Federal Register / Vol. 70, No. 164 / Thursday, August 25, 2005 / Proposed Rules 49885

conduct inspections by the hourly rate. 

The daily or weekly charge shall be 

prorated among applicants by 

multiplying the daily or weekly charge 

by the percentage of product passed 

and/or failed for each applicant during 

that day or week. Waiting time and 

overtime charges shall be charged 

directly to the applicant responsible for 

their incurrence. 

(e) When performing inspections at 

the request of the applicant during 

periods which are outside the grader’s 

regularly scheduled work week, a 

charge for overtime or holiday work 

shall be made at the rate of $29.00 per 

hour or portion thereof in addition to 

the carlot equivalent fee, package 

charge, or hourly charge specified in 

this subpart. Overtime or holiday 

charges for time shall be rounded to the 

nearest half hour. 

(f) When an inspection is delayed 

because product is not available or 

readily accessible, a charge for waiting 

time shall be made at the prevailing 

hourly rate in addition to the carlot 

equivalent fee, package charge, or 

hourly charge specified in this subpart. 

Waiting time shall be rounded to the 

nearest half hour.

Dated: August 18, 2005. 

Kenneth C. Clayton, 

Associate Administrator, Agricultural 

Marketing Service.

[FR Doc. 05–16863 Filed 8–24–05; 8:45 am] 

BILLING CODE 3410–02–P

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service 

7 CFR Part 983

[Docket No. FV05–983–2 PR] 

Pistachios Grown in California; 

Establishment of Additional Inspection 

Requirements

AGENCY: Agricultural Marketing Service, 

USDA.

ACTION: Proposed rule.

SUMMARY: This rule invites comments 

on the establishment of additional 

inspection requirements authorized 

under the California pistachio marketing 

order (order). The order regulates the 

handling of pistachios grown in 

California and is administered locally 

by the Administrative Committee for 

Pistachios (Committee). This rule would 

modify sampling procedures for darkstained pistachios which are intended to 

be dyed or color-coated. It would also 

establish reinspection requirements for 

lots of pistachios, which are materially 

changed after meeting initial aflatoxin, 

quality, and size requirements. This 

action is expected to assure the quality 

of pistachios, improve the marketability 

of pistachios, and provide handlers 

more marketing flexibility. The benefits 

of this action are expected to offset the 

increased inspection costs.

DATES: Comments must be received by 

September 1, 2005.

ADDRESSES: Interested persons are 

invited to submit written comments 

concerning this proposal. Comments 

must be sent to the Docket Clerk, 

Marketing Order Administration 

Branch, Fruit and Vegetable Programs, 

AMS, USDA, 1400 Independence 

Avenue SW, STOP 0237, Washington, 

DC 20250–0237; Fax: (202) 720–8938, or 

E-mail: moab.docketclerk@usda.gov, or 

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 and 

will be made available for public 

inspection in the Office of the Docket 

Clerk during regular business hours, or 

can be viewed at: http://

www.ams.usda.gov/fv/moab.html.

FOR FURTHER INFORMATION CONTACT: Rose 

Aguayo or Terry Vawter, Marketing 

Specialists, California Marketing Field 

Office, Marketing Order Administration 

Branch, Fruit and Vegetable Programs, 

AMS, USDA; Telephone: (559) 487–

5901, Fax: (559) 487–5906; or George 

Kelhart, Technical Advisor, 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. 

Small businesses may request 

information on complying with this 

regulation by contacting Jay Guerber, 

Marketing Order Administration 

Branch, Fruit and Vegetable Programs, 

AMS, USDA, 1400 Independence 

Avenue SW, STOP 0237, Washington, 

DC 20250–0237; Telephone: (202) 720–

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

Jay.Guerber@usda.gov.

SUPPLEMENTARY INFORMATION: This 

proposal is issued under Marketing 

Order No. 983 (7 CFR part 983), 

regulating the handling of pistachios 

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 

(USDA) is issuing this rule in 

conformance with Executive Order 

12866. 

This proposal has been reviewed 

under Executive Order 12988, Civil 

Justice Reform. This rule is not intended 

to have retroactive effect. This proposal 

will not preempt any State or local laws, 

regulations, or policies, unless they 

present an irreconcilable conflict with 

this rule. 

The Act provides that administrative 

proceedings must be exhausted before 

parties may file suit in court. Under 

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

handler subject to an order may file 

with USDA a petition stating that the 

order, any provision of the order, or any 

obligation imposed in connection with 

the order is not in accordance with law 

and request a modification of the order 

or to be exempted therefrom. 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. 

This rule would modify sampling 

procedures for dark-stained pistachios 

which are intended to be dyed or colorcoated. It would also establish 

reinspection requirements for lots of 

pistachios, which are materially 

changed after meeting initial aflatoxin, 

quality, and size requirements. This 

action is expected to assure the quality 

of pistachios, provide handlers more 

marketing flexibility, and improve the 

marketability of pistachios. The benefits 

of this action are expected to offset the 

increased inspection costs. For the 

purposes of this proposed rule, the 

terms ‘‘marketing year’’ and 

‘‘production year’’ are synonymous.

Section 983.46 of the order authorizes 

the Committee to recommend that the 

Secretary modify or suspend the order 

provisions contained in §§ 983.38 

through 983.45. These sections took 

effect August 1, 2005. 

Sampling Procedures 

Sections 983.38 and 983.39 of the 

order specify maximum aflatoxin, 

minimum quality and minimum size 

requirements, respectively, that must be 

met prior to the shipment of pistachios. 

Sections 983.38(d)(1) and 983.39(e)(1) 

of the order specify that a sample must 

be drawn from each lot, and that this lot 

sample must be divided into two 

samples—one portion for aflatoxin 

testing and one for minimum quality 

and size testing. 

