[Federal Register Volume 59, Number 55 (Tuesday, March 22, 1994)] [Unknown Section] [Page 0] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 94-6653] [[Page Unknown]] [Federal Register: March 22, 1994] DEPARTMENT OF AGRICULTURE Agricultural Marketing Service 7 CFR Part 981 [Docket No. FV93-981-4FR] Almonds Grown in California; Final Rule Revising Quality Control Provisions AGENCY: Agricultural Marketing Service, USDA. ACTION: Final rule. ----------------------------------------------------------------------- SUMMARY: This final rule revises the quality control provisions established under the Federal marketing order for California almonds. This rule better reflects current almond processing capabilities, marketing standards and practices. This rule is based on a recommendation of the Almond Board of California (Board), which is responsible for local administration of the order. EFFECTIVE DATE: July 1, 1994. FOR FURTHER INFORMATION CONTACT: Kathleen M. Finn, Marketing Specialist, Marketing Order Administration Branch, Fruit and Vegetable Division, AMS, USDA, room 2523-S., P.O. Box 96456, Washington, DC 20090-6456; telephone: (202) 720-1509, or FAX (202) 720-5698, or Martin Engeler, Assistant Officer-in-Charge, California Marketing Field Office, Fruit and Vegetable Division, AMS, USDA, 2202 Monterey Street, Suite 102-B, Fresno, California 93721; (209) 487-5901, or FAX (209) 487-5906. SUPPLEMENTARY INFORMATION: This final rule is issued under Marketing Agreement and Order No. 981 (7 CFR part 981), both as amended, regulating the handling of almonds grown in California. The marketing agreement and order are authorized by 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 (Department) is issuing this rule in conformance with Executive Order 12866. This final rule has been reviewed under Executive Order 12778, Civil Justice Reform. This rule is not intended to have retroactive effect. This final rule will not preempt any State or local laws, regulations, or policies, unless they present an irreconcilable conflict with this rule. The Act provides that administrative proceedings must be exhausted before parties may file suit in court. Under section 8c(15)(A) of the Act, any handler subject to an order may file with the Secretary 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 requesting a modification of the order or to be exempted therefrom. A handler is afforded the opportunity for a hearing on the petition. After a hearing the Secretary 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 in equity to review the Secretary's ruling on the petition, provided a bill in equity is filed not later than 20 days after date of entry of the ruling. Pursuant to requirements set forth in the Regulatory Flexibility Act (RFA), the Administrator of the Agricultural Marketing Service (AMS) has considered the economic impact of this final rule on small entities. 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 rules issued thereunder, are unique in that they are brought about through group action of essentially small entities acting on their own behalf. Thus, both statutes have small entity orientation and compatibility. There are approximately 115 handlers of almonds that are subject to regulation under the marketing order and approximately 7,000 producers in the regulated area. Small agricultural producers have been defined by the Small Business Administration (13 CFR 121.601) as those having annual receipts of less than $500,000, and small agricultural service firms are defined as those whose annual receipts are less than $3,500,000. The majority of the almond producers and handlers may be classified as small entities. This rule revises Sec. 981.442--Subpart--Administrative Rules and Regulations and is based on a recommendation (by a 5-4 vote) of the Almond Board of California (Board) on May 11, 1993, and other available information. The processing of almonds involves various steps taken by growers and handlers prior to shipment to market. Initially, growers take their almonds to a huller/sheller operation where the hulls and shells are mechanically removed. The almonds are then delivered to a handler, who has the almonds inspected by the Federal-State Inspection Service. Through sampling procedures, the inspector determines the percentage of inedible almond kernels, as defined in Sec. 981.408, in each lot. Under the quality control provisions of the marketing order, handlers incur a disposition obligation of inedible almonds, based on the results of this inspection. The weight of inedible kernels in excess of 0 percent of the kernel weight determined by the inspection service constitutes the inedible disposition obligation. In order to meet this disposition obligation, handlers must deliver packer pickouts, kernels rejected in blanching, pieces of kernel, meal accumulated in manufacturing, or other material to crushers, feed manufacturers, feeders or dealers in nut wastes on record with the Board as accepted users. The Board maintains a list of approved accepted users, which includes feedlots and oil mills. Handlers must notify the Board at least 72 hours prior to delivery to an accepted user. The quality control provisions previously required that the almond meat content of the inedible shipments must be at least 10 percent of the shipment to the accepted user or it cannot be used as a credit against the handler's disposition obligation. Although there are no minimum grade requirements under the marketing order, USDA standards for almonds do exist and are widely used in the industry. The highest USDA standard allows for a tolerance of 1\1/2\ percent inedible almonds per container, based on an outgoing inspection. The standards recognize that handlers may not be able to separate 100% of the inedible nuts from the end product. However, the current quality control provisions under the marketing order require that handlers dispose of a quantity of almonds equal to 100% of the inedible obligation as determined by incoming inspections. When this was first implemented, it was thought that handlers could meet the disposition obligation by supplementing pickouts with material generated in handlers' processing operations (slicing, dicing, etc.). However, many handlers do not have a processing operation wherein excess almond material is generated. In order to meet their disposition obligation, they often purchase a mixture of almonds and foreign material such as hulls, shells, etc., mixed with a low percentage of almond meats from a hulling and/or shelling operation and mix it with their inedibles. These low percentage lots are usually disposed of to feedlots, whereas the higher meat percentage lots are usually disposed of to oil mills. The Board contends that the intent of the quality control provisions of the rules and regulations was not being met with these requirements. For the above-mentioned reasons, the Board recommended, by a 5 to 4 vote, that the base tolerance level be revised from 0 percent to 1 percent and that the minimum meat content for inedible deliveries available