[Federal Register Volume 63, Number 77 (Wednesday, April 22, 1998)]
[Rules and Regulations]
[Pages 20019-20023]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-10658]


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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.

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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

[[Page 20020]]

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 will 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 the date of the entry of the ruling.
    This rule finalizes an interim final rule which provided for the 
issuance of diversion certificates to growers in volume regulated 
districts under the tart cherry marketing order for the 1997 crop year 
(July 1997 through June 1998). The order became effective September 25, 
1996, and the initial Board was appointed in December 1996. The Board 
held meetings in January, February, March and June 1997, to consider 
its start-up costs and establish rules and regulations to implement the 
order authorities. At its meetings, the Board unanimously recommended 
that the regulations be forwarded to the Department for appropriate 
action.
    In discussions, during its meetings, concerning volume regulation 
for the 1997 crop year, the Board considered guidelines and procedures 
for grower diversion. Growers in the States which would be subject to 
volume regulation were sent information about the Board's discussions 
and recommendations. A majority of the growers (approximately 700 out 
of 1,220) indicated interest in the diversion program, and in the 
districts which would be subject to volume regulation, a number of them 
voluntarily chose to divert cherries based on information disseminated 
by the Board concerning its deliberations and recommendations. The 
Board, during its meetings, continued considering various provisions of 
the order, such as those pertaining to optimum supply, and making 
recommendations which included recommended guidelines for grower 
diversion.
    The order in section 930.50 provides the method of establishing an 
optimum supply level of cherries for the crop year. The optimum supply 
consists of a free percentage amount which a handler may sell and a 
restricted percentage amount, when warranted, which will have to be 
withheld from the market. Based on the optimum supply level, the Board 
establishes preliminary free and restricted percentages. Preliminary 
percentages were established by the Board on July 2, 1997, pursuant to 
Section 930.50(b) of the order, using Department estimates of the 
upcoming crop. Preliminary free and restricted percentages of 66 and 34 
percent, respectively, were announced to the industry in accordance 
with section 930.50(h) of the order. No later than September 15, after 
harvest and processing of the crop have been completed, the Board is 
required to compute, and recommend to the Secretary, final free and 
restricted percentages based on actual crop amounts. After receiving 
the Board's recommendation, the Secretary designates the final free and 
restricted percentages through the informal rulemaking process if the 
Secretary finds that designating such percentages would tend to 
effectuate the declared policy of the Act. For this season, the 
proposed free and restricted percentages are 55 percent and 45 percent, 
respectively, as published in the January 21, 1998, Federal Register 
(63 FR 3048). A final action concerning the final free and restricted 
percentages is being published separately in the Federal Register. The 
difference between any final free market tonnage percentage designated 
by the Secretary and 100 percent would be the final restricted 
percentage. A handler can satisfy restricted percentage obligations 
established by regulation by holding restricted percentage cherries in 
an inventory reserve that the handler maintains, by redeeming grower 
diversion certificates, or by diverting cherries.
    Section 930.58 of the tart cherry marketing order provides 
authority for voluntary grower diversion. Growers can divert all or a 
portion of their cherries which otherwise, upon delivery to a handler, 
would become restricted percentage cherries. Growers may be issued 
diversion certificates by the Board stating the weight of cherries 
diverted. The grower may then present the certificate to a handler in 
lieu of actual cherries. The handler can apply the weight of cherries 
represented by the certificate against the handler's restricted 
percentage amount.
    The Board recommended rules and regulations specifying the 
guidelines for the grower diversion program. First, the Board 
recommended that any grower desiring to divert in the orchard would 
first need to apply to the Board. The application would include the 
name, address, phone number and a statement signed by the grower 
agreeing to abide by all the rules and regulations for diversion. In 
addition, the grower would be required to provide maps of such grower's 
orchard.
    The Board recommended two types of in-orchard diversion for the 
1997-98 crop year. These are random row diversion, in which orchard 
rows are randomly chosen by the Board, using a computer program, to be 
left unharvested, and whole block diversion, in which a whole definable 
orchard block is left unharvested. Trees below a certain age (in this 
rule, six years or less) would not qualify for diversion, since these 
trees are not yet in full production.
    The Board recommended that all grower diversion certificates must 
be redeemed with handlers by November 1. After November 1, grower 
diversion certificates would not be valid. It was intended that 
diversion certificates be used within the same crop year that they were 
issued, as if a crop had been produced. The November 1 date would allow 
handlers adequate time to meet their restricted percentage amounts 
after final percentages had been established. However, due to the fact 
this is a new program in its first year of operation, the November 1 
deadline was extended to February 5, 1998 (See the handler diversion 
regulation published January 6, 1998, 63 FR 399). A conforming 
modification is made in this rule by removing the reference to the 
November 1 deadline.
    The Board also recommended guidelines concerning random row and 
whole block diversion and compliance procedures for growers to follow 
under the grower diversion program.
    This crop year a number of growers voluntarily diverted cherries 
based on preliminary free and restricted percentages which had been 
announced by the Board and on recommendations concerning diversion 
which the Board made to the Secretary. One hundred twenty of them 
received diversion certificates. The interim rule and this finalization 
provides for the issuance of grower diversion certificates by the Board 
subject to certain specified terms and conditions. In order to receive 
a certificate, a grower must show, to the satisfaction of the Board, 
that cherries were in fact diverted. This may be accomplished in a 
number of ways. Information about the grower's production must be 
submitted to the Board. In addition, the grower must agree to allow the 
Board to confirm reported diversion figures by allowing a Board 
compliance officer to visit the grower's orchard.
    After obtaining the necessary information concerning diversion by a 
grower, the Board would issue a diversion certificate. The diversion