Section 983.39(b)(3)(iv) of the order 

currently defines dark stain and 

specifies that pistachios that are dyed or 

color-coated to improve their marketing 

49886 Federal Register / Vol. 70, No. 164 / Thursday, August 25, 2005 / Proposed Rules 

quality are not subject to the maximum 

permissible defects for dark stain. 

Pistachios grow on trees in grape-like 

clusters and are encased in an outer 

skin, or hull. During the pistachio 

harvest process, the nuts, which contain 

a significant amount of moisture when 

harvested, must arrive at the handling 

facility as soon as possible and the hulls 

covering the shell must be removed. If 

the hulls are not removed from the nuts 

within 24 hours of their removal from 

the tree, staining of the outer shell 

occurs. After being hulled, the 

pistachios are then dried, and placed in 

storage containers. When the nuts are 

removed from storage, they are sorted, 

sized, graded, and mechanically 

separated into open and closed shell 

product (pin-picked), and placed into 

lots for aflatoxin and minimum quality 

testing. Some handlers have the 

pistachios tested for aflatoxin prior to 

these processes. A ‘‘lot’’ is any quantity 

of pistachios that is designated for 

testing. 

During the sorting process, the inshell 

pistachios are separated by the color of 

the shells and the amount of stain on 

the shells. On average, approximately 95 

percent of the harvested inshell 

pistachios are placed into lots 

designated as non-stained or lightstained pistachios. Such pistachios are 

typically marketed without any 

treatment to cover the stains. The 

remaining 5 percent are placed into lots 

consisting primarily of dark-stained 

inshell pistachios. Handlers typically 

dye or color-coat the dark-stained 

inshell pistachios to cover the stains, 

because they are generally not 

marketable in their natural state. The 

staining detracts from their appearance. 

The color-coating process usually 

consists of applying a white coating or 

a flavoring to the shells of the 

pistachios. The dyeing process consists 

of applying a dye to the shells. These 

pistachios are marketed after either of 

these processes are performed by the 

handler. 

Under the regulatory requirements of 

the order, one test sample will be drawn 

per lot and divided into two portions—

one for aflatoxin testing and the other 

for minimum quality and size testing. 

Handlers or the inspection service will 

draw this sample while the pistachios 

are in their natural state (prior to dyeing 

or color-coating) because false positive 

test results may occur when dyed or 

color-coated pistachios are used in 

conducting aflatoxin tests. Lots of badly 

stained natural condition pistachios 

would likely exceed the maximum 

permissible 3 percent by weight 

tolerance for dark stain. Thus, they 

would fail to meet existing voluntary 

minimum quality requirements under 

the U.S. Grade Standards for Pistachios 

in the Shell (7 CFR 51.2540 through 

51.2549) or the minimum quality 

requirements under the order, that 

became effective August 1, 2005. 

On dark stained lots, it is common 

practice for handlers to use or submit 

the portion of the initial natural sample 

designated for aflatoxin testing for the 

aflatoxin testing at a USDA or USDA 

approved laboratory. If the sample 

meets the aflatoxin requirements, 

handlers then return the sample portion 

designated for the minimum quality and 

minimum size testing to the lot, dye or 

color-coat the lot, and draw or have 

drawn a second representative dyed or 

color-coated sample for minimum 

quality and size testing. The second 

representative sample is taken after the 

pistachios have been dyed or colorcoated to assure that the coloring is 

uniform and adequately covers the 

stained pistachios. 

Because the inspection requirements 

do not provide for a second sample after 

dyeing or color-coating, the Committee, 

on December 15, 2004, recommended 

modifying the order’s sampling 

procedures and establishing a new 

section entitled ‘‘§ 983.138—Samples 

for testing.’’ The vote was 8 in favor and 

0 opposed. 

For those lots that consist of primarily 

light-stained or non-stained inshell 

pistachios, one sample would continue 

to be drawn as specified in 

§§ 983.38(d)(1) and 983.39(e)(1) of the 

order. 

The Committee estimated that the 

total 2005–06 inshell pistachio crop will 

be approximately 200 million pounds 

and that approximately 5 percent (6 

million pounds or 600 lots) of all inshell 

pistachios marketed domestically would 

be dyed or color-coated to cover darkstained shells.

While this modification to sampling 

procedures under the order is expected 

to result in a slight increase in 

inspection costs for lots which are dyed 

or color-coated, the improvement in the 

marketability of these pistachios is 

expected to offset the additional costs. 

When the dark-stained pistachios are 

shelled out, the kernels generally have 

an approximate value of $1.00 per 

pound, which is substantially less than 

the $2.00 per pound value of dyed or 

color-coated inshell pistachios. 

Producers, handlers, and consumers 

benefit from dyeing or color-coating, 

because dyeing or color-coating darkstained inshell pistachios results in nuts 

having a more desirable color. This 

makes the nuts more appealing to 

retailers and consumers. Thus, retailers 

are willing to pay on average $2.00 per 

pound for these previously 

unmarketable dark-stained inshell 

pistachios. This increased value also is 

expected to contribute to improved or 

maintained producer returns. 

Reinspection 

Sections 983.38 and 983.39 of the 

order will specify maximum aflatoxin, 

and minimum quality and minimum 

size requirements, respectively. These 

sections took effect August 1, 2005. 

Section 983.39(e) of the pistachio 

order will provide minimum quality 

testing and inspection procedures and 

require each lot of pistachios to be 

certified, be uniquely identified, and 

traceable from testing through shipment 

by the handler. 

Section 983.41 of the pistachio order 

provides handlers who handle less than 

1 million pounds of assessed weight 

(dried weight) pistachios per production 

year (September 1–August 31) with 

certain aflatoxin testing options and 

allows such handlers to apply to the 

Committee for an exemption from 

minimum quality testing. Handlers 

granted an exemption will be required 

to pull the samples, make them 

available for review by the Committee, 

and maintain these samples in their 

handling facilities for 90 days. Handlers 

who do not apply or who are not 

granted an exemption from minimum 

quality testing, must test all lots for 

aflatoxin, quality, and size requirements 

under the order. This section also took 

effect August 1, 2005. 

