[Federal Register: August 4, 2003 (Volume 68, Number 149)]
[Proposed Rule]
[Page 45989-46033]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04au03-15]
[[Page 45989]]
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Part III
Department of Agriculture
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Agricultural Marketing Service
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7 CFR Part 983
Pistachios Grown in California; Recommended Decision and Opportunity To
File Written Exceptions to Proposed Marketing Agreement and Order No.
983; Proposed Rule
[[Page 45990]]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 983
[Docket No. AO-F&V-983-2; FV02-983-01]
Pistachios Grown in California; Recommended Decision and
Opportunity To File Written Exceptions to Proposed Marketing Agreement
and Order No. 983
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Proposed rule and opportunity to file exceptions.
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SUMMARY: This recommended decision proposes the issuance of a marketing
agreement and order (order) for pistachios grown in California. The
proposed order would set standards for the quality of pistachios
produced and handled in California by establishing a maximum aflatoxin
tolerance level, maximum limits for defects, a minimum size
requirement, and mandatory inspection and certification. An eleven-
member committee, consisting of eight producers, two handlers, and one
public member, would locally administer the program. The program would
be financed by assessments on handlers of pistachios grown in the
production area. The objective of the program would be to enhance
grower returns through the delivery of higher-quality pistachios to
consumers. This rule also announces the Agricultural Marketing
Service's intention to request approval by the Office of Management and
Budget of new information collection requirements to implement this
program.
DATES: Written exceptions must be filed by September 3, 2003. Pursuant
to the Paperwork Reduction Act, comments on the information collection
burden must be received by October 3, 2003.
ADDRESS: Four copies of all written exceptions should be filed with the
Hearing Clerk, U.S. Department of Agriculture, room 1081-S, Washington,
DC 20250-9200, Facsimile number (202) 720-9776. All comments should
reference the docket number and the date and page number of this issue
of the Federal Register. Comments will be made available for public
inspection in the Office of the Hearing Clerk during regular business
hours, or can be viewed at: http://www.ams.usda.gov/fv/moab.html.
FOR FURTHER INFORMATION CONTACT: Melissa Schmaedick, Marketing Order
Administration Branch, Fruit and Vegetable Programs, Agricultural
Marketing Service, USDA, Post Office Box 1035, Moab, UT 84532,
telephone: (435) 259-7988, fax: (435) 259-4945; or Anne M. Dec,
Marketing Order Administration Branch, Fruit and Vegetable Programs,
AMS, USDA, 1400 Independence Avenue SW., Stop 0237, Washington, DC
20250-0237; telephone: (202) 720-2491, fax: (202) 720-8938. Small
businesses may request information on this proceeding by contacting Jay
Guerber, Marketing Order Administration Branch, Fruit and Vegetable
Programs, AMS, USDA, 1400 Independence Avenue SW., Stop 0237,
Washington, DC 20250-0237; telephone: (202) 720-2491, fax: (202) 720-
8938.
SUPPLEMENTARY INFORMATION: Prior documents in this proceeding: Notice
of Hearing issued on June 19, 2002, and published in the June 26, 2002,
issue of the Federal Register (67 FR 43045).
This action is governed by the provisions of sections 556 and 557
of title 5 of the United States Code and is therefore 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 marketing agreement
and order regulating the handling of pistachios grown in California,
and the opportunity to file written exceptions thereto. Copies of this
decision can be obtained from Melissa Schmaedick, whose address is
listed above.
This recommended decision 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 marketing agreement and order are based on the record
of a public hearing held July 23-25, 2002, in Fresno, California. The
hearing was held to receive evidence on the proposed marketing order
from producers, handlers, and other interested parties located
throughout the proposed production area. Notice of this hearing was
published in the Federal Register on June 26, 2002.
This proposal is the result of nearly three years of efforts
undertaken by the Proponents Committee (proponents), a group
representing the majority of producers and handlers of pistachios in
California. The Proponents Committee was established in 2000 as a
result of renewed industry interest in a Federal marketing order.
An earlier attempt to establish a Federal marketing order in 1996
on behalf of the pistachio industry by the California Pistachio
Commission (CPC or Commission) and the Western Pistachio Association
(Association) was terminated in 2000 due to a lack of industry support
for certain proposed provisions. The current proposal is different from
that which was previously proposed since many controversial issues have
either been removed or resolved through more exacting specifications in
the proposed order. The Proponents Committee is independent of the
Commission and the Association.
Witnesses at the hearing explained that the provisions of this
proposal aim to provide the California pistachio industry with a tool
to regulate the quality of pistachios handled in California. This would
include preventing pistachios containing aflatoxin above the proposed
permitted maximum tolerance level of 15 parts per billion (ppb) from
entering the market place. The proposed order would also preclude
defective and small pistachios from being sold. Under the proposed
order, testing and certification of pistachios for quality (including
aflatoxin) would be mandatory. A mandatory regulatory program would
provide the industry with an effective means of ensuring product
quality, thereby enhancing customer satisfaction.
At the conclusion of the hearing, the Administrative Law Judge
fixed September 23, 2002, as the final date for interested persons to
file proposed findings and conclusions or written arguments and briefs
based on the evidence received at the hearing. One brief was filed on
behalf of the Proponents Committee in support of the proposed program
and its provisions. The brief also recommended certain changes in the
regulatory text of the proposed order as a result of the public hearing
held in Fresno, California from July 25 through July 27, 2002. These
changes are discussed as appropriate later in this document.
Material Issues
The material issues presented on the record of hearing are as
follows:
1. Whether the handling of pistachios produced in the production
area is in the current of interstate or foreign commerce or directly
burdens, obstructs, or affects such commerce;
2. Whether the economic and marketing conditions are such that they
justify a need for a Federal marketing agreement and order which would
tend
[[Page 45991]]
to effectuate the declared policy of the Act;
3. What the definition of the production area and the commodity to
be covered by the order should be;
4. What the identity of the persons and the marketing transactions
to be regulated should be;
5. What the specific terms and provisions of the order should be,
including:
(a) The definitions of terms used therein which are necessary and
incidental to attain the declared objectives and policy of the Act and
order;
(b) The establishment, composition, maintenance, procedures, powers
and duties of an administrative committee for pistachios that would be
the local administrative agency for assisting USDA in the
administration of the order;
(c) The authority to incur expenses and the procedure to levy
assessments on handlers to obtain revenue for paying such expenses;
(d) The establishment of mandatory inspection and certification for
aflatoxin, quality and size requirements for California pistachios;
(e) The establishment of requirements for handler reporting and
recordkeeping;
(f) The requirement for compliance with all provisions of the order
and with any regulations issued under it;
(g) The requirement for periodic continuance referenda;
(h) An exemption for handlers of non-commercial quantities of
pistachios;
(i) Coordination of administration with the California Pistachio
Commission program;
(j) Additional terms and conditions as set forth in Sec. 983.59
through Sec. 983.69 of the Notice of Hearing published in the Federal
Register of June 26, 2002, which are common to all marketing agreements
and orders, and other terms and conditions published at Sec. 983.90
through Sec. 983.92 that are common to marketing agreements only; and
6. Whether the proposed marketing order and its provisions, if
approved in grower referendum, should be implemented in two phases.
Findings and Conclusions
The following findings and conclusions on the material issues are
based on the record of the hearing.
Material Issue Number 1--Whether the Handling of California Pistachios
is in the Current of Interstate or Foreign Commerce
The record indicates that the handling of pistachios grown in
California is in the current of interstate or foreign commerce or
directly burdens, obstructs or affects such commerce.
Witnesses testifying at the hearing stated that over 97 percent of
the pistachios produced in the United States are grown in California
orchards. There are minor amounts of commercial plantings in eastern
Arizona and New Mexico. However, it is estimated that these States
account for only 2 and less than 1 percent of national production,
respectively.
The record shows that domestic consumption of California pistachios
is well established, with the U.S. market representing an estimated 70
percent of total production distributed in 1999-2000. Pistachios grown
in the proposed production area are shipped throughout the United
States, and the California industry, through the Commission, conducts a
national promotion program for its product.
The record also shows that export markets are increasingly
important to California producers and handlers. About 30 percent of the
crop is sold in foreign markets in more than 40 countries. According to
the 2000-2001 CPC Annual Report, Germany, Japan, Canada and Hong Kong
are California's largest pistachio export destinations. Exports to
Germany alone accounted for 20 percent of total inshell pistachio
exports in 1999-2000.
Evidence presented at the hearing confirmed that any handling of
California pistachios in market channels, including intrastate
shipments, exerts an influence on all other handling of such
pistachios. Thus, it is concluded that the handling of pistachios grown
in the proposed production area is in the current of interstate and
foreign commerce and directly affects such commerce.
Material Issue Number 2--The Need for a Pistachio Marketing Order
The record evidence demonstrates that there is a need for a
marketing order for California pistachios.
Farming pistachios is a costly investment with a significant delay
in benefits and an unreliable crop yield. Increasing yields have led to
an increasing overall value of California pistachio production.
However, to remain economically viable, producers must maintain a level
of return per pound harvested that covers their cost of production.
Witnesses of the proposed order assert that maintaining a high level of
quality product in the market will lead to increasing consumer demand
and stability in producer returns.
Poor quality pistachios impact demand, and the potential growth of
demand, for pistachios. Characteristics routinely deemed as ``poor
quality'' by customers of the California pistachio industry include
small size, and excessive internal and external blemishes. Market
studies and references to customer comment databases presented by
witnesses at the hearing demonstrate that the presence of poor quality
pistachios in the marketplace significantly impacts demand in a
negative way.
According to record evidence, minimizing the level of aflatoxin in
California pistachios is another significant quality factor, since
aflatoxin is a known carcinogenic. Consumer concerns over aflatoxin can
impact their perception of the quality of pistachios, and therefore
negatively impact demand. Moreover, any market disturbances related to
aflatoxin in pistachios, regardless of the origin of those pistachios,
could have a detrimental effect on the California pistachio industry. A
regulatory program limiting the amount of aflatoxin tolerated in
pistachios would be useful to bolster consumer confidence in the
quality of California pistachios.
Pistachio acreage has consistently increased in California, from
just over 20,000 bearing acres in 1979 to 78,000 bearing acres in 2001.
The number of non-bearing acres (i.e., acres less than 7 years old, not
yet in full production) has also shown consistent growth, increasing
from 17,062 acres in 1997 to 23,500 acres in 2001. Yield per acre has
also been steadily rising. Over the 1976-1980 period, average yield per
bearing acre measured 1,097 pounds; by 1996-2000, this average
increased to 2,418 pounds.
Higher yields and increasing acreage have resulted in increasing
production. According to information submitted by the California
Pistachio Commission, production in 2000 totaled 242 million pounds, a
64 percent increase over 1995 production, which totaled 148 million
pounds. Moreover, witnesses at the hearing indicated that maturing
acreage, absent any additional new plantings, will likely result in a
60 percent increase in California pistachio production over the coming
years.
Several witnesses at the hearing testified that, in light of
increasing production, future stability of market returns is reliant on
continually increasing consumer demand for pistachios. These witnesses
stated that strong consumer demand, which is ultimately related to
consumer perceptions of product quality, is
[[Page 45992]]
essential to the continued economic well-being of the California
pistachio industry. Moreover, witnesses discussed the importance of
implementing a marketing order program that would provide a regulatory
structure to monitor and ensure that minimum quality standards are not
compromised as production of California pistachios increases. One of
the most important quality characteristics cited by witnesses is the
regulation of aflatoxins as these carcinogenic molds can be found in
improperly handled pistachios.
The proposed order would set quality standards for pistachios
produced and handled in California by establishing a maximum aflatoxin
tolerance level, maximum limits for defects, a minimum size
requirement, and mandatory inspection and certification. Witnesses of
the proposed marketing order argued that this regulatory program would
bolster consumer demand for pistachios.
The relationship among product quality, consumer demand, and
producer returns in the pistachio industry was demonstrated at the
hearing. Pistachio production is not only costly in terms of initial
investment and cultural costs, but it is highly unpredictable in terms
of returns. Between the initial processes of cleaning, hulling, sorting
and drying, a significant portion of the initial volume harvested is
reduced. This volume is further reduced as the handling process reaches
its final stages of further sorting for quality and final preparation
for market. As such, witnesses explained that ultimate pistachio sales
are based on approximately 30 percent of the volume initially harvested
from the field. Because of this, witnesses stated that the process of
extracting the highest quality portion of the harvest, and ensuring
consumer satisfaction with that product, is crucial to determining the
value of the crop.
Pistachio production is similar to other nut crops in that yield
and total production are impacted by the alternate bearing nature of
pistachio trees (meaning cyclical high and low production years). In
addition, producer returns and total crop value are dependent on the
overall quality of the crop. One example is the percentage of harvest
that is either ``open shell'' or ``closed shell.'' Each harvest yields
a certain percentage of nuts that have not naturally opened prior to
harvest. These nuts are classified as ``closed shell,'' ``shelling
stock'' or ``non-splits,'' and have a lower market value than those
nuts that are naturally split, or ``open shell.'' As the percentage of
open-shells varies, the total value of production can change
significantly from one year to the next.
Total value and value per acre are generally higher in high
yielding years. An economic analysis of the California pistachio
industry presented at the hearing by Dr. Dan Sumner of the University
of California, Davis, indicates that trends for total crop value and
value per bearing acre have been increasing over the past 20 years. In
1980, the total value of the pistachio crop in California was $55.8
million. By 2000, total crop value had increased more than four-fold,
reaching $236.72 million. These gains are attributed to increases in
both total pistachio producing acreage and yield per acre. Average
value per bearing acre increased from $1,642 per acre in 1980-1984 to
$2,658 per acre in 1996-2000.
Conversely, grower return per pound is generally higher in low
yielding years. According to CPC historical price data, price per pound
has gradually decreased over the past 20 years, ranging from a high of
$2.05 per pound in 1980 to a low of $0.98 per pound in 2000. Thus, in
terms of current producer ability to reconcile production costs with
receipts, yield per acre must be sufficiently high to compensate for
low returns in price per pound. According to the record, the proposed
order would assist in stabilizing, if not increasing, producer returns
for pistachios. The quality requirements proposed herein would not only
assist in fortifying consumer demand by ensuring consumer satisfaction
with product quality, but mandatory quality standards would also boost
domestic prices by culling poor product, which tends to have price-
depressing effects, from the market.
The record evidence is that total costs of production can be
divided into three categories: the costs of orchard establishment,
cultural costs and administrative costs. Establishment costs, or the
overall cost to develop an acre of pistachios until revenues exceed
growing expenses, are estimated at between $10,000 and $15,000, with an
average tree maturation period of 7 years. In order to recover these
investment costs, the hearing record indicates that producers generally
target an 11 per cent return on investment, estimated at between $1,100
and $1,650 per acre. Annual per acre cultural costs average between
$1,100 and $1,600, once the trees are productive. Administrative costs
include the cost of farm management and crop financing, and range from
$150 to $200 per acre.
Given the cost estimates above, a producer would need to harvest an
average of 2,000 pounds per acre to cover total production costs. This
calculation assumes an average field price of $1.25 per pound, which is
based on 24 years of CPC crop value statistics. For example, minimum
estimated cultural costs plus administrative costs and an 11 percent
return on investment results in a minimum total production cost of
$2,350 per acre per year. Total production costs less the targeted 11
percent return on investment equals $1,250 per acre, or an average
harvest of 1,000 pounds per acre to cover production costs without a
return on investment.
While the CPC 2002 Annual Report indicates a State average of
$2,619 per acre in gross receipts over the last four years, 1998-2001
CPC yield per acre information reveals that only 6 out of 26 California
counties with pistachio production yield on average more than 2,000
pounds per acre. These counties include Colusa, Sutter, Madera, Fresno,
Kings and Kern, and together represent over 88 percent of total
California pistachio production between the years 1998 to 2001. Glenn,
Butte, Placer, Yolo, Contra Costa, San Joaquin, Calaveras, Stanislaus,
Merced, Tulare and Santa Barbara counties yield on average between
1,000 to 2,000 pounds per acre and represent roughly 12 percent of
total State production. Shasta, Tehama, Yuba, Solano, Sacramento, San
Luis Obispo, Los Angeles, San Bernardino and Riverside counties yield
on average less than 1,000 pounds per acre and represent less than one
percent of California pistachio production.
Given the assumptions made above, approximately 88 percent of the
industry is covering total costs of production. Conversely, roughly 12
percent of the industry is currently covering cultural costs but not
generating a return on their investment.
In 1996, high levels of aflatoxin were detected in foreign
pistachios imported into the European Union (EU). Publicity about the
presence of aflatoxin at high levels first led to a total ban on
imports and has since reduced the number of pistachios imported from
all sources into the EU by 45 percent. In Germany the drop was 60
percent, and by 2000 imports were still only 53 percent of 1997 levels.
Witnesses testifying at the hearing used this case of pistachios
contaminated with aflatoxin, and the subsequent damage to consumer
confidence and demand for pistachios in the EU, to demonstrate the
industry's need to safeguard against similar findings in California
pistachios. According to those who testified, mandatory inspection and
certification
[[Page 45993]]
against high levels of aflatoxin would be the most effective means of
preventing such an event with pistachios handled in California.
Similarly, witnesses stressed the need to have a mandatory
regulatory system in place in the event that aflatoxin were found in
non-California pistachios, but were to universally impact the demand of
all pistachios, regardless of origin. If such an event were to occur,
witnesses of the order stressed the usefulness of having a federally
regulated program for aflatoxin in order to maintain consumer
confidence with regard to California pistachios.
Evidence presented at the hearing supports a Federal marketing
order for pistachios grown in California. In view of the foregoing, and
based on the record of the proceeding, it is concluded that current
economic and marketing conditions justify a need for a marketing order
for California pistachios. The order would meet many needs of the
industry and would tend to effectuate the declared policy of the Act.
Material Issue Number 3--Definition of Pistachio and Production Area
Definitions of the terms ``pistachio'' and ``production area''
should be included in the order to delineate the commodity and the area
that would be regulated under the provisions of the proposed program.
``Pistachio'' should be defined to mean the nut or nuts of the
pistachio tree, genus Pistacia Vera. The term ``pistachio'' would cover
all fruits of the Pistcaia Vera grown in the production area, whether
inshell or shelled. Pistachios grown outside the production area would
not be covered by the proposed order.
Record evidence explains that the pistachio nut is the seed of a
semidry drupaceous fruit, or stone fruit, much like peaches and mangos.
However, while peach flesh is eaten and the seed discarded, the
opposite is true of the pistachio; the flesh or ``hull'' is discarded
and the seed, once it has been freed from protection of the thin, bony
shell, is eaten.
Pistachio development starts with a seedling being grown in a pot
in a nursery for nearly two years. The seedlings are then transplanted
into the field at a rate of 130 to 160 seedlings per acre, usually in
January or February when the seedlings are dormant. Toward the end of
the first growing season these seedlings are then grafted or budded in
the field to Pistacia Vera, both male and female. The pistachio tree is
dioecious, meaning there are both ``male'' and ``female'' trees, and is
pollinated by the wind. The typical California pistachio orchard
requires one male tree for every 8-24 females.
Pistachio trees typically require six years of maturation after
budding to produce a commercial crop. During the maturation period,
young trees require considerable care, including yearly pruning,
irrigation, fertilizer application and pest control, thus contributing
to the considerable investment costs of establishing a pistachio
orchard. Harvest of a tree's first commercial-sized crop typically
occurs in the tree's seventh year. The crop and tree continue to grow
in size for another seven to eight years until the tree is considered
fully mature and has reached a height of approximately 25 to 30 feet.
Pistachio trees require a significant dormant period, currently
estimated to be 800 hours below 45[deg]F, followed by long, hot, dry
summers. The trees are pruned during dormancy, and once they bloom, in
late March or early April, they need to be irrigated, fertilized and
treated for various pests during the rest of the year. The major input
is usually water, as each acre requires approximately 36'' of water to
be applied during the growing season if the trees are to produce a full
crop.
Currently there is no consensus as to the useful commercial life of
a tree. Pistachio trees in the Middle East have lived for thousands of
years. Trees appear to be long lived in California, although producers
must replace 2 to 3 percent of their trees that die from disease or
other causes every year. The overall cost to develop an acre of
pistachios until revenues exceed growing expenses is between $10,000
and $15,000 per acre, and does not differ significantly due to the size
of the planting.
The term ``production area'' should be defined to mean the State of
California. The record shows that the production area defined in the
proposed order is the major pistachio producing area in the United
States.
Witnesses testifying at the hearing stated that over 97 percent of
the pistachios produced in the United States are grown in California
orchards. Production is concentrated in six counties in the San Joaquin
Valley, in the central part of the State. However, commercial
production is reported in an additional 20 counties throughout
California. While there are some counties in the State in which no
pistachios are currently produced, witnesses testified that the
production area should be defined to allow for coverage of any new
pistachio development outside current plantings within California.
Witnesses also proposed coverage of the entire State because the
industry (through the California Pistachio Commission) finances
national and international promotion programs to expand demand for
California pistachios. Thus, buyers of California pistachios consider
the entire State to be the pistachio producing area.
While the proposed Federal order and the State commission would
operate independently of each other, witnesses testified that the
quality assurance standards implemented under the proposed order would
complement the promotion activities undertaken by the Commission. Thus,
they believed that having the two programs would benefit the California
pistachio industry.
Record evidence indicates that there are minor amounts of
commercial plantings in eastern Arizona and New Mexico. However, it is
estimated that these states produce only 2 and less than one percent of
national production, respectively.
Witnesses explained that Arizona and New Mexico had been considered
as part of the production area during the initial stages of drafting
the proposed order. According to record testimony, although there is
some interest in the proposed marketing order among Arizona and New
Mexico pistachio producers, support in those States is not strong
enough to warrant including them in the proposed production area.
Record evidence also indicates that pistachios produced in Arizona
and New Mexico are mainly consumed within the respective State
boundaries and have a relatively limited presence in national and
international markets. Moreover, acreage in both States is neither
increasing, nor is it expected to increase in the future, as climate
factors limit the growth potential of existing pistachio orchards.
Pistachio production from these States is not considered to represent a
significant portion of total domestic production. It is also unlikely
that Arizona and New Mexico pistachios will hold a significant presence
in domestic and international markets in the future.
Lastly, information presented at the hearing indicates that
California nurserymen have sold a limited amount of pistachio trees
into other western states, such as Nevada, Utah and Texas, but there is
no known significant commercial production in these States. Production
from these States is not believed to enter into the current of
interstate commerce.
The Act requires that marketing orders be limited in their
application to the smallest regional production area found practicable.
For the reasons given
[[Page 45994]]
above, it is concluded that covering pistachios grown in California
(and not those grown in other States) under the proposed order is
consistent with carrying out the declared policy of the Act and,
therefore, the production area should be defined as hereinafter set
forth.
Material Issue Number 4--Definition of Handler and Handle
The term ``handler'' should be defined to identify the persons who
would be subject to regulation under the order. Such term should apply
to any person who handles pistachios within the production area, or
places pistachios in the current of commerce within the production
area, or in the current of commerce between the production area and any
point outside thereof. A handler could be an individual, a joint
venture, partnership, corporation, or other business entity.
The definition of ``handler'' identifies persons who would be
responsible for meeting the requirements of the order, including paying
assessments, complying with testing and certification provisions of the
order, and submitting reports and other information required for the
administration of the proposed program. The term is also used to
identify those persons who are eligible to vote for, and serve as,
handler members and alternate members on the committee.
The term ``handle'' should be defined in the order to establish the
specific functions that would place pistachios in the current of
commerce within the production area, or between the production area and
any point outside thereof, and to provide a basis for determining which
functions are subject to regulation under the authority of the proposed
marketing order.
``Handle'' should be defined to mean engaging in: (a) Receiving
pistachios, (b) hulling and drying pistachios, (c) further preparing
pistachios by sorting, sizing, shelling, roasting, cleaning, salting,
and/or packaging for marketing in or transporting to any and all
markets in interstate or foreign commerce, and (d) placing pistachios
into the current of commerce between the production area and any point
outside that area.
The record evidence is that the handling of pistachios is a multi-
step process. Witnesses described the harvest and initial processing
(hulling and drying) of pistachios as an intense period of activity,
typically beginning in early September, when the pistachio nuts are
mature, and lasting for a period of 20 to 30 days.
The trees are deemed ready for harvest when the ``hull'' slips on
the shell when pressure is applied. By this time, approximately 75
percent of the nuts have naturally ``split,'' meaning that the shell
has naturally opened to give its characteristic ``open mouth''
appearance. This splitting of the shell typically will not be apparent,
as the hull or outer layer remains intact, protecting the kernel from
fungal infection and insect infestation. The hulls of some pistachios,
however, may split, thereby revealing the tender pistachio nut inside.
These pistachios, referred to as ``early splits,'' are more prone to
mold or insect infestation.
The balance of the pistachio harvest has not naturally opened.
These are referred to as ``closed shell'' or ``non-split'' pistachios.
According to record testimony, pistachios must be rapidly harvested
when mature in order to prevent insect infestation and staining of the
shell, and to avoid difficulty of handling an overripe product. During
the harvest process, each tree is mechanically shaken to cause the
pistachio nuts to fall into a catching frame. This method of harvesting
allows the California pistachio industry to harvest pistachios without
the nuts having to touch the ground, thereby avoiding possible
contamination from soil-borne molds or insects. The nuts are then
dumped from the catching frames into bins or trucks and readied for
transport to the handler.
The nuts, which contain a significant amount of moisture when
harvested, must arrive at the handling facility as soon as possible
after harvest. If the nuts are not hulled within 24 hours of their
removal from the tree, staining of the outer shell occurs, and this is
considered detrimental in the marketplace. Due to the short harvest
period and the significant investment in equipment at the handling
facility, witnesses explained that pistachio harvest will typically
take place 24 hours a day 7 days a week until harvest is complete.
At the handling facility, the nuts are weighed and emptied from the
trailers. As the emptying of bins or trucks takes place, usually
through bottom dump trailers into a pit, the nuts are sampled. This
sampling of wet product is used to determine the quality and payable
weight of the nuts being delivered.
Once the nuts have been sampled and the trash (i.e., leaves, twigs,
etc.) has been removed, the hull or the outer layer covering the shell
is removed by equipment that resembles large potato peelers. Once
hulled, the pistachios are then moved through various dewatering
devices prior to entering a dryer. Some handlers do some initial
quality sorting between hulling and drying, but this is not universal.
The nuts are then dried in high-powered dryers to about 14 percent
moisture. After drying, they are placed in storage in containers that
vary from 500-pound bins to 1,000,000-pound silos. During the initial
phase of storage, the nuts continue to be dried by air circulation, to
get them down to a safe, long-term storage moisture content of around 6
percent. At this stage, the nuts are stable and can remain in storage
for up to two years.
The sample taken at delivery is processed like the rest of the
nuts, i.e., the trash is removed and the nuts in the sample are hulled
and then dried before sorting. An assessment of the quality of the
sample is then made. The assessment may include such things as a
determination of the percentage of naturally split nuts, the color of
the shells, and the amount of insect infestation (if any). This
delivery sample may be used to determine payment to the producer, and
to give the handler some idea of the characteristics of the crop he or
she has to process.
The record shows that producers often commit their nuts to more
than one handler. The normal practice in the industry is to have
contracts between producers and handlers, many of them multi-year and
often with premiums for quality. Many of the contracts also have
minimum prices. Apart from this minimum price, the producer often does
not know what final price he/she will receive for the pistachios. The
handler makes interim payments throughout the year culminating in a
final payment, usually in August following the previous September's
harvest. The amount paid by the handler will depend in large part on
the price that he or she obtained for the processed crop, and the costs
of handling the pistachios.
When the nuts are removed from storage, the nuts are sorted, sized,
graded and mechanically separated into open and closed shell product.
These activities can take place in different sequences and the process
varies among handling facilities. As part of this process, a
considerable amount of trash, bad nuts, loose shells, etc., are removed
from the product stream. At this stage, the nuts may be ready for
market. However, some California pistachios are then roasted and salted
by the handler prior to being placed in consumer or industrial size
packages to be marketed.
Once the nuts have been roasted and salted, their shelf life is
reduced as they can become rancid or stale, and they need to be stored
at temperatures approximating 35 degrees Fahrenheit in order to remain
completely stable. If they are not placed in cold storage, they
[[Page 45995]]
have a shelf life of approximately nine months.
The record shows that all of these activities, from initial receipt
of the pistachios at the handling facility, to final packaging of the
product, should be included in the definition of ``handle.'' These
activities were identified as those necessary to prepare pistachios for
entering the stream of commerce and, as such, should be included in the
definition of the process which makes a person a ``handler,'' and,
thus, subject to regulation under the proposed order.
In addition, the hearing record indicates that placing California
pistachios into the current of commerce from within the production area
to points outside thereof for the purpose of hulling and drying, or
further processing would also constitute handling. In such cases, the
individual responsible for placing California pistachios into the
current of commerce would be considered a handler and would be subject
to the provisions of the proposed order.
USDA recommends adding a paragraph (d) to Sec. 983.14 of the
proposed order as it appeared in the Notice of Hearing. To clarify the
definition of ``handle,'' the following language is proposed to be
added: ``Placing California pistachios into the current of commerce
from within the production area to points outside thereof.''
