[Federal Register Volume 76, Number 204 (Friday, October 21, 2011)]
[Rules and Regulations]
[Pages 65357-65360]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-27276]



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  Federal Register / Vol. 76, No. 204 / Friday, October 21, 2011 / 
Rules and Regulations  

[[Page 65357]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 930

[Doc. No. AMS-FV-11-0047; FV11-930-1 FR]


Tart Cherries Grown in Michigan, New York, Pennsylvania, Oregon, 
Utah, Washington, and Wisconsin; Suspension of Order Regulations 
Regarding Random Row Diversion

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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

SUMMARY: This rule changes the grower diversion regulations prescribed 
under the marketing order for tart cherries (order). The order 
regulates the handling of tart cherries grown in the States of 
Michigan, New York, Pennsylvania, Oregon, Utah, Washington, and 
Wisconsin and is administered locally by the Cherry Industry 
Administrative Board (Board). This rule suspends indefinitely the 
regulations establishing random row as a method of grower diversion. 
With growers consistently choosing other diversion methods which offer 
more flexibility and fewer potential problems, the Board recommended 
this suspension to bring grower diversion requirements in line with 
current industry practices.

DATES: Effective Date: October 22, 2011.

FOR FURTHER INFORMATION CONTACT: Jennie M. Varela, Marketing 
Specialist, or Christian D. Nissen, Regional Manager, Southeast 
Marketing Field Office, Marketing Order and Agreement Division, Fruit 
and Vegetable Programs, AMS, USDA; Telephone: (863) 324-3375, Fax: 
(863) 325-8793, or E-mail: [email protected] or 
[email protected].
    Small businesses may request information on complying with this 
regulation by contacting Laurel May, Marketing Order Administration 
Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence 
Avenue, SW., STOP 0237, Washington, DC 20250-0237; Telephone: (202) 
720-2491, Fax: (202) 720-8938, or E-mail: [email protected].

SUPPLEMENTARY INFORMATION: This final rule is issued under Marketing 
Agreement and Order No. 930, both as amended (7 CFR part 930), 
regulating the handling of tart cherries grown in Michigan, New York, 
Pennsylvania, Oregon, Utah, Washington, and Wisconsin, hereinafter 
referred to as the ``order.'' The order is effective under the 
Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-
674), hereinafter referred to as the ``Act.''
    The Department of Agriculture (USDA) is issuing this rule in 
conformance with Executive Order 12866.
    This final rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. This rule 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 
the handler is an inhabitant, or has his or her principal place of 
business, has jurisdiction to review USDA's ruling on the petition, 
provided an action is filed not later than 20 days after the date of 
the entry of the ruling.
    This final rule changes the grower diversion regulations prescribed 
under the order. This rule suspends indefinitely the regulations 
establishing random row as a method of grower diversion. With growers 
consistently choosing other diversion methods which offer more 
flexibility and fewer potential problems, the Board recommended this 
suspension to bring grower diversion requirements in line with current 
industry practices. The Board unanimously recommended this action at a 
meeting on March 24, 2011.
    Section 930.58 of the order provides authority for voluntary grower 
diversion. Under volume regulation, growers can divert all or a portion 
of their cherries which otherwise, upon delivery to a handler, would be 
subject to regulation. Section 930.158 prescribes the rules and 
regulations for grower diversion, including the procedures and deadline 
dates for applying for diversion and the types of diversion available 
to growers. Currently, there are four types of grower diversion: Random 
row, whole block, partial block, and in-orchard tank. This rule 
suspends the portions of Sec.  930.158 that provide random row as an 
option under grower diversion.
    The order contains volume control provisions that allow the 
industry to address fluctuations in production from season to season, 
helping to stabilize supplies and prices. When volume control is in 
effect, free and restricted percentages are established. Handlers can 
meet their restricted percentage obligation by placing cherries in 
inventory reserve, diverting cherries themselves, or redeeming grower 
diversion certificates.
    Under voluntary grower diversion, growers can divert cherries from 
production in exchange for Board issued grower diversion certificates 
stating the quantity diverted. Growers can then present these 
certificates to handlers who may redeem them as a method of complying 
with their restricted percentage obligation under volume regulation. By 
diverting cherries from production, growers can avoid the costs of 
harvesting and transporting fruit, reduce the supply, and mitigate the 
downward pressure on prices that result from oversupply.
    Following the promulgation of the order in 1996, the Board 
recommended regulations outlining two grower diversion options for the 
1997 crop year, whole block and random row (63 FR 20019). Under whole 
block diversion, growers select entire orchard blocks to be left 
unharvested. With random row diversion, the Board randomly selects rows 
of trees the grower is to leave unharvested, providing growers with a 
way to divert a portion of an orchard rather than a whole orchard 
block.
    For the 1998 crop year and subsequent seasons, the grower

