Tart Cherries Grown in the States of Michigan, et al.; Increasing the Primary Reserve Capacity and Revising Exemption Requirements, 40250-40253 [2012-16699]
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Federal Register / Vol. 77, No. 131 / Monday, July 9, 2012 / Rules and Regulations
4. Amend § 2.68 by adding paragraph
(a)(12) to read as follows:
■
§ 2.68 Administrator, National Agricultural
Statistics Service.
(a) * * *
(12) Enter into agreements with and
receive funds from any State, other
political subdivision, organization, or
individual for the purpose of
conducting cooperative research
projects, including agricultural
statistical survey activities (7 U.S.C.
450a).
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PART 520—PROCEDURES FOR
IMPLEMENTING NATIONAL
ENVIRONMENTAL POLICY ACT
5. The authority citation for part 520
continues to read as follows:
■
Authority: National Environmental Policy
Act (NEPA) as amended, 42 U.S.C. 4321 et
seq.; E.O. 11514, 34 FR 4247, as amended by
E.O. 11991, 42 FR 26927; E.O. 12144, 44 FR
11957; 5 U.S.C. 301; 40 CFR 1500–1508.
6. Amend § 520.4 by revising
paragraph (a) to read as follows:
■
§ 520.4
Responsibilities.
(a) Administrator. The Administrator
is responsible for environmental
analysis and documentation required for
compliance with the provisions of
NEPA and related laws, policies, plans,
programs, and projects. The ARS
Deputy Administrator for Natural
Resources has been delegated
responsibility for the establishment of
procedures and coordination necessary
to carry out the policies and provisions
of NEPA.
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Dated: June 29, 2012.
Thomas J. Vilsack,
Secretary.
[FR Doc. 2012–16610 Filed 7–6–12; 8:45 am]
BILLING CODE 3410–09–P
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 930
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[Doc. No. AMS–FV–11–0092; FV12–930–1
FR]
Tart Cherries Grown in the States of
Michigan, et al.; Increasing the Primary
Reserve Capacity and Revising
Exemption Requirements
Agricultural Marketing Service,
USDA.
ACTION: Final rule.
AGENCY:
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This rule revises the primary
inventory reserve capacity and the
exemption provisions applicable to
handler diversion activities prescribed
under the marketing order for tart
cherries (order). The order regulates the
handling of tart cherries grown in the
States of Michigan, New York,
Pennsylvania, Oregon, Utah,
Washington, and Wisconsin, and is
administered locally by the Cherry
Industry Administrative Board (Board).
This action increases the volume of tart
cherries that can be placed in the
primary inventory reserve from 50
million pounds to 100 million pounds
and revises exemption provisions by
limiting diversion credits for new
market development and market
expansion activities to one year. These
changes are intended to facilitate sales
and lessen the impact of market
expansion activities on volume
restriction calculations.
DATES: Effective Date: July 10, 2012.
FOR FURTHER INFORMATION CONTACT:
Jennie M. Varela, Marketing Specialist,
or Christian D. Nissen, Regional
Director, Southeast Marketing Field
Office, Marketing Order and Agreement
Division, Fruit and Vegetable Program,
AMS, USDA; Telephone: (863) 324–
3375, Fax: (863) 325–8793, or Email:
Jennie.Varela@ams.usda.gov or
Christian.Nissen@ams.usda.gov.
Small businesses may request
information on complying with this
regulation by contacting Laurel May,
Marketing Order and Agreement
Division, Fruit and Vegetable Program,
AMS, USDA, 1400 Independence
Avenue SW., STOP 0237, Washington,
DC 20250–0237; Telephone: (202) 720–
2491, Fax: (202) 720–8938, or Email:
Laurel.May@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 Order
12866.
This final rule has been reviewed
under Executive Order 12988, Civil
Justice Reform. This rule is not intended
to have retroactive effect.
The Act provides that administrative
proceedings must be exhausted before
parties may file suit in court. Under
SUMMARY:
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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 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 States 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
not later than 20 days after the date of
the entry of the ruling.
