Federal Register / Vol. 65, No. 218 / Thursday, November 9, 2000 / Proposed Rules 67585

What are the next steps after the

recommended decision?

USDA will evaluate the exceptions

and, if it is decided to continue with the

proceeding, a Secretary’s Decision and

Referendum Order will be issued. A

producer referendum will be conducted

and will include all affected producers.

The referendum will be conducted by

mail ballot, and producers can vote on

each material issue presented. There are

seven material issues in this

recommended decision.

To become effective, the amendments

require approval of two-thirds of the

producers voting in the referendum or

approval by two-thirds of the volume of

production represented by the

producers voting in the referendum. If

the vote favors any or all of the

amendments, the Department prepares a

final order effectuating the amendments.

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. 134 and Marketing

Order No. 923, regulating the handling

of sweet cherries grown in designated

counties in Washington, (hereinafter

referred to as the order), and the

opportunity to file written exceptions

thereto.

This action 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 amendment of

Marketing Agreement No. 134 and

Order No. 923 is based on the record of

a public hearing held in Yakima,

Washington, on November 16, 1999.

Notice of this hearing was published in

the Federal Register on November 8,

1999. The notice of hearing contained

proposals submitted by the Committee

and the Department.

The Committee’s proposed

amendments would: Increase the

production area to cover the area in the

State of Washington east of the Cascade

Mountain Range, redefine the districts

currently established under the order

and allow for special purpose shipments

of cherries to packing operations outside

the production area; Increase

representation on the Committee by

adding an additional handler member;

Provide for late payment and interest

charges on delinquent assessments;

Authorize establishment of container

marking requirements; and Allow

prospective Committee members and

alternates to qualify for membership by

filing a single form.

Also, AMS proposed to establish a

limit on the number of consecutive

terms a person may serve as a member

on the Committee and to require that

continuance referenda be conducted on

a periodic basis to ascertain industry

support for the order.

At the conclusion of the hearing, the

Administrative Law Judge fixed January

20, 2000, as 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. None were filed.

Material Issues

The material issues of record

addressed in this decision are as

follows:

(1) Whether to increase the

production area to cover the area in the

State of Washington east of the Cascade

Mountain Range; to redefine the

districts established under the order;

and to authorize special purpose

shipments, with appropriate safeguards,

allowing movement of cherries to

packing facilities outside the production

area;

(2) Whether to increase representation

on the Committee by adding one

additional handler member;

(3) Whether to authorize the

Committee, with USDA approval, to

collect late payment and interest

charges on delinquent assessments;

(4) Whether to authorize the

Committee, with USDA approval, to

establish container marking

requirements;

(5) Whether to authorize Committee

nominees to qualify as a member or

alternate by filing a written acceptance

of willingness to serve prior to the

selection;

(6) Whether to establish a limit on the

number of consecutive terms a person

may serve as a member on the

Committee; and

(7) Whether to require that

continuance referenda be conducted on

a periodic basis to ascertain industry

support for the order.

Findings and Conclusions

The findings and conclusions on the

material issues, all of which are based

on evidence presented at the hearing

and the record thereof, are:

Material Issue Number 1

The definition of production area

under § 923.4 should be amended to

include the counties of Okanogan,

Chelan, Kittitas, Yakima, Klickitat in the

State of Washington and all of the

counties in Washington lying east

thereof and § 923.14 should be amended

to include the additional counties in the

two districts established under the

order. In addition, § 923.54 should be

amended to authorize special purpose

shipments, with appropriate safeguards,

allowing movement of cherries to

packing operations outside the

production area.

Currently, the production area

includes only the counties of Okanogan,

Chelan, Douglas, Grant, Yakima and

Benton in the State of Washington.

District 1 includes the counties of

Chelan, Okanogan, Douglas and Grant.

District 2 includes the counties of

Yakima and Benton. There are no

provisions in the current order that

authorize uninspected cherries to be

shipped outside the production area for

packing.

The marketing order was promulgated

in 1957. At that time, the primary

objective of the order was to provide

consumers with a uniform product so

that buyers were assured of quality. The

order has never been amended. Since

that time, many changes have occurred

in the sweet cherry industry. New areas

of production have developed and

marketing practices have changed. For

example, Franklin County is not

currently regulated under the marketing

order, but reports indicate that sweet

cherry trees have been planted in that

county in recent years. This is true in

other non-regulated counties as well. If

12 counties in the State of Washington

are producing cherries in significant

volume, and only 6 are regulated under

the order, inconsistencies in quality

could occur which could impact the

current high quality image of

Washington sweet cherries. The

proposed amendment intends to update

the order to reflect this change. The

proposed amendment also would

redefine the districts established under

the order to include the new counties in

the existing districts.

In addition, many of the cherries

grown in the counties proposed to be

added to the production area are

currently packed in Oregon. If the

production area is expanded to include

these counties, it is recommended that

sweet cherry shipments be authorized

outside the production area to these

packing facilities for preparing for

market. This would be done under the

special purpose authority contained in

§ 923.54 of the order. Grower/handlers

could deliver cherries to those Oregon

packing operations that agree to abide

by the marketing order requirements for

such cherries, including obtaining

inspections and paying assessments.

The Committee would establish

67586 Federal Register / Vol. 65, No. 218 / Thursday, November 9, 2000 / Proposed Rules

safeguards to ensure that marketing

order requirements are being met.

Expansion of Production Area

When the order was created in 1957,

sweet cherries were primarily grown in

only 6 counties in the State of

Washington. The 6 counties that are

currently regulated are Okanogan,

Chelan, Douglas, Grant, Benton and

Yakima. The 14 additional counties

proposed for inclusion are Kittitas,

Klickitat, Ferry, Stevens, Pend Oreille,

Lincoln, Spokane, Adams, Whitman,

Franklin, Walla Walla, Columbia,

Garfield and Asotin.

Cherry production has dramatically

increased in areas within the State of

Washington that are outside the current

production area. As more land has come

into irrigation and farmers look for

alternative crops to grow, sweet cherry

production is expected to continue to

increase in areas outside the current

production area.

The total production of sweet cherries

in Washington was reported by the

National Agricultural Statistics Service

(NASS), USDA to be 96,000 tons in 1998

and 95,000 tons in 1997. Production by

county is not available. However, NASS

does report production information by

Fruit Reporting Districts and this

information is available annually for

1993 through 1997.

The West Fruit Reporting District

produces a minimal amount of sweet

cherries (50 tons per year) and is not

proposed to be included in the order’s

production area. In addition to the low

level of production, testimony revealed

that, due to weather conditions, it

would be unlikely that cherries could be

commercially produced in significant

amounts west of the Cascade Mountain

Range in Washington. Average

production in this area is 50 tons per

year. Testimony indicated that excessive

rain causes serious quality problems

with sweet cherries, such as cracking.

Generally, weather conditions in eastern

Washington are more favorable for

growing sweet cherries, as well as other

horticultural crops.

The Mid-Columbia Fruit Reporting

District includes the counties of

Wahkiakum, Cowlitz, Clark, Skamania,

and Klickitat. These counties produced

an average of 1,550 tons during the 1993

though 1997 seasons. Only Klickitat

County would be included in the

proposed regulated area. The other four

counties are in the western part of the

State and have minimal sweet cherry

production and no potential for

significant production. These counties

not included in the proposed

production area have weather

conditions similar to the counties in the

West Fruit Reporting District.

The Wenatchee Fruit Reporting

District includes the counties of

Okanogan, Chelan, and Douglas. This is

one of the two biggest sweet cherry

producing districts with an average

production of 34,360 tons from 1993

through 1997. These three counties are

currently regulated under the federal

marketing order.

The Yakima Valley Fruit Reporting

District is the other large sweet cherry

producing district with an average

production of 35,830 tons from 1993

through 1997. Yakima County is

currently regulated, while Kittitas

County is proposed for inclusion in the

regulated area.

The Columbia Basin Fruit Reporting

District includes the counties of Grant,

Adams, and Franklin. Grant is currently

regulated under the federal marketing

order, while Adams and Franklin

counties are proposed additions to the

regulated area. The Columbia Basin

Fruit Reporting District averaged 3,410

tons annually over the past 5 seasons.

The Northeast Fruit Reporting District

is made-up of Ferry, Stevens, Pend

Oreille, Lincoln, and Spokane counties.

The average annual production from

this fruit-reporting district is 100 tons.

All of these counties would be included

in the proposed production area.

The Southeast Fruit Reporting District

is comprised of Whitman, Walla Walla,

Columbia, Garfield, and Asotin

counties. Average production from 1993

through 1997 for this fruit-reporting

district was 100 tons. Again, the

proposed production area would

include all of these counties.

Of the 14 counties that are proposed

to be added to the marketing order, 10

currently produce cherries (Franklin,

Klickitat, Walla Walla, Spokane,

Stevens, Asotin, Lincoln, Kittitas,

Adams, and Whitman). Production of

cherries is not shown for the counties of

Ferry, Pend Oreille, Columbia, and

Garfield.