According to the record, the acts of transporting pistachios from a
producer's orchard to a processing plant within the production area and
of transporting pistachios between handlers within the production area
should be excluded from the definition of ``handle.''
The transportation of pistachios from the orchard to the handling
facility is typically either performed by the producer him or her self,
or contracted out to third parties. Given that neither the producer nor
the contract hauler would be engaged in the process of preparing
pistachios for market in this capacity, their activities should be
excluded from those considered as part of ``handling.''
Similarly, witnesses stated that pistachios are customarily traded
among handlers, and that this activity should not be considered part of
the definition of ``handling.'' Trade among handlers predominantly
occurs as a means for individual handlers to buy or sell surplus
pistachios and to meet the demands of their respective customers.
Witnesses also explained that some handlers are better equipped to
handle pistachios that present processing problems. For example,
pistachios requiring re-working to meet industry quality standards may
be transferred from one handler to another for more efficient
processing.
The record evidence is that most producers do not handle their own
pistachios. However, a producer would become a handler if the producer
performs any handling functions. For example, a producer that hulls and
dries pistachios before shipment for further preparation for marketing
would be considered a handler. Once a producer becomes a handler, he or
she would be subject to the proposed order provisions.
Material Issue Number 5(a)--Other Definitions
(a) Certain terms should be defined for the purpose of specifically
designating their applicability and limitations whenever they are used
in the order.
``Accredited laboratory'' should be defined to mean a USDA
laboratory or any other laboratory that has been approved or accredited
by the U.S. Department of Agriculture for testing aflatoxin in
pistachios. Witnesses testified that the aflatoxin testing and
certification provisions of the proposed order are key components of
the quality control program deemed necessary by the California
pistachio industry. In order for the testing and certification process
to be credible, the order should provide that the laboratories
performing these functions must be accredited or approved by USDA.
``Act'' should be defined as the Agricultural Marketing Agreement
Act of 1937, as amended (7 U.S.C. 601-674). This is the statute under
which the proposed regulatory program would be operative, and this
definition avoids the need to refer to the citation throughout the
order.
According to record evidence, ``affiliation'' should be defined, as
it is important within the context of proposed eligibility requirements
for committee members and their alternates. Witnesses testified that
``affiliation'' should be defined to mean a person who is: (1) A
producer or handler that directly or indirectly, through one or more
intermediaries, owns or controls, or is controlled by or is under
common control with the producer or handler specified; or, (2) a
producer or handler who directly or indirectly through one or more
intermediaries, is connected in a proprietary capacity or shares the
ownership or control of the specified producer or handler with one or
more other producers or handlers.
According to the hearing record, the term ``control'' should be
further defined to mean ``the possession, direct or indirect, of the
power to direct or cause the direction of the management of policies of
a handler or a producer whether through voting securities, membership
in a cooperative, by contract or otherwise.''
Witnesses explained that this definition of ``affiliation'' is
proposed to ensure that persons who are in business together as
handlers or producers are limited in their representation on the
administrative committee. Further discussion of affiliation and its
intended use under the provisions of the proposed order appears under
material issue 5(b), the establishment of an agency to locally
administer the order.
``Aflatoxin'' should be defined as one of the several carcinogenic
mycotoxins produced by naturally occurring molds. Aflatoxin can be
found, and can spread, in improperly processed and stored nuts, dried
fruits and grains. According to information presented at the hearing,
this group of fungal toxins is produced by the molds Aspergillus flavus
and Aspergillus parasiticus. Aflatoxin is a known carcinogen and
potential contaminant for pistachios.
Proposed Sec. 983.38 sets forth a maximum aflatoxin level of 15
parts per billion (ppb) for California pistachios. This threshold was
substantiated by testimony from experts in the field of aflatoxin and
food contaminants, and is further discussed under material issue 5(d).
``Aflatoxin inspection certificate'' should be defined to mean a
certificate issued by a laboratory that is accredited or approved by
USDA to indicate that a lot of pistachios was tested for and met the
aflatoxin quality requirements proposed in this order. In particular,
an ``aflatoxin inspection certificate'' would indicate that the
pistachios have been tested for aflatoxin and the aflatoxin in the
nuts, if any, did not exceed a level of 15 ppb. Under the provisions of
this proposed order, no handler could ship pistachios for domestic
human consumption that exceed an aflatoxin level of 15 ppb. Witnesses
explained that any handler placing California pistachios into the
stream of domestic commerce for the purpose of human consumption would
be required to obtain an aflatoxin inspection certificate for each lot
of pistachios handled. Aflatoxin certificates would also be important
for committee record-keeping and auditing responsibilities with regard
to local administration of the order.
``Assessed weight'' should be defined to mean the weight of all
pistachios,
[[Page 45996]]
clear of debris, hulled and measured at 5 percent moisture, that are
received for processing by a handler within each production year.
Calculation of the assessed weight would be based on the weight of the
pistachios received from the field. As the handler receives pistachios,
a delivery sample would be taken, and the nuts in that sample cleaned,
hulled and dried to 5 percent moisture content. The actual weight of
the pistachios received would then be adjusted to reflect the
characteristics of the delivery sample and its final weight when dried
to 5 percent moisture content. According to the record, the 5 percent
moisture content is an industry standard used by all handlers.
In calculating the ``assessed weight'' for loose kernels, witnesses
explained that the calculation method proposed in the order reflects
current industry practices. To determine the weight of the kernels
without shells, the weight of the kernel would be multiplied by two as
it is generally accepted that the shell accounts for approximately half
of the weight of a whole pistachio nut.
Witnesses also explained that assessments placed on pistachio
handlers would be based on the volume of pistachios received by each
handler for processing during a production year. Hence, the term
``assessed weight'' is essential to the committee's assessment
collection. This term is further discussed in connection with proposed
Sec. 983.53, ``Assessments.''
The definition contained in the Notice of Hearing defined assessed
weight as ``* * * edible inshell pistachios received for processing by
a handler * * * .'' USDA recommends deleting the word ``edible'' from
the definition. This would correct a conflict between the Notice of
Hearing definition of ``assessed weight'' and the proposed definition
of ``edible pistachios,'' Sec. 983.13. The definition proposed under
Sec. 983.13, discussed later in this document, states that edible
pistachios are pistachios that do not exceed aflatoxin and other
quality provisions of the order described under Sec. Sec. 983.38 and
983.39. Pistachios received from the field for processing by the
handler have yet to be tested and certified as having met the proposed
provisions of Sec. Sec. 983.38 and 983.39. Therefore, USDA recommends
the modified definition described above.
According to the hearing record, the definition of assessed weight
could be modified based on a recommendation of the committee and
approval by the Department through the public rulemaking process.
Witnesses supported this authority so the industry would be able to
take advantage of any better standard developed to determine the
assessable weight of pistachios received by handlers.
``Certified pistachios'' should be defined to mean those pistachios
for which aflatoxin inspection certificates and minimum quality
certificates have been issued. Under the provisions of the proposed
order, California pistachios shipped for domestic human consumption
would be required to be certified. The definition of ``certified
pistachios'' is further discussed under material issue 5(d) related to
proposed quality (including aflatoxin) requirements.
``Committee'' should be defined to mean the administrative
committee, which would be established pursuant to the proposed
provisions of Sec. 983.32. The Act authorizes USDA to appoint an
agency or agencies to assist in the administration of a marketing order
program. This definition would identify the agency to locally
administer the proposed pistachio order. The committee would be
comprised of eight pistachio producers, two handlers, and one public
member. The establishment of a committee would be important to ensure
representation of the industry and consumers to USDA.
``Confidential data or information'' should be defined to mean
reports and records furnished or submitted by handlers to the committee
which include data or information constituting trade secrets or
disclosing the trade position, financial condition, or business
operations of a particular handler or its customers. This term is
relevant to proposed Sec. 983.48 pertaining to disclosure of handler
information. The confidentiality requirements in that provision of the
order, discussed under material issue 5(e) are consistent with those
contained in the Act.
``Department'' or ``USDA'' should be defined to mean the United
States Department of Agriculture, which is the governmental body
responsible for oversight of Federal marketing orders and agreements.
This definition allows the usage of the USDA acronym, or reference to
the USDA as the Department throughout the language of the proposed
order.
``District'' should be defined to mean each geographic subdivision
of the proposed production area described in the marketing order. The
district delineations defined would be important for the purposes of
committee nominations and producer representation of the regional areas
of the production area.
The record supports dividing the production area into three
districts. District 1 would consist of 11 counties in Southern
California (Tulare, Kern, San Bernardino, San Luis Obispo, Santa
Barbara, Ventura, Los Angeles, Orange, Riverside, San Diego, and
Imperial Counties). District 2 would be comprised of four counties in
Central California where pistachio production is most highly
concentrated (Kings, Fresno, Madera, and Merced Counties). District 3
would consist of the remaining 43 California counties, primarily in the
Northern portion of the State. The record shows that dividing the
production area into these three districts would provide for adequate
producer representation on the committee.
Allocation of producer membership among the districts would be
based, in large part, on the relative levels of acreage and production
among the districts, as well as the number of producers in each of the
districts. Allocation of producer membership among the districts is
discussed further under material issue 5(b).
Testimony indicated that authority should be provided to allow the
committee to recommend to USDA the re-establishment of district
boundaries and reapportionment of producer membership among the
districts. This would allow changes in producer representation on the
committee to reflect any future shifts in pistachio acreage and
production within the production area.
Witnesses also stated that district changes under the California
Pistachio Commission should be a criterion used in adjusting the
district boundaries under the proposed order. It may be reasonable to
assume that changes in the distribution of pistachio producers, acreage
and production would justify district reestablishment under both the
State and Federal programs. However, any recommended change in the
district boundaries under the order would be evaluated on its own
merits.
The definition of ``district'' contains authority to reestablish
district boundaries. Redistricting would require a recommendation of
the committee and approval by USDA through the rulemaking process.
Authority for reallocation of producer membership among the districts
is contained in proposed Sec. 983.32 and is discussed later in this
document.
``Domestic shipments'' should be defined to mean shipments to the
50 United States and to the territories of the United States. This term
is important as the proposed quality requirements (including those
pertaining to aflatoxin and size) would only apply to domestic
shipments. The proposed quality requirements would
[[Page 45997]]
not apply to exports. The regulatory text of proposed Sec. 983.12 is
recommended to be modified from what appeared in the Notice of Hearing
to include shipments to the District of Columbia as domestic shipments.
Omission of Washington, DC as a domestic market was an oversight on the
part of the proponent group, and its inclusion in the order is
consistent with the record evidence.
``Edible pistachios'' should be defined to mean pistachios that
meet the quality requirements (including those pertaining to aflatoxin
and size) set forth under the proposed provisions of Sec. 983.38,
``Aflatoxin levels,'' and Sec. 983.39, ``Minimum quality and size
levels.'' In particular, edible pistachios are pistachios that have
been certified that they do not exceed the maximum level for aflatoxin
and that they meet the minimum requirements for shell and kernel
quality (including those relating to size).
``Inshell pistachios'' should be defined to mean pistachios that
have a shell that has not been removed. This is to distinguish an
inshell pistachio from a pistachio kernel or shelled pistachio. This
term is further discussed in the context of proposed order provisions
relating to quality standards under material issue 5(d).
``Inspector'' should be defined to mean any inspector authorized or
approved by the USDA to inspect pistachios. This term is used in
connection with the quality requirements proposed to be included in the
order. An inspector, for example, would pull samples for aflatoxin
testing by accredited laboratories. Inspectors would also be
responsible for inspecting and certifying that pistachios meet the
other quality requirements of the order.
The record shows that the Federal or Federal-State Inspection
Service would be designated as the agency responsible for conducting
these activities. To provide maximum flexibility, however, the order
should provide that any inspector so authorized or approved by the
Department may perform these functions.
``Lot'' should be defined to mean any quantity of pistachios that
is submitted for testing for certification under the minimum quality
requirements (including aflatoxin and size) of this proposed order.
Specifically, a ``lot'' would be an identifiable quantity of pistachios
handled by a handler at one time. A lot could have common
characteristics, such as origin, type of packing, packer, consignor, or
markings.
The record shows that the definition of lot is important in the
context of traceability, as each lot tested would be issued a unique
identification number. Traceability would allow handlers to respond to
any sub-quality or aflatoxin issues that would necessitate preventing
pistachios from entering the stream of commerce. The definition of
``lot'' is further discussed under material issue 5(d) in connection
with the testing and certification provisions contained in proposed
Sec. Sec. 983.38 and 983.39.
``Minimum quality requirements'' should be defined to mean those
requirements specified under the proposed provisions of Sec. 983.39,
which prescribe the permissible maximum defects and minimum size for
inshell pistachios and pistachio kernels handled and shipped from and
within the proposed production area. Regulation of quality is central
to the proposed marketing order. This term is further discussed under
material issue 5(d).
In conjunction with the definition of minimum quality requirements
given above, ``minimum quality certificate'' should be defined to mean
a certificate issued by an inspector that would indicate that a lot of
pistachios was tested for the quality requirements proposed in this
order and whether it met those requirements. Under the provisions of
this program, no handler could ship pistachios for domestic human
consumption that exceeded the percentage of defects or small-sized nuts
allowed under Sec. 983.39. Witnesses explained that any handler
placing California pistachios into the stream of domestic commerce for
the purpose of human consumption would be required to obtain a minimum
quality certificate to this effect. Therefore, minimum quality
certificates are also important to the committee record-keeping and
auditing responsibilities.
``Part'' should be defined to mean the order regulating the
handling of pistachios grown in the State of California, and all rules
and regulations issued under the order. The order itself would be
defined as a subpart of the part, as would individual rules and
regulations.
According to record evidence ``person'' should be defined to mean
an individual, partnership, limited liability corporation, corporation,
trust, association, or any other business unit. This definition is
consistent with the definition contained in the Act.
``Processing'' should be defined to mean hulling and drying of
pistachios grown in the production area in preparation for market. This
term covers the first steps of the handling process that occurs after
the pistachios are harvested.
Witnesses describing the assessment collection aspects of the
proposed order explained that handler assessments would be based on the
volume of pistachios initially received from the field. Record evidence
suggests that it is important to differentiate between processing
activities and further preparing pistachios for market, as different
handlers may perform these different functions. That is, one handler
may perform the initial handling function of processing (hulling and
drying), while another handler performs the remaining steps in the
handling process.
Witnesses stated that only those handlers conducting the initial
processing activities would be responsible for paying assessments to
the committee. This would preclude the same pistachios from being
assessed more than once. This term is included in the discussion of
proposed Sec. 983.53, ``Assessments'' which appears under material
issue 5(c).
``Producer'' should be defined to identify those persons who are
eligible to vote for, and serve as, producer members and alternate
members of the committee, and those who are eligible to vote in any
referendum. The term should mean any person engaged within the
production area in a proprietary capacity in the production or growing
of pistachios for sale.
Each business unit (such as a corporation or partnership) should be
considered a single grower and should have a single vote in nomination
proceedings and referenda. The term ``producer'' should include any
person who owns or shares in the ownership of pistachios. For example,
a person who rents land and produces pistachios resulting in that
person's ownership of all or part of the pistachios produced on that
land would be considered a producer.
Also, any person who owns land, which that person does not farm,
but as rental for such land obtains ownership of a portion of the
pistachios produced thereon, should be regarded as a producer for that
portion of the pistachios received as rent. The tenant on such land
should be regarded as a producer for the remaining portion produced on
such land.
A joint venture is one whereby several persons contribute resources
to a single endeavor to produce and market a pistachio crop. In such
venture, one party may be the farmer who contributes one or more
factors such as labor, time, production facilities or cultural skills,
and the other party may be a handler who contributes money and
cultural, harvesting, and marketing supervision. Normally, a husband
and wife operation would be considered a partnership. Any
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individual, partnership, family enterprise, organization, estate, or
other business unit currently engaged in the production of pistachios
for market would be considered a producer under the order, and would be
entitled to vote in referenda and committee nominations. Each party
would have to have title to at least part of the crop produced,
electing its disposition, and receiving the proceeds there from. This
control would come from owning and farming land producing pistachios,
payment for farming services performed, or a landlord's share of the
crop for the use of the producing land. A landlord who only receives
cash for the land would not be eligible to vote. A business unit would
be able to cast only one vote regardless of the number and location of
its orchards, but each legal entity would be entitled to vote.
``Production year'' should be defined to mean the period beginning
on September 1st and ending on August 31st of each year, or such other
period as may be recommended by the committee and approved by the
Department. This period starts with the typical beginning of the
harvest season for pistachios and would prescribe a period of conduct
for the committee's administrative activities, such as preparing an
annual budget of expenses and accounting for receipts and expenditures
of funds. Thus, the term ``production year'' would be synonymous with
the term ``fiscal period.''
Witnesses at the hearing also supported the September 1 through
August 31 period because it coincides with the California Pistachio
Commission's accounting year. Having the same fiscal periods could
facilitate the joint management of the two programs, which could yield
administrative efficiencies to the industry's benefit.
As discussed under material issue 5(c), assessments would be based
on the volume of pistachios received by a handler in each production
year. Witnesses at the hearing stated that, although rare, there are
some instances when pistachio harvest begins earlier than September 1.
Record evidence suggests that this has happened in 2 out of the past 10
production years. In an effort to reconcile potential accounting
differences within the context of the proposed Federal program,
witnesses suggested that any pistachios harvested as much as four weeks
earlier than the beginning of September be attributed to the new year's
production total. Thus, this definition would also state that
pistachios harvested and received in August of any year would be
counted as part of the subsequent production year for assessment and
other marketing order purposes. The inclusion of pistachios harvested
and received within four weeks prior to September 1 represents a
modification of the order language contained in the Notice of Hearing.
``Proprietary Capacity'' should be defined to mean the capacity or
interest of a producer or handler that, either directly or through an
intermediary, is a property owner together with the rights of an owner
including the right to vote the interest in that capacity as an
individual, shareholder, member of a cooperative, partner, trustee, or
in any other capacity with respect to any other business unit.
Witnesses explained that this term is important to the proposed
order and its provisions in that this language would make persons who
are sharing ownership of a common business entity ``affiliated'' (see
previous definition) for purposes of eligibility to serve on the
committee. The term ``proprietary capacity'' is intended to imply
ownership of a business as compared to an employee status only.
``Secretary'' means the Secretary of Agriculture of the United
States or any officer or employee of the United States Department of
Agriculture who is, or who may hereafter be, authorized to act in the
Secretary's stead. The term includes any other officer or employee of
the United States Department of Agriculture who has been delegated or
who may be delegated the authority to act on behalf of the Secretary.
``Shelled pistachio'' should be defined to mean a pistachio kernel
or part thereof and is distinct from an ``inshell pistachio.'' This
term is relevant to the discussion of quality requirements set forth in
proposed Sec. Sec. 983.38 and 983.39, ``Aflatoxin levels'' and
``Minimum quality levels,'' and proposed Sec. Sec. 983.40 and 983.43,
``Failed lots/rework procedures'' and ``Reinspection.''
``Substandard pistachios'' should be defined to mean shelled or
inshell pistachios that do not meet the proposed quality requirements
(including those related to size and aflatoxin) of the proposed order.
According to the record, substandard pistachios should not be marketed
for domestic human consumption. The proposed order contains specific
provisions regarding the disposition of substandard pistachios. These
provisions appear in proposed Sec. Sec. 983.40 and 983.43, ``Failed
lots/rework procedures'' and ``Reinspection,'' and are discussed under
material issue 5(d).
Material Issue Number 5(b)--Administrative Committee
Pursuant to the Act, it is necessary to establish an agency to
administer the order locally and to provide for effective and efficient
operation of the order. The establishment and membership of an
administrative committee is addressed in Sec. Sec. 983.32 and 983.33
of the proposed order.
The hearing record shows that the committee should consist of 11
members. Eight members should be producers, two members should be
handlers, and one member should be selected from the general public.
Each member should have an alternate member who, possessing the same
qualifications as the member, could serve in that member's place and
stead in the event that the committee member could not fulfill his or
her duties.
Allocation of Producer Membership
For the purpose of producer representation, the proposed order
provides that the production area be divided into three districts.
District 1 would consist of Tulare, Kern, San Bernardino, San Luis
Obispo, Santa Barbara, Ventura, Los Angeles, Orange, Riverside, San
Diego and Imperial Counties. District 2 would consist of Kings, Fresno,
Madera, and Merced Counties. District 3 would consist of all other
Counties in California not included in Districts 1 and 2.
As mentioned previously, the record indicates that producer
representation from each district should be based, in large part, on
the relative number of producers, bearing acreage, and volume of
production in each district. According to record evidence, District 1
had 227 producers, 38,396 acres, and production totaling 95,889,846
pounds in 2001. This represents 35 percent of the total number of
California pistachio producers (647), 49 percent of the State's bearing
acreage (78,000) and 60 percent of total production in 2001
(160,295,282 pounds). District 2 had 358 producers (55 percent) and
36,330 acres (47 percent), and produced a total of 57,453,864 pounds
(36 percent) in 2001. District 3 had 62 producers (10 percent), 3,274
acres (4 percent) and 6,951,572 pounds of production (4 percent).
Given the relative volumes and to ensure that each district's
producers are represented on the committee, witnesses testified that of
the eight producer members, four should be from District 1, three
should represent District 2, and one should be a pistachio grower in
District 3.
As discussed under material issue 5(a), Sec. 983.11 of the
proposed order
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(which defines the three districts) should contain authority for the
reestablishment of those districts. This would enable producer
representation on the committee to reflect any future shifts in
pistachio production among the districts.
The record also supports authority for reapportionment of producer
membership among the districts. This authority would complement the
authority to reestablish districts, and would serve to allow for
changes in representation in producer membership on the committee.
Producer membership could be reapportioned whether or not the districts
were reestablished. The record supports allowing producer membership to
be reapportioned among the districts upon a two-thirds recommendation
of the committee and approval of the Department (through the rulemaking
process).
While the record supports the ability to reapportion producer
membership, the proposed order as it appeared in the Notice of Hearing
did not contain such a provision. USDA recommends adding language to
Sec. 983.32(b) of the proposed order to provide authority to
reapportion producer membership among the districts.
Allocation of Handler Membership
While the record shows that producer representation on the
committee should be allocated among geographic districts, such
allocation is not needed for the two handler members on the committee.
The two handler members would represent the production area-at-large.
For one of the handler members, each pistachio handler would be
entitled to cast one vote in the nomination process. For the second
handler member, each pistachio handler would be entitled to cast one
vote for each ton of assessed weight of pistachios processed by that
handler during the two production years preceding the year in which
nominations are made.
The record shows that there are 19 pistachio handlers in
California, and that 1 of these handlers accounts for more than half of
the volume of pistachios processed in California each year. Under the
proposed provisions of the order, one of the handler members would
likely represent the largest handler in the industry, since voting in
the nomination process for that member would be weighted by volume. All
remaining handlers would then nominate the other handler member, since
any one handling entity would not be eligible to fill both handler
member positions. (This limitation is discussed below.) Witnesses
supported this method of allocating handler membership as adequate to
ensure appropriate representation of the interests of California
pistachio handlers in committee deliberations.
In weighting the nomination votes for one of the handler members,
the record shows that each handler would be entitled to cast one vote
for each ton (or portion thereof) of assessed weight of pistachios
processed by that handler during the two production years preceding the
production year in which nominations are made. Calculating the assessed
weight based on two years of production is intended to take into
account the alternate bearing nature of pistachio trees. Furthermore,
the assessed weight of pistachios would be credited to the handler
responsible under the order for the payment of the assessments. This
provision would address the fact that pistachios are often traded or
sold by one handler to another after they are harvested. Attributing
the volume of pistachios to the first handler of those pistachios would
preclude double counting of nuts that are transferred from one handler
to another. It would also provide the most accurate measure of the
relative volumes of pistachios handled by each handler.
Witnesses at the hearing testified that all handlers currently
process (hull and dry) pistachios. Thus, all handlers would be able to
participate in the nomination of both handler members on the committee.
The record supports authority in the proposed order to revise
handler representation on the committee to ensure that industry
representation remains appropriate. This provision would allow for
flexibility in the order to accommodate for future changes in industry
structure. For example, if a significant number of handlers in the
industry ceased to process pistachios, it could be appropriate to
weight their votes in the nomination process on some other basis than
the assessed weight of pistachios. Any change in handler representation
would require a recommendation by the committee and approval by USDA
through the rulemaking process.
Committee Member Affiliations
The order should provide that not more than two members of the
committee, and not more than two alternate members, could be employed
by or affiliated with the same handler and/or producer. Additionally,
only one producer member and alternate in any one district and only one
handler member and alternate could be affiliated.
The record evidence is that the membership of the committee should
be representative of the industry as a whole. No one group of people
who share common business interests should be able to gain control of
committee decision making. To accomplish this goal, the order should
limit the number of positions the members of any one affiliated group
could hold.
As previously mentioned, one handler in the industry accounts for
more than half of the California pistachios handled annually. The
record shows that the two-member limitation is in large part intended
to prevent any entity, and its many affiliates, from dominating
committee actions. The limitation is designed to assure fair
representation on the committee, given the current nature and structure
of the California pistachio industry.
As discussed under Material Issue 5(a), the term ``affiliation''
should be defined broadly so that it encompasses the many different
relationships through which people have common business interests.
Witnesses at the hearing gave several examples to illustrate their
view of how this limitation on committee membership should work. In the
case of a corporate handler, all of its shareholders should be
considered an affiliated group because they would be connected in a
proprietary capacity and share in the ownership and control of the
corporate handler. In this scenario, the shareholders and employees of
the corporation would be limited to one handler member on the
committee; they could not hold both handler member positions. If the
corporation was also a pistachio producer, a producer member could also
represent the affiliated group. In no case could more than two
committee members represent that affiliated group.
Another example offered by witnesses described one corporation
owned by one set of shareholders and a second corporation with a
separate set of shareholders that jointly own a handling entity. In
this case, the employees of the handling entity and both of the
corporations, and both sets of shareholders, would be considered as one
affiliated group. As such, this combination of two corporations and one
handler would be limited to a maximum of two committee positions.
A third scenario described by witnesses entailed a corporation,
owned by its shareholders, and a producer cooperative that jointly own
a handling entity. The cooperative was comprised of producer members
who grow pistachios and share in the proceeds of the sale of all of the
pistachios of the
[[Page 46000]]
members pooled together. In this case, the corporation (owned by its
shareholders) and the cooperative (owned by its members) would be
affiliated through their common control of the handler. Therefore, this
combination of corporate employees and shareholders, cooperative
employees and members, and handler employees, would constitute a single
affiliated group. The entire group would be entitled to no more than
two representatives on the committee.
Witnesses also testified about a producer who sells pistachios to a
handler for cash or a fixed price plus bonuses but has no ownership or
proprietary interest in that handler. In such a case, the producer
would not be affiliated with that handler for purposes of committee
membership.
In a final illustration, if a producer is a shareholder or a member
of, or directly or indirectly owns a handler, that producer would be
considered a part of the handler's affiliated group. This would be true
even if that producer sells part of his or her crop to another handler
that is not part of the affiliated group.
Cooperative Affiliation
As discussed above, members of a producer cooperative would
constitute an affiliated group for purposes of committee membership.
The record shows that the order should contain a provision to clarify
when a person ceases to be affiliated with a cooperative for those
purposes.
As explained for the record, cooperatives usually retain from their
profits, which would otherwise be paid pro rata to its members, such
amount as is needed for its capital needs and reserves. These
``retains'' are allocated and then paid pro rata to each member
whenever the capital needs change or are replaced by new retains in
subsequent years. This is known as ``revolving capital.''
Paragraph (f) of proposed Sec. 983.33 should provide that a
producer who has not marketed pistachios through a cooperative during
the current and one preceding production year would no longer be
considered ``affiliated'' with that cooperative. This would be true
even if the cooperative continued to hold that producer's retains. If
the cooperative holds none of the producer's retains, that producer
would become unaffiliated with that cooperative at the time his or her
membership is terminated.
The record supports an additional clarification concerning producer
cooperatives. There may be an occasion where a producer cooperative
has, as a member, another producer cooperative that handles pistachios.
While the members of both cooperatives would be considered affiliated,
the producer cooperatives would still qualify as producers for purposes
of voting for producer members on the committee.
Qualifications of the Public Member
At the hearing, witnesses supported having a public member on the
committee. The appointment of a public member would offer many
advantages. One such advantage would be that the committee would have
an impartial individual, having no economic interest in the pistachio
industry, with whom to discuss industry problems and concerns. Such a
person could offer a unique perspective in committee deliberations.
As such, witnesses recommended that the public member and alternate
public member should not be permitted to have a financial interest in
the production, processing, financing, buying, packing, or marketing of
pistachios, except as a consumer. This member and his or her alternate
would also be precluded from being a director, officer, employee or
affiliate of any firm or business entity engaged in the pistachio
industry. The public member should be willing to devote sufficient time
to regularly attend committee meetings and become familiar with the
background and economics of the industry, as well as the provisions of
the proposed order. Testimony indicated that the committee could be
able to establish (with the approval of USDA) further qualifications
the public member and alternate member should possess, if deemed
necessary.
Nominations
For the proposed committee to function, a mechanism is required by
which members and alternate members would be nominated by their peers,
and selected and appointed by the Department. Nomination procedures are
set forth in the proposed provisions of Sec. Sec. 983.32 and 983.33.
