[Federal Register Volume 60, Number 109 (Wednesday, June 7, 1995)]
[Proposed Rules]
[Pages 30170-30181]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-13928]




[[Page 30169]]

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Part IV





Department of Agriculture





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Agricultural Marketing Services



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7 CFR Part 982



Filberts/Hazelnuts Grown in Oregon and Washington; Recommended Decision 
on Proposed Further Amendment of Marketing Agreement and Order No. 982; 
Proposed Rule

  Federal Register / Vol. 60, No. 109 / Wednesday, June 7, 1995 / 
Proposed Rules    
[[Page 30170]] 

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 982

[Docket No. AO-205-A7; FV94-982-1]


Filberts/Hazelnuts Grown in Oregon and Washington; Recommended 
Decision on Proposed Further Amendment of Marketing Agreement and Order 
No. 982

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule and opportunity to file exceptions.

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SUMMARY: This recommended decision invites written exceptions on 
proposed amendments to Marketing Agreement and Order No. 982 (order). 
The agreement and order regulate the handling of filberts/hazelnuts 
grown in Oregon and Washington. The proposed amendments would make 
changes in order provisions regarding: Volume control; nomination and 
membership of the Filbert/Hazelnut Marketing Board (Board); collecting 
assessments; and the administration and operation of the program. The 
proposed amendments were submitted by the Board to make the order more 
consistent with current industry conditions and needs. The Fruit and 
Vegetable Division, Agricultural Marketing Service (AMS), is proposing 
conforming and other necessary changes. The proposed amendments are 
designed to improve order operations.

DATES: Written exceptions must be filed by July 7, 1995.

ADDRESSES: Written exceptions should be filed with the Hearing Clerk, 
U.S. Department of Agriculture, room 1081-S, Washington, D.C. 20050-
9200, FAX (202) 720-9776. Four copies of all written exceptions should 
be submitted and should reference the docket number and the date and 
page number of this issue of the Federal Register. Exceptions will be 
made available for public inspection in the Office of the Hearing Clerk 
during regular business hours.

FOR FURTHER INFORMATION CONTACT: Teresa Hutchinson, Marketing 
Specialist, Northwest Marketing Field Office, Fruit and Vegetable 
Division, Agricultural Marketing Service, USDA, 1220 SW Third Ave., 
room 369, Portland, OR 97204; telephone (503) 326-2724, FAX (503) 326-
7440; or Tom Tichenor, Marketing Order Administration Branch, Fruit and 
Vegetable Division, AMS, USDA, room 2523-S, P.O. Box 96456, Washington, 
D.C. 20090-6456; telephone: 202-720-6862; FAX 202-720-5698.

SUPPLEMENTARY INFORMATION: Prior documents in this proceeding: Notice 
of Public Hearing issued on February 24, 1994, and published in the 
February 28, 1994, issue of the Federal Register (59 FR 9425).
    This administrative action is governed by the provisions of 
sections 556 and 557 of title 5 of the United States Code, and, 
therefore, is excluded from the requirements of Executive Order 12866.

Preliminary Statement

    Notice is hereby given of the filing with the Hearing Clerk of this 
recommended decision with respect to the proposed further amendment of 
Marketing Agreement and Order No. 982 and of the opportunity to file 
written exceptions thereto. For the purposes of this document and this 
formal rulemaking proceeding, Marketing Agreement and Order No. 982 is 
referred to as the ``order'' and the term filberts and filberts/
hazelnuts is hereinafter referred to as hazelnuts. Copies of this 
decision may be obtained from Teresa Hutchinson or Tom Tichenor, at the 
addresses listed above.
    This notice is issued pursuant to the provisions of the 
Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601 
et seq.), hereinafter referred to as the ``Act,'' and the applicable 
rules of practice and procedure governing the formulation of marketing 
agreements and orders (7 CFR part 900).
    The proposed further amendment of the order is based on the record 
of a public hearing held in Newberg, Oregon, on March 8, 1994. Notice 
of this hearing was published in the Federal Register on February 28, 
1994. The notice of public hearing listed 12 proposals submitted by the 
Board, the agency responsible for local administration of the order, 
and one proposal by the Fruit and Vegetable Division (Division), of the 
Agricultural Marketing Service (AMS), U.S. Department of Agriculture 
(Department), concerning conforming changes.
    The proposals would: (1) Change the name of the commodity covered 
under the order from ``filberts'' to ``hazelnuts;'' (2) for purposes of 
volume regulation, establish the trade demand area as the entire United 
States and allow the Board, with the Secretary's approval, to make 
changes in the inshell trade acquisition distribution area; (3) change 
the length of Board members' terms of office and the number of 
consecutive terms that may be held, make changes in the criteria used 
for nominating handler members and for weighting handler votes when 
electing handler nominees, and change the voting procedures used for 
nominating members; (4) allow Board telephone votes to remain 
unconfirmed until the next public Board meeting; (5) remove the 
``verbatim'' reporting requirement on Board marketing policy meetings; 
(6) provide the Board with some flexibility in recommending final free 
and restricted percentages; (7) authorize different identification 
standards for inspected and certified hazelnuts; (8) correct current 
language that specifies handler credit for ungraded hazelnuts; (9) 
change the procedures for establishing bonding requirements for 
deferred restricted obligations and allow the Board to purchase excess 
restricted credits from handlers; (10) clarify that mail order sales 
outside the production area are not exempt from order requirements; 
(11) allow the Board to accept advance assessment payments, provide 
discounts for such payments, and accept voluntary contributions; and 
(12) make such changes as are necessary to conform with any amendment 
that may result from the hearing.
    The public hearing was held to: (1) Receive evidence about the 
economic and marketing conditions which relate to the proposed 
amendments of the order; (2) determine whether there is a need for the 
proposed amendments to the order; and (3) determine whether the 
proposed amendments, or appropriate modifications thereof, will tend to 
effectuate the declared policy of the Act.
    No person testified in opposition to the proposals offered at the 
hearing and no alternative proposals were offered.
    At the conclusion of the hearing, the administrative law judge 
fixed April 8, 1994, as the final date for interested persons to file 
corrections to the hearing transcript, proposed findings and 
conclusions, and written arguments or briefs based on the evidence 
received at the hearing. Corrections to the hearing transcript were 
filed by the Division with the Hearing Clerk on April 5, 1994. No other 
corrections, findings, conclusions, arguments or briefs were filed.

