This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

68819

Vol. 69, No. 227

Friday, November 26, 2004

DEPARTMENT OF AGRICULTURE 

Agricultural Marketing Service 

7 CFR Part 946

[Docket No. AO–F&V–946–3; FV03–946–01] 

Irish Potatoes Grown in Washington; 

Recommended Decision and 

Opportunity To File Written Exceptions 

to Proposed Amendments to Marketing 

Agreement No. 113 and Marketing 

Order No. 946

AGENCY: Agricultural Marketing Service, 

USDA.

ACTION: Proposed rule and opportunity 

to file exceptions. 

SUMMARY: This recommended decision 

invites written exceptions on proposed 

amendments to the marketing agreement 

and order (order) for Irish potatoes 

grown in Washington. Seven 

amendments are based on those 

proposed by the State of Washington 

Potato Committee (Committee), which is 

responsible for local administration of 

the order. These amendments include: 

Adding authority for container and 

marking regulations; requiring 

Committee producer members to have 

produced potatoes for the fresh market 

in at least 3 out of the last 5 years prior 

to nomination; updating order 

provisions pertaining to establishment 

of districts and apportionment of 

Committee membership among those 

districts; requiring Committee nominees 

to submit a written background and 

acceptance statement prior to selection 

by USDA; allowing for nominations to 

be held at industry meetings or events; 

adding authority to change the size of 

the Committee; and adding authority to 

allow temporary alternates to serve 

when a Committee member and that 

member’s alternate are unable to serve. 

The USDA proposed two additional 

amendments: To establish tenure 

limitations for Committee members; and 

to require that continuance referenda be 

conducted on a periodic basis to 

ascertain producer support for the order. 

The proposed amendments are intended 

to improve the operation and 

functioning of the marketing order 

program.

DATES: Written exceptions must be filed 

by December 27, 2004.

ADDRESSES: Written exceptions should 

be filed with the Hearing Clerk, U.S. 

Department of Agriculture, room 1081–

S, Washington, DC 20250–9200, 

Facsimile number (202) 720–9776 or 

http://www.regulations.gov. All 

comments should reference the docket 

number and the date and page number 

of this issue of the Federal Register. 

Comments will be made available for 

public inspection in the Office of the 

Hearing Clerk during regular business 

hours, or can be viewed at: http://

www.ams.usda.gov/fv/moab.html.

FOR FURTHER INFORMATION CONTACT:

Melissa Schmaedick, Marketing Order 

Administration Branch, Fruit and 

Vegetable Programs, Agricultural 

Marketing Service, USDA, Post Office 

Box 1035, Moab, UT 84532, telephone: 

(435) 259–7988, fax: (435) 259–4945. 

Small businesses may request 

information on this proceeding 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.

SUPPLEMENTARY INFORMATION: Prior 

documents in this proceeding: Notice of 

Hearing issued on October 6, 2003, and 

published in the October 10, 2003, issue 

of the Federal Register (68 FR 58638). 

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 

Notice is hereby given of the filing 

with the Hearing Clerk of this 

recommended decision with respect to 

the proposed amendment of Marketing 

Agreement No. 113 and Marketing 

Order 946 regulating the handling of 

Irish potatoes grown in Washington, and 

the opportunity to file written 

exceptions thereto. Copies of this 

decision can be obtained from Melissa 

Schmaedick, whose address is listed 

above.

This recommended decision is issued 

pursuant to the provisions of the 

Agricultural Marketing Agreement Act 

of 1937, as amended (7 U.S.C. 601 et 

seq.), 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). 

The proposed amendments are based 

on the record of a public hearing held 

November 20, 2003, in Moses Lake, 

Washington. Notice of this hearing was 

published in the Federal Register on 

October 10, 2003 (68 FR 58638). The 

notice of hearing contained order 

changes proposed by the Committee and 

USDA. 

The Committee’s proposed 

amendments include: Adding authority 

to establish container and marking 

regulations; requiring Committee 

producer members to have produced 

potatoes for the fresh market in at least 

3 out of the last 5 years prior to 

nomination; updating provisions 

pertaining to districts and allocation of 

Committee membership among those 

districts; requiring Committee nominees 

to submit a written background and 

acceptance statement prior to selection 

by USDA; allowing for nominations to 

be held at industry meetings or events; 

adding authority to change the size of 

the Committee; and adding authority to 

allow temporary alternates to serve 

when a Committee member and that 

member’s alternate are unable to serve. 

The USDA proposed two additional 

amendments: To establish tenure 

limitations for Committee members; and 

require that continuance referenda be 

conducted on a periodic basis to 

ascertain producer support for the order. 

In addition, USDA proposed to allow 

such changes as may be necessary to the 

order, if any of the proposed changes are 

adopted, so that all of the order’s 

provisions conform to the effectuated 

amendments. 

Four industry witnesses testified at 

the hearing. These witnesses 

represented fresh Irish potato producers 

and handlers in the production area, 

and they all supported the Committee’s 

recommended changes. 

Industry witnesses addressed the 

need for adding authority to establish 

container and marking regulations, 

noting that uniform industry regulations 

and increased flexibility in marketing 

practices would positively affect the 

Washington fresh potato industry. 

Witnesses also recommended that 

definitions of ‘‘pack’’ and ‘‘container’’ 

be added to the order. 

68820 Federal Register / Vol. 69, No. 227 / Friday, November 26, 2004 / Proposed Rules 

Industry witnesses stated their 

approval of the Committee’s 

recommendations to: Require producer 

members to have produced potatoes for 

the fresh market in at least 3 out of the 

last 5 years prior to nomination; update 

obsolete order language pertaining to 

districts; and to require Committee 

nominees to submit a written 

background and acceptance statement 

prior to their selection by USDA. These 

proposals would ensure adequate 

representation of fresh potato growers 

on the Committee, replace outdated 

language pertaining to districts and 

allocation of membership among the 

districts, and combine the Background 

Statement and the Letter of Acceptance 

into a single form. 

Witnesses also supported the 

proposals to allow for nominations to be 

held at large industry meetings rather 

than at meetings in each district, and to 

add authority for changes in Committee 

size. Witnesses stated that the former 

would broaden grower participation in 

the nomination process. The latter 

would allow the Committee to assess 

the appropriateness of current 

Committee size and structure in light of 

changes in the Washington potato 

industry. 

Lastly, industry witnesses testified in 

support of allowing a temporary 

alternate to serve at Committee meetings 

when both a member and his or her 

alternate are unable to attend. This 

would facilitate attaining a quorum and 

prevent delays in Committee decisionmaking.

A USDA witness testified in support 

of tenure limitations as a means of 

broadening industry participation in 

administering the programs. That 

witness also favored continuance 

referenda as a means of periodically 

determining whether potato growers 

want the program to continue. 

At the conclusion of the hearing, the 

Administrative Law Judge stated that 

the final date for interested persons to 

file proposed findings and conclusions 

or written arguments and briefs based 

on the evidence received at the hearing 

would be 30 days after USDA’s receipt 

of the hearing record transcript. No 

briefs were filed. 

Material Issues 

The material issues presented on the 

record of hearing are as follows: 

(1) Whether to add authority to 

establish container and marking 

regulations; 

(2) Whether Committee producer 

members should be required to have 

produced potatoes for the fresh market 

in at least 3 out of the last 5 years before 

nomination; 

(3) Whether to update order 

provisions pertaining to establishment 

of districts and allocation of Committee 

membership among those districts; 

(4) Whether to require Committee 

nominees to submit a written 

background and acceptance statement 

prior to selection by USDA; 

(5) Whether to allow for nominations 

to be held at industry meetings or 

events; 

(6) Whether to add authority to 

change the size of the Committee; 

(7) Whether to add authority to allow 

for temporary alternates to serve when 

a Committee member and that member’s 

alternate are unable to serve; 

(8) Whether to establish tenure 

limitation for Committee members; and 

(9) Whether to require periodic 

grower continuance referenda. 

Findings and Conclusions 

The following findings and 

conclusions on the material issues are 

based on evidence presented at the 

hearing and the record thereof. 

