[Federal Register Volume 63, Number 149 (Tuesday, August 4, 1998)]
[Rules and Regulations]
[Pages 41390-41392]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-20791]



[[Page 41390]]

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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 920

[Docket No. FV98-920-2 FR]


Kiwifruit Grown in California; Temporary Suspension of an 
Inspection Requirement

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This rule temporarily suspends an inspection requirement for 
kiwifruit covered under the California kiwifruit marketing order. The 
marketing order regulates the handling of kiwifruit grown in 
California, and is administered locally by the Kiwifruit Administrative 
Committee (Committee). Prior to this suspension, certification of any 
kiwifruit which was inspected and certified as meeting grade, size, 
quality, or maturity requirements in effect under the marketing order 
was valid until December 31 of the current fiscal year or 21 days from 
the date of inspection, whichever was later. This rule enables handlers 
to ship kiwifruit without the necessity for reinspection and 
recertification and the costs associated with such requirements. This 
temporary suspension was unanimously recommended by the Committee and 
is expected to reduce handler costs and to increase grower returns, 
while continuing to provide consumers with the same high quality fruit 
as was available under previous requirements.

EFFECTIVE DATE: September 1, 1998 through July 31, 1999.

FOR FURTHER INFORMATION CONTACT: Rose Aguayo, Marketing Specialist, 
California Marketing Field Office, Marketing Order Administration 
Branch, Fruit and Vegetable Programs, AMS, USDA, 2202 Monterey Street, 
suite 102B, Fresno, California 93721; telephone: (209) 487-5901, Fax: 
(209) 487-5906; or George Kelhart, Technical Advisor, Marketing Order 
Administration Branch, Fruit and Vegetable Programs, AMS, USDA, room 
2525-S, P.O. Box 96456, Washington, DC 20090-6456; telephone: (202) 
720-2491, Fax: (202) 205-6632. Small businesses may request information 
on compliance with this regulation by contacting Jay Guerber, Marketing 
Order Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 
room 2525-S, P.O. Box 96456, Washington, DC 20090-6456; telephone: 
(202) 720-2491, Fax: (202) 205-6632.

SUPPLEMENTARY INFORMATION: This final rule is issued under Marketing 
Order No. 920 (7 CFR part 920), as amended, regulating the handling of 
kiwifruit grown in California, hereinafter referred to as the 
``order.'' The order is effective under the Agricultural Marketing 
Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter 
referred to as the ``Act.''
    The Department of Agriculture (Department) is issuing this rule in 
conformance with Executive Order 12866.
    This final rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. This rule is not intended to have retroactive 
effect. This rule will not preempt any State or local laws, 
regulations, or policies, unless they present an irreconcilable 
conflict with this rule.
    The Act provides that administrative proceedings must be exhausted 
before parties may file suit in court. Under section 608c(15)(A) of the 
Act, any handler subject to an order may file with the Secretary a 
petition stating that the order, any provision of the order, or any 
obligation imposed in connection with the order is not in accordance 
with law and request a modification of the order or to be exempted 
therefrom. A handler is afforded the opportunity for a hearing on the 
petition. After the hearing the Secretary would rule on the petition. 
The Act provides that the district court of the United States in any 
district in which the handler is an inhabitant, or has his or her 
