14368 Federal Register / Vol. 72, No. 58 / Tuesday, March 27, 2007 / Proposed Rules 

DEPARTMENT OF AGRICULTURE 

Agricultural Marketing Service 

7 CFR Part 984 

[Docket No. AO–192–A7; FV06–984–1] 

Walnuts Grown in California; 

Recommended Decision and 

Opportunity To File Written Exceptions 

to Proposed Amendments of Marketing 

Agreement and Order No. 984 

AGENCY: Agricultural Marketing Service, 

USDA. 

ACTION: Proposed rule and opportunity 

to file exceptions. 

SUMMARY: This recommended decision 

invites written exceptions on proposed 

amendments to Marketing Order No. 

984, which regulates the handling of 

walnuts grown in California (Order). 

The amendments were proposed by the 

Walnut Marketing Board (Board), which 

is responsible for local administration of 

the order. The amendments included in 

this recommended 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 

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outdated order language with current 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 changes to the order as 

may be necessary to conform with any 

amendment that may result from the 

hearing. 

The proposed amendments are 

intended to improve the operation and 

functioning of the marketing order 

program. 

DATES: Written exceptions must be filed 

by April 16, 2007. 

ADDRESSES: Written exceptions should 

be filed with the Hearing Clerk, U.S. 

Department of Agriculture, room 1081– 

S, Washington, DC 20250–9200, Fax: 

(202) 720–9776, or via the Internet: 

http://www.regulations.gov. All 

comments should reference the docket 

number and the date and page number 

of this issue of the Federal Register. 

Comments will be made available for 

public inspection in the Office of the 

Hearing Clerk during regular business 

hours, or can be viewed at: http:// 

www.regulations.gov. 

FOR FURTHER INFORMATION CONTACT: 

Melissa Schmaedick or Kathleen M. 

Finn, Marketing Order Administration 

Branch, Fruit and Vegetable Programs, 

AMS, USDA, 1400 Independence 

Avenue, SW., Stop 0237, Washington, 

DC 20250–0237; Telephone: (202) 720– 

2491, Fax: (202) 720–8938, or e-mail: 

Melissa.Schmaedick@usda.gov or 

Kathy.Finn@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). 

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 

Notice is hereby given of the filing 

with the Hearing Clerk of this 

recommended decision with respect to 

the proposed amendment of Marketing 

Agreement and Order No. 984, which 

regulates the handling of walnuts grown 

in California, and the opportunity to file 

written exceptions thereto. Copies of 

this decision can be obtained from 

Melissa Schmaedick, whose address is 

listed above. 

This recommended decision is issued 

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 orders (7 CFR part 900). 

The proposed amendments are based 

on the record of a public hearing held 

on May 17 and 18, 2006, in Modesto, 

California. 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 administration of the order, and by 

the Agricultural Marketing Service 

(AMS). 

The proposed amendments are the 

result of a committee appointed by the 

Board to conduct a review of the order. 

The committee met several times in 

2005 and drafted proposed amendments 

to the order and presented them at 

industry meetings. The proposed 

amendments were then forwarded to the 

Board, which unanimously approved 

them. The amendments are intended to 

streamline organization and 

administration of the marketing order 

program. The Board’s request for a 

hearing was submitted to USDA on 

March 3, 2006. 

The Board’s proposed amendments to 

the order are summarized below. 

1. Amend the order to change the 

marketing year from August 1 through 

July 31 to September 1 through August 

31. This proposal would amend § 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. Amend the order by specifying 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 


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proposal would add a new paragraph (d) 

to § 984.35, Walnut Marketing Board. 

7. Amend Board quorum and voting 

requirements to add percentage 

requirements, add authority for the 

Board to vote by ‘‘any other means of 

communication’’ (including facsimile) 

and add authority for Board meetings to 

be held by telephone or by ‘‘any other 

means of communication’’, providing 

that all votes cast at such meetings shall 

be confirmed in writing. This proposal 

would amend § 984.45, Procedure, and 

would result in a conforming change in 

§ 984.48(a), Marketing estimates and 

recommendations. 

8. Amend the order to add authority 

to carry over excess assessment funds. 

This proposal would amend § 984.69, 

Assessments. 

9. Amend the order by adding 

authority to accept voluntary financial 

contributions. This proposal would add 

a new § 984.70, Contributions. 

10. Amend the order to clarify that 

members and alternate members may be 

reimbursed for expenses incurred while 

performing their duties and that 

reimbursement includes per diem. This 

proposal would amend § 984.42, 

Expenses. 

11. Amend the order to add authority 

for the Board to appoint more than one 

inspection service as long as the 

functions performed by each service are 

separate and do not duplicate each 

other. This proposal would amend 

§ 984.51, Inspection and certification of 

inshell and shelled walnuts. 

12. (a) Amend the order by 

broadening the scope of the quality 

control provisions and by adding 

authority to recommend different 

regulations for different market 

destinations. This proposal would 

amend § 984.50, Grade and size 

regulations. 

12. (b) Amend the order by adding 

authority that would allow for shelled 

walnuts to be inspected after having 

been sliced, chopped, ground, or in any 

other manner changed from shelled 

walnuts, if regulations for such walnuts 

are in effect. This proposal would 

amend § 984.52, Processing of shelled 

walnuts. 

13. Amend the order by adding 

authority for marketing promotion and 

paid advertising. This proposal would 

amend § 984.46, Research and 

development. 

14. Amend the order to replace the 

terms ‘‘carryover’’ with ‘‘inventory,’’

and ‘‘mammoth’’ with ‘‘jumbo,’’ to 

reflect current day industry 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) Amend the order to clarify and 

to simplify the interhandler transfer 

provision, and to 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) Amend the order to 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 

three provisions that would help assure 

that the operation of the program 

conforms to current Department policy 

and that USDA can make any necessary 

conforming changes. These provisions 

would: 

18. Establish tenure requirements for 

Board members. This proposal would 

amend § 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 such changes as may be 

necessary to the order to conform with 

any amendment thereto that may result 

from the hearing. 

Twenty-five witnesses testified at the 

hearing. These witnesses represented 

walnut growers and handlers. While all 

witnesses supported the Board’s 

recommended changes, several 

witnesses opposed USDA 

recommendations to establish tenure 

requirements and require continuance 

referenda. 

Witnesses speaking in favor of the 

proposed changes addressed the need to 

change the structure of the Board to 

reflect recent changes in the industry, 

and the need to improve the 

administration, operation and 

functioning of the program in effect for 

walnuts grown in California. The order 

was established in 1948 and was last 

amended in 1976. 

Witnesses at the hearing further stated 

that the amendments being considered 

were designed to streamline the 

operation of the order based on accepted 

business procedures in the 21st century. 

Witnesses also stated that many of the 

proposed amendments would provide 

the program with the necessary 

flexibility for the future. 

At the conclusion of the hearing, the 

Administrative Law Judge stated that 

the final date for interested persons to 

file proposed findings and conclusions 

or written arguments and briefs based 

on the evidence received at the hearing 

would be 30 days after the posting of the 

hearing transcript on the USDA Web 

site, or July 6, 2006. One brief was filed. 

The brief clarified the intent of the 

Board’s proposed amendments and 

offered general support. 

Material Issues 

The material issues presented on the 

record of hearing are as follows: 

1. Whether to amend the order to 

change the marketing year from August 

1 through July 31 to September 1 

through August 31; 

2. Whether to amend the order by 

specifying that the act of packing 

walnuts is considered a handling 

function and by clarifying that the 

definition of ‘‘pack’’ should include the 

term ‘‘shell’’; 

3. (a) Whether to amend all parts of 

the order that refer to cooperative seats 

on the Board, redistribute member seats 

among districts, and provide designated 

seats for a major handler, if such 

handler exists (a major handler would 

have to handle 35 percent or more of the 

crop); 

3. (b) Whether to amend the Board 

member nomination process to reflect 

proposed changes in the Board 

structure, as outlined in 3(a); 

4. Whether to require Board nominees 

to submit a written qualification and 

acceptance statement prior to selection 

by USDA; 

5. Whether to change the name of the 

Walnut Marketing Board to the 

California Walnut Board; 

6. Whether to add authority to 

reestablish districts, reapportion 

members among districts, and revise 

groups eligible for representation on the 

Board; 

7. Whether to amend Board quorum 

and voting requirements to add 

percentage requirements, to add 

authority for the Board to vote by ‘‘any 

other means of communication’’

(including facsimile), and to add 

authority for Board meetings to be held 

by telephone or by ‘‘any other means of 


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communication’’, providing that all 

votes cast at such meetings shall be 

confirmed in writing; 

8. Whether to amend the order to add 

authority to carry over excess 

assessment funds; 

