Tart Cherries Grown in Michigan, New York, Pennsylvania, Oregon, Utah, Washington, and Wisconsin; Secretary's Decision and Referendum Order on Proposed Amendment of Marketing Order No. 930, 13015-13019 [2012-5197]

Agencies

• Agricultural Marketing Service
• DEPARTMENT OF AGRICULTURE

[Federal Register Volume 77, Number 43 (Monday, March 5, 2012)]
[Proposed Rules]
[Pages 13015-13019]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-5197]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 930

[Doc. No. AO-370-A9; 11-0093; AMS-FV-10-0087; FV10-930-5]


Tart Cherries Grown in Michigan, New York, Pennsylvania, Oregon, 
Utah, Washington, and Wisconsin; Secretary's Decision and Referendum 
Order on Proposed Amendment of Marketing Order No. 930

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule and referendum order.

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SUMMARY: This decision proposes amendments to Marketing Order No. 930 
(order), which regulates the handling of tart cherries grown in 
Michigan, New York, Pennsylvania, Oregon, Utah, Washington, and 
Wisconsin and provides growers and processors with the opportunity to 
vote in a referendum to determine if they favor the changes. These 
amendments were proposed by the Cherry Industry Administrative Board 
(CIAB), which is responsible for local administration of the order. 
These amendments would revise: Section 930.10, the definition of 
``Handle''; Section 930.50, ``Marketing Policy'' and Section 930.58, 
``Grower Diversion Privilege.'' The amendments are intended to improve 
the operation and administration of the order.

DATES: The referendum will be conducted from March 19, 2012 to March 
30, 2012. The representative period for the purpose of the referendum 
is July 1, 2010 through June 30, 2011.

FOR FURTHER INFORMATION CONTACT: Parisa Salehi, Marketing Order and 
Agreement Division, Fruit and Vegetable Programs, AMS, USDA, 1400 
Independence Avenue SW., Stop 0237, Washington DC 20250-0237; 
Telephone: (202) 270-9918, Fax: (202) 720-8938, or Email: 
Parisa.Salehi@ams.usda.gov; or Martin Engeler, Marketing Order and 
Agreement Division, Fruit and Vegetable Program, AMS, USDA, 2202 
Monterey Street, Fresno, California 93721; Telephone: (559) 487-5110, 
Fax: (559) 487-5110, or Email: Martin.Engeler@ams.usda.gov.
    Small businesses may request information on this proceeding by 
contacting Laurel May, Marketing Order and Agreement Division, Fruit 
and Vegetable Programs, AMS, USDA, 1400 Independence Avenue SW., Stop 
0237, Washington, DC 20250-0237; Telephone: (202) 205-2830, Fax: (202) 
720-8938, Email: Laurel.May@ams.usda.gov.

SUPPLEMENTARY INFORMATION: Prior documents in this proceeding: Notice 
of Hearing issued on March 4, 2011, and published in the March 14, 
2011, issue of the Federal Register (76 FR 13528). The Recommended 
Decision was issued on November 3, 2011 and published in the November 
9, 2011, issue of the Federal Register (76 FR 69673).
    This action is governed by the provisions of sections 556 and 557 
of title 5 of the United States Code and is therefore excluded from the 
requirements of Executive Order 12866.