principal place of business, has jurisdiction to review the Secretary's 
ruling on the petition, provided an action is filed not later than 20 
days after the date of the entry of the ruling.
    This final rule temporarily suspends an inspection requirement for 
kiwifruit covered under the California kiwifruit marketing order. This 
rule temporarily suspends the current limitation of the inspection 
certificate validation period and enables handlers to ship kiwifruit 
without the necessity for reinspection and recertification. The rule 
will be in effect during the 1998-99 fiscal year.
    Section 920.55 of the order requires that prior to handling any 
variety of California kiwifruit, such kiwifruit shall be inspected by 
the Federal or Federal-State Inspection Service (inspection service) 
and certified as meeting the applicable grade, size, quality, or 
maturity requirements in effect pursuant to Sec. 920.52 or Sec. 920.53. 
Section 920.55 also provides authority for the establishment, through 
the order's administrative rules and regulations, of a period prior to 
shipment during which inspections must be performed.
    Section 920.155 of the order's administrative rules and regulations 
prescribes that the certification of grade, size, quality, and maturity 
of kiwifruit pursuant to Sec. 920.52 or Sec. 920.53 during each fiscal 
year is valid until December 31 of such year or 21 days from the date 
of inspection, whichever is later. Any inspected kiwifruit to be 
shipped after the certification period lapses must be reinspected and 
recertified before shipping.
    At its meeting on February 11, 1998, the Committee unanimously 
recommended suspending Sec. 920.155 for the 1998-99 fiscal year. The 
Committee made this recommendation in an effort to reduce the 
additional costs of reinspection. In recent years, after cultural and 
post-harvest expenses have been paid, many kiwifruit growers have lost 
money or merely recovered their production costs with little or no 
profit. Because storage and handling operations have improved in the 
industry, and as a result of a fruit ripening program being utilized by 
the industry, the Committee believes it may no longer be necessary to 
have fruit reinspected to provide consumers with a high quality 
product. The recommended suspension is for a one-year period so the 
effects can be evaluated. The Committee further recommended that this 
suspension be in effect no later than September 1, 1998, to enable 
handlers to make operational decisions in time for the 1998 harvest and 
shipping season.
    When the order was promulgated, authority was included to limit the 
length of time inspection certificates would be valid. This authority 
was provided because the condition of kiwifruit can change while it is 
held in cold storage.
    The industry has estimated that approximately 30 percent of the 
inspected kiwifruit is subject to reinspection each year at a cost of 
approximately $0.03 per tray equivalent (a tray equivalent being 7 
pounds of kiwifruit), and that a minimal amount, approximately 1 
percent, of reinspected fruit fails to meet order requirements.
    As the inspection service has not yet established the 1998-99 
reinspection rates, the total costs for the industry are based on the 
past season's rates. These annual costs were estimated to be 
approximately $50,000 for the 1998-99 season.
    By suspending the reinspection requirement, handlers will be able 
to reduce handling costs by conducting their own reinspection of fruit 
before shipment, when necessary. The Committee believes that consumers 
will continue to receive the same high quality fruit as was available 
when reinspection was conducted by the

