[Federal Register Volume 82, Number 187 (Thursday, September 28, 2017)]
[Proposed Rules]
[Pages 45208-45212]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-19920]


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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. 82, No. 187 / Thursday, September 28, 2017 / 
Proposed Rules  

[[Page 45208]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 982

[Doc. No. AO-SC-16-0136; AMS-SC-16-0074; SC16-982-1]


Hazelnuts Grown in Oregon and Washington; Secretary's Decision 
and Referendum Order on Proposed Amendments to Marketing Order No. 982

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule and referendum order.

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

SUMMARY: This decision proposes amendments to Marketing Order No. 982 
(order), which regulates the handling of hazelnuts grown in Oregon and 
Washington, and provides growers with the opportunity to vote in a 
referendum to determine if they favor the changes. Two amendments are 
proposed by the Hazelnut Marketing Board (Board), which is responsible 
for local administration of the order. The proposed amendments would 
add both the authority to regulate quality for the purpose of pathogen 
reduction and the authority to establish different regulations for 
different markets. In addition, the Agricultural Marketing Service 
(AMS) proposed to make any such changes as may be necessary to the 
order to conform to any amendment that may result from the public 
hearing. The proposals would aid in pathogen reduction and the 
industry's ability to meet the needs of different market destinations.

DATES: The referendum will be conducted from October 16, 2017, through 
November 3, 2017. The representative period for the purpose of the 
referendum is July 1, 2016, through June 30, 2017.

ADDRESSES: Marketing Order and Agreement Division, Specialty Crops 
Program, AMS, USDA, 1400 Independence Avenue SW., Stop 0237, 
Washington, DC 20250-0237.

FOR FURTHER INFORMATION CONTACT: Melissa Schmaedick, Marketing Order 
and Agreement Division, Specialty Crops Program, AMS, USDA, Post Office 
Box 952, Moab, UT 84532; Telephone: (202) 557-4783, Fax: (435) 259-
1502, or Julie Santoboni, Marketing Order and Agreement Division, 
Specialty Crops Program, AMS, USDA, 1400 Independence Avenue SW., Stop 
0237, Washington, DC 20250-0237; Telephone: (202) 720-2491, Fax: (202) 
720-8938, or Email: [email protected] or 
[email protected].
    Small businesses may request information on this proceeding by 
contacting Richard Lower, Marketing Order and Agreement Division, 
Specialty Crops Program, AMS, USDA, 1400 Independence Avenue SW., Stop 
0237, Washington, DC 20250-0237; Telephone: (202) 720-2491, Fax: (202) 
720-8938, or Email: [email protected].

SUPPLEMENTARY INFORMATION: Prior documents in this proceeding: Notice 
of Hearing issued on September 27, 2016, and published in the September 
30, 2016, issue of the Federal Register (81 FR 67217) and a Recommended 
Decision issued on June 5, 2017, and published in the June 12, 2017, 
issue of the Federal Register (82 FR 26859).
    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 Orders 12866, 13563, and 13175. 
Additionally, because this rule does not meet the definition of a 
significant regulatory action it does not trigger the requirements 
contained in Executive Order 13771. See OMB's Memorandum titled 
``Interim Guidance Implementing Section 2 of the Executive Order of 
January 30, 2017 titled `Reducing Regulation and Controlling Regulatory 
Costs'[thinsp]'' (February 2, 2017).
    Notice of this rulemaking action was provided to tribal governments 
through the Department of Agriculture's (USDA) Office of Tribal 
Relations.

Preliminary Statement

    The proposed amendments are based on the record of a public hearing 
held on October 18, 2016, in Wilsonville, Oregon. The hearing was held 
pursuant to the provisions of the Agricultural Marketing Agreement Act 
of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the 
``Act,'' and the applicable rules of practice and procedure governing 
the formulation of marketing agreements and orders (7 CFR part 900). 
Notice of this hearing was published in the Federal Register September 
30, 2016 (81 FR 67217. The notice of hearing contained two proposals 
submitted by the Board and one submitted by USDA.
    The amendments in this decision would:
    (1) Add authority to regulate quality for the purpose of pathogen 
reduction;
    (2) Add authority to establish different outgoing quality 
regulations for different markets; and
    (3) Make any such changes as may be necessary to the order to 
conform to any amendment that may be adopted, or to correct minor 
inconsistencies and typographical errors.
    USDA is recommending one clarifying change to the language in the 
proposed new paragraph 982.45(c), which would add authority to regulate 
quality. USDA has determined that the language as presented in the 
Notice of Hearing was redundant and, therefore, confusing. USDA has 
revised the proposed language in the new paragraph Sec.  982.45 (c) so 
that its intent is more clearly stated. This new language is included 
in the proposed regulatory text of this decision.
    Upon the basis of evidence introduced at the hearing and the record 
thereof, the Administrator of AMS on June 5, 2017, filed with the 
Hearing Clerk, USDA, a Recommended Decision and Opportunity to File 
Written Exceptions thereto by July 12, 2017. No exceptions were filed.

