Kiwifruit Grown in California; Proposed Revision of Administrative Rules Pertaining to Delinquent Assessments

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 920

[Docket No. FV97-920-1 PR]

Kiwifruit Grown in California; Proposed Revision of

Administrative Rules Pertaining to Delinquent Assessments

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: This proposal invites comments on revisions to time periods

specified for timely payment of assessments owed by handlers under the

Federal marketing order for kiwifruit grown in California. This rule

would reduce the time periods specified for timely payments of

assessments from 60 days of invoice for in-line inspection and from 45

days of invoice for block inspection, to 30 days of invoice for both

types of inspection. It would also allow the Kiwifruit Administrative

Committee (committee) to further revise this time period to a later

time period, in the future, if deemed necessary and approved by the

committee. This rule would contribute to the efficient operation of the

program, and would reduce the administrative and accounting burden for

handlers and the committee staff.

DATES: Comments must be received by August 6, 1997.

ADDRESSES: Interested persons are invited to submit written comments

concerning this proposal. Comments must be sent in triplicate to the

Docket Clerk, Fruit and Vegetable Division, AMS, USDA, P.O. Box 96456,

room 2525-S, Washington, DC 20090-6456, FAX (202) 720-5698. All

comments should reference this docket number and the date and page

number of this issue of the Federal Register and will be made available

for public inspection in the Office of the Docket Clerk during regular

business hours.

FOR FURTHER INFORMATION CONTACT: Rose Aguayo, California Marketing

Field Office, Marketing Order Administration Branch, Fruit and

Vegetable Division, AMS, USDA, 2202 Monterey St., suite 102B, Fresno,

California 93721, telephone (209) 487-5901, FAX (209) 487-5906; or

George Kelhart, Marketing Order Administration Branch, Fruit and

Vegetable Division, AMS, USDA, P.O. Box 96456, room 2526-S, Washington,

DC 20090-6456, telephone (202) 720-2491, 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 2525-S,

Washington, DC 20090-6456, telephone (202) 720-2491, FAX (202) 720-

5698.

SUPPLEMENTARY INFORMATION: This proposed rule is issued under Marketing

Order No. 920 (7 CFR part 920), as amended, regulating the handling of

kiwifruit grown in California, hereinafter referred to as the

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

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

referred to as the ``Act.''

The Department of Agriculture (Department) is issuing this proposed

rule in conformance with Executive Order 12866.

This proposed rule has been reviewed under Executive Order 12988,

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

effect. This proposed 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 that 20

days after date of the entry of the ruling.

This proposal invites comments on revisions to time periods

specified for timely payment of assessments owed by handlers under the

Federal marketing order for kiwifruit grown in California. Under

Sec. 920.41(a) of the order, each person who first handles kiwifruit is

required to pay a pro-rata share of the costs of administering the

program. This cost is in the form of a uniform assessment rate applied

to each handler's shipments. Section 920.41(a) also provides that if a

handler does not pay an assessment within the time prescribed by the

committee, the assessment may be subject to an interest or late payment

charge, or both. Section 920.112 of the order's administrative rules

specifies that a simple interest rate of 1.5 percent per month will be

charged to assessments which are not received within 60 days of invoice

for in-line inspected kiwifruit or within 45 days of invoice for block

inspected kiwifruit. It further specifies that a 10 percent late charge

will be assessed handlers when payment becomes 30 days late.

The committee, the agency responsible for local administration of

the marketing order, met on April 16, 1997, and unanimously recommended

revising the administrative rules in effect under the order pertaining

to the time period specified for timely payment of assessments owed by

handlers. The committee recommended reducing the time period for timely

payment of assessments owed by handlers from 60 days of invoice for in-

line inspection and from 45 days of invoice for block inspection, to 30

days of invoice for both types of inspection. The committee also

requested that Sec. 920.112 of the rules and regulations be revised to

allow the committee to further revise this time period in the future,

if deemed necessary.

Kiwifruit grown in California is harvested in late September or

early October. The fruit is packed shortly after harvest and much of it

is placed into storage until shipment. The primary shipping season

extends through the following May, although some fruit is marketed

during the summer months.

Whenever grade, size, quality, or maturity requirements are in

effect for California kiwifruit, handlers are

[[Page 36232]]

required to have their fruit inspected and certified as meeting those

requirements. Handlers have a choice of two different inspection

methods, referred to as ``in-line'' and ``block'' inspection. With in-

line inspection, kiwifruit is inspected during the packing process,

prior to storage. With block inspection, the kiwifruit is inspected

after it has been packed. Block inspections are typically performed

just prior to shipment.

Pursuant to Sec. 920.160, each shipper who ships kiwifruit shall

furnish a report of shipment and inventory data to the committee not

later than the fifth day of the month following such shipment. This

Monthly Shipment Report is also required under the State kiwifruit

program administered by the California Kiwifruit Commission

(commission). The Federal and State programs are both administered by

the same staff.

