Onions Grown in Certain Designated Counties in Idaho, and Malheur County, Oregon, and Imported Onions; Proposed Increase in Grade Requirement for White Onions

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 958

[Docket No. FV97-958-2 PR]

Onions Grown in Certain Designated Counties in Idaho, and Malheur

County, Oregon, and Imported Onions; Proposed Increase in Grade

Requirement for White Onions

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This rule would increase the minimum grade requirement for

white onion varieties handled under the Idaho-Eastern Oregon onion

marketing order from U.S. No. 2 or U.S. Commercial to U.S. No. 1. The

marketing order regulates the handling of onions produced in certain

designated counties in Idaho, and Malheur County, Oregon, and is

administered locally by the Idaho-Eastern Oregon Onion Committee

(Committee). This rule would improve the marketing of white onions and

increase returns to producers, as well as provide consumers with higher

quality onions. As provided under section 8e of the Agricultural

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

grade requirement would also apply to all imported varieties of white

onions.

DATES: Comments must be received by August 31, 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 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 Programs, AMS, USDA, 1220 SW Third Avenue, room 369,

Portland, Oregon 97204-2807; telephone: (503) 326-2724, Fax: (503) 326-

7440; and George J. Kelhart, 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

Agreement No. 130 and Marketing Order No. 958, both as amended (7 CFR

part 958), regulating the handling of onions grown in certain

designated counties in Idaho, and Malheur County, Oregon, 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.''

This proposed rule is also issued under section 8e of the Act,

which provides that whenever certain specified commodities, including

onions, are regulated under a Federal marketing order, imports of these

commodities into the United States are prohibited unless they meet the

same or comparable grade, size, quality, or maturity requirements as

those in effect for the domestically produced commodities.

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 would 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 date of the entry of the ruling.

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. This proposal invites comments on

an increase in the minimum grade requirement for white onion varieties

grown in the defined production area and handled under order authority.

This proposed rule, unanimously recommended by the Committee at its

June 19, 1997, meeting, would require that all white onion varieties

handled be U.S. No. 1 grade. The current regulations allow the handling

of white onions of U.S. No. 2, U.S. Commercial, and U.S. No. 1 grades.

As provided under section 8e of the Agricultural Marketing Agreement

Act of 1937, the proposed increase in the minimum grade requirements

would also apply to all imported varieties of white onions.

Sections 958.51 and 958.52 of the order provide authority for the

establishment and modification of regulations applicable to the

handling of particular grades of onions. Section 958.328(a)(1)

establishes the grade requirements for white onions handled subject to

the Idaho-Eastern Oregon onion marketing order. Such grade requirements

are based on the U.S. Standards for Grades of Onions (Other than

Bermuda-Granex-Grano and Creole Types) (7 CFR part 51.2830 et seq.), or

the U.S. Standards for Grades of Bermuda-Granex-Grano Type Onions (7

CFR part 51.3195 et seq.). Currently, these handling regulations

require that white onion varieties shall be (1) U.S.

[[Page 36195]]

No. 2 or U.S. Commercial, 1 inch minimum to 2 inches maximum diameter;

or (2) U.S. No. 2 or U.S. Commercial, if not more than 30 percent of

the lot is comprised of onions of U.S. No. 1 quality, and at least 1\1/

2\ inches minimum diameter; or (3) U.S. No. 1, at least 1\1/2\ inches

minimum diameter. The regulations further specify that none of these

three categories may be commingled in the same bag or other container.

This proposed rule would require that all bags or other containers

of white onion varieties shipped subject to order requirements be

either: (1) U.S. No. 1, 1 inch minimum to 2 inches maximum diameter; or

(2) U.S. No. 1, at least 1\1/2\ inches minimum diameter. Commingling of

these two categories would not be allowed. Current exemptions under the

order for special purpose shipments in section 958.328(e), and

shipments qualifying for a minimum quantity exemption in section

958.328(g), would continue to apply when applicable.

The Committee justification for its recommendation indicated that

shipments of U.S. No. 2 and U.S. Commercial grade white onions have had

a negative impact on producer returns and have been a factor in

decreasing this industry's share of the fresh domestic white onion

market. In addition, the Committee stated that consumers of white

onions traditionally demand a quality product and that U.S. No. 2 and

U.S. Commercial grade white onions have poor consumer acceptance.

