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38498 Federal Register / Vol. 72, No.

134 / Friday, July 13, 2007 / Proposed Rules

This proposed rule would impose no § 922.235 Assessment rate. ascertain producer support for the order,
additional reporting or recordkeeping On or after April 1, 2007, an and to make any necessary conforming
requirements on either small or large assessment rate of $1.50 per ton is changes.
Washington apricot handlers. As with established for the Washington Apricot The proposed amendments are
all Federal marketing order programs, Marketing Committee. intended to improve the operation and
reports and forms are periodically Dated: July 9, 2007. functioning of the marketing order
reviewed to reduce information Lloyd C. Day, program.
requirements and duplication by Administrator, Agricultural Marketing DATES: The referendum will be
industry and public sector agencies. Service. conducted from August 1 to 17, 2007.
Furthermore, USDA has not identified [FR Doc. E7–13581 Filed 7–12–07; 8:45 am] The representative period for the
any relevant Federal rules that
BILLING CODE 3410–02–P purpose of the referendum is August 1,
duplicate, overlap, or conflict with this
2006, through July 31, 2007.
AMS is committed to complying with DEPARTMENT OF AGRICULTURE
the E-Government Act, to promote the Melissa Schmaedick, Marketing Order
use of the Internet and other Agricultural Marketing Service Administration Branch, Fruit and
information technologies to provide Vegetable Programs, AMS, USDA, 1400
increased opportunities for citizen 7 CFR Part 984 Independence Avenue, SW., STOP
access to Government information and 0237, Washington, DC 20250–0237;
[Docket No. AMS–FV–07–0004; AO–192–A7; telephone: (202) 720–2491, Fax: (202)
services, and for other purposes. FV06–984–1] 720–8938, or e-mail:
A small business guide on complying Melissa.Schmaedick@usda.gov.
with fruit, vegetable, and specialty crop Walnuts Grown in California;
Secretary’s Decision and Referendum Small businesses may request
marketing agreements and order may be
Order on Proposed Amendment of information on this proceeding by
viewed at: http://www.ams.usda.gov/fv/
Marketing Agreement and Order No. contacting Jay Guerber, Marketing Order
moab.html. Any questions about the
984 Administration Branch, Fruit and
compliance guide should be sent to Jay
Vegetable Programs, AMS, USDA, 1400
Guerber at the previously mentioned AGENCY: Agricultural Marketing Service, Independence Avenue, SW., STOP
address in the FOR FURTHER INFORMATION USDA. 0237, Washington, DC 20250–0237;
CONTACT section.
ACTION: Proposed rule and referendum telephone: (202) 720–2491, Fax: (202)
A 10-day comment period is provided order. 720–8938, or e-mail:
to allow interested persons to respond Jay.Guerber@usda.gov.
to this proposed rule. Ten days is SUMMARY: This decision proposes
deemed appropriate because: (1) The amendments to Marketing Order No. SUPPLEMENTARY INFORMATION: Prior
2007–2008 fiscal period began on April 984, which regulates the handling of documents in this proceeding: Notice of
1, 2007, and the order requires that the walnuts grown in California (order), and Hearing issued on April 18, 2006, and
assessment rate for each fiscal period provides growers with the opportunity published in the April 24, 2006, issue of
apply to all assessable apricots handled to vote in a referendum to determine if the Federal Register (71 FR 20902) and
during such fiscal period; (2) the they favor the changes. The a Recommended Decision issued on
Washington apricot harvest and amendments were proposed by the March 19, 2007, and published in the
shipping season is expected to begin as Walnut Marketing Board (Board), which March 27, 2007, issue of the Federal
early as the last week of June; (3) the is responsible for local administration of Register (72 FR 14368).
Committee needs to have sufficient the order. The amendments would: This action is governed by the
funds to pay its expenses, which are change the marketing year; include provisions of sections 556 and 557 of
incurred on a continuous basis; and (4) ‘‘pack’’ as a handler function; Title 5 of the United States Code and,
handlers are aware of this action, which restructure the Board and revise therefore, is excluded from the
was recommended by the Committee at nomination procedures; rename the requirements of Executive Order 12866.
a public meeting and is similar to other Board and add authority to change
Preliminary Statement
assessment rate actions issued in past Board composition; modify Board
years. meeting and voting procedures; add The proposed amendments are based
authority for marketing promotion and on the record of a public hearing held
List of Subjects in 7 CFR Part 922 paid advertising; add authority to accept on May 17 and 18, 2006, in Modesto,
Apricots, Marketing agreements, voluntary financial contributions and to California. The hearing was held to
Reporting and recordkeeping carry over excess assessment funds; consider the proposed amendment of
requirements. broaden the scope of the quality control the order. The hearing was held
provisions and add the authority to pursuant to the provisions of the
For the reasons set forth in the Agricultural Marketing Agreement Act
recommend different regulations for
preamble, 7 CFR part 922 is proposed to of 1937, as amended (7 U.S.C. 601 et
different market destinations; add
be amended as follows: seq.) hereinafter referred to as the ‘‘Act,’’
authority for the Board to appoint more
PART 922—APRICOTS GROWN IN than one inspection service; replace and the applicable rules of practice and
DESIGNATED COUNTIES IN outdated order language with current procedure governing the formulation of
WASHINGTON industry terminology; and other related marketing agreements and marketing
amendments. orders (7 CFR Part 900).
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1. The authority citation for 7 CFR The Department of Agriculture Notice of this hearing was published
part 922 continues to read as follows: (USDA) proposed three additional in the Federal Register on April 24,
amendments: To establish tenure 2006 (71 FR 20902). The notice of
Authority: 7 U.S.C. 601–674.
limitations for Board members, to hearing contained proposals submitted
2. Section 922.235 is revised to read require that continuance referenda be by the Walnut Marketing Board (Board),
as follows: conducted on a periodic basis to which is responsible for local

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Federal Register / Vol. 72, No. 134 / Friday, July 13, 2007 / Proposed Rules 38499

administration of the order, and by the would add a new § 984.70, confidential. This would add a new
Agricultural Marketing Service (AMS). Contributions. § 984.91, Relationship with the
The proposed amendments to 10. Clarify that members and alternate California Walnut Commission.
marketing order 984 would: members may be reimbursed for In addition, USDA proposed adding
1. Change the marketing year from expenses incurred while performing two provisions that would help assure
August 1 through July 31 to September their duties and that reimbursement that the operation of the program
1 through August 31. This proposal includes per diem. This proposal would conforms to current Department policy
would amend § 984.7, Marketing year, amend § 984.42, Expenses. and that USDA can make any necessary
and would result in conforming changes 11. Add authority for the Board to conforming changes. These provisions
being made to § 984.36, Term of office, appoint more than one inspection would:
and § 984.48, Marketing estimates and service as long as the functions
recommendations. performed by each service are separate 18. Establish tenure requirements for
2. Specify that the act of packing and do not duplicate each other. This Board members. This proposal would
walnuts is considered a handling proposal would amend § 984.51, amend § 984.36, Term of office.
function. This proposal would amend Inspection and certification of in-shell 19. Require that continuance
§ 984.13, to handle, as well as clarify the and shelled walnuts. referenda be conducted on a periodic
definition of ‘‘pack’’ in § 984.15 by 12. (a) Broaden the scope of the basis to ascertain industry support for
including the term ‘‘shell’’ as a function quality control provisions by adding the order and add more flexibility in the
of ‘‘pack.’’ authority to recommend different termination provisions. This proposal
3. (a) Amend all parts of the order that regulations for different market would amend § 984.89, Effective time
refer to cooperative seats on the Board, destinations. This proposal would and termination.
redistribute member seats among amend § 984.50, Grade and size 20. Make changes as may be necessary
districts, and provide designated seats regulations. to the order, if any of the proposed
for a handler handling 35 percent or 12. (b) Add authority that would changes are adopted, so that all of the
more of production, if such handler allow for shelled walnuts to be order’s provisions conform to the
exists. This proposal would amend inspected after having been sliced, effectuated amendments. To the extent
§ 984.35, Walnut Marketing Board, and chopped, ground, or in any other necessary, conforming changes have
§ 984.14, Handler. manner changed from shelled walnuts, made to the amendments. These
3. (b) Amend the Board member if regulations for such walnuts are in conforming changes have been
nomination process to reflect proposed effect. This proposal would amend identified in the above list of proposed
changes in the Board structure, as § 984.52, Processing of shelled walnuts. amendments.
outlined in 3(a). This proposal would 13. Add authority for marketing Upon the basis of evidence
amend § 984.37, Nominations, and promotion and paid advertising. This introduced at the hearing and the record
§ 984.40, Alternate. proposal would amend § 984.46, thereof, the Administrator of AMS on
4. Require Board nominees to submit Research and development. March 19, 2007, filed with the Hearing
a written qualification and acceptance 14. Replace the terms ‘‘carryover’’
Clerk, U.S. Department of Agriculture, a
statement prior to selection by USDA. with ‘‘inventory,’’ and ‘‘mammoth’’ with
Recommended Decision and
This proposal would amend § 984.39, ‘‘jumbo,’’ to reflect current day industry
Opportunity to File Written Exceptions
Qualify by acceptance. practices. This proposal would amend
thereto by April 16, 2007.
5. Change the name of the Walnut § 984.21, Handler inventory, and
Marketing Board to the California § 984.67, Exemption, and would also Fifteen exceptions were filed during
Walnut Board. This proposal would result in conforming changes being the exception period. The exceptions
amend § 984.6, Board, and § 984.35, made to § 984.48, Marketing estimates expressed concern over the discussion
Walnut Marketing Board. and recommendations, and § 984.71, in the Recommended Decision regarding
6. Add authority to reestablish Reports of handler carryover. Material Issue No. 11. This proposal
districts, reapportion members among 15. (a) Clarify to simplify the would add authority for the Board to
districts, and revise groups eligible for interhandler transfer provision, and add appoint more than one inspection
representation on the Board. This authority for the Board to recommend to service as long as the functions
proposal would add a new paragraph (d) USDA regulations, including necessary performed by each service are separate
to § 984.35, Walnut Marketing Board. reports, for administrative oversight of and do not duplicate each other.
7. Add percentage requirements to such transfers. This proposal would Comments stated that, if this authority
Board quorum and voting requirements, amend § 984.59, Interhandler transfers. were implemented, private sector
add authority for the Board to vote by 15. (b) Clarify that the Board may entities, in addition to USDA, should be
‘‘any other means of communication’’ require reports from handlers or packers able to offer non-traditional inspection
(including facsimile) and add authority that place California walnuts into the services. Persons filing these comments
for Board meetings to be held by stream of commerce. This proposal claimed that the proposed amendatory
telephone or by ‘‘any other means of would amend § 984.73, Reports of language would prevent any service
communication’’, providing that all walnut receipts. other than USDA from offering non-
votes cast at such meetings shall be 16. Update and simplify the language traditional inspection. The specifics of
confirmed in writing. This proposal in § 984.22, Trade demand, to state these exceptions are further discussed
would amend § 984.45, Procedure, and ‘‘United States and its territories,’’ in the Findings and Conclusions;
would result in a conforming change in rather than name ‘‘Puerto Rico’’ and Discussion of Exceptions section of this
§ 984.48(a), Marketing estimates and ‘‘The Canal Zone’’. document. One of the exceptions also
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recommendations. 17. Amend the order by adding offered a comment of general support
8. Add authority to carry over excess language that would acknowledge that for the proposal to implement term
assessment funds. This proposal would the Board may deliberate, consult, limits as a method to encourage
amend § 984.69, Assessments. cooperate, and exchange information participation of industry members that
9. Add authority to accept voluntary with the California Walnut Commission. have not previously served on the
financial contributions. This proposal Any information sharing would be kept Board.