Final Regulatory Flexibility Analysis

    Pursuant to the requirements set forth in the Regulatory 
Flexibility Act (RFA), AMS has considered the economic impact of this 
action on small entities. Accordingly, AMS has prepared this final 
regulatory flexibility analysis.
    The purpose of the RFA is to fit regulatory actions to the scale of 
businesses subject to such actions so that small businesses will not be 
unduly or disproportionately burdened. Marketing orders and amendments 
thereto are unique in that they are normally brought about through 
group

[[Page 45209]]

action of essentially small entities for their own benefit.

Hazelnut Industry Background and Overview

    According to the hearing transcript, there are currently over 800 
hazelnut growers in the production area. According to National 
Agricultural Statistics Service (NASS) data presented at the hearing, 
2015 grower receipts averaged $2,800 per ton. With a total 2015 
production of 31,000 tons, the farm gate value for hazelnuts in that 
year totaled $86.8 million ($2,800 per ton multiplied by 31,000 tons). 
Taking the total value of production for hazelnuts and dividing it by 
the total number of hazelnut growers provides a return per grower of 
$108,500. A small grower as defined by the Small Business 
Administration (SBA) (13 CFR 121.201) is one that grosses less than 
$750,000 annually. Therefore, a majority of hazelnut growers are 
considered small entities under the SBA standards. Record evidence 
indicates that approximately 98 percent of hazelnut growers are small 
businesses.
    According to the industry, there are 17 hazelnut handlers, four of 
which handle 80 percent of the crop. While market prices for hazelnuts 
were not included among the data presented at the hearing, an 
estimation of handler receipts can be calculated using the 2015 grower 
receipt value of $86.8 million. Multiplying $86.8 million by 80 percent 
($86.8 million x 80 percent = $69.4 million) and dividing by four 
indicates that the largest hazelnut handlers received an estimated 
$17.3 million each. Dividing the remaining 20 percent of $86.8 million, 
or $17.4 million, by the remaining 13 handlers, indicates average 
receipts of $1.3 million each. A small agricultural service firm is 
defined by the SBA as one that grosses less than $7,500,000. Based on 
the above calculations, a majority of hazelnut handlers are considered 
small entities under SBA's standards.
    The production area regulated under the order covers Oregon and 
Washington. According to the record, Eastern Filbert Blight has heavily 
impacted hazelnut production in Washington. One witness stated that 
there currently is no commercial production in that state. As a result, 
production data entered into the record pertains almost exclusively to 
Oregon.
    NASS data indicates bearing acres of hazelnuts reached a fifteen-
year high during the 2013-2014 crop year at 30,000 acres. Acreage has 
remained steady, at 30,000 bearing acres for the 2015-2016 crop year. 
By dividing 30,000 acres by 800 growers, NASS data indicate there are 
approximately 37.5 acres per grower. Industry testimony estimates that 
due to new plantings, there are potentially 60,000 bearing acres of 
hazelnuts, or an estimated 75 bearing acres per hazelnut grower.
    During the hearing held October 18, 2016, interested parties were 
invited to present evidence on the probable regulatory impact of the 
proposed amendments to the order on small businesses. The evidence 
presented at the hearing shows that none of the proposed amendments 
would have a significant economic impact on a substantial number of 
small agricultural growers or firms.

