Tart Cherries Grown in the States of Michigan, New York, Pennsylvania, Oregon, Utah, Washington, and Wisconsin; Secretary's Decision and Referendum Order on the Proposed Marketing Agreement and Order

SUMMARY: This decision proposes the issuance of a marketing agreement

and order for tart cherries grown in certain designated States and

provides growers and processors the opportunity to vote in a referendum

to determine if they favor the proposed order. For the purposes of this

document, the term ``Cherries'' refers to all tart/sour cherry

varieties grown in the proposed production area, which consists of the

States of Michigan, New York, Pennsylvania, Oregon, Utah, Washington,

and Wisconsin. The proposed order would authorize volume regulation,

grade, size, and maturity regulations, and mandatory inspection. It

would also authorize production, processing, and marketing research and

promotion projects, including paid advertising. The order would be

administered by an 18 member administrative board consisting of 17

growers and handlers and one public member, and would be financed by

assessments on handlers of tart cherries grown in the production area.

A primary objective of this program would be to improve producer

returns by strengthening consumer demand through volume control and

quality assurance mechanisms. Tart cherry producers and processors

would vote in a referendum to determine if they favor issuance of the

proposed marketing order.

DATES: The referendum shall be conducted from June 12, 1996, through

July 10, 1996. The representative period for the purpose of the

referendum herein ordered is July 1, 1995, through May 31, 1996.

FOR FURTHER INFORMATION CONTACT:

(1) R. Charles Martin or Kenneth G. Johnson, Marketing Order

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

Box 96456, room 2523-S, Washington, D.C. 20090-6456; telephone: 202-

720-5053, FAX: 202-720-5698.

(2) Robert Curry, Northwest Marketing Field Office, Marketing Order

Administration Branch, Fruit and Vegetable Division, AMS, USDA, 1220

S.W. Third Avenue, room 369, Portland, Oregon 97204; telephone: 503-

326-2725, FAX: 503-326-7440.

SUPPLEMENTARY INFORMATION:

Prior Documents in This Proceeding

Notice of Hearing, issued on November 30, 1993, and published in

the Federal Register on November 30, December 23, 1993, and January 31,

1994 [58 FR 63108, 58 FR 68065, and 59 FR 4259, respectively]. The

notice reopening the hearing was issued on December 5, 1994, and

published in the Federal Register on December 8, 1994 [59 FR 63273];

Recommended Decision and Opportunity to File Written Exceptions to the

Proposed Marketing Agreement and Order, issued November 20, 1995, and

published in the Federal Register on November 29, 1995 (60 FR 61292).

The reopening of the comment period to file written exceptions to the

proposed marketing agreement and order was issued on December 27, 1995,

and published in the Federal Register on January 2, 1996 (61 FR 21).

This administrative 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.

The marketing agreement and order proposed herein have been

reviewed under Executive Order 12778, Civil Justice Reform. They are

not intended to have retroactive effect. If adopted, the proposed

agreement and order would not preempt any State or local laws,

regulations, or policies, unless they present an irreconcilable

conflict with the 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 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 to review the Secretary's

ruling on the petition, provided an action is filed not later than 20

days after the date of the entry of the ruling.

Preliminary Statement

This proposed marketing agreement and order was formulated on the

record of a public hearing held December 15-17, 1993, in Grand Rapids,

Michigan; January 13, 1994, in Provo, Utah; February 15-17, 1994, in

Portland, Oregon; January 12-13, 1995, in Portland, Oregon; and January

18-19, 1995, in Grand Rapids, Michigan. These multiple hearing sessions

were held to consider a proposed marketing agreement and order

regulating the handling of tart cherries grown in the proposed

production area. The hearing was held pursuant to the provisions of the

Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-

674), hereinafter referred to as the Act, and the applicable rules of

practice and procedure governing the formulation of marketing

agreements and marketing orders (7 CFR part 900). Approximately 40

witnesses, including tart cherry growers, handlers, and economists,

testified in support of the order. Growers and handlers mainly from the

States of Oregon and Washington testified in opposition to the proposed

order and asked to have Oregon and Washington excluded from the

proposed production area.

At the conclusion of the February 1994 hearing in Oregon, the

deadline for filing post-hearing briefs was set at April 29, 1994. The

deadline for filing post-hearing briefs was subsequently extended to

May 31, 1994. However, based on a review of the hearing evidence and

post-hearing briefs, USDA determined that the hearing should be

reopened to clarify some provisions. USDA wanted to obtain additional

information and clarification concerning: (1) The States that should be

regulated under the order; (2) the economic impact of the proposed

order on small and large businesses; (3) whether the expected program

benefits would exceed costs, especially for growers, handlers and

consumers; and (4) how certain provisions would be implemented under

the proposed marketing order. The hearing was reopened and held January

12-13, 1995, in Portland, Oregon, and January 18-19, 1995 in Grand

Rapids, Michigan. At the conclusion of the Michigan hearing, the

deadline for filing post-hearing briefs was set at March 17, 1995. Ten

briefs were filed following the first briefing period and seven briefs

were filed following the second briefing period.

The proponents testified that severely fluctuating tart cherry

prices are

[[Page 26957]]

inherently harmful to growers and consumers. It was contended that the

proposed marketing order would improve grower returns by strengthening

consumer demand through volume control and quality assurance

mechanisms.

Upon the basis of evidence introduced at the hearing and the record

thereof, the Administrator of the Agricultural Marketing Service (AMS)

on November 29, 1995, filed with the Hearing Clerk, U. S. Department of

Agriculture, a recommended decision with the opportunity for written

exceptions by December 29, 1995. Subsequently, the USDA received three

requests to provide more time to analyze the recommended decision and

prepare and file written comments. Based on these requests the USDA

reopened the comment period until January 16, 1996.

There were 29 exceptions received on the proposed order. Seven

exceptions support the order as proposed, 4 support the order with

minor modifications, 2 support the order with substantial

modifications, 15 oppose the order, and 1 recommends only a minor

technical clarification. Exceptions were received from: Richard

DeRuiter, Michigan tart cherry processor; Senator Mark Hatfield,

Congressional Representatives Peter DeFazio, Jim Bunn, Ron Wyden,

Elizabeth Furse, and Wes Cooley, all from the State of Oregon; Mark L.

Schrepel, Oregon tart cherry grower and processor; William R. Sherman,

Burnette Foods, Inc., Michigan grower/processor; Randy Hageman, General

Manager, Milne Fruit Products; Rick Jacobson, NORPAC Foods; Christian

Schlect, President, Northwest Horticultural Council; Mark Riley,

Michigan tart cherry grower; Terry Dorsing, President, Washington Tart

Cherry Products, Inc.; Ray, Jim, Mildred and Mary Schultz, Michigan

tart cherry growers; Philip Walker, Oregon tart cherry grower; Thomas

A. Facer, Vice-President Agricultural Services, Comstock Michigan Fruit

Division; Lee W. Schrepel, Chair, Oregon Tart Cherry Association; Bruce

Andrews, Director, Oregon Department of Agriculture; the Department of

Justice, Anti-Trust Division; Claude A. Rowley, Manager, Payson Fruit

Growers; David Frank, Fruit Belt Canning, Co. Inc.; Norman R.

Veliquette, President, Great Lakes Packing Company; Dean Kleckner,

President, American Farm Bureau Federation; Forest P. Johnson, Michigan

tart cherry grower; Ken Guise, Executive Vice-President, Chief

Operating Officer, Knouse Foods Cooperative, Inc.; Kenneth T. Morrison,

President, Cherry Growers, Inc.; David White, President, Chain O'Lakes

Fruit Growers Association; Randy G. Harmson, General Manager, Michigan

Agricultural Cooperative Marketing Association, Inc.; Jack Laurie,

President, Michigan Farm Bureau; Teryl R. Roper, Associate Professor

and Extension Fruit Specialist, University of Wisconsin; Gene A.

Veliquette, Michigan tart cherry grower, President, Shoreline Fruit,

Inc.; Ian A. MacKay, CPA, American Institute of Certified Public

Accountants; and the Cherry Marketing Institute (CMI), the proponent

group.

The issues raised in the exceptions are discussed in the Findings

and Conclusions.

Small Business Consideration and Paperwork Reduction Act: In

accordance with the Regulatory Flexibility Act (5 U.S.C. 601 et seq.),

AMS has considered the economic impact of this action on small

entities. The record indicates that there are approximately 1,600

growers of tart cherries and 75 handlers who process cherries in the

production area proposed to be regulated. Small agricultural service

firms have been defined by the Small Business Administration (SBA) (13

CFR 121.601) as those whose annual receipts are less than $5,000,000,

and small agricultural producers as those having annual receipts of

less than $500,000. The majority of the tart cherry handlers and

producers may be classified as small entities.

For practical purposes, there is no fresh market for tart cherries.

Processors dry, freeze, can, juice, or puree pitted tart cherries.

Market use averages are: 56 percent of the product becomes industrial

grade frozen cherries; 16 percent goes into consumer-size cans of pie

filling; 8 percent is used for commercial pie filling; 10 percent

becomes juice concentrate; 2 percent is dried; and, 8 percent goes into

water packs.

Since 1971, there has been a marked transformation in the

processing industry's structure. Currently, 75 percent of the crop is

processed by farmer-owned cooperatives or grower-owned processing

facilities; whereas in 1971, a substantial volume was processed by

independent handlers. Processors, through their sales agents, market in

all U.S. markets and export to Europe and Asia. There are no discrete

regional markets where cherries from a particular district could have a

particular advantage, beyond nominal differences in transportation

costs, which can often be overcome by price discounting.

The record evidence shows that economic adversity has caused more

than 21 percent of Michigan's growers to withdraw from tart cherry

farming. There were 1,183 Michigan commercial growers in 1986, compared

to 933 in 1992. In 1992, Michigan growers had an average production of

238,000 pounds with 19 percent of those growers averaging 800,000

pounds, accounting for 66 percent of the total Michigan production. In

States other than Michigan, there has also been a general decline in

the number of commercial growers since 1986. There are fewer growers in

other States besides Michigan, but the number of bearing acres has

increased from 45,000 acres in 1986, to more than 50,000 acres in 1990.

Record evidence also indicates that the demand for red tart

cherries is inelastic at high and low levels of production, and

relatively elastic in the middle range. At the extremes, during times

of very low and very high production, different factors become

operational. In very short crop years, such as 1991, there is limited

but sufficient exclusive demand for cherries that can cause processor

prices to double and grower prices to triple. In the event of large

crops, there seems to be no price low enough to expand sales beyond

about 275 million pounds of raw fruit in a single year.

Since 1982, annual sales have averaged 230 million pounds. Under

the proposed order, total returns to growers could be increased by

restricting supplies of red tart cherries available for sale by

handlers during large crop years. Also, production characteristics of

the tart cherry industry provide an opportunity to increase growers'

total earnings by converting the excess production of large crop years

into storable products that could constitute reserve pools. These pools

would be liquidated in a year when the available supplies are short.

One of the main concerns addressed in this proposed order is the

short term annual variation in supply which is attributable to climatic

factors that neither growers nor processors can control, and which

leads to chaotic marketing conditions. Such climatic factors can result

in highly unpredictable annual crop sizes, causing gluts and shortages

of tart cherries. When gluts occur, large carryin inventories can

decrease processor and grower prices, regardless of the anticipated

size of the oncoming year's crop. Many sales are consummated with large

buyers well before the current crop year's supply and demand situation

is clear (based on what can best be described as ``Anticipated

Supply'', i.e., the sum of the carryin inventory and USDA crop

forecast, available usually

[[Page 26958]]

late in June, weeks before the actual crop harvest.)

These large, unrestricted carryin inventories and crop estimates

can play a dominant role in setting the tone of the market in a given

year. The proposed order is intended to lessen the impact of these

inventories and estimates by establishing an ``optimum supply,''

thereby reducing price swings to growers and buyers, and ultimately

resulting in a stabilization and enhancement of the market.

The order would impose some reporting and record keeping

requirements on handlers. Handler testimony indicated that the expected

burden that would be imposed with respect to these requirements would

be negligible since most of the information that would be reported to

the Board is already compiled by handlers for other uses and is readily

available. Reporting and record keeping requirements issued under

comparable marketing order programs impose an average annual burden on

each regulated handler of about one hour. It is reasonable to expect

that a comparable burden would be imposed under this proposed marketing

order on the estimated 75 handlers of tart cherries. With respect to

growers, they testified at the hearing that information required to be

submitted to the Board for grower diversion is already collected and

available from growers.

The Act requires that, prior to the issuance of a marketing order

for tart cherries, a referendum be conducted among effected producers

and processors to determine if they favor issuance of the order. The

ballot material that would be used in conducting the referendum would

be submitted to and approved by OMB before it is used. It is estimated

that it would take an average of 20 minutes for each of the

approximately 1,600 tart cherry growers and 75 tart cherry processors

to complete the ballots. Additionally, it has been estimated that it

would take approximately ten minutes for each handler to read and sign

the marketing agreement.

In compliance with Office of Management and Budget (OMB)

regulations (5 CFR Part 1320), which implement the Paperwork Reduction

Act of 1995 (Pub. L. 104-13), the information collection and record

keeping requirements contained in the proposed rule specific to the

ballot material to be used in conducting the referendum have been

approved by OMB on a temporary basis and have been assigned OMB number

0581-0177. An expiration date of September 1996 has been established

for this temporary OMB approval. A complete package of information and

collection requirements contained in this proposed rule will be

submitted, for approval, to OMB at a later date. Those requirements

would not become effective prior to OMB review. Interested persons

would be provided 60 days to comment on : (1) whether the proposed

collection of information is necessary for the functioning of the

proposed tart cherry marketing order program and USDA'S oversight of

that program; (2) the accuracy of the collection burden estimate and

the validity of methodology and assumptions used in estimating the

burden on respondents; (3) ways to enhance the quality, utility, and

clarity of the information requested; and (4) ways to minimize the

burden, including use of automated or electronic technologies. Any

record keeping and reporting requirements imposed would be evaluated

against the potential benefits to be derived and it is expected that

any added burden resulting from increased reporting and record keeping

would not be significant when compared to those anticipated benefits

derived from administration of the order.

The purpose of the RFA is to fit regulatory and informational

requirements to the size and scale of the business entities in a manner

that is consistent with the objectives of the rule and applicable

statutes. The proposed marketing order provisions have been carefully

reviewed and every effort has been made to eliminate any unnecessary

costs or requirements. As discussed in the RFA, Congress' intent, among

other objectives, was to direct agencies to identify the need for any

``special accommodation'' (e.g., exemption or relaxation) on regulated

small entities (i.e., handlers) because, in the past, some Federal

regulatory and reporting requirements imposed unnecessary and

disproportionately burdensome demands on small businesses. After

reviewing the record AMS determined that direct or indirect costs

imposed under the marketing order regulation would not be

proportionately greater on small handlers than on large handlers, or

conversely, that any projected order benefits would not be

proportionately smaller for small handlers than for large handlers.

The record evidence indicates that the proposed order may impose

some additional costs and requirements on handlers, but those costs are

insignificant and are directly proportional to the size of the

regulated handlers. The evidence also indicates that, given the severe

economic conditions and unstable markets facing the majority of the

industry, the benefits to small (as well as large) handlers are likely

to be greater than would accrue under the alternatives to the order

proposed herein, namely no marketing order, or an order without the

proposed combination of volume controls and other order authorities.

