[Federal Register: May 12, 2009 (Volume 74, Number 90)]
[Proposed Rules]
[Page 22112-22123]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12my09-11]
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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.
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[[Page 22112]]
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 930
[Docket No. AO-370-A8; AMS-FV-06-0213; FV07-930-2]
Tart Cherries Grown in the States of Michigan, New York,
Pennsylvania, Oregon, Utah, Washington, and Wisconsin; Recommended
Decision on Proposed Amendment of Marketing Agreement and Order No. 930
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Proposed rule and opportunity to file exceptions.
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SUMMARY: This recommended decision invites written exceptions to
proposed amendments to Marketing Agreement and Order No. 930 (order),
which regulates the handling of tart cherries grown in Michigan, New
York, Pennsylvania, Oregon, Utah, Washington, and Wisconsin. Seven
amendments were proposed by the Cherry Industry Administrative Board
(Board), which is responsible for local administration of the order.
These proposed amendments would: Authorize changing the primary reserve
capacity associated with the volume control provisions of the order;
authorize establishment of a minimum inventory level at which all
remaining product held in reserves would be released to handlers for
use as free tonnage; establish an age limitation on product placed into
reserves; revise the nomination and election process for handler
members on the Board; revise Board membership affiliation requirements;
and update order language to more accurately reflect grower and handler
participation in the nomination and election process in districts with
only one Board representative. In addition, the Agricultural Marketing
Service (AMS) proposed to make any such changes as may be necessary to
the order to conform to any amendment that may result from the hearing.
This decision does not recommend the Board proposal to revise the
voting requirements necessary to approve a Board action.
The proposals are designed to provide flexibility in administering
the volume control provisions of the order and to update Board
nomination, election, and membership requirements. The proposed
amendments are intended to improve the operation and administration of
the order.
DATES: Written exceptions must be filed by June 11, 2009.
ADDRESSES: Written exceptions should be filed with the Hearing Clerk,
U.S. Department of Agriculture, room 1031-S, Washington, DC 20250-9200,
Fax: (202) 720-9776 or via the Internet at http://www.regulations.gov,
or to Martin Engeler at the E-mail address provided in the For Further
Information Contact section. All comments should reference the docket
number and the date and page number of this issue of the Federal
Register. Comments will be made available for public inspection in the
Office of the Hearing Clerk during regular business hours, or can be
viewed at: http://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: Martin Engeler, Marketing Order
Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 2202
Monterey Street, Suite 102-B, Fresno, California 93721; telephone:
(559) 487-5110, Fax: (559) 487-5906; or Marc McFetridge, Marketing
Order Administration Branch, Fruit and Vegetable Programs, AMS, USDA,
1400 Independence Avenue, SW., Stop 0237, Washington, DC 20250-0237;
telephone: (202) 720-1509, Fax: (202) 720-8938, or E-mail:
Martin.Engeler@usda.gov or Marc.McFetridge@usda.gov.
Small businesses may request information on this proceeding 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, E-mail: Jay.Guerber@usda.gov.
SUPPLEMENTARY INFORMATION: Prior document in this proceeding: Notice of
Hearing issued on February 5, 2007, and published in the February 7,
2007, issue of the Federal Register (72 FR 5646).
This action is governed by the provisions of sections 556 and 557
of title 5 of the United States Code and is therefore excluded from the
requirements of Executive Order 12866.
Preliminary Statement
Notice is hereby given of the filing with the Hearing Clerk of this
recommended decision with respect to the proposed amendments to
Marketing Order 930 regulating the handling of tart cherries grown in
Michigan, New York, Pennsylvania, Oregon, Utah, Washington, and
Wisconsin, and the opportunity to file written exceptions thereto.
Copies of this decision can be obtained from Martin Engeler whose
address is listed above.
This recommended decision is issued pursuant to the provisions of
the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C.
601 et seq.), hereinafter referred to as the ``Act'', and the
applicable rules of practice and procedure governing the formulation of
marketing agreements and orders (7 CFR Part 900).
The proposed amendments are based on the record of public hearings
held February 21 and 22, 2007, in Grand Rapids, Michigan and March 1
and 2, 2007, in Provo, Utah. Notice of this hearing was published in
the Federal Register on February 7, 2007 (72 FR 5646). The notice of
hearing contained proposals submitted by the Board.
The proposed amendments were recommended by the Board and initially
submitted to AMS on December 16, 2005. Additional information was
submitted in June 2006 at the request of AMS and a determination was
subsequently made to schedule this matter for hearing.
The proposed amendments to the order recommended by the Board are
summarized below.
1. Amend Sec. 930.50 of the order to authorize changing the
primary reserve capacity associated with the volume control provisions
of the order.
2. Amend Sec. 930.54 of the order to authorize establishment of a
minimum
[[Page 22113]]
inventory level at which all remaining product held in reserves would
be released to handlers for use as free tonnage.
3. Amend Sec. 930.55 to establish an age limitation on product
placed into reserves.
4. Amend Sec. 930.32 to revise the voting requirements necessary
to approve a Board action.
5. Amend Sec. 930.23 to revise the nomination and election process
for handler members on the Board;
6. Amend Sec. 930.20 to revise Board membership affiliation
requirements.
7. Amend Sec. 930.23 to update order language to more accurately
reflect grower and handler participation in the nomination and election
process in Districts with only one Board representative.
In addition to the proposed amendments to the order, AMS proposes
the following:
8. To make any such changes as may be necessary to the order to
conform to any amendments that may result from the hearing.
One amendment proposed by the Board is not being recommended for
adoption and is discussed in this decision.
Twenty-one industry witnesses testified at the hearing. These
witnesses consisted of tart cherry producers and handlers in the
production area, and Board staff. The majority of the witnesses
testified in favor of the proposed amendments, while some were opposed
to various proposals.
At the conclusion of the hearing, the Administrative Law Judge
established a deadline of May 30, 2007, for interested persons to file
proposed findings and conclusions or written arguments and briefs based
on the evidence received at the hearing. Two briefs were filed. One was
in support of all the proposed amendments and one was opposed to most
of the proposals.
Material Issues
The material issues presented on the record of hearing are as
follows:
(1) Whether to amend the order to authorize changing the primary
reserve capacity through informal rulemaking;
(2) Whether to amend the order to authorize establishment of a
minimum inventory level at which all remaining product held in reserves
would be released to handlers for use as free tonnage;
(3) Whether to amend the order to establish an age limitation on
product placed into reserves;
(4) Whether to amend the order to revise the voting requirements
necessary to approve a Board action;
(5) Whether to amend the order to revise the nomination and
election process for handler members on the Board;
(6) Whether to amend the order to revise Board membership
affiliation requirements; and
(7) Whether to amend order language regarding the nomination and
election process in districts with only one Board representative.
Findings and Conclusions
The following findings and conclusions on the material issues are
based on evidence presented at the hearing and the record thereof.
Material Issue Number 1--Authority to Change the Primary Reserve
Capacity
The order should be amended to authorize changing the primary
reserve capacity through the informal rulemaking process rather than
the formal rulemaking process. Such a change could occur no more than
once per crop year, and a recommendation from the Board to USDA to make
such a change must be made by September 30 of the preceding crop year.
Any change made to the reserve capacity would remain in effect until
further modified. Prior to making a recommendation to change the
reserve capacity, the Board should consider appropriate factors when
making such a recommendation.
