[Federal Register Volume 71, Number 78 (Monday, April 24, 2006)]
[Proposed Rules]
[Pages 20902-20909]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-6071]


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 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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  Federal Register / Vol. 71, No. 78 / Monday, April 24, 2006 / 
Proposed Rules  

[[Page 20902]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 984

[Docket No. AO-192-A7; FV06-984-1]


Walnuts Grown in California; Hearing on Proposed Amendment of 
Marketing Agreement and Order No. 984

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Notice of hearing on proposed rulemaking.

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

SUMMARY: Notice is hereby given of a public hearing to receive evidence 
on proposed amendments to Marketing Order No. 984, which regulates the 
handling of walnuts grown in California. The amendments are proposed by 
the Walnut Marketing Board (Board), which is responsible for local 
administration of order 984. The amendments would: Change the marketing 
year; include ``pack'' as a handler function; restructure the Board and 
revise nomination procedures; rename the Board and add authority to 
change Board composition; modify Board meeting and voting procedures; 
add authority for marketing promotion and paid advertising; add 
authority to accept contributions, and to carry over excess assessment 
funds; broaden the scope of the quality control provisions and add the 
authority to recommend different regulations for different market 
destinations; add authority for the Board to appoint more than one 
inspection service; replace outdated order language with current 
industry terminology; and other related amendments.
    The USDA proposes three additional amendments: To establish tenure 
limitations for Board members, to require that continuance referenda be 
conducted on a periodic basis to ascertain producer support for the 
order, and to make any changes to the order as may be necessary to 
conform with any amendment that may result from the hearing.
    The proposed amendments are intended to improve the operation and 
functioning of the marketing order program.

DATES: The hearing will be held on May 17, 2006, in Modesto, 
California, beginning at 8:30 a.m. and ending at 4:30 p.m. The hearing 
will continue, if necessary, on May 18, 2006, commencing at 8:30 a.m.

ADDRESSES: The hearing location is: Stanislaus County Farm Bureau, 1201 
L Street, Modesto, CA, 95353, telephone: (209) 522-7278.

FOR FURTHER INFORMATION CONTACT: Melissa Schmaedick, Marketing Order 
Administration Branch, Fruit and Vegetable Programs, AMS, USDA, P.O. 
Box 1035, Moab, Utah; telephone: (435) 259-7988, Fax: (435) 259-4945; 
or Kathleen M. Finn, 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 this proceeding by 
contacting Jay Guerber, 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.

SUPPLEMENTARY INFORMATION: This administrative action is instituted 
pursuant to the Agricultural Marketing Agreement Act of 1937, as 
amended (7 U.S.C. 601-674), hereinafter referred to as the ``Act.'' 
This action is governed by the provisions of sections 556 and 557 of 
title 5 of the United States Code and, therefore, is excluded from the 
requirements of Executive Order 12866.
    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) seeks to 
ensure that within the statutory authority of a program, the regulatory 
and informational requirements are tailored to the size and nature of 
small businesses. Interested persons are invited to present evidence at 
the hearing on the possible regulatory and informational impacts of the 
proposals on small businesses.
    The amendments proposed herein have been reviewed under Executive 
Order 12988, Civil Justice Reform. They are not intended to have 
retroactive effect. If adopted, the proposed amendments would not 
preempt any State or local laws, regulations, or policies, unless they 
present an irreconcilable conflict with the proposals.
    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. 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 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.
    The hearing is called pursuant to the provisions of the Act and the 
applicable rules of practice and procedure governing the formulation of 
marketing agreements and orders (7 CFR part 900).
    The proposed amendments are the result of a committee appointed by 
the Board to conduct a review of the order. The committee met several 
times in 2005 and drafted proposed amendments to the order and 
presented them at industry meetings. The proposed amendments were then 
forwarded to the Board, which unanimously approved them. The amendments 
are intended to streamline organization and administration of the 
marketing order program.
    The Board's request for a hearing was submitted to USDA on March 3, 
2004. The Board's proposed amendments to Marketing Order No. 984 
(order) are summarized below.
    1. Amend the order to change the marketing year from August 1 
through July 31 to September 1 through August 31. This proposal would 
amend Sec.  984.7, Marketing year, and would result in conforming 
changes being made to Sec.  984.36, Term of Office, and Sec.  984.48 
Marketing estimates and recommendations.
    2. Amend the order by specifying that the act of packing walnuts is 
considered a handling function. This proposal would amend Sec.  984.13, 
To handle, as well as clarify the definition of ``pack''

