Tart Cherries Grown in the States of Michigan, et al.; Revision of Exemption Requirements, 22511-22513 [2016-08834]

Agencies

• Agricultural Marketing Service
• DEPARTMENT OF AGRICULTURE

[Federal Register Volume 81, Number 74 (Monday, April 18, 2016)]
[Rules and Regulations]
[Pages 22511-22513]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-08834]



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Federal Register / Vol. 81, No. 74 / Monday, April 18, 2016 / Rules 
and Regulations

[[Page 22511]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 930

[Doc. No. AMS-FV-15-0046; FV15-930-1 FIR]


Tart Cherries Grown in the States of Michigan, et al.; Revision 
of Exemption Requirements

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Affirmation of interim rule as final rule.

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SUMMARY: The Department of Agriculture (USDA) is adopting, as a final 
rule, without change, an interim rule implementing a recommendation 
from the Cherry Industry Administrative Board (Board) that revised the 
exemption provisions under the marketing order for tart cherries grown 
in the States of Michigan, New York, Pennsylvania, Oregon, Utah, 
Washington, and Wisconsin (order). The Board locally administers the 
order and is comprised of growers and handlers operating within the 
production area. The interim rule changed the number of years that new 
market development and market expansion projects are eligible for 
handler diversion credit from one year to three years. The interim rule 
also revised the composition of the subcommittee which reviews 
exemption requests. These changes are intended to encourage handlers to 
participate in new market and market expansion activities to facilitate 
sales and help ensure impartiality during the review process.

DATES: Effective April 19, 2016.

FOR FURTHER INFORMATION CONTACT: Jennie M. Varela, Marketing 
Specialist, or Christian D. Nissen, Regional Director, Southeast 
Marketing Field Office, Marketing Order and Agreement Division, 
Specialty Crops Program, AMS, USDA; Telephone: (863) 324-3375, Fax: 
(863) 291-8614, or Email: Jennie.Varela@ams.usda.gov or 
Christian.Nissen@ams.usda.gov.
    Small businesses may obtain information on complying with this and 
other marketing order regulations by viewing a guide at the following 
Web site: https://www.ams.usda.gov/rules-regulations/moa/small-businesses; or by contacting Antoinette Carter, Marketing Order and 
Agreement Division, Specialty Crops Program, AMS, USDA, 1400 
Independence Avenue SW., STOP 0237, Washington, DC 20250-0237; 
Telephone: (202) 720-2491, Fax: (202) 720-8938, or Email: 
Antoinette.Carter@ams.usda.gov.

SUPPLEMENTARY INFORMATION: This final rule is issued under Marketing 
Order No. 930, as amended (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 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 of Agriculture (USDA) is issuing this rule in 
conformance with Executive Orders 12866, 13563, and 13175.
    This final rule continues in effect the provisions of the interim 
rule that revised the exemption provisions prescribed under the order. 
The interim rule changed the number of years that new market 
development and market expansion projects are eligible for handler 
diversion credit from one year to three years. The interim rule also 
revised the composition of the subcommittee which reviews exemption 
requests. These changes are intended to encourage the use of new market 
development and market expansion activities to facilitate sales and to 
help ensure impartiality during the review process. These changes were 
unanimously recommended by the Board at its meeting on June 25, 2015.
    Section 930.59 of the order authorizes handler diversion. When 
volume regulation is in effect, handlers may fulfill any restricted 
percentage requirement in full or in part by acquiring diversion 
certificates or by voluntarily diverting cherries or cherry products in 
a program approved by the Board, rather than placing cherries in an 
inventory reserve.
    Section 930.159 of the order's administrative rules specifies 
methods of handler diversion, including using cherries or cherry 
products for exempt purposes prescribed under Sec.  930.162. Section 
930.162 establishes the terms and conditions of exemption that must be 
satisfied for handlers to receive diversion certificates for exempt 
uses. Section 930.162(b) defines the activities which qualify for 
exemptions under new market development and market expansion and the 
period for which they are eligible for diversion credit. New market 
development and market expansion activities include, but are not 
limited to, sales of cherries into markets that are not yet 
commercially established, product line extensions, or segmentation of 
markets along geographic or other definable characteristics.
    Section 930.162(d) establishes a Board-appointed subcommittee to 
review the applications for exemption or renewal of exemption and to 
either approve or deny the exemption. Prior to this change, this 
section specified that the subcommittee consist of three members, 
including the Board manager, or a Board member acting in the manager's 
stead, the public member, and one industry person who is not on the 
Board.
    The order provides for the use of volume regulation to stabilize 
prices and improve grower returns during periods of oversupply. At the 
beginning of each season, the Board examines production and sales data 
to determine whether a volume regulation is necessary and, if so, 
announces free and restricted percentages to limit the volume of tart 
cherries on the market. Free percentage cherries can be used to supply 
any available market, including domestic markets for pie filling, water 
packed, and frozen tart cherries. Restricted percentage cherries can be 
placed in reserve or be used to earn diversion credits as prescribed in 
Sec. Sec.  930.159 and 930.162 of the order's administrative rules. 
These activities include, in part, the development of new products, new 
market development and market expansion, the development of export 
markets, and charitable contributions.
    In 2012, the Board made a series of changes to the volume control