Testimony indicated that it is likely

for these current non-producing

counties to produce cherries in the

future. One grower testified that there

are newly planted cherry orchards in

Pend Oreille, one of the counties

proposed to be in the expanded

production area, that currently lists no

commercial production. Testimony

indicated that these four counties with

no current statistics on cherry orchards,

could produce cherries in significant

volume in the future. The climatic

conditions in those counties have

potential for future growth. Additional

testimony revealed that cattle and wheat

farmers in these areas are looking for

alternative crops to enhance their

operations and cherries could be a

reasonable choice.

As discussed later in this decision,

the Committee considered various

alternatives and concluded that the

proposal it submitted on the expansion

of the production area is the most

reasonable alternative. The proposed

production area is the smallest regional

area, which is practicable, while

maintaining program effectiveness.

Testimony revealed that Washington

cherries have a very positive image to

buyers and consumers. When purchases

are made of Washington cherries, the

buyer does not necessarily know if the

cherries originate from counties under

the marketing order or not. If one county

ships an inferior cherry, the entire

state’s image could be impacted.

Testimony indicated that most of the

facilities that pack Washington cherries

(both those inside and outside the

production area) already pack to the

marketing order requirements. However,

without modifying the order, a greater

possibility exists for more cherries being

shipped of an inferior quality.

Testimony further indicated that a

grower’s success is partly based on the

quality of fruit delivered. As production

levels continue to increase, the value of

maintaining a high quality image will

assist growers from encountering

decreasing prices. The marketing order

assists all growers in that handlers

prepare their cherries to a certain

quality level, which helps to maintain

price levels.

Testimony was received at the hearing

on the costs associated with the

proposed amendments. The current

assessment of 75 cents per ton

comprises less than 1 percent of total

production costs. The 1999–2000 budget

for the Committee is $62,815, of which

$3,388 is earmarked for compliance

efforts. Testimony indicated that

increased compliance and

administrative costs necessary to

monitor this proposal would not be

significant. Testimony further indicated

that the annual assessment could even

be reduced due to additional cherries

being assessed with the expansion of the

production area. Testimony at the

hearing indicated that the benefits of

strengthening the market would

outweigh any increase in costs.

Adversely, if the production area is not

redefined, testimony indicated that the

Washington cherry image could be

harmed, as more and more areas are

growing cherries. In addition,

indications are that a large number of

non-bearing acres are coming into

production inside and outside the

current production area. Adding to the

Federal Register / Vol. 65, No. 218 / Thursday, November 9, 2000 / Proposed Rules 67587

increase in production are growers of

other crops, such as grain and apples,

looking for alternative crops to grow in

order to supplement incomes. Sweet

cherries are an option these growers

consider.

Applying grades and standards to the

new production areas should provide

benefits to producers. The grades and

standards allow small producers the

opportunity to develop a reputation for

producing and delivering a consistent,

high quality product. These grades and

standards provide incentives and

rewards for the production of high

quality product. In addition, the

establishment of uniform grades and

standards across all the production

areas provides a level field for

competition among both small and large

growers. Testimony indicated that as

production increases, quality issues

become more important. Production is

expected to increase in excess of

100,000 tons for the first time in the

industry’s future.

As an example of the impact

inconsistent quality can have on a

market, testimony was presented on the

Rainier cherry market. Although Rainier

cherries are included in the marketing

order, they were specifically exempt

from quality requirements until a few

years ago. Some handlers packed high

quality Rainier cherries and received a

premium price. When other growers and

handlers realized the acceptance of the

Rainier, various ranges of quality were

shipped in anticipation of receiving a

premium price. However, buyers

became reluctant to purchase Rainier

cherries due to inconsistent quality. The

Committee recommended minimum

quality requirements for Rainier cherries

which were established by regulation

under the order. Assurance of consistent

quality has resulted in the Rainier

cherry market becoming more stable,

and Rainiers are again considered a

premium product.

The Washington cherry market

distinguishes itself from competitors.

More product is available from

Washington than the other cherry

producing States. The Washington

cherry market is more diverse and

national in scope, and testimony

indicated that buyers have confidence

in Washington sweet cherries due to

consistent quality. Testimony revealed

that this distinction is a direct result of

the establishment of minimum quality

requirements under the marketing order.

Testimony was received from a

cooperative cherry handler that

represents 108 growers, 27 of which are

located in the proposed production area

(the balance are in the current

production area.) This handler testified

that his company has two packing

facilities, one inside the current

production area and one in the

proposed production area. It was this

handler’s position that its customers

and growers must have confidence in

their ability to pack a high quality

consistent product.

The witness testified that bringing all

his growers under the marketing order

would provide better returns for these

growers and help bolster the image of

the Washington sweet cherry. He stated

that implementation of these proposals

would level the playing field by

eliminating confusion and creating more

orderly marketing. This handler would

anticipate no significant additional costs

as his company already packs all

cherries received to the marketing

order’s minimum quality requirements.

It was this handler’s position that the

benefits would outweigh the costs to

cherry growers.

This handler stated that quality issues

are foremost to the industry and equate

to buyer confidence. Repeat business is

critical to the cooperative and any bad

perceptions could be detrimental to

future business. If all major cherry

producing counties were required to

maintain the same quality requirements,

consistency in quality would prevail.

With increasing levels of production in

Washington, other U.S. states and in

foreign countries, quality becomes more

and more important. Consumers view

Washington cherries as a premium

preferred product and this positive

image could suffer if quality is not

maintained.

When regulations are in place, all

cherries in the production area are

required to be inspected and certified as

meeting established requirements.

Testimony indicated that increased

costs associated with more cherries

being inspected would be offset by

consistent quality and a stable

marketplace. Inspection costs are

discussed in detail later in this

document.

Production has and continues to

increase. The increased production is

coming from the traditional growing

areas in addition to the new production

areas. The peak shipping week occurs

during the last week of June. With new

production and the plantings of lateseason varieties of sweet cherries, the

marketing window for shipping

Washington sweet cherries is expanding

into August.

Minimum quality and size standards

in the proposed production area would

maintain the integrity of the product so

that the commodity’s overall quality

image is not diminished by a low

quality sample. The principal objective

of a grading system is to make the

market work more efficiently. Minimum

quality and size requirements would

improve information between buyers

and sellers. Contracts could be made

based on grade specifications, and

buyers need not personally inspect each

lot of product. Standardization of

quality and size reduces uncertainty

between buyers and sellers, and this

helps reduce marketing costs. The goal

of an effective grading system is to

improve quality and size. Minimum

quality and size standards would help

ensure that substandard product does

not find its way to the market and

destroy consumer confidence and harm

producer returns. Cherries that do not

make the specified grade and size

requirements can be shipped to

processing outlets.

Record evidence supports expanding

the production area to include all

counties in the State of Washington east

of the Cascade Mountain Range.

Redefining Districts To Include

Expanded Production Area

For purposes of allocating Committee

membership, the production area is

divided into two geographic districts. If

the production area is expanded, it will

be necessary to incorporate the

additional counties into the districts

currently established under the order.

The Committee discussed dividing the

production area into three districts and

distributing the counties and

membership across these districts. The

Committee was concerned that this

would entail increasing Committee

membership by more than one handler

member as proposed and discussed in

Material Issue No. 2. The record

indicated that the Committee believed a

16 member Committee would be the

most effective. Therefore, it was decided

to distribute the new counties

proportionately between the two

existing districts. District 1 is currently

composed of the counties of Chelan,

Okanogan, Douglas and Grant. This

proposal adds the counties of Lincoln,

Spokane, Pend Oreille, Stevens and

Ferry. District 2 is currently composed

of the counties of Yakima and Benton.

This proposal adds the counties of

Kittitas, Klickitat, Adams, Franklin,

Walla Walla, Whitman, Columbia,

Garfield and Asotin.

The proposed District 1 encompasses

the northern part of the production area

and District 2 encompasses the southern

part. In 1997 production in proposed

District 1 was approximately 44,300

tons of sweet cherries and in proposed

District 2, 45,500 tons. In addition, the

tonnage packed in each proposed

district is about the same.

67588 Federal Register / Vol. 65, No. 218 / Thursday, November 9, 2000 / Proposed Rules

Record evidence supports redefining

the districts to incorporate the

additional counties into the currently

established districts in the order.

Authority To Deliver Cherries to

Packing Facilities Outside the

Production Area

The term ‘‘handle’’ under § 923.13

means to sell, consign, deliver, or

transport cherries or cause the sale,

consignment, delivery, or transportation

of cherries in the current of commerce

from any point within the production

area to any point outside. All cherries

‘‘handled’’ must meet marketing order

requirements, but the requirements can

be waived for special purpose

shipments which are defined in § 923.54

of the order. The Committee has

proposed adding as ‘‘special purpose

shipments’’ the authority to ship

cherries outside the production area for

grading or packing. The Committee has been discussing

amending the order for many years. In

1990, the subcommittee appointed to

study the expansion of the production

area, discussed expanding the

production area with producers located

outside the production area. Out of

these discussions, it was determined

that if the production area was

expanded, the authority to grade and

pack outside the production area was

also needed in order to allow many

growers in the proposed production area

to continue having their cherries packed

in Oregon. This would help avoid

financial hardships for these growers by

maintaining continuity in the packing of

their cherries.