[[Page 20903]]

in Sec.  984.15 by including the term ``shell.''
    3. (a) Amend all parts of the order that refer to cooperative seats 
on the Board, redistribute member seats among districts, and provide 
designated seats for a major handler, if such handler existed. A major 
handler would have to handle 35 percent or more of the crop. This 
proposal would amend Sec.  984.35, Walnut Marketing Board and Sec.  
984.14, Handler.
    3. (b) Amend the Board member nomination process to reflect 
proposed changes in the Board structure, as outlined in 3(a). This 
proposal would amend Sec.  984.37, Nominations, and Sec.  984.40, 
Alternate.
    4. Require Board nominees to submit a written qualification and 
acceptance statement prior to selection by USDA. This proposal would 
amend Sec.  984.39, Qualify by acceptance.
    5. Change the name of the Walnut Marketing Board to the California 
Walnut Board. This proposal would amend Sec.  984.6, Board, and Sec.  
984.35, Walnut Marketing Board.
    6. Add authority to reestablish districts, reapportion members 
among districts, and revise groups eligible for representation on the 
Board. This proposal would add a new paragraph (d) to Sec.  984.35, 
Walnut Marketing Board.
    7. Amend Board quorum and voting requirements to add percentage 
requirements, add authority for the Board to vote by ``any other means 
of communication'' (including facsimile) and add authority for Board 
meetings to be held by telephone or by ``any other means of 
communication'', providing that all votes cast at such meetings shall 
be confirmed in writing. This proposal would amend Sec.  984.45, 
Procedure and would result in a conforming change in Sec.  984.48(a), 
Marketing estimates and recommendations.
    8. Amend the order to add authority to carry over excess assessment 
funds. This proposal would amend Sec.  984.69, Assessments.
    9. Amend the order by adding authority to accept contributions. 
This proposal would add a new Sec.  984.70, Contributions.
    10. Amend the order to clarify that members and alternate members 
may be reimbursed for expenses incurred while performing their duties 
and that reimbursement includes per diem. This proposal would amend 
Sec.  984.42, Expenses.
    11. Amend the order to add authority for the Board to appoint more 
than one inspection service as long as the functions performed by each 
service are separate and do not conflict with each other. This proposal 
would amend Sec.  984.51, Inspection and certification of inshell and 
shelled walnuts.
    12. (a) Amend the order by broadening the scope of the quality 
control provisions and by adding authority to recommend different 
regulations for different market destinations. This proposal would 
amend Sec.  984.50, Grade and size regulations.
    12. (b) Amend the order by adding authority that would allow for 
shelled walnuts to be inspected after having been sliced, chopped, 
ground or in any other manner changed from shelled walnuts, if 
regulations for such walnuts are in effect. This proposal would amend 
Sec.  984.52, Processing of shelled walnuts.
    13. Amend the order by adding authority for marketing promotion and 
paid advertising. This proposal would amend Sec.  984.46, Research and 
development.
    14. Amend the order to replace the terms ``carryover'' with 
``inventory,'' and ``mammoth'' with ``jumbo,'' to reflect current day 
industry procedures. This proposal would amend Sec.  984.21, Handler 
inventory, Sec.  984.67, Exemption, and would also result in conforming 
changes being made to Sec.  984.48, Marketing estimates and 
recommendations, and Sec.  984.71, Reports of handler carryover.
    15. (a) Amend the order to clarify the term ``transfer'' and to add 
authority for the Board to recommend methods and procedures, including 
necessary reports, for administrative oversight of such transfers. This 
proposal would amend Sec.  984.59, Interhandler transfers.
    15. (b) Amend the order to add authority to require reports of 
interhandler transfers. This proposal would amend Sec.  984.73, Reports 
of walnut receipts.
    16. Update and simplify the language in Sec.  984.22, Trade demand, 
to state ``United States and its territories,'' rather than name 
``Puerto Rico'' and ``The Canal Zone''.
    17. Amend the order by adding language that would acknowledge that 
the Board may deliberate, consult, cooperate and exchange information 
with the California Walnut Commission. Any information sharing would be 
kept confidential. This would add a new Sec.  984.91, Relationship with 
the California Walnut Commission.
    The Board works with USDA in administering the orders. These 
proposals have not received the approval of the Department. The Board 
believes that the proposed changes would improve the administration, 
operation, and functioning of the programs in effect for walnuts grown 
in California.
    In addition, USDA proposes adding three provisions that would help 
assure that the operation of the program conforms to current Department 
policy and that USDA can make any necessary conforming changes. These 
provisions would:
    18. Establish tenure requirements for Board members. This proposal 
would amend Sec.  984.36, Term of office.
    19. Require that continuance referenda be conducted on a periodic 
basis to ascertain industry support for the order and add more 
flexibility in the termination provisions. This proposal would amend 
Sec.  984.89 Effective time and termination.
    20. Make such changes as may be necessary to the order to conform 
with any amendment thereto that may result from the hearing.
    The public hearing is held for the purpose of: (i) Receiving 
evidence about the economic and marketing conditions which relate to 
the proposed amendments of the order; (ii) determining whether there is 
a need for the proposed amendments to the order; and (iii) determining 
whether the proposed amendments or appropriate modifications thereof 
will tend to effectuate the declared policy of the Act.
    Testimony is invited at the hearing on all the proposals and 
recommendations contained in this notice, as well as any appropriate 
modifications or alternatives.
    All persons wishing to submit written material as evidence at the 
hearing should be prepared to submit four copies of such material at 
the hearing and should have prepared testimony available for 
presentation at the hearing.
    From the time the notice of hearing is issued and until the 
issuance of a final decision in this proceeding, USDA employees 
involved in the decisional process are prohibited from discussing the 
merits of the hearing issues on an ex parte basis with any person 
having an interest in the proceeding. The prohibition applies to 
employees in the following organizational units: Office of the 
Secretary of Agriculture; Office of the Administrator, AMS; Office of 
the General Counsel, except any designated employee of the General 
Counsel assigned to represent the Committee in this proceeding; and the 
Fruit and Vegetable Programs, AMS.
    Procedural matters are not subject to the above prohibition and may 
be discussed at any time.

