81 FR 38975 - Tart Cherries Grown in the States of Michigan, et al.; Revision of Optimum Supply Requirements and Establishment of Inventory Release Procedures

DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service

Federal Register Volume 81, Issue 115 (June 15, 2016)

This proposed rule would implement recommendations from the Cherry Industry Administrative Board (Board) to add inventory release procedures and revise optimum supply provisions under the marketing order for tart cherries grown in the States of Michigan, New York, Pennsylvania, Oregon, Utah, Washington, and Wisconsin (order). The Board locally administers the order and is comprised of growers and handlers operating within the production area. This rule would establish procedures for releasing inventory from reserves and increase the maximum carry-out volume available when calculating optimum supply from 20 million pounds to 100 million pounds. These changes would provide clear procedures should an inventory release be necessary and would provide more flexibility when calculating optimum supply.

[Federal Register Volume 81, Number 115 (Wednesday, June 15, 2016)]
[Proposed Rules]
[Pages 38975-38978]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-14173]


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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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Federal Register / Vol. 81, No. 115 / Wednesday, June 15, 2016 / 
Proposed Rules

[[Page 38975]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 930

[Doc. No. AMS-FV-15-0047; FV15-930-2 PR]


Tart Cherries Grown in the States of Michigan, et al.; Revision 
of Optimum Supply Requirements and Establishment of Inventory Release 
Procedures

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would implement recommendations from the 
Cherry Industry Administrative Board (Board) to add inventory release 
procedures and revise optimum supply provisions under the marketing 
order for tart cherries grown in the States of Michigan, New York, 
Pennsylvania, Oregon, Utah, Washington, and Wisconsin (order). The 
Board locally administers the order and is comprised of growers and 
handlers operating within the production area. This rule would 
establish procedures for releasing inventory from reserves and increase 
the maximum carry-out volume available when calculating optimum supply 
from 20 million pounds to 100 million pounds. These changes would 
provide clear procedures should an inventory release be necessary and 
would provide more flexibility when calculating optimum supply.

DATES: Comments must be received by July 15, 2016.

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

FOR FURTHER INFORMATION CONTACT: Jennie M. Varela, Marketing 
Specialist, or Christian D. Nissen, Regional Director, Southeast 
Marketing Field Office, Marketing Order and Agreement Division, 
Specialty Crops Program, AMS, USDA; Telephone: (863) 324-3375, Fax: 
(863) 291-8614, or Email: [email protected] or 
[email protected].
    Small businesses may request information on complying with this 
regulation by contacting Antoinette Carter, Marketing Order and 
Agreement Division, Specialty Crops Program, AMS, USDA, 1400 
Independence Avenue SW., STOP 0237, Washington, DC 20250-0237; 
Telephone: (202) 720-2491, Fax: (202) 720-8938, or Email: 
[email protected].

SUPPLEMENTARY INFORMATION: This proposal is issued under Marketing 
Order No. 930, as amended (7 CFR part 930), regulating the handling of 
tart cherries grown in the States of Michigan, New York, Pennsylvania, 
Oregon, Utah, Washington, and Wisconsin, hereinafter referred to as the 
``order.'' The order is effective under the Agricultural Marketing 
Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter 
referred to as the ``Act.''
    The Department of Agriculture (USDA) is issuing this proposed rule 
in conformance with Executive Orders 12866, 13563, and 13175.
    This proposal has been reviewed under Executive Order 12988, Civil 
Justice Reform. This proposed rule is not intended to have retroactive 
effect.
    The Act provides that administrative proceedings must be exhausted 
before parties may file suit in court. Under section 608c(15)(A) of the 
Act, any handler subject to an order may file with USDA a petition 
stating that the order, any provision of the order, or any obligation 
imposed in connection with the order is not in accordance with law and 
request a modification of the order or to be exempted therefrom. A 
handler is afforded the opportunity for a hearing on the petition. 
After the hearing, USDA would rule on the petition. The Act provides 
that the district court of the United States in any district in which 
the handler is an inhabitant, or has his or her principal place of 
business, has jurisdiction to review USDA's ruling on the petition, 
provided an action is filed not later than 20 days after the date of 
the entry of the ruling.
    This proposal invites comments on changes that would add inventory 
release procedures and would revise the optimum supply and exemption 
provisions under the order. This proposal would establish procedures 
for releasing inventory from reserves and increase the maximum carry-
out volume available when calculating optimum supply from 20 million 
pounds to 100 million pounds. These changes would provide clear 
procedures should an inventory release be necessary and would provide 
more flexibility when calculating optimum supply. The Board voted to 
recommend these proposed changes to the Secretary at its meeting on 
June 25, 2015.
    Section 930.50 prescribes procedures for calculating an optimum 
supply based on sales history to determine free and restricted 
percentages under volume regulation. As part of the process, the Board 
is required to determine the volume of fruit they anticipate would be 
necessary to have on hand at the end of the crop year. The order refers 
to this volume as carry-out inventory. This section currently 
specifies, in part, that the Board can consider a carry-out inventory 
of up to 20 million pounds, or another amount with the approval of the 
Secretary. This proposal would amend Section 930.151 to increase the 
maximum carry-out volume available when calculating optimum supply from 
20 million pounds to 100 million pounds.
    Section 930.54 of the order governs the use or disposition of 
inventory reserve cherries. Under this authority, the Board can 
recommend to the Secretary that a portion or all of inventory reserve 
cherries be released if there is not sufficient fruit on the market to 
meet commercial demand. Sections 930.55 and 930.57 outline the 
provisions and requirements of the

