Pistachios Grown in California; Recommended Decision and Opportunity To File Written Exceptions to Proposed Amendment of Marketing Order No. 983, 20630-20647 [E9-10150]

Agencies

• Agricultural Marketing Service
• DEPARTMENT OF AGRICULTURE

[Federal Register Volume 74, Number 85 (Tuesday, May 5, 2009)]
[Proposed Rules]
[Pages 20630-20647]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-10150]


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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 74, No. 85 / Tuesday, May 5, 2009 / Proposed 
Rules

[[Page 20630]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 983

[Doc. No. AO-FV-08-0147; AMS-FV-08-0051; FV08-983-1]


Pistachios Grown in California; Recommended Decision and 
Opportunity To File Written Exceptions to Proposed Amendment of 
Marketing Order No. 983

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule and opportunity to file exceptions.

-----------------------------------------------------------------------

SUMMARY: This is a recommended decision regarding proposed amendments 
to Marketing Agreement and Order No. 983 (order), which regulates the 
handling of pistachios grown in California. The amendments were 
proposed by the Administrative Committee for Pistachios (Committee), 
which is responsible for local administration of the order. The 
proposed amendments would: Expand the production area covered under the 
order to include Arizona and New Mexico in addition to California; 
authorize the Committee to reimburse handlers for a portion of their 
inspection and certification costs in certain situations; authorize the 
Committee to recommend research projects; modify existing order 
authorities concerning aflatoxin and quality regulations; modify the 
authority for interhandler transfers of order obligations; redesignate 
several sections of the order; remove previously suspended order 
provisions, and make other related changes. The amendments are intended 
to improve the operation and functioning of the marketing order 
program. This recommended decision invites written exceptions on the 
proposed amendments. This rule also announces AMS's intention to 
request approval by the Office of Management and Budget (OMB) of a new 
information collection.

DATES: Written exceptions must be filed by June 4, 2009. Pursuant to 
the Paperwork Reduction Act, comments on the information collection 
burden must be received by July 6, 2009.

ADDRESSES: Written exceptions should be filed with the Hearing Clerk, 
U.S. Department of Agriculture, Room 1031-S, Washington, DC 20250-9200, 
Fax: (202) 720-9776 or via the Internet at https://www.regulations.gov, 
or to Martin Engeler at the E-mail address provided in the For Further 
Information Contact section. All comments should reference the document 
number and the date and page number of this issue of the Federal 
Register. Comments will be made available for public inspection in the 
Office of the Hearing Clerk during regular business hours, or can be 
viewed at: https://www.regulations.gov. All comments submitted in 
response to this rule will be included in the record and will be made 
available to the public. Please be advised that the identity of the 
individuals or entities submitting the comments will be made public on 
the Internet at the address provided above.

FOR FURTHER INFORMATION CONTACT: Martin Engeler, Marketing Order 
Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 2202 
Monterey Street, Suite 102-B, Fresno, California 93721; Telephone: 
(559) 487-5110, Fax: (559) 487-5906, or E-mail: 
Martin.Engeler@ams.usda.gov; or Laurel May, Marketing Order 
Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 
Independence Avenue, SW., Stop 0237, Washington, DC 20250-0237; 
Telephone: (202) 720-1509, Fax: (202) 720-8938, or E-mail: 
Laurel.May@ams.usda.gov.
    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 20250-0237; Telephone: (202) 720-2491, Fax: (202) 
720-8938, E-mail: Jay.Guerber@ams.usda.gov.

SUPPLEMENTARY INFORMATION: Prior document in this proceeding: Notice of 
Hearing issued on July 15, 2008, and published in the July 18, 2008, 
issue of the Federal Register (73 FR 41298).
    This action is governed by the provisions of sections 556 and 557 
of title 5 of the United States Code and is therefore excluded from the 
requirements of Executive Order 12866.