A grower/handler from Oregon who

does pack Washington cherries testified

that some growers who are in the

proposed production area have always

had their cherries packed at plants

outside the production area. His

company has operated an orchard at

Dallesport, Washington for over 17 years

and has always packed the fruit in The

Dalles, Oregon. This witness testified

that much is invested in his facilities

and it would be an economic hardship

not to be able to pack and ship his fruit

at his own plant. This is a good example

of why the proposals for expansion of

the production area and shipments

outside the production area for packing

should be considered as one material

issue. This situation applies to many

other growers in Dallesport and White

Salmon, Washington. Expenses for

growers could be dramatically increased

if they are required to change their

packing facilities to those that are

farther from their orchards but in the

production area. The four closest

packing operations to Dallesport,

Washington are in The Dalles, Oregon.

The closest packing facility in

Washington to that growing area is in

Yakima, which is over 50 miles away. In addition to proximity to their

orchards, there are other reasons

growers select certain packing facilities.

Many growers select packers based on

the quality of pack, the packinghouse

image and/or whether or not the

packing facility is a cooperative. These

options for growers would be limited if

they were no longer able to have their

cherries packed in Oregon. There are approximately 75 packing

operations in the current production

area and two additional packing houses

in the proposed production area. There

are four packing operations in Oregon

that pack Washington cherries for

grower/handlers. Testimony indicated

that existing packing facilities in the

State of Washington could have

difficulty handling the volume of

Washington cherries if the production

continues to increase. The proposal to

allow shipments of Washington cherries

outside the production area for packing

would specifically address this issue.

This proposal would provide flexibility

in moving product in and out of the

marketing order production area while

ensuring that quality objectives are not

compromised. WSDA currently has an agreement

with the Oregon Department of

Agriculture covering the border area

between both states, namely in the

Bingen, Washington area, where the

Oregon Department of Agriculture

conducts inspections to Washington

standards and marketing order

specifications, using appropriate

Washington certificates. Testimony

indicated this agreement works well, as

it assists the industry in supplying

quality inspections in that area. Because of the agreement with the

Oregon Department of Agriculture, there

is assurance that any Washington

product that is inspected by the Oregon

Department of Agriculture is inspected

to Washington standards or to

Washington marketing order

requirements. There is documentation

that verifies product inspections and

this process has proven to be successful

in this area. Testimony indicated that

the inspection office does not envision

any oversight burden imposed by these

proposals that it cannot meet. Safeguard provisions are incorporated

into this proposal to ensure compliance

with the proposal to authorize

shipments outside the production area.

This would be done under the special

purpose shipment authority contained

in § 923.54 of the order. Grower/

handlers could deliver cherries to those

Oregon packing operations that agree to

abide by the marketing order

requirements for such cherries. The

Committee would establish additional

safeguards to ensure that marketing

order requirements are being met.

Although no specific procedures have

been developed as yet, such information

may include a requirement that packing

facilities that grade and pack cherries

outside the production area apply to the

Committee and provide pertinent

information necessary to safeguard

marketing order provisions. If a packing

facility does not abide by applicable

requirements, the committee can

rescind their agreement and Washington

cherries could not be delivered to that

facility.

The WSDA assists in monitoring for

compliance with the marketing order

and would continue to do so. The

WSDA provides the Committee with

copies of all Federal/State inspection

note sheets. If WSDA notifies the

Committee of a potential marketing

order violation, the Committee takes

steps to ensure compliance. Compliance

is currently not a problem with the

Committee.

The Committee proposal concerning

this part of the amendment was

designed to address this specific

situation involving the packing facilities

in Oregon. The proposed order language

states that authority for ‘‘shipments of

cherries for grading and packing to

specified locations outside the

production area’’ would be authorized.

The specified locations would include

the areas where these packing facilities

are located in Oregon across the

Washington border. This amendment is

intended to provide flexibility in

addressing the current situation of

expanding the production area and to

allow packing facilities currently being

used to pack Washington cherries to

continue to do so.

Record evidence supports authorizing

shipments, with appropriate safeguards,

outside the production area for packing.

Combining Expansion of Production

Area, Redefining Districts and

Shipments Outside the Production Area

as One Issue

Record evidence supports that the

proposals to expand the production

area, to redefine the districts and to

authorize shipments outside the

production area for packing be

considered as one votable issue in a

referendum. Evidence presented at the

hearing demonstrated that these

proposals are inextricably intertwined

and would cause confusion in the

referendum if not voted upon as a single

issue. The proposal to redefine the

districts to allocate the new counties

Federal Register / Vol. 65, No. 218 / Thursday, November 9, 2000 / Proposed Rules 67589

between the existing districts obviously

is only necessary if the production area

is expanded. Therefore, this proposal

should be combined with the proposal

to expand the production area.

Regarding combining the proposals on

the production area expansion and the

authority to authorize shipments of

uninspected cherries outside the

production area for packing, these

proposals are reliant on each other and

should be combined as one issue.

Failure for both aspects to pass in

referendum could result in hardships

for grower/handlers, especially those

grower/handlers who currently ship

their cherries to Oregon for packing.

There are grower/handlers in the

proposed production area whose

orchards are closer to packing plants in

Oregon than in Washington and who

currently ship their cherries to these

plants for packing.

The record supports these proposed

amendments. For the above reasons, the

proposal to amend § 923.4 Production

area by including the counties of

Okanogan, Chelan, Kittitas, Yakima,

Klickitat in the State of Washington and

all of the counties in Washington lying

east; the proposal to amend § 923.14

District by including the additional

counties under Districts 1 and 2; and the

proposal to amend § 923.54 Special

purpose shipments to authorize special

purpose shipments, with appropriate

safeguards, allowing movement of

cherries to packing operations outside

the production area should be voted on

in the referendum as one material issue.

Material Issue Number 2

Section 923.20 should be amended to

increase representation on the

Committee by adding one additional

handler member representing District 1.

In addition, § 923.20 should be

amended to provide equal grower

representation in each district.

The current 15-member Committee

consists of four grower members

representing District 1, six grower

members representing District 2, two

handler members representing District 1

and three handler members representing

District 2. All members have alternates.

District 1 includes the counties of

Chelan, Okanogan, Douglas, and Grant.

District 2 includes the counties of

Yakima and Benton. If the proposal to

expand the production area is

implemented, District 1 would include

the counties of Chelan, Okanogan,

Douglas, Grant, Lincoln, Spokane, Pend

Oreille, Stevens and Ferry. District 2

would include the counties of Kittitas,

Yakima, Klickitat, Benton, Adams,

Franklin, Walla Walla, Whitman,

Columbia, Garfield and Asotin.

The Committee believes that producer

representation in District 1 should

remain at 4 members and District 2

should remain at 6 members. A witness

testified that the amount of tonnage

produced is significantly greater in

District 2. However, significant

quantities of cherries produced in

District 2 are packed and graded in

District 1. It was estimated that total

product packed is nearly equal in both

districts. By adding one handler

member to District 1, both districts

would be equally represented by 3

handler members.

Record evidence supports increasing

the membership on the Committee by

one handler member. The Washington

sweet cherry industry is growing.

Bearing acres and production are

increasing and markets, including

exports, are expanding. Although the

Committee’s recommendation to

increase the number of Committee

members by one initially related to the

expansion of the production area, the

record testimony revealed that the

Committee would prefer to have an

additional handler member even if the

production area is not expanded.

Therefore, this material issue is not tied

to the expansion of the production area

and should be addressed and voted in

the referendum on its own merits.

Increasing representation on the

Committee would allow additional

input in Committee decisions. Having

equal handler representation for each

district is reasonable considering that

the volume handled is similar in each

district, whether or not the production

area is expanded.

The Committee discussed alternatives

to address appropriate representation

and districting should the production

area be expanded. The Committee

agreed that 16 members was an

appropriate number for the Committee

to be most effective while adequately

representing the expanded production

area. The alternatives are discussed in

more detail later in this document.

Further, an economic report

submitted as evidence at the hearing

does not support the proponents’

statement that the amount of tonnage

produced is significantly greater in

District 2. The report shows that under

the current districts, District 1 has

approximately 814 farms growing sweet

cherries on approximately 10,000 acres

of land. In District 2, approximately 621

farms produce sweet cherries on

approximately 9,141 acres of land.

In the proposed districts, District 1

would have approximately 870 farms

growing cherries on 10,074 acres.

District 2 would have approximately

753 farms that grow cherries on

approximately 11,560 acres of land.