This rule revises the primary
inventory reserve capacity and the
exemption provisions applicable to
handler diversion activities prescribed
under the order. This action increases
the volume of tart cherries that can be
placed in the primary inventory reserve
from 50 million pounds to 100 million
pounds and revises exemption
provisions by limiting diversion credits
for new market development and market
expansion activities to one year. These
changes are intended to facilitate sales
and lessen the impact of new market
development and market expansion
activities on volume restriction
calculations. These changes were
recommended by the Board at its
meetings on September 15, 2011, and
November 2, 2011, respectively.
Section 930.55 of the order provides
authority for the establishment of a
primary inventory reserve as part of the
order’s volume control provisions.
Section 930.50(i) of the order establishes
a cap of 50 million pounds on the
primary inventory reserve, but provides
authority to raise that limit if necessary,
provided that any recommendation for
change is made by the Board on or
before September 30 to become effective
for the following crop year.
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. These eligible
diversion activities include, in part, use
for new market development and market
expansion activities.
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 § 930.162.
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Federal Register / Vol. 77, No. 131 / Monday, July 9, 2012 / Rules and Regulations
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 including
new market development and market
expansion. 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.
In July 2011, the Board established an
ad hoc committee (committee) to
examine the volume regulation process
under the order and recommend
changes that might benefit the industry.
The committee made a series of
recommendations, mostly
administrative in nature, which were
discussed by the entire Board at its
September and November meetings. The
recommended administrative changes
were approved by the Board and the
changes to the primary reserve and
diversion credits for market expansion
activities, are the subject of this action.
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, marketed through
exempt activities, including market
expansion, or diverted in orchard or at
the processing plant.
When using reserves to meet their
restricted percentage, handlers have two
inventory reserve pools available, a
primary reserve currently limited to 50
million pounds and an unlimited
secondary reserve. Reserves allow the
industry to mitigate the impact of
oversupply in large crop years, while
allowing the industry to supply markets
in years when production falls below
demand. Volume in the secondary
reserve cannot be released unless the
primary reserve is empty. Most reserve
inventory flows in and out of the
primary reserve, and it is rarely at zero,
making it difficult to release volume
from the secondary reserve.
Accessing reserves, particularly at the
beginning of a crop year when the new
crop has yet to be harvested, has become
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more important in recent seasons. When
the order was promulgated, tart cherries
were primarily processed as ingredients
or into pie filling and a 50 million
pound primary reserve met the needs of
the industry. However, dried cherries,
juice, and juice concentrate are growing
segments of the industry, and some
handlers are also manufacturing
finished products for retail. The
additional processing steps for these
new products, as well as the growing
variety of retail products have changed
reserve needs. At any given time,
handlers now hold more volume in
reserve.
Additionally, in years when a crop is
short or demand exceeds expectations,
the Board can vote to issue a reserve
release. During the 2010–2011 season,
the Board found it necessary to issue
two such releases. The Board believes
increasing the capacity of the primary
reserve to 100 million pounds will
facilitate the release of reserve cherries
when they are needed. Moving
additional reserve volume into the
primary pool, which is easier to access,
allows the industry to be more
responsive to changes in demand and
supply, and allows handlers more
flexibility in how they utilize the
reserve. The intent of this action is not
to increase the volume of cherries in
reserve, but to shift a greater volume
into the primary reserve where it is
more accessible to meet handler needs.
This change should not impact volume
restriction calculations.
Accordingly, at its meeting on
September 15, 2011, the Board
recommended increasing the capacity of
the primary inventory reserve from 50
million pounds to 100 million pounds.
Fifteen Board members voted for this
change and two abstained.
In addition to discussing the primary
reserve, the Board also considered
changes to diversion credits. These
credits are a handler’s alternative to
placing fruit in reserve in order to
comply with their restricted percentage
under volume restriction. The order
provides that fruit used for certain
exempt purposes, including new market
development and market expansion, is
eligible to receive diversion credits.
Market expansion is defined as an
activity that expands the sale of either
tart cherries or the products in which
tart cherries are an ingredient. The
Board currently limits the duration of
any diversion credit for new market
development and market expansion to
three years.
