38498 Federal Register / Vol. 72, No. 134 / Friday, July 13, 2007 / Proposed Rules 

This proposed rule would impose no 

additional reporting or recordkeeping 

requirements on either small or large 

Washington apricot handlers. 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. 

Furthermore, USDA has not identified 

any relevant Federal rules that 

duplicate, overlap, or conflict with this 

rule. 

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. 

A small business guide on complying 

with fruit, vegetable, and specialty crop 

marketing agreements and order 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. 

A 10-day comment period is provided 

to allow interested persons to respond 

to this proposed rule. Ten days is 

deemed appropriate because: (1) The 

2007–2008 fiscal period began on April 

1, 2007, and the order requires that the 

assessment rate for each fiscal period 

apply to all assessable apricots handled 

during such fiscal period; (2) the 

Washington apricot harvest and 

shipping season is expected to begin as 

early as the last week of June; (3) the 

Committee needs to have sufficient 

funds to pay its expenses, which are 

incurred on a continuous basis; and (4) 

handlers are aware of this action, which 

was recommended by the Committee at 

a public meeting and is similar to other 

assessment rate actions issued in past 

years. 

List of Subjects in 7 CFR Part 922 

Apricots, Marketing agreements, 

Reporting and recordkeeping 

requirements. 

For the reasons set forth in the 

preamble, 7 CFR part 922 is proposed to 

be amended as follows: 

PART 922—APRICOTS GROWN IN 

DESIGNATED COUNTIES IN 

WASHINGTON 

1. The authority citation for 7 CFR 

part 922 continues to read as follows: 

Authority: 7 U.S.C. 601–674. 

2. Section 922.235 is revised to read 

as follows: 

§ 922.235 Assessment rate. 

On or after April 1, 2007, an 

assessment rate of $1.50 per ton is 

established for the Washington Apricot 

Marketing Committee. 

Dated: July 9, 2007. 

Lloyd C. Day, 

Administrator, Agricultural Marketing 

Service. 

[FR Doc. E7–13581 Filed 7–12–07; 8:45 am] 

BILLING CODE 3410–02–P 

DEPARTMENT OF AGRICULTURE 

Agricultural Marketing Service 

7 CFR Part 984 

[Docket No. AMS–FV–07–0004; AO–192–A7; 

FV06–984–1] 

Walnuts Grown in California; 

Secretary’s Decision and Referendum 

Order on Proposed Amendment of 

Marketing Agreement and Order No. 

984 

AGENCY: Agricultural Marketing Service, 

USDA. 

ACTION: Proposed rule and referendum 

order. 

SUMMARY: This decision proposes 

amendments to Marketing Order No. 

984, which regulates the handling of 

walnuts grown in California (order), and 

provides growers with the opportunity 

to vote in a referendum to determine if 

they favor the changes. The 

amendments were proposed by the 

Walnut Marketing Board (Board), which 

is responsible for local administration of 

the order. The amendments would: 

change the marketing year; include 

‘‘pack’’ as a handler function; 

restructure the Board and revise 

nomination procedures; rename the 

Board and add authority to change 

Board composition; modify Board 

meeting and voting procedures; add 

authority for marketing promotion and 

paid advertising; add authority to accept 

voluntary financial contributions and to 

carry over excess assessment funds; 

broaden the scope of the quality control 

provisions and add the authority to 

recommend different regulations for 

different market destinations; add 

authority for the Board to appoint more 

than one inspection service; replace 

outdated order language with current 

industry terminology; and other related 

amendments. 

The Department of Agriculture 

(USDA) proposed three additional 

amendments: To establish tenure 

limitations for Board members, to 

require that continuance referenda be 

conducted on a periodic basis to 

ascertain producer support for the order, 

and to make any necessary conforming 

changes. 

The proposed amendments are 

intended to improve the operation and 

functioning of the marketing order 

program. 

DATES: The referendum will be 

conducted from August 1 to 17, 2007. 

The representative period for the 

purpose of the referendum is August 1, 

2006, through July 31, 2007. 

FOR FURTHER INFORMATION CONTACT: 

Melissa Schmaedick, 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: 

Melissa.Schmaedick@usda.gov. 

Small businesses may request 

information on this proceeding by 

contacting Jay Guerber, Marketing Order 

Administration Branch, Fruit and 

Vegetable Programs, AMS, USDA, 1400 

Independence Avenue, SW., STOP 

0237, Washington, DC 20250–0237; 

telephone: (202) 720–2491, Fax: (202) 

720–8938, or e-mail: 

Jay.Guerber@usda.gov. 

SUPPLEMENTARY INFORMATION: Prior 

documents in this proceeding: Notice of 

Hearing issued on April 18, 2006, and 

published in the April 24, 2006, issue of 

the Federal Register (71 FR 20902) and 

a Recommended Decision issued on 

March 19, 2007, and published in the 

March 27, 2007, issue of the Federal 

Register (72 FR 14368). 

This action is governed by the 

provisions of sections 556 and 557 of 

Title 5 of the United States Code and, 

therefore, is excluded from the 

requirements of Executive Order 12866. 

Preliminary Statement 

The proposed amendments are based 

on the record of a public hearing held 

on May 17 and 18, 2006, in Modesto, 

California. The hearing was held to 

consider the proposed amendment of 

the order. The hearing was held 

pursuant to the provisions of the 

Agricultural Marketing Agreement Act 

of 1937, as amended (7 U.S.C. 601 et 

seq.) hereinafter referred to as the ‘‘Act,’’

and the applicable rules of practice and 

procedure governing the formulation of 

marketing agreements and marketing 

orders (7 CFR Part 900). 

Notice of this hearing was published 

in the Federal Register on April 24, 

2006 (71 FR 20902). The notice of 

hearing contained proposals submitted 

by the Walnut Marketing Board (Board), 

which is responsible for local 


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administration of the order, and by the 

Agricultural Marketing Service (AMS). 

The proposed amendments to 

marketing order 984 would: 

1. Change the marketing year from 

August 1 through July 31 to September 

1 through August 31. This proposal 

would amend § 984.7, Marketing year, 

and would result in conforming changes 

being made to § 984.36, Term of office, 

and § 984.48, Marketing estimates and 

recommendations. 

2. Specify that the act of packing 

walnuts is considered a handling 

function. This proposal would amend 

§ 984.13, to handle, as well as clarify the 

definition of ‘‘pack’’ in § 984.15 by 

including the term ‘‘shell’’ as a function 

of ‘‘pack.’’

3. (a) Amend all parts of the order that 

refer to cooperative seats on the Board, 

redistribute member seats among 

districts, and provide designated seats 

for a handler handling 35 percent or 

more of production, if such handler 

exists. This proposal would amend 

§ 984.35, Walnut Marketing Board, and 

§ 984.14, Handler. 

3. (b) Amend the Board member 

nomination process to reflect proposed 

changes in the Board structure, as 

outlined in 3(a). This proposal would 

amend § 984.37, Nominations, and 

§ 984.40, Alternate. 

4. Require Board nominees to submit 

a written qualification and acceptance 

statement prior to selection by USDA. 

This proposal would amend § 984.39, 

Qualify by acceptance. 

5. Change the name of the Walnut 

Marketing Board to the California 

Walnut Board. This proposal would 

amend § 984.6, Board, and § 984.35, 

Walnut Marketing Board. 

6. Add authority to reestablish 

districts, reapportion members among 

districts, and revise groups eligible for 

representation on the Board. This 

proposal would add a new paragraph (d) 

to § 984.35, Walnut Marketing Board. 

7. Add percentage requirements to 

Board quorum and voting requirements, 

add authority for the Board to vote by 

‘‘any other means of communication’’

(including facsimile) and add authority 

for Board meetings to be held by 

telephone or by ‘‘any other means of 

communication’’, providing that all 

votes cast at such meetings shall be 

confirmed in writing. This proposal 

would amend § 984.45, Procedure, and 

would result in a conforming change in 

§ 984.48(a), Marketing estimates and 

recommendations. 

8. Add authority to carry over excess 

assessment funds. This proposal would 

amend § 984.69, Assessments. 

9. Add authority to accept voluntary 

financial contributions. This proposal 

would add a new § 984.70, 

Contributions. 

10. Clarify that members and alternate 

members may be reimbursed for 

expenses incurred while performing 

their duties and that reimbursement 

includes per diem. This proposal would 

amend § 984.42, Expenses. 

11. Add authority for the Board to 

appoint more than one inspection 

service as long as the functions 

performed by each service are separate 

and do not duplicate each other. This 

proposal would amend § 984.51, 

Inspection and certification of in-shell 

and shelled walnuts. 

12. (a) Broaden the scope of the 

quality control provisions by adding 

authority to recommend different 

regulations for different market 

destinations. This proposal would 

amend § 984.50, Grade and size 

regulations. 

12. (b) Add authority that would 

allow for shelled walnuts to be 

inspected after having been sliced, 

chopped, ground, or in any other 

manner changed from shelled walnuts, 

if regulations for such walnuts are in 

effect. This proposal would amend 

§ 984.52, Processing of shelled walnuts. 

13. Add authority for marketing 

promotion and paid advertising. This 

proposal would amend § 984.46, 

Research and development. 

14. Replace the terms ‘‘carryover’’

with ‘‘inventory,’’ and ‘‘mammoth’’ with 

‘‘jumbo,’’ to reflect current day industry 

practices. This proposal would amend 

§ 984.21, Handler inventory, and 

§ 984.67, Exemption, and would also 

result in conforming changes being 

made to § 984.48, Marketing estimates 

and recommendations, and § 984.71, 

Reports of handler carryover. 

15. (a) Clarify to simplify the 

interhandler transfer provision, and add 

authority for the Board to recommend to 

USDA regulations, including necessary 

reports, for administrative oversight of 

such transfers. This proposal would 

amend § 984.59, Interhandler transfers. 

15. (b) Clarify that the Board may 

require reports from handlers or packers 

that place California walnuts into the 

stream of commerce. This proposal 

would amend § 984.73, Reports of 

walnut receipts. 

16. Update and simplify the language 

in § 984.22, Trade demand, to state 

‘‘United States and its territories,’’

rather than name ‘‘Puerto Rico’’ and 

‘‘The Canal Zone’’. 

17. Amend the order by adding 

language that would acknowledge that 

the Board may deliberate, consult, 

cooperate, and exchange information 

with the California Walnut Commission. 

Any information sharing would be kept 

confidential. This would add a new 

§ 984.91, Relationship with the 

California Walnut Commission. 

In addition, USDA proposed adding 

two provisions that would help assure 

that the operation of the program 

conforms to current Department policy 

and that USDA can make any necessary 

conforming changes. These provisions 

would: 

18. Establish tenure requirements for 

Board members. This proposal would 

amend § 984.36, Term of office. 

