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[Federal Register Volume 77, Number 117 (Monday, June 18, 2012)]
[Rules and Regulations]
[Pages 36119-36123]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-14813]

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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 983

[Doc. No. AMS-FV-10-0099; FV11-983-1 FR]

Pistachios Grown in California, Arizona, and New Mexico; Order 
Amending Marketing Order No. 983

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This final rule amends Marketing Agreement and Order No. 983 
(order), which regulates the handling of pistachios grown in 
California, Arizona, and New Mexico. The amendments were proposed by 
the

[[Page 36120]]

Administrative Committee for Pistachios (Committee), which is 
responsible for local administration of the order. The amendments will 
provide authority to establish aflatoxin and quality regulations for 
pistachios shipped to export markets, including authority to establish 
different regulations for different markets; change a related section 
of the order concerning substandard pistachios to conform to the 
proposed addition of export authority; and correct an erroneous cross-
reference to another section of the order. These amendments are 
intended to provide authority to ensure uniform and consistent 
aflatoxin and quality regulations in the domestic and various export 
markets.

DATES: This rule is effective June 19, 2012.

FOR FURTHER INFORMATION CONTACT: Martin Engeler, Marketing Order and 
Agreement Division, Fruit and Vegetable Program, AMS, USDA, 2202 
Monterey Street, Fresno, California, 93721; Telephone: (559) 487-5110, 
Fax: (559) 487-5906; or Kathleen M. Finn, Marketing Order and Agreement 
Division, Fruit and Vegetable Program, AMS, USDA, 1400 Independence 
Avenue SW., Stop 0237, Washington, DC 20250-0237; Telephone: (202) 720-
2491, Fax: (202) 720-8938, or Email: Martin.Engeler@ams.usda.gov or 
Kathy.Finn@ams.usda.gov.
    Small businesses may request information on complying with this 
regulation by contacting Laurel May, Marketing Order and Agreement 
Division, Fruit and Vegetable Program, AMS, USDA, 1400 Independence 
Avenue SW., STOP 0237, Washington, DC 20250-0237; Telephone: (202) 720-
2491, Fax: (202) 720-8938, or Email: Laurel.May@ams.usda.gov.

SUPPLEMENTARY INFORMATION: This rule is issued under Marketing 
Agreement and Order No. 983, both as amended (7 CFR part 983), 
regulating the handling of pistachios produced in California, Arizona, 
and New Mexico, hereinafter referred to as the ``order.'' The order is 
effective under the Agricultural Marketing Agreement Act of 1937, as 
amended (7 U.S.C. 601-674), hereinafter referred to as the ``Act.'' The 
applicable rules of practice and procedure governing the formulation of 
marketing agreements and orders (7 CFR part 900) authorize amendment of 
the order through this informal rulemaking action.
    The Department of Agriculture (USDA) is issuing this rule in 
conformance with Executive Order 12866.
    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule is not intended to have retroactive effect.
    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.
    Section 1504 of the Food, Conservation, and Energy Act of 2008 
(2008 Farm Bill) (Pub. L. 110-246) made changes to section 18c(17) of 
the Act, which in turn required the addition of supplemental rules of 
practice to 7 CFR part 900 (73 FR 49307; August, 21, 2008). The changes 
to section 18c(17) of the Act and additional supplemental rules of 
practice authorize the use of informal rulemaking (5 U.S.C. 553) to 
amend federal fruit, vegetable, and nut marketing agreements and orders 
if certain criteria are met.
    AMS considered the nature and complexity of the proposed 
amendments, the potential regulatory and economic impacts on affected 
entities, and other relevant matters, and determined that amending the 
order as proposed by the Committee could appropriately be accomplished 
through informal rulemaking.
    The proposed amendments were unanimously recommended by the 
Committee following deliberations at a public meeting on July 9, 2010. 
A proposed rule soliciting comments on the proposed amendments was 
issued on June 5, 2011, and published in the Federal Register on June 
13, 2011 (76 FR 34181). One comment was received in support of the 
proposed amendments. A proposed rule and referendum order was issued on 
September 12, 2011, and published in the Federal Register on September 
15, 2011 (76 FR 57001). This document directed that a referendum among 
pistachio producers be conducted during the period October 3 through 
October 14, 2011, to determine whether they favor the proposed 
amendments to the order. To become effective, the amendments had to be 
approved by at least two-thirds of the producers voting, or two-thirds 
of the volume of pistachios represented by voters in the referendum. 
All of the proposed amendments were favored by at least 97 percent of 
those voting in the referendum and by at least 98 percent of the volume 
represented in the referendum.
    The amendments included in this final rule will:
    (1) Provide authority to establish aflatoxin sampling, analysis, 
and inspection requirements for shipments of pistachios to export 
markets, including authority to establish different regulations for 
different markets;
    (2) Provide authority to establish quality and inspection 
requirements for shipments of pistachios to export markets, including 
authority to establish different regulations for different markets;
    (3) Change a related section of the order concerning substandard 
pistachios to conform to the proposed addition of export authority; and
    (4) Correct an erroneous cross-reference to another section of the 
order.
    An amended marketing agreement was subsequently provided to all 
pistachio handlers in the production area for their approval. The 
marketing agreement was approved by handlers representing more than 50 
percent of the volume of pistachios handled by all handlers covered 
under the order.

