Filberts/Hazelnuts Grown in Oregon and Washington; Recommended Decision on Proposed Further Amendment of Marketing Agreement and Order No. 982

Part IV

Department of Agriculture

_______________________________________________________________________

Agricultural Marketing Services

_______________________________________________________________________

7 CFR Part 982

Filberts/Hazelnuts Grown in Oregon and Washington; Recommended Decision

on Proposed Further Amendment of Marketing Agreement and Order No. 982;

Proposed Rule

Proposed Rules

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 982

[Docket No. AO-205-A7; FV94-982-1]

Filberts/Hazelnuts Grown in Oregon and Washington; Recommended

Decision on Proposed Further Amendment of Marketing Agreement and Order

No. 982

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule and opportunity to file exceptions.

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SUMMARY: This recommended decision invites written exceptions on

proposed amendments to Marketing Agreement and Order No. 982 (order).

The agreement and order regulate the handling of filberts/hazelnuts

grown in Oregon and Washington. The proposed amendments would make

changes in order provisions regarding: Volume control; nomination and

membership of the Filbert/Hazelnut Marketing Board (Board); collecting

assessments; and the administration and operation of the program. The

proposed amendments were submitted by the Board to make the order more

consistent with current industry conditions and needs. The Fruit and

Vegetable Division, Agricultural Marketing Service (AMS), is proposing

conforming and other necessary changes. The proposed amendments are

designed to improve order operations.

DATES: Written exceptions must be filed by July 7, 1995.

of the program. The

proposed amendments were submitted by the Board to make the order more

consistent with current industry conditions and needs. The Fruit and

Vegetable Division, Agricultural Marketing Service (AMS), is proposing

conforming and other necessary changes. The proposed amendments are

designed to improve order operations.

DATES: Written exceptions must be filed by July 7, 1995.

ADDRESSES: Written exceptions should be filed with the Hearing Clerk,

U.S. Department of Agriculture, room 1081-S, Washington, D.C. 20050-

9200, FAX (202) 720-9776. Four copies of all written exceptions should

be submitted and should reference the docket number and the date and

page number of this issue of the Federal Register. Exceptions will be

made available for public inspection in the Office of the Hearing Clerk

during regular business hours.

FOR FURTHER INFORMATION CONTACT: Teresa Hutchinson, Marketing

Specialist, Northwest Marketing Field Office, Fruit and Vegetable

Division, Agricultural Marketing Service, USDA, 1220 SW Third Ave.,

room 369, Portland, OR 97204; telephone (503) 326-2724, FAX (503) 326-

7440; or Tom Tichenor, Marketing Order Administration Branch, Fruit and

Vegetable Division, AMS, USDA, room 2523-S, P.O. Box 96456, Washington,

D.C. 20090-6456; telephone: 202-720-6862; FAX 202-720-5698.

SUPPLEMENTARY INFORMATION: Prior documents in this proceeding: Notice

of Public Hearing issued on February 24, 1994, and published in the

February 28, 1994, issue of the Federal Register (59 FR 9425).

This administrative action is governed by the provisions of

sections 556 and 557 of title 5 of the United States Code, and,

therefore, is excluded from the requirements of Executive Order 12866.

Preliminary Statement

ON: Prior documents in this proceeding: Notice

of Public Hearing issued on February 24, 1994, and published in the

February 28, 1994, issue of the Federal Register (59 FR 9425).

This administrative action is governed by the provisions of

sections 556 and 557 of title 5 of the United States Code, and,

therefore, is excluded from the requirements of Executive Order 12866.

Preliminary Statement

Notice is hereby given of the filing with the Hearing Clerk of this

recommended decision with respect to the proposed further amendment of

Marketing Agreement and Order No. 982 and of the opportunity to file

written exceptions thereto. For the purposes of this document and this

formal rulemaking proceeding, Marketing Agreement and Order No. 982 is

referred to as the ``order'' and the term filberts and filberts/

hazelnuts is hereinafter referred to as hazelnuts. Copies of this

decision may be obtained from Teresa Hutchinson or Tom Tichenor, at the

addresses listed above.

This notice is issued pursuant to the provisions of the

Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601

et seq.), hereinafter referred to as the ``Act,'' and the applicable

rules of practice and procedure governing the formulation of marketing

agreements and orders (7 CFR part 900).

The proposed further amendment of the order is based on the record

of a public hearing held in Newberg, Oregon, on March 8, 1994. Notice

of this hearing was published in the Federal Register on February 28,

1994. The notice of public hearing listed 12 proposals submitted by the

Board, the agency responsible for local administration of the order,

and one proposal by the Fruit and Vegetable Division (Division), of the

Agricultural Marketing Service (AMS), U.S. Department of Agriculture

(Department), concerning conforming changes

of this hearing was published in the Federal Register on February 28,

1994. The notice of public hearing listed 12 proposals submitted by the

Board, the agency responsible for local administration of the order,

and one proposal by the Fruit and Vegetable Division (Division), of the

Agricultural Marketing Service (AMS), U.S. Department of Agriculture

(Department), concerning conforming changes.

The proposals would: (1) Change the name of the commodity covered

under the order from ``filberts'' to ``hazelnuts;'' (2) for purposes of

volume regulation, establish the trade demand area as the entire United

States and allow the Board, with the Secretary's approval, to make

changes in the inshell trade acquisition distribution area; (3) change

the length of Board members' terms of office and the number of

consecutive terms that may be held, make changes in the criteria used

for nominating handler members and for weighting handler votes when

electing handler nominees, and change the voting procedures used for

nominating members; (4) allow Board telephone votes to remain

unconfirmed until the next public Board meeting; (5) remove the

``verbatim'' reporting requirement on Board marketing policy meetings;

(6) provide the Board with some flexibility in recommending final free

and restricted percentages; (7) authorize different identification

standards for inspected and certified hazelnuts; (8) correct current

language that specifies handler credit for ungraded hazelnuts; (9)

change the procedures for establishing bonding requirements for

deferred restricted obligations and allow the Board to purchase excess

restricted credits from handlers; (10) clarify that mail order sales

outside the production area are not exempt from order requirements;

(11) allow the Board to accept advance assessment payments, provide

discounts for such payments, and accept voluntary contributions; and

cedures for establishing bonding requirements for

deferred restricted obligations and allow the Board to purchase excess

restricted credits from handlers; (10) clarify that mail order sales

outside the production area are not exempt from order requirements;

(11) allow the Board to accept advance assessment payments, provide

discounts for such payments, and accept voluntary contributions; and

(12) make such changes as are necessary to conform with any amendment

that may result from the hearing.

The public hearing was held to: (1) Receive evidence about the

economic and marketing conditions which relate to the proposed

amendments of the order; (2) determine whether there is a need for the

proposed amendments to the order; and (3) determine whether the

proposed amendments, or appropriate modifications thereof, will tend to

effectuate the declared policy of the Act.

No person testified in opposition to the proposals offered at the

hearing and no alternative proposals were offered.

At the conclusion of the hearing, the administrative law judge

fixed April 8, 1994, as the final date for interested persons to file

corrections to the hearing transcript, proposed findings and

conclusions, and written arguments or briefs based on the evidence

received at the hearing. Corrections to the hearing transcript were

filed by the Division with the Hearing Clerk on April 5, 1994. No other

corrections, findings, conclusions, arguments or briefs were filed.

Small Business Considerations

r interested persons to file

corrections to the hearing transcript, proposed findings and

conclusions, and written arguments or briefs based on the evidence

received at the hearing. Corrections to the hearing transcript were

filed by the Division with the Hearing Clerk on April 5, 1994. No other

corrections, findings, conclusions, arguments or briefs were filed.

Small Business Considerations

In accordance with the provisions of the Regulatory Flexibility Act

(RFA) (5 U.S.C. 601 et seq.), the Administrator of the AMS has

determined that this action would not have a significant economic

impact on a substantial number of small entities. Small agricultural

service firms, which include handlers regulated under this order, have

been defined by the Small Business Administration (SBA) (13 CFR

121.601) as those having annual receipts for the last three years of

less than $5,000,000. Small agricultural producers are

defined as those having annual receipts of less than $500,000.

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. Interested persons were

invited to present evidence at the hearing on the probable regulatory

and informational impact of the proposed amendments on small

businesses. The record indicates that handlers would not be unduly

burdened by any additional regulatory requirements, including those

pertaining to reporting and recordkeeping, that might result from this

proceeding. The record also indicates that a majority of handlers and

producers would meet the SBA definitions of small agricultural service

firms and small agricultural producers, respectively.

During the 1993-94 marketing year, approximately 25 handlers were

regulated under the order. In addition, there were approximately 950

producers of hazelnuts in the production area. The Act requires the

application of uniform rules on regulated handlers

of handlers and

producers would meet the SBA definitions of small agricultural service

firms and small agricultural producers, respectively.

During the 1993-94 marketing year, approximately 25 handlers were

regulated under the order. In addition, there were approximately 950

producers of hazelnuts in the production area. The Act requires the

application of uniform rules on regulated handlers. Since handlers

covered under the order are predominantly small businesses, the order

itself is tailored to the size and nature of small businesses.

Marketing orders and amendments thereto, are unique in that they are

normally brought about through group action of essentially small

entities for their own benefit. Thus, both the RFA and the Act are

compatible with respect to small entities.

For discussion of the anticipated impact on small businesses, the

proposed amendments have been grouped into programmatic categories.

Amendments concerning the order's marketing and volume control programs

would: Change the name of the commodity to ``hazelnuts'' (Sec. 982.4);

add the State of Hawaii to the trade demand area and allow the Board to

make changes in the trade demand area, with the approval of the

Secretary (Sec. 982.16); provide the Board the flexibility to release

up to 15 percent of the average three year inshell trade acquisitions

for desirable carryout (Sec. 982.40); correct the current language that

determines handler credit for ungraded hazelnuts (Sec. 982.51);

establish the bonding rate for deferred restricted obligations at the

estimated value of restricted credits for the current marketing year

and allow the Board to use defaulted bond payments to purchase excess

restricted credits (Sec. 982.54); and clarify that mail order sales are

not exempt from order requirements (new Sec. 982.57). These proposed

amendments are designed to assist the Board in its domestic and export

marketing efforts

ricted obligations at the

estimated value of restricted credits for the current marketing year

and allow the Board to use defaulted bond payments to purchase excess

restricted credits (Sec. 982.54); and clarify that mail order sales are

not exempt from order requirements (new Sec. 982.57). These proposed

amendments are designed to assist the Board in its domestic and export

marketing efforts. The amendments would allow the Board to make program

and management decisions that are more consistent with changing market

conditions and better respond to changing marketing needs. Because the

Board acts in the best interests of the industry, increased Board

decision making flexibility should benefit the industry and, thus,

small businesses in the industry.