The order should provide that USDA would conduct nominations for
initial producer and handler members of the committee. Such nominations
could be made either at industry meetings, or by mail. The provisions
also state that the first nominees must meet the same qualifications as
required for their successors. While the Department would have
discretion in determining a reasonable process to conduct initial
committee nominations, the committee should be established as provided
in Sec. 983.22 of the proposed order.
A revision in paragraph (a) of Sec. 983.33 is recommended. This
revision would clarify that USDA would conduct the initial nominations
of producer and handler members and alternates only. The initial public
member and alternate would be nominated by the industry members of the
committee, as described later in this document.
Successor Producer and Handler Members
The record evidence is that the committee staff should conduct
subsequent nominations for producer and handler members of the
committee. To facilitate maximum participation in the process,
nominations would be conducted by mail ballot.
The record evidence shows that producer and handler member
nominations would entail several steps. First, individuals seeking
nomination would be required to establish their qualifications to serve
as a California pistachio producer or handler, and to identify the
district (for producer seats) they are seeking to represent. Candidates
would also be required to identify whether they intend to seek
nomination as a producer or handler member. Considering that many
pistachio handlers are also producers, witnesses recommended that
individuals be limited to seeking nomination as one or the other. In
other words, the same individual would not be allowed to simultaneously
seek a producer and a handler seat; his or her name could only appear
on the producer or the handler ballot, not both.
The record shows that individuals seeking to fill member seats
would need to submit notice of their intent to run as a nominee to the
committee in advance of nominations. This would allow the committee
staff adequate time to determine a candidate's eligibility in advance
of issuing nomination ballots, and would allow for any questions or
informational needs to be addressed in advance of voting for nominees.
Once qualified candidates are identified, ballots containing the
names of those individuals and additional space for write-in candidates
would be prepared. The ballots, together with voting instructions,
would be mailed to all producers and handlers who are on record with
the committee. The committee staff would tally the votes and submit its
nomination report to USDA for selection.
The hearing record supports the same general approach for
nominations of both producer and handler members. However, the language
contained in the Notice of Hearing did not include provisions specific
to successor handler
[[Page 46001]]
nominations. USDA is suggesting that proposed Sec. 983.33(b) be
modified accordingly.
The record shows that the committee should have authority (with
USDA approval) to establish additional rules and regulations governing
the nomination process, if deemed necessary. This authority would apply
to both producer and handler member nominations.
Producer Members
Witnesses explained that individuals seeking candidacy for
nomination to a producer seat would be required to designate the
district in which they seek election and substantiate their
qualification as a producer, or designated representative of a
producer, in that district. However, testimony also clarified that the
order would not require that the candidate be a resident of that
district. Witnesses explained that it would not be reasonable to impose
such a requirement since not all producers live in the same district in
which they produce pistachios. Such a residency requirement would,
therefore, preclude a number of pistachio producers from being able to
serve on the committee.
Record evidence states that only producers would be qualified to
serve as producer members and to participate in the nomination of
producer members and their alternates. Producers can be corporations,
partnerships, limited liability companies, trusts or other legal
entities, as well as a sole proprietorship owned by an individual. The
owners of the pistachio groves could designate an officer or employee
to seek membership and to cast the votes on their behalf. As proposed,
officers and employees would not include professional farm managers who
perform farm management services for a number of different producers
without being an employee or an officer of the producer. The intent is
to limit those eligible to serve as producer members to persons who are
involved, either as a producer with a proprietary interest in the
pistachio industry or an employee working in the industry for a
producer.
Each producer would be entitled to cast one vote, either in person
or through an authorized officer or employee, for each producer member
position to be filled in his or her district. Witnesses suggested that
rules and regulations could be recommended by the committee and
approved by the Department that would require such authorization to be
in writing and to be addressed to the committee. A producer would only
be able to cast his or her vote in the district in which that producer
produces pistachios. If the producer were engaged in producing
pistachios in more than one district, then the producer would need to
select a district in which to participate as a nominee and/or as a
voter. A producer would not be allowed to vote for candidates in more
than one district.
Producers receiving the highest number of votes in each district
would be designated nominees for their respective districts. Alternates
for each nominee would be the candidates receiving the second highest
number of votes in the same district. In the case of a tie, witnesses
recommended that final nominees and their alternates be selected by a
drawing.
Handler Members
Handler nominees would be selected for the production area as a
whole, and final candidates would be determined based on those two
individuals receiving (1) The most votes representing handlers by
number, and (2) the most votes representing handlers by volume.
Alternates would be designated as those individuals receiving the
second highest vote in each respective category. Handler voting
procedures are further described below.
Record evidence specifies that only handlers could participate in
the nomination of the handler members and their alternates. Handlers
would include the duly authorized officers or employees of handlers.
Since many of the handlers are incorporated, a corporation or other
business entity would be required to designate its representative.
Individuals could also designate an employee to act on behalf of the
proprietorship through a written designation signed by the owner.
As indicated above, handler representation would be divided into
two categories, with one member nominated by a number vote and the
other member nominated by a volume vote. The former would be nominated
by receiving the highest number of votes placed by voting handlers,
with each handler having one vote. That member's alternate would be the
candidate receiving the second highest number of votes.
The provisions of the proposed order provide that if a person were
both a producer and a handler of pistachios, that person would be able
to participate in both the producer and handler nominations. While a
single individual may not hold more than one seat on the committee, a
producer who is also a handler could designate an officer or employee
as a handler nominee, and another representative as a producer nominee.
The affiliation provisions described above would apply.
Members of the committee, at the time of their selection and during
their term of office, must be pistachio producers or handlers, or
officers or employees of a producer or handler. If that relationship
should terminate during their term as a committee member or alternate,
that person would become disqualified to serve further, and the
position would be deemed vacant.
Public Member
The provisions proposed under Sec. 983.32(c) would govern
nomination and selection of the public member and alternate member.
According to the record, the public member, who would be neither a
pistachio producer nor a handler, would have all the rights and
responsibilities of any other member of the committee. The record
evidence is that the producer and handler members of the committee
should nominate the public member. Witnesses explained that industry
committee members would be in the best position to identify individuals
who are qualified and willing to serve. Once the committee identified
possible public member and alternate public member candidates, the
committee would make a recommendation to USDA for final approval and
selection by the Department.
Alternate Members
The order should provide for the nomination and selection of an
alternate member for each committee member. Alternates would be subject
to the same eligibility requirements as committee members. They would
act in the place and stead of the committee members they are alternates
for when the committee members cannot fulfill their committee
obligations. Alternates would provide continuity and stability to
committee operations by ensuring full representation of the industry,
including their particular district and group (producers or handlers).
Alternate members would be nominated in the same manner as
committee members, except that the recommended alternate(s) would be
the individual(s) receiving the next highest votes to the nominee(s)
receiving the highest number of votes. If a person were selected as an
alternate from the same district as a member and both are employed by
or connected in a proprietary capacity with the same business entity,
the alternate would serve as the alternate to that member.
When serving in the place and stead of their committee members,
alternate members would be able to exercise all
[[Page 46002]]
of the rights, duties and powers of those members as though they were
serving as full members of the committee. Alternate members would only
be allowed to vote in the absence of those members for whom they are
alternates, or when they succeed to those members' positions.
Record evidence also shows that an alternate member should succeed
his or her member in the event of that member's death, removal,
resignation or disqualification. The alternate would then serve until a
successor was selected and qualified.
Selection by USDA
Record evidence states that once the nomination process for
producer and handler members is completed, and the industry has voted
on committee member and alternate candidates, nomination reports or
committee minutes would be prepared by the committee staff and sent to
the USDA. This should be done at least 60 days prior to the beginning
of each two-year term of office (or by May 1). The Department, after
determining that the conditions and qualifications of each nominee have
been met, would then select the 10 producer and handler members of the
committee and an alternate for each of those members based upon the
nominations.
As previously mentioned, the newly appointed industry members of
the committee would nominate the public member and alternate member.
USDA would also be responsible for selecting the public member and
alternate.
Nominees would be required to indicate in advance of their
selection that they are willing to accept the position for which they
were nominated. Agreeing in advance to serve as a committee member or
alternate would avoid possible delays in the appointment of the
committee.
In the event that nominations are not made within the time and
manner specified in the order, the USDA could appoint members and
alternates without regard to nominations. Those appointments would be
made on the basis of representation provided in proposed Sec. Sec.
983.32 and 983.33.
Term of Office
Record evidence suggests that the term of office should begin on
July 1 and last for 2 years. The month of July represents a natural
break in the California pistachio production cycle, with each new
harvest beginning typically in September, or at the earliest in August.
Moreover, witnesses indicated that this time frame would allow adequate
time for committee members and staff to prepare an annual budget,
develop a marketing policy for the upcoming production year, and make
any recommendations to the Department for any needed regulatory changes
prior to harvest activities.
In addition, witnesses at the hearing indicated that terms should
be staggered so that approximately half of the committee members'
positions would be filled each year. This provision would ensure that
continuity in experience among committee members was maintained, yet
provide for new members with new ideas and fresh perspectives to
participate in the administration of the order. To initiate this
process, witnesses recommended that the first committee members
nominated would be divided into two groups by a drawing to determine
whether they would be seated for initial terms of one year or two
years. Four producer members, one handler member and their alternates
would serve an initial term of about one year. Remaining industry
members and the public member (and their alternates) would serve an
initial term of about 2 years.
The regulatory text contained in the Notice of Hearing failed to
specify that the term of office should apply to all committee members
and their alternates. Paragraph (k) of proposed Sec. 983.33 has been
revised to correct this.
Term Limits
Record evidence supports term limits to spread the involvement of
the pistachio producers and handlers, and increase industry
participation in administering the marketing order. Term limits should
apply to all committee members and alternates, including those
representing the public. The maximum number of terms that an individual
would be allowed to serve for would be four consecutive two-year terms
of office, or a maximum of eight consecutive years on the committee.
The tenure requirements would apply to both committee members and
alternate members. Once a person has served as a member and/or
alternate for 8 years, that person would not be eligible for
renomination. He or she would be eligible to serve again after 12
consecutive months out of office.
Vacancies
Any vacancy on the committee would be filled by a majority vote of
the committee members remaining for the remaining unexpired term of the
vacant position. This authority appears in paragraph (j) of proposed
Sec. 983.33. The replacement must fulfill all of the qualifications
set forth as required for any other nominee for the position, and that
person's qualifications would have to be certified to USDA. The
Department could then appoint the nominee to serve the balance of the
term.
This procedure would eliminate the need to conduct a special
nomination to fill a vacancy for the balance of a term, which would be
less than two years in any case. It would also serve to address
situations in which a member's position is vacant and the alternate
declines the position or is not available to fill the vacancy, as
provided in proposed Sec. 983.33(g). The authority could also be used
to fill a vacancy for an alternate member.
Proposed Quorum and Voting Provisions
The record evidence is that once the committee is appointed, a
quorum of the committee would consist of seven committee members. This
would include handlers, producers and the public member. Except as
discussed below, any action of the committee would require the
concurring vote of a majority of the committee members present. An
alternate could serve as a member for purposes of constituting a quorum
and voting if the member is absent.
Record evidence indicated, however, that certain issues are of
sufficient significance to the industry that action should require a
greater degree of consensus than a simple majority vote would
demonstrate. Witnesses testified that there are four areas that should
require at least seven concurring votes, prior to any recommendation
being made to the USDA. The first involves any modifications of the
minimum quality levels set forth in proposed Sec. 983.39. The second
entails any change in the aflatoxin levels prescribed in Sec. 983.38
of the proposed order. Adjustments in the sampling and inspection
requirements included in the order with respect to minimum quality
(including aflatoxin) requirements is another area that should require
seven concurring votes. And, finally, the record indicates that
recommendations related to changes in committee representation
(including qualifications and affiliation issues) should require a
higher level of committee member agreement.
As such, this proposal provides that any recommended change or
modification to the issues outlined above would require at least seven
concurring votes. Any other actions by the committee could be
determined by a simple majority of those voting.
The record shows that at committee meetings, members could cast
their vote
[[Page 46003]]
by voice or in writing. Participation by telephone would be permitted
as long as the equipment used would allow all meeting participants to
hear and communicate with each other. Telephone or similar
communication equipment could include conference call equipment and/or
audio-visual equipment that would allow all members to participate in a
meeting simultaneously.
If for some reason an action must be taken without a meeting,
record evidence indicates that such action would require a unanimous
vote of the committee, and the votes would have to be in writing.
Witnesses testifying at the hearing stated that the types of committee
actions contemplated without a meeting would be limited to issues of
routine business or those of relatively minor importance, such as
approval of meeting minutes. Such matters would not merit the time and
expense of holding an assembled meeting. This proposed provision is
common to several existing marketing orders and would enhance the
committee's decision-making abilities on simple administrative matters.
Compensation
While testimony supported reimbursement of necessary expenses
incurred by committee members attending meetings, witnesses testified
that no compensation should be made to pistachio producers and handlers
for their service on the committee. To the extent the committee
requested the attendance of alternate members, those alternates would
also be entitled to reimbursement of their expenses.
Record evidence did support compensation, in addition to the
necessary expenses, of the public member. In order to get the level of
experience and background required to serve as a qualified, effective
public member, witnesses stated that it might be necessary to
compensate that person for his or her time. Compensation would need to
be set at a reasonable level, and should be consistent with that
person's experience and background.
Committee Powers and Duties
The committee, under proposed Sec. 983.35, should be given those
specific powers that are set forth in section 608c(7)(C) of the Act.
Such powers are necessary for an administrative agency, such as the
proposed committee, to carry out its proper functions. According to
record evidence, the committee would have four general powers under the
proposed provisions of this order:
(1) To administer the provisions of the order;
(2) To adopt by-laws, rules, and regulations for the implementation
of the order with the approval of the Department;
(3) To receive, investigate, and report to the Department
complaints regarding violations of the order; and
(4) To recommend marketing order amendments to the Department.
These powers are necessary to carry out the committee's functions
under both the proposed order and the Act. Witnesses indicated that
these powers would enable the committee to make recommendations to the
Department that reflect the conditions in the industry from their
knowledge and experience.
The specific duties of the committee as set forth in Sec. 983.36
of the proposed order are necessary for the discharge of its
responsibilities. These duties are similar to those typically specified
for administrative agencies under other marketing order programs. They
pertain to specific activities authorized under the order, such as
investigating and compiling information regarding California pistachio
marketing conditions, and to the general administration of the program
including hiring employees, appointing officers, and keeping records of
all committee transactions. The proposed order delineates the
committee's duties as follows:
(1) The committee should adopt bylaws and rules for the conduct of
its meetings and for such other purposes as it deems necessary. The
committee should also select such officers from among its membership,
including a chairperson and vice-chairperson, as may be necessary, and
define the duties of such officers.
(2) The committee should employ such persons as it deems necessary
to effectively and efficiently operate the program. The committee could
enter into contracts or agreements with such persons, determine their
duties, and establish appropriate levels of compensation. Such
contracts or agreements would pertain to the provision of services
required by the order and for the payment of the cost of such services
with funds collected under the order.
(3) The committee should select such subcommittees as may be
necessary.
(4) The committee should submit to the USDA a budget for each
fiscal period, prior to the beginning of such period. The budget
submission should include a report explaining the budget items and the
committee's recommendation as to the rate of assessments for the fiscal
period.
(5) The committee should be required to keep minutes, books, and
records that reflect all of the acts and transactions of the committee.
Such records would be subject to examination by the Department.
(6) The committee should prepare periodic statements of the
financial operations of the committee and make copies of each statement
available to producers and handlers for examination at the office of
the committee.
(7) The committee should be required to have its financial
statements audited by a certified public accountant at least once each
fiscal year and at such times as the USDA may request. Such audits
should include an examination of the receipt of assessments and the
disbursement of all funds. The committee should provide USDA with a
copy of all audit reports and should make copies of such audits, after
the removal of any confidential individual or handler information that
may be contained in them, available for examination at the committee's
office.
(8) The committee should act as an intermediary between USDA and
any pistachio producer or handler with respect to the operations of the
order.
(9) The committee should investigate and assemble data on the
growing, handling, shipping and marketing conditions with respect to
pistachios.
(10) The committee should be required to apprise the Department of
all committee meetings in a timely manner.
(11) The committee should be required to submit to USDA such
available information as the Department may request.
(12) The committee should have the duty to investigate compliance
with the provisions of the order.
(13) The committee should provide, through communication to
producers and handlers, information regarding the activities of the
committee. The committee should also respond to industry inquiries
about committee activities.
(14) The committee should oversee the collection of assessments
levied under the order.
(15) Finally, the committee should have the authority to borrow
such funds as may be necessary to fulfill its responsibilities and
obligations. Any loan would be subject to USDA approval and could not
exceed the expected expenses of one fiscal year.
Witnesses explained that the above-outlined duties are important to
the efficient and functional operation of the committee.
[[Page 46004]]
Material Issue Number 5(c)--Expenses and Assessments
The committee should be required to prepare a budget showing
estimates of income and expenditures necessary for the administration
of the marketing order during each fiscal year. The budget, including
an analysis of its component parts, should be submitted to USDA
sufficiently in advance of each fiscal period to provide for USDA's
review and approval. The budget should also include a recommendation to
USDA of a rate of assessment designed to secure income required for
such fiscal year.
The committee should be authorized under Sec. 983.52 of the
proposed order to incur such expenses as the Department finds are
reasonable and likely to be incurred during each fiscal, or production,
year. Such a provision is necessary to assure the maintenance and
functioning of the committee, and to enable the committee to perform
its duties in accordance with the provisions of the order.
The record states that funds to cover the committee's expenses
would be obtained through the collection of assessments from handlers
who process pistachios in the proposed production area. These
assessments are intended to reflect each handler's proportional share
of the committee's expenses. As such, assessments would be based on the
total amount of pistachios processed by each handler relative to the
total amount of pistachios processed by the industry as a whole during
a given production year.
Witnesses explained that since pistachios are often transferred
between handlers for further preparation or packaging for market, it
would be appropriate to apply assessment calculations to the handler
who first handles a particular lot of pistachios. By assessing the
handler who initially receives a lot of pistachios, the industry
intends to prevent having assessments paid more than once for the same
pistachios. The previous discussion of the definition of ``assessed
weight'' further clarifies this calculation.
Testimony in support of proposed Sec. 983.52 covering committee
expenses indicates that prior to the beginning of each production year,
and as may be necessary thereafter, the committee should prepare an
estimated budget of expenses necessary for its effective administration
of the order. Based upon this estimate, the committee would calculate
and recommend to the Department a rate of assessment that would provide
adequate funds to cover the cost of projected expenditures. Preparing a
budget for the committee prior to the beginning of each fiscal period
is reasonable. A budget is necessary to provide the committee and the
Department with a basis for determining the assessment necessary to
cover the cost of operation.
The committee would present its annual budget to USDA for review
and approval. Accompanying the budget would be a report showing the
basis for its calculations, an explanation of each line item, and any
proposed year-over-year increases or decreases. Assessments would be
levied at the rates established by USDA. Establishment of such
assessment rates would be accomplished through the informal rulemaking
process. Such rates would be established on the basis of the
committee's recommendations or other available information.
Witnesses stated that any assessment rate recommended to the
Department should be limited to a maximum rate of one half of 1 percent
of the industry's previous production year's average producer price.
The average producer price would be calculated by the committee and
would be based on the previous year's average grower receipt per pound
of pistachios.
The record shows that recent producer prices for pistachios were
around $1.10 per pound. If the average producer price calculated by the
committee for the previous year was $1.10 per pound, the maximum
assessment rate for the current year's crop would be $0.0055, or
approximately one half a cent per pound. Applying this rate to 2001
production of about 160 million pounds would yield a maximum assessment
income of $880,000. Witnesses testified that this should be sufficient
to operate the proposed program.
The intent of the maximum limit on the assessment rate is to assure
pistachio producers and handlers that program expenses would be kept
within specified limits, and that no projects requiring extraordinary
expenditures would be undertaken. The proposed limit appears reasonable
for the administration of a program of this nature.
Witnesses reasoned that there could be times during a fiscal period
when it would become necessary to revise the budget and/or increase the
assessment. Such instances could include situations where actual
harvest is lower than anticipated or the committee incurs unforeseen
expenses. In this regard, witnesses stated that the assessment rate
should not be increased without the committee first making a
recommendation and securing approval of the Department to do so. Such
recommendation would also need to be made prior the issuance of that
production year's final handler assessment bill. Any assessment
increase would be applicable to all pistachios received and processed
by handlers within the proposed production area for that production
year.
During the hearing, questions were raised regarding proposed order
language contained in the Notice of Hearing. Language in the Notice
provided that any change to the assessment rate would be required to be
recommended and approved before October 1 of any production year and
before the date established for payment of the assessment. Discussion
at the hearing resulted in witnesses acknowledging that situations
could arise where these deadlines would be too restrictive, and would
prevent the committee from being able to address unforeseen shortfalls
in assessment income.
Accordingly, witnesses recommended that the committee, as
necessary, be permitted to adjust the rate of assessment (with USDA's
approval) at any time before the final billing is made for the
assessment. Section 983.53(b) should therefore be modified by removing
the October 1 deadline and clarifying language that would allow the
committee to recommend changes to the assessment rate before the
issuance of the last handler assessment billing statement.
Record evidence in support of proposed Sec. 983.55 indicates that
if assessments are not paid within the time prescribed by the
committee, the handler would be required to pay to the committee a late
payment charge of 10 percent of the amount of the assessment determined
to be past due and, in addition, interest on the unpaid balance at the
rate of 1\1/2\ percent per month. Late payment charges and interest on
unpaid balances are reasonable in encouraging timely payment of
assessments and compensating the committee for expenses incurred in
collecting unpaid assessments.
While supporters of this proposal indicated that any assessments
imposed under the program would be quite modest, timely collection of
those assessments would be important in order to efficiently and
effectively administer the provisions of this proposed program.
Moreover, they indicated that if one handler were to become delinquent
in paying his or her assessments, this could serve as an incentive for
others to also become delinquent. Witnesses felt that the proposed late
payment and interest
[[Page 46005]]
charges would help to ensure stability in the flow of committee funds
collected through assessments.
The record evidence is that the committee should have the authority
to recommend other rates for late payment and interest charges, as may
be appropriate. Section 983.55 is being modified to clarify this point.
Any change in these rates would require approval of the Department
through the informal rulemaking process.
The Department is recommending several additional modifications in
proposed Sec. 983.55. The language contained in the hearing notice
provided that in addition to delinquent assessments, late charges and
interest would be imposed on handlers who fail to file required reports
under the order. Since (in the case of unfiled reports) there would be
no monetary value upon which to impose these charges, this provision is
found unworkable and is therefore deleted.
Witnesses also supported a provision that if a handler is
delinquent in paying his or her assessments for more than 60 days, the
committee could request that the USDA stop providing aflatoxin and
grade and size inspections to the delinquent handler. Witnesses also
suggested that the committee could require any handler who fails to pay
an assessment or related charge to furnish and maintain a surety bond
in a form and amount, and for a period of time, specified by the
committee. These provisions are not typical in relation to delinquent
assessments under a marketing order program. Thus, these provisions are
being deleted from Sec. 983.55 of the proposed order. The Department
would work with the committee staff in determining an appropriate
course of action relating to violations of the proposed order,
including nonpayment of assessments.
Under the proposed order, the committee would be allowed to accept
voluntary contributions. Contributions could only be used to pay for
authorized committee expenses. The committee may accept contributions,
for example, to fund the operations of the order during the first part
of a production year, before sufficient income is available from
assessments on the current year's pistachios.
A section on accounting is necessary to assure handlers and the
industry that funds would only be used for the purposes intended, that
there would be a proper disposition of excess funds, and that a
detailed accounting would be made of such disposition. Under the order,
the committee would only be authorized to incur such expenses as USDA
finds are reasonable and likely to be incurred by it during each
production year for its maintenance and functioning, and for such other
purposes as the Department may determine to be appropriate.
Paragraph (a) of proposed Sec. 983.56 provides for situations
where, at the end of the fiscal period, the assessments collected may
be in excess of expenses incurred. According to record evidence, the
provisions under this section would allow the committee, with the
approval of the Department, to establish an operating monetary reserve.
This would allow the committee to carry over to subsequent production
years any excess funds in a reserve, provided that funds already in the
reserve do not exceed approximately two years' expenses. If reserve
funds do exceed that amount, the assessment rate should be reduced to
bring the reserves to a more reasonable level. These reserve funds
could be used to defray expenses during any production year before
assessment income is sufficient to cover such expenses; to cover
deficits incurred during any fiscal period when assessment income is
less than expenses; to defray expenses incurred during any period when
any or all provisions of the order were suspended or inoperative; and,
to cover necessary expenses of liquidation in the event of termination
of the program.
If any excess funds were not retained in a reserve, each handler
who paid assessments would be entitled to a proportionate refund of the
excess assessments collected. If excess assessments remained at the end
of a given production year, the committee could apply each handler's
excess as a credit for handlers towards the next production year's
operating costs, or the committee could refund such funds to the
handlers.
Testimony states that all funds received by the committee pursuant
to the provisions of the proposed order would be used solely for the
purposes specified in the order. Moreover, Sec. 983.56 would authorize
the Department at any time to require the committee and its members to
account for all receipts, disbursements, funds, property or records for
which they are responsible. This authority is necessary to ensure that
proper accounting procedures are followed at all times.
Whenever any person ceases to be a member of the committee, that
individual should be required to account for all receipts and
disbursements for which he or she was responsible. That person should
also be required to deliver all property and funds in such person's
possession to the committee. Finally, that person would execute such
assignments and other instruments as might be necessary or appropriate
to vest in the committee full title of all committee property and
funds.
In the event the proposed order were to be terminated or become
inoperative, the committee, with the approval of USDA, would appoint
one or more trustees for holding records, funds or other property of
the committee. Any funds not required to defray the necessary expenses
of liquidation would be returned, to the extent practicable, pro rata
to the handlers from whom such funds were collected. Distribution of
those funds would be carried out in a way that the Department deems
appropriate.
Material Issue Number 5(d)--Quality and Inspection Requirements
According to record evidence, provisions regarding maximum
aflatoxin levels, minimum quality levels (including size requirements),
and testing and certification procedures should be included in the
proposed order. These provisions are captured under the proposed
Sec. Sec. 983.38 through 983.46.
Presently, certain pistachio quality controls are in place under
the California Pistachio Marketing Agreement (agreement). The agreement
is effective under the California Marketing Act (Chapter 1, Part 2,
Division 21 of the Food and Agricultural Code of the State of
California). The regulations in effect under the agreement prohibit the
blending of naturally and artificially opened pistachios; ban the
practice of bleaching pistachios; and require mandatory aflatoxin
testing for shipments to specified export markets. These regulations
are voluntary in that they apply only to handlers who choose to sign
the agreement. The record evidence is that signatories to the agreement
current account for 82 percent of the pistachios produced in
California.
The proposed Federal order would establish mandatory testing and
certification requirements for California pistachios distributed for
domestic human consumption. The order would include requirements that
set maximum tolerance levels for aflatoxin and defects, and a minimum
allowable size. The requirements under the proposed order would not
duplicate or contradict the regulations under the State agreement.
According to the record, in preparation for this proposal, the
California pistachio industry initiated a study group on pistachio
quality assurance issues in May 2000. The
[[Page 46006]]
purpose of this study group was to identify areas of quality regulation
that would elicit consensus and support among industry producers and
handlers. Record evidence also states that the proposed regulatory
provisions are based on current industry practices and are
substantiated by a wide body of scientific research and data.
Record testimony ties the industry's concern over the regulation of
aflatoxin in pistachios to the protection of consumer interests by
preventing the sale of contaminated nuts. Witnesses repeatedly cited
evidence demonstrating consumers' reluctance to buying defective or
damaged pistachios contaminated with mold. Consumer concerns about the
presence or threat of aflatoxin in pistachios makes the regulation of
aflatoxin bearing molds important.
Moreover, witnesses testified that if there were an outbreak of
aflatoxin contamination in pistachios, widespread consumer reluctance
to buy pistachios could result, even if the contamination was limited
and quickly remedied. Witnesses feared that a single occurrence of
aflatoxin contamination in pistachios could devastate the California
pistachio industry and create effects that could take years and
substantial financial resources to overcome.
Record evidence demonstrates the importance of regulating quality
(including size) in tandem with aflatoxin, as research suggests a
strong correlation between some sub-quality characteristics (for
example, ``early-split'' pistachio nuts) and the propensity for
aflatoxin contamination.
Evidence presented at the hearing suggests that aflatoxin
contamination first occurs in the field and can continue to occur until
pistachios are dried to a level where mold cannot grow. Industry
research shows that most of the aflatoxin occurs in early split nuts or
pistachios where the hull is damaged prior to harvest. A high
percentage of small pistachios have a tendency to split early compared
to larger pistachios. Accordingly, witnesses explained that there is a
strong correlation between smaller, lighter pistachios with staining on
the shell and the presence of aflatoxin.
