Tomatoes Grown in Florida and Imported Tomatoes; Final Rule to Change Minimum Grade Requirements

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Parts 966 and 980

[Docket No. FV98-966-1 FR]

Tomatoes Grown in Florida and Imported Tomatoes; Final Rule to

Change Minimum Grade Requirements

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This final rule increases the minimum grade requirements for

Florida and imported tomatoes. The grade requirements are changed from

U.S. No. 3 to U.S. No. 2. The change in grade requirements will help

the Florida tomato industry meet domestic market needs, increase

returns to producers, and provide consumers with higher quality

tomatoes. Application of the increased grade requirements to imported

tomatoes is required under section 8e of the Agricultural Marketing

Agreement Act of 1937.

EFFECTIVE DATE: March 30, 1998.

FOR FURTHER INFORMATION CONTACT: Christian Nissen, Southeast Marketing

Field Office, Marketing Order Administration Branch, Fruit and

Vegetable Programs, AMS, USDA, 301 Third Street, N.W., Suite 206,

Winter Haven, Florida 33881; telephone: (941) 299-4770, Fax: (941) 299-

5169; or George Kelhart, Marketing Order Administration Branch, Fruit

and Vegetable Programs, AMS, USDA, room 2525-S, P.O. Box 96456,

Washington, DC 20090-6456; telephone (202) 720-2491, Fax: (202) 205-

6632. Small businesses may request information on compliance with this

regulation by contacting Jay Guerber, Marketing Order Administration

Branch, Fruit and Vegetable Programs, AMS, USDA, room 2525-S, P.O. Box

96456, Washington, DC 20090-6456; telephone (202) 720-2491, Fax: (202)

205-6632.

SUPPLEMENTARY INFORMATION: This final rule is issued under Marketing

Agreement No. 125 and Marketing Order No. 966, both as amended (7 CFR

part 966), regulating the handling of tomatoes grown in certain

designated counties in Florida, hereinafter referred to as the

``order.'' The marketing agreement and order 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 rule in

conformance with Executive Order 12866.

This rule has been reviewed under Executive Order 12988, Civil

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

This 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

[[Page 12397]]

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.

Section 8e of the Act specifies that whenever certain specified

commodities, including tomatoes, are regulated under a Federal

marketing order, imports of those commodities must meet the same or

comparable grade, size, quality, and maturity requirements as those in

effect for the domestically produced commodity. 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.

Under the order, tomatoes produced in the production area and

shipped to fresh market channels outside the regulated area are

required to meet grade, size, inspection, and container requirements.

These requirements are specified in Sec. 966.323 of the handling

regulation issued under the order. These requirements apply during the

period October 10 through June 15 each year. The regulated area

includes the portion of the State of Florida which is bounded by the

Suwannee River, the Georgia border, the Atlantic Ocean, and the Gulf of

Mexico. That is, the entire State of Florida, except the panhandle. The

production area is part of the regulated area. Specialty packed red

ripe tomatoes, yellow meated tomatoes, and single and double layer

place packed tomatoes are exempt from container net weight

requirements.

Under Sec. 966.323, all tomatoes, except for pear shaped, paste,

cherry, hydroponic, and greenhouse tomatoes, must be inspected as

specified in the United States Standards for Grades of Fresh Tomatoes

(7 CFR part 51.1855 through 51.1877; standards). Through February 3,

1998, such tomatoes had to be at least 2\8/32\ inches in diameter, and

sized with proper equipment in one or more of the following ranges of

diameters.

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

Inches Inches

Size designation minimum maximum

diameter diameter.

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

Medium............................................. 2\8/32\ 2\17/32\

Large.............................................. 2\16/32\ 2\25/32\

Extra Large........................................ 2\24/32\ .........

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

These size designations and diameter ranges are the same as

specified in Sec. 51.1859 of the standards. All tomatoes in the Medium

size designation were required to grade at least a U.S. No. 2, while

tomatoes in the larger size designations were only required to grade at

least a U.S. No. 3. Section 966.52 of the order provides authority for

the establishment and modification of regulations applicable to the

handling of particular grades, sizes, and size designations of

tomatoes.