Final Regulatory Flexibility Analysis

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA) (5 U.S.C. 601-612), the Agricultural Marketing Service (AMS) 
has considered the economic impact of this action on small entities. 
Accordingly, AMS has prepared this final regulatory flexibility 
analysis.
    The purpose of the RFA is to fit regulatory actions to the scale of 
business subject to such actions in order that small businesses will 
not be unduly or disproportionately burdened. Marketing orders issued 
pursuant to the Act, and rules issued thereunder, are unique in that 
they are brought about through group action of essentially small 
entities acting on their own behalf.
    There are approximately 900 producers and 25 handlers of pistachios 
in the production area encompassing California, Arizona, and New 
Mexico. The Small Business Administration (SBA) (13 CFR 121.201) 
defines small agricultural producers as those having annual receipts of 
less than $750,000, and small agricultural service firms are

[[Page 36121]]

defined as those having annual receipts of less than $7,000,000.
    Based on Committee data, it is estimated that over 70 percent of 
the handlers ship less than $7,000,000 worth of pistachios and would 
thus be considered small business under the SBA definition. It is also 
estimated that over 80 percent of the growers in the production area 
produce less than $750,000 worth of pistachios and would thus be 
considered small businesses under the SBA definition.
    The amendments will provide authority to establish aflatoxin 
sampling, analysis, and inspection requirements for shipments of 
pistachios to export markets, including authority to establish 
different regulations for different markets; provide authority to 
establish quality and inspection requirements for shipments of 
pistachios to export markets, including authority to establish 
different regulations for different markets; change a related section 
of the order concerning substandard pistachios to conform to the 
proposed addition of export authority; and correct an erroneous cross-
reference to another section of the order.
    These amendments were unanimously recommended at a public meeting 
of the Committee held on July 10, 2010. None of the amendments will 
have an immediate impact on handlers or producers because they will not 
establish any requirements or regulations on handlers. However, the 
amendments that will add authority to the order to regulate exports 
could impact growers and handlers in the industry if the authority is 
implemented. Therefore, the potential costs that may be associated with 
future regulation of exports is discussed below. In the event 
implementing regulations are subsequently recommended by the Committee, 
additional analysis of the potential costs and benefits will be 
conducted as part of the informal rulemaking process.
    Under section 983.50 of the order and section 983.150 of the 
administrative rules and regulations, sampling, analysis, and 
inspection of pistachios for aflatoxin is required prior to shipment to 
domestic markets. Specific procedures and requirements for handlers to 
follow are prescribed. It is anticipated that any requirements 
recommended for export shipments would be similar to those in effect 
for domestic shipments. Thus, the associated costs would be similar.
    The costs of complying with aflatoxin regulations can be broken 
into three basic elements: sampling of the product, the market value of 
the product samples that are used in testing, and the cost of the 
aflatoxin analysis performed by laboratories. These costs can vary 
among handlers depending on their particular operations. In recognition 
of this, the Committee provided estimates of the various cost elements 
for purposes of this discussion.
    The cost of drawing samples from lots is estimated to range from 
$50.00 to $75.00 per lot. The variation in this cost can be attributed 
to factors such as the type of inspection program utilized by handlers. 
For purposes of this evaluation a cost factor of $70.00 per lot is 
utilized. The cost of the product used in sampling and testing varies 
depending upon the market price for pistachios. For purposes of this 
evaluation a value of $3.00 per pound as estimated by the Committee is 
utilized. At $3.00 per pound and a 44-pound sample, the cost of product 
used in sampling is $132.00 per lot. Laboratory costs for analyzing 
aflatoxin content are estimated to be $100.00 per test; with two tests 
per lot, the cost is $200.00 per lot.
    Pistachio lots tested for aflatoxin can vary in size, but for 
purposes of this evaluation, a lot size of 50,000 pounds is used as 
that is a reasonable representative size for a typical handler 
operation. Applying the above cost estimates to a lot size of 50,000 
pounds results in the following cost estimates on a per pound basis:
    1. Sampling cost: $0.0014 per pound ($70.00 per lot divided by 
50,000 pounds).
    2. Value of product used in sampling: $0.0026 per pound ($132.00 
per lot divided by 50,000 pounds).
    3. Analytical cost of aflatoxin testing: $0.0040 per pound ($200 
per sample divided by 50,000 pounds).

