FR Doc 05-16981

[Federal Register: August 25, 2005 (Volume 70, Number 164)]
[Proposed Rules]
[Page 49885-49891]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25au05-15]

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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 983

[Docket No. FV05-983-2 PR]

Pistachios Grown in California; Establishment of Additional
Inspection Requirements

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This rule invites comments on the establishment of additional
inspection requirements authorized under the California pistachio
marketing order (order). The order regulates the handling of pistachios
grown in California and is administered locally by the Administrative
Committee for Pistachios (Committee). This rule would modify sampling
procedures for dark-stained pistachios which are intended to be dyed or
color-coated. It would also establish reinspection requirements for
lots of pistachios, which are materially changed after meeting initial
aflatoxin, quality, and size requirements. This action is expected to
assure the quality of pistachios, improve the marketability of
pistachios, and provide handlers more marketing flexibility. The
benefits of this action are expected to offset the increased inspection
costs.

DATES: Comments must be received by September 1, 2005.

ADDRESSES: Interested persons are invited to submit written comments
concerning this proposal. Comments must be sent to the Docket Clerk,
Marketing Order Administration Branch, Fruit and Vegetable Programs,
AMS, USDA, 1400 Independence Avenue SW, STOP 0237, Washington, DC
20250-0237; Fax: (202) 720-8938, or E-mail: moab.docketclerk@usda.gov,
or Internet: http://www.regulations.gov. All comments should reference

the docket number and the date and page number of this issue of the
Federal Register and will be made available for public inspection in
the Office of the Docket Clerk during regular business hours, or can be
viewed at: http://www.ams.usda.gov/fv/moab.html.

FOR FURTHER INFORMATION CONTACT: Rose Aguayo or Terry Vawter, Marketing
Specialists, California Marketing Field Office, Marketing Order
Administration Branch, Fruit and Vegetable Programs, AMS, USDA;
Telephone: (559) 487-5901, Fax: (559) 487-5906; or George Kelhart,
Technical Advisor, 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 complying 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, or E-mail: Jay.Guerber@usda.gov.

SUPPLEMENTARY INFORMATION: This proposal is issued under Marketing
Order No. 983 (7 CFR part 983), regulating the handling of pistachios
grown in California, hereinafter referred to as the ``order.'' The
order is effective under the Agricultural Marketing Agreement Act of
1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the
``Act.''
The Department of Agriculture (USDA) is issuing this rule in
conformance with Executive Order 12866.
This proposal has been reviewed under Executive Order 12988, Civil
Justice Reform. This rule is not intended to have retroactive effect.
This proposal will not preempt any State or local laws, regulations, or
policies, unless they present an irreconcilable conflict with this
rule.
The Act provides that administrative proceedings must be exhausted
before parties may file suit in court. Under section 608c(15)(A) of the
Act, any handler subject to an order may file with USDA 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 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 USDA's ruling on the petition,
provided an action is filed not later than 20 days after the date of
the entry of the ruling.
This rule would modify sampling procedures for dark-stained
pistachios which are intended to be dyed or color-coated. It would also
establish reinspection requirements for lots of pistachios, which are
materially changed after meeting initial aflatoxin, quality, and size
requirements. This action is expected to assure the quality of
pistachios, provide handlers more marketing flexibility, and improve
the marketability of pistachios. The benefits of this action are
expected to offset the increased inspection costs. For the purposes of
this proposed rule, the terms ``marketing year'' and ``production
year'' are synonymous.
Section 983.46 of the order authorizes the Committee to recommend
that the Secretary modify or suspend the order provisions contained in
Sec. Sec. 983.38 through 983.45. These sections took effect August 1,
2005.

Sampling Procedures

Sections 983.38 and 983.39 of the order specify maximum aflatoxin,
minimum quality and minimum size requirements, respectively, that must
be met prior to the shipment of pistachios.
Sections 983.38(d)(1) and 983.39(e)(1) of the order specify that a
sample must be drawn from each lot, and that this lot sample must be
divided into two samples--one portion for aflatoxin testing and one for
minimum quality and size testing.
Section 983.39(b)(3)(iv) of the order currently defines dark stain
and specifies that pistachios that are dyed or color-coated to improve
their marketing