Small Business Considerations

    In accordance with the provisions of the Regulatory Flexibility Act 
(RFA) (5 U.S.C. 601 et seq.), the Administrator of the AMS has 
determined that this action would not have a significant economic 
impact on a substantial number of small entities. Small agricultural 
service firms, which include handlers regulated under this order, have 
been defined by the Small Business Administration (SBA) (13 CFR 
121.601) as those having annual receipts for the last three years of 
less [[Page 30171]] than $5,000,000. Small agricultural producers are 
defined as those having annual receipts of less than $500,000.
    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. Interested persons were 
invited to present evidence at the hearing on the probable regulatory 
and informational impact of the proposed amendments on small 
businesses. The record indicates that handlers would not be unduly 
burdened by any additional regulatory requirements, including those 
pertaining to reporting and recordkeeping, that might result from this 
proceeding. The record also indicates that a majority of handlers and 
producers would meet the SBA definitions of small agricultural service 
firms and small agricultural producers, respectively.
    During the 1993-94 marketing year, approximately 25 handlers were 
regulated under the order. In addition, there were approximately 950 
producers of hazelnuts in the production area. The Act requires the 
application of uniform rules on regulated handlers. Since handlers 
covered under the order are predominantly small businesses, the order 
itself is tailored to the size and nature of small businesses. 
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. Thus, both the RFA and the Act are 
compatible with respect to small entities.
    For discussion of the anticipated impact on small businesses, the 
proposed amendments have been grouped into programmatic categories. 
Amendments concerning the order's marketing and volume control programs 
would: Change the name of the commodity to ``hazelnuts'' (Sec. 982.4); 
add the State of Hawaii to the trade demand area and allow the Board to 
make changes in the trade demand area, with the approval of the 
Secretary (Sec. 982.16); provide the Board the flexibility to release 
up to 15 percent of the average three year inshell trade acquisitions 
for desirable carryout (Sec. 982.40); correct the current language that 
determines handler credit for ungraded hazelnuts (Sec. 982.51); 
establish the bonding rate for deferred restricted obligations at the 
estimated value of restricted credits for the current marketing year 
and allow the Board to use defaulted bond payments to purchase excess 
restricted credits (Sec. 982.54); and clarify that mail order sales are 
not exempt from order requirements (new Sec. 982.57). These proposed 
amendments are designed to assist the Board in its domestic and export 
marketing efforts. The amendments would allow the Board to make program 
and management decisions that are more consistent with changing market 
conditions and better respond to changing marketing needs. Because the 
Board acts in the best interests of the industry, increased Board 
decision making flexibility should benefit the industry and, thus, 
small businesses in the industry.
    Regarding nomination and Board membership, the proposed amendments 
would: Change from one to two years the length of Board member and 
alternate member terms of office (Sec. 982.33); limit the number of 
consecutive terms members and alternate members may hold to three two-
year terms (Sec. 982.33); and make conforming changes and a correction 
in the qualifications for nominating members (Secs. 982.30 and 982.32). 
The amendments are proposed to ease the burden of conducting nomination 
meetings every year and enhance the Board's efficiency. The amendments 
are administrative in nature and would not impose additional costs on 
small businesses.
    Other recommended amendments to the order's administrative 
procedures and operations would: Allow Board telephone votes to remain 
unconfirmed in writing until the next public Board meeting 
(Sec. 982.37); remove the ``verbatim'' reporting requirement on Board 
marketing policy meetings (Sec. 982.39); allow the Board to accept 
advance assessment payments and provide discounts for such payments 
(Sec. 982.61); and allow the Board to accept voluntary contributions 
(new Sec. 982.63). These proposed amendments are intended to improve 
the operations of the Board, lessen the administrative burden on Board 
members and staff, and improve management of the order's financial 
resources. As such, the proposed changes would have negligible, if any, 
economic impact on small entities.
    Finally, one amendment would provide the Board with the authority 
to establish more up-to-date identification standards (Sec. 982.46), 
which would make order identification and certification provisions 
consistent with current industry practices and enable handlers more 
flexibility in meeting identification requirements.
    All of these changes are designed to enhance the administration and 
functioning of the order and benefit the entire industry. Any added 
costs are not expected to be significant because the benefits of the 
proposed amendments are expected to outweigh the costs. Finally, the 
proposed amendments would have no significant impact or burden on small 
businesses' recordkeeping and reporting requirements.
    The amendments proposed herein have been reviewed under Executive 
Order 12778, Civil Justice Reform and are not intended to have 
retroactive affect. If adopted, the proposed amendments would not 
preempt any state or local laws, regulations, or policies, unless they 
present an irreconcilable conflict with the amendments.
    The Act provides that administrative proceedings must be exhausted 
before parties may file suit in court. Under section 608c(15)(A) of the 
Act, any handler subject to an order may file with the Secretary 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 requesting a modification of the order or to be exempted 
therefrom. A handler is afforded the opportunity for a hearing on the 
petition. After the hearing the Secretary 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 in equity to review the 
Secretary's ruling on the petition, provided a bill in equity is filed 
not later than 20 days after the date of the entry of the ruling.
    In accordance with the Paperwork Reduction Act of 1980 (44 U.S.C. 
Chapter 35), any additional reporting and recordkeeping requirements 
that might result from the proposed amendments would be submitted to 
the Office of Management and Budget (OMB). The provisions would not be 
effective until after receiving OMB approval.

Material Issues

    The material issues of record addressed in this decision are:
    (1) Whether to change the name of the commodity from ``filberts'' 
to ``hazelnuts;''
    (2) whether the inshell trade acquisition (trade demand) 
distribution area should be expanded to include the entire United 
States; whether the Board, with the approval of the Secretary, should 
be allowed to make changes in the trade demand distribution area; and, 
whether inshell hazelnuts shipped to export markets should be 
restricted from importation into all trade demand distribution areas;
    (3) whether to extend the length of Board members' and alternate 
members' [[Page 30172]] terms of office to two years, limit the number 
of consecutive terms which may be held to three two-year terms, make 
conforming changes to the qualifications for nominating members, make a 
correction in the weighting of handler votes, and clarify voting 
procedures;
    (4) whether Board telephone votes should remain unconfirmed in 
writing until the next public Board meeting;
    (5) whether to remove the ``verbatim'' reporting requirement on 
Board marketing policy meetings;
    (6) whether the Board should have additional flexibility in 
recommending final free and restricted percentages;
    (7) whether to provide the Board with the authority, subject to the 
approval of the Secretary, to establish different identification 
standards for inspected and certified hazelnuts;
    (8) whether to correct the factor used to convert kernel weight to 
inshell equivalent weight when calculating the volume of hazelnuts 
withheld for restricted credit;
    (9) whether the Board should use the estimated value of restricted 
credits when establishing bonding rates, and whether to allow the Board 
to purchase restricted credits;
    (10) whether to clarify that mail order sales are not exempt from 
order requirements;
    (11) whether the Board should have authority to accept advance 
assessment payments, provide discounts for such payments, borrow money, 
and accept voluntary contributions; and
    (12) whether any conforming changes should be made to the order if 
any or all of these proposals were to become effective.

