Tart Cherries Grown in the States of Michigan, New York, Pennsylvania, Oregon, Utah, Washington, and Wisconsin; Assessment Rate and Establishment of Late Payment and Interest Charges on Delinquent Assessments

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 930

[Docket No. FV97-930-1 FIR]

Tart Cherries Grown in the States of Michigan, New York,

Pennsylvania, Oregon, Utah, Washington, and Wisconsin; Assessment Rate

and Establishment of Late Payment and Interest Charges on Delinquent

Assessments

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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

final rule, with modifications, the provisions of an interim final rule

that established an assessment rate for the 1997-98 and subsequent

fiscal periods to cover expenses incurred by the Cherry Industry

Administrative Board (Board) under Marketing Order No. 930. That rule

also established an interest rate and late payment charge on delinquent

assessments owed by handlers under the tart cherry marketing order. The

Board is responsible for local administration of the marketing order.

Authorization to assess tart cherry handlers will enable the Board to

incur expenses that are reasonable and necessary to administer the

program. The interest rate and late payment charges will contribute to

the efficient operation of the program by ensuring adequate funds are

available to cover budgeted expenses incurred under the marketing

order. The 1997-98 fiscal period covers the period July 1, through June

30. The assessment rate will remain in effect indefinitely unless

modified, suspended, or terminated.

EFFECTIVE DATE: April 23, 1998.

FOR FURTHER INFORMATION CONTACT: Patricia A. Petrella, Marketing

Specialist, or Kenneth G. Johnson, Regional Manager, DC Marketing Field

Office, 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. Small businesses

may request information on compliance with this regulation by

contacting Jay Guerber, Marketing Order Administration Branch, Fruit

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

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

6632.

SUPPLEMENTARY INFORMATION: This rule is issued under Marketing

Agreement and Order No. 930 (7 CFR part 930), regulating the handling

of tart cherries grown in the States of Michigan, New York,

Pennsylvania, Oregon, Utah, Washington, and Wisconsin, 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. Under the marketing order now in effect, tart cherry

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 tart cherries

beginning July 1, 1997, 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.

The tart cherry marketing order in section 930.31 provides that one

of the duties of the Board is to submit to the Secretary a budget for

each fiscal period, prior to the beginning of such period, including a

report explaining the items appearing therein and a recommendation as

to the rates of assessments for such period. The recommendations

concerning the proposed assessment rate are discussed in a public

meeting. Thus, all directly affected persons have an opportunity to

participate and provide input.

At its meeting on January 8 and 9, 1997, the Board unanimously

recommended expenditures of $650,000, and an assessment rate of $0.0025

per pound of tart cherries handled during the 1997-1998 crop year and

subsequent crop years. The recommended expenditure figure covers

expenses for the 1997-98 fiscal period, as well as expenses incurred in

connection with the start-up of the program beginning on January 1,

1997, when the first public meeting of the newly formed Board took

place. The tart cherry marketing order became effective on September

25, 1996. The Department has approved the Board's 1997-98 budget of

expenses.

The Board assessed handlers after the effective date of the interim

final rule concerning assessments, and all assessments were due to the

Board office by November 30, 1997, for this season only. Future

assessment payments will be due to the Board office by October 1 of

each crop year. Major expenditures recommended by the Board for the

1997-98 fiscal period, ending June 30, 1998, and expenditures for the

prior six months, are $25,000 for interest, $175,000 for Board meeting

expenses, $150,000 for salaries, $100,000 for administration, and

$200,000 for compliance. For the six month period from January 1, 1997,

through June 30, 1997, the expenses were $59,000.

The order provides that when an assessment rate based on the number

of

[[Page 14022]]

pounds of cherries handled is established it should provide for

differences in relative market values for various cherry products. The

discussion of this provision in the order promulgation record indicates

that proponents testified that cherries utilized in high value products

such as frozen, canned, or dried cherries should be assessed one rate

while cherries used to make low value products such as juice

concentrate or puree should be assessed at one half that rate.