Section 983.42 of the pistachio order 

provides that handlers may commingle 

aflatoxin and minimum quality certified 

lots with other certified lots. This 

section took effect August 1, 2005. 

Section 983.43 of the pistachio order 

provides authority for the Committee to 

recommend the establishment of rules 

and regulations to specify conditions 

under which pistachios would be 

subject to reinspection. This section, 

too, took effect August 1, 2005. 

Section 983.70 of the pistachio order 

exempts handlers who handle 1,000 

pounds or less of dried weight 

pistachios during any marketing year 

(dried to 5 percent moisture) within the 

production area from all aflatoxin and 

minimum quality requirements. 

As mentioned earlier, during the 

production year handlers typically hull 

and dry pistachios and place the nuts 

into storage containers. These nuts 

usually remain in storage until an order 

is received from a buyer. When the nuts 

are removed from storage, handlers have 

the option of sampling and having the 

nuts tested for aflatoxin prior to further 

processing (i.e., sorting, sizing, grading, 

and pin-picking (segregating the splitVerDate jul<14>2003 15:46 Aug 24, 2005 Jkt 205001 PO 00000 Frm 00005 Fmt 4702 Sfmt 4702 E:\FR\FM\25AUP1.SGM 25AUP1
Federal Register / Vol. 70, No. 164 / Thursday, August 25, 2005 / Proposed Rules 49887

and closed-shell pistachios)), or placing 

the nuts into lots for aflatoxin and 

minimum quality and size testing after 

these processes have been performed. 

The first option is expected to be used 

primarily by those handlers who have 

been granted an exemption from 

minimum quality and size testing 

pursuant to § 983.41(b). Most handlers 

are expected to perform these processes, 

segregate the pistachios into lots, and 

then draw or have drawn the samples 

for the required aflatoxin, quality, and 

size tests. 

Typically, handlers who handle a 

million or more pounds of assessed 

weight pistachios per marketing year 

further process the nuts prior to testing 

for aflatoxin, quality, and size 

requirements. Such handlers, pursuant 

to § 983.38(d) are required to uniquely 

identify each lot so that it can be traced 

from the point of testing through 

shipment. 

Pistachio handlers who handle less 

than a million pounds of assessed 

weight pistachios per marketing year 

and whose pistachios pass aflatoxin 

testing requirements would not have to 

comply with the traceability procedures 

set forth in § 983.38(d). Furthermore, 

pursuant to § 983.41(a) of the order, 

such handlers may test their entire 

inventory (maximum lot size of 150,000 

pounds) or segregate receipts into 

various sized lots and have an inspector 

sample and test each specified lot for 

aflatoxin and may also, pursuant to 

§ 983.41(b) of the order, apply to the 

Committee for an exemption from 

minimum quality testing. 

Because it is more economical for 

smaller handlers to test larger lots for 

aflatoxin and to be exempt from 

minimum quality testing, it is expected 

that the majority, if not all such 

handlers, will apply for the exemption 

from minimum quality testing.

Exempted handlers, who handle more 

than 1,000 pounds and less than a 

million pounds of assessed weight 

pistachios per marketing year, would 

draw or have one sample drawn per lot. 

This sample would be divided into two 

portions, one for aflatoxin and one for 

minimum quality testing. Typically, 

when such handlers receive notice that 

the lots have passed aflatoxin testing 

requirements, they return the sample 

portion designated for minimum quality 

testing to the lot. Such lots are then 

further processed (i.e., sized, sorted, airlegged, pin-picked, and graded). 

Handlers would then draw a new 

sample, which is required to be 

maintained for 90 days at the handler’s 

facilities and required to be made 

available for review or auditing by the 

Committee. Those handlers who handle 

more than 1,000 pounds and less than 

a million pounds and who are not 

granted such an exemption by the 

Committee are required to meet the 

traceability procedures as specified in 

§ 983.38(d) of the order and the 

aflatoxin, quality, and size requirements 

under the order. 

After certification for aflatoxin, 

quality, and size or pulling and 

retaining required samples, the majority 

of these lots are shipped directly into 

the channels of commerce. However, 

some certified lots are readied and 

retained in the handler’s facility in 

anticipation of future orders. 

When handlers receive new orders, 

they typically either resort or resize 

existing certified lots of inshell 

pistachios or create new lots from 

uncertified stored nuts. When existing 

certified lots are used they generally 

have to be reworked to meet specific 

buyer needs. For instance, light-stained 

nuts, dark-stained nuts, insect infested 

nuts, smaller or larger-sized nuts, closed 

shell or open shell nuts may have to be 

removed via hand-sorting, color-sorting, 

pin-picking and/or resizing. Removal of 

these nuts results in new lots which no 

longer have representative inspection 

certificates. Such lots would be 

considered to have been ‘‘materially 

changed’’. 

Thus, the Committee at its November 

3, 2004, meeting, unanimously 

recommended establishing a new 

section entitled ‘‘§ 983.143—

Reinspection’’ to define the term 

‘‘materially changed’’ and to specify 

handler reinspection requirements to 

assure the quality of pistachios entering 

market channels. 

The Committee, at its April 12, 2005, 

meeting, reconsidered and further 

clarified its previous recommendation. 

The Committee unanimously 

recommended that, effective August 1, 

2005, lots which are color-sorted, handsorted, pin-picked, and/or resized after 

being initially certified for aflatoxin, 

quality, and size requirements under the 

order be considered ‘‘materially 

changed’’ and that any portion of a lot 

(the portion resorted and resized to meet 

buyer specifications or the portion that 

was removed from the original lot) be 

inspected as new lots. The Committee 

clarified, that § 983.42 which provides 

that previously certified lots can be 

commingled with other certified lots, 

does not apply to portions of lots which 

are materially changed under the order, 

as such newly formed lots may no 

longer contain the same quantity or 

quality of inshell pistachios as the 

original lots. 

