Nectarines and Peaches Grown in California; Relaxation of Quality Requirements for Fresh Nectarines and Peaches

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Parts 916 and 917

[Docket No. FV98-916-2 IFR]

Nectarines and Peaches Grown in California; Relaxation of Quality

Requirements for Fresh Nectarines and Peaches

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Interim final rule with request for comments.

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SUMMARY: This interim final rule relaxes ``CA Utility'' quality

requirements for California nectarines and peaches for the remainder of

the 1998 season. The ``CA Utility'' quality requirements are based on

minimum quality requirements established under the California

Agricultural Code, with a limitation on the amount of fruit meeting

U.S. No. 1 or higher grade requirements that may be present in each

container marked ``CA Utility.'' Currently, the ``CA Utility'' quality

requirement permits not more than 30 percent of nectarines or peaches

in any container to meet or exceed the requirements of U.S. No. 1. This

relaxation increases that limitation from 30 percent to not more than

40 percent except that at least one-quarter of the fruit grading U.S.

No. 1 in such containers must have non-scoreable blemishes. A non-

scoreable blemish is a defect that does not cause the fruit to fail

U.S. No. 1 grade requirements. This rule will allow more U.S. No. 1

nectarines and peaches to be packed in containers marked ``CA

Utility,'' and is expected to benefit growers, handlers, and consumers.

DATES: Effective September 23, 1998. Comments received by October 7,

1998 will be considered prior to issuance of any final rule.

ADDRESSES: Interested persons are invited to submit written comments

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

Fruit and Vegetable Programs, AMS, USDA, P.O. Box 96456, room 2523-S,

Washington, DC 20090-6456; Fax: (202) 205-6632; or E-mail:

[email protected]. 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: Terry Vawter, Marketing Specialist, or

Kurt J. Kimmel, Regional Manager, 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, P.O. Box 96456, Room 2525-S,

Washington, D.C. 20090-6456; telephone: (202) 720-2491, Fax: (202) 205-

6632.

SUPPLEMENTARY INFORMATION: This interim final rule is issued under

Marketing Agreement Nos. 124 and 85, and Marketing Order Nos. 916 and

917 [7 CFR Parts 916 and 917] regulating the handling of nectarines and

peaches grown in California, respectively, hereinafter referred to as

the ``orders.'' The orders 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 of Agriculture (Department) is issuing this final

rule in conformance with Executive Order 12866.

This final rule has been reviewed under Executive Order 12866,

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

retroactive effect. This final 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 interim final rule relaxes, for the remainder of the 1998

season, the ``CA Utility'' quality requirement to allow more U.S. No. 1

grade nectarines and peaches in containers marked ``CA Utility''.

Currently, the term ``CA Utility'' means that not more than 30 percent

of the nectarines and peaches in any container meet or exceed the

requirements of the U.S. No. 1 grade, and meet other specified

requirements. This interim final rule increases that percentage to 40

percent except that at least one-quarter of the fruit grading U.S. No.

1 in such containers must have non-scoreable blemishes. A non-scoreable

blemish is a defect that will not cause the fruit to fail to meet the

requirements of U.S. No. 1. This relaxation will be in effect for the

remainder of the 1998 season, and will allow more U.S. No. 1 grade

fruit to be packed as ``CA Utility'' quality.

The Nectarine Administrative Committee (NAC) and Peach Commodity

Committee (PCC) (committees) met on September 15, 1998, to discuss this

relaxation. At that time, the NAC voted without opposition to recommend

the increased percentage of U.S. No. 1 nectarines with non-scoreable

blemishes. The PCC voted with eight in favor and one opposed to

recommend a similar change. The member opposed believed that it was too

late in the season to make such a change, that such a change would

[[Page 50462]]

disadvantage those who had already shipped ``CA Utility'' fruit in

1998, and that more study and analysis of the situation was needed.

Sections 916.52 and 917.41 of the orders authorize the

establishment of grade and quality requirements for nectarines and

peaches, respectively. Prior to the 1996 season, Sec. 916.356 of the

order's rules and regulations required nectarines to meet a modified

U.S. No. 1 grade. Specifically, nectarines were required to meet U.S.

No. 1 grade requirements, except there was a slightly tighter

requirement for scarring and a more liberal allowance for misshapen

fruit. Under Sec. 917.459 of the order's rules and regulations prior to

the 1996 season, peaches were also required to meet the requirements of

U.S. No. 1, except there was a more liberal allowance for open sutures

that were not ``serious damage.''