Section 930.50 of the order specifies procedures concerning
establishment of volume control in the form of free and restricted
percentages applied to the cherries handlers acquire from growers in a
given crop year. Applying the free percentage to the cherries acquired
by handlers results in a quantity of free tonnage cherries, and
applying the restricted percentage results in a quantity of restricted
cherries applicable to regulated handlers. Free tonnage cherries may be
disposed of by handlers in any market outlet. Restricted cherries may
be released to handlers for market expansion opportunities or to
augment supplies in free market outlets. They may also be disposed of
in certain outlets not competitive with normal market outlets,
according to procedures specified in the order.
Section 930.50(i) provides for the establishment of a primary
reserve and a secondary reserve. The first 50-million pounds of reserve
established by applying the reserve percentages to the aggregate
quantity of cherries acquired by handlers is placed in a primary
reserve. Any reserve cherries in excess of the 50-million-pound
limitation, or cap, are placed into a secondary reserve. Product from
the secondary reserve cannot be released until all cherries in any
primary reserve have been released. Currently, formal rulemaking is
required to change the 50-million-pound cap on the primary reserve.
The Board proposed amending the order to authorize changing the 50-
million-pound limitation on the primary reserve through the informal
rulemaking process rather than through the formal rulemaking process,
as is currently required. Under the proposal, a change to the reserve
cap could not be made more than once per year, and a recommendation
from the Board to make such a change must be made prior to September 30
of the preceding crop year.
Witnesses testified that the proposed amendment is primarily
procedural in nature, and would add flexibility to the order. They
testified that the current process needed to change the reserve
limitation (formal rulemaking) is lengthier than the informal
rulemaking process. Witnesses indicated that if this amendment is
adopted it would provide a more efficient and timely process for
changing the reserve capacity. Witnesses testified that the cap could
be either increased or decreased through this process.
Witnesses testified that the topic of reserves is of great
importance and interest to the industry, and it is desirable that a
full discussion of the issues occur prior to changing the reserve
limitation. They further indicated that the informal rulemaking process
would provide ample opportunity for a thorough discussion and analysis
of the pertinent issues prior to making a recommendation to the USDA
for changing the reserve cap. Witnesses further stated that the order's
voting requirements for a ``super-majority'' to approve a Board action
would ensure that a high level of industry agreement is reached before
any recommended change could be made. Witnesses also pointed out that
the Board itself cannot implement an informal rulemaking change. Such
changes are recommended to the USDA, and are only implemented after
informal rulemaking by USDA. Witnesses testified that changes to the
primary reserve capacity through informal rulemaking should be made no
more than one time per year to prevent any market disruption that could
occur by changing it more frequently. The proposed requirement that any
change must be recommended no later than September 30 of the prior year
would allow all industry participants to be fully aware of the
regulation well in advance of its implementation.
Proponents of the proposal presented testimony indicating that
changes in the
[[Page 22114]]
industry have occurred which may warrant a change in the primary
reserve inventory cap in the future. Handlers are obligated to provide
cherry products to meet their reserve obligation, and they currently
produce a broader spectrum of products than when the order was
formulated in 1996. In the past, the primary product produced and sold
was frozen cherries; the product mix is now more diverse with increased
amounts of products such as dried cherries, frozen concentrate, and
single strength juice being marketed. Because there is now a wider
variety of cherry products produced, held in inventory, and sold than
in the past, it may be necessary at some point to increase the reserve
capacity so the industry can adequately supply buyers' needs with
reserve product if and when the reserve is released. Witnesses
testified that industry production and sales information is more
accurate and more readily available now than in the past, which
contributes to the need for the marketing order and its rules and
regulations to be responsive to changes in a more timely manner.
Additional testimony suggested that it may be desirable to increase
the reserve cap in the future due to an anticipated increase in demand
and sales. In 2002, the industry experienced an extremely short crop,
and sales in subsequent years decreased as buyers sourced product from
different suppliers or used substitute products. It is anticipated that
the industry will ultimately regain lost sales and eventually increase
demand, especially with the support of a new industry-wide promotion
program recently implemented. An increase in demand and annual sales
could warrant an increase in the reserve capacity at some point in the
future. For example, if annual demand increases, and the industry has a
short crop like in 2002, it would be in a better position to adequately
supply markets if a larger reserve is in place.
Witnesses opposed to the proposal indicated that the current 50-
million-pound cap has worked well for the industry. When the order was
promulgated, a 50-million-pound reserve was considered to be an
appropriate level, and would help prevent a large inventory buildup. A
previous tart cherry marketing order in effect from 1971 to 1987 was
not as effective as it could have been because there was no cap on the
reserve, which led to the buildup of excessively large inventories.
This situation ultimately contributed to the demise of that program,
according to testimony.
One witness testified that it is good business practice to carry
approximately 25 percent of annual sales in inventory. A 50-million-
pound reserve is thus appropriate for the industry because annual
industry sales have been in the range of 200 million pounds in recent
years. If the industry carries too large a reserve, grower returns
could be negatively affected because the demand for tart cherries is
relatively inelastic, according to the witness.
Another witness testified that current features of the order allow
adequate reserve product to be made available to augment market
supplies. There is no need to increase the reserve cap for that
purpose, according to the witness.
The witness further testified that the 50-million-pound reserve
capacity was a core element of the order when it was promulgated, and
its intended use was to manage supplies wisely. According to the
witness, no evidence was presented at the hearing that warrants a
specific change to the reserve capacity. However, the witness stated
that if a change in the reserve capacity is appropriate in the future,
any change should be subject to specific, measurable criteria for the
Board to consider. As discussed below, such consideration should be
part of the Board's analysis and recommendation to USDA.
This proposal would not increase the 50-million-pound primary
reserve capacity. The amendment, if adopted, would only change the
process by which a future revision in the reserve capacity could be
effectuated if conditions warrant.
The record shows that industry and market conditions change over
time, and there may be circumstances that would warrant a change in the
reserve capacity. Allowing such a change to be made through informal
rather than formal rulemaking would add flexibility to the order by
providing the industry with an additional tool to respond to industry
and market conditions in a more timely and efficient manner.
Hearing testimony indicated that it is desirable for the Board to
conduct a full and thorough analysis when recommending changes to key
elements in marketing order programs, such as volume control
provisions. This includes the impacts of any proposed change on
producers and handlers. Witnesses testified that it is also desirable
to attain a high level of agreement among industry members before
regulatory changes are implemented.
There can be benefits in allowing changes to be made to program
requirements through informal rulemaking rather than formal rulemaking.
As with all recommendations for informal rulemaking, USDA expects the
Board to fully consider and analyze pertinent factors when making
recommendations to change the reserve capacity.
In consideration of the record, USDA recommends that Section
930.50(i) be revised to authorize changing the reserve capacity from
its current 50-million-pound limit through informal rulemaking. Such a
change should only occur once per year, and any recommendation for a
change should be made by the Board to USDA no later than September 30
of the preceding year. Any change would remain in effect until
subsequently modified through informal rulemaking. The requirement to
make any such changes no more than one time per year would help to
ensure that the industry has sufficient time to plan and respond to the
change, and the requirement that any change must be recommended no
later that September 30 of the prior year would allow sufficient time
to implement the change. In addition, the super-majority voting
requirement of the Board will help to ensure that any recommendation
for a change to the reserve capacity has a high level of support.
For the above reasons, the proposed amendment to Sec. 930.50(i) is
recommended for adoption.
Material Issue Number 2--Authority To Establish a Minimum Inventory
Level at Which Reserves Would Be Released
The order should be amended to add the authority for the Board to
establish a minimum inventory level at which cherries held in the
primary and secondary reserves would be released and made available to
handlers as free tonnage. This change would allow the Board to clear
out the primary reserve and subsequently the secondary reserve when a
specified inventory level of tart cherries is reached. The specified
inventory level would be established by the Secretary through informal
rulemaking upon recommendation of the Board.
