Tart Cherries Grown in the States of Michigan, New York, Pennsylvania, Oregon, Utah, Washington, and Wisconsin; Issuance of Grower Diversion Certificates

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 930

[Docket No. FV97-930-5 IFR]

Tart Cherries Grown in the States of Michigan, New York,

Pennsylvania, Oregon, Utah, Washington, and Wisconsin; Issuance of

Grower Diversion Certificates

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Interim final rule with request for comments.

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SUMMARY: This rule establishes terms and conditions for the issuance of

grower diversion certificates by the Cherry Industry Administrative

Board (Board) under the newly promulgated marketing order for tart

cherries. In the event volume regulations are issued by the Secretary

for the 1997 crop year, handlers could use such certificates in order

to satisfy their restricted percentage amounts. Tart cherries handlers

in Oregon, Pennsylvania, Washington and Wisconsin (Districts 5, 6, 8,

and 9) would not be subject to volume regulation, if implemented,

because these districts do not currently produce adequate tonnage to

trigger such regulation under the order.

DATES: Effective August 26, 1997; comments received by September 24,

1997, will be considered prior to issuance of a final rule.

ADDRESSES: Interested persons are invited to submit written comments

concerning this rule. Comments must be sent in triplicate to the Docket

Clerk, Fruit and Vegetable Division, AMS, USDA, room 2525-S, P.O. Box

96456, Washington, DC 20090-6456; Fax: (202) 720-5698. All comments

should reference the 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: Patricia A. Petrella or Kenneth G.

Johnson, Marketing Order Administration Branch, F&V, AMS, USDA, room

2530-S, P.O. Box 96456, Washington, DC 20090-6456, telephone: (202)

720-5053, 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 rule is issued under Marketing

Agreement and Order No. 930 (7 CFR part 930), regulating the handling

of tart cherries grown in the States of Michigan, New York,

Pennsylvania, Oregon, Utah, Washington, and Wisconsin, hereinafter

referred to as the ``order.'' This marketing agreement and order are

effective under the Agricultural Marketing Agreement Act of 1937, as

amended (7 U.S.C. 601-674), hereinafter referred to as the ``Act.''

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

conformance with Executive Order 12866.

This rule has been reviewed under Executive Order 12988, Civil

Justice Reform. Under the marketing order provisions now in effect,

preliminary free and restricted percentages have been established for

tart cherries acquired by handlers during the 1997 crop year, July 1,

1997, through June 30, 1998. Final free and restricted percentages may

be established at a later date. This rule authorizes the issuance of

diversion certificates to growers for cherries diverted during the 1997

crop year. This rule will not preempt any State or local laws,

regulations, or policies, unless they present an irreconcilable

conflict with this rule.

The Act provides that administrative proceedings must be exhausted

before parties may file suit in court. Under section 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 the date of the entry of the ruling.

This rule provides for the issuance of diversion certificates to

growers in volume regulated districts under the tart cherry marketing

order for the 1997 crop year. The order became effective September 25,

1996, and the initial Cherry Industry Administrative Board was

appointed in December 1996. The Board held several meetings in January,

February, March and June 1997, to consider its start-up costs and

establish rules and regulations to implement the order authorities. At

its meetings, the Board unanimously recommended that

[[Page 44882]]

the regulations be forwarded to the Department for appropriate action.

In discussions concerning volume regulations for the 1997 crop

year, the Board considered guidelines and procedures for grower

diversion. Growers in the States which would be subject to volume

regulation were sent information about diversion and were notified that

participation in a diversion program would be completely voluntary. A

majority of the growers (approximately 700 out of 1,220) in the

districts which would be subject to volume regulation if it were

imposed have been diverting their cherries this season based on

preliminary free and restricted percentage figures announced by the

Board. The Board, in its meetings, continued its review of applicable

sections of the order, such as those pertaining to optimum supply, and

making recommendations to specify guidelines for grower diversion.

