[Federal Register Volume 60, Number 209 (Monday, October 30, 1995)]
[Proposed Rules]
[Pages 55213-55220]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-26787]



 ========================================================================
 Proposed Rules
                                                 Federal Register
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 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. 60, No. 209 / Monday, October 30, 1995 / 
Proposed Rules  

[[Page 55213]]


DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 981

[Docket No. A0-214-A7; FV-93-981-1]


Almonds Grown in California; Secretary's Decision and Referendum 
Order on Proposed Further Amendment of Marketing Agreement and Order 
No. 981

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule and referendum order.

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SUMMARY: This decision proposes amendments to the subject marketing 
agreement and order (order) and provides almond producers with the 
opportunity to vote in a referendum to determine if they favor the 
proposed amendments. The proposed amendments were submitted by the 
Almond Board of California (Board) and five additional persons. The 
proposed changes would: change five existing definitions in the order; 
revise Board representation, nomination procedures, terms of office, 
quorum and qualification procedures, voting and tenure requirements; 
modify creditable advertising provisions; revise volume control 
procedures; require handlers to maintain records in the State of 
California; authorize interest or late payment charges on assessments 
paid late; provide for periodic continuance referenda; authorize 
exemptions for organic almonds from certain program requirements; and 
make necessary conforming changes. These changes are being proposed to 
improve the administration, operation and functioning of the California 
almond marketing order program.

DATES: The referendum shall be conducted from January 8, 1996, through 
February 2, 1996. The representative period for the purpose of the 
referendum herein ordered is July 1, 1994, through June 30, 1995.

FOR FURTHER INFORMATION CONTACT: Kathleen M. Finn, Marketing 
Specialist, Marketing Order Administration Branch, Fruit and Vegetable 
Division, AMS, USDA, room 2523-S, P.O. Box 96456, Washington, DC 20090-
6456, telephone: (202) 720-1509 or Fax (202) 720-5698; or Martin 
Engeler, Assistant Officer-in-Charge, California Marketing Field 
Office, Marketing Order Administration Branch, Fruit and Vegetable 
Division, AMS, USDA, 2202 Monterey Street, suite 102-B, Fresno, 
California 93721; (209) 487-5901 or FAX (209) 487-5906.

SUPPLEMENTARY INFORMATION: Prior documents in this proceeding: Notice 
of Hearing issued on August 3, 1993, and published in the Federal 
Register on August 17, 1993 (58 FR 43565). Recommended Decision and 
Opportunity to File Written Exceptions issued on March 22, 1995, and 
published in the Federal Register on April 6, 1995 (60 FR 17466).
    This administrative action is governed by the provisions of 
sections 556 and 557 of Title 5 of the United States Code and, 
therefore, is excluded from the requirements of Executive Order 12866.

Preliminary Statement

    The proposed amendments were formulated on the record of a public 
hearing held in Modesto, California, on November 3, 4 and 5, 1993, to 
consider the proposed amendment of the Marketing Agreement and Order 
No. 981, regulating the handling of almonds grown in California, 
hereinafter referred to collectively as the ``order.'' The hearing was 
held pursuant to the provisions of the Agricultural Marketing Agreement 
Act of 1937, as amended (7 U.S.C. 601 et seq.), hereinafter referred to 
as the Act, and the applicable rules of practice and procedure 
governing proceedings to formulate marketing agreements and marketing 
orders (7 CFR part 900). The Notice of Hearing contained several 
amendment proposals submitted by the Almond Board of California (Board) 
established under the order to assist in local administration of the 
program and by five additional persons.
    The Board's proposals would: (1) Increase its membership by two 
positions and change Board nomination, selection, and operation 
procedures; (2) change the term of office of its members from one to 
three years, and limit the tenure of Board members; (3) change the 
definitions of ``cooperative handler,'' ``to handle,'' ``settlement 
weight,'' ``crop year'' and ``trade demand''; (4) require handlers of 
California almonds to maintain program records in the State of 
California; (5) change its advertising assessment credit program to 
allow credit for certain advertising costs incurred by handlers not 
previously authorized; (6) authorize requiring handlers to pay interest 
and/or late payment charges for past due assessments; (7) provide for 
continuance referenda every five years; (8) require handlers to submit 
grower lists to the Board; and (9) allow multi-year contracting.
    Five persons submitted additional proposals related to continuance 
referenda, Board composition and nomination procedures, organic 
almonds, regulatory provisions, advertising and promotion, assessments, 
compliance audits, the definition of grower, and research and reserve 
operations.
    The Fruit and Vegetable Division, Agricultural Marketing Service 
(AMS), U.S. Department of Agriculture (USDA), proposals would make such 
changes as are necessary to the order, if any or all of the above 
amendments are adopted, so that all of its provisions conform with the 
proposed amendment. USDA also proposed that continuance referenda be 
conducted on a periodic basis consistent with USDA's policy guidelines.
    Upon the basis of evidence introduced at the hearing and the record 
thereof, the Administrator of the Agricultural Marketing Service (AMS) 
on March 22, 1995, filed with the Hearing Clerk, U.S. Department of 
Agriculture, a Recommended Decision and Opportunity to File Written 
Exceptions thereto by May 8, 1995. Exceptions were received from Mr. 
Robert J. Crockett, Attorney, Office of the General Counsel, USDA, 
representing the Board; Mr. Steven W. Easter, Vice President, Blue 
Diamond Growers, Inc.; Mr. Brian C. Leighton, general counsel to almond 
handler Cal-Almond, Inc.; and Mr. Rick Veldstra, almond grower. The 
exceptions will be addressed in this document.

