[Federal Register Volume 71, Number 216 (Wednesday, November 8, 2006)]
[Rules and Regulations]
[Pages 65373-65376]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-9133]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 981

[Docket No. FV06-981-2 FR]


Almonds Grown in California; Changes to Incoming Quality Control 
Requirements

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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[[Page 65374]]

SUMMARY: This rule changes the incoming quality control requirements 
under the administrative rules and regulations of the California almond 
marketing order (order). The order regulates the handling of almonds 
grown in California and is administered locally by the Almond Board of 
California (Board). These changes will help minimize the risk of 
aflatoxin in almonds by removing inedible kernels from human 
consumption. Inedible almonds are poor quality kernels or pieces of 
defective kernels that may be contaminated with aflatoxin. This action 
is intended to improve the overall quality of almonds placed into 
consumer channels.

EFFECTIVE DATE: This final rule becomes effective on November 9, 2006.

FOR FURTHER INFORMATION CONTACT: Maureen T. Pello, Assistant Regional 
Manager, or Kurt Kimmel, Regional Manager, California Marketing Field 
Office, Marketing Order Administration Branch, Fruit and Vegetable 
Programs, AMS, USDA, telephone: (559) 487-5901, Fax: (559) 487-5906, or 
E-mail: [email protected], or [email protected]. 
    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 
Avenue, 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 Order 
No. 981, as amended (7 CFR part 981), regulating the handling of 
almonds grown in California, 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. 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 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. Such 
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 changes the incoming quality control requirements under 
the administrative rules and regulations of the order. These changes 
will help minimize the risk of aflatoxin in almonds by removing 
inedible almonds from human consumption. Inedible almonds are poor 
quality kernels or pieces of defective kernels that may be contaminated 
with aflatoxin. These changes are intended to improve the overall 
quality of almonds placed into consumer channels, and were recommended 
by the Board at a meeting on May 18, 2006.
    Section 981.42 of the order provides authority for a quality 
control program. Paragraph (a) of that section requires handlers to 
obtain incoming inspections on almonds received from growers to 
determine the percent of inedible kernels in each lot of any variety. 
Based on these inspections, handlers incur an inedible disposition 
obligation. They must satisfy their obligation by disposing of inedible 
almonds in outlets such as oil and animal feed.
    Section 981.442(a)(4) of the order's administrative rules and 
regulations specifies that the weight of inedible kernels in excess of 
1 percent of kernel weight shall constitute that handler's disposition 
obligation. Handlers must 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 through non-human consumption outlets. 
Paragraph (a)(5) of Sec.  981.442 specifies further that at least 25 
percent of a handler's total annual disposition obligation be satisfied 
with inedible kernels as defined under Sec.  981.408 (hereinafter 
referred to as ``true inedibles''). Handlers with total annual inedible 
obligations of less than 1,000 pounds are exempt from the 25 percent 
requirement.
    Board research has shown that aflatoxin in almonds is directly 
related to insect damage in inedible kernels. In order to help minimize 
the risk of aflatoxin in almonds, the Board recommended reducing the 
tolerance for inedible kernels from 1 to 0.50 percent, and increasing 
the percent of a handler's total annual inedible obligation that must 
be true inedibles from 25 to 50 percent. Such revisions are intended to 
improve the overall quality of almonds placed into consumer channels.
    All of the Board's members supported the change regarding true 
inedibles, but three of the Board's 10 members opposed the change to 
reduce the incoming tolerance for inedible kernels (the Board's 
chairperson abstained). Those opposed pointed to the existing 2 percent 
voluntary outgoing tolerance and expressed concern about additional 
costs that handlers may incur to separate out inedible kernels. The 
majority of Board members supported both changes. Paragraphs (a)(4) and 
(a)(5) of Sec.  981.442 are revised accordingly.

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 rule 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 the rules issued thereunder, are unique in 
that they are brought about through group action of essentially small 
entities acting on their own behalf. Thus, both statutes have small 
entity orientation and compatibility.
    There are approximately 6,000 producers of almonds in the 
production area and approximately 115 handlers subject to regulation 
under the marketing order. 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 whose annual receipts are less than 
$6,500,000.
    Data for the most recently completed crop year indicate that about 
52 percent of the handlers shipped under $6,500,000 worth of almonds. 
Dividing average almond crop value for 2003-2005 reported by the 
National

[[Page 65375]]