Preliminary Statement

    Notice is hereby given of the filing with the Hearing Clerk of this 
recommended decision with respect to the proposed amendments to 
Marketing Agreement and Order 983 regulating the handling of pistachios 
grown in California, and the opportunity to file written exceptions 
thereto. Copies of this decision can be obtained from Martin Engeler, 
whose address is listed above.
    This recommended decision is issued pursuant to the provisions of 
the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 
601-674), hereinafter referred to as the ``Act'', and the applicable 
rules of practice and procedure governing the formulation of marketing 
agreements and orders (7 CFR Part 900).
    The proposed amendments are based on the record of a public hearing 
held July 29 and 30, 2008, in Fresno, California. Notice of this 
hearing was published in the Federal Register on July 18, 2008 (73 FR 
41298). The notice of hearing contained the proposals submitted by the 
Committee.
    The proposed amendments were recommended by the Committee and 
submitted to USDA on June 10, 2008. After reviewing the recommendation 
and other information submitted by the Committee, AMS determined to 
proceed with the formal rulemaking process and schedule the matter for 
hearing.
    The proposed amendments include addition of new sections to the 
order which would result in numerical redesignation of several sections 
of the order. The redesignated sections would allow the related 
provisions to be grouped together in the order. The proposed amendments 
recommended by the Committee are summarized below.
    1. Proposal 1 would amend the order to expand the production area 
to include the States of Arizona and New Mexico. The production area 
covered under the order is currently limited to the State of 
California. This proposal would revise existing Sec.  983.26, 
Production area, and redesignate it as Sec.  983.25. It would also 
result in corresponding changes being made to existing Sec.  983.11, 
Districts; Sec.  983.21, Part and subpart; and existing Sec.  983.32, 
Establishment and membership. Existing sections 983.21 and 983.32

[[Page 20631]]

would also be redesignated as Sec.  983.20 and Sec.  983.41, 
respectively.
    2. Proposal 2 would amend the order to authorize the Committee to 
reimburse handlers for travel and shipping costs related to aflatoxin 
inspection, under certain circumstances. This proposal would amend 
existing Sec.  983.44, Inspection, certification and identification, 
and redesignate it as Sec.  983.56.
    3. Proposal 3 would amend the order to add a new Sec.  983.46, 
Research, that would authorize the Committee to engage in research 
projects with the approval of USDA. This proposed amendment would also 
require corresponding changes to existing Sec.  983.34, Procedure, to 
establish voting requirements for Committee recommendations concerning 
research. It would also require corresponding changes to existing Sec.  
983.46, Modification or suspension of regulations, and Sec.  983.54, 
Contributions. The existing Sec.  983.34, Sec.  983.46, and Sec.  
983.54 would also be redesignated as Sec.  983.43, Sec.  983.59, and 
Sec.  983.72, respectively.
    4. Proposal 4 would amend the order to provide broad authority for 
aflatoxin regulations by revising existing Sec.  983.38, Aflatoxin 
levels, and redesignating it as Sec.  983.50. This proposal would also 
require corresponding changes to existing Sec.  983.40, and 
redesignating that section as Sec.  983.52. It would also require 
corresponding changes to Sec.  983.1, Accredited laboratory.
    5. Proposal 5 would amend the order to provide broad authority for 
quality regulations by revising existing Sec.  983.39, Minimum quality 
levels, and redesignating it as Sec.  983.51. It would also remove 
provisions from that section concerning specific quality regulations 
that are currently suspended. This amendment would also require 
corresponding changes by removing currently suspended language in Sec.  
983.6, Assessed weight; revising Sec.  983.7, Certified pistachios; 
removing existing Sec.  982.19, Minimum quality requirements and Sec.  
983.20, Minimum quality certificate; revising existing Sec.  983.31, 
Shelled pistachios; revising existing Sec.  983.41, Testing of minimal 
quantities, and removing currently suspended language in that section; 
revising existing Sec.  983.42, Commingling; and revising existing 
Sec.  983.45, Substandard pistachios. Sections 983.31, 983.41, 983.42, 
and 983.45 would be redesignated as sections 983.30, 983.53, 983.54, 
and 983.57, respectively.
    6. Proposal 6 would amend the order to add a new Sec.  983.58, 
Interhandler Transfers. This proposal would modify existing authority 
under the order by expanding the range of marketing order obligations 
that may be transferred between handlers when pistachios are 
transferred between handlers. This proposal would require a 
corresponding change to existing Sec.  983.53, Assessments, and would 
redesignate Sec.  983.53 as Sec.  983.71.
    7. As a result of the proposed amendments and corresponding changes 
to the order summarized above, numerous administrative changes to the 
order would also be required. Such changes include numerical 
redesignations to several sections of the order, changes to cross 
references of section numbers in regulatory text as a result of the 
numerical redesignations, and removal of obsolete provisions. In 
addition, a change would be made to amend existing Sec.  983.70 and 
redesignate it as Sec.  983.92.
    In addition to the proposed amendments to the order, AMS proposed 
to make any such additional changes as may be necessary to the order to 
conform to any amendment that may result from the hearing.
    Fourteen industry witnesses testified at the hearing. These 
witnesses represented pistachio producers and handlers in the 
production area, as well as Committee staff, and all were supportive of 
the proposed amendments.
    At the conclusion of the hearing, the Administrative Law Judge 
established a deadline of September 26, 2008, for interested persons to 
file proposed findings and conclusions or written arguments and briefs 
based on the evidence received at the hearing. Five briefs were filed 
during that period; all supported the proposed amendments.