19. Require that continuance 

referenda be conducted on a periodic 

basis to ascertain industry support for 

the order and add more flexibility in the 

termination provisions. This proposal 

would amend § 984.89, Effective time 

and termination. 

20. Make changes as may be necessary 

to the order, if any of the proposed 

changes are adopted, so that all of the 

order’s provisions conform to the 

effectuated amendments. To the extent 

necessary, conforming changes have 

made to the amendments. These 

conforming changes have been 

identified in the above list of proposed 

amendments. 

Upon the basis of evidence 

introduced at the hearing and the record 

thereof, the Administrator of AMS on 

March 19, 2007, filed with the Hearing 

Clerk, U.S. Department of Agriculture, a 

Recommended Decision and 

Opportunity to File Written Exceptions 

thereto by April 16, 2007. 

Fifteen exceptions were filed during 

the exception period. The exceptions 

expressed concern over the discussion 

in the Recommended Decision regarding 

Material Issue No. 11. This proposal 

would add authority for the Board to 

appoint more than one inspection 

service as long as the functions 

performed by each service are separate 

and do not duplicate each other. 

Comments stated that, if this authority 

were implemented, private sector 

entities, in addition to USDA, should be 

able to offer non-traditional inspection 

services. Persons filing these comments 

claimed that the proposed amendatory 

language would prevent any service 

other than USDA from offering nontraditional inspection. The specifics of 

these exceptions are further discussed 

in the Findings and Conclusions; 

Discussion of Exceptions section of this 

document. One of the exceptions also 

offered a comment of general support 

for the proposal to implement term 

limits as a method to encourage 

participation of industry members that 

have not previously served on the 

Board. 


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Small Business Considerations 

Pursuant to the requirements set forth 

in the Regulatory Flexibility Act (RFA), 

the Agricultural Marketing Service 

(AMS) has considered the economic 

impact of this action on small entities. 

Accordingly, AMS has prepared this 

final regulatory flexibility analysis. 

The purpose of the RFA is to fit 

regulatory actions to the scale of 

business subject to such actions so that 

small businesses will not be unduly or 

disproportionately burdened. Marketing 

orders and amendments thereto are 

unique in that they are normally 

brought about through group action of 

essentially small entities for their own 

benefit. 

Small agricultural growers are defined 

by the Small Business Administration 

(SBA) (13 CFR 121.201) as those having 

annual receipts of less than $750,000. 

Small agricultural service firms, which 

include handlers regulated under the 

order, are defined as those with annual 

receipts of less than $6,500,000. 

Interested persons were invited to 

present evidence at the hearing on the 

probable regulatory and informational 

impact on growers and handlers of the 

proposed amendments, and in 

particular the impact on small 

businesses. The record evidence shows 

that the proposed amendments are 

designed to enhance industry 

efficiencies and streamline 

administrative operations of the 

marketing order. The record evidence is 

that while some minimal costs may 

occur, those costs would be outweighed 

by the benefits expected to accrue to the 

California walnut industry. 

Walnut Industry Background and 

Overview 

According to the record, the 

California walnut industry currently has 

44 handlers and approximately 5000 

producers. The crop is produced in a 

region that spans approximately 400 

miles in California’s Central Valley. 

Fifteen grower witnesses and 7 

handler witnesses testified at the 

hearing. Using the SBA definition 

($750,000 in gross annual walnut sales), 

7 of the grower witnesses identified 

themselves as large business entities 

and 6 as small business entities. All 7 

handler witnesses identified themselves 

as being large business entities 

according to the SBA definition. Some 

of the handler witnesses were also 

growers. According to witnesses, 37 out 

of an industry total of 44 handlers 

would qualify as small business entities 

under the SBA definition. Also, under 

the order amendments contained herein, 

it is estimated that five packers would 

be considered handlers, the majority of 

whom would be considered small 

entities. 

Based on information presented at the 

hearing, calculations describing an 

average California walnut producer 

provide the following: Dividing 219,000 

bearing acres in 2005 by 5,000 

producers indicates an average of 44 

bearing acres per producer. Dividing the 

two-year average crop value for 2003 

and 2004 ($414,950,000) by 5,000 

producers yields an average walnut 

revenue per producer estimate of about 

$83,000. According to the hearing 

record, more than 70 percent of 

California walnut producers would be 

classified as small producers according 

to the SBA definition. 

According to a study presented at the 

hearing, entitled ‘‘Cost to Produce 

Walnuts in California’’ (prepared by Dr. 

Karen Klonsky, Department of 

Agriculture and Resource Economics, 

University of California Davis, 2006), 

typical average costs for a walnut 

orchard in the Sacramento Valley are 

$2,460 per acre in full production. The 

costs are broken down as follows: (a) 

Land and trees, $678 (28 percent), (b) 

cultural costs, $667 (27 percent), (c) 

harvest, $538 (22 percent), (d) 

equipment and buildings, $302 (12%), 

and (e) cash overhead, $275 (11 

percent). 

At an average grower price in recent 

years of $0.62 per pound, a grower 

would need a yield of 2 tons per acre 

to break even, according to the study. 

The breakeven price at the State average 

yield of 1.5 tons per acre is about $0.70 

per pound, which is above the actual 

price received in most recent years, but 

equal to the 2004 average price received 

by growers. 

Individual grower costs can vary 

considerably due to such variables as 

horticultural practices and varieties 

grown, and also due to orchard location 

and year of acquisition, and water 

availability and cost. 

Although a majority of producers are 

considered small business entities, 

record evidence also indicates that 

producer revenue has increased over 

time. The National Agricultural 

Statistical Service (NASS) crop value 

estimate for 2004, $451.75 million, was 

38 percent higher than in 1995, and was 

the sixth successive yearly increase. 

Average revenue per acre in 2004 

reached a record $2,082. 

Record evidence also indicates that 

acreage and production are trending 

upward. Production did not exceed 

300,000 tons until 2001, but has 

exceeded that level for 4 out of the last 

5 years. Witnesses stated that the fiveyear average production for 1996–2000 

was 244,000 tons, compared to the fiveyear average production (2001–2005), 

which was 318,600 inshell tons. 

According to the hearing record, a 

number of factors have contributed to 

increased production in recent years. 

New acres have been planted at a rate 

of three to five thousand acres per year, 

some of which are new varieties with 

higher yields. Witnesses explained that 

older varieties may yield 1,500 to 3,000 

pounds per acre, due to both planting 

patterns and the typical yield of the 

variety. New varieties, such as the 

Chandler, will yield up to 6,000 pounds 

per acre. Newer plantings have led to a 

reduction in the cyclical peaks and 

valleys associated with the alternatebearing characteristic of tree nuts. This, 

in turn, has facilitated better inventory 

management and has made the walnut 

industry a more reliable ingredient 

supplier to the food-processing 

industry. 

According to the hearing record, the 

growing season commences in March of 

each year with harvest occurring 

between September and November, 

depending upon the variety. Inshell 

California walnuts are a seasonal item 

with 95 percent of the volume shipped 

between the months of September and 

December. This represents roughly 25 

percent of the industry’s production. 

Inshell walnuts are marketed primarily 

as a winter holiday food. According to 

the hearing record, the purchase of 

significant quantities of inshell walnuts 

occurs due to the tradition in many 

markets of displaying them with other 

inshell nuts as part of winter holiday 

decor. 

Shelled walnuts are marketed on a 

year-round basis, and represent about 75 

percent of utilization. Large handler 

infrastructure investments have 

contributed substantially to the growth 

of the year-round shelled business, as 

well as the inshell business. 

Over the past ten years sophisticated 

laser-sorting equipment and new 

varieties such as the Chandler have 

contributed to improved quality. Higher 

customer expectations have 

accompanied the improvements in 

technology and quality, with more 

demand for high-quality, highspecification California walnuts. 

Marketing success in Japan is cited as a 

prime example of this trend. 

According to the hearing record, 

shelled walnuts are utilized in a variety 

of ways, with commercial baking 

believed to be the single largest 

utilization category. Retail consumption 

of walnuts packaged for use in the home 

has increased dramatically over the past 

several years. Shelled walnuts may be 

sold in packages ranging from 2.75 


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ounce retail packages to large bulk 

containers of 25 pounds or more for 

industrial users, wholesalers, and 

distributors. The last 12 years have seen 

substantial increases in snack food uses 

of walnuts, in addition to expansion of 

ingredient use beyond baking and 

confectionery items to include usage 

with salads, rice, and pasta. 

A high degree of mechanization in the 

harvest has reduced the deleterious 

impact on nut quality from rain and 

other weather conditions. Once 

harvested, walnuts are taken to holding 

stations where a fibrous husk is 

removed, and the walnuts are then dried 

to approximately eight percent 

moisture. They are delivered to handlers 

for further processing, which includes 

cleaning, sorting, and shelling. 

According to the hearing record, 

California walnuts rank eighth in 

exports over all the commodities grown 

in the state. The top three inshell export 

markets are Spain, Italy, and Germany. 

Five-year average export value (2000/ 

01–2004/05) is approximately $52 

million, representing 63 percent of total 

export value for that five-year period. 

The key export markets for shelledwalnut utilization are: Japan, Germany, 

Spain, Israel, Korea, and Canada. Fiveyear average export value for those six 

countries is $91.8 million, which is 

about 76 percent of the total value of 

shelled walnut exports. 

California walnuts compete with 

walnuts grown in China, Turkey, 

France, Italy, Chile, North Korea, India, 

Vietnam, Argentina, Brazil, and many 

areas within the former Soviet Union 

including Kazakhstan, Ukraine, 

Hungary, and Moldova. Within the 

European Union the major competition 

comes from France and Eastern Europe. 

In the Pacific Rim, major competitors 

include China and India. 

Material Issues 

The amendments included in this 

decision would: Change the marketing 

year; include ‘‘pack’’ as a handler 

function; restructure the Board and 

revise nomination procedures; rename 

the Board and add authority to change 

Board composition; modify Board 

meeting and voting procedures; add 

authority for marketing promotion and 

paid advertising; add authority to accept 

contributions, and to carry over excess 

assessment funds; broaden the scope of 

the quality control provisions and add 

the authority to recommend different 

regulations for different market 

destinations; add authority for the Board 

to designate more than one inspection 

service; replace outdated order language 

with current industry terminology; and 

other related amendments. 

The USDA proposed three additional 

amendments: To establish tenure 

limitations for Board members, to 

require that continuance referenda be 

conducted on a periodic basis to 

ascertain producer support for the order, 

and to make any changes to the order as 

may be necessary to conform with any 

amendment that may result from the 

hearing. 