The order in Sec. 930.50 provides the method of establishing an

optimum supply level of cherries for the crop year. The optimum supply

consists of a free percentage amount which a handler could sell to any

market and a restricted percentage amount, when warranted, which would

have to be withheld from the market. Preliminary percentages were

established by the Board on July 2, pursuant to Sec. 930.50(b) of the

order, using Department estimates of the upcoming crop. Preliminary

free and restricted percentages of 66 and 34 percent, respectively,

were announced to the industry in accordance with Sec. 930.50(h) of the

order. No later than September 15, after harvest and processing of the

crop have been completed, the Board is required to compute, and

recommend to the Secretary, final percentages based on actual crop

amounts. A handler can satisfy restricted percentage obligations

established by regulation by holding restricted percentage cherries in

an inventory reserve that the handler maintains, by redeeming grower

diversion certificates, or by diverting cherries.

Section 930.58 of the tart cherry marketing order provides

authority for voluntary grower diversion. Growers can divert all or a

portion of their cherries which otherwise, upon delivery to a handler,

would become restricted percentage cherries. Growers would receive

diversion certificates from the Board stating the weight of cherries

diverted. The grower could then present this certificate to a handler

in lieu of actual cherries. The handler could apply the weight of

cherries represented by the certificate against the handler's

restricted percentage amount.

The Board recommended rules and regulations specifying the

guidelines for the grower diversion program. First, the Board

recommended that any grower desiring to divert in the orchard should

first apply to the Board. The application should include the name,

address, phone number and a statement signed by the grower agreeing to

abide by all the rules and regulations for diversion. In addition, the

grower would provide maps of such grower's orchard.

The Board recommended two types of in-orchard diversion. These are

random row diversion, in which orchard rows are randomly chosen by the

Board, using a computer program, to be left unharvested, and whole

block diversion, in which a whole definable orchard block is left

unharvested. Trees six years old or younger would not qualify for

diversion, since these trees are not yet in full production.

The Board recommended that all grower diversion certificates should

be redeemed with handlers by November 1. After November 1, grower

diversion certificates would not be valid. It was intended that

diversion certificates be used within the same crop year that they were

issued, as if a crop had been produced. The November 1 date would allow

handlers adequate time to meet their restricted percentage amounts

after final percentages have been established.

The Board also recommended guidelines concerning random row and

whole block diversion and compliance procedures for growers to follow

under the grower diversion program.

This crop year a majority of growers are voluntarily diverting

cherries based on preliminary free and restricted percentages which

have been established by the Board and on recommendations and guidance

concerning diversion which the Board has developed, and will be

requesting diversion certificates from the Board. This rule provides

for the issuance of such certificates subject to certain specified

terms and conditions. In order to receive a certificate, a grower must

show, to the satisfaction of the Board, that cherries were in fact

diverted. This may be accomplished in a number of ways. The Board needs

information about the grower's production. In addition, the grower must

agree to allow the Board to confirm reported diversion figures by

allowing a Board compliance officer to visit the grower's orchard to

determine whether rows or trees selected for diversion have not been

harvested.

Once the Board has obtained the necessary information concerning

diversion by a grower, it will issue a diversion certificate. The

diversion certificate would be issued for an amount equal to the

estimated volume of cherries diverted by the grower.

For random row diversion, such estimated volume would be calculated

by applying the percentage of the grower's production diverted to the

actual average volume per acre of cherries produced and harvested. For

example, Grower A farms 1,000 acres and elects to divert 20 percent of

the harvestable acreage (200 acres). The grower harvests the remaining

800 acres and obtains 6,400,000 pounds of cherries, which represents a

yield per acre of 8,000 pounds. Such grower would receive a diversion

certificate for 1,600,000 pounds of cherries (8,000 lbs multiplied by

the 20 percent of the total acreage diverted; in this instance, 200

acres).

For whole block diversion, the weight of a harvested sample of 5

percent of each block, provided by the grower, would be used to

calculate the total volume of diverted cherries to be credited on the

diversion certificate. For example, Grower B farms 1,000 acres and

elects to whole block divert a 200 acre block. If the 5 percent of the

harvested trees in the block diverted yield 80,000 pounds of cherries,

the grower would receive a diversion certificate for 1,600,000 pounds

(80,000 pounds divided by 5 percent (.05) yields 1,600,000 pounds). The

rest of the block would remain unharvested.