[[Page 20021]]

certificate would be issued for an amount equal to the estimated volume 
of cherries diverted by the grower.
    For random row diversion, such estimated volume is calculated by 
applying the percentage of the grower's production diverted to the 
actual average volume per acre of cherries produced and harvested. For 
example, Grower A farms 1,000 acres and elects to divert 20 percent of 
the harvestable acreage (200 acres). The grower harvests the remaining 
800 acres and obtains 6,400,000 pounds of cherries, which represents a 
yield per acre of 8,000 pounds. Such grower would receive a diversion 
certificate for 1,600,000 pounds of cherries (8,000 lbs multiplied by 
the 20 percent of the total acreage diverted; in this instance, 200 
acres).
    For whole block diversion, the weight of a harvested sample of 5 
percent of each block, provided by the grower, is used to calculate the 
total volume of diverted cherries to be credited on the diversion 
certificate. For example, Grower B farms 1,000 acres and elects to 
whole block divert a 200 acre block. If the 5 percent of the harvested 
trees in the block diverted yield 80,000 pounds of cherries, the grower 
receives a diversion certificate for 1,600,000 pounds (80,000 pounds 
divided by 5 percent (.05) yields 1,600,000 pounds). The rest of the 
block is unharvested.
    After receiving a certificate from the Board, the grower may offer 
the certificate to a handler to be redeemed. Based upon the 
recommendations of the Board, guidelines and procedures for grower 
diversion for 1998 and subsequent seasons will be established through 
another rulemaking action.

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) would 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 the small businesses 
will not be unduly or disproportionately burdened. Marketing orders 
issued pursuant to the Act, and the rules issued 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 1,220 producers of tart cherries in the 
production area and approximately 40 handlers subject to regulation 
under the marketing order. Small agricultural producers have been 
defined by the Small Business Administration (13 CFR 121.601) as those 
having annual receipts less than $500,000, and small agricultural 
service firms are defined as those whose annual receipts are less than 
$5,000,000. The majority of tart cherry producers and handlers may be 
classified as small entities.
    One comment was received concerning the regulatory flexibility 
analysis. The commenter argued that AMS has provided no economic 
analysis concerning the interim rule, did not consider any 
alternatives, and did not provide a pre-rule opportunity to comment. We 
disagree. An initial regulatory flexibility analysis was performed in 
the interim rule and alternatives considered were discussed. It was 
also explained why the rule was issued as an interim final.
    Section 930.58(b) authorizes the Board to issue diversion 
certificates to growers in volume regulated districts under the tart 
cherry marketing order if cherries are diverted according to terms and 
conditions specified in the order, or according to such other terms and 
conditions that the Board, with the approval of the Secretary, may 
establish. The tart cherry marketing order was promulgated on September 
25, 1996, and the Board met several times in 1997 to recommend rules 
and regulations to implement the order authorities. The Board is 
required under the order to review its marketing policy on or before 
July 1 and then make recommendations to the Secretary for volume 
regulation, if such regulation is deemed necessary. The Board met June 
26-27, 1997, 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. 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 final 
free market tonnage and restricted tonnage percentages of 55 and 45 
percent, respectively. A proposed rule setting these percentages for 
the 1997-98 crop year was published in the Federal Register on January 
21, 1998, (63 FR 3048). Final action concerning the final free and 
restricted percentage is being published separately in the Federal 
Register.
    The impact of this rule is beneficial to growers. Grower diversion 
is one of the methods under the order that a handler can utilize to 
meet any such handler's restricted percentage. Growers may voluntarily 
choose to divert because they have cherries that do not meet expected 
quality standards, or because they are unable to find a processor 
willing to process some or all of their cherries. Before choosing to 
divert, the grower will most likely evaluate the harvesting and other 
cultural costs that will be saved by diverting and locate a handler 
that will be willing to redeem such grower's diversion certificate.
    The Board discussed alternatives to its recommendation to issue 
grower diversion certificates for the 1997 crop year. The Board 
considered not issuing grower diversion certificates for the 1997 crop 
year but believed this action would serve the economic interests of 
both growers and handlers.
    The Board also discussed limiting the blocks to be diverted to no 
less than 5 acre blocks, but felt that this would have an adverse 
impact on small growers that produce on less than 5 acre blocks. 
Therefore, the Board recommended not restricting the size of orchard 
blocks which could be diverted.
    This rule does not contain any reporting or recordkeeping 
requirements in addition to those already considered or approved during 
the order promulgation proceeding. The only written information 
requested from a grower choosing to divert cherries for 1997 is an 
orchard map and the grower's final production volume. Since growers 
maintain this information as part of their normal farming operations, 
it takes approximately 10 minutes to prepare a map and less than a 
minute to total the final production volume.
    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 have been previously approved by OMB and 
assigned OMB Number 0581-0177.
    As with all Federal marketing order programs, reports and forms are

