Kiwifruit Grown in California; Relaxation in Pack Requirements

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 920

[Docket No. FV97-920-2 FR]

Kiwifruit Grown in California; Relaxation in Pack Requirements

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This final rule revises pack requirements for Size 42 and Size

45 kiwifruit under the Federal marketing order for kiwifruit grown in

California. This rule increases the size variation tolerance for Size

42 kiwifruit from 5 percent, by count, to 10 percent, by count, and

increases the size variation tolerance for Size 45 kiwifruit from 10

percent, by count, to 25 percent, by count. This relaxation was

recommended by the Kiwifruit Administrative Committee (committee), the

agency responsible for local administration of the marketing order. The

committee expects this rule to reduce handler costs, increase grower

returns, and allow the kiwifruit industry to meet the increased demand

for lower priced kiwifruit.

EFFECTIVE DATE: This final rule becomes effective September 22, 1997.

FOR FURTHER INFORMATION CONTACT: Rose Aguayo, Marketing Specialist,

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, room 2525-S, P.O. Box

96456, 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 final 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 rule in

conformance with Executive Order 12866.

This final rule has been reviewed under Executive Order 12988,

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

effect. 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

principle place of business, has jurisdiction in equity to review the

Secretary's ruling on the petition, provided a bill in equity is filed

not later than 20 days after the date of the entry of the ruling.

This final rule revises pack requirements for Size 42 and Size 45

kiwifruit under the Federal marketing order for kiwifruit grown in

California. This rule will increase the size variation tolerance for

Size 42 kiwifruit from 5 percent, by count, to 10 percent, by count,

and will increase the size variation tolerance for Size 45 kiwifruit

from 10 percent, by count, to 25 percent, by count.

Section 920.52 authorizes the establishment of pack requirements.

Section 920.302(a)(4) of the rules and regulations outlines the pack

requirements for fresh shipments of California kiwifruit. Under

Sec. 920.302(a)(4)(i) of the rules and regulations, kiwifruit packed in

containers with cell compartments, cardboard fillers, or molded trays

shall be of proper size and fairly uniform in size. Section

920.302(a)(4)(ii) outlines pack requirements for kiwifruit packed in

cell compartments, cardboard fillers or molded trays and includes a

table that specifies numerical size designations and the size variation

tolerances. It also outlines pack requirements for kiwifruit packed in

bags, volume fill or bulk containers, and includes a separate table

that specifies numerical size designations and size variation

tolerances. This section provides that not more than 10 percent, by

count of the containers in any lot may fail to meet pack requirements.

It also provides that not more than 5 percent, by count, of kiwifruit

in any container, (except that for Size 45 kiwifruit, the tolerance, by

count, in any one container, may not be more than 10 percent) may fail

to meet pack requirements. This size variation tolerance does not apply

to other pack requirements such as how the fruit fills the cell

compartments, cardboard fillers, or molded trays, or any weight

requirements.

Prior to the 1995-1996 season, handlers were experiencing

difficulty meeting the size variation tolerance for Size 45 kiwifruit.

Size 45 is the minimum size. The committee determined that the best

solution was to increase the size variation tolerance, by count, in any

one container, for Size 45 kiwifruit. Section 920.302 (a)(4) was

revised by a final rule issued June 21, 1995 (60 FR 32257) to include a

provision that increased the size variation tolerance, by count, in any

one container, from 5 percent to 10 percent for Size 45 kiwifruit.

This increased size variation tolerance for Size 45 kiwifruit has

been utilized for two seasons. Handlers are still experiencing

difficulty discerning if size variation tolerances for smaller fruit

are being met during the packing process.

