FR Doc 04-17271

[Federal Register: July 28, 2004 (Volume 69, Number 144)]
[Proposed Rules]
[Page 44975-44981]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28jy04-20]

========================================================================
Proposed Rules
Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.

========================================================================

[[Page 44975]]

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 920

[Docket No. FV04-920-1 PR]

Kiwifruit Grown in CA; Relaxation of Pack and Container
Requirements

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: This rule invites comments on revisions to pack and container
requirements currently prescribed for California kiwifruit under the
California kiwifruit marketing order (order). The order regulates the
handling of kiwifruit grown in California and is administered locally
by the Kiwifruit Administrative Committee (Committee). This rule would
add a new size designation to the allowable size designations for packs
of kiwifruit; revise the standard packaging requirements to require
volume filled containers of kiwifruit designated by weight to hold
19.8-pounds (9-kilograms) net weight of kiwifruit, unless such
containers hold less than 15 pounds or more than 35 pounds net weight
of kiwifruit; require the quantity statement to be indicated in terms
of both ``count'' and ``size'' for all kiwifruit packed into cell
compartments, cardboard fillers, or molded trays; and exempt all
varieties of kiwifruit from the ``tightly packed'' standard pack
requirement. This rule is expected to help handlers compete more
effectively in the marketplace, better meet the needs of retailers,
reduce handler packing costs, and to improve handler and grower
returns.

DATES: Comments must be received by August 12, 2004.

ADDRESSES: Interested persons are invited to submit written comments
concerning this proposal. Comments must be sent to the Docket Clerk,
Marketing Order Administration Branch, Fruit and Vegetable Programs,
AMS, USDA, 1400 Independence Avenue SW., STOP 0237, Washington, DC
20250-0237; Fax: (202) 720-8938, e-mail: moab.docketclerk@usda.gov, or
Internet: http://www.regulations.gov. All comments should reference the

docket 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:
http://www.ams.usda.gov/fv/moab.html.

FOR FURTHER INFORMATION CONTACT: Rose Aguayo, California Marketing
Field Office, Marketing Order Administration Branch, Fruit and
Vegetable Programs, AMS, USDA, 2202 Monterey Street, suite 102B,
Fresno, California 93721; telephone: (559) 487-5901, Fax: (559) 487-
5906; or George Kelhart, Technical Advisor, Marketing Order
Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 1400
Independence Avenue SW., STOP 0237, Washington, DC 20250-0237;
telephone: (202) 720-2491, Fax: (202) 720-8938.
Small businesses may request information on complying with this
regulation by contacting Jay Guerber, Marketing Order Administration
Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence
Avenue SW., STOP 0237, Washington, DC 20250-0237; telephone: (202) 720-
2491, Fax: (202) 720-8938, or e-mail: Jay.Guerber@usda.gov.

SUPPLEMENTARY INFORMATION: This proposal is issued under Marketing
Order No. 920 as amended (7 CFR part 920), regulating the handling of
kiwifruit grown in California, 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 proposal has been reviewed under Executive Order 12988, Civil
Justice Reform. This rule is not intended to have retroactive effect.
This proposal will not preempt any State or local laws, regulations, or
policies, unless they present an irreconcilable conflict with this
rule.
The Act provides that administrative proceedings must be exhausted
before parties may file suit in court. Under section 608c(15)(A) of the
Act, any handler subject to an order may file with 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 proposed rule invites comments on revisions to pack and
container requirements currently prescribed for California kiwifruit
under the order. This rule would: (1) Add a new size designation to the
allowable size designations for packs of kiwifruit; (2) revise the
standard packaging requirements to require volume filled containers of
kiwifruit designated by weight to hold 19.8-pounds (9-kilograms) net
weight of kiwifruit, unless such containers hold less than 15 pounds or
more than 35 pounds net weight of kiwifruit; (3) require the quantity
statement to be indicated in terms of both ``count'' and ``size'' for
all kiwifruit packed into cell compartments, cardboard fillers, or
molded trays; and (4) exempt all varieties of kiwifruit from the
``tightly packed'' standard pack requirement. The Committee recommended
these changes at its March 10, 2004, meeting. This rule is expected to
help handlers compete more effectively in the marketplace, better meet
the needs of retailers, reduce handler packing and costs, and to
improve handler and grower returns.

Additional Numerical Count Size Designation

Under the terms of the order, fresh market shipments of kiwifruit
grown in California are required to be inspected and meet grade, size,
maturity, pack, and container requirements.
Section 920.52 authorizes the establishment of pack requirements.
Section 920.302(a)(4) of the order's administrative rules and
regulations specifies pack requirements for fresh shipments of
California kiwifruit.