Material Issue Number 1—Authority To 

Establish Container and Marking 

Regulations 

The order should be amended to give 

authority to the Committee to 

recommend, for approval by USDA, 

container and container marking 

regulations. Such recommendations 

could include specification of the size, 

capacity, weight, dimensions, pack, and 

marking or labeling of the containers 

that can be used in the packaging or 

handling of Irish potatoes grown in 

Washington. This amendment would 

also require the definition of two new 

terms: ‘‘pack’’ and ‘‘container.’’ ‘‘Pack’’

would be defined to mean a quantity of 

potatoes in any type of container which 

falls within specific weight limits or 

within specific grade and/or size limits, 

or any combination thereof. ‘‘Container’’

would be defined to mean a sack, box, 

bag, crate, hamper, basket, carton, 

package, barrel or any other type of 

receptacle used in the packing, 

transportation, sale or other handling of 

potatoes. 

Section 946.52 of the order currently 

authorizes the establishment of grade, 

size, quality and maturity regulations 

for fresh potatoes. Under this authority, 

fresh potatoes grown in the production 

area must meet a minimum grade 

requirement of U.S. No. 2, and must 

meet minimum size, cleanness, and 

maturity specifications. Additionally, 

potatoes packed in cartons must grade at 

least U.S. No. 1. These requirements 

appear in § 946.336 of the order’s rules 

and regulations. 

The Committee proposed amending 

§ 946.52 to add authority for container 

regulations, including labeling 

requirements. Witnesses supported this 

proposal as a way to add flexibility to 

the order, allowing the industry to 

adjust to changing market demands. To 

illustrate their point, witnesses 

discussed their desire to allow U.S. No. 

2 grade potatoes to be packed in cartons, 

but only if the grade were required to be 

clearly marked on the container.

Witnesses stated that having the 

authority to require labeling of cartons 

is vital to the industry, as mandatory 

labeling would prevent any handler 

from misrepresenting the quality of the 

potatoes packed in specified cartons. As 

previously mentioned, only U.S. No. 1 

or higher grade Washington potatoes 

have been traditionally packed in 

cartons. Witnesses pressed the 

importance of mandatory labeling if 

U.S. No. 2 potatoes were packed in 

cartons to differentiate the lower quality 

pack, thereby preventing customer 

dissatisfaction with the quality of 

Washington potatoes. As one witness 

stated, mandatory labeling would 

ensure that handlers accurately 

represent the quality of potatoes packed 

in cartons, thereby maintaining the 

market for the industry’s premium pack. 

According to the hearing record, the 

U.S. potato industry is highly 

competitive. Consolidation within the 

industry has resulted in fewer producers 

and handlers competing for market 

demand. For this reason, witnesses 

asserted that the Washington potato 

industry’s ability to respond to customer 

demands for alternate containers and 

labeling or marking requirements is 

essential to its continued success in the 

market place. 

To illustrate this point, witnesses 

described a recurring request among 

industry customers for the packing of 

U.S. No. 2 grade potatoes in 50-pound 

cartons. Record evidence indicates this 

request stems from wholesalers and 

retailers who desire U.S. No. 2 grade 

potatoes packed in 50-pound cartons for 

the purpose of addressing issues such as 

ease of stacking in warehouses and 

greater product protection. Adding this 

authority would allow the Washington 

potato industry to offer its customers a 

package that is easier to handle and 

store, that would protect potatoes from 

light induced ‘‘greening’’, and would 

help protect against bruising during 

transport. 

Witnesses also submitted as evidence 

a letter from a major food service 

distributor outlining several reasons for 

requesting that U.S. No. 2 grade potatoes 

from Washington be packed in cartons. 

Reasons outlined in the letter include: 

Federal Register / Vol. 69, No. 227 / Friday, November 26, 2004 / Proposed Rules 68821

Reduced damage losses and increased 

product integrity in the distribution 

system; increased handling efficiencies 

in the flow of product from the handlers 

throughout the distribution system; and 

efficient receiving, storage, order 

selection and delivery of the product to 

the end user as a result of clear, 

consistent and accurate labeling of 

product. Labeling could include grade, 

pack, and product description. When 

asked if the industry agreed with these 

statements, witnesses stated that these 

benefits could be realized if container 

and marking regulatory authority was 

added to the order. 

Witnesses stated that the order’s lack 

of container and labeling authority has 

challenged the Washington potato 

industry’s ability to meet evolving 

requests from its customers. Moreover, 

witnesses fear that if this authority were 

not added to the order, the Washington 

potato industry would potentially lose 

valuable market share, as customers 

would search elsewhere to satisfy their 

demand for specific product in specific 

packaging. 

In addition to meeting packing 

demands, witnesses noted the 

importance of proper labeling and 

product quality. Upholding the integrity 

of the Washington State potato industry, 

witnesses explained, is as important as 

meeting customer specifications. 

Mandatory labeling would not only 

ensure that handlers are putting the 

right product in the right packaging, but 

it would also assure that customers 

actually receive what they have ordered, 

thus alleviating potential consumer 

perception problems. For example, 

without labeling authority, a customer 

could mistakenly receive cartons 

containing U.S. No. 2 grade potatoes 

instead of U.S. No. 1 grade potatoes. If 

such a situation were to occur, it could 

damage customer perceptions of U.S. 

No. 1 grade potatoes produced in 

Washington. 

Having the flexibility to market 

different grades of potatoes in labeled 

cartons would also expand the 

marketability of Washington potatoes. 

Witnesses explained that conditions 

relating to the production of table stock, 

or fresh market, potatoes and the 

resultant marketability of such potatoes 

can greatly fluctuate annually due to 

water availability, weather, and 

variances in pest control and other 

cultural practices. Thus, the overall 

quality of the potato crop can change 

enough from year to year that the U.S. 

No. 1 grade packout percentage can be 

widely variable. Witnesses explained 

that, generally, U.S. No. 2 grade potatoes 

are directed to the dehydration market, 

a market that does not always provide 

returns high enough to meet the costs 

associated with potato production. 

Witness added, however, that 

occasional demand exists for U.S. No. 2 

grade potatoes as ‘‘peelers’’ in the 

restaurant sector for use in soups and 

salads, or as ‘‘natural’’ French fries.

Witnesses stated that because the 

order lacks container labeling authority, 

greater opportunities to market U.S. No. 

2 grade potatoes are not currently 

available. If this authority were added to 

the order, witnesses indicated that the 

Washington fresh potato industry would 

gain access to opportunities that other 

production areas have access to that 

they do not. Witnesses stated that 

having the ability to pack U.S. No. 2 

grade potatoes in labeled cartons would 

meet the current demand of the food 

service industry, enable the Washington 

potato industry to remain competitive 

with other growing areas, and help 

potato producers in Washington State 

remain viable. 

While witnesses used the example of 

packing U.S. No. 2 grade potatoes in 

cartons, it is not intended that the 

authority for container (including 

labeling) requirements be limited to this 

situation. Witnesses stated that this 

authority would allow the industry to 

respond to consumer demands as new 

market trends develop. Another witness 

stated that demands on the fresh potato 

industry are changing on a regular basis. 

In order to remain competitive, 

producers and handlers cannot rely on 

‘‘business as usual’’ from year to year. 

Testimony indicated that packing 

facilities are already configured for 

packing potatoes in cartons and labeling 

the cartons. Witnesses noted that there 

would be little, if any, need for 

equipment changes or additions. Thus, 

the proposed change is not expected to 

negatively affect the costs associated 

with handling fresh market potatoes. 

Moreover, one handler testifying in 

favor of this amendment expressed 

confidence in the principle that 

customers seeking alternate packing 

procedures, container types, or specific 

marking requirements would also be 

willing to pay any cost differential. 

Thus, the witness argued that any 

additional charge incurred while 

packing would be offset by the 

increased selling price. The proposed 

amendment authorizes container and 

marking specifications. Any specific 

recommendation by the Committee to 

implement this authority would be 

subject to further analysis through the 

informal rulemaking process. 

It was also requested by witnesses at 

the hearing that definitions of ‘‘pack’’

and ‘‘container’’ be added to the order 

to further clarify this proposed 

amendment. Adding these two 

definitions would assist in clarifying 

future requirements established under 

the above-proposed authority. Proposed 

definitions of both terms were presented 

at the hearing and are supported by the 

hearing record. 

