20012 Federal Register / Vol. 63, No. 77 /Wednesday, April 22, 1998 /Rules and Regulations

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 930

[Docket No. FV97–930–4 FIR]

Tart Cherries Grown in the States of

Michigan, et al.; Temporary

Suspension of a Proviso for Exporting

Juice and Juice Concentrate;

Establishment of Rules and

Regulations Concerning Exemptions

From Certain Order Provisions; and

Establishment of Regulations for

Handler Diversion

AGENCY: Agricultural Marketing Service,

USDA.

ACTION: Final rule.

SUMMARY: The Department of

Agriculture (Department) is adopting, as

a final rule, with a change, the

provisions of an interim final rule

implementing provisions of the Federal

tart cherry marketing order (order) by

establishing regulations concerning

handler diversion, including diversion

credit for exempt uses, and by defining

certain terms relating to exemptions. In

addition, this rule temporarily suspends

language in a provision of the order

which results in allowing handlers to

receive diversion credit for exporting

juice and juice concentrate to eligible

countries for the 1997–98 crop year

only. Handlers handling cherries

harvested in a regulated district may

fulfill any restricted percentage

requirement when volume regulation is

in effect by diverting cherries or cherry

products rather than by placing them in

an inventory reserve.

EFFECTIVE DATE: May 22, 1998.

FOR FURTHER INFORMATION CONTACT:

Patricia A. Petrella or Kenneth G.

Johnson, Marketing Order

Administration Branch, F&V, AMS,

USDA, room 2525–S, P.O. Box 96456,

Washington, DC 20090–6456, telephone:

(202) 720–5053, Fax: (202) 720–5698.

Small businesses may request

information on compliance with this

regulation by contacting: Jay Guerber,

Marketing Order Administration

Branch, Fruit and Vegetable Programs,

AMS, USDA, P.O. Box 96456, room

2525–S, Washington, DC 20090–6456;

telephone (202) 720–2491; Fax: (202)

720–5698.

SUPPLEMENTARY INFORMATION: This rule

is issued under Marketing Agreement

and Order No. 930 (7 CFR part 930)

regulating the handling of tart cherries

grown in the States of Michigan, New

York, Pennsylvania, Oregon, Utah,

Washington, and Wisconsin, hereinafter

referred to as the ‘‘order.’’ This order is

effective under the Agricultural

Marketing Agreement Act of 1937, as

amended (7 U.S.C. 601–674), hereinafter

referred to as the ‘‘Act.’’

The Department of Agriculture

(Department) is issuing this rule in

conformance with Executive Order

12866.

This rule has been reviewed under

Executive Order 12988, Civil Justice

Reform. This rule is not intended to

have retroactive effect. This rule will

not preempt any State or local laws,

regulations, or policies, unless they

present an irreconcilable conflict with

this rule.

The Act provides that administrative

proceedings must be exhausted before

parties may file suit in court. Under

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

handler subject to an order may file

with the Secretary a petition stating that

the order, any provision of the order, or

any obligation imposed in connection

with the order is not in accordance with

law and request a modification of the

order or to be exempted therefrom. A

handler is afforded the opportunity for

a hearing on the petition. After the

hearing the Secretary would rule on the

petition. The Act provides that the

district court of the United States in any

district in which the handler is an

inhabitant, or has his or her principal

place of business, has jurisdiction to

review the Secretary’s ruling on the

petition, provided an action is filed not

later than 20 days after date of the entry

of the ruling. The tart cherry marketing order was

recently promulgated and the Cherry

Industry Administrative Board (Board)

met March 12–13, June 26–27, and

September 11–12, 1997, to establish,

and recommend to the Secretary, rules

and regulations to implement the order

authorities, and to consider volume

regulation for this crop year. On or

about July 1 of each crop year the Board

is required to review sales data,

inventory data, crop forecasts and

market conditions in order to establish

an optimum supply volume which is

then used in calculating a preliminary

free market tonnage percentage. In the

event that a restricted percentage is

recommended and imposed, handler

diversion is one method under the order

that handlers can utilize to meet

restricted percentage requirements. The

Board established and announced the

optimum supply level and preliminary

free and restricted percentages for the

1997–98 crop year as required by the

order. On September 11–12, 1997, the

Board reviewed its marketing policy and

previous recommendations, and

recommended a 55 percent final free

market tonnage and a restricted

percentage of 45 percent for this crop

year.

All handlers were notified of this

recommendation pursuant to § 930.50(h)

of the order. Pursuant to § 930.50, final

percentages for volume regulation are

required to be recommended to the

Secretary by September 15. Whenever it

is found by the Secretary that it would

be appropriate to set free market

tonnage and restricted percentages for

cherries acquired by handlers, volume

regulations would be issued through

informal rulemaking.

This rule establishes procedures for

handler diversion. Handler diversion is

authorized under § 930.59 of the order

and, when volume regulation is in

effect, handlers may fulfill restricted

percentage requirements by diverting

cherries or cherry products. Volume

regulation is intended to help the tart

cherry industry stabilize supplies and

prices in years of excess production.

The volume regulation provisions of the

order provide for a combination of

processor owned inventory reserves and

grower or handler diversion of excess

tart cherries. Reserve cherries may be

released for sale into commercial outlets

when the current crop is not expected

to fill demand. Under certain

circumstances, such cherries may also

be used for charity, experimental

purposes, nonhuman use, and other

approved purposes.

Section 930.59(b) of the order

provides for the designation of

allowable forms of handler diversion.

These include: uses exempt under

§ 930.62; contribution to a Board

approved food bank or other approved

charitable organization; acquisition of

grower diversion certificates that have

been issued in accordance with

§ 930.58; or other uses, including

diversion by destruction of the cherries

at the handler’s facilities.

A new § 930.159 is added to the rules

and regulations concerning handler

diversion. One method of diversion

available to handlers is by destruction of

cherries at the handler’s facility.

