[Federal Register Volume 62, Number 209 (Wednesday, October 29, 1997)]
[Rules and Regulations]
[Pages 56049-56051]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-28630]



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Rules and Regulations
                                                Federal Register
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Federal Register / Vol. 62, No. 209 / Wednesday, October 29, 1997 / 
Rules and Regulations

[[Page 56049]]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 981

[Docket No. FV97-981-2 FR]


Almonds Grown in California; Interhandler Transfers of Reserve 
Obligations

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This final rule revises regulations under the California 
almond marketing order to authorize interhandler transfers of reserve 
obligations. The almond marketing order regulates the handling of 
almonds grown in California and is administered locally by the Almond 
Board of California (Board). This rule will allow the Board to 
implement authority contained in the marketing order to authorize 
handlers to transfer reserve withholding obligations to other handlers. 
It will provide handlers with an additional option to satisfy reserve 
obligations. This rule will enhance the utility and flexibility of the 
volume control regulations while benefiting producers, handlers, and 
consumers.

EFFECTIVE DATE: This rule becomes effective November 28, 1997.

FOR FURTHER INFORMATION CONTACT: Kathleen M. Finn, Marketing 
Specialist, Marketing Order Administration Branch, F&V, AMS, USDA, room 
2530-S, P.O. Box 96456, Washington, DC 20090-6456; telephone: (202) 
720-1509, Fax: (202) 720-5698; or Martin Engeler, California Marketing 
Field Office, Marketing Order Administration Branch, F&V, AMS, USDA, 
2202 Monterey Street, suite 102B, Fresno, California 93721; telephone: 
(209) 487-5901, Fax: (209) 487-5906. Small businesses may request 
information on compliance with this regulation by contacting Jay 
Guerber, Marketing Order Administration Branch, F&V, AMS, USDA, room 
2525-S, P.O. Box 96456, Washington, DC 20090-6456, telephone: (202) 
720-2491 or Fax: (202) 720-5698.

SUPPLEMENTARY INFORMATION: This rule is issued under Marketing Order 
No. 981 (7 CFR part 981), as amended, regulating the handling of 
almonds grown in California, 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 Department of Agriculture (Department) is issuing this rule in 
conformance with Executive Order 12866.
    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule is not intended to have retroactive effect. 
This rule will not preempt any State or local laws, regulations, or 
policies, unless they present an irreconcilable conflict with this 
rule.
    The Act provides that administrative proceedings must be exhausted 
before parties may file suit in court. Under section 608c(15)(A) of the 
Act, any handler subject to an order may file with the Secretary 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 the Secretary 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 the Secretary's 
ruling on the petition, provided an action is filed not later than 20 
days after date of the entry of the ruling.
    This rule implements regulations authorizing interhandler transfers 
of reserve obligations. Sections 981.45 through 981.60 set forth the 
authority to implement volume control regulations under the order by 
establishing salable and reserve percentages of almonds. Annually, the 
Board meets to review projected crop estimates and marketing conditions 
for the coming season. Variations in production can cause wide 
fluctuations in prices. These swings in supplies and price levels can 
result in market instability and uncertainty for growers, handlers, 
buyers, and consumers.
    If it is determined a reserve is warranted, the Board recommends to 
the Secretary the salable and reserve percentages to be placed on the 
almond crop. If a reserve is established, handlers are required to 
refrain from selling to normal market outlets a quantity of almonds 
equal to the reserve percentage. This percentage becomes the handlers' 
reserve withholding obligation. Handlers must either maintain product 
in inventory for possible release at a later date or dispose of product 
to secondary reserve outlets to satisfy their reserve obligation. The 
last season a reserve was in effect was during the 1994-95 crop year.
    Section 981.55 of the order was amended by final order dated June 
26, 1996 (61 FR 32917) to include a provision that allows handlers to 
transfer reserve withholding obligations to other handlers. Prior to 
the amendment to the order, Sec. 981.55 authorized only the transfer of 
almonds (not reserve almonds) or reserve credits to other handlers. 
Reserve credits are issued to handlers when they dispose of almonds to 
secondary outlets in satisfaction of their reserve obligation. Handlers 
can transfer excess credits to other handlers. Receiving handlers can 
use the credit to meet all or a portion of their reserve obligations. 
This section of the order further states that the terms and conditions 
implementing the provision must be recommended by the Board and 
approved by the Secretary. Adding a third option by amendment to the 
order was intended to provide more flexibility for handlers in 
satisfying their reserve obligation.
    At a Board meeting held on February 18, 1997, the Board unanimously 
recommended implementing the third option under Sec. 981.55 concerning 
reserve withholding obligation transfers by making appropriate changes 
to the rules and regulations. This rule will enhance the utility and 
flexibility of the volume control regulations. It will provide handlers 
with an additional method of satisfying reserve obligations.
    Currently, Sec. 981.455 contains three paragraphs setting forth 
rules and regulations regarding interhandler transfers of almonds. 
These paragraphs set forth procedures for (1) transferring

