Kiwifruit Grown in California; Temporary Suspension of an Inspection Requirement

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 920

[Docket No. FV98-920-2 PR]

Kiwifruit Grown in California; Temporary Suspension of an

Inspection Requirement

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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

SUMMARY: This rule invites comments on the temporary suspension of an

inspection requirement for kiwifruit covered under the California

kiwifruit marketing order. The marketing order regulates the handling

of kiwifruit grown in California, and is administered locally by the

Kiwifruit Administrative Committee (Committee). Currently,

certification of any kiwifruit which is inspected and certified as

meeting grade, size, quality, or maturity requirements in effect under

the marketing order is valid until December 31 of the current fiscal

year or 21 days from the date of inspection, whichever is later. Any

kiwifruit not shipped before the end of this certification period must

be reinspected and recertified before shipping. This rule would

temporarily suspend this provision for the 1998-99 fiscal year and

would enable handlers to ship kiwifruit without the necessity for

reinspection and recertification and the costs associated with such

requirements. This temporary

[[Page 30656]]

suspension was unanimously recommended by the Committee and is expected

to reduce handler costs and to increase grower returns, while

continuing to provide consumers with the same high quality fruit as is

available under current requirements.

DATES: Comments must be received by July 6, 1998.

ADDRESSES: Interested persons are invited to submit written comments

concerning this proposal. Comments must be sent to the Docket Clerk,

Fruit and Vegetable Programs, AMS, USDA, Room 2525-S, P.O. Box 96456,

Washington, DC 20090-6456; Fax: (202) 205-6632. All comments should

reference the docket number and the date and page number of this issue

of the Federal Register and will be available for public inspection in

the Office of the Docket Clerk during regular business hours.

FOR FURTHER INFORMATION CONTACT: Rose Aguayo, Marketing Specialist,

California Marketing Field Office, Fruit and Vegetable Programs, AMS,

USDA, 2202 Monterey Street, suite 102B, Fresno, California 93721;

telephone: (209) 487-5901, Fax: (209) 487-5906; or George Kelhart,

Technical Advisor, Marketing Order Administration Branch, Fruit and

Vegetable Programs, AMS, USDA, room 2525-S, P.O. Box 96456, Washington,

DC 20090-6456; telephone: (202) 720-2491, Fax: (202) 205-6632. Small

businesses may request information on compliance with this regulation

by contacting Jay Guerber, Marketing Order Administration Branch, Fruit

and Vegetable Programs, AMS, USDA, room 2525-S, P.O. Box 96456,

Washington, DC 20090-6456; telephone: (202) 720-2491, Fax: (202) 205-

6632.

SUPPLEMENTARY INFORMATION: This proposal 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 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.

This proposal invites comments on the temporary suspension of an

inspection requirement for kiwifruit covered under the California

kiwifruit marketing order. This rule would temporarily suspend the

current limitation of the inspection certificate validation period and

would enable handlers to ship kiwifruit without the necessity for

reinspection and recertification. The rule would be in effect for the

1998-99 fiscal year.

Section 920.55 of the order requires that prior to handling any

variety of California kiwifruit, such kiwifruit shall be inspected by

the Federal or Federal-State Inspection Service (inspection service)

and certified as meeting the applicable grade, size, quality, or

maturity requirements in effect pursuant to Sec. 920.52 or Sec. 920.53.

Section 920.55 also provides authority for the establishment through

the order's administrative rules and regulations of a period prior to

shipment during which inspections must be performed.

Section 920.155 of the order's administrative rules and regulations

prescribes that the certification of grade, size, quality, and maturity

of kiwifruit pursuant to Sec. 920.52 or Sec. 920.53 during each fiscal

year is valid until December 31 of such year or 21 days from the date

of inspection, whichever is later. Any inspected kiwifruit to be

shipped after the certification period lapses is required to be

reinspected and recertified before shipping.

At its meeting on February 11, 1998, the Committee unanimously

recommended suspending Sec. 920.155 for the 1998-99 fiscal year. The

Committee made this recommendation in an effort to reduce the

additional costs of reinspection. In recent years, after cultural and

post-harvest expenses have been paid, many kiwifruit growers have lost

money or merely recovered their production costs with little or no

profit. Because storage and handling operations have improved in the

industry, and as a result of a fruit ripening program being utilized by

the industry, the Committee believes it may no longer be necessary to

have fruit reinspected to provide consumers with a high quality

product. The recommended suspension is for a one-year period so the

effects can be evaluated. The Committee further recommended that this

suspension be in effect no later than September 1, 1998, to enable

handlers to make operational decisions in time for the 1998 harvest and

shipping season.

When the order was promulgated, authority was included to limit the

length of time inspection certificates would be valid. This authority

was provided because the condition of kiwifruit can change while it is

held in cold storage. The current inspection requirements are intended

to help ensure that all fruit meets order requirements prior to

shipment.