[[Page 65358]]

diversion program was expanded to include two additional options, 
partial block and in-orchard tank diversions (63 FR 33523). Partial 
block diversion allows the grower to select a contiguous portion of an 
orchard block that will be left unharvested. With in-orchard tank 
diversion, cherries are harvested into tanks, the volume is calculated, 
and then diverted in the orchard.
    The addition of these options provided growers with greater 
flexibility when considering diversion, and marked a substantial 
decline in the use of random row. For the last ten years, random row 
has been the least utilized grower diversion option, and accounted for 
less than three percent of total grower diversion during the last three 
seasons.
    During the discussion of this issue, the Board noted several issues 
that have contributed to the nominal use of random row as a grower 
diversion option. Random row diversion is the least flexible of grower 
diversion options in terms of quality control. When a grower selects a 
whole block or partial block to divert, the grower controls which fruit 
will be harvested and which trees will be left unharvested. Similarly, 
under in-orchard tank diversion, the grower determines what fruit is 
picked and stored in the tanks for diversion. Consequently, these three 
methods allow the grower to incorporate quality into the decision of 
which cherries to divert. Delivering higher quality fruit not only 
brings the grower a greater return, but higher quality benefits the 
industry overall.
    Under the random row method of diversion, the diverted rows are 
selected randomly by the Board. This could result in the best quality 
fruit being left in the orchard, with lower quality fruit delivered to 
handlers, leading to lower grower returns.
    In addition to quality concerns, the logistics of random row also 
present particular challenges to the grower. With the exception of in-
orchard tank diversion, all grower diversion methods require the grower 
to submit an orchard map to the Board. The burden of having to keep 
orchard maps precisely up-to-date is borne by growers. The random 
selection of rows by the Board places additional importance on the 
accuracy and precision of submitted maps. Inaccurate maps can lead to 
harvesting errors, with rows selected for diversion being inadvertently 
harvested.
    Even if maps are kept current, diverting random rows during harvest 
can be challenging. While whole and partial block diversions allow 
growers to leave contiguous areas unharvested, random row diversions 
require that specified rows be left unharvested, increasing the 
likelihood of error. Further, given the prevalence of contract 
harvesting, workers are often unfamiliar with the orchards they are 
harvesting, and mistakes are made in identifying the specific rows to 
be left unharvested.
    The greater potential for error during harvesting is of major 
concern to growers because penalties for errors in random row diversion 
are costly. If a grower discovers an error during harvest, two trees 
must be left unharvested for every one of the trees improperly 
harvested in order to remain in compliance, with the grower only 
receiving the original diversion amount. If the grower reports an error 
at the end of harvesting, a reduced diversion amount is calculated. If 
an unreported error is discovered by the Board after harvesting is 
complete, no diversion certificate would be issued.
    In addition to the issues affecting grower interest in this option, 
the Board also has concerns regarding the use of random row diversion. 
Specifically, the Board is concerned about the potential for 
miscalculations or misuse that could lead to overstated diversion 
amounts. Random row diversion differs from the other options in that 
the diverted tonnage receiving certificates is calculated based on 
volume delivered from the orchard. In contrast, whole and partial block 
diversions involve sampling trees in the selected area to determine the 
volume being diverted before harvest takes place, and in-orchard tank 
diversion is determined by the actual volume measured in the tanks.
    Calculating the diverted volume after delivery creates opportunity 
for error. It can be difficult to determine if the volume delivered to 
the handler all came from appropriately mapped groves, included in the 
grower's diversion application. With diversion calculations based on 
delivered volume, it is important that the volume only include cherries 
from those orchards in which random rows were diverted. Some growers 
care for and deliver fruit from orchards other than their own. There is 
concern that the handler accepting delivery could easily mistake how 
much volume came from the grower's own mapped orchards, resulting in 
the overstatement of the amount diverted.
    With the availability of other diversion options that offer the 
grower more flexibility and less potential problems, random row 
represents a very small percentage of total grower diversion. Further, 
with the higher potential for harvesting errors and for miscalculations 
of diversion amounts, the Board believes random row is the most 
problematic of the diversion options. Consequently, the Board 
unanimously recommended this action which suspends the regulations 
providing random row as a grower diversion option. The Board voted to 
suspend the regulations rather than eliminating them altogether in the 
event the industry would want to reinstate random row diversion in the 
future.