This results in a total estimated per pound cost of $0.0080 ($0.0014 + 
$0.0026 + $0.0040), or 0.8 cents per pound.
    When compared to the market price for pistachios, the direct costs 
associated with an aflatoxin program are proportionately small. 
Utilizing a market price of $3.00 per pound as used in the above cost 
estimates, the costs of aflatoxin sampling and testing represent 0.27 
percent of the market price. Even if the market price for pistachios 
was $1.00 per pound, the aflatoxin sampling and testing costs would be 
well below one percent of the price.
    Most handlers who shipped pistachios to export markets in the past 
were signatories to a state marketing agreement that required aflatoxin 
sampling and analysis. That program was terminated in 2010. Since then, 
most handlers reportedly conduct aflatoxin testing and certification on 
export shipments to satisfy the requirements of the various markets. 
Therefore, the costs discussed above are already being borne by 
handlers.
    While difficult to quantify, one of the primary benefits of an 
aflatoxin program is the reduced risk of a potential food incident. For 
example, in the late 1990's, high aflatoxin levels were detected in 
pistachios in European markets. This led to a 60 percent decrease in 
pistachio imports in Europe, and it took several years for the market 
to return to more normal levels. The U.S was not dominant in the 
European market at that time, but in recent years, Europe has become an 
increasingly significant market for U.S. pistachios. Regardless of the 
location of the market, this example demonstrates the devastating 
effect a food quality or food safety issue can have on the marketing of 
a product.
    Another benefit of an aflatoxin testing program is the resulting 
reduction in the incidence of rejected shipments at their destination. 
Many countries test product prior to allowing its importation. Product 
that does not meet the importing country's standards can be rejected 
and returned to the shipper. It is estimated that the cost of handling 
or returning a rejected lot is between $12,000 and $15,000 per lot. 
Product that has been tested prior to shipment based on the 
requirements of its market destination is less likely to be rejected 
and would not incur the associated costs.
    Avoiding a disruption in the marketing of pistachios in export 
markets is important in maintaining the viability of the industry. 
Shipments of open inshell pistachios increased dramatically in recent 
years; from 95,761,666 pounds in the 2004-05 shipping season to 
192,436,136 pounds in the 2009-10 season, according to Committee data. 
Exports represented approximately 63 percent of total U.S. pistachio 
shipments during the 2009-10 season. According to statistics reported 
by the Committee, total acreage in California increased from 117,773 
acres in 2004 to 215,336 acres in 2010, representing an 83 percent 
increase. Much of this newer acreage is non-bearing and will come into 
production in the near future. These statistics demonstrate that 
domestic production of pistachios will continue to increase in the 
future, and export markets must be maintained to accommodate the 
increased supplies.
    Expanding order authority to include establishing aflatoxin 
requirements applicable to export shipments will

[[Page 36122]]