After receiving a certificate from the Board, the grower could

present the certificate to a handler to be redeemed. Based upon the

recommendations of the Board, guidelines and procedures for grower

diversion for 1998 and subsequent seasons will be established later

through another rulemaking action.

Pursuant to requirements set forth in the Regulatory Flexibility

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

economic impact of this action on small entities. Accordingly, 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 will

not be unduly or disproportionately burdened. Marketing orders issued

pursuant to the Act, and rules 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 40 handlers of tart cherries who are

subject to regulation under the order and approximately 1,220 producers

or growers of tart cherries in the regulated

[[Page 44883]]

area. Small agricultural service firms, which include handlers, have

been defined by the Small Business Administration (13 CFR 121.601) as

those having annual receipts of less than $5,000,000, and small

agricultural producers are defined as those having annual receipts of

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

cherries may be classified as small entities.

Section 930.58(b) authorizes the Board to issue diversion

certificates to growers in volume regulated districts under the tart

cherry marketing order if cherries are diverted according to terms and

conditions specified in the order, or according to such other terms and

conditions that the Board, with the approval of the Secretary, may

establish. The tart cherry marketing order was recently promulgated and

the Board met several times in 1997 to recommend rules and regulations

to implement the order authorities. The Board is required under the

order to review its marketing policy on or before July 1 and then make

recommendations to the Secretary for volume regulation, if such

regulation is deemed necessary.

The impact of this rule would be beneficial to growers. Grower

diversion is one of the methods under the order that a handler can

utilize to meet any such handler's restricted percentage. For example,

growers may voluntarily choose to divert because they have an abundance

of low value, poor quality cherries or because they are unable to find

a processor willing to process some or all of their cherries. Before

choosing to divert, the grower would most likely evaluate the

harvesting and other cultural costs that could be saved by diverting

and locate a handler that would be willing to redeem such grower's

diversion certificate.

The Board discussed alternatives to its recommendation to issue

grower diversion certificates for the 1997 crop year. The Board

considered not issuing grower diversion certificates for the 1997 crop

year but believed this action was needed.

The Board also discussed limiting the blocks to be diverted to no

less than 5 acre blocks, but felt that this could have an adverse

impact on small growers that produce on less than 5 acre blocks.

Therefore, the Board recommended not to restrict the size of orchard

blocks which could be diverted.

This rule will not impose any reporting or recordkeeping

requirements on either small or large tart cherry growers or handlers

in addition to those already considered or approved during the order

promulgation proceeding. The only written information requested from a

grower for 1997 is an orchard map and the grower's final production

volume. Since growers maintain this information as part of their normal

farming operations, it takes approximately 10 minutes to prepare a map

and less than a minute to total the final production volume. As with

all Federal marketing order programs, reports and forms are

periodically reviewed to reduce information requirements and

duplication by industry and public sectors. In addition, the Department

has not identified any relevant Federal rules that duplicate, overlap

or conflict with this rule.

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

recordkeeping requirements have been previously approved by OMB and

assigned OMB Number 0581-0177.

The Board's meetings were widely publicized throughout the tart

cherry industry and all interested persons were invited to attend the

meetings and participate in Board deliberations. All Board meetings

were open to the public and all entities, both large and small, were

able to express their views on these issues. The Board itself is

composed of 18 members, of which 17 members are growers and handlers

and one represents the public. Also, the Board has a number of

appointed committees to review certain issues and make recommendations

to the Board. Finally, interested persons are invited to submit

information on the regulatory and informational impacts of this action

on small businesses.

After consideration of all relevant material presented, including

the Board's recommendation, and other information, it is found that

this interim final rule, as hereinafter set forth, will tend to

effectuate the declared policy of the Act.

This interim final invites comments on grower diversion. Any

comments received will be considered prior to finalization of this

rule.