Findings and Conclusions

    The findings and conclusions on the material issues, all of which 
are based on evidence provided at the hearing and the record thereof, 
are:
    (1) The terms ``filberts'' and ``filberts/hazelnuts'' should be 
revised to read ``hazelnuts.'' Section 982.4 defines filberts to mean 
filberts or hazelnuts produced in the States of Oregon and Washington 
from trees of the genus Corylus.
    Over the years, the use of the term ``filberts'' has lessened both 
within and outside the industry. ``Hazelnuts'' is widely used in the 
industry to describe the tree nut covered under the order and in 
international marketing efforts.
    While some handlers continue to refer to the product as filberts, 
record evidence indicates that changing the name in the order will not 
have an adverse effect on those handlers who have traditionally 
referred to the product as ``filberts'' or use the term in the company 
name or logo. Further, changing the term would be consistent with 
public practice because, in 1989, the hazelnut--not filbert--was 
declared the official state nut of Oregon. Record evidence indicates 
that, in the production area, the tree is generally referred to as a 
filbert tree while the nuts are referred to as hazelnuts.
    In recognition of the more prominent use of the term ``hazelnuts,'' 
the Board recommended that the tree nut defined as ``filberts'' in the 
order and the title of the Board, and the term ``filbert/hazelnut'' in 
the order's title be defined as ``hazelnuts'' throughout the order and 
the order's rules and regulations. Thus, the title of the order should 
be amended to read ``Hazelnuts Grown in Oregon and Washington,'' the 
definition for filberts should be amended to read, ``Hazelnuts means 
hazelnuts or filberts produced in the States of Oregon and Washington 
from trees of the genus Corylus,'' and the title ``Filbert Control 
Board'' should be changed to ``Hazelnut Marketing Board.'' Wherever the 
term ``filberts'' appears in Subpart--Order Regulating Handling and 
Subpart--Grade and Size Regulations, it should be changed to 
``hazelnuts.'' Such changes should be made in the table of contents and 
the following sections: 982.4, 982.6, 982.7, 982.8, 982.11, 982.12, 
982.13, 982.14, 982.15, 982.16, 982.18, 982.19, 982.20, 982.30, 982.32, 
982.34, 982.39, 982.40, 982.41, 982.45, 982.46, 982.50, 982.51, 982.52, 
982.53, 982.54, 982.55, 982.56, 982.57, 982.58, 982.61, 982.65, 982.66, 
982.67, 982.69, 982.71, 982.86, and 982.101, including Exhibit A. 
Wherever the term ``filberts/hazelnuts'' appears in Subpart--
Administrative Rules and Regulations, it should be changed to 
``hazelnuts.'' Such changes should be made in the following sections: 
982.446, 982.450, 982.452, 982.453, 982.455, 982.456, 982.466, 982.468, 
and 982.471. Finally, references to ``F/H Form * * *'', followed by a 
letter or number, or both, should be changed to read ``H Form'', 
followed by a letter or number, or both sections 982.450, 982.452, 
982.453, 982.454, 982.455, 982.456, 982.460, 982.466, and 982.468.
    (2) In Sec. 982.16, Inshell trade acquisitions, the inshell trade 
demand area should include all 50 states of the United States, and not 
just the continental United States, and the Board, with the Secretary's 
approval, should be authorized to make changes in the distribution 
area. Therefore, this amendment would make two changes in the order: 
(1) Include all 50 states of the United States in the trade demand 
area, thus, adding Hawaii, and (2) provide authority to the Board to 
make changes to the trade demand area through informal rulemaking 
procedures. For the purposes of these findings and conclusions, trade 
demand area is synonymous with inshell trade acquisition distribution 
area.
    Under the order's volume regulations, shipments of inshell 
hazelnuts to the continental U.S. are limited to a prescribed 
percentage of the industry's supply, subject to regulation each 
marketing year. Currently, the continental U.S. comprises the 
``domestic market'' under the order. All markets outside the 
continental U.S., including Hawaii, are currently export markets to 
which handlers may ship inshell hazelnuts without regard to volume 
regulations established under the order. This amendment would expand 
the trade demand area to include Hawaii, thus, making that state part 
of the ``domestic market.''
    Inshell trade acquisitions are defined as the quantity of inshell 
hazelnuts acquired by the trade (commercial buyers) from all handlers 
during a marketing year for distribution in the continental United 
States. The trade demand for any given year is based on inshell trade 
acquisitions during the preceding three years. The domestic inshell 
market volume is restricted under volume regulations. Restricted 
hazelnuts are shelled or exported inshell to other countries, or are 
held in satisfaction of the handler's restricted obligation.
    The effect of the first change would be to add Hawaii to the trade 
demand area. When the order was promulgated in 1949, ``trade demand'' 
was defined as the quantity of filberts/hazelnuts acquired for 
``distribution in the continental U.S., Alaska, Hawaii, Puerto Rico and 
the Canal Zone; except that there may also be considered in the making 
of such computations such acquirements for distribution in Canada or 
Cuba, whenever the Board is of the opinion that such distribution may 
be made to the particular country at prices to handlers approximating 
such prices on distribution in the Continental United States.'' (14 FR 
5657, September 15, 1949.) This definition was amended in 1959 (24 FR 
5305, June 30, 1959) to include only the continental U.S. because it 
was determined that the other areas would better serve the industry as 
export outlets for restricted hazelnuts. The Board now recommends that 
all 50 states be included in the trade demand area.
    However, testimony presented at the hearing did not provide any 
economic analysis, data, or other persuasive reasons that would support 
adding Hawaii to the trade demand area. The [[Page 30173]] Department 
believes that the addition of Hawaii to the trade demand area should be 
evaluated on the same bases as other markets which might be added to 
the trade demand area. Should the second part of this material issue, 
as described below, be approved in this formal rulemaking procedure, 
the Board would be able to recommend adding Hawaii to the trade demand 
area through informal rulemaking procedures. Thus, this recommended 
decision denies that portion of the second material issue which 
recommends adding Hawaii to the trade demand area.
    The second change would provide authority to the Board to make 
changes to the trade demand area, through informal rulemaking 
procedures. The Board now believes that it is in the best interest of 
the industry that the Board have the flexibility to respond to changing 
market conditions by adding a country or marketing region, when 
appropriate, to the trade demand area.
    As currently provided, changes to the trade demand area require 
formal rulemaking procedures which include a public hearing, a 
recommended decision, an industry referendum and a final rulemaking 
decision. However, marketing policy decisions need to be made on a 
yearly basis, particularly those decisions that require computation to 
determine the amount of inshell hazelnuts available to be sold without 
restriction. The formal rulemaking procedure does not provide the Board 
with the flexibility or the timeliness it needs to respond to changing 
markets in other countries. Informal rulemaking authority, which 
requires a Board recommendation and Secretarial approval, would enable 
the Board to make more timely responses to changing market conditions 
in countries or regions outside the U.S.
    The record indicates that a recommendation to add a country or 
region to the trade demand area would first be considered by the 
Board's Export Committee when it develops and recommends to the Board 
an annual export marketing policy. Changes in the trade demand area 
would then be considered by the Board and recommended to the Secretary. 
Notice of these meetings would be made to hazelnut growers and handlers 
in Oregon and Washington and the meetings would be open to all members 
of the industry.
    According to the hearing record, a Board recommendation to add a 
country or region to the trade demand area would be based primarily on 
the potential market conditions and opportunities in the country or 
region. Market considerations could include: Transportation modes and 
costs for getting product to the country or region; non-restrictive or 
at least neutral import and customs requirements; marketing 
infrastructure; consumption habits, holidays or cultural factors to 
which marketing efforts could be tied; economic outlook in the country; 
and other financial and economic factors.
    The record evidence indicates that the characteristics of markets 
in some countries are very close to market characteristics in the 
United States. For instance, Canada, an export market country, is an 
example of a market that could be reviewed in a Board recommendation to 
expand the trade demand area. There is a considerable difference in 
price between hazelnuts sold in the U.S. and the same product sold in 
Canada. Inshell hazelnuts are marketed primarily during the end-of-the-
year holiday season--which is also widely celebrated in Canada. The 
standard of living and disposable income levels in Canada are similar 
to those in the U.S. Thus, the record indicates that, for instance, the 
Board could recommend including Western Canada, or possibly all of 
Canada, in the trade demand area. Other examples of countries or areas 
which could be considered for inclusion in the trade demand area 
include Puerto Rico, and all or part of Mexico.
    The Board would necessarily need to consider the effect adding a 
new country or region to the trade demand area would have on the U.S. 
inshell market. If the inshell supply designated for the trade demand 
area is not increased to meet the expected demand increase in new 
countries or regions, the inshell supply available to the U.S. market 
would be reduced. Thus, the addition of one or more new inshell 
markets, without an increase in inshell supply, could affect the amount 
of inshell hazelnuts available for shipment to domestic U.S. markets.
    Any Board recommendation to shift a country or region from the 
export market to the trade demand area would likely result in a 
corresponding recommendation regarding the free and restricted volumes 
shipped. The Board should include the projected volume for the new 
country or region in inshell trade acquisitions when determining free 
and restricted percentages in its marketing policy recommendation to 
the Secretary. For instance, if Canada is added to the trade demand 
area, inshell shipments to Canada would be included in inshell trade 
acquisitions.
    ``Export'' sales would be only hazelnut sales to those countries or 
regions that are not designated as being in the trade demand area.
    Record evidence also indicates that the Board could recommend to 
the Secretary that a country or region be removed from the trade demand 
area if desired marketing results are not achieved. Indicators of 
failure could include: The volume of sales of hazelnuts in the new 
market were below expectations; the expected prices in the new market 
were not sustained; or the new market resulted in a negative or 
depressing affect on the marketing of hazelnuts in the remainder of the 
trade demand area.
    The record does not suggest a minimum amount of time that a new 
country would be in the trade demand area before the Board could 
recommend its removal to the Secretary. The Board analyzes and 
recommends its marketing policy to the Secretary on an annual basis. 
Such analysis should include a complete and thorough review of any 
changes to the trade demand area that were made during the previous 
marketing season. Any recommendation to remove a country or region from 
the trade demand area would be reviewed by the Export Committee and 
recommended to the Board. Discussions for such a recommendation would 
be held at meetings open to industry members and the public prior to 
any recommendation to the Secretary. Thus, it is apparent that 
implementation of such a recommendation would preclude action to remove 
a country during the same marketing year it was added to the trade 
demand area.
    A conforming change should be made in paragraph (b) of Sec. 982.52 
Disposition of restricted filberts. This amendment was listed as 
proposed material issue 9 in the Notice of Hearing but is discussed in 
this material issue as a conforming change.
    Testimony submitted at the hearing indicates that free hazelnuts 