[[Page 44976]]

Section 920.302(a)(4)(ii)(B) provides that kiwifruit packed in
individual consumer packages, bags, volume filled, or bulk containers,
may not vary more than \1/2\-inch in diameter for size designations 30
or larger.
Section 920.302(a)(4)(iii) contains a table commonly referred to as
the ``Size Designation Chart''. This chart specifies numerical count
size designations and the maximum number of fruit per 8-pound sample
for each numerical count size designation for fruit packed in
individual consumer packages, bags, volume filled, or bulk containers.
In 1985, the Committee recommended and the USDA approved
establishment of the first numerical count size designation chart by
publishing a final rule in the Federal Register on September 9, 1985
(50 FR 36567). This regulation established size designation 49 defined
as a maximum of 64 pieces of fruit in an 8-pound sample, as the minimum
size. It also established four other size designations and required
that kiwifruit packed in bags, volume filled, or bulk containers be
``fairly uniform in size.'' At that time, ``fairly uniform in size''
meant that size designation 30 or larger could not vary more than \1/2\
inch in diameter, size designations 33 and 36 could not vary more than
\3/8\ of an inch, and size designations 39 and smaller could not vary
more than \1/4\ inch in diameter. Diameter was defined to mean the
greatest dimension measured at right angles to a line from stem to
blossom end; with some tolerances provided.
Over the years, numerical count size designations have been added,
removed, and the maximum number of fruit per numerical count size
designation has been revised to accommodate new packaging and changing
market conditions. The Committee recommended and the USDA approved
revisions to the size designation chart by publishing the following
interim and final rules in the Federal Register: August 16, 1993 (58 FR
43243); September 2, 1994 (59 FR 45617); September 3, 1998 (63 FR
46861); December 1, 1988 (53 FR 48513); July 29, 1999 (64 FR 41010);
October 29, 2001 (66 FR 1413); March 14, 2002 (67 FR 11396); and August
22, 2002 (67 FR 54327).
In recent years, many California growers have increased the size of
California kiwifruit through various cultural practices. During the
2003-2004 season, growers produced a crop with unusually large sizes.
Handlers experienced difficulty staying within the size variation
tolerance allowed for the largest size, size 20. Kiwifruit larger than
size 20 had to be blended into the size 20 designation, as there was no
larger size designation established for the 2003-04 season. This
blending required handlers to take special care to stay within the size
variation tolerance and reduced the uniformity of the pack size.
Handlers also incurred additional costs in meeting the requirements.
Thus, the Committee, at its March 10, 2004, meeting, unanimously
recommended adding size designation 18, defined as a maximum of 25
pieces of fruit per 8-pound sample, to the size designation chart. This
proposed change would provide handlers with a total of eleven numerical
count size designations as follows:

Size Designation Chart
------------------------------------------------------------------------
Column 2
maximum
number of
Column 1 size designation fruit per 8
pound
sample
------------------------------------------------------------------------
18*........................................................ 25
20......................................................... 27
23......................................................... 30
25......................................................... 32
27/28...................................................... 35
30......................................................... 39
33......................................................... 43
36......................................................... 46
39......................................................... 49
42......................................................... 53
45......................................................... 55
------------------------------------------------------------------------
*New size designation is in bold.

Additionally, for clarification, the title ``Size Designation
Chart'' would be added to the top of the chart.
The new size designation is expected to ease packing requirements,
by allowing handlers to stay within size variances for larger sized
fruit and is expected to improve handler and grower returns, as larger-
sized fruit commands higher prices. This action would not affect import
requirements.

Standardization of Packaging Requirement for Volume Filled Containers
Designated by Net Weight

Section 920.52(a)(3) of the order authorizes the establishment of
weight requirements for containers of California kiwifruit.
Section 920.302(a)(4) of the order's administrative rules and
regulations outlines pack requirements for fresh shipments of
California kiwifruit.
In a volume filled container, fairly uniform size kiwifruit are
loosely packed without cell compartments, cardboard fillers, or molded
trays. Handlers may ship volume filled containers marked with either
the appropriate count (number of pieces of fruit) or net weight (total
weight of pieces of fruit in the container). Handler shipments are
based upon the preference of the receiver.
In 1994, the Committee unanimously recommended and USDA established
standard packaging for certain volume filled containers designated by
weight (59 FR 53563, October 25, 1994). At that time 52 percent of the
total crop was packed into volume filled containers. The percentage of
the total crop packed into volume filled containers increased to 85
percent during the 2001-02 season.
In 2001-02, imports from the Northern hemisphere (Greece, Italy,
and France) totaled approximately 17 percent of the U.S. market share.
The majority of imported kiwifruit was shipped in 19.8-pound (9-
kilogram) volume filled containers; whereas the order limited
California handlers to 22-pound (10-kilogram) net weight volume filled
containers. With the 22-pound provisions, handlers could not meet buyer
demands for other types of packaging.
In an effort to meet buyer demands for other types of packaging,
the standardized packaging requirement of 22-pounds (10-kilograms) net
weight for certain volume filled containers was suspended for the 2002-
2003 and 2003-2004 seasons. These suspensions were implemented by an
interim final rule published on August 22, 2002 (67 FR 54327); a final
rule on November 21, 2002 (67 FR 76140); and another final rule
published in the Federal Register on July 28, 2003 (68 FR 44191). The
suspension published on July 28, 2003 is in effect until July 31, 2004.
Additionally, the final rule published on July 28, 2003 (68 FR 44191)
removed a pack requirement in Sec. 920.302(a)(4)(iv) and paragraph
(a)(4)(v) was redesignated as paragraph (a)(4)(iv).
However, during the 2002-2003 and 2003-2004 seasons, since handlers
and retailers were not limited to a specific net weight for volume
filled containers designated by weight, some confusion appeared in the
marketplace. Without a specific net weight for volume filled
containers, more than one net weight was packed by handlers.
In an effort to determine the best means of ensuring more orderly
marketing, a survey of kiwifruit handlers and growers was conducted
during the 2003-2004 season. The survey results clearly showed that the
industry favored establishment of a standardized packaging requirement
for volume filled containers of kiwifruit designated by weight to hold
19.8-pound (9-kilograms) net weight of kiwifruit, unless such
containers hold