[[Page 49886]]

quality are not subject to the maximum permissible defects for dark
stain.
Pistachios grow on trees in grape-like clusters and are encased in
an outer skin, or hull. During the pistachio harvest process, the nuts,
which contain a significant amount of moisture when harvested, must
arrive at the handling facility as soon as possible and the hulls
covering the shell must be removed. If the hulls are not removed from
the nuts within 24 hours of their removal from the tree, staining of
the outer shell occurs. After being hulled, the pistachios are then
dried, and placed in storage containers. When the nuts are removed from
storage, they are sorted, sized, graded, and mechanically separated
into open and closed shell product (pin-picked), and placed into lots
for aflatoxin and minimum quality testing. Some handlers have the
pistachios tested for aflatoxin prior to these processes. A ``lot'' is
any quantity of pistachios that is designated for testing.
During the sorting process, the inshell pistachios are separated by
the color of the shells and the amount of stain on the shells. On
average, approximately 95 percent of the harvested inshell pistachios
are placed into lots designated as non-stained or light-stained
pistachios. Such pistachios are typically marketed without any
treatment to cover the stains. The remaining 5 percent are placed into
lots consisting primarily of dark-stained inshell pistachios. Handlers
typically dye or color-coat the dark-stained inshell pistachios to
cover the stains, because they are generally not marketable in their
natural state. The staining detracts from their appearance.
The color-coating process usually consists of applying a white
coating or a flavoring to the shells of the pistachios. The dyeing
process consists of applying a dye to the shells. These pistachios are
marketed after either of these processes are performed by the handler.
Under the regulatory requirements of the order, one test sample
will be drawn per lot and divided into two portions--one for aflatoxin
testing and the other for minimum quality and size testing. Handlers or
the inspection service will draw this sample while the pistachios are
in their natural state (prior to dyeing or color-coating) because false
positive test results may occur when dyed or color-coated pistachios
are used in conducting aflatoxin tests. Lots of badly stained natural
condition pistachios would likely exceed the maximum permissible 3
percent by weight tolerance for dark stain. Thus, they would fail to
meet existing voluntary minimum quality requirements under the U.S.
Grade Standards for Pistachios in the Shell (7 CFR 51.2540 through
51.2549) or the minimum quality requirements under the order, that
became effective August 1, 2005.
On dark stained lots, it is common practice for handlers to use or
submit the portion of the initial natural sample designated for
aflatoxin testing for the aflatoxin testing at a USDA or USDA approved
laboratory. If the sample meets the aflatoxin requirements, handlers
then return the sample portion designated for the minimum quality and
minimum size testing to the lot, dye or color-coat the lot, and draw or
have drawn a second representative dyed or color-coated sample for
minimum quality and size testing. The second representative sample is
taken after the pistachios have been dyed or color-coated to assure
that the coloring is uniform and adequately covers the stained
pistachios.
Because the inspection requirements do not provide for a second
sample after dyeing or color-coating, the Committee, on December 15,
2004, recommended modifying the order's sampling procedures and
establishing a new section entitled ``Sec. 983.138--Samples for
testing.'' The vote was 8 in favor and 0 opposed.
For those lots that consist of primarily light-stained or non-
stained inshell pistachios, one sample would continue to be drawn as
specified in Sec. Sec. 983.38(d)(1) and 983.39(e)(1) of the order.
The Committee estimated that the total 2005-06 inshell pistachio
crop will be approximately 200 million pounds and that approximately 5
percent (6 million pounds or 600 lots) of all inshell pistachios
marketed domestically would be dyed or color-coated to cover dark-
stained shells.
While this modification to sampling procedures under the order is
expected to result in a slight increase in inspection costs for lots
which are dyed or color-coated, the improvement in the marketability of
these pistachios is expected to offset the additional costs. When the
dark-stained pistachios are shelled out, the kernels generally have an
approximate value of $1.00 per pound, which is substantially less than
the $2.00 per pound value of dyed or color-coated inshell pistachios.
Producers, handlers, and consumers benefit from dyeing or color-
coating, because dyeing or color-coating dark-stained inshell
pistachios results in nuts having a more desirable color. This makes
the nuts more appealing to retailers and consumers. Thus, retailers are
willing to pay on average $2.00 per pound for these previously
unmarketable dark-stained inshell pistachios. This increased value also
is expected to contribute to improved or maintained producer returns.

