Kiwifruit Grown in California; Relaxation of Pack Requirements

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 920

[Docket No. FV98-920-4 IFR]

Kiwifruit Grown in California; Relaxation of Pack Requirements

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Interim final rule with request for comments.

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

SUMMARY: This rule relaxes the pack requirements prescribed 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). This rule

increases the size variation tolerance for Size 42 kiwifruit and

increases the maximum number of fruit per 8-pound sample for Sizes 42

through 30. In addition, it suspends, for the 1998-99 season, the

minimum net weight requirements for kiwifruit packed in containers with

cell compartments, cardboard fillers, or molded trays. These changes

were unanimously recommended by the Committee and are expected to

reduce handler packing costs, increase producer returns, and enable

handlers to compete more effectively in the marketplace.

DATES: This document is effective September 4, 1998. The suspension of

Sec. 920.302(a)(4)(iii) is effective September 4, 1998, through July

31, 1999. Comments received prior to November 2, 1998, will be

considered prior to issuance of a final rule.

ADDRESSES: Interested persons are invited to submit written comments

concerning this rule. 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; or E-mail:

[email protected]. 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: Rose M. Aguayo, 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, 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 rule is issued under Marketing Order

No. 920, as amended (7 CFR part 920), 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 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 rule increases the size variation tolerance for Size 42

kiwifruit and increases the maximum number of fruit per 8-pound sample

for Sizes 42 through 30. In addition, it suspends, for the 1998-99

season, the minimum net weight requirements for kiwifruit packed in

containers with cell compartments, cardboard fillers, or molded trays.

These changes were unanimously recommended by the Committee and are

expected to reduce handler packing costs, increase producer returns,

and enable handlers to compete more effectively in the marketplace.

Under the terms of the order, fresh market shipments of kiwifruit

grown in California are required to be inspected and meet grade, size,

maturity, pack, and container requirements. Section 920.52 authorizes

the establishment of pack requirements. Section 920.302(a)(4) of the

order's administrative rules and regulations outlines pack requirements

for fresh shipments of California kiwifruit.

Section 920.302(a)(4)(ii) provides pack requirements for kiwifruit

packed in cell compartments, cardboard fillers, or molded trays and

includes a table that specifies numerical size designations and size

variation tolerances. It also provides pack requirements for kiwifruit

packed in bags, volume fill, or bulk containers, and includes a

separate table that specifies numerical size designations and size

variation tolerances. Paragraph (a)(4)(ii) also provides that not more

than 10 percent, by count, of the containers in any lot and not more

than 5 percent, by count, of kiwifruit in any one container (except

that for Size 42 kiwifruit, the tolerance, by count, in any one

container, may not be more than 10 percent, and except that for Size 45

kiwifruit, the tolerance by count, in any one container, may not be

more than 25

[[Page 46862]]

percent) may fail to meet the requirements of this paragraph.

Section 920.302(a)(4)(iii) provides requirements for fruit packed

in containers with cell compartments, cardboard fillers, or molded

trays and requires that specific minimum net weights per size

designation be met.

Section 920.302(a)(4)(iv) establishes a maximum number of fruit per

8-pound sample for each numerical count size designation for fruit

packed in bags, volume fill, or bulk containers.

The amount of kiwifruit supplied to the domestic market by

California handlers has declined 22 percent, since the 1992-93 season.

In addition, producer prices have steadily declined in spite of a

continuous increase in the U.S. per capita consumption of kiwifruit.

When the order was implemented in 1984, the average Free-on-Board (FOB)

value was $1.14 per pound. This average has steadily decreased to $0.53

per pound for the 1997-98 season. The Committee reviewed FOB values and

determined that the average FOB value for the 1992-93 season through

the 1997-98 season was $0.55 per pound. To address these concerns, the

industry held several industry-wide planning sessions during May and

June 1998.

The Committee subsequently met on July 8, 1998, and unanimously

recommended modifying the pack regulations under Sec. 920.302 as

follows:

(1) Increase the size variation tolerance, from 10 percent, by

count, in any one container, to 25 percent, by count, for Size 42

kiwifruit;

(2) Increase the maximum number of fruit per 8-pound sample for

Sizes 42, 39, 36, 33, and 30 of kiwifruit packed in bags, volume fill,

or bulk containers; and

(3) Temporarily suspend, for the 1998-99 season, the minimum net

weight requirements for kiwifruit packed in containers with cell

compartments, cardboard fillers, or molded trays.