shipped to the trade demand area are marketed at prices higher than 
export prices. There is concern that exported inshell hazelnuts not be 
re-exported back to the U.S. at prices less than domestic market 
prices. The fourth sentence of Sec. 982.52(b) currently provides that 
exporting handlers obtain certification from buyers that they will not 
re-export inshell hazelnuts back into the U.S. Record evidence 
indicates that, because foreign countries may be added to the trade 
demand area, inshell export sales to countries not in the trade demand 
area should not be exported or shipped onward to any country designated 
in the trade demand area. Thus, certifications signed by importers in 
export countries should include provisions that exported inshell 
hazelnuts not be exported again to any country or region that is part 
of [[Page 30174]] the trade demand area. Inshell hazelnut shipments may 
be shipped from one trade demand area country or market to other 
countries or markets that are also in the trade demand area. Based on 
hearing testimony, the United States is one region and should not be 
subdivided into two or more regions for the purpose of removing some 
states from the trade demand area.
    The proposed amendments should provide the Board with the 
flexibility to take advantage of changing market conditions and do so 
on a timely basis. Thus, Sec. 982.16 should be changed to: (1) Include 
all states in the U.S. in the inshell trade acquisition distribution 
area; and (2) allow the Board, with the approval of the Secretary, to 
add or remove countries or regions to or from the trade demand area. 
The proposed amendment would also make corresponding changes in the 
first sentence of paragraph (b) of Sec. 982.52 to include all states of 
the United States in the trade demand area and add other countries or 
regions to the trade demand area, as recommended by the Board and 
approved by the Secretary. Likewise, a corresponding change should be 
made in the fourth sentence of paragraph (b) to prevent inshell export 
sales from being exported to countries or regions that are included in 
the trade demand area.
    (3) In paragraph (b) of Sec. 982.33, Selection and term of office, 
the length of Board member and alternate member terms of office should 
be changed from one to two years and the number of consecutive terms a 
member could serve should be limited to three terms. Conforming changes 
should be made in provisions covering the qualifications of handlers 
nominating handler members (Sec. 982.30(b)) and weighting handler votes 
in the nomination process (Sec. 982.32(b)), and a minor change should 
be made in Sec. 982.32(a) to remove the reference to initial Board 
members. Finally, when nominating the fourth handler member and 
alternate member, as provided in Sec. 982.32(c), a correction in the 
criteria used to calculate a handler's minimum weighted vote should be 
made and the voting procedure should be amended to provide that 
eligible handlers vote for both the fourth member and fourth alternate 
member.
    The term of office for Board members and alternates has been 
amended twice since promulgation of the order. The record indicates the 
reason for this amendment to change the term of office from one to two 
years is to relieve the administrative burden that yearly nominations 
procedures place on industry members and the Board's administrative 
staff. Nomination meetings, industry voting and ballot counting, and 
resultant certification paperwork have been required of the industry 
and the Board every year since 1959. When two-year terms were in effect 
from 1959 to 1986, the terms were staggered, so that half the members 
were nominated and selected each year. Staggered terms required that 
nomination referenda be held each year and, thus, did not relieve the 
burden on industry members or the Board's administrative staff.
    This amendment would establish two-year terms of office for Board 
members and alternate members with all terms beginning and ending at 
the same time. Thus, the nomination process would be conducted only 
once every two years, thereby reducing by half the administrative 
burden on industry members and the Board's administrative staff. Record 
evidence indicates that, because of the infrequent turnover of new 
members, the lack of staggered terms should not affect the continuity 
of Board membership.
    Also, record evidence indicates that moving to two year terms of 
office would be beneficial to the Board's public member and alternate 
public member. The timing for annual nomination and selection of the 
Board's public member prevents that member from being an active and 
effective participant on the Board. Currently, the public member and 
alternate is nominated at the first meeting of the new Board, usually 
in late August. However, by the time the public member and alternate is 
subsequently selected by the Secretary, many important Board activities 
have been completed for the year. The proposed amendment to establish 
two-year terms of office would enable the public member and alternate 
public member to more actively participate in Board decisions because 
these members would be on the Board for a two-year period.
    If the term of office is changed from one to two years, changes 
also should be made to three provisions regarding Board membership. 
Sections 982.30 and 982.32, regarding establishment of the Board and 
nomination of Board members, respectively, should be amended to provide 
that nominations of the three largest handler members be based on the 
handlers' tonnage during the previous two marketing years. Currently, 
nominations are based on the previous year's handled volume.
    Paragraph (c) of Sec. 982.32 contains an error in the wording which 
specifies the minimum weighted vote handlers may cast in nominating the 
fourth handler member and alternate to serve on the Board. The current 
language says that if a handler eligible to vote for the fourth handler 
position handles less than one ``percent,'' the handler's vote should 
be weighted as one ton. The term ``percent'' does not have any meaning 
without a reference as a percent of something. Testimony on this 
provision in the 1986 formal rulemaking proceeding shows that the 
intent of the industry was for the term to be ton and not percent. This 
error inadvertently occurred between publication of the proposed rule 
(50 FR 42545, October 21, 1985) and final rule (51 FR 29547, August 19, 
1986) in the previous formal rulemaking proceeding in 1985/86. The 
Board has recognized the intent of the provision and has correctly 
recorded handlers' weighted votes when tabulating votes for the fourth 
handler member and alternate member. Thus, in the third sentence of 
paragraph (c) of Sec. 982.32, the term ``percent'' should be replaced 
with the term ``ton.''
    Paragraph (c) of Sec. 982.32 should also be amended by changing the 
last sentence regarding the casting of votes for the fourth handler 
member and alternate member. Current paragraph (c) provides that 
handlers vote for one candidate and the candidate receiving the highest 
number of votes shall be the fourth handler member nominee and the 
candidate receiving the second highest number of votes shall be the 
fourth handler alternate member nominee. This proposal provides that 
each eligible handler shall cast two separate votes: one for the fourth 
handler member and one for the fourth handler alternate member. The 
candidates who receive the highest numbers of votes in each category 
would be the nominees.
    Currently, paragraph (b) of Sec. 982.33 limits the number of 
consecutive one year terms a member may serve to six terms. To maintain 
the order's intent that members and alternates should not serve more 
than six consecutive years, paragraph (b) should be amended to provide 
for a maximum of three consecutive two-year terms of office. If 
approved in referendum and by the Secretary, the three term limit would 
begin with the first nominations held after completion of this formal 
rulemaking process. Thus, any standing Board members and alternates 
nominated and selected for the first two year term would be eligible to 
serve two additional terms, regardless of past service. Also, this 
amendment would not restrict a member who has served three consecutive 
terms from then serving three consecutive terms as an alternate member 
or for an alternate member who has served three 
[[Page 30175]] consecutive terms from then serving three consecutive 
terms as a member.
    The Board recommended a minor wording change in Sec. 982.32(a) 
which would remove the reference to ``initial'' Board members as those 
members serving prior to the amendment of the order. This change would 
simplify the wording of the paragraph and make it consistent with the 
changing nature of Board membership. The proposed amended paragraph 
would provide that members and alternate members of the Board serving 
immediately prior to the effective date of this amended subpart shall 
continue to serve until their respective successors have been selected.
    Thus, Sec. 982.33 should be amended to provide two year terms of 
office for Board members and alternate members. Sections 982.30 and 
982.32 covering nominating qualifications, weighting handler votes, 
voting procedures, and consecutive terms should also be changed for 
consistency and conformity with two-year office terms.
    (4) In paragraph (b) of Sec. 982.37, Procedure, the requirement 
that Board votes by telephone, telegraph or other means of long 
distance communication be confirmed in writing should be amended to 
provide that such votes remain unconfirmed until the next public Board 
meeting.
    The Board generally meets twice a year. At least once each year 
over the last five years, the Board has found it necessary to vote on 
an issue by telephone. The issue has been the final budget which must 
be submitted to the Department at a time when there are no scheduled 
Board meetings.
    Record evidence indicates that it is difficult to obtain written 
confirmation of all telephone votes cast by Board members. All 
telephone votes must be confirmed, and written confirmation must be 
unanimous. Even though a ballot is mailed to each member, and follow-up 
calls are made to those who have not submitted their written ballot, 
some members fail to respond.
    Because of such confirmation delays, some telephone votes have been 
confirmed at the next public Board meeting. At these meetings, the 
members confirm their original vote and reaffirm their position. This 
procedure should be on the record and so recorded in the committee 
minutes. Reaffirmation must be unanimous. The record indicates that, 
under the proposed amendment, if any member were to change his or her 
original vote, the issue would be debated again and a new vote by all 
committee members would be taken. The second vote would require passage 
by a simple majority.
    The record indicates that telephone votes should be taken only on 
issues that are known to be non-controversial. If an issue is known to 
have any one member or industry group against it, a telephone vote on 
the issue would not be taken and a public meeting would have to be 
called for consideration of the issue.
    The record also indicates that a vote cast by facsimile 
transmission is considered a vote by ``other means of communication.'' 
While a facsimile transmission produces a piece of paper which is 
received and held by the Board staff, the vote would still have to be 
confirmed at the next public Board meeting.
    Thus, Sec. 982.37(b) should be amended to provide that Board votes 
cast by telephone, telegraph or other means of communication shall be 
confirmed at the next regularly scheduled Board meeting and that such 
confirmation shall require ten concurring votes.
    (5) In paragraph (i) of Sec. 982.39, Duties, the requirement that 
the Board furnish verbatim reports of its marketing policy meetings to 
the Secretary should be amended to require that summary reports of such 
meetings be furnished to the Secretary.
    The promulgation documentation provided that a ``complete report of 
the proceedings'' of the Board meeting establishing a marketing policy 
recommendation be reported to the Secretary (14 FR 5669, September 15, 
1949). Because the Board in 1959 was providing verbatim reports of 
marketing policy deliberations, the verbatim requirement was added to 
the reporting requirement (24 FR 4173, May 23, 1959) and the 
requirement was moved to paragraph (5) of Sec. 982.39 Duties (24 FR 
5307, June 30, 1959). The amendment stated that only that portion of a 
meeting dealing directly with marketing policy discussions be reported 
verbatim.
    However, the record indicates that verbatim reports are impractical 
because either a court reporter has to be contracted or a recording 
