[Federal Register Volume 72, Number 61 (Friday, March 30, 2007)]
[Rules and Regulations]
[Pages 15021-15036]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 07-1557]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 981

[Docket No. FV06-981-1 FR]


Almonds Grown in California; Outgoing Quality Control 
Requirements

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This rule adds outgoing 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). This rule provides for a mandatory program under 
the order to reduce the potential for Salmonella bacteria in almonds. 
This action will help ensure that quality almonds are available for 
human consumption.

DATES: This rule is effective on March 31, 2007. Handler treatment 
plans for the 2007-08 crop year must be submitted by May 31, 2007. 
Mandatory compliance with this rule begins September 1, 2007.

FOR FURTHER INFORMATION CONTACT: Maureen T. Pello, Assistant Regional 
Manager, or Kurt J. 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: <a href="/cdn-cgi/l/email-protection#c984a8bcbbacaca7e799aca5a5a689bcbaada8e7aea6bf"><span class="__cf_email__" data-cfemail="145975616671717a3a447178787b54616770753a737b62">[email protected]</span></a>, or <a href="/cdn-cgi/l/email-protection#69221c1b1d47220004040c05291c1a0d08470e061f"><span class="__cf_email__" data-cfemail="c78cb2b5b3e98caeaaaaa2ab87b2b4a3a6e9a0a8b1">[email protected]</span></a>.
    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: <a href="/cdn-cgi/l/email-protection#8fc5eef6a1c8faeafdedeafdcffafcebeea1e8e0f9"><span class="__cf_email__" data-cfemail="6329021a4d2416061101061123161007024d040c15">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION: This final rule is issued under Marketing 
Order No. 981, as amended (7 CFR part 981), regulating the handling of 
almonds grown in California, hereinafter referred

[[Page 15022]]

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 final rule adds outgoing quality control requirements under 
the administrative rules and regulations of the order. This rule 
provides for a mandatory program to reduce the potential for Salmonella 
bacteria in almonds. This action will help ensure that quality almonds 
are available for human consumption. This action was unanimously 
recommended by the Board at a meeting on August 22, 2006.
    Section 981.42(b) of the order provides authority for the Board to 
establish, with approval of the Secretary, such minimum quality and 
inspection requirements applicable to almonds to be handled or to be 
processed into manufactured products, as will contribute to orderly 
marketing or be in the public interest. In such crop year, no handler 
shall handle or process almonds into manufactured items or products 
unless they meet the applicable requirements as evidenced by 
certification acceptable to the Board. The Board, with approval of the 
Secretary, may establish rules and regulations necessary and incidental 
to the administration of this provision.

Salmonella Outbreaks Linked to Almonds

    In 2001, a Salmonella outbreak was identified in Canada, which was 
linked to a specific retailer, traced back to raw almonds sold in bulk 
bins, and ultimately traced back to the handler and the grower. The 
Salmonella strain was extremely unusual and had not previously been 
associated with contamination in a non-animal product. Three orchards 
where the almonds were produced were identified, and samples gathered 
from the orchards contained Salmonella. With oversight by the 
California Department of Health Services (CDHS), procedures were 
implemented by the grower, huller/sheller, and handler to specify how 
the almonds from those orchards were to be processed using a treatment 
to reduce the potential for Salmonella before the almonds were moved 
into commercial channels. The Board initiated an extensive research 
program to help understand the occurrence of Salmonella in almond 
orchards.
    The Board also initiated an education program for the industry 
regarding Good Agricultural Practices (GAPs), Good Manufacturing 
Practices (GMPs), and Sanitation Standard Operating Procedures (SSOPs). 
GAPs provide guidelines to growers on how to minimize potential 
biological hazards during the production and harvesting of almonds. 
GMPs define procedures to be used by handlers to allow almonds to be 
processed, packed, and sold under sanitary conditions. SSOPs help to 
ensure a clean and sanitary environment in the packing facility. 
Together, these practices and procedures provide a framework for a 
Hazard Analysis Critical Control Point (HACCP) program for the industry 
to proactively eliminate or minimize potential sources of Salmonella 
contamination.
    In the spring of 2004, a second Salmonella outbreak occurred in 
Oregon that was linked to raw almonds purchased at a particular 
retailer. The Salmonella strain was very similar to that identified in 
2001. One handler had been the supplier to the retailer, and the 
handler initiated a voluntary recall of 5 million pounds of almonds 
sold in the U.S. The Food and Drug Administration (FDA) subsequently 
announced that the almonds had been exported to eight countries. The 
handler then initiated a full recall of the suspect almonds produced, 
packed, and shipped, increasing the recall to approximately 15 million 
pounds.
    In the summer of 2004, the Board unanimously approved a voluntary 
action plan that called for treating all almonds to reduce the 
potential for Salmonella. Handlers were encouraged to treat the almonds 
prior to shipment, or ship the almonds to a manufacturer who agreed to 
treat the almonds. The Board continued to fund research on various 
technologies that could be used to help reduce the potential for 
Salmonella in almonds.

Board Recommendation for a Mandatory Treatment Program

    To further its efforts in providing a high quality product to 
consumers, in August 2006, the Board recommended that a mandatory 
treatment program be implemented under the order, pursuant to authority 
provided in Sec.  981.42(b). Specifically, handlers must subject their 
almonds to a process that achieves a minimum 4-log reduction in 
Salmonella bacteria prior to shipment. The program provides for an 
exemption for handlers who ship untreated almonds under a direct 
verifiable (DV) program to manufacturers within the U.S., Canada, or 
Mexico who agree to treat the almonds accordingly. The program also 
provides for an exemption for handlers who ship untreated almonds to 
locations outside of the U.S., Canada, or Mexico. All containers of 
untreated almonds shipped under the two exemptions must be prominently 
identified with the term ``unpasteurized.''

Specific Parameters of Mandatory Program

    Under the program, handlers must subject their almonds to a 
treatment process or processes that achieve in total a minimum 4-log 
reduction of Salmonella bacteria, or ship their almonds under one of 
the two exemptions cited above. The rule only affects those who meet 
the definition of ``handler'' in Sec.  981.13 of the order (thus 
exempting growers selling through roadside stands). Log reduction 
describes how much bacterial contamination is reduced by a treatment 
process. A 4-log reduction decreases bacteria by a factor of 10,000 (4 
zeros). One treatment process that independently achieves a minimum 4-
log reduction may be used, or a combination of different treatments may 
be used that collectively achieve a minimum 4-log reduction (``hurdle'' 
technologies).
    The Board initially supported a 5-log reduction, which is FDA's 
performance standard. However, the Board subsequently funded research 
with the University of California, Davis, in conjunction with Rutgers 
University, whereby a risk assessment model was developed using data 
from the two

[[Page 15023]]

Salmonella outbreaks, as well as data from an industry pathogen 
survey.\1\ The risk assessment model demonstrated that a minimum 4-log 
reduction provides an appropriate level of consumer protection. Thus, 
the Board concluded that a 4-log reduction was an appropriate standard 
for almonds.
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    \1\ Journal of Food Protection, Vol. 69, No. 7, 2006, Pages 
1594-1599.
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Treatment Processes

    Treatment processes for handlers must utilize technologies that 
have been determined to achieve a minimum 4-log reduction of Salmonella 
bacteria in almonds, pursuant to a letter of determination issued by 
the FDA, or acceptance by a scientific review panel as identified by 
the Board (known as the Technical Expert Review Panel, or TERP).
    The FDA reviews studies utilizing specific protocols and treatment 
parameters, and issues a letter of determination when it determines 
that a process has sufficiently demonstrated its effectiveness to 
achieve a 5-log reduction of Salmonella in almonds. To-date, FDA has 
issued letters of determination for propylene oxide (PPO), oil 
roasting, blanching, and for a moist heat process.
    The TERP will evaluate various treatment technologies against 
specific criteria, based on recommendations provided by the National 
Advisory Committee on Microbiological Criteria in Food (NACMCF). The 
NACMCF was formed in 1988 under Departmental Regulation 1043-28, and 
provides impartial, scientific advice to Federal food safety agencies 
for use in the development of an integrated national food safety 
systems approach from farm to final consumption to assure the safety of 
domestic, imported, and exported foods. It is co-sponsored by USDA's 
Food Safety and Inspection Service, the FDA, the Center for Disease 
Control and Prevention, the National Marine Fisheries Service, and the 
Department of Defense Veterinary Service Activity.
    While the TERP will not ``recommend'' or ``approve'' technologies, 
its review will ensure that technologies utilized by the industry have 
been evaluated against specific science-based criteria demonstrating 
the technology's ability to deliver a lethal treatment for Salmonella 
in almonds. Documentation and data must be provided to the TERP (by a 
company pursuing TERP acceptance for its technology) for review to 
ensure that the technologies are consistently achieving the minimum 4-
log reduction.
    The TERP, initially formed by the Board in the fall of 2004 to 
review treatment technologies, consists of four scientists, with a 
representative from the FDA serving as an ex-officio member. The TERP 
has been evaluating various technologies and treatments for the almond 
industry, and to-date, the TERP has accepted steam and moist heat 
treatments as acceptable for achieving the Board's Salmonella reduction 
goals. Membership on the TERP must be approved annually by the Board 
prior to the beginning of each crop year, or more frequently if needed 
during the crop year, for example, to fill a vacancy on the panel.

On-Site Versus Off-Site Treatment

    Under the program, unless handlers ship their almonds to a Board-
approved DV user (described later in this document), or ship their 
almonds to locations outside of the U.S., Canada, or Mexico, handlers 
must subject their almonds to a treatment process or processes prior to 
shipment either at their handling facility (on-site), or at an off-site 
treatment facility located within the production area (California). An 
off-site facility may or may not be affiliated with another handler. 
Transportation of almonds by a handler to an off-site treatment 
facility will not be considered a shipment.