Increase in Size Variation Tolerance for Size 42 Kiwifruit

Currently, a size variation tolerance of \1/4\-inch (6.4 mm)

difference is allowed between the widest and narrowest kiwifruit in any

Size 42 container utilizing cell compartments, cardboard fillers, or

molded trays and a \3/8\-inch (9.5 mm) size variation difference is

allowed between the widest and narrowest kiwifruit packed in a Size 42

bag, volume fill, or bulk container. Not more than 10 percent, by

count, of the containers in any lot and not more than 5 percent, by

count, of kiwifruit in any container may fail to meet the established

size variations for Sizes 39 and larger.

Prior to the 1996-97 season, handlers were experiencing difficulty

meeting the size variation tolerances for Sizes 42 and 45 kiwifruit

because it is difficult to separate the round, narrow fruit from the

flatter, broader fruit. Weight sizers will not separate this fruit

because the fruit may weigh exactly the same yet be of different shapes

requiring them to be packed into different boxes in order to stay

within the size variation requirements. This sizing problem occurs

mostly in 40 series fruit where size variations are often indiscernible

to the eye and calipers are needed to detect differences. Fruit packed

in the 40 series consistently provides lower returns to California

producers than larger sized fruit and also is the most costly to pack.

The Committee determined that the best way to address the sizing

problem was to increase the size variation tolerance, by count, in any

one container, for Sizes 42 and 45 kiwifruit. Section 920.302(a)(4) of

the order's administrative rules and regulations was revised by a final

rule issued September 19, 1997 (52 FR 49128), to include a provision

that increased the size variation tolerance, by count, in any one

container, from 5 percent to 10 percent for Size 42 kiwifruit. That

rule also increased the size variation tolerance, by count, for Size 45

kiwifruit from 10 percent, by count, to 25 percent, by count.

During the 1997-98 season, the increased size variation tolerances

for Sizes 42 and 45 benefitted the industry by easing the packing

burden and reducing costs, while maintaining uniform looking boxes of

fruit desired by customers.

Since the 1997-98 harvest, the industry held several industry-wide

planning sessions and considered ways to reduce handler packing costs,

increase producer returns, and enable handlers to compete more

effectively in the marketplace.

The three recommendations to relax packing requirements made by the

Committee on July 8, 1998, were the final result of these discussions.

The recommendation to increase the size variation tolerance for Size 42

fruit from 10 percent, by count, to 25 percent, by count, was made

because the Committee realized that increasing the number of fruit in

an 8-pound sample for Size 42 fruit would make it difficult for

handlers to meet the established size variation requirements.

Increasing the size variation tolerance for Size 42 fruit will ease the

handler packing burden by adding several more pieces of fruit to the 8-

pound sample, and will reduce handler packing costs.

Additionally, increasing the size variation tolerance for Size 42

from 10 percent, by count, to 25 percent, by count, will increase the

number of kiwifruit that may exceed the \3/8\-inch size variation

requirement in bags, volume fill, or bulk containers. When applied to a

22-pound volume fill container, this increase in the size variation

tolerance will allow approximately 37 pieces of fruit out of 146 to

exceed the \3/8\-inch tolerance versus 15 pieces of fruit per 22-pound

volume fill container at the current 10 percent tolerance level.

Very little Size 42 kiwifruit is packed in single layer containers

with cell compartments, cardboard fillers, or molded trays. However,

Size 42 fruit is packed in 3-layer containers with cell compartments,

cardboard fillers, or molded trays. Increasing the size variation

tolerance to 25 percent, by count, will allow approximately 31 pieces

of fruit out of 126 to exceed the \1/4\-inch tolerance versus the 12

pieces of fruit per 3-layer container at the current 10 percent

tolerance level. Increasing the size variation tolerance for Size 42

fruit will reduce packing costs.

The Committee expects that increasing the size variation tolerance

for Size 42 kiwifruit will reduce packing costs because the additional

tolerance will make it easier to pack round and flat Size 42 fruit

without slowing down the packing line. The Committee anticipates that

producer returns will increase as a portion of the fruit previously

packed as Size 45 will be able to be packed as Size 42. Approximately

75 percent of all California kiwifruit is shipped in 22-pound volume

fill containers. Retailers pay approximately $1.14 more for a 22-pound

volume fill container of Size 42 fruit than for a similar container of

Size 45 fruit. Lastly, the Committee expects this change to benefit the

industry by providing retailers and consumers with uniform containers

of kiwifruit.

