[Federal Register Volume 69, Number 11 (Friday, January 16, 2004)]
[Rules and Regulations]
[Pages 2493-2497]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-1004]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 982

[Docket No. FV04-982-1 IFR]


Hazelnuts Grown in Oregon and Washington; Establishment of 
Interim Final and Final Free and Restricted Percentages for the 2003-
2004 Marketing Year

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Interim final rule with request for comments.

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SUMMARY: This rule establishes interim final and final free and 
restricted percentages for domestic inshell hazelnuts for the 2003-2004 
marketing year under the Federal marketing order for hazelnuts grown in 
Oregon and Washington. The interim final free and restricted 
percentages are 6.8393 percent and 93.1607 percent, respectively, and 
the final free and restricted percentages are 8.2303 percent and 
91.7697 percent, respectively. The percentages allocate the quantity of 
domestically produced hazelnuts that 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 
unanimously recommended by the Hazelnut Marketing Board (Board), which 
is the agency responsible for local administration of the marketing 
order.

DATES: Effective Date: This interim final rule is effective January 20, 
2004. This interim final rule applies to all 2003-2004 marketing year 
restricted hazelnuts until they are properly disposed of in accordance 
with marketing order requirements. Comments: Comments received by March 
16, 2004 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 to the Docket Clerk, 
Marketing Order Administration Branch, Fruit and Vegetable Programs, 
AMS, USDA, 1400 Independence Avenue SW., STOP 0237, Washington, DC 
20250-0237; Fax: (202) 720-8938, or E-mail: [email protected]. 
All 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

[[Page 2494]]

the Office of the Docket Clerk during regular business hours, or can be 
viewed at: http://www.ams.usda.gov/fv/moab.html.

FOR FURTHER INFORMATION CONTACT: Teresa L. Hutchinson, Northwest 
Marketing Field Office, Marketing Order Administration Branch, Fruit 
and Vegetable Programs, AMS, USDA, 1220 SW Third Avenue, Suite 385, 
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, 1400 Independence 
Avenue SW., STOP 0237, Washington, DC 20250-0237; telephone: (202) 720-
2491, Fax: (202) 720-8938.
    Small businesses may request information on complying with this 
regulation by contacting Jay Guerber, Marketing Order Administration 
Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence SW., 
STOP 0237, Washington, DC 20250-0237; telephone: (202) 720-2491, Fax: 
(202) 720-8938, or E-mail: [email protected].

SUPPLEMENTARY INFORMATION: This rule is issued under Marketing 
Agreement No. 115 and Marketing 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 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 (USDA) 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 2003-2004 marketing year 
(July 1, 2003, through June 30, 2004). 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 USDA 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, USDA 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 USDA'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 that 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 the 
percentages are specified in Sec.  982.40 of the order.
    The quantity to be 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). Prior to 
September 20 of each marketing year, the Board must compute and 
announce preliminary free and restricted percentages. The preliminary 
free percentage releases 80 percent of the adjusted inshell trade 
demand to the domestic market. The purpose of releasing only 80 percent 
of the inshell trade demand under the preliminary percentage is to 
guard against an underestimate of crop size. 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.
    The National Agricultural Statistics Service (NASS) has estimated 
hazelnut production at 35,000 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.
    At its August 28, 2003, meeting, the Board adjusted the NASS crop 
estimate down to 33,717 tons by deducting the average crop 
disappearance over the preceding three years (4.64 percent or 1,624 
tons) and adding the undeclared carryin (341 tons) to the 35,000 ton 
production estimate. Disappearance is the difference between orchard-
run production (crop estimate) and the available supply of merchantable 
product available for sale by handlers. Disappearance consists of (1) 
unharvested hazelnuts, (2) culled product (nuts that are delivered to 
handlers but later discarded), or (3) product used on the farm, sold 
locally, or otherwise disposed of by producers. The Board computed the 
adjusted inshell trade demand of 2,306 tons by taking the difference 
between the average of the past three years' sales (3,127 tons) and the 
declared carryin from last year's crop (821 tons).
    The Board computed and announced preliminary free and restricted 
percentages of 5.4720 percent and 94.5280 percent, respectively, at its 
August 28, 2003, meeting. The preliminary free percentage was computed 
by multiplying the adjusted trade demand by 80 percent and dividing the 
result by the adjusted crop estimate (2,306 tons x 80 percent/33,717 
tons = 5.4720 percent.) The preliminary free percentage thus initially 
released 1,845 tons of hazelnuts from the 2003 supply for domestic 
inshell use, and the preliminary restricted percentage withheld 31,872 
tons for the export and shelled (kernel) markets.
    Under the order, the Board must meet again 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 order requires that the final 
free and restricted percentages shall be effective 30 days prior to the 
end of the marketing year, or earlier, if recommended by the Board and 
approved by USDA. Revisions in the marketing policy can be made until 
February 15 of each marketing year, but the inshell trade demand can 
only be

