Kiwifruit Grown in California; Decreased Assessment Rate

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 920

[Docket No. FV98-920-3 FIR]

Kiwifruit Grown in California; Decreased Assessment Rate

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

which decreased the assessment rate from $0.0225 per tray or tray

equivalent to $0.05 per 22-pound volume fill container or equivalent of

kiwifruit established for the Kiwifruit Administrative Committee

(Committee) under Marketing Order No. 920 for the 1998-99 and

subsequent fiscal periods. The assessment rate of $0.0225 per tray or

tray equivalent approximates $0.0675 per 22-pound volume fill

container. Thus, the assessment rate of $0.05 per 22-pound volume fill

container is less than the 1997-98 assessment rate. The Committee is

responsible for local administration of the marketing order which

regulates the handling of kiwifruit grown in California. Authorization

to assess kiwifruit handlers enables the Committee to incur expenses

that are reasonable and necessary to administer the program. The fiscal

period began August 1 and ends July 31. The assessment rate will remain

in effect indefinitely unless modified, suspended, or terminated.

EFFECTIVE DATE: December 10, 1998.

FOR FURTHER INFORMATION CONTACT: Toni Sasselli, Marketing Assistant or

Rose M. Aguayo, Marketing Specialist, California Marketing Field

Office, 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 complying 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, DC 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 Order

No. 920, as amended (7 CFR part 920), regulating the handling of

kiwifruit grown in California, hereinafter referred to as the

``order.'' The marketing 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 is issuing this rule in conformance with Executive

Order 12866.

This rule has been reviewed under Executive Order 12988, Civil

Justice Reform. Under the marketing order now in effect, California

kiwifruit handlers are subject to assessments. Funds to administer the

order are derived from such assessments. It is intended that the

assessment rate as issued herein will be applicable to all assessable

kiwifruit beginning August 1, 1998, and continuing until amended,

suspended, or terminated. 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. Such 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 a decrease in the assessment rate and continues

a change in the assessable unit established for the Committee for the

1998-99 and subsequent fiscal periods from $0.0225 per tray or tray

equivalent to $0.05 per 22-pound volume fill container or equivalent.

The assessment rate of $0.0225 per tray or tray equivalent approximates

$0.0675 per 22-pound volume fill container. Thus, the assessment rate

of $0.05 per 22-pound volume fill container for the 1998-99 and

subsequent fiscal periods is less than the 1997-98 assessment rate.

The California kiwifruit marketing order provides authority for the

Committee, with the approval of the Department, to formulate an annual

budget of expenses and collect assessments from handlers to administer

the program. The members of the Committee are producers of California

kiwifruit. They are familiar with the Committee's needs and with the

costs for goods and services in their local area and are thus in a

position to formulate an appropriate budget and assessment rate. The

assessment rate is formulated and discussed in a public meeting. Thus,

all directly affected persons have

[[Page 62924]]

an opportunity to participate and provide input.

For the 1997-98 and subsequent fiscal periods, the Committee

recommended, and the Department approved, an assessment rate that would

continue in effect from fiscal period to fiscal period unless modified,

suspended, or terminated by the Secretary upon recommendation and

information submitted by the Committee or other information available

to the Secretary.

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

1998-99 expenditures of $135,250 and an assessment rate of $0.05 per

22-pound volume fill container or equivalent of kiwifruit. In

comparison, last year's budgeted expenditures were $161,286, and the

assessment rate was $0.0225 per tray equivalent, which approximates

$0.0675 per 22-pound volume fill container. The assessment rate of

$0.05 per 22-pound volume fill container is $0.0175 or 26 percent lower

than the 1997-98 equivalent rate. The Committee voted to reduce 1998-99

budgeted expenditures and the assessment rate to lessen the financial

burden on California kiwifruit handlers.

The Committee recommended changing the assessable unit to a 22-

pound volume fill container or equivalent basis because this container

is now the predominant container being used by handlers within the

industry. Tray packs had been the container of choice in previous

seasons, but handlers have been switching gradually to volume fill

containers.

The Committee owes $32,577 to the California Kiwifruit Commission

(Commission) and plans to pay off the loan during the 1998-99 fiscal

period. The Commission administers a State program utilized to promote

kiwifruit grown in California. The Committee and Commission share staff

and expenses pursuant to an agreement.