The record evidence indicates that the proposed order would be

instrumental in providing expanding markets and sales, and raising and

stabilizing prices of tart cherries, primarily for the benefit of

producers. The evidence also indicates that handlers would benefit as

well. While the level of such benefits to handlers is difficult to

quantify, it is also clear the provisions of the proposed order are

designed to benefit small entities. Small handlers and producers are

more likely to be minimally capitalized than large entities, and are

less likely to survive without the stability the proposed order would

provide.

Accordingly, based on the information discussed above, AMS has

determined that the issuance of this proposed rule and referendum order

would not have a significant economic impact on a substantial number on

small entities.

The material issues presented on the record are:

1. Whether the handling of tart cherries grown in the proposed

production area is in the current of interstate or foreign commerce, or

directly burdens, obstructs, or affects such commerce;

2. Whether the economic and marketing conditions are such that they

justify a need for a Federal marketing agreement and order which will

tend to effectuate the declared policy of the Act;

3. What the definition of the production area and the commodity to

be covered by the marketing order should be;

4. What the identity of the persons and the marketing transactions

to be regulated should be; and

5. What the specific terms and provisions of the order should be

including:

(a) The definition of terms used therein which are necessary and

incidental to attain the declared policy and objectives of the order

and the Act;

(b) The establishment, composition, maintenance, procedures, powers

and duties of a committee that shall be the local administrative agency

for assisting the Secretary in the administration of the marketing

order;

(c) The authority to incur expenses and the procedure to levy

assessments on handlers to obtain revenue for paying such expenses;

[[Page 26959]]

(d) The authority to establish or provide for the establishment of

production, processing and marketing research and marketing development

projects, including paid advertising;

(e) The authority to establish regulations that would require

minimum quality and inspection requirements applicable to cherries to

be handled;

(f) The authority to establish regulations that would provide for a

volume control program;

(g) The establishment of requirements for handler reporting and

record keeping;

(h) The requirement of compliance with all provisions of the order

and with any regulations issued under it; and

(i) Additional terms and conditions as set forth in section 930.81

through section 930.91 of the Notice of Hearing published in the

Federal Register of November 30, 1993, which are common to all

marketing agreements and orders, and other terms and conditions

published at section 930.92 through section 930.94 that are common to

marketing agreements only.

Findings and Conclusions and Rulings on Exceptions

The material issues, findings and conclusions, rulings, and general

findings and determinations included in the Recommended Decision set

forth in the November 29, 1995, issue of the Federal Register [60 FR

61292] are hereby approved and adopted subject to the following

additions and modifications:

Based upon the exceptions filed by Department of Justice, Anti-

trust Division (DOJ), and Mr. Lee Schrepel, the findings and

conclusions in material issue number 2 of the Recommended Decision

concerning the question of whether economic and marketing conditions

are such that they justify a need for a Federal marketing agreement and

order which would tend to effectuate the declared policy of the Act are

amended by adding the following eight paragraphs after the last

paragraph (60 FR 61297) to read as follows:

In its exception to the Recommended Decision, DOJ urged USDA to

reject the proponents' request for a marketing order for tart cherries.

DOJ contended that the proposed marketing order is not by any means a

``national solution'' for any existing problems in the tart cherry

industry, and its implementation would harm the public. DOJ asserts

there is no reliable evidence to show that the proposed marketing order

would produce supply or price stability and it should not be issued. In

addition, DOJ cited two areas of disagreement with the Recommended

Decision. DOJ stated that: (1) The tart cherry industry does not

require regulation based on the evidence presented at the hearing; and

(2) the proposed marketing order would not stabilize tart cherry prices

or supplies.

In regard to its first concern, DOJ stated that growers and

handlers who prefer to protect against fluctuating prices may do so by

using any one of the numerous market mechanisms that already exist for

that purpose. DOJ stated that these mechanisms are far superior to

government regulation for reducing risk because they help producers

deal with fluctuating supplies without artificially inflating prices.

As previously stated, the market mechanisms suggested by DOJ are

currently available to the industry. The marketing order is another

tool for the industry to use in stabilizing supplies. Marketing orders

do not exist to the exclusion of other market mechanisms. However, as

the record shows, those mechanisms have not been effective in dealing

with the production variability problems faced by the industry.

In regard to its second concern, DOJ contended that the finding

that the proposed marketing order would contribute to orderly marketing

conditions and, therefore, effectuate the declared policy of the Act,

is without support in the record. The agency stated that USDA relied

heavily on the testimony of Dr. Forker, who testified on price

stability. It is DOJ's position that Dr. Forker's conclusions on price

stability are wrong and that he improperly manipulated the data to

reach a desired result. In addition, in his exception, Mr. Lee Schrepel

also objected to USDA relying on the evidence presented by Dr. Forker.

As previously stated, USDA believes that the proponents have

demonstrated a need for a tart cherry marketing order. The record

supports the argument that the industry has suffered since the

termination of the prior order. A proposed order was developed to

correct the situation with the goal of increasing grower returns and

bringing supplies in line with demand. Authority for volume control

regulation which would only be used when the market warrants it, is

included in the order. Record evidence supports the need for the

marketing order. Evidence presented at the hearing did not offer a

basis for discrediting Dr. Forker. Dr. Forker is a recognized expert in

his field and there was no persuasive evidence presented at the hearing

which would refute his testimony. In addition, USDA did not rely solely

on Dr. Forker. It considered all the testimony and analyzed the record

in its entirety in arriving at its findings and conclusions.

In Mr. Schrepel's exception, he stated that USDA has discounted any

and all arguments that reporting and record keeping requirements will

be significantly greater for Oregon producers and processors, and that

their subsequent costs and benefits of operating under the marketing

order are proportionately and significantly different than expected to

be experienced in larger producing districts. Mr. Schrepel also

contends that smaller producing States (i.e., Pennsylvania and Oregon)

have not been producing the reports that will be needed under the

marketing order, and therefore it will be an added burden on small

handlers to submit such reports to the Board under the marketing order.

Handlers from the smaller producing areas testified that reporting

to the Board would not be unduly burdensome. They normally keep such

records in conducting their business operations and therefore could

easily compile the information for use under the marketing order. In

addition, handlers in districts which are not volume regulated (e.g.,

the smaller producing states) would have fewer reporting and record

keeping requirements than those handlers in regulated districts since

they would not be maintaining reserve pools and reporting on storage

and disposition. Such requirements would stay reduced as long as that

district's production remains below the trigger amount for volume

regulation.

The record evidence also supports the premise that small growers

and handlers would have the most to benefit from implementation of the

marketing order because such growers and handlers have been going out

of business over most of the last 8 years due to low cherry prices.

Since the order would help increase grower returns, this should

increase the buffer between success and failure.

Based on the above discussion, the exceptions by DOJ and Mr.

Schrepel are denied.

Based upon the exceptions filed by Mr. Dorsing, Mr. Hageman, Mr.

Mark Schrepel, and Mr. Lee Schrepel, the findings and conclusions in

material issue number 3 of the Recommended Decision concerning the

definition of the production area and the commodity to be covered are

amended by adding the following six paragraphs after the last paragraph

(60 FR 61299) to read as follows:

The exception filed by Mr. Dorsing stated that the States of

Washington and Oregon should not be included in the proposed marketing

order. Mr. Dorsing

[[Page 26960]]

indicated that 1995 production figures for the State of Washington show

that over 90 percent of the tart cherry production went to juice

concentrate. He contended that the majority of producers in Washington

and Oregon produce their cherries for use in juice concentrate rather

than canned or frozen products. Mr. Dorsing also stated that the juice

characteristics of the Northwest tart cherry are unique in character

and juice companies are finding that the characteristics of Northwest

juice concentrate meet their required specifications. He also stated

that Northwest production is not adding to the ``glut'' in the packed

product industry, since the Northwest is primarily a juice concentrate

industry. Mr. Dorsing stated further that the Northwest tart cherry

industry pays for its own storage, develops its own markets and does

its own promotion and advertising. Thus, there is nothing to be gained

by the Northwest being included in the tart cherry marketing order. In

addition, Mr. Dorsing requested that each State be allowed to vote

separately for inclusion in the marketing order.

The exception filed by Mr. Hageman opposed the proposed marketing

order. He stated that the order would unnaturally inflate grower prices

to nearly double the current level. He also asked that Washington and

Oregon be excluded from coverage under the proposed marketing order.

The reason given was that Washington and Oregon account for 6.5 percent

of the 1990-1994 total U.S. production and that, during the same time

period, less than 20 percent of the Washington and Oregon production

entered the five plus one canned and frozen product line. This would

indicate that less than 1.5 percent of the nation's supply of five plus

one stock was produced in the Northwest. It was argued by Mr. Hageman

that the Northwest industry is dependent on the juice concentrate and

puree market which does not compete with the five plus one market. Mr.

Hageman also requested a State-by-State referendum.

The exception filed by Mr. Mark Schrepel stated that any proposed

order should not include the State of Oregon, and that the Act appears

not to include cherries for canning or freezing if they originated in

Oregon or Washington. Mr. Schrepel believes that no Oregon grower or

processor supports the order. He also requested a State-by-State

referendum.

The exception filed by Mr. Lee Schrepel indicated that one of the

reasons the proposed order should exclude Washington and Oregon is

because the Northwest has distinctive production and marketing

characteristics. Further, it is Mr. Schrepel's contention that

successful marketing orders depend on the support of affected producers

and handlers. According to him, the unanimous opposition of Oregon

producers and handlers and near unanimous opposition by Washington

producers and handlers demonstrate the lack of this essential element.

Mr. Schrepel also requested voting by a State-by-State referendum.

As previously stated, to exclude any portion of the proposed

production area would tend to defeat the purpose of the proposed order

and could depress prices of the regulated cherries. Contrary to Mr.

Schrepel's suggestion, Oregon and Washington cherries for freezing or

canning are not excluded from coverage under the Act. Record evidence

supports the position that the oversupply situation in the U.S. is a

national problem. In addition, the juice concentrate market in areas

such as Oregon and Washington can be impacted by production in other

areas. Therefore, the entire industry needs to work together to

alleviate the problem. Also, the record evidence supports the argument

that the Northwest has the greatest potential to expand tart cherry

producing acreage, thereby further benefiting from the proposed order

in the event of increased production. Therefore, the Northwest should

be included in the production area under the proposed order and the

requests to exclude Oregon and Washington from the proposed production

area are denied.

In regard to the requests to conduct a State-by-State referendum to

determine who should be covered under the proposed tart cherry order,

such requests are denied. The Act requires that all producers and

processors in the proposed production area should vote in a referendum

on the promulgation of an order. There is no authority for State by

State voting.

Based upon the exception filed by CMI, the findings and conclusions

in material issue number 5(a) of the Recommended Decision concerning

the commodity to be covered are amended by adding the following

paragraph after the sixth paragraph (60 FR 61300) to read as follows:

CMI stated that the definition of cherries should be modified to

correct the misspelling of a species name and to include the words ``or

hybrids of'' to the cherry definition. Adding these words would correct

and clarify the definition. Therefore, CMI's exception is adopted

herein.

Based upon the exceptions filed by CMI, Mr. Morrison, and Mr.

Facer, the findings and conclusions in material issue number 5(b) of

the Recommended Decision concerning the establishment, composition,

maintenance, procedures, powers and duties of the Board are amended by

adding the following eight paragraphs after the 73rd paragraph in

material issue number 5(b) (60 FR 61307) to read as follows:

In its exception, it was CMI's contention that the order should be

modified to require that, in order for the Board to adopt preliminary

or final free and restricted percentages for any crop year, at least 11

Board members from districts that would be subject to volume regulation

vote in the affirmative on any such action. CMI also wanted this

requirement to apply if there are modifications to the marketing policy

under section 930.50(f). In addition, CMI argued that since the

Recommended Decision contains a Board voting requirement of two-thirds

of the entire Board rather than a majority of the Board, as originally

proposed, this modification is necessary because it is important that a

clear majority of those who are going to be regulated agree with the

determination before volume regulation can go into effect. It was also

CMI's concern that the unregulated districts could somehow influence

the decision to impose volume regulation when such regulation is a

possibility under the optimum supply formula. Eleven votes out of 13 is

approximately 85 percent of the votes from the volume regulated

districts. CMI suggested that this voting requirement apply to

recommendations made under sections 930.50(b), 930.50(d) and 930.50(f).

In his exception, Mr. Morrison argued that Board members from

nonregulated districts should not be allowed to vote on matters

concerning regulation of the crop or the timing on the release of the

primary pool.

Throughout this formal rulemaking process, it has been expressed

that the oversupply situation in the U.S. is a national problem, and

that the entire industry should work together to alleviate the problem

by participating in the proposed marketing order. Although USDA

understands CMI's concerns, they are overstated, since the proposed

order provisions concerning the marketing policy and issuance of volume

regulations contain a number of procedural steps which, in many

respects, make them self-executing. Also, it is the Secretary, and not

the Board, who issues the volume regulations and sets the final free

and restricted percentages. Therefore, as

[[Page 26961]]

previously discussed in the Recommended Decision, all actions by the

Board, including volume regulation issues, should continue to require a

two-thirds affirmative vote of the entire Board to pass. Therefore,

CMI's and Mr. Morrison's exceptions are denied.

Mr. Facer requested that only regulated districts be allowed to

vote on the release of the primary reserve. This is not necessary nor

is it supported by the record. As previously stated the situation that

exists in the industry is a national problem, therefore, all members

that represent the tart cherry industry in the Board should vote in all

matters. The reserve would be released by the Board when certain

conditions exist. For example, proposed section 930.50(g) would

release, to all handlers, up to an additional 10 percent (above the

optimum supply level) of the average of the prior three years sales, if

such inventory is available in the primary inventory reserve.

Therefore, Mr. Facer's exception is denied.

Based upon the exception filed by CMI and Mr. Lee Schrepel, the

findings and conclusions in material issue number 5(b) of the

Recommended Decision concerning the establishment, composition,

maintenance, procedures, powers and duties of the Board are amended by

adding the following three paragraphs after the fourth paragraph (60 FR

61301) to read as follows:

Questions and recommendations regarding order language concerning

the Board membership limitation on sales constituencies in proposed

Sec. 930.20(f) were raised by both Mr. Lee Schrepel and CMI. It was Mr.

Schrepel's concern that a single sales constituency could potentially

gain control of the Board and he asked that not more than 30 percent of

the Board be allowed to be affiliated (even remotely) in any manner

with a single sales constituency. However, a 30 percent limitation is

not adequately supported by the record. CMI's concern was that if a

grower who sells cherries through a number of different processors is

nominated for membership to the Board in a district, all of those

processors but one would then be prevented from having grower

representation on the Board. According to CMI, this would be true even

if the grower sold a very small amount of cherries to a particular

handler on a one-time basis. As proposed by CMI, this concern can be

addressed by considering the sales constituency to which the grower

delivers the majority of his or her cherries to be the grower's sales

constituency for nomination and representation purposes.