As the size of the kiwifruit increases, so does the size of the

variation allowed. In the larger kiwifruit sizes, failure to meet the

required size variation standards results in packs that are visibly

irregular in size. In Size 42 and

[[Page 49129]]

Size 45 packs, however, when the respective 5 and 10 percent tolerances

are exceeded, the variation is difficult to detect visually. A size

variation of \1/4\-inch (6.4 mm) difference is allowed between the

widest and narrowest kiwifruit in any Size 42 container utilizing cell

compartments, cardboard fillers or molded trays and a \3/8\-inch (9.5

mm) size variation difference is allowed between the widest and

narrowest kiwifruit in a Size 42 bag, volume fill or bulk container. A

\1/4\-inch (6.4 mm) size variation difference is allowed between the

widest and narrowest kiwifruit in any Size 45 container.

Packers must separate the round and flat shaped kiwifruit into two

different containers in order to meet the size variation requirements.

During the packing operation, a mechanical sizer routinely sorts the

kiwifruit by shape and size. The kiwifruit which is missed by the

mechanical sizer must be manually sorted by the handler. If size

variation tolerances are not being met, packers must slow down the pack

line and increase efforts to separate the round and flat kiwifruit to

ensure that current size variation requirements are met. Since it is

not economically feasible for each handler to be equipped with a

caliper to measure size variation, they rely on their visual judgement.

During inspection, calipers are utilized by the inspectors to determine

if the size variation is met for Size 42 and Size 45 containers. The

industry views this separation of Size 42 and 45 round and flat shaped

kiwifruit into two different containers by shape as an added cost, that

is particularly detrimental because this fruit returns little if any

money back to the grower. The higher costs of sizing the fruit during

the packing operation may have cost the industry sales as well.

Further, this sizing of kiwifruit may not be apparent to consumers.

Usually a pallet of Size 42 kiwifruit includes containers of round

fruit and containers of flat fruit. When a pallet of Size 42 kiwifruit

reaches the retailer, a container of round fruit may be displayed. As

the kiwifruit is sold, a container of the Size 42 flat fruit may be

commingled with the remaining round fruit. The consumer will then see

this commingled fruit with slightly different shapes on display. The

size variation standards that the packer strived so hard to stay within

during the packing process are erased.

The committee met on April 16, 1997, and recommended by a vote of

eight in favor and one opposed to relax the pack requirements in effect

under the order pertaining to size variation tolerances for Size 42 and

Size 45 kiwifruit. The committee recommended increasing size variation

tolerances for kiwifruit, in any one container, from 5 percent, by

count, to 10 percent, by count, for Size 42 kiwifruit and from 10

percent, by count, to 25 percent, by count, for Size 45 kiwifruit and

further recommended that this rule be effective in September for the

1997-1998 season. The season normally begins the end of September or

the first week of October. The increased size variation tolerances will

apply to any container of kiwifruit.

This final rule will reduce costs for handlers by allowing them to

operate in a more efficient and cost-effective manner and will enable

the industry to meet the increased demand in the marketplace for lower

priced, uniform containers of kiwifruit. Through these cost savings,

growers will be expected to receive higher returns.

There is support in the industry to increase these size variation

tolerances. The one committee member who opposed the recommendation

believes it will lower the quality of California kiwifruit.

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 final 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 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 order and approximately 450 kiwifruit 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

than $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.

Section 920.52 authorizes the establishment of pack requirements.

Section 920.302(a)(4)(ii) outlines pack requirements for kiwifruit

packed in any container and contains tables that specify numerical size

designations and size variation tolerances. This rule will increase the

size variation tolerance for Size 42 kiwifruit from 5 percent, by

count, to 10 percent, by count, and will increase the size variation

tolerance for Size 45 kiwifruit from 10 percent, by count, to 25

percent, by count. This relaxation was recommended by the committee,

the agency responsible for local administration of the marketing order.