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 

[[Page 55214]]
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 of less 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. Marketing orders and 
rules issued thereunder are unique in that they are brought about 
through group action of essentially small entities acting on their own 
behalf. Thus, both the RFA and the Act have small entity orientation 
and compatibility. Interested persons were invited to present evidence 
at the hearing on the probable impact that the proposed amendments to 
the order would have on small businesses.
    During the 1993-94 crop year, approximately 115 handlers were 
regulated under Marketing Order No. 981. In addition, there are about 
7,000 producers of almonds in the production area. The Act requires the 
application of uniform rules on regulated handlers. 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.
    The proposed amendments to the marketing agreement and order 
include changes to five definitions in the marketing order. These 
definitions are cooperative handler, to handle, settlement weight, crop 
year, and trade demand. The changes that are proposed to the 
definitions are intended to make them consistent with current industry 
practices. The proposed changes to the definitions are designed to 
enhance the administration and functioning of the marketing order to 
the benefit of the industry.
    The proposed amendment to revise Board representation would 
increase the Board's size by allowing two additional grower members to 
serve on the Board. This would increase grower representation on the 
Board from five to seven and allow more grower input into Board 
decisions. The quorum size would also be increased to correspond with 
the increase in Board size. The change in voting requirements would 
require an increased number of votes needed to approve a Board action. 
The change to the nomination procedures would require Board nominees to 
be nominated by January 20 rather than April 20 as currently provided. 
This would ensure that the new Board is seated prior to meetings where 
important decisions are made for the following crop year. These 
proposed amendments are designed to improve grower representation on 
the Board and allow the Board to function more efficiently.
    The proposed amendment to change the Board members' term of office 
from one year to three year staggered terms would allow more continuity 
on the Board. This would allow the Board to focus more on long-term 
strategic goals and develop long-term approaches to problems in the 
industry.
    The proposed amendment to require those persons nominated to the 
Board to qualify prior to their selection to the Board is an 
administrative change. This change would allow the selection process to 
take place in a more timely manner. The proposed amendment to add 
tenure requirements for Board members would allow more persons the 
opportunity to serve as members on the Board. It would provide 
opportunity for new ideas and approaches to issues that the Board 
addresses each year.
    The proposed amendment to the creditable advertising provisions 
would provide for expansion of the promotional activities for which 
handlers may receive Credit-Back from their assessments. This would 
allow the Board to increase program flexibility for participating 
handlers.
    The proposed amendment to allow the settlement weight for unshelled 
almonds to be determined on the basis of representative samples would 
be more consistent with current industry practices. There would be no 
increase in burden on handlers expected from this proposed amendment.
    The proposed amendment to require handlers to maintain records in 
the State of California would improve the Board's administration of the 
program. It would also allow the Board to have the records available to 
them for compliance purposes. It is not expected that any additional 
costs would be incurred by handlers to comply with this amendment.
    The proposed amendment to authorize interest and/or late payment 
charges on assessments paid late would encourage handlers to pay their 
assessments on time. Assessments not paid promptly add an undue burden 
on the Board because the Board has ongoing projects and programs funded 
by assessments that are functioning throughout the year. The addition 
of such changes is consistent with standard business practices.
    The proposed amendment to provide for periodic continuance 
referenda would allow growers the opportunity to vote on whether to 
continue the operation of the almond marketing order.
    The proposed amendment to allow handlers to transfer their reserve 
obligation to other handlers would help facilitate the operation of the 
reserve program by providing handlers more flexibility.
    The proposed amendment to exempt organic almonds from certain 
program requirements would provide the organic segment of the industry 
more flexibility in marketing and selling their product. The proposed 
amendment would authorize organic almond handlers to be exempt from 
reserve requirements and advertising assessments. Organic growers and 
handlers demonstrated at the hearing that certain current marketing 
order provisions do not take into account marketing differences between 
certified organic almonds and conventional almonds.
    The proposal to make other miscellaneous changes that would be 
consistent with the proposed amendments is necessary so that all 
sections of the order would be consistent if any or all of the 
amendments are adopted. These changes include deleting and 
redesignating certain sections of the order.
    All these changes are designed to enhance the administration and 
functioning of the marketing agreement and order to the benefit of the 
industry. Accordingly, it is determined that the proposed revisions of 
the order would not have a significant economic impact on handlers or 
producers.
    The amendments proposed herein have been reviewed under Executive 
Order 12778, Civil Justice Reform. They are not intended to have 
retroactive effect. 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 

[[Page 55215]]
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. 
35), the reporting and recordkeeping provisions that are included in 
the proposed amendments will be submitted to the Office of Management 
and Budget (OMB). They would not become effective prior to OMB 
approval.

