57816 Federal Register / Vol. 69, No. 187 / Tuesday, September 28, 2004 / Rules and Regulations 

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service 

7 CFR Part 930 

[Docket No. FV03–930–5 FIR] 

Tart Cherries Grown in the States of 

Michigan, et al.; Revision of 

Procedures for Handlers To Receive 

Exempt Use/Diversion Credit for New 

Product and New Market Development 

Activities

AGENCY: Agricultural Marketing Service, 

USDA.

ACTION: Final rule.

SUMMARY: The Department of 

Agriculture (Department) is adopting, as 

a final rule, without change, an interim 

final rule that provides more specific 

criteria to help handlers take better 

advantage of exempt use/diversion 

credit activities in meeting volume 

regulation requirements, and to help the 

Cherry Industry Administrative Board 

(Board) better assess the validity of 

handler requests for such diversion 

credit.

DATES: Effective: October 28, 2004.

FOR FURTHER INFORMATION CONTACT:

Patricia A. Petrella or Kenneth G. 

Johnson, Marketing Order 

Administration Branch, Fruit and 

Vegetable Programs, AMS, USDA, Suite 

6C02, Unit 155, 4700 River Road, 

Riverdale, MD 20737, telephone: (301) 

734–5243, or fax: (301) 734–5275; or 

George Kelhart, Technical Advisor, 

Marketing Order Administration 

Branch, Fruit and Vegetable Programs, 

AMS, USDA, 1400 Independence 

Avenue, SW., STOP 0237, Washington, 

DC 20250–0237; telephone: (202) 720–

2491, or fax: (202) 720–8938. 

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: 

Jay.Guerber@usda.gov.

SUPPLEMENTARY INFORMATION: This rule 

is issued under Marketing Agreement 

and Order No. 930 (7 CFR part 930), 

regulating the handling of tart cherries 

grown in the States of Michigan, New 

York, Pennsylvania, Oregon, Utah, 

Washington, and Wisconsin, hereinafter 

referred to as the ‘‘order.’’ The 

marketing agreement and order are 

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 rule has been reviewed under 

Executive Order 12988, Civil Justice 

Reform. This rule will not preempt any 

State or local laws, regulations, or 

policies, unless they present an 

irreconcilable conflict with this rule. 

The Act provides that administrative 

proceedings must be exhausted before 

parties may file suit in court. Under 

section 608c(15)(A) of the Act, any 

handler subject to an order may file 

with USDA a petition stating that the 

order, any provision of the order, or any 

obligation imposed in connection with 

the order is not in accordance with law 

and request a modification of the order 

or to be exempted therefrom. Such 

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 rule continues in effect 

procedures for handlers to receive 

exempt use/diversion credit in meeting 

their volume regulation obligations as 

follows: (1) It continues to provide more 

specific criteria to help handlers take 

better advantage of exempt use/

diversion credit activities and to help 

the Board better assess the validity of 

handler requests for diversion credit; (2) 

it continues to clarify the current 

definitions of ‘‘new product 

development’’ and ‘‘new market 

development’’ activities eligible 

diversion credit, and adds ‘‘market 

expansion’’ to the definition of ‘‘new 

market development’’; (3) it also 

continues to specify an industry-wide 

limit for market expansion activities 

totaling 10 million pounds per crop 

year. This limitation reflects the Board’s 

concern that these activities should be 

developed gradually. The limitation will 

be allocated on a pro rata basis among 

the handlers who request diversion 

credit for market expansion activities 

and are approved by the Board; and (4) 

handlers requesting diversion credit 

under these provisions will have to 

provide evidence to the Board that they 

have been actively involved in the 

development of the new product, new 

market, or market expansion activity, or 

have financially supported the 

development efforts. This is to assure 

that the handlers initiating such efforts 

are the ones who earn the resulting 

diversion credits. 

Handler diversion is authorized under 

§ 930.59 of the order and, when volume 

regulation is in effect, handlers may 

fulfill restricted percentage 

requirements by diverting cherries or 

cherry products rather than placing tart 

cherries in an inventory reserve. 

Volume regulation is intended to help 

the tart cherry industry stabilize 

supplies and prices in years of excess 

production. The volume regulation 

provisions of the order provide for a 

combination of processor owned 

inventory reserves and grower or 

handler diversion of excess tart cherries. 