[[Page 2495]]

revised upward, consistent with Sec.  982.40(e).
    The Board met on November 13, 2003, and reviewed and approved an 
amended marketing policy and recommended the establishment of interim 
final and final free and restricted percentages. The interim final free 
and restricted percentages were recommended at 6.8393 percent free and 
93.1607 percent restricted. Final percentages, which included an 
additional 15 percent of the average of the preceding three-years' 
trade acquisitions for desirable carryout, were recommended at 8.2303 
free and 91.7697 percent restricted effective May 31, 2004. The final 
free percentage releases 2,775 tons of inshell hazelnuts from the 2003 
supply for domestic inshell use.
    The interim and final marketing percentages are based on the 
Board's final production estimate and the following supply and demand 
information for the 2003-2004 marketing year:

------------------------------------------------------------------------
                     Inshell supply                            Tons
------------------------------------------------------------------------
(1) Total production (crop estimate)....................          35,000
(2) Less substandard, farm use (disappearance; 4.64                1,624
 percent of Item 1).....................................
(3) Merchantable production (Board's adjusted crop                33,376
 estimate; Item 1 minus Item 2).........................
(4) Plus undeclared carryin as of July 1, 2003, (subject             341
 to regulation).........................................
(5) Supply subject to regulation (Item 3 plus Item 4)...          33,717
------------------------------------------------------------------------
                          Inshell Trade Demand
------------------------------------------------------------------------
(6) Average trade acquisitions of inshell hazelnuts for            3,127
 three prior years......................................
(7) Less declared carryin as of July 1, 2003 (not                    821
 subject to regulation).................................
(8) Adjusted Inshell Trade Demand (Item 6 minus Item 7).           2,306
(9) Desirable carryout on August 31, 2004 (15 percent of             469
 Item 6)................................................
(10) Adjusted Inshell Trade Demand plus desirable                  2,775
 carryout (Item 8 plus Item 9)..........................
------------------------------------------------------------------------


 
                 Percentages                      Free      Restricted
------------------------------------------------------------------------
(11) Interim final percentages (Item 8            6.8393         93.1607
 divided by Item 5) x 100....................
(12) Final percentages (Item 10 divided by        8.2303         91.7697
 Item 5) x 100...............................
(13) Final free in tons (Item 10)............      2,775  ..............
(14) Final restricted in tons (Item 5 minus    .........          30,942
 Item 10)....................................
------------------------------------------------------------------------

    In addition to complying with the provisions of the order, the 
Board also considered USDA'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 allocating supplies for the export 
inshell, export kernel, and domestic kernel markets. This provides for 
plentiful supplies for consumers and for market expansion, while 
retaining the mechanism for dealing with oversupply situations. The 
established final percentages will make available an additional 469 
tons for desirable carryout effective May 31, 2004. The total free 
supply for the 2003-2004 marketing year is 3,596 tons of hazelnuts, 
which is the sum of the final trade demand of 3,127 tons and the 469 
ton desirable carryout. This amount is 115 percent of prior years' 
sales and exceeds the goal of the Guidelines.