The Board believes that new market
development and market expansion
activities have been successful in
increasing sales. Some Board members
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expressed that these activities have been
very helpful in developing the dried
cherry and juice segments. Earlier
regulations limited the volume that
could receive diversion credit to 10
million pounds. However, the Board
believed the limitation could be
discouraging expansion and in 2006
recommended removing the diversion
credit volume limitations. Since that
time, the use of new market
development and market expansion
activities to meet restricted percentages
has grown. The current three-year
average for diversion credit for market
expansion activities is approximately 35
million pounds a year.
In its discussions of this issue, the
Board sought to find a solution that
would continue to encourage new
market development and market
expansion projects, but reduce the
impact these credits have on volume
restriction calculations. While market
expansion activities designated for
diversion credit represent about 15
percent of gross sales, these sales are not
included in the average sales figure used
to determine optimum supply for
volume regulation. The Board estimates
that limiting credits to one year will
lower the annual average credit for
market expansion to 16 million pounds,
or 19 million pounds below the current
average.
With this action, it is anticipated that
the difference in volume between the
three-year credit and one-year credit for
market expansion will shift to free sales
helping to reduce the calculated
restricted percentage. Using current
numbers, assuming that the difference
of 19 million pounds will be counted as
free sales, this change will reduce the
calculated surplus. Reducing the
calculated surplus will, in turn, help
lower restricted percentages. The Board
believes this change will help make the
calculations under volume regulation
more reflective of industry conditions.
Accordingly, at its November 2, 2011,
meeting, the Board voted unanimously
to revise exemption provisions
applicable to handler diversion
activities by limiting diversion credits
for market expansion activities to one
year, with the time limit beginning with
the date of the first shipment. The Board
also noted that projects approved prior
to this action will be allowed to finish
their three-year cycle.
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,
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Federal Register / Vol. 77, No. 131 / Monday, July 9, 2012 / Rules and Regulations
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.
There are approximately 40 handlers
of tart cherries who are subject to
regulation under the marketing order
and approximately 600 producers of tart
cherries in the regulated area. Small
agricultural service firms have been
defined by the Small Business
Administration (SBA) 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 (13 CFR 121.201).
According to the National
Agricultural Statistics Service, and
Board data, the average annual grower
price for tart cherries during the 2010–
11 season was $0.221 per pound, and
total shipments were around 270
million pounds. Therefore, average
receipts for tart cherry producers were
around $99,000, well below the SBA
threshold for small producers. In 2010,
The Food Institute estimated an f.o.b.
price of $0.84 per pound for frozen tart
cherries, which make up the majority of
processed tart cherries. Using this data,
average annual handler receipts were
about $5.7 million, 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 rule increases the volume of tart
cherries that can be placed in the
primary inventory reserve from 50
million pounds to 100 million pounds
and revises the exemption provisions
pertaining to handler diversion
activities by limiting diversion credits
for new market development and market
expansion activities to one year. These
changes are intended to facilitate sales
and lessen the impact of such activities
on volume restriction calculations. This
rule adds § 930.150 to the rules and
regulations to establish the increased
limit for the primary inventory reserve,
and revises § 930.162 of the regulations
regarding exemptions as they pertain to
handler diversion activities. The
authority for these actions is provided
in §§ 930.50 and 930.59 of the order.
The Board recommended these actions
at meetings on September 15, 2011, and
November 2, 2011.
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The Board believes these changes
better align regulations with industry
needs and practices, facilitate the
release of restricted fruit, and help avoid
over-restriction. It is not anticipated that
this action will impose additional costs
on handlers or growers, regardless of
size. Handlers of all sizes could realize
a cost savings by not having to store
product relegated to the secondary
reserve, which is difficult to access.
Further, increasing the maximum
volume that can be held in the primary
reserve will allow handlers to be more
responsive to industry needs by making
reserves easier to access in periods of
short supply or increased demand,
which could facilitate sales. Changes in
processing and cherry products have
created a situation in which handlers
may have more volume on hand at any
given time, furthering the need to access
reserves. Expanding the volume
available in the primary reserve will
assist handlers in managing their stocks
and should help maintain a steady
inventory of finished products to supply
retailers and consumers.
