Oranges and Grapefruit Grown in the Lower Rio Grande Valley in Texas; Higher Quality and Reduced Size Requirements for Texas Grapefruit

DEPARTMENT OF AGRICULTURE

7 CFR Part 906

[Docket No. FV94-906-3-FR]

Oranges and Grapefruit Grown in the Lower Rio Grande Valley in

Texas; Higher Quality and Reduced Size Requirements for Texas

Grapefruit

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This final rule increases the minimum quality requirements for

Texas grapefruit to Texas Choice, from the current minimum grade

requirement of U.S. No. 2. This rule also temporarily relaxes the

minimum size requirements for certain Texas grapefruit for the

remainder of the 1994-95 season. This rule is designed to help the

Texas citrus industry successfully market the 1994-95 season grapefruit

crop.

EFFECTIVE DATE: This final rule becomes effective November 14, 1994.

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

Administration Branch, Fruit and Vegetable Division, AMS, USDA, P.O.

Box 96456, Room 2523-S, Washington, DC 20090-6456; telephone: 202-720-

5127; or Belinda G. Garza, McAllen Marketing Field Office, USDA/AMS,

1313 East Hackberry, McAllen, Texas 78501; telephone: 210-682-2833.

SUPPLEMENTARY INFORMATION: This final rule is issued under Marketing

Agreement and Marketing Order No. 906 [7 CFR Part 906] regulating the

handling of oranges and grapefruit grown in the Lower Rio Grande Valley

in Texas, 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 about 15 citrus handlers subject to regulation under the

order covering oranges and grapefruit grown in Texas, and about 750

producers of these citrus fruits in Texas. Small agricultural service

firms, which include grapefruit handlers, have been defined by the

Small Business Administration [13 CFR 121.601] as those having annual

receipts less than $5,000,000, and small agricultural producers are

defined as those whose annual receipts are less than $500,000. A

majority of these handlers and producers may be classified as small

entities.

The Texas Valley Citrus Committee (committee) met on June 30, 1994,

and recommended the regulatory changes for Texas grapefruit. The

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

regulations effective on a continuous basis for each citrus fruit

regulated under the order. Committee meetings are open to the public,

and interested persons may express their views at these meetings. The

Department reviews committee recommendations and information, as well

as information from other sources, and determines whether modification,

suspension, or termination of the handling regulations would tend to

effectuate the declared policy of the Act.

Minimum grade and size requirements for fresh grapefruit grown in

Texas are in effect under Sec. 906.365 [7 CFR 906.365]. This rule

amends Sec. 906.365 by revising paragraph (a)(3) to delete authority

for shipping U.S. No. 2 grade grapefruit and by revising paragraph

(a)(4) to permit shipment of grapefruit measuring at least 3\5/16\

inches in diameter (pack size 112) for the remainder of the 1994-95

season ending July 31, 1995, provided such grapefruit grade at least

U.S. No. 1.

Revision of Minimum Quality Requirements

Section 906.365 of the order's rules and regulations currently

provide that fresh shipments of grapefruit must grade, in descending

order of quality, U.S. Fancy, U.S. No. 1, U.S. No. 1 Bright, U.S. No. 1

Bronze, or U.S. No. 2. The requirements for these grades are set forth

in the U.S. Standards for Grades of Grapefruit (Texas and States other

than Florida, California and Arizona) [7 CFR 51.620 through 51.653]. In

addition, there are other qualities of grapefruit packed by the Texas

citrus industry defined in section 906.137, pertaining to handlers' use

of identifying marks utilized by the committee in promotional and

advertising projects. Section 906.137 provides that handlers may use

the identifying mark ``Texas Fancy'' only with respect to grapefruit

grading at least U.S. No. 1, but with no more than 40 percent of the

surface of the fruit, in aggregate, affected by discoloration. This

quality of fruit is slightly better than that grading U.S. No. 1, but

slightly less than that grading U.S. Fancy. Section 906.137 further

provides that handlers may use the identifying mark ``Texas Choice''

only with respect to fruit grading at least U.S. No. 2, except that no

more than 60 percent of the surface of the fruit, in aggregate, may be

affected by discoloration. ``Texas Choice'' fruit is of a quality

slightly better than that of a U.S. No. 2 grade, which provides that up

to two-thirds of the fruit surface may be affected by discoloration.

