60998 Federal Register / Vol. 62, No. 220 / Friday, November 14, 1997 / Rules and Regulations

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 46

[Docket Number FV97–355]

Revision to Part 46, Regulations Under

the Perishable Agricultural

Commodities Act (PACA)

AGENCY: Agricultural Marketing Service,

USDA.

ACTION: Final rule.

SUMMARY: The Department of

Agriculture (USDA) is revising the

regulations (other than Rules of

Practice) Under the Perishable

Agricultural Commodities Act (PACA or

Act) to establish that electronic

transmissions are ‘‘ordinary and usual

billing or invoice statements’’ within the

meaning of the PACA.

EFFECTIVE DATE: December 15, 1997.

FOR FURTHER INFORMATION CONTACT:

Charles W. Parrott, Assistant Chief,

PACA Branch, Room 2095-So. Bldg.,

Fruit and Vegetable Division, AMS,

USDA, 1400 Independence Avenue,

S.W.,Washington, D.C. 20250, Phone

(202) 720–4180.

SUPPLEMENTARY INFORMATION: This

regulation is issued under authority of

section 15 of the PACA (7 U.S.C. 499o).

Background

The PACA establishes a code of fair

trading practices covering the marketing

of fresh and frozen fruits and vegetables

in interstate and foreign commerce. It

protects growers, shippers, distributors,

and retailers dealing in those

commodities by prohibiting unfair and

fraudulent trade practices. Thus, the law

fosters an efficient nationwide

distribution system for fresh and frozen

fruits and vegetables, benefitting the

whole marketing chain from farmer to

consumer. The PACA provides for a

forum to adjudicate commercial

disputes in which USDA may award

damages against a licensee who fails to

meet contractual obligations in violation

of the Act. The law also imposes a

statutory trust on perishable agricultural

commodities received but not yet paid

for, products derived from those

commodities, and any receivables or

proceeds due from the sale of those

commodities or products thereof for the

benefit of unpaid suppliers or sellers.

USDA’s Agricultural Marketing Service

(AMS) administers and enforces the

PACA.

The PACA Amendments of 1995,

among other things, eliminated the

requirement for unpaid produce

suppliers to file trust notices with

USDA in order to preserve their trust

rights under the statutory trust

provision of the Act. Additionally, the

amendments to the PACA allow unpaid

sellers of fresh and frozen fruits and

vegetables to preserve trust benefits by

adding language to ‘‘ordinary and usual

billing or invoice statements’’ that

advises the buyer of the creditor’s

intention to preserve trust benefits. This

addition of language indicating the

intent to preserve trust benefits to bills

or invoices eliminates the need for a

trust creditor to provide any additional

notice to the debtor of the creditor’s

intention to preserve trust benefits.

However, the Act does not explicitly

declare that information transmitted in

the course of electronic transactions

would constitute ‘‘ordinary and usual

billing or invoice statements’’.

On January 15, 1997, the United Fresh

Fruit and Vegetable Association

(UFFVA), a produce industry trade

association based in Alexandria,

Virginia, petitioned AMS to adopt

regulations under the PACA to

recognize the use of Electronic Data

Interchange. Ten other produce industry

organizations joined the UFFVA on the

petition. The petitioners sought

clarification as to whether EDI

transactions are considered by AMS to

be ‘‘ordinary and usual billing or

invoice statements’’ within the meaning

of the 1995 PACA amendments. USDA

agreed with petitioners that a revision to

the regulations would eliminate any

uncertainty in this regard and would

ensure that licensees can use reasonable

technological advances while still

receiving appropriate trust protection

under the PACA.

Therefore, USDA proposed a change

in the PACA regulations to achieve this

end. The proposal was published in the

Federal Register on June 20, 1997 (62

FR 33574). The proposal contained a

definition for the term ‘‘ordinary and

usual billing or invoice statements’’ to

be added in section 46.46(a) as follows:

‘‘Ordinary and usual billing or invoice

statements’’ as used in section 5(c)(4) of the

Act and ‘‘invoice or other billing statement’’

as used in section 46.46(f)(3) mean

communications customarily used between

parties to a transaction in perishable

agricultural commodities in whatever form,

documentary or electronic, for billing or

invoicing purposes.