Agricultural Statistics Service ($2.171 billion) by the number of 
producers (6,000) yields an average annual producer revenue estimate of 
about $362,000. Based on the foregoing, about half of the handlers and 
a majority of almond producers may be classified as small entities.
    This rule revises paragraphs (a)(4) and (a)(5) of Sec.  981.442 of 
the order's administrative rules and regulations regarding inedible 
almonds. These changes will help minimize the risk of aflatoxin in 
almonds by removing inedible kernels from human consumption. Inedible 
almonds are poor quality kernels or pieces of defective kernels that 
may be contaminated with aflatoxin. Specifically, this action reduces 
the tolerance for inedible kernels in each variety of almonds received 
by a handler from 1 to 0.50 percent, and increases the percent of a 
handler's annual inedible obligation that must be satisfied with 
dispositions containing inedible almonds from 25 to 50 percent. 
Authority for these changes is provided in Sec.  981.42(a) of the 
order.
    Regarding the impact of this action on affected entities, this 
action is intended to improve the overall quality of almonds placed 
into consumer channels and therefore should be beneficial to the 
industry. In addition, this rule is not expected to change handler 
inspection costs. Handlers must currently have an incoming inspection 
done on each lot of almonds received to determine the percent of 
inedible kernels. Additionally, inedible almond dispositions must be 
inspected to determine the percent of inedible kernels in such 
dispositions. Such inspections are performed by the inspection agency, 
which means the Federal-State Inspection Service. The inspection agency 
charges a fee of $40 per hour, plus $0.75 per ton, with a minimum total 
fee of $55, to perform an inedible disposition inspection.
    The Board considered various alternatives and options before making 
its recommendation on inedible almonds. It was decided that a 0.50 
percent tolerance was appropriate rather than 0 percent. As previously 
stated, Board members opposed pointed to the existing 2 percent 
voluntary outgoing tolerance and expressed concern about additional 
costs that handlers may incur to separate out inedible kernels. 
Ultimately, the majority of Board members supported both changes. The 
Board's Food Quality and Safety (FQS) Committee met again via 
teleconference on June 13, 2006, and concurred with the Board's 
recommendation.
    This action imposes no additional reporting and recordkeeping 
burden on California almonds handlers. In accordance with the Paperwork 
Reduction Act of 1995 (44 U.S.C. Chapter 35), the information 
collection requirements in this rule have been approved by the Office 
of Management and Budget (OMB) under OMB Control No. 0581-0178, 
Vegetable and Specialty Crops. 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 AMS is committed to complying with the E-Government Act, to 
promote the use of the Internet and other information technologies to 
provide increased opportunities for citizen access to Government 
information and services, and for other purposes.
    USDA has not identified any relevant Federal rules that duplicate, 
overlap, or conflict with this rule. There are U.S. Standards for 
Grades of Shelled Almonds (7 CFR 51.2105 through 51.2131) and U.S. 
Standards for Grades of Almonds in the Shell (7 CFR 51.2075 through 
51.2091) issued under the Agricultural Marketing Act of 1946 (7 U.S.C. 
1621 through 1627). However, these standards are voluntary for the 
almond industry.
    Additionally, the meetings were widely publicized throughout the 
California almond industry and all interested persons were invited to 
attend the meetings and participate in deliberations on all issues. 
Like all Board meetings, the task force meetings on March 23 and April 
26, 2006, the FQS Committee meetings on April 11, May 8, and June 13, 
2006, and the Board meeting on May 18, 2006, were public meetings and 
all entities, both large and small, were able to express views on this 
issue.
    A proposed rule concerning this action was published in the Federal 
Register on August 16, 2006 (71 FR 47152). Copies of the proposed rule 
were also mailed or sent via facsimile to all almond handlers. Finally, 
the proposal was made available through the Internet by USDA and the 
Office of the Federal Register. A 7-day comment period ending August 
23, 2006, was provided for interested persons to respond to the 
proposal. Five comments were received from industry handlers opposed to 
the proposed reduced tolerance for inedible kernels from 1 to 0.50 
percent. All the points raised in these five comments were previously 
discussed by the almond industry at the meetings cited earlier in this 
rule.
    Two of the commenters believe that reducing the incoming tolerance 
for inedible kernels will not remove additional inedible almonds from 
the market. They pointed to the existing voluntary outgoing tolerances 
for seriously damaged kernels in the U.S. Standards for Grades of 
Shelled Almonds (1 percent tolerance for U.S. Fancy and 2 percent 
tolerance for U.S. Select Sheller run). One commenter also pointed to 
the Board's voluntary aflatoxin sampling plan that recommends that 
loads of almonds with over 2 percent serious damage be tested for 
aflatoxin. The commenters contend that reducing the incoming tolerance 
will not cause handlers to ship almonds at a lower outgoing tolerance 
into the market.
    We disagree with these comments. Reducing the incoming tolerance 
for inedible kernels will remove more inedible almonds from channels of 
commerce. Let us assume that the annual almond production is 1 billion 
pounds, of which 3 percent or 30 million pounds (.03 x 1 billion 
pounds) are inedible. The current inedible program provides for a 1 
percent tolerance, or 10 million pounds (.01 x 1 billion pounds) of 
almonds that can be inedible and sold into normal market channels. 
Thus, 20 million pounds (.02 x 1 billion pounds) must be disposed of 
into specified outlets for inedible almonds. Of the 20 million pounds, 
only 25 percent, or 5 million pounds, must be true inedibles, and the 
remaining 15 million pounds can be edible, inedible, or meal.
    In comparison, the revised inedible program provides for a 
tolerance of 0.50 percent, or 5 million pounds (.005 x 1 billion 
pounds) of almonds that can be inedible and sold into normal market 
channels. Thus, 25 million pounds (.025 x 1 billion pounds) must be 
disposed of into specified outlets for inedible almonds. Of the 25 
million pounds, 50 percent, or 12.5 million pounds, must be true 
inedibles, and the remaining 12.5 million pounds can be edible, 
inedible, or meal.
    In summary, a total of 5 million pounds of true inedible almonds 
are removed from the market annually under the current program, and 
12.5 million pounds of almonds will be removed annually under the 
revised program. Thus, the revised program will remove an additional 
7.5 million pounds of inedible almonds from the market.
    A commenter also stated that reducing the incoming tolerance from 1 
to 0.50 percent may provide an unfair advantage for larger processors 
that have blanching facilities. We disagree. The process of blanching 
involves scalding the almonds with hot water to remove the skins, and 
then running the almonds