provide an additional tool to aid in the marketing of pistachios 
covered under the order. In the event the authority is implemented, the 
potential costs associated with a mandatory aflatoxin program for 
exports are expected to be more than offset by the potential benefits 
discussed above.
    An analysis of the potential costs of adding authority to the order 
to establish quality regulations is not possible because no quality 
regulations are currently in effect under the order, and none are being 
contemplated. Quality regulations were in effect for domestic shipments 
from 2004 through 2007, but were suspended because they were no longer 
meeting the industry's needs. However, the order still contains broad 
authority for domestic quality regulations and the industry may desire 
to reinstate them if circumstances warrant. As a result of the 
increasing importance of the export market as demonstrated above, the 
Committee recommended adding authority to the order for quality 
regulation for export shipments in the event circumstances in the 
future warrant their implementation.
    A unanimous action of the Committee will be required to recommend 
the establishment of any export quality regulations. In addition, 
informal rulemaking will be required for implementation, and an 
analysis of the potential costs and benefits will need to be conducted 
during that process.
    The remaining amendments are administrative in nature and will have 
no economic impact on growers or handlers. One of the proposed 
amendments adds conforming language to another section of the order as 
a result of approval of other amendments, and another proposed 
amendment will correct an incorrect section reference in the order.
    Alternatives to these proposals include making no changes at this 
time. However, the Committee believes it will be beneficial to have the 
means necessary to apply regulations to the export markets if 
circumstances warrant.
    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
chapter 35), the order's information collection requirements have been 
previously approved by the Office of Management and Budget (OMB) and 
assigned OMB No. 0581-0215, ``Pistachios Grown in California''. No 
changes in those requirements as a result of this proceeding are 
anticipated. Should any changes become necessary, they will be 
submitted to OMB for approval.
    As with all Federal marketing order programs, reports and forms are 
periodically reviewed to reduce information requirements and 
duplication by industry and public sector agencies.
    In addition, USDA has not identified any relevant Federal rules 
that duplicate, overlap, or conflict with this rule.
    AMS is committed to complying with the E-Government Act, to promote 
the use of the Internet and other information technologies to provide 
increased opportunities for citizen access to Government information 
and services, and for other purposes.
    The Committee's meeting, at which these proposals were discussed, 
was widely publicized throughout the pistachio industry. All interested 
persons were invited to attend the meeting and encouraged to 
participate in Committee deliberations on all issues. Like all 
Committee meetings, the meeting was public, and all entities, both 
large and small, were encouraged to express their views on these 
proposals.
    A proposed rule concerning this action was issued on June 5, 2011, 
and published in the Federal Register on June 13, 2011 (76 FR 34181). 
Copies of the rule were mailed or sent via facsimile to all Committee 
members and pistachio handlers. Finally, the rule was made available 
through the Internet by USDA and the Office of the Federal Register. A 
30-day comment period ending July 13, 2011, was provided to allow 
interested persons to respond to the proposal. One comment was received 
in response to the proposal. The comment, submitted on behalf of a 
pistachio trade association, was supportive of the proposed amendments. 
No changes were made to the proposed amendments, based on the comment 
received.
    A proposed rule and referendum order was then issued on September 
12, 2011, and published in the Federal Register on September 15, 2011 
(74 FR 57001). This document directed that a referendum among pistachio 
producers be conducted during the period October 3 through October 14, 
2011, to determine whether they favor the proposed amendments to the 
order. To become effective, the amendments had to be approved by at 
least two-thirds of the producers voting, or two-thirds of the volume 
of pistachios represented by voters in the referendum. All of the 
proposed amendments were favored by at least 97 percent of those voting 
in the referendum and by at least 98 percent of the volume represented 
in the referendum.
    An amended marketing agreement was subsequently provided to all 
pistachio handlers in the production area for their approval. The 
marketing agreement was approved by handlers representing more than 50 
percent of the volume of pistachios handled by all handlers covered 
under the order.
    A small business guide on complying with fruit, vegetable, and 
specialty crop marketing agreements and orders may be viewed at: 
www.ams.usda.gov/MarketingOrdersSmallBusinessGuide. Any questions about 
the compliance guide should be sent to Laurel May at the previously 
mentioned address in the FOR FURTHER INFORMATION CONTACT section.

Order Amending the Order Regulating the Handling of Pistachios Grown in 
California, Arizona, and New Mexico Findings and Determinations

(a) Findings and Determinations Upon the Basis of the Rulemaking Record

    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 all of the 
terms and conditions thereof, will tend to effectuate the declared 
policy of the Act;
    2. The marketing agreement and order, as amended, regulate the 
handling of pistachios grown in California, Arizona, and New Mexico in 
the same manner as, and are applicable only to, persons in the 
respective classes of commercial and industrial activity specified in 
the marketing agreement and order;
    3. The marketing agreement and order, as amended, are limited in 
application to the smallest regional production area 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 area would not effectively carry out the declared policy 
of the Act;
    4. The marketing agreement and order, as 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 pistachios 
produced or packed in the production area; and
    5. All handling of pistachios produced in the production area as

[[Page 36123]]

defined in the marketing agreement and order is in the current of 
interstate or foreign commerce or directly burdens, obstructs, or 
affects such commerce.

