[Federal Register Volume 74, Number 90 (Tuesday, May 12, 2009)]
[Proposed Rules]
[Pages 22112-22123]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-11052]


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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 74, No. 90 / Tuesday, May 12, 2009 / Proposed 
Rules

[[Page 22112]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 930

[Docket No. AO-370-A8; AMS-FV-06-0213; FV07-930-2]


Tart Cherries Grown in the States of Michigan, New York, 
Pennsylvania, Oregon, Utah, Washington, and Wisconsin; Recommended 
Decision on Proposed Amendment of Marketing Agreement and Order No. 930

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule and opportunity to file exceptions.

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SUMMARY: This recommended decision invites written exceptions to 
proposed amendments to Marketing Agreement and Order No. 930 (order), 
which regulates the handling of tart cherries grown in Michigan, New 
York, Pennsylvania, Oregon, Utah, Washington, and Wisconsin. Seven 
amendments were proposed by the Cherry Industry Administrative Board 
(Board), which is responsible for local administration of the order. 
These proposed amendments would: Authorize changing the primary reserve 
capacity associated with the volume control provisions of the order; 
authorize establishment of a minimum inventory level at which all 
remaining product held in reserves would be released to handlers for 
use as free tonnage; establish an age limitation on product placed into 
reserves; revise the nomination and election process for handler 
members on the Board; revise Board membership affiliation requirements; 
and update order language to more accurately reflect grower and handler 
participation in the nomination and election process in districts with 
only one Board representative. In addition, the Agricultural Marketing 
Service (AMS) proposed to make any such changes as may be necessary to 
the order to conform to any amendment that may result from the hearing.
    This decision does not recommend the Board proposal to revise the 
voting requirements necessary to approve a Board action.
    The proposals are designed to provide flexibility in administering 
the volume control provisions of the order and to update Board 
nomination, election, and membership requirements. The proposed 
amendments are intended to improve the operation and administration of 
the order.

DATES: Written exceptions must be filed by June 11, 2009.

ADDRESSES: Written exceptions should be filed with the Hearing Clerk, 
U.S. Department of Agriculture, room 1031-S, Washington, DC 20250-9200, 
Fax: (202) 720-9776 or via the Internet at http://www.regulations.gov, 
or to Martin Engeler at the E-mail address provided in the For Further 
Information Contact section. All comments should reference the docket 
number and the date and page number of this issue of the Federal 
Register. Comments will be made available for public inspection in the 
Office of the Hearing Clerk during regular business hours, or can be 
viewed at: http://www.regulations.gov.
    All comments submitted in response to this rule will be included in 
the record and will be made available to the public. Please be advised 
that the identity of the individuals or entities submitting the 
comments will be made public on the Internet at the address provided 
above.

FOR FURTHER INFORMATION CONTACT: Martin Engeler, Marketing Order 
Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 2202 
Monterey Street, Suite 102-B, Fresno, California 93721; telephone: 
(559) 487-5110, Fax: (559) 487-5906; or Marc McFetridge, Marketing 
Order Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 
1400 Independence Avenue, SW., Stop 0237, Washington, DC 20250-0237; 
telephone: (202) 720-1509, Fax: (202) 720-8938, or E-mail: 
<a href="/cdn-cgi/l/email-protection#ade0ccdfd9c4c383e8c3cac8c1c8dfedd8dec9cc83cac2db"><span class="__cf_email__" data-cfemail="a3eec2d1d7cacd8de6cdc4c6cfc6d1e3d6d0c7c28dc4ccd5">[email protected]</span></a> or <a href="/cdn-cgi/l/email-protection#b4f9d5c6d79af9d7f2d1c0c6ddd0d3d1f4c1c7d0d59ad3dbc2"><span class="__cf_email__" data-cfemail="eda08c9f8ec3a08eab88999f84898a88ad989e898cc38a829b">[email protected]</span></a>.
    Small businesses may request information on this proceeding 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, E-mail: <a href="/cdn-cgi/l/email-protection#94def5edbad3e1f1e6f6f1e6d4e1e7f0f5baf3fbe2"><span class="__cf_email__" data-cfemail="e9a38890c7ae9c8c9b8b8c9ba99c9a8d88c78e869f">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION: Prior document in this proceeding: Notice of 
Hearing issued on February 5, 2007, and published in the February 7, 
2007, issue of the Federal Register (72 FR 5646).
    This action is governed by the provisions of sections 556 and 557 
of title 5 of the United States Code and is therefore excluded from the 
requirements of Executive Order 12866.

Preliminary Statement

    Notice is hereby given of the filing with the Hearing Clerk of this 
recommended decision with respect to the proposed amendments to 
Marketing Order 930 regulating the handling of tart cherries grown in 
Michigan, New York, Pennsylvania, Oregon, Utah, Washington, and 
Wisconsin, and the opportunity to file written exceptions thereto. 
Copies of this decision can be obtained from Martin Engeler whose 
address is listed above.
    This recommended decision is issued pursuant to the provisions of 
the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 
601 et seq.), hereinafter referred to as the ``Act'', and the 
applicable rules of practice and procedure governing the formulation of 
marketing agreements and orders (7 CFR Part 900).
    The proposed amendments are based on the record of public hearings 
held February 21 and 22, 2007, in Grand Rapids, Michigan and March 1 
and 2, 2007, in Provo, Utah. Notice of this hearing was published in 
the Federal Register on February 7, 2007 (72 FR 5646). The notice of 
hearing contained proposals submitted by the Board.
    The proposed amendments were recommended by the Board and initially 
submitted to AMS on December 16, 2005. Additional information was 
submitted in June 2006 at the request of AMS and a determination was 
subsequently made to schedule this matter for hearing.
    The proposed amendments to the order recommended by the Board are 
summarized below.
    1. Amend Sec.  930.50 of the order to authorize changing the 
primary reserve capacity associated with the volume control provisions 
of the order.
    2. Amend Sec.  930.54 of the order to authorize establishment of a 
minimum

[[Page 22113]]

inventory level at which all remaining product held in reserves would 
be released to handlers for use as free tonnage.
    3. Amend Sec.  930.55 to establish an age limitation on product 
placed into reserves.
    4. Amend Sec.  930.32 to revise the voting requirements necessary 
to approve a Board action.
    5. Amend Sec.  930.23 to revise the nomination and election process 
for handler members on the Board;
    6. Amend Sec.  930.20 to revise Board membership affiliation 
requirements.
    7. Amend Sec.  930.23 to update order language to more accurately 
reflect grower and handler participation in the nomination and election 
process in Districts with only one Board representative.
    In addition to the proposed amendments to the order, AMS proposes 
the following:
    8. To make any such changes as may be necessary to the order to 
conform to any amendments that may result from the hearing.
    One amendment proposed by the Board is not being recommended for 
adoption and is discussed in this decision.
    Twenty-one industry witnesses testified at the hearing. These 
witnesses consisted of tart cherry producers and handlers in the 
production area, and Board staff. The majority of the witnesses 
testified in favor of the proposed amendments, while some were opposed 
to various proposals.
    At the conclusion of the hearing, the Administrative Law Judge 
established a deadline of May 30, 2007, for interested persons to file 
proposed findings and conclusions or written arguments and briefs based 
on the evidence received at the hearing. Two briefs were filed. One was 
in support of all the proposed amendments and one was opposed to most 
of the proposals.

Material Issues

    The material issues presented on the record of hearing are as 
follows:
    (1) Whether to amend the order to authorize changing the primary 
reserve capacity through informal rulemaking;
    (2) Whether to amend the order to authorize establishment of a 
minimum inventory level at which all remaining product held in reserves 
would be released to handlers for use as free tonnage;
    (3) Whether to amend the order to establish an age limitation on 
product placed into reserves;
    (4) Whether to amend the order to revise the voting requirements 
necessary to approve a Board action;
    (5) Whether to amend the order to revise the nomination and 
election process for handler members on the Board;
    (6) Whether to amend the order to revise Board membership 
affiliation requirements; and
    (7) Whether to amend order language regarding the nomination and 
election process in districts with only one Board representative.

Findings and Conclusions

    The following findings and conclusions on the material issues are 
based on evidence presented at the hearing and the record thereof.