[[Page 44977]]

less than 15 pounds or more than 35 pounds net weight of kiwifruit.
Accordingly, the Committee, on March 10, 2004, unanimously
recommended revising the standard packaging requirements for volume
filled containers of kiwifruit designated by weight to hold 19.8-pounds
(9-kilograms) net weight of kiwifruit, unless such containers hold less
than 15 pounds or more than 35 pounds net weight of kiwifruit.
This recommended change would allow the industry to compete more
effectively in the market place with its foreign competition, allow
continued packing of the new variety of kiwifruit in 14-pound
containers, and would improve grower returns. This action would not
affect import requirements.

Container Marking Requirements

Section 920.52 authorizes the establishment of pack, and container
requirements for California kiwifruit.
Section 920.303 of the order's administrative rules and regulations
outlines specific container marking requirements for fresh shipments of
California kiwifruit.
Section 920.303(c)(1) provides that the quantity statement shall be
indicated in terms of count for kiwifruit packed in cell compartments,
cardboard fillers, or molded trays, and the contents shall conform to
the count.
Historically, the industry and buyers have associated count (number
of pieces of fruit) with fruit size designations (maximum number of
pieces of fruit in an 8-pound sample). Molded trays were originally
designed in the early 1980's to accommodate fruit of the corresponding
size from the numerical count size designation chart. For example,
count 36 trays (trays that held 36 pieces of fruit) would accommodate
size designation 36 fruit.
As previously mentioned, numerous changes have been made to the
size designation chart over the years. Other changes have included
removal of the minimum tray weight requirements (66 FR 39270; July 30,
2001), and the addition of the new molded tray inserts with smaller cup
sizes. Currently, handlers can pack five sizes of fruit (33, 36, 39,
42, and 45) into three tray counts (33, 36, and 39), with the tray
weighing as little as 5 pounds. These differences may cause confusion
in the marketplace, especially if buyers assume that count is
equivalent to size.
Thus, the Committee, at its March 10, 2004, meeting, recommended
that both ``count'' and ``size'' be marked on containers with cell
compartments, cardboard fillers, or molded trays. Under this
recommendation, containers would be marked with the size of the fruit
as specified in the size designation chart and the number of pieces of
fruit in the box. For example, a tray marked with size designation 45
and could hold 36 pieces of fruit. Retailers would be able to clearly
discern the number of pieces of fruit packed into the container and the
size of that fruit. Of the eleven members present, ten voted for this
change, and one voted against it. The sole opponent of this
recommendation believes that requiring both ``count'' and ``size'' to
be marked on containers of California kiwifruit would impose additional
inspection requirements on California handlers. This member believes
that this recommendation would place the California handler at a
disadvantage in competing against imported kiwifruit, as importers do
not have to comply with container marking requirements.
In its deliberations, the Committee discussed inspection
requirements. Committee members mentioned that currently inspectors
count the number of fruit in the container. Others mentioned that
requiring the quantity statement to be indicated in terms of both
``count'' and ``size'' for all kiwifruit packed into cell compartments,
cardboard fillers, or molded trays would require inspectors to also
verify the size markings. An analysis of inspection costs indicates
there would likely be an overall increase for the industry of 1.5
percent or about $2,529. Handlers in the industry contract with the
USDA Inspection Service to perform either a block or an in-line
inspection. Inspectors that perform in-line inspection inspect the
fruit at the time of packing, whereas, block inspections occur after
the fruit has been packed, just prior to shipment. The additional costs
would be incurred by handlers who use the block inspection method for
their initial inspections, and those handlers who have fruit
reinspected prior to shipment. The block inspection method is used for
13 percent of initial inspections and for all reinspections. In recent
seasons, in-line inspections accounted for 87 percent of all initial
inspections. Reinspections are required if fruit is restyled or
repacked.
The Committee believes that marking both ``count'' and ``size'' on
containers would eliminate possible confusion in the market place. This
action would not affect import requirements.

