[Federal Register: April 5, 2004 (Volume 69, Number 65)]
[Rules and Regulations]
[Page 17843-17861]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr05ap04-19]
[[Page 17843]]
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Part IV
Department of Agriculture
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Agricultural Marketing Service
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7 CFR Part 983
Pistachios Grown in California; Order Regulating Handling; Final Rule
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 983
[Docket Nos. AO-F&V-983-2; FV02-983-01]
Pistachios Grown in California; Order Regulating Handling
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Final rule.
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SUMMARY: This rule establishes a marketing agreement and order (order)
for pistachios grown in California. The order sets 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, will locally administer
the program. The program will be financed by assessments on handlers of
pistachios grown in the production area. The program is designed to
enhance grower returns through the delivery of higher-quality
pistachios to consumers.
DATES: This rule is effective April 6, 2004, except for Sec. Sec.
983.38 through 983.46, which are effective August 1, 2004.
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 compliance with this regulation
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); Recommended Decision and
Opportunity to File Written Exceptions issued on July 23, 2003, and
published in the August 4, 2003, issue of the Federal Register (68 FR
45990); and Secretary's Decision and Referendum Order issued on
December 11, 2003, and published in the December 30, 2003, issue of the
Federal Register (68 FR 75320).
This administrative action is governed by the provisions of
sections 556 and 557 of title 5 of the United States Code and,
therefore, is excluded from the requirements of Executive Order 12866.
Preliminary Statement
The marketing agreement and order regulating the handling of
pistachios grown in California is 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 production area. The hearing was held 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). Notice of this
hearing was published in the Federal Register on June 26, 2002.
The proposal was submitted for consideration to the Department by
the Proponents Committee (proponents), a group representing the
majority of producers and handlers of pistachios in California. The
proponents are independent of the California Pistachio Commission and
the Western Pistachio Association.
The order provides the California pistachio industry with a tool to
regulate the quality of pistachios handled in California. This includes
preventing pistachios containing aflatoxin above the permitted maximum
tolerance level of 15 parts per billion (ppb) from entering the market
place. The order also precludes defective and small pistachios from
being sold. Under the order, testing and certification of pistachios
for quality (including aflatoxin) will be mandatory. The mandatory
regulatory program is designed to provide the industry with an
effective means of ensuring product quality, thereby enhancing customer
satisfaction.
Upon the basis of evidence introduced at the hearing and the record
thereof, the Administrator of AMS on July 23, 2003, filed with the
Hearing Clerk, U.S. Department of Agriculture, a Recommended Decision
and Opportunity to File Written Exceptions thereto by September 3,
2003. That document also announced AMS's intent to request approval of
new information collection requirements to implement the program.
Written comments on the proposed information collection requirements
were due by October 3, 2003.
One exception (and as corrected) was filed during the period
provided on behalf of the proponents. The exception expressed general
support of the marketing order and requested that several changes be
made to the proposed order provisions, including that one proposed
definition be revised, one definition be deleted, and several editorial
and clarifying changes be made. The specifics of the exception were
addressed in the Secretary's Decision and Referendum Order issued on
December 11, 2003, and published in the Federal Register on December
30, 2003.
That document also directed that a referendum be conducted during
the period January 12 through February 9, 2004, among growers of
California pistachios to determine whether they favored issuance of the
order. In the referendum, the order was favored by more than two-thirds
of the growers voting in the referendum by number and volume.
The marketing agreement was mailed to all pistachio handlers in the
production area for their approval. The marketing agreement was
approved by handlers representing more than 50 percent of the volume of
pistachios handled by all handlers during the representative period of
September 1, 2002, through August 31, 2003.
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 final 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. Marketing orders are unique in
that they are normally brought through group action of essentially
small entities for their own benefit. Thus, both the RFA and the Act
are compatible with respect to small entities.
Small agricultural producers have been defined by the Small
Business Administration (SBA) (13 CFR 121.201) as those having annual
receipts of less than $750,000. Small agricultural service firms, which
include handlers that will be regulated under the pistachio order, are
defined as those
[[Page 17845]]
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 pistachio
marketing order program on small businesses. The record evidence is
that while the program will impose some costs on the regulated parties,
those costs will 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 19 handlers who process pistachios in
the production area.