The proposed definition specifies that

‘‘ordinary and usual billing or invoice

statements’’ as used in the PACA and

‘‘invoice or other billing statement’’ as

used in section 46.46(f)(3) include both

paper documentation and electronic

transmissions customarily used between

a seller and a buyer for billing or

invoicing purposes. This change to the

regulations is very similar to the change

suggested in the UFFVA petition. The

30-day comment period on the proposed

rule closed on July 21, 1997.

Comments

USDA received comments on the

proposed rule from the American

Frozen Food Institute (AFFI), McLean,

Virginia; Western Growers Association,

Newport Beach, California; Driscoll’s

Strawberry Associates, Inc.,

Watsonville, California; and The Nunes

Company, Inc., Salinas, California. All

of the commentors supported USDA’s

proposal to amend the regulations to

establish that electronic transmissions

are ‘‘ordinary and usual billing or

invoice statements’’ within the meaning

of the PACA.

In its favorable comment, AFFI

suggested that in order to clarify and

strengthen the proposal, USDA should

confirm in the final rule that including

a statement on an electronic invoice or

other billing document that the sale is

subject to the provisions of the PACA

statutory trust will satisfy the notice

requirements under the statute. AFFI is

concerned that the statement preserving

trust benefits may not be recognized as

a standard data field on an electronic

document, and therefore may not be

received or read by the party to which

the information is being disclosed.

However, as we stated in the preamble

to the proposed rule, both parties to an

electronic transaction must agree to the

format of the information to be

transmitted and received in an

electronic transmission. USDA believes

that this agreement is the proper forum

for ensuring that the buyer receives

notice of trust preservation from the

seller in the electronic transmission.

The PACA requires that the seller give

notice to the buyer in order to preserve

its trust benefits. Therefore, a seller

engaged in electronic transactions must

ensure in the agreement with its buyer

that the buyer is receiving the trust

statement as part of the electronic

transmission. Otherwise, the seller is

responsible for finding other means of

giving notice to the buyer in order to

qualify for PACA trust protection.

Under these circumstances, USDA is

making no change to the final rule based

on this comment.

Executive Orders 12866 and 12988

This rule, issued under the Perishable

Agricultural Commodities Act (7 U.S.C.

499 et seq.), as amended, has been

determined to be not significant for the

purposes of Executive Order 12866.

This final rule has been reviewed

under Executive Order 12988, Civil

Justice Reform. This rule is not intended
Federal Register / Vol. 62, No. 220 / Friday, November 14, 1997 / Rules and Regulations 60999

to have retroactive effect. This final rule

will not preempt any State or local laws,

regulations, or policies, unless they

present an irreconcilable conflict with

this rule. There are no administrative

procedures which must be exhausted

prior to any judicial challenge to the

provisions of this rule.

Effects on Small Businesses

Pursuant to requirements set forth in

the Regulatory Flexibility Act (RFA) (5

U.S.C. 601 et seq.), USDA has

considered the economic impact of this

final rule on small entities. The purpose

of the RFA is to fit regulatory actions to

the scale of businesses subject to such

actions in order that small businesses

will not be unduly or disproportionately

burdened. Small agricultural service

firms have been defined by the Small

Business Administration (13 CFR

121.601) as those whose annual receipts

are less than $5,000,000. The PACA

requires all businesses that operate

subject to its provisions maintain a

license issued by USDA. There are

approximately 15,700 PACA licensees,

many of which may be classified as

small entities.

The revised regulations establish that

the electronic transmissions used in

perishable agricultural commodity

transactions are, in fact, ‘‘ordinary and

usual billing or invoice statements.’’

The use of electronic transactions is

voluntary, and the revised regulations

specifically provide companies an

electronic alternative to paper

documentation to give notice of intent

to preserve trust rights.

Accordingly, based on the

information in the above discussion,

AMS has determined that the provisions

of this rule would not have a significant

economic impact on a substantial

number of small entities.

Paperwork Reduction Act

In compliance with Office of

Management and Budget (OMB)

regulations (5 CFR part 1320) which

implement the Paperwork Reduction

Act of 1995 (Pub. L. 104–13), the

information collection and

recordkeeping requirements covered by

this rule were approved by OMB on

October 31, 1996, and expires on

October 31, 1999.