Standard Pack ``Tightly Packed'' Requirement

Section 920.52(a)(2) of the order authorizes the establishment of
grade standards.
Section 920.302(a)(1) of the order's administrative rules and
regulations states the minimum grade shall be at least KAC No. 1
quality.
Section 920.302(b) defines the term KAC No. 1 quality as kiwifruit
that meets the requirements of U.S. No. 1 grade as defined in 7 CFR
51.2335 through 51.2340 of the United States Standards for Grades of
Kiwifruit (Grade Standards), except that the kiwifruit shall be ``not
badly misshapen'' and an additional 7 percent tolerance is provided for
``badly misshapen,'' and except that the ``Hort16A'' variety of
kiwifruit is exempt from the ``tightly packed'' standard as defined in
Sec. 51.2338(a) of the Grade Standards.
The Grade Standards define standard pack requirements, require
containers to be well filled, and require the contents to be tightly
packed, but not excessively or unnecessarily bruised by overfilling or
oversizing for fruit packed in cell compartments, cardboard fillers, or
molded trays. This is commonly referred to in the industry as the
``tight-fill'' requirement.
In 1990, these ``tight-fill'' provisions were established in Sec.
920.302(b) to ensure that ``Hayward'' variety kiwifruit (the
predominant kiwifruit variety produced in the production area) fits
tightly into the tray-liner cups (55 FR 42179, October 18, 1990). Some
kiwifruit handlers believe that kiwifruit packed tightly into the cups
of the tray-liners are less subject to movement and therefore less
damage.
A new kiwifruit cultivar, the Actinidia chinensis ``Hort16A,''
commonly referred to as ``gold'' kiwifruit, was recently introduced in
California and is being harvested and sold commercially. To minimize
damage, the ``Hort16A'' is packed into a special shallow molded tray
with a notch for the beak. The ``Hort16A'' kiwifruit, when packed in
this shallow tray, may not meet the ``tightly packed'' requirement for
standard pack under the Grade Standards. Therefore, on March 12, 2003,
the Committee unanimously recommended and USDA subsequently approved an
exemption for all ``gold'' kiwifruit varieties from the order's
``tightly packed'' requirement. This exemption was implemented by a
final rule published in the Federal Register on July 28, 2003 (68 FR
44191).
During the last several years, the value of the ``tight-fill''
requirement has decreased due to manufacturer changes in the shape and
cuts of the molded trays.
Thus, the Committee, at its March 10, 2004, meeting, recommended
eliminating the ``tight-fill'' requirement. The majority of the
Committee members

[[Page 44978]]

agreed that the tight-fill requirement is no longer necessary, as they
believe handlers would continue to pack fruit that is tightly fit into
the cup of the molded tray to prevent damage to the fruit and to meet
buyer demands for uniform sized kiwifruit packs. Of the eleven members
present, ten voted for this change. The one member voting against this
recommendation preferred keeping the ``tight-fill'' requirement,
because he believes that handlers would be disadvantaged in the market
place by loose packs. The Committee discussed leaving the ``tight-
fill'' requirement in place, but concluded that elimination of the
``tight-fill'' pack requirement would relax handler pack and inspection
requirements, and increase handler and grower returns. This action
would not affect import requirements.

Initial Regulatory Flexibility Analysis

Pursuant to requirements set forth in the Regulatory Flexibility
Act (RFA), 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
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 the rules issued thereunder, are unique in
that they are brought about through group action of essentially small
entities acting on their own behalf. Thus, both statutes have small
entity orientation and compatibility.
There are approximately 45 handlers of California kiwifruit subject
to regulation under the marketing order and approximately 270 growers
in the production area. Small agricultural service firms are defined by
the Small Business Administration (13 CFR 121.201) as those whose
annual receipts are less than $5,000,000, and small agricultural
producers are defined as those whose annual receipts are less than
$750,000. None of the 45 handlers subject to regulation have annual
kiwifruit sales of at least $5,000,000. In addition, six growers
subject to regulation have annual sales exceeding $750,000. Therefore,
a majority of the kiwifruit handlers and growers may be classified as
small entities.
This proposed rule invites comments on revisions to pack
requirements prescribed under the California kiwifruit order. This rule
would: (1) Add a new size designation to the allowable size
designations for packs of kiwifruit; (2) revise the standard packaging
requirements to require volume filled containers of kiwifruit
designated by weight to hold 19.8-pounds (9-kilograms) net weight of
kiwifruit, unless such containers hold less than 15 pounds or more than
35 pounds net weight of kiwifruit; (3) require the quantity statement
to be indicated in terms of ``count'' and ``size'' for kiwifruit packed
in cell compartments, cardboard fillers, or molded trays; and (4)
exempt all varieties of kiwifruit from the ``tightly packed'' standard
pack requirement. The Committee recommended these changes at its March
10, 2004, meeting. These changes are expected to help handlers compete
more effectively in the marketplace, better meet the needs of
retailers, and to improve grower returns.
Authority for these actions is provided in Sec. 920.52 of the
order.

