[Federal Register: March 3, 2008 (Volume 73, Number 42)]
[Rules and Regulations]
[Page 11328-11340]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03mr08-5]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 984
[Docket No. AO-192-A7; AMS-FV-07-0004; FV06-984-1]
Walnuts Grown in California; Order Amending Marketing Order and
Agreement No. 984
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Final rule.
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SUMMARY: This rule amends the marketing order for walnuts grown in
California. The amendments were proposed by the Walnut Marketing Board
(Board), which is responsible for local administration of the order.
The amendments will: Change the marketing year; include ``pack'' as a
handler function; restructure the Board and revise nomination
procedures; rename the Board and add authority to change Board
composition; modify Board meeting and voting procedures; add authority
for marketing promotion and paid advertising; add authority to accept
voluntary financial contributions and to carry over excess assessment
funds; broaden the scope of the quality control provisions and add the
authority to recommend different regulations for different market
destinations; add authority for the Board to appoint more than one
inspection service; replace outdated order language with current
industry terminology; and other related amendments.
The Department of Agriculture (USDA) proposed three additional
amendments: To establish tenure limitations for Board members, to
require that continuance referenda be conducted on a periodic basis to
ascertain producer support for the order, and to make any necessary
conforming changes.
With the exception of the amendment to establish tenure
limitations, all of the amendments were favored by walnut growers in a
mail referendum, held August 1 through 17, 2007. The proposed
amendments are intended to improve the operation and functioning of the
marketing order program.
DATES: This rule is effective April 2, 2008, except for amendments to
Sec. Sec. 984.7, 984.13, 984.14, 984.15, 984.21, 984.22, 984.42,
984.46, 984.48, 984.50, 984.51, 984.52, 984.59, 984.67, 984.69, 984.70,
984.71, 984.73 and 984.89, which are effective September 1, 2008.
FOR FURTHER INFORMATION CONTACT: Melissa Schmaedick, Marketing Order
Administration Branch, Fruit and Vegetable Programs, Agricultural
Marketing Service, USDA, Northwest Marketing Field Office, 1220 S.W.
Third Avenue, Room 385, Portland, Oregon 97204; telephone: (503) 326-
2724, Fax: (503) 326-7440, or e-mail: Melissa.Schmaedick@usda.gov.
Small businesses may request information on this proceeding by
contacting Jay Guerber, Marketing Order Administration Branch, Fruit
and Vegetable Programs, AMS, USDA, 1400 Independence Avenue, SW., Stop
0237, Washington, DC 20250-0237; telephone: (202) 720-2491, fax: (202)
720-8938.
SUPPLEMENTARY INFORMATION: Prior documents in this proceeding: Notice
of Hearing issued on April 18, 2006, and published in the April 24,
2006, issue of the Federal Register (71 FR 20902); a Recommended
Decision issued on March 19, 2007, and published in the March 27, 2007,
issue of the Federal Register (72 FR 14368); and Secretary's Decision
and Referendum Order issued on July 9, 2007, and published in the July
13, 2007 issue of the Federal Register (72 FR 38498).
This action is governed by the provisions of sections 556 and 557
of title 5 of the United States Code and is therefore excluded from the
requirements of Executive Order 12866.
Preliminary Statement
This final rule was formulated on the record of a public hearing
held on May 17 and 18, 2006, in Modesto, California. Notice of this
hearing was issued April 18, 2006 and published in the Federal Register
on April 24, 2006 (71 FR 420902). The hearing was held to consider the
proposed amendment of Marketing Order 984, hereinafter referred to as
the ``order.''
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 marketing orders (7 CFR part 900).
The notice of hearing contained order changes proposed by the
Walnut Marketing Board (Board), which is responsible for local
administration of the order, and by the Agricultural Marketing Service
(AMS).
Upon the basis of evidence introduced at the hearing and the record
[[Page 11329]]
thereof, the Administrator of AMS on March 19, 2007, filed with the
Hearing Clerk, U.S. Department of Agriculture, a Recommended Decision
and Opportunity to File Written Exceptions thereto by April 16, 2007.
Fifteen exceptions were filed during the exception period.
A Secretary's Decision and Referendum Order was issued on July 9,
2007, directing that a referendum be conducted during the period August
1 through 17, 2007, among walnut growers to determine whether they
favored the proposed amendments to the order. To become effective, the
amendments had to be approved by at least two-thirds of those producers
voting or by voters representing at least two-thirds of the volume of
walnuts represented by voters voting in the referendum. Voters voting
in the referendum favored all but one of the proposed amendments.
The amendments favored by voters and included in this order will:
1. Change the marketing year from August 1 through July 31 to
September 1 through August 31. This will amend Sec. 984.7, Marketing
year, and will result in conforming changes being made to Sec. 984.36,
Term of office, and Sec. 984.48, Marketing estimates and
recommendations.
2. Specify that the act of packing walnuts is considered a handling
function. This will amend Sec. 984.13, To handle, as well as clarify
the definition of ``pack'' in Sec. 984.15 by including the term
``shell'' as a function of ``pack.''
3. (a) Amend all parts of the order that refer to cooperative seats
on the Board, redistribute member seats among districts, and provide
designated seats for a handler handling 35 percent or more of
production, if such handler exists. This will amend Sec. 984.35,
Walnut Marketing Board, and Sec. 984.14, Handler.
3. (b) Amend the Board member nomination process to reflect
proposed changes in the Board structure, as outlined in 3(a). This will
amend Sec. 984.37, Nominations, and Sec. 984.40, Alternate.
4. Require Board nominees to submit a written qualification and
acceptance statement prior to selection by USDA. This will amend Sec.
984.39, Qualify by acceptance.
5. Change the name of the Walnut Marketing Board to the California
Walnut Board. This will amend Sec. 984.6, Board, and Sec. 984.35,
Walnut Marketing Board.
6. Add authority to reestablish districts, reapportion members
among districts, and revise groups eligible for representation on the
Board. This will add a new paragraph (d) to Sec. 984.35, Walnut
Marketing Board.
7. Add percentage requirements to Board quorum and voting
requirements, add authority for the Board to vote by ``any other means
of communication'' (including facsimile) and add authority for Board
meetings to be held by telephone or by ``any other means of
communication'', providing that all votes cast at such meetings shall
be confirmed in writing. This will amend Sec. 984.45, Procedure, and
will result in a conforming change in Sec. 984.48 (a), Marketing
estimates and recommendations.
8. Add authority to carry over excess assessment funds. This will
amend Sec. 984.69, Assessments.
9. Add authority to accept voluntary financial contributions. This
will add a new Sec. 984.70, Contributions.
10. Clarify that members and alternate members may be reimbursed
for expenses incurred while performing their duties and that
reimbursement includes per diem. This will amend Sec. 984.42,
Expenses.
11. Add authority for the Board to appoint more than one inspection
service as long as the functions performed by each service are separate
and do not duplicate each other. This will amend Sec. 984.51,
Inspection and certification of inshell and shelled walnuts.
12. (a) Broaden the scope of the quality control provisions and by
adding authority to recommend different regulations for different
market destinations. This will amend Sec. 984.50, Grade and size
regulations.
12. (b) Add authority that would allow for shelled walnuts to be
inspected after having been sliced, chopped, ground, or in any other
manner changed from shelled walnuts, if regulations for such walnuts
are in effect. This will amend Sec. 984.52, Processing of shelled
walnuts.
13. Add authority for marketing promotion and paid advertising.
This will amend Sec. 984.46, Research and development.
14. Replace the terms ``carryover'' with ``inventory,'' and
``mammoth'' with ``jumbo,'' to reflect current day industry practices.
This will amend Sec. 984.21, Handler inventory, and Sec. 984.67,
Exemption, and will also result in conforming changes being made to
Sec. 984.48, Marketing estimates and recommendations, and Sec.
984.71, Reports of handler carryover.
15. (a) Clarify and simplify the interhandler transfer provision,
and add authority for the Board to recommend to USDA regulations,
including necessary reports, for administrative oversight of such
transfers. This will amend Sec. 984.59, Interhandler transfers.