[[Page 20904]]

List of Subjects in 7 CFR Part 984

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

PART 984--WALNUTS GROWN IN CALIFORNIA

    1. The authority citation for 7 CFR part 984 continues to read as 
follows:

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

    2. Testimony is invited on the following proposals or appropriate 
alternatives or modifications to such proposals.
    Proposals submitted by the Walnut Marketing Board are as follows:

Proposal Number 1

    3. Revise Sec.  984.7 to read as follows:


Sec.  984.7  Marketing year.

    Marketing year means the twelve months from September 1 to the 
following August 31, both inclusive, or any other such period deemed 
appropriate and recommended by the Board for approval by the Secretary.
    4. Revise Sec.  984.36 to read as follows:


Sec.  984.36  Term of office.

    The term of office of Board members, and their alternates shall be 
for a period of two years ending on August 31 of odd-numbered years, 
but they shall serve until their respective successors are selected and 
have qualified.
    5. Revise Sec.  984.48 to read as follows:


Sec.  984.48  Marketing estimates and recommendations.

    (a) Each marketing year the Board shall hold a meeting, prior to 
October 20, for the purpose of recommending to the Secretary a 
marketing policy for such year. Each year such recommendation shall be 
adopted by the affirmative vote of at least six members of the Board 
and shall include the following, and where applicable, on a 
kernelweight basis:
    (1) Its estimate of the orchard-run production in the area of 
production for the marketing year;
    (2) Its estimate of the handler carryover on September 1 of inshell 
and shelled walnuts;
    (3) Its estimate of the merchantable and substandard walnuts in the 
production;
    (4) Its estimate of the trade demand for such marketing year for 
shelled and inshell walnuts, taking into consideration trade carryover, 
imports, prices, competing nut supplies, and other factors;
    (5) Its recommendation for desirable handler carryover of inshell 
and shelled walnuts on August 31 of each marketing year;
    (6) Its recommendation as to the free and reserve percentages to be 
established for walnuts;
    (7) Its recommendation of the percentage of reserve walnuts that 
may be exported pursuant to Sec.  984.56, when it determines that the 
quantity of reserve walnuts that may be exported should be limited;
    (8) Its opinion as to whether grower prices are likely to exceed 
parity; and
    (9) Its recommendation for change, if any, in grade and size 
regulations.
    (b) [Reserved].

Proposal Number 2

    6. Revise Sec.  984.13 to read as follows:


Sec.  984.13  To handle.

    To handle means to pack, sell, consign, transport, or ship (except 
as a common or contract carrier of walnuts owned by another person), or 
in any other way to put walnuts, inshell or shelled, into the current 
of commerce either within the area of production or from such area to 
any point outside thereof, or for a manufacturer or retailer within the 
area of production to purchase directly from a grower: The term ``to 
handle'' shall not include sales and deliveries within the area of 
production by growers to handlers, or between handlers.
    7. Revise Sec.  984.15 to read as follows:


Sec.  984.15  Pack.

    Pack means to bleach, clean, grade, shell or otherwise prepare 
walnuts for market as inshell or shelled walnuts.

Proposal Number 3(a)

    8. Revise Sec.  984.35 to read as follows:


Sec.  984.35  Walnut Marketing Board.

    (a) A Walnut Marketing Board is hereby established consisting of 10 
members selected by the Secretary, each of whom shall have an alternate 
nominated and selected in the same way and with the same qualifications 
as the member. The members and their alternates shall be selected by 
the Secretary from nominees submitted by each of the following groups 
or from other eligible persons belonging to such groups:
    (1) Two handler members from District 1;
    (2) Two handler members from District 2;
    (3) Two grower members from District 1;
    (4) Two grower members from District 2;
    (5) One member nominated at-large from the production area; and,
    (6) One member and alternate who shall be selected after the 
selection of the nine handler and grower members and after the 
opportunity for such members to nominate the tenth member and 
alternate. The tenth member and his or her alternate shall be neither a 
walnut grower nor a handler.
    (b) In the event that one handler handles 35% or more of the crop 
the membership of the Board shall be as follows:
    (1) Two handler members to represent the handler that handles 35% 
or more of the crop;
    (2) Two members to represent growers who market their walnuts 
through the handler that handles 35% or more of the crop;
    (3) Two handler members to represent handlers that do not handle 
35% or more of the crop;
    (4) One member to represent growers from District 1 who market 
their walnuts through handlers that do not handle 35% or more of the 
crop;
    (5) One member to represent growers from District 2 who market 
their walnuts through handlers that do not handle 35% or more of the 
crop;
    (6) One member to represent growers who market their walnuts 
through handlers that do not handle 35% or more of the crop shall be 
nominated at large from the production area; and,
    (7) One member and alternate who shall be selected after the 
selection of the nine handler and grower members and after the 
opportunity for such members to nominate the tenth member and 
alternate. The tenth member and his or her alternate shall be neither a 
walnut grower nor a handler.
    (c) Grower Districts:
    (1) District 1. District 1 encompasses the counties in the State of 
California that lie north of a line drawn on the south boundaries of 
San Mateo, Alameda, San Joaquin, Calaveras, and Alpine Counties.
    (2) District 2. District 2 shall consist of all other walnut 
producing counties in the State of California south of the boundary 
line set forth in paragraph (c)(1) of this section.
    9. Revise Sec.  984.14 to read as follows:


Sec.  984.14  Handler.

    Handler means any person who handles inshell or shelled walnuts.

Proposal Number 3(b)

    10. Revise Sec.  984.37 to read as follows:


Sec.  984.37  Nominations.

    (a) Nominations for all grower members shall be submitted by ballot 
pursuant to an announcement by press releases of the Board to the news 
media in the walnut producing areas. Such releases shall provide 
pertinent voting

[[Page 20905]]

information, including the names of candidates and the location where 
ballots may be obtained. Ballots shall be accompanied by full 
instructions as to their markings and mailing and shall include the 
names of incumbents who are willing to continue serving on the Board 
and such other candidates as may be proposed pursuant to methods 
established by the Board with the approval of the Secretary. Each 
grower, regardless of the number and location of his or her walnut 
orchard(s), shall be entitled to cast only one ballot in the nomination 
and each vote shall be given equal weight. If the grower has orchard(s) 
in both grower districts, he or she shall advise the Board of the 
district in which he/she desires to vote. The person receiving the 
highest number of votes for each grower position shall be the nominee.
    (b) Nominations for handler members shall be submitted on ballots 
mailed by the Board to all handlers in their respective Districts. All 
handlers' votes shall be weighted by the kernelweight of walnuts 
certified as merchantable by each handler during the preceding 
marketing year. Each handler in the production area may vote for 
handler member nominees and their alternates. However, no handler with 
less than 35% of the crop shall have more than one member and one 
alternate member. The person receiving the highest number of votes for 
each handler member position shall be the nominee for that position.
    (c) In the event that one handler handles 35% or more of the crop 
the membership of the Board, nominations shall be as follows:
    (1) Nominations of growers who market their walnuts to the handler 
that handles 35% or more of the crop shall be conducted by that handler 
in such a manner that is consistent with the requirements of 
nominations of growers conducted by the Board. The two persons 
receiving the highest number of votes for the grower positions 
attributed to that handler (Group (b)(2) of Sec.  984.35) shall be the 
nominees. The two persons receiving the third and fourth highest number 
of votes shall be designated as alternates.
    (2) Nominations for the two handler members representing the major 
handler shall be conducted by the major handler in such a manner that 
is consistent with the requirements of nominations of handlers 
conducted by the Board. The two (2) persons receiving the highest 
number of votes for the major handler positions shall be the nominees. 
The two persons receiving the third and fourth highest number of votes 
shall be designated as alternates.
    (3) Nominations on behalf of all other grower members (Groups (b) 
(4), (5) and (6) of Sec.  984.35) shall be submitted after ballot by 
such growers pursuant to an announcement by press releases of the Board 
to the news media in the walnut producing areas. Such releases shall 
provide pertinent voting information, including the names of candidates 
and the location where ballots may be obtained. Ballots shall be 
accompanied by full instructions as to their markings and mailing and 
shall include the names of incumbents who are willing to continue 
serving on the Board and such other candidates as may be proposed 
pursuant to methods established by the Board with the approval of the 
Secretary. Each grower in Groups (Groups (b) (4), (5) and (6) of Sec.  
984.35), regardless of the number and location of his or her walnut 
orchard(s), shall be entitled to cast only one ballot in the nomination 
and each vote shall be given equal weight. If the grower has orchard(s) 
in both grower districts he or she shall advise the Board of the 
district in which he or she desires to vote. The person receiving the 
highest number of votes for grower position shall be the nominee.
    (4) Nominations for handler members representing handlers that do 
not handle 35% or more of the crop shall be submitted on ballots mailed 
by the Board to those handlers. The votes of these handlers shall be 
weighted by the kernelweight of walnuts certified as merchantable by 
each handler during the preceding marketing year. Each handler in the 
production area may vote for handler member nominees and their 
alternates of this subsection. However, no handler shall have more than 
one person on the Board either as member or alternate member. The 
person receiving the highest number of votes for a handler member 
position of this subsection shall be the nominee for that position.
    (d) Each grower is entitled to participate in only one nomination 
process, regardless of the number of handler entities to whom he or she 
delivers walnuts. If a grower delivers walnuts to more than one handler 
entity, the grower must choose which nomination process he or she 
participates in.
    (e) The nine members shall nominate one person as member and one 
person as alternate for the tenth member position. The tenth member and 
alternate shall be nominated by not less than 6 votes cast by the nine 
members of the Board.
    (f) Nominations in the foregoing manner received by the Board shall 
be reported to the Secretary on or before June 15 of each odd-numbered 
year, together with a certified summary of the results of the 
nominations. If the Board fails to report nominations to the Secretary 
in the manner herein specified by June 15 of each odd-numbered year, 
the Secretary may select the members without nomination. If nominations 
for the tenth member are not submitted by September 1 of any such year, 
the Secretary may select such member without nomination.
    (g) The Board, with the approval of the Secretary, may change these 
nomination procedures should the Board determine that a revision is 
necessary.
    11. Revise Sec.  984.40 to read as follows:


Sec.  984.40  Alternate.