Initial Regulatory Flexibility Analysis 

Pursuant to requirements set forth in 

the Regulatory Flexibility Act (RFA), 

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 in order 

that small businesses would not be 

unduly or disproportionately burdened. 

Marketing orders issued pursuant to the 

Act, and the rules issued thereunder, are 

unique in that they are brought about 

through group action of essentially 

small entities acting on their own 

behalf. Thus, both statutes have small 

entity orientation and compatibility. 

There are approximately 24 handlers 

of California pistachios subject to 

regulation under the order and 

approximately 741 producers in the 

production area. Small agricultural 

producers are defined by the Small 

Business Administration (13 CFR 

121.201) as those having annual receipts 

less than $750,000, and small 

agricultural service firms are defined as 

those whose annual receipts are less 

than $6,000,000. Seventeen of the 24 

handlers subject to regulation have 

annual pistachio receipts of less than 

$6,000,000. In addition, 722 producers 

have annual receipts less than $750,000. 

Thus, the majority of handlers and 

producers of California pistachios may 

be classified as small entities. 

This rule would modify sampling 

procedures for dark-stained pistachios 

which are intended to be dyed or colorcoated. It would also establish 

reinspection requirements for lots of 

pistachios, which are materially 

changed after meeting initial aflatoxin, 

quality, and size requirements. This 

action is expected to assure the quality 

of pistachios, provide handlers more 

marketing flexibility, improve the 

marketability of pistachios, and enhance 

the marketability of reworked 

pistachios. These benefits are expected 

to offset increased inspection costs.

Section 983.46 of the order authorizes 

the Committee to recommend that the 

Secretary modify or suspend order 

provisions contained in §§ 983.38 

through 983.45. These provisions took 

effect August 1, 2005. 

Sampling Procedures 

Sections 983.38 and 983.39 of the 

order specify maximum aflatoxin, 

minimum quality and minimum size 

requirements, respectively, that must be 

met prior to the shipment of pistachios. 

Sections 983.38(d)(1) and 983.39(e)(1) 

of the order specify that a sample must 

49888 Federal Register / Vol. 70, No. 164 / Thursday, August 25, 2005 / Proposed Rules 

be drawn from each lot, and that this lot 

sample must be divided into two 

samples—one portion for aflatoxin 

testing and one for minimum quality 

and size testing. 

Section 983.39(b)(3)(iv) of the order 

defines dark stain and specifies that 

pistachios that are dyed or color-coated 

to improve their marketing quality are 

not subject to the maximum permissible 

defects for dark stain. 

Pistachios grow on trees in grape-like 

clusters and are encased in an outer 

skin, or hull. During the pistachio 

harvest process, the nuts, which contain 

a significant amount of moisture when 

harvested, must arrive at the handling 

facility as soon as possible and the hulls 

covering the shell must be removed. If 

the hulls are not removed from the nuts 

within 24 hours of their removal from 

the tree, staining of the outer shell 

occurs. After being hulled, the 

pistachios are then dried, and placed in 

storage containers. When the nuts are 

removed from storage, they are sorted, 

sized, graded, and mechanically 

separated into open and closed shell 

product (pin-picked) and placed into 

lots for aflatoxin and minimum quality 

testing. A ‘‘lot’’ is any quantity of 

pistachios that is segregated for testing. 

During the sorting process, the inshell 

pistachios are separated by the color of 

the shells and the amount of stain on 

the shells. On average, approximately 95 

percent of the harvested inshell 

pistachios are placed into lots 

designated as non-stained or lightstained pistachios. Such pistachios are 

typically marketed without any 

treatment to cover or remove the stains. 

The remaining 5 percent are placed into 

lots consisting primarily of dark-stained 

inshell pistachios. Handlers typically 

dye or color-coat the dark-stained 

inshell pistachios to cover the stains, 

because they are generally not 

marketable in their natural state. 

The color-coating process usually 

consists of applying a white coating or 

a flavoring to the shells of the 

pistachios. The dyeing process consists 

of applying a dye to the shells. 

Prior to placing pistachios into the 

domestic channels of commerce on 

August 1, 2005, and later, handlers will 

be required to draw or have drawn a 

sample and test or have tested each 

sample for aflatoxin, quality, and size 

requirements, unless exempted under 

§§ 983.41 or 983.70 of the order. 

Under the regulatory requirements of 

the order, one test sample will be drawn 

per lot and divided into two portions—

one for aflatoxin testing and the other 

for minimum quality and size testing. 

Handlers will draw this sample while 

the pistachios are in their natural state 

(prior to dyeing or color-coating) 

because false positive test results may 

occur when dyed or color-coated 

pistachios are used in conducting 

aflatoxin tests. 

When handlers believe that lots of 

natural condition pistachios exceed the 

maximum permissible 3 percent by 

weight tolerance for dark stain under 

the existing voluntary minimum quality 

requirements of the U.S. Grade 

Standards for Pistachios in the Shell (7 

CFR part 51.2540 through 51.2549), or 

the minimum quality requirements 

under the order, they will have the 

natural condition portion of the sample 

designated for aflatoxin testing tested. If 

the sample meets the aflatoxin 

requirements, handlers then return the 

sample portion designated for the 

minimum quality and minimum size 

testing to the lot, dye or color-coat the 

lot, and draw or have drawn a second 

representative dyed or color-coated 

sample to be tested for minimum quality 

and size. This second sample is taken 

after the pistachios have been dyed or 

color-coated to assure that the color is 

uniform and adequately covers the 

staining. 