15. (b) Clarify that the Board may require reports from handlers or
packers that place California walnuts into the stream of commerce. This
will amend Sec. 984.73, Reports of walnut receipts.
16. Update and simplify the language in Sec. 984.22, Trade demand,
to state ``United States and its territories,'' rather than name
``Puerto Rico'' and ``The Canal Zone''.
17. Add language to the order that would acknowledge that the Board
may deliberate, consult, cooperate, and exchange information with the
California Walnut Commission. Any information sharing would be kept
confidential. This will add a new Sec. 984.91, Relationship with the
California Walnut Commission.
18. Require that continuance referenda be conducted on a periodic
basis to ascertain industry support for the order and add more
flexibility in the termination provisions. This will amend Sec.
984.89, Effective time and termination.
The USDA proposal to authorize limitations on tenure failed to
obtain the requisite number of votes needed, in number or in volume, to
pass.
Conforming changes were made to the extent necessary. The amended
marketing agreement was subsequently mailed to all walnut handlers in
the production area for their approval. The marketing agreement was not
approved by handlers representing at least 50 percent of the volume of
walnuts handled by all handlers during the representative period of
August 1, 2006, through July 31, 2007.
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, 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 and amendments
thereto are unique in that they are normally brought about through
group action of essentially small entities for their own benefit.
Small agricultural growers are 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 regulated under the order, were defined at the time of the
hearing as those with annual receipts of
[[Page 11330]]
less than $5,000,000. The definition of small agricultural service firm
has subsequently changed to one with annual receipts of $6,500,000.
Interested persons were invited to present evidence at the hearing
on the probable regulatory and informational impact on growers and
handlers of the proposed amendments, and in particular the impact on
small businesses. The record evidence shows that the proposed
amendments are designed to enhance industry efficiencies and streamline
administrative operations of the marketing order. The record evidence
is that while some minimal costs may occur, those costs will be
outweighed by the benefits expected to accrue to the California walnut
industry.
Walnut Industry Background and Overview
According to the record, the California walnut industry currently
has 44 handlers and approximately 5,000 producers. The crop is produced
in a region that spans approximately 400 miles in California's Central
Valley.
Fifteen grower witnesses and 7 handler witnesses testified at the
hearing. Using the SBA definition ($750,000 in gross annual walnut
sales), 7 of the grower witnesses identified themselves as large
business entities and 6 as small business entities. All 7 handler
witnesses identified themselves as being large business entities
according to the SBA definition. Some of the handler witnesses were
also growers. According to witnesses, 37 out of an industry total of 44
handlers would qualify as small business entities under the SBA
definition. Also, under the order amendments contained herein, it is
estimated that five packers would be considered handlers, the majority
of whom would be considered small entities.
Based on information presented at the hearing, calculations
describing an average California walnut producer provide the following:
Dividing 219,000 bearing acres in 2005 by 5,000 producers indicates an
average of 44 bearing acres per producer. Dividing the two-year average
crop value for 2003 and 2004 ($414,950,000) by 5,000 producers yields
an average walnut revenue per producer estimate of about $83,000.
According to the hearing record, more than 70 percent of California
walnut producers would be classified as small producers according to
the SBA definition.
According to a study presented at the hearing, entitled ``Cost to
Produce Walnuts in California'' (prepared by Dr. Karen Klonsky,
Department of Agriculture and Resource Economics, University of
California Davis, 2006), typical average costs for a walnut orchard in
the Sacramento Valley are $2,460 per acre in full production. The costs
are broken down as follows: (a) Land and trees, $678 (28 percent), (b)
cultural costs, $667 (27 percent), (c) harvest, $538 (22 percent), (d)
equipment and buildings, $302 (12%), and (e) cash overhead, $275 (11
percent).
At an average grower price in recent years of $0.62 per pound, a
grower would need a yield of 2 tons per acre to break even, according
to the study. The breakeven price at the State average yield of 1.5
tons per acre is about $0.70 per pound, which is above the actual price
received in most recent years, but equal to the 2004 average price
received by growers.
Individual grower costs can vary considerably due to such variables
as horticultural practices and varieties grown, and also due to orchard
location and year of acquisition, and water availability and cost.
Although a majority of producers are considered small business
entities, record evidence also indicates that producer revenue has
increased over time. The National Agricultural Statistical Service
(NASS) crop value estimate for 2004, $451.75 million, was 38 percent
higher than in 1995, and was the sixth successive yearly increase.
Average revenue per acre in 2004 reached a record $2,082.
Record evidence also indicates that acreage and production are
trending upward. Production did not exceed 300,000 tons until 2001, but
has exceeded that level for 4 out of the last 5 years. Witnesses stated
that the five-year average production for 1996-2000 was 244,000 tons,
compared to the five-year average production (2001-2005), which was
318,600 inshell tons.
According to the hearing record, a number of factors have
contributed to increased production in recent years. New acres have
been planted at a rate of three to five thousand acres per year, some
of which are new varieties with higher yields. Witnesses explained that
older varieties may yield 1,500 to 3,000 pounds per acre, due to both
planting patterns and the typical yield of the variety. New varieties,
such as the Chandler, will yield up to 6,000 pounds per acre. Newer
plantings have led to a reduction in the cyclical peaks and valleys
associated with the alternate-bearing characteristic of tree nuts.
This, in turn, has facilitated better inventory management and has made
the walnut industry a more reliable ingredient supplier to the food-
processing industry.
According to the hearing record, the growing season commences in
March of each year with harvest occurring between September and
November, depending upon the variety. Inshell California walnuts are a
seasonal item with 95 percent of the volume shipped between the months
of September and December. This represents roughly 25 percent of the
industry's production. Inshell walnuts are marketed primarily as a
winter holiday food. According to the hearing record, the purchase of
significant quantities of inshell walnuts occurs due to the tradition
in many markets of displaying them with other inshell nuts as part of
winter holiday decor.
Shelled walnuts are marketed on a year-round basis, and represent
about 75 percent of utilization. Large handler infrastructure
investments have contributed substantially to the growth of the year-
round shelled business, as well as the inshell business.
Over the past ten years sophisticated laser-sorting equipment and
new varieties such as the Chandler have contributed to improved
quality. Higher customer expectations have accompanied the improvements
in technology and quality, with more demand for high-quality, high-
specification California walnuts. Marketing success in Japan is cited
as a prime example of this trend.
According to the hearing record, shelled walnuts are utilized in a
variety of ways, with commercial baking believed to be the single
largest utilization category. Retail consumption of walnuts packaged
for use in the home has increased dramatically over the past several
years. Shelled walnuts may be sold in packages ranging from 2.75 ounce
retail packages to large bulk containers of 25 pounds or more for
industrial users, wholesalers, and distributors. The last 12 years have
seen substantial increases in snack food uses of walnuts, in addition
to expansion of ingredient use beyond baking and confectionery items to
include usage with salads, rice, and pasta.
A high degree of mechanization in the harvest has reduced the
deleterious impact on nut quality from rain and other weather
conditions. Once harvested, walnuts are taken to holding stations where
a fibrous husk is removed, and the walnuts are then dried to
approximately eight percent moisture. They are delivered to handlers
for further processing, which includes cleaning, sorting, and shelling.
According to the hearing record, California walnuts rank eighth in
[[Page 11331]]
exports over all the commodities grown in the state. The top three
inshell export markets are Spain, Italy, and Germany. Five-year average
export value (2000/01-2004/05) is approximately $52 million,
representing 63 percent of total export value for that five-year
period. The key export markets for shelled-walnut utilization are:
Japan, Germany, Spain, Israel, Korea, and Canada. Five-year average
export value for those six countries is $91.8 million, which is about
76 percent of the total value of shelled walnut exports.
California walnuts compete with walnuts grown in China, Turkey,
France, Italy, Chile, North Korea, India, Vietnam, Argentina, Brazil,
and many areas within the former Soviet Union including Kazakhstan,
Ukraine, Hungary, and Moldova. Within the European Union the major
competition comes from France and Eastern Europe. In the Pacific Rim,
major competitors include China and India.