Process Authorities

    Handlers may only use, or transport their almonds to off-site 
treatment facilities that use treatment processes that have been 
``validated'' by a Board-approved process authority. Validation means 
that the treatment technology and equipment utilized have been 
demonstrated to achieve the minimum 4-log reduction. The use of process 
authorities is modeled after process authorities as cited in the 
``Guide to Inspections of Low Acid Canned Food Manufacturers'' (Guide) 
(http://www.fda.gov). Treatment technology and equipment that have been 
modified to the point where operating parameters such as time, 
temperature, or volume, change must be revalidated.
    For purposes of this document, a process authority is a person that 
has expert knowledge of appropriate processes for the treatment of 
almonds as described above, and meets other criteria as specified by 
the Board. Such criteria include the following: (1) Knowledge about the 
equipment used for the treatment process; (2) experience in conducting 
appropriate studies to determine the ability of the equipment to 
deliver the appropriate treatment (such as heat penetration or heat 
distribution studies); and (3) the ability to determine that sufficient 
data has been gathered to identify the critical factors needed to 
ensure the quality of the final product. Process authorities must 
submit an application to the Board on ABC Form No. 51, ``Application 
for Process Authority for Almonds,'' and be approved by the TERP. 
Should the applicant disagree with the TERP's decision concerning 
approval, it may appeal the decision in writing to the Board, and 
ultimately to USDA. Additionally, the TERP may revoke any approval for 
cause. The TERP must notify the process authority in writing of the 
reasons for revoking the approval. If the process authority disagrees 
with the TERP's decision, he/she may appeal the decision in writing to 
the Board, and ultimately to USDA. A process authority whose approval 
has been revoked must submit a new application to the TERP and await 
approval.
    As explained later in this document, process authorities may also 
``establish'' treatment processes for manufacturers under the DV 
program. The procedures and criteria for process authorities who 
establish treatment processes are identical to those for process 
authorities who validate such processes. ``Establish'' means that the 
treatment processes and protocols have been evaluated to ensure the 
technology's ability to deliver a lethal treatment for Salmonella in 
almonds to achieve a minimum 4-log reduction.

Compliance and Verification Program

Treatment Plans
    To ensure compliance with the mandatory program, handlers will be 
subject to verification by the Federal or Federal-State Inspection 
Service (inspection agency) and review by Board staff. Handlers may use 
either an on-site (traditional) or an audit-based verification program. 
Each handler must decide which verification program will be the most 
cost-effective for his or her operation. All handlers must submit a 
treatment plan to the Board for the upcoming crop year by May 31. The 
crop year runs from August 1 through July 31 of the subsequent year. 
The plan will be reviewed by the Board in conjunction with the 
inspection agency to ensure such plans are complete and auditable. The 
plan will be approved by the Board and must address specific parameters 
for the handler to ship almonds. Such parameters include, but are not 
limited to, the following: (1) The location of treatment plant; (2) the 
name and address of off-site treatment facility (custom processor), if 
appropriate; (3) a statement regarding whether treatment processes have 
been accepted by the

[[Page 15024]]

TERP and/or ``determined'' by the FDA; (4) a statement regarding 
validation of treatment technology and equipment by a Board-approved 
process authority; (5) a statement whether untreated almonds will be 
exported; (6) a statement whether the handler will use the DV program; 
(7) a description or flow chart explaining how raw, untreated almonds 
enter and flow through the handler facility, and how the product would 
flow through the treatment process, including post treatment, packing, 
and/or storage; (8) a list of all treatments that will be used on the 
almonds (including, for example, number of blanching lines, etc.); (9) 
a description of how treated product will be differentiated and 
segregated from untreated product to ensure maintenance of treated 
product integrity; (10) a list of procedures regarding how interhandler 
transfers will be tracked; and (11) an explanation by handlers using a 
combination of processes to achieve a minimum 4-log reduction, that the 
processes occur in an appropriate sequence in sufficiently close 
proximity to ensure that the integrity of the treated product is 
maintained between processes.
    Almonds sent by a handler for treatment to an off-site facility 
affiliated with another handler will be subject to the approved 
treatment plan utilized at that off-site facility. Handlers must follow 
their own approved treatment plans for almonds sent to an off-site 
facility that is not affiliated with another handler.
    Additionally, an off-site treatment facility that does not handle 
almonds, pursuant to Sec.  981.16, must provide access to the 
inspection agency and Board staff for verification of treatment and 
review of treatment records. A treatment process at an off-site 
facility that has been validated by a Board-approved process authority 
is deemed to be approved by the Board for handler use. The Board may 
revoke any such approval for cause. The Board must notify the off-site 
treatment facility of the reasons for revoking the approval. Should the 
off-site facility disagree with the Board's decision, it may appeal the 
decision in writing to USDA. Handlers may treat their almonds only at 
off-site treatment facilities that have been deemed to be approved by 
the Board.

On-Site Verification Program

    Under an on-site verification program, handlers must cause the 
inspection agency to verify that their almonds were subjected to a 
treatment process that was validated by a Board-approved process 
authority. Such handlers must submit, or cause to be submitted, a 
verification report to the Board. The inspection agency must physically 
observe the treatment process to issue such a report. It is the 
handler's responsibility to arrange for inspection agency verification. 
An on-site program is comparable to a traditional in-line or lot 
inspection program.

Audit-Based Verification Program

    Under an audit-based verification program, handlers will be subject 
to periodic audits conducted by the inspection agency. The inspection 
agency will verify that handlers were following the treatment 
parameters and protocols specified in their approved treatment plans. 
Audit frequency will be tied to handler performance. Handlers will be 
provided with written audit reports specifying deficiencies. Handlers 
who do not comply with an audit-based verification program will be 
required to revert to an on-site verification program. Audit reports 
will be provided to the Board to facilitate program compliance.

Interhandler Transfers

    Interhandler transfers of almonds may or may not be treated prior 
to transfer. Handlers receiving untreated almonds from another handler 
will be responsible for treating the product. Handlers receiving 
treated almonds from another handler must have procedures outlined in 
their treatment plan addressing how the integrity of the treated 
almonds will be maintained. In all instances involving interhandler 
transfers, it will be the responsibility of the receiving handler to 
ensure that the almonds are treated prior to shipment and to maintain 
documentation to that effect. As provided in Sec.  981.455, handlers 
must submit an ABC Form No. 7, ``Interhandler Transfer of Almonds,'' to 
the Board when they are involved in interhandler transfers.

Records

    Handlers will be required to maintain records and documentation 
that will be subject to audit by the inspection agency and the Board 
for the purpose of verifying compliance with the regulation. Consistent 
with Sec.  981.70 of the order regarding handler records and 
verification, records must be maintained for 2 full years following the 
end of a crop year. Such records must identify lots from the point of 
treatment forward to the point of shipment by the handler. Lot 
identification must also provide the ability to differentiate treated 
from untreated product. Additionally, off-site treatment facilities 
located within the production area that provide the service of treating 
almonds for handlers, but are not handlers themselves, must maintain 
treatment records for 2 full years following the end of a crop year and 
make such records available to the Board.

Exemptions

Direct Verifiable Program
    Handlers may ship untreated almonds directly to Board-approved 
manufacturers (DV users) within the U.S., Canada, or Mexico for further 
processing under the Direct Verifiable or DV program. The Board will 
issue a DV user code to an approved manufacturer. Handlers must 
reference this code on all documentation accompanying the lot. This 
will help the Board track DV shipments and facilitate compliance with 
the program. Handlers must also identify each container of such almonds 
with the term ``unpasteurized.'' Container means a box, bin, bag, 
carton, or any other type of receptacle used in the packaging or 
handling of bulk almonds. The lettering must be on one outside 
principal display panel, at least \1/2\ inch in height, clear and 
legible. If a third party is involved in the transaction, the handler 
must provide sufficient documentation to the Board to track the 
shipment from the handler's facility directly to the approved DV user. 
While a third party may be involved in such transactions, shipments to 
a third party and then to a manufacturing location are not permitted 
under the DV program. Almonds under the DV program must be shipped 
directly from handlers to approved manufacturing locations.
    Manufacturers wanting to participate in the DV program must submit 
an application to the Board on ABC Form No. 52, ``Application for 
Direct Verifiable (DV) Program for Further Processing of Untreated 
Almonds,'' and be approved by the TERP. Should the applicant disagree 
with the TERP's decision concerning approval, it may appeal the 
decision in writing to the Board, and ultimately to USDA. Additionally, 
the TERP may revoke any approval for cause. The TERP must notify the 
manufacturer in writing of the reasons for revoking the approval. If 
the manufacturer disagrees with the TERP's decision, it may appeal the 
decision in writing to the Board, and ultimately to USDA. A 
manufacturer whose approval has been revoked must submit a new 
application to the TERP and await approval.
    Similar to handlers, manufacturers must subject the almonds to a 
treatment process or processes using technologies that achieve in total 
a minimum 4-log reduction of Salmonella bacteria as determined by the 
FDA or accepted by

[[Page 15025]]

the TERP. Additionally, manufacturers may use treatment processes that 
have been ``established'' by a Board-approved process authority. As 
previously stated, ``established'' means that the process authority has 
evaluated the treatment processes and protocols to ensure the 
technology's ability to deliver a lethal treatment for Salmonella in 
almonds to achieve a minimum 4-log reduction. The Board recommended 
this option to address manufacturers' concern regarding the process to 
seek TERP acceptance of their treatments, which could involve providing 
data on their proprietary processes to the TERP (i.e., specific time 
and temperature data for special equipment). DV users must submit with 
their application to the TERP documentation to verify that their 
treatment technology and equipment have been validated by a Board-
approved process authority. Such documentation may include, but not be 
limited to, a letter from a process authority certifying the 
validation. The documentation must be sufficient to demonstrate that 
the treatment processes and equipment achieve a 4-log reduction in 
Salmonella bacteria.
    Manufacturers must also do the following: (1) Identify the 
manufacturing locations where treatment will occur; (2) have their 
treatment technology and equipment validated by a Board-approved 
process authority. Treatment technology and equipment that have been 
modified to the point where operating parameters such as time, 
temperature, or volume, change must be revalidated; (3) maintain all 
records regarding validation and verification of treatment methods, 
processing, and product traceability for 2 years, and make such records 
available for review by the Board; and (4) ship untreated almonds (due, 
for example, to a manufacturer overbuying) to a handler, to another 
approved DV user, to locations outside the U.S., Canada, or Mexico 
(containers must remain identified with the term unpasteurized), or 
dispose of such almonds in non-edible channels.
    Further, DV users will be audited by a Board-approved auditor 
within 1-2 months after the start of treatments, and at least once 
every 12 months thereafter. The cost of the DV audit shall be borne by 
the manufacturer. Such audits will determine if: (1) The DV user 
utilized appropriate treatment processes; (2) the DV user has a letter 
issued by a Board-approved process authority that validated that the 
treatment achieves a 4-log reduction of Salmonella; (3) personnel and 
procedures used at the facility ensure that treatment parameters were 
followed; and (4) records are retained for two years that document the 
treatment of almonds, or that any untreated almonds were properly 
disposed of as outlined above. A summary audit report of the DV user 
will be sent to the Board within 10 days of the audit. DV user auditors 
must submit an application to the Board on ABC Form No. 53, 
``Application for Direct Verifiable (DV) Program Auditors,'' and be 
approved by the TERP. Should the applicant disagree with the TERP's 
decision concerning approval, it may appeal the decision in writing to 
the Board, and ultimately to USDA. Additionally, the TERP may revoke 
any approval for cause. The TERP must notify the DV auditor in writing 
of the reasons for revoking the approval. If the DV auditor disagrees 
with the TERP's decision, it may appeal the decision in writing to the 
Board, and ultimately to USDA. A DV auditor whose approval has been 
revoked must submit a new application to the TERP and await approval.
    The Board recommended including Mexico and Canada as part of the DV 
program for compliance purposes. The Board was concerned that handlers 
could circumvent the regulation by shipping untreated almonds to Mexico 
or Canada, then, bring them back into the U.S. and sell them in normal 
market channels.

