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

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 958

[Docket No. FV97-958-2 FR]

Onions Grown in Certain Designated Counties in Idaho, and Malheur

County, Oregon, and Imported Onions; Increase in Grade Requirement for

White Onions

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This rule increases the minimum grade requirement for white

onion varieties handled under the Idaho-Eastern Oregon onion marketing

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

order regulates the handling of onions produced in certain designated

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

locally by the Idaho-Eastern Oregon Onion Committee (Committee). This

rule is intended to improve the marketing of white onions, increase

returns to producers, and provide consumers with higher quality onions.

As provided under section 8e of the Agricultural Marketing Agreement

Act of 1937, the increase in the minimum grade requirement also applies

to all imported varieties of white onions.

EFFECTIVE DATE: November 9, 1998.

FOR FURTHER INFORMATION CONTACT: Robert J. Curry, Northwest Marketing

Field Office, Marketing Order Administration Branch, Fruit and

Vegetable Programs, AMS, USDA, 1220 SW Third Avenue, room 369,

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

7440; and George J. Kelhart, Marketing Order Administration Branch,

Fruit and Vegetable Programs, AMS, USDA, room 2525-S, 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 final rule is issued under Marketing

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

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

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

referred to as the ``order.'' The order is effective under the

Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-

674), hereinafter referred to as the ``Act.''

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

provides that whenever certain specified commodities, including onions,

are regulated under a Federal marketing order, imports of these

commodities into the United States are prohibited unless they meet the

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

those in effect for the domestically produced commodities.

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

conformance with Executive Order 12866.

This final rule has been reviewed under Executive Order 12988,

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

effect. This rule will

[[Page 55780]]

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.

There are no administrative procedures which must be exhausted

prior to any judicial challenge to the provisions of import regulations

issued under section 8e of the Act.

This final rule increases the minimum grade requirement for white

onion varieties grown in the defined production area and handled under

order authority. This rule, unanimously recommended by the Committee at

its June 19, 1997, meeting, requires that all white onion varieties

handled be U.S. No. 1 grade. The previous regulation permitted the

handling of U.S. No. 2 grade and U.S. Commercial grade white onions as

well. As provided under section 8e of the Agricultural Marketing

Agreement Act of 1937, the increase in the minimum grade requirement

also applies to all imported varieties of white onions.

Sections 958.51 and 958.52 of the order provide authority for the

establishment and modification of regulations applicable to the

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

establishes the grade requirements for white onions handled subject to

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

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

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

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

CFR part 51.3195 et seq.). Previously, Sec. 958.328(a)(1) required that

white onion varieties be: (1) U.S. No. 2 or U.S. Commercial, 1 inch

minimum to 2 inches maximum diameter; (2) U.S. No. 2 or U.S.

Commercial, if not more than 30 percent of the lot is comprised of

onions of U.S. No. 1 quality, and at least 1\1/2\ inches minimum

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

This final rule requires that all bags or other containers of white

onion varieties shipped subject to order requirements be either: (1)

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

No. 1, at least 1\1/2\ inches minimum diameter. Commingling of these

two categories is not allowed. Exemptions under the order for special

purpose shipments in Sec. 958.328(e), and shipments qualifying for a

minimum quantity exemption in Sec. 958.328(g), continue to apply when

applicable.

The Committee justification for its recommendation indicated that

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

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

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

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

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

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

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

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

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

following harvest. Based upon comments made by handlers and receivers

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

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

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

onions. The free-on-board (f.o.b.) price for U.S. No. 2 white onions

usually averages about one-half the f.o.b. price of U.S. No. 1 white

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

markets. Furthermore, over the last several years there has been

increased competition from white onions grown in Nevada, Washington,

Colorado, and Utah. The quality produced and marketed from those States

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

Eastern Oregon should help this industry compete more effectively and

increase demand through stronger confidence in the quality of Idaho-

Eastern Oregon white onions.

