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[Federal Register Volume 78, Number 140 (Monday, July 22, 2013)]
[Rules and Regulations]
[Pages 43758-43761]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-17462]

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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Parts 920 and 944

[Doc. No. AMS-FV-13-0032; FV13-920-1 IR]

Kiwifruit Grown in California and Imported Kiwifruit; Relaxation 
of Minimum Grade Requirement

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Interim rule with request for comments.

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SUMMARY: This rule relaxes the minimum grade requirement under the 
marketing order for kiwifruit grown in California (order), and for 
kiwifruit imported into the United States that are shipped to the fresh 
market, by increasing the tolerance of kiwifruit which is ``badly 
misshapen'' from 7 percent to 16 percent. The order is administered 
locally by the Kiwifruit Administrative Committee (Committee). This 
change is intended to facilitate the packing of fruit to meet the 
minimum grade requirement of ``KAC No. 1'', and reduce costs associated 
with re-sorting and repacking this grade of fruit. The change in the 
import regulation is required under section 8e of the Agricultural 
Marketing Agreement Act of 1937.

DATES: July 25, 2013; comments received by September 20, 2013 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 and Agreement Division, Fruit and Vegetable Program, 
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 document 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: Kathie M. Notoro, Marketing 
Specialist, or Martin Engeler, Regional Director, California Marketing 
Field Office, Marketing Order and Agreement Division, Fruit and 
Vegetable Program, AMS, USDA; Telephone: (559) 487-5901, Fax: (559) 
487-5906, or Email: Kathie.Notoro@ams.usda.gov or 
Martin.Engeler@ams.usda.gov.
    Small businesses may request information on complying with this 
regulation by contacting Jeffrey Smutny, Marketing Order and Agreement 
Division, Fruit and Vegetable Program, AMS, USDA, 1400 Independence 
Avenue SW., STOP 0237, Washington, DC 20250-0237; Telephone: (202) 720-
2491, Fax: (202) 720-8938, or Email: Jeffrey.Smutny@ams.usda.gov.

SUPPLEMENTARY INFORMATION: This rule is issued under Marketing Order 
No. 920, as amended (7 CFR part 920), regulating the handling of 
kiwifruit in 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 
kiwifruit, 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 Department of Agriculture (USDA) is issuing this rule in 
conformance with Executive Order 12866.
    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule 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.
    There are no administrative procedures which must be exhausted 
prior to any judicial challenge to the provisions of import regulations 
issued under section 8e of the Act.
    Under the terms of the marketing order, fresh market shipments of 
California kiwifruit are required to be inspected and are subject to 
grade, size, maturity, pack, and container requirements. Current 
requirements include specifications that such shipments be at least 
Size 45, grade at least KAC No. 1 quality, and contain a minimum of 6.2 
percent soluble solids.
    This rule relaxes the minimum grade requirement under the 
definition for KAC No. 1 kiwifruit quality by increasing the tolerance 
for ``badly misshapen'' fruit from 7 percent to 16 percent. The 
Committee unanimously recommended these changes at a meeting on March 
27, 2013.
    Section 920.52 of the order provides, in part, the authority to 
regulate the handling of kiwifruit and specifically, in paragraph 
(a)(1), the Secretary may limit, during any period or periods, the 
shipment of any particular grade, size, quality, maturity, or pack, or 
any combination thereof, of any variety or varieties of kiwifruit grown 
in the production area.
    Section 920.302 establishes regulations regarding grade, size, 
pack, and container regulations. Paragraph (a) (1) specifies that the 
minimum grade be at least KAC No.1 quality and paragraph (b) defines 
that the term KAC No. 1 quality means kiwifruit that meets the 
requirements of the U.S. No. 1 grade as defined in the United States 
Standards for Grades of Kiwifruit (7 CFR 51.2335 through 51.2340) 
except that the kiwifruit shall be ``not badly misshapen,'' and a 
tolerance of 7 percent is provided for kiwifruit that is ``badly 
misshapen,'' and except that all varieties of kiwifruit are exempt from 
the ``tightly packed'' standard as defined in Sec.  51.2338(a) of the 
U.S. Standards for Grades of Kiwifruit. The terms fairly uniform in 
size and diameter mean the same as defined in the U.S. Standards for 
Grades of Kiwifruit.
    At its meeting, the Committee recommended revising paragraph (b) of 
920.302 to increase the tolerance for ``badly misshapen'' fruit from 7 
percent to 16 percent. ``Badly misshapen fruit'' is defined in the 
United States