Because the inspection requirements 

do not provide for sampling and 

inspections at this stage of the process, 

the Committee, on December 15, 2004, 

recommended modifying the order’s 

sampling procedures and establishing a 

new section entitled ‘‘§ 983.138 Samples 

for testing.’’ The vote was 8 in favor and 

0 opposed. 

The first alternative considered was to 

leave the order provisions unchanged, 

but this alternative was not adopted, as 

handlers, producers, and consumers 

would benefit from permitting the 

orderly marketing of pistachios 

containing edible nutmeats that fail 

minimum quality for external cosmetic 

reasons. The Committee also considered 

providing handlers with more flexibility 

in removing dark-stained inshell 

pistachios from lots, but decided that 

modifying the sampling procedures for 

lots intended for dyeing or color-coating 

would allow handlers to market these 

dark-stained pistachios without having 

to implement lengthy and costly 

removal processes.

The Committee estimated that the 

total 2005–06 inshell pistachio crop will 

be approximately 200 million pounds 

and that approximately 5 percent (6 

million pounds or 600 lots) of all inshell 

pistachios marketed domestically would 

be dyed or color-coated to cover darkstained shells. 

While this modification to sampling 

procedures under the order is expected 

to result in a slight increase in 

inspection costs for lots which are dyed 

or color-coated, the improvement in the 

marketability of these pistachios is 

expected to offset the additional costs. 

When the dark-stained pistachios are 

shelled out, the kernels are expected to 

have an approximate value of $1.00 per 

pound, which is substantially less than 

the $2.00 per pound value of dyed or 

color-coated inshell pistachios. 

Accordingly, producers, handlers, and 

consumers would benefit, as dyeing and 

color-coating dark-stained inshell 

pistachios results in nuts with a more 

pleasing appearance. Covering the dark 

stain would allow these edible 

pistachios to meet minimum quality 

requirements under the order and also 

make the pistachios more appealing to 

retailers and consumers. Retailers are 

expected to be willing to pay on average 

$2.00 per pound for these nuts that were 

previously unmarketable as inshell nuts. 

This increased value also is expected to 

contribute to improved or maintained 

producer returns. 

Reinspection 

Sections 983.38 and 983.39 of the 

order specify maximum aflatoxin 

requirements, and minimum quality and 

minimum size requirements, 

respectively. 

Section 983.39(e) of the pistachio 

order provides minimum quality testing 

and inspection procedures and requires 

that each lot of pistachios to be certified 

be uniquely identified and traceable 

from testing through shipment by the 

handler. 

Section 983.43 of the pistachio order 

provides authority for the Committee to 

recommend the establishment of rules 

and regulations to specify conditions 

under which pistachios would be 

subject to reinspection. 

Section 983.41 of the pistachio order 

provides handlers who handle less than 

1 million pounds of assessed weight 

(dried weight) pistachios per production 

year (September 1–August 31) with 

certain aflatoxin testing options and 

allows such handlers to apply to the 

Committee for an exemption from 

minimum quality testing. Handlers 

granted an exemption must pull the 

samples and maintain these samples in 

their handling facilities for 90-days for 

review and audit by the Committee 

when requested. Handlers who are not 

granted an exemption from minimum 

quality testing, must test all lots for 

aflatoxin, quality and size requirements 

under the order. 

Section 983.42 of the pistachio order 

provides that handlers may commingle 

aflatoxin and minimum quality certified 

lots with other certified lots. This 

section took effect August 1, 2005. 

Federal Register / Vol. 70, No. 164 / Thursday, August 25, 2005 / Proposed Rules 49889

Section 983.43 of the pistachio order 

provides authority for the Committee to 

recommend the establishment of rules 

and regulations to specify conditions 

under which pistachios would be 

subject to reinspection. This section, 

too, took effect August 1, 2005. 

Section 983.70 of the pistachio order 

exempts handlers who handle 1,000 

pounds or less of dried weight 

pistachios during any marketing year 

(dried to 5 percent moisture) within the 

production area from all aflatoxin and 

minimum quality requirements. 

As mentioned earlier, during the 

production year handlers typically hull 

and dry pistachios and place the nuts 

into storage containers. These nuts 

usually remain in storage until an order 

is received from a buyer. When the nuts 

are removed from storage, handlers have 

the option of testing the nuts for 

aflatoxin prior to further processing (i.e., 

sorting, sizing, grading, pin-picking 

(segregating the split- and closed-shell 

nuts), or placing the nuts into lots for 

aflatoxin and minimum quality and size 

testing after these processes have been 

completed. 

Typically, handlers who handle a 

million or more pounds of assessed 

weight pistachios per marketing year 

further process the nuts prior to testing 

for aflatoxin, quality, and size 

requirements. Such handlers, pursuant 

to § 983.38(d) are required to uniquely 

identify each lot so that it can be traced 

from the point of testing through 

shipment. 

Pistachio handlers who handle less 

than a million pounds of assessed 

weight pistachios per marketing year 

and whose pistachios pass aflatoxin 

testing requirements would not have to 

comply with the traceability procedures 

set forth in § 983.38(d). Furthermore, 

pursuant to § 983.41(a) of the order, 

such handlers may test their entire 

inventory (maximum lot size of 150,000 

pounds) or segregate receipts into 

various sized lots and have an inspector 

sample and have each specified lot 

tested for aflatoxin and may also, 

pursuant to § 983.41(b) of the order, 

apply to the Committee for exemption 

from minimum quality testing.

Because it is more economical for 

smaller handlers to test larger lots for 

aflatoxin and to be exempt from 

minimum quality testing, it is expected 

that the majority, if not all such 

handlers, will apply for the exemption 

from minimum quality and size testing. 

Thus, those exempted handlers, who 

handle more than 1,000 pounds and less 

than a million pounds of assessed 

weight pistachios per marketing year, 

would draw or have one sample drawn 

per lot. This sample would be divided 

into two portions, one for aflatoxin and 

one for minimum quality testing. 

