[Federal Register Volume 66, Number 146 (Monday, July 30, 2001)]
[Rules and Regulations]
[Pages 39270-39274]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-18946]


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

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 981

[Docket No. FV01-981-1 FR]


Almonds Grown in California; Revision of Requirements Regarding 
Quality Control Program

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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

SUMMARY: This rule revises the administrative rules and regulations of 
the California almond marketing order (order) pertaining to the quality 
control program. The order regulates the handling of almonds grown in 
California, and is administered locally by the Almond Board of 
California (Board). Under the order, handlers receiving almonds from 
growers must have them inspected to determine the percentage of 
inedible almonds in each lot. Based on these inspections, handlers 
incur an inedible disposition obligation. They must satisfy this 
obligation by disposing of inedible almonds or almond material in 
outlets such as oil and animal feed. This rule

[[Page 39271]]

will require at least 25 percent of each handler's disposition 
obligation to be satisfied by disposing of inedible almonds. Handlers 
with total annual inedible obligations of less than 1,000 pounds will 
be exempt from the 25 percent requirement. This rule will also 
implement a change requiring inedible obligation reports prepared by 
the Federal-State Inspection Service (inspection agency) to cover 
weekly rather than monthly periods, consistent with current practice. 
These changes will help remove more inedible product from human 
consumption channels, and improve program administration.

EFFECTIVE DATE: This final rule becomes effective on August 1, 2001.

FOR FURTHER INFORMATION CONTACT: Martin Engeler, Assistant Regional 
Manager, California Marketing Field Office, Marketing Order 
Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 2202 
Monterey Street, suite 102B, Fresno, California 93721; telephone: (559) 
487-5901, Fax: (559) 487-5906; or George 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) 720-8938.
    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) 720-8938, or E-mail: [email protected].

SUPPLEMENTARY INFORMATION: This final 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 order is 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 the date of the entry of the ruling.
    This final rule revises the administrative rules and regulations 
pertaining to the quality control program under the California almond 
marketing order. The rule will require that at least 25 percent of 
handlers' inedible disposition obligations be satisfied by disposing of 
inedible almonds to accepted users of such product. Handlers with total 
annual inedible obligations of less than 1,000 pounds will be exempt 
from this requirement. The rule will also require inedible obligation 
reports prepared by the inspection agency to cover weekly rather than 
monthly periods. The Board initially recommended adding the 25 percent 
disposition requirement at a July 12, 2000, meeting. The Department 
subsequently requested additional information regarding reporting 
requirements and additional inspection costs. At a meeting on December 
6, 2000, the Board provided the requested information and added a 
recommendation to change the reporting requirement to require inedible 
obligation reports prepared by the inspection agency to cover weekly 
rather than monthly periods. Both proposals were unanimously 
recommended by the Board.
    Section 981.42 of the order provides authority for a quality 
control program. Section 981.42(a) requires handlers to obtain incoming 
inspection on almonds received from growers to determine the percent of 
inedible kernels in each lot of any variety. This information is then 
reported to the Board. Section 981.42(a) further requires handlers to 
dispose of a quantity of almonds or almond product to satisfy an 
inedible disposition obligation as determined by the incoming 
inspection. This section 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 quality 
control provisions.

Twenty-Five Percent Requirement

    Section 981.442 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 that handler's disposition obligation. 
Handlers are required to satisfy the disposition obligation by 
delivering packer pickouts, kernels rejected in blanching, pieces of 
kernels, meal accumulated in manufacturing, or other material, to 
crushers, feed manufacturers, feeders, or dealers in nut wastes on 
record with the Board as accepted users of such product. Accepted users 
dispose of this material to non-human consumption outlets. Currently, 
any of the aforementioned almond material can be used by handlers to 
satisfy any or all of their inedible disposition obligation. This rule 
requires that at least 25 percent of handlers' disposition obligations 
be satisfied with inedible kernels as defined under Sec. 981.408 of the 
rules and regulations. Handlers with total annual inedible obligations 
of less than 1,000 pounds will be exempt from the 25 percent 
requirement.
    The overall intent of the quality control program is to remove 
inedible almonds from product shipped to consumers. Inedible almonds 
are poor quality kernels or pieces of defective almonds that in some 
instances may contain aflatoxin. Removing inedible almonds from human 
consumption channels provides a better quality product to consumers.
    When the quality control program was initially implemented, it was 
recognized that it was not commercially feasible for handlers to remove 
all inedible almonds during the course of processing. Thus, handlers 
were allowed to use other almond material besides inedible almonds to 
satisfy their inedible disposition obligation.
    Over the years, changes have occurred in the industry. There has 
been a marked increase in the amount of almonds used in the manufacture 
of almond products. This has led to an increase in the amount of almond 
by-product material generated by handlers. Handlers can use this 
product to satisfy their disposition obligation. Because of the 
increased availability of this almond by-product material for use in 
satisfying the disposition obligation, handlers may be less diligent 
than in the past in removing inedible almonds from their finished 
product.