Regarding nomination and Board membership, the proposed amendments

would: Change from one to two years the length of Board member and

alternate member terms of office (Sec. 982.33); limit the number of

consecutive terms members and alternate members may hold to three two-

year terms (Sec. 982.33); and make conforming changes and a correction

in the qualifications for nominating members (Secs. 982.30 and 982.32).

The amendments are proposed to ease the burden of conducting nomination

meetings every year and enhance the Board's efficiency. The amendments

are administrative in nature and would not impose additional costs on

small businesses.

Other recommended amendments to the order's administrative

procedures and operations would: Allow Board telephone votes to remain

unconfirmed in writing until the next public Board meeting

(Sec. 982.37); remove the ``verbatim'' reporting requirement on Board

marketing policy meetings (Sec. 982.39); allow the Board to accept

advance assessment payments and provide discounts for such payments

(Sec. 982.61); and allow the Board to accept voluntary contributions

(new Sec. 982.63)

ould: Allow Board telephone votes to remain

unconfirmed in writing until the next public Board meeting

(Sec. 982.37); remove the ``verbatim'' reporting requirement on Board

marketing policy meetings (Sec. 982.39); allow the Board to accept

advance assessment payments and provide discounts for such payments

(Sec. 982.61); and allow the Board to accept voluntary contributions

(new Sec. 982.63). These proposed amendments are intended to improve

the operations of the Board, lessen the administrative burden on Board

members and staff, and improve management of the order's financial

resources. As such, the proposed changes would have negligible, if any,

economic impact on small entities.

Finally, one amendment would provide the Board with the authority

to establish more up-to-date identification standards (Sec. 982.46),

which would make order identification and certification provisions

consistent with current industry practices and enable handlers more

flexibility in meeting identification requirements.

All of these changes are designed to enhance the administration and

functioning of the order and benefit the entire industry. Any added

costs are not expected to be significant because the benefits of the

proposed amendments are expected to outweigh the costs. Finally, the

proposed amendments would have no significant impact or burden on small

businesses' recordkeeping and reporting requirements.

The amendments proposed herein have been reviewed under Executive

Order 12778, Civil Justice Reform and are not intended to have

retroactive affect. If adopted, the proposed amendments would not

preempt any state or local laws, regulations, or policies, unless they

present an irreconcilable conflict with the amendments.

The Act provides that administrative proceedings must be exhausted

before parties may file suit in court

ave been reviewed under Executive

Order 12778, Civil Justice Reform and are not intended to have

retroactive affect. If adopted, the proposed amendments would not

preempt any state or local laws, regulations, or policies, unless they

present an irreconcilable conflict with the amendments.

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 requesting 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 in equity to review the

Secretary's ruling on the petition, provided a bill in equity is filed

not later than 20 days after the date of the entry of the ruling.

In accordance with the Paperwork Reduction Act of 1980 (44 U.S.C.

Chapter 35), any additional reporting and recordkeeping requirements

that might result from the proposed amendments would be submitted to

the Office of Management and Budget (OMB). The provisions would not be

effective until after receiving OMB approval.

Material Issues

The material issues of record addressed in this decision are:

(1) Whether to change the name of the commodity from ``filberts''

to ``hazelnuts;''

nal reporting and recordkeeping requirements

that might result from the proposed amendments would be submitted to

the Office of Management and Budget (OMB). The provisions would not be

effective until after receiving OMB approval.

Material Issues

The material issues of record addressed in this decision are:

(1) Whether to change the name of the commodity from ``filberts''

to ``hazelnuts;''

(2) whether the inshell trade acquisition (trade demand)

distribution area should be expanded to include the entire United

States; whether the Board, with the approval of the Secretary, should

be allowed to make changes in the trade demand distribution area; and,

whether inshell hazelnuts shipped to export markets should be

restricted from importation into all trade demand distribution areas;

(3) whether to extend the length of Board members' and alternate

members' terms of office to two years, limit the number

of consecutive terms which may be held to three two-year terms, make

conforming changes to the qualifications for nominating members, make a

correction in the weighting of handler votes, and clarify voting

procedures;

(4) whether Board telephone votes should remain unconfirmed in

writing until the next public Board meeting;

(5) whether to remove the ``verbatim'' reporting requirement on

Board marketing policy meetings;

(6) whether the Board should have additional flexibility in

recommending final free and restricted percentages;

(7) whether to provide the Board with the authority, subject to the

approval of the Secretary, to establish different identification

standards for inspected and certified hazelnuts;

(8) whether to correct the factor used to convert kernel weight to

inshell equivalent weight when calculating the volume of hazelnuts

withheld for restricted credit;

(9) whether the Board should use the estimated value of restricted

credits when establishing bonding rates, and whether to allow the Board

to purchase restricted credits;

ication

standards for inspected and certified hazelnuts;

(8) whether to correct the factor used to convert kernel weight to

inshell equivalent weight when calculating the volume of hazelnuts

withheld for restricted credit;

(9) whether the Board should use the estimated value of restricted

credits when establishing bonding rates, and whether to allow the Board

to purchase restricted credits;

(10) whether to clarify that mail order sales are not exempt from

order requirements;

(11) whether the Board should have authority to accept advance

assessment payments, provide discounts for such payments, borrow money,

and accept voluntary contributions; and

(12) whether any conforming changes should be made to the order if

any or all of these proposals were to become effective.

Findings and Conclusions

The findings and conclusions on the material issues, all of which

are based on evidence provided at the hearing and the record thereof,

are:

(1) The terms ``filberts'' and ``filberts/hazelnuts'' should be

revised to read ``hazelnuts.'' Section 982.4 defines filberts to mean

filberts or hazelnuts produced in the States of Oregon and Washington

from trees of the genus Corylus.

Over the years, the use of the term ``filberts'' has lessened both

within and outside the industry. ``Hazelnuts'' is widely used in the

industry to describe the tree nut covered under the order and in

international marketing efforts.

While some handlers continue to refer to the product as filberts,

record evidence indicates that changing the name in the order will not

have an adverse effect on those handlers who have traditionally

referred to the product as ``filberts'' or use the term in the company

name or logo. Further, changing the term would be consistent with

public practice because, in 1989, the hazelnut--not filbert--was

declared the official state nut of Oregon

ct as filberts,

record evidence indicates that changing the name in the order will not

have an adverse effect on those handlers who have traditionally

referred to the product as ``filberts'' or use the term in the company

name or logo. Further, changing the term would be consistent with

public practice because, in 1989, the hazelnut--not filbert--was

declared the official state nut of Oregon. Record evidence indicates

that, in the production area, the tree is generally referred to as a

filbert tree while the nuts are referred to as hazelnuts.

In recognition of the more prominent use of the term ``hazelnuts,''

the Board recommended that the tree nut defined as ``filberts'' in the

order and the title of the Board, and the term ``filbert/hazelnut'' in

the order's title be defined as ``hazelnuts'' throughout the order and

the order's rules and regulations. Thus, the title of the order should

be amended to read ``Hazelnuts Grown in Oregon and Washington,'' the

definition for filberts should be amended to read, ``Hazelnuts means

hazelnuts or filberts produced in the States of Oregon and Washington

from trees of the genus Corylus,'' and the title ``Filbert Control

Board'' should be changed to ``Hazelnut Marketing Board.'' Wherever the

term ``filberts'' appears in Subpart--Order Regulating Handling and

Subpart--Grade and Size Regulations, it should be changed to

``hazelnuts.'' Such changes should be made in the table of contents and

the following sections: 982.4, 982.6, 982.7, 982.8, 982.11, 982.12,

982.13, 982.14, 982.15, 982.16, 982.18, 982.19, 982.20, 982.30, 982.32,

982.34, 982.39, 982.40, 982.41, 982.45, 982.46, 982.50, 982.51, 982.52,

982.53, 982.54, 982.55, 982.56, 982.57, 982.58, 982.61, 982.65, 982.66,

982.67, 982.69, 982.71, 982.86, and 982.101, including Exhibit A

es should be made in the table of contents and

the following sections: 982.4, 982.6, 982.7, 982.8, 982.11, 982.12,

982.13, 982.14, 982.15, 982.16, 982.18, 982.19, 982.20, 982.30, 982.32,

982.34, 982.39, 982.40, 982.41, 982.45, 982.46, 982.50, 982.51, 982.52,

982.53, 982.54, 982.55, 982.56, 982.57, 982.58, 982.61, 982.65, 982.66,

982.67, 982.69, 982.71, 982.86, and 982.101, including Exhibit A.

Wherever the term ``filberts/hazelnuts'' appears in Subpart--

Administrative Rules and Regulations, it should be changed to

``hazelnuts.'' Such changes should be made in the following sections:

982.446, 982.450, 982.452, 982.453, 982.455, 982.456, 982.466, 982.468,

and 982.471. Finally, references to ``F/H Form * * *'', followed by a

letter or number, or both, should be changed to read ``H Form'',

followed by a letter or number, or both sections 982.450, 982.452,

982.453, 982.454, 982.455, 982.456, 982.460, 982.466, and 982.468.

(2) In Sec. 982.16, Inshell trade acquisitions, the inshell trade

demand area should include all 50 states of the United States, and not

just the continental United States, and the Board, with the Secretary's

approval, should be authorized to make changes in the distribution

area. Therefore, this amendment would make two changes in the order:

(1) Include all 50 states of the United States in the trade demand

area, thus, adding Hawaii, and (2) provide authority to the Board to

make changes to the trade demand area through informal rulemaking

procedures. For the purposes of these findings and conclusions, trade

demand area is synonymous with inshell trade acquisition distribution

area.