Additional Numerical Count Size Designation

Under the terms of the order, fresh market shipments of kiwifruit
grown in California are required to be inspected and meet grade, size,
maturity, pack, and container requirements.
Section 920.302(a)(4) of the order's administrative rules and
regulations specifies pack requirements for fresh shipments of
California kiwifruit.
Section 920.302(a)(4)(ii)(B) provides that kiwifruit packed in
individual consumer packages, bags, volume fill, or bulk containers,
may not vary more than \1/2\-inch in diameter for size designations 30
or larger.
Section 920.302(a)(4)(iii) contains a table commonly referred to as
the ``Size Designation Chart''. This chart specifies numerical count
size designations and the maximum number of fruit per 8-pound sample
for each numerical count size designation for fruit packed in
individual consumer packages, bags, volume filled, or bulk containers.
In 1985, the Committee recommended and the USDA approved
establishment of the first numerical count size designations by
publishing a final rule in the Federal Register on September 9, 1985
(50 FR 36567). This regulation established size designation 49 defined
as a maximum of 64 pieces of fruit in an 8-pound sample, as the minimum
size. It also established four other size designations and required
that kiwifruit packed in bags, volume filled, or bulk containers be
``fairly uniform in size.'' At that time, ``fairly uniform in size''
meant that size designation 30 or larger could not vary more than \1/2\
inch in diameter, size designations 33 and 36 could not vary more than
\3/8\ of an inch, and size designations 39 and smaller could not vary
more than \1/4\ inch in diameter. Diameter was defined to mean the
greatest dimension measured at right angles to a line from stem to
blossom end; with some tolerances provided.
Over the years, numerical count size designations have been added,
deleted, and the maximum number of fruit per numerical count size
designation has been revised to accommodate new packaging and changing
market conditions. The Committee recommended and the USDA approved
revisions to the size designation chart by publishing the following
interim and final rules in the Federal Register: August 16, 1993 (58 FR
43243); September 2, 1994 (59 FR 45617); September 3, 1998 (63 FR
46861); December 1, 1988 (53 FR 48513); July 29, 1999 (64 FR 41010);
October 29, 2001 (66 FR 1413); March 14, 2002 (67 FR 11396); and August
22, 2002 (67 FR 54327).
In recent years, many California growers have increased the size of
California kiwifruit through various cultural practices. During the
2003-2004 season, growers produced a crop with unusually large sizes.
Handlers experienced difficulty staying within the size variation
tolerance allowed for the largest size, size designation 20. Kiwifruit
larger than size 20 had to be blended into the size 20 designation, as
there was no larger size designation established for the 2003-04
season. This blending requires handlers to take special care to stay
within the size variation tolerance and reduces the uniformity of the
pack size.
Thus, the Committee, at its March 10, 2004, meeting, unanimously
recommended adding size designation 18, defined as a maximum of 25
pieces of fruit per 8-pound sample, to the size designation chart. This
proposed change would provide handlers with a total of eleven numerical
count size designations as follows:

[[Page 44979]]

Additionally, for clarification, the title ``Size Designation
Chart'' would be added to the top of the chart.
The Committee discussed alternatives to this change including not
adding size 18 to the order's administrative rules and regulations, but
concluded that this change would provide an additional pack option to
handlers and increase handler and grower returns. Almost 10 percent
(over 4,000 tray equivalents) of the fruit packed as size 20 as of
March 31, 2004, could have been packed as the new proposed size 18.
Packing 4,000 tray equivalents as size 18 could have increased grower
returns approximately 5 cents per pound more than size 20 kiwifruit
(4000 te x 7 pounds/te equals 28,000 pounds x $.05 FOB per pound equals
$1,400). This change would not affect import requirements.

Standardization of Packaging Requirement for Volume Filled Containers
Designated by Weight

