Almonds Grown in California; Revision of Requirements Regarding Quality Control Program

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 981

[Docket No. FV98-981-1 FR]

Almonds Grown in California; Revision of Requirements Regarding

Quality Control Program

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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

SUMMARY: This rule revises the administrative rules and regulations of

the California almond marketing order (order) pertaining to the quality

control program. The order regulates the handling of almonds grown in

California, and is administered locally by the Almond Board of

California (Board). 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 accepted users

of such product. Accepted users are approved annually by the Board.

This rule clarifies conditions upon which accepted users' status may be

denied or revoked by the Board. This rule will help to ensure that

inedible almonds are removed from human consumption channels, thereby

maintaining the integrity of the quality control provisions of the

order.

EFFECTIVE DATE: This final rule becomes effective August 6, 1998.

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, Technical Advisor, Marketing Order

Administration Branch, Fruit and Vegetable Programs, AMS, USDA, room

2525-S, PO Box 96456, Washington, DC 20090-6456; telephone: (202) 720-

2491, Fax: (202) 205-6632. 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, PO Box 96456,

Washington, DC 20090-6456; telephone: (202) 720-2491, Fax: (202) 205-

6632.

SUPPLEMENTARY INFORMATION: This final 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 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 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 final rule revises the administrative rules and regulations

pertaining to a quality control program under the California almond

order. This rule was unanimously recommended by the Board, and

clarifies conditions under which the Board may deny or revoke the

status of accepted users of inedible almonds.

Section 981.42 of the order provides authority for a quality

control program. Section 981.42(a) requires handlers to obtain incoming

inspection on almonds received from growers to determine the percent of

inedible kernels in each lot of any variety. Handlers are required to

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

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 quality control

provisions.

Section 981.442 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. Handlers are required to deliver inedible kernels

accumulated in the course of processing to Board-approved accepted

users of such product in order to satisfy the disposition obligation.

Accepted users then dispose of inedible kernels to non-human

consumption outlets. Because inedible kernels are considered unfit for

human consumption, 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.

Accepted users of inedible almonds file an application with the

Board specifying certain terms and conditions with which they will

voluntarily abide. The application also indicates they will dispose of

the inedible almonds received from handlers in one or more of the

following manners: crushing into oil; manufacturing into animal feed;

or feeding directly to animals. The Board staff reviews and approves

accepted user applications on an annual basis.

Section 981.442(a)(7) of the rules and regulations lists

eligibility criteria for accepted users. These criteria are applied by

the Board when reviewing and approving accepted users. However, the

regulations do not specifically address when the Board may deny or

revoke accepted user status. Situations

[[Page 41710]]

have occurred in the past wherein accepted users have failed to

completely meet these conditions, and the Board could not be assured

the inedible almonds were being disposed of in non-human consumption

outlets.

The Board met on March 25, 1998, and unanimously recommended adding

language to Sec. 981.442(a)(7) of the administrative rules and

regulations stating that an accepted user's status may be denied or

revoked if the eligibility requirements are not met or if the terms and

conditions agreed to in the accepted user application are not met. The

Board recommended that this change be made effective by the beginning

of the crop year (August 1, 1998), or as soon as possible thereafter,

so that this action coincides with the approval cycle for accepted user

applications.

This change provides a clear foundation of understanding between

the Board, handlers, and accepted users. This action will assist in

maintaining the integrity of the Board's quality control program by

providing clear authority to deny or revoke accepted user status. This

will help to ensure inedible almonds are properly disposed of in non-

human consumption outlets, which is in the interest of producers,

handlers, and consumers.

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 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.

There are currently 23 accepted users of inedible almonds approved

by the Board. Accepted users may enter into a voluntary agreement with

the Board to function as an outlet to which handlers can ship inedible

almonds to satisfy an order obligation. While data concerning these

entities is limited, based on a review of the quantity of inedible

almonds delivered to each entity, it is believed that the majority may

be classified as small entities.

This rule revises the quality control provisions of the

administrative rules and regulations issued under the California almond

order. 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 accepted users of such

product. Accepted users are approved annually by the Board.