Typically, when such handlers receive 

notice that the lots have passed 

aflatoxin testing requirements, they 

return the sample portion designated for 

minimum quality testing to the lot. Such 

lots are then further processed (sized, 

sorted, air-legged, pin-picked, and 

graded). Handlers would then draw a 

new sample, which is required to be 

maintained for 90-days at the handler’s 

facilities and made available for review 

or auditing by the Committee. 

Those handlers who handle more 

than 1,000 pounds and less than a 

million pounds and who are not granted 

such an exemption by the Committee 

are required to meet the traceability 

procedures as specified in § 983.38(d) of 

the order and the aflatoxin, quality, and 

size requirements under the order for 

each lot of pistachios. 

After certification for aflatoxin, 

quality, and size or pulling and 

retaining required samples, the majority 

of these lots are shipped directly into 

the channels of commerce. However, 

some certified lots are readied and 

retained in the handler’s facility in 

anticipation of future orders. 

When handlers receive new orders, 

they typically either resort or resize 

existing certified lots of inshell 

pistachios or create new lots from 

uncertified stored nuts. When existing 

certified lots are used they generally 

have to be reworked to meet specific 

buyer needs. For instance, light-stained 

nuts, dark-stained nuts, insect infested 

nuts, smaller or larger sized nuts, closed 

shell or open shell nuts may have to be 

removed via hand-sorting, color-sorting, 

pin-picking and/or resizing. Removal of 

these nuts, results in new lots which no 

longer have representative inspection 

certificates. Such lots would be 

considered to have been ‘‘materially 

changed’’. 

Thus, the Committee at its November 

3, 2004, meeting, unanimously 

recommended establishing a new 

section entitled ‘‘§ 983.143—

Reinspection’’ to define the term 

‘‘materially changed’’ and to specify 

handler reinspection requirements.

The Committee, at its April 12, 2005, 

meeting, reconsidered and further 

clarified its previous recommendation. 

The Committee unanimously 

recommended that, effective August 1, 

2005, lots which are color-sorted, handsorted, pin-picked, and/or resized after 

being initially certified for aflatoxin, 

quality, and size requirements under the 

order be considered ‘‘materially 

changed’’ and that any portion of a lot 

(the portion resorted and resized to meet 

buyer specifications or the portion that 

was removed from the original lot) be 

inspected as new lots. The Committee 

clarified, that § 983.42 which provides 

that previously certified lots can be 

commingled with other certified lots, 

does not apply to portions of lots which 

are materially changed under the order, 

as such newly formed lots may no 

longer contain the same quantity or 

quality of inshell pistachios as the 

original lots. 

Lastly, the Committee recommended 

that some handlers be exempt from 

reinspection requirements under the 

order. As previously mentioned, 

§ 983.70 of the pistachio order exempts 

handlers who handle 1,000 pounds or 

less of dried weight pistachios during 

any marketing year (dried to 5 percent 

moisture) from all aflatoxin and 

minimum quality requirements. Thus, 

the Committee recommended that such 

handlers also be exempt from any 

reinspection requirements under the 

order. 

Additionally, § 983.41 of the pistachio 

order provides that handlers who 

handle less than 1 million pounds of 

assessed weight (dried weight) 

pistachios per production year 

(September–August 31) with certain 

aflatoxin testing options and allows 

such handlers to apply to the Committee 

for an exemption from minimum quality 

and size testing. The order further 

provides that handlers, who are granted 

an exemption, shall pull and maintain 

for 90 days representative lot samples of 

any lots intended to be shipped into the 

domestic channels of commerce for 

review and audit by the Committee as 

requested. 

The Committee recommended 

exempting such handlers from 

reinspection requirements, as typically 

such handlers pull or have pulled 

representative lot samples immediately 

prior to shipment, do not materially 

change the lots, and ship such lots 

directly into the domestic channels of 

commerce and because the Committee 

believed such smaller handlers could be 

negatively impacted by the additional 

cost of reinspection. However, because 

such handlers could materially change 

their lots prior to shipment into the 

domestic channels of commerce, USDA 

is proposing to require such handlers to 

pull or have pulled representative 

samples of the materially changed lots 

to assure the quality of the pistachios 

and to keep the sampling and inspection 

procedures consistent with order 

authority. As noted in this document, 

the costs for reinspection are expected 

to be small compared to the benefit of 

assuring the quality of the pistachios 

entering commercial channels. 

49890 Federal Register / Vol. 70, No. 164 / Thursday, August 25, 2005 / Proposed Rules 

Such representative lot samples 

would be divided into two parts, one 

part would be retested for aflatoxin and 

the other part would be maintained for 

90 days at the handler’s facilities. Such 

samples would be stored in the 

handler’s facility and should not add to 

the handler’s cost. Additionally, 

handlers would be required to make 

those samples maintained for 90 days 

available for auditing by the Committee. 

While handlers who handle less than 

a million pounds may apply to the 

Committee for a minimum quality 

testing exemption, there may be 

occasions when the Committee does not 

grant these handlers such an exemption. 

The Committee unanimously 

recommended that such handlers and 

any handler who handles more than a 

million pounds of assessed weight 

pistachios during per marketing year 

and who materially changes any lot of 

pistachios shall test or have tested such 

lots for aflatoxin, and minimum quality 

and size requirements under the order 

before shipping such pistachios into the 

domestic channels of commerce, when 

the order requirements took effect on 

August 1, 2005. 