Section 920.302(a)(4) of the order's administrative rules and
regulations outlines pack requirements for fresh shipments of
California kiwifruit.
In a volume filled container, fairly uniform size kiwifruit are
loosely packed without cell compartments, cardboard fillers, or molded
trays. Handlers may ship volume filled containers marked by either the
appropriate count (number of pieces of fruit) or net weight (total
weight of pieces of fruit in the container). Handler shipments are
based upon the preference of the receiver.
In 1994, the Committee unanimously recommended and USDA established
standard packaging for certain volume filled containers designated by
weight (59 FR 53563, October 25, 1994). At that time 52 percent of the
total crop was packed into volume filled containers. The percentage of
the total crop packed into volume filled containers increased to 85
percent during the 2001-02 season.
In 2001-02, imports from the Northern Hemisphere (Greece, Italy,
and France) totaled approximately 17 percent of the U.S. market share.
The majority of imported kiwifruit was shipped in 19.8-pound (9-
kilogram) volume filled containers; whereas the order limited
California handlers to 22-pound (10-kilogram) net weight volume filled
containers. With the 22-pound provisions, handlers could not meet buyer
demands for other types of packaging.
In an effort to meet buyer demands for other types of packaging,
the standardized packaging requirement of 22-pounds (10-kilograms) net
weight for certain volume filled containers was suspended for the 2002-
2003 and 2003-2004 seasons. These suspensions were implemented by an
interim final rule published on August 22, 2002 (67 FR 54327); a final
rule published on November 21, 2002 (67 FR 76140); and another final
rule published in the Federal Register on July 28, 2003 (68 FR 44191).
The suspension published on July 28, 2003, is in effect until July 31,
2004. Additionally, the final rule published on July 28, 2003 (68 FR
44191) removed a pack requirement in Sec. 920.302(a)(4)(iv) and
paragraph (a)(4)(v) was redesignated as paragraph (a)(4)(iv). The
provisions removed required containers to hold a quantity of kiwifruit
equal to 3 times the size designation marked on the container. For
example, if a container was marked as ``size 33,'' the container had to
hold 99 pieces of fruit.
However, during the 2002-2003 and 2003-2004 seasons, since handlers
were not limited to a specified net weight for volume fill containers,
some confusion appeared in the market place. Without a specific net
weight for volume filled containers, more than one net weight was
packed by handlers.
In an effort to determine the best means of ensuring more orderly
marketing, a survey of kiwifruit handlers and growers was conducted
during the 2003-2004 season. The survey results clearly showed that the
industry favored establishment of standardized packaging requirement
for volume filled containers of kiwifruit designated by weight to hold
19.8-pound (9-kilograms) net weight of kiwifruit, unless such
containers hold less than 15 pounds or more than 35 pounds net weight
of kiwifruit.
Thus, the Committee, on March 10, 2004, unanimously recommended
revising the standard packaging requirements for volume filled
containers of kiwifruit designated by weight to hold 19.8-pounds (9-
kilograms) net weight of kiwifruit, unless such containers hold less
than 15 pounds or more than 35 pounds net weight of kiwifruit.
The Committee discussed alternatives to the recommended change,
including removing the standardized volume fill net weight requirement
from the order's administrative rules and regulations but did not adopt
this alternative, as it believes that a standardized volume fill is
necessary to achieve orderly marketing of California kiwifruit.
The Committee also discussed establishing a standard packing
requirement that would require volume filled containers of kiwifruit
designated by weight to hold 19.8-pounds (9 kilograms) net weight of
kiwifruit, unless such containers hold less than 10-pounds or more than
35-pounds net weight of kiwifruit. The Committee did not adopt this
suggestion, as it believes that it is important to accommodate the
``Hort16A'' variety which is packed in a 14-pound volume filled
container.
Lastly, the Committee discussed reinstating the 22-pound (10-
kilogram) net weight standard packaging requirement for volume filled
containers. The Committee calculated that utilizing a 19.8-pound (9-
kilo) net weight standard volume fill pack would increase the cost of
packaging by 10 percent, generate approximately 10 percent more total
volume filled boxes than the 22-pound standard; would increase the
grower return by 20 percent, thereby offsetting the 10 percent increase
in packaging costs; and would better serve the industry.
This recommended change would allow the industry to compete more
effectively in the market place with its foreign competition, continue
packing the new variety of kiwifruit in 14-pound containers, and
improve grower returns. This change would not affect import
requirements.

Container Marking Requirements

Section 920.303 of the order's administrative rules and regulations
outlines specific container marking requirements for fresh shipments of
California kiwifruit.
Section 920.303(c)(1) provides that the quantity shall be indicated
in terms of count for kiwifruit packed in cell compartments, cardboard
fillers, or molded trays, and the contents shall conform to the count.
Historically, the industry and buyers have associated count (number
of pieces of fruit) with fruit size designations (maximum number of
pieces of fruit in an 8-pound sample). Molded trays were originally
designed in the early 1980's to accommodate fruit of the corresponding
size from the numerical count size designation chart. For example,
count 36 trays (trays that held 36 pieces of fruit) would accommodate
size designation 36 fruit.
As previously mentioned, numerous changes have been made to the
size designation chart over the years. Other changes have included
removal of the minimum tray weight requirements (66 FR 39270; July 30,
2001), and the addition of the new molded tray inserts with smaller cup
sizes. Currently, handlers can pack five sizes of fruit (33, 36, 39,
42, and 45) into three tray counts (33, 36, and 39), with the tray
weighing as little as 5 pounds. These differences may cause confusion
in the market