All of the proposals are intended to 

streamline and improve the 

administration, operation, and 

functioning of the program. Many of the 

proposed amendments would update 

the language of the order, thus better 

representing and conforming to current 

practices in the industry. The proposed 

amendments are not expected to result 

in any significant cost increases for 

growers or handlers. More efficient 

administration of program activities 

may result in cost savings for the Board. 

A description of the proposed 

amendments and their anticipated 

economic impact on large and small 

entities is outlined below. 

Designation of More Than One 

Inspection Service 

Proposal 11 would amend the order to 

add authority for the Board to designate 

more than one inspection service, as 

long as the functions performed by each 

service are separate and do not conflict 

with each other. 

To ensure that walnuts are properly 

graded and meet marketing order 

minimum standards, the Board 

currently arranges for inspection of 

walnuts prior to shipping for all walnut 

handlers. The marketing order currently 

authorizes contracting with one agency, 

the California based Dried Fruit and Nut 

Association (DFA). 

DFA inspects all walnuts that leave 

California to certify that they meet 

marketing order minimum standards. 

Operating as an out-going inspection 

service, samples of packed walnuts are 

examined and certified by licensed DFA 

inspectors at the end of the handling 

and packing process. 

The following data representing 

current inspection costs, summarizing 

actual inspection cost data for 2004–05 

for the entire industry (44 handlers), 

was presented at the hearing by Board 

representatives. According to the record, 

the 2004–05 cost to serve the 44 

handlers was $1.857 million, which is 

an average cost of just over $42,000 per 

handler. 

Since inspection costs depend largely 

on volume handled, the four largest 

handlers account for $1.282 million, or 

69% of total inspection expenditure in 

the 2004–05 crop year. The 37 smaller 

handlers account for $412,172 in 

expenditure, about 22 percent of the 

total, averaging about $11,000 per 

handler. 

ANNUAL WALNUT INSPECTION COSTS USING DFA, 2004–05 CROP YEAR

DFA cost No. 

handlers 

Average per 

handler 

Largest Handlers ..................................................................................................................................... $1,282,362 4 $320,591 

Additional Large Handlers ....................................................................................................................... 162,487 3 54,162 

Other Handlers ........................................................................................................................................ 412,172 37 11,140 

All Handlers ............................................................................................................................................. 1,857,021 44 42,205 

Source: Walnut Marketing Board 

The Federal-State Inspection Service 

(FSIS) has developed effective, less 

costly alternative inspection programs. 

The Partners in Quality Program, or 

PIQ, is a documented quality assurance 

system. Under this program, individual 

handlers must demonstrate and 

document their ability to handle and 

pack product that meets all relevant 

quality requirements. Effectiveness of 

the program is verified through 

periodic, unannounced audits of each 

handler’s system by USDA-approved 

auditors. 

Under the Customer-Assisted 

Inspection Program, or CAIP, USDA 

inspectors oversee the in-line sampling 

and inspection process performed by 

trained company staff. USDA oversight 

ranges from periodic visits throughout 

the day to a continuous on-site 

presence. 

DFA does not offer inspection 

services that operate similarly to the PIQ 

and CAIP programs. 

Cost savings would occur by reducing 

the prevalence of double inspections 


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under the current system. Currently, one 

inspection is undertaken to meet 

minimum USDA quality requirements 

specified in the marketing order. A 

second inspection is often necessary to 

meet the considerably higher standards 

of specific customers. Moving to a PIQ 

or CAIP program would greatly reduce 

inspection costs, because meeting 

higher standards under PIQ or CAIP 

would also ensure that an inspected lot 

met minimum marketing order 

standards. 

Witnesses at the hearing testified that 

the California walnut industry should 

allow handlers to take advantage of 

USDA’s alternative inspection programs 

such as the CAIP and the PIQ. Handlers 

who do not wish to use the alternative 

inspection services offered by USDA 

would continue to use the services of 

the DFA for traditional inspection 

services, such as end-line and lot 

inspections. 

The proposal also specifies that ‘‘each 

service shall be separate so as to not 

conflict with each other,’’ meaning that 

each inspection service would offer 

distinct and different services (i.e. PIQ 

vs. lot inspections) so that the integrity 

of both programs can be maintained. 

Witnesses speaking in favor of this 

proposal explained the importance of a 

handler’s ability to take advantage of 

inspection services that would most 

economically fit the size and functions 

of his or her operation. Currently, all 

walnut product is inspected by DFA. 

While this inspection service has 

worked well for the industry for many 

years, the DFA inspection service does 

not accommodate inspection procedures 

that support larger handler economies of 

scale. Witnesses stated that USDA 

programs, such as PIQ and CAIP, are 

designed to fit larger scale handling 

operations, and therefore offer cost 

saving advantages that the DFA service 

does not. This proposal, if implemented, 

would allow handlers to use the 

alternative inspection programs offered 

by USDA. 

Several witnesses indicated that 

lowering costs to handlers would 

benefit growers because they expect that 

the cost reduction would be reflected in 

increased payments to growers. 

Financial impact calculations 

provided by the Board (shown in the 

table below) indicate that introducing 

the option of using PIQ or CAIP 

programs could result in savings of 

$1.09 million, an average per handler 

savings of $156,067 for the industry’s 

seven largest handlers. Due to the high 

volumes handled, most of the savings 

accrue to the four largest handlers, 

estimated at $1.05 million, or an average 

per handler of $263,169. 

WALNUT INSPECTION COST COMPARISON: DFA VS. USDA FOR TOP 7 HANDLERS

DFA USDA 

PIQ/CAIP 

Cost savings 

Total Per handler 

Largest 4 handlers ........................................................................................... $1,282,362 $229,688 $1,052,674 $263,169 

Additional 3 large handlers .............................................................................. 162,487 122,692 39,795 13,265 

Largest 7 handlers ........................................................................................... 1,444,849 352,380 1,092,469 156,067 

Source: Walnut Marketing Board. 

Data from NASS indicate that the twoyear average value of the 2003 and 2004 

crops was about $415 million. The 

current DFA inspection cost ($1.857 

million) represents a very small 

proportion of crop value, about 0.4 

percent. If the largest 7 handlers used 

USDA for inspection at a cost of 

$352,380 and the remaining 37 handlers 

continue to work with DFA at an 

estimated cost of $412,172, then the 

combined cost of $764,552 would 

represent 0.2 percent of the recent-year 

crop value. 

Witnesses emphasized the cost 

effectiveness of having an additional 

inspection agency. If implemented, this 

proposal would facilitate the 

streamlining of handler operations to 

utilize the inspection service best suited 

to their operations. 

Since potential savings are correlated 

with economies of scale, record 

evidence indicates that PIQ and CAIP 

programs would be most beneficial for 

large handlers. It is unlikely that the 

smaller handlers would initially opt for 

these programs. Smaller handlers that 

expand their operations in the future 

may realize benefits from switching to 

PIQ or CAIP. Witnesses stated that no 

change in inspection costs is expected 

for handlers remaining with traditional 

DFA inspection services. Therefore, no 

financial disadvantages are expected to 

result from this proposed amendment. If 

implemented, this proposal may result 

in an overall decrease in costs of 

inspection to the industry. 

Inspection of Sliced, Chopped or 

Ground Shelled Walnuts 

Proposal 12b would add authority for 

shelled walnuts to be inspected after 

having been sliced, chopped, or ground 

or in any manner changed from being 

shelled walnuts, if regulations for such 

walnuts are in effect. 

New walnut product forms are 

regularly requested by both domestic 

and foreign customers. In the last 20 

years, the industry has become much 

more capable of producing at a 

considerably higher level quality and of 

developing more specific types of 

products that meet the differing needs of 

individual customers. To capitalize on 

this growing capability, a number of 

witnesses expressed the view that an 

important tool for increasing sales is the 

ability to establish standards for these 

walnut products. 

The order currently requires shelled 

product to be certified as merchantable, 

that is, meeting the minimum USDA 

requirements prior to further processing. 

When handlers are processing for end 

users that require further processing, 

this certification represents a costly 

extra step. After the initial shelled 

walnut certification, the handlers 

employ their own quality control 

procedures to meet the higher customer 

specifications. This proposal would 

allow a single inspection at the end of 

the process that would serve both 

purposes. If implemented, this proposal 

would allow the Board to recommend 

modifications to allow certification of 

product after it has been modified or 

chopped, leading to cost savings in the 

handling process. 

Witnesses contended that current 

standards focus on visually observed 

characteristics that are significant for 

consumer acceptance, but often do not 

adequately address specific quality 

concerns important to various export 

markets, including Europe. Such 

concerns include, for example, moisture 

content or aflatoxin tolerances. If 

implemented, this proposal would 

allow the Board to review scientific data 

and develop inspection procedures for 

recommendation and approval by USDA 

to assure customers that walnuts meet 

their specified criteria. 


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Any new quality standards 

recommended by the Board would be 

subject to thorough review prior to 

seeking approval from USDA. Witnesses 

supported this amendment as it would 

give the Board authority to pursue 

quality regulations in addition to 

existing grade standards, both of which 

are important to industry customers. 

Witnesses emphasized that this 

proposal would grant authority to the 

Board to recommend quality standards 

that could exceed current standards or 

to develop new standards for product 

characteristics not currently covered. 

Witnesses also stated that no specific 

modifications are currently requested, 

just flexibility to create them in the 

future. 

While this proposed amendment may 

result in some cost increases associated 

with administration and oversight of 

new quality regulations, it is also 

expected that some handlers may 

benefit from lower inspection costs if 

the inspection requirements for specific 

markets were modified. Any costs 

associated with the implementation of 

this proposal are expected to be 

outweighed by the overall benefits 

accrued to the industry. 

Marketing Promotion and Paid 

Advertising. 

Proposal 13 would amend the order 

by adding authority for marketing 

promotion and paid advertising. 

Current promotional activities for 

California walnuts are undertaken by 

the California Walnut Commission 

(CWC). Witnesses stated that the CWCs 

activities have led to considerable 

success in increasing demand for the 

industry’s product. 

Witnesses explained that with price 

inelastic demand for walnuts, recent 

increases in production could have 

driven down prices and total grower 

revenue. The CWC’s successful 

promotional activities have helped 

mitigate that potential impact, keeping 

average grower prices and grower 

revenue steady or increasing for several 

years. 

According to the hearing record, 

adding authority for paid advertising 

and promotion under the order would 

benefit the industry by allowing the 

Board to engage in activities that are 

currently supported by the Commission. 

Small businesses would be the greatest 

beneficiaries of an expanded generic 

advertising program, because they have 

the least financial resources to devote to 

selling their products, according to a 

witness. 