Under the order's volume regulations, shipments of inshell

hazelnuts to the continental U.S. are limited to a prescribed

percentage of the industry's supply, subject to regulation each

marketing year. Currently, the continental U.S. comprises the

``domestic market'' under the order

se findings and conclusions, trade

demand area is synonymous with inshell trade acquisition distribution

area.

Under the order's volume regulations, shipments of inshell

hazelnuts to the continental U.S. are limited to a prescribed

percentage of the industry's supply, subject to regulation each

marketing year. Currently, the continental U.S. comprises the

``domestic market'' under the order. All markets outside the

continental U.S., including Hawaii, are currently export markets to

which handlers may ship inshell hazelnuts without regard to volume

regulations established under the order. This amendment would expand

the trade demand area to include Hawaii, thus, making that state part

of the ``domestic market.''

Inshell trade acquisitions are defined as the quantity of inshell

hazelnuts acquired by the trade (commercial buyers) from all handlers

during a marketing year for distribution in the continental United

States. The trade demand for any given year is based on inshell trade

acquisitions during the preceding three years. The domestic inshell

market volume is restricted under volume regulations. Restricted

hazelnuts are shelled or exported inshell to other countries, or are

held in satisfaction of the handler's restricted obligation.

The effect of the first change would be to add Hawaii to the trade

demand area. When the order was promulgated in 1949, ``trade demand''

was defined as the quantity of filberts/hazelnuts acquired for

``distribution in the continental U.S., Alaska, Hawaii, Puerto Rico and

the Canal Zone; except that there may also be considered in the making

of such computations such acquirements for distribution in Canada or

Cuba, whenever the Board is of the opinion that such distribution may

be made to the particular country at prices to handlers approximating

such prices on distribution in the Continental United States.'' (14 FR

5657, September 15, 1949.) This definition was amended in 1959 (24 FR

5305, June 30, 1959) to include only the continental U.S

putations such acquirements for distribution in Canada or

Cuba, whenever the Board is of the opinion that such distribution may

be made to the particular country at prices to handlers approximating

such prices on distribution in the Continental United States.'' (14 FR

5657, September 15, 1949.) This definition was amended in 1959 (24 FR

5305, June 30, 1959) to include only the continental U.S. because it

was determined that the other areas would better serve the industry as

export outlets for restricted hazelnuts. The Board now recommends that

all 50 states be included in the trade demand area.

However, testimony presented at the hearing did not provide any

economic analysis, data, or other persuasive reasons that would support

adding Hawaii to the trade demand area. The Department

believes that the addition of Hawaii to the trade demand area should be

evaluated on the same bases as other markets which might be added to

the trade demand area. Should the second part of this material issue,

as described below, be approved in this formal rulemaking procedure,

the Board would be able to recommend adding Hawaii to the trade demand

area through informal rulemaking procedures. Thus, this recommended

decision denies that portion of the second material issue which

recommends adding Hawaii to the trade demand area.

The second change would provide authority to the Board to make

changes to the trade demand area, through informal rulemaking

procedures. The Board now believes that it is in the best interest of

the industry that the Board have the flexibility to respond to changing

market conditions by adding a country or marketing region, when

appropriate, to the trade demand area.

As currently provided, changes to the trade demand area require

formal rulemaking procedures which include a public hearing, a

recommended decision, an industry referendum and a final rulemaking

decision

st interest of

the industry that the Board have the flexibility to respond to changing

market conditions by adding a country or marketing region, when

appropriate, to the trade demand area.

As currently provided, changes to the trade demand area require

formal rulemaking procedures which include a public hearing, a

recommended decision, an industry referendum and a final rulemaking

decision. However, marketing policy decisions need to be made on a

yearly basis, particularly those decisions that require computation to

determine the amount of inshell hazelnuts available to be sold without

restriction. The formal rulemaking procedure does not provide the Board

with the flexibility or the timeliness it needs to respond to changing

markets in other countries. Informal rulemaking authority, which

requires a Board recommendation and Secretarial approval, would enable

the Board to make more timely responses to changing market conditions

in countries or regions outside the U.S.

The record indicates that a recommendation to add a country or

region to the trade demand area would first be considered by the

Board's Export Committee when it develops and recommends to the Board

an annual export marketing policy. Changes in the trade demand area

would then be considered by the Board and recommended to the Secretary.

Notice of these meetings would be made to hazelnut growers and handlers

in Oregon and Washington and the meetings would be open to all members

of the industry.

According to the hearing record, a Board recommendation to add a

country or region to the trade demand area would be based primarily on

the potential market conditions and opportunities in the country or

region

nded to the Secretary.

Notice of these meetings would be made to hazelnut growers and handlers

in Oregon and Washington and the meetings would be open to all members

of the industry.

According to the hearing record, a Board recommendation to add a

country or region to the trade demand area would be based primarily on

the potential market conditions and opportunities in the country or

region. Market considerations could include: Transportation modes and

costs for getting product to the country or region; non-restrictive or

at least neutral import and customs requirements; marketing

infrastructure; consumption habits, holidays or cultural factors to

which marketing efforts could be tied; economic outlook in the country;

and other financial and economic factors.

The record evidence indicates that the characteristics of markets

in some countries are very close to market characteristics in the

United States. For instance, Canada, an export market country, is an

example of a market that could be reviewed in a Board recommendation to

expand the trade demand area. There is a considerable difference in

price between hazelnuts sold in the U.S. and the same product sold in

Canada. Inshell hazelnuts are marketed primarily during the end-of-the-

year holiday season--which is also widely celebrated in Canada. The

standard of living and disposable income levels in Canada are similar

to those in the U.S. Thus, the record indicates that, for instance, the

Board could recommend including Western Canada, or possibly all of

Canada, in the trade demand area. Other examples of countries or areas

which could be considered for inclusion in the trade demand area

include Puerto Rico, and all or part of Mexico.

The Board would necessarily need to consider the effect adding a

new country or region to the trade demand area would have on the U.S.

inshell market

could recommend including Western Canada, or possibly all of

Canada, in the trade demand area. Other examples of countries or areas

which could be considered for inclusion in the trade demand area

include Puerto Rico, and all or part of Mexico.

The Board would necessarily need to consider the effect adding a

new country or region to the trade demand area would have on the U.S.

inshell market. If the inshell supply designated for the trade demand

area is not increased to meet the expected demand increase in new

countries or regions, the inshell supply available to the U.S. market

would be reduced. Thus, the addition of one or more new inshell

markets, without an increase in inshell supply, could affect the amount

of inshell hazelnuts available for shipment to domestic U.S. markets.

Any Board recommendation to shift a country or region from the

export market to the trade demand area would likely result in a

corresponding recommendation regarding the free and restricted volumes

shipped. The Board should include the projected volume for the new

country or region in inshell trade acquisitions when determining free

and restricted percentages in its marketing policy recommendation to

the Secretary. For instance, if Canada is added to the trade demand

area, inshell shipments to Canada would be included in inshell trade

acquisitions.

``Export'' sales would be only hazelnut sales to those countries or

regions that are not designated as being in the trade demand area.

Record evidence also indicates that the Board could recommend to

the Secretary that a country or region be removed from the trade demand

area if desired marketing results are not achieved. Indicators of

failure could include: The volume of sales of hazelnuts in the new

market were below expectations; the expected prices in the new market

were not sustained; or the new market resulted in a negative or

depressing affect on the marketing of hazelnuts in the remainder of the

trade demand area

gion be removed from the trade demand

area if desired marketing results are not achieved. Indicators of

failure could include: The volume of sales of hazelnuts in the new

market were below expectations; the expected prices in the new market

were not sustained; or the new market resulted in a negative or

depressing affect on the marketing of hazelnuts in the remainder of the

trade demand area.

The record does not suggest a minimum amount of time that a new

country would be in the trade demand area before the Board could

recommend its removal to the Secretary. The Board analyzes and

recommends its marketing policy to the Secretary on an annual basis.

Such analysis should include a complete and thorough review of any

changes to the trade demand area that were made during the previous

marketing season. Any recommendation to remove a country or region from

the trade demand area would be reviewed by the Export Committee and

recommended to the Board. Discussions for such a recommendation would

be held at meetings open to industry members and the public prior to

any recommendation to the Secretary. Thus, it is apparent that

implementation of such a recommendation would preclude action to remove

a country during the same marketing year it was added to the trade

demand area.

A conforming change should be made in paragraph (b) of Sec. 982.52

Disposition of restricted filberts. This amendment was listed as

proposed material issue 9 in the Notice of Hearing but is discussed in

this material issue as a conforming change.

Testimony submitted at the hearing indicates that free hazelnuts

shipped to the trade demand area are marketed at prices higher than

export prices. There is concern that exported inshell hazelnuts not be

re-exported back to the U.S. at prices less than domestic market

prices. The fourth sentence of Sec. 982.52(b) currently provides that

exporting handlers obtain certification from buyers that they will not

re-export inshell hazelnuts back into the U.S

uts

shipped to the trade demand area are marketed at prices higher than

export prices. There is concern that exported inshell hazelnuts not be

re-exported back to the U.S. at prices less than domestic market

prices. The fourth sentence of Sec. 982.52(b) currently provides that

exporting handlers obtain certification from buyers that they will not

re-export inshell hazelnuts back into the U.S. Record evidence

indicates that, because foreign countries may be added to the trade

demand area, inshell export sales to countries not in the trade demand

area should not be exported or shipped onward to any country designated

in the trade demand area. Thus, certifications signed by importers in

export countries should include provisions that exported inshell

hazelnuts not be exported again to any country or region that is part

of the trade demand area. Inshell hazelnut shipments may

be shipped from one trade demand area country or market to other

countries or markets that are also in the trade demand area. Based on

hearing testimony, the United States is one region and should not be

subdivided into two or more regions for the purpose of removing some

states from the trade demand area.