This rule increases the minimum grade requirements from U.S. No. 3

to U.S. No. 2 for all tomatoes regardless of size. This change in grade

requirements was recommended by the Florida Tomato Committee

(Committee) on September 5, 1997, by a vote of 10 in favor and 2

opposed. The grade requirement change eliminates shipments of U.S. No.

3 grade tomatoes from the regulated area. The opponents of this change

stated that there were good markets for U.S. No. 3 tomatoes in years of

short supply, and when crop quality was down due to adverse weather

conditions. The members in favor countered stating that during normal

seasons U.S. No. 3 grade tomatoes comprised a small share of total

shipments and that such shipments had a price depressing effect on the

higher quality tomatoes shipped during those seasons.

At the same meeting, the Committee unanimously recommended an

increase in the diameter size requirement for Florida tomatoes from

2\8/32\ inches to 2\9/32\ inches, that the size designations of Medium,

Large, and Extra Large be changed to numeric size designations of

6 x 7, 6 x 6, and 5 x 6, respectively, and that the diameter size

ranges for the designated sizes be increased slightly. These size

ranges are different from those specified in Sec. 51.1859 of the

standards. The minimum size and size designation changes were addressed

in a separate rulemaking action. That action was published in the

Federal Register on October 6, 1997 (62 FR 52047). Interested persons

were invited to submit written comments until October 16, 1997.

Subsequently, the period for comments was reopened until November 5,

1997, by a document published in the Federal Register on October 22,

1997 (62 FR 54809). After evaluating all comments received, the

Department issued a final rule on December 30, 1997, implementing the

recommended size increase and size designation changes. That final rule

was published on January 5, 1998, with the changes effective on

February 4, 1998 (63 FR 139).

The changes in that final rule require tomatoes to be at least 2\9/

32\ inches in diameter, and sized with proper equipment in one or more

of the following ranges of diameters (63 FR 139; January 5, 1998).

These size designations and diameter ranges are not the same as those

specified in Sec. 51.1859 of the standards.

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

Inches Inches

Size designation minimum maximum

diameter diameter

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

6 x 7 (Formerly Medium)............................. 2\9/32\ 2\19/32\

6 x 6 (Formerly Large).............................. 2\17/32\ 2\27/32\

5 x 6 (Formerly Extra Large)........................ 2\25/32\ ........

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

Based on an analysis of markets and demands of buyers, the

Committee believes that increasing the minimum grade from U.S. No. 3 to

U.S. No. 2 will improve the marketing of Florida and foreign produced

tomatoes, and protect the entire market from the price depressing

effects of poorer quality tomatoes from both domestic and foreign

supply sources. The increase in grade requirements is expected to

prevent low-quality tomatoes from reaching the marketplace, and improve

the overall quality of tomatoes in fresh market channels. This is

expected to benefit the marketers of both Florida and imported

tomatoes.

Tomatoes grading U.S. No. 3 must be well developed, may be

misshapen, and cannot be seriously damaged by sunscald (7 CFR 51.1858).

Tomatoes grading U.S. No. 2 have to be well developed, reasonably well-

formed, and free from sunscald (7 CFR 51.1857). Sunscald is an injury

which usually occurs on the sides or upper half of the tomato, but may

occur wherever the rays of the sun strike most directly. Sunscald

results in the formation of a whitish, shiny, blistered area on the

tomato. The affected tissue gradually collapses, forming a slight

sunken area that may become pale yellow, and wrinkle or shrivel as the

tomato ripens. This detracts from the overall quality of the tomato.

The difference between tomatoes grading U.S. No. 3 and U.S. No. 2

with regard to development, shape, and sunscald is especially

noticeable in smaller sized tomatoes, but also noticeable in larger

sized tomatoes. U.S. No. 3 grade tomatoes are generally of very poor

quality, and are not desired by the consumer.

The Committee indicated that when tomatoes of this quality are

offered for sale to consumers in a normal season these tomatoes have an

adverse affect on the demand and sale of other Florida tomatoes. The

increase in grade requirements is expected to improve the quality of

the tomato packs shipped from Florida.