While an increase in advertising and 

promotional activities may result in 

increased Board expenditures, witnesses 

were confident that the positive results 

of the Board’s promotional activities on 

consumer demand for California 

walnuts would more than outweigh any 

increases in costs to the industry. 

Impact of Remaining Amendment 

Proposals 

Remaining amendment proposals are 

largely administrative in nature and 

would impose no new significant 

regulatory burdens on California walnut 

growers or handlers. They should 

benefit the industry by improving the 

operation of the program and making it 

more responsive to industry needs. 

Marketing Year 

Proposal 1 would amend the order to 

change the marketing year from August 

1 through July 31 to September 1 

through August 31. Under the current 

definition of the order, the California 

walnut marketing year begins August 1 

and continues through July 31. 

Witnesses explained that, over time, 

new varieties of walnuts have been 

introduced, and the areas in which 

walnuts are cultivated have shifted. The 

newer varieties mature later than the 

varieties grown at the time of the 

program’s inception. At the same time, 

cultivation has slowly moved into areas 

that previously were not suited for 

walnut production. With differences in 

climate, soil, and water, witnesses 

explained that these new production 

areas have slightly later growing cycles. 

The proposed change in the marketing 

year would better reflect current crop 

cycles. 

Proposed conforming changes would 

ensure that Board member terms of 

office and marketing estimates 

calculated by the Board would conform 

to the modified marketing year. This 

amendment is not expected to result in 

any increases in costs to growers or 

handlers. 

Definition of Pack 

Proposal 2 would amend the order by 

specifying that the act of packing 

walnuts is considered a handling 

function. In addition, the term ‘‘pack’’

would be amended to include shelling, 

and would be modified so that packing 

is applicable to both inshell and shelled 

walnuts. 

According to the hearing record, the 

order currently defines ‘‘to handle’’ as to 

‘‘sell, consign, transport, or ship, or in 

any other way, to put walnuts into the 

current of commerce’’. The definition 

does not include the specific act of 

packing. ‘‘To pack’’, as currently 

defined in the order means, ‘‘to bleach, 

clean, grade or otherwise prepare 

inshell walnuts for market’’. Pack is not 

currently applicable to shelled walnuts. 

Witnesses stated that the proposed 

amendments to the definitions of 

‘‘handle’’ and ‘‘pack’’ would more 

accurately reflect current industry 

operations. 

This amendment is not expected to 

result in any increases in costs to 

growers. If implemented, this proposal 

may result in some packing entities 

previously not considered to be 

handlers under the order to be redefined 

as handlers. According to witnesses, 

there are roughly five packer entities 

that would qualify as handlers under 

the new definition. While some 

increases in administration costs on the 

part of handlers could arise as a result 

of reporting requirements, record 

evidence indicates that the benefit of 

more accurate industry information 

would merit that expense. 

Restructuring of the Board 

Proposal 3(a) seeks to amend all parts 

of the order that refer to cooperative 

seats on the Board, to redistribute 

member seats among districts, and to 

provide designated seats for a major 

handler, if such handler existed. A 

major handler would have to handle 35 

percent or more of the crop. 

According to the hearing record, the 

recent transition of the industry’s largest 

cooperative from a cooperative entity to 

a publicly held company was the 

impetus for this proposal. Witnesses 

expressed the need to modify the Board 

structure to provide for representation 

that accurately reflects the current 

industry. Witnesses advocated that the 

Board structure should maintain the 

current number of Board members and 

alternates, and that the allocation of 

member seats between grower and 

handler positions should remain the 

same (meaning 4 handler member seats, 

five grower member seats and one 

public member). 

Witnesses also recommended 

modifying the allocation of Board 

representation according to two possible 

scenarios. The two scenarios include: 

(1) Membership allocation that 

acknowledges the existence of a handler 

handling 35 percent or more of 

production and, (2) membership 

allocation in the absence of such 

handler. According to record evidence, 

these proposed amendments would not 

result in any increases in costs. 

Nominations 

Proposal 3(b) would amend the Board 

member nomination process to reflect 

proposed changes in the Board 

structure, as outlined in 3(a). Current 

nomination procedures allow for all 

cooperative seat nominees to be selected 


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by the cooperative and forwarded to the 

Secretary for approval and appointment. 

The cooperative nominee selection 

process is independent of the Board. All 

non-cooperative seat nominees are 

selected through a ballot nomination 

process overseen by the Board staff, and 

forwarded to the Secretary for approval 

and appointment. 

According to the hearing record, the 

revised nomination procedures would 

allow a handler who handles 35 percent 

or more of the crop to nominate persons 

to fill its designated seats (as described 

in 3(a)) and to forward them to the 

Secretary for approval and appointment. 

Nomination of persons to fill all other 

seats would be conducted by the Board 

staff. 

In the event a handler handling 35 

percent or more of the crop does not 

exist, all Board nominees would be 

selected through a ballot nomination 

process conducted by the Board staff. 

While some increases in 

administration costs could arise as a 

result of an increased number of ballots 

to be mailed by the Board if a major 

handler does not exist, record evidence 

indicates that the expense would be 

minor and would not directly burden 

growers or handlers. 

Qualify by Acceptance 

Proposal 4 would require Board 

nominees to submit a written 

qualification and acceptance statement 

prior to selection by USDA. Currently, 

the acceptance procedure for persons 

nominated and selected to serve on the 

Board involves a two-step process. If 

this amendment were implemented, the 

two steps could be combined into one, 

thus resulting in less paperwork, a 

shorter acceptance procedure and 

improved efficiency in the acceptance 

process. This amendment is not 

expected to result in any increases in 

costs to growers or handlers. 

California Walnut Board 

Proposal 5 would change the name of 

the Walnut Marketing Board to the 

California Walnut Board. Witnesses 

stated that the proposed name of 

‘‘California Walnut Board’’ would more 

accurately represent the Board’s 

responsibilities. This amendment is not 

expected to result in any significant 

increases in costs to growers or 

handlers. 

Authority To Reestablish Districts and 

Board Structure 

Proposal 6 would add authority to 

reestablish districts, to reapportion 

members among districts, and to revise 

groups eligible for representation on the 

Board. The intent of this proposal is to 

provide the Board with a tool to more 

efficiently respond to the changing 

character of the California walnut 

industry. In recommending any such 

changes, the following would be 

considered: (1) Shifts in acreage within 

districts and within the production area 

during recent years; (2) the importance 

of new production in its relation to 

existing districts; (3) the equitable 

relationship between Board 

apportionment and districts; (4) changes 

in industry structure and/or the 

percentage of crop represented by 

various industry entities resulting in the 

existence of two or more handlers 

handling 35 percent or more of the crop; 

and (5) other relevant factors. This 

amendment is not expected to result in 

any increases in costs to growers or 

handlers. 

Voting Procedures 

Proposal 7 would amend Board 

quorum and voting requirements to add 

percentage requirements, add authority 

for the Board to vote by ‘‘any other 

means of communication’’ (including 

facsimile) and add authority for Board 

meetings to be held by telephone or by 

‘‘any other means of communication’’. 

Witnesses stated that references to the 

meeting quorum requirements should be 

amended to include a percentage 

equivalent of the current six-out-of-10- 

member minimum, or sixty percent. In 

addition, witnesses supported 

modifying the order language regarding 

voting requirements to state that a sixtypercent super-majority vote of the 

members present at a meeting should be 

required of all Board decisions, except 

where otherwise specifically provided. 

The order currently states that a 

majority vote is needed, with no 

percentage equivalent specified. 

According to the record, the order 

currently requires that all Board 

meetings be held at a physical location. 

Witnesses stated that the order should 

be amended to allow for some meetings 

to be held using ‘‘other means of 

communication’’, such as telephone or 

videoconferencing. Witnesses stated 

that use of new communication 

technology would result in timesavings 

while still allowing the Board to 

conduct its business. Witnesses stated 

that it is the intent of the Board that 

voting procedures for all types of nontraditional meetings can be 

recommended and adopted as 

appropriate for each type of technology 

used. 

Amendments proposed under this 

material issue are not expected to result 

in any significant changes in costs to 

growers or handlers. 

Carryover of Excess Assessment Funds 

Proposal 8 would amend the order to 

add authority to carry over excess 

assessment funds. According to the 

hearing record, the order currently 

states that any assessment funds held in 

excess of the marketing year’s expenses 

must be refunded to handlers. Refunds 

are returned to handlers in accordance 

with the amount of that handler’s pro 

rata share of the actual expenses of the 

Board. 

This proposed amendment would 

allow the Board, with the approval of 

the Secretary, to establish an operating 

monetary reserve. This would allow the 

Board to carry over to subsequent 

production years any excess funds in a 

reserve, provided that funds already in 

the reserve do not exceed approximately 

two years’ expenses. If reserve funds do 

exceed that amount, the assessment rate 

could be reduced so as to cause reserves 

to diminish to a level below the twoyear threshold. 

According to the record, reserve funds 

could be used to defray expenses during 

any production year before assessment 

income is sufficient to cover such 

expenses, or to cover deficits incurred 

during any fiscal period when 

assessment income is less than 

expenses. Additionally, reserve funds 

could be used to defray expenses 

incurred during any period when any or 

all of the provisions of the order are 

suspended, or to meet any other such 

costs recommended by the Board and 

approved by the Secretary. This 

proposal is not expected to result in any 

significant increases in costs to growers 

or handlers. 

Contributions 

Proposal 9 would amend the order by 

adding authority to accept 

contributions. If implemented, this 

proposed amendment would grant 

authority to the Board to accept 

voluntary contributions. Contributions 

could only be used to pay for research 

and development activities, and would 

be free from any encumbrances by the 

donor. According to the hearing record, 

the Board would retain oversight of the 

application of such contributions. 

Witnesses supported this proposal by 

stating that it would provide the Board 

and the industry with valuable 

resources to enhance research and 

development activities. It is not 

expected that this proposal would result 

in any additional costs to growers or 

handlers. 

Reimbursement of Expenses 

Proposal 10 would amend the order to 

clarify that members and alternate 


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members may be reimbursed for 

expenses incurred while performing 

their duties and that reimbursement 

includes per diem. According to the 

hearing record, this proposed 

amendment would not have any impact 

on the current expense reimbursement 

activities of the Board. Rather, it would 

clarify and update order language to 

more clearly state that while Board 

members and alternates serve without 

compensation, expenses incurred while 

performing the duties of a Board 

member that have been authorized by 

the Board will be reimbursed. It is not 

expected that this proposal would result 

in any additional costs to growers or 

handlers. 