9. Whether to amend the order by 

adding authority to accept voluntary 

financial contributions; 

10. Whether to amend the order to 

clarify that members and alternate 

members may be reimbursed for 

expenses incurred while performing 

their duties and that reimbursement 

includes per diem; 

11. Whether to amend the order to 

add authority for the Board to appoint 

more than one inspection service as 

long as the functions performed by each 

service are separate and do not 

duplicate each other; 

12. (a) Whether to amend the order by 

broadening the scope of the quality 

control provisions and by adding 

authority to recommend different 

regulations for different market 

destinations; 

12. (b) Whether to amend the order by 

adding authority that would allow for 

shelled walnuts to be inspected after 

having been sliced, chopped, ground, or 

in any other manner changed from 

shelled walnuts, if regulations for such 

walnuts are in effect; 

13. Whether to amend the order by 

adding authority for marketing 

promotion and paid advertising; 

14. Whether to amend the order to 

replace the terms ‘‘carryover’’ with 

‘‘inventory,’’ and ‘‘mammoth’’ with 

‘‘jumbo,’’ to reflect current industry 

procedures; 

15. (a) Whether to amend the order to 

clarify and to simplify the interhandler 

transfer provision and to add authority 

for the Board to recommend to USDA 

methods and procedures, including 

necessary reports, for administrative 

oversight of such transfers; 

15. (b) Whether to amend the order to 

clarify reports required regarding 

interhandler transfers; 

16. Whether to 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. Whether to amend the order by 

adding language that would 

acknowledge that the Board may 

deliberate, consult, cooperate, and 

exchange information with the 

California Walnut Commission; 

18. Whether to amend the order to 

limit the number of terms a member 

may serve on the Board at any one time 

to three consecutive, two-year terms; 

and, 

19. Whether to require that 

continuance referenda are held every six 

years to determine support for 

continuation of the order. 

Findings and Conclusions 

The following findings and 

conclusions on the material issues are 

based on evidence presented at the 

hearing and the record thereof. 

Material Issue Number 1—Marketing 

Year 

Section 984.7, Marketing year, should 

be amended 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. While this marketing 

period was appropriate at the time of 

the order’s promulgation in 1948, 

witnesses stated that it no longer reflects 

the current crop cycle. 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. 

Witnesses also advocated adding 

language to this section that would 

allow the Board to recommend, subject 

to USDA’s approval, alternative 

marketing year periods. Witnesses 

stated that this authority would allow 

the industry to adjust to future changes 

in crop cycles without the need to 

undertake formal amendment of the 

marketing order language. 

Witnesses also stated that conforming 

changes should be made to §§ 984.36, 

Term of office, and 984.48, Marketing 

estimates. According to the hearing 

record, Walnut Marketing Board 

member terms of office should be for a 

period of two years and should end on 

the same day as the marketing year. 

Currently a member’s term ends one 

month prior to the end of the marketing 

year, or on June 30. If implemented, the 

amended term of office would end on 

August 31. 

Market estimates, which evaluate 

California walnut production and 

market activities, should also be 

amended to reflect current-day harvest 

cycles. If implemented, the amended 

market estimate would be calculated 

using handler beginning inventory on 

September 1, and ending inventory on 

August 31, and would coincide with the 

amended marketing year. 

According to the record, market 

estimates are typically calculated 

shortly after the beginning of the 

marketing year, prior to September 20. 

The proposed amendment would 

change this requirement to calculate 

market estimates prior to October 20. 

This proposal would maintain the 

amount of time between the beginning 

of the amended marketing year and the 

required market estimate calculation as 

currently required under the order. 

Record evidence supports amending 

the marketing year for California 

walnuts from August 1 through July 31 

to September 1 through August 31. This 

amendment would update the order’s 

marketing year to reflect the industry’s 

current growing cycle and would 

provide authority for the Board to 

recommend, with USDA approval, 

changes in future marketing year 

periods. Record evidence also supports 

conforming changes proposed to 

§§ 984.36, Term of office, and 984.48, 

Marketing estimates. Section 984.36 

would be amended so that the end of a 

Board member’s term of office would 

coincide with the end of the amended 

marketing year (August 31) after a 

period of two years. Section 984.48 

would be amended so that market 

estimates would be calculated using 

handler beginning and ending 

inventories coinciding with the 

amended marketing year. Market 

estimates would be required to be 

calculated prior to October 20. 

No testimony in opposition to this 

proposed amendment was given. For the 

reasons stated above, it is recommended 

that § 984.7, Marketing year, be 

amended. Additionally, conforming 

changes to §§ 984.36, Term of Office, 

and 984.48, Marketing estimates, should 

also be made. 

Material Issue Number 2—Definition of 

‘‘Pack’’ 

Section 984.13, To handle, should be 

amended to include the act of packing 

walnuts as a handling function. In 

addition, § 984.15, Pack, should be 

amended to include shelling, and 

should 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. ‘‘Pack’’, as currently defined in 

the order means, ‘‘to bleach, clean, 


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grade, or otherwise prepare inshell 

walnuts for market.’’ Pack is not 

currently applicable to shelled walnuts. 

Witnesses stated that the proposed 

amendment to the definition of 

‘‘handle’’ would more accurately reflect 

current industry practices. Witnesses 

described present day situations where 

a grower may have his or her product 

cleaned by a packer. The packer cleans 

and grades the product to meet the 

standards specified under the order and 

prepares the product for market. 

Through the packing process, the 

product is typically inspected and 

certified to meet order requirements. 

Witnesses explained that because the 

current definition of ‘‘handle’’ does not 

include the term ‘‘to pack’’ and the 

activities associated therewith, the 

packer is not subject to the reporting or 

assessment requirements under the 

order. Witnesses explained that because 

inspection and certification of the 

product is conducted under the care of 

the packer, subjecting the packer to 

reporting and assessment requirements 

of the order would result in a more 

efficient and accurate tracking system 

for California walnuts. Witnesses stated 

that packers should be responsible for 

reporting the amount of walnuts 

processed by their facility to the Board, 

and for paying assessments on those 

walnuts, as is currently required for 

walnut handlers. Witnesses also 

explained that if this amendment were 

implemented there would be 

approximately 5 packer entities that 

would qualify as handlers under the 

new definition. 

Witnesses stated that the definition of 

‘‘pack’’ under the order should be 

revised to include the act of shelling 

and should apply to both inshell and 

shelled walnuts. Currently, the 

definition of ‘‘pack’’ only applies to 

activities preparing inshell walnuts for 

market. 

In the past, packers packed primarily 

inshell walnuts for sale during 

traditional holiday seasons and were not 

responsible for inspection certification 

prior to shipping product to market. At 

that time, shelled walnuts did not 

comprise a large portion of the market, 

and therefore were not included. 

According to the record, shelled 

walnuts have become increasingly 

important in terms of industry sales, 

specifically to the baking and 

confectionary industries. As a result, 

many packers now include the function 

of shelling as part of the activities 

undertaken to prepare walnuts for 

market. For this reason, witnesses stated 

that act of ‘‘shelling’’ should be 

included in the definition of ‘‘pack.’’

Record evidence supports adding the 

act of packing to the definition of 

handle. This amendment would 

facilitate more accurate tracking of 

California walnuts prepared for market, 

including inspection and reporting 

requirements as they relate to the 

collection of assessments. Record 

evidence also supports adding the act of 

shelling to the definition of ‘‘pack’’ as it 

would modify the term to be applicable 

to both shelled and inshell walnuts. 

There was no opposition testimony 

given against this proposed amendment. 

For the reasons stated above, it is 

recommended that § 984.13, To handle, 

should be amended to include the act of 

packing walnuts as a handling function. 

In addition, § 984.15, Pack, should be 

amended to include the term ‘‘to shell’’

and the definition should be modified 

so that packing is applicable to both 

inshell and shelled walnuts. 

Material Issue Number 3a—

Restructuring of the Board 

Sections 984.35, Walnut Marketing 

Board, and § 984.14, Handler, should be 

amended to remove all references to 

cooperative membership on the Board, 

to redistribute member seats among 

districts, and to provide designated 

seats for any handler handling 35 

percent or more of production, if such 

handler exists. 

Witnesses explained that when the 

order was established, a cooperative 

marketing association represented a 

majority share of California walnut 

production. Board structure 

accommodated representation of this 

large cooperative by allocating two 

grower and two handler seats out of a 

total of 10 member seats to cooperatives. 

The remaining seats were divided 

between the order’s two districts, with 

one grower and one handler member 

being selected from each district, 

respectively, for a total of four noncooperative member positions. 