Material Issues
The amendments included in this final rule will: Change the
marketing year; include ``pack'' as a handler function; restructure the
Board and revise nomination procedures; rename the Board and add
authority to change Board composition; modify Board meeting and voting
procedures; add authority for marketing promotion and paid advertising;
add authority to accept contributions, and to carry over excess
assessment funds; broaden the scope of the quality control provisions
and add the authority to recommend different regulations for different
market destinations; add authority for the Board to designate more than
one inspection service; replace outdated order language with current
industry terminology; and other related amendments.
In addition, the order will be amended to require that continuance
referenda be conducted on a periodic basis to ascertain industry
support for the order and add more flexibility in the termination
provisions.
All of the amendments are intended to streamline and improve the
administration, operation, and functioning of the program. Many of the
amendments will up-date the language of the order, thus better
representing and conforming to current practices in the industry. The
amendments are not expected to result in any significant cost increases
for growers or handlers. More efficient administration of program
activities may result in cost savings for the Board. A description of
the amendments and their anticipated economic impact on large and small
entities is outlined below.
Designation of More Than One Inspection Service
This amendment adds authority to the order for the Board to
designate more than one inspection service, as long as the functions
performed by each service are separate and do not conflict with each
other.
To ensure that walnuts are properly graded and meet marketing order
minimum standards, the Board currently arranges for inspection of
walnuts prior to shipping for all walnut handlers. The marketing order
currently authorizes contracting with one agency, the California based
Dried Fruit and Nut Association (DFA).
DFA inspects all walnuts that leave California to certify that they
meet marketing order minimum standards. Operating as an out-going
inspection service, samples of packed walnuts are examined and
certified by licensed DFA inspectors at the end of the handling and
packing process.
The following data representing current inspection costs,
summarizing actual inspection cost data for 2004-05 for the entire
industry (44 handlers), was presented at the hearing by Board
representatives. According to the record, the 2004-05 cost to serve the
44 handlers was $1.857 million, which is an average cost of just over
$42,000 per handler.
Since inspection costs depend largely on volume handled, the four
largest handlers account for $1.282 million, or 69% of total inspection
expenditure in the 2004-05 crop year. The 37 smaller handlers account
for $412,172 in expenditure, about 22 percent of the total, averaging
about $11,000 per handler.
Annual Walnut Inspection Costs Using DFA, 2004-05 Crop Year
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Number of Average per
DFA cost handlers handler
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Largest Handlers................................................ $1,282,362 4 $320,591
Additional Large Handlers....................................... 162,487 3 54,162
Other Handlers.................................................. 412,172 37 11,140
All Handlers.................................................... 1,857,021 44 42,205
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Source: Walnut Marketing Board.
The Federal-State Inspection Service (FSIS) has developed
effective, less costly alternative inspection programs.
The Partners in Quality Program, or PIQ, is a documented quality
assurance system. Under this program, individual handlers must
demonstrate and document their ability to handle and pack product that
meets all relevant quality requirements. Effectiveness of the program
is verified through periodic, unannounced audits of each handler's
system by USDA approved auditors.
Under the Customer Assisted Inspection Program, or CAIP, USDA
inspectors oversee the in-line sampling and inspection process
performed by trained company staff. USDA oversight ranges from periodic
visits throughout the day to a continuous on-site presence.
DFA does not offer inspection services that operate similarly to
the PIQ and CAIP programs.
Cost savings will occur by reducing the prevalence of double
inspections under the current system. Currently, one inspection is
undertaken to meet minimum USDA quality requirements specified in the
marketing order. A second inspection is often necessary to meet the
considerably higher standards of specific customers. Moving to a PIQ or
CAIP program would greatly reduce inspection costs, because meeting
higher standards under PIQ or CAIP would also ensure that an inspected
lot met minimum marketing order standards.
Witnesses at the hearing testified that the California walnut
industry should allow handlers to take advantage of USDA's alternative
inspection programs such as the CAIP and the PIQ. Handlers who do not
wish to use the alternative inspection services offered by USDA would
continue to use the services of the DFA for traditional inspection
services, such as end-line and lot inspections.
The amendment also specifies that ``each service shall be separate
so as to not conflict with each other'', meaning
[[Page 11332]]
that each inspection service will offer distinct and different services
(i.e. PIQ vs. lot inspections) so that the integrity of both programs
will be maintained.
Witnesses speaking in favor of this amendment explained the
importance of a handler's ability to take advantage of inspection
services that would most economically fit the size and functions of his
or her operation. Currently, all walnut product is inspected by DFA.
While this inspection service has worked well for the industry for many
years, the DFA inspection service does not accommodate inspection
procedures that support larger handler economies of scale. Witnesses
stated that USDA programs, such as PIQ and CAIP, are designed to fit
larger scale handling operations, and therefore offer cost saving
advantages that the DFA service does not. This amendment, when
implemented, will allow handlers to use the alternative inspection
programs offered by USDA.
Several witnesses indicated that lowering costs to handlers will
benefit growers because they expect that the cost reduction will be
reflected in increased payments to growers.
Financial impact calculations provided by the Board (shown in the
table below) indicate that introducing the option of using PIQ or CAIP
programs could result in savings of $1.09 million, an average per
handler savings of $156,067 for the industry's seven largest handlers.
Due to the high volumes handled, most of the savings accrue to the four
largest handlers, estimated at $1.05 million, or an average per handler
of $263,169.
Walnut Inspection Cost Comparison: DFA vs. USDA for Top 7 Handlers
----------------------------------------------------------------------------------------------------------------
Cost savings
DFA USDA PIQ/CAIP -------------------------------
Total Per handler
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Largest 4 Handlers.............................. $1,282,362 $229,688 $1,052,674 $263,169
Additional 3 large handlers..................... 162,487 122,692 39,795 13,265
Largest 7 Handlers.............................. 1,444,849 352,380 1,092,469 156,067
----------------------------------------------------------------------------------------------------------------
Source: Walnut Marketing Board.
Data from NASS indicate that the two-year average value of the 2003
and 2004 crops was about $415 million. The current DFA inspection cost
($1.857 million) represents a very small proportion of crop value,
about 0.4 percent. If the largest 7 handlers used USDA for inspection
at a cost of $352,380 and the remaining 37 handlers continue to work
with DFA at an estimated cost of $412,172, then the combined cost of
$764,552 would represent 0.2 percent of the recent-year crop value.
Witnesses emphasized the cost effectiveness of having an additional
inspection agency. When implemented, this amendment will facilitate the
streamlining of handler operations to utilize the inspection service
best suited to their operations.
Since potential savings are correlated with economies of scale,
record evidence indicates that PIQ and CAIP programs would be most
beneficial for large handlers. It is unlikely that the smaller handlers
would initially opt for these programs. Smaller handlers that expand
their operations in the future may realize benefits from switching to
PIQ or CAIP. Witnesses stated that no change in inspection costs is
expected for handlers remaining with traditional DFA inspection
services. Therefore, no financial disadvantages are expected to result
from this proposed amendment. When implemented, this amendment will
likely result in an overall decrease in costs of inspection to the
industry.
Inspection of Sliced, Chopped or Ground Shelled Walnuts
This amendment adds authority for shelled walnuts to be inspected
after having been sliced, chopped, or ground or in any manner changed
from being shelled walnuts, if regulations for such walnuts are in
effect.
New walnut products are regularly requested by both domestic and
foreign customers. In the last 20 years, the industry has become much
more capable of producing at a considerably higher level quality and of
developing more specific types of products that meet the differing
needs of individual customers. To capitalize on this growing
capability, a number of witnesses expressed the view that an important
tool for increasing sales is the ability to establish standards for
these walnut products.
The order currently requires shelled product to be certified as
merchantable, that is, meeting the minimum USDA requirements prior to
further processing. When handlers are processing for end users that
require further processing, this certification represents a costly
extra step. After the initial shelled walnut certification, the
handlers employ their own quality control procedures to meet the higher
customer specifications. This amendment will allow a single inspection
at the end of the process to serve both purposes. When implemented,
this amendment will allow the Board to recommend modifications to allow
certification of product after it has been modified or chopped, leading
to cost savings in the handling process.