Production figures show that in 1997,

production in proposed District 1 was

approximately 44,300 tons of sweet

cherries and in proposed District 2,

production was approximately 45,500

tons.

These statistics indicate that volume

of production between Districts 1 and 2

is not significantly different in the

current and proposed districts. Record

evidence revealed that District 2 has

slightly less growing acreage currently

than District 1 and would have slightly

more if the proposal to expand the

production area were adopted. Based on

record testimony, the Committee is

striving for handler representation based

on the volume of cherries handled in

each district. The record indicated that

the Committee intends that grower

representation be based on the volume

of production for each district. Since

statistics show that production in the

proposed districts would be relatively

the same, grower membership between

districts should be equal. Therefore, the

record supports modifying the current

representation of 4 growers for District

1 and 6 for District 2 to 5 grower

members and their respective

alternatives per district.

The marketing order provides the

authority to redefine the production

area districts and to reapportion the

representation of any district on the

Committee. The Committee may

recommend changes in district

representation if cherry production

within the districts and the production

area shifts. These changes can be

accomplished through informal

rulemaking.

Currently, 12 members are required to

make a quorum under the 15-member

Committee. Also, 9 concurring votes are

currently required to pass any

Committee action. A witness testified

that quorum and concurring voting

requirements were not discussed at

meetings when the issue to increase

membership was discussed. However,

the current quorum and voting numbers

would still be considered a ‘‘super’’

majority should the membership on the

Committee increase by one handler

member. The witness indicated that the

current requirements would be adequate

and no changes are being recommended

to the quorum and voting requirements.

Seemingly, record evidence suggests

increasing representation on the

Committee by one handler member and

providing for equal grower

representation in each district.

Material Issue Number 3

Section 923.41 should be amended to

add authority to require handlers to pay

67590 Federal Register / Vol. 65, No. 218 / Thursday, November 9, 2000 / Proposed Rules

late payment charges and/or interest on

late assessment payments in order to

encourage timely remittance of

assessments by handlers.

Currently, § 923.41 requires handlers

to pay to the Committee on demand

assessments on cherries received by the

handler. There is no provision for a late

payment or interest charge.

Record testimony revealed that most

handlers pay assessments promptly and

timely. However, the Committee’s

operating budget is relatively small and

late payments could be detrimental to

the operations of the Committee. Three

marketing orders are administered by

one manager and share expenses in

order to mitigate costs. The other

marketing orders are the Washington

Apricot marketing order (Marketing

Order No. 922) and the WashingtonOregon Fresh Prune marketing order

(Marketing Order No. 924). Assessments

collected under the sweet cherry order

represent 80 percent of the combined

budgets. For example, the 1999–2000

total annual budget for sweet cherries is

$62,815, while the two other program

budgets combined total $18,600.

Testimony indicated that even a few

hundred dollars in late assessments

could be detrimental to the

administration of the cherry program.

Testimony further indicated that

failure to incorporate a charge for late

payment of assessments would not be

equitable for handlers who pay on time.

These handlers would be financing

Committee operations while late paying

handlers would benefit from the

Committee programs.

Late payment and interest charges for

delinquent assessments would provide

an incentive for handlers to pay on time.

This would result in fewer funds

needed by the Committee for collection

activities. Also, the fees derived from

late payment and interest charges would

partially compensate the Committee for

its collection efforts.

The Committee envisions

implementing the specifics of the late

payment and/or interest charges through

informal rulemaking with the

Secretary’s approval. This would allow

the Committee to remain flexible with

the establishment of the interest and late

payment charge. The Committee

anticipates that the billing statements

would include a date at which time a

late payment charge of a specified

amount would be assessed. The

statement would advise the handler that

in addition to the late payment charge,

an interest payment of a certain percent

on the unpaid balance would be

assessed each month thereafter.

Testimony indicated that an example of

such charges would be similar to what

commercial businesses charge, such as a

$25 late fee, and a one and a half

percent per month charge on the unpaid

balance.

The Department agrees that

authorizing late payment and interest

charges would encourage prompt

payment and thereby, help ensure that

the Committee operates effectively. The

annual sweet cherry budget is small

enough that even a few handlers paying

late could disrupt Committee

operations.

Accordingly, record evidence

supports this aspect of the proposal.

However, in the proposed amendatory

language, a provision was included

stating ‘‘the Committee may also

recommend other methods of

assessment collection with the approval

of the Secretary.’’ Testimony revealed

that other methods of assessment

collection would be filing liens against

handlers for failure to pay assessments

or suing a handler in small claims court

for unpaid assessments.

There is no authority under the Act

allowing the Committee to file liens or

sue in small claims court for unpaid

assessments. Therefore, this provision

should not be included in the proposed

amendment.

Material Issue Number 4

Section 923.52 should be amended to

authorize the Committee to establish

container marking requirements.

Currently, the order provides the

authority to fix the size, capacity,

weight, dimensions, or pack of

containers that may be used to ship

fresh sweet cherries. The order does not

include authority to establish marking

requirements.

Testimony indicated that, in the

cherry industry, the customer dictates

specifications of products such as

quality, packaging and variety. The

quality, size, container and pack

requirements currently authorized

under the order address many of these

preferences. These provisions are used

by the Committee and modified with

industry changes and customer

preferences. They help to maintain a

positive image for Washington sweet

cherries and stimulate repeat business.

The proposal to add the authority to

implement marking requirements would

add an additional marketing tool for the

Committee to continue meeting

customer needs.

Washington sweet cherry bearing

acres are continually increasing, which

has resulted in increased production.

Since 1959, the production of sweet

cherries has increased by over 500

percent. Production levels are trending

toward 100,000 tons in the near future.

New national markets have developed

and exports now play an important role

in the marketing of sweet cherries.

Exports represented 40 percent of fresh

sweet cherry shipments in 1998. In

1998, exports increased 35 percent over

the 1997 levels, achieving a new high of

28,560 tons.

Testimony revealed that two

containers are primarily used in packing

sweet cherries currently. However, in

response to customer preferences, the

industry is moving to multiple

packaging and multiple varieties of

cherries. As packaging and varieties

become more diverse and production

continues to increase, container

markings are becoming increasingly

important.

In addition, product identification

and origination becomes increasingly

important as more and more sweet

cherries are shipped greater distances

nationally and to foreign markets.

Testimony indicated that many handlers

currently mark their containers to meet

customer needs. However, uniform

marking requirements would eliminate

confusion and ensure to customers that

they are receiving the products ordered.

Testimony indicated that marking

requirements that may be recommended

by the Committee are weights, growing

areas and State of origin.

For these reasons, the Committee

believes that it is becoming more

important to denote product origination

and varieties on packaging. Testimony

indicated that containers may need to be

marked more precisely in the future

than just stating ‘‘sweet cherries.’’

Uniform marking requirements would

provide additional consistency in

product identification. This proposal is

intended to provide that authority.

The proponents have recommended

establishing the authority for marking

requirements under the marketing order.

However, implementation of any

specific regulations would require a

recommendation by the Committee for

informal rulemaking. The Committee

wants to keep the order language

flexible enough so that the Committee

could adapt and modify marking

requirements with changing needs and

preferences of customers.

Testimony indicated that no

significant costs would be incurred if

this authority were implemented

because handlers already have the

equipment to mark containers.

Container markings are currently

accomplished by handlers on an

individual basis. The benefits of this

proposed amendment would be in the

form of uniform marking requirements

for Washington sweet cherries.

Federal Register / Vol. 65, No. 218 / Thursday, November 9, 2000 / Proposed Rules 67591

Although the Committee has not

developed a specific type of marking

that would be recommended, adding the

authority to establish marking

requirements in the future is reasonable.

The authority for uniform container

marking requirements would further

expand and complement the current

container and pack requirements

already being used. The Committee

would discuss any recommended

markings at meetings and vote on

support for a marking requirement.

Therefore, record evidence supports

adding authority for container marking

requirements to § 923.52.

Material Issue Number 5

Section 923.25 should be amended to

authorize Committee nominees to

qualify as a member or alternate by

filing a written acceptance of

willingness to serve prior to the

selection.

The Committee consists of 15

members, each of whom has an

alternate. Ten members are growers and

five are handlers. The term of office for

Committee members and alternates is

two years, beginning on April 1 and

ending on March 31. Members and

alternates serve in such capacities for

the term of office for which they were

selected and qualified until their

respective successors are selected and

have qualified.

Currently, Committee nominations are

made at the designated meetings where

elections are to be held. These meetings

are required to be held no later than

March 1 of each year. Elected nominees

for member and alternate positions are

required to furnish a background

statement, which is forwarded to the

Secretary along with a list of nominees.

After being notified of the selection by

the Secretary, the members and

alternates sign a written acceptance

indicating their willingness to serve on

the Committee.

The proposal would delete the

requirement that the selected member/

alternate file a written acceptance after

notification of selection and combine

the acceptance letter with the

background statement submitted prior

to the selection. The nominee would, in

effect, be indicating willingness to serve

on the Committee prior to being

selected.