[[Page 20022]]

periodically reviewed to reduce information requirements and 
duplication by industry and public sectors. In addition, the Department 
has not identified any relevant Federal rules that duplicate, overlap 
or conflict with this rule.
    The Board's meetings were widely publicized throughout the tart 
cherry industry and all interested persons were invited to attend the 
meetings and participate in Board deliberations. All Board meetings 
were open to the public 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 
to the Board.
    An interim final rule concerning this action was issued by the 
Department on August 18, 1997, and published in the Federal Register 
(62 FR 44881) on August 25, 1997. Copies of the rule were mailed by the 
Board's staff to all Board members, and tart cherry handlers. Finally, 
the rule was made available through the Internet by the Office of the 
Federal Register.
    A 30-day comment period was provided to allow interested persons to 
respond to the interim final rule. One comment from a person 
representing an industry organization was received during the comment 
period in response to the rule.
    In addition to that portion of the comment concerning the 
regulatory flexibility analysis, the commenter raised a variety of 
issues concerning and complaining about this rulemaking and the tart 
cherry program. We disagree with this comment. This rulemaking action 
is consistent with the Agricultural Marketing Agreement Act of 1937 and 
the tart cherry marketing order and other applicable law.
    First, the commenter stated that the interim final rule violates 
the Administrative Procedure Act. The commenter stated that the Board 
recommended the proposal several months prior to the issuance of the 
rule, and the issuance is well after harvest. The commenter further 
stated that the Agricultural Marketing Service (AMS) based its decision 
making on this rule on additional information that AMS has kept secret, 
and that AMS has not demonstrated ``good cause'' for its failure to 
provide a 30 day delayed effective date.
    The Board has worked diligently along with USDA in discussing and 
formulating rules and regulations to implement authorities under this 
new marketing order. It met January, February, March, June, and 
September of 1997, and recommended rulemaking actions at various 
meetings. However, since this is a new program, these recommendations 
needed to be discussed at more than one meeting, and in some instances, 
modified. Growers were aware of the procedures being recommended for 
participation in a grower diversion program. As a result, many of them 
were voluntarily diverting cherries with the anticipation that rules 
would be forthcoming and that they would be able to obtain diversion 
certificates. An interim final rule with an opportunity for comment 
(30-day comment period) was issued. The comments have been reviewed and 
are addressed in this rulemaking. With regard to the comment regarding 
``secret'' information, there is no basis for such statement. AMS has, 
and will continue to conduct the tart cherry program as it does for all 
other marketing order programs with required and appropriate public 
promulgation. AMS considers all relevant information which may have a 
bearing on the tart cherry marketing order program conducted under the 
authority of the Agricultural Marketing Agreement Act of 1937.
    Second, the commenter objected to the November 1, 1997, deadline 
for providing diversion certificates to the Board in order to meet 
reserve obligations. The commenter also stated that USDA has not acted 
on any of the percentage recommendations made at the June and September 
meetings. Final free and restricted percentages were proposed by the 
Secretary on January 21, 1998 (63 FR 3048). Final action concerning the 
final free and restricted percentage is being published separately in 
the Federal Register. Also, the November 1 deadline for handlers to 
redeem grower diversion certificates was extended to February 5, 1998, 
by the handler diversion regulation published on January 6, 1998 (63 FR 
399).
    Third, the commenter stated that growers were sent information, the 
content of which was not specified, about the 1997 diversion program. 
The commenter further stated that any such advance information 
highlights AMS's failure to follow the APA's mandatory procedures for 
reasoned decision making. Information pertaining to the grower 
diversion program being recommended by the Board was distributed by the 
Board. This was discussed in the interim final rule that was published 
concerning grower diversion. Further, the grower diversion program is 
voluntary. A number of growers chose to divert cherries in anticipation 
of receiving diversion certificates. Regulations concerning the program 
were adopted and issued as an interim final rule and are being made 
final in this action.
    Fourth, the commenter stated that the rule disallowing cherries 
from trees six years or younger from the diversion program is entirely 
arbitrary; that the concept behind diversion is keeping pounds of 
marketable cherries off the market, and has nothing to do with trees. 
Allowing the use of trees which are not yet bearing cherries or which 
are just beginning to bear cherries in calculating diversion amounts 
would result in figures which are not representative of a grower's true 
production. Information used to arrive at the age of trees eligible for 
diversion came from record testimony and from the National Agricultural 
Statistics Service (NASS), which only counts trees in its statistical 
reports that are six years and older.
    Fifth, the commenter stated that a key component of the Final Order 
implementing the marketing order was that the order not be used as a 
form of ``crop insurance'' for cherries which are not marketable, and 
that the interim rule contains no assurance that diverted cherries are 
marketable. The diversion program should not be and is not a crop 
insurance program for unmarketable cherries. The diversion program for 
the 1997-98 crop year provides that growers can divert all or a portion 
of their cherries which otherwise, upon delivery to a handler, would 
become restricted percentage cherries. To receive grower diversion 
certificates, growers must also agree to allow the Board to confirm 
that diversion of such cherries has actually taken place. Diverted 
production is measured based on the amount equal to the estimated 
volume of cherries diverted by the grower. The grower must agree to 
allow a Board compliance officer to visit the grower's orchard to 
ensure that diversion requirements are satisfied. The issue of 
unmarketable cherries will be further considered when diversion rules 
for the 1998-99 and the following crop years are drafted.
    Sixth, the commenter stated that there is no sufficient guarantee 
of compliance and that the Board has not adopted a compliance plan as 
part of its annual marketing policy. The commenter also stated that the 
5 percent sample size provided by the grower could be weighted with 
``lead'' cherries therefore abusing the system. Grower diversion for 
the 1997-98 crop year was sampled and measured under the supervision of 
Board compliance staff. Therefore, before issuing certificates, the 
Board

