Tomatoes Grown in Florida and Imported Tomatoes; Proposed Rule To Change Minimum Size and Size Designation Requirements

Federal RegisterOct 6, 1997

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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 966 and 7 CFR Part 980

[Docket No. FV97-966-1 PR]

Tomatoes Grown in Florida and Imported Tomatoes; Proposed Rule To

Change Minimum Size and Size Designation Requirements

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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

SUMMARY: This proposal would increase the minimum diameter size

requirement for Florida and imported tomatoes. For Florida tomatoes

alone, the rule would change the size designations from Medium, Large,

and Extra Large to numeric size designations of 6 x 7, 6 x 6, and 5

x 6. The rule also would slightly increase the diameter size ranges

for the designated sizes. The marketing order regulates the handling of

tomatoes grown in Florida, and is administered locally by the Florida

Tomato Committee (Committee). This proposed rule would help the Florida

tomato industry meet domestic market and industry demands, provide

handlers more marketing flexibility, and increase returns to producers,

as well as provide consumers with slightly larger, more mature

tomatoes. Application of the size requirement increase to imported

tomatoes is required under section 8e of the Agricultural Marketing

Agreement Act of 1937.

DATES: Comments must be received by October 16, 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, 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: Christian Nissen, Southeast Marketing

Field Office, Marketing Order Administration Branch, Fruit and

Vegetable Division, AMS, USDA, 301 Third Street, N.W., Suite 206,

Winter Haven, Florida 33881; telephone: (941) 299-4770, Fax: (941) 299-

5169; and 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, room 2525-S, P.O. Box

96456,Washington, DC 20090-6456; telephone (202) 720-2491, Fax: (202)

720-5698.

SUPPLEMENTARY INFORMATION: This proposal is issued under Marketing

Agreement No. 125 and Marketing Order No. 966, both as amended (7 CFR

part 966), regulating the handling of tomatoes grown in certain

designated counties in Florida, hereinafter referred to as the

``order.'' The 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 proposal has been reviewed under Executive Order 12988, Civil

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

This proposal 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.

Section 8e of the Act specifies that whenever certain specified

commodities, including tomatoes, are regulated under a Federal

marketing order, imports of those commodities must meet the same or

comparable grade, size, quality, and maturity requirements as those in

effect for the domestically produced commodity. 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.

Under the order, tomatoes produced in the production area and

shipped to fresh market channels outside the regulated area are

required to meet grade, size, inspection, and container requirements.

These requirements are specified in Sec. 966.323 of the handling

regulations issued under the order. These requirements apply during the

period October 10 through June 15 each year. The regulated area is the

entire State of Florida, except the panhandle. The production area is

part of the regulated area. Specialty packed red ripe tomatoes, yellow

meated tomatoes, and single and double layer place packed tomatoes are

exempt from container net weight requirements.

Under Sec. 966.323, all tomatoes, except for pear shaped, paste,

cherry, hydroponic, and greenhouse tomatoes, must be inspected as

specified in the United States Standards for Grades of Fresh Tomatoes

(7 CFR part 51.1855 through 51.1877; standards). Such tomatoes also

must be at least 28/32 inches in diameter, and sized with proper

equipment in one or more of the following ranges of diameters.

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

Inches Inches

Size Designation minimum maximum

diameter diameter

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

Medium............................................ 2 8/32 2 17/32

Large............................................. 2 16/32 2 25/32

Extra Large....................................... 2 24/32 .........

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[[Page 52048]]

These size designations and diameter ranges are the same as

specified in Sec. 51.1859 of the standards. All tomatoes in the Medium

size designation are required to grade at least a U.S. No. 2, while

tomatoes in the larger size designations are only required to grade at

least a U.S. No. 3. Section 966.52 of the order provides authority for

the establishment and modification of regulations applicable to the

handling of particular sizes and size designations of tomatoes.