would have to be exactly transcribed by a Board employee. Either of 
these alternatives requires an extra expense for the Board and results 
in a delay in completing the report.
    This amendment would establish that the Board tape record all 
meetings and then summarize the proceedings using the tape recording to 
ensure a complete and thorough report. The record testimony reports 
that this process should take considerably less time and be less costly 
than making a direct transcript of the recording. This revised 
procedure is expected to maintain the accuracy of the meeting report.
    Thus, Sec. 982.39(i) should be amended to provide that the Board 
furnish the Secretary a report of the proceedings of each meeting of 
the Board held for the purpose of marketing policy recommendations.
    (6) In paragraph (c)(2) of Sec. 982.40, Marketing policy and volume 
regulation, the Board should be provided some flexibility in 
recommending final free and restricted percentages. In the 1985-86 
amendment of the order, development of the Board's annual marketing 
policy and volume regulation action were established to follow specific 
procedures and formula computations. This amendment would enable the 
Board to better respond to market conditions when recommending the 
final free and restricted percentages.
    On or before November 15, the Board meets to recommend to the 
Secretary, the establishment of interim final and final free and 
restricted percentages. The interim final percentage results in the 
release of 100 percent of the inshell trade demand previously computed 
by the Board. Paragraph (c)(2) of Sec. 982.40 now requires that the 
final percentages release an additional 15 percent of the average of 
the preceding three years' trade acquisitions of inshell hazelnuts for 
desirable carryout.
    This amendment focuses on the mandatory release of the final 15 
percent. Record evidence indicates that the mandatory release of the 
entire tonnage resulting from the additional 15 percent can sometimes 
be harmful to the market and may not always be in the best interest of 
the industry. For instance, the mandatory release of the final 15 
percent could place an excess supply of hazelnuts on the market and 
result in a weak market. Market conditions may be such that release of 
a smaller final percentage would be a wiser marketing policy. This 
amendment provides the Board with that flexibility when recommending 
the final free and restricted percentages.
    In addition to complying with the provisions of the marketing 
order, the Board must also consider the Department's 1982 ``Guidelines 
for Fruit, Vegetable, and Specialty Crop Marketing Orders'' 
(Guidelines) when recommending marketing policy computations. Volume 
control regulation provides the industry a means of collectively 
limiting the supply of inshell hazelnuts available for sale in the 
trade demand area. The Guidelines provide that the trade demand area 
have available a quantity equal to at least 110 percent of recent 
years' sales in the trade demand area before volume regulations can be 
implemented. This provides for [[Page 30176]] plentiful supplies for 
consumers and for market expansion while retaining a mechanism for 
dealing with oversupply situations.
    The hazelnut industry in Oregon and Washington has satisfied the 
Guidelines' 110 percent requirement. Pursuant to Sec. 982.40(b), each 
year the Board may, for market expansion purposes, increase inshell 
trade demand by an amount up to 25 percent of the previous 3 years' 
average inshell trade acquisitions. In addition, the Board must add to 
the adjusted inshell trade demand a total of 15 percent of the 3-year 
inshell trade acquisition average to meet the desirable carryout 
requirement of Sec. 982.40(c)(2). This more than meets the 110 percent 
requirement.
    Over the years, the authority for these increases has caused the 
Board to exceed the Guidelines' 110 percent requirement. It is possible 
that the Board could choose to recommend a market expansion increase 
and a final free and restricted percentage increase that totalled less 
than the Guidelines' 110 percent requirement. However, based on present 
Board practices, such a recommendation is not expected. Any Board 
recommendation that totalled less than the 110 percent requirement 
could be referred by the Secretary back to the Board.
    Thus, Sec. 982.40(c)(2) should be amended to provide that the final 
free and restricted percentages may release up to an additional 15 
percent of the average of the preceding three years' trade acquisitions 
of inshell hazelnuts for desirable carryout.
    (7) In paragraph (b) of Sec. 982.46, Inspection and certification, 
specific identification practices for the handling and withholding of 
restricted obligation hazelnuts should be amended to provide that all 
inspected and certified hazelnuts shall be identified as prescribed by 
the Board.
    Traditionally, hazelnuts were inspected and certified as either 
free or restricted before or during handling, or before being set aside 
as withheld for restricted obligation. Paragraph (b) provides that 
handlers use seals, stamps, tags or other identification fixed to the 
containers to identify lots set aside as either free or restricted 
hazelnuts. However, the record indicates that, since 1975, industry 
practices have changed significantly and now allow handlers to 
substitute fresh hazelnut lots for free and restricted lots that have 
been set aside. It is no longer necessary for handlers to meet their 
volume control obligations by maintaining restricted lots that are 
sealed, stamped, tagged, or otherwise so identified.
    Under the proposed amendment, the Board may prescribe other methods 
of identification of restricted obligation hazelnuts. The record 
indicates that the Board currently allows handlers to carryover 
hazelnuts which are reported as either undeclared, declared restricted, 
or declared free. The hazelnuts are reported as one or the other, but 
do not have to be specifically so marked.
    These relaxed identification procedures would enable handlers to 
continue to meet identification requirements for restricted obligation 
hazelnuts without setting aside specific, identifiable lots. The 
amended procedures would bring the marketing order provisions up-to-
date with current industry practices. Thus, Sec. 982.46(b) should be 
amended to provide that hazelnuts inspected and certified for free and 
restricted use shall be identified as prescribed by the Board.
    (8) In paragraph (a) of Sec. 982.51, Restricted credit for ungraded 
inshell hazelnuts and for shelled hazelnuts, the current language that 
authorizes handler credit for ungraded hazelnuts should be amended to 
delete an incorrect and misleading term.
    This provision allows handlers to receive merchantable credit for 
ungraded inshell hazelnuts they hold to meet their restricted 
obligation. The hazelnuts must be inspected to determine kernel weight, 
which is converted back to an inshell equivalent. The industry uses a 
conversion factor of 60 percent shell or waste product and 40 percent 
kernel weight. Thus, it takes 2.5 pounds of inshell hazelnuts to make 1 
pound of hazelnut kernels--a conversion factor of 2.5 to 1.
    However, the first sentence of paragraph (a) of Sec. 982.51 states 
that the conversion factor is 2.5 ``percent.'' The term ``percent'' is 
not correct and, in fact, greatly reduces the conversion factor. If the 
conversion factor was to be represented as a percentage, it would be 
250 percent. This error evidently occurred when Sec. 982.51 was amended 
in 1986. The Board and industry handlers have been operating on the 
correct conversion factor of 2.5 to 1. Thus, the language that 
specifies handler credit for ungraded hazelnuts in Sec. 982.51 should 
be amended to correct the conversion factor as stated herein.
    (9) In Sec. 982.54, Deferment of restricted obligation, several 
changes and conforming changes should be made to provisions regarding 
bonding values and rates, the use of defaulted bond funds, and the 
Board's flexibility when dispensing defaulted bond funds.
    Prior to or upon shipping inshell hazelnuts to the trade demand 
area, handlers are required to withhold from handling a quantity of 
hazelnuts equal to the restricted obligation resulting from that 
shipment. Hazelnuts so withheld may be exported inshell or shelled. The 
withholding obligation also may be deferred. Section 982.54 provides 
that a handler may post a bond as a guarantee that the handler will 
eventually fulfill the handler's restricted obligations. Hearing 
testimony indicates that the provision establishing the bonding rate 
currently specified in the order is too high and too burdensome on 
handlers under present marketing conditions.
    Handlers may either shell or export inshell as many hazelnuts as 
they wish, but they are limited in the amount of inshell hazelnuts they 
can sell as free tonnage in the trade demand area when volume 
regulations are in effect. Volume regulations under the order require 
that, prior to or upon shipping inshell hazelnuts to the trade demand 
area, handlers shall withhold from handling a quantity of hazelnuts 
equal to the restricted obligation resulting from that shipment. 
Hazelnuts so withheld may be certified merchantable, inspected 
ungraded, or certified shelled. The domestic inshell market is 
extremely seasonal with most of the shipments occurring in October or 
early November, the same period when hazelnuts are harvested and 
delivered to handlers. During this period, handlers do not have enough 
hazelnuts certified, inspected, or shelled to meet their restricted 
obligations. Therefore, handlers use the bonding provisions in the 
order to defer a large part of their obligations.
    As domestic use of inshell hazelnuts has declined and production 
has increased, the percent of the crop going to the primary inshell 
market has dropped. For example, in the 1993-94 marketing season, the 
free percentage was only 13 percent--resulting in a restricted 
obligation nearly 6.7 times the quantity handled for the free market. 
Such a high restricted obligation-to-handling ratio makes a bonding 
rate based on the price for inshell hazelnuts very burdensome. Such a 
high bonding rate is not necessary as long as the bonding rate reflects 
the difference between the domestic inshell price and the returns 
available in authorized markets for restricted hazelnuts such as 
inshell exports or shelling.
    Inshell exports have been a large and growing market for restricted 
hazelnuts. In some years, the average reported value for inshell 
exports has exceeded domestic quotations for domestic sales of U.S. No. 
1 large hazelnuts. This apparently results from a willingness of some 
foreign buyers to pay a significant [[Page 30177]] premium for the 
largest sizes of hazelnuts. Thus, restricted disposition credits earned 
by exporting inshell hazelnuts may reflect little or no loss compared 
to the domestic inshell market.
    The order authorizes the transfer of restricted disposition credits 
between handlers, and some handlers use this authority.
    The record shows that members of the Board, particularly its 
handler members, have knowledge of the marketing opportunities in 
various restricted outlets and knowledge of the transfer of restricted 
disposition credits. Thus, the Board should be capable of using these 
factors to calculate an appropriate bonding rate that is financially 
acceptable but not so low as to encourage handlers to default on their 
bonds.
    The proposed amendments would change the method by which the Board 
determines the rate of the bond. Paragraphs (b), (c), (d), (e) and (f) 
of Sec. 982.54 would be amended to replace terminology that ties 
bonding rates to the value of quantities handled or certified for 
handling. Instead, bonding rates would be tied to the estimated value 
of restricted credits as established by the Board. A bonding rate based 
on the value of restricted disposition credits should provide adequate 
protection against default and would be much less burdensome.
    Paragraph (b) provides that the bonding value for each handler be 
established by multiplying the deferred restricted obligation poundage 
bearing the lowest bonding rate by the applicable bonding rate. Under 
the proposed amended paragraph (b), the bonding value would be 
determined by multiplying the deferred restricted obligation poundage 
by the applicable bonding rate.
    Paragraph (c) provides for a bonding rate for each pack withheld 
which is the amount per pound as established by the Board. Under the 
proposed amended paragraph (c), the Board would establish the bonding 
rate based on the Board's estimated value of restricted credits. Record 
evidence indicates that the value of credits should be based on the 