Record evidence presented on the basis of research conducted by
Mark A. Doster and Themis J. Michailides (``Characteristics of
Pistachio Nuts with Aspergillus Molds,'' 1991) delineates a positive
correlation between early split pistachios and aflatoxin. A witness
citing this study quoted, ``Early splits (ES) are pistachio nuts that
have both hull and shell split and frequently have moldy and/or insect-
infested kernels. The hulls of ES nuts split over a several week period
prior to harvest. Those ES that split earlier than two weeks before
harvest had four times greater Aspergillus mold contamination compared
with ES that split within two weeks of harvest. Both older ES and ES
with moldy kernels had very different physical characteristics compared
to normal nuts: fruits and kernels weighed less, hulls were more
shriveled, and shells were smaller and stained * * *. In a typical
orchard approximately 1 to 4% of the nuts are ES at harvest time. Molds
in the genus Aspergillus are frequently found in ES nuts.''
According to other studies cited at the hearing, 90 percent of
aflatoxin is contained in 4.6 percent of low-quality pistachios.
Witnesses citing these studies further stated that removal of low-
quality product, defined as smaller, lighter, stained-shell nuts
typically found in ``early splits'', would reduce the average presence
of aflatoxin in pistachios from 1.2 to 0.12 nano-grams/gram (ng/g) for
all product sold for human consumption.
Furthermore, drawing from a study on the distribution of aflatoxin
in processed and unprocessed pistachios, witnesses cited the study's
conclusion that, ``all aflatoxin found here arises in the orchard; none
is produced under normal processing conditions.''
Record evidence demonstrated that aflatoxin occurs rarely in a very
small number of nuts, it originates in the field, and it is
predominantly found in early split or damaged pistachios which have
very different physical characteristics than higher quality pistachios.
Due to the exceptional physical characteristics of the infected
nuts, witnesses explained that these nuts should be removed as part of
the industry's handling procedures. As such, witnesses advocated the
implementation of mandatory regulations that would not only set a
maximum level of aflatoxin, but also, through quality and size
specifications, encourage the removal of those nuts that both have the
least consumer acceptance and are most likely to harbor aflatoxin.
Marketing Policy
Proposed Sec. 983.37 would require that the committee prepare and
submit to USDA prior to August 1st of each year an annual marketing
policy. The marketing policy would serve as the basis for any committee
recommendations for revisions in quality regulations for the upcoming
crop year. Record evidence explained that in developing its marketing
policy, the committee should consider production, harvesting,
processing and storage conditions, as well as current and prospective
prices.
Proposed Aflatoxin Provisions
According to testimony presented by Dr. Al Eaton, Director of the
Center for Ecogenetics and Environmental Health, and the Department of
Environmental Health, School of Public Health and Community Medicine,
both of the University of Washington, aflatoxin is a known contaminant
in pistachios. Dr. Eaton's testimony outlined the scientific arguments
behind regulating aflatoxin as a known human carcinogen. Other
witnesses argued that regulation of aflatoxin is an important factor
contributing to the quality of pistachios. Witnesses testified that
regulation of aflatoxin is crucial to positive acceptance of pistachios
among consumers and growth of consumer demand.
As stated by Dr. Eaton, the U.S. and international scientific
communities have reviewed the significance of aflatoxin in human food
and animal feed extensively. Dr. Eaton referred to studies by Eaton and
Groopman, 1994, as well as the Food and Agriculture Organization and
World Health Organization's Joint Expert Committee on Food Additives
(JECFA), 1998. Dr. Eaton stated that limiting aflatoxin in affected
commodities is important in regard to these concerns.
Proposed Sec. 983.38(a) would provide for a maximum aflatoxin
level for pistachios shipped for domestic human consumption. The level
supported by record evidence is 15 parts per billion (ppb). Under this
provision, no pistachios with an aflatoxin level greater than 15 ppb
could be shipped for domestic human consumption. Witnesses testifying
at the hearing stated that the 15 ppb threshold is an appropriate level
to ensure the quality of pistachios. Witnesses also explained that 15
ppb is the maximum level of aflatoxin allowed in peanuts, another
commodity known to be affected by aflatoxin-bearing molds (7 CFR part
996).
The United States Food and Drug Administration (FDA) currently
employs an aflatoxin tolerance level in pistachios of 20 ppb. Thus,
this proposal would be more restrictive than what is currently accepted
by the FDA. Witnesses explained that the 15 ppb was selected as the
proposed maximum threshold to ensure that sampling procedures would
result in aflatoxin tolerances below the current FDA level.
Proposed Sec. 983.38(a) also provides that an aflatoxin inspection
certificate
[[Page 46007]]
must cover all shipments for domestic human consumption. Further, any
pistachios that fail to meet the aflatoxin requirement must be disposed
of in certain ways. The inspection and substandard pistachio
disposition procedures are discussed in detail later in this document.
At the hearing, witnesses recommended eliminating the decimal point
and the zero from all references to ``15.0'' ppb. The maximum aflatoxin
threshold should read ``15'' ppb. Witnesses explained that current
testing techniques available to the industry are only accurate to one
part per billion. As such, requiring testing beyond the one part per
billion would not be compatible with current industry testing
abilities. Similarly, references to ``5.0'' ppb and ``10.0'' ppb should
be changed to ``5'' ppb and ``10'' ppb in all corresponding
descriptions of aflatoxin test sampling procedures. These changes are
reflected in the proposed order language contained in this Recommended
Decision.
Witnesses testified that a considerable amount of concern and
debate over the proposed aflatoxin and other quality requirements
resulted in the details of those proposed requirements being included
in the proposed order language. According to the record, industry
discussions favored including specific regulatory language in the order
over establishing committee authority to recommend such regulations.
Witnesses explained that the former would allow industry participants
to know, prior to voting on the proposed order in referendum, what
specific requirements would be imposed on the industry. Thus, producers
would be able to make a more informed decision as to whether they favor
the program.
Witnesses testified that the committee should have the authority to
make recommendations to the Department to change the specified maximum
aflatoxin level of 15 ppb. Paragraph (b) of proposed Sec. 983.38
therefore provides authority for changing the allowable level of
aflatoxin in the event that industry conditions change or research
shows that a change in the aflatoxin level would be appropriate. As
previously discussed under Material Issue 5(b), such a recommendation
would require the concurring votes of at least seven committee members.
Transfer Between Handlers
Paragraph (c) of Sec. 983.38 would provide that transfers of
pistachios between handlers within the production area are exempt from
the aflatoxin requirement.
Record evidence indicates that pistachios are customarily traded
among handlers. Trade among handlers predominantly occurs as a means
for individual handlers to buy or sell pistachios to meet the specific
needs of their respective customers. Witnesses also explained that some
handlers are better equipped than others to handle pistachios that
present processing problems. As such, pistachios requiring re-working
to meet industry quality standards are often transferred from one
handler to another for more efficient handling.
An example of an inter-handler transfer presented at the hearing
described a handler who is unable to ship pistachios because they have
too much dark stain on the shells, and are deemed to be unmarketable in
that state. However, another handler is able to paint the shells with a
red food grade colorant that covers the dark stain, making the
pistachios acceptable to consumers. Transferring the pistachios from
the first handler to the second handler could benefit both parties.
Proposed Sec. 983.38(c) would facilitate transfers of pistachios
between handlers, which would allow for the highest use of the
pistachios. While pistachios could be transferred from one handler to
another without first being tested and certified as meeting the
aflatoxin requirement, those pistachios would have to meet that
requirement prior to entering the market for domestic human
consumption. If the pistachios had been tested and certified as meeting
the aflatoxin requirement by the first handler, those pistachios would
not have to be tested and certified a second time. This would be true
only if the lot's identity had been preserved, as discussed in the
discussion below relative to ``Traceability.''
Traceability
Proposed Sec. 983.38(d) would require that each lot of pistachios
inspected for aflatoxin be uniquely identified and traceable from the
point of testing through shipment by the handler. This is necessary
because the handling of pistachios consists of a number of different
steps that occur over a period of time.
Witnesses stated that identification of individual lots would be
necessary in order to distinguish one lot from another for aflatoxin
certification purposes. Unique identification and traceability of lots
would be necessary to ensure handler compliance with the provisions of
the order. Further, in the event that sub-quality or aflatoxin
contamination was found by a handler or his or her customers,
traceability would allow for expeditious response on the part of that
handler to remove such product from the production line or market.
Traceability would be accomplished through the maintenance of each
lot's identity as that lot proceeds through a handling facility. A lot
could be in a handler's storage bins when a sample is taken for
aflatoxin testing and certification purposes. The pistachios could be
run through a roasting line later that day, and packaged on a
subsequent day. In this example, witnesses explained that the handler
would assign a unique number to the lot when the sample is taken, and
the pistachios in the lot would be identified by that number through
the entire handling process. This issue is further discussed in
relation to proposed Sec. 983.44, ``Inspection, certification and
identification.''
Sampling
Proposed Sec. 983.38(d)(1) and (d)(2) outline sampling procedures
for testing for aflatoxin and other quality requirements. The samples
would be drawn by an inspector or under the supervision of an
inspector.
Witnesses explained that each sample drawn would need to be
sufficient to meet testing procedure requirements under proposed Sec.
Sec. 983.38 (Aflatoxin levels) and 983.39 (Minimum quality levels).
The record shows that having one sample drawn to serve both purposes
would make the testing procedures more efficient and cost effective, as
the process of drawing samples for each certification process would be
condensed into one. Witnesses explained that this would help minimize
inspection fees, as less sampling time would be needed. Sampling
procedures for aflatoxin and minimum quality (including size)
certification are described below, and under the discussion of proposed
Sec. 983.39.
Aflatoxin Sampling Procedures
As previously discussed, the record is that aflatoxin typically
presents itself in high concentrations in very few nuts. Witnesses
recommended a sampling system rooted in statistical calculations of
aflatoxin per lot based on varying sample sizes calibrated to lot
weight. The recommended sampling protocol would rely on established
statistical sampling methodologies.
As there is not an internationally agreed upon procedure for
aflatoxin sampling of pistachios, the proposed sampling regimen is
based upon sequential sampling procedures used in the U.S. peanut
industry; sampling
[[Page 46008]]
parameters identified by experts in the field; and sampling protocols
currently used by the European Union.
Record evidence stated that each lot sample for inshell and kernel
pistachio aflatoxin testing must be made up of a prescribed number of
incremental samples. Incremental sampling would be accomplished with an
automatic sampling device or with a sampling probe.
Witnesses explained that automatic samplers are devices that
extract random samples from a stream of pistachios while the nuts are
processed in the handler's plant. Sampling probes are tubes, with 5 to
10 ports, that are pushed down into bins of bulk pistachios. The probe
extracts pistachios from the bin at different levels of the bin
ensuring that a cross sample of the pistachios in the bin are taken for
testing and facilitates the collection of the required incremental
samples. Probing devices are widely used in the sampling of other food
products with similar physical characteristics.
According to record evidence, the number of incremental samples and
the total weight of the lot sample would be dependent on the size of
the lot. As shown in the table below, a small lot of inshell pistachios
weighing 220 pounds or less would require 10 incremental samples,
resulting in a total lot sample weighing 3 kilograms. For a larger lot
of inshell pistachios weighing 22,001 pounds to 150,000 pounds, a lot
sample of 30 kilograms would consist of 100 incremental samples. As
discussed later, the total lot sample would then be divided into three
test samples. The fourth column of the table shows the weight of each
of the test samples.
Inshell Pistachio Lot Sampling Increments for Aflatoxin Certification
----------------------------------------------------------------------------------------------------------------
Number of
incremental Total weight of lot Weight of test
Lot weight (lbs.) samples for the sample (kilograms) sample (kilograms)
lot sample
----------------------------------------------------------------------------------------------------------------
220 or less........................................ 10 3.0 1.0
221-440............................................ 15 4.5 1.5
441-1100........................................... 20 6.0 2.0
1101-2200.......................................... 30 9.0 3.0
2201-4400.......................................... 40 12.0 4.0
4401-11,000........................................ 60 18.0 6.0
11,001-22,000...................................... 80 24.0 8.0
22,001-150,000..................................... 100 30.0 10.0
----------------------------------------------------------------------------------------------------------------
For aflatoxin testing of pistachio kernels, the proposed
incremental sampling requirements would follow the same methodology.
The number of incremental samples would depend on the size of the lot,
and would equal the number required for inshell lots of pistachios.
However, the lot samples for kernel testing would be half the weight of
the lot samples for inshell pistachio testing. This is because, as the
record shows, half of the weight of inshell pistachios is made up of
the shell, and only the kernels are tested for aflatoxin.
According to the below table, a lot sample for a lot of 220 pounds
or less of kernels would equal 1.5 kilograms and consist of 10
incremental samples. A lot sample for a lot of 22,001 pounds to 150,000
pounds of kernels would equal 15 kilograms and would consist of 100
incremental samples.
Pistachio Kernel Lot Sampling Increments for Aflatoxin Certification
----------------------------------------------------------------------------------------------------------------
Number of
incremental Total weight of lot Weight of test
Lot weight (lbs.) samples for the sample (kilograms) sample (kilograms)
lot sample
----------------------------------------------------------------------------------------------------------------
220 or less....................................... 10 1.5 .5
220-440........................................... 15 2.3 .75
441-1100.......................................... 20 3.0 1.0
1101-2200......................................... 30 4.5 1.5
2201-4400......................................... 40 6.0 2.0
4401-11,000....................................... 60 9.0 3.0
11,001-22,000..................................... 80 12.0 4.0
22,001-150,000.................................... 100 15.0 5.0
----------------------------------------------------------------------------------------------------------------
The above tables provide for lot sizes up to 150,000 pounds. The
record shows that this reflects current industry practice. That is,
handlers do not handle lots in excess of that amount. However, in the
event that these practices change, proposed section 983.46 would allow
the proposed sampling methodology to accommodate the change. Any change
in sampling procedures would require a recommendation of the committee
and approval of the Department. Proposed Sec. 983.46 is discussed
further under ``Modification or suspension of regulations.''
The record evidence is that the next step in the sampling process
should be that the lot samples for inshell and kernel aflatoxin testing
be divided into 3 equal test samples. The dividing of the lot sample
would be conducted by, or under the supervision of, an inspector with
the Federal or Federal-State Inspection Service (Inspection Service).
Witnesses testified that any inspection process in use by the
Inspection Service should be available to pistachio handlers under the
proposed order. Inspection programs that could be used include the
``Partners In Quality'' program and the ``Customer Assisted Inspection
Program.''
Aflatoxin Testing Procedures
As provided in Sec. 983.38(d)(2), lot samples intended for
aflatoxin testing and certification would be submitted to a laboratory
that has been approved or accredited for aflatoxin analysis by the
USDA. Witnesses explained that such a laboratory could be a third-party
[[Page 46009]]
laboratory or a laboratory run by an individual handler. In any case,
witnesses stated that any laboratory conducting aflatoxin testing for
certification under the provisions of the proposed order would be
required to be approved or accredited by the USDA.
The test samples would be processed according to the provisions
proposed under Sec. 983.38(d)(3). The laboratory would record the
receipt of each test sample. The test samples would then be prepared
and chemically analyzed according to established testing procedures
prescribed under the High Pressure Liquid Chromatograph (HPLC) or Vicam
(Aflatest) aflatoxin testing methodologies, or any other method
recommended by at least seven members of the committee and approved by
USDA.
The language authorizing the use of additional testing methods
represents a departure from the language contained in the Notice of
Hearing. The revised language was proposed by proponents of the
marketing order and would provide the committee with additional
flexibility in identifying acceptable methods of testing. The authority
to review and recommend alternative methods of aflatoxin testing for
approval by the Department would allow for the accommodation of
advances in aflatoxin technology.
Proposed Sec. 983.38(d)(4) sets forth the process by which the
test samples would be analyzed in order to determine whether a lot met
the maximum aflatoxin threshold of 15 ppb.
As previously mentioned, each lot sample would be divided into
three test samples. If the first sample tested, test sample 1, had an
aflatoxin level at or below 5 ppb, the lot would be certified as
negative to aflatoxin. No analysis of the other two test samples would
be necessary. If test sample 1 were to test at or above 25 ppb, the lot
would fail and the accredited laboratory would fill out a failed lot
notification report as specified in Sec. 938.40, described below.
If test sample 1 were to test above 5 ppb and below 25 ppb, the
handler could either elect to continue the testing process or
voluntarily re-work the lot. If the lot is re-worked, it would be
subject to sampling and testing as if it were a new lot altogether.
If the handler elects not to re-work the lot and go forward with
the testing, the accredited laboratory would analyze test sample 2, and
the results of test samples 1 and 2 would be averaged. The lot would be
certified as negative to aflatoxin if the laboratory determines that
the averaged result for test samples 1 and 2 is at or below 10 ppb. If
the averaged result of test samples 1 and 2 is at or above 20 ppb, the
lot would fail and the laboratory would fill out a failed lot
notification report. If the averaged aflatoxin level of test samples 1
and 2 is above 10 ppb and below 20 ppb, the handler could withdraw the
lot from testing and re-work it. Thereafter, the handler could resubmit
the lot for sampling and testing under proposed Sec. 983.38(d).
If the handler elected to continue with the testing, the laboratory
would analyze test sample 3, and the results of test samples 1, 2 and 3
would be averaged. A lot would be certified as negative to aflatoxin
and the laboratory would issue an aflatoxin inspection certificate if
the averaged result of test samples 1, 2 and 3 is at or below 15 ppb.
If the averaged aflatoxin level of test samples 1, 2 and 3 is above 15
ppb, the lot would fail and the laboratory would fill out a failed lot
form as required by proposed Sec. 983.40, ``Failed lots/re-work
procedures.''
If a lot failed to test below the maximum threshold for aflatoxin,
the laboratory would send a copy of the Failed Lots/Re-Work Procedure
form to the committee and to the failed lot's owner within 10 working
days of failure.
If an aflatoxin inspection certificate were issued certifying that
a lot is negative to aflatoxin at any stage of the sequential testing,
meaning the lot's aflatoxin content is below the maximum threshold, the
certification would identify the lot by weight, grade and date. The
certification would expire after 12 months.
The recommendation at the hearing that a handler may withdraw his
or her lot from testing at any stage in the testing and certification
process represents a change to the proposed order language contained in
the Notice of Hearing. Witnesses recommended this modification so that
if a handler was not satisfied with an early aflatoxin content result,
he or she could elect to rework the lot before the expense of
completing the testing protocol.
Proposed Sec. 983.38(d)(5) provides that accredited laboratories
perform aflatoxin tests. Each lot shipped for domestic human
consumption would be required to be tested and certified by a
laboratory that it meets the aflatoxin requirement. The records of each
test and of the final shipping disposition would be required to be kept
by the handler. The records would be required to be maintained for 3
years and would be subject to audit by the Department or the committee
at any time. The maintenance of the records and the audit provisions
are to enable the committee to determine handler compliance with the
aflatoxin level requirements, and are discussed further under Material
Issue 5(e).
Pistachios that fail to meet the aflatoxin requirement would be
required to be reworked or disposed of. Witnesses stated that a rework
option is important as the cultivation of pistachios requires a
substantial investment, and maximizing saleable usage of each harvest
is crucial to the economic well being of both producers and handlers.
Equally important are disposal requirements for pistachios failing to
be certified as negative to aflatoxin. Disposal procedures would be
important in assuring industry and consumers that failed product does
not enter the stream of domestic commerce. Requirements for disposal of
failed lots are discussed later under proposed Sec. Sec. 983.40,
``Failed lots/rework procedures'' and 983.45 ``Substandard
pistachios.''
Proposed Sec. 983.38(d)(6) provides that if test samples 2 or 3
are not used for testing and certification purposes, the handler could
request the laboratory to return those samples to him or her. This
would allow handlers to sell the pistachios that comprise test samples
2 and 3 for domestic human consumption if the lot is shown to comply
with the aflatoxin regulation with the testing of sample 1. For
example, with larger lots of 22,001 to 150,000 pounds, this would allow
the handler to sell an additional 44 pounds of pistachios for human
consumption.
Proposed Minimum Quality Levels
The record supports minimum quality requirements for pistachios
being included in the proposed order. These requirements, set forth in
proposed Sec. 983.39, would establish maximum tolerances for certain
internal and external defects, and a minimum size specification.
The record shows that elimination of shell defects, bad tasting,
insect-infested and closed pistachios would not only increase consumer
satisfaction but also reduce the incidence of aflatoxin. Moreover,
witnesses stated that, based on industry experience, most consumers
prefer large pistachios. Because many consumers do not find smaller
pistachios desirable, these pistachios sell for lower prices. Quality
and size specifications would help improve grower returns by ensuring
that California pistachios sold in the domestic market are of the
quality that consumers prefer. Enhancing consumer demand by assuring
acceptable quality (including the absence of aflatoxin) is necessary
for the industry to market
[[Page 46010]]
increasing supplies of California pistachios.
The record shows that the defects listed in proposed Sec. 983.39
are generally accepted by the industry as those that reduce the
marketability and consumer acceptance of pistachios. Handlers currently
eliminate defective nuts in their normal operations to pack a product
that meets their customers' expectations.
Four categories of defects are proposed. The first is external
shell defects, which includes non-splits (shells that are not open),
adhering hull material, dark stain, and other damage that materially
detracts from the appearance of the shell. Next are internal defects,
which include immature kernels, kernel spotting, insect damage, mold,
rancidity, and decay. The third class of ``other defects'' includes
shell pieces and blanks, foreign material, particles and dust, and
loose kernels. The final category is in shell pistachios that are below
the specified minimum size.
The proposed minimum quality requirements provide a maximum
tolerance level for each type of defect. This is to recognize that in
normal handling operations, it is impossible to eliminate every single
defective nut from a lot. As an example, up to 5 percent (by weight) of
the inshell pistachios in a lot may be below the minimum permissible
size. The following table contains the proposed defects and tolerances.
Maximum Defect and Minimum Size Levels
------------------------------------------------------------------------
Maximum permissible defects
(percent by weight)
Factor -------------------------------
Inshell Kernels
------------------------------------------------------------------------
EXTERNAL (SHELL) DEFECTS
a. Non-splits & not split on suture..... 10.0 ..............
(1) Maximum non-splits allowed...... 4.0 ..............
b. Adhering hull material............... 2.0 ..............
c. Dark stain........................... 3.0 ..............
d. Damage by other means, other than a, 10.0 ..............
b and c above, which materially
detracts from the appearance or the
edible or marketing quality of the
individual shell or the lot............
INTERNAL (KERNEL) DEFECTS
a. Damage: Immature kernel (Fills <75% - 6.0 3.0
50% of the shell), Kernel
spotting (Affects \1/8\ aggregate
surface)...............................
b. Serious damage--Minor insect or 4.0 2.5
vertebrate injury/insect damage, insect
evidence, mold, rancidity, decay.......
(1) Maximum insect damage allowed... 2.0 0.5
-----------------
Total external or internal 9.0 ..............
defects allowed................
OTHER DEFECTS
a. Shell pieces and blanks (Fills <50% 2.0 ..............
of the shell)..........................
(1) Maximum blanks allowed.......... 1.0 ..............
b. Foreign material--No glass, metal or 0.25 0.1
live insects permitted.................
3. Particles and dust................... 0.25 ..............
4. Loose kernels........................ 6.0 ..............
Minimum permissible defects
(percent by weight)
Maximum allowable inshell pistachios 5.0 ..............
that will pass through a 30/64ths inch
round hole screen......................
------------------------------------------------------------------------
Witnesses testified that about 90 percent of the pistachios
produced in California are packed to higher quality standards than
those being proposed in the order. Thus, imposition of these quality
requirements should have a minimal impact on handlers, while ensuring
that the pistachios available to U.S. consumers are of acceptable
quality.
The terms used in the above table are defined in further detail
under Sec. 983.39(b) of the proposed order. These terms would clarify
permissible maximum defects for inshell pistachios and pistachio
kernels.
One of the terms defined in paragraph (b) of proposed Sec. 983.39
is ``dark stain,'' an external defect. The definition of that term
included in this Recommended Decision differs from that in the Notice
of Hearing. In the Notice, dark stain was defined to mean an aggregate
amount of discoloration affecting more than one-eighth of the shell
surface or, on dyed nuts, when readily noticeable. Testimony at the
hearing indicated that the last portion of that definition would have
adversely impacted handlers who dye or color their nuts to remove
cosmetic shell defects. Thus, this provision has been modified to
exempt dyed or colored nuts from the dark stain requirements. This
exemption is intended to allow handlers to improve the marketability of
pistachios containing dark stain by covering that defect with a dye or
color coat.
Witnesses stated that each shipment of California pistachios
intended for domestic human consumption would require a minimum quality
certificate. As previously discussed, this certificate would be issued
by an inspector and would certify that the pistachios contained in that
lot meet the established minimum quality requirements. Pistachios that
fail to meet the minimum quality specifications would be disposed of in
such manner as described in proposed Sec. 983.40.
The record also states that under proposed Sec. 983.39 (d),
transfers between handlers within the production area would be exempt
from minimum quality and size regulation. This exemption, as with a
similar exemption for aflatoxin certificates, is designed to allow
transfer of product between handlers. It would allow handlers to sell
and trade pistachios of varying qualities among themselves, and would
allow for efficiencies within the industry due to different handlers'
abilities to prepare pistachios for market. All pistachios would have
to be inspected and certified as meeting minimum quality
[[Page 46011]]
requirements before being shipped for domestic human consumption.
As with aflatoxin testing, provisions for minimum quality and size
testing under the order would require that lot samples consisting of a
minimum number of incremental samples be drawn. A minimum number of
incremental samples would be required to protect the statistical
validity of the testing process and to ensure that the test sample is
representative of the quality of the entire lot of pistachios from
which it was drawn.
As shown in the table below, the number of incremental samples per
lot sample would be the same under the aflatoxin testing as under the
minimum quality and size testing requirements. This would allow the
handler to pull one set of samples for both tests, as previously
explained. The sample would be drawn by, or under the supervision of,
an inspector.
Inshell and Kernel Pistachio Lot Sampling Increments for Minimum Quality Certification
----------------------------------------------------------------------------------------------------------------
Number of
incremental Total weight of Weight of inshell
Lot weight (lbs.) samples for the lot sample and kernel test
lot sample (grams) sample (grams)
----------------------------------------------------------------------------------------------------------------
220 or less............................................ 10 500 500
221-440................................................ 15 500 500
441-1100............................................... 20 600 500
1101-2200.............................................. 30 900 500
2201-4400.............................................. 40 1200 500
4401-11,000............................................ 60 1800 500
11,001-22,000.......................................... 80 2400 1000
22,001-150,000......................................... 100 3000 1000
----------------------------------------------------------------------------------------------------------------
According to witness testimony, a lot of inshell pistachios
weighing 220 pounds or less would require a lot sample weighing a total
of 500 grams. This lot sample would consist of 10 incremental samples
collected throughout the lot. Alternatively, a lot weighing 22,001
pounds to 150,000 pounds would require a lot sample equal to 3,000
grams and would consist of 100 incremental samples.
A test sample would then be taken from the lot sample. For lots up
to 11,000 pounds, the test sample would equal 500 grams. For any lot in
excess of 11,000 pounds, the test sample would be 1,000 grams.
The test sample sizes for minimum quality requirements differ from
those for aflatoxin testing. Under the aflatoxin testing system, the
lot sample drawn would be divided into three equal test samples, with
each sample being used progressively depending on the aflatoxin content
of each test sample. Under the sampling and testing procedures for the
proposed minimum quality requirements, the test sample would be used in
its entirety. Inspectors would assess the quality of the test sample
for external and internal defects.
Table 4 in proposed Sec. 983.39(e)(1) has been revised from that
included in the Notice of Hearing. An additional column entitled
``Weight of kernel test sample (grams)'' has been eliminated, and the
column previously entitled ``Weight of inshell test sample (grams)''
has been re-titled to ``Weight of inshell and kernel test sample
(grams).'' These changes are based on witness testimony that the test
sample sizes for inshell and kernel testing should be the same.
Proposed Minimum Quality Testing Procedures
Witnesses stated that the test samples should be analyzed in
accordance with USDA inspection procedures. This would ensure that the
pistachios do not contain in excess of the maximum permissible defects
and that they meet the minimum size level.
Under the USDA inspection procedures, the inspector would analyze
the test sample for external, internal, and other defects. The nuts
would be shelled for further analysis of internal kernel defects if the
pistachios exhibited dark stain, adhering hull, or other external
defects, or if, in the inspector's opinion, they had possible internal
defects.
Witnesses explained the importance of this requirement as studies
have shown that nuts with external defects have a higher probability of
kernel defects. These studies, discussed earlier in this document,
linked certain quality defects with the incidence of aflatoxin. Nuts
with unblemished shells would be subject to internal kernel analysis at
the discretion of the inspector. After testing, inspectors would
certify that the lot had met the minimum quality levels.
The record states that handlers would be required to keep testing
and certification records, along with records of final shipping
disposition, for three years after the crop year in which the
pistachios were shipped. These records would be subject to audit by the
committee at any time. These requirements would be important in
allowing the committee and the USDA to ensure that pistachio handlers
comply with the proposed provisions of the order. As stated in the
discussion of proposed aflatoxin testing procedures, each lot tested
for minimum quality and size certification would also be required to be
uniquely identified to ensure traceability.
Substandard Pistachios
Proposed Sec. 983.40 addresses procedures recommended by the
witnesses for reworking or disposing of substandard pistachios.
Substandard pistachios are pistachios that fail to test below the
maximum aflatoxin tolerance level or do not meet minimum quality
(including size) requirements.