Findings and Conclusions and Rulings on Exceptions

    The material issues, findings and conclusions, rulings, and general 
findings and determinations included in the Recommended Decision set 
forth in the April 6, 1995, issue of the Federal Register (60 FR 17466) 
are hereby approved and adopted subject to the following additions and 
modifications:
    Based upon the exceptions filed by Mr. Crockett, Mr. Leighton and 
Mr. Veldstra, the findings and conclusions in material issue number six 
of the Recommended Decision concerning the acceptable methods for Board 
voting and Board voting requirements are amended by adding the 
following four paragraphs after the 16th paragraph of material issue 
number six to read as follows:
    The exception filed by Mr. Crockett indicated that section 981.40 
should be modified to include the term ``other electronic means'' as an 
acceptable method for voting. ``Other electronic means'' is envisioned 
to include the use of modems, video and teleconferencing. The term is 
flexible to allow for the advancement of new technologies that could be 
used by the Board for voting. Mr. Crockett stated that although ``other 
electronic means'' was not part of the original proposal, its 
incorporation at this time is reasonable since it is merely a technical 
adjustment. This request is also consistent with the record evidence. 
Therefore, in accordance with Mr. Crockett's exception, the amendatory 
language in Sec. 981.40 is modified.
    The exception received from Mr. Leighton objects to the proposed 
voting requirements, indicating that one segment of the industry, Blue 
Diamond, would have the ability to effectively block any proposed 
action by the Board.
    The exception received from Mr. Veldstra similarly objected to the 
voting requirements proposed, indicating that it is fundamentally 
flawed to guarantee one segment of the industry a minimum of 5 votes, 
when those 5 votes could constitute a ``Super Minority'' able to direct 
the policy of the Board by their veto power.
    Testimony at the hearing indicated strong industry support for this 
proposal. Proponents testified that the proposed voting requirements 
would help increase industry cohesion. No new evidence or arguments to 
the contrary were presented in the exceptions. Further, no one industry 
segment will perpetually be guaranteed a certain number of votes as a 
result of this proposal because of the ability to reapportion Board 
membership, which is discussed under material issue number 14. 
Therefore, these exceptions are denied.
    Based upon the exception of Mr. Veldstra and the exception of Mr. 
Leighton, the findings and conclusions in material issue number 14 of 
the Recommended Decision concerning whether to authorize the Board, 
with the approval of the Secretary, to reapportion grower and/or 
handler member representation on the Board based on the proportionate 
amounts of almonds handled by different segments of the industry are 
amended by adding the following three paragraphs after the tenth 
paragraph of material issue number 14 to read as follows:
    The exception filed by Mr. Veldstra indicated that reapportionment 
of Board membership should be required, based on percentages of crop 
produced by industry segments, rather than optional, at the 
recommendation of the Board and approval of the Secretary. 
Reapportionment should be required because otherwise, one segment of 
the industry would be able to prohibit passing a Board action 
recommending reapportionment, if the proposed voting requirements in 
material issue number 6 are approved. This could result in one segment 
of the industry having a disproportionate share of Board representation 
based on percentage of production.
    The exception filed by Mr. Leighton stated that Board 
representation should be based on percentages of crop represented by 
each entity. The exception indicated that although the proposed 
amendment allows for changes in reapportionment and representation, any 
such changes will not occur if the voting requirements in material 
issue number 6 are implemented. The exception stated that Blue Diamond 
would not vote for any change which would reduce their representation, 
thus any Board recommendation on this issue would be blocked.
    Hearing testimony indicated that the number of growers represented 
by industry entities should also be given consideration in determining 
equitable Board representation as well as tonnage handled by these 
entities. The current proposal with respect to representation reflects 
this position and testimony presented indicates widespread industry 
support for the proposal. In addition, there was no specific 
alternative proposal presented. However, USDA recognizes the potential 
problems associated with the Board's ability to pass an action 
recommending reapportionment and changes in representation, if voting 
requirements as proposed in material issue number 6 are implemented. It 
should be clarified that the amendatory language as proposed in 
Sec. 981.31(d) does not require a recommendation by the Board on this 
issue. Although USDA looks to the Board as the body representing the 
industry for recommendations on such issues, it is not precluded from 
taking action to reapportion membership based on other information 
available. Therefore, no change to the proposed order language is 
necessary based on Mr. Veldstra's and Mr. Leighton's exceptions. Their 
exceptions are denied.
    Based upon the exception filed by Mr. Leighton, the findings and 
conclusions in material issue number 13 of the Recommended Decision 
concerning the deletion of the authority for the Credit-Back 
advertising program under the almond marketing order and to modify the 
generic program are amended by adding the following two paragraphs 
after the 11th paragraph of material issue number 13 to read as 
follows:
    Mr. Leighton's exception stated that he opposed the generic 
advertising program, but a generic advertising program is preferable to 
a brand program, provided excessive funds are not expended promoting 
almonds as snacks off the store shelf. Mr. Leighton also reiterated 
that the new Credit-Back program violates the First Amendment to the 
U.S. Constitution. In addition, he states that there is not wide 
industry support for this proposal because a number of handlers 
representing 20 percent of the tonnage in the industry have filed 
administrative petitions pursuant to 7 U.S.C. section 608c(15)(A) 
contesting the constitutionality of this program.
    The record evidence does not the support the deletion of the 
authority for this program. The Credit-Back program provides 
flexibility in allowing the Board and handlers various options to 

