This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

17466

Vol. 60, No. 66

Thursday, April 6, 1995

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 981

[Docket Nos. AO–214–A7; FV93–981–1]

Almonds Grown in California;

Recommended Decision and

Opportunity To File Written Exceptions

to Proposed Further Amendment of

Marketing Agreement and Order No.

981

AGENCY: Agricultural Marketing Service,

USDA.

ACTION: Proposed rule and opportunity

to file exceptions.

SUMMARY: This recommended decision

invites written exceptions on proposed

amendments to the marketing agreement

and order for almonds grown in the

State of California. The proposed

amendments would: Amend five

existing definitions in the order; revise

board representation, nomination

procedures, terms of office, quorum and

qualification procedures, voting and

tenure requirements; modify creditable

advertising provisions; revise volume

control procedures; require handlers to

maintain records in the State of

California; authorize interest or late

payment charges on assessments paid

late; provide for periodic continuance

referenda; authorize exemptions for

organic almonds from certain program

requirements; and make necessary

conforming changes. These proposed

amendments are designed to improve

the administration, operation and

functioning of the California almond

marketing order program.

DATES: Written exceptions must be filed

by May 8, 1995.

ADDRESSES: Written exceptions should

be filed with the Hearing Clerk, U.S.

Department of Agriculture, room 1079–

S, Washington, DC 20250–9200,

Facsimile number (202) 720–9776. Four

copies of all written exceptions should

be submitted and they should reference

the docket numbers and the date and

page number of this issue of the Federal

Register. Exceptions will be made

available for public inspection in the

Office of the Hearing Clerk during

regular business hours.

FOR FURTHER INFORMATION CONTACT:

Kathleen M. Finn, Marketing Specialist,

Marketing Order Administration

Branch, Fruit and Vegetable Division,

AMS, USDA, room 2523–S,

Washington, D.C. 20250–0200;

telephone: (202) 720–1509, or FAX (202)

720–5698; or Martin Engeler, Assistant

Officer-In -Charge, California Marketing

Field Office, Marketing Order

Administration Branch, Fruit and

Vegetable Division, AMS, USDA, 2202

Monterey Street, suite 102–B, Fresno,

California 93721; (209) 487–5901 or

FAX (209) 487–5906.

SUPPLEMENTARY INFORMATION: Prior

documents in this proceeding: Notice of

Hearing issued on August 3, 1993, and

published in the August 17, 1993, issue

of the Federal Register (58 FR 43565).

This administrative action is governed

by the provisions of sections 556 and

557 of Title 5 of the United States Code

and, therefore, is excluded from the

requirements of Executive Order 12866.

Preliminary Statement

Notice is hereby given of the filing

with the Hearing Clerk of this

recommended decision with respect to

the proposed further amendment of

Marketing Agreement and Order No.

981, regulating the handling of almonds

grown in California, and the

opportunity to file written exceptions

thereto. Copies of this decision can be

obtained from Kathleen M. Finn or

Martin Engeler whose addresses are

listed above.

This action is issued pursuant to the

provisions of the Agricultural Marketing

Agreement Act of 1937, as amended (7

U.S.C. 601 et seq.), hereinafter referred

to as the ‘‘Act,’’ and the applicable rules

of practice and procedure governing the

formulation of marketing agreements

and orders (7 CFR part 900).

The proposed amendment of

Marketing Agreement and Order No.

981 is based on the record of a public

hearing held in Modesto, California, on

November 3, 4 and 5, 1993. Notice of

this hearing was published in the

Federal Register on August 17, 1993.

The notice of hearing contained several

proposals submitted by the Almond

Board of California (Board), which

locally administers the order, and other

interested parties.

The Board’s proposed amendments

would: (1) Increase its membership by

two positions and change Board

nomination, selection, and operation

procedures; (2) change the term of office

of its members from one to three years,

and limit the tenure of Board members;

(3) change the definitions of

‘‘cooperative handler,’’ ‘‘to handle,’’

‘‘settlement weight,’’ ‘‘crop year’’ and

‘‘trade demand’’; (4) require handlers of

California almonds to maintain program

records in the State of California; (5)

change its advertising assessment credit

program to allow credit for certain

advertising costs incurred by handlers

not previously authorized; (6) require

handlers to pay interest and/or late

payment charges for past due

assessments; (7) provide for continuance

referenda every five years; (8) require

handlers to submit grower lists; and (9)

allow multi-year contracting.

Five persons submitted additional

proposals related to continuance

referenda, Board composition and

nomination procedures, organic

almonds, regulatory provisions,

advertising and promotion, assessments,

compliance audits, the definition of

grower, and research and reserve

operations.

At the hearing, Mr. Brian C. Leighton,

on behalf of Cal-Almond, Inc., withdrew

five of his proposals that were listed as

proposal numbers 27, 30, 32, 33, and 38

in the Notice of Hearing. In addition,

there was no evidence provided with

respect to proposal numbers 42, 43, and

45 as listed in the Notice of Hearing.

Therefore, these proposals are not

included in this Recommended

Decision.

The Notice of Hearing also included

proposals by the Fruit and Vegetable

Division, Agricultural Marketing Service

(AMS), U.S. Department of Agriculture,

to make such changes as are necessary

to the order, if any or all of the above

amendments are adopted, so that all of

its provisions conform with the

proposed amendment. The Department

also proposed that continuance

referenda be conducted on a periodic

basis consistent with the Department’s

policy guidelines.

At the conclusion of the hearing the

Administrative Law Judge fixed

February 28, 1994, as the final date for

interested persons to file proposed
Federal Register / Vol. 60, No. 66 / Thursday, April 6, 1995 / Proposed Rules 17467

findings and conclusions or written

arguments and briefs based on the

evidence received at the hearing. The

following persons submitted

documents: Mr. Robert J. Crockett,

Attorney for the Board; Ms. Suzanne

Vaupel, Attorney representing several

organic almond growers; and Mr. Steven

W. Easter, Vice President of Blue

Diamond Growers.

Small Business Considerations

In accordance with the provisions of

the Regulatory Flexibility Act (RFA), the

Administrator of the AMS has

determined that this action would not

have a significant economic impact on

a substantial number of small entities.

Small agricultural producers have been

defined by the Small Business

Administration (SBA) (13 CFR 121.601)

as those having annual receipts of less

than $500,000. Small agricultural

service firms, which include handlers

regulated under the order, are defined as

those with annual receipts of less than

$5,000,000.

The purpose of the RFA is to fit

regulatory actions to the scale of

business subject to such actions so that

small businesses will not be unduly or

disproportionately burdened. Interested

persons were invited to present

evidence at the hearing on the probable

regulatory and informational impact of

the proposed amendments on small

businesses. The record indicates that

handlers would not be unduly burdened

by any additional regulatory

requirements, including those

pertaining to reporting and

recordkeeping, that might result from

this proceeding.

During the 1993–94 crop year,

approximately 115 handlers were

regulated under Marketing Order No.

981. In addition, there were about 7,000

producers of almonds in the production

area. The Act requires the application of

uniform rules on regulated handlers.

Marketing orders and amendments

thereto are unique in that they are

normally brought about through group

action of essentially small entities for

their own benefit. Thus, both the RFA

and the Act are compatible with respect

to small entities.

The proposed amendments to the

marketing agreement and order include

changes to five definitions in the

marketing order. These definitions are

cooperative handler, to handle,

settlement weight, crop year, and trade

demand. The changes that are proposed

to the definitions are intended to make

them consistent with current industry

practices. The proposed changes to the

definitions are designed to enhance the

administration and functioning of the

marketing order to the benefit of the

industry.

The proposed amendment to revise

Board representation would increase the

Board’s size by allowing two additional

grower members to serve on the Board.

This would increase grower

representation on the Board from five to

seven and allow more grower input into

Board decisions. The quorum size

would also be increased to correspond

with the increase in Board size. The

change to the nomination procedures

would require Board nominees to be

nominated by January 20 rather than

April 20 as currently provided. This

would ensure that the new Board is

seated prior to meetings where

important decisions are made for the

following crop year. These proposed

amendments are designed to improve

grower representation on the Board and

allow the Board to function more

efficiently.

The proposed amendment to change

the Board members’ term of office from

one-year to three-year staggered terms

would allow more continuity on the

Board. This would allow the Board to

focus more on long-term strategic goals

and develop long-term approaches to

problems in the industry.

The proposed amendment to require

those persons nominated to the Board to

qualify prior to their selection to the

Board is an administrative change. This

change would allow the selection

process to take place in a more timely

manner. The proposed amendment to

add tenure requirements for Board

members would allow more persons the

opportunity to serve as members on the

Board. It would provide opportunity for

new ideas and approaches to issues that

the Board addresses each year.

The proposed amendment to the

creditable advertising provisions would

provide for expansion of the

promotional activities for which

handlers may receive credit-back from

their assessments. This would allow the

Board to increase program flexibility for

participating handlers.

The proposed amendment to allow

the settlement weight for unshelled

almonds to be determined on the basis

of representative samples would be

more consistent with current industry

practices. There would be no increase in

burden on handlers expected from this

proposed amendment.

The proposed amendment to require

handlers to maintain records in the

State of California would improve the

Board’s administration of the program.

It would also allow the Board to have

the records available to them for

compliance purposes. It is not expected

that any additional costs would be

incurred by handlers to comply with

this amendment.

The proposed amendment to add

interest or late payment charges on

assessments paid late would encourage

handlers to pay their assessments on

time. Assessments not paid promptly

add an undue burden on the Board

because the Board has ongoing projects

and programs funded by assessments

that are functioning throughout the year.

The addition of such a penalty is

consistent with standard business

practices.

The proposed amendment to provide

for periodic continuance referenda

would allow growers the opportunity to

vote on whether to continue the

operation of the almond marketing

order.

The proposed amendment to allow

handlers to sell their reserve almonds

and the accompanying reserve

obligation to other handlers would help

facilitate the operation of the reserve

program by providing handlers more

flexibility.

The proposed amendment to exempt

organic almonds from certain program

requirements would provide the organic

segment of the industry more flexibility

in marketing and selling their product.

The proposed amendment would

authorize organic almond handlers to be

exempt from reserve requirements and

advertising assessments. Organic

growers and handlers demonstrated at

the hearing that certain current

marketing order provisions do not take

into account marketing differences

between certified organic almonds and

conventional almonds.

All of these changes are designed to

enhance the administration and

functioning of the marketing agreement

and order to the benefit of the industry.

Accordingly, the Administrator of AMS

has determined that the proposed

revisions of the order would not have a

significant economic impact on

handlers and growers.

The amendments proposed herein

have been reviewed under Executive

Order 12778, Civil Justice Reform. They

are not intended to have retroactive

effect. If adopted, the proposed

amendments would not preempt any

State or local laws, regulations, or

policies, unless they present an

irreconcilable conflict with the

amendments.

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
17468 Federal Register / Vol. 60, No. 66 / Thursday, April 6, 1995 / Proposed Rules

with the order is not in accordance with

law and requesting 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 in

equity to review the Secretary’s ruling

on the petition, provided a bill in equity

is filed not later than 20 days after date

of the entry of the ruling.

In accordance with the Paperwork

Reduction Act of 1980 (44 U.S.C. 35),

the reporting and recordkeeping

provisions that are included in the

proposed amendments would be

submitted to the Office of Management

and Budget (OMB). The provisions

would not be effective until receiving

OMB approval.

Material Issues

The material issues of record

addressed in this decision are as

follows:

(1) Whether to revise the existing

definition for ‘‘cooperative handler’’;

(2) Whether to revise the existing

definition for ‘‘to handle’’;

(3) Whether to revise the existing

definition for ‘‘settlement weight’’;

(4) Whether to revise the existing

definition for ‘‘crop year’’ and to change

the date that handler carryover and

reserve inventory is reported to the

Secretary to be used in fixing the salable

and reserve percentages;

(5) Whether to revise the existing

definition for ‘‘trade demand’’;

(6) Whether to increase membership

representation on the Board, revise

quorum requirements, allow voting by

facsimile machines, only require the

participation of 10 members when

voting by facsimile machines, telegram

or mail, increase the number of votes

needed for Board actions, and increase

the number of affirmative votes needed

to make recommendations on reserve

policies;

(7) Whether to change the date for

submitting nominees for Board

membership to the Secretary;

(8) Whether to revise the terms of

office and add tenure requirements for

members and alternates;

(9) Whether to require a written

acceptance with the background

statement from nominees;

(10) Whether to expand activities for

which handlers may receive credit

under the credit-back advertising and

promotion provisions;

(11) Whether to revise the provisions

regarding the determination and

redetermination of kernelweight for

unshelled almonds and whether to

eliminate the shelling ratios for

unshelled almonds;

(12) Whether to change the deadline

date for disposition of reserve almonds;

(13) Whether to delete the authority

for the creditable advertising provisions

and to modify the generic advertising

and promotion program;

(14) Whether to authorize the Board,

with the approval of the Secretary, to

reapportion grower and/or handler

member representation on the Board

based on the proportionate amounts of

almonds handled by different segments

of the industry;

(15) Whether additional eligibility

requirements should be added for

grower members on the Board;

(16) Whether to require handlers to

maintain records in the State of

California;

(17) Whether to provide handlers

advance notice before an audit or

inspection is performed;

(18) Whether to require handlers to

submit to the Board a complete list of

growers who have delivered almonds to

that handler during that crop year;

(19) Whether to authorize the

imposition of interest and/or late

payment charges for assessments that

are paid late;

(20) Whether to authorize payment of

interest in the event a suit or

administrative petition on payment of

assessments is successful;

(21) Whether to amend the definition

of almonds to exempt certified organic

almonds entirely from the marketing

order;

(22) Whether to exempt certified

organic almonds from advertising and

promotion assessments;

(23) Whether to require that a

minimum of 25 percent of funds

collected for production research

projects be spent on research and

development of production methods

which reduce or eliminate the use of

synthetic chemicals in the production

and handling of almonds;

(24) Whether to require that almonds

grown and sold as ‘‘certified organic

almonds’’ be exempt from the reserve

provisions;

(25) Whether to authorize the Board to

enter into contracts for periods up to

five years for services, goods or other

reasonable expenses;

(26) Whether to require that

continuance referenda be conducted on

a periodic basis;

(27) Whether to modify the reserve

provisions of the order by eliminating

the authority requiring reserve almonds

to be sold in secondary or market

development outlets and by authorizing

handlers to sell reserve almonds and the

reserve obligation to other handlers;

(28) Whether to require that the first

250,000 pounds of almonds handled by

a handler be exempt from reserve

provisions; and

(29) Whether to require incoming

inspections be conducted no later than

the last day of February during the then

current crop year.

Findings and Conclusions

The findings and conclusions on the

material issues, all of which are based

on evidence presented at the hearing

and the record thereof, are:

Material Issue Number 1

The term ‘‘cooperative handler’’

should be amended by referencing the

California Food and Agricultural Code

(California Code) in section 981.14 so

that cooperative handler would be more

clearly defined in the marketing order.

Currently, section 981.14 defines

cooperative handler as any handler

which is a cooperative marketing

association of growers regardless of

where or under what laws it may be

organized. This definition is used for

Board membership purposes only.

Proponents testified that this definition

needs to be amended to eliminate any

misinterpretations or

misunderstandings by the industry.

Therefore, the proponents stated that

the definition should reference the

California Code which specifically

defines a cooperative. Record evidence

supported that the term ‘‘cooperative

handler’’ should be defined in § 981.14

to mean any handler as defined in

section 981.13 (Handler), and which

qualifies for treatment as a non-profit

cooperative association as defined in

section 54001, et seq. of the California

Code. Under this new definition,

organizations would be unable to

identify themselves as cooperatives

under the almond marketing order

unless they meet the specific criteria

contained in the California Code.

