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 FIR]

Nectarines and Peaches Grown in California; Relaxation of Quality

Requirements for Fresh Nectarines and Peaches

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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

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

relaxing ``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.'' The

interim final rule increased that percentage 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 fruit to fail U.S. No. 1 grade

requirements. This rule continues in effect this relaxation for the

remainder of the 1998 season. This rule allows more U.S. No. 1

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

Utility.'' The added packing flexibility provided by this rule is

expected to benefit growers, handlers, and consumers.

EFFECTIVE DATE: November 10, 1998.

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,

or obtain a guide on complying with fruit, vegetable, and specialty

crop marketing agreements and orders 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, or E-mail:

Jay__N__G[email protected]. You may view the marketing agreement and

order small business compliance guide at the following web site: http:/

/www.ams.usda.gov/fv/moab.html.

SUPPLEMENTARY INFORMATION: This 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 is issuing this rule in conformance with Executive

Order 12866.

This rule has been reviewed under Executive Order 12866, 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 continues in effect, for the remainder of the 1998

season, the modification to the orders' administrative rules and

regulations relaxing the ``CA Utility'' quality requirement by allowing

more U.S. No. 1 grade nectarines and peaches in containers marked ``CA

Utility.'' Prior to the publication of an interim final rule (63 FR

50461, September 22, 1998), the term ``CA Utility'' meant that not more

than 30 percent of the nectarines and peaches in any container could

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

fruit meet other specified requirements. The interim final rule

increased 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 is in effect for the remainder of the 1998 season only,

and allows more 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

disadvantage those who had already

[[Page 60210]]

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

a U.S. No. 1 grade, 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 containers of 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 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 was 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,

respectively, shipped which meets 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 averaged about 4 percent of total

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

than 2 percent. The increase this season has been attributed to quality

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

later during the season damaged some fruit and rendered it unsalable,

while some fruit sustained only moderate scarring. This was 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 represented 4.0 percent of all nectarine

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

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

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

1998 season.

The interim final rule amended 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. This

final rule continues in effect that revision.

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 all 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 also noted that an unseasonable morning rain in late summer

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 the relaxation

provided by the interim final rule presented an opportunity for

handlers 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 allowed 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 distinct

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 were also blemished. It was, therefore,

agreed that an additional 10 percent U.S. No. 1 would be permitted

except that every piece of fruit in that 10 percent must possess a non-

scoreable blemish. This relaxation is in effect for the remainder of

the 1998 season. Boxes marked ``CA Utility'' should 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 was

the opinion of the committees that this relaxation would not cause

confusion among buyers.

[[Page 60211]]

Data on recent production and shipments of California nectarines

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

marketed 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 the increased flexibility to improve

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

For these reasons, the NAC and PCC recommended, 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 remains 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 final regulatory flexibility

analysis.

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

business subject to such actions in order that small businesses will

not be unduly or disproportionately burdened. Marketing orders issued

pursuant to the Act, and rules issued thereunder, are unique in that

they are brought about through group action of essentially small

entities acting on their own behalf. Thus, both statutes have small

entity orientation and compatibility.

There are approximately 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 include 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. The interim final rule

relaxed, for the remainder of the 1998 season only, the definition of

``CA Utility'' quality for California nectarines and peaches. 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 contained in the utility pack. Prior to the

publication of the interim final rule, the ``CA Utility'' quality

requirement permitted not more than 30 percent of the nectarines or

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

No. 1. The interim final rule increased 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 continues this relaxation

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

Since the 1996 shipping season, the nectarine and peach regulations

have allowed ``CA Utility'' quality 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 the 1996 season. 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

relaxation provided by the interim final rule presented an opportunity

for handlers 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 to allow additional U.S. No. 1 fruit to be

packed in ``CA Utility'' containers did not disadvantage those handlers

who had 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 was done by

implementing this relaxation that 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. The interim final rule increased the percentage of U.S. No. 1

nectarines and peaches which could 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

represented 4.0 percent of all nectarine shipments, or approximately

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

Utility'' peaches represented 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 increased

percentage of non-scoreable defects is expected to have a positive

impact on producers, handlers, and consumers by

[[Page 60212]]

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 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 failed to offer a sound basis for comparison with the

requirement of not more than 30 percent U.S. No. 1 because it did 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.''

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.

An interim final rule concerning this action was published in the

Federal Register on September 22, 1998. Copies of the rule were made

available to all committee members and nectarine and peach handlers by

the committees' staff. The rule was also made available through the

Internet by the Office of the Federal Register. That rule provided for

a 15-day comment period which ended October 7, 1998. No comments were

received.

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 finalizing the interim

final rule, without change, as published in the Federal Register (63 FR

50461, September 22, 1998) 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 the changes made to the

regulations were to relax the ``California Utility'' quality

requirements for California nectarines and peaches for the remainder of

the 1998 season and the season has ended or will end shortly for these

commodities. Accordingly, this rule should be made final as soon as

possible. Also, a 15-day comment period was provided for in the interim

final rule and no comments were received.

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.

PART 916--NECTARINES GROWN IN CALIFORNIA

Accordingly, the interim final rule amending 7 CFR part 916 which

was published at 63 FR 50461 on September 22, 1998, is adopted as a

final rule without change.

PART 917--FRESH PEARS AND PEACHES GROWN IN CALIFORNIA

Accordingly, the interim final rule amending 7 CFR part 917 which

was published at 63 FR 50461 on September 22, 1998, is adopted as a

final rule without change.

Dated: November 4, 1998.

Robert C. Keeney,

Deputy Administrator, Fruit and Vegetable Programs.

[FR Doc. 98-29937 Filed 11-6-98; 8:45 am]

BILLING CODE 3410-02-P