This rule continues an assessment rate for the 1997-98 and

subsequent fiscal periods at $0.0025 per pound of tart cherries used in

the production of tart cherry products other than juice, juice

concentrate and puree, and $0.00125 per pound for cherries used for

juice, juice concentrate and puree. The Department inadvertently stated

in the preamble of the interim final rule and in the regulatory text

itself that the assessment rate for cherries used for juice, juice

concentrate and puree shall be $0.0125. Such rate should be one half of

$0.0025 which is $0.00125. Such error has been corrected in this rule.

Data from the National Agricultural Statistics Service (NASS)

states that for 1996, tart cherry utilization for juice, wine or brined

uses was 8.0 million pounds for all districts covered under the

marketing order. The total processed amount of tart cherries for the

1996 crop year was 256.1 million pounds. Juice, wine, or brined

represents about 3 percent of the total processed crop. Data for this

season (1997-98) is not available at this time. However, based on the

data from the previous season, it seems that juice, juice concentrate

and puree represent a very small percentage of the crop. Therefore, a

reduced assessment rate for cherries used in such products should have

an insignificant effect on the monies collected for assessments this

season.

The assessment rate recommended by the Board was derived by

dividing anticipated expenses by expected shipments of tart cherries.

Tart cherry shipments for the 1997-98 crop year were estimated at 260

million pounds and were projected to provide $650,000 in assessment

income which, along with interest income, should have been adequate to

cover budgeted expenses. At this time, actual production figures are

available. Crop production for the 1997-98 season is now projected at

278,989,653 pounds. Assessment income, based on this crop, will be

adequate to cover this year's expenses. Funds in any reserve will be

kept within the current approximately one year's operational expenses

permitted by the order (Sec. 930.42(a)).

Section 930.41 also provides that if a handler does not pay an

assessment within the time prescribed by the Board, the assessment may

be made subject to an interest or late payment charge, or both.

This final rule continues an interest rate of 1 percent per month

and a late payment charge equal to 10 percent of the unpaid balance of

the assessment amount due. The interest rate will be applied to any

assessment not paid by the October 1 due date. For the 1997-98 crop

year only, the assessment due date was November 30. Any interest charge

for late assessment payments accrued 30 days after the November 30 due

date and any late fee accrued 90 days after that date. The late payment

fees on an unpaid assessment balance by a handler will be assessed 90

days after the October 1 due date for future seasons.

Section 930.41(a) of the marketing order provides for the payment

by handlers of a pro-rata share of the cost of administering the

program under the order. The payment is in the form of a uniform

assessment rate applied to each handler's cherry acquisitions. In

addition, section 930.41(f) provides that assessments will be

calculated on the basis of pounds handled provided that the formula

adopted by the Board and approved by the Secretary for determining the

rate of assessment will compensate for differences in the number of

pounds of cherries utilized for various cherry products and the

relative market values of such cherry products.

Assessments are the main source of funds to pay Board expenses. The

failure of handlers to pay assessment obligations promptly results in

added expense and operational problems for the Board. Authority was

placed in the order to levy interest and late payment charges on

delinquent assessments. The interest rate and late payment charges in

this final rule are similar to those established under other marketing

orders. In collecting delinquent assessments, the Board would incur the

added expense of sending out additional invoices and contacting each

delinquent handler by phone, in person, or by fax. Nonpayment or late

payment of assessments hampers the operation of the Board.

Any amount paid by the handler will be credited upon receipt in the

Board office. Interest and late payment charges will provide incentive

for handlers to remit assessments in a timely manner, with the intent

of creating a fair and equitable process among all industry handlers.

They will not impose any costs on handlers who pay their assessments on

time, and will contribute to the efficient administration of the

program.

In its deliberations, the Board discussed lower rates when

recommending the interest rate and late payment charge but decided that

prompt payment of assessments by handlers was crucial to the operation

of the program. Therefore, the Board recommended an interest rate and

late payment charge deemed to be sufficient to serve as an incentive to

handlers to be prompt with their payment of assessments.