At the hearing, there was concern

about future modifications to the

California Code which may be

unacceptable to the almond industry.

Record testimony indicated that it was

more important to develop a concise

definition that would help to alleviate

current problems the industry is

experiencing with misunderstandings

under the current cooperative definition

than to be concerned that the State may

develop an unsatisfactory definition of

cooperative at some future date. If the

definition of cooperative was amended

by the State and the amendment

rendered the definition unsatisfactory to

the Board, it would become necessary to
Federal Register / Vol. 60, No. 66 / Thursday, April 6, 1995 / Proposed Rules 17469

amend the marketing order definition

again. In the event the State definition

changed but remained satisfactory for

marketing order purposes, a change in

the State’s legal citation would still

require a change in the order. Therefore,

a provision is recommended to be added

to the amendatory language to allow the

Board, with the approval of the

Secretary, to modify the definition

through informal rulemaking if the

cooperative handler definition is

changed by California. This would

allow the Board to change the definition

without going through the formal

rulemaking process. This proposed

amendment is therefore recommended

with the above modifications.

Material Issue Number 2

The term ‘‘to handle’’ in § 981.16

should be amended to mean to

commercially use almonds of own

production or to sell, consign, transport

or ship or in any other way to put

almonds grown in the area of

production into any channel of trade for

human consumption worldwide.

Currently, § 981.16 defines ‘‘to

handle’’ to mean ‘‘to use almonds

commercially of own production or to

sell, consign, transport, ship (except as

a common carrier of almonds owned by

another person) or in any other way to

put into channels of trade, either within

the area of production or from such area

to points outside thereof, or to receive

as the first receiver thereof at any point

of entry in the United States and Puerto

Rico, almonds which have been

exported therefrom and are submitted

for reentry or are reentered free of

duty * * *’’.

At the hearing, proponents testified

that the current definition should be

amended to conform to the present state

of the industry and to ensure that some

entities not normally considered

handlers who may sell almonds to

channels of human consumption are

subject to regulation.

This proposed amendment intends to

clarify the current definition to insure

that entities whose primary function is

to remove hulls and shells from

almonds (hullers and shellers) who

retain some of the growers’ almonds and

sell them into human consumption

channels are subject to marketing order

regulations for those almonds sold to

human consumption channels. These

hullers and shellers are currently

performing a handling function by

taking title to the almonds and are

covered under the current definition.

However, the proponents believed that

further clarification to the definition is

needed in order to insure that hullers

and shellers that perform handling

functions are regulated. Proponents

testified that modifying the definition

would ensure that high quality almonds

are shipped into human consumption

outlets. Proponents testified that

because the new definition would be

clear, certain hullers and shellers would

be aware that they are subject to

regulation under the marketing order.

Because of this, the number of almond

handlers regulated under the marketing

order may be increased by this

amendment, but the increase is not

expected to be significant. This proposal

is not intended to bring all hullersshellers under the authority of the

marketing order, but only those that

perform handling functions by placing

almonds into human consumption

outlets.

The proponents also intended that

growers not be considered handlers

unless they prepare the almonds into a

form ready for human consumption. In

cases where growers deliver field run

almonds to another entity, the Board

wants to clarify that the entities that

receive such almonds from growers and

sell those almonds into human

consumption channels are considered

handlers under the marketing order.

This proposed amendment is

recommended.

Material Issue Number 3

The definition of the term ‘‘settlement

weight’’ should be amended in § 981.18

to allow adjustments in settlement

weight for inedible kernels.

The current section defines settlement

weight as the actual gross weight of any

lot of almonds received for the handler’s

own account, less adjustments for

weight of containers, for excess

moisture, and for trash or other foreign

material of any kind. There is no

adjustment specified for inedible

kernels.

Handlers report to the Board the

almonds they receive from growers in

terms of settlement weight. If settlement

is made on shelled almonds, the

settlement weight equals the

kernelweight. If settlement is made on

unshelled almonds, the settlement

weight is converted to a kernelweight

basis in accordance with § 981.60 of the

order. Volume regulations and other

order obligations are imposed on

handlers on the basis of kernelweight.

Thus, the settlement weight of almonds

received impacts a handler’s reserve

obligations. Such obligations do not

accrue on those items deducted from the

actual gross weight of the almonds

received (e.g., trash and other foreign

material).

Evidence at the hearing indicated that

almond production has dramatically

increased since the inception of the

marketing order. Therefore, the number

of inedible kernels has also increased

and the disposition of inedible kernels

has become a major issue for the

industry. Inedible kernel percentages

are not currently deducted from the

gross weight in determining settlement

weight. This amendment is intended to

allow handlers to deduct inedible

kernels in settlement weight

calculations and thereby, more

accurately reflect the marketable

quantity of almonds purchased by

handlers.

This proposed amendment is

recommended.

Material Issue Number 4

In § 981.19, the term ‘‘crop year’’

should be amended from ‘‘July 1

through June 30’’ to ‘‘August 1 through

July 31’’ in order to more accurately

reflect industry harvesting and

marketing activities. This change should

also be made for handler recordkeeping

purposes.

If this proposal becomes effective, the

proponents suggest having one 13-

month fiscal year in the first year after

implementation of the amendment to

provide for a smooth transition of the

modification. Almonds are normally

harvested and received by handlers

between August and November. Record

evidence indicated that there was

concern that, in the past, almonds were

occasionally harvested as early as July.

The Board representatives were

questioned as to what effects early crop

almonds would have on the change in

fiscal year. For example, if a reserve was

anticipated for the following crop year,

a handler may wish to have July

almonds apply to the previous crop year

to avoid subjecting those almonds to

reserve requirements. The same

situation could apply if the assessment

rate was raised. A handler could have

July almonds apply to the previous crop

year to avoid paying a higher

assessment.

A statistical table submitted by the

Department showed that for the past 12

years, no almond receipts were listed in

July, even in a year where almonds were

harvested in July. A Board

representative stated that, in those

situations, the almonds were held in a

handler’s plant and not inspected until

August, so therefore they were not

reported as received until August. This

representative stated that, in the rare

instance that almonds would be

harvested in July, the almonds should

be considered new crop almonds and

held until August. However, it also was

stated that under the proposed order

amendment, July almonds would be
17470 Federal Register / Vol. 60, No. 66 / Thursday, April 6, 1995 / Proposed Rules

considered as applying to the current

crop year and handlers could use that to

their advantage by processing almonds

in July and not subjecting them to a

reserve if a reserve was recommended

for the next crop year. It was stated that

there was nothing in the proposal to

prevent that situation from occurring.

One independent handler’s

representative stated that his client

would be the first to report almonds in

July if it meant being able to avoid a

reserve. Record evidence indicated that

the amendatory language proposed by

the Board should be modified to correct

the potential for problems relating to

this situation. Although the record

indicated no almonds have been

reported in July for several years, the

amendatory language has been modified

to correct this potential problem by

adding a sentence to the definition

which states that any new crop year

almonds harvested prior to August 1

would be applied to the next crop year

for purposes of assessments, quality

control provisions and volume

regulations. This proposed amendment

is recommended.

Conforming changes are also

necessary to the regulations to conform

with the change in crop year. There

were three proposals relating to

conforming changes in reference to the

crop year. One was withdrawn

(Proposal No. 22) because it proposed

changing § 981.441. Since the

publication of these proposals in the

Federal Register, this section has been

completely modified and no longer

references any dates relating to the crop

year. It was proposed to amend

§ 981.467 by making a date change to

conform with the change in the crop

year (Proposal No. 23). It was proposed

to amend § 981.472 by modifying the

reporting periods for reports of almonds

received to be consistent with the new

crop year calendar (Proposal No. 24).

This proposal was modified at the

hearing to correct an error which

appeared when published. Specifically,

at the hearing, the proposal was

clarified to amend paragraph (a) of

§ 981.472 by removing the dates ‘‘July 1

to August 31’’ and adding in their place

‘‘August 1 to August 31’’ and removing

the dates ‘‘April 1 to June 30’’ and

adding in their place the dates ‘‘April 1

to July 31’’.

A conforming change is also

necessary to section 981.73 of the

marketing order regarding the filing of

periodic reports. Testimony confirmed

the intent would be to change the July

15 reporting date to August 15 and the

June 30th reporting date to July 31. In

addition, § 981.49(b) should be

amended by changing the date through

which estimates of handler carryover

and reserve inventory must be

calculated from July 1 to July 31. The

above modifications have been made by

the Department.

Material Issue Number 5

The definition of ‘‘trade demand’’

should be amended in § 981.21 to

remove the option of not including

exports as part of the trade demand.

Currently, the term ‘‘trade demand’’

means the quantity of almonds which

commercial distributors and users such

as the wholesale, chain store,

confectionery, bakery, ice cream, and

nut salting trades will acquire from all

handlers during a crop year for

distribution in the United States, Puerto

Rico, and the Canal Zone, provided that

in recommending the salable and

reserve percentages for any crop year,

the Board may include, with the

approval of the Secretary, export outlets

for almonds. Testimony indicated that,

because of the growth of export markets,

they should be recognized as an integral

part of the trade demand for California

almonds and that this proposal would

more accurately reflect the true

worldwide nature of today’s almond

industry. Statistics presented at the

hearing confirmed the growth of the

export market. Record evidence also

indicated that conforming changes

would be necessary to §§ 981.47 and

981.66 to correspond with this proposal

by deleting phrases relating to trade

demand including either domestic or

domestic plus export. Paragraph (f) of

§ 981.49 should be deleted as it relates

to the percentage of reserve almonds

that may be exported. By making export

almonds part of trade demand, the

Board’s ability to establish an export

percentage is not necessary. This

proposed amendment is recommended.

Material Issue Number 6

Sections 981.30 and 981.31 should be

amended to increase Board

representation from 10 to 12 members to

strengthen the influence of growers on

the Board. Section 981.30 establishes

the number of representatives on the

Board and § 981.31 sets forth the

representation of the members.

Current Board representation consists

of two members representing

cooperative handlers, two members

representing handlers other than

cooperative handlers (independent

handlers), two members representing

growers who market their almonds

through cooperative handlers, two

members representing growers who

market their almonds through

independent handlers, one member

representing handlers (cooperative or

independent handlers) who through

March 31 of the then current crop year

handled more than 50 percent of the

crop, and one member representing

growers whose almonds were handled

through the handler group that handled

more than 50 percent of the crop.

Record evidence indicated that

adding one additional grower

representing cooperative handlers and

one additional grower representing

independent handlers would increase

grower representation on the Board.

This would allow additional grower

input in Board decisions.

The date for computing the

percentage of the crop handled by the

entities who handled more than 50

percent of the crop is also being

amended from March 31 to December 31

of the then current crop year to allow

more adequate time for the election

process. The election process for

independent member and alternate

member positions on the Board requires

that candidates submit their names for

inclusion on a ballot to be mailed prior

to a specified date (currently April 20).

Handlers then vote for handler members

and alternates. Each handler vote is

weighted by the quantity of almonds

handled in a prior period. Growers vote

for grower members, with each vote

equal in weight.

Record testimony and statistical

evidence indicated that at least 95

percent of the crop is harvested by

December 31 and modifying the date in

this section would have little or no

impact on the percentages computed in

determining which group handled more

than 50 percent of the crop for that year.

Section 981.40 should be amended by

revising paragraphs (b) and (c) and

amending paragraph (e) by removing the

word ‘‘seven’’ and adding in its place

the word ‘‘eight.’’ This proposal would

change the quorum size and the number

of votes required to recommend certain

activities. Specifically, the proposal

intends that all Board decisions shall be

as follows: If eight or nine members are

present, six affirmative votes will be

needed to pass an action; if 10 members

are present, seven affirmative votes will

be needed to pass an action; if 11 or 12

members are present, eight affirmative

votes will be needed to pass an action.

Currently, § 981.40 provides for a

quorum size of six members and a

majority vote of the members present to

pass Board recommendations. In

addition, § 981.40(e) provides that seven

affirmative votes are required for Board

recommendations with respect to

projects pursuant to § 981.41 involving

production research, marketing research

and development projects, and

marketing promotion including paid
Federal Register / Vol. 60, No. 66 / Thursday, April 6, 1995 / Proposed Rules 17471

advertising and crediting the pro rata

expense assessment obligation of

handlers with such portion of their

direct expenditures for marketing

promotion including paid advertising.

Witnesses testified at the hearing that

the change in the quorum size and

number of votes needed to pass Board

recommendations including those under

§ 981.41 would be needed if the Board

is increased from 10 to 12 members.

With the increase in membership from

10 to 12 members, the Board believes

that more stringent quorum size

requirements would ensure that the

almond industry is well represented at

Board meetings.

An opponent testified that the twothirds majority component is

undemocratic because it allows the

minority to effectively have veto power

over a majority of elected

representatives. Another opponent

testified that because the cooperative

segment will always have a minimum of

five votes, it has the ability to block

Board actions. This witness stated that

although the independent segment has

the same ability, history has shown that

it is rare for the independent segment to

vote in unison. This witness testified

that since 1950, the cooperative segment

voted together on every occasion, except

two.

The proponent testified that a twothirds requirement would help increase

industry cohesion and harmony on

important issues that come before the

Board. The proponent also believes that

the almond industry would become

stronger as a result of this change as all

industry factions would work together

to find common ground. Witnesses

testified that industry unity is a major

factor when the Secretary reviews

recommendations submitted to the

Department for action or approval.

Although the independent and

cooperative segments have the ability to

block Board actions by voting in unison,

neither could alone carry enough votes

to pass a recommended action under

this proposal’s voting requirements.

With the two-thirds majority, voting in

unison by one segment of the industry

could keep an action from passing.

However, under a simple majority, one

segment of the industry would be in a

position to actually pass a Board action

with its seven votes. This could allow

Board actions and recommendations to

be approved with only the support of

one industry segment.

Record evidence supports the quorum

size being increased to a two-thirds

majority. Although there was testimony

in opposition to increasing the number

of votes required to pass Board

recommendations from a simple

majority to an approximate two-thirds

majority, the testimony in favor of this

proposal by the Board, the Processors

and Hullers Association and the

Almond Growers Council strongly

supports this proposal. As stated

previously, this proposed amendment

will allow for more diverse support for

Board activities and is, therefore,

recommended as proposed.

Record evidence indicated that the

two-thirds voting requirement has been

used by the Board’s public relations and

advertising committee and has been

successful. The general belief of the

committee members is that the

requirement has been very beneficial in

helping them reach consensus on major

issues.

Section 981.49 should also be

amended to increase the required

number of votes when recommending

saleable and reserve percentages to the

Secretary.

Record evidence indicates that the

number of affirmative votes required to

recommend saleable and reserve

percentages should be increased from

six to eight. This change would require

more stringent voting requirements for

reserve recommendations than those for

other Board actions in some cases. Such

requirements would ensure that broad

industry support exists for such

recommendations. This proposal was

unanimously supported by the Board

and was supported by the Almond

Growers Council. No opposition

testimony was presented at the hearing.

Additionally, this proposal addresses

the issue of voting by methods other

than at assembled meetings. Currently,

§ 981.40 states that votes conducted by

mail or telegram must be unanimous to

pass an action. Thus, even one negative

vote would cause an action to fail. The

proposal would add facsimile machines

as a method of voting, and would

require 10 affirmative votes out of a

possible 12 votes on an issue when

voting by facsimile machine, telegram or

mail for an issue to pass. Record

evidence indicated that, in the past,

important Board business was

sometimes delayed by a member failing

to respond by telegram or mail for an

issue to pass. The recommended change

would alleviate this problem and would

increase the Board’s options in voting

outside of assembled meetings.

