Almonds Grown in California; Revision to Requirements Regarding Inedible Almonds

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 981

[Docket No. FV97-981-3 FIR]

Almonds Grown in California; Revision to Requirements Regarding

Inedible Almonds

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: The Department of Agriculture (Department) is adopting, as a

final rule, without change, the provisions of an interim final rule

revising the administrative rules and regulations of the California

almond marketing order regarding inedible almonds. Under the terms of

the order, handlers are required to obtain inspection on almonds

received from growers to determine the percent of inedible almonds in

each lot of any variety. Handlers are then required to dispose of a

quantity of almonds in excess of 1 percent of the weight of almonds

reported as inedible to non-human consumption outlets. This rule allows

alternative methods of determining handlers' inedible disposition

obligations in such instances. It will add flexibility to the order's

rules and regulations and will help ensure that the integrity of the

quality control provisions is maintained.

EFFECTIVE DATE: October 27, 1997.

FOR FURTHER INFORMATION CONTACT: Martin Engeler, Assistant Regional

Manager, California Marketing Field Office, Marketing Order

Administration Branch, F&V, AMS, USDA, 2202 Monterey Street, suite

102B, Fresno, California 93721; telephone: (209) 487-5901, Fax: (209)

487-5906; or George Kelhart, Marketing Order Administration Branch,

Fruit and Vegetable Division, AMS, USDA, Room 2525-S, P.O. Box 96456,

Washington, DC 20090-6456; telephone: (202) 720-2491, Fax: (202) 720-

5698. Small businesses may request information on compliance with this

regulation by contacting Jay Guerber, Marketing Order Administration

Branch, F&V, AMS, USDA, room 2525-S, P.O. Box 96456, Washington, DC

20090-6456; telephone: (202) 720-2491, Fax: (202) 720-5698.

SUPPLEMENTARY INFORMATION: This rule is issued under Marketing Order

No. 981, as amended (7 CFR part 981), regulating the handling of

almonds grown in California, hereinafter referred to as the ``order.''

The marketing agreement and order are 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 (Department) is issuing this rule in

conformance with Executive Order 12866.

This rule has been reviewed under Executive Order 12988, Civil

Justice Reform. This rule is not intended to have retroactive effect.

This 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 608c(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 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 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 to review the Secretary's

ruling on the petition, provided an action is filed not later than 20

days after date of the entry of the ruling.

This rule revises the administrative rules and regulations of the

California almond order regarding inedible almonds. Under the terms of

the order, handlers are required to obtain inspection on almonds

received from growers to determine the percent of inedible almonds in

each lot of any variety. Handlers are then required to dispose of a

quantity of almonds in excess of 1 percent of the weight of almonds

reported as inedible to non-human consumption outlets. The quantity of

almonds required to be disposed of is the handler's inedible

disposition obligation. However, there are times when an incoming

inspection sample may not be drawn, may be lost, or the size of the

sample drawn may be too small for an inedible weight to be determined.

This rule provides handlers with the opportunity in such cases to

substantiate to the Board the weight of almonds received, the edible

and inedible kernel weights, and the adjusted kernel weight. Such

information can often be obtained from an outgoing inspection

certificate. The inedible disposition obligation may then be based on

that information. If a handler is only able to substantiate the

approximate weight of almonds received, an inedible disposition

obligation of 10 percent of the weight of almonds received in that

particular lot may be applied, upon agreement between Board staff and

the handler. The appropriate weight received can often be obtained from

a weighmaster's weight certificate. In adding these procedures to the

text of the rules and regulations, this rule will add flexibility to

the rules and regulations and will help ensure that the integrity of

the quality control provisions of the order is maintained. This change

was unanimously recommended by the Board.

Section 981.42(a) of the almond order requires handlers to obtain

incoming inspection on almonds received from growers to determine the

percent of inedible kernels in any variety. Handlers are required to

report such inedible determination for each lot received to the Board.

Inedible kernels are those kernels, pieces, or particles of kernels

with any defect scored as serious damage (excluding the presence of web

and frass), or damage due to mold, gum, shrivel, or brown spot, as

defined in the United States Standards for Grades of Shelled Almonds,

or which have embedded dirt not easily removed by washing. Edible

kernels are kernels, pieces, or particles of almond kernels that are

not inedible. Section 981.42(a) also provides authority for the Board,

with the approval of the Secretary, to establish rules and regulations

necessary and incidental to

[[Page 50240]]

the administration of the order's incoming quality control provisions.