Preliminary Statement

    The proposed amendments are based on the record of a public hearing 
held April 20 and 21, 2011, in Grand Rapids, Michigan, and a second 
public hearing held April 26, 2011, in Provo, Utah. The hearing was 
held pursuant to the provisions of the Agricultural Marketing Agreement 
Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as 
the ``Act'', and the applicable rules of practice and procedure 
governing the formulation of marketing agreements and orders (7 CFR 
part 900). Notice of this hearing was published in the Federal Register 
on March 14, 2011 (76 FR 13528). The notice of hearing contained the 
proposal submitted by CIAB and one proposal by the Agricultural 
Marketing Service (AMS). This action is a decision addressing the 
amendments listed in the notice of hearing.
    The proposed amendments were recommended by CIAB and submitted to 
USDA on September 22, 2010.
    The proposed amendments recommended by the CIAB are summarized 
below.
    1. Amendment 1 would revise the term ``handle'' within the order. 
This proposal would revise existing section 930.10, Handle, to exclude 
handler acquisition of grower diversion certificates from definition of 
handle.
    2. Amendment 2 would revise the ``marketing policy'' provisions in 
section 930.50 of the order so that grower-diverted cherries are not 
counted as production in the volume control formula.
    3. Amendment 3 would revise the existing section 930.58, so grower-
diverted cherries are not treated as actual harvested cherries.
    In addition to the proposed amendments to the order, AMS proposed 
to making any additional changes to the order as may be necessary to 
conform to any amendment that may result from the hearings.
    Upon the basis of evidence introduced at the hearings and the 
record thereof, the Administrator of AMS issued a Recommended Decision 
published in the Federal Register on November 9, 2011 (76 FR 69673). An 
opportunity to file written exceptions was provided through November 
25, 2011. Two comments were received during that period. A comment was 
received on behalf of the Cherry

[[Page 13016]]

Industry Administrative Board. The second comment was from a grower/
handler in Michigan. Both supported the proposed amendments. Therefore, 
no changes were adopted by AMS based on the received comments.