Material Issue Number 1--Authority to Change the Primary Reserve 
Capacity

    The order should be amended to authorize changing the primary 
reserve capacity through the informal rulemaking process rather than 
the formal rulemaking process. Such a change could occur no more than 
once per crop year, and a recommendation from the Board to USDA to make 
such a change must be made by September 30 of the preceding crop year. 
Any change made to the reserve capacity would remain in effect until 
further modified. Prior to making a recommendation to change the 
reserve capacity, the Board should consider appropriate factors when 
making such a recommendation.
    Section 930.50 of the order specifies procedures concerning 
establishment of volume control in the form of free and restricted 
percentages applied to the cherries handlers acquire from growers in a 
given crop year. Applying the free percentage to the cherries acquired 
by handlers results in a quantity of free tonnage cherries, and 
applying the restricted percentage results in a quantity of restricted 
cherries applicable to regulated handlers. Free tonnage cherries may be 
disposed of by handlers in any market outlet. Restricted cherries may 
be released to handlers for market expansion opportunities or to 
augment supplies in free market outlets. They may also be disposed of 
in certain outlets not competitive with normal market outlets, 
according to procedures specified in the order.
    Section 930.50(i) provides for the establishment of a primary 
reserve and a secondary reserve. The first 50-million pounds of reserve 
established by applying the reserve percentages to the aggregate 
quantity of cherries acquired by handlers is placed in a primary 
reserve. Any reserve cherries in excess of the 50-million-pound 
limitation, or cap, are placed into a secondary reserve. Product from 
the secondary reserve cannot be released until all cherries in any 
primary reserve have been released. Currently, formal rulemaking is 
required to change the 50-million-pound cap on the primary reserve.
    The Board proposed amending the order to authorize changing the 50-
million-pound limitation on the primary reserve through the informal 
rulemaking process rather than through the formal rulemaking process, 
as is currently required. Under the proposal, a change to the reserve 
cap could not be made more than once per year, and a recommendation 
from the Board to make such a change must be made prior to September 30 
of the preceding crop year.
    Witnesses testified that the proposed amendment is primarily 
procedural in nature, and would add flexibility to the order. They 
testified that the current process needed to change the reserve 
limitation (formal rulemaking) is lengthier than the informal 
rulemaking process. Witnesses indicated that if this amendment is 
adopted it would provide a more efficient and timely process for 
changing the reserve capacity. Witnesses testified that the cap could 
be either increased or decreased through this process.
    Witnesses testified that the topic of reserves is of great 
importance and interest to the industry, and it is desirable that a 
full discussion of the issues occur prior to changing the reserve 
limitation. They further indicated that the informal rulemaking process 
would provide ample opportunity for a thorough discussion and analysis 
of the pertinent issues prior to making a recommendation to the USDA 
for changing the reserve cap. Witnesses further stated that the order's 
voting requirements for a ``super-majority'' to approve a Board action 
would ensure that a high level of industry agreement is reached before 
any recommended change could be made. Witnesses also pointed out that 
the Board itself cannot implement an informal rulemaking change. Such 
changes are recommended to the USDA, and are only implemented after 
informal rulemaking by USDA. Witnesses testified that changes to the 
primary reserve capacity through informal rulemaking should be made no 
more than one time per year to prevent any market disruption that could 
occur by changing it more frequently. The proposed requirement that any 
change must be recommended no later than September 30 of the prior year 
would allow all industry participants to be fully aware of the 
regulation well in advance of its implementation.
    Proponents of the proposal presented testimony indicating that 
changes in the

[[Page 22114]]

industry have occurred which may warrant a change in the primary 
reserve inventory cap in the future. Handlers are obligated to provide 
cherry products to meet their reserve obligation, and they currently 
produce a broader spectrum of products than when the order was 
formulated in 1996. In the past, the primary product produced and sold 
was frozen cherries; the product mix is now more diverse with increased 
amounts of products such as dried cherries, frozen concentrate, and 
single strength juice being marketed. Because there is now a wider 
variety of cherry products produced, held in inventory, and sold than 
in the past, it may be necessary at some point to increase the reserve 
capacity so the industry can adequately supply buyers' needs with 
reserve product if and when the reserve is released. Witnesses 
testified that industry production and sales information is more 
accurate and more readily available now than in the past, which 
contributes to the need for the marketing order and its rules and 
regulations to be responsive to changes in a more timely manner.
    Additional testimony suggested that it may be desirable to increase 
the reserve cap in the future due to an anticipated increase in demand 
and sales. In 2002, the industry experienced an extremely short crop, 
and sales in subsequent years decreased as buyers sourced product from 
different suppliers or used substitute products. It is anticipated that 
the industry will ultimately regain lost sales and eventually increase 
demand, especially with the support of a new industry-wide promotion 
program recently implemented. An increase in demand and annual sales 
could warrant an increase in the reserve capacity at some point in the 
future. For example, if annual demand increases, and the industry has a 
short crop like in 2002, it would be in a better position to adequately 
supply markets if a larger reserve is in place.
    Witnesses opposed to the proposal indicated that the current 50-
million-pound cap has worked well for the industry. When the order was 
promulgated, a 50-million-pound reserve was considered to be an 
appropriate level, and would help prevent a large inventory buildup. A 
previous tart cherry marketing order in effect from 1971 to 1987 was 
not as effective as it could have been because there was no cap on the 
reserve, which led to the buildup of excessively large inventories. 
This situation ultimately contributed to the demise of that program, 
according to testimony.
    One witness testified that it is good business practice to carry 
approximately 25 percent of annual sales in inventory. A 50-million-
pound reserve is thus appropriate for the industry because annual 
industry sales have been in the range of 200 million pounds in recent 
years. If the industry carries too large a reserve, grower returns 
could be negatively affected because the demand for tart cherries is 
relatively inelastic, according to the witness.
    Another witness testified that current features of the order allow 
adequate reserve product to be made available to augment market 
supplies. There is no need to increase the reserve cap for that 
purpose, according to the witness.
    The witness further testified that the 50-million-pound reserve 
capacity was a core element of the order when it was promulgated, and 
its intended use was to manage supplies wisely. According to the 
witness, no evidence was presented at the hearing that warrants a 
specific change to the reserve capacity. However, the witness stated 
that if a change in the reserve capacity is appropriate in the future, 
any change should be subject to specific, measurable criteria for the 
Board to consider. As discussed below, such consideration should be 
part of the Board's analysis and recommendation to USDA.
    This proposal would not increase the 50-million-pound primary 
reserve capacity. The amendment, if adopted, would only change the 
process by which a future revision in the reserve capacity could be 
effectuated if conditions warrant.
    The record shows that industry and market conditions change over 
time, and there may be circumstances that would warrant a change in the 
reserve capacity. Allowing such a change to be made through informal 
rather than formal rulemaking would add flexibility to the order by 
providing the industry with an additional tool to respond to industry 
and market conditions in a more timely and efficient manner.
    Hearing testimony indicated that it is desirable for the Board to 
conduct a full and thorough analysis when recommending changes to key 
elements in marketing order programs, such as volume control 
provisions. This includes the impacts of any proposed change on 
producers and handlers. Witnesses testified that it is also desirable 
to attain a high level of agreement among industry members before 
regulatory changes are implemented.
    There can be benefits in allowing changes to be made to program 
requirements through informal rulemaking rather than formal rulemaking. 
As with all recommendations for informal rulemaking, USDA expects the 
Board to fully consider and analyze pertinent factors when making 
recommendations to change the reserve capacity.
    In consideration of the record, USDA recommends that Section 
930.50(i) be revised to authorize changing the reserve capacity from 
its current 50-million-pound limit through informal rulemaking. Such a 
change should only occur once per year, and any recommendation for a 
change should be made by the Board to USDA no later than September 30 
of the preceding year. Any change would remain in effect until 
subsequently modified through informal rulemaking. The requirement to 
make any such changes no more than one time per year would help to 
ensure that the industry has sufficient time to plan and respond to the 
change, and the requirement that any change must be recommended no 
later that September 30 of the prior year would allow sufficient time 
to implement the change. In addition, the super-majority voting 
requirement of the Board will help to ensure that any recommendation 
for a change to the reserve capacity has a high level of support.
    For the above reasons, the proposed amendment to Sec.  930.50(i) is 
recommended for adoption.