Initial 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 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 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.
    Small agricultural producers are defined by the Small Business 
Administration (13 CFR 121.201) as those having annual receipts of less 
than $750,000, and small agricultural service firms are defined as 
those having annual receipts of less than $5,000,000. There are 
approximately 750 producers of hazelnuts in the production area and 
approximately 17 handlers subject to regulation under the order. 
Average annual hazelnut revenue per producer is approximately $36,133. 
This is computed by dividing NASS figures for the average value of 
production for 2001 and 2002 ($27,100,000) by the number of producers. 
The level of sales of other crops by hazelnut producers is not known. 
In addition, based on Board records, about 95 percent of the handlers 
ship under $5,000,000 worth of hazelnuts on an annual basis. In view of 
the foregoing, it can be concluded that the 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.
    Currently, U.S. hazelnut production is allocated among three market 
outlets: domestic inshell, export inshell, and kernel markets. Handlers 
and growers receive the highest return on domestic inshell, less for 
export inshell, and the least for kernels. Based on Board records of 
average shipments for 1993-2002, the percentage going to each of these 
markets was 13 percent (domestic inshell), 43 percent (export inshell), 
and 44 percent (kernels).
    The inshell market can be characterized as having limited demand 
and being prone to oversupply and low grower prices in the absence of 
supply restrictions. 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 continental U.S.

[[Page 2496]]

On average, 77 percent of domestic inshell hazelnuts are shipped during 
the period October 1 through November 30, primarily to supply the 
holiday nut market.
    Many years of marketing experience led to the development of the 
current volume control procedures. These procedures have helped the 
industry to improve its marketing situation by keeping inshell supplies 
in balance with domestic needs. Volume controls fully supply the 
domestic inshell market while preventing an oversupply of that market.
    The estimated inshell trade demand (2,306 tons) and the larger 2003 
crop were key market factors leading to the Board's recommendation for 
the 8.2303 percent final free percentage. The 35,000 ton hazelnut 
production for 2003 is 15,500 tons more than in 2002, and 14,500 tons 
less than the production level in 2001, the largest crop in the last 
ten years.
    Although the domestic inshell market is a relatively small 
proportion of total sales (13 percent of average shipments over the 
last ten years, and 11 percent of average shipments for the last two 
years), it remains a profitable market segment. The volume control 
provisions of the marketing order are designed to avoid oversupplying 
this particular market segment, because that would likely lead to 
substantially lower grower prices. The domestic kernel market and 
inshell exports are both expected to continue to be good outlets for 
U.S. hazelnut production.
    Recent production and price data reflect the stabilizing effect of 
the volume control regulations. Industry statistics show that total 
hazelnut production has varied widely over the 10-year period between 
1993 and 2002, from a low of 15,400 tons in 1998 to a high of 49,500 
tons in 2001. Production in the shortest crop year and the biggest crop 
year was 49 percent and 159 percent, respectively, of the 10-year 
average tonnage of 31,220. Since low production years typically follow 
high production years (a consistent pattern for hazelnuts), lower 
production is expected in 2004.
    The coefficient of variation (a standard statistical measure of 
variability; ``CV'') for hazelnut production over the 10-year period is 
0.39. In contrast, the coefficient of variation for hazelnut grower 
prices is 0.12, less than one third of the CV for production. The 
considerably lower variability of prices versus production provides an 
illustration of the order's price-stabilizing impacts.
    Comparing grower cost of production to grower revenue in recent 
years highlights the financial impacts on growers at varying production 
levels. A recent hazelnut cost of production study from Oregon State 
University estimated cost of production per acre to be approximately 
$1,340 for a typical 100-acre hazelnut enterprise. Average grower 
revenue per bearing acre (based on NASS acreage and value of production 
data) equaled or exceeded that typical cost level twice between 1995 
and 2002. Average grower revenue was below typical costs in the other 
years. Since 1995, the highest level of revenue per bearing acre was 
$1,552 (1997) and the lowest was $561 in 1996. Without the stabilizing 
impact of the order, growers may have lost more money. While crop size 
fluctuates, the volume regulations contribute to orderly marketing and 
market stability, and help to moderate the variation in returns for all 
producers and handlers, both large and small.
    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. This regulation provides equitable allotment of the most 
profitable market, the domestic inshell market. That market is 
available to all handlers, regardless of size.
    As an alternative to this regulation, the Board discussed not 
regulating the 2003-2004 hazelnut crop. However, without any 
regulations in effect, the Board believes that the industry would 
oversupply the inshell domestic market.
    Section 982.40 of the order establishes a procedure and 
computations for the Board to follow in recommending to USDA the 
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.
    Hazelnuts produced under the order comprise virtually all of the 
hazelnuts produced in the U.S. This production represents, on average, 
less than 4 percent of total U.S. production for other tree nuts, and 
less than 4 percent of the world's hazelnut production.
    During the 2002-2003 season, 87 percent of the kernels were 
marketed in the domestic market and 13 percent were exported. 
Domestically produced kernels generally command a higher price in the 
domestic market than imported kernels. The industry is continuing its 
efforts to develop new markets and expand demand, with emphasis on the 
domestic kernel market. Small business entities, both producers and 
handlers, benefit from the expansion efforts resulting from this 
program.
    Inshell hazelnuts produced under the order compete well in export 
markets because of quality. Based on Board statistics, Europe has 
historically been the primary export market for U.S.-produced inshell 
hazelnuts, with a 10-year average of 5,249 tons, 40 percent of total 
average exports of 12,478 tons. The largest share went to Germany. In 
1995, 70 percent of export shipments went to Europe. Recent years have 
seen a significant shift in export destinations, however, with Europe's 
share declining to 30 percent of inshell shipments (3,321 tons) in the 
2002-2003 season. Inshell shipments to Asia have increased dramatically 
in the past few years, growing to 55 percent of total exports of 10,979 
tons in the 2002-2003 season. Hong Kong is the largest export 
destination, followed by China. The industry continues to pursue export 
opportunities.
    There are some reporting, recordkeeping, and other compliance 
requirements under the order. The reporting and recordkeeping burdens 
are necessary for compliance purposes and for developing statistical 
data for maintenance of the program. The information collection 
requirements have been previously approved by the Office of Management 
and Budget under OMB No. 0581-0178. 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 
all Federal marketing order programs, reports and forms are 
periodically reviewed to reduce information requirements and 
duplication by industry and public sector agencies. This rule does not 
change those requirements. In addition, USDA has not identified any 
relevant Federal rules that duplicate, overlap or conflict with this 
rule.
    Further, the Board's meetings were widely publicized throughout the 
hazelnut industry and all interested persons were invited to attend the 
meetings and participate in Board deliberations. Like all Board 
meetings, those held on August 28 and November 13, 2003, were public 
meetings and all entities, both large and small, were able to express 
their views on this issue. Finally, interested persons are invited to 
submit information on the regulatory and informational impacts of this 
action on small businesses.