Quality Regulations 

Proposal 12a would broaden the 

scope of the quality control provisions 

by adding authority to recommend 

different regulations for different market 

destinations. Witnesses emphasized the 

usefulness in terms of market 

development of being able to establish 

different regulations for individual 

markets and/or regions. Witnesses 

stated that allowing the Board to make 

such recommendations would help the 

walnut industry adapt to changing 

international market conditions. 

Updating Order Terminology 

Proposal 14 would amend the order 

by replacing the terms ‘‘carryover’’ with 

‘‘inventory,’’ and ‘‘mammoth’’ with 

‘‘jumbo,’’ to reflect current day industry 

procedures. This proposal would also 

result in conforming changes being 

made to the ‘‘Marketing estimates and 

recommendations’’ and ‘‘Reports of 

handler carryover’’ sections of the order. 

Handler carryover, defines the 

amount of California walnuts (both 

merchantable as well as the estimated 

quantity of merchantable walnuts to be 

produced from shelling stock and 

unsorted material), wherever located, 

held by California walnut handlers at 

any given time. 

Witnesses explained that the current 

term ‘‘carryover’’ is misleading in that 

the term implies the amount of 

inventory held by handlers from one 

marketing year to the next. Witnesses 

stated that the term ‘‘inventory’’ would 

more accurately convey the intent of 

this definition, and would also reflect 

current day calculations of walnut 

availability. 

Section 984.67, Exemptions, of the 

order provides for situations under 

which California walnuts may be 

exempted from complying with order 

regulations. One exemption is 

applicable to lots of merchantable 

inshell walnuts that are mammoth size 

or larger, as defined by the United States 

Standards for Walnuts in the Shell. 

Witnesses stated that given the new 

varieties currently being produced in 

the industry, the term ‘‘mammoth’’ no 

longer applies. According to record 

evidence, the current production’s 

equivalent to ‘‘mammoth’’ size is 

‘‘jumbo’’ size, as defined by the United 

States Standards for Walnuts in the 

Shell. Thus, witnesses stated that the 

order language should be updated to 

reflect the industry’s current 

terminology and size of walnuts being 

produced. This proposal is not expected 

to result in any increases in costs to 

growers or handlers. 

Interhandler Transfers 

Proposal 15(a) would amend the order 

to clarify the term ‘‘transfer’’ and to add 

authority for the Board to recommend 

methods and procedures, including 

necessary reports, for administrative 

oversight of such transfers. 

Witnesses stated that it would be 

beneficial to simplify current order 

language so that all interhandler 

transfers were considered a ‘‘sale of 

inshell and shelled walnuts within the 

area of production by one handler to 

another.’’ Witnesses explained that the 

proposed language restated the current 

application of this provision in walnut 

transactions in simpler terms. This 

proposal is not expected to result in any 

increases in costs to growers or 

handlers. 

Reporting Requirements 

Proposal 15(b) would amend the order 

to clarify that the Board may require 

reports from handlers and packers to 

include interhandler transfers or any 

other activity that involves placing 

California walnuts into the stream of 

commerce. 

According to the hearing record, 

current authority provided in this 

section only applies to the reporting of 

handler walnut receipts from growers. 

Witnesses stated that this authority 

should be broadened to include 

interhandler transfers, or receipts from 

any other entity as recommended by the 

Board and approved by the Secretary. 

This proposal is not expected to result 

in any increases in costs to growers or 

handlers. 

Trade Demand 

Proposal 16 would update and 

simplify the language in § 984.22, Trade 

demand, to state ‘‘United States and its 

territories,’’ rather than name ‘‘Puerto 

Rico’’ and ‘‘The Canal Zone’’. Witnesses 

explained that the reference to ‘‘Puerto 

Rico’’ and ‘‘The Canal Zone’’ in the 

order is outdated and should be updated 

to reference ‘‘United States and its 

territories’’. 

According to record evidence, this 

amendment would not impact trade 

demand calculations under the order 

since the purpose of the reference is to 

accurately identify the amount of 

shelled or inshell walnuts demanded by 

the United States, including its 

territories. Thus, while the terminology 

identifying the geographic regions 

included in the calculation would 

change, the intent of the original 

language would remain unchanged. 

This proposal is not expected to result 

in any increases in costs to growers or 

handlers. 

Relationship With California Walnut 

Commission 

Proposal 17 would amend the order 

by adding language that would 

acknowledge that the Board may 

deliberate, consult, cooperate and 

exchange information with the 

California Walnut Commission (CWC). 

Any information sharing would be kept 

confidential. 

Recorded evidence indicates the CWC 

and the Federal marketing order 

program are currently administered out 

of the same office location and employ 

the same staff. Thus, this proposal, if 

implemented, would formalize the 

relationship that currently exists 

between the two entities. Witnesses 

stated that collaboration between the 

two programs leads to reduced 

administrative costs, as much of the 

information collected by each entity can 

be shared. This amendment is not 

expected to result in any increases in 

costs to growers or handlers. 

In addition, USDA proposed adding 

two provisions that would help assure 

that the operation of the program 

conforms to current Department policy. 

Proposal 18 would establish tenure 

requirements for Board members. 

Currently, the term of office of each 

member and alternate member of the 

Board is 2 years. There are no 

provisions related to term limits in the 

marketing order. 

The recorded evidence suggests that 

term limits for Board members could 

increase industry participation on the 

Board, provide for more diverse 

membership, provide the Board with 

new perspectives and ideas, and 

increase the number of individuals in 

the industry with Board experience. 

This amendment is not expected to 

result in any increases in costs to 

growers or handlers. 

Proposal 19 would require that 

continuance referenda be conducted on 

a periodic basis to ascertain industry 


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support for the order and add more 

flexibility in the termination provisions. 

Currently, there is no requirement in 

the order that continuance referenda be 

conducted on a periodic basis. The 

USDA believes that growers should 

have an opportunity to periodically vote 

on whether a marketing order should 

continue. Continuance referenda 

provide an industry with a means to 

measure grower support for the 

program. Experience has shown that 

programs need significant industry 

support to operate effectively. This 

amendment is not expected to result in 

any increases in costs to growers or 

handlers. 

The proposals put forth at the hearing 

would streamline program organization, 

but are not expected to result in a 

significant change in industry 

production, handling or distribution 

activities. In discussing the impacts of 

the proposed amendments on growers 

and handlers, recorded evidence 

indicates that the changes are expected 

to be positive because the 

administration of the programs would 

be more efficient, and therefore more 

effective, in executing Board duties and 

responsibilities. There would be no 

significant cost impact on either small 

or large growers or handlers. 

Interested persons were invited to 

present evidence at the hearing on the 

probable regulatory and informational 

impact of the proposed amendments to 

the order on small entities. The 

recorded evidence is that the 

amendments are designed to increase 

efficiency in the functioning of the 

order. 

USDA has not identified any relevant 

Federal rules that duplicate, overlap or 

conflict with this proposed rule. These 

amendments are designed to enhance 

the administration and functioning of 

marketing order 984 to benefit of the 

California walnut industry. 

Paperwork Reduction Act 

Current information collection 

requirements for Part 984 are approved 

by OMB under OMB No. 0581–0178, 

Vegetable and Specialty Crops. Any 

changes in those requirements as a 

result of this proceeding would be 

submitted to OMB for approval. 

Witnesses stated that existing forms 

could be adequately modified to serve 

the needs of the Board. While 

conforming changes to the forms would 

need to be made (such as changing the 

name of the Board), the functionality of 

the forms would remain the same. 

As with other similar marketing order 

programs, reports and forms are 

periodically reviewed to reduce 

information requirements and 

duplication by industry and public 

sector agencies. 

AMS is committed to complying with 

the Government Paperwork Elimination 

Act (GPEA), which requires Government 

agencies in general to provide the public 

the option of submitting information or 

transacting business electronically to 

the maximum extent possible. 

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. 

Civil Justice Reform 

The amendments to Marketing Order 

No. 984 proposed herein have been 

reviewed under Executive Order 12988, 

Civil Justice Reform. They are not 

intended to have retroactive effect. If 

adopted, the proposed amendments 

would not preempt any State or local 

laws, regulations, or policies, unless 

they present an irreconcilable conflict 

with this proposal. 

The Act provides that administrative 

proceedings must be exhausted before 

parties may file suit in court. Under 

section 608c(15)(A) of the Act, any 

handler subject to an order may file 

with USDA a petition stating that the 

order, any provision of the order, or any 

obligation imposed in connection with 

the order is not in accordance with law 

and request a modification of the order 

or to be exempted therefrom. A handler 

is afforded the opportunity for a hearing 

on the petition. After the hearing, USDA 

would rule on the petition. The Act 

provides that the district court of the 

United States in any district in which 

the handler is an inhabitant, or has his 

or her principal place of business, has 

jurisdiction to review USDA’s ruling on 

the petition, provided an action is filed 

not later than 20 days after the date of 

the entry of the ruling. 

Findings and Conclusions; Discussion 

of Exceptions 

The findings and conclusions, rulings, 

and general findings and determinations 

included in the Recommended Decision 

set forth in the March 27, 2007, issue of 

the Federal Register (72 FR 14368) are 

hereby approved and adopted subject to 

the following additions and 

modifications: 

Based upon the briefs and exceptions 

filed, the findings and conclusions in 

material issue number 11 of the 

Recommended Decision concerning 

whether or not to add authority to 

designate more than one inspection 

service are amended by adding the 

following six paragraphs to read as 

follows: 

Exceptions to the Recommended 

Decision stated that if the authority to 

designate more than one inspection 

service were implemented, private 

sector entities, in addition to USDA, 

should be able to offer non-traditional 

inspection services, such as the PIQ and 

the CAIP. Exceptions further stated that 

the current proposed language 

(meaning, ‘‘each service shall be 

separate so as to not duplicate each 

other’’) would prevent any private 

sector company from offering those 

services. 

The proposed amendment, if 

implemented, would not prevent any 

private sector company from offering 

traditional or non-traditional inspection 

services, as long as the services were 

recommended by the Board and 

approved by USDA. 

The Agricultural Marketing Service is 

responsible for ensuring that all 

handlers regulated under a marketing 

order program are in compliance with 

any regulations that are in effect. Under 

the marketing order for California 

walnuts, the Board is responsible for 

locally administering the program, 

which includes monitoring industry’s 

compliance with order requirements, 

and reporting any violations to USDA 

for enforcement measures. 

While the USDA supports and 

encourages cost-saving measures, it is 

important that the program maintains its 

integrity and that any quality or size 

regulations in effect are not 

compromised. Furthermore, it is 

important that inspection of product is 

conducted with uniformity and 

consistency. For this reason, it is 

important that the language stating that 

‘‘each service shall be separate so as to 

not duplicate each other’’ be 

maintained. 

