflict with this final rule.
    In addition, the Committee's meetings were widely publicized 
throughout the grape industry and all interested persons were invited 
to attend the meetings and participate in Committee deliberations. Like 
all Committee meetings, the November 14, 2002, and the December 12, 
2002, meetings were public meetings and all entities, both large and 
small, were able to express their views on changing the marketing order 
regulatory period. Also, the World Trade Organization, the Chilean 
Technical Barriers to Trade (TBT) inquiry point for notifications under 
the U.S-Chile Free Trade Agreement, the embassies of Argentina, Brazil, 
Canada, Chile, Italy, Mexico, Peru, and South Africa, and known grape 
importers were notified of the proposed action. Finally, interested 
persons are invited to submit comments on this interim final rule, 
including the regulatory and informational impacts of this action on 
small businesses.

Previously Published Proposed Rule

    A proposed rule concerning this action was published in the Federal 
Register on May 25, 2005 (70 FR 30001). The rule proposed changing the 
regulatory period for southeastern California grapes and imported 
grapes from April 20 through August 15 to April 1 through July 10 and 
clarifying the maturity requirements for southeastern California and 
imported Flame Seedless variety grapes.
    The proposed rule was subsequently reopened five times for further 
comments on July 25, 2005 (70 FR 42513), on September 27, 2005 (70 FR 
56378), on July 11, 2006 (71 FR 39019), on October 25, 2007 (72 FR 
60588), and on December 13, 2007 (72 FR 70811). Copies of the rule were 
mailed or sent via facsimile to all Committee members and grape 
handlers. Finally, the rule was made available through the Internet by 
the Office of the Federal Register. A total of five 60-day comment 
periods and one 15-day comment period, the last of which ended December 
28, 2007, were provided to allow interested persons to respond to the 
proposal.
    In total, USDA received 161 comments in response to the proposed 
rule and subsequent reopenings. Comments were broken down as follows; 
20 comments were in support of the proposal, 141 were in opposition, 
112 of the comments originated from foreign sources, and 49 originated 
from domestic sources. Fifteen comments were in reference to procedural 
aspects of the rulemaking process and were not related directly to the 
merits of the proposal.
    The comments were primarily directed towards the proposed change to 
the beginning date of the regulatory period from April 20 to April 1, 
as published in the proposed rule. There were no comments in opposition 
to the proposed change to the ending date of the regulatory period or 
to the proposed change in the maturity requirements in the import 
regulation.
    All comments, both in support of and in opposition to the proposed 
rule, were reviewed thoroughly and considered prior to the issuance of 
this action. Likewise, all comments received in response to this 
interim final rule will be considered prior to the issuance of a final 
rule.

Comments in Full Support

    Twenty comments were submitted in full support of the proposal. The 
comments were submitted by domestic grape producers and handlers, 
associations related to the domestic grape industry, domestic 
agricultural service firms, and members of the U.S. Congress.

Comments in Opposition

    Of the 141 comments in opposition to the proposal, 14 were 
concerned with procedural aspects of the rulemaking process, 106 were 
so similar in style and content as to be considered form letters, and 
the remaining 21 were unique submissions. The commenters represented 
foreign grape producers, foreign grape producer associations, and 
shippers, importers, exporters, and maritime affiliates that are 
directly involved in the importation of foreign produced grapes into 
the U.S.
    The opposition comments that had material bearing on this 
rulemaking action were summarized into the following four categories: 
(1) The proposed change in the beginning effective date contravenes the 
mandates set forth in the Act; (2) the proposed rule fails to supply a 
reasoned analysis to rescind the 1987 finding that a change of the 
beginning effective date for Marketing Order 925 and Import Regulation 
4 to a date before April 20 would constitute an unnecessary regulation 
of imports at a time when domestic shipments would appear to be remote; 
(3) the proposed beginning effective date of April 1 is contrary to the 
declared administrative policy of AMS/USDA; and (4) the proposed rule 
imposes marketing order standards on Chilean supplies when no domestic 
varieties are available, and therefore allegedly constitutes a non-
tariff barrier contrary to the terms of WTO Agreements and the U.S.-
Chile Free Trade Agreement and assesses inspection fees starting April 
1 when no domestic supplies are being so charged,

[[Page 3419]]