Committee Form FV–23 is the

Background Statement form. This form

allows the Committee and Secretary to

determine a nominee’s eligibility to

serve on the Committee by requiring

information on the nominees’

experience in the sweet cherry industry.

The time required to complete this form

is estimated to be five minutes. When

nominated, the nominee completes this

form. If the nominees do not return

these forms promptly, delays can occur

in submitting the nominee’s names to

the Secretary for selection, which could

have a negative impact on the seating of

the Committee.

The Acceptance Letter, currently

signed after selection, merely requires a

signature from the person accepting the

appointment. Testimony indicated that

there is no advantage to waiting for this

form to be signed by the selectee.

The Committee believes that

combining these forms as one and

requiring submission at the time of

nomination would be more efficient

than the current method. Testimony

indicated that the nominee, in effect,

indicates willingness to serve on the

Committee by accepting the nomination

and completing the background

statement upon nomination. By

combining these forms into one and

requiring the information at the time of

nomination, the Committee and

Secretary know in advance that the

nominees are willing to serve on the

Committee if selected.

Testimony indicated that there is no

benefit in waiting for the nominee to

sign the Acceptance Letter after being

selected. No negative impacts are

anticipated from implementing this

proposal. However, the benefits are that

the nominees are only required to sign

and deliver one form. In addition, the

Committee could obtain all pertinent

information well ahead of the time for

seating of the new Committee, thereby

operating more efficiently.

The Department will submit the

modified form to the Office of

Management and Budget (OMB) for

approval. Current information collection

requirements for Part 923 are approved

by OMB under OMB number 0581–

0133.

Accordingly, record evidence

supports revising § 923.25 of the order.

Material Issue Number 6

Section 923.21 should be revised to

establish a limit on the number of

consecutive terms a person may serve

on the Committee. Currently, the term of

office of each member and alternate

member of the Committee is two 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 Department believes that all

marketing order programs should

consider tenure requirements for

committee membership as a part of any

amended order process. The Department

believes that this provision would

increase industry participation on the

Committee, provide for more diverse

membership, provide the Committee

with new perspectives and ideas, and

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 two years, the

Department is proposing that no

member serve more than three

consecutive two-year terms or a total of

six years. This proposal for a limitation

on tenure would not apply to alternates.

Once a member has served on the

Committee for three consecutive terms,

or six years, the member would sit out

for one year before being eligible to

serve as a member again. The member

could serve as an alternate during that

time.

Witnesses presented testimony in

opposition to this proposal. Although

the Committee agrees with the principal

that outreach efforts are important, the

application of tenure could be

problematic. Testimony indicated that

the sweet cherry producing area is

rather small in comparison to other fruit

and vegetable growing areas, and

finding growers willing to serve on the

Committee is difficult. In addition,

testimony further indicated that it is

counterproductive to require valuable

members to step down when the current

system is working well.

Regarding diversity, testimony

indicated that there are few diverse

individuals in the cherry industry and

limiting tenure on the Committee would

make it challenging to maintain a

diverse Committee membership and to

meet the Department’s diversity goals.

The Committee has difficulty getting

growers involved in Committee

operations. Many growers participate in

the nomination meetings, but few

volunteer to participate as members or

alternates. The Committee finds that the

industry members that do agree to serve

bring knowledge and experience to the

Committee that would be difficult to

replace.

Testimony indicated that the

Committee would continue outreach

efforts to encourage diverse

representation on the Committee. If the

proposal is implemented, the

Committee supports that tenure should

not apply to alternates.

The Department believes, and

experience with other marketing order

committees has demonstrated, that

tenure requirements for committee

membership increases participation,

67592 Federal Register / Vol. 65, No. 218 / Thursday, November 9, 2000 / Proposed Rules

provides for more diverse committees,

provides for different perspectives, and

increases the number of industry

members with Committee experience.

Therefore, record evidence supports

establishing tenure requirements for the

Committee.

Material Issue Number 7

Section 923.64 should be amended to

require that continuance referenda be

conducted every six years to ascertain

industry support for the order.

Currently, there is no provision in the

marketing order that provides for

periodic continuance referenda.

The Department 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 marketing

order program. Experience has shown

that programs need significant industry

support to operate effectively. Under

this proposal, the Department would

consider termination of the marketing

order if less than two-thirds of those

voting and less than two-thirds of the

volume represented in the referendum

favored continuance. This is the same as

that for issuance of an order. As with

tenure, 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.

Witnesses presented testimony in

opposition to this proposal. Testimony

indicated that the industry currently has

the ability to request a continuance

referendum at any time. The Committee

believes that requiring unnecessary

referenda is costly and of little value to

the industry or the Department. The

program has worked successfully since

1957 and growers have not been against

any major aspects of the order since that

time.

Testimony also indicated that

requiring a continuance referendum

every six years would further impede

participation on the Committee. Based

on record evidence, many industry

members believed that the process for

conducting continuance referenda is

similar to the marketing order

amendment process, in that a hearing

would be required.

Contrary to formal amendment

proceedings, continuance referenda do

not require a hearing. Most referenda are

conducted by mail. All growers in the

production area would be sent a ballot

and would be asked, not required, to

answer whether they support

continuance of the marketing order. The

growers then send the ballot back to the

Department. That is the extent of grower

responsibility in the continuance

referenda process. The Department

prepares the ballot, mails the ballots and

tallies and publishes the results. The

Committee office does assist the

Department in this process by providing

a list of growers eligible to vote in the

referendum.

The Department believes that

producers should have an opportunity

to periodically vote on whether the

marketing order should continue.

Accordingly, the record evidence

supports adding a requirement that such

referenda be conducted.

The Agricultural Marketing Service

also proposed to make such changes as

may be necessary to the order to

conform with any amendment that may

result from the hearing. The Department

has identified no necessary conforming

changes.

Small Business Considerations

Pursuant to the requirements set forth

in the Regulatory Flexibility Act (RFA),

the 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. Small

agricultural producers have been

defined by the Small Business

Administration (SBA) (13 CFR 121.201)

as those having annual receipts of less

than $500,000. 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 on

small businesses. The record indicates

that growers and handlers would not be

burdened by any additional regulatory

requirements, including those

pertaining to reporting and

recordkeeping as a result of these

proposed amendments.

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.

The record indicates that there are

approximately 75 handlers currently

regulated under Marketing Order No.

923. There are two additional packing

houses in the proposed production area

that would be considered handlers if the

production area is expanded. There are

four packing operations in Oregon that

pack Washington cherries for grower/

handlers. In addition, there are

approximately 1,400 cherry growers in

the current production area. There

would be approximately 200 additional

growers if the production area is

expanded as proposed.

In 1998, Washington produced 96,000

tons of sweet cherries. The average price

for fresh cherries in 1998 was $1,600 per

ton. This computes to approximate

revenues for the 1998 crop of

$153,600,000. The record indicated that

approximately 15 handlers handle the

majority of the crop and could be

classified as large businesses. Thus, a

majority of sweet cherry handlers could

be classified as small entities. The same

is estimated with regard to the packing

houses in Oregon.

Dividing total production from 1998

by the number of growers in the

proposed production area, the average

grower produces about 60 tons of

cherries annually. With an average price

of $1,600 per ton for 1998 sweet

cherries, average revenues would be

$96,000. Thus, it is reasonable to

conclude that most sweet cherry

growers are small entities.

Industry Background

Sweet cherries rank second to apples

as the most important fruit grown in

Washington, with a value of production

of $128.7 million. Washington growers

produced 96,000 tons of sweet cherries

in 1998, which is 46 percent of the

nation’s total.

The varieties of sweet cherries subject

to regulation under the order are: Bing,

Chelan, Lambert, Lapin, Rainier, and

Sweetheart. Shipping of these cherries

generally begins around June 15 and

usually ends around August 15. The

most active harvest period is from June

10 through July 20.

The order authorizes the use of grade,

size and container regulations for the

fresh shipment of sweet cherries from

the production area. The regulations,

specify certain size, maturity and pack

requirements. The current regulations

are based on Washington grade

standards and apply to specific

varieties. The purpose of these

regulations is to ensure the shipment of

high quality cherries. The order has

allowed the industry to develop the

reputation for shipping a quality

product, which has allowed producers

to ship and sell fruit in a more stable

marketplace.

Federal Register / Vol. 65, No. 218 / Thursday, November 9, 2000 / Proposed Rules 67593

Washington is the leading producer of

sweet cherries for fresh market sale.

Washington’s main competitors in

domestic fresh markets are California

and Oregon. From 1994 through 1998,

Washington produced an average of

55,600 tons per year. This represents 59

percent of the total sweet cherries

marketed fresh. California produced an

average of 20,460 tons per year and

Oregon produced 12,900 tons per year

from 1994 through 1998.

Sweet cherries are also grown in

Idaho, Montana and Utah, as well as

Michigan, New York and Pennsylvania.