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38500 Federal Register / Vol. 72, No. 134 / Friday, July 13, 2007 / Proposed Rules

Small Business Considerations be considered handlers, the majority of was 244,000 tons, compared to the five-
Pursuant to the requirements set forth whom would be considered small year average production (2001–2005),
in the Regulatory Flexibility Act (RFA), entities. which was 318,600 inshell tons.
Based on information presented at the According to the hearing record, a
the Agricultural Marketing Service
hearing, calculations describing an number of factors have contributed to
(AMS) has considered the economic
average California walnut producer increased production in recent years.
impact of this action on small entities.
provide the following: Dividing 219,000 New acres have been planted at a rate
Accordingly, AMS has prepared this
bearing acres in 2005 by 5,000 of three to five thousand acres per year,
final regulatory flexibility analysis.
producers indicates an average of 44 some of which are new varieties with
The purpose of the RFA is to fit
bearing acres per producer. Dividing the higher yields. Witnesses explained that
regulatory actions to the scale of
two-year average crop value for 2003 older varieties may yield 1,500 to 3,000
business subject to such actions so that
and 2004 ($414,950,000) by 5,000 pounds per acre, due to both planting
small businesses will not be unduly or producers yields an average walnut patterns and the typical yield of the
disproportionately burdened. Marketing revenue per producer estimate of about variety. New varieties, such as the
orders and amendments thereto are $83,000. According to the hearing Chandler, will yield up to 6,000 pounds
unique in that they are normally record, more than 70 percent of per acre. Newer plantings have led to a
brought about through group action of California walnut producers would be reduction in the cyclical peaks and
essentially small entities for their own classified as small producers according valleys associated with the alternate-
benefit. to the SBA definition. bearing characteristic of tree nuts. This,
Small agricultural growers are defined According to a study presented at the in turn, has facilitated better inventory
by the Small Business Administration hearing, entitled ‘‘Cost to Produce management and has made the walnut
(SBA) (13 CFR 121.201) as those having Walnuts in California’’ (prepared by Dr. industry a more reliable ingredient
annual receipts of less than $750,000. Karen Klonsky, Department of supplier to the food-processing
Small agricultural service firms, which Agriculture and Resource Economics, industry.
include handlers regulated under the University of California Davis, 2006), According to the hearing record, the
order, are defined as those with annual typical average costs for a walnut growing season commences in March of
receipts of less than $6,500,000. orchard in the Sacramento Valley are each year with harvest occurring
Interested persons were invited to $2,460 per acre in full production. The between September and November,
present evidence at the hearing on the costs are broken down as follows: (a) depending upon the variety. Inshell
probable regulatory and informational Land and trees, $678 (28 percent), (b) California walnuts are a seasonal item
impact on growers and handlers of the cultural costs, $667 (27 percent), (c) with 95 percent of the volume shipped
proposed amendments, and in harvest, $538 (22 percent), (d) between the months of September and
particular the impact on small equipment and buildings, $302 (12%), December. This represents roughly 25
businesses. The record evidence shows and (e) cash overhead, $275 (11 percent of the industry’s production.
that the proposed amendments are percent). Inshell walnuts are marketed primarily
designed to enhance industry At an average grower price in recent as a winter holiday food. According to
efficiencies and streamline years of $0.62 per pound, a grower the hearing record, the purchase of
administrative operations of the would need a yield of 2 tons per acre significant quantities of inshell walnuts
marketing order. The record evidence is to break even, according to the study. occurs due to the tradition in many
that while some minimal costs may The breakeven price at the State average markets of displaying them with other
occur, those costs would be outweighed yield of 1.5 tons per acre is about $0.70 inshell nuts as part of winter holiday
by the benefits expected to accrue to the per pound, which is above the actual decor.
California walnut industry. price received in most recent years, but Shelled walnuts are marketed on a
equal to the 2004 average price received year-round basis, and represent about 75
Walnut Industry Background and
by growers. percent of utilization. Large handler
Individual grower costs can vary infrastructure investments have
According to the record, the considerably due to such variables as contributed substantially to the growth
California walnut industry currently has horticultural practices and varieties of the year-round shelled business, as
44 handlers and approximately 5000 grown, and also due to orchard location well as the inshell business.
producers. The crop is produced in a and year of acquisition, and water Over the past ten years sophisticated
region that spans approximately 400 availability and cost. laser-sorting equipment and new
miles in California’s Central Valley. Although a majority of producers are varieties such as the Chandler have
Fifteen grower witnesses and 7 considered small business entities, contributed to improved quality. Higher
handler witnesses testified at the record evidence also indicates that customer expectations have
hearing. Using the SBA definition producer revenue has increased over accompanied the improvements in
($750,000 in gross annual walnut sales), time. The National Agricultural technology and quality, with more
7 of the grower witnesses identified Statistical Service (NASS) crop value demand for high-quality, high-
themselves as large business entities estimate for 2004, $451.75 million, was specification California walnuts.
and 6 as small business entities. All 7 38 percent higher than in 1995, and was Marketing success in Japan is cited as a
handler witnesses identified themselves the sixth successive yearly increase. prime example of this trend.
as being large business entities Average revenue per acre in 2004 According to the hearing record,
according to the SBA definition. Some reached a record $2,082. shelled walnuts are utilized in a variety
of the handler witnesses were also Record evidence also indicates that of ways, with commercial baking
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growers. According to witnesses, 37 out acreage and production are trending believed to be the single largest
of an industry total of 44 handlers upward. Production did not exceed utilization category. Retail consumption
would qualify as small business entities 300,000 tons until 2001, but has of walnuts packaged for use in the home
under the SBA definition. Also, under exceeded that level for 4 out of the last has increased dramatically over the past
the order amendments contained herein, 5 years. Witnesses stated that the five- several years. Shelled walnuts may be
it is estimated that five packers would year average production for 1996–2000 sold in packages ranging from 2.75