Section 930.54 of the order specifies different uses and conditions
for release of cherries placed in inventory reserve. Reserve cherries
may be released from the primary or secondary reserve if demand is
greater than supply in commercial outlets, if the Board recommends a
portion or the entire reserve inventory be released for sale in
designated markets, or the cherries are to be used in certain exempt
outlets.
Section 930.55 of the order provides authority and establishes
parameters for a primary reserve, including a maximum quantity of
product that can be held in primary reserve inventories.
[[Page 22115]]
Section 930.57 provides authority and parameters for a secondary
reserve. Quantities of product in excess of the maximum amount
established in the primary reserve may be placed in the secondary
reserve.
Section 930.57(d) of the order states, in part, that ``No cherries
may be released from the secondary reserve until all cherries in any
primary inventory reserve established under Sec. 930.55 have been
released.'' Based on the language in Sec. 930.57(d) handlers cannot
access the secondary reserve if any cherries remain in the primary
reserve. In addition, the current provisions of the order do not allow
the Board to require handlers to release all inventory held in their
portion of the primary reserve. The proposed amendment would authorize
the Secretary, upon recommendation of the Board, to establish a minimum
inventory level at which all remaining cherries held in the primary and
secondary reserve would be released and made available to handlers as
free tonnage.
Witnesses testified that because handlers cannot access the
secondary reserve until the primary reserve is completely depleted,
minimal amounts left in the primary reserve can create problems for the
industry. According to testimony, this may occur when handlers do not
take full advantage of opportunities to utilize their portion of the
primary reserve and carry minimum inventories in the primary reserve.
Therefore, a minimal amount of inventory remaining in the primary
reserve of one or a few handlers can prevent the rest of the industry
from accessing the secondary reserve. In effect, this can prevent the
majority of the industry from clearing out excess reserve inventories.
The record indicates that there should be a way to access the
secondary reserve when there is a minimal amount of product remaining
in the primary reserve and handlers are not willing or are unable to
completely deplete their reserve inventories. The proposed amendment
would provide a way to clear out small amounts of primary reserve and
provide access to secondary reserve inventories when necessary.
According to the record, implementation of this amendment could
also reduce costs associated with administering the reserve program. A
significant portion of the Board staff's time is directed at tracking
reserve inventory by reviewing reports from handlers and also
performing on-site reviews of records and verification of handler
inventories. Once the reserve is released, it is no longer necessary
for Board staff to track the reserve inventory.
Similar to the Board staff, handlers also incur costs in
maintaining reserves. These costs include the cost of storage and the
costs associated with tracking inventory levels. If the storage time is
reduced, the cost to handlers will also be reduced.
Witnesses stated that when inventory levels reach a minimal amount,
the costs of tracking inventory at the Board and handler level, plus
storage costs, outweigh any potential benefit from carrying inventory
in the primary reserve.
According to witnesses, the intent of this proposal would be to
authorize the Board, through informal rulemaking, to establish the
inventory level at which the Board could release reserves when levels
are minimal.
The proposed amendment, if implemented, has the potential to
positively impact the market by allowing for the sale of more tart
cherries than the current order provides.
One witness testified against the proposal. The witness stated that
no quantification of the potential cost savings was offered by the
proponents. The witness suggested as an alternative that the Board
propose or recommend a volume level at which the cost of regulation
exceeds the benefit. However, no such proposal was offered at the
hearing.
The proposed amendment would not establish a specific quantity at
which primary reserves would be released. Witnesses testified that the
intent of the proposed amendment is for the Secretary to establish the
level through informal rulemaking after discussion and recommendation
of the Board. Pertinent factors would be considered and analyzed during
that process. No proposal to establish a specific level at which the
reserve would be released was presented at the hearing. The Board is
made up of a diverse industry group that ensures that all issues will
be discussed, and with USDA oversight, the appropriate threshold would
be established. Establishing the minimum inventory level through
informal rulemaking would ensure broad support due to the two-thirds
super majority vote needed for Board approval and recommendation to the
Secretary. Once the minimum inventory level is established, the Board
staff would administer the reserve release.
According to the record, providing authority to establish a minimum
inventory level at which reserves would be released through the
informal rulemaking process would provide additional flexibility in
administering the reserve program. If the Board ultimately recommends a
minimum level at which reserves would be released, it would help the
industry to access secondary reserves in certain situations. It could
also help reduce costs associated with the tracking and storing of
minimal amounts of reserve product by handlers and Board staff.
Based on the record evidence, USDA recommends amending the order as
proposed by the Board by adding Sec. 930.54(d) to authorize the
Secretary, upon recommendation of the Board, to establish a minimum
inventory level at which all remaining product held in reserves would
be released to handlers for use as free tonnage.
Material Issue Number 3--Establishment of a Minimum Age Limitation on
Product Placed Into Reserves
The order should be amended to establish a minimum age limitation
on products placed into reserves. Currently, there is no age limitation
on products carried in the reserves. Product carried in storage can
deteriorate over time and is more difficult to sell than product stored
for a shorter period.
Section 930.55 of the order specifies parameters for cherries
placed into reserves. Reserve cherries can be in the form of frozen,
canned, dried, or concentrated juice.
According to witness testimony, the marketing order and its
inventory reserve provisions were crafted with the idea that market
forces would generally define the products carried in the reserve.
Handlers are given the option of carrying whatever form and whatever
type of product they choose in the reserve. There are no quality
standards applied to products placed into reserves, nor is there a
limitation regarding the age of products that can be carried in the
reserve. This has created a situation where handlers can carry product
that is several years old in the reserve inventories. Witnesses
testified that because product quality deteriorates over time, poor
quality product is often carried in reserve inventory.
According to the record, one of the main rationales for the
establishment of the reserve program was the concept that the release
of reserve inventories in low production years would support the long-
term marketing efforts of the industry. This can only be achieved if
the reserve products released are acceptable to the market.
Establishing a minimum age limitation on reserve product would prevent
product that has deteriorated over time from being held in reserve
inventories. This would
[[Page 22116]]
ultimately aid the industry in its marketing efforts by having better
quality products available when reserves are released to the market.
One witness testified that the marketing order currently has
authority to regulate the quality of cherries held in reserves. If the
Board wants to regulate the quality of reserve product, it should do so
through that authority. The witness further testified that the Board's
proposal to limit the age of cherries placed in reserve would not
prevent handlers from placing low-grade cherries in reserve, and that
such cherries can be challenging to sell.
Other witnesses acknowledged that the order contains authority to
regulate the quality of cherries held in reserves, and this can be done
through establishing minimum grade, quality, and condition
requirements. However, witnesses also testified that the industry has
chosen not to implement grade and quality standards with respect to
products carried in the reserve. According to witness testimony,
establishing and complying with minimum grade and quality standards
would be expensive to the industry due to inspection costs, inventory
management costs, and added costs associated with monitoring and
tracking product grade. Witnesses testified that a more practical
solution for the industry is to establish an age limitation on reserve
products. Since tart cherry products deteriorate over time and
generally have a shelf life of up to three years according to
testimony, placing an age limitation of three years on reserve product
should help to ensure reserve product is of marketable quality.
Based on the record evidence, USDA recommends amending Sec.
930.55(b) as proposed by the Board to require that products placed into
reserve inventory must have been produced in the current or preceding
two crop years.
Material Issue Number 4--Revise Voting Requirements Necessary To
Approve a Board Action
The order should not be amended to revise the number of votes
necessary to approve a Board action.