Concerns regarding sales constituencies and Board representation

have been raised from the beginning of this rulemaking process. That is

one of the reasons that USDA decided to impose a two-thirds voting

requirement instead of a simple majority, and added a provision

requiring the consensus of at least two-thirds of the entire Board to

pass any action by the Board (see page 61306 of the Recommended

Decision). The record is clear that the major reason Sec. 930.20(f)

generated so much discussion was the perception among some of the

participants at the hearing sessions that the Board could become

controlled by a single constituency, and the interests of those growers

and handlers not associated with such constituency would not receive

proper attention or could be ignored altogether. Additions and changes

to Sec. 930.20(f) were suggested by Mr. Lee Schrepel and CMI, and

although these have merit, they are not dispositive of the main issue,

i.e., control of the Board by a single interest group.

When the question of adding further restrictions to Sec. 930.20(f)

arose early in the rulemaking proceeding, CMI indicated that it was

unlikely that any single sales constituency could gain control of the

Board, and that theoretical projections of such possibilities are not

realistic. Furthermore, it was pointed out by CMI that the Secretary

could effectively enforce the limitations contemplated by

Sec. 930.20(f) without modifying its language because the ultimate

decision of whom to appoint to the Board lies with the Secretary.

Therefore, in light of such requirements, and clear record evidence

that the purpose of Sec. 930.20(f) is to achieve a fair and balanced

Board representation, USDA will not add additional limitations to

Sec. 930.20(f), but, instead, will add language to more clearly express

the purpose of that section. In addition, the Secretary could issue

regulations to implement the section, if necessary.

Based upon the exception filed by Mr. Lee Schrepel, the findings

and conclusions in material issue number 5(b) of the Recommended

Decision concerning the establishment, composition, maintenance,

procedures, powers and duties of the Board are amended by adding the

following two paragraphs after the 30th paragraph (60 FR 61303) to read

as follows:

In Mr. Lee Schrepel's exception, he stated that the testimony by

the proponent made it clear that its intent is to maintain control of

the Board's public member. It was Mr. Schrepel's view that the proposed

marketing order still has no provisions to prevent the Board from

appointing Board members. Mr. Schrepel argued that the public member

should be appointed at the sole discretion of the Secretary, without

the advice or consent of the Board.

The Secretary has discretion in appointing members and alternate

members to the Board, including the public member. The appointments can

be made from Board nominees or other qualified individuals. In the case

of the public member and such member's alternate, the Secretary is

relying on the Board to nominate and elect eligible individuals. As was

previously stated in the Recommended Decision, such individuals would

then be subject to appointment by the Secretary. This procedure is

similar to the selection of public members and alternates on other

marketing order committees. Therefore, Sec. 930.24 is modified to

clarify the selection and appointment procedure.

Based upon the exceptions filed by Mr. Facer, Mr. Guise, Mr. Lee

Schrepel and CMI, the findings and conclusions in material issue number

5(b) of the Recommended Decision concerning the establishment,

composition, maintenance, procedures, powers and duties of the Board

are amended by adding the following six paragraphs after the 27th

paragraph (60 FR 61303) to read as follows:

The exception filed by Mr. Facer stated that the responsibilities

and authority of the Board relating to its ability to assess the

industry for research, development, promotion and advertising are too

broadly described. Also, the Board composition includes too much

representation from the nonregulated districts.

USDA relies on the marketing order committees and boards to

recommend rules and regulations concerning their particular industries.

Marketing order committees and boards are comprised of industry grower

and handler members and are experienced in the industry's operations

and should be capable of evaluating the industry's needs. It is for the

Secretary to determine whether rules recommended by committees or

boards should be issued. Board composition was recommended by the

proponent group to provide fair and equitable representation to the

entire industry based on the relative levels of production of cherries

in the various producing districts. It was the proponents' position

that all States covered under the order should be represented on the

Board in order to keep them informed of the Board's activities. In

addition, all States covered under the marketing order have the

potential to become regulated States in the future. Mr. Facer's

exception is therefore denied.

[[Page 26962]]

The exceptions filed by Mr. Ken Guise, Mr. Lee Schrepel and CMI

requested that the proposed order be modified to correct the handler

nomination petition process for District 6. Currently, only one handler

exists in District 6, which covers the State of Pennsylvania (Knouse

Foods Cooperative, Inc.). The Recommended Decision provided that for a

handler to be nominated for election to the Board, the handler would

have to obtain the signature of at least one handler, other than the

nominee, from the nominee's district who is eligible to vote in the

referendum. Under this procedure, Mr. Guise and CMI point out that

since there is no other handler in District 6 except Knouse Foods, such

handler would be denied the opportunity to be nominated for election to

the Board and District 6 would never be represented by a handler

representative unless another handler were to start operating in that

District.

CMI stated that this result is wholly unintended by the proponent

and requests that the USDA modify section 930.23(b)(2) to require that

when nominating handler members to the Board, the petition form be

signed by a handler other than the nominee shall not apply in any

District where less than two handlers are eligible to vote.

Mr. Schrepel requested that the same procedures developed for

Pennsylvania also apply to Washington and Oregon, since they have very

few handlers. The modification proposed by the proponents would also

address Mr. Lee Schrepel's concerns since the modification would apply

to any District that has less than two handlers.

Mr. Guise's, Mr. Lee Schrepel's and CMI's exception on this issue

is therefore adopted in this Secretary's Decision and appropriate

changes are made in section 930.23(b)(2).

Based upon the exception filed by Mr. Lee Schrepel, the findings

and conclusions in material issue number 5(b) of the Recommended

Decision concerning the establishment, composition, maintenance,

procedures, powers and duties of the Board are amended by adding the

following paragraph after the 33rd paragraph (60 FR 61304) to read as

follows:

Mr. Lee Schrepel requested that the procedures for electing

alternate members to the Board be more clearly detailed in the order.

The proposed order provides under section 930.23 that each member and

alternate member would be nominated and elected separately. The Board

has the authority to recommend rules and regulations to effectuate such

authority and specify more detailed procedures in regard to the

nomination process. Therefore, Mr. Schrepel's exception is denied.

Based upon the exception filed by Mr. Lee Schrepel, the findings

and conclusions in material issue number 5(b) of the Recommended

Decision concerning the establishment, composition, maintenance,

procedures, powers and duties of the Board are amended by adding the

following paragraph after the 35th paragraph (60 FR 61304) to read as

follows:

In his exception, Mr. Schrepel stated that USDA has submitted

contradictatory language regarding the nomination process. He claimed

that USDA appears to be advancing it's own interests of fast tracking

the proposal, if promulgated, by conducting nomination meetings in the

districts and allowing growers and handlers to vote for members and

alternate members at these meetings. USDA is not fast tracking such a

proposal. If the Secretary determines that conducting nomination

meetings and voting at these meetings would be the best method of

completing the process in a timely manner, then such method should be

used. Should the proposed order receive the required level of grower

and processor support in the referendum, USDA intends to conduct

meetings to nominate and elect the initial Board members and alternate

members using petition forms and election ballots as provided by

Sec. 930.23. Therefore, Mr. Schrepel's exception is denied.

In Mr. Lee Schrepel's exception, he indicated that there was an

error in proposed section 930.22 regarding Board members' terms of

office. The current proposed order specifies that one-third of such

initial members and alternates shall serve only one fiscal year, one-

third of such members and alternates shall serve only two fiscal years

and one-third of such members and alternate members shall serve two

fiscal years. The latter reference to two fiscal years should be

changed to three fiscal years to be consistent with the record

evidence. Mr. Schrepel is correct and his exception is adopted herein

by revising the order language.

Based upon the exceptions filed by Mr. MacKay and Mr. Lee Schrepel,

the findings and conclusions in material issue number 5(b) of the

Recommended Decision concerning the establishment, composition,

maintenance, procedures, powers and duties of the Board are amended by

adding the following three paragraphs after the 51st paragraph (60 FR

61305) to read as follows:

In Mr. Lee Schrepel's exception, he stated that in section

930.31(h), the reference to disbursement of all funds, including the

payment of storage to handlers, should not be included in that

particular section. USDA does not intend for the Board to utilize

assessments to pay for the storage of any cherries or cherry products.

The proponent's proposal to collect assessments from handlers for

storage of primary inventory reserve cherries was removed by the USDA

in the Recommended Decision. Therefore, such language referencing

storage assessments should not be contained in the proposed order. This

has been an oversight and such language shall be removed. Therefore,

Mr. Schrepel's exception is adopted.

The exception filed by Mr. MacKay requested that the proposed

marketing order be modified under the area of duties of the Board to

include that the Board's financial statements be prepared in accordance

with generally accepted accounting principles and to be audited by a

certified public accountant. Currently, the proposed order provides

that the Board cause its books to be audited by a certified public

accountant. Mr. MacKay requested USDA to clarify in the final order

whether the term ``books'' refers to the Board's financial statements

and clarify the basis for the financial statement presentation

(generally accepted accounting principles).

The term ``books'' does refer to the Board's financial statements.

The modification to change the term ``books'' to ``financial

statements'' is incorporated in this document. However, the

modification to clarify the basis for the financial statement

presentation (generally accepted accounting principles) is denied. The

Fruit and Vegetable Division's Marketing Agreement and Order Operation

Manual specifies the types of financial statement presentations to be

used in committee audits. This manual is used by all marketing order

committees and is a policy document issued by USDA. It is not feasible

to place such language in the order, since in the future, USDA could

change the basis for financial statement presentation for all marketing

order committees to use. If such a change occurred, the marketing order

would have to be amended, which can be a costly process. Therefore,

such a modification is denied. Thus, Mr. MacKay's exception is

partially denied.

Based upon the exception filed by Mr. Lee Schrepel, the findings

and conclusions in material issue number 5(c) of the Recommended

Decision concerning the authority to incur expenses and the procedure

to levy assessments on handlers to obtain revenue for paying such

expenses are

[[Page 26963]]

amended by adding the following paragraph after the seventh paragraph

(60 FR 61308) to read as follows:

In his exception, Mr. Lee Schrepel contended that a built-in limit

on the authority to level assessments should be established. Mr.

Schrepel proposed that this authority be capped at no more than 5

percent of the average field price for the season. He suggested that

this limit could be adjustable through modification at continuance

referendum time or more frequently. Under the order, the tart cherry

industry assessment rate would be dependent on meeting administrative

and other expenses and would be necessarily influenced by the volume of

the crop. The assessment rate would be established through informal

rulemaking which would require a Board recommendation and an

opportunity for public comment. Mr. Schrepel did not specify why 5

percent of the average field price for the season would be a reasonable

limit, and record evidence does not contain support for such a cap.

However, if the marketing order is implemented, the Board could adopt

such a cap as a guideline when recommending the assessment rate.

Therefore, Mr. Schrepel's exception is denied.

Based upon the exception filed by Mr. Lee Schrepel, the findings

and conclusions in material issue number 5(c) of the Recommended

Decision concerning the authority to incur expenses and the procedure

to levy assessments on handlers to obtain revenue for paying such

expenses are amended by adding the following two paragraphs after the

eighth paragraph (60 FR 61308) to read as follows:

In Mr. Lee Schrepel's exception, he stated that it is not equitable

to exempt from assessment those cherries which are diverted in

accordance with proposed sections 930.58 and 930.59.

Pursuant to section 930.62, cherries would be exempt from

assessments if they are diverted according to section 930.59. Product

diverted by handlers would not be entering normal market channels,

therefore assessments should not be levied. Mr. Schrepel does not point

to any evidence in the record to support his exception concerning

assessment of diverted cherries. Conversely, record testimony amply

supported exempting diverted cherries, since they are not entering

normal market channels. Therefore, Mr. Schrepel's exception is denied.

Based upon the exceptions filed by Mr. Mark Schrepel and Mr.

Morrison, the findings and conclusions in material issue number 5(c) of

the Recommended Decision concerning the authority to incur expenses and

the procedure to levy assessments on handlers to obtain revenue for

paying such expenses are amended by adding the following three

paragraphs after the eighth paragraph (60 FR 61308) to read as follows:

In Mr. Mark Schrepel's exception, he stated that he is concerned

about provisions within the proposal that would add expense and

hardship to growers. Mr. Schrepel contended that handlers should not be

assessed under this marketing order program if handlers are not in a

regulated district. He further stated that handlers in unregulated

districts should not be assessed for any expenses accrued by the Board

since handlers who divert are not assessed on diverted product.

As supported by record evidence, all growers and handlers in the

States proposed to be covered under the marketing order, including

those not subject to volume regulation, would enjoy the benefits

provided by the marketing order (i.e., improved grower returns and

increased consumption of tart cherries). Therefore, all handlers should

be assessed for the administrative costs of the order. Also, handlers

who enter cherries into normal market channels who choose to divert

some of their cherries would still be assessed for the cherries that

enter normal market channels. Therefore, Mr. Schrepel's exception is

denied.

In Mr. Morrison's exception, he stated that further effort needs to

be made to make sure that growers understand that the cost of holding

and processing the reserve can be passed on to growers by their

handlers. It is true that some handlers may pass such costs on to their

growers, either directly or indirectly. Under the former order, which

was based on a grower pool, growers were directly assessed storage and

processing costs for reserve pool cherries. However, this proposed

order is based on a handler pool. Therefore, it does not contain

authority to assess growers for such costs. Because of this difference,

Mr. Morrison's recommendation to somehow emphasize that storing and

processing costs can be passed on to growers is denied.

Based upon the exception filed by Mr. Lee Schrepel, the findings

and conclusions in material issue number 5(d) of the Recommended

Decision concerning the authority to provide for the establishment of

production, processing and marketing research and market development

projects, including paid advertising, are amended by adding the

following paragraph after the sixth paragraph (60 FR 61309) to read as

follows:

Mr. Lee Schrepel questioned whether the handlers in States that

have State marketing order programs should be exempted from paying

assessments on research and marketing development to the Federal

marketing order. Mr. Schrepel stated that there should only be one

assessment, a Federal or state assessment, not both. There is no

current proposal to exempt handlers from paying these assessments if

they are in a State that has a State marketing order program. The

record evidence did indicate that it would be highly unlikely that the

Board would initiate recommendations for research, development, or

promotion related assessments while a high percentage of tart cherry

growers are financing such activities through other organizations. The

record evidence does not contain support for Mr. Schrepel's proposal,

therefore, his exception is denied.

Based upon the exceptions filed by Mr. Frank, Mr. Morrison, Mr.

Facer, and Mr. Lee Schrepel, the findings and conclusions in material

issue number 5(e) of the Recommended Decision concerning the authority

to establish regulations that would require minimum quality and

inspection requirements are amended by adding the following six

paragraphs after the seventh paragraph (60 FR 61310) to read as

follows:

In Mr. Frank's exception, he stated that sections 930.44 (a) and

(b) are ambiguous and do not spell out what form of inspection would be

required (raw product or finished product). He also stated that any

inspection of free tonnage cherries should be a decision by a handler

and growers that deliver cherries to such handler. This should not be a

decision by an administrative body such as the Board. Local weather

conditions could affect a small geographic area, thereby causing damage

in a localized area rather than the entire production area under the

proposed order. This also interferes with a handler's decision on what

quality such handler feels could be marketed. Mr. Frank suggested that

the above mentioned sections be deleted from the proposed marketing

order.

Mr. Morrison also filed an exception that stated that only the

quality of cherries placed in the reserve should be regulated. This

would be the same as the prior order. Also, Mr. Morrison stated that

the Board should not regulate the raw product grade.

