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DEPARTMENT OF AGRICULTURE

United States Sentencing Commission

CFR Citation: 7 CFR Part 983

Docket ID: [Docket No. AO-F&V-983-2; FV02-983-01]

NOTICE: Part II

DOCUMENT ACTION: Proposed rule and referendum order.

SUBJECT CATEGORY: Pistachios Grown in California; Secretary's Decision and Referendum Order on Proposed Marketing Agreement and Order No. 983

DATES: The referendum will be conducted from January 12 to February 9, 2004. The representative period for the purpose of the referendum is September 1, 2002, through August 31, 2003.

DOCUMENT SUMMARY: This decision proposes the issuance of a marketing agreement and order (order) for pistachios grown in California, and provides growers with the opportunity to vote in a referendum to determine if they favor promulgation of the order. The proposed order would set standards for the quality of pistachios produced and handled in California by establishing a maximum aflatoxin tolerance level, maximum limits for defects, a minimum size requirement, and mandatory inspection and certification. An elevenmember committee, consisting of eight producers, two handlers, and one public member, would locally administer the program. The program would be financed by assessments on handlers of pistachios grown in the production area. The program would enhance grower returns through the delivery of higherquality pistachios to consumers.

SUMMARY: Agriculture Department, Agricultural Marketing Service,

SUPPLEMENTAL INFORMATION

Prior documents in this proceeding: Notice of Hearing issued on June 19, 2002, and published in the June 26, 2002, issue of the Federal Register (67 FR 43045); Recommended Decision and Opportunity to File Written Exceptions issued on July 23, 2003, and published in the August 4, 2003, issue of the Federal Register (68 FR 45990).

This administrative action is governed by the provisions of sections 556 and 557 of title 5 of the United States Code and, therefore, is excluded from the requirements of Executive Order 12866. Preliminary Statement

The proposed marketing agreement and order regulating the handling of pistachios grown in California is based on the record of a public hearing held July 2325, 2002, in Fresno, California. The hearing was held to receive evidence on the proposed marketing order from producers, handlers, and other interested parties located throughout the proposed production area. The hearing was held pursuant to the provisions of the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601 et seq.), hereinafter referred to as the ``Act,'' and the applicable rules of practice and procedure governing the formulation of marketing agreements and orders (7 CFR Part 900). Notice of this hearing was published in the Federal Register on June 26, 2002.

The proposal was submitted for consideration to the Department by the Proponents Committee (proponents), a group representing the majority of producers and handlers of pistachios in California. The proponents are independent of the California Pistachio Commission and the Western Pistachio Association.

Provisions of this proposal would provide the California pistachio industry with a tool to regulate the quality of pistachios handled in California. This would include preventing pistachios containing aflatoxin above the proposed permitted maximum tolerance level of 15 parts per billion (ppb) from entering the marketplace. The proposed order would also preclude defective and small pistachios from being sold. Under the proposed order, testing and certification of pistachios for quality (including aflatoxin) would be mandatory. A mandatory regulatory program would provide the industry with an effective means of ensuring product quality, thereby enhancing customer satisfaction.

Upon the basis of evidence introduced at the hearing and the record thereof, the Administrator of AMS on July 23, 2003, filed with the Hearing Clerk, U.S. Department of Agriculture, a Recommended Decision and Opportunity to File Written Exceptions thereto by September 3, 2003. That document also announced AMS's intent to request approval of new information collection requirements to implement the program. Written comments on the proposed information collection requirements were due by October 3, 2003.

One exception (and as corrected) was filed during the period provided on behalf of the proponents. The exception expressed general support of the proposed marketing order and requested that several changes be made to the proposed order provisions, including that one proposed definition be revised, one definition be deleted, and several editorial and clarifying changes be made. The specifics of the exception are discussed in the Findings and Conclusions; Discussion of Exceptions section of this document.

Small Business Consideration

Pursuant to the requirements set forth in the Regulatory Flexibility Act (RFA), the Agricultural Marketing Service (AMS) has considered the economic impact of this action on small entities. Accordingly, the AMS has prepared this final regulatory flexibility analysis.

The purpose of the RFA is to fit regulatory actions to the scale of business subject to such actions so that small businesses will not be unduly or disproportionately burdened. Marketing orders are unique in that they are normally brought through group action of essentially small entities for their own benefit. Thus, both the RFA and the Act are compatible with respect to small entities.

Small agricultural producers have been defined by the Small Business Administration (SBA) (13 CFR 121.201) as those having annual receipts of less than $750,000. Small agricultural service firms, which include handlers that would be regulated under the proposed pistachio order, are defined as those with annual receipts of less than $5,000,000.

Interested persons were invited to present evidence at the hearing on the probable regulatory and informational impact of the proposed pistachio marketing order program on small businesses. The record evidence is that while the program would impose some costs on the regulated parties, those costs would be outweighed by the benefits expected to accrue to the U.S. pistachio industry.

The record indicates that there are approximately 647 pistachio producers, which includes the members of the one
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existing pistachio producer cooperative. There are 19 handlers who process pistachios in the production area proposed to be regulated.

Statistics prepared by the California Pistachio Commission and submitted as evidence at the hearing show that 445 California pistachio producers (69% of the total) produce less than 100,000 pounds per year; 100 producers (15%) produce more than 100,000 and less than 250,000 pounds; 43 producers (7%) produce more than 250,000 and less than 500,000 pounds; and 59 producers (9%) grow more than 500,000 pounds.

Using an average grower price of $1.10 per pound, 91 percent of the California pistachio producers receive less than $550,000 annually, and 9 percent receive more than $550,000 annually. Thus, at least 91 percent of these producers would meet SBA's definition of a small agricultural producer.

The record shows that 12 California pistachio handlers (63 percent of the total) handle less than 1,000,000 pounds per year; 4 handlers (21%) handle between 1,000,000 and 10,000,000 pounds; and 3 handlers (16%) handle more than 10,000,000 pounds annually. The largest handler processes over 50 percent of industry production.

Using an average handler price of $1.80 per pound, 63 percent of the pistachio handlers would receive annual receipts of less than $1.8 million, 2 percent would receive between $1.8 and $18.0 million, and 16 percent would receive more than $18.0 million. At least 12 of the pistachio handlers (or 63 percent of the total) could be considered small businesses under SBA's definition.

Record evidence concerning pistachio production and handling costs provide an understanding of the California pistachio industry and potential impacts of implementing the proposed order. Farming pistachios is a costly investment with a significant delay in benefits and an unreliable crop yield.