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Federal Register / Vol. 72, No. 134 / Friday, July 13, 2007 / Proposed Rules 38501

ounce retail packages to large bulk Material Issues economic impact on large and small
containers of 25 pounds or more for entities is outlined below.
industrial users, wholesalers, and The amendments included in this
decision would: Change the marketing Designation of More Than One
distributors. The last 12 years have seen
year; include ‘‘pack’’ as a handler Inspection Service
substantial increases in snack food uses
of walnuts, in addition to expansion of function; restructure the Board and Proposal 11 would amend the order to
ingredient use beyond baking and revise nomination procedures; rename add authority for the Board to designate
confectionery items to include usage the Board and add authority to change more than one inspection service, as
with salads, rice, and pasta. Board composition; modify Board long as the functions performed by each
A high degree of mechanization in the meeting and voting procedures; add service are separate and do not conflict
harvest has reduced the deleterious authority for marketing promotion and with each other.
impact on nut quality from rain and paid advertising; add authority to accept To ensure that walnuts are properly
other weather conditions. Once contributions, and to carry over excess graded and meet marketing order
harvested, walnuts are taken to holding assessment funds; broaden the scope of minimum standards, the Board
stations where a fibrous husk is the quality control provisions and add currently arranges for inspection of
removed, and the walnuts are then dried the authority to recommend different walnuts prior to shipping for all walnut
to approximately eight percent regulations for different market handlers. The marketing order currently
moisture. They are delivered to handlers destinations; add authority for the Board authorizes contracting with one agency,
for further processing, which includes to designate more than one inspection the California based Dried Fruit and Nut
cleaning, sorting, and shelling. service; replace outdated order language Association (DFA).
According to the hearing record, with current industry terminology; and DFA inspects all walnuts that leave
California walnuts rank eighth in other related amendments. California to certify that they meet
exports over all the commodities grown The USDA proposed three additional marketing order minimum standards.
in the state. The top three inshell export amendments: To establish tenure Operating as an out-going inspection
markets are Spain, Italy, and Germany. limitations for Board members, to service, samples of packed walnuts are
Five-year average export value (2000/ require that continuance referenda be examined and certified by licensed DFA
01–2004/05) is approximately $52 conducted on a periodic basis to inspectors at the end of the handling
million, representing 63 percent of total ascertain producer support for the order, and packing process.
export value for that five-year period. and to make any changes to the order as The following data representing
The key export markets for shelled- may be necessary to conform with any current inspection costs, summarizing
walnut utilization are: Japan, Germany, amendment that may result from the actual inspection cost data for 2004–05
Spain, Israel, Korea, and Canada. Five- hearing. for the entire industry (44 handlers),
year average export value for those six All of the proposals are intended to was presented at the hearing by Board
countries is $91.8 million, which is streamline and improve the representatives. According to the record,
about 76 percent of the total value of administration, operation, and the 2004–05 cost to serve the 44
shelled walnut exports. functioning of the program. Many of the handlers was $1.857 million, which is
California walnuts compete with proposed amendments would update an average cost of just over $42,000 per
walnuts grown in China, Turkey, the language of the order, thus better handler.
France, Italy, Chile, North Korea, India, representing and conforming to current Since inspection costs depend largely
Vietnam, Argentina, Brazil, and many practices in the industry. The proposed on volume handled, the four largest
areas within the former Soviet Union amendments are not expected to result handlers account for $1.282 million, or
including Kazakhstan, Ukraine, in any significant cost increases for 69% of total inspection expenditure in
Hungary, and Moldova. Within the growers or handlers. More efficient the 2004–05 crop year. The 37 smaller
European Union the major competition administration of program activities handlers account for $412,172 in
comes from France and Eastern Europe. may result in cost savings for the Board. expenditure, about 22 percent of the
In the Pacific Rim, major competitors A description of the proposed total, averaging about $11,000 per
include China and India. amendments and their anticipated handler.


No. Average per
DFA cost handlers handler

Largest Handlers ..................................................................................................................................... $1,282,362 4 $320,591

Additional Large Handlers ....................................................................................................................... 162,487 3 54,162
Other Handlers ........................................................................................................................................ 412,172 37 11,140
All Handlers ............................................................................................................................................. 1,857,021 44 42,205
Source: Walnut Marketing Board

The Federal-State Inspection Service quality requirements. Effectiveness of trained company staff. USDA oversight
(FSIS) has developed effective, less the program is verified through ranges from periodic visits throughout
costly alternative inspection programs. periodic, unannounced audits of each the day to a continuous on-site
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The Partners in Quality Program, or handler’s system by USDA-approved presence.

PIQ, is a documented quality assurance auditors. DFA does not offer inspection
system. Under this program, individual Under the Customer-Assisted services that operate similarly to the PIQ
handlers must demonstrate and Inspection Program, or CAIP, USDA and CAIP programs.
document their ability to handle and inspectors oversee the in-line sampling Cost savings would occur by reducing
pack product that meets all relevant and inspection process performed by the prevalence of double inspections

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38502 Federal Register / Vol. 72, No. 134 / Friday, July 13, 2007 / Proposed Rules

under the current system. Currently, one services, such as end-line and lot operations, and therefore offer cost
inspection is undertaken to meet inspections. saving advantages that the DFA service
minimum USDA quality requirements The proposal also specifies that ‘‘each does not. This proposal, if implemented,
specified in the marketing order. A service shall be separate so as to not would allow handlers to use the
second inspection is often necessary to conflict with each other,’’ meaning that alternative inspection programs offered
meet the considerably higher standards each inspection service would offer by USDA.
of specific customers. Moving to a PIQ distinct and different services (i.e. PIQ
Several witnesses indicated that
or CAIP program would greatly reduce vs. lot inspections) so that the integrity
lowering costs to handlers would
of both programs can be maintained.
inspection costs, because meeting benefit growers because they expect that
Witnesses speaking in favor of this
higher standards under PIQ or CAIP proposal explained the importance of a the cost reduction would be reflected in
would also ensure that an inspected lot handler’s ability to take advantage of increased payments to growers.
met minimum marketing order inspection services that would most Financial impact calculations
standards. economically fit the size and functions provided by the Board (shown in the
Witnesses at the hearing testified that of his or her operation. Currently, all table below) indicate that introducing
the California walnut industry should walnut product is inspected by DFA. the option of using PIQ or CAIP
allow handlers to take advantage of While this inspection service has programs could result in savings of
USDA’s alternative inspection programs worked well for the industry for many $1.09 million, an average per handler
such as the CAIP and the PIQ. Handlers years, the DFA inspection service does savings of $156,067 for the industry’s
who do not wish to use the alternative not accommodate inspection procedures seven largest handlers. Due to the high
inspection services offered by USDA that support larger handler economies of volumes handled, most of the savings
would continue to use the services of scale. Witnesses stated that USDA accrue to the four largest handlers,
programs, such as PIQ and CAIP, are estimated at $1.05 million, or an average
the DFA for traditional inspection
designed to fit larger scale handling per handler of $263,169.
Cost savings
DFA PIQ/CAIP Total Per handler

Largest 4 handlers ........................................................................................... $1,282,362 $229,688 $1,052,674 $263,169

Additional 3 large handlers .............................................................................. 162,487 122,692 39,795 13,265
Largest 7 handlers ........................................................................................... 1,444,849 352,380 1,092,469 156,067
Source: Walnut Marketing Board.

Data from NASS indicate that the two- for handlers remaining with traditional requirements prior to further processing.
year average value of the 2003 and 2004 DFA inspection services. Therefore, no When handlers are processing for end
crops was about $415 million. The financial disadvantages are expected to users that require further processing,
current DFA inspection cost ($1.857 result from this proposed amendment. If this certification represents a costly
million) represents a very small implemented, this proposal may result extra step. After the initial shelled
proportion of crop value, about 0.4 in an overall decrease in costs of walnut certification, the handlers
percent. If the largest 7 handlers used inspection to the industry. employ their own quality control
USDA for inspection at a cost of Inspection of Sliced, Chopped or procedures to meet the higher customer
$352,380 and the remaining 37 handlers Ground Shelled Walnuts specifications. This proposal would
continue to work with DFA at an allow a single inspection at the end of
estimated cost of $412,172, then the Proposal 12b would add authority for the process that would serve both
combined cost of $764,552 would shelled walnuts to be inspected after purposes. If implemented, this proposal
represent 0.2 percent of the recent-year having been sliced, chopped, or ground would allow the Board to recommend
crop value. or in any manner changed from being modifications to allow certification of
shelled walnuts, if regulations for such product after it has been modified or
Witnesses emphasized the cost walnuts are in effect.
effectiveness of having an additional chopped, leading to cost savings in the
New walnut product forms are
inspection agency. If implemented, this regularly requested by both domestic handling process.
proposal would facilitate the and foreign customers. In the last 20 Witnesses contended that current
streamlining of handler operations to years, the industry has become much standards focus on visually observed
utilize the inspection service best suited more capable of producing at a characteristics that are significant for
to their operations. considerably higher level quality and of consumer acceptance, but often do not
Since potential savings are correlated developing more specific types of adequately address specific quality
with economies of scale, record products that meet the differing needs of concerns important to various export
evidence indicates that PIQ and CAIP individual customers. To capitalize on markets, including Europe. Such
programs would be most beneficial for this growing capability, a number of concerns include, for example, moisture
large handlers. It is unlikely that the witnesses expressed the view that an content or aflatoxin tolerances. If
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smaller handlers would initially opt for important tool for increasing sales is the implemented, this proposal would
these programs. Smaller handlers that ability to establish standards for these allow the Board to review scientific data
expand their operations in the future walnut products. and develop inspection procedures for
may realize benefits from switching to The order currently requires shelled recommendation and approval by USDA
PIQ or CAIP. Witnesses stated that no product to be certified as merchantable, to assure customers that walnuts meet
change in inspection costs is expected that is, meeting the minimum USDA their specified criteria.