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, 91 percent of the
California pistachio producers receive less than $550,000 annually, and
9 percent receive more than $550,000 annually. Thus, at least 91
percent 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 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 should 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 should 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.
[[Page 17846]]
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 order will assist in improving producer returns for
pistachios. The order will 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 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 marketing order provisions. 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
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 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 are an
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
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
[[Page 17847]]
($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 will 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 an upward 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).
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 will reduce the chance of a demand-decreasing market
disturbance in the U.S.
Witnesses cited a 1996 pistachio aflatoxin case that 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 will make the probability of an
aflatoxin event less likely. As a starting point, witnesses argued that
without mandatory aflatoxin testing through the 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 will
face higher costs to comply with the 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 will 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
[[Page 17848]]
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 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 below the price 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 marketing order does not impose any direct compliance costs on
producers. The direct impact is on the handlers who are required to pay
for testing and inspection. Producers will 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 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
will 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 will benefit from implementation of the order. Further,
[[Page 17849]]
there is no evidence of differing economic impacts between small and
large producers.
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 marketing order includes provisions to reduce compliance costs
for small handlers. Firms that handle less than 1,000,000 pounds per
year will be subject to simplified aflatoxin testing procedures.
Additionally, they will 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 compliance Net economic
Handler group* cost (dollars) impact (dollars)
------------------------------------------------------------------------
Higher Volume/Lower Compliance -$667,000 1,178,000
Costs............................
Medium Volume/Compliance Costs.... -150,000 208,000
Lower Volume/Higher Compliance -58,000 61,000
Costs............................
--------------------
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, will reap about 81 percent of the benefits of
the program. AMS therefore concludes that the program will 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 marketing order will
require minimal adjustments in current processing activities and will
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 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 program and its regulatory
provisions.
The order will impose some reporting and recordkeeping requirements
on handlers. However, handler testimony indicated that the expected
burden that will be imposed with respect to these requirements will be
negligible. Most of the information that will 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 will be imposed
under this marketing order on the estimated 19 handlers of pistachios
in California.
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, namely no marketing order, or an order
without the combination of quality, size and aflatoxin regulation.
USDA has not identified any relevant Federal rules that duplicate,
overlap, or conflict with this rule.
In determining that the order and its provisions will not have a
disproportionate economic on a substantial number of small entities,
all of the issues discussed above were considered. Based on hearing
record evidence and USDA's analysis of the economic information
provided, the order provisions have been carefully reviewed to ensure
that every effort has been made to eliminate any unnecessary costs or
requirements.
Although the order will 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 should be offset by the benefits derived from expanded sales
benefiting handlers and producers alike. Accordingly, it is determined
that the order will not have a disproportionate economic impact on a
substantial number of small handlers or producers.
Paperwork Reduction Act
In compliance with OMB regulations (5 CFR part 1320) which
implement the Paperwork Reduction Act of 1995 (Pub. L. 104-13), the
forms to be used for nomination and selection of the initial
administrative committee have been submitted to and approved by OMB.
Any additional information collection and recordkeeping
requirements that
[[Page 17850]]
may be imposed under the order will be submitted to OMB for approval.
Those requirements would not become effective prior to OMB approval.
Civil Justice Reform
The provisions of the marketing agreement and order have been
reviewed under Executive Order 12778, Civil Justice Reform. They are
not intended to have retroactive effect. The agreement and order will
not preempt any State or local laws, regulations, or policies, unless
they present an irreconcilable conflict with this rule.
The Act provides that administrative proceedings must be exhausted
before parties may file suit in court. Under section 608c(15)(A) of the
Act, any handler subject to an order may file with the 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
therefrom. 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.
Findings and Determinations
(a) Findings upon the basis of the hearing record. Pursuant to the
provisions of the Agricultural Marketing Agreement of 1937, as amended
(7 U.S.C. 601 et seq.), and the applicable rules of practice and
procedure effective thereunder (7 CFR part 900), a public hearing was
held upon a proposed marketing agreement and order regulating the
handling of pistachios grown in California.
Upon the basis of the evidence introduced at such hearing and the
record thereof, it is found that:
(1) The marketing agreement and order, and all of the terms and
conditions thereof, will tend to effectuate the declared policy of the
Act;
(2) The 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 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 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 marketing agreement and order, is in the current of interstate or
foreign commerce or directly burdens, obstructs, or affects such
commerce.