Material Issue Number 2--Authority To Establish a Minimum Inventory 
Level at Which Reserves Would Be Released

    The order should be amended to add the authority for the Board to 
establish a minimum inventory level at which cherries held in the 
primary and secondary reserves would be released and made available to 
handlers as free tonnage. This change would allow the Board to clear 
out the primary reserve and subsequently the secondary reserve when a 
specified inventory level of tart cherries is reached. The specified 
inventory level would be established by the Secretary through informal 
rulemaking upon recommendation of the Board.
    Section 930.54 of the order specifies different uses and conditions 
for release of cherries placed in inventory reserve. Reserve cherries 
may be released from the primary or secondary reserve if demand is 
greater than supply in commercial outlets, if the Board recommends a 
portion or the entire reserve inventory be released for sale in 
designated markets, or the cherries are to be used in certain exempt 
outlets.
    Section 930.55 of the order provides authority and establishes 
parameters for a primary reserve, including a maximum quantity of 
product that can be held in primary reserve inventories.

[[Page 22115]]

Section 930.57 provides authority and parameters for a secondary 
reserve. Quantities of product in excess of the maximum amount 
established in the primary reserve may be placed in the secondary 
reserve.
    Section 930.57(d) of the order states, in part, that ``No cherries 
may be released from the secondary reserve until all cherries in any 
primary inventory reserve established under Sec.  930.55 have been 
released.'' Based on the language in Sec.  930.57(d) handlers cannot 
access the secondary reserve if any cherries remain in the primary 
reserve. In addition, the current provisions of the order do not allow 
the Board to require handlers to release all inventory held in their 
portion of the primary reserve. The proposed amendment would authorize 
the Secretary, upon recommendation of the Board, to establish a minimum 
inventory level at which all remaining cherries held in the primary and 
secondary reserve would be released and made available to handlers as 
free tonnage.
    Witnesses testified that because handlers cannot access the 
secondary reserve until the primary reserve is completely depleted, 
minimal amounts left in the primary reserve can create problems for the 
industry. According to testimony, this may occur when handlers do not 
take full advantage of opportunities to utilize their portion of the 
primary reserve and carry minimum inventories in the primary reserve. 
Therefore, a minimal amount of inventory remaining in the primary 
reserve of one or a few handlers can prevent the rest of the industry 
from accessing the secondary reserve. In effect, this can prevent the 
majority of the industry from clearing out excess reserve inventories.
    The record indicates that there should be a way to access the 
secondary reserve when there is a minimal amount of product remaining 
in the primary reserve and handlers are not willing or are unable to 
completely deplete their reserve inventories. The proposed amendment 
would provide a way to clear out small amounts of primary reserve and 
provide access to secondary reserve inventories when necessary.
    According to the record, implementation of this amendment could 
also reduce costs associated with administering the reserve program. A 
significant portion of the Board staff's time is directed at tracking 
reserve inventory by reviewing reports from handlers and also 
performing on-site reviews of records and verification of handler 
inventories. Once the reserve is released, it is no longer necessary 
for Board staff to track the reserve inventory.
    Similar to the Board staff, handlers also incur costs in 
maintaining reserves. These costs include the cost of storage and the 
costs associated with tracking inventory levels. If the storage time is 
reduced, the cost to handlers will also be reduced.
    Witnesses stated that when inventory levels reach a minimal amount, 
the costs of tracking inventory at the Board and handler level, plus 
storage costs, outweigh any potential benefit from carrying inventory 
in the primary reserve.
    According to witnesses, the intent of this proposal would be to 
authorize the Board, through informal rulemaking, to establish the 
inventory level at which the Board could release reserves when levels 
are minimal.
    The proposed amendment, if implemented, has the potential to 
positively impact the market by allowing for the sale of more tart 
cherries than the current order provides.
    One witness testified against the proposal. The witness stated that 
no quantification of the potential cost savings was offered by the 
proponents. The witness suggested as an alternative that the Board 
propose or recommend a volume level at which the cost of regulation 
exceeds the benefit. However, no such proposal was offered at the 
hearing.
    The proposed amendment would not establish a specific quantity at 
which primary reserves would be released. Witnesses testified that the 
intent of the proposed amendment is for the Secretary to establish the 
level through informal rulemaking after discussion and recommendation 
of the Board. Pertinent factors would be considered and analyzed during 
that process. No proposal to establish a specific level at which the 
reserve would be released was presented at the hearing. The Board is 
made up of a diverse industry group that ensures that all issues will 
be discussed, and with USDA oversight, the appropriate threshold would 
be established. Establishing the minimum inventory level through 
informal rulemaking would ensure broad support due to the two-thirds 
super majority vote needed for Board approval and recommendation to the 
Secretary. Once the minimum inventory level is established, the Board 
staff would administer the reserve release.
    According to the record, providing authority to establish a minimum 
inventory level at which reserves would be released through the 
informal rulemaking process would provide additional flexibility in 
administering the reserve program. If the Board ultimately recommends a 
minimum level at which reserves would be released, it would help the 
industry to access secondary reserves in certain situations. It could 
also help reduce costs associated with the tracking and storing of 
minimal amounts of reserve product by handlers and Board staff.
    Based on the record evidence, USDA recommends amending the order as 
proposed by the Board by adding Sec.  930.54(d) to authorize the 
Secretary, upon recommendation of the Board, to establish a minimum 
inventory level at which all remaining product held in reserves would 
be released to handlers for use as free tonnage.

Material Issue Number 3--Establishment of a Minimum Age Limitation on 
Product Placed Into Reserves

    The order should be amended to establish a minimum age limitation 
on products placed into reserves. Currently, there is no age limitation 
on products carried in the reserves. Product carried in storage can 
deteriorate over time and is more difficult to sell than product stored 
for a shorter period.
    Section 930.55 of the order specifies parameters for cherries 
placed into reserves. Reserve cherries can be in the form of frozen, 
canned, dried, or concentrated juice.
    According to witness testimony, the marketing order and its 
inventory reserve provisions were crafted with the idea that market 
forces would generally define the products carried in the reserve. 
Handlers are given the option of carrying whatever form and whatever 
type of product they choose in the reserve. There are no quality 
standards applied to products placed into reserves, nor is there a 
limitation regarding the age of products that can be carried in the 
reserve. This has created a situation where handlers can carry product 
that is several years old in the reserve inventories. Witnesses 
testified that because product quality deteriorates over time, poor 
quality product is often carried in reserve inventory.
    According to the record, one of the main rationales for the 
establishment of the reserve program was the concept that the release 
of reserve inventories in low production years would support the long-
term marketing efforts of the industry. This can only be achieved if 
the reserve products released are acceptable to the market. 
Establishing a minimum age limitation on reserve product would prevent 
product that has deteriorated over time from being held in reserve 
inventories. This would

[[Page 22116]]

ultimately aid the industry in its marketing efforts by having better 
quality products available when reserves are released to the market.
    One witness testified that the marketing order currently has 
authority to regulate the quality of cherries held in reserves. If the 
Board wants to regulate the quality of reserve product, it should do so 
through that authority. The witness further testified that the Board's 
proposal to limit the age of cherries placed in reserve would not 
prevent handlers from placing low-grade cherries in reserve, and that 
such cherries can be challenging to sell.
    Other witnesses acknowledged that the order contains authority to 
regulate the quality of cherries held in reserves, and this can be done 
through establishing minimum grade, quality, and condition 
requirements. However, witnesses also testified that the industry has 
chosen not to implement grade and quality standards with respect to 
products carried in the reserve. According to witness testimony, 
establishing and complying with minimum grade and quality standards 
would be expensive to the industry due to inspection costs, inventory 
management costs, and added costs associated with monitoring and 
tracking product grade. Witnesses testified that a more practical 
solution for the industry is to establish an age limitation on reserve 
products. Since tart cherry products deteriorate over time and 
generally have a shelf life of up to three years according to 
testimony, placing an age limitation of three years on reserve product 
should help to ensure reserve product is of marketable quality.
    Based on the record evidence, USDA recommends amending Sec.  
930.55(b) as proposed by the Board to require that products placed into 
reserve inventory must have been produced in the current or preceding 
two crop years.