A proposed rule concerning this action was published in the Federal

Register on July 3, 1997 (62 FR 36020). An interim final rule was

issued by the Department on October 17, 1997, and published in the

Federal Register on Thursday, October 23, 1997 (62 FR 55146). The rule

addressed the comments concerning the proposed rule and was made

available through the Internet by the Office of the Federal Register. A

60-day comment period, which ended on December 22, 1997, was provided

to allow interested persons to respond to a modification of the

proposed rule. The modification provided a different rate of assessment

for cherries used for juice, juice concentrate, or puree.

One comment was received during the comment period in response to

the interim final rule. That comment is discussed later in this rule.

The Regulatory Flexibility Act and Effects on Small Businesses

The Agricultural Marketing Service (AMS) has considered the

economic impact of this action on small entities and has prepared this

final regulatory flexibility analysis. The Regulatory Flexibility Act

(RFA) would allow AMS to certify that regulations do not have a

significant economic impact on a substantial number of small entities.

However, as a matter of general policy, AMS' Fruit and Vegetable

Programs (Programs) no longer opt for such certification, but rather

perform regulatory flexibility analyses for any rulemaking that would

generate the interest of a significant number of small entities.

Performing such analyses shifts the Programs' efforts from determining

whether regulatory flexibility analyses are required to the

consideration of regulatory options and economic impacts.

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

business subject to such actions in order that the small businesses

will not be unduly or disproportionately burdened. Marketing orders

issued pursuant to the

[[Page 14023]]

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 1,220 producers of tart cherries in the

production area and approximately 40 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. The majority of tart cherry producers and handlers may be

classified as small entities.

This rule continues an assessment rate for the 1997-98 and

subsequent fiscal periods to cover expenses of the Board at $0.0025 per

pound of tart cherries used in the production of tart cherry products

other than juice, juice concentrate and puree, and $0.00125 per pound

for cherries used in the production of juice, juice concentrate and

puree.

The Board unanimously recommended expenditures of $650,000 for

expenses incurred during the 1997-98 fiscal period as well as for those

incurred during the start-up period beginning January 1, 1997. From

January 1, 1997, through June 30, 1997, the expenses for this six month

period was $59,000. The expenses for the 1997-98 fiscal period are

projected at $591,000. Tart cherry shipments for the year were

estimated at 260 million pounds, which would have provided $650,000 in

assessment income (260,000,000 pounds at $0.0025 per pound) and would

have been adequate to cover this year's expenses. At this time, actual

production figures are available. Crop production for the 1997-98

season is 278,989,653 pounds, which, even with the reduced assessment

rate for cherries used in juice, juice concentrate, and puree, will

provide adequate assessment income to cover this year's expenses. Funds

in any reserve will be kept within the current approximately one year's

operational expenses permitted by the order (Sec. 930.42(a)).

The Board discussed alternatives when recommending the interest

rate and late payment charge. The Board discussed lower rates, but

decided that prompt payment of assessments by handlers is crucial to

the operation of the program. Therefore, the Board recommended an

interest rate and late payment charge deemed to be sufficient to serve

as an incentive to handlers to be prompt with their payment of

assessments.

Major expenditures recommended for the 18-month period ending in

June 30, 1998, include $25,000 for interest, $175,000 for Board meeting

expenses, $150,000 for salaries, $100,000 for administration, and

$200,000 for program compliance. The $200,000 for compliance was deemed

necessary in the event volume control regulations are implemented

during the 1997-98 season. The Board discussed setting an assessment

rate that would allow for sufficient operation of a volume control

program for the upcoming season. With regards to alternatives, this

rate may be adjusted by the Secretary, if necessary. Accordingly, the

Department believes that since the assessments are necessary to make

funds available to cover the initial costs of implementing the new

order, including operation of a volume control program for this season,

the assessment rate will be as recommended by the Board, and modified

by the Department.