The minimum grade, size, and maturity requirements in Sec. 916.356

applicable to shipments of California nectarines apply during the

period April 1 through October 31 each year. The minimum grade, size,

and maturity requirements in Sec. 917.459 applicable to shipments of

California peaches apply during the period April 1 through November 23

each year.

Since the 1996 shipping season, the nectarine and peach regulations

have allowed ``CA Utility'' quality to be shipped during the regulatory

periods. Utility quality is a lower quality fruit than U.S. No. 1.

Containers marked as ``CA Utility'' must be inspected by the

Federal or Federal-State Inspection Service and certified as meeting

the ``CA Utility'' quality requirements. Part of the inspection process

is to evaluate the fruit in accordance with the requirements of the

U.S. Standards for Grades of Nectarines, the U.S. Standards for Grades

of Peaches, and the orders. In conducting inspections, inspectors are

required to evaluate various blemishes. Some blemishes are serious or

severe enough to be ``scored'' as defects which are damaging to the

grade of the fruit, while some other blemishes are either not serious

or severe enough to affect the grade of the fruit. In the first

instance, the blemishes are termed ``scoreable'' defects; and in the

second instance, the blemishes are termed ``non-scoreable.'' It is the

recommendation of the committees that such non-scoreable blemishes must

be present on at least one-quarter of the 40 percent of the fruit

grading U.S. No. 1 in boxes marked ``CA Utility.''

While containers marked ``CA Utility'' fruit are subject to relaxed

quality requirements, all other requirements of the orders must be met.

In addition to the grade requirements, Secs. 916.350 and 917.442

require each package or container of nectarines and peaches meeting the

requirements of ``CA Utility,'' to be conspicuously marked with the

words ``CA Utility'' on a visible display panel.

Through August 31 of the 1998 season, shipments of ``CA Utility''

quality nectarines and peaches have averaged about 4 percent of total

shipments. In prior seasons, utility quality shipments have been less

than 2 percent. The increase this season is attributed to quality

problems resulting from heavy early season rains. Also, hail storms

later during the season damaged some fruit rendering it unsalable,

while some fruit sustained only moderate scarring. This is especially

true for nectarines, whose smooth skin does not provide the same

protection as the fuzzy exterior of peaches.

Preliminary studies conducted by the NAC and PCC indicate that some

consumers, retailers, and foreign buyers found the lower-quality fruit

acceptable in some markets. Shipments of ``CA Utility'' nectarines

represented 1.1 percent of all nectarine shipments, or approximately

210,000 boxes in 1996. In 1997, shipments of ``CA Utility'' nectarines

represented 1.1 percent of all nectarine shipments, or approximately

230,000 boxes. Shipments of ``CA Utility'' peaches represented 1.9

percent of all peach shipments, or 366,000 boxes in 1996. In 1997,

shipments of ``CA Utility'' peaches represented 1.0 percent of all

peach shipments, or approximately 217,000 boxes. By contrast, shipments

of ``CA Utility'' nectarines represents 4.0 percent of all nectarine

shipments, or approximately 694,881 boxes by August 31 of the 1998

season. Shipments of ``CA Utility'' peaches represents 4.0 percent of

all peach shipments, or approximately 544,065 boxes by August 31 of the

1998 season.

This rule amends Secs. 916.356 and 917.459 by revising paragraph

(a)(1) under each section to allow not more than 40 percent U.S. No. 1

grade fruit to be packed in containers marked as ``CA Utility'' except

that at least one-quarter of the fruit grading U.S. No. 1 in such

container must have non-scoreable blemishes.

At the September 15, 1998, committee meetings, comments supporting

the recommendation were made by handlers who had experienced incidents

where the percentage of U.S. No. 1 fruit contained in their ``CA

Utility'' boxes was found to be higher than permitted by the orders'

rules and regulations. In those instances, they were forced to repack

the boxes, move blemished fruit to boxes containing U.S. No. 1 fruit,

or discard or donate the fruit.

At least one handler complained that the fruit with non-scoreable

blemishes was unsightly in the type of U.S. No. 1 box he offered to the

marketplace and to his customers. His preference was to place the fruit

with non-scoreable blemishes in boxes marked ``CA Utility.'' The

limitation of not more than 30 percent U.S. No. 1 fruit in boxes marked

``CA Utility'' became a greater hindrance as the season progressed. The

handler noted that an unseasonable morning rain had recently caused

dark stains on the skin of nectarines, rendering them unsuitable for

inclusion in his U.S. No. 1 boxes. He preferred including such fruit in

the ``CA Utility'' boxes, but doing so caused the ``CA Utility'' boxes

to contain more than the 30 percent U.S. No. 1 fruit permissible.