The proposed amendments should provide the Board with the

flexibility to take advantage of changing market conditions and do so

on a timely basis. Thus, Sec. 982.16 should be changed to: (1) Include

all states in the U.S. in the inshell trade acquisition distribution

area; and (2) allow the Board, with the approval of the Secretary, to

add or remove countries or regions to or from the trade demand area.

The proposed amendment would also make corresponding changes in the

first sentence of paragraph (b) of Sec. 982.52 to include all states of

the United States in the trade demand area and add other countries or

regions to the trade demand area, as recommended by the Board and

approved by the Secretary

al of the Secretary, to

add or remove countries or regions to or from the trade demand area.

The proposed amendment would also make corresponding changes in the

first sentence of paragraph (b) of Sec. 982.52 to include all states of

the United States in the trade demand area and add other countries or

regions to the trade demand area, as recommended by the Board and

approved by the Secretary. Likewise, a corresponding change should be

made in the fourth sentence of paragraph (b) to prevent inshell export

sales from being exported to countries or regions that are included in

the trade demand area.

(3) In paragraph (b) of Sec. 982.33, Selection and term of office,

the length of Board member and alternate member terms of office should

be changed from one to two years and the number of consecutive terms a

member could serve should be limited to three terms. Conforming changes

should be made in provisions covering the qualifications of handlers

nominating handler members (Sec. 982.30(b)) and weighting handler votes

in the nomination process (Sec. 982.32(b)), and a minor change should

be made in Sec. 982.32(a) to remove the reference to initial Board

members. Finally, when nominating the fourth handler member and

alternate member, as provided in Sec. 982.32(c), a correction in the

criteria used to calculate a handler's minimum weighted vote should be

made and the voting procedure should be amended to provide that

eligible handlers vote for both the fourth member and fourth alternate

member.

The term of office for Board members and alternates has been

amended twice since promulgation of the order. The record indicates the

reason for this amendment to change the term of office from one to two

years is to relieve the administrative burden that yearly nominations

procedures place on industry members and the Board's administrative

staff

he fourth member and fourth alternate

member.

The term of office for Board members and alternates has been

amended twice since promulgation of the order. The record indicates the

reason for this amendment to change the term of office from one to two

years is to relieve the administrative burden that yearly nominations

procedures place on industry members and the Board's administrative

staff. Nomination meetings, industry voting and ballot counting, and

resultant certification paperwork have been required of the industry

and the Board every year since 1959. When two-year terms were in effect

from 1959 to 1986, the terms were staggered, so that half the members

were nominated and selected each year. Staggered terms required that

nomination referenda be held each year and, thus, did not relieve the

burden on industry members or the Board's administrative staff.

This amendment would establish two-year terms of office for Board

members and alternate members with all terms beginning and ending at

the same time. Thus, the nomination process would be conducted only

once every two years, thereby reducing by half the administrative

burden on industry members and the Board's administrative staff. Record

evidence indicates that, because of the infrequent turnover of new

members, the lack of staggered terms should not affect the continuity

of Board membership.

Also, record evidence indicates that moving to two year terms of

office would be beneficial to the Board's public member and alternate

public member. The timing for annual nomination and selection of the

Board's public member prevents that member from being an active and

effective participant on the Board. Currently, the public member and

alternate is nominated at the first meeting of the new Board, usually

in late August. However, by the time the public member and alternate is

subsequently selected by the Secretary, many important Board activities

have been completed for the year

ion of the

Board's public member prevents that member from being an active and

effective participant on the Board. Currently, the public member and

alternate is nominated at the first meeting of the new Board, usually

in late August. However, by the time the public member and alternate is

subsequently selected by the Secretary, many important Board activities

have been completed for the year. The proposed amendment to establish

two-year terms of office would enable the public member and alternate

public member to more actively participate in Board decisions because

these members would be on the Board for a two-year period.

If the term of office is changed from one to two years, changes

also should be made to three provisions regarding Board membership.

Sections 982.30 and 982.32, regarding establishment of the Board and

nomination of Board members, respectively, should be amended to provide

that nominations of the three largest handler members be based on the

handlers' tonnage during the previous two marketing years. Currently,

nominations are based on the previous year's handled volume.

Paragraph (c) of Sec. 982.32 contains an error in the wording which

specifies the minimum weighted vote handlers may cast in nominating the

fourth handler member and alternate to serve on the Board. The current

language says that if a handler eligible to vote for the fourth handler

position handles less than one ``percent,'' the handler's vote should

be weighted as one ton. The term ``percent'' does not have any meaning

without a reference as a percent of something. Testimony on this

provision in the 1986 formal rulemaking proceeding shows that the

intent of the industry was for the term to be ton and not percent. This

error inadvertently occurred between publication of the proposed rule

(50 FR 42545, October 21, 1985) and final rule (51 FR 29547, August 19,

1986) in the previous formal rulemaking proceeding in 1985/86

eference as a percent of something. Testimony on this

provision in the 1986 formal rulemaking proceeding shows that the

intent of the industry was for the term to be ton and not percent. This

error inadvertently occurred between publication of the proposed rule

(50 FR 42545, October 21, 1985) and final rule (51 FR 29547, August 19,

1986) in the previous formal rulemaking proceeding in 1985/86. The

Board has recognized the intent of the provision and has correctly

recorded handlers' weighted votes when tabulating votes for the fourth

handler member and alternate member. Thus, in the third sentence of

paragraph (c) of Sec. 982.32, the term ``percent'' should be replaced

with the term ``ton.''

Paragraph (c) of Sec. 982.32 should also be amended by changing the

last sentence regarding the casting of votes for the fourth handler

member and alternate member. Current paragraph (c) provides that

handlers vote for one candidate and the candidate receiving the highest

number of votes shall be the fourth handler member nominee and the

candidate receiving the second highest number of votes shall be the

fourth handler alternate member nominee. This proposal provides that

each eligible handler shall cast two separate votes: one for the fourth

handler member and one for the fourth handler alternate member. The

candidates who receive the highest numbers of votes in each category

would be the nominees.

Currently, paragraph (b) of Sec. 982.33 limits the number of

consecutive one year terms a member may serve to six terms. To maintain

the order's intent that members and alternates should not serve more

than six consecutive years, paragraph (b) should be amended to provide

for a maximum of three consecutive two-year terms of office. If

approved in referendum and by the Secretary, the three term limit would

begin with the first nominations held after completion of this formal

rulemaking process

rve to six terms. To maintain

the order's intent that members and alternates should not serve more

than six consecutive years, paragraph (b) should be amended to provide

for a maximum of three consecutive two-year terms of office. If

approved in referendum and by the Secretary, the three term limit would

begin with the first nominations held after completion of this formal

rulemaking process. Thus, any standing Board members and alternates

nominated and selected for the first two year term would be eligible to

serve two additional terms, regardless of past service. Also, this

amendment would not restrict a member who has served three consecutive

terms from then serving three consecutive terms as an alternate member

or for an alternate member who has served three

consecutive terms from then serving three consecutive

terms as a member.

The Board recommended a minor wording change in Sec. 982.32(a)

which would remove the reference to ``initial'' Board members as those

members serving prior to the amendment of the order. This change would

simplify the wording of the paragraph and make it consistent with the

changing nature of Board membership. The proposed amended paragraph

would provide that members and alternate members of the Board serving

immediately prior to the effective date of this amended subpart shall

continue to serve until their respective successors have been selected.

Thus, Sec. 982.33 should be amended to provide two year terms of

office for Board members and alternate members. Sections 982.30 and

982.32 covering nominating qualifications, weighting handler votes,

voting procedures, and consecutive terms should also be changed for

consistency and conformity with two-year office terms.

continue to serve until their respective successors have been selected.

Thus, Sec. 982.33 should be amended to provide two year terms of

office for Board members and alternate members. Sections 982.30 and

982.32 covering nominating qualifications, weighting handler votes,

voting procedures, and consecutive terms should also be changed for

consistency and conformity with two-year office terms.

(4) In paragraph (b) of Sec. 982.37, Procedure, the requirement

that Board votes by telephone, telegraph or other means of long

distance communication be confirmed in writing should be amended to

provide that such votes remain unconfirmed until the next public Board

meeting.

The Board generally meets twice a year. At least once each year

over the last five years, the Board has found it necessary to vote on

an issue by telephone. The issue has been the final budget which must

be submitted to the Department at a time when there are no scheduled

Board meetings.

Record evidence indicates that it is difficult to obtain written

confirmation of all telephone votes cast by Board members. All

telephone votes must be confirmed, and written confirmation must be

unanimous. Even though a ballot is mailed to each member, and follow-up

calls are made to those who have not submitted their written ballot,

some members fail to respond.

Because of such confirmation delays, some telephone votes have been

confirmed at the next public Board meeting. At these meetings, the

members confirm their original vote and reaffirm their position. This

procedure should be on the record and so recorded in the committee

minutes. Reaffirmation must be unanimous. The record indicates that,

under the proposed amendment, if any member were to change his or her

original vote, the issue would be debated again and a new vote by all

committee members would be taken. The second vote would require passage

by a simple majority.

The record indicates that telephone votes should be taken only on

issues that are known to be non-controversial

on must be unanimous. The record indicates that,

under the proposed amendment, if any member were to change his or her

original vote, the issue would be debated again and a new vote by all

committee members would be taken. The second vote would require passage

by a simple majority.

The record indicates that telephone votes should be taken only on

issues that are known to be non-controversial. If an issue is known to

have any one member or industry group against it, a telephone vote on

the issue would not be taken and a public meeting would have to be

called for consideration of the issue.

The record also indicates that a vote cast by facsimile

transmission is considered a vote by ``other means of communication.''

While a facsimile transmission produces a piece of paper which is

received and held by the Board staff, the vote would still have to be

confirmed at the next public Board meeting.

Thus, Sec. 982.37(b) should be amended to provide that Board votes

cast by telephone, telegraph or other means of communication shall be

confirmed at the next regularly scheduled Board meeting and that such

confirmation shall require ten concurring votes.

(5) In paragraph (i) of Sec. 982.39, Duties, the requirement that

the Board furnish verbatim reports of its marketing policy meetings to

the Secretary should be amended to require that summary reports of such

meetings be furnished to the Secretary.