Witnesses contended that current standards focus on visually
observed characteristics that are significant for consumer acceptance,
but often do not adequately address specific quality concerns important
to various export markets, including Europe. Such concerns include, for
example, moisture content or aflatoxin tolerances. When implemented,
this amendment will allow the Board to review scientific data and
develop inspection procedures for recommendation and approval by USDA
to assure customers that walnuts meet their specified criteria.
Any new quality standards recommended by the Board will be subject
to thorough review prior to seeking approval from USDA. Witnesses
supported this amendment as it will give the Board authority to pursue
quality regulations in addition to existing grade standards, both of
which are important to industry customers.
Witnesses emphasized that this amendment will grant authority to
the Board to recommend quality standards that could exceed current
standards or to develop new standards for product characteristics not
currently covered. Witnesses also stated that no specific modifications
are currently requested, just flexibility to create them in the future.
While this amendment may result in some cost increases associated
with administration and oversight of new quality regulations, it is
also expected that some handlers may benefit from lower inspection
costs if the inspection requirements for specific markets were
modified. Any costs associated with the
[[Page 11333]]
implementation of this amendment are expected to be outweighed by the
overall benefits accrued to the industry.
Marketing Promotion and Paid Advertising
This amendment adds authority for marketing promotion and paid
advertising to the order.
Current promotional activities for California walnuts are
undertaken by the California Walnut Commission (CWC). Witnesses stated
that the CWC's activities have led to considerable success in
increasing demand for the industry's product.
Witnesses explained that with price inelastic demand for walnuts,
recent increases in production could have driven down prices and total
grower revenue. The CWC's successful promotional activities have helped
mitigate that potential impact, keeping average grower prices and
grower revenue steady or increasing for several years.
According to the hearing record, adding authority for paid
advertising and promotion under the order will benefit the industry by
allowing the Board to engage in activities that are currently supported
by the Commission. Small businesses will be the greatest beneficiaries
of an expanded generic advertising program, because they have the least
financial resources to devote to selling their products, according to a
witness.
While an increase in advertising and promotional activities may
result in increased Board expenditures, witnesses were confident that
the positive results of the Board's promotional activities on consumer
demand for California walnuts will more than outweigh any increases in
costs to the industry.
Impact of Remaining Amendments
Remaining amendments are largely administrative in nature and will
impose no new significant regulatory burdens on California walnut
growers or handlers. They will benefit the industry by improving the
operation of the program and making it more responsive to industry
needs.
Marketing Year
This amendment changes the marketing year of the order from August
1 through July 31 to September 1 through August 31. Under the current
definition of the order, the California walnut marketing year begins
August 1 and continues through July 31. Witnesses explained that, over
time, new varieties of walnuts have been introduced, and the areas in
which walnuts are cultivated have shifted. The newer varieties mature
later than the varieties grown at the time of the program's inception.
At the same time, cultivation has slowly moved into areas that
previously were not suited for walnut production. With differences in
climate, soil, and water, witnesses explained that these new production
areas have slightly later growing cycles. The proposed change in the
marketing year will better reflect current crop cycles.
Conforming changes were made to Sec. 984.36, Term of office and
Sec. 984.48, Marketing estimates and recommendations, so that Board
member terms of office and marketing estimates are calculated according
to the modified marketing year. This amendment is not expected to
result in any increases in costs to growers or handlers.
Definition of Pack
This amendment specifies that the act of packing walnuts is
considered a handling function under the order. In addition, the term
``pack'' is amended to include shelling, and is modified so that
packing is applicable to both inshell and shelled walnuts.
According to the hearing record, the order currently defines ``to
handle'' as to ``sell, consign, transport, or ship, or in any other
way, to put walnuts into the current of commerce''. The definition does
not include the specific act of packing. ``To pack'', as currently
defined in the order means, ``to bleach, clean, grade or otherwise
prepare inshell walnuts for market''. Pack is not currently applicable
to shelled walnuts. Witnesses stated that the amended definitions of
``handle'' and ``pack'' will more accurately reflect current industry
operations.
This amendment is not expected to result in any increases in costs
to growers. When implemented, this amendment may result in some packing
entities previously not considered to be handlers under the order to be
redefined as handlers. According to witnesses, there are roughly five
packer entities that will qualify as handlers under the new definition.
While some increases in administration costs on the part of handlers
could arise as a result of reporting requirements, record evidence
indicates that the benefit of more accurate industry information will
merit that expense.
Restructuring of the Board
This amendment modifies all parts of the order that refer to
cooperative seats on the Board, redistributes member seats among
districts, and provides designated seats for a major handler, if such
handler exists. A major handler will have to handle 35 percent or more
of the crop.
According to the hearing record, the recent transition of the
industry's largest cooperative from a cooperative entity to a publicly
held company was the impetus for this amendment. Witnesses expressed
the need to modify the Board structure to provide for representation
that accurately reflects the current industry. Witnesses advocated that
the Board structure should maintain the current number of Board members
and alternates, and that the allocation of member seats between grower
and handler positions should remain the same (meaning 4 handler member
seats, five grower member seats and one public member).
Witnesses also recommended modifying the allocation of Board
representation according to two possible scenarios. The two scenarios
include: (1) Membership allocation that acknowledges the existence of a
handler handling 35 percent or more of production and, (2) membership
allocation in the absence of such handler. According to record
evidence, these amendments will not result in any increases in costs.
Nominations
This amendment modifies the Board member nomination process to
reflect changes in the Board structure. Current nomination procedures
allow for all cooperative seat nominees to be selected by the
cooperative and forwarded to the Secretary for approval and
appointment. The cooperative nominee selection process is independent
of the Board. All non-cooperative seat nominees are selected through a
ballot nomination process overseen by the Board staff, and forwarded to
the Secretary for approval and appointment.
According to the hearing record, the revised nomination procedures
will allow a handler who handles 35 percent or more of the crop to
nominate persons to fill its designated seats and to forward them to
the Secretary for approval and appointment. Nomination of persons to
fill all other seats would be conducted by the Board staff.
In the event a handler handling 35 percent or more of the crop does
not exist, all Board nominees will be selected through a ballot
nomination process conducted by the Board staff.
While some increases in administration costs could arise as a
result of an increased number of ballots to be mailed by the Board if a
major handler does not exist, record evidence indicates that the
expense would be
[[Page 11334]]
minor and would not directly burden growers or handlers.
Qualify by Acceptance
This amendment requires Board nominees to submit a written
qualification and acceptance statement prior to selection by USDA.
Currently, the acceptance procedure for persons nominated and selected
to serve on the Board involves a two-step process. When implemented,
the two steps will be combined into one, thus resulting in less
paperwork, a shorter acceptance procedure and improved efficiency in
the acceptance process. This amendment is not expected to result in any
increases in costs to growers or handlers.
California Walnut Board
This amendment changes the name of the Walnut Marketing Board to
the California Walnut Board. Witnesses stated that the name
``California Walnut Board'' will more accurately represent the Board's
responsibilities. This amendment is not expected to result in any
significant increases in costs to growers or handlers.
Authority To Reestablish Districts and Board Structure
This amendment adds authority to reestablish districts, to
reapportion members among districts, and to revise groups eligible for
representation on the Board. The intent of this amendment is to provide
the Board with a tool to more efficiently respond to the changing
character of the California walnut industry. In recommending any such
changes, the following will be considered: (1) Shifts in acreage within
districts and within the production area during recent years; (2) the
importance of new production in its relation to existing districts; (3)
the equitable relationship between Board apportionment and districts;
(4) changes in industry structure and/or the percentage of crop
represented by various industry entities resulting in the existence of
two or more handlers handling 35 percent or more of the crop; and (5)
other relevant factors. This amendment is not expected to result in any
increases in costs to growers or handlers.
Voting Procedures
This amendment modifies Board quorum and voting requirements to add
percentage requirements, adds authority for the Board to vote by ``any
other means of communication'' (including facsimile) and adds authority
for Board meetings to be held by telephone or by ``any other means of
communication''.