Shipments Outside of the U.S., Canada, or Mexico

    Handlers may also ship untreated almonds directly to locations 
outside the U.S., Canada, or Mexico, provided that each container of 
such almonds is prominently identified with the term unpasteurized. The 
lettering must be on one outside principal display panel, at least \1/
2\ inch in height, clear and legible. Again, if a third party is 
involved in the transaction, the handler must provide sufficient 
documentation to the Board to track the shipment from the handler's 
facility directly to the importer in the foreign country.
    Accordingly, a new paragraph (b) regarding outgoing quality control 
and a mandatory program to reduce the potential for Salmonella bacteria 
contamination in almonds is added to Sec.  981.442 of the order's 
administrative rules and regulations.

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. Comments 
concerning the impact of the rule on small entities are discussed in 
the Analysis of Comments section below.
    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. Additionally, the Board estimates there will 
be about 25 process authorities, 53 almond manufacturers, 50 DV program 
auditors, and 20 off-site California treatment facilities (non-
handlers) impacted by this rule. 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 Agricultural Statistics Service (NASS) ($2.043 billion) by the 
number of producers (6,000) yields an average annual producer revenue 
estimate of about $340,000. Based on the foregoing, about half of the 
handlers and a majority of almond producers may be classified as small 
entities. While data regarding the size of process authorities, almond 
manufacturers, DV program auditors, and off-site treatment facilities 
(non-handlers) is not available, it may be assumed that some process 
authorities, almond manufacturers, DV program auditors, and off-site 
California treatment facilities (non-handlers) may be classified as 
small entities.
    The almond industry's 6,000 growers produce approximately 1 billion 
pounds annually (kernel weight basis). Industry members expect 
production to increase by 50 percent in the next 3-5 years, due to a 
significant amount of newly planted acreage that will come into 
production.
    Although the Board currently projects that that there are about 115 
handlers, handler number estimates can vary over time. Recent surveys 
have yielded estimates ranging from 112 (see Table 1) to 117 (see Table 
2). Handlers ultimately market their almonds to customers in the U.S. 
and abroad. As shown in Table

[[Page 15026]]

1, the Board estimates that about 27 of 112 handlers handle more than 
10 million pounds each, and cumulatively handle 82 percent of the crop.

                                Table 1.--Number of Handlers Categorized by Size
----------------------------------------------------------------------------------------------------------------
                                                                                   Between 5 and
                                                    Less than 1    Between 1 and    10 million     More than 10
                                                   million lbs.   5 million lbs.       lbs.        million lbs.
----------------------------------------------------------------------------------------------------------------
No. of handlers.................................              41              28              16              27
Percent of crop handled.........................               1               6              11              82
----------------------------------------------------------------------------------------------------------------

    According to data provided by the Board, about 30 percent of 
California almonds are sold domestically (about 300 million pounds). An 
estimated 20 percent of the domestic shipments are in the form of 
manufactured product--blanched, sliced, diced, or otherwise further 
processed using thermal treatments. About 70 percent of California 
almond production is exported to more than 80 countries worldwide. 
Mexico and Canada account for approximately 5 percent of export 
shipments. The quantities shipped by companies handling almonds vary 
considerably. However, a limited number of handlers are responsible for 
the majority of domestic and export shipments as shown in Table 2 
below. Table 2 shows that 16 handlers are responsible for 90 percent of 
domestic shipments. Many of the same handlers are among the 38 that are 
responsible for 90 percent of exports. About 79 of an estimated 117 
handlers are responsible for the remaining 10 percent of export 
shipments.

                                       Table 2.--Handler Shipment Summary
----------------------------------------------------------------------------------------------------------------
                                                                                                    All export
                                                                     Domestic        Export to       (includes
                                                                      (U.S.)        Canada and      Canada and
                                                                    300,000,000       Mexico          Mexico)
                                                                      pounds        37,600,000      700,000,000
                                                                                      pounds          pounds
----------------------------------------------------------------------------------------------------------------
No. of handlers responsible for 50 percent of shipments.........               3               4               9
No. of handlers responsible for 80 percent of shipments.........              12              16              26
No. of handlers responsible for 90 percent of shipments.........              16              26              38
----------------------------------------------------------------------------------------------------------------

    This rule adds a new paragraph (b) for outgoing quality control 
under Sec.  981.442 of the order's administrative rules and 
regulations, whereby a mandatory program to reduce the potential for 
Salmonella bacteria in almonds will be implemented under the order. 
Specifically, handlers must subject their almonds to a treatment 
process that achieves a minimum 4-log reduction in Salmonella bacteria 
prior to shipment. The program exempts handlers who ship untreated 
almonds under a direct verifiable (DV) program to manufacturers within 
the U.S., Canada, or Mexico who agree to treat the almonds accordingly. 
The program also exempts handlers who ship untreated almonds to 
locations outside of the U.S., Canada, or Mexico. All containers of 
untreated almonds shipped under the exemptions must be prominently 
identified with the term ``unpasteurized.'' Authority for the program 
is provided in Sec.  981.42(b) of the order.
    According to the Board, the costs to individual handlers to comply 
with the program will vary considerably depending on their markets and 
treatment method(s) chosen. Handlers may: (1) Install new equipment in 
their processing lines to treat the almonds prior to shipment into 
commercial channels; (2) outsource to another handler or an off-site 
facility within California for treatment; (3) transfer their untreated 
product to another handler who will treat the almonds prior to 
shipment; (4) ship their untreated almonds to Board-approved DV users 
or to locations outside of the U.S., Canada, or Mexico; or (5) use a 
combination of these approaches.
    In a handler survey conducted by the Board in March 2005 (to which 
116 handlers handling almonds at that time responded), 86 handlers (74 
percent) have their own facilities and/or equipment to process almonds; 
the remainder have almonds processed on their behalf. Of those handlers 
with their own facilities and/or equipment, 66 (77 percent of 86) 
indicated they planned to install equipment to treat almonds while the 
remaining 20 indicated they would outsource to a third party, or custom 
processor. Again, the overall economic impact of the program will vary 
based on the approach selected. Smaller handlers may choose to defer 
purchasing equipment and send their almonds to an off-site facility for 
treatment until more cost effective technologies are available.
    Costs will also vary by treatment method. Some handlers may choose 
to install PPO chambers at their facilities. Handler sources estimate 
that typical installation costs for a PPO chamber range from $500,000 
to $1,250,000. As with other technologies, overall cost will depend 
upon how much infrastructure is in place in the processing facility as 
well as the desired capacity of the chambers. Actual treatment cost for 
handlers treating their own product is approximately $0.03 per pound, 
varying with volume and efficiencies. PPO treatment is currently 
available in the industry on a contract basis at $0.04-$0.05 per pound 
(including transportation to the facility).
    Regarding steam technologies, handler sources estimate the 
following equipment costs for in-line steam systems designed to treat 
almonds at varying capacities from 1,000 pounds to over 30,000 pounds 
of almonds per hour:

[[Page 15027]]



Table 3.--Estimated Equipment Costs for Steam Units for Differing Levels
                          of Treatment Capacity
------------------------------------------------------------------------
            Capacity (pounds per hour)                 Equipment costs
------------------------------------------------------------------------
1,000.............................................     $100,000-$200,000
5,000.............................................       300,000-325,000
7,500-15,000......................................       370,000-470,000
20,000-30,000.....................................       525,000-800,000
Over 30,000.......................................     600,000-1,000,000
------------------------------------------------------------------------

    While treatment equipment costs will be the most significant 
outlay, there will also be capital expenditures associated with 
additional conveyance equipment, boilers, cooling systems, bins, and 
possible expansion or construction of new buildings. Handler sources 
estimate these costs to be an additional 50 percent of the treatment 
equipment costs cited in Table 3, depending on capacity needs, and 
assuming maximum throughput.
    A typical system of 10 million pound annual capacity will be 
equivalent to 22,000 pounds per hour, which falls in the 20,000 to 
30,000 pound per hour range in Table 3. The treatment equipment costs 
for that capacity range from $525,000 to $800,000. With an additional 
50 percent for cost of other related equipment and facility expansion, 
the costs range from $787,500 to $1,200,000. Handler sources suggest 
that a figure near the upper end of that range, $1,125,000, is a good 
point estimate of the cost for a 10,000,000 pound per year treatment 
line.
    An important step in assessing the financial impact of the 
mandatory treatment program on handlers is to estimate the annualized 
equipment cost and operating cost of treating the almonds to prevent 
Salmonella contamination. This can be illustrated by additional 
computations, with 10,000,000 pounds per year serving as a 
representative level of treatment capacity, as shown in Table 4, third 
line of column A. Table 4 also shows a range of costs across different 
levels of handler treatment capacity.