value of hazelnuts in all markets--restricted as well as free. Because 
restricted market hazelnuts usually have less market value than free 
hazelnuts, the credit value usually is less than the actual market 
value of free hazelnuts. Thus, a bond based on credit value would lower 
the value of the bond, making it a more acceptable burden for handlers. 
The record also indicates that a bond value based on credits would be 
high enough to discourage handlers from voluntarily defaulting on their 
bond.
    Paragraph (d) requires the Board to use the funds collected from 
defaulted bond payments to purchase quantities of certified 
merchantable hazelnuts on which the restricted obligations have been 
met. To make paragraph (d) consistent with amended paragraph (c), the 
Board would use defaulted bond funds to purchase restricted credits 
from handlers.
    Paragraph (e) provides that unexpended funds resulting from 
defaulted bond payments remaining at the end of the marketing year 
would be used by the Board to pay its expenses and in the purchase of 
hazelnuts as provided in paragraph (d). Consistent with amended 
paragraph (d), a conforming change would be made in amended paragraph 
(e) to provide that unexpended funds resulting from defaulted bond 
payments remaining at the end of the marketing year could be used by 
the Board to purchase restricted credits, rather than merchantable 
hazelnuts, on which the restricted obligation has been met.
    The last sentence in paragraph (e) provides that any balance of 
funds collected from defaulted bond obligations remaining at the end of 
the marketing year after payment of Board expenses, including 
administrative costs and the purchase of hazelnuts, would be returned 
pro-rata to all handlers. However, experience indicates that no such 
unused funds have remained at the end of recent marketing years to be 
refunded to handlers. Bond payments based on restricted credit values 
are expected to result in fewer defaults and less default funds 
collected. Thus, a marketing year that would produce an excess of 
defaulted bond funds is not likely to occur. In addition, paragraph (b) 
of Sec. 982.62 provides Board authority to return excess funds at the 
end of each marketing year.
    Paragraph (f) currently provides that merchantable hazelnuts 
purchased by the Board as provided in paragraph (d) shall be turned 
over to handlers who have defaulted on their bonds for disposal by the 
handlers as restricted hazelnuts. A conforming change would be made in 
amended paragraph (f) to provide that the restricted credits purchased 
by the Board under amended paragraph (d) would be turned over to those 
handlers who have defaulted on their bonds for liquidation of their 
restricted obligation.
    The record indicates that some small handlers only shell hazelnuts 
and have no need to use the bonding authority. This proposed amendment 
would have no effect on these handlers. All handlers who use the 
bonding authority would benefit from the reduced cost of the lower 
bonding rates.
    Therefore, paragraphs (b), (c) and (d) of Sec. 982.54 should be 
amended to provide, respectively, that: the bonding value be determined 
by multiplying the deferred restricted obligation poundage by the 
applicable bonding rate; the bonding rate be based on the estimated 
value of restricted credits; and the Board use handlers' defaulted bond 
funds to purchase restricted credits. Conforming changes should also be 
made to paragraphs (e) unexpended sums and (f) transfer of purchases.
    (10) Section 982.57, Exemptions, should be amended to clarify that 
mail order sales are not exempt from order requirements.
    This provision was amended in 1986 to clarify that hazelnuts sold 
directly to end users (consumers) at a grower's ranch or orchard, or at 
roadside stands and farmers markets are exempt from regulatory and 
assessment provisions of the order. No testimony was provided at the 
amendment hearing in 1985 to suggest that mail order sales should be 
exempt from order regulations. However, some growers and handlers in 
the industry believe that the exemption provision applies also to mail 
order sales.
    To help correct this misinterpretation, the Board proposed that 
Sec. 982.57 be amended by adding a sentence at the end of paragraph (b) 
to clarify that mail order sales are not considered exempt from order 
requirements.
    The added sentence that appeared in the Notice of hearing for this 
rulemaking (59 FR 9428; February 28, 1994) included a phrase that could 
cause further confusion among industry members. The proposed sentence 
in the Notice of hearing reads, ``Mail order sales to destinations 
outside the area of production are not considered to be exempt sales 
under this part.'' The phrase ``to destinations outside the area of 
production'' could be interpreted to mean that mail order sales to 
destinations inside the States of Oregon and Washington would be exempt 
from order requirements. However, this is not consistent with Board 
policy.
    It is current Board policy that no exemptions are authorized for 
mail order sales, regardless of destination. Hearing testimony 
indicated that the Board has always considered that no mail order sales 
are exempt from order regulations. Testimony further indicates that 
this amendment is not a change in policy. Thus, the proposed clarifying 
sentence should read: ``Mail order sales are not exempt sales under 
this part.'' [[Page 30178]] 
    Therefore, paragraph (b) of 982.57 should be amended by adding the 
clarification that mail order sales are not exempt sales under the 
order.
    (11) A new paragraph (b) of Sec. 982.61, Assessments, should be 
established to allow the Board to accept advance assessment payments, 
provide discounts for such advanced payments, and borrow funds. Also, a 
new Sec. 982.63 Contributions, should be established to allow the Board 
to accept voluntary contributions for payment of research, promotion, 
and market development activities.
    The marketing order's fiscal period begins July 1, which is three 
months before the hazelnut harvest and four months before receipt of 
assessment payments for the new marketing year. During the initial four 
months, the Board's access to funds is limited. The first proposed 
amendment is intended to increase the Board's ability to obtain funds 
on a temporary basis early in the marketing year. While marketing order 
reserve funds may be used to pay for planned research and promotion 
programs and other administrative obligations, record evidence 
indicates that the Board would prefer to accept advance assessment 
payments or borrow funds rather than draw from the order's reserve 
funds to pay for financial obligations that might occur prior to the 
accumulation of assessment funds.
    The second amendment would allow the Board to increase funds--
through contributions--to pay expenses incurred under Sec. 982.58, 
Research, promotion and market development. A minor change would be 
added to Sec. 982.52 to make that provision consistent with the 
proposed new paragraph. The record indicates that these amendments are 
not proposed in response to any specific program or current need.
    Testimony indicates that with access to additional funds the Board 
would have the opportunity to enter into significant marketing or 
promotional programs in conjunction with other commodity groups. 
Likewise, the Board would have the ability to meet unforeseen increases 
in administrative obligations that may occur at the start of a 
marketing year. While such promotional opportunities or emergency needs 
have not occurred in the past, the Board believes it is important that 
the Board have the ability to accrue additional funds, if needed.
    Record evidence does not provide guidelines or procedures as to how 
the Board would announce and collect advanced assessment payments or 
borrow funds. The record does indicate, however, that after approval of 
the proposed amendment, guidelines and procedures to implement the 
amendment would be discussed by the Board in a public meeting and 
recommended to the Secretary for approval through informal rulemaking 
procedures.
    To encourage advance payment, the Board recommended that advance 
assessment payments be discounted. Record evidence indicates that the 
amount of discount could be closely tied to prevailing commercial bank 
interest rates. A discount assessment rate based on commercial bank 
interest rates would encourage handlers who pay advanced assessments 
because they would not lose more money than they would accrue if their 
advanced assessment payment was held in a commercial bank interest 
bearing account. Discounted assessment payment opportunities should be 
available to all handlers throughout the production area.
    The record confirms that a decision to accept advance assessment 
payments and offer discounts for such payments would be made at public 
meetings open to all industry members. Any additional administrative 
and operating procedures needed for the collection of advance 
assessment payments and the calculation of appropriate advance payment 
discounts should be recommended by the Board to the Secretary for 
approval. The record evidence indicates that the Board's administrative 
staff has the capability to assure that advance assessment payments and 
borrowed funds would be properly budgeted and expended for the 
authorized purposes for which they would be collected.
    This recommendation would be established by designating the current 
assessment provision as paragraph (a) and adding a new paragraph (b) to 
provide that the Board should have the authority to offer handlers the 
opportunity to pay assessments in advance and receive a discount on 
such assessments paid. New paragraph (b) would provide the Board with 
authority, with Secretarial approval, to borrow funds early in the 
marketing year. Such borrowed funds would be used to meet program or 
fiscal needs as described above.
    The record indicates that funds should be borrowed from lending 
institutions rather than from industry handlers. The Board would make 
the decision to borrow funds based on recommendations of the 
appropriate committee that establishes the need for the borrowed funds. 
For example, the Executive Promotion Committee and the Promotion 
Committee could recommend that the Board should borrow funds for a 
specified promotion project or program. The record also suggests that 
borrowed funds should be paid back within the same marketing year, so 
as not to encumber future Boards with the financial obligations of its 
predecessors.
    The Board proposes that a new Sec. 982.63, Contributions, be 
established to provide the Board with the authority to accept 
contributions. Such contributions would be used only to pay for 
production research, market research and development, and market 
promotion programs, including paid advertising. Such research and 
development programs would be designed to improve or promote the 
marketing, distribution, consumption or efficient production of 
hazelnuts. The Board would not be able to accept contributions that 
might have stipulations or other provisos on the expenditure of 
contributed funds. Thus, the Board would have complete control over the 
expenditure of contributed funds. The record indicates that the Board 
has not received contribution offers but would like the authority to 
accept contributions in the future should they be offered.
    The record also indicates that the proviso specifying contributions 
be free from any encumbrances by the donor is not intended to prevent 
the Board from entering into joint promotional programs with other 
agencies. However, funding for such joint programs may not come from 
donations which specify the intended use of the donated funds.
    Therefore, Sec. 982.61 should be amended by adding a new paragraph 
(b) that provides the Board with the authority to collect advance 
assessment payments, offer discounts for such payments, and borrow 
money to provide funds for administration of the order during the early 
months of the marketing period. Also, a new Sec. 982.63, Contributions, 
should be established to provide the Board with the authority to accept 
contributions, provided that such contributions are used to pay 
expenses incurred pursuant to Sec. 982.58 and are free of any 
encumbrances by the donor. A conforming change should be made to 
Sec. 982.58, adding contributions as a source of funds that may only be 
used to pay research, promotion and market development expenses.
    (12) The Department proposed in the public hearing to make such 
changes as are necessary to conform with any amendment that may result 
from the hearing. This proposal was supported at the hearing without 
opposition. Record evidence supports these changes. [[Page 30179]] 