Witnesses stated that references to the meeting quorum requirements
should be amended to include a percentage equivalent of the current
six-out-of-10-member minimum, or sixty percent. In addition, witnesses
supported modifying the order language regarding voting requirements to
state that a sixty-percent super-majority vote of the members present
at a meeting should be required of all Board decisions, except where
otherwise specifically provided. The order currently states that a
majority vote is needed, with no percentage equivalent specified.
According to the record, the order currently requires that all
Board meetings be held at a physical location. Witnesses stated that
the order should be amended to allow for some meetings to be held using
``other means of communication'', such as telephone or
videoconferencing. Witnesses stated that use of new communication
technology would result in time-savings while still allowing the Board
to conduct its business. Witnesses stated that it is the intent of the
Board that voting procedures for all types of non-traditional meetings
can be recommended and adopted as appropriate for each type of
technology used.
The above amendments are not expected to result in any significant
changes in costs to growers or handlers.
Carryover of Excess Assessment Funds
This amendment adds authority to the order to carry over excess
assessment funds from one marketing year to the next. According to the
hearing record, the order currently states that any assessment funds
held in excess of the marketing year's expenses must be refunded to
handlers. Refunds are returned to handlers in accordance with the
amount of that handler's pro rata share of the actual expenses of the
Board.
This amendment will allow the Board, with the approval of the
Secretary, to establish an operating monetary reserve. This will allow
the Board to carry over to subsequent production years any excess funds
in a reserve, provided that funds already in the reserve do not exceed
approximately two years' expenses. If reserve funds do exceed that
amount, the assessment rate could be reduced so as to cause reserves to
diminish to a level below the two-year threshold.
According to the record, reserve funds could be used to defray
expenses during any production year before assessment income is
sufficient to cover such expenses, or to cover deficits incurred during
any fiscal period when assessment income is less than expenses.
Additionally, reserve funds could be used to defray expenses incurred
during any period when any or all of the provisions of the order are
suspended, or to meet any other such costs recommended by the Board and
approved by the Secretary. This amendment is not expected to result in
any significant increases in costs to growers or handlers.
Contributions
This amendment adds authority to order for the Board to accept
voluntary contributions. Contributions can only be used to pay for
research and development activities, and will be free from any
encumbrances by the donor. According to the hearing record, the Board
will retain oversight of the application of such contributions.
Witnesses supported this amendment by stating that it would provide
the Board and the industry with valuable resources to enhance research
and development activities. It is not expected that this amendment will
result in any additional costs to growers or handlers.
Reimbursement of Expenses
This amendment clarifies that members and alternate members may be
reimbursed for expenses incurred while performing their duties and that
reimbursement includes per diem. According to the hearing record, this
amendment will not have any impact on the current expense reimbursement
activities of the Board. Rather, it will clarify and update order
language to more clearly state that while Board members and alternates
serve without compensation, expenses incurred while performing the
duties of a Board member that have been authorized by the Board will be
reimbursed. It is not expected that this amendment will result in any
additional costs to growers or handlers.
Quality Regulations
This amendment broadens the scope of the quality control provisions
of the order by adding authority to recommend different regulations for
different market destinations. Witnesses emphasized the usefulness in
terms of market development of being able to establish different
regulations for individual markets and/or regions. Witnesses stated
that allowing the Board to make such recommendations will help the
walnut industry adapt to changing international market conditions.
[[Page 11335]]
Updating Order Terminology
This amendment replaces the terms ``carryover'' with ``inventory,''
and ``mammoth'' with ``jumbo,'' to reflect current day industry
procedures. Conforming changes were made to the Sec. 984.48, Marketing
estimates and recommendations, and Sec. 984.71, Reports of handler
carryover, sections of the order so that order terminology is
consistent throughout.
Handler carryover defines the amount of California walnuts (both
merchantable as well as the estimated quantity of merchantable walnuts
to be produced from shelling stock and unsorted material), wherever
located, held by California walnut handlers at any given time.
Witnesses explained that the current term ``carryover'' is
misleading in that the term implies the amount of inventory held by
handlers from one marketing year to the next. Witnesses stated that the
term ``inventory'' will more accurately convey the intent of this
definition, and will also reflect current day calculations of walnut
availability.
Section 984.67, Exemptions, of the order provides for situations
under which California walnuts may be exempted from complying with
order regulations. One exemption is applicable to lots of merchantable
inshell walnuts that are mammoth size or larger, as defined by the
United States Standards for Walnuts in the Shell.
Witnesses stated that given the new varieties currently being
produced in the industry, the term ``mammoth'' no longer applies.
According to record evidence, the current production's equivalent to
``mammoth'' size is ``jumbo'' size, as defined by the United States
Standards for Walnuts in the Shell. Thus, witnesses stated that the
order language should be updated to reflect the industry's current
terminology and size of walnuts being produced. This amendment is not
expected to result in any increases in costs to growers or handlers.
Interhandler Transfers
This amendment clarifies the term ``transfer'' as used in the order
and adds authority for the Board to recommend methods and procedures,
including necessary reports, for administrative oversight of such
transfers.
Witnesses stated that it would be beneficial to simplify current
order language so that all interhandler transfers are considered a
``sale of inshell and shelled walnuts within the area of production by
one handler to another.'' Witnesses explained that the new language
restated the current application of this provision in walnut
transactions in simpler terms. This amendment is not expected to result
in any increases in costs to growers or handlers.
Reporting Requirements
This amendment clarifies that the Board may require reports from
handlers and packers to include interhandler transfers or any other
activity that involves placing California walnuts into the stream of
commerce.
According to the hearing record, current authority provided in this
section only applies to the reporting of handler walnut receipts from
growers. Witnesses stated that this authority should be broadened to
include interhandler transfers, or receipts from any other entity as
recommended by the Board and approved by the Secretary. This amendment
is not expected to result in any increases in costs to growers or
handlers.
Trade Demand
This amendment updates and simplifies the language in Sec. 984.22,
Trade demand, to state ``United States and its territories,'' rather
than name ``Puerto Rico'' and ``The Canal Zone''. Witnesses explained
that the reference to ``Puerto Rico'' and ``The Canal Zone'' in the
order is outdated and should be updated to reference ``United States
and its territories''.
According to record evidence, this amendment will not impact trade
demand calculations under the order since the purpose of the reference
is to accurately identify the amount of shelled or inshell walnuts
demanded by the United States, including its territories. Thus, while
the terminology identifying the geographic regions included in the
calculation will change, the intent of the original language will
remain unchanged. This amendment is not expected to result in any
increases in costs to growers or handlers.
Relationship With California Walnut Commission
This amendment adds language to the order stating that the Board
may deliberate, consult, cooperate and exchange information with the
California Walnut Commission (CWC). Any information sharing will be
kept confidential.
Record evidence indicates the CWC and the Federal marketing order
program are currently administered out of the same office location and
employ the same staff. Thus, this amendment will formalize the
relationship that currently exists between the two entities. Witnesses
stated that collaboration between the two programs leads to reduced
administrative costs, as much of the information collected by each
entity can be shared. This amendment is not expected to result in any
increases in costs to growers or handlers.
Continuance Referenda
In addition, the order is amended to require that continuance
referenda be conducted on a periodic basis to ascertain industry
support for the order and add more flexibility in the termination
provisions.
Currently, there is no requirement in the order that continuance
referenda be conducted on a periodic basis. The USDA believes that
growers should have an opportunity to periodically vote on whether a
marketing order should continue. Continuance referenda provide an
industry with a means to measure grower support for the program.
Experience has shown that programs need significant industry support to
operate effectively. This amendment is not expected to result in any
increases in costs to growers or handlers.
In discussing the impacts of the proposed amendments on growers and
handlers, record evidence indicates that the changes are expected to be
positive because the administration of the program will be more
efficient. There will be no significant cost impact on either small or
large growers or handlers.
Interested persons were invited to present evidence at the hearing
on the probable regulatory and informational impact of the proposed
amendments to the order on small entities. The record evidence is that
the amendments are designed to increase efficiency in the functioning
of the order.
USDA has not identified any relevant Federal rules that duplicate,
overlap or conflict with this proposed rule. These amendments are
designed to enhance the administration and functioning of marketing
order 984 to benefit the California walnut industry.