The proponents of the change indicated that the marketplace is

[[Page 12398]]

changing and that the Florida industry has been shipping fewer U.S. No.

3 grade tomatoes than it had in past seasons in response to those

changes. During the last three shipping seasons, the quantity of U.S.

No. 3 grade tomatoes shipped as a percentage of total shipments ranged

from a low of 4.4 percent to a high of 7.6 percent.

At the meeting, the Committee discussed whether eliminating U.S.

No. 3 tomatoes would diminish the quality of the U.S. No. 2 grade pack

by handlers trying to commingle more U.S. No. 3 grade as U.S. No. 2

grade. The proponents acknowledged that some of the tomatoes currently

being sold at the U.S. No. 3 grade could be reworked to make U.S. No. 2

grade. They stated, however, that they were interested in eliminating

the true U.S. No. 3 grade which in normal seasons has tended to detract

from the overall pack and depress prices for higher quality tomatoes.

The grade increase is expected to improve the overall tomato pack,

provide consumers with the quality of tomatoes desired, and, thus,

encourage repeat purchases. In other words, the new grade requirements

will allow handlers to respond better to market preferences which is

expected to benefit producers and handlers of Florida tomatoes.

Section 8e of the Act requires that when certain domestically

produced commodities, including tomatoes, are regulated under a Federal

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

comparable grade, size, quality, or maturity requirements for the

domestically produced commodity. The current import regulations are

specified in 7 CFR 980.212. Similar to the order, regulations apply

during the period October 10 through June 15 when the Florida handling

requirements are in effect. Because this action increases the minimum

grade for domestic tomato shipments, this increase will apply to

imported tomatoes.

Florida tomatoes must be packed in accordance with three specified

size designations, and tomatoes falling into different size

designations may not be commingled in a single container. These pack

restrictions do not apply to imported tomatoes. Because pack

requirements do not apply, different sizes of imported tomatoes may be

commingled in the same container.

Beginning February 4, 1998, and until the effective date of this

final rule import requirements specify that all lots with a minimum

diameter of 2\19/32\ inches and larger shall meet at least a U.S. No. 3

grade. All other tomatoes shall meet at least a U.S. No. 2 grade. Any

lot with more than 10 percent of its tomatoes less than 2\19/32\ inches

in diameter is required to grade at least U.S. No. 2. This final rule

changes these requirements by requiring all lots of imported tomatoes

to grade at least U.S. No. 2, regardless of size.

This change is expected to benefit the marketers of both Florida

and imported tomatoes by providing consumers with the higher quality

tomatoes they desire. The Department contacted a few tomato importers

concerning imports. The importers indicated that they will not have

difficulty meeting the U.S. No. 2 grade requirements. Thus, the

Department believes that the increase will not limit the quantity of

imported tomatoes or place an undue burden on exporters, or importers

of tomatoes. The expected increase in customer satisfaction should

benefit all tomato importers regardless of size.

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. Thus,

this final rule will have small entity orientation, and will impact

both small and large business entities in a manner comparable to those

rules issued under marketing orders.

There are approximately 65 handlers of Florida tomatoes who are

subject to regulation under the order and approximately 75 tomato

producers in the regulated area. In addition, at least 170 importers of

tomatoes are subject to import regulations and would be affected by

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

the Small Business Administration (SBA)(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.

Committee data indicates that approximately 20 percent of the

Florida handlers handle 80 percent of the total volume shipped outside

the regulated area. Based on this information, the shipment information

for the 1996-97 season, and the 1996-97 season average price of $7.97

per 25 pound equivalent carton, the majority of handlers would be

classified as small entities as defined by the SBA. The majority of

producers of Florida tomatoes also may be classified as small entities.

Moreover, the Department believes that most importers may be classified

as small entities.

Under Sec. 966.52 of the Florida tomato marketing order, the

Committee, among other things, has authority to recommend changes in

the minimum grade requirements for tomatoes grown in the defined

production area and handled under the order. This final rule increases

the minimum grade from U.S. No. 3 to U.S. No. 2. As provided under

section 8e of the Agricultural Marketing Agreement Act of 1937, the

grade increase must apply to imported tomatoes.