[[Page 39272]]

    Changes in the marketplace have also created conditions allowing 
handlers to deliver product containing a higher level of inedible 
almonds to their customers. Buyers, especially those who process 
almonds into other products, accept almonds with a higher inedible 
content than in the past. They can purchase this type of product at 
reduced price levels and still meet their needs. Although there is a 
market for this product, handlers shipping product with a higher 
inedible content is not consistent with the intent of the quality 
control program, which is to remove inedible almonds from human 
consumption channels.
    Finally, improvements in technology have enabled the delivery of a 
relatively clean product from shellers to handlers. Almonds are 
typically shelled, then delivered to handlers. In some instances, this 
product can meet a customer's specifications without further handler 
processing to remove inedible almonds.
    The intent of the quality control program is to remove inedible 
almonds from product prior to shipment. Because of the aforementioned 
factors, the Board believes the intent of the quality control program 
is not sufficiently achieved. Therefore, the Board recommended 
requiring that at least 25 percent of handlers' disposition obligations 
be satisfied with inedible almonds. This change is designed to ensure 
that handlers remove more inedible almonds from their product prior to 
shipment. It is expected that this change will result in a higher 
quality product shipped to consumers and more inedible almonds being 
removed from human consumption channels, thereby better effectuating 
the intent of the Board's quality control program.

Reporting Period Change

    Section 981.442(a)(3) of the regulations requires the Federal-State 
Inspection Service (inspection agency) to prepare a report for each 
handler showing the weight of almonds received and the inedible 
content, and provide copies of the report to the Board and handler. 
Section 981.442(a)(3) currently requires this report from the 
inspection agency to cover a period of one day or a period not 
exceeding one month.
    In carrying out the quality control program under the order, the 
almond industry utilizes the inspection agency to perform the required 
inspections. Prior to the 2000-2001 crop year, the inspection agency 
issued a report covering a monthly period. At the beginning of the 
2000-2001 crop year, the inspection agency began issuing a report 
covering weekly periods. This period has made it easier for the Board 
to collect and disseminate statistical information to handlers in a 
more timely manner. To specify in the rules and regulations the current 
practice, the Board recommended revising Sec. 981.442(a)(3) to require 
the inspection agency's report to the Board and handlers to cover 
weekly periods.

Additional Change

    Finally, this rule adds clarifying language to the regulations 
regarding the mechanics of crediting the disposition obligation. The 
language clarifies that the handlers' disposition obligations are 
credited upon satisfactory completion of ABC Form 8, and states who the 
responsible parties are for completing ABC Form 8.

