[Federal Register Volume 63, Number 14 (Thursday, January 22, 1998)]
[Rules and Regulations]
[Pages 3251-3254]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-1433]


-----------------------------------------------------------------------

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 982

[Docket No. FV98-982-1 IFR]


Hazelnuts Grown in Oregon and Washington; Establishment of 
Interim and Final Free and Restricted Percentages for the 1997-98 
Marketing Year

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Interim final rule with request for comments.

-----------------------------------------------------------------------

SUMMARY: This interim final rule establishes interim and final free and 
restricted percentages for domestic inshell hazelnuts for the 1997-98 
marketing year under the Federal marketing order for hazelnuts grown in 
Oregon and Washington. The percentages allocate the quantity of 
domestically produced hazelnuts which may be marketed in the domestic 
inshell market. The percentages are intended to stabilize the supply of 
domestic inshell hazelnuts to meet the limited domestic demand for such 
hazelnuts and provide reasonable returns to producers. This rule was 
recommended unanimously by the Hazelnut Marketing Board (Board), which 
is the agency responsible for local administration of the order.

DATES: Effective January 23, 1998. Comments which are received by March 
23, 1998, will be considered prior to issuance of a final rule.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this rule. Comments must be sent in triplicate to the Docket 
Clerk, Fruit and Vegetable Programs, AMS, USDA, Room 2525-S, P.O. Box 
96456, Washington, DC 20090-6456; Fax: (202) 205-6632. Comments should 
reference the docket number and the date and page number of this issue 
of the Federal Register and will be available for public inspection in 
the Office of the Docket Clerk during regular business hours.

FOR FURTHER INFORMATION CONTACT: Teresa L. Hutchinson, Northwest 
Marketing Field Office, Fruit and Vegetable Programs, Agricultural 
Marketing Service, USDA, 1220 SW Third Avenue, Room 369, Portland, OR 
97204; telephone: (503) 326-2724, Fax: (503) 326-7440 or George J. 
Kelhart, Marketing Order Administration Branch, Fruit and Vegetable 
Programs, AMS, USDA, Room 2525-S, P.O. Box 96456, Washington, DC 20090-
6456; telephone: (202) 720-2491, Fax: (202) 205-6632. Small businesses 
may request information on compliance with this regulation by 
contacting: Jay Guerber, Marketing Order Administration Branch, Fruit 
and Vegetable Programs, AMS, USDA, P.O. Box 96456, Room 2525-S, 
Washington, DC 20090-6456; telephone: (202) 720-2491, Fax: (202) 205-
6632.

SUPPLEMENTARY INFORMATION: This rule is issued under Marketing 
Agreement No. 115 and Order No. 982 (7 CFR part 982), both as amended, 
regulating the handling of hazelnuts grown in Oregon and Washington, 
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. It is intended that this action apply to all 
merchantable hazelnuts handled during the 1997-98 marketing year (July 
1, 1997, through June 30, 1998). 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 the date of the entry of the ruling.
    This rule establishes marketing percentages which allocate the 
quantity of inshell hazelnuts that may be marketed in domestic markets. 
The Board is required to meet prior to September 20 of each marketing 
year to compute its marketing policy for that year and compute and 
announce an inshell trade demand if it determines that volume 
regulations would tend to effectuate the declared policy of the Act. 
The Board also computes and announces preliminary free and restricted 
percentages for that year.
    The inshell trade demand is the amount of inshell hazelnuts that 
handlers may ship to the domestic market throughout the marketing 
season. The order specifies that the inshell trade demand be computed 
by averaging the preceding three ``normal'' years' trade acquisitions 
of inshell hazelnuts, rounded to the nearest whole number. The Board 
may increase the three-year average by up to 25 percent, if market 
conditions warrant an increase. The Board's authority to recommend 
volume regulations and the computations used to determine released 
percentages are specified in section 982.40 of the order.
    The National Agricultural Statistics Service (NASS) estimated 
hazelnut production at 40,000 tons for the Oregon and Washington area.
    The majority of domestic inshell hazelnuts are marketed in October, 
November, and December. By November, the marketing season is well under 
way.
    The quantity marketed is broken down into free and restricted 
percentages to make available hazelnuts which may be marketed in 
domestic inshell markets (free) and hazelnuts which must be exported, 
shelled or