An additional grower seat was 

awarded to cooperatives if they 

represented more than 50 percent of 

production. Otherwise, the additional 

grower seat was filled as an at-large noncooperative member position. Only 

growers not affiliated with cooperatives 

were eligible to fill the at-large seat, and 

that member could be from either 

district. Lastly, the Board nominated a 

public member, who was not affiliated 

with the growing or handling of 

California walnuts. Provisions for Board 

structure in the absence of a large 

cooperative was not contemplated when 

the order was promulgated, and thus 

was not provided for in the order. 

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). However, witnesses 

recommended modifying the allocation 

of Board representation according to 

two possible scenarios. The two 

scenarios include: (1) Membership 

allocation that accommodates the 

existence of a handler handling 35 

percent or more of production and, (2) 

membership allocation in the absence of 

such handler. 

Witnesses stated that in the first 

scenario, a handler handling 35 percent 

or more of the crop would be afforded 

a designated number of seats, and 

nominations for those seats would be 

conducted by the handler. The Board 

would conduct all other member 

nominations. 

In the second scenario, none of the 

Board membership positions would be 

allocated to a specific entity, and all 

nominations would be conducted by the 

Board. Proposed modifications to 

nomination procedures are further 

discussed under Material Issue No. 3b. 

Evidence presented at the hearing 

outlines the following Board structure 

and membership allocation in the event 

that a handler representing 35 percent 

or more of production exists: 

The Board would consist of 10 

members and alternates, including one 

public member and alternate. Two 

handler members and two grower 

members would represent the handler 

handling 35 percent or more of 

production. Grower members filling 

these seats would be growers that 

deliver their product to that handler. 

Handler members would be either 

employees or officers of that handler. 

Two handler members would 

represent handlers that do not handle 35 

percent of production. Two grower 

members would be growers that do not 

market their product through the 

handler that handles 35 percent or more 

of the production. One grower member 

would represent District 1, and one 

grower would represent District 2. 

One member would be an at-large 

grower member who does not market 

his or her product through the handler 

that handles 35 percent or more of the 

production. A public member would be 


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nominated by the Board and would 

have no affiliations with the industry as 

a handler or grower. 

In the event that no handler handles 

35 percent or more of the crop, the 

following Board structure is proposed: 

The Board would consist of 10 

members and alternates, including one 

public member and alternate. Two 

handler members and two grower 

members would represent District 1. 

Two handler members and two grower 

members would represent District 2. 

One member would represent the 

production area at-large. A public 

member would be nominated by the 

Board and would have no affiliations 

with the industry as a grower or a 

handler. 

The proposed amendment and 

hearing record pertaining to this 

scenario does not specify whether the 

at-large member seat is allocated to a 

grower or handler. However, as 

previously discussed, witnesses 

advocated that the allocation of member 

seats between growers and handlers 

should not change as a result of the 

amendment. Current order language 

allocates the at-large seat to growers in 

all situations. In addition, scenario 1 of 

the proposed amendment allocates the 

at-large seat to growers. USDA therefore 

recommends modifying the proposed 

amendatory language to specify that the 

at-large seat under scenario 2 be 

allocated as a grower seat. This would 

achieve the intent of the industry by 

making the number of grower and 

handler seats consistent with the 

allocation under current order 

requirements. 

Witnesses stated that 35 percent was 

determined to be a reasonable level at 

which a handler should be afforded 

designated seats on the Board. 

Witnesses also stated that the 

determination of whether or not a 

handler qualifies as handling 35 percent 

or more of the crop should be based on 

a calculation which averages the crop 

handled for the two years prior to the 

year in which the nominations are 

made. 

Witnesses recognized that the 

potential scale of the impact of Board 

recommendations increases with the 

volume of product handled, and that 

any entity holding a major interest at or 

above the proposed 35 percent should 

be afforded representation. According to 

record evidence, there are 44 handlers 

that handle California walnuts. Current 

distribution of industry production 

among those handlers indicates that any 

handler handling 35 percent or greater 

of the total crop would be a major 

handler and therefore should be 

guaranteed representation on the Board. 

Witnesses also provided testimony 

regarding allocation of Board 

membership in the event that there were 

two or more handlers handling 35 

percent or more of production. 

Witnesses testified that the proposed 

language in Material Issue No. 6, 

Authority to Reestablish Districts and 

Change Board Structure, includes a 

provision that would allow the Board to 

make recommendations, subject to the 

Secretary’s approval, to revise the 

groups eligible to be represented, if such 

situation occurred. 

In addition to amending § 984.35, 

Walnut Marketing Board, witnesses 

identified necessary changes in 

§ 984.14, Handler. The current order 

definition of handler includes the term 

‘‘cooperative handler.’’ Witnesses stated 

that a revised definition of the term 

handler would remove the distinction 

between cooperative and independent 

handlers and simplify the definition. 

No opposition to this proposed 

amendment was offered at the hearing. 

Record evidence supports the 

amendment of § 984.35, Walnut 

Marketing Board, and therefore, 

§ 984.14, Handler, should be amended 

to remove all references to cooperative 

membership on the Board and to 

provide designated seats for a major 

handler, if such handler exists. 

This proposal should also be modified 

to clarify that the at-large seat proposed 

in the revised Board structure for the 

industry when a handler handling 35 

percent or more of the crop does not 

exist should be allocated as an at-large 

grower seat. 

Material Issue Number 3b—

Nominations 

Sections 984.37, Nominations, and 

984.40, Alternate, should be amended to 

reflect proposed changes in the Board 

structure, as outlined in Material Issue 

No. 3a. 

According to record evidence, current 

nomination procedures are designed to 

accommodate cooperative membership 

on the Board. As described in Material 

Issue No. 3a, above, Board membership 

is presently configured to include 4 

cooperative seats (2 grower and 2 

handler), 4 non-cooperative seats (2 

grower and 2 handler), one grower seat 

that is either a cooperative or noncooperative seat, depending on the 

cooperative’s share of production, and 

one public member seat. 

Current nomination procedures allow 

for all cooperative seat nominees to be 

selected by the cooperative and 

forwarded to the Secretary for approval 

and appointment. According to the 

record, current nomination procedures 

do not specify the method of nominee 

selection by the cooperative. The 

cooperative nominees selection process 

is independent of the Board. 

All noncooperative seat nominees are 

selected through a ballot nomination 

process overseen by the Board staff, and 

forwarded to the Secretary for approval 

and appointment. Board staff is 

responsible for identifying all parties 

interested in filling Board member seats. 

Once a list of nominee candidates is 

identified, nomination ballots are sent 

out to all growers and handlers not 

associated with the cooperative. Board 

member nominations are given to the 

parties receiving the highest and second 

highest number of votes for their District 

and member seat. The names of the 

nominees are then forwarded to USDA 

for approval and appointment by the 

Secretary. 

The public member is selected by the 

Board members, and then forwarded to 

the Secretary for approval and 

appointment. 

According to the hearing record, the 

revised nomination procedures would 

be as follows: 

In the event that a handler who 

handles 35 percent or more of the crop 

exists, nominees to fill Board seats 

designated for that handler would be 

selected by that handler and forwarded 

to the Board for approval. The Board 

would include those nominations with 

the other nominees and submit them to 

the Secretary for approval and 

appointment. 

Accordingly, based on the hearing 

record, USDA recommends modifying 

the proposed language in § 984.37(c)(1) 

as published in the Notice of Hearing by 

removing the following language: ‘‘In 

such a manner that is consistent with 

the requirements of nominations of 

growers conducted by the Board. The 

two persons receiving the highest 

number of votes for the grower positions 

attributed to that handler (Groups (b)(2) 

of § 984.35) shall be nominees. The two 

persons receiving the third and fourth 

highest number of votes shall be 

designated as alternates.’’ The removed 

statement should be replaced with the 

following statement: ‘‘And the names of 

the nominees shall be forwarded to the 

Board for approval and appointment by 

the Secretary.’’ The USDA also 

recommends modifying the proposed 

language in § 984.37(c)(2) as published 

in the Notice of Hearing by removing 

the following language: ‘‘In such a 

manner that is consistent with the 

requirements of nominations of 

handlers conducted by the Board. The 

two persons receiving the highest 

number of votes for the major handler 

positions shall be nominees. The two 

persons receiving the third and fourth 


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highest number of votes shall be 

designated as alternates.’’ The removed 

statement should be replaced with the 

following statement: ‘‘And the names of 

the nominees shall be forwarded to the 

Board for approval and appointment by 

the Secretary.’’

Witnesses also stated that the 

determination of whether or not a 

handler qualifies as handling 35 percent 

or more of the crop should be based on 

a calculation which averages the crop 

handled for the two years prior to the 

year in which the nominations are 

made. 

