[Federal Register Volume 70, Number 213 (Friday, November 4, 2005)]
[Rules and Regulations]
[Pages 67306-67315]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-21978]



[[Page 67305]]

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Part IV





Department of Agriculture





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Agricultural Marketing Service



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 7 CFR Part 82



Regulations Governing the California Clingstone Peach (Tree Removal) 
Diversion Program; Final Rule

Federal Register / Vol. 70, No. 213 / Friday, November 4, 2005 / 
Rules and Regulations

[[Page 67306]]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 82

[Docket No. FV05-82-01 FR]
RIN 0581-AC45


Regulations Governing the California Clingstone Peach (Tree 
Removal) Diversion Program

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This rule provides procedures for a California Clingstone 
Peach Diversion Program. The program will be voluntary and consist 
entirely of tree removal. The program will be implemented under clause 
(3) of Section 32 of the Act of August 24, 1935, as amended. Based on 
2003 and prior season acreage, production, supply, and marketing 
information for California clingstone peaches, this program is expected 
to bring the domestic canned peach supply more in line with the market 
and provide relief to growers faced with excess acreage and supplies, 
and with low prices. The program will ensure that removal is not part 
of the normal process of tree replacement.

EFFECTIVE DATE: November 5, 2005.

FOR FURTHER INFORMATION CONTACT: George Kelhart, Technical Advisor, 
Marketing Order Administration Branch, Fruit and Vegetable Programs, 
AMS, USDA, 1400 Independence Avenue, SW., Stop 0237, Washington, DC 
20250-0237; Telephone: (202) 720-2491; Fax: (202) 720-8938; or e-mail: 
<a href="/cdn-cgi/l/email-protection#cc8ba9a3beaba9e287a9a0a4adbeb88cb9bfa8ade2aba3ba"><span class="__cf_email__" data-cfemail="df98bab0adb8baf194bab3b7beadab9faaacbbbef1b8b0a9">[email protected]</span></a>.; or Kurt Kimmel, California Marketing Field 
Office, Marketing Order Administration Branch, Fruit and Vegetable 
Programs, AMS, USDA, 2202 Monterey Street, Suite 102B, Fresno, 
California 93721; Telephone: (559) 487-5901; Fax: (559) 487-5906; or e-
mail: <a href="/cdn-cgi/l/email-protection#69221c1b1d47220004040c05291c1a0d08470e061f"><span class="__cf_email__" data-cfemail="703b0502045e3b191d1d151c30050314115e171f06">[email protected]</span></a>.
    Small businesses may request information on the proposed diversion 
program by contacting Jay Guerber, Marketing Order Administration 
Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence 
Avenue, SW., Stop 0237, Washington, DC 20250-0237; Telephone: (202) 
720-2491; Fax: (202) 720-8938; or e-mail: <a href="/cdn-cgi/l/email-protection#a9e3c8d087eedcccdbcbccdbe9dcdacdc887cec6df"><span class="__cf_email__" data-cfemail="19537860375e6c7c6b7b7c6b596c6a7d78377e766f">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This rule has been determined to be not significant for the 
purposes of Executive Order 12866 and, therefore, has not been reviewed 
by the Office of Management and Budget (OMB). In accordance with 
Executive Order 12866, the Department of Agriculture (USDA) has 
prepared a detailed regulatory impact cost-benefit assessment, which 
can be obtained by contacting the person(s) listed in the FOR FURTHER 
INFORMATION CONTACT section of this rule. USDA also prepared a civil 
rights impact analysis. This document also can be obtained by following 
the same procedure.

Public Law 104-4

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State and local governments and 
the private sector. Under section 202 of the UMRA, the Agricultural 
Marketing Service (AMS) generally must prepare a written statement, 
including a cost-benefit analysis, for proposed and final rules with 
``Federal mandates'' that may result in expenditures by State and local 
governments, in the aggregate, or by the private sector, of $100 
million or more in any one year. When such a statement is needed for a 
rule, section 205 of the UMRA generally requires federal agencies to 
identify and consider a reasonable number of regulatory alternatives 
and adopt the least costly, most cost-effective, or least burdensome 
alternative that achieves the objectives of the rule.
    This rule contains no Federal mandates (under the regulatory 
provisions of Title II of the UMRA) for State and local governments or 
the private sector of $100 million or more in any one year. Therefore, 
this rule is not subject to the requirements of sections 202 and 205 of 
the UMRA.

Executive Order 12988

    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. The rule is intended to have preemptive effect with 
respect to any State or local laws, regulations or policies which 
conflict with its provisions, or which will otherwise impede its full 
implementation. Prior to any judicial challenge to the provisions of 
this rule or the application of its provisions, all applicable 
administrative procedures must be exhausted.

Executive Order 12372

    This program is not subject to the provisions of Executive Order 
12372, which requires intergovernmental consultation with State and 
local officials. See the Notice related to 7 CFR part 3015, subpart V 
published at 48 FR 29115 (June 24, 1983).

Executive Order 12612

    It has been determined that this rule does not have sufficient 
Federalism implications to warrant the preparation of a Federalism 
Assessment. The provisions contained in this rule will not have a 
substantial direct effect on States or their political subdivisions or 
on the distribution of power and responsibilities among the various 
levels of government.

Authority for a Diversion Program

    This program is intended to reestablish the purchasing power of 
California clingstone peach growers who suffered from excess acreage, 
supplies, and low prices in 2003. Programs to reestablish the 
purchasing power of U.S. farmers are authorized by clause (3) of 
Section 32 of the Act of August 24, 1935, as amended (7 U.S.C. 612c), 
hereinafter referred to as ``Section 32.'' Clause (3) authorizes USDA 
to ``* * * reestablish farmers' purchasing power by making payments in 
connection with the normal production of any agricultural commodity for 
domestic consumption.'' Section 32 also authorizes USDA to use Section 
32 funds ``* * * at such times, and in such manner, and in such 
amounts, as USDA finds will effectuate substantial accomplishments of 
any one or more of the purposes of this section.'' Furthermore, 
``Determinations by USDA as to what constitutes * * * normal production 
for domestic consumption shall be final.''

