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[Federal Register Volume 76, Number 137 (Monday, July 18, 2011)]
[Proposed Rules]
[Pages 42072-42074]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-17883]

[[Page 42072]]

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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 930

[Doc. No. AMS-FV-11-0047; FV11-930-1 PR]

Tart Cherries Grown in Michigan, New York, Pennsylvania, Oregon, 
Utah, Washington, and Wisconsin; Suspension of Order Regulations 
Regarding Random Row Diversion

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This proposed rule invites comments on changes to the grower 
diversion regulations prescribed under the marketing order for tart 
cherries (order). The order regulates the handling of tart cherries 
grown in the States of Michigan, New York, Pennsylvania, Oregon, Utah, 
Washington, and Wisconsin and is administered locally by the Cherry 
Industry Administrative Board (Board). This rule would suspend 
indefinitely the regulations establishing random row as a method of 
grower diversion. With growers consistently choosing other diversion 
methods which offer more flexibility and fewer potential problems, the 
Board recommended this suspension to bring grower diversion 
requirements in line with current industry practices.

DATES: Comments must be received by July 28, 2011.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this proposal. Comments must be sent to the Docket Clerk, 
Marketing Order Administration Branch, Fruit and Vegetable Programs, 
AMS, USDA, 1400 Independence Avenue, SW., STOP 0237, Washington, DC 
20250-0237; Fax: (202) 720-8938; or Internet: http://www.regulations.gov. All comments should reference the docket number 
and the date and page number of this issue of the Federal Register and 
will be made available for public inspection in the Office of the 
Docket Clerk during regular business hours, or can be viewed at: http://www.regulations.gov. All comments submitted in response to this rule 
will be included in the record and will be made available to the 
public. Please be advised that the identity of the individuals or 
entities submitting the comments will be made public on the Internet at 
the address provided above.

FOR FURTHER INFORMATION CONTACT: Jennie M. Varela, Marketing 
Specialist, or Christian D. Nissen, Regional Manager, Southeast 
Marketing Field Office, Marketing Order Administration Branch, Fruit 
and Vegetable Programs, AMS, USDA; Telephone: (863) 324-3375, Fax: 
(863) 325-8793, or E-mail: Jennie.Varela@ams.usda.gov or 
Christian.Nissen@ams.usda.gov.
    Small businesses may request information on complying with this 
regulation by contacting Laurel May, Marketing Order Administration 
Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence 
Avenue, SW., STOP 0237, Washington, DC 20250-0237; Telephone: (202) 
720-2491, Fax: (202) 720-8938, or E-mail: Laurel.May@ams.usda.gov.