Section 930.32 establishes the quorum requirements for Board
meetings and the voting requirements necessary to approve Board
actions. This section specifies that two-thirds of the members of the
Board, including alternates acting for absent members, shall constitute
a quorum. It further specifies that for any action of the Board to
pass, two-thirds of the entire Board must vote in favor of such action.
The Board proposed amending the voting requirement in Sec. 930.32
to specify that for any action of the Board to pass, at least two-
thirds of those present at the meeting must vote in support of such
action. The quorum requirement would not change under the proposal.
Witnesses in favor of this proposal believe the current voting
requirement can give members who are not in attendance at meetings an
undue influence on the outcome of votable issues. Witnesses believed
that because the current requirement for passing a Board action is
based on a favorable vote of at least two-thirds of the entire Board
membership, any vacant Board position at a meeting results in the
equivalent of a ``no'' vote on all votable issues. Witnesses further
testified that the current requirement may encourage members to not
attend a meeting if they do not want to discuss the merits of an issue,
and that their non-attendance has an impact on the outcome of any vote
taken at the meeting. The proposed amendment, according to proponents,
would encourage members to attend meetings because they would no longer
have an impact on the outcome of Board actions by virtue of their
absence. If the proposal is implemented, members would have more
incentive to attend meetings in order to discuss, vote, and have an
impact on Board actions, according to witnesses. Witnesses also
testified that improved meeting attendance would lead to increased
interaction and discussion of industry issues among Board members.
Witnesses asserted that the current voting requirements are
unnecessarily restrictive. The current requirements could allow a small
minority of Board members to effectively block an action that may be
favored by the majority of the Board. For example, with an 18 or 19-
member Board, six members could block an action favored by 13 members.
An example cited at the hearing referenced a specific Board meeting
where 15 of 19 members were present. The required number of votes to
pass a Board action was 13. It was testified that a small minority of
three members were not supportive of an issue that the majority of
Board members favored, which prevented the Board from taking an action
it may have otherwise taken.
Witnesses opposed to this proposed change testified that the
proposed change to the voting requirements could create a situation
where a minority number of Board members could approve an action. For
example, if the Board consisted of 19 members and there were 13 members
present at a meeting, an action could be passed by an affirmative vote
of nine members. Nine members would represent only 47 percent of the 19
Board members.
Witnesses opposed to the proposal also testified that the proposed
change could increase the possibility that members affiliated with a
common sales constituency or region could dominate the Board and Board
actions. This effect could be amplified if the proposed amendment to
Sec. 930.20 (see material issue 6) is adopted. That
particular proposal could result in an increase in the number of Board
members affiliated with a common sales constituency under certain
circumstances.
Witness testimony also contended that there is no evidence that the
current voting requirements are ineffective. Lacking any evidence to
the contrary, the arguments used in implementing the current voting
requirements are as valid now as when they were originally implemented,
according to one witness.
The contention that a vacant Board position at a meeting
automatically results in a ``no'' vote on all votable issues is not
correct. If a Board seat is vacant at a meeting, the vacant seat would
not be recorded in vote counts. In contrast however, under the order,
voting requirements do not change based on the number of members
present at the meeting. It takes a fixed number of votes to pass a
Board action, regardless of the number of members in attendance at a
meeting. Thus, if a member was absent from a meeting, that member's
absence would have the same impact on a vote as if the member was
present and voted ``no''.
According to statistics presented at the hearing regarding
attendance at past Board meetings, there was non-attendance of members
in 20 of the past 40 Board meetings. Of the 20 meetings with members
not in attendance, 17 of those meetings had one member absent, two
meetings had two absent members, and one meeting had four absences.
These statistics indicate that lack of attendance of Board members has
not been an overriding problem at Board meetings. In fact, only 3.4% of
the available Board seats have been unrepresented in the 40 meetings
for which statistics were provided. Further, the statistics do not
indicate there is an attendance problem from any particular region or
district. Given the size of the Board (18 or 19 members, depending on
production levels in the districts), and the geographic disbursement of
members and travel involved to attend meetings, the meeting attendance
record is very high. On a percentage basis, nearly 97 percent of
available Board seats were filled in the 40 meetings for which
statistics were provided.
[[Page 22117]]
Record testimony indicated that the Board tries to reach consensus
on issues coming before it. Most actions taken by the Board are
unanimous or very close to unanimous, indicating a high degree of
support for Board actions.
The current super-majority voting requirements were intentionally
incorporated into the order when it was promulgated and subsequently
amended. The requirements were designed to help ensure a high degree of
support for issues at the Board level. According to the order's
promulgation record, the current voting requirements were incorporated
into the order to ensure that the industry majority supports actions of
the Board, and that minority interests are addressed. Further, the
requirements were intended in part to ensure that a single sales
constituency would not have a controlling interest on the Board. The
record evidence does not refute that these same issues are valid today.
Further, the evidence does not show that the current voting
requirements are having an undue impact on Board actions or functions
or that lack of attendance has caused an undue influence on the outcome
of Board actions.
The record evidence does not support changing the voting
requirements under the order. For the reasons discussed herein, USDA
recommends that proposed amendment to Sec. 930.32(a) not be adopted.
Material Issue Number 5--Revise Nomination and Election Process for
Handler Members on the Board
The order should be amended to require a handler to receive support
from handler(s) that handled at least five percent of the average
production of tart cherries handled in the applicable district in order
to be eligible to participate as a candidate in an election for Board
membership. The order should also be amended to require a handler to
receive support from handler(s) that handled at least five percent of
the average production of tart cherries handled in the applicable
district in order to be elected by the industry and recommended to the
Secretary for Board membership.
Section 930.23 specifies procedures and criteria for growers and
handlers to be nominated as candidates for Board membership. It also
specifies procedures and criteria for candidates to be elected by the
industry for recommendation to the Secretary for Board membership.
To be nominated as a Board candidate, a handler must be nominated
by one or more handlers, other than the nominee, from the applicable
district. If there are fewer than two handlers in the district, a
handler can nominate him or herself. To be elected by the industry for
recommendation to the Secretary, the successful handler candidate is
the candidate receiving the most votes. Each eligible handler is
entitled to one vote, and there is no weight given to the individual
votes based on the volume of cherries handled.
The amendment proposed by the Board would provide additional
criteria for being nominated as a handler candidate and being elected
by the industry for recommendation for a handler position on the Board.
The proposed additional criteria for a person to be nominated as a
handler candidate would require the prospective candidate to attain
support from another handler or handlers whose combined tonnage handled
represents at least five percent of the average production handled in
the applicable district. If a handler attained this five percent
support, he or she could then be a candidate in the election. A
successful candidate would then be required to similarly receive
support (through the balloting process) from another handler or
handlers whose combined tonnage represented no less than five percent
of the average production handled in the applicable district. Of the
candidates who received support from handlers representing at least
five percent of the average production in the district, the candidate
with the most votes would be recommended to the Secretary for Board
membership.
Witnesses testified that handler members on the Board should at
least have support of a minimum amount of tonnage handled in the
applicable district to help ensure they represent the interests of
handlers in the district. Obtaining support from handlers representing
at least five percent of the volume in the district was considered to
be reasonable, and would not be an overly burdensome amount of support
to obtain. Witnesses also testified that under the order's current
provisions, handlers representing a small amount of volume could attain
and potentially control the handler seats on the Board. Witnesses
indicated that it would not be equitable to the handlers representing
the vast majority of production if this situation was to occur.