                   Table 4.--Estimate of Average Annual Equipment and Operating Costs at Varying Levels of Handler Treatment Capacity
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          D E Unit Cost of Equipment at:                   G H Equipment plus operating
                                                           C Annual use  --------------------------------                            cost at:
                                              B Total         cost of                                        F Average   -------------------------------
   A Handler annual capacity (Pounds)        equipment     equipment, 5       50% of       Full capacity  operating cost      50% of
                                               cost*        year life**    capacity  (C/       (C/A)                       capacity (D +   Full capacity
                                                                             50% of A)                                          F)            (E + F)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                          ..............  ..............                                  Cents per pound
--------------------------------------------------------------------------------------------------------------------------------------------------------
2,000,000...............................        $300,000         $69,292          $0.069          $0.035         $0.0035         $0.0725         $0.0385
5,000,000...............................         487,500         112,600           0.045           0.023          0.0035          0.0485          0.0265
10,000,000..............................       1,125,000         259,845           0.052           0.026          0.0035          0.0555          0.0295
15,000,000..............................       1,500,000         346,460           0.046           0.023          0.0035          0.0495          0.0265
20,000,000..............................       1,650,000         381,106           0.038           0.019          0.0035          0.0415          0.0225
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Equipment cost estimates at varying capacity levels, including treatment chambers, plus an additional 50 percent for conveyors, other equipment and
  extension of facilities.
** Annualized equipment cost is computed by dividing the equipment purchase cost by 4.3295, which is the Present Value of a $1 annuity for 5 Years
  (estimated life of the equipment) at a 5 percent interest rate (estimated cost of capital).
Source for equipment and operating costs: Almond handlers.

    To obtain the annual unit cost for installing a 10 million pound 
capacity treatment line (an expenditure of $1,125,000 in column B), the 
first step is to obtain the annualized equipment cost. The parameters 
recommended by the handlers were a 5 year equipment life and a 5 
percent cost of capital. The annual equipment use factor (4.3295) is 
the present value of a $1 annuity for 5 years at 5 percent. Dividing 
the total equipment expenditure of $1,125,000 by 4.3295 yields an 
annualized equipment cost estimate of $259,845 (column C). Dividing 
this figure by the annual 10,000,000 pound capacity yields a cost per 
pound estimate of 2.6 cents (column E). If the treatment line ran at 
half capacity, the equipment costs per pound would double to 5.2 cents 
(column D).
    This method of computing annualized equipment cost does not account 
for the tax implications of annual equipment depreciation or for the 
salvage value at the end of the equipment's useful life. In addition, 
the useful life of many pieces of equipment may well be over 5 years.
    Ongoing operational costs (electricity, etc.) are estimated by 
handlers to range from $0.0027 to $0.0043 per pound, depending on the 
system. The midpoint of this range ($0.0035) appears in column F.
    The key results from Table 4 are the cost estimates per pound of 
almonds treated, including both annualized equipment costs and 
operating costs. The highest cost is 7.25 cents per pound for the 
smallest handler (2 million pounds treated annually) operating at 50 
percent capacity (column G). The lowest cost estimate is 2.25 cents per 
pound for a handler treating 20 million pounds per year operating at 
full capacity (column H). These costs can be put in context by 
comparing them to almond grower prices as reported each year by the 
NASS. For 2003 to 2005, grower prices averaged $2.07 per pound, 
computed by dividing the value of production for those three years by 
the three-year quantity of production. The treatment cost estimates per 
pound in Table 4 range from 3 percent to 1 percent of the 2003-2005 
average grower price, and represent an even smaller proportion of the 
prices paid to handlers when selling to almond users further down the 
marketing chain.
    A key aspect of handler costs is the proportion of total capacity 
at which a new production line will operate. Operating at higher 
capacity spreads the equipment cost across a wider base. For a small 
handler, investing in equipment with this level of capacity may only be 
viable economically if the costs are spread over their entire 
production run, rather than only applying costs to a small portion of 
their production run. If they do not intend to run their entire 
production through the treatment process, it may be more viable to 
outsource the treatment. Costs of contract processing (i.e., batch 
operations for steam processes or PPO treatment) are estimated to range 
from $0.04 to $0.05 per pound. This estimate includes additional costs 
associated

[[Page 15028]]

with transporting almonds to a custom facility ($0.01 to $0.015 per 
pound). For medium-sized and larger handlers, it may be more cost 
effective to construct a treatment processing line, particularly if 
they intend to immediately put a significant portion of their 
production through the process.
    Handler sources estimate that the cost of setting up a new oil 
roast line is $300,000 to $600,000, with operating costs of $0.06 to 
$0.10 per pound. A blanching line may cost upward of $1,500,000 to 
$2,500,000 with an operating cost of approximately $0.12 to $0.22 per 
pound. It is unlikely that handlers will select these technologies 
unless they are already providing custom processed, value-added 
products to their customers.
    Regarding compliance and oversight costs, it is anticipated that 
handlers who do not currently have thorough recordkeeping procedures in 
place will likely have to invest approximately 40-80 person-hours to 
develop their treatment plan. However, once this document has been 
created, it will be updated on an annual basis, which will likely 
involve less time. Validation of treatment systems is estimated to cost 
from $1,000 to $3,000 per line, depending upon the complexity of the 
equipment utilized. Treatment technology and equipment that have been 
modified to the point where operating parameters such as time, 
temperature, or volume, change must be revalidated. Validation costs 
are expected to be borne by handlers, as well as DV users and off-site 
treatment facilities (non-handler). DV audit costs will be borne by DV 
users.
    Handler verification costs may vary, depending on whether the 
handler is under an on-site program or an audit-based program. The fee 
for an on-site program will be a minimum charge of $44.00 per hour 
(with 1 hour required to treat 44,000 pounds), or $0.204 per 
hundredweight, whichever is greater. The former is equivalent to $1.00 
per thousand pounds treated. For an audit-based program, the fee will 
be a minimum $78.00 per hour. Travel time for both programs will be 
charged at $44.00 per hour and $0.34 per mile. Verification costs may 
also be charged to off-site treatment facilities (non-handler); 
however, such costs may be passed on to the respective handlers using 
the facility.
    Examples of estimated handler verification costs are provided in 
Tables 5 and 6 below:

                          Table 5.--Annual Handler Verification Costs: On-Site Program
----------------------------------------------------------------------------------------------------------------
                                                        Volume of almonds treated per year
       Audit cost by type        -------------------------------------------------------------------------------
                                   100,000 lbs.    2 mill. lbs.    40 mill. lbs.  100 mill. lbs.  250 mill. lbs.
----------------------------------------------------------------------------------------------------------------
Hourly rate*....................            $100          $2,000         $40,000        $100,000        $250,000
Per Cwt=$.204...................             204           4,080          81,600         204,000        510,000
----------------------------------------------------------------------------------------------------------------
*Hourly rate of $44/hour, with 1 hour required per 44,000 lbs of volume treated (equivalent to $1.00 per
  thousand pounds treated).


                                            Table 6.--Annual Handler Verification Costs: Audit-Based Program
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Audit cost by hours required to complete audit*
                                                 -------------------------------------------------------------------------------------------------------
                                                       1            2            3            4            5            6            7            8
--------------------------------------------------------------------------------------------------------------------------------------------------------
Audit hourly cost=$78...........................          $78         $156         $234         $312         $390         $468         $546         $624
Auditor Transportation Cost **..................           32           32           32           32           32           32           32           32
Cost per individual audit.......................          110          188          266          344          422          500          578         656
--------------------------------------------------------------------------------------------------------------------------------------------------------
*Estimated hours per audit varies by volume treated annually: (up to 2 million pounds: 1-3 hours); (more than 2 but less than 40 million pounds: 2-5
  hours); (40 million pounds or more: 3-8 hours).
**Estimated auditor transportation cost to each facility is approximately $32: $22 for travel time (1/2 hour @ $44/hour) plus mileage reimbursement of
  $10 (30 miles @ $0.34 per mile).

    The benefits associated with the mandatory program are the avoided 
costs of a Salmonella outbreak. These costs may vary depending on 
several factors, including the quantity of product recalled, impact on 
consumer sales, lost customer confidence, insurance costs, and possible 
litigation. Using 2003-2005 average almond crop value as the basis, a 
loss of 5 percent would be equal to approximately $102 million.
    The Board considered various alternatives and options to a 
mandatory treatment program. One option was to take no action. However, 
the Board concluded that this was not in the best interest of the 
industry nor consumers. The Board believes that the industry should 
provide consumers with a quality product. Taking no action when there 
are viable alternatives could be significant in terms of the financial 
well being of the industry should another outbreak occur that was 
linked to almonds.
    The Board also considered continuing its voluntary action plan 
alone, without proposing a mandatory program. However, surveys 
conducted by the Board indicate that not all handlers are implementing 
the action plan. Thus, the Board concluded that a mandatory program is 
in the best interest of the industry and consumers.
    The Board also considered the effectiveness of testing for 
Salmonella prior to shipment. During the 2001 and 2004 outbreaks, 
significant amounts of testing occurred at the orchard level, in 
hulling and shelling facilities, and at retail. However, it was 
determined by the CDHS, University of California, Davis, and other 
pathogen experts that testing cannot be relied upon as the only measure 
to ensure that almonds are Salmonella free. Thus, the Board concluded 
that testing alone was not a viable alternative.
    The Board also explored the merits of requiring alternative log 
reductions. As previously mentioned, the Board initially supported a 5-
log reduction, which was FDA's performance standard. However, a risk 
assessment model demonstrated that a minimum 4-log reduction could 
provide an appropriate level of consumer protection compared to a 5-log 
reduction. Thus, the Board concluded that a minimum 4-log reduction was 
an appropriate standard for almonds.

