Raisins Produced From Grapes Grown in California; Modifications to the Raisin Diversion Program

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 989

[Docket No. FV97-989-3 FIR]

Raisins Produced From Grapes Grown in California; Modifications

to the Raisin Diversion Program

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: The Department of Agriculture (Department) is adopting, as a

final rule, without change, the provisions of an interim final rule

modifying the raisin diversion program (RDP) currently authorized under

the Federal marketing order for California raisins. The marketing order

regulates the handling of raisins produced from grapes grown in

California and is administered locally by the Raisin Administrative

Committee (Committee). Under the RDP, producers are issued certificates

representing reserve raisins for voluntarily reducing their raisin

production in order to bring raisin supplies more closely in line with

market needs. Producers may then sell these certificates to handlers,

who, in turn, can redeem the certificates for reserve raisins. This

rule continues in effect various modifications to the diversion program

to improve compliance and bring the program in line with current

industry practices. Improving compliance with the RDP helps ensure

equity among all producers who participate in the program, and helps

maintain the integrity of the RDP.

EFFECTIVE DATE: March 2, 1998.

FOR FURTHER INFORMATION CONTACT: Maureen T. Pello, Marketing

Specialist, California Marketing Field Office, Marketing Order

Administration Branch, F&V, 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, PO 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, PO Box 96456, Washington, DC 20090-6456; telephone: (202)

720-2491, Fax: (202) 205-6632.

SUPPLEMENTARY INFORMATION: This rule is issued under Marketing

Agreement and Order No. 989, both as amended (7 CFR part 989),

regulating the handling of raisins produced from grapes grown in

California, 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 is issuing this rule in conformance with Executive

Order 12866.

This 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

[[Page 4369]]

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.

This rule continues in effect modifications to the raisin diversion

program currently authorized under the Federal marketing order for

California raisins. Under the RDP, producers are issued certificates

representing reserve raisins for voluntarily reducing their raisin

production in order to bring raisin supplies more closely in line with

market needs. Producers may then sell these certificates to handlers,

who, in turn, can redeem the certificates for reserve raisins. This

rule makes various modifications to the RDP to improve compliance and

bring the RDP in line with current industry practices. Improving

compliance with the RDP helps ensure equity among all producers who

participate in the program, and helps maintain the integrity of the

RDP.

The Federal marketing order for California raisins provides

authority for volume regulation designed to promote orderly marketing

conditions, stabilize prices and supplies, and improve producer

returns. When volume regulation is in effect, a certain percentage of

the raisin crop may be sold by handlers to any market (free tonnage)

while the remaining percentage of the crop must be held by handlers in

a reserve pool (or reserve) for the account of the Committee. Reserve

pool raisins are disposed through certain programs authorized under the

order. For example, reserve raisins may be sold by the Committee to

handlers for sale to any market; exported to authorized countries;

carried over as a hedge against a short crop the following year; or may

be disposed of in other outlets not competitive with those for free

tonnage raisins, such as government purchase, distilleries, or animal

feed. The RDP is another program concerning reserve pool raisins

authorized under the order, and may be used as a means for controlling

overproduction. The RDP is described in the following paragraphs.

Pursuant to Sec. 989.56 of the order, the Committee meets by

November 30 of each crop year to review raisin data, including

information on production, supplies, market demand, and inventories. If

the Committee determines that the available supply of raisins,

including those in the reserve pool, exceeds projected market needs, it

can decide to implement a diversion program, and announce the amount of

tonnage eligible for diversion during the subsequent crop year.

Producers who wish to participate in the RDP must submit an application

to the Committee. Such producers then curtail their production by vine

removal or some other means established by the Committee and receive a

certificate from the Committee which represents the quantity of raisins

diverted. Producers sell these certificates to handlers who pay

producers for the free tonnage applicable to the diversion certificate

minus the established harvest cost for the diverted tonnage. Handlers

redeem the certificates by presenting them to the Committee and paying

an amount equal to the established harvest cost plus payment for

receiving, storing, fumigating, handling, and inspecting the tonnage

represented on the certificate. The Committee then gives the handler

raisins from the reserve pool in an amount equal to the tonnage

represented by the diversion certificate.

