[Federal Register Volume 62, Number 186 (Thursday, September 25, 1997)]
[Rules and Regulations]
[Pages 50239-50241]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-25412]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 981

[Docket No. FV97-981-3 FIR]


Almonds Grown in California; Revision to Requirements Regarding 
Inedible Almonds

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: The Department of Agriculture (Department) is adopting, as a 
final rule, without change, the provisions of an interim final rule 
revising the administrative rules and regulations of the California 
almond marketing order regarding inedible almonds. Under the terms of 
the order, handlers are required to obtain inspection on almonds 
received from growers to determine the percent of inedible almonds in 
each lot of any variety. Handlers are then required to dispose of a 
quantity of almonds in excess of 1 percent of the weight of almonds 
reported as inedible to non-human consumption outlets. This rule allows 
alternative methods of determining handlers' inedible disposition 
obligations in such instances. It will add flexibility to the order's 
rules and regulations and will help ensure that the integrity of the 
quality control provisions is maintained.

EFFECTIVE DATE: October 27, 1997.

FOR FURTHER INFORMATION CONTACT: Martin Engeler, Assistant Regional 
Manager, California Marketing Field Office, Marketing Order 
Administration Branch, F&V, AMS, USDA, 2202 Monterey Street, suite 
102B, Fresno, California 93721; telephone: (209) 487-5901, Fax: (209) 
487-5906; or George Kelhart, Marketing Order Administration Branch, 
Fruit and Vegetable Division, AMS, USDA, Room 2525-S, P.O. Box 96456, 
Washington, DC 20090-6456; telephone: (202) 720-2491, Fax: (202) 720-
5698. Small businesses may request information on compliance with this 
regulation by contacting Jay Guerber, Marketing Order Administration 
Branch, F&V, AMS, USDA, room 2525-S, P.O. Box 96456, Washington, DC 
20090-6456; telephone: (202) 720-2491, Fax: (202) 720-5698.

SUPPLEMENTARY INFORMATION: This rule is issued under Marketing Order 
No. 981, as amended (7 CFR part 981), regulating the handling of 
almonds grown in California, hereinafter referred to as the ``order.'' 
The marketing agreement and order are effective under the Agricultural 
Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), 
hereinafter referred to as the ``Act.''
    The Department of Agriculture (Department) is issuing this rule in 
conformance with Executive Order 12866.
    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule is not intended to have retroactive effect. 
This rule will not preempt any State or local laws, regulations, or 
policies, unless they present an irreconcilable conflict with this 
rule.
    The Act provides that administrative proceedings must be exhausted 
before parties may file suit in court. Under section 608c(15)(A) of the 
Act, any handler subject to an order may file with 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 request a modification of the order or to be exempted 
therefrom. A handler is afforded the opportunity for a hearing on the 
petition. After the hearing 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 to review the Secretary's 
ruling on the petition, provided an action is filed not later than 20 
days after date of the entry of the ruling.
    This rule revises the administrative rules and regulations of the 
California almond order regarding inedible almonds. Under the terms of 
the order, handlers are required to obtain inspection on almonds 
received from growers to determine the percent of inedible almonds in 
each lot of any variety. Handlers are then required to dispose of a 
quantity of almonds in excess of 1 percent of the weight of almonds 
reported as inedible to non-human consumption outlets. The quantity of 
almonds required to be disposed of is the handler's inedible 
disposition obligation. However, there are times when an incoming 
inspection sample may not be drawn, may be lost, or the size of the 
sample drawn may be too small for an inedible weight to be determined. 
This rule provides handlers with the opportunity in such cases to 
substantiate to the Board the weight of almonds received, the edible 
and inedible kernel weights, and the adjusted kernel weight. Such 
information can often be obtained from an outgoing inspection 
certificate. The inedible disposition obligation may then be based on 
that information. If a handler is only able to substantiate the 
approximate weight of almonds received, an inedible disposition 
obligation of 10 percent of the weight of almonds received in that 
particular lot may be applied, upon agreement between Board staff and 
the handler. The appropriate weight received can often be obtained from 
a weighmaster's weight certificate. In adding these procedures to the 
text of the rules and regulations, this rule will add flexibility to 
the rules and regulations and will help ensure that the integrity of 
the quality control provisions of the order is maintained. This change 
was unanimously recommended by the Board.
    Section 981.42(a) of the almond order requires handlers to obtain 
incoming inspection on almonds received from growers to determine the 
percent of inedible kernels in any variety. Handlers are required to 
report such inedible determination for each lot received to the Board. 
Inedible kernels are those kernels, pieces, or particles of kernels 
with any defect scored as serious damage (excluding the presence of web 
and frass), or damage due to mold, gum, shrivel, or brown spot, as 
defined in the United States Standards for Grades of Shelled Almonds, 
or which have embedded dirt not easily removed by washing. Edible 
kernels are kernels, pieces, or particles of almond kernels that are 
not inedible. Section 981.42(a) also provides authority for the Board, 
with the approval of the Secretary, to establish rules and regulations 
necessary and incidental to