The committee staff calculates assessments from the Monthly

Shipment Report for all inspected kiwifruit and bills handlers for

committee and commission assessments. The billing period runs from the

first to the last day of the month for all handlers. Invoices are

typically prepared and mailed at the end of the month of receipt of the

Monthly Shipment Report, with payment due 60 days from date of invoice

for in-line inspected kiwifruit and 45 days from date of invoice for

block inspected kiwifruit.

Approximately a month before the start of the 1996-1997 season, the

commission reduced its time period to specify that assessments would be

considered late if not received within 30 days of invoice. The

committee did not recommend a change in its requirements at that time

because there was not adequate time to implement such a change for the

1996-1997 crop year. Operating under two different time periods for

timely payment of assessments requires the committee staff to process

and mail two invoices each month and requires the handlers to review

two invoices and make two payments. Thus, this proposed rule should

reduce costs for handlers and the committee by making the procedures

under both programs the same.

The committee met on April 16, 1997, and recommended reducing the

time periods for timely payment of assessments owed by handlers to 30

days of invoice so that the committee's time period would be consistent

with the commission's time period and further recommended that this

rule be effective in September for the l997-1998 season.

The committee also recommended including authority to revise this

time period in the future, if deemed necessary and approved by the

committee. The committee would like to ensure that consistent

accounting and administrative procedures could be implemented

simultaneously in the future. The Department believes the committee

should be granted authority to increase the time period; however, a

reduction in the time period should be subject to the informal

rulemaking process. The committee's recommendation is proposed to be

modified accordingly.

This action proposes revising Sec. 920.112 to provide that

assessments on all kiwifruit be considered delinquent if not received

within 30 days of invoice, or such other later time as specified by the

committee.

There is unanimous committee support to reduce the time periods

specified for timely payment of assessments owed by handlers to within

30 days of invoice for both types of inspections.

Pursuant to requirements set forth in the Regulatory Flexibility

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

economic impact of this rule on small entities. Accordingly, the AMS

has prepared this initial regulatory flexibility analysis.

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

business subject to such actions in order that small businesses would

not be unduly or disproportionately burdened. Marketing orders issued

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

they are brought about through group action of essentially small

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

entity orientation and compatibility.

There are approximately 60 handlers of California kiwifruit subject

to regulation under the marketing order and 450 producers in the

production area. Small agricultural service firms are 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

have been defined as those having annual receipts of less that

$500,000. One of the 60 handlers subject to regulation has annual

kiwifruit sales of at least $5,000,000, and the remaining 59 handlers

have sales less than $5,000,000, excluding receipts from any other

sources. Ten of the 450 producers subject to regulation have annual

sales of at least $500,000, and the remaining 440 producers have sales

less than $500,000, excluding receipts from any other sources.

Therefore, a majority of handlers and producers of California kiwifruit

may be classified as small entities.

Under Sec. 920.41(a) of the marketing order for kiwifruit grown in

California, each person who first handles kiwifruit is required to pay

a pro-rata share of the costs of administering the program. This cost

is in the form of a uniform assessment rate applied to each handler's

shipments. Section 920.41(a) also provides that if a handler does not

pay an assessment within the time prescribed by the committee, the

assessment may be subject to an interest or late payment charge, or

both. Section 920.112 of the order's administrative rules specifies

that a simple interest rate of 1.5 percent per month will be charged to

assessments which are not received within 60 days of invoice for in-

line inspected kiwifruit or within 45 days of invoice for block

inspected kiwifruit. It further specifies that a 10 percent late charge

will be assessed handlers when payment becomes 30 days late.

Pursuant to Sec. 920.160, each shipper who ships kiwifruit shall

furnish a report of shipment and inventory data to the committee not

later than the fifth day of the month following such shipment. This

Monthly Shipment Report is also required under the State kiwifruit

program administered by the California Kiwifruit Commission. The

Federal and State programs are both administered by the same staff.

The committee staff calculates assessments from the Monthly

Shipment Report for all inspected kiwifruit and bills handlers for

committee and commission assessments. The billing period runs from the

first to the last day of the month for all handlers. Invoices are

typically prepared and mailed at the end of the month of receipt of the

Monthly Shipment Report, with payment due 60 days from date of invoice

for in-line inspected kiwifruit and 45 days from date of invoice for

block inspected kiwifruit.

Approximately a month before the start of the 1996-1997 season, the

commission reduced its time period to specify that assessments would be

considered late if not received within 30 days of invoice. The

committee did not recommend a change in its requirements at that time

because there was not adequate time to implement such a change for the

1996-1997 crop year. Two different time periods for timely payment of

assessments requires the committee staff to process and mail two

invoices each month and requires the handlers to review two invoices

and make two payments. Thus, this proposed rule should reduce costs for

[[Page 36233]]

handlers and the committee by making the procedures under both programs

the same.