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Federal Register / Vol. 72, No. 134 / Friday, July 13, 2007 / Proposed Rules 38503

Any new quality standards were confident that the positive results currently applicable to shelled walnuts.
recommended by the Board would be of the Board’s promotional activities on Witnesses stated that the proposed
subject to thorough review prior to consumer demand for California amendments to the definitions of
seeking approval from USDA. Witnesses walnuts would more than outweigh any ‘‘handle’’ and ‘‘pack’’ would more
supported this amendment as it would increases in costs to the industry. accurately reflect current industry
give the Board authority to pursue operations.
Impact of Remaining Amendment This amendment is not expected to
quality regulations in addition to
Proposals result in any increases in costs to
existing grade standards, both of which
are important to industry customers. Remaining amendment proposals are growers. If implemented, this proposal
Witnesses emphasized that this largely administrative in nature and may result in some packing entities
proposal would grant authority to the would impose no new significant previously not considered to be
Board to recommend quality standards regulatory burdens on California walnut handlers under the order to be redefined
that could exceed current standards or growers or handlers. They should as handlers. According to witnesses,
to develop new standards for product benefit the industry by improving the there are roughly five packer entities
characteristics not currently covered. operation of the program and making it that would qualify as handlers under
Witnesses also stated that no specific more responsive to industry needs. the new definition. While some
modifications are currently requested, increases in administration costs on the
Marketing Year
just flexibility to create them in the part of handlers could arise as a result
future. Proposal 1 would amend the order to of reporting requirements, record
While this proposed amendment may change the marketing year from August evidence indicates that the benefit of
result in some cost increases associated 1 through July 31 to September 1 more accurate industry information
with administration and oversight of through August 31. Under the current would merit that expense.
new quality regulations, it is also definition of the order, the California
walnut marketing year begins August 1 Restructuring of the Board
expected that some handlers may
benefit from lower inspection costs if and continues through July 31. Proposal 3(a) seeks to amend all parts
the inspection requirements for specific Witnesses explained that, over time, of the order that refer to cooperative
markets were modified. Any costs new varieties of walnuts have been seats on the Board, to redistribute
associated with the implementation of introduced, and the areas in which member seats among districts, and to
this proposal are expected to be walnuts are cultivated have shifted. The provide designated seats for a major
outweighed by the overall benefits newer varieties mature later than the handler, if such handler existed. A
accrued to the industry. varieties grown at the time of the major handler would have to handle 35
program’s inception. At the same time, percent or more of the crop.
Marketing Promotion and Paid cultivation has slowly moved into areas According to the hearing record, the
Advertising. that previously were not suited for recent transition of the industry’s largest
Proposal 13 would amend the order walnut production. With differences in cooperative from a cooperative entity to
by adding authority for marketing climate, soil, and water, witnesses a publicly held company was the
promotion and paid advertising. explained that these new production impetus for this proposal. Witnesses
Current promotional activities for areas have slightly later growing cycles. expressed the need to modify the Board
California walnuts are undertaken by The proposed change in the marketing structure to provide for representation
the California Walnut Commission year would better reflect current crop that accurately reflects the current
(CWC). Witnesses stated that the CWCs cycles. industry. Witnesses advocated that the
activities have led to considerable Proposed conforming changes would Board structure should maintain the
success in increasing demand for the ensure that Board member terms of current number of Board members and
industry’s product. office and marketing estimates alternates, and that the allocation of
Witnesses explained that with price calculated by the Board would conform member seats between grower and
inelastic demand for walnuts, recent to the modified marketing year. This handler positions should remain the
increases in production could have amendment is not expected to result in same (meaning 4 handler member seats,
driven down prices and total grower any increases in costs to growers or five grower member seats and one
revenue. The CWC’s successful handlers. public member).
promotional activities have helped Witnesses also recommended
mitigate that potential impact, keeping Definition of Pack modifying the allocation of Board
average grower prices and grower Proposal 2 would amend the order by representation according to two possible
revenue steady or increasing for several specifying that the act of packing scenarios. The two scenarios include:
years. walnuts is considered a handling (1) Membership allocation that
According to the hearing record, function. In addition, the term ‘‘pack’’ acknowledges the existence of a handler
adding authority for paid advertising would be amended to include shelling, handling 35 percent or more of
and promotion under the order would and would be modified so that packing production and, (2) membership
benefit the industry by allowing the is applicable to both inshell and shelled allocation in the absence of such
Board to engage in activities that are walnuts. handler. According to record evidence,
currently supported by the Commission. According to the hearing record, the these proposed amendments would not
Small businesses would be the greatest order currently defines ‘‘to handle’’ as to result in any increases in costs.
beneficiaries of an expanded generic ‘‘sell, consign, transport, or ship, or in
advertising program, because they have any other way, to put walnuts into the Nominations
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the least financial resources to devote to current of commerce’’. The definition Proposal 3(b) would amend the Board
selling their products, according to a does not include the specific act of member nomination process to reflect
witness. packing. ‘‘To pack’’, as currently proposed changes in the Board
While an increase in advertising and defined in the order means, ‘‘to bleach, structure, as outlined in 3(a). Current
promotional activities may result in clean, grade or otherwise prepare nomination procedures allow for all
increased Board expenditures, witnesses inshell walnuts for market’’. Pack is not cooperative seat nominees to be selected

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by the cooperative and forwarded to the provide the Board with a tool to more Carryover of Excess Assessment Funds
Secretary for approval and appointment. efficiently respond to the changing Proposal 8 would amend the order to
The cooperative nominee selection character of the California walnut add authority to carry over excess
process is independent of the Board. All industry. In recommending any such assessment funds. According to the
non-cooperative seat nominees are changes, the following would be hearing record, the order currently
selected through a ballot nomination considered: (1) Shifts in acreage within states that any assessment funds held in
process overseen by the Board staff, and districts and within the production area excess of the marketing year’s expenses
forwarded to the Secretary for approval during recent years; (2) the importance must be refunded to handlers. Refunds
and appointment. of new production in its relation to are returned to handlers in accordance
According to the hearing record, the existing districts; (3) the equitable with the amount of that handler’s pro
revised nomination procedures would relationship between Board rata share of the actual expenses of the
allow a handler who handles 35 percent apportionment and districts; (4) changes Board.
or more of the crop to nominate persons in industry structure and/or the This proposed amendment would
to fill its designated seats (as described percentage of crop represented by allow the Board, with the approval of
in 3(a)) and to forward them to the various industry entities resulting in the the Secretary, to establish an operating
Secretary for approval and appointment. existence of two or more handlers monetary reserve. This would allow the
Nomination of persons to fill all other handling 35 percent or more of the crop; Board to carry over to subsequent
seats would be conducted by the Board and (5) other relevant factors. This production years any excess funds in a
staff. amendment is not expected to result in
In the event a handler handling 35 reserve, provided that funds already in
any increases in costs to growers or the reserve do not exceed approximately
percent or more of the crop does not handlers.
exist, all Board nominees would be two years’ expenses. If reserve funds do
selected through a ballot nomination Voting Procedures exceed that amount, the assessment rate
process conducted by the Board staff. could be reduced so as to cause reserves
Proposal 7 would amend Board to diminish to a level below the two-
While some increases in quorum and voting requirements to add
administration costs could arise as a year threshold.
percentage requirements, add authority According to the record, reserve funds
result of an increased number of ballots for the Board to vote by ‘‘any other
to be mailed by the Board if a major could be used to defray expenses during
means of communication’’ (including any production year before assessment
handler does not exist, record evidence facsimile) and add authority for Board
indicates that the expense would be income is sufficient to cover such
meetings to be held by telephone or by expenses, or to cover deficits incurred
minor and would not directly burden ‘‘any other means of communication’’.
growers or handlers. during any fiscal period when
Witnesses stated that references to the assessment income is less than
Qualify by Acceptance meeting quorum requirements should be expenses. Additionally, reserve funds
amended to include a percentage could be used to defray expenses
Proposal 4 would require Board
equivalent of the current six-out-of-10- incurred during any period when any or
nominees to submit a written
member minimum, or sixty percent. In all of the provisions of the order are
qualification and acceptance statement
addition, witnesses supported suspended, or to meet any other such
prior to selection by USDA. Currently,
modifying the order language regarding costs recommended by the Board and
the acceptance procedure for persons
voting requirements to state that a sixty- approved by the Secretary. This
nominated and selected to serve on the
percent super-majority vote of the proposal is not expected to result in any
Board involves a two-step process. If
members present at a meeting should be significant increases in costs to growers
this amendment were implemented, the
required of all Board decisions, except or handlers.
two steps could be combined into one,
where otherwise specifically provided.
thus resulting in less paperwork, a Contributions
The order currently states that a
shorter acceptance procedure and
majority vote is needed, with no Proposal 9 would amend the order by
improved efficiency in the acceptance
percentage equivalent specified. adding authority to accept
process. This amendment is not
expected to result in any increases in According to the record, the order contributions. If implemented, this
costs to growers or handlers. currently requires that all Board proposed amendment would grant
meetings be held at a physical location. authority to the Board to accept
California Walnut Board Witnesses stated that the order should voluntary contributions. Contributions
Proposal 5 would change the name of be amended to allow for some meetings could only be used to pay for research
the Walnut Marketing Board to the to be held using ‘‘other means of and development activities, and would
California Walnut Board. Witnesses communication’’, such as telephone or be free from any encumbrances by the
stated that the proposed name of videoconferencing. Witnesses stated donor. According to the hearing record,
‘‘California Walnut Board’’ would more that use of new communication the Board would retain oversight of the
accurately represent the Board’s technology would result in timesavings application of such contributions.
responsibilities. This amendment is not while still allowing the Board to Witnesses supported this proposal by
expected to result in any significant conduct its business. Witnesses stated stating that it would provide the Board
increases in costs to growers or that it is the intent of the Board that and the industry with valuable
handlers. voting procedures for all types of non- resources to enhance research and
traditional meetings can be development activities. It is not
Authority To Reestablish Districts and recommended and adopted as expected that this proposal would result
Board Structure
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appropriate for each type of technology in any additional costs to growers or

Proposal 6 would add authority to used. handlers.
reestablish districts, to reapportion Amendments proposed under this
members among districts, and to revise material issue are not expected to result Reimbursement of Expenses
groups eligible for representation on the in any significant changes in costs to Proposal 10 would amend the order to
Board. The intent of this proposal is to growers or handlers. clarify that members and alternate