Material Issue Number 1--Adding Authority To Regulate Quality

    The proposal described in Material Issue 1 would amend Sec.  982.45 
to authorize the Board to establish minimum quality requirements and 
Sec.  982.46 to allow for certification and inspection to enforce 
quality regulations.
    Presently, the Board is charged with assuring hazelnuts meet grade 
and size standards. The Board also has the authority to employ volume 
control. If finalized, this proposal would authorize the Board to 
propose quality regulations that require a treatment to reduce pathogen 
load prior to shipping hazelnuts. Witnesses supported this proposal and 
stated that treatment regulation would not significantly impact the 
majority of handlers since most handlers already treat product prior to 
shipment. Witness testimony indicated that the proposed amendment would 
lower the likelihood of a product recall incident and the associated 
negative economic impacts. Witnesses noted that the proposed amendment 
would give the Board flexibility to ensure consumer confidence in the 
quality of hazelnuts.
    It is determined that the additional costs incurred to regulate 
quality would be greatly outweighed by the increased flexibility for 
the industry to respond to changing quality regulation and food safety. 
There is expected to be no financial impact on growers. Mandatory 
treatment requirements should not cause dramatic increases in handler 
operating costs, as most already voluntarily treat hazelnuts. Handlers 
bear the direct cost associated with installing and operating treatment 
equipment or contract out the treatment of product to a third party.
    According to the industry, most domestic hazelnut product is 
shipped to California for treatment with propylene oxide. The cost to 
ship and treat product is estimated to be 10 cents per pound or less. 
Using 2014-2015 shipment data, at 10 cents per pound, the cost to ship 
and treat the 6.5 million pounds of Oregon hazelnuts shipped to the 
domestic market is not expected to exceed $650,000. Shipments to 
foreign markets typically do not require treatment and therefore have 
no associated treatment costs. Large handlers who wish to install 
treatment equipment may face costs ranging from $100,000 to $5,000,000 
depending on the treatment system.
    One witness noted that mandatory treatment would benefit the 
industry by addressing the free-rider situation in which handlers who 
do not treat the product benefit from consumer confidence while 
incurring additional risks. Handlers that do treat product absorb all 
costs of treatment while building the reputation of the industry.
    The record shows that the proposal to add authority to establish 
different outgoing quality requirements for different markets would, in 
itself, have no economic impact on growers or handlers of any size. 
Regulations implemented under that authority could impose additional 
costs on handlers required to comply with them. However, witnesses 
testified that establishing mandatory regulations for different markets 
could increase the industry's credibility and reduce the risk that 
shipments of substandard product could jeopardize the entire industry's 
reputation. Record evidence shows that any additional costs are likely 
to be offset by the benefits of complying with those requirements.
    For the reasons described above, it is determined that the costs 
attributed to the above-proposed changes are minimal; therefore, the 
proposal would not have a significant economic impact on a substantial 
number of small entities.

Material Issue Number 2--Adding Authority for Different Market 
Regulations

    The proposal described in Material Issue 2 would allow for the 
establishment of different outgoing quality regulations for different 
markets.
    Witnesses testified that allowing different regulations for 
different markets would likely lower the costs to handlers and prevent 
multiple treatments of hazelnuts while preserving hazelnut quality.
    Certain buyers of hazelnuts do not require prior treatment and 
perform their own kill-step processes such as roasting, baking or 
pasteurization. A witness stated that two of the largest buyers of 
hazelnuts, Diamond of

[[Page 45210]]

California and Kraft Foods, Inc. choose to treat product after arrival.
    Shipments to foreign markets often do not require treatment and are 
treated after exportation. Testimony indicated that during the 2014-
2015 season, of the 9.5 million pounds of kernel hazelnuts shipped to 
Canada, almost all were further treated by the customers. In 
conjunction with the proposed quality authority discussed in Material 
Issue 1, specific regulation could be developed to exempt exported 
product, subject to further pathogen-reduction treatment in the country 
of purchase, from mandatory treatment. In Canada, the purchaser, not 
the handler, is responsible for providing pathogen reduction treatment. 
Requiring handlers to treat hazelnuts before export would be 
duplicative in cost and treatment. At 10 cents per pound, it is 
estimated that on sales to Canada alone, handler savings could reach as 
much as $950,000 (9.5 million pounds of shipments multiplied by 10 
cents per pound), if exempted from the mandatory treatment requirement. 
Hazelnuts shipped to China are typically processed after arrival and 
also do not necessitate treatment by handlers in the United States.
    China is a major export market for inshell hazelnuts. According to 
the hearing transcript, from 2011-2015, 54 percent of inshell hazelnuts 
were exported. The total value of inshell exports was approximately 
$41,340,780, if 54 percent is multiplied by the $76,557,000 total 
hazelnut exports. In 2015-2016 China received 90 percent of U.S. 
inshell hazelnut exports. The 2015-2016 value of U.S. hazelnut exports 
to China is estimated to be approximately $37,206,702, or 90 percent of 
the value of all U.S. inshell exports. Oregon hazelnuts compete 
primarily with Turkish (kernel) and Chilean (inshell) hazelnuts. 
Testimony indicates that multiple treatments of hazelnuts would likely 
affect the quality of hazelnuts. Allowing for different regulations for 
different markets would help Oregon and Washington hazelnuts compete in 
foreign markets and maintain U.S. market share. It is estimated that 80 
to 90 percent of product is already being treated, and thus, the cost 
has already been incorporated into the price purchasers pay.
    One witness noted that shipments to the European Union may require 
different regulations since this market prefers certain treatment 
processes.
    The record shows that the proposal to add authority to establish 
different outgoing quality requirements for different markets would, in 
itself, have no economic impact on growers or handlers of any size. 
Regulations implemented under that authority could potentially impose 
additional costs on handlers required to comply with them.
    For the reasons described above, it is determined that the benefits 
of adding authority for different market regulations to the order would 
outweigh the potential costs of future implementation.
    USDA has not identified any relevant Federal rules that duplicate, 
overlap or conflict with this proposed rule. These amendments are 
intended to improve the operation and administration of the order and 
to assist in the marketing of hazelnuts.
    Board meetings regarding these proposals, as well as the hearing 
date and location, were widely publicized throughout the Oregon and 
Washington hazelnut industry, and all interested persons were invited 
to attend the meetings and the hearing to participate in Board 
deliberations on all issues. All Board meetings and the hearing were 
public forums, and all entities, both large and small, were able to 
express views on these issues. Finally, interested persons are invited 
to submit information on the regulatory impacts of this action on small 
businesses.