These proposed amendments are

recommended.

Material Issue Number 7

Section 981.32 should be amended to

change the nomination deadline for

Board nominees from April 20 to

January 20 and to change the deadline

for presenting the nominees for

selection with the Secretary from May

20 to February 20. Section 981.33

should also be amended to change the

beginning of the term of office from June

20 to March 1. These proposals are

intended to ensure that the new Board

members and alternates are seated prior

to meetings where important decisions

are made for the following crop year.

These issues could relate to setting

assessment rates, adopting budgets,

approving production research or

advertising programs or setting a

reserve. Testimony showed that this

proposal would allow new Board

members and alternates to be seated by

March 1, which would help alleviate

this problem as most of these decisions

are made after March 1 but before June

20.

The above proposed amendments are

recommended.

Material Issue Number 8

Section 981.33 should be amended to

change the Board members’ terms of

office from one year to three year

staggered terms to provide continuity of

operation. This section should also be

amended to limit these terms to six

consecutive years. Currently, Board

members serve for a term of one year

with no limitations on the number of

terms members can serve. The intent of

one-year terms was to have a Board that

reflected the current interests and

wishes of the almond industry.

Because of the many complex issues

facing the almond industry today,

testimony indicated that more emphasis

should be placed on long-term strategic

goals. Three year terms for some Board

members would allow the Board the

opportunity to work together on

industry issues and develop long-term

approaches. This would also provide

continuity on the Board from one year

to the next year. The two new grower

positions proposed to be established

under this formal rulemaking process

under § 981.31(c) would remain at oneyear terms. The record evidence

indicated that these two positions are

swing positions, which means that they

would be subject to change each year

depending on whether the independent

handlers or the cooperative handled the

majority of the tonnage.

With this proposal, it is intended that

each year the terms of office of three of

the members would expire, except every

third year when the term of office for

four of those members would expire. To

accomplish this, initially, three

members would serve for a term of one

year, three members would serve for a

term of two years and four members

would serve for a term of three years. At

the time of nomination the Board shall
17472 Federal Register / Vol. 60, No. 66 / Thursday, April 6, 1995 / Proposed Rules

make this designation by lot. To the

extent practicable, the designations

should be equitable between grower and

handler positions and between

cooperative and independent positions.

The two new grower positions would

always be for a period of one year.

Nominees for each respective member

and alternate position would be chosen

by ballot delivered to the Board.

The modification to section 981.32

also stated that ‘‘each year the terms of

office of one third of the Board shall

expire, except in 1994, when all terms

of office shall expire, except where

otherwise provided.’’ Record testimony

revealed that it was not mathematically

feasible for one-third of the Board terms

to expire since 10 members serve 3 year

terms and 2 members serve 1 year terms.

A brief filed by Mr. Robert J. Crockett,

Attorney for the Board, provided a

modification to the amendatory

language correcting the mathematical

error as stated above as well as the

reference to 1994.

Proponents also testified that section

981.33 should be amended to require a

term limitation of nine years for Board

members. Record evidence indicated

that alternate members’ terms of office

would not be subject to the nine year

term limitation.

It is the Department’s view that a limit

on tenure for Board members would

improve representation on the Board by

allowing for different and more

contemporary ideas, and that such a

limit would be beneficial to the Board’s

operations. The Department’s policy is

that a Board member’s consecutive

service be limited to a total of six years.

At the hearing, proponents for the

nine year tenure limitation testified that

nine years was the Board’s proposal,

however, the testimony indicated that

the proponents would not be opposed to

a six year tenure requirement. Further,

proponents testified that the Board

would not be opposed to the Secretary

extending the term of office limitation

for a member if another qualified

candidate was unable to be found

willing to serve.

Thus, in conformance with the above

policy, the Board’s proposal for a tenure

limitation of nine years for Board

members should be modified to six

years. Therefore, it is proposed that the

order be amended to limit the tenure of

members to six years. Tenure would not

apply to alternates. The proposal

intended that a person who has served

less than the term amount may not be

nominated to a new term if the total

consecutive years on the Board at the

end of that new term would exceed the

tenure. For example, a member could

serve for a two-year term and may then

be elected to serve in a position that has

a three-year term. That member could

not then be nominated to another threeyear term because the length of service

(eight years) would exceed the term

limitation of six years.

Any member would become ineligible

to serve on the Board after having

served six consecutive years. Such

individuals could again become eligible

to serve on the Board by not serving on

the Board for one full year as a member.

Since there is no term limitation on

alternate members, a member having

served for six consecutive years could

serve as a alternate member for a year

and be eligible to serve again as a

member. This limitation on tenure shall

not include service on the Board prior

to implementation of this amendment.

These proposed amendments are

recommended.

Material Issue Number 9

Section 981.34 should be amended to

require those persons nominated as

Board members or alternate members to

qualify prior to their selection by the

Secretary by stating that they agree to

serve in the capacity for which they

were nominated.

Currently, any person selected to be a

member or alternate member on the

Board is required to qualify by filing a

written acceptance with the Secretary

after such selection is made.

At the hearing, proponents testified

that the proposal is designed to remove

the possibility that a person who is

unwilling to serve is appointed by the

Secretary to the Board. This would be

accomplished simply by requiring that

the prospective candidate provide

background information and at the same

time advise the Secretary that he or she

agrees to serve in the position for which

nominated. All this information would

be provided to the Department prior to

the selection process. This proposal

would allow candidates to be selected to

the Board in a more timely manner.

Section 981.34 should also be

amended to clarify who is eligible to

serve in Board positions. Proponents

testified that the eligibility requirements

for member and alternate members on

the Board should be clarified to more

specifically state that grower members

and alternates must be growers or

employees of growers and handler

members and alternates must be

handlers or employees of handlers.

Section 981.34 currently states only

provisions relative to these persons

ceasing to be growers, handlers or

employees of growers and handlers.

There was further discussion at the

hearing that the intent of the proposal

would be to change the word ‘‘may’’ to

‘‘shall’’. This would require that only

such persons can serve in the grower

and handler positions. This change has

been made to amendatory language.

These proposed amendments are

recommended.

Material Issue Number 10

Section 981.41(c) should be amended

by revising the last sentence to allow the

Board to expand the range of paid

advertising activities for which handlers

may receive credit-back from their

advertising assessments. Section

981.41(c) should be amended by

removing all text following the words

‘‘15 percent’’ in the last sentence and

removing the colon after ‘‘15 percent’’

and adding in its place a period.

Currently, this provision lists

activities that are not eligible for credit

against a handler’s assessment

obligation. These activities include

advertising production costs,

preparation expenses, travel allowances,

other expenses not directly connected

with paid space or time, costs relating

to pretesting of advertising, test

marketing, directory advertising, point

of sales materials, premiums and trade

promotion allowances.

Hearing testimony indicated that by

expanding the range of activities for

which handlers may receive credit back

from their assessments, the effectiveness

of the industry’s market development

efforts will be improved. The proposal

complements actions taken by the Board

through informal rulemaking to replace

a creditable advertising program with an

expanded credit-back program. The

proposal is intended to allow for a

wider range of activities available for

credit, thereby, providing handlers,

especially those with no brand name,

with additional opportunities.

Testimony against the proposal

indicated that the new Credit-Back

program compels handlers to advertise

their products and directs handlers

where and when to advertise almonds.

The marketing order does not compel

handlers to advertise. The Credit-Back

program is a voluntary program that

allows handlers to receive credit-back

from their advertising assessment if they

engage in certain types of promotional

activities. The proposed amendment

would provide authority to expand

upon an existing program by allowing

the Board additional flexibility in

recommending modifications to the

regulations. Therefore, the proposed

amendment is recommended.

Material Issue Number 11

Sections 981.60(b) and 981.61 should

be amended and § 981.62 removed to

allow the settlement weight for
Federal Register / Vol. 60, No. 66 / Thursday, April 6, 1995 / Proposed Rules 17473

unshelled almonds to be determined on

the basis of representative samples of

unshelled almonds reduced to shelled

weight.

Currently, § 981.60(b) provides that

unshelled almonds for which settlement

is made on the basis of shelled weight

shall be included in the total

kernelweight for any handler at the

settlement weight of such unshelled

almonds multiplied by the shelling

ratios in § 981.62. Settlement weight is

the weight of almonds that handlers pay

growers for upon delivery. Record

evidence indicated that using a

representative sample for determining

kernelweight is a common industry

practice. This practice would provide

handlers with more accurate

kernelweight figures. Current procedure

under this section requires that shelling

ratios be applied to the weight of

unshelled almonds to arrive at a

kernelweight. Shelling ratios are

established by variety.

Proponents testified that

representative samples would be taken

by handlers on almonds received at the

handler’s premise under the supervision

of the Department’s inspection service

or by the inspectors themselves. A

sampling plan would be developed by

the Board each year and would

prescribe the size of the sample to be

taken dependent on the actual weight of

the load. For example, the plan would

consist of sampling procedures for each

handler to use that would coincide with

the quality of the almond crop for that

particular year. Evidence supported an

appeal process if any handler disagreed

with the actual representative sample

taken. The appeal process would begin

with the complaint being brought before

the quality control committee (a

subcommittee of the Board). If a handler

did not receive satisfaction through the

quality control committee, the handler

could then take the complaint to the full

Board.

Evidence also supported amending

§ 981.61 of the marketing order.

Currently, § 981.61 provides that, three

times during the crop year, the Board

redetermine the kernelweight of

almonds received for the purposes of

computing each handler’s reserve

obligation. Section 981.61 further

provides that the weights used in such

computations for redetermining the

kernelweight for unshelled almonds be

computed by application of shelling

ratios authorized pursuant to § 981.62.

Proponents testified that this is a

companion proposal to the issue of

determining settlement weight for

unshelled almonds. Therefore, § 981.61

should be amended to allow the Board

to redetermine the kernelweight of

unshelled almonds by using a

representative sample reduced to

shelled weight. Record evidence

indicated that this amendment would

provide that the best and most common

practices are being used for

redetermining kernelweight.

Finally, the record evidence

supported removing § 981.62 from the

marketing order. Currently, § 981.62

contains a table of shelling ratios for

each variety of almonds. These varietal

shelling ratios are used for computing

kernelweight for unshelled almonds.

Record evidence indicated that these

shelling ratios are no longer necessary to

compute the kernelweight for unshelled

almonds since the proponents have

recommended using representative

samples to compute such weight. Also,

the shelling ratios are outdated because

new varieties of almonds have been

developed since the marketing order’s

promulgation.

Proponents testified that the

amendments to §§ 981.60, 981.61 and

981.62 are intended to reflect the

industry’s current practices and provide

a more accurate kernelweight figure.

These proposed amendments are

recommended.

Material Issue Number 12

Sections 981.66(e) and 981.67 should

be amended by changing the disposition

date for reserve almonds from

September 1 to December 31. Currently,

these sections require reserve almonds

to be disposed of by handlers by

September 1 of the following crop year.

If any reserve is remaining after that

date, the Board is required to dispose of

the reserve through the most readily

available reserve outlets. The order also

provides that the September 1 date may

be extended by the Board to a later date,

if necessary.

Record evidence indicated that a

December 31 date is a much more

practicable deadline date than the

current date. When the order was first

promulgated, the almond industry was

much smaller and the majority of the

crop was sold in the fall. At that time,

there was little need for storage and

storage techniques did not allow the

product to be stored for a long period of

time.

Proponents testified that the almond

crop today is much larger and storage

capabilities allow handlers to store

almonds for a year or more. The last two

times that an almond reserve was in

effect, the Board recommended that the

September 1 disposition date be

extended to December 31. The record

evidence showed that a December 31

disposition date is a more realistic

deadline for the industry based on

current industry practices. This

proposal would also provide that the

December 31 disposition date may be

extended by the Board to a later date, if

necessary, with the Department’s

approval.

The proposed amendment is

recommended.

Material Issue Number 13

Sections 981.40 and 981.41 should

not be amended to delete the authority

for the Credit-Back advertising program

under the almond marketing order and

to modify the generic program. In

addition, § 981.81 should not be

amended to conform with the proposal

to amend §§ 981.40 and 981.41. A

proponent of this proposed amendment

testified that the program is

unconstitutional and a waste of the

growers’ money. The program also

requires several office hours and many

hours to complete forms to participate

in the program. Further, the proponent

testified that by the time handlers get

done wasting their money on the

current regulations, they have no funds

left to advertise almonds in the way

they would prefer.

The proponent testified that other

areas of the Credit-Back program are

burdensome and wasteful to the

handlers. One area is that handlers only

receive credit-back for that portion of

the product weight represented by

almonds or the handler’s actual

payment, whichever is less. The

proponent testified that this area of the

Credit-Back program is unfair because

handlers should be paid back for all

their advertising since they moved a lot

of almonds into the marketplace.

Further, the almond is used as an

ingredient product and many handlers

sell almonds into that market. The

proponent testified that the Board

should not care where the almonds are

sold (e.g., cereals, candy, ice cream,

etc.). The Board should only be

concerned about moving California

almonds into the marketplace.

Another area of concern expressed by

the proponent was that the government

can dictate to handlers where to

advertise and where not to advertise,

where they can get credit and where

they cannot get credit.

The proponent testified that it is not

opposed to the generic advertising

program. However, the witness

proposed that the Board should not be

allowed to engage in promotion directed

solely at snack almonds nor should the

primary purpose of any Board

advertising or promotion be directed for

the consumption or sale of snack

almonds. The proponent testified that

95 to 98 percent of the entire almond
17474 Federal Register / Vol. 60, No. 66 / Thursday, April 6, 1995 / Proposed Rules

production is for ingredient uses and

not for snack almonds. Therefore, the

witness testified that Board funds for

the generic program should be spent on

ingredient use.

Testimony from the opponents at the

hearing indicated that actions have been

taken and additional recommendations

are being made to improve and expand

the promotional activities for which

handlers may receive credit-back from

their assessments. The Credit-Back

program is an example of an action

which made the program more flexible.

Another example is the proposal in this

proceeding to further expand the range

of activities for which handlers could

get credit-back by amending Section

981.41(c), thus increasing program

flexibility for those participating.

The opponents further testified that

wide-spread industry support exists for

the creditable advertising provisions

and the authority should remain in the

order. Opponents stated that this

proposal eliminates handler choice and

severely handicaps the industry in

developing creative advertising and

promotional activities. Regarding the

portion of the proposal to prohibit

promotion of snack almonds, opponents

testified that problems would exist with

attempting to define a specific type of

almond as ‘‘snack.’’ Opponents stated

this part of the proposal is arbitrary and

capricious because the size of the

package, method of sale, product form

or shape or other criteria do not define

almonds as snack. The witness testified

that snacking is a form of consumption

rather than a form of product.

Opponents believe that all forms of

almond sales can and do benefit the

industry.

On August 17, 1993, the Department

issued an interim final rule (58 FR

43500) which implemented a new

Credit-Back advertising and promotion

program. The new Credit-Back program

substantially revised the creditable

advertising program whereby handlers

may receive credit against their

assessment obligation for their

individual promotional activities, in

lieu of contributing entirely to a generic

promotion program administered by the

Board.

Although the new Credit-Back

program allows credit for the percentage

of almonds in other products, the

program is designed to promote the sale

of almonds and almonds in products,

not the products that contain almonds.