During the 1997-98 fiscal period, the Committee borrowed $32,577

from the Commission pursuant to Sec. 920.41 of the order to cover a

funding deficit. Handler assessments received were lower than expected

because the 1997-98 crop of 9 million trays or tray equivalents and

shipments of 8.5 million trays or tray equivalents were smaller than

the Committee anticipated. The Committee had estimated that assessments

would total $225,000 for the 1997-98 fiscal period, and that shipments

for the period would total 10 million trays or tray equivalents.

The following table compares major budget expenditures (in

thousands of dollars) recommended by the Committee for the 1998-99 and

1997-98 fiscal periods:

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

Budget expense categories 1998-99 1997-98

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Administrative Staff and Field Salaries........... 44.2 102.2

Contingency Fund/Operating Reserve................ 29.2 0

Travel, Food and Lodging.......................... 5.0 13.8

Accident and Health Insurance..................... 3.8 12.2

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The assessment rate recommended by the Committee was derived by

considering anticipated expenses, expected shipments of California

kiwifruit, and additional pertinent factors. Kiwifruit shipments for

the year are estimated at 2,705,000 22-pound volume fill containers or

equivalents of kiwifruit, which should provide $135,250 in assessment

income. Income derived from handler assessments will be adequate to

cover budgeted expenses, to reimburse the borrowed funds, and to fund

an adequate reserve. It is anticipated that the assessment rate of

$0.05 per 22-pound volume fill container or equivalent of kiwifruit

handled will provide a reserve of $29,200 at the end of the fiscal

year. Currently, there are no funds in the reserve. Reserve funds will

be kept within 1 fiscal period's expenses, the maximum permitted under

Sec. 920.42 of the order.

The assessment rate will continue in effect indefinitely unless

modified, suspended, or terminated by the Secretary upon recommendation

and information submitted by the Committee or other available

information.

Although this assessment rate is effective for an indefinite

period, the Committee will continue to meet prior to or during each

fiscal period to recommend a budget of expenses and consider

recommendations for modification of the assessment rate. The dates and

times of Committee meetings are available from the Committee or the

Department. Committee meetings are open to the public and interested

persons may express their views at these meetings. The Department will

evaluate Committee recommendations and other available information to

determine whether modification of the assessment rate is needed.

Further rulemaking will be undertaken as necessary. The Committee's

1998-99 budget and those for subsequent fiscal periods will be reviewed

and, as appropriate, approved by the Department.

Pursuant to requirements set forth in the Regulatory Flexibility

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

economic impact of this rule 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 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 450 producers of kiwifruit in the

production area and approximately 60 handlers subject to regulation

under the marketing order. Small agricultural producers have been

defined by the Small Business Administration (13 CFR 121.601) as those

having annual receipts 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 sales of at least $5,000,000, and the remaining 59 handlers

have sales less than $5,000,000, excluding receipts from any other

sources. Ten of the 450 producers subject to regulation have annual

sales of at least $500,000, and the remaining 440 producers have sales

less than $500,000, excluding receipts from any other sources. The

majority of California kiwifruit producers and handlers may be

classified as small entities.

This rule continues a decrease in the assessment rate and continues

a change in the assessable unit established for the Committee for the

1998-99 and subsequent fiscal periods from $0.0225 per tray or tray

equivalent to $0.05 per 22-pound volume fill container or equivalent.

The assessment rate of $0.0225 per tray or tray equivalent approximates

$0.0675 per 22-pound volume fill container. Thus, the assessment rate

of $0.05 per 22-pound volume fill container for the 1998-99 and

subsequent fiscal periods is $0.0175 less than the 1997-98 assessment

rate. The Committee unanimously recommended 1998-99 expenditures of

$135,250. The quantity of assessable kiwifruit for the 1998-99 fiscal

period is estimated at 2,705,000, 22-pound volume fill containers.

Thus, the $0.05 rate should provide $135,250 in assessment income and

be adequate to meet this year's expenses.

The Committee recommended changing the assessable unit to a 22-

pound volume fill container or equivalent basis because this container

is now the predominant container being used by handlers within the

industry.

[[Page 62925]]

Tray packs had been the container of choice in previous seasons, but

handlers have been switching gradually to volume fill containers.