Disposal at the handler’s facility will

take place prior to placing the product

into the processing line. This is to

ensure that the product diverted is not

simply an undesirable by-product of

processing. Handlers electing to divert

cherries or cherry products must first

notify the Board and submit a plan for

approval. Such notification and plan

shall include an agreement that

diversion will take place under the

supervision of the USDA Processed

Products Inspection Service or Board

employee inspectors, and that the costs

of such supervision are to be paid by the

handler. USDA inspectors will
Federal Register / Vol. 63, No. 77 /Wednesday, April 22, 1998 /Rules and Regulations 20013

supervise diversion of cherry products

at the current hourly rate of $41.00,

which is subject to change, under

USDA’s inspection fee schedule (7 CFR

§ 54.42). Board employees will

supervise diversion at the same rate.

Diversion may also be accomplished by

handlers donating cherries to charitable

organizations, utilizing cherries in

exempt outlets, or redeeming grower

diversion certificates obtained from

growers who have diverted cherries by

non-harvest, and who have been issued

diversion certificates by the Board in

accordance with rules and regulations

governing the issuance of grower

diversion certificates in § 930.100.

Diversion by means other than

destruction of cherries at handlers’

facilities would also be subject to

supervision as found necessary by the

Board. Fees would be charged as

discussed above.

Once diversion is satisfactorily

accomplished, handlers will receive

diversion certificates stating the weight

of cherries diverted. Such diversion

certificates can be used to satisfy

handlers’ restricted percentage

obligations. Cherries and cherry

products which have been diverted

shall not be subject to assessment.

A handler will have one crop year to

fulfill the diversion plan which was

submitted and approved by the Board.

The details of the plan shall show,

among other things, the name and

address of the handler, the total product

processed at-plant, cherries diverted atplant, in-orchard diversion certificates

redeemed, and anticipated donations to

charitable outlets. A handler will also

have one crop year to dispose of

cherries or cherry products for exempt

uses approved by the Board, unless

granted a renewal. By February 5, 1998,

for the 1997 crop year only, and

November 1 for subsequent crop years,

each handler must submit on Board

Form No. 4 the details of how such

handler will satisfy the restricted

percentage obligation. The Board may

extend this date in individual cases

pursuant to a written request showing

good cause why the plan cannot be

provided by the due date. The

November 1 date corresponds with the

date that grower diversion certificates

are no longer valid (for the 1997–98

crop year this date is February 5, 1998).

Other reports detailing the inventory

reserve summary were also due by

February 5, 1998, for the 1997 crop year

only, and November 1 for subsequent

crop years. Any information obtained by

the Board which is of a confidential

and/or proprietary nature would be

protected from disclosure pursuant to

section 930.73 of the order.

Section 930.59(b) which specifies the

diversion options for handlers, includes

uses exempt under § 930.62. Section

930.62 provides that the Board, with the

approval of the Secretary, may exempt

from the provisions of §§ 930.41, 930.44,

930.51, 930.53, and 930.55 through

930.57 cherries which are diverted in

accordance with § 930.59, which are

used for new product and new market

development, which are used for

experimental purposes, or which are

used for any other purpose designated

by the Board, including cherries

processed into products for markets for

which less than 5 percent of the

preceding 5-year average production of

cherries were utilized. One such use

which may be designated as an exempt

use and granted diversion credit is the

exportation of cherries. Tart cherries

used for exempt purposes are not

subject to certain marketing order

provisions. These provisions include

assessment, quality control, volume

regulation, and reserve provisions.

For the purposes of the regulation

concerning exempt uses, the Board has

recommended that certain terms be

defined. Also, the Board recommended

that handlers who use cherries or cherry

products for approved exempt purposes

receive diversion credit pursuant to

section 930.59(b).

Thus, a new section 930.162 was

added to the rules and regulations

defining exempt use terms and

authorizing exemptions under the

marketing order. Terms defined include

new product development, new market

development, development of export

markets, and experimental purposes.

The first term defined is ‘‘new

product development.’’ New product

development includes the production or

processing of a tart cherry product using

a technique not presently being utilized

commercially in the tart cherry

industry. For example, a handler may

ask for an exemption for product such

as ground meat in combination with raw

tart cherries to form a leaner meat

product. The Board determined that

when a new product is commercially

viable, which is defined as the time

when total industry utilization for the

product exceeds 2 percent of the five

year average production of tart cherries,

the exemption shall terminate.

Therefore, the Board has recommended

that when the utilization of the product

exceeds 2 percent of the five year

average production, the product has

received consumer acceptance and

should no longer be eligible for a new

product development exemption.

The second term which is defined is

‘‘new market development.’’ Under the

definition, new market development

means the development of markets for

cherry products which are not

commercially established markets and

which are not competitive with

commercial outlets presently utilized by

the tart cherry industry. For example, a

handler may seek to establish sales of

cherry preserves to India or China,

currently undeveloped markets. The

Board determined that a new market

becomes commercially established

when the total industry utilization in

that market exceeds 2 percent of the five

year average production of tart cherries.

The third term which is defined is

‘‘development of export markets.’’ This

is defined as exports to countries other

than Canada, Mexico and Japan,

including the development of sales for

new or different tart cherry products or

the expansion of sales for existing tart

cherry products. An example of

development of sales for new or

different tart cherry products could be a

handler seeking to establish sales of

dried cherries in Germany, which is

primarily a hot pack market. Board

members and meeting participants

discussed the favorable export market

this season. Handlers have exports to

many countries, including Italy, France,

Belgium, Germany and the Netherlands

and have enjoyed a significant increase

in volume of exports into these

countries. Handlers have indicated that

exports of tart cherry products have

increased significantly over previous

years’ exports. Board members indicated

that last year’s exports totaled about 10

million pounds. This year, handlers are

expected to experience the largest

volume of exports on record, estimated

at up to 50 million pounds. Handlers

have been able to expand existing

export markets and establish new

markets for the future. Board members

also commented that hot pack product

(canned tart cherries) have been shipped

to export markets that have never

received such product before.

Contributing to their success is the

excellent quality of this year’s crop.

Growers and handlers have experienced

high quality fruit due to favorable

growing conditions for tart cherries this

season. This high quality fruit has

resulted in high quality products which

are very competitive in export markets.