According to record testimony, handlers would have different
options available for managing substandard pistachios. The first of
these would allow a handler to rework a lot of pistachios until that
lot met the aflatoxin and quality requirements proposed under the
order. If, after being reworked, the pistachios met the aflatoxin and
minimum quality levels, those pistachios could be shipped for domestic
human consumption.
If a handler chose not to rework a lot of substandard pistachios,
then the handler would be required to either dispose of those nuts or
use them for non-human consumption. These pistachios could also be
exported if they met the requirements of the receiving country.
Proposed Sec. 983.45 would prevent substandard pistachios from
entering the stream of domestic human consumption. Under the provisions
of this section, reporting and disposition procedures for substandard
pistachios would be implemented by USDA (upon recommendation of the
committee) through informal rulemaking.
[[Page 46012]]
Failed Lot Reporting
According to record evidence, Sec. 983.40(b) would establish
reporting requirements for lots failing to meet aflatoxin or minimum
quality requirements of the proposed order. Reports of failing lots
would have to be filed with the committee within 10 working days of the
test failure. Reports regarding lots exceeding the maximum aflatoxin
tolerance level would be sent by the accredited laboratory directly to
the committee. Reporting of lots exceeding the maximum aflatoxin
requirements directly by the laboratory rather than the handler would
expedite and increase the efficiency of the committee's ability to
locally oversee industry compliance to the proposed aflatoxin
provisions. Reports concerning lots failing to meet the minimum quality
requirements would be filed by the handler with the committee, as
minimum quality testing would be conducted at the handler's facility
and not at a laboratory.
Establishing reporting procedures for lots failing to meet the
requirements of the order would assist the committee in ensuring that
only certified lots are used for domestic human consumption. This would
help ensure that poor quality pistachios are either re-worked to
requisite quality and aflatoxin levels, or properly disposed of. In
this context, witnesses stated that failed lots reporting would be
essential to supporting the committee's oversight and auditing
responsibilities. Failed lot reporting would also present the committee
with an important information-gathering tool, as it would allow the
compilation of industry quality statistics.
Rework Procedures
Notification of a failed lot, either with regard to aflatoxin or
quality, would alert the committee to the possible reworking of
pistachios for reinspection, or to the disposal of those pistachios.
Witnesses expressed the importance of establishing rework procedures in
order to allow handlers the opportunity to separate acceptable quality
pistachios from inferior ones. Witnesses explained that while reworking
and reinspection would not be required under the order, rework would
provide handlers with an opportunity to secure a better return for
their pistachios. Rework and reinspection procedures should therefore
benefit both handlers and producers.
Witnesses expanded on the importance of safeguarding against the
negative effect of poor quality pistachios in the marketplace by
explaining that lots failing to meet aflatoxin requirements would be
subject to a different set of rework procedures than those failing
quality requirements.
Rework procedures for inshell pistachios failing to meet aflatoxin
requirements would require handlers to remove 100 percent of the
failing lot from its bulk or retail packaging. These pistachios would
be required to pass through the sorting stages of the handling process
in order to remove from the lot those nuts having the characteristics
most susceptible to harboring aflatoxin. Witnesses stated that after
reworking the lot, the weight of the total accepted and rejected
product would be reported to the committee. The acceptable portion of
the reworked lot would again be sampled and tested for aflatoxin, as
proposed under Sec. 983.38, Aflatoxin levels, with one exception. In
the case of a reworked lot, the lot sample size and the test sample
size would be doubled from that specified in Table 1 of proposed Sec.
983.38. In addition to being tested for aflatoxin content, the reworked
lot would also be sampled and tested for minimum quality.
If, after having been reworked, the lot fails aflatoxin testing for
a second time, the lot could be shelled and the kernels reworked,
sampled and tested in the manner required for an original lot of
pistachio kernels. If the handler decided not to pursue further
reworking of the failed lot, those pistachios would be prohibited from
entering the stream of commerce for domestic human consumption. That
lot would be required to be disposed of, sold for domestic non-human
consumption purposes, or exported in compliance with the receiving
country's requirements.
Rework procedures proposed for pistachio kernels failing to test
negative to aflatoxin would also require a re-processing of 100 percent
of the volume of the failing lot. After reworking, witnesses stated
that the total weight of the accepted product and the total weight of
the rejected product would be reported to the committee for
verification purposes. The reworked lot of kernels would be sampled and
reinspected for aflatoxin as specified in the aflatoxin requirements of
the order.
According to record evidence, handlers should also be able to
rework lots that fail to meet the minimum quality requirements proposed
in Sec. 983.39 of the order. As in the case of pistachios failing
aflatoxin requirements, handlers would need to remove from packaging
and rework 100 percent of the product within that lot. Reworking would
be completed by standard sorting techniques, including mechanical,
electronic or manual procedures normally used in the handling of
pistachios.
The reworked lot would be sampled and tested as required under
proposed Sec. 983.39, ``Minimum quality levels.'' There would be no
limit to the number of times a lot could be reworked for minimum
quality levels.
Testing of Minimal Quantities
The record supports simplified aflatoxin testing requirements for
handlers who handle less than one million pounds of assessed weight of
pistachios a year. Additionally, such handlers should qualify for an
exemption from minimum quality inspection and certification
requirements under certain circumstances. Including these provisions in
the proposed order would reduce costs for the smallest handlers, while
maintaining the industry objective of having all pistachios used for
domestic human consumption meet certain quality (including aflatoxin)
levels.
Section 983.41 of the proposed order, Testing of minimal
quantities, would provide that aflatoxin testing for handlers of
minimal quantities (less than a million pounds per year) could be
accomplished in two ways. The first option would allow a handler to
have an inspector sample and test all the handler's hulled and dried
pistachios for aflatoxin certification prior to further processing. If
the pistachios meet the proposed aflatoxin requirement, an aflatoxin
certificate would be issued to cover the handler's total inventory. The
handler would not then have to comply with the traceability procedures
set forth in paragraph (d) of proposed Sec. 983.38.
If the pistachios did not meet the aflatoxin requirements, the
handler could subdivide his or her inventory into smaller lots and have
each individual lot sampled and tested for aflatoxin. Any lots found to
be above the maximum aflatoxin threshold could be reworked and would
then be subject to the testing procedures specified in Sec. 983.38.
Witnesses testifying at the hearing stated that small handlers
should be allowed to test all of their hulled and dried pistachios
before the pistachios are further processed for quality and size. The
language of proposed Sec. 983.41(a) has been so clarified.
Witnesses also testified that handlers of minimal quantities could
apply to the committee for an exemption from inspection with respect to
the minimum quality requirements set forth in
[[Page 46013]]
proposed Sec. 983.39 of the order. If the exemption were granted, the
handler would be required to pull and retain (for 90 days) samples from
each lot shipped. The samples would be required to be made available
for review by the committee.
Witnesses explained that if it was determined that an exempt
handler were shipping substandard pistachios, the committee should be
able to revoke the handler's exemption. The handler in question would
then be subject to minimum quality and size inspections until further
determination by the committee. The record indicates that implementing
regulations should be effectuated to establish the specific procedures
for such exemptions.
Commingling
Witnesses recommended under proposed Sec. 983.42 that after a lot
were issued an aflatoxin inspection certificate and minimum quality
certificate, it could be commingled with other certified lots and
maintain its aflatoxin and minimum quality certifications. However,
handlers would be required to comply with paragraph (d) of proposed
Sec. 983.38 which provides that each certified lot be identified and
traceable from testing through shipment. Thus, if pistachios were
transferred between handlers prior to certification, those pistachios
would be required to meet the certification provisions of this proposed
order prior to being commingled with other certified lots. In the case
of the exemption from minimum quality certification for handlers
handling less than 1 million pounds, any pistachios transferred from an
exempt handler to a non-exempt handler would be subject to minimum
quality certification.
Reinspection
Witnesses supported authority for the committee to reject an
inspection certificate and request reinspection of a lot whenever it
has reason to believe that pistachios may have been damaged or
deteriorated while in storage. That lot would be prevented from
entering the marketplace for domestic human consumption until a new
certification was obtained.
USDA would not allow invalidation of a certificate that has been
issued by an inspector. However, there may be circumstances that
warrant a requirement that a lot be subject to a second inspection.
Thus, proposed Sec. 983.43, Reinspection, is modified to provide that
the Department, upon recommendation of the committee, may establish
rules and regulations to establish conditions under which pistachios
would be subject to reinspection.
Inspection, Certification and Identification
The record indicates that all pistachios shipped for domestic human
consumption should be required to be inspected and certified as meeting
the order's quality requirements (including those pertaining to
aflatoxin levels). If deemed necessary, lots of pistachios could be
required to be identified by appropriate seals, stamps, tags, or other
identification affixed to the containers by the handler. All
inspections would be at the expense of the handler.
Witnesses testified that not all handlers would have their
pistachios tested or inspected at the same point in the handling
process. The proposed order is intended to be flexible, as it was
explained by witnesses that inspection could be appropriate for certain
handlers at one stage in the process while being appropriate for other
handlers at another stage. Witnesses stated that differences in
inspection timing throughout different handlers' processing systems
would not pose a compliance problem as long as lot identity was
required and maintained.
Several handler witnesses testified that they have already
implemented traceability systems in their plants. Currently, several
different systems for tracking lots of pistachios exist in the
industry. Record testimony indicates that some handlers identify lots
by date and shift. These lots are then traced by written records
maintained by the handler's staff. Other handlers mark the containers
with a code using crayons or markers. Yet other handlers use bar codes.
The record indicates that current handling practices relating to
the tracking of lots may be adequate for compliance purposes under the
order. However, if deemed necessary, the USDA, upon recommendation of
the committee, could issue rules to specify that handlers be required
to affix some standardized type of identification to the containers in
a lot.
The record shows that the responsibility for affixing such
identification could be given to the handlers without requiring it be
done under the direction or supervision of an inspector. This
represents a departure from the regulatory text of proposed Sec.
983.44 contained in the Notice of Hearing. Originally, affixing of
identification would have been required under the supervision of an
inspector. Witnesses explained that giving handlers the responsibility
to maintain pistachio identity could result in more flexibility in
handlers' operations and lower costs. Section 983.44 has been modified
accordingly.
Substandard Pistachios
Record evidence indicates that the committee should have the
authority to establish reporting and disposition requirements as it
deems necessary to ensure that pistachios which do not meet the
aflatoxin and minimum quality requirements prescribed by Sec. 983.38
and Sec. .39 are not shipped for domestic human consumption. This
authority would appear in Sec. 983.45 of the proposed order, and would
require approval by the Department through the informal rulemaking
process.
Witnesses opined that much of the information the committee and the
Department would need to administer the order has been covered by
reporting requirements set forth elsewhere in the proposed order. For
example, reports would be required when pistachio lots fail testing for
the aflatoxin tolerance or fail inspections for minimum quality and
size specifications. However, in the course of administering the order,
the committee may determine that further reports are necessary. This
section gives the committee the authority to establish further
reporting requirements, subject to the approval of the Department.
The committee should also be authorized to recommend other rules
(aside from those relating to reporting requirements) needed to ensure
appropriate disposition of substandard pistachios. For example,
handlers could be required to dispose of substandard pistachios under
the supervision of the committee staff or an inspector. Again, such
rules would need to be approved by USDA.
In the Notice of Hearing, reference to Sec. 983.38 was
inadvertently omitted from Sec. 983.45 of the proposed order. This
oversight is corrected in this document.
Modification or Suspension of Regulations
According to record evidence, proposed Sec. 983.46 should allow
for modification, suspension, or termination of the requirements in
Sec. Sec. 983.38 through 983.45 of the order. These sections of the
proposed order relate to aflatoxin and minimum quality requirements.
The record shows that the quality and aflatoxin requirements
specified in the proposed order are reasonable and appropriate at the
current time. However, if the committee were to determine by reasons of
changed industry conditions (such as development of new technology)
that certain provisions of the order need to
[[Page 46014]]
be modified, suspended or terminated, the committee should have the
authority to make those recommendations. All such recommendations would
require seven concurring votes by the committee and would be subject to
review and approval of USDA through the rulemaking process.
Additionally, the record shows that the committee should have the
authority to recommend any rules necessary for the implementation of
the provisions of Sec. Sec. 983.38 through 983.45 of the proposed
order. Again, any such recommendation would require USDA approval. It
is recommended that a new paragraph (c) be added to proposed Sec.
983.46 to add this authority to the order.
Material Issue Number 5(e)--Reporting and Recordkeeping
The record evidence is that the committee should have the
authority, with the approval of the Department, to require handlers to
submit such reports and information as the committee may need to
perform its functions and fulfill its responsibilities under the order.
The committee would need to collect information for such purposes as
collecting assessments, compiling statistical data for use in market
evaluation, and determining whether handlers are complying with order
requirements. The types of information that could be collected to fill
these reporting needs include but are not limited to production, sales
and inventory data, and information pertaining to transfers of
pistachios between handlers.
Additionally, under proposed Sec. 983.49, each handler would be
required to maintain records with respect to pistachios acquired,
processed, further handled, sold, or otherwise disposed of, as would be
necessary to verify the reports that the handler submits to the
committee. All such records would be required to be maintained for at
least 3 years after the end of the fiscal year in which the transaction
occurred.
Witnesses also stated that the order should provide the authority
for USDA and authorized employees of the committee to examine those
records pertaining to matters within the purview of the order. This
provision would enable verification of compliance with requirements of
the proposed order.
All reports and records submitted to the committee by handlers
would be required to remain confidential and be disclosed only as
authorized by USDA in accordance with the Act. However, the committee
would be authorized to release composite information from any or all
reports. Such composite information could not disclose the identity of
the persons furnishing the information or any person's individual
operation.
The record shows that industry handlers already collect and
maintain much of the information contemplated to be reported and
retained under the proposed order provisions. Thus, compliance with the
provisions of the order with regard to reporting and recordkeeping
would entail minimal handler costs.
Material Issue Number 5(f)--Compliance
No handler should be permitted to handle pistachios except in
conformity with the provisions of the order, as set forth in proposed
Sec. 983.58. If the program is to be effective, compliance with its
requirements is essential.
Material Issue Number 5(g)--Continuance Referenda
In accordance with proposed Sec. 983.67(d), the order should
provide that the Department conduct periodic continuance referenda
every 6 years. The initial continuance referendum should be conducted
within 6 years of the effective date of the marketing order.
USDA has determined that continuance referenda are an effective
means for ascertaining whether producers favor continuance of marketing
order programs. As such, the proposed marketed order should include a
provision for continuance referenda.
The Act provides that in the promulgation of a marketing order, at
least two-thirds of the producers voting, by number or by volume
represented in the referendum, must favor the issuance if the order.
Continuance referenda should be based on the same standard of industry
support. This requirement is considered adequate to measure producers'
support to continue the marketing order.
The Department would consider termination of the order if less than
two-thirds of the producers voting in the referendum and producers of
less than two-thirds of the volume of pistachios represented in the
referendum favor continuance. In evaluating the merits of continuance
versus termination, USDA would not only consider the results of the
referendum. The Department would also consider all other relevant
information concerning the operation of the order and its relative
benefits and disadvantages in order to determine whether continued
operation of the order would tend to effectuate the declared policy of
the Act.
The Department's ``Guidelines for Fruit, Vegetable and Specialty
Crop Marketing Orders'' provide for periodic referenda to allow
producers the opportunity to indicate their support for or rejection of
a marketing order. It is the position of the Department that periodic
referenda ensure that marketing order programs continue to be
accountable to producers, obligate producers to evaluate their programs
periodically, and involve them more closely in their operation. The
record evidence supports these goals.
In any event, section 608(C)(16)(B) of the Act requires the
Department to terminate the order whenever the Department finds that
the majority of all producers favor termination, and that such majority
produced more than 50 percent of the commodity for market.
Material Issue Number 5(h)--Exemption for Small Quantities
Proposed Sec. 983.69, ``Exemption,'' states that any handler who
handles 1,000 dried pounds of pistachios or less during any year may
handle pistachios free of the regulatory and assessment provisions of
the proposed order.
The record shows that the purpose of this provision is to provide
an exemption from the proposed requirements of the order for small
quantities of pistachios, such as those that are grown for home or
personal use. This section may be changed, as recommended by the
committee and approved by the Department. For example, the committee
may recommend that the 1,000-pound threshold be revised.
Additionally, implementing rules and regulations may be deemed
necessary to ensure that handlers claiming this minimum exemption are
not selling pistachios in domestic human consumption outlets that are
not in compliance with the minimum quality requirements of the order.
Such rules and regulations could be implemented under the authority in
proposed Sec. 983.45 of the order.
Material Issue Number 5(i)--California Pistachio Commission
Proposed Sec. 983.70, ``Relationship with the California Pistachio
Commission,'' is supported by witness testimony that the committee have
authority to deliberate, consult, cooperate and exchange information
with the California Pistachio Commission (CPC). Any sharing of
information between the two organizations would be kept confidential in
accordance with the provisions of section 10(i) of the Act.
[[Page 46015]]
Testimony offered by the Chief Executive Officer of the CPC further
clarifies the potential efficiencies to be gained through cooperation
of the CPC and the committee. As stated by the witness, the industry is
already familiar with the structure and protocols of the Commission.
Joint management of the two programs could reduce added paperwork,
costs and duplication of efforts.
In terms of proposed regulation, witnesses stated that the two
programs would be complimentary, as the provisions of each program
would not overlap. The proposed provisions of the Federal program
pertain to mandatory testing and certification for aflatoxin, quality
and size. The CPC does not administer such regulation but rather
focuses on promotion and research activities. The CPC does oversee the
California Pistachio Marketing Agreement, but this is a voluntary
agreement among handlers, and the quality parameters under the
agreement do not include those addressed in the proposed order.
Witnesses speaking in support of Sec. 983.71 explained that, when
the Agreement was formulated, it was the intention of the participants
to pattern the administrative and organizational structure of the
Agreement after the Commission for the purpose of minimizing
administrative costs and avoiding the duplication of efforts as much as
possible. According to record testimony, this goal has been obtained
and has allowed the Agreement signatories the ability to maintain a
very low administrative overhead with a minimum of added paperwork.
Witnesses stated that, if the Federal program is approved, it is their
intention to capture similar benefits.
Material Issue Number 5(j)--Common Terms
The provisions of proposed Sec. Sec. 983.59 through 983.69 and
Sec. Sec. 983.90 through 983.92 are common to marketing agreements and
orders now operating. All such provisions are necessary to effectuate
the other provisions of the marketing order and marketing agreement and
to effectuate the declared policy of the Act. The record evidence
supports inclusion of each provision. These provisions, which are
applicable to both the marketing agreement and the marketing order, are
identified by section number and heading as follows: Sec. 983.59
Rights of the Secretary; Sec. 983.60 Personal Liability; Sec. 983.61
Separability; Sec. 983.62 Derogation; Sec. 983.63 Duration of
immunities; Sec. 983.64 Agents; Sec. 983.65 Effective time; Sec.
983.66 Suspension or termination; Sec. 983.67 Termination; Sec.
983.68 Procedure upon termination; and Sec. 983.69 Effect of
termination or amendment. Those provisions applicable to the marketing
agreement only are: Sec. 983.90 Counterparts; Sec. 983.91 Additional
parties; and, Sec. 983.92 Order with marketing agreement.
Material Issue Number 6--Implementation of Proposed Order
Based on a review of the hearing record, USDA recommends that if
California pistachio producers were to vote in favor of promulgating
the proposed marketing order, the provisions of this program be
implemented in two phases. This recommendation addresses the need to
establish administrative procedures, guidelines and forms, some of
which would require USDA rulemaking and OMB approval, for the mandatory
inspection and certification provisions of the proposed program to
function effectively.
The first phase would allow for the nomination and seating of an
initial administrative committee, and the recommendation and
implementation of administrative rules, including reporting and
recordkeeping requirements, under which the program would operate.
These activities include, but are not limited to, nominations of
producer and handler members and alternate members of the committee,
the selection of that committee by the Department, and holding
committee meetings to select a staff, draft operating procedures,
recommend a budget and assessment rate for the first fiscal period
under the proposed order, and make other recommendations necessary to
implement order authorities. Some of the committee recommendations
would require rulemaking by the Department and approval of new
information collection requirements by the Office of Management and
Budget (OMB).
The second phase would allow for the implementation of the
regulatory provisions proposed under this program and necessary
procedures to effectively administer them. This would include the
mandatory testing and certification provisions for maximum aflatoxin
and minimum quality levels of California pistachios, and failed lot
rework provisions under Sec. Sec. 983.38 through 983.46 of the
proposed order. USDA recommends that these provisions become effective
on August 1, 2004.
This recommendation reflects the fact that, if the order were to be
approved through a producer referendum and implemented in its entirety,
the immediate effectiveness of regulatory provisions without adequate
administrative procedures to support them could obstruct the flow of
California pistachios to the marketplace. USDA believes that while the
intended effect of the proposed order is to ensure the delivery of high
quality California pistachios to consumers, implementation of the
regulatory provisions proposed herein without adequate implementation
of industry administrative procedures could result in the unintended
disruption of California pistachio shipments.
Small Business Consideration
Pursuant to the requirements set forth in the Regulatory
Flexibility Act (RFA), the Agricultural Marketing Service (AMS) has
considered the economic impact of this action on small entities.
Accordingly, the AMS has prepared this initial regulatory flexibility
analysis.
The purpose of the RFA is to fit regulatory actions to the scale of
business subject to such actions so that small businesses will not be
unduly or disproportionately burdened. Small agricultural producers
have been defined by the Small Business Administration (SBA) (13 CFR
121.601) as those having annual receipts of less than $750,000. Small
agricultural service firms, which include handlers that would be
regulated under the proposed pistachio order, are defined as those with
annual receipts of less than $5,000,000.
Interested persons were invited to present evidence at the hearing
on the probable regulatory and informational impact of the proposed
pistachio marketing order program on small businesses. The record
evidence is that while the program would impose some costs on the
regulated parties, those costs would be outweighed by the benefits
expected to accrue to the U. S. pistachio industry.
The record indicates that there are approximately 647 pistachio
producers, which includes the members of the one existing pistachio
producer cooperative. There are about 19 handlers who process
pistachios in the production area proposed to be regulated.
Statistics prepared by the California Pistachio Commission and
submitted as evidence at the hearing show that 445 California pistachio
producers (69% of the total) produce less than 100,000 pounds per year;
100 producers (15%) produce more than 100,000 and less than 250,000
pounds; 43 producers (7%) produce more than 250,000 and less than
500,000 pounds; and 59 producers (9%) grow more than 500,000 pounds.
Using an average grower price of $1.10 per pound, 9 percent of the
[[Page 46016]]
California pistachio producers receive more than $550,000 annually.
Only a portion of these producers would meet SBA's definition of a
small agricultural producer.
The record shows that 12 California pistachio handlers (63 percent
of the total) handle less than 1,000,000 pounds per year; 4 handlers
(21%) handle between 1,000,000 and 10,000,000 pounds; and 3 handlers
(16%) handle more than 10,000,000 pounds annually. The largest handler
processes over 50 percent of industry production.
Using an average handler price of $1.80 per pound, 63 percent of
the pistachio handlers would receive annual receipts of less than $1.8
million, 2 percent would receive between $1.8 and $18.0 million, and 16
percent would receive more than $18.0 million. At least 12 of the
pistachio handlers (or 63 percent of the total) could be considered
small businesses under SBA's definition.
Record evidence concerning pistachio production and handling costs
provide an understanding of the California pistachio industry and
potential impacts of implementing the proposed order. Farming
pistachios is a costly investment with a significant delay in benefits
and an unreliable crop yield.
Although increasing yields have led to an increasing overall value
of California pistachio production, producers must maintain a level of
return per pound harvested that covers the cost of production in order
for their pistachio operations to remain economically viable. Witnesses
testified that maintaining a high level of quality product in the
market would lead to increasing consumer demand and greater stability
in producer returns.
Evidence suggests that poor quality pistachios impact the demand,
and the potential growth of demand, for pistachios. Characteristics
routinely deemed as ``poor quality'' by customers of the California
pistachio industry include small size, and excessive internal and
external blemishes. Market studies and customer comments presented by
handler witnesses demonstrate that the presence of poor quality
pistachios in the marketplace significantly impacts demand in a
negative way.
Minimizing the level of aflatoxin in California pistachios is
another significant quality factor, as aflatoxin is a known carcinogen.
Consumer concerns over aflatoxin can affect their perception of
pistachio quality, and therefore negatively impact demand. Moreover,
any market disturbances related to aflatoxin in pistachios, regardless
of the geographic origin of those pistachios, could have a detrimental
effect on the California pistachio industry. A regulatory program
limiting the amount of aflatoxin in pistachios could be useful in
bolstering consumer confidence in the quality of California pistachios.
Pistachio acreage has been consistently increasing in California,
from just over 20,000 bearing acres in 1979 to 78,000 bearing acres in
2001. The number of non-bearing acres (i.e. acres less than 7 years
old, not yet in full production) has also shown consistent growth in
recent years, rising from 13,400 acres in 1995 to 23,500 acres in 2001,
a 75 percent increase. Yield per acre has also been steadily rising.
Over the 1976-1980 period, average yield per bearing acre measured
1,110 pounds; by 1996-2000, this average had increased to 2,512 pounds.
Higher yields and increasing acreage has resulted in increasing
production. According to information submitted by the CPC, production
in 2000 totaled 242 million pounds, a 64-percent increase over 1995
production, which totaled 148 million pounds. Moreover, witnesses at
the hearing indicated that maturing acreage, absent any additional new
plantings, will likely result in a 60-percent increase in California
pistachio production over the coming years.
Several witnesses at the hearing testified that, in light of
increasing production, future stability of market returns is reliant on
continually increasing consumer demand for pistachios. These witnesses
stated that strong consumer demand, which is ultimately related to
consumer perceptions of product quality, is essential to the continued
economic well being of the California pistachio industry. Moreover,
witnesses discussed the importance of implementing a marketing order
program that would provide them with a regulatory structure to monitor
and assure that minimum quality standards are not compromised as
production of California pistachios increases.
The relationship between product quality, consumer demand and
producer returns in the pistachio industry was demonstrated at the
hearing. Pistachio production is not only costly in terms of initial
investment and cultural costs, but it is highly unpredictable in terms
of producer returns. Between the initial processes of cleaning,
hulling, sorting and drying, a significant portion of the initial
volume harvested is reduced. This volume is further reduced as the
handling process reaches its final stages of sorting for quality and
final preparation for market. Witnesses explained that ultimate
pistachio sales are based on approximately 30 percent of the volume
initially harvested from the field. Because of this, witnesses stated
that the process of extracting the highest quality portion of the
harvest, and ensuring consumer satisfaction with that product, is
crucial to determining the value of the crop.
Pistachio production is similar to other nut crops in that yield
and total production vary substantially from year to year because of
the alternate bearing nature of pistachio trees resulting in cyclical
high and low production years. Total value and value per acre are
generally higher in higher yielding years. Conversely, grower return
per pound is generally higher in low yielding years.
Producer returns and total crop value are also dependent on the
percentage of harvest that is either ``open shell'' or ``closed
shell.'' Each harvest yields a certain percentage of nuts that have not
naturally opened prior to cultivation. These nuts are classified as
``closed shell,'' ``shelling stock'' or ``non-splits,'' and have a
lower market value than those nuts that are naturally split, or ``open
shell.'' The proportion of open-shells is a key factor in year-to-year
changes in the total value of production.
Economic evidence presented at the hearing, based on data from the
National Agricultural Statistics Service (NASS) and the CPC, indicates
that trends for total crop value and value per bearing acre have been
increasing over the past 20 years. In 1980, the pistachio crop in
California was valued at $55.8 million. By 2000, total crop value had
increased more than four-fold, reaching $245 million. These gains are
attributed to increases in both total pistachio producing acreage and
yield per acre. Average value per bearing acre increased from $1,642
per acre in 1980-1984 to $2,665 per acre in 1996-2000.
According to CPC historical price data, price per pound has
gradually decreased over the past 20 years, ranging from a high of
$2.05 per pound in 1980 to a low of $0.99 per pound in 2001. According
to the record, the proposed order would assist in improving producer
returns for pistachios. The proposed order would not only assist in
fortifying consumer demand by ensuring consumer satisfaction with
product quality, but mandatory quality and aflatoxin requirements are
also likely to boost domestic prices by culling lower quality
pistachios, which tend to have price-depressing effects, from the
market.
A University of California Cooperative Extension study presented as
part of record evidence estimates total cost of
[[Page 46017]]
production in 2001 at $2,643 per acre. According to industry data, the
average grower return (value per bearing acre) for 1998-2001 was
$2,619. This average revenue estimate is just below the Extension
study's $2,643 estimate of typical cost. Record evidence indicates that
over that 4-year period, the lowest value per bearing acre was $2,137
in 2001 and the highest was $3,207 in 2000.
Witnesses supplied an additional set of cost estimates, which
ranged from a low-cost operation of $2,350 per acre to a high of $3,400
per acre. In their testimony, total costs of production were divided
into three categories: the costs of orchard establishment, cultural
costs and administrative costs. Establishment costs, or the overall
cost to develop an acre of pistachios until revenues exceed growing
expenses, were estimated at between $10,000 and $15,000, with an
average tree maturation period of 7 years. In order to recover these
investment costs, the hearing record states that producers generally
target an 11% return on investment, estimated at between $1,100 and
$1,650 per acre. Annual per acre cultural costs average between $1,100
and $1,600, once the trees are productive. Administrative costs include
the cost of farm management and crop financing, and can vary between
$150 and $200 per acre. The sum of cultural and administrative costs
therefore range from $1,250 to $1,800.