(b) Additional Findings

    It is necessary and in the public interest to make these amendments 
effective not later than one day after publication in the Federal 
Register. A later effective date would unnecessarily delay 
implementation of the amendments. These amendments should be in place 
as soon as possible so that any regulations recommended as a result of 
these amendments can be in place prior to the next production year, 
which begins on September 1. In view of the foregoing, it is hereby 
found and determined that good cause exists for making these amendments 
effective one day after publication in the Federal Register, and that 
it would be contrary to the public interest to delay the effective date 
for 30 days after publication in the Federal Register. (Sec. 553(d), 
Administrative Procedure Act; 5 U.S.C. 551-559.)

(c) Determinations

    It is hereby determined that:
    1. The ``Marketing Agreement Regulating the Handling of Pistachios 
Grown in California, Arizona, and New Mexico,'' has been signed by 
handlers (excluding cooperative associations of producers who are not 
engaged in processing, distributing, or shipping pistachios covered 
under the order) who during the period September 1, 2010, through 
August 31, 2011, handled not less than 50 percent of the volume of such 
pistachios covered under the order; and
    2. The issuance of this amendatory order, amending the aforesaid 
order, is favored or approved by at least two-thirds of the producers 
who participated in a referendum on the question of approval and who, 
during the period of September 1, 2010, through August 31, 2011, have 
been engaged within the production area in the production of such 
pistachios, such producers having also produced for market at least 
two-thirds of the volume of such commodity represented in the 
referendum.

Order Relative to Handling

    It is therefore ordered, That on and after the effective date 
hereof, all handling of pistachios grown in California, Arizona, and 
New Mexico shall be in conformity to, and in compliance with, the terms 
and conditions of the said order as hereby amended as follows:
    The provisions of the proposed marketing order amending the order 
contained in the proposed rule issued by the Administrator on September 
12, 2011, and published in the Federal Register on September 15, 2011 
(76 FR 57001), shall be and are the terms and provisions of this order 
amending the order and are set forth in full herein.

List of Subjects in 7 CFR Part 983

    Pistachios, Marketing agreements and orders, Reporting and 
recordkeeping requirements.

    For the reasons set forth in the preamble, 7 CFR Part 983 is 
amended as follows:

PART 983--PISTACHIOS GROWN IN CALIFORNIA, ARIZONA, AND NEW MEXICO

0
1. The authority citation for 7 CFR part 983 continues to read as 
follows:

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

0
2. Revise Sec.  983.50 to read as follows:

Sec.  983.50  Aflatoxin regulations.

    The committee shall establish, with the approval of the Secretary, 
such aflatoxin sampling, analysis, and inspection requirements 
applicable to pistachios to be shipped for domestic human consumption 
as will contribute to orderly marketing or be in the public interest. 
The committee may also establish, with the approval of the Secretary, 
such requirements for pistachios to be shipped for human consumption in 
export markets. No handler shall ship, for human consumption in 
domestic, or if applicable, export markets, pistachios that exceed an 
aflatoxin level established by the committee and approved by the 
Secretary. All shipments to markets for which requirements have been 
established must be covered by an aflatoxin inspection certificate. The 
committee may, with the approval of the Secretary, establish different 
sampling, analysis, and inspection requirements, and different 
aflatoxin level requirements, for different markets.

0
3. Revise Sec.  983.51 to read as follows:

Sec.  983.51  Quality regulations.

    For any production year, the committee may establish, with the 
approval of the Secretary, such quality and inspection requirements 
applicable to pistachios shipped for human consumption in domestic or 
export markets as will contribute to orderly marketing or be in the 
public interest. In such production year, no handler shall ship 
pistachios for human consumption in domestic, or if applicable, export 
markets unless they meet the applicable requirements as evidenced by 
certification acceptable to the committee. The committee may, with the 
approval of the Secretary, establish different quality and inspection 
requirements for different markets.

0
4. Amend Sec.  983.53 by removing the reference to ``Sec.  983.50'' an 
adding in its place ``Sec.  983.52'' in paragraph (a)(2).

0
5. Revise Sec.  983.57 to read as follows:

Sec.  983.57  Substandard pistachios.

    The committee shall, with the approval of the Secretary, establish 
such reporting and disposition procedures as it deems necessary to 
ensure that pistachios which do not meet aflatoxin and quality 
requirements are not shipped for human consumption in those markets for 
which such requirements exist pursuant to Sec.  983.50 and Sec.  
983.51.

    Dated: June 13, 2012.
David R. Shipman,
Administrator, Agricultural Marketing Service.
[FR Doc. 2012-14813 Filed 6-15-12; 8:45 am]
BILLING CODE 3410-02-P
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