Reserve cherries may be released for 

sale into commercial outlets when the 

current crop is not expected to fill 

demand. Under certain circumstances, 

such cherries may also be used for 

charity, experimental purposes, 

nonhuman use, and other approved 

purposes.

Section 930.59(b) of the order 

provides for the designation of 

allowable forms of handler diversion. 

These include: uses exempt under 

§ 930.62; contribution to a Board 

approved food bank or other approved 

charitable organization; acquisition of 

grower diversion certificates that have 

been issued in accordance with 

§ 930.58; or other uses, including 

diversion by destruction of the cherries 

at the handler’s facilities. Section 930.62 

provides that the Board, with the 

approval of the Secretary, may exempt 

from the provisions of §§ 930.41 

(Assessments), 930.44 (Quality control), 

930.51 (Issuance of volume regulations), 

930.53 (Modification, suspension, or 

termination of regulations), and 930.55 

through 930.57 (Reserve regulations) 

cherries which are diverted in 

accordance with § 930.59, which are 

used for new product and new market 

development, which are used for 

experimental purposes, or which are 

used for any other purpose designated 

by the Board, including cherries 

processed into products for markets for 

which less then 5 percent of the 

preceding 5-year average production of 

cherries were utilized. 

When applying to the Board to receive 

exemptions for cherries or cherry 

products used for exempt purposes, the 

handler must detail the nature of the 

product or market, how it differs from 

the current, existing products and/or 

markets, and the estimated short and 

long term sales volume for the 

exemption. In addition, in order to 

obtain diversion credit for cherries used 

for exempt purposes, the application 

Federal Register / Vol. 69, No. 187 / Tuesday, September 28, 2004 / Rules and Regulations 57817

must also contain an agreement that the 

proposed exempt use diversion is to be 

carried out under the supervision of the 

Board, and that the cost of any such 

supervision that is needed is paid by the 

applicant. The fees for such USDA or 

Board supervision as previously stated, 

will be the current hourly rate of $41.00, 

which is subject to change, under 

USDA’s inspection fee schedule (7 CFR 

54.42). 

The information that is provided 

allows the Board to assess the request 

for exemption and render a 

determination concerning its approval 

or disapproval. Any information 

received by the Board, which is of a 

confidential, and/or proprietary nature 

is protected from disclosure pursuant to 

§ 930.73 of the order. 

Each handler that is granted an 

exemption must submit to the Board an 

annual progress report, due May 1 of 

each year. The progress report shall 

include the results of the exemption 

activity (comparison of intended 

activity with actual activity) for the year 

in its entirety, the volume of exempted 

fruit, an analysis of the success of the 

exemption program, and such other 

information the Board may request.

For the purposes of regulation 

concerning exempt uses and diversion 

credit, assisting handlers in obtaining 

exempt use/diversion credit under 

§ 930.162, and assisting the Board in 

properly administering these provisions, 

the terms ‘‘new product development’’, 

‘‘new market development’’, 

‘‘development of export markets’’, and 

‘‘experimental purposes’’ are defined. 

Previously, ‘‘new product development’’

was defined as the production or 

processing of new tart cherry products 

or foods or other products in which tart 

cherries or tart cherry products are 

incorporated which are not presently 

being produced on a commercial basis. 

New product development could also 

include the production or processing of 

a tart cherry product using a technique 

not presently being utilized 

commercially in the tart cherry 

industry. For example, a handler might 

ask for an exemption for a product such 

as ground meat in combination with raw 

tart cherries to form a leaner meat 

product. When a new product is 

commercially viable, which is defined 

as the time when total industry 

utilization for the product exceeds 2 

percent of the 5-year average production 

of tart cherries, the product is no longer 

eligible for a new product development 

exemption and diversion credit. 

‘‘New market development’’

previously meant the development of 

markets for cherry products which are 

not commercially established markets 

and which are not competitive with 

commercial outlets presently utilized by 

the tart cherry industry (including the 

development of new export markets). 

For example, a handler might seek to 

establish sales of cherry preserves to 

India or China, currently undeveloped 

markets. New markets become 

commercially established when the total 

industry utilization in the market 

exceeds 2 percent of the 5-year average 

production of tart cherries. When the 

new markets become commercially 

viable they are no longer eligible as an 

exempt use outlet and diversion credit. 