The Committee also discussed 

alternatives to this change, including 

not establishing these reinspection 

requirements, but believes that 

consumers should be provided with 

assurance of a certified high quality 

product that does not currently exist 

when a certified lot is ‘‘materially 

changed.’’ Also, the Committee 

discussed but decided not to include the 

following processes in the definition of 

‘‘materially changed’’: (1) Roasting, 

salting, flavoring, dyeing, color-coating, 

were discussed but not included in the 

definition as these processes do not alter 

a lot’s minimum quality or maximum 

aflatoxin levels; (2) cleaning was 

considered but not included because 

cleaning typically is accomplished prior 

to the initial inspection; and (3) airlegging which is performed to remove 

loose shells, was considered but not 

included because this process does not 

significantly change a lot. 

Lastly, the Committee discussed 

whether tracing a lot would provide 

assurance that materially changed lots 

would continue to meet the order’s 

maximum aflatoxin and minimum 

quality requirements and believed that 

it would not provide such assurance. It 

is of the view, that the best way to 

assure the quality of materially changed 

lots was through resampling and 

retesting.

The Committee also discussed the 

slight increase in the cost of inspection 

and the benefits of this action for 

handlers, consumers, and producers. 

Typically, nuts removed from materially 

changed lots are blended into other lots 

of uninspected inshell pistachios, 

shelled out into kernels, dyed or colorcoated, or discarded. Very few inshell 

pistachios are discarded, as handlers 

typically further process the nuts to 

obtain as many marketable nuts as 

possible. 

Closed-shell pistachios that are not 

blended into other uninspected lots are 

typically shelled out into kernels. 

Kernels are marketed on average for 

$1.00 per pound on the domestic market 

and can be marketed in some export 

markets for $2.00 to $3.00 per pound. 

Ordinarily, the dark-stained pistachios 

that are not blended into other 

uninspected lots are dyed or colorcoated and are marketed for $2.00 per 

pound in the domestic market, slightly 

less than the price received for natural 

condition, inshell pistachios. Dyed or 

color-coated nuts occasionally can be 

marketed in export markets as well. The 

Committee mentioned that the cost of 

resorting and resizing lots varies from 

lot to lot, and that such costs are 

dependent upon whether the product is 

hand sorted or mechanically sorted, the 

size of the lot, the percentage of the lot 

removed, and other similar factors. The 

Committee believes that the overall 

handler cost for resorting and/or 

resizing such lots is typically 

insignificant compared to the prices 

received for better quality lots. 

In reviewing inspection costs, the 

Committee believes that a typical initial 

aflatoxin certification costs 

approximately $70 per lot and an initial 

minimum quality inspection costs $100 

per lot. Buyers and consumers are 

willing to pay more for more appealing 

pistachios. Therefore, the Committee 

expects that handlers will market these 

materially changed lots at prices that 

will offset the combined costs of initial 

inspection, reprocessing, and 

reinspection. 

Thus, this action is expected to 

benefit handlers, buyers, and 

consumers. Handlers and buyers would 

be able to offer higher quality lots and 

consumers would receive more 

appealing, higher quality pistachios. 

These higher quality lots also should 

contribute to improved grower returns. 

The Committee does not foresee any 

industry problems that may result from 

implementation of this 

recommendation. 

This action would not impose any 

additional reporting or recordkeeping 

requirements on either small or large 

pistachio handlers. As with all Federal 

marketing order programs, reports and 

forms are periodically reviewed to 

reduce information requirements and 

duplication by industry and public 

sector agencies. 

USDA has not identified any relevant 

Federal rules that duplicate, overlap or 

conflict with this proposed rule. 

In addition, the Committee’s meetings 

were widely publicized throughout the 

pistachio industry and all interested 

persons were encouraged to attend the 

meetings and participate in the 

Committee’s deliberations on all issues. 

Like all Committee meetings, the 

November 3, December 15, 2004, and 

April 12, 2005, meetings, were public 

meetings and all entities, both large and 

small, were able to express their 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 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. 

A 7-day comment period is provided 

to allow interested persons to respond 

to this proposal. Seven days is deemed 

appropriate because any changes 

resulting from this proposed rule should 

be in place by mid-September. The 

beginning of harvest for the 2005–06 

season is expected to start at the end of 

August and handlers are expected to 

begin reworking their lots of pistachios 

by mid-September. All written 

comments timely received will be 

considered before a final determination 

is made on this matter.

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 proposed to 

be amended as follows:

PART 983—PISTACHIOS GROWN IN 

CALIFORNIA 

1. The authority citation for 7 CFR 

part 983 continues to read as follows:

Authority: 7 U.S.C. 601–674.

2. In part 983, Subpart—Rules and 

Regulations is amended by adding new 

§§ 983.138 and 983.143 to read as 

follows:

§ 983.138 Samples for testing.

Prior to testing, a sample shall be 

drawn from each lot and divided into 

two subsamples to be used to test 

pistachios for aflatoxin and for 

Federal Register / Vol. 70, No. 164 / Thursday, August 25, 2005 / Proposed Rules 49891

minimum quality. The lot subsamples 

shall be of sufficient weight to comply 

with Tables 1 and 2 of § 983.38 and 

Table 4 of § 983.39: Provided, that lots 

of pistachios which are intended for 

dyeing or color-coating shall be sampled 

for minimum quality after the dyeing or 

color-coating process.

§ 983.143 Reinspection. 

(a) Any lot of inshell pistachios that 

is pin-picked, hand-sorted, color-sorted, 

and/or resized is considered to be 

‘‘materially changed.’’ Pistachios which 

are roasted, salted, flavored, air-legged, 

dyed, color-coated, cleaned, and 

otherwise subjected to similar processes 

are not considered to be materially 

changed. 

(b) Each handler who handles 

pistachios shall cause any lot or portion 

of a lot initially certified for aflatoxin, 

quality, and size requirements, and 

subsequently materially changed, to be 

reinspected for aflatoxin, quality, and 

size, and certified as new lots: Provided,

that: (1) Pursuant to § 983.41(b) handlers 

exempted from minimum quality testing 

shall pull or have pulled representative 

lot samples for aflatoxin testing of any 

materially changed lots intended to be 

shipped into the domestic channels of 

commerce. Such representative lot 

samples shall be divided into two parts, 

one part shall be retested for aflatoxin 

and the other part shall be maintained 

for 90 days at the handler’s facilities. 

