[Federal Register Volume 75, Number 118 (Monday, June 21, 2010)]
[Proposed Rules]
[Pages 34950-34953]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-14845]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 75, No. 118 / Monday, June 21, 2010 /
Proposed Rules
[[Page 34950]]
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 984
[Doc. No. AMS-FV-09-0036; FV09-984-4 PR]
Walnuts Grown in California; Changes to the Quality Regulations
for Shelled Walnuts
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Proposed rule.
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SUMMARY: This rule invites comments on revisions to the quality
regulations for shelled walnuts under the Federal marketing order for
California walnuts (order). The order regulates the handling of walnuts
grown in California and is administered locally by the California
Walnut Board (Board). This rule would require inspection and
certification of shelled walnut products after manufacturing instead of
before manufacturing. It would also establish a process to specify that
manufactured products smaller than eight sixty-fourths of an inch in
diameter are derived from walnut pieces that have been inspected and
certified to U.S. Commercial grade standards. These changes would
result in more efficient and cost-effective handler operations, and
would certify the final size and grade of all manufactured walnut
pieces.
DATES: Comments must be received by July 6, 2010.
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 Internet: http://www.regulations.gov. All comments should reference the document 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.regulations.gov. All comments submitted in response to this rule
will be included in the record and will be made available to the
public. Please be advised that the identity of the individuals or
entities submitting the comments will be made public on the Internet at
the address provided above.
FOR FURTHER INFORMATION CONTACT: Debbie Wray, Marketing Specialist, or
Kurt J. Kimmel, Regional Manager, California Marketing Field Office,
Marketing Order Administration Branch, Fruit and Vegetable Programs,
AMS, USDA; Telephone: (559) 487-5901, Fax: (559) 487-5906, or E-mail:
[email protected] or [email protected].
Small businesses may request information on complying with this
regulation by contacting Antoinette Carter, 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:
[email protected].
SUPPLEMENTARY INFORMATION: This proposed rule is issued under Marketing
Order No. 984, as amended (7 CFR part 984), regulating the handling of
walnuts 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.
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 proposal invites comments on revisions to the quality
regulations for shelled walnuts to require inspection and certification
after chopping or dicing them into smaller pieces (manufacturing)
instead of before manufacturing, and to establish a process for
specifying that manufactured products smaller than eight sixty-fourths
of an inch in diameter are derived from walnut pieces that have been
inspected and certified to U.S. Commercial grade standards. This would
result in more efficient and cost-effective handler operations and
would certify the final size and grade of all manufactured walnut
pieces. This proposal was unanimously recommended by the Board at a
meeting on September 12, 2008.
Section 984.50(d) of the order provides authority for the Board to
recommend to the Secretary additional grade, size, or other quality
regulations for California walnuts. Section 984.52 of the order
provides that handlers shall not change the form of shelled walnuts
unless such walnuts have been certified as merchantable or meet quality
regulations established under Sec. 984.50(d).
Currently, all shelled walnuts are inspected and certified before
manufacturing by the American Council for Food Safety & Quality (also
known as DFA of California and hereinafter referred to as ``DFA'') to
ensure the walnuts meet marketing order requirements for U.S.
Commercial grade. Following inspection, walnut pieces may be further
manufactured by chopping them into smaller pieces, or ``end products.''
Pieces smaller than eight sixty-fourths of an inch that are accumulated
during the manufacturing process are considered a byproduct of this
process and are called ``meal.'' Walnut meal is sold into the market
for industrial use, such as in commercial bakery products.
Upon passing inspection, an inspection certificate is issued for
the
[[Page 34951]]
lot of shelled walnuts, and the certificate number follows the walnuts
from that lot through the entire manufacturing process. The original
inspection certificate number is noted on the certificates that
accompany both the end products and the meal derived from the original
lot of shelled walnuts. Providing information about the original lot of
walnuts from which the end products and meal were derived assures
customers that those products were derived from walnuts that meet
quality standards under the order.