    (a) An alternate for a member of the Board shall act in the place 
and stead of such member in his or her absence or in the event of his 
or her death, removal, resignation, or disqualification, until a 
successor for his or her unexpired term has been selected and has 
qualified.
    (b) In the event any member of the Board and his or her alternate 
are both unable to attend a meeting of the Board, any alternate for any 
other member representing the same group as the absent member may serve 
in the place of the absent member, or in the event such other alternate 
cannot attend, or there is no such other alternate, such member, or in 
the event of his or her disability or a vacancy, his or her alternate 
may designate, subject to the disapproval of the Secretary, a temporary 
substitute to attend such meeting. At such meeting such temporary 
substitute may act in the place of such member.

Proposal Number 4

    12. Revise Sec.  984.39 to read as follows:


Sec.  984.39  Qualify by acceptance.

    Any person nominated to serve as a member or alternate member of 
the Board shall, prior to selection by USDA, qualify by filing a 
written qualification and acceptance statement indicating such person's 
willingness to serve in the position for which nominated.

Proposal Number 5

    13. Revise Sec.  984.6 to read as follows:


Sec.  984.6  Board.

    Board means the California Walnut Board established pursuant to 
Sec.  934.35.
    14. In addition to the Board's recommended changes as set forth in 
Proposal No. 3(a), revise Sec.  984.35(a) introductory text to read as 
follows:

[[Page 20906]]

Sec.  984.35  California Walnut Board.

    (a) A California Walnut Board is hereby established consisting of 
10 members selected by the Secretary, each of whom shall have an 
alternate nominated and selected in the same way and with the same 
qualifications as the member. The members and their alternates shall be 
selected by the Secretary from nominees submitted by each of the 
following groups or from other eligible persons belonging to such 
groups:
* * * * *

Proposal Number 6

    15. In addition to the Board's recommended changes as set forth in 
Proposal No.3(a) and Proposal No. 5, add a new paragraph (d) to Sec.  
984.35 to read as follows:


Sec.  984.35  California Walnut Board.

* * * * *
    (d) The Secretary, upon recommendation of the Board, may 
reestablish districts, may reapportion members among districts, and may 
revise the groups eligible for representation on the Board specified in 
paragraphs (a) and (b) of this section: Provided, That any such 
recommendation shall require at least six concurring votes of the 
voting members of the Board. In recommending any such changes, the 
following shall be considered:
    (1) Shifts in acreage within districts and within the production 
area during recent years;
    (2) The importance of new production in its relation to existing 
districts;
    (3) The equitable relationship between Board apportionment and 
districts;
    (4) Changes in industry structure and/or the percentage of crop 
represented by various industry entities resulting in the existence of 
two or more major handlers;
    (5) Other relevant factors.

Proposal Number 7

    16. Revise Sec.  984.45 to read as follows:


Sec.  984.45  Procedure.

    (a) The members of the Board shall select a chairman from their 
membership, and shall select such other officers and adopt such rules 
for the conduct of Board business as they deem advisable. The Board 
shall give the Secretary the same notice of its meetings as is given to 
members of the Board.
    (b) All decisions of the Board, except where otherwise specifically 
provided, shall be by a sixty-percent (60%) super-majority vote of the 
members present. A quorum of six members, or the equivalent of sixty 
percent (60%) of the Board, shall be required for the conduct of Board 
business.
    (c) The Board may vote by mail or telegram, or by any other means 
of communication, upon due notice to all members. When any proposition 
is to be voted on by any of these methods, one dissenting vote shall 
prevent its adoption. The Board, with the approval of the Secretary, 
shall prescribe the minimum number of votes that must be cast when 
voting is by any of these methods, and any other procedures necessary 
to carry out the objectives of this paragraph.
    (d) The Board may provide for meetings by telephone, or other means 
of communication and any vote cast at such a meeting shall be confirmed 
promptly in writing: Provided, That if any assembled meeting is held, 
all votes shall be cast in person.
    17. In addition to the Board's recommended changes as set forth in 
Proposal No. 1, revise Sec.  984.48(a) introductory text to read as 
follows:


Sec.  984.48  Marketing estimates and recommendations.

    (a) Each marketing year the Board shall hold a meeting, prior to 
October 20, for the purpose of recommending to the Secretary a 
marketing policy for such year. Each year such recommendation shall be 
adopted by the affirmative vote of at least 60% of the Board and shall 
include the following, and where applicable, on a kernelweight basis:
* * * * *

Proposal Number 8

    18. Revise Sec.  984.69 to read as follows:


Sec.  984.69  Assessments.