Small Business Considerations

    Pursuant to the requirements set forth in the Regulatory 
Flexibility Act (RFA), AMS has considered the economic impact of this 
action on small entities. Accordingly, AMS has prepared this final 
regulatory flexibility analysis.
    The purpose of the RFA is to fit regulatory actions to the scale of 
business subject to such actions so that small businesses will not be 
unduly or disproportionately burdened. Marketing orders and amendments 
thereto are unique in that they are normally brought about through 
group action of essentially small entities for their own benefit.
    There are approximately 40 handlers of tart cherries subject to 
regulation under the order and approximately 600 producers of tart 
cherries in the regulated area. Small agricultural service firms, which 
include handlers, have been defined by the Small Business 
Administration (SBA) (13 CFR 121.201) as those having annual receipts 
of less than $7,000,000, and small agricultural producers are defined 
as those having annual receipts of less than $750,000. A majority of 
the tart cherry producers and handlers are considered small entities 
under the SBA standards.
    The geographic region regulated by the order includes the states of 
Michigan, New York, Oregon, Pennsylvania, Utah, Washington, and 
Wisconsin. Acreage devoted to tart cherry production in the regulated 
area has declined in recent years. According to data presented at the 
hearings, bearing acreage in 1987-88 totaled 50,050 acres; by 2010-11 
it had declined to 35,650 acres. Michigan accounts for 73 percent of 
total U.S. bearing acreage with 26,200 bearing acres. Utah is second, 
with a reported 3,300 acres, or approximately nine percent of the 
total. The remaining states' acreage ranges from 600 to 1,800 acres. 
The order includes authority for (1) volume regulation, (2) promotion 
and research, and (3) grade and quality standards. Volume regulation is 
used under the order to augment supplies during low supply years, with 
product placed in reserves during large supply years.
    Production of tart cherries can fluctuate widely from year to year. 
The magnitude of these fluctuations is one of the most pronounced for 
any agricultural commodity in the United States, and is due in large 
part to weather related conditions during the bloom and growing 
seasons. This fluctuation in supply presents a marketing challenge for 
the tart cherry industry because demand for the product is relatively 
inelastic; meaning a change in supply has a proportionately larger 
change in price.
    According to data presented at the hearing, production has ranged 
from a low of 62.5 million pounds in 2002-03 to a high of 395.6 million 
pounds in 1995-96. For 2010-11, Michigan accounted for 71 percent of 
total U.S. production with 135 million pounds. Utah is second, with a 
reported 23 million pounds, or approximately twelve percent of the 
total. The remaining states produce between 15.4 and 1.2 million 
pounds.
    During the hearings, multiple witnesses testified that they did not 
believe that the proposed amendments would have any adverse impacts on 
small agricultural service firms or small agricultural producers as 
defined by the SBA. According to the record, the proposed amendments 
would help agricultural businesses and growers by encouraging growers 
to divert some of their tart cherries in the orchard during years of 
extremely large supply. The proposed amendments would result in higher 
grower returns during years of extremely large supply. Furthermore, the 
growers who divert their crop do not incur harvest and transportation 
costs. The proposed amendments would result in a lower possibility of 
market saturation. Overall the supply of tart cherries in extremely 
large supply years would result in higher returns for growers.
    The proposed amendments are intended to provide additional 
flexibility in administering the volume control provisions of the 
order, and to improve its operation and administration. Record evidence 
indicates that the proposed amendments are intended to benefit all 
producers and handlers under the order, regardless of size.
    There are three proposed amendments. Amendment one would amend 
Section 930.10 of the order to change the definition of ``handle,'' so 
that handler acquisition of grower diversion certificates is not 
considered handling. Amendment two would amend the ``marketing policy'' 
provisions in Section 930.50 of the order so that grower-diverted 
cherries are not counted as production in the OSF. Amendment three 
would amend section 930.58 of the order so that grower-diverted 
cherries are not treated as actual harvested cherries. The proposed 
amendments would modify how grower diversions are accounted for under 
the order.
    Evidence presented when the order was promulgated indicated that a 
grower diversion program could benefit the industry by managing 
fluctuating supply. Witnesses indicated that the order has been 
successful in this regard. However, the record indicated that the order 
should be more flexible in addressing how grower diversions are 
utilized under the order.
    The most efficient method to deal with a surplus is at the lowest 
level of the production and processing chain. The industry wastes the 
least amount of resources if it diverts cherries in the orchard. Once 
they are harvested, chilled, washed, de-stemmed, sorted, pitted, and 
packed, significantly higher costs are incurred and there is a greater 
risk of waste. Diverting surplus cherries in the orchard is the most 
cost effective method of dealing with a surplus situation and provides 
the largest benefit to growers through lower costs.
    The order establishes an opportunity for growers to undertake in-
orchard diversions of cherries (section 930.58). These diversions are 
done during harvest in accordance with procedures defined under the 
order and are overseen by the CIAB. The CIAB issues grower diversion 
certificates to the growers that represent the pounds of cherries that 
were left in the orchard.
    Growers redeem the diversion certificates with handlers, who use 
them as one of their compliance alternatives to meet their reserve or 
restricted obligation. However, under the current order definition of 
``handle,'' handlers must include the pounds of cherries represented by 
the certificates as part of the total cherries that have been delivered 
and processed.
    Consequently, grower in-orchard diversions effectively increase the 
supply of restricted cherries even though none of those cherries were 
delivered for processing. Grower diversion certificates are considered 
to be part of the total quantity of cherries that a handler receives 
and processes, and contribute to the total supply of restricted 
cherries in the OSF. This creates confusion in accounting for the 
cherries in years when cherries are restricted for both the growers and 
processors.
    The OSF is the mechanism specified in the order and used by CIAB to 
determine the relationship between the demand and supply of tart 
cherries in a given year. When the supply of tart cherries exceeds the 
average demand, volume regulation is implemented.