[[Page 55216]]
promote almonds. The program provides the opportunity for handlers to 
receive credit against their assessment obligation or pay assessments 
for a generic program. Although there are currently ongoing legal 
challenges to this program, the record evidence supports maintaining 
the authority for the program. With the authority in place, 
recommendations can be made by the Board and implemented by the 
Secretary to further modify and improve the program, if warranted. The 
program need not be active if it is determined that discontinuing all 
or part of the program would be in the best interest of the industry. 
Therefore, Mr. Leighton's exception is denied.
    Based upon the exception filed by Mr. Leighton, the findings and 
conclusions in material issue number 17 of the Recommended Decision 
concerning the requirement that the Board provide handlers with 24 
hours advance notice before audits are conducted of records and 
inspections of reserve almonds are amended by adding the following two 
paragraphs after the sixth paragraph of material issue number 17 to 
read as follows:
    Mr. Leighton's exception states that USDA does not provide examples 
showing that ``surprise'' visits by the Board have uncovered widespread 
abuse of the reporting requirements relating to the reserve provisions. 
In addition, Mr. Leighton states that the Board should not require 
handlers to use their own equipment and personnel during the audit 
visits.
    As previously stated, the almond industry is subject to Federal 
regulation and therefore, audit visits are a part of participating in 
this Federal program. USDA requires that adequate compliance programs 
are in place for marketing order programs. The record evidence 
supported the continuation of such a tool for compliance purposes. In 
addition, the record evidence supported handlers assisting the Board by 
using their equipment and personnel during an audit visit. Therefore, 
Mr. Leighton's exception is denied.
    Based upon the exceptions filed by Mr. Leighton, Mr. Veldstra and 
Mr. Easter, the findings and conclusions in material issue number 18 of 
the Recommended Decision concerning the requirement for handlers to 
submit to the Board a list of growers who have delivered almonds to 
such handler during the crop year are amended by adding the following 
four paragraphs after the 17th paragraph of material issue number 18 to 
read as follows:
    The exception filed by Mr. Leighton stated that Blue Diamond should 
also be required to submit a grower list to the Board. He stated that 
since the independent grower list would be available under the Freedom 
of Information Act, Blue Diamond is given an unfair advantage by having 
accessibility to all almond growers. Mr. Leighton contends that the 
independent growers should be allowed the same opportunity.
    Mr. Veldstra's exception similarly objected to the material issue 
stating that if Blue Diamond's list is proprietary and protected under 
California State law, then the independent list should also be 
protected. In addition, Mr. Veldstra stated that Blue Diamond growers 
should elect Blue Diamond growers to the Board rather than have them 
appointed by the cooperative. Finally, Mr. Veldstra stated that growers 
who deliver their almonds to both the cooperative and independent 
handlers may theoretically vote twice in elections--once through the 
cooperative process and once as independent growers. If the Board had a 
complete list, it could identify these situations and ensure that 
growers participate in the voting process only once.
    As previously stated, the record evidence supports that the primary 
reason an independent grower list would be submitted to the Board would 
be for the purposes of Board elections. Record evidence showed that 
there are other sources of obtaining a grower list. The Blue Diamond 
cooperative testified that they do inform their members of all 
important matters concerning the marketing order. Blue Diamond's list 
is its grower/supplier list and therefore, it is considered their 
customer list. This would not be the case for a list of independent 
growers in part, because this list is not handler-specific. In 
addition, there was no record evidence to support that Board members 
elected from the cooperative should be elected in another manner as 
suggested by Mr. Veldstra. Also, growers participating in independent 
elections must certify on the ballot that they do not deliver almonds 
to a cooperative. Therefore, Mr. Leighton's and Mr. Veldstra's 
exceptions are denied.
    The exception filed by Mr. Easter fully supported the proposal. Mr. 
Easter stated that Blue Diamond believes that its grower list is 
protected by California law and that no case has been made for a 
requirement that it be submitted to the Board.
    Based upon the exception filed by Mr. Leighton, the findings and 
conclusions in material issue number 19 of the Recommended Decision 
concerning the addition of the authority to require handlers to pay 
interest and/or late payment charges are amended by adding the 
following two paragraphs after the seventh paragraph of material issue 
number 19 to read as follows:
    The exception filed by Mr. Leighton stated that unless prevailing 
handlers can receive a refund of assessments wrongfully imposed plus 
interest, the proposed revisions to section 981.81 to allow the 
collection of interest and late penalties on past due assessments is 
confiscatory and violates Due Process. Mr. Leighton further stated that 
this provision violates the First Amendment, because handlers will be 
penalized for filing administrative challenges to any assessment 
provision by being forced to pay late charges if their challenges are 
unsuccessful. Mr. Leighton contends that the proposal authorizing the 
Board to assess late payments and/or interest on unpaid assessments 
should not be adopted unless the proposal authorizing interest to 
handlers for successfully challenging the payment of assessments is 
adopted.
    As previously discussed, the evidence at the hearing fully 
supported this proposal. Many marketing orders provide for the 
collection of interest and/or late payment charges to encourage prompt 
payment of assessments. Again, the Act authorizes that each handler 
shall pay to a marketing order committee such handler's pro rata share 
for the operation of the marketing order. Therefore, Mr. Leighton's 
exception is denied.
    Based upon the exception filed by Mr. Leighton, the findings and 
conclusions in material issue number 20 of the Recommended Decision 
concerning the requirement of refunds plus payment of interest to a 
handler in the event a suit or administrative petition filed by a 
handler challenging the payment of assessments is successful are 
amended by adding the following two paragraphs after the fifth 
paragraph of material issue number 20 to read as follows:
    Mr. Leighton's exception stated that unless this proposal is 
adopted, Material Issue number 19, which proposes authority for 
interest and late payment charges should not be adopted. Mr. Leighton 
indicated that USDA rejected this proposal because ``the Board may not 
have funds available to make a refund'' and Due Process requires a 
clear and certain remedy if one must pay now and file a complaint 
later. Mr. Leighton further stated that USDA clearly does not address 
where court ordered refunds will be derived, nor does it provide for 
such remedy.
    The record does not support this proposal. Section 608c(15)(A) of 
the Act provides a method for challenging marketing order provisions. 
In addition, 