A niche market exists for utility quality fruit and an opportunity

should be made available to market somewhat better quality ``CA

Utility'' fruit to meet demand. Allowing ten percent more U.S. No. 1

grade fruit to be packed as ``CA Utility'' quality requirements would

allow more fruit to be marketed as ``CA Utility'' if handlers prefer to

do so. ``CA Utility'' quality fruit is generally made available at

lower prices to especially benefit lower-income consumers.

Some committee members initially continued to support limiting the

amount of U.S. No. 1 grade fruit that can be included in a utility pack

to 30 percent of the total in any container to maintain differences

between U.S. No. 1 containers and ``CA Utility'' containers. However,

after further discussion, it was agreed that a greater percentage of

U.S. No. 1 in a ``CA Utility'' container would not be confusing if such

fruit is also blemished. It was, therefore, agreed that an additional

10 percent U.S. No. 1 should be permitted except that every piece of

fruit in that 10 percent must possess a non-scoreable blemish. This

relaxation will be in effect for the remainder of the 1998 season. The

boxes marked ``CA Utility'' would be clearly distinct from boxes

containing U.S. No. 1 grade. Failure to provide a clear distinction

could cause confusion in the marketplace and would not meet the goal of

providing low-cost fruit to low-income consumers. It is the opinion of

the committees that this relaxation will not cause confusion among

buyers.

Data on recent production and shipments of California nectarines

and peaches appear to indicate that ``CA Utility'' quality fruit can be

marketed

[[Page 50463]]

successfully without interfering with sales of higher quality fruit. In

fact, some handlers noted that they used the ``CA Utility'' box as a

``safety net.'' Fruit which was not good enough to meet their own

criteria for packing in U.S. No. 1 boxes could be better utilized in

boxes of ``CA Utility.'' The advent of ``CA Utility'' quality

requirements has given handlers increased flexibility to improve the

overall appearance of their U.S. No. 1 shipments.

For these reasons, the NAC and PCC recommended that for the

remainder of the 1998 season that the percentage of U.S. No. 1

nectarines and peaches permitted in containers marked as ``CA Utility''

quality be increased from 30 percent to 40 percent except that at least

one-quarter of the fruit grading U.S. No. 1 in such containers must

have non-scoreable blemishes. This relaxation will be in effect for the

remainder of the 1998 season. The committees also voted to review the

percentages during the winter.

Pursuant to the 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 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 300 California nectarine and peach handlers

subject to regulation under the orders covering nectarines and peaches

grown in California, and about 1,800 producers of these fruits in

California. Small agricultural service firms, which includes handlers,

are defined by the Small Business Administration [13 CFR 121.601] as

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

agricultural producers have been defined as those having annual

receipts of less than $500,000. A majority of these handlers and

producers may be classified as small entities.

Under Secs. 916.356 and 917.459 of the orders, grade and size

requirements are established for fresh shipments of California

nectarines and peaches, respectively. Such requirements are in effect

during the period April 1 through October 31 each year for nectarines,

and April 1 through November 23 for peaches. This rule relaxes, for the

remainder of the 1998 season, the definition of the ``CA Utility''

quality for California nectarines and peaches. The ``CA Utility''

quality requirement is based on minimum quality requirements

established under the California Agricultural Code, with a limitation

on the amount of fruit meeting U.S. No. 1 or higher grade requirements

that may be contained in the utility pack. Currently, the ``CA

Utility'' quality requirement, permits not more than 30 percent of the

peaches in any container to meet or exceed the requirements of a U.S.

No. 1. This relaxation increases that percentage to not more than 40

percent except that at least one-quarter of the fruit grading U.S. No.

1 in such container must have non-scoreable blemishes. A non-scoreable

blemish is a defect that does not cause the fruit to fail to meet U.S.

No. 1 grade requirements. This rule is expected to benefit growers,

handlers, and consumers.

Since the 1996 shipping season, the nectarine and peach regulations

have allowed ``CA Utility'' fruit to be shipped during the regulatory

periods. Prior to the 1996 season, Sec. 916.356 of the order's rules

and regulations required nectarines to meet a modified U.S. No. 1

grade. Specifically, nectarines were required to meet U.S. No. 1 grade

requirements, except there was a slightly tighter requirement for

scarring and a more liberal allowance for misshapen fruit. Under

Sec. 917.459 of the order's rules and regulations prior to the 1996

season, peaches were also required to meet the requirements of a U.S.

