Tart Cherries Grown in the States of Michigan, et al.; Revision of Exemption Requirements, 68424-68427 [2015-28141]

Agencies

• Agricultural Marketing Service
• DEPARTMENT OF AGRICULTURE

[Federal Register Volume 80, Number 214 (Thursday, November 5, 2015)]
[Rules and Regulations]
[Pages 68424-68427]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-28141]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 930

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


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

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Interim rule with request for comments.

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SUMMARY: This rule implements a recommendation from the Cherry Industry 
Administrative Board (Board) to revise 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. This rule 
changes 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 revises the composition of the 
subcommittee which

[[Page 68425]]

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 November 6, 2015; comments received by January 4, 2016 
will be considered prior to issuance of a final rule.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this rule. Comments must be sent to the Docket Clerk, 
Marketing Order and Agreement Division, Fruit and Vegetable Program, 
AMS, USDA, 1400 Independence Avenue SW., STOP 0237, Washington, DC 
20250-0237; Fax: (202) 720-8938; or Internet: https://www.regulations.gov. All comments should reference the document number 
and the date and page number of this issue of the Federal Register and 
will be made available for public inspection in the Office of the 
Docket Clerk during regular business hours, or can be viewed at: https://www.regulations.gov. All comments submitted in response to this rule 
will be included in the record and will be made available to the 
public. Please be advised that the identity of the individuals or 
entities submitting the comments will be made public on the internet at 
the address provided above.

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) 324-3775, Fax: (863) 
291-8614, 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 Jeffrey Smutny, 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: Jeffrey.Smutny@ams.usda.gov.

SUPPLEMENTARY INFORMATION: This 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 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 exemption provisions prescribed under the 
order. This rule expands the availability of diversion credits for new 
market development and market expansion activities from one year to 
three years. This rule also revises the composition of the subcommittee 
which reviews exemption requests. These changes are intended to 
encourage the use of new market developments 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. This section currently specifies 
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 
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, 
these 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

[[Page 68426]]

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 making this change, 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. For the 
2014-15 season, the first season with volume regulation since the 
change, 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 revises 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. Current rule provisions (Sec.  930.162(d))state 
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. However, 
these changes will be considered under a separate action.

Initial 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 initial 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 
$7,000,000 (13 CFR 121.201).
    According to the National Agricultural Statistics Service and Board 
data, the average annual grower price for tart cherries during the 
2013-14 season was $0.35 per pound, and total shipments were around 289 
million pounds. Therefore, average receipts for tart cherry producers 
were around $168,600, 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 rule revises 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 revises 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. These changes were 
unanimously recommended by the Board at its meeting on June 25, 2015.
    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 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 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 were eligible for diversion credit from one 
year to three years provides handlers with more incentive

[[Page 68427]]

to utilize these programs, while not impacting the calculations for 
free and restricted percentages. Another alternative considered was 
maintaining the current 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.
    Accordingly, 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.
    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.
    USDA has not identified any relevant Federal rules that duplicate, 
overlap or conflict with this rule.
    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 these 
issues. Finally, interested persons are invited to submit comments on 
this interim rule, including the regulatory and informational impacts 
of this action on small businesses.
    A small business guide on complying with fruit, vegetable, and 
specialty crop marketing agreements and orders may be viewed at: https://www.ams.usda.gov/MarketingOrdersSmallBusinessGuide. Any questions 
about the compliance guide should be sent to Jeffrey Smutney at the 
previously mentioned address in the FOR FURTHER INFORMATION CONTACT 
section.
    This rule invites comments on changes to the exemption requirements 
currently prescribed under the order. Any comments received will be 
considered prior to the finalization of this rule.
    After consideration of all relevant material presented, including 
the Board's recommendation, and other information, it is found that 
this interim rule, as hereinafter set forth, will tend to effectuate 
the declared policy of the Act.
    Pursuant to 5 U.S.C. 553, it is also found and determined upon good 
cause that it is impracticable, unnecessary, and contrary to the public 
interest to give preliminary notice prior to putting this rule into 
effect and that good cause exists for not postponing the effective date 
of this rule until 30 days after publication in the Federal Register 
because: (1) The Board would like this in in place as soon as possible 
should volume regulation be recommended for this season so handlers can 
consider these changes when making plans; (2) the Board unanimously 
recommended these changes at a public meeting and interested parties 
had an opportunity to provide input; and (3) this rule provides a 60-
day comment period and any comments received will be considered prior 
to finalization of this 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. Section 930.162 is amended by revising the last sentence of 
paragraph (b)(2) and revising paragraph (d) 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 three years from 
the handler's first date of shipment into such outlets.
* * * * *
    (d) Review of applications. A Board appointed subcommittee shall 
review applications for exemption or renewal of exemption and either 
approve or deny the exemption. The subcommittee shall consist of three 
members and one alternate, each having no handler affiliation but 
knowledge of the tart cherry industry, one of whom shall be the public 
member or the alternate public member if available to serve. Any denial 
of an application for exemption or renewal of an existing exemption 
shall be served on the applicant by certified mail and shall state the 
reasons for the denial. Within 10 days after the receipt of a denial, 
the applicant may file an appeal, in writing, with the Deputy 
Administrator, Specialty Crops Program, supported by any arguments and 
evidence the applicant may wish to offer as to why the application for 
exemption or renewal of exemption should have been approved. The Deputy 
Administrator, upon consideration of such appeal, will take such action 
as deemed appropriate with respect to the application for exemption or 
renewal of exemption.
* * * * *

    Dated: October 30, 2015.
Rex A. Barnes,
Associate Administrator, Agricultural Marketing Service.
[FR Doc. 2015-28141 Filed 11-4-15; 8:45 am]
BILLING CODE 3410-02-P