Sweet Onions Grown in the Walla Walla Valley of Southeast Washington and Northeast Oregon; Establishment of Container Marking Requirements and Special Purpose Shipment Exemptions

SUMMARY: This rule would establish container marking requirements for

all shipments of Walla Walla Sweet Onions, and establish exemptions

from assessment and container marking requirements for certain special

purpose shipments of Walla Walla Sweet Onions. This rule would

contribute to the efficient marketing of Walla Walla Sweet Onions and

assist in program compliance. This rule was recommended by the Walla

Walla Sweet Onion Committee (Committee), the agency responsible for the

local administration of the marketing order for sweet onions grown in

the Walla Walla Valley.

DATES: Comments must be received by March 12, 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,

South Building, 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: Robert J. Curry, Northwest Marketing

Field Office, Marketing Order Administration Branch, Fruit and

Vegetable Division, AMS, USDA, 1220 SW Third Avenue, room 369,

Portland, Oregon 97204-2807; telephone: (503) 326-2043; or George J.

Kelhart, Marketing Order Administration Branch, Fruit and Vegetable

Division, AMS, USDA, P.O. Box 96456, room 2525-S, Washington, DC 20090-

6456; telephone: (202) 690-3919. 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 proposed under Marketing

Agreement and Order No. 956 (7 CFR Part 956), regulating the handling

of sweet onions grown in the Walla Walla Valley of southeast Washington

and northeast Oregon, hereinafter referred to as the ``order.'' This

order is authorized by 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 proposed rule has been reviewed under Executive Order 12988,

Civil Justice Reform. It is not intended to have retroactive effect. If

adopted, the proposed rule would not preempt any State or local laws,

regulations, or policies, unless they present an irreconcilable

conflict with the proposal.

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 date of the entry of the ruling.

The Committee meets regularly throughout each season to consider

recommendations for implementation, modification, suspension, or

termination of the regulatory requirements for Walla Walla Sweet

Onions. Committee meetings are open to the public and interested

persons may express their views at these meetings. The Department

reviews Committee recommendations in conjunction with information

submitted by the Committee and from other industry and government

sources.

The Committee met twice to recommend adding container marking

requirements and exemption for special purpose shipments to the

marketing order's Subpart--Rules and Regulations provisions which are

authorized in the order. Section 956.62 provides authority for the

Committee, with the approval of the Secretary, to establish a method

for fixing the markings of containers used in the packaging or handling

of Walla Walla Sweet Onions. Further, based upon recommendations

submitted by the Committee, section 956.63 provides authority for the

Secretary to issue regulations in regard to assessment and container

marking requirements to facilitate the handling of Walla Walla Sweet

Onions for specified purposes.

The Committee met October 8, 1996, and recommended that all Walla

Walla Sweet Onions produced in the production area and shipped to the

fresh market be packed in containers marked with the ``Genuine Walla

Walla Sweet Onion'' logo. The Committee also recommended exemption from

assessments for sweet onions shipped to outlets specified in proposed

Sec. 956.163.

At its next regularly scheduled meeting November 12, 1996, the

Committee reconfirmed the recommendations to establish container

marking requirements and exempt specified shipments from assessments.

At that meeting, the Committee also recommended exempting shipments

specified in Sec. 956.163 from container marking requirements. This

proposed rule combines the recommendations from the two Committee

meetings into one rulemaking action.

The first proposal would establish in Sec. 956.162 container

marking

[[Page 5934]]

requirements under the order. When the Walla Walla Sweet Onion industry

began the process of formulating Marketing Order 956, a primary

objective was to help promote product identity at wholesale, retail,

and consumer levels, while at the same time deterring the marketing of

non-sweet onions, or onions grown outside the production area, as Walla

Walla Sweet Onions. The Committee is authorized to use a trademarked

logo developed by the Walla Walla Sweet Onion Commission and the Walla

Walla Area Chamber of Commerce. The logo was developed and patented by

the Walla Walla Sweet Onion Commission in December 1991, and currently

is widely recognized by the onion industry. Provisions regarding

container markings are specified in proposed Sec. 956.162.

The logo has been used by the Committee on promotional material and

correspondence since the Committee obtained the license to use it on

April 19, 1996. During both the subcommittee and the regular Committee

meetings held to develop the recommendation for this proposed rule, all

participants agreed that containers of Walla Walla Sweet Onions should

be marked with the Committee's registered logo. Discussion during the

meetings indicated that product identity, just as it was during the

formulation of the order, is still a primary concern for both

promotional and compliance purposes, and that steps should be taken to

add specific container marking regulations.