Record evidence supports amending 

the order to include container and 

marking regulatory authority. This 

amendment would allow the Committee 

to recommend, and USDA to 

implement, container and marking 

requirements through the informal 

rulemaking procedure. No opposition to 

the above proposal was voiced at the 

hearing. Accordingly, USDA proposes 

that § 946.52 be amended. 

The USDA also proposes that 

definitions of ‘‘pack’’ and ‘‘container’’

be added to the order. Adding these two 

definitions would assist in defining 

future requirements established under 

the above-proposed authority. 

Material Issue Number 2—Eligibility 

Requirements for Producer Members of 

the Committee 

The order should be amended to 

require Committee producer members to 

have produced potatoes for the fresh 

market in at least three out of the last 

five years before nomination. In 

addition, producer member nominees 

should also be required to be current 

producers of fresh potatoes. Such 

recommendation would ensure 

representation of fresh potato interests 

in a market increasingly dominated by 

processed potato interests.

Section 946.22 of the order establishes 

the Washington Potato Committee to 

locally administer the program. The 

Committee consists of 10 producer and 

5 handler members, each having an 

alternate. Section 946.25 further 

provides that a producer member of the 

Committee must be a producer in the 

district he or she is nominated to 

represent, or be an officer or employee 

of a corporate grower in that district. 

The record supports adding additional 

eligibility requirements for producer 

members of the Committee. 

Generally, producers nominated to 

serve on the Committee produce fresh 

market potatoes. However, the order 

does not specifically prevent a producer 

who is solely engaged in the production 

of potatoes for processing from being 

elected to serve on the Committee. 

Witnesses indicated that adding this 

requirement to the order would ensure 

adequate representation of fresh potato 

producers in Committee deliberations. 

Witnesses introduced support for this 

proposal by noting that Marketing Order 

946 was established in 1949 to address 

market needs of the Washington State 

68822 Federal Register / Vol. 69, No. 227 / Friday, November 26, 2004 / Proposed Rules 

fresh potato industry. Since that time, 

the proportion of potatoes produced for 

the fresh market relative to those 

produced for the processing market has 

shifted substantially. As an example, 

one witness noted that, in 1955, nearly 

three-quarters of the production from 

the State’s 36,000 acres of potatoes was 

directed to the fresh market. In 2003, the 

share directed to the fresh market 

represented only 15 percent of the 

165,000 acres grown in Washington. 

Witnesses stated that the declining 

number of Washington potato 

producers, coupled with the decreasing 

proportion of potato production 

directed to the fresh market, has 

heightened the Committee’s awareness 

of its need to ensure representation of 

fresh producers. 

Because the order was created to serve 

the fresh market industry, witnesses felt 

that only those producers who supply 

product to that market should represent 

the industry. Moreover, witnesses stated 

that a Committee member’s personal 

experience in the production and 

marketing of fresh market potatoes 

would enable that producer to make 

decisions that are in his or her best 

interest, as well as in the best interest 

of the industry. 

According to the hearing record, the 

cultural practices of fresh potato 

production differ significantly from the 

cultural practices utilized in the 

production of potatoes for processing. 

Witnesses explained that, while some 

shifts by individual producers in 

delivery of potatoes to the fresh versus 

the processing market may occur 

because of economic conditions, 

substantial swings in the flow of 

product are unlikely. Reasons 

preventing significant diversion of 

potatoes produced for the fresh market 

to the processing potato market include 

different production and harvesting 

techniques, as well as differences in the 

varieties grown for each market. 

One witness stated that production for 

the fresh versus processing market is a 

factor that is taken into consideration 

before planting of the crop. While some 

adjustments may be made due to 

production or market conditions, it is 

unlikely for an entire crop to be diverted 

from one market to the other. Therefore, 

witnesses stressed that representation of 

the fresh market industry should be 

distinct from that of the processing 

market industry, even though there may 

be some diversion from one to the other. 

Witnesses stated that a nominee’s 

eligibility could be easily verified 

through the collection of pertinent 

information on nominee background 

and acceptance statements. Nominees 

would be asked to designate the number 

of years they have been growing for the 

fresh market, and whether they are 

currently producing for that market.

Record evidence supports amending 

the order to require producer members 

to have produced potatoes for the fresh 

market in at least three out of the last 

five years before nomination. In 

addition, USDA recommends clarifying 

the industry’s intent, as presented at the 

hearing, that producer member 

nominees also be current producers of 

fresh potatoes. Further, USDA 

recommends adding these requirements 

to § 946.25(a) of the order, rather than to 

§ 946.22 as proposed by the Committee. 

This would put all producer member 

eligibility requirements in a single 

location. This proposal would ensure 

adequate representation of fresh potato 

interests on the Committee. There was 

no opposition given to the above 

proposal. 

Material Issue Number 3—

Establishment of Districts and 

Allocation of Committee Membership 

Among Districts 

Section 946.25, Selection, and 

§ 946.31, Districts, of the order should 

be revised to incorporate updated 

language currently in the order’s 

administrative rules and regulations. 

The intent of this proposal is to replace 

obsolete order language pertaining to 

the establishment of districts and the 

allocation of Committee membership 

among those districts. 

As previously discussed, the 

Committee is comprised of 10 producer 

members and 5 handler members. For 

purposes of Committee representation, 

the production area is divided into 

geographic districts, and Committee 

membership is allocated among those 

districts. 

Section 946.31 of the order establishes 

five districts. Section 946.25 allocates 

producer and handler membership 

among those districts. Section 946.31 

further authorizes USDA, upon 

recommendation of the Committee, to 

reestablish the districts and to 

reapportion Committee membership 

among the various districts. 

Under the authority in § 946.31, the 

districts were reestablished and 

membership reapportioned in 1975. A 

further reapportionment occurred in 

1987. These revisions were made to 

reflect changes in production patterns 

since the order’s promulgation in 1952. 

Current requirements appear in 

§ 946.103, Reestablishment of districts, 

and § 946.104, Reapportionment of 

committee membership, of the order’s 

administrative rules and regulations. 

To update and simplify the order, the 

Committee recommended that the 

current language in §§ 946.104 and 

946.103 replace the obsolete language in 

§§ 946.25 and 946.31. 

Witnesses maintained that the 

currently established districts and 

apportionment of membership among 

those districts remain adequate to 

ensure appropriate representation of the 

Washington potato industry on the 

Committee. Further, witnesses 

supported retaining the authority to 

further reestablish the districts and 

reapportion membership in the future if 

deemed appropriate. 

Record evidence supports revising the 

order by replacing obsolete language 

pertaining to districts and allocation of 

membership. As this proposal would 

facilitate proper interpretation of the 

order and there was no opposition 

presented at the hearing, USDA is 

proposing that §§ 946.25 and 946.31 be 

revised accordingly. 

A conforming change is 

recommended in § 946.31. Paragraph (b) 

of that section authorizes 

reestablishment of the districts and 

reapportionment of membership among 

those districts. It also lists the criteria 

that must be considered in making such 

changes. As discussed further in 

connection with Material Issue Number 

6, USDA is proposing that this authority 

be included in § 946.22. Additionally, 

the criteria for changes in membership 

(including reestablishment of districts 

and reapportionment among those 

districts) are being updated. Thus, 

USDA recommends deleting current 

§ 946.31(b) as unnecessary and in need 

of updating. 

Material Issue Number 4—Combing 

Written Background and Acceptance 

Statements

Section 946.26 should be amended to 

require Committee nominees to qualify 

as a member or alternate member by 

filing a written background and 

acceptance statement indicating 

willingness to serve before selection. 

Currently, USDA requires a background 

statement to be completed before 

selection to determine nominees’

eligibility to serve. Section 946.26 

requires a written acceptance after 

selection. 

Witnesses stated that this amendment 

would allow the Background Statement 

to be combined with the Letter of 

Acceptance for nominated Committee 

members, thereby reducing the number 

of forms required of each nominee from 

two to one. Rather than eliminate any 

requirements currently outlined in the 

order, this proposal would streamline 

the process by making it more efficient. 