This rule would increase the minimum diameter size requirement for

Florida tomatoes from 2\8/32\ inches to 2\9/32\ inches and would make

conforming changes to container marking requirements and the regulation

for special packed tomatoes. This rule would also rename the size

designations from Medium, Large, and Extra Large to numeric size

designations of 6 X 7, 6 X 6, and 5 X 6 (respectively), and increase

the diameter size ranges for the designated sizes. These size ranges

are different from those specified in Sec. 51.1859 of the standards. On

September 5, 1997, the Committee met and unanimously recommended these

changes. At the same meeting, the Committee recommended by a vote of 10

to 2 to eliminate shipments of U.S. No. 3 grade tomatoes from the

regulated area. That proposal will be addressed in a separate

rulemaking action.

Based on an analysis of markets and demands of buyers, the

Committee believes that the increase in minimum size would improve the

marketing of Florida tomatoes. By increasing the minimum size, the

tomatoes would be slightly larger and, thus, more mature when packed.

This follows recent industry trends to ship larger and more mature

tomatoes. New commercial tomato varieties also have resulted in larger

sized tomatoes being shipped in response to a strong consumer demand.

Because of this demand, production of larger tomatoes has been a

popular method of improving returns among producers as it also

increases total yields.

The Committee also recommended the increase in minimum size

requirements to improve the uniformity and appearance of tomato packs.

The slightly smaller tomatoes in the Medium packs increase the size

variability of the pack and are more likely to be immature and have

less taste. The current minimum size of 2\8/32\ inches allows these

tomatoes to be combined with more mature tomatoes, which lowers the

overall quality and price of the pack. This has resulted in complaints

from buyers throughout the market.

In the mid-1980's, Dr. Jeffrey K. Brecht, at the University of

Florida, did a study of smaller tomatoes. According to his findings,

fully mature green tomatoes begin coloring within a few days of

harvesting and ripen at 68 degrees Fahrenheit. Since they are not

easily identified by a surface indicator (color) of full maturity in

green fruit, pickers are forced to rely on size rather than maturity

when harvesting tomatoes. The result of this is that tomatoes of 2\8/

32\ of an inch may require two weeks or more to begin ripening.

Attainment of the full ripe stage requires on average a week to 10 days

additional time. Hence, the full ripening process could take as long as

four weeks. Tomatoes that take this long to ripen after harvest have

been shown to have poor taste. Hence, increasing the minimum size to

2\9/32\ inches for Medium tomatoes is expected to help reduce this

problem. Also, consumers are demanding a slightly larger tomato and

smaller tomatoes with a less uniform pack have poor consumer acceptance

especially in chain stores.

The increase in the minimum size from 2\8/32\ inches to 2\9/32\

inches is not expected to significantly affect the total number of

shipments. During the 1996-1997 season, of the 47,879,084 containers of

25,000 pound equivalent shipments, approximately 15 percent or about

7,023,239 shipments of 25,000 pound equivalents from Florida were of

the Medium size designation. The Medium size covers a range of 2\8/32\

to 2\17/32\ inches or about \9/32\ of an inch. The \1/32\ increase in

size requirements is only expected to reduce total shipments by

approximately 1.5 percent.

The Committee also recommended the following new designations and

tomato diameter size ranges:

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

Inches Inches

Size designation minimum maximum

diameter diameter

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

6 x 7 (Currently Medium)........................ 2\9/32\ 2\19/32\

6 x 6 (Currently Large)......................... 2\17/32\ 2\27/32\

5 x 6 (Currently Extra Large)................... 2\25/32\

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

The current size designations have been in place since 1991, and

were designed to provide a uniform basis for marketing tomatoes.

However, the numeric designations have continued to be used by

marketers and retailers of tomatoes and are an important factor in

negotiating price and other terms of trade. Committee members stated

that numeric designations are used in negotiating price and other terms

of trade and is the terminology used primarily in marketing tomatoes.

Florida tomato handlers found that this difference in terminology

hindered their negotiations with buyers, and adversely affected handler

and producer returns. The handlers believe that buyers tend to discount

Florida tomatoes because the buyers do not have confidence that the

Medium, Large, and Extra Large designations correctly correspond with

the industry recognized size designations of 6 x 7, 6 x 6, and 5

x 6. Thus, the change in size designations would put the Florida

tomato industry on the same terminology basis as the marketers of

tomatoes from other growing areas. This also would reduce the chances

of market confusion and possible problems with market pricing.