This rule amends section 906.365 to provide that the minimum

quality of grapefruit shipped to fresh market outlets will be ``Texas

Choice'', thereby eliminating the authority to ship U.S. No. 2 grade

fruit beginning with 1994-95 season shipments.

The committee recommended that the minimum quality requirements for

fresh market shipments of Texas-grown grapefruit be increased, as

specified. The committee reports that because grapefruit production in

Texas as well as in other competitive grapefruit growing areas is

increasing much faster than consumer demand, there is an opportunity to

increase consumer satisfaction with fresh market grapefruit and a need

to improve returns to producers. The consumer demand for such

grapefruit should be strengthened, because consumers prefer the higher

quality grapefruit which this rule requires be shipped.

Minimum grade requirements under the order are designed to provide

fresh markets with fruit of acceptable grade and maturity, thereby

maintaining consumer confidence in fresh Texas-grown grapefruit. This

helps create buyer confidence and contributes to stable marketing

conditions.

The committee believes elimination of the U.S. No. 2 grade has

other benefits as well. First, it reduces the number of different packs

of grapefruit currently being offered by the Texas citrus industry from

seven to six. This reduction enhances standardization and reduces buyer

confusion, which should benefit Texas growers and shippers. Second,

this action makes the Texas grapefruit industry more competitive with

other growing areas. The Citrus Administrative Committee which

administers Federal Marketing Order No. 905, covering citrus grown in

Florida, recently made a similar recommendation to eliminate the

shipment of U.S. No. 2 grade grapefruit. The Texas industry believes it

should do the same to remain viable in this highly competitive

business. Finally, the committee believes that increasing the quality

of grapefruit offerings from Texas will complement its promotion and

advertising activities undertaken under authority of the order. These

activities are designed to create buyer preference for Texas-grown

grapefruit, and increasing the quality offered for shipment enhances

these efforts.

This increase in quality requirements should not have a significant

impact on available supplies of fresh Texas grapefruit. The committee

reports that in recent seasons, grapefruit grading U.S. No. 2 have

comprised less than 1 percent of total fresh shipments. The benefits of

this rule should therefore outweigh any costs related to increasing the

minimum quality requirements. Grapefruit not meeting ``Texas Choice''

quality requirements could be utilized in exempt outlets, such as

processing, relief or charity.

Temporary Relaxation of Minimum Size Requirements

Section 906.365 also establishes minimum size requirements for

Texas grapefruit. During the period November 16 through January 31 each

season, grapefruit must be at least pack size 96, except that the

minimum diameter for the grapefruit in any lot is 3\9/16\ inches. At

other times, grapefruit that is pack size 112, except that the minimum

diameter for grapefruit in any lot is 3\5/16\ inches, may be shipped if

it grades at least U.S. No. 1. This rule provides that pack size 112

grapefruit may be shipped throughout the remainder of the 1994-95

season if such grapefruit grade at least U.S. No. 1. This relaxation is

the same as the relaxation which previously was issued for the period

beginning October 25, 1993, and ending July 31, 1994.

This relaxation is expected to help the Texas citrus industry

successfully market its 1994-95 season grapefruit crop and have a

positive effect on producer returns. Permitting shipments of pack size

112 grapefruit grading at least U.S. No. 1 for the remainder of the

1994-95 season will enable Texas grapefruit handlers to meet market

needs and compete with similar sized grapefruit expected to be shipped

from Florida. This rule is based on the current and prospective crop

and market conditions for Texas grapefruit. Fresh Texas grapefruit

shipments are expected to begin in October of this season.

This rule reflects the committee's and the Department's appraisal

of the need to increase minimum quality and temporarily relax minimum

size requirements for fresh Texas-grown grapefruit, as specified. The

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

Texas producers and handlers of fresh grapefruit, since it enables such

producers and handlers to make available the quality and sizes of

grapefruit needed to meet consumer needs consistent with the remainder

of the 1994-95 season crop and market conditions.