The inspection certificate specifies the size of the shelled walnut
pieces before manufacturing. The size may be stated as ``large pieces''
or ``halves and pieces,'' and that information is also noted on the
certificates that accompany the end products and the meal, although it
does not accurately describe the size of the manufactured end product
pieces or meal. If a customer requires certification of the size of a
finished end product, the handler must obtain a second inspection for
that product, which may add expense to the process.
Currently, meal may be co-mingled into one output bin as it is
accumulated from the manufacturing of several different lots of shelled
walnuts. When this occurs, the certificate number from each original
lot of shelled walnuts is transferred to the meal certificate. As a
result, the certificate for one output bin of meal may include multiple
certificate numbers.
Transferring the inspection certificate number from an original lot
of shelled walnuts to various manufactured end products and meal is
cumbersome and creates a potential for errors under the current system.
Currently, all of a certified lot of shelled walnuts must be
manufactured at one time to ensure the certificate number of that lot
is properly transferred to the resulting end products and meal. If, at
a future date, the end products from the original manufacturing run are
remanufactured in order to be cut to a smaller size, the certificate
numbers must be transferred from the first manufactured product to the
second manufactured product. This additional process of transferring
certificate numbers to and from multiple end products is cumbersome and
further increases the potential for error.
The Board's Grades and Standards Committee formed a work group in
May 2008 to investigate alternatives to the current inspection and
certification process of manufactured shelled walnuts. The work group
recommended changing the existing process to allow handlers to
manufacture shelled walnuts into smaller end products without prior
inspection. Instead, handlers would be required to have all end
products inspected. The manufactured pieces equal to or larger than
eight sixty-fourths of an inch in diameter would be inspected and
certified to existing U.S. Commercial grade requirements specified in
the United States Standards for Shelled Walnuts (Juglans regia). Each
end product that passes inspection would be issued an inspection
certificate, which would include the actual size of the end product.
The U.S. Commercial grade requirements do not include standards for
walnut meal. Therefore, the meal accumulated during the manufacturing
process would not be inspected. Meal collected from multiple
manufacturing runs would no longer be co-mingled in one output bin but
would remain segregated.
A document also referred to as a ``meal certificate'' would be
issued for the walnut meal accumulated during each manufacturing run.
Because the meal most closely resembles the color, freshness, and other
characteristics of the smallest end product produced during
manufacturing, the meal could be affiliated with that end product. If
the end product passes inspection and is certified, the certificate
number assigned to that end product would be referenced on the meal
certificate. If that end product fails inspection, the meal created
during the same manufacturing process would be rejected and disposed of
pursuant to the requirements of Sec. 984.64. However, the end product
that failed inspection could be reconditioned, re-sampled, and
presented again for inspection and certification.
These changes would improve the manufacturing process by
eliminating the need for multiple inspections for the same product, and
would improve handler efficiencies by eliminating duplicative inventory
tracking. Consumers would be better served since each finished end
product would be certified to U.S. Commercial grade requirements, and
accurate size information for each end product would be provided on the
individual inspection certificates. Handlers could continue to assure
customers that walnut meal is derived from walnuts that have been
inspected and certified. Accordingly, a new Sec. 984.450(c) containing
these regulations is proposed to be added to the order's administrative
rules and regulations.
This rule would also revise the first sentence in Sec. 984.450(a)
regarding the minimum kernel content requirements of inshell walnuts
for reserve disposition credit. The sentence incorrectly references
requirements for inshell walnuts pursuant to Sec. 984.59(a). The
correct reference is Sec. 984.50(a). The sentence would be revised
accordingly.
Initial Regulatory Flexibility Analysis
Pursuant to requirements set forth in the Regulatory Flexibility
Act (RFA) (5 U.S.C. 601-612), the Agricultural Marketing Service (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 will
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.
There are currently 58 handlers of California walnuts subject to
regulation under the marketing order, and there are approximately 4,500
growers in the production area. Small agricultural service firms are
defined by the Small Business Administration (SBA) (13 CFR 121.201) as
those having annual receipts of less than $7,000,000, and small
agricultural producers are defined as those having annual receipts of
less than $750,000.