Additionally, the Board believes
limiting diversion credits for market
expansion to one year will move more
sales into the free sales category for
purposes of computing volume
regulations. This should reduce the
calculated surplus, and in turn lower
restrictions. Lower restrictions allow
handlers to have a greater portion of
their volume available for free sales.
This could facilitate additional sales
which could improve returns for
growers and handlers.
This rule is expected to benefit
producers, handlers, and consumers.
The effects of this rule are not expected
to be disproportionately greater or less
for small handlers or producers than for
larger entities.
The Committee discussed alternatives
to these changes, including not
increasing the primary reserve capacity,
as well as eliminating diversion credits
for market expansion rather than
limiting them to one year. Regarding the
change to primary reserve capacity, the
Board agreed that changes in the
industry necessitated this change and
that it was in the industry’s best interest
to have this change in place by the next
season. In discussing the change to
diversion credits for market expansion,
the Board considered phasing out
diversion credits for market expansion
altogether. However, some Board
members believed that offering
diversion credit for these activities had
been beneficial to the industry and thus
should not be eliminated entirely. The
Board believes limiting credits to a
maximum of one year would continue
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to encourage handlers to enter new
markets, but lessen the impact on
volume restriction calculations.
Therefore, 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.
Accordingly, this action 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.
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.
In addition, the Board formed a
committee to review the order’s volume
regulation procedures and suggest
changes to the Board. This committee
held meetings where these issues were
discussed in detail. These meetings
were public meetings and both large and
small entities were able to participate
and express their views. The Board’s
meetings were 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 September 15,
2011, and November 2, 2011, meetings
were public meetings and all entities,
both large and small, were able to
express views on these issues.
A proposed rule concerning this
action was published in the Federal
Register on April 25, 2012 (77 FR
24640). Copies of the rule were emailed
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
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15-day comment period ending May 10,
2012, was provided to allow interested
persons to respond to the proposal. No
comments were received.
A small business guide on complying
with fruit, vegetable, and specialty crop
marketing agreements and orders may
be viewed at: www.ams.usda.gov/
MarketingOrdersSmallBusinessGuide.
Any questions about the compliance
guide should be sent to Laurel May at
the previously mentioned address in the
expansion outlets are eligible for
handler diversion credit for a period of
one year from the handler’s first date of
shipment into such outlets.
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Dated: July 3, 2012.
David R. Shipman,
Administrator, Agricultural Marketing
Service.
[FR Doc. 2012–16699 Filed 7–6–12; 8:45 am]
BILLING CODE 3410–02–P
FOR FURTHER INFORMATION CONTACT
section.
After consideration of all relevant
matter 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.
It is further found that good cause
exists for not postponing the effective
date of this rule until 30 days after
publication in the Federal Register (5
U.S.C. 553) because handlers are already
beginning to make plans for the
upcoming season. Further, handlers are
aware of these changes, which were
recommended at public meetings. Also,
a 15-day comment period was provided
for in the proposed rule.
List of Subjects in 7 CFR Part 930
Marketing agreements, Reporting and
recordkeeping requirements, Tart
cherries.
For the reasons set forth in the
preamble, 7 CFR part 930 is amended 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. A new § 930.150 is added to read
as follows:
■
§ 930.150
Primary inventory reserve.
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Beginning July 1, 2012, the primary
inventory reserve may not exceed 100
million pounds.
■ 3. Section 930.162 is amended by
adding a sentence at the end of section
(b)(2) to read as follows:
§ 930.162
Exemptions.
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*
(b) * * *
(2) * * * In addition, shipments of
tart cherries or tart cherry products in
new market development and market
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DEPARTMENT OF AGRICULTURE
7 CFR Part 3560
RIN 0575–AC66
Reserve Account
Rural Housing Service, USDA.
Final rule.
AGENCY:
Through this action, the Rural
Housing Service (RHS) is amending its
regulation to change the Reserve
Account for new construction for the
Sections 514/516 Farm Labor Housing
(FLH) program and the Section 515
Rural Rental Housing (RRH) program.
This action will not affect reserve
accounts for existing portfolios.
DATES: Effective Date: This rule is
effective September 7, 2012.
