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 FR]

Kiwifruit Grown in California; Temporary Suspension of an

Inspection Requirement

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This rule temporarily suspends 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). Prior to this suspension, certification of any

kiwifruit which was inspected and certified as meeting grade, size,

quality, or maturity requirements in effect under the marketing order

was valid until December 31 of the current fiscal year or 21 days from

the date of inspection, whichever was later. This rule enables handlers

to ship kiwifruit without the necessity for reinspection and

recertification and the costs associated with such requirements. This

temporary 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 was available under previous requirements.

EFFECTIVE DATE: September 1, 1998 through July 31, 1999.

FOR FURTHER INFORMATION CONTACT: Rose Aguayo, Marketing Specialist,

California Marketing Field Office, Marketing Order Administration

Branch, 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 final rule is issued under Marketing

Order No. 920 (7 CFR part 920), as amended, regulating the handling of

kiwifruit grown in California, hereinafter referred to as the

``order.'' The order is effective under the Agricultural Marketing

Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter

referred to as the ``Act.''

The Department of Agriculture (Department) is issuing this rule in

conformance with Executive Order 12866.

This final rule has been reviewed under Executive Order 12988,

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

effect. This rule will not preempt any State or local laws,

regulations, or policies, unless they present an irreconcilable

conflict with this rule.

The Act provides that administrative proceedings must be exhausted

before parties may file suit in court. Under section 608c(15)(A) of the

Act, any handler subject to an order may file with the Secretary a

petition stating that the order, any provision of the order, or any

obligation imposed in connection with the order is not in accordance

with law and request a modification of the order or to be exempted

therefrom. A handler is afforded the opportunity for a hearing on the

petition. After the hearing the Secretary would rule on the petition.

The Act provides that the district court of the United States in any

district in which the handler is an inhabitant, or has his or her

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 final rule temporarily suspends an inspection requirement for

kiwifruit covered under the California kiwifruit marketing order. This

rule temporarily suspends the current limitation of the inspection

certificate validation period and enables handlers to ship kiwifruit

without the necessity for reinspection and recertification. The rule

will be in effect during 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 must 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 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.

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

reinspection rates, the total costs for the industry are based on the

past season's rates. These annual costs were estimated to be

approximately $50,000 for the 1998-99 season.

By suspending the reinspection requirement, handlers will be able

to reduce handling costs by conducting their own reinspection of fruit

before shipment, when necessary. The Committee believes that consumers

will continue to receive the same high quality fruit as was available

when reinspection was conducted by the

[[Page 41391]]

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

valid.

The Committee believes that eliminating the reinspection

requirement will 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

provided under previous 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 final regulatory flexibility analysis.

The purpose of the RFA is to fit regulatory actions to the scale of

business subject to such actions in order that small businesses will

not be unduly or disproportionately burdened. Marketing orders issued

pursuant to the Act, and 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

receipts of at least $5,000,000. This figure excludes 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 final rule temporarily suspends an inspection requirement for

kiwifruit covered under the California kiwifruit marketing order. This

rule temporarily suspends the current limitation of the inspection

certificate validation period and enables handlers to ship kiwifruit

without the necessity for reinspection and recertification. The rule

will be in effect during 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 must 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 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, 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 will be able to reduce handling costs by conducting their

own reinspection of fruit before shipment, when necessary. The

Committee believes that consumers will continue to receive the same

high quality fruit as was available when reinspection was conducted by

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

valid.

The Committee believes that eliminating the reinspection

requirement will 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

[[Page 41392]]

quality fruit as provided under previous requirements.

The 1998-99 kiwifruit crop estimate was revised in April 1998 from

10 to 12 million tray equivalents to 8.5 million tray equivalents.

Based on recent experience, approximately 30 percent of the inspected

kiwifruit is subject to reinspection. The 1998-99 reinspection fees

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

preliminary estimates indicate that these rates will be slightly higher

than the 1997-98 rates. The 1997-98 rates were $0.032 per tray/volume

fill/count fill container, $0.047 per 3 layer/master container, and

$0.0047 per pound for bins. The inspection service estimates that

reinspection costs will continue to be approximately $42,000 and that

with the addition of mileage and overtime fees, the inspection service

estimates that the total annual costs to the industry will continue to

be approximately $50,000. Therefore, the suspension of the reinspection

requirement is expected to result in an annual savings of $50,000 for

the 1998-99 fiscal year.

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 provides handlers assurance

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.

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 is in the best interest of the

industry, as this suspension 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

previous reinspection requirements.

This action will not impose any additional reporting or

recordkeeping requirements on either small or large kiwifruit handlers.

As with all Federal marketing order programs, reports and forms are

periodically reviewed to reduce information requirements and

duplication by industry and public sector agencies.

As noted in the initial regulatory flexibility analysis, the

Department has not identified any relevant Federal rules that

duplicate, overlap, or conflict with this final rule.

In addition, 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, nine 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 were invited to

submit information on the regulatory and informational impacts of this

action on small businesses.

A proposed rule concerning this action was published in the Federal

Register on June 5, 1998 (63 FR 30655). Copies of the rule were also

mailed or sent via facsimile to all Committee members and kiwifruit

handlers. Finally, the rule was made available through the Internet by

the Office of the Federal Register.

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

respond to the proposal. No comments were received.

After consideration of all relevant matter presented, including the

information and recommendation submitted by the Committee and other

available information, it is hereby found that the provisions of the

regulation, as hereinafter set forth, should be suspended to effectuate

the declared policy of the Act.

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

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

Federal Register (5 U.S.C. 553) because handlers need this action in

place by September 1 to provide sufficient time to plan for the

upcoming marketing season. Harvest is expected to begin the end of

September or early October and handlers want to take advantage of the

relaxation as soon as possible. Further, handlers are aware of this

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

period was provided for in the proposed rule and no comments were

received.

List of Subjects in 7 CFR Part 920

Kiwifruit, Marketing agreements, Reporting and recordkeeping

requirements.

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

amended as follows:

PART 920--KIWIFRUIT GROWN IN CALIFORNIA

1. The authority citation for 7 CFR part 920 continues to read as

follows:

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

Sec. 920.155 [Suspended]

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

September 1, 1998, through July 31, 1999.

Dated: July 29, 1998.

Robert C. Keeney,

Deputy Administrator, Fruit and Vegetable Programs.

[FR Doc. 98-20791 Filed 8-3-98; 8:45 am]

BILLING CODE 3410-02-P