Section 989.156 of the order's administrative rules and regulations

prescribes additional procedures for the RDP. At a meeting on August

14, 1997, the Committee unanimously recommended that various changes be

made to these additional RDP procedures to improve compliance and bring

the RDP in line with current industry practices.

The first change to the RDP recommended by the Committee concerns

references throughout Sec. 989.156 to partial production units. Such

references are contained in paragraphs (d), (h)(2), (h)(3), (i),

(s)(1), and (s)(3) of Sec. 989.156. As defined in Sec. 989.156(o), a

production unit is a clearly defined geographic area with permanent

boundaries (either natural or man-made). For example, a production unit

could be 30 acres of raisins surrounded by a permanent road on two

sides and permanent fencing on the other two sides.

Partial production units have been allowed under the RDP in past

years. For instance, in the 30-acre production unit example, three rows

of vines from that unit could qualify as a partial production unit

under the RDP. Under Sec. 989.156(s)(3) of the order's administrative

rules and regulations, the determination of the tonnage allowed for

acreage removed for such a partial unit would be computed by

multiplying the previous year's tonnage produced and verified on the

entire unit by the ratio of the acreage removed divided by the acreage

contained in the total production unit. However, the Committee is

concerned that some producers may be removing weak vines in a

production unit and getting credit under the RDP for an inflated amount

of tonnage. In the 30-acre example, a producer could have an average

past production of 2.2 tons of raisins on the entire unit, remove three

rows of low-producing vines that averaged only 1.5 tons of raisins per

acre, and get credit in the RDP for 2.2 tons of raisins per acre.

Although Sec. 989.56(a) of the order specifies a cap of 2.75 tons of

raisins per acre for an approved production unit (which can be changed

through informal rulemaking), the Committee is still concerned that

actual production on a partial unit could be inflated.

Thus, the Committee recommended that partial production units no

longer be accepted as part of the RDP. This change will help ensure

that producers who participate in an RDP do not receive credit for an

inflated amount of tonnage and gain a financial advantage over other

producers. This change will help ensure equity among all producers who

participate in the program, and help maintain the integrity of the RDP.

In addition, the Committee believes that this change will improve

the accuracy of the amount of tonnage accepted into the RDP. When an

RDP is established, a quantity of raisins equivalent to the amount

diverted would be made available in the subsequent crop year from the

prior year's reserve. This RDP diverted tonnage from the reserve is

included in the Committee's marketing policy computations for that year

and subject to free and reserve percentages. Thus, it is important for

the Committee to have as accurate a figure as possible for RDP tonnage.

The Committee believes that not allowing partial production units into

the RDP will improve the accuracy of this figure. Appropriate changes

have been made to the applicable paragraphs to implement this

recommended change.

According to Committee staff, most of the RDP applications over the

years have been for full production units. The partial unit authority

has typically been used by a producer desiring to receive credit under

the RDP for a few weak rows of vines, which usually amounts to less

than an acre. Thus, this change is not expected to adversely impact RDP

participants.

The second change recommended by the Committee concerns paragraph

(g) of Sec. 989.156 regarding procedures to verify whether producers

under the RDP are curtailing their production. This section

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currently specifies that committees of industry persons may be

established to serve as agents of the Committee in assuring producer

compliance with the RDP. These groups of industry persons may be

furnished approved RDP applications and are to advise the Committee on

the progress of the diversion within a particular district.

Such industry committees have been utilized during only one season

since the inception of the RDP in 1985. Committee staff has assumed the

functions of monitoring producer diversion and assuring program

compliance. Thus, the Committee recommended that reference to these RDP

industry committees be removed from Sec. 989.156(g) of the order's

administrative rules and regulations. This change brings RDP procedures

in line with current industry practices.

