[Federal Register Volume 75, Number 24 (Friday, February 5, 2010)]
[Rules and Regulations]
[Pages 5879-5886]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-2542]


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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 FIR]


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

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: The Department of Agriculture (USDA) is adopting, as a final 
rule, without change, an interim final rule revising 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 help 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 continues in 
effect the action that clarified the maturity (soluble solids) 
requirements for southeastern California and imported Flame Seedless 
variety grapes.

DATES: Effective Date: February 8, 2010.

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 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).
    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.
    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

[[Page 5880]]

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 finalizes the interim final rule published in the Federal 
Register on January 21, 2009 (74 FR 3412), that revised 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, 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. This 
final rule continues in effect the changes made by the interim final 
rule. The previous regulatory period for both domestic and 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 adequately addresses the 
League's concerns and is consistent with the provisions of the Act.
    This rule also finalizes the clarification to 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 regulations under the 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.
    Prior to the interim final rule in this rulemaking, 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 finalizes the revised regulatory 
period established in the import regulations for imported grapes to 
April 10 through July 10 of each year. This period mirrors the period 
set by the marketing order for domestic regulation.
    The ending date of the regulatory period was 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 was 
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 the earlier 
beginning regulatory period date for the marketing order helps 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 the interim final rule, 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 to change the date

[[Page 5881]]

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 the regulatory 
requirements on July 10 will benefit handlers and producers 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 required 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 
established, through an interim final rule, an April 10 beginning date 
of the regulatory period for imported grapes. This final rule continues 
in effect the action that revised the beginning regulatory period date 
to April 10.
    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 
beginning 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 
reduces the likelihood that uninspected grapes that are imported prior 
to the start of regulation are marketed during the regulatory period.
    Exporting countries ship many high quality grapes to the U.S. prior 
to April 20. Those same countries have the capability of exporting 
grapes which consistently meet the minimum requirements of the import 
regulation. There is no expectation that the earlier beginning date of 
regulation will cause a shortage of grapes in the market. The earlier 
beginning date helps 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

[[Page 5882]]

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 during 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 on 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 timeframes 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 was 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, as well as 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 rule also finalizes the modifications to 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). Prior to the implementation of the interim final rule, 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 has been removed from 
paragraph (a)(1). These requirements are already in effect for grapes 
shipped from southeastern California under Marketing Order No. 925.

Final 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 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. Import regulations issued under 
the Act are comparable to those established under Federal marketing 
orders.
    There are approximately 14 handlers of southeastern California 
grapes 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 $2,800,000 in revenue from the 
sale of grapes. Therefore, we believe that the majority

[[Page 5883]]

of these importers may also be classified as small entities.

Summary of Changes

    This rule continues in effect the interim final rule published in 
the Federal Register on January 21, 2009 (74 FR 3412), that revised 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 the 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 end for grapes grown in California to July 10. 
Moving the ending date of the regulatory period forward is in the 
interest of table grape 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 
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 addressed the League's concerns and was 
consistent with the provisions of the Act.
    In addition, this finalizes the interim final rule that revised 
regulatory language in the grape import regulations to clarify maturity 
requirements on imported Flame Seedless variety grapes. Prior to the 
interim final rule, the regulation did not include the 16.5 percent 
option for meeting maturity requirements that has been in effect for 
grapes shipped from southeastern California under the order.

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 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 the original 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, FOB prices for early season Flame Seedless 
grapes ranged from $13.85 to $23.85, while end-of-season Flame Seedless 
grape FOB prices ranged from $11.85 to $12.85 per 18-pound lug. In 
2008, early season Flame Seedless prices ranged from $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, a 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).
    Section 944.503(a)(3) of the import regulation specifies the 
regulatory period during which imported grapes are subject to 
regulation. Prior to the interim final rule, the regulatory period was 
April 20 to August 15 of each year. Since that action changed the 
ending date of the regulatory period for the California production area 
to July 10, a corresponding change to the regulatory period for 
imported table grapes was 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

[[Page 5884]]

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 
addressed the League's concerns and was consistent with the provisions 
of the Act. The beginning date of the marketing order regulatory period 
was also 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 section 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 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, countries that export table grapes to the 
European Union and Canada must meet minimum inspection requirements on 
a year-round basis. A number of these countries are the same as those 
who also export table grapes to the United States. 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 during this same time period. 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

[[Page 5885]]

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/getfile?dDocName=STELPRDC5065795 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 imported grapes 
under the grape import regulation are 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 the implementation of the interim final 
rule, 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 addressed 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.
    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.
    This rule 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. In addition, USDA 
has not identified any relevant Federal rules that duplicate, overlap, 
or conflict with this final rule.
    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 and interim final rules. Finally, 
interested persons were invited to submit comments on the interim final 
rule, including the regulatory and informational impacts of this action 
on small businesses.
    An interim final rule was published in the Federal Register on 
January 21, 2009 (74 FR 3412). Copies of the rule were mailed by the 
Board's staff to all Committee members and grape handlers. In addition, 
the rule was made available through the Internet by USDA and the Office 
of the Federal Register. A 60-day comment period ending March 23, 2009, 
was provided to allow interested persons to respond to the rule.