Reinspection

Sections 983.38 and 983.39 of the order will specify maximum
aflatoxin, and minimum quality and minimum size requirements,
respectively. These sections took effect August 1, 2005.
Section 983.39(e) of the pistachio order will provide minimum
quality testing and inspection procedures and require each lot of
pistachios to be certified, be uniquely identified, and traceable from
testing through shipment by the handler.
Section 983.41 of the pistachio order provides handlers who handle
less than 1 million pounds of assessed weight (dried weight) pistachios
per production year (September 1-August 31) with certain aflatoxin
testing options and allows such handlers to apply to the Committee for
an exemption from minimum quality testing. Handlers granted an
exemption will be required to pull the samples, make them available for
review by the Committee, and maintain these samples in their handling
facilities for 90 days. Handlers who do not apply or who are not
granted an exemption from minimum quality testing, must test all lots
for aflatoxin, quality, and size requirements under the order. This
section also took effect August 1, 2005.
Section 983.42 of the pistachio order provides that handlers may
commingle aflatoxin and minimum quality certified lots with other
certified lots. This section took effect August 1, 2005.
Section 983.43 of the pistachio order provides authority for the
Committee to recommend the establishment of rules and regulations to
specify conditions under which pistachios would be subject to
reinspection. This section, too, took effect August 1, 2005.
Section 983.70 of the pistachio order exempts handlers who handle
1,000 pounds or less of dried weight pistachios during any marketing
year (dried to 5 percent moisture) within the production area from all
aflatoxin and minimum quality requirements.
As mentioned earlier, during the production year handlers typically
hull and dry pistachios and place the nuts into storage containers.
These nuts usually remain in storage until an order is received from a
buyer. When the nuts are removed from storage, handlers have the option
of sampling and having the nuts tested for aflatoxin prior to further
processing (i.e., sorting, sizing, grading, and pin-picking
(segregating the split-

[[Page 49887]]

and closed-shell pistachios)), or placing the nuts into lots for
aflatoxin and minimum quality and size testing after these processes
have been performed. The first option is expected to be used primarily
by those handlers who have been granted an exemption from minimum
quality and size testing pursuant to Sec. 983.41(b). Most handlers are
expected to perform these processes, segregate the pistachios into
lots, and then draw or have drawn the samples for the required
aflatoxin, quality, and size tests.
Typically, handlers who handle a million or more pounds of assessed
weight pistachios per marketing year further process the nuts prior to
testing for aflatoxin, quality, and size requirements. Such handlers,
pursuant to Sec. 983.38(d) are required to uniquely identify each lot
so that it can be traced from the point of testing through shipment.
Pistachio handlers who handle less than a million pounds of
assessed weight pistachios per marketing year and whose pistachios pass
aflatoxin testing requirements would not have to comply with the
traceability procedures set forth in Sec. 983.38(d). Furthermore,
pursuant to Sec. 983.41(a) of the order, such handlers may test their
entire inventory (maximum lot size of 150,000 pounds) or segregate
receipts into various sized lots and have an inspector sample and test
each specified lot for aflatoxin and may also, pursuant to Sec.
983.41(b) of the order, apply to the Committee for an exemption from
minimum quality testing.
Because it is more economical for smaller handlers to test larger
lots for aflatoxin and to be exempt from minimum quality testing, it is
expected that the majority, if not all such handlers, will apply for
the exemption from minimum quality testing.
Exempted handlers, who handle more than 1,000 pounds and less than
a million pounds of assessed weight pistachios per marketing year,
would draw or have one sample drawn per lot. This sample would be
divided into two portions, one for aflatoxin and one for minimum
quality testing. Typically, when such handlers receive notice that the
lots have passed aflatoxin testing requirements, they return the sample
portion designated for minimum quality testing to the lot. Such lots
are then further processed (i.e., sized, sorted, air-legged, pin-
picked, and graded). Handlers would then draw a new sample, which is
required to be maintained for 90 days at the handler's facilities and
required to be made available for review or auditing by the Committee.
Those handlers who handle more than 1,000 pounds and less than a
million pounds and who are not granted such an exemption by the
Committee are required to meet the traceability procedures as specified
in Sec. 983.38(d) of the order and the aflatoxin, quality, and size
requirements under the order.
After certification for aflatoxin, quality, and size or pulling and
retaining required samples, the majority of these lots are shipped
directly into the channels of commerce. However, some certified lots
are readied and retained in the handler's facility in anticipation of
future orders.
When handlers receive new orders, they typically either resort or
resize existing certified lots of inshell pistachios or create new lots
from uncertified stored nuts. When existing certified lots are used
they generally have to be reworked to meet specific buyer needs. For
instance, light-stained nuts, dark-stained nuts, insect infested nuts,
smaller or larger-sized nuts, closed shell or open shell nuts may have
to be removed via hand-sorting, color-sorting, pin-picking and/or
resizing. Removal of these nuts results in new lots which no longer
have representative inspection certificates. Such lots would be
considered to have been ``materially changed''.
Thus, the Committee at its November 3, 2004, meeting, unanimously
recommended establishing a new section entitled ``Sec. 983.143--
Reinspection'' to define the term ``materially changed'' and to specify
handler reinspection requirements to assure the quality of pistachios
entering market channels.
The Committee, at its April 12, 2005, meeting, reconsidered and
further clarified its previous recommendation. The Committee
unanimously recommended that, effective August 1, 2005, lots which are
color-sorted, hand-sorted, pin-picked, and/or resized after being
initially certified for aflatoxin, quality, and size requirements under
the order be considered ``materially changed'' and that any portion of
a lot (the portion resorted and resized to meet buyer specifications or
the portion that was removed from the original lot) be inspected as new
lots. The Committee clarified, that Sec. 983.42 which provides that
previously certified lots can be commingled with other certified lots,
does not apply to portions of lots which are materially changed under
the order, as such newly formed lots may no longer contain the same
quantity or quality of inshell pistachios as the original lots.