Need for a Diversion Program

    Domestic production of clingstone peaches is concentrated in 
California. Although there are more than 200 peach varieties, there are 
two basic types: Clingstone and freestone. Clingstone peaches--so named 
because their flesh ``clings'' to the stone, or pit--are almost 
exclusively canned due to their ability to retain flavor and textural 
consistency. Other relatively minor uses include frozen peaches, baby 
food, and fruit concentrate for juice. Freestone peaches--so named 
because their flesh is readily removed from the stone--are primarily 
produced for the fresh market, with secondary outlets including the 
frozen and dried fruit market.
    Although peaches are grown commercially in more than 30 states, the 
National Agricultural Statistics Service (NASS) reported that, in 2003, 
California produced about 74 percent of all peaches grown in the U.S. 
Other significant peach producing states, including South Carolina, 
Georgia, New

[[Page 67307]]

Jersey, Pennsylvania, and Washington, had a combined production of a 
little less than 17 percent of the U.S. total. As noted earlier, 
clingstone peach production is concentrated in California, which claims 
over 95 percent of the domestic production.
    NASS reports that U.S. production of all peaches in 2004 totaled a 
little over 1.279 million tons, of which 949 thousand tons were 
produced in California. In comparison, California clingstone peach 
production in 2004 totaled 539 thousand tons.
    The U.S. is the largest producer of canned peaches in the world. 
However, foreign imports of canned clingstone peaches are providing an 
increasingly important volume of competition for the U.S. industry. 
Greece, the world's second largest producer of canned peaches, has been 
the largest exporter to the U.S., followed by Spain, South Africa, 
China, and Thailand (re-manufactured product). According to a February 
2001 report by the Foreign Agricultural Service, the U.S. has become a 
net importer of canned peaches, with exports averaging around 20 
thousand tons and imports averaging approximately 21 thousand tons.
    The California Canning Peach Association (CCPA) requested the 
diversion program on behalf of the clingstone peach industry. 
Established in 1922, the CCPA is a nonprofit cooperative bargaining 
association, owned and directed by its member growers. The CCPA 
negotiates an annual grower price and otherwise operates on behalf of 
its nearly 600 members, who produce approximately 80 percent of the 
clingstone peaches grown in California.
    Specifically, the industry requested that USDA provide funding for 
a tree removal program during 2004. Implementation was not possible at 
that time, but the diversion program will begin November 5, 2005 and 
grower applications to participate will be due on November 30, 2005. 
After receiving the CCPA's written notification approving grower tree 
pull applications, growers may participate in the program. The tree 
removals will have to be completed by June 1, 2006. CCPA believes that 
the program will provide relief to the peach growers who have been 
displaced from domestic and international markets. CCPA cited 
continuing market disruption and deteriorating economic conditions 
during 2003 for peach growers as reasons for the diversion program. The 
CCPA stated that the steadily increasing supply of low-priced foreign 
canned peaches, as well as high production costs and high levels of 
domestic production have resulted in record amounts of unsold fruit.
    The industry's difficulty is due in part to the high cost of 
domestic production coupled with high levels of plantings between 1998 
and 2002, and in part to the increased supply of low-priced canned 
peaches from other nations. Labor costs (more than \2/3\ of growers' 
direct production costs), as well as the costs of energy, chemicals, 
fertilizer, and equipment have climbed dramatically over the last few 
years. Producer prices have not kept pace with these increases. 
Moreover, as processing costs have increased, canners have been forced 
to raise their selling prices, thus providing a more attractive 
domestic market for low-priced imports and a more attractive market for 
clingstone peaches in countries traditionally supplied by the U.S. 
industry (Mexico, Canada, and Japan, for example).
    As previously noted, the U.S. has become a net importer of canned 
peaches due to several factors, including unfavorable exchange rates, 
subsidized Greek over-production, and low-cost Chinese production. The 
large increase in imports has resulted in a diminished need for 
domestic production with the consequence of record volumes of fruit not 
being sold. Imports are expected to continue to increase while the 
export of canned clingstone peaches, as well as clingstone peaches for 
canning, is anticipated to stay steady or decline. Exports to Mexico 
and other Central American countries--both canned peaches and peaches 
for canning--are being priced out by Greece, while exports to Asian 
markets are facing strong price competition from both Greece and China. 
Increasing levels of both domestic and foreign production coupled with 
diminished export demand (world demand for canned fruit is flat outside 
of the European Union) will lead to continued surplus situations for a 
number of years.
    Young, recently planted clingstone peach trees are more productive 
than older trees. This results in actual production volume increasing 
rapidly in proportion to the increase in acreage. Due to an industry-
wide belief that the canned peach market would be taking a turn for the 
better, farmers planted an average of 3,526 acres of clingstone peach 
trees per year between 1998 and 2002. Although much of this acreage has 
been offset with concurrent acreage reduction, the net result over the 
last ten years is an increase of about 4,000 acres. This extra peach 
acreage is not needed, however, because of the slow demand growth in 
the canned fruit sector and the increasing pressure from imports. The 
recent bankruptcy of Tri-Valley Growers (one of the major peach 
processors in California) has also greatly impacted the industry's 
ability to process the extra peach production.
    Once planted, it takes clingstone peach trees 3 years to produce 
fruit in commercial quantities. Once a peach grower has committed funds 
to the planting and maintenance of an orchard, it is difficult to 
reverse those decisions and recoup cost. Because supply is slow to 
adjust to changing market conditions, without some remedial action the 
industry anticipates many years of production outpacing demand, 
resulting in a continuation, if not a worsening, of disruptive market 
conditions.

Industry Self-Help Initiatives

    The California clingstone peach industry has taken a number of 
steps on its own to deal with oversupply issues. Since 1993, the 
industry has spent over $17 million to remove more than 10,000 acres of 
trees. In fact, the industry sponsored a tree pull in the spring of 
2005 resulting in the removal of 2,000 additional acres. Although the 
CCPA administered some industry initiated acreage removal programs that 
compensated growers, many growers carried the costs of tree removal 
themselves. As noted earlier, even with aggressive tree removal, net 
acreage is currently up by about 2,000 acres over what it was a decade 
ago. Ten years ago, the number of acres was 28,100. The CCPA has also 
initiated and helped fund research projects aimed at reducing labor 
costs in the orchards, funded export incentive programs, and, as of 
2004, its growers have limited new plantings to the lowest level in 
more than 50 years (only 580 acres planted in 2004, and an estimated 
890 acres will be planted in 2005). To further improve its long-term 
market position, the California peach industry plans on developing new 
processing technology as well as new and innovative uses for clingstone 
peaches other than canning.
    Despite these recent self-help efforts at mitigating the supply and 
demand imbalance, production of clingstone peaches has continued to be 
significantly greater than normal market needs. In fact, during both 
2001 and 2002 50 million pounds of clingstone peaches were harvested 
but could not be sold, and in 2003 the unutilized quantity was 61 
million pounds. The unsold portions represented 5.3, 4.5, and 5.9 
percent, respectively, of the total crops in each of those years. In 
2004, all of the clingstone peach production harvested was utilized.
    The California clingstone peach industry is in need of the 
immediate relief USDA can provide. A diversion

[[Page 67308]]

program wholly consisting of a reduction in acreage through the removal 
of bearing trees will assist the industry in restoring a more balanced 
supply-demand situation for the clingstone peach industry in the short- 
and long-term.