    (a) Requirement for payment. Each handler shall pay the Board, on 
demand, his or her pro rata share of the expenses authorized by the 
Secretary for each marketing year. Each handler's pro rata share shall 
be the rate of assessment per kernelweight pound of walnuts fixed by 
the Secretary times the kernelweight of merchantable walnuts he or she 
has certified. At any time during or after the marketing year the 
Secretary may increase the assessment rate as necessary to cover 
authorized expenses and each handler's pro rata share shall be adjusted 
accordingly.
    (b) Reserve walnut pool expenses. The Board is authorized temporary 
use of funds derived from assessments collected pursuant to paragraph 
(a) of this section to defray expenses incurred in disposing of reserve 
walnuts pooled. All such expenses shall be deducted from the proceeds 
obtained by the Board from the sale or other disposal of pooled reserve 
walnuts.
    (c) Accounting. If at the end of a marketing year the assessments 
collected are in excess of expenses incurred, such excess shall be 
accounted for in accordance with one of the following:
    (1) If such excess is not retained in a reserve, as provided in 
paragraph (c)(2) or (c)(3) of this section, it shall be refunded to 
handlers from whom collected and each handler's share of such excess 
funds shall be the amount of assessments he or she has paid in excess 
of his or her pro rata share of the actual expenses of the Board.
    (2) Excess funds may be used temporarily by the Board to defray 
expenses of the subsequent marketing year: Provided, That each 
handler's share of such excess shall be made available to him or her by 
the Board within five months after the end of the year.
    (3) The Board may carry over such excess into subsequent marketing 
years as a reserve: Provided, That funds already in reserve do not 
exceed approximately two years' budgeted expenses. In the event that 
funds exceed two marketing years' budgeted expenses, future assessments 
will be reduced to bring the reserves to an amount that is less than or 
equal to two marketing years' budgeted expenses. Such reserve funds may 
be used:
    (i) To defray expenses, during any marketing year, prior to the 
time assessment income is sufficient to cover such expenses;
    (ii) To cover deficits incurred during any year when assessment 
income is less than expenses;
    (iii) To defray expenses incurred during any period when any or all 
provisions of this part are suspended;
    (iv) To meet any other such costs recommended by the Board and 
approved by the Secretary.
    (d) Termination. Any money collected from assessments hereunder and 
remaining unexpended in the possession of the Board upon termination of 
this part shall be distributed in such manner as the Secretary may 
direct.

Proposal Number 9

    19. Add a new Sec.  984.70 to read as follows:


Sec.  984.70  Contributions.

    The Board may accept voluntary contributions but these shall only 
be used to pay expenses incurred pursuant to Sec.  984.46, Research and 
development. Furthermore, such contributions shall be free from any 
encumbrances by the

[[Page 20907]]

donor and the Board shall retain complete control of their use.

Proposal Number 10

    20. Revise Sec.  984.42 to read as follows:


Sec.  984.42  Expenses.

    The members and their alternates of the Board shall serve without 
compensation, but shall be allowed their necessary expenses incurred by 
them in the performance of their duties under this part.

Proposal Number 11

    21. Revise Sec.  984.51 to read as follows:


Sec.  984.51  Inspection and certification of inshell and shelled 
walnuts.

    (a) Before or upon handling of any walnuts for use as free or 
reserve walnuts, each handler at his or her own expense shall cause 
such walnuts to be inspected to determine whether they meet the then 
applicable grade and size regulations. Such inspection shall be 
performed by the inspection service or services designated by the Board 
with the approval of the Secretary; Provided, That if more than one 
inspection service is designated, the functions performed by each 
service shall be separate, and shall not conflict with each other. 
Handlers shall obtain a certificate for each inspection and cause a 
copy of each certificate issued by the inspection service to be 
furnished to the Board. Each certificate shall show the identity of the 
handler, quantity of walnuts, the date of inspection, and for inshell 
walnuts the grade and size of such walnuts as set forth in the United 
States Standards for Walnuts (Juglans regia) in the Shell. Certificates 
covering reserve shelled walnuts for export shall also show the grade, 
size, and color of such walnuts as set forth in the United States 
Standards for Shelled Walnuts (Juglans regia). The Board, with the 
approval of the Secretary, may prescribe such additional information to 
be shown on the inspection certificates as it deems necessary for the 
proper administration of this part.
    (b) Inshell merchantable walnuts certified shall be converted to 
the kernelweight equivalent at 45 percent of their inshell weight. This 
conversion percentage may be changed by the Board with the approval of 
the Secretary.
    (c) Upon inspection, all walnuts for use as free or reserve walnuts 
shall be identified by tags, stamps, or other means of identification 
prescribed by the Board and affixed to the container by the handler 
under the supervision of the Board or of a designated inspector and 
such identification shall not be altered or removed except as directed 
by the Board. The assessment requirements in Sec.  984.69 shall be 
incurred at the time of certification.
    (d) Whenever the Board determines that the length of time in 
storage or conditions of storage of any lot of merchantable walnuts 
which has been previously inspected have been or are such as normally 
to cause deterioration, such lot of walnuts shall be reinspected at the 
handler's expense and recertified as merchantable prior to shipment.