Section 981.442(a)(4) of the order's administrative rules and

regulations specifies that the weight of inedible kernels in each lot

of any variety of almonds in excess of 1 percent of the kernel weight

received by a handler shall constitute such handler's inedible

disposition obligation. Inedible kernels accumulated in the course of

processing must be disposed of in non-human consumption outlets such as

Board approved oil crushers, feed manufacturers, and animal feeders.

Requiring handlers to meet this obligation helps to ensure that each

handler's outgoing shipments of almonds are relatively free of almonds

with serious damage, and the number of kernels with minor damage should

be minimal. Thus, the intent of the order's inedible program is to help

ensure that only quality almonds are ultimately shipped into market

channels.

At a meeting on May 9, 1997, the Board recommended that

Sec. 981.442 of the order's administrative rules and regulations be

revised to allow alternative methods of establishing handlers' inedible

disposition obligations in certain instances. The Board recommended

that this rule be in effect for the beginning of the 1997-98 crop year

which began on August 1, 1997.

Discussions at this and prior meetings of the Board's Quality

Control Committee indicated that a considerable amount of activity

occurs at handlers' facilities when handlers are receiving almonds from

growers. For example, handlers may be receiving, moving, processing,

and shipping several lots of almonds at a rapid pace. During this time,

incoming inspection for some lots of almonds may be inadvertently

missed due to the high level of activity. In addition, samples are

occasionally lost or the size of the samples drawn are too small for

kernel weight determinations. Board staff commented that there are

instances where handlers notice that an error was made and contact the

Board's staff in an effort to comply with the order's rules and

regulations. Board staff also indicated that this is not a large

problem but that it does occur occasionally.

Thus, the Board recommended that for any lot of almonds where a

sample is not drawn, is lost, or is too small for the kernel weight to

be determined, the handler may establish and substantiate, to the

Board's satisfaction, the weight of the almonds received, the edible

and inedible kernel weights, and the adjusted kernel weight. Adjusted

kernel weight means the actual gross weight of any lot of almonds less

the following: the weight of containers; moisture of kernels in excess

of 5 percent; shells (if applicable); processing loss of 1 percent for

deliveries with less than 95 percent kernels; and trash or other

foreign material. In such instances, the handler's inedible disposition

obligation will be based on that information. If the handler is only

able to establish and substantiate the approximate received weight, an

inedible disposition obligation of 10 percent of such received weight

may be applied, upon agreement between Board staff and the handler.

This change will add flexibility to the order and will help ensure

that the integrity of the order's quality control provisions is

maintained. The Board estimates that for the past 3 years, about 3.05

percent of the almonds received by handlers from growers were inedible.

Thus, the Board's recommended 10 percent disposition obligation for

lots of almonds where an inedible weight was not determined exceeds

historical averages. This should provide a disincentive for handlers to

purposely avoid inspection, while providing handlers an opportunity to

maintain compliance with order requirements.

Pursuant to requirements set forth in the Regulatory Flexibility

Act (RFA), 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

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 97 handlers of California almonds who are

subject to regulation under the marketing order and approximately 7,000

almond producers in the regulated area. Small agricultural service

firms have been defined by the Small Business Administration (13 CFR

121.601) as those having annual receipts of less than $5,000,000, and

small agricultural producers are defined as those having annual

receipts of less than $500,000.

Currently, about 58 percent of the handlers ship under $5,000,000

worth of almonds and 42 percent ship over $5,000,000 worth on an annual

basis. In addition, based on acreage, production, and grower prices

reported by the National Agricultural Statistics Service, and the total

number of almond growers, the average annual grower revenue is

approximately $156,000. In view of the foregoing, it can be concluded

that the majority of handlers and producers of California almonds may

be classified as small entities.

This rule revises the administrative rules and regulations of the

almond order regarding inedible almonds. Section 981.42(a) of the order

requires handlers to obtain inspection on almonds received from growers

to determine the percent of inedible almonds in each lot of any

variety. Section 981.42(a) also provides authority for the Board, with

the approval of the Secretary, to establish rules and regulations

necessary and incidental to the administration of the order's incoming

quality control provisions.

Under Sec. 981.442(a)(4) of the order's administrative rules and

regulations, handlers are required to dispose of a quantity of almonds

in excess of 1 percent of the weight of almonds reported as inedible in

non-human consumption outlets. However, there are times when a sample

may not be drawn, may be lost, or the size of the sample drawn may be

too small for an inedible kernel weight to be determined. This rule

revises Sec. 981.442(a)(4) to allow a handler's inedible disposition

obligation in such cases to be based on documentation provided by the

handler, to the satisfaction of Board staff. If sufficient

documentation is not available, an inedible disposition obligation of

10 percent of the received weight may be applied. This change adds

flexibility to the regulations while maintaining the integrity of the

order's quality control provisions. This rule was unanimously

recommended by the Board and will be in effect beginning with the 1997-

98 season which began on August 1, 1997.