Committee members, as well as industry participants at the meeting,

agreed that the use of a widely recognized logo would have a positive

effect on the economic returns for the entire industry. One of the

major problems for this industry has been the marketing of non-Walla

Walla Sweet Onions, grown either in the traditional production area or

outside of it, as Walla Walla Sweet Onions. Committee members believe

that, after purchasing onions represented to them as being Walla Walla

Sweet Onions, buyers would rarely return to purchase more due to the

lack of confidence such a sale had fostered. This had, and still has,

the effect of curtailing demand and reducing returns to producers.

Some of the handler members on the Committee recommended that the

proposed regulation allow handlers a period of time to utilize current

packaging inventory before being required to use containers with the

Committee's logo. These individuals expressed concern that some

handlers may have significant container inventory with pre-printed

graphics and other markings. Comments by handlers at the meeting

indicated that the expense and burden of disposing of their container

inventory, or, alternatively, adding decals, stickers, or stamps to the

existing containers would be significant. The Committee agreed that,

although handlers should make every effort to begin using the logo on

containers as soon as possible, a grace period of two crop years would

allow adequate time for handlers to exhaust current container

inventories. Proposed Sec. 956.162(b) provides such a grace period for

handlers, subject to Committee verification of handler container

inventories.

The Committee recommended that the logo be clearly displayed as

either a decal or an imprint on all containers, and that there should

be no specific requirements for the size and color of the markings. As

it is a common industry practice to ship onions in field pack bulk bins

containing more than 500 pounds net weight from the field to road-side

stands and farmers' markets where they are bagged for resale, the

Committee recommended that the container marking requirement should not

apply to shipments to these two small outlets. This exemption is

specified in proposed Sec. 956.163.

The container marking requirement would contribute to the efficient

marketing of Walla Walla Sweet Onions by ensuring better product

identification, building buyer confidence, increasing returns to the

industry, and enhancing Committee compliance efforts. During the

shipping season, the Committee manager frequently visits handling

operations to ensure that these operations are complying with marketing

order requirements. Requiring that the registered logo be displayed on

the container should decrease the amount of time the manager spends

tracing and tracking these onions to ensure that they are not onions

from outside the production area being sold as Walla Walla Sweet

Onions.

The Committee's second recommendation would add Sec. 956.163

providing exemptions for shipments made to certain non-fresh use

outlets. Committee members stated that most Walla Walla Sweet Onions

are shipped into the fresh market. However, a small percentage of the

onions are utilized for other purposes, including relief and charitable

organizations, livestock feed, planting and plants, salad onions,

processing, disposal of culls, and seed. For the exemption to apply to

shipments made to relief or charitable organizations, the Committee

included a provision in its recommendation that such shipments must be

donated and not sold.

Proposed Sec. 956.163 clearly indicates which shipments are

exempted from assessments and container marking requirements. This is

intended to lessen the chance of confusion on the part of the regulated

industry and alleviate potential administrative and compliance problems

for the Committee, thereby facilitating the marketing of Walla Walla

Sweet Onions.

Pursuant to requirements set forth in the Regulatory Flexibility

Act (RFA), the AMS has considered the economic impact of this action on

small entities.

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 35 handlers of Walla Walla Sweet Onions

subject to regulation under the marketing order and approximately 60

producers in the regulated production area. Small agricultural service

firms 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 whose annual receipts

are less than $500,000.

The region in which Walla Walla Sweet Onions are produced is a

relatively small production area, encompassing only a portion of

Oregon's Umatilla County and Washington's Walla Walla County. Produced

on an estimated 850 acres, the industry's total 1996 Walla Walla Sweet

Onion pack-out approximated 20,106,200 pounds. Based on assessments

collected on 50-pound cartons or sacks, Committee records for the 1996

season show that 18 handlers shipped 500 or fewer units, eight handlers

shipped between 500 and 5,000 units, four handlers shipped between

5,000 and 50,000 units, and five handlers shipped between 50,000 and

100,000 units.

Information provided by the Department's Fresh Fruit and Vegetable

Market News officials in Yakima, Washington, indicates that 1996 F.O.B.

prices on jumbo Walla Walla Sweet Onions, packed in 50-pound cartons,

ranged from a high of $16.00 early in the season to a low at the end of

the season of $10.00. On the other end of the scale, medium Walla Walla

Sweet Onions,

[[Page 5935]]

packed in 50-pound mesh sacks, ranged from early season, high returns

of $14.00 per sack down to a low at the season's conclusion of $6.00

per sack. Handlers have stated that packing costs average between $4.00

and $5.00 per 50-pound carton, and around $3.00 per 50-pound sack.