Tree Removal Diversion Program

    The industry is requesting $5 million in federal funds to fund a 
voluntary tree removal program, including administrative costs. In 
addition, a total of $2 million from CCPA assessments on its grower-
members (to be collected and remitted by processors based on 2005 
season deliveries) will be used to augment the federal funds.
    The industry expects to remove 4,000 bearing acres of clingstone 
peach trees, or a little over 13 percent of the 30,200 acres currently 
in production. A healthy peach tree lives for about 20 years and 
reaches peak production when between 8 and 12 years old. Many of the 
current bearing trees are reaching the age where the normal cycle of 
removing old trees followed by replanting will be considered. The 
diversion program will provide an incentive to growers to remove 
healthy, fruit bearing trees rather than those near the end of their 
productive life, while ensuring that those orchards are not replanted 
with clingstone peach trees.
    To be eligible for the tree removal program, growers must have made 
deliveries to processors during 2005. Orchards that have been abandoned 
will not be eligible for participation. Growers will be paid $100/ton 
based on their actual 2005 peach deliveries to processors from the same 
acreage that is being removed, provided that payments will not exceed 
$1,700 per acre nor be less than $500 per acre. Trees will have to be 
removed prior to June 1, 2006, and to be eligible must be bearing and 
have been planted after 1987 and before 2003. Thus, trees removed under 
this program will be at least three years old but less than 18 years 
old.
    Growers who participate in the diversion program and subsequently 
replant a clingstone peach tree in the same location, and within the 
10-year period following removal of the trees, will be required to 
refund to USDA all payments received, plus interest, on replanted 
acreage. Because it takes new trees at least three years to be 
commercially productive, this provision will effectively remove the 
acreage participating in the diversion program from commercial 
production of clingstone peaches for at least 13 years.
    As previously stated, the tree removal program is expected to 
reduce California clingstone peach acreage by up to 4,000 acres, which, 
based on the most recent 10-year average annual yield of 17.5 tons per 
acre, could reduce annual production by approximately 70,000 tons. This 
one-time decrease in production will help align supply with demand, 
while also ensuring an adequate supply. In addition, this program will 
provide the clingstone peach industry with the economic opportunity to 
concentrate its efforts on rebuilding demand for the future.
    The diversion program will be administered by AMS and CCPA. Any 
California clingstone peach grower wishing to participate in the 
program will file an application with the CCPA on a form approved by 
OMB. The application period will begin after publication of the final 
rule announcing the terms and conditions of the program. Applications 
must be submitted by November 30, 2005.
    Each applicant will provide information needed by the CCPA to 
operate the program. This will include, for example, the location of 
the orchard from which trees will be removed, the acreage to be 
removed, and the tonnage harvested off the applicable acreage in 2005. 
Applicants will also certify that all equity holders in the 
participating acreage consent to the filing of the application, and 
will agree not to replant clingstone peach trees on the same acreage 
for 10 years after the trees were removed. The CCPA will review each 
application for completeness, and will make every reasonable effort to 
contact growers to obtain any missing information.
    Each approved applicant will be notified by the CCPA on another 
form approved by OMB. The approved grower will be required to fill out 
a portion of this ``notification'' form, certifying to the CCPA that 
he/she had removed the clingstone peach trees, and the date of removal. 
The remainder of this form will be filled out by a CCPA staff member. 
The staff member will verify that the approved block of clingstone 
peach trees had been removed, list the equivalent 2005 delivery tons 
removed, and indicate the total amount of money due to the grower. To 
verify that trees are eligible for the program, a CCPA representative 
may sample one or more trees in the block by taking a cross section of 
the base of the tree after it has been cut down and counting the tree 
rings to determine the age of the tree. In addition, the CCPA and USDA 
may verify the age of the trees in the block by relying on grower 
records, and may use any other means deemed necessary to confirm the 
eligibility of the trees.
    As noted earlier, the USDA will provide $5 million to fund the tree 
removal program, including administrative costs. Applications will be 
approved until the available USDA and CCPA funds have been committed. 
Each participating grower will have until June 1, 2006, to remove trees 
from their land.
    Growers will be paid $100 per ton based on their actual peach 
deliveries to processors of peaches that were harvested in 2005 from 
the acreage involved in the tree removal program. Based on the 
conditions of program participation, payments to growers will range 
from $500 to $1,700 per acre, which should cover most of the costs of 
removing the trees as well as preparing the land for other uses. Thus, 
even if a grower had a yield greater than 17 tons per acre on the 
acreage selected for removal, payment will not exceed the maximum of 
$1,700 per acre established by this rule.
    Conversely, if a selected block of land had a 2005 yield of 5 tons 
per acre or less, the grower will receive the minimum of $500 per acre. 
The $100 per ton payment, as well as the upper and lower limits to the 
amount paid per acre, are considered necessary to help ensure that 
enough growers participate in the tree removal program. The costs of 
participating in the program will vary depending on the number of acres 
removed. Some cost savings may accrue when larger blocks of acreage are 
removed.
    Estimated costs for tree removal, including the removal of roots 
and associated debris, range from $325-$525 per acre. In addition, 
costs associated with preparing the ground for other crops, including 
leveling, fumigation, and weed control could cost between $1,050 and 
$1,875. Based on these estimates, grower costs associated with tree 
removal could total as much as $2,400 per acre. The $500-$1,500 per 
acre payment under the program will offset a significant portion of 
each grower's costs associated with tree removal.
    Further offsetting the costs of tree removal will be the economic 
opportunities afforded the grower associated with being positioned to 
plant alternative crops on the cleared acreage. Additionally, the 
current economic conditions within the industry, specifically weak 
demand, reduced per capita consumption, stagnant domestic shipments and 
exports, increasing low-priced imports, and declining grower prices and 
revenues will appear to limit the incentives for replanting acreage to 
clingstone peach trees.

[[Page 67309]]

Final Regulatory Flexibility Analysis

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA), the Agricultural Marketing Service (AMS) has considered the 
economic impact of this rule 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 actions in order that small businesses will not be 
unduly or disproportionately burdened.
    There are about 700 growers of clingstone peaches in California. 
Small agricultural producers have been defined by the Small Business 
Administration (13 CFR 121.201) as those having annual receipts of less 
than $750,000. Based on 2003 data from the California Agricultural 
Statistics Service, all of the growers will be considered small growers 
with annual incomes under $750,000. Thus, the majority of the growers 
are considered small entities under SBA's definition.
    This rule will establish a tree removal diversion program for 
California clingstone peaches. Authority for this program is provided 
in clause (3) of Section 32 of the Act of August 24, 1935, as amended.
    Participation in the diversion program is voluntary, so individual 
producers, both large and small, can weigh the benefits and costs for 
their own operations before deciding whether to participate in the 
program.

