[Federal Register Volume 69, Number 227 (Friday, November 26, 2004)]
[Proposed Rules]
[Pages 68819-68829]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-26124]


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Proposed Rules
                                                Federal Register
________________________________________________________________________

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.

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

[[Page 68819]]



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.

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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.

[[Page 68820]]

    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 decision-making.
    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 Sec.  946.336 of the order's rules and regulations.
    The Committee proposed amending Sec.  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:

[[Page 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 Sec.  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

[[Page 68822]]

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 
Sec.  946.25(a) of the order, rather than to Sec.  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 Sec.  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 Sec.  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 Sec.  946.103, Reestablishment of 
districts, and Sec.  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 Sec. Sec.  946.104 and 946.103 replace the 
obsolete language in Sec. Sec.  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 
Sec. Sec.  946.25 and 946.31 be revised accordingly.
    A conforming change is recommended in Sec.  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 Sec.  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 Sec.  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

[[Page 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 Sec.  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 Sec.  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

[[Page 68824]]

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, Sec.  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 Sec.  946.24 
should be maintained. To accomplish this, a conforming change is 
recommended in Sec.  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 Sec. Sec.  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 Sec.  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 follow-up. 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 Sec.  927.23 be revised accordingly. A 
conforming change is recommended in Sec.  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

[[Page 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

[[Page 68826]]

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 Sec.  
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

[[Page 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 higher-grade 
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

[[Page 68828]]

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 Sec.  946.17 to read as follows:


Sec.  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 Sec.  946.18 to read as follows:


Sec.  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 Sec.  946.22, designate the current text as paragraph (a) and 
add a new paragraph (b) to read as follows:


Sec.  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 Sec.  946.23, designate the current text as paragraph (a) and 
add a new paragraph (b) to read as follows:


Sec.  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:


Sec.  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

[[Page 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 Sec.  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:


Sec.  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 Sec.  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 Sec.  946.26 to read as follows:


Sec.  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 Sec.  946.27 by revising paragraph (a) to read as follows:


Sec.  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 Sec.  946.31 to read as follows:


Sec.  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 Sec.  946.32 by revising paragraph (a) to read as 
follows:


Sec.  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 Sec.  946.52 by adding a new paragraph (a)(5) to read as 
follows:


Sec.  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 Sec.  946.63, redesignate paragraph (d) as paragraph (e) and 
add a new paragraph (d) to read as follows:


Sec.  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