Testimony was also provided at the hearing regarding application of
this proposed amendment in conjunction with the proposed amendment to
Sec. 930.20(g) addressed in material issue number six. It was
discussed that if a potential handler candidate for Board membership
could not achieve support from handlers handling five percent of the
average production in a district, that should not prevent him or her
from serving on the Board if it would prevent a sales constituency
conflict from occurring as provided in Sec. 930.20(g). (A sales
constituency conflict is considered to exist if two persons from the
same district are affiliated with the same sales constituency.)
Record testimony supports requiring a minimum level of support for
a handler to be elected to the Board. A provision to require members to
have support from their peers representing at least five percent of the
volume in the district would help to ensure that commercial handler
interests in the applicable district are being represented. Such a
provision would not preclude a small handler from serving on the Board.
It would only require a handler to garner a minimum level of support
from industry peers in order to serve on the Board. The provision would
establish a minimum threshold of support in terms of volume handled to
represent the constituents in the district.
However, testimony also was provided at the hearing regarding
application of the proposed amendment in conjunction with the proposed
amendment to Sec. 930.20(g) addressed in material issue number six. As
discussed in material issue number six, USDA agrees with testimony
indicating that if a potential handler candidate for Board membership
could not achieve support from handlers handling five percent of the
average production in a district, that should not prevent him or her
from serving on the Board if it would prevent a sales constituency
conflict from occurring as provided in Sec. 930.20(g). (A sales
constituency conflict is considered to exist if two persons from the
same district are affiliated with the same sales constituency.)
Record evidence supports adopting the Board's proposal by amending
Sec. 930.23(b)(2) and Sec. 930.23(c)(3)(ii) of the order to require
handler candidates seeking nomination to the Board to receive support
from handler(s) that handled at least five percent of the average
production of tart cherries handled in the district in which he or she
is seeking the position. Record evidence also supports adding
provisions to Sec. 930.23(b)(2) and Sec. 930.23(c)(3)(ii) that would
conform this section to the proposed amendments to Sec. 930.20(g)
regarding sales constituency affiliation. USDA recommends adoption of
this amendment as proposed, with changes as noted.
[[Page 22118]]
Material Issue Number 6--Revise Board Membership Affiliation
Requirements
The order should be amended to revise Board membership affiliation
requirements to allow more than one Board member per district from
being affiliated with the same sales constituency if it cannot be
avoided.
Section 930.20(g) of the order currently provides that no more than
one Board member may be from, or affiliated with, a single sales
constituency in those districts with more than one seat on the Board. A
sales constituency is defined in Sec. 930.16 as ``* * * a common
marketing organization or brokerage firm or individual representing a
group of handlers or growers * * *.'' The purpose of this provision is
to achieve a fair and balanced representation on the Board and to
prevent any one sales constituency from gaining control of the Board.
The proposed amendment would add a proviso to the prohibition
limiting the number of Board members from a sales constituency in
districts with more than one member. The proviso states that the sales
constituency prohibition shall not apply in a district where such a
conflict cannot be avoided.
Witnesses supporting this proposed amendment testified that the
current order provisions recently prevented District 7, the State of
Utah, from attaining its full complement of positions on the Board.
Section 930.20(b) provides that districts with greater than 10 million
pounds of production and less than 40 million pounds are entitled to
two seats on the Board. Based on this provision, the State of Utah is
entitled to two positions on the Board. However, a situation occurred
in recent years where there were no eligible persons willing to serve
on the Board from Utah who were affiliated with a different sales
constituency than the existing Board member, as required by Section
930.30(g). Witnesses testified that despite extensive outreach efforts,
they were only able to locate one eligible candidate from a different
sales constituency, but that person had no interest in serving on the
Board. Because of this situation, there was one vacant Utah seat on the
Board. Utah was unable to achieve its full complement of positions on
the Board pursuant to Sec. 930.20(b) of the order. Witnesses believed
that a fair and equitable process was not being well served in this
situation, and that a conflict exists between sections 930.20(b), which
allocates Utah two positions on the Board, and 930.20(g), which
prevents two members from the same sales constituency in the same
district from serving on the Board.
The proposed amendment is intended to prevent this type of
situation from occurring. Witnesses testified that a district's right
to representation on the Board is more important than the requirement
that Board members from the same District not be affiliated with the
same sales constituency.
One witness expressed reservations about the proposed amendment. He
indicated that a potential increase in the number of Board members
affiliated with the same sales constituency may not promote diversity
of views on the Board. The witness also stated that this proposal would
not be desirable if the proposed change to the voting requirements is
adopted. The witness suggested an alternative idea would be to divide
the State of Utah into two districts for Board representation purposes.
However, the witness did not present a specific alternative proposal or
any information or analysis demonstrating how this would address the
problem.
The record indicates that the Board's proposal would address the
issue of ensuring that the various districts under the order would be
able to maintain their share of representation on the Board.
The provisions of the proposed amendment would allow two Board
members from a district to be affiliated with the same sales
constituency if it cannot be avoided. An example given at the hearing
regarding when a sales constituency conflict could not be avoided was
if there were no other persons willing and able to serve on the Board
from a particular district from a different sales constituency.
Witnesses were questioned about the possible implementation of this
proposed amendment and the proposed amendment under material issue
number five that would require a handler Board member candidate to
achieve support from handlers representing at least five percent of the
production in the District in order to run for a position and be
elected to the Board. Some witnesses testified that if the only
qualified candidate in a particular district that was not affiliated
with the same sales constituency as the other Board member from that
district could not achieve the five percent support, then that person
should be able to serve on the Board to avoid having two members from
the same district affiliated with the same sales constituency. Other
witnesses testified that if such a situation occurred, the candidate
should not be allowed to serve on the Board, and if another qualified
candidate from the same sales constituency as the existing member was
available and met the five percent criteria, that candidate should be
able to serve.
The record is clear that if there are no willing and eligible
candidates available to serve on the Board from a different sales
constituency than the existing member(s), then it should be permissible
to allow two members from the same sales constituency to serve so that
each district achieves its share of representation. In order to
appropriately address the issue that generated this proposal while
avoiding two members on the Board from the same sales constituency,
USDA concludes that it is reasonable to not apply the five percent
requirements discussed in material issue number five in these
circumstances. Accordingly, as provided in material issue number five,
language is added to conform and clarify the two sections of the order.
Record evidence supports amending Sec. 930.20(g) to revise Board
membership affiliation requirements to allow more than one Board member
per district from being affiliated with the same sales constituency if
such a conflict cannot be avoided. USDA recommends adoption of this
amendment as proposed.
Material Issue Number 7--Update Order Language
Section 930.23 of the order should be revised to update order
language to more accurately reflect grower and handler participation in
the nomination and election process in districts with only one Board
representative. Section 930.20 establishes the calculations for the
number of representatives on the Board to which each district is
entitled. Based on the calculations established in Sec. 930.20, the
number of Board representatives can vary from year to year due to
shifts in production levels in various districts.
Sections 930.23(b)(5) and (c)(4) specifically reference Districts
5, 6, 8 and 9 in regard to the nomination and election process. Those
were the districts entitled to one Board seat when the order was
initially promulgated. However, districts that are entitled to one
Board seat have changed over time due to shifts in production. Amending
Sec. 930.23(b)(5) and (c)(4) by removing the specific references to
Districts 5, 6, 8 and 9 and replacing it with generic language to cover
any district that is entitled to only one Board representative based on
the representation calculation established in Sec. 930.20 would update
order language to accommodate changes in production
[[Page 22119]]
patterns in the tart cherry industry. This amendment is intended to
simply update language rather than alter the meaning of order
provisions in any way. Witnesses supported this proposed amendment at
the hearing and there was no opposition expressed.
The record evidence supports amending Sec. 930.23(b)(5) and (c)(4)
as proposed.