FOR FURTHER INFORMATION CONTACT:
Michael Steininger, Acting Director,
Multi-Family Housing Preservation and
Direct Loan Division, Rural Housing
Service, U.S. Department of Agriculture,
STOP 0781, 1400 Independence Avenue
SW., Washington, DC 20250–0781.
Telephone: 202–720–1610 (this is not a
toll-free number); email: michael.
steininger@wdc.usda.gov.
SUPPLEMENTARY INFORMATION:
SUMMARY:
Classification
This final rule has been determined to
be not significant and was reviewed by
the Office of Management and Budget
(OMB) under Executive Order 12866.
Civil Justice Reform
This final rule has been reviewed
under E.O. 12988, Civil Justice Reform.
If this final rule is adopted: (1) Unless
otherwise specifically provided, all
State and local laws that are in conflict
with this rule will be preempted; (2) no
retroactive effect will be given to this
rule except as specifically prescribed in
the rule; and (3) administrative
proceedings of the National Appeals
Division of the Department of
Agriculture (7 CFR part 11) must be
exhausted before bringing suit.
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Regulatory Flexibility Act
The final rule has been reviewed with
regard to the requirements of the
Regulatory Flexibility Act (5 U.S.C.
601–612). The undersigned has
determined and certified by signature
on this document that this rule will not
have a significant economic impact on
a substantial number of small entities.
This rulemaking action does not involve
a new or expanded program nor does it
require any more action on the part of
a small business than required of a large
entity.
Paperwork Reduction Act
There are no new reporting and
recordkeeping requirements associated
with this rule.
Rural Housing Service
ACTION:
40253
E-Government Act Compliance
RHS is committed to complying with
the E-Government Act, by promoting the
use of the Internet and other
information technologies in order to
provide increased opportunities for
citizen access to Government
information, services, and other
purposes.
Unfunded Mandate Reform Act
(UMRA)
This rule contains no Federal
mandates (under the regulatory
provisions of Title II of the UMRA) for
state, local and tribal governments or
the private sector. Therefore, this rule is
not subject to the requirements of
Sections 202 and 205 of the UMRA.
Environmental Impact Statement
This document has been reviewed in
accordance with 7 CFR part 1940,
subpart G, ‘‘Environmental Program.’’
RHS determined that the proposed
action does not constitute a major
Federal action significantly affecting the
quality of the environment. Therefore in
accordance with the National
Environmental Policy Act of 1969,
Public Law 91–190, an Environmental
Impact Statement is not required.
Programs Affected
The programs affected by this
regulation are listed in the Catalog of
Federal Domestic Assistance under
numbers 10.405—Farm Labor Housing
Loans and Grants; 10.415—Rural Rental
Housing Loans; and 10.427—Rural
Rental Assistance Payments.
Federalism
For the reasons discussed above, this
rule does not have significant
Federalism implications that warrant
the preparation of a Federalism
assessment under Executive Order
13132.
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]]>Agencies
[Federal Register Volume 77, Number 131 (Monday, July 9, 2012)]
[Rules and Regulations]
[Pages 40250-40253]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-16699]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 930
[Doc. No. AMS-FV-11-0092; FV12-930-1 FR]
Tart Cherries Grown in the States of Michigan, et al.; Increasing
the Primary Reserve Capacity and Revising Exemption Requirements
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This rule revises the primary inventory reserve capacity and
the exemption provisions applicable to handler diversion activities
prescribed under the marketing order for tart cherries (order). The
order regulates the handling of tart cherries grown in the States of
Michigan, New York, Pennsylvania, Oregon, Utah, Washington, and
Wisconsin, and is administered locally by the Cherry Industry
Administrative Board (Board). This action increases the volume of tart
cherries that can be placed in the primary inventory reserve from 50
million pounds to 100 million pounds and revises exemption provisions
by limiting diversion credits for new market development and market
expansion activities to one year. These changes are intended to
facilitate sales and lessen the impact of market expansion activities
on volume restriction calculations.
DATES: Effective Date: July 10, 2012.
FOR FURTHER INFORMATION CONTACT: Jennie M. Varela, Marketing
Specialist, or Christian D. Nissen, Regional Director, Southeast
Marketing Field Office, Marketing Order and Agreement Division, Fruit
and Vegetable Program, AMS, USDA; Telephone: (863) 324-3375, Fax: (863)
325-8793, or Email: Jennie.Varela@ams.usda.gov or
Christian.Nissen@ams.usda.gov.