Previously Published Proposed Rule

    In addition, prior to the publication of the interim final rule, a 
proposed rule concerning this action was published in the Federal 
Register on May 25, 2005 (70 FR 30001). That 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, and the rule was 
made available through the Internet at http://www.regulations.gov.
    A total of seven comment periods (five 60-day comment periods, a 
30-day comment period, and a 15-day comment period) have been provided 
to allow interested persons to respond to the proposed action. The last 
comment period ended March 23, 2009.
    In total, USDA received 161 comments related to the proposed rule. 
Comments were broken down as follows: 20 comments were in support of 
the proposal and 141 in opposition; 112 of the comments originated from 
foreign sources and 49 from domestic sources. Fifteen of the comments 
were in relation to extending the comment period or requests for 
additional information. The comments received were primarily directed 
towards discussion of the proposed change to the beginning date of the 
regulatory period. There were no comments in opposition to the proposed 
change to the ending date of the regulatory period or to the proposed 
change of the maturity requirements in the import regulation.
    Twenty comments were submitted in full support of the proposed 
changes during the proposed rule comment period. 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.
    USDA received a total of 141 comments in opposition to the proposal 
during the proposed rule comment period and subsequent five reopenings. 
Fourteen of the comments were in relation to extending the comment 
period or requests for additional information, 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, 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 the previously 
published proposed rule may be 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

[[Page 5886]]

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 the 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, thereby allegedly 
violating Article III and Article VIII of GATT 1994. These comments 
were addressed in the interim final rule.

Interim Final Rule

    The interim final rule was published in the Federal Register on 
January 21, 2009. This rule revised the regulatory period when minimum 
grade, size, quality, and maturity requirements apply to southeastern 
California grapes under the order and to imported grapes under the 
table grape import regulations, from April 20 through August 15 of each 
year to April 10 through July 10 of each year. The action also 
clarified the maturity requirement for southeastern California and 
imported Flame Seedless variety grapes. A 60-day comment period was 
provided to allow interested persons to respond to the interim final 
rule.
    Five comments were received during the comment period--one in 
support of the action and four in opposition. The one comment in 
support of the action was received from an organization representing 
domestic grape producers. The commenter agreed with the determinations 
made by USDA and was in full support of finalization of the interim 
final rule.
    Four comments were received in opposition to the action taken in 
the interim final rule. The opposition comments were received from a 
domestic consumer, a grape importer, a domestic maritime trade 
association, and a foreign association of importers. Except for the 
domestic consumer who objected to marketing orders in general, 
including the grape marketing order, the opposition comments were 
received from persons who had commented previously concerning the 
proposed rule. These commenters raised issues that were the same or 
substantially the same as those raised in their earlier comments on the 
proposed rule.
    As in their previous comments, the commenters in opposition to the 
interim final 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 
there was 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. 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 disagrees with the contentions raised in the opposition 
comments. Further, USDA 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 the interim final rule presented appropriate statistical 
justification for this action and are in compliance with the governing 
statures. 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, decision, agreements, or treaties binding on the U.S. 
Government. Accordingly, no changes will be made in the finalization of 
the interim final rule.
    Finally, one opposition commenter raised concern regarding the 
issue of grape varieties subject to exemption under the marketing order 
regulations. However, the issue of exempt varieties requires separate 
review and consideration.
    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 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.
    In accordance with section 8e of the Act, USTR has concurred with 
the issuance of this 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 finalizing the interim 
final rule, without change, as published in the Federal Register (74 FR 
3412, January 21, 2009) will tend to effectuate the declared policy of 
the Act. Pursuant to 5 U.S.C. 553, it is also found and determined 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 immediate implementation of this rule is necessary for importers to 
make marketing decisions and to contract in advance for shipping; (2) 
handlers and importers are aware of this rule; (3) an interim final 
rule was published in the Federal Register on January 21, 2009 (74 FR 
3412); and (4) the interim final rule is finalized without change.

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.

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

0
Accordingly, the interim final rule amending 7 CFR part 925 which was 
published at 74 FR 3412 on January 21, 2009, is adopted as a final rule 
without change.

PART 944--FRUITS; IMPORT REGULATIONS

0
Accordingly, the interim final rule amending 7 CFR part 944 which was 
published at 74 FR 3412 on January 21, 2009, is adopted as a final rule 
without change.

    Dated: February 2, 2010.
Rayne Pegg,
Administrator, Agricultural Marketing Service.
[FR Doc. 2010-2542 Filed 2-4-10; 8:45 am]
BILLING CODE P