In Mr. Facer's exception, he stated that although the order

requires inspection of primary reserve tart cherries, there is no

official quality standards for some products. Therefore,

[[Page 26964]]

such inspection will be impractical, irrelevant and of no economic

benefit.

In Mr. Lee Schrepel's exception, he stated that the Board should

not be empowered to require the inspection of all cherries entering the

stream of commerce.

As previously stated, the proponents testified that as technology

increases, the Board should have the authority to adopt quality

standards for cherries, especially those concerning pit count. If

quality standards are recommended by the Board and implemented by the

Secretary, no handler would be allowed to process cherries into

manufactured products or sell manufactured products in the current of

commerce unless the cherries used in such products meet the applicable

requirements. Before recommending quality regulation, the record

evidence shows that it was the intent of the proponents that the Board

would obtain an industry consensus before making a recommendation to

USDA on this issue. Any such regulation would be issued by the

Secretary through informal rulemaking which would allow an opportunity

for comment.

Without additional Board action, only inventory reserve cherries

would be inspected, prior to placing them in the reserve. It is

imperative to maintain the quality of the reserve so that only good

quality cherries are released to handlers to be sold in the

marketplace. Therefore, based on the above discussion on the record

evidence, Mr. Frank's, Mr. Morrison's, Mr. Facer's, and Mr. Lee

Schrepel's exceptions are denied.

Based upon the exception filed by Mr. Lee Schrepel, the findings

and conclusions in material issue number 5(e) of the Recommended

Decision concerning the authority to establish regulations that would

require minimum quality and inspection requirements are amended by

adding the following two paragraphs after the 4th paragraph (60 FR

61310) to read as follows:

In Mr. Schrepel's exception, he stated that the cost of inspecting

new cherries to be rotated into the reserve and removing older cherries

out of the reserve should be at the expense of the handler. Such action

as this, undertaken by or at the convenience of the affected handler

for the benefit of the handler or some other party, should not be the

expense of the industry.

As previously stated, rotating cherries in the reserve is not a

requirement. However, it would benefit the industry if it were done.

This would insure that good quality cherries are being released when

inventory reserve cherries are sold. The Board will have the authority

to limit the number of inspections of cherries to be rotated into

inventory for which the Board would be financially liable. In order to

establish such limits, the Board would make a recommendation to the

Secretary and informal rulemaking would be conducted. Based on the fact

that the record evidence supports including this authority it will

remain in the order. Therefore, Mr. Lee Schrepel's exception is denied.

Based upon the exception filed by Mr. Lee Schrepel, the findings

and conclusions in material issue number 5(e) of the Recommended

Decision concerning the authority to establish regulations that would

require minimum quality and inspection requirements are amended by

adding the following two paragraphs after the third paragraph (60 FR

61310) to read as follows:

The exception filed by Mr. Lee Schrepel stated that there should be

no reimbursement of inspection costs for quality inspections for any

reserve or free market cherries. Also, requirements for reinspection

are inappropriate unless such cherries are part of the primary reserve.

The record evidence indicates that quality control inspections

would be paid for by handlers. However, inspections of primary reserve

cherries should be paid for by the Board. As previously stated, this

would insure that only good quality cherries would be available for

release from the reserve into the marketplace. This benefits all in the

industry. In regard to reinspection, cherries would only be reinspected

if they were regraded, resorted, repackaged or any other way further

prepared for market. This would be done if a handler had to repackage a

product that was already packaged for a client. This provision is a

safety valve to prevent poor quality product entering the marketplace.

New crop cherries would be inspected prior to being placed in the

primary reserve. The record evidence supports the above provisions,

therefore, Mr. Lee Schrepel's exception is denied.

Based upon the exceptions filed by CMI, the findings and

conclusions in material issue number 5(e) of the Recommended Decision

concerning the authority to establish regulations that would require

minimum quality and inspection requirements are amended by adding the

following paragraph after the seventh paragraph (60 FR 61310) to read

as follows:

CMI's exception stated that the proponent wishes to make it clear

that the Board would exercise its powers with regard to the

establishment of quality standards and inspection requirements in a

manner consistent with the establishment of quality standards under the

prior order. Producers and handlers were comfortable with the way that

the Board under the prior order instituted inspection requirements. The

proponents expect the new Board would operate in the same manner,

although they recognize that there are obvious significant differences

between the two orders. In addition, such quality regulations would be

implemented through the informal rulemaking process which would require

a Board vote and opportunity for the public to comment.

Based upon the exception filed by Mr. Harmson, the findings and

conclusions in material issue number 5(f) of the Recommended Decision

concerning the authority to establish volume regulation provisions

under the proposed order are amended by adding the following two

paragraphs after the 15th paragraph (60 FR 61311) to read as follows:

In an exception filed by Mr. Harmson, he stated that the provision

that would allow the Board to acknowledge a national bargaining agency

on behalf of growers should not be deleted from the proposed order.

Bargaining associations are a form of group action in agriculture that

contributes greatly to the economic well being of growers and adds an

important dimension to representation of their interests in the

marketplace.

As previously stated, the record evidence did not adequately

explain how such a provision would work or what the benefits would be

to growers. Also, the record evidence did not define the functions of a

national bargaining association as related to the proposed marketing

order. Therefore, Mr. Harmson's exception is denied.

Based upon the exception filed by Mr. Lee Schrepel, the findings

and conclusions in material issue number 5(f) of the Recommended

Decision concerning the authority to establish volume regulation

provisions under the proposed order are amended by adding the following

two paragraphs after the 23rd paragraph (60 FR 61312) to read as

follows:

The exception filed by Mr. Lee Schrepel stated that ownership of

the primary or secondary reserve should not be allowed to be

transferred, but remain with the handler who had the initial reserve

obligation.

Record evidence supported authorizing the transfer of a handler's

equity in the primary reserve to another person. As previously stated,

a handler may need to do this if, for example, such handler does not

have the storage

[[Page 26965]]

area to store the primary reserve. Therefore, Mr. Schrepel's exception

is denied.

Based upon the exception filed by CMI, the findings and conclusions

in material issue number 5(f) of the Recommended Decision concerning

the authority to establish volume regulation provisions under the

proposed order are amended by adding the following paragraph after the

seventh paragraph (60 FR 61311) to read as follows:

In CMI's exception, it stated that section 930.50(b) governing the

application of the optimum supply formula in calculating preliminary

free and restricted percentages was altered from the proponents'

proposal. The proponents' proposal provided that tonnage requirements

for the current crop year should be subtracted from the current year

USDA crop forecast. The Recommended Decision provided that these

numbers should be divided. This calculation would not work properly and

is an inadvertent error by USDA. Therefore, it will be corrected in the

amendatory language and CMI's exception is adopted.

Based upon the exception filed by CMI, the findings and conclusions

in material issue number 5(f) of the Recommended Decision concerning

the authority to establish volume regulation provisions under the

proposed order are amended by adding the following paragraph after the

67th paragraph (60 FR 61316) to read as follows:

The exception filed by CMI indicated that section 930.52(d) should

be corrected and clarified by removing the word ``maximum'' in the

phrase ``maximum average annual processed production'' since this

phrase is ambiguous and lacks clear meaning. One can either have a

maximum annual production or an average annual production over the last

five years, but not both. Therefore, section 930.52(d) should be

modified by removing the word ``maximum'' and simply permit a district

to drop out of volume regulation when its current crop is 50 percent

less than the average crop processed over the prior five years. CMI's

exception is adopted herein.

Based upon the exceptions filed by Mr. Rowley, Mr. Morrison, CMI,

Mr. Mark Schrepel, and Mr. Lee Schrepel, the findings and conclusions

in material issue number 5(f) of the Recommended Decision concerning

the authority to establish volume regulation provisions under the

proposed order are amended by adding the following eight paragraphs

after the 59th paragraph (60 FR 61315) to read as follows:

The exception filed by Mr. Rowley stated that he was very concerned

that the Recommended Decision did not authorize cherries used for

drying as a diversion outlet. Mr. Rowley stated that his company had

spent over $1,500,000 to develop dried cherries and dried cherry

products. He believes that it would be grossly unfair that unregulated

States could sell all their dried cherry products and he could not

since dried cherries is not a diversion outlet.

Mr. Mark Schrepel's exception expressed concern that export would

be prohibited as an exempt use or diversion outlet.

Mr. Morrison's exception requested that diversion credit be allowed

for juice, exports and dried cherries. Mr. Morrison stated that

companies have invested substantial sums to develop new markets and

expand current markets dealing with juice, export and dried cherries.

In CMI's exception, it requested that the USDA modify section 930.62 to

include dried cherries that are exported, and cherries that are

converted to juice.

Under section 930.59 of the proposed order, handler diversion can

take place by several methods, including uses exempt under section

930.62. Section 930.62 provides that diverted cherries used for

specific purposes may be exempt from certain provisions of the

marketing order. These include exemption from assessment and volume

control provisions.

Dried cherries or cherries designated for export can be exempted

under Sec. 930.62 from certain order provisions or can be allowed to

qualify as diversion outlets under Sec. 930.59. As specified under

section 930.62, the Board can also designate other exempt uses. If the

Board choose to designate export or dried cherries as an exempted use

under Sec. 930.62, export and dried cherries could also be specified as

an eligible diversion outlet. Thus, such uses requested by the

exceptions for diversion credit are not prohibited under the marketing

order, except for cherries converted to juice or juice concentrate.

As previously discussed, record evidence supports the proposition

that cherries converted to juice or juice concentrate cannot be used as

an eligible diversion outlet. The arguments raised in the exceptions

did not overcome the evidence in the record indicating that cherries

converted to juice or juice concentrate cannot be used as an eligible

diversion. This is mainly because of the possibility of oversupplies

damaging the juice market already established by cherry producers and

handlers in Oregon and Washington.

In addition, CMI's exception requested USDA to modify section

930.59(d) to clarify that the prohibition of juice or juice concentrate

as an eligible handler diversion only prohibits the conversion of

diverted cherries to juice or concentrate. CMI requested that the use

of juice or juice concentrate for sales in export markets be eligible

for diversion credit. As previously discussed, the prohibition of juice

or juice concentrate for diversion credit, discussed in the Recommended

Decision (60 FR 61316), would also apply to sales of juice or juice

concentrate in export markets. This prohibition on diversion credit,

however, does not preclude the export of free tonnage cherries that

have been converted to juice or juice concentrate. Therefore, CMI's

exception is denied.

Finally, Mr. Lee Schrepel's exception stated that there was an

error in section 930.58(b) which referenced section 930.63 as exempted

uses. Section 930.62 is the section in the marketing order that

specifies the exempt uses. Therefore, section 930.58(b) should be

corrected.

Based upon the exceptions filed by Mr. Frank and Mr. Facer, the

findings and conclusions in material issue number 5(f) of the

Recommended Decision concerning the authority to establish volume

regulation provisions under the proposed order are amended by adding

the following paragraph after the 68th paragraph (60 FR 61317) to read

as follows:

In Mr. Frank's exception, he stated that tart cherries is a

national crop and the oversupply is a national problem. Therefore,

Washington, Oregon, Wisconsin and Pennsylvania should not be exempt

from participating in the marketing order. These States comprise 17

percent of the total bearing acreage. Mr. Frank states that this is not

an insignificant amount and to exempt these States from participating

in the marketing order is not fair or right. In Mr. Facer's exception,

he stated that he opposed the 15 million pound requirement tart cherry

producing areas would have to meet to become regulated under the order.

All tart cherry producing areas should be included or there should not

be a marketing order. The above-mentioned States are not exempt from

the marketing order. If the proposed order becomes effective, they

would not be regulated under the order's proposed volume regulation

because they do not meet the 15 million pound criteria. Should they

meet the criteria in the future, they would become regulated. Handlers

in all States would pay assessments for the administration of the

order. The record evidence does not warrant volume

[[Page 26966]]

regulation in the States discussed by Mr. Frank or Mr. Facer, at this

time. Therefore, Messrs. Frank's and Facer's exceptions are denied.

Based upon the exception filed by Mr. Facer, the findings and

conclusions in material issue number 5(f) of the Recommended Decision

concerning the authority to establish volume regulation provisions

under the proposed order are amended by adding the following two

paragraphs after the 23rd paragraph (60 FR 61312) to read as follows:

Mr. Facer expressed a concern that the proposed order would not

protect individual producers' investments in processing/marketing

cooperatives. He stated that many producers have made substantial

investments in cooperatives to market their production while other

producers have no such investments. It is his contention that the order

will make all producers equal, allowing each to market the same portion

of his/her crop.

The proposed order does not regulate producers. The order regulates

only handlers of tart cherries. If a volume regulation is implemented,

handlers would have to decide how to market their product, whether to

withhold the required reserve or divert product, or both. Independent

handlers and cooperatives would be making similar decisions concerning

tart cherries to those they have made in the past when faced with

overproduction. Such decisions would include identifying which

producers' cherries to purchase, and which of those to utilize in

various products and markets. The proposed marketing order is intended

to bring supplies in line with current demand, thereby increasing

returns to growers. Therefore, Mr. Facer's exception is denied.

Based upon the exception filed by Mr. Lee Schrepel, the findings

and conclusions in material issue number 5(f) of the Recommended

Decision concerning the authority to establish volume regulation

provisions under the proposed order are amended by adding the following

two paragraphs after the 20th paragraph (60 FR 61312) to read as

follows:

Mr. Lee Schrepel's exception stated that the Board, even with the

concurrence of the Secretary, should never have authority to modify the

50 million pound primary reserve limit. If a modification occurs, it

should involve a proposal of modification to the Secretary followed by

a comment period and State-by-State voting.

The record evidence supports the 50 million pound level specified

in section 930.50(i). If the Board recommended a change to the 50

million pound level, it would have to be implemented through the formal

rulemaking process which would require a public hearing and eventually

a favorable vote by growers and processors to implement such change.

State-by-State voting is not authorized under the Act nor is it

supported by the record.

Based upon the exception filed by CMI, the findings and conclusions

in material issue number 5(f) of the Recommended Decision concerning

the authority to establish volume regulation provisions under the

proposed order are amended by adding the following paragraph after the

16th paragraph (60 FR 61311) to read as follows:

The exception filed by CMI stated that there was an inconsistency

in section 930.55(b) of the proposed order. The record evidence

supported the concept that handlers could place cherries in any form in

the inventory reserve. Handlers would have the option of choosing what

form of inventory they wish to store. However, proposed section

930.55(b) states that the form to be used would be prescribed by the

Board. This statement is inconsistent with the record evidence.

Therefore, CMI's exception is adopted and appropriate modifications are

made in section 930.55(b).

Based upon the exception filed by CMI, the findings and conclusions

in material issue number 5(f) of the Recommended Decision concerning

the authority to establish volume regulation provisions under the

proposed order are amended by adding the following paragraph after the

15th paragraph (60 FR 61311) to read as follows:

The exception filed by CMI stated that section 930.53 should also

apply to the modification, suspension, or termination of quality

regulations along with volume regulations. This change would clarify

the Board's responsibility to monitor crop and market conditions and

recommend changes to existing regulations as necessary. Therefore,

CMI's exception is adopted and appropriate modifications to section

930.53 have been made.