Increasing the Maximum Number of Fruit per 8-Pound Sample

Currently, under the rules and regulations, kiwifruit packed in

bags, volume fill, or bulk containers, must not exceed the maximum

number of fruit per an 8-pound sample per numerical count size

designation.

The Committee determined that increasing the maximum number of

fruit per 8-pound sample for Sizes 42 through 30 will increase the

number of fruit packed in each bag, volume-fill, or bulk container and

will help lessen the sizing differences between California

[[Page 46863]]

and imported kiwifruit. The Committee believes that lessening the size

differences should help California handlers compete more effectively in

the marketplace.

The Committee unanimously recommended increasing the maximum number

of fruit per 8-pound sample as shown in the following chart:

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

Maximum number of fruit per

Tray equivalency size designation 8 pound sample

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

21......................................... 22

25......................................... 27

27/28...................................... 30

30......................................... 33 (32)*

33......................................... 36 (35)*

36......................................... 42 (40)*

39......................................... 48 (45)*

42......................................... 53 (50)*

45......................................... 55

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

* Prior number of fruit per 8-pound sample.

This chart is commonly referred to as the ``Size Designation

Chart'' in the industry. Increasing the maximum number of fruit per 8-

pound sample will allow some smaller-sized fruit to be packed into a

larger-size category. This rule allows three more pieces of fruit to be

packed per 8-pound sample in Sizes 42 and 39, two more pieces of fruit

to be packed in Size 36, and one more piece of fruit to be packed in

Sizes 33 and 30. It also reduces the percentage of fruit packed in the

40 series and increases the percentage of fruit packed in sizes 39 and

36, which are the preferred sizes by U.S. retail. Thus, handlers will

be better able to meet the needs of buyers, because kiwifruit sells by

the piece, and buyers desire as much fruit in each container as the

container can comfortably hold. This change does not affect the minimum

size and will not allow fruit currently considered as ``undersized'' to

be packed. The Committee further believes that increasing the maximum

number of fruit in the 8-pound sample will help lessen the sizing

differences between California and imported kiwifruit. Lessening the

size differences should help California handlers compete more

effectively in the marketplace.

Minimum Net Weight Requirements

Currently, fruit packed in containers with cell compartments,

cardboard fillers, or molded trays are required to meet the minimum net

weight requirements as shown in the following chart:

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

Minimum net

weight of

Count designation of fruit fruit

(Pounds)

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

34 or larger.............................................. 7.5

35 to 37.................................................. 7.25

38 to 40.................................................. 6.875

41 to 43.................................................. 6.75

44 and smaller............................................ 6.5

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

Prior to the 1989-90 season, tray weights were voluntary and 73.5

percent of the crop was packed in trays. During the 1989-90 season,

tray weights were mandated, as there were many new packers involved in

the kiwifruit packing process and stricter regulations were viewed as

necessary to provide uniform container weights by size. However, since

that season less and less fruit has been tray packed.

During the 1997-98 season, only 15.5 percent of the crop was packed

into molded trays (singles and three-layers) and less than 1 percent of

this fruit was rejected for failure to meet minimum tray weights. As a

consequence, the Committee believes that minimum tray weight

requirements may no longer be necessary to maintain uniformity in the

marketplace. It further believes that suspension of this requirement

will help reduce tray pack packing costs for both large and small

handlers. Therefore, the Committee unanimously recommended that minimum

net weights for kiwifruit packed in cell compartments, cardboard

fillers, or molded trays be temporarily suspended for the 1998-99

season. The recommended suspension is for one season so the effects of

the suspension can be evaluated. The Committee further recommended that

this suspension begin no later than September 20, 1998, to enable

handlers to make operational decisions in time for the 1998-99 harvest

and shipping season. The 1998-99 season ends July 31, 1999.

Initial Regulatory Flexibility Analysis

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

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 the kiwifruit handlers and

producers may be classified as small entities.

This rule increases the size variation tolerance for Size 42

kiwifruit and increases the maximum number of fruit per 8-pound sample

for Sizes 42 through 30. In addition, it suspends, for the 1998-99

season, the minimum net weight requirements for kiwifruit packed in

containers with cell compartments, cardboard fillers, or molded trays.

These changes were unanimously recommended by the Committee and are

expected to reduce handler packing costs, increase producer returns,

and enable handlers to compete more effectively in the marketplace.

