Regulations Governing the Fresh Irish Potato Diversion Program, 1996 Crop

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 80

[Docket No. FV-97-80-02]

RIN 0581-AA93

Regulations Governing the Fresh Irish Potato Diversion Program,

1996 Crop

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: The Department of Agriculture (USDA) is adopting, with

changes, an interim final rule previously published in the Federal

Register setting forth the Fresh Irish Potato Diversion Program (PDP)

for the 1996 crop. This rule will allow the program to continue through

August 27, 1997, to assist fresh Irish potato growers faced with

oversupplies and low prices.

EFFECTIVE DATE: July 25, 1997.

FOR FURTHER INFORMATION CONTACT: Susan Proden, Acting Chief, Commodity

Procurement Branch, Fruit and Vegetable Division, AMS, USDA, room

2548--South Building, 1400 Independence Avenue, S.W., Washington, DC

20250, (202) 720-6391.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

The Department of Agriculture is issuing this rule in conformance

with Executive Order 12866, and the Office of Management and Budget has

determined that it is ``not a significant action.''

Executive Order 12988

This final rule has been reviewed under USDA procedures established

in accordance with Executive Order 12988, Civil Justice Reform. The

provisions of the final rule do not preempt State law and are not

retroactive. Before any judicial action may be brought regarding the

provisions of this final rule, the appeal and mediation procedure in 7

CFR part 780 must be exhausted.

Paperwork Reduction Act

Information collection requirements contained in this part have

been approved by the Office of Management and Budget (OMB) in

accordance with the provisions of 44 U.S.C. chapter 35, and have been

assigned OMB control number 0560-0145.

Regulatory Flexibility Act

Pursuant to requirements set forth in the Regulatory Flexibility

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

(AMS) has determined that this action will not have a significant

economic impact on a substantial number of small entities. The purpose

of the RFA is to fit regulatory actions of the scale of business

subject to such actions in order that small businesses will not be

unduly or disproportionally burdened. The Small Business Administration

(13 CFR 121.1) has defined small agricultural producers as those having

gross revenue for the last three years of less than $500,000, and small

agricultural service firms are defined as those whose gross annual

receipts are less than $5,000,000. Because there is a preponderance of

entities shipping fresh Irish potatoes that meet these growers revenue

limitations, it is anticipated that the majority of the program

participants could be classified as small entities without substantial

regulatory restriction. Therefore, the provisions of the RFA are not

applicable and no Regulatory Flexibility analysis is required.

Executive Order 12372

PDP is not subject to the provisions of Executive Order 12372,

which requires intergovernmental consultation with State and local

officials. See the Notice related to 7 CFR part 3015, subpart V,

published at 48 FR 29115 (June 24, 1983).

Executive Order 12612

It has been determined that this rule does not have sufficient

federalism implications to warrant the preparation of a Federalism

Assessment. The provisions contained in this rule will not have a

substantial direct effect on states or their political subdivisions, or

on the distribution of power and responsibilities among the various

levels of government.

Background Information

On June 2, 1997, AMS issued an interim rule setting forth the terms

for conducting PDP. See, 62 F.R. 29650 (June 2, 1997). PDP is

authorized by clause (2) of section 32 of the Act of August 24, 1935,

as amended (7 U.S.C. 612c) (Section 32). Section 32 authorizes the

Secretary of Agriculture to ``encourage the domestic consumption of

such [agricultural] commodities or products by diverting them, by the

payment of benefits or indemnities or by other means, from the normal

channels of trade and commerce * * *.'' Section 32 also authorizes the

Secretary to use Section 32 funds ``at such times, in such manner, and

in such amounts as the Secretary of Agriculture finds will effectuate

substantial accomplishment of any one or more of the purposes of this

section.'' Furthermore, ``determinations by the Secretary as to what

constitutes diversion, and what constitutes normal channels of trade

and commerce, and what constitutes normal production for domestic

consumption shall be final.''