The Credit-Back program was

recommended to the Department by the

Board which is comprised of

independent and cooperative members

which represent the almond industry.

The Credit-Back program is a voluntary

program that allows handlers to receive

credit-back from their advertising

assessment if they engage in any of a

broad range of promotional activities.

Research studies show that

promotional programs conducted under

the almond marketing order have been

effective and are a good investment of

industry funds. The Credit-Back

program combined with the Board’s

generic program is a proven method of

promoting almonds. The combined

generic and Credit-Back program

administered by the Board recognizes

the positive aspects of both forms of

promotion and has been proven to be

successful and responsive to changing

needs and desires of the industry over

time.

We agree with the view that the

marketing order promotion and

advertising provisions should remain as

flexible as possible and provide choices

for the Board in determining how best

to promote almonds. Removing

authority for a Credit-Back program

would reduce the options available to

the industry for promoting its product.

Maintaining that authority does not

mandate use of such a program, it

merely preserves an available tool.

It is determined that this variety of

options can only benefit the industry. It

is also determined that restricting the

generic program by not allowing

promotions for snack almonds also

would unnecessarily limit choices for

the Board and would not serve any

useful purpose.

Accordingly, the record evidence does

not support the amendment to eliminate

the creditable advertising provisions or

to modify the provisions as

recommended in this proposal.

Therefore, this proposed amendment is

not recommended.

Material Issue Number 14

Section 981.32 should be amended to

authorize the Board, with the approval

of the Secretary, to reapportion grower

and/or handler member representation

on the Board based on the proportionate

amounts of almonds handled by

different segments of the industry.

A proposal was submitted and

testimony received at the hearing which

would require that cooperative

representation on the Board not exceed

the percentage of the industry tonnage

handled by the cooperative in the

immediately preceding crop year.

However, no specific amendatory

language was provided by the

proponent.

At the hearing, the proponent testified

that the industry’s major cooperative

marketing association, Blue Diamond

Growers, Inc. (Blue Diamond), should

not be guaranteed five of the 12 seats on

the Board. The proponent testified that

it is no longer democratic to provide

Blue Diamond with five seats on the

Board since the industry percentage of

almonds handled by Blue Diamond has

decreased. The proponent provided the

following example of how the proposal

would work: If Blue Diamond handled

from 45 to 55 percent of the industry

tonnage, Blue Diamond would have five

seats; 35 to 44.9 percent, Blue Diamond

would have four seats; 25 to 34.9

percent, Blue Diamond would have two

to three seats. The proponent stated that

this would prevent a single entity, such

as Blue Diamond, from bloc voting on

Board proposals. The proponent further

stated that, currently, Blue Diamond has

an unfair advantage by being allowed to

always have five seats on the Board.

Opponents to this proposal testified

that the Board’s proposal to increase the

number of members from 10 to 12

would provide additional grower

representation on the Board. The

proposal to increase the number of

Board members represents the

overwhelming sentiment of the

industry. Opponents also testified that,

in the past, the cooperative was able to

have a majority of the Board’s

membership because of the amount of

tonnage it handled. However, that is not

the situation that exists today, as

independent growers and handlers

currently hold a majority of the Board’s

member positions.

Another opponent testified that, even

with the decline in the percent of total

crop handled by Blue Diamond, their

membership exceeds 50 percent of the

total number of California almond

growers. Further, other opponents

testified that the proposal is directed at

only one organization, and fails to take

into account that, even at 30 percent of

the crop handled, the cooperative would

still represent over 50 percent of the

total number of almond growers in the

State of California.

The proponent testified that, without

obtaining a list of the cooperative’s

growers, it is not possible to determine

if, in fact, the cooperative does represent

over 50 percent of the total number of

growers in the State of California. The

proponent further testified that Board

representation should be based on

tonnage in all circumstances.

An opponent testified that if, in ten

years, the cooperative represented ten

percent of the industry, the cooperative

should not have five seats on the Board.

Another opponent testified that he

would prefer the whole industry to

operate on a tonnage basis.

Record evidence indicates that

currently, there is strong industry
Federal Register / Vol. 60, No. 66 / Thursday, April 6, 1995 / Proposed Rules 17475

support to maintain Board membership

representation with the cooperative and

independent segments being authorized

to hold the specified numbers of seats

proposed in Material Issue Number 6.

However, in the event the industry

structure changes in future years, there

may be a need to further modify the

structure of member representation.

Record evidence does not support

amending the marketing order as the

proponent recommended. The evidence

does support, however, authorizing the

Board, with the approval of the

Secretary, to modify the membership

representation requirements in the

future if the industry structure changes.

This would allow the Board, with the

approval of the Secretary, to recommend

modifications to the representation

requirements, if necessary, through

informal rulemaking procedures. This

would provide additional flexibility in

the program by providing and ensuring

that the Board continues to fairly

represent all segments of the industry.

Therefore, this proposal is

recommended, in part, by authorizing

the Board, subject to the approval of the

Secretary, to reapportion the grower

and/or handler member representation

among the 12 member positions, of any

group listed in the proposed § 981.31 (a)

through (c) to be nominated as a Board

representative. This proposal does not

intend that the Board may increase or

decrease the number of members on the

Board. The Board may reapportion the

positions within the 12 member Board.

A new paragraph (d) has been added to

§ 981.31 to set forth this

recommendation.

Material Issue Number 15

The proposed amendment to section

981.12 would have revised the

definition of grower. At the hearing, the

proponents for this amendment revised

the amendatory language that was

published in the Notice of Hearing as

follows: For the purpose of holding a

grower seat on the Board, a grower

would be required to have over 50

percent of his or her involvement and

income in the almond industry derived

from growing almonds. A grower

wishing to run for a seat would certify

to this criterion on the nominating

petition.

Proponents testified that, in the past,

some grower seats have been occupied

by persons who were basically handlers.

It was perceived by growers that they

consistently represented a handler point

of view at the expense of the grower.

The proposal is intended to ensure that

the grower seats on the Board are

represented by growers and the growers’

interests are reflected and represented.

The proposal would only apply to

independent growers who are

nominated to become members or

alternate members on the Board because

its purpose relates to nominations for

Board positions.

At the hearing, proponents testified

that the grower would sign a

certification that over 50 percent of his

or her involvement and income in the

almond industry was derived from

growing almonds and would make that

known to all growers when running for

a Board position. If an opponent had

signed the certification and it was well

known that the opponent was basically

a handler, the grower could raise that

issue during the campaign. Proponents

also testified that the grower would be

making the determination as to the 50

percent involvement and income, and

there would be no penalty for falsifying

the certification. In addition, if a grower

refused to sign the certification, the

grower would be ineligible to serve on

the Board.

Record evidence indicated that

although certifications by growers could

be signed during the nomination

process, there is no procedure to verify

such certifications, nor is there a

penalty for a false certification.

Therefore, the intent of this proposal

would not be served.

The proposal has been modified by

revising § 981.32, rather than § 981.12 as

proposed by the proponents. Record

evidence supported that the intent of

the proposal is to only modify the

definition of grower with respect to

nominations of growers to the Board. It

would not be appropriate to modify the

grower definition under § 981.12 since

this definition applies to the use of

grower throughout the marketing order.

It is therefore proposed that a new

paragraph be added under § 981.34 to

further define grower for nomination

purposes. The record evidence supports

a grower definition that would allow

growers to be nominated to the Board

that would truly represent grower

interests. However, the proponent’s

amendment would not be enforceable as

proposed and would not accomplish the

intent of the amendment. Therefore, the

Department proposes that the Board be

provided the authority, with the

approval of the Secretary, to make

recommendations to establish

additional eligibility requirements for

growers, for nomination purposes,

through informal rulemaking. This

would allow the Board to further

explore avenues to accomplish the

intent of the proposed amendment. The

amendatory language therefore has been

modified to add such authority.

Material Issue Number 16

Section 981.70 should be amended to

require handlers to maintain records in

California to provide Board auditors

with reasonable access and improve

program management. Currently,

§ 981.70 only requires that the handler’s

premises be accessible to Board auditors

for records to be examined and audited.

At the hearing, proponents testified

that Board auditors should not have to

travel out of state to examine handler

records. It is an economic burden on the

Board, and therefore the almond

industry, to pay travel expenses for

Board auditors to travel out of state. In

addition, it is necessary to have

immediate access to handlers’ records if

compliance issues arise.

An opponent testified that handlers

could be burdened by being required to

maintain all records in California. He

stated that some needed records could

be the buyers’ or the shipping company

records. In addition, the witness

testified that the terms ‘‘as well as other

pertinent information regarding his or

her operations’’ could lead to abuse if

the person determining what is

‘‘pertinent’’ selects some unreasonable

records such as tax returns to be

maintained in California.

The purpose of this proposal is to

keep handlers from maintaining all their

records in a different state making it

difficult for the Board to effectively

audit handler’s records. It is not

intended that handlers maintain records

in the state that would not normally be

maintained, such as buyers’ or shipping

company records. This proposal does

not intend to add any undue hardship

on handlers and the proposal, as

written, does not make unnecessary or

unreasonable requirements on handlers.

The language which would require

different types of records than those

specified, if necessary (‘‘other pertinent

information’’), is necessary to account

for the many different recordkeeping

systems maintained by handlers.

Maintenance of records within the

State of California would assure that the

benefits from marketing order

compliance activities exceed related

costs. It is not expected that any

additional costs would be incurred by

handlers to comply with this

amendment. Therefore, this amendment

is recommended as proposed.

Material Issue Number 17

The proposed amendment to section

981.70 would have required that the

Board provide handlers with 24 hours

advance notice before they conduct

audits of records and inspections of

reserve almonds. In addition, handlers
17476 Federal Register / Vol. 60, No. 66 / Thursday, April 6, 1995 / Proposed Rules

would not have been required to

provide any labor or equipment to the

Board to facilitate inspections.

Currently, § 981.70 provides that each

handler’s premises shall be accessible to

authorized representatives of the Board

and the Secretary for examination and

audit of handler records and for

inspection and observation of reserve

almonds. The Board shall make such

checks of almonds or audits of each

handler’s records as it deems

appropriate or as requested by the

Secretary to insure that accurate

information as required in this part is

being furnished by the handlers.

A proponent testified that handlers

may be busy with almond buyers and

may not have time to show all the

records that Board auditors need to

examine during an audit visit. The

proponent testified that handlers should

be made aware of the audit visit in order

to make preparations to have the records

made available for the audit. Further,

the proponent stated that handlers

should be treated like businesses and

not as if they are under constant

suspicion of violating the marketing

order. In addition, the proponent

testified that if a handler does not desire

to assist and aid the Board in

conducting the audit, the handler

should not be required to furnish labor

and equipment to do it. The handler

should not be required to bear the

expense or the liability of conducting

handler audits.

The record evidence indicated that

the almond industry is subject to

Federal regulations under a marketing

order. Regulated industries that choose

to participate in a Federal program are

subject to inspection of records. The

marketing order currently contains

authority to allow the Board to conduct

checks of almonds or audits of each

handler’s records. Testimony indicated

that the Board has the authority to make

these visits without prior notice. The

record evidence supports this provision

remaining in order to properly carry out

the regulatory aspects of the order.

At the hearing, additional testimony

in opposition to the proposal indicated

that Board staff usually schedules

appointments with handlers ahead of

time to maintain a positive and

courteous relationship between the

Board and the handlers. However, the

reality remains that all handlers do not

comply with the provisions of the

marketing order. Opponents testified

that removal of the authority to make

unannounced visits to audit handlers

would remove an important compliance

tool from the Board and the Secretary.

A handler with something to hide

would have plenty of time to conceal

vital documents from scrutiny by

authorized Board personnel.

Opponents further testified that most

handlers prefer to conduct any

movement of product by using their

own personnel and equipment at their

premises. Handler personnel would also

be familiar with the location of reserve

almonds that would need to be

examined.

Accordingly, the record evidence does

not support the amendment to require

the Board to provide handlers with 24

hours advance notice before it conducts

audits and inspections or for handlers to

not be required to furnish any labor or

equipment to the Board to facilitate

inspections. Therefore, this proposed

amendment is not recommended.

Material Issue Number 18

The proposed amendments regarding

§§ 981.76 and 981.90 would each

require handlers to submit to the Board

a list of growers who have delivered

almonds to such handler during the

crop year. Because these proposals

would provide for essentially the same

recommendation, they will be discussed

as one material issue.

The proposed § 981.76 would require

each handler to submit to the Board, no

later than December 31 of each year, a

complete list of growers who have

delivered almonds to such handler

during the crop year. The proposed

amendment to § 981.90 would require

each handler to submit to the Board, no

later than January 31 of each year, a list

of names and addresses of all growers

from whom such handler received

almond production for the then current

crop year.

Currently, the marketing order does

not require such information to be

submitted to the Board under any

section. Such information is submitted

to the Board by most handlers on a

voluntary basis for nomination

purposes.

Proponents testified that the

proposals are intended to help the

Board be more efficient in conducting

elections for Board members and

alternate members. Since the list is

currently submitted to the Board on a

voluntary basis, the Board is not assured

that it has a complete and accurate list

of growers to use in conducting the

election of Board members. In order for

the Board to operate efficiently, it is

necessary for the Board to reach as

many growers as possible. Mandatory

submission of grower lists would help

accomplish this goal. The proponents

testified that the amendment would

help provide the widest possible

participation by growers in the election

process.

The proponents stated that this

requirement would respect the private

business relationship between a grower

and handler. The proprietary nature of

the relationship would be respected by

the Board and that information would

not be divulged by the Board.

A proponent testified that the list

would be used for annual elections of

Board members and for periodic

continuance referenda. The list would

not reveal a grower’s handler affiliation.

This proposal would further provide

that the Board could charge handlers

and growers who request the list for

photocopying and mailing.

A witness testified that the

cooperative grower list is needed when

periodic continuance referenda are

conducted because other interested

parties to a referendum have a right to

know who those growers are so they are

in a position to provide them

information which may influence their

vote. This witness further testified that

the Board should know who these 4,000

growers are so they are aware if any of

these growers become handlers.

The opponents to the amendment

testified that it is a well-established fact

that lists of members of agricultural

cooperatives are considered proprietary

information. The witness testified that

there are no other programs in which

cooperatives are required to release such

a list and the Department has long

recognized that cooperatives are not

required to reveal the names of their

members. Many farmers who belong to

agricultural cooperatives do not want

their names and addresses used for

purposes other than those needed by the

cooperative to properly perform its

business functions. The opponents

further testified that the only reason for

a requirement for handlers to submit

grower lists is for the use in the election

of Board members representing those

marketing through independent

handlers.

Opponents testified that Board

elections have been conducted with

wide publicity and all growers have an

opportunity to participate. The

cooperative informs all its members

when elections do take place even

though Board members are nominated

by the cooperative’s board of directors.

An opponent testified that the release

of such information would be controlled

directly by the Department, which in

turn is controlled by the Administrative

Procedure Act, the Freedom of

Information Act, and the Privacy Act, as

well as court interpretations. By

including the proposed language in the

marketing order, the Board could face a

situation in which the marketing order

mandates release of information while
Federal Register / Vol. 60, No. 66 / Thursday, April 6, 1995 / Proposed Rules 17477

the Department and the courts or both

may require that the information not be

released. Therefore, the question of

release of information should be left to

the Department.