Material Issue Number 4--Revise Voting Requirements Necessary To 
Approve a Board Action

    The order should not be amended to revise the number of votes 
necessary to approve a Board action.
    Section 930.32 establishes the quorum requirements for Board 
meetings and the voting requirements necessary to approve Board 
actions. This section specifies that two-thirds of the members of the 
Board, including alternates acting for absent members, shall constitute 
a quorum. It further specifies that for any action of the Board to 
pass, two-thirds of the entire Board must vote in favor of such action.
    The Board proposed amending the voting requirement in Sec.  930.32 
to specify that for any action of the Board to pass, at least two-
thirds of those present at the meeting must vote in support of such 
action. The quorum requirement would not change under the proposal.
    Witnesses in favor of this proposal believe the current voting 
requirement can give members who are not in attendance at meetings an 
undue influence on the outcome of votable issues. Witnesses believed 
that because the current requirement for passing a Board action is 
based on a favorable vote of at least two-thirds of the entire Board 
membership, any vacant Board position at a meeting results in the 
equivalent of a ``no'' vote on all votable issues. Witnesses further 
testified that the current requirement may encourage members to not 
attend a meeting if they do not want to discuss the merits of an issue, 
and that their non-attendance has an impact on the outcome of any vote 
taken at the meeting. The proposed amendment, according to proponents, 
would encourage members to attend meetings because they would no longer 
have an impact on the outcome of Board actions by virtue of their 
absence. If the proposal is implemented, members would have more 
incentive to attend meetings in order to discuss, vote, and have an 
impact on Board actions, according to witnesses. Witnesses also 
testified that improved meeting attendance would lead to increased 
interaction and discussion of industry issues among Board members.
    Witnesses asserted that the current voting requirements are 
unnecessarily restrictive. The current requirements could allow a small 
minority of Board members to effectively block an action that may be 
favored by the majority of the Board. For example, with an 18 or 19-
member Board, six members could block an action favored by 13 members. 
An example cited at the hearing referenced a specific Board meeting 
where 15 of 19 members were present. The required number of votes to 
pass a Board action was 13. It was testified that a small minority of 
three members were not supportive of an issue that the majority of 
Board members favored, which prevented the Board from taking an action 
it may have otherwise taken.
    Witnesses opposed to this proposed change testified that the 
proposed change to the voting requirements could create a situation 
where a minority number of Board members could approve an action. For 
example, if the Board consisted of 19 members and there were 13 members 
present at a meeting, an action could be passed by an affirmative vote 
of nine members. Nine members would represent only 47 percent of the 19 
Board members.
    Witnesses opposed to the proposal also testified that the proposed 
change could increase the possibility that members affiliated with a 
common sales constituency or region could dominate the Board and Board 
actions. This effect could be amplified if the proposed amendment to 
Sec.  930.20 (see material issue <greek-i>6) is adopted. That 
particular proposal could result in an increase in the number of Board 
members affiliated with a common sales constituency under certain 
circumstances.
    Witness testimony also contended that there is no evidence that the 
current voting requirements are ineffective. Lacking any evidence to 
the contrary, the arguments used in implementing the current voting 
requirements are as valid now as when they were originally implemented, 
according to one witness.
    The contention that a vacant Board position at a meeting 
automatically results in a ``no'' vote on all votable issues is not 
correct. If a Board seat is vacant at a meeting, the vacant seat would 
not be recorded in vote counts. In contrast however, under the order, 
voting requirements do not change based on the number of members 
present at the meeting. It takes a fixed number of votes to pass a 
Board action, regardless of the number of members in attendance at a 
meeting. Thus, if a member was absent from a meeting, that member's 
absence would have the same impact on a vote as if the member was 
present and voted ``no''.
    According to statistics presented at the hearing regarding 
attendance at past Board meetings, there was non-attendance of members 
in 20 of the past 40 Board meetings. Of the 20 meetings with members 
not in attendance, 17 of those meetings had one member absent, two 
meetings had two absent members, and one meeting had four absences. 
These statistics indicate that lack of attendance of Board members has 
not been an overriding problem at Board meetings. In fact, only 3.4% of 
the available Board seats have been unrepresented in the 40 meetings 
for which statistics were provided. Further, the statistics do not 
indicate there is an attendance problem from any particular region or 
district. Given the size of the Board (18 or 19 members, depending on 
production levels in the districts), and the geographic disbursement of 
members and travel involved to attend meetings, the meeting attendance 
record is very high. On a percentage basis, nearly 97 percent of 
available Board seats were filled in the 40 meetings for which 
statistics were provided.

[[Page 22117]]

    Record testimony indicated that the Board tries to reach consensus 
on issues coming before it. Most actions taken by the Board are 
unanimous or very close to unanimous, indicating a high degree of 
support for Board actions.
    The current super-majority voting requirements were intentionally 
incorporated into the order when it was promulgated and subsequently 
amended. The requirements were designed to help ensure a high degree of 
support for issues at the Board level. According to the order's 
promulgation record, the current voting requirements were incorporated 
into the order to ensure that the industry majority supports actions of 
the Board, and that minority interests are addressed. Further, the 
requirements were intended in part to ensure that a single sales 
constituency would not have a controlling interest on the Board. The 
record evidence does not refute that these same issues are valid today. 
Further, the evidence does not show that the current voting 
requirements are having an undue impact on Board actions or functions 
or that lack of attendance has caused an undue influence on the outcome 
of Board actions.
    The record evidence does not support changing the voting 
requirements under the order. For the reasons discussed herein, USDA 
recommends that proposed amendment to Sec.  930.32(a) not be adopted.

Material Issue Number 5--Revise Nomination and Election Process for 
Handler Members on the Board

    The order should be amended to require a handler to receive support 
from handler(s) that handled at least five percent of the average 
production of tart cherries handled in the applicable district in order 
to be eligible to participate as a candidate in an election for Board 
membership. The order should also be amended to require a handler to 
receive support from handler(s) that handled at least five percent of 
the average production of tart cherries handled in the applicable 
district in order to be elected by the industry and recommended to the 
Secretary for Board membership.
    Section 930.23 specifies procedures and criteria for growers and 
handlers to be nominated as candidates for Board membership. It also 
specifies procedures and criteria for candidates to be elected by the 
industry for recommendation to the Secretary for Board membership.
    To be nominated as a Board candidate, a handler must be nominated 
by one or more handlers, other than the nominee, from the applicable 
district. If there are fewer than two handlers in the district, a 
handler can nominate him or herself. To be elected by the industry for 
recommendation to the Secretary, the successful handler candidate is 
the candidate receiving the most votes. Each eligible handler is 
entitled to one vote, and there is no weight given to the individual 
votes based on the volume of cherries handled.
    The amendment proposed by the Board would provide additional 
criteria for being nominated as a handler candidate and being elected 
by the industry for recommendation for a handler position on the Board. 
The proposed additional criteria for a person to be nominated as a 
handler candidate would require the prospective candidate to attain 
support from another handler or handlers whose combined tonnage handled 
represents at least five percent of the average production handled in 
the applicable district. If a handler attained this five percent 
support, he or she could then be a candidate in the election. A 
successful candidate would then be required to similarly receive 
support (through the balloting process) from another handler or 
handlers whose combined tonnage represented no less than five percent 
of the average production handled in the applicable district. Of the 
candidates who received support from handlers representing at least 
five percent of the average production in the district, the candidate 
with the most votes would be recommended to the Secretary for Board 
membership.
    Witnesses testified that handler members on the Board should at 
least have support of a minimum amount of tonnage handled in the 
applicable district to help ensure they represent the interests of 
handlers in the district. Obtaining support from handlers representing 
at least five percent of the volume in the district was considered to 
be reasonable, and would not be an overly burdensome amount of support 
to obtain. Witnesses also testified that under the order's current 
provisions, handlers representing a small amount of volume could attain 
and potentially control the handler seats on the Board. Witnesses 
indicated that it would not be equitable to the handlers representing 
the vast majority of production if this situation was to occur.
    Testimony was also provided at the hearing regarding application of 
this proposed amendment in conjunction with the proposed amendment to 
Sec.  930.20(g) addressed in material issue number six. It was 
discussed that if a potential handler candidate for Board membership 
could not achieve support from handlers handling five percent of the 
average production in a district, that should not prevent him or her 
from serving on the Board if it would prevent a sales constituency 
conflict from occurring as provided in Sec.  930.20(g). (A sales 
constituency conflict is considered to exist if two persons from the 
same district are affiliated with the same sales constituency.)
    Record testimony supports requiring a minimum level of support for 
a handler to be elected to the Board. A provision to require members to 
have support from their peers representing at least five percent of the 
volume in the district would help to ensure that commercial handler 
interests in the applicable district are being represented. Such a 
provision would not preclude a small handler from serving on the Board. 
It would only require a handler to garner a minimum level of support 
from industry peers in order to serve on the Board. The provision would 
establish a minimum threshold of support in terms of volume handled to 
represent the constituents in the district.
    However, testimony also was provided at the hearing regarding 
application of the proposed amendment in conjunction with the proposed 
amendment to Sec.  930.20(g) addressed in material issue number six. As 
discussed in material issue number six, USDA agrees with testimony 
indicating that if a potential handler candidate for Board membership 
could not achieve support from handlers handling five percent of the 
average production in a district, that should not prevent him or her 
from serving on the Board if it would prevent a sales constituency 
conflict from occurring as provided in Sec.  930.20(g). (A sales 
constituency conflict is considered to exist if two persons from the 
same district are affiliated with the same sales constituency.)
    Record evidence supports adopting the Board's proposal by amending 
Sec.  930.23(b)(2) and Sec.  930.23(c)(3)(ii) of the order to require 
handler candidates seeking nomination to the Board to receive support 
from handler(s) that handled at least five percent of the average 
production of tart cherries handled in the district in which he or she 
is seeking the position. Record evidence also supports adding 
provisions to Sec.  930.23(b)(2) and Sec.  930.23(c)(3)(ii) that would 
conform this section to the proposed amendments to Sec.  930.20(g) 
regarding sales constituency affiliation. USDA recommends adoption of 
this amendment as proposed, with changes as noted.