Economic Assessment of the Diversion Program

    To assess the impact a tree removal program will have on prices 
growers receive for their product, impacts on grower prices and 
inventories with a tree removal program and without a tree removal 
program were estimated. This economic assessment compares the benefits 
and costs of a tree removal program to the alternative of not having a 
tree removal program. An econometric model was also developed for the 
purpose of estimating nominal season average grower prices under both 
scenarios.
    Although a tree removal program will directly reduce the number of 
bearing acres, the impact of the program will not be apparent until 
after the 2006 crop harvest. In 2004, bearing acres are estimated at 
31,740 acres. The industry has indicated that no additional net 
plantings of clingstone peach trees are occurring at this time. 
However, trees planted in 2002 through 2004 will enter production in 
2005 through 2007.
    The tree removal analysis assumes that 4,000 acres of clingstone 
peach orchards will be removed through this program. This results in 
the reduction in bearing acreage from 31,740 to 30,480. This number is 
estimated by taking the bearing acreage of 31,740, subtracting the 
proposed tree removal acreage (4,000) and adding the acreage planted in 
2002 (2,740 acres), which will start producing in 2005. Subsequent 
years' bearing acreage is estimated using the same process; i.e., 
adding estimated acres planted three years earlier to existing bearing 
acreage.
    Under the proposed program, acreage in 2010 is estimated to total 
28,256. It is assumed that the industry will only replant trees that 
were removed due to old age. However, it is not likely that all trees 
removed due to age will be replaced, and further, that trees removed 
due to age will not be involved in the tree removal program.
    Production for 2004 is reported by NASS at 539,000 tons. Carryin 
inventory for 2004 was reported by CCPA to be 3.44 million cases (24 
No. 2\1/2\ size cans; No. 2\1/2\ cans have a net weight of 27-29 
ounces).
    Based on historical pack-out and per capita consumption, CCPA has 
estimated that demand for the 2005 clingstone peach crop could 
approximate 460,000 tons. Subsequent demand for canned peaches is 
estimated to increase by about one percent a year for 2006 through 
2010. This assumes that per capita consumption remains constant while 
demand increases with the level of population.
    The 2005 clingstone peach production, however, is estimated at 
530,000 tons based on the reduced acreage projection of 30,480 acres 
and an estimated yield of 18.53 tons per acre. For this analysis, the 
estimated carryin is 3 million cases (24 No. 2\1/2\ basis) for 2005 and 
2 million cases (24 No. 2\1/2\ basis) for 2006 through 2010, which is 
the desirable level favored by the industry.
    Acreage removed after 2006 is estimated based on an econometric 
model. Despite the removal of 4,000 acres in the diversion program, the 
industry will conceivably continue to remove acreage on its own due to 
normally aging orchards.
    The analysis also estimates yields based on an autoregressive model 
of order two that allows for some fluctuations up and down. Yields 
under the proposed tree removal program are adjusted upwards by 0.2 
tons per acre due to the removal of lower yielding trees which will 
result in higher average yields than will happen without a program. 
Estimated production, computed by multiplying acreage times yield, 
fluctuates accordingly.
    As carryin inventories are reduced, the total available supply will 
moderate for 2006 through 2010, relative to the situation without a 
tree removal program. This results in estimated season average grower 
prices ranging from $224 to $245 per ton during that same time span. 
This estimated price is slightly more than the total estimated cost of 
production. It should be noted that the margin of error for these 
estimates becomes very large for future years.
    Even though season-average grower prices per ton increase under the 
tree removal program, all product produced is not necessarily of 
marketable quantity. Costs are incurred on all of the production, but 
revenue is received only on product actually marketed. Thus, the 
economic effect of the tree removal program on a per acre basis is to 
dramatically reduce losses and bring producer returns closer to a 
break-even level. With the level of imports anticipated to continue to 
increase and with the level of exports anticipated to continue to 
decrease, there should be only a limited incentive to further expand 
production as a result of the tree removal program. It will remain for 
growers to control costs and to expand demand to ensure their longer-
term economic stability and viability.
    Grower prices are a small component of the marketable canned peach 
product and are not closely associated with movements in retail prices. 
However, the increases in grower prices estimated for 2006 through 2010 
may have an impact on retail prices. The extent of any retail price 
increases will depend on processor and retailer margins, as well as the 
pricing and availability of substitute canned fruit products. It should 
be noted that clingstone peach prices are estimated to increase with or 
without a tree removal program, but the magnitude of the grower price 
increase is greater with the program. This increase in retail price may 
have a slight negative impact on the quantity demanded. Such a decrease 
in the quantity demanded is not taken into account in this analysis.
    Without a tree removal program in place, the number of bearing 
acres is also estimated to decrease, although at a rate slower than 
with a tree removal program. This decrease in bearing acreage is 
estimated by taking the number of producing acres during the prior 
year, subtracting the number of acres removed from production and then 
adding the number of acres planted three seasons previously. For 2006 
through 2010, production is estimated to decrease due to the decline in 
the number of bearing acres. However,

[[Page 67310]]

marketable production will continue to be above the estimated 460,000 
tons desired by the industry and carryin inventories are estimated as 
high as 3.5 million cases (24 No. 2\1/2\ basis).
    In addition, abandonment of some product is estimated to occur for 
2005 through 2010. Under this scenario, 2005 grower prices are 
estimated at $220 per ton. With high inventories and low grower prices, 
market forces are assumed to induce growers to remove less productive 
acres and the number of bearing acres is estimated to decline from to 
31,740 to 29,068. Even with the decline in bearing acres, production 
and inventories remain excessive from 2006 through 2010. Under this 
scenario, grower prices are estimated to remain below or equal to the 
cost of production until 2010 when prices are estimated to be just 
above the cost of production.
    Under both scenarios, grower prices increase. However, adjustments 
to inventories and prices occur more rapidly under a tree removal 
program. This will accelerate benefits to growers until market forces 
could bring about a slow correction.
    In addition to the direct impact a tree removal program will have 
on grower price and revenue, there are indirect impacts. A tree removal 
program assists in decreasing the volume of fruit that is harvested but 
subsequently not utilized or simply not harvested. Without a tree 
removal program, large quantities of clingstone peaches could be 
produced and harvested but not utilized by packers. Growers will have 
to cover the total cost of production, harvest, and transportation but 
only receive payments on fruit actually canned. Further, in an attempt 
to sell the excessive inventories, packers might reduce f.o.b. prices, 
which in turn leads to market share battles and lower prices being 
passed back to producers. A more balanced supply and demand situation 
allows growers and packers to jointly continue developing markets in 
ways that benefit the entire industry.

Benefits of the Program

    The economic assessment of the tree removal program indicates that 
it is expected to benefit growers (particularly small, under-
capitalized growers), canners, and others associated with the 
clingstone peach industry. The per ton sales price is projected to 
increase over the next six years, thus reducing losses and moving 
grower returns closer to break-even levels. The benefit to growers from 
reduced losses is projected to total approximately $50 million over the 
six-year period. The benefits over the six-year period will average 
nearly $8 million annually.