[[Page 15029]]

    The Board also explored the merits of whether the DV program should 
be temporary, whereby all almonds would be treated at the handler level 
prior to shipment. The Board submitted an initial proposal to USDA in 
February 2006 that would have ultimately required handlers to treat all 
almonds prior to shipment, with the DV program being temporary. 
However, concerns were raised by various parties, including 
manufacturers, handlers, and foreign countries, regarding the temporary 
nature of the DV program, and the requirement that all exported almonds 
be treated prior to shipment. The Board ultimately revised its proposal 
to remove the proviso regarding discontinuance of the DV program, to 
allow untreated almonds to be shipped to locations outside the U.S., 
Canada, or Mexico, and to require that all containers of untreated 
almonds be prominently identified with the term ``unpasteurized.''
    This action imposes additional reporting and recordkeeping burden 
on California almond handlers, process authorities, almond 
manufacturers, DV program auditors, and off-site treatment facilities. 
Process authorities, manufacturers, and DV auditors must submit 
respective applications to the Board. Almond handlers must submit 
treatment plans to the Board. In accordance with the Paperwork 
Reduction Act of 1995 (44 U.S.C. Chapter 35), these new forms and a 
sample ``Handler Treatment Plan'' were submitted to the Office of 
Management and Budget (OMB) and have been approved under OMB Control 
No. 0581-0242, Almonds Grown in California. Specific burdens for the 
three new applications and handler treatment plan are addressed in the 
section below titled Paperwork Reduction Act. ABC Form No. 7, 
``Interhandler Transfer of Almonds,'' has previously been approved by 
OMB under OMB Control No. 0581-0178, ``Vegetable and Specialty Crop 
Marketing Orders. 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. Finally, USDA 
has not identified any relevant Federal rules that duplicate, overlap, 
or conflict with this rule.
    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.
    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. 
Between the summer of 2004 and the Board's August 2006, meeting, this 
issue was addressed at an estimated 12 Board meetings, 18 Food Quality 
and Safety Committee meetings, and well over 20 task force meetings. 
All of these meetings were public meetings and all entities, both large 
and small, were able to express views on this issue. Additionally, the 
Board issued about 35 updates to handlers regarding its voluntary 
action plan and progress towards its recommended mandatory program.

Analysis of Comments

    A proposed rule concerning this action was published in the Federal 
Register on December 6, 2006 (71 FR 70683). Copies of the 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 45-day comment period ending January 22, 
2007, was provided for interested persons to respond to the proposal. 
Eighteen comments were received. Of the 18 comments, 3 supported the 
rule with no changes, 7 supported the rule with modification, 3 were 
opposed, and the remaining 5 comments raised other issues. The comments 
are addressed in the following paragraphs.

Comments in Full Support

    The three comments which supported the rule with no changes were 
submitted by a grower cooperative/ handler/marketer; a grower/handler; 
and a trade association representing almond hullers and shellers. One 
commenter believes the rule is necessary to prevent Salmonella from 
reaching the consuming public via California almonds. Another of the 
commenters summarized his company's experience in a Salmonella outbreak 
and recall. He contends that, based on his company's experience with 
treatments, there has been no noticeable impact on product shelf-life, 
roasting, or flavor to consumers. He added that his raw almond business 
has increased since implementing 100 percent treatment with no increase 
in quality complaints. The third commenter believes that the livelihood 
of the industry is at risk if it does not proceed immediately to 
mitigate the presence of Salmonella in its product. All of the 
commenters supported implementation of the rule as soon as possible.

Comments in Support, With Modification

    The seven comments which supported the rule with modification were 
submitted by the Board; a trade association representing food, 
beverage, and consumer product companies; a trade association 
representing confectionary manufacturers, suppliers, buyers, and 
brokers; a chocolate and confectionary manufacturer; a processor/
marketer of nut products; a handler; and a grower/handler.
    Four of the commenters addressed the proposed reporting 
requirements. Three of these comments expressed concern with an annual 
submission of an application for DV users. Two suggested that, once the 
DV user has been approved by the Board and is on an approved list, 
there is no reason to remove the entity except for cause, or at the 
request of the DV user. Another suggested that, if a DV user does not 
change its treatment technology, and if a problem has not been 
identified by the DV auditor, there is no reason for DV users to 
reapply annually to the Board. Two commenters suggested that the 
initial approval for process authorities and DV auditors should be 
sufficient, adding that agency approval is not required under 
regulations governing production of low-acid canned foods, which is the 
source of the process authority concept.
    The Board commented that the DV user and auditor applications were 
designed so that once the entity is originally approved, it would only 
have to reconfirm participation in subsequent years. A new or modified 
application would only be necessary in cases where new procedures, 
equipment, or processing locations have been introduced.
    Based on the comments received, USDA has determined that 
modifications to the proposed rule regarding reporting requirements are 
warranted. Process authorities, DV users, and DV auditors must submit 
an initial application to the Board. For subsequent crop years, such 
approved entities with changes in the information contained in their 
initial application must submit a new, revised application to the Board 
for review and approval prior to the start of the crop year. Approved 
applicants with no changes to their initial application must send the 
Board a letter, signed and dated, indicating that there are no changes 
to the application the Board has on file. In the new Sec.  
981.442(b)(3) regarding the application for process authorities, Sec.  
981.442(b)(6)(i) regarding the application for DV users, and

[[Page 15030]]

Sec.  981.442(b)(6)(i)(D) regarding the application for DV auditors are 
revised accordingly. The revised reporting burdens are addressed in the 
section below titled Paperwork Reduction Act.
    Three of the comments raised various issues regarding process 
authorities. One issue concerned the release of proprietary information 
regarding manufacturers' processes. Two commenters suggested adding 
language to the regulatory text that clarifies, as the preamble does, 
the role of process authorities in establishing technologies for 
manufacturers, in particular, the protection this option provides 
regarding proprietary data under the DV program. The commenters want to 
ensure that disclosure of data on manufacturers' proprietary processes 
is not required for determination of acceptance by the TERP of 
manufacturers' treatment processes. The Board commented that process 
authorities for DV users must provide reports to the Board that contain 
sufficient content to describe the verification methodologies that were 
used to establish that the treatment processes and technologies achieve 
a minimum 4-log reduction in Salmonella bacteria. The Board contends 
that the TERP would not require information regarding manufacturers' 
proprietary manufacturing processes.
    As previously stated, manufacturers' use of treatment processes 
established by process authorities was included in the regulation to 
address concerns regarding the release of data on manufacturers' 
proprietary processes to the TERP. Modification of the regulatory text 
to address this is not warranted. However, USDA concurs that the Board 
needs documentation to ensure that processes established by process 
authorities achieve a 4-log reduction in Salmonella bacteria. 
Accordingly, Sec.  981.442(b)(6)(i)(C) is revised to specify that DV 
users must provide documentation with their DV application to the TERP 
to verify that their treatment technology and equipment have been 
validated by a Board-approved process authority. Such documentation may 
include, but not be limited to, a letter from such process authority 
certifying the validation. Finally, such documentation must be 
sufficient to demonstrate that the treatment processes and equipment 
achieve a 4-log reduction in Salmonella bacteria. The revised reporting 
burden regarding DV users is addressed in the section below titled 
Paperwork Reduction Act.
    Two commenters requested that the rule be clarified to specify that 
process authorities may be employees of a manufacturer, which is 
similar to process authorities for low-acid canned foods. USDA concurs, 
but notes that it is essential to ensure that process authorities act 
in a neutral, unbiased manner for both manufacturers and handlers. 
Accordingly, paragraph (b)(3) in Sec.  981.442 has been modified to 
specify that process authorities may be employees of the entity for 
which they are conducting validation.
    The rule has also been clarified to specify that DV auditors may 
not be employees of manufacturers they are auditing. It is important 
that a third party perform the audit to ensure the integrity of the DV 
program. Accordingly, paragraph (b)(6)(i)(D) in Sec.  981.442 has been 
modified to specify that DV auditors may not be employees of the entity 
for which they are conducting an audit.
    Two commenters also suggested adding language to the regulatory 
text that clarifies, as the preamble does, the criteria that process 
authorities must meet in order to be approved by the TERP. This 
criteria includes the following: (1) Knowledge about the equipment used 
for the treatment process; (2) experience in conducting appropriate 
studies to determine the ability of the equipment to deliver the 
appropriate treatment (such as heat penetration or heat distribution); 
and (3) able to determine that sufficient data has been gathered to 
identify the critical factors needed to ensure the quality of the final 
product. Accordingly, paragraph (3) in the new Sec.  981.442(b) has 
been modified accordingly.
    The Board commented that the rule be clarified to specify that 
persons, not an organization, must submit applications for approval as 
process authorities. It is the Board's intent that persons, not 
organizations, be approved process authorities. The Board wants to 
ensure that persons conducting validation are qualified to do so. USDA 
concurs with the comment. Paragraph (3) in the new Sec.  981.442(b) has 
been modified accordingly.
    The Board also commented that the rule be clarified to specify 
that, under the DV program, almonds must be shipped by handlers 
directly to approved manufacturer locations where such almonds will be 
treated. The Board contends that, without direct shipment, it would be 
impossible to ensure that almonds were being shipped to a facility 
where treatment would occur. Indirect shipments to third parties could 
lose identity and be difficult to track. USDA concurs with the comment. 
While a third party may be involved in the transaction, shipments to a 
third party and then to a manufacturing location are not permitted 
under the DV program. Paragraph (b)(6)(i) of Sec.  981.442 has been 
modified accordingly.
    Related to the issue of direct DV shipments, one commenter stated 
that two small roasters indicated to him they would like to see the 
rule revised to allow use of a custom vendor under the DV program. USDA 
assumes this means that the almonds would be shipped outside the 
production area to a non-manufacturing entity or third party for 
treatment. Based on the reasons stated in the preceding paragraph 
regarding the need to track shipments to approved manufacturer 
locations, the comment is denied.
    Two commenters provided recommendations regarding the frequency of 
USDA audits for handlers under the audit-based verification program. In 
its comment, the Board agreed that audit frequency be tied to handler 
performance, and suggested that, during the first year, audits be 
conducted during month 1, 3, 6, and 12. If all procedures are in place 
and documentation is accurate, in the second year, audits should only 
be conducted once every 6 months. Another commenter suggested that two 
audits be conducted for the first year, but less frequently in 
subsequent years when the program is ongoing unless equipment changes 
are made to the technology used by the handler; the commenter suggested 
audits every 24 months in subsequent years.
    USDA has taken these suggestions under consideration in development 
of its handler audit plan. However, handler audit frequency is not a 
part of the regulatory text of this rule. Accordingly, no changes have 
been made to the proposed rule based on these comments.
    One commenter requested that the Board (TERP) provide process 
authorities critical ranges, or minimum standards, for variables and 
conditions that are critical to PPO and other treatment processes. USDA 
understands that it is the Board's intent to make this information 
available to process authorities and other interested parties (i.e., 
equipment manufacturers, handlers, or scientists). Paragraph (b)(3) of 
Sec.  981.442 is modified accordingly.
    Related to validation, one commenter stated that, to-date, there is 
no surrogate organism for validating dry roasting processes. This is 
correct. USDA understands that the Board continues to fund research for 
non-pathogenic surrogates that could be used for validating both moist 
and dry heat treatment processes. Until these are available, validation 
for moist and dry heat processes must be done with