[[Page 44980]]

place, especially if buyers assume that count is equivalent to size.
Thus, committee at its March 10, 2004, meeting recommended that
both ``count'' and ``size'' be marked on containers with cell
compartments, cardboard fillers, or molded trays. The Committee
discussed several alternatives to this change. The first alternative
considered was to reinstitute tray weights. The Committee felt this
requirement would be too restrictive as it would dictate what size
fruit had to be packed into a specific tray and that this might result
in handlers having to repack kiwifruit that did not meet established
minimum tray weight requirements. They were concerned that
reinstituting minimum tray weights might result in increased handler
costs.
The second alternative discussed by the Committee was to regulate
the size of the molded cup. However, the Committee determined that
regulating the size of the molded cup would not be feasible at this
time and could result in higher packing costs.
Lastly, the Committee discussed not changing the container marking
requirements to include both ``count'' and ``size'' for kiwifruit
packed in cell compartments, cardboard fillers, or molded trays.
However, the Committee agreed that it was important to specify both
``count'' and ``size'' to ensure that fruit size was clearly specified.
Under this recommendation, containers would be marked with the size of
the fruit as specified in the size designation chart and the number of
pieces of fruit in the box. For example, a tray marked with size
designation 45 and could hold 36 pieces of fruit. Retailers would be
able to clearly discern the number of pieces of fruit packed into the
container and the size of that fruit. Of the eleven members present,
ten voted for this change. The one member voting against this
recommendation believes that requiring both ``count'' and ``size'' to
be marked on containers of California kiwifruit would result in
additional inspection requirements and increased inspection costs for
California handlers. This member believes that this recommendation
would place California handlers at a disadvantage in competing against
imported kiwifruit, as importers do not have to comply with container
marking requirements.
In its deliberations, the Committee discussed inspection
requirements. Committee members mentioned that currently inspectors
count the number of fruit in the container. Others mentioned that
requiring the quantity statement to be indicated in terms of both
``count'' and ``size'' for all kiwifruit packed into cell compartments,
cardboard fillers, or molded trays would require inspectors to also
verify the size markings.
An analysis of inspection costs indicates that there would likely
be an overall increase for the industry of 1.5 percent or about $2,529.
Handlers in the industry contract with the USDA Inspection Service to
perform either a block or an in-line inspection. Inspectors that
perform in-line inspection inspect the fruit at the time of packing,
whereas, block inspections occur after the fruit has been packed, just
prior to shipment. The additional costs would be incurred by handlers
who use the block inspection method for their initial inspections, and
those handlers who have fruit reinspected prior to shipment. The block
inspection method is used for 13 percent of initial inspections and for
all reinspections. In recent seasons, in-line inspections accounted for
87 percent of all initial inspections. Reinspections are required if
fruit is restyled or repacked.
Additionally, the Committee mentioned that the recommended change
does not mandate that the ``count'' and the ``size'' be the same, as a
tray marked with size designation 45 could still hold count 36 fruit
and still weigh as little as 5 pounds.
This change is expected to eliminate possible confusion in the
marketplace and would not affect import requirements. Standard Pack
``Tightly Packed'' Requirement.
Section 920.302(a)(1) of the order's administrative rules and
regulations states the minimum grade shall be at least KAC No. 1
quality.
Section 920.302(b) defines the term KAC No. 1 quality as kiwifruit
that meets the requirements of U.S. No. 1 grade as defined in 7 CFR
51.2335 through 51.2340 of the Grade Standards, except that the
kiwifruit shall be ``not badly misshapen'' and an additional 7 percent
tolerance is provided for badly misshapen fruit and except that the
``Hort16A'' variety of kiwifruit is exempt from the ``tightly packed''
standard as defined in Sec. 51.2338(a) of the Grade Standards.
The Grade Standards define standard pack requirements, require
containers to be well filled, and require the contents to be tightly
packed, but not excessively or unnecessarily bruised by overfilling or
oversizing for fruit packed in cell compartments, cardboard fillers, or
molded trays. This is commonly referred to in the industry as the
``tight-fill'' requirement.
These ``tight-fill'' provisions were established under the order to
ensure that the ``Hayward'' variety (the predominant kiwifruit variety
produced in the production area) fits tightly into the tray-liner cups
(55 FR 42179, October 18, 1990). Some kiwifruit handlers believe that
kiwifruit packed tightly into the cups of the tray-liners are less
subject to movement and therefore less damage.
A new kiwifruit cultivar, the Actinidia chinensis ``Hort16A,''
commonly referred to as ``gold'' kiwifruit, was recently introduced in
California and is being harvested and sold commercially. To minimize
damage, the ``Hort16A'' is packed into a special shallow molded tray
with a notch for the beak. The ``Hort16A'' kiwifruit, when packed in
this shallow tray, may not meet the ``tightly packed'' requirement for
standard pack under the Grade Standards. Therefore, on March 12, 2003,
the Committee unanimously recommended an exemption for all ``gold''
kiwifruit varieties from the order's ``tightly packed'' requirement.
This recommendation was implemented by USDA through a final rule
published in the Federal Register on July 28, 2003 (68 FR 44191).
During the last several years, the value of the ``tight-fill''
requirement has decreased due to manufacturer changes in the shape and
cuts of the molded trays.
Thus, the Committee, at its March 10, 2004, meeting, recommended
that the ``tight-fill'' requirement be eliminated. The majority of the
Committee members agreed that the tight-fill requirement is no longer
necessary, as they believe handlers would continue to pack fruit that
is tightly fit into the cup of the molded tray to prevent damage to the
fruit and to meet buyer demands for uniform sized kiwifruit packs. Of
the eleven members present, ten voted for this change. The one member
voting against this recommendation preferred keeping the ``tight-fill''
requirement, because he believes that handlers would be disadvantaged
in the market place by loose packs.
The Committee discussed leaving the ``tight-fill'' requirement in
place, but concluded that handlers would continue to pack fruit that is
tightly fit into the cup of the molded tray to prevent damage to the
fruit and to meet buyer demands for uniform sized kiwifruit packs
without the ``tight-fill'' pack requirement. This change would relax
handler pack and inspection requirements, and increase handler and
grower returns. This recommended change would not impact import
regulations, as pack and container requirements are not regulated under
import regulations.
This proposed rule would relax pack and container requirements
under the