USDA's National Agricultural Statistics Service (NASS) reports that
California walnuts were harvested from a total of 223,000 bearing acres
during 2008-09. The average yield for the 2008-09 crop was 1.96 tons
per acre, which is higher than the 1.56 tons per acre average for the
previous five years. NASS reported the value of the 2008-09 crop at
$1,210 per ton, which is lower than the previous five-year average of
$1,598 per ton.
At the time of the 2007 Census of Agriculture, which is the most
recent information available, approximately 89 percent of California's
walnut farms were smaller than 100 acres. Fifty-four percent were
between 1 and 15 acres. A 100-acre farm with an average yield of 1.96
tons per acre would have been expected to produce about 196 tons of
walnuts during 2008-09. At $1,210 per ton, that farm's production would
have had an approximate value of $237,000. Assuming that the majority
of California's walnut farms are still smaller than 100 acres, it could
be concluded that the majority of the growers had receipts of less than
$237,000 in 2008-09. This is well below the SBA threshold of $750,000;
thus, the majority of California's walnut growers
[[Page 34952]]
would be considered small growers according to SBA's definition.
According to information supplied by the industry, approximately
one-half of California's walnut handlers shipped merchantable walnuts
valued under $7,000,000 during the 2008-09 marketing year and would
therefore be considered small handlers according to the SBA definition.
The firm that currently inspects and certifies shelled walnuts before
manufacturing would likely be considered a large agricultural business
firm.
This rule would amend Sec. 984.450 of the order's administrative
rules and regulations by adding a new paragraph (c) that would require
inspection and certification of shelled walnuts after manufacturing
instead of before manufacturing, and would establish a process for
specifying that walnut meal is derived from manufactured walnut pieces
that have been inspected and certified to U.S. Commercial grade
standards. This would result in more efficient and cost-effective
handler operations, and would certify the final size and grade of all
manufactured walnut pieces. Authority for these changes are provided in
Sec. Sec. 984.50(d) and 984.52 of the order.
Regarding the impact of the proposed action on affected entities,
this rule should not impose any additional costs. It should reduce
costs to handlers by streamlining and improving the production process.
Handlers would no longer need to track lots of shelled walnuts through
the manufacturing process in order to tie those original lots to the
manufactured end products and meal. Handlers would be able to more
easily manage inventory and production since they would no longer be
required to manufacture an entire lot of shelled walnuts at one time in
order to transfer the certificate number of the original lot to each
end product and the meal. Since handlers would no longer be required to
transfer certificate numbers from an entire lot of shelled walnuts to
multiple manufactured end products, a portion of a lot could be held
for manufacturing or remanufacturing at a later date.
The potential for errors would be reduced under the proposed system
because fewer certificate numbers would be transferred. Each end
product would have its own certificate number, and the certificate
number of the smallest end product would be referenced on the meal
certificate for the meal that was accumulated during the same
manufacturing process.
Handler costs would also be reduced when customers require
manufactured product to be certified to U.S. Commercial grade
requirements since this would be automatically provided under the
proposed regulations. Under the current system, if a customer requires
this type of certification after manufacturing, handlers may pay
additional fees if an inspector makes a special trip to perform a
second inspection. If a DFA inspector is already onsite at a handler's
facility, there is no additional charge for a second inspection. DFA
charges $28.00 per hour with a four-hour minimum charge for a special
visit to the handler's site, for a minimum total charge of $112 per
visit.
While discussing this proposed change, the Board considered lab
testing the meal as an alternative to transferring the inspection
certificate number of the smallest manufactured end product to the
meal. There is no U.S. Commercial grade standard for meal, so it is not
currently possible to inspect and certify it as meeting a standard.
Quality standards for meal would need to be developed in order to
pursue this alternative. In addition, lab testing the meal could
increase handler costs. This alternative would also cause a delay in
shipping in order to allow time for lab testing, and this could
adversely impact marketing efforts. As a result, lab testing of meal
was not considered a viable alternative.