USDA statistics indicated that as of May 1, 1997, that the supply

of fresh Irish potatoes stored in 15 states exceeded by 32 percent the

amount of stocks held on May 1, 1996. Based on these statistics the

Secretary determined that the 1996 fresh Irish potato crop was in

surplus supply, and that the domestic consumption of such potatoes

would be encouraged by using section 32 funds to divert fresh Irish

potatoes from the normal channels of trade and commerce under a

diversion program. PDP encompasses all types and varieties of potatoes

(except sweet potatoes) of U.S. Grade No. 2 (fairly clean) and U.S.

Grade No. 2 Processing, including varieties commonly used for

processing, chipping and table stock. Due to a need for expediency in

implementing PDP and concern about undue delay in conducting

environmental analysis and impact studies on composting, PDP was

limited to charitable institutions and livestock feed.

The price established for fresh Irish potatoes destined for animal

feed included all costs, including transportation. The price

established for fresh Irish potatoes destined for use by

[[Page 40730]]

charitable institutions covered all costs except transportation. USDA

arranged and paid for the transportation costs between the grower and

the charitable institution because it believed that in most instances,

it would be in a better position than the grower to match the grower

efficiently and effectively with the charitable institutions already

identified by USDA.

Summary of Comments

The public had until July 2, 1997, to comment on the interim rule.

USDA received comments from four Irish potato producers, three potato

processors, and one trade association. These comments are on file in

room 2548--South Building, 1400 Independence Avenue, S.W., Washington,

DC 20250.

Four comments opposed PDP on the grounds that such diversion

purchases create more difficulties than they solve, distort market

conditions, and only exacerbate negative economic conditions for most

growers. Also, some growers felt that USDA should not provide price

support for fresh Irish potatoes, and due to the late effective date of

the program, many fresh Irish potatoes would not meet minimum grade for

condition. Pursuant to Section 32, the Secretary found that

establishment of the PDP would tend to benefit Irish potato producers

given current supply and market conditions.

Four comments expressed concern that composting was not offered as

a diversion outlet in the PDP, and recommended that it be allowed. As

stated in the preamble to the interim rule, including composting would

have required an environmental impact study, and because of the time

required to conduct such a study, inclusion of composting would have

resulted in an undue delay in the implementation of PDP, to the

detriment of potato producers.

Four comments recommended that USDA make PDP retroactive to May 9,

1997, the date the Secretary of Agriculture announced his intent to

offer a diversion program. USDA had considered this option, but

concluded that it would be difficult to ensure compliance with the

program's requirements retroactively, and that a retroactive initial

effective date would not have provided equitable treatment to all

producers.

One comment expressed concern that the PDP assists growers and not

processors. The comment stated that no programs have been set up by

USDA to address the hardships faced by fresh or refrigerated potato

processors, and recommended that the final rule be revised to include a

provision to assist this group. While USDA is sympathetic to these

concerns, Section 32 is intended to assist only producers by diverting

or purchasing surplus supplies of certain agricultural commodities.

Therefore, no change is being made to the final rule based on this

comment.

Three comments questioned the amount of funds allocated to each

state for PDP and recommended additional funds be allocated to certain

states. Although $8.5 million has been allocated to this program, and

applications have been approved to divert product, as of July 21, 1997,

only $1.4 million had actually been paid to potato producers. Since

producers have additional time to complete their diversions, it is not

yet known how much money will actually be spent on the PDP.

However, to further address these concerns, USDA has determined

that potato producers need additional time to comply with the

provisions of the PDP, including completing their diversions and

submitting the required documentation to receive payment, and that

additional changes are required to help ensure that PDP is available to

as many producers as possible. These changes include placing deadlines

on diversions and removing the packaging requirement. Accordingly, the

provisions contained in the interim rule will remain in effect except

for the following modifications:

(1) PDP is extended for an additional 30 days through August 27,

1997.