Paperwork Reduction Act

    Current information collection requirements for part 982 are 
approved by OMB, under OMB Number 0581-0189--``Generic OMB Fruit 
Crops.'' No changes are anticipated in these requirements as a result 
of this proceeding. Should any such changes become necessary, they 
would be submitted to OMB for approval.
    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.
    AMS is committed to complying with the Government Paperwork 
Elimination Act, which requires Government agencies in general to 
provide the public the option of submitting information or transacting 
business electronically to the maximum extent possible.
    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.

Civil Justice Reform

    The amendments to the order 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 this 
proposal.
    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 no later than 20 days after the date of 
entry of the ruling.

Findings and Conclusions

    The findings and conclusions, rulings, and general findings and 
determinations included in the Recommended Decision set forth in the 
June 12, 2017, issue of the Federal Register (82 FR 26859) are hereby 
approved and adopted.

Marketing Order

    Annexed hereto and made a part hereof is the document entitled 
``Order Amending the Order Regulating the Handling of Hazelnuts Grown 
in Oregon and Washington.'' This document has been decided upon as the 
detailed and appropriate means of effectuating the foregoing findings 
and conclusions.
    It is hereby ordered, that this entire decision be published in the 
Federal Register.

Referendum Order

    It is hereby directed that a referendum be conducted in accordance 
with the procedure for the conduct of referenda (7 CFR 900.400-407) to 
determine whether the annexed order amending the order regulating the 
handling of hazelnuts grown in Oregon and Washington is approved or 
favored by growers, as defined under the terms of the order, who during 
the representative period were engaged in the production of hazelnuts 
in the production area.
    The representative period for the conduct of such referendum is 
hereby determined to be July 1, 2016, through June 30, 2017.

[[Page 45211]]

    The agents of the Secretary to conduct such referendum are hereby 
designated to be Dale Novotny and Gary Olson, California Marketing 
Field Office, Marketing Order and Agreement Division, Specialty Crops 
Program, AMS, USDA, 1220 SW Third Avenue, Suite 305, Portland, Oregon 
97204; telephone: (503) 326-2724; or fax: (503) 326-7440 or Email: 
[email protected] or [email protected], respectively.

Order Amending the Order Regulating the Handling of Hazelnuts Grown in 
Oregon and Washington \1\
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    \1\ This order shall not become effective unless and until the 
requirements of Sec.  900.14 of the rules of practice and procedure 
governing proceedings to formulate marketing agreements and 
marketing orders have been met.
---------------------------------------------------------------------------

Findings and Determinations

    The findings and determinations hereinafter set forth are 
supplementary to the findings and determinations that were previously 
made in connection with the issuance of the marketing order; and all 
said previous findings and determinations are hereby ratified and 
affirmed, except insofar as such findings and determinations may be in 
conflict with the findings and determinations set forth herein.
    (a) Findings and Determinations Upon the Basis of the Hearing 
Record
    Pursuant to the provisions of the Agricultural Marketing Agreement 
Act of 1937, as amended (7 U.S.C. 601-674), and the applicable rules of 
practice and procedure effective thereunder (7 CFR part 900), a public 
hearing was held upon proposed further amendment of Marketing Order No. 
982, regulating the handling of hazelnuts grown in Oregon and 
Washington.
    Upon the basis of the record, it is found that:
    (1) The marketing order, as amended, and as hereby proposed to be 
further amended, and all of the terms and conditions thereof, would 
tend to effectuate the declared policy of the Act;
    (2) The marketing order, as amended, and as hereby proposed to be 
further amended, regulates the handling of hazelnuts grown in the 
production area in the same manner as, and are applicable only to, 
persons in the respective classes of commercial and industrial activity 
specified in the marketing order upon which a hearing has been held;
    (3) The marketing order, as amended, and as hereby proposed to be 
further amended, is limited in its application to the smallest regional 
production area that is practicable, consistent with carrying out the 
declared policy of the Act, and the issuance of several orders 
applicable to subdivisions of the production area would not effectively 
carry out the declared policy of the Act;
    (4) The marketing order, as amended, and as hereby proposed to be 
further amended, prescribes, insofar as practicable, such different 
terms applicable to different parts of the production area as are 
necessary to give due recognition to the differences in the production 
and marketing of hazelnuts grown in Oregon and Washington; and
    (5) All handling of hazelnuts grown in the production area as 
defined in the marketing order is in the current of interstate or 
foreign commerce or directly burdens, obstructs, or affects such 
commerce.