Small businesses may request information on complying with this
regulation by contacting Laurel May, Marketing Order and Agreement
Division, Fruit and Vegetable Program, AMS, USDA, 1400 Independence
Avenue SW., STOP 0237, Washington, DC 20250-0237; Telephone: (202) 720-
2491, Fax: (202) 720-8938, or Email: Laurel.May@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 Order 12866.
This final rule has been reviewed under Executive Order 12988,
Civil Justice Reform. This rule is 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 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 States 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 not later than 20 days after the date of
the entry of the ruling.
This rule revises the primary inventory reserve capacity and the
exemption provisions applicable to handler diversion activities
prescribed under the order. This action increases the volume of tart
cherries that can be placed in the primary inventory reserve from 50
million pounds to 100 million pounds and revises exemption provisions
by limiting diversion credits for new market development and market
expansion activities to one year. These changes are intended to
facilitate sales and lessen the impact of new market development and
market expansion activities on volume restriction calculations. These
changes were recommended by the Board at its meetings on September 15,
2011, and November 2, 2011, respectively.
Section 930.55 of the order provides authority for the
establishment of a primary inventory reserve as part of the order's
volume control provisions. Section 930.50(i) of the order establishes a
cap of 50 million pounds on the primary inventory reserve, but provides
authority to raise that limit if necessary, provided that any
recommendation for change is made by the Board on or before September
30 to become effective for the following crop year.
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. These eligible diversion activities include, in
part, use for new market development and market expansion activities.
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.
[[Page 40251]]
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 including new market development and market expansion.
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.
In July 2011, the Board established an ad hoc committee (committee)
to examine the volume regulation process under the order and recommend
changes that might benefit the industry. The committee made a series of
recommendations, mostly administrative in nature, which were discussed
by the entire Board at its September and November meetings. The
recommended administrative changes were approved by the Board and the
changes to the primary reserve and diversion credits for market
expansion activities, are the subject of this action.
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, marketed through exempt activities, including market
expansion, or diverted in orchard or at the processing plant.
When using reserves to meet their restricted percentage, handlers
have two inventory reserve pools available, a primary reserve currently
limited to 50 million pounds and an unlimited secondary reserve.
Reserves allow the industry to mitigate the impact of oversupply in
large crop years, while allowing the industry to supply markets in
years when production falls below demand. Volume in the secondary
reserve cannot be released unless the primary reserve is empty. Most
reserve inventory flows in and out of the primary reserve, and it is
rarely at zero, making it difficult to release volume from the
secondary reserve.
Accessing reserves, particularly at the beginning of a crop year
when the new crop has yet to be harvested, has become more important in
recent seasons. When the order was promulgated, tart cherries were
primarily processed as ingredients or into pie filling and a 50 million
pound primary reserve met the needs of the industry. However, dried
cherries, juice, and juice concentrate are growing segments of the
industry, and some handlers are also manufacturing finished products
for retail. The additional processing steps for these new products, as
well as the growing variety of retail products have changed reserve
needs. At any given time, handlers now hold more volume in reserve.
Additionally, in years when a crop is short or demand exceeds
expectations, the Board can vote to issue a reserve release. During the
2010-2011 season, the Board found it necessary to issue two such
releases. The Board believes increasing the capacity of the primary
reserve to 100 million pounds will facilitate the release of reserve
cherries when they are needed. Moving additional reserve volume into
the primary pool, which is easier to access, allows the industry to be
more responsive to changes in demand and supply, and allows handlers
more flexibility in how they utilize the reserve. The intent of this
action is not to increase the volume of cherries in reserve, but to
shift a greater volume into the primary reserve where it is more
accessible to meet handler needs. This change should not impact volume
restriction calculations.
Accordingly, at its meeting on September 15, 2011, the Board
recommended increasing the capacity of the primary inventory reserve
from 50 million pounds to 100 million pounds. Fifteen Board members
voted for this change and two abstained.