Although increasing yields have led to an increasing overall value of California pistachio production, producers must maintain a level of return per pound harvested that covers the cost of production in order for their pistachio operations to remain economically viable. Witnesses testified that maintaining a high level of quality product in the market would lead to increasing consumer demand and greater stability in producer returns.

Evidence suggests that poor quality pistachios impact the demand, and the potential growth of demand, for pistachios. Characteristics routinely deemed as ``poor quality'' by customers of the California pistachio industry include small size, and excessive internal and external blemishes. Market studies and customer comments presented by handler witnesses demonstrate that the presence of poor quality pistachios in the marketplace significantly impacts demand in a negative way.

Minimizing the level of aflatoxin in California pistachios is another significant quality factor, as aflatoxin is a known carcinogen. Consumer concerns over aflatoxin can affect their perception of pistachio quality, and therefore negatively impact demand. Moreover, any market disturbances related to aflatoxin in pistachios, regardless of the geographic origin of those pistachios, could have a detrimental effect on the California pistachio industry. A regulatory program limiting the amount of aflatoxin in pistachios could be useful in bolstering consumer confidence in the quality of California pistachios.

Pistachio acreage has been consistently increasing in California, from just over 20,000 bearing acres in 1979 to 78,000 bearing acres in 2001. The number of nonbearing acres (i.e. acres less than 7 years old, not yet in full production) has also shown consistent growth in recent years, rising from 13,400 acres in 1995 to 23,500 acres in 2001, a 75 percent increase. Yield per acre has also been steadily rising. Over the 19761980 period, average yield per bearing acre measured 1,110 pounds; by 19962000, this average had increased to 2,512 pounds.

Higher yields and increasing acreage has resulted in increasing production. According to information submitted by the CPC, production in 2000 totaled 242 million pounds, a 64percent increase over 1995 production, which totaled 148 million pounds. Moreover, witnesses at the hearing indicated that maturing acreage, absent any additional new plantings, will likely result in a 60percent increase in California pistachio production over the coming years.

Several witnesses at the hearing testified that, in light of increasing production, future stability of market returns is reliant on continually increasing consumer demand for pistachios. These witnesses stated that strong consumer demand, which is ultimately related to consumer perceptions of product quality, is essential to the continued economic wellbeing of the California pistachio industry. Moreover, witnesses discussed the importance of implementing a marketing order program that would provide them with a regulatory structure to monitor and assure that minimum quality standards are not compromised as production of California pistachios increases.

The relationship between product quality, consumer demand and producer returns in the pistachio industry was demonstrated at the hearing. Pistachio production is not only costly in terms of initial investment and cultural costs, but it is highly unpredictable in terms of producer returns. Between the initial processes of cleaning, hulling, sorting and drying, a significant portion of the initial volume harvested is reduced. This volume is further reduced as the handling process reaches its final stages of sorting for quality and final preparation for market. Witnesses explained that ultimate pistachio sales are based on approximately 30 percent of the volume initially harvested from the field. Because of this, witnesses stated that the process of extracting the highest quality portion of the harvest, and ensuring consumer satisfaction with that product, is crucial to determining the value of the crop.

Pistachio production is similar to other nut crops in that yield and total production vary substantially from year to year because of the alternate bearing nature of pistachio trees resulting in cyclical high and low production years. Total value and value per acre are generally higher in higher yielding years. Conversely, grower return per pound is generally higher in low yielding years.

Producer returns and total crop value are also dependent on the percentage of harvest that is either ``open shell'' or ``closed shell.'' Each harvest yields a certain percentage of nuts that have not naturally opened prior to cultivation. These nuts are classified as ``closed shell,'' ``shelling stock'' or ``nonsplits,'' and have a lower market value than those nuts that are naturally split, or ``open shell.'' The proportion of openshells is a key factor in yeartoyear changes in the total value of production.

Economic evidence presented at the hearing, based on data from the National Agricultural Statistics Service (NASS) and the CPC, indicates that trends for total crop value and value per bearing acre have been increasing over the past 20 years. In 1980, the pistachio crop in California was valued at $55.8 million. By 2000, total crop value had increased more than fourfold, reaching $245 million. These gains are attributed to increases in both total pistachio producing acreage and yield per acre. Average value per bearing acre increased from $1,642 per acre in 19801984 to $2,665 per acre in 19962000.

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According to CPC historical price data, price per pound has gradually decreased over the past 20 years, ranging from a high of $2.05 per pound in 1980 to a low of $0.99 per pound in 2001. According to the record, the proposed order would assist in improving producer returns for pistachios. The proposed order would not only assist in fortifying consumer demand by ensuring consumer satisfaction with product quality, but mandatory quality and aflatoxin requirements are also likely to boost domestic prices by culling lower quality pistachios, which tend to have pricedepressing effects, from the market.

A University of California Cooperative Extension study presented as part of record evidence estimates total cost of production in 2001 at $2,643 per acre. According to industry data, the average grower return (value per bearing acre) for 19982001 was $2,619. This average revenue estimate is just below the Extension study's $2,643 estimate of typical cost. Record evidence indicates that over that 4year period, the lowest value per bearing acre was $2,137 in 2001 and the highest was $3,207 in 2000.

Witnesses supplied an additional set of cost estimates, which ranged from a lowcost operation of $2,350 per acre to a high of $3,400 per acre. In their testimony, total costs of production were divided into three categories: The costs of orchard establishment, cultural costs and administrative costs. Establishment costs, or the overall cost to develop an acre of pistachios until revenues exceed growing expenses, were estimated at between $10,000 and $15,000, with an average tree maturation period of 7 years. In order to recover these investment costs, the hearing record states that producers generally target an 11% return on investment, estimated at between $1,100 and $1,650 per acre. Annual per acre cultural costs average between $1,100 and $1,600, once the trees are productive. Administrative costs include the cost of farm management and crop financing, and can vary between $150 and $200 per acre. The sum of cultural and administrative costs therefore range from $1,250 to $1,800.

Grower price per pound averaged approximately $1.10 between 1997 and 2001. Given that $1.10 average grower price and the cost estimates above, a producer would need to harvest an average of at least 2,000 pounds per acre to cover total production costs for the lowcost operation ($2,350 per acre). A producer would need to harvest at least 1,136 pounds per acre to cover the cultural and administrative costs of $1,250 per acre (not including a return on investment).