Currently, nominations of Committee 

members are made within each district 

Federal Register / Vol. 69, No. 227 / Friday, November 26, 2004 / Proposed Rules 68823

utilizing mail balloting procedures. This 

process generally entails two separate 

mailings, follow-up telephone calls, and 

finally, submission of the nominees’

names to USDA for final selection. The 

Committee staff first collects the names 

of individuals interested in being on the 

Committee. Producers and handlers may 

nominate themselves or are nominated 

by other potato producers or handlers. 

The Committee manager then verifies 

with each individual his or her consent 

to serve as a Committee member if 

selected. The names of all individuals 

who wish to serve are then placed on a 

ballot and mailed to all producers and 

handlers by district. Completed ballots 

are returned and tabulated at the 

Committee office. 

The producer or handler receiving the 

highest number of votes for a vacant 

producer or handler Committee position 

is designated as the member nominee. 

The producer or handler receiving the 

second highest votes is designated as 

the respective alternate member 

nominee. Before submission to USDA 

for selection, nominated members and 

alternate members are required to 

complete and sign a Background 

Statement. The Background Statement 

allows both the Committee and USDA to 

determine a nominee’s eligibility to 

serve on the Committee by requiring 

information on the nominee’s position 

in the Washington potato industry. 

Following selection by the USDA, the 

newly appointed Committee members 

are each required to complete an 

Acceptance Letter by providing their 

name, address, and signature. 

Testimony indicated that this process 

utilizing two forms is unnecessary 

because the producer or handler has 

already indicated his or her willingness 

to serve by accepting the nomination 

and filling out the background 

statement. The Committee believes that 

combining the two forms, and requiring 

the single form’s submission at the time 

of nomination, would be more efficient 

than the current method. By combining 

these forms into one and requiring the 

information at the time of nomination, 

the Committee and USDA would also 

know in advance that the nominees are 

willing to serve on the Committee if 

selected. 

Record evidence supports amending 

the order to require Committee 

nominees to submit a written 

background and acceptance statement 

before selection by USDA. No 

opposition to this proposal was 

presented at the meeting. Accordingly, 

record evidence supports revising 

§ 946.26 of the order. 

Material Issue Number 5—Industry 

Nomination Meetings 

Section 946.32 should be amended to 

authorize Committee nominations to be 

held at industry meetings or events 

rather than at meetings held in each of 

the five districts. This proposal would 

provide more flexibility in the 

nomination process and could result in 

increased industry participation. 

According to the record, several 

industry-wide meetings are held 

between the months of November and 

March each year. Because these 

meetings include producer education 

and information components, they 

typically draw larger crowds than the 

scheduled district meetings held solely 

for the purpose of nominations. Given 

recent challenges in recruiting and 

maintaining a fully seated Committee, 

witnesses at the hearing suggested that 

these large meetings may also represent 

an untapped opportunity to educate the 

industry on the duties of the 

administrative committee and to hold 

nomination meetings. Witnesses stated 

that recruitment efforts at these 

meetings would give Committee 

vacancies more exposure and could 

provide greater diversity on the 

Committee, as a broader group of 

potential nominees would be reached. 

Constant demands for time on both 

producers’ and handlers’ schedules 

limit the effectiveness of current 

recruitment efforts that rely heavily on 

distributing marketing order 

information through the mail. Because 

of this factor, many in the fresh market 

potato industry are not knowledgeable 

about Committee issues and 

membership responsibilities. Industry 

meetings or events would provide an 

opportunity to improve understanding 

of the Committee, its role, and its 

objectives relative to the fresh market 

potato industry. If such authority is 

added to the order, testimony indicated 

that the Committee could explore the 

option of asking for nominations at 

industry meetings or events. Such 

meetings would have to be open to all 

Washington potato growers and 

handlers.

Witnesses stated that this amendment 

would neither change the Committee’s 

authority to conduct nominations at 

district meetings or by mail, nor would 

it affect the current structure of the 

Committee. 

Record evidence supports amending 

the order to authorize nominations at 

meetings other than at individual 

district meetings held by the Committee. 

This amendment would provide more 

flexibility in conducting nominations 

and could result in participation by 

more growers and handlers. There was 

no opposition to the above proposal. 

Accordingly, USDA is proposing that 

§ 946.32 be amended. 

Material Issue Number 6—Authority for 

Changes in Committee Size 

Section 946.22 of the order should be 

revised to add authority for the 

Committee to recommend changes in 

Committee size and structure. The 

intent of this proposal is to provide the 

Committee with a tool to more 

efficiently respond to the changing 

character of the Washington State fresh 

potato industry. In recommending any 

such changes, the following would be 

considered: (1) Shifts in acreage within 

districts and within the production area 

during recent years; (2) the importance 

of new production in its relation to 

existing districts; (3) equitable 

relationship between Committee 

apportionment and the various districts; 

(4) other relevant factors. 

Testimony indicates that significant 

changes have occurred in both the 

production base and industry 

demographics of the fresh market potato 

industry since the order was 

implemented. These changes suggest 

that flexibility in adapting to the 

changing character of the Washington 

fresh market potato industry is 

important to the administrative 

applicability of the order. Witnesses 

stated that, ultimately, the order’s 

ability to remain effective over time 

would be reliant on its ability to change 

with the needs of the industry. In this 

regard, the Committee has proposed 

adding authority to the order that would 

allow for Committee size and structure 

to be considered, and recommendations 

for change to be made. 

Witnesses testified that careful 

industry analysis would lead to sound 

recommendations to USDA regarding 

any change in Committee size or 

structure. If the authority to change the 

size of the Committee were added to the 

order, the Committee could, at a regular 

meeting, review the current structure of 

the Committee using the points of 

consideration mentioned above. Upon 

completing this analysis on the fresh 

industry, the Committee could make a 

recommendation to USDA for a change 

in the size of the Committee. 

Implementation of this authority 

would allow such changes to be 

pursued through the informal 

rulemaking process. Witnesses stated 

that formal rulemaking does not allow 

the industry to respond quickly enough 

to changes in the industry. 

Given the changes that the 

Washington fresh potato industry has 

seen over the past 10 years, flexibility to 

68824 Federal Register / Vol. 69, No. 227 / Friday, November 26, 2004 / Proposed Rules 

change the size of the Committee in step 

with the evolving needs of the industry 

would be an important tool. It would 

allow the Committee to focus on the 

increasing competitiveness in the 

market while minimizing costs and 

maximizing efficiency. 

When asked how procedural aspects 

of the order would be impacted given a 

change in Committee size, witnesses 

stated that administration of the order 

should continue to be conducted as 

currently outlined, but should be 

modified to reflect any changes in the 

number of Committee members. For 

example, § 946.24, Procedure, provides 

that nine members are required for a 

quorum at Committee meetings, and 

that nine concurring votes are required 

to pass any Committee action. If the 

Committee size were to change from its 

current 15 members to 10 members, for 

example, witnesses felt that the intent of 

§ 946.24 should be maintained. To 

accomplish this, a conforming change is 

recommended in § 946.24. The current 

ratio of 9 out of 15 members, or 60 

percent, would be applied to the 

quorum and voting requirements for any 

newly established Committee. The 

revision of this language would be 

necessary to maintain the current voting 

parameters of the order if the Committee 

size were to change. 

Record evidence supports amending 

the order to add authority to change in 

Committee size and structure. This 

amendment would allow the 

Committee, given due analysis and 

consideration of key factors and USDA 

approval, to more quickly adapt to 

changes within the industry. There was 

no opposition to the above proposal. 

Accordingly, USDA is proposing that 

§§ 946.22 and 946.24 be amended. 

Material Issue Number 7—Designation 

of a Temporary Alternate To Act for an 

Absent Committee Member 

The order should be amended to 

include the authority for a Committee 

member, when that Committee member 

and his or her alternate are unable to 

attend a Committee meeting, to 

designate any available, current 

Committee member alternate of the 

same classification (handler or 

producer) to serve in his or her stead. 

This should include a provision that, if 

the absent Committee member is unable 

or unwilling to designate a temporary 

alternate to serve in his or her place, the 

Committee members present could 

designate the temporary alternate.

The Committee is composed of 15 

members, with the industry members 

allocated among five geographic 

districts. Each Committee member has 

an alternate who has the same 

qualifications as the member. 