[[Page 50240]]

the administration of the order's incoming quality control provisions.
    Section 981.442(a)(4) of the order's administrative rules and 
regulations specifies that the weight of inedible kernels in each lot 
of any variety of almonds in excess of 1 percent of the kernel weight 
received by a handler shall constitute such handler's inedible 
disposition obligation. Inedible kernels accumulated in the course of 
processing must be disposed of in non-human consumption outlets such as 
Board approved oil crushers, feed manufacturers, and animal feeders. 
Requiring handlers to meet this obligation helps to ensure that each 
handler's outgoing shipments of almonds are relatively free of almonds 
with serious damage, and the number of kernels with minor damage should 
be minimal. Thus, the intent of the order's inedible program is to help 
ensure that only quality almonds are ultimately shipped into market 
channels.
    At a meeting on May 9, 1997, the Board recommended that 
Sec. 981.442 of the order's administrative rules and regulations be 
revised to allow alternative methods of establishing handlers' inedible 
disposition obligations in certain instances. The Board recommended 
that this rule be in effect for the beginning of the 1997-98 crop year 
which began on August 1, 1997.
    Discussions at this and prior meetings of the Board's Quality 
Control Committee indicated that a considerable amount of activity 
occurs at handlers' facilities when handlers are receiving almonds from 
growers. For example, handlers may be receiving, moving, processing, 
and shipping several lots of almonds at a rapid pace. During this time, 
incoming inspection for some lots of almonds may be inadvertently 
missed due to the high level of activity. In addition, samples are 
occasionally lost or the size of the samples drawn are too small for 
kernel weight determinations. Board staff commented that there are 
instances where handlers notice that an error was made and contact the 
Board's staff in an effort to comply with the order's rules and 
regulations. Board staff also indicated that this is not a large 
problem but that it does occur occasionally.
    Thus, the Board recommended that for any lot of almonds where a 
sample is not drawn, is lost, or is too small for the kernel weight to 
be determined, the handler may establish and substantiate, to the 
Board's satisfaction, the weight of the almonds received, the edible 
and inedible kernel weights, and the adjusted kernel weight. Adjusted 
kernel weight means the actual gross weight of any lot of almonds less 
the following: the weight of containers; moisture of kernels in excess 
of 5 percent; shells (if applicable); processing loss of 1 percent for 
deliveries with less than 95 percent kernels; and trash or other 
foreign material. In such instances, the handler's inedible disposition 
obligation will be based on that information. If the handler is only 
able to establish and substantiate the approximate received weight, an 
inedible disposition obligation of 10 percent of such received weight 
may be applied, upon agreement between Board staff and the handler.
    This change will add flexibility to the order and will help ensure 
that the integrity of the order's quality control provisions is 
maintained. The Board estimates that for the past 3 years, about 3.05 
percent of the almonds received by handlers from growers were inedible. 
Thus, the Board's recommended 10 percent disposition obligation for 
lots of almonds where an inedible weight was not determined exceeds 
historical averages. This should provide a disincentive for handlers to 
purposely avoid inspection, while providing handlers an opportunity to 
maintain compliance with order requirements.
    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA), the Agricultural Marketing Service (AMS) has considered the 
economic impact of this action on small entities. Accordingly, AMS has 
prepared this final regulatory flexibility analysis.
    The purpose of the RFA is to fit regulatory actions to the scale of 
business subject to such actions in order that small businesses will 
not be unduly or disproportionately burdened. Marketing orders issued 
pursuant to the Act, 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 statutes have small 
entity orientation and compatibility.
    There are approximately 97 handlers of California almonds who are 
subject to regulation under the marketing order and approximately 7,000 
almond producers in the regulated area. Small agricultural service 
firms have been defined by the Small Business Administration (13 CFR 
121.601) as those having annual receipts of less than $5,000,000, and 
small agricultural producers are defined as those having annual 
receipts of less than $500,000.
    Currently, about 58 percent of the handlers ship under $5,000,000 
worth of almonds and 42 percent ship over $5,000,000 worth on an annual 
basis. In addition, based on acreage, production, and grower prices 
reported by the National Agricultural Statistics Service, and the total 
number of almond growers, the average annual grower revenue is 
approximately $156,000. In view of the foregoing, it can be concluded 
that the majority of handlers and producers of California almonds may 
be classified as small entities.
    This rule revises the administrative rules and regulations of the 
almond order regarding inedible almonds. Section 981.42(a) of the order 
requires handlers to obtain inspection on almonds received from growers 
to determine the percent of inedible almonds in each lot of any 
variety. Section 981.42(a) also provides authority for the Board, with 
the approval of the Secretary, to establish rules and regulations 
necessary and incidental to the administration of the order's incoming 
quality control provisions.
    Under Sec. 981.442(a)(4) of the order's administrative rules and 
regulations, handlers are required to dispose of a quantity of almonds 
in excess of 1 percent of the weight of almonds reported as inedible in 
non-human consumption outlets. However, there are times when a sample 
may not be drawn, may be lost, or the size of the sample drawn may be 
too small for an inedible kernel weight to be determined. This rule 
revises Sec. 981.442(a)(4) to allow a handler's inedible disposition 
obligation in such cases to be based on documentation provided by the 
handler, to the satisfaction of Board staff. If sufficient 
documentation is not available, an inedible disposition obligation of 
10 percent of the received weight may be applied. This change adds 
flexibility to the regulations while maintaining the integrity of the 
order's quality control provisions. This rule was unanimously 
recommended by the Board and will be in effect beginning with the 1997-
98 season which began on August 1, 1997.
    Regarding the impact of this rule on handlers and growers in terms 
of cost, providing handlers with the option of accepting an inedible 
disposition obligation based on appropriate documentation or accepting 
an obligation of 10 percent for lots where a sample was not drawn, was 
lost, or was too small for an inedible weight to be determined are 
options that will be made available to all handlers, both large and 
small. Handlers receive lower prices for inedible almonds that must be 
sold in non-human consumption outlets as opposed to edible almonds that 
can be sold in normal market channels. For example, handlers receive 
about 28-35 cents per pound for almonds used for crushing into oil and 
about 2-3 cents per pound for almonds used for animal