Initial Regulatory Flexibility Analysis

Pursuant to requirements set forth in the Regulatory Flexibility
Act (RFA), AMS has considered the economic impact of this action on
small entities. Accordingly, AMS has prepared this initial regulatory
flexibility analysis.
The purpose of the RFA is to fit regulatory actions to the scale of
business subject to such actions in order that small businesses would
not be unduly or disproportionately burdened. Marketing orders issued
pursuant to the Act, and the rules issued thereunder, are unique in
that they are brought about through group action of essentially small
entities acting on their own behalf. Thus, both statutes have small
entity orientation and compatibility.
There are approximately 24 handlers of California pistachios
subject to regulation under the order and approximately 741 producers
in the production area. Small agricultural producers are defined by the
Small Business Administration (13 CFR 121.201) as those having annual
receipts less than $750,000, and small agricultural service firms are
defined as those whose annual receipts are less than $6,000,000.
Seventeen of the 24 handlers subject to regulation have annual
pistachio receipts of less than $6,000,000. In addition, 722 producers
have annual receipts less than $750,000. Thus, the majority of handlers
and producers of California pistachios may be classified as small
entities.
This rule would modify sampling procedures for dark-stained
pistachios which are intended to be dyed or color-coated. It would also
establish reinspection requirements for lots of pistachios, which are
materially changed after meeting initial aflatoxin, quality, and size
requirements. This action is expected to assure the quality of
pistachios, provide handlers more marketing flexibility, improve the
marketability of pistachios, and enhance the marketability of reworked
pistachios. These benefits are expected to offset increased inspection
costs.
Section 983.46 of the order authorizes the Committee to recommend
that the Secretary modify or suspend order provisions contained in
Sec. Sec. 983.38 through 983.45. These provisions took effect August
1, 2005.

Sampling Procedures

[[Page 49888]]