Final Regulatory Flexibility 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 action on small entities. 
Accordingly, AMS has prepared this final regulatory flexibility 
analysis.
    The purpose of the RFA is to fit regulatory actions to the scale of 
business subject to such actions in order that small businesses will 
not be unduly or disproportionately burdened. Marketing orders issued 
pursuant to the Act, and rules issued thereunder, are unique in that 
they are brought about through group action of essentially small 
entities acting on their own behalf.
    There are approximately 40 handlers of tart cherries who are 
subject to regulation under the marketing order and approximately 600 
producers of tart cherries in the regulated area. Small agricultural 
service firms have been defined by the Small Business Administration 
(SBA) as those having annual receipts of less than $7,000,000, and 
small agricultural producers are defined as those having annual 
receipts of less than $750,000 (13 CFR 121.201).
    According to the National Agricultural Statistics Service, and 
Board data, the average annual grower price for tart cherries during 
the 2009-2010 season was $0.197 per pound, and total shipments were 
around 227 million pounds. Therefore, average receipts for tart cherry 
producers were around $75,000, well below the SBA threshold for small 
producers. The Food Institute estimates an f.o.b. price of $0.84 per 
pound for frozen tart cherries, which make up the majority of processed 
tart cherries. Using this data, average annual handler receipts were 
about $4.8 million, also below the SBA threshold for small agricultural 
service firms. Assuming a normal distribution, the majority of 
producers and handlers of tart cherries may be classified as small 
entities.
    This action changes the grower diversion regulations prescribed 
under the order. This rule suspends

[[Page 65359]]

