Source: https://www.federalregister.gov/documents/2009/05/12/E9-11052/tart-cherries-grown-in-the-states-of-michigan-new-york-pennsylvania-oregon-utah-washington-and
Timestamp: 2017-09-22 12:32:32
Document Index: 547791614

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Federal Register :: 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
A Proposed Rule by the Agricultural Marketing Service on 05/12/2009
Written exceptions must be filed by June 11, 2009.
74 FR 22112
22112-22123 (12 pages)
E9-11052
https://www.federalregister.gov/d/E9-11052 https://www.federalregister.gov/d/E9-11052
Start Preamble Start Printed Page 22112
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.
2. Amend § 930.54 of the order to authorize establishment of a minimum Start Printed Page 22113inventory level at which all remaining product held in reserves would be released to handlers for use as free tonnage.
4. Amend § 930.32 to revise the voting requirements necessary to approve a Board action.
5. Amend § 930.23 to revise the nomination and election process for handler members on the Board;
6. Amend § 930.20 to revise Board membership affiliation requirements.
7. Amend § 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.
Proponents of the proposal presented testimony indicating that changes in the Start Printed Page 22114industry 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.
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.
For the above reasons, the proposed amendment to § 930.50(i) is recommended for adoption.
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. Start Printed Page 22115Section 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 § 930.55 have been released.” Based on the language in § 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.
Based on the record evidence, USDA recommends amending the order as proposed by the Board by adding § 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.
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 Start Printed Page 22116ultimately aid the industry in its marketing efforts by having better quality products available when reserves are released to the market.
Based on the record evidence, USDA recommends amending § 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.
The Board proposed amending the voting requirement in § 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 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 § 930.20 (see material issue #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.
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.Start Printed 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 record evidence does not support changing the voting requirements under the order. For the reasons discussed herein, USDA recommends that proposed amendment to § 930.32(a) not be adopted.
Testimony was also provided at the hearing regarding application of this proposed amendment in conjunction with the proposed amendment to § 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 § 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.)
However, testimony also was provided at the hearing regarding application of the proposed amendment in conjunction with the proposed amendment to § 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 § 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 § 930.23(b)(2) and § 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 § 930.23(b)(2) and § 930.23(c)(3)(ii) that would conform this section to the proposed amendments to § 930.20(g) regarding sales constituency affiliation. USDA recommends adoption of this amendment as proposed, with changes as noted.Start Printed Page 22118
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 § 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.
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 § 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 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.
Record evidence supports amending § 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.
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 § 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 § 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 § 930.20 would update order language to accommodate changes in production Start Printed Page 22119patterns 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 § 930.23(b)(5) and (c)(4) as proposed.
The proposal described in Material Issue No. 1 of this recommended decision would amend § 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.
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 Start Printed Page 22120would 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.
The proposal described in Material Issue No. 2 would amend § 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.
The proposal described in Material Issue No. 3 would amend § 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.
The proposal submitted by the Board in Material Issue No. 4 would revise voting requirements under § 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.
The proposal submitted by the Board in Material Issue No. 5 relates to nomination and election of Board members under § 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.
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.Start Printed Page 22121
The Board's proposal discussed in Material Issue No. 6 would amend § 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, § 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 proposal described in Material Issue No. 7 would amend § 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 § 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 § 930.20 would update order language to better reflect the constantly changing tart cherry industry.
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.
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 Start Printed Page 22122no later than 20 days after the date of the entry of the ruling.
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 § 930.23 to read as follows:
(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 § 930.55 or § 930.57 or by diversion of product in accordance with § 930.59. In years where required, the Board shall establish a maximum percentage of the restricted quantity which may be established as a primary Start Printed Page 22123inventory 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.
[FR Doc. E9-11052 Filed 5-11-09; 8:45 am]