The availability of such high quality

cherry products increases the likelihood

of maintaining such markets in future

seasons. Handlers also have experienced

a growth in IQF (Individually Quick

Frozen) sales in the export market this

season. If handlers are not able to use

this option, more product might be

destroyed to avoid the possibility of

processing and storage costs associated
20014 Federal Register / Vol. 63, No. 77 /Wednesday, April 22, 1998 /Rules and Regulations

with placing cherries into an inventory

reserve. Exports to Mexico, Canada, and

Japan are not included in this

exemption because, according to the

Board, tart cherry markets are well

established in those countries.

The fourth term which is defined is

‘‘experimental purposes.’’ Uses for

experimental purposes include

preliminary and/or developmental

activities, such as a handler working

with cereal companies to develop a

cereal using dried cherries. Such

experimental purposes should be

intended to result in new products, new

applications and/or new markets for

existing tart cherry products. Any

exemption for experimental purposes

shall be limited in scope, duration, and

volume which the applicant shall

specify at the time a request for

exemption is made. In no case shall an

exemption for experimental purposes

last longer than five years or exceed

100,000 pounds raw product equivalent

per handler of tart cherries during the

duration of the experiment. The Board

has recommended that the five year or

100,000 pound raw product equivalent

per handler limits are sufficient to

determine whether such cherries for

experimental purposes can be

developed into new products or uses.

To qualify for an exemption under

§ 930.62, a handler must apply to the

Board for a new exemption or for

renewal of an existing exemption by

November 1 for the next succeeding

year. Handlers should have applied for

an exemption through February 5, 1998,

for the 1997 crop year only, and by

November 1 for subsequent crop years.

These dates were changed from the

Board’s recommendation of June 1 in

order to provide handlers ample time to

harvest and assess their crop each year.

When applying to the Board for an

exemption, the handler must detail the

nature of the product or market, how it

differs from current, existing products

and/or markets and the estimated short

and long term sales volume for the

exemption. In addition, in order to

obtain diversion credit for cherries used

for exempt purposes, the application

must also contain an agreement that the

proposed exempt use diversion is to be

carried out under the supervision of the

Board, and that the cost of any such

supervision that is needed is to be paid

by the applicant. The fees for such

USDA or Board supervision, as

previously stated, will be the current

hourly rate of $41.00, which is subject

to change, under USDA’s inspection fee

schedule (7 CFR 54.42). The information

which is provided will allow Board staff

to assess the request for exemption and

render a determination concerning its

approval. Any information received by

the Board which is of a confidential

and/or proprietary nature would be

protected from disclosure pursuant to

§ 930.73 of the order.

The Board discussed providing

assistance to its staff with reviewing

applications pertaining to exemptions.

The Board recommended that a

subcommittee be formed to assist staff

members to ensure that exemptions are

properly reviewed and granted. The

Board suggested that a subcommittee of

three persons, which could include the

manager, a public member and one

industry member who is not on the

Board, be established. Handlers whose

requests for exemption or renewal of

exemption are denied would be able to

appeal such denial to the Deputy

Administrator, Fruit and Vegetable

Programs.

Each handler that is granted an

exemption must submit to the Board an

annual progress report, due May 1 of

each year. The progress report shall

include the results of the exemption

activity (comparison of intended

activity with actual activity) for the year

in its entirety, the volume of exempted

fruit, an analysis of the success of the

exemption program, and such other

information the Board may request.

As previously discussed, the Board

has recommended that exports to

countries other than Canada, Mexico,

and Japan be exempted pursuant to

§ 930.62. The Board has also

recommended that diversion credit be

granted for such exports. Handlers

wishing to receive diversion credit for

exports must provide to the Board onboard bill of lading documentation or

other documentation to verify export

before the Board will issue diversion

credit.

The Board will grant diversion credit

for exempted products after it has

received the necessary information

concerning the particular exemption

and when it is satisfied that the handler

requesting the diversion credit has

satisfied all the requirements relevant to

the exemption. The Board

recommended for the 1997 season (July

1, 1997 through June 30, 1998) only,

that handlers receive diversion credit

for up to one million pounds of

exempted products per handler for new

market development and new product

development. The Board believes this

will provide adequate flexibility for

individual handlers to obtain diversion

credit for exempt uses this season, but

recommended providing some

restriction on the absolute volume of

such allowable diversions until more

experience with the program has been

obtained. However, the one million

pound limit for exempted products per

handler does not apply to handlers

desiring to receive diversion credit for

exports. As stated previously, this is the

first season this program is in effect and

handlers have exported or contracted to

export tart cherry products. Some of

these handlers may have shipped in

excess of the one million pound limit.

Allowing full diversion credit for the

amount of product shipped abroad, will

prevent both growers and handlers from

incurring financial losses. The Board is

continuing to review the issue of what

limits to impose on exempted products.

Handlers desiring to receive diversion

credit for donations to charitable

organizations should follow the

requirements specified in the

regulations. For contributions to qualify

for diversion credit, the contributed

product should be marked clearly ‘‘NOT

FOR RESALE’’. The receiving

organization must be approved by the

Board as a qualified recipient of

contributions of tart cherry products.

Such organizations must be tax-exempt,

must not sell the donated products and

must be noncompetitive with other tart

cherry industry sales outlets. Once

products are donated to an organization,

the Board must receive satisfactory

documentation of the transaction.

Handlers should provide the Board with

information on how the product was

used and the volume of product used.

Handlers desiring to receive diversion

credit for cherries diverted under

§ 930.59, including uses exempt under

§ 930.62, but who fail to meet the terms

and conditions in the regulation for

such diversion would not receive

diversion credit for the cherries or

cherry products. Any cherries not

properly diverted in accordance with

Board Form No. 4 must be placed into

the handler’s secondary reserve if one

has been established or the primary

reserve if a secondary reserve has not

been established. The primary reserve is

the first reserve where handlers in

volume regulated districts can place tart

cherries or tart cherry products to hold

from primary markets in order to meet

restricted percentage obligations. The

primary reserve is limited to a capacity

of 50 million pounds. A secondary

reserve is established only after the

primary reserve has been filled to the 50

million pound capacity. The secondary

reserve is where the balance of reserve

cherries or cherry products are held.