The promulgation documentation provided that a ``complete report of

the proceedings'' of the Board meeting establishing a marketing policy

recommendation be reported to the Secretary (14 FR 5669, September 15,

1949). Because the Board in 1959 was providing verbatim reports of

marketing policy deliberations, the verbatim requirement was added to

the reporting requirement (24 FR 4173, May 23, 1959) and the

requirement was moved to paragraph (5) of Sec. 982.39 Duties (24 FR

5307, June 30, 1959)

ting establishing a marketing policy

recommendation be reported to the Secretary (14 FR 5669, September 15,

1949). Because the Board in 1959 was providing verbatim reports of

marketing policy deliberations, the verbatim requirement was added to

the reporting requirement (24 FR 4173, May 23, 1959) and the

requirement was moved to paragraph (5) of Sec. 982.39 Duties (24 FR

5307, June 30, 1959). The amendment stated that only that portion of a

meeting dealing directly with marketing policy discussions be reported

verbatim.

However, the record indicates that verbatim reports are impractical

because either a court reporter has to be contracted or a recording

would have to be exactly transcribed by a Board employee. Either of

these alternatives requires an extra expense for the Board and results

in a delay in completing the report.

This amendment would establish that the Board tape record all

meetings and then summarize the proceedings using the tape recording to

ensure a complete and thorough report. The record testimony reports

that this process should take considerably less time and be less costly

than making a direct transcript of the recording. This revised

procedure is expected to maintain the accuracy of the meeting report.

Thus, Sec. 982.39(i) should be amended to provide that the Board

furnish the Secretary a report of the proceedings of each meeting of

the Board held for the purpose of marketing policy recommendations.

rocess should take considerably less time and be less costly

than making a direct transcript of the recording. This revised

procedure is expected to maintain the accuracy of the meeting report.

Thus, Sec. 982.39(i) should be amended to provide that the Board

furnish the Secretary a report of the proceedings of each meeting of

the Board held for the purpose of marketing policy recommendations.

(6) In paragraph (c)(2) of Sec. 982.40, Marketing policy and volume

regulation, the Board should be provided some flexibility in

recommending final free and restricted percentages. In the 1985-86

amendment of the order, development of the Board's annual marketing

policy and volume regulation action were established to follow specific

procedures and formula computations. This amendment would enable the

Board to better respond to market conditions when recommending the

final free and restricted percentages.

On or before November 15, the Board meets to recommend to the

Secretary, the establishment of interim final and final free and

restricted percentages. The interim final percentage results in the

release of 100 percent of the inshell trade demand previously computed

by the Board. Paragraph (c)(2) of Sec. 982.40 now requires that the

final percentages release an additional 15 percent of the average of

the preceding three years' trade acquisitions of inshell hazelnuts for

desirable carryout.

This amendment focuses on the mandatory release of the final 15

percent. Record evidence indicates that the mandatory release of the

entire tonnage resulting from the additional 15 percent can sometimes

be harmful to the market and may not always be in the best interest of

the industry. For instance, the mandatory release of the final 15

percent could place an excess supply of hazelnuts on the market and

result in a weak market. Market conditions may be such that release of

a smaller final percentage would be a wiser marketing policy

age resulting from the additional 15 percent can sometimes

be harmful to the market and may not always be in the best interest of

the industry. For instance, the mandatory release of the final 15

percent could place an excess supply of hazelnuts on the market and

result in a weak market. Market conditions may be such that release of

a smaller final percentage would be a wiser marketing policy. This

amendment provides the Board with that flexibility when recommending

the final free and restricted percentages.

In addition to complying with the provisions of the marketing

order, the Board must also consider the Department's 1982 ``Guidelines

for Fruit, Vegetable, and Specialty Crop Marketing Orders''

(Guidelines) when recommending marketing policy computations. Volume

control regulation provides the industry a means of collectively

limiting the supply of inshell hazelnuts available for sale in the

trade demand area. The Guidelines provide that the trade demand area

have available a quantity equal to at least 110 percent of recent

years' sales in the trade demand area before volume regulations can be

implemented. This provides for plentiful supplies for

consumers and for market expansion while retaining a mechanism for

dealing with oversupply situations.

The hazelnut industry in Oregon and Washington has satisfied the

Guidelines' 110 percent requirement. Pursuant to Sec. 982.40(b), each

year the Board may, for market expansion purposes, increase inshell

trade demand by an amount up to 25 percent of the previous 3 years'

average inshell trade acquisitions. In addition, the Board must add to

the adjusted inshell trade demand a total of 15 percent of the 3-year

inshell trade acquisition average to meet the desirable carryout

requirement of Sec. 982.40(c)(2). This more than meets the 110 percent

requirement.

Over the years, the authority for these increases has caused the

Board to exceed the Guidelines' 110 percent requirement

trade acquisitions. In addition, the Board must add to

the adjusted inshell trade demand a total of 15 percent of the 3-year

inshell trade acquisition average to meet the desirable carryout

requirement of Sec. 982.40(c)(2). This more than meets the 110 percent

requirement.

Over the years, the authority for these increases has caused the

Board to exceed the Guidelines' 110 percent requirement. It is possible

that the Board could choose to recommend a market expansion increase

and a final free and restricted percentage increase that totalled less

than the Guidelines' 110 percent requirement. However, based on present

Board practices, such a recommendation is not expected. Any Board

recommendation that totalled less than the 110 percent requirement

could be referred by the Secretary back to the Board.

Thus, Sec. 982.40(c)(2) should be amended to provide that the final

free and restricted percentages may release up to an additional 15

percent of the average of the preceding three years' trade acquisitions

of inshell hazelnuts for desirable carryout.

(7) In paragraph (b) of Sec. 982.46, Inspection and certification,

specific identification practices for the handling and withholding of

restricted obligation hazelnuts should be amended to provide that all

inspected and certified hazelnuts shall be identified as prescribed by

the Board.

Traditionally, hazelnuts were inspected and certified as either

free or restricted before or during handling, or before being set aside

as withheld for restricted obligation. Paragraph (b) provides that

handlers use seals, stamps, tags or other identification fixed to the

containers to identify lots set aside as either free or restricted

hazelnuts. However, the record indicates that, since 1975, industry

practices have changed significantly and now allow handlers to

substitute fresh hazelnut lots for free and restricted lots that have

been set aside

d obligation. Paragraph (b) provides that

handlers use seals, stamps, tags or other identification fixed to the

containers to identify lots set aside as either free or restricted

hazelnuts. However, the record indicates that, since 1975, industry

practices have changed significantly and now allow handlers to

substitute fresh hazelnut lots for free and restricted lots that have

been set aside. It is no longer necessary for handlers to meet their

volume control obligations by maintaining restricted lots that are

sealed, stamped, tagged, or otherwise so identified.

Under the proposed amendment, the Board may prescribe other methods

of identification of restricted obligation hazelnuts. The record

indicates that the Board currently allows handlers to carryover

hazelnuts which are reported as either undeclared, declared restricted,

or declared free. The hazelnuts are reported as one or the other, but

do not have to be specifically so marked.

These relaxed identification procedures would enable handlers to

continue to meet identification requirements for restricted obligation

hazelnuts without setting aside specific, identifiable lots. The

amended procedures would bring the marketing order provisions up-to-

date with current industry practices. Thus, Sec. 982.46(b) should be

amended to provide that hazelnuts inspected and certified for free and

restricted use shall be identified as prescribed by the Board.

meet identification requirements for restricted obligation

hazelnuts without setting aside specific, identifiable lots. The

amended procedures would bring the marketing order provisions up-to-

date with current industry practices. Thus, Sec. 982.46(b) should be

amended to provide that hazelnuts inspected and certified for free and

restricted use shall be identified as prescribed by the Board.

(8) In paragraph (a) of Sec. 982.51, Restricted credit for ungraded

inshell hazelnuts and for shelled hazelnuts, the current language that

authorizes handler credit for ungraded hazelnuts should be amended to

delete an incorrect and misleading term.

This provision allows handlers to receive merchantable credit for

ungraded inshell hazelnuts they hold to meet their restricted

obligation. The hazelnuts must be inspected to determine kernel weight,

which is converted back to an inshell equivalent. The industry uses a

conversion factor of 60 percent shell or waste product and 40 percent

kernel weight. Thus, it takes 2.5 pounds of inshell hazelnuts to make 1

pound of hazelnut kernels--a conversion factor of 2.5 to 1.

However, the first sentence of paragraph (a) of Sec. 982.51 states

that the conversion factor is 2.5 ``percent.'' The term ``percent'' is

not correct and, in fact, greatly reduces the conversion factor. If the

conversion factor was to be represented as a percentage, it would be

250 percent. This error evidently occurred when Sec. 982.51 was amended

in 1986. The Board and industry handlers have been operating on the

correct conversion factor of 2.5 to 1. Thus, the language that

specifies handler credit for ungraded hazelnuts in Sec. 982.51 should

be amended to correct the conversion factor as stated herein.

on factor was to be represented as a percentage, it would be

250 percent. This error evidently occurred when Sec. 982.51 was amended

in 1986. The Board and industry handlers have been operating on the

correct conversion factor of 2.5 to 1. Thus, the language that

specifies handler credit for ungraded hazelnuts in Sec. 982.51 should

be amended to correct the conversion factor as stated herein.

(9) In Sec. 982.54, Deferment of restricted obligation, several

changes and conforming changes should be made to provisions regarding

bonding values and rates, the use of defaulted bond funds, and the

Board's flexibility when dispensing defaulted bond funds.

Prior to or upon shipping inshell hazelnuts to the trade demand

area, handlers are required to withhold from handling a quantity of

hazelnuts equal to the restricted obligation resulting from that

shipment. Hazelnuts so withheld may be exported inshell or shelled. The

withholding obligation also may be deferred. Section 982.54 provides

that a handler may post a bond as a guarantee that the handler will

eventually fulfill the handler's restricted obligations. Hearing

testimony indicates that the provision establishing the bonding rate

currently specified in the order is too high and too burdensome on

handlers under present marketing conditions.