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

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

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

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

Eastern Oregon onion shipments for this period, including white,

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

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

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

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

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

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

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

Onions from the Idaho-Eastern Oregon production area are shipped

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

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

significant additional volume through February. Preliminary information

pertaining to the 1998/99 shipping season indicates that the f.o.b.

price for onions this season could average $13.10 per hundredweight.

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

certain domestically produced commodities, including onions, are

regulated under a Federal marketing order, imports of that commodity

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

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

marketing orders regulating the same commodity produced in different

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

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

direct competition with the imported commodity. Imports must then meet

the requirements established for that particular area.

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

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

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

the marketing orders were established. The current import regulation

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

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

import regulation specifies that imported onions must meet the

requirements of the Idaho-Eastern Oregon onion marketing order during

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

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

rule changes the import requirements for the period June 5 through

March 9 of each marketing year to provide that all

[[Page 55781]]

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

changes are required in the language of Sec. 980.117, all white onion

varieties imported during this period are required to meet the modified

grade requirement.

White onions are imported into the United States throughout the

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

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

States from November through July, with the heaviest volumes moving

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

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

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

all imported onions from all sources during the same period was

4,040,004 hundredweight.

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

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

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

hundredweight, imports from Chile totaled 139,927 hundredweight and

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

hundredweight and 20,172 hundredweight, respectively. Also during 1996

and 1997, onion imports from France totaled 82,034 hundredweight and

102,956 hundredweight, imports from Guatemala were 32,540 hundredweight

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

hundredweight and 2,386 hundredweight, Moroccan imports totaled 287

hundredweight and 948 hundredweight, and imports from the Netherlands

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

Pursuant to requirements set forth in the Regulatory Flexibility

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

economic impact of this action on small entities. Accordingly, the 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.

Import regulations issued under the Act are based on those

established under Federal marketing orders which regulate the handling

of domestically produced products.

There are approximately 35 handlers of Idaho-Eastern Oregon onions

who are subject to regulation under the order and approximately 260

onion producers, including approximately 80 producers of white onions,

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

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

final rule. Small agricultural service firms have been defined by the

Small Business Administration (13 CFR 121.601) as those having annual

receipts of less than $5,000,000, and small agricultural producers are

defined as those having annual receipts of less than $500,000.

Approximately 90 percent of the handlers and 70 percent of the

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

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

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

number of the 150 importers could be classified as such.

This final rule increases the minimum grade requirement for white

onion varieties grown in the defined production area and handled under

order authority. This rule, unanimously recommended by the Committee at

its June 19, 1997, meeting, requires that all white onion varieties

handled be U.S. No. 1 grade. The previous regulation permitted the

handling of U.S. No. 2 grade and U.S. Commercial grade white onions as

well. As provided under section 8e of the Agricultural Marketing

Agreement Act of 1937, the increase in the minimum grade requirement

also applies to all imported varieties of white onions.

At the meeting the Committee discussed the impact its

recommendation might have on handlers and producers in terms of cost.

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

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

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

harvest.

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

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

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

price of the higher quality U.S. No. 1 grade white onions. The f.o.b.

price for U.S. No. 2 white onions usually averages about one-half the

f.o.b. price of U.S. No. 1 white onions, reflecting the weak demand for

U.S. No. 2 white onions in fresh markets. Furthermore, over the last

several years there has been increased competition from white onions

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

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

white onions grown in Idaho-Eastern Oregon should help this industry

compete more effectively and increase demand through stronger

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

Preliminary information pertaining to the 1998-99 shipping season

indicates that the f.o.b. price for onions this season could average

$13.10 per hundredweight.

While this rule may impose some additional costs on handlers and

producers, the costs are expected to be minimal, and should be offset

by the benefits of the rule. This final rule is expected to similarly

impact importers of white onions. The Committee believes that this

modification will benefit consumers, producers, and handlers. The

benefits of this rule are not expected to be disproportionately greater

or lesser for small entities than for large entities.

As alternatives to the proposal, the Committee discussed both

leaving the regulations unmodified and using voluntary methods to solve

the problem. Both alternatives were rejected. The prevailing opinion

was that market confidence and producer income would continue to erode

without the implementation of this rule. The majority of Committee

members stated that voluntary measures had not been effective in the

past.