Based upon the exception filed by Mr. Lee Schrepel, the findings

and conclusions in material issue number 5(f) of the Recommended

Decision concerning the authority to establish volume regulation

provisions under the proposed order are amended by adding the following

paragraph after the 12th paragraph (60 FR 61311) to read as follows:

In Mr. Lee Schrepel's exception, he stated that the reference to

the harvest season beginning in August (used as part of an

illustration) was incorrect. Mr. Schrepel stated that the harvest

season actually begins in mid-June and runs through mid-August. Mr.

Schrepel's exception is correct.

Based upon the exception filed by Mr. Lee Schrepel, the findings

and conclusions in material issue number 5(f) of the Recommended

Decision concerning the authority to establish volume regulation

provisions under the proposed order are amended by adding the following

paragraph after the 52nd paragraph (60 FR 61314) to read as follows:

The exception filed by Mr. Lee Schrepel stated that grower

diversion credit should not be given for fruit that is storm damaged. A

diversion credit may be a marketable commodity, an item of value, and

no such value should be accrued for unmarketable cherries. USDA did not

include the proponents' proposal to authorize diversion credit for

unharvestable or unmarketable fruit. The record evidence supported the

proposition that growers should be allowed to receive diversion credit

for marketable, harvestable fruit, even if some portion of such fruit

was damaged by storm winds or floods. USDA has determined that the

grower diversion program contained in the Recommended Decision could

benefit the industry and believes that this finding is consistent with

Mr. Schrepel's exception.

Based upon the exceptions filed by CMI and Mr. Lee Schrepel, the

findings and conclusions in material issue number 5(f) of the

Recommended Decision concerning the authority to establish volume

regulation provisions under the proposed order are amended by adding

the following 10 paragraphs after the 68th paragraph (60 FR 61317) to

read as follows:

The exception filed by CMI stated that since USDA modified the

provisions under section 930.52, the section may not now provide

authority to subject additional districts to volume regulation once the

initial group of volume regulated districts is established at the time

of promulgation. CMI also proposes a new section 930.52 to replace

section 930.52 that was published in the Recommended Decision. CMI

objected to USDA removing a 150 percent trigger provision which would

make districts that had a surge in production subject to volume

control. USDA determined that such an additional criteria would be

complicated for the Board to administer and possibly inequitable to

growers and handlers.

CMI stated that, since the 150 percent trigger was removed from the

proposal, the potential now exists for having up to 25 million pounds

of unregulated

[[Page 26967]]

production. In a market of 250 million pounds, this amounts to 10

percent of unregulated production annually and an additional 10 percent

could have a substantial impact upon markets and prices. CMI states

that this emphasizes the need to have realistic production triggers.

Also, CMI disagrees with USDA's conclusion that the dual triggers (150

percent and 15 million pounds) would somehow cause confusion and

concern that a district could meet one criteria and not the other and

still be regulated. CMI contends that the rules pertaining to the 15

million pound criteria and the 150 percent trigger are clear on the

record, and therefore are not confusing.

CMI has proposed modifications to section 930.52 which would

provide that: (1) Upon promulgation, those districts potentially

subject to any imposed volume regulation would be those in which the

average annual production of cherries over the prior three years,

measured on a total production basis, has exceeded 15 million pounds of

cherries and that handlers in districts not meeting this 15 million

pound requirement at the time of order promulgation shall become

subject to any volume regulation implemented in accordance with this

part in the crop year that follows any three-year period in which the

15 million pound average production requirement is exceeded in that

district; (2) If total production data is unavailable for a district,

the Board would adjust the 15 million pound trigger upward or downward

by a factor accounting for the historical difference between the total

production and total utilization; and (3) When a district hits the 15

million pound trigger, it would be subject to regulation in the next

crop year and remain regulated until the crop year following that in

which its production drops below 15 million pounds over any three-year

period subsequent to the year in which it hit the original 15 million

pound threshold.

Regarding modification number one, USDA is adopting CMI's

exception. This would clarify the intent and meaning of section 930.52

which should provide that after the initial regulation of districts

that meet the 15 million pound test, additional districts may become

regulated in the future.

Regarding modification number two, USDA is not adopting this

exception. Such factors as proposed by CMI would be confusing and

difficult to administer. If the order is promulgated, information

needed to calculate each State's production would be collected under

the marketing order. The marketing order provides for information

collection from handlers that can be used for this purpose.

Finally, the third modification is also denied. This modification

would lock a State in to being regulated for three years once it

reaches the 15 million pound threshold. This was not the intent of

USDA's modification to the Recommended Decision to delete the 150

percent trigger mechanism. USDA intended that States would become

regulated in the year subsequent to when they reach 15 million pounds

(computed as a rolling average of a three year period). Also, States

would become unregulated in the year subsequent to when they fell below

the 15 million pounds. The production of each State or district would

be reviewed annually to determine if they would be regulated or not

regulated in the upcoming crop year. Therefore, CMI's exception is

denied on this issue.

In Mr. Lee Schrepel's exception, he stated that the Board should

not have the authority to modify the 15 million pound requirement for

volume regulation. If the Board decided to recommend modification of

the 15 million pound level, such modification would have to be

implemented through formal rulemaking procedures. This would require a

public hearing and a favorable vote by growers and processors to

implement such change.

Mr. Schrepel further stated that the proposal should be modified to

facilitate that this trigger (15 million pound requirement) for

imposition of volume regulations increase whenever it falls below 8

percent of the optimum supply. There is no support in the record for

such proposition. Also, Mr. Schrepel did not specify why 8 percent was

chosen and how this provision would work, therefore, his exception is

denied.

Mr. Schrepel also requested clarification of when districts would

become permanently regulated; would it be contingent upon the average

of the previous three seasons? As previously discussed, no district

would be regulated unless that district continued to have production

above the 15 million pound requirement. Each year, the production of

each district (based on a rolling 3-year average) would be evaluated to

determine if such district would be regulated in the upcoming crop

year.

Mr. Schrepel also requested that USDA specify the source of data

for application of the trigger. USDA believes that the proponents

intended that the Board use post-harvest production figures from each

district. The Board can also obtain this information from USDA data and

handler reports.

Based upon the exception filed by Mr. Lee Schrepel, the findings

and conclusions in material issue number 5(f) of the Recommended

Decision concerning the authority to establish volume regulation

provisions under the proposed order are amended by adding the following

paragraph after the 19th paragraph (60 FR 61312) to read as follows:

Mr. Lee Schrepel's exception stated under section 930.63(a) that

referenced ``60 days prior to the end of the crop year'' appears to be

open to interpretation by the reader. USDA disagrees with this

statement. Crop year is defined under the marketing to mean the 12-

month period beginning on July 1 of any year and ending on June 30 of

the following year. Therefore, 60 days prior to the end of the crop

year would mean April 30. Mr. Schrepel's exception is denied.

Based upon the exception filed by Mr. Lee Schrepel, the findings

and conclusions in material issue number 5(h) of the Recommended

Decision concerning the additional terms and conditions which are

common to all marketing orders are amended by adding the following five

paragraphs after the sixth paragraph (60 FR 61318) to read as follows:

Mr. Lee Schrepel's exception stated that a continuance referendum

every sixth year is not frequent enough. The industry should be able to

petition the Secretary to hold a continuance referendum more

frequently.

The record evidence supported the conduct of a continuance

referendum at least every six years among growers and processors in the

industry to determine if they favor continuance of the order. This is

also consist with Departmental guidelines that endorse a continuance

referendum every six years. The Secretary is not prevented from holding

a continuance referendum at an earlier date if such referendum is

deemed necessary. Therefore, Mr. Schrepel's exception is denied.

Mr. Schrepel also stated that the standards or criteria should be

as stringent for continuance of the order as it is for the initial

promulgation. As was indicated in the Recommended Decision, it was

contemplated that the criteria for continuance of the order would be

based on a two-thirds affirmative vote by number or volume represented

in the referendum. This standard would be similar to the promulgation

standard. In any event, the Secretary would still have discretionary

authority in deciding whether to continue the order. Therefore, Mr.

Schrepel's exception is denied.

[[Page 26968]]

Mr. Schrepel also stated that section 930.91 should include

provisions for the initiation of an amendment from a source within the

industry other than the Board. Mr. Schrepel stated that incidents may

occur and the Board may not choose to act on a matter that may be of

considerable importance to an industry segment. The language in section

930.91 is standard language which is found in other orders and does not

preclude anyone from recommending amendments.

The Secretary relies on the Board to make recommendations that are

important to the welfare of the industry. If one segment of the

industry is concerned about an issue, it should be brought to the Board

to be addressed. Any person can submit recommendations to the Secretary

for consideration. If the Secretary does conclude that formal

rulemaking is necessary based on a Board recommendation or other

recommendations, other persons will also have the opportunity to submit

proposals. In addition, the Secretary may propose amendments, even in

the absence of outside recommendations. Therefore, Mr. Schrepel's

exception is denied.

In addition, to the exceptions filed and discussed above, CMI filed

an exception that included some typographical errors in the amendatory

language of the proposed order. Those changes are adopted in the

amendatory language below. They are:

(1) Section 930.11--Add the words ``for his or her own account'' at

the end of the definition.

(2) Section 930.15--cross sectional references are incorrect that

refer to the primary and secondary reserve.

(3) Section 930.17--cross sectional reference is incorrect that

refers to the primary and secondary reserve.

(4) Section 930.25--the phrase ``reapportionment or'' should be

added to make this section consistent with other changes that were

made.

(5) Section 930.51--A comma and the word ``this'' were left out of

the proposal.

(6) Section 930.55(a)--cross sectional reference is incorrect that

refers to equity holders.

(7) Section 930.57(a)--cross sectional reference is incorrect that

refers to equity holders.

(8) Section 930.58(b)--cross sectional reference is incorrect that

refers to exemptions.

(9) Section 930.58(b)(i)--add an ``and'' at the end of the

paragraph.

(10) Section 930.60--Change ``sole property'' to sole

responsibility.''

Also, in his exception, Mr. Lee Schrepel pointed out some

typographical errors and omissions of words in the Recommended

Decision. They are: (1) the dates of the Grand Rapids, Michigan hearing

session were incorrectly listed (60 FR 61292) and should be changed

from January 9 and 10, 1995, to January 18 and 19, 1995, respectively;

(2) in the description of small agricultural producers as those

entities having annual receipts of less than $500,000 (60 FR 61293),

the words ``less than'' were inadvertently omitted and should be added;

and, (3) the listings of U.S. bearing acreage of tart cherries (60 FR

61293) in 1986 and 1990 were incorrectly stated and should be changed

from 4.5 million and 5 million, respectively, to 45,000 and 50,000,

respectively.

USDA has modified sections 70(c) to make that provision consistent

with authorities provided under this proposed order and other Federal

marketing orders. In addition, where necessary, USDA has made minor

conforming changes to ensure that all sections of this part accurately

reflect the modifications adopted in this decision.

Rulings on Exceptions

In arriving at the findings and conclusions and the regulatory

provisions of this decision, the exceptions to the Recommended Decision

were carefully considered in conjunction with the record evidence. To

the extent that the findings and conclusions and the regulatory

provisions of this decision are at variance with the exceptions, such

exceptions are denied.

Marketing Agreement and Order

Annexed hereto and made a part hereof is the document entitled

``Order Regulating the Handling of Tart Cherries Grown in the States of

Michigan, New York, Pennsylvania, Oregon, Utah, Washington, and

Wisconsin.'' This document has been decided upon as the detailed and

appropriate means of effectuating the foregoing findings and

conclusions.

It is hereby ordered, That this entire decision be published in the

Federal Register.

Referendum Order

It is hereby directed that a referendum be conducted in accordance

with the procedure for the conduct of referenda (7 CFR 900.400) to

determine whether the issuance of the annexed order regulating the

handling of tart cherries grown in the States of Michigan, New York,

Pennsylvania, Oregon, Utah, Washington, and Wisconsin is approved or

favored by growers and processors, as defined under the terms of the

order, who, during the representative period were engaged in the

production or processing of tart cherries in the proposed production

area.

The representative period for the conduct of such referendum is

hereby determined to be July 1, 1995, through May 31, 1996.

The agents of the Secretary to conduct such referendum are hereby

designated to be Gary D. Olson and Robert J. Curry, Marketing Order

Administration Branch, Fruit and Vegetable Division, AMS, USDA, 1220

S.W. Third Avenue, room 369, Portland, Oregon 97204; telephone 503-326-

2724, FAX 503-326-7440.

List of Subjects in 7 CFR Part 930

Marketing agreements, Tart cherries, Reporting and recordkeeping

requirements.

Dated: May 22, 1996.

Shirley R. Watkins,

Deputy Assistant Secretary, Marketing and Regulatory Programs.

Order Regulating the Handling of Tart Cherries Grown in the States of

Michigan, New York, Pennsylvania, Oregon, Utah, Washington, and

Wisconsin 1

---------------------------------------------------------------------------

\1\ This order shall not become effective unless and until the

requirements of section 900.14 of the rules of practice and

procedure governing proceedings to formulate marketing agreements

and marketing orders have been met.

---------------------------------------------------------------------------

Findings and determinations upon the basis of the record. Pursuant

to the provisions of the Agricultural Marketing Agreement Act of 1937,

as amended (7 U.S.C. 601 et seq.), and the applicable rules of practice

and procedure effective thereunder (7 CFR part 900), a public hearing

was held upon a proposed marketing agreement and order regulating the

handling of tart cherries grown in the States of Michigan, New York,

Pennsylvania, Oregon, Utah, Washington, and Wisconsin.

Upon the basis of the evidence introduced at such hearing and the

record thereof, it is found that:

(1) The marketing agreement and order, and all of the terms and

conditions thereof, will tend to effectuate the declared policy of the

Act;

(2) The marketing agreement and order regulate the handling of tart

cherries grown in the production area 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 hearings have been held;

[[Page 26969]]

(3) The marketing agreement and order 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) There are no differences in the production and marketing of

tart cherries produced in the production area which make necessary

different terms and provisions applicable to different parts of such

area; and

(5) All handling of tart cherries grown in the production area is

in the current of interstate or foreign commerce or directly burdens,

obstructs, or affects such commerce.

Order Relative to Handling

It is therefore ordered, That on and after the effective date

hereof, all handling of tart cherries grown in the States of Michigan,

New York, Pennsylvania, Oregon, Utah, Washington, and Wisconsin, shall

be in conformity to, and in compliance with, the terms and conditions

of the said order, as follows:

The provisions of the proposed marketing agreement and order

contained in the Recommended Decision issued by the Administrator on

November 20, 1995, and published in the Federal Register on November

29, 1995 [60 FR 61292], as revised herein, shall be and are the terms

and provisions of this agreement and order. Sections 930.92 through

930.94 apply only to the proposed marketing agreement and not the

proposed order.

Title 7, Chapter IX is proposed to be amended by adding part 930 to

read as follows:

PART 930--TART CHERRIES GROWN IN THE STATES OF MICHIGAN, NEW YORK,

PENNSYLVANIA, OREGON, UTAH, WASHINGTON, AND WISCONSIN

Subpart A--Order Regulating Handling

Definitions

Sec.