Costs of the Program

    The major direct cost of the program will be the payment to growers 
for removing their clingstone peach trees. A total of $5 million, less 
the costs associated with local administration of the program, will be 
made available by USDA for the tree removal program. Administrative 
costs for reviewing applications and verifying tree removals are 
expected to be about $125,000. Major expense categories for 
administration include costs for salaries and benefits, vehicle rental 
and maintenance, and insurance, overhead, and supplies.
    Total grower costs associated with the completion of diversion 
program applications, payment requests, and record maintenance for the 
period specified after tree removal are expected to be about $530.

Overall Assessment of the Program

    Payments made through this program could help California clingstone 
peach growers by addressing the oversupply problem that is adversely 
affecting their industry. The implementation of a tree removal program 
could reduce available supply more quickly than if the industry relied 
on market forces alone. While market forces could also result in 
supplies being reduced, such an adjustment may occur more slowly, with 
resultant economic hardships for growers and processors. In addition, a 
tree removal program could be beneficial in reducing the risk of loan 
default for lenders that financed clingstone peach growers. This 
program could also help small, under-capitalized growers stay in 
business.
    Increasing the level of profitability also should provide 
opportunities for the industry to engage in additional demand-enhancing 
activities, especially directed at the domestic market. Even a moderate 
increase in domestic per capita consumption will have a significant, 
positive impact on grower returns.
    Costs for the program will include the $7 million ($5 million 
provided by USDA and $2 million by the industry) to be paid to growers 
and to the CCPA for administrative costs. Additionally, growers will 
incur costs totaling $500 to comply with the application and record-
keeping requirements of the program.
    Benefits to growers under the tree removal program could total 
approximately $50 million. This is calculated by multiplying total 
marketable production for each of the next six years times the 
difference between grower price and variable cost, and then adding 
those figures. This calculation was done for each of the two scenarios 
(with and without a tree removal program). The $50 million difference 
between those figures represents an estimate of program benefits 
resulting from reduced grower losses.
    Growers who participate in the tree pull program will likely remove 
older, less productive trees from production. Because younger trees are 
more productive, older trees typically have higher variable costs of 
production than younger trees, where the variable costs are spread over 
a higher yield. Accordingly, the $50 million benefit under the tree 
pull scenario is the result of both higher prices resulting from the 
tree pull combined with lower variable costs per ton of production.
    This cost calculation assumes that the acreage on which trees are 
removed remains idle, and that growers will therefore absorb all fixed 
costs on that acreage. To the extent that the land is put to other 
productive uses, growers will not be absorbing all fixed costs of 
producing clingstone peaches, and grower benefits will be higher.
    If growers are earning more income, it follows that processors will 
pay more to obtain the peaches from the growers. These higher costs 
could be passed on to consumers through higher retail prices or could 
be absorbed as reduced operating margins for processors, wholesalers, 
or retailers. An estimate of these costs is obtained by multiplying the 
estimated grower price over each of the next six years times annual 
shipments with the diversion program in place and without it in place. 
That figure, summed over the six years, is approximately $25 million. 
Processors, wholesalers, and retailers are anticipated to absorb the 
additional costs. Adjustments in retail prices, as well as retailer and 
processor margins, are anticipated to change with or without the 
program.
    Another cost of the tree removal program is the reduced economic 
activity due to the growers purchasing fewer inputs (labor, chemicals, 
etc.) because of the reduction in the number of clingstone peach acres 
managed and harvested. Farm laborers and agricultural supply firms such 
as chemical manufacturers and distributors will realize less revenue 
because of the reduced need for their services and goods. To the extent 
that acreage removed is replanted in other crops, those costs could be 
somewhat offset by purchases of labor and supplies to produce the 
alternative crops. This cost of the tree removal program is difficult 
to quantify and is not included in this analysis.

[[Page 67311]]

Conclusion

    Based on all of the information available, USDA has determined that 
there is a surplus of clingstone peaches, and that reestablishment of 
growers' purchasing power will be encouraged by using Section 32 funds 
to reduce supplies under a tree removal program for California 
clingstone peaches. USDA has further determined that this program will 
be a long-term solution to the oversupply situation that exists in the 
California clingstone peach industry, and that it will provide relief 
to growers.
    Each grower participating in the program will agree not to replant 
clingstone peaches on the land from which the trees were removed for 10 
years from the date the trees are removed. The non-planting promise is 
a guarantee by the participant that no one (not just the participant) 
will plant the land to clingstone peaches. Only those persons who are 
current owners of the land, and have not contracted to sell the land or 
destroy the trees, will be eligible to participate. Also, growers will 
guarantee that they have not made prior arrangements to sell the land 
or remove the trees for commercial purposes, like shopping centers, 
housing developments, or similar such purposes. Including such non-
agricultural land in the program will not serve the purposes of the 
tree removal program.
    Notice of this action was published in the Federal Register on 
August 3, 2005 (70 FR 44525). Interested persons were invited to submit 
written comments until September 2, 2005. Six comments were received. 
Two of those comments were received from the California Canning Peach 
Association, the association that requested financial support from USDA 
for the tree removal program. The other comments were received from a 
vendor of fruits and vegetables, and producers and processors of 
clingstone peaches.
    In one of the association's comments, it requested several changes 
to the proposal. It pointed out that its original request specified 
that the maximum age of eligible trees was 18, but that the proposed 
rule changed that age to 17. The final rule has been modified to 
reflect the association's initial intent. A maximum clingstone peach 
tree age of 18 is expected to facilitate participation in the program. 
In addition, the association requested that two additional association 
office locations be listed to facilitate the receipt and review of 
grower applications in the production area. These office locations, 
telephone, and fax numbers have been added to the regulatory text. It 
also requested that the implementation process start immediately after 
tree removal applications have been approved. This was USDA's intent 
and this has been clarified in the final rule. In addition, USDA has 
added language regarding verifying the eligibility of trees to be 
removed. To verify that trees are eligible for the program, an 
association representative may sample one or more trees in the block by 
taking a cross section of the base of the tree after it has been cut 
down and counting the tree rings to determine the age of the tree. In 
addition, the association and USDA may verify the age of the trees in 
the block by relying on grower records, and may use any other means 
deemed necessary to confirm the eligibility of the trees.
    In another comment, the association provided additional information 
in support of the diversion program. It indicated that it is much more 
cost effective for USDA to deal with the clingstone peach industry's 
supply/demand imbalance by funding the $5 million tree removal program 
than it would be to spend nearly $30 million per year buying surplus 
finished product (clingstone peaches) from processors.
    One commenter stated that the program will be an effective solution 
to the industry's oversupply problem and will help growers survive in 
the long term. Another commenter stated that the industry's acreage 
exceeds market demand and the removal program will help bring the 
clingstone peach supply in line with market needs and reduce current 
high inventory levels.
    Another commenter requested changes to the program to allow 
clingstone peach growers to remove trees by grafting their trees over 
to other fruits, such as nectarines or plums, rather than removing the 
trees entirely. The commenter states that considering grafting as 
removal under the program would be more enticing to him than removing 
an orchard. Grafting was not considered to be a method of removal when 
developing the program. The program contemplates removal of the trees 
and the roots of the trees, and the basis for calculating the payments 
per tree includes costs for removing the entire tree. Therefore, the 
definition of removal continues to exclude grafting as a method of 
removal.
    One commenter did not support implementing the proposed program at 
this time. The commenter believes that implementation now might result 
in an overcorrection of the supply imbalance. According to the 
commenter, reducing the raw product supply too much could result in the 
increased importation of foreign produced peaches. This could displace 
domestic production and shrink the California peach grower base even 
more. Also, if fewer peaches are available for processors, this could 
increase manufacturing costs, and lead to decreased consumption and 
demand.
    The commenter states that a significant reduction is forecasted for 
the 2005 peach crop due to weather changes and this already accounts 
for a reduction in volume that exceeds the proposed program. The 
commenter estimates that the 2005 harvest will be approximately 476,000 
tons. The USDA projects this figure to actually be 530,000 tons and 
large enough to warrant implementation at this time without an 
overcorrection in supplies.
    The opposing commenter also blames the dried prune/plum tree 
removal program in 2002 for the current low production in the industry. 
The dried prune/plum industry has experienced two years of extremely 
low yields due to unusual weather conditions during the bloom in 
spring. Yields in 2004 are reported by NASS at 0.70 tons per acre, 
which is a record low yield. Thus, the industry would have experienced 
a supply shortage even if the 17,448 bearing acres had not been removed 
in 2002.
    From 1988 through 2003 total dried prune/plum shipments ranged from 
170,000 to 180,000 tons. Given the expectation of production in excess 
of 200,000 tons, the industry faced a severe surplus situation. Supply 
is slow to adjust to changing market conditions given the substantial 
fixed investment in orchards. The tree removal program assisted the 
dried prune/plum industry in making the adjustment to lower production 
more rapidly than awaiting market adjustment.
    The California clingstone peach industry faces a similar situation 
as dried prune/plum growers did in 2002. Over the past several years, 
the clingstone peach industry has suffered from record amounts of 
unsold product due to low-priced, imported canned peaches and high 
domestic production. This situation is leading to low grower prices and 
revenues that are expected to continue to deteriorate. During the 2001 
and 2002 seasons, 50 million pounds of clingstone peaches were 
harvested but could not be sold, and 61 million pounds were unutilized 
in 2003. The percent of unutilized production for each of those years 
is 5.3 percent, 4.5 percent, and 5.9 percent.
    Though there is indication of a decline in clingstone peach bearing 
acres for the 2005-06 crop year, there were a large number of trees 
planted from 1998 through 2002 that are only

