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[Federal Register Volume 77, Number 109 (Wednesday, June 6, 2012)]
[Rules and Regulations]
[Pages 33303-33306]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-13645]

[[Page 33303]]

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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 930

[Doc. No. AO-370-A9; 11-0093; AMS-FV-10-0087; FV10-930-5]

Tart Cherries Grown in the States of Michigan, New York, 
Pennsylvania, Oregon, Utah, Washington, and Wisconsin; Order Amending 
Marketing Order No. 930

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This final rule amends Marketing Order No. 930 (order), which 
regulates the handling of tart cherries grown in Michigan, New York, 
Pennsylvania, Oregon, Utah, Washington, and Wisconsin. These amendments 
were proposed by the Cherry Industry Administrative Board (CIAB), which 
is responsible for local administration of the order. These amendments 
revise: the definition of ``Handle''; and regulations concerning 
``Marketing Policy'' and ``Grower Diversion Privilege.'' The amendments 
are intended to improve the operation and administration of the order.

DATES: This rule is effective June 7, 2012.

FOR FURTHER INFORMATION CONTACT: Parisa Salehi, Marketing Order and 
Agreement Division, Fruit and Vegetable Program, AMS, USDA, 1400 
Independence Avenue SW., Stop 0237, Washington, DC 20250-0237; 
Telephone: (202) 270-9918, Fax: (202) 720-8938, or Email: 
Parisa.Salehi@ams.usda.gov; or Martin Engeler, Marketing Order and 
Agreement Division, Fruit and Vegetable Program, AMS, USDA, 2202 
Monterey Street, Fresno, California, 93721; Telephone: (559) 487-5110, 
Fax: (559) 487-5110, or Email: Martin.Engeler@ams.usda.gov.
    Small businesses may request information on this proceeding by 
contacting Laurel May, 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: Laurel.May@ams.usda.gov.

SUPPLEMENTARY INFORMATION: Prior documents in this proceeding: Notice 
of Hearing issued on March 4, 2011, and published in the March 14, 
2011, issue of the Federal Register (76 FR 13528). The Recommended 
Decision was issued on November 3, 2011, and published in the November 
9, 2011, issue of the Federal Register (76 FR 69673), and a Secretary's 
Decision and Referendum Order issued on February 28, 2012, and 
published in the March 5, 2012 issue of the Federal Register (77 FR 
13015).
    This action is governed by the provisions of sections 556 and 557 
of title 5 of the United States Code and is therefore excluded from the 
requirements of Executive Order 12866.

Preliminary Statement

    This final rule was formulated on the record of a public hearing 
held April 20 and 21, 2011, in Grand Rapids, Michigan, and a second 
public hearing held April 26, 2011, in Provo, Utah. The hearing was 
held pursuant to the provisions of the Agricultural Marketing Agreement 
Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as 
the ``Act'', and the applicable rules of practice and procedure 
governing the formulation of marketing agreements and orders (7 CFR 
Part 900). Notice of this hearing was published in the Federal Register 
on March 14, 2011 (76 FR 13528). The notice of hearing contained the 
proposal submitted by CIAB and one proposal by the Agricultural 
Marketing Service (AMS).
    Upon the basis of evidence introduced at the hearings and the 
record thereof, the Administrator of AMS issued a Recommended Decision 
published in the Federal Register on November 9, 2011 (76 FR 69673). An 
opportunity to file written exceptions was provided through November 
25, 2011. Two comments were received during that period in support of 
these amendments.
    A Secretary's Decision and Referendum Order was issued on February 
28, 2012, and published in the March 5, 2012, issue of the Federal 
Register (77 FR 13015). This document directed that a referendum among 
tart cherry growers and processors be conducted during the period March 
19, 2012, through March 30, 2012, to determine whether they favor the 
proposed amendments to the order. To become effective, the amendments 
had to be approved by at least two-thirds of the growers voting in the 
referendum or two thirds of the production represented by such growers. 
In addition, processors who had frozen or canned at least fifty percent 
of the volume of tart cherries had to vote in favor of the amendments 
for them to become effective. All of the proposed amendments were 
approved by growers and processors. The amendments included in this 
final order will:
    1. Amendment 1 revises the term ``handle'' within the order. This 
amendment revises existing section 930.10, Handle, to exclude handler 
acquisition of grower diversion certificates from the definition of 
handle.
    2. Amendment 2 revises the ``marketing policy'' provisions in 
section 930.50 of the order so that grower-diverted cherries are not 
counted as production in the volume control formula.
    3. Amendment 3 revises the existing section 930.58, so grower-
diverted cherries are not treated as actual harvested cherries.
    In addition to the proposed amendments to the order, AMS proposed 
to make any additional changes to the order as may be necessary to 
conform to any amendment that may result from the hearings.
    A marketing agreement was subsequently mailed to all tart cherry 
handlers in the production area for their approval. The marketing 
agreement was approved by handlers representing more than 50 percent of 
the volume of tart cherries handled by all handlers during the 
representative period of July 1, 2010, to June 30, 2011.