A third change to the RDP recommended by the Committee concerns

paragraph (h) of Sec. 989.156 regarding compliance. Paragraph (h)(1) of

Sec. 989.156 currently specifies that an approved applicant must remove

or spur-prune vines to preclude grapes from being produced and

harvested on the production unit involved in the program: Provided,

That vine removal may be the only acceptable means of diversion in some

seasons as determined by the Committee. If the Committee

representatives or agents determine that there is an average of more

than four bunches per vine remaining on a properly spur-pruned

production unit, the producer must be notified in writing and given 2

weeks to remove such bunches.

The Committee recommended that this section be modified to remove

the impression that spur-pruning is the only acceptable method of

diverting the crop, other than removing the vines altogether. Other

methods such as spraying with certain substances should also be

allowed. Producers should be allowed to remove and destroy the bunches

of grapes by whatever method they choose in order to receive a

diversion certificate. The Committee also recommended that the word

``acceptable'' in the first sentence in Sec. 989.156(h)(1) be removed

because it is not necessary. In addition, the Committee recommended

that the section be modified to strengthen the requirement regarding

producer notification of noncompliance with the RDP. Specifically,

Committee staff must notify producers ``immediately by certified

mail,'' in writing, and give producers 2 weeks to remove extra bunches.

The Committee believes that this added language will strengthen

producer compliance with the RDP.

The Committee also recommended that paragraph (h)(3) of

Sec. 989.156 concerning failure to divert be revised to specify that

any producer who has more than one production unit and fails to divert

on an approved production unit may be denied the opportunity to

participate in the next RDP on all of that producer's production units.

The current provisions specify that the producer should be denied

participation, and not the specific production unit. However, the

provisions have been interpreted so that producers only have been

denied the opportunity to participate in the next RDP on the unit that

was not properly diverted, not all of that producer's units. The

clarification will eliminate the confusion and is expected to provide

producers more incentive to remain in compliance with the RDP because

the clarified provisions specify that the failure to comply could mean

denial to participate on any of that producer's production units in the

next RDP. Thus, this provision is expected to strengthen producer

compliance with the RDP which will help ensure that the integrity of

the program is maintained.

The fourth change to the RDP recommended by the Committee concerns

paragraph (o) of Sec. 989.156. This section defines a production unit.

As previously mentioned, a production unit is a clearly defined

geographic area with permanent boundaries (either natural or man-made).

Under the RDP, producers must be able to document to the Committee the

previous year's production data for that specific area by means of

sales receipts or other delivery or transfer documents which indicate

the creditable fruit weight delivered to handlers from that specific

area. Additional criteria are specified for new production units and

existing units that may have been transferred to another producer.

The Committee believes that additional information may be necessary

in some cases to verify the appropriate production figure to apply to a

production unit. There have been concerns that some producers have

inflated their production units under past RDP's by reporting

statistics showing higher than actual raisin production. For example,

since diversion certificate tonnage is based on the tons of raisins

delivered per acre during the prior year, producers could inflate their

tonnage by acquiring raisins from another source and adding them to

deliveries from their production units, thereby receiving credit for a

greater amount of raisins than actually produced on the acreage. By

inflating yield figures, producers could receive diversion certificates

equal to more raisins from the reserve pool than they actually would

have produced from those production units.

Thus, the Committee recommended that authority be added to

paragraph (o) of Sec. 989.156 authorizing Committee staff to request

additional documentation to substantiate the tonnage of raisins

produced on any known production unit. This documentation may include

information such as tray count, employee payroll records, prior years'

production for all production units, and insurance records. This

information is maintained by producers in the normal course of

business. Such information for approved production units, in addition

to producers' other known production units, will give Committee staff

another tool to ensure producer compliance with the RDP so that the

integrity of the program is maintained.

This rule also continues to make minor changes to remove obsolete

language in paragraph (s)(1) in Sec. 989.156. That paragraph makes two

references to provisions particular to the 1985 calendar year which

marked the inception of the RDP. Certain parameters regarding dates

particular to 1985 were incorporated into the order's administrative

rules and regulations that are no longer necessary. Thus, those two

references have been removed.