The industry has estimated that approximately 30 percent of the

inspected kiwifruit is subject to reinspection each year at a cost of

approximately $0.03 per tray equivalent (a tray equivalent being 7

pounds of kiwifruit), and that a minimal amount, approximately 1

percent, of reinspected fruit fails to meet order requirements.

Although the inspection service has not yet established the 1998-99

inspection rates, based on the past season's rates, total reinspection

costs for the industry are expected to be approximately $50,000 for the

1998-99 fiscal year.

Handlers would like to reduce handling costs and believe that they

can do so by conducting their own reinspection of fruit before

shipment, when necessary. The Committee believes that consumers would

be provided with the same high quality fruit as available under current

reinspection requirements. Handlers have continually upgraded their

cold storage and handling operations, resulting in fewer fruit

condition problems. In recent seasons, improved storage facilities have

resulted in fewer storage-related condition problems, such as black

sooty mold. In addition, processing and packing equipment utilized by

handlers has improved in recent years, resulting in less damage to

fruit in the handling process, thus resulting in fewer condition

problems. Finally, the industry's ripening program has resulted in

earlier seasonal shipments and a decreased amount of inspected fruit

remaining in cold storage

[[Page 30657]]

beyond the maximum time for which an inspection certificate is valid.

The Committee believes that eliminating the reinspection

requirement would not have a negative impact on any aspect of the

industry; however, it wishes to approach this issue with caution. Thus,

the Committee recommended temporarily suspending Sec. 920.155 for the

1998-99 fiscal year as a ``pilot test,'' so it can evaluate the results

after the season. The Committee expects this action to reduce handler

costs by $50,000, resulting in increased grower returns, while

continuing to provide consumers with the same high quality fruit as is

available under current reinspection requirements.

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 the 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 marketing order and approximately 450 producers

in the production area. Small agricultural producers are defined by the

Small Business Administration (13 CFR 121.601) as those whose annual

receipts are less than $500,000, and small agricultural service firms

are defined as those whose annual receipts are less than $5,000,000.

One of the 60 handlers subject to regulation has annual kiwifruit sales

of at least $5,000,000, excluding receipts from any other sources. The

remaining 59 handlers have annual receipts less than $5,000,000,

excluding receipts from other sources. In addition, 10 of the 450

producers subject to regulation have annual sales of at least $500,000,

excluding receipts from any other sources. The remaining 440 producers

have annual sales less than $500,000, excluding receipts from any other

sources. Therefore, a majority of handlers and producers are classified

as small entities.

This proposal invites comments on the temporary suspension of an

inspection requirement for kiwifruit covered under the California

kiwifruit marketing order. This rule would temporarily suspend the

current limitation of the inspection certificate validation period and

would enable handlers to ship kiwifruit without the necessity for

reinspection and recertification. The rule would be in effect for the

1998-99 fiscal year.

Section 920.55 of the order requires that prior to handling any

variety of California kiwifruit, such kiwifruit shall be inspected by

the inspection service and certified as meeting the applicable grade,

size, quality, or maturity requirements in effect pursuant to

Sec. 920.52 or Sec. 920.53. Section 920.55 also provides authority for

the establishment through the order's administrative rules and

regulations of a period prior to shipment during which inspections must

be performed.

Section 920.155 of the order's administrative rules and regulations

prescribes that the certification of grade, size, quality, and maturity

of kiwifruit pursuant to Sec. 920.52 or Sec. 920.53 during each fiscal

year is valid until December 31 of such year or 21 days from the date

of inspection, whichever is later. Any inspected kiwifruit to be

shipped after the certification period lapses is required to be

reinspected and recertified before shipping.

At its meeting on February 11, 1998, the Committee unanimously

recommended suspending Sec. 920.155 for the 1998-99 fiscal year. The

Committee made this recommendation in an effort to reduce the

additional costs of reinspection. In recent years, after cultural and

post-harvest expenses have been paid, many kiwifruit growers have lost

money or merely recovered their production costs with little or no

profit. Also, because storage and handling operations have improved in

the industry, and as a result of a fruit ripening program being

utilized by the industry, the Committee believes it may no longer be

necessary to have fruit reinspected to provide consumers with a high

quality product. The recommended suspension is for a one-year period so

the effects can be evaluated. The Committee further recommended that

this suspension be in effect no later than September 1, 1998, to enable

handlers to make operational decisions in time for the 1998 harvest and

shipping season.

When the order was promulgated, authority was included to limit the

length of time inspection certificates would be valid. This authority

was provided because the condition of kiwifruit can change while it is

held in cold storage. The current inspection requirements are intended

to help ensure that all fruit meets order requirements prior to

shipment.

The industry has estimated that approximately 30 percent of the

inspected kiwifruit is subject to reinspection each year at a cost of

approximately $0.03 per tray equivalent (a tray equivalent being 7

pounds of kiwifruit), and that a minimal amount, approximately 1

percent, of reinspected fruit fails to meet order requirements.

Although the inspection service has not yet established the 1998-99

inspection rates, based on the past season's rates, total reinspection

costs for the industry are expected to be approximately $50,000 for the

1998-99 fiscal year.