[[Page 55217]]
USDA did not reject this proposal on the basis of the ability to pay 
refunds. USDA relied on the record and the evidence presented by both 
sides. Therefore, Mr. Leighton's exception is denied.
    Based upon the exception filed by Mr. Crockett, the findings and 
conclusions in material issue number 24 of the Recommended Decision 
concerning the exemption of organic almonds from all reserve 
requirements are amended by adding the following three paragraphs after 
the ninth paragraph of material issue number 24 to read as follows:
    The exception from Mr. Crockett requested that USDA reconsider this 
proposal. Mr. Crockett stated that this proposal would create a 
separate class of producers from the mainstream of almond production 
and would eliminate the flexibility of the Board to address this issue. 
Further, Mr. Crockett indicated that past experience shows that the 
Board determined that certified organic almonds would be an eligible 
outlet for disposition of reserve almonds when special circumstances 
warranted exempting them from these requirements. The exception also 
indicated that the circumstances today may be that organically grown 
almonds are non-competitive in nature, but the situation could change 
in the future. For this reason, Mr. Crockett stated that the Board 
should be allowed to respond to those changes as they arise and not be 
bound by a regulation that no longer reflects the realities of almond 
production. Mr. Crockett further stated that the cost to administer 
such an exemption is prohibitive and would cause compliance problems 
because there is no practical means of identifying an organically grown 
almond from a conventional almond.
    The proponents of this proposal presented a compelling case that 
certified organic almonds are unique and are sold into different 
markets. In addition, growers and handlers of organic almonds must 
follow strict regulations to ensure their almonds are certified organic 
and these almonds can be traced by a paper trail to the retail level.
    Mr. Crockett's concern regarding compliance problems that could be 
encountered in documenting sales of certified organic almonds does have 
merit. Although stringent requirements exist for certifying almonds as 
organic, it is important that the order require that handlers provide 
documentation substantiating that their almonds meet these requirements 
if they are to be exempt from reserve requirements. The proposed 
amendment to section 981.47(b) is being slightly modified to require 
that documentation be submitted to the Board by handlers in order to 
substantiate that almonds were, in fact, sold as certified organic and 
met the requirements of the Organic Foods Production Act of 1990 and 
the California Organic Foods Act of 1990 in order to be exempt from 
reserve requirements. Therefore, Mr. Crockett's exception is accepted, 
in part.
    Based upon the exception filed by Mr. Crockett, the findings and 
conclusions in material issue number 25 of the Recommended Decision 
concerning the authority to allow the Board to enter into contracts for 
periods of five years for services, goods or other reasonable expenses 
are amended by adding the following two paragraphs after the eighth 
paragraph of material issue number 25 to read as follows:
    The exception filed by Mr. Crockett requested that USDA reconsider 
this proposal. The exception indicated that the inability to enter into 
long term arrangements for goods and services from vendors hinders the 
efficiency of the order. Mr. Crockett stated the Board should be able 
to avail itself of such simple common business sense to stretch grower 
monies to their maximum effectiveness. Mr. Crockett further stated that 
although USDA states that other marketing orders have been approved for 
long term contracts, it ignores that potential opportunities may be 
lost seeking advance approval of each contract.
    As previously stated, USDA has provided approval for marketing 
order committees to enter into multi-year contracts on a case-by-case 
basis. Record evidence indicates that this proposal could limit annual 
reviews and restrict activities of future Boards. USDA will work with 
the Board to ensure such approvals are completed in a timely manner to 
promote efficient Board operation. Therefore, Mr. Crockett's exception 
is denied.
    Based upon the exception filed by Mr. Leighton, the findings and 
conclusions in material issue number 27 of the Recommended Decision 
concerning certain reserve provisions are amended by adding the 
following two paragraphs after the 11th paragraph of material issue 
number 27 to read as follows:
    Mr. Leighton's exception contended that USDA claimed that removing 
the authority for allocated reserve would remove a valuable tool of the 
Board. However, Mr. Leighton contended that there should be no tool 
available to require the dumping of valuable and nutritious product 
given the storage capability of almonds. In addition, Mr. Leighton 
stated that USDA has a conflict of interest in retaining this tool 
because USDA uses these almonds for school lunch programs. Mr. Leighton 
states that the cost of school lunch programs should be borne by 
taxpayers, not the almond industry.
    The marketing order contains authority to require reserve almonds 
to be disposed of in certain approved outlets that are non-competitive 
with normal markets. There is no requirement for dumping the product. 
Under certain conditions, it may be desirable for the industry to 
divert product to these non-competitive outlets rather than carrying 
product over into the next crop year. Record evidence supports 
retaining this tool. USDA does not consider the provision a conflict of 
interest. USDA does purchase almonds as a surplus removal program and 
those almonds are used in the school lunch program. The purpose of USDA 
surplus removal purchases is to remove excess supplies from normal 
market channels. In addition, USDA does not specify that the almonds it 
buys must be reserve almonds. The record evidence supported adopting 
this proposal, in part. Therefore, Mr. Leighton's exception is denied.

Marketing Agreement and Order

    Annexed hereto and made a part hereof is the document entitled 
``Order Amending the Order Regulating the Handling of Almonds Grown in 
California.'' This document has been decided upon as the detailed and 
appropriate means of effectuating the foregoing findings and 
conclusions.
    It is hereby ordered, That this entire decision be published in the 
Federal Register.

Referendum Order

    It is hereby directed that a referendum be conducted in accordance 
with the procedure for the conduct of referenda (7 CFR 900.400 et seq.) 
to determine whether the issuance of the annexed order amending the 
order regulating the handling of almonds grown in California is 
approved or favored by producers, as defined under the terms of the 
order, who during the representative period were engaged in the 
production of almonds grown in California.
    The representative period for the conduct of such referendum is 
hereby determined to be July 1, 1994, through June 30, 1995.
    The agents of the Secretary to conduct such referendum are hereby 
designated to be Martin Engeler, Assistant Officer-in-Charge, and 
Maureen Pello, Marketing Specialist, California Marketing Field Office, 
Marketing Order Administration Branch, Fruit and Vegetable Division, 
AMS, USDA, 2202 

[[Page 55218]]
Monterey Street, suite 102-B, Fresno, California 93721, telephone (209) 
487-5901.

List of Subjects in 7 CFR Part 981

    Almonds, Marketing agreements, Nuts, Reporting and recordkeeping 
requirements.

    Dated: October 23, 1995
Shirley R. Watkins,
Acting Assistant Secretary, Marketing and Regulatory Programs.