No. 1 grade, except there was a more liberal allowance for open sutures

that were not ``serious damage. ``CA Utility'' quality is a lower-

quality fruit than U.S. No. 1 and has been regulated since its

inception in 1996. Through August 31 of the 1998 season, shipments of

utility quality for both nectarines and peaches have averaged about 4

percent of total shipments. In prior seasons, utility quality shipments

have been in the 1 to 2 percent range. The increase so far this season

is mostly attributed to quality problems resulting from heavy early

season rains.

A niche market exists for ``CA Utility'' quality fruit and the

opportunity should be made available to market somewhat better-quality

``CA Utility'' fruit to meet demand.

According to comments made at the meeting on September 15, 1998,

changing the requirements now to allow additional U.S. No. 1 fruit to

be packed in ``CA Utility'' containers would not disadvantage those

handlers who have already finished for the season. Those handlers were

able to put fruit grading U.S. No. 1 into their U.S. No. 1 containers.

Since they would have likely wanted to pack such fruit in these

containers to receive the higher return anticipated for U.S. No. 1

fruit, they have not been harmed economically. Therefore, no harm has

been done by implementing this relaxation this late in the season.

Therefore, the NAC and PCC recommended changing the ``CA Utility''

quality at their September 15, 1998, meetings by modifying the

percentage of U.S. No.1 fruit in each box. The committees also voted to

review the percentages during the winter.

In Secs. 916.350 and 917.442 of the orders regulating nectarines

and peaches, respectively, lower-quality nectarines and peaches were

authorized for shipment as ``CA Utility'' as an experiment for the 1996

season only. Such authorization was continued during the 1997 and 1998

seasons. This rule changes the percentage of U.S. No. 1 nectarines and

peaches which can be packed in a container marked ``CA Utility'' for

the remainder of the 1998 season except that the fruit grading U.S. No.

1 must have a specified percentage of non-scoreable blemishes.

During the 1996 season, the Department authorized the shipment of

nectarines and peaches which were of a lower quality than the minimum

permitted for previous seasons. During 1996, there were approximately

210,000 boxes of nectarines and approximately 366,000 boxes of peaches

packed as ``CA Utility,'' or 1.1 percent and 1.9 percent of fresh

shipments, respectively. During 1997, there were approximately 230,000

boxes of nectarines and 217,000 boxes of peaches packed as ``CA

Utility,'' or 1.1 percent and 1.0 percent of fresh shipments,

respectively. By contrast, shipments of ``CA Utility'' nectarines

represents 4.0 percent of all nectarine shipments, or approximately

694,881 boxes by August 31 of the 1998 season. Shipments of ``CA

Utility'' peaches represents 4.0 percent of all peach shipments, or

approximately 544,065 boxes by August 31 of the 1998 season. Continued

availability of ``CA Utility'' quality fruit with the new relaxations

is expected to have a positive impact on producers, handlers, and

consumers by permitting more nectarines and peaches to be shipped into

fresh market channels, without adversely impacting the market for

higher quality fruit.

The committees considered several alternatives at the meeting. One

alternative was to leave the percentage of U.S. No. 1 nectarines and

peaches permitted in ``CA Utility'' containers

[[Page 50464]]

unchanged. It was determined that alternative would not address the

problem which faced the industry. The NAC and PCC also considered

increasing the 30 percent U.S. No. 1 tolerance to not more than 40

percent or to not more than 50 percent, but determined that such a

relaxation could render ``CA Utility'' boxes less distinctive from U.S.

No. 1 and create confusion in the marketplace. Another alternative

included a requirement that at least 90 percent of the individual

fruits in all boxes marked with ``CA Utility'' possess defects. Such a

requirement would create a box of fruit which would be distinct from

U.S. No. 1 due to a greater number of defects present. However, this

alternative was determined to be unacceptable because it represented

too radical a change of ``CA Utility'' quality given the emergency

nature of the recommendation. This alternative fails to offer a sound

basis for comparison with the current requirement of not more than 30

percent U.S. No. 1 because it does not reference the U.S. No. 1 grade.

Such comparison may be necessary as the committees continue to study

marketplace reaction to changes in quality requirements of ``CA

Utility.'' fruit.