Proposal Number 12(a)

    22. Revise Sec.  984.50 to read as follows:


Sec.  984.50  Grade, quality and size regulations.

    (a) Minimum standard for inshell walnuts. Except as provided in 
Sec.  984.64, no handler shall handle inshell walnuts unless such 
walnuts are equal to or better than the requirements of U.S. No. 2 
grade and baby size as defined in the then effective United States 
Standards for Walnuts (Juglans regia) in the Shell. This minimum 
standard may be modified by the Secretary on the basis of a Board 
recommendation or other information.
    (b) Minimum standard for shelled walnuts. Except as provided in 
Sec.  984.64, no handler shall handle shelled walnuts unless such 
walnuts are equal to or better than the requirements of the U.S. 
Commercial grade as defined in the then effective United States 
Standards for Shelled Walnuts (Juglans regia) and the minimum size 
shall be pieces not more than 5 percent of which will pass through a 
round opening \6/64\ inch in diameter. This minimum standard may be 
modified by the Secretary on the basis of a Board recommendation or 
other information.
    (c) Effective period. The minimum standards established pursuant to 
paragraphs (a) and (b) of this section and the provisions of this part 
relating to the administration thereof, shall continue in effect 
irrespective of whether the season average price for walnuts is above 
the parity level specified in section 2(1) of the Act.
    (d) Additional grade, size or other quality regulation. The Board 
may recommend to the Secretary additional grade, size or other quality 
regulations, and may also recommend different regulations for different 
market destinations. If the Secretary finds on the basis of such 
recommendation or other information that such additional regulations 
would tend to effectuate the declared policy of the Act, he or she 
shall establish such regulations.
    (e) Minimum requirements for reserve. The Board, with the approval 
of the Secretary, may specify the minimum kernel content and related 
requirements for any lot of walnuts acceptable for disposition for 
credit against a reserve obligation: Provided, That reserve walnuts 
exported must meet the requirements of paragraph (a) of this section if 
inshell, or paragraph (b) of this section if shelled.

Proposal Number 12(b)

    23. Revise Sec.  984.52 to read as follows:


Sec.  984.52  Processing of shelled walnuts.

    (a) No handler shall slice, chop, grind, or in any manner change 
the form of shelled walnuts unless such walnuts have been certified as 
merchantable or unless such walnuts meet quality regulations 
established under Sec.  984.50(d) if such regulations are in effect.
    (b) Any lot of shelled walnuts which, upon inspection, fails to 
meet the minimum standard effective pursuant to Sec.  984.50 solely due 
to excess shriveling may be certified for processing provided that the 
total amount of shrivel does not exceed 20 percent, by weight, of the 
lot. All such walnuts must be reinspected after processing and shall be 
certified as merchantable if the processed material meets the effective 
minimum standard. The provisions of this paragraph may be modified by 
the Secretary, upon recommendation of the Board or other information.
    (c) The Board shall establish such procedures as are necessary to 
insure that all such walnuts are inspected prior to being placed into 
the current of commerce.

Proposal Number 13

    24. Revise Sec.  984.46 to read as follows:


Sec.  984.46  Research and development.

    The Board, with the approval of the Secretary, may establish or 
provide for the establishment of production research, marketing 
research and development projects, and marketing promotion, including 
paid advertising, designed to assist, improve, or promote the 
marketing, distribution, and consumption or efficient production of 
walnuts. The expenses of such projects shall be paid from funds 
collected pursuant to Sec.  984.69 and Sec.  984.70.

Proposal Number 14

    25. Revise Sec.  984.21 to read as follows:


Sec.  984.21  Handler inventory.

    Handler inventory as of any date means all walnuts, inshell or 
shelled (except those held in satisfaction of a reserve obligation), 
wherever located, then held by a handler or for his or her account.

[[Page 20908]]

    26. Revise Sec.  984.67 to read as follows:


Sec.  984.67  Exemptions.

    (a) Exemption from volume regulation. Reserve percentages shall not 
apply to lots of merchantable inshell walnuts which are of jumbo size 
or larger as defined in the then effective United States Standards for 
Walnuts in the Shell, or to such quantities as the Board may, with the 
approval of the Secretary, prescribe.
    (b) Exemptions from assessments, quality, and volume regulations:
    (1) Sales by growers direct to consumers. Any walnut grower may 
handle walnuts of his or her own production free of the regulatory and 
assessment provisions of this part if he or she sells such walnuts in 
the area of production directly to consumers under the following types 
of exemptions.
    (i) At roadside stands and farmers' markets;
    (ii) In quantities not exceeding an aggregate of 500 pounds of 
inshell walnuts or 200 pounds of shelled walnuts during any marketing 
year (at locations other than those specified in (b)(i) of this 
section); and
    (iii) If shipped by parcel post or express in quantities not 
exceeding 10 pounds of inshell walnuts or 4 pounds of shelled walnuts 
to any one consumer in any one calendar day.
    (2) Green walnuts. Walnuts which are green and which are so 
immature that they cannot be used for drying and sale as dried walnuts 
may be handled without regard to the provisions of this part.
    (3) Noncompetitive outlets. Any person may handle walnuts, free of 
the provisions of this part, for use by charitable institutions, relief 
agencies, governmental agencies for school lunch programs, and 
diversion to animal feed or oil manufacture pursuant to an authorized 
governmental diversion program.
    (c) Rules and modifications. The Board may establish, with the 
approval of the Secretary, such rules, regulations and safeguards and 
such modifications as will promote the objectives of this subpart.
    27. In addition to the Board's recommended changes set forth in 
Proposal Nos. 1 and 7, revise Sec.  984.48 (a)(2), (a)(4), and (a)(5) 
to read as follows:


Sec.  984.48  Marketing estimates and recommendations.

    (a) * * *
    (1) * * *
    (2) Its estimate of the handler inventory on September 1 of inshell 
and shelled walnuts;
    (3) * * *
    (4) Its estimate of the trade demand for such marketing year for 
shelled and inshell walnuts, taking into consideration trade inventory, 
imports, prices, competing nut supplies, and other factors;
    (5) Its recommendation for desirable handler inventory of inshell 
and shelled walnuts on August 31 of each marketing year;
* * * * *
    28. Revise Sec.  984.71 to read as follows:


Sec.  984.71  Reports of handler inventory.

    Each handler shall submit to the Board in such form and on such 
dates as the Board may prescribe, reports showing his or her inventory 
of inshell and shelled walnuts.

Proposal Number 15(a)

    29. Revise Sec.  984.59 to read as follows:


Sec.  984.59  Interhandler transfers.

    For the purposes of this part, transfer means the sale of inshell 
and shelled walnuts within the area of production by one handler to 
another. The receiving handler shall comply with the regulations made 
effective pursuant to this part. The Board, with the approval of the 
Secretary, may establish methods and procedures, including necessary 
reports, for such transfers.

Proposal Number 15(b)

    30. Revise Sec.  984.73 to read as follows:


Sec.  984.73  Reports of walnut receipts.

    Each handler shall file such reports of his or her walnut receipts 
from growers, handlers, or others in such form and at such times as may 
be requested by the Board with the approval of the Secretary.

Proposal Number 16

    31. Revise Sec.  984.22 to read as follows:


Sec.  984.22  Trade demand.

    (a) Inshell. The quantity of merchantable inshell walnuts that the 
trade will acquire from all handlers during a marketing year for 
distribution in the United States and its territories.
    (b) Shelled. The quantity of merchantable shelled walnuts that the 
trade will acquire from all handlers during a marketing year for 
distribution in the United States and its territories.

Proposal Number 17

    32. Add a new Sec.  984.91 to read as follows:


Sec.  984.91  Relationship with the California Walnut Commission.

    In conducting Board activities and other objectives under this 
part, the Board may deliberate, consult, cooperate and exchange 
information with the California Walnut Commission, whose activities 
compliment those of the Board. Any sharing of information gathered 
under this subpart shall be kept confidential in accordance with 
provisions under section 10(i) of the Act.
    Proposals submitted by USDA are as follows:

Proposal Number 18

    33. Revise Sec.  984.36 to read as follows:


Sec.  984.36  Term of office.

    The term of office of Board members, and their alternates shall be 
for a period of two years ending on June 30 of odd-numbered years, but 
they shall serve until their respective successors are selected and 
have qualified. Board members may serve up to four consecutive, two-
year terms of office. In no event shall any member serve more than 
eight consecutive years on the Board. For purposes of determining when 
a Board member has served four consecutive terms, the accrual of terms 
shall begin following any period of at least twelve consecutive months 
out of office. The limitation on tenure shall not apply to alternates.

Proposal Number 19

    34. Amend Sec.  984.89 by redesignating the current paragraph 
(b)(4) as (b)(5), and adding a new paragraph (b)(4) to read as follows:


Sec.  984.89  Effective time and termination.

    (a) * * *
    (b) * * *
    (1) * * *
    (2) * * *
    (3) * * *
    (4) Within six years of the effective date of this part the 
Secretary shall conduct a referendum to ascertain whether continuance 
of this part is favored by producers. Subsequent referenda to ascertain 
continuance shall be conducted every six years thereafter. The 
Secretary may terminate the provisions of this part at the end of any 
fiscal period in which the Secretary has found that continuance of this 
part is not favored by a two thirds (2/3) majority of voting producers, 
or a two thirds (2/3) majority of volume represented thereby, who, 
during a representative period determined by the Secretary, have been 
engaged in the production for market of walnuts in the production area. 
Such termination shall be announced on or before the end of the 
production year.
* * * * *

[[Page 20909]]

Proposal Number 20

    Make such changes as may be necessary to the order to conform with 
any amendment thereto that may result from the hearing.

    Dated: April 18, 2006.
Lloyd C. Day,
Administrator, Agricultural Marketing Service.
 [FR Doc. E6-6071 Filed 4-21-06; 8:45 am]
BILLING CODE 3410-02-P