The CPC Annual Report for Crop Year 20012002 reveals that 6 out of 26 California counties with pistachio production yielded on average more than 2,000 pounds per acre between 1998 and 2001. These six counties, which together represented over 88 percent of total California pistachio production in 2000, are Colusa, Sutter, Madera, Fresno, Kings and Kern. Glenn, Butte, Placer, Yolo, Contra Costa, San Joaquin, Calaveras, Stanislaus, Merced, Tulare and Santa Barbara counties yield on average between 1,000 to 2,000 pounds per acre and represent roughly 12 percent of total state production. Shasta, Tehama, Yuba, Solano, Sacramento, San Luis Obispo, Los Angeles, San Bernardino and Riverside counties yield on average less than 1,000 pounds per acre and represent less than one percent of California pistachio production.

Given the assumptions made above, approximately 88 percent of the industry is covering total costs of production. Conversely, roughly 12 percent of the industry is currently covering cultural costs but not generating a return on their investment.

Simulation Model

Record evidence includes an economic analysis presented by Dr. Daniel Sumner, University of CaliforniaDavis on the potential impacts of the proposed marketing order provisions if the program were implemented. Dr. Sumner presented a costbenefit analysis based on a simulation model, the purpose of which was to provide a framework for comparing costs of compliance to the benefits of improved quality through implementation of the standards.

Cost Estimates

Dr. Sumner's presentation focused on the regulatory features of the proposed marketing order: (1) Mandatory testing of pistachios for the presence of aflatoxin, with a maximum allowable tolerance of 15 ppb; and (2) mandatory minimum quality standards. The quality standards would specify minimum size and maximum allowable defects.

According to record testimony, the major costs associated with these features are the cost of aflatoxin testing and the cost of USDA presence in the handlers' plant to inspect and sample lots of pistachios. Expected benefits identified by the witnesses would be the increase in consumer confidence in pistachios as a result of aflatoxin regulation, and the combined increases in consumer demand for pistachios due to mandatory USDA regulation and stringent quality standards.

Dr. Sumner's analysis took into account many of the variables presented in testimony by other witnesses describing typical production and processing costs, and presented a weighted average cost computation for marketing order compliance. The average cost of compliance, as identified by several witnesses and reiterated in Dr. Sumner's analysis, is approximately one half cent per pound of domestic pistachio production, or $0.00525 per pound.

Record evidence suggests that the cost of having a USDA inspector in the plant, including mileage plus the standard fee per hour, is approximately $291 per day for the largest plants (which process about 80 percent of total production). Total production for the domestic market that would be processed by the largest plants (those that process over 10 million pounds annually) is estimated at 136 million pounds. If an average lot is 40,000 pounds (the most common lot size for testing cited by the largest handlers), then 3,400 lots would need to be tested to account for all 136 million pounds (166.67 million pounds times 80 percent). If a USDA official were to test 5.5 lots per day, then 618 persondays would be needed to test all of the lots. Multiplying $291 per day times 618 persondays yields an annual cost of $180,000 for testing 136 million pounds. Dividing the $180,000 annual cost by 136 million pounds yields an estimated cost per pound of $0.0013 for having USDA personnel in the plant to sample and certify that the pistachios meet minimum quality standards. Testimony suggests that this cost estimate is on the high side, since many handlers would already have USDA personnel in their plants to perform other grading services besides certification of lots for minimum quality.

The cost of aflatoxin testing in the witnesses' simulation analysis is estimated at the current rate charged by a private laboratory ($75 per test). Given this rate information, the aflatoxin testing cost per pound would be $0.0019 ($75 divided by the average lot size of 40,000 pounds).

For the largest handlers, the combined cost of aflatoxin testing and paying for the USDA presence in the plants would be equal to the sum of the quality and aflatoxin cost figures outlined above ($0.0013 + $0.0019), or $0.0032 per pound. To account for imprecision of data and other incidental costs, Dr. Sumner's analysis employs a median cost per pound for marketing order compliance, which is slightly higher, or $0.005 per pound. The analysis further
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assumes that per unit costs are somewhat higher for smaller plants. Thus, median costs for two categories of smaller plants are estimated at $0.006 and $0.007.

Weighting these cost figures for the three different size categories of plants yields an overall median estimated cost per pound for compliance of $0.00525. In terms of economic theory, this cost increase is represented by an upward shift in the supply curve of about onehalf cent, as measured along the vertical axis in a supplydemand graph. The total direct cost of compliance is estimated at $875,000 in the median scenario ($0.00525 times 166.67 million pounds in the domestic market).

Benefit Estimates

The witness's economic analysis takes into account three separate demand benefits, which he considers distinct. The first, and largest, of the demand benefits is higher expected long run average demand due to the reduced chance of an aflatoxin event that would cause a major negative shock to demand. The mandatory aflatoxin testing under the marketing order would reduce the chance of a demanddecreasing market disturbance in the U.S.

Witnesses cited a 1996 pistachio aflatoxin case which occurred in Germany as an example of what could befall the U.S. pistachio industry if aflatoxin were not properly regulated. Widespread negative publicity about aflatoxin in foreign pistachios exported to Germany caused sales revenue to decline by 50 percent for a duration of three years or more. Witnesses estimate that a similar event in the United States could cost the industry over $300 million in gross revenue. Witnesses also pointed out that there were significant additional repercussions on pistachio sales worldwide as word of the German aflatoxin incident spread through the media of other nations, especially in Europe, affecting pistachio sales in those countries.

The witness's analysis assumes that an aflatoxin related market disturbance would cause a more moderate decrease, represented in the median simulation case as a 10 percent decline (18 cents) from the $1.80 per pound typical base price at the handler level.

By requiring aflatoxin testing for all pistachios destined for the domestic market, the marketing order would make the probability of an aflatoxin event less likely. As a starting point, witnesses argued that without mandatory aflatoxin testing through the proposed marketing order, there is a 5percent annual probability of an aflatoxin related market disturbance. If such an incident were to occur, witnesses estimated that its impact would last for 3 years. Implementation of mandatory testing is then assumed to reduce the probability to 1 percent, a decline of 4 percentage points.

Mandatory testing under the marketing order therefore increases expected demand, or willingness to pay for pistachios, by $0.0216 per pound (4 per cent decline in probability times 18 cents times 3 years).

The witness's analysis includes two additional demandside benefits. The witness asserts that USDA requirements convey a positive benefit in the market as reflected by the use of this claim in product promotion, labels, and displays. A median increase of $0.0025 in willingness to pay reflects a reasonably conservative estimate of the higher buyer confidence in pistachios due solely to USDA participation in the pistachio quality testing and certification process. The certification gives additional confidence in the quality of the product.

The third demand benefit is higher buyer perception of quality due to minimum standards. Witnesses assume a similarly small magnitude for this estimated increase in willingness to pay ($0.003 per pound).