[[Page 65376]]

through a series of rollers to remove any remaining skin and smooth the 
almond surface. Handlers with blanching equipment may clean up inedible 
almonds for market. However, increasing the percent of a handler's 
total annual obligation that must be true inedible from 25 to 50 
percent will reduce the amount of inedible almonds that are available 
to be cleaned up with blanching equipment. Additionally, the revised 
tolerances apply to all handlers throughout the industry, regardless of 
size or processing capabilities.
    Another commenter expressed concern that the reduced incoming 
tolerance is only being applied to the California almond industry, and 
that other producing countries like Spain and Australia would not be 
impacted by the change. The commenter added that the real concern to 
the California industry is aflatoxin, and suggested that the industry 
focus more on testing almonds prior to shipment rather than tightening 
up the inedible almond program under the order.
    The comment correctly points out that the revised tolerances are 
applied under the California almond marketing order, and are only 
applicable to domestic California production. However, concerning the 
issue of aflatoxin, a number of initiatives have been recommended by 
the Board. For example, the Board has endorsed a voluntary aflatoxin 
sampling plan that recommends that loads of almonds with over 2 percent 
serious damage be tested for aflatoxin. Additionally, Board research 
has shown that aflatoxin in almonds is directly related to insect 
damage in inedible kernels. In order to help minimize the risk of 
aflatoxin, the Board recommended reducing the tolerance for inedible 
kernels from 1 to 0.50 percent, and increasing the percent of a 
handler's total annual inedible obligation that must be true inedibles 
from 25 to 50 percent. This rule implements the Board's recommendation.
    Two commenters expressed concern that this issue was not fully 
deliberated by the Board and/or its committees. However, the Board 
formed a task force to address the industry's concerns regarding 
aflatoxin. The task force met on March 23 and April 26, 2006, and 
recommended reducing the incoming tolerance from 1 to 0 percent, and 
increasing the percent of a handler's total annual inedible obligation 
that must be true inedibles from 25 to 50 percent. The FQS Committee 
reviewed the task force's proposal on April 11 and again on May 8, 
2006. After much discussion, the FQS Committee reached a compromise and 
recommended that the incoming tolerance be reduced from 1 to 0.50 
percent. The FQS Committee concurred with the proposal regarding true 
inedibles. The Board considered the issue on May 18, 2006. Ultimately, 
the majority of Board members concurred with the FQS Committee's 
proposal. The FQS Committee met again via teleconference on June 13, 
2006, revisited the issue, and reaffirmed its previous recommendation 
that was ultimately approved by the Board and submitted to USDA. Thus, 
the issue was fully deliberated at several meetings, and interested 
persons had ample opportunity to express their views and participate in 
the discussions.
    Accordingly, no changes will be made to the rule as proposed, based 
on the comments 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 material 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.
    Pursuant to 5 U.S.C. 553, it is also found and determined that good 
cause exists for not postponing the effective date of this rule until 
30 days after publication in the Federal Register because the 2006-07 
crop year began on August 1, 2006, and handlers are disposing of 
inedible almonds. These changes should be in effect for as much of the 
crop year as possible. Handlers are aware of this action which was 
recommended at a public meeting. Additionally, a 7-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.

0
For the reasons set forth in the preamble, 7 CFR part 981 is amended as 
follows:

PART 981--ALMONDS GROWN IN CALIFORNIA

0
1. The authority citation for 7 CFR part 981 continues to read as 
follows:

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

0
2. Section 981.442 is amended by revising the first sentence of 
paragraph (a)(4)(i) and the eleventh sentence in paragraph (a)(5) to 
read as follows:


Sec.  981.442  Quality control.

    (a) * * *
    (4) Disposition obligation. (i) The weight of inedible kernels in 
excess of 0.50 percent of kernel weight reported to the Board of any 
variety received by a handler shall constitute that handler's 
disposition obligation. * * *
* * * * *
    (5) Meeting the disposition obligation.
     * * * At least 50 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 50 
percent requirement shall not apply to handlers with total annual 
obligations of less than 1,000 pounds. * * *
* * * * *

    Dated: November 3, 2006.
Lloyd C. Day,
Administrator, Agricultural Marketing Service.
[FR Doc. 06-9133 Filed 11-3-06; 4:34 pm]
BILLING CODE 3410-02-P