Small Business Considerations

    Pursuant to the requirements set forth in the Regulatory 
Flexibility Act (RFA), 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 so that small businesses will not be 
unduly or disproportionately burdened. Marketing orders and amendments 
thereto are unique in that they are normally brought about through 
group action of essentially small entities for their own benefit.
    There are approximately 40 handlers of tart cherries subject to 
regulation under the order and approximately 600 producers of tart 
cherries in the regulated area. Small agricultural service firms, which 
include handlers, have been 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 of less than $750,000. A majority of 
the tart cherry

[[Page 33304]]

producers and handlers are considered small entities under the SBA 
standards.
    The geographic region regulated by the order includes the states of 
Michigan, New York, Oregon, Pennsylvania, Utah, Washington, and 
Wisconsin. Acreage devoted to tart cherry production in the regulated 
area has declined in recent years. According to data presented at the 
hearings, bearing acreage in 1987-88 totaled 50,050 acres; by 2010-11 
it had declined to 35,650 acres. Michigan accounts for 73 percent of 
total U.S. bearing acreage with 26,200 bearing acres. Utah is second, 
with a reported 3,300 acres, or approximately nine percent of the 
total. The remaining states' acreage ranges from 600 to 1,800 acres. 
The order includes authority for (1) volume regulation, (2) promotion 
and research, and (3) grade and quality standards. Volume regulation is 
used under the order to augment supplies during low supply years, with 
product placed in reserves during large supply years.
    Production of tart cherries can fluctuate widely from year to year. 
The magnitude of these fluctuations is one of the most pronounced for 
any agricultural commodity in the United States, and is due in large 
part to weather related conditions during the bloom and growing 
seasons. This fluctuation in supply presents a marketing challenge for 
the tart cherry industry because demand for the product is relatively 
inelastic, meaning a change in supply has a proportionately larger 
change in price.
    According to data presented at the hearing, production has ranged 
from a low of 62.5 million pounds in 2002-03 to a high of 395.6 million 
pounds in 1995-96. For 2010-11, Michigan accounted for 71 percent of 
total U.S. production with 135 million pounds. Utah is second, with a 
reported 23 million pounds, or approximately twelve percent of the 
total. The remaining states produce between 15.4 and 1.2 million 
pounds.
    During the hearings, multiple witnesses testified that they did not 
believe that these amendments will have any adverse impacts on small 
agricultural service firms or small agricultural producers as defined 
by the SBA. According to the record, these amendments will help 
agricultural businesses and growers by encouraging growers to divert 
some of their tart cherries in the orchard during years of extremely 
large supply and result in higher grower returns during years of 
extremely large supply. Furthermore, the growers who divert their crop 
do not incur harvest and transportation costs. These amendments will 
result in a lower possibility of market saturation. Overall the supply 
of tart cherries in extremely large supply years results in higher 
returns for growers.
    These amendments provide additional flexibility in administering 
the volume control provisions of the order, and improve its operation 
and administration. Record evidence indicates that these amendments 
benefit all producers and handlers under the order, regardless of size.
    The amendments in this final order are: Amendment 1 revises Section 
930.10 of the order to change the definition of ``handle,'' so that 
handler acquisition of grower diversion certificates is not considered 
handling. Amendment 2 revises the ``marketing policy'' provisions in 
Section 930.50 of the order so that grower-diverted cherries are not 
counted as production in the OSF. Amendment 3 revises section 930.58 of 
the order so that grower-diverted cherries are not treated as actual 
harvested cherries. These amendments modify how grower diversions are 
accounted for under the order.
    Evidence presented when the order was promulgated indicated that a 
grower diversion program benefits the industry by managing fluctuating 
supply. Witnesses indicated that the order has been successful in this 
regard. However, the record indicated that the order should be more 
flexible in addressing how grower diversions are utilized under the 
order.
    The most efficient method to deal with a surplus is at the lowest 
level of the production and processing chain. The industry wastes the 
least amount of resources if it diverts cherries in the orchard. Once 
they are harvested, chilled, washed, de-stemmed, sorted, pitted, and 
packed, significantly higher costs are incurred and there is a greater 
risk of waste. Diverting surplus cherries in the orchard is the most 
cost effective method of dealing with a surplus situation and provides 
the largest benefit to growers through lower costs.
    The order establishes an opportunity for growers to undertake in-
orchard diversions of cherries (section 930.58). These diversions are 
done during harvest in accordance with procedures defined under the 
order and are overseen by the CIAB. The CIAB issues grower diversion 
certificates to the growers that represent the pounds of cherries that 
were left in the orchard.
    Growers redeem the diversion certificates with handlers, who use 
them as one of their compliance alternatives to meet their reserve or 
restricted obligation. However, under the previous order definition of 
``handle,'' handlers must include the pounds of cherries represented by 
the certificates as part of the total cherries that have been delivered 
and processed.
    Consequently, grower in-orchard diversions effectively increased 
the supply of restricted cherries even though none of those cherries 
were delivered for processing. Grower diversion certificates are 
considered to be part of the total quantity of cherries that a handler 
receives and processes, and contribute to the total supply of 
restricted cherries in the OSF. This creates confusion in accounting 
for the cherries in years when cherries are restricted for both the 
growers and processors.
    The OSF is the mechanism specified in the order and used by CIAB to 
determine the relationship between the demand and supply of tart 
cherries in a given year. When the supply of tart cherries exceeds the 
average demand, volume regulation is implemented.
    In an effort to stabilize supply and prices, the tart cherry 
industry uses volume regulation, which allows the industry to set free 
and restricted percentages. Free percentage cherries can be marketed by 
handlers to any outlet, while restricted percentage cherries are placed 
in a reserve inventory. The primary purpose of setting restricted 
percentages and placing cherries in a reserve inventory is to attempt 
to balance supply with demand.
    A related component of the OSF under the order involves growers 
diverting cherries by leaving them un-harvested in the orchard. 
Handlers can coordinate with their growers in large crop years by 
encouraging them to divert cherries from production. Handlers can then 
acquire the diversion certificates issued to growers and use them as 
credit toward their restriction or reserve obligations.
    Prior to implementation of these amendments, the interaction of 
sections 930.10 and 930.50 of the order established that grower in-
orchard diversion is subject to the restriction percentage calculated 
for the year. Because of this, grower diversion certificates had less 
value when growers redeemed them with handlers. Therefore, when a 
handler utilized the grower diversion certificates received from 
growers, the certificates had a reduced value as a compliance tool in 
meeting the restricted obligation. Because the certificates have a 
reduced value, growers delivered most of their crop to handlers instead 
of diverting cherries in the orchard in large crop years.