Material Issues

    The material issues presented on the record of hearing are as 
follows:
    (1) Whether to amend the order to expand the production area to 
include the States of Arizona and New Mexico and to make related 
changes regarding Committee membership, representation, and voting 
requirements;
    (2) Whether to amend the order to authorize the Committee to 
reimburse handlers for travel and shipping costs related to aflatoxin 
inspection, under certain circumstances;
    (3) Whether to amend the order to add a new section that would 
authorize the Committee to engage in research projects with the 
approval of USDA;
    (4) Whether to amend the order to provide broad authority for 
aflatoxin regulations;
    (5) Whether to amend the order to provide broad authority for 
quality regulations and to remove existing provisions from the order 
concerning specific quality regulations that are currently suspended; 
and,
    (6) Whether to amend the order to add specific provisions for 
interhandler transfers of marketing order obligations. This proposal 
would modify existing authority under the order by expanding the range 
of marketing order obligations that may be transferred between handlers 
when pistachios are transferred between handlers.
    Numerous administrative changes to the order would also be required 
if the proposed amendments described in the material issues above are 
adopted. Such changes include numerical redesignations to several 
sections of the order, changes to cross references of section numbers 
in regulatory text as a result of the numerical redesignations, and 
removal of obsolete provisions.

Findings and Conclusions

    The following findings and conclusions on the material issues are 
based on evidence presented at the hearing and the record thereof.

Material Issue Number 1--Expanding the Production Area

    Section 983.26 of the order should be amended to expand the 
production area to include the States of Arizona and New Mexico. The 
production area is currently limited to the State of California. This 
section should also be redesignated as Sec.  983.25. Sections 983.11, 
Districts; 983.21, Part and subpart; and 983.32, Establishment and 
membership, should also be amended to reflect the proposed addition of 
Arizona and New Mexico to the order. Section 983.34 should likewise be 
amended to revise the voting requirements needed to approve Committee 
actions due to the above proposed changes. Existing sections 983.21 and 
983.32 should also be redesignated as sections 983.20 and 983.41, 
respectively.
    The order regulating the handling of pistachios grown in the State 
of California was established in 2004. The primary feature of the order 
is a quality provision that requires pistachios to be sampled and 
tested for aflatoxin prior to shipment to domestic markets. Such 
shipments of pistachios may not exceed a tolerance level for aflatoxin 
of 15 parts per billion. Aflatoxin is a carcinogen that is considered 
to be harmful to humans if ingested.
    According to the record, one of the primary reasons the order was 
established was to assure consumers of a high quality product through 
the aflatoxin program. Reducing the risk of potential aflatoxin 
incidence in