A brief filed by Mr. Steven W. Easter

of Blue Diamond Growers stated that the

two similar proposals discussed at the

hearing were worded slightly differently

but they essentially provide for the same

thing. Both proposals are directed at

requiring Blue Diamond Growers to turn

over its cooperative membership list to

the Board. Both proposals represent an

effort by independent handlers and

growers to obtain the membership list of

their principal competitor, Blue

Diamond Growers.

Mr. Easter stated that there is no other

proposed amendment nor any current

provision that requires a cooperative,

including Blue Diamond, to furnish its

membership list to the Board. It is well

established that growers may contact the

Board directly to be placed on the

Board’s mailing list. Mr. Easter also

stated that Blue Diamond provides

notice of all elections to its members

directly. This satisfies Blue Diamond’s

contractual obligations with its

members and the Board’s desire to have

all members of the industry notified of

elections. The witness stated that this

system has worked for 43 years.

Mr. Easter further provided in his

brief that Blue Diamond’s membership

list contains the names and addresses of

all of its grower/supplier members and

is, in that sense, its customer list. Under

California law, customer lists have been

protected as trade secrets under the

Trade Secrets Act so long as they meet

the definition set out in California

Corporations Code. In conclusion, Mr.

Easter stated that elections to the Board

and referenda on proposed amendments

and continuation have taken place since

1950 successfully. The guidance

provided by the Board has enabled the

industry to move forward in a beneficial

manner. Mr. Easter requested that the

proposal be rejected.

The record evidence indicates that it

would benefit the Board to have a list

of independent growers’ names and

addresses. Board elections would be

conducted in a more efficient manner

and there would be greater assurance

that all growers are informed regarding

activities centered on Board elections.

The record evidence supported that it is

not necessary for the Board to obtain the

names and addresses of cooperative

growers for nomination purposes since

those Board members are selected by the

cooperative’s board of directors.

Although grower lists not revealing

handler affiliation can be obtained by

requesting the list from the Department

under the Freedom of Information Act,

the Board is responsible for

confidentiality of handler information

and does not release a complete

growers’ list.

When continuance referenda are

conducted, a method to ensure that

ballots are provided to all cooperative

growers would have to be derived. For

example, one method would be for the

Department to provide the ballots to the

cooperative and obtain a sworn

statement from a representative of the

cooperative attesting that all growers

were sent ballots. It would be in the best

interest of the cooperative to ensure that

all of its growers vote in referenda and

USDA will ensure that a satisfactory

method has been established when

continuance referenda are conducted.

In the event a cooperative chooses to

bloc vote for all its members in a

referendum, the Department would

require the cooperative to submit a

grower list to verify that none of those

members also voted individually.

However, this is not sufficient reason to

require the cooperative to submit a

grower list to the Board on an annual

basis since the Board does not need that

list to conduct its operations.

Regarding the testimony that the

Board needs to know the cooperative

growers in case any of them become

handlers, this does not appear to be

sufficient reason to require this list from

the cooperative. The Board has an

established compliance program to

address compliance issues and needs.

Also, if a grower list is desired, such a

list can be obtained from other sources.

Testimony indicated there are

alternative sources for that information.

For the above stated reasons, the

proposed amendment is modified to

allow the Board to request from

independent handlers their growers’

names and addresses for purposes of

elections. The lists would be submitted

no later than December 31 of each year

to facilitate Board administration. The

proposed amendment, as modified, is

therefore recommended.

Material Issue Number 19

Section 981.81 should be amended to

add authority to require handlers to pay

interest and/or late payment charges in

order to discourage late payment of

assessments.

Currently, § 981.81 requires handlers

to pay to the Board on demand

assessments on almonds received by the

handler for the handler’s own account.

There is no provision for a late payment

or interest charge.

The proponents testified at the

hearing that the Board’s experiences

with collection of assessments for

administration, research and generic

promotion have been frustrating. At the

present time, about 90 percent or more

of the handlers promptly pay the

assessments when due, others are at

times slow to pay. As of June 30, 1993,

the Board was owed past due

assessments totaling several million

dollars. If these amounts had been paid

promptly, the funds received could have

been utilized for Board programs. The

proponents do not believe that it is

equitable for late paying handlers to

benefit from the wide variety of Board

programs financed by handlers who pay

on time. Significant industry support is

necessary in order for the marketing

order to be successful.

An opponent to the proposal testified

that handlers who challenge the

assessment rate would be penalized if

they pay the assessment in order to

avoid the late charges because they

would not recoup the assessments paid

if they prevail in their challenge. This

position is discussed in detail in

Material Issue Number 20 which deals

with another proposal to authorize

payment of interest in the event a suit

or administrative petition regarding

payment of assessments is successful.

This witness further testified that if

this proposal is authorized and

regulations are implemented, it would

be better to require that the payment be

postmarked within 30 days from the

invoice date rather than received in the

Board office within 30 days.

The proponents testified that the

Board envisioned implementing the

specifics of the late payment and/or

interest charges through informal

rulemaking with the Secretary’s

approval. This would allow the Board to

remain flexible with the establishment

of the interest and/or late payment

charge. The Board proposed language

for the regulations in this proceeding.

However, USDA has determined that

this would be better accomplished by

the Board recommending to the

Secretary an informal rulemaking action

at a later date if this provision is

implemented.

The suggestion that payments be

postmarked within 30 days of invoice to

be considered timely does have merit.

When assessing interest charges for late

payment, it would appear reasonable

that handlers be allowed 30 days from

invoice to mail these charges to the

Board. The Board should consider this

suggestion when making a

recommendation to the Secretary to

implement the regulations regarding late

payment and/or interest charges.

The record evidence supports this

proposed amendment and therefore, it is

recommended.
17478 Federal Register / Vol. 60, No. 66 / Thursday, April 6, 1995 / Proposed Rules

Material Issue Number 20

This proposed amendment to the

order would have required refunds plus

payment of interest to a handler in the

event a suit or administrative petition

filed by such handler challenging the

payment of assessments is successful.

No specific amendatory language was

provided.

The proponent testified that there

have been several challenges to the

almond, orange and tree fruit marketing

orders. In these cases, the proponent

stated that the Judicial Officer of USDA

did not authorize the prevailing handler

to recoup the assessments paid. The

proponent also testified that the

Agricultural Marketing Agreement Act

permits handlers to challenge

provisions of federal marketing orders,

including the establishment of

assessment rates. The Board’s proposal

to add an interest and/or late payment

charge would penalize handlers that

challenge the assessment rate since they

would have to pay the assessment to

avoid the late charges but would not

receive the assessment back if they

prevail. In addition, the Department

argued in court that the Board would

have to vote for a prevailing handler to

have assessments returned and the

funds would have to be approved in the

Board’s budget.

The proponent further testified that it

is better to address the issue at this time

by putting the provision in the

marketing order than to wait for the

Department to tell the Board they have

to pay the handler back their

assessments plus interest. It was

discussed at the hearing where the

money should come from to pay back

the handler, and the proponent testified

that such money should come from the

Department. If not from the Department,

the money should come from the

industry. The witness testified that the

Department continues to approve every

proposed rule for assessments over the

proponent’s objections, therefore, they

should pay the money back to the

prevailing handler.

Opponents to the proposal testified

that they are opposed for three reasons.

First, there was no language specified to

analyze the proposal, therefore, their

understanding of the subject was vague

and undefined. Second, the proposal

refers to the legal rate of interest which

is not compatible with the Board’s

proposal. Third, the term ‘‘successful’’

is not defined to differentiate between

an administrative ruling before a law

judge or the final review by the Judicial

Officer. The opponents further testified

that such rulings may be reviewed by

the District Court, therefore, this

proposal must be opposed because it

does not clearly state at what point a

handler could claim a refund of

assessment and the accompanying

interest. Also, depending on the timing

of such refund, the Board may not have

funds available to make the refund.

The proponent responded to the

opposition by stating that he has no

qualms with stating that the interest rate

be the same as what the Board

established. Also, that within 30 days of

a final non-appealable decision being

made, the Board should make the

refund. Finally, if the Board does not

pay back the prevailing handler in 30

days, the Board would be required to

pay a five percent penalty.

The record evidence does not support

this proposed amendment. Section

610b(2)(ii) of the Act provides that

handlers regulated by marketing orders

pay their pro rata share of such

expenses as the Secretary may find are

reasonable and likely to be incurred

during a specified period for the

maintenance and functioning of the

marketing order. Section 608c(15)(A) of

the Act provides a method for

challenging marketing order provisions,

including the requirement to pay

assessments, through administrative

petitions. In addition, several of the

issues which this proposal raises are

currently being appealed to the Ninth

Circuit.

Therefore, this proposed amendment

is not recommended.

Material Issue Number 21

The proposed amendment to section

981.4 would have amended the

definition of ‘‘almonds’’ to exempt

certified organic almonds from the

entire marketing order.

Currently, the marketing order does

not differentiate between almonds that

are organically grown and those that are

not.

The proponents for this amendment

testified that the markets for organic

almonds are totally separate from those

for conventionally grown almonds. The

organic tonnage of almonds in the

industry is very small. The proponent

testified that he empathizes with the

organic growers since they do not want

their money spent on Board programs

that do not benefit organic almond

growers and handlers. The proponent

stated that the California Department of

Food and Agriculture has strict

requirements for certified organic

commodities and penalties if growers

violate them.

Opponents testified that it would be

difficult to determine if an almond has

truly been organically grown. While it is

true there are voluminous regulations

on organic products, once the almonds

reach the market place, it is impossible

to discern organically-grown almonds

from those that are not organically

grown. In addition, the opponent

testified that organic growers currently

benefit from the various programs

conducted by the Board. The Board is

pursuing a very active program of

promoting almonds. Organic growers

benefit from the perceived value of

almonds that result from such

aggressive promotion programs. There

are also many production research

programs sponsored by the Board that

benefit organic growers as well as other

almond growers. They include crop

irrigation management, bud failure,

nematode infestation, integrated pest

management and problems from

Africanized honey bees. The opponent

further testified that all segments of the

industry are interested in finding the

most cost-effective, reliable method of

increasing production and delivering a

high-value, safe product to the

consumer. In addition, the opponent

stated that the Board is committed to

working with organic growers to ensure

that their interests are considered in

making Board recommendations.

Several organic growers and handlers

submitted proposals for differential

treatment under the almond marketing

order, but did not propose the organic

community be entirely exempt.

Accordingly, the record evidence does

not support the amendment to exempt

organic almonds entirely from the

marketing order. Record evidence shows

that organic growers do reap some

benefits from the order and its

programs, which include certain

research activities and the new CreditBack advertising program. Therefore,

this proposed amendment is not

recommended.

Material Issue Number 22

The proposed amendment to § 981.41

would require that handlers not be

assessed for marketing promotion,

including advertising for the number of

pounds of certified organic almonds

handled. Currently, there is no

provision in the marketing order to

exclude organic almonds from the

marketing promotion program.

The proponents for this amendment

testified that the proposal is intended to

provide an exemption for certified

organic almonds from the advertising

assessments since advertising for

conventional almonds is not relevant to

the market for certified organic

almonds. The market for organic

almonds is not yet well developed and

does not benefit from generic

advertising of almonds. The market is a
Federal Register / Vol. 60, No. 66 / Thursday, April 6, 1995 / Proposed Rules 17479

niche market, made up of consumers

who are seeking a guaranteed organic

product. Any effective advertising must

be geared to that market. The

proponents testified that there are strict

penalties for violating the certified

organic regulations. Under Federal law,

it is a violation to sell anything as

organic that is not certified organic, and

there is a fine of up to $10,000. In

addition, any person found to have

violated the law can be prohibited from

organic certification for five years.

The proponents stated that buyers of

certified organic almonds include

natural food stores, consumers through

mail order, roadside stands, certified

farmers markets and specialty health

food distributors. The end user is a

consumer looking for an organic

product first. If the consumer cannot

find organic almonds, the consumer is

more likely to substitute a different

organic product rather than

conventional almonds. Under the

current assessment program, even if the

certified organic handlers fully

participate in the credit-back program,

50 percent of their assessment would

still support generic advertising which

is not relevant to their market. This

proposal would have a positive benefit

on growers and handlers of certified

organic almonds, most of whom are

small businesses.

Another proponent testified that

certified organic almond handlers need

relief from the burdens and restrictions

imposed by the Board. Certified organic

almonds have very little in common

with commercial almonds. Promotion

and advertising requires a different

direction and a totally different target

market which is not acknowledged by

the Board.

Testimony in opposition to the

amendment indicated that organic

almonds should continue to fall under

the marketing order and be assessed for

marketing promotion. The opponent

testified that all almonds benefit from

generic advertising and promotion

campaigns conducted by the Board.

This includes growers that grow the

Mission variety of almonds that appeals

to the candy manufacturers. However,

the opponent testified that Mission

variety growers are not asking to be

exempt from the order. The witness

further stated that pooling industry

resources can stimulate industry growth

for the benefit of everyone. The

opponent stated that the Board has

made an effort to reach out to the

organic growers and establish dialogue

on key issues. The witness testified that

there is a lot of common ground and

that the industry can continue to build

on that common purpose and interest by

working together rather than working

apart.

The record evidence supports that the

organic market is a separate and distinct

market. Although testimony indicated

that generic advertising for conventional

almonds could have a limited effect on

organic consumers, the organic industry

may not benefit directly from the

Board’s generic advertising program.

However, the evidence did show that

organic handlers could derive some

benefit from the Board’s new CreditBack advertising program. The Board

has stated that it wants to work with the

organic segment of the industry and

recognize them as an important part of

the industry. Therefore, the Department

is modifying the amendment to provide

that the Board may, with approval of the

Secretary, exempt certified organic

almond handlers from the advertising

assessment through further informal

rulemaking. This would provide the

Board and the organic segment of the

industry with the flexibility of

exempting handlers of certified organic

almonds from the advertising

assessment. It would also provide for

development of a framework to

implement and verify compliance with

such an exemption. Therefore, the

proposed amendment is recommended

as modified.

Material Issue Number 23

The proposed amendment to § 981.41

would require that a minimum of 25

percent of funds collected for projects

involving production research shall be

spent on research and development of

production methods which reduce or

eliminate the use of synthetic chemicals

in the production and handling of

almonds. Under the current marketing

order, there is no requirement that a

minimum amount be spent in any

certain area.

The proponents testified that this

amendment is intended to benefit all

almond growers by finding ways to

reduce and eliminate the use of

synthetic chemicals. This effort is

especially important in light of the

restrictions on continuing availability

and use of certain agricultural

chemicals. Record evidence indicated

that this research activity would be

coordinated by the production research

committee of the Board. The proponent

recommended the appointment of one

or more growers of certified organic

almonds to the production research

committee. The committee would issue

a request for proposals that contribute to

finding new production techniques

which reduce or eliminate the use of

synthetic chemicals. The committee

would then allocate a minimum of 25

percent of funds, earmarked for

research, for such proposals.

The proponents further testified that

the amendment would require a positive

effort to seek out and fund proposals

that investigate ways to reduce chemical

use. Such a pro-active policy by the

Board would send a signal to the

research community to generate these

proposals. It would also send a message

to the public that the Board is taking

steps to improve the environment

through reducing the use of synthetic

chemicals. This effort is important to

the future of the industry for two

reasons: (1) Various agricultural

chemicals commonly used by almond

growers are being phased out and will

be taken off the market by government

regulations; (2) very little research is

currently being conducted on nonsynthetic alternatives for almond

growers and handlers. The proponent

testified that she is aware of only one

Board research project in this area.