[[Page 33305]]

    The implementation of these amendments will remove the grower 
disincentive for in-orchard diversion. Because the way grower 
diversions are accounted for will change, the grower diversion program 
helps mitigate the negative effects of oversupply by increasing the 
amount of cherries diverted from production.
    This action will have a positive impact on growers. The value of 
the grower diversion certificates will increase. As the value of the 
certificates increases, grower diversion of cherries in large crop 
years will increase. Increased grower diversion activity will help 
reduce excess supplies, which in turn will have a positive impact on 
grower returns. In addition, grower costs associated with harvesting 
and transporting cherries to handlers will be reduced as more cherries 
are diverted.
    This action will also have a positive impact on handlers. As more 
fruit is diverted in the orchard, handlers will avoid the processing 
and storage costs that they would otherwise incur if growers harvested 
and delivered the fruit. Reducing the available supply of cherries will 
mitigate the price depressing effects that oversupply typically has on 
the market, resulting in a positive effect for both growers and 
handlers.
    Testimony at the hearing suggested that the amendments, which 
encourage grower diversions, will not have a negative impact on small 
growers or handlers. The hearing record suggests that these amendments 
will benefit small growers by providing better opportunities to divert 
cherries in the orchard in large crop years. Small handlers are not 
always able to ship to export markets or have as much new product 
activity as larger handlers. Small handlers will benefit from these 
amendments by providing diversion credits as a way to meet their 
restrictions.