[[Page 67312]]

starting to produce fruit and this situation is expected to adversely 
affect grower prices unless the tree removal program is implemented. 
Clingstone peach acres are expected to continue to decline but it's 
anticipated this will occur at a slower pace than with a tree removal 
program. The proposed program provides an incentive for growers to 
remove healthy, fruit bearing trees rather than those at the end of 
their productive life and ensuring those orchards are not replanted 
with clingstone peach trees for 10 years.
    Although clingstone peach production may be down for the 2005-06 
crop year (NASS final production information will not be available 
until January 2006), the tree removal program attempts to solve a long 
run over-production problem for a number of years. The program is 
expected to help align supply with demand and improve grower returns at 
a faster pace. The benefit to growers from reduced losses is projected 
to be approximately $50 million over the six-year period from 2005 to 
2010, which is an average of nearly $8 million annually.
    In view of the foregoing, and after considering all of the comments 
presented, the USDA has decided not to postpone the tree removal 
program, but as indicated has made changes where appropriate. The 
changes made based on the comments received are expected to improve the 
program and to help the program better accomplish the objectives 
intended. The only changes made by the final rule clarify eligibility 
and removal requirements as discussed above.
    After consideration of all relevant matter presented, including the 
comments received, and other information, it is found that this final 
rule, as hereinafter set forth, will tend to effectuate the policy of 7 
U.S.C. 612c.
    Pursuant to 5 U.S.C. 553, it is further found that good cause 
exists for not postponing the effective date of this rule. Such delay 
will be contrary to the public interest because clingstone peach 
producers need to know as soon as possible whether they will be 
accepted into the program. Eligible interested producers want to begin 
removing the clingstone peach trees as soon as possible. In addition, 
further delay could jeopardize the successful removal of excess 
clingstone peach production.

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
Chapter 35), the AMS has obtained approval from OMB of a new 
information collection, California Clingstone Peach (Tree Removal) 
Diversion Program, under OMB No. 0581-0232.
    AMS is committed to compliance with the Government Paperwork 
Elimination Act (GPEA), which requires Government agencies in general 
to provide the public the option of submitting information or 
transacting business electronically to the maximum extent possible.
    As mentioned earlier, two forms will be needed for the 
administration of the tree removal program. Growers who wish to 
participate in the program will have to submit form FV-302, 
``Application for Clingstone Peach Tree Removal Program,'' along with 
documentation, to the CCPA, which will administer the program. Upon 
receipt of FV-302, the CCPA will send the grower form FV-303, 
``Notification of Clingstone Peach Tree Removal.'' The grower will fill 
out a portion of this form certifying that his/her approved block of 
clingstone peach trees was removed, and the date of removal. The 
remainder of this form will be filled out by a CCPA staff member, 
notifying the grower of his/her eligibility to receive a diversion 
payment. The form will also be used to notify USDA that the CCPA 
verified the grower's compliance with program regulations and recommend 
disbursement of Section 32 funds to the grower. Finally, participants 
will be required to retain records pertaining to the tree removal 
program for 10 years after the date the trees were removed.
    We estimate that 100 growers may submit applications, and that it 
will take each grower about 30 minutes to complete, for a total burden 
of 50 hours. We also estimate that it will take the growers about 2 
minutes to complete their portion of the notification form, for a total 
burden of 3 hours. The estimated one-time cost for all growers in 
completing the participation application and payment request statement 
(notification form), and maintaining records, is $530. This total cost 
was calculated by multiplying the estimated 53 burden hours by $10 per 
hour (a sum deemed reasonable, should the applicants be compensated for 
this time).
    Comments were invited on the information collection in the August 
3, 2005, notice of proposed rulemaking. The deadline for comments ended 
on October 3, 2005, and no comments were received.

List of Subjects in 7 CFR Part 82

    Administrative practice and procedures, Agriculture, Peaches, 
Reporting and recordkeeping requirements, Surplus agricultural 
commodities.