Regarding the impact of this rule on handlers and growers in terms

of cost, providing handlers with the option of accepting an inedible

disposition obligation based on appropriate documentation or accepting

an obligation of 10 percent for lots where a sample was not drawn, was

lost, or was too small for an inedible weight to be determined are

options that will be made available to all handlers, both large and

small. Handlers receive lower prices for inedible almonds that must be

sold in non-human consumption outlets as opposed to edible almonds that

can be sold in normal market channels. For example, handlers receive

about 28-35 cents per pound for almonds used for crushing into oil and

about 2-3 cents per pound for almonds used for animal

[[Page 50241]]

feed. Price levels for sales of edible almonds to normal market outlets

vary significantly from year to year depending on available supplies

and market conditions and can range from $1.00-$3.00 per pound. If

inedible almonds were allowed to be sold in normal market channels,

consumer and buyer satisfaction would likely decrease because poor

quality almonds were being made available. Buyers would likely purchase

fewer almonds and demand for almonds would thus decline, which would in

turn decrease returns to growers and handlers, both large and small.

Thus, this rule will add flexibility to the rules and regulations

and help ensure that the integrity of the order's quality control

provisions is maintained. As previously mentioned, the Board estimates

that for the past 3 years, about 3.05 percent of the almonds received

by handlers from growers were inedible. The Board's recommended 10

percent disposition obligation for lots where an inedible weight was

not determined exceeds historical averages. This rule also provides

handlers an opportunity to maintain compliance with order requirements.

An alternative to this change would be to not incorporate these

options into the order's administrative rules and regulations. Thus, in

cases where an inedible disposition obligation was inadvertently not

obtained, such handlers would be considered to be out of compliance

with order requirements and subject to penalties under the Act.

However, the Board determined that it would be in the industry's best

interest to provide alternative methods of determining inedible

disposition obligations. This will allow handlers additional options in

the rules and regulations to remain in compliance with order

requirements and the integrity of the order's incoming quality control

program will still be maintained.

This rule will not impose any additional reporting or recordkeeping

requirements on either small or large almond handlers. As with all

Federal marketing order programs, reports and forms are periodically

reviewed to reduce information requirements and duplication by industry

and public sectors. In accordance with the Paperwork Reduction Act of

1995 (44 U.S.C. Chapter 35), the information collection requirements

that are contained in this rule have been previously approved by the

Office of Management and Budget (OMB) and have been assigned OMB No.

0581-0071. In addition, as noted in the initial regulatory flexibility

analysis, the Department has not identified any relevant Federal rules

that duplicate, overlap or conflict with this rule.

Further, the Board's meeting was widely publicized throughout the

almond industry and all interested persons were invited to attend the

meeting and participate in Board deliberations. Like all Board

meetings, the May 9, 1997, meeting was a public meeting and all

entities, both large and small, were able to express their views on

this issue.

Also, the Board has a number of appointed committees to review

certain issues and make recommendations to the Board. The Board's

Quality Control Committee met on April 23, 1997, and discussed this

inedible disposition obligation issue in detail. That meeting was also

a public meeting and both large and small entities were able to

participate and express their views. Finally, interested persons were

invited to submit information on the regulatory and information impacts

of this action on small businesses.

An interim final rule concerning this action was issued by the

Department on July 8, 1997, and published in the Federal Register on

July 14, 1997 (62 FR 37485). Copies of the rule were mailed or sent via

facsimile to all almond handlers. Finally, a copy of the rule was made

available through the Internet by the Office of the Federal Register.

No comments were received in response to the interim final rule.

After consideration of all relevant material presented, including

the Board's recommendation, and other information, it is found that

finalizing this interim final rule, without change, as published in the

Federal Register (62 FR 37485, July 14, 1997), will tend to effectuate

the declared policy of the Act.

List of Subjects in 7 CFR Part 981

Almonds, Marketing agreements, Nuts, Reporting and recordkeeping

requirements.

PART 981--ALMONDS GROWN IN CALIFORNIA

Accordingly, the interim final rule amending 7 CFR 981 which was

published at 62 FR 37485 on July 14, 1997, is adopted as a final rule

without change.

Dated: September 19, 1997.

Robert C. Keeney,

Director, Fruit and Vegetable Division.

[FR Doc. 97-25412 Filed 9-24-97; 8:45 am]

BILLING CODE 3410-02-P