Paperwork Reduction Act

    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 
Michigan, New York, Pennsylvania, Oregon, Utah, Washington and 
Wisconsin). No changes in those requirements is necessary a result of 
this action. Should any change become necessary, it would be submitted 
to OMB for approval.
    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. USDA has not 
identified any relevant Federal rules that duplicate, overlap or 
conflict with this rule. All of these amendments are designed to 
enhance the administration and functioning of the marketing order to 
the benefit of the industry.
    The implementation of these requirements will not impose any 
additional costs on handlers. In fact, these amendments will reduce 
costs for both growers and handlers.
    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.

Civil Justice Reform

    The amendments to Marketing Order 930 stated herein have been 
reviewed under Executive Order 12988, Civil Justice Reform. They are 
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 the 
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 Sates 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 no later than 20 days after the date of the 
entry of the ruling.

Order Amending the Order Regulating the Handling of Tart Cherries Grown 
in Michigan, New York, Pennsylvania, Oregon, Utah, Washington, and 
Wisconsin

Findings and Determinations

    The findings and determinations hereinafter set forth are 
supplementary to the findings and determinations that were previously 
made in connection with the issuance of the marketing agreement and 
order; and all said previous findings and determinations are hereby 
ratified and affirmed, except insofar as such findings and 
determinations may be in conflict with the findings and determinations 
set forth herein.
    (a) Findings and Determinations Upon the Basis of the Hearing 
Record.
    Pursuant to the provisions of the Agricultural Marketing Agreement 
Act of 1937, as amended, (7 U.S.C. 601-612), and the applicable rules 
of practice and procedure effective thereunder (7 CFR part 900), a 
public hearing was held upon proposed further amendment of Marketing 
Agreement and Order No. 930, regulating the handling of tart cherries 
grown in Michigan, New York, Pennsylvania, Oregon, Utah, Washington, 
and Wisconsin. Upon the basis of the evidence introduced at such 
hearing and the record thereof, it is found that:
    1. The marketing agreement and order, as amended, and as hereby 
further amended, and all of the terms and conditions thereof, will tend 
to effectuate the declared policy of the Act;
    2. The marketing agreement and order, as amended, and as hereby 
further amended, regulate the handling of tart cherries grown in the 
production area in the same manner as, and are applicable only to, 
persons in the respective classes of commercial and industrial activity 
specified in the marketing agreement and order upon which a hearing has 
been held;
    3. The marketing agreement and order, as amended, and as hereby 
further amended, are limited in their application to the smallest 
regional production area which is practicable, consistent with carrying 
out the declared policy of the Act, and the issuance of several orders 
applicable to subdivisions of the production area would not effectively 
carry out the declared policy of the Act;
    4. The marketing agreement and order, as amended, and as hereby 
further amended, prescribe, insofar as practicable, such different 
terms applicable to different parts of the production area as are 
necessary to give due recognition to the differences in the production 
and marketing of tart cherries grown in the production area; and
    5. All handling of tart cherries grown in the production area as 
defined in the marketing agreement and order, is in the current of 
interstate or foreign commerce or directly burdens, obstructs, or 
affects such commerce.
    (b) Additional Findings.
    It is necessary and in the public interest to make these amendments 
effective not later than one day after publication in the Federal 
Register. A later effective date would unnecessarily delay 
implementation of the

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amendments. These amendments should be in place as soon as possible, as 
the new production year begins on July 1.
    In view of the foregoing, it is hereby found and determined that 
good cause exists for making these amendments effective one day after 
publication in the Federal Register, and that it would be contrary to 
the public interest to delay the effective date for 30 days after 
publication in the Federal Register (Sec. 553(d), Administrative 
Procedure Act; 5 U.S.C. 551-559).
    (c) Determinations. It is hereby determined that:
    1. Handlers (excluding cooperative associations of producers who 
are not engaged in processing, distributing, or shipping tart cherries 
covered by the order as hereby amended) who, during the period July 1, 
2010, through June 30, 2011, handled 50 percent or more of the volume 
of such cherries covered by said order, as hereby amended, have signed 
a marketing agreement, and
    2. The issuance of this amendatory order, further amending the 
aforesaid order, is favored or approved by at least two-thirds of the 
producers who participated in a referendum on the question of approval 
and who, during the period of July 1, 2010, through June 30, 2011 
(which has been determined to be a representative period), have been 
engaged within the production area in the production of such cherries, 
such producers having also produced for market at least two-thirds of 
the volume of such commodity represented in the referendum.
    3. The issuance of this amendatory order is favored or approved by 
processors who, during the period of July 1, 2010, through June 30, 
2011 (which has been determined to be a representative period), have 
engaged in canning or freezing cherries for market and have frozen or 
canned more than 50 percent of the total volume of cherries regulated 
which were canned or frozen within the production area.