Conforming Changes
The Agricultural Marketing Service also proposed to make such
changes as may be necessary to the order to conform to any amendment
that may result from the hearing. Except as previously discussed, the
Department has identified no additional conforming changes.
Small Business Considerations
Pursuant to the requirements set forth in the Regulatory
Flexibility Act (RFA), AMS has considered the economic impact of this
action on small entities. Accordingly, AMS has prepared this initial
regulatory flexibility analysis.
The purpose of the RFA is to fit regulatory actions to the scale of
business subject to such actions so that small businesses will not be
unduly or disproportionately burdened. Marketing orders and amendments
thereto are unique in that they are normally brought about through
group action of essentially small entities for their own benefit.
Small agricultural producers have been defined by the Small
Business Administration (SBA) (13 CFR 121.201) as those having annual
receipts of less than $750,000. Small agricultural service firms, which
include handlers regulated under the order, are defined as those with
annual receipts of less than $6,500,000.
There are approximately 40 handlers of tart cherries subject to
regulation under the order and approximately 900 producers of tart
cherries in the regulated area. A majority of the producers and
handlers are considered small entities according to the SBA's
definition.
The geographic region regulated under the order covers the states
of Michigan, New York, Oregon, Pennsylvania, Utah, Washington, and
Wisconsin. Acreage devoted to tart cherry production in the regulated
area has declined in recent years. According to data presented at the
hearing, bearing acreage in 1987-88 totaled 50,050 acres; by 2006-2007
it had declined to 37,200 acres. Michigan accounts for 74 percent of
total U.S. bearing acreage with 27,700 bearing acres. Utah is second,
with a reported 2,800 acres, or approximately eight percent of the
total. The remaining states' acreage ranges from 700 to 2,000 acres.
Production of tart cherries can fluctuate widely from year to year.
The magnitude of these fluctuations is one of the most pronounced for
any agricultural commodity in the United States, and is due in large
part to weather related conditions during the bloom and growing
seasons. This fluctuation in supplies presents a marketing challenge
for the tart cherry industry because demand for the product is
relatively static. In addition, the demand for tart cherries is
inelastic, which means a change in the supply has a proportionately
larger change in the price level.
Authorities under the order include volume regulation, promotion
and research, and grade and quality standards. Volume regulation is
used under the order to augment supplies during short supply years with
product placed in reserves during large supply years. This practice is
intended to reduce the annual fluctuations in supplies and
corresponding fluctuations in prices.
The Board is comprised of representatives from all producing areas
based on the volume of cherries produced in those areas. The Board
consists of a mix of handler and grower members, and a member that
represents the public. Board meetings where regulatory recommendations
and other decisions are made are open to the public. All members are
able to participate in Board deliberations, and each Board member has
an equal vote. Others in attendance at meetings are also allowed to
express their views.
The Board appointed a subcommittee to consider amendments to the
marketing order. The subcommittee met several times for this purpose,
and ultimately recommended several amendments to the order. The Board
subsequently requested that USDA conduct a hearing to consider the
proposed amendments. The views of all participants were considered
throughout this process.
In addition, the hearing to receive evidence on the proposed
amendments was open to the public and all interested parties were
invited and encouraged to participate and express their views.
The proposed amendments are intended to provide additional
flexibility in administering the volume control provisions of the
order, and to update Board nomination, election, and membership
requirements. The amendments are intended to improve the operation and
administration of the order. Record evidence indicates the proposals
are intended to benefit all producers and handlers under the order,
regardless of size.
Proposal 1--Adding the Authority To Change the Primary Reserve Capacity
The proposal described in Material Issue No. 1 of this recommended
decision would amend Sec. 930.50 of the order to authorize changing
the primary reserve capacity associated with the volume provisions of
the order through informal rulemaking. Changing the reserve capacity
currently requires amendment of the order through the formal rulemaking
process.
The order establishes a fixed quantity of 50-million pounds of tart
cherries and tart cherry products that can be held in the primary
reserve. Any reserve product in excess of the 50-million-pound
limitation must be placed in the secondary reserve.
Free tonnage product can be sold to any market outlet, but most
shipments are sold domestically, which is considered the primary
market. Reserve product can be used only in specific outlets which are
considered secondary markets. These secondary markets include
development of export markets, new product development, new markets,
and government purchases.
When the order was promulgated, a 50-million-pound limitation was
placed on the capacity of the primary reserve. Proponents of the
current order proposed a limitation on the quantity of product that
could be placed into the primary reserve. That limitation was
incorporated into the order, and can only be changed through the formal
rulemaking process.
Economic data presented when the order was promulgated indicated
that a reserve program could benefit the industry by managing
fluctuating supplies. Witnesses at the February and March 2007 hearing
indicated the order has been successful in this regard. However, the
record indicated that the order could be more flexible in allowing
modifications to the 50-million-pound limitation should conditions
warrant such a change in the future.
If the reserve capacity was changed, costs associated with storing
product in reserves could also change. In addition, to the extent such
a change could affect supplies in the marketplace; returns to both
growers and handlers could also be affected.
Any Board recommendation to change the reserve capacity would be
required to be implemented through the informal rulemaking process. As
part of the informal rulemaking process, USDA expects that any Board
recommendation
[[Page 22120]]
would include an analysis of the pertinent factors and issues,
including the impact of a proposed regulation on producers and
handlers. Any change to the reserve capacity would be implemented only
with analysis of the expected economic impact on the affected entities.
Proposal 2--Adding the Authority To Establish a Minimum Inventory Level
at Which Reserves Would Be Released
The proposal described in Material Issue No. 2 would amend Sec.
930.54 of the order to provide the Board with the authority to
establish a minimum inventory level at which reserves would be released
and made available to handlers as free tonnage. If implemented, the
proposed amendment would allow the Board to clear out the primary
reserve and subsequently the secondary reserve when a specified minimum
inventory level of tart cherries is reached. The specified minimum
level would be established through the informal rulemaking process.
Under current order provisions, handlers cannot access the
secondary reserve until the primary reserve is empty. Based on current
language of the order, one handler who has not completely disposed of
or otherwise fulfilled its reserve obligation can prevent access to the
secondary reserve.
The proposed amendment would allow the Board to clear out the
primary reserve when inventory levels are at a minimum level in order
to provide the industry access to secondary reserve inventories.
If the amendment were implemented, costs to both handlers and the
Board could be reduced. Handlers incur costs in maintaining reserves.
According to the record, these costs include the cost of storage, which
can be in the range of $.01 per pound per month. Handlers also incur
costs associated with tracking their own inventory levels. Witnesses
stated that when inventory levels reach a minimal amount the costs of
tracking inventory outweighs the benefit from carrying inventory in the
primary reserve.
A significant portion of the Board staff's time is directed at
tracking reserve inventory maintained at handlers' facilities. Hearing
witnesses testified that while it is difficult to quantify the exact
value of the Board staff's time to conduct these activities, the time
could be better spent on other industry issues, and it is unnecessary
to track minimal levels of inventory.
The proposed amendment, if implemented, could have a positive
impact on the market. As inventories are released from the reserves,
products could be sold, generating revenue for the industry. This
proposed amendment, if implemented, is expected to reduce costs to
handlers and the Board, thus having a positive economic impact.
Proposal 3--Establishing an Age Limitation on Products Placed Into
Reserves
The proposal described in Material Issue No. 3 would amend Sec.
930.55 to require that products placed in reserves must have been
produced in the current or immediately preceding two crop years. If
implemented, this proposed amendment would allow the Board to place an
age limit on products carried in the reserve. The purpose of the
amendment would be to help ensure that products of saleable quality are
maintained in reserve inventories.
