Almonds Grown in California; Interhandler Transfers of Reserve Obligation

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 981

[Docket No. FV-97-981-2 PR]

Almonds Grown in California; Interhandler Transfers of Reserve

Obligation

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This proposal invites comments on implementing regulations to

authorize interhandler transfers of reserve obligations. This rule also

announces the Agricultural Marketing Service's (AMS) intention to

request a revision to the currently approved information collection

requirements issued under the marketing order. The almond marketing

order regulates the handling of almonds grown in California and is

administered locally by the Almond Board of California (Board). This

rule would allow the Board to implement authority contained in the

marketing order to authorize handlers to transfer reserve withholding

obligations to other handlers. It would provide handlers with an

additional option to satisfy reserve obligations. If implemented, this

rule would enhance the utility and flexibility of the volume control

regulations while benefiting producers, handlers, and consumers.

DATES: Comments must be received by June 9, 1997.

ADDRESSES: Interested persons are invited to submit written comments

concerning this proposal. Comments must be sent in triplicate to the

Docket Clerk, Fruit and Vegetable Division, AMS, USDA, room 2525-S,

P.O. Box 96456, Washington, DC 20090-6456, Fax (202) 720-5698. All

comments should reference the docket number and the date and page

number of this issue of the Federal Register and will be made available

for public inspection in the Office of the Docket Clerk during regular

business hours.

FOR FURTHER INFORMATION CONTACT: Kathleen M. Finn, Marketing

Specialist, Marketing Order Administration Branch, F&V, AMS, USDA, room

2530-S, P.O. Box 96456, Washington, DC 20090-6456; telephone: (202)

720-1509, Fax (202) 720-5698; or Martin Engeler, 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. 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 or Fax (202) 720-5698.

SUPPLEMENTARY INFORMATION: This proposal is issued under Marketing

Agreement and Order No. 981 (7 CFR part 981), both as amended,

regulating the handling of almonds grown in 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.''

The Department of Agriculture (Department) is issuing this rule in

conformance with Executive Order 12866.

This proposal has been reviewed under Executive Order 12988, Civil

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

This proposal 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 proposal invites comments on implementing regulations

authorizing interhandler transfers of reserve obligations. Sections

981.45 through 981.60 set forth the authority to implement volume

control regulations under the order by establishing salable and reserve

percentages of almonds. Annually, the Board meets to review projected

crop estimates and marketing conditions for the coming season.

Variations in production can cause wide fluctuations in prices. These

swings in supplies and price levels can result in market instability

and uncertainty for growers, handlers, buyers, and consumers.

If it is determined a reserve is warranted, the Board recommends to

the Secretary the salable and reserve percentages to be placed on the

almond crop. If a reserve is established, handlers are required to

refrain from selling to normal market outlets a quantity of almonds

equal to the reserve percentage. This percentage becomes the handlers'

reserve withholding obligation. Handlers must either maintain product

in inventory for possible release at a later date or dispose of product

to secondary reserve outlets to satisfy their reserve obligation. The

last season a reserve was in effect was during the 1994-95 crop year.

Section 981.55 of the order was amended by final order dated June

26, 1996 (61 FR 32917) to include a provision that allows handlers to

transfer reserve withholding obligation to other handlers. Prior to the

amendment to the order, Sec. 981.55 authorized only the transfer of

almonds (not reserve almonds) or reserve credits to other handlers.

Reserve credits are issued to handlers when they dispose of almonds to

secondary outlets in satisfaction of their reserve obligation. Handlers

can transfer excess credits to other handlers. The receiving handler

can use the credit to meet all or a portion of its reserve obligation.

This section of the order further states that the terms and conditions

implementing the provision must be recommended by the Board and

approved by the Secretary. Adding a third option by

[[Page 17570]]

amendment to the order was intended to provide more flexibility for

handlers in satisfying their reserve obligation.

At a Board meeting held on February 18, 1997, the Board unanimously

recommended implementing the third option under Section 981.55

concerning reserve withholding obligation transfers by making

appropriate changes to the rules and regulations. This proposal would

enhance the utility and flexibility of the volume control regulations.

It would provide handlers with an additional method of satisfying

reserve obligations.

Currently, Sec. 981.455 contains three paragraphs setting forth

rules and regulations regarding interhandler transfers of almonds.

These paragraphs set forth procedures for: (1) Transferring non-reserve

almonds; (2) transferring reserve credits; and (3) transferring

inedible almond obligations. The Board's proposal recommends adding a

new paragraph including procedures for transferring reserve withholding

obligations.

This rule would expand the options available to handlers in the

event a reserve is implemented. The ability to transfer reserve

obligations would particularly benefit those handlers who do not stay

in business all year and do not have facilities for storage of reserve

almonds. Such handlers are traditionally the smaller handlers in the

industry. Storage and other costs associated with maintaining reserve

inventory or disposing of product to secondary outlets could be

reduced. This rule would provide another option for handlers to choose

from in satisfying their reserve obligations that may better suit their

operation.