[[Page 41391]]

inspection service. Handlers have continually upgraded their cold 
storage and handling operations, resulting in fewer fruit condition 
problems. In recent seasons, improved storage facilities have resulted 
in fewer storage-related condition problems, such as black sooty mold. 
In addition, processing and packing equipment utilized by handlers has 
improved in recent years, resulting in less damage to fruit in the 
handling process, thus resulting in fewer condition problems. Finally, 
the industry's ripening program has resulted in earlier seasonal 
shipments and a decreased amount of inspected fruit remaining in cold 
storage beyond the maximum time for which an inspection certificate is 
valid.
    The Committee believes that eliminating the reinspection 
requirement will not have a negative impact on any aspect of the 
industry; however, it wishes to approach this issue with caution. Thus, 
the Committee recommended temporarily suspending Sec. 920.155 for the 
1998-99 fiscal year as a ``pilot test,'' so it can evaluate the results 
after the season. The Committee expects this action to reduce handler 
costs by $50,000, resulting in increased grower returns, while 
continuing to provide consumers with the same high quality fruit as 
provided under previous requirements.
    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA), the Agricultural Marketing Service (AMS) has considered the 
economic impact of this action on small entities. Accordingly, AMS has 
prepared this final regulatory flexibility analysis.
    The purpose of the RFA is to fit regulatory actions to the scale of 
business subject to such actions in order that small businesses will 
not be unduly or disproportionately burdened. Marketing orders issued 
pursuant to the Act, and 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 60 handlers of California kiwifruit subject 
to regulation under the marketing order and approximately 450 producers 
in the production area. Small agricultural producers are defined by the 
Small Business Administration (13 CFR 121.601) as those whose annual 
receipts are less than $500,000, and small agricultural service firms 
are defined as those whose annual receipts are less than $5,000,000. 
One of the 60 handlers subject to regulation has annual kiwifruit 
receipts of at least $5,000,000. This figure excludes receipts from any 
other sources. The remaining 59 handlers have annual receipts less than 
$5,000,000, excluding receipts from other sources. In addition, 10 of 
the 450 producers subject to regulation have annual sales of at least 
$500,000, excluding receipts from any other sources. The remaining 440 
producers have annual sales less than $500,000, excluding receipts from 
any other sources. Therefore, a majority of handlers and producers are 
classified as small entities.
    This final rule temporarily suspends an inspection requirement for 
kiwifruit covered under the California kiwifruit marketing order. This 
rule temporarily suspends the current limitation of the inspection 
certificate validation period and enables handlers to ship kiwifruit 
without the necessity for reinspection and recertification. The rule 
will be in effect during the 1998-99 fiscal year.
    Section 920.55 of the order requires that prior to handling any 
variety of California kiwifruit, such kiwifruit shall be inspected by 
the Inspection Service and certified as meeting the applicable grade, 
size, quality, or maturity requirements in effect pursuant to 
Sec. 920.52 or Sec. 920.53. Section 920.55 also provides authority for 
the establishment, through the order's administrative rules and 
regulations, of a period prior to shipment during which inspections 
must be performed.
    Section 920.155 of the order's administrative rules and regulations 
prescribes that the certification of grade, size, quality, and maturity 
of kiwifruit pursuant to Sec. 920.52 or Sec. 920.53 during each fiscal 
year is valid until December 31 of such year or 21 days from the date 
of inspection, whichever is later. Any inspected kiwifruit to be 
shipped after the certification period lapses must be reinspected and 
recertified before shipping.
    At its meeting on February 11, 1998, the Committee unanimously 
recommended suspending Sec. 920.155 for the 1998-99 fiscal year. The 
Committee made this recommendation in an effort to reduce the 
additional costs of reinspection. In recent years, after cultural and 
post-harvest expenses have been paid, many kiwifruit growers have lost 
money or merely recovered their production costs with little or no 
profit. Because storage and handling operations have improved in the 
industry, and as a result of a fruit ripening program being utilized by 
the industry, the Committee believes it may no longer be necessary to 
have fruit reinspected to provide consumers with a high quality 
product. The recommended suspension is for a one-year period so the 
effects can be evaluated. The Committee further recommended that this 
suspension be in effect no later than September 1, 1998, to enable 
handlers to make operational decisions in time for the 1998 harvest and 
shipping season.
    When the order was promulgated, authority was included to limit the 
length of time inspection certificates would be valid. This authority 
was provided because the condition of kiwifruit can change while it is 
held in cold storage.
    The industry has estimated that approximately 30 percent of the 
inspected kiwifruit is subject to reinspection each year at a cost of 
approximately $0.03 per tray equivalent, and that a minimal amount, 
approximately 1 percent, of reinspected fruit fails to meet order 
requirements.
    Although the inspection service has not yet established the 1998-99 
inspection rates, based on the past season's rates, total reinspection 
costs for the industry are expected to be approximately $50,000 for the 
1998-99 fiscal year.
    Handlers will be able to reduce handling costs by conducting their 
own reinspection of fruit before shipment, when necessary. The 
Committee believes that consumers will continue to receive the same 
high quality fruit as was available when reinspection was conducted by 
the inspection service. Handlers have continually upgraded their cold 
storage and handling operations, resulting in fewer fruit condition 
problems. In recent seasons, improved storage facilities have resulted 
in fewer storage-related condition problems, such as black sooty mold. 
In addition, processing and packing equipment utilized by handlers has 
improved in recent years, resulting in less damage to fruit in the 
handling process, thus resulting in fewer condition problems. Finally, 
the industry's ripening program has resulted in earlier seasonal 
shipments and a decreased amount of inspected fruit remaining in cold 
storage beyond the maximum time for which an inspection certificate is 
valid.
    The Committee believes that eliminating the reinspection 
requirement will not have a negative impact on any aspect of the 
industry; however, it wishes to approach this issue with caution. Thus, 
the Committee recommended temporarily suspending Sec. 920.155 for the 
1998-99 fiscal year as a ``pilot test,'' so it can evaluate the results 
after the season. The Committee expects this action to reduce handler 
costs by $50,000, resulting in increased grower returns, while 
continuing to provide consumers with the same high

[[Page 41392]]