be drawn from each lot, and that this lot sample must be divided into
two samples--one portion for aflatoxin testing and one for minimum
quality and size testing.
Section 983.39(b)(3)(iv) of the order defines dark stain and
specifies that pistachios that are dyed or color-coated to improve
their marketing quality are not subject to the maximum permissible
defects for dark stain.
Pistachios grow on trees in grape-like clusters and are encased in
an outer skin, or hull. During the pistachio harvest process, the nuts,
which contain a significant amount of moisture when harvested, must
arrive at the handling facility as soon as possible and the hulls
covering the shell must be removed. If the hulls are not removed from
the nuts within 24 hours of their removal from the tree, staining of
the outer shell occurs. After being hulled, the pistachios are then
dried, and placed in storage containers. When the nuts are removed from
storage, they are sorted, sized, graded, and mechanically separated
into open and closed shell product (pin-picked) and placed into lots
for aflatoxin and minimum quality testing. A ``lot'' is any quantity of
pistachios that is segregated for testing.
During the sorting process, the inshell pistachios are separated by
the color of the shells and the amount of stain on the shells. On
average, approximately 95 percent of the harvested inshell pistachios
are placed into lots designated as non-stained or light-stained
pistachios. Such pistachios are typically marketed without any
treatment to cover or remove the stains. The remaining 5 percent are
placed into lots consisting primarily of dark-stained inshell
pistachios. Handlers typically dye or color-coat the dark-stained
inshell pistachios to cover the stains, because they are generally not
marketable in their natural state.
The color-coating process usually consists of applying a white
coating or a flavoring to the shells of the pistachios. The dyeing
process consists of applying a dye to the shells.
Prior to placing pistachios into the domestic channels of commerce
on August 1, 2005, and later, handlers will be required to draw or have
drawn a sample and test or have tested each sample for aflatoxin,
quality, and size requirements, unless exempted under Sec. Sec. 983.41
or 983.70 of the order.
Under the regulatory requirements of the order, one test sample
will be drawn per lot and divided into two portions--one for aflatoxin
testing and the other for minimum quality and size testing. Handlers
will draw this sample while the pistachios are in their natural state
(prior to dyeing or color-coating) because false positive test results
may occur when dyed or color-coated pistachios are used in conducting
aflatoxin tests.
When handlers believe that lots of natural condition pistachios
exceed the maximum permissible 3 percent by weight tolerance for dark
stain under the existing voluntary minimum quality requirements of the
U.S. Grade Standards for Pistachios in the Shell (7 CFR part 51.2540
through 51.2549), or the minimum quality requirements under the order,
they will have the natural condition portion of the sample designated
for aflatoxin testing tested. If the sample meets the aflatoxin
requirements, handlers then return the sample portion designated for
the minimum quality and minimum size testing to the lot, dye or color-
coat the lot, and draw or have drawn a second representative dyed or
color-coated sample to be tested for minimum quality and size. This
second sample is taken after the pistachios have been dyed or color-
coated to assure that the color is uniform and adequately covers the
staining.
Because the inspection requirements do not provide for sampling and
inspections at this stage of the process, the Committee, on December
15, 2004, recommended modifying the order's sampling procedures and
establishing a new section entitled ``Sec. 983.138 Samples for
testing.'' The vote was 8 in favor and 0 opposed.
The first alternative considered was to leave the order provisions
unchanged, but this alternative was not adopted, as handlers,
producers, and consumers would benefit from permitting the orderly
marketing of pistachios containing edible nutmeats that fail minimum
quality for external cosmetic reasons. The Committee also considered
providing handlers with more flexibility in removing dark-stained
inshell pistachios from lots, but decided that modifying the sampling
procedures for lots intended for dyeing or color-coating would allow
handlers to market these dark-stained pistachios without having to
implement lengthy and costly removal processes.
The Committee estimated that the total 2005-06 inshell pistachio
crop will be approximately 200 million pounds and that approximately 5
percent (6 million pounds or 600 lots) of all inshell pistachios
marketed domestically would be dyed or color-coated to cover dark-
stained shells.
While this modification to sampling procedures under the order is
expected to result in a slight increase in inspection costs for lots
which are dyed or color-coated, the improvement in the marketability of
these pistachios is expected to offset the additional costs. When the
dark-stained pistachios are shelled out, the kernels are expected to
have an approximate value of $1.00 per pound, which is substantially
less than the $2.00 per pound value of dyed or color-coated inshell
pistachios.
Accordingly, producers, handlers, and consumers would benefit, as
dyeing and color-coating dark-stained inshell pistachios results in
nuts with a more pleasing appearance. Covering the dark stain would
allow these edible pistachios to meet minimum quality requirements
under the order and also make the pistachios more appealing to
retailers and consumers. Retailers are expected to be willing to pay on
average $2.00 per pound for these nuts that were previously
unmarketable as inshell nuts. This increased value also is expected to
contribute to improved or maintained producer returns.

Reinspection

Sections 983.38 and 983.39 of the order specify maximum aflatoxin
requirements, and minimum quality and minimum size requirements,
respectively.
Section 983.39(e) of the pistachio order provides minimum quality
testing and inspection procedures and requires that each lot of
pistachios to be certified be uniquely identified and traceable from
testing through shipment by the handler.
Section 983.43 of the pistachio order provides authority for the
Committee to recommend the establishment of rules and regulations to
specify conditions under which pistachios would be subject to
reinspection.
Section 983.41 of the pistachio order provides handlers who handle
less than 1 million pounds of assessed weight (dried weight) pistachios
per production year (September 1-August 31) with certain aflatoxin
testing options and allows such handlers to apply to the Committee for
an exemption from minimum quality testing. Handlers granted an
exemption must pull the samples and maintain these samples in their
handling facilities for 90-days for review and audit by the Committee
when requested. Handlers who are not granted an exemption from minimum
quality testing, must test all lots for aflatoxin, quality and size
requirements under the order.
Section 983.42 of the pistachio order provides that handlers may
commingle aflatoxin and minimum quality certified lots with other
certified lots. This section took effect August 1, 2005.