The proponent testified that this

proposal would help all almond growers

and handlers face the challenges of

decreasing availability of agricultural

chemicals and increasing pressure from

environmental groups. Developing such

alternatives would protect growers and

handlers from potential large crop losses

and would satisfy consumer demand for

reduced chemical usage. The proposal

would also have a positive effect on

small businesses since most growers

and handlers of organic almonds are

small businesses.

At the hearing, opponents did not

believe that one tenth of one percent of

the industry should be in a position to

dictate to the other 99.9 percent of the

industry how to spend its funds,

especially considering that this small

segment is attempting to be exempt from

certain major areas of the order. The

proponent testified that the organic

community believes that this proposal

would be beneficial to the whole

almond industry. Every grower is under

pressure to reduce chemical use. The

proposal would give the industry the

tools to meet production needs and to

reduce pest and diseases without using

chemicals. It was further discussed that

organic almond growers have not

brought forth any research projects to

the production research committee.

Also, the proponent was not aware of

any such research projects being turned

down by that committee.

It was also discussed that the

marketing order currently contains

authority to accomplish the proponents’

goal. If the proponents attended the

production research meetings and

provided information on the needed
17480 Federal Register / Vol. 60, No. 66 / Thursday, April 6, 1995 / Proposed Rules

research in those areas, they could

possibly convince the Board to fund

projects in the proposed area. In

addition, testimony was offered that the

Board may not be able to find within the

research community projects to reach

the 25 percent minimum that is

proposed. The proponents testified that

if a bona fide effort was made by the

Board to obtain such projects, funding a

lesser percentage would not be a

problem. A bona fide effort by the Board

would include: (1) Prepare a request for

proposals that specified the type of

research that is desired by the Board; (2)

clarify the amount of money that is

being set aside for that type of proposal;

and (3) distribute widely to the

universities, the extension service and

to other known researchers, notice of

the opportunities to conduct this type of

research.

Another proponent of the amendment

testified that some of the areas that need

immediate attention are the study of soil

biology, fungus control, climatic and

economic thresholds, understanding the

value of beneficial organisms,

developing environmentally sound

methods of production, wildlife habitat

enhancement, etc. The proponent

further testified that if the Board is

spending its money, it should be on

projects that directly benefit the organic

farmer as well as the community at

large.

The opponents testified that the Board

has a very strong commitment to

production research. Currently, the

Board has budgeted $500,000 for

various research projects. The benefits

of these studies are shared throughout

the industry. The Board invites

members of the organic almond

community to participate at the

production research committee

meetings and take part in the process

which determines which studies will be

funded. The witness testified that the

process of open committee meetings in

which there can be active dialogue best

lends itself to achieve the goal of this

proposal. The witness testified that a

bad precedent would be established by

having a marketing order amendment to

guarantee funding for one particular

research project, no matter how well

intentioned. Such action would leave

the door wide open for a long line of

groups demanding the order be

amended to accommodate their needs.

The witness testified that the framework

exists which can be used by the organic

community to make its case for funding

projects as proposed.

The opponent also testified at the

hearing that the Board is currently

funding such type of projects. For

example, one project is to find ways to

reduce the use of chemicals in

controlling the navel orangeworm,

which is one of the worst pests in the

almond industry. Through the project,

the Board has been instrumental in

reducing such chemical usage, but their

use has not been eliminated yet.

The record evidence does not support

this proposed amendment. The

authority is currently in the order for

such projects as proposed to be

conducted. In addition, the Board is

currently funding projects which are

intended to reduce the use of synthetic

chemicals. Record evidence indicates

that the Board wants to work with the

organic almond community to recognize

them as an important faction in the

industry. If the organic almond

community works with the Board and

takes an active part in the process of

determining the expenditure of

production research funds, they will

make their voice heard and assist the

Board in making expenditure decisions

that will help to benefit the whole

almond industry.

The record evidence also supported

that there may not be enough sources of

research to obtain the proposed 25

percent of the production research

funds and this proposal would be too

restrictive for the Board. Therefore, for

the above reasons, the proposed

amendment is not recommended.

Material Issue Number 24

Sections 981.47 and 981.50 should be

amended to require that the Secretary

shall exempt from any reserve, that part

of the crop which is sold as ‘‘certified

organic almonds’’ under standards

established by the Organic Foods Act of

1990 and the California Organic Foods

Act of 1990. The Board may propose

regulations to assure procedures to

implement this section.

Currently, there is no requirement in

the marketing order to exempt certified

organic almonds from the reserve

provisions.

The proponents testified that they are

proposing the exemption because

certified organic almonds are a distinct

and different product from conventional

almonds. There are many laws and

requirements for a farmer to become

certified as organic. First, the California

Organic Foods Act of 1990 requires that

any foods sold as organic are grown

without the use of prohibited materials.

Prohibited materials are all synthetic

products. No prohibited materials can

be used in the soil for at least one year

prior to the season in which the crop is

grown. Handlers are also restricted from

using any prohibited materials.

California law requires extensive

recordkeeping by organic growers and

handlers. California law also requires

that each grower and handler of foods

sold as organic must be registered

annually with the State. The State

intends to strictly enforce provisions of

the organic program. Two growers have

been recently fined $7,000 or more for

violations. The certification process is

quite lengthy and costly.

The proponent testified at the hearing

that certified almonds are a distinct

product from conventional almonds.

They are sold into a different market

than conventional almonds. The price

for certified organic almonds is

significantly higher, approximately 30

to 44 percent higher than for

conventional almonds. Certified organic

almonds only comprise about one-tenth

of one percent of the total almond

industry. A 1992 report by the

University of California Cooperative

Extension Service states that, ‘‘At

present, no bulk commodity market

exists for organically grown almonds.

Because of this, market fluctuations and

pricing of conventionally-grown

almonds do not directly affect the

market for organically-grown almonds’’.

Certified almonds are sold in a niche

market to consumers whose first

concern is purchasing an organic

product. If organic almonds are not

available, the consumer will be more

likely to substitute another organic

product instead of conventional

almonds. Many wholesalers and

retailers of organic almonds do not

purchase conventional almonds.

At the hearing, the proponent testified

that a reserve requirement for certified

organic almonds disrupts the market

and is contrary to the intent of the

provision. The market for certified

organic almonds is chronically undersupplied. Therefore, a reserve which

removes product from the market

disrupts the flow of supply to the

market.

The proponent testified that organic

almonds are more difficult to store since

most fumigation practices are

prohibited. Although methods have

been developed to store organic

almonds, the normal marketing season

of organic almonds is not as long as that

for conventional almonds. Many organic

growers therefore, use cold storage

which can be quite expensive. When a

reserve is implemented, handlers keep a

percentage of certified organic almonds

off the market and are unable to meet

market demand. In addition, handlers

have been unable to fill buyer orders

even though they have certified organic

almonds in reserve.

The proponent further testified that

the proposal would have a positive

impact on small businesses since most
Federal Register / Vol. 60, No. 66 / Thursday, April 6, 1995 / Proposed Rules 17481

organic almond growers and handlers

are small businesses.

At the hearing, it was discussed that

there is an extensive audit trail from the

organic grower to the handler so there

would be no confusion as to which

almonds would be organic or

conventional. Testimony was also

offered that if a conventional lot and

certified organic lot were commingled,

the almonds could no longer be sold as

certified organic almonds. Also,

containers that include certified organic

almonds have to be extensively

identified.

Opponents at the hearing testified that

certified organic growers do benefit

from many programs under the almond

marketing order. The reserve program is

one such program that needs

participation by all members of the

almond industry. By excluding organic

almonds from the reserve, a two-tiered

system would be implemented creating

dissension within the industry and in

the long run would act against the

organic growers’ best interests by

alienating them from the industry. The

Board is supportive of attempts to

include the interests of organic growers

on all policy matters discussed by the

Board. In the testimony by the

proponents, they indicated that many of

the regulations governing organic

farming are just now being developed.

The Board addressed this issue when

the 1990 reserve was established. At

that time, organic growers requested

that the Board exclude or declare

organic production a reserve outlet.

That request was denied by the Board.

It was thought at that time that the

organic program was not fully

developed and there could be a lack of

a reliable system of certification and

tracking. The opponent testified that

there is now a complete system in place

and given the information the Board

now knows the Board could make a

decision to use organic almonds as an

outlet for reserve almonds. The witness

testified that the marketing order

currently contains language to

accomplish what the organic

community wants without this

amendment. The organic almond

production could be evaluated on a

yearly basis to determine if certified

organic almonds should be part of the

reserve.

The record evidence supports the

merits of this amendment. The

proponents have presented a compelling

case that certified organic almonds are

unique and are sold into different

markets. During a reserve year, handlers

of organic almonds are unable to supply

all of their buyers with certified organic

almonds. The certified almond growers

and handlers must follow strict

regulations to ensure that they are

selling certified organic almonds in the

marketplace. Certified organic almonds

can be traced by a paper trail to the

retail level. If commingling occurs with

non-organic almonds, they are no longer

considered certified organic. There are

State and Federal laws regulating the

practices of certification of organic

products. Storing organic almonds is

problematic because most fumigation

practices are prohibited. Certified

organic almonds currently comprise

only one-tenth of one percent of the

almond industry.

Certified organic almonds can

currently be exempted from reserve

provisions by designating them as an

authorized reserve outlet under an

agency agreement recommended by the

Board and approved by the Secretary.

This can be done on a yearly basis when

a reserve is recommended. However,

record testimony has shown that the

imposition of a reserve on certified

organic handlers in any year could be

unnecessarily detrimental to this

segment of the industry with no proven

benefit to the industry as a whole.

Therefore, the proposed amendment is

recommended.

Material Issue Number 25

The proposed amendment to section

981.80 would have allowed the Board to

contract for periods of five years for

services, goods or other reasonable

expenses.

Currently, section 981.80 specifies

that the Board is authorized to incur

expenses during each crop year. The

recommendation of the Board for their

expenses each year must be submitted

to the Secretary on or before August 1

of the crop year. Expenditures are then

incurred on a yearly basis.

Proponents testified at the hearing

that the Board has been handicapped in

the areas of research and marketing by

the inability to enter into multi-year

contracts. The Board is required to do

business on a year-to-year basis. Some

contracting parties become disillusioned

because a concept may take several

years to develop and implement and

they are restricted to contracting for

only a year at a time. The contracting

parties may find that it is not

economically feasible to enter into a

contract without a commitment of more

than one year. This often results in lost

opportunities for the Board in being

forced to negotiate for a one year

contract that may be more expensive

and less desirable than a contract

covering more than one year.

At the hearing, the proponents stated

that the California Agricultural Statistics

Service (CASS) was asked to deliver a

proposal for an acreage survey. The cost

of the survey was considered to be too

high for a single year’s budget. The

CASS then suggested a two year

proposal in which they would survey

one half the crop one year and the other

half the next year. Record evidence

indicated that the Board contracted to

survey one-half this year, but will be

prohibited from committing to the

project’s completion. A new Board next

year may change its mind which could

lead to development of a survey for one

half of the crop. This would not be a

desirable use of Board’s funds.

The proponents further testified that

the adoption of this amendment would

have a positive economic impact. The

Board does not anticipate that all or

most future business activities would

take the form of a multi-year contract.

However, where needed and cost

effective, the proponents testified that

the ability to enter into such agreements

should be available.

At the hearing, further discussions

focused on the proposal to have threeyear terms of office for Board members

and how this would affect five-year

contracts that could be in effect.

Proponents testified that this particular

situation occurs everyday in businesses

and corporations where the directors

that are there could very well be turned

over and not be there when the contract

comes to a conclusion. The proponents

further testified that they envision that

such multi-year contracts could be used

for a building lease or the development

of a new almond product.

The record evidence shows that

marketing order committees have

already been given permission, on a

case-by-case basis, to enter into multiyear contracts, although such contracts

are contingent on the marketing order

remaining in effect. Also, some of the

Board’s research and promotion projects

are currently four or five year projects.

Proponents, however, testified that

these projects have been funded only on

a yearly basis. The record evidence

showed that funding a project on a yearby-year basis would allow the Board to

evaluate the progress of the project and

decide if it should be continued. The

marketing order is designed to operate

on an annual basis and to be evaluated

by the Secretary on an annual basis. The

record evidence also showed that the

Department has given permission to

marketing order boards and committees,

on a case-by-case basis, to enter into

multi-year contracts.

The Act provides that marketing order

committees establish budgets and

assessment rates on a periodic basis.

The marketing order requires that the
17482 Federal Register / Vol. 60, No. 66 / Thursday, April 6, 1995 / Proposed Rules

expenses and assessment rate be

established for each crop year. This

allows for evaluation by the Board and

the Secretary of Board activities on an

annual basis. The Secretary is

responsible for oversight of Board

activities and believes that this proposal

could limit the annual reviews as well

as restrict the activities of future Boards.

It is acknowledged, however, that multiyear contracts, in some instances, could

benefit the Board by allowing for longrange, cost-effective planning. It is

preferred that these situations be

handled on a case-by-case basis.

Accordingly, the record evidence does

not support the amendment for the

Board to be allowed to enter into multiyear contracts. Therefore, this proposed

amendment is not recommended.

Material Issue Number 26

Two proposed amendments to section

981.90 would require that continuance

referenda be conducted. One proposal

would have required that continuance

referenda be conducted every five years

beginning July 31, 1999, to determine

grower support for continuation of the

marketing order for almonds. Another

proposal would have required that

continuance referenda be conducted

every four years with the first to be held

in 1996.

Currently, there is no provision in the

marketing order that provides for

periodic continuance referenda.

The proponents for five-year

referenda testified that the growers

should have the ability to vote for

continuance or termination of the

marketing order. These referenda would

allow growers to have a voice as to the

value of the almond marketing order.

The proponents testified that they

realize that circumstances change over

time, and therefore believe that a time

period of five years would allow for a

timely debate as to the merits of

continuing or terminating the marketing

order.

The proponents’ proposal for five-year

referenda also contained language

regarding termination of the marketing

order that is already contained in the

order. The proponents testified that they

would agree to the criteria which the

Secretary may use in determining

whether the marketing order should

continue.

The order currently provides that the

Secretary shall terminate the order if a

majority of all growers favor termination

and such majority produced more than

50 percent of the almonds for market

within the State of California. Since less

than 50 percent of all growers usually

participate in a referendum, it is

difficult to determine grower support for

termination of an order.

Another way of assessing whether

growers favor the continuation of an

order would be to hold a continuance

referendum using the same criteria as

set forth in section 8c(8) of the Act with

respect to producer approval of the

issuance of a marketing agreement and

order. This section of the Act requires

approval by two-thirds of the producers

voting in the referendum or by

producers who have produced twothirds of the volume of the production

voted during a representative period.

This is a reasonable and appropriate

basis for determining whether almond

growers favor continuation of the order.

In the event that the requisite majority

of growers, by number or volume of

production represented in the

referendum, do not approve

continuation of the order, the Secretary

may consider termination of the order

but would not be required to terminate.

In evaluating the merits of termination,

the Secretary would not only consider

the results of the continuance

referendum, but also would consider all

other relevant information concerning

the operation of the order and the

relative benefits and disadvantages to

producers, handlers, and consumers in

order to determine whether continued

operation of the order would tend to

effectuate the declared policy of the Act.

In this regard, the Secretary may solicit

input from the public through meetings,

press releases, or any other means. The

proponents testified at the hearing that

in evaluating the merits of continuing

the order, they would like to see the

Secretary not only consider the results

of the continuance referendum but also

consider information relative to the

operation of the marketing order.

Proponents of the proposal for fouryear continuance referenda testified that

a vote for continuance should be held in

1996. They testified that two years of

operating under the new amendments

should be adequate time for the growers

to make a well-informed decision as to

whether the program is effective.