Under the terms of the order, fresh market shipments of kiwifruit

grown in California are required to be inspected and meet grade, size,

maturity, pack, and container requirements. Section 920.52 authorizes

the establishment of pack requirements. Section 920.302(a)(4) of the

order's administrative rules and regulations outlines pack requirements

for fresh shipments of California kiwifruit.

Section 920.302(a)(4)(ii) provides pack requirements for kiwifruit

packed in cell compartments, cardboard fillers, or molded trays and

includes a table that specifies numerical size designations and size

variation tolerances. It also provides pack requirements for kiwifruit

packed in bags, volume fill, or bulk containers, and includes a

separate table that specifies numerical size designations and size

variation tolerances. Paragraph (a)(4)(ii) provides that not more than

10 percent, by count, of the containers in

[[Page 46864]]

any lot and not more than 5 percent, by count, of kiwifruit in any one

container (except that for Size 42 kiwifruit, the tolerance, by count,

in any one container, may not be more than 10 percent, and except that

for Size 45 kiwifruit, the tolerance, by count, in any one container,

may not be more than 25 percent) may fail to meet the requirements of

this paragraph.

Section 920.302(a)(4)(iii) provides requirements for fruit packed

in containers with cell compartments, cardboard fillers, or molded

trays and requires that specific minimum net weights per size

designation be met.

Section 920.302(a)(4)(iv) establishes a maximum number of fruit per

8-pound sample for each numerical count size designation for fruit

packed in bags, volume fill, or bulk containers.

The amount of kiwifruit supplied to the domestic market by

California handlers has declined 22 percent since the 1992-93 season.

In addition, producer prices have steadily declined, in spite of a

continuous increase in the U.S. per capita consumption of kiwifruit.

When the order was implemented in 1984, the average Free-on-Board (FOB)

value was $1.14 per pound. This average has steadily decreased to $0.53

per pound for the 1997-98 season. The Committee reviewed FOB values and

determined that the average FOB value for the 1992-93 season through

the 1997-98 season was $0.55 per pound. To address these concerns, the

industry held several industry-wide planning sessions during May and

June 1998.

The Committee subsequently met on July 8, 1998, and unanimously

recommended modifying Sec. 920.302 of the order's administrative rules

and regulations to make the following changes:

(1) Increase the size variation tolerance, from 10 percent, by

count, in any one container, to 25 percent, by count, for Size 42

kiwifruit;

(2) Increase the maximum number of fruit per 8-pound sample for

Sizes 42, 39, 36, 33, and 30 of kiwifruit packed in bags, volume fill,

or bulk containers; and

(3) Temporarily suspend, for the 1998-99 season, the minimum net

weight requirements for kiwifruit packed in containers with cell

compartments, cardboard fillers, or molded trays.

Increase in Size Variation Tolerance for Size 42 Kiwifruit

Currently, a size variation tolerance of \1/4\-inch (6.4 mm)

difference is allowed between the widest and narrowest kiwifruit in any

Size 42 container utilizing cell compartments, cardboard fillers, or

molded trays and a \3/8\-inch (9.5 mm) size variation difference is

allowed between the widest and narrowest kiwifruit packed in a Size 42

bag, volume fill, or bulk container. Not more than 10 percent, by

count, of the containers in any lot and not more than 5 percent, by

count, of kiwifruit in any container may fail to meet the established

size variations for Sizes 39 and larger.

Prior to the 1996-97 season, handlers were experiencing difficulty

meeting the size variation tolerances for Sizes 42 and 45 kiwifruit

because it is difficult to separate the round, narrow fruit from the

flatter, broader fruit. Weight sizers will not separate this fruit

because the fruit may weigh exactly the same yet be of different shapes

requiring them to be packed into different containers in order to stay

within the size variation requirements. This sizing problem occurs

mostly in 40 series fruit where size variations are often indiscernible

to the eye and calipers are needed to detect differences. Fruit packed

in the 40 series consistently provides lower returns to California

producers than larger sized fruit and also is the most costly to pack.

The Committee determined that the best way to address the sizing

problem was to increase the size variation tolerance, by count, in any

one container, for Sizes 42 and 45 kiwifruit. Section 920.302(a)(4) of

the order's administrative rules and regulations was revised by a final

rule issued September 19, 1997 (52 FR 49128) to include a provision

that increased the size variation tolerance, by count, in any one

container, from 5 percent to 10 percent for Size 42 kiwifruit. That

rule also increased the size variation tolerance, by count, for Size 45

kiwifruit from 10 percent, by count, to 25 percent, by count.