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

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

interest to give preliminary notice prior to putting this rule into

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

of this rule until 30 days after publication in the Federal Register

because: (1) The marketing order has been recently promulgated and the

rule needs to be implemented as soon as possible since, based on

announced preliminary percentages, volume regulation may be recommended

for the 1997 crop year; (2) the 1997 crop year for cherries is from

July 1, 1997, through June 30, 1998; (3) over 700 growers participating

in a diversion program and have been voluntarily diverting cherries

based on preliminary free and restricted percentages announced by the

Board; and, (4) this rule provides a 30-day comment period and any

comments received will be considered prior to finalization of this

rule.

List of Subjects in 7 CFR Part 930

Marketing agreements, Tart cherries, Reporting and recordkeeping

requirements.

For the reasons set forth in the preamble, 7 CFR part 930 is

amended as follows:

PART 930--TART CHERRIES GROWN IN THE STATES OF MICHIGAN, NEW YORK,

PENNSYLVANIA, OREGON, UTAH, WASHINGTON, AND WISCONSIN

1. The authority citation for 7 CFR part 930 continues to read as

follows:

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

2. In part 930, a new Sec. 930.100 is added to read as follows:

Sec. 930.100 Grower diversion certificates.

(a) In accordance with paragraph (b) of this section, the Board

may, for the 1997 crop year, issue diversion certificates to growers,

in districts subject to volume regulation (Northwest Michigan, Central

Michigan, New York, and Utah) who have voluntarily elected to divert in

the orchard all or a portion of their 1997 tart cherry production which

otherwise, upon delivery to handlers, would become restricted

percentage cherries. Growers may offer the diversion certificate to

handlers in lieu of delivering cherries. Handlers may redeem diversion

certificates with the Board through November 1 of the 1997 crop year.

After November 1 of the 1997 crop year that crop year's grower

diversion certificates are no longer valid.

(b) Terms and conditions. To be eligible to receive diversion

credit, growers voluntarily choosing to divert cherries must meet the

following terms and conditions:

(1) In order to receive a certificate, a grower must demonstrate,

to the satisfaction of the Board, that rows or trees which were

selected for diversion were not harvested. Trees six years old or

younger do not qualify for diversion.

(2) The grower must furnish the Board with a total harvested

production amount so the Board can calculate the amount of grower

diversion tonnage to

[[Page 44884]]

be placed on the diversion certificate. The Board will confirm the

grower's production amount with information provided by handlers (to

which the grower delivers cherries) on Board Form Number Two.

(3) The grower must agree to allow a Board compliance officer to

visit the grower's orchard to confirm that diversion has actually taken

place.

(c) Calculation of diversion amounts. The weight of cherries

diverted and left unharvested shall be calculated by the Board after

growers furnish the Board with the necessary information concerning

their production. After verification of the volume of cherries

diverted, the Board shall calculate the amounts of grower diversion

tonnage to be placed on the diversion certificates and issue such

certificates to growers. Such amounts shall be determined as follows:

(1) For whole block diversion, the weight of a harvested sample of

5 percent of each diverted block, provided by the grower, will be used

to calculate the total volume of diverted cherries to be credited on

the diversion certificate. For example, a grower farms 1,000 acres and

elects to whole block divert a 200 acre block. If 5 percent of the

harvested trees in the block diverted yield 80,000 pounds of cherries,

the grower would receive a diversion certificate for 1,600,000 pounds

(80,000 pounds divided by 5 percent (.05) yields 1,600,000 pounds). The

rest of the block would remain unharvested.

(2) For random row diversion, such estimated volume would be

calculated by applying the percentage of the grower's production

diverted to the actual average volume per acre of cherries produced and

harvested. For example, a grower farms 1,000 acres and elects to divert

20 percent of the harvestable acreage (200 acres). The grower harvests

the remaining 800 acres and obtains 6,400,000 pounds of cherries, which

represents a yield per acre of 8,000 pounds. Such grower would receive

a diversion certificate for 1,600,000 pounds of cherries (8,000 lbs

multiplied by the 20 percent of the total acreage diverted; in this

instance, 200 acres).

Dated: August 18, 1997.

Robert C. Keeney,

Director, Fruit and Vegetable Division.

[FR Doc. 97-22578 Filed 8-20-97; 4:06 pm]

BILLING CODE 3410-02-P