[[Page 3252]]

otherwise disposed of (restricted). The preliminary free percentage 
releases 80 percent of the adjusted inshell trade demand. The 
preliminary free percentage is expressed as a percentage of the total 
supply subject to regulation (supply) and is based on the preliminary 
crop estimate.
    At its August 28, 1997, meeting, the Board computed and announced 
preliminary free and restricted percentages of 8 percent and 92 
percent, respectively. The Board used the NASS crop estimate of 40,000 
tons. The purpose of releasing only 80 percent of the inshell trade 
demand under the preliminary percentage was to guard against an 
underestimate of crop size. The preliminary free percentage released 
3,003 tons of hazelnuts from the 1997 supply for domestic inshell use. 
The preliminary restricted percentage of the 1997 supply for export and 
kernel markets totaled 34,296 tons.
    Under the order, the Board must meet a second time, on or before 
November 15, to recommend interim final and final percentages. The 
Board uses current crop estimates to calculate the interim final and 
final percentages. The interim final percentages are calculated in the 
same way as the preliminary percentages and release the remaining 20 
percent (to total 100 percent of the inshell trade demand) previously 
computed by the Board. Final free and restricted percentages may 
release up to an additional 15 percent of the average of the preceding 
three years' trade acquisitions to provide an adequate carryover into 
the following season. The final free and restricted percentages must be 
effective by June 1, at least 30 days prior to the end of the marketing 
year, June 30. The final free and restricted percentages can be made 
effective earlier, if recommended by the Board and approved by the 
Secretary. Revisions in the marketing policy can be made until February 
15 of each marketing year, but the inshell trade demand can only be 
revised upward, consistent with section 982.40(e).
    The Board met on November 13, 1997, and reviewed and approved an 
amended marketing policy. The Board recommended that the three-year 
average trade acquisition figure of 4,279 tons be increased by 214 tons 
for market expansion. The Board also recommended the establishment of 
interim final and final free and restricted percentages. Interim final 
percentages were recommended at 10 percent free and 90 percent 
restricted. The interim final percentage makes an additional 965 tons 
of inshell hazelnuts available for the domestic inshell market, 
including product for market expansion. The interim final marketing 
percentages are based on the Board's final production estimate (42,000 
tons) and release 3,968 tons to the domestic inshell market from the 
1997 supply subject to regulation. The interim final restricted 
percentage resulted in a restricted obligation of 35,173 tons.
    The final free and restricted percentages were recommended at 12 
percent and 88 percent, respectively. The Board also recommended that 
the final percentages be effective on April 30, 1997. The established 
final marketing percentages release for domestic inshell use an 
additional 642 tons from the supply subject to regulation. Thus, a 
total of 4,610 tons of inshell hazelnuts will be released from the 1997 
supply for domestic inshell use.
    The marketing percentages are based on the Board's production 
estimates and the following supply and demand information for the 1997-
98 marketing year:

------------------------------------------------------------------------
                                                                  Tons  
------------------------------------------------------------------------
                        Inshell Supply                                  
(1) Total production (Board's estimate).......................    42,000
(2) Less substandard, farm use (disappearance)................     2,860
(3) Merchantable production (Board's adjusted crop estimate)..    39,140
(4) Plus undeclared carryin as of July 1, 1997, subject to              
 regulation...................................................         1
(5) Supply subject to regulation (Item 3 plus Item 4).........    39,141
                     Inshell Trade Demand                               
(6) Average trade acquisitions of inshell hazelnuts for three           
 prior years..................................................     4,279
(7) Increase to encourage increased sales (5 percent of Item            
 6)...........................................................       214
(8) Less declared carryin as of July 1, 1996, not subject to            
 regulation...................................................       525
(9) Adjusted Inshell Trade Demand.............................     3,968
(10) 15 percent of the average trade acquisitions of inshell            
 hazelnuts for three prior years (Item 6).....................       642
(11) Adjusted Inshell Trade Demand plus 15 percent for                  
 carryout (Item 9 plus Item 10)...............................     4,610
------------------------------------------------------------------------