This proposed rule would not impose any additional reporting or
recordkeeping requirements on either small or large walnut 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.
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.
USDA has not identified any relevant Federal rules that duplicate,
overlap or conflict with this proposed rule.
In addition, the Board's meeting on September 12, 2008, when this
action was considered, was widely publicized throughout the walnut
industry. This issue was also deliberated at a Grades and Standards
Committee meeting on May 20, 2008; a Board meeting on May 28, 2008; and
a Grades and Standards Committee work group meeting on September 2,
2008. Like all Board meetings, these meetings were public meetings, and
all interested persons were invited to attend the meetings and
participate in deliberations on all issues. Finally, interested persons
are invited to submit comments on this proposed rule, including 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/AMSv1.0/ams.fetchTemplateData.do?template=TemplateN&page=MarketingOrdersSmallBusinessGuide. Any questions about the compliance guide should be sent to
Antoinette Carter at the previously mentioned address in the FOR
FURTHER INFORMATION CONTACT section.
A 15-day comment period is provided to allow interested persons to
respond to this proposal. Fifteen days is deemed appropriate because
the proposed changes would improve handler and program operations and,
as such, should be available as soon as possible during the marketing
year, if adopted. All written comments timely received will be
considered before a final determination is made on this matter.
List of Subjects in 7 CFR Part 984
Marketing agreements, Nuts, Reporting and recordkeeping
requirements, Walnuts.
For the reasons set forth in the preamble, 7 CFR part 984 is
proposed to be amended as follows:
PART 984--WALNUTS GROWN IN CALIFORNIA
1. The authority citation for 7 CFR part 984 continues to read as
follows:
Authority: 7 U.S.C. 601-674.
Sec. 984.450 [Amended]
2. Section 984.450 is amended by revising the first sentence in
paragraph (a) and adding a new paragraph (c) to read as follows:
Sec. 984.450 Grade and size regulations.
(a) Minimum kernel content requirements for inshell walnuts for
reserve disposition credit. For purposes of Sec. Sec. 984.54 and
984.56, no lot of inshell walnuts may be held, exported, or disposed of
for use by governmental agencies or charitable institutions unless it
meets the minimum requirements for merchantable inshell walnuts
effective pursuant to Sec. 984.50(a). * * *
* * * * *
(c) Inspection and certification of shelled walnuts that are
manufactured into products. For purposes of Sec. Sec. 984.50(d) and
984.52(c), shelled walnuts may be cut or diced without prior inspection
and certification: Provided, That the end product, except for walnut
meal, is inspected and
[[Page 34953]]
certified. For purposes of this section, end product shall be defined
as walnut pieces equal to or larger than eight sixty-fourths of an inch
in diameter. Walnut meal shall be defined as walnut pieces smaller than
eight sixty-fourths of an inch in diameter.
(1) End product. End product must be sized, inspected and
certified, and the size must be noted on the inspection certificate.
The end product quality must be equal to or better than the minimum
requirements of U.S. Commercial grade as defined in the United States
Standards for Shelled Walnuts (Juglans regia).
(2) Walnut meal. Walnut meal that is accumulated during the cutting
or dicing of shelled walnuts to create end product must be presented
with the smallest end product from that manufacturing run that is
inspected and certified. If the end product meets the applicable U.S.
Commercial grade requirements, the walnut meal accumulated during the
manufacture of that end product shall be identified and referenced on a
separate meal certificate as ``meal derived from walnut pieces that
meet U.S. Commercial grade requirements.'' The certificate number of
the smallest end product will be referenced on the meal certificate.
(3) Failed lots. If the end product fails to meet applicable U.S.
Commercial grade requirements, the end product may be reconditioned,
re-sampled, inspected again, and certified. However, the walnut meal
accumulated during the manufacture of that end product shall be
rejected and disposed of pursuant to the requirements of Sec. 984.64.
Dated: June 11, 2010.
Rayne Pegg,
Administrator, Agricultural Marketing Service.
[FR Doc. 2010-14845 Filed 6-18-10; 8:45 am]
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