Papayas Grown in Hawaii; Suspension of Grade Requirements

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 928

[Docket No. FV94-928-3-FR]

Papayas Grown in Hawaii; Suspension of Grade Requirements

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: The Department of Agriculture (Department) is adopting as a

final rule, without change, the provisions of an interim final rule

which suspended all grade requirements in effect under the marketing

order for Hawaiian papayas. This final rule also eliminates inspection

requirements for papayas and is expected to help the papaya industry

reduce expenses.

EFFECTIVE DATE: November 17, 1994.

FOR FURTHER INFORMATION CONTACT: Charles L. Rush, Marketing Specialist,

Marketing Order Administration Branch, Fruit and Vegetable Division,

AMS, USDA, P.O. Box 96456, Room 2523-S, Washington, DC 20090-6456;

telephone: 202-720-5331, or FAX: 202-720-5698; or Martin J. Engeler,

Assistant Officer In Charge, California Marketing Field Office, Fruit

and Vegetable Division, AMS, USDA, 2202 Monterey Street, Suite 102B,

Fresno, California 93721; telephone: 209-487-5901.

SUPPLEMENTARY INFORMATION: This rule is issued under Marketing

Agreement and Order No. 928 (7 CFR Part 928) regulating the handling of

papayas grown in Hawaii, hereinafter referred to as the order. This

order is effective under the Agricultural Marketing Agreement Act of

1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the

Act.

The Department of Agriculture (Department) is issuing this rule in

conformance with Executive Order 12866.

This final rule has been reviewed under Executive Order 12778,

Civil Justice Reform. This rule is not intended to have retroactive

effect. This rule will not preempt any State or local laws,

regulations, or policies, unless they present an irreconcilable

conflict with this rule.

The Act provides that administrative proceedings must be exhausted

before parties may file suit in court. Under section 8c(15)(A) of the

Act, any handler subject to an order may file with the Secretary a

petition stating that the order, any provision of the order, or any

obligation imposed in connection with the order is not in accordance

with law and requesting a modification of the order or to be exempted

therefrom. A handler is afforded the opportunity for a hearing on the

petition. After the hearing, the Secretary would rule on the petition.

The Act provides that the district court of the United States in any

district in which the handler is an inhabitant, or has his or her

principal place of business, has jurisdiction in equity to review the

Secretary's ruling on the petition, provided a bill in equity is filed

not later than 20 days after the date of the entry of the ruling.

Pursuant to the requirements set forth in the Regulatory

Flexibility Act (RFA), the Administrator of the Agricultural Marketing

Service (AMS) has considered the economic impact of this action on

small entities.

The purpose of the RFA is to fit regulatory actions to the scale of

business subject to such actions in order that small businesses will

not be unduly or disproportionately burdened. Marketing orders issued

pursuant to the Act, and rules issued thereunder, are unique in that

they are brought about through group action of essentially small

entities acting on their own behalf. Thus, both statutes have small

entity orientation and compatibility.

There are approximately 120 papaya handlers subject to regulation

under the marketing order covering fresh papayas grown in Hawaii, and

approximately 400 producers of papayas in Hawaii. Small agricultural

producers have been defined by the Small Business Administration (13

CFR 121.601) as those having annual receipts of less than $500,000, and

small agricultural service firms are defined as those whose annual

receipts are less than $5,000,000. A majority of these handlers and

producers may be classified as small entities.

This rule finalizes a suspension for an indefinite period the

minimum grade and the inspection requirements previously in effect

under the order. This suspension was recommended by the Papaya

Administrative Committee (committee) on April 22, 1994, by a vote of 8

in favor, 2 opposed, and 2 abstentions.

An interim final rule concerning this matter was issued on July 21,

1994, and published in the Federal Register on July 27, 1994, (59 FR

38102). That rule provided a 30-day comment period which ended August

26, 1994. No comments were received.

The committee meets prior to and during each season to review the

rules and regulations effective on a continuous basis for papayas

regulated under the order. The Department reviews committee

recommendations and information, as well as information from other

sources, and determines whether modification, suspension, or

termination of the rules and regulations would tend to effectuate the

declared policy of the Act.

Section 928.52 of the order authorizes the establishment of grade,

size, quality, maturity, pack and container regulations for fresh

shipments of papayas. Section 928.53 allows for the modification,

suspension or termination of such regulations when warranted. Section

928.55 provides that whenever papayas are regulated pursuant to

Sec. 928.52 or Sec. 928.53, such papayas must be inspected by the

Federal or Federal-State Inspection Service and certified as meeting

the applicable requirements of such regulation. The cost of inspection

and certification is borne by handlers.

Prior to the implementation of the interim final rule, section

928.313 of the rules and regulations in effect under the order

established minimum grade requirements for fresh shipments of Hawaiian

papayas. This rule finalizes the provisions of the interim final rule

which suspended Sec. 928.313, which required that such papayas grade at

least Hawaii No. 1, except that not more than 5 percent of the fruit

may be immature, and that the weight requirements specified in the

Hawaiian grade standards do not apply.

The minimum grade requirement had been in effect since 1984. The

objective of this requirement was to provide that only acceptable

quality fruit enter fresh market channels, thereby ensuring consumer

satisfaction, increasing sales, and improving returns to papaya

producers.

While the industry continues to believe that quality is an

important factor in maintaining sales, the committee recommended this

suspension because it believes the cost of inspection and certification

(mandated when the grade regulations are in effect) exceeds the

benefits derived. The cost of papaya inspections on a per pound basis

averages about $.006, which is nearly as much as the assessment rate

established under the order to cover the order's administrative and

promotion costs.