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members may be reimbursed for or larger, as defined by the United States to reference ‘‘United States and its
expenses incurred while performing Standards for Walnuts in the Shell. territories’’.
their duties and that reimbursement Witnesses stated that given the new According to record evidence, this
includes per diem. According to the varieties currently being produced in amendment would not impact trade
hearing record, this proposed the industry, the term ‘‘mammoth’’ no demand calculations under the order
amendment would not have any impact longer applies. According to record since the purpose of the reference is to
on the current expense reimbursement evidence, the current production’s accurately identify the amount of
activities of the Board. Rather, it would equivalent to ‘‘mammoth’’ size is shelled or inshell walnuts demanded by
clarify and update order language to ‘‘jumbo’’ size, as defined by the United the United States, including its
more clearly state that while Board States Standards for Walnuts in the territories. Thus, while the terminology
members and alternates serve without Shell. Thus, witnesses stated that the identifying the geographic regions
compensation, expenses incurred while order language should be updated to included in the calculation would
performing the duties of a Board reflect the industry’s current change, the intent of the original
member that have been authorized by terminology and size of walnuts being language would remain unchanged.
the Board will be reimbursed. It is not produced. This proposal is not expected This proposal is not expected to result
expected that this proposal would result to result in any increases in costs to in any increases in costs to growers or
in any additional costs to growers or growers or handlers. handlers.
Interhandler Transfers Relationship With California Walnut
Quality Regulations Proposal 15(a) would amend the order Commission
Proposal 12a would broaden the to clarify the term ‘‘transfer’’ and to add Proposal 17 would amend the order
scope of the quality control provisions authority for the Board to recommend by adding language that would
by adding authority to recommend methods and procedures, including acknowledge that the Board may
different regulations for different market necessary reports, for administrative deliberate, consult, cooperate and
destinations. Witnesses emphasized the oversight of such transfers. exchange information with the
usefulness in terms of market Witnesses stated that it would be California Walnut Commission (CWC).
development of being able to establish beneficial to simplify current order Any information sharing would be kept
different regulations for individual language so that all interhandler confidential.
markets and/or regions. Witnesses transfers were considered a ‘‘sale of Recorded evidence indicates the CWC
stated that allowing the Board to make inshell and shelled walnuts within the and the Federal marketing order
such recommendations would help the area of production by one handler to program are currently administered out
walnut industry adapt to changing another.’’ Witnesses explained that the of the same office location and employ
international market conditions. proposed language restated the current the same staff. Thus, this proposal, if
application of this provision in walnut implemented, would formalize the
Updating Order Terminology
transactions in simpler terms. This relationship that currently exists
Proposal 14 would amend the order proposal is not expected to result in any
by replacing the terms ‘‘carryover’’ with between the two entities. Witnesses
increases in costs to growers or stated that collaboration between the
‘‘inventory,’’ and ‘‘mammoth’’ with handlers.
‘‘jumbo,’’ to reflect current day industry two programs leads to reduced
procedures. This proposal would also Reporting Requirements administrative costs, as much of the
result in conforming changes being Proposal 15(b) would amend the order information collected by each entity can
made to the ‘‘Marketing estimates and to clarify that the Board may require be shared. This amendment is not
recommendations’’ and ‘‘Reports of reports from handlers and packers to expected to result in any increases in
handler carryover’’ sections of the order. include interhandler transfers or any costs to growers or handlers.
Handler carryover, defines the other activity that involves placing In addition, USDA proposed adding
amount of California walnuts (both California walnuts into the stream of two provisions that would help assure
merchantable as well as the estimated commerce. that the operation of the program
quantity of merchantable walnuts to be According to the hearing record, conforms to current Department policy.
produced from shelling stock and current authority provided in this Proposal 18 would establish tenure
unsorted material), wherever located, section only applies to the reporting of requirements for Board members.
held by California walnut handlers at handler walnut receipts from growers. Currently, the term of office of each
any given time. Witnesses stated that this authority member and alternate member of the
Witnesses explained that the current should be broadened to include Board is 2 years. There are no
term ‘‘carryover’’ is misleading in that interhandler transfers, or receipts from provisions related to term limits in the
the term implies the amount of any other entity as recommended by the marketing order.
inventory held by handlers from one Board and approved by the Secretary. The recorded evidence suggests that
marketing year to the next. Witnesses This proposal is not expected to result term limits for Board members could
stated that the term ‘‘inventory’’ would in any increases in costs to growers or increase industry participation on the
more accurately convey the intent of handlers. Board, provide for more diverse
this definition, and would also reflect membership, provide the Board with
current day calculations of walnut Trade Demand new perspectives and ideas, and
availability. Proposal 16 would update and increase the number of individuals in
Section 984.67, Exemptions, of the simplify the language in § 984.22, Trade the industry with Board experience.
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order provides for situations under demand, to state ‘‘United States and its This amendment is not expected to
which California walnuts may be territories,’’ rather than name ‘‘Puerto result in any increases in costs to
exempted from complying with order Rico’’ and ‘‘The Canal Zone’’. Witnesses growers or handlers.
regulations. One exemption is explained that the reference to ‘‘Puerto Proposal 19 would require that
applicable to lots of merchantable Rico’’ and ‘‘The Canal Zone’’ in the continuance referenda be conducted on
inshell walnuts that are mammoth size order is outdated and should be updated a periodic basis to ascertain industry

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38506 Federal Register / Vol. 72, No. 134 / Friday, July 13, 2007 / Proposed Rules

support for the order and add more duplication by industry and public following six paragraphs to read as
flexibility in the termination provisions. sector agencies. follows:
Currently, there is no requirement in AMS is committed to complying with Exceptions to the Recommended
the order that continuance referenda be the Government Paperwork Elimination Decision stated that if the authority to
conducted on a periodic basis. The Act (GPEA), which requires Government designate more than one inspection
USDA believes that growers should agencies in general to provide the public service were implemented, private
have an opportunity to periodically vote the option of submitting information or sector entities, in addition to USDA,
on whether a marketing order should transacting business electronically to should be able to offer non-traditional
continue. Continuance referenda the maximum extent possible. inspection services, such as the PIQ and
provide an industry with a means to The AMS is committed to complying the CAIP. Exceptions further stated that
measure grower support for the with the E-Government Act, to promote the current proposed language
program. Experience has shown that the use of the Internet and other (meaning, ‘‘each service shall be
programs need significant industry information technologies to provide separate so as to not duplicate each
support to operate effectively. This increased opportunities for citizen other’’) would prevent any private
amendment is not expected to result in access to Government information and sector company from offering those
any increases in costs to growers or services, and for other purposes. services.
handlers. The proposed amendment, if
The proposals put forth at the hearing Civil Justice Reform implemented, would not prevent any
would streamline program organization, The amendments to Marketing Order private sector company from offering
but are not expected to result in a No. 984 proposed herein have been traditional or non-traditional inspection
significant change in industry reviewed under Executive Order 12988, services, as long as the services were
production, handling or distribution recommended by the Board and
Civil Justice Reform. They are not
activities. In discussing the impacts of approved by USDA.
intended to have retroactive effect. If
the proposed amendments on growers
adopted, the proposed amendments The Agricultural Marketing Service is
and handlers, recorded evidence
would not preempt any State or local responsible for ensuring that all
indicates that the changes are expected
laws, regulations, or policies, unless handlers regulated under a marketing
to be positive because the
they present an irreconcilable conflict order program are in compliance with
administration of the programs would
with this proposal. any regulations that are in effect. Under
be more efficient, and therefore more
The Act provides that administrative the marketing order for California
effective, in executing Board duties and
proceedings must be exhausted before walnuts, the Board is responsible for
responsibilities. There would be no
parties may file suit in court. Under locally administering the program,
significant cost impact on either small
section 608c(15)(A) of the Act, any which includes monitoring industry’s
or large growers or handlers.
handler subject to an order may file compliance with order requirements,
Interested persons were invited to
with USDA a petition stating that the and reporting any violations to USDA
present evidence at the hearing on the
order, any provision of the order, or any for enforcement measures.
probable regulatory and informational
impact of the proposed amendments to obligation imposed in connection with While the USDA supports and
the order on small entities. The the order is not in accordance with law encourages cost-saving measures, it is
recorded evidence is that the and request a modification of the order important that the program maintains its
amendments are designed to increase or to be exempted therefrom. A handler integrity and that any quality or size
efficiency in the functioning of the is afforded the opportunity for a hearing regulations in effect are not
order. on the petition. After the hearing, USDA compromised. Furthermore, it is
USDA has not identified any relevant would rule on the petition. The Act important that inspection of product is
Federal rules that duplicate, overlap or provides that the district court of the conducted with uniformity and
conflict with this proposed rule. These United States in any district in which consistency. For this reason, it is
amendments are designed to enhance the handler is an inhabitant, or has his important that the language stating that
the administration and functioning of or her principal place of business, has ‘‘each service shall be separate so as to
marketing order 984 to benefit of the jurisdiction to review USDA’s ruling on not duplicate each other’’ be
California walnut industry. the petition, provided an action is filed maintained.
not later than 20 days after the date of Finally, the proposed order language
Paperwork Reduction Act the entry of the ruling. would provide authority for the Board
Current information collection to recommend the use of alternative
Findings and Conclusions; Discussion
requirements for Part 984 are approved inspection methods and services as they
of Exceptions
by OMB under OMB No. 0581–0178, are developed and accredited. The
Vegetable and Specialty Crops. Any The findings and conclusions, rulings, proposed authority is intended to allow
changes in those requirements as a and general findings and determinations industry to benefit from cost-saving
result of this proceeding would be included in the Recommended Decision advances in technology while also
submitted to OMB for approval. set forth in the March 27, 2007, issue of ensuring uniform application of
Witnesses stated that existing forms the Federal Register (72 FR 14368) are inspection methodology and standards
could be adequately modified to serve hereby approved and adopted subject to industry wide.
the needs of the Board. While the following additions and Based upon the exception filed, the
conforming changes to the forms would modifications: findings and conclusions in material
need to be made (such as changing the Based upon the briefs and exceptions issue number 18 of the Recommended
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name of the Board), the functionality of filed, the findings and conclusions in Decision concerning whether or not to
the forms would remain the same. material issue number 11 of the establish a limit on the number of
As with other similar marketing order Recommended Decision concerning consecutive terms a person may serve as
programs, reports and forms are whether or not to add authority to a member of the Board are amended by
periodically reviewed to reduce designate more than one inspection adding the following paragraph to read
information requirements and service are amended by adding the as follows:

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One of the exceptions filed offered a Dated: July 9, 2007. would not effectively carry out the
comment of general support for the Lloyd C. Day, declared policy of the Act;
proposal to implement term limits as a Administrator, Agricultural Marketing (4) The marketing agreement and
method to encourage participation of Service. order, as amended, and as hereby
industry members that have not proposed to be further amended,
Order Amending the Order Regulating
previously served on the Board. prescribe, insofar as practicable, such
the Handling of Walnuts Grown in
different terms applicable to different
Rulings on Exceptions California 1
parts of the production area as are
Findings and Determinations necessary to give due recognition to the
In arriving at the findings and
differences in the production and
conclusions and the regulatory The findings and determinations
marketing of walnuts grown in the
provisions of this decision, the hereinafter set forth are supplementary
production area; and
exceptions to the Recommended to the findings and determinations
(5) All handling of walnuts grown in
Decision were carefully considered in which were previously made in
the production area as defined in the
conjunction with the recorded evidence. connection with the issuance of the
marketing agreement and order is in the
To the extent that the findings and marketing agreement and order; and all
current of interstate or foreign
conclusions and the regulatory said previous findings and
commerce or directly burdens,
provisions of this decision are at determinations are hereby ratified and
obstructs, or affects such commerce.
variance with the exceptions, such affirmed, except insofar as such findings
exceptions are denied. and determinations may be in conflict Order Relative to Handling
with the findings and determinations set It is therefore ordered, That on and
Marketing Agreement and Order forth herein. after the effective date hereof, all
(a) Findings and Determinations Upon handling of walnuts grown in California
Annexed hereto and made a part the Basis of the Hearing Record.
hereof is the document entitled ‘‘Order shall be in conformity to, and in
Pursuant to the provisions of the compliance with, the terms and
Amending the Order Regulating the Agricultural Marketing Agreement Act conditions of the said order as hereby
Handling of Walnuts Grown in of 1937, as amended (7 U.S.C. 601 et proposed to be amended as follows:
California.’’ This document has been seq.), and the applicable rules of The provisions of the proposed
decided upon as the detailed and practice and procedure effective marketing agreement and order
appropriate means of effectuating the thereunder (7 CFR part 900), a public amending the order contained in the
foregoing findings and conclusions. hearing was held upon the proposed Recommended Decision issued by the
It is hereby ordered, That this entire amendments to Marketing Agreement Administrator on March 19, 2007, and
decision be published in the Federal and Order No. 984 (7 CFR part 984), published in the Federal Register on
Register. regulating the handling of walnuts March 27, 2007, will be and are the
grown in California. Upon the basis of terms and provisions of this order
Referendum Order the evidence introduced at such hearing amending the order and are set forth in
and the record thereof, it is found that: full herein.
It is hereby directed that a referendum
(1) The marketing agreement and
be conducted in accordance with the PART 984—WALNUTS GROWN IN
order, as amended, and as hereby
procedure for the conduct of referenda proposed to be further amended, and all CALIFORNIA
(7 CFR part 900.400 et seq.) to of the terms and conditions thereof,
determine whether the annexed order 1. The authority citation for 7 CFR
would tend to effectuate the declared
amending the order regulating the part 984 continues to read as follows:
policy of the Act;
handling of walnuts grown in California (2) The marketing agreement and Authority: 7 U.S.C. 601–674.
is approved or favored by growers, as order, as amended, and as hereby 2. Revise § 984.6 to read as follows:
defined under the terms of the order, proposed to be further amended,
who during a representative period were regulate the handling of walnuts grown § 984.6 Board.
engaged in the production of walnuts in in the production area in the same Board means the California Walnut
the production area. manner as, and are applicable only to, Board established pursuant to § 934.35.
The representative period for the persons in the respective classes of 3. Revise § 984.7 to read as follows:
conduct of such referendum is hereby commercial and industrial activity § 984.7 Marketing year.
determined to be August 1, 2006, specified in the marketing agreement
and order upon which a hearing has Marketing year means the twelve
through July 31, 2007. months from September 1 to the
been held;
The agents of the Secretary to conduct following August 31, both inclusive, or
(3) The marketing agreement and
such referendum are hereby designated any other such period deemed
order, as amended, and as hereby
to be Shereen Marino and Kurt Kimmel, appropriate and recommended by the
proposed to be further amended, are
California Marketing Field Office, Board for approval by the Secretary.
limited in their application to the
Marketing Order Administration 4. Revise § 984.13 to read as follows:
smallest regional production area that is
Branch, Fruit and Vegetable Programs, practicable, consistent with carrying out § 984.13 To handle.
AMS, USDA, 2202 Monterey Street, the declared policy of the Act, and the
Suite 102B, Fresno, California 93721; To handle means to pack, sell,
issuance of several orders applicable to consign, transport, or ship (except as a
telephone (559) 487–5901.
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subdivisions of the production area common or contract carrier of walnuts

List of Subjects in 7 CFR Part 984 owned by another person), or in any
1 This order shall not become effective unless and
other way to put walnuts, inshell or
Marketing agreements, Nuts, until the requirements of § 900.14 of the rules of
practice and procedure governing proceedings to
shelled, into the current of commerce
Reporting and recordkeeping formulate marketing agreements and marketing either within the area of production or
requirements, Walnuts. orders have been met. from such area to any point outside

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thereof, or for a manufacturer or retailer and alternate. The tenth member and his (3) The equitable relationship
within the area of production to or her alternate shall be neither a walnut between Board apportionment and
purchase directly from a grower: The grower nor a handler. districts;
term ‘‘to handle’’ shall not include sales (b) In the event that one handler (4) Changes in industry structure and/
and deliveries within the area of handles 35% or more of the crop the or the percentage of crop represented by
production by growers to handlers, or membership of the Board shall be as various industry entities resulting in the
between handlers. follows: existence of two or more major
5. Revise § 984.14 to read as follows: (1) Two handler members to represent handlers;
the handler that handles 35% or more (5) Other relevant factors.
§ 984.14 Handler. 10. Revise § 984.36 to read as follows:
of the crop;
Handler means any person who (2) Two members to represent growers
handles inshell or shelled walnuts. § 984.36 Term of office.
who market their walnuts through the
6. Revise § 984.15 to read as follows: The term of office of Board members,
handler that handles 35% or more of the
and their alternates shall be for a period
§ 984.15 Pack. crop;
of two years ending on August 31 of
Pack means to bleach, clean, grade, (3) Two handler members to represent
odd-numbered years, but they shall
shell or otherwise prepare walnuts for handlers that do not handle 35% or
serve until their respective successors
market as inshell or shelled walnuts. more of the crop;
are selected and have qualified. Board
7. Revise § 984.21 to read as follows: (4) One member to represent growers
members may serve up to three
from District 1 who market their
§ 984.21 Handler inventory. consecutive, two-year terms of office. In
walnuts through handlers that do not
no event shall any member serve more
Handler inventory as of any date handle 35% or more of the crop;
than six consecutive years on the Board.
means all walnuts, inshell or shelled (5) One member to represent growers For purposes of determining when a
(except those held in satisfaction of a from District 2 who market their Board member has served three
reserve obligation), wherever located, walnuts through handlers that do not consecutive terms, the accrual of terms
then held by a handler or for his or her handle 35% or more of the crop; shall begin following any period of at
account. (6) One member to represent growers least twelve consecutive months out of
8. Revise § 984.22 to read as follows: who market their walnuts through office. The limitation on tenure shall not
handlers that do not handle 35% or apply to alternates.
§ 984.22 Trade demand.
more of the crop shall be nominated at 11. Revise § 984.37 to read as follows:
(a) Inshell. The quantity of large from the production area; and,
merchantable inshell walnuts that the (7) One member and alternate who § 984.37 Nominations.
trade will acquire from all handlers shall be selected after the selection of (a) Nominations for all grower
during a marketing year for distribution the nine handler and grower members members shall be submitted by ballot
in the United States and its territories. and after the opportunity for such pursuant to an announcement by press
(b) Shelled. The quantity of members to nominate the tenth member releases of the Board to the news media
merchantable shelled walnuts that the and alternate. The tenth member and his in the walnut producing areas. Such
trade will acquire from all handlers or her alternate shall be neither a walnut releases shall provide pertinent voting
during a marketing year for distribution grower nor a handler. information, including the names of
in the United States and its territories. (c) Grower Districts: candidates and the location where
9. Revise § 984.35 to read as follows:
(1) District 1. District 1 encompasses ballots may be obtained. Ballots shall be
§ 984.35 California Walnut Board. the counties in the State of California accompanied by full instructions as to
(a) A California Walnut Board is that lie north of a line drawn on the their markings and mailing and shall
hereby established consisting of 10 south boundaries of San Mateo, include the names of incumbents who
members selected by the Secretary, each Alameda, San Joaquin, Calaveras, and are willing to continue serving on the
of whom shall have an alternate Alpine Counties. Board and such other candidates as may
nominated and selected in the same way (2) District 2. District 2 shall consist be proposed pursuant to methods
and with the same qualifications as the of all other walnut producing counties established by the Board with the
member. The members and their in the State of California south of the approval of the Secretary. Each grower,
alternates shall be selected by the boundary line set forth in paragraph regardless of the number and location of
Secretary from nominees submitted by (c)(1) of this section. his or her walnut orchard(s), shall be
each of the following groups or from (d) The Secretary, upon entitled to cast only one ballot in the
other eligible persons belonging to such recommendation of the Board, may nomination and each vote shall be given
groups: reestablish districts, may reapportion equal weight. If the grower has orchards
(1) Two handler members from members among districts, and may in both grower districts, he or she shall
District 1; revise the groups eligible for advise the Board of the district in which
(2) Two handler members from representation on the Board as specified he/she desires to vote. The person
District 2; in paragraphs (a) and (b) of this section: receiving the highest number of votes
(3) Two grower members from District Provided, That any such for each grower position shall be the
1; recommendation shall require at least nominee.
(4) Two grower members from District six concurring votes of the voting (b) Nominations for handler members
2; members of the Board. In shall be submitted on ballots mailed by
(5) One grower member nominated at- recommending any such changes, the the Board to all handlers in their
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large from the production area; and, following shall be considered: respective Districts. All handlers’ votes
(6) One member and alternate who (1) Shifts in acreage within districts shall be weighted by the kernelweight of
shall be selected after the selection of and within the production area during walnuts certified as merchantable by
the nine handler and grower members recent years; each handler during the preceding
and after the opportunity for such (2) The importance of new production marketing year. Each handler in the
members to nominate the tenth member in its relation to existing districts; production area may vote for handler

