82_FR_28870 82 FR 28749 - Tart Cherries Grown in the States of Michigan, et al.; Free and Restricted Percentages for the 2016-17 Crop Year for Tart Cherries

82 FR 28749 - Tart Cherries Grown in the States of Michigan, et al.; Free and Restricted Percentages for the 2016-17 Crop Year for Tart Cherries

DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service

Federal Register Volume 82, Issue 121 (June 26, 2017)

Page Range28749-28755
FR Document2017-13241

This rule implements a recommendation from the Cherry Industry Administrative Board (Board) to establish free and restricted percentages for the 2016-17 crop year 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 marketing order and is comprised of producers and handlers of tart cherries operating within the production area, and a public member. This action establishes the proportion of tart cherries from the 2016 crop which may be handled in commercial outlets at 71 percent free and 29 percent restricted. These percentages should stabilize marketing conditions by adjusting supply to meet market demand and help improve grower returns.

Federal Register, Volume 82 Issue 121 (Monday, June 26, 2017)
[Federal Register Volume 82, Number 121 (Monday, June 26, 2017)]
[Rules and Regulations]
[Pages 28749-28755]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-13241]



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Federal Register / Vol. 82, No. 121 / Monday, June 26, 2017 / Rules 
and Regulations

[[Page 28749]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 930

[Doc. No. AMS-SC-16-0105; SC16-930-5 FR]


Tart Cherries Grown in the States of Michigan, et al.; Free and 
Restricted Percentages for the 2016-17 Crop Year for Tart Cherries

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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

SUMMARY: This rule implements a recommendation from the Cherry Industry 
Administrative Board (Board) to establish free and restricted 
percentages for the 2016-17 crop year 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 marketing order and is comprised of producers and 
handlers of tart cherries operating within the production area, and a 
public member. This action establishes the proportion of tart cherries 
from the 2016 crop which may be handled in commercial outlets at 71 
percent free and 29 percent restricted. These percentages should 
stabilize marketing conditions by adjusting supply to meet market 
demand and help improve grower returns.

DATES: Effective June 27, 2017.

FOR FURTHER INFORMATION CONTACT: Steven W. Kauffman, 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 Richard Lower, 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 final rule is issued under Marketing 
Agreement and Order No. 930, both as amended (7 CFR part 930), 
regulating the handling of tart cherries produced in the States of 
Michigan, New York, Pennsylvania, Oregon, Utah, Washington and 
Wisconsin, hereinafter referred to as the ``order.'' The order is 
effective under the Agricultural Marketing Agreement Act of 1937, as 
amended (7 U.S.C. 601-674), hereinafter referred to as the ``Act.''
    The Department of Agriculture (USDA) is issuing this rule in 
conformance with Executive Orders 13563 and 13175.
    This action falls within a category of regulatory actions that the 
Office of Management and Budget (OMB) has exempted from Executive Order 
12866 review. Additionally, because this rule does not meet the 
definition of a significant regulatory action it does not trigger the 
requirements contained in Executive Order 13771. See OMB's Memorandum 
titled ``Interim Guidance Implementing Section 2 of the Executive Order 
of January 30, 2017 titled `Reducing Regulation and Controlling 
Regulatory Costs' '' (February 2, 2017).
    This final rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. Under the order provisions now in effect, free 
and restricted percentages may be established for tart cherries handled 
during the crop year. This final rule establishes free and restricted 
percentages for tart cherries for the 2016-17 crop year, beginning July 
1, 2016, through June 30, 2017.
    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 final rule establishes free and restricted percentages for the 
2016-17 crop year. This rule establishes the proportion of tart 
cherries from the 2016 crop which may be handled in commercial outlets 
at 71 percent free and 29 percent restricted. This action should 
stabilize marketing conditions by adjusting supply to meet market 
demand and help improve grower returns. The carry-out and the final 
percentages were recommended by the Cherry Industry Administrative 
Board (Board) at a meeting on September 8, 2016.
    Section 930.51(a) of the order provides authority to regulate 
volume by designating free and restricted percentages for any tart 
cherries acquired by handlers in a given crop year. Section 930.50 
prescribes procedures for computing an optimum supply based on sales 
history and for calculating these free and restricted percentages. Free 
percentage volume may be shipped to any market, while restricted 
percentage volume must be held by handlers in a primary or secondary 
reserve, or be diverted or used for exempt purposes as prescribed in 
Sec. Sec.  930.159 and 930.162 of the regulations. Exempt purposes 
include, in part, the development of new products, sales into new 
markets, the development of export markets, and charitable 
contributions. Sections 930.55 through 930.57 prescribe procedures for 
inventory reserve. For cherries held in reserve, handlers would be 
responsible for storage and would retain title of the tart cherries.
    Under Sec.  930.52, only those districts with an annual average 
production over the prior three years of at least six million pounds 
are subject to regulation, and any district producing a crop which is 
less than 50 percent of its annual average of the previous five years 
is exempt. The regulated districts for the 2016-17 crop year are: 
District 1--Northern Michigan; District 2--Central Michigan; District 
3--Southern Michigan; District 4--New York; District

[[Page 28750]]

7--Utah; District 8--Washington; and District 9--Wisconsin. Districts 5 
and 6 (Oregon and Pennsylvania, respectively) are not regulated for the 
2016-17 season.
    Demand for tart cherries and tart cherry products tends to be 
relatively stable from year to year. Conversely, annual tart cherry 
production can vary greatly. In addition, tart cherries are processed 
and can be stored and carried over from crop year to crop year, further 
impacting supply. As a result, supply and demand for tart cherries are 
rarely in balance.
    Because demand for tart cherries is inelastic, total sales volume 
is not very responsive to changes in price. However, prices are very 
sensitive to changes in supply. As such, an oversupply of cherries can 
have a sharp negative effect on prices, driving down grower returns. 
The Board, aware of this economic relationship, focuses on using the 
volume control provisions in the order to balance supply and demand to 
stabilize industry returns.
    Pursuant to Sec.  930.50 of the order, the Board meets on or about 
July 1 to review sales data, inventory data, current crop forecasts and 
market conditions for the upcoming season and, if necessary, to 
recommend preliminary free and restricted percentages if anticipated 
supply would exceed demand. After harvest is complete, but no later 
than September 15, the Board meets again to update its calculations 
using actual production data, consider any necessary adjustments to the 
preliminary percentages, and determine if final free and restricted 
percentages should be recommended to the Secretary.
    The Board uses sales history, inventory, and production data to 
determine whether there is a surplus, and if so, how much volume should 
be restricted to maintain optimum supply. The optimum supply represents 
the desirable volume of tart cherries that should be available for sale 
in the coming crop year. 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 market demand until the 
new crop is available. Desirable carry-out is set by the Board after 
considering market circumstances and needs. Section 930.151(b) 
specifies that desirable carry-out can range from zero to a maximum of 
100 million pounds.
    In addition, USDA's ``Guidelines for Fruit, Vegetable, and 
Specialty Crop Marketing Orders'' (http://www.ams.usda.gov/publications/content/1982-guidelines-fruit-vegetable-marketing-orders) 
specify that 110 percent of recent years' sales should be made 
available to primary markets each season before recommendations for 
volume regulation are approved. This requirement is codified in Sec.  
930.50(g) of the order, which specifies that, in years when restricted 
percentages are established, the Board shall make available tonnage 
equivalent to an additional 10 percent of the average sales of the 
prior three years for market expansion (market growth factor).
    After the Board determines optimum supply, desirable carry-out, and 
market growth factor, it must examine the current year's available 
volume to determine whether there is an oversupply situation. Available 
volume includes carry-in inventory (any inventory available at the 
beginning of the season) along with that season's production. If 
production is greater than the optimum supply minus carry-in, the 
difference is considered surplus. This surplus tonnage is divided by 
the sum of production in the regulated districts to reach a restricted 
percentage. This percentage must be held in reserve or used for 
approved diversion activities, such as exports.
    The Board met on June 23, 2016, and computed an optimum supply of 
287 million pounds for the 2016-17 crop year using the average of free 
sales for the three previous seasons and a desirable carry-out of 57 
million pounds. The Board determined three months of sales would be a 
good estimate for what was needed at the end of the season, as there is 
a three-month gap between the calculation of carry-out at the end of 
one season and the availability of fruit in the next season. The 
recommended carry-out of 57 million pounds is approximately a quarter 
of average annual sales.
    The Board then subtracted the estimated carry-in of 81.3 million 
pounds from the optimum supply to calculate the production needed from 
the 2016-17 crop to meet optimum supply. This number, 205.7 million 
pounds, was subtracted from the Board's estimated 2016-17 production of 
351.3 million pounds to calculate a surplus of 145.6 million pounds of 
tart cherries. The Board also complied with the market growth factor 
requirement by adding 23 million pounds (average sales for prior three 
years of 230 million times 10 percent) to the free supply. The surplus 
minus the market growth factor was then divided by the expected 
production in the regulated districts (348 million pounds) to reach a 
preliminary restricted percentage of 35 percent for the 2016-17 crop 
year.
    The Board then discussed whether this calculation would provide 
sufficient supply to grow sales while being able to supply orders that 
are already scheduled, including filling remaining orders from a USDA 
purchase made the previous season. The Board, after considering 
anticipated supply needs for the 2016-17 season, decided to make an 
economic adjustment of 22 million pounds to increase the available 
supply of tart cherries. This economic adjustment further reduced the 
preliminary surplus to 100.6 million pounds. After these adjustments, 
the preliminary restricted percentage was recalculated as 29 percent 
(100.6 million pounds divided by 348 million pounds).
    The Board met again on September 8, 2016, to consider final volume 
regulation percentages for the 2016-17 season. The final percentages 
are based on the Board's reported production figures and the supply and 
demand information available in September. The total production for the 
2016-17 season was 341 million pounds, 10 million pounds below the 
Board's June estimate. In addition, growers diverted 26 million pounds 
in the orchard, leaving 315 million pounds available to market, 310 
million pounds of which are in the restricted districts. Using the 
actual production numbers, and accounting for the recommended desirable 
carry-out and economic adjustment, as well as the market growth factor, 
the restricted percentage was recalculated.
    The Board subtracted the carry-in figure used in June of 81.3 
million pounds from the optimum supply of 287 million pounds to 
determine 205.7 million pounds of 2016-17 production would be necessary 
to reach optimum supply. The Board subtracted the 205.7 million pounds 
from the actual production of 341.3 million pounds, resulting in a 
surplus of 135.6 million pounds of tart cherries. The surplus was then 
reduced by subtracting the economic adjustment of 22 million pounds and 
the market growth factor of 23 million pounds, resulting in an adjusted 
surplus of 90.6 million pounds. The Board then divided this final 
surplus by the available production of 310 million pounds in the 
regulated districts (336.1 million pounds minus 26.4 million pounds of 
in-orchard diversion) to calculate a restricted percentage of 29 
percent with a corresponding free percentage of 71 percent for the 
2016-17 crop year, as outlined in the following table:

[[Page 28751]]



------------------------------------------------------------------------
                                                               Millions
                                                               of pounds
------------------------------------------------------------------------
Final Calculations:
  (1) Average sales of the prior three years................       230.0
  (2) Plus desirable carry-out..............................        57.0
  (3) Optimum supply calculated by the Board................       287.0
  (4) Carry-in as of July 1, 2016...........................        81.3
  (5) Adjusted optimum supply (item 3 minus item 4).........       205.7
  (6) Board reported production.............................       341.3
  (7) Surplus (item 6 minus item 5).........................       135.6
  (8) Total economic adjustments............................        22.0
  (9) Market growth factor..................................        23.0
  (10) Adjusted Surplus (item 7 minus items 8 and 9)........        90.6
  (11) Supply in regulated districts........................       336.1
  (12) In-Orchard Diversion.................................        26.4
                                                             -----------
  (13) Production minus in orchard diversion................       309.7
                                                             -----------
Final Percentages:                                              Percent
  Restricted (item 10 divided by item 13 x 100).............          29
  Free (100 minus restricted percentage)....................          71
------------------------------------------------------------------------

    The primary purpose of setting restricted percentages is an attempt 
to bring supply and demand into balance. If the primary market is 
oversupplied with cherries, grower prices decline substantially. 
Restricted percentages have benefited grower returns and helped 
stabilize the market as compared to those seasons prior to the 
implementation of the order. The Board believes the available 
information indicates that a restricted percentage should be 
established for the 2016-17 crop year to avoid oversupplying the market 
with tart cherries. Consequently, based on its discussion of this issue 
and the result of the above calculations, the Board recommended final 
percentages of 71 percent free and 29 percent restricted by a vote of 
16 in favor, 2 opposed, and 2 abstentions.
    Though production came in below the Board's June, 2016, estimate, 
the initial restriction percentage remained the same due to the 
substantial in-orchard diversion. During the discussion of the proposed 
restriction, several members supported the proposed percentages as 
there was no change from the preliminary 29 percent restriction 
recommended in June. They believed deviating from the percentages 
announced in June would be disruptive to the industry, as processors 
have already made agreements with growers.
    Another member noted when there was a crop failure in 2012, there 
was not enough reserve to maintain sales and warned against being 
unprepared in the future. The member also noted that in the last four 
years, even with volume regulation and an increase in imported 
products, overall domestic sales have increased since 2013, including 
modest growth in both juice and piefill.
    Some members opposed to the proposed restriction expressed concern 
regarding competition from imported tart cherry juice concentrate. In 
particular, they were concerned that the additional volume from imports 
is not accounted for in the Optimum Supply Formula (OSF), thus not 
capturing overall supply and demand.
    Others were of the opinion that the Board's recent actions to 
expand the use of diversion credits in new markets or through grower 
diversion were allowing the industry to remain competitive without 
making additional adjustments to supply. Another member countered that 
not all handlers are helped by new market diversion credits and cannot 
sell all of their product under a restriction.
    When asked how much of the market currently being served by imports 
could be supplied by the domestic handlers, some members stated they 
could utilize the full adjusted calculated surplus of 90.6 million 
pounds. Others noted that trying to compete for those markets by 
matching the price of imported concentrate would drop grower returns to 
an unsustainable level.
    One member summarized that, although there is a carrying cost for 
storing restricted fruit, and the industry appears to be at a trade 
disadvantage, the Board should account for those factors all the while 
focusing on continuing to grow sales. Though there was much discussion 
regarding the market impact of imports, there was no motion made by any 
Board member to make a further economic adjustment to the calculation 
based on imported product.
    After reviewing the available data, and considering the concerns 
expressed, the Board determined that a 29 percent restriction with a 
carry-out volume of 57 million pounds meets sales needs and establishes 
some reserves without oversupplying the market. Thus, the Board 
recommended establishing final percentages of 71 percent free and 29 
percent restricted. The Board could meet and recommend the release of 
additional volume during the crop year if conditions so warranted.

Final Regulatory Flexibility Act

    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 final regulatory flexibility 
analysis.
    The purpose of the RFA is to fit regulatory actions to the scale of 
businesses subject to such actions in order that small businesses will 
not be unduly or disproportionately burdened. Marketing orders issued 
pursuant to the Act, and rules issued thereunder, are unique in that 
they are brought about through group action of essentially small 
entities acting on their own behalf.
    There are approximately 600 producers of tart cherries in the 
regulated area and approximately 40 handlers of tart cherries who are 
subject to regulation under the order. Small agricultural producers are 
defined by the Small Business Administration (SBA) as those having 
annual receipts of less than $750,000 and small agricultural service 
firms have been defined as those whose annual receipts are less than 
$7,500,000 (13 CFR 121.201).
    According to the National Agricultural Statistics Service (NASS) 
and Board data, the average annual grower price for tart cherries 
during the 2015-16 season was approximately $0.347 per pound. With 
total utilization at 251.1 million pounds, the total 2015-16 crop value 
is estimated at $87 million. Dividing the crop value by the estimated 
number of producers (600) yields an estimated average annual receipt 
per producer of $145,000. This is well below the SBA threshold for 
small producers. In 2015, The Food Institute estimated a free on board 
(f.o.b.) price of $0.96 per pound for frozen tart cherries, which make 
up the majority of processed tart cherries. Multiplying the f.o.b price 
by total utilization of 251.1 million pounds results in an estimated 
handler-level tart cherry value of $241 million. Dividing this figure 
by the number of handlers (40) yields an estimated average annual 
handler receipts of $6 million, which is below the SBA threshold for 
small agricultural service firms. Assuming a normal bell-curve 
distribution, the majority of producers and handlers of tart cherries 
may be classified as small entities.
    The tart cherry industry in the United States is characterized by 
wide, annual fluctuations in production. According to NASS, the pounds 
of tart cherry production for the years 2012 through 2015 were 85 
million, 291 million, 301 million, and 251 million, respectively. 
Because of these fluctuations, supply and demand for tart cherries are 
rarely equal.
    Demand for tart cherries is inelastic, meaning changes in price 
have a minimal effect on total sales volume. However, prices are very 
sensitive to changes in supply, and grower prices vary widely in 
response to the large swings in annual supply, with prices ranging from 
a low of 7.3 cents per

[[Page 28752]]

pound in 1987 to a high of 59.4 cents per pound in 2012.
    Because of this relationship between supply and price, 
oversupplying the market with tart cherries would have a sharp negative 
effect on prices, driving down grower returns. The Board, aware of this 
economic relationship, focuses on using the volume control authority in 
the order to align supply with demand and stabilize industry returns. 
This authority allows the industry to set free and restricted 
percentages as a way to bring supply and demand into balance. Free 
percentage cherries can be marketed by handlers to any outlet, while 
restricted percentage volume must be held by handlers in reserve, 
diverted, or used for exempted purposes.
    This rule controls the supply of tart cherries by establishing 
percentages of 71 percent free and 29 percent restricted for the 2016-
17 crop year. These percentages should stabilize marketing conditions 
by adjusting supply to meet market demand and help improve grower 
returns. This rule regulates tart cherries handled in Michigan, New 
York, Utah, Washington, and Wisconsin. The authority for this action is 
provided for in Sec. Sec.  930.50, 930.51(a) and 930.52 of the order. 
The Board recommended this action at a meeting on September 8, 2016.
    This rule will result in some fruit being diverted from the primary 
domestic markets. However, as mentioned earlier, the USDA's 
``Guidelines for Fruit, Vegetable, and Specialty Crop Marketing 
Orders'' (http://www.ams.usda.gov/publications/content/1982-guidelines-fruit-vegetable-marketing-orders) specify that 110 percent of recent 
years' sales should be made available to primary markets each season 
before recommendations for volume regulation are approved. The quantity 
that is available under this action is greater than 110 percent of the 
average quantity shipped in the prior three years.
    In addition, there are secondary uses available for restricted 
fruit, including the development of new products, sales into new 
markets, the development of export markets, and being placed in 
reserve. While these alternatives may provide different levels of 
return than the sales to primary markets, they play an important role 
for the industry. The areas of new products, new markets, and the 
development of export markets utilize restricted fruit to develop and 
expand the markets for tart cherries. In 2015-16, these activities 
accounted for over 27 million pounds in sales, 12 million of which were 
exports.
    Placing tart cherries into reserves is also a key part of balancing 
supply and demand. Although handlers bear the handling and storage 
costs for fruit in reserve, reserves stored in large crop years are 
used to supplement supplies in short crop years. The reserves allow the 
industry to mitigate the impact of oversupply in large crop years, 
while allowing the industry to maintain supply to markets in years when 
production falls below demand. Further, storage and handling costs are 
more than offset by the increase in price when moving from a large crop 
to a short crop year.
    In addition, the Board recommended an increased carry-out of 57 
million pounds and made a demand adjustment of 22 million pounds in 
order to make the regulation less restrictive. Even with the 
restriction, over 300 million pounds of fruit will be available to the 
domestic market. Consequently, it is not anticipated that this 
regulation will unduly burden growers or handlers.
    While this action could result in some additional costs to the 
industry, these costs are more than outweighed by the benefits. The 
purpose of setting restricted percentages is to attempt to bring supply 
and demand into balance. If the primary market (domestic) is 
oversupplied with cherries, grower prices decline substantially. 
Without volume control, the primary market will likely be oversupplied, 
resulting in lower grower prices.
    The three districts in Michigan, along with the districts in New 
York, Utah, Washington, and Wisconsin, are the restricted areas for 
this crop year with a combined total production of 310 million pounds. 
A 29 percent restriction means 220 million pounds will be available to 
be shipped to primary markets from these five states. The 220 million 
pounds from the restricted districts, 5 million pounds from the 
unrestricted districts (Oregon and Pennsylvania), and the 81 million 
pound carry-in inventory would make a total of 306 million pounds 
available as free tonnage for the primary markets. This is similar to 
the 305 million pounds of free tonnage made available last year. This 
is enough to cover the 251 million pounds of total utilization in 2015-
16, while providing substantial carry-out. Further, the Board could 
meet and recommend the release of additional volume during the crop 
year if conditions so warranted.
    Prior to the implementation of the order, grower prices often did 
not cover the cost of production. The most recent costs of production 
determined by representatives of Michigan State University are an 
estimated $0.33 per pound. To assess the impact that volume control has 
on the prices growers receive for their product, an econometric model 
has been developed. Based on the model, the use of volume control would 
have a positive impact on grower returns for this crop year. With 
volume control, grower prices are estimated to be approximately $0.06 
per pound higher than without restrictions. In addition, absent volume 
control, the industry could start to build large amounts of unwanted 
inventories. These inventories would have a depressing effect on grower 
prices.
    Retail demand is assumed to be highly inelastic, which indicates 
that changes in price do not result in significant changes in the 
quantity demanded. Consumer prices largely do not reflect fluctuations 
in cherry supplies. Therefore, this action should have little or no 
effect on consumer prices and should not result in a reduction in 
retail sales.
    The free and restricted percentages established by this rule 
provide the market with optimum supply and apply uniformly to all 
regulated handlers in the industry, regardless of size. As the 
restriction represents a percentage of a handler's volume, the costs, 
when applicable, are proportionate and should not place an extra burden 
on small entities as compared to large entities.
    The stabilizing effects of this action benefit all handlers by 
helping them maintain and expand markets, despite seasonal supply 
fluctuations. Likewise, price stability positively impacts all growers 
and handlers by allowing them to better anticipate the revenues their 
tart cherries would generate. Growers and handlers, regardless of size, 
benefit from the stabilizing effects of this restriction. In addition, 
the increased carry-out should provide processors enough supply to meet 
market needs going into the next season.
    The Board considered alternatives in its preliminary restriction 
discussions that affected this action. Regarding demand, the Board 
began with the actual sales average of 230 million pounds. However, the 
Board noted that some previously contracted sales would be due for 
delivery in the coming season. In order to avoid undersupplying the 
market, the Board determined that the calculation of the optimum supply 
should include an additional adjustment for that purpose. After 
discussion, an adjustment of an additional 22 million pounds was made 
in the 2016-17 available supply of tart cherries as it was determined 
that this amount would best meet the industry's

[[Page 28753]]

sales needs. Thus, the other alternative levels were rejected.
    Regarding the carry-out value, the Board considered a range of 
alternatives. One member suggested the Board begin with 57 million 
pounds, approximately a quarter of average annual sales. Other members 
suggested alternatives as high as 70 million pounds. However, some 
members were concerned about leaving too much fruit on the market at 
the end of the season and depressing prices going into the next year. 
The Board determined three months of sales would be a good estimate for 
what is needed at the end of the season, as there is a three-month gap 
between the calculation of carry-out at the end of one season and the 
availability of fruit from the next season. Thus, the other 
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 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.
    This action will not impose any additional reporting or 
recordkeeping requirements on either small or large tart cherry 
handlers. As with all Federal marketing order programs, reports and 
forms are periodically reviewed to reduce information requirements and 
duplication by industry and public sector agencies.
    As noted in the initial regulatory flexibility analysis, USDA has 
not identified any relevant Federal rules that duplicate, overlap, or 
conflict with this final rule. Further, the public comments received 
concerning the proposal did not address the initial regulatory 
flexibility analysis.
    AMS is committed to complying with the E-Government Act, to promote 
the use of the internet and other information technologies to provide 
increased opportunities for citizen access to Government information 
and services, and for other purposes.
    In addition, the Board's meeting was widely publicized throughout 
the tart cherry industry, and all interested persons were invited to 
attend the meeting and participate in Board deliberations on all 
issues. Like all Board meetings, the June 23, 2016, and September 8, 
2016, meetings were public meetings, and all entities, both large and 
small, were able to express views on this issue.
    A proposed rule concerning this action was published in the Federal 
Register on March 21, 2017 (82 FR 14481). Copies of the rule were sent 
via email to all Board members and tart cherry handlers. Finally, the 
rule was made available through the internet by USDA and the Office of 
the Federal Register. A 30-day comment period ending April 20, 2017, 
was provided to allow interested persons to respond to the proposal.
    Eleven comments were received during the comment period in response 
to the proposal. Four comments favored the proposed regulation and 
seven comments opposed the proposed regulation. One comment received 
was signed by 67 industry members. The commenters included growers, 
handlers, Board members, an industry representative, economic policy 
and law students, individuals, and one anonymous cherry consumer. Most 
of the points made by the commenters in opposition had been discussed 
prior to the Board's vote recommending this action.
    The comment signed by 67 industry members asserted the United 
States government import data indicate that 40 percent of tart cherry 
consumption in the 2015 season was from imported products. AMS's 
analysis of the Foreign Agricultural Service's Global Agricultural 
Trade System (GATS) indicates an equivalent of more than 230 million 
pounds of cherries products were imported into the U.S. in the 2016 
season. The imported volume has remained above 230 million pounds since 
the 2014 season. According to the data, tart cherry juice concentrate 
represents by far the largest segment of imports and has experienced 
tremendous growth beginning in 2012.
    Five of the comments in opposition, including the comment signed by 
67 industry members, reference the absence of imported tart cherry 
products in the OSF. All of these commenters implied that not including 
imported tart cherry products into the OSF calculation disregards a 
large portion of the demand for tart cherries. As a result, these 
commenters since believe the proposed rule fails to bring supply into 
balance with demand in the targeted market. The comment with 67 
signatures states the federal marketing order does not account for the 
total demand of tart cherry products in the US because imported 
products are not included in the formula. Another commenter suggested 
not considering imported products in the OSF indicates the Board's 
recommended restriction is arbitrary and capricious.
    The OSF presented to the Board included several adjustments to 
avoid the possibility of undersupplying the market. In determining 
demand, the Board takes into account many factors, including previous 
sales history and an analysis of economic factors having a bearing on 
the market. The final percentages recommended by the Board included 
several adjustments to supply additional fruit to the market. In 
calculating these adjustments for determining demand in the OSF, the 
Board also considered supplies of competing commodities and the 
additional ten percent added for the market growth factor. This was 
noted by one of the commenters voicing support for the proposed 
regulation. The economic adjustment added 22 million pounds and the 
market growth factor added 23 million pounds for an additional 55 
million pounds beyond the average sales.
    Under the order, when computing and determining final percentages 
for recommendation to the Secretary, the Board must give consideration 
to several factors including supplies of competing commodities and 
economic factors having a bearing on cherry markets. At the meetings on 
June 23, 2016, and September 8, 2016, the Board discussed its concerns 
regarding the economic impact of imports. At the September meeting, 
following the motion to adopt the OSF as presented, several comments 
and observations were made regarding the matter of imports. However, 
none of the members suggested an alternative adjustment for imports. 
Additionally, the Board did not propose amending the order language in 
section 930.50 to include imports as a factor in calculating the OSF. 
Most of the comments at the September meeting supported the motion to 
adopt the OSF as presented.
    The comment with 67 signatures also states that the domestic 
industry has been unable to supply the significant growth in 
consumption of dried and juiced cherry products. Data concur that 
domestic production alone would not replace the imported volume in 
recent years. However, the Board reported steady or increased overall 
domestic sales from 2013-15, even though each of those seasons were 
regulated. The use of diversion credits allowed handlers to ship an 
additional 27.5 million pounds of restricted fruit during the 2015-16 
season in addition to free sales. Despite this growth, the industry 
reported a remaining free inventory of over 80 million pounds going 
into the crop year,

[[Page 28754]]

suggesting availability of domestic fruit is not a concern.
    Also at the September meeting, a Board member stated an adjustment 
to the OSF for imports is one alternative, but the Board's preferred 
alternative was to use restricted cherries for supplying new and 
competing commodity markets. Therefore, alternatives were considered 
consistent with Executive Order 13563. The member also stated that 
restricting cherries under the order aids in stabilizing grower prices. 
Placing excess cherries into the market is contrary to the purpose of 
the order. The Board supports utilizing exempted markets for restricted 
cherries as an alternative to storage. Exporting cherry products and 
participating in new product and new market projects allows handlers to 
sell restricted cherries into these markets.
    Should domestic handlers decide to compete in these new markets, in 
most cases, restricted cherries could be used and the handler could 
receive diversion credits under the diversion provisions of the order. 
Further, the Board recently recommended extending the maximum length of 
these activities from three years to five years, creating even more 
opportunities to pursue new markets. Consequently, handlers currently 
have ample opportunity to compete for new markets using restricted 
cherries while continuing to service traditional markets with 
unrestricted cherries. In addition, should industry efforts cause 
demand to exceed available volume, the Board could meet and recommend 
the release of additional volume.
    Another commenter opposed to the 29 percent or approximately 90 
million pound restriction indicated the total percent restriction, over 
the past three years, was 69 percent. However, the percent restriction 
for each year cannot be added together to arrive at the total 
restriction over the last three years. The calculation to derive the 
percent restriction over the past three years is achieved by dividing 
the total adjusted surplus by the total production in regulated 
districts over the past three years. The pounds of regulated production 
for 2014, 2015, and 2016 seasons were 295 million with 59 million 
restricted, 240 million with 47 million restricted, and 310 million 
with 91 million restricted, respectively. The total 197 million pounds 
of surplus divided by the total regulated production of 845 million 
equals a 23 percent restriction. The miscalculation from the commenter 
in opposition overstated the total percent restriction for the past 
three years by triple.
    This commenter also stated that marketers of cherry products should 
not be forced to hold volume off the market while imported products 
enter the market freely. Contrary to the commenter's opinion, a Board 
member at the September 8, 2016, meeting stated that placing excess 
cherries into the market as a method of countering imports would only 
lower grower prices significantly and would not be positive for the 
grower community. Another Board member added that imports are capturing 
a less profitable market while the domestic industry is serving more 
profitable markets.
    One commenter indicated the OSF was calculated incorrectly by 
including the in-orchard diverted fruit as part of production in the 
formula. This individual suggested if the in-orchard diverted fruit was 
removed from production, the percentage would be 21 percent, instead of 
29 percent restriction. However, 26.4 million pounds of in-orchard 
diversion were accounted for when calculating the volume subject to 
restriction from the regulated districts. This is consistent with the 
method used to account for fruit produced in unrestricted districts. 
The total production (341.3 million pounds) minus the in-orchard 
diversions (26.4 million pounds) and production in unrestricted 
districts (5.2 million pounds) left 309.7 million pounds subject to 
restriction. The Board divided the surplus of 90.6 million pounds by 
this volume to arrive at 29 percent restricted and 71 percent free 
market cherries.
    One comment, submitted twice, from two students in opposition to 
this regulation suggested the government should not intervene and 
require cherry farmers to restrict supply. This comment assumed the 
order restricts the amount of tart cherries that can be produced. 
Volume regulation under the order is a tool for the tart cherry 
industry to stabilize market conditions due to fluctuations in supply 
and the inelastic nature of demand for tart cherries. This action does 
not regulate growers' production of the commodity. This regulatory 
action is a restriction on domestic tart cherry products handled for 
the market. This regulation will only restrict cherries purchased for 
handling. Further, this action is a recommendation from the tart cherry 
industry as represented by the Board made up of growers, handlers, and 
a member of the public. The Board considered not regulating as a 
possible alternative, consistent with Executive Order 13563, but this 
consideration was rejected after reviewing production data.
    One commenter opposed the restriction because it would reduce tart 
cherry production and not allow the producers to benefit from 
maximizing the crop. The commenter also concluded the restriction would 
make it difficult for the industry to reach optimum supply. As 
previously mentioned, this action does not restrict tart cherry 
production. Production decisions are made well in advance of the 
recommendation for volume restriction, which is discussed just prior to 
harvest and finalized following harvest. Unlike some other commodities 
like row crops, tree crops such as tart cherries cannot be easily taken 
out of production. This action regulates only the handling of tart 
cherries.
    Regarding the commenter's second concern, USDA requires 110 percent 
of average sales be made available under any volume regulation. The 
Board recommended an economic adjustment for the 2016-17 season to make 
even more fruit available, going beyond the initial optimum supply 
calculation. While the restriction may not impact production costs, 
producers do experience a drop in price when the market is 
oversupplied. When the market approaches optimum supply, prices tend to 
be more stable.
    All four of the proponents of this action suggest the restriction 
will stabilize the cherry industry's economy. Three of the proponents 
made reference to the industry wide support for the recommended 
restriction, as represented by the Board's vote in which 16 members, 
the majority of the Board, voted in favor, two abstained and two 
opposed the recommended restriction. One of these proponents indicated 
this level of support is significantly greater than the requisite two-
thirds majority required for Board action. Further, two proponents made 
reference that the action is supported by a large majority of the 
industry.
    Three proponents of this action recognized the Board's 
consideration of the opponents' concerns in their comments on the 
proposal. All three noted the matter of imports has been addressed by 
the Board at several meetings. One proponent recognized the Board 
established a committee to suggest alternative ways to increase 
domestic juice and juice concentrate sales. Another commenter suggested 
if growers and processors want to account for imports in a way other 
than through adjustments, then the Board should focus on amending the 
order language for determining optimum supply to account for imports.
    All three proponents made reference to the Board's efforts in 
promoting the exemption process as a method of competing with imported 
cherry products. One commenter noted the

[[Page 28755]]

Board's recommendation for extending the time from one year to three 
years for new product and new market exemptions that was implemented in 
the previous season. As mentioned previously, the Board has recommended 
a further expansion of the timeframe. The additional time will allow 
opportunity for more cherries to qualify for exemption in response to 
the level of imported cherry products.
    One commenter referenced the opportunities available to use both 
in-orchard and post-harvest diversion to comply with a restriction. The 
commenter stated the Federal marketing order provides major incentive 
to expand sales by using restricted fruit to serve new markets, new 
products, and exports. Additionally, there is incentive in place for 
growers to divert excess fruit where there is no market or where the 
cost associated with marketing the fruit may not increase returns. 
Growers who choose to divert in the orchard can be issued certificates 
by the Board that can be sold to handlers to meet their restriction 
requirements.
    One commenter noted the Board felt the final calculations were 
appropriate. They also stated that the majority of the industry 
approved the order in its last referendum, believing that the order 
brings more returns to growers. Another proponent noted, even with the 
restriction, sales are not being lost due to lack of available 
unrestricted cherries. The carry-in from July 2016 (81 million lbs.) 
and the projected availability of free market carry-out (57 million 
lbs.) indicate the restriction is not a factor in limiting sales of 
tart cherry products. The Board deliberated thoroughly on whether or 
not to make an additional economic adjustment to account for imported 
cherry products. However, no motion was made for an additional 
adjustment to reflect the impact of imported cherry products. As one 
commenter noted, there is a lack of consensus on how to factor imports 
into the final calculation.
    Further, according to Foreign Agricultural Service's GATS database, 
though imported cherry products remained high (230 million lbs. 
equivalent) during the 2016 calendar year, the volume is down from the 
2015 calendar year (267 million lbs. equivalent) and also below the 
2014 calendar year (244 million lbs. equivalent). The final NASS prices 
for the 2016 season are not yet available, but from 2013-15, grower 
prices were stable, ranging from $0.34 to $0.36 per pound. Thus, when 
using available sales, utilization, and price data from previous years 
it is difficult to determine what, if any, specific negative impact 
imports have had on the market for domestic tart cherries and then 
account for that impact in the OSF.
    As previously stated, there are more than 309 million pounds of 
tart cherries available for free sales for 2016-17. This volume exceeds 
total sales from 2015-16 of both free and restricted cherries of 288 
million pounds. Further, the order provides numerous alternatives for 
the use of restricted fruit, such as handler diversion, for complying 
with the recommended restriction. Additionally, the USDA announced the 
intent to purchase over 10 million pounds of cherry products in the 
2016-2017 season as surplus purchases. Therefore, as stated in the RFA, 
it is not anticipated that this action will unduly burden growers or 
handlers.
    Accordingly, no changes will be made to the rule as proposed, based 
on the comments received.
    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 Richard Lower at the 
previously mentioned address in the FOR FURTHER INFORMATION CONTACT 
section.
    After consideration of all relevant matter presented, including the 
information and recommendation submitted by the Committee and other 
available information, it is hereby found that this rule, as 
hereinafter set forth, will tend to effectuate the declared policy of 
the Act.
    It is further found that good cause exists for not postponing the 
effective date of this rule until 30 days after publication in the 
Federal Register (5 U.S.C. 553) because handlers are already shipping 
tart cherries from the 2016-17 crop. Further, handlers are aware of 
this rule, which was recommended at a public meeting. Also, a 30-day 
comment period was provided for in the proposed rule.

List of Subjects in 7 CFR Part 930

    Marketing agreements, Reporting and recordkeeping requirements, 
Tart cherries.

    For the reasons set forth in the preamble, 7 CFR part 930 is 
amended as follows:

PART 930--TART CHERRIES GROWN IN THE STATES OF MICHIGAN, NEW YORK, 
PENNSYLVANIA, OREGON, UTAH, WASHINGTON, AND WISCONSIN

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

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


0
2. Section 930.151 is revised to read as follows:


Sec.  930.151  Desirable carry-out inventory.

    For the 2016 crop year, the desirable carry-out inventory, for the 
purposes of determining an optimum supply volume, will be 57 million 
pounds.

0
3. Section 930.256 is revised to read as follows:


Sec.  930.256  Free and restricted percentages for the 2016-17 crop 
year.

    The percentages for tart cherries handled by handlers during the 
crop year beginning on July 1, 2016, which shall be free and 
restricted, respectively, are designated as follows: Free percentage, 
71 percent and restricted percentage, 29 percent.

    Dated: June 20, 2017.
Bruce Summers,
Acting Administrator, Agricultural Marketing Service.
[FR Doc. 2017-13241 Filed 6-23-17; 8:45 am]
 BILLING CODE 3410-02-P



                                                                                                                                                                                              28749

                                              Rules and Regulations                                                                                          Federal Register
                                                                                                                                                             Vol. 82, No. 121

                                                                                                                                                             Monday, June 26, 2017



                                              This section of the FEDERAL REGISTER                    Marketing Order and Agreement                          would rule on the petition. The Act
                                              contains regulatory documents having general            Division, Specialty Crops Program,                     provides that the district court of the
                                              applicability and legal effect, most of which           AMS, USDA, 1400 Independence                           United States in any district in which
                                              are keyed to and codified in the Code of                Avenue SW., STOP 0237, Washington,                     the handler is an inhabitant, or has his
                                              Federal Regulations, which is published under           DC 20250–0237; Telephone: (202) 720–                   or her principal place of business, has
                                              50 titles pursuant to 44 U.S.C. 1510.
                                                                                                      2491, Fax: (202) 720–8938, or Email:                   jurisdiction to review USDA’s ruling on
                                              The Code of Federal Regulations is sold by              Richard.Lower@ams.usda.gov.                            the petition, provided an action is filed
                                              the Superintendent of Documents.                        SUPPLEMENTARY INFORMATION: This final                  not later than 20 days after the date of
                                                                                                      rule is issued under Marketing                         the entry of the ruling.
                                                                                                      Agreement and Order No. 930, both as                      This final rule establishes free and
                                              DEPARTMENT OF AGRICULTURE                               amended (7 CFR part 930), regulating                   restricted percentages for the 2016–17
                                                                                                      the handling of tart cherries produced in              crop year. This rule establishes the
                                              Agricultural Marketing Service                                                                                 proportion of tart cherries from the 2016
                                                                                                      the States of Michigan, New York,
                                                                                                      Pennsylvania, Oregon, Utah,                            crop which may be handled in
                                              7 CFR Part 930                                                                                                 commercial outlets at 71 percent free
                                                                                                      Washington and Wisconsin, hereinafter
                                              [Doc. No. AMS–SC–16–0105; SC16–930–5                    referred to as the ‘‘order.’’ The order is             and 29 percent restricted. This action
                                              FR]                                                     effective under the Agricultural                       should stabilize marketing conditions
                                                                                                      Marketing Agreement Act of 1937, as                    by adjusting supply to meet market
                                              Tart Cherries Grown in the States of                                                                           demand and help improve grower
                                                                                                      amended (7 U.S.C. 601–674), hereinafter
                                              Michigan, et al.; Free and Restricted                                                                          returns. The carry-out and the final
                                                                                                      referred to as the ‘‘Act.’’
                                              Percentages for the 2016–17 Crop Year                                                                          percentages were recommended by the
                                                                                                         The Department of Agriculture
                                              for Tart Cherries                                                                                              Cherry Industry Administrative Board
                                                                                                      (USDA) is issuing this rule in
                                              AGENCY:  Agricultural Marketing Service,                conformance with Executive Orders                      (Board) at a meeting on September 8,
                                              USDA.                                                   13563 and 13175.                                       2016.
                                              ACTION: Final rule.                                        This action falls within a category of                 Section 930.51(a) of the order
                                                                                                      regulatory actions that the Office of                  provides authority to regulate volume
                                              SUMMARY:   This rule implements a                       Management and Budget (OMB) has                        by designating free and restricted
                                              recommendation from the Cherry                          exempted from Executive Order 12866                    percentages for any tart cherries
                                              Industry Administrative Board (Board)                   review. Additionally, because this rule                acquired by handlers in a given crop
                                              to establish free and restricted                        does not meet the definition of a                      year. Section 930.50 prescribes
                                              percentages for the 2016–17 crop year                   significant regulatory action it does not              procedures for computing an optimum
                                              under the marketing order for tart                      trigger the requirements contained in                  supply based on sales history and for
                                              cherries grown in the states of Michigan,               Executive Order 13771. See OMB’s                       calculating these free and restricted
                                              New York, Pennsylvania, Oregon, Utah,                   Memorandum titled ‘‘Interim Guidance                   percentages. Free percentage volume
                                              Washington, and Wisconsin (order). The                  Implementing Section 2 of the Executive                may be shipped to any market, while
                                              Board locally administers the marketing                 Order of January 30, 2017 titled                       restricted percentage volume must be
                                              order and is comprised of producers and                 ‘Reducing Regulation and Controlling                   held by handlers in a primary or
                                              handlers of tart cherries operating                     Regulatory Costs’ ’’ (February 2, 2017).               secondary reserve, or be diverted or
                                              within the production area, and a public                   This final rule has been reviewed                   used for exempt purposes as prescribed
                                              member. This action establishes the                     under Executive Order 12988, Civil                     in §§ 930.159 and 930.162 of the
                                              proportion of tart cherries from the 2016               Justice Reform. Under the order                        regulations. Exempt purposes include,
                                              crop which may be handled in                            provisions now in effect, free and                     in part, the development of new
                                              commercial outlets at 71 percent free                   restricted percentages may be                          products, sales into new markets, the
                                              and 29 percent restricted. These                        established for tart cherries handled                  development of export markets, and
                                              percentages should stabilize marketing                  during the crop year. This final rule                  charitable contributions. Sections
                                              conditions by adjusting supply to meet                  establishes free and restricted                        930.55 through 930.57 prescribe
                                              market demand and help improve                          percentages for tart cherries for the                  procedures for inventory reserve. For
                                              grower returns.                                         2016–17 crop year, beginning July 1,                   cherries held in reserve, handlers would
                                              DATES: Effective June 27, 2017.                         2016, through June 30, 2017.                           be responsible for storage and would
                                              FOR FURTHER INFORMATION CONTACT:                           The Act provides that administrative                retain title of the tart cherries.
                                              Steven W. Kauffman, Marketing                           proceedings must be exhausted before                      Under § 930.52, only those districts
                                              Specialist, or Christian D. Nissen,                     parties may file suit in court. Under                  with an annual average production over
                                              Regional Director, Southeast Marketing                  section 608c(15)(A) of the Act, any                    the prior three years of at least six
                                              Field Office, Marketing Order and                       handler subject to an order may file                   million pounds are subject to regulation,
                                              Agreement Division, Specialty Crops                     with USDA a petition stating that the                  and any district producing a crop which
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                                              Program, AMS, USDA; Telephone: (863)                    order, any provision of the order, or any              is less than 50 percent of its annual
                                              324–3375, Fax: (863) 291–8614, or                       obligation imposed in connection with                  average of the previous five years is
                                              Email: Steven.Kauffman@ams.usda.gov                     the order is not in accordance with law                exempt. The regulated districts for the
                                              or Christian.Nissen@ams.usda.gov.                       and request a modification of the order                2016–17 crop year are: District 1—
                                                Small businesses may request                          or to be exempted therefrom. A handler                 Northern Michigan; District 2—Central
                                              information on complying with this                      is afforded the opportunity for a hearing              Michigan; District 3—Southern
                                              regulation by contacting Richard Lower,                 on the petition. After the hearing, USDA               Michigan; District 4—New York; District


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                                              28750               Federal Register / Vol. 82, No. 121 / Monday, June 26, 2017 / Rules and Regulations

                                              7—Utah; District 8—Washington; and                      marketing-orders) specify that 110                        The Board then discussed whether
                                              District 9—Wisconsin. Districts 5 and 6                 percent of recent years’ sales should be               this calculation would provide
                                              (Oregon and Pennsylvania, respectively)                 made available to primary markets each                 sufficient supply to grow sales while
                                              are not regulated for the 2016–17                       season before recommendations for                      being able to supply orders that are
                                              season.                                                 volume regulation are approved. This                   already scheduled, including filling
                                                Demand for tart cherries and tart                     requirement is codified in § 930.50(g) of              remaining orders from a USDA purchase
                                              cherry products tends to be relatively                  the order, which specifies that, in years              made the previous season. The Board,
                                              stable from year to year. Conversely,                   when restricted percentages are                        after considering anticipated supply
                                              annual tart cherry production can vary                  established, the Board shall make                      needs for the 2016–17 season, decided
                                              greatly. In addition, tart cherries are                 available tonnage equivalent to an                     to make an economic adjustment of 22
                                              processed and can be stored and carried                 additional 10 percent of the average
                                              over from crop year to crop year, further                                                                      million pounds to increase the available
                                                                                                      sales of the prior three years for market              supply of tart cherries. This economic
                                              impacting supply. As a result, supply                   expansion (market growth factor).
                                              and demand for tart cherries are rarely                                                                        adjustment further reduced the
                                                                                                         After the Board determines optimum                  preliminary surplus to 100.6 million
                                              in balance.                                             supply, desirable carry-out, and market
                                                Because demand for tart cherries is                                                                          pounds. After these adjustments, the
                                                                                                      growth factor, it must examine the
                                              inelastic, total sales volume is not very                                                                      preliminary restricted percentage was
                                                                                                      current year’s available volume to
                                              responsive to changes in price.                         determine whether there is an                          recalculated as 29 percent (100.6
                                              However, prices are very sensitive to                   oversupply situation. Available volume                 million pounds divided by 348 million
                                              changes in supply. As such, an                          includes carry-in inventory (any                       pounds).
                                              oversupply of cherries can have a sharp                 inventory available at the beginning of                   The Board met again on September 8,
                                              negative effect on prices, driving down                 the season) along with that season’s                   2016, to consider final volume
                                              grower returns. The Board, aware of this                production. If production is greater than              regulation percentages for the 2016–17
                                              economic relationship, focuses on using                 the optimum supply minus carry-in, the                 season. The final percentages are based
                                              the volume control provisions in the                    difference is considered surplus. This
                                              order to balance supply and demand to                                                                          on the Board’s reported production
                                                                                                      surplus tonnage is divided by the sum                  figures and the supply and demand
                                              stabilize industry returns.
                                                                                                      of production in the regulated districts               information available in September. The
                                                Pursuant to § 930.50 of the order, the
                                              Board meets on or about July 1 to review                to reach a restricted percentage. This                 total production for the 2016–17 season
                                              sales data, inventory data, current crop                percentage must be held in reserve or                  was 341 million pounds, 10 million
                                              forecasts and market conditions for the                 used for approved diversion activities,                pounds below the Board’s June estimate.
                                              upcoming season and, if necessary, to                   such as exports.                                       In addition, growers diverted 26 million
                                              recommend preliminary free and                             The Board met on June 23, 2016, and                 pounds in the orchard, leaving 315
                                              restricted percentages if anticipated                   computed an optimum supply of 287                      million pounds available to market, 310
                                              supply would exceed demand. After                       million pounds for the 2016–17 crop                    million pounds of which are in the
                                              harvest is complete, but no later than                  year using the average of free sales for
                                                                                                                                                             restricted districts. Using the actual
                                              September 15, the Board meets again to                  the three previous seasons and a
                                                                                                                                                             production numbers, and accounting for
                                              update its calculations using actual                    desirable carry-out of 57 million
                                                                                                      pounds. The Board determined three                     the recommended desirable carry-out
                                              production data, consider any necessary                                                                        and economic adjustment, as well as the
                                              adjustments to the preliminary                          months of sales would be a good
                                                                                                      estimate for what was needed at the end                market growth factor, the restricted
                                              percentages, and determine if final free                                                                       percentage was recalculated.
                                              and restricted percentages should be                    of the season, as there is a three-month
                                              recommended to the Secretary.                           gap between the calculation of carry-out                  The Board subtracted the carry-in
                                                The Board uses sales history,                         at the end of one season and the                       figure used in June of 81.3 million
                                              inventory, and production data to                       availability of fruit in the next season.              pounds from the optimum supply of 287
                                              determine whether there is a surplus,                   The recommended carry-out of 57                        million pounds to determine 205.7
                                              and if so, how much volume should be                    million pounds is approximately a                      million pounds of 2016–17 production
                                              restricted to maintain optimum supply.                  quarter of average annual sales.                       would be necessary to reach optimum
                                              The optimum supply represents the                          The Board then subtracted the                       supply. The Board subtracted the 205.7
                                              desirable volume of tart cherries that                  estimated carry-in of 81.3 million                     million pounds from the actual
                                              should be available for sale in the                     pounds from the optimum supply to                      production of 341.3 million pounds,
                                              coming crop year. Optimum supply is                     calculate the production needed from                   resulting in a surplus of 135.6 million
                                              defined as the average free sales of the                the 2016–17 crop to meet optimum                       pounds of tart cherries. The surplus was
                                              prior three years plus desirable carry-                 supply. This number, 205.7 million                     then reduced by subtracting the
                                              out inventory. Desirable carry-out is the               pounds, was subtracted from the                        economic adjustment of 22 million
                                              amount of fruit needed by the industry                  Board’s estimated 2016–17 production
                                                                                                                                                             pounds and the market growth factor of
                                              to be carried into the succeeding crop                  of 351.3 million pounds to calculate a
                                                                                                                                                             23 million pounds, resulting in an
                                              year to meet market demand until the                    surplus of 145.6 million pounds of tart
                                                                                                                                                             adjusted surplus of 90.6 million pounds.
                                              new crop is available. Desirable carry-                 cherries. The Board also complied with
                                                                                                      the market growth factor requirement by                The Board then divided this final
                                              out is set by the Board after considering
                                                                                                      adding 23 million pounds (average sales                surplus by the available production of
                                              market circumstances and needs.
                                              Section 930.151(b) specifies that                       for prior three years of 230 million times             310 million pounds in the regulated
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                                              desirable carry-out can range from zero                 10 percent) to the free supply. The                    districts (336.1 million pounds minus
                                              to a maximum of 100 million pounds.                     surplus minus the market growth factor                 26.4 million pounds of in-orchard
                                                In addition, USDA’s ‘‘Guidelines for                  was then divided by the expected                       diversion) to calculate a restricted
                                              Fruit, Vegetable, and Specialty Crop                    production in the regulated districts                  percentage of 29 percent with a
                                              Marketing Orders’’ (http://                             (348 million pounds) to reach a                        corresponding free percentage of 71
                                              www.ams.usda.gov/publications/                          preliminary restricted percentage of 35                percent for the 2016–17 crop year, as
                                              content/1982-guidelines-fruit-vegetable-                percent for the 2016–17 crop year.                     outlined in the following table:


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                                                                           Federal Register / Vol. 82, No. 121 / Monday, June 26, 2017 / Rules and Regulations                                                 28751

                                                                                                           Millions        Some members opposed to the                       unduly or disproportionately burdened.
                                                                                                          of pounds     proposed restriction expressed concern               Marketing orders issued pursuant to the
                                              Final Calculations:                                                       regarding competition from imported                  Act, and rules issued thereunder, are
                                                (1) Average sales of the prior three                                    tart cherry juice concentrate. In                    unique in that they are brought about
                                                  years ..............................................          230.0   particular, they were concerned that the             through group action of essentially
                                                (2) Plus desirable carry-out ...............                     57.0   additional volume from imports is not                small entities acting on their own
                                                (3) Optimum supply calculated by the
                                                  Board ..............................................          287.0   accounted for in the Optimum Supply                  behalf.
                                                (4) Carry-in as of July 1, 2016 ..........                       81.3   Formula (OSF), thus not capturing                       There are approximately 600
                                                (5) Adjusted optimum supply (item 3                                     overall supply and demand.                           producers of tart cherries in the
                                                  minus item 4) .................................               205.7      Others were of the opinion that the               regulated area and approximately 40
                                                (6) Board reported production ...........                       341.3
                                                (7) Surplus (item 6 minus item 5) ......                        135.6   Board’s recent actions to expand the use             handlers of tart cherries who are subject
                                                (8) Total economic adjustments ........                          22.0   of diversion credits in new markets or               to regulation under the order. Small
                                                (9) Market growth factor ....................                    23.0   through grower diversion were allowing               agricultural producers are defined by
                                                (10) Adjusted Surplus (item 7 minus                                     the industry to remain competitive                   the Small Business Administration
                                                  items 8 and 9) ................................                90.6
                                                (11) Supply in regulated districts .......                      336.1   without making additional adjustments                (SBA) as those having annual receipts of
                                                (12) In-Orchard Diversion ..................                     26.4   to supply. Another member countered                  less than $750,000 and small
                                                                                                                        that not all handlers are helped by new              agricultural service firms have been
                                                 (13) Production minus in orchard di-
                                                   version ............................................         309.7
                                                                                                                        market diversion credits and cannot sell             defined as those whose annual receipts
                                                                                                                        all of their product under a restriction.            are less than $7,500,000 (13 CFR
                                              Final Percentages:                                           Percent         When asked how much of the market                 121.201).
                                                Restricted (item 10 divided by item                                     currently being served by imports could                 According to the National
                                                  13 × 100) ........................................              29
                                                Free (100 minus restricted percent-
                                                                                                                        be supplied by the domestic handlers,                Agricultural Statistics Service (NASS)
                                                  age) ................................................           71    some members stated they could utilize               and Board data, the average annual
                                                                                                                        the full adjusted calculated surplus of              grower price for tart cherries during the
                                                 The primary purpose of setting                                         90.6 million pounds. Others noted that               2015–16 season was approximately
                                              restricted percentages is an attempt to                                   trying to compete for those markets by               $0.347 per pound. With total utilization
                                              bring supply and demand into balance.                                     matching the price of imported                       at 251.1 million pounds, the total 2015–
                                              If the primary market is oversupplied                                     concentrate would drop grower returns                16 crop value is estimated at $87
                                              with cherries, grower prices decline                                      to an unsustainable level.                           million. Dividing the crop value by the
                                              substantially. Restricted percentages                                        One member summarized that,                       estimated number of producers (600)
                                              have benefited grower returns and                                         although there is a carrying cost for                yields an estimated average annual
                                              helped stabilize the market as compared                                   storing restricted fruit, and the industry           receipt per producer of $145,000. This
                                              to those seasons prior to the                                             appears to be at a trade disadvantage,               is well below the SBA threshold for
                                              implementation of the order. The Board                                    the Board should account for those                   small producers. In 2015, The Food
                                              believes the available information                                        factors all the while focusing on                    Institute estimated a free on board
                                              indicates that a restricted percentage                                    continuing to grow sales. Though there               (f.o.b.) price of $0.96 per pound for
                                              should be established for the 2016–17                                     was much discussion regarding the                    frozen tart cherries, which make up the
                                              crop year to avoid oversupplying the                                      market impact of imports, there was no               majority of processed tart cherries.
                                              market with tart cherries. Consequently,                                  motion made by any Board member to                   Multiplying the f.o.b price by total
                                              based on its discussion of this issue and                                 make a further economic adjustment to                utilization of 251.1 million pounds
                                              the result of the above calculations, the                                 the calculation based on imported                    results in an estimated handler-level tart
                                              Board recommended final percentages                                       product.                                             cherry value of $241 million. Dividing
                                              of 71 percent free and 29 percent                                            After reviewing the available data,               this figure by the number of handlers
                                              restricted by a vote of 16 in favor, 2                                    and considering the concerns expressed,              (40) yields an estimated average annual
                                              opposed, and 2 abstentions.                                               the Board determined that a 29 percent               handler receipts of $6 million, which is
                                                 Though production came in below the                                    restriction with a carry-out volume of 57            below the SBA threshold for small
                                              Board’s June, 2016, estimate, the initial                                 million pounds meets sales needs and                 agricultural service firms. Assuming a
                                              restriction percentage remained the                                       establishes some reserves without                    normal bell-curve distribution, the
                                              same due to the substantial in-orchard                                    oversupplying the market. Thus, the                  majority of producers and handlers of
                                              diversion. During the discussion of the                                   Board recommended establishing final                 tart cherries may be classified as small
                                              proposed restriction, several members                                     percentages of 71 percent free and 29                entities.
                                              supported the proposed percentages as                                     percent restricted. The Board could                     The tart cherry industry in the United
                                              there was no change from the                                              meet and recommend the release of                    States is characterized by wide, annual
                                              preliminary 29 percent restriction                                        additional volume during the crop year               fluctuations in production. According to
                                              recommended in June. They believed                                        if conditions so warranted.                          NASS, the pounds of tart cherry
                                              deviating from the percentages                                                                                                 production for the years 2012 through
                                              announced in June would be disruptive                                     Final Regulatory Flexibility Act                     2015 were 85 million, 291 million, 301
                                              to the industry, as processors have                                          Pursuant to requirements set forth in             million, and 251 million, respectively.
                                              already made agreements with growers.                                     the Regulatory Flexibility Act (RFA) (5              Because of these fluctuations, supply
                                                 Another member noted when there                                        U.S.C. 601–612), the Agricultural                    and demand for tart cherries are rarely
                                              was a crop failure in 2012, there was not                                 Marketing Service (AMS) has                          equal.
                                              enough reserve to maintain sales and                                      considered the economic impact of this                  Demand for tart cherries is inelastic,
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                                              warned against being unprepared in the                                    action on small entities. Accordingly,               meaning changes in price have a
                                              future. The member also noted that in                                     AMS has prepared this final regulatory               minimal effect on total sales volume.
                                              the last four years, even with volume                                     flexibility analysis.                                However, prices are very sensitive to
                                              regulation and an increase in imported                                       The purpose of the RFA is to fit                  changes in supply, and grower prices
                                              products, overall domestic sales have                                     regulatory actions to the scale of                   vary widely in response to the large
                                              increased since 2013, including modest                                    businesses subject to such actions in                swings in annual supply, with prices
                                              growth in both juice and piefill.                                         order that small businesses will not be              ranging from a low of 7.3 cents per


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                                              28752               Federal Register / Vol. 82, No. 121 / Monday, June 26, 2017 / Rules and Regulations

                                              pound in 1987 to a high of 59.4 cents                      Placing tart cherries into reserves is              pound. To assess the impact that
                                              per pound in 2012.                                      also a key part of balancing supply and                volume control has on the prices
                                                 Because of this relationship between                 demand. Although handlers bear the                     growers receive for their product, an
                                              supply and price, oversupplying the                     handling and storage costs for fruit in                econometric model has been developed.
                                              market with tart cherries would have a                  reserve, reserves stored in large crop                 Based on the model, the use of volume
                                              sharp negative effect on prices, driving                years are used to supplement supplies                  control would have a positive impact on
                                              down grower returns. The Board, aware                   in short crop years. The reserves allow                grower returns for this crop year. With
                                              of this economic relationship, focuses                  the industry to mitigate the impact of                 volume control, grower prices are
                                              on using the volume control authority in                oversupply in large crop years, while                  estimated to be approximately $0.06 per
                                              the order to align supply with demand                   allowing the industry to maintain                      pound higher than without restrictions.
                                              and stabilize industry returns. This                    supply to markets in years when                        In addition, absent volume control, the
                                              authority allows the industry to set free               production falls below demand. Further,                industry could start to build large
                                              and restricted percentages as a way to                  storage and handling costs are more                    amounts of unwanted inventories.
                                              bring supply and demand into balance.                   than offset by the increase in price when              These inventories would have a
                                              Free percentage cherries can be                         moving from a large crop to a short crop               depressing effect on grower prices.
                                              marketed by handlers to any outlet,                     year.                                                     Retail demand is assumed to be
                                              while restricted percentage volume                         In addition, the Board recommended                  highly inelastic, which indicates that
                                              must be held by handlers in reserve,                    an increased carry-out of 57 million                   changes in price do not result in
                                              diverted, or used for exempted                          pounds and made a demand adjustment                    significant changes in the quantity
                                              purposes.                                               of 22 million pounds in order to make                  demanded. Consumer prices largely do
                                                 This rule controls the supply of tart                the regulation less restrictive. Even with             not reflect fluctuations in cherry
                                              cherries by establishing percentages of                 the restriction, over 300 million pounds               supplies. Therefore, this action should
                                              71 percent free and 29 percent restricted               of fruit will be available to the domestic             have little or no effect on consumer
                                              for the 2016–17 crop year. These                        market. Consequently, it is not                        prices and should not result in a
                                              percentages should stabilize marketing                  anticipated that this regulation will                  reduction in retail sales.
                                              conditions by adjusting supply to meet                  unduly burden growers or handlers.                        The free and restricted percentages
                                                                                                         While this action could result in some
                                              market demand and help improve                                                                                 established by this rule provide the
                                                                                                      additional costs to the industry, these
                                              grower returns. This rule regulates tart                                                                       market with optimum supply and apply
                                                                                                      costs are more than outweighed by the
                                              cherries handled in Michigan, New                                                                              uniformly to all regulated handlers in
                                                                                                      benefits. The purpose of setting
                                              York, Utah, Washington, and                                                                                    the industry, regardless of size. As the
                                                                                                      restricted percentages is to attempt to
                                              Wisconsin. The authority for this action                                                                       restriction represents a percentage of a
                                                                                                      bring supply and demand into balance.
                                              is provided for in §§ 930.50, 930.51(a)                 If the primary market (domestic) is                    handler’s volume, the costs, when
                                              and 930.52 of the order. The Board                      oversupplied with cherries, grower                     applicable, are proportionate and
                                              recommended this action at a meeting                    prices decline substantially. Without                  should not place an extra burden on
                                              on September 8, 2016.                                   volume control, the primary market will                small entities as compared to large
                                                 This rule will result in some fruit                  likely be oversupplied, resulting in                   entities.
                                              being diverted from the primary                         lower grower prices.                                      The stabilizing effects of this action
                                              domestic markets. However, as                              The three districts in Michigan, along              benefit all handlers by helping them
                                              mentioned earlier, the USDA’s                           with the districts in New York, Utah,                  maintain and expand markets, despite
                                              ‘‘Guidelines for Fruit, Vegetable, and                  Washington, and Wisconsin, are the                     seasonal supply fluctuations. Likewise,
                                              Specialty Crop Marketing Orders’’                       restricted areas for this crop year with               price stability positively impacts all
                                              (http://www.ams.usda.gov/publications/                  a combined total production of 310                     growers and handlers by allowing them
                                              content/1982-guidelines-fruit-vegetable-                million pounds. A 29 percent restriction               to better anticipate the revenues their
                                              marketing-orders) specify that 110                      means 220 million pounds will be                       tart cherries would generate. Growers
                                              percent of recent years’ sales should be                available to be shipped to primary                     and handlers, regardless of size, benefit
                                              made available to primary markets each                  markets from these five states. The 220                from the stabilizing effects of this
                                              season before recommendations for                       million pounds from the restricted                     restriction. In addition, the increased
                                              volume regulation are approved. The                     districts, 5 million pounds from the                   carry-out should provide processors
                                              quantity that is available under this                   unrestricted districts (Oregon and                     enough supply to meet market needs
                                              action is greater than 110 percent of the               Pennsylvania), and the 81 million                      going into the next season.
                                              average quantity shipped in the prior                   pound carry-in inventory would make a                     The Board considered alternatives in
                                              three years.                                            total of 306 million pounds available as               its preliminary restriction discussions
                                                 In addition, there are secondary uses                free tonnage for the primary markets.                  that affected this action. Regarding
                                              available for restricted fruit, including               This is similar to the 305 million                     demand, the Board began with the
                                              the development of new products, sales                  pounds of free tonnage made available                  actual sales average of 230 million
                                              into new markets, the development of                    last year. This is enough to cover the                 pounds. However, the Board noted that
                                              export markets, and being placed in                     251 million pounds of total utilization                some previously contracted sales would
                                              reserve. While these alternatives may                   in 2015–16, while providing substantial                be due for delivery in the coming
                                              provide different levels of return than                 carry-out. Further, the Board could meet               season. In order to avoid
                                              the sales to primary markets, they play                 and recommend the release of                           undersupplying the market, the Board
                                              an important role for the industry. The                 additional volume during the crop year                 determined that the calculation of the
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                                              areas of new products, new markets,                     if conditions so warranted.                            optimum supply should include an
                                              and the development of export markets                      Prior to the implementation of the                  additional adjustment for that purpose.
                                              utilize restricted fruit to develop and                 order, grower prices often did not cover               After discussion, an adjustment of an
                                              expand the markets for tart cherries. In                the cost of production. The most recent                additional 22 million pounds was made
                                              2015–16, these activities accounted for                 costs of production determined by                      in the 2016–17 available supply of tart
                                              over 27 million pounds in sales, 12                     representatives of Michigan State                      cherries as it was determined that this
                                              million of which were exports.                          University are an estimated $0.33 per                  amount would best meet the industry’s


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                                                                  Federal Register / Vol. 82, No. 121 / Monday, June 26, 2017 / Rules and Regulations                                         28753

                                              sales needs. Thus, the other alternative                large and small, were able to express                  the Board’s recommended restriction is
                                              levels were rejected.                                   views on this issue.                                   arbitrary and capricious.
                                                 Regarding the carry-out value, the                      A proposed rule concerning this                        The OSF presented to the Board
                                              Board considered a range of alternatives.               action was published in the Federal                    included several adjustments to avoid
                                              One member suggested the Board begin                    Register on March 21, 2017 (82 FR                      the possibility of undersupplying the
                                              with 57 million pounds, approximately                   14481). Copies of the rule were sent via               market. In determining demand, the
                                              a quarter of average annual sales. Other                email to all Board members and tart                    Board takes into account many factors,
                                              members suggested alternatives as high                  cherry handlers. Finally, the rule was                 including previous sales history and an
                                              as 70 million pounds. However, some                     made available through the internet by                 analysis of economic factors having a
                                              members were concerned about leaving                    USDA and the Office of the Federal                     bearing on the market. The final
                                              too much fruit on the market at the end                 Register. A 30-day comment period                      percentages recommended by the Board
                                              of the season and depressing prices                     ending April 20, 2017, was provided to                 included several adjustments to supply
                                              going into the next year. The Board                     allow interested persons to respond to                 additional fruit to the market. In
                                              determined three months of sales would                  the proposal.                                          calculating these adjustments for
                                              be a good estimate for what is needed                      Eleven comments were received                       determining demand in the OSF, the
                                              at the end of the season, as there is a                 during the comment period in response                  Board also considered supplies of
                                              three-month gap between the                             to the proposal. Four comments favored                 competing commodities and the
                                              calculation of carry-out at the end of one              the proposed regulation and seven                      additional ten percent added for the
                                              season and the availability of fruit from               comments opposed the proposed                          market growth factor. This was noted by
                                              the next season. Thus, the other                        regulation. One comment received was                   one of the commenters voicing support
                                              alternatives were rejected.                             signed by 67 industry members. The                     for the proposed regulation. The
                                                 In accordance with the Paperwork                     commenters included growers,                           economic adjustment added 22 million
                                              Reduction Act of 1995 (44 U.S.C.                        handlers, Board members, an industry                   pounds and the market growth factor
                                              Chapter 35), the order’s information                    representative, economic policy and law                added 23 million pounds for an
                                              collection requirements have been                       students, individuals, and one                         additional 55 million pounds beyond
                                              previously approved by OMB and                          anonymous cherry consumer. Most of                     the average sales.
                                              assigned OMB No. 0581–0177, Tart                        the points made by the commenters in                      Under the order, when computing and
                                              Cherries Grown in the States of                         opposition had been discussed prior to                 determining final percentages for
                                              Michigan, New York, Pennsylvania,                       the Board’s vote recommending this                     recommendation to the Secretary, the
                                              Oregon, Utah, Washington, and                           action.                                                Board must give consideration to several
                                              Wisconsin. No changes in those                             The comment signed by 67 industry                   factors including supplies of competing
                                              requirements as a result of this action                 members asserted the United States                     commodities and economic factors
                                              are necessary. Should any changes                       government import data indicate that 40                having a bearing on cherry markets. At
                                              become necessary, they would be                         percent of tart cherry consumption in                  the meetings on June 23, 2016, and
                                              submitted to OMB for approval.                          the 2015 season was from imported                      September 8, 2016, the Board discussed
                                                 This action will not impose any                      products. AMS’s analysis of the Foreign                its concerns regarding the economic
                                              additional reporting or recordkeeping                   Agricultural Service’s Global                          impact of imports. At the September
                                              requirements on either small or large                   Agricultural Trade System (GATS)                       meeting, following the motion to adopt
                                              tart cherry handlers. As with all Federal               indicates an equivalent of more than                   the OSF as presented, several comments
                                              marketing order programs, reports and                   230 million pounds of cherries products                and observations were made regarding
                                              forms are periodically reviewed to                      were imported into the U.S. in the 2016                the matter of imports. However, none of
                                              reduce information requirements and                     season. The imported volume has                        the members suggested an alternative
                                              duplication by industry and public                      remained above 230 million pounds                      adjustment for imports. Additionally,
                                              sector agencies.                                        since the 2014 season. According to the                the Board did not propose amending the
                                                 As noted in the initial regulatory                   data, tart cherry juice concentrate                    order language in section 930.50 to
                                              flexibility analysis, USDA has not                      represents by far the largest segment of               include imports as a factor in
                                              identified any relevant Federal rules                   imports and has experienced                            calculating the OSF. Most of the
                                              that duplicate, overlap, or conflict with               tremendous growth beginning in 2012.                   comments at the September meeting
                                              this final rule. Further, the public                       Five of the comments in opposition,                 supported the motion to adopt the OSF
                                              comments received concerning the                        including the comment signed by 67                     as presented.
                                              proposal did not address the initial                    industry members, reference the                           The comment with 67 signatures also
                                              regulatory flexibility analysis.                        absence of imported tart cherry products               states that the domestic industry has
                                                 AMS is committed to complying with                   in the OSF. All of these commenters                    been unable to supply the significant
                                              the E-Government Act, to promote the                    implied that not including imported tart               growth in consumption of dried and
                                              use of the internet and other                           cherry products into the OSF                           juiced cherry products. Data concur that
                                              information technologies to provide                     calculation disregards a large portion of              domestic production alone would not
                                              increased opportunities for citizen                     the demand for tart cherries. As a result,             replace the imported volume in recent
                                              access to Government information and                    these commenters since believe the                     years. However, the Board reported
                                              services, and for other purposes.                       proposed rule fails to bring supply into               steady or increased overall domestic
                                                 In addition, the Board’s meeting was                 balance with demand in the targeted                    sales from 2013–15, even though each of
                                              widely publicized throughout the tart                   market. The comment with 67                            those seasons were regulated. The use of
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                                              cherry industry, and all interested                     signatures states the federal marketing                diversion credits allowed handlers to
                                              persons were invited to attend the                      order does not account for the total                   ship an additional 27.5 million pounds
                                              meeting and participate in Board                        demand of tart cherry products in the                  of restricted fruit during the 2015–16
                                              deliberations on all issues. Like all                   US because imported products are not                   season in addition to free sales. Despite
                                              Board meetings, the June 23, 2016, and                  included in the formula. Another                       this growth, the industry reported a
                                              September 8, 2016, meetings were                        commenter suggested not considering                    remaining free inventory of over 80
                                              public meetings, and all entities, both                 imported products in the OSF indicates                 million pounds going into the crop year,


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                                              28754               Federal Register / Vol. 82, No. 121 / Monday, June 26, 2017 / Rules and Regulations

                                              suggesting availability of domestic fruit               be forced to hold volume off the market                producers to benefit from maximizing
                                              is not a concern.                                       while imported products enter the                      the crop. The commenter also
                                                 Also at the September meeting, a                     market freely. Contrary to the                         concluded the restriction would make it
                                              Board member stated an adjustment to                    commenter’s opinion, a Board member                    difficult for the industry to reach
                                              the OSF for imports is one alternative,                 at the September 8, 2016, meeting stated               optimum supply. As previously
                                              but the Board’s preferred alternative was               that placing excess cherries into the                  mentioned, this action does not restrict
                                              to use restricted cherries for supplying                market as a method of countering                       tart cherry production. Production
                                              new and competing commodity                             imports would only lower grower prices                 decisions are made well in advance of
                                              markets. Therefore, alternatives were                   significantly and would not be positive                the recommendation for volume
                                              considered consistent with Executive                    for the grower community. Another                      restriction, which is discussed just prior
                                              Order 13563. The member also stated                     Board member added that imports are                    to harvest and finalized following
                                              that restricting cherries under the order               capturing a less profitable market while               harvest. Unlike some other commodities
                                              aids in stabilizing grower prices. Placing              the domestic industry is serving more                  like row crops, tree crops such as tart
                                              excess cherries into the market is                      profitable markets.                                    cherries cannot be easily taken out of
                                              contrary to the purpose of the order. The                  One commenter indicated the OSF                     production. This action regulates only
                                              Board supports utilizing exempted                       was calculated incorrectly by including                the handling of tart cherries.
                                              markets for restricted cherries as an                   the in-orchard diverted fruit as part of                  Regarding the commenter’s second
                                              alternative to storage. Exporting cherry                production in the formula. This                        concern, USDA requires 110 percent of
                                              products and participating in new                       individual suggested if the in-orchard                 average sales be made available under
                                              product and new market projects allows                  diverted fruit was removed from                        any volume regulation. The Board
                                              handlers to sell restricted cherries into               production, the percentage would be 21                 recommended an economic adjustment
                                              these markets.                                          percent, instead of 29 percent                         for the 2016–17 season to make even
                                                 Should domestic handlers decide to                   restriction. However, 26.4 million                     more fruit available, going beyond the
                                              compete in these new markets, in most                   pounds of in-orchard diversion were                    initial optimum supply calculation.
                                              cases, restricted cherries could be used                accounted for when calculating the                     While the restriction may not impact
                                              and the handler could receive diversion                 volume subject to restriction from the                 production costs, producers do
                                              credits under the diversion provisions                  regulated districts. This is consistent                experience a drop in price when the
                                              of the order. Further, the Board recently               with the method used to account for                    market is oversupplied. When the
                                              recommended extending the maximum                       fruit produced in unrestricted districts.              market approaches optimum supply,
                                              length of these activities from three                   The total production (341.3 million                    prices tend to be more stable.
                                              years to five years, creating even more                 pounds) minus the in-orchard                              All four of the proponents of this
                                              opportunities to pursue new markets.                    diversions (26.4 million pounds) and                   action suggest the restriction will
                                              Consequently, handlers currently have                   production in unrestricted districts (5.2              stabilize the cherry industry’s economy.
                                              ample opportunity to compete for new                    million pounds) left 309.7 million                     Three of the proponents made reference
                                              markets using restricted cherries while                 pounds subject to restriction. The Board               to the industry wide support for the
                                              continuing to service traditional markets               divided the surplus of 90.6 million                    recommended restriction, as
                                              with unrestricted cherries. In addition,                pounds by this volume to arrive at 29                  represented by the Board’s vote in
                                              should industry efforts cause demand to                 percent restricted and 71 percent free                 which 16 members, the majority of the
                                              exceed available volume, the Board                      market cherries.                                       Board, voted in favor, two abstained and
                                              could meet and recommend the release                       One comment, submitted twice, from                  two opposed the recommended
                                              of additional volume.                                   two students in opposition to this                     restriction. One of these proponents
                                                 Another commenter opposed to the 29                  regulation suggested the government                    indicated this level of support is
                                              percent or approximately 90 million                     should not intervene and require cherry                significantly greater than the requisite
                                              pound restriction indicated the total                   farmers to restrict supply. This                       two-thirds majority required for Board
                                              percent restriction, over the past three                comment assumed the order restricts the                action. Further, two proponents made
                                              years, was 69 percent. However, the                     amount of tart cherries that can be                    reference that the action is supported by
                                              percent restriction for each year cannot                produced. Volume regulation under the                  a large majority of the industry.
                                              be added together to arrive at the total                order is a tool for the tart cherry                       Three proponents of this action
                                              restriction over the last three years. The              industry to stabilize market conditions                recognized the Board’s consideration of
                                              calculation to derive the percent                       due to fluctuations in supply and the                  the opponents’ concerns in their
                                              restriction over the past three years is                inelastic nature of demand for tart                    comments on the proposal. All three
                                              achieved by dividing the total adjusted                 cherries. This action does not regulate                noted the matter of imports has been
                                              surplus by the total production in                      growers’ production of the commodity.                  addressed by the Board at several
                                              regulated districts over the past three                 This regulatory action is a restriction on             meetings. One proponent recognized the
                                              years. The pounds of regulated                          domestic tart cherry products handled                  Board established a committee to
                                              production for 2014, 2015, and 2016                     for the market. This regulation will only              suggest alternative ways to increase
                                              seasons were 295 million with 59                        restrict cherries purchased for handling.              domestic juice and juice concentrate
                                              million restricted, 240 million with 47                 Further, this action is a                              sales. Another commenter suggested if
                                              million restricted, and 310 million with                recommendation from the tart cherry                    growers and processors want to account
                                              91 million restricted, respectively. The                industry as represented by the Board                   for imports in a way other than through
                                              total 197 million pounds of surplus                     made up of growers, handlers, and a                    adjustments, then the Board should
                                              divided by the total regulated                          member of the public. The Board                        focus on amending the order language
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                                              production of 845 million equals a 23                   considered not regulating as a possible                for determining optimum supply to
                                              percent restriction. The miscalculation                 alternative, consistent with Executive                 account for imports.
                                              from the commenter in opposition                        Order 13563, but this consideration was                   All three proponents made reference
                                              overstated the total percent restriction                rejected after reviewing production data.              to the Board’s efforts in promoting the
                                              for the past three years by triple.                        One commenter opposed the                           exemption process as a method of
                                                 This commenter also stated that                      restriction because it would reduce tart               competing with imported cherry
                                              marketers of cherry products should not                 cherry production and not allow the                    products. One commenter noted the


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                                                                  Federal Register / Vol. 82, No. 121 / Monday, June 26, 2017 / Rules and Regulations                                                28755

                                              Board’s recommendation for extending                    impact imports have had on the market                      Authority: 7 U.S.C. 601–674.
                                              the time from one year to three years for               for domestic tart cherries and then                    ■ 2. Section 930.151 is revised to read
                                              new product and new market                              account for that impact in the OSF.                    as follows:
                                              exemptions that was implemented in                         As previously stated, there are more
                                              the previous season. As mentioned                       than 309 million pounds of tart cherries               § 930.151    Desirable carry-out inventory.
                                              previously, the Board has recommended                   available for free sales for 2016–17. This               For the 2016 crop year, the desirable
                                              a further expansion of the timeframe.                   volume exceeds total sales from 2015–                  carry-out inventory, for the purposes of
                                              The additional time will allow                          16 of both free and restricted cherries of             determining an optimum supply
                                              opportunity for more cherries to qualify                288 million pounds. Further, the order                 volume, will be 57 million pounds.
                                              for exemption in response to the level                  provides numerous alternatives for the                 ■ 3. Section 930.256 is revised to read
                                              of imported cherry products.                            use of restricted fruit, such as handler               as follows:
                                                 One commenter referenced the                         diversion, for complying with the
                                              opportunities available to use both in-                 recommended restriction. Additionally,                 § 930.256 Free and restricted percentages
                                              orchard and post-harvest diversion to                   the USDA announced the intent to                       for the 2016–17 crop year.
                                              comply with a restriction. The                          purchase over 10 million pounds of                       The percentages for tart cherries
                                              commenter stated the Federal marketing                  cherry products in the 2016–2017                       handled by handlers during the crop
                                              order provides major incentive to                       season as surplus purchases. Therefore,                year beginning on July 1, 2016, which
                                              expand sales by using restricted fruit to               as stated in the RFA, it is not                        shall be free and restricted, respectively,
                                              serve new markets, new products, and                    anticipated that this action will unduly               are designated as follows: Free
                                              exports. Additionally, there is incentive               burden growers or handlers.                            percentage, 71 percent and restricted
                                              in place for growers to divert excess                      Accordingly, no changes will be made                percentage, 29 percent.
                                              fruit where there is no market or where                 to the rule as proposed, based on the                    Dated: June 20, 2017.
                                              the cost associated with marketing the                  comments received.                                     Bruce Summers,
                                              fruit may not increase returns. Growers                    A small business guide on complying                 Acting Administrator, Agricultural Marketing
                                              who choose to divert in the orchard can                 with fruit, vegetable, and specialty crop              Service.
                                              be issued certificates by the Board that                marketing agreements and orders may                    [FR Doc. 2017–13241 Filed 6–23–17; 8:45 am]
                                              can be sold to handlers to meet their                   be viewed at: http://www.ams.usda.gov/
                                                                                                                                                             BILLING CODE 3410–02–P
                                              restriction requirements.                               rules-regulations/moa/small-businesses.
                                                 One commenter noted the Board felt                   Any questions about the compliance
                                              the final calculations were appropriate.                guide should be sent to Richard Lower
                                              They also stated that the majority of the               at the previously mentioned address in                 FEDERAL RESERVE SYSTEM
                                              industry approved the order in its last                 the FOR FURTHER INFORMATION CONTACT
                                              referendum, believing that the order                                                                           12 CFR Part 201
                                                                                                      section.
                                              brings more returns to growers. Another                    After consideration of all relevant                 [Docket No. R–1565; RIN 7100 AE–79]
                                              proponent noted, even with the                          matter presented, including the
                                              restriction, sales are not being lost due               information and recommendation                         Regulation A: Extensions of Credit by
                                              to lack of available unrestricted cherries.             submitted by the Committee and other                   Federal Reserve Banks
                                              The carry-in from July 2016 (81 million                 available information, it is hereby found              AGENCY:  Board of Governors of the
                                              lbs.) and the projected availability of                 that this rule, as hereinafter set forth,              Federal Reserve System.
                                              free market carry-out (57 million lbs.)                 will tend to effectuate the declared
                                              indicate the restriction is not a factor in                                                                    ACTION: Final rule.
                                                                                                      policy of the Act.
                                              limiting sales of tart cherry products.                    It is further found that good cause                 SUMMARY:  The Board of Governors of the
                                              The Board deliberated thoroughly on                     exists for not postponing the effective                Federal Reserve System (‘‘Board’’) has
                                              whether or not to make an additional                    date of this rule until 30 days after                  adopted final amendments to its
                                              economic adjustment to account for                      publication in the Federal Register (5                 Regulation A to reflect the Board’s
                                              imported cherry products. However, no                   U.S.C. 553) because handlers are already               approval of an increase in the rate for
                                              motion was made for an additional                       shipping tart cherries from the 2016–17                primary credit at each Federal Reserve
                                              adjustment to reflect the impact of                     crop. Further, handlers are aware of this              Bank. The secondary credit rate at each
                                              imported cherry products. As one                        rule, which was recommended at a                       Reserve Bank automatically increased
                                              commenter noted, there is a lack of                     public meeting. Also, a 30-day comment                 by formula as a result of the Board’s
                                              consensus on how to factor imports into                 period was provided for in the proposed                primary credit rate action.
                                              the final calculation.                                  rule.
                                                 Further, according to Foreign                                                                               DATES: This rule is effective June 26,
                                              Agricultural Service’s GATS database,                   List of Subjects in 7 CFR Part 930                     2017. The rate changes for primary and
                                              though imported cherry products                                                                                secondary credit were applicable
                                                                                                        Marketing agreements, Reporting and                  beginning June 15, 2017.
                                              remained high (230 million lbs.                         recordkeeping requirements, Tart
                                              equivalent) during the 2016 calendar                                                                           FOR FURTHER INFORMATION CONTACT:
                                                                                                      cherries.
                                              year, the volume is down from the 2015                                                                         Clinton Chen, Attorney (202/452–3952),
                                                                                                        For the reasons set forth in the                     or Sophia Allison, Special Counsel,
                                              calendar year (267 million lbs.                         preamble, 7 CFR part 930 is amended as
                                              equivalent) and also below the 2014                                                                            (202/452–3565), Legal Division, or Lyle
                                                                                                      follows:                                               Kumasaka, Senior Financial Analyst
                                              calendar year (244 million lbs.
                                              equivalent). The final NASS prices for                  PART 930—TART CHERRIES GROWN                           (202/452–2382); for users of
sradovich on DSK3GMQ082PROD with RULES




                                              the 2016 season are not yet available,                  IN THE STATES OF MICHIGAN, NEW                         Telecommunications Device for the Deaf
                                              but from 2013–15, grower prices were                    YORK, PENNSYLVANIA, OREGON,                            (TDD) only, contact 202/263–4869;
                                              stable, ranging from $0.34 to $0.36 per                 UTAH, WASHINGTON, AND                                  Board of Governors of the Federal
                                              pound. Thus, when using available                       WISCONSIN                                              Reserve System, 20th and C Streets
                                              sales, utilization, and price data from                                                                        NW., Washington, DC 20551.
                                              previous years it is difficult to                       ■ 1. The authority citation for 7 CFR                  SUPPLEMENTARY INFORMATION: The
                                              determine what, if any, specific negative               part 930 continues to read as follows:                 Federal Reserve Banks make primary


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Document Created: 2018-11-14 10:11:05
Document Modified: 2018-11-14 10:11:05
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionRules and Regulations
ActionFinal rule.
DatesEffective June 27, 2017.
ContactSteven W. Kauffman, 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]
FR Citation82 FR 28749 
CFR AssociatedMarketing Agreements; Reporting and Recordkeeping Requirements and Tart Cherries

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