Summing the median parameters for each of these three demand impacts, the increase in willingness to pay for pistachios supplied to the domestic market is a little under 3 cents per pound ($0.0271). In terms of economic theory, this figure represents an upward shift in the demand curve of nearly 3 cents, as measured along the vertical axis in a supplydemand graph. Most of the impact is from the first benefit, the reduced probability of aflatoxin being found in California pistachios.

Thus the median benefit in terms of increased per unit demand (willingness to pay) is estimated to be substantially larger than the estimated median per unit direct cost of marketing order compliance ($0.0271 versus $0.00525). Expected or average demand is higher, reflecting the lower probability of an aflatoxin event and the average quality and certification effects in the domestic market. Handlers would face higher costs to comply with the proposed requirements. Simulation Results

These figures for increased cost and increased willingness to pay were combined with different demand and supply elasticities in the simulation model developed by Dr. Sumner to assess the net economic impact of marketing order implementation. The median elasticities used were unitary (1.0 for demand and 1.0 for supply). The supply response that is modeled is a long run supply response (additional planting) due to the permanent change in market conditions resulting from the marketing order. These assumed elasticities are based on other prior econometric estimates for pistachios and other tree nuts. Witnesses cited a 1999 report by Lucinda Lewis of Competition Economics, Inc., ``Charting a Direction for the U.S. Pistachio Industry,'' which found a 1.14 demand elasticity for pistachios. According to the record testimony, the range of elasticities used in the simulation scenarios are consistent with published economic studies of supply and demand for pistachios and other tree nuts.

The simulation model solves a system of supply and demand equations for a new set of industry prices and quantities from marketing order implementation. As stated above, the total direct cost of compliance is $875,000. In the simulation, there is an upward shift in the market supply curve, representing increased costs to firms in the pistachio market. The magnitude of the price and quantity change from the shift in the supply curve is determined by the higher cost of production (compliance cost) and the elasticity of supply. The resulting computed (simulated) loss to the handler segment of the industry from higher expenses for marketing order compliance is $490,000.

This $490,000 differs from the previously stated $875,000 cost of compliance figure by the amount of an implied price increase and the small equalization effect on the smaller handlers that process 20 percent of the product.

The witness's analysis assumes that with minimum quality requirements the relative position of the smaller firms would improve to match those of other handlers. This is because prior to the new mandatory requirements, these firms are assumed to have fewer quality controls than most other firms, and thus end up selling nuts to the part of the market that buys lower quality nuts at lower prices. The equalization effect resulting from uniform minimum quality specifications is a small positive benefit that offsets some of the cost of compliance for the smaller firms.

On the demand side, the higher willingness to pay is $0.0216 per pound for the reduced probability of aflatoxin in California pistachios, and $0.0055 for the two additional demandside benefits (higher buyer confidence from USDA certification and higher buyer [[Page 75324]]
perception of quality). The magnitude of the price and quantity change from the shift in the demand curve is determined by the higher willingness to pay and the elasticity of demand.

In the median simulation, the amount sold in the domestic market rises by 1.6 million pounds. The benefit to industry participants is the total value of this increase in domestic sales which is the 1.6 million pound increase in quantity sold multiplied by the higher expected price level resulting from the shifting of the supply and demand curves in the simulation of marketing order impacts.

Using the median supply and demand elasticities in the simulation model, and the median compliance cost and willingness to pay figures, the computed benefit to the handler portion of the market from the reduced chance of an aflatoxin market disturbance is $1.545 million dollars. The value of the two additional demandside benefits is $.392 million dollars. The total benefit to handlers is thus $1.938 million dollars.

When the loss due to compliancerelated expenses ($490,000) is factored in, the resulting net benefit to pistachio handlers from the marketing order is $1.448 million dollars. This $1.448 million dollar estimate of net benefit to handlers is the key result from the witness's costbenefit analysis.

In economic theory terminology, this part of the simulation is measuring the change in producer surplus. Viewed in terms of a supply demand graph, producer surplus is the area below the price and above the supply curve. The $1.448 million dollar estimate of net benefit is a measure of the difference between producer surplus at the initial equilibrium (e.g. $1.80 average price at the handler level, or $1.10 at the grower level) and the new higher price and quantity after the supply and demand curves have been shifted to represent the median changes in cost (supply) and willingness to pay (demand).
Table 1.Simulation of Pistachio Marketing Order Impacts on Producers/ Handlers
[Annual net costs and benefits with median parameter values] Benefit 1: Reduced chance of aflatoxin event $1,545,000 Benefit 2: USDA certification 178,000 Benefit 3: Improved quality perception 214,000

Total benefit.......................................... 1,938,000 Impact of cost of compliance............................... 490,000

Net Total.............................................. 1,448,000

It should be noted that although the witness asserts that Benefit 2 and Benefit 3 are conceptually distinct, one could argue that there is significant overlap between the value of USDA certification and improved quality perception on the part of pistachio buyers and consumers. However, the assumed benefits are small in both cases, and if either of the benefit figures is eliminated, net estimated benefits to handlers still exceed one million dollars.

Costbenefit studies which use economic welfare analysis also typically include consumer impacts, and the witness's economic analysis includes a parallel set of computations for the buyer/consumer segment of the pistachio industry. The largest demandside benefit, the reduced chance of an aflatoxin event, is estimated at $2.586 million. The combined value of the two additional demandside benefits is $.655 million, yielding a total benefit estimate of $3.241 million. Subtracting the estimated impact on buyers/consumers of introducing added costs of marketing order compliance ($245,000) yields a buyer/ consumer net benefit estimate of $2.996 million. A key aspect of this economic analysis is that consumer willingness to pay for pistachios rises as consumer confidence improves from the higher quality standards imposed by the order. With the demand and supply elasticities used in the analysis, the benefits to the domestic buyers/consumers in this simulation are larger than benefits to the handler side of the market.

In economic theory terminology, this part of the simulation is measuring the change in consumer surplus. Viewed in terms of a supply demand graph, consumer surplus is the area above the price and below the demand curve. The $2.996 million dollar estimate of net benefit is a measure of the difference between consumer surplus at the initial equilibrium and the new price and quantity after the supply and demand curves have been shifted to represent the median changes in cost (supply) and willingness to pay (demand).

Summing the producer/handler and buyer/consumer net benefits ($2.996 + $1.448) yields a $4.444 million median estimated value of the marketing order to the economy.

Estimated Impacts on Small Producers

The proposed marketing order would not impose any direct compliance costs on producers. The direct impact is on the handlers who would be required to pay for testing and inspection. Producers would be affected to the extent that they may have to discard more low quality nuts than previously, if they produce quantities of nuts below the proposed size and quality standard. Witnesses stated there is no evidence that the proportion of low quality nuts is correlated with farm size.