‘‘Development of export markets’’ is 

defined as the sale of cherries or cherry 

products, including the development of 

sales for new or different tart cherry 

products or the expansion of sales for 

existing tart cherry products, to 

countries other than Canada and 

Mexico. An example of development of 

sales for new or different tart cherry 

products could be a handler seeking to 

establish sales of dried cherries in 

Germany, which is primarily a hot pack 

market (canned tart cherries). No 

quantity limitations are specified for the 

development of export markets. The 

Board did not want to put any 

constraints on handlers seeking to 

establish export markets. Moreover, the 

optimum supply formula, which is used 

by the Board to calculate the desirable 

volume of tart cherries that should be 

available for sale, does not apply to 

product that can be diverted or used in 

exempt outlets. Thus, the Board felt that 

handlers in meeting their restricted 

percentage obligations during volume 

regulation seasons, should be free to 

move exempted/diverted cherries to 

export markets without constraints. 

‘‘Experimental purposes’’ is defined 

as the use of cherries or cherry products 

in preliminary and/or developmental 

activities intended to result in new 

products, new applications and/or new 

markets for tart cherry products, such as 

a handler working with cereal 

companies to develop a cereal using 

dried cherries. Any exemption for 

experimental work must be limited in 

scope, duration, and volume based on 

information supplied by the applicant at 

the time a request for exemption is 

made. In no case, shall an individual 

exemption for experimental purposes 

last longer than 5 years or exceed 

100,000 pounds raw product equivalent 

of tart cherries. 

To improve the administration of the 

exempt use/diversion credit procedures, 

the Board recommended that the 

previous definitions of what constitutes 

new product development and new 

market development be clarified, and 

that a definition for market expansion 

should be included in the definition of 

‘‘new market development’’ in 

§ 930.162(b). It also recommended that 

an industry-wide limit for market 

expansion activities be established 

totaling 10 million pounds per crop year 

to be allocated pro rata among the 

approved handler applicants.

Under the recommended procedures, 

handlers applying for exempt use/

diversion credit would have to provide 

the Board evidence that they have been 

actively involved in the development of 

the new product, new market, or market 

expansion activities, or have financially 

supported the development efforts. A 

definition of the term ‘‘involvement’’

has been added to the provisions 

specifying these conditions in 

§ 930.162(c)(5). 

The Board believes that these changes 

will provide handlers better guidance in 

making marketing decisions and in 

earning exempt use/diversion credits, 

and help the Board in assessing handler 

applications and in determining when 

handlers have satisfactorily 

accomplished diversion and rightfully 

earned credits against their restricted 

percentage obligations during a crop 

year with volume regulation 

percentages. No changes were 

recommended in the definitions of the 

terms ‘‘development of export markets’’

or ‘‘experimental purposes’’. 

These issues were discussed at the 

Board’s January 2003 meeting, they 

were then reconsidered at an April 2003 

meeting, and a final recommendation 

was reached at the Board’s June 26, 

2003, meeting. 

There have been differences of 

opinion between industry members and 

the Board concerning the existing 

provisions. The Board developed the 

recommended changes to provide 

handlers with clearer and more detailed 

guidelines to help them better 

understand the procedures when 

applying for such credits, and to 

provide the Board members on the New 

Product/New Market (NPNM) 

subcommittee with more specific 

guidance on granting and denying 

applications for such diversion credits. 

The Board believes that it is important 

to expand the demand for tart cherries 

to better keep supplies in line with 

market needs. To accomplish this, the 

Board thinks that the development of 

new markets and products and that the 

expansion of current markets for tart 

cherries and tart cherry products should 

be encouraged to the fullest extent 

possible. The changes to the exempt 

use/diversion credit procedures 

continued in effect by this rule are 

expected to help the tart cherry industry 

57818 Federal Register / Vol. 69, No. 187 / Tuesday, September 28, 2004 / Rules and Regulations 

further the Board’s objectives and help 

producers and handlers accordingly. 

This rule continues to specify revised 

definitions for ‘‘new product 

development,’’ and ‘‘new market 

development,’’ continues to add the 

concept of ‘‘market expansion’’ to the 

definition of ‘‘new market 

development,’’ and continues to add a 

new condition of participation in 

obtaining exempt use/diversion credit 

for new product development, new 

market development, and market 

expansion referred to as ‘‘involvement’’. 