Bearing acreage figures are not

published for the States of Idaho and

Montana. Utah’s production area totals

600 acres, and has been declining.

Bearing acreage figures are published for

Michigan, New York and Pennsylvania,

but the majority of sweet cherries grown

in those states are not sold in fresh

markets. The fruit in these States are

produced and marketed during the

summer months each year. While these

States compete with Washington,

Oregon and California in the marketing

of fresh sweet cherries, their production

is relatively small.

From 1964 through 1998, total U.S.

production of sweet cherries increased

332 percent and fresh utilization

increased 393 percent. This suggests

that fresh shipments have been growing

in importance, while the processing

sector has remained relatively stable.

Over the past five seasons, 66 percent of

Washington’s production moved into

fresh markets.

Over the last 30 years, prices between

the three primary growing States have

been very competitive. Prices in

California, Washington and Oregon have

averaged $1,166, $1,028 and $798 per

ton, respectively. California prices are

slightly higher than prices in

Washington or Oregon. One of the

reasons that California prices average

higher than Washington’s is that

California shipments begin in the early

part of May, when competition in the

fresh fruit market is limited.

Washington shipments do not start until

the middle of June. Early-season

shippers generally receive a premium

for their product on the fresh market.

Fresh prices for Washington sweet

cherries receive a premium over

processing sweet cherries. From 1969 to

1998, fresh prices have increased more

than 350 percent. Fresh cherry prices

were $350 per ton in 1969 and were as

high as $2,150 per ton in 1996. Prices

were $1,600 per ton in 1998.

While California growers receive

higher prices than Washington growers

on average, Washington’s value of

production is much greater than

California’s or Oregon’s. This is due to

higher yields and larger production

levels in Washington. This likely

indicates that Washington growers have

a comparative cost advantage over

California or Oregon growers. In 1998,

Washington reported its highest value of

fresh production, $113.6 million. This

compares to a 1998 value of fresh

production of $17.9 million for

California and $22.6 million for Oregon.

The value of fresh production has

increased more than 150 percent since

1991.

Exports play an important role in the

marketing of Washington sweet cherries.

With increasing bearing acres and

production levels trending toward

100,000 tons in the near future,

increasing levels of exports can be

anticipated. However, competition in

the export markets is expected to be

high. California continues to export a

large volume of their increasing

production. In addition, China is

estimated to have 25,000 acres of

cherries planted. Spain, Greece, Turkey,

Iran, Lebanon, Syria and some Eastern

European countries have also increased

production levels. These countries do

not import sweet cherries into the U.S.

Exports of fresh Washington sweet

cherries have been increasing, in

particular during the 1997 and 1998

seasons. Exports reached a high of

21,148 tons in 1997. In 1998, exports

increased 35 percent over the 1997

levels, achieving a new high of 28,560

tons.

Export markets demand a high quality

product. With a limited shelf life, these

fresh deliveries of sweet cherries require

a high quality product. The shipment of

low quality product could ruin years of

market development in an export

market. Grades and standards assure the

shipment of high quality fruit into

export markets, and small growers as

well as large growers will benefit.

Production Area and Shipments

Outside Production Area

When the marketing order was

created in 1957, sweet cherries were

primarily grown in only 6 counties in

the State of Washington. The 6 counties

that are currently regulated are

Okanogan, Chelan, Douglas, Grant,

Benton, and Yakima. The 14 additional

counties proposed for inclusion are

Kittitas, Klickitat, Ferry, Stevens, Pend

Oreille, Lincoln, Spokane, Adams,

Whitman, Franklin, Walla Walla,

Columbia, Garfield, and Asotin.

Cherry production has dramatically

increased in areas within the State of

Washington that are outside the current

production area. As more land has come

into irrigation and farmers look for

alternative crops to grow, sweet cherry

production is expected to increase in

areas outside the current production

area.

The proposed amendment to increase

the production area to cover the area in

the State of Washington east of the

Cascade Mountain Range, to redefine

the districts in order to include the

additional counties and to authorize

special purpose shipments, with

appropriate safeguards, allowing

movement of cherries to packing

operations outside the production area

would improve the effectiveness of the

marketing order by ensuring that the

major cherry producing counties in

Washington are covered under the

marketing order. In addition, including

counties with potential to produce

significant amounts of sweet cherries

would ensure that all major production

would be covered under the marketing

order in the future. The proposed

amendment would also benefit growers,

especially growers not currently

regulated under the order, by allowing

many of these growers to continue

shipping their cherries to Oregon for

packing.

The Committee has been discussing

amending the order in this regard for

many years. In 1990, a subcommittee

composed of small and large growers

and handlers was appointed to study

the expansion of the production area.

The Committee discussed expanding the

production area with producers located

outside the production area. Out of

these discussions, it was determined

that if the production area was

expanded, the authority to grade and

pack cherries outside the production

area was also needed in order to allow

growers in the proposed production area

to avoid financial hardships by

maintaining continuity in the packing of

their cherries.

In March 1998, the Committee

recommended numerous amendments

to the marketing order, including

covering the entire State of Washington

in the production area. In August 1999,

the Committee recommended modifying

the recommendation on the production

area proposal from regulating the entire

State to only including the eastern part

of the State.

Alternatives to the current proposal

on the expansion of the production area

were considered by the Committee.

These alternatives were: (1) Including

the entire State of Washington; (2)

including the States of Washington and

Oregon; and (3) including the States of

Washington, Oregon, Idaho and Utah.

Committee representatives

communicated with growers and

handlers in these regions. Public

67594 Federal Register / Vol. 65, No. 218 / Thursday, November 9, 2000 / Proposed Rules

meetings on the subject were publicized

in these growing areas and interested

parties were encouraged to attend.

Committee members also attended

grower meetings in these areas to

discuss expansion of the production

area.

Regarding including the entire State

of Washington, the Committee

determined that due to weather

conditions, it would be unlikely that

cherries could be commercially

produced in significant amounts west of

the Cascade Mountain Range in

Washington. Average production in this

area is 50 tons per year. Testimony

indicated that excessive rain causes

serious quality problems with sweet

cherries, such as cracking. Generally,

weather conditions in eastern

Washington are more favorable for

growing sweet cherries, as well as other

horticultural crops.

Representatives from Idaho and Utah

believed that their production and

marketing could be easily distinguished

and segregated from Washington and

Oregon production. In addition, it was

believed the Idaho and Utah sweet

cherry industry was not large enough to

make an impact on Washington

cherries. Statistical data presented at the

hearing on the volume of cherries

produced in Idaho and Utah supports

this belief.

Oregon’s sweet cherry industry

primarily borders the State of

Washington, but representatives from

Oregon believed their industry should

be kept separate from the Washington

industry. The record evidence revealed

that Oregon already has two

organizations that represent the interests

of sweet cherry growers, the Oregon

Sweet Cherry Commission and the

Wasco County Fruit and Produce

League. These organizations collect

assessments based on cherry

production. According to record

testimony, the Oregon growers did not

see the need to form another

organization to protect their interests. In

addition, testimony indicated that

Oregon growers did not want to become

a minor part of the Washington order.

An organization called the Northwest

Cherry Growers also represents the

States of Washington, Oregon, Idaho

and Utah. This group is responsible for

collecting assessments based on cherry

tonnage and directing promotion

programs for sweet cherries grown in

these four states.

Based on record evidence, the

Committee considered these various

alternatives and concluded that the

proposal it submitted on the expansion

of the production area is the most

reasonable alternative. The proposed

production area is the smallest regional

area, which is practicable, while

maintaining program effectiveness.

The record revealed that the average

cherry farm size in Washington ranges

from 3 or 4 acres to several hundred

acres. The average farm is

approximately 40 acres. According to

testimony, there are approximately 180

growers in the proposed production area

that are larger that the average farm.

Some farms in the proposed production

area, particularly in Franklin County,

are 50 to 200 acres. Although much of

this acreage is currently non-producing,

testimony indicated that the potential

exists for significant production. Unlike

the western part of the State where

significant production is not

anticipated, if those areas with

significant production potential are not

regulated, it could have a detrimental

impact on the favorable Washington

sweet cherry quality image.

Testimony was received at the hearing

on the costs associated with the

proposed amendments. This testimony

indicated that costs associated with this

proposal would be minor. The total

annual cost of production for a mature

orchard is $7,413.06 per acre. The

current assessment of 75 cents per ton

comprises less than 1 percent of total

production costs. Any increase in

assessments resulting from this

proposed amendment would not have a

significant negative financial impact on

growers or handlers. Testimony

indicated that the annual assessment

could even be reduced due to additional

cherries being assessed with the

expansion of the production area.

Applying grades and standards to the

new production areas should provide

benefits to small producers. The grades

and standards allow small producers the

opportunity to develop a reputation for

producing and delivering a consistent,

high quality product. These grades and

standards provide incentives and

rewards for the production of high

quality product. In addition, the

establishment of uniform grades and

standards across all the production

areas provides a level field for

competition among both small and large

growers. Testimony indicated that as

production increases, quality issues

become more important and production

is expected to increase in excess of

100,000 tons for the first time in the

industry’s history.