[[Page 15031]]

Salmonella bacteria. Validation with live Salmonella is not necessary 
for PPO, blanching, or oil roasting because the Board has developed 
specific protocols and parameters for these processes.
    Two commenters suggested that the rule be modified to specify time 
frames for the approval of process authorities; one suggested a 45-day 
time frame for approval, and one suggested a 30-day time frame for 
approval, and 2 weeks for appeals. One of the commenters also suggested 
time frames for approval of applications for DV users and DV auditors--
30 day time frame for approval, and 2 weeks for appeals.
    Timely review of these applications is important. USDA will work 
with the Board to ensure quick review and response. However, it is not 
necessary to specify time frames within the regulation. Thus, these 
comments are denied.
    One commenter suggested that DV users be audited no more than once 
every 2 years. Although not specified in the regulatory language, the 
preamble indicates that DV users will be audited within 1-2 months 
after the start of treatments, and at least once every 12 months 
thereafter. An annual audit of DV users is appropriate to maintain the 
integrity of the mandatory program. Thus, the comment is denied.
    Three commenters expressed concern with the impact of treatments on 
the quality, shelf-life, and/or sensory characteristics of almonds. One 
contends that the Board's quality research is still ongoing. Another 
contends that treated and untreated almonds should be comparable in 
terms of taste, nutritional composition, product performance, color, 
appearance, and shelf-life; the commenter requested that the Board or 
TERP require extensive product testing of any potential new technology 
to assure the consuming public that such almonds are materially 
unchanged in regard to their eating quality.
    In early 2006, the Board allocated $1 million towards a project to 
ensure that appropriate treatment resulted in no significant 
degradation of the almonds. The Board formed a team comprised of 
manufacturers, handlers, technical experts, and Board staff to develop 
the parameters of the research project and evaluate the results. 
Control almonds were compared with almonds that were subjected to PPO 
and two different moist heat treatments. Control and treated almonds 
were also roasted. The Board indicated it its comments that the team 
met in January 2007 and reviewed the following findings. There were no 
indications to-date of significant degradation or product deterioration 
when comparing treated samples with control samples. Data presented by 
a confectionary manufacturer regarding a pilot trial with treated, 
consumer ready product indicated that the product chemistry does not 
present any evidence of degradation in raw or roasted almonds. Also, as 
mentioned earlier, one commenter who was involved in a recall contends 
that, based on his company's experience with treatments, there has been 
no noticeable impact on product shelf-life, roasting, or flavor to 
consumers. No changes have been made to the proposed rule based on 
these comments.
    One commenter expressed concern with the treatment cost estimates 
in the proposed rule. Costs for steam and PPO treatments were estimated 
between $0.02--$0.07 per pound. The commenter represents confectionary 
companies and contends that costs to its members would be slightly 
higher, depending on broker fees and the volume of almonds purchased. 
The commenter estimates that there could be an additional cost of $0.05 
to $0.10 per pound for treated almonds purchased by small and medium 
confectionary companies that purchase lesser volumes of almonds through 
brokers.
    While costs to these buyers could be slightly higher if they 
purchased treated almonds, the benefits of this rulemaking action 
outweigh the costs. Additionally, confectionary companies will still be 
able to purchase untreated almonds. No changes have been made to the 
proposed rule based on this comment.
    Several of the comments addressed PPO. One commenter contends that 
PPO is not permitted to-date in Canada, the European Union (EU), or 
Mexico. While it is true that PPO is not permitted in the EU and 
Canada, it is permitted in Mexico. Regarding shipments to the EU, under 
the mandatory program, handlers may ship almonds untreated to the EU, 
provided such almonds are labeled ``unpasteurized.'' Almonds shipped to 
Canada can be treated with one of the other available technologies, or 
can be shipped untreated to DV users in that country. No changes have 
been made to the proposed rule based on these comments.
    One of the commenters stated that they support pasteurization, but 
believe it should not be at the handler level, and questioned the 
authority to impose such a requirement through this rulemaking. The 
commenter contends that the safety of almond-containing products can be 
assured by treating almonds after they leave control of the handler, 
and that later treatment furthers food safety objectives by affording 
less opportunity for re-contamination of almonds. The commenter argues 
that only treated almonds should be sold to those who plan to sell them 
to consumers as raw or natural almonds.
    USDA is implementing this rulemaking action under the quality 
control authority contained in the almond marketing order. Under the 
Act, the authorizing statute for all marketing orders, regulations may 
only be implemented at the handler level. Thus, no changes have been 
made to the proposed rule based on this comment.
    One of the commenters indicated his support for 100 percent 
pasteurization for all almonds. He stated that, given the food safety 
risks, available control technologies and protocols, he strongly 
encourages USDA to make almond pasteurization mandatory for all 
almonds.
    As stated earlier in this rule, the Board's initial proposal to 
USDA in February 2006 would have ultimately required handlers to treat 
all almonds prior to shipment. However, concerns were raised by various 
parties, including manufacturers, handlers, and foreign countries, 
regarding the temporary nature of the DV program, and the requirement 
that all exported almonds be treated prior to shipment. The Board 
ultimately revised its proposal to remove the proviso regarding 
discontinuance of the DV program, to allow untreated almonds to be 
shipped to locations outside the U.S., Canada, or Mexico, and to 
require that all containers of untreated almonds be prominently 
identified with the term ``unpasteurized.''
    Although this rule does not mandate treatment for all California 
almonds, it will help to ensure consumers receive a good quality 
product, while at the same time addressing global customer needs. No 
changes will be made to the rule based on this comment.
    One commenter asked for USDA's assistance in getting PPO approved 
for use in all export markets. The commenter also asked USDA to pursue 
avenues to provide $3-$5 million to the almond industry over the next 5 
years for research to continue development of additional food safety 
issues, including aflatoxin and pasteurization. These requests are 
outside the scope of this rulemaking action. Thus, no changes have been 
made to the proposed rule based on this comment.

Comments Opposed or Raising Other Issues

    The three comments opposed to the rule were submitted by small 
handlers and one was submitted by an agricultural consultant. All of 
the

[[Page 15032]]

commenters contend that the rule will put small handlers out of 
business. One small handler said that 40 percent of his shipments are 
brown skin, and 60 percent are manufacturered. Almost all of his sales 
are domestic, with some product shipped to Canada and Mexico. Two 
commenters said that their businesses were geared toward providing 
product to buyers and consumers quickly. Both of these commenters 
contend that the technologies are too expensive for small handlers. 
Both also expressed concern with the cost of contracting out for 
treatment. One stated that having product treated ahead of time is 
problematic because one may not know the container-size that buyers 
want prior to treatment. Concern was also expressed with the quality of 
treated almonds, stating that there are only two methods of treatment 
to-date--PPO and steam (moist heat). One commenter also contends that 
consumers should have a choice to buy raw or processed almonds, and 
that labeling almonds as non-pasteurized would be acceptable to many.
    USDA has evaluated the impact of this rulemaking action on small 
handlers. There is an added expense for handlers who ship primarily 
domestic to entities that are not DV users. Their almonds must be 
treated prior to shipment. Such handlers must evaluate their own 
business situation to determine the merits of investing in treatment 
equipment or contracting out for treatment. As previously stated, PPO 
treatment is currently available on a contract basis at $0.04-$0.05 per 
pound (including transportation to the facility). Also, the Board 
continues to fund research projects to develop additional treatment 
methods. USDA understands the challenges facing small handlers; 
however, USDA is also concerned about the impact of another Salmonella 
outbreak linked to almonds on the industry as a whole. USDA supports 
the Board's proposal for a mandatory treatment program for almonds.
    The concern raised regarding the impact of treatments on the 
quality of almonds was addressed earlier in this document. Preliminary 
results of a comprehensive study conducted by the Board in conjunction 
with manufacturers and handlers, has shown no significant degradation 
in the quality or shelf-life of almonds. Again, no changes have been 
made to the proposed rule based on concerns regarding quality.
    In response to the comment that consumers should have a choice to 
buy raw or processed almonds, and the suggestion that almonds be 
labeled as non-pasteurized, USDA assumes that the commenter means 
labeling at the consumer level. The Act provides authority for 
requirements under a marketing order at the handler level, not the 
consumer level. Thus, no changes have been made to the proposed rule 
based on this comment.
    Two comments were submitted by a small handler and a collective 
group of three handlers/growers requesting delayed implementation of 
the rule. The proposed rule stated that the mandatory program would 
take effect on August 1, 2007, the start of the 2007-08 crop year, with 
handlers submitting their treatment plans for 2007-08 by May 1, 2007. 
The three growers/handlers raised concerns about available treatment 
capacity, and contend that it is logistically impossible to implement 
the program by August 1, 2007. They expressed concern with potentially 
only a 3-month lag between publication of the final rule and 
implementation of the program. The small handler requested delayed 
implementation until issues for small handlers are addressed 
guaranteeing that they will not be forced out of business.
    Regarding capacity, the commenters contend that more technologies 
are needed and believe that, once the rule becomes mandatory, more 
companies will likely submit protocols to TERP for review acceptance. 
The commenters summarized their understanding of available 
technologies, and contend that the mandatory program would restrict 
commerce due to insufficient capacity. The comment contends the 
following. There are three moist heat processes accepted by the TERP. 
The latest process (A) recently received ``approval'' for one chamber, 
and is operating at one facility in central California. Another process 
(B) has been TERP-accepted with no systems built, and the third (C) has 
three systems in place primarily for private use, and limited capacity 
for outside custom volume. Regarding PPO, the commenters contend there 
are limited facilities in California. The largest facility available is 
in Nevada, outside the production area of California. They contend 
that, due to capacity constraints, only a fraction of the needed PPO 
space is available. The comment also raises concerns regarding fees and 
availability for custom treatment, particularly if the time frame 
between publication of the final rule and implementation of the program 
is only 3 months. If a handler were going to build his/her own 
facility, the comment estimates that construction and validation could 
take more than 1 year.
    In response to concerns regarding technology and available 
capacity, the comment is correct in that there are three moist heat 
processes accepted to-date by the TERP. However, as shown below in 
Table 7, moist heat capacity is estimated at a minimum 652 million 
pounds. The comment is correct that one chamber for Process A in 
central California has been validated and is in operation (100 million 
pound capacity). However, that machine has two other chambers to be 
validated. Once validation is completed, an additional 200 million 
pounds of capacity will be available. Regarding process B, the comment 
is incorrect that a machine has not yet been built. In fact, a machine 
has been built and is being installed (88 million pound capacity). For 
process C, one machine is operational, and in-plant validation is 
starting on two additional machines (another 176 million pounds in 
capacity).