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 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 20 handlers of California raisins who are

subject to regulation under the order and approximately 4,500 raisin

producers in the regulated 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 having annual receipts of

less than $500,000. No more than 8 handlers, and a majority of

producers, of California raisins may be classified as small entities.

Twelve of the 20 handlers

[[Page 4371]]

subject to regulation have annual sales estimated to be at least

$5,000,000, and the remaining 8 handlers have sales less than

$5,000,000, excluding receipts from any other sources.

This rule continues to modify the RDP currently authorized under

Sec. 989.56 of the Federal marketing order for California raisins.

Under the RDP, the Committee issues diversion certificates to producers

who have removed grapes in accordance with Sec. 989.156 to reduce

raisin production and bring raisin supplies more closely in line with

market needs. Such certificates represent an amount of reserve tonnage

raisins equal to the amount of raisins diverted. Diversion certificates

may be submitted by producers to handlers. Handlers may then redeem

such certificates for reserve pool raisins from the Committee. This

rule continues to make various modifications to Sec. 989.156 of the

order's administrative rules and regulations concerning the RDP. The

changes include: Removing authority for the diversion of partial

production units in an RDP; removing authority for committees of

industry persons to assist the Committee in compliance efforts;

clarifying that spur-pruning is not the only acceptable method of

aborting a crop; and making other changes to strengthen compliance with

the RDP.

Regarding the impact of this rule on affected entities, the changes

are designed to either improve compliance with the RDP, or are

administrative in nature to bring the RDP in line with current industry

practices. None of the changes concerning compliance are expected to

increase the cost of administering the RDP. Also, because most of the

producer applications over the years have been for full production

units, rather than for partial production units, discontinuance of

partial production units as part of the RDP is not expected to increase

appreciably costs to producers. Moreover, the addition of other methods

of diversion, like chemical application, should have a positive affect.

The changes are intended to ensure equity among all those participating

in the RDP and to maintain the integrity of the program. Thus, the

changes are expected to be equally beneficial to all affected entities

who are adhering to the requirements of the program, regardless of

size.

Other alternatives to the RDP procedures were considered by the

raisin industry prior to the Committee's recommendation. The Committee

has an appointed Amendment Subcommittee and Working Group which held

several public meetings throughout the year to consider changes to the

RDP and other order provisions. One alternative considered was to leave

the RDP procedures unchanged. However, the Committee concluded that the

changes established by this rule were necessary to improve the RDP and

better accomplish program objectives. The Working Group also considered

adding to the rules and regulations a scale that would correlate

production ranges with an appropriate production cap for each range, to

help ensure that participating producers did not receive credit for an

inflated amount of tonnage and gain a financial advantage over other

participants. Another related option concerned modifying the rules and

regulations to specify that the production cap should be based on a 5-

year rolling average of production per acre with a maximum of 2.75 tons

per acre. However, Committee staff indicated that data concerning total

industry production on a per acre basis was not available, and the

Working Group decided not to recommend these changes.

The Working Group also considered adding guidelines to the RDP

procedures for hardship cases where producers have been denied

participation in an RDP. For example, there have been cases in past

seasons where producers have submitted an application to participate in

an RDP, curtailed production, and then been denied a certificate from

Committee staff because such producers did not satisfy the terms of the

RDP (i.e., could not document their previous year's production). Under

the current rules and regulations, such producers have the option of

appealing such a decision to the Committee and ultimately the

Department. After some deliberation, the Working Group decided not to

change this appeal process by trying to specify various ``what if''

scenarios in the rules and regulations. The group believed it was best

to address each such situation on a case-by-case basis. Ultimately, the

full Committee concluded that the changes to the RDP previously

discussed were appropriate at this time.

Regarding any additional reporting or recordkeeping requirements,

this rule continues to allow Committee staff to request additional

information from producers participating in an RDP to verify

production. However, such information will only be requested on a case-

by-case basis for use as a compliance tool when the information

submitted on a producer's application concerning a unit's production is

significantly greater than past production on the unit, production on

neighboring units, or the industry norm, or when Committee staff is

unable to verify production based on submitted documentation. For

instance, if a producer had multiple production units of similar size,

and the production on the unit to be diverted was significantly

different than the others, the Committee wants its staff to be

authorized to request additional information such as that mentioned to

verify the accuracy of the producer application. Additional information

may also be needed in cases where the production on a unit to be

diverted is significantly different from that of neighboring production

units. As a third example, if information obtained from weigh tags and

other delivery documents provided to the Committee did not correspond

to the production figure indicated on the producer's application,

Committee staff may request additional information.