The 1999–2000 budget for the

Committee is $62,815, of which $3,388

is earmarked for compliance efforts.

Testimony indicated that increased

compliance and administrative costs

necessary to monitor this proposal

would not be significant. It was testified

that the benefits of strengthening the

market would outweigh any increase in

costs. Adversely, if the production area

is not redefined, testimony indicated

that the Washington cherry image could

be harmed, as more and more areas are

growing cherries. In addition,

indications are that a large number of

non-bearing acres are coming into

production inside and outside the

current production area. Adding to the

increase in production are growers of

other crops, such as grain and apples,

looking for alternative crops to grow in

order to supplement incomes. Sweet

cherries are an option these growers

consider.

The Washington cherry market

distinguishes itself from competitors.

More product is available from

Washington than the other cherry

producing States. The Washington

cherry market is more diverse and

national in scope, and testimony

indicated that buyers have confidence

in Washington sweet cherries due to

consistent quality. Testimony revealed

that this distinction is a direct result of

the establishment of minimum quality

requirements under the marketing order.

If the proposal to allow cherry

shipments outside the production area

for packing is implemented there are

safeguards in place to ensure that

minimum quality requirements are met.

If these facilities fail to abide by the

applicable requirements, the committee

can rescind their privileges and

Washington cherries could not be

delivered to that facility.

When regulations are in place, all

cherries in the production area are

required to be inspected and certified as

meeting established requirements. The

Washington State Department of

Agriculture’s Fruit and Vegetable

Inspection Program (WSDA),

headquartered in Olympia, Washington

collaborates with USDA–AMS, Fresh

Products Branch to provide inspection

to marketing order commodities in

Washington. WSDA’s district offices are

located in Yakima, Wenatchee and

Moses Lake. These main district offices

have area offices in strategic locations to

the various growing areas in the State.

WSDA employs approximately 150–160

full-time inspection staff throughout the

State. In addition, during peak harvest

periods, temporary inspectors are hired.

The WSDA operates on a user-fee

basis; no appropriated funds are

received. Inspection fees pay for the

program to operate. Except for random

inspections conducted on fruit stands to

comply with a cherry fruit fly

quarantine program, WSDA provides

inspections only upon request. The

applicant indicates to WSDA what type

Federal Register / Vol. 65, No. 218 / Thursday, November 9, 2000 / Proposed Rules 67595

of inspection is needed, such as

compliance with a marketing order.

The fees for cherry inspections are 21

cents per hundred weight or $23/hour,

whichever is greater, plus additional

charges for travel time and mileage. The

larger growers have individual

inspectors stationed at their warehouses

during the season. The time and mileage

charges are more frequently assessed to

the smaller grower/packer because of

the small volumes inspected and remote

locations. However, WSDA attempts to

mitigate costs, especially to small

growers and handlers. WSDA helps

smaller growers mitigate these costs by

meeting growers halfway between their

orchard and the inspection office or

WSDA authorizes the grower to bring

the product to the inspection office.

Individual shipments not exceeding

100 pounds in the aggregate are exempt

from the regulations, as well as cherries

for home use and cherries not intended

for re-sale. In addition, shipments for

consumption by charitable institutions,

for distribution by relief agencies or for

commercial processing into products are

exempt from regulation.

Testimony indicated that increased

costs associated with more cherries

being inspected in accordance with

marketing order requirements would be

offset by consistent quality and a stable

market place. In addition, most handlers

already pack their cherries and have

them inspected in accordance with

marketing order requirements,

regardless of whether the cherries are

grown inside or outside the current

production area.

Minimum quality and size standards

in the proposed production area would

maintain the integrity of the product so

that the commodity’s overall quality

image is not diminished by a low

quality sample. The principle objective

of a grading system is to make the

market work more efficiently. Minimum

quality and size requirements would

improve information between buyers

and sellers. Contracts could be made

based on grade specifications, and

buyers need not personally inspect each

lot of product. Standardization of

quality and size reduces uncertainty

between buyers and sellers, and this

helps reduce marketing costs. The goal

of an effective grading system is to

improve quality and size. Minimum

quality and size standards would help

ensure that substandard produce does

not find its way to the market and

destroy consumer confidence and harm

producer returns. Cherries that do not

meet the grade and size requirements

can be sold in the processed market.

In addition to proximity to their

orchards, there are other reasons

growers select certain packinghouses.

Many growers select handlers based on

the quality of pack, the packinghouse

image and/or whether or not the handler

is a cooperative. These options for

growers would be limited if they were

no longer able to have their cherries

packed in Oregon.

Testimony indicated that existing

packing facilities in the State of

Washington could have difficulty

handling the volume of Washington

cherries if the production continues to

increase. The proposal to allow

shipments of Washington cherries

outside the production area for packing

would specifically address this issue.

This proposal would provide flexibility

in moving product in and out of the

marketing order production area.

WSDA currently has an agreement

with the Oregon Department of

Agriculture covering the border area

between both states, namely in the

Bingen, Washington area, where Oregon

Department of Agriculture conducts the

inspections to Washington standards

and marketing order specifications.

Testimony indicated this agreement

works well, as it assists the WSDA in

supplying quality inspections in that

area. Testimony indicated that the

inspection office does not envision any

oversight burden imposed by these

proposals that it cannot meet. Safeguard

provisions are incorporated into this

proposal to ensure compliance with the

proposal to authorize shipments outside

the production area.

If the production area is expanded, it

would be necessary to incorporate the

additional counties regulated into the

districts currently established under the

order. The Committee discussed

dividing the production area into three

districts and distributing the counties

and membership across these districts.

The Committee was concerned that this

would entail increasing Committee

membership by more than one handler

member as proposed and discussed in

Material Issue No. 2. The record

indicated that the Committee believed a

16 member Committee would be the

most effective. Therefore, it was decided

to distribute the counties

proportionately among the two districts.

The proposed District 1 encompasses

the northern part of the production area

and District 2 encompasses the southern

part. In 1997 production in proposed

District 1 was approximately 44,300

tons of sweet cherries and in proposed

District 2, 45,500 tons. In addition, tons

packed in each proposed district is close

to equal. This distribution of counties

among the two districts would provide

for equal representation of handlers and

growers from each district.

Committee Representation

The proposed amendment to increase

representation on the Committee by

adding one additional handler member

would improve representation on the

Committee and allow the Committee to

function more efficiently.

Record evidence supports increasing

the membership on the Committee by

one handler member. The Washington

sweet cherry industry is growing.

Bearing acres and production are

increasing and markets, including

exports, are expanding. Although the

Committee’s recommendation to

increase the number of Committee

members by one initially related to the

expansion of the production area, the

record testimony revealed that the

Committee would prefer to have an

additional handler member even if the

production area is not expanded.

Increasing representation on the

Committee would allow additional

input in Committee decisions. Having

equal handler representation for each

district is reasonable considering that

the volume handled is similar in each

district, regardless if the production area

is expanded. Costs of adding an

additional member to the Committee

would be minimal.

In its deliberations, the Committee

discussed alternatives to address

appropriate representation and

districting should the production area

be expanded. One alternative was to

divide the area into three districts and

distribute membership proportionately

across these districts. This alternative

would have likely entailed increasing

membership by more than one. The

Committee was concerned that

increasing the number of members by

more than one would hinder the

decision-making capability of the

Committee. The Committee agreed that

16 members was an appropriate number

for the Committee to be most effective

while adequately representing the

expanded production area.

Late Payment and Interest Charges on

Delinquent Assessments

The proposed amendment to

authorize the Committee, with AMS

approval, to collect late payment and

interest charges on delinquent

assessments would encourage handlers

to pay their assessments on time.

Assessments not paid promptly add an

undue burden on the Committee

because the Committee has ongoing

projects and programs funded by

assessments that are functioning

throughout the year. The addition of

such a charge is consistent with

standard business practices. No costs

67596 Federal Register / Vol. 65, No. 218 / Thursday, November 9, 2000 / Proposed Rules

would be associated for handlers who

pay timely assessments.

Late payment and interest charges for

delinquent assessments would provide

an incentive for handlers to pay on time.

This would result in fewer funds

needed by the Committee for collection

activities. Also, the fees derived from

late payment and interest charges would

partially compensate the Committee for

its collection efforts.

Container Marking Requirements

The proposed amendment to

authorize the Committee, with AMS

approval, to establish container marking

requirements would further expand and

enhance the current container and pack

requirements already being used.

Uniform marking requirements would

assist in avoiding confusion in the

marketplace.

Testimony indicated that no

significant costs would be incurred if

this authority were implemented

because handlers already have the

equipment to mark containers.

Container markings are currently

accomplished by handlers, on an

individual basis. The benefits of this

proposed amendment would be in the

form of uniform marking requirements

for Washington sweet cherries.