Order Amending the Order Regulating the Handling of Almonds Grown in 
California 1

    \1\ This order shall not become effective unless and until the 
requirements of Sec. 900.14 of the rules of practice and procedure 
governing proceedings to formulate marketing agreements and 
marketing orders have been met.
---------------------------------------------------------------------------

Findings and Determinations

    The findings and determinations hereinafter set forth are 
supplementary and in addition to the findings and determinations 
previously made in connection with the issuance of the order; and all 
of said previous findings and determinations are hereby ratified and 
affirmed, except insofar as such findings and determinations may be in 
conflict with the findings and determinations set forth herein.
    (a) Findings and Determinations Upon the Basis of the Hearing 
Record.
    Pursuant to the provisions of the Agricultural Marketing Agreement 
Act of 1937, as amended (7 U.S.C. 601 et seq.), and the applicable 
rules of practice and procedure effective thereunder (7 CFR part 900), 
a public hearing was held upon the proposed amendments to the Marketing 
Agreement and Order No. 981 (7 CFR part 981), regulating the handling 
of almonds grown in California.
    Upon the basis of the evidence introduced at such hearing and the 
record thereof, it is found that:
    (1) The order, as amended, as hereby proposed to be further 
amended, and all of the terms and conditions thereof, will tend to 
effectuate the declared policy of the Act;
    (2) The order, as amended, as hereby proposed to be further 
amended, regulates the handling of almonds grown in the production area 
in the same manner as, and is applicable only to persons in the 
respective classes of commercial and industrial activity specified in 
the marketing order upon which hearings have been held;
    (3) The order, as amended, as hereby proposed to be further 
amended, is limited in application to the smallest regional production 
area which is practicable, consistent with carrying out the declared 
policy of the Act, and the issuance of several orders applicable to 
subdivisions of the production area would not effectively carry out the 
declared policy of the Act;
    (4) The order, as amended, as hereby proposed to be further 
amended, prescribes, insofar as practicable, such different terms 
applicable to different parts of the production area as are necessary 
to give due recognition to the differences in the production and 
marketing of almonds grown in the production area; and
    (5) All handling of almonds grown in the production area is in the 
current of interstate or foreign commerce or directly burdens, 
obstructs, or affects such commerce.

Order Relative to Handling

    It is therefore ordered, That on and after the effective date 
hereof, all handling of almonds grown in California, shall be in 
conformity to, and in compliance with, the terms and conditions of the 
said order as hereby proposed to be amended as follows:
    The provisions of the proposed marketing agreement and the order 
amending the order contained in the Recommended Decision issued by the 
Administrator on March 22, 1995, and published in the Federal Register 
on April 6, 1995, shall be and are the terms and provisions of this 
order amending the order and are set forth in full herein.

PART 981--ALMONDS GROWN IN CALIFORNIA

    1. The authority citation for 7 CFR part 981 continues to read as 
follows:

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

    2. Section 981.14 is revised to read as follows:


Sec. 981.14  Cooperative handler.

    Cooperative handler means any handler as defined in Sec. 981.13 of 
this subpart which qualifies for treatment as a nonprofit cooperative 
association as defined in Section 54001, et seq. of the California Food 
and Agricultural Code. The Board, with the approval of the Secretary, 
may modify this definition, if necessary.
    3. Section 981.16 is revised to read as follows:


Sec. 981.16  To handle.

    To handle means to use almonds commercially of own production or to 
sell, consign, transport, ship (except as a common carrier of almonds 
owned by another) or in any other way to put almonds grown in the area 
of production into any channel of trade for human consumption 
worldwide, either within the area of production or by transfer from the 
area of production to points outside or by receipt as first receiver at 
any point of entry in the United States or Puerto Rico of almonds grown 
in the area of production, exported therefrom and submitted for reentry 
or which are reentered free of duty. However, sales or deliveries by a 
grower to handlers, hullers or other processors within the area of 
production shall not, in itself, be considered as handling by a grower.
    4. Section 981.18 is amended by removing the word ``and'' at the 
end of paragraph (b); removing the period and adding ``, and'' at the 
end of paragraph (c); and adding a new paragraph (d) to read as 
follows:


Sec. 981.18  Settlement weight.

* * * * *
    (d) For inedible kernels as defined in Sec. 981.8.
    5. Section 981.19 is revised to read as follows:


Sec. 981.19  Crop year.

    Crop year means the twelve month period from August 1 to the 
following July 31, inclusive. Any new crop almonds harvested or 
received prior to August 1 will be applied to the next crop year for 
marketing order purposes. The first crop year after the implementation 
of this amendment shall be a 13-month period.
    6. Section 981.21 is revised to read as follows:


Sec. 981.21  Trade demand.

    Trade demand means the quantity of almonds (kernelweight basis) 
which commercial distributors and users such as the wholesale, chain 
store, confectionery, bakery, ice cream, and nut salting trades will 
acquire from all handlers during a crop year for distribution 
worldwide.
    7. Sections 981.30 and 981.31 are revised to read as follows:


Sec. 981.30  Establishment.

    The Almond Board shall consist of twelve members, each with an 
alternate member.


Sec. 981.31  Membership representation.

    Membership of the Board will be determined in the following manner:
    (a) Three members and an alternate for each member shall be 
selected from nominees submitted by each of the following groups 
designated in paragraphs (a) (1) and (2) of this section, or from among 
other qualified persons belonging to such groups:
    (1) Those growers who market their almonds through cooperative 
handlers; and 

[[Page 55219]]

    (2) Those growers who market their almonds through other than 
cooperative handlers.
    (b) Two members and an alternate for each member shall be selected 
from nominees submitted by each of the following groups designated in 
paragraphs (b) (1) and (2) of this section, or from among other 
qualified persons belonging to such groups:
    (1) Cooperative handlers; and
    (2) All handlers, other than cooperative handlers.
    (c) One member and an alternate shall be selected from nominees 
submitted by each of the following groups designated in paragraphs 
(c)(1) and (2) of this section, or from among other qualified persons 
belonging to such groups:
    (1) The group of cooperative handlers or the group of handlers 
other than cooperative handlers, whichever received for their account 
more than 50 percent of the almonds delivered by all growers as 
determined by December 31 of the then current crop year; and
    (2) Those growers whose almonds were marketed through the handler 
group identified in paragraph (c)(1) of this section.
    (d) The Secretary, upon recommendation of the Board, or other 
information, may reapportion within the 12-member Board, the number of 
grower members or handler members, or both, of any group listed in 
Sec. 981.31 (a) through (c), to be nominated pursuant to Sec. 981.32. 
Any such change shall be based, insofar as practicable, upon the 
proportionate amounts of almonds handled within any group.
    8. Section 981.32 is amended by revising paragraph (a) and amending 
paragraph (b)(2) by removing the date ``March 31'' and adding in its 
place the date ``December 31'' to read as follows:


Sec. 981.32  Nominations.