This rule would also increase the minimum and maximum diameter

ranges of the three size designations. The net increase for the maximum

diameters for the Medium (6 x 7) and Large (6 x 6) size

designations would be \1/32\ inch. This would result in a \2/32\'s

overlap in the maximum diameters in these size designations to the next

larger size. According to the Committee, this would provide a more even

distribution of tomato shipments throughout the three size

designations, which would enable handlers to make better decisions on

which size of tomatoes to pack. For instance, tomatoes that measure at

the top end of the Medium size can either be packed with Medium size

tomatoes or as a smaller tomato with Large tomatoes. The same increased

flexibility would exist for Large tomatoes packed with Extra Large (5

x 6) tomatoes. Such decisions could depend on specific buyer or market

demands, on general crop size, and on condition of the tomatoes and

prices on each day of packing.

According to the Committee, problems have evolved in sizing some of

the newer varieties that are slightly more oblong. To better

accommodate sizing of the new varieties, the Committee recommended the

changes to the diameter size ranges for the three size designations.

Due to strong consumer demand, during the 1996-1997 season

approximately 80 percent of the tomatoes sold were in the Extra Large

(5 x 6) size designation. This rule would increase the minimum

diameter of the Extra Large (5 x 6) designation to 2\25/32\ inches

from 2\24/32\ inches with no maximum. Increasing the minimum diameter

size of this designation by \1/32\ inch for Extra Large (5 x 6)

packs, would reduce the number of smaller sized tomatoes for that size

designation. Hence, this is expected to decrease size

[[Page 52049]]

variability and improve uniformity of this premium pack. Thus,

improvements in this size category are expected to further enhance

consumer demand resulting in increased returns to producers.

Also, a study conducted by Dr. John J. VanSickle at the University

of Florida, estimates that size increases could result in an increase

in the overall price of Florida tomatoes. The study indicates that if

increasing the size limits shifted 1 percent of the Extra Large (5 x

6) tomatoes into the smaller size categories then prices for Extra

Large (5 x 6) tomatoes would increase. The price of Extra Large (5

x 6) tomatoes could increase by .25 percent, the price of Large (6 x

6) tomatoes by .15 percent, and the price of Medium (6 x 7) tomatoes

by .07 percent. The increase in price would occur because of the

redistribution of larger sized tomatoes into the smaller size

designations which responds to consumer demand for a more consistent

pack and slightly larger tomatoes.

This rule would also make conforming changes to Sec. 966.323

paragraphs (a)(2)(iii) concerning container marking requirements and

(d)(3) for special packed tomatoes. This would increase the currently

applied minimum size of 2\8/32\ to 2\9/32\ inches in diameter.

Thus, these changes are expected to increase returns to producers

by improving size consistency, quality, and maturity, and, thus,

encourage repeat purchases from consumers. The new size designations

would allow handlers to respond better to market preferences which is

expected to benefit producers and handlers of Florida tomatoes.

Section 8e of the Act requires that when certain domestically

produced commodities, including tomatoes, are regulated under a Federal

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

comparable grade, size, quality, or maturity requirements for the

domestically produced commodity. The current import regulations are

specified in 7 CFR 980.212. Similar to the order, regulations apply

during the period October 10 through June 15 when the Florida handling

requirements are in effect. Because this proposal would increase the

minimum size for domestic tomato shipments, this increase would be

applicable to imported tomatoes.

Florida tomatoes must be packed in accordance with three specified

size designations, and tomatoes falling into different size

designations may not be commingled in a single container. These pack

restrictions do not apply to imported tomatoes. Because pack

requirements do not apply, different sizes of imported tomatoes may be

commingled in the same container.

However, the handling requirements also specify that tomatoes that

are designated as Medium (6 X 7) must meet a U.S. No. 2 grade, while

the larger sizes are required to meet a U.S. No. 3 grade. The more

stringent grade requirements are applied to the Medium (6 X 7) size

designation because of quality problems with smaller tomatoes.