There is no maximum capacity for the

secondary reserve. Both primary and

secondary reserves are operated at the

handler’s expense and no cherries can

be removed from the secondary reserve

until the primary reserve has been

depleted. Upon termination of an
Federal Register / Vol. 63, No. 77 /Wednesday, April 22, 1998 /Rules and Regulations 20015

exemption, any volume of tart cherry

products that were exempted from order

requirements but which were not

utilized should be placed into the

secondary inventory reserve if one has

been established, or into the primary

reserve. It is the handler’s responsibility

to fulfill the restricted percentage

obligations established by volume

regulation. A handler may fulfill the

restricted percentage obligation by

either transferring cherries from his/her

own inventory, purchasing additional

cherries or cherry products or obtaining

diversion certificates from other

handlers to meet such obligation.

In addition to the recommendation

already discussed, the Board, at its

March 1997 meeting, also recommended

that the Department modify the

optimum supply formula by deducting

exports from the calculation. The

Department is not proceeding with this

recommendation since the order

promulgation record indicates that

average sales should include sales to all

markets, including exports.

At its meeting in March 1997, when

discussing exports, the Board also

recommended that juice and juice

concentrate, to countries other than

Canada, Mexico, and Japan, receive

diversion credit. During the production

and processing of the crop, handlers

have exported, or have contracted to

export, tart cherry juice or juice

concentrate for this season. Many of

these exports were for the purpose of

expanding existing markets or

developing new markets. According to

the Board, if diversion credit is not

allowed for export juice or juice

concentrate, some of these handlers

could suffer substantial financial losses

since they would have to pack or

purchase additional cherries to place in

their inventory reserves or default on

contracts. These costs would likely be

passed on to growers. Therefore, the

Board recommended at its September

11–12, 1997, meeting that the proviso in

§ 930.59(b) of the order be suspended

for this year only and that diversion

credit for exports of juice and juice

concentrate be allowed for the 1997–

1998 crop year. The temporary

suspension of the proviso for the 1997–

98 crop year will allow handlers to

receive diversion credit for juice and

juice concentrate exported to countries

other than Canada, Mexico and Japan.

New export sales of juice and juice

concentrate this crop year are estimated

to be in the range of 4–7 million

pounds. While significant to the

handlers making such sales, traditional

sellers of juice and juice concentrate

products in established domestic and

export markets should not experience

any undue increase in competition. This

is because indications are that the bulk

of the new export sales of juice and

juice concentrate represent sales to new

markets or expansion of existing

markets. This suspension action is not

intended to establish a precedent for

future seasons. Its purpose is to correct

any misunderstandings that have

occurred in the industry about order

operations concerning juice and juice

concentrate, to prevent disorderly

marketing conditions and unnecessary

financial losses by handlers. Not

proceeding with the suspension this

season could result in disorderly

marketing in the domestic market, since,

in addition to the problems already

mentioned, juice and juice concentrate

intended for export would likely have to

be sold domestically. This situation will

be avoided in subsequent seasons since

handlers should be fully aware of the

order’s restrictions.

The Regulatory Flexibility Act and

Effects on Small Businesses

The Agricultural Marketing Service

(AMS) has considered the economic

impact of this action on small entities

and has prepared this final regulatory

flexibility analysis. The Regulatory

Flexibility Act (RFA) will allow AMS to

certify that regulations do not have a

significant economic impact on a

substantial number of small entities.

However, as a matter of general policy,

AMS’ Fruit and Vegetable Programs

(Programs) no longer opt for such

certification, but rather perform

regulatory flexibility analyses for any

rulemaking that would generate the

interest of a significant number of small

entities. Performing such analyses shifts

the Programs’ efforts from determining

whether regulatory flexibility analyses

are required to the consideration of

regulatory options and economic

impacts.

The purpose of the RFA is to fit

regulatory actions to the scale of

business subject to such actions in order

that small businesses will not be unduly

or disproportionately burdened.

Marketing orders issued pursuant to the

Act, and rules thereunder, are unique in

that they are brought about through

group action of essentially small entities

acting on their own behalf. Thus, both

statutes have small entity orientation

and compatibility.

There are approximately 40 handlers

of tart cherries who are subject to

regulation under the order and

approximately 1,220 producers of tart

cherries in the regulated area. Small

agricultural service firms, which

include handlers, have been defined by

the Small Business Administration (13

CFR 121.601) as those having annual

receipts of less than $5,000,000, and

small agricultural producers are defined

as those having annual receipts of less

than $500,000. The majority of handlers

and producers of tart cherries may be

classified as small entities.

Section 930.59 of the tart cherry

marketing order provides authority for

handler diversion. Handlers handling

cherries harvested in a regulated district

may fulfill any restricted percentage

requirements which may be in effect in

full or in part through diversion of

cherries or cherry products in a program

approved by the Board, rather than

placing cherries in an inventory reserve.

Handlers can divert by destruction of

the cherries at the handler’s facility,

making charitable donations, and using

cherries or cherry products for exempt

purposes, or by redeeming grower

diversion certificates obtained from

growers who have diverted cherries by

non-harvest, and who have been issued

diversion certificates by the Board. Once

diversion is satisfactorily accomplished,

handlers will receive a diversion

certificate stating the weight of cherries

diverted. Such diversion certificates can

be used to satisfy the handler’s

restricted percentage obligation. This

enables handlers to either place cherries

into an inventory reserve or select the

diversion option most advantageous to

their particular business operation.

Costs for supervision of such actions

will take place under the supervision of

the USDA Processed Products

Inspection Service or Board employee

inspectors, and that the costs of such

supervision is to be paid by the handler.

USDA inspectors will supervise

diversion of cherry products at the

current hourly rate of $41.00, which is

subject to change, under USDA’s

inspection fee schedule (7 CFR § 54.42).

Board employees will supervise

diversion at the same rate. Diversion

may also be accomplished by handlers

donating cherries to charitable

organizations, utilizing cherries in

exempt outlets, or redeeming grower

diversion certificates obtained from

growers who have diverted cherries by

non-harvest, and who have been issued

diversion certificates by the Board in

accordance with rules and regulations

governing the issuance of grower

diversion certificates in § 930.100.