[[Page 43759]]

Standards for Kiwifruit as fruit that is so decidedly deformed that its 
appearance is seriously affected.
    Most kiwifruit naturally grow in an ``egg'' shape. A small 
percentage of fruit develop into a flat, wide, almost square shape. 
Such fruit, if it is wider than it is tall, is considered to be badly 
misshapen. Identification of badly misshapen fruit is performed 
visually during the packing process, and this fruit is manually sorted 
out by packinghouse employees. The flat/wide fruit is separated from 
the cylindrical fruit and packed into different boxes so that there is 
a uniformity of shape within the containers.
    However, during the inspection process, badly misshapen fruit is 
identified using calipers that precisely measure the dimensions of the 
fruit. Consequently, fruit that appears to meet the grade requirement 
based on visual observation occasionally fails to meet the requirements 
when measured with calipers. Containers of packed KAC No. 1 fruit 
sometimes exceed the tolerance for misshapen fruit by two or three 
pieces of fruit and are required to be re-sorted and repacked, 
resulting in increased costs.
    The end of season packout by grade for kiwifruit for 2011/12 
resulted in 1 percent U.S. Fancy, 94 percent U.S. No. 1, and 5 percent 
KAC No. 1. Although it accounts for only 5 percent of the industry 
pack, KAC No. 1 fruit is the most difficult to pack because of the 
discrepancy between visually identifying misshapen fruit and 
identifying such fruit with calipers during the inspection process.
    Increasing the tolerance for badly misshapen fruit is expected to 
reduce the incidence of containers of KAC No. 1 fruit failing to meet 
grade requirements, thereby reducing costs associated with repacking 
and re-sorting failing fruit. It is also expected to help facilitate 
and streamline the packing process by avoiding disruptions associated 
with repacking and re-sorting fruit.
    Section 8e of the Act provides that when certain domestically 
produced commodities, including kiwifruit, are regulated under a 
Federal marketing order, imports of that commodity must meet the same 
or comparable grade, size, quality, and maturity requirements. Since 
this action would relax the minimum grade requirement by increasing the 
tolerance of kiwifruit which is ``badly misshapen'' from 7 percent to 
16 percent under the domestic handling regulations, a corresponding 
change to the import regulations must also be considered.
    Minimum grade, size, quality, and maturity requirements for 
kiwifruit imported into the United States are currently in effect under 
Sec.  944.550 (7 CFR 944.550). Paragraph (a) of this section specifies 
a tolerance of 7 percent for badly misshapen fruit. This rule would 
increase the tolerance for imported kiwifruit that is badly misshapen 
from 7 percent to 16 percent to be consistent with the requirements for 
California kiwifruit regulated under the order. The increase in the 
tolerance for imports is expected to reduce the incidence of product 
that fails to meet the minimum grade requirement of KAC No. 1. This 
would help reduce costs associated with product that fails to meet 
import requirements, and would help to facilitate the importation of 
kiwifruit.