[[Page 56050]]

non-reserve almonds; (2) transferring reserve credits; and (3) 
transferring inedible almond obligations. This rule will add a new 
paragraph including procedures for transferring reserve withholding 
obligations.
    This rule will expand the options available to handlers in the 
event a reserve is implemented. The ability to transfer reserve 
obligations will particularly benefit those handlers who do not stay in 
business all year and do not have facilities for storage of reserve 
almonds. Such handlers are traditionally the smaller handlers in the 
industry. Storage and other costs associated with maintaining reserve 
inventory or disposing of product to secondary outlets will be reduced. 
This rule will provide another option for handlers to choose from in 
satisfying their reserve obligations that may better suit their 
operation.
    The objective of the reserve provisions is to keep a certain 
quantity of almonds off the market in order to maintain market 
stability. The additional flexibility in the reserve provisions is 
expected to improve compliance among handlers, which in turn will 
maintain the integrity of the volume control regulations.
    In order to ensure that adequate procedures are in place to monitor 
transfer of reserve obligations among handlers, ABC Form 11, which 
currently covers interhandler transfers of reserve credits, will be 
modified. New information will be added to the form to properly 
document reserve obligation transfers. Almond handlers wanting to 
transfer their reserve obligation to another handler will complete one 
portion of revised Form 11 and forward the form to the receiving 
handler. The receiving handler will complete their portion of the form 
and submit it to the Board. Authorized Board personnel will review, and 
if appropriate, approve the transfer. The Board will then submit copies 
of the forms to involved parties.
    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA), the Agricultural Marketing Service (AMS) has considered the 
economic impact of this action on small entities. Accordingly, AMS has 
prepared this final regulatory flexibility analysis.
    The purpose of the RFA is to fit regulatory actions to the scale of 
business subject to such actions 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. Thus, both statutes have small 
entity orientation and compatibility.
    There are approximately 97 handlers of California almonds who are 
subject to regulation under the marketing order and approximately 7,000 
almond producers in the regulated area. Small agricultural service 
firms have been defined by the Small Business Administration (13 CFR 
121.601) as those having annual receipts of less than $5,000,000, and 
small agricultural producers are defined as those having annual 
receipts of less than $500,000.
    Currently, about 58 percent of the handlers ship under $5 million 
of almonds and 42 percent ship over $5 million on an annual basis. In 
addition, based on acreage, production, and grower prices reported by 
the National Agricultural Statistics Service, and the total number of 
almond growers, the average annual grower revenue is approximately 
$156,000. In view of the foregoing, it can be concluded that the 
majority of handlers and producers of California almonds may be 
classified as small entities.
    Sections 981.45 through 981.60 of the almond marketing order 
provide authority to implement volume control regulations by 
establishing salable and reserve percentages of almonds. If it is 
determined a reserve is warranted, the Board recommends to the 
Secretary the salable and reserve percentages to be placed on the 
almond crop. If a reserve is established, handlers must refrain from 
selling to normal market outlets a quantity of almonds equal to the 
reserve percentage. Handlers must either maintain product in inventory 
for possible release at a later date or dispose of product to lower 
value reserve outlets to satisfy their reserve obligation. These lower 
value outlets are primarily crushing for oil and animal feed.
    Section 981.55 of the order provides authority for the interhandler 
transfer of almonds and reserve credits. This section was recently 
amended to include authority for interhandler transfer of reserve 
obligations. This rule will implement the authority to transfer reserve 
withholding obligations by revising Section 981.455 of the 
administrative rules and regulations accordingly. This rule will 
provide another option, in addition to those that appear in that 
section, for handlers to satisfy their reserve obligations. The ability 
to transfer reserve obligations will particularly benefit those 
handlers who do not stay in business all year and do not have 
facilities for storage of reserve almonds. Such handlers are 
traditionally the smaller handlers in the industry. Storage and other 
costs associated with maintaining reserve inventory or disposing of 
product to secondary outlets will be reduced. This rule will provide 
another option for handlers to choose from in satisfying their reserve 
obligations that may better suit their operation.
    In past years, handlers either had to maintain product in inventory 
or dispose of it in approved reserve outlets to satisfy their 
withholding obligation, as discussed earlier. Those handlers choosing 
to maintain product in inventory must locate storage facilities and 
incur storage costs they may not otherwise incur, until the reserve is 
lifted.
    Storage costs vary, depending upon factors such as the type of 
facilities utilized and quantities involved. These costs are generally 
in the range of one cent per pound per month, with additional charges 
for moving product into and out of storage facilities. These costs 
could be incurred for approximately six to eighteen months depending on 
the ultimate disposition of the reserve.
    Those handlers choosing to dispose of their reserve to approved 
outlets may save on storage costs, but receive a lower return on the 
sales than they may receive if sold in normal market channels if the 
reserve is ultimately released. Price levels for almonds used for 
crushing into oil are in the range of 28 to 35 cents per pound, while 
animal feed brings about two to three cents per pound. Price levels for 
sales to normal market outlets vary significantly from year to year 
depending on available supplies and market conditions, and can range 
from $1 to $3 per pound. The additional option that will be provided by 
this rule will allow handlers to make arrangements to transfer their 
reserve obligation to other handlers. Handlers will be able to choose 
the most cost effective method of satisfying their reserve obligations 
that best suits their operations. This rule will provide more 
flexibility if volume control regulations under the almond marketing 
order are issued.
    A current form is being revised for handlers to supply the transfer 
information to the Board for its approval. The current form (ABC Form 
11) provides for handlers to transfer reserve credits. Information will 
be added to this form to collect information on transfers of 
withholding obligation. No additional burden will be added to the form 
because handlers will choose one of the options on the form. The form's 
current burden time of 5 minutes will not be changed. This action will 
not impose any significant additional reporting or recordkeeping 
requirements on either small or large almond