Combining Forms Required by

Committee Nominees

The proposed amendment to

authorize Committee nominees to

qualify as a member or alternate by

filing a written acceptance of

willingness to serve prior to the

selection would allow the selection

process to take place in a more timely

fashion.

The proposal would delete the

requirement that the selected member/

alternate file a written acceptance after

notification of selection and combine

the acceptance letter with the

background statement submitted prior

to selection. The nominee would, in

effect, be indicating willingness to serve

on the Committee prior to being

selected.

Testimony indicated that there is no

benefit in waiting for the nominee to

sign the acceptance letter after being

selected. No negative impacts are

anticipated from implementing this

proposal. However, the benefits are that

the nominees are only required to sign

and deliver one form. In addition, the

Committee could obtain all pertinent

information well ahead of the time for

seating of the new Committee, thereby

operating more efficiently.

Committee Tenure Requirements

The proposed amendment to add

tenure requirements for Committee

members would allow more persons the

opportunity to serve as members on the

Committee. It would provide for more

diverse membership, provide the

Committee with new perspectives and

ideas, and increase the number of

individuals in the industry with

Committee experience. It is anticipated

that this proposed amendment would

not increase costs to small businesses.

Continuance Referenda

The proposed amendment to require

that continuance referenda be

conducted on a periodic basis to

ascertain industry support for the order

would allow growers the opportunity to

vote on whether to continue the

operation of the marketing order.

Although this proposed amendment

may generate minimal Committee costs

to assist in conducting the referenda,

there are no additional costs anticipated

for small businesses.

Paperwork Reduction Act

In accordance with the Paperwork

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

the reporting and recordkeeping

provisions that would be generated by

the proposed amendments would be

submitted to the Office of Management

and Budget (OMB). Specifically, if the

production area is expanded, the overall

burden of completion of all Committee

generated forms and reports could

increase due to additional handlers

being regulated, as well as additional

growers in the regulated area. Current

total burden hours are approximately 69

hours and only relate to referenda and

nominations. Sixty eight of these hours

relate to producer referenda. The other

hour covers time spent by Committee

members and alternates completing

membership forms. Adding an

additional 200 growers would increase

the overall burden for referenda

documentation by approximately one

hour. Adding an additional handler

member would increase the overall

burden to complete nomination forms

from 1.25 hours to 1.33 hours. The

documentation required to implement

the safeguard provisions for the four

packing facilities in Oregon are yet to be

established, but it is not anticipated that

the overall burden would be

dramatically increased. It is anticipated

an application form would be developed

for these packing operations. These

provisions and any additional

provisions modifying reporting and

recordkeeping burdens that generate

from these proposed amendments

would not be effective until receiving

OMB approval. Current information

collection requirements for Part 923 are

approved by OMB under OMB number

0581–0133. 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.

The Department has not identified

any relevant Federal rules that

duplicate, overlap or conflict with this

proposed rule. All of these amendments

are designed to enhance the

administration and functioning of the

marketing order to the benefit of the

industry.

While the implementation of these

requirements may impose some

additional costs on handlers, the costs

are minimal and uniform on all

handlers. Some of these costs may be

passed on to growers. However, these

costs would be offset by the benefits

derived by the operation of the

marketing order. In addition, the

meetings regarding these proposals as

well as the hearing date were widely

publicized throughout the Washington

sweet cherry production area and

proposed production area 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

able to express views on these issues.

The Committee itself is composed of 15

members, of whom five are handlers

and ten are producers. Finally,

interested persons are invited to submit

information on 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 the following web site:

http://www.ams.usda.gov/fv/

moab.html. Any questions about the

compliance guide should be sent to Jay

Guerber at the previously mentioned

address in the FOR FURTHER INFORMATION

CONTACT section.

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 2001 season

which begins April 1, 2001. All written

exceptions timely received will be

considered and a grower referendum

will be conducted before these

proposals are implemented.

Federal Register / Vol. 65, No. 218 / Thursday, November 9, 2000 / Proposed Rules 67597

Civil Justice Reform

The amendments 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 will not preempt any State

or local laws, regulations, or policies,

unless they present an irreconcilable

conflict with the amendments.

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.

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 hereby proposed to be

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 hereby proposed to be

amended, regulate the handling of sweet

cherries 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 hereby proposed to be

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; and

(4) All handling of sweet cherries

grown in the production area as defined

in the marketing agreement and order,

as hereby proposed to be amended, is in

the current of interstate or foreign

commerce or directly burdens,

obstructs, or affects such commerce.

List of Subjects in 7 CFR Part 923

Marketing agreements, Cherries,

Reporting and recordkeeping

requirements.

Recommended Amendment of the

Marketing Agreement and Order

For the reasons set out in the

preamble, 7 CFR part 923 is proposed to

be amended as follows:

PART 923—SWEET CHERRIES

GROWN IN DESIGNATED COUNTIES

IN WASHINGTON

1. The authority citation for 7 CFR

part 923 continues to read as follows:

Authority: 7 U.S.C. 601–674.

2. Revise § 923.4 to read as follows:

§ 923.4 Production area.

Production area means the counties of

Okanogan, Chelan, Kittitas, Yakima,

Klickitat in the State of Washington and

all of the counties in Washington lying

east thereof.

3. Amend § 923.14 by revising

paragraphs (a) and (b) to read as follows:

§ 923.14 District.

* * * * *

(a) District 1 shall include the

Counties of Chelan, Okanogan, Douglas,

Grant, Lincoln, Spokane, Pend Oreille,

Stevens, and Ferry.

(b) District 2 shall include the

counties of Kittitas, Yakima, Klickitat,

Benton, Adams, Franklin, Walla Walla,

Whitman, Columbia, Garfield and

Asotin.

§ 923.20 [Amended]

4. Amend § 923.20 as follows:

a. In the first sentence remove the

word ‘‘fifteen’’ and add the word

‘‘sixteen’’ in its place;

b. In the third and fourth sentences

remove the word ‘‘five’’ and add the

word ‘‘six’’ in its place;

c. In the fifth sentence, remove the

words ‘‘four’’ and ‘‘six’’ and add the

word ‘‘five’’ in their place; and

d. In the sixth sentence, remove the

word ‘‘two’’ and add the word ‘‘three’’

in its place.

5. Revise § 923.21 to read as follows:

§ 923.21 Term of office.

The term of office of each member

and alternate member of the committee

shall be for two years beginning April 1

and ending March 31. Members and

alternate members shall serve in such

capacities for the portion of the term of

office for which they are selected and

have qualified and until their respective

successors are selected and have

qualified. Committee members shall not

serve more than three consecutive

terms. Members who have served for

three consecutive terms must leave the

committee for at least one year before

becoming eligible to serve again.

6. Revise § 923.25 to read as follows:

§ 923.25 Acceptance.

Any person prior to selection as a

member or an alternate member of the

committee shall qualify by filing with

the Secretary a written acceptance of

willingness to serve on the committee.

7. Amend § 923.41 by adding a new

paragraph (c) to read as follows:

§ 923.41 Assessments.

* * * * *

(c) If a handler does not pay any

assessment within the time prescribed

by the committee, the assessment may

be subject to an interest or late payment

charge, or both, as may be established

by the Secretary as recommended by the

committee.

§ 923.52 [Amended]

8. In § 923.52, paragraph (a)(3) is

amended by adding the word

‘‘markings,’’ after the word

‘‘dimensions,’’.

9. Amend § 923.54 as follows

a. Remove the words ‘‘(including

shipments to facilitate the conduct of

marketing research and development

projects established pursuant to

§ 923.45),’’ in paragraph (b) and add a

new sentence at the end of the section;

and

b. Add a new sentence at the end of

paragraph (c) to read as follows:

§ 923.54 Special purpose shipments.

* * * * *

(b) * * * Specified purposes under

this section may include shipments of

cherries for grading or packing to

specified locations outside the

production area and shipments to

facilitate the conduct of marketing

research and development projects

established pursuant to § 923.45.

(c) * * * The committee may rescind

or deny to any packing facility the

special purpose shipment certificate if

proof satisfactory to the committee is

obtained that cherries shipped for the

purpose stated in this section were

67598 Federal Register / Vol. 65, No. 218 / Thursday, November 9, 2000 / Proposed Rules

handled contrary to the provisions of

this section.

10. Amend § 923.64 by adding a new

sentence at the beginning of paragraph

(c) to read as follows:

§ 923.64 Termination.

* * * * *

(c) The Secretary shall conduct a

referendum six years after the effective

date of this paragraph and every sixth

year thereafter to ascertain whether

continuance of this part is favored by

growers. * * *

* * * * *

Dated: November 2, 2000.

Kenneth C. Clayton,

Associate Administrator, Agricultural

Marketing Service.

[FR Doc. 00–28660 Filed 11–8–00; 8:45 am]

BILLING CODE 3410–02–P