Section 981.442(a)(7) of the order's administrative rules and

regulations provides criteria which accepted users must meet. This rule

revises this section to specify that an accepted user's status may be

denied or revoked if the criteria are not met. This rule will help

maintain the integrity of the Board's quality control program.

This change is not expected to impact handlers, other than to

clarify to them that an accepted user's status may be denied or

revoked. Handlers are provided a listing of approved accepted users so

they know who they can deliver inedible material to and receive credit

against their obligation. In the event an application for accepted user

status is denied or an accepted user's status is revoked, handlers will

be notified by Board staff and provided an updated listing.

This rule only impacts applicants for accepted user status, or

accepted users in the sense that it clarifies that accepted user status

may be denied or revoked if the terms and conditions set forth in the

rules and regulations and the accepted user application are not met.

Accepted users are approved entities to which handlers may deliver

inedible almonds and receive credit against their inedible disposition

obligation. Accepted users voluntarily agree to meet certain terms and

conditions so the Board may be assured that inedible almonds do not

enter human consumption channels. If these dealers in inedible almonds

do not agree to the terms and conditions, they are not approved by the

Board. However, they may still operate in the business, although

handlers do not receive credit against their inedible disposition

obligation if they deliver product to such non-approved entities.

Situations have occurred in the past wherein accepted users have failed

to completely meet these conditions, and the Board could not be assured

the inedible almonds were being disposed of in non-human consumption

outlets.

One alternative to this rule would be to maintain the regulatory

language as it currently exists, in which case there would be no

clarification. Another alternative would be to specify at length all

possible reasons for denying or revoking an accepted user's status. The

first alternative fails to address the issue, and the second would

require unnecessary lengthy additions to regulatory language, and may

be incomplete.

This rule imposes no 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 sector agencies. 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 approved by the

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

0581-0071. Finally, the Department has not identified any relevant

Federal rules that duplicate, overlap or conflict with this rule.

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 Board deliberations. Like all Board

meetings, the March 25, 1998, meeting was a public meeting and all

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

this issue. The Board itself is composed of 10 members, of which 5 are

producers and 5 are handlers.

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 February 25, 1998,

[[Page 41711]]

and discussed this issue. That meeting was also a public meeting and

both large and small entities were able to participate and express

their views.

A proposed rule concerning this action was published in the Federal

Register on June 17, 1998 (63 FR 33010). Copies of the rule were mailed

to all Board members and almond handlers. Finally, the rule was made

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

30-day comment period ending July 17, 1998, was provided to allow

interested persons to respond to the proposal.

One comment was received in response to the proposed rule. The

commenter, a marketing cooperative representing California almond

growers, supported the proposal. The commenter believes that denying or

revoking accepted user status is the principal method that the Board

has to ensure that only users that dispose of inedible almonds in

proper channels are approved by the Board.

After consideration of all relevant matter presented, including the

information and recommendation submitted by the Board, the comment

received, and other available information, it is hereby found that this

rule, as hereinafter set forth, will tend to effectuate the declared

policy of the Act.

It is further found that good cause exists for not postponing the

effective date of this rule until 30 days after publication in the

Federal Register (5 U.S.C. 553) because the beginning of the 1998-99

crop year is August 1, 1998, and the rule needs to be in effect as soon

as possible so this action coincides with the approval cycle for

accepted user applications. Further, handlers are aware of this rule,

which was recommended at a public meeting. Also, a 30-day comment

period was provided for in the proposed rule, and one comment was

received which supported the change.

List of Subjects in 7 CFR Part 981

Almonds, Marketing agreements, Nuts, Reporting and recordkeeping

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 continues to read as

follows:

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

2. Section 981.442 is amended by adding a new paragraph (a)(7)(iv)

to read as follows:

Sec. 981.442 Quality Control.

(a) * * *

(7) * * *

(iv) The Board may deny or revoke accepted user status at any time

if the applicant or accepted user fails to meet the terms and

conditions of Sec. 981.442, or if the applicant or accepted user fails

to meet the terms and conditions set forth in the accepted user

application (ABC Form 34).

* * * * *

Dated: July 30, 1998.

Robert C. Keeney,

Deputy Administrator, Fruit and Vegetable Programs.

[FR Doc. 98-20913 Filed 8-4-98; 8:45 am]

BILLING CODE 3410-02-P