------------------------------------------------------------------------
                    Percentages                       Free    Restricted
------------------------------------------------------------------------
(12) Interim final percentages (Item 9 divided by                       
 Item 5)  x  100..................................        10         90 
(13) Final percentages (Item 11 divided by Item 5)                      
  x  100..........................................        12         88 
------------------------------------------------------------------------

    In addition to complying with the provisions of the order, the 
Board also considered the Department's 1982 ``Guidelines for Fruit, 
Vegetable, and Specialty Crop Marketing Orders'' (Guidelines) when 
making its computations in the marketing policy. This volume control 
regulation provides a method to collectively limit the supply of 
inshell hazelnuts available for sale in domestic markets. The 
Guidelines provide that the domestic inshell market has available a 
quantity equal to 110 percent of prior years' shipments before 
secondary market allocations are approved. This provides for plentiful 
supplies for consumers and for market expansion, while retaining the 
mechanism for dealing with oversupply situations. At its November 13, 
1997, meeting, the Board recommended that an increase of 5 percent (214 
tons) for market expansion be included in the inshell trade demand 
which was used to compute the interim percentages. The established 
final percentages are based on the final inshell trade demand, and will 
make available an additional 642 tons for desirable carryout. The total 
free supply for the 1997-98 marketing year is 5,135 tons of hazelnuts, 
which is the final trade demand of 4,610 tons plus the declared carryin 
of 525 tons. This amount is 120 percent of prior years' sales and 
exceeds the goal of the Guidelines.
    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA), the Agricultural Marketing Service (AMS) has considered the 
economic impact of this rule on small entities. Accordingly, AMS has 
prepared this initial regulatory flexibility analysis.
    The purpose of the RFA is to fit regulatory actions to the scale of 
business subject to such actions in order that small businesses will 
not be unduly or disproportionately burdened. Marketing orders issued 
pursuant to the Act, and 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 1,000 producers of hazelnuts in the 
production area and approximately 23 handlers subject to regulation 
under the marketing order. Small agricultural producers have been 
defined by the Small Business Administration (13 CFR 121.601) as those 
having annual receipts of less than $500,000, and small agricultural 
service firms are defined as those whose annual receipts are less than 
$5,000,000. Using these criteria, virtually all of the producers are 
small agricultural producers and an estimated 20 of the 23 handlers are 
small

[[Page 3253]]