Additionally, the record shows that handler costs of compliance are typically reflected in handler payments to producers. Witnesses stated that the anticipated benefit derived from increased consumer demand would offset the cost of compliance to producers.

Witnesses stated that most producers sell to large handlers (which handle 80 percent of production). Distinguishing among handlers by size does not indicate different economic impacts on individual farms, which are distributed broadly across handlers.

Witnesses also pointed out that there is substantial interhandler competition in the pistachio industry, with at least 10 handlers out of 19 competing for producers' pistachios (with the remainder presumably processing for their own account). Given the distribution of producers across processing firms and the level of competition, the overall cost benefit results may be taken as the impact on the full size range of producers.

Based on a farm price of $1.10 and a handler price of $1.80, producers receive about 60 percent of the revenue in the industry, and are likely (given certain supply elasticities) to receive more than 60 percent of the estimated handler net benefits. Producer total gain (out of the estimated $1.448 million in net benefits to the handler segment) is thus at least $870,000 per year ($1.448 million times 0.60). This is distributed across producers in proportion to output, with no differential impact on smaller or larger producers.

Based on the hearing record, AMS therefore concludes that pistachio producers would benefit from implementation of the proposed order. Further, there is no evidence of differing economic impacts between small and large producers.

Estimated Impact on Small Handlers

Most compliance costs are uniform across handlers, but some differences could be correlated with the size of a handler's operation. Two relevant points are the number of lots ready to be tested per day and the lot size to be tested. Larger firms, which are more likely to have larger lot sizes for testing and to have more lots ready per day (up to about 5), may experience some savings relative to firms with smaller lot sizes and fewer lots to be tested at one time.

The proposed marketing order includes provisions to reduce [[Page 75325]]
compliance costs for small handlers. Firms that handle less than 1,000,000 pounds per year would be subject to simplified aflatoxin testing procedures. Additionally, they would be exempt from testing for remaining minimum quality requirements. This should reduce the expenses for smaller handlers.

Some other handlers, which process substantially more, may face somewhat higher costs for at least part of their production. Those handlers are likely, however, to have more than $5 million in total revenue, and would thus not be classified as small business entities.

Table 2 shows that the compliance costs and net economic impacts for different sizes of handlers. A positive net economic impact would exist for all handler groups.
Table 2.Distribution of Economic Effects Across Handlers of Different Sizes
[Pistachio marketing order simulation results with median parameter values]
Direct
Handler group* compliance Net economic cost impact Higher Volume/Lower Compliance Costs.... $667,000 $1,178,000 Medium Volume/Compliance Costs.......... 150,000 208,000 Lower Volume/Higher Compliance Costs.... 58,000 61,000

Total............................... 875,000 1,447,000 \*\ 80%, 15%, and 5%, respectively, of total quantity of pistachios marketed annually.

The above table shows that the net economic impact is in direct proportion to the volume of pistachios handled by each handler group. For example, the largest handler group, accounting for 80 percent of the pistachios marketed, would reap about 81 percent of the benefits of the program. AMS therefore concludes that the program would not have a disproportionate impact on small entities.

The cost and benefit estimates presented above focus on a single set of results using median parameter values. The witness's economic analysis involved simulating a number of scenarios, using alternative values for compliance costs, benefits, and elasticities of supply and demand. All scenarios, even the low benefit, high cost scenarios, indicated positive net economic impacts.

The witness's analysis concludes that the proposed marketing order would require minimal adjustments in current processing activities and would yield large estimated benefits. The simulation results indicate that costs of compliance are small relative to benefits for all firms, and that both small and large entities are likely to benefit significantly. Producers are likely to share net producer benefits in proportion to production. Large and small handlers both gain from the marketing order, also in proportion to the volumes handled. Some of the smallest handlers could have larger net benefits per unit because of the provision allowing special lowercost testing arrangements.

The witness's net benefit analysis represents a reasonable, plausible set of estimates of the economic impact of mandatory aflatoxin testing and minimum quality standards through promulgation of a Federal marketing order. The median cost and benefit figures explained during the hearing are considered to adequately represent estimates of the economic impact of implementation of the proposed program and its regulatory provisions.

The proposed order would impose some reporting and recordkeeping requirements on handlers. However, handler testimony indicated that the expected burden that would be imposed with respect to these requirements would be negligible. Most of the information that would be reported to the committee is already compiled by handlers for other uses and is readily available. Reporting and recordkeeping requirements issued under the peanut aflatoxin certification program (7 CFR part 996) impose an average annual burden on each regulated handler and importer of about 8 hours. It is reasonable to expect that a similar burden may be imposed under this proposed marketing order on the estimated 19 handlers of pistachios in California.

The record evidence also indicates that the benefits to small as well as large handlers are likely to be greater than would accrue under the alternatives to the order proposed herein, namely no marketing order, or an order without the proposed combination of quality, size and aflatoxin regulation.

In determining that the proposed order and its provisions would not have a disproportionate economic on a substantial number of small entities, all of the issues discussed above were considered. Based on hearing record evidence and USDA's analysis of the economic information provided, the proposed order provisions have been carefully reviewed to ensure that every effort has been made to eliminate any unnecessary costs or requirements.

Although the proposed order may impose some additional costs and requirements on handlers, it is anticipated that the order will help to strengthen demand for California pistachios. Therefore, any additional costs would be offset by the benefits derived from expanded sales benefiting handlers and producers alike. Accordingly, it is determined that the proposed order would not have a disproportionate economic impact on a substantial number of small handlers or producers. Paperwork Reduction Act

In compliance with OMB regulations (5 CFR part 1320) which implement the Paperwork Reduction Act of 1995 (Pub. L. 10413), the ballot material that will be used in conducting the referendum has been submitted to and approved by OMB. The forms to be used for nomination and selection of the initial administrative committee have also been reviewed and approved by OMB.

Any additional information collection and recordkeeping requirements that may be imposed under the order would be submitted to OMB for approval. Those requirements would not become effective prior to OMB approval.

Civil Justice Reform

The marketing agreement and order proposed herein have been reviewed under Executive Order 12778, Civil Justice Reform. They are not intended to have retroactive effect. If adopted, the proposed agreement and order would not preempt any State or local laws, regulations, or policies, unless they present an irreconcilable conflict with this rule.