930.1 Act.

930.2 Board.

930.3 Cherries.

930.4 Crop year.

930.5 Department or USDA.

930.6 District.

930.7 Fiscal period.

930.8 Free market tonnage percentage cherries.

930.9 Grower.

930.10 Handle.

930.11 Handler.

930.12 Person.

930.13 Primary inventory reserve.

930.14 Production area.

930.15 Restricted percentage cherries.

930.16 Sales constituency.

930.17 Secondary inventory reserve.

930.18 Secretary.

Administrative Body

930.20 Establishment and membership.

930.21 Reestablishment

930.22 Term of office.

930.23 Nomination and election.

930.24 Appointment.

930.25 Failure to nominate.

930.26 Acceptance.

930.27 Vacancies.

930.28 Alternate members

930.29 Eligibility for membership on Cherry Industry Administrative

Board.

930.30 Powers.

930.31 Duties.

930.32 Procedure.

930.33 Expenses and compensation.

Expenses and Assessments

930.40 Expenses.

930.41 Assessments.

930.42 Accounting.

Quality Control

930.44 Quality Control.

Research, Market Development and Promotion

930.48 Research, Market Development and Promotion.

Regulations

930.50 Marketing policy.

930.51 Issuance of volume regulations.

930.52 Establishment of districts subject to volume regulations.

930.53 Modification, suspension, or termination of regulations.

930.54 Prohibition on the use or disposition of inventory reserve

cherries.

930.55 Primary inventory reserves.

930.56 Off-premise inventory reserve.

930.57 Secondary inventory reserve.

930.58 Grower diversion privilege.

930.59 Handler diversion privilege.

930.60 Equity holders.

930.61 Handler compensation.

930.62 Exemptions.

930.63 Deferment of restricted obligation.

Reports and Records

930.70 Reports.

930.71 Records.

930.72 Verification of reports and records.

930.73 Confidential information.

Miscellaneous Provisions

930.80 Compliance.

930.81 Right of the Secretary.

930.82 Effective time.

930.83 Termination.

930.84 Proceedings after termination.

930.85 Effect of termination or amendment.

930.86 Duration of immunities.

930.87 Agents.

930.88 Derogation.

930.89 Personal liability.

930.90 Separability.

930.91 Amendments.

930.92 Counterparts.

930.93 Additional parties.

930.94 Order with marketing agreement.

Subpart B--[Reserved]

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

Subpart A--Order Regulating Handling

Definitions

Sec. 930.1 Act.

Act means Public Act No. 10, 73d Congress (May 12, 1933), as

amended, and as reenacted and amended by the Agriculture Marketing

Agreement Act of 1937, as amended (48 Stat. 31, as amended, 68 Stat.

906, 1047; 7 U.S.C. 601 et seq.).

Sec. 930.2 Board.

Board means the Cherry Industry Administrative Board established

pursuant to Sec. 930.20.

Sec. 930.3 Cherries.

Cherries means all tart/sour cherry varieties grown in the

production area classified botanically as Prunus cerasas, or hybrids of

Prunus cerasas by Prunus avium, or Prunus cerasas by Prunus fruticosa.

Sec. 930.4 Crop year.

Crop year means the 12-month period beginning on July 1 of any year

and ending on June 30 of the following year, or such other period as

the Board, with the approval of the Secretary, may establish.

Sec. 930.5 Department or USDA.

Department or USDA means the United States Department of

Agriculture.

Sec. 930.6 District.

District means one of the subdivisions of the production area

described in Sec. 930.20(c), or such other subdivisions as may be

established pursuant to Sec. 930.21, or any subdivision added pursuant

to Sec. 930.63.

Sec. 930.7 Fiscal period.

Fiscal period is synonymous with fiscal year and means the 12-month

period beginning on July 1 of any year and ending on June 30 of the

following year, or such other period as the Board, with the approval of

the Secretary, may establish: Provided, That the initial fiscal period

shall begin on the effective date of this part.

Sec. 930.8 Free market tonnage percentage cherries.

Free market tonnage percentage cherries means that proportion of

cherries handled in a crop year which are free to be marketed in normal

commercial outlets in that crop year under any volume regulation

established pursuant to Sec. 930.50 or Sec. 930.51 and, in the absence

of a

[[Page 26970]]

restricted percentage being established for a crop year pursuant to

Sec. 930.50 or Sec. 930.51, means all cherries received by handlers in

that crop year.

Sec. 930.9 Grower.

Grower is synonymous with producer and means any person who

produces cherries to be marketed in canned, frozen, or other processed

form and who has a proprietary interest therein: Provided, That the

term grower shall not include a person who produces cherries to be

marketed exclusively for the fresh market in an unpitted condition.

Sec. 930.10 Handle.

Handle means the process to brine, can, concentrate, freeze,

dehydrate, pit, press or puree cherries, or in any other way convert

cherries commercially into a processed product, or divert cherries

pursuant to Sec. 930.59 or obtain grower diversion certificates issued

pursuant to Sec. 930.58, or otherwise place cherries into the current

of commerce within the production area or from the area to points

outside thereof: Provided, That the term handle shall not include:

(a) The brining, canning, concentrating, freezing, dehydration,

pitting, pressing or the converting, in any other way, of cherries into

a processed product for home use and not for resale.

(b) The transportation within the production area of cherries from

the orchard where grown to a processing facility located within such

area for preparation for market.

(c) The delivery of such cherries to such processing facility for

such preparation.

(d) The sale or transportation of cherries by a grower to a handler

of record within the production area.

(e) The sale of cherries in the fresh market in an unpitted

condition.

Sec. 930.11 Handler.

Handler means any person who first handles cherries or causes

cherries to be handled for his or her own account.

Sec. 930.12 Person.

Person means an individual, partnership, corporation, association,

or any other business unit.

Sec. 930.13 Primary inventory reserve.

Primary inventory reserve means that portion of handled cherries

that are placed into handlers' inventories in accordance with any

restricted percentage established pursuant to Sec. 930.50 or

Sec. 930.51.

Sec. 930.14 Production area.

Production area means the States of Michigan, New York,

Pennsylvania, Oregon, Utah, Washington and Wisconsin.

Sec. 930.15 Restricted percentage cherries.

Restricted percentage cherries means that proportion of cherries

handled in a crop year which must be either placed into handlers'

inventories in accordance with Sec. 930.55 or Sec. 930.57 or otherwise

diverted in accordance with Sec. 930.60 and thereby withheld from

marketing in normal commercial outlets under any volume regulation

established pursuant to Sec. 930.50 or Sec. 930.51.

Sec. 930.16 Sales constituency.

Sales constituency means a common marketing organization or

brokerage firm or individual representing a group of handlers or

growers.

Sec. 930.17 Secondary inventory reserve.

Secondary inventory reserve means any portion of handled cherries

voluntarily placed into inventory by a handler under Sec. 930.57.

Sec. 930.18 Secretary.

Secretary means the Secretary of Agriculture of the United States,

or any officer or employee of the U.S. Department of Agriculture to

whom authority has heretofore been delegated, or to whom authority may

hereafter be delegated, to act in the Secretary's stead.

Administrative Body

Sec. 930.20 Establishment and membership.

(a) There is hereby established a Cherry Industry Administrative

Board (Board) consisting of 18 members. Seventeen of these members

shall be qualified growers and handlers selected pursuant to this part,

each of whom shall have an alternate having the same qualifications as

the member for whom the person is an alternate. The remaining member of

the Board shall be a public member who, along with his or her

alternate, shall be elected by the Board from the general public.

(b) District representation on the Board shall be as follows:

------------------------------------------------------------------------

Grower Handler

District members members

------------------------------------------------------------------------

1................................................. 2 2

2................................................. 1 2

3................................................. 1 1

4................................................. 1 1

5................................................. 1 or 1

6................................................. 1 or 1

7................................................. 1 1

8................................................. 1 or 1

9................................................. 1 or 1

------------------------------------------------------------------------

(c) Upon the adoption of this part, the production area shall be

divided into the following described subdivisions for purposes of this

section:

District 1--Northern Michigan: That portion of the State of

Michigan which is north of a line drawn along the northern boundary of

Mason County and extended east to Lake Huron.

District 2--Central Michigan: That portion of the State of Michigan

which is south of District 1 and north of a line drawn along the

southern boundary of Allegan County and extended east to Lake St.

Clair.

District 3--Southern Michigan: That portion of the State of

Michigan not included in Districts 1 and 2.

District 4--The State of New York.

District 5--The State of Oregon.

District 6--The State of Pennsylvania.

District 7--The State of Utah.

District 8--The State of Washington.

District 9--The State of Wisconsin.

(d) The ratio of grower to handler representation in District 2

shall alternate each time the term of a Board member from the

representative group having two seats expires. During the initial

period of the order, the ratio shall be as designated in paragraph (b)

of this section.

(e) Board members from Districts 5, 6, 8 and 9 may be either grower

or handler members and will be nominated and elected as outlined in

Sec. 930.23. If District 5, 6, 8, and/or 9 becomes subject to volume

regulation under Secs. 930.52(a), then the Board shall be reestablished

by the Secretary to provide such District(s) with at least one grower

and one handler seat on the Board and such seats shall be filled

according to the provisions of Sec. 930.23.

(f) 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. There is, however, 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.

(g) Subject to the approval of the Secretary, the Board shall at

its first meeting and annually thereafter elect from among any of its

members a chairperson and a vice-chairperson and may elect other

appropriate officers.

Sec. 930.21 Reestablishment.

Districts, subdivisions of districts, and the distribution of

representation among growers and handlers within a respective district

or subdivision

[[Page 26971]]

thereof, or among the subdivision of districts, may be reestablished by

the Secretary, subject to the provisions of Sec. 930.23, based upon

recommendations by the Board. In recommending any such changes, the

Board shall consider:

(a) the relative importance of producing areas;

(b) relative production;

(c) the geographic locations of producing areas as they would

affect the efficiency of administration of this part;

(d) shifts in cherry production within the districts and the

production area;

(e) changes in the proportion and role of growers and handlers

within the districts; and

(f) other relevant factors.

Sec. 930.22 Term of office.

The term of office of each member and alternate member of the Board

shall be for three fiscal years: Provided that, of the nine initial

members and alternates from the combination of Districts 1, 2 and 3,

one-third of such initial members and alternates shall serve only one

fiscal year, one-third of such members and alternates shall serve only

two fiscal years, one-third of such members and alternates shall serve

three fiscal years; and one-half of the initial members and alternates

from Districts 4 and 7 shall serve only one fiscal year, and one-half

of such initial members and alternates shall serve two fiscal years

(determination of which of the initial members and their alternates

shall serve for 1 fiscal year, 2 fiscal years, or 3 fiscal years, in

both instances, shall be by lot). Members and alternate members shall

serve in such capacity for the portion of the term of office for which

they are selected and have qualified until their respective successors

are selected, have qualified and are appointed. The consecutive terms

of office of grower, handler and public members and alternate members

shall be limited to two 3-year terms, excluding any initial term

lasting less than 3 years. The term of office of a member and alternate

member for the same seat shall be the same. If this part becomes

effective on a date such that the initial fiscal period is less than 6

months in duration, then the tolling of time for purposes of this

subsection shall not begin until the beginning of the first 12-month

fiscal period.

Sec. 930.23 Nomination and election.

(a) Forms and ballots. Nomination and election of initial and

successor members and alternate members of the Board shall be conducted

through petition forms and election ballots distributed to all eligible

growers and handlers via the U.S. Postal Service or other means, as

determined by the Secretary. Similar petition forms and election

ballots shall be used for both members and alternate members and any

requirements for election of a member shall apply to the election of an

alternate.

(b) Nomination:

(1) In order for the name of a grower 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, except in

District 8, contains at least five signatures of growers, other than

the nominee, from the nominee's district who are eligible to vote in

the referendum. Grower petition forms in District 8 must be signed by

only two growers, other than the nominee, from the nominee's district.

(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 at least one handler, other than the nominee, from the

nominee's district who is eligible to vote in the referendum. The

requirement that the petition form be signed by a handler other than

the nominee shall not apply in any District where less than two

handlers are eligible to vote.

(3) Only growers, including duly authorized officers or employees

of growers, who are eligible to serve as grower members of the Board

shall participate in the nomination of grower members and alternate

grower members of the Board. No grower shall participate in the

submission of nominees in more than one district during any fiscal

period. If a grower produces cherries in more than one district, that

grower may select in which district he or she wishes to participate in

the nominations and election process and shall notify the Secretary or

the Board of such selection. A grower may not participate in the

nomination process in one district and the election process in a second

district in the same election cycle.

(4) Only handlers, including duly authorized officers or employees

of handlers, who are eligible to serve as handler members of the Board

shall participate in the nomination of handler members and alternate

handler members of the Board. No handler shall participate in the

selection of nominees in more than one district during any fiscal

period. If a handler handles cherries in more than one district, that

handler may select in which district he or she wishes to participate in

the nominations and election process and shall notify the Secretary or

the Board of such selection. A handler may not participate in the

nominations process in one district and the elections process in a

second district in the same election cycle. If a person is a grower and

a grower-handler only because some or all of his or her cherries were

custom packed, but he or she does not own or lease and operate a

processing facility, such person may vote only as a grower.

(5) In Districts 5, 6, 8 and 9, 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.

(6) All eligible growers and handlers in all districts may submit

the names of the nominees for the public member and alternate public

member of the Board.

(7) After the appointment of the initial Board, the Secretary or

the Board shall announce at least 180 days in advance when a Board

member's term is expiring and shall solicit nominations for that

position in the manner described in this section. Nominations for such

position should be submitted to the Secretary or the Board not less

than 120 days prior to the expiration of such term.

(c) Election:

(1) After receiving nominations, the Secretary or the Board shall

distribute ballots via the U.S. Postal Service or other means, as

determined by the Secretary, to all eligible growers and handlers

containing the names of the nominees by district for the respective

seats on the Board, excluding the public voting member seat. The

ballots will clearly indicate that growers and handlers may only rank

or otherwise vote for nominees in their own district.

(2) Except as provided in paragraph (c)(4) of this section, only

growers, including duly authorized officers or employees of growers,

who are eligible to serve as grower members of the Board shall

participate in the election of grower members and alternate grower

members of the Board. No grower shall participate in the election of

Board members in more than one district during any fiscal period. If a

grower produces cherries in more than one district, the grower must

vote in the same district in which he or she chose to participate in

the nominations process under paragraph (b)(3) of this section.

However, if the grower did not participate in the nominations process,

he or she may select in which district he or she wishes to vote and

shall notify the Secretary or the Board of such selection.

(3) Except as provided in paragraph (c)(4) of this section, only

handlers, including duly authorized officers or

[[Page 26972]]

employees of handlers, who are eligible to serve as handler members of

the Board shall participate in the election of handler members and

alternate handler members of the Board. No handler shall participate in

the election of Board members in more than one district during any

fiscal period. If a handler does handle cherries in more than one

district, he or she must vote in the same district in which the handler

elected to participate in the nominations process under paragraph

(b)(4) of this section. However, if a handler did not participate in

the nominations process, that handler may select in which district he

or she chooses to vote and shall notify the Secretary or the Board of

such selection. If a person is a grower and a grower-handler only

because some or all of his or her cherries were custom packed, but he

or she does not own or lease and operate a processing facility, such

person may vote only as a grower.

(4) In Districts 5, 6, 8 and 9, growers and handlers may vote for

either the grower or handler nominee(s) for the single seat allocated

to those districts.

(d) The members of the Board appointed by the Secretary pursuant to

Sec. 930.24 shall, at the first meeting and whenever necessary

thereafter, by at least a two-thirds vote of the entire Board, select

individuals to serve as the public member and alternate public member

of the Board from the list of nominees received from growers and

handlers pursuant to paragraph (b) of this section or from other

persons nominated by the Board. The persons selected shall be subject

to appointment by the Secretary under Sec. 930.24.