Handlers may either shell or export inshell as many hazelnuts as

they wish, but they are limited in the amount of inshell hazelnuts they

can sell as free tonnage in the trade demand area when volume

regulations are in effect. Volume regulations under the order require

that, prior to or upon shipping inshell hazelnuts to the trade demand

area, handlers shall withhold from handling a quantity of hazelnuts

equal to the restricted obligation resulting from that shipment.

Hazelnuts so withheld may be certified merchantable, inspected

ungraded, or certified shelled

ade demand area when volume

regulations are in effect. Volume regulations under the order require

that, prior to or upon shipping inshell hazelnuts to the trade demand

area, handlers shall withhold from handling a quantity of hazelnuts

equal to the restricted obligation resulting from that shipment.

Hazelnuts so withheld may be certified merchantable, inspected

ungraded, or certified shelled. The domestic inshell market is

extremely seasonal with most of the shipments occurring in October or

early November, the same period when hazelnuts are harvested and

delivered to handlers. During this period, handlers do not have enough

hazelnuts certified, inspected, or shelled to meet their restricted

obligations. Therefore, handlers use the bonding provisions in the

order to defer a large part of their obligations.

As domestic use of inshell hazelnuts has declined and production

has increased, the percent of the crop going to the primary inshell

market has dropped. For example, in the 1993-94 marketing season, the

free percentage was only 13 percent--resulting in a restricted

obligation nearly 6.7 times the quantity handled for the free market.

Such a high restricted obligation-to-handling ratio makes a bonding

rate based on the price for inshell hazelnuts very burdensome. Such a

high bonding rate is not necessary as long as the bonding rate reflects

the difference between the domestic inshell price and the returns

available in authorized markets for restricted hazelnuts such as

inshell exports or shelling.

Inshell exports have been a large and growing market for restricted

hazelnuts. In some years, the average reported value for inshell

exports has exceeded domestic quotations for domestic sales of U.S. No.

1 large hazelnuts. This apparently results from a willingness of some

foreign buyers to pay a significant premium for the

largest sizes of hazelnuts

ts such as

inshell exports or shelling.

Inshell exports have been a large and growing market for restricted

hazelnuts. In some years, the average reported value for inshell

exports has exceeded domestic quotations for domestic sales of U.S. No.

1 large hazelnuts. This apparently results from a willingness of some

foreign buyers to pay a significant premium for the

largest sizes of hazelnuts. Thus, restricted disposition credits earned

by exporting inshell hazelnuts may reflect little or no loss compared

to the domestic inshell market.

The order authorizes the transfer of restricted disposition credits

between handlers, and some handlers use this authority.

The record shows that members of the Board, particularly its

handler members, have knowledge of the marketing opportunities in

various restricted outlets and knowledge of the transfer of restricted

disposition credits. Thus, the Board should be capable of using these

factors to calculate an appropriate bonding rate that is financially

acceptable but not so low as to encourage handlers to default on their

bonds.

The proposed amendments would change the method by which the Board

determines the rate of the bond. Paragraphs (b), (c), (d), (e) and (f)

of Sec. 982.54 would be amended to replace terminology that ties

bonding rates to the value of quantities handled or certified for

handling. Instead, bonding rates would be tied to the estimated value

of restricted credits as established by the Board. A bonding rate based

on the value of restricted disposition credits should provide adequate

protection against default and would be much less burdensome.

Paragraph (b) provides that the bonding value for each handler be

established by multiplying the deferred restricted obligation poundage

bearing the lowest bonding rate by the applicable bonding rate. Under

the proposed amended paragraph (b), the bonding value would be

determined by multiplying the deferred restricted obligation poundage

by the applicable bonding rate

e much less burdensome.

Paragraph (b) provides that the bonding value for each handler be

established by multiplying the deferred restricted obligation poundage

bearing the lowest bonding rate by the applicable bonding rate. Under

the proposed amended paragraph (b), the bonding value would be

determined by multiplying the deferred restricted obligation poundage

by the applicable bonding rate.

Paragraph (c) provides for a bonding rate for each pack withheld

which is the amount per pound as established by the Board. Under the

proposed amended paragraph (c), the Board would establish the bonding

rate based on the Board's estimated value of restricted credits. Record

evidence indicates that the value of credits should be based on the

value of hazelnuts in all markets--restricted as well as free. Because

restricted market hazelnuts usually have less market value than free

hazelnuts, the credit value usually is less than the actual market

value of free hazelnuts. Thus, a bond based on credit value would lower

the value of the bond, making it a more acceptable burden for handlers.

The record also indicates that a bond value based on credits would be

high enough to discourage handlers from voluntarily defaulting on their

bond.

Paragraph (d) requires the Board to use the funds collected from

defaulted bond payments to purchase quantities of certified

merchantable hazelnuts on which the restricted obligations have been

met. To make paragraph (d) consistent with amended paragraph (c), the

Board would use defaulted bond funds to purchase restricted credits

from handlers.

Paragraph (e) provides that unexpended funds resulting from

defaulted bond payments remaining at the end of the marketing year

would be used by the Board to pay its expenses and in the purchase of

hazelnuts as provided in paragraph (d). Consistent with amended

paragraph (d), a conforming change would be made in amended paragraph

ulted bond funds to purchase restricted credits

from handlers.

Paragraph (e) provides that unexpended funds resulting from

defaulted bond payments remaining at the end of the marketing year

would be used by the Board to pay its expenses and in the purchase of

hazelnuts as provided in paragraph (d). Consistent with amended

paragraph (d), a conforming change would be made in amended paragraph

(e) to provide that unexpended funds resulting from defaulted bond

payments remaining at the end of the marketing year could be used by

the Board to purchase restricted credits, rather than merchantable

hazelnuts, on which the restricted obligation has been met.

The last sentence in paragraph (e) provides that any balance of

funds collected from defaulted bond obligations remaining at the end of

the marketing year after payment of Board expenses, including

administrative costs and the purchase of hazelnuts, would be returned

pro-rata to all handlers. However, experience indicates that no such

unused funds have remained at the end of recent marketing years to be

refunded to handlers. Bond payments based on restricted credit values

are expected to result in fewer defaults and less default funds

collected. Thus, a marketing year that would produce an excess of

defaulted bond funds is not likely to occur. In addition, paragraph (b)

of Sec. 982.62 provides Board authority to return excess funds at the

end of each marketing year.

Paragraph (f) currently provides that merchantable hazelnuts

purchased by the Board as provided in paragraph (d) shall be turned

over to handlers who have defaulted on their bonds for disposal by the

handlers as restricted hazelnuts. A conforming change would be made in

amended paragraph (f) to provide that the restricted credits purchased

by the Board under amended paragraph (d) would be turned over to those

handlers who have defaulted on their bonds for liquidation of their

restricted obligation

(d) shall be turned

over to handlers who have defaulted on their bonds for disposal by the

handlers as restricted hazelnuts. A conforming change would be made in

amended paragraph (f) to provide that the restricted credits purchased

by the Board under amended paragraph (d) would be turned over to those

handlers who have defaulted on their bonds for liquidation of their

restricted obligation.

The record indicates that some small handlers only shell hazelnuts

and have no need to use the bonding authority. This proposed amendment

would have no effect on these handlers. All handlers who use the

bonding authority would benefit from the reduced cost of the lower

bonding rates.

Therefore, paragraphs (b), (c) and (d) of Sec. 982.54 should be

amended to provide, respectively, that: the bonding value be determined

by multiplying the deferred restricted obligation poundage by the

applicable bonding rate; the bonding rate be based on the estimated

value of restricted credits; and the Board use handlers' defaulted bond

funds to purchase restricted credits. Conforming changes should also be

made to paragraphs (e) unexpended sums and (f) transfer of purchases.

(10) Section 982.57, Exemptions, should be amended to clarify that

mail order sales are not exempt from order requirements.

This provision was amended in 1986 to clarify that hazelnuts sold

directly to end users (consumers) at a grower's ranch or orchard, or at

roadside stands and farmers markets are exempt from regulatory and

assessment provisions of the order. No testimony was provided at the

amendment hearing in 1985 to suggest that mail order sales should be

exempt from order regulations. However, some growers and handlers in

the industry believe that the exemption provision applies also to mail

order sales.

To help correct this misinterpretation, the Board proposed that

Sec. 982.57 be amended by adding a sentence at the end of paragraph (b)

to clarify that mail order sales are not considered exempt from order

requirements

order sales should be

exempt from order regulations. However, some growers and handlers in

the industry believe that the exemption provision applies also to mail

order sales.

To help correct this misinterpretation, the Board proposed that

Sec. 982.57 be amended by adding a sentence at the end of paragraph (b)

to clarify that mail order sales are not considered exempt from order

requirements.

The added sentence that appeared in the Notice of hearing for this

rulemaking (59 FR 9428; February 28, 1994) included a phrase that could

cause further confusion among industry members. The proposed sentence

in the Notice of hearing reads, ``Mail order sales to destinations

outside the area of production are not considered to be exempt sales

under this part.'' The phrase ``to destinations outside the area of

production'' could be interpreted to mean that mail order sales to

destinations inside the States of Oregon and Washington would be exempt

from order requirements. However, this is not consistent with Board

policy.

It is current Board policy that no exemptions are authorized for

mail order sales, regardless of destination. Hearing testimony

indicated that the Board has always considered that no mail order sales

are exempt from order regulations. Testimony further indicates that

this amendment is not a change in policy. Thus, the proposed clarifying

sentence should read: ``Mail order sales are not exempt sales under

this part.''

Therefore, paragraph (b) of 982.57 should be amended by adding the

clarification that mail order sales are not exempt sales under the

order.

dered that no mail order sales

are exempt from order regulations. Testimony further indicates that

this amendment is not a change in policy. Thus, the proposed clarifying

sentence should read: ``Mail order sales are not exempt sales under

this part.''

Therefore, paragraph (b) of 982.57 should be amended by adding the

clarification that mail order sales are not exempt sales under the

order.

(11) A new paragraph (b) of Sec. 982.61, Assessments, should be

established to allow the Board to accept advance assessment payments,

provide discounts for such advanced payments, and borrow funds. Also, a

new Sec. 982.63 Contributions, should be established to allow the Board

to accept voluntary contributions for payment of research, promotion,

and market development activities.