[[Page 20023]]

should know whether diversion requirements are met. The Board has 
recommended an improved sampling method to be in place for the 1998-99 
crop year and subsequent seasons. The Department is also continuing to 
work with the Board to further develop and refine the compliance plan 
for the tart cherry marketing order for future seasons.
    Finally, the commenter questioned the composition of the Board and 
whether some members should be disqualified. The Board was properly 
nominated in accordance with USDA and order procedures, and selected on 
December 20, 1996. Concerns that have been raised about the composition 
of the Board and questions about the eligibility of certain members to 
serve on the Board are being reviewed by the Department and will be 
addressed separately.
    Accordingly, no changes are made to the rule as drafted in the 
interim final rule, based on the comment received. However, as 
discussed, this rule does delete the certificate redemption date in 
Sec. 930.100(a).
    After consideration of all relevant material presented, including 
the Board's recommendation, and other information, it is found that 
this final rule as hereinafter set forth, will tend to effectuate the 
declared policy of the Act.

List of Subjects in 7 CFR Part 930

    Cherries, Marketing agreements, Reporting and recordkeeping 
requirements.

    Accordingly, the interim final rule amending 7 CFR 930 which was 
published at 62 FR 44881 on August 25, 1997, is adopted as a final rule 
with the following changes:

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

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

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

    2. In Sec. 930.100, paragraph (a) is revised to read as follows:


Sec. 930.100  Grower diversion certificates.

    (a) In accordance with paragraph (b) of this section, the Board 
may, for the 1997 crop year, issue diversion certificates to growers, 
in districts subject to volume regulation (Northwest Michigan, Central 
Michigan, New York, and Utah) who have voluntarily elected to divert in 
the orchard all or a portion of their 1997 tart cherry production which 
otherwise, upon delivery to handlers, would become restricted 
percentage cherries. Growers may offer the diversion certificate to 
handlers in lieu of delivering cherries.
* * * * *
    Dated: April 16, 1998.
Robert C. Keeney,
Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 98-10658 Filed 4-21-98; 8:45 am]
BILLING CODE 3410-02-P