[[Page 22118]]

Material Issue Number 6--Revise Board Membership Affiliation 
Requirements

    The order should be amended to revise Board membership affiliation 
requirements to allow more than one Board member per district from 
being affiliated with the same sales constituency if it cannot be 
avoided.
    Section 930.20(g) of the order currently provides that no more than 
one Board member may be from, or affiliated with, a single sales 
constituency in those districts with more than one seat on the Board. A 
sales constituency is defined in Sec.  930.16 as ``* * * a common 
marketing organization or brokerage firm or individual representing a 
group of handlers or growers * * *.'' The purpose of this provision is 
to achieve a fair and balanced representation on the Board and to 
prevent any one sales constituency from gaining control of the Board.
    The proposed amendment would add a proviso to the prohibition 
limiting the number of Board members from a sales constituency in 
districts with more than one member. The proviso states that the sales 
constituency prohibition shall not apply in a district where such a 
conflict cannot be avoided.
    Witnesses supporting this proposed amendment testified that the 
current order provisions recently prevented District 7, the State of 
Utah, from attaining its full complement of positions on the Board. 
Section 930.20(b) provides that districts with greater than 10 million 
pounds of production and less than 40 million pounds are entitled to 
two seats on the Board. Based on this provision, the State of Utah is 
entitled to two positions on the Board. However, a situation occurred 
in recent years where there were no eligible persons willing to serve 
on the Board from Utah who were affiliated with a different sales 
constituency than the existing Board member, as required by Section 
930.30(g). Witnesses testified that despite extensive outreach efforts, 
they were only able to locate one eligible candidate from a different 
sales constituency, but that person had no interest in serving on the 
Board. Because of this situation, there was one vacant Utah seat on the 
Board. Utah was unable to achieve its full complement of positions on 
the Board pursuant to Sec.  930.20(b) of the order. Witnesses believed 
that a fair and equitable process was not being well served in this 
situation, and that a conflict exists between sections 930.20(b), which 
allocates Utah two positions on the Board, and 930.20(g), which 
prevents two members from the same sales constituency in the same 
district from serving on the Board.
    The proposed amendment is intended to prevent this type of 
situation from occurring. Witnesses testified that a district's right 
to representation on the Board is more important than the requirement 
that Board members from the same District not be affiliated with the 
same sales constituency.
    One witness expressed reservations about the proposed amendment. He 
indicated that a potential increase in the number of Board members 
affiliated with the same sales constituency may not promote diversity 
of views on the Board. The witness also stated that this proposal would 
not be desirable if the proposed change to the voting requirements is 
adopted. The witness suggested an alternative idea would be to divide 
the State of Utah into two districts for Board representation purposes. 
However, the witness did not present a specific alternative proposal or 
any information or analysis demonstrating how this would address the 
problem.
    The record indicates that the Board's proposal would address the 
issue of ensuring that the various districts under the order would be 
able to maintain their share of representation on the Board.
    The provisions of the proposed amendment would allow two Board 
members from a district to be affiliated with the same sales 
constituency if it cannot be avoided. An example given at the hearing 
regarding when a sales constituency conflict could not be avoided was 
if there were no other persons willing and able to serve on the Board 
from a particular district from a different sales constituency. 
Witnesses were questioned about the possible implementation of this 
proposed amendment and the proposed amendment under material issue 
number five that would require a handler Board member candidate to 
achieve support from handlers representing at least five percent of the 
production in the District in order to run for a position and be 
elected to the Board. Some witnesses testified that if the only 
qualified candidate in a particular district that was not affiliated 
with the same sales constituency as the other Board member from that 
district could not achieve the five percent support, then that person 
should be able to serve on the Board to avoid having two members from 
the same district affiliated with the same sales constituency. Other 
witnesses testified that if such a situation occurred, the candidate 
should not be allowed to serve on the Board, and if another qualified 
candidate from the same sales constituency as the existing member was 
available and met the five percent criteria, that candidate should be 
able to serve.
    The record is clear that if there are no willing and eligible 
candidates available to serve on the Board from a different sales 
constituency than the existing member(s), then it should be permissible 
to allow two members from the same sales constituency to serve so that 
each district achieves its share of representation. In order to 
appropriately address the issue that generated this proposal while 
avoiding two members on the Board from the same sales constituency, 
USDA concludes that it is reasonable to not apply the five percent 
requirements discussed in material issue number five in these 
circumstances. Accordingly, as provided in material issue number five, 
language is added to conform and clarify the two sections of the order.
    Record evidence supports amending Sec.  930.20(g) to revise Board 
membership affiliation requirements to allow more than one Board member 
per district from being affiliated with the same sales constituency if 
such a conflict cannot be avoided. USDA recommends adoption of this 
amendment as proposed.

Material Issue Number 7--Update Order Language

    Section 930.23 of the order should be revised to update order 
language to more accurately reflect grower and handler participation in 
the nomination and election process in districts with only one Board 
representative. Section 930.20 establishes the calculations for the 
number of representatives on the Board to which each district is 
entitled. Based on the calculations established in Sec.  930.20, the 
number of Board representatives can vary from year to year due to 
shifts in production levels in various districts.
    Sections 930.23(b)(5) and (c)(4) specifically reference Districts 
5, 6, 8 and 9 in regard to the nomination and election process. Those 
were the districts entitled to one Board seat when the order was 
initially promulgated. However, districts that are entitled to one 
Board seat have changed over time due to shifts in production. Amending 
Sec.  930.23(b)(5) and (c)(4) by removing the specific references to 
Districts 5, 6, 8 and 9 and replacing it with generic language to cover 
any district that is entitled to only one Board representative based on 
the representation calculation established in Sec.  930.20 would update 
order language to accommodate changes in production

[[Page 22119]]

patterns in the tart cherry industry. This amendment is intended to 
simply update language rather than alter the meaning of order 
provisions in any way. Witnesses supported this proposed amendment at 
the hearing and there was no opposition expressed.
    The record evidence supports amending Sec.  930.23(b)(5) and (c)(4) 
as proposed.