The marketing order's fiscal period begins July 1, which is three

months before the hazelnut harvest and four months before receipt of

assessment payments for the new marketing year. During the initial four

months, the Board's access to funds is limited. The first proposed

amendment is intended to increase the Board's ability to obtain funds

on a temporary basis early in the marketing year. While marketing order

reserve funds may be used to pay for planned research and promotion

programs and other administrative obligations, record evidence

indicates that the Board would prefer to accept advance assessment

payments or borrow funds rather than draw from the order's reserve

funds to pay for financial obligations that might occur prior to the

accumulation of assessment funds.

The second amendment would allow the Board to increase funds--

through contributions--to pay expenses incurred under Sec. 982.58,

Research, promotion and market development. A minor change would be

added to Sec. 982.52 to make that provision consistent with the

proposed new paragraph. The record indicates that these amendments are

not proposed in response to any specific program or current need

he second amendment would allow the Board to increase funds--

through contributions--to pay expenses incurred under Sec. 982.58,

Research, promotion and market development. A minor change would be

added to Sec. 982.52 to make that provision consistent with the

proposed new paragraph. The record indicates that these amendments are

not proposed in response to any specific program or current need.

Testimony indicates that with access to additional funds the Board

would have the opportunity to enter into significant marketing or

promotional programs in conjunction with other commodity groups.

Likewise, the Board would have the ability to meet unforeseen increases

in administrative obligations that may occur at the start of a

marketing year. While such promotional opportunities or emergency needs

have not occurred in the past, the Board believes it is important that

the Board have the ability to accrue additional funds, if needed.

Record evidence does not provide guidelines or procedures as to how

the Board would announce and collect advanced assessment payments or

borrow funds. The record does indicate, however, that after approval of

the proposed amendment, guidelines and procedures to implement the

amendment would be discussed by the Board in a public meeting and

recommended to the Secretary for approval through informal rulemaking

procedures.

To encourage advance payment, the Board recommended that advance

assessment payments be discounted. Record evidence indicates that the

amount of discount could be closely tied to prevailing commercial bank

interest rates. A discount assessment rate based on commercial bank

interest rates would encourage handlers who pay advanced assessments

because they would not lose more money than they would accrue if their

advanced assessment payment was held in a commercial bank interest

bearing account. Discounted assessment payment opportunities should be

available to all handlers throughout the production area

t rates. A discount assessment rate based on commercial bank

interest rates would encourage handlers who pay advanced assessments

because they would not lose more money than they would accrue if their

advanced assessment payment was held in a commercial bank interest

bearing account. Discounted assessment payment opportunities should be

available to all handlers throughout the production area.

The record confirms that a decision to accept advance assessment

payments and offer discounts for such payments would be made at public

meetings open to all industry members. Any additional administrative

and operating procedures needed for the collection of advance

assessment payments and the calculation of appropriate advance payment

discounts should be recommended by the Board to the Secretary for

approval. The record evidence indicates that the Board's administrative

staff has the capability to assure that advance assessment payments and

borrowed funds would be properly budgeted and expended for the

authorized purposes for which they would be collected.

This recommendation would be established by designating the current

assessment provision as paragraph (a) and adding a new paragraph (b) to

provide that the Board should have the authority to offer handlers the

opportunity to pay assessments in advance and receive a discount on

such assessments paid. New paragraph (b) would provide the Board with

authority, with Secretarial approval, to borrow funds early in the

marketing year. Such borrowed funds would be used to meet program or

fiscal needs as described above.

The record indicates that funds should be borrowed from lending

institutions rather than from industry handlers. The Board would make

the decision to borrow funds based on recommendations of the

appropriate committee that establishes the need for the borrowed funds

borrow funds early in the

marketing year. Such borrowed funds would be used to meet program or

fiscal needs as described above.

The record indicates that funds should be borrowed from lending

institutions rather than from industry handlers. The Board would make

the decision to borrow funds based on recommendations of the

appropriate committee that establishes the need for the borrowed funds.

For example, the Executive Promotion Committee and the Promotion

Committee could recommend that the Board should borrow funds for a

specified promotion project or program. The record also suggests that

borrowed funds should be paid back within the same marketing year, so

as not to encumber future Boards with the financial obligations of its

predecessors.

The Board proposes that a new Sec. 982.63, Contributions, be

established to provide the Board with the authority to accept

contributions. Such contributions would be used only to pay for

production research, market research and development, and market

promotion programs, including paid advertising. Such research and

development programs would be designed to improve or promote the

marketing, distribution, consumption or efficient production of

hazelnuts. The Board would not be able to accept contributions that

might have stipulations or other provisos on the expenditure of

contributed funds. Thus, the Board would have complete control over the

expenditure of contributed funds. The record indicates that the Board

has not received contribution offers but would like the authority to

accept contributions in the future should they be offered.

The record also indicates that the proviso specifying contributions

be free from any encumbrances by the donor is not intended to prevent

the Board from entering into joint promotional programs with other

agencies. However, funding for such joint programs may not come from

donations which specify the intended use of the donated funds.

Therefore, Sec. 982.61 should be amended by adding a new paragraph

d also indicates that the proviso specifying contributions

be free from any encumbrances by the donor is not intended to prevent

the Board from entering into joint promotional programs with other

agencies. However, funding for such joint programs may not come from

donations which specify the intended use of the donated funds.

Therefore, Sec. 982.61 should be amended by adding a new paragraph

(b) that provides the Board with the authority to collect advance

assessment payments, offer discounts for such payments, and borrow

money to provide funds for administration of the order during the early

months of the marketing period. Also, a new Sec. 982.63, Contributions,

should be established to provide the Board with the authority to accept

contributions, provided that such contributions are used to pay

expenses incurred pursuant to Sec. 982.58 and are free of any

encumbrances by the donor. A conforming change should be made to

Sec. 982.58, adding contributions as a source of funds that may only be

used to pay research, promotion and market development expenses.

(12) The Department proposed in the public hearing to make such

changes as are necessary to conform with any amendment that may result

from the hearing. This proposal was supported at the hearing without

opposition. Record evidence supports these changes.

Rulings on Briefs of Interested Persons

The presiding officer of the hearing set April 8, 1994, as the

final date for filing briefs with respect to the evidence presented at

the hearing and the conclusions which should be drawn therefrom. No

briefs were received.

General Findings

Upon the basis of the record, it is found that:

without

opposition. Record evidence supports these changes.

Rulings on Briefs of Interested Persons

The presiding officer of the hearing set April 8, 1994, as the

final date for filing briefs with respect to the evidence presented at

the hearing and the conclusions which should be drawn therefrom. No

briefs were received.

General Findings

Upon the basis of the record, it is found that:

(1) The findings hereinafter set forth are supplementary to the

previous findings and determinations which were made in connection with

the issuance of the marketing agreement and order and each previously

issued amendment thereto. Except insofar as such findings and

determinations may be in conflict with the findings and determinations

set forth herein, all of the said prior findings and determinations are

hereby ratified and affirmed;

(2) The marketing agreement and order, as amended, and hereby

proposed to be further amended, and all of the terms and conditions

thereof, will tend to effectuate the declared policy of the Act;

(3) The marketing agreement and order, as amended, and as hereby

proposed to be further amended, regulate the handling of hazelnuts

grown in the production area in the same manner as, and are applicable

only to, persons in the respective classes of commercial and industrial

activity specified in the marketing agreement and order upon which a

hearing has been held;

(4) The marketing agreement and order, as amended, and as hereby

proposed to be further amended, are limited in their application to the

smallest regional production area which is practicable, consistent with

carrying out the declared policy of the Act, and the issuance of

several orders applicable to subdivisions of the production area would

not effectively carry out the declared policy of the Act; and

quantity of inshell hazelnuts

acquired by the trade from all handlers during a marketing year for

distribution in the continental United States and such other

distribution areas as may be recommended by the Board and established

by the Secretary.

5. Section 982.30 is amended by revising paragraphs (a), (b)(1),

(b)(2), and (b)(3) to read as follows:

Sec. 982.30 Establishment and membership.

(a) There is hereby established a Hazelnut Marketing Board

consisting of 10 members, each of whom shall have an alternate member,

to administer the terms and provisions of this part. Each member and

alternate shall meet the same eligibility qualifications. The 10 member

positions shall be allocated as follows:

(b) * * *

(1) One member shall be nominated by the handler who handled the

largest volume of hazelnuts during the two marketing years preceding

the marketing year in which nominations are made;

(2) One member shall be nominated by the handler who handled the

second largest volume of hazelnuts during the two marketing years

preceding the marketing year in which nominations are made;

(3) One member shall be nominated by the handler who handled the

third largest volume of hazelnuts during the two marketing years

preceding the marketing year in which nominations are made;

* * * * *

6. In Sec. 982.32, paragraphs (a), (b), (c) and (f) are revised to

read as follows:

Sec. 982.32 Initial members and nomination of successor members.

(a) Members and alternate members of the Board serving immediately

prior to the effective date of this amended subpart shall continue to

serve on the Board until their respective successors have been

selected.

h nominations are made;

* * * * *

6. In Sec. 982.32, paragraphs (a), (b), (c) and (f) are revised to

read as follows:

Sec. 982.32 Initial members and nomination of successor members.

(a) Members and alternate members of the Board serving immediately

prior to the effective date of this amended subpart shall continue to

serve on the Board until their respective successors have been

selected.

(b) Nominations for successor handler members and alternate members

specified in Sec. 982.30(b) (1) through (3) shall be made by the

largest, second largest, and third largest handler determined according

to the tonnage of certified merchantable hazelnuts and, when shelled

hazelnut grade and size regulations are in effect, the inshell

equivalent of certified shelled hazelnuts (computed to the nearest

whole ton) recorded by the Board as handled by each such handler during

the two marketing years preceding the marketing year in which

nominations are made.