0
For the reasons set forth in the preamble, Title 7, Subtitle B, Chapter 
1 is amended as follows:

PART 82--[AMENDED]

0
1. In Subtitle B, Chapter 1, Part 82 is added to read as follows:

PART 82--CLINGSTONE PEACH DIVERSION PROGRAM

Sec.
82.1 Applicability.
82.2 Administration.
82.3 Definitions.
82.4 Length of program.
82.5 General requirements.
82.6 Rate of payment; total payments.
82.7 Eligibility for payment.
82.8 Application and approval for participation.
82.9 Inspection and certification of diversion.
82.10 Claim for payment.
82.11 Compliance with program provisions.
82.12 Inspection of premises.
82.13 Records and accounts.
82.14 Offset, assignment, and prompt payment.
82.15 Appeals.
82.16 Refunds; joint and several liability.
82.17 Death, incompetency or disappearance.

    Authority: 7 U.S.C. 612c.


Sec.  82.1  Applicability.

    Pursuant to the authority conferred by Section 32 of the Act of 
August 24, 1935, as amended (7 U.S.C. 612c) (Section 32), the 
Agricultural Marketing Service (AMS) will make payment to California 
growers who divert clingstone peaches by removing trees on which the 
fruit is produced in accordance with the terms and conditions set forth 
herein.


Sec.  82.2  Administration.

    The program will be administered under the general direction and 
supervision of the Deputy Administrator, Fruit and Vegetable Programs, 
AMS, United States Department of Agriculture (USDA), and will be 
implemented by the California Canning Peach Association (CCPA). The 
CCPA, or its authorized representatives, does not have authority to 
modify or waive any of the provisions of this subpart. The 
Administrator or delegatee, in the Administrator's or delegatee's sole 
discretion can modify deadlines to serve the goals of the program. In 
all cases, payments under this part are subject to the availability of 
funds.


Sec.  82.3  Definitions.

    (a) Administrator means the Administrator of AMS.
    (b) AMS means the Agricultural Marketing Service of the U.S. 
Department of Agriculture.

[[Page 67313]]

    (c) Application means ``Application for Clingstone Peach Tree 
Removal Program.''
    (d) Calendar year means the 12-month period beginning January 1 and 
ending the following December 31.
    (e) CCPA means the California Canning Peach Association, a grower-
owned marketing and bargaining cooperative representing the clingstone 
peach industry in California.
    (f) Diversion means the removal of clingstone peach trees after 
approval of applications by the CCPA.
    (g) Grower means an individual, partnership, association, or 
corporation in the State of California who grows clingstone peaches for 
canning.
    (h) Removal or removed means that the clingstone peach trees are no 
longer standing and capable of producing a crop, and the roots of the 
trees have been removed. The grower can accomplish removal by any means 
the grower desires. Grafting another type of tree to the rootstock 
remaining after removing the clingstone peach tree will not qualify as 
removal under this program.


Sec.  82.4  Length of program.

    This program is effective November 5, 2005, through November 9, 
2015. Growers diverting clingstone peaches by removing clingstone peach 
trees must complete the diversion no later than June 1, 2006.


Sec.  82.5  General requirements.

    (a) To be eligible for this program, the trees to be removed must 
be fruit-bearing and have been planted after the 1987 and before the 
2003 calendar years. Abandoned orchards and dead trees will not 
qualify. The block of trees for removal must be easily definable by 
separations from other blocks of eligible trees and contain at least 
1,000 eligible trees or an entire orchard. Clingstone peach tree 
removal shall not take place until the grower has been informed in 
writing that the grower's application has been approved.
    (b) Any grower participating in this program must agree not to 
replant clingstone peach trees on the land cleared under this program 
through June 1, 2016. Participants bear responsibility for ensuring 
that trees are not replanted, whether by themselves, by successors to 
the land, or by any other person, until after June 1, 2016. If trees 
are replanted before June 1, 2016, by any persons, participants must 
refund all USDA payments, with interest, made in connection with this 
tree removal program.


Sec.  82.6  Rate of payment; total payments.

    (a) Applications will be processed on a first-come, first-served 
basis. Growers will be paid $100 per ton based on their actual 2005 
deliveries of clingstone peaches to processors from those acres of 
clingstone peach trees removed under this program, except that, 
regardless of actual 2005 deliveries, growers will receive a minimum of 
$500 per acre and a maximum of $1,700 per acre.
    (b) Payment under paragraph (a) of this section will only be made 
after tree removal has been verified by the staff of the CCPA.
    (c) The $100 per ton payment is intended to cover the costs of tree 
removal. USDA will not make any other payment with respect to such 
removals. The grower will be responsible for arranging, requesting, and 
paying for the tree removal in the specified acreage.
    (d) Total payments under this program are limited to not more than 
$5,000,000 of Section 32 funds. No additional expenditures shall be 
made unless the Administrator or delegatee in their sole and exclusive 
discretion shall, in writing, declare otherwise.


Sec.  82.7  Eligibility for payment.

    (a) If total applications for payment do not exceed $5,000,000, 
less administration costs, payments, as set forth in Sec.  82.6, will 
be made under this program to any grower of clingstone peaches who 
complies with the requirements in Sec.  82.8 and all other terms and 
conditions in this part.
    (b) If applications for participation in the program authorized by 
this part exceed $5,000,000, less administration costs, the CCPA will 
approve the applications (subject to the requirements in Sec.  82.8) in 
the order in which the completed applications are received in the CCPA 
office to the extent that funds are available. Applications received 
after total outlays exceed the amount of money available will be 
denied.


Sec.  82.8  Application and approval for participation.

    (a) Applications will be reviewed for program compliance and 
approved or disapproved by CCPA office personnel.
    (b) Applications for participation in the Clingstone Peach 
Diversion Program can be obtained from the CCPA office at 2300 River 
Plaza Drive, Suite 110, Sacramento, CA 95833; Telephone: (916) 925-
9131; Fax: (916) 925-9030; at 335 Teegarden Avenue, Suite A, Yuba City, 
CA 95991; Telephone: (530) 673-8526; Fax: (530) 673-2673; or at 1704 
Herndon Road, Ceres, CA 95307; Telephone: (209) 537-0715; Fax: (209) 
537-1043.
    (c) Any grower desiring to participate in the Clingstone Peach 
Diversion Program must file an application with the CCPA prior to 
November 30, 2005. The application shall be accompanied by a copy of 
any two of the following four documents: Plot Map from the County Hall 
of Records; Irrigation Tax Bill; County Property Tax Bill; or any other 
documents containing an Assessor's Parcel Number. Such application 
shall include at least the following information:
    (1) The name, address, telephone number, and tax identification 
number or social security number of the grower;
    (2) The location and amount of acreage to be diverted;
    (3) The 2005 clingstone peach production from the acreage to be 
diverted;
    (4) If the land with respect to which the clingstone peach trees 
will be destroyed is subject to a mortgage, statutory lien, or other 
equity interest, the grower must obtain from the holder of such 
interest a written statement that such party agrees to the enrollment 
of such land in this program to the extent determined necessary by AMS. 
Obtaining such assent shall be the responsibility of the applicant who 
shall alone bear any responsibilities which may extend to such third 
parties;
    (5) A statement that the applicant agrees to comply with all of the 
regulations established for the clingstone peach diversion program;
    (6) The applicant shall sign the application certifying that the 
information contained in the application is true and correct;
    (7) The year that the clingstone peach acreage to be diverted was 
planted;
    (8) The names of the processors who received the clingstone peaches 
from the grower in 2005.
    (d) After the CCPA receives the applications, it shall review them 
to determine whether all the required information has been provided and 
that the information is correct.
    (e) If the deliveries off the acreage to be removed in such 
applications, multiplied by $100 per ton (for actual 2005 deliveries on 
these acres, but within the constraints of a minimum payment of $500 
per acre and a maximum payment of $1,700 per acre), exceed the amount 
of funds available for the diversion program, each grower's application 
will be considered in the order in which they are received at the CCPA 
offices.
    (f) After the application reviews and confirmation of eligible 
trees are completed, the CCPA shall notify the applicant, in writing, 
as to whether or not the application has been approved

[[Page 67314]]

and the tonnage approved for payment after removal. If an application 
is not approved, the notification shall specify the reason(s) for 
disapproval.