Finally, the proposed order language 

would provide authority for the Board 

to recommend the use of alternative 

inspection methods and services as they 

are developed and accredited. The 

proposed authority is intended to allow 

industry to benefit from cost-saving 

advances in technology while also 

ensuring uniform application of 

inspection methodology and standards 

industry wide. 

Based upon the exception filed, the 

findings and conclusions in material 

issue number 18 of the Recommended 

Decision concerning whether or not to 

establish a limit on the number of 

consecutive terms a person may serve as 

a member of the Board are amended by 

adding the following paragraph to read 

as follows: 


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1This order shall not become effective unless and 

until the requirements of § 900.14 of the rules of 

practice and procedure governing proceedings to 

formulate marketing agreements and marketing 

orders have been met. 

One of the exceptions filed offered a 

comment of general support for the 

proposal to implement term limits as a 

method to encourage participation of 

industry members that have not 

previously served on the Board. 

Rulings on Exceptions 

In arriving at the findings and 

conclusions and the regulatory 

provisions of this decision, the 

exceptions to the Recommended 

Decision were carefully considered in 

conjunction with the recorded evidence. 

To the extent that the findings and 

conclusions and the regulatory 

provisions of this decision are at 

variance with the exceptions, such 

exceptions are denied. 

Marketing Agreement and Order 

Annexed hereto and made a part 

hereof is the document entitled ‘‘Order 

Amending the Order Regulating the 

Handling of Walnuts Grown in 

California.’’ This document has been 

decided upon as the detailed and 

appropriate means of effectuating the 

foregoing findings and conclusions. 

It is hereby ordered, That this entire 

decision be published in the Federal 

Register. 

Referendum Order 

It is hereby directed that a referendum 

be conducted in accordance with the 

procedure for the conduct of referenda 

(7 CFR part 900.400 et seq.) to 

determine whether the annexed order 

amending the order regulating the 

handling of walnuts grown in California 

is approved or favored by growers, as 

defined under the terms of the order, 

who during a representative period were 

engaged in the production of walnuts in 

the production area. 

The representative period for the 

conduct of such referendum is hereby 

determined to be August 1, 2006, 

through July 31, 2007. 

The agents of the Secretary to conduct 

such referendum are hereby designated 

to be Shereen Marino and Kurt Kimmel, 

California Marketing Field Office, 

Marketing Order Administration 

Branch, Fruit and Vegetable Programs, 

AMS, USDA, 2202 Monterey Street, 

Suite 102B, Fresno, California 93721; 

telephone (559) 487–5901. 

List of Subjects in 7 CFR Part 984 

Marketing agreements, Nuts, 

Reporting and recordkeeping 

requirements, Walnuts. 

Dated: July 9, 2007. 

Lloyd C. Day, 

Administrator, Agricultural Marketing 

Service. 

Order Amending the Order Regulating 

the Handling of Walnuts Grown in 

California 1

Findings and Determinations 

The findings and determinations 

hereinafter set forth are supplementary 

to the findings and determinations 

which were previously made in 

connection with the issuance of the 

marketing agreement and order; and all 

said previous findings and 

determinations are hereby ratified and 

affirmed, except insofar as such findings 

and determinations may be in conflict 

with the findings and determinations set 

forth herein. 

(a) Findings and Determinations Upon 

the Basis of the Hearing Record. 

Pursuant to the provisions of the 

Agricultural Marketing Agreement Act 

of 1937, as amended (7 U.S.C. 601 et 

seq.), and the applicable rules of 

practice and procedure effective 

thereunder (7 CFR part 900), a public 

hearing was held upon the proposed 

amendments to Marketing Agreement 

and Order No. 984 (7 CFR part 984), 

regulating the handling of walnuts 

grown in California. Upon the basis of 

the evidence introduced at such hearing 

and the record thereof, it is found that: 

(1) The marketing agreement and 

order, as amended, and as hereby 

proposed to be further amended, and all 

of the terms and conditions thereof, 

would tend to effectuate the declared 

policy of the Act; 

(2) The marketing agreement and 

order, as amended, and as hereby 

proposed to be further amended, 

regulate the handling of walnuts grown 

in the production area in the same 

manner as, and are applicable only to, 

persons in the respective classes of 

commercial and industrial activity 

specified in the marketing agreement 

and order upon which a hearing has 

been held; 

(3) The marketing agreement and 

order, as amended, and as hereby 

proposed to be further amended, are 

limited in their application to the 

smallest regional production area that is 

practicable, consistent with carrying out 

the declared policy of the Act, and the 

issuance of several orders applicable to 

subdivisions of the production area 

would not effectively carry out the 

declared policy of the Act; 

(4) The marketing agreement and 

order, as amended, and as hereby 

proposed to be further amended, 

prescribe, insofar as practicable, such 

different terms applicable to different 

parts of the production area as are 

necessary to give due recognition to the 

differences in the production and 

marketing of walnuts grown in the 

production area; and 

(5) All handling of walnuts grown in 

the production area as defined in the 

marketing agreement and order is in the 

current of interstate or foreign 

commerce or directly burdens, 

obstructs, or affects such commerce. 

Order Relative to Handling 

It is therefore ordered, That on and 

after the effective date hereof, all 

handling of walnuts grown in California 

shall be in conformity to, and in 

compliance with, the terms and 

conditions of the said order as hereby 

proposed to be amended as follows: 

The provisions of the proposed 

marketing agreement and order 

amending the order contained in the 

Recommended Decision issued by the 

Administrator on March 19, 2007, and 

published in the Federal Register on 

March 27, 2007, will be and are the 

terms and provisions of this order 

amending the order and are set forth in 

full herein. 

PART 984—WALNUTS GROWN IN 

CALIFORNIA 

1. The authority citation for 7 CFR 

part 984 continues to read as follows: 

Authority: 7 U.S.C. 601–674. 

2. Revise § 984.6 to read as follows: 

§ 984.6 Board. 

Board means the California Walnut 

Board established pursuant to § 934.35. 

3. Revise § 984.7 to read as follows: 

§ 984.7 Marketing year. 

Marketing year means the twelve 

months from September 1 to the 

following August 31, both inclusive, or 

any other such period deemed 

appropriate and recommended by the 

Board for approval by the Secretary. 

4. Revise § 984.13 to read as follows: 

§ 984.13 To handle. 

To handle means to pack, sell, 

consign, transport, or ship (except as a 

common or contract carrier of walnuts 

owned by another person), or in any 

other way to put walnuts, inshell or 

shelled, into the current of commerce 

either within the area of production or 

from such area to any point outside 


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thereof, or for a manufacturer or retailer 

within the area of production to 

purchase directly from a grower: The 

term ‘‘to handle’’ shall not include sales 

and deliveries within the area of 

production by growers to handlers, or 

between handlers. 

5. Revise § 984.14 to read as follows: 

§ 984.14 Handler. 

Handler means any person who 

handles inshell or shelled walnuts. 

6. Revise § 984.15 to read as follows: 

§ 984.15 Pack. 

Pack means to bleach, clean, grade, 

shell or otherwise prepare walnuts for 

market as inshell or shelled walnuts. 

7. Revise § 984.21 to read as follows: 

§ 984.21 Handler inventory. 

Handler inventory as of any date 

means all walnuts, inshell or shelled 

(except those held in satisfaction of a 

reserve obligation), wherever located, 

then held by a handler or for his or her 

account. 

8. Revise § 984.22 to read as follows: 

§ 984.22 Trade demand. 

(a) Inshell. The quantity of 

merchantable inshell walnuts that the 

trade will acquire from all handlers 

during a marketing year for distribution 

in the United States and its territories. 

(b) Shelled. The quantity of 

merchantable shelled walnuts that the 

trade will acquire from all handlers 

during a marketing year for distribution 

in the United States and its territories. 

9. Revise § 984.35 to read as follows: 

§ 984.35 California Walnut Board. 

(a) A California Walnut Board is 

hereby established consisting of 10 

members selected by the Secretary, each 

of whom shall have an alternate 

nominated and selected in the same way 

and with the same qualifications as the 

member. The members and their 

alternates shall be selected by the 

Secretary from nominees submitted by 

each of the following groups or from 

other eligible persons belonging to such 

groups: 

(1) Two handler members from 

District 1; 

(2) Two handler members from 

District 2; 

(3) Two grower members from District 

1; 

(4) Two grower members from District 

2; 

(5) One grower member nominated atlarge from the production area; and, 

(6) One member and alternate who 

shall be selected after the selection of 

the nine handler and grower members 

and after the opportunity for such 

members to nominate the tenth member 

and alternate. The tenth member and his 

or her alternate shall be neither a walnut 

grower nor a handler. 

(b) In the event that one handler 

handles 35% or more of the crop the 

membership of the Board shall be as 

follows: 

(1) Two handler members to represent 

the handler that handles 35% or more 

of the crop; 

(2) Two members to represent growers 

who market their walnuts through the 

handler that handles 35% or more of the 

crop; 

(3) Two handler members to represent 

handlers that do not handle 35% or 

more of the crop; 

(4) One member to represent growers 

from District 1 who market their 

walnuts through handlers that do not 

handle 35% or more of the crop; 

(5) One member to represent growers 

from District 2 who market their 

walnuts through handlers that do not 

handle 35% or more of the crop; 

(6) One member to represent growers 

who market their walnuts through 

handlers that do not handle 35% or 

more of the crop shall be nominated at 

large from the production area; and, 

(7) One member and alternate who 

shall be selected after the selection of 

the nine handler and grower members 

and after the opportunity for such 

members to nominate the tenth member 

and alternate. The tenth member and his 

or her alternate shall be neither a walnut 

grower nor a handler. 

(c) Grower Districts: 

(1) District 1. District 1 encompasses 

the counties in the State of California 

that lie north of a line drawn on the 

south boundaries of San Mateo, 

Alameda, San Joaquin, Calaveras, and 

Alpine Counties. 

(2) District 2. District 2 shall consist 

of all other walnut producing counties 

in the State of California south of the 

boundary line set forth in paragraph 

(c)(1) of this section. 

(d) The Secretary, upon 

recommendation of the Board, may 

reestablish districts, may reapportion 

members among districts, and may 

revise the groups eligible for 

representation on the Board as specified 

in paragraphs (a) and (b) of this section: 

Provided, That any such 

recommendation shall require at least 

six concurring votes of the voting 

members of the Board. In 

recommending any such changes, the 

following shall be considered: 

(1) Shifts in acreage within districts 

and within the production area during 

recent years; 

(2) The importance of new production 

in its relation to existing districts; 

(3) The equitable relationship 

between Board apportionment and 

districts; 

(4) Changes in industry structure and/ 

or the percentage of crop represented by 

various industry entities resulting in the 

existence of two or more major 

handlers; 

(5) Other relevant factors. 