[[Page 13017]]

    In an effort to stabilize supply and prices, the tart cherry 
industry uses volume regulation which allows the industry to set free 
and restricted percentages. Free percentage cherries can be marketed by 
handlers to any outlet, while restricted percentage cherries are placed 
in a reserve inventory. The primary purpose of setting restricted 
percentages and placing cherries in a reserve inventory is to attempt 
to balance supply with demand.
    A related component of the OSF under the order involves growers 
diverting cherries by leaving them un-harvested in the orchard. 
Handlers can coordinate with their growers in large crop years by 
encouraging them to divert cherries from production. Handlers can then 
acquire the diversion certificates issued to growers and use them as 
credit toward their restriction or reserve obligations.
    The interaction of sections 930.10 and 930.50 of the order 
establishes that grower in-orchard diversion is subject to the 
restriction percentage calculated for the year. Because of this, grower 
diversion certificates have less value when growers redeem them with 
handlers. Therefore, when a handler utilizes the grower diversion 
certificates received from growers, the certificates have a reduced 
value as a compliance tool in meeting the restricted obligation. 
Because the certificates have a reduced value growers will deliver most 
of their crop to handlers instead of diverting cherries in the orchard 
in large crop years.
    The intent of these amendments is to remove the grower disincentive 
for in-orchard diversion. If the way grower diversions are accounted 
for is changed, the grower diversion program is expected to help 
mitigate the negative effects of oversupply, by increasing the amount 
of cherries diverted from production.
    This action is expected to have a positive impact on growers. The 
value of the grower diversion certificates is expected to increase. As 
the value of the certificates increases, grower diversion of cherries 
in large crop years is expected to increase. Increased grower diversion 
activity will help to reduce excess supplies, which in turn is expected 
to have a positive impact on grower returns. In addition, grower costs 
associated with harvesting and transporting cherries to handlers will 
be reduced as more cherries are diverted.
    This action is also expected to have a positive impact on handlers. 
As more fruit is diverted in the orchard, handlers will avoid the 
processing and storage costs that they would otherwise incur if growers 
harvested and delivered the fruit. Reducing the available supply of 
cherries is expected to mitigate the price depressing effects that 
oversupply typically has on the market, resulting in a positive effect 
for both growers and handlers.
    Testimony at the hearing suggested that the amendments, which would 
encourage grower diversions, would not have a negative impact on small 
growers or handlers. The hearing record suggests that these amendments 
would benefit small growers by providing better opportunities to divert 
cherries in the orchard in large crop years. Small handlers are not 
always able to ship to export markets or have as much new product 
activity as larger handlers. Small handlers would benefit from these 
amendments by providing diversion credits as a way to meet their 
restrictions.

Paperwork Reduction Act

    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 is necessary a result of 
this action. Should any change become necessary, it would be submitted 
to OMB for approval.
    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. USDA has not 
identified any relevant Federal rules that duplicate, overlap or 
conflict with this proposed rule. All of these amendments are designed 
to enhance the administration and functioning of the marketing order to 
the benefit of the industry.
    The implementation of these requirements is not expected to have 
any additional costs on handlers. In fact, these proposed changes are 
expected to reduce costs for both growers and handlers.
    In addition, the meetings regarding these proposals as well as the 
hearing dates were widely publicized throughout the existing tart 
cherry production area and all interested persons were invited to 
attend the meetings and the hearings and participate in CIAB 
deliberations on all issues. All CIAB meetings and the hearing were 
public forums and all entities, both large and small, were able to 
express views on these issues. The CIAB itself is composed of members 
representing handlers, producers and the public. Finally, interested 
persons were invited to present evidence at the hearing on the 
regulatory and informational impacts of this action on small 
businesses.
    AMS is committed to complying with the E-Government Act, to promote 
the use of the Internet and other information technologies to provide 
increased opportunities for citizen access to Government information 
and services, and for other purposes.

Civil Justice Reform

    The amendments to Marketing Order 930 proposed herein have been 
reviewed under Executive Order 12988, Civil Justice Reform. They are 
not intended to have retroactive effect.
    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 USDA 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 the 
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, USDA would rule on the petition. The Act 
provides that the district court of the United Sates in any district in 
which the handler is an inhabitant, or has his or her principal place 
of business, has jurisdiction to review USDA's ruling on the petition, 
provided an action is filed no later than 20 days after the date of the 
entry of the ruling.