Similarly, current import requirements specify that all lots with a

minimum diameter of 2 \17/32\ inches and larger shall meet at least a

U.S. No. 3 grade. All other tomatoes shall meet at least a U.S. No. 2

grade. Any lot with more than 10 percent of its tomatoes less than 2

\17/32\ inches in diameter is required to grade at least U.S. No. 2.

This proposed rule would change these requirements to reflect the

changes to the handling requirements by requiring that all lots with a

minimum diameter of 2 \19/32\ inches and larger meet at least a U.S.

No. 3 grade. All other tomatoes would need to meet at least a U.S. No.

2 grade. Any lot with more than 10 percent of its tomatoes less than 2

\19/32\ inches in diameter would have to grade at least U.S. No. 2.

These changes are expected to benefit the marketers of both Florida

and imported tomatoes by providing consumers with better quality,

higher maturity, and slightly larger tomatoes. The Department has

contacted a few tomato importers concerning imports. The importers

indicated that they are importing larger sizes of tomatoes. Thus, the

Department believes that the proposed increase will not limit the

quantity of imported tomatoes or place an undue burden on exporters, or

importers of tomatoes. The expected increase in customer satisfaction

should benefit all tomato importers regardless of size.

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, 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 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

which regulate the handling of domestically produced products.

There are approximately 65 handlers of Florida tomatoes who are

subject to regulation under the order and approximately 75 tomato

producers in the regulated area. In addition, at least 170 importers of

tomatoes are subject to import regulations and would be affected by

this proposed rule. Small agricultural service firms have been defined

by the Small Business Administration (SBA) (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.

Committee data indicates that approximately 20 percent of the

Florida handlers handle 80 percent of the total volume. Based on this

information, the shipment information for the 1996-97 season, and the

1996-97 season average price of $7.97 per 25,000 pound equivalent

carton, the majority of handlers would be classified as small entities

as defined by the SBA. The majority of producers of Florida tomatoes

may be classified as small entities. The Department also believes that

most importers may be classified as small entities.

Under Sec. 966.52 of the Florida tomato marketing order, the

Committee has authority to increase the minimum size requirement and

change the size designations for Florida tomatoes grown in the defined

production area and handled under the order. This proposed rule,

unanimously recommended by the Committee at its September 5, 1997,

meeting, would increase the minimum size, change size designations and

corresponding diameter size ranges. As provided under the Agricultural

Marketing Agreement Act of 1937, the proposed increases in the minimum

diameter size requirements would apply to imported tomatoes.

Based on analysis of markets and demands of buyers, the Committee

recommended increasing the minimum size from 2\8/32\ inches to 2\9/32\

inches in diameter and the corresponding minimum sizes for the other

two size designations. The Committee believes these size increases will

improve the marketing of Florida tomatoes. By increasing the minimum

sizes, the tomatoes would be slightly larger and, thus, more mature

when packed. This follows recent industry trends to ship larger and

more mature tomatoes. Current trends in cultural practices and new

commercial tomato varieties also have resulted in larger sized tomatoes

being shipped in response to consumer demand for such tomatoes. Because

[[Page 52050]]

this demand, production of larger tomatoes has been a popular method of

improving returns among producers as it also increases total yields and

total pounds. While yields increase with larger fruit, the labor costs

associated with picking these tomatoes remains fairly constant because

producers pick relatively the same number of fruit.

The change in the minimum size was recommended because demand for

larger tomatoes has increased over the last five years. This in part is

due to the fact that size continues to be a major influence on price.

According to Dr. John J. VanSickle of the University of Florida, the

percent of Extra Large (5 X 6) tomatoes shipped has increased steadily

since 1992-1993 from 43.2 percent to 50 percent in 1996-1997 for mature

green tomatoes. Mature green tomatoes are green but are developed

enough to continue to fully ripen. Meanwhile, the percent marketed in

the Extra Large (5 X 6) size for vine ripe tomatoes has increased from

66.6 percent to 79.2 percent. Vine ripe tomatoes have at least started

to break into color from green to tannish-yellow, pink, or red.