[[Page 56051]]

handlers. The benefits of providing another tool to the industry to 
assist them in making business decisions far outweigh the estimated 5 
minutes it will take to complete the form. Further, any additional 
reporting may be offset by reduced reporting for those handlers 
choosing to utilize this option in lieu of other options available for 
satisfying reserve obligations. 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.
    As noted in the initial regulatory flexibility analysis, the 
Department has not identified any relevant Federal rules that 
duplicate, overlap or conflict with this rule. Information generated by 
State, Federal, and private sector reports pertains to almonds in 
general and does not contain specific producer and handler information. 
Therefore, such information would not be detailed enough to be used for 
the specific purposes required under the order.
    The amendment to the marketing order was voted on in a referendum 
and was overwhelmingly supported by almond growers. This rule will 
establish procedures to implement the amendment that authorized 
transfers of reserve obligations. There are no alternatives that would 
result in the additional flexibility sought by the industry.
    In addition, the Board's meeting was widely publicized throughout 
the almond industry and all interested persons were invited to attend 
the meeting and participate in Board deliberations on all issues. Like 
all Board meetings, the February 18, 1997, meeting was a public meeting 
and all entities, both large and small, were able to express views on 
this issue. The Board itself is composed of ten industry members, of 
which five are handlers and five are growers.
    A proposed rule concerning this action was issued by the Department 
on April 4, 1997, and published in the Federal Register on April 10, 
1997 (62 FR 17569). It was also made available through the Internet by 
the Office of the Federal Register. A 60 day comment period was 
provided to allow interested persons to respond to the proposal. No 
comments were received.
    After consideration of all relevant matter presented, including the 
information and recommendation submitted by the Board and other 
available information, it is hereby found that this rule, as 
hereinafter set forth, will tend to effectuate the declared policy of 
the Act.
    The proposed rule regarding the interhandler transfer of almonds 
also announced the AMS's intent to request a revision to the currently 
approved information collection requirements issued under the marketing 
order. The 60 day comment period was also provided to allow interested 
persons the opportunity to respond to the notice. No comments were 
received on the information collection requirements.
    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
Chapter 35), the information collection requirements that are contained 
in this rule have been approved by the Office of Management and Budget 
(OMB) and have been assigned OMB No. 0581-0071.

List of Subjects in 7 CFR Part 981

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

    For the reasons set forth in the preamble, 7 CFR part 981 is 
amended as follows:

PART 981--ALMONDS GROWN IN CALIFORNIA

    1. The authority citation for 7 CFR part 981 continues to read as 
follows:

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

    2. In Sec. 981.455, paragraph (c) is redesignated as paragraph (d) 
and a new paragraph (c) is added to read as follows:


Sec. 981.455  Interhandler transfers.

* * * * *
    (c) Transfers of reserve withholding obligation. A handler may 
transfer reserve withholding obligation to other handlers pursuant to 
Sec. 981.55 after having filed with the Board an ABC Form 11 executed 
by both handlers. The Board shall approve the transfer upon receipt of 
the properly completed form.
* * * * *

    Dated: October 23, 1997.
Eric M. Forman,
Acting Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 97-28630 Filed 10-28-97; 8:45 am]
BILLING CODE 3410-02-P