Handlers shall make the samples 

maintained for 90 days available for 

auditing by the Administrative 

Committee for Pistachios; and (2) 

handlers exempted from order 

requirements under § 983.70 are 

exempted from all reinspection 

requirements.

Dated: August 22, 2005. 

Lloyd C. Day, 

Administrator, Agricultural Marketing 

Service.

[FR Doc. 05–16981 Filed 8–23–05; 11:52 am] 

BILLING CODE 3410–02–P

FEDERAL RESERVE SYSTEM

12 CFR Part 205

[Regulation E; Docket No. R–1234] 

Electronic Fund Transfers

AGENCY: Board of Governors of the 

Federal Reserve System.

ACTION: Proposed rule; official staff 

interpretation. 

SUMMARY: The Board is publishing for 

comment a proposal to amend 

Regulation E, which implements the 

Electronic Fund Transfer Act (EFTA). 

The proposal would also revise the 

official staff commentary to the 

regulation. The commentary interprets 

the requirements of Regulation E to 

facilitate compliance primarily by 

financial institutions that offer 

electronic fund transfer services to 

consumers. 

The proposed revisions would clarify 

the disclosure obligations of automated 

teller machine (ATM) operators with 

respect to fees imposed on a consumer 

for initiating an electronic fund transfer 

or a balance inquiry at an ATM. The 

Board is withdrawing previously 

proposed revisions to the Regulation E 

staff commentary that would have 

addressed this issue.

DATES: Comments must be received on 

or before October 7, 2005.

ADDRESSES: You may submit comments, 

identified by Docket No. R–1234, by any 

of the following methods: 

• Agency Web site: http://

www.federalreserve.gov. Follow the 

instructions for submitting comments at 

http://www.federalreserve.gov/

generalinfo/foia/ProposedRegs.cfm.

• Federal eRulemaking Portal: http://

www.regulations.gov. Follow the 

instructions for submitting comments. 

• E-mail: 

regs.comments@federalreserve.gov.

Include docket number in the subject 

line of the message. 

• FAX: 202/452–3819 or 202/452–

3102. 

• Mail: Jennifer J. Johnson, Secretary, 

Board of Governors of the Federal 

Reserve System, 20th Street and 

Constitution Avenue, NW., Washington, 

DC 20551. 

All public comments are available 

from the Board’s Web site at http://

www.federalreserve.gov/generalinfo/

foia/ProposedRegs.cfm as submitted, 

unless modified for technical reasons. 

Accordingly, your comments will not be 

edited to remove any identifying or 

contact information. Public comments 

may also be viewed electronically or in 

paper in Room MP–500 of the Board’s 

Martin Building (20th and C Streets, 

NW.) between 9 a.m. and 5 p.m. on 

weekdays.

FOR FURTHER INFORMATION CONTACT: Ky 

Tran-Trong, Senior Attorney, or Daniel 

G. Lonergan, David A. Stein, Natalie E. 

Taylor or John C. Wood, Counsels, 

Division of Consumer and Community 

Affairs, Board of Governors of the 

Federal Reserve System, Washington, 

DC 20551, at (202) 452–2412 or (202) 

452–3667. For users of 

Telecommunications Device for the Deaf 

(TDD) only, contact (202) 263–4869.

SUPPLEMENTARY INFORMATION: 

I. Background 

The Electronic Fund Transfer Act 

(EFTA or Act) (15 U.S.C. 1693 et seq.), 

enacted in 1978, establishes the rights, 

liabilities, and responsibilities of 

participants in electronic fund transfer 

(EFT) systems. The Board’s Regulation E 

(12 CFR part 205) implements the 

EFTA. Examples of types of transfers 

covered by the Act and regulation 

include transfers initiated through an 

automated teller machine (ATM), pointof-sale (POS) terminal, automated 

clearinghouse (ACH), telephone billpayment plan, or remote banking 

service. The Act and regulation require 

disclosure of terms and conditions of an 

EFT service; documentation of 

electronic transfers by means of 

terminal receipts and periodic account 

activity statements; limitations on 

consumer liability for unauthorized 

transfers; procedures for error 

resolution; and certain rights related to 

preauthorized EFTs. 

The Official Staff Commentary (12 

CFR part 205 (Supp. I)) is designed to 

facilitate compliance and provide 

protection from liability under sections 

915 and 916 of the EFTA for financial 

institutions and persons subject to the 

Act. 15 U.S.C. 1593m(d)(1). The 

commentary is updated periodically, as 

necessary, to address significant 

questions that arise. 

II. Summary of Proposed Revisions 

Section 205.16 provides that an ATM 

operator that imposes a fee on a 

consumer for initiating an EFT or a 

balance inquiry must post notices at 

ATMs that a fee will be imposed. 

Section 205.16(b) would be revised to 

clarify the operation of the ATM signage 

rule when fees are not imposed by the 

ATM operator on all consumers. The 

revised language specifically clarifies 

the intent of the rule that ATM 

operators may provide a notice that a fee 

may be imposed if there are 

circumstances in which an ATM fee 

will not be charged for a particular 

transaction, such as where the card has 

been issued by a foreign bank or the 

card issuer has entered into a 

contractual relationship with the ATM 

operator regarding surcharges. 

Section 205.16 does not require that 

any sign be posted if no fee is charged 

to the consumer by the ATM operator. 

The rule is intended to allow consumers 

to identify immediately ATMs that 

generally charge a fee for use. It is not 

intended to represent a complete 

disclosure to the consumer regarding 

the fees associated with the particular 

type of transaction the consumer seeks 

to conduct. Rather, a more detailed