The increase in the minimum size from 2\8/32\ inches to 2\9/32\

inches is not expected to significantly affect the total number of

Florida shipments. During the 1996-1997 season, of the 47,879,084

shipments of 25,000 pound equivalents, approximately 15 percent or

about 7,023,239 shipments of 25,000 pound equivalents from Florida were

in the minimum size designation of Medium. The Medium size currently

covers a range of 2\8/32\ to 2\17/32\ inches or about 9/32 of an inch.

Because Florida tomatoes are sizing larger than in the past, the

proposed increase in size requirements is expected to have a minimal

impact on total shipments. As mentioned earlier, the expected decrease

is only about 1.5 percent.

Also, this rule would change the size designations from Medium,

Large, and Extra Large to numeric size designations of 6 X 7, 6 X 6,

and 5 X 6. The rule also would slightly increase the diameter size

ranges for the designated sizes.

The Committee stated that, absent a change in the regulations, the

erosion of market confidence and producer income could occur.

Furthermore, the majority of Committee members stated that voluntary

measures had not been effective.

Direct costs associated with this rule would be the purchase of new

sizing belts. Sizing belts convey and size fruit during the packing

process. Sizing belts, depending on the amount of use, can last a

season or may need to be replaced two to three times a season.

Estimated prices associated with these purchases could range from

$450.00 for a small handler to $19,000 for very large handlers. While

there are short-term costs associated with the new sizing designations,

the benefits are expected to outweigh the costs.

A study conducted by Dr. John J. VanSickle at the University of

Florida, estimates that size increases would result in an increase in

the overall price for Florida tomatoes, and better returns to

producers. The study indicates that increasing the size limits would

shift some of the Extra Large (5 x 6) tomatoes into the smaller size

categories. As a result, a 1 percent decline in the volume of Extra

Large (5 x 6) tomatoes would increase in price by .25 percent, the

price of Large (6 x 6) tomatoes by .15 percent, and the price of

Medium (6 x 7) tomatoes by .07 percent. The increase in price would

occur because of the redistribution of larger sized tomatoes into the

smaller size designations which responds to consumer demand for a more

consistent pack with slightly larger tomatoes. The costs to the

industry associated with the minimum size and size designation changes

would include purchases of new equipment and adjustments to operate

under the new requirements. These costs are expected to be minimal

relative to the benefits expected.

Returning to the previously used numeric size designations should

not have a negative impact on any packer regardless of size. This is a

return to common size designations (6 x 7, 6 x 6, and 5 x 6) used

throughout the industry, and would help Florida handlers respond to

market and consumer demand. The more standard size designations should

benefit both small and large businesses in the industry.

This proposed rule may impose some additional costs on handlers,

and producers. However, the costs are expected to be minimal, and would

be offset by the benefits of the proposal. This proposal is expected to

similarly impact importers of tomatoes as far as the slight increase in

minimum size is concerned. The Committee believes that this proposed

modification would benefit consumers, producers, handlers, and

importers. The benefits of this rule are not expected to be

disproportionately greater or lesser for small entities than for large

entities.

The Committee discussed alternatives to this recommendation,

including leaving the regulations as currently issued. All Committee

members agreed that some change to the size designations was necessary

to improve pack appearance and compete in the present market. The

amount of change became a concern, with a portion of the Committee

favoring a larger size increase and another portion favoring small

incremental moves over a period of time. The Committee recommended a

compromise to allow individual packing houses leeway to implement the

amount of change through a \2/32\ overlap in sizes.

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

Over the last 10 years, Mexican exports to the United States averaged

32,527 containers of 25,000 pound equivalents per season (October 5-

July 5) and comprised about 99 percent of all imported tomatoes to the

United States during that time. Total imports during that period

averaged 32,752 containers of 25,000 pound equivalents (October 5-July

5). Some of the imports from Mexico may have been transhipped to

Canada. Domestic shipments or consumption for the past 10 years

averaged 108,577 containers of 25,000 pound equivalents (October 5-July

5). Florida shipments averaged 52,977 containers of 25 pound

equivalents or approximately 48 percent of the total shipments or

domestic consumption for the same period. This information is from AMS

Market News Branch data that most closely approximates the Florida

shipping season.