(b) Additional findings. It is necessary and in the public interest
to make most of the provisions of this order effective not later than
one day after publication in the Federal Register. The exception would
be for those provisions of the order (Sec. Sec. 983.38 through 983.46)
that establish mandatory testing inspection and certification for
maximum aflatoxin and minimum quality levels of California pistachios.
These provisions would not become effective until August 1, 2004.
A later effective date would unnecessarily delay implementation of
the program, which is expected to benefit the California pistachio
industry. Making the program effective as specified would allow for the
nomination, selection and organization of the initial administrative
committee sufficiently in advance of the 2004 pistachio harvest season.
It also allows time for the committee to recommend a budget and
assessment rate and any administrative rules and regulations deemed
necessary to operate the program.
In view of the foregoing, it is hereby found and determined that
good cause exists for making most of the order provisions effective one
day after publication in the Federal Register, and that it would be
contrary to the public interest to delay the effective date for 30 days
after publication in the Federal Register (Sec. 553(d), Administrative
Procedure Act; 5 U.S.C. 551-559).
(c) Determinations. It is hereby determined that:
(1) The ``Marketing Agreement Regulating the Handling of Pistachios
Grown in California,'' upon which the aforesaid public hearing was
held, has been signed by handlers (excluding cooperative associations
of producers who are not engaged in processing, distributing, or
shipping pistachios covered by the order) who during the period
September 1, 2002, through August 31, 2003, handled not less than 50
percent of the volume of such pistachios covered by the order, and
(2) The issuance of this order is favored or approved by at least
two-thirds of the producers who participated in a referendum on the
question of its approval and who, during the period September 1, 2002,
through August 31, 2003 (which has been determined to be a
representative period), have been engaged within the production area in
the production of pistachios for market, such producers having also
produced for market at least two-thirds of the volume of such commodity
represented in the referendum.
List of Subjects in Proposed 7 CFR Part 983
Marketing agreements, Pistachios, Reporting and recordkeeping
requirements.
Order Relative to the Handling of Pistachios Grown in California
It is therefore ordered, That on and after the effective date
hereof, all handling of pistachios grown in California shall be in
conformity to, and in compliance with, the terms and conditions of the
said order, as follows:
The provisions of the marketing order are set forth in full herein.
0
Title 7, chapter IX is 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.
983.14 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.
[[Page 17851]]
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.
Regulations
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 Right 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.
Authority: 7 U.S.C. 601-674.
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.
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 inshell pistachios, free of
internal defects as defined in Sec. 983.39(b)(4) and (5), 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. 983.14 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
[[Page 17852]]
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.
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
[[Page 17853]]
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 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
[[Page 17854]]
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 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.
[[Page 17855]]
(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 the following Table 1. The gross weight of the kernel lot
sample for aflatoxin testing and the number of incremental samples
required is shown in the following Table 2 of this paragraph.
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 sample
Lot weight (lbs.) samples for the lot sample (kilograms)
lot sample (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),
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 Sample
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 Sample 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
[[Page 17856]]
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
accredited 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 of this
paragraph.
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 ...............
1, 2 and 3 above, which materially
detracts from the appearance or the
edible or marketing quality of the
individual shell or the lot........
-------------------------------------
INTERNAL (KERNEL) DEFECTS
------------------------------------------------------------------------
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 2.0 0.5
allowed........................
Total external or internal defects 9.0 ...............
allowed............................
-------------------------------------
OTHER DEFECTS
------------------------------------------------------------------------
1. Shell pieces and blanks (Fills 2.0 ...............
<50% of the shell).................
(i) Maximum blanks allowed...... 1.0 ...............
2. Foreign material--No glass, metal 0.25 0.1
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 \30/64\ths
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 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
[[Page 17857]]
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:
(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
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
----------------------------------------------------------------------------------------------------------------
(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
[[Page 17858]]
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 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 the
order provisions contained in Sec. Sec. 983.38 through 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. Sec. 983.38 and 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.
[[Page 17859]]
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 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.
[[Page 17860]]
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. Sec. 983.47 through 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 Right 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.
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.
[[Page 17861]]
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.
Dated: March 25, 2004.
A.J. Yates,
Administrator, Agricultural Marketing Service.
[FR Doc. 04-7414 Filed 4-2-04; 8:45 am]
BILLING CODE 3410-02-P