The following table compares major budget expenditures (in

thousands of dollars) recommended by the Committee for the 1998-99 and

1997-98 fiscal years:

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

Budget expense categories 1998-99 1997-98

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

Administrative Staff and Field Salaries........... 44.2 102.2

Contingency Fund/Operating Reserve................ 29.2 0

Travel, Food and Lodging.......................... 5.0 13.8

Accident and Health Insurance..................... 3.8 12.2

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

The Committee owes $32,577 to the California Kiwifruit Commission

(Commission) and plans to pay off the loan during the 1998-99 fiscal

period. The Commission administers a State program utilized to promote

California kiwifruit. The Committee and Commission share staff and

expenses through an agency agreement.

The Committee borrowed the money from the Commission pursuant to

Sec. 920.41 of the order to cover a fund shortage during the 1997-98

fiscal period. Handler assessments received were lower than expected

because the 1997-98 crop of 9 million trays or tray equivalents and

shipments of 8.5 million trays or equivalents were smaller than the

Committee anticipated. The Committee had estimated that assessments

would be $225,000 for the 1997-98 fiscal period and that kiwifruit

shipments would be 10 million trays or equivalents.

To lessen the financial burden on handlers, the Committee voted to

reduce 1998-99 expenditures and the assessment rate. The reduced rate

allows the Committee to meet its expenses, to reimburse the borrowed

funds, and to establish an adequate reserve (estimated to be $29,200 at

the end of the 1998-99 fiscal period). Currently, there are no funds in

the reserve. Section 920.42 of the order provides for a maximum reserve

equal to approximately 1 fiscal period's expenses.

Prior to arriving at this budget, the Committee considered

information from various sources, such as the Committee's Finance and

Assessment Subcommittee. Alternative expense levels and assessment

rates were considered at several industry strategic planning meetings.

The assessment rate of $0.05 per 22-pound volume fill container or

equivalent of assessable kiwifruit was determined by dividing the total

recommended budget for 1998-99 by the quantity of assessable kiwifruit,

estimated at 2,705,000 22-pound volume fill containers or equivalents.

A review of historical information and preliminary information

pertaining to the upcoming fiscal period indicated that the grower

price for the 1998-99 season would be approximately $7.59 per 22-pound

volume fill container or equivalent of kiwifruit. Therefore, the

estimated assessment revenue for the 1998-99 fiscal period as a

percentage of total grower revenue is estimated at 0.7 percent.

This action continues a decrease in the assessment obligation

imposed on handlers. Assessments are applied uniformly on all handlers,

and some of the costs may be passed on to producers. However,

decreasing the assessment rate reduces the burden on handlers, and may

reduce the burden on producers. In addition, the Committee's meeting

was widely publicized throughout the California kiwifruit industry and

all interested persons were invited to attend the meeting and

participate in Committee deliberations on all issues. Like all

Committee meetings, the July 8, 1998, 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.

This action imposes no additional reporting or recordkeeping

requirements on either small or large California 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 sector agencies.

The Department has not identified any relevant Federal rules that

duplicate, overlap, or conflict with this rule.

An interim final rule concerning this action was published in the

Federal Register on August 20, 1998 (63 FR 44541). Copies of that rule

were also mailed or sent via facsimile to all kiwifruit handlers.

Finally, the interim final rule was made available through the Internet

by the Office of the Federal Register. A 60-day comment period was

provided for interested persons to respond to the interim final rule.

The comment period ended on October 19, 1998, and no comments were

received.

After consideration of all relevant material presented, including

the information and recommendation submitted by the Committee 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.

List of Subjects in 7 CFR Part 920

Kiwifruit, Marketing agreements.

For the reasons set forth in the preamble, 7 CFR part 920 is

amended as follows:

PART 920--KIWIFRUIT GROWN IN CALIFORNIA

Accordingly, the interim final rule amending 7 CFR part 920 which

was published at 63 FR 44541 on August 20, 1998, is adopted as a final

rule without change.

Dated: November 4, 1998.

Robert C. Keeney,

Deputy Administrator, Fruit and Vegetable Programs.

[FR Doc. 98-30121 Filed 11-9-98; 8:45 am]

BILLING CODE 3410-02-P