[[Page 2497]]

    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.
    This rule invites comments on the establishment of interim final 
and final free and restricted percentages for the 2003-2004 marketing 
year under the hazelnut marketing order. Any comments received will be 
considered prior to 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 2003-2004 marketing year began July 1, 2003, 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, and 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.

0
For the reasons set forth in the preamble, 7 CFR Part 982 is amended as 
follows:

PART 982--HAZELNUTS GROWN IN OREGON AND WASHINGTON

0
1. The authority citation for 7 CFR Part 982 continues to read as 
follows:

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

0
2. A new section 982.251 is added to read as follows:

[Note: This section will not be published in the annual Code of 
Federal Regulations.]

Sec.  982.251  Free and restricted percentages--2003-2004 marketing 
year.

    (a) The interim final free and restricted percentages for 
merchantable hazelnuts for the 2003-2004 marketing year shall be 6.8393 
percent and 93.1607 percent, respectively.
    (b) On May 31, 2004, the final free and restricted percentages for 
merchantable hazelnuts for the 2003-2004 marketing year shall be 8.2303 
percent and 91.7697 percent, respectively.

    Dated: January 12, 2004.
A.J. Yates,
Administrator, Agricultural Marketing Service.
[FR Doc. 04-1004 Filed 1-15-04; 8:45 am]
BILLING CODE 3410-02-P