Proponents in favor of the four-year

referenda proposal testified that because

of the lack of referenda in the past (the

only continuance referendum on the

almond marketing order was conducted

in 1989), it is appropriate to have a

continuance referendum every four

years.

Based on evidence and testimony

submitted at the hearing relative to

periodic referenda, the order should be

amended to require that such referenda

be conducted.

It is USDA’s preference to provide for

periodic referenda at least every six

years to allow growers an opportunity to

indicate their support for or rejection of

the order. The record evidence

demonstrates that the proposal for

referenda every five years is reasonable

and has widespread industry support. A

referendum every five years would

allow growers an opportunity to vote in

favor or in opposition to the order as

changes occur in the industry yet would

not be wasteful of the Board’s resources.

For the above reasons, the order should

be amended to provide for periodic

referenda every five years beginning two

years from the year these amendments

are finalized. Conducting a continuance

referendum two years after the

implementation of the proposed

amendments would allow the industry

sufficient time to evaluate the new

amendments and determine if the

marketing order should continue in

effect. Therefore, the proposed

amendment, as modified, is

recommended.

Material Issue Number 27

Sections 981.51, 981.54, 981.55, and

981.66, which relate to certain reserve

provisions, should not be deleted from

the marketing order. In addition,

§§ 981.52 and 981.67, also relating to

the reserve, should not be amended as

proposed. Section 981.55 should be

amended to clarify that handlers may be

authorized to transfer reserve almonds

to another handler.

Extensive record testimony indicated

this proposal had three basic purposes.

One purpose was to eliminate authority

in the marketing order that requires

reserve almonds to be sold in secondary

or market development outlets. Another

purpose was to allow handlers to sell

their reserve almonds and the

accompanying reserve obligation to

another handler. The remainder of the

proposal was to make conforming

changes in the order language to

coincide with the two aforementioned

purposes.

The proponent of this proposal

testified that reserve almonds should

not be required to be sold to secondary

outlets (where the return is significantly

lower). The proponent believed that this

was not economically sound, and

explained that, if reserves are

established, the reserve almonds should

ultimately be sold in normal

competitive outlets at some point in the

future. The proponent testified that

reserve almonds could be carried

forward for several years to augment

short supplies in the event of a crop

failure.

Opponent’s testimony indicated that

the option of having reserves in effect

for consecutive years already exists in
Federal Register / Vol. 60, No. 66 / Thursday, April 6, 1995 / Proposed Rules 17483

the marketing order. The proposal

would maintain that option, but would

eliminate the order’s flexibility to

require disposition in non-competitive

outlets. The proponent failed to offer

any economic analysis in support of

carrying reserve product forward

indefinitely, as opposed to diverting the

product.

The proponent also testified that the

reserve program had been manipulated

in the past by the Board in that Board

members were aware of Board decisions

well in advance of the rest of the

industry, thus, placing them at an

advantage over the remainder of the

industry.

No evidence was presented at the

hearing indicating that Board members

are aware of final Board

recommendations prior to the voting

process. To the contrary, it was testified

that many Board members act

independently. Further, Board members

are elected through a democratic

process and, therefore, risk not being

renominated if they do not fairly

represent their constituency.

The proponent testified that handlers

should be able to sell their reserve

almonds and accompanying reserve

obligation to other handlers. A large

number of handlers in the industry

handle a relatively small proportion of

the crop and operate for only a few

months each year. Other larger handlers

operate on a year-round basis. The

proponent testified that the smaller

handlers, who would normally cease

their handling operation, are forced to

maintain, at an additional cost to them,

the required inventory in good

condition in storage. If these small

handlers do not want to incur the

additional costs, the proponent stated

the only other option available is

disposition to approved reserve outlets

at significantly lower prices. The

proponent stated that handlers that

dispose of their reserve almonds in

secondary outlets could be financially

disadvantaged in the event the reserve

is released to the saleable category after

their disposition.

Opponents stated that the proposal

contained several provisions and

eliminations of provisions that appeared

to be in conflict with one another.

Therefore, it was not clearly understood

what exactly the proposal in its entirety

was attempting to accomplish.

Additional rationale against the

proposal was a general difference in

philosophy regarding eliminating tools

of the marketing order currently

available to the industry.

As previously stated, the proposal

contained three basic purposes. The first

purpose involved eliminating the

authority to require reserve almonds to

be sold in secondary outlets. We agree

with the position that there is authority

in the marketing order to release all of

the reserve, making it unnecessary to

sell reserve almonds in non-competitive

outlets, if recommended by the Board.

Removing the Board’s authority to

recommend to the Secretary that reserve

almonds be sold in these outlets would

remove an option available to the Board

that may be considered necessary and in

the best interest of the industry under

certain circumstances. It is determined

that the Board should retain flexibility

in this regard and that this portion of

the proposal would place an

unnecessary restriction on the Board in

making recommendations to the

Secretary regarding the reserve. For this

reason, this part of the proposal is not

recommended.

Record evidence supports the merits

of the second portion of this proposal

dealing with selling reserve almonds

and transferring reserve obligations to

another handler. The overall intent of

the reserve program could still be met

as long as the same total quantity of

product was held off the market.

Providing handlers the additional

authority to transfer any or all of their

reserve obligations to other handlers in

the industry could help facilitate the

operation of the reserve program by

providing more flexibility. In order to

ensure such a provision is administered

properly, it would be necessary for the

Board, with the approval of the

Secretary, to implement regulations to

effectuate such a provision.

The third purpose of the proposal

involved eliminating certain sections of

the order to correspond with the other

purposes of this proposal. However, it is

not necessary to delete these sections of

the marketing order as proposed to

accomplish that portion of the proposal

that is being accepted and

recommended herein.

For the aforementioned reasons, this

proposed amendment is recommended,

in part, by modifying § 981.55 to

provide the authority for the Board,

with the approval of the Secretary, to

allow handlers to transfer their reserve

obligation to other handlers.

Material Issue Number 28

The proposed amendment to § 981.50

would have required that, when a

reserve is established, the first 250,000

pounds of almonds handled by a

handler would be exempt from the

reserve percentage. In addition, the

exemption would not apply to a handler

who has not been a handler and paid

assessments for each of the two previous

crop years and/or to one who has been

associated or under contract with or is

a director, controller, shareholder,

owner, or partner in any other handler

facility taking advantage of the

exemption.

Currently, § 981.50 provides that each

handler shall withhold from handling a

quantity of almonds equal to the reserve

percentage of the kernelweight of all

almonds such handler receives for his/

her own account during the crop year.

There is no quantity reserve exemption

in the marketing order at this time.

The proponent testified that the

purpose of this amendment is to benefit

small handlers. A small handler’s cost

per pound to operate is much greater

than that of a larger handler. The small

handler, defined as one who handles

less than 250,000 pounds annually,

would probably close such facility after

the handling season, but must remain

open to maintain the reserve almonds.

Record evidence indicated that small

handlers that handle less than 250,000

pounds would be treated differently

since there would be a differential

impact of reserve requirements on such

handlers.

The proponent testified that the

conditions for the exemption are there

to prevent people from becoming

handlers during the year of regulation to

take advantage of the 250,000 pound

reserve exemption. The condition for

the exemption would prevent people

from anticipating that a reserve is going

to be established.

At the hearing, it was discussed that

possibly a creative attorney could

breakdown a single business into

separate entities so that each one would

handle less than 250,000 pounds to take

advantage of the exemption. However,

the proponent testified that he did not

see that as a problem under this

proposal because of the criteria for

eligibility written into the proposal.

Opponents testified that the proposal

would create two classes of handlers,

those who have to participate in the

reserve and those who do not. The

proposal is also based on an arbitrary

level of 250,000 pounds. Record

evidence stated that the strength of the

marketing order is that all members of

the industry participate in the order and

the rules and regulations apply to

everyone across the board. The

exemption would only serve to cut the

industry into very small segments that

would dilute the strength of the order.

This proposal would create an

opportunity for those inclined to take

advantage of any loopholes and benefit

from them. Opponents further testified

that by eliminating a proportion of

handlers from the reserve, the burden
17484 Federal Register / Vol. 60, No. 66 / Thursday, April 6, 1995 / Proposed Rules

would fall on fewer handlers causing

them financial hardship.

The record evidence indicated that

the Act provides that reserve provisions

should be applied uniformly throughout

the entire industry. While all handlers

would have the same exemption under

this proposal, those handlers that

handled over 250,000 pounds would be

regulated and those who handled less

than that amount would not be

regulated. The Department disagrees

with the proponent’s assertion that

administering this proposal would not

be problematic. It would be difficult to

implement this proposal and develop

equitable regulations covering all

situations that could occur. The record

evidence also indicated that this

proposal could potentially have an

effect on the market if there were many

handlers that handled less than 250,000

pounds of almonds. This in turn would

place more of a burden on those

regulated handlers that handled more

than 250,000 pounds of almonds.

Accordingly, the record evidence does

not support the proposal to require that

when a reserve is established, the first

250,000 pounds handled by a handler

would be exempt from the reserve

percentage. Therefore, this proposed

amendment is not recommended.

Material Issue Number 29

The proposed amendment to § 981.71

would have required incoming

inspections to be conducted no later

than the last day of February during the

then current crop year.

Section 981.71, which provides for

furnishing statistical information to the

Board for purposes of establishing the

reserve obligation, was suspended

indefinitely in 1975. Section 981.42

provides that handlers shall obtain

incoming inspection through the

Federal-State inspection service to

determine the amount of inedible

kernels in each variety and report the

determination to the Board.

A proponent at the hearing testified

that the incoming inspection is needed

in order to determine the size of the

industry’s total crop. The industry

needs to know no later than the end of

February of each year, the quantity of

almonds received by handlers for

election purposes, Board statistical use,

reserve calculations, and assessment

calculations. The proponent testified

that the longer inspection is delayed,

the longer payment of assessments is

also delayed. If the Board is going to

receive the assessment money, they

would prefer to receive it earlier. If a

handler receives almonds after the

February date, the handler should

assume a penalty or completely reject

the almonds for delivery.

Statistics presented at the hearing

indicate, however, that since 1980

almonds received by handlers through

the month of February in any given year

have exceeded 97 percent of the total

almonds received for the entire crop

year. In most years, the receipts through

February exceeded 99 percent of the

total. Based on this information, there

would be no appreciable difference in

the estimated crop size at that point of

the season if all almonds were required

to be inspected by February 28 of each

year. In addition, there would be no

appreciable difference in handlers’

share of the crop handled for election

purposes.

Handlers are currently required to

report to the Board all almonds received

for their account during several

prescribed periods. This information is

combined with other information

reported to the Board to determine

handlers’ assessment and reserve

obligations. Inspection certificates are

used to verify information reported to

the Board and for determining inedible

obligations. They are not necessary for

the Board to make assessment billings

and determine reserve obligations.

If implemented, this proposal may

subject handlers to civil or criminal

penalties for having product inspected

after February 28. It would also have the

effect of dictating to growers when they

have to sell and deliver their product to

a handler. It is conceivable that for

financial reasons, a grower may choose

to store his or her product until late in

the season before selling it to a handler.

This proposed amendment would, in

effect, prohibit such a practice.

While the proposed amendment

could, in some instances, serve to

facilitate the operations of the Board,

the positive aspects of such a proposal

are outweighed by the negative.

Regulating the industry in this regard

would place an undue burden on both

growers and handlers which is not

necessary for the functioning and

administration of the program.

For the reasons stated above, this

proposed amendment is not

recommended.

Rulings on Briefs of Interested Persons

Briefs, proposed findings and

conclusions, and the evidence in the

record were considered in making the

findings and conclusions set forth in

this recommended decision. To the

extent that the suggested findings and

conclusions filed by interested persons

are inconsistent with the findings and

conclusions of this recommended

decision, the requests to make such

findings or to reach such conclusions

are denied.

General Findings

(1) The findings hereinafter set forth

are supplementary to the previous

findings and determinations which were

made in connection with the issuance of

the marketing agreement and order and

each previously issued amendment

thereto. Except insofar as such findings

and determinations may be in conflict

with the findings and determinations set

forth herein, all of the said prior

findings and determinations are hereby

ratified and affirmed;

(2) The marketing agreement and

order, as amended, and as hereby

proposed to be further amended, and all

of the terms and conditions thereof,

would tend to effectuate the declared

policy of the Act;

(3) The marketing agreement and

order, as amended, and as hereby

proposed to be further amended,

regulate the handling of almonds grown

in California in the same manner as, and

are applicable only to, persons in the

respective classes of commercial and

industrial activity specified in the

marketing agreement and order upon

which a hearing has been held;

(4) The marketing agreement and

order, as amended, and as hereby

proposed to be further amended, are

limited in their application to the

smallest regional production area which

is practicable, consistent with carrying

out the declared policy of the Act, and

the issuance of several orders applicable

to subdivision of the production area

would not effectively carry out the

declared policy of the Act; and

(5) All handling of almonds grown in

California as defined in the marketing

agreement and order, as amended, and

as hereby proposed to be further

amended, is in the current of interstate

or foreign commerce or directly

burdens, obstructs, or affects such

commerce.

List of Subjects in 7 CFR Part 981

Almonds, Marketing agreements,

Nuts, Reporting and recordkeeping

requirements.

Recommended Further Amendment of

the Marketing Agreement and Order

For the reasons set out in the

preamble, 7 CFR part 981 is proposed to

be 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.
Federal Register / Vol. 60, No. 66 / Thursday, April 6, 1995 / Proposed Rules 17485

2. Section 981.14 is revised to read as

follows:

§ 981.14 Cooperative handler.

Cooperative handler means any

handler as defined in § 981.13 of this

subpart which qualifies for treatment as

a nonprofit cooperative association as

defined in Section 54001, et seq. of the

California Food and Agricultural Code.

The Board, with the approval of the

Secretary, may modify this definition, if

necessary.

3. Section 981.16 is revised to read as

follows:

§ 981.16 To handle.

To handle means to use almonds

commercially of own production or to

sell, consign, transport, ship (except as

a common carrier of almonds owned by

another) or in any other way to put

almonds grown in the area of

production into any channel of trade for

human consumption worldwide, either

within the area of production or by

transfer from the area of production to

points outside or by receipt as first

receiver at any point of entry in the

United States or Puerto Rico of almonds

grown in the area of production,

exported therefrom and submitted for

reentry or which are reentered free of

duty. However, sales or deliveries by a

grower to handlers, hullers or other

processors within the area of production

shall not, in itself, be considered as

handling by a grower.

4. Section 981.18 is amended by

removing the word ‘‘and’’ at the end of

paragraph (b); removing the period and

adding ‘‘, and’’ at the end of paragraph

(c); and adding a new paragraph (d) to

read as follows:

§ 981.18 Settlement weight.

* * * * *

(d) For inedible kernels as defined in

§ 981.8.

5. Section 981.19 is revised to read as

follows:

§ 981.19 Crop year.

Crop year means the twelve month

period from August 1 to the following

July 31, inclusive. Any new crop

almonds harvested or received prior to

August 1 will be applied to the next

crop year for marketing order purposes.

The first crop year after the

implementation of this amendment

shall be a 13-month period.

6. Section 981.21 is revised to read as

follows:

§ 981.21 Trade demand.

Trade demand means the quantity of

almonds (kernelweight basis) which

commercial distributors and users such

as the wholesale, chain store,

confectionery, bakery, ice cream, and

nut salting trades will acquire from all

handlers during a crop year for

distribution worldwide.