Order Relative to Handling

    It is therefore ordered, that on and after the effective date 
hereof, all handling of hazelnuts grown in Oregon and Washington shall 
be in conformity to, and in compliance with, the terms and conditions 
of the said order as hereby proposed to be amended as follows:
    The provisions of the proposed marketing order amending the order 
contained in the Recommended Decision issued on June 5, 2017, and 
published in the June 12, 2017, issue of the Federal Register (82 FR 
26859) will be and are the terms and provisions of this order amending 
the order and are set forth in full herein.

List of Subjects in 7 CFR Part 982

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

Recommended Further Amendment of the Marketing Order

    For the reasons set out in the preamble, 7 CFR part 989 is proposed 
to be 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.

Subpart A--[Amended]

0
2. Designate the subpart labeled ``Order Regulating Handling'' as 
subpart A.
0
3. Revise Sec.  982.12 to read as follows:


Sec.  982.12  Merchantable hazelnuts.

    Merchantable hazelnuts means inshell hazelnuts that meet the grade, 
size, and quality regulations in effect pursuant to Sec.  982.45 and 
are likely to be available for handling as inshell hazelnuts.
0
4. Amend Sec.  982.40 by revising paragraph (d) to read as follows:


Sec.  982.40  Marketing policy and volume regulation.

* * * * *
    (d) Grade, size, and quality regulations. Prior to September 20, 
the Board may consider grade, size, and quality regulations in effect 
and may recommend modifications thereof to the Secretary.
* * * * *
0
5. Revise the undesignated center heading prior to Sec.  982.45 to read 
as follows:

Grade, Size, and Quality Regulation

0
6. In Sec.  982.45:
0
a. Revise the section heading; and
0
b. Add new paragraphs (c) and (d).
    The revisions to read as follows:


Sec.  982.45  Establishment of grade, size, and quality regulations.

* * * * *
    (c) Quality regulations. For any marketing year, the Board may 
establish, with the approval of the Secretary, such minimum quality and 
inspection requirements applicable to hazelnuts to facilitate the 
reduction of pathogens as will contribute to orderly marketing or will 
be in the public interest. In such marketing year, no handler shall 
handle hazelnuts unless they meet applicable minimum quality and 
inspection requirements as evidenced by certification acceptable to the 
Board.
    (d) Different regulations for different markets. The Board may, 
with the approval of the Secretary, recommend different outgoing 
quality requirements for different markets. The Board, with the 
approval of the Secretary, may establish rules and regulations 
necessary and incidental to the administration of this provision.
0
7. Amend Sec.  982.46 by adding paragraph (d) to read as follows:


Sec.  982.46  Inspection and certification.

* * * * *
    (d) Whenever quality regulations are in effect pursuant to Sec.  
982.45, each handler shall certify that all product to be handled or 
credited in satisfaction of a restricted obligation meets the quality 
regulations as prescribed.

Subpart B--Grade and Size Requirements

0
8. Designate the subpart labeled ``Grade and Size Regulation'' as 
subpart B and revise the heading as shown above.

[[Page 45212]]

Subpart C--[Amended]

0
9. Designate the subpart labeled ``Free and Restricted Percentages'' as 
subpart C.

Subpart D--[Amended]

0
10. Designate the subpart labeled ``Assessment Rates'' as subpart D.

Subpart E--Administrative Requirements

0
11. Designate the subpart labeled ``Administrative Rules and 
Regulations'' as subpart E and revise the heading as shown above.

    Dated: September 14, 2017.
Bruce Summers,
Acting Administrator, Agricultural Marketing Service.
[FR Doc. 2017-19920 Filed 9-27-17; 8:45 am]
BILLING CODE 3410-02-P