Section 8e of the Act requires that when certain domestically

produced commodities, including onions, are regulated under a Federal

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

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

also provides that whenever two or more marketing orders regulating the

same commodity produced in different areas of the United States are

concurrently in effect, the Secretary shall determine which of the

areas produces the commodity in more direct competition with the

imported commodity. Imports must then meet the requirements established

for the particular area.

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

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

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

the orders were established. The current import regulation specifies

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

categories of onions grown in both marketing order areas.

[[Page 55782]]

The import regulations specify that imported onions must meet the

requirements of the Idaho-Eastern Oregon onion order during the period

June 5 through March 9 each season and the South Texas onion order

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

changes the import requirements for the period June 5 through March 9

of each marketing year to provide that all imported white onion

varieties must be U.S. No. 1 grade.

This action does not impose any additional reporting or

recordkeeping requirements on either small or large handlers. As with

all Federal marketing order programs, reports and forms are

periodically reviewed to reduce information requirements and

duplication by industry and public sector agencies.

In addition, the Committee's meeting was widely publicized

throughout the Idaho-Eastern Oregon onion industry and all interested

persons were invited to attend the meeting and participate in Committee

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

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

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

persons were invited to submit information on the regulatory and

informational impacts of this action on small businesses. Five comments

were received and were of the view that the proposed increase in the

minimum grade would not have a negative impact on small entities. These

comments are discussed in more detail later in this document.

The Department has not identified any relevant Federal rules that

duplicate, overlap, or conflict with this rule.

Both an advance notice of proposed rulemaking and a proposed rule

were published in the Federal Register on February 3, 1998 (63 FR

5472), and on July 2, 1998 (63 FR 36194), respectively. Both

publications provided 60-day comment periods to allow interested

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

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

including its probable regulatory and economic impact on small business

entities. Copies of the publications were faxed and mailed to the

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

Oregon onion industry members of the recommendation and proposed

rulemaking. The Department also provided copies of the publications to

the administrative offices of the Walla Walla Sweet Onion Committee,

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

well as to the World Trade Organization, European Commission, Brussels,

Belgium, onion importers on AMS' mailing list, to foreign embassies of

countries known to be interested in exporting onions to the United

States, and to the National Institute of Standards and Technology for

dissemination to the secretariat of the World Trade Organization. In

addition, the Committee's meetings were widely publicized throughout

the Idaho-Eastern Oregon onion industry and all interested persons were

invited to attend and participate on all issues. Copies of the advanced

notice and the proposed rule were also made available on the Internet

by the Department as well as by the U.S. Government Printing Office.

Five comments were received in regard to the advanced notice (63 FR

5472). Four of the comments were supportive of the Committee's

recommendation. The Idaho-Eastern Oregon Onion Committee reaffirmed its

unanimous recommendation in favor of increasing the minimum grade for

white onions from U.S. No. 2 or U.S. Commercial to U.S. No. 1. The

South Texas Onion Committee, administering Marketing Order No. 959,

expressed its support of the recommended modification as well. The

South Texas Onion Committee commented that when the South Texas

industry enters the market in March of each year, the market has been

flooded with inferior quality white onions from both Mexico and Idaho-

Eastern Oregon, and that the onion industries and consumers would

benefit from the minimum grade increase. The minimum grade requirement

for white onion varieties handled under the South Texas marketing order

is a modified U.S. No. 1 grade. This rule will increase the minimum

grade requirement for Idaho-Eastern Oregon onions, resulting in the

respective minimum grade requirements becoming more similar.

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

South Texas onion handler, and an association representing Texas onion

handlers and importers of Mexican onions. Both commenters are located

in Mission, Texas. The handler commented that the recommended

modification would allow the South Texas industry the necessary

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

negative consumer reaction associated with poor quality white onions.