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The Act provides that administrative proceedings must be exhausted before parties may file suit in court. Under section 608c(15)(A) of the Act, any handler subject to an order may file with the Department a petition stating that the order, any provision of the order, or any obligation imposed in connection with the order is not in accordance with law and request a modification of the order or to be exempted therefrom. A handler is afforded the opportunity for a hearing on the petition. After the hearing, the USDA would rule on the petition. The Act provides that the district court of the United States in any district in which the handler is an inhabitant, or has his or her principal place of business, has jurisdiction to review the Department's ruling on the petition, provided an action is filed not later than 20 days after the date of the entry of the ruling. Findings and Conclusions; Discussion of Exceptions

The findings and conclusions, rulings, and general findings and determinations included in the Recommended Decision set forth in the August 4, 2003, issue of the Federal Register (68 FR 45990) are hereby approved and adopted subject to the following additions and modifications.

Material Issue Number 5(a)Other Definitions

Based upon the exception filed, the findings and conclusions under material issue number 5(a) of the Recommended Decision (pertaining to the definition of ``assessed weight'') are revised by adding the following seven paragraphs after the fourteenth paragraph of that section:

In its exception, the proponents asked that the definition of ``assessed weight'' be revised to include a reference to Sec. 983.39(b)(4) and (5), the sections that pertain to the maximum level of defects allowable in certified pistachios.

Proponents commented that the Recommended Decision definition of ``assessed weight'' differs from that which was published in the Notice of Hearing as the words ``edible inshell'' were removed in the former. Proponents agreed with the change. However, proponents commented that the elimination of those words makes the definition unclear as to what standards are to be used in determining ``assessed weight.'' The proponents recommend that this uncertainty be eliminated by incorporating into the definition a reference to Sec. 983.39(b)(4) and (5).

By referring to Sec. 983.39 (b)(4) and (5) in the definition of ``assessed weight,'' the applicable maximum defects allowed by that section are incorporated into ``assessed weight.'' This reference makes clear that the ``assessed weight'' is determined after the test for defects is completed. This would also make this definition consistent with the determination of the weight of pistachios presently used by handlers to calculate their payments to producers. In Sec. 983.53, the ``* * *assessed weight of pistachios received by the handler'' in each year would be used to determine each handler's prorata share of the expenses authorized by the Department for the operation of the proposed order.

The proponents' exception has merit, and Sec. 983.6 of the proposed order has been revised accordingly.

Based upon the exception filed, the findings and conclusions under material issue number 5(a) of the Recommended Decision (pertaining to the definition of ``districts'') are revised by adding the following four paragraphs after the twentyfourth paragraph of that section:

In its exception, proponents commented that the committee should be required to obtain a vote of at least seven concurring members in order to recommend any future changes in district boundaries, and that such requirement should be included in the definition of ``districts''. Proponents noted that this requirement was part of the process by which the industry reached a consensus on the proposed marketing order program.

Section 983.34 of the proposed order sets forth voting requirements for committee actions. That section provides that any recommendation for a change in the establishment of the committee (which would include revisions in district boundaries) would require at least seven concurring votes. It is not necessary to repeat this requirement under the definition of ``districts.''

The proponents' exception also stated that at least seven concurring votes should be required only if the recommended change is not based on an action of the California Pistachio Commission (CPC) to change district boundaries. If the change were based on a CPC action, only a simple majority vote would be required.

While the CPC's definition of districts could be considered by the committee in drawing up marketing order districts, any recommendation to change marketing order districts would be evaluated by USDA on its own merits. Thus, the same committee voting requirements would be appropriate for any recommendation to change district boundaries. Further, there was no testimony at the hearing in support of the lower voting threshold for some recommendations to change district boundaries. For these reasons, the proponents' exception relative to the definition of the term ``districts'' is denied.

Based upon the exception filed, the findings and conclusions under material issue number 5(a) of the Recommended Decision (pertaining to the definition of ``edible pistachios'') are revised by adding the following paragraph after the twentysixth paragraph of that section:

The proponents' exception recommended that the definition of ``edible pistachios'' in proposed Sec. 983.13 be deleted. As previously discussed, the term ``edible pistachios'' has been deleted from Sec. 983.6 and is not used elsewhere in the proposed order. Thus, this definition is not needed and should be deleted. This modification has been made.
Material Issue Number 5(d)Quality and Inspection Requirements

Based upon the exception filed, the findings and conclusions under material issue number 5(d) of the Recommended Decision (pertaining to the aflatoxin requirements) are revised by adding the following four paragraphs at the end of the section entitled ``Proposed Aflatoxin Provisions.''

In its exception, the proponents suggested that Sec. 983.38(b) be amended to specify that any recommendation by the committee for a change in the maximum allowable aflatoxin level would require a vote of at least seven concurring committee members.

Section 983.46 of the proposed order sets forth voting requirements for committee actions. That section states that any changes in the aflatoxin requirements require a vote of at least seven committee members. It is not necessary to repeat the voting requirement in Sec. 983.38(b).

The proponents also took exception to the requirement (in Sec. 983.46) that any change in the aflatoxin provisions of the proposed order must be because of ``changed conditions''.

While we agree that the language, ``by reason of changed conditions'' in Sec. 983.46 is not necessary, we do note, as stated in a previous paragraph, that Sec. 983.38(b) provides authority for changing the allowable level of aflatoxin in the event industry conditions change or research shows that a change in the aflatoxin level would be appropriate. Accordingly, Sec. 983.46(a) is modified by deleting the words ``by reason of changed conditions.''

Based upon the exception filed, the findings and conclusions under material issue number 5(d) of the Recommended
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Decision are revised by adding the following two paragraphs at the end of the section entitled ``Aflatoxin Testing Procedures.''

In its exception, the proponents requested two editorial changes in proposed Sec. 983.38: one in paragraph (d)(3) and another in paragraph (d)(4). In paragraph (d)(3), the word ``and'' between the terms ``High Pressure Liquid Chromatograph (HPLC)'' and ``Vicam Method (Aflatest)'' should be replaced with a comma. Proponents state that these are two separate tests and should not be run together to appear as though it is one test, or that both are required. This change has been incorporated into the language of the proposed order.

In paragraph (d)(4) of Sec. 983.38, the word ``accreditation'' should be changed to ``accredited.'' The next to the last sentence should therefore begin, ``The accredited laboratory shall * * *'' This recommendation is consistent with the definition of ``accredited laboratory'' in Sec. 983.1 and has been incorporated into the language of the proposed order.

Based upon the exception filed, the findings and conclusions under material issue number 5(d) of the Recommended Decision (pertaining to the minimum quality requirements) are revised by adding the following paragraph after the eighth paragraph of the section entitled ``Proposed Minimum Quality Levels.''