This action will not impose any additional reporting or

recordkeeping on either small or large tart cherry 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 forms for the

operation of the order have been previously approved by the Office of

Management and Budget (OMB) and have been assigned OMB No. 0581-0177.

The interest and late payment charges were also discussed at a

public meeting. The Board believes the interest charge is reasonable.

The late payment charge is high enough to discourage late payments and

encourage the timely payment of assessments by handlers.

This final rule continues to provide an incentive for handlers to

remit assessments in a timely manner, with the intent of creating a

fair and equitable process among all industry handlers. It will not

impose any costs on handlers who pay their assessments on time, and

will contribute to the efficient administration of the program.

Handlers who do not pay their assessments on time would be able to

reap the benefits of Board programs at the expense of others. In

addition, they would be able to utilize funds for their own use that

will otherwise be paid to the Board to finance Board programs. In

effect, this would provide handlers with an interest free loan.

Continuation of the interest and late payment charges will provide

an incentive for handlers to pay assessments on time, which will

improve compliance with the order. It should help minimize actions

taken against handlers who fail to pay assessments on time through

administrative remedies or the Federal courts. This final rule will

remove any economic advantage gained by those handlers who do not pay

on time, thus helping to ensure a program that is equitable to all.

This is also consistent with standard business practices.

While this final rule will impose some costs on handlers, the costs

are in the form of uniform assessments on all handlers. Some of the

additional costs may be passed on to producers. However, these costs

will be offset by the benefits derived by the operation of the

marketing order.

This final rule will not impose any additional reporting or

recordkeeping requirements on either small or large tart cherry

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 final rule. In addition, the Board's meeting was

widely publicized throughout the tart cherry industry and all

interested persons were invited to attend the meeting and participate

in Board deliberations on all issues. Like all Board meetings, the

January 8 and 9, 1997, meeting was a public meeting and all entities,

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

Finally, interested persons were invited to submit information on the

regulatory and informational impacts of this final rule on small

businesses, and none were received on this issue.

The Board discussed alternatives when recommending the interest

rate and late payment charge. The Board discussed lower rates, but

decided that prompt payment of assessments by handlers is crucial to

the operation of the program. Therefore, the Board recommended an

interest rate and late payment charge deemed to be sufficient to serve

as an incentive to handlers to be prompt with their payment of

assessments. The assessment rate, interest rate and late payment charge

established in this final rule will continue in effect indefinitely

unless modified, suspended, or terminated by the Secretary upon

recommendation and information submitted by the Board or other

available information.

Although the assessment rate, interest rate and late payment charge

will be effective for an indefinite period, the Board will continue to

meet prior to or

[[Page 14024]]

during each fiscal period to recommend a budget of expenses and

consider recommendations for modification of the assessment and

interest rates and late payment charge. The dates and times of Board

meetings are available from the Board or the Department. Board meetings

are open to the public and interested persons may express their views

at these meetings. The Department will evaluate Board recommendations

and other available information to determine whether modification of

the assessment or interest rates or late payment charge is needed.

Further rulemaking would be undertaken as necessary. The Board's 1997-

98 budget has already been approved by the Department to allow the

Board to expend funds that they have borrowed. Budgets for subsequent

fiscal periods will be reviewed and, as appropriate, approved by the

Department.

One comment concerning the interim final rule was received. The

commenter urged the Department to not assess cherries used in juice,

juice concentrate, or puree at a different rate. The commenter stated

that the Board considered the differences in the number of pounds of

cherries utilized for various cherry products and the relative market

value of such cherry products in its recommendation. The Board

unanimously recommended that because raw product values for the past

years have been relatively equal for most product uses the assessments

should be based on a single assessment rate for all raw products

delivered. The commenter also stated that the Board considered the

appropriate factors when it needed to consider the recommended

assessment rate, and recommended that a dual assessment rate should not

be imposed.