(e) The Board, with the approval of the Secretary, may establish

rules and regulations necessary and incidental to the administration of

this section.

Sec. 930.24 Appointment.

The selection of nominees made pursuant to elections conducted

under Sec. 930.23(c) shall be submitted to the Secretary in a format

which indicates the nominees by district, with the nominee receiving

the highest number of votes at the top and the number of votes received

being clearly indicated. The Secretary shall appoint from those

nominees or from other qualified individuals, the grower and handler

members of the Board and an alternate for each such member on the basis

of the representation provided for in Sec. 930.20 or as provided for in

any reapportionment or reestablishment undertaken pursuant to

Sec. 930.21. The public member and alternate public member is nominated

by the Board pursuant to Sec. 930.23(d) and shall also be subject to

appointment by the Secretary. The Secretary shall appoint from nominees

by the Board or from other qualified individuals the public member and

the alternate public member.

Sec. 930.25 Failure to nominate.

If nominations are not made within the time and in the manner

prescribed in Sec. 930.23, the Secretary may, without regard to

nominations, select the members and alternate members of the Board on

the basis of the representation provided for in Sec. 930.20 or as

provided for in any reapportionment or reestablishment undertaken

pursuant to Sec. 930.21.

Sec. 930.26 Acceptance.

Each person to be appointed by the Secretary as a member or as an

alternate member of the Board shall, prior to such appointment, qualify

by advising the Secretary that he/she agrees to serve in the position

for which nominated for selection.

Sec. 930.27 Vacancies.

To fill any vacancy occasioned by the failure of any person

appointed as a member or as an alternate member of the Board to

qualify, or in the event of the death, removal, resignation, or

disqualification of any member or alternate member of the Board, a

successor for the unexpired term of such member or alternate member of

the Board shall be appointed by the Secretary from the most recent list

of nominations for the Board made by growers and handlers, from

nominations made by the Board, or from other qualified individuals. Any

nominations made by the Board to fill a vacancy must be received by the

Secretary within 90 days of the effective date of the vacancy. Board

members wishing to resign from the Board must do so in writing to the

Secretary.

Sec. 930.28 Alternate members.

An alternate member of the Board, during the absence of the member

for whom that member serves as an alternate, shall act in the place and

stead of such member and perform such other duties as assigned.

However, if a member is in attendance at a meeting of the Board, an

alternate member may not act in the place and stead of such member. In

the event of the death, removal, resignation, or disqualification of a

member, the alternate shall act for the member until a successor for

such member is appointed and has qualified.

Sec. 930.29 Eligibility for membership on Cherry Industry

Administrative Board.

(a) Each grower member and each grower alternate member of the

Board shall be a grower, or an officer or employee of a grower, in the

district for which nominated or appointed.

(b) Each handler member and each handler alternate member of the

Board shall be a handler, or an officer or employee of a handler, who

owns, or leases, and operates a cherry processing facility in the

district for which nominated or appointed.

(c) The public member and alternate public member of the Board

shall be prohibited from having any financial interest in the cherry

industry and shall possess such additional qualifications as may be

established by regulation.

Sec. 930.30 Powers.

The Board shall have the following powers:

(a) To administer this part in accordance with its terms and

provisions;

(b) To make rules and regulations to effectuate the terms and

provisions of this part;

(c) To receive, investigate, and report to the Secretary complaints

of violations of this part; and

(d) To recommend to the Secretary amendments to this part.

Sec. 930.31 Duties.

The Board shall have, among others, the following duties:

(a) To select such officers, including a chairperson and vice-

chairperson, as may be necessary, and to define the duties of such

officers and the duties of the chairperson and the vice- chairperson;

(b) To employ or contract with such persons or agents as the Board

deems necessary and to determine the duties and compensation of such

persons or agents;

(c) To select such committees and subcommittees as may be

necessary;

(d) To adopt bylaws and to adopt such rules for the conduct of its

business as it may deem advisable;

(e) To submit to the Secretary a budget for each fiscal period,

prior to the beginning of such period, including a report explaining

the items appearing therein and a recommendation as to the rates of

assessments for such period;

(f) To keep minutes, books, and records which will reflect all of

the acts and transactions of the Board and which shall be subject to

examination by the Secretary;

(g) To prepare periodic statements of the financial operations of

the Board and to make copies of each statement available to growers and

handlers for examination at the office of the Board;

(h) To cause its financial statements to be audited by a certified

public accountant at least once each fiscal year

[[Page 26973]]

and at such times as the Secretary may request. Such audit shall

include an examination of the receipt of assessments and the

disbursement of all funds. The Board shall provide the Secretary with a

copy of all audits and shall make copies of such audits, after the

removal of any confidential individual grower or handler information

that may be contained in them, available to growers and handlers for

examination at the offices of the Board;

(i) To act as intermediary between the Secretary and any grower or

handler with respect to the operations of this part;

(j) To investigate and assemble data on the growing, handling, and

marketing conditions with respect to cherries;

(k) To apprise the Secretary of all Board meetings in a timely

manner;

(l) To submit to the Secretary such available information as the

Secretary may request;

(m) To investigate compliance with the provisions of this part;

(n) To develop and submit an annual marketing policy for approval

by the Secretary containing the optimum supply of cherries for the crop

year established pursuant to Sec. 930.50 and recommending such

action(s) necessary to achieve such optimum supply;

(o) To implement volume regulations established under Sec. 930.50

and issued by the Secretary under Sec. 930.51, including the release of

any inventory reserves;

(p) To provide thorough communication to growers and handlers

regarding the activities of the Board and to respond to industry

inquiries about Board activities;

(q) To oversee the collection of assessments levied under this

part;

(r) To enter into contracts or agreements with such persons and

organizations as the Board may approve for the development and conduct

of activities, including research and promotion activities, authorized

under this part or for the provision of services required by this part

and for the payment of the cost thereof with funds collected through

assessments pursuant to Sec. 930.41 and income from such assessments.

Contracts or agreements for any plan or project shall provide that:

(1) The contractors shall develop and submit to the Board a plan or

project together with a budget(s) which shall show the estimated cost

to be incurred for such plan or project;

(2) Any contract or agreement for a plan or project and any plan or

project adopted by the Board shall only become effective upon approval

by the Secretary; and

(3) Every such contracting party shall keep accurate records of all

of its transactions and make periodic reports to the Board of

activities conducted and an accounting for funds received and expended,

and such other reports as the Secretary or the Board may require. The

Secretary or employees of the Board may audit periodically the records

of the contracting party;

(s) Pending disbursement consistent with its budget, to invest,

with the approval of the Secretary, and in accordance with applicable

Departmental policies, funds collected through assessments authorized

under Sec. 930.41 and income from such assessments;

(t) To establish standards or grade requirements for cherries for

frozen and canned cherry products, subject to the approval of the

Secretary;

(u) To borrow such funds, subject to the approval of the Secretary

and not to exceed the expected expenses of one fiscal year, as are

necessary for administering its responsibilities and obligations under

this part; and

(v) To establish, with the approval of the Secretary, such rules

and procedures relative to administration of this subpart as may be

consistent with the provisions contained in this subpart and as may be

necessary to accomplish the purposes of the Act and the efficient

administration of this subpart.

Sec. 930.32 Procedure.

(a) Twelve members of the Board, including alternates acting for

absent members, shall constitute a quorum. For any action of the Board

to pass, at least two-thirds of the entire Board must vote in support

of such action.

(b) The Board may provide through its own rules and regulations,

subject to approval by the Secretary, for simultaneous meetings of

groups of its members assembled at different locations and for votes to

be conducted by telephone or other means of communication. Votes so

cast shall be promptly confirmed in writing.

(c) All meetings of the Board are open to the public, although the

Board may hold portions of meetings in executive session for the

consideration of certain business. The Board will establish, with the

approval of the Secretary, a means of advanced notification of growers

and handlers of Board meetings.

Sec. 930.33 Expenses and compensation.

Except for the public member and alternate public member who shall

receive such compensation as the Board may establish and the Secretary

may approve, the members of the Board, and alternates when acting as

members, shall serve without compensation but shall be reimbursed for

necessary and reasonable expenses, as approved by the Board, incurred

by them in the performance of their duties under this part. The Board

at its discretion may request the attendance of one or more alternates

at any or all meetings, notwithstanding the expected or actual presence

of the respective member(s), and may pay the expenses of such

alternates.

Expenses and Assessments

Sec. 930.40 Expenses.

The Board is authorized to incur such expenses as the Secretary

finds are reasonable and likely to be incurred for its maintenance and

functioning and to enable it to exercise its powers and perform its

duties in accordance with the provisions of this part. The funds to

cover such expenses shall be acquired by the levying of assessments as

provided in Sec. 930.41.

Sec. 930.41 Assessments.

(a) An assessment may be levied upon handlers annually under this

part to cover the administrative costs of the Board, costs of

inspection, and any research, development and promotion activities

initiated by the Board under Sec. 930.48.

(b) Each part of an assessment intended to cover the costs of each

activity in paragraph (a) of this section, must be identified and

approved by the Board and the Secretary, and any notification or other

statement regarding assessments provided to handlers must contain such

information.

(c) As a pro rata share of the administrative, inspection,

research, development, and promotion expenses which the Secretary finds

reasonable and likely to be incurred by the Board during a fiscal

period, each handler shall pay to the Board assessments on all cherries

handled, as the handler thereof, during such period: Provided, a

handler shall be exempt from any assessment on the tonnage of handled

cherries that are diverted according to Sec. 930.59 which includes

cherries represented by grower diversion certificates issued pursuant

to Sec. 930.58(b)(2) and acquired by handlers and those cherries

devoted to exempt uses under Sec. 930.62.

(d) The Secretary, after consideration of the recommendation of the

Board, shall fix the rate of assessment to be paid by each handler

during the fiscal period in an amount designed to secure sufficient

funds to cover the expenses which may be approved and incurred

[[Page 26974]]

during such period or subsequent period as provided in paragraph (c) of

this section. At any time during or after the fiscal period, the

Secretary may increase the rate of assessment in order to secure

sufficient funds to cover any later finding by the Secretary relative

to the expenses which may be incurred. Such increase shall be applied

to all cherries handled during the applicable fiscal period. In order

to provide funds for the administration of the provisions of this part

during the first part of a fiscal period before sufficient operating

income is available from assessments, the Board may accept the payment

of assessments in advance, and may borrow money for such purposes.

(e) Assessments not paid within a time prescribed by the Board may

be made subject to interest or late payment charges, or both. The

period of time, rate of interest, and late payment charge will be as

recommended by the Board and approved by the Secretary: Provided, That

when interest or late payment charges are in effect, they shall be

applied to all assessments not paid within the prescribed period of

time.

(f) Assessments will be calculated on the basis of pounds of

cherries handled: Provided, That the formula adopted by the Board and

approved by the Secretary for determining the rate of assessment will

compensate for differences in the number of pounds of cherries utilized

for various cherry products and the relative market values of such

cherry products.

(g) The Board, with the approval of the Secretary, may establish

rules and regulations necessary and incidental to the administration of

this section.

Sec. 930.42 Accounting.

(a) If, at the end of a fiscal period, the assessments collected

are in excess of expenses incurred, the Board, with the approval of the

Secretary, may carry over all or any portion of such excess into

subsequent fiscal periods as a reserve. Such reserve funds may be used

to cover any expenses authorized by this part, and to cover necessary

expenses of liquidation in the event of termination of this part. If

any such excess is not retained in a reserve, it shall be refunded

proportionately to the handlers from whom the excess was collected.

Without an additional reserve level approved by the Secretary, the

amount held in reserve may not exceed approximately one year's

operational expenses. Upon termination of this part, any funds not

required to defray the necessary expenses of liquidation shall be

disposed of in such a manner as the Secretary may determine to be

appropriate: Provided, That to the extent practicable, such funds shall

be returned pro rata to the persons from whom such funds were

collected.

(b) All funds received by the Board pursuant to the provisions of

this part shall be used solely for the purpose specified in this part

and shall be accounted for in the manner provided in this part. The

Secretary may at any time require the Board and its members to account

for all receipts and disbursements.

Quality Control

Sec. 930.44 Quality Control.

(a) Quality standards. The Board may establish, with the approval

of the Secretary, such minimum quality and inspection requirements

applicable to cherries as will contribute to orderly marketing or be in

the public interest. If such requirements are adopted, no handler shall

process cherries into manufactured products or sell manufactured

products in the current of commerce unless such cherries and/or such

cherries used in the manufacture of products meet the applicable

requirements as evidenced by certification acceptable to the Board. The

Board, with the approval of the Secretary, may establish rules and

regulations necessary and incidental to the administration of this

section.

(b) Inspection and certification. Whenever the handling of any

cherries requires inspection pursuant to this part, each handler who

handles cherries shall cause such cherries to be inspected by the

appropriate division of USDA, and certified by it as meeting the

applicable requirements of such regulation: Provided, That inspection

and certification shall be required for cherries which previously have

been so inspected and certified only if such cherries have been

regraded, resorted, repackaged, or in any other way further prepared

for market. Promptly after inspection and certification, each such

handler shall submit, or cause to be submitted, to the Board a copy of

the certificate of inspection issued with respect to such cherries.

Research, Market Development and Promotion

Sec. 930.48 Research, Market Development and Promotion.

The Board, with the approval of the Secretary, may establish or

provide for the establishment of production and processing research,

market research and development, and/or promotional activities,

including paid advertising, designed to assist, improve or promote the

efficient production and processing, marketing, distribution, and

consumption of cherries subject to this part. The expense of such

projects shall be paid from funds collected pursuant to this part and

the income from such funds.

Regulations

Sec. 930.50 Marketing policy.

(a) Optimum Supply. On or about July 1 of each crop year, the Board

shall hold a meeting to review sales data, inventory data, current crop

forecasts and market conditions in order to establish an optimum supply

level for the crop year. The optimum supply volume shall be calculated

as 100 percent of the average sales of the prior three years to which

shall be added a desirable carryout inventory not to exceed 20 million

pounds or such other amount as the Board, with the approval of the

Secretary may establish. This optimum supply volume shall be announced

by the Board in accordance with paragraph (h) of this section.

(b) Preliminary percentages. On or about July 1 of each crop year,

the Board shall establish a preliminary free market tonnage percentage

which shall be calculated as follows: from the optimum supply computed

in paragraph (a) of this section, the Board shall deduct the carryin

inventory to determine the tonnage requirements (adjusted to a raw

fruit equivalent) for the current crop year which will be subtracted by

the current year USDA crop forecast. If the resulting number is

positive, this would represent the estimated over-production which

would need to be the restricted percentage tonnage. This restricted

percentage tonnage would then be divided by the sum of the USDA crop

forecast for the regulated districts to obtain the percentages for the

regulated districts. The Board shall establish a preliminary restricted

percentage equal to the quotient, rounded to the nearest whole number,

with the compliment being the preliminary free tonnage percentage. If

subtracting the current crop year requirement, computed in the first

sentence from the current USDA crop forecast, results in a negative

number, the Board shall establish a preliminary free tonnage of 100

percent with a preliminary restricted percentage of zero. The Board

shall announce these preliminary percentages in accordance with

paragraph (h) of this section.