[[Page 38976]]

primary and secondary reserves, respectively. Further, no cherries in 
the secondary reserve may be released until all cherries in the primary 
reserve have been released. This proposal would create Section 930.154 
to establish procedures for releasing inventory from reserves.
    When volume regulation is in place, the restricted portion of the 
crop is either held in reserve by handlers or can be sold for exempt 
uses as authorized in the rules and regulations of the order. Reserves 
can be held over multiple crop years and are released when there is a 
shortfall in supply. While the Board maintains record of the volume in 
reserve, handlers maintain ownership of the reserve fruit.
    All inventory reserves were released to meet demand following a 
crop disaster in 2012. The following year, the industry was still 
recovering and the Board did not recommend a volume regulation. When 
the Board recommended a volume regulation for the 2014-15 season to the 
Secretary, and cherries were again being added to the reserve, the 
Board established a committee to review the procedures for releasing 
restricted inventory from reserves. The committee recommended to the 
Board that the procedures as previously developed by the Board be 
maintained, and that any releases should first come from inventory 
currently in the primary reserve and then from any cherries designated 
for reserve from the current season if necessary.
    Under these procedures, once the additional volume needed for 
release is established, the release should be apportioned among 
handlers based on each handler's prior three-year average of volume 
handled as a percentage of the industry's three-year average. For 
example, if a handler handled five percent of the previous three years' 
production, and the Board recommended a release of 20 million pounds, 
that handler would potentially be authorized to release one million 
pounds of established reserves (.05 x 20 million). If a handler 
receives a release larger than what they have in the primary reserve, 
the excess amount would be reapportioned to those handlers with 
remaining primary reserve. If the handler in the scenario above had 
only 750,000 pounds in the primary reserve, the remaining 250,000 
pounds would be reallocated to those handlers who still had inventory 
in the primary reserve.
    The committee that reviewed the procedures for releasing restricted 
inventory from the reserves recognized that inventory reserves can be 
accumulated over a period of years. Therefore, the committee agreed 
releases should be based on the average amount handled during the three 
previous crop years, rather than using a year-to-year basis. The 
existing release procedures were crafted by the Board through a series 
of actions in past years and meetings. However, the procedures were not 
codified in the rules and regulations under the order. This proposal 
would add the inventory release procedures to the regulations.
    This recommendation was also thought to be the most equitable way 
to conduct releases. One Board member believed the releases should come 
from the current year's reserves prior to releasing from existing 
reserves, and did not support the recommendation. However, the Board 
recognized that during the crop year, complete information on reserves 
and shipment data would not be available. Thus, the Board recommended 
codifying inventory release procedures as recommended by the committee. 
The Board supported the recommendation by a vote of 17-1. This proposal 
would add a new Section 930.154 to the regulations to establish 
procedures for releasing inventory from reserves.
    In addition to reviewing inventory release procedures, the Board 
discussed changes to some of its practices regarding calculation of 
optimum supply. Optimum supply is defined as the average free sales of 
the prior three years plus desirable carry-out inventory. Desirable 
carry-out is the amount of fruit needed by the industry to be carried 
into the succeeding crop year to meet marketing demand until the new 
crop is available. Desirable carry-out is set each year by the Board 
after considering market circumstances and needs. Section 930.50(a) 
currently specifies that desirable carry-out can range from 0 to a 
maximum of 20 million pounds, but also authorizes the Board to 
establish an alternative carry-out figure with the approval of the 
Secretary.
    Since the promulgation of the order, the industry has seen new 
products and new segments emerge, such as dried tart cherries. As a 
result, at the end of a season there are multiple product lines that 
need to be supplied with tart cherries before the next harvest, which 
has impacted desirable carry-out. Desirable carry-out is the amount of 
fruit needed by the industry to be carried into the succeeding crop 
year to meet marketing demand until the new crop is available.
    In 2014, the Board used its authority to recommend to the Secretary 
a carry-out volume above the order-prescribed 20 million pound maximum 
for the 2014-2015 crop year. At that time, the Board estimated it was 
necessary to have 50 million pounds available at the end of the crop 
year to fulfill the needs of the industry. In discussing volume 
regulation for the 2015-2016 crop year, the Board agreed an increased 
carry-out was again necessary and recommended to the Secretary a 55 
million pound carry-out when calculating the optimum supply.
    In order to facilitate future carry-out needs without engaging with 
annual rulemaking, the Board recommended permanently increasing the 
maximum carry-out to 100 million pounds. Some members considered the 
100 million pound upper limit to be too high, and voted against the 
recommendation. However, this proposed change would only increase the 
available range for the carry-out value from 0 to 20 million pounds to 
0 to 100 million. This proposed amendment would provide the Board with 
additional flexibility when considering the carry-out, but in itself 
does not establish a carry-out amount. The Board would still have to 
discuss and recommend a desirable carry-out value that represents 
current industry needs each crop year. Consequently, the Board 
supported the recommendation by a vote of 12-5. This proposal would 
amend Section 930.151 of the regulations to increase the maximum carry-
out volume possible when calculating optimum supply from 20 million 
pounds to 100 million pounds.
    The Board made several other recommendations for changes to the 
rules and regulations under the order at its June 25, 2015 meeting. 
These changes are being considered under a separate action.