10. Revise § 984.36 to read as follows: 

§ 984.36 Term of office. 

The term of office of Board members, 

and their alternates shall be for a period 

of two years ending on August 31 of 

odd-numbered years, but they shall 

serve until their respective successors 

are selected and have qualified. Board 

members may serve up to three 

consecutive, two-year terms of office. In 

no event shall any member serve more 

than six consecutive years on the Board. 

For purposes of determining when a 

Board member has served three 

consecutive terms, the accrual of terms 

shall begin following any period of at 

least twelve consecutive months out of 

office. The limitation on tenure shall not 

apply to alternates. 

11. Revise § 984.37 to read as follows: 

§ 984.37 Nominations. 

(a) Nominations for all grower 

members shall be submitted by ballot 

pursuant to an announcement by press 

releases of the Board to the news media 

in the walnut producing areas. Such 

releases shall provide pertinent voting 

information, including the names of 

candidates and the location where 

ballots may be obtained. Ballots shall be 

accompanied by full instructions as to 

their markings and mailing and shall 

include the names of incumbents who 

are willing to continue serving on the 

Board and such other candidates as may 

be proposed pursuant to methods 

established by the Board with the 

approval of the Secretary. Each grower, 

regardless of the number and location of 

his or her walnut orchard(s), shall be 

entitled to cast only one ballot in the 

nomination and each vote shall be given 

equal weight. If the grower has orchards 

in both grower districts, he or she shall 

advise the Board of the district in which 

he/she desires to vote. The person 

receiving the highest number of votes 

for each grower position shall be the 

nominee. 

(b) Nominations for handler members 

shall be submitted on ballots mailed by 

the Board to all handlers in their 

respective Districts. All handlers’ votes 

shall be weighted by the kernelweight of 

walnuts certified as merchantable by 

each handler during the preceding 

marketing year. Each handler in the 

production area may vote for handler 


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member nominees and their alternates. 

However, no handler with less than 

35% of the crop shall have more than 

one member and one alternate member. 

The person receiving the highest 

number of votes for each handler 

member position shall be the nominee 

for that position. 

(c) A calculation to determine 

whether or not a handler who handles 

35 percent or more of the crop shall be 

made prior to nominations. For the first 

nominations held upon implementation 

of this language, the 35 percent 

threshold shall be calculated using an 

average of crop handled for the year in 

which nominations are made and one 

year’s handling prior. For all future 

nominations, the 35 percent handling 

calculation shall be based in the average 

of the two years prior to the year in 

which nominations are made. In the 

event that one handler handles 35% or 

more of the crop the membership of the 

Board, nominations shall be as follows: 

(1) Nominations of growers who 

market their walnuts to the handler that 

handles 35% or more of the crop shall 

be conducted by that handler and the 

names of the nominees shall be 

forwarded to the Board for approval and 

appointment by the Secretary. 

(2) Nominations for the two handler 

members representing the major handler 

shall be conducted by the major handler 

and the names of the nominees shall be 

forwarded to the Board for approval and 

appointment by the Secretary. 

(3) Nominations on behalf of all other 

grower members (Groups (b)(4), (5) and 

(6) of § 984.35) shall be submitted after 

ballot by such growers pursuant to an 

announcement by press releases of the 

Board to the news media in the walnut 

producing areas. Such releases shall 

provide pertinent voting information, 

including the names of candidates and 

the location where ballots may be 

obtained. Ballots shall be accompanied 

by full instructions as to their markings 

and mailing and shall include the 

names of incumbents who are willing to 

continue serving on the Board and such 

other candidates as may be proposed 

pursuant to methods established by the 

Board with the approval of the 

Secretary. Each grower in Groups 

(Groups (b)(4), (5) and (6) of § 984.35), 

regardless of the number and location of 

his or her walnut orchard(s), shall be 

entitled to cast only one ballot in the 

nomination and each vote shall be given 

equal weight. If the grower has 

orchard(s) in both grower districts he or 

she shall advise the Board of the district 

in which he or she desires to vote. The 

person receiving the highest number of 

votes for grower position shall be the 

nominee. 

(4) Nominations for handler members 

representing handlers that do not 

handle 35% or more of the crop shall be 

submitted on ballots mailed by the 

Board to those handlers. The votes of 

these handlers shall be weighted by the 

kernelweight of walnuts certified as 

merchantable by each handler during 

the preceding marketing year. Each 

handler in the production area may vote 

for handler member nominees and their 

alternates of this subsection. However, 

no handler shall have more than one 

person on the Board either as member 

or alternate member. The person 

receiving the highest number of votes 

for a handler member position of this 

subsection shall be the nominee for that 

position. 

(d) Each grower is entitled to 

participate in only one nomination 

process, regardless of the number of 

handler entities to whom he or she 

delivers walnuts. If a grower delivers 

walnuts to more than one handler 

entity, the grower must choose which 

nomination process he or she 

participates in. 

(e) The nine members shall nominate 

one person as member and one person 

as alternate for the tenth member 

position. The tenth member and 

alternate shall be nominated by not less 

than 6 votes cast by the nine members 

of the Board. 

(f) Nominations in the foregoing 

manner received by the Board shall be 

reported to the Secretary on or before 

June 15 of each odd-numbered year, 

together with a certified summary of the 

results of the nominations. If the Board 

fails to report nominations to the 

Secretary in the manner herein specified 

by June 15 of each odd-numbered year, 

the Secretary may select the members 

without nomination. If nominations for 

the tenth member are not submitted by 

September 1 of any such year, the 

Secretary may select such member 

without nomination. 

(g) The Board may recommend, 

subject to the approval of the Secretary, 

a change to these nomination 

procedures should the Board determine 

that a revision is necessary. 

12. Revise § 984.38 to read as follows: 

§ 984.38 Eligibility. 

No person shall be selected or 

continue to serve as a member or 

alternate to represent one of the groups 

specified in § 984.35(a)(1) through (6) or 

§ 984.38(b)(1) through (6), unless he or 

she is engaged in the business he or she 

is to represent, or represents, either in 

his or her own behalf or as an officer or 

employee if the business unit engaged 

in such business. Also, each member or 

alternate member representing growers 

in District 1 or District 2 shall be a 

grower, or officer or employee of the 

group he or she is to represent. 

13. Revise § 984.39 to read as follows: 

§ 984.39 Qualify by acceptance. 

Any person nominated to serve as a 

member or alternate member of the 

Board shall, prior to selection by USDA, 

qualify by filing a written qualification 

and acceptance statement indicating 

such person’s willingness to serve in the 

position for which nominated. 

14. Revise § 984.40 to read as follows: 

§ 984.40 Alternate. 

(a) An alternate for a member of the 

Board shall act in the place and stead of 

such member in his or her absence or 

in the event of his or her death, removal, 

resignation, or disqualification, until a 

successor for his or her unexpired term 

has been selected and has qualified. 

(b) In the event any member of the 

Board and his or her alternate are both 

unable to attend a meeting of the Board, 

any alternate for any other member 

representing the same group as the 

absent member may serve in the place 

of the absent member, or in the event 

such other alternate cannot attend, or 

there is no such other alternate, such 

member, or in the event of his disability 

or a vacancy, his or her alternate may 

designate, subject to the disapproval of 

the Secretary, a temporary substitute to 

attend such meeting. At such meeting, 

such temporary substitute may act in 

the place of such member. 

15. Revise § 984.42 to read as follows: 

§ 984.42 Expenses. 

The members and their alternates of 

the Board shall serve without 

compensation, but shall be allowed 

their necessary expenses incurred by 

them in the performance of their duties 

under this part. 

16. Amend § 984.45 by revising 

paragraphs (b) and (c) and adding 

paragraph (d) to read as follows: 

§ 984.45 Procedure. 

* * * * * 

(b) All decisions of the Board, except 

where otherwise specifically provided 

(see § 984.35(d)), shall be by a sixtypercent (60%) super-majority vote of the 

members present. A quorum of six 

members, or the equivalent of sixty 

percent (60%) of the Board, shall be 

required for the conduct of Board 

business. 

(c) The Board may vote by mail or 

telegram, or by any other means of 

communication, upon due notice to all 

members. The Board, with the approval 

of the Secretary, shall prescribe the 

minimum number of votes that must be 


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cast when voting is by any of these 

methods, and any other procedures 

necessary to carry out the objectives of 

this paragraph. 

(d) The Board may provide for 

meetings by telephone, or other means 

of communication and any vote cast at 

such a meeting shall be confirmed 

promptly in writing: Provided, That if 

any assembled meeting is held, all votes 

shall be cast in person. 

17. Revise § 984.46 to read as follows: 

§ 984.46 Research and development. 

The Board, with the approval of the 

Secretary, may establish or provide for 

the establishment of production 

research, marketing research and 

development projects, and marketing 

promotion, including paid advertising, 

designed to assist, improve, or promote 

the marketing, distribution, and 

consumption or efficient production of 

walnuts. The expenses of such projects 

shall be paid from funds collected 

pursuant to § 984.69 and § 984.70. 

18. Amend § 984.48 by revising 

paragraphs (a) introductory text, (a)(2), 

(4), and (5) to read as follows: 

§ 984.48 Marketing estimates and 

recommendations. 

(a) Each marketing year the Board 

shall hold a meeting, prior to October 

20, for the purpose of recommending to 

the Secretary a marketing policy for 

such year. Each year such 

recommendation shall be adopted by 

the affirmative vote of at least 60% of 

the Board and shall include the 

following, and where applicable, on a 

kernel weight basis: 

* * * * * 

(2) The Board’s estimate of the 

handler inventory on September 1 of 

inshell and shelled walnuts; 

* * * * * 

(4) The Board’s estimate of the trade 

demand for such marketing year for 

shelled and inshell walnuts, taking into 

consideration trade inventory, imports, 

prices, competing nut supplies, and 

other factors; 

(5) The Board’s recommendation for 

desirable handler inventory of inshell 

and shelled walnuts on August 31 of 

each marketing year; 

* * * * * 

19. Amend § 984.50 by revising the 

heading and paragraph (d) to read as 

follows: 

§ 984.50 Grade, quality and size 

regulations. 

* * * * * 

(d) Additional grade, size or other 

quality regulation. The Board may 

recommend to the Secretary additional 

grade, size or other quality regulations, 

and may also recommend different 

regulations for different market 

destinations. If the Secretary finds on 

the basis of such recommendation or 

other information that such additional 

regulations would tend to effectuate the 

declared policy of the Act, he or she 

shall establish such regulations. 