Proposed language published in the 

Notice of Hearing does not state this 

requirement. Moreover, the hearing 

record does not state how the 35 percent 

threshold should be applied for the 

nomination of new Board members if 

this proposed amendment were to be 

implemented in 2007, when a two year 

average calculation would capture the 

transition of the cooperative to a 

publicly traded company. For this 

reason, USDA recommends the 

following calculation and proposes to 

modify order language accordingly: 

If this proposed amendment is 

implemented, the 35 percent threshold 

for the first nominations held following 

implementation should be calculated 

using an average of the crop handled for 

the year in which nominations are made 

and the crop handled for the year prior 

to the nomination. This 

recommendation considers the recent 

transition of the industry’s largest 

cooperative to a publicly held company. 

For all future nominations, the 35 

percent crop handling calculation 

should be based on the average of the 

crop handled for the two years prior to 

the year in which nominations are 

made. 

Further, USDA also proposes adding 

the following language to the beginning 

of § 984.37(c), as published in the 

Notice of Hearing: ‘‘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 on 

the average of the two years prior to the 

year in which nominations are made.’’

Witnesses clarified that any grower 

delivering all of his or her production to 

the handler with designated grower 

seats would be considered eligible for 

nomination by that handler. Any grower 

delivering part of his or her production 

to the handler in question would have 

the option of selecting whether or not 

they would participate in that handler’s 

nomination process and serve as a 

grower member nominated to fill that 

handler’s grower representation on the 

Board. A grower would not be eligible 

for nomination as both a grower 

representative of a major handler and as 

an independent grower on the Board. 

According to the hearing record, 

owners, employees or officers of the 

handler handling 35 percent or more of 

the crop would be eligible as nominees 

for that handler’s designated handler 

seats. 

All nominees for remaining, nonhandler-designated seats (with the 

exception of the public member) would 

be selected through a ballot nomination 

process overseen by the Board staff (the 

current non-cooperative nominee 

selection process, described above), and 

then forwarded to the Secretary for 

approval and appointment. The public 

member nominee would be selected by 

the Board and forwarded to the 

Secretary for approval and appointment. 

Record evidence states that in the 

event a handler handling 35 percent or 

more of the crop does not exist, all 

Board nominees (with the exception of 

the public member) would be selected 

through a ballot nomination process (the 

current non-cooperative nominee 

selection process, described above). 

Nominees would then be forwarded to 

the Secretary for approval and 

appointment. The public member would 

be selected by the Board and then 

forwarded to the Secretary for approval 

and appointment. 

Regarding proposed amendments to 

§ 984.40, this section would be modified 

by removing all references to 

cooperative member seats in order to 

conform with the proposed changes to 

§ 984.37. USDA recommends modifying 

the amendatory text as published in the 

Notice of Hearing by removing the last 

sentence of paragraph (b) of this section 

that refers to qualification of handler 

Board members to serve as temporary 

alternate members for other handlers. It 

was not the intention of the Board to 

propose this language and it was 

published in the Notice of Hearing by 

error. 

No opposition to this proposed 

amendment was offered at the hearing. 

Record evidence supports the 

amendment of § 984.37, Nominations, 

and 984.40, Alternate, to reflect 

proposed changes in the Board 

structure, as outlined in Material Issue 

No. 3a. Section 984.37(c), and 

paragraphs §§ 984.37(c)(1) and 

984.37(c)(2) should also be modified as 

recommended by USDA above. The last 

sentence of § 984.40 should also be 

removed, as recommended by USDA. 

Material Issue Number 4—Qualify by 

Acceptance 

Section 984.39, Qualify by 

acceptance, should be amended to 

require Board nominees to submit a 

written qualification and acceptance 

statement prior to selection by USDA. 

This proposed amendment would 

modify the current acceptance 

procedure for persons nominated to 

serve on the Board. Currently, the 

acceptance procedure for persons 

nominated and selected to serve on the 

Board involves a two-step process. First, 

persons nominated for consideration 

and possible appointment to the Board 

by USDA are required to complete a 

form indicating their eligibility to sit as 

a member of the Board. Once appointed 

by USDA, nominees must then sign an 

additional form indicating their 

acceptance of the appointment. 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. 

The change means that when a nominee 

submits a statement confirming their 

eligibility, the nominee will also in that 

statement agree to serve if the Secretary 

appoints the nominee to the Board. 

Record evidence supports this 

proposed change. No opposition to this 

proposed amendment was presented at 

the hearing. For the reasons outlined 

above, § 984.39, Qualify by acceptance, 

should be amended. 

Material Issue Number 5—California 

Walnut Board 

Sections 984.6, Board, and 984.35, 

Walnut Marketing Board, should be 

amended to change the name of the 

Walnut Marketing Board to the 

California Walnut Board. 

Witnesses explained that the current 

use of the word ‘‘marketing’’ in the 

Board’s title is confusing to persons not 

familiar with federal marketing order 

programs. The Board’s activities involve 

generic promotion of California walnuts. 

Witnesses stated that the proposed 

name of ‘‘California Walnut Board’’

would more accurately represent the 

Board’s responsibilities. 

Witnesses also stated that identifying 

their industry’s product as a product of 

California is particularly important in 

foreign markets, where the California 

name is often associated with a high 

level of quality. 

Record evidence supports this 

proposed change. No opposition to this 

proposed amendment was presented at 

the hearing. For the reasons outlined 


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above, § 984.6, Board, should be 

amended. 

Material Issue Number 6—Authority To 

Reestablish Districts and Change Board 

Structure 

A new paragraph (d) should be added 

to § 984.35, Walnut Marketing Board, to 

add authority to the order to reestablish 

districts, reapportion members among 

districts, and 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 to the Secretary 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. 

Testimony indicates that significant 

changes have occurred in both the 

production base and industry 

demographics of the California walnut 

industry since the order was 

implemented. These changes suggest 

that flexibility in adapting to the 

changing character of the industry is 

important to the administration of the 

order. Witnesses stated that the order’s 

ability to remain effective over time 

would be reliant on its ability to change 

with the needs of the industry. In this 

regard, witnesses proposed adding 

authority to the order that would allow 

for certain aspects of the Board’s 

structure to be reconsidered, including: 

Reestablishment of districts, 

reapportionment of members among 

districts, and revisions to groups eligible 

for representation on the Board. 

Witnesses stated that the authority to 

reapportion and redistrict districts 

within the production area would be 

important. According to the hearing 

record, walnut production has shifted 

over time. Competition between 

agriculture and urban growth for land 

has served as an incentive for walnut 

production to locate to areas previously 

not cultivated. Moreover, new varieties 

of walnuts have allowed growers to 

produce walnuts in areas that would not 

have been suited for traditional varieties 

of walnuts. Witnesses stated that the 

need to adjust district boundaries, or 

reallocate representation of Board seats 

among districts, would be important to 

maintain accurate representation of 

shifting production within the 

production area. 

According to the record, the authority 

to revise groups eligible for 

representation on the Board would 

include modifying the proportion of 

grower to handler seats on the Board, as 

well as modifying representation of 

entities either producing or handling a 

major portion of the crop. 

Witnesses testified that careful 

industry analysis would lead to sound 

recommendations to USDA regarding 

reapportionment of members among 

districts, reestablishment of districts, or 

revisions in groups eligible for 

representation on the Board. If this 

authority were added, the Board could, 

at regular meetings, review its current 

structure using the points of 

consideration mentioned above. Upon 

completing this analysis, the Board 

could make a recommendation to USDA 

for such changes described above. 

Implementation of this authority would 

allow these changes to be pursued 

through the informal rulemaking 

process. 

Given the changes that the California 

walnut industry has seen over time, 

flexibility to change the composition of 

the Board in step with the evolving 

needs of the industry would be an 

important tool. Witnesses stated that 

this authority would allow the Board to 

more effectively represent the industry 

as production and member 

representation demands shift. It would 

ensure that the Board appropriately 

represented the industry. 

There was no opposition to the above 

proposal. Record evidence supports 

amending the order to add authority to 

reestablish districts, reapportion 

members among districts, and revise 

groups eligible for representation on the 

Board. This amendment would allow 

the Board, given due analysis and 

consideration of key factors and USDA 

approval, to more quickly adapt to 

changes within the industry. 

Accordingly, USDA is proposing that a 

new paragraph (d) be added to § 984.35, 

as proposed. 

Material Issue Number 7—Voting 

Procedures 

Section 984.45, Procedure, should be 

amended to add percentage 

requirements to quorum and voting 

procedures, to add authority for Board 

meetings to be held by telephone or by 

‘‘any other means of communication’’, 

and to add authority for the Board to 

vote by ‘‘any other means of 

communication.’’ This proposal would 

also add authority for the Board to 

recommend the minimum number of 

votes that must be met when voting by 

any of those methods, and any other 

necessary procedures. In addition, this 

proposal would result in a conforming 

change to § 984.48(a), Marketing 

estimates and recommendations. 