[[Page 50241]]

feed. Price levels for sales of edible almonds to normal market outlets 
vary significantly from year to year depending on available supplies 
and market conditions and can range from $1.00-$3.00 per pound. If 
inedible almonds were allowed to be sold in normal market channels, 
consumer and buyer satisfaction would likely decrease because poor 
quality almonds were being made available. Buyers would likely purchase 
fewer almonds and demand for almonds would thus decline, which would in 
turn decrease returns to growers and handlers, both large and small.
    Thus, this rule will add flexibility to the rules and regulations 
and help ensure that the integrity of the order's quality control 
provisions is maintained. As previously mentioned, the Board estimates 
that for the past 3 years, about 3.05 percent of the almonds received 
by handlers from growers were inedible. The Board's recommended 10 
percent disposition obligation for lots where an inedible weight was 
not determined exceeds historical averages. This rule also provides 
handlers an opportunity to maintain compliance with order requirements.
    An alternative to this change would be to not incorporate these 
options into the order's administrative rules and regulations. Thus, in 
cases where an inedible disposition obligation was inadvertently not 
obtained, such handlers would be considered to be out of compliance 
with order requirements and subject to penalties under the Act. 
However, the Board determined that it would be in the industry's best 
interest to provide alternative methods of determining inedible 
disposition obligations. This will allow handlers additional options in 
the rules and regulations to remain in compliance with order 
requirements and the integrity of the order's incoming quality control 
program will still be maintained.
    This rule will not impose any additional reporting or recordkeeping 
requirements on either small or large almond handlers. As with all 
Federal marketing order programs, reports and forms are periodically 
reviewed to reduce information requirements and duplication by industry 
and public sectors. In accordance with the Paperwork Reduction Act of 
1995 (44 U.S.C. Chapter 35), the information collection requirements 
that are contained in this rule have been previously approved by the 
Office of Management and Budget (OMB) and have been assigned OMB No. 
0581-0071. In addition, as noted in the initial regulatory flexibility 
analysis, the Department has not identified any relevant Federal rules 
that duplicate, overlap or conflict with this rule.
    Further, the Board's meeting was widely publicized throughout the 
almond industry and all interested persons were invited to attend the 
meeting and participate in Board deliberations. Like all Board 
meetings, the May 9, 1997, meeting was a public meeting and all 
entities, both large and small, were able to express their views on 
this issue.
    Also, the Board has a number of appointed committees to review 
certain issues and make recommendations to the Board. The Board's 
Quality Control Committee met on April 23, 1997, and discussed this 
inedible disposition obligation issue in detail. That meeting was also 
a public meeting and both large and small entities were able to 
participate and express their views. Finally, interested persons were 
invited to submit information on the regulatory and information impacts 
of this action on small businesses.
    An interim final rule concerning this action was issued by the 
Department on July 8, 1997, and published in the Federal Register on 
July 14, 1997 (62 FR 37485). Copies of the rule were mailed or sent via 
facsimile to all almond handlers. Finally, a copy of the rule was made 
available through the Internet by the Office of the Federal Register. 
No comments were received in response to the interim final rule.
    After consideration of all relevant material presented, including 
the Board's recommendation, and other information, it is found that 
finalizing this interim final rule, without change, as published in the 
Federal Register (62 FR 37485, July 14, 1997), will tend to effectuate 
the declared policy of the Act.

List of Subjects in 7 CFR Part 981

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

PART 981--ALMONDS GROWN IN CALIFORNIA

    Accordingly, the interim final rule amending 7 CFR 981 which was 
published at 62 FR 37485 on July 14, 1997, is adopted as a final rule 
without change.

    Dated: September 19, 1997.
Robert C. Keeney,
Director, Fruit and Vegetable Division.
[FR Doc. 97-25412 Filed 9-24-97; 8:45 am]
BILLING CODE 3410-02-P