As previously stated, ‘‘new product 

development’’ was previously defined 

as the production or processing of new 

tart cherry products or foods or other 

products in which tart cherries or tart 

cherry products are incorporated which 

are not presently being produced on a 

commercial basis. New product 

development can also include the 

production or processing of a tart cherry 

product using a technique not presently 

being utilized commercially in the tart 

cherry industry. Once total industry 

utilization for the product exceeds 2 

percent of the 5-year average production 

of tart cherries, the product will no 

longer be eligible for a new product 

development exemption. 

This action continues to add to the 

definition of ‘‘new product 

development’’ the following 

clarification: (1) New product 

development can also include an end 

product of the processing of raw tart 

cherries created by handlers at pack 

time either for resale or for remanufacturing which has not previously 

been manufactured by handlers in the 

industry (for example, dried tart 

cherries (dehydrated) were marketed as 

a new product after first undergoing 

processing as a five plus one product 

(25 pounds of cherries topped with 5 

pounds of sugar)); or (2) a processed, 

value-added, item that includes tart 

cherry products as an ingredient which 

has never been marketed to consumers 

either by a handler within the industry 

or by a food manufacturer. For example, 

during the 2002–03 crop year, a new 

cookie with a tart cherry filling was sold 

in retail markets for the first time.

As previously mentioned, language 

within § 930.162(b)(1) provides a 

volume limit of 2 percent of the five 

year average of production of tart 

cherries. Once this total industry 

utilization for a new product exceeds 

this amount, the product is no longer 

considered under development and is 

not eligible for a new product 

development exemption and diversion 

credit. This limitation remains the same. 

However, an additional limitation 

recommended by the Board for new 

product and new market development 

continues to limit the duration of any 

diversion credit to three years from the 

first date of shipment of the new 

product. The Board believes that 

limiting the eligibility of the exemption 

for 3 years from the first date of 

shipment of the new product provides 

a handler time to adequately develop 

the market for the product. After 3 

years, regardless whether markets have 

been developed for the new product or 

not, the product will no longer qualify 

for an exemption and diversion credit. 

Continuing to add such references 

and volume limitations to the current 

definition of ‘‘new product 

development’’ clarifies what new 

product activities can qualify for exempt 

use/diversion credit and how long such 

credit can be obtained by the handler 

once the Board approves the handler’s 

application and sales and shipments of 

the product are made. 

Under the order, ‘‘new market 

development’’ was previously defined 

as the development of markets for tart 

cherry products which are not 

commercially established markets and 

which are not competitive with 

commercial outlets presently utilized by 

the tart cherry industry (including the 

development of new export markets). 

For instance, a handler who developed 

a new market for tart cherries that is 

also an export market would get credit 

for either the new market development 

or development of the export market but 

could not get credit for both. A new 

market becomes commercially 

established, when total industry 

utilization in the market exceeds 2 

percent of the five year average 

production of tart cherries, and is not 

eligible for exempt use/diversion credit. 

This action also continues to clarify 

the definition of ‘‘new market 

development’’ by adding to that 

definition a proviso that ‘‘new market 

development’’ should be a geographic 

area into which tart cherries or products 

derived from them have not previously 

been sold. Included within the revised 

‘‘new market development’’ definition 

are ‘‘market expansion activities’’, 

which are defined as activities that 

incrementally expand the sale of either 

tart cherries or the products in which 

tart cherries are an ingredient. Such 

activities include, but are not limited to: 

(1) Expansions of the geographic areas 

in which products are marketed; (2) 

product line extensions; (3) significant 

improvements to or revisions of existing 

products; (4) packaging innovations; (5) 

segmentation of markets along 

geographic, demographic, or other 

definable characteristics; and (6) 

product repositionings. 