The Committee recommended the grade increase to improve the

marketing of Florida tomatoes and follow the recent industry trend of

shipping higher grade tomatoes. This trend is in response to a strong

consumer demand for such tomatoes. The Committee noted that a U.S. No.

3 grade tomato can have a negative impact on the market for higher

quality tomatoes.

According to the Committee, when supplies are not short or crop

quality is not lowered due to adverse weather conditions, U.S. No. 3

grade tomatoes comprise a small share of total shipments. During the

last three shipping seasons, the quantity of U.S. No. 3 grade shipped

as a percentage of total shipments ranged from a low of 4.4 percent to

a high of 7.6 percent. Thus, the increase in the minimum grade

requirements is not expected to significantly impact the total number

of Florida shipments. It is, however, expected to have a positive

effect in the marketplace by providing a strong price base for the

industry. As mentioned earlier, the Committee believes that U.S. No.

3's have a price depressing effect on higher grade shipments.

According to the Committee, during the 1996-97 season, about 47.9

million 25 pound equivalents were shipped from Florida. Of that amount,

only 4.9 percent were U.S. No. 3 grade. The value of all sales during

that season totaled about $381.4 million. The value of the U.S. No. 3

grade tomatoes totaled about $16.6 million, or about 4.4 percent of

total sales during that season. In 1995-96, the total of all tomatoes

shipped was 47.3 million 25 pound

[[Page 12399]]

equivalents. The U.S. No. 3 grade portion was 7.9 percent. That season,

the value of all sales totaled about $369.7 million, and the U.S. No.

3's comprised 7.6 percent of the total value. The percentages for the

1994-95 season were similar with U.S. No. 3's making up about 6.8

percent of the total shipments, and the sales value of the U.S. No. 3

grade making up about 6.1 percent of the total value. That season,

total industry shipments totaled about 55.5 million 25 pound

equivalents, and the total value was about $388.3 million.

The Committee also noted that a recent voluntary elimination of

U.S. No. 3 grade by the industry had been successful in strengthening

the market and in supporting grower returns. This action is expected to

continue those successes. Without an increase in grade requirements,

the Committee believes that an erosion of market confidence and

producer returns could occur.

The raising of the minimum grade from U.S. No. 3 to U.S. No. 2 is

expected to impact all handlers uniformly, whether small or large,

because all handlers, regardless of size, currently pack about the same

percentage of U.S. No. 3 grade tomatoes. The benefits of the higher

prices resulting from eliminating the U.S. No. 3's will be distributed

evenly among all handlers, and are expected to be greater than the

minimal costs expected to be incurred.

Direct costs to the industry associated with the minimum grade

requirement increase will include sorting and packing line adjustments

to operate under the new requirements. These costs are expected to be

minimal relative to the benefits expected. Other costs will include

possible losses because handlers will no longer be able to ship U.S.

No. 3 grade tomatoes outside of the regulated area, as defined in the

marketing order. However, these losses also are expected to be minimal

because tomatoes lower in quality than U.S. No. 2 could continue to be

shipped within the regulated area, or shipped for processing.

Foreign tomato shippers also have alternative markets for lower

grade tomatoes which should lessen any losses as a result of this

action. That is, foreign tomatoes lower in grade than U.S. No. 2 could

be marketed in locations other than the United States.

Additionally, the marketplace price and quality benefits expected

for Florida growers and handlers as a result of this action will also

benefit exporters and importers of tomatoes. Consumers will also

benefit as a result of the higher quality product available in the

marketplace. As mentioned earlier, the benefits of this rule are not

expected to be disproportionately greater or lesser for small entities

than for large entities.

The Committee discussed alternatives to this recommendation,

including leaving the grade requirements unchanged. However, after

thoroughly discussing the issue the majority of the Committee members

agreed that the grade increase was necessary to improve pack appearance

and effectively compete in the present market. During the discussion,

most Committee members acknowledged that U.S. No. 3 grade tomatoes

could be important to the market in years of short supply and lower

than normal quality resulting from adverse weather conditions. However,

those members also pointed out that during normal seasons U.S. No. 3

tomatoes were not popular in the marketplace, and that the lower grade

had a price depressing effect on better grade tomatoes.