List of Subjects in 7 CFR Part 46

Agricultural commodities, Brokers,

Penalties, Reporting and record keeping

requirements.

For the reasons set forth in the

preamble, 7 CFR part 46 is amended as

follows:

PART 46—[AMENDED]

1. The authority citation for part 46

continues to read as follows:

Authority: Sec. 15, 46 Stat. 537; 7 U.S.C.

499o

2. In § 46.46, a new paragraph (a)(5)

is added to read as follows:

§ 46.46 Statutory trust.

* * * * *

(a) * * *

(5) ‘‘Ordinary and usual billing or

invoice statements’’ as used in section

5(c)(4) of the Act, and ‘‘invoice or other

billing statement’’ as used in

§ 46.46(f)(3), mean communications

customarily used between parties to a

transaction in perishable agricultural

commodities in whatever form,

documentary or electronic, for billing or

invoicing purposes.

Dated: November 7, 1997.

Robert C. Keeney,

Deputy Administrator, Fruit and Vegetable

Programs.

[FR Doc. 97–29926 Filed 11–13–97; 8:45 am]

BILLING CODE 3410–02–P

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 927

[Docket Nos. AO–99–A7; FV96–927–1]

Winter Pears Grown in Oregon,

Washington, and California; Order

Amending the Marketing Order

AGENCY: Agricultural Marketing Service,

USDA.

ACTION: Final rule.

SUMMARY: This final rule amends the

marketing agreement and order (order)

for winter pears grown in Oregon,

Washington, and California. The

amendments remove the State of

California from the order and make

related changes to provisions

concerning the production area,

districts, and establishment and

membership of the Committee. Another

amendment allows the use of

telecopiers or other electronic means in

Committee voting procedures. The

amendments will improve the

administration, operation and

functioning of the order.

EFFECTIVE DATE: November 17, 1997.

FOR FURTHER INFORMATION CONTACT:

Kathleen M. Finn, Marketing Specialist,

Marketing Order Administration

Branch, Fruit and Vegetable Division,

AMS, USDA, room 2523–S,

Washington, D.C. 20250–0200;

telephone: (202) 720–2491, or FAX (202)

720–5698; or Teresa Hutchinson,

Marketing Specialist, Northwest

Marketing Field Office, Marketing Order

Administration Branch, Fruit and

Vegetable Division, AMS, USDA, 1220

S.W. Third Avenue, room 369, Portland,

OR 97204–2807; telephone (509) 326–

2724 or FAX (509) 326–7440. Small

businesses may request information on

compliance with this regulation by

contacting: Jay Guerber, Marketing

Order Administration Branch, Fruit and

Vegetable Division, AMS, USDA, P.O.

Box 96456, room 2523–S, Washington,

DC 20090–6456; telephone (202) 720–

2491; Fax (202) 720–5698.

SUPPLEMENTARY INFORMATION: Prior

documents in this proceeding: Notice of

Hearing issued on June 24, 1996, and

published in the June 26, 1996, issue of

the Federal Register (61 FR 33047).

Recommended Decision and

Opportunity to File Written Exceptions

issued on June 9, 1997, and published

in the Federal Register on June 16, 1997

(62 FR 32548). Secretary’s Decision and

Referendum Order issued July 22, 1997,

and published in the Federal Register

on July 28, 1997 (62 FR 40310).

Preliminary Statement

This administrative action is governed

by the provisions of sections 556 and

557 of Title 5 of the United States Code

and, therefore, is excluded from the

requirements of Executive Order 12866.

This final rule has been reviewed

under Executive Order 12988, Civil

Justice Reform. This rule is not intended

to have retroactive effect. This rule will

not preempt any State or local laws,

regulations, or policies, unless they

present an irreconcilable conflict with

this rule.

The Act provides that administrative

proceedings must be exhausted before

parties may file suit in court. Under

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

handler subject to an order may file

with the Secretary 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 the Secretary 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 the Secretary’s ruling on the

petition, provided an action is filed not

later than 20 days after date of the entry

of the ruling.