quality fruit as provided under previous requirements.
    The 1998-99 kiwifruit crop estimate was revised in April 1998 from 
10 to 12 million tray equivalents to 8.5 million tray equivalents. 
Based on recent experience, approximately 30 percent of the inspected 
kiwifruit is subject to reinspection. The 1998-99 reinspection fees 
have not yet been established by the inspection service, however, 
preliminary estimates indicate that these rates will be slightly higher 
than the 1997-98 rates. The 1997-98 rates were $0.032 per tray/volume 
fill/count fill container, $0.047 per 3 layer/master container, and 
$0.0047 per pound for bins. The inspection service estimates that 
reinspection costs will continue to be approximately $42,000 and that 
with the addition of mileage and overtime fees, the inspection service 
estimates that the total annual costs to the industry will continue to 
be approximately $50,000. Therefore, the suspension of the reinspection 
requirement is expected to result in an annual savings of $50,000 for 
the 1998-99 fiscal year.
    The Committee discussed a number of alternatives to this rule, 
including making inspection certificates valid to January 31, or 
modifying the reinspection process by requiring inspection for 
condition only, but it was determined that neither of these 
alternatives would reduce reinspection costs. The Committee also 
discussed the possibility of reducing the sample size from the current 
one-half of 1 percent; however, the inspection service advised the 
Committee that further reduction of the sample size would jeopardize 
the integrity of the inspection.
    Another alternative discussed was the elimination of in-line 
inspections altogether, but this was determined to be unacceptable to 
the industry. Use of in-line inspection provides handlers assurance 
that the fruit is making grade at the time of packing. Any problems 
that may exist can be identified immediately and corrected, thus 
avoiding the additional costs of repacking at the time of shipment.
    The Committee also considered increasing the use of inspection 
waivers as a means to lower costs. However, the Committee could not 
reach a consensus on an acceptable and equitable means to increase the 
issuance of waivers throughout the industry, and, thus, it was 
determined to be an unacceptable alternative.
    As another possibility, the Committee discussed alternative 
inspection methods. It was decided that they would not be a viable 
option at this time.
    Following discussion of these alternatives, the Committee concluded 
that temporarily suspending Sec. 920.155 is in the best interest of the 
industry, as this suspension is expected to save as much as $50,000 in 
reinspection fees and to increase grower returns, while continuing to 
provide consumers with the same high quality fruit as provided under 
previous reinspection requirements.
    This action will not impose any additional reporting or 
recordkeeping requirements on either small or large kiwifruit 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.
    As noted in the initial regulatory flexibility analysis, the 
Department has not identified any relevant Federal rules that 
duplicate, overlap, or conflict with this final rule.
    In addition, the Committee's February 11, 1998, meeting was widely 
publicized throughout the kiwifruit industry and all interested persons 
were invited to attend the meeting and participate in Committee 
deliberations on all issues. Like all Committee meetings, the February 
11, 1998, meeting was a public meeting and all entities, both large and 
small, were able to express views on this issue. The Committee itself 
is composed of 12 members. Two of these members are handlers and 
producers, nine are producers only, and one is a public member. The 
majority of the Committee members are small entities. In addition, a 
survey on the options of eliminating or keeping the reinspection 
requirement was mailed to all growers and handlers of California 
kiwifruit. Of the 485 surveys mailed, 159 were returned to the 
Committee by the deadline of February 6, 1998, for a response rate of 
33 percent. Growers accounted for 77 percent of the total surveys 
returned by the deadline, and of those, 67 percent were in favor of 
eliminating reinspection. Finally, interested persons were invited to 
submit information on the regulatory and informational impacts of this 
action on small businesses.
    A proposed rule concerning this action was published in the Federal 
Register on June 5, 1998 (63 FR 30655). Copies of the rule were also 
mailed or sent via facsimile to all Committee members and kiwifruit 
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 proposal. No comments were received.
    After consideration of all relevant matter presented, including the 
information and recommendation submitted by the Committee and other 
available information, it is hereby found that the provisions of the 
regulation, as hereinafter set forth, should be suspended to effectuate 
the declared policy of the Act.
    It is further found that good cause exists for not postponing the 
effective date of this rule until 30 days after publication in the 
Federal Register (5 U.S.C. 553) because handlers need this action in 
place by September 1 to provide sufficient time to plan for the 
upcoming marketing season. Harvest is expected to begin the end of 
September or early October and handlers want to take advantage of the 
relaxation as soon as possible. Further, handlers are aware of this 
rule, which was recommended at a public meeting. Also, a 30-day comment 
period was provided for in the proposed rule and no comments were 
received.

List of Subjects in 7 CFR Part 920

    Kiwifruit, Marketing agreements, Reporting and recordkeeping 
requirements.
    For the reasons set forth in the preamble, 7 CFR part 920 is 
amended as follows:

PART 920--KIWIFRUIT GROWN IN CALIFORNIA

    1. The authority citation for 7 CFR part 920 continues to read as 
follows:

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


Sec. 920.155  [Suspended]

    2. In part 920, Sec. 920.155 is suspended in its entirety effective 
September 1, 1998, through July 31, 1999.

    Dated: July 29, 1998.
Robert C. Keeney,
Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 98-20791 Filed 8-3-98; 8:45 am]
BILLING CODE 3410-02-P