The Committee stated that producers seldom profit from U.S. No. 2

or U.S. Commercial grade white onion sales, and as a consequence,

common business practice for many is to discard such onions as culls

following harvest. Based upon comments made by handlers and receivers

of white onions, the Committee reported that shipments of low quality

U.S. No. 2 and U.S. Commercial grade white onions have a depressing

influence on the price of the higher quality U.S. No. 1 grade white

onions. The Free-on-Board (FOB) price for U.S. No. 2 white onions

usually runs about one-half the FOB price on U.S. No. 1 white onions

reflecting the weak demand for U.S. No. 2 white onions in fresh

markets. Moreover, over the last several years there has been increased

competition from white onions grown in Nevada, Washington, Colorado,

and Utah. The quality produced and marketed from those States is

excellent. Thus, a higher grade for white onions grown in Idaho-Eastern

Oregon should help this industry compete more effectively and increase

demand through stronger confidence in the quality of Idaho-Eastern

Oregon white onions.

Between the 1986/87 and the 1996/97 marketing seasons, an annual

average of 336,000 hundredweight of white onions, representing 3.9

percent of the total of all onion varieties, has been shipped from the

Idaho-Eastern Oregon production area. The annual average of all Idaho-

Eastern Oregon onion shipments for this period, including white,

yellow, and red onion varieties, is 9,517,500 hundredweight. During the

same period of time, shipments of Idaho-Eastern Oregon U.S. No. 2 white

onions averaged 3,807 hundredweight per year, or approximately an

annual average of 1.2 percent of white Idaho-Eastern Oregon onion

shipments and an annual average of .04 percent of all Idaho-Eastern

Oregon onion shipments. The majority, or nearly 99 percent, of the

white onions shipped from this production area are U.S. No. 1 grade.

Onions from the Idaho-Eastern Oregon production area are shipped

throughout most of the year. Most Idaho-Eastern Oregon white onions are

marketed during the months of September, October, and November, with

significant additional volume through February. Preliminary information

pertaining to the 1998/99 shipping season indicates that the FOB price

for onions this season could average $13.10 per hundredweight.

As mentioned earlier, section 8e of the Act requires that when

certain domestically produced commodities, including onions, are

regulated under a Federal marketing order, imports of that commodity

must meet the same or comparable grade, size, quality, or maturity

requirements. Section 8e also provides that whenever two or more

marketing orders regulating the same commodity produced in different

areas of the United States are concurrently in effect, a determination

must be made as to which of the areas produces the commodity in most

direct competition with the imported commodity. Imports must then meet

the requirements established for that particular area.

Grade, size, quality, and maturity regulations have been issued

regularly under both Marketing Order No. 958 and Marketing Order No.

959, which regulates the handling of onions grown in South Texas, since

the marketing orders were established. The current import regulation

specifies that import requirements for onions are to be based on the

seasonal categories of onions grown in both marketing order areas. The

import regulation specifies that imported onions must meet the

requirements of the Idaho-Eastern Oregon onion marketing order during

the period June 5 through March 9 and the South Texas onion marketing

order during the period March 10 through June 4 each season. This

proposal would change the import requirements for the period June 5

through March 9 of each marketing year to provide that all imported

white onion varieties must be U.S. No. 1 grade. While no changes are

required in the language of section 980.117, all white onion varieties

imported during this period would be required to meet the modified

grade requirement.

White onions are imported into the United States throughout the

year from a number of different countries. By far the largest source of

all imported onions is Mexico. Mexican white onions enter the United

States from November through July, with the heaviest volumes moving

during the months of December through April. The annual average volume

of all Mexican onions imported into the United States between 1986 and

1996 was 3,333,150 hundredweight, while the annual average volume for

all imported onions from all sources during the same period was

4,040,004 hundredweight.

Other sources of imported onions are Canada, Chile, New Zealand,

France, Guatemala, Belgium, Morocco, and the Netherlands. In 1996 and

1997, imports from Canada totaled 654,728 hundredweight and 498,950

hundredweight, imports from Chile totaled 139,927 hundredweight and

85,914 hundredweight, and those from New Zealand totaled 13,007

hundredweight and 20,172 hundredweight. During those two years, onion

imports from France totaled 82,034 hundredweight and 102,956

hundredweight, imports from Guatemala were 32,540 hundredweight and

32,474 hundredweight, imports from Belgium totaled 1,565 hundredweight

and 2,386 hundredweight, Moroccan imports totaled 287 hundredweight and

948 hundredweight, and imports from the Netherlands during 1996 and

1997 totaled 26,852 and 26,544 hundredweight, respectively.

Pursuant to requirements set forth in the Regulatory Flexibility

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

economic impact this action would have 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

[[Page 36196]]

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 35 handlers of Idaho-Eastern Oregon onions

who are subject to regulation under the order and approximately 260

onion producers, including approximately 80 producers of white onions,

in the regulated area. In addition, approximately 150 importers of

onions are subject to import regulations and could be affected by this

proposed rule. 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 having annual receipts of less than

$500,000. Approximately 90 percent of the handlers and 70 percent of

the producers of Idaho-Eastern Oregon white onions may be classified as

small entities. Although it is not known how many importers of white

onions may be classified as small entities, it can be assumed that a

number of the 150 importers could be classified as such.