The commenter further stated that the proponent's original proposal

for a tart cherry marketing order contained provisions for storage

assessments. According to the commenter, the discussion in the record

of the administrative proceeding to formulate the order concerning dual

assessments relates to high and low value fruit as a consequence of

these different costs of storage. The Department, during the

promulgation process, concluded that a collection of a storage

assessment would not be equitable to the industry as a whole and

therefore such assessment was not included in the order since

nonregulated districts would not incur storage expenses. Therefore, the

commenter stated that the discussion on high and low value fruit is no

longer relevant and it is improper and inconsistent for the Department

to rely on such testimony to require a dual assessment rate.

The Department issued the rule to reflect the intent of Sec. 930.41

of the order which states that assessments will be calculated on the

basis of pounds of cherries handled. The order further states that the

formula adopted by the Board and approved by the Secretary for

determining the rate of assessment will compensate for differences in

the number of pounds of cherries utilized for various cherry products

and the relative market values of such cherry products. The proponents

of the order testified during promulgation of the order that there

should be different assessment rates by providing exhibits of how such

assessment rates would work based on the relative market value of

products. Therefore, this part of the comment is denied.

The commenter also stated that no grace period was recommended

under the interest and late payment charge provision. The Department

included a 30-day grace period which would allow assessments due on

October 1 to be paid as late as October 31 without incurring interest

and late payment charges. The commenter stated that handlers' financial

officers would clearly take advantage of this 30-day grace period and

not pay assessments until October 31. However, the Board's period of

heaviest expense is the summer months when harvest is underway and

compliance activities are at their peak. If reserves are not available,

the Board would have to borrow money to operate. It is therefore

important that assessments be paid on the October 1 date as recommended

by the Board.

Based on this comment, the Department is modifying the date when

the interest rate begins to accrue by excluding the 30-day grace

period. Therefore, starting with the 1998-99 crop year, assessments

will be due on October 1 and interest will begin to accrue after

October 1 on any unpaid assessment balance.

After consideration of all relevant material presented, including

the information and recommendation submitted by the Board 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 930

Marketing agreements, Reporting and recordkeeping requirements,

Tart cherries.

Accordingly, the interim final rule amending 7 CFR part 930 which

was published at 62 FR 55146 on October 23, 1997, is adopted as a final

rule with the following changes:

PART 930--TART CHERRIES GROWN IN THE STATES OF MICHIGAN, NEW YORK,

PENNSYLVANIA, OREGON, UTAH, WASHINGTON, AND WISCONSIN

1. The authority citation for 7 CFR Part 930 continues to read as

follows:

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

2. Section 930.141 is amended by revising paragraph (a) and by

removing and reserving paragaph (b) to read as follows:

Sec. 930.141 Delinquent assessments.

(a) Pursuant to Sec. 930.41, the Board shall impose an interest

charge on any handler whose assessment payment has not been received by

October 1 of each crop year. The interest rate shall be a rate of one

percent per month and shall be applied to the unpaid assessment balance

not paid by the October 1 due date. In addition to the interest charge,

the Board shall impose a late payment charge on any handler whose

assessment payment has not been received within 90 days from the due

date of October 1. The late payment charge shall be 10 percent of the

unpaid balance.

3. Section 930.200 is revised to read as follows:

Sec. 930.200 Handler assessment rate.

On and after the effective date of this rule, the assessment rate

imposed on handlers shall be $0.0025 per pound of cherries handled for

tart cherries grown in the production area and utilized in the

production of tart cherry products other than juice, juice concentrate,

or puree. The assessment rate for tart cherries utilized in the

production of juice, juice concentrate, and puree products shall be

$0.00125 per pound. The assessment due date shall be October 1 of each

crop year.

Dated: March 18, 1998.

Robert C. Kenney,

Deputy Administrator, Fruit and Vegetable Programs.

[FR Doc. 98-7512 Filed 3-23-98; 8:45 am]

BILLING CODE 3410-02-P