Order Relative to Handling of Tart Cherries Grown in Michigan, New 
York, Pennsylvania, Oregon, Utah, Washington, and Wisconsin

    It is therefore ordered, That on and after the effective date 
hereof, all handling of tart cherries grown in Michigan, New York, 
Pennsylvania, Oregon, Utah, Washington, and Wisconsin shall be in 
conformity to, and in compliance with the terms and conditions of the 
said order as hereby amended as follows:
    The provisions of the proposed marketing order amending the order 
contained in the Secretary's Decision issued on February 28, 2012 and 
published in the Federal Register on March 5, 2012 (77 FR 13015) shall 
be and are the terms and provisions of this order amending the order 
and are set forth in full below.

List of Subjects in 7 CFR Part 930

    Marketing agreements, Reporting and recordkeeping requirements, 
Tart cherries.

    For the reasons stated in the preamble, the Agricultural Marketing 
Service amends 7 CFR part 930 as follows:

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

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

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

0
2. Revise the introductory text in Sec.  930.10 to read as follows:

Sec.  930.10  Handle.

    Handle means the process to brine, can, concentrate, freeze, 
dehydrate, pit, press or puree cherries, or in any other way convert 
cherries commercially into a processed product, or divert cherries 
pursuant to Sec.  930.59, or to otherwise place cherries into the 
current of commerce within the production area or from the area to 
points outside thereof: Provided, That the term handle shall not 
include:
* * * * *

0
3. Revise paragraphs (d) and (e) of Sec.  930.50 to read as follows:

Sec.  930.50  Marketing policy.

* * * * *
    (d) Final percentages. No later than September 15 of each crop 
year, the Board shall review the most current information available 
including, but not limited to, processed production and grower 
diversions of cherries during the current crop year. The Board shall 
make such adjustments as are necessary between free and restricted 
tonnage to achieve the optimum supply and recommend such final free 
market tonnage and restricted percentages to the Secretary and announce 
them in accordance with paragraph (h) of this section. The difference 
between any final free market tonnage percentage designated by the 
Secretary and 100 percent shall be the final restricted percentage. 
With its recommendation, the Board shall report on its consideration of 
the factors in paragraph (e) of this section.
    (e) Factors. When computing preliminary and interim percentages, or 
determining final percentages for recommendation to the Secretary, the 
Board shall give consideration to the following factors:
    (1) The estimated total production of cherries;
    (2) The estimated size of the crop to be handled;
    (3) The expected general quality of such cherry production;
    (4) The expected carryover as of July 1 of canned and frozen 
cherries and other cherry products;
    (5) The expected demand conditions for cherries in different market 
segments;
    (6) Supplies of competing commodities;
    (7) An analysis of economic factors having a bearing on the 
marketing of cherries;
    (8) The estimated tonnage held by handlers in primary or secondary 
inventory reserves;
    (9) Any estimated release of primary or secondary inventory reserve 
cherries during the crop year; and
    (10) The quantity of grower-diverted cherries during the crop year.
* * * * *

0
4. Revise paragraph (a) of Sec.  930.58 to read as follows:

Sec.  930.58  Grower diversion privilege.

    (a) In general. Any grower may voluntarily elect to divert, in 
accordance with the provisions of this section, all or a portion of the 
cherries which otherwise, upon delivery to a handler, would become 
restricted percentage cherries. Upon such diversion and compliance with 
the provisions of this section, the Board shall issue to the diverting 
grower a grower diversion certificate which such grower may deliver to 
a handler. Any grower diversions completed in accordance with this 
section, but which are undertaken in districts subsequently exempted by 
the Board from volume regulation under Sec.  930.52(d), shall qualify 
for diversion credit.
* * * * *

    Dated: May 31, 2012.
David R. Shipman,
Administrator, Agricultural Marketing Service.
[FR Doc. 2012-13645 Filed 6-5-12; 8:45 am]
BILLING CODE 3410-02-P
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