[[Page 49889]]

Section 983.43 of the pistachio order provides authority for the
Committee to recommend the establishment of rules and regulations to
specify conditions under which pistachios would be subject to
reinspection. This section, too, took effect August 1, 2005.
Section 983.70 of the pistachio order exempts handlers who handle
1,000 pounds or less of dried weight pistachios during any marketing
year (dried to 5 percent moisture) within the production area from all
aflatoxin and minimum quality requirements.
As mentioned earlier, during the production year handlers typically
hull and dry pistachios and place the nuts into storage containers.
These nuts usually remain in storage until an order is received from a
buyer. When the nuts are removed from storage, handlers have the option
of testing the nuts for aflatoxin prior to further processing (i.e.,
sorting, sizing, grading, pin-picking (segregating the split- and
closed-shell nuts), or placing the nuts into lots for aflatoxin and
minimum quality and size testing after these processes have been
completed.
Typically, handlers who handle a million or more pounds of assessed
weight pistachios per marketing year further process the nuts prior to
testing for aflatoxin, quality, and size requirements. Such handlers,
pursuant to Sec. 983.38(d) are required to uniquely identify each lot
so that it can be traced from the point of testing through shipment.
Pistachio handlers who handle less than a million pounds of
assessed weight pistachios per marketing year and whose pistachios pass
aflatoxin testing requirements would not have to comply with the
traceability procedures set forth in Sec. 983.38(d). Furthermore,
pursuant to Sec. 983.41(a) of the order, such handlers may test their
entire inventory (maximum lot size of 150,000 pounds) or segregate
receipts into various sized lots and have an inspector sample and have
each specified lot tested for aflatoxin and may also, pursuant to Sec.
983.41(b) of the order, apply to the Committee for exemption from
minimum quality testing.
Because it is more economical for smaller handlers to test larger
lots for aflatoxin and to be exempt from minimum quality testing, it is
expected that the majority, if not all such handlers, will apply for
the exemption from minimum quality and size testing.
Thus, those exempted handlers, who handle more than 1,000 pounds
and less than a million pounds of assessed weight pistachios per
marketing year, would draw or have one sample drawn per lot. This
sample would be divided into two portions, one for aflatoxin and one
for minimum quality testing. Typically, when such handlers receive
notice that the lots have passed aflatoxin testing requirements, they
return the sample portion designated for minimum quality testing to the
lot. Such lots are then further processed (sized, sorted, air-legged,
pin-picked, and graded). Handlers would then draw a new sample, which
is required to be maintained for 90-days at the handler's facilities
and made available for review or auditing by the Committee.
Those handlers who handle more than 1,000 pounds and less than a
million pounds and who are not granted such an exemption by the
Committee are required to meet the traceability procedures as specified
in Sec. 983.38(d) of the order and the aflatoxin, quality, and size
requirements under the order for each lot of pistachios.
After certification for aflatoxin, quality, and size or pulling and
retaining required samples, the majority of these lots are shipped
directly into the channels of commerce. However, some certified lots
are readied and retained in the handler's facility in anticipation of
future orders.
When handlers receive new orders, they typically either resort or
resize existing certified lots of inshell pistachios or create new lots
from uncertified stored nuts. When existing certified lots are used
they generally have to be reworked to meet specific buyer needs. For
instance, light-stained nuts, dark-stained nuts, insect infested nuts,
smaller or larger sized nuts, closed shell or open shell nuts may have
to be removed via hand-sorting, color-sorting, pin-picking and/or
resizing. Removal of these nuts, results in new lots which no longer
have representative inspection certificates. Such lots would be
considered to have been ``materially changed''.
Thus, the Committee at its November 3, 2004, meeting, unanimously
recommended establishing a new section entitled ``Sec. 983.143--
Reinspection'' to define the term ``materially changed'' and to specify
handler reinspection requirements.
The Committee, at its April 12, 2005, meeting, reconsidered and
further clarified its previous recommendation. The Committee
unanimously recommended that, effective August 1, 2005, lots which are
color-sorted, hand-sorted, pin-picked, and/or resized after being
initially certified for aflatoxin, quality, and size requirements under
the order be considered ``materially changed'' and that any portion of
a lot (the portion resorted and resized to meet buyer specifications or
the portion that was removed from the original lot) be inspected as new
lots. The Committee clarified, that Sec. 983.42 which provides that
previously certified lots can be commingled with other certified lots,
does not apply to portions of lots which are materially changed under
the order, as such newly formed lots may no longer contain the same
quantity or quality of inshell pistachios as the original lots.
Lastly, the Committee recommended that some handlers be exempt from
reinspection requirements under the order. As previously mentioned,
Sec. 983.70 of the pistachio order exempts handlers who handle 1,000
pounds or less of dried weight pistachios during any marketing year
(dried to 5 percent moisture) from all aflatoxin and minimum quality
requirements. Thus, the Committee recommended that such handlers also
be exempt from any reinspection requirements under the order.
Additionally, Sec. 983.41 of the pistachio order provides that
handlers who handle less than 1 million pounds of assessed weight
(dried weight) pistachios per production year (September-August 31)
with certain aflatoxin testing options and allows such handlers to
apply to the Committee for an exemption from minimum quality and size
testing. The order further provides that handlers, who are granted an
exemption, shall pull and maintain for 90 days representative lot
samples of any lots intended to be shipped into the domestic channels
of commerce for review and audit by the Committee as requested.
The Committee recommended exempting such handlers from reinspection
requirements, as typically such handlers pull or have pulled
representative lot samples immediately prior to shipment, do not
materially change the lots, and ship such lots directly into the
domestic channels of commerce and because the Committee believed such
smaller handlers could be negatively impacted by the additional cost of
reinspection. However, because such handlers could materially change
their lots prior to shipment into the domestic channels of commerce,
USDA is proposing to require such handlers to pull or have pulled
representative samples of the materially changed lots to assure the
quality of the pistachios and to keep the sampling and inspection
procedures consistent with order authority. As noted in this document,
the costs for reinspection are expected to be small compared to the
benefit of assuring the quality of the pistachios entering commercial
channels.