(c) Interim percentages. Between July 1 and September 15 of each

crop year, the Board may modify the preliminary free market tonnage and

restricted percentages to adjust to the actual pack occurring in the

industry. The Board shall announce any interim percentages

[[Page 26975]]

in accordance with paragraph (h) of this section.

(d) Final percentages. No later than September 15 of each crop

year, the Board shall review actual production during the current crop

year and make such adjustments as are necessary between free and

restricted tonnage to achieve the optimum supply and recommend such

final free market tonnage and restricted percentages to the Secretary

and announce them in accordance with paragraph (h) of this section. The

difference between any final free market tonnage percentage designated

by the Secretary and 100 percent shall be the final restricted

percentage. With its recommendation, the Board shall report on its

consideration of the factors in paragraph (e) of this section.

(e) Factors. When computing preliminary and interim percentages, or

determining final percentages for recommendation to the Secretary, the

Board shall give consideration to the following factors:

(1) The estimated total production of cherries;

(2) The estimated size of the crop to be handled;

(3) The expected general quality of such cherry production;

(4) The expected carryover as of July 1 of canned and frozen

cherries and other cherry products;

(5) The expected demand conditions for cherries in different market

segments;

(6) Supplies of competing commodities;

(7) An analysis of economic factors having a bearing on the

marketing of cherries;

(8) The estimated tonnage held by handlers in primary or secondary

inventory reserves; and

(9) Any estimated release of primary or secondary inventory reserve

cherries during the crop year.

(f) Modification. In the event the Board subsequently deems it

advisable to modify its marketing policy, because of national

emergency, crop failure, or other major change in economic conditions,

it shall hold a meeting for that purpose, and file a report thereof

with the Secretary within 5 days (exclusive of Saturdays, Sundays, and

holidays) after the holding of such meeting, which report shall show

the Board's recommended modification and the basis therefor.

(g) Reserve tonnage to sell as free tonnage. In addition, the Board

shall make available tonnage equivalent to an additional 10 percent, if

available, of the average sales of the prior 3 years for market

expansion. Handlers can determine if they need the additional tonnage

and inform the Board so that reserve cherries may be released to them.

Handlers not desiring the additional tonnage would not have it released

to them.

(h) Publicity. The Board shall promptly give reasonable publicity

to growers and handlers of each meeting to consider a marketing policy

or any modification thereof, and each such meeting shall be open to

them and to the public. Similar publicity shall be given to growers and

handlers of each marketing policy report or modification thereof, filed

with the Secretary and of the Secretary's action thereon. Copies of all

marketing policy reports shall be maintained in the office of the

Board, where they shall be made available for examination. The Board

shall notify handlers, and give reasonable publicity to growers, of its

computation of the optimum supply, preliminary percentages, and interim

percentages and shall notify handlers of the Secretary's action on

final percentages by registered or certified mail.

(i) Restricted Percentages. Restricted percentage requirements

established under paragraph (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 inventory reserve such that the total

primary inventory reserve does not exceed 50 million pounds. 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.

(j) Inventory Reserve Release. In years when inventory reserve

cherries are available and when the expected availability of cherries

from the current crop plus expected carryin inventory does not fulfill

the optimum supply, the Board shall release not later than November 1st

of the current crop year such volume from the inventory reserve as will

satisfy the optimum supply.

(k) The Board, with the approval of the Secretary, may establish

rules and regulations necessary and incidental to the administration of

this section.

Sec. 930.51 Issuance of volume regulations.

(a) Whenever the Secretary finds, from the recommendation and

supporting information supplied by the Board, that to designate final

free market tonnage and restricted percentages for any cherries

acquired by handlers during the crop year will tend to effectuate the

declared policy of the Act, the Secretary shall designate such

percentages. Such regulation designating such percentage shall fix the

free market tonnage and restricted percentages, totaling 100 percent,

which shall be applied in accordance with this section, Sec. 930.55,

Sec. 930.57 and Sec. 930.59 to cherries grown in regulated districts,

as determined under Sec. 930.52, and handled during such fiscal period.

(b) The Board shall be informed immediately of any such regulation

issued by the Secretary, and the Board shall promptly give notice

thereof to handlers.

(c) That portion of a handler's cherries that are restricted

percentage cherries is the product of the restricted percentage imposed

under paragraph (a) of this section multiplied by the tonnage of

cherries, originating in a regulated district, handled, including those

diverted according to Sec. 930.59, by that handler in that fiscal year.

Therefore, while diverted cherries, including those represented by

grower diversion certificates, may be exempt from assessment under

Sec. 930.41, they must be counted when computing restricted percentage

requirements.

(d) The Board, with the approval of the Secretary, shall develop

rules and regulations which shall provide guidelines for handlers in

complying with any restricted tonnage requirements, including, but not

limited to, a grace period of at least 30 days to segregate and

appropriately document any tonnage they wish to place in the inventory

reserve and to assemble any applicable diversion certificates.

Sec. 930.52 Establishment of districts subject to volume regulations.

(a) Upon adoption of this part, the districts in which handlers

shall be subject to any volume regulations implemented in accordance

with this part shall be those districts in which the average annual

production of cherries over the prior three years has exceeded 15

million pounds. Handlers in districts not meeting the 15 million pound

requirement at the time of order promulgation shall become subject to

volume regulation implemented in accordance with this part in the crop

year that follows any three-year period in which the 15 million pound

average

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production requirement is exceeded in that district.

(b) Handlers in districts which are not subject to volume

regulation would only be so regulated to the extent that they handled

cherries which were grown in a district subject to regulation as

specified in paragraph (a) of this section. In such a case, the handler

must place in inventory reserve pursuant to Sec. 930.55 or Sec. 930.57

or divert pursuant to Sec. 930.59 the required restricted percentage of

the crop originating in the regulated district.

(c) Handlers in districts not meeting the production requirement

described in paragraph (a) of this section in a given year would not be

subject to volume regulation in the next crop year.

(d) Any district producing a crop which is less than 50 percent of

the average annual processed production in that district in the

previous five years would be exempt from any volume regulation if, in

that year, a restricted percentage is established.

(e) The Board, with the approval of the Secretary, may establish

rules and regulations necessary and incidental to the administration of

this section.

Sec. 930.53 Modification, suspension, or termination of regulations.

(a) In the event the Board at any time finds that, by reason of

changed conditions, any regulations issued pursuant to Secs. 930.44 or

930.51 should be modified, suspended, or terminated, it shall so

recommend to the Secretary.

(b) Whenever the Secretary finds, from the recommendations and

information submitted by the Board or from other available information,

that a regulation issued pursuant to Secs. 930.44 or 930.51 should be

modified, suspended or terminated with respect to any or all shipments

of cherries in order to effectuate the declared policy of the Act, the

Secretary shall modify, suspend, or terminate such regulation.

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

cherries.

(a) Release of primary and secondary inventory reserve cherries.

Except as provided in Sec. 930.50 and paragraph (b) of this section,

cherries that are placed in inventory reserve pursuant to the

requirements of Sec. 930.50, Sec. 930.51, Sec. 930.55, or Sec. 930.57

shall not be used or disposed of by any handler or any other person:

Provided, That if the Board determines that the total available

supplies for use in normal commercial outlets do not at least equal the

amount, as estimated by the Board, needed to meet the demand in such

outlets, the Board shall recommend to the Secretary and provide such

justification that, during such period as may be recommended by the

Board and approved by the Secretary, a portion or all of the primary

and/or secondary inventory reserve cherries shall be released for such

use.

Sec. 930.55 Primary inventory reserves.

(a) Whenever the Secretary has fixed the free market tonnage and

restricted percentages for any fiscal period, as provided for in

Sec. 930.51(a), each handler in a regulated district shall place in his

or her primary inventory reserve for such period, at such time, and in

such manner, as the Board may prescribe, or otherwise divert, according

to Sec. 930.59, a portion of the cherries acquired during such period.

(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. Except as may be limited by Sec. 930.50 (i) or

as may be permitted pursuant to Sec. 930.59 and Sec. 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.

(c) Inventory reserve cherries shall meet such standards of grade,

quality, or condition as the Board, with the approval of the Secretary,

may establish. All such cherries shall be inspected by USDA. A

certificate of such inspection shall be issued which shall show, among

other things, the name and address of the handler, the number and type

of containers in the lot, the grade of the product, the location where

the lot is stored, identification marks (can codes or lot stamp), and a

certification that the cherries meet the prescribed standards. Promptly

after inspection and certification, each such handler shall submit, or

cause to be submitted, to the Board, at the place designated by the

Board, a copy of the certificate of inspection issued with respect to

such cherries.

(d) Handlers shall be compensated for inspection costs incurred on

cherries placed in the primary inventory reserve. All reporting of

cherries placed in, rotated in and out, or released from an inventory

reserve shall be in accordance with rules and procedures established by

the Board, with the approval of the Secretary. The Board could, with

the approval of the Secretary, also limit the number of inspections of

reserve cherries being rotated into inventory reserves for which the

Board would be financially liable.

(e) Except as provided in Sec. 930.54, handlers may not sell

inventory reserve cherries prior to their official release by the

Board. Handlers may rotate cherries in their inventory reserves with

prior notification to the Board. All cherries rotated into the

inventory reserve must meet the applicable inspection requirements.

Sec. 930.56 Off-premise inventory reserve.

Any handler may, upon notification to the Board, arrange to hold

inventory reserve, of his or her own production or which was purchased,

on the premises of another handler or in an approved commercial storage

facility in the same manner as though the inventory reserve were on the

handler's own premises.

Sec. 930.57 Secondary inventory reserve.

(a) In the event the inventory reserve established under

Sec. 930.55 of this part is at its maximum volume, and the Board has

announced, in accordance with Sec. 930.50, that volume regulation will

be necessary to maintain an orderly supply of quality cherries for the

market, handlers in a regulated district may elect to place in a

secondary inventory reserve all or a portion of the cherries the volume

regulation would otherwise require them to divert in accordance with

Sec. 930.59.

(b) Should any handler in a regulated district exercise his or her

right to establish a secondary inventory reserve under paragraph (a) of

this section, all costs of maintaining that reserve, as well as

inspection costs, will be the responsibility of the individual handler.

(c) The secondary inventory reserve shall be established in

accordance with Secs. 930.55(b) and (c) and such other rules and

regulations which the Board, with the approval of the Secretary, may

establish.

(d) The Board shall retain control over the release of any cherries

from the secondary inventory reserve. 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. Any release

of the secondary inventory reserve shall be in accordance with the

annual marketing policy and with Sec. 930.54.

Sec. 930.58 Grower diversion privilege.

(a) In general. Any grower may voluntarily elect to divert, in

accordance with the provisions of this section, all

[[Page 26977]]

or a portion of the cherries which otherwise, upon delivery to a

handler, would become restricted percentage cherries. Upon such

diversion and compliance with the provisions of this section, the Board

shall issue to the diverting grower a grower diversion certificate

which such grower may deliver to a handler, as though there were actual

harvested cherries.

(b) Eligible diversion. Grower diversion certificates shall be

issued to growers only if the cherries are diverted in accordance with

the following terms and conditions or such other terms and conditions

that the Board, with the approval of the Secretary, may establish.

Diversion may take such of the following forms which the Board, with

the approval of the Secretary, may designate: uses exempt under

Sec. 930.62; nonhuman food uses; or other uses, including diversion by

leaving such cherries unharvested.

(c) Application/mapping. The Board, with the approval of Secretary,

shall develop rules and regulations providing for the diversion of

cherries by growers. Such regulations may include, among other things:

(1) The form and content of applications and agreements relating to the

diversion, including provisions for supervision and compensation; and

(2) provisions for mapping areas in which cherries will be left

unharvested.

(d) Diversion certificate. If the Board approves the application it

shall so notify the applicant and conduct such supervision of the

applicant's diversion of cherries as may be necessary to assure that

the cherries have been diverted. After the diversion has been

accomplished, the Board shall issue to the diverting grower a diversion

certificate stating the weight of cherries diverted. Where diversion is

carried out by leaving the cherries unharvested, the Board shall

estimate the weight of cherries diverted on the basis of such uniform

rule prescribed in rules and regulations as the Board, with the

approval of the Secretary, may recommend to implement this section.

Sec. 930.59 Handler diversion privilege.

(a) In general. Handlers handling cherries harvested in a regulated

district may fulfill any restricted percentage requirement in full or

in part by voluntarily diverting cherries or cherry products in a

program approved by the Board, rather than placing cherries in an

inventory reserve. Upon such diversion and compliance with the

provisions of this section, the Board shall issue to the diverting

handler a handler diversion certificate which shall satisfy any

restricted percentage or diversion requirement to the extent of the

Board or Department inspected weight of the cherries diverted.

(b) Eligible diversion. Handler diversion certificates shall be

issued to handlers only if the cherries are diverted in accordance with

the following terms and conditions or such other terms and conditions

that the Board, with the approval of the Secretary, may establish. Such

diversion may take place in any of the following forms which the Board,

with the approval of the Secretary, may designate: uses exempt under

Sec. 930.62; contribution to a Board approved food bank or other

approved charitable organization; acquisition of grower diversion

certificates that have been issued in accordance with Sec. 930.58; or

other uses, including diversion by destruction of the cherries at the

handler's facilities: Provided, That diversion may not be accomplished

by converting cherries into juice or juice concentrate.

(c) Notification. The handler electing to divert cherries through

means specified in this section or other approved means (not including

uses exempt under Sec. 930.62), shall first notify the Board of such

election. Such notification shall describe in detail the manner in

which the handler proposes to divert cherries including, if the

diversion is to be by means of destruction of the cherries, a detailed

description of the means of destruction and ultimate disposition of the

cherries. It shall also contain an agreement that the proposed

diversion is to be carried out under the supervision of the Board and

that the cost of such supervision is to be paid by the handler. Uniform

fees for such supervision shall be established by the Board, pursuant

to rules and regulations approved by the Secretary.

(d) Application. The handler electing to divert cherries by

utilizing an exemption under Sec. 930.62 shall first apply to the Board

for approval of such diversion; no diversion should take place prior to

such approval. Such application shall describe in detail the uses to

which the diverted cherries will be put. It shall also contain an

agreement that the proposed diversion is to be carried out under the

supervision of the Board and that the cost of such supervision is to be

paid by the applicant. The Board shall notify the applicant of the

Board's approval or disapproval of the submitted application.

(e) Diversion certificate. The Board shall conduct such supervision

of the handler's diversion of cherries under paragraph (c) or under

paragraph (d) of this section as may be necessary to assure that the

cherries are diverted. After the diversion has been accomplished, the

Board shall issue to the diverting handler a handler diversion

certificate indicating the weight of cherries which may be used to

offset any restricted percentage requirement.

Sec. 930.60 Equity holders.

(a) Inventory reserve ownership. The inventory reserve shall be the

sole responsibility of the handlers who place products into the

inventory reserve. A handler's equity in the primary inventory reserve

may be transferred to another person upon notification to the Board.

(b) Agreements with growers. Individual handlers are encouraged to

have written agreements with growers who deliver their cherries to the

handler as to how any restricted percentage cherries delivered to the

handler will be handled and what share, if any, the grower will have in

the eventual sale of any inventory reserve cherries.

(c) Rulemaking authority. The Board,

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