Witnesses stated that references to the 

meeting quorum requirement in this 

section should be amended to include a 

percentage equivalent of the current sixout-of-10-member minimum, or sixty 

percent. In addition, witnesses 

supported modifying the order language 

regarding voting requirements to state 

that a sixty-percent 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. 

Witnesses stated that a conforming 

change should also be made to 

§ 984.48(a), Marketing estimates and 

recommendations. The proposed 

conforming change would change the 

current six-out-of-10-member minimum 

vote requirement for the adoption of a 

marketing policy to sixty percent of the 

Board. 

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 time savings 

while still allowing the Board to 

conduct its business. For example, 

telephone or videoconferencing 

technology would be helpful in 

providing Board meeting flexibility 

during harvest season when Board 

members find it more challenging to 

take time away from the field. 

Additionally, short assembled 

meetings held to discuss noncontroversial or administrative issues do 

not justify Board members’ time and 

travel expenses. For this reason, 

witnesses stated that the authority to 

meet via teleconference call or 

videoconference, or any other means of 

communication recommended by the 

Board, could result in a more effective 

use of each member’s time. 

Witnesses stated that teleconferencing 

or videoconferencing should only be 

used as a method for conducting 

meetings when the meeting agenda does 

not contain issues that require a 

significant amount of deliberation, such 

as establishing the recommended rate of 

assessment. 


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According to the record, voting 

requirements for meetings other than 

assembled meetings should be 

established through informal 

rulemaking by USDA upon 

recommendation of the Board. 

Witnesses stated that procedures 

specific to each different method of 

meeting may need to be established. For 

example, while videoconferencing 

involves technology that allows each 

member to see the other members in 

attendance at the meeting, witnesses 

stated that any voting should continue 

to be verified through a written 

accounting that confirms the original 

votes made at the meeting. Similarly, 

votes made by teleconference (or 

telephone) would need to be followed 

by the submission of signed votes to the 

Board office by mail, or by fax or e-mail 

that contains a scanned copy of the 

original with the member’s signature. 

Thus, witnesses stated that adding 

authority for the Board to recommend 

voting requirements and procedures 

would be important in order to ensure 

accurate and fair voting methods for 

each form of communication. 

Witnesses speaking in favor of this 

amendment identified a sentence in 

paragraph (c) of § 984.45 as published in 

the Notice of Hearing that was not 

intended to be included in the proposed 

language. This sentence reads, ‘‘When 

any proposition is to be voted on by any 

of these methods, one dissenting vote 

shall prevent its adoption.’’ Witnesses 

stated that this sentence is part of the 

current order language and was 

intended to be replaced the following 

sentence: ‘‘The Board, with the approval 

of the Secretary, shall prescribe the 

minimum number of votes that must be 

cast when voting is by any of these 

methods, and any other procedures 

necessary to carry out the objectives of 

this paragraph.’’

Witnesses stated that it is the intent 

of the Board that voting guidelines for 

all types of non-traditional meetings can 

be recommended and adopted as 

appropriate for each type of technology 

used. For this reason, USDA 

recommends modifying the proposed 

language for § 984.45 as published in 

the Notice of Hearing by removing the 

sentence erroneously left in the 

proposed language. 

There was no opposition testimony 

given against this proposed amendment. 

For the reasons stated above, § 984.45, 

Procedure, should be amended to add 

percentage requirements to quorum and 

voting procedures, to add authority for 

the Board to vote by ‘‘other means of 

communication’’, and to add authority 

for Board meetings to be held by 

telephone or by ‘‘any other means of 

communication.’’ The Board would be 

authorized to recommend voting 

procedures for votes taken by means 

other than at traditional meetings. The 

proposed language for this section 

should be modified as recommended by 

USDA. This amendment should also 

result in a conforming change to 

§ 984.48(a), Marketing estimates and 

recommendations. 

Material Issue Number 8—Carryover of 

Excess Assessment Funds 

Section 984.69, Assessments, should 

be amended to add authority to 

carryover 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. 

Record evidence supports that 

allowing a monetary reserve to be 

maintained would provide flexibility to 

the Board’s in meeting its financial 

planning responsibilities. If the 

amendment were implemented, the 

Board would have the authority to 

decide, at regular Board meetings, 

whether or not to establish a monetary 

reserve. Currently, the Board may 

refund any excess assessment funds on 

a pro-rata basis to each handler or apply 

excess funds to defray administrative 

expenses. These options would remain 

available to the Board. 

Record evidence supports amending 

the order to add authority to carryover 

excess assessment funds as a financial 

reserve. There was no opposition 

testimony given against this proposed 

amendment. For the reasons stated 

above § 984.69, Assessments, should be 

amended. 

Material Issue Number 9—Contributions 

A new § 984.70, Contributions, should 

be added to the order to allow the Board 

to accept voluntary contributions to pay 

for expenses incurred under § 984.46, 

Research and development. 

Witnesses stated that the order 

currently does not provide authority to 

accept voluntary contributions of any 

kind. 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. Record evidence 

indicates that any contributions used to 

further production research, market 

research and market development 

projects would not only benefit the 

industry, but also the consumer, 

through improved production 

technology and product information. 

There was no opposition testimony 

given against this proposed amendment. 

For the reasons stated above, a new 

§ 984.70, Contributions, should be 

added to the order to allow the Board 

to accept voluntary contributions. 

Material Issue Number 10—

Reimbursement of Expenses 

Section 984.42, Expenses, should be 

amended to clarify that members and 

alternate members may be reimbursed 

for expenses incurred while performing 

their duties. 

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 will be incurred. 

For the reasons outline above, 

§ 984.42, Expenses, should be amended. 

Record evidence supports this 

amendment, and no opposition to this 

proposal was offered at the hearing. 


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Material Issue Number 11—Alternative 

Inspection Services 

Section 984.51 of the order provides 

the Board with the authority to 

designate an inspection service for 

mandatory certification of product 

under the order. This section should be 

amended to allow the Board to 

designate more than one inspection 

service, as long as the functions 

performed by each service shall be 

separate so as not to duplicate each 

other. Inspection and certification 

requirements ensure compliance with 

any regulations in effect under the 

authority of § 984.50, Grade quality and 

size regulations. 

The purpose of this proposal is to 

allow handlers to take advantage of 

USDA’s alternative inspection programs 

such as the Customer Assisted 

Inspection Program (CAIP) and the 

Partners in Quality Program (PIQ). 

Handlers who do not wish to use the 

alternative inspection services offered 

by USDA would continue to use the 

services of the Dried Food 

Administration of California (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) that do not duplicate 

each other. Accordingly, USDA 

recommends modification of the 

proposed regulatory language to clarify 

that the two inspection services will not 

duplicate the services of each other. 

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. 

Since the order’s inception, the 

California walnut industry has used 

end-line inspection services provided 

by DFA. Under this scenario, samples of 

packed walnuts are examined and 

certified by licensed DFA inspectors at 

the end of the handling and packing 

process. 

The Federal-State Inspection Service 

has developed effective, less costly 

alternatives to traditional end-line 

inspection programs. One alternative, 

the PIQ program, 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 USDAapproved auditors. 

Under 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. 

Witnesses at the hearing testified that 

a California walnut handler should be 

provided the flexibility to use either the 

DFA for traditional inspections, such as 

end-line or lot inspections or alternative 

programs such as PIQ or CAIP offered 

by USDA. Either inspection service can 

determine whether walnuts meet the 

minimum order requirements. 

According to the hearing record, if 

this amendment was implemented, total 

industry savings of $1 million or more 

could be realized on an annualized 

basis. Financial impact calculations 

provided by the Board indicate that 

introducing the option of using USDA 

PIQ and CAIP programs could result in 

an average per handler savings of 

$156,067 for the industry’s seven largest 

handlers. Given that the PIQ and CAIP 

programs are most beneficial for large 

handlers, as potential savings are 

correlated with economies of scale, it is 

unlikely that the smaller handlers 

would opt for these programs. Witnesses 

stated that no change in inspection costs 

is expected for handlers remaining with 

traditional DFA inspection services. 

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. 

Marketing order administrative bodies 

have the responsibility of locally 

administering marketing order 

programs, which includes monitoring 

industry’s compliance with order 

requirements, and reporting any 

violations to the Department for 

enforcement measures. 