The proponents' exception requested that the definition of the term ``loose kernels'' in Sec. 983.39(b)(1) be revised by eliminating the word ``edible.'' As previously discussed, a definition of the term ``edible'' has been deleted from the proposed order as unnecessary. Thus, this change is needed as a conforming change and is being incorporated in the definitions section of the order.

Rulings on Exceptions

In arriving at the findings and conclusions and the regulatory provisions of this decision, the exceptions to the Recommended Decision were carefully considered in conjunction with the record evidence. To the extent that the findings and conclusions and the regulatory provisions of this decision are at variance with the exceptions, such exceptions are denied.

Marketing Agreement and Order

Annexed hereto and made a part hereof is the document entitled ``Order Regulating the Handling of Pistachios Grown in California.'' This document has been decided upon as the detailed and appropriate means of effectuating the foregoing findings and conclusions.

It is hereby ordered, That this entire decision be published in the Federal Register.

Referendum Order

It is hereby directed that a referendum be conducted in accordance with the procedure for the conduct of referenda (7 CFR 900.400) to determine whether the issuance of the annexed order regulating the handling of pistachios grown in California is approved or favored by growers, as defined under the terms of the order, who, during the representative period were engaged in the production of pistachios in the proposed production area.

The representative period for the conduct of such referendum is hereby determined to be September 1, 2002 through August 31, 2003.

The agents of the Secretary to conduct such referendum are hereby designated to be Kurt Kimmel, Regional Manager, California Marketing Field Office, and Rose Aguayo, Marketing Specialist, Marketing Order Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 2202 Monterey Street, Suite 102 B, Fresno, California, 93721; telephone (559) 4875901.

List of Subjects in 7 CFR Part 983

Marketing agreements, Pistachios, Reporting and recordkeeping requirements.

Dated: December 11, 2003.
A. J. Yates,
Administrator, Agricultural Marketing Service.
Order Regulating the Handling of Pistachios Grown in California \1\ \1\ This order shall not become effective unless and until the requirements of Sec. 900.14 of the rules of practice and procedure governing proceedings to formulate marketing agreements and marketing orders have been met.

Findings and Determinations

Pursuant to the provisions of the Agricultural Marketing Agreement of 1937, as amended (7 U.S.C. 601 et seq.), and the applicable rules of practice and procedure effective thereunder (7 CFR part 900), a public hearing was held upon a proposed marketing agreement and order regulating the handling of pistachios grown in California.

Upon the basis of the evidence introduced at such hearing and the record thereof, it is found that:
(1) The proposed marketing agreement and order, and all of the terms and conditions thereof, will tend to effectuate the declared policy of the Act;
(2) The proposed marketing agreement and order regulate the handling of pistachios in California in the same manner as, and are applicable only to, persons in the respective classes of commercial and industrial activity specified in the marketing agreement and order upon which a hearing has been held;
(3) The proposed marketing agreement and order are limited in their application to the smallest regional production area which is practicable, consistent with carrying out the declared policy of the Act, and the issuance of several orders applicable to subdivision of the production area would not effectively carry out the declared policy of the Act;
(4) The proposed marketing agreement and order prescribe, insofar as practicable, such different terms applicable to different parts of the production area as are necessary to give due recognition to the differences in the production and marketing of pistachios grown in the production area; and
(5) All handling of pistachios grown in California as defined in the proposed marketing agreement and order, is in the current of interstate or foreign commerce or directly burdens, obstructs, or affects such commerce.

Order Relative To Handling

It is therefore ordered, That on and after the effective date hereof, all handling of pistachios grown in California shall be in conformity to, and in compliance with, the terms and conditions of the said order, as follows:

The provisions of the proposed marketing agreement and order contained in the Recommended Decision issued by the Administrator on July 23, 2003, and published in the Federal Register on August 4, 2003 (68 FR 45990), as revised herein, shall be and are the terms and provisions of this agreement and order and are set forth in full herein. Sections 983.90 through 983.92 apply only to the proposed marketing agreement and not the proposed order.

Title 7, chapter IX is proposed to be amended by adding part 983 to read as follows:
PART 983PISTACHIOS GROWN IN CALIFORNIA
SubpartOrder Regulating Handling
Definitions
Sec.
983.1 Accredited laboratory.
983.2 Act.
983.3 Affiliation.
983.4 Aflatoxin.
983.5 Aflatoxin inspection certificate.
983.6 Assessed weight.
983.7 Certified pistachios.
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983.8 Committee.
983.9 Confidential data or information.
983.10 Department or USDA.
983.11 Districts.
983.12 Domestic shipments.
983.14 Handle.
983.15 Handler.
983.16 Inshell pistachios.
983.17 Inspector.
983.18 Lot.
983.19 Minimum quality requirements.
983.20 Minimum quality certificate.
983.21 Part and subpart.
983.22 Person.
983.23 Pistachios.
983.24 Processing.
983.25 Producer.
983.26 Production area.
983.27 Production year.
983.28 Proprietary capacity.
983.29 Secretary.
983.30 Shelled pistachios.
983.31 Substandard pistachios.
Administrative Committee
983.32 Establishment and membership.
983.33 Initial members and nomination of successor members. 983.34 Procedure.
983.35 Powers.
983.36 Duties.
Marketing Policy
983.37 Marketing policy.
Regulations
983.38 Aflatoxin levels.
983.39 Minimum quality levels.
983.40 Failed lots/rework procedure.
983.41 Testing of minimal quantities.
983.42 Commingling.
983.43 Reinspection.
983.44 Inspection, certification and identification.
983.45 Substandard pistachios.
983.46 Modification or suspension of regulations.
Reports, Books and Records
983.47 Reports.
983.48 Confidential information.
983.49 Records.
983.50 Random verification audits.
983.51 Verification of reports.
Expenses and Assessments
983.52 Expenses.
983.53 Assessments.
983.54 Contributions.
983.55 Delinquent assessments.
983.56 Accounting.
983.57 Implementation and amendments.
Miscellaneous Provisions
983.58 Compliance.
983.59 Right of the Secretary.
983.60 Personal liability.
983.61 Separability.
983.62 Derogation.
983.63 Duration of immunities.
983.64 Agents.
983.65 Effective time.
983.66 Suspension or termination.
983.67 Termination.
983.68 Procedure upon termination.
983.69 Effect of termination or amendment.
983.70 Exemption.
983.71 Relationship with the California Pistachio Commission. *983.90 Counterparts.
*983.91 Additional parties.
*983.92 Order with marketing agreement.