Final Regulatory Flexibility Analysis

    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 106 handlers of California almonds who are 
subject to regulation under the 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 121.201) 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.
    Data for the most recently completed season indicate that about 63 
percent of the handlers ship under $5,000,000 worth of almonds and 37 
percent ship over $5,000,000 worth on an annual basis. In addition, 
based on production and grower price data reported by the National 
Agricultural Statistics Service, and the total number of almond 
growers, the average annual grower revenue was approximately $98,000. 
In view of the foregoing, it can be concluded that the majority of 
producers of California almonds may be classified as small entities, 
excluding receipts from other sources.
    This final rule revises the administrative rules and regulations 
pertaining to the quality control program under the California almond 
marketing order. Section 981.42 of the order provides authority for a 
quality control program. Section 981.42(a) requires almond handlers to 
obtain incoming inspection on almonds received from growers to 
determine the percent of inedible kernels in each lot of any variety. 
This information is reported to the Board by the inspection agency. 
Based on this incoming inspection, handlers incur an inedible 
disposition obligation. Handlers are then required to dispose of a 
quantity of almonds or almond material to accepted users of such 
product (basically, non-human consumption outlets) to satisfy their 
inedible disposition obligation. Section 981.42 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 quality control provisions. Section 981.442 contains the rules 
and regulations used in administering the quality control program.
    This rule will require that at least 25 percent of a handler's 
inedible disposition obligation be satisfied by disposing of inedible 
almonds to the appropriate outlets. Currently, handlers can dispose of 
various types of almonds and almond products to satisfy the obligation. 
The purpose of this 25 percent requirement is to help ensure that the 
intent of the program is being met, which is to remove inedible almonds 
from human consumption channels. The rule also modifies language to 
specify a reporting period for the inspection agency to not exceed one 
week rather than one day or a period exceeding one month. This change 
brings the language of the rules and regulations into conformity with 
reporting procedures currently being followed.
    There will be no additional cost to the industry regarding this 
change. However, there will be additional costs associated with 
implementing the requirement that at least 25 percent of each handler's 
total inedible dispositions be satisfied with inedible almonds. 
Inspection costs will increase slightly. Section 981.442(a)(5) provides 
that the inspection agency must determine the almond content of each 
inedible disposition for each handler. That information is provided to 
the Board, and is credited against the appropriate handler's inedible 
disposition obligation after the disposition takes place. In order to 
implement the 25 percent requirement,

[[Page 39273]]

it will be necessary for the inspection agency to determine not only 
the almond content of the dispositions, but also the amount of inedible 
product in the almond material. This will require additional analysis 
of samples by the inspection agency. The inspection agency charges a 
per-ton fee and an hourly fee for inedible almond inspections. The per 
ton fee will not change. However, the number of hours required to 
implement the additional analysis is expected to increase. It is 
estimated that the average total number of hours spent on inedible 
almond inspections could increase up to 20 percent; that is, from 1,116 
hours to 1,339 hours. At the rate of $14 per hour, this would represent 
an estimated increase to the industry of approximately $3,122.
    While additional costs are expected due to this rule, there are 
also benefits. The intent of the quality control program under the 
order is to remove inedible almonds from human consumption channels and 
provide an improved quality product to consumers. It is difficult to 
estimate the potential benefits of this action in dollar terms. 
However, ensuring a good quality product to consumers leads to consumer 
satisfaction and repeat purchases, and contributes to orderly 
marketing.
    Based on the foregoing, the Board believes that the costs of this 
rule will be outweighed by the benefits. This rule is expected to be 
beneficial to both the almond industry and consumers.
    Handlers incurring total annual inedible obligations of less than 
1,000 pounds will not be required to meet the 25 percent requirement. 
The approximately 30 handlers with such small obligations were allowed 
under previous regulations to deliver their inedible material to Board 
staff in lieu of an accepted user. Almond Board staff is not trained to 
perform inedible analysis on almond product, and it is thought that 
handlers with a 1,000 pound inedible obligation or less should not 
incur additional costs for analyzing such small amounts of product. 
This exemption is also consistent with the RFA goal of ensuring that 
regulatory actions do not disproportionately impact smaller businesses. 
Thus, the exemption is in order.
    One alternative to the proposals is to leave the regulations 
unchanged. With regard to the inspection reporting period changes, that 
was not considered appropriate because current practice needs only to 
be specified in the language of the rules and regulations. Regarding 
the 25 percent inedible disposition requirement, leaving the program 
unchanged will not help ensure inedibles are removed from human 
consumption channels. Because of the significant amount of almond by-
product material available to satisfy disposition obligations, it is 
believed that some handlers can satisfy their entire inedible 
obligation with this material. This rule will help ensure inedibles are 
removed.
    Another alternative is to require 100 percent of handlers' 
disposition obligations to be satisfied with inedible almonds. However, 
such a requirement would not be commercially feasible for handlers. The 
Board believes that setting a 25 percent requirement is a reasonable 
change to better reflect the intent of the program.
    This rule will not impose any additional reporting or recordkeeping 
requirements on either small or large almond handlers. The current 
information collection requirements referenced in this final rule have 
been previously approved by the Office of Management and Budget (OMB) 
under OMB No. 0581-0071. As with all Federal marketing order programs, 
reports and forms are periodically reviewed to reduce information 
requirements and duplication by industry and public sector agencies.
    The Department has not identified any relevant Federal rules that 
duplicate, overlap or conflict with this rule.
    In addition, the Board's meetings were 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 July 12, 2000, and December 6, 2000, meetings were public 
meetings and all entities, both large and small, were able to express 
their views on this issue. The Board itself is composed of ten members, 
of whom five are producers and five are handlers.
    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 July 11, 2000, and on September 13, 
2000, and discussed these issues. Those meetings were also public 
meetings and both large and small entities were able to participate and 
express their views.
    A proposed rule concerning this action was published in the Federal 
Register on May 2, 2001 (66 FR 21888). Copies of the rule were mailed 
or sent via facsimile to all Board members and almond handlers. 
Finally, the rule was made available through the Internet by the Office 
of the Federal Register. A 30-day comment period ending June 1, 2001, 
was provided to allow interested parties to respond to the proposal. No 
comments were received.
    A small business guide on complying with fruit, vegetable, and 
specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/fv/moab.html. Any questions about the compliance 
guide should be sent to Jay Guerber at the previously mentioned address 
in the FOR FURTHER INFORMATION CONTACT section.
    After consideration of all relevant matter presented, including the 
information and recommendation submitted by the Board and other 
available information, it is hereby found that this rule, as 
hereinafter set forth, will tend to effectuate the declared policy of 
the Act.
    It is further found that good cause exists for not postponing the 
effective date of this rule until 30 days after publication in the 
Federal Register (5 U.S.C. 553) because this regulation needs to be in 
effect for the 2001-2002 crop year which begins August 1, 2001, in 
order to be equitable to all handlers. Further, handlers are aware of 
this rule, which was recommended at a public meeting. Also, a 30-day 
comment period was provided for in the proposed rule.