SUPPLEMENTARY INFORMATION: This proposal is issued under Marketing 
Agreement and Order No. 930, both as amended (7 CFR part 930), 
regulating the handling of tart cherries grown in Michigan, New York, 
Pennsylvania, Oregon, Utah, Washington, and Wisconsin, hereinafter 
referred to as the ``order.'' The order is effective under the 
Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-
674), hereinafter referred to as the ``Act.''
    The Department of Agriculture (USDA) is issuing this rule in 
conformance with Executive Order 12866.
    This proposal has been reviewed under Executive Order 12988, Civil 
Justice Reform. This proposed rule is not intended to have retroactive 
effect.
    The Act provides that administrative proceedings must be exhausted 
before parties may file suit in court. Under section 608c(15)(A) of the 
Act, any handler subject to an order may file with USDA a petition 
stating that the order, any provision of the order, or any obligation 
imposed in connection with the order is not in accordance with law and 
request a modification of the order or to be exempted therefrom. A 
handler is afforded the opportunity for a hearing on the petition. 
After the hearing, USDA would rule on the petition. The Act provides 
that the district court of the United States in any district in which 
the handler is an inhabitant, or has his or her principal place of 
business, has jurisdiction to review USDA's ruling on the petition, 
provided an action is filed not later than 20 days after the date of 
the entry of the ruling.
    This proposed rule invites comments on changes to the grower 
diversion regulations prescribed under the order. This rule would 
suspend indefinitely the regulations establishing random row as a 
method of grower diversion. With growers consistently choosing other 
diversion methods which offer more flexibility and fewer potential 
problems, the Board recommended this suspension to bring grower 
diversion requirements in line with current industry practices. The 
Board unanimously recommended this action at a meeting on March 24, 
2011.
    Section 930.58 of the order provides authority for voluntary grower 
diversion. Under volume regulation, growers can divert all or a portion 
of their cherries which otherwise, upon delivery to a handler, would be 
subject to regulation. Section 930.158 prescribes the rules and 
regulations for grower diversion, including the procedures and deadline 
dates for applying for diversion and the types of diversion available 
to growers. Currently, there are four types of grower diversion: Random 
row, whole block, partial block, and in-orchard tank. This rule would 
suspend portions of Sec.  930.158 that provide random row as an option 
under grower diversion.
    The order contains volume control provisions that allow the 
industry to address fluctuations in production from season to season, 
helping to stabilize supplies and prices. When volume control is in 
effect, free and restricted percentages are established. Handlers can 
meet their restricted percentage obligation by placing cherries in 
inventory reserve, diverting cherries themselves, or redeeming grower 
diversion certificates.
    Under voluntary grower diversion, growers can divert cherries from 
production in exchange for Board issued grower diversion certificates 
stating the quantity diverted. Growers can then present these 
certificates to handlers who may redeem them as a method of complying 
with their restricted percentage obligation under volume regulation. By 
diverting cherries from production, growers can avoid the costs of 
harvesting and transporting fruit, reduce the supply, and mitigate the 
downward pressure on prices that result from oversupply.
    Following the promulgation of the order in 1996, the Board 
recommended regulations outlining two grower diversion options for the 
1997 crop year, whole block and random row (63 FR 20019). Under whole 
block diversion, growers select entire orchard blocks to be left 
unharvested. With random row diversion, the Board randomly selects

[[Page 42073]]

rows of trees the grower is to leave unharvested, providing growers 
with a way to divert a portion of an orchard rather than a whole 
orchard block.
    For the 1998 crop year and subsequent seasons, the grower diversion 
program was expanded to include two additional options, partial block 
and in-orchard tank diversions (63 FR 33523). Partial block diversion 
allows the grower to select a contiguous portion of an orchard block 
that will be left unharvested. With in-orchard tank diversion, cherries 
are harvested into tanks, the volume is calculated, and then diverted 
in the orchard.
    The addition of these options provided growers with greater 
flexibility when considering diversion, and marked a substantial 
decline in the use of random row. For the last ten years, random row 
has been the least utilized grower diversion option, and accounted for 
less than three percent of total grower diversion during the last three 
seasons.
    During the discussion of this issue, the Board noted several issues 
that have contributed to the nominal use of random row as a grower 
diversion option. Random row diversion is the least flexible of grower 
diversion options in terms of quality control. When a grower selects a 
whole block or partial block to divert, the grower controls which fruit 
will be harvested and which trees will be left unharvested. Similarly, 
under in-orchard tank diversion, the grower determines what fruit is 
picked and stored in the tanks for diversion. Consequently, these three 
methods allow the grower to incorporate quality into the decision of 
which cherries to divert. Delivering higher quality fruit not only 
brings the grower a greater return, but higher quality benefits the 
industry overall.
    Under the random row method of diversion, the diverted rows are 
selected randomly by the Board. This could result in the best quality 
fruit being left in the orchard, with lower quality fruit delivered to 
handlers, leading to lower grower returns.
    In addition to quality concerns, the logistics of random row also 
present particular challenges to the grower. With the exception of in-
orchard tank diversion, all grower diversion methods require the grower 
to submit an orchard map to the Board. The burden of having to keep 
orchard maps precisely up-to-date is borne by growers. The random 
selection of rows by the Board places additional importance on the 
accuracy and precision of submitted maps. Inaccurate maps can lead to 
harvesting errors, with rows selected for diversion being inadvertently 
harvested.
    Even if maps are kept current, diverting random rows during harvest 
can be challenging. While whole and partial block diversions allow 
growers to leave contiguous areas unharvested, random row diversions 
require that specified rows be left unharvested, increasing the 
likelihood of error. Further, given the prevalence of contract 
harvesting, workers are often unfamiliar with the groves they are 
harvesting, and mistakes are made in identifying the specific rows to 
be left unharvested.
    The greater potential for error during harvesting is of major 
concern to growers because penalties for errors in random row diversion 
are costly. If a grower discovers an error during harvest, two trees 
must be left unharvested for every one of the trees improperly 
harvested in order to remain in compliance, with the grower only 
receiving the original diversion amount. If the grower reports an error 
at the end of harvesting, a reduced diversion amount is calculated. If 
an unreported error is discovered by the Board after harvesting is 
complete, no diversion certificate would be issued.
    In addition to the issues affecting grower interest in this option, 
the Board also has concerns regarding the use of random row diversion. 
Specifically, the Board is concerned about the potential for 
miscalculations or misuse that could lead to overstated diversion 
amounts. Random row diversion differs from the other options in that 
the diverted tonnage receiving certificates is calculated based on 
volume delivered from the orchard. In contrast, whole and partial block 
diversions involve sampling trees in the selected area to determine the 
volume being diverted before harvest takes place, and in-orchard tank 
diversion is determined by the actual volume measured in the tanks.
    Calculating the diverted volume after delivery creates opportunity 
for error. It can be difficult to determine if the volume delivered to 
the handler all came from appropriately mapped groves, included in the 
grower's diversion application. With diversion calculations based on 
delivered volume, it is important that the volume only include cherries 
from those orchards in which random rows were diverted. Some growers 
care for and deliver fruit from orchards other than their own. There is 
concern that the handler accepting delivery could easily mistake how 
much volume came from the grower's own mapped orchards, resulting in 
the overstatement of the amount diverted.
    With the availability of other diversion options that offer the 
grower more flexibility and less potential problems, random row 
represents a very small percentage of total grower diversion. Further, 
with the higher potential for harvesting errors and for miscalculations 
of diversion amounts, the Board believes random row is the most 
problematic of the diversion options. Consequently, the Board 
unanimously recommended this action which would suspend the regulations 
providing random row as a grower diversion option. The Board voted to 
suspend the regulations rather than eliminating them altogether in the 
event the industry would want to reinstate random row diversion in the 
future.