Findings and Conclusions

    The findings and conclusions, rulings, and general findings and 
determinations included in the Recommended Decision set forth in the 
November 9, 2011 (76 FR 69673) issue of the Federal Register are hereby 
approved and adopted.

Marketing Order

    Annexed hereto and made a part hereof is the document entitled 
``Order Amending the Order Regulating the Handling of Tart Cherries 
Grown in Michigan, New York, Pennsylvania, Oregon, Utah, Washington, 
and Wisconsin.'' This document has been decided upon as the detailed 
and appropriate means of effectuating the foregoing findings and 
conclusions.
    It is hereby ordered, that this entire decision be published in the 
Federal Register.

[[Page 13018]]

Referendum Order

    It is hereby directed that a referendum be conducted in accordance 
with the procedure for the conduct of referenda (7 CFR 900.400-407) to 
determine whether the annexed order amending the order regulating the 
handling of Tart cherries is approved or favored by growers and 
processors, as defined under the terms of the order, who during the 
representative period were engaged in the production or processing of 
tart cherries in the production area.
    The representative period for the conduct of such referendum is 
hereby determined to be July 1, 2010, through, June 30, 2011.
    The agents of the Secretary to conduct such referendum are hereby 
designated to be Christian Nissen, or Jennie Varela, Southeast 
Marketing Field Office, Marketing Order and Agreement Division, Fruit 
and Vegetable Programs, AMS, USDA; Telephone: (863)324-3375, Fax 
(863)325-8793, or Email: Christian.Nissen@ams.usda.gov or 
Jennie.Varela@ams.usda.gov, respectively.

List of Subjects in 7 CFR Part 930

    Marketing agreements, Reporting and recordkeeping requirements, 
Tart cherries.

    Dated: February 28, 2012.
Robert C. Keeney,
Acting Administrator, Agricultural Marketing Service.

Order Amending the Order Regulating the Handling of Tart Cherries Grown 
in Michigan, New York, Pennsylvania, Oregon, Utah, Washington, and 
Wisconsin\1\
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    \1\ This order shall not become effective unless and until the 
requirements of Sec.  900.14 of the rules of practice and procedure 
governing proceedings to formulate marketing agreements and 
marketing orders have been met.
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Findings and Determinations

    The findings and determinations hereinafter set forth are 
supplementary to the findings and determinations which were previously 
made in connection with the issuance of the marketing order; and all 
said previous findings and determinations are hereby ratified and 
affirmed, except insofar as such findings and determinations may be in 
conflict with the findings and determinations set forth herein.
    (a) Findings and Determinations Upon the Basis of the Hearing 
Record
    Pursuant to the provisions of the Agricultural Marketing Agreement 
Act of 1937, as amended, (7 U.S.C. 601-612), and the applicable rules 
of practice and procedure effective thereunder (7 CFR part 900), a 
public hearing was held upon proposed further amendment of Marketing 
Agreement and Order No. 930, regulating the handling of tart cherries 
grown in Michigan, New York, Pennsylvania, Oregon, Utah, Washington, 
and Wisconsin. Upon the basis of the evidence introduced at such 
hearing and the record thereof, it is found that:
    1. The marketing order, as amended, and as hereby proposed to be 
further amended, and all of the terms and conditions thereof, would 
tend to effectuate the declared policy of the Act;
    2. The marketing order, as amended, and as hereby proposed to be 
further amended, regulates the handling of tart cherries grown in the 
production area in the same manner as, and is applicable only to, 
persons in the respective classes of commercial and industrial activity 
specified in the marketing order upon which a hearing has been held;
    3. The marketing order, as amended, and as hereby proposed to be 
further amended, is limited in its application to the smallest regional 
production area which is practicable, consistent with carrying out the 
declared policy of the Act, and the issuance of several orders 
applicable to subdivisions of the production area would not effectively 
carry out the declared policy of the Act;
    4. The marketing order, as amended, and as hereby proposed to be 
further amended, prescribes, insofar as practicable, such different 
terms applicable to different parts of the production area as are 
necessary to give due recognition to the differences in the production 
and marketing of tart cherries grown in the production area; and
    5. All handling of tart cherries grown in the production area as 
defined in the marketing order, is in the current of interstate or 
foreign commerce or directly burdens, obstructs, or affects such 
commerce.