During the 1997-98 season, the increased size variation tolerances

for Sizes 42 and 45 benefitted the industry by easing the packing

burden and reducing costs, while maintaining uniform looking boxes of

fruit desired by customers.

Since the 1997-98 harvest, the industry has held several industry-

wide planning sessions and considered ways to reduce handler packing

costs, increase producer returns, and enable handlers to compete more

effectively in the marketplace. The three recommendations to relax pack

requirements made by the Committee on July 8, 1998, were the final

result of these discussions. The recommendation to increase the size

variation tolerance for Size 42 fruit from 10 percent, by count, to 25

percent, by count, was made because the Committee realized that

increasing the number of fruit in an 8-pound sample for Size 42 fruit

would make it difficult to meet the established size variation

requirements. Increasing the size variation tolerance for Size 42 fruit

will ease the packing burden created by adding several more pieces of

fruit to the 8-pound sample, and will reduce handler packing costs.

Additionally, increasing the size variation tolerance for Size 42

from 10 percent, by count, to 25 percent, by count, will increase the

number of kiwifruit that may exceed the 3/8-inch (9.5 mm) size

variation requirement in bags, volume fill, or bulk containers. When

applied to a 22-pound volume fill container, this increase in the size

variation tolerance will allow approximately 37 pieces of fruit out of

146 to exceed the 3/8-inch (9.5 mm) tolerance versus 15 pieces of fruit

per 22-pound volume fill container at the current 10 percent tolerance

level.

Very little Size 42 kiwifruit is packed in single layer containers

with cell compartments, cardboard fillers, or molded trays. However,

Size 42 fruit is packed in 3-layer containers with cell compartments,

cardboard fillers, or molded trays. Increasing the size variation

tolerance to 25 percent, by count, will allow approximately 31 pieces

of fruit out of 126 to exceed the 1/4-inch (6.4 mm) tolerance versus

the 12 pieces of fruit per 3-layer container at the current 10 percent

tolerance level.

The impact of this change on producers and handlers is expected to

be beneficial for all levels of business, but especially beneficial for

small businesses. Often times, the very small packing operations have

older, outdated sizing equipment which makes it difficult to size

kiwifruit as precisely as to what the order's rules and regulations

require. More hand labor is required in order to ``fine tune'' the

sizing process. More hand labor slows the packing line and increases

packing costs.

The Committee expects that increasing the size variation tolerance

for Size 42 kiwifruit will reduce packing costs because the additional

tolerance will make it easier to pack round and flat Size 42 fruit

without slowing down the packing line. Additionally, the Committee

expects producer returns to increase as a portion of the fruit

previously packed as Size 45 will be able to be packed as Size 42.

Approximately 75 percent of all kiwifruit is shipped in 22-pound volume

fill containers. Retailers pay approximately $1.14 more for a 22-pound

volume fill container of Size 42 fruit than for a similar container of

Size 45 fruit. Lastly, the Committee expects

[[Page 46865]]

this change will benefit the industry by providing retailers and

consumers with uniform containers of kiwifruit.

Increasing the Maximum Number of Fruit per 8-Pound Sample

Currently, under the rules and regulations, kiwifruit packed in

bags, volume fill, or bulk containers, must not exceed the maximum

number of fruit per an 8-pound sample per numerical count size

designation.

The Committee determined that increasing the maximum number of

fruit per 8-pound sample for Sizes 42 through 30 will increase the

number of fruit packed in each bag, volume-fill, or bulk container and

will help lessen the sizing differences between California and imported

kiwifruit. The Committee believes lessening the size differences should

help California handlers compete more effectively in the marketplace.

The Committee unanimously recommended increasing the maximum number

of fruit per 8-pound sample as shown in the following chart:

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

Maximum number of fruit per

Tray equivalency size designation 8 pound sample

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

21......................................... 22

25......................................... 27

27/28...................................... 30

30......................................... * 33 (32)

33......................................... * 36 (35)

36......................................... * 42 (40)

39......................................... * 48 (45)

42......................................... * 53 (50)

45......................................... 55

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

* Prior number of fruit per 8-pound sample.