Diversion by means other than

destruction of cherries at handlers’

facilities would also be subject to

supervision as found necessary by the

Board. Fees would be charged as

discussed above. Providing such options

allows handlers to minimize processing

and storage costs associated with
20016 Federal Register / Vol. 63, No. 77 /Wednesday, April 22, 1998 /Rules and Regulations

meeting restricted percentage

obligations. Such cost savings may also

be passed on to growers and consumers.

Thus, providing these options

accomplishes the purposes of the order

and the Act.

The Board also recommended

granting handlers diversion credit for

cherries used for exempt purposes

under § 930.62. Those purposes include

cherries used for new product

development, for the development of

export markets, for experimental

purposes, and the export of cherries and

cherry products, including juice or juice

concentrate, to approved countries.

In order to provide for juice and juice

concentrate as a diversion outlet, the

Board recommended that the proviso

under § 930.59(b) of the order be

suspended. Therefore, this rule

temporarily suspends language in the

proviso under § 930.59(b) of the order.

The suspension would temporarily

remove a prohibition against allowing

diversion credit for juice and juice

concentrate for this crop year only.

However, the Board would only grant

diversion credit for juice or juice

concentrate exported to eligible

countries. The Board recommended this

suspension be used to correct any

misunderstandings that have occurred

in the industry about order operations

concerning juice and juice concentrate,

to prevent disorderly marketing

conditions and unnecessary financial

losses by handlers.

The temporary suspension of the juice

and juice concentrate proviso was

discussed at the most recent Board

meeting. It was the Board’s view that if

the proviso is not suspended, affected

handlers will have to expend additional

funds to meet their restricted obligations

by placing products that they could

have sold in export markets into an

inventory reserve or at-plant divert. The

costs of these actions would likely be

passed on to growers.

New export sales of juice and juice

concentrate this crop year are estimated

to be in the range of 4–7 million

pounds. While significant to the

handlers making such sales, traditional

sellers of juice and juice concentrate

products in established domestic and

export markets should not experience

any undue increase in competition this

season. This is because indications are

that the bulk of the new export sales of

juice and juice concentrate represent

sales to new markets or expansion of

existing markets, rather than an increase

in competition among sellers for

previously developed markets. As

previously stated, handlers have

indicated that exports of tart cherry

products have increased significantly

over previous years’ exports. Board

members indicated that last year’s

exports totaled about 10 million

pounds. This year, handlers are

expected to experience the largest

volume of exports on record, estimated

at up to 50 million pounds. Handlers

have been able to expand existing

export markets and establish new

markets for the future. Board members

also commented that hot pack product

(canned tart cherries) have been shipped

to export markets that have never

received such product before.

Contributing to their success is the

excellent quality of this year’s crop.

Growers and handlers have experienced

high quality fruit due to favorable

growing conditions for tart cherries this

season. This high quality fruit has

resulted in high quality products which

are very competitive in export markets.

The availability of such high quality

cherry products increases the likelihood

of maintaining such markets in future

seasons. Not proceeding with the

suspension this season could result in

disorderly marketing in the domestic

market.

The impact of this rule would be

beneficial to growers and handlers.

Authorizing various diversion outlets

and allowing diversion credit for

exempt uses means handlers will not be

required to divert excess cherries at

their plants. Instead, fruit can be

processed into a usable form, thereby

promoting the development of new

products and the expansion of new

markets for tart cherries. Authorizing

exemptions for various uses of tart

cherries should also promote such

market development and expansion, as

well as making cherries available for

charitable purposes. Suspending an

order provision for this season only will

allow handlers to take advantage of

export markets and obtain diversion

credit for such exports, increasing the

utilization of this season’s crop and

grower and handler returns.

The Board considered alternatives to

these recommendations. With respect to

handler diversion and diversion credit

for exempt uses, if handlers who are

subject to volume regulation are unable

to receive diversion credit, they would

have to divert cherries by other means

or place cherries in an inventory reserve

which may not be desirable because of

storage costs. For example, the Board

discussed not granting handlers

diversion credit for at-plant diversion.

However, the Board felt that providing

such a diversion option increased

handler flexibility to process and pack

the best cherries available during a year

when volume regulation is in effect and

to reduce the costs of processing and

storing reserve cherries.

The Board also discussed not granting

exemptions, and diversion credit for

such exemptions, for exports to eligible

countries (including juice and juice

concentrate), other exempt uses, and

charitable donations. However, the

Board felt this would not be in the best

interest of the industry or the public. As

previously discussed, the Board

expressed that not allowing the export

and other exemptions would have a

detrimental effect on the market this

season if free and restricted percentages

are imposed. Without such exemptions

and diversion credits for export sales,

new market development and other

specified uses, about 50 million pounds

of cherries would not be removed from

the domestic market this season,

depressing grower returns for all

cherries. The marketing order was

designed to increase grower returns by

stabilizing supplies with demand as

well as stabilizing prices and creating a

more orderly and predictable marketing

environment. Expanding markets and

developing new products is key to

meeting this marketing order’s goals.

Not granting exemptions and

diversion credit for exports to countries

other than Canada, Mexico, and Japan

was also discussed at Board meetings.

However, the Board expressed that this

recommendation is very important to

creating stable conditions in the export

marketplace this season and would

encourage future market growth. The

Board further stated that such action

will improve returns to growers because

of the tremendous growth in the export

market this season.

This rule imposes certain reporting

and recordkeeping requirements on tart

cherry handlers. As with all Federal

marketing order programs, reports and

forms are periodically reviewed to

reduce information requirements and

duplication by industry and public

sectors. In addition, the Department has

not identified any relevant Federal rules

which duplicate, overlap or conflict

with this rule.

In compliance with Office of

Management and Budget (OMB)

regulations (5 CFR Part 1320) which

implement the Paperwork Reduction

Act of 1995 (Pub. L. 104–13), the

information collection and

recordkeeping requirements imposed by

the order have been previously

approved by OMB and assigned OMB

Number 0581–0177. This includes the

requirements contained in this

regulation (i.e. progress reports,

applications).