Committee members and alternates are 

nominated by their peers in the district 

they represent. 

Section 946.23 of the order provides 

that if a Committee member is absent 

from a meeting, his or her alternate shall 

act in that member’s place. There is no 

provision for a situation in which both 

the member and that member’s alternate 

are unavailable. 

The Committee’s proposal would 

change § 946.23 to provide that if both 

a member and his or her alternate 

cannot attend a Committee meeting, the 

Committee members present could 

designate an available, current alternate 

member of the same classification 

(handler or producer) to act in their 

place and stead. Witnesses also stated 

that the temporary alternate designated 

should, if possible, represent the same 

district as the absent member. 

Witnesses felt strongly about the need 

to ensure adequate producer and 

handler representation at Committee 

meetings in order to gain efficiencies in 

Committee meeting time. Witnesses 

cited examples of meetings where a 

quorum was not present and Committee 

discussions and decisions were delayed. 

Because the Committee typically only 

meets twice annually, issues are either 

tabled until the next meeting or have to 

be addressed through telephone 

meetings or special mailings or fax 

transmissions that poll each member on 

the specific issues requiring Committee 

action. 

According to the record, the lack of a 

quorum results in the Committee staff 

dedicating valuable time and resources 

to secure a Committee decisions through 

either mail or fax votes. By allowing the 

Committee to designate temporary 

alternates, witnesses stated that a 

quorum could be established and 

Committee business could be carried 

out without the need for costly followup. This authority would result in a 

more cost-effective use of industry time 

and money. Witnesses also testified that 

assembled meetings are preferred 

quorums for Committee decision 

making (as opposed to mail or telephone 

voting). Such a forum provides for full 

and open discussion of issues under 

consideration. 

When asked what type of selection 

mechanism would be employed to 

designate a temporary alternate, 

witnesses suggested that that decision 

should be left to the Committee 

chairperson, subject to approval from 

other members present. However, no 

specific suggestions were made as to 

how the Committee would either voice 

its approval or disapproval if no quorum 

were present, or what guidelines should 

be offered to ensure impartial selection 

of the temporary alternate. Witnesses 

suggested that the Committee, if deemed 

necessary, could establish specific 

procedures, as part of its by-laws. 

The USDA agrees that full 

participation at Committee meetings 

should be encouraged. The USDA also 

believes that there is merit in allocating 

membership among districts because the 

conditions in one district may vary 

considerably from those in another. 

Committee members are nominated by 

their producer and handler peers to 

represent them at Committee meetings. 

A Committee member’s charge to 

represent his or her constituents is an 

important part of fulfilling Committee 

member responsibilities for that district. 

However, it is also recognized that the 

order should contain flexibility to 

minimize delays in Committee 

decisions due to a lack of a quorum. 

Therefore, should a situation arise 

where neither a Committee member nor 

his or her alternate are able to attend a 

meeting, the Committee member should 

be able to designate a temporary 

alternate from among available, current 

Committee alternate members of the 

same classification. However, if the 

absent Committee member does not 

designate a temporary alternate, such 

responsibility should fall on his or her 

alternate. Further, if neither the absent 

member nor absent alternate member 

designate a temporary alternate, the 

responsibility should become that of the 

Committee members present at the 

meeting.

USDA proposes that § 927.23 be 

revised accordingly. A conforming 

change is recommended in § 946.24 

Procedure to provide that Committee 

action to designate a temporary alternate 

to serve at a meeting shall not be subject 

to the quorum and voting requirements 

of that section. 

Material Issue Number 8—Tenure 

Limitations 

Section 946.27, Term of office, should 

be revised to establish a limit on the 

number of consecutive terms a person 

may serve as a member of the 

Committee. Currently, the term of office 

of each member and alternate member 

of the Committee is three years. There 

are no provisions related to tenure in 

the marketing order. Members and 

alternates may serve on the Committee 

until their respective successors are 

selected and have qualified. 

The record evidence is that tenure 

limits for Committee members could 

increase industry participation on the 

Committee, provide for more diverse 

membership, provide the Committee 

with new perspectives and ideas, and 

Federal Register / Vol. 69, No. 227 / Friday, November 26, 2004 / Proposed Rules 68825

increase the number of individuals in 

the industry with Committee 

experience. 

Experience with other marketing 

order programs suggests that a period of 

six years would be appropriate. Since 

the current term of office for members 

and alternates is three years, USDA is 

proposing that members serve no more 

than two consecutive three-year terms 

or a total of six years. This proposal for 

a limitation on tenure would not apply 

to alternate members. Once a member 

has served on the Committee for two 

consecutive terms, or six years, the 

member would sit out for at least one 

year before being eligible to serve as a 

member again. However, the individual 

could immediately begin serving as an 

alternate member after completing two 

consecutive terms as a member. 

Industry witnesses presented 

testimony in opposition to this 

proposal. Although they agreed 

increased industry participation in the 

program is desirable, the application of 

tenure could be problematic. Testimony 

indicated that the number of 

Washington fresh market potato 

producers is decreasing, and that 

finding producers willing to serve on 

the Committee is difficult. Witnesses 

noted that there currently exist at least 

six vacancies for alternate member 

positions on the Committee due in part 

to the difficulty involved in recruiting 

new members. Moreover, witnesses 

stated that industry members who 

currently serve on the Committee bring 

knowledge and experience to the 

Committee that would be difficult to 

replace. 

The Committee has had difficulty in 

recent years in recruiting and 

maintaining a full membership. 

However, other program changes 

proposed in this recommended decision 

have been designed to mitigate 

problems associated with recruitment 

and appointment of Committee 

members. Therefore, USDA 

recommends establishing tenure 

requirements for Committee members. 

Section 946.27 also provides that 

Committee members serve staggered 

terms so that about one-third of the 

membership is selected each year. The 

language of this section if proposed to 

be revised to retain the staggered terms 

of office, but delete references to initial 

Committee members’ terms of office. 

These references are obsolete and no 

longer needed. 

Material Issue Number 9—Continuance 

Referenda 

Section 946.63, Termination, should 

be amended to require that continuance 

referenda be conducted every six years 

to ascertain industry support for the 

order.

Currently, there is no requirement in 

the order that continuance referenda be 

conducted on a periodic basis. The 

USDA believes that producers should 

have an opportunity to periodically vote 

on whether a marketing order should 

continue. Continuance referenda 

provide an industry with a means to 

measure producer support for the 

program. Experience has shown that 

programs need significant industry 

support to operate effectively. Under 

this proposal, USDA would consider 

termination of the order if continuance 

is not favored by at least two-thirds of 

those voting, or at least two-thirds of the 

volume represented in the referendum. 

This is the same as that for issuance and 

amendment of an order. Experience in 

recent years indicates that six years is 

an appropriate period to allow 

producers an opportunity to vote for 

continuance of the program. Therefore, 

the proposal sets forth that a referendum 

would be conducted six years after the 

effective date of this amendment and 

every sixth year thereafter. 

Several industry witnesses opposed 

periodic continuance referenda. They 

indicated that the industry currently has 

the ability to request a continuance 

referendum at any time, and requiring 

unnecessary referenda would be costly 

and of little value to the industry or 

USDA. 

The USDA believes, however, that 

producers should have an opportunity 

to periodically vote on whether the 

marketing order should continue, and 

that the costs in time and money are 

well worth the periodic producer 

feedback afforded the Committee and 

the USDA by such referenda. 

Accordingly, the record evidence 

supports adding a requirement that such 

referenda be conducted. 

The USDA also proposed to make 

such changes as may be necessary to the 

order to conform to any amendment that 

may result from the hearing. All 

conforming changes have been 

identified and discussed in this 

document. 

Small Business Consideration 

Pursuant to the requirements set forth 

in the Regulatory Flexibility Act (RFA), 

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 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. Thus, both the RFA and the Act 

are compatible with respect to small 

entities. 

Small agricultural producers have 

been defined by the Small Business 

Administration (SBA) (13 CFR 121.201) 

as those having annual receipts of less 

than $750,000. Small agricultural 

service firms, which include handlers 

regulated under the order, are defined as 

those with annual receipts of less than 

$5,000,000. 