This chart is commonly referred to as the ``Size Designation

Chart'' in the industry. Increasing the maximum number of fruit per 8-

pound sample will allow some smaller-sized fruit to be packed into a

larger-size category. This rule allows three more pieces of fruit to be

packed per 8-pound sample in Sizes 42 and 39, two more pieces of fruit

to be packed in Size 36, and one more piece of fruit to be packed in

Sizes 33 and 30. It also reduces the percentage of fruit packed in the

40 series and increases the percentage of fruit packed in sizes 39 and

36, which are the preferred sizes by U.S. retail. Thus, handlers will

be better able to meet the needs of buyers because kiwifruit sells by

the piece and buyers desire more fruit in each container. This change

does not affect the minimum size and will not allow fruit currently

considered as ``undersized'' to be packed. The Committee believes

increasing the maximum number of fruit in the 8-pound sample will help

lessen the sizing differences between California and imported

kiwifruit. Lessening the size differences should help California

handlers compete more effectively in the marketplace.

The increase in the maximum number of fruit per 8-pound sample is

not so significant that consumers or retailers will notice a visual

size difference in the fruit being offered. The California Kiwifruit

Commission, which administers a State program utilized to promote

kiwifruit grown in California, has conducted kiwifruit sizing studies

over the past 4 years. These studies show that there is only an average

of \3/32\-inch to \4/32\-inch difference in fruit length between sizes,

and \2/32\-inch to \3/32\-inch difference in fruit width. These

differences are indistinguishable to the eye.

Further, the 1998-99 crop is expected to approximate the 1997-98

crop. The Committee estimated that utilizing the new size designations

will yield the California kiwifruit industry $32,106,395 in FOB value

versus the $30,931,451 received for the 1997-98 season. This is an

additional $1.17 million in FOB value for the 1998-99 season.

The Committee anticipates that these changes will equally benefit

small and large businesses, enable handlers to compete more effectively

in the marketplace, and help increase producer returns.

Minimum Net Weight Requirements

Currently, fruit packed in containers with cell compartments,

cardboard fillers, or molded trays are required to meet the minimum net

weight requirements as shown in the following chart:

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

Minimum net

weight of

Count designation of fruit fruit

(Pounds)

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

34 or larger.............................................. 7.5

35 to 37.................................................. 7.25

38 to 40.................................................. 6.875

41 to 43.................................................. 6.75

44 and smaller............................................ 6.5

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

Prior to the 1989-90 season, tray weights were voluntary and 73.5

percent of the crop was packed in trays. During the 1989-90 season,

tray weights were mandated, as there were many new packers involved in

the kiwifruit packing process and stricter regulations were viewed as

necessary to provide uniformity in tray weights. However, since that

season less and less fruit has been packed in tray style packs.

During the 1997-98 season, only 15.5 percent of the crop was packed

into molded trays (singles and three-layers) and less than 1 percent of

this fruit was rejected for failure to meet minimum tray weights. As a

consequence, the Committee believes that minimum tray weight

requirements may no longer be needed to assure uniform container

weights in the marketplace. It further believes that suspension of this

requirement will help reduce packing costs for both large and small

handlers. Therefore, the Committee unanimously recommended that the

minimum net weights for kiwifruit packed in cell compartments,

cardboard fillers, or molded trays be temporarily suspended for the

1998-99 season. The recommended suspension is for one season so the

effects can be evaluated. The Committee further recommended that the

suspension begin no later than September 20, 1998, to enable handlers

to make operational decisions in time for the 1998-99 harvest and

shipping season. The 1998-99 season ends July 31, 1999.

Packing costs for handlers for a 22-pound volume fill container

range from approximately $0.25 to $0.75 per container. It is

anticipated that the potential cost savings per 22-pound volume fill

container will be around $0.01. The crop estimate for the 1998-99

season is 2,705,000, 22-pound volume fill container equivalents. It is

estimated that the three recommended changes could result in a

potential savings in packing costs for handlers of approximately

$27,000 during the 1998-99 season. The Committee and the Federal-State

Inspection Service determined that these changes will not result in a

reduction in inspection costs as the inspection process is essentially

the same.

There is wide-spread agreement in the industry for the need to

relax pack requirements. The Committee considered other alternatives to

relaxing packing requirements but determined that these suggestions

will not adequately address the industry's problems.

One suggestion was to suspend all pack requirements and to make all

pack requirements voluntary. Another suggestion was to terminate the

order. The Committee did not adopt these suggestions because it

believes they will result in a vast array of packs without uniformity,

and that this will cause disorderly marketing and confusion in the

marketplace. The Committee wants to maintain the reputation California

has established for uniformly packed containers of kiwifruit to prevent

such problems.