Initial Regulatory Flexibility Analysis

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA) (5 U.S.C. 601-612), the Agricultural Marketing Service (AMS) 
has considered the economic impact of this action on small entities. 
Accordingly, AMS has prepared this initial regulatory flexibility 
analysis.
    The purpose of the RFA is to fit regulatory actions to the scale of 
business subject to such actions in order that small businesses will 
not be unduly or disproportionately burdened. Marketing orders issued 
pursuant to the Act, and rules issued thereunder, are unique in that 
they are brought about through group action of essentially small 
entities acting on their own behalf.
    There are approximately 40 handlers of tart cherries who are 
subject to regulation under the marketing order and approximately 600 
producers of tart cherries in the regulated area. Small agricultural 
service firms have been defined by the Small Business Administration 
(SBA) as those having annual receipts of less than $7,000,000, and 
small agricultural producers are defined as those having annual 
receipts of less than $750,000 (13 CFR 121.201).
    According to the National Agricultural Statistics Service, and 
Board data, the average annual grower price for tart cherries during 
the 2009-2010 season was $0.197 per pound, and total shipments were 
around 227 million pounds. Therefore, average receipts for tart cherry 
producers were around $75,000, well below the SBA threshold for small 
producers. The Food Institute estimates an f.o.b. price of $0.84 per 
pound for frozen tart cherries, which make up the majority of processed 
tart cherries. Using this data, average annual handler receipts were 
about $4.8 million, also below the SBA threshold for small agricultural 
service