Interested persons were invited to 

present evidence at the hearing on the 

probable regulatory and informational 

impact of the proposed amendments to 

the order on small businesses. The 

record evidence is that while minimal 

costs may occur upon implementation 

of some of the proposed amendments, 

those costs would be outweighed by the 

benefits expected to accrue to the 

Washington fresh market potato 

industry. 

The record indicates that there are 

about 39 fresh potato handlers currently 

regulated under the order. With total 

fresh sales valued at $108 million, on 

average, these handlers each received 

$2.8 million. In addition, there are about 

160 producers of fresh potatoes in the 

production area. With total fresh sales at 

the grower level valued at $58 million, 

each grower’s average receipts would be 

$362,500. Witnesses testified that about 

76 percent of these growers are small 

businesses.

It is reasonable to conclude that a 

majority of the fresh Washington potato 

handlers and producers are small 

businesses. 

Potato Industry Overview 

Record evidence supplied by the 

Washington State Potato Commission 

indicates that there are approximately 

323 potato producers in the State, of 

which approximately 160 (50 percent) 

are producers of fresh market potatoes. 

Approximately 76 percent of the fresh 

market potato producers are small 

entities, according to the SBA 

definition. Many of these farming 

operations also produce potatoes for the 

processing market. The Washington 

State potato industry also includes 39 

handlers and 12 processing plants. 

A 2001 publication of Washington 

State University (WSU) Extension 

estimated that total demand for potatoes 

produced in Washington State was $495 

million. Of this total sales value figure 

for Washington potato producers, fresh 

market potato pack-out represented 

approximately 12 percent, with 

68826 Federal Register / Vol. 69, No. 227 / Friday, November 26, 2004 / Proposed Rules 

producer sales valued at $58 million. 

The largest proportion of the crop ($357 

million or 72 percent) was represented 

by sales to the frozen potato product 

market, principally for French fries. 

Other uses included seed potatoes, 

dehydration and potato chips. 

The WSU report also explained that 

the supply of fresh market potatoes is 

handled by various potato packers 

(handlers) whose operations vary in 

size. These handlers supply the retail 

market, including supermarkets and 

grocery stores, as well as restaurants and 

other foodservice operations. Potatoes 

are prepared for the fresh market by 

cleaning, sorting, grading, and 

packaging before shipment is made to 

final destinations. Due to customer 

specifications about sizes, shapes, and 

blemishes, as well as the minimum 

quality, size, and maturity regulations of 

the order, about 42–43 percent of the 

potatoes delivered to handlers are 

graded out of the fresh market. Potatoes 

not meeting grade are generally 

delivered to processors for use in the 

frozen French fry and dehydrated potato 

markets. The total output of the fresh 

pack industry in terms of sales value is 

$108 million. 

Washington State acreage and 

production is second only to that of 

Idaho, but its yields per acre are the 

highest of any State in the United States. 

Produced on 165,000 acres, total potato 

production in Washington in 2002 was 

92.4 million hundredweight, with an 

average yield of 560 hundredweight per 

acre. These figures are based on data 

published by the USDA’s National 

Agricultural Statistical Service (NASS), 

which is also the source for most of the 

other production, acreage, yield, and 

price information used in this 

document. The Committee provided 

other figures at the hearing. Over the 

last several years, Washington has 

produced about 21 percent of the total 

U.S. potato production on about 13 

percent of the total acreage dedicated to 

potatoes. Washington’s share of the total 

value has been about 17 percent of the 

nation’s total. Fresh utilization has 

varied between 11 percent and 15 

percent from 1993 through 2002. 

The record indicates that soil type, 

climate, and number of irrigated acres 

combine to make Washington an 

excellent area to grow potatoes. In 2000, 

Washington produced a record crop 

with 105 million hundredweight grown 

on 175,000 acres with a total industry 

value of $555.2 million. This represents 

a substantial increase from 1949—the 

year in which the marketing order was 

established—in which producers 

harvested 29,000 acres with a yield of 

6.4 million hundredweight of potatoes 

valued at $14.8 million. According to 

testimony, the producer price per 

hundredweight of potatoes was $2.30 in 

1949 and $5.40 in 2002.

The Role of U.S. No. 2 Grade Potatoes 

in the Washington Potato Industry 

Witnesses at the hearing explained 

that potato production is dependent on 

many factors over which they have little 

control, including water availability, 

weather, and pest and weed pressures. 

For example, the potato crop may be of 

higher average quality one year, yielding 

an increased supply of U.S. No. 1 grade 

potatoes, and have an overall lower 

quality the next year with a 

preponderance of U.S. No. 2 grade 

potatoes. 

According to testimony, U.S. No. 2 

grade potatoes in Washington are 

generally diverted for use in making 

dehydrated potato products. In addition, 

U.S. No. 2 grade potatoes are 

occasionally in demand as ‘‘peelers’’ for 

use in soups and salads, or as ‘‘natural’’

fries. Regardless of the secondary 

products markets, witnesses explained, 

the fresh, table stock market is an 

important additional market for U.S. No. 

2 grade potatoes. Witnesses explained 

that the Washington potato industry 

cannot currently take advantage of this 

market without container marking 

authority. Having the additional 

flexibility to pack U.S. No. 2 grade 

potatoes in labeled cartons would help 

the industry overall. 

Economic Impact of Proposal 1, Adding 

Container and Marking Regulatory 

Authority 

The proposal described in Material 

Issue No. 1 would amend § 946.52, 

Issuance of regulations, to add authority 

for the Committee to recommend 

container and marking regulations to the 

USDA for subsequent implementation. 

This would be in addition to the 

existing authority for grade, size, quality 

and maturity requirements. 

In testifying in support of this 

amendment, witnesses cited an example 

of how this authority could be used. 

They stated that the Committee wants to 

respond to customer demand for U.S. 

No. 2 grade potatoes packed in cartons, 

but at the same time it wants to ensure 

that such cartons would be properly 

labeled. Three people testified in favor 

of this proposal, and no one testified in 

opposition. The three witnesses covered 

similar themes in expressing their views 

on the proposal. 

Each stated that the U.S. potato 

market is highly competitive and that 

the potato industry in Washington 

needs to be vigilant in responding to 

market needs so as not to lose market 

share to other states. Testimony 

indicated that the fresh market potato 

industry in Washington needs to ensure 

that their customers are receiving what 

they order, and must remain flexible 

and innovative. All three witnesses 

emphasized that offering appropriate 

packaging is a key element of being 

flexible and responsive to customers. 

The witnesses offered an historical 

perspective by pointing out that 40 

years ago, the industry standard for 

potato packaging was a 50 or 100-pound 

burlap bag. The passing of 30 years saw 

the phasing in of 50-pound cartons and 

polyethylene (poly) bags. Now, potatoes 

are shipped in burlap, cartons, poly, 

mesh, cardboard bulk displays and baler 

bags. Container sizes can range from 2 

pounds to 100 pounds. It was 

emphasized that the industry is 

constantly looking for new packaging 

and delivery methods. 

Witnesses stated that as early as 1994, 

the Committee began receiving requests 

from retailers and wholesalers to pack 

U.S. No. 2 grade potatoes from 

Washington in 50 lb. cartons. These 

customers cited a number of reasons for 

wanting the U.S. No. 2 grade potatoes in 

cartons, including ease of handling and 

stacking in warehouses, improved 

worker safety, and better product 

protection (for example, less ‘‘greening’’

from exposure to light, and reduced 

bruising during transport.) 

Although authority exists in the order 

for the Committee to recommend 

regulations to allow packing of U.S. No. 

2 grade potatoes in cartons, witnesses 

explained that up until now the 

Committee has chosen not to permit this 

lower grade to be packed in cartons 

because of the inability to mandate 

labeling. The current handling 

regulations specify that only U.S. No. 1 

or better grade potatoes may be packed 

in cartons, and as such, buyers of 

Washington potatoes have learned to 

expect this premium grade when 

purchasing potatoes in cartons. Adding 

this labeling authority would provide 

assurance to customers and to the 

industry that the product being shipped 

is properly identified. Mandatory 

labeling prevents handlers from 

misrepresenting the quality of the 

potatoes packed in the carton. Even one 

handler sending substandard product to 

customers can mar the reputation of the 

Washington State potato industry, 

according to witnesses.