In addition to discussing the primary reserve, the Board also
considered changes to diversion credits. These credits are a handler's
alternative to placing fruit in reserve in order to comply with their
restricted percentage under volume restriction. The order provides that
fruit used for certain exempt purposes, including new market
development and market expansion, is eligible to receive diversion
credits. Market expansion is defined as an activity that expands the
sale of either tart cherries or the products in which tart cherries are
an ingredient. The Board currently limits the duration of any diversion
credit for new market development and market expansion to three years.
The Board believes that new market development and market expansion
activities have been successful in increasing sales. Some Board members
expressed that these activities have been very helpful in developing
the dried cherry and juice segments. Earlier regulations limited the
volume that could receive diversion credit to 10 million pounds.
However, the Board believed the limitation could be discouraging
expansion and in 2006 recommended removing the diversion credit volume
limitations. Since that time, the use of new market development and
market expansion activities to meet restricted percentages has grown.
The current three-year average for diversion credit for market
expansion activities is approximately 35 million pounds a year.
In its discussions of this issue, the Board sought to find a
solution that would continue to encourage new market development and
market expansion projects, but reduce the impact these credits have on
volume restriction calculations. While market expansion activities
designated for diversion credit represent about 15 percent of gross
sales, these sales are not included in the average sales figure used to
determine optimum supply for volume regulation. The Board estimates
that limiting credits to one year will lower the annual average credit
for market expansion to 16 million pounds, or 19 million pounds below
the current average.
With this action, it is anticipated that the difference in volume
between the three-year credit and one-year credit for market expansion
will shift to free sales helping to reduce the calculated restricted
percentage. Using current numbers, assuming that the difference of 19
million pounds will be counted as free sales, this change will reduce
the calculated surplus. Reducing the calculated surplus will, in turn,
help lower restricted percentages. The Board believes this change will
help make the calculations under volume regulation more reflective of
industry conditions.
Accordingly, at its November 2, 2011, meeting, the Board voted
unanimously to revise exemption provisions applicable to handler
diversion activities by limiting diversion credits for market expansion
activities to one year, with the time limit beginning with the date of
the first shipment. The Board also noted that projects approved prior
to this action will be allowed to finish their three-year cycle.
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,
[[Page 40252]]
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.
There are approximately 40 handlers of tart cherries who are
subject to regulation under the marketing order and approximately 600
producers of tart cherries in the regulated area. Small agricultural
service firms have been defined by the Small Business Administration
(SBA) 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 (13 CFR 121.201).
According to the National Agricultural Statistics Service, and
Board data, the average annual grower price for tart cherries during
the 2010-11 season was $0.221 per pound, and total shipments were
around 270 million pounds. Therefore, average receipts for tart cherry
producers were around $99,000, well below the SBA threshold for small
producers. In 2010, The Food Institute estimated an f.o.b. price of
$0.84 per pound for frozen tart cherries, which make up the majority of
processed tart cherries. Using this data, average annual handler
receipts were about $5.7 million, 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 rule increases the volume of tart cherries that can be placed
in the primary inventory reserve from 50 million pounds to 100 million
pounds and revises the exemption provisions pertaining to handler
diversion activities by limiting diversion credits for new market
development and market expansion activities to one year. These changes
are intended to facilitate sales and lessen the impact of such
activities on volume restriction calculations. This rule adds Sec.
930.150 to the rules and regulations to establish the increased limit
for the primary inventory reserve, and revises Sec. 930.162 of the
regulations regarding exemptions as they pertain to handler diversion
activities. The authority for these actions is provided in Sec. Sec.
930.50 and 930.59 of the order. The Board recommended these actions at
meetings on September 15, 2011, and November 2, 2011.
The Board believes these changes better align regulations with
industry needs and practices, facilitate the release of restricted
fruit, and help avoid over-restriction. It is not anticipated that this
action will impose additional costs on handlers or growers, regardless
of size. Handlers of all sizes could realize a cost savings by not
having to store product relegated to the secondary reserve, which is
difficult to access.