While the Department supports and 

encourages innovation and development 

of cost-saving procedures, it is 

important that the program maintain its 

integrity and that any quality or size 

regulations in effect are not 

compromised. For this reason, USDA 

supports providing the Board with 

authority to recommend rules and 

regulations to administer this proposed 

amendment. To this end, the last 

sentence of paragraph (a) of § 984.51 

should be modified to read as follows: 

The Board, with the approval of the 

Secretary, may prescribe procedures for 

the administration of this provision. 

According to the hearing record, the 

industry’s commitment to comply with 

grade and size regulations would not be 

compromised by allowing the industry 

to take advantage of the inspection 

service that best meets their needs. The 

authority to designate more than one 

inspection service would be a practical 

tool for the industry. It would allow 

grade and size standards to be 

maintained, yet could allow for time 

and cost-saving opportunities. 

No opposition to this proposed 

amendment was offered at the hearing. 

Record evidence supports amending 

§ 984.51 to allow more than one 

inspection service to be designated by 

the Board to inspect California walnuts. 

This proposal should also be modified 

as recommended by USDA above. 

Material Issue Number 12a—Quality 

Regulations and Different Regulations 

for Different Market Destinations 

Section 984.50, Grade and size 

regulations, should be amended to 

broaden the scope of quality regulations 

issued under the order. In addition, the 

authority for the Board to recommend 

different regulations for different market 

destinations should be added to this 

section. 

Currently the order provides for the 

establishment of minimum grade 

regulations, but does not specify 

authority for the Board to recommend 

other types of quality regulations. 

Witnesses stated that adding this 

authority to the order would be an 

important tool. 

Witnesses explained that the intent of 

this proposal is to broaden the scope of 

the order’s authority to include the 

ability to regulate other factors of 

quality in addition to the current grade 

regulations, which reflect the U.S. Grade 

Standards for Walnuts. Quality 

standards, other than minimum grade, 

would be recommended by the Board 

for approval by USDA and would 

regulate certain product characteristics 

currently not regulated by U.S. Grade 

Standards for inshell or shelled walnuts. 

Other quality regulations could regulate, 

for example, moisture content or 

aflatoxin levels, if such proposed 

regulations were approved by USDA. 

These additional quality regulations 

could also regulate characteristics 


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currently regulated by U.S. Grade 

Standards at levels more stringent than 

existing grade regulations, if warranted 

for a specific market destination. 

According to the hearing record, the 

order currently allows for the 

establishment of more restrictive 

minimum grade standards. The 

proposed amendment would replace 

this language with language specifying 

the Board’s authority to recommend 

other quality standards in addition to 

minimum grade. Witnesses explained 

that the proposed modification in the 

order language would clarify that any 

additional quality standards established 

under the order would be guidelines 

recommended by the Board and would 

be different from grade regulation based 

on USDA grade standards. Witnesses 

stated that this distinction would reduce 

possible confusion in the administration 

of such standards. 

According to the hearing record, the 

authority to establish different 

regulations for different market 

destinations would provide the Board 

with authority to formalize current 

trends in export market product 

specifications. Witnesses stated that 

many customers in export markets have 

unique product specifications in place 

to meet the consumer tastes and needs 

of their market. California walnut 

handlers shipping to those markets are 

already meeting those product 

specifications. 

Witnesses explained that this 

proposed authority would result in the 

Board’s ability to recommend uniform 

standards for all California walnut 

handlers shipping to specific export 

markets, if such regulation is needed. 

Different regulations for different market 

destinations would ensure that all 

product shipped into a particular export 

market would meet the same 

requirements. Product uniformity 

among California handlers serving those 

markets would ensure uniform quality 

of product, and a level playing field for 

foreign customers who are comparing 

product services from multiple 

handlers. 

According to the hearing record, the 

addition of this authority is not 

intended to address any specific export 

market at this time. Witnesses stated 

that the market is currently functioning 

well, with quality product being 

shipped to consistently meet foreign 

customers’ product specifications. 

Witnesses stated, however, that the 

export market has become increasingly 

important to the California walnut 

industry. Witnesses noted that export 

market demand for California walnuts 

has increased nearly 35 percent over the 

past 5 years, making up a large portion 

of the California walnut industry’s 

ability to maintain positive producer 

returns within the context of increasing 

yields per acre and total industry 

production. Witnesses stated that 

ensuring product quality and uniformity 

is vital to the California walnut industry 

and its ability to maintain viable export 

market relationships. For this reason, 

witnesses stated that the authority to 

establish uniform guidelines for specific 

market destinations would be an 

important tool. 

According to the hearing record, any 

proposed regulation specific to different 

market destinations would require 

deliberation among the Board members 

and approval by USDA. 

Record evidence supports amending 

the order to broaden the scope of 

regulations issued under the order to 

include additional types of quality 

regulations. In addition, the authority 

for the Board to recommend different 

regulations for different market 

destinations should be added to this 

section. No opposition to this proposed 

amendment was offered at the hearing. 

Material Issue Number 12b—Processing 

of Shelled Walnuts 

Section 984.52, Processing of shelled 

walnuts, should be amended by adding 

authority to 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. The Act allows for the regulation 

of processed walnuts. This proposal 

would establish authority for the Board 

to recommend such regulations, subject 

to approval by the Secretary. 

According to the hearing record, the 

order currently provides that handlers 

may only reprocess previously 

inspected walnuts that have been 

certified as meeting any size and grade 

regulations in effect. The order 

specifically provides that shelled 

walnuts may not be sliced, chopped, 

ground or otherwise altered unless such 

walnuts have been previously certified. 

Witnesses explained that this language 

was appropriate for the technology 

available to the industry when the order 

was promulgated. Such provisions were 

necessary in order to provide assurances 

that off-grade product did not enter into 

the stream of commerce. 

Witnesses explained that more 

effective technology, which relies on 

laser color sorters and highly automated 

screening processes to eliminate defects 

throughout the sorting process, is now 

widely used by the industry. This 

current technology provides handlers 

with a sophisticated system of 

assurances that product entering the 

market place meets minimum quality 

standards. For this reason, witnesses 

advocated amending the order language 

to allow the Board to recommend 

testing, certification, and minimum 

standards for processed walnuts. 

Witnesses stated that the reliability of 

current technology is such that 

provisions for handlers to inspect and 

certify product after further processing 

could be established, and that such 

provisions would facilitate flow of 

product through processing facilities yet 

maintain a minimum standard of 

quality. 

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 walnut 

products for which no USDA standards 

currently exist. 

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. 

According to the hearing record, the 

proposed language would allow for 

walnuts to be sliced, chopped, ground 

or in any other manner altered if quality 

for such walnuts were established under 

§ 984.50(d), Additional grade, quality 

and size regulation, as discussed in 

Material Issue No. 12(a), above. This 

amendment would also establish a new 

paragraph (c) to § 984.52, Processing of 

shelled walnuts, that would provide 

authority for the Board to establish any 

procedures as deemed necessary to 

insure that all walnuts are inspected 

prior to being placed into the stream of 

commerce. The proposed language 

would allow the Board to create 

guidelines that would ensure that 

processed walnut product would meet a 


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minimum standard, and that it would be 

certified as compliant with the 

regulation in effect under the order. 

Implementation of this authority would 

allow these changes to be pursued 

through the informal rulemaking 

process. 

Given the changes that the California 

walnut industry has seen over time, 

flexibility to recommend regulation 

regarding the further processing of 

shelled walnuts prior to inspection and 

certification would be an important tool. 

Witnesses explained that as consumer 

demands for further processed product 

grows, increases in efficiency of product 

flow through the processing facilities 

would enable handlers to handle 

product more quickly, better satisfy 

their customers, as well as potentially 

reduce costs. 

Record evidence supports amending 

the order to add authority to allow for 

shelled walnuts to be inspected after 

having been sliced, chopped, ground, or 

in any other manner changed from 

shelled walnuts. The record also 

supports amending the language to 

provide authority for the Board to 

recommend any necessary testing, 

certification or minimum quality 

standards for such product to ensure 

that the integrity of any California 

walnut product entering the stream of 

commerce is kept. 

There was no opposition to the 

proposed amendment offered at the 

hearing. For the reasons outlined above, 

Section 984.52, Processing of shelled 

walnuts, should be amended as 

proposed. 

Material Issue Number 13—Paid 

Advertising and Promotion 

Amend the order by adding authority 

for marketing promotion and paid 

advertising. This proposal would amend 

§ 984.46, Research and development. 

This order provision currently 

authorizes only production research, 

marketing research and development 

activities. 

This authority would enable the 

Board to develop more efficient 

marketing and distribution techniques 

for walnuts produced in the production 

area. Promotional activities, including 

paid advertising, could lead to greater 

market exposure and consumer demand 

for California walnuts, thereby 

supporting increased returns for 

growers. 

According to the record, this authority 

would enable the Board to fund 

promotion efforts. Such activities could 

be conducted by the Board itself or be 

contracted out to other parties. 