The objective of the reserve provisions is to keep a certain

quantity of almonds off the market in order to maintain market

stability. The additional flexibility in the reserve provisions is

expected to improve compliance among handlers, which in turn would

maintain the integrity of the volume control regulations.

In order to ensure that adequate procedures are in place to monitor

transfer of reserve obligations among handlers, the Board recommended

modifying ABC Form 11 which currently covers interhandler transfers of

reserve credits. New information would be added to the form to properly

document reserve obligation transfers. Almond handlers wanting to

transfer their reserve obligation to another handler would complete one

portion of revised Form 11 and forward the form to the receiving

handler. The receiving handler would complete their portion of the form

and submit it to the Board. Authorized Board personnel would review,

and if appropriate, approve the transfer. The Board would then submit

copies of the forms to involved parties.

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 initial 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 million

of almonds and 42 percent ship over $5 million 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.

Sections 981.45 through 981.60 of the almond marketing order

provide authority to implement volume control regulations by

establishing salable and reserve percentages of almonds. If it is

determined a reserve is warranted, the Board recommends to the

Secretary the salable and reserve percentages to be placed on the

almond crop. If a reserve is established, handlers are required to not

sell to normal market outlets a quantity of almonds equal to the

reserve percentage. Handlers must either maintain product in inventory

for possible release at a later date or dispose of product to lower

value reserve outlets to satisfy their reserve obligation. These lower

value outlets are primarily crushing for oil and animal feed.

Section 981.55 of the order provides authority for the interhandler

transfer of almonds and reserve credits. This section was recently

amended to include authority for interhandler transfer of reserve

obligations. This proposed rule would implement the authority to

transfer reserve withholding obligations by revising Sec. 981.455 of

the administrative rules and regulations accordingly. This proposal

would provide another option, in addition to those that appear in that

section, for handlers to satisfy their reserve obligations. The ability

to transfer reserve obligations would particularly benefit those

handlers who do not stay in business all year and do not have

facilities for storage of reserve almonds. Such handlers are

traditionally the smaller handlers in the industry. Storage and other

costs associated with maintaining reserve inventory or disposing of

product to secondary outlets could be reduced. This rule would provide

another option for handlers to choose from in satisfying their reserve

obligations that may better suit their operation.

In past years, handlers either had to maintain product in inventory

or dispose of it in approved reserve outlets to satisfy their

withholding obligation, as discussed earlier. Those handlers choosing

to maintain product in inventory must locate storage facilities and

incur storage costs they may not otherwise incur, until the reserve is

lifted. Storage costs vary, depending upon factors such as the type of

facilities utilized and quantities involved. These costs are generally

in the range of one cent per pound per month, with additional charges

for moving product into and out of storage facilities. These costs

could be incurred for approximately six months to a year and a half

depending on the ultimate disposition of the reserve.

Those handlers choosing to dispose of their reserve to approved

outlets may save on storage costs, but receive a lower return on the

sales than they may receive if sold in normal market channels if the

reserve is ultimately released. Price levels for almonds used for

crushing into oil are in the range of 28 to 35 cents per pound, while

animal feed brings about two to three cents per pound. Price levels for

sales to normal market outlets vary significantly from year to year

depending on available supplies and market conditions. The additional

option that would be provided by this proposal would allow handlers to

make arrangements to transfer their reserve obligation to other

handlers. Handlers could choose the most cost effective method of

satisfying

[[Page 17571]]

their reserve obligations that best suits their operations. This

proposed rule would provide more flexibility if volume control

regulations under the almond marketing order are issued.

A current form is being revised for handlers to supply the transfer

information to the Board for its approval. The current form (ABC Form

11) provides for handlers to transfer reserve credits. Information

would be added to this form to collect information on transfers of

withholding obligation. No additional burden would be added to the form

because handlers would choose one of the options on the form. The forms

current burden time of 5 minutes would not be changed. This action

would not impose any significant additional reporting or recordkeeping

requirements on either small or large almond handlers. The benefits of

providing another tool to the industry to assist them in making

business decisions far outweigh the estimated 5 minutes it would take

to complete the form. Further, any additional reporting may be offset

by reduced reporting for those handlers choosing to utilize this option

in lieu of other options available for satisfying reserve obligations.

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.

The Department has not identified any relevant Federal rules that

duplicate, overlap or conflict with this proposed rule. Information

generated by State, Federal, and private sector reports pertains to

almonds in general and does not contain specific producer and handler

information. Therefore, such information would not be detailed enough

to be used for the specific purposes required under the order.

The amendment to the marketing order was voted on in a referendum

and was overwhelmingly supported by almond growers. This proposal would

establish procedures to implement the amendment that authorized

transfers of reserve obligations. There are no alternatives that would

result in the additional flexibility sought by the industry.