The proposed rule concerning this action was published in the

September 1, 1994, Federal Register [59 FR 45241], with a 15-day

comment period ending September 16, 1994. One comment was received and

it was in opposition to the proposed rule.

The comment in opposition to increasing the minimum grade

requirement for Texas grapefruit was submitted by the United States

Department of Justice (DOJ). The DOJ contends that this action will

result in a restriction on grapefruit shipments which will offer no

long term benefits to consumers or producers. The DOJ also contends

that the higher minimum grade requirements will artificially restrict

the supply of fresh grapefruit, causing consumer prices to rise and

promoting wasteful misallocation of society's resources. Additionally,

the DOJ contends that the increased grower profits will not be

sustainable in the long run, because any artificially raised returns to

producers will provide an incentive for inefficient new grapefruit

production. The DOJ contends further that this new inefficient

production will increase producer costs and erode grower profits until

producer returns revert to the prerestriction level.

The Department's position is that higher minimum grade requirements

will have the effect of stabilizing prices for grapefruit by providing

consistent quality to consumers. In addition, studies have shown that

consumers prefer high quality fruit. Therefore, a higher grade

requirement could increase and sustain demand. Consequently, the DOJ

request that the Secretary reject the committee's recommendation is

denied.

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

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

substantial number of small entities.

After consideration of all relevant matter presented, including the

information and recommendations submitted by the committee and other

available information, it is hereby found that this rule, as

hereinafter set forth, will tend to effectuate the declared policy of

the Act.

Pursuant to 5 U.S.C. 553, it is also found and determined upon good

cause that it is impracticable, unnecessary, and contrary to the public

interest to give preliminary notice prior to putting this rule into

effect and that good cause exists for not postponing the effective date

of this action until 15 days after publication in the Federal Register

because: (1) The committee needs to have this amendment in effect as

soon as possible because Texas grapefruit shipments for the 1994-95

season have begun; (2) handlers are aware of this action which was

unanimously recommended by the committee at a public meeting; and (3)

the proposed rule provided a 15-day comment period and all comments

timely received were considered prior to finalization of this action.

List of Subjects in 7 CFR Part 906

Grapefruit, Marketing agreements, Oranges, Reporting and

recordkeeping requirements.

For the reasons set forth in the preamble, 7 CFR Part 906 is

amended as follows:

PART 906--ORANGES AND GRAPEFRUIT GROWN IN LOWER RIO GRANDE VALLEY

IN TEXAS

1. The authority citation for 7 CFR Part 906 continues to read as

follows:

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

2. Section 906.365 is amended by revising paragraphs (a)(3) and

(a)(4) to read as follows:

Sec. 906.365 Texas Orange and Grapefruit Regulation 34.

(a) * * *

(3) Such grapefruit grade U.S. Fancy, U.S. No. 1, U.S. No. 1

Bright, or U.S. No. 1 Bronze, or meet the quality requirements of

``Texas Fancy'' or ``Texas Choice'' as defined in section 906.137 of

this part;

(4) Such grapefruit are at least pack size 96, except that the

minimum diameter limit for pack size 96 grapefruit in any lot shall be

3\9/16\ inches: Provided, That any handler may handle grapefruit,

except during the period November 16 through January 31 each season,

which are smaller than pack size 96, if such grapefruit grade at least

U.S. No. 1 and they are at least pack size 112, except that the minimum

diameter limit for pack size 112 grapefruit in any lot shall be 3\5/16\

inches: Provided further, That for the period beginning October 15,

1994, and ending July 31, 1995, any handler may handle grapefruit if

such grapefruit grade at least U.S. No. 1 and they are at least pack

size 112, except that the minimum diameter limit for pack size 112

grapefruit in any lot shall be 3\5/16\ inches in diameter.

* * * * *

Dated: November 8, 1994.

Martha B. Ransom,

Acting Deputy Director, Fruit and Vegetable Division.

[FR Doc. 94-28084 Filed 11-9-94; 9:24 am]

BILLING CODE 3410-02-P