The association also added its support of the recommended minimum grade

increase. The association stated that it has within its membership

approximately 21 South Texas onion handlers, most of whom also import

onions from Mexico. The commenter added that the association has

numerous members who only handle imported produce, including white

onions. The commenter noted further that in the modern competitive

produce market, consumers must be provided with the best quality

produce available.

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

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

the proposal aims at increasing the minimum diameter size requirement

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

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

Committee's recommendation was to increase the minimum grade for Idaho-

Eastern Oregon white onions during the period June 5 through March 9

from U.S. No. 2 to U.S. No. 1, and did not include a modification to

the minimum diameter size itself, which continues to be 1 inch or 2.54

centimeters.

In conjunction with the issuance of the advance notice and request

for comment, the Texas Cooperative Inspection Program monitored white

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

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

determine the quantity of imported white onions potentially impacted by

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

by the Inspection Program indicates that approximately 98 percent of

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

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

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

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

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

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

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

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

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

Five comments were also received in regard to the proposed rule (63

FR 36194). Comments were received from the South Texas Onion Committee,

two Texas produce marketing firms, and two Texas producers. All five

commenters expressed support for the proposal. Furthermore, each

commenter expressed the view that the increase in

[[Page 55783]]

the minimum grade for Idaho-Eastern Oregon white onions will not have a

negative impact on small entities, and that the change will in fact

assist producers from all growing regions in providing better quality

white onions to consumers.

Accordingly, based on the comments received, no changes will be

made to the rule as proposed, except for non-substantive format changes

to conform to the current scheme in Sec. 958.328.

Idaho-Eastern Oregon onion handlers have just begun shipping 1998-

99 crop white onions, and they want to accrue the benefits anticipated.

The Department understands that very little modification must be made

to existing packing equipment and sorting procedures by domestic

handlers and exporters/importers to meet the new grade requirement.

However, sufficient time must be provided for the Idaho-Eastern Oregon

and import onion industries to comply with the new grade requirement

and to allow white onions already picked and packed, and certified as

meeting the lower minimum grade requirements to be shipped. To allow

this to occur and to allow handlers and exporters time to adjust their

sorting and packing lines to meet the higher grade, the Department has

decided that the effective date of this action should be November 9,

1998. This effective date is reasonable and will allow both the

domestic and imported onion industries sufficient time to adjust to the

new grade requirement and to ship any onions that are already picked

and packed.

In view of all of the foregoing, the Department has concluded that

the increase in the minimum grade requirement to U.S. No. 1 will

advance the interests of the Idaho-Eastern Oregon and foreign onion

industries and should be implemented.

In accordance with the section 8e of the Act, the United States

Trade Representative has concurred with the issuance of this final

rule.

After consideration of all relevant matter presented, including the

information and recommendation submitted by the Committee, the comments

received, 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: (1) Idaho-Eastern Oregon onion

handlers are aware of this action, which was unanimously recommended by

the Committee, and are prepared to comply with the new grade

requirement; (2) Handlers, exporters, importers, and other interested

persons were given an opportunity to provide input through the advance

notice of proposed rulemaking and the proposed rule; (3) the grade

increase needs to be in place to cover the balance of the 1998-99 white

onion shipping season so that the Idaho-Eastern Oregon onion industry

can take advantage of the anticipated benefits; and (4) an adequate

amount of time has been provided for handlers and importers to adjust

their packing and sorting lines to meet the higher grade requirement.

List of Subjects in 7 CFR Part 958

Marketing agreements, Onions, Reporting and recordkeeping

requirements.

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

amended as follows:

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

MALHEUR COUNTY, OREGON

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

follows:

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

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

as follows:

Sec. 958.328 Handling Regulations.

* * * * *

(a) Grade and Size requirements--(1) White varieties. Shall be

either:

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

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

neither of these two categories of onions may be commingled in the same

bag or other container.

* * * * *

Dated: October 13, 1998.

Robert C. Keeney,

Deputy Administrator, Fruit and Vegetable Programs.

[FR Doc. 98-27892 Filed 10-16-98; 8:45 am]

BILLING CODE 3410-02-P