Witnesses supported the proposed amendment by stating that it would
add credibility to product quality for all products carried in the
reserve. Currently, handlers can carry products they have no intention
of selling just to meet their reserve obligation. This amendment would
require handlers to rotate product in their reserve inventory, thus
preventing them from maintaining the same product in the reserve year
after year. Product held in inventory tends to deteriorate over time.
When reserve product is ultimately released for sale to meet market
demand, this proposed amendment would help ensure the reserve product
available is in saleable condition and can satisfy the market's needs.
Assuring product is available to satisfy the market helps to foster
long term market stability.
In terms of costs, handlers may experience some minimal costs
associated with periodically rotating product through their reserve
inventory. It would be difficult to estimate such costs because they
would vary depending upon each handler's operation. To the extent costs
would be increased, they would be proportionate to each handler's share
of the entire industry's reserve inventory. Each handler's reserve
inventory obligation is based on the handler's share of the total crop
handled. Thus, small handlers would not be disproportionately burdened.
It is anticipated that the benefits of providing a good quality
product in reserves to ultimately supply markets when needed would
outweigh any costs associated with implementation of this amendment.
Proposal 4--Revision of Voting Requirements To Approve Board Actions
The proposal submitted by the Board in Material Issue No. 4 would
revise voting requirements under Sec. 930.32 of the order. Current
requirements provide that any action of the Board requires a two-thirds
vote of the entire Board. The proposal would allow passage of a Board
action with a two-thirds vote of those present at a meeting. USDA
denied this proposal and will not change the voting requirements for
reasons specified earlier in this recommended decision.
Proposal 5--Revision of Nomination and Election Process for Handler
Members on the Board
The proposal submitted by the Board in Material Issue No. 5 relates
to nomination and election of Board members under Sec. 930.23 of the
order. It would require a handler to receive support from handlers that
handled at least five percent of the average production of tart
cherries in the applicable district in order to be a candidate and to
be elected by the industry and recommended to the Secretary for Board
membership.
Under the current order, there is no accounting for handler volume
in the nomination and balloting process. Each handler is entitled to
one equal vote. This proposal would continue to allow each handler to
have one vote, but would also require handler candidates to be
supported by handlers representing at least five percent of the average
production in the applicable district to be eligible to run for a Board
position and to be elected by the industry for recommendation to the
Secretary. This would help to ensure that handler members on the Board
represent the interests of handlers in their district that account for
at least a minimal percentage of the volume in the district.
This proposed amendment is not anticipated to have a significant
economic impact on small businesses. It only affects the nomination and
election criteria for membership on the Board by adding volume as an
element of support to help ensure that Board membership reflects the
interests of its constituency. All handlers, regardless of size, will
continue to be able to participate in the nomination and election
process. The process would continue to allow for both small and large
handlers to be represented on the Board.
[[Page 22121]]
Proposal 6--Revision of Board Membership Affiliation Requirements
The Board's proposal discussed in Material Issue No. 6 would amend
Sec. 930.20 to allow more than one Board member to be affiliated with
the same sales constituency from the same district, if such a conflict
cannot be avoided.
Currently, Sec. 930.20 does not allow more than one Board member
to be affiliated with the same sales constituency from the same
district under any circumstances. The purpose of this provision is to
prevent any one sales constituency from having a controlling influence
on Board issues and actions. However, a situation occurred in District
7, Utah, where this particular provision of the order did not allow the
district from having two representatives on the Board, as it was
entitled to under section 930.20(b) of the order. In that situation,
the only candidates willing to serve on the Board from Utah were
affiliated with the same sales constituency. Thus Utah was only able,
under the marketing order rules, to seat one of the two Board
representatives it was entitled to.
The proposed amendment is designed to prevent this problem from
occurring in the future by allowing more than one Board member
affiliated with the same sales constituency to represent a district, if
such a sales constituency conflict cannot be avoided. The hearing
record is clear that the sales constituency provision should not
prevent a district from having its allocated number of seats on the
board if there are eligible candidates willing to serve on the Board.
This amendment is not expected to have an economic impact on
growers or handlers. It relates to representation on the Board, and is
intended to help ensure each area covered under the order has the
opportunity to achieve its allocated representation on the Board.
Proposal 7--Update Order Language to Accurately Reflect Grower and
Handler Participation in the Nomination and Election Process in
Districts With Only One Board Representative
The proposal described in Material Issue No. 7 would amend Sec.
930.23 to revise and update order language to more accurately reflect
grower and handler participation in the nomination and election process
in districts with only one Board representative.
Sections 930.23(b)(5) and (c)(4) specifically reference Districts
5, 6, 8 and 9 in regard to the nomination and election process. Those
were the districts entitled to one Board seat when the order was
initially promulgated. However, districts that are entitled to one
Board seat have changed over time due to shifts in production. Amending
Sec. 930.23(b)(5) and (c)(4) by removing the specific references to
Districts 5, 6, 8 and 9 and replacing it with generic language to cover
any district that is entitled to only one Board representative based on
the representative calculation established in Sec. 930.20 would update
order language to better reflect the constantly changing tart cherry
industry.
This amendment updates order language to remove incorrect
references to district representation in the event production shifts
occur. It has no economic impact on handlers, growers, or any other
entities.
Interested persons were invited to present evidence at the hearing
on the probable regulatory and informational impacts of the proposed
amendments to the order on small entities. The record evidence is that
some of the proposed amendments may result in some minimal cost
increases while others will result in cost decreases. To the extent
there are any cost increases, the benefits of the proposed changes are
expected to outweigh the costs. In addition, changes in costs as a
result of these amendments would be proportional to the size of
businesses involved and would not unduly or disproportionately impact
small entities. The informational impact of proposed amendments is
addressed in the Paperwork Reduction Act discussion that follows.
USDA has not identified any relevant Federal rules that duplicate,
overlap or conflict with this proposed rule. These amendments are
intended to improve the operation and administration of the order to
the benefit of the industry.
Board meetings regarding these proposals as well as the hearing
date and location were widely publicized throughout the tart cherry
industry, and all interested persons were invited to attend the
meetings and the hearing, and to participate in Board deliberations on
all issues. All Board meetings and the hearing were public forums and
all entities, both large and small, were able to express 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 30-day comment period is provided to allow interested persons to
respond to this proposal. Thirty days is deemed appropriate because
these proposed changes have been widely publicized and the Board and
industry would like to avail themselves of the opportunity to to
implement the changes as soon as possible. All written exceptions
timely received will be considered and a grower referendum will be
conducted before any of these proposals are implemented.
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.
Paperwork Reduction Act
Information collection requirements for Part 930 are currently
approved by the Office of Management and Budget (OMB), under OMB Number
0581-0177, Tart Cherries Grown in the States of Michigan, New York,
Pennsylvania, Oregon, Utah, Washington, and Wisconsin. Implementation
of these proposed amendments would not trigger any changes to those
requirements. It is possible that a change to the reporting
requirements may occur in the future if the Board believes it would be
necessary to assist in program compliance efforts. Should any such
changes become necessary in the future, they would be submitted to OMB
for approval.
As with all Federal marketing order programs, reports and forms are
periodically reviewed to reduce information requirements and
duplication by industry and public sector agencies.
Civil Justice Reform
The amendments to Marketing Order 930 proposed herein have been
reviewed under Executive Order 12988, Civil Justice Reform. They are
not intended to have retroactive effect. If adopted, the proposed
amendments would not preempt any State or local laws, regulations, or
policies, unless they present an irreconcilable conflict with this
proposal.