Rulings on Briefs of Interested Persons

    The presiding officer of the hearing set April 8, 1994, as the 
final date for filing briefs with respect to the evidence presented at 
the hearing and the conclusions which should be drawn therefrom. No 
briefs were received.

General Findings

    Upon the basis of the record, it is found that:
    (1) The findings hereinafter set forth are supplementary to the 
previous findings and determinations which were made in connection with 
the issuance of the marketing agreement and order and each previously 
issued amendment thereto. Except insofar as such findings and 
determinations may be in conflict with the findings and determinations 
set forth herein, all of the said prior findings and determinations are 
hereby ratified and affirmed;
    (2) The marketing agreement and order, as amended, and hereby 
proposed to be further amended, and all of the terms and conditions 
thereof, will tend to effectuate the declared policy of the Act;
    (3) The marketing agreement and order, as amended, and as hereby 
proposed to be further amended, regulate the handling of hazelnuts 
grown in the production area in the same manner as, and are applicable 
only to, persons in the respective classes of commercial and industrial 
activity specified in the marketing agreement and order upon which a 
hearing has been held;
    (4) The marketing agreement and order, as amended, and as hereby 
proposed to be further amended, are limited in their application to the 
smallest regional production area which is practicable, consistent with 
carrying out the declared policy of the Act, and the issuance of 
several orders applicable to subdivisions of the production area would 
not effectively carry out the declared policy of the Act; and
    (5) All handling of hazelnuts grown in the production area as 
defined in the marketing agreement and order, as amended, and as hereby 
proposed to be further amended, is in the current of interstate or 
foreign commerce or directly burdens, obstructs or affects such 
commerce.

List of Subjects in 7 CFR Part 982

    Filberts, Hazelnuts, Marketing agreements, Nuts, Reporting and 
recordkeeping requirements.

    For the reasons set forth in the preamble, 7 CFR part 982 is 
proposed to be amended as follows:

PART 982--FILBERTS/HAZELNUTS GROWN IN OREGON AND WASHINGTON

    1. The authority citation for 7 CFR part 982 continues to read as 
follows:

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

    2. In part 982 all references to ``filbert'', ``filberts'', 
``filbert/hazelnut'', ``filberts/hazelnuts'' are revised to read as 
``hazelnut'', ``hazelnuts'', ``hazelnut'', and hazelnuts'', 
respectively.
    3. Section 982.4 is revised to read as follows:


Sec. 982.4  Hazelnuts.

    Hazelnuts means hazelnuts or filberts produced in the States of 
Oregon and Washington from trees of the genus Corylus.
    4. Section 982.16 is revised to read as follows:


Sec. 982.16  Inshell trade acquisitions.

    Inshell trade acquisitions means the quantity of inshell hazelnuts 
acquired by the trade from all handlers during a marketing year for 
distribution in the continental United States and such other 
distribution areas as may be recommended by the Board and established 
by the Secretary.
    5. Section 982.30 is amended by revising paragraphs (a), (b)(1), 
(b)(2), and (b)(3) to read as follows:


Sec. 982.30  Establishment and membership.

    (a) There is hereby established a Hazelnut Marketing Board 
consisting of 10 members, each of whom shall have an alternate member, 
to administer the terms and provisions of this part. Each member and 
alternate shall meet the same eligibility qualifications. The 10 member 
positions shall be allocated as follows:
    (b) * * *
    (1) One member shall be nominated by the handler who handled the 
largest volume of hazelnuts during the two marketing years preceding 
the marketing year in which nominations are made;
    (2) One member shall be nominated by the handler who handled the 
second largest volume of hazelnuts during the two marketing years 
preceding the marketing year in which nominations are made;
    (3) One member shall be nominated by the handler who handled the 
third largest volume of hazelnuts during the two marketing years 
preceding the marketing year in which nominations are made;
* * * * *
    6. In Sec. 982.32, paragraphs (a), (b), (c) and (f) are revised to 
read as follows:


Sec. 982.32  Initial members and nomination of successor members.