[[Page 20632]]

pistachios would help to bolster consumer confidence in the quality of 
pistachios, thus leading to increased demand and improved grower 
returns. An economic study that included a cost-benefit analysis of the 
aflatoxin provisions of the pistachio marketing order was included in 
the hearing record as hearing exhibit 10. This study's findings, which 
are discussed in more detail in the Regulatory Flexibility Analysis 
section of this recommended decision, indicate the order's aflatoxin 
program results in a positive benefit to both the industry and 
consumers over various time horizons.
    Witnesses testified at the hearing that this proposal is intended 
to further the goal of improving the quality of pistachios available to 
consumers by reducing the risk of potential aflatoxin incidence in 
pistachios through expanding the scope of the regulatory requirements 
to include all the areas of the United States where pistachios are 
produced commercially. Record evidence indicates that area includes the 
States of California, Arizona, and New Mexico. The record shows that 
while California accounts for over 95 percent of commercial production 
(up to 98 percent in some years), the States of Arizona and New Mexico 
are also considered to have commercially significant production. 
Pistachios are also grown in small quantities in Texas, Utah, and 
Nevada. Witnesses testified that production from those states account 
for less than .02 percent (two one-hundredths of one percent) of the 
pistachios grown in the United States. Witnesses also testified that 
pistachios produced in those states are considered to be the result of 
hobby farming and are not commercially significant in volume. 
California, Arizona, and New Mexico account for over 99.99 percent of 
domestic pistachio production and essentially all of the production 
used for commercial purposes, according to the record.
    Witnesses from both California and the new states proposed to be 
added to the production area (Arizona and New Mexico) testified in 
support of this proposal. They testified that the implications from an 
aflatoxin contamination incident in pistachios, whether within the 
current production area or otherwise, would have an adverse impact on 
the entire U.S. pistachio industry, citing a previous example. Examples 
of other events also were cited in other agricultural commodities.
    Therefore, they believe it is important to the U.S. pistachio 
industry that the production area be expanded to cover all commercial 
pistachio producing areas in the U.S.
    Witnesses from California testified that the aflatoxin testing 
program under the order has been successful since it was implemented in 
2005. Through the aflatoxin sampling and testing program, pistachio 
lots exceeding the maximum tolerance for aflatoxin have been prevented 
from being shipped to markets.
    Witnesses testified that to further improve the quality of product 
to consumers and to reduce the likelihood of an aflatoxin incident in 
the pistachio industry, all product destined for commercial shipment 
should be subject to the same aflatoxin sampling, testing, and maximum 
tolerance requirements. Witnesses testified that ensuring consumers of 
a good quality product will increase consumer confidence in pistachios, 
leading to increased demand and improved grower returns.
    Witnesses from Arizona and New Mexico testified in support of those 
states being included under the order. They recognized the need to 
ensure that consumers receive a good quality product. They also 
recognized that an aflatoxin incident in any one commercial producing 
area could adversely affect other commercial producing areas.
    Witnesses from Arizona and New Mexico testified that pistachios 
from those areas should not have any specific problems or issues that 
would make it difficult to meet aflatoxin requirements, when compared 
to California-grown pistachios. They testified that Arizona and New 
Mexico produce a high quality product and have not had any known 
problems with aflatoxin. They do not anticipate any problem meeting the 
aflatoxin requirements currently in effect under the order. Witnesses 
from Arizona and New Mexico also expressed that they did not believe 
that pistachios grown in those states would have any trouble meeting 
other quality regulations that may be established in the future.
    Witnesses from Arizona and New Mexico also testified that they were 
aware there are certain costs associated with being included under the 
order. However, they testified that they believe the benefits 
associated with being included under the order would outweigh the 
costs.
    Witnesses also testified that including Arizona and New Mexico 
under the existing order would be more desirable than establishing a 
separate order or orders applicable to their state or states. They 
stated that it is important that uniform quality and testing 
requirements be applied consistently to all commercially produced 
pistachios in the U.S., and the three states should be considered one 
production area under the order.
    In addition to having consistent quality requirements, witnesses 
testified that it would be more cost effective to be included under the 
existing pistachio order than to establish a separate order or orders. 
Certain fixed costs are inherent in administering a marketing order 
program, such as staffing costs, office space, office equipment and 
supplies, etc. The existing marketing order has this infrastructure in 
place. If a separate order or orders were established, these costs 
would have to be funded separately, which would likely result in higher