Witnesses stated that it is important to 

include promotion and paid advertising 

under the Federal marketing order, as 

these activities are vital to increasing 

demand for walnuts which promotes the 

long-term health of the industry. 

The record evidence shows that 

walnut acreage in California has 

increased from 193,000 acres in 1997 to 

an estimated 219,000 acres in 2005. In 

that same time period, overall tonnage 

of California walnuts increased from 

269,000 tons to 355,000 tons, or an 

increase in average yield from 1.39 tons 

per acre to 1.62 tons per acre. Witnesses 

testified that acreage and production 

will continue to increase, making 

promotion and paid advertising all that 

more important. 

Witnesses explained that the 

California Walnut Commission 

(Commission), and other entities within 

the industry, has been responsible for 

past promotion and paid advertising 

activities. Demonstrated success of these 

promotion activities has led to industry 

support for adding this authority to the 

order. Testimony indicated that current 

marketing and promotion activities 

range from in-store promotion activities, 

to featured articles in magazines, 

inclusion of walnuts in cooking shows 

and promotion by celebrity chefs, and 

paid advertising. 

A representative of the Board 

testifying at the hearing stated that, 

since 2001, both volume and prices of 

California walnuts have shown annual 

increases. Increased market demand can 

be tied to the Commission’s success in 

working with the market outlets, the 

retail sector and consumers, with 

domestic consumption increasing by 

over 34 percent in the past 5 years. 

Witnesses attribute the industry’s ability 

to successfully meet the challenge of 

increasing production to these 

promotion activities. 

Witnesses explained that the industry 

wants to further its ability to conduct 

these activities by adding promotion 

authority to the order. According to the 

hearing record, authority to conduct 

promotion and paid advertising under 

the order would ensure that those 

activities continue in a consistent 

manner. Board member input into the 

development of promotional programs 

would also ensure that these activities, 

and the use of assessment funds to 

support them, would remain responsive 

to industry needs. Witnesses also 

indicated that this authority would be 

equally beneficial to small and large 

grower and handler entities. 

According to the record, adding this 

authority to the order would provide the 

Board with the flexibility to use 

promotional activities, including paid 

advertising, to assist and improve the 

marketing, distribution and 

consumption of California walnuts. The 

use of assessments for such promotion 

would be an important component to 

increasing demand and consumption of 

California walnuts, and would be 

beneficial to all members of the 

industry. The industry does not 

contemplate using this provision 

immediately. However, it wants to have 

the ability to consider these activities in 

the future. The impacts of any increased 

assessments resulting from 

implementing any program would be 

considered before a recommendation is 

made. 

There was no opposition testimony on 

this issue. The record supports adding 

authority for promotion and paid 

advertising to § 984.46, Research and 

development. 

Material Issue Number 14—Updating 

Order Terminology 

Section 984.21, Handler carryover, 

and § 984.67, Exemptions, should be 

amended to replace the terms 

‘‘carryover’’ with ‘‘inventory,’’ and 

‘‘mammoth’’ with ‘‘jumbo,’’

respectively, to reflect current day 

industry nomenclature. Conforming 

changes should also be made to 

§ 984.48, Marketing estimates and 

recommendations, and § 984.71, Reports 

of handler carryover. 

Section 984.21, 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. 

According to the record, conforming 

changes should also be made to 

§ 984.48, Marketing estimates and 

recommendations, and § 984.71, Reports 

of handler carryover. Both of these 

sections make references to handler 

‘‘carryover.’’ In order to provide 

consistency in the order’s terminology, 

witnesses stated that these sections 

should incorporate the updated term 

‘‘inventory.’’

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 


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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. New walnut varieties do 

not produce walnuts that fit this size 

description. According to record 

evidence, the current production’s 

equivalent to ‘‘mammoth’’ size is 

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

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. 

Record evidence supports this 

proposed change. The term ‘‘carryover’’

should be changed to ‘‘inventory’’, and 

the term ‘‘mammoth’’ should be 

changed to ‘‘jumbo.’’ No opposition to 

this proposed amendment was 

presented at the hearing. For the reasons 

outlined above, § 984.21, Handler 

carryover, and § 984.67, Exemptions, 

should be amended. Conforming 

changes should also be made to 

§ 984.48, Marketing estimates and 

recommendations, and § 984.71, Reports 

of handler carryover. 

Material Issue Number 15a—

Interhandler Transfers 

Section 984.59, Interhandler transfers, 

should be amended to clarify the 

interhandler transfer provision of the 

order, and to add authority for the Board 

to recommend to USDA regulations, 

including necessary reports, for 

administrative oversight of such 

transfers. 

According to the hearing record, 

current order language specifies two 

scenarios under which certain 

provisions relating to interhandler 

transfers are regulated. These include: 

(1) Transfers of inshell walnuts for the 

purpose of packing or shelling; or, (2) 

interhandler transfers that are made to 

meet reserve obligations. In both 

scenarios, the receiving handler must 

comply with regulations that are in 

effect under the order. The order further 

provides that any interhandler transfers 

that is not included under the above two 

scenarios, the first handler of such 

walnuts shall comply with any 

regulations in effect under the order. 

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. 

Witnesses also explained that 

authority for the Board to recommend 

rules and regulations, including 

necessary reports for such transfers, 

should be added to the order. This 

proposed authority would provide the 

Board with flexibility to adapt 

interhandler transfer rules and 

regulations as needed. 

Concurrent with the proposal to add 

this authority, witnesses stated that the 

sentence, ‘‘The receiving handler shall 

comply with the regulations made 

effective to this part,’’ as published in 

the Notice of Hearing, should be 

removed. Witnesses stated that the 

intent of this proposal was to replace 

the above sentence with the proposed 

authority for the Board to recommend 

such regulations. For this reason, USDA 

is recommending that this sentence be 

removed. 

No opposition to this proposed 

amendment was presented at the 

hearing. Record evidence supports this 

proposed change. The order provisions 

regarding interhandler transfers should 

be simplified, as proposed. The 

authority for the Board to make 

recommendations to establish methods 

and procedures, including reporting 

requirements, for overseeing 

interhandler transfers should also be 

added. The proposed language for this 

section should be modified as 

recommended by USDA. 

Material Issue Number 15b—Reporting 

Requirements 

Section 984.73, Reports of walnut 

receipts, should be amended to clarify 

that the Board may require reports from 

handlers or packers that involve 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 transfer receipts, or any 

other entity as recommended by the 

Board and approved by the Secretary. 

Witnesses explained that this 

proposal is intended to support other 

proposed amendments to the order, 

such as the proposed clarification of 

interhandler transfer provisions 

discussed under Material Issue No. 

15(a), above, by further clarifying the 

Board’s authority to recommend 

reporting provisions necessary to obtain 

accurate tracking information of 

California walnuts. 

No opposition to this proposed 

amendment was presented at the 

hearing. Record evidence supports this 

proposed change. The authority for the 

Board to request handler reports of 

walnut receipts should be broadened to 

include receipts from other handlers, 

entities or activities that involve placing 

California walnuts into the stream of 

commerce. 

Material Issue Number 16—Trade 

Demand 

Section 984.22, Trade demand, 

should be amended to change the order 

language to state ‘‘United States and its 

territories,’’ rather than name ‘‘Puerto 

Rico’’ and ‘‘The Canal Zone’’. 

Under the marketing order, the Board 

is required to calculate a trade demand 

for all inshell and shelled walnuts. 

Calculation of domestic trade demand, 

or the anticipated amount of California 

inshell and shelled walnuts that are 

needed to satisfy the domestic market, 

is important in determining the need for 

volume regulation, and the amount of 

free versus reserve tonnage if volume 

regulation is in effect. 

Witnesses explained that the 

reference to ‘‘Puerto Rico’’ and ‘‘The 

Canal Zone’’ in the order is outdated. 

According to the record, this 

terminology was incorporated into the 

order at the time of promulgation. 

Witnesses stated that the order language 

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 Untied 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. 

Record evidence supports this 

proposed change. No opposition to this 

proposed amendment was presented at 

the hearing. For the reasons outlined 

above, § 984.22, Trade demand, should 

be amended. 

Material Issue Number 17—

Relationship With the California Walnut 

Commission 

Witnesses supported the addition of 

§ 984.91, Relationship with the 

California Walnut Commission, by 

stating that the Board should have 

authority to deliberate, consult, 

cooperate and exchange information 

with the California Walnut Commission 

(CWC). Any sharing of information 

between the two organizations would be 

kept confidential in accordance with the 

provisions of section 10(i) of the Act. 


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Record 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. 