This action does not impose any additional reporting and

recordkeeping requirements on either small or large handlers.

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

periodically reviewed to reduce information requirements and

duplication by industry and public sector agencies. In accordance with

the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), the

information collection requirements that are contained in Parts 916 and

917 have been previously approved by the Office of Management and

Budget (OMB) and have been assigned OMB Nos. 0581-0072 and 0581-0080,

respectively.

The Department has not identified any relevant Federal rules that

duplicate, overlap, or conflict with this rule. However, as previously

stated, nectarines and peaches under the orders have to meet certain

requirements set forth in the standards issued under the Agricultural

Marketing Act of 1946 (7 U.S.C. 1621 through 1627). Standards issued

under the Agricultural Marketing Act of 1946 are otherwise voluntary.

In addition, the committees' meetings were widely publicized

throughout the nectarine and peach industries and all interested

parties were invited to attend the meetings and participate in

committee deliberations on all issues. Like all committee meetings, the

September 15, 1998, meetings were public meetings and all entities,

both large and small, were able to express views on these issues. The

committees themselves are composed of producers, the majority of whom

are small entities. Finally, interested persons are invited to submit

information on the regulatory and informational impacts of this action

on small businesses.

This rule reflects the Department's appraisal of the need to revise

the quality requirements for California nectarines and peaches. The

Department believes that this rule will have a beneficial impact on

producers, handlers, and consumers of California nectarines and

peaches.

After consideration of all relevant matter presented, including the

information and recommendations submitted by the Committees, and other

available information, it is hereby found that this rule, as

hereinafter set forth, will tend 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 this rule should apply to as

many shipments of California nectarines and peaches as possible. The

shipping seasons for both California nectarines and peaches began on

April 1, 1998. To maximize the effectiveness of this relaxation prior

to the end of the season, this rule needs to be in place as soon as

possible. Further, handlers are aware of this rule, which was

recommended and discussed in public meetings of the committees and no

additional time is needed for those handlers to comply with the relaxed

quality requirements. Finally, a 15-day comment period is provided for

in this interim final rule, and any written comments received will be

considered in the finalization of this interim final rule. A 15-day

comment period is appropriate because the end of the season is quickly

approaching.

List of Subjects

7 CFR Part 916

Marketing agreements, Nectarines, Reporting and recordkeeping

requirements.

7 CFR Part 917

Marketing agreements, Peaches, Pears, Reporting and recordkeeping

requirements.

For the reasons set forth in the preamble, 7 CFR Parts 916 and 917

are amended as follows:

1. The authority citation for 7 CFR Parts 916 and 917 continues to

read as follows:

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

PART 916--NECTARINES GROWN IN CALIFORNIA

2. In Sec. 916.356, paragraph (a)(1) introductory text, the last

proviso in the first sentence and the last phrase are revised to read

as follows:

Sec. 916.356 California Nectarine Grade and Size Regulation.

(a) * * *

(1) * * * Provided further, That, during the period September 23,

1998, through October 31, 1998, any handler may handle nectarines if

such nectarines meet ``CA Utility'' quality requirements. The term ``CA

Utility'' means that not more than 40 percent of the nectarines in any

container meet or exceed the requirements of the U.S. No. 1 grade,

except that at least one-quarter of the fruit grading U.S. No. 1 grade

shall have non-scoreable blemishes as determined when applying the U.S.

Standards for Grades of Nectarines; and that such nectarines are mature

and are:

* * * * *

PART 917--FRESH PEARS AND PEACHES GROWN IN CALIFORNIA

3. In Sec. 917.459, paragraph (a)(1) introductory text, the last

proviso in the first sentence and the last phrase are revised to read

as follows:

(a) * * *

(1) * * * Provided further, That during the period September 23,

1998, through November 23, 1998, any handler may handle peaches if such

peaches meet ``CA Utility'' requirements. The term ``CA Utility'' means

that not more than 40 percent of the peaches in any container meet or

exceed the requirements of the U.S. No. 1 grade, except that at least

one-quarter of the fruit grading U.S. No. 1 grade shall have non-

scoreable blemishes as determined when applying the U.S. Standards for

Grades of Peaches; and that such peaches are mature and are:

* * * * *

Dated: September 18, 1998.

Robert C. Keeney,

Deputy Administrator, Fruit and Vegetable Programs.

[FR Doc. 98-25398 Filed 9-21-98; 8:45 am]

BILLING CODE 3410-02-P