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member nominees and their alternates. (4) Nominations for handler members in District 1 or District 2 shall be a
However, no handler with less than representing handlers that do not grower, or officer or employee of the
35% of the crop shall have more than handle 35% or more of the crop shall be group he or she is to represent.
one member and one alternate member. submitted on ballots mailed by the 13. Revise § 984.39 to read as follows:
The person receiving the highest Board to those handlers. The votes of
number of votes for each handler these handlers shall be weighted by the § 984.39 Qualify by acceptance.
member position shall be the nominee kernelweight of walnuts certified as Any person nominated to serve as a
for that position. merchantable by each handler during member or alternate member of the
(c) A calculation to determine the preceding marketing year. Each Board shall, prior to selection by USDA,
whether or not a handler who handles handler in the production area may vote qualify by filing a written qualification
35 percent or more of the crop shall be for handler member nominees and their and acceptance statement indicating
made prior to nominations. For the first alternates of this subsection. However, such person’s willingness to serve in the
nominations held upon implementation no handler shall have more than one position for which nominated.
of this language, the 35 percent person on the Board either as member 14. Revise § 984.40 to read as follows:
threshold shall be calculated using an or alternate member. The person
average of crop handled for the year in § 984.40 Alternate.
receiving the highest number of votes
which nominations are made and one for a handler member position of this (a) An alternate for a member of the
year’s handling prior. For all future subsection shall be the nominee for that Board shall act in the place and stead of
nominations, the 35 percent handling position. such member in his or her absence or
calculation shall be based in the average (d) Each grower is entitled to in the event of his or her death, removal,
of the two years prior to the year in participate in only one nomination resignation, or disqualification, until a
which nominations are made. In the process, regardless of the number of successor for his or her unexpired term
event that one handler handles 35% or handler entities to whom he or she has been selected and has qualified.
more of the crop the membership of the delivers walnuts. If a grower delivers (b) In the event any member of the
Board, nominations shall be as follows: walnuts to more than one handler Board and his or her alternate are both
(1) Nominations of growers who entity, the grower must choose which unable to attend a meeting of the Board,
market their walnuts to the handler that nomination process he or she any alternate for any other member
handles 35% or more of the crop shall participates in. representing the same group as the
be conducted by that handler and the (e) The nine members shall nominate absent member may serve in the place
names of the nominees shall be one person as member and one person of the absent member, or in the event
forwarded to the Board for approval and as alternate for the tenth member such other alternate cannot attend, or
appointment by the Secretary. position. The tenth member and there is no such other alternate, such
(2) Nominations for the two handler alternate shall be nominated by not less member, or in the event of his disability
members representing the major handler than 6 votes cast by the nine members or a vacancy, his or her alternate may
shall be conducted by the major handler of the Board. designate, subject to the disapproval of
and the names of the nominees shall be (f) Nominations in the foregoing the Secretary, a temporary substitute to
forwarded to the Board for approval and manner received by the Board shall be attend such meeting. At such meeting,
appointment by the Secretary. reported to the Secretary on or before such temporary substitute may act in
(3) Nominations on behalf of all other June 15 of each odd-numbered year, the place of such member.
grower members (Groups (b)(4), (5) and together with a certified summary of the 15. Revise § 984.42 to read as follows:
(6) of § 984.35) shall be submitted after results of the nominations. If the Board
ballot by such growers pursuant to an § 984.42 Expenses.
fails to report nominations to the
announcement by press releases of the Secretary in the manner herein specified The members and their alternates of
Board to the news media in the walnut by June 15 of each odd-numbered year, the Board shall serve without
producing areas. Such releases shall the Secretary may select the members compensation, but shall be allowed
provide pertinent voting information, without nomination. If nominations for their necessary expenses incurred by
including the names of candidates and the tenth member are not submitted by them in the performance of their duties
the location where ballots may be September 1 of any such year, the under this part.
obtained. Ballots shall be accompanied Secretary may select such member 16. Amend § 984.45 by revising
by full instructions as to their markings without nomination. paragraphs (b) and (c) and adding
and mailing and shall include the (g) The Board may recommend, paragraph (d) to read as follows:
names of incumbents who are willing to subject to the approval of the Secretary,
continue serving on the Board and such § 984.45 Procedure.
a change to these nomination
other candidates as may be proposed procedures should the Board determine * * * * *
pursuant to methods established by the that a revision is necessary. (b) All decisions of the Board, except
Board with the approval of the 12. Revise § 984.38 to read as follows: where otherwise specifically provided
Secretary. Each grower in Groups (see § 984.35(d)), shall be by a sixty-
(Groups (b)(4), (5) and (6) of § 984.35), § 984.38 Eligibility. percent (60%) super-majority vote of the
regardless of the number and location of No person shall be selected or members present. A quorum of six
his or her walnut orchard(s), shall be continue to serve as a member or members, or the equivalent of sixty
entitled to cast only one ballot in the alternate to represent one of the groups percent (60%) of the Board, shall be
nomination and each vote shall be given specified in § 984.35(a)(1) through (6) or required for the conduct of Board
equal weight. If the grower has § 984.38(b)(1) through (6), unless he or business.
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orchard(s) in both grower districts he or she is engaged in the business he or she (c) The Board may vote by mail or
she shall advise the Board of the district is to represent, or represents, either in telegram, or by any other means of
in which he or she desires to vote. The his or her own behalf or as an officer or communication, upon due notice to all
person receiving the highest number of employee if the business unit engaged members. The Board, with the approval
votes for grower position shall be the in such business. Also, each member or of the Secretary, shall prescribe the
nominee. alternate member representing growers minimum number of votes that must be