    (a) Method. (1) Each year the terms of office of three of the 
members elected pursuant to Sec. 981.31(a) and (b) shall expire, except 
every third year when the term of office for four of those members 
shall expire. Nominees for each respective member and alternate member 
shall be chosen by ballot delivered to the Board. Nominees chosen by 
the Board in this manner shall be submitted by the Board to the 
Secretary on or before February 20 of each year together with such 
information as the Secretary may require. If a nomination for any Board 
member or alternate is not received by the Secretary on or before 
February 20, the Secretary may select such member or alternate from 
persons belonging to the group to be represented without nomination. 
The Board shall mail to all handlers and growers, other than the 
cooperative(s) of record, the required ballots with all necessary 
voting information including the names of incumbents willing to accept 
renomination, and, to such growers, the name of any person proposed for 
nomination in a petition signed by at least 15 such growers and filed 
with the Board on or before January 20. Distribution of ballots shall 
be announced by press release, furnishing pertinent information on 
balloting, issued by the Board through newspapers and other 
publications having general circulation in the almond producing areas.
    (2) Nominees for the positions described in Sec. 981.31(c) shall be 
handled in the same manner as described in paragraph (a)(1) of this 
section except that those terms of office shall expire annually.
* * * * *
    9. Section 981.33 is revised to read as follows:


Sec. 981.33  Selection and term of office.

    (a) Members and their respective alternates for positions open on 
the Board shall be selected by the Secretary from persons nominated 
pursuant to Sec. 981.32, or, at the discretion of the Secretary, from 
other qualified persons, for a term of office beginning March 1. 
Members and alternates shall continue to serve until their respective 
successors are selected and qualified.
    (b) The term of office of members of the Board shall be for a 
period of three years beginning on March 1 of the years selected except 
where otherwise provided. However, for the initial ten members of the 
Board selected pursuant to this section and to paragraphs (a) and (b) 
of Sec. 981.31, three members shall serve for a term of one year; three 
members shall serve for a term of two years; and four members shall 
serve for a term of three years. For the initial terms of office, at 
the time of nomination under Sec. 981.32, the Board shall make this 
designation by lot. The term of office for the two members selected 
under paragraph (c) of Sec. 981.31 shall always be for a period of one 
year.
    (c) Board members may serve for a total of six consecutive years. 
Members who have served for six consecutive years must leave the Board 
for at least one year before becoming eligible to serve again. A person 
who has served less than six consecutive years on the Board may not be 
nominated to a new three year term if his or her total consecutive 
years on the Board at the end of that new term would exceed six years. 
This limitation on tenure shall not include service on the Board prior 
to implementation of this amendment and shall not apply to alternate 
members.
    10. Section 981.34 is revised to read as follows:


Sec. 981.34  Qualification and acceptance.

    (a) Any person to be selected as a member or alternate of the Board 
shall, prior to such selection, qualify by providing such background 
information as necessary and by advising the Secretary that he/she 
agrees to serve in the position for which nominated. Grower members and 
alternates shall be growers or employees of growers, and handler 
members and alternates shall be handlers or employees of handlers. In 
the event any member or alternate ceases to be qualified for the 
position for which selected, that position shall be deemed vacant.
    (b) The Board, with approval of the Secretary, may establish 
additional eligibility requirements for grower members on the Board.
    11. Section 981.40 is amended by revising paragraphs (b) and (c) 
and amending paragraph (e) by removing the word ``seven'' and adding in 
its place the word ``eight'' to read as follows:


Sec. 981.40  Procedure.

* * * * *
    (b) Quorum. The presence of eight members shall be required to 
constitute a quorum. All decisions of the Board shall be as follows 
except where otherwise specifically provided: 8 or 9 members present, 6 
votes; 10 members present, 7 votes; 11 or 12 members present, 8 votes.
    (c) Voting by mail, telegram, fax or other electronic means. The 
Board may vote by mail, telegram, fax or other electronic means upon 
written notice to all members, or alternates acting in their place, 
including in the notice a statement of a reasonable time, not to exceed 
10 days, in which a vote by mail, telegram, fax or other electronic 
means must be received by the Board for counting. Voting by mail, 
telegram, fax or other electronic means shall not be permitted at any 
assembled meeting of the Board. When a proposition is submitted for 
vote by mail, telegram, fax or other electronic means, at least ten 
members of the Board must vote in favor of its passage or the 
proposition shall be defeated.
* * * * *
    12. In Sec. 981.41, paragraph (c) is amended by removing the colon 
and all text following the words ``15 percent'' in the last sentence 
and adding in its place a period and by amending paragraph (a) by 
adding a sentence at the end of the paragraph to read as follows: 

[[Page 55220]]



Sec. 981.41  Research and development.

    (a) * * * Notwithstanding the foregoing, certified organic almonds 
may be exempt from assessments for marketing promotion, including paid 
advertising, upon recommendation of the Board and approval of the 
Secretary.
* * * * *
    13. Section 981.47 is amended by designating the existing paragraph 
as (a), removing the words ``either domestic or'' in the third sentence 
of paragraph (a), and adding a new paragraph (b) to read as follows:


Sec. 981.47  Method of establishing salable and reserve percentages.