For the reasons stated above, a new 

§ 984.91, Relationship with the 

California Walnut Commission, should 

be added. No opposition to this 

proposal was presented at the hearing. 

Material Issue Number 18—Term Limits 

Section 984.36, Term of office, should 

be revised to establish a limit on the 

number of consecutive terms a person 

may serve as a member of the Board. 

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. Members and 

alternates may serve on the Board until 

their respective successors are selected 

and have qualified. 

The record 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. 

At the hearing, USDA proposed a 

period of 8 years as an appropriate limit 

to the number of years a member may 

serve consecutively. However, in other 

instances concerning Federal marketing 

orders containing term limit provisions, 

USDA has determined that a period of 

6 years would be more appropriate. 

Accordingly, a limit of six years as the 

number of years that a member may 

serve consecutively would be in 

conformance with other marketing 

orders containing this provision and 

with established USDA practices 

regarding term limits. The proposed 

regulatory text has been modified to 

reflect this change. 

Since the current term of office for 

members and alternates is 2 years, 

USDA is proposing that members serve 

no more than 3 consecutive two-year 

terms, or a total of 6 years. This 

proposal for term limits would not 

apply to alternate members. Once a 

member has served on the Board for 3 

consecutive terms, or 6 years, the 

member could not serve as a member for 

least one year before being eligible to 

serve again. However, the individual 

could immediately begin serving as an 

alternate member after completing 3 

consecutive terms as a member. 

Industry witnesses presented 

testimony in opposition to this 

proposal. Although they agreed that 

increased industry participation in the 

program is desirable, witnesses stated 

that the application of term limits could 

be problematic. Testimony indicated 

that finding California walnut growers 

to serve on the Board is difficult. 

Witnesses noted that there have been 

times in the past when filling Board 

member positions has been difficult, 

and that recruiting new members is not 

easily done. Moreover, witnesses stated 

that industry members who currently 

serve on the Board bring knowledge and 

experience to the Board that would be 

difficult to replace. 

USDA believes that any additional 

efforts necessary to find eligible growers 

and handlers who are willing to serve 

on the Board are offset by the benefits 

derived by broader industry 

participation in order operations. USDA 

recommends adding this requirement. 

Section 984.35, Term of office, should 

be amended to include tenure 

requirements. The proposed language 

should also be modified to reflect a 

proposed term limit of a total of six 

years, as discussed above. 

Material Issue Number 19—

Continuance Referenda 

Section 984.89, Effective time and 

termination, should be amended to 

require that continuance referenda be 

conducted every six years to ascertain 

industry support for the order. 

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. 

Under this proposal, USDA would 

consider termination of the order if 

continuance is not favored by at least 

two-thirds of those voting, or at least 

two-thirds of the volume represented in 

the referendum. This is the same as that 

for issuance and amendment of an 

order. Experience in recent years 

indicates that six years is an appropriate 

period to allow growers an opportunity 

to vote for continuance of the program. 

Therefore, the proposal sets forth that a 

referendum would be conducted six 

years after the year in which this 

amendment is effective and every sixth 

year thereafter. 

Several industry witnesses opposed 

periodic continuance referenda. They 

indicated that requiring unnecessary 

referenda would be costly and of little 

value to the industry or USDA. 

The USDA believes, however, that 

growers should have an opportunity to 

periodically vote on whether the 

marketing order should continue, and 

that the minimal industry costs in time 

and money are well worth the periodic 

grower feedback afforded to the Board 

and the USDA by such referenda. 

Accordingly, USDA recommends 

adding a requirement that such 

referenda be conducted. 

The USDA also proposed to make 

such changes as may be necessary to the 

order to conform to any amendment that 

may result from the hearing. All 

conforming changes have been 

identified and discussed in this 

document. 

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 

initial 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. Thus, both the RFA and the Act 

are compatible with respect to small 

entities. 

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 


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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 walnuts producer 

provide the following: Dividing 5000 

producers by 219,000 bearing acres in 

2005 indicates an average of 44 bearing 

acres per producer. Dividing 5000 

producers by the two-year average crop 

value for 2003 and 2004 ($414,950) 

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 

de ́cor. 

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 

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 


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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 

recommended 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 up-date 

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 Number of 

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 

which do not require the continuous 

presence of a third party inspector at the 

end of the packing lines. 

The PIQ program 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 USDAapproved 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 

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 required 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 


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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 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 of 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. 

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 


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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 CWCs successful 

promotional activities has 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 

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 

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 


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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 

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 incurred. 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 


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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 Untied 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. 

Record 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 record 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 

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, record 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 record 

evidence is that most of the 


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amendments are designed to increase 

efficiency in the functioning of the 

orders. 

Current information collection 

requirements for Part 984 are approved 

by OMB under OMB number 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. 

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 the benefit of the 

California walnut industry. 

Board meetings regarding these 

proposals as well as the hearing dates 

were widely publicized throughout the 

California walnut industry. All 

interested persons were invited to 

attend the meetings and the hearing and 

participate in deliberations on all issues. 

All Board meetings and the hearing 

were public forums and all entities, both 

large and small, were able to express 

views on these issues. Finally, 

interested persons are invited to submit 

information on the regulatory and 

informational impacts of this action on 

small businesses. 

A 20-day comment period is provided 

to allow interested persons to respond 

to this proposal. Twenty days is deemed 

appropriate so that this rulemaking may 

be completed and nominations can be 

conducted prior to the beginning of the 

next crop year. All written exceptions 

timely received will be considered and 

a grower referendum will be conducted 

before these proposals are implemented. 

AMS is committed to complying with 

the E-Government Elimination 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. 

Further, the public hearing held on 

May 17 and 18, 2006, in Modesto, 

California, was widely publicized 

throughout the California walnut 

industry and all interested persons were 

invited to attend and all entities, both 

large and small, were able to express 

their views on this issue. 

Finally, interested persons are invited 

to submit information on the regulatory 

and informational impacts of this action 

on small businesses. 

A small business guide on complying 

with fruit, vegetable, and specialty crop 

marketing agreements and orders may 

be viewed at: http://www.ams.usda.gov/ 

fv/moab.html. Any questions about the 

compliance guide should be sent to Jay 

Guerber at the previously mentioned 

address in the FOR FURTHER INFORMATION

CONTACT section. 

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. 

Rulings on Briefs of Interested Persons 

Briefs, proposed findings and 

conclusions, and the evidence in the 

record were considered in making the 

findings and conclusions set forth in 

this recommended decision. To the 

extent that the suggested findings and 

conclusions filed by interested persons 

are inconsistent with the findings and 

conclusions of this recommended 

decision, the requests to make such 

findings or to reach such conclusions 

are denied. 

General Findings 

The findings 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. 

(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 (the State of 

California) in the same manner as, and 

are applicable only to, persons in the 

respective classes of commercial and 

industrial activity specified in the 

marketing agreements and orders 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 areas 

which is practicable, consistent with 

carrying out the declared policy of the 

Act, and the issuance of several orders 

applicable to subdivisions of the 

production areas 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 areas 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. 

List of Subjects in 7 CFR Part 984 

Marketing agreements, Nuts, 

Reporting and recordkeeping 

requirements, and Walnuts. 

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: 


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§ 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 

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 


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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 

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. 

§ 984.40 [Amended] 

14. Amend § 984.40 by removing the 

word ‘‘his’’ and adding the phrase ‘‘his 

or her’’ in its place in 2 places in 

paragraph (a) and 3 places in paragraph 

(b), and by removing the last sentence 

in paragraph (b). 

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. 

(a) * * * 

(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 

cast when voting is by any of these 

methods, and any other procedures 


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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 

kernelweight basis: 

(1) * * * 

(2) Its estimate of the handler 

inventory on September 1 of inshell and 

shelled walnuts; 

(3) * * * 

(4) Its estimate of the trade demand 

for such marketing year for shelled and 

inshell walnuts, taking into 

consideration trade inventory, imports, 

prices, competing nut supplies, and 

other factors; 

(5) Its recommendation for desirable 

handler inventory of inshell and shelled 

walnuts on August 31 of each marketing 

year; 

* * * * * 

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. Amend § 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. 

§ 984.67 [Amended] 

23. Amend § 984.67 by removing the 

word ‘‘mammoth’’ and adding the word 

‘‘jumbo’’ in its place in paragraph (a). 

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; 

(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: 


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§ 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 compliment those of 

the Board. Any sharing of information 

gathered under this subpart shall be 

kept confidential in accordance with 

provisions under section 10(i) of the 

Act. 

Dated: March 19, 2007. 

Lloyd C. Day, 

Administrator, Agricultural Marketing 

Service. 

[FR Doc. E7–5312 Filed 3–26–07; 8:45 am] 

BILLING CODE 3410–02–P 


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