Grower price per pound averaged approximately $1.10 between 1997
and 2001. Given that $1.10 average grower price and the cost estimates
above, a producer would need to harvest an average of at least 2,000
pounds per acre to cover total production costs for the low-cost
operation ($2,350 per acre). A producer would need to harvest at least
1,136 pounds per acre to cover the cultural and administrative costs of
$1,250 per acre (not including a return on investment).
The CPC Annual Report for Crop Year 2001-2002 reveals that 6 out of
26 California counties with pistachio production yielded on average
more than 2,000 pounds per acre between 1998 and 2001. These six
counties, which together represented over 88 percent of total
California pistachio production in 2000, are Colusa, Sutter, Madera,
Fresno, Kings and Kern. Glenn, Butte, Placer, Yolo, Contra Costa, San
Joaquin, Calaveras, Stanislaus, Merced, Tulare and Santa Barbara
counties yield on average between 1,000 to 2,000 pounds per acre and
represent roughly 12 percent of total state production. Shasta, Tehama,
Yuba, Solano, Sacramento, San Luis Obispo, Los Angeles, San Bernardino
and Riverside counties yield on average less than 1,000 pounds per acre
and represent less than one percent of California pistachio production.
Given the assumptions made above, approximately 88 percent of the
industry is covering total costs of production. Conversely, roughly 12
percent of the industry is currently covering cultural costs but not
generating a return on their investment.
Simulation Model
Record evidence includes an economic analysis presented by Dr.
Daniel Sumner, University of California-Davis on the potential impacts
of the proposed marketing order provisions if the program were
implemented. Dr. Sumner presented a cost-benefit analysis based on a
simulation model, the purpose of which was to provide a framework for
comparing costs of compliance to the benefits of improved quality
through implementation of the standards.
Cost Estimates
Dr. Sumner's presentation focused on the regulatory features of the
proposed marketing order: (1) Mandatory testing of pistachios for the
presence of aflatoxin, with a maximum allowable tolerance of 15 ppb;
and (2) mandatory minimum quality standards. The quality standards
would specify minimum size and maximum allowable defects.
According to record testimony, the major costs associated with
these features are the cost of aflatoxin testing and the cost of USDA
presence in the handlers' plant to inspect and sample lots of
pistachios. Expected benefits identified by the witnesses would be the
increase in consumer confidence in pistachios as a result of aflatoxin
regulation, and the combined increases in consumer demand for
pistachios due to mandatory USDA regulation and stringent quality
standards.
Dr. Sumner's analysis took into account many of the variables
presented in testimony by other witnesses describing typical production
and processing costs, and presented a weighted average cost computation
for marketing order compliance. The average cost of compliance, as
identified by several witnesses and reiterated in Dr. Sumner's
analysis, is approximately one half cent per pound of domestic
pistachio production, or $0.00525 per pound.
Record evidence suggests that the cost of having a USDA inspector
in the plant, including mileage plus the standard fee per hour, is
approximately $291 per day for the largest plants (which process about
80 percent of total production). Total production for the domestic
market that would be processed by the largest plants (those that
process over 10 million pounds annually) is estimated at 136 million
pounds. If an average lot is 40,000 pounds (the most common lot size
for testing cited by the largest handlers), then 3,400 lots would need
to be tested to account for all 136 million pounds (166.67 million
pounds times 80 per cent). If a USDA official were to test 5.5 lots per
day, then 618 person-days would be needed to test all of the lots.
Multiplying $291 per day times 618 person-days yields an annual cost of
$180,000 for testing 136 million pounds. Dividing the $180,000 annual
cost by 136 million pounds yields an estimated cost per pound of
$0.0013 for having USDA personnel in the plant to sample and certify
that the pistachios meet minimum quality standards. Testimony suggests
that this cost estimate is on the high side, since many handlers would
already have USDA personnel in their plants to perform other grading
services besides certification of lots for minimum quality.
The cost of aflatoxin testing in the witnesses' simulation analysis
is estimated at the current rate charged by a private laboratory ($75
per test). Given this rate information, the aflatoxin testing cost per
pound would be $0.0019 ($75 divided by the average lot size of 40,000
pounds).
For the largest handlers, the combined cost of aflatoxin testing
and paying for the USDA presence in the plants would be equal to the
sum of the quality and aflatoxin cost figures outlined above ($0.0013 +
$0.0019), or $0.0032 per pound. To account for imprecision of data and
other incidental costs, Dr. Sumner's analysis employs a median cost per
pound for marketing order compliance, which is slightly higher, or
$0.005 per pound. The analysis further assumes that per unit costs are
somewhat higher for smaller plants. Thus, median costs for two
categories of smaller plants are estimated at $0.006 and $0.007.
Weighting these cost figures for the three different size
categories of plants yields an overall median estimated cost per pound
for compliance of $0.00525. In terms of economic theory, this cost
increase is represented by a vertical shift in the supply curve of
about one-half cent, as measured along the vertical axis in a supply-
demand graph. The total direct cost of compliance is estimated at
$875,000 in the median scenario ($0.00525 times 166.67 million pounds
in the domestic market).
[[Page 46018]]
Benefit Estimates
The witness's economic analysis takes into account three separate
demand benefits, which he considers distinct. The first, and largest,
of the demand benefits is higher expected long run average demand due
to the reduced chance of an aflatoxin event that would cause a major
negative shock to demand. The mandatory aflatoxin testing under the
marketing order would reduce the chance of a demand-decreasing market
disturbance in the U.S.
Witnesses cited a 1996 pistachio aflatoxin case which occurred in
Germany as an example of what could befall the U.S. pistachio industry
if aflatoxin were not properly regulated. Widespread negative publicity
about aflatoxin in foreign pistachios exported to Germany caused sales
revenue to decline by 50 percent for a duration of three years or more.
Witnesses estimate that a similar event in the United States could cost
the industry over $300 million in gross revenue. Witnesses also pointed
out that there were significant additional repercussions on pistachio
sales worldwide as word of the German aflatoxin incident spread through
the media of other nations, especially in Europe, affecting pistachio
sales in those countries.
The witness's analysis assumes that an aflatoxin related market
disturbance would cause a more moderate decrease, represented in the
median simulation case as a 10 percent decline (18 cents) from the
$1.80 per pound typical base price at the handler level.
By requiring aflatoxin testing for all pistachios destined for the
domestic market, the marketing order would make the probability of an
aflatoxin event less likely. As a starting point, witnesses argued that
without mandatory aflatoxin testing through the proposed marketing
order, there is a 5-percent annual probability of an aflatoxin related
market disturbance. If such an incident were to occur, witnesses
estimated that its impact would last for 3 years. Implementation of
mandatory testing is then assumed to reduce the probability to 1
percent, a decline of 4 percentage points.
Mandatory testing under the marketing order therefore increases
expected demand, or willingness to pay for pistachios, by $0.0216 per
pound (4 per cent decline in probability times 18 cents times 3 years).
The witness's analysis includes two additional demand-side
benefits. The witness asserts that USDA requirements convey a positive
benefit in the market as reflected by the use of this claim in product
promotion, labels, and displays. A median increase of $0.0025 in
willingness to pay reflects a reasonably conservative estimate of the
higher buyer confidence in pistachios due solely to USDA participation
in the pistachio quality testing and certification process. The
certification gives additional confidence in the quality of the
product.
The third demand benefit is higher buyer perception of quality due
to minimum standards. Witnesses assume a similarly small magnitude for
this estimated increase in willingness to pay ($0.003 per pound).
Summing the median parameters for each of these three demand
impacts, the increase in willingness to pay for pistachios supplied to
the domestic market is a little under 3 cents per pound ($0.0271). In
terms of economic theory, this figure represents an upward shift in the
demand curve of nearly 3 cents, as measured along the vertical axis in
a supply-demand graph. Most of the impact is from the first benefit,
the reduced probability of aflatoxin being found in California
pistachios.
Thus the median benefit in terms of increased per unit demand
(willingness to pay) is estimated to be substantially larger than the
estimated median per unit direct cost of marketing order compliance
($0.0271 versus $0.00525). Expected or average demand is higher,
reflecting the lower probability of an aflatoxin event and the average
quality and certification effects in the domestic market. Handlers
would face higher costs to comply with the proposed requirements.
Simulation Results
These figures for increased cost and increased willingness to pay
were combined with different demand and supply elasticities in the
simulation model developed by Dr. Sumner to assess the net economic
impact of marketing order implementation. The median elasticities used
were unitary (-1.0 for demand and 1.0 for supply). The supply response
that is modeled is a long run supply response (additional planting) due
to the permanent change in market conditions resulting from the
marketing order. These assumed elasticities are based on other prior
econometric estimates for pistachios and other tree nuts. Witnesses
cited a 1999 report by Lucinda Lewis of Competition Economics, Inc.,
``Charting a Direction for the U.S. Pistachio Industry,'' which found a
-1.14 demand elasticity for pistachios. According to the record
testimony, the range of elasticities used in the simulation scenarios
are consistent with published economic studies of supply and demand for
pistachios and other tree nuts.
The simulation model solves a system of supply and demand equations
for a new set of industry prices and quantities from marketing order
implementation. As stated above, the total direct cost of compliance is
$875,000. In the simulation, there is an upward shift in the market
supply curve, representing increased costs to firms in the pistachio
market. The magnitude of the price and quantity change from the shift
in the supply curve is determined by the higher cost of production
(compliance cost) and the elasticity of supply. The resulting computed
(simulated) loss to the handler segment of the industry from higher
expenses for marketing order compliance is $490,000.
This $490,000 differs from the previously stated $875,000 cost of
compliance figure by the amount of an implied price increase and the
small equalization effect on the smaller handlers that process 20
percent of the product.
The witness's analysis assumes that with minimum quality
requirements the relative position of the smaller firms would improve
to match those of other handlers. This is because prior to the new
mandatory requirements, these firms are assumed to have fewer quality
controls than most other firms, and thus end up selling nuts to the
part of the market that buys lower quality nuts at lower prices. The
equalization effect resulting from uniform minimum quality
specifications is a small positive benefit that offsets some of the
cost of compliance for the smaller firms.
On the demand side, the higher willingness to pay is $0.0216 per
pound for the reduced probability of aflatoxin in California
pistachios, and $0.0055 for the two additional demand-side benefits
(higher buyer confidence from USDA certification and higher buyer
perception of quality). The magnitude of the price and quantity change
from the shift in the demand curve is determined by the higher
willingness to pay and the elasticity of demand.
In the median simulation, the amount sold in the domestic market
rises by 1.6 million pounds. The benefit to industry participants is
the total value of this increase in domestic sales which is the 1.6
million pound increase in quantity sold multiplied by the higher
expected price level resulting from the shifting of the supply and
demand curves in the simulation of marketing order impacts.
Using the median supply and demand elasticities in the simulation
model, and the median compliance cost and
[[Page 46019]]
willingness to pay figures, the computed benefit to the handler portion
of the market from the reduced chance of an aflatoxin market
disturbance is $1.545 million dollars. The value of the two additional
demand-side benefits is $.392 million dollars. The total benefit to
handlers is thus $1.938 million dollars.
When the loss due to compliance-related expenses ($490,000) is
factored in, the resulting net benefit to pistachio handlers from the
marketing order is $1.448 million dollars. This $1.448 million dollar
estimate of net benefit to handlers is the key result from the
witness's cost-benefit analysis.
In economic theory terminology, this part of the simulation is
measuring the change in producer surplus. Viewed in terms of a supply-
demand graph, producer surplus is the area under the cost and above the
supply curve. The $1.448 million dollar estimate of net benefit is a
measure of the difference between producer surplus at the initial
equilibrium (e.g. $1.80 average price at the handler level, or $1.10 at
the grower level) and the new higher price and quantity after the
supply and demand curves have been shifted to represent the median
changes in cost (supply) and willingness to pay (demand).
Table 1.--Simulation of Pistachio Marketing Order Impacts on Producers/
Handlers
[Annual Net Costs and Benefits with Median Parameter Values]
------------------------------------------------------------------------
------------------------------------------------------------------------
Benefit 1: Reduced chance of aflatoxin event............... $1,545,000
Benefit 2: USDA certification.............................. 178,000
Benefit 3:
Improved quality perception............................ 214,000
------------
Total benefit...................................... 1,938,000
Impact of cost of compliance........................... -490,000
------------
Net total.......................................... 1,448,000
------------------------------------------------------------------------
It should be noted that although the witness asserts that Benefit 2
and Benefit 3 are conceptually distinct, one could argue that there is
significant overlap between the value of USDA certification and
improved quality perception on the part of pistachio buyers and
consumers. However, the assumed benefits are small in both cases, and
if either of the benefit figures is eliminated, net estimated benefits
to handlers still exceed one million dollars.
Cost-benefit studies which use economic welfare analysis also
typically include consumer impacts, and the witness's economic analysis
includes a parallel set of computations for the buyer/consumer segment
of the pistachio industry. The largest demand-side benefit, the reduced
chance of an aflatoxin event, is estimated at $2.586 million. The
combined value of the two additional demand-side benefits is $.655
million, yielding a total benefit estimate of $3.241 million.
Subtracting the estimated impact on buyers/consumers of introducing
added costs of marketing order compliance ($245,000) yields a buyer/
consumer net benefit estimate of $2.996 million. A key aspect of this
economic analysis is that consumer willingness to pay for pistachios
rises as consumer confidence improves from the higher quality standards
imposed by the order. With the demand and supply elasticities used in
the analysis, the benefits to the domestic buyers/consumers in this
simulation are larger than benefits to the handler side of the market.
In economic theory terminology, this part of the simulation is
measuring the change in consumer surplus. Viewed in terms of a supply-
demand graph, consumer surplus is the area above the price and below
the demand curve. The $2.996 million dollar estimate of net benefit is
a measure of the difference between consumer surplus at the initial
equilibrium and the new price and quantity after the supply and demand
curves have been shifted to represent the median changes in cost
(supply) and willingness to pay (demand).
Summing the producer/handler and buyer/consumer net benefits
($2.996 + $1.448) yields a $4.444 million median estimated value of the
marketing order to the economy.
Estimated Impacts on Small Producers
The proposed marketing order would not impose any direct compliance
costs on producers. The direct impact is on the handlers who would be
required to pay for testing and inspection. Producers would be affected
to the extent that they may have to discard more low quality nuts than
previously, if they produce quantities of nuts below the proposed size
and quality standard. Witnesses stated there is no evidence that the
proportion of low quality nuts is correlated with farm size.
Additionally, the record shows that handler costs of compliance are
typically reflected in handler payments to producers. Witnesses stated
that the anticipated benefit derived from increased consumer demand
would offset the cost of compliance to producers.
Witnesses stated that most producers sell to large handlers (which
handle 80 percent of production). Distinguishing among handlers by size
does not indicate different economic impacts on individual farms, which
are distributed broadly across handlers.
Witnesses also pointed out that there is substantial inter-handler
competition in the pistachio industry, with at least 10 handlers out of
19 competing for producers' pistachios (with the remainder presumably
processing for their own account). Given the distribution of producers
across processing firms and the level of competition, the overall cost-
benefit results may be taken as the impact on the full size range of
producers.
Based on a farm price of $1.10 and a handler price of $1.80,
producers receive about 60 percent of the revenue in the industry, and
are likely (given certain supply elasticities) to receive more than 60
percent of the estimated handler net benefits. Producer total gain (out
of the estimated $1.448 million in net benefits to the handler segment)
is thus at least $870,000 per year ($1.448 million times 0.60). This is
distributed across producers in proportion to output, with no
differential impact on smaller or larger producers.
Based on the hearing record, AMS therefore concludes that pistachio
producers would benefit from implementation of the proposed order.
Further, there is no evidence of differing economic impacts between
small and large producers.
[[Page 46020]]
Estimated Impact on Small Handlers
Most compliance costs are uniform across handlers, but some
differences could be correlated with the size of a handler's operation.
Two relevant points are the number of lots ready to be tested per day
and the lot size to be tested. Larger firms, which are more likely to
have larger lot sizes for testing and to have more lots ready per day
(up to about 5), may experience some savings relative to firms with
smaller lot sizes and fewer lots to be tested at one time.
The proposed marketing order includes provisions to reduce
compliance costs for small handlers. Firms that handle less than
1,000,000 pounds per year would be subject to simplified afaltoxin
testing procedures. Additionally, they would be exempt from testing for
remaining minimum quality requirements. This should reduce the expenses
for smaller handlers.
Some other handlers, which process substantially more, may face
somewhat higher costs for at least part of their production. Those
handlers are likely, however, to have more than $5 million in total
revenue, and would thus not be classified as small business entities.
Table 2 shows that the compliance costs and net economic impacts
for different sizes of handlers. A positive net economic impact would
exist for all handler groups.
Table 2.--Distribution of Economic Effects Across Handlers of Different
Sizes
[Pistachio Marketing Order Simulation Results With Median Parameter
Values]
------------------------------------------------------------------------
Direct Net economic
Handler group* compliance cost impact
------------------------------------------------------------------------
Higher Volume/Lower Compliance Costs -$667,000 $1,178,000
Medium Volume/Compliance Costs...... -150,000 208,000
Lower Volume/Higher Compliance Costs 58,000 61,000
-------------------
Total......................... 875,000 1,447,000
------------------------------------------------------------------------
* 80%, 15%, and 5%, respectively, of total quantity of pistachios
marketed annually.
The above table shows that the net economic impact is in direct
proportion to the volume of pistachios handled by each handler group.
For example, the largest handler group, accounting for 80 percent of
the pistachios marketed, would reap about 81 percent of the benefits of
the program. AMS therefore concludes that the program would not have a
disproportionate impact on small entities.
The cost and benefit estimates presented above focus on a single
set of results using median parameter values. The witness's economic
analysis involved simulating a number of scenarios, using alternative
values for compliance costs, benefits, and elasticities of supply and
demand. All scenarios, even the low benefit, high cost scenarios,
indicated positive net economic impacts.
The witness's analysis concludes that the proposed marketing order
would require minimal adjustments in current processing activities and
would yield large estimated benefits. The simulation results indicate
that costs of compliance are small relative to benefits for all firms,
and that both small and large entities are likely to benefit
significantly. Producers are likely to share net producer benefits in
proportion to production. Large and small handlers both gain from the
marketing order, also in proportion to the volumes handled. Some of the
smallest handlers could have larger net benefits per unit because of
the provision allowing special lower-cost testing arrangements.
The witness's net benefit analysis represents a reasonable,
plausible set of estimates of the economic impact of mandatory
aflatoxin testing and minimum quality standards through promulgation of
a Federal marketing order. The median cost and benefit figures
explained during the hearing are considered to adequately represent
estimates of the economic impact of implementation of the proposed
program and its regulatory provisions.
The proposed order would impose some reporting and recordkeeping
requirements on handlers. However, handler testimony indicated that the
expected burden that would be imposed with respect to these
requirements would be negligible. Most of the information that would be
reported to the committee is already compiled by handlers for other
uses and is readily available. Reporting and recordkeeping requirements
issued under the peanut aflatoxin certification program (7 CFR part
996) impose an average annual burden on each regulated handler and
importer of about 8 hours. It is reasonable to expect that a similar
burden may be imposed under this proposed marketing order on the
estimated 19 handlers of pistachios in California.
The Act requires that, prior to the issuance of a marketing order,
a referendum be conducted among the affected producers to determine if
they favor issuance of the order. The ballot material that would be
used in conducting the referendum would be submitted to and approved by
OMB before it is used. It is estimated that it would take an average of
10 minutes for each of the approximately 647 pistachio producers in
California to complete the ballot. Additionally, it has been estimated
that it would take approximately 10 minutes for each handler to
complete the marketing agreement.
Therefore, in compliance with OMB regulations (5 CFR part 1320)
which implement the Paperwork Reduction Act of 1995 (Pub. L. 104-13),
the information collection and recordkeeping requirements that may be
imposed by this order would be submitted to OMB for approval. Those
requirements would not become effective prior to OMB review. Any
recordkeeping and reporting requirements imposed would be evaluated
against the potential benefits to be derived and it is expected that
any added burden resulting from increased reporting and recordkeeping
would not be significant when compared to those anticipated benefits
derived from administration of the order.
The record evidence also indicates that the benefits to small as
well as large handlers are likely to be greater than would accrue under
the alternatives to the order proposed herein, namely no marketing
order, or an order without the proposed combination of quality, size
and aflatoxin regulation.
In determining that the proposed order and its provisions would not
have a disproportionate economic on a substantial number of small
entities, all of the issues discussed above were
[[Page 46021]]
considered. Based on hearing record evidence and USDA's analysis of the
economic information provided, the proposed order provisions have been
carefully reviewed to ensure that every effort has been made to
eliminate any unnecessary costs or requirements.
Although the proposed order may impose some additional costs and
requirements on handlers, it is anticipated that the order will help to
strengthen demand for California pistachios. Therefore, any additional
costs would be offset by the benefits derived from expanded sales
benefiting handlers and producers alike. Accordingly, it is determined
that the proposed order would not have a disproportionate economic
impact on a substantial number of small handlers or producers.
A 30-day comment period is provided to allow interested persons to
respond to this proposed decision to effectuate a marketing order.
Thirty days is deemed appropriate so that any marketing order resulting
from this rulemaking process may be implemented as soon as possible at
the beginning of the nearest marketing year. A 60-day comment period on
the information collection burden is deemed appropriate as any
paperwork burden imposed by this action will not become effective until
the process is finalized. All written exceptions and comments timely
received will be considered and a grower referendum will be conducted
before these proposals are implemented.
Civil Justice Reform
The marketing agreement and order proposed herein have been
reviewed under Executive Order 12988, Civil Justice Reform. They are
not intended to have retroactive effect. If adopted, the proposed order
would not preempt any State or local laws, regulations, or policies,
unless they present an irreconcilable conflict with this proposal.
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 Department a
petition stating that the order, any provision of the order, or any
obligation imposed in connection with the order is not in accordance
with law and request a modification of the order or to be exempted
there from. A handler is afforded the opportunity for a hearing on the
petition. After the hearing, the USDA would rule on the petition. The
Act provides that the district court of the United States in any
district in which the handler is an inhabitant, or has his or her
principal place of business, has jurisdiction to review the
Department's ruling on the petition, provided an action is filed not
later than 20 days after the date of the entry of the ruling.
Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
Chapter 35), AMS announces its intention to request an approval of a
new information collection for the marketing order regulating
pistachios grown in California.
Title: Pistachios Grown in California.
OMB Number: 0581-NEW.
Expiration Date of Approval: To be assigned by OMB.
Type of Request: Intent to establish a new information collection.
Abstract: The information collection requirements in this request
are essential to carry out the intent of the Act, to provide the
respondents the type of service they request, and to administer the
California pistachio marketing order program.
The California pistachio marketing order would authorize standards
for quality of pistachios produced and handled in California by
establishing a maximum aflatoxin tolerance level, maximum limits for
defects, a minimum size requirement, and mandatory inspection and
certification. AMS is the agency that would provide oversight of the
order, and any administrative rules and regulations issued under the
program.
The Department must determine if sufficient producer support exists
within the industry to initially establish the proposed marketing
order. If the order were established, the USDA could also, given
recommendation by the committee and adequate support by the industry,
implement formal rulemaking to amend the order. Further, a continuance
referendum would be conducted every 6 years to determine ongoing
industry support for the order. In all of these instances, ballot
information would be collected from producers and compiled in aggregate
for purposes of determining producer support for the order (or any
amendment to the order).
Upon implementation of the order or during amendatory proceedings,
handlers would be asked to sign a marketing agreement to indicate their
willingness to comply with the provisions of the new or amended order.
AMS would also provide a certificate of resolution for each handler
organization to sign, documenting the handler's support of the
marketing agreement and order.
If the proposed order is established, handler and producer
nomination forms, ballots, and confidential qualification and
acceptance statements will be used to nominate and appoint the
committee members.
California pistachio producers and handlers would be nominated by
their peers to serve as representatives on the committee. Each producer
and handler would have the opportunity to submit a nomination form with
the names of individuals to be considered for nomination.
Individuals who are nominated and wish to stand for election would
be required to complete a confidential qualification and acceptance
statement before the election. If qualified, the nominees would be
placed on a nomination ballot.
Producers and handlers would vote for the candidate(s) of their
choice using the producer and handler nomination ballots. Names of
candidates receiving the most votes would be submitted to AMS for
appointment as committee members and alternate members. The producer
and handler members of the committee would nominate a public member and
alternate public member. Each would complete qualification and
acceptance statement before being recommended to AMS for appointment.
The forms covered under this information collection request
submission of minimum information necessary to ascertain producer
support for implementing the proposed order and to appoint initial
committee members. Additional reporting and recordkeeping requirements
may subsequently be recommended by the committee for its use in
administering the order. The burden imposed by any additional
requirements would be submitted for approval by the OMB.
The information collected would be used only by authorized
representatives of USDA, including AMS, Fruit and Vegetable Programs
regional and headquarters' staff, and authorized employees of the
committee, if established. Section 608(d)(2) of the Act provides that
all information would be kept confidential.
Total Annual Estimated Burden
The total burden for the proposed information collection under the
order is as follows:
Estimate of Burden: Public reporting burden for this collection of
information is estimated to average 15 minutes per response.
Estimated Number of Respondents: 668 (647 producers, 19 handlers
and the public member and alternate nominee).
[[Page 46022]]
Estimated Number of Responses per Respondent: .77
Estimated Total Annual Burden on Respondents: 133 hours.
Estimated Annual Burden for Each Form
For each new form, the proposed request for approval of new
information collections under the order are as follows:
FV-240 Producer's Referendum Ballot (promulgation and continuance).
Producers would use this ballot to vote whether they favor
establishment of the order and, once every 6 years, whether they want
the order to continue in effect. For the purpose of this calculation,
it is estimated that 450 pistachio producers (75 percent of the total)
would vote in the promulgation referendum and in the continuance
referenda.
Estimate of Burden: Public reporting burden for this collection of
information is estimated to average 20 minutes per response.
Respondents: California pistachio producers.
Estimated Number of Respondents: 450.
Estimated Number of Responses per Respondent: Once every 6 years.
Estimated Total Annual Burden on Respondents: 25 hours.
FV-241 Cooperative Association of Producers Referendum Ballot
(promulgation and continuance). This ballot would be used to register
the cooperative's vote on promulgation or continuance of the marketing
order. At the time of this promulgation proceeding, there is only 1
pistachio cooperative registered in the production area.
Estimate of Burden: Public reporting burden for this collection of
information is estimated to average 20 minutes per response.
Respondents: California pistachio cooperative.
Estimated Number of Respondents: 1.
Estimated Number of Responses per Respondent: Once every 6 years.
Estimated Total Annual Burden on Respondents: 3 minutes.
FV-242 Marketing Agreement. Handlers would use this form to
indicate their willingness to comply with the provisions of the order.
The Marketing Agreement would be completed if the proposed order is
implemented and in any future amendment of the order.
Estimate of Burden: Public reporting burden for this collection of
information is estimated to average 5 minutes per response.
Respondents: California pistachio handlers.
Estimated Number of Respondents: 19.
Estimated Number of Responses per Respondent: Once every 6 years.
Estimated Total Annual Burden on Respondents: 16 minutes.
FV-242A Certificate of Resolution. This would document corporate
handlers' support for the order and marketing agreement. The Marketing
Agreement would be completed if the proposed order is implemented and
in any future amendment of the order.
Estimate of Burden: Public reporting burden for this collection of
information is estimated to average 5 minutes per response.
Respondents: Incorporated pistachio handlers.
Estimated Number of Respondents: 19.
Estimated Number of Responses per Respondent: Once every 6 years.
Estimated Total Annual Burden on Respondents: 16 minutes.
FV-243 Administrative Committee for Pistachios Confidential
Producer/Handler and Public Member Qualification and Acceptance
Statement. There are 11 members and 11 alternate members on the
committee. Each year after the initial committee is seated, half of the
22 members would be replaced with new members. This form would be used
by candidates for nomination to provide their qualifications to serve
on the committee. For the purpose of this calculation, it is estimated
that 30 individuals will agree to be candidates to serve on the
committee.
Estimate of Burden: Public reporting burden for this collection of
information is estimated to average 10 minutes per response.
Respondents: California pistachio producers, handlers and public
member nominees.
Estimated Number of Respondents: 30.
Estimated Number of Responses per Respondent: 1.
Estimated Total Annual Burden on Respondents: 5 hours.
FV-244 Handler Members and Alternate Handler Members' Ballot. Each
handler would use the ballot to vote on handler member nominees to
serve on the committee.
Estimate of Burden: Public reporting burden for this collection of
information is estimated to average 5 minutes per response.
Respondents: California pistachio handlers.
Estimated Number of Respondents: 19.
Estimated Number of Responses per Respondent: 1.
Estimated Total Annual Burden on Respondents: 1.5 hours.
FV-245 Producer Members and Alternate Producer Members Nomination
Form. Pistachio producers would use this form to nominate themselves or
other producers to serve on the committee. For the purpose of this
calculation, it is estimated that 50 producers will offer nominations.