Paperwork Reduction Act
Current information collection requirements for Part 984 are
approved by OMB under OMB No. 0581-0178, Vegetable and Specialty Crops.
Any changes in those requirements as a result of this proceeding would
be submitted to OMB for approval. Witnesses stated that existing forms
could be adequately modified to serve the needs of the Board. While
conforming changes to the forms would need to be made (such as changing
the
[[Page 11336]]
name of the Board), the functionality of the forms would remain the
same.
As with other similar marketing order programs, reports and forms
are periodically reviewed to reduce information requirements and
duplication by industry and public sector agencies.
AMS is committed to complying with the Government Paperwork
Elimination Act (GPEA), which requires Government agencies in general
to provide the public the option of submitting information or
transacting business electronically to the maximum extent possible.
The AMS is committed to complying with the E-Government Act, to
promote the use of the Internet and other information technologies to
provide increased opportunities for citizen access to Government
information and services, and for other purposes.
Civil Justice Reform
The amendments to Marketing Order 984 stated herein have been
reviewed under Executive Order 12988, Civil Justice Reform. They are
not intended to have retroactive effect. The amendments will not
preempt any State or local laws, regulations, or policies, unless they
present an irreconcilable conflict with an amendment.
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.
Order Amending the Order Regulating Walnuts Grown in California
Findings and Determinations
The findings and determinations set forth hereinafter are
supplementary and in addition to the findings and determination
previously made in connection with the issuance of the order; and all
of said previous findings and determinations are hereby ratified and
affirmed, except as such findings and determinations may be in conflict
with the findings and determinations set forth herein.
(a) Findings and Determinations Upon the Basis of the Hearing
Record.
Pursuant to the provisions of the Agricultural Marketing Agreement
Act 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 the proposed amendments to Marketing Order
No. 984 (7 CFR part 984), regulating the handling of walnuts grown in
California.
Upon the basis of the evidence introduced at such hearing and the
record thereof, it is found that:
(1) The marketing order, as amended, and as hereby further amended,
and all of the terms and conditions thereof, will tend to effectuate
the declared policy of the Act;
(2) The marketing order, as amended, and as hereby further amended,
regulates the handling of walnuts grown in the production area in the
same manner as, and is applicable only to persons in the respective
classes of commercial and industrial activity specified in the
marketing order upon which hearings have been held;
(3) The marketing order, as amended, and as hereby further amended,
is limited in 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 order, as amended, and as hereby further amended,
prescribes, 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
walnuts grown in the production area; and
(5) All handling of walnuts grown in the production area is in the
current of interstate or foreign commerce or directly burdens,
obstructs, or affects such commerce.
(b) Additional findings. The effective date for the amendments
shall be 30 days after publication in the Federal Register, except for
Sec. Sec. 984.7, 984.13, 984.14, 984.15, 984.21, 984.22, 984.42,
984.46, 984.48, 984.50, 984.51, 984.52, 984.59, 984.67, 984.69, 984.70,
984.71, 984.73 and 984.89, which are effective September 1, 2008.
The amendments to these sections should be implemented to coincide
with the beginning of a new crop year.
(b) Determinations. It is hereby determined that:
(1) Handlers (excluding cooperative associations of producers who
are not engaged in processing, distributing, or shipping walnuts
covered by the order as hereby amended) who, during the period August
1, 2006, through July 31, 2007, handled 50 percent or more of the
volume of such walnuts covered by said order, as hereby amended, have
not signed an amended marketing agreement; and, (2) The issuance of
this amendatory order, further amending the aforesaid order, is favored
or approved by at least two-thirds of the producers who participated in
a referendum on the question of approval and who, during the period of
August 1, 2006, through July 31, 2007 (which has been deemed to be a
representative period), have been engaged within the production area in
the production of such walnuts, such producers having also produced for
market at least two-thirds of the volume of such commodity represented
in the referendum.
(3) In the absence of a signed marketing agreement, the issuance of
this amendatory order is the only practical means pursuant to the
declared policy of the Act of advancing the interests of producers of
walnuts in the production area.
Order Relative to Handling of Walnuts Grown in California
It is therefore ordered, That on and after the effective dates
hereof, all handling of walnuts grown in California shall be in
conformity to, and in compliance with, the terms and conditions of the
said order as hereby amended as follows:
The provisions of the proposed order amending the order contained
in the Recommended Decision issued by the Administrator on March 19,
2007, and published in the Federal Register on March 27, 2007, (72 FR
14368), shall be and are the terms and provisions of this order
amending the order and set forth in full herein.
List of Subjects in 7 CFR Part 984
Marketing agreements, Nuts, Reporting and recordkeeping
requirements, and Walnuts.
PART 984--WALNUTS GROWN IN CALIFORNIA
0
For the reasons set forth in the preamble, title 7 of chapter XI of the
Code of Federal Regulations is amended as follows:
0
1. The authority citation for 7 CFR part 984 continues to read as
follows:
Authority: 7 U.S.C. 601-674.
0
2. Revise Sec. 984.6 to read as follows:
[[Page 11337]]
Sec. 984.6 Board.
Board means the California Walnut Board established pursuant to
Sec. 934.35.
0
3. Revise Sec. 984.7 to read as follows:
Sec. 984.7 Marketing year.
Marketing year means the twelve months from September 1 to the
following August 31, both inclusive, or any other such period deemed
appropriate and recommended by the Board for approval by the Secretary.
0
4. Revise Sec. 984.13 to read as follows:
Sec. 984.13 To handle.
To handle means to pack, sell, consign, transport, or ship (except
as a common or contract carrier of walnuts owned by another person), or
in any other way to put walnuts, inshell or shelled, into the current
of commerce either within the area of production or from such area to
any point outside thereof, or for a manufacturer or retailer within the
area of production to purchase directly from a grower: The term ``to
handle'' shall not include sales and deliveries within the area of
production by growers to handlers, or between handlers.
0
5. Revise Sec. 984.14 to read as follows:
Sec. 984.14 Handler.
Handler means any person who handles inshell or shelled walnuts.
0
6. Revise Sec. 984.15 to read as follows:
Sec. 984.15 Pack.
Pack means to bleach, clean, grade, shell or otherwise prepare
walnuts for market as inshell or shelled walnuts.
0
7. Revise Sec. 984.21 to read as follows:
Sec. 984.21 Handler inventory.
Handler inventory as of any date means all walnuts, inshell or
shelled (except those held in satisfaction of a reserve obligation),
wherever located, then held by a handler or for his or her account.
0
8. Revise Sec. 984.22 to read as follows:
Sec. 984.22 Trade demand.
(a) Inshell. The quantity of merchantable inshell walnuts that the
trade will acquire from all handlers during a marketing year for
distribution in the United States and its territories.
(b) Shelled. The quantity of merchantable shelled walnuts that the
trade will acquire from all handlers during a marketing year for
distribution in the United States and its territories.
0
9. Revise Sec. 984.35 to read as follows:
Sec. 984.35 California Walnut Board.
(a) A California Walnut Board is hereby established consisting of
10 members selected by the Secretary, each of whom shall have an
alternate nominated and selected in the same way and with the same
qualifications as the member. The members and their alternates shall be
selected by the Secretary from nominees submitted by each of the
following groups or from other eligible persons belonging to such
groups:
(1) Two handler members from District 1;
(2) Two handler members from District 2;
(3) Two grower members from District 1;
(4) Two grower members from District 2;
(5) One grower member nominated at-large from the production area;
and,
(6) One member and alternate who shall be selected after the
selection of the nine handler and grower members and after the
opportunity for such members to nominate the tenth member and
alternate. The tenth member and his or her alternate shall be neither a
walnut grower nor a handler.