This rule requires no new forms and the number of producers for

which additional information may be requested is expected to be small.

According to the Committee staff, only about 5-10 percent of producer

applications raise questions for which additional information may be

needed. During the industry's diversion program in 1996 which provided

for only vine removal (as opposed to allowing spur pruning), 66

producers participated. In 1995's program, which provided for spur

pruning and vine removal, 778 producers participated.

Using the 778 participation figure and the 10 percent figure for

questionable applications, a total of 78 producer applicants might need

to provide additional information. The Committee staff estimated that

it will take each of these participants about 10 minutes to compile,

package, and submit this information. Thus, the time taken by the 78

participants as a group will total about 13 hours, and this time is

currently approved under OMB No. 0581-0178 by the Office of Management

and Budget (OMB) in accordance with the Paperwork Reduction Act of 1995

(44 U.S.C. Chapter 35).

The industry is currently implementing a diversion program for

Zante Currant raisins for the 1997-98 season. The Department is

monitoring producer reporting under the current diversion program.

This rule does not impose a reporting burden above that currently

approved for small and large raisin producers. As with all Federal

marketing order programs, reports and forms are periodically reviewed

to reduce information requirements and duplication by industry and

public sectors. In addition, the Department has not identified any

relevant Federal rules

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that duplicate, overlap, or conflict with this rule.

Further, the Committee's meeting was widely publicized throughout

the raisin industry and all interested persons were invited to attend

the meeting and participate in Committee deliberations. Like all

Committee meetings, the August 14, 1997, meeting was a public meeting

and all entities, both large and small, were able to express their

views on this issue.

Also, the Committee has a number of appointed subcommittees to

review certain issues and make recommendations to the Committee. As

previously mentioned, the Committee's Amendment Working Group met

throughout the year at public meetings to discuss various changes to

the raisin order, including the recommended changes to the RDP. The

Working Group made its recommendations concerning revisions to the RDP

to the Amendment Subcommittee on August 7, 1997. The Amendment

Subcommittee in turn made its recommendations to the full Committee on

August 14, 1997. All of these meetings were public meetings and both

large and small entities were able to participate and express their

views.

As stated earlier and in accordance with the Paperwork Reduction

Act of 1995 (44 U.S.C. Chapter 35), the information collection

requirements contained in this rule have been previously approved by

the Office of Management and Budget (OMB) and have been assigned OMB

No. 0581-0178.

An interim final rule concerning this action was published in the

Federal Register on November 13, 1997. Copies of the rule were mailed

by the Committee's staff to all raisin handlers. In addition, the rule

was made available through the Internet by the Office of the Federal

Register. That rule provided for a 60-day comment period which ended on

January 12, 1998. Interested persons were also invited to submit

information on the information and regulatory impact of the rule. No

comments were received.

After consideration of all relevant material presented, including

the Committee's recommendation, and other information, it is found that

finalizing this interim final rule, as published in the Federal

Register (62 FR 60764; November 13, 1997), will tend to effectuate the

declared policy of the Act.

List of Subjects in 7 CFR Part 989

Grapes, Marketing agreements, Raisins, Reporting and recordkeeping

requirements.

PART 989--RAISINS PRODUCED FROM GRAPES GROWN IN CALIFORNIA

Accordingly, the interim final rule amending 7 CFR part 989 which

was published at 62 FR 60764 on November 13, 1997, is adopted as a

final rule without change.

Dated: January 23, 1998.

Robert C. Keeney,

Deputy Administrator, Fruit and Vegetable Programs.

[FR Doc. 98-2122 Filed 1-28-98; 8:45 am]

BILLING CODE 3410-02-P