List of Subjects in 7 CFR Part 981

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

    For the reasons set forth in the preamble, 7 CFR part 981 is 
amended as follows:

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. In Sec. 981.442, the last sentence in paragraph (a)(3) and 
paragraph (a)(5) are revised to read as follows:


Sec. 981.442  Quality control.

    (a) * * *
    (3) * * * The report shall cover the handler's daily receipt or the 
handler's total receipts during a period not exceeding one week, and 
shall be submitted by the inspection agency to the Board and the 
handler.
* * * * *
    (5) Meeting the disposition obligation. Each handler shall meet its 
disposition obligation by delivering packer pickouts, kernels rejected 
in blanching, pieces of kernels, meal accumulated in manufacturing, or 
other material, to crushers, feed manufacturers, feeders, or dealers in 
nut wastes on record with the Board as accepted users. Handlers shall

[[Page 39274]]

notify the Board at least 72 hours prior to delivery: Provided, That 
the Board or its employees may lessen this notification time whenever 
it determines that the 72 hour requirement is impracticable. The Board 
may supervise deliveries at its option. In the case of a handler having 
an annual total obligation of less than 1,000 pounds, delivery may be 
to the Board in lieu of an accepted user, in which case the Board would 
certify the disposition lot and report the results to the USDA. For 
dispositions by handlers with mechanical sampling equipment, samples 
may be drawn by the handler in a manner acceptable to the Board and the 
inspection agency. For all other dispositions, samples shall be drawn 
by or under supervision of the inspection agency. Upon approval by the 
Board and the inspection agency, sampling may be accomplished at the 
accepted user's destination. The edible and inedible almond meat 
content of each delivery shall be determined by the inspection agency 
and reported by the inspection agency to the Board and the handler. The 
handler's disposition obligation will be credited upon satisfactory 
completion of ABC Form 8. ABC Form 8, Part A, is filled out by the 
handler, and Part B by the accepted user. Deliveries containing less 
than 50 percent almond meat content shall not be credited against the 
disposition obligation. At least 25 percent of a handler's total crop 
year inedible disposition obligation shall be satisfied with 
dispositions consisting of inedible kernels as defined in Sec. 981.408: 
Provided, That this 25 percent requirement shall not apply to handlers 
with total annual obligations of less than 1,000 pounds. Each handler's 
disposition obligation shall be satisfied when the almond meat content 
of the material delivered to accepted users equals the disposition 
obligation, but no later than August 31 succeeding the crop year in 
which the obligation was incurred.
* * * * *

    Dated: July 25, 2001.
Kenneth C. Clayton,
Acting Administrator, Agricultural Marketing Service.
[FR Doc. 01-18946 Filed 7-26-01; 11:22 am]
BILLING CODE 3410-02-P