[[Page 49890]]

Such representative lot samples would be divided into two parts,
one part would be retested for aflatoxin and the other part would be
maintained for 90 days at the handler's facilities. Such samples would
be stored in the handler's facility and should not add to the handler's
cost. Additionally, handlers would be required to make those samples
maintained for 90 days available for auditing by the Committee.
While handlers who handle less than a million pounds may apply to
the Committee for a minimum quality testing exemption, there may be
occasions when the Committee does not grant these handlers such an
exemption. The Committee unanimously recommended that such handlers and
any handler who handles more than a million pounds of assessed weight
pistachios during per marketing year and who materially changes any lot
of pistachios shall test or have tested such lots for aflatoxin, and
minimum quality and size requirements under the order before shipping
such pistachios into the domestic channels of commerce, when the order
requirements took effect on August 1, 2005.
The Committee also discussed alternatives to this change, including
not establishing these reinspection requirements, but believes that
consumers should be provided with assurance of a certified high quality
product that does not currently exist when a certified lot is
``materially changed.'' Also, the Committee discussed but decided not
to include the following processes in the definition of ``materially
changed'': (1) Roasting, salting, flavoring, dyeing, color-coating,
were discussed but not included in the definition as these processes do
not alter a lot's minimum quality or maximum aflatoxin levels; (2)
cleaning was considered but not included because cleaning typically is
accomplished prior to the initial inspection; and (3) air-legging which
is performed to remove loose shells, was considered but not included
because this process does not significantly change a lot.
Lastly, the Committee discussed whether tracing a lot would provide
assurance that materially changed lots would continue to meet the
order's maximum aflatoxin and minimum quality requirements and believed
that it would not provide such assurance. It is of the view, that the
best way to assure the quality of materially changed lots was through
resampling and retesting.
The Committee also discussed the slight increase in the cost of
inspection and the benefits of this action for handlers, consumers, and
producers. Typically, nuts removed from materially changed lots are
blended into other lots of uninspected inshell pistachios, shelled out
into kernels, dyed or color-coated, or discarded. Very few inshell
pistachios are discarded, as handlers typically further process the
nuts to obtain as many marketable nuts as possible.
Closed-shell pistachios that are not blended into other uninspected
lots are typically shelled out into kernels. Kernels are marketed on
average for $1.00 per pound on the domestic market and can be marketed
in some export markets for $2.00 to $3.00 per pound. Ordinarily, the
dark-stained pistachios that are not blended into other uninspected
lots are dyed or color-coated and are marketed for $2.00 per pound in
the domestic market, slightly less than the price received for natural
condition, inshell pistachios. Dyed or color-coated nuts occasionally
can be marketed in export markets as well. The Committee mentioned that
the cost of resorting and resizing lots varies from lot to lot, and
that such costs are dependent upon whether the product is hand sorted
or mechanically sorted, the size of the lot, the percentage of the lot
removed, and other similar factors. The Committee believes that the
overall handler cost for resorting and/or resizing such lots is
typically insignificant compared to the prices received for better
quality lots.
In reviewing inspection costs, the Committee believes that a
typical initial aflatoxin certification costs approximately $70 per lot
and an initial minimum quality inspection costs $100 per lot. Buyers
and consumers are willing to pay more for more appealing pistachios.
Therefore, the Committee expects that handlers will market these
materially changed lots at prices that will offset the combined costs
of initial inspection, reprocessing, and reinspection.
Thus, this action is expected to benefit handlers, buyers, and
consumers. Handlers and buyers would be able to offer higher quality
lots and consumers would receive more appealing, higher quality
pistachios. These higher quality lots also should contribute to
improved grower returns.
The Committee does not foresee any industry problems that may
result from implementation of this recommendation.
This action would not impose any additional reporting or
recordkeeping requirements on either small or large pistachio handlers.
As with all Federal marketing order programs, reports and forms are
periodically reviewed to reduce information requirements and
duplication by industry and public sector agencies.
USDA has not identified any relevant Federal rules that duplicate,
overlap or conflict with this proposed rule.
In addition, the Committee's meetings were widely publicized
throughout the pistachio industry and all interested persons were
encouraged to attend the meetings and participate in the Committee's
deliberations on all issues. Like all Committee meetings, the November
3, December 15, 2004, and April 12, 2005, meetings, were public
meetings and all entities, both large and small, were able to express
their views on these issues. Finally, interested persons are invited to
submit information on the regulatory and informational impacts of this
action on small businesses.
A small business guide on complying with fruit, vegetable, and
specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/fv/moab.html.
Any questions about the compliance