Mexico is the largest exporter of tomatoes to the United States.

Over the last 10 years, Mexican exports to the United States averaged

32,527,000 containers of 25 pound equivalents per season (October 5-

July 5) and comprised about 99 percent of all imported tomatoes to the

United States during that time. Total imports during that period

averaged 32,752,000 containers of 25 pound equivalents (October 5-July

5). Some of the imports from Mexico may have been transhipped to

Canada. Small quantities of tomatoes are imported from Caribbean Basin

countries. Domestic shipments for the past 10 years averaged

108,577,000 containers of 25 pound equivalents (October 5-July 5).

Florida shipments comprised about 48 percent of the total shipments for

the same period. This information is from AMS Market News Branch data

that most closely approximates the Florida shipping season.

The grade increase is expected to benefit the marketers of both

Florida and imported tomatoes by providing consumers with higher

quality tomatoes. The Department contacted a few tomato importers

concerning imports. The importers indicated that they will not have

undue difficulty meeting the higher grade requirements. Also,

Department fresh products inspectors at the Port of Nogales, Arizona,

the port where most Mexican produced tomatoes enter the United States,

estimated that only 2 to 3 percent of the total tomato imports from

Mexico were U.S. No. 3 grade. The remainder were U.S. No. 2 grade and

higher. Thus, the Department believes that the increase will not limit

the quantity of imported tomatoes or place an undue burden on

exporters, or importers of tomatoes. The expected increase in customer

satisfaction and more positive marketplace atmosphere resulting from

providing the desired quality should benefit all tomato importers

regardless of size.

This action will not impose any additional reporting or record

keeping 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.

The Department has not identified any relevant Federal rules that

duplicate, overlap or conflict with this proposed rule.

In addition, the Committee's meeting was widely publicized

throughout the Florida tomato industry, and all interested persons were

invited to attend the meeting and participate in Committee

deliberations on all issues. Like all Committee meetings, the September

5, 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. One comment

on the regulatory impacts of this action was received from a handler of

Florida tomatoes and is discussed below.

The proposed rule regarding this action was published in the

Federal Register on December 18, 1997 (62 FR 66312). Interested persons

were invited to submit written comments until January 20, 1998. Copies

of the proposed rule were faxed and mailed to all known interested

persons. Also, the rule was made available through the Internet by the

Office of the Federal Register. A total of 11 comments were received.

Seven favorable comments were received. One comment was received

from a voluntary agricultural cooperative association of Florida tomato

producers representing about 90 percent of the total volume of tomatoes

produced under the marketing order each year. Another comment was

received from a cooperative agricultural association composed of first

handlers of fresh Florida tomatoes grown in Central and South Florida.

An association representing the interests of fruit and vegetable

growers throughout Florida also supported the proposed grade increase.

A comment was received from the Commissioner of the Florida Department

of Agriculture and Consumer Services supporting the

[[Page 12400]]

proposed grade increase. These commenters supported the belief that

increasing the minimum grade requirements from U.S. No. 3 to U.S. No. 2

will help increase customer satisfaction, improve demand, and improve

the overall quality of tomatoes in the market.

The Committee also submitted a favorable comment. In its comment,

the Committee mentioned that the statement in the proposed rule at

column one on page 66313 of the Federal Register (62 FR 66313; December

18, 1997) stating that ``Based on an analysis of markets and demands of

buyers, the Committee believes that increasing the minimum grade from

U.S. No. 3 to U.S. No. 2 would improve the marketing of Florida

tomatoes, and help the industry protect its markets from foreign

competition.'' misleads and confuses the reader. The Committee asserted

that the proposed rule is not intended to limit and, in fact, would not

protect the Florida tomato industry from foreign competition. The

proposal is designed to protect the entire market from the price

depressing effect of poorer quality tomatoes from both domestic and

foreign supply sources and would provide a better product for the

consumer. Accordingly, this statement has been clarified in the final

rule. The Committee also suggested that the use of 25 pound and 25,000

pound equivalents in different parts of the proposed rule could confuse

the reader, and suggested that only 25 pound equivalents be used

because this is the common standard used by the Florida industry.