    (a) Members and alternate members of the Board serving immediately 
prior to the effective date of this amended subpart shall continue to 
serve on the Board until their respective successors have been 
selected.
    (b) Nominations for successor handler members and alternate members 
specified in Sec. 982.30(b) (1) through (3) shall be made by the 
largest, second largest, and third largest handler determined according 
to the tonnage of certified merchantable hazelnuts and, when shelled 
hazelnut grade and size regulations are in effect, the inshell 
equivalent of certified shelled hazelnuts (computed to the nearest 
whole ton) recorded by the Board as handled by each such handler during 
the two marketing years preceding the marketing year in which 
nominations are made.
    (c) Nominations for successor handler member and alternate handler 
member positions specified in Sec. 982.30(b)(4) shall be made by the 
handlers in that category by mail ballot. All votes cast shall be 
weighted according to the tonnage of certified merchantable hazelnuts 
and, when shelled hazelnut grade and size regulations are in effect, 
the inshell equivalent of certified shelled hazelnuts (computed to the 
nearest whole ton) recorded by the Board as handled by each handler 
during the two marketing years preceding the marketing year in which 
nominations are made. If less than one ton is recorded for any such 
handler, the vote shall be weighted as one ton. Voting will be by 
position, and each eligible handler can vote for a member and an 
alternate member. The person receiving the highest number of weighted 
votes for each position shall be the nominee for that respective 
position.
* * * * *
    (f) Nominations received in the foregoing manner by the Board for 
all handler and grower member and alternate member positions shall be 
certified and sent to the Secretary at least 60 days prior to the 
beginning of each two-year term of office, together with all necessary 
data and other information deemed by the Board to be pertinent or 
requested by the Secretary. If nominations are not made within the time 
and manner specified in this subpart, the Secretary may, without regard 
to nominations, select the Board members and alternates on the basis of 
the representation provided for in this subpart.
* * * * * [[Page 30180]] 
    7. In Sec. 982.33, paragraph (b) is revised to read as follows:


Sec. 982.33  Selection and term of office.

* * * * *
    (b) Term of office. The term of office of Board members and their 
alternates shall be for two years beginning on July 1 and ending on 
June 30, but they shall serve until their respective successors are 
selected and have qualified: Provided, That beginning with the 199____-
9____ marketing year, no member shall serve more than three consecutive 
two-year terms as member and no alternate member shall serve more than 
three consecutive two-year terms as alternate unless specifically 
exempted by the Secretary. Nomination elections for all Board grower 
and handler member and alternate positions shall be held every two 
years.
* * * * *
    8. In Sec. 982.37, paragraph (b) is revised to read as follows:


Sec. 982.37  Procedure.

* * * * *
    (b) The Board may vote by mail, telephone, telegraph, or other 
means of communication: Provided, That any votes (except mail votes) so 
cast shall be confirmed at the next regularly scheduled meeting. When 
any proposition is submitted for voting by any such method, its 
adoption shall require 10 concurring votes.
* * * * *
    9. In Sec. 982.39, paragraph (i) is revised to read as follows:


Sec. 982.39  Duties.

* * * * *
    (i) To furnish to the Secretary a report of the proceedings of each 
meeting of the Board held for the purpose of making marketing policy 
recommendations.
    10. In Sec. 982.40, paragraph (c)(2) introductory text is amended 
by removing the word ``shall'' in the third sentence and adding in its 
place the word ``may''.
    11. In Sec. 982.46, paragraph (b) is revised to read as follows:


Sec. 982.46  Inspection and certification.

* * * * *
    (b) All hazelnuts so inspected and certified shall be identified as 
prescribed by the Board. Such identification shall be affixed to the 
hazelnut containers by the handler under direction and supervision of 
the Board or the Federal-State Inspection Service, and shall not be 
removed or altered by any person except as directed by the Board.
* * * * *


Sec. 982.51  [Amended]

    12. In Sec. 982.51, paragraph (a) is amended by removing the word 
``percent'' at the end of the first sentence.
    13. In Sec. 982.52, paragraph (b) is revised to read as follows:


Sec. 982.52  Disposition of restricted hazelnuts.

* * * * *
    (b) Export. Sales of certified merchantable restricted hazelnuts 
for shipment to destinations outside the United States and such other 
distribution areas as may be recommended by the Board and established 
by the Secretary shall be made only by the Board. Any handler desiring 
to export any part or all of that handler's certified merchantable 
restricted hazelnuts shall deliver to the Board the certified 
merchantable restricted hazelnuts to be exported, but the Board shall 
be obligated to sell in export only such quantities for which it may be 
able to find satisfactory export outlets. Any hazelnuts so delivered 
for export which the Board is unable to export shall be returned to the 
handler delivering them. Sales for export shall be made by the Board 
only on execution of an agreement to prevent exportation into the area 
designated in Sec. 982.16. A handler may be permitted to act as an 
agent of the Board, upon such terms and conditions as the Board may 
specify, in negotiating export sales, and when so acting shall be 
entitled to receive a selling commission as authorized by the Board. 
The proceeds of all export sales, after deducting all expenses actually 
and necessarily incurred, shall be paid to the handler whose certified 
merchantable restricted hazelnuts are so sold by the Board.
* * * * *
    14. In Sec. 982.54, paragraphs (b), (c), (d), (e) and (f) are 
revised to read as follows:


Sec. 982.54  Deferment of restricted obligation.

* * * * *
    (b) Bonding requirement. Such bond or bonds shall, at all times 
during their effective period, be in such amounts that the aggregate 
thereof shall be no less than the total bonding value of the handler's 
deferred restricted obligation. The bonding value shall be the deferred 
restricted obligation poundage multiplied by the applicable bonding 
rate. The cost of such bond or bonds shall be borne by the handler 
filing same.
    (c) Bonding rate. Said bonding rate shall be an amount per pound as 
established by the Board. Such bonding rate shall be based on the 
estimated value of restricted credits for the current marketing year. 
Until bonding rates for a marketing year are fixed, the rates in effect 
for the preceding marketing year shall continue in effect. The Board 
should make any necessary adjustments once such new rates are fixed.
    (d) Restricted credit purchases. Any sums collected through default 
of a handler on the handler's bond shall be used by the Board to 
purchase restricted credits from handlers, who have such restricted 
credits in excess of their needs, and are willing to part with them. 
The Board shall at all times purchase the lowest priced restricted 
credits offered, and the purchases shall be made from the various 
handlers as nearly as practicable in proportion to the quantity of 
their respective offerings of the restricted credits to be purchased.
    (e) Unexpended sums. Any unexpended sums which have been collected 
by the Board through default of a handler on the handler's bond, 
remaining in the possession of the Board at the end of a marketing 
year, shall be used to reimburse the Board for its expenses, including 
administrative and other costs incurred in the collection of such sums, 
and in the purchase of restricted credits as provided in paragraph (d) 
of this section.
    (f) Transfer of restricted credit purchases. Restricted credits 
purchased as provided for in this section shall be turned over to those 
handlers who have defaulted on their bonds for liquidation of their 
restricted obligation. The quantity delivered to each handler shall be 
that quantity represented by sums collected through default.
* * * * *
    15. In Sec. 982.57, paragraph (b) is revised to read as follows:


Sec. 982.57  Exemptions.

* * * * *
    (b) Sales by growers direct to consumers. Any hazelnut grower may 
sell hazelnuts of such grower's own production free of the regulatory 
and assessment provisions of this part if such grower sells such 
hazelnuts in the area of production directly to end users at such 
grower's ranch or orchard or at roadside stands and farmers' markets. 
The Board, with the approval of the Secretary, may establish such 
rules, regulations, and safeguards and require such reports, 
certifications, and other conditions, as are necessary to ensure that 
such hazelnuts are disposed of only as authorized. Mail order sales are 
not exempt sales under this part.
    16. In Sec. 982.58, the last sentence of paragraph (a) is revised 
to read as follows: [[Page 30181]] 


Sec. 982.58  Research, promotion, and market development.

    (a) * * * The expenses of such projects shall be paid from funds 
collected pursuant to Sec. 982.61, Sec. 982.63, or credited pursuant to 
paragraph (b) of this section.
* * * * *
    17. Section 982.61 is amended by designating the existing 
undesignated paragraph as paragraph (a) and adding a new paragraph (b) 
to read as follows:


Sec. 982.61  Assessments.

    (a) * * *
    (b) In order to provide funds for the administration of the 
provisions of this part during the first part of a fiscal period before 
sufficient operating income is available from assessments on the 
current year's shipments, the Board may accept the payment of 
assessments in advance, and may also borrow money for such purpose. 
Further, payment discounts may be authorized by the Board upon the 
approval of the Secretary to handlers making such advance assessment 
payments.
    18. A new Sec. 982.63 is added to read as follows:


Sec. 982.63  Contributions.

    The Board may accept voluntary contributions but these shall only 
be used to pay expenses incurred pursuant to Sec. 982.58. Furthermore, 
such contributions shall be free from any encumbrances by the donor and 
the Board shall retain complete control of their use.

    Dated: May 24, 1995.
Lon Hatamiya,
Administrator.
[FR Doc. 95-13928 Filed 6-6-95; 8:45 am]
BILLING CODE 3410-02-P