This proposal invites comments on an increase in the minimum grade

requirement for white onion varieties grown in the defined production

area and handled under order authority. This proposed rule, unanimously

recommended by the Committee at its June 19, 1997, meeting, would

require that all white onion varieties handled be U.S. No. 1 grade. The

current regulations allow the handling of U.S. No. 2 grade and U.S.

Commercial grade white onions as well. As provided under section 8e of

the Agricultural Marketing Agreement Act of 1937, the proposed increase

in the minimum grade requirement would also apply to all imported

varieties of white onions.

At the meeting the Committee discussed the impact of this proposal

on handlers and producers in terms of cost. The Committee stated that

producers seldom profit from U.S. No. 2 or U.S. Commercial grade white

onion sales, and as a consequence, common business practice for many is

to discard such onions as culls following harvest.

Based upon comments made by handlers and receivers of white onions,

the Committee reported that shipments of low quality U.S. No. 2 and

U.S. Commercial grade white onions have a depressing influence on the

price of the higher quality U.S. No. 1 grade white onions. The Free-on-

Board (FOB) price for U.S. No. 2 white onions usually runs about one-

half the FOB price on U.S. No. 1 white onions reflecting the weak

demand for U.S. No. 2 white onions in fresh markets. Moreover, over the

last several years there has been increased competition from white

onions grown in Nevada, Washington, Colorado, and Utah. The quality

produced and marketed from those States is excellent. Thus, a higher

grade for white onions grown in Idaho-Eastern Oregon should help this

industry compete more effectively and increase demand through stronger

confidence in the quality of Idaho-Eastern Oregon white onions.

Preliminary information pertaining to the 1998-99 shipping season

indicates that the FOB price for onions this season could average

$13.10 per hundredweight.

While this proposed rule may impose some additional costs on

handlers and producers, 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 white onions. The Committee believes that

this proposed modification would benefit consumers, producers, and

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

disproportionately greater or lesser for small entities than for large

entities.

As alternatives to the proposal, the Committee discussed leaving

the regulations as currently issued and using voluntary methods to

solve the problem. Both alternatives were rejected. The prevailing

opinion was that market confidence and producer income would continue

to erode without the implementation of this proposal. The majority of

Committee members stated that voluntary measures had not been effective

in the past.

Section 8e of the Act requires that when certain domestically

produced commodities, including onions, are regulated under a Federal

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

comparable grade, size, quality, or maturity requirements. Section 8e

also provides that whenever two or more marketing orders regulating the

same commodity produced in different areas of the United States are

concurrently in effect, the Secretary shall determine which of the

areas produces the commodity in more direct competition with the

imported commodity. Imports must then meet the requirements established

for the particular area.

Grade, size, quality, and maturity regulations have been issued

regularly under both Marketing Order No. 958 and Marketing Order No.

959, which regulates the handling of onions grown in South Texas, since

the orders were established. The current import regulation specifies

that import requirements for onions are to be based on the seasonal

categories of onions grown in both marketing order areas. The import

regulations specify that imported onions must meet the requirements of

the Idaho-Eastern Oregon onion order during the period June 5 through

March 9 each season and the South Texas onion order during the period

March 10 through June 4 each season. This proposal would change the

import requirements for the period June 5 through March 9 of each

marketing year to provide that all imported white onion varieties must

be U.S. No. 1 grade.

This action would not impose any additional reporting or

recordkeeping requirements on either small or large 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 proposed rule.

In addition, the Committee's meeting was widely publicized

throughout the Idaho-Eastern Oregon onion industry and all interested

persons were invited to attend the meeting and participate in Committee

deliberations on all issues. Like all Committee meetings, the June 19,

1997, meeting was a public meeting and all entities, both large and

small, were able to express views on this issue. Finally, interested

persons are invited to submit information on the regulatory and

informational impacts of this action on small businesses.

An advance notice of proposed rulemaking with request for public

comment was published in the Federal Register (63 FR 5472) on February

3, 1998. A 60-day comment period was provided to allow interested

persons the opportunity to comment on the volume and grade of imported

white onions, as well as other aspects of the potential grade increase,

including its probable regulatory and economic impact on small business

entities. Copies of the notice were faxed and mailed to the Committee

office, which in turn notified Committee and Idaho-Eastern Oregon onion

industry members of the recommendation. The Department also provided

copies of the notice to the administrative offices of the Walla Walla

Sweet Onion Committee, the South Texas Onion Committee, and the Vidalia

Onion Committee, as well as to

[[Page 36197]]

the World Trade Organization. In addition, the Committee's meetings

were widely publicized throughout the Idaho-Eastern Oregon onion

industry and all interested persons were invited to attend and

participate on all issues. A copy of the notice was also made available

on the Internet by the U.S. Government Printing Office.