                      Table 7.--Moist Heat Capacity
------------------------------------------------------------------------
                                                               Capacity
         Moist heat process                  Status            (pounds)
------------------------------------------------------------------------
A..................................  --3 chambers for one        \1\ 100
                                      machine in one plant,
                                      1 chamber validated
                                      and operational.
                                     --Other 2 chambers to       \1\ 200
                                      be validated.
B..................................  --1 machine being            \1\ 88
                                      installed (validated
                                      in industrial
                                      warehouse).
C..................................  --1 machine validated        \1\ 88
                                      and operational.
                                     --2 machines in             \1\ 176
                                      process of in-plant
                                      validation.
------------------------------------------------------------------------
Total capacity 652 million.
\1\ In millions.

    Regarding PPO, the comment is correct in that handlers must treat 
their almonds within the production area of California. However, the 
comment is incorrect that PPO capacity in California is limited. Board 
data indicates available PPO capacity within California of at least 250 
million pounds. Thus, total capacity from moist heat and PPO is 
estimated at over 800 million pounds. Additional machines and equipment 
are likely to be built in the future. Raw domestic almond shipments 
(240 million pounds) and shipments to Canada and Mexico (36.7 million 
pounds) total about 276 million pounds. Thus, there will be more than 
sufficient capacity to treat all of this production.

[[Page 15033]]

No changes have been made to the proposed rule due to concerns 
regarding capacity.
    In response to the suggestion that implementation of the program be 
delayed, USDA believes this has merit. USDA concurs that sufficient 
time is needed between publication of the final rule and implementation 
of the mandatory program. Once the final rule is published, the Board 
must circulate applications to prospective process authorities, DV 
users, and DV auditors. Time is needed for application submission, 
review, and approval. Treatment technology and equipment must be 
validated by Board-approved process authorities. Handlers must develop 
and submit treatment plans to USDA and the Board for review and 
approval. Small handlers without treatment equipment must arrange for 
outsourcing treatment and may have to make adjustments in their 
business practices. For example, they may have to treat their almonds 
ahead of time, work with their customers to assess their needs 
regarding container size, etc. earlier than in the past, or perhaps try 
to develop new customers that could qualify as DV users.
    USDA has determined that about a 5-month lag time between 
publication of the final rule and implementation of the program is 
appropriate. USDA assessed the merits of waiting another complete crop 
year for implementation, August 2008, and believes that such a delay 
would not be warranted. USDA considered a September 1, 2007, date for 
implementation. New crop shipments begin September 1, so this date 
would ensure that 2007-08 crop almonds are covered under the program. 
Accordingly, in the new Sec.  981.442(b), the introductory text in 
paragraph (b) is modified to specify a September 1, 2007, 
implementation date, and paragraph (b)(4)(i) is modified to specify 
that, for the 2007-08 crop year, handler treatment plans must be 
submitted by May 31, 2007, rather than May 1, 2007.
    Another commenter contends that the DV program is the only viable 
and rational option to adopt and maintain, and supports the labeling of 
untreated product shipped to approved DV users within the U.S., Canada, 
and Mexico, and outside these areas, provided product is labeled. The 
commenter does not support 100 percent treatment for all almonds when 
only 5 percent of almonds are consumed raw. In response, the rule 
provides for a DV program, labeling of untreated product, and does not 
require all almonds to be treated prior to shipment.
    Another commenter suggested that the word ``pasteurized'' or 
``unpasteurized'' on containers be both in English and in the language 
used by the receiving country. The Board addressed this concern in its 
comment. The Board contends that translating the word ``unpasteurized'' 
on containers is not feasible because it is not always clear what the 
final destination will be. The Board suggests that all markings on 
containers be in English for ease of translation if so required by the 
country into which the goods will enter. USDA concurs with the Board. 
Regarding the word ``pasteurized,'' the regulation does not require 
treated containers of almonds to be labeled. No changes have been made 
to the proposed rule based on this comment.
    Another commenter contends that the industry's concern regarding 
California almonds being shipped back into the U.S. from Canada and 
Mexico is unfounded. He contends that freight costs and difficulties 
with getting the goods through customs would prohibit transshipments. 
The Board discussed this issue in depth prior to making its 
recommendation to treat Canada and Mexico similar to the U.S. under the 
mandatory program. The Board concluded that transshipments could be a 
problem. USDA concurs with the Board. The comment is denied.

Paperwork Reduction Act

    The proposed rule published on December 6, 2006, provided for a 60-
day comment period on the reporting requirements contained in the rule. 
That period ended on February 5, 2007. Four comments were received that 
concern reporting requirements and are addressed in the Analysis of 
Comments section above. Based on these comments, the reporting burdens 
were revised for the applications for process authorities, DV users, 
and DV program auditors. These entities must submit an initial 
application to the Board. For subsequent years, rather than submitting 
new applications, approved applicants with no changes to their initial 
applications must send the Board a letter, signed and dated, indicating 
there are no changes to the application the Board has on file. 
Additionally, DV users must submit with their application documentation 
to verify that their treatment technology and equipment were validated 
by a Board-approved process authority, and to demonstrate appropriate 
treatment processes. The revised reporting burdens are as follows.
    Regarding ABC Form No. 51, ``Application for Process Authority for 
Almonds,'' it is estimated that it will take a process authority about 
2 hours per response (same as proposal) for the first year of 
regulation, but only .25 hours per response each year thereafter (a 
reduction of 1.75 hours), and that 25 process authorities will respond. 
Thus, the total annual reporting burden for the form is estimated at 50 
hours (same as proposal) for the first year of regulation, and 6.25 
hours for each year thereafter (a reduction of 43.75 hours).
    Regarding ABC Form No. 52, ``Application for Direct Verifiable (DV) 
Program for Further Processing of Untreated Almonds,'' it is estimated 
it will take a manufacturer about 1.5 hours per response (.5 hours more 
than initially proposed) for the first year of regulation. The 
additional .5 hours addresses the time for DV users to include 
documentation with their application to verify that their treatment 
technology and equipment were validated by a Board-approved process 
authority. It is estimated that it will take a manufacturer only .25 
hours per response each year thereafter, and that 53 manufacturers will 
respond each year. Thus, the total annual reporting burden for the form 
is estimated at 79.5 hours (26.5 hours more than initially proposed) 
for the first year of regulation, and 13.25 hours for each year 
thereafter (a reduction of 66.25 hours).
    Regarding ABC Form No. 53, ``Application for Direct Verifiable (DV) 
Program Auditors,'' it is estimated it will take a DV auditor about 1 
hour per response for the first year of regulation, but only .25 hours 
per response (a reduction of .75 hours) each year thereafter, and that 
50 auditors will respond. Thus, the total annual reporting burden for 
the form is estimated at 50 hours for the first year of regulation, and 
12.5 hours for each year thereafter (a reduction of 37.5 hours).
    As previously stated, in accordance with the PRA, the information 
collection was submitted to the OMB and was approved under OMB Control 
No. 0581-0242, Almonds Grown in California.
    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 matters 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.

[[Page 15034]]

    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 handler 
treatment plans for the 2007-08 crop year are due to the Board and USDA 
by May 31, 2007, and mandatory compliance with this rule begins 
September 1, 2007. Handlers are aware of this action which was 
unanimously recommended at a public meeting. Additionally, a 45-day 
comment period was provided for in the proposed rule, and all comments 
received were addressed herein.

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 redesignating the undesignated text 
following paragraph (a)(7)(iv) as paragraph (a)(7)(v) and by adding 
paragraph (b) to read as follows:


Sec.  981.442  Quality control.