(2) All producers receiving the approved form, Potato Diversion

Program Application for Participation (FSA-117) dated May 29 through

July 11 must complete the diversion and submit all required

documentation by July 28, 1997. Any of these producers who have not

completed the diversion and submitted the required documentation by

July 28 will no longer be eligible for payment. However the producer

may again apply for program participation.

(3) All producers receiving approved FSA-117's dated July 14

through July 28 will have until August 13, 1997, to complete the

diversion and submit all required documentation. After August 13, any

unused allocation will no longer be available to those producers.

(4) Producers who receive FSA-117's from July 29 through August 27

must complete their diversions and submit all required documentation by

August 27, when the program ends.

(5) Final dates to complete diversions and submit required

documentation may be waived by USDA if it is determined that severe

weather conditions prevented the completion of the diversion during the

allotted time period.

(6) Producers who registered for diversion during the original

program dates of May 29 through July 28 and whose FSA-117's were not

approved in whole or part because of a lack of funding need not

register again. Producers who previously were approved and did not

divert potatoes may again register to participate in the program.

(7) Potatoes may also be shipped in bulk if the charitable

institution agrees to accept bulk deliveries during the additional 30-

day period. For diversions of potatoes to charitable institutions that

are not in bags or cartons, USDA will pay the producer $0.75 per

hundredweight. In the event the charitable institution does not agree

to accept bulk deliveries, producers may have the option to divert

deliveries to charitable institutions in 50 lb cartons or bags.

List of Subjects in 7 CFR Part 80

Administrative practice and procedures, Agriculture, Agricultural

commodities, Reporting and recordkeeping requirements.

Accordingly, the interim final rule amending 7 CFR part 80 which

was published at 62 FR 29649 on June 2, 1997, is adopted as a final

rule with the following changes:

PART 80--FRESH IRISH POTATO DIVERSION PROGRAM

1. The authority citation for part 80 continues to read as follows:

Authority: 7 U.S.C. 612c.

2. In Sec. 80.4, the date ``July 28'' is revised to read ``August

27,'' each time it appears and a new sentence is added at the end of

the section to read as follows:

Sec. 80.4 Length of program.

* * * Application for charitable diversions as well as for

livestock feed will be accepted until August 27, 1997.

3. In Sec. 80.5, paragraph (a) is revised to read as follows:

Sec. 80.5 Rate of payment.

(a) The rate of payment for potatoes for charitable institutions

will be $1.50 per hundredweight for fresh Irish potatoes if packed in

bags or cartons, and will be $0.75 if shipped in bulk. All eligible

fresh Irish potatoes intended for donation to charitable institutions

must: Meet U.S. Grade No. 2 (fairly clean) requirements as certified by

the AMS or the Federal-State Inspection Service; and be in a quantity

of 40,000 pounds

[[Page 40731]]

net or a multiple of 40,000 pounds net. Only transportation costs

associated with donations to charitable institutions may be arranged

for and paid by USDA. USDA will make no other payment with respect to

such potatoes.

* * * * *

4. In Sec. 80.6, paragraph (a)(5) is revised to read as follows:

Sec. 80.6 Eligibility for payment.

(a) * * *

(5) Diverts fresh Irish potatoes and submits required documentation

by July 28, 1997, if Form FSA-117 is approved by USDA from May 29

through July 11, 1997; or diverts fresh Irish potatoes and submits

required documentation by August 13, 1997, if Form FSA-117 is approved

by USDA from July 14 through July 28, 1997; or diverts fresh Irish

potatoes and submits required documentation by August 27, 1997, if Form

FSA-117 is approved by USDA from July 29 through August 27, 1997.

Allocations unused by the applicable date will no longer be available

for that producer. Final dates to complete diversions and submit

documentation may be waived by USDA if it is determined that severe

weather conditions prevented the completion of the diversion during the

allotted time period.

* * * * *

Dated: July 24, 1997.

Lon Hatamiya,

Administrator, Agricultural Marketing Service.

[FR Doc. 97-20091 Filed 7-25-97; 3:59 pm]

BILLING CODE 3410-02-P