for credit be revised from 10 percent to 50 percent. The Board feels that these changes will better reflect current industry processing and marketing capabilities while maintaining the integrity of the quality control provisions of the marketing order. With a 1 percent tolerance, these changes are expected to enable handlers to pick out enough inedible material to satisfy their disposition obligations. Because the foreign material has already been removed in the hulling and shelling operation, the inedible portion of the shipments should most likely contain well over 50 percent meat content. Although it is likely these lots will be primarily sold to oil mills, those shipments with less than 50 percent meat content will also likely continue to go to accepted users, either directly from hullers and shellers or from handlers. However, handlers will not receive credit against their disposition obligation on shipments with less than 50 percent meat content. Handlers will no longer have to supplement their shipments with huller and sheller purchases because sufficient inedibles will be picked out by the handlers. The marketing of inedible almonds should not be affected by the changes. The members who voted against the recommendation were concerned that a negative perception might be projected by increasing the tolerance to 1 percent; i.e., that the industry is relaxing its quality requirements. The members believed that buyers may question the industry's commitment to quality control. They also felt that it may appear that the tolerance is being increased in order for the handlers to have more product to sell. For the reasons previously stated, the Board members in favor of this rule believed that the changed tolerance and minimum meat content requirement will improve the quality control program administered under the marketing order. The proposed rule was published in the Federal Register (58 FR 64175), on December 6, 1993. That rule provided a 30-day comment period which ended January 5, 1994. Two comments were received within the prescribed time period, and one comment was received late. The late comment cannot be considered. However, it was essentially the same as those received on a timely basis. The comments were all from independent almond handlers. The commenters supported the recommended changes but objected to the decision regarding the effective date of this rule, July 1, 1994. The first commenter stated that he relied on the original recommendation of the Board and planned his business operations for this crop year as if the recommendation was in effect. He believed that the recommendation was intended for the 1993 crop and the Board would reconsider the issue for the 1994 crop at an appropriate time. The second commenter stated, among other things, that he understood that the provisions on base tolerance for inedibles were designed to apply to conditions particular to a specific crop year. He further stated that handlers, in the past, have made operating decisions based on recommendations of the Board, such as reserve recommendations, even though the rule did not become final until later in the crop year. He believed that the intent of the Board was to have this recommendation effective in the 1993-94 crop year. He added that the failure to implement this recommendation in the current crop year could have serious financial implications for several handlers who have been operating on the assumption it would be effective for the 1993-94 crop year. Finally, he stated that most inedible shipments are more at the end of the crop year, thus implementing the rule in mid-year should not cause a problem for handlers. These commenters are correct that the Board recommended that this rule become effective in the 1993-94 crop year, which began on July 1, 1993. However, many factors were considered in the Department's decision to make this change effective beginning with the 1994-95 crop year. The vote on these recommendations was a divided 5 to 4 decision. The Department deemed it necessary to solicit comments from interested parties prior to implementing the rule. In addition, the required explanation and justification for the proposed changes was not received by the Department until after the 1993-94 crop year had begun. Thus, the Department was unable to complete this rulemaking proceeding prior to the beginning of the 1993-94 crop year. The Department also believes that making this change effective in the middle of a crop year would be difficult to administer fairly. It would be inequitable to handlers who disposed of inedible almonds during the early part of the crop year based on the 0 percent base tolerance because this action relaxes that tolerance to 1 percent. With this change, an additional 1 percent of almonds becomes available for sale on the open market. Also, dispositions made prior to the issuance of this rule would have been disallowed if they were below the 50 percent nut meat content. While it is true that the base tolerance for inedible dispositions is considered annually by the Board, the information received by the Department indicates that the recommended changes in the base tolerance and minimum nut meat content of the lots to be disposed of in satisfaction of inedible obligations should be treated as a package (not individually). The increase in the base tolerance relaxes handler requirements while the increase of the meat content tightens handler requirements, but together the two changes are intended to better reflect handler processing capabilities and improve the quality of almonds made available to consumers. Accordingly, handlers should be allowed ample time to modify their operations. With respect to the commenter's belief that the Board's recommendation was intended solely for the 1993-94 crop year, the recommendation was not limited to the 1993-94 crop year, but was presented as an overall improvement of the quality control provisions. For the reasons stated, the Department is making no changes based on these comments. Based on the above, the Administrator of the AMS has determined that this final rule will not have a significant economic impact on a substantial number of small entities. After consideration of the Board's recommendation, the comments received, and other relevant information, it is found that this final rule will tend to effectuate the declared policy of the Act. List of Subjects in 7 CFR 981 Almonds, Marketing agreements, Nuts, Reporting and recording requirements. For the reasons set forth in the preamble, 7 CFR Part 981 is amended as follows: PART 981--ALMONDS GROWN IN CALIFORNIA 1. The authority citation for 7 CFR Part 981 is revised to read as follows: Authority: 7 U.S.C. 601-674. 2. Section 981.442(a)(4) is amended by changing the words ``0 percent'' to read ``1 percent''. 3. Section 981.442(a)(5) is amended by changing the words ``10 percent'' to read ``50 percent''. Dated: March 16, 1994. Martha B. Ransom, Acting Deputy Director, Fruit and Vegetable Division. [FR Doc. 94-6653 Filed 3-21-94; 8:45 am] BILLING CODE 3410-02-P