[[Page 22512]]

provisions to facilitate the marketing of tart cherries and to help 
lower restrictions during seasons when volume control is implemented. 
One of these changes was to decrease the number of years that new 
market development and market expansion projects are eligible for 
handler diversion credit from three years to one year. The Board 
thought this decrease would continue to encourage new market 
development and market expansion projects while reducing the impact 
these credits had on volume restriction calculations. At that time, new 
market and market expansion sales were not included in the average 
sales figure used to determine optimum supply for volume regulation. 
The Board anticipated the change would shift more volume to sales, 
helping to reduce the calculated surplus and lower the restricted 
percentage.
    In revisiting this change, the Board recognized that the underlying 
rationale for having reduced the duration of diversion credit for new 
market development and market expansion was no longer an issue. Since 
that change, the method for calculating average sales for the purpose 
of volume regulation has been adjusted so that only export sales are 
excluded from the average sales calculation. Consequently, all sales 
from market development and market expansion activities are now 
included as sales when calculating a restriction. Therefore, increasing 
the number of years new market development and market expansion 
projects are eligible to receive diversion credit from one year to 
three years will not significantly impact the calculations for free and 
restricted percentages.
    Further, since limiting these activities to one year, participation 
in new market development and market expansion activities has dropped 
dramatically. In years prior to changing from three years to one year, 
applications for new market activities numbered around 20 to 25 a 
season. During the 2014-15 season, the first season with volume 
regulation under the one-year limitation, applications dropped to 
eight. Handlers stated that it was not worth the time and effort to 
develop one of these projects if the benefit was only for a single 
year. It was reported that the shortened time frame did not allow 
handlers to recoup the resources needed to establish one of these 
projects.
    The Board affirmed its support for new market development and 
market expansion diversion credit programs. Accordingly, the Board 
voted unanimously to change the exemption provisions applicable to 
handler diversion activities by increasing the number of years that new 
market development and market expansion activities are eligible for 
diversion credit back to three years. The Board also noted that 
projects approved for the 2014-15 season would be allowed to continue 
and be subject to the new three-year cycle.
    This action also continues in effect a revision to the composition 
of the subcommittee appointed to review exemption applications. The 
subcommittee was formed to assist Board staff members in reviewing and 
granting exemptions. The subcommittee reviews applications to use 
restricted cherries for activities related to new product development, 
new market development and market expansion, the development of export 
markets, and for experimental purposes. Prior to this change, the 
previous provisions (Sec.  930.162(d)) stated that the subcommittee 
consists of the manager of the Board or a Board member acting in their 
stead, the public member, and one industry member who is not on the 
Board. The Board recommended changing the composition of the 
subcommittee to help ensure impartiality so that no one affiliated with 
a handler was part of the review process.
    Consequently, the Board recommended revising the subcommittee to 
consist of three members, all of whom are not affiliated with a handler 
but have industry knowledge. One of these members shall be the public 
member or the alternate public member, if available to serve. The 
subcommittee will also include a similarly qualified alternate should 
one of the other members be unable to serve.
    The Board made several other recommendations for changes to the 
regulations under the order at its June 25, 2015, meeting. These 
changes are being considered under a separate action.

Final Regulatory Flexibility Analysis

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA) (5 U.S.C. 601-612), 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 
businesses 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.
    There are approximately 600 producers of tart cherries in the 
regulated area and approximately 40 handlers of tart cherries who are 
subject to regulation under the order. Small agricultural producers are 
defined by the Small Business Administration (SBA) as those having 
annual receipts of less than $750,000 and small agricultural service 
firms have been defined as those having annual receipts of less than 
$7,500,000 (13 CFR 121.201).
    According to the National Agricultural Statistics Service and Board 
data, the average annual grower price for tart cherries during the 
2014-15 season was $0.35 per pound, and total utilization was around 
300 million pounds. Therefore, average receipts for tart cherry 
producers were around $175,800, well below the SBA threshold for small 
producers. In 2014, The Food Institute estimated an f.o.b. price of 
$0.96 per pound for frozen tart cherries, which make up the majority of 
processed tart cherries. Using this data, average annual handler 
receipts were about $6.9 million, which is also below the SBA threshold 
for small agricultural service firms. Assuming a normal distribution, 
the majority of producers and handlers of tart cherries may be 
classified as small entities.
    This final rule continues in effect the action that revised Sec.  
930.162 of the regulations regarding exemptions by changing the number 
of years that new market development and market expansion projects are 
eligible for handler diversion credit from one year to three years. 
This rule also continues in effect the revision to the composition of 
the subcommittee which reviews exemption requests. These changes are 
intended to encourage the use of new market development and market 
expansion activities to facilitate sales and to help ensure 
impartiality during the review process. The authority for these actions 
is provided in Sec.  930.59 of the order.
    It is not anticipated that this action will impose additional costs 
on handlers or growers, regardless of size. Rather, this should help 
handlers receive better returns on their new market development and 
market expansion projects by providing additional time for the handlers 
to receive diversion credit for those activities. This should provide 
more opportunity for them to recoup the time and resources required to 
establish these projects.
    In addition, changing the number of years that these projects are 
eligible for