Another suggestion presented was that the size markings should be

based

[[Page 46866]]

on the number of pieces of fruit per pound. The Committee did not adopt

this suggestion because it believes such marking practices would

continue to cause inconsistencies in the marketplace. The Committee

considered a suggestion to lower the minimum maturity requirement, but

determined that the current minimum maturity requirement of 6.5 percent

soluble solids was appropriate and should remain unchanged.

Another suggestion presented was to reduce the number of size

designations. Some Committee members thought that fewer size

designations might lessen confusion in the marketplace. The Committee

did not adopt this suggestion because retailers are familiar with the

various size designations utilized by handlers and have not expressed

concerns with the number of size designations.

After considering these alternatives, the Committee recommended

increasing the size variation tolerance for Size 42 kiwifruit,

increasing the maximum number of fruit per 8-pound sample for Sizes 42

through 30, and suspending, for the 1998-99 season, the minimum tray

weight requirements for kiwifruit packed in cell compartments,

cardboard fillers, or molded trays. The Committee expects these

relaxations to pack requirements to reduce handler packing costs,

increase producer returns, and enable handlers to compete more

effectively in the marketplace.

These changes address the marketing and shipping needs of the

kiwifruit industry and are in the interest of handlers, producers,

buyers, and consumers. The impact of these changes on producers and

handlers is expected to be beneficial for all levels of business.

This rule 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 sectors. In addition, the Department has not identified any

relevant Federal rules that duplicate, overlap, or conflict with this

rule.

Further, the Committee's meeting was widely publicized throughout

the kiwifruit industry and all interested persons were invited to

attend the meeting and participate in Committee deliberations. Like all

Committee meetings, the July 8, 1998, meeting was a public meeting and

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

this issue. The Committee itself is composed of 12 members. Three of

these members are handlers and producers, eight are producers only, and

one is a public member. The majority of the Committee members are small

entities.

Finally, interested persons are invited to submit information on

the regulatory and informational impacts of this action on small

businesses.

After consideration of all relevant material presented, including

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

this interim final rule, as hereinafter set forth, will tend to

effectuate the declared policy of the Act.

This rule invites comments on a relaxation of two pack requirements

and the suspension of the minimum net weight requirements currently

prescribed under the California kiwifruit marketing order. Any comments

received will be considered prior to finalization of this rule.

Pursuant to 5 U.S.C. 553, it is also found and determined upon good

cause that it is impracticable, unnecessary, and contrary to the public

interest to give preliminary notice prior to putting this rule into

effect and that good cause exists for not postponing the effective date

of this rule until 30 days after publication in the Federal Register

because: (1) This rule relaxes pack requirements; (2) the 1998-99

harvest is expected to begin the end of September, and this rule should

be in effect before that time so producers and handlers can make plans

to operate under the relaxed requirements; (3) the Committee

unanimously recommended these changes at a public meeting and

interested parties had an opportunity to provide input; and (4) this

rule provides a 60-day comment period and any comments received will be

considered prior to finalization of this rule.

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.

2. Section 920.302 is amended by suspending paragraph (a)(4)(iii)

effective September 4, 1998, through July 31, 1999, and revising the

last sentence of paragraph (a)(4)(ii), and the table in paragraph

(a)(4)(iv) to read as follows:

Sec. 920.302 Grade, size, pack, and container regulations.

(a)* * *

(4)* * *

(ii)* * * Not more than 10 percent, by count of the containers in

any lot and not more than 5 percent, by count, of kiwifruit in any

container, (except that for Sizes 42 and 45 kiwifruit, the tolerance,

by count, in any one container, may not be more than 25 percent) may

fail to meet the requirements of this paragraph.

* * * * *

(iv) * * *

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

Column 2

maximum

number of

Column 1 numerical count size designation fruit per

8-pound

sample

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

21........................................................... 22

25........................................................... 27

27/28........................................................ 30

30........................................................... 33

33........................................................... 36

36........................................................... 42

39........................................................... 48

42........................................................... 53

45........................................................... 55

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

* * * * *

Dated: August 28, 1998.

Robert C. Keeney,

Deputy Administrator, Fruit and Vegetable Programs.

[FR Doc. 98-23711 Filed 9-2-98; 8:45 am]

BILLING CODE 3410-02-P