and thereby allegedly violates Article III and Article VIII of GATT 
1994.
    The specific comments in opposition to the proposed rule maintained 
that the action violated the criteria set forth in the Act for such 
action and lacked the required statistical evidence from ``the previous 
year.'' The commenters also charged that deficient or irrelevant 
evidence in support of the action, rebutted allegations of poor quality 
of grape imports being imported immediately prior to the regulatory 
period, and asserted that grape imports would be curtailed in response 
to the action. Virtually all of the commenters in opposition stated 
that the imported grape industry would suffer negative economic impacts 
as a result of such action. In addition, opposition commenters asserted 
that the action violated previous rulemaking findings, that the action 
contravenes departmental policy determinations dating back to 1982, and 
that the action constituted a breach of various trade agreements 
entered into by the U.S. Government.
    USDA is in disagreement with most of the opposition comments. 
However, USDA believes that an April 1 beginning date for the 
regulatory period would be too early and could potentially place an 
unjustifiable hardship on the imported grape industry. USDA believes 
that moving the beginning date of the regulatory period forward from 
April 20 to April 10 is necessary and justified.
    USDA further believes that this rulemaking action fully adheres to 
the requirements of the Act to take such action. USDA has sought to 
collect, present, analyze, and consider evidence that is both current 
and relevant, as is required by the Act. The proposed rule, the 
reopening of the comment period to present updated statistical data, 
and this interim final rule present appropriate statistical 
justification for this action and are in compliance with the governing 
statutes. In addition, USDA rejects the opposition commenters' 
contention that any statutory or procedural errors were committed 
during the course of this rulemaking process. USDA believes that all 
statutes, policies, and procedures of the federal government have been 
strictly adhered to.
    Likewise, USDA believes that this action is not contrary to any 
previous actions, decisions, agreements, or treaties binding on the 
U.S. Government.
    In deciding how to proceed on this matter, USDA took into 
consideration the information submitted prior to issue of the proposed 
rule, as well as the comments received and determined that an April 10 
regulatory period beginning date is more appropriate than the proposed 
April 1 date. Consequently, this interim final rule implements an April 
10 regulatory period beginning date instead of the April 1 date 
contained in the proposed 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/AMSv1.0/ams.fetchTemplateData.do?template=TemplateN&page=MarketingOrdersSmallBusinessGuide. 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 the revisions to the regulatory 
period when minimum grade, size, quality, and maturity requirements 
apply to southeastern California grapes under Marketing Order No. 925 
(order), and to imported grapes under the table grape import 
regulation. Any comments received will be considered prior to 
finalization of this rule.
    In accordance with section 8e of the Act, USTR has concurred with 
the issuance of this interim final rule.
    After consideration of all relevant material presented, including 
the information and recommendation submitted by the Committee and other 
available information, it is hereby found that this interim final rule, 
as hereinafter set forth, will tend to effectuate the declared policy 
of the Act.
    Pursuant to 5 U.S.C. 553, it is also found and determined upon good 
cause that it is impracticable, unnecessary, and contrary to the public 
interest to give preliminary notice prior to putting this rule into 
effect and that good cause exists for not postponing the effective date 
of this action until 30 days after publication in the Federal Register 
because: (1) The 2008-2009 shipping season for imported grapes affected 
by this rule has already begun; (2) the immediate implementation of 
this rule is necessary for importers to make marketing decisions and to 
contract in advance for shipping; (3) handlers and importers are aware 
of this rule; (4) a proposed rule concerning the action taken in this 
rule was published in the Federal Register May 25, 2005 (70 FR 30001); 
and (5) this rule provides a 60-day comment period and all comments 
timely received will be considered prior to finalization of this rule.

List of Subjects

7 CFR Part 925

    Grapes, Marketing agreements, Reporting and recordkeeping 
requirements.

7 CFR Part 944

    Avocados, Food grades and standards, Grapefruit, Grapes, Imports, 
Kiwifruit, Limes, Olives, Oranges.

0
For the reasons set forth in the preamble, 7 CFR parts 925 and 944 are 
amended as follows:

PART 925--GRAPES GROWN IN A DESIGNATED AREA OF SOUTHEASTERN 
CALIFORNIA

0
1. The authority citation for 7 CFR parts 925 and 944 continues to read 
as follows:

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


0
2. The introductory text to Sec.  925.304 is revised to read as 
follows:


Sec.  925.304  California Desert Grape Regulation 6.

    During the period April 10 through July 10 each year, no person 
shall pack or repack any variety of grapes except Emperor, Almeria, 
Calmeria, and Ribier varieties, on any Saturday, Sunday, Memorial Day, 
or the observed Independence Day holiday, unless approved in accordance 
with paragraph (e) of this section, nor handle any variety of grapes 
except Emperor, Calmeria, Almeria, and Ribier varieties, unless such 
grapes meet the requirements specified in this section.
* * * * *

PART 944--FRUITS; IMPORT REGULATIONS

0
3. In Sec.  944.503, paragraphs (a)(1) introductory text, (a)(1)(ii), 
and (a)(3) are revised to read as follows:


Sec.  944.503  Table Grape Import Regulation 4.

    (a)(1) Pursuant to section 8e of the Act and Part 944--Fruits, 
Import Regulations, the importation into the United States of any 
variety of Vinifera species table grapes, except Emperor, Calmeria, 
Almeria, and Ribier varieties, is prohibited unless such grapes meet 
the minimum grade and size requirements specified in 7 CFR 51.884 for 
U.S. No. 1 table, as set forth in the United States Standards for 
Grades of Table Grapes (European or Vinifera Type, 7 CFR 51.880 through 
51.914), or shall meet all the requirements of U.S. No. 1 Institutional 
with the exception of the tolerance for bunch size. Such tolerance 
shall be 33 percent instead of

[[Page 3420]]

4 percent as is required to meet U.S. No. 1 Institutional grade. Grapes 
meeting these quality requirements shall not be marked ``Institutional 
Pack,'' but may be marked ``DGAC No. 1 Institutional.''
    (i) * * *
    (ii) Grapes of the Flame Seedless variety shall meet the minimum 
berry size requirement of ten-sixteenths of an inch (1.5875 
centimeters) and shall be considered mature if the juice meets or 
exceeds 16.5 percent soluble solids, or the juice contains not less 
than 15 percent soluble solids and the soluble solids are equal to or 
in excess of 20 parts to every part acid contained in the juice, in 
accordance with applicable sampling and testing procedures specified in 
sections 1436.3, 1436.5, 1436.6, 1436.7, 1436.12, and 1436.17 of 
Article 25 of Title 3: California Code of Regulations (CCR).
* * * * *
    (3) All regulated varieties of grapes offered for importation shall 
be subject to the grape import requirements contained in this section 
effective April 10 through July 10.
* * * * *

    Dated: January 14, 2009.
James E. Link,
Administrator, Agricultural Marketing Service.
 [FR Doc. E9-1139 Filed 1-16-09; 8:45 am]
BILLING CODE 3410-02-P