* * * * * 

20. Revise § 984.51 by revising 

paragraph (a) to read as follows: 

§ 984.51 Inspection and certification of 

inshell and shelled walnuts. 

(a) Before or upon handling of any 

walnuts for use as free or reserve 

walnuts, each handler at his or her own 

expense shall cause such walnuts to be 

inspected to determine whether they 

meet the then applicable grade and size 

regulations. Such inspection shall be 

performed by the inspection service or 

services designated by the Board with 

the approval of the Secretary; Provided, 

That if more than one inspection service 

is designated, the functions performed 

by each service shall be separate, and 

shall not duplicate each other. Handlers 

shall obtain a certificate for each 

inspection and cause a copy of each 

certificate issued by the inspection 

service to be furnished to the Board. 

Each certificate shall show the identity 

of the handler, quantity of walnuts, the 

date of inspection, and for inshell 

walnuts the grade and size of such 

walnuts as set forth in the United States 

Standards for Walnuts (Juglans regia) in 

the Shell. Certificates covering reserve 

shelled walnuts for export shall also 

show the grade, size, and color of such 

walnuts as set forth in the United States 

Standards for Shelled Walnuts (Juglans 

regia). The Board, with the approval of 

the Secretary, may prescribe procedures 

for the administration of this provision. 

* * * * * 

21. Amend § 984.52 by revising 

paragraph (a) and adding a new 

paragraph (c) to read as follows: 

§ 984.52 Processing of shelled walnuts. 

(a) No handler shall slice, chop, grind, 

or in any manner change the form of 

shelled walnuts unless such walnuts 

have been certified as merchantable or 

unless such walnuts meet quality 

regulations established under 

§ 984.50(d) if such regulations are in 

effect. 

* * * * * 

(c) The Board shall establish such 

procedures as are necessary to insure 

that all such walnuts are inspected prior 

to being placed into the current of 

commerce. 

22. Revise § 984.59 to read as follows: 

§ 984.59 Interhandler transfers. 

For the purposes of this part, transfer 

means the sale of inshell and shelled 

walnuts within the area of production 

by one handler to another. The Board, 

with the approval of the Secretary, may 

establish methods and procedures, 

including necessary reports, for such 

transfers. 

23. Amend § 984.67 by revising 

paragraph (a) to read as follows: 

§ 984.67 Exemptions. 

(a) Exemption from volume 

regulation. Reserve percentages shall 

not apply to lots of merchantable inshell 

walnuts which are of jumbo size or 

larger as defined in the then effective 

United States Standards for Walnuts in 

the Shell, or to such quantities as the 

Board may, with the approval of the 

Secretary, prescribe. 

* * * * * 

24. Amend § 984.69 by revising 

paragraph (c) to read as follows: 

§ 984.69 Assessments. 

* * * * * 

(c) Accounting. If at the end of a 

marketing year the assessments 

collected are in excess of expenses 

incurred, such excess shall be 

accounted for in accordance with one of 

the following: 

(1) If such excess is not retained in a 

reserve, as provided in paragraph (c)(2) 

or (c)(3) of this section, it shall be 

refunded to handlers from whom 

collected and each handler’s share of 

such excess funds shall be the amount 

of assessments he or she has paid in 

excess of his or her pro rata share of the 

actual expenses of the Board. 

(2) Excess funds may be used 

temporarily by the Board to defray 

expenses of the subsequent marketing 

year: Provided, That each handler’s 

share of such excess shall be made 

available to him or her by the Board 

within five months after the end of the 

year. 

(3) The Board may carry over such 

excess into subsequent marketing years 

as a reserve: Provided, That funds 

already in reserve do not exceed 

approximately two years’ budgeted 

expenses. In the event that funds exceed 

two marketing years’ budgeted 

expenses, future assessments will be 

reduced to bring the reserves to an 

amount that is less than or equal to two 

marketing years’ budgeted expenses. 

Such reserve funds may be used: 

(i) To defray expenses, during any 

marketing year, prior to the time 

assessment income is sufficient to cover 

such expenses; 


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(ii) To cover deficits incurred during 

any year when assessment income is 

less than expenses; 

(iii) To defray expenses incurred 

during any period when any or all 

provisions of this part are suspended; 

(iv) To meet any other such costs 

recommended by the Board and 

approved by the Secretary. 

* * * * * 

25. Add a new § 984.70 to read as 

follows: 

§ 984.70 Contributions. 

The Board may accept voluntary 

contributions but these shall only be 

used to pay expenses incurred pursuant 

to § 984.46, Research and development. 

Furthermore, such contributions shall 

be free from any encumbrances by the 

donor and the Board shall retain 

complete control of their use. 

26. Revise § 984.71 to read as follows: 

§ 984.71 Reports of handler inventory. 

Each handler shall submit to the 

Board in such form and on such dates 

as the Board may prescribe, reports 

showing his or her inventory of inshell 

and shelled walnuts. 

27. Revise § 984.73 to read as follows: 

§ 984.73 Reports of walnut receipts. 

Each handler shall file such reports of 

his or her walnut receipts from growers, 

handlers, or others in such form and at 

such times as may be requested by the 

Board with the approval of the 

Secretary. 

28. Amend § 984.89 by redesignating 

paragraph (b)(4) as (b)(5) and adding a 

new paragraph (b)(4) to read as follows: 

§ 984.89 Effective time and termination. 

* * * * * 

(b) * * * 

(4) Within six years of the effective 

date of this amendment the Secretary 

shall conduct a referendum to ascertain 

whether continuance of this part is 

favored by producers. Subsequent 

referenda to ascertain continuance shall 

be conducted every six years thereafter. 

The Secretary may terminate the 

provisions of this part at the end of any 

fiscal period in which the Secretary has 

found that continuance of this part is 

not favored by a two thirds (2⁄3) majority 

of voting producers, or a two thirds (2⁄3) 

majority of volume represented thereby, 

who, during a representative period 

determined by the Secretary, have been 

engaged in the production for market of 

walnuts in the production area. Such 

termination shall be announced on or 

before the end of the production year. 

* * * * * 

29. Add a new § 984.91 to read as 

follows: 

§ 984.91 Relationship with the California 

Walnut Commission. 

In conducting Board activities and 

other objectives under this part, the 

Board may deliberate, consult, 

cooperate and exchange information 

with the California Walnut Commission, 

whose activities complement those of 

the Board. Any sharing of information 

gathered under this subpart shall be 

kept confidential in accordance with 

provisions under section 10(i) of the 

Act. 

[FR Doc. 07–3412 Filed 7–10–07; 9:28 am] 

BILLING CODE 3410–02–P 

DEPARTMENT OF AGRICULTURE 

Rural Utilities Service 

7 CFR Part 1767 

RIN 0572–AC08 

Accounting Requirements for RUS 

Electric Program Borrowers 

AGENCY: Rural Utilities Service, USDA. 

ACTION: Proposed rule. 

SUMMARY: The Rural Utilities Service, an 

agency delivering the United States 

Department of Agriculture’s Rural 

Development Utilities Programs, 

hereinafter referred to as Rural 

Development, proposes to amend its 

regulation on accounting policies and 

procedures for Rural Development 

Electric Programs borrowers as set forth 

in 7 CFR Part 1767, Accounting 

Requirements for Rural Development 

Electric Program Borrowers. This 

proposed rule seeks to reconcile Part 

1767 with the Uniform System of 

Accounts as set forth by the Federal 

Energy Regulatory Commission (FERC); 

to adopt FERC accounting guidance for 

Regional Transmission Organizations, 

Asset Retirement Obligations with 

modifications, Other Comprehensive 

Income, and Derivatives and Hedging 

Instruments; to amend accounting 

interpretations for Special Equipment 

Accounting, Storm Damage, Rural 

Economic Development Loan and Grant 

Program and Consolidated Financial 

Statements; to set forth accounting 

interpretations that establish uniform 

reporting procedures for Accounting for 

Cushion of Credit Accounts and 

Renewable Energy Credits, and to codify 

guidance on records retention currently 

published in Bulletin 180–2. This 

proposed rule also seeks to correct a 

number of administrative errors 

currently existing within this part. 

DATES: Written comments must be 

received by Rural Development or carry 

a postmark or equivalent no later than 

September 11, 2007. 

ADDRESSES: You may submit comments 

by any of the following methods: 

• Federal eRulemaking Portal: Go to 

http://www.regulations.gov and, in the 

lower ‘‘Search Regulations and Federal 

Actions’’ box, select ‘‘Rural Utilities 

Service’’ from the agency drop-down 

menu, then click on ‘‘Submit.’’ In the 

Docket ID column, select RUS–07– 

Electric–0002 to submit or view public 

comments and to view supporting and 

related materials available 

electronically. Information on using 

Regulations.gov, including instructions 

for accessing documents, submitting 

comments, and viewing the docket after 

the close of the comment period, is 

available through the site’s ‘‘User Tips’’ 

link. 

• Agency Web Site: http:// 

www.usda.gov/rus/index2/ 

Comments.htm. Follow the instructions 

for submitting comments. 

• E-mail: RUSComments@usda.gov. 

Include in the subject line of the 

message ‘‘Accounting Requirements for 

Electric Borrowers.’’ 

• Mail: Addressed to Michele Brooks, 

Acting Director, Program Development 

and Regulatory Analysis, Rural 

Development, U.S. Department of 

Agriculture, 1400 Independence 

Avenue, SW., STOP 1522, Washington, 

DC 20250–1522. 

• Hand Delivery/Courier: Addressed 

to Michele Brooks, Acting Director, 

Program Development and Regulatory 

Analysis, Rural Development, U.S. 

Department of Agriculture, 1400 

Independence Avenue, SW., Room 

5168–S, Washington, DC 20250–1522. 

Instructions: All submissions received 

must include the agency name and the 

subject heading ‘‘Accounting 

Requirements for Electric Borrowers’’. 

All comments received must identify 

the name of the individual (and the 

name of the entity, if applicable) who is 

submitting the comment. All comments 

received will be posted without change 

to http://www.usda.gov/rus/index2/ 

Comments.htm, including any personal 

information provided. 

FOR FURTHER INFORMATION CONTACT: Ms. 

Diana C. Alger, Chief, Technical 

Accounting and Auditing Staff, Program 

Accounting Services Division, Rural 

Development, Ag Box 1523, Room 2221, 

South Building, U.S. Department of 

Agriculture, Washington, DC 20250, 

telephone number (202) 720–5227. 

SUPPLEMENTARY INFORMATION: 

Executive Order 12866 

This proposed rule is exempted from 

the Office of Management and Budget 


jlentini on PROD1PC65 with PROPOSALS