Authority: 7 U.S.C. 601674.
*Sections identified with an asterisk (*) apply only to the proposed marketing agreement.
Definitions

Sec. 983.1 Accredited laboratory.

An accredited laboratory is a laboratory that has been approved or accredited by the U.S. Department of Agriculture for testing aflatoxin. Sec. 983.2 Act.

Act means Public Act No. 10, 73rd Congress (May 12, 1933), as amended and as reenacted and amended by the Agricultural Marketing Order Act of 1937, as amended (48 Stat. 31, as amended; 7 U.S.C. 601 et seq.).

Sec. 983.3 Affiliation.

Affiliation. This term normally appears as ``affiliate of'', or ``affiliated with'', and means a person such as a producer or handler who is: A producer or handler that directly, or indirectly through one or more intermediaries, owns or controls, or is controlled by, or is under common control with the producer or handler specified; or a producer or handler that directly, or indirectly through one or more intermediaries, is connected in a proprietary capacity, or shares the ownership or control of the specified producer or handler with one or more other producers or handlers. As used in this part, the term ``control'' (including the terms ``controlling'', ``controlled by'', and ``under the common control with'') means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a handler or a producer, whether through voting securities, membership in a cooperative, by contract or otherwise.

Sec. 983.4 Aflatoxin.

Aflatoxin is one of a group of mycotoxins produced by the molds Aspergillus flavus and Aspergillus parasiticus. Aflatoxins are naturally occurring compounds produced by molds, which can be spread in improperly processed and stored nuts, dried fruits and grains. Sec. 983.5 Aflatoxin inspection certificate.

Aflatoxin inspection certificate is a certificate issued by an accredited laboratory or by a USDA laboratory.

Sec. 983.6 Assessed weight.

Assessed weight means pounds of inshell pistachios, free of internal defects as defined in Sec. 983.39(b)(4) and (5), with the weight computed at 5 percent moisture, received for processing by a handler within each production year: Provided, That for loose kernels, the actual weight shall be multiplied by two to obtain an inshell weight; or based on such other elements as may be recommended by the committee and approved by the Secretary.

Sec. 983.7 Certified pistachios.

Certified pistachios are those for which aflatoxin inspection and minimum quality certificates have been issued.

Sec. 983.8 Committee.

Committee means the administrative committee for pistachios established pursuant to Sec. 983.32.

Sec. 983.9 Confidential data or information.

Confidential data or information submitted to the committee consists of data or information constituting a trade secret or disclosure of the trade position, financial condition, or business operations of a particular entity or its customers.

Sec. 983.10 Department or USDA.

Department or USDA means the United States Department of Agriculture.
Sec. 983.11 Districts.
(a) Districts shall consist of the following:
(1) District 1 consists of Tulare, Kern, San Bernardino, San Luis Obispo, Santa Barbara, Ventura, Los Angeles, Orange, Riverside, San Diego, and Imperial Counties of California.
(2) District 2 consists of Kings, Fresno, Madera, and Merced Counties of California.
(3) District 3 consists of all counties in California where pistachios are produced that are not included in Districts 1 and 2. (b) With the approval of the Secretary, the boundaries of any district may be changed by the committee to ensure proper
representation. The boundaries need not coincide with county lines. In addition, the boundaries in the production area may be adjusted to conform to changes to the boundaries of the districts established for those of the California Pistachio Commission upon the recommendation of the committee and approval of the Secretary.
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Sec. 983.12 Domestic shipments.

Domestic shipments means shipments to the fifty states of the United States or to territories of the United States and the District of Columbia.
Sec. 983.14 Handle.

Handle means to engage in:
(a) Receiving pistachios;
(b) Hulling and drying pistachios;
(c) Further preparing pistachios by sorting, sizing, shelling, roasting, cleaning, salting, and/or packaging for marketing in or transporting to any and all markets in the current of interstate or foreign commerce; and/or
(d) Placing pistachios into the current of commerce from within the production area to points outside thereof: Provided, however, that transportation within the production area between handlers and from the orchard to the processing facility is not handling

Sec. 983.15 Handler.

Handler means any person who handles pistachios. Sec. 983.16 Inshell pistachios.

Inshell pistachios means pistachios that have a shell that has not been removed.

Sec. 983.17 Inspector.

Inspector means any inspector authorized by the USDA to inspect pistachios.

Sec. 983.18 Lot.

Lot means any quantity of pistachios that is submitted for testing purposes under this part.

Sec. 983.19 Minimum quality requirements.

Minimum quality requirements are permissible maximum defects and minimum size levels for inshell pistachios and kernels specified in Sec. 983.39.

Sec. 983.20 Minimum quality certificate.

Minimum quality certificate is a certificate issued by the USDA or Federal/State Inspection Service.

Sec. 983.21 Part and subpart.

Part means the order regulating the handling of pistachios grown in the State of California, and all rules, regulations and supplementary orders issued there under. The aforesaid order regulating the handling of pistachios grown in California shall be a subpart of such part. Sec. 983.22 Person.

Person means an individual, partnership, limited liability corporation, corporation, trust, association, or any other business unit.

Sec. 983.23 Pistachios.

Pistachios means the nuts of the pistachio tree of the genus Pistacia vera grown in the production area whether inshell or shelled. Sec. 983.24 Processing.

Processing means hulling and drying pistachios in preparation for market.

Sec. 983.25 Producer.

Producer means any person engaged within the production area in a proprietary capacity in the production of pistachios for sale. Sec. 983.26 Production area.

Production area means the State of California.

Sec. 983.27 Production year.

Production year is synonymous with ``fiscal period'' and means the period beginning on September 1 and ending on August 31 of each year or such other period as may be recommended by the committee and approved by the Secretary. Pistachios harvested and received in August of any year shall be applied to the subsequent production year for marketing order purposes.

Sec. 983.28 Proprietary capacity.

Proprietary capacity means the capacity or interest of a producer or handler that, either directly or thr

FOR FURTHER INFORMATION CONTACT Melissa Schmaedick, Marketing Order Administration Branch, Fruit and Vegetable Programs, Agricultural Marketing Service, USDA, Post Office Box 1035, Moab, UT 84532, telephone: (435) 2597988, fax: (435) 2594945; or Anne M. Dec, Marketing Order Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence Avenue SW., Stop 0237, Washington, DC 202500237; telephone: (202) 7202491, fax: (202) 7208938. Small businesses may request information on this proceeding by contacting Jay Guerber, Marketing Order Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence Avenue SW., Stop 0237, Washington, DC 202500237; telephone: (202) 7202491, fax: (202) 720 8938.