The components of the Handler

Reserve Plan and Final Pack Report
Federal Register / Vol. 63, No. 77 /Wednesday, April 22, 1998 /Rules and Regulations 20017

which handlers must submit to utilize

at-plant and exempt use diversion and

the requirements for other reports

related to handler diversion and

handlers meeting their restricted

percentage obligations (i.e., Inventory

Reserve Summary, Cherries Acquired

from Producers, Handler Reserve Plan

and Final Pack Report, and Inventory

Location Report) have received approval

by OMB. It was anticipated that as many

as 45 handlers might be regulated if

volume regulations are established.

Many reports are submitted a single

time each season, while some are

submitted more frequently. In addition,

the bulk of the information handlers

must report is obtained during the

normal course of their business

operations. It would take handlers

approximately 15 minutes per report to

complete for a total of 60 minutes per

handler and approximately 2,700

minutes annually for the estimated 45

handlers. As with all Federal marketing

order programs, reports and forms are

periodically reviewed to reduce

information requirements and

duplication by industry and public

sector agencies.

The Board’s meetings were publicized

throughout the tart cherry industry and

all interested persons were invited to

attend them and participate in Board

deliberations. Like all Board meetings,

the March, June, and September 1997,

meetings were public meetings and all

entities, both large and small, were able

to express their views on these issues.

The Board itself is composed of 18

members, of which 17 members are

growers and handlers and one

represents the public. Also, the Board

has a number of appointed committees

to review certain issues and make

recommendations. The Board’s

Diversion Subcommittee met on March

12, 1997, and discussed handler

diversion in detail. That meeting was

also a public meeting and both large and

small entities were able to participate

and express their views. A majority of

these entities expressed that, in their

opinion, the recommendations made by

the Board would have a positive impact

on both small and large entities. Finally,

interested persons were invited to

submit information on the regulatory

and informational impacts of the action

on small businesses.

The following discussion concerns

comments raised about the initial

regulatory flexibility analysis and

statements made therein. A comment

received from a tart cherry handler

stated that the text of the interim final

rule exhibits no detail of any analysis as

required by the RFA. The commenter

asserts that such analyses are required

and that this industry includes both

large and small entities. The commenter

also states that this interim final rule

should not be advanced as final until

such analysis is completed, documented

and published for comment. We

disagree with this comment. Both the

initial regulatory flexibility analysis

published in the January 6, 1998,

Federal Register (63 FR 399) and this

final regulatory flexibility analysis are

consistent with the provisions of the

RFA. Accordingly, we are of the view

that the Department has met the

requirements of the RFA. Further, the

comment offered no further explanation

for this assertion but did go on to

discuss part of the initial regulatory

flexibility analysis as it relates to both

large and small entities.

Second, the commenter stated that the

regulatory flexibility analysis lacked an

understanding that tart cherries

produced in, for instance, Oregon and

Washington are handled in a manner

that they become a high quality puree or

juice concentrate by intent. Tart cherries

produced in other parts of the

production area under the order enter

the stream of commerce generally in

another form. The commenter contends

that it is the sort outs or culls from these

other products that become puree and

juice concentrate and that these

products, puree and juice concentrate

made with these sort outs or culls, are

not equivalent commodities. The

commenter believes that allowing a oneyear period where these sort outs or

culls can receive diversion credit will

unfairly compete with someone else’s

primary market product. The

commenter went on to state that

prevention of this inequity was part of

the reason the order was written as it

was.

The Board made the recommendation

to suspend the juice and juice

concentrate provisions for one year

only. The Department allowed the

suspension of the juice and juice

concentrate provisions on the basis that

the bulk of the new export sales of juice

and juice concentrate would probably

represent sales to new markets or

expansion of existing markets. It was

expected that such shipments would not

be in direct competition with juice and

juice concentrate markets established by

Oregon and Washington handlers.

Present indications are that the bulk of

sales of juice and juice concentrate are

going to new export markets or are being

used for the expansion of existing

export markets and are thus not in

direct competition with existing markets

for juice and juice concentrate.

Third, the commenter disagreed with

a statement in the regulatory flexibility

analysis and was of the view that

meetings are not widely publicized in

advance and are not held in a location

central to the production area. Meetings

have been central only to those

producers and handlers in the Michigan

districts. The commenter stated that the

Board does a poor job of publicizing

Board meetings.

In regard to the commenter’s

statement, the Board also has to

consider the cost of travel for all Board

members since the Board pays travel

expenses for all of its members. The first

meetings held in December of 1996 and

throughout 1997 were attended by all

members and their alternates. A Board

recommendation was passed that the

start-up meetings be attended by the

alternates so they would be involved

and aware of Board activities. It would

have resulted in considerable expense to

the Board to hold the meetings outside

of Michigan since 16 members and

alternates are from the State of

Michigan. The Board realizes the time

spent in travel and has made a

commitment to hold the June marketing

policy meeting in Michigan and the

September marketing policy meeting in

a district outside of Michigan. The

Board is also committed to holding

meetings outside the Michigan districts

to allow producers and handlers to

attend the meetings and cut down on

travel time for those not located in

Michigan. In regard to the commenter’s

contention that the Board does a poor

job of publicizing Board and

subcommittee meetings, we disagree.

The Board has and will continue to take

appropriate action to provide the widest

possible notice of upcoming meetings to

all handlers and Board members and

alternate Board members. The Board

sends meeting notices to all Board

members and several tart cherry

industry organizations. In fact, the

Board is currently developing a

newsletter which will be distributed to

all growers and handlers of record to

further publicize upcoming Board

meetings.