[[Page 44981]]

kiwifruit order. Accordingly, these actions would not impose any
additional reporting or recordkeeping requirements on either small or
large kiwifruit handlers. As with all Federal marketing order programs,
reports and forms are periodically reviewed to reduce information
requirements and duplication by industry and public sectors.
USDA has not identified any relevant Federal rules that duplicate,
overlap, or conflict with this proposed rule. However, as previously
stated, California kiwifruit must meet the ``tight-fill'' requirements,
as specified in the U.S. Standards for Grade of Kiwifruit (7 CFR
51.2335 through 51.2340) issued under the Agricultural Marketing Act of
1946 (7 U.S.C. 1621 through 1627).
In addition, the Committee's meeting was widely publicized
throughout the kiwifruit industry and all interested persons were
invited to attend the meeting and participate in Committee
deliberations on all issues. Like all Committee meetings, the March 12,
2003, meeting, was a public meeting and all entities, both large and
small, were able to express their views on these issues. Finally,
interested persons are invited to submit information on 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 http://www.ams.usda.gov/fv/moab.html.
Any questions about the compliance guide

should be sent to Jay Guerber at the previously mentioned address in
the FOR FURTHER INFORMATION CONTACT section.
A 15-day comment period is provided to allow interested persons to
respond to this proposal. Fifteen-days is deemed appropriate because
this rule should be in place by September 10, 2004, as the shipping
season is expected to begin early this season and these changes, if
adopted, should be made as soon as possible. All written comments
timely received will be considered before a final determination is made
on this matter.

List of Subjects in 7 CFR Part 920

Kiwifruit, Marketing agreements, Reporting and recordkeeping
requirements.
For the reasons set forth in the preamble, 7 CFR part 920 is
proposed to be amended as follows:

PART 920--KIWIFRUIT GROWN IN CALIFORNIA

1. The authority citation for 7 CFR part 920 continues to read as
follows:

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

Sec. 920.302 [Amended]

2. In Sec. 920.302, paragraphs (a)(4)(iii), (a)(4)(iv), and (b)
are revised to read as follows:

Sec. 920.302 Grade, size, pack, and container regulations.

* * * * *
(4) * * *
(iii) When kiwifruit is packed in individual consumer packages,
bags, volume fill or bulk containers, the following table specifying
the size designation and maximum number of fruit per 8-pound sample is
to be used:

Size Designation Chart
------------------------------------------------------------------------
Column 2
maximum
number of
Column 1 size designation fruit per 8
pound
sample
------------------------------------------------------------------------
18......................................................... 25
20......................................................... 27
23......................................................... 30
25......................................................... 32
27/28...................................................... 35
30......................................................... 39
33......................................................... 43
36......................................................... 46
39......................................................... 49
42......................................................... 53
45......................................................... 55
------------------------------------------------------------------------

(iv) All volume fill containers of kiwifruit designated by weight
shall hold 19.8-pounds (9-kilograms) net weight of kiwifruit unless
such containers hold less than 15 pounds or more than 35 pounds net
weight of kiwifruit.
(b) Definitions. The term KAC No. 1 quality means kiwifruit that
meets the requirements of the U.S. No. 1 grade as defined in the United
States Standards for Grades of Kiwifruit (7 CFR 51.2335 through
51.2340) except that the kiwifruit shall be ``not badly misshapen,''
and an additional tolerance of 7 percent is provided for kiwifruit that
is ``badly misshapen,'' and except that all varieties of kiwifruit are
exempt from the ``tightly packed'' standard as defined in Sec.
51.2338(a) of the U.S. Standards for Grades of Kiwifruit. The terms
fairly uniform in size and diameter mean the same as defined in the
U.S. Standards for Grades of Kiwifruit.
* * * * *
3. In Sec. 920.303, paragraph (c)(1) is revised to read as
follows:

Sec. 920.303 Container marking regulations.

* * * * *
(c) * * *
(1) The quantity shall be indicated in terms of count and size for
kiwifruit packed in cell compartments, cardboard fillers, or molded
trays, and the contents shall conform to the count.

Dated: July 23, 2004.
A.J. Yates,
Administrator, Agricultural Marketing Service.
[FR Doc. 04-17271 Filed 7-27-04; 8:45 am]

BILLING CODE 3410-02-P