Initial Regulatory Flexibility Analysis

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA) (5 U.S.C. 601-612), the Agricultural Marketing Service (AMS) 
has considered the economic impact of this action on small entities. 
Accordingly, AMS has prepared this initial regulatory flexibility 
analysis.
    The purpose of the RFA is to fit regulatory actions to the scale of 
businesses subject to such actions in order that small businesses will 
not be unduly or disproportionately burdened. Marketing orders issued 
pursuant to the Act, and rules issued thereunder, are unique in that 
they are brought about through group action of essentially small 
entities acting on their own behalf.
    There are approximately 600 producers of tart cherries in the

[[Page 38977]]

regulated area and approximately 40 handlers of tart cherries who are 
subject to regulation under the order. Small agricultural producers are 
defined by the Small Business Administration (SBA) as those having 
annual receipts of less than $750,000 and small agricultural service 
firms have been defined as those having annual receipts of less than 
$7,500,000 (13 CFR 121.201).
    According to the National Agricultural Statistics Service and Board 
data, the average annual grower price for tart cherries during the 
2014-15 crop year was $0.35 per pound, and total utilization was around 
300 million pounds. Therefore, average receipts for tart cherry 
producers were around $175,800, well below the SBA threshold for small 
producers. In 2014, The Food Institute estimated an f.o.b. price of 
$0.96 per pound for frozen tart cherries, which make up the majority of 
processed tart cherries. Using this data, average annual handler 
receipts were about $6.9 million, which is also below the SBA threshold 
for small agricultural service firms. Assuming a normal distribution, 
the majority of producers and handlers of tart cherries may be 
classified as small entities.
    This proposed action would create Sec.  930.154 of the rules and 
regulations, establishing procedures for release of inventory reserves. 
This proposed rule would also revise Sec.  930.151 to allow the Board 
to consider a carry-out of up to 100 million pounds when calculating 
optimum supply. These changes are intended to provide clear direction 
in the event an inventory release becomes necessary and allow the Board 
to be more responsive to tart cherry market demand. The authority for 
these actions is provided in Sec. Sec.  930.50 and 930.54 of the order. 
The Board voted to recommend these proposed changes to the Secretary at 
its meeting on June 25, 2015.
    It is not anticipated that this action would impose additional 
costs on handlers or growers, regardless of size. The proposed changes 
are administrative in nature and intended to align the provisions of 
the order with current industry practices. The addition of rules and 
regulations regarding inventory releases is a codification of 
administrative procedures the Board has had in place for many years. 
The expanded carry-out upper limit would allow the Board additional 
flexibility in meeting market needs without additional rulemaking.
    The benefits of this rule are not expected to be disproportionately 
greater or less for small handlers or producers than for larger 
entities.
    The Board discussed alternatives to these proposed changes to the 
order, including releasing reserves from the current crop year or 
releasing cherries in the order in which the fruit was put into 
reserve. A committee was established to review the reserve procedures, 
and it proposed using a three-year average percentage for each handler 
and releasing the previous crop years' reserves. The Board agreed that 
the committee's recommendation would be the most equitable solution. 
Regarding the carry-out limit, the Board considered not recommending a 
permanent change. However, the Board anticipates needing more than 20 
million pounds of carry-out for the foreseeable future. A member 
suggested changing the motion to 80 million pounds, but that suggestion 
did not receive support. Thus, the suggested alternatives were 
rejected.
    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