Examples of these activities follow: 

(1) Expansions of the geographic areas 

in which products are marketed would 

include shipping tart cherries to the 

Ukraine and then on to Uzbekistan; (2) 

product line extensions would include 

taking tart cherry pie and making it an 

apple-cherry-berry pie; (3) significant 

improvements to or revisions of existing 

products would include using non-sugar 

sweeteners or reduced sugar content in 

processed tart cherry products; (4) 

packaging innovations would include 

using square containers instead of round 

2.5 pound poly bags; (5) an example of 

segmentation of markets along 

geographic, demographic, or other 

definable characteristics would include 

tart cherry juice concentrate marketed 

specifically to consumers who suffer 

with arthritis or gout; and (6) product 

repositionings would mean that retailers 

would move pie-fill out of the dessert 

category to be used as a topping. These 

examples are intended to provide 

guidance of potential marketing 

opportunities and not to limit the 

marketing creativity of the handlers in 

the tart cherry industry.

To earn new market development or 

new product development exempt use/

diversion credits for cherries or cherry 

products a handler must demonstrate 

involvement in the activity for which 

credits are sought. To demonstrate 

involvement for the purpose of earning 

market development or new product 

development diversion credits, the 

requesting handler must either (1) be or 

have been involved in development of 

the product or the market for which the 

credits are sought or (2) have had 

financial involvement in these 

processes. This involvement must be 

demonstrated and established to the 

satisfaction of the NPNM subcommittee 

by the handler requesting the diversion 

credits. 

This action also continues a 

conforming change to § 930.162(a) to be 

consistent with a formal rulemaking 

order amendment completed in 2002. 

Language within § 930.162(a) previously 

stated, in summary, that tart cherry juice 

and juice concentrate products are not 

eligible for exempt use/diversion credit 

in domestic markets but such products 

for export can receive exempt use/

diversion credit. This language was no 

longer correct because juice and juice 

concentrate shipped into domestic 

markets can now receive exempt use/

diversion credit as provided by the 2002 

order amendment. 

The Regulatory Flexibility Act and 

Effects on Small Businesses 

The Agricultural Marketing Service 

(AMS) has considered the economic 

Federal Register / Vol. 69, No. 187 / Tuesday, September 28, 2004 / Rules and Regulations 57819

impact of this action on small entities 

and has prepared this final regulatory 

flexibility analysis. The Regulatory 

Flexibility Act (RFA) allows AMS to 

certify that regulations do not have a 

significant economic impact on a 

substantial number of small entities. 

However, as a matter of general policy, 

AMS’ Fruit and Vegetable Programs 

(Programs) no longer opts for such 

certification, but rather performs 

regulatory flexibility analyses for any 

rulemaking that would generate the 

interest of a significant number of small 

entities. Performing such analyses shifts 

the Programs’ efforts from determining 

whether regulatory flexibility analyses 

are required to the consideration of 

regulatory options and economic or 

regulatory impacts. 

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. 

There are approximately 40 handlers 

of tart cherries who are subject to 

regulation under the order and 

approximately 900 producers of tart 

cherries in the regulated area. Small 

agricultural service firms have been 

defined by the Small Business 

Administration (13 CFR 121.201) as 

those having annual receipts less than 

$5,000,000, and small agricultural 

producers are those whose annual 

receipts are less than $750,000. A 

majority of the tart cherry handlers and 

producers may be classified as small 

entities. 

Pursuant to a unanimous 

recommendation of the Board, this rule 

continues to specify revised definitions 

for ‘‘new product development’’ and 

‘‘new market development,’’ the 

addition of the concept of ‘‘market 

expansion’’ to the definition of ‘‘new 

market development,’’ the addition of a 

condition of handler participation in 

obtaining exempt use/diversion credit 

for new product development, new 

market development, and market 

expansion referred to as ‘‘involvement’’, 

and to specify an industry-wide limit on 

market expansion activities for exempt 

use/diversion credit. 

The rule continues to provide more 

specific criteria to help handlers take 

better advantage of exempt use/

diversion credit activities and to help 

the Board better assess the validity of 

handler requests for diversion credit. It 

continues to clarify the definitions of 

‘‘new product development’’ and ‘‘new 

market development’’ activities eligible 

for exempt use/diversion credit, and 

adds ‘‘market expansion’’ to the 

definition of ‘‘new market 

development’’. It also continues an 

industry-wide limit for market 

expansion activities totaling 10 million 

pounds per crop year. This limitation 

reflects the Board’s concern that these 

activities should be developed 

gradually. The limitation would be 

allocated on a pro rata basis among the 

handlers who requested diversion credit 

for market expansion activities and were 

approved by the Board. Handlers 

requesting exempt use/diversion credit 

under these provisions would have to 

provide evidence to the Board that they 

have been actively involved in the 

development of the new product, new 

market, or market expansion activity, or 

have financially supported the 

development efforts. This is to assure 

that the handlers initiating such efforts 

are the ones earning the diversion 

credits. 