Conforming Changes

    The Agricultural Marketing Service also proposed to make such 
changes as may be necessary to the order to conform to any amendment 
that may result from the hearing. Except as previously discussed, the 
Department has identified no additional conforming changes.

Small Business Considerations

    Pursuant to the requirements set forth in the Regulatory 
Flexibility Act (RFA), AMS has considered the economic impact of this 
action on small entities. Accordingly, AMS has prepared this initial 
regulatory flexibility analysis.
    The purpose of the RFA is to fit regulatory actions to the scale of 
business subject to such actions so that small businesses will not be 
unduly or disproportionately burdened. Marketing orders and amendments 
thereto are unique in that they are normally brought about through 
group action of essentially small entities for their own benefit.
    Small agricultural producers have been defined by the Small 
Business Administration (SBA) (13 CFR 121.201) as those having annual 
receipts of less than $750,000. Small agricultural service firms, which 
include handlers regulated under the order, are defined as those with 
annual receipts of less than $6,500,000.
    There are approximately 40 handlers of tart cherries subject to 
regulation under the order and approximately 900 producers of tart 
cherries in the regulated area. A majority of the producers and 
handlers are considered small entities according to the SBA's 
definition.
    The geographic region regulated under the order covers the states 
of Michigan, New York, Oregon, Pennsylvania, Utah, Washington, and 
Wisconsin. Acreage devoted to tart cherry production in the regulated 
area has declined in recent years. According to data presented at the 
hearing, bearing acreage in 1987-88 totaled 50,050 acres; by 2006-2007 
it had declined to 37,200 acres. Michigan accounts for 74 percent of 
total U.S. bearing acreage with 27,700 bearing acres. Utah is second, 
with a reported 2,800 acres, or approximately eight percent of the 
total. The remaining states' acreage ranges from 700 to 2,000 acres.
    Production of tart cherries can fluctuate widely from year to year. 
The magnitude of these fluctuations is one of the most pronounced for 
any agricultural commodity in the United States, and is due in large 
part to weather related conditions during the bloom and growing 
seasons. This fluctuation in supplies presents a marketing challenge 
for the tart cherry industry because demand for the product is 
relatively static. In addition, the demand for tart cherries is 
inelastic, which means a change in the supply has a proportionately 
larger change in the price level.
    Authorities under the order include volume regulation, promotion 
and research, and grade and quality standards. Volume regulation is 
used under the order to augment supplies during short supply years with 
product placed in reserves during large supply years. This practice is 
intended to reduce the annual fluctuations in supplies and 
corresponding fluctuations in prices.
    The Board is comprised of representatives from all producing areas 
based on the volume of cherries produced in those areas. The Board 
consists of a mix of handler and grower members, and a member that 
represents the public. Board meetings where regulatory recommendations 
and other decisions are made are open to the public. All members are 
able to participate in Board deliberations, and each Board member has 
an equal vote. Others in attendance at meetings are also allowed to 
express their views.
    The Board appointed a subcommittee to consider amendments to the 
marketing order. The subcommittee met several times for this purpose, 
and ultimately recommended several amendments to the order. The Board 
subsequently requested that USDA conduct a hearing to consider the 
proposed amendments. The views of all participants were considered 
throughout this process.
    In addition, the hearing to receive evidence on the proposed 
amendments was open to the public and all interested parties were 
invited and encouraged to participate and express their views.
    The proposed amendments are intended to provide additional 
flexibility in administering the volume control provisions of the 
order, and to update Board nomination, election, and membership 
requirements. The amendments are intended to improve the operation and 
administration of the order. Record evidence indicates the proposals 
are intended to benefit all producers and handlers under the order, 
regardless of size.

Proposal 1--Adding the Authority To Change the Primary Reserve Capacity

    The proposal described in Material Issue No. 1 of this recommended 
decision would amend Sec.  930.50 of the order to authorize changing 
the primary reserve capacity associated with the volume provisions of 
the order through informal rulemaking. Changing the reserve capacity 
currently requires amendment of the order through the formal rulemaking 
process.
    The order establishes a fixed quantity of 50-million pounds of tart 
cherries and tart cherry products that can be held in the primary 
reserve. Any reserve product in excess of the 50-million-pound 
limitation must be placed in the secondary reserve.
    Free tonnage product can be sold to any market outlet, but most 
shipments are sold domestically, which is considered the primary 
market. Reserve product can be used only in specific outlets which are 
considered secondary markets. These secondary markets include 
development of export markets, new product development, new markets, 
and government purchases.
    When the order was promulgated, a 50-million-pound limitation was 
placed on the capacity of the primary reserve. Proponents of the 
current order proposed a limitation on the quantity of product that 
could be placed into the primary reserve. That limitation was 
incorporated into the order, and can only be changed through the formal 
rulemaking process.
    Economic data presented when the order was promulgated indicated 
that a reserve program could benefit the industry by managing 
fluctuating supplies. Witnesses at the February and March 2007 hearing 
indicated the order has been successful in this regard. However, the 
record indicated that the order could be more flexible in allowing 
modifications to the 50-million-pound limitation should conditions 
warrant such a change in the future.
    If the reserve capacity was changed, costs associated with storing 
product in reserves could also change. In addition, to the extent such 
a change could affect supplies in the marketplace; returns to both 
growers and handlers could also be affected.
    Any Board recommendation to change the reserve capacity would be 
required to be implemented through the informal rulemaking process. As 
part of the informal rulemaking process, USDA expects that any Board 
recommendation

[[Page 22120]]

would include an analysis of the pertinent factors and issues, 
including the impact of a proposed regulation on producers and 
handlers. Any change to the reserve capacity would be implemented only 
with analysis of the expected economic impact on the affected entities.

Proposal 2--Adding the Authority To Establish a Minimum Inventory Level 
at Which Reserves Would Be Released

    The proposal described in Material Issue No. 2 would amend Sec.  
930.54 of the order to provide the Board with the authority to 
establish a minimum inventory level at which reserves would be released 
and made available to handlers as free tonnage. If implemented, the 
proposed amendment would allow the Board to clear out the primary 
reserve and subsequently the secondary reserve when a specified minimum 
inventory level of tart cherries is reached. The specified minimum 
level would be established through the informal rulemaking process.
    Under current order provisions, handlers cannot access the 
secondary reserve until the primary reserve is empty. Based on current 
language of the order, one handler who has not completely disposed of 
or otherwise fulfilled its reserve obligation can prevent access to the 
secondary reserve.
    The proposed amendment would allow the Board to clear out the 
primary reserve when inventory levels are at a minimum level in order 
to provide the industry access to secondary reserve inventories.
    If the amendment were implemented, costs to both handlers and the 
Board could be reduced. Handlers incur costs in maintaining reserves. 
According to the record, these costs include the cost of storage, which 
can be in the range of $.01 per pound per month. Handlers also incur 
costs associated with tracking their own inventory levels. Witnesses 
stated that when inventory levels reach a minimal amount the costs of 
tracking inventory outweighs the benefit from carrying inventory in the 
primary reserve.
    A significant portion of the Board staff's time is directed at 
tracking reserve inventory maintained at handlers' facilities. Hearing 
witnesses testified that while it is difficult to quantify the exact 
value of the Board staff's time to conduct these activities, the time 
could be better spent on other industry issues, and it is unnecessary 
to track minimal levels of inventory.
    The proposed amendment, if implemented, could have a positive 
impact on the market. As inventories are released from the reserves, 
products could be sold, generating revenue for the industry. This 
proposed amendment, if implemented, is expected to reduce costs to 
handlers and the Board, thus having a positive economic impact.