Appropriate modifications have been made in response to these suggested

changes.

Another favorable comment was received from a national

confederation of Mexican vegetable growers indicating that the increase

in requirements for minimum grade to U.S. No. 2 will help improve the

overall quality of tomatoes in the market and will contribute to better

marketing and increase the growers' income.

A final favorable comment was received from a trade association

representing over 100 distributors, shippers, brokers, and affiliated

companies who are directly involved with the receipt, handling, and

sale of perishable agricultural commodities grown in the Republic of

Mexico. This comment supported the proposal to increase the minimum

grade requirement to U.S. No. 2, but expressed the belief that the

proposed change does not tighten quality restrictions enough. The trade

association requested the Department to establish a minimum grade of 85

percent U.S. No. 1.

The trade association stated that it strongly agrees that the

presence of U.S. No. 3 tomatoes in the marketplace hurts grower

returns. The comment pointed out that tomatoes grading U.S. No. 2 are

of poor cosmetic quality and this discourages many shoppers from buying

tomatoes. The comment noted that with the rapid expansion of the

availability and affordability of greenhouse-grown tomatoes, field

grown tomatoes are now in direct competition for shelf-space and

consumer demand with greenhouse tomatoes. The comment stated that if

the intent of the proposed rule is to have a positive effect in the

marketplace by providing a strong price base for the industry, the

minimum grade requirement should be tightened to 85 percent U.S. No. 1

or better.

It would not be appropriate to act upon this recommended change at

this time. The recommended change is more restrictive than proposed.

Because of this, AMS believes that further review and analysis is

needed and that notice and comment rulemaking should be used before

implementation. Also, this recommended change has been sent to the

Committee for future consideration.

Four opposition comments were received. These comments were from

handlers of Florida tomatoes, and an import broker. The Florida

handlers stated that this past fall, as well as several occasions last

season, overall tomato demand and price allowed them to pack and sell

all of their U.S. No. 3 grade tomatoes above the minimum price in

effect for Mexican grown tomatoes through the settlement of a trade

action brought against Mexico. One of these handlers indicated that had

the grade increase been implemented earlier, it would have caused an

economic loss to farms in Florida, as they were able to sell all of the

U.S. No. 3 tomatoes they packed. Another handler stated that the

elimination of U.S. No. 3 grade tomatoes would reduce the overall grade

due to commingling of the product, and that the proposal was a step

backward in competing with their international competitors. All three

of the Florida handlers pointed out that there is currently a mechanism

in place under a tomato growers exchange that would remove U.S. No. 3

grade tomatoes from the market under a certain pricing structure.

However, not all Florida production would be covered by this mechanism

at all times. The import broker indicated that there was a market for

lower priced imported U.S. No. 3 grade tomatoes.

As indicated earlier, in making its recommendation the Committee

discussed leaving the grade requirements unchanged. However, after

discussing the merits of this alternative, the majority of the

Committee members agreed that the grade increase was necessary to

improve pack appearance and effectively compete in a market whose

buyers are requesting higher quality product. These members

acknowledged that U.S. No. 3 tomatoes could be important to the market

in years of short supply and lower than normal quality resulting from

adverse weather conditions. They also pointed out that during normal

seasons U.S. No. 3 tomatoes were not popular in the marketplace, and

that the lower grade had a price depressing effect on better grade

tomatoes.

Opposition commenters may have been able to market their U.S. No. 3

grade tomatoes because a small market exists for such tomatoes.

However, the Committee made its recommendation because it believes that

higher quality and the expansion of consumer demand are keys to

improving the tomato industry in the long term. When short term quality

problems occur due to adverse weather or other causes and sufficient

supplies of U.S. No. 2 or better grade tomatoes are not available to

meet market needs, appropriate action could be taken to address such

problems. The Committee could meet and request the Department to

implement emergency rulemaking which would allow handlers to ship

tomatoes lower than U.S. No. 2 grade.