Estimate of Burden: Public reporting burden for this collection of
information is estimated to average 20 minutes per response.
Respondents: California pistachio producers.
Estimated Number of Respondents: 50.
Estimated Number of Responses per Respondent: 1.
Estimated Total Annual Burden on Respondents: 17 hours.
FV-245A Handler Members and Alternate Handler Members' Nomination
Form. Pistachio handlers would use this form to nominate themselves or
other handlers to serve on the committee. For the purpose of this
calculation, it is estimated that 10 handlers will offer nominations.
Estimate of Burden: Public reporting burden for this collection of
information is estimated to average 20 minutes per response.
Respondents: California pistachio handlers.
Estimated Number of Respondents: 10.
Estimated Number of Responses per Respondent: 1.
Estimated Total Annual Burden on Respondents: 3.3 hours.
FV-246 Producer Member and Alternate Producer Member Ballot.
Pistachio producers would use this ballot to vote on their choice of
nominees to serve on the committee. For the purpose of this
calculation, it is estimated that 325 producers (50 percent of all
producers) will vote in nomination elections.
Estimate of Burden: Public reporting burden for this collection of
information is estimated to average 15 minutes per response.
Respondents: California pistachio producers.
Estimated Number of Respondents: 325.
Estimated Number of Responses per Respondent: 1.
Estimated Total Annual Burden on Respondents: 81 hours.
If this marketing order program is approved by producers in
referendum and established by USDA, the committee could recommend to
the Department other forms (such as monthly handler reports of
acquisitions
[[Page 46023]]
or dispositions of substandard pistachios) which would be needed to
administer the order. All such forms would be subject to USDA and OMB
review and approval.
Comments: Comments are invited on: (1) Whether the proposed
collection of information is necessary for the proper performance of
the functions of the agency, including whether the information would
have practical utility; (2) the accuracy of the agency's estimate of
the burden of the proposed collection of information, including the
validity of the methodology and assumptions used; (3) ways to enhance
the quality, utility, and clarity of the information to be collected;
and (4) ways to minimize the burden of the collection of information on
those who are to respond, including the use of appropriate automated,
electronic, mechanical, or other technological collection techniques or
other forms of information technology.
Comments should reference OMB No. 0581-NEW and the California
pistachio marketing order, and be sent to USDA in care of the Docket
Clerk at the previously mentioned address. All comments received will
be available for public inspection during regular business hours at the
same address.
All responses to this notice will be summarized and included in the
request for OMB approval of the above-described forms. All comments
will become a matter of public record.
Rulings on Proposed Findings and Conclusions
Briefs, proposed findings and conclusions, and the evidence in the
record were considered in making the findings and conclusions set forth
in this recommended decision. To the extent that the suggested findings
and conclusions filed by interested persons are inconsistent with the
findings and conclusions of this recommended decision, the requests to
make such findings or to reach such conclusions are denied.
General Findings
(1) The proposed marketing agreement and order and all of the terms
and conditions thereof, would tend to effectuate the declared policy of
the Act;
(2) The proposed marketing agreement and order regulate the
handling of pistachios in California 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;
(3) The proposed marketing agreement and order 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 subdivision of
the production area would not effectively carry out the declared policy
of the Act;
(4) The proposed marketing agreement and order prescribe, insofar
as practicable, such different terms applicable to different parts of
the production area as are necessary to give due recognition to the
differences in the production and marketing of pistachios grown in the
production area; and
(5) All handling of pistachios grown in California as defined in
the proposed marketing agreement and order, is in the current of
interstate or foreign commerce or directly burdens, obstructs, or
affects such commerce.
Provisions of the proposed marketing agreement and order follow.
Those sections identified with an asterisk (*) apply only to the
proposed marketing agreement.
List of Subjects in 7 CFR Part 983
Marketing agreements, Pistachios, Reporting and recordkeeping
requirements.
Title 7, chapter IX is proposed to be amended by adding part 983 to
read as follows:
PART 983--PISTACHIOS GROWN IN CALIFORNIA
Subpart--Order Regulating Handling
Definitions
Sec.
983.1 Accredited laboratory.
983.2 Act.
983.3 Affiliation.
983.4 Aflatoxin.
983.5 Aflatoxin inspection certificate.
983.6 Assessed weight.
983.7 Certified pistachios.
983.8 Committee.
983.9 Confidential data or information.
983.10 Department or USDA.
983.11 Districts.
983.12 Domestic shipments.
983.13 Edible pistachios.
983.14 Handle.
983.15 Handler.
983.16 Inshell pistachios.
983.17 Inspector.
983.18 Lot.
983.19 Minimum quality requirements.
983.20 Minimum quality certificate.
983.21 Part and subpart.
983.22 Person.
983.23 Pistachios.
983.24 Processing.
983.25 Producer.
983.26 Production area.
983.27 Production year.
983.28 Proprietary capacity.
983.29 Secretary.
983.30 Shelled pistachios.
983.31 Substandard pistachios.
Administrative Committee
983.32 Establishment and membership.
983.33 Initial members and nomination of successor members.
983.34 Procedure.
983.35 Powers.
983.36 Duties.
Marketing Policy
983.37 Marketing policy.
Regulation
983.38 Aflatoxin levels.
983.39 Minimum quality levels.
983.40 Failed lots/rework procedure.
983.41 Testing of minimal quantities.
983.42 Commingling.
983.43 Reinspection.
983.44 Inspection, certification and identification.
983.45 Substandard pistachios.
983.46 Modification or suspension of regulations.
Reports, Books and Records
983.47 Reports.
983.48 Confidential information.
983.49 Records.
983.50 Random verification audits.
983.51 Verification of reports.
Expenses and Assessments
983.52 Expenses.
983.53 Assessments.
983.54 Contributions.
983.55 Delinquent assessments.
983.56 Accounting.
983.57 Implementation and amendments.
Miscellaneous Provisions
983.58 Compliance.
983.59 Rights of the Secretary.
983.60 Personal liability.
983.61 Separability.
983.62 Derogation.
983.63 Duration of immunities.
983.64 Agents.
983.65 Effective time.
983.66 Suspension or termination.
983.67 Termination.
983.68 Procedure upon termination.
983.69 Effect of termination or amendment.
983.70 Exemption.
983.71 Relationship with the California Pistachio Commission.
* 983.90 Counterparts.
* 983.91 Additional parties.
* 983.92 Order with marketing agreement.
*Sections identified with an asterisk (*) apply only to the proposed
marketing agreement.
Authority: 7 U.S.C. 601-674.
Subpart--Order Regulating Handling
Definitions
Sec. 983.1 Accredited laboratory.
An accredited laboratory is a laboratory that has been approved or
accredited by the U.S. Department of Agriculture for testing aflatoxin.
[[Page 46024]]
Sec. 983.2 Act.
Act means Public Act No. 10, 73rd Congress (May 12, 1933), as
amended and as re-enacted and amended by the Agricultural Marketing
Order Act of 1937, as amended (48 Stat. 31, as amended; 7 U.S.C. 601 et
seq.).
Sec. 983.3 Affiliation.
Affiliation. This term normally appears as ``affiliate of'', or
``affiliated with'', and means a person such as a producer or handler
who is: a producer or handler that directly, or indirectly through one
or more intermediaries, owns or controls, or is controlled by, or is
under common control with the producer or handler specified; or a
producer or handler that directly, or indirectly through one or more
intermediaries, is connected in a proprietary capacity, or shares the
ownership or control of the specified producer or handler with one or
more other producers or handlers. As used in this part, the term
control (including the terms controlling, controlled by, and under the
common control with) means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies
of a handler or a producer, whether through voting securities,
membership in a cooperative, by contract or otherwise.
Sec. 983.4 Aflatoxin.
Aflatoxin is one of a group of mycotoxins produced by the molds
Aspergillus flavus and Aspergillus parasiticus. Aflatoxins are
naturally occurring compounds produced by molds, which can be spread in
improperly processed and stored nuts, dried fruits and grains.
Sec. 983.5 Aflatoxin inspection certificate.
Aflatoxin inspection certificate is a certificate issued by an
accredited laboratory or by a USDA laboratory.
Sec. 983.6 Assessed weight.
Assessed weight means pounds of pistachios, with the weight
computed at 5 percent moisture, received for processing by a handler
within each production year: Provided, That for loose kernels, the
actual weight shall be multiplied by two to obtain an inshell weight;
or based on such other elements as may be recommended by the committee
and approved by the Secretary.
Sec. 983.7 Certified pistachios.
Certified pistachios are those for which aflatoxin inspection and
minimum quality certificates have been issued.
Sec. 983.8 Committee.
Committee means the administrative committee for pistachios
established pursuant to Sec. 983.32.
Sec. 983.9 Confidential data or information.
Confidential data or information submitted to the committee
consists of data or information constituting a trade secret or
disclosure of the trade position, financial condition, or business
operations of a particular entity or its customers.
Sec. 983.10 Department or USDA.
Department or USDA means the United States Department of
Agriculture.
Sec. 983.11 Districts.
(a) Districts shall consist of the following:
(1) District 1 consists of Tulare, Kern, San Bernardino, San Luis
Obispo, Santa Barbara, Ventura, Los Angeles, Orange, Riverside, San
Diego, and Imperial Counties of California.
(2) District 2 consists of Kings, Fresno, Madera, and Merced
Counties of California.
(3) District 3 consists of all counties in California where
pistachios are produced that are not included in Districts 1 and 2.
(b) With the approval of the Secretary, the boundaries of any
district may be changed by the committee, to ensure proper
representation. The boundaries need not coincide with county lines. In
addition, the boundaries in the production area may be adjusted to
conform to changes to the boundaries of the districts established for
those of the California Pistachio Commission upon the recommendation of
the committee and approval of the Secretary.
Sec. 983.12 Domestic shipments.
Domestic shipments means shipments to the fifty states of the
United States or to territories of the United States and the District
of Columbia.
Sec. 983.13 Edible pistachios.
Edible pistachios are those that do not exceed the level of defects
under Sec. 983.38 and Sec. 983.39.
Sec. 983.14 Handle.
Handle means to engage in:
(a) Receiving pistachios;
(b) Hulling and drying pistachios;
(c) Further preparing pistachios by sorting, sizing, shelling,
roasting, cleaning, salting, and/or packaging for marketing in or
transporting to any and all markets in the current of interstate or
foreign commerce; and/or
(d) Placing pistachios into the current of commerce from within the
production area to points outside thereof: Provided, however, that
transportation within the production area between handlers and from the
orchard to the processing facility is not handling.
Sec. 983.15 Handler.
Handler means any person who handles pistachios.
Sec. 983.16 Inshell pistachios.
Inshell pistachios means pistachios that have a shell that has not
been removed.
Sec. 983.17 Inspector.
Inspector means any inspector authorized by the USDA to inspect
pistachios.
Sec. 983.18 Lot.
Lot means any quantity of pistachios that is submitted for testing
purposes under this part.
Sec. 983.19 Minimum quality requirements.
Minimum quality requirements are permissible maximum defects and
minimum size levels for inshell pistachios and kernels specified in
Sec. 983.39.
Sec. 983.20 Minimum quality certificate.
Minimum quality certificate is a certificate issued by the USDA or
Federal/State Inspection Service.
Sec. 983.21 Part and subpart.
Part means the order regulating the handling of pistachios grown in
the State of California, and all rules, regulations and supplementary
orders issued there under. The aforesaid order regulating the handling
of pistachios grown in California shall be a subpart of such part.
Sec. 983.22 Person.
Person means an individual, partnership, limited liability
corporation, corporation, trust, association, or any other business
unit.
Sec. 983.23 Pistachios.
Pistachios means the nuts of the pistachio tree of the genus
Pistacia vera grown in the production area whether inshell or shelled.
Sec. 983.24 Processing.
Processing means hulling and drying pistachios in preparation for
market.
Sec. 983.25 Producer.
Producer means any person engaged within the production area in a
proprietary capacity in the production of pistachios for sale.
[[Page 46025]]
Sec. 983.26 Production area.
Production area means the State of California.
Sec. 983.27 Production year.
Production year is synonymous with ``fiscal period'' and means the
period beginning on September 1 and ending on August 31 of each year or
such other period as may be recommended by the committee and approved
by the Secretary. Pistachios harvested and received in August of any
year shall be applied to the subsequent production year for marketing
order purposes.
Sec. 983.28 Proprietary capacity.
Proprietary capacity means the capacity or interest of a producer
or handler that, either directly or through one or more intermediaries,
is a property owner together with all the appurtenant rights of an
owner including the right to vote the interest in that capacity as an
individual, a shareholder, member of a cooperative, partner, trustee or
in any other capacity with respect to any other business unit.
Sec. 983.29 Secretary.
Secretary means the Secretary of Agriculture of the United States
or any officer or employee of the United States Department of
Agriculture who is, or who may hereafter be, authorized to act in his/
her stead.
Sec. 983.30 Shelled pistachios.
Shelled pistachios means pistachio kernels, or portions of kernels,
after the pistachio shells have been removed.
Sec. 983.31 Substandard pistachios.
Substandard pistachios means pistachios, inshell or shelled, which
do not comply with the maximum aflatoxin and/or minimum quality
regulations of this part.
Administrative Committee
Sec. 983.32 Establishment and membership.
There is hereby established an administrative committee for
pistachios to administer the terms and provisions of this part. This
committee, consisting of eleven (11) member positions, each of whom
shall have an alternate, shall be allocated as follows:
(a) Handlers. Two of the members shall represent handlers, as
follows:
(1) One handler member nominated by one vote for each handler; and
(2) One handler member nominated by voting based on each handler
casting one vote for each ton (or portion thereof) of the assessed
weight of pistachios processed by such handler during the two
production years preceding the production year in which the nominations
are made.
(b) Producers. Eight members shall represent producers. Producers
within the respective districts shall nominate four producers from
District 1, three producers from District 2 and one producer from
District 3. The Secretary, upon recommendation of the committee, may
reapportion producer membership among the districts to ensure proper
representation.
(c) Public member. One member shall be a public member who is
neither a producer nor a handler and shall have all the powers, rights
and privileges of any other member of the committee. The public member
and alternate public member shall be nominated by the committee and
selected by the Secretary.
Sec. 983.33 Initial members and nomination of successor members.
Nomination of committee members and alternates shall follow the
procedure set forth in this section or as may be changed as recommended
by the committee and approved by the Secretary.
(a) Initial members. Nominations for initial grower and handler
members shall be conducted by the Secretary by either holding meetings
of handlers and producers, or by mail.
(b) Successor members. Subsequent to the first nomination of
committee members under this part, persons to be nominated to serve on
the committee as producer or handler members shall be selected pursuant
to nomination procedures that shall be established by the committee
with the approval of the Secretary: Provided, That:
(1) Any qualified individuals who seek nomination as a producer
member shall submit to the committee an intent to seek office in one
designated district on such form and with such information as the
committee shall designate; ballots, accompanied by the names of all
such candidates, with spaces to indicate voters' choices and spaces for
write-in candidates, together with voting instructions, shall be mailed
to all producers who are on record with the committee within the
respective districts; the person(s) receiving the highest number of
votes shall be the member nominee(s) for that district, and the
person(s) receiving the second highest number of votes shall be the
alternate member nominee(s). In case of a tie vote, the nominee shall
be selected by a drawing.
(2) Any qualified individuals who seek nomination as a handler
member shall submit to the committee an intent to seek office with such
information as the committee shall designate; ballots, accompanied by
the names of all such candidates, with spaces to indicate voters'
choices and spaces for write-in candidates, together with voting
instructions, shall be mailed to all handlers who are on record with
the committee. For the first handler member seat, the person receiving
the highest number of votes shall be the handler member nominee for
that seat, and the person receiving the second highest number of votes
shall be the alternate member nominee. For the second handler member
seat, the person receiving the highest number of votes representing
handler volume shall be the handler member nominee for that seat, and
the person receiving the second highest number of votes representing
handler volume shall be the alternate member nominee. In case of a tie
vote, the nominee shall be selected by a drawing.
(c) Handlers. Only handlers, including duly authorized officers or
employees of handlers, may participate in the nomination of the two
handler member nominees and their alternates. Nomination of the two
handler members and their alternates shall be as follows:
(1) For one handler member nomination, each handler entity shall be
entitled to one vote;
(2) For the second handler member nomination, each handler entity
shall be entitled to cast one vote respectively for each ton of
assessed weight of pistachios processed by that handler during the two
production years preceding the production year in which the nominations
are made. For the purposes of nominating handler members and alternates
by volume, the assessed weight of pistachios shall be credited to the
handler responsible under the order for the payment of assessments of
those pistachios. The committee with the approval of the Secretary, may
revise the handler representation on the committee if the committee
ceases to be representative of the industry.
(d) Producers. Only producers, including duly authorized officers
or employees of producers, may participate in the nomination of
nominees for producer members and their alternates. Each producer shall
be entitled to cast only one vote, whether directly or through an
authorized officer or employee, for each position to be filled in the
district in which the producer produces pistachios. If a producer is
engaged in producing pistachios in more than one district, such
producer shall select the district in which to participate in the
nomination. If a person is both a producer and a handler of pistachios,
such person may participate in both producer and
[[Page 46026]]
handler nominations, provided, however, that a single member may not
hold concurrent seats as both a producer and handler.
(e) Member's affiliation. Not more than two members and not more
than two alternate members shall be persons employed by or affiliated
with producers or handlers that are affiliated with the same handler
and/or producer. Additionally, only one member and one alternate in any
one district representing producers and only one member and one
alternate representing handlers shall be employed by, or affiliated
with the same handler and/or producer. No handler, and all of its
affiliated handlers, can be represented by more than one handler
member.
(f) Cooperative affiliation. In the case of a producer cooperative,
a producer shall not be deemed to be connected in a proprietary
capacity with the cooperative notwithstanding any outstanding retains,
contributions or financial indebtedness owed by the cooperative to a
producer if the producer has not marketed pistachios through the
cooperative during the current and one preceding production year. A
cooperative that has as its members one or more other cooperatives that
are handlers shall not be considered as a handler for the purpose of
nominating or voting under this part.
(g) Alternate members. Each member of the committee shall have an
alternate member to be nominated in the same manner as the member. Any
alternate serving in the same district as a member where both are
employed by, or connected in a proprietary capacity with the same
corporation, firm, partnership, association, or business organization,
shall serve as the alternate to that member. An alternate member, in
the absence of the member for whom that alternate is selected shall
serve in place of that member on the committee, and shall have and be
able to exercise all the rights, privileges, and powers of the member
when serving on the committee. In the event of death, removal,
resignation, or the disqualification of a member, the alternate shall
act as a member on the committee until a successor member is selected
and has been qualified.
(h) Selection by Secretary. Nominations under paragraph (g) of this
section received by the committee for all handler and producer members
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 committee to be pertinent or requested by the Secretary.
From those nominations, the Secretary shall select the ten producer and
handler members of the committee and an alternate for each member.
(i) Acceptance. Each person to be selected by the Secretary as a
member or as an alternate member of the committee shall, prior to such
selection, qualify by advising the Secretary that if selected, such
person agrees to serve in the position for which that nomination has
been made.
(j) Failure to nominate. If nominations are not made within the
time and manner specified in this part, the Secretary may, without
regard to nominations, select the committee members and alternates
qualified to serve on the basis of the representation provided for in
Sec. 983.32.
(k) Term of office. Selected members and alternate members of the
committee shall serve for terms of two years: Provided, That four of
the initially selected producer members and one handler member and
their alternates shall, by a drawing, be seated for terms of one year
so that approximately half of the memberships' terms expire each year.
Each member and alternate member shall continue to serve until a
successor is selected and has qualified. The term of office shall begin
on July 1st of each year. Committee members and alternates may serve up
to four consecutive, two-year terms of office. In no event shall any
member or alternate serve more than eight consecutive years on the
committee. For purposes of determining when a member or alternate has
served four consecutive terms, the accrual of terms shall begin
following any period of at least twelve consecutive months out of
office.
(l) Qualifications. (1) Each producer member and alternate shall
be, at the time of selection and during the term of office, a producer
or an officer, or employee, of a producer in the district for which
nominated.
(2) Each handler member and alternate shall be, at the time of
selection and during the term of office, a handler or an officer or
employee of a handler.
(3) Any member or alternate member who at the time of selection was
employed by or affiliated with the person who is nominated, that member
shall, upon termination of that relationship, become disqualified to
serve further as a member and that position shall be deemed vacant.
(4) No person nominated to serve as a public member or alternate
public member shall have a financial interest in any pistachio growing
or handling operation.
(m) Vacancy. Any vacancy on the committee occurring by the failure
of any person selected to the committee to qualify as a member or
alternate member due to a change in status making the member ineligible
to serve, or due to death, removal, or resignation, shall be filled, by
a majority vote of the committee for the unexpired portion of the term.
However, that person shall fulfill all the qualifications set forth in
this part as required for the member whose office that person is to
fill. The qualifications of any person to fill a vacancy on the
committee shall be certified in writing to the Secretary. The Secretary
shall notify the committee if the Secretary determines that any such
person is not qualified.
(n) The committee, with the approval of the Secretary, may issue
rules and regulations implementing Sec. Sec. 983.32, 983.33 and
983.34.
Sec. 983.34 Procedure.
(a) Quorum. A quorum of the committee shall be any seven voting
committee members. The vote of a majority of members present at a
meeting at which there is a quorum shall constitute the act of the
committee: Provided, That actions of the committee with respect to the
following issues shall require at least seven concurring votes of the
voting members regarding any recommendation to the Secretary for
adoption or change in:
(1) Minimum quality levels;
(2) Aflatoxin levels;
(3) Inspection programs;
(4) The establishment of the committee.
(b) Voting. Members of the committee may participate in a meeting
by attendance in person or through the use of a conference telephone or
similar communication equipment, as long as all members participating
in such a meeting can communicate with one another. An action required
or permitted to be taken by the committee may be taken without a
meeting, if all members of the committee shall consent in writing to
that action.
(c) Compensation. The members of the committee and their alternates
shall serve without compensation, but members and alternates acting as
members shall be allowed their necessary expenses: Provided, That the
committee may request the attendance of one or more alternates not
acting as members at any meeting of the committee, and such alternates
may be allowed their necessary expenses; and, Provided further, That
the public member and the alternate for the public member may be paid
reasonable
[[Page 46027]]
compensation in addition to necessary expenses.
Sec. 983.35 Powers.
The committee shall have the following powers:
(a) To administer the provisions of this part in accordance with
its terms;
(b) To make and adopt bylaws, rules and regulations to effectuate
the terms and provisions of this part with the approval of the
Secretary;
(c) To receive, investigate, and report to the Secretary complaints
of violations of this part; and
(d) To recommend to the Secretary amendments to this part.
Sec. 983.36 Duties.
The committee shall have, among others, the following duties:
(a) To adopt bylaws and rules for the conduct of its meetings and
the selection of such officers from among its membership, including a
chairperson and vice-chairperson, as may be necessary, and define the
duties of such officers; and adopt such other bylaws, regulations and
rules as may be necessary to accomplish the purposes of the Act and the
efficient administration of this part;
(b) To employ or contract with such persons or agents as the
committee deems necessary and to determine the duties and compensation
of such persons or agents;
(c) To select such subcommittees as may be necessary;
(d) To submit to the Secretary a budget for each fiscal period,
prior to the beginning of such period, including a report explaining
the items appearing therein and a recommendation as to the rate of
assessments for such period;
(e) To keep minutes, books, and records which will reflect all of
the acts and transactions of the committee and which shall be subject
to examination by the Secretary;
(f) To prepare periodic statements of the financial operations of
the committee and to make copies of each statement available to
producers and handlers for examination at the office of the committee;
(g) To cause its financial statements to be audited by a certified
public accountant at least once each fiscal year and at such times as
the Secretary may request. Such audit shall include an examination of
the receipt of assessments and the disbursement of all funds. The
committee shall provide the Secretary with a copy of all audits and
shall make copies of such audits, after the removal of any confidential
individual or handler information that may be contained in them,
available for examination at the offices of the committee;
(h) To act as intermediary between the Secretary and any producer
or handler with respect to the operations of this part;
(i) To investigate and assemble data on the growing, handling,
shipping and marketing conditions with respect to pistachios;
(j) To apprise the Secretary of all committee meetings in a timely
manner;
(k) To submit to the Secretary such available information as the
Secretary may request;
(l) To investigate compliance with the provisions of this part;
(m) To provide, through communication to producers and handlers,
information regarding the activities of the committee and to respond to
industry inquiries about committee activities;
(n) To oversee the collection of assessments levied under this
part;
(o) To borrow such funds, subject to the approval of the Secretary
and not to exceed the expected expenses of one fiscal year, as are
necessary for administering its responsibilities and obligations under
this part.
Marketing Policy
Sec. 983.37 Marketing policy.
Prior to August 1st each year, the committee shall prepare and
submit to the Secretary a report setting forth its recommended
marketing policy covering quality regulations for the pending crop. In
the event it becomes advisable to modify such policy, because of
changed crop conditions, the committee shall formulate a new policy and
shall submit a report thereon to the Secretary. In developing the
marketing policy, the committee shall give consideration to the
production, harvesting, processing and storage conditions of that crop.
The committee may also give consideration to current prices being
received and the probable general level of prices to be received for
pistachios by producers and handlers. Notice of the committee's
marketing policy, and of any modifications thereof, shall be given
promptly by reasonable publicity, to producers and handlers.
Regulations
Sec. 983.38 Aflatoxin levels.
(a) Maximum level. No handler shall ship for domestic human
consumption, pistachios that exceed an aflatoxin level of more than 15
ppb. All shipments must also be covered by an aflatoxin inspection
certificate. Pistachios that fail to meet the aflatoxin requirements
shall be disposed in such manner as described in Failed lots/rework
procedure of this part.
(b) Change in level. The committee may recommend to the Secretary
changes in the aflatoxin level specified in this section. If the
Secretary finds on the basis of such recommendation or other
information that such an adjustment of the aflatoxin level would tend
to effectuate the declared policy of the Act, such change shall be made
accordingly.
(c) Transfers between handlers. Transfers between handlers within
the production area are exempt from the aflatoxin regulation of this
section.
(d) Aflatoxin testing procedures. To obtain an aflatoxin inspection
certificate, each lot to be certified shall be uniquely identified, be
traceable from testing through shipment by the handler and be subjected
to the following:
(1) Samples for testing. Prior to testing, a sample shall be drawn
from each lot and divided between those pistachios for aflatoxin
testing and those for minimum quality testing (``lot samples'') in
sufficient weight to comply with Table 1, Table 2 and Table 4 of this
part.
(2) Test samples for aflatoxin. Prior to submission of samples to
an accredited laboratory for aflatoxin analysis, three samples shall be
created equally from the pistachios designated for aflatoxin testing in
compliance with the requirements of Tables 1 and 2 of this paragraph
(d)(2) (``test samples''). The test samples shall be prepared by, or
under the supervision of, an inspector, or as approved under an
alternative USDA-recognized inspection program. The test samples shall
be designated by an inspector as Test Sample 1, Test Sample
2, and Test Sample 3. Each sample shall be placed in
a suitable container, with the lot number clearly identified, and then
submitted to an accredited laboratory. The gross weight of the inshell
lot sample for aflatoxin testing and the number of samplings required
are shown in Table 1 of this paragraph (d)(2). The gross weight of the
kernel lot sample for aflatoxin testing and the number of incremental
samples required is shown in Table 2 of this paragraph (d)(2).
[[Page 46028]]
Table 1.--Inshell Pistachio Lot Sampling Increments for Aflatoxin Certification
----------------------------------------------------------------------------------------------------------------
Number of
incremental Total weight of Weight of test
Lot weight (lbs.) samples for the lot sample sample
lot sample (kilograms) (kilograms)
----------------------------------------------------------------------------------------------------------------
220 or less............................................ 10 3.0 1.0
221-440................................................ 15 4.5 1.5
441-1100............................................... 20 6.0 2.0
1101-2200.............................................. 30 9.0 3.0
2201-4400.............................................. 40 12.0 4.0
4401-11,000............................................ 60 18.0 6.0
11,001-22,000.......................................... 80 24.0 8.0
22,001-150,000......................................... 100 30.0 10.0
----------------------------------------------------------------------------------------------------------------
Table 2.--Shelled Pistachio Kernel Lot Sampling Increments for Aflatoxin Certification
----------------------------------------------------------------------------------------------------------------
Number of
incremental Total weight of Weight of test
Lot weight (lbs.) samples for the lot sample sample
lot sample (kilograms) (kilograms)
----------------------------------------------------------------------------------------------------------------
220 or less........................................... 10 1.5 .5
221-440............................................... 15 2.3 .75
441-1100.............................................. 20 3.0 1.0
1101-2200............................................. 30 4.5 1.5
2201-4400............................................. 40 6.0 2.0
4401-11,000........................................... 60 9.0 3.0
11,001-22,000......................................... 80 12.0 4.0
22,001-150,000........................................ 100 15.0 5.0
----------------------------------------------------------------------------------------------------------------
(3) Testing of pistachios. Test samples shall be received and
logged by an accredited laboratory and each test sample shall be
prepared and analyzed using High Pressure Liquid Chromatograph (HPLC)
and Vicam Method (Aflatest) or other methods as recommended by not less
than seven members of the committee and approved by the Secretary. The
aflatoxin level shall be calculated on a kernel weight basis.