Witnesses stated that upholding the 

integrity of the Washington State potato 

industry is as important to producers as 

meeting customer specifications. 

Mandating labeling would help ensure 

product integrity. The Committee has 

discussed that without the labeling 

Federal Register / Vol. 69, No. 227 / Friday, November 26, 2004 / Proposed Rules 68827

authority, a customer could potentially 

receive U.S. No. 2 grade potatoes from 

a handler, thinking that they are of U.S. 

No. 1 grade quality. This could damage 

customer perceptions of the highergrade potatoes coming out of 

Washington. Labeling authority would 

help alleviate consumer perception 

problems. Further, not only would it 

help verify that handlers are putting the 

right product into the right packaging, 

but it also would assure customers that 

they are actually receiving what they 

have ordered. 

Witnesses also emphasized the 

minimal additional cost of 

implementing this proposal. They point 

out that handlers’ facilities are already 

configured for packing potatoes in 

cartons, and for labeling those cartons, 

so there is no need for any equipment 

changes or additions. In the witnesses’

view, any additional costs a handler 

would have in packing potatoes in 

cartons rather than sacks would be 

offset by the increased selling price. 

The USDA concurs that adding 

container and marking authority would 

be a useful market-facilitating 

improvement to the order. Requiring 

labeling of cartons would help to 

improve market transactions between 

seller and buyer by assuring all 

concerned as to the exact content of 

such cartons. Washington producers 

and handlers would benefit from taking 

advantage of another market niche, with 

minimal additional cost. 

Testimony and industry data together 

indicate that little to no differential 

impact between small versus large 

producers or handlers would result from 

the proposed amendment to authorize 

container and labeling requirements. 

Although not easily quantifiable, the 

USDA concurs that benefits to the 

potato industry appear to substantially 

outweigh the potential costs associated 

with implementing this proposal. 

Economic Impact of Remaining 

Amendment Proposals 

Remaining amendment proposals are 

administrative in nature and would 

impose no new regulatory burdens on 

Washington potato growers or handlers. 

They should benefit the industry by 

improving the operation of the program 

and making it more responsive to 

industry needs. 

Grower members of the Committee are 

currently required to be growers in the 

district they are nominated to represent. 

Adding another eligibility 

requirement—that they be growers of 

fresh potatoes—would ensure that the 

Committee is representative of, and 

responsive to, those growers the 

program impacts most directly. No 

additional costs would be incurred. 

Replacing obsolete order language 

pertaining to establishment of districts 

and allocation of Committee 

membership among those districts 

would simply update the order. To the 

extent updating order language 

simplifies the program and reduces 

confusion, it would benefit the industry.

Currently, Committee member 

nominees are required to complete a 

Background Statement before selection 

by USDA, and an Acceptance Letter 

subsequent to selection. Combining 

these into a single form would 

streamline the appointment process and 

reduce reporting requirements imposed 

on Committee members. 

Nominations of Committee members 

can be conducted through mail balloting 

or at meetings held in each of the five 

established districts. Allowing 

nominations to be made at larger, 

industry-wide meetings would provide 

the industry with an additional option. 

This option could result in the 

Committee reaching a larger audience of 

growers and handlers, thereby 

broadening industry participation and 

facilitating the nomination process. 

The Washington Potato Committee 

consists of 10 growers, 5 handlers, and 

their alternates. Changing the size of the 

Committee would allow the industry to 

adjust to changes in fresh potato 

production patterns and in the number 

of active industry participants. An 

increase in Committee size could lead to 

marginally higher program costs 

because Committee members are 

reimbursed for expenses they incur in 

attending meetings and performing 

other duties under the order. A 

reduction in Committee size (deemed to 

be more likely according to the record) 

would likewise reduce program costs. 

Any recommendation to change the size 

of the Committee would be considered 

in terms of cost and the need to ensure 

appropriate representation of growers 

and handlers in Committee 

deliberations. 

Committee members serve 3-year 

terms of office, with no limit on the 

number of terms they may serve. The 

proposed amendment to add tenure 

requirements would allow more persons 

the opportunity to serve as Committee 

members. It would provide for more 

diverse membership, provide new 

perspectives and ideas, and increase the 

number of individuals in the industry 

with Committee experience. No 

additional costs are expected to be 

incurred because of this proposed 

amendment. 

The recommendation to require 

periodic continuance referenda to 

ascertain industry support for the 

program would allow growers the 

opportunity to vote on whether to 

continue the operation of the order. 

Most of the costs associated with 

referenda are borne by USDA. Ensuring 

that the program is administered in 

response to grower needs would 

outweigh these costs. 

Paperwork Reduction Act 

In accordance with the Paperwork 

Reduction Act of 1980 (44 U.S.C. 35), 

any reporting and recordkeeping 

provision changes that would be 

generated by the proposed amendments 

would be submitted to the Office of 

Management and Budget (OMB). 

The Washington Potato Committee 

recommended amending producer 

eligibility requirements to require 

production of potatoes for the fresh 

market for 3 out of the 5 years of 

production prior to nomination. The 

Committee has also made 

recommendations that would streamline 

the nomination process and increase 

industry participation in nominations. 

In conformance with these 

recommendations, a confidential 

qualification and acceptance statement 

would be used in the appointment of 

committee members. This form would 

be based on the currently approved 

Confidential Background Statement for 

the Washington Potato Marketing 

Committee. If this proposal is 

implemented, the form would only be 

used after approval by OMB. 

Current information collection 

requirements for Part 946 are approved 

by OMB under OMB number 0581–

0178. Any changes in those 

requirements as a result of this 

proceeding 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 proposed rule. These 

amendments are designed to enhance 

the administration and functioning of 

the marketing order to the benefit of the 

industry.

Committee meetings regarding these 

proposals as well as the hearing date 

were widely publicized throughout the 

Washington potato industry, and all 

interested persons were invited to 

attend the meetings and the hearing and 

participate in Committee deliberations 

on all issues. All Committee meetings 

and the hearing were public forums and 

all entities, both large and small, were 

68828 Federal Register / Vol. 69, No. 227 / Friday, November 26, 2004 / Proposed Rules 

able to express views on these issues. 

Finally, interested persons are invited to 

submit information on the regulatory 

and informational impacts of this action 

on small businesses. 

A 30-day comment period is provided 

to allow interested persons to respond 

to this proposal. Thirty days is deemed 

appropriate so that this rulemaking may 

be completed in a timely manner. All 

written exceptions timely received will 

be considered and a grower referendum 

will be conducted before these 

proposals are implemented. 

Civil Justice Reform 

The amendments to Marketing 

Agreement 113 and Marketing Order 

946 proposed herein have been 

reviewed under Executive Order 12988, 

Civil Justice Reform. They are not 

intended to have retroactive effect. If 

adopted, the proposed amendments 

would not preempt any State or local 

laws, regulations, or policies, unless 

they present an irreconcilable conflict 

with this proposal. 

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. 

Rulings on Briefs of Interested Persons 

Briefs, and proposed findings and 

conclusions based on the record 

evidence were solicited in this 

proceeding. No briefs were filed. 

General Findings 

The findings hereinafter set forth are 

supplementary to the findings and 

determinations which 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. 

(1) The marketing agreement and 

order, as amended, and as hereby 

proposed to be further amended, and all 

of the terms and conditions thereof, 

would tend to effectuate the declared 

policy of the Act; 

(2) The marketing agreement and 

order, as amended, and as hereby 

proposed to be further amended, 

regulate the handling of Irish potatoes 

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 

proposed to be 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 

proposed to be 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 Irish potatoes grown in the 

production area; and 

(5) All handling of Irish potatoes 

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. 

A 30-day comment period is provided 

to allow interested persons to respond 

to this proposal. Thirty days is deemed 

appropriate so that this rulemaking may 

be completed prior to the 2005–2006 

season. All written exceptions timely 

received will be considered and a 

grower referendum will be conducted 

before these proposals are implemented.

List of Subjects in 7 CFR Part 946

Marketing agreements, Potatoes, 

Reporting and recordkeeping 

requirements.