In the larger kiwifruit sizes, failure to meet the required size

variation standards results in packs that are visibly irregular in

size. In Size 42 and Size 45, however, when the respective 5 and 10

percent tolerances are exceeded, the variation is difficult to detect

visually. However, packers must separate the round and flat shaped

kiwifruit into two different containers in order to meet the size

variation requirements within each container for Size 42 and Size 45

kiwifruit. The industry views this separation of Size 42 and 45 round

and flat shaped kiwifruit into two different containers by shape as an

added cost, that is particularly detrimental because this fruit returns

little if any money back to the grower. The higher costs of sizing the

fruit during the packing operation may have cost the industry sales as

well.

Further, this sizing of kiwifruit may not be apparent to consumers.

Usually a pallet of Size 42 kiwifruit includes containers of round

fruit and containers of flat fruit. When a pallet of Size 42 kiwifruit

reaches the retailer, a container of round fruit may be displayed. As

the kiwifruit is sold, a container of the Size 42 flat fruit may be

commingled with the remaining round fruit and the current size

variation standards that the packer strived so hard to stay within

during the packing process are erased.

This final rule should reduce costs for handlers by allowing them

to operate in a more efficient and cost-effective manner and to meet

the increased demand in the marketplace for lower priced, uniform

containers of kiwifruit.

Approximately 74 percent of all kiwifruit shipped during the 1996-

1997 season was shipped in bags, volume fill or bulk containers. The

increased tolerance for Size 42 from 5 percent, by count, to 10

percent, by count, will increase the number of kiwifruit that

[[Page 49130]]

may exceed the \3/8\'' size variation requirement in bags, volume fill,

or bulk containers. Since the individual fruit weight of a Size 42

kiwifruit is approximately 0.160 ounces, a 22-pound volume fill

container of Size 42 kiwifruit will contain approximately 138 fruit. An

increased tolerance of 10 percent per container will allow

approximately 14 kiwifruit to exceed the \3/8\'' tolerance versus 7

kiwifruit at the 5 percent tolerance rate. As a result, handlers will

be able to operate more efficiently with this increased tolerance.

The increased tolerance for Size 45 from 10 percent, by count, to

25 percent, by count, will increase the number of kiwifruit that may

exceed the \1/4\'' size variation requirement. Since the individual

fruit weight of a Size 45 kiwifruit is approximately 0.145 ounces, a

22-pound volume fill container of Size 45 kiwifruit contains

approximately 151 kiwifruit. An increased tolerance of 25 percent, by

count, per container will allow 37 kiwifruit out of 151 kiwifruit to

exceed the \1/4\'' tolerance versus 15 kiwifruit at the 10 percent

tolerance rate. With this increased tolerance, handlers expect to be

able to pack round and flat shaped kiwifruit into one container,

thereby reducing costs.

This action is not expected to reduce the quality of the kiwifruit

pack. Consumers will not see any changes to the product at retail,

because the produce staff at the stores already commingle round and

flat kiwifruit in their display bins. Also, the allowed variation will

be at a reasonable level and retailers will still receive a fairly

uniform box of fruit.

California kiwifruit packing operations range from very small

operations, employing as few as 2 persons, to large operations

employing as many as 150 people per shift. The 1997-1998 season crop

estimate is projected to be 10 to 12 million tray equivalents. A tray

equivalent is 7 pounds of fruit. Handlers pack from several hundred to

over 25,000 tray equivalents during the season. Packing costs for

volume fill containers range from approximately $0.25 to $0.75 per

container. The 60 packing sheds can be divided into 3 size categories

of small, medium, and large. Small sheds consist of 25 employees or

less, medium sheds 26-75 employees, and large sheds consist of 76 or

more employees. The committee anticipates that labor devoted to

packout, on average, will be decreased by 1 to 3 employees per packing

shed. The committee estimates cost savings of approximately $0.01 per

tray equivalent. Based on a projected crop estimate of 10 to 12 million

tray equivalents, a savings of $100,000 to $120,000 could be realized

for the 1997-1998 season.