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cast when voting is by any of these and may also recommend different § 984.59 Interhandler transfers.
methods, and any other procedures regulations for different market For the purposes of this part, transfer
necessary to carry out the objectives of destinations. If the Secretary finds on means the sale of inshell and shelled
this paragraph. the basis of such recommendation or walnuts within the area of production
(d) The Board may provide for other information that such additional by one handler to another. The Board,
meetings by telephone, or other means regulations would tend to effectuate the with the approval of the Secretary, may
of communication and any vote cast at declared policy of the Act, he or she establish methods and procedures,
such a meeting shall be confirmed shall establish such regulations. including necessary reports, for such
promptly in writing: Provided, That if * * * * * transfers.
any assembled meeting is held, all votes 20. Revise § 984.51 by revising 23. Amend § 984.67 by revising
shall be cast in person. paragraph (a) to read as follows: paragraph (a) to read as follows:
17. Revise § 984.46 to read as follows:
§ 984.51 Inspection and certification of § 984.67 Exemptions.
§ 984.46 Research and development.
inshell and shelled walnuts.
The Board, with the approval of the (a) Exemption from volume
Secretary, may establish or provide for (a) Before or upon handling of any regulation. Reserve percentages shall
the establishment of production walnuts for use as free or reserve not apply to lots of merchantable inshell
research, marketing research and walnuts, each handler at his or her own walnuts which are of jumbo size or
development projects, and marketing expense shall cause such walnuts to be larger as defined in the then effective
promotion, including paid advertising, inspected to determine whether they United States Standards for Walnuts in
designed to assist, improve, or promote meet the then applicable grade and size the Shell, or to such quantities as the
the marketing, distribution, and regulations. Such inspection shall be Board may, with the approval of the
consumption or efficient production of performed by the inspection service or Secretary, prescribe.
walnuts. The expenses of such projects services designated by the Board with * * * * *
shall be paid from funds collected the approval of the Secretary; Provided, 24. Amend § 984.69 by revising
pursuant to § 984.69 and § 984.70. That if more than one inspection service paragraph (c) to read as follows:
18. Amend § 984.48 by revising is designated, the functions performed
paragraphs (a) introductory text, (a)(2), by each service shall be separate, and § 984.69 Assessments.
(4), and (5) to read as follows: shall not duplicate each other. Handlers * * * * *
shall obtain a certificate for each (c) Accounting. If at the end of a
§ 984.48 Marketing estimates and inspection and cause a copy of each
marketing year the assessments
certificate issued by the inspection collected are in excess of expenses
(a) Each marketing year the Board service to be furnished to the Board. incurred, such excess shall be
shall hold a meeting, prior to October Each certificate shall show the identity accounted for in accordance with one of
20, for the purpose of recommending to of the handler, quantity of walnuts, the the following:
the Secretary a marketing policy for date of inspection, and for inshell
such year. Each year such (1) If such excess is not retained in a
walnuts the grade and size of such
recommendation shall be adopted by reserve, as provided in paragraph (c)(2)
walnuts as set forth in the United States
the affirmative vote of at least 60% of or (c)(3) of this section, it shall be
Standards for Walnuts (Juglans regia) in
the Board and shall include the refunded to handlers from whom
the Shell. Certificates covering reserve
following, and where applicable, on a collected and each handler’s share of
shelled walnuts for export shall also
kernel weight basis: such excess funds shall be the amount
show the grade, size, and color of such
of assessments he or she has paid in
* * * * * walnuts as set forth in the United States
excess of his or her pro rata share of the
(2) The Board’s estimate of the Standards for Shelled Walnuts (Juglans
actual expenses of the Board.
handler inventory on September 1 of regia). The Board, with the approval of
inshell and shelled walnuts; the Secretary, may prescribe procedures (2) Excess funds may be used
for the administration of this provision. temporarily by the Board to defray
* * * * * expenses of the subsequent marketing
(4) The Board’s estimate of the trade * * * * * year: Provided, That each handler’s
demand for such marketing year for 21. Amend § 984.52 by revising share of such excess shall be made
shelled and inshell walnuts, taking into paragraph (a) and adding a new available to him or her by the Board
consideration trade inventory, imports, paragraph (c) to read as follows: within five months after the end of the
prices, competing nut supplies, and year.
other factors; § 984.52 Processing of shelled walnuts.
(5) The Board’s recommendation for (3) The Board may carry over such
(a) No handler shall slice, chop, grind, excess into subsequent marketing years
desirable handler inventory of inshell or in any manner change the form of
and shelled walnuts on August 31 of as a reserve: Provided, That funds
shelled walnuts unless such walnuts already in reserve do not exceed
each marketing year; have been certified as merchantable or approximately two years’ budgeted
* * * * * unless such walnuts meet quality expenses. In the event that funds exceed
19. Amend § 984.50 by revising the regulations established under two marketing years’ budgeted
heading and paragraph (d) to read as § 984.50(d) if such regulations are in expenses, future assessments will be
follows: effect. reduced to bring the reserves to an
§ 984.50 Grade, quality and size * * * * * amount that is less than or equal to two
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regulations. (c) The Board shall establish such marketing years’ budgeted expenses.
* * * * * procedures as are necessary to insure Such reserve funds may be used:
(d) Additional grade, size or other that all such walnuts are inspected prior (i) To defray expenses, during any
quality regulation. The Board may to being placed into the current of marketing year, prior to the time
recommend to the Secretary additional commerce. assessment income is sufficient to cover
grade, size or other quality regulations, 22. Revise § 984.59 to read as follows: such expenses;

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(ii) To cover deficits incurred during § 984.91 Relationship with the California a postmark or equivalent no later than
any year when assessment income is Walnut Commission. September 11, 2007.
less than expenses; In conducting Board activities and ADDRESSES: You may submit comments
(iii) To defray expenses incurred other objectives under this part, the by any of the following methods:
during any period when any or all Board may deliberate, consult, • Federal eRulemaking Portal: Go to
provisions of this part are suspended; cooperate and exchange information http://www.regulations.gov and, in the
(iv) To meet any other such costs with the California Walnut Commission, lower ‘‘Search Regulations and Federal
recommended by the Board and whose activities complement those of Actions’’ box, select ‘‘Rural Utilities
approved by the Secretary. the Board. Any sharing of information Service’’ from the agency drop-down
* * * * * gathered under this subpart shall be menu, then click on ‘‘Submit.’’ In the
25. Add a new § 984.70 to read as kept confidential in accordance with Docket ID column, select RUS–07–
follows: provisions under section 10(i) of the Electric–0002 to submit or view public
Act. comments and to view supporting and
§ 984.70 Contributions.
[FR Doc. 07–3412 Filed 7–10–07; 9:28 am] related materials available
The Board may accept voluntary electronically. Information on using
contributions but these shall only be Regulations.gov, including instructions
used to pay expenses incurred pursuant for accessing documents, submitting
to § 984.46, Research and development. comments, and viewing the docket after
Furthermore, such contributions shall the close of the comment period, is
be free from any encumbrances by the Rural Utilities Service available through the site’s ‘‘User Tips’’
donor and the Board shall retain link.
complete control of their use. 7 CFR Part 1767 • Agency Web Site: http://
26. Revise § 984.71 to read as follows: www.usda.gov/rus/index2/
RIN 0572–AC08
§ 984.71 Reports of handler inventory. Comments.htm. Follow the instructions
Accounting Requirements for RUS for submitting comments.
Each handler shall submit to the
Electric Program Borrowers • E-mail: RUSComments@usda.gov.
Board in such form and on such dates
Include in the subject line of the
as the Board may prescribe, reports
AGENCY: Rural Utilities Service, USDA. message ‘‘Accounting Requirements for
showing his or her inventory of inshell
ACTION: Proposed rule. Electric Borrowers.’’
and shelled walnuts.
• Mail: Addressed to Michele Brooks,
27. Revise § 984.73 to read as follows: SUMMARY: The Rural Utilities Service, an Acting Director, Program Development
§ 984.73 Reports of walnut receipts. agency delivering the United States and Regulatory Analysis, Rural
Each handler shall file such reports of Department of Agriculture’s Rural Development, U.S. Department of
his or her walnut receipts from growers, Development Utilities Programs, Agriculture, 1400 Independence
handlers, or others in such form and at hereinafter referred to as Rural Avenue, SW., STOP 1522, Washington,
such times as may be requested by the Development, proposes to amend its DC 20250–1522.
Board with the approval of the regulation on accounting policies and • Hand Delivery/Courier: Addressed
Secretary. procedures for Rural Development to Michele Brooks, Acting Director,
28. Amend § 984.89 by redesignating Electric Programs borrowers as set forth Program Development and Regulatory
paragraph (b)(4) as (b)(5) and adding a in 7 CFR Part 1767, Accounting Analysis, Rural Development, U.S.
new paragraph (b)(4) to read as follows: Requirements for Rural Development Department of Agriculture, 1400
Electric Program Borrowers. This Independence Avenue, SW., Room
§ 984.89 Effective time and termination. proposed rule seeks to reconcile Part 5168–S, Washington, DC 20250–1522.
* * * * * 1767 with the Uniform System of Instructions: All submissions received
(b) * * * Accounts as set forth by the Federal must include the agency name and the
(4) Within six years of the effective Energy Regulatory Commission (FERC); subject heading ‘‘Accounting
date of this amendment the Secretary to adopt FERC accounting guidance for Requirements for Electric Borrowers’’.
shall conduct a referendum to ascertain Regional Transmission Organizations, All comments received must identify
whether continuance of this part is Asset Retirement Obligations with the name of the individual (and the
favored by producers. Subsequent modifications, Other Comprehensive name of the entity, if applicable) who is
referenda to ascertain continuance shall Income, and Derivatives and Hedging submitting the comment. All comments
be conducted every six years thereafter. Instruments; to amend accounting received will be posted without change
The Secretary may terminate the interpretations for Special Equipment to http://www.usda.gov/rus/index2/
provisions of this part at the end of any Accounting, Storm Damage, Rural Comments.htm, including any personal
fiscal period in which the Secretary has Economic Development Loan and Grant information provided.
found that continuance of this part is Program and Consolidated Financial FOR FURTHER INFORMATION CONTACT: Ms.
not favored by a two thirds (2⁄3) majority Statements; to set forth accounting Diana C. Alger, Chief, Technical
of voting producers, or a two thirds (2⁄3) interpretations that establish uniform Accounting and Auditing Staff, Program
majority of volume represented thereby, reporting procedures for Accounting for Accounting Services Division, Rural
who, during a representative period Cushion of Credit Accounts and Development, Ag Box 1523, Room 2221,
determined by the Secretary, have been Renewable Energy Credits, and to codify South Building, U.S. Department of
engaged in the production for market of guidance on records retention currently Agriculture, Washington, DC 20250,
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walnuts in the production area. Such published in Bulletin 180–2. This telephone number (202) 720–5227.
termination shall be announced on or proposed rule also seeks to correct a SUPPLEMENTARY INFORMATION:
before the end of the production year. number of administrative errors
* * * * * currently existing within this part. Executive Order 12866
29. Add a new § 984.91 to read as DATES: Written comments must be This proposed rule is exempted from
follows: received by Rural Development or carry the Office of Management and Budget

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