Limes Grown in Florida and Imported Limes; Change in Regulatory Period

DEPARTMENT OF AGRICULTURE

7 CFR Parts 911 and 944

[Docket No. FV96-911-2FR]

Limes Grown in Florida and Imported Limes; Change in Regulatory

Period

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule; suspension.

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SUMMARY: This rule suspends the regulatory period currently prescribed

under the lime marketing order and the lime import regulations. The

marketing order regulates the handling of limes grown in Florida and is

administered locally by the Florida Lime Administrative Committee

(committee). By temporarily reducing the regulatory period and its

associated costs, this rule should decrease industry expenses and allow

the committee to evaluate its impact. The changes in import

requirements are necessary under section 8e of the Agricultural

Marketing Agreement Act of 1937.

EFFECTIVE DATES: June 1, 1997, through December 31, 1997.

FOR FURTHER INFORMATION CONTACT: Aleck Jonas, Southeast Marketing Field

Office, Marketing Order Administration Branch, F&V, AMS, USDA, P.O. Box

2276, Winter Haven, Florida 33883; telephone: (941) 299-4770, Fax:

(941) 299-5169; or Caroline Thorpe, Marketing Order Administration

Branch, F&V, AMS, USDA, room

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2522-S, P.O. Box 96456, Washington, DC 20090-6456: telephone: (202)

720-8139, Fax: (202) 720-5698. Small businesses may request information

on compliance with this regulation by contacting: Jay Guerber,

Marketing Order Administration Branch, Fruit and Vegetable Division,

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

telephone (202) 720-2491; Fax: (202) 720-5698.

SUPPLEMENTARY INFORMATION: This final rule is issued under Marketing

Agreement and Marketing Order No. 911 (7 CFR Part 911), as amended,

regulating the handling of limes, hereinafter referred to as the

``order.'' This order is effective under the Agricultural Marketing

Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter

referred to as the ``Act.''

This final rule is also issued under section 8e of the Act, which

provides that whenever certain specified commodities, including limes,

are regulated under a Federal marketing order, imports of these

commodities into the United States are prohibited unless they meet the

same or comparable grade, size, quality, or maturity requirements as

those in effect for the domestically produced commodities.

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

conformance with Executive Order 12866.

This final rule has been reviewed under Executive Order 12988,

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

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

regulations, or policies, unless they present an irreconcilable

conflict with this rule.

The Act provides that administrative proceedings must be exhausted

before parties may file suit in court. Under section 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 request a modification of the order or to be exempted

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

petition. After the hearing 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 date of the entry of the ruling.

There are no administrative procedures which must be exhausted

prior to any judicial challenge to the provisions of import regulations

issued under section 8e of the Act.

Pursuant to the requirements set forth in the Regulatory

Flexibility Act (RFA), the Agricultural Marketing Service (AMS) has

considered the economic impact of this final rule on small entities.

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

business subject to such actions in order that small businesses will

not be unduly or disproportionately burdened. Marketing orders issued

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

they are brought about through group action of essentially small

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

entity orientation and compatibility. Import regulations issued under

the Act are based on those established under Federal marketing orders.

There are approximately 10 handlers subject to regulation under the

order and about 115 producers of Florida limes. There are approximately

35 importers of limes. Small agricultural service firms, which include

lime handlers and importers, have been defined by the Small Business

Administration (13 CFR 121.601) as those whose annual receipts are less

than $5,000,000, and small agricultural producers are defined as those

whose annual receipts are less than $500,000. A majority of these

handlers, producers, and importers may be classified as small entities.

This rule changes the regulatory period by suspending both the

domestic and import regulations from June 1, 1997 through December 31,

1997. By temporarily reducing the regulatory period and its associated

costs, this rule should provide a decrease in industry expenses. Both

large and small growers, handlers and importers should benefit from the

reduced costs of no regulations, such as no inspection fees during the

deregulated period.

In addition, small handlers usually use block inspection. Under

block inspection, the fruit is packed and palletized, and then

inspection is requested. The handler must wait for an available

Federal-State inspector to inspect and certify the limes prior to

shipment. Larger facilities use continuous inspection because their

volume of fruit justifies the constant presence of an inspector. By

relaxing regulations for this seven month period, small handlers will

benefit by being able to ship fruit without the delay of waiting for an

inspector. Small and large handlers should both benefit from the

reduction in inspection costs and committee expenses from fewer

meetings and less compliance monitoring. Therefore, the AMS has

determined that this action will not have a significant economic impact

on a substantial number of small entities.

Section 911.48 of the lime marketing order provides authority to

issue regulations establishing specific pack, container, grade and size

requirements. These requirements are specified under Sections 911.311,

911.329 and 911.344. Section 911.51 requires inspection and

certification that these requirements are met. Currently, there is no

regulatory period stated in the order, and these regulations are

applied on a continuous year-round basis.

This rule changes the regulatory period by suspending both the

domestic and import regulations from June 1, 1997 through December 31,

1997. The committee met on December 13, 1995, and in a vote of six in

favor and four opposed, recommended a change in the regulatory period.