With regard to alternatives, the Board 

discussed leaving the exempt use/

diversion credit procedures unchanged. 

However, the Board determined that 

this course of action would not be 

satisfactory and recommended adding 

specific guidelines for consideration 

when reviewing handler applications 

for exempt use/diversion credit 

activities. 

The principal demand for tart cherries 

is in the form of processed products. 

Tart cherries are dried, frozen, canned, 

juiced, and pureed. During the period 

1998/99 through 2002/03, 

approximately 91 percent of the U.S. 

tart cherry crop, or 240.6 million 

pounds, was processed annually. Of the 

240.6 million pounds of tart cherries 

processed, 55 percent was frozen, 30 

percent was canned, and 15 percent was 

utilized for juice and other products.

Based on National Agricultural 

Statistics Service data, acreage in the 

United States devoted to tart cherry 

production has been trending 

downward. Bearing acreage has 

declined from a high of 50,050 acres in 

1987/88 to 36,900 acres in 2002/03. This 

represents a 26 percent decrease in total 

bearing acres. Michigan leads the nation 

in tart cherry acreage with 70 percent of 

the total and produces about 75 percent 

of the U.S. tart cherry crop each year. 

The 2003/04 crop is moderate in size 

at 222.1 million pounds. The largest 

crop occurred in 1995 with production 

in the regulated districts reaching a 

record 395.6 million pounds. The price 

per pound received by tart cherry 

growers ranged from a low of 7.3 cents 

in 1987 to a high of 46.4 cents in 1991. 

This action will not impose additional 

costs on handlers, regardless of size, 

because the changes are intended to 

clarify and improve the Board’s current 

procedures on approving exempt use/

diversion credit requests. The 

recommended changes are intended to 

assure that all exempt use/diversion 

credit requests are handled in a more 

consistent and equitable manner. 

The Board’s meetings were 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 

January 23, April 24, and June 26, 2003, 

meetings were public meetings and all 

entities, both large and small, were able 

to express views on this issue. Finally, 

interested persons are invited to submit 

information on the regulatory and 

informational impacts of this action on 

small businesses. 

This action will impose no 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. 

USDA has not identified any relevant 

Federal rules that duplicate, overlap, or 

conflict with this rule. 

An interim final rule concerning this 

action was published in the Federal 

Register on June 22, 2004. The Board’s 

staff mailed copies of the rule to all 

Board members and tart cherry 

handlers. In addition, the rule was made 

available through the Internet by the 

Office of the Federal Register and 

USDA. That rule provided a 60-day 

comment period that ended August 23, 

2004. No comments were 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/fv/moab/html. Any 

questions about the compliance guide 

should be sent to Jay Guerber at the 

previously mentioned address in the 

FOR FURTHER INFORMATION CONTACT

section. 

After consideration of all relevant 

material presented, including the 

Board’s recommendation, and other 

information, it is found that finalizing 

the interim final rule, without change, 

as published in the Federal Register (69 

FR 34549) will tend to effectuate the 

declared policy of the Act.

57820 Federal Register / Vol. 69, No. 187 / Tuesday, September 28, 2004 / Rules and Regulations 

List of Subjects in 7 CFR Part 930 

Marketing agreements, Reporting and 

recordkeeping requirements, Tart 

cherries.

PART 930—TART CHERRIES GROWN 

IN THE STATES OF MICHIGAN, NEW 

YORK, PENNSYLVANIA, OREGON, 

UTAH, WASHINGTON, AND 

WISCONSIN

■ Accordingly, the interim final rule 

amending 7 CFR part 930 which was 

published at 69 FR 34549 on June 22, 

2004, is adopted as a final rule without 

change.

Dated: September 22, 2004. 

A. J. Yates, 

Administrator, Agricultural Marketing 

Service.

[FR Doc. 04–21631 Filed 9–27–04; 8:45 am] 

BILLING CODE 3410–02–P

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service 

7 CFR Part 981 

[Docket No. FV04–981–4 FIR] 

Almonds Grown in California; Revision 

of Quality Control Provisions

AGENCY: Agricultural Marketing Service, 

USDA.

