[Federal Register Volume 64, Number 82 (Thursday, April 29, 1999)]
[Rules and Regulations]
[Pages 23011-23014]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-10772]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 982

[Docket No. FV99-982-1 FIR]


Hazelnuts Grown in Oregon and Washington; Establishment of Final 
Free and Restricted Percentages for the 1998-99 Marketing Year

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 
which established interim and final free and restricted percentages for 
domestic inshell hazelnuts for the 1998-99 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.

EFFECTIVE DATE: June 1, 1999.

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, Technical Advisor, 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) 720-
5698. Small businesses may request information on complying with this 
regulation, or obtain a guide on complying with fruit, vegetable, and 
specialty crop marketing agreements and orders 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) 720-5698, or E-mail: 
Jay.G[email protected]. You may view the marketing agreement and order 
small business compliance guide at the following web site: http://
www.ams.usda.gov/fv/moab.html.

SUPPLEMENTARY INFORMATION: This rule is issued under Marketing 
Agreement No. 115 and Order No. 982, both as amended (7 CFR part 982), 
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 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 rule apply to all merchantable 
hazelnuts handled during the 1998-99 marketing year (July 1, 1998, 
through June 30, 1999). 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 continues in effect 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''

[[Page 23012]]

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 the percentages are specified in Sec. 982.40 of the order.
    The National Agricultural Statistics Service (NASS) estimated 
hazelnut production at 16,500 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 otherwise disposed of by handlers (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 27, 1998, meeting, the Board computed and announced 
preliminary free and restricted percentages of 18 percent and 82 
percent, respectively. The Board used the NASS crop estimate of 16,500 
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 
2,763 tons of hazelnuts from the 1998 supply for domestic inshell use. 
The preliminary restricted percentage of the 1998 supply for export and 
kernel markets totaled 12,623 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 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; (i.e., desirable carryout). 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 Sec. 982.40(e).
    The Board met on November 12, 1998, and reviewed and approved an 
amended marketing policy and recommended the establishment of final 
free and restricted percentages. The Board decided that market 
conditions were such that immediate release of an additional 15 percent 
for desirable carryout would not adversely affect the 1998-99 domestic 
inshell market. Accordingly, no interim final free and restricted 
percentages were recommended. Final percentages were recommended at 30 
percent free and 70 percent restricted. The final percentages released 
4,115 tons of inshell hazelnuts from the 1998 supply for domestic use.
    The final marketing percentages are based on the Board's final 
production estimate (14,500 tons) and the following supply and demand 
information for the 1998-99 marketing year:

------------------------------------------------------------------------
                                                           Tons
------------------------------------------------------------------------
Inshell Supply:
    (1) Total production (Board's estimate)....                   14,500
    (2) Less substandard, farm use                                 1,077
     (disapperarance)..........................
    (3) Merchantable production (Board's                          13,423
     adjusted crop estimate; Item 1 minus Item
     2)........................................
    (4) Plus undeclared carryin as of July 1,                        120
     1997, subject to regulation...............
    (5) Supply subject to regulation (Item 3                      13,543
     plus Item 4)..............................
Inshell Trade Demand:
    (6) Average trade acquisitions of inshell                      4,408
     hazelnuts for three prior years...........
    (7) Less declared carryin as of July 1,                          954
     1997, not subject to regulation...........
    (8) Adjusted Inshell Trade Demand..........                    3,454
    (9) Desirable carryout on August 31, 1999                        661
     (15 percent of Item 6)....................
    (10) Adjusted Inshell Trade Demand plus                        4,115
     desirable carryout (Item 8 plus Item 9)...
------------------------------------------------------------------------


------------------------------------------------------------------------
                  Percentages                       Free      Restricted
------------------------------------------------------------------------
    (11) Final percentages (Item 10 divided by           30           70
     Item 5)  x  100..........................
------------------------------------------------------------------------

    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. The established final 
percentages are based on the final inshell trade demand, and will make 
available an additional 661 tons for desirable carryout. The total free 
supply for the 1998-99 marketing year is 5,069 tons of hazelnuts, which 
is the final trade demand of 4,408 tons plus the 661 tons for desirable 
carryout. This amount is 115 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 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.

[[Page 23013]]

Marketing orders issued pursuant to the Act, and the rules issued 
thereunder, are unique in that they are brought about through group 
action of essentially small entities acting on their own behalf. Thus, 
both statutes have small entity orientation and compatibility.
    There are approximately 800 producers of hazelnuts in the 
production area and approximately 22 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 19 of the 22 handlers are 
small agricultural service firms. In view of the foregoing, it can be 
concluded that the majority of hazelnut producers and handlers may be 
classified as small entities.
    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 while preventing 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 47,000 tons in 1997. Average production has been around 27,000 
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 producers and handlers, both large and 
small. For instance, production in the shortest crop year (1989) was 48 
percent of the 10-year average (1988-1997). Production in the biggest 
crop year (1997) was 173 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 producer price per pound has 
increased over the last 5 years, from $.32 in 1993 to $.45 in 1997.
    The Board discussed the only alternative to volume regulation 
percentages which was not to regulate. Without any regulations in 
effect, the Board believes that the industry would oversupply the 
inshell domestic market. Although the 1998 hazelnut crop is much 
smaller than last year, the release of 14,500 tons on the domestic 
inshell market would cause producer returns to decrease drastically, 
and completely disrupt the market.
    While the level of benefits of this rulemaking is 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 United States. This production represents, on 
average, less than 5 percent of total U.S. tree nut production, and 
less than 5 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 United States. Section 982.40 of the order 
establishes a procedure and computations for the Board to follow in 
recommending to the Secretary the 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 1997-98. 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.
    This rule will not impose any additional reporting or recordkeeping 
requirements on either small or large hazelnut 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 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 
hazelnut industry and all interested persons were invited to attend the 
meeting and encouraged to participate in Board deliberations. Like all 
Board meetings, the November 12, 1998, meeting was a public meeting 
held in a location central to the production area and all entities, 
both large and small, were able to express their views on this issue. 
Thus, Board recommendations can be considered to represent the 
interests of small business entities in the industry. The Board itself 
is composed of 10 members, of which four are handlers, five are 
growers, and one is a public member.
    An interim final rule concerning this action was published in the 
Federal Register on January 14, 1999. Copies of the rule were mailed by 
the Board's staff to all Board members and hazelnut handlers. In 
addition, the rule was made available through the Internet by the 
Office of the Federal Register. That rule provided for a 60-day comment 
period which ended March 15, 1999. No comments were received.
    After consideration of all relevant material presented, including 
the Board's recommendation and other information, it is found that 
finalizing the interim final rule, without change, as published in the 
Federal Register (64 FR 2422, January 14, 1999) will tend to effectuate 
the declared policy of the Act.

List of Subjects in 7 CFR Part 982

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

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

PART 982--HAZELNUTS GROWN IN OREGON AND WASHINGTON

    Accordingly, the interim final rule amending 7 CFR part 982 which 
was published at 64 FR 2422 on January 14, 1999, is adopted as a final 
rule without change.


[[Page 23014]]


    Dated: April 21, 1999.
Robert C. Keeney,
Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 99-10772 Filed 4-28-99; 8:45 am]
BILLING CODE 3410-02-P