Initial 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 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. Import regulations issued under 
the Act are based on those established under Federal marketing orders.
    There are approximately 178 kiwifruit growers subject to regulation 
under the marketing order and approximately 28 handlers in the 
production area. There are approximately 53 importers of kiwifruit. 
Small agricultural service firms, which include kiwifruit handlers and 
importers, are defined by the Small Business Administration (SBA) (13 
CFR 121.201) as those having annual receipts of less than $7,000,000, 
and small agricultural producers are defined as those having annual 
receipts less than $750,000.
    The California Agricultural Statistical Service (CASS) reported 
total California kiwifruit production for the 2011-12 season at 37,700 
tons, with an average price of $775 per ton. Based on the average price 
and shipment information provided by the CASS and the Committee, the 
majority of kiwifruit handlers would be considered small businesses 
under the SBA definition. Based on kiwifruit production and price 
information, as well as the total number of California kiwifruit 
growers, the average annual grower revenue is less than $750,000. Thus, 
the majority of California kiwifruit producers may also be classified 
as small entities. In addition, based on data from the U.S. Census 
Bureau, Department of Commerce, the value of imported kiwifruit for 50 
of the 53 importers was less than $7,000,000. Thus, it can be concluded 
that the majority of kiwifruit importers may be classified as small 
entities.
    This rule relaxes the minimum grade requirement currently specified 
in Sec.  920.302 (b) of the regulations under the order by increasing 
the tolerance for kiwifruit that is ``badly misshapen'' from 7 percent 
to 16 percent under the definition for KAC No. 1 quality.
    This action does not impose any additional costs on the industry. 
It is expected to reduce costs to handlers and growers of kiwifruit, 
and to increase efficiencies in the packing process. Containers of 
packed kiwifruit occasionally fail to meet the minimum grade 
requirement of KAC No. 1 quality because two or three pieces of 
misshapen fruit in a container cause the container to exceed the 
allowable tolerance for such fruit. The fruit in these containers must 
then be re-sorted and repacked to meet the minimum grade requirement. 
There are costs associated with re-sorting and repacking. Assuming a 
labor cost of $8.50 per hour and an estimated time of five to ten 
minutes to re-sort and repack a container of fruit, the direct 
additional cost per container of fruit could be up to $1.40. Other 
costs associated with repacking and re-sorting fruit include employee 
supervision, and the unstacking and re-stacking of pallets in order to 
do the work. These latter types of costs are difficult to estimate due 
to differences in various packing operations. Some of these costs 
incurred by handlers are passed on to the growers. In addition to these 
costs, the re-sorting and repacking of fruit causes inefficiencies in 
the packing process, as packing lines can be interrupted and employees 
are diverted from other duties to repack fruit.
    Increasing the tolerance for misshapen fruit will reduce the amount 
of product that fails to meet the minimum grade, thus reducing re-
sorting and repacking costs and reducing inefficiencies in the packing 
process.
    The quality of fruit to consumers is not expected to be 
significantly affected. Based on Committee data, 95 percent of 
kiwifruit under the order is packed to a higher grade standard than the

[[Page 43760]]