(4) Certification of lots ``negative'' as to aflatoxin. Lots will
be certified as ``negative'' on the aflatoxin inspection certificate if
Test Sample 1 has an aflatoxin level at or below 5 ppb. If the
aflatoxin level of Test Sample 1 is above 25 ppb, the lot
fails and the accredited laboratory shall fill out a failed lot
notification report as specified in Sec. 983.40. If the aflatoxin
level of Test Sample 1 is above 5 ppb and below 25 ppb, the
accredited laboratory may at the handler's discretion analyze Test
Sample 2 and the test results of Test Samples 1 and
2 will be averaged. Alternatively, the handler may elect to
withdraw the lot from testing, rework the lot, and re-submit it for
testing after re-working. If the handler directs the laboratory to
proceed with the analysis of Test Sample 2, a lot will be
certified as negative to aflatoxin and the laboratory shall issue an
aflatoxin inspection certificate if the averaged results of Test
Samples 1 and Test Sample 2 is at or below 10 ppb. If
the averaged aflatoxin level of the Test Samples 1 and
2 is at or above 20 ppb, the lot fails and the accredited
laboratory shall fill out a failed lot notification report as specified
in Sec. 983.40. If the averaged aflatoxin level of Test Samples
1 and 2 is above 10 ppb and below 20 ppb, the
accredited laboratory may, at the handler's discretion, analyze Test
Sample 3 and the results of Test Samples 1,
2 and 3 will be averaged. Alternatively, the handler
may elect to withdraw the lot from testing, re-work the lot, and re-
submit it for testing after a re-working. If the handler directs the
laboratory to proceed with the analysis of Test Sample 3, a
lot will be certified as negative to aflatoxin and the laboratory shall
issue an aflatoxin inspection certificate if the averaged results of
Test Samples 1, 2 and 3 is at or below 15
ppb. If the averaged aflatoxin results of Test Samples 1,
2 and 3 is above 15 ppb, the lot fails and the
accredited laboratory shall fill out a failed lot notification report
as specified in Sec. 983.40. The accreditation laboratory shall send a
copy of the failed lot notification report to the committee and to the
failed lot's owner within 10 working days of any failure described in
this section. If the lot is certified as negative as described in this
section, the aflatoxin inspection certificate shall certify the lot
using a certification form identifying each lot by weight, grade and
date. The certification expires for the lot or remainder of the lot
after 12 months.
(5) Certification of aflatoxin levels. Each accredited laboratory
shall complete aflatoxin testing and reporting and shall certify that
every lot of California pistachios shipped domestically does not exceed
the aflatoxin levels as required in Sec. 983.38(d)(4). Each handler
shall keep a record of each test, along with a record of final shipping
disposition. These records must be maintained for three years beyond
the crop year of their applicability, and are subject to audit by the
Secretary or the committee at any time.
(6) Test samples that are not used for analysis. If a handler does
not elect to use Test Samples 2 or 3 for
certification purposes the handler may request the laboratory to return
them to the handler.
Sec. 983.39 Minimum quality levels.
(a) Maximum defect and minimum size. No handler shall ship for
domestic human consumption, pistachios that exceed permissible maximum
defect and minimum size levels shown in the following Table 3.
[[Page 46029]]
Table 3.--Maximum Defect and Minimum Size Levels
------------------------------------------------------------------------
Maximum permissible defects
(percent by weight)
Factor -------------------------------
Inshell Kernels
------------------------------------------------------------------------
External (Shell) Defects
1. Non-splits & not split on suture..... 10.0 ..............
(i) Maximum non-splits allowed...... 4.0 ..............
2. Adhering hull material............... 2.0 ..............
3. Dark stain........................... 3.0 ..............
4. Damage by other means, other than 10.0 ..............
paragraphs 1, 2 and 3, which materially
detracts from the appearance or the
edible or marketing quality of the
individual shell or the lot............
Internal (Kernel) Deffects
1. Damage............................... 6.0 3.0
Immature kernel (Fills <75%- <50% of
the shell)
Kernel spotting (Affects \1/8\
aggregate surface)
2. Serious damage....................... 4.0 2.5
Minor insect or vertebrate injury/
insect damage, insect evidence,
mold, rancidity, decay
(i) Maximum insect damage allowed... 2.0 0.5
Total external or internal defects 9.0 ..............
allowed................................
Other Defects
1. Shell pieces and blanks (Fills <50% 2.0 ..............
of the shell)..........................
(i) Maximum blanks allowed.......... 1.0 ..............
2. Foreign material..................... 0.25 0.1
No glass, metal or live insects
permitted
3. Particles and dust................... 0.25 ..............
4. Loose kernels........................ 6.0 ..............
Minimum permissible defects
(percent by weight)
Maximum allowable inshell pistachios 5.0 ..............
that will pass through a 30/64ths inch
round hole screen......................
------------------------------------------------------------------------
(b) Definitions applicable to permissible maximum defect and
minimum size levels: The following definitions shall apply to inshell
pistachio and pistachio kernel maximum defect and minimum size:
(1) Loose kernels means edible kernels or kernel portions that are
out of the shell and which cannot be considered particles and dust.
(2) External (shell) defects means any abnormal condition affecting
the hard covering around the kernel. Such defects include, but are not
limited to, non-split shells, shells not split on suture, adhering hull
material or dark stains.
(3) Damage by external (shell) defects shall also include any
specific defect described in paragraphs (b)(3)(i) through (iv) of this
section or an equally objectionable variation of any one of these
defects, any other defect or any combination of defects which
materially detracts from the appearance or the edibility or the
marketing quality of the individual shell or the lot.
(i) Non-split shells means shells are not opened or are partially
opened and will not allow an 18/1000 (.018) inch thick by \1/4\ (.25)
inch wide gauge to slip into the opening.
(ii) Not split on suture means shells are split other than on the
suture and will allow an 18/1000 (.018) inch thick by \1/4\ (.25) inch
wide gauge to slip into the opening.
(iii) Adhering hull material means an aggregate amount of hull
covers more than one-eighth (\1/8\) of the total shell surface, or when
readily noticeable on dyed shells.
(iv) Dark stain on raw or roasted nuts means an aggregate amount of
dark brown, dark gray or black discoloration that affects more than
one-eighth of the total shell surface. Pistachios that are dyed or
color-coated to improve their marketing quality are not subject to the
maximum permissible defects for dark stain. Speckled discoloration on
the stem end, bottom quarter of the nut is not considered damage.
(4) Internal (kernel) defects means any damage affecting the
kernel. Such damage includes, but is not limited to evidence of
insects, immature kernels, rancid kernels, mold or decay.
(i) Damage by internal (kernel) defects shall also include any
specific defect described in paragraphs (b)(4)(i)(A) and (B) of this
section, or an equally objectionable variation of any one of these
defects, any other defect, or any combination of defects, which
materially detracts from the appearance or the edibility or the
marketing quality of the individual kernel or of the lot.
(A) Immature kernels in inshell are excessively thin kernels, or
when a kernel fills less than three-fourths, but not less than one-half
of the shell cavity. ``Immature kernels'' in shelled pistachios are
excessively thin kernels and can have black, brown or gray surface with
a dark interior color and the immaturity has adversely affected the
flavor of the kernel.
(B) Kernel spotting refers to dark brown or dark gray spots
aggregating more than one-eighth of the surface of the kernel.
(ii) Serious damage by internal (kernel) defects means any specific
defect described in paragraphs (b)(4)(ii)(A) through (E) of this
section, or an equally objectionable variation of any one of these
defects, which seriously detracts from the appearance or the edibility
or the marketing quality of the individual kernel or of the lot.
(A) Minor insect or vertebrate injury means the kernel shows
conspicuous evidence of feeding.
(B) Insect damage means an insect, insect fragment, web or frass
attached to the kernel. No live insects shall be permitted.
(C) Mold that is readily visible on the shell or kernel.
(D) Rancidity means the kernel is distinctly rancid to taste.
Staleness of flavor shall not be classed as rancidity.
(E) Decay means \1/16\th or more of the kernel surface is
decomposed.
(5) Other defects means defects that cannot be considered internal
defects or external defects. Such defects include, but are not limited
to shell pieces, blanks, foreign materials or particles and dust. The
following shall be considered other defects:
[[Page 46030]]
(i) Shell pieces means open inshell without a kernel, half shells
or pieces of shell which are loose in the sample.
(ii) Blanks means a non-split shell not containing a kernel or
containing a kernel that fills less than one-half of the shell cavity.
(iii) Foreign material means leaves, sticks, loose hulls or hull
pieces, dirt, rocks, insects or insect fragments not attached to nuts,
or any substance other than pistachio shells or kernels. Glass, metal
or live insects shall not be permitted.
(iv) Particles and dust means pieces of nut kernels that will pass
through \5/64\ inch round opening.
(v) Undersized means inshell pistachios that fall through a \30/
64\-inch round hole screen.
(c) Minimum quality certificate. Each shipment for domestic human
consumption must be covered by a USDA certificate certifying a minimum
quality or higher. Pistachios that fail to meet the minimum quality
specifications shall be disposed of in such manner as described in
Sec. 983.40.
(d) Transfers between handlers. Transfers between handlers within
the production area are exempt from the minimum quality regulation of
this section.
(e) Minimum quality testing procedures. To obtain a minimum quality
certificate, each lot to be certified shall be uniquely identified,
shall be traceable from testing through shipment by the handler and
shall be subjected to the following procedure:
(1) Sampling of pistachios for maximum defects and minimum size.
The gross weight of the inshell and kernel sample, and number of
samplings required to meet the minimum quality regulation, is shown in
Table 4 of this paragraph (e)(1). These samples shall be drawn from the
lot that is to be certified pursuant to Sec. 983.38(d)(1) under the
supervision of an inspector or as approved under an alternative USDA
recognized inspection program.
Table 4.--Inshell and Kernel Pistachio Lot Sampling Increments for Minimum Quality Certification
----------------------------------------------------------------------------------------------------------------
Number of Weight of
incremental Total weight inshell and
Lot weight (lbs.) samples for of lot sample kernel test
the lot (grams) sample
sample (grams)
----------------------------------------------------------------------------------------------------------------
220 or less..................................................... 10 500 500
221-440......................................................... 15 500 500
441-1100........................................................ 20 600 500
1101-2200....................................................... 30 900 500
2201-4400....................................................... 40 1200 500
4401-11,000..................................................... 60 1800 500
11,001-22,000................................................... 80 2400 1000
22,001-150,000.................................................. 100 3000 1000
----------------------------------------------------------------------------------------------------------------
(2) Testing of pistachios for maximum defect and minimum size. The
sample shall be analyzed according to USDA protocol, current or as
subsequently revised, to insure that the lot does not exceed maximum
defects and meets at least the minimum size levels as specified in
Table 3 of paragraph (a) of this section. For inshell pistachios, those
nuts with dark stain, adhering hull, and those exhibiting apparent
serious defects shall be shelled for internal kernel analysis. The USDA
protocol currently appears in USDA inspection instruction manual
``Pistachios in the Shell, Shipping Point and Market Inspection
Instructions,'' June 1994: revised September 1994, HU-125-9(b). Copies
may be obtained from the Fresh Products Branch, Agricultural Marketing
Service, USDA. Contact information may be found at http://www.ams.usda.gov/fv/fvstand.htm
.
(f) Certification of minimum quality. Each inspector shall complete
minimum quality testing and reporting and shall certify that every lot
of California pistachios or portion thereof shipped domestically meets
minimum quality levels. A record of each test, along with a record of
final shipping disposition, shall be kept by each handler. These
records must be maintained for three years following the production
year in which the pistachios were shipped, and are subject to audit by
the committee at any time.
Sec. 983.40 Failed lots/rework procedure.
(a) Substandard pistachios. Each lot of substandard pistachios may
be reworked to meet minimum quality requirements.
(b) Failed lot reporting. If a lot fails to meet the aflatoxin and/
or the minimum quality requirements of this part, a failed lot
notification report shall be completed and sent to the committee within
10 working days of the test failure. This form must be completed and
submitted to the committee each time a lot fails either aflatoxin or
the minimum quality testing. The accredited laboratories shall send the
failed lot notification reports for aflatoxin tests to the committee,
and the handler, under the supervision of an inspector, shall send the
failed lot notification reports for the lots that do not meet the
minimum quality requirements to the committee.
(c) Inshell rework procedure for aflatoxin. If inshell rework is
selected as a remedy to meet the aflatoxin requirements of this part,
then 100% of the product within that lot shall be removed from the bulk
and/or retail packaging containers and reworked to remove the portion
of the lot that caused the failure. Reworking shall consist of
mechanical, electronic or manual procedures normally used in the
handling of pistachios. After the rework procedure has been completed
the total weight of the accepted product and the total weight of the
rejected product shall be reported to the committee. The reworked lot
shall be sampled and tested for aflatoxin as specified in Sec. 983.38
except that the lot sample size and the test sample size shall be
doubled. The reworked lot shall also be sampled and tested for the
minimum quality requirements. If, after the lot has been reworked and
tested, it fails the aflatoxin test for a second time, the lot may be
shelled and the kernels reworked, sampled and tested in the manner
specified for an original lot of kernels, or the failed lot may be used
for non-human consumption or otherwise disposed of.
(d) Kernel rework procedure for aflatoxin. If pistachio kernel
rework is selected as a remedy to meet the aflatoxin requirements of
Sec. 983.38, then 100% of the product within that lot shall be removed
from the bulk and/or retail packaging containers and
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reworked to remove the portion of the lot that caused the failure.
Reworking shall consist of mechanical, electronic or manual procedures
normally used in the handling of pistachios. After the rework procedure
has been completed the total weight of the accepted product and the
total weight of the rejected product shall be reported to the
committee. The reworked lot shall be sampled and tested for aflatoxin
as specified in Sec. 983.38.
(e) Minimum quality rework procedure for inshell pistachios and
kernels. If rework is selected as a remedy to meet the minimum quality
requirements of Sec. 983.39, then 100% of the product within that lot
shall be removed from the bulk and/or retail packaging containers and
processed to remove the portion of the lot that caused the failure.
Reworking shall consist of mechanical, electronic or manual procedures
normally used in the handling of pistachios. The reworked lot shall be
sampled and tested for the minimum quality requirements as specified in
the minimum quality regulations of Sec. 983.39.
Sec. 983.41 Testing of minimal quantities.
(a) Aflatoxin. Handlers who handle less than 1 million pounds of
assessed weight per year, have the option of utilizing both of the
following methods for testing for aflatoxin:
(1) The handler may have an inspector sample and test his or her
entire inventory of hulled and dried pistachios for the aflatoxin
certification before further processing.
(2) The handler may segregate receipts into various lots at the
handler's discretion and have an inspector sample and test each
specific lot. Any lots that have less than 15 ppb aflatoxin can be
certified by an inspector to be negative as to aflatoxin. Any lots that
are found to be above 15 ppb may be tested after reworking in the same
manner as specified in Sec. 983.38.
(b) Minimum quality. Handlers who handle less than 1 million pounds
of assessed weight can apply to the committee for an exemption from
minimum quality testing. If the committee grants an exemption, then the
handler must pull and retain samples of the lots and make samples
available for review by the committee. The handler shall maintain the
samples for 90 days.
Sec. 983.42 Commingling.
After a lot is issued an aflatoxin inspection certificate and
minimum quality certificate, it may be commingled with other certified
lots.
Sec. 983.43 Reinspection.
The Secretary, upon recommendation of the committee, may establish
rules and regulations to establish conditions under which pistachios
would be subject to reinspection.
Sec. 983.44 Inspection, certification and identification.
Upon recommendation of the committee and approval of the Secretary,
all pistachios that are required to be inspected and certified in
accordance with this part, shall be identified by appropriate seals,
stamps, tags, or other identification to be affixed to the containers
by the handler. All inspections shall be at the expense of the handler.
Sec. 983.45 Substandard pistachios.
The committee shall, with the approval of the Secretary, establish
such reporting and disposition procedures as it deems necessary to
ensure that pistachios which do not meet the outgoing maximum aflatoxin
tolerance and minimum quality requirements prescribed by Sec. Sec.
983.38 and 983.39 shall not be shipped for domestic human consumption.
Sec. 983.46 Modification or suspension of regulations.
(a) In the event that the committee, at any time, finds that, by
reason of changed conditions, the order provisions contained in Sec.
983.38 through Sec. 983.45 should be modified or suspended, it shall
by vote of at least seven concurring members, so recommend to the
Secretary.
(b) Whenever the Secretary finds from the recommendations and
information submitted by the committee or from other available
information, that the aflatoxin or minimum quality provisions in Sec.
983.38 and Sec. 983.39 should be modified, suspended, or terminated
with respect to any or all shipments of pistachios in order to
effectuate the declared policy of the Act, the Secretary shall modify
or suspend such provisions. If the Secretary finds that a regulation
obstructs or does not tend to effectuate the declared policy of the
Act, the Secretary shall suspend or terminate such regulation.
(c) The committee, with the approval of the Secretary, may issue
rules and regulations implementing Sec. Sec. 983.38 through 983.45.
Reports, Books and Records
Sec. 983.47 Reports.
Upon the request of the committee, with the approval of the
Secretary, each handler shall furnish such reports and information on
such forms as are needed to enable the Secretary and the committee to
perform their functions and enforce the regulations under this part.
The committee shall provide a uniform report format for the handlers.
Sec. 983.48 Confidential information.
All reports and records furnished or submitted by handlers to the
committee which include confidential data or information constituting a
trade secret or disclosing the trade position, financial condition, or
business operations of the particular handler or their customers shall
be received by, and at all times kept in the custody and under the
control of, one or more employees of the committee, who shall disclose
such data and information to no person except the Secretary. However,
such data or information may be disclosed only with the approval of the
Secretary, to the committee when reasonably necessary to enable the
committee to carry out its functions under this part.
Sec. 983.49 Records.
Records of pistachios received, held and shipped by him, as will
substantiate any required reports and will show performance under this
part will be maintained by each handler for at least three years beyond
the crop year of their applicability.
Sec. 983.50 Random verification audits.
(a) All handlers' pistachio inventory shall be subject to random
verification audits by the committee to ensure compliance with the
terms of the order, and regulations adopted pursuant thereto.
(b) Committee staff or agents of the committee, based on
information from the industry or knowledge of possible violations, may
make buys of handler product in retail locations. If it is determined
that violations of the order have occurred as a result of the buys, the
matter will be referred to the Secretary for appropriate action.
Sec. 983.51 Verification of reports.
For the purpose of checking and verifying reports filed by handlers
or the operation of handlers under the provisions of this part, the
Secretary and the committee, through their duly authorized agents,
shall have access to any premises where pistachios and records relating
thereto may be held by any handler and at any time during reasonable
business hours, shall be permitted to inspect any pistachios so held by
such handler and any and all records of such handler with respect to
the acquisition, holding, or disposition of all pistachios which may be
held or
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which may have been shipped by him/her.
Expenses and Assessments
Sec. 983.52 Expenses.
The committee is authorized to incur such expenses as the Secretary
finds are reasonable and likely to be incurred by it during each
production year for the maintenance and functioning of the committee
and for such other purposes as the Secretary may, pursuant to the
provisions of this part, determine to be appropriate.
Sec. 983.53 Assessments.
(a) Each handler who receives pistachios for processing in each
production year shall pay the committee on demand, an assessment based
on the pro rata share of the expenses authorized by the Secretary for
that year attributable to the assessed weight of pistachios received by
that handler in that year.
(b) The committee, prior to the beginning of each production year,
shall recommend and the Secretary shall set the assessment for the
following production year, which shall not exceed one-half of one
percent of the average price received by producers in the preceding
production year. The committee, with the approval of the Secretary, may
revise the assessment if it determines, based on information including
crop size and value, that the action is necessary, and if the revision
does not exceed the assessment limitation specified in this section and
is made prior to the final billing of the assessment.
Sec. 983.54 Contributions.
The committee may accept voluntary contributions but these shall
only be used to pay for committee expenses.
Sec. 983.55 Delinquent assessments.
Any handler who fails to pay any assessment within the time
required by the committee, shall pay to the committee a late payment
charge of 10 percent of the amount of the assessment determined to be
past due and, in addition, interest on the unpaid balance at the rate
of one and one-half percent per month. The late payment and interest
charges may be modified by the Secretary upon recommendation of the
committee.
Sec. 983.56 Accounting.
(a) If, at the end of a production year, the assessments collected
are in excess of expenses incurred, such excess shall be accounted for
in accordance with one of the following:
(1) If such excess is not retained in a reserve, as provided in
paragraph (a)(2) of this section, it shall be refunded proportionately
to the persons from whom it was collected in accordance with Sec.
983.53: Provided, That any sum paid by a person in excess of his/her
pro rata share of the expenses during any production year may be
applied by the committee at the end of such production year as credit
for such person, toward the committee's fiscal operations of the
following production year;
(2) The committee, with the approval of the Secretary, may carry
over such excess into subsequent production years as a reserve:
Provided, That funds already in the reserve do not exceed approximately
two production years' budgeted expenses. In the event that funds exceed
two production years' budgeted expenses, future assessments will be
reduced to bring the reserves to an amount that is less than or equal
to two production years' budgeted expenses. Such reserve funds may be
used:
(i) To defray expenses, during any production year, prior to the
time assessment income is sufficient to cover such expenses;
(ii) To cover deficits incurred during any production year when
assessment income is less than expenses;
(iii) To defray expenses incurred during any period when any or all
provisions of this part are suspended; and
(iv) To cover necessary expenses of liquidation in the event of
termination of this part. Upon such termination, any funds not required
to defray the necessary expenses of liquidation shall be disposed of in
such manner as the Secretary may determine to be appropriate: Provided,
That to the extent practical, such funds shall be returned pro rata to
the persons from whom such funds were collected.
(b) All funds received by the committee pursuant to the provisions
of this part shall be used solely for the purpose specified in this
part and shall be accounted for in the manner provided in this part.
The Secretary may at any time require the committee and its members to
account for all receipts and disbursements.
(c) Upon the removal or expiration of the term of office of any
member of the committee, such member shall account for all receipts and
disbursements for which that member was personally responsible, deliver
all committee property and funds in the possession of such member to
the committee, and execute such assignments and other instruments as
may be necessary or appropriate to vest in the committee full title to
all of the committee property, funds, and claims vested in such member
pursuant to this part.
Sec. 983.57 Implementation and amendments.
The Secretary, upon the recommendation of a majority of the
committee, may issue rules and regulations implementing or modifying
Sec. 983.47 through Sec. 983.56, inclusive.
Miscellaneous Provisions
Sec. 983.58 Compliance.
Except as provided in this part, no handler shall handle
pistachios, the handling of which has been prohibited or otherwise
limited by the Secretary in accordance with provisions of this part;
and no handler shall handle pistachios except in conformity to the
provision of this part.
Sec. 983.59 Rights of the Secretary.
The members of the committee (including successors or alternates)
and any agent or employee appointed or employed by the committee, shall
be subject to removal or suspension at the discretion of the Secretary,
at any time. Each and every decision, determination, or other act of
the committee shall be subject to the continuing right of the Secretary
to disapprove of the same at any time, and upon such disapproval, shall
be deemed null and void.
Sec. 983.60 Personal liability.
No member or alternate member of the committee, nor any employee,
representative, or agent of the committee shall be held personally
responsible to any handler, either individually, or jointly with
others, in any way whatsoever, to any person, for errors in judgment,
mistakes, or other acts, either of commission or omission, as such
member, alternate member, employee, representative, or agent, except
for acts of dishonesty, willful misconduct, or gross negligence.
Sec. 983.61 Separability.
If any provision of this part is declared invalid, or the
applicability thereof to any person, circumstance, or thing is held
invalid, the validity of the remainder, or the applicability thereof to
any other person, circumstance, or thing, shall not be affected
thereby.
Sec. 983.62 Derogation.
Nothing contained in this part is, or shall be construed to be, in
derogation or in modification of the rights of the Secretary or of the
United States to exercise any powers granted by the Act or otherwise,
or, in accordance with such powers, to act in the premises whenever
such action is deemed advisable.
[[Page 46033]]
Sec. 983.63 Duration of immunities.
The benefits, privileges, and immunities conferred upon any person
by virtue of this part shall cease upon its termination, except with
respect to acts done under and during the existence thereof.
Sec. 983.64 Agents.
The Secretary may, by a designation in writing, name any person,
including any officer or employee of the United States Government, or
name any service, division or branch in the United States Department of
Agriculture, to act as agent or representative of the Secretary in
connection with any of the provisions of this part.
Sec. 983.65 Effective time.
The provisions of this part, as well as any amendments, shall
become effective at such time as the Secretary may declare, and shall
continue in force until terminated or suspended in one of the ways
specified in Sec. 983.66 or Sec. 983.67.
Sec. 983.66 Suspension or termination.
The Secretary shall terminate or suspend the operation of any or
all of the provisions of this part, whenever he/she finds that such
provisions do not tend to effectuate the declared policy of the Act.
Sec. 983.67 Termination.
(a) The Secretary may at any time terminate the provisions of this
part.
(b) The Secretary shall terminate or suspend the operations of any
or all of the provisions of this part whenever it is found that such
provisions do not tend to effectuate the declared policy of the Act.
(c) The Secretary shall terminate the provisions of this part at
the end of any fiscal period whenever it is found that such termination
is favored by a majority of producers who, during a representative
period, have been engaged in the production of pistachios: Provided,
That such majority has, during such representative period, produced for
market more than fifty percent of the volume of such pistachios
produced for market, but such termination shall be announced at least
90 days before the end of the current fiscal period.
(d) Within six years of the effective date of this part the
Secretary shall conduct a referendum to ascertain whether continuance
of this part is favored by producers. Subsequent referenda to ascertain
continuance shall be conducted every six years thereafter. The
Secretary may terminate the provisions of this part at the end of any
fiscal period in which the Secretary has found that continuance of this
part is not favored by a two thirds (\2/3\) majority of voting
producers, or a two thirds (\2/3\) majority of volume represented
thereby, who, during a representative period determined by the
Secretary, have been engaged in the production for market of pistachios
in the production area. Such termination shall be announced on or
before the end of the production year.
(e) The provisions of this part shall, in any event, terminate
whenever the provisions of the Act authorizing them cease.
Sec. 983.68 Procedure upon termination.
Upon the termination of this part, the members of the committee
then functioning shall continue as joint trustees, for the purpose of
liquidating the affairs of the committee. Action by such trustees shall
require the concurrence of a majority of said trustees. Such trustees
shall continue in such capacity until discharged by the Secretary, and
shall account for all receipts and disbursements and deliver all
property on hand, together with all books and records of the committee
and the joint trustees, to such persons as the Secretary may direct;
and shall upon the request of the Secretary, execute such assignments
or other instruments necessary or appropriate to vest in such person
full title and right to all the funds, properties, and claims vested in
the committee or the joint trustees, pursuant to this part. Any person
to whom funds, property, or claims have been transferred or delivered
by the committee or the joint trustees, pursuant to this section, shall
be subject to the same obligations imposed upon the members of said
committee and upon said joint trustees.
Sec. 983.69 Effect of termination or amendment.
Unless otherwise expressly provided by the Secretary, the
termination of this part or of any regulation issued pursuant thereto,
or the issuance of any amendment to either thereof, shall not:
(a) Affect or waive any right, duty, obligation, or liability which
shall have arisen or which may thereafter arise, in connection with any
provisions of this part or any regulation issued there under,
(b) Release or extinguish any violation of this part or any
regulation issued there under, or
(c) Affect or impair any rights or remedies of the Secretary, or of
any other persons, with respect to such violation.
Sec. 983.70 Exemption.
Any handler may handle pistachios within the production area free
of the requirements in Sec. Sec. 983.38 through 983.45 and 983.53 if
such pistachios are handled in quantities not exceeding 1,000 dried
pounds during any marketing year. This subpart may be changed as
recommended by the committee and approved by the Secretary.
Sec. 983.71 Relationship with the California Pistachio Commission.
In conducting committee activities and other objectives under this
part, the committee may deliberate, consult, cooperate and exchange
information with the California Pistachio Commission. Any sharing of
information gathered under this subpart shall be kept confidential in
accordance with provisions under section 10(i) of the Act.
*Sec. 983.90 Counterparts.
Handlers may sign an agreement with the Secretary indicating their
support for this marketing order. This agreement may be executed in
multiple counterparts by each handler. If more than fifty percent of
the handlers, weighted by the volume of pistachios handled during a
representative period, enter into such an agreement, then a marketing
agreement shall exist for the pistachio marketing order. This marketing
agreement shall not alter the terms of this part. Upon the termination
of this part, the marketing agreement has no further force or effect.
*Sec. 983.91 Additional parties.
After this part becomes effective, any handler may become a party
to the marketing agreement if a counterpart is executed by the handler
and delivered to the Secretary.
*Sec. 983.92 Order with marketing agreement.
Each signatory handler hereby requests the Secretary to issue,
pursuant to the Act, an order for regulating the handling of pistachios
in the same manner as is provided for in this agreement.
Dated: July 23, 2003.
A. J. Yates,
Administrator, Agricultural Marketing Service.
[FR Doc. 03-19123 Filed 8-1-03; 8:45 am]
BILLING CODE 3410-02-P