agricultural service firms. Thus, the great majority of hazelnut 
producers and handlers may be classified as small entities.
    Board meetings are widely publicized in advance of the meetings and 
are held in a location central to the production area. The meetings are 
open to all industry members and other interested persons who are 
encouraged to participate in the deliberations and voice their opinions 
on topics under discussion. Thus, Board recommendations can be 
considered to represent the interests of small business entities in the 
industry.
    Many years of marketing experience led to the development of the 
current volume control procedures. These procedures have helped the 
industry solve its marketing problems by keeping inshell supplies in 
balance with domestic needs. The current volume control procedures 
fully supply the domestic inshell market, provide for market expansion, 
and help prevent oversupplies in that market.
    Inshell hazelnuts sold to the domestic market provide higher 
returns to the industry than are obtained from shelling. The inshell 
market is inelastic and is characterized as having limited demand and 
being prone to oversupply.
    Industry statistics show that total hazelnut production has varied 
widely over the last 10 years, from a low of 13,000 tons in 1989 to a 
high of 41,000 tons in 1993. Average production has been around 24,000 
tons. While crop size has fluctuated, the volume regulations contribute 
toward orderly marketing and market stability, and help moderate the 
variation in returns for all growers and handlers, both large and 
small. For instance, production in the shortest crop year (1989) was 53 
percent of the 10-year average (1987-1996). Production in the biggest 
crop year (1996) was 170 percent of the 10-year average. The percentage 
releases provide all handlers with the opportunity to benefit from the 
most profitable domestic inshell market. That market is available to 
all handlers, regardless of handler size.
    NASS statistics show that the grower price per pound has increased 
steadily over the last 4 years, from $.28 in 1992 to $.43 in 1996.
    The Board discussed the only alternative to this rule which was not 
to regulate. Without any regulations in effect, the Board believes that 
the industry would oversupply the inshell domestic market. With the 
1997 hazelnut crop the largest in history, the release of 42,000 tons 
on the domestic inshell market would cause grower returns to decrease 
drastically, and completely disrupt the market.
    While the level of benefits of this rulemaking are difficult to 
quantify, the stabilizing effects of the volume regulations impact both 
small and large handlers positively by helping them maintain and expand 
markets even though hazelnut supplies fluctuate widely from season to 
season.
    Hazelnuts produced under the order comprise virtually all of the 
hazelnuts produced in the U.S. This production represents, on average, 
approximately 3 percent of total U.S. tree nut production and 
approximately 3 percent of the world's hazelnut production.
    This volume control regulation provides a method for the U.S. 
hazelnut industry to limit the supply of domestic inshell hazelnuts 
available for sale in the U.S. Section 982.40 of the order establishes 
a procedure and computations for the Board to follow in recommending to 
the Secretary release of preliminary, interim final, and final 
quantities of hazelnuts to be released to the free and restricted 
markets each marketing year. The program results in plentiful supplies 
for consumers and for market expansion while retaining the mechanism 
for dealing with oversupply situations.
    Currently, U.S. hazelnut production can be successfully allocated 
between the inshell domestic and secondary markets. One of the best 
secondary markets for hazelnuts is the export market. Inshell hazelnuts 
produced under the marketing order compete well in export markets 
because of quality. Europe, and Germany in particular, is historically 
the primary world market for U.S. produced inshell hazelnuts, although 
China was the largest importer in 1996-97. A third market is for 
shelled hazelnuts sold domestically. Domestically produced kernels 
generally command a higher price in the domestic market than imported 
kernels. The industry is continuing its efforts to develop and expand 
secondary markets, especially the domestic kernel market. Small 
business entities, both producers and handlers, benefit from the 
expansion efforts resulting from this program.
    There are some reporting, recordkeeping and other compliance 
requirements under the order. The reporting and recordkeeping burdens 
have been accepted by the handlers as necessary for compliance purposes 
and for developing statistical data for maintenance of the program. The 
forms require information which is readily available from handler 
records and which can be provided without data processing equipment or 
trained statistical staff. As with other marketing order programs, 
reports and forms are periodically studied to reduce or eliminate 
duplicate information collection burdens by industry and public sector 
agencies. This interim final rule does not change those requirements.
    The Department has not identified any relevant Federal rules that 
duplicate, overlap or conflict with this regulation.
    Written comments as to the effect of this action on small business 
entities timely received, will be considered before finalization of 
this rule.
    After consideration of all relevant material presented, including 
the Board's recommendation and other information, it is found that this 
interim final rule, as hereinafter set forth, will tend to effectuate 
the declared policy of the Act.
    Pursuant to 5 U.S.C. 553, it is also found and determined, upon 
good cause, that it is impracticable, unnecessary, and contrary to the 
public interest to give preliminary notice prior to putting this rule 
into effect, and that good cause exists for not postponing the 
effective date of this action until 30 days after publication in the 
Federal Register because: (1) The 1997-98 marketing year began July 1, 
1997, and the percentages established herein apply to all merchantable 
hazelnuts handled from the beginning of the crop year; (2) handlers are 
aware of this rule, which was recommended at an open Board meeting, and 
need no additional time to comply with this rule; and (3) interested 
persons are provided a 60-day comment period in which to respond. All 
comments timely received will be considered prior to finalization of 
this action.

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 
amended as follows:

PART 982--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. Section 982.245 is added to read as follows:

    Note: This section will not appear in the annual Code of Federal 
Regulations.

[[Page 3254]]

Sec. 982.245  Free and restricted percentages--1997-98 marketing year.

    (a) The interim final free and restricted percentages for 
merchantable hazelnuts for the 1997-98 marketing year shall be 10 and 
90 percent, respectively.
    (b) On April 30, 1998, the final free and restricted percentages 
for merchantable hazelnuts for the 1997-98 marketing year shall be 12 
and 88 percent, respectively.

    Dated: January 15, 1998.
Robert C. Keeney,
Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 98-1433 Filed 1-21-98; 8:45 am]
BILLING CODE 3410-02-P