(b) In the event that one handler handles 35% or more of the crop
the membership of the Board shall be as follows:
(1) Two handler members to represent the handler that handles 35%
or more of the crop;
(2) Two members to represent growers who market their walnuts
through the handler that handles 35% or more of the crop;
(3) Two handler members to represent handlers that do not handle
35% or more of the crop;
(4) One member to represent growers from District 1 who market
their walnuts through handlers that do not handle 35% or more of the
crop;
(5) One member to represent growers from District 2 who market
their walnuts through handlers that do not handle 35% or more of the
crop;
(6) One member to represent growers who market their walnuts
through handlers that do not handle 35% or more of the crop shall be
nominated at large from the production area; and,
(7) One member and alternate who shall be selected after the
selection of the nine handler and grower members and after the
opportunity for such members to nominate the tenth member and
alternate. The tenth member and his or her alternate shall be neither a
walnut grower nor a handler.
(c) Grower Districts:
(1) District 1. District 1 encompasses the counties in the State of
California that lie north of a line drawn on the south boundaries of
San Mateo, Alameda, San Joaquin, Calaveras, and Alpine Counties.
(2) District 2. District 2 shall consist of all other walnut
producing counties in the State of California south of the boundary
line set forth in paragraph (c)(1) of this section.
(d) The Secretary, upon recommendation of the Board, may
reestablish districts, may reapportion members among districts, and may
revise the groups eligible for representation on the Board as specified
in paragraphs (a) and (b) of this section: Provided, That any such
recommendation shall require at least six concurring votes of the
voting members of the Board. In recommending any such changes, the
following shall be considered:
(1) Shifts in acreage within districts and within the production
area during recent years;
(2) The importance of new production in its relation to existing
districts;
(3) The equitable relationship between Board apportionment and
districts;
(4) Changes in industry structure and/or the percentage of crop
represented by various industry entities resulting in the existence of
two or more major handlers;
(5) Other relevant factors.
0
10. Revise Sec. 984.37 to read as follows:
Sec. 984.37 Nominations.
(a) Nominations for all grower members shall be submitted by ballot
pursuant to an announcement by press releases of the Board to the news
media in the walnut producing areas. Such releases shall provide
pertinent voting information, including the names of candidates and the
location where ballots may be obtained. Ballots shall be accompanied by
full instructions as to their markings and mailing and shall include
the names of incumbents who are willing to continue serving on the
Board and such other candidates as may be proposed pursuant to methods
established by the Board with the approval of the Secretary. Each
grower, regardless of the number and location of his or her walnut
orchard(s), shall be entitled to cast only one ballot in the nomination
and each vote shall be given equal weight. If the grower has orchards
in both grower districts, he or she shall advise the Board of the
district in which he/she desires to vote. The person receiving the
highest number of votes for each grower position shall be the nominee.
(b) Nominations for handler members shall be submitted on ballots
mailed by the Board to all handlers in their respective Districts. All
handlers' votes shall be weighted by the kernelweight of walnuts
certified as merchantable by
[[Page 11338]]
each handler during the preceding marketing year. Each handler in the
production area may vote for handler member nominees and their
alternates. However, no handler with less than 35% of the crop shall
have more than one member and one alternate member. The person
receiving the highest number of votes for each handler member position
shall be the nominee for that position.
(c) A calculation to determine whether or not a handler who handles
35 percent or more of the crop shall be made prior to nominations. For
the first nominations held upon implementation of this language, the 35
percent threshold shall be calculated using an average of crop handled
for the year in which nominations are made and one year's handling
prior. For all future nominations, the 35 percent handling calculation
shall be based in the average of the two years prior to the year in
which nominations are made. In the event that one handler handles 35%
or more of the crop the membership of the Board, nominations shall be
as follows:
(1) Nominations of growers who market their walnuts to the handler
that handles 35% or more of the crop shall be conducted by that handler
and the names of the nominees shall be forwarded to the Board for
approval and appointment by the Secretary.
(2) Nominations for the two handler members representing the major
handler shall be conducted by the major handler and the names of the
nominees shall be forwarded to the Board for approval and appointment
by the Secretary.
(3) Nominations on behalf of all other grower members (Groups
(b)(4), (5) and (6) of Sec. 984.35) shall be submitted after ballot by
such growers pursuant to an announcement by press releases of the Board
to the news media in the walnut producing areas. Such releases shall
provide pertinent voting information, including the names of candidates
and the location where ballots may be obtained. Ballots shall be
accompanied by full instructions as to their markings and mailing and
shall include the names of incumbents who are willing to continue
serving on the Board and such other candidates as may be proposed
pursuant to methods established by the Board with the approval of the
Secretary. Each grower in Groups (Groups (b)(4), (5) and (6) of Sec.
984.35), regardless of the number and location of his or her walnut
orchard(s), shall be entitled to cast only one ballot in the nomination
and each vote shall be given equal weight. If the grower has orchard(s)
in both grower districts he or she shall advise the Board of the
district in which he or she desires to vote. The person receiving the
highest number of votes for grower position shall be the nominee.
(4) Nominations for handler members representing handlers that do
not handle 35% or more of the crop shall be submitted on ballots mailed
by the Board to those handlers. The votes of these handlers shall be
weighted by the kernelweight of walnuts certified as merchantable by
each handler during the preceding marketing year. Each handler in the
production area may vote for handler member nominees and their
alternates of this subsection. However, no handler shall have more than
one person on the Board either as member or alternate member. The
person receiving the highest number of votes for a handler member
position of this subsection shall be the nominee for that position.
(d) Each grower is entitled to participate in only one nomination
process, regardless of the number of handler entities to whom he or she
delivers walnuts. If a grower delivers walnuts to more than one handler
entity, the grower must choose which nomination process he or she
participates in.
(e) The nine members shall nominate one person as member and one
person as alternate for the tenth member position. The tenth member and
alternate shall be nominated by not less than 6 votes cast by the nine
members of the Board.
(f) Nominations in the foregoing manner received by the Board shall
be reported to the Secretary on or before June 15 of each odd-numbered
year, together with a certified summary of the results of the
nominations. If the Board fails to report nominations to the Secretary
in the manner herein specified by June 15 of each odd-numbered year,
the Secretary may select the members without nomination. If nominations
for the tenth member are not submitted by September 1 of any such year,
the Secretary may select such member without nomination.
(g) The Board may recommend, subject to the approval of the
Secretary, a change to these nomination procedures should the Board
determine that a revision is necessary.
0
11. In Sec. 984.38, the suspension of August 20, 2005 (70 FR 50153),
is lifted effective April 2, 2008.
0
12. Revise Sec. 984.38 to read as follows:
Sec. 984.38 Eligibility.
No person shall be selected or continue to serve as a member or
alternate to represent one of the groups specified in Sec.
984.35(a)(1) through (6) or Sec. 984.38(b)(1) through (6), unless he
or she is engaged in the business he or she is to represent, or
represents, either in his or her own behalf or as an officer or
employee if the business unit engaged in such business. Also, each
member or alternate member representing growers in District 1 or
District 2 shall be a grower, or officer or employee of the group he or
she is to represent.
0
13. Revise Sec. 984.39 to read as follows:
Sec. 984.39 Qualify by acceptance.
Any person nominated to serve as a member or alternate member of
the Board shall, prior to selection by USDA, qualify by filing a
written qualification and acceptance statement indicating such person's
willingness to serve in the position for which nominated.
0
14. Revise Sec. 984.40 to read as follows:
Sec. 984.40 Alternate.
(a) An alternate for a member of the Board shall act in the place
and stead of such member in his or her absence or in the event of his
or her death, removal, resignation, or disqualification, until a
successor for his or her unexpired term has been selected and has
qualified.
(b) In the event any member of the Board and his or her alternate
are both unable to attend a meeting of the Board, any alternate for any
other member representing the same group as the absent member may serve
in the place of the absent member, or in the event such other alternate
cannot attend, or there is no such other alternate, such member, or in
the event of his disability or a vacancy, his or her alternate may
designate, subject to the disapproval of the Secretary, a temporary
substitute to attend such meeting. At such meeting such temporary
substitute may act in the place of such member.
0
15. Revise Sec. 984.42 to read as follows:
Sec. 984.42 Expenses.
The members and their alternates of the Board shall serve without
compensation, but shall be allowed their necessary expenses incurred by
them in the performance of their duties under this part.
0
16. Amend Sec. 984.45 by revising paragraphs (b) and (c) and adding
paragraph (d) to read as follows:
Sec. 984.45 Procedure.