In addition, the Board's meeting was widely publicized throughout

the almond industry and all interested persons were invited to attend

the meeting and participate in committee deliberations on all issues.

Like all Board meetings, the February 18, 1997, meeting was a public

meeting and all entities, both large and small, were able to express

views on this issue. The Board itself is composed of ten members, of

which five are handlers and five are growers, the majority of whom are

small entities. Finally, interested persons are invited to submit

information on the regulatory and informational impacts of this action

on small businesses.

Paperwork Reduction Act

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.

Chapter 35), the AMS announces its intention to request a revision to a

currently approved information collection for almonds grown in

California.

Title: Almonds Grown in California, Marketing Order 981.

OMB Number: 0581-0071.

Expiration Date of Approval: August 31, 1999.

Type of Request: Intent to extend and revise a currently approved

information collection.

Abstract: The information collection requirements in this request

are essential to carry out the intent of the AMAA, to provide the

respondents the type of service they request, and to administer the

California almond marketing order program, which has been operating

since 1950.

Several provisions of the marketing order were amended as a result

of extensive formal rulemaking proceedings, including a referendum of

growers. Section 981.55 of the Order was amended to authorize handlers

to transfer reserve withholding obligations during the effective period

of a reserve. On February 18, 1997, the Board unanimously recommended

implementing accompanying regulations to correspond with this

amendment. This notice entails modifying ABC Form 11, which covers

reserve credit transfers, to include transfers of reserve withholding

obligation.

Handlers are already required to complete the form only during

reserve years if they transfer reserve credits. This modification would

authorize another option for handlers to dispose of their reserve

obligation. This rule would necessitate adding data to this form

requiring information from handlers on reserve obligation transfers.

Almond handlers wanting to transfer their reserve obligation to another

handler would complete their portion of the revised ABC Form 11. The

initiating handler would forward the partially completed Form 11 to the

handler agreeing to assume the obligation. When the receiving handler

completes their portion of the form, it would transfer the form to

authorized Board personnel for approval of the transfer. Following the

authorization, the transfer would be deemed complete. Only handlers

wanting to transfer reserve or reserve credits would be required to

complete the form.

The information collected is used only by authorized

representatives of the USDA, including AMS, Fruit and Vegetable

Division regional and headquarters staff, and authorized employees of

the Board. Authorized Board employees and the industry are the primary

users of the information and AMS is the secondary user.

Estimate of Burden: Public reporting burden for this collection of

information is estimated to average 0.083 hours per response.

Respondents: California almond growers, handlers and accepted users

of inedible almonds.

Estimated Number of Respondents: 7,658.

Estimated Number of Responses per Respondent: 6,022.

Estimated Total Annual Burden on Respondents: 2,512 hours.

Comments: Comments are invited on: (1) Whether the proposed

collection of information is necessary for the proper performance of

the functions of the agency, including whether the information will

have practical utility; (2) the accuracy of the agency's estimate of

the burden of the proposed collection of information, including the

validity of the methodology and assumptions used; (3) ways to enhance

the quality, utility, and clarity of the information to be collected;

and (4) ways to minimize the burden of the collection of information on

those who are to respond, including through the use of appropriate

automated, electronic, mechanical, or other technological collection

techniques or other forms of information technology.

Comments should reference OMB No. 0581-0071 and the California

Almond Marketing Order No. 981, and be sent to USDA in care of Kathleen

Finn at the address above. All comments received will be available for

public inspection during regular business hours at the same address.

All responses to this notice will be summarized and included in the

request for OMB approval. All comments will also become a matter of

public record.

A 60-day comment period is provided to allow interested persons to

respond to this proposal.

List of Subjects in 7 CFR Part 981

Almonds, Marketing agreements, Nuts, Reporting and recordkeeping

requirements.

[[Page 17572]]

For the reasons set forth in the preamble, 7 CFR part 981 is

proposed to be amended as follows:

PART 981--ALMONDS GROWN IN CALIFORNIA

1. The authority citation for 7 CFR part 981 continues to read as

follows:

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

Sec. 981.455 [Amended]

2. In Sec. 981.455, paragraph (c) is redesignated as paragraph (d)

and a new paragraph (c) is proposed to be added to read as follows:

Sec. 981.455 Interhandler transfers.

* * * * *

(c) Transfers of reserve withholding obligation. A handler may

transfer reserve withholding obligation to other handlers pursuant to

Sec. 981.55 after having filed with the Board an ABC Form 11 executed

by both handlers. The Board shall approve the transfer upon receipt of

the properly completed form.

* * * * *

Dated: April 4, 1997.

Sharon Bomer Lauritsen,

Deputy Director, Fruit and Vegetable Division.

[FR Doc. 97-9187 Filed 4-9-97; 8:45 am]

BILLING CODE 3410-02-P