Order Relative to Handling

    It is therefore ordered, That on and after the effective date 
hereof, all handling of tart cherries grown in Michigan, New York, 
Pennsylvania, Oregon, Utah, Washington, and Wisconsin shall be in 
conformity to, and in compliance with the terms and conditions of the 
said order as hereby proposed to be amended as follows:
    The provisions of the proposed marketing order amending the order 
contained in the Recommended Decision issued on November 3, 2011 and 
published on November 9, 2011 (76 FR 69673) will be and are the terms 
and provisions of this order amending the order and are set forth in 
full below.
    For the reasons stated in the preamble, the Agricultural Marketing 
Service proposes to amend 7 CFR Part 930 as follows:

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. Revise the introductory paragraph in Sec.  930.10 to read as 
follows:


Sec.  930.10  Handle.

    Handle means the process to brine, can, concentrate, freeze, 
dehydrate, pit, press or puree cherries, or in any other way convert 
cherries commercially into a processed product, or divert cherries 
pursuant to Sec.  930.59, or to otherwise place cherries into the 
current of commerce within the production area or from the area to 
points outside thereof: Provided, That the term handle shall not 
include:
* * * * *
    3. Revise paragraphs (d) and (e) of Sec.  930.50 to read as 
follows:


Sec.  930.50  Marketing Policy.

* * * * *
    (d) Final percentages. No later than September 15 of each crop 
year, the Board shall review the most current information available 
including, but not limited to, processed production and grower 
diversions of cherries during the current crop year. The Board shall 
make such adjustments as are necessary between free and restricted 
tonnage to achieve the optimum supply and recommend such final free 
market tonnage and restricted percentages to the Secretary and announce 
them in accordance with paragraph (h) of this section. The difference 
between any final free market tonnage percentage designated by the 
Secretary and 100 percent shall be the final restricted percentage. 
With its recommendation, the Board shall report on its consideration of 
the factors in paragraph (e) of this section.
    (e) Factors. When computing preliminary and interim percentages, or 
determining final percentages for recommendation to the Secretary, the 
Board shall give consideration to the following factors:
    (1) The estimated total production of cherries;
    (2) The estimated size of the crop to be handled;
    (3) The expected general quality of such cherry production;

[[Page 13019]]

    (4) The expected carryover as of July 1 of canned and frozen 
cherries and other cherry products;
    (5) The expected demand conditions for cherries in different market 
segments;
    (6) Supplies of competing commodities;
    (7) An analysis of economic factors having a bearing on the 
marketing of cherries;
    (8) The estimated tonnage held by handlers in primary or secondary 
inventory reserves;
    (9) Any estimated release of primary or secondary inventory reserve 
cherries during the crop year; and
    (10) The quantity of grower-diverted cherries during the crop year.
* * * * *
    4. Revise paragraph (a) of Sec.  930.58 to read as follows:


Sec.  930.58  Grower Diversion privilege.

    (a) In general. Any grower may voluntarily elect to divert, in 
accordance with the provisions of this section, all or a portion of the 
cherries which otherwise, upon delivery to a handler, would become 
restricted percentage cherries. Upon such diversion and compliance with 
the provisions of this section, the Board shall issue to the diverting 
grower a grower diversion certificate which such grower may deliver to 
a handler. Any grower diversions completed in accordance with this 
section, but which are undertaken in districts subsequently exempted by 
the Board from volume regulation under Sec.  930.52(d), shall qualify 
for diversion credit.
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[FR Doc. 2012-5197 Filed 3-2-12; 8:45 am]
BILLING CODE 3410-02-P