The committee met on April 16, 1997, and recommended revising

Sec. 920.112 to provide that the time periods for timely payment of

assessments owed by handlers be reduced to 30 days of invoice so that

the committee's time period would be consistent with the commission's

time period and further recommended that this rule be effective in

September for the l997-1998 season. The committee also recommended

including authority to revise this time period in the future, if deemed

necessary. It would like to ensure that consistent accounting and

administrative procedures could be implemented simultaneously in the

future.

There is unanimous committee support to reduce the time periods

specified for timely payment of assessments owed by handlers to 30 days

of invoice for both types of inspections.

Currently, the time lapse between the date the fruit is shipped and

the date assessments are due is between 60-90 days. Handlers normally

receive payment for shipments within 30 days of shipment. Therefore,

the impact of this action would not be significant as payments for

shipments are normally received 30-60 days before assessments are due.

Handlers currently pay assessments of $.0175 per tray or tray

equivalent and have 60 days from date of invoice for in-line inspected

kiwifruit and have 45 days from date of invoice for block inspected

kiwifruit to pay their assessments before their assessments are

considered delinquent. If handlers pay their assessments in a timely

manner, they are not charged the simple interest rate of 1.5 percent

per month or the 10 percent late charge.

Under this proposal, handlers would have 30 days from the invoice

date before their assessments would be considered delinquent. This 30-

day reduction in the time period for handlers receiving in-line

inspection and 15-day reduction in the time period for handlers

receiving block inspection would have no impact on handlers who pay

their assessments in a timely manner. Even for those who do not pay in

a timely manner, the impact would not be significant. For example, if a

handler is delinquent in paying assessments, a simple interest rate of

1.5 percent interest per month and an assessment of $.0175 per tray or

tray equivalent would apply. During the peak month of March, 1996, less

than 1.6 million trays or tray equivalents were shipped. This equates

to an approximate average of 26,667 trays for each of the 60 handlers,

which when assessed at $.1075 per tray generates a $467 assessment per

handler. If an account is 30 days delinquent, the handler is charged a

1.5 percent interest charge in the amount of $7.00 and a 10 percent

late charge in the amount of $46.70 over the assessment. This action

does not change the interest rate or the late charge percentage, but

reduces the time period specified for timely payment to 30 days. If

amounts are paid in a timely manner, no additional charges are

incurred.

The majority of assessments owed by handlers are paid within the

specified time periods.

This change would reduce the administrative and accounting burden

for handlers and for the committee staff by making the committee's and

the commission's time periods consistent. While no specific

alternatives were suggested during the public meeting, the committee's

recommendation and the rule proposed herein do provide for built-in

alternatives and flexibility. Allowing the committee to further revise

this time period to a later time period in the future, if deemed

necessary, would ensure that consistent accounting and administrative

procedures could be implemented simultaneously in the future. This rule

would be applied uniformly to all handlers and was viewed by the

committee as the best solution.

This action would not impose any additional reporting or

recordkeeping requirements on either small or large kiwifruit handlers.

As with all Federal marketing order programs, reports and forms are

periodically reviewed to reduce information requirements and

duplication by industry and public sector agencies.

The Department has not identified any relevant Federal rules that

duplicate, overlap or conflict with this proposed rule.

In addition, the committee's meeting was widely publicized

throughout the kiwifruit industry and all interested persons were

invited to attend the meeting and participate in committee

deliberations on all issues. Like all committee meetings, the April 16,

1997, meeting was a public meeting and all entities, both large and

small, were able to express views on this issue. The committee itself

is composed of 12 members. Two of these members are handlers and

producers, 9 are producers only, and one is a public member. The

majority are small entities, with one producer member having annual

receipts over $500,000. Thus, committee recommendations can be

considered to represent the interests of small business entities in the

industry. Finally, interested persons are invited to submit information

on the regulatory and informational impacts of this action on small

businesses.

A 30-day comment period is provided to allow interested persons to

respond to this proposal. All written comments timely received will be

considered before a final determination is made on this matter.

List of Subjects in 7 CFR Part 920

Kiwifruit, Marketing agreements.

For the reasons set forth in the preamble, 7 CFR part 920 is

proposed to be amended as follows:

PART 920--KIWIFRUIT GROWN IN CALIFORNIA

1. The authority citation for 7 CFR part 920 continues to read as

follows:

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

2. Section 920.112 is revised to read as follows:

Sec. 920.112 Late payments.

Pursuant to Sec. 920.41(a), interest will be charged at a 1.5

percent monthly simple interest rate. Assessments for kiwifruit shall

be deemed late if not received within 30 days of invoice, or such other

later time period as specified by the committee. A 10 percent late

charge will be assessed when payment becomes 30 days late. Interest and

late payment charges shall be applied only to the overdue assessment.

Dated: June 30, 1997.

Eric M. Forman,

Acting Director, Fruit and Vegetable Division.

[FR Doc. 97-17605 Filed 7-3-97; 8:45 am]

BILLING CODE 3410-02-P