* * * * *
    (b) Outgoing. Pursuant to Sec.  981.42(b), beginning September 1, 
2007, and except as provided in Sec.  981.13 and in paragraph (b)(6) of 
this section, handlers shall subject their almonds to a treatment 
process or processes prior to shipment to reduce potential Salmonella 
bacteria contamination in accordance with the provisions of this 
section.
    (1) Treatment process. Treatment processes shall utilize 
technologies that have been determined to achieve in total a minimum 4-
log reduction of Salmonella bacteria in almonds, pursuant to a letter 
of determination issued by the Food and Drug Administration (FDA), or 
acceptance by a scientific review panel as identified by the Board 
(Technical Expert Review Panel or ``TERP''). Such panel shall be 
approved at least annually by the Board prior to the beginning of each 
crop year, or as needed during the crop year.
    (2) On-site versus off-site treatment. Handlers shall subject 
almonds to a treatment process or processes prior to shipment either at 
their handling facility (on-site), or at an off-site treatment facility 
located within the production area. Transportation of almonds by a 
handler to an off-site treatment facility shall not be deemed a 
shipment.
    (3) Validation by process authorities. Handlers shall only use, or 
transport their almonds to off-site treatment facilities that use 
treatment processes that have been validated by a Board-approved 
process authority. Treatment technology and equipment that have been 
modified to a point where operating parameters such as time, 
temperature, or volume change, shall be revalidated.
    (i) Validation means that the treatment technology and equipment 
have been demonstrated to achieve in total a minimum 4-log reduction of 
Salmonella bacteria in almonds.
    (ii) A process authority is a person that has expert knowledge of 
appropriate processes for the treatment of almonds as defined in 
paragraph (b)(1) of this section, and meets the following criteria:
    (A) Knowledge about the equipment used for the treatment process;
    (B) Experience in conducting appropriate studies to determine the 
ability of the equipment to deliver the appropriate treatment (such as 
heat penetration or heat distribution); and
    (C) Able to determine that sufficient data has been gathered to 
identify the critical factors needed to ensure the quality of the final 
product.
    (iii) Process authorities may be employees of the entity for which 
they are conducting validation. The Board shall provide process 
authorities specific protocols and parameters for treatment processes 
that are FDA determined or TERP accepted.
    (iv) Process authorities must submit an initial application to the 
Board on ABC Form No. 51, ``Application for Process Authority for 
Almonds,'' and be approved by the TERP. Should the applicant disagree 
with the TERP's decision concerning approval, the applicant may appeal 
the decision in writing to the Board, and ultimately to USDA. For 
subsequent crop years, approved applicants with no changes to their 
initial application must send the Board a letter, signed and dated, 
indicating that there are no changes to the application the Board has 
on file.
    (v) The TERP may revoke any approval for cause. The TERP shall 
notify the process authority in writing of the reasons for revoking the 
approval. Should the process authority disagree with the TERP's 
decision, he/she may appeal the decision in writing to the Board, and 
ultimately to USDA. A process authority whose approval has been revoked 
must submit a new application to the TERP and await approval.
    (4) Compliance and verification. In accordance with the 
requirements of this paragraph, handlers shall utilize either an on-
site verification program (traditional), or an audit-based verification 
program to ensure that their almonds have been subjected to a treatment 
process to reduce Salmonella bacteria prior to shipment. Each handler 
may decide which verification program would be the most cost-effective 
for his or her operation.
    (i) By May 31, each handler shall submit to the Board a Treatment 
Plan for the upcoming crop year. A Treatment Plan shall describe how a 
handler plans to treat his or her almonds, and must address specific 
parameters as outlined by the Board for the handler to ship almonds. 
Such plan shall be reviewed by the Board, in conjunction with the 
inspection agency, to ensure it is complete and can be verified, and be 
approved by the Board. Almonds sent by a handler for treatment to an 
off-site facility affiliated with another handler shall be subject to 
the approved Treatment Plan utilized at that facility. Handlers shall 
follow their own approved Treatment Plans for almonds sent to an off-
site facility that is not affiliated with another handler.
    (ii) Handlers utilizing an on-site verification program shall cause 
the inspection agency to verify that their Treatment Plans have been 
followed, and that their almonds have been subjected to a treatment 
process that has been validated by a Board-approved process authority. 
Such handlers shall submit, or cause to be submitted, a verification 
report to the Board. The inspection agency must physically observe the 
treatment process to issue such report.
    (iii) Handlers utilizing an audit-based verification program shall 
be subject to periodic audits conducted by the inspection agency. The 
inspection agency shall provide copies of the audit report to the 
Board. Handlers who do not comply with an audit-based verification 
program shall be required to revert to an on-site verification program.
    (iv) Interhandler transfers of almonds may or may not be treated 
prior to transfer. Handlers receiving untreated almonds from another 
handler shall be responsible for treating the product. Handlers 
receiving treated almonds from another handler must have procedures 
outlined in their Treatment Plan addressing how the integrity of the 
treated almonds will be maintained. In all instances involving 
interhandler transfers, the receiving handler shall be

[[Page 15035]]

responsible for ensuring that the almonds are treated prior to shipment 
and maintaining documentation to that effect.
    (v) An off-site treatment facility that does not handle almonds, 
pursuant to Sec.  981.16, shall provide access to the inspection agency 
and Board staff for verification of treatment and review of treatment 
records. A treatment process at an off-site treatment facility that has 
been validated by a Board approved process authority is deemed to be 
approved by the Board for handler use. The Board may revoke any such 
approval for cause. The Board shall notify the off-site treatment 
facility of the reasons for revoking the approval. Should the off-site 
facility disagree with the Board's decision, it may appeal the decision 
in writing to USDA. Handlers may treat their almonds only at off-site 
treatment facilities that have been deemed to be approved by the Board.
    (5) Records. Handlers shall maintain records and documentation that 
will be subject to audit by the Board for the purpose of verifying 
compliance with this section. Records must be maintained for two full 
years following the end of the crop year, and must identify lots from 
the point of treatment forward to the point of shipment by the handler. 
Lot identification shall also provide the ability to differentiate 
treated from untreated product. Off-site treatment facilities that do 
not handle almonds pursuant to Sec.  981.16, shall maintain treatment 
records for 2 full years following the end of a crop year and make such 
records available to the Board.
    (6) Exemptions. Handlers may ship untreated almonds under the 
following conditions. For purposes of this section, container means a 
box, bin, bag, carton, or any other type of receptacle used in the 
packaging of bulk almonds.
    (i) Handlers may ship untreated almonds for further processing 
directly to manufacturers located within the U.S., Canada or Mexico. 
This program shall be termed the Direct Verifiable (DV) program. 
Handlers may only ship untreated almonds to manufacturers who have 
submitted ABC Form No. 52, ``Application for Direct Verifiable (DV) 
Program for Further Processing of Untreated Almonds,'' and have been 
approved by the TERP. Such almonds must be shipped directly to approved 
manufacturing locations, as specified on Form No. 52. Such 
manufacturers DV users must submit an initial Form No. 52 to the Board 
and be approved by the TERP. Should the applicant disagree with the 
TERP's decision concerning approval, it may appeal the decision in 
writing to the Board, and ultimately to USDA. For subsequent crop 
years, approved applicants with no changes to their initial application 
must send the Board a letter, signed and dated, indicating that there 
are no changes to the application the Board has on file. The TERP may 
revoke any approval for cause. The TERP shall notify the manufacturer 
in writing of the reasons for revoking the approval. Should the 
manufacturer disagree with the TERP's decision, it may appeal the 
decision in writing to the Board, and ultimately to USDA. A 
manufacturer whose approval has been revoked must submit a new 
application to the TERP and await approval. The Board shall issue a DV 
User code to an approved manufacturer. Handlers must reference such 
code in all documentation accompanying the lot and identify each 
container of such almonds with the term ``unpasteurized.'' Such 
lettering shall be on one outside principal display panel, at least \1/
2\ inch in height, clear and legible. If a third party is involved in 
the transaction, the handler must provide sufficient documentation to 
the Board to track the shipment from the handler's facility to the 
approved DV user. While a third party may be involved in such 
transactions, shipments to a third party and then to a manufacturing 
location are not permitted under the DV program. Approved DV Users 
shall:
    (A) Subject such almonds to a treatment process or processes using 
technologies that achieve in total a minimum 4-log reduction of 
Salmonella bacteria as determined by the FDA, accepted by the TERP, or 
established by a process authority approved in accordance with and 
subject to the provisions and procedures of paragraph (b)(6) of this 
section. Establish means that the treatment process and protocol have 
been evaluated to ensure the technology's ability to deliver a lethal 
treatment for Salmonella bacteria in almonds to achieve a minimum 4-log 
reduction;
    (B) Identify the manufacturing locations where treatment will 
occur;
    (C) Have their treatment technology and equipment validated by a 
Board-approved process authority, and provide documentation with their 
DV application to verify that their treatment technology and equipment 
have been validated by a Board-approved process authority. Such 
documentation may include, but not be limited to, a letter from such 
process authority certifying the validation. Such documentation shall 
be sufficient to demonstrate that the treatment processes and equipment 
achieve a 4-log reduction in Salmonella bacteria. Treatment technology 
and equipment that have been modified to a point where operating 
parameters such as time, temperature, or volume change, shall be 
revalidated;
    (D) Have their technology and procedures verified by a Board-
approved DV auditor to ensure they are being applied appropriately. A 
DV auditor may not be an employee of the manufacturer that he/she is 
auditing. DV auditors must submit a report to the Board after 
conducting each audit. DV auditors must submit an initial application 
to the Board on ABC Form No. 53, ``Application for Direct Verifiable 
(DV) Program Auditors,'' and be approved by the TERP. Should the 
applicant disagree with the TERP's decision concerning approval, it may 
appeal the decision in writing to the Board, and ultimately to USDA. 
For subsequent crop years, approved DV auditors with no changes to 
their initial application must send the Board a letter, signed and 
dated, indicating that there are no changes to the application the 
Board has on file. The TERP may revoke any approval for cause. The TERP 
shall notify the DV auditor in writing of the reasons for revoking the 
approval. Should the DV auditor disagree with the TERP's decision, it 
may appeal the decision in writing to the Board, and ultimately to 
USDA. A DV auditor whose approval has been revoked must submit a new 
application to the TERP and await approval;
    (E) Maintain all records regarding validation and verification of 
treatment methods, processing, and product traceability. Such records 
shall be retained for two years and shall be made available for review 
by the Board; and,
    (F) Ship any almonds which will not be treated to a handler, to 
another approved DV user, to locations outside the U.S., Canada, and 
Mexico (containers must remain identified with the term 
``unpasteurized''), as specified in Sec.  981.442(b)(6)(i), or dispose 
of such almonds in non-edible channels.
    (ii) Handlers may ship untreated almonds directly or through a 
third party to locations outside the U.S., Canada, and Mexico, provided 
that each container of such almonds is identified with the term 
``unpasteurized.'' Such lettering shall be on one outside principal 
display panel, at least \1/2\ inch in height, clear and legible. If a 
third party is involved in the transaction, the handler must provide 
sufficient documentation to the Board to track the shipment from the 
handler's facility to the importer in the foreign country.
    (7) Other restrictions. The provisions of this section do not 
supersede any restrictions or prohibitions regarding almonds grown in 
California under the Federal Food, Drug and Cosmetic Act,

[[Page 15036]]

or any other applicable laws or regulations or the need to comply with 
applicable food and sanitary regulations of city, county, State or 
Federal agencies.

    Dated: March 26, 2007.
Lloyd C. Day,
Administrator, Agricultural Marketing Service.
[FR Doc. 07-1557 Filed 3-27-07; 10:50 am]
BILLING CODE 3410-02-P


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