Handlers would like to reduce handling costs and believe that they

can do so by conducting their own reinspection of fruit before

shipment, when necessary. The Committee believes that consumers would

be provided with the same high quality fruit as available under current

reinspection requirements. Handlers have continually upgraded their

cold storage and handling operations, resulting in fewer fruit

condition problems. In recent seasons, improved storage facilities have

resulted in fewer storage-related condition problems, such as black

sooty mold. In addition, processing and packing equipment utilized by

handlers has improved in recent years, resulting in less damage to

fruit in the handling process, thus resulting in fewer fruit condition

problems. Finally, the industry's ripening program has resulted in

earlier seasonal shipments and a decreased amount of inspected fruit

remaining in cold storage beyond the maximum time for which an

inspection certificate is valid.

The Committee believes that eliminating the reinspection

requirement would not have a negative impact on any aspect of the

industry; however, it wishes to approach this issue with caution. Thus,

the Committee recommended temporarily suspending Sec. 920.155 for the

1998-99 fiscal year as a ``pilot test,'' so it can evaluate the results

after the season. The Committee expects this action to reduce handler

costs by $50,000, resulting in increased grower returns, while

continuing to provide consumers with the same high quality fruit as is

available under current reinspection requirements.

The 1998-99 kiwifruit crop is estimated to be 10 to 12 million tray

equivalents (a tray equivalent being equal to 7 pounds). Based on

recent experience, approximately 30 percent of the inspected kiwifruit

is subject to reinspection. At the current estimates

[[Page 30658]]

for the 1998-99 crop, that would amount to 3.0 to 3.6 million tray

equivalents requiring reinspection. The 1998-99 reinspection fees have

not yet been established by the inspection service, however, utilizing

the 1997-98 rates ($0.032 per tray/volume fill/count fill container,

$0.047 per 3 layer/master container, and $0.0047 per pound for bins),

it is estimated that the 1998-99 costs for reinspection would be around

$42,000. Adding mileage and overtime fees charged by the inspection

service would result in total annual costs for reinspection for the

1998-99 fiscal year of approximately $50,000.

The Committee discussed a number of alternatives to this rule,

including making inspection certificates valid to January 31, or

modifying the reinspection process by requiring inspection for

condition only, but it was determined that neither of these

alternatives would reduce reinspection costs. The Committee also

discussed the possibility of reducing the sample size from the current

one-half of 1 percent; however, the inspection service advised the

Committee that further reduction of the sample size would jeopardize

the integrity of the inspection.

Another alternative discussed was the elimination of in-line

inspections altogether, but this was determined to be unacceptable to

the industry. Use of in-line inspection allows handlers to be assured

that the fruit is making grade at the time of packing. Any problems

that may exist can be identified immediately and corrected, thus

avoiding the additional costs of repacking at the time of shipment.

The Committee also considered increasing the use of inspection

waivers as a means to lower costs. However, the Committee could not

reach a consensus on an acceptable and equitable means to increase the

issuance of waivers throughout the industry, and, thus, it was

determined to be an unacceptable alternative to this proposal.

As another possibility, the Committee discussed alternative

inspection methods. It was decided that they would not be a viable

option at this time.

Following discussion of these alternatives, the Committee concluded

that temporarily suspending Sec. 920.155 would be in the best interest

of the industry at this time, as it is expected to save as much as

$50,000 in reinspection fees and to increase grower returns, while

continuing to provide consumers with the same high quality fruit as

provided under current reinspection requirements.

This action would 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 rule.

The Committee's February 11, 1998, 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 February

11, 1998, meeting was a public meeting and all entities, both large and

small, were able to express views on this issue. The Committee itself

is composed of 12 members. Two of these members are handlers and

producers, 9 are producers only, and one is a public member. The

majority of the Committee members are small entities. In addition, a

survey on the options of eliminating or keeping the reinspection

requirement was mailed to all growers and handlers of California

kiwifruit. Of the 485 surveys mailed, 159 were returned to the

Committee by the deadline of February 6, 1998, for a response rate of

33 percent. Growers accounted for 77 percent of the total surveys

returned by the deadline, and of those, 67 percent were in favor of

eliminating reinspection. Finally, 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, including any regulatory and informational

impacts of this action on small businesses. Thirty days is deemed

appropriate because: (1) The industry would like the changes proposed

in this rule to be in place by September 1 to provide sufficient time

to plan for the upcoming marketing season; and (2) this action was

unanimously recommended by the Committee at a public meeting and is not

expected to be controversial. 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 920

Kiwifruit, Marketing agreements, Reporting and recordkeeping

requirements.

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

proposed to be 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.

Sec. 920.155 [Suspended]

2. In Part 920, Sec. 920.155 is suspended in its entirety effective

August 1, 1998, through July 31, 1999.

Dated: May 29, 1998.

Sharon Bomer Lauritsen,

Acting Deputy Administrator, Fruit and Vegetable Programs.

[FR Doc. 98-15001 Filed 6-4-98; 8:45 am]

BILLING CODE 3410-02-P