Proposal 3--Establishing an Age Limitation on Products Placed Into 
Reserves

    The proposal described in Material Issue No. 3 would amend Sec.  
930.55 to require that products placed in reserves must have been 
produced in the current or immediately preceding two crop years. If 
implemented, this proposed amendment would allow the Board to place an 
age limit on products carried in the reserve. The purpose of the 
amendment would be to help ensure that products of saleable quality are 
maintained in reserve inventories.
    Witnesses supported the proposed amendment by stating that it would 
add credibility to product quality for all products carried in the 
reserve. Currently, handlers can carry products they have no intention 
of selling just to meet their reserve obligation. This amendment would 
require handlers to rotate product in their reserve inventory, thus 
preventing them from maintaining the same product in the reserve year 
after year. Product held in inventory tends to deteriorate over time. 
When reserve product is ultimately released for sale to meet market 
demand, this proposed amendment would help ensure the reserve product 
available is in saleable condition and can satisfy the market's needs. 
Assuring product is available to satisfy the market helps to foster 
long term market stability.
    In terms of costs, handlers may experience some minimal costs 
associated with periodically rotating product through their reserve 
inventory. It would be difficult to estimate such costs because they 
would vary depending upon each handler's operation. To the extent costs 
would be increased, they would be proportionate to each handler's share 
of the entire industry's reserve inventory. Each handler's reserve 
inventory obligation is based on the handler's share of the total crop 
handled. Thus, small handlers would not be disproportionately burdened.
    It is anticipated that the benefits of providing a good quality 
product in reserves to ultimately supply markets when needed would 
outweigh any costs associated with implementation of this amendment.

Proposal 4--Revision of Voting Requirements To Approve Board Actions

    The proposal submitted by the Board in Material Issue No. 4 would 
revise voting requirements under Sec.  930.32 of the order. Current 
requirements provide that any action of the Board requires a two-thirds 
vote of the entire Board. The proposal would allow passage of a Board 
action with a two-thirds vote of those present at a meeting. USDA 
denied this proposal and will not change the voting requirements for 
reasons specified earlier in this recommended decision.

Proposal 5--Revision of Nomination and Election Process for Handler 
Members on the Board

    The proposal submitted by the Board in Material Issue No. 5 relates 
to nomination and election of Board members under Sec.  930.23 of the 
order. It would require a handler to receive support from handlers that 
handled at least five percent of the average production of tart 
cherries in the applicable district in order to be a candidate and to 
be elected by the industry and recommended to the Secretary for Board 
membership.
    Under the current order, there is no accounting for handler volume 
in the nomination and balloting process. Each handler is entitled to 
one equal vote. This proposal would continue to allow each handler to 
have one vote, but would also require handler candidates to be 
supported by handlers representing at least five percent of the average 
production in the applicable district to be eligible to run for a Board 
position and to be elected by the industry for recommendation to the 
Secretary. This would help to ensure that handler members on the Board 
represent the interests of handlers in their district that account for 
at least a minimal percentage of the volume in the district.
    This proposed amendment is not anticipated to have a significant 
economic impact on small businesses. It only affects the nomination and 
election criteria for membership on the Board by adding volume as an 
element of support to help ensure that Board membership reflects the 
interests of its constituency. All handlers, regardless of size, will 
continue to be able to participate in the nomination and election 
process. The process would continue to allow for both small and large 
handlers to be represented on the Board.

[[Page 22121]]

Proposal 6--Revision of Board Membership Affiliation Requirements

    The Board's proposal discussed in Material Issue No. 6 would amend 
Sec.  930.20 to allow more than one Board member to be affiliated with 
the same sales constituency from the same district, if such a conflict 
cannot be avoided.
    Currently, Sec.  930.20 does not allow more than one Board member 
to be affiliated with the same sales constituency from the same 
district under any circumstances. The purpose of this provision is to 
prevent any one sales constituency from having a controlling influence 
on Board issues and actions. However, a situation occurred in District 
7, Utah, where this particular provision of the order did not allow the 
district from having two representatives on the Board, as it was 
entitled to under section 930.20(b) of the order. In that situation, 
the only candidates willing to serve on the Board from Utah were 
affiliated with the same sales constituency. Thus Utah was only able, 
under the marketing order rules, to seat one of the two Board 
representatives it was entitled to.
    The proposed amendment is designed to prevent this problem from 
occurring in the future by allowing more than one Board member 
affiliated with the same sales constituency to represent a district, if 
such a sales constituency conflict cannot be avoided. The hearing 
record is clear that the sales constituency provision should not 
prevent a district from having its allocated number of seats on the 
board if there are eligible candidates willing to serve on the Board.
    This amendment is not expected to have an economic impact on 
growers or handlers. It relates to representation on the Board, and is 
intended to help ensure each area covered under the order has the 
opportunity to achieve its allocated representation on the Board.

Proposal 7--Update Order Language to Accurately Reflect Grower and 
Handler Participation in the Nomination and Election Process in 
Districts With Only One Board Representative

    The proposal described in Material Issue No. 7 would amend Sec.  
930.23 to revise and update order language to more accurately reflect 
grower and handler participation in the nomination and election process 
in districts with only one Board representative.
    Sections 930.23(b)(5) and (c)(4) specifically reference Districts 
5, 6, 8 and 9 in regard to the nomination and election process. Those 
were the districts entitled to one Board seat when the order was 
initially promulgated. However, districts that are entitled to one 
Board seat have changed over time due to shifts in production. Amending 
Sec.  930.23(b)(5) and (c)(4) by removing the specific references to 
Districts 5, 6, 8 and 9 and replacing it with generic language to cover 
any district that is entitled to only one Board representative based on 
the representative calculation established in Sec.  930.20 would update 
order language to better reflect the constantly changing tart cherry 
industry.
    This amendment updates order language to remove incorrect 
references to district representation in the event production shifts 
occur. It has no economic impact on handlers, growers, or any other 
entities.
    Interested persons were invited to present evidence at the hearing 
on the probable regulatory and informational impacts of the proposed 
amendments to the order on small entities. The record evidence is that 
some of the proposed amendments may result in some minimal cost 
increases while others will result in cost decreases. To the extent 
there are any cost increases, the benefits of the proposed changes are 
expected to outweigh the costs. In addition, changes in costs as a 
result of these amendments would be proportional to the size of 
businesses involved and would not unduly or disproportionately impact 
small entities. The informational impact of proposed amendments is 
addressed in the Paperwork Reduction Act discussion that follows.
    USDA has not identified any relevant Federal rules that duplicate, 
overlap or conflict with this proposed rule. These amendments are 
intended to improve the operation and administration of the order to 
the benefit of the industry.
    Board meetings regarding these proposals as well as the hearing 
date and location were widely publicized throughout the tart cherry 
industry, and all interested persons were invited to attend the 
meetings and the hearing, and to participate in Board deliberations on 
all issues. All Board meetings and the hearing were public forums and 
all entities, both large and small, were able to express views on these 
issues. Finally, interested persons are invited to submit information 
on the regulatory and informational impacts of this action on small 
businesses.
    A 30-day comment period is provided to allow interested persons to 
respond to this proposal. Thirty days is deemed appropriate because 
these proposed changes have been widely publicized and the Board and 
industry would like to avail themselves of the opportunity to to 
implement the changes as soon as possible. All written exceptions 
timely received will be considered and a grower referendum will be 
conducted before any of these proposals are implemented.
    AMS is committed to complying with the E-Government Act, to promote 
the use of the Internet and other information technologies to provide 
increased opportunities for citizen access to Government information 
and services, and for other purposes.

Paperwork Reduction Act

    Information collection requirements for Part 930 are currently 
approved by the Office of Management and Budget (OMB), under OMB Number 
0581-0177, Tart Cherries Grown in the States of Michigan, New York, 
Pennsylvania, Oregon, Utah, Washington, and Wisconsin. Implementation 
of these proposed amendments would not trigger any changes to those 
requirements. It is possible that a change to the reporting 
requirements may occur in the future if the Board believes it would be 
necessary to assist in program compliance efforts. Should any such 
changes become necessary in the future, they would be submitted to OMB 
for approval.
    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.

Civil Justice Reform

    The amendments to Marketing Order 930 proposed herein have been 
reviewed under Executive Order 12988, Civil Justice Reform. They are 
not intended to have retroactive effect. If adopted, the proposed 
amendments would not preempt any State or local laws, regulations, or 
policies, unless they present an irreconcilable conflict with this 
proposal.
    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 USDA 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, USDA would rule on the petition. The Act provides 
that the district court of the United Sates in any district in which 
the handler is an inhabitant, or has his or her principal place of 
business, has jurisdiction to review USDA's ruling on the petition, 
provided an action is filed

[[Page 22122]]

no later than 20 days after the date of the entry of the ruling.