* * * * *
(b) All decisions of the Board, except where otherwise specifically
provided (see Sec. 984.35(d)), shall be by a sixty-percent (60%)
super-majority vote of the members present. A quorum of six members, or
the equivalent of sixty percent (60%) of the Board, shall be required
for the conduct of Board business.
[[Page 11339]]
(c) The Board may vote by mail or telegram, or by any other means
of communication, upon due notice to all members. The Board, with the
approval of the Secretary, shall prescribe the minimum number of votes
that must be cast when voting is by any of these methods, and any other
procedures necessary to carry out the objectives of this paragraph.
(d) The Board may provide for meetings by telephone, or other means
of communication and any vote cast at such a meeting shall be confirmed
promptly in writing: Provided, That if any assembled meeting is held,
all votes shall be cast in person.
0
17. Revise Sec. 984.46 to read as follows:
Sec. 984.46 Research and development.
The Board, with the approval of the Secretary, may establish or
provide for the establishment of production research, marketing
research and development projects, and marketing promotion, including
paid advertising, designed to assist, improve, or promote the
marketing, distribution, and consumption or efficient production of
walnuts. The expenses of such projects shall be paid from funds
collected pursuant to Sec. 984.69 and Sec. 984.70.
0
18. Amend Sec. 984.48 by revising paragraphs (a) introductory text,
(a)(2), (4), and (5) to read as follows:
Sec. 984.48 Marketing estimates and recommendations.
(a) Each marketing year the Board shall hold a meeting, prior to
October 20, for the purpose of recommending to the Secretary a
marketing policy for such year. Each year such recommendation shall be
adopted by the affirmative vote of at least 60% of the Board and shall
include the following, and where applicable, on a kernelweight basis:
* * * * *
(2) The Board's estimate of the handler inventory on September 1 of
inshell and shelled walnuts;
* * * * *
(4) The Board's estimate of the trade demand for such marketing
year for shelled and inshell walnuts, taking into consideration trade
inventory, imports, prices, competing nut supplies, and other factors;
(5) The Board's recommendation for desirable handler inventory of
inshell and shelled walnuts on August 31 of each marketing year;
* * * * *
0
19. Amend Sec. 984.50 by revising the heading and paragraph (d) to
read as follows:
Sec. 984.50 Grade, quality and size regulations.
* * * * *
(d) Additional grade, size or other quality regulation. The Board
may recommend to the Secretary additional grade, size or other quality
regulations, and may also recommend different regulations for different
market destinations. If the Secretary finds on the basis of such
recommendation or other information that such additional regulations
would tend to effectuate the declared policy of the Act, he or she
shall establish such regulations.
* * * * *
0
20. Amend Sec. 984.51 by revising paragraph (a) to read as follows:
Sec. 984.51 Inspection and certification of inshell and shelled
walnuts.
(a) Before or upon handling of any walnuts for use as free or
reserve walnuts, each handler at his or her own expense shall cause
such walnuts to be inspected to determine whether they meet the then
applicable grade and size regulations. Such inspection shall be
performed by the inspection service or services designated by the Board
with the approval of the Secretary; Provided, That if more than one
inspection service is designated, the functions performed by each
service shall be separate, and shall not duplicate each other. Handlers
shall obtain a certificate for each inspection and cause a copy of each
certificate issued by the inspection service to be furnished to the
Board. Each certificate shall show the identity of the handler,
quantity of walnuts, the date of inspection, and for inshell walnuts
the grade and size of such walnuts as set forth in the United States
Standards for Walnuts (Juglans regia) in the Shell. Certificates
covering reserve shelled walnuts for export shall also show the grade,
size, and color of such walnuts as set forth in the United States
Standards for Shelled Walnuts (Juglans regia). The Board, with the
approval of the Secretary, may prescribe procedures for the
administration of this provision.
* * * * *
0
21. Amend Sec. 984.52 by revising paragraph (a) and adding a new
paragraph (c) to read as follows:
Sec. 984.52 Processing of shelled walnuts.
(a) No handler shall slice, chop, grind, or in any manner change
the form of shelled walnuts unless such walnuts have been certified as
merchantable or unless such walnuts meet quality regulations
established under Sec. 984.50(d) if such regulations are in effect.
* * * * *
(c) The Board shall establish such procedures as are necessary to
insure that all such walnuts are inspected prior to being placed into
the current of commerce.
0
22. Revise Sec. 984.59 to read as follows:
Sec. 984.59 Interhandler transfers.
For the purposes of this part, transfer means the sale of inshell
and shelled walnuts within the area of production by one handler to
another. The Board, with the approval of the Secretary, may establish
methods and procedures, including necessary reports, for such
transfers.
0
23. Amend Sec. 984.67 by revising paragraph (a) to read as follows:
Sec. 984.67 Exemptions.
(a) Exemption from volume regulation. Reserve percentages shall not
apply to lots of merchantable inshell walnuts which are of jumbo size
or larger as defined in the then effective United States Standards for
Walnuts in the Shell, or to such quantities as the Board may, with the
approval of the Secretary, prescribe.
* * * * *
0
24. Amend Sec. 984.69 by revising paragraph (c) to read as follows:
Sec. 984.69 Assessments.
* * * * *
(c) Accounting. If at the end of a marketing 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 (c)(2) or (c)(3) of this section, it shall be refunded to
handlers from whom collected and each handler's share of such excess
funds shall be the amount of assessments he or she has paid in excess
of his or her pro rata share of the actual expenses of the Board.
(2) Excess funds may be used temporarily by the Board to defray
expenses of the subsequent marketing year: Provided, That each
handler's share of such excess shall be made available to him or her by
the Board within five months after the end of the year.
(3) The Board may carry over such excess into subsequent marketing
years as a reserve: Provided, That funds already in reserve do not
exceed approximately two years' budgeted expenses. In the event that
funds exceed two marketing years' budgeted expenses, future assessments
will be reduced to bring the reserves to an amount that is less than or
equal to two
[[Page 11340]]
marketing years' budgeted expenses. Such reserve funds may be used:
(i) To defray expenses, during any marketing year, prior to the
time assessment income is sufficient to cover such expenses;
(ii) To cover deficits incurred during any 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;
(iv) To meet any other such costs recommended by the Board and
approved by the Secretary.
* * * * *
0
25. Add a new Sec. 984.70 to read as follows:
Sec. 984.70 Contributions.
The Board may accept voluntary contributions but these shall only
be used to pay expenses incurred pursuant to Sec. 984.46, Research and
development. Furthermore, such contributions shall be free from any
encumbrances by the donor and the Board shall retain complete control
of their use.
0
26. Revise Sec. 984.71 to read as follows:
Sec. 984.71 Reports of handler inventory.
Each handler shall submit to the Board in such form and on such
dates as the Board may prescribe, reports showing his or her inventory
of inshell and shelled walnuts.
0
27. Revise Sec. 984.73 to read as follows:
Sec. 984.73 Reports of walnut receipts.
Each handler shall file such reports of his or her walnut receipts
from growers, handlers, or others in such form and at such times as may
be requested by the Board with the approval of the Secretary.
0
28. Amend Sec. 984.89 by redesignating paragraph (b)(4) as (b)(5) and
adding a new paragraph (b)(4) to read as follows:
Sec. 984.89 Effective time and termination.
* * * * *
(b) * * *
(4) Within six years of the effective date of this amendment 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 walnuts in
the production area. Such termination shall be announced on or before
the end of the production year.
* * * * *
0
29. Add a new Sec. 984.91 to read as follows:
Sec. 984.91 Relationship with the California Walnut Commission.
In conducting Board activities and other objectives under this
part, the Board may deliberate, consult, cooperate and exchange
information with the California Walnut Commission, whose activities
compliment those of the Board. Any sharing of information gathered
under this subpart shall be kept confidential in accordance with
provisions under section 10(i) of the Act.
Dated: February 27, 2008.
Lloyd C. Day,
Administrator, Agricultural Marketing Service.
[FR Doc. E8-4016 Filed 2-29-08; 8:45 am]
BILLING CODE 3410-02-P