Sec.  82.9  Inspection and certification of diversion.

    When the removal of the clingstone peach trees is complete, the 
grower will notify the CCPA on a form provided by the CCPA. The CCPA 
will certify that the trees approved for removal from the acreage have 
been removed, and notify AMS.


Sec.  82.10  Claim for payment.

    To obtain payment for the trees removed, the grower must submit to 
the CCPA by July 31, 2006, a completed form provided by the CCPA. Such 
form shall include the CCPA's certification that the qualifying trees 
from the acreage have been removed. AMS will then issue a check to the 
grower in the amount of $100 per eligible ton removed consistent with 
the minimum and maximum payments per acre earlier specified in this 
part.


Sec.  82.11  Compliance with program provisions.

    If USDA or the CCPA determines that any provision of this part have 
not been complied with by the grower, the grower will not be entitled 
to diversion payments in connection with tree removal. If a grower does 
not comply with all the terms of this part, including the requirement 
specified in Sec.  82.5(b), the grower must refund any payment made in 
connection with this program, and will also be liable for any other 
damages incurred as a result of such failure. The USDA may deny any 
grower the right to participate in this program or the right to receive 
payments in connection with any diversion previously made under this 
program, or both, if the USDA determines that:
    (a) The grower has failed to properly remove the clingstone peach 
trees from the applicable acreage, regardless of whether such failure 
was caused directly by the grower or by any other person or persons;
    (b) The grower has not acted in good faith, or has engaged in a 
scheme, fraud, or device, in connection with any activity under this 
program; or
    (c) The grower has failed to discharge fully any obligation assumed 
by him or her under this program.


Sec.  82.12  Inspection of premises.

    The grower must permit authorized representatives of USDA or the 
CCPA, at any reasonable time, to have access to their premises to 
inspect and examine the acreage where the trees were removed as well as 
any records pertaining to that acreage to determine compliance with the 
provisions of this part.


Sec.  82.13  Records and accounts.

    (a) The growers participating in this program must keep accurate 
records and accounts showing the details relative to the clingstone 
peach tree removal, including the contract entered into with any firm 
removing the trees, as well as the invoices.
    (b) The growers must permit authorized representatives of USDA, the 
CCPA, and the Government Accountability Office at any reasonable time 
to inspect, examine, and make copies of such records and accounts to 
determine compliance with provisions of this part. Such records and 
accounts must be retained for ten years after the date of payment to 
the grower under the program, or for ten years after the date of any 
audit of records by USDA, whichever is later. Any destruction of 
records by the grower at any time will be at the risk of the grower 
when there is reason to know, believe, or suspect that matters may be 
or could be in dispute or remain in dispute.


Sec.  82.14  Offset, assignment, and prompt payment.

    (a) Any payment or portion thereof due any person under this part 
shall be allowed without regard to questions of title under State law, 
and without regard to any claim or lien against the crop proceeds 
thereof in favor of the grower or any other creditors except agencies 
of the U.S. Government.
    (b) Payments which are earned by a grower under this program may be 
assigned in the same manner as allowed under the provisions of 7 CFR 
part 1404.


Sec.  82.15  Appeals.

    Any grower who is dissatisfied with a determination made pursuant 
to this part may make a request for reconsideration or appeal of such 
determination. The Deputy Administrator of Fruit and Vegetable Programs 
shall establish the procedure for such appeals.


Sec.  82.16  Refunds; joint and several liability.

    (a) In the event there is a failure to comply with any term, 
requirement, or condition for payment arising under the application of 
this part, and if any refund of a payment to AMS shall otherwise become 
due in connection with the application of this part, all payments made 
under this part to any grower shall be refunded to AMS together with 
interest.
    (b) All growers signing an application for payment as having an 
interest in such payment shall be jointly and severally liable for any 
refund, including related charges, that is determined to be due for any 
reason under the terms and conditions of the application of this part.
    (c) Interest shall be applicable to refunds required of any grower 
under this part if AMS determines that payments or other assistance 
were provided to a grower who was not eligible for such assistance. 
Such interest shall be charged at the rate of interest that the United 
States Treasury charges the Commodity Credit Corporation (CCC) for 
funds, as of the date AMS made benefits available to such grower. Such 
interest shall accrue from the date of repayment or the date interest 
increases as determined in accordance with applicable regulations. AMS 
may waive the accrual of interest if AMS determines that the cause of 
the erroneous determination was not due to any action of the grower.
    (d) Interest determined in accordance with paragraph (c) of this 
section may be waived on refunds required of the grower when there was 
no intentional noncompliance on the part of the grower, as determined 
by AMS. Such decision to waive or not waive the interest shall be at 
the discretion of the Administrator or delegatee.
    (e) Late payment interest shall be assessed on all refunds in 
accordance with the provisions of, and subject to the rates prescribed 
for, those claims which are addressed in 14 CFR part 1403.
    (f) Growers must refund to AMS any excess payments, as determined 
by AMS, with respect to such application. Such determinations shall be 
made by the Administrator or delegatee.
    (g) In the event that a benefit under this part was provided as the 
result of erroneous information provided by the grower, or was 
erroneously or improperly paid for any other reason, the benefit must 
be repaid with any applicable interest, subject to paragraphs (c) and 
(d) of Sec.  82.6.


Sec.  82.17  Death, incompetency, or disappearance.

    In the case of death, incompetency, disappearance, or dissolution 
of a clingstone peach grower that is eligible to receive benefits in 
accordance with this part, any person or persons who will, under 7 CFR 
part 707 of this title, be eligible for payments and benefits covered 
by this part, may receive such benefits otherwise due the actual 
producer, as determined appropriate by AMS.


[[Page 67315]]


    Dated: October 31, 2005.
Lloyd C. Day,
Administrator, Agricultural Marketing Service.
[FR Doc. 05-21978 Filed 11-3-05; 8:45 am]
BILLING CODE 3410-02-P


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