Further, increasing the maximum volume that can be held in the
primary reserve will allow handlers to be more responsive to industry
needs by making reserves easier to access in periods of short supply or
increased demand, which could facilitate sales. Changes in processing
and cherry products have created a situation in which handlers may have
more volume on hand at any given time, furthering the need to access
reserves. Expanding the volume available in the primary reserve will
assist handlers in managing their stocks and should help maintain a
steady inventory of finished products to supply retailers and
consumers.
Additionally, the Board believes limiting diversion credits for
market expansion to one year will move more sales into the free sales
category for purposes of computing volume regulations. This should
reduce the calculated surplus, and in turn lower restrictions. Lower
restrictions allow handlers to have a greater portion of their volume
available for free sales. This could facilitate additional sales which
could improve returns for growers and handlers.
This rule is expected to benefit producers, handlers, and
consumers. The effects of this rule are not expected to be
disproportionately greater or less for small handlers or producers than
for larger entities.
The Committee discussed alternatives to these changes, including
not increasing the primary reserve capacity, as well as eliminating
diversion credits for market expansion rather than limiting them to one
year. Regarding the change to primary reserve capacity, the Board
agreed that changes in the industry necessitated this change and that
it was in the industry's best interest to have this change in place by
the next season. In discussing the change to diversion credits for
market expansion, the Board considered phasing out diversion credits
for market expansion altogether. However, some Board members believed
that offering diversion credit for these activities had been beneficial
to the industry and thus should not be eliminated entirely. The Board
believes limiting credits to a maximum of one year would continue to
encourage handlers to enter new markets, but lessen the impact on
volume restriction calculations. Therefore, 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.
Accordingly, this action 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.
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.
In addition, the Board formed a committee to review the order's
volume regulation procedures and suggest changes to the Board. This
committee held meetings where these issues were discussed in detail.
These meetings were public meetings and both large and small entities
were able to participate and express their views. The Board's meetings
were 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 September 15,
2011, and November 2, 2011, meetings were public meetings and all
entities, both large and small, were able to express views on these
issues.
A proposed rule concerning this action was published in the Federal
Register on April 25, 2012 (77 FR 24640). Copies of the rule were
emailed 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
[[Page 40253]]
15-day comment period ending May 10, 2012, was provided to allow
interested persons to respond to the proposal. No comments were
received.
A small business guide on complying with fruit, vegetable, and
specialty crop marketing agreements and orders may be viewed at:
www.ams.usda.gov/MarketingOrdersSmallBusinessGuide. Any questions about
the compliance guide should be sent to Laurel May at the previously
mentioned address in the FOR FURTHER INFORMATION CONTACT section.
After consideration of all relevant matter 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.
It is further found that good cause exists for not postponing the
effective date of this rule until 30 days after publication in the
Federal Register (5 U.S.C. 553) because handlers are already beginning
to make plans for the upcoming season. Further, handlers are aware of
these changes, which were recommended at public meetings. Also, a 15-
day comment period was provided for in the proposed rule.
List of Subjects in 7 CFR Part 930
Marketing agreements, Reporting and recordkeeping requirements,
Tart cherries.
For the reasons set forth in the preamble, 7 CFR part 930 is
amended as follows:
PART 930--TART CHERRIES GROWN IN THE STATES OF MICHIGAN, NEW YORK,
PENNSYLVANIA, OREGON, UTAH, WASHINGTON, AND WISCONSIN
0
1. The authority citation for 7 CFR part 930 continues to read as
follows:
Authority: 7 U.S.C. 601-674.
0
2. A new Sec. 930.150 is added to read as follows:
Sec. 930.150 Primary inventory reserve.
Beginning July 1, 2012, the primary inventory reserve may not
exceed 100 million pounds.
0
3. Section 930.162 is amended by adding a sentence at the end of
section (b)(2) to read as follows:
Sec. 930.162 Exemptions.
* * * * *
(b) * * *
(2) * * * In addition, shipments of tart cherries or tart cherry
products in new market development and market expansion outlets are
eligible for handler diversion credit for a period of one year from the
handler's first date of shipment into such outlets.
* * * * *
Dated: July 3, 2012.
David R. Shipman,
Administrator, Agricultural Marketing Service.
[FR Doc. 2012-16699 Filed 7-6-12; 8:45 am]
BILLING CODE 3410-02-P