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 Sates in any district in which
the handler is an inhabitant, or has his or her principal place of
business, has jurisdiction to review USDA's ruling on the petition,
provided an action is filed
[[Page 22122]]
no later than 20 days after the date of the entry of the ruling.
Rulings on Briefs of Interested Persons
Briefs, proposed findings and conclusions, and the evidence in the
record were considered in making the findings and conclusions set forth
in this recommended decision. To the extent that the suggested findings
and conclusions filed by interested persons are inconsistent with the
findings and conclusions of this recommended decision, the requests to
make such findings or to reach such conclusions are denied.
General Findings
The findings hereinafter set forth are supplementary to the
findings and determinations which were previously made in connection
with the issuance of the marketing agreement and order; and all said
previous findings and determinations are hereby ratified and affirmed,
except insofar as such findings and determinations may be in conflict
with the findings and determinations set forth herein.
(1) The marketing agreement and order, as amended, and as hereby
proposed to be further amended, and all of the terms and conditions
thereof, would tend to effectuate the declared policy of the Act;
(2) The marketing agreement and order, as amended, and as hereby
proposed to be further amended, regulate the handling of tart cherries
grown in the production area (the States of Michigan, New York, Oregon,
Pennsylvania, Utah, Washington, and Wisconsin) in the same manner as,
and are applicable only to, persons in the respective classes of
commercial and industrial activity specified in the marketing agreement
and order upon which a hearing has been held;
(3) The marketing agreement and order, as amended, and as hereby
proposed to be further amended, are limited in their application to the
smallest regional production area which is practicable, consistent with
carrying out the declared policy of the Act, and the issuance of
several orders applicable to subdivisions of the production area would
not effectively carry out the declared policy of the Act;
(4) The marketing agreement and order, as amended, and as hereby
proposed to be further amended, prescribe, insofar as practicable, such
different terms applicable to different parts of the production area as
are necessary to give due recognition to the differences in the
production and marketing of tart cherries grown in the production area;
and
(5) All handling of tart cherries grown in the production area as
defined in the marketing agreement and order, is in the current of
interstate or foreign commerce or directly burdens, obstructs, or
affects such commerce.
A 30-day comment period is provided to allow interested persons to
respond to this proposal. Thirty days is deemed appropriate because
these proposed changes have been widely publicized and implementation
of the changes, if adopted, would be desirable to benefit the industry
as soon as possible. All written exceptions timely received will be
considered and a grower referendum will be conducted before any of
these proposals are implemented.
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
proposed to be 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. Revise paragraph (g) of Sec. 930.20 to read as follows:
Sec. 930.20 Establishment and membership.
* * * * *
(g) In order to achieve a fair and balanced representation on the
Board, and to prevent any one sales constituency from gaining control
of the Board, not more than one Board member may be from, or affiliated
with, a single sales constituency in those districts having more than
one seat on the Board; Provided, That this prohibition shall not apply
in a district where such a conflict cannot be avoided. There is no
prohibition on the number of Board members from differing districts
that may be elected from a single sales constituency which may have
operations in more than one district. However, as provided in Sec.
930.23, a handler or grower may only nominate Board members and vote in
one district.
* * * * *
3. Revise paragraphs (b)(2) and (b)(5), redesignate paragraph
(c)(3) as paragraph (c)(3)(i), add a new paragraph (c)(3)(ii), and
revise paragraph (c)(4) of Sec. 930.23 to read as follows:
Sec. 930.23 Nomination and Election.
* * * * *
(b) * * *
(2) In order for the name of a handler nominee to appear on an
election ballot, the nominee's name must be submitted with a petition
form, to be supplied by the Secretary or the Board, which contains the
signature of one or more handler(s), other than the nominee, from the
nominee's district who is or are eligible to vote in the election and
that handle(s) a combined total of no less than five percent (5%) of
the average production, as that term is used Sec. 930.20, handled in
the district. Provided, that this requirement shall not apply if its
application would result in a sales constituency conflict as provided
in Sec. 930.20(g). The requirement that the petition form be signed by
a handler other than the nominee shall not apply in any district where
fewer than two handlers are eligible to vote.
* * * * *
(5) In districts entitled to only one Board member, both growers
and handlers may be nominated for the district's Board seat. Grower and
handler nominations must follow the petition procedures outlined in
paragraphs (b)(1) and (b)(2) of this section.
* * * * *
(c) * * *
(3) * * *
(ii) To be seated as a handler representative in any district, the
successful candidate must receive the support of handler(s) that
handled a combined total of no less than five percent (5%), of the
average production, as that term is used in Sec. 930.20, handled in
the district; Provided, that this paragraph shall not apply if its
application would result in a sales constituency conflict as provided
in Sec. 930.20(g).
(4) In districts entitled to only one Board member, growers and
handlers may vote for either the grower or handler nominee(s) for the
single seat allocated to those districts.
* * * * *
4. Revise paragraph (i) of Sec. 930.50 to read as follows:
Sec. 930.50 Marketing policy.
* * * * *
(i) Restricted Percentages. Restricted percentage requirements
established under paragraphs (b), (c), or (d) of this section may be
fulfilled by handlers by either establishing an inventory reserve in
accordance with Sec. 930.55 or Sec. 930.57 or by diversion of product
in accordance with Sec. 930.59. In years where required, the Board
shall establish a maximum percentage of the restricted quantity which
may be established as a primary
[[Page 22123]]
inventory reserve such that the total primary inventory reserve does
not exceed 50-million pounds; Provided, That such 50-million-pound
quantity may be changed upon recommendation of the Board and approval
of the Secretary. Any such change shall be recommended by the Board on
or before September 30 of any crop year to become effective for the
following crop year, and the quantity may be changed no more than one
time per crop year. Handlers will be permitted to divert (at plant or
with grower diversion certificates) as much of the restricted
percentage requirement as they deem appropriate, but may not establish
a primary inventory reserve in excess of the percentage established by
the Board for restricted cherries. In the event handlers wish to
establish inventory reserve in excess of this amount, they may do so,
in which case it will be classified as a secondary inventory reserve
and will be regulated accordingly.
* * * * *
5. Add a new paragraph (d) to Sec. 930.54 to read as follows:
Sec. 930.54 Prohibition on the use or disposition of inventory
reserve cherries.
* * * * *
(d) Should the volume of cherries held in the primary inventory
reserves and, subsequently, the secondary inventory reserves reach a
minimum amount, which level will be established by the Secretary upon
recommendation from the Board, the products held in the respective
reserves shall be released from the reserves and made available to the
handlers as free tonnage.
6. Revise paragraph (b) of Sec. 930.55 to read as follows:
Sec. 930.55 Primary inventory reserves.
* * * * *
(b) The form of the cherries, frozen, canned in any form, dried, or
concentrated juice, placed in the primary inventory reserve is at the
option of the handler. The product(s) placed by the handler in the
primary inventory reserve must have been produced in either the current
or the preceding two crop years. Except as may be limited by Sec.
930.50(i) or as may be permitted pursuant to Sec. Sec. 930.59 and
930.62, such inventory reserve portion shall be equal to the sum of the
products obtained by multiplying the weight or volume of the cherries
in each lot of cherries acquired during the fiscal period by the then
effective restricted percentage fixed by the Secretary; Provided, That
in converting cherries in each lot to the form chosen by the handler,
the inventory reserve obligations shall be adjusted in accordance with
uniform rules adopted by the Board in terms of raw fruit equivalent.
* * * * *
Dated: May 7, 2009.
Craig Morris,
Acting Associate Administrator.
[FR Doc. E9-11052 Filed 5-11-09; 8:45 am]
BILLING CODE 3410-02-P