Committee members supporting the suspension stated that such action

would be in the best interests of producers, because eliminating the

cost of inspection will increase producer returns. Those members

contend that the marketplace will dictate fruit quality, and

competition among shippers will ensure shipments of good quality fruit.

In addition, the industry is pursuing alternative means of

improving and ensuring quality, such as providing financial incentives

to producers to deliver good quality fruit to handlers. Current

industry practice is for producers to deliver their fruit to handlers

for grading, packing and marketing. Producers are paid by handlers

based, in part, on the quality of fruit they deliver. Producer prices

are reduced to reflect the amount of fruit that is discarded during

handling because it is of unacceptable quality. All producers

delivering fruit to a particular handler are typically paid the same

amount for their fruit, based on the average quality delivered by all

producers. This practice causes producers delivering high quality fruit

to be penalized by producers delivering poorer quality fruit. A newly

formed producers' bargaining cooperative is attempting to change this

practice by having low quality fruit attributed to individual

producers. That is, an individual producer would be paid based upon the

quality of fruit that individual delivered to the handler. Thus,

producers would have a financial incentive to harvest and deliver high

quality product. This should help improve and maintain the quality of

papayas entering the fresh market.

Committee members opposed to the suspension stated that it would

allow poor quality fruit on the market and have a negative impact on

the market. Additionally, those members believe that such a suspension

will be perceived negatively by the State of Hawaii Department of

Agriculture. They are also concerned about the length of time necessary

to reinstate the grade requirements, if it is determined that such

action is needed in the future to ensure that only fruit of acceptable

quality is shipped to fresh markets.

The majority of committee members acknowledge the possibility that

fruit quality could decline as a result of this action, but do not

believe that this is likely. They believe that the reduction in

handling costs due to elimination of mandatory inspection will outweigh

any declines in returns attributable to reduced quality. Further, the

committee will monitor the impact this action has on the market, and

will recommend reinstatement of quality standards if warranted.

This rule finalizes the suspension of grade and inspection

requirements for fresh papayas. Such suspension enables handlers to

ship papayas to the fresh market at a reduced cost, since handlers are

no longer required to have their fruit inspected and pay the resulting

inspection costs. Suspending grade requirements for fresh papayas is

expected to increase producer returns by reducing costs and maintaining

the quality of fruit offered for sale. The industry is committed to

instituting alternative means of quality assurance by providing

incentives to producers to harvest and deliver only acceptable quality

fruit. This activity should ensure that consumers continue to receive

good quality fresh papayas. This rule is in the best interest of

producers, handlers and consumers, and is expected to increase returns

to papaya producers.

The Department's view is that this rule will have a beneficial

impact on producers and handlers, since it will reduce costs, and, in

light of changes in the structure of contracts between papaya handlers

and the growers who supply them it is not expected to adversely impact

the quality of fruit entering fresh markets.

Consistent with the suspension of Sec. 928.313, this rule also

finalizes the suspension of Secs. 928.150 and 928.152 of the rules and

regulations under the order. Section 928.150 provided a means for

handlers to receive waivers from the mandatory inspection requirement

under certain circumstances, and Sec. 928.152 authorized exemptions

from the grade requirement relating to fruit maturity. Since this

action suspends mandatory inspection and grade requirements, these

rules authorizing exemptions from such requirements are no longer

needed.

A conforming change is also made in Sec. 928.160, which required

handlers to file monthly utilization reports with the committee. Among

the information required to be submitted was the inspection certificate

numbers applicable to each fresh shipment of papayas. Since inspection

is no longer mandatory, the requirement that handlers submit inspection

certificate numbers is no longer needed. Thus, Sec. 928.160 is revised

to suspend such requirement.

Based on the above, the Administrator of the AMS has determined

that this rule will not have a significant economic impact on a

substantial number of small entities.

The information collection requirements contained in the referenced

sections have been previously approved by the Office of Management and

Budget (OMB) under the provisions of 44 U.S.C. Chapter 35 and have been

assigned OMB number 0581-0102.

This rule should reduce the reporting burden on approximately 5

papaya handlers who have been completing PAC Form 7, Application to be

an Approved Handler of Immature Papayas, and PAC Form 7(c), Immature

Papaya Order Form. Form 7 is estimated to take 15 minutes to complete,

and Form 7(c) about 10 minutes per form. No reduction in reporting

burden is expected as a result of the revision in Sec. 928.160

pertaining to monthly utilization reports. While handlers are no longer

required to provide inspection certificate numbers, the remaining

information on the reports will continue to be collected. It is

estimated that each report requires 1 hour to complete.

After consideration of all relevant matter presented, the

information and recommendations submitted by the committee, and other

information, it is found that the suspension of these sections, as set

forth below, will tend to effectuate the declared policy of the Act.

List of Subjects in 7 CFR Part 928

Papayas, Marketing agreements, Reporting and recordkeeping

requirements.

For the reasons set forth in the preamble, 7 CFR Part 928 is

amended as follows:

PART 928--PAPAYAS GROWN IN HAWAII

Accordingly, the interim final rule amending 7 CFR part 928 which

was published at 59 FR 38102 on July 27, 1994, is adopted as a final

rule without change.

Dated: October 11, 1994.

Eric M. Forman,

Deputy Director, Fruit and Vegetable Division.

[FR Doc. 94-25669 Filed 10-17-94; 8:45 am]

BILLING CODE 3410-02-P