indefinitely the regulations in Sec.  930.158 establishing random row 
as a method of grower diversion. With growers consistently choosing 
other diversion methods which offer more flexibility and fewer 
potential problems, the Board recommended this suspension to bring 
grower diversion requirements in line with current industry practices. 
The authority for this action is provided for in Sec.  930.58 of the 
order. The Board unanimously recommended this action at a meeting on 
March 24, 2011.
    This final rule will not impose any additional costs on growers. 
The grower diversion program under the order is completely voluntary. 
In an effort to stabilize supplies and prices, the tart cherry industry 
uses mechanisms under the order to attempt to bring supply and demand 
into balance. Under voluntary grower diversion, growers can divert 
cherries from production in exchange for Board issued grower diversion 
certificates stating the quantity diverted. Growers can then present 
these certificates to handlers who may redeem them as a method of 
complying with their restricted percentage obligation under volume 
regulation. By diverting cherries from production, growers can avoid 
the costs of harvesting and transporting fruit, reduce the supply, and 
mitigate the downward pressure on prices that result from oversupply.
    This action suspends only the regulations that provide random row 
as a method of grower diversion. The other three options, whole block, 
partial block, and in-orchard tank, remain unchanged by this action. 
Random row is the least utilized of the grower diversion options, with 
the other three options accounting for 97 percent of diversion volume. 
Consequently, this change brings the regulations in line with current 
industry preferences and practices. Further, the remaining grower 
diversion options offer the grower some flexibility to control quality, 
which in turn could increase grower returns. The effects of this rule 
are not expected to be disproportionately greater or less for small 
entities than for larger entities.
    One alternative action considered by the Board was to remove the 
regulations pertaining to random row diversion. However, the Board 
agreed that suspension would be the most appropriate action should the 
industry determine it would like to reinstate random row as a diversion 
option in the future. Thus, termination was rejected as an alternative.
    In accordance with the Paperwork Reduction Act of 1995, (44 U.S.C. 
Chapter 35), the order's information collection requirements have been 
previously approved by the Office of Management and Budget (OMB) and 
assigned OMB No. 0581-0177, Tart Cherries Grown in the States of MI, 
NY, PA, OR, UT, WA and WI. No changes in those requirements as a result 
of this action are necessary. Should any changes become necessary, they 
would be submitted to OMB for approval.
    This rule will not impose any additional reporting or recordkeeping 
requirements on either small or large tart cherry handlers. As with all 
Federal marketing order programs, reports and forms are periodically 
reviewed to reduce information requirements and duplication by industry 
and public sector agencies.
    As noted in the initial regulatory flexibility analysis, USDA has 
not identified any relevant Federal rules that duplicate, overlap or 
conflict with this final rule. Further, the public comments received 
concerning the proposal did not address the initial regulatory 
flexibility analysis.
    AMS is committed to complying 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, the Board's meeting was widely publicized throughout 
the tart cherry industry and all interested persons were invited to 
attend the meeting and participate in Board deliberations on all 
issues. Like all Board meetings, the March 24, 2011, meeting was a 
public meeting and all entities, both large and small, were able to 
express views on this issue.
    A proposed rule concerning this action as published in the Federal 
Register on Monday, July 18, 2011 (76 FR 42072). Copies of the rule 
were mailed or sent via facsimile to all Board members and tart cherry 
handlers. Finally, the rule was made available through the Internet by 
USDA and the Office of the Federal Register. A 10-day comment period 
ending July 28, 2011, was provided to allow interested persons to 
respond to the proposal.
    One comment was received during the comment period. The commenter, 
a small grower, opposed the proposed change. The commenter claimed that 
random row diversion allows their operation to save time and labor. The 
commenter stated that by using random row they do not have to wait for 
weights and estimates for each load and it speeds up harvesting as the 
trees that are to remain unpicked are marked in advance.
    Grower diversion is a voluntary program established under the 
order. Growers can choose whether or not they want to participate. 
While this action suspends random row as an option under grower 
diversion, three options remain: whole block, partial block, and in-
orchard tank. Of these options, whole block and partial block can be 
used similarly to random row by leaving segments of the grower's 
production unharvested. Further, like random row, weights and estimates 
of each load are not required and the trees that are to remain 
unharvested are determined in advance, so harvest speeds are not 
affected. In addition to having characteristics similar to random row, 
whole and partial block diversions also provide the grower with control 
over which trees will be left unharvested, allowing the grower some 
flexibility to control for quality.
    Accordingly, no changes will be made to the rule as proposed, based 
on the comment received.
    A small business guide on complying with fruit, vegetable, and 
specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/MarketingOrdersSmallBusinessGuide. Any questions 
about the compliance guide should be sent to Laurel May at the 
previously mentioned address in the FOR FURTHER INFORMATION CONTACT 
section.
    After consideration of all relevant matter presented, including the 
information and recommendation submitted by the Board and other 
available information, it is hereby found that the provision suspended, 
as hereinafter set forth, no longer tends to effectuate the declared 
policy of the Act.
    It is further found that good cause exists for not postponing the 
effective date of this rule until 30 days after publication in the 
Federal Register (5 U.S.C. 553) because handlers are already processing 
tart cherries from the 2011 crop and the Board wants to implement this 
change as soon as possible. Further, handlers are aware of this rule, 
which was recommended at a public meeting. Also, a 10-day comment 
period was provided for in the proposed rule.

List of Subjects in 7 CFR Part 930

    Marketing agreements, Reporting and recordkeeping requirements, 
Tart Cherries.

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

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

0
1. The authority citation for 7 CFR part 930 continues to read as 
follows:


[[Page 65360]]


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


Sec.  930.158  [Amended]

0
2. In Sec.  930.158:
0
A. Suspend paragraph (b)(1) indefinitely.
0
B. In paragraph (c)(3), redesignate the first two sentences as 
paragraph (c)(3)(i) and the remaining sentences as paragraph 
(c)(3)(ii).
0
C. Newly designated paragraph (c)(3)(ii) is suspended indefinitely.

    Dated: October 14, 2011.
David R. Shipman,
Acting Administrator, Agricultural Marketing Service.
[FR Doc. 2011-27276 Filed 10-20-11; 8:45 am]
BILLING CODE 3410-02-P