Chapter 35), the order's information collection requirements have been 
previously approved by the Office of Management and Budget (OMB) and 
assigned OMB No. 0581-0177, (Tart Cherries Grown in the States of 
Michigan, New York, Pennsylvania, Oregon, Utah, Washington, and 
Wisconsin). No changes in those requirements as a result of this action 
are necessary. Should any changes become necessary, they would be 
submitted to OMB for approval.
    Accordingly, this proposal would not impose any additional 
reporting or recordkeeping requirements on either small or large tart 
cherry handlers. As with all Federal marketing order programs, reports 
and forms are periodically reviewed to reduce information requirements 
and duplication by industry and public sector agencies.
    AMS is committed to complying with the E-Government Act to promote 
the use of the Internet and other information technologies to provide 
increased opportunities for citizen access to Government information 
and services, and for other purposes.
    USDA has not identified any relevant Federal rules that duplicate, 
overlap or conflict with this rule.
    The Board's meeting was widely publicized throughout the tart 
cherry industry and all interested persons were invited to attend and 
participate in Board deliberations on all issues. Like all Board 
meetings, the June 25, 2015, meeting was a public meeting and all 
entities, both large and small, were able to express views on these 
issues. Finally, interested persons are invited to submit comments on 
this proposed rule, including the regulatory and informational impacts 
of this action on small businesses.
    A small business guide on complying with fruit, vegetable, and 
specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/rules-regulations/moa/small-businesses. Any questions 
about the compliance guide should be sent to Antoinette Carter at the 
previously mentioned address in the FOR FURTHER INFORMATION CONTACT 
section.
    A 30-day comment period is provided to allow interested persons to 
respond to this proposal. A 30-day period is deemed appropriate because 
this action would need to be in place as soon as possible since 
handlers are already putting cherries into reserve from the 2015-2016 
crop. The action would also need to be in place before the Board meets 
in June to have preliminary discussions on volume control, including 
determining an appropriate carry-out figure. All written comments 
received during the comment period will be considered before a final 
determination is made on this matter.

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

0
1. The authority citation for 7 CFR part 930 continues to read as 
follows:

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

0
2. In Sec.  930.151:
0
a. Designate the current paragraph as paragraph (a); and
0
b. Add a new paragraph (b) to read as follows:


Sec.  930.151  Desirable carry-out inventory.

* * * * *
    (b) Beginning with the crop year starting July 1, 2016, for the 
purposes of determining an optimum supply volume, the Board may 
recommend a desirable carry-out inventory not to exceed 100 million 
pounds.
0
3. Section 930.154 is added to read as follows:


Sec.  930.154  Release of inventory reserve cherries.

    As provided in Sec.  930.54, the Board may recommend a release of a 
portion or all of the primary and/or secondary

[[Page 38978]]

reserve cherries. The total available reserves will be determined at 
the beginning of the crop year. The primary reserve as defined in 
Sec. Sec.  930.55 and 930.150 must be depleted before the secondary 
reserve can be released. If a release is recommended, the recommended 
volume shall be apportioned to handlers on the basis of each handler's 
proportion of the total volume handled in the preceding three crop 
years. If a handler has less volume in reserve than is apportioned, the 
excess volume shall be reapportioned to those who still have volume in 
reserve until the total release is complete.

    Dated: June 10, 2016.
Elanor Starmer,
Administrator, Agricultural Marketing Service.
[FR Doc. 2016-14173 Filed 6-14-16; 8:45 am]
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