Rulings on Briefs of Interested Persons

    Briefs, proposed findings and conclusions, and the evidence in the 
record were considered in making the findings and conclusions set forth 
in this recommended decision. To the extent that the suggested findings 
and conclusions filed by interested persons are inconsistent with the 
findings and conclusions of this recommended decision, the requests to 
make such findings or to reach such conclusions are denied.

General Findings

    The findings hereinafter set forth are supplementary to the 
findings and determinations which were previously made in connection 
with the issuance of the marketing agreement and order; and all said 
previous findings and determinations are hereby ratified and affirmed, 
except insofar as such findings and determinations may be in conflict 
with the findings and determinations set forth herein.
    (1) The marketing agreement and order, as amended, and as hereby 
proposed to be further amended, and all of the terms and conditions 
thereof, would tend to effectuate the declared policy of the Act;
    (2) The marketing agreement and order, as amended, and as hereby 
proposed to be further amended, regulate the handling of tart cherries 
grown in the production area (the States of Michigan, New York, Oregon, 
Pennsylvania, Utah, Washington, and Wisconsin) in the same manner as, 
and are applicable only to, persons in the respective classes of 
commercial and industrial activity specified in the marketing agreement 
and order upon which a hearing has been held;
    (3) The marketing agreement and order, as amended, and as hereby 
proposed to be further amended, are limited in their application to the 
smallest regional production area which is practicable, consistent with 
carrying out the declared policy of the Act, and the issuance of 
several orders applicable to subdivisions of the production area would 
not effectively carry out the declared policy of the Act;
    (4) The marketing agreement and order, as amended, and as hereby 
proposed to be further amended, prescribe, insofar as practicable, such 
different terms applicable to different parts of the production area as 
are necessary to give due recognition to the differences in the 
production and marketing of tart cherries grown in the production area; 
and
    (5) All handling of tart cherries grown in the production area as 
defined in the marketing agreement and order, is in the current of 
interstate or foreign commerce or directly burdens, obstructs, or 
affects such commerce.
    A 30-day comment period is provided to allow interested persons to 
respond to this proposal. Thirty days is deemed appropriate because 
these proposed changes have been widely publicized and implementation 
of the changes, if adopted, would be desirable to benefit the industry 
as soon as possible. All written exceptions timely received will be 
considered and a grower referendum will be conducted before any of 
these proposals are implemented.

List of Subjects in 7 CFR Part 930

    Marketing agreements, Reporting and recordkeeping requirements, 
Tart cherries.

    For the reasons set forth in the preamble, 7 CFR Part 930 is 
proposed to be amended as follows:

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. Revise paragraph (g) of Sec.  930.20 to read as follows:


Sec.  930.20  Establishment and membership.

* * * * *
    (g) In order to achieve a fair and balanced representation on the 
Board, and to prevent any one sales constituency from gaining control 
of the Board, not more than one Board member may be from, or affiliated 
with, a single sales constituency in those districts having more than 
one seat on the Board; Provided, That this prohibition shall not apply 
in a district where such a conflict cannot be avoided. There is no 
prohibition on the number of Board members from differing districts 
that may be elected from a single sales constituency which may have 
operations in more than one district. However, as provided in Sec.  
930.23, a handler or grower may only nominate Board members and vote in 
one district.
* * * * *
    3. Revise paragraphs (b)(2) and (b)(5), redesignate paragraph 
(c)(3) as paragraph (c)(3)(i), add a new paragraph (c)(3)(ii), and 
revise paragraph (c)(4) of Sec.  930.23 to read as follows:


Sec.  930.23  Nomination and Election.

* * * * *
    (b) * * *
    (2) In order for the name of a handler nominee to appear on an 
election ballot, the nominee's name must be submitted with a petition 
form, to be supplied by the Secretary or the Board, which contains the 
signature of one or more handler(s), other than the nominee, from the 
nominee's district who is or are eligible to vote in the election and 
that handle(s) a combined total of no less than five percent (5%) of 
the average production, as that term is used Sec.  930.20, handled in 
the district. Provided, that this requirement shall not apply if its 
application would result in a sales constituency conflict as provided 
in Sec.  930.20(g). The requirement that the petition form be signed by 
a handler other than the nominee shall not apply in any district where 
fewer than two handlers are eligible to vote.
* * * * *
    (5) In districts entitled to only one Board member, both growers 
and handlers may be nominated for the district's Board seat. Grower and 
handler nominations must follow the petition procedures outlined in 
paragraphs (b)(1) and (b)(2) of this section.
* * * * *
    (c) * * *
    (3) * * *
    (ii) To be seated as a handler representative in any district, the 
successful candidate must receive the support of handler(s) that 
handled a combined total of no less than five percent (5%), of the 
average production, as that term is used in Sec.  930.20, handled in 
the district; Provided, that this paragraph shall not apply if its 
application would result in a sales constituency conflict as provided 
in Sec.  930.20(g).
    (4) In districts entitled to only one Board member, growers and 
handlers may vote for either the grower or handler nominee(s) for the 
single seat allocated to those districts.
* * * * *
    4. Revise paragraph (i) of Sec.  930.50 to read as follows:


Sec.  930.50  Marketing policy.

* * * * *
    (i) Restricted Percentages. Restricted percentage requirements 
established under paragraphs (b), (c), or (d) of this section may be 
fulfilled by handlers by either establishing an inventory reserve in 
accordance with Sec.  930.55 or Sec.  930.57 or by diversion of product 
in accordance with Sec.  930.59. In years where required, the Board 
shall establish a maximum percentage of the restricted quantity which 
may be established as a primary

[[Page 22123]]

inventory reserve such that the total primary inventory reserve does 
not exceed 50-million pounds; Provided, That such 50-million-pound 
quantity may be changed upon recommendation of the Board and approval 
of the Secretary. Any such change shall be recommended by the Board on 
or before September 30 of any crop year to become effective for the 
following crop year, and the quantity may be changed no more than one 
time per crop year. Handlers will be permitted to divert (at plant or 
with grower diversion certificates) as much of the restricted 
percentage requirement as they deem appropriate, but may not establish 
a primary inventory reserve in excess of the percentage established by 
the Board for restricted cherries. In the event handlers wish to 
establish inventory reserve in excess of this amount, they may do so, 
in which case it will be classified as a secondary inventory reserve 
and will be regulated accordingly.
* * * * *
    5. Add a new paragraph (d) to Sec.  930.54 to read as follows:


Sec.  930.54  Prohibition on the use or disposition of inventory 
reserve cherries.

* * * * *
    (d) Should the volume of cherries held in the primary inventory 
reserves and, subsequently, the secondary inventory reserves reach a 
minimum amount, which level will be established by the Secretary upon 
recommendation from the Board, the products held in the respective 
reserves shall be released from the reserves and made available to the 
handlers as free tonnage.
    6. Revise paragraph (b) of Sec.  930.55 to read as follows:


Sec.  930.55  Primary inventory reserves.

* * * * *
    (b) The form of the cherries, frozen, canned in any form, dried, or 
concentrated juice, placed in the primary inventory reserve is at the 
option of the handler. The product(s) placed by the handler in the 
primary inventory reserve must have been produced in either the current 
or the preceding two crop years. Except as may be limited by Sec.  
930.50(i) or as may be permitted pursuant to Sec. Sec.  930.59 and 
930.62, such inventory reserve portion shall be equal to the sum of the 
products obtained by multiplying the weight or volume of the cherries 
in each lot of cherries acquired during the fiscal period by the then 
effective restricted percentage fixed by the Secretary; Provided, That 
in converting cherries in each lot to the form chosen by the handler, 
the inventory reserve obligations shall be adjusted in accordance with 
uniform rules adopted by the Board in terms of raw fruit equivalent.
* * * * *

    Dated: May 7, 2009.
Craig Morris,
Acting Associate Administrator.
[FR Doc. E9-11052 Filed 5-11-09; 8:45 am]
BILLING CODE 3410-02-P


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