(c) Nominations for successor handler member and alternate handler

member positions specified in Sec. 982.30(b)(4) shall be made by the

handlers in that category by mail ballot. All votes cast shall be

weighted according to the tonnage of certified merchantable hazelnuts

and, when shelled hazelnut grade and size regulations are in effect,

the inshell equivalent of certified shelled hazelnuts (computed to the

nearest whole ton) recorded by the Board as handled by each handler

during the two marketing years preceding the marketing year in which

nominations are made. If less than one ton is recorded for any such

handler, the vote shall be weighted as one ton. Voting will be by

position, and each eligible handler can vote for a member and an

alternate member. The person receiving the highest number of weighted

votes for each position shall be the nominee for that respective

position.

* * * * *

rs preceding the marketing year in which

nominations are made. If less than one ton is recorded for any such

handler, the vote shall be weighted as one ton. Voting will be by

position, and each eligible handler can vote for a member and an

alternate member. The person receiving the highest number of weighted

votes for each position shall be the nominee for that respective

position.

* * * * *

(f) Nominations received in the foregoing manner by the Board for

all handler and grower member and alternate member positions shall be

certified and sent to the Secretary at least 60 days prior to the

beginning of each two-year term of office, together with all necessary

data and other information deemed by the Board to be pertinent or

requested by the Secretary. If nominations are not made within the time

and manner specified in this subpart, the Secretary may, without regard

to nominations, select the Board members and alternates on the basis of

the representation provided for in this subpart.

* * * * *

7. In Sec. 982.33, paragraph (b) is revised to read as follows:

Sec. 982.33 Selection and term of office.

* * * * *

(b) Term of office. The term of office of Board members and their

alternates shall be for two years beginning on July 1 and ending on

June 30, but they shall serve until their respective successors are

selected and have qualified: Provided, That beginning with the 199____-

9____ marketing year, no member shall serve more than three consecutive

two-year terms as member and no alternate member shall serve more than

three consecutive two-year terms as alternate unless specifically

exempted by the Secretary. Nomination elections for all Board grower

and handler member and alternate positions shall be held every two

years.

* * * * *

8. In Sec. 982.37, paragraph (b) is revised to read as follows:

Sec. 982.37 Procedure.

* * * * *

utive

two-year terms as member and no alternate member shall serve more than

three consecutive two-year terms as alternate unless specifically

exempted by the Secretary. Nomination elections for all Board grower

and handler member and alternate positions shall be held every two

years.

* * * * *

8. In Sec. 982.37, paragraph (b) is revised to read as follows:

Sec. 982.37 Procedure.

* * * * *

(b) The Board may vote by mail, telephone, telegraph, or other

means of communication: Provided, That any votes (except mail votes) so

cast shall be confirmed at the next regularly scheduled meeting. When

any proposition is submitted for voting by any such method, its

adoption shall require 10 concurring votes.

* * * * *

9. In Sec. 982.39, paragraph (i) is revised to read as follows:

Sec. 982.39 Duties.

* * * * *

(i) To furnish to the Secretary a report of the proceedings of each

meeting of the Board held for the purpose of making marketing policy

recommendations.

10. In Sec. 982.40, paragraph (c)(2) introductory text is amended

by removing the word ``shall'' in the third sentence and adding in its

place the word ``may''.

11. In Sec. 982.46, paragraph (b) is revised to read as follows:

Sec. 982.46 Inspection and certification.

* * * * *

(b) All hazelnuts so inspected and certified shall be identified as

prescribed by the Board. Such identification shall be affixed to the

hazelnut containers by the handler under direction and supervision of

the Board or the Federal-State Inspection Service, and shall not be

removed or altered by any person except as directed by the Board.

* * * * *

Sec. 982.51 [Amended]

12. In Sec. 982.51, paragraph (a) is amended by removing the word

``percent'' at the end of the first sentence.

13. In Sec. 982.52, paragraph (b) is revised to read as follows:

Sec. 982.52 Disposition of restricted hazelnuts.

* * * * *

or the Federal-State Inspection Service, and shall not be

removed or altered by any person except as directed by the Board.

* * * * *

Sec. 982.51 [Amended]

12. In Sec. 982.51, paragraph (a) is amended by removing the word

``percent'' at the end of the first sentence.

13. In Sec. 982.52, paragraph (b) is revised to read as follows:

Sec. 982.52 Disposition of restricted hazelnuts.

* * * * *

(b) Export. Sales of certified merchantable restricted hazelnuts

for shipment to destinations outside the United States and such other

distribution areas as may be recommended by the Board and established

by the Secretary shall be made only by the Board. Any handler desiring

to export any part or all of that handler's certified merchantable

restricted hazelnuts shall deliver to the Board the certified

merchantable restricted hazelnuts to be exported, but the Board shall

be obligated to sell in export only such quantities for which it may be

able to find satisfactory export outlets. Any hazelnuts so delivered

for export which the Board is unable to export shall be returned to the

handler delivering them. Sales for export shall be made by the Board

only on execution of an agreement to prevent exportation into the area

designated in Sec. 982.16. A handler may be permitted to act as an

agent of the Board, upon such terms and conditions as the Board may

specify, in negotiating export sales, and when so acting shall be

entitled to receive a selling commission as authorized by the Board.

The proceeds of all export sales, after deducting all expenses actually

and necessarily incurred, shall be paid to the handler whose certified

merchantable restricted hazelnuts are so sold by the Board.

* * * * *

14. In Sec. 982.54, paragraphs (b), (c), (d), (e) and (f) are

revised to read as follows:

Sec. 982.54 Deferment of restricted obligation.

* * * * *

sion as authorized by the Board.

The proceeds of all export sales, after deducting all expenses actually

and necessarily incurred, shall be paid to the handler whose certified

merchantable restricted hazelnuts are so sold by the Board.

* * * * *

14. In Sec. 982.54, paragraphs (b), (c), (d), (e) and (f) are

revised to read as follows:

Sec. 982.54 Deferment of restricted obligation.

* * * * *

(b) Bonding requirement. Such bond or bonds shall, at all times

during their effective period, be in such amounts that the aggregate

thereof shall be no less than the total bonding value of the handler's

deferred restricted obligation. The bonding value shall be the deferred

restricted obligation poundage multiplied by the applicable bonding

rate. The cost of such bond or bonds shall be borne by the handler

filing same.

(c) Bonding rate. Said bonding rate shall be an amount per pound as

established by the Board. Such bonding rate shall be based on the

estimated value of restricted credits for the current marketing year.

Until bonding rates for a marketing year are fixed, the rates in effect

for the preceding marketing year shall continue in effect. The Board

should make any necessary adjustments once such new rates are fixed.

(d) Restricted credit purchases. Any sums collected through default

of a handler on the handler's bond shall be used by the Board to

purchase restricted credits from handlers, who have such restricted

credits in excess of their needs, and are willing to part with them.

The Board shall at all times purchase the lowest priced restricted

credits offered, and the purchases shall be made from the various

handlers as nearly as practicable in proportion to the quantity of

their respective offerings of the restricted credits to be purchased.

stricted credits from handlers, who have such restricted

credits in excess of their needs, and are willing to part with them.

The Board shall at all times purchase the lowest priced restricted

credits offered, and the purchases shall be made from the various

handlers as nearly as practicable in proportion to the quantity of

their respective offerings of the restricted credits to be purchased.

(e) Unexpended sums. Any unexpended sums which have been collected

by the Board through default of a handler on the handler's bond,

remaining in the possession of the Board at the end of a marketing

year, shall be used to reimburse the Board for its expenses, including

administrative and other costs incurred in the collection of such sums,

and in the purchase of restricted credits as provided in paragraph (d)

of this section.

(f) Transfer of restricted credit purchases. Restricted credits

purchased as provided for in this section shall be turned over to those

handlers who have defaulted on their bonds for liquidation of their

restricted obligation. The quantity delivered to each handler shall be

that quantity represented by sums collected through default.

* * * * *

15. In Sec. 982.57, paragraph (b) is revised to read as follows:

Sec. 982.57 Exemptions.

* * * * *

(b) Sales by growers direct to consumers. Any hazelnut grower may

sell hazelnuts of such grower's own production free of the regulatory

and assessment provisions of this part if such grower sells such

hazelnuts in the area of production directly to end users at such

grower's ranch or orchard or at roadside stands and farmers' markets.

The Board, with the approval of the Secretary, may establish such

rules, regulations, and safeguards and require such reports,

certifications, and other conditions, as are necessary to ensure that

such hazelnuts are disposed of only as authorized. Mail order sales are

not exempt sales under this part.

16. In Sec. 982.58, the last sentence of paragraph (a) is revised

to read as follows:

ts.

The Board, with the approval of the Secretary, may establish such

rules, regulations, and safeguards and require such reports,

certifications, and other conditions, as are necessary to ensure that

such hazelnuts are disposed of only as authorized. Mail order sales are

not exempt sales under this part.

16. In Sec. 982.58, the last sentence of paragraph (a) is revised

to read as follows:

Sec. 982.58 Research, promotion, and market development.

(a) * * * The expenses of such projects shall be paid from funds

collected pursuant to Sec. 982.61, Sec. 982.63, or credited pursuant to

paragraph (b) of this section.

* * * * *

17. Section 982.61 is amended by designating the existing

undesignated paragraph as paragraph (a) and adding a new paragraph (b)

to read as follows:

Sec. 982.61 Assessments.

(a) * * *

(b) In order to provide funds for the administration of the

provisions of this part during the first part of a fiscal period before

sufficient operating income is available from assessments on the

current year's shipments, the Board may accept the payment of

assessments in advance, and may also borrow money for such purpose.

Further, payment discounts may be authorized by the Board upon the

approval of the Secretary to handlers making such advance assessment

payments.

18. A new Sec. 982.63 is added to read as follows:

Sec. 982.63 Contributions.

The Board may accept voluntary contributions but these shall only

be used to pay expenses incurred pursuant to Sec. 982.58. Furthermore,

such contributions shall be free from any encumbrances by the donor and

the Board shall retain complete control of their use.

Dated: May 24, 1995.

Lon Hatamiya,

Administrator.

[FR Doc. 95-13928 Filed 6-6-95; 8:45 am]

BILLING CODE 3410-02-P