An interim final rule concerning this

action was published in the Federal

Register on January 6, 1998. Copies of

the rule were mailed by the Board’s staff

to all Board members and cherry

handlers. In addition, the rule was made

available through the Internet by the

Office of the Federal Register. That rule

provided for a 30-day comment period

which ended February 5, 1998. Two

comments were received. One comment

was received from a tart cherry

association representing tart cherry

growers and processors in the State of

Oregon and the other from a handler.
20018 Federal Register / Vol. 63, No. 77 /Wednesday, April 22, 1998 /Rules and Regulations

The first commenter representing the

tart cherry association also commented

on the proposed rule published on

January 21, 1998, in the Federal

Register (63 FR 3048) that proposed

final free and restricted percentages for

the 1997–98 crop year. To the extent

that the comment addressed or

identified issues relating to the January

21, 1998, publication, that portion of the

comment will be discussed, as

appropriate, in the final action

concerning that document which will be

published separately from this action.

The first commenter stated that they

objected to the use of export markets for

disposal of tart cherries for exempt or

diversion purposes. The commenter

stated that the use of exports in this

manner will create a two-tiered pricing

system. Some exports have been

cheaply priced even though domestic

prices warrant a stronger approach. The

commenter states further that this will

draw down the domestic price, as well

as the export price for those cherries not

receiving diversion credit. The

commenter believes that if the domestic

market strengthens as a result of these

activities, the industry may become over

enthusiastic and begin planting and

create a worse oversupply in the future.

There must be well maintained

compliance to ensure that tart cherry

products exported and receive diversion

credit are not returned to the domestic

market.

In response to the commenter’s

statements, the Board has recommended

that exports to certain countries receive

diversion credit. The Board has

indicated exports have increased due to

the diversion credit option and short

supplies in other countries. The Board

will be able to analyze results of this

year’s activity to determine if such

program worked. The Board will

continue to monitor activities to ensure

that exported cherries are not

reexported into the domestic market.

The first commenter also commented

that the Department rule soon on the

identity and nature of CherrCo, Inc., a

new entity in the tart cherry industry, as

it relates to the marketing order. The

Department is continuing to work with

the Board on this issue. This issue will

be addressed separately.

Finally, the first commenter noted

that there is reference made to a limit

for diversion credit of 1 million pounds

of product per year. The commenter

further states that in the interim final

rule, the Board’s intent that there be no

limit on export credits at all needs to be

properly reflected. The regulatory text

inadvertently states that under

§ 930.159(f) that the one million pound

exemption limitation for diversion

credit does not apply to handlers

exporting juice or juice concentrate. The

one million pound limitation does not

apply to any exports, not just juice and

juice concentrate. The supplementary

information of the interim final rule

explains this limitation correctly.

Therefore, this final rule corrects this

error in the amendatory language as

suggested by the commenter.

Additionally, this commenter stated that

they agree with the comments submitted

by the second commenter discussed

below.

The second commenter raised ten

points in his comment, three of which

related to the initial regulatory

flexibility analysis and have been

discussed previously in this document.

First, the commenter stated that it is not

equitable that cherries which have been

authorized for diversion or exemption

from restrictions are excused from

assessment. All tonnage produced

should be subject to assessment. A

majority of the Board’s budget is

earmarked for compliance expenses.

The compliance costs are generated in

districts with the bulk of the diversions

and exemptions. Handlers and

producers in districts which are not

subject to tonnage restrictions should

not be penalized for maintaining

production at moderate levels.

The Board, after its initial 1997–98

crop year, is reviewing the order and

considering several amendment

proposals to assist the order to operate

more efficiently in future crop years.

One proposal the Board is considering

is that any cherries produced, which

would be those diverted or exempted,

be subject to assessments. Only those

cherries that are diverted at the orchard

would not be subject to assessments.

Secondly, the commenter stated that

it is not equitable that diversion credits

are issued in situations involving

exemption. Based on its category of use,

destruction or reserve, a cherry product

should qualify either as a diversion or

an exemption. The commenter asserted

the two terms are not synonymous and

stated that this confusion should be

clarified with a re-publication for

subsequent comment prior to the

interim final rule becoming truly final.

We disagree.

The terms used in this rule are not

used synonymously. These terms are

different because diversion credit is

provided to growers who voluntarily

divert their crop if such crop is of poor

quality due to hail damage or some

other climatic condition. Diversion

credit is provided to handlers if such

handlers, in order to meet their

restricted percentage obligations, when

volume regulations are implemented, by

placing cherries in a primary inventory

reserve or diverting cherries, or a

combination of both. Whereas, tart

cherries can be exempted from certain

order provisions if they are diverted in

accordance with the order by being used

for new products or new market

development or for experimental

purposes or other uses designated by the

Board. The Board has the authority to

grant diversion credit under § 930.59 for

products that are exempted under

§ 930.62. There is no reason to clarify

this authority under the order, since the

recommendations made by the Board

are clearly authorized under marketing

order provisions.

Thirdly, the commenter stated that

the Board should not be allowed to

deviate from the marketing order

authorities, even for a season, because

some participants in the industry did

not clearly understand what they could

and could not utilize as either

diversionary or exempted products. The

commenter further stated that it was

clear during the promulgation that the

order was to be very specific in the

authorities that would be granted to the

Board.

The Board may recommend

suspensions of the order or provisions

thereof. The Board felt that it would be

in the best interests of the industry to

suspend the order language with regard

to juice and juice concentrate. This is a

new order and difficult to administer in

its first year of operation. The Board’s

recommendation will be used to correct

any misunderstandings that have

occurred in the industry about order

operations concerning juice and juice

concentrate and allow the industry to

expand the export market for this

season. As explained in the rule this

suspension is for one year only.

Accordingly, no change is made to the

temporary suspension as a result of this

comment.

Fourth, the commenter stated that it is

simply untrue that interested parties

have an opportunity to provide input

concerning the recommendations of the

Board to the Secretary. The commenter

further stated that the record of Board

meetings will also show that not all

these recommendations were made

unanimously as stated in the rule.

Since the meetings are public,

interested persons have an opportunity

to provide input on these actions. Also,

during this informal rulemaking

process, comments are solicited. Most of

the actions discussed herein were

recommended unanimously by the

Board.

Fifth, the commenter stated that the

Board needs to have an approved

compliance plan prior to issuing supply
Federal Register / Vol. 63, No. 77 /Wednesday, April 22, 1998 /Rules and Regulations 20019

control regulations. The Board has

approved a compliance plan at its

January 29–30, 1998, meeting.