minimum grade of KAC No.1. Of the 5 percent packed as KAC No.1, only a 
small percentage of those shipments will be affected by allowing two or 
three additional misshapen pieces of fruit in the container.
    Regarding alternatives to this action, the Committee discussed 
changing the current parameters for misshapen fruit; from ``fruit that 
is not wider than tall'' to fruit that is a certain percentage wider 
than it is tall. This alternative would allow for flatter/wider fruit 
to be packed than what is currently allowed and would be even more 
difficult to accurately sort fruit visually. The industry does not want 
to pack more fruit that is flatter and wider; they want to make it 
easier to accurately identify and pack the KAC No. 1 grade fruit as it 
is currently defined. Therefore, the Committee rejected this 
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. 0581-0189, Generic Fruit Crops. 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 kiwifruit handlers in California 
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 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, USDA has not identified any relevant Federal rules 
that duplicate, overlap or conflict with this rule.
    Further, the Committee meeting was widely publicized throughout the 
California kiwifruit industry. All interested persons were invited to 
attend the meeting and participate in Committee deliberations. Like all 
Committee meetings, the March 27, 2013, meeting was a public meeting. 
All entities, both large and small, were able to express their views on 
this issue. Also, the embassies of those countries that export fruit to 
the United States and known kiwifruit importers will be notified of 
this interim rule upon its publication. Finally, interested persons are 
invited to submit comments on this interim rule, including the 
regulatory and informational impacts of this action on small 
businesses.
    A small business guide on complying with fruit, vegetable, and 
specialty crop marketing agreements and orders may be viewed at: 
www.ams.usda.gov/MarketingOrdersSmallBusinessGuide. Any questions about 
the compliance guide should be sent to Jeffrey Smutny at the previously 
mentioned address in the FOR FURTHER INFORMATION CONTACT section.
    This rule invites comments on relaxing the minimum grade 
requirements for domestic and imported kiwifruit. Any comments received 
will be considered prior to finalization of this rule.
    In accordance with section 8e of the Act, the United States Trade 
Representative has concurred with the issuance of this rule.
    After consideration of all relevant material presented, including 
the Committee's recommendation, and other information, it is found that 
this interim 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 rule until 30 days after publication in the Federal Register 
because: (1) This action relaxes the current minimum grade requirement 
under the order; (2) this change needs to be in effect by September 15, 
2013; (3) the Committee recommended these changes at a public meeting 
and interested parties had an opportunity to provide input; and (4) 
this rule provides a 60-day comment period and any comments received 
will be considered prior to finalization of this rule.

List of Subjects

7 CFR Part 920

    Kiwifruit, Marketing agreements.

7 CFR Part 944

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

    For the reasons set forth in the preamble, 7 CFR parts 920 and 944 
are amended as follows:

PART 920--KIWIFRUIT GROWN IN CALIFORNIA

0
1. The authority citation for 7 CFR parts 920 and 944 continues to read 
as follows:

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

0
2. In Sec.  920.302, revise paragraph (b) to read as follows:

Sec.  920.302  Grade, size, pack, and container regulations.

* * * * *
    (b) Definitions. The term KAC No. 1 quality means kiwifruit that 
meets the requirements of the U.S. No. 1 grade as defined in the United 
States Standards for Grades of Kiwifruit (7 CFR 51.2335 through 
51.2340) except that the kiwifruit shall be ``not badly misshapen,'' 
and an additional tolerance of 16 percent is provided for kiwifruit 
that is ``badly misshapen,'' and except that all varieties of kiwifruit 
are exempt from the ``tightly packed'' standard as defined in Sec.  
51.2338(a) of the U.S. Standards for Grades of Kiwifruit. The terms 
fairly uniform in size and diameter mean the same as defined in the 
U.S. Standards for Grades of Kiwifruit.
* * * * *

PART 944--FRUITS; IMPORT REGULATIONS

0
3. In Sec.  944.550, revise paragraph (a) to read as follows:

Sec.  944.550  Kiwifruit import regulation.

    (a) Pursuant to section 8e of the Agricultural Marketing Agreement 
Act of 1937, as amended, the importation into the United States of any 
kiwifruit is prohibited unless such kiwifruit meets all the 
requirements of a U.S. No. 1 grade as defined in the United States 
Standards for Grades of Kiwifruit (7 CFR 51.2335 through 51.2340), 
except that the kiwifruit shall be ``not badly misshapen,'' and an 
additional tolerance of 16 percent is provided for kiwifruit that is 
``badly misshapen,'' and except that such kiwifruit shall have a 
minimum of 6.2 percent soluble solids. Such fruit shall be at least 
Size 45, which means there shall be a maximum of 55 pieces of fruit and 
the average weight of all samples in a specific lot must weigh at least 
8 pounds (3.632 kilograms), provided that no individual sample may be 
less than 7 pounds 12 ounces (3.472 kilograms).
* * * * *

[[Page 43761]]

    Dated: July 16, 2013.
Rex A. Barnes,
Associate Administrator, Agricultural Marketing Service.
[FR Doc. 2013-17462 Filed 7-19-13; 8:45 am]
BILLING CODE 3410-02-P
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