Five comments were received. Four of the comments are supportive of

the Committee's recommendation. The Idaho-Eastern Oregon Onion

Committee reaffirmed its unanimous recommendation in favor of

increasing the minimum grade for white onions from U.S. No. 2 or U.S.

Commercial to U.S. No. 1. The South Texas Onion Committee,

administering Marketing Order No. 959, expressed its support of the

recommended modification as well. The South Texas Onion Committee

commented that by the time the South Texas industry enters the market

in March of each year, the market is flooded with inferior quality

white onions from both Mexico and Idaho-Eastern Oregon, and that the

onion industries and consumers would benefit from the minimum grade

increase. The minimum grade requirement for white onion varieties

handled under the South Texas marketing order is a modified U.S. No. 1

grade. The proposed rule would increase the minimum grade requirement

for Idaho-Eastern Oregon onions, with the two minimum grade

requirements becoming more similar.

Also commenting in favor of the Committee's recommendation were a

South Texas onion handler and an association representing Texas onion

handlers as well as importers of Mexican onions. Both commentators are

located in Mission, Texas. The handler commented that the recommended

modification would allow the South Texas industry the necessary

confidence to continue to produce onions for a market free from the

negative consumer reaction associated with poor quality white onions.

The association also added its support of the recommended minimum grade

increase. The association stated that it has within its membership

approximately 21 South Texas handlers of onions, most of whom also

import onions from Mexico. The commenter added that the association has

numerous members who only handle imported produce, including white

onions. The commenter noted further that in the modern competitive

produce market, consumers must be provided with the best quality

products available.

A comment was also received from the European Commission, Brussels,

Belgium, on behalf of the European Community. That comment stated that

the proposal aims at increasing the minimum diameter size requirement

for imported onions from 2.54 to 2.79 centimeters for the period June 5

through March 9 of each year, and objected to such action. However, the

Committee had recommended increasing the minimum grade for Idaho-

Eastern Oregon white onions and white onions imported during the period

June 5 through March 9 from U.S. No. 2 to U.S. No. 1. However, the

recommendation did not include a modification to the minimum diameter

size itself, which continues to be 1 inch or 2.54 centimeters.

In conjunction with the issuance of the advance notice and request

for comment, the Texas Cooperative Inspection Program monitored white

onions imported from Mexico during the period December 1, 1997, through

March 9, 1998. This process was conducted at the request of the AMS to

determine the quantity of imported white onions potentially impacted by

the Committee's recommendation. An analysis of the information provided

by the Inspection Program indicates that approximately 98 percent of

the white onions imported from Mexico during the test period met U.S.

No. 1 grade. The balance of the imported white onions during this

period either met U.S. Commercial grade or failed to meet the minimum

of U.S. No. 2 grade. There were no U.S. No. 2 grade white onions

imported from Mexico during this period. During the test period, a

total of 1,006,279 50-pound containers were offered for importation. A

total of 948,069 50-pound containers graded U.S. No. 1, 11,427 50-pound

containers graded U.S. Commercial, and 10,783 50-pound containers

failed to meet the current minimum grade requirement of U.S. No. 2.

The Department has not identified any relevant Federal rules that

duplicate, overlap, or conflict with this rule.

A 60-day comment period is provided to allow interested persons the

opportunity to respond to this proposal. All written comments timely

received will be considered before a final determination is made on

this matter.

List of Subjects in 7 CFR Part 958

Marketing agreements, Onions, Reporting and recordkeeping

requirements.

For the reasons set forth in the preamble, 7 CFR part 958 is

proposed to be amended as follows:

PART 958--ONIONS GROWN IN CERTAIN DESIGNATED COUNTIES IN IDAHO, AND

MALHEUR COUNTY, OREGON

1. The authority citation for 7 CFR part 958 continues to read as

follows:

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

2. Section 958.328 is amended by revising paragraph (a)(1) to read

as follows:

Sec. 958.328 Handling Regulations.

* * * * *

(a)(1) Grade and size requirements. (i) White varieties shall be

either:

(A) U.S. No. 1, 1 inch minimum to 2 inches maximum diameter; or

(B) U.S. No. 1, at least 1\1/2\ inches minimum diameter.

(ii) Neither of these two categories of onions may be commingled in

the same bag or other container.

* * * * *

Dated: June 26, 1998.

Eric M. Forman,

Acting Deputy Administrator, Fruit and Vegetable Programs.

[FR Doc. 98-17564 Filed 7-1-98; 8:45 am]

BILLING CODE 3410-02-P