The committee discussed numerous alternatives to this change,

including eliminating all pack requirements, increasing the size

variation tolerance to establish a Size 42-45 container by blending the

packing of Size 42 and Size 45 kiwifruit into one container, reducing

the minimum size from Size 45 to Size 49, eliminating Size 45 and

making Size 42 the minimum size, making Size 45 requirements more

restrictive, reducing the maximum to 53 kiwifruit in the 8 pound

sample, lowering the minimum maturity to 6.2 percent, and increasing

the degree, or size of the variation allowed, from \1/4\-inch to \3/8\-

inch for Size 45 kiwifruit. After lengthy discussion, all of these

alternatives were deemed unacceptable. The general consensus was that

eliminating all pack requirements could adversely affect quality. The

committee wishes to continue utilizing separate Size 42 and Size 45

containers at this time because handlers are able to market each size.

Reducing the minimum size from Size 45 to Size 49 would not have

benefitted the industry because growers and handlers could not make a

profit growing, packing and selling Size 49.

It was the general consensus that eliminating Size 45 and making

Size 42 the minimum size, or making Size 45 requirements more

restrictive, by reducing the maximum to 53 kiwifruit in the 8 pound

sample, would have imposed more stringent requirements on California

growers and handlers and eliminate salable fruit from markets.

Committee members deemed lowering the minimum maturity to 6.2 percent

unacceptable as kiwifruit picked below the current minimum maturity of

6.5 percent may shrivel in cold storage. The last alternative

considered was to increase the degree, or size of the variation

allowed, from \1/4\-inch to \3/8\-inch for Size 45 kiwifruit. It was

the consensus of the committee that such an increase would have allowed

undesired blending of undersize kiwifruit. The end result would have

been a container with visibly different fruit sizes, including

undersize fruit. This alternative was deemed not acceptable as the

industry desires to pack a uniform container of kiwifruit.

This final rule will relax pack requirements under the kiwifruit

marketing order and these requirements will be applied uniformly to all

handlers. This action will 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 final rule.

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.

A proposed rule concerning this action was issued by the Department

on July 2, 1997, and published in the Federal Register on Wednesday,

July 9, 1997 (62 FR 36743). Copies of the rule were mailed to all

committee members and kiwifruit handlers. Finally, the rule was made

available through the Internet by the Office of the Federal Register.

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

respond to the proposal. No comments were received.

After consideration of all relevant matter presented, including the

information and recommendation submitted by the committee and other

available information, it is hereby found that this rule, as

hereinafter set forth, will tend to effectuate the declared policy of

the Act.

It is further found that good cause exists for not postponing the

effective date of this rule until 30 days after publication in the

Federal Register (5 U.S.C. 553) because these changes in size variation

tolerances relieve restrictions on handlers and should apply to all

Size 42 and Size 45 kiwifruit shipped during the 1997-98 season. Such

shipments are expected to begin at the end of September or early

October. Further, handlers are aware of this rule, which was

recommended at a public meeting. Also, a 30-day comment period was

provided for in the proposed rule, and no comments were received.

List of Subjects in 7 CFR Part 920

Kiwifruit, Marketing agreements.

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

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.

[[Page 49131]]

2. In Sec. 920.302, paragraph (a)(4)(ii) is amended by revising the

last sentence to read as follows:

Sec. 920.302 Grade, size, pack and container regulations.

(a) * * *

(4) * * *

(ii) * * * Not more than 10 percent, by count of the containers in

any lot and not more than 5 percent, by count, of kiwifruit in any

container, (except that for Size 42 kiwifruit, the tolerance, by count,

in any one container, may not be more than 10 percent and except that

for Size 45 kiwifruit, the tolerance, by count, in any one container,

may not be more than 25 percent) may fail to meet the requirements of

this paragraph.

Dated: September 15, 1997.

Robert C. Keeney,

Director, Fruit and Vegetable Division.

[FR Doc. 97-24957 Filed 9-18-97; 8:45 am]

BILLING CODE 3410-02-P