The proponents of the change on the Committee acknowledged that

some of the tomatoes currently being sold at the U.S. No. 3 grade level

could be reworked to make U.S. No. 2 grade. However, they indicated

that they were interested in eliminating the true U.S. No. 3 grade

which has depressed the market for better quality tomatoes in normal

seasons.

Most of the commenters requested that the proposed grade increase

be implemented as soon as possible. The need for prompt implementation

is appropriate because Florida handlers are more than half-way through

the 1997-98 shipping season, and they want to accrue the benefits

anticipated. Moreover, the comment from the trade association

representing importers requested prompt action stating that there is

little modification that must be made to existing packing equipment

that would result in unusual additional expenditures for importers or

packers. However, sufficient time must be provided for the Florida and

import tomato industries to comply with the new grade requirement and

to allow tomatoes already picked and packed, and certified as U.S. No.

3 grade to be shipped. Further, handlers and

[[Page 12401]]

exporters need to adjust their sorting and packing lines to meet the

higher grade requirement. Therefore, the Department has decided that

the effective date of this action should be March 30, 1998. This period

of time is reasonable and consistent with the provisions of the Act,

and will allow both the domestic and imported tomato industries

sufficient time to adjust to the new grade requirement and to ship

commodity that is already picked and packed.

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

increase in the minimum grade requirement from U.S. No. 3 to U.S. No. 2

will advance the interests of the Florida and foreign tomato industries

and should be implemented.

In accordance with 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 and other

available information, and the comments received, it is hereby found

that this rule, as hereinafter set forth, will tend to effectuate the

declared policy of the Act.

Pursuant to 5 U.S.C. 553, it is also found that good cause exists

for not postponing the effective date of this action until 30 days

after publication in the Federal Register because: (1) Florida tomato

handlers are aware of this action, which was discussed at various

industry and association meetings and was recommended by a majority of

the Committee; (2) the Committee meeting was a public meeting and all

interested parties had an opportunity to provide input; (3) the grade

increase needs to be in place as soon as possible to cover the balance

of the 1997-98 shipping season which ends in June; 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

7 CFR Part 966

Marketing agreements, Reporting and recordkeeping requirements,

Tomatoes.

7 CFR Part 980

Food grades and standards, Imports, Marketing agreements, Onions,

Potatoes, Tomatoes.

For the reasons set forth in the preamble, 7 CFR parts 966 and 980

are amended as follows:

1. The authority citation for 7 CFR parts 966 and 980 continues to

read as follows:

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

PART 966--TOMATOES GROWN IN FLORIDA

2. In Sec. 966.323, paragraph(a)(1) is revised to read as follows:

Sec. 966.323 Handling regulation.

* * * * *

(a) Grade, size, container, and inspection requirements. (1) Grade.

Tomatoes shall be graded and meet the requirements specified for U.S.

No. 1, U.S. Combination, or U.S. No. 2 of the U.S. Standards for Grades

of Fresh Tomatoes. When not more than 15 percent of the tomatoes in any

lot fail to meet the requirements of U.S. No. 1 grade and not more than

one-third of this 15 percent (or 5 percent) are comprised of defects

causing very serious damage including not more than 1 percent of

tomatoes which are soft or affected by decay, such tomatoes may be

shipped and designated as at least 85 percent U.S. No. 1 grade.

PART 980--VEGETABLES; IMPORT REGULATIONS

3. In Sec. 980.212, paragraph (b)(1) is revised to read as follows:

Sec. 980.212 Import regulations; tomatoes.

* * * * *

(b) * * *

(1) From October 10 through June 15 of each season, tomatoes

offered for importation shall be at least 2 \9/32\ inches in diameter.

Not more than 10 percent, by count, in any lot may be smaller than the

minimum specified diameter. All lots of tomatoes shall be at least U.S.

No. 2 grade.

* * * * *

Dated: March 9, 1998.

Robert C. Keeney,

Deputy Administrator, Fruit and Vegetable Programs.

[FR Doc. 98-6618 Filed 3-12-98; 8:45 am]

BILLING CODE 3410-02-P