Recommended Further Amendment of 

the Marketing Agreement and Order

For the reasons set out in the 

preamble, 7 CFR part 946 is proposed to 

be amended as follows:

PART 946—IRISH POTATOES GROWN 

IN WASHINGTON 

1. The authority citation for 7 CFR 

part 946 continues to read as follows:

Authority: 7 U.S.C. 601–674.

2. Add a new § 946.17 to read as 

follows:

§ 946.17 Pack. 

Pack means a quantity of potatoes in 

any type of container and which falls 

within the specific weight limits or 

within specific grade and/or size limits, 

or any combination thereof, 

recommended by the committee and 

approved by the Secretary. 

3. Add a new § 946.18 to read as 

follows:

§ 946.18 Container. 

Container means a sack, box, bag, 

crate, hamper, basket, carton, package, 

barrel, or any other type of receptacle 

used in the packing, transportation, sale 

or other handling of potatoes. 

4. In § 946.22, designate the current 

text as paragraph (a) and add a new 

paragraph (b) to read as follows:

§ 946.22 Establishment and membership.

* * * * *

(b) The Secretary, upon 

recommendation of the committee, may 

reestablish districts, may reapportion 

members among districts, may change 

the number of members and alternate 

members, and may change the 

composition by changing the ratio of 

members, including their alternates. In 

recommending any such changes, the 

following shall be considered: 

(1) Shifts in acreage within districts 

and within the production area during 

recent years; 

(2) The importance of new production 

in its relation to existing districts; 

(3) The equitable relationship 

between committee apportionment and 

districts; and, 

(4) Other relevant factors. 

5. In § 946.23, designate the current 

text as paragraph (a) and add a new 

paragraph (b) to read as follows:

§ 946.23 Alternate members.

* * * * *

(b) In the event that both a member 

and his or her alternate are unable to 

attend a Committee meeting, the 

member, the alternate member, or the 

Committee members present, in that 

order, may designate another alternate 

of the same classification (handler or 

producer) to serve in such member’s 

place and stead. 

6. Section 946.24 is revised to read as 

follows:

§ 946.24 Procedure. 

(a) Sixty percent of the committee 

members shall constitute a quorum and 

a concurring vote of 60 percent of the 

committee members will be required to 

Federal Register / Vol. 69, No. 227 / Friday, November 26, 2004 / Proposed Rules 68829

pass any motion or approve any 

committee action. 

(b) The quorum and voting 

requirements of paragraph (a) of this 

section shall not apply to the 

designation of temporary alternates as 

provided in § 946.23. 

(c) The committee may provide for 

meetings by telephone, telegraph, or 

other means of communication and any 

vote cast at such a meeting shall be 

confirmed promptly in writing: 

Provided, That if any assembled 

meeting is held, all votes shall be cast 

in person. 

7. Section 946.25 is amended by: 

A. Revising paragraph (a). 

B. Revising paragraph (c). 

The revisions read as follows:

§ 946.25 Selection. 

(a) Persons selected as committee 

members or alternates to represent 

producers shall be individuals who are 

producers of fresh potatoes in the 

respective district for which selected, or 

officers or employees of a corporate 

producer in such district. Such 

individuals must also have produced 

potatoes for the fresh market for at least 

three out of the five years prior to 

nomination. 

(b) * * *

(c) The Secretary shall select 

committee membership so that, during 

each fiscal period, each district, as 

designated in § 946.31, will be 

represented as follows: 

(1) District No. 1—Three producer 

members and one handler member; 

(2) District No. 2—Two producer 

members and one handler member; 

(3) District No. 3—Two producer 

members and one handler member; 

(4) District No. 4—Two producer 

members and one handler member; 

(5) District No. 5—One producer 

member and one handler member. 

8. Revise § 946.26 to read as follows:

§ 946.26 Acceptance. 

Any person nominated to serve as a 

member or alternate member of the 

committee shall, prior to selection by 

USDA, qualify by filing a written 

background and acceptance statement 

indicating such person’s willingness to 

serve in the position for which 

nominated. 

9. Amend § 946.27 by revising 

paragraph (a) to read as follows:

§ 946.27 Term of office. 

(a) The term of office of each member 

and alternate member of the committee 

shall be for 3 years beginning July 1 and 

continuing until their successors are 

selected and have qualified. The terms 

of office of members and alternates shall 

be determined so that about one-third of 

the total committee membership is 

selected each year. Committee members 

shall not serve more than 2 consecutive 

terms. Members who have served for 2 

consecutive terms will be ineligible to 

serve as a member for 1 year.

* * * * *

10. Revise § 946.31 to read as follows:

§ 946.31 Districts. 

For the purpose of determining the 

basis for selecting committee members, 

the following districts of the production 

area are hereby established: 

(a) District No. 1—The counties of 

Ferry, Stevens, Pend Oreille, Spokane, 

Whitman, and Lincoln, plus the East 

Irrigation District of the Columbia Basin 

Project, plus the area of Grant County 

not included in either the Quincy or 

South Irrigation Districts which lies east 

of township vertical line R27E, plus the 

area of Adams County not included in 

either of the South or Quincy Irrigation 

Districts. 

(b) District No. 2—The counties of 

Kittitas, Douglas, Chelan, and 

Okanogan, plus the Quincy Irrigation 

District of the Columbia Basin Project, 

plus the area of Grant County not 

included in the East or South Irrigation 

Districts which lies west of township 

line R28E. 

(c) District No. 3—The counties of 

Benton, Klickitat, and Yakima. 

(d) District No. 4—The counties of 

Walla Walla, Columbia, Garfield, and 

Asotin, plus the South Irrigation District 

of the Columbia Basin Project, plus the 

area of Franklin County not included in 

the South District. 

(e) District No. 5—All of the 

remaining counties in the State of 

Washington not included in Districts 

No. 1, 2, 3, and 4 of this section. 

11. Amend § 946.32 by revising 

paragraph (a) to read as follows:

§ 946.32 Nomination.

* * * * *

(a) Nominations for Committee 

members and alternate members shall 

be made at a meeting or meetings of 

producers held by the Committee or at 

other industry meetings or events not 

later than May 1 of each year; or the 

Committee may conduct nominations by 

mail not later than May 1 of each year 

in a manner recommended by the 

Committee and approved by the 

Secretary.

* * * * *

12. Amend § 946.52 by adding a new 

paragraph (a)(5) to read as follows:

§ 946.52 Issuance of regulations. 

(a) * * *

(5) To regulate the size, capacity, 

weight, dimensions, pack, and marking 

or labeling of the container, or 

containers, which may be used in the 

packing or handling of potatoes, or both.

* * * * *

13. In § 946.63, redesignate paragraph 

(d) as paragraph (e) and add a new 

paragraph (d) to read as follows:

§ 946.63 Termination.

* * * * *

(d) The Secretary shall conduct a 

referendum six years after the effective 

date of this paragraph and every sixth 

year thereafter to ascertain whether 

producers favor continuance of this 

part.

* * * * *

Dated: November 19, 2004. 

A.J. Yates, 

Administrator, Agricultural Marketing 

Service.

[FR Doc. 04–26124 Filed 11–24–04; 8:45 am] 

BILLING CODE 3410–02–P

NATIONAL CREDIT UNION 

ADMINISTRATION 

12 CFR Part 701

Loans to Members and Lines of Credit 

to Members

AGENCY: National Credit Union 

Administration (NCUA).

ACTION: Proposed rule.

SUMMARY: NCUA is proposing to amend 

three subsections of its lending rule to 

incorporate legal interpretations 

previously issued by its Office of 

General Counsel (OGC) regarding 

permissible maturities for certain types 

of loans and the effect of partial 

government guarantees. The proposal 

clarifies: The conditions for applying 

the lending rule to loans secured by 

mobile homes, recreational vehicles, 

house trailers and boats; that loans 

secured by manufactured homes may be 

considered residential real estate loans; 

and that loans with a partial government 

guarantee, insurance, or advance 

commitment to purchase a portion of a 

loan fall within the rule. The NCUA 

Board is proposing these changes 

because it believes it is helpful to 

federal credit unions (FCUs) and others 

that may consult NCUA regulations to 

incorporate these interpretations as part 

of the rule itself rather than having them 

stated separately in OGC legal opinions.

DATES: The NCUA must receive 

comments on or before January 25, 

2005.