[[Page 22513]]

diversion credits may provide additional incentive for handlers to 
develop these programs and may facilitate additional sales, which could 
improve returns for growers and handlers. Further, the Board does not 
believe that this change significantly impacts the calculations for 
free and restricted percentages.
    The change in composition of the subcommittee is administrative in 
nature and is not expected to result in any additional costs.
    This rule is expected to benefit the industry. The effects of this 
rule are not expected to be disproportionately greater or less for 
small handlers or producers than for larger entities.
    The Board discussed alternatives to these changes, including not 
changing the number of years that new market development and market 
expansion projects were eligible for diversion credit. The Board agreed 
that increasing the number of years that new market development and 
market expansion projects are eligible for diversion credit from one 
year to three years provides handlers with more incentive to utilize 
these programs while not impacting the calculations for free and 
restricted percentages.
    Another alternative considered was maintaining the previous 
composition of the subcommittee responsible for reviewing exemption 
requests. However, the Board wanted to specify that the subcommittee be 
composed of members who are not affiliated with any handler. Therefore, 
for the reasons mentioned above, these alternatives were rejected.
    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
Chapter 35), the order's information collection requirements have been 
previously approved by the Office of Management and Budget (OMB) and 
assigned OMB No. 0581-0177, (Tart Cherries Grown in the States of 
Michigan, New York, Pennsylvania, Oregon, Utah, Washington, and 
Wisconsin). No changes in those requirements as a result of this action 
are necessary. Should any changes become necessary, they would be 
submitted to OMB for approval.
    This 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.
    As noted in the initial regulatory flexibility analysis, USDA has 
not identified any relevant Federal rules that duplicate, overlap, or 
conflict with this final rule. Further, the public comment received 
concerning the proposal did not address the initial regulatory 
flexibility analysis.
    In addition, the Board's meeting was widely publicized throughout 
the tart cherry industry, and all interested persons were invited to 
attend and participate in Board deliberations on all issues. Like all 
Board meetings, the June 25, 2015, meeting was a public meeting, and 
all entities, both large and small, were able to express views on this 
issue.
    An interim rule concerning this action was published in the Federal 
Register on November 5, 2015, (80 FR 68424) and was effective November 
6, 2015. Copies of the rule were sent via email to all Board members 
and tart cherry handlers. Finally, the rule was made available through 
the internet by USDA and the Office of the Federal Register. A 60-day 
comment period ending January 4, 2016, was provided to allow interested 
persons to respond to the proposal.
    One comment was received during the comment period in response to 
the interim rule. The commenter, a producer, supported part of the 
action but offered an alternative to the membership of the 
subcommittee.
    The commenter supported the expansion of handler diversion credits 
for new market development and market expansion projects from one year 
to three years. The commenter agreed with the Board's finding that it 
will encourage growth in the industry.
    Regarding the change to the membership of the approval 
subcommittee, the commenter suggested that membership should be further 
modified to include cherry growers that are not also handlers. However, 
the Board's intent in making the revision to the subcommittee 
requirements was, in part, to ensure impartiality. Consequently, the 
Board recommended that the subcommittee be composed of members who are 
not affiliated with any handler. Even growers who are not handlers 
themselves have a business relationship with the handlers to which they 
sell.
    The additional points in the comment were not relevant to the 
interim rule. Accordingly, no changes will be made to the interim rule, 
based on the comment received. Therefore, for the reasons given in the 
interim rule, we are adopting the interim rule as a final rule, without 
change.
    To view the interim rule and the comment that was received, go to: 
https://www.regulations.gov/#!docketDetail;D=AMS-FV-15-0046.
    This action also affirms information contained in the interim rule 
concerning Executive Orders 12866, 12988, 13175, and 13563; the 
Paperwork Reduction Act (44 U.S.C. Chapter 35); and the E-Gov Act (44 
U.S.C. 101).
    After consideration of all relevant material presented, it is found 
that finalizing the interim rule, without change, as published in the 
Federal Register (80 FR 68424, November 5, 2015) 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.


0
Accordingly, the interim rule that amended 7 CFR part 930 and that was 
published at 80 FR 68424 on November 5, 2015, is adopted as a final 
rule, without change.

    Dated: April 12, 2016.
Elanor Starmer,
Administrator, Agricultural Marketing Service.
[FR Doc. 2016-08834 Filed 4-15-16; 8:45 am]
 BILLING CODE 3410-02-P