7. Sections 981.30 and 981.31 are

revised to read as follows:

§ 981.30 Establishment.

The Almond Board shall consist of

twelve members, each with an alternate

member.

§ 981.31 Membership representation.

Membership of the Board will be

determined in the following manner:

(a) Three members and an alternate

for each member shall be selected from

nominees submitted by each of the

following groups designated in

paragraphs (a)(1) and (2) of this section,

or from among other qualified persons

belonging to such groups:

(1) Those growers who market their

almonds through cooperative handlers;

and

(2) Those growers who market their

almonds through other than cooperative

handlers.

(b) Two members and an alternate for

each member shall be selected from

nominees submitted by each of the

following groups designated in

paragraphs (b)(1) and (2) of this section,

or from among other qualified persons

belonging to such groups:

(1) Cooperative handlers; and

(2) All handlers, other than

cooperative handlers.

(c) One member and an alternate shall

be selected from nominees submitted by

each of the following groups designated

in paragraphs (c)(1) and (2) of this

section, or from among other qualified

persons belonging to such groups:

(1) The group of cooperative handlers

or the group of handlers other than

cooperative handlers, whichever

received for their account more than 50

percent of the almonds delivered by all

growers as determined by December 31

of the then current crop year; and

(2) Those growers whose almonds

were marketed through the handler

group identified in paragraph (c)(1) of

this section.

(d) The Secretary, upon

recommendation of the Board, or other

information, may reapportion within the

12-member Board, the number of grower

members or handler members, or both,

of any group listed in § 981.31 (a)

through (c), to be nominated pursuant to

§ 981.32. Any such change shall be

based, insofar as practicable, upon the

proportionate amounts of almonds

handled within any group.

8. Section 981.32 is amended by

revising paragraph (a) and amending

paragraph (b)(2) by removing the date

‘‘March 31’’ and adding in its place the

date ‘‘December 31’’ to read as follows:

§ 981.32 Nominations.

(a) Method. (1) Each year the terms of

office of three of the members elected

pursuant to Section 981.31(a) and (b)

shall expire, except every third year

when the term of office for four of those

members shall expire. Nominees for

each respective member and alternate

member shall be chosen by ballot

delivered to the Board. Nominees

chosen by the Board in this manner

shall be submitted by the Board to the

Secretary on or before February 20 of

each year together with such

information as the Secretary may

require. If a nomination for any Board

member or alternate is not received by

the Secretary on or before February 20,

the Secretary may select such member

or alternate from persons belonging to

the group to be represented without

nomination. The Board shall mail to all

handlers and growers, other than the

cooperative(s) of record, the required

ballots with all necessary voting

information including the names of

incumbents willing to accept

renomination, and, to such growers, the

name of any person proposed for

nomination in a petition signed by at

least 15 such growers and filed with the

Board on or before January 20.

Distribution of ballots shall be

announced by press release, furnishing

pertinent information on balloting,

issued by the Board through newspapers

and other publications having general

circulation in the almond producing

areas.

(2) Nominees for the positions

described in § 981.31(c) shall be

handled in the same manner as

described in paragraph (a)(1) of this

section except that those terms of office

shall expire annually.

* * * * *

9. Section 981.33 is revised to read as

follows:

§ 981.33 Selection and term of office.

(a) Members and their respective

alternates for positions open on the

Board shall be selected by the Secretary

from persons nominated pursuant to

§ 981.32, or, at the discretion of the

Secretary, from other qualified persons,

for a term of office beginning March 1.

Members and alternates shall continue

to serve until their respective successors

are selected and qualified.

(b) The term of office of members of

the Board shall be for a period of three

years beginning on March 1 of the years

selected except where otherwise

provided. However, for the initial ten

members of the Board selected pursuant
17486 Federal Register / Vol. 60, No. 66 / Thursday, April 6, 1995 / Proposed Rules

to this section and to paragraphs (a) and

(b) of § 981.31, three members shall

serve for a term of one year; three

members shall serve for a term of two

years; and four members shall serve for

a term of three years. For the initial

terms of office, at the time of

nomination under § 981.32, the Board

shall make this designation by lot. The

term of office for the two members

selected under paragraph (c) of § 981.31

shall always be for a period of one year.

(c) Board members may serve for a

total of six consecutive years. Members

who have served for six consecutive

years must leave the Board for at least

one year before becoming eligible to

serve again. A person who has served

less than six consecutive years on the

Board may not be nominated to a new

three year term if his or her total

consecutive years on the Board at the

end of that new term would exceed six

years. This limitation on tenure shall

not include service on the Board prior

to implementation of this amendment

and shall not apply to alternate

members.

10. Section 981.34 is revised to read

as follows:

§ 981.34 Qualification and acceptance.

(a) Any person to be selected as a

member or alternate of the Board shall,

prior to such selection, qualify by

providing such background information

as necessary and by advising the

Secretary that he/she agrees to serve in

the position for which nominated.

Grower members and alternates shall be

growers or employees of growers, and

handler members and alternates shall be

handlers or employees of handlers. In

the event any member or alternate

ceases to be qualified for the position for

which selected, that position shall be

deemed vacant.

(b) The Board, with approval of the

Secretary, may establish additional

eligibility requirements for grower

members on the Board.

11. Section 981.40 is amended by

revising paragraphs (b) and (c) and

amending paragraph (e) by removing the

word ‘‘seven’’ and adding in its place

the word ‘‘eight’’ to read as follows:

§ 981.40 Procedure.

* * * * *

(b) Quorum. The presence of eight

members shall be required to constitute

a quorum. All decisions of the Board

shall be as follows except where

otherwise specifically provided: 8 or 9

members present, 6 votes; 10 members

present, 7 votes; 11 or 12 members

present, 8 votes.

(c) Voting by mail, telegram or fax.

The Board may vote by mail, telegram

or fax upon written notice to all

members, or alternates acting in their

place, including in the notice a

statement of a reasonable time, not to

exceed 10 days, in which a vote by mail,

telegram or fax must be received by the

Board for counting. Voting by mail,

telegram or fax shall not be permitted at

any assembled meeting of the Board.

When a proposition is submitted for

vote by mail, telegram or fax, at least ten

members of the Board must vote in favor

of its passage or the proposition shall be

defeated.

* * * * *

12. In § 981.41, paragraph (c) is

amended by removing the colon and all

text following the words ‘‘15 percent’’ in

the last sentence and adding in its place

a period and by amending paragraph (a)

by adding a sentence at the end of the

paragraph to read as follows:

§ 981.41 Research and development.

(a) * * * Notwithstanding the

foregoing, certified organic almonds

may be exempt from assessments for

marketing promotion, including paid

advertising, upon recommendation of

the Board and approval of the Secretary.

* * * * *

13. Section 981.47 is amended by

designating the existing paragraph as

(a), removing the words ‘‘either

domestic or’’ in the third sentence of

paragraph (a), and adding a new

paragraph (b) to read as follows:

§ 981.47 Method of establishing salable

and reserve percentages.

* * * * *

(b) Notwithstanding the provisions of

paragraph (a) of this section, the

Secretary shall exempt from any reserve

that is established that part of the crop

which is sold as ‘‘certified organic’’

under standards established by the

Organic Foods Production Act of 1990,

(7 U.S.C. 2101 et seq.) and the California

Organic Foods Act of 1990, as amended.

The Board may propose regulations to

assure procedures to implement this

section.

14. In § 981.49, the introductory

paragraph is amended by removing the

word ‘‘six’’ and adding in its place the

word ‘‘eight’’, by removing ‘‘; and’’ in

paragraph (e) and adding a period in its

place, by adding ‘‘and’’ at the end of

paragraph (d); by removing paragraph (f)

and by revising paragraph (b) to read as

follows:

§ 981.49 Board estimates and

recommendations.

* * * * *

(b) The estimated handler carryover

and the estimated reserve inventory as

of July 31;

* * * * *

§ 981.50 [Amended]

15. Amend § 981.50 by adding after

the words ‘‘into oil’’, the words ‘‘or sold

as certified organic.’’

16. Amend § 981.55 by designating

the existing paragraph as (a) and adding

a new paragraph (b) to read as follows:

§ 981.55 Interhandler transfers.

* * * * *

(b) When saleable and reserve

percentages are in effect, any handler

may transfer reserve withholding

obligation to other handlers. Terms and

conditions implementing this provision

must be recommended by the Board and

approved by the Secretary.

17. Section 981.60 is amended by

revising paragraph (b) to read as follows:

§ 981.60 Determination of kernel weight.

* * * * *

(b) Almonds for which settlement is

made on unshelled weight. The

settlement weight for unshelled

almonds shall be determined on the

basis of representative samples of

unshelled almonds reduced to shelled

weight.

18. Section 981.61 is amended by

revising the last sentence to read as

follows:

§ 981.61 Redetermination of kernel weight.

* * * Weights used in such

computations for various classifications

of almonds shall be:

(a) For unshelled almonds, the

kernelweight based on representative

samples reduced to shelled weight;

(b) For shelled almonds, the net

weight; and

(c) For shelled almonds used in

production of almond products, the net

weight of such almonds.

§ 981.62 [Removed]

19. Section 981.62 is removed.

§ 981.66 [Amended]

20. Section 981.66 is amended by

removing paragraphs (b) and (d),

redesignating paragraph (c) as paragraph

(b), redesignating paragraph (e) as

paragraph (c), redesignating paragraphs

(f) and (g) as paragraphs (d) and (e), and

by amending newly designated

paragraph (c) by removing all references

to the date ‘‘September 1’’ and adding

in each place ‘‘December 31’’.

§ 981.67 [Amended]

21. Section 981.67 is amended by

removing all references to the date

‘‘September 1’’ and adding in each place

‘‘December 31’’.

22. Section 981.70 is amended by

revising the first sentence to read as

follows:
Federal Register / Vol. 60, No. 66 / Thursday, April 6, 1995 / Proposed Rules 17487

§ 981.70 Records and verification.

Each handler shall keep records

which will clearly show the details of

his or her receipts of almonds,

withholdings, sales, shipments,

inventories, reserve disposition,

advertising and promotion activities, as

well as other pertinent information

regarding his or her operation pursuant

to the provisions of this part: Provided,

that, such records shall be kept in the

State of California. * * *

23. A new § 981.76 is added before

the undesignated center heading

‘‘Expenses and Assessments’’ to read as

follows:

§ 981.76 Handler List of Growers.

No later than December 31 of each

crop year, each handler other than a

cooperative handler (hereinafter,

referred to as independent handler)

governed by this subpart shall, upon

request, submit to the Board a complete

list of growers who have delivered

almonds to such independent handler

during that crop year.

24. Section 981.81 is amended by

adding a new paragraph (e) to read as

follows:

§ 981.81 Assessment.

* * * * *

(e) Any assessment not paid by a

handler within a period of time

prescribed by the Board may be subject

to an interest or late payment charge or

both. The period of time, rate of interest

and late payment charge shall be as

recommended by the Board and

approved by the Secretary. Subsequent

to such approval, all assessments not

paid within the prescribed period of

time shall be subject to an interest or

late payment charge or both.

25. Section 981.90 is amended

redesignating paragraph (b)(2) and (b)(3)

as paragraphs (b)(3) and (b)(4) and by

amending newly designated paragraph

(b)(3) by removing the date ‘‘June 1’’ and

adding in its place ‘‘July 1’’ and adding

a new (b)(2), to read as follows:

§ 981.90 Effective time, suspension, or

termination.

* * * * *

(b) * * *

(2) The Secretary shall conduct a

referendum as soon as practical after the

end of the fiscal year ending two years

after implementation of this

amendment, and at such time every fifth

year thereafter, to ascertain whether

continuation of the order is favored by

growers who have been engaged in the

production of almonds for market

within the State of California during the

current crop year.

* * * * *

§ 981.467 [Amended]

26. In § 981.467, paragraph (a) is

amended by removing the date ‘‘July 1’’

and adding in its place ‘‘August 1’’ and

by removing the words ‘‘export or’’ and

‘‘or both,’’ from the second sentence in

paragraph (a).

§ 981.462 [Amended]

27. In § 981.472, paragraph (a) is

amended by removing the dates ‘‘July 1

to August 31’’ and adding in its place

‘‘August 1 to August 31.’’

Dated: March 22, 1995.

Lon Hatamiya,

Administrator.

[FR Doc. 95–8205 Filed 4–5–95; 8:45 am]

BILLING CODE 3410–02–P

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. 95–ANE–10]

Airworthiness Directives; General

Electric Company CF6 Series Turbofan

Engines

AGENCY: Federal Aviation

Administration, DOT.

ACTION: Notice of proposed rulemaking

(NPRM).

SUMMARY: This document proposes the

adoption of a new airworthiness

directive (AD) that is applicable to

General Electric Company (GE) CF6–45/

–50 series turbofan engines. This

proposal would require an initial and

repetitive on-wing visual inspection of

the side links of the five-link forward

mount assembly for cracks, and

replacement of the side links and pylon

attachment bolts, and inspection of the

fail-safe bolt and platform lug, if the

side links are found cracked. This

proposal would also require a shoplevel refurbishment of the side links as

a terminating action to the on-wing

inspection program. This proposal is

prompted by four reports of cracked

side links detected during routine

engine shop visits. The actions specified

by the proposed AD are intended to

prevent a side link fracture, which

could result in the failure of the second

side link, or the forward engine mount

pylon attachment bolts, and possible

separation of the engine from the

aircraft.

DATES: Comments must be received by

May 8, 1995.

ADDRESSES: Submit comments in

triplicate to the Federal Aviation

Administration (FAA), New England

Region, Office of the Assistant Chief

Counsel, Attention: Rules Docket No.

95–ANE–10, 12 New England Executive

Park, Burlington, MA 01803–5299.

Comments may be inspected at this

location between 8:00 a.m. and 4:30

p.m., Monday through Friday, except

Federal holidays.

The service information referenced in

the proposed rule may be obtained from

General Electric Aircraft Engines, CF6

Distribution Clerk, Room 132, 111

Merchant Street, Cincinnati, OH 45246.

This information may be examined at

the FAA, New England Region, Office of

the Assistant Chief Counsel, 12 New

England Executive Park, Burlington MA.

FOR FURTHER INFORMATION CONTACT:

Robert J. Ganley, Aerospace Engineer,

Engine Certification Office, FAA, Engine

and Propeller Directorate, 12 New

England Executive Park, Burlington, MA

01803–5299; telephone (617) 238–7138;

fax (617) 238–7199.

SUPPLEMENTARY INFORMATION:

Comments Invited

Interested persons are invited to

participate in the making of the

proposed rule by submitting such

written data, views, or arguments as

they may desire. Communications

should identify the Rules Docket

number and be submitted in triplicate to

the address specified above. All

communications received on or before

the closing date for comments, specified

above, will be considered before taking

action on the proposed rule. The

proposals contained in this notice may

be changed in light of the comments

received.

Comments are specifically invited on

the overall regulatory, economic,

environmental, and energy aspects of

the proposed rule. All comments

submitted will be available, both before

and after the closing date for comments,

in the Rules Docket for examination by

interested persons. A report

summarizing each FAA-public contact

concerned with the substance of this

proposal will be filed in the Rules

Docket.

Commenters wishing the FAA to

acknowledge receipt of their comments

submitted in response to this notice

must submit a self-addressed, stamped

postcard on which the following

statement is made: ‘‘Comments to

Docket Number 95–ANE–10.’’ The

postcard will be date stamped and

returned to the commenter.

Availability of NPRMs

Any person may obtain a copy of this

NPRM by submitting a request to the

FAA, New England Region, Office of the