* * * * *
    (b) Notwithstanding the provisions of paragraph (a) of this 
section, the Secretary shall exempt from any reserve that is 
established that part of the crop which is sold as ``certified 
organic'' under standards established by the Organic Foods Production 
Act of 1990, (7 U.S.C. 2101 et seq.) and the California Organic Foods 
Act of 1990, as amended: Provided, That handlers provide adequate 
documentation demonstrating the almonds were sold as certified organic 
and met the requirements of the aforementioned Acts. The Board may 
propose regulations to assure procedures to implement this section.
    14. In Sec. 981.49, the introductory paragraph is amended by 
removing the word ``six'' and adding in its place the word ``eight'', 
by removing ``; and'' in paragraph (e) and adding a period in its 
place, by adding ``and'' at the end of paragraph (d); by removing 
paragraph (f) and by revising paragraph (b) to read as follows:


Sec. 981.49  Board estimates and recommendations.

* * * * *
    (b) The estimated handler carryover and the estimated reserve 
inventory as of July 31;
* * * * *


Sec. 981.50  [Amended]

    15. Amend Sec. 981.50 by adding after the words ``into oil'', the 
words ``or sold as certified organic.''
    16. Amend Sec. 981.55 by designating the existing paragraph as (a) 
and adding a new paragraph (b) to read as follows:


Sec. 981.55  Interhandler transfers.

* * * * *
    (b) When saleable and reserve percentages are in effect, any 
handler may transfer reserve withholding obligation to other handlers. 
Terms and conditions implementing this provision must be recommended by 
the Board and approved by the Secretary.
    17. Section 981.60 is amended by revising paragraph (b) to read as 
follows:


Sec. 981.60  Determination of kernel weight.

* * * * *
    (b) Almonds for which settlement is made on unshelled weight. The 
settlement weight for unshelled almonds shall be determined on the 
basis of representative samples of unshelled almonds reduced to shelled 
weight.
    18. Section 981.61 is amended by revising the last sentence to read 
as follows:


Sec. 981.61  Redetermination of kernel weight.

    *  *  * Weights used in such computations for various 
classifications of almonds shall be:
    (a) For unshelled almonds, the kernelweight based on representative 
samples reduced to shelled weight;
    (b) For shelled almonds, the net weight; and
    (c) For shelled almonds used in production of almond products, the 
net weight of such almonds.


Sec. 981.62  [Removed]

    19. Section 981.62 is removed.


Sec. 981.66  [Removed]

    20. Section 981.66 is amended by removing paragraphs (b) and (d), 
redesignating paragraph (c) as paragraph (b), redesignating paragraph 
(e) as paragraph (c), redesignating paragraphs (f) and (g) as 
paragraphs (d) and (e), and by amending newly designated paragraph (c) 
by removing all references to the date ``September 1'' and adding in 
each place ``December 31''.


Sec. 981.67  [Amended]

    21. Section 981.67 is amended by removing all references to the 
date ``September 1'' and adding in each place ``December 31''.
    22. Section 981.70 is amended by revising the first sentence to 
read as follows:


Sec. 981.70  Records and verification.

    Each handler shall keep records which will clearly show the details 
of his or her receipts of almonds, withholdings, sales, shipments, 
inventories, reserve disposition, advertising and promotion activities, 
as well as other pertinent information regarding his or her operation 
pursuant to the provisions of this part: Provided, that, such records 
shall be kept in the State of California. * * *
    23. A new Sec. 981.76 is added before the undesignated center 
heading ``Expenses and Assessments'' to read as follows:


Sec. 981.76  Handler list of growers.

    No later than December 31 of each crop year, each handler other 
than a cooperative handler (hereinafter, referred to as independent 
handler) governed by this subpart shall, upon request, submit to the 
Board a complete list of growers who have delivered almonds to such 
independent handler during that crop year.
    24. Section 981.81 is amended by adding a new paragraph (e) to read 
as follows:


Sec. 981.81  Assessment.

* * * * *
    (e) Any assessment not paid by a handler within a period of time 
prescribed by the Board may be subject to an interest or late payment 
charge or both. The period of time, rate of interest and late payment 
charge shall be as recommended by the Board and approved by the 
Secretary. Subsequent to such approval, all assessments not paid within 
the prescribed period of time shall be subject to an interest or late 
payment charge or both.
    25. Section 981.90 is amended redesignating paragraph (b)(2) and 
(b)(3) as paragraphs (b)(3) and (b)(4) and by amending newly designated 
paragraph (b)(3) by removing the date ``June 1'' and adding in its 
place ``July 1'' and adding a new (b)(2), to read as follows:


Sec. 981.90  Effective time, suspension, or termination.

* * * * *
    (b) * * *
    (2) The Secretary shall conduct a referendum as soon as practical 
after the end of the fiscal year ending two years after [effective date 
of the final rule], and at such time every fifth year thereafter, to 
ascertain whether continuation of the order is favored by growers who 
have been engaged in the production of almonds for market within the 
State of California during the current crop year.
* * * * *


Sec. 981.467  [Amended]

    26. In Sec. 981.467, paragraph (a) is amended by removing the date 
``July 1'' and adding in its place ``August 1'' and by removing the 
words ``export or'' and ``or both,'' from the second sentence in 
paragraph (a).


Sec. 981.472  [Amended]

    27. In Sec. 981.472, paragraph (a) is amended by removing the dates 
``July 1 to August 31'' and adding in its place ``August 1 to August 
31.''

[FR Doc. 95-26787 Filed 10-27-95; 8:45 am]
BILLING CODE 3410-02-P