ACTION: Final rule.

SUMMARY: The Department of 

Agriculture is adopting, as a final rule, 

without change, an interim final rule 

that revised the quality control 

provisions under the California almond 

marketing order (order). The order 

regulates the handling of almonds 

grown in California and is administered 

locally by the Almond Board of 

California (Board). Under the order, 

handlers receiving almonds from 

growers must have them inspected to 

determine the percentage of inedible 

almonds in each lot. Based on these 

inspections, handlers incur an inedible 

disposition obligation. This obligation is 

calculated by the Board for each variety 

of almonds, and handlers must satisfy 

the obligation by disposing of inedible 

almonds or almond material in outlets 

such as oil and animal feed. This rule 

continues in effect changes in the 

varietal classifications of almonds for 

which inedible obligations are 

calculated. This will allow the Board to 

determine handlers’ inedible 

disposition obligations by varietal 

classifications consistent with handler 

reporting requirements and current 

industry harvesting and marketing 

practices.

DATES: Effective October 28, 2004.

FOR FURTHER INFORMATION CONTACT:

Martin Engeler, Assistant Regional 

Manager, 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 George Kelhart, Technical 

Advisor, 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. 

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: 

Jay.Guerber@usda.gov.

SUPPLEMENTARY INFORMATION: This rule 

is issued under Marketing Order No. 

981, as amended (7 CFR part 981), 

regulating the handling of almonds 

grown 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.’’

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. This rule will 

not preempt any State or local laws, 

regulations, or policies, unless they 

present an irreconcilable conflict with 

this rule. 

The Act provides that administrative 

proceedings must be exhausted before 

parties may file suit in court. Under 

section 608c(15)(A) of the Act, any 

handler subject to an order may file 

with USDA a petition stating that the 

order, any provision of the order, or any 

obligation imposed in connection with 

the order is not in accordance with law 

and request a modification of the order 

or to be exempted therefrom. Such 

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 rule continues in effect revisions 

to the quality control provisions under 

the order. Under the order, handlers 

receiving almonds from growers must 

have them inspected to determine the 

percentage of inedible almonds in each 

lot. Based on these inspections, 

handlers incur an inedible disposition 

obligation. This obligation is calculated 

by the Board for each variety of 

almonds, and handlers must satisfy the 

obligation by disposing of inedible 

almonds or almond material in outlets 

such as oil and animal feed. This rule 

continues to change the varietal 

classifications of almonds for which 

inedible obligations are calculated. This 

will allow the Board to determine 

handlers’ inedible disposition 

obligations by varietal classifications 

consistent with handler reporting 

requirements and current industry 

harvesting and marketing practices. This 

action was unanimously recommended 

by the Board at a meeting on May 20, 

2004. 

Section 981.42 of the almond 

marketing order provides authority for 

quality control regulations, including a 

requirement that almonds must be 

inspected prior to processing (incoming 

inspection) to determine, by variety, the 

percentage of inedible kernels in each 

lot received. The percentage of inedible 

kernels are reported to individual 

handlers and the Board, by variety, as 

determined by the incoming inspection. 

The Board then calculates each 

handler’s inedible disposition obligation 

by variety, and handlers are required to 

dispose of a quantity of almonds equal 

to their inedible weight obligation. 

Section 981.442(a)(2) of the order’s 

rules and regulations defines ‘‘variety’’

for the purpose of calculating handlers’

inedible disposition obligations. Prior to 

implementation of the interim final rule 

(69 FR 40534; July 6, 2004), ‘‘variety’’

was defined as that variety of almonds 

which constituted at least 90 percent of 

the almonds in a lot. Further, if no 

variety constituted at least 90 percent of 

the almonds in a lot, the lot was 

classified as ‘‘mixed.’’

One such mixture is the combination 

of the Butte and Padre varieties of 

almonds, which have very similar 

characteristics. It has become common 

practice within the industry to harvest 

the two varieties together and sell them 

under the marketing classification 

known as ‘‘California’’. In addition to 

harvesting and marketing these varieties 

together, handlers also present them for 

inspection and report them as ‘‘ButtePadre’’, rather than ‘‘mixed’’, regardless