guide should be sent to Jay Guerber at the previously mentioned address
in the FOR FURTHER INFORMATION CONTACT section.
A 7-day comment period is provided to allow interested persons to
respond to this proposal. Seven days is deemed appropriate because any
changes resulting from this proposed rule should be in place by mid-
September. The beginning of harvest for the 2005-06 season is expected
to start at the end of August and handlers are expected to begin
reworking their lots of pistachios by mid-September. All written
comments timely received will be considered before a final
determination is made on this matter.

List of Subjects in 7 CFR Part 983

Pistachios, Marketing agreements and orders, Reporting and
recordkeeping requirements.

For the reasons set forth in the preamble, 7 CFR part 983 is
proposed to be amended as follows:

PART 983--PISTACHIOS GROWN IN CALIFORNIA

1. The authority citation for 7 CFR part 983 continues to read as
follows:

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

2. In part 983, Subpart--Rules and Regulations is amended by adding
new Sec. Sec. 983.138 and 983.143 to read as follows:

Sec. 983.138 Samples for testing.

Prior to testing, a sample shall be drawn from each lot and divided
into two subsamples to be used to test pistachios for aflatoxin and for

[[Page 49891]]

minimum quality. The lot subsamples shall be of sufficient weight to
comply with Tables 1 and 2 of Sec. 983.38 and Table 4 of Sec. 983.39:
Provided, that lots of pistachios which are intended for dyeing or
color-coating shall be sampled for minimum quality after the dyeing or
color-coating process.

Sec. 983.143 Reinspection.

(a) Any lot of inshell pistachios that is pin-picked, hand-sorted,
color-sorted, and/or resized is considered to be ``materially
changed.'' Pistachios which are roasted, salted, flavored, air-legged,
dyed, color-coated, cleaned, and otherwise subjected to similar
processes are not considered to be materially changed.
(b) Each handler who handles pistachios shall cause any lot or
portion of a lot initially certified for aflatoxin, quality, and size
requirements, and subsequently materially changed, to be reinspected
for aflatoxin, quality, and size, and certified as new lots: Provided,
that: (1) Pursuant to Sec. 983.41(b) handlers exempted from minimum
quality testing shall pull or have pulled representative lot samples
for aflatoxin testing of any materially changed lots intended to be
shipped into the domestic channels of commerce. Such representative lot
samples shall be divided into two parts, one part shall be retested for
aflatoxin and the other part shall be maintained for 90 days at the
handler's facilities. Handlers shall make the samples maintained for 90
days available for auditing by the Administrative Committee for
Pistachios; and (2) handlers exempted from order requirements under
Sec. 983.70 are exempted from all reinspection requirements.

Dated: August 22, 2005.
Lloyd C. Day,
Administrator, Agricultural Marketing Service.
[FR Doc. 05-16981 Filed 8-23-05; 11:52 am]

BILLING CODE 3410-02-P