Committee records indicate that individual farms currently have acreage

dedicated to the production of Walla Walla Sweet Onions ranging from 1

to 160 acres.

About 25 of the 35 regulated handlers of Walla Walla Sweet Onions

are also producers and generally pack their own onions in the field

while harvesting them. These onions are usually marketed direct to

consumers through road-side stands and farmers' markets or through mail

order sales. Only about 10 of these handlers own and operate

commercially sized packing facilities and market the majority of their

onions through large wholesale and retail outlets. Based on current

information the majority of Walla Walla Sweet Onion handlers and

producers may be classified as small entities.

The only alternative to this proposal discussed at the meetings was

to not recommend the additions at all. The Committee determined that

such an alternative would not be acceptable to the industry because of

the significant benefits expected as a result of the proposed

regulations. Without container marking requirements, the Committee

believes the current marketing and compliance problems, basic reasons

behind the promulgation of the marketing order, would not be

alleviated. As for the foregoing special purpose shipment exemptions,

the Committee concluded that the absence of a list of shipments exempt

from assessments and container marking requirements would perpetuate

confusion and compliance problems, as well as increase the economic,

reporting and recordkeeping burden on handlers.

This proposed rule would provide that containers of Walla Walla

Sweet Onions for shipment to fresh markets be marked with the

Committee's registered logo, and that specified shipments of Walla

Walla Sweet Onions be exempt from such container marking requirements

and from assessments. This action would not impose any additional

reporting or recordkeeping requirements on either small or large

handlers of Walla Walla Sweet Onions. Additionally, the benefits of

this rule are not expected to be disproportionately greater or less for

small handlers or producers than for larger entities.

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.

The Committee's meetings were widely publicized throughout the

production area. All interested persons were invited to attend the

meetings. The Committee actively seeks participation in its

deliberations at all of its meetings. Both the October 8 and November

12, 1996, meetings were open to the public and representatives of both

large and small entities expressed their views on these and related

issues. The majority of the Committee, composed of six producers, three

handlers, and a public member, represent small entities. Additionally,

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 received within the

comment period will be considered before a final determination is made

on this matter.

List of Subjects in 7 CFR Part 956

Marketing agreements, Onions, Reporting and recordkeeping

requirements.

For the reasons set forth in the preamble, it is proposed that 7

CFR Part 956 be amended as follows:

PART 956--SWEET ONIONS GROWN IN THE WALLA WALLA VALLEY OF SOUTHEAST

WASHINGTON AND NORTHEAST OREGON

1. The authority citation for 7 CFR Part 956 continues to read as

follows:

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

2. In part 956, new Secs. 956.162 and 956.163 are added to read as

follows:

Sec. 956.162 Container markings.

Effective (Insert date one date after day of publication of the

final rule in the Federal Register), no handler shall ship any

container of Walla Walla Sweet Onions except in accordance with the

following terms and provisions:

(a) Each container of Walla Walla Sweet Onions shall be

conspicuously marked with the ``Genuine Walla Walla Sweet Onion'' logo.

The marking may be in the form of a decal or a stamped imprint of any

color and size: Provided, That the decal or stamped imprint must be

placed in plain sight and easy to read.

(b) Walla Walla Sweet Onions may be handled not subject to the

marking requirements of this section when handlers ship such onions

pursuant to Sec. 956.163, or ship such onions in field packed bulk bins

containing more than 500 pounds net weight for sale to roadside stands

and farmers' market operators for repacking and direct consumer sale:

Provided, That subject to Committee verification of handler container

inventories, handlers may use their existing inventories of unmarked

containers until (Insert date two years after publication after the

effective date of the final rule).

Sec. 956.163 Handling for specified purposes.

(a) Assessment and container marking requirements specified in this

part shall not be applicable to shipments of onions for any of the

following purposes:

(1) Shipments of Walla Walla Sweet Onions for relief or to

charitable institutions: Provided, That such shipments must be donated

and not sold in order for this exemption to apply;

(2) Shipments of Walla Walla Sweet Onions for livestock feed;

(3) Shipments of Walla Walla Sweet Onions for planting and for

plants;

(4) Shipments of Walla Walla Sweet Onions as salad onions;

(5) Shipments of Walla Walla Sweet Onions for all processing uses

including, pickling, peeling, dehydration, juicing, or other

processing;

(6) Shipments of Walla Walla Sweet Onions for disposal;

(7) Shipments of Walla Walla Sweet Onions for seed.

Dated: February 4, 1997.

Robert C. Keeney,

Director, Fruit and Vegetable Division.

[FR Doc. 97-3137 Filed 2-7-97; 8:45 am]

BILLING CODE 3410-02-P