Sixth, the commenter believes it is a

particularly serious matter that the

Board appears to be functioning under

the control of CherrCo, Inc., a new

entity in the tart cherry industry. The

Department is continuing to work with

the Board on this issue. This issue will

be addressed separately.

Finally, the commenter urges the

Department to insist that the Board

randomly conduct unannounced

compliance inspections prior to next

harvest to insure that reserves are

maintained as certified and that

required documentation is maintained

properly by handlers.

The Board has the authority to inspect

reserves and audit handlers as required.

The Board will audit handlers, as

appropriate, to ensure that proper

inventory reserves are being maintained.

Accordingly, one change will be made

to the rule as proposed, based on the

comments received.

After consideration of all relevant

material presented, including the

Board’s recommendation, and other

information, it is found that finalizing

the interim final rule, with a change, as

published in the Federal Register (63

FR 399, January 6, 1998), will tend to

effectuate the declared policy of the Act.

It is also found that, for the 1997–98

crop year only, the proviso under

§ 930.59(b), which prohibits handlers

from receiving diversion credit for juice

and juice concentrate, should be

suspended since such proviso does not

tend to effectuate the declared policy of

the Act.

List of Subjects in 7 CFR Part 930

Cherries, Marketing agreements,

Reporting and recordkeeping

requirements.

For the reasons set forth in the

preamble, 7 CFR part 930 is amended as

follows:

PART 930—TART CHERRIES GROWN

IN THE STATES OF MICHIGAN, NEW

YORK, PENNSYLVANIA, OREGON,

UTAH, WASHINGTON, AND

WISCONSIN

Accordingly, the interim final rule

amending 7 CFR part 930 which was

published at 63 FR 399 on January 6,

1998, is adopted as a final rule with the

following change:

PART 930—TART CHERRIES GROWN

IN THE STATES OF MICHIGAN, NEW

YORK, PENNSYLVANIA, OREGON,

UTAH, WASHINGTON, AND

WISCONSIN

1. The authority citation for part 930

continues to read as follows:

Authority: 7 U.S.C. 601–674.

2. Paragraph (f) of § 930.159 is revised

to read as follows:

§ 930.159 Handler diversion.

* * * * *

(f) Exempt uses. To receive diversion

credit for cherries used for exempt

purposes, handlers must meet the terms

and conditions specified in § 930.162.

Each handler may receive diversion

credit for up to one million pounds of

exempted products each crop year,

except that, for the 1997 season only,

the one million pound exemption

limitation for diversion credit does not

apply to handlers exporting tart cherry

products.

Dated: April 16, 1998.

Robert C. Keeney,

Deputy Administrator, Fruit and Vegetable

Programs.

[FR Doc. 98–10659 Filed 4–21–98; 8:45 am]

BILLING CODE 3410–02–P

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 930

[Docket No. FV97–930–5 FIR]

Tart Cherries Grown in the States of

Michigan, New York, Pennsylvania,

Oregon, Utah, Washington, and

Wisconsin; Issuance of Grower

Diversion Certificates

AGENCY: Agricultural Marketing Service,

USDA.

ACTION: Final rule.

SUMMARY: The Department of

Agriculture (Department) is adopting, as

a final rule, with an appropriate

modification to reflect a change in a

certificate redemption date, an interim

final rule establishing terms and

conditions for the issuance of grower

diversion certificates by the Cherry

Industry Administrative Board (Board)

under the marketing order for tart

cherries. Handlers may use such

certificates in order to satisfy their

restricted percentage amounts when

volume regulations are issued by the

Secretary. Tart cherry handlers in

Oregon, Pennsylvania, Washington and

Wisconsin (Districts 5, 6, 8, and 9) are

not subject to volume regulation at this

time because these districts do not

currently produce adequate tonnage to

trigger such regulation under the order.

EFFECTIVE DATE: May 22, 1998.

FOR FURTHER INFORMATION CONTACT:

Patricia A. Petrella or Kenneth G.

Johnson, Marketing Order

Administration Branch, F&V, AMS,

USDA, room 2525–S, P.O. Box 96456,

Washington, DC 20090–6456, telephone:

(202) 720–2491, Fax: (202) 720–5698.

Small businesses may request

information on compliance with this

regulation by contacting: Jay Guerber,

Marketing Order Administration

Branch, Fruit and Vegetable Programs,

AMS, USDA, P.O. Box 96456, room

2525–S, Washington, DC 20090-6456;

telephone (202) 720–2491; Fax: (202)

720–5698.

SUPPLEMENTARY INFORMATION: This rule

is issued under Marketing Agreement

and Order No. 930 (7 CFR Part 930),

regulating the handling of tart cherries

grown in the States of Michigan, New

York, Pennsylvania, Oregon, Utah,

Washington, and Wisconsin, hereinafter

referred to as the ‘‘order.’’ This

marketing agreement and order are

effective under the Agricultural

Marketing Agreement Act of 1937, as

amended (7 U.S.C. 601–674), hereinafter

referred to as the ‘‘Act.’’

The Department is issuing this rule in

conformance with Executive Order

12866.

This rule has been reviewed under

Executive Order 12988, Civil Justice

Reform. Under the marketing order

provisions now in effect, preliminary

free and restricted percentages for tart

cherries acquired by handlers during the

1997 crop year were established by the

Board during its June 26–27, 1997,

meeting. Final free and restricted

percentages were recommended by the

Board to the Secretary during its

September 11–12, 1997, meeting and a

proposed rule setting the final free and

restricted percentages for the 1997–98

crop year at 55 percent and 45 percent,

respectively. Final action concerning

the final free and restricted percentages

is being published separately in the

Federal Register. This finalization of an

interim final rule provides for the

issuance of diversion certificates to

growers for cherries diverted during the

1997 crop year. This rule will not

preempt any State or local laws,

regulations, or policies, unless they

present an irreconcilable conflict with

this rule.

The Act provides that administrative

proceedings must be exhausted before

parties may file suit in court. Under

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

handler subject to an order may file