[[Page 42074]]

firms. Assuming a normal distribution, the majority of producers and 
handlers of tart cherries may be classified as small entities.
    This action would change the grower diversion regulations 
prescribed under the order. This rule would suspend indefinitely the 
regulations in Sec.  930.158 establishing random row as a method of 
grower diversion. With growers consistently choosing other diversion 
methods which offer more flexibility and fewer potential problems, the 
Board recommended this suspension to bring grower diversion 
requirements in line with current industry practices. The authority for 
this action is provided for in Sec.  930.58 of the order. The Board 
unanimously recommended this action at a meeting on March 24, 2011.
    This proposed rule would not impose any additional costs on 
growers. The grower diversion program under the order is completely 
voluntary. In an effort to stabilize supplies and prices, the tart 
cherry industry uses mechanisms under the order to attempt to bring 
supply and demand into balance. Under voluntary grower diversion, 
growers can divert cherries from production in exchange for Board 
issued grower diversion certificates stating the quantity diverted. 
Growers can then present these certificates to handlers who may redeem 
them as a method of complying with their restricted percentage 
obligation under volume regulation. By diverting cherries from 
production, growers can avoid the costs of harvesting and transporting 
fruit, reduce the supply, and mitigate the downward pressure on prices 
that result from oversupply.
    This action would only suspend the regulations that provide random 
row as a method of grower diversion. The other three options, whole 
lot, partial block, and in-orchard tank, would remain unchanged by this 
action. Random row is the least utilized of the grower diversion 
options, with the other three options accounting for 97 percent of 
diversion volume. Consequently, this change would bring the regulations 
in line with current industry preferences and practices. Further, the 
remaining grower diversion options offer the grower some flexibility to 
control quality, which in turn could increase grower returns. The 
effects of this rule are not expected to be disproportionately greater 
or less for small entities than for larger entities.
    One alternative action considered by the Board was to remove the 
regulations pertaining to random row diversion. However, the Board 
agreed that suspension would be the most appropriate action should the 
industry determine it would like to reinstate random row as a diversion 
option in the future. Thus, termination was rejected as an alternative.
    This rule would not impose any additional reporting or 
recordkeeping requirements on either small or large tart cherry 
handlers. As with all Federal marketing order programs, reports and 
forms are periodically reviewed to reduce information requirements and 
duplication by industry and public sector agencies.
    AMS is committed to complying with the E-Government Act, to promote 
the use of the Internet and other information technologies to provide 
increased opportunities for citizen access to Government information 
and services, and for other purposes.
    USDA has not identified any relevant Federal rules that duplicate, 
overlap or conflict with this proposed rule.
    In addition, the Board's meeting was widely publicized throughout 
the tart cherry industry and all interested persons were invited to 
attend the meeting and participate in Board deliberations on all 
issues. Like all Board meetings, the March 24, 2011, meeting was a 
public meeting and all entities, both large and small, were able to 
express views on this issue. Finally, interested persons are invited to 
submit comments on this proposed rule, including the regulatory and 
informational impacts of this action on small businesses.
    A small business guide on complying with fruit, vegetable, and 
specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/MarketingOrdersSmallBusinessGuide. Any questions 
about the compliance guide should be sent to Laurel May at the 
previously mentioned address in the FOR FURTHER INFORMATION CONTACT 
section.
    A ten-day comment period is provided to allow interested persons to 
respond to this proposal. Ten days is deemed appropriate because the 
2011-12 tart cherry crop harvest will begin in mid to late July 2011. 
Also, growers need to make their determinations as to grower diversion 
prior to harvest. Further, growers and handlers are aware of this 
action, which was unanimously recommended by the Board at a public 
meeting on March 24, 2011. All written comments timely received will be 
considered before a final determination is made on this matter.

List of Subjects in 7 CFR Part 930

    Marketing agreements, Reporting and recordkeeping requirements, 
Tart cherries.

    For the reasons set forth in the preamble, 7 CFR part 930 is 
proposed to be amended as follows:

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

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

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

Sec.  930.158  [Amended]

    2. In Sec.  930.158:
    A. Suspend paragraph (b)(1) indefinitely.
    B. In paragraph (c)(3), redesignate the first two sentences as 
paragraph (c)(3)(i) and the remaining sentences as paragraph 
(c)(3)(ii).
    C. Newly redesignated paragraph (c)(3)(ii) is suspended 
indefinitely.

    Dated: July 12, 2011.
Rayne Pegg,
Administrator, Agricultural Marketing Service.
[FR Doc. 2011-17883 Filed 7-15-11; 8:45 am]
BILLING CODE P
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