There is general agreement in the industry for the need to reduce

costs and increase grower returns under current market conditions. The

committee made this recommendation to decrease industry expenses by

reducing the regulatory period and its associated costs. Prior to

Hurricane Andrew, there were approximately 6,500 producing acres of

limes in the production area. Currently, there are approximately 1,500

acres of producing lime trees in the production area. Growers are

expending approximately $2,500 per acre to plant new groves and replant

lost ones. They are also spending approximately $1,500 per acre per

year to maintaining new groves of young trees which will not produce

fruit in commercially significant volumes for several years, thus,

giving no return for their investments.

During the 1991-1992 season, prior to Hurricane Andrew, assessments

were collected on 1,682,677 bushels. In the 1993-1994 and the 1994-1995

seasons, after the storm, assessments were collected on 228,455 bushels

and 283,977 bushels respectively. Lost income from reduced volume and

the costs of replanting and maintaining groves, with no immediate

monetary return, has caused the industry to seek cost saving measures.

Historically, the June 1 through December 31 period is a time when

fruit is plentiful, prices are low, and the overall quality of the crop

is good for both domestic and imported supplies. The committee

maintains that under these abundant and good quality fruit

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conditions, competition and market demand will keep quality standards

high.

Conversely, during the time period January 1 through May 31, past

seasons have shown that for both domestic and imported fruit, skins are

thicker, the juice content is lower and supplies of fruit are limited.

Because the temptation to ship poor quality is greater under these high

demand and low supply conditions, the committee believes regulations

are necessary to prevent poor quality fruit from entering and damaging

the lime market. Therefore, the committee believes that for the period

June 1, 1997 through December 31, 1997, pack, container, grade and size

regulations can be suspended. Competition under good quality and high

supply conditions should protect the consumer from poor quality fruit

entering market during the deregulated period. The application of

regulations from January 1 through May 31 will insure uniform quality

throughout the year. The committee will evaluate the impact of this

action on the market at the end of the suspension.

Growers, handlers and importers should benefit from the reduced

costs of no regulations, such as no inspection fees during the

deregulated period. Committee expenses should also be reduced by

requiring fewer meetings and less compliance monitoring. Reporting

requirements are not affected by this change, and handler reports will

continue to be collected during the period of suspension.

Several alternatives to this action were discussed by the

committee. One alternative was to leave the regulations in place year-

round. This alternative was rejected by the committee because the need

to take some action was considered necessary under current market

conditions. It was argued that when these regulations were put in

place, the quality of both the domestic and imported lime supply varied

greatly. Over the years, improved agricultural practices have produced

a more consistent, high quality lime supply. This is particularly true

during the June through December time period.

Another alternative raised was to terminate the marketing order.

Although seriously considered, committee members rejected the idea

under arguments that during the January through May time period when

supplies are reduced and juice content of all limes is lower, poor

quality fruit could enter the market. Consumer dissatisfaction with

poor quality limes could lead to product rejection and substitution

with lemons, causing lost market share.

This rule represents a compromise of the alternatives considered.

The committee believes that this change will provide the consumer with

quality fruit throughout the year, while reducing industry costs.

Section 8e of the Act provides that when certain domestically

produced commodities, including limes, are regulated under a Federal

marketing order, imports of that commodity must meet the same or

comparable grade, size, quality, and maturity requirements. Since this

rule changes the regulatory period under the domestic handling

regulations, a corresponding change to the import regulations must also

be implemented.

Minimum grade and size requirements for limes imported into the

United States are currently in effect under Section 944.209 [7 CFR

944.209]. This rule will result in relaxed import requirements because

the lime import regulations will not be in effect during the period

June 1, 1997, through December 31, 1997. This should reduce costs to

importers.

Mexico is the largest exporter of limes to the United States.

During the 1994-95 season, Mexico exported 6,075,685 bushels to the

United States, while all other sources shipped a combined total of

201,053 bushels during the same time period. The majority of Mexican

imports enter the United States between June 1 and December 31, the

deregulated period covered in this rule.

A proposed rule concerning this action was published in the May 8,

1996, Federal Register (61 FR 20754), with a 30-day comment period

ending June 7, 1996. The comment period was extended to July 8, 1996,

through a notice published in the June 26, 1996, Federal Register (61

FR 33047). Eight comments were received. Three comments recommended

modifications to the proposed rule, and five comments opposed the

proposed rule.

The three comments requesting modification to the proposed rule

were submitted by the committee administrator, Gail Knodel, on behalf

of the committee. The first comment requested that the proposed rule be

modified from a permanent change to a one year trial basis. On April

17, 1996, this recommendation was passed by the committee on a majority

vote of seven in support, none against and one abstention. The

committee modified its original position because it believes that it is

important that this change be thoroughly evaluated before making the

suspension on a permanent basis. At the end of the trial year, the

committee will evaluate the impact of this action on the industry and

determine if continuation is justified.

The second committee comment requested an extension of the comment

period. This request was made due to the complexity of the proposed

rule and the potential impact of the proposed changes to the industry.

A reopening of the comment period was granted by the Department and

published in the June 26, 1996, Federal Register (61 FR 33047).

The third committee comment was a request to make the effective

date of the rule June 1, 1997. Because the extension of the comment

period would delay the effective date of a final rule, making it

impossible to begin the period of deregulation effective June 1, 1996,

the committee voted to postpone the effective date to allow for a

continuous period of deregulation from June 1 to December 31. The

committee believes that this will be beneficial for handlers. The

committee also believes that this will allow for a more accurate

analysis of the impact of the suspension. The recommendation to change

the effective date to June 1, 1997, was made by unanimous vote of the

committee. This rule has been modified to reflect the committee's

recommendations.

The five opposing comments were submitted by Steve Biondo, grower;

Gregory P. Nelson, president of Bernard Egan & Company, grower/

importer; Barney W. Rutzke, president of Barney W. Rutzke, Inc.,

grower/handler; Tina Marie Rutzke, operations manager of Florida Brands

Inc., grower/handler; and the fifth was jointly submitted by Herbert

Yamamura, president of LIMECO, Inc., grower/handler; Joe Guggino,

registered agent for Primo Groves, Inc., grower; Richard Takeshita,

grower; Edna Batho, grower; Elizabeth Harrill, grower; Robert Yamamura,

grower; Donald Strock, grower; and April Yamamura, grower.

All of the opposing comments expressed concerns that loss of

regulation and the associated quality standards will result in poor

quality limes on the market and consumer dissatisfaction. Ms. Rutzke

states that the loss of regulations will lead to consumer rejection of

limes and the substitution of lemons, causing a loss of overall market

share. Both the comment of Mr. Rutzke and the jointly signed comment

expressed concerns that low quality imported limes will be dumped on

the domestic market.

The committee, upon further discussion, shared these concerns, and

therefore recommended that the proposed rule be modified from a

permanent change to a one year trial basis. The committee believes that

there

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is an adequate supply of high quality limes to meet consumer demands

during the requested deregulation period. However, the committee also

believes that a test of the deregulation period will determine if

consumer demand will keep quality high or result in substitution of

lemons and loss of market share.

Four of the opposing comments allege that the proposed rule was

passed by a committee with unqualified members seated, and therefore

the proposal should not have been acted on by the Department.

Commenters claim that, when the original recommendation was made on

December 13, 1995, some members were serving in positions that they

were not qualified to hold. However, since that time, a new committee

has been seated. At its organizational meeting on April 17, 1996, the

newly elected members of the committee took up the discussion of the

suspension. The new committee voted to recommend that the proposed rule

be modified from a permanent change to a one year trial basis.

Consequently, the changes provided for in this rule were affirmed by

the current committee with a majority vote of seven in support, none

opposed, and one abstention.

The jointly signed comment disagreed with the proposed rule's

contention that, historically, the June 1 through December 31 period is

a time when fruit prices are low, and the overall quality of the crop

is good. They argued that prices in June, September, October, November

and December often have differed from year to year, between low to

moderately high, and that lime prices in 1993 and 1994 remained

moderate during the months of July and August.

In terms of quality, they state that during the June through

December time period, quality is not considered high quality. For

example, they state there is a relatively large amount of stylar-end

breakdown, which is a weakening of the rind at the fruit's blossom end

which deteriorates over time. In its deliberations of this rule, the

committee considered the availability of quality fruit during the

proposed period of suspension. The proposed rule noted that

historically prices are low, and the overall quality of the crop is

good, indicating a trend and general view of the time period. This does

not mean to imply that fluctuations do not occur during various months

within the period or from year to year. However, during the period from

June to December, juice content improves, fruit matures, and the

overall quality of limes is better. The committee plans to review the

effects of the suspension on the market, and base further action on its

analysis.

After thoroughly analyzing the comments received and other

available information, the Department has concluded that this final

rule is appropriate.

In accordance with section 8e of the Act, the United States Trade

Representative has concurred with the issuance of this final rule.

After consideration of all relevant matter presented, including the

information and recommendations submitted by the committee and other

available information, it is hereby found that the provisions of the

regulations to be suspended, as hereinafter set forth, no longer tend

to effectuate the declared policy of the Act.

List of Subjects

7 CFR Part 911

Limes, Marketing agreements, Reporting and recordkeeping

requirements.

7 CFR Part 944

Avocados, Food grades and standards, Grapefruit, Grapes, Imports,

Kiwifruit, Limes, Olives, Oranges.

For the reasons set forth in the preamble, 7 CFR parts 911 and 944

are amended as follows:

1. The authority citation for 7 CFR parts 911 and 944 continues to

read as follows:

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

PART 911--LIMES GROWN IN FLORIDA

Secs. 911.311, 911.329, 911.344 [Amended]

2. Effective June 1, 1997, through December 31, 1997,

Secs. 911.311, 911.329, and 911.344 are suspended.

PART 944--FRUITS; IMPORT REGULATIONS

Sec. 944.209 [Amended]

3. Effective June 1, 1997, through December 31, 1997, Sec. 944.209

is suspended.

Robert C. Keeney,

Director, Fruit and Vegetable Division.

[FR Doc. 96-21210 Filed 8-20-96; 8:45 am]

BILLING CODE 3410-02-P