Change in Regulatory Periods: Grapes Grown in a Designated Area of Southeastern California and Imported Table Grapes

This Rule document was issued by the Agricultural Marketing Service (AMS)

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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Parts 925 and 944
[Doc. No. AMS-FV-06-0184; FV03-925-1 FIR]

Grapes Grown in a Designated Area of Southeastern California and Imported Table Grapes; Change in Regulatory Periods

Agency

Agricultural Marketing Service, USDA.

Action

Final rule.

Summary

The Department of Agriculture (USDA) is adopting, as a final rule, without change, an interim final rule revising the regulatory period when minimum grade, size, quality, and maturity requirements apply to southeastern California grapes under Marketing Order No. 925 (order), and to imported grapes under the table grape import regulation, from April 20 through August 15 of each year to April 10 through July 10 of each year. The order regulates the handling of grapes grown in a designated area of southeastern California and is administered locally by the California Desert Grape Administrative Committee (Committee). The change to the regulatory period beginning date is needed to help ensure that imported table grapes marketed in competition with domestic grapes are subject to the grade, size, quality, and maturity requirements of the order. Section 8e of the Agricultural Marketing Agreement Act of 1937 (Act) provides authority for such change. The change to the regulatory period ending date is needed to realign the regulatory period with current shipping trends for grapes in the order's production area. This rule also continues in effect the action that clarified the maturity (soluble solids) requirements for southeastern California and imported Flame Seedless variety grapes.

Dates

Effective Date: February 8, 2010.

For Further Information Contact

Barry Broadbent, Northwest Marketing Field Office, Marketing Order Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 1220 SW. Third Avenue, Suite 385, Portland, Oregon 97204; Telephone: (503) 326-2724, Fax: (503) 326-7440, or E-mail: Barry.Broadbent@ams.usda.gov; or Kurt Kimmel, California Marketing Field Office, Marketing Order Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 2202 Monterey Street, Suite 102B, Fresno, California 93721; Telephone: (559) 487-5901, Fax: (559) 487-5906, or E-mail: Kurt.Kimmel@ams.usda.gov.

Small businesses may request information on complying with this regulation by contacting Jay Guerber, Marketing Order Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence Avenue, SW., STOP 0237, Washington, DC 20250-0237; Telephone: (202) 720-2491, Fax: (202) 720-8938, or E-mail: Jay.Guerber@ams.usda.gov.

Supplementary Information

This rule is issued under Marketing Agreement and Order No. 925 (7 CFR part 925), regulating the handling of grapes grown in a designated area of southeastern California, hereinafter referred to as the “order.” The order is effective under the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the “Act.”

This rule is also issued under section 8e of the Act, which provides that whenever certain specified commodities, including table grapes, are regulated under a Federal marketing order, imports of these commodities into the United States are prohibited unless they meet the same or comparable grade, size, quality, or maturity requirements as those in effect for the domestically produced commodities. The table grape import regulation is specified in § 944.503 (7 CFR part 944.503).

USDA is issuing this rule in conformance with Executive Order 12866.

This rule has been reviewed under Executive Order 12988, Civil Justice Reform. This action is not intended to have retroactive effect.

The Act provides that administrative proceedings must be exhausted before parties may file suit in court. Under section 608c(15)(A) of the Act, any handler subject to an order may file with USDA a petition stating that the order, any provision of the order, or any obligation imposed in connection with the order is not in accordance with law and request a modification of the order or to be exempted therefrom. A handler is afforded the opportunity for a hearing on the petition. After the hearing, USDA would rule on the petition. The Act provides that the district court of the United States in any district in whichthe 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.

There are no administrative procedures that must be exhausted prior to any judicial challenge to the provisions of import regulations issued under section 8e of the Act.

Introduction

This rule finalizes the interim final rule published in theFederal Registeron January 21, 2009 (74 FR 3412), that revised the beginning and ending dates of the regulatory period when minimum grade, size, quality, and maturity requirements apply to southeastern California grapes under Marketing Order No. 925, and to imported grapes under the table grape import regulation. The revised regulatory period also applies to pack and container requirements issued under the order. This final rule continues in effect the changes made by the interim final rule. The previous regulatory period for both domestic and imported grapes was April 20 through August 15 of each year.

The Committee, which locally administers the order, unanimously recommended changing the date when the order's requirements expire to July 10 of each year, because few grapes are normally shipped after that date. Additionally, the Desert Grape Growers League of California (League) requested that USDA change the beginning date of the regulatory period for imported table grapes from April 20 to April 1. The League requested this change to ensure that grapes imported prior to the beginning of the regulatory period, but marketed during the regulatory period in competition with domestically produced grapes, meet the California grape order's grade, size, quality, and maturity requirements. After much consideration, USDA has determined that a beginning regulatory period date of April 10 adequately addresses the League's concerns and is consistent with the provisions of the Act.

This rule also finalizes the clarification to the maturity (soluble solids) requirements for southeastern California and imported Flame Seedless variety grapes.

Section 925.52(a)(2) of the grape marketing order provides authority to limit the handling of any grade, size, quality, maturity, or pack of grapes differently for different varieties, or any combination of the foregoing during any period or periods. Section 925.55 provides for mandatory inspection for all grapes handled pursuant to § 925.52 of the order. Section 925.304 of the order's administrative rules and regulations prescribes the period during which grapes are handled pursuant to regulation.

Current regulations under the order require grapes shipped during the regulatory period to be at least U.S. No. 1 Table, as set forth in the United States Standards for Grades of Table Grapes (European or Vinifera type) (7 CFR 51.880 through 51.914) (Standards), or meet the requirements of the U.S. No. 1 Institutional grade, except for the tolerance percentage for bunch size. The tolerance is 33 percent instead of 4 percent as is required to meet the U.S. No. 1 Institutional grade.

Grapes meeting the institutional quality requirements may be marked “DGAC No. 1 Institutional” but shall not be marked “Institutional Pack.” Grapes of the Flame Seedless and Perlette varieties are required to meet the “other varieties” standard for berry size (ten-sixteenths of an inch).

In addition, fresh shipments of grapes from the marketing order area are required to meet the minimum maturity requirements for table grapes as specified in the California Code of Regulations (3 CCR 1436.12). Grapes of the Flame Seedless variety shall be considered mature if the juice meets or exceeds 16.5 percent soluble solids, or contains not less than 15 percent soluble solids and the soluble solids are equal to or in excess of 20 parts to every part acid contained in the juice in accordance with applicable sampling and testing procedures specified in the California Code of Regulations.

Prior to the interim final rule in this rulemaking, the regulatory period for imported grapes began April 20 and extended through August 15 of each year, the same as the period delineated in the marketing order for domestic grapes. This rule finalizes the revised regulatory period established in the import regulations for imported grapes to April 10 through July 10 of each year. This period mirrors the period set by the marketing order for domestic regulation.

The ending date of the regulatory period was changed from August 15 to July 10 to more accurately reflect the production season of grapes produced within the marketing order production area. Recent production history shows the majority of the grapes produced in the production area are shipped prior to July 10. Regulating after that date is unjustified, both economically and logistically, for the small quantity of grapes that are produced.

Additionally, the beginning date of the regulatory period was changed from April 20 to April 10 of each year to respond to the marketing and technology changes that have occurred within the imported grape industry. Improvements in cold storage technology have enabled large quantities of imported grapes to be imported prior to the beginning of the marketing order regulatory period, when the order requirements come into effect, and subsequently be held in cold storage for long periods of time. This can potentially allow the stored product to be marketed after the start of the regulatory period in competition with regulated, domestically produced grapes. Establishing the earlier beginning regulatory period date for the marketing order helps ensure that imported table grapes marketed in competition with domestically produced table grapes meet the minimum marketing order quality standards.

Marketing order regulation is intended to protect the interests of both the producers and consumers of agricultural commodities covered under the Act. A USDA/ERS report discussed the purposes and benefits of quality and condition standards (USDA, Economic Research Service, Agricultural Economic Report Number 707, “Federal Marketing Orders and Federal Research and Promotion Programs, Background for 1995 Farm Legislation”, by Steven A. Neff and Gerald E. Plato, May 1995). The basic rationale for such standards is that only satisfied customers are repeat customers. Thus, quality standards help ensure that consumers are presented a product that is of a consistent quality, helps create buyer confidence, and contributes to stable market conditions. When consumers purchase satisfactory quality grapes, they are likely to purchase grapes again, and inspection helps ensure a quality product. It is anticipated that this action will improve the orderly marketing of grapes and benefit producers and consumers of grapes.

Changing the Date When Domestic and Imported Table Grape Regulations Expire

Prior to the interim final rule, § 925.304 of the order specified a regulatory period of April 20 through August 15 when minimum grade, size, quality, and maturity requirements apply to grapes grown in southeastern California. A final rule published on March 20, 1987, (52 FR 8865) established the regulatory period to promote the orderly marketing of grapes.

The Committee met on November 14, 2002, and unanimously recommended modifying § 925.304 to change the datewhen minimum grade, size, quality, and maturity requirements expire to July 10, rather than August 15. The Committee met again on December 12, 2002, and clarified that the proposed regulatory period should also apply to pack and container requirements under the order.

Since 1987, the amount of grapes handled in the production area after July 10 has generally decreased as older vineyards, which typically produce late season varieties, have been removed. For the years 2000-2008, almost 99 percent of the approximately 7.3 million 18-pound lugs of grapes grown annually in the production area were handled during the period April 20 to July 10. On average, just over one percent of these grapes were harvested and marketed during the period July 11 to August 15. The Committee believes that ending the regulatory requirements on July 10 will benefit handlers and producers by reducing the costs associated with mandatory inspection.

Under section 8e of the Act, minimum grade, size, quality, and maturity requirements for table grapes imported into the United States are established under Table Grape Import Regulation 4 (7 CFR 944.503) (import regulation). Section 944.503(a)(3) of the import regulation specifies the regulatory period when imported grapes are subject to minimum requirements. The change to the order's regulatory period expiration date required a corresponding change to expiration date of the regulatory period for imported table grapes.

It is expected that the earlier end to the regulatory period for domestic and imported grapes will benefit handlers, producers, and importers, because the regulatory burden on these entities will be reduced.

Changing the Beginning of the Regulatory Period for Domestic and Imported Table Grapes

In January 2003, the League requested that USDA change the beginning date of the regulatory period for imported table grapes from April 20 to April 1, and provided information in support of that request. The League contended that, in prior years, grapes not subject to marketing order requirements were imported prior to the start of the regulatory period and were subsequently marketed during the regulatory period in competition with domestically produced grapes subject to the California grape order's grade, size, maturity, and quality requirements. The League further contended that there would be no adverse effect on the availability and prices of grapes if the beginning of the regulatory period for imports were changed to April 1.

After much consideration, including the League's proposal and comments received by USDA concerning the proposed change, USDA established, through an interim final rule, an April 10 beginning date of the regulatory period for imported grapes. This final rule continues in effect the action that revised the beginning regulatory period date to April 10.

USDA is authorized by Section 608e(b)(1) of the Act to extend marketing order requirements for a period, not to exceed 35 days, during which the order requirements would be effective for an imported commodity during any year, if USDA determines that the additional period of time is necessary to effectuate the purposes of the Act and to ensure that imports marketed during the regulatory period meet the grade, size, quality, or maturity requirements of the marketing order applicable to domestic production. Further, section 608e(b)(2) of the Act provides that in making such a determination, USDA shall consider, through notice and comment procedures:

(A) To what extent, during the previous year, imports of a commodity that did not meet the requirements of a marketing order applicable to such commodity were marketed in the United States during the period that such marketing order requirements were in effect for available domestic commodities (or would have been marketed during such time if not for any additional period established by the Secretary);

(B) If the importation into the United States of such commodity did, or was likely to, avoid the grade, size, quality, or maturity standards of a seasonal marketing order applicable to such commodity produced in the United States; and

(C) The availability and price of commodities of the variety covered by the marketing order during any additional period the marketing order requirements are to be in effect.

In its request, the League presented arguments and data that support the claim that unregulated imported grapes have been and likely will continue to be in the market in competition with grapes subject to regulation, that the presence of such grapes may result in an avoidance of the marketing order requirements, and that expanding the marketing order regulatory period to ensure that imported and domestic grapes marketed during the regulatory period meet minimum marketing order quality standards will have minimal impact on the price and availability of grapes.

Current market mechanisms for imported grapes dictate that product is either immediately shipped directly to retail markets or diverted for holding in cold storage facilities. Improved cold storage technology allows importers to divert imported grapes from normal marketing channels for up to 60 days after their arrival at a U.S. port. The practice of importing grapes into the U.S. prior to the beginning of the regulatory period, holding them in cold storage, and subsequently releasing them into the market after the regulatory period has begun may result in the avoidance of the marketing order regulation. Revising the start of the regulatory period to April 10 reduces the likelihood that uninspected grapes that are imported prior to the start of regulation are marketed during the regulatory period.

Exporting countries ship many high quality grapes to the U.S. prior to April 20. Those same countries have the capability of exporting grapes which consistently meet the minimum requirements of the import regulation. There is no expectation that the earlier beginning date of regulation will cause a shortage of grapes in the market. The earlier beginning date helps ensure that grapes being imported and marketed during the regulatory period meet minimum requirements prior to being allowed to be marketed in the U.S.

It is expected that uniform high quality product consistently in the market will encourage repeat purchases of imported and domestic grapes, which should benefit producers, handlers, importers, and consumers of grapes.

The U.S. Census Bureau indicates that on average for the years 2000-2008, 68 million 18-pound lugs of grapes were imported into the United States. The two main countries exporting to the United States were Chile, with average exports of 51 million 18-pound lugs (76 percent of the total), and Mexico, with 14 million 18-pound lugs (21 percent of the total). The remaining three percent came from various other countries.

Total grape imports for the February through April period in the years 2000-2008 averaged 44 million 18-pound lugs. Of this amount, 97 percent came from Chile and the remaining percentage came from various other countries.

Information from USDA's Market News Service (Market News) for 2000-2008 shows that the Port of Philadelphia (where historically the greatest percentage of Chilean table grapes enter the United States) received an average of 20 million 18-pound lugs of importedChilean grapes during the February 1 to April 19 period, with approximately 30 percent (6 million) of these 20 million 18-pound lugs arriving between April 1 and April 19. Market News import statistics for the 2008 shipping season show that 18.82 million lugs of grapes were imported from Chile into Philadelphia from February 1 to April 19, with 28 percent (5.26 million) arriving between April 1 and April 19. After the April 20 start of the regulatory period, shipments dropped off dramatically and ended completely by June 4.

Fresh grapes imported prior to the beginning of the regulatory period are not subject to mandatory inspection but may be inspected on a voluntary basis. USDA's Fresh Products Branch, Fruit and Vegetable Programs (Fresh Products), is responsible for the performance of those voluntary inspections and compiles the inspection results data. Approximately 10 percent of the table grapes imported during the period April 1-19, 2008, were voluntarily inspected.

The grapes that are voluntarily inspected and fail to meet the Standards are not prohibited from entering into the channels of commerce in the U.S. By contrast, imported grapes that fail import quality requirements during the regulatory period must be reworked to meet the minimum requirements before being marketed in the U.S. Otherwise, failing product must be exported, destroyed, or utilized in processed products.

Under normal marketing conditions, imported grapes move directly through distribution channels into retail markets. However, when the supply of imported product exceeds demand, the imported grapes can be put into cold storage until the market is ready to absorb them. The length of time the grapes remain in storage likely has a negative effect on the quality of the grapes.

Studies of table grape importer storage behavior performed by SURRES, a division of the Applied Technology Corporation, and the College of Business and Management, University of Maryland, indicate that importers use their storage capability extensively during the March-April timeframes and that storage periods in the 30 to 60 day range are not uncommon at this time of year. Thus, the utilization of cold storage facilities in this manner creates a mechanism whereby grapes imported prior to the April 20 start of the regulatory period (product which is not subject to the marketing order requirements) may be held over in cold storage and subsequently enter the market after April 20, in competition with grapes that have passed inspection and met or exceeded the marketing order and import requirements.

Market News reports of commodity movement for the years 2000-2008 show that grape imports decrease dramatically soon after the start of the regulatory period. The amount of grapes imported during the regulatory period cannot account for the substantial quantity of imported grapes consistently present in the market in May and, sometimes, into June. Since few grapes are imported early in the regulatory period, many of the imported grapes available during the regulatory period have entered the country prior to the beginning of the regulatory period and have been held in cold storage and marketed during the regulatory period.

The Market News terminal market reports generally indicate that marginal quality and condition grapes command dramatically reduced prices in the market. In addition, those same reports indicate that grapes of better quality and condition tend to receive higher prices.

The April 10 regulatory period beginning date was implemented to ensure that imported and domestic grapes marketed during the regulatory period meet the minimum marketing order quality standards. This action is expected to reduce the quantity of unregulated imported grapes marketed during the regulatory period and to provide consumers with higher quality grapes on a more consistent basis. Experience has shown that an improvement in product quality results in increased acceptance in the marketplace and translates into more frequent purchases. USDA expects domestic producers and handlers of southeastern California grapes, as well as exporters and importers of foreign-produced grapes, to benefit from this action through stabilized marketing conditions and prices. The regulatory period change is anticipated to benefit the producers and marketers of both domestic and imported grapes, as well as grape consumers.

Clarification of Maturity Requirements

This rule also finalizes the modifications to § 944.503(a)(1)(ii) to clarify that imported Flame Seedless variety grapes shall be considered mature if the juice meets or exceeds 16.5 percent soluble solids, or contains not less than 15 percent soluble solids and the soluble solids are equal to or in excess of 20 parts to every part acid contained in the juice in accordance with applicable sampling and testing procedures specified in the California Code of Regulations (3 CCR 1436.3, 1436.5, 1463.6, 1436.7, 1436.12, and 1436.17). Prior to the implementation of the interim final rule, this subparagraph did not include the 16.5 percent option for meeting maturity requirements. In addition, obsolete language specifically regarding requirements in effect only in 1998 has been removed from paragraph (a)(1). These requirements are already in effect for grapes shipped from southeastern California under Marketing Order No. 925.

Final Regulatory Flexibility Impact Analysis

Pursuant to requirements set forth in the Regulatory Flexibility Act (RFA) (5 U.S.C. 601-612), the Agricultural Marketing Service (AMS) has considered the economic impact of this rule 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 business subject to such actions in order that small businesses will not be unduly or disproportionately burdened. Marketing orders issued pursuant to the Act, and the rules issued thereunder, are unique in that they are brought about through group action of essentially small entities acting on their own behalf. Thus, both statutes have small entity orientation and compatibility. Import regulations issued under the Act are comparable to those established under Federal marketing orders.

There are approximately 14 handlers of southeastern California grapes subject to regulation under the order and about 50 grape producers in the production area. In addition, there are approximately 123 importers of grapes. Small agricultural service firms are defined by the Small Business Administration (13 CFR 121.201) as those having annual receipts of less than $7,000,000, and small agricultural producers are defined as those whose annual receipts are less than $750,000. Nine of the 14 handlers subject to regulation have annual grape sales of less than $7 million. Based on data from the National Agricultural Statistics Service (NASS) and the Committee, the average crop value for 2008 is about $53,040,000. Dividing this figure by the number of producers (50) yields an average annual producer revenue estimate of about $1,060,800, which is above the SBA threshold of $750,000. Based on the foregoing, it may be concluded that a majority of grape handlers and none of the producers may be classified as small entities. The average importer receives $2,800,000 in revenue from the sale of grapes. Therefore, we believe that the majorityof these importers may also be classified as small entities.

Summary of Changes

This rule continues in effect the interim final rule published in theFederal Registeron January 21, 2009 (74 FR 3412), that revised the regulatory periods when minimum grade, size, quality, and maturity requirements apply to grapes grown in southeastern California under the order, and to imported grapes under the table grape import regulation. The revised regulatory period also applies to pack and container requirements issued under the order. Prior to the action, the regulatory period for both domestic and imported grapes was April 20 through August 15 of each year.

The California Desert Grape Administrative Committee, which locally administers the order for grapes grown in a designated area of southeastern California, unanimously recommended changing the date when these requirements end for grapes grown in California to July 10. Moving the ending date of the regulatory period forward is in the interest of table grape handlers and producers. The Desert Grape Growers League of California requested that the beginning date of the regulatory period for imported grapes be changed from April 20 to April 1 and provided information to support its request. The League proposed this regulatory period change to reduce the quantity of unregulated imported grapes that are marketed during the regulatory period in competition with regulated grapes. The League believes that regulating product quality to meet minimum standards will result in increased acceptance of grapes in the marketplace, and is expected to translate into more frequent purchases on the part of the consumer.

After publishing a proposed rule and receiving comments, USDA subsequently determined that changing the beginning date of the regulatory period to April 10, as opposed to the April 1 date requested by the League, adequately addressed the League's concerns and was consistent with the provisions of the Act.

In addition, this finalizes the interim final rule that revised regulatory language in the grape import regulations to clarify maturity requirements on imported Flame Seedless variety grapes. Prior to the interim final rule, the regulation did not include the 16.5 percent option for meeting maturity requirements that has been in effect for grapes shipped from southeastern California under the order.

Changing the Ending of the Regulatory Period for Domestic and Imported Grapes

Section 925.52(a)(2) of the grape order provides authority to limit the handling of any grade, size, quality, maturity or pack of grapes differently for different varieties, or any combination of the foregoing during any period or periods.

Section 925.304 of the order's administrative rules and regulations stipulates the regulatory period when minimum grade, size, quality, and maturity requirements apply to grapes grown in southeastern California under the order. A final rule published on March 20, 1987 (52 FR 8865), established the original regulatory period to promote the orderly marketing of grapes.

Grape handlers in the production area shipped and marketed an average of 7.3 million 18-pound lugs of grapes annually from 2000-2008. Approximately 99 percent of those grapes were shipped and marketed during the period April 20 to July 10. At least 14 varieties are grown in the production area regulated under the order and marketed in major U.S. market areas. The four major varieties are Flame Seedless, Perlettes, Thompson Seedless, and Sugraone.

Since 1987, the amount of grapes handled after July 10 has decreased, and, in the period 2000-2008, the amount of grapes handled after July 10 constituted just slightly more than 1 percent of the grapes produced in the production area. The Committee met on November 14, 2002, and unanimously recommended modifying § 925.304 of the order's administrative rules and regulations to advance the date when minimum grade, size, quality, and maturity requirements expire to July 10, rather than August 15. The Committee met again on December 12, 2002, and clarified that the proposed regulatory period should also apply to pack and container requirements under the order.

The amount of grapes handled in the production area after July 10 of each year has generally decreased as older vineyards, which typically produce late season varieties, have been removed. During the past 3 years, approximately 99 percent of the grapes grown in the production area were handled during the period April 20 through July 10.

Grapes handled after July 10 tend to bring much lower prices than early season grapes. For example, in the 2003 season that followed the Committee recommendation, FOB prices for early season Flame Seedless grapes ranged from $13.85 to $23.85, while end-of-season Flame Seedless grape FOB prices ranged from $11.85 to $12.85 per 18-pound lug. In 2008, early season Flame Seedless prices ranged from $22.95 to $28.95 while the late season prices averaged $11.95 per 18-pound lug.

Additionally, inspection costs for grapes handled after July 10 are higher, as inspection fees are proportionate to the volume of grapes inspected. Thus, a shortened regulatory period is expected to benefit handlers and producers.

The Committee considered other regulatory period alternatives that would more adequately reflect the end of the harvest for the domestic production area but still ensure shipments of higher quality grapes. For example, one suggestion was to change the ending date of the regulatory period for grapes grown in the designated area of southeastern California to July 1 or July 5. This suggestion was not adopted because the Committee believes that July 10 is more reflective of the end of the season. Approximately one percent of grapes are shipped from the production area after July 10, but the industry felt that commercial quantities of grapes may still be shipped before that date and was not supportive of an earlier ending date.

Section 8e of the Act specifies that whenever certain specified commodities, including table grapes, are regulated under a Federal marketing order, imports of that commodity into the United States are prohibited unless they meet the same or comparable grade, size, quality, and maturity requirements as those in effect for the domestically produced commodity. Minimum grade, size, quality, and maturity requirements for table grapes imported into the United States are established under Table Grape Import Regulation 4 (7 CFR 944.503).

Section 944.503(a)(3) of the import regulation specifies the regulatory period during which imported grapes are subject to regulation. Prior to the interim final rule, the regulatory period was April 20 to August 15 of each year. Since that action changed the ending date of the regulatory period for the California production area to July 10, a corresponding change to the regulatory period for imported table grapes was required under section 8e of the Act.

Changing the Beginning of the Regulatory Period for Imported Grapes

The U.S. Census Bureau indicates that on average, for the years 2000-2008, 68 million 18-pound lugs of grapes were imported into the United States. The majority of these grapes are imported prior to April 20. Only grapes imported during the regulatory period are required to be inspected and to complywith the same minimum grade, size, quality, and maturity requirements as the domestic marketing order.

The League requested that the beginning date of the regulatory period for imported grapes be advanced from April 20 to April 1, and submitted information to support its request to USDA for review and evaluation. After much consideration, USDA determined that changing the beginning date of the regulatory period to April 10 adequately addressed the League's concerns and was consistent with the provisions of the Act. The beginning date of the marketing order regulatory period was also changed to keep the import and domestic regulatory period dates the same.

The authority for changing the beginning date of the regulatory period for imports is specified in section 608e(b) of the Act. These provisions allow the Secretary to extend import requirements for a period, not to exceed 35 days, during which the import requirements would be effective for the imported commodity. To change the beginning date, USDA must consider the following: (1) For the prior year, whether imports of grapes that did not meet import requirements were marketed in the United States during the period that such import requirements were in effect; (2) whether imported grapes did or were likely to avoid such import requirements; and (3) whether there would be any adverse effect on the availability and prices of grapes if the regulatory period for imports was changed.

The League contends that such an action is needed to ensure that grapes imported into the United States prior to the beginning of the regulatory period, but marketed when the regulation is in effect, meet marketing order grade, size, quality, and maturity requirements.

Grape importers use cold storage extensively during the months of March and April. Storage periods in the 30-60 day range are not uncommon at this time of year. Much of the imported product available in the market during the regulatory period is believed to have been shipped prior to the beginning of the regulatory period and held in such facilities before shipping to terminal markets.

On average, 68.0 million 18-pound lugs of grapes were imported into the United States at all ports during each of the years 2000 to 2008. During each of those years, there was a significant decrease in imports after the April 20 beginning of the regulatory period. Approximately 3 million 18-pound lugs of imported grapes arrive each week of the shipping season prior to the April 20 beginning date of regulation. After April 20, shipments drop dramatically and usually cease altogether by May 31.

Market News reports show that shipments of imported Chilean grapes in 2008 mirror the pattern of previous years. An average of 3.25 million 18-pound lugs of grapes were imported each week of the season leading up to the April 20 start of regulation. For the week following the April 20 start date, shipments dropped to approximately 750,000 lugs per week. In the weeks that followed, shipments were 430,000 lugs, 372,000 lugs, and 78,000 lugs. Shipments continued to decrease to statistically insignificant quantities, ceasing completely after June 4, 2008.

Fresh Products data indicates that from 2004-2007, less than one percent of imported Chilean grapes were subject to inspection during the regulatory period, confirming that only limited quantities of Chilean grapes are imported after the import regulation takes effect. The majority of imports from Mexico are imported during the May-July period of each year subject to the import regulation requirements.

Market News terminal market reports for grapes for the years 2000-2008 indicate that imported table grapes are in the domestic market during May and June and that they compete with regulated grapes that are required to be inspected and certified as meeting minimum quality requirements. Given the small quantity of grapes imported during the early part of the regulatory period, it is presumed that the imported grapes available in the market during that time were imported prior to the start of the regulatory period and held over in cold storage.

USDA's Economic Research Service (ERS) studies indicate that low quality commodities can adversely affect the market for shippers of acceptable quality products. Quality requirements are typically used to cultivate a positive image of a consistent and reliable supplier of high-quality product. This results in consumer goodwill that strengthens demand and boosts producer prices. (USDA, Economic Research Service, Agricultural Economic Report Number 629, “Federal Marketing Orders for Fruits, Vegetables, Nuts, and Specialty Crops” by Nicholas J. Powers, March 1990; USDA, Economic Research Service, “Criteria for Evaluating Federal Marketing Orders: Fruits, Vegetables, Nuts, and Specialty Commodities” by Leo C. Polopolus, Hoy F. Carman, Edward V. Jesse, and James D. Shaffer, December 1986).

The presence of lower quality product in the marketplace, from any source, weakens demand for all products of that type. Market research and experience shows that consumers often purchase other commodities in place of the commodity with which they have had a bad quality experience. Decreasing demand ultimately has a negative effect on grower, handler, exporter, and importer returns.

The ERS report also discusses the purposes of quality standards. The basic rationale for such standards is that only satisfied customers are repeat customers. When consumers have a good quality experience, they make repeat purchases. Thus, quality standards help ensure that consumers are presented product that is of a known level of quality. It is in the interest of the grape industry to maintain consumer confidence by consistently offering high-quality product.

According to the League, countries that export table grapes to the European Union and Canada must meet minimum inspection requirements on a year-round basis. A number of these countries are the same as those who also export table grapes to the United States. Hence, a change in the effective date to April 10 should not dramatically adversely affect the availability of imported table grapes in the U.S. market, as the exporting countries have the ability to supply high-quality table grapes during this same time period. As an example, during the period April 1-19, 2004, FOB prices for imported grapes in U.S. markets ranged from $8 to $26 per package, depending on the date, condition, and size of the grapes. During the same period, Canadian FOB prices for imported grapes ranged from $12.03 to $33.98 and European Union prices ranged from $8 to $22 depending on the date, condition, and size of the grapes.

Better quality grapes tend to command higher prices. The increase in revenue could offset the added inspection costs of 3.8 cents per box for imported grapes checked at dockside. In 2000-2008, less than 1 percent of Chilean grapes required mandatory inspection. However, if inspection in these years had been mandatory as of April 10, about 7 percent would have been required to be inspected. It is anticipated that grape prices will be slightly higher as the quality level of grapes offered to consumers is increased.

Inspection fees will now be applicable to grapes imported during the April 10-19 period. These fees vary, depending on such factors as the location of the inspection, the size of the load to be inspected, and whether there are multiple commodities to be inspected. Current inspection fees for importedgrapes are 3.8 cents per package when inspected at dockside. When the inspection is performed at a location other than dockside, the fees range from $69 to $151 per car lot (approximately 45,000 pounds), depending on the number of packages in the load. (See http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELPRDC5065795 for inspection fee information.)

With prices for imported grapes ranging from $6 to mostly $44 per package, depending on the month, condition, and size of the grapes, inspection fees are anticipated to be less than 1 percent of the value of the grapes imported during this period of time.

The benefits and costs associated with changing the dates when grade, size, quality, and maturity requirements apply to grapes grown in a designated area of southeastern California and to imported grapes under the grape import regulation are not expected to be disproportionately larger or smaller for small importers than for large importers, nor for small handlers or producers than for larger entities.

A number of alternatives to an April 10 regulatory period start date were considered prior to the implementation of the interim final rule, including leaving the April 20 beginning date of the regulatory period unchanged, and setting an earlier beginning date (April 1 per the League's request).

There is clear evidence that the April 20 start date has allowed unregulated imported grapes to compete in the marketplace with regulated grapes, negatively impacting domestic producers and handlers. Maintaining the status quo in relation to the regulatory period start date was not deemed to be a viable option.

An April 1 regulatory period start date, as originally proposed by the League, would certainly have addressed the problem, but may have also created some unintended consequences. The imported grape industry felt that an April 1 start date would have created undue economic hardship for the industry and may have ultimately resulted in curtailed shipments.

The April 10 regulatory period start date addressed the concerns of the domestic grape industry, while not excessively burdening the imported grape industry. An April 10 beginning date is expected to improve the quality of imported and domestic grapes available to consumers, lessen the chances of unregulated imported grapes being in the market during the regulatory period in competition with regulated grapes, and, ultimately, be in the best interest of all grape handlers, producers, importers, and consumers.

AMS is committed to compliance 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.

This rule will not impose any additional reporting or recordkeeping requirements on either small or large grape handlers or importers. 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. In addition, USDA has not identified any relevant Federal rules that duplicate, overlap, or conflict with this final rule.

The Committee's meetings were widely publicized throughout the grape industry and all interested persons were invited to attend the meetings and participate in Committee deliberations. Like all Committee meetings, the November 14, 2002, and the December 12, 2002, meetings were public meetings and all entities, both large and small, were able to express their views on changing the marketing order regulatory period. Also, the World Trade Organization, the Chilean Technical Barriers to Trade (TBT) inquiry point for notifications under the U.S.-Chile Free Trade Agreement, the embassies of Argentina, Brazil, Canada, Chile, Italy, Mexico, Peru, and South Africa, and known grape importers were notified of the proposed and interim final rules. Finally, interested persons were invited to submit comments on the interim final rule, including the regulatory and informational impacts of this action on small businesses.

An interim final rule was published in theFederal Registeron January 21, 2009 (74 FR 3412). Copies of the rule were mailed by the Board's staff to all Committee members and grape handlers. In addition, the rule was made available through the Internet by USDA and the Office of the Federal Register. A 60-day comment period ending March 23, 2009, was provided to allow interested persons to respond to the rule.

Previously Published Proposed Rule

In addition, prior to the publication of the interim final rule, a proposed rule concerning this action was published in theFederal Registeron May 25, 2005 (70 FR 30001). That proposed rule was subsequently reopened five times for further comments on July 25, 2005 (70 FR 42513), on September 27, 2005 (70 FR 56378), on July 11, 2006 (71 FR 39019), on October 25, 2007 (72 FR 60588), and on December 13, 2007 (72 FR 70811). Copies of the rule were mailed or sent via facsimile to all Committee members and grape handlers, and the rule was made available through the Internet at http://www.regulations.gov.

A total of seven comment periods (five 60-day comment periods, a 30-day comment period, and a 15-day comment period) have been provided to allow interested persons to respond to the proposed action. The last comment period ended March 23, 2009.

In total, USDA received 161 comments related to the proposed rule. Comments were broken down as follows: 20 comments were in support of the proposal and 141 in opposition; 112 of the comments originated from foreign sources and 49 from domestic sources. Fifteen of the comments were in relation to extending the comment period or requests for additional information. The comments received were primarily directed towards discussion of the proposed change to the beginning date of the regulatory period. There were no comments in opposition to the proposed change to the ending date of the regulatory period or to the proposed change of the maturity requirements in the import regulation.

Twenty comments were submitted in full support of the proposed changes during the proposed rule comment period. The comments were submitted by domestic grape producers and handlers, associations related to the domestic grape industry, domestic agricultural service firms, and members of the U.S. Congress.

USDA received a total of 141 comments in opposition to the proposal during the proposed rule comment period and subsequent five reopenings. Fourteen of the comments were in relation to extending the comment period or requests for additional information, 106 were so similar in style and content as to be considered form letters, and the remaining 21 were unique submissions. The commenters represented foreign grape producers, foreign grape producer associations, shippers, importers, exporters, and maritime affiliates that are directly involved in the importation of foreign produced grapes into the U.S.

The opposition comments that had material bearing on the previously published proposed rule may be summarized into the following four categories: (1) The proposed change in the beginning effective date contravenes the mandates set forth in the Act; (2) the proposed rule fails to supply a reasoned analysis to rescind the 1987 finding that a change of the beginning effective datefor Marketing Order 925 and Import Regulation 4 to a date before April 20 would constitute an unnecessary regulation of imports at a time when domestic shipments would appear to be remote; (3) the proposed beginning effective date of April 1 is contrary to the declared administrative policy of the AMS/USDA; and (4) the proposed rule imposes marketing order standards on Chilean supplies when no domestic varieties are available, and therefore allegedly constitutes a non-tariff barrier contrary to the terms of WTO Agreements and the U.S.-Chile Free Trade Agreement and assesses inspection fees starting April 1 when no domestic supplies are being so charged, thereby allegedly violating Article III and Article VIII of GATT 1994. These comments were addressed in the interim final rule.

Interim Final Rule

The interim final rule was published in theFederal Registeron January 21, 2009. This rule revised the regulatory period when minimum grade, size, quality, and maturity requirements apply to southeastern California grapes under the order and to imported grapes under the table grape import regulations, from April 20 through August 15 of each year to April 10 through July 10 of each year. The action also clarified the maturity requirement for southeastern California and imported Flame Seedless variety grapes. A 60-day comment period was provided to allow interested persons to respond to the interim final rule.

Five comments were received during the comment period—one in support of the action and four in opposition. The one comment in support of the action was received from an organization representing domestic grape producers. The commenter agreed with the determinations made by USDA and was in full support of finalization of the interim final rule.

Four comments were received in opposition to the action taken in the interim final rule. The opposition comments were received from a domestic consumer, a grape importer, a domestic maritime trade association, and a foreign association of importers. Except for the domestic consumer who objected to marketing orders in general, including the grape marketing order, the opposition comments were received from persons who had commented previously concerning the proposed rule. These commenters raised issues that were the same or substantially the same as those raised in their earlier comments on the proposed rule.

As in their previous comments, the commenters in opposition to the interim final rule maintained that the action violated the criteria set forth in the Act for such action and lacked the required statistical evidence from “the previous year.” The commenters also charged that there was deficient or irrelevant evidence in support of the action, rebutted allegations of poor quality of grape imports being imported immediately prior to the regulatory period, and asserted that grape imports would be curtailed. Virtually all of the commenters in opposition stated that the imported grape industry would suffer negative economic impacts as a result of such action. In addition, opposition commenters asserted that the action violated previous rulemaking findings, that the action contravenes departmental policy determinations dating back to 1982, and that the action constituted a breach of various trade agreements entered into by the U.S. Government.

USDA disagrees with the contentions raised in the opposition comments. Further, USDA believes that this rulemaking action fully adheres to the requirements of the Act to take such action. USDA has sought to collect, present, analyze, and consider evidence that is both current and relevant, as is required by the Act. The proposed rule, the reopening of the comment period to present updated statistical data, and the interim final rule presented appropriate statistical justification for this action and are in compliance with the governing statures. In addition, USDA rejects the opposition commenters' contention that any statutory or procedural errors were committed during the course of this rulemaking process. USDA believes that all statutes, policies, and procedures of the federal government have been strictly adhered to.

Likewise, USDA believes that this action is not contrary to any previous actions, decision, agreements, or treaties binding on the U.S. Government. Accordingly, no changes will be made in the finalization of the interim final rule.

Finally, one opposition commenter raised concern regarding the issue of grape varieties subject to exemption under the marketing order regulations. However, the issue of exempt varieties requires separate review and consideration.

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/AMSv1.0/ams.fetchTemplateData.do?template=TemplateN&page=MarketingOrdersSmallBusinessGuide. Any questions about the compliance guide should be sent to Jay Guerber at the previously mentioned address in theFOR FURTHER INFORMATION CONTACTsection.

In accordance with section 8e of the Act, USTR has concurred with the issuance of this final rule.

After consideration of all relevant material presented, including the information and recommendation submitted by the Committee and other available information, it is hereby found that finalizing the interim final rule, without change, as published in theFederal Register(74 FR 3412, January 21, 2009) will tend to effectuate the declared policy of the Act. Pursuant to 5 U.S.C. 553, it is also found and determined that good cause exists for not postponing the effective date of this action until 30 days after publication in theFederal Registerbecause: (1) The immediate implementation of this rule is necessary for importers to make marketing decisions and to contract in advance for shipping; (2) handlers and importers are aware of this rule; (3) an interim final rule was published in theFederal Registeron January 21, 2009 (74 FR 3412); and (4) the interim final rule is finalized without change.

List of Subjects

7 CFR Part 925

Grapes, Marketing agreements, Reporting and recordkeeping requirements.

7 CFR Part 944

Avocados, Food grades and standards, Grapefruit, Grapes, Imports, Kiwifruit, Limes, Olives, Oranges.

Regulatory Text

Part 925 Grapes Grown in a Designated Area of Southeastern California

Accordingly, the interim final rule amending 7 CFR part 925 which was published at 74 FR 3412 on January 21, 2009, is adopted as a final rule without change.

Part 944 Fruits Import Regulations

Accordingly, the interim final rule amending 7 CFR part 944 which was published at 74 FR 3412 on January 21, 2009, is adopted as a final rule without change.

Dated: February 2, 2010.
Rayne Pegg,
Administrator, Agricultural Marketing Service.
[FR Doc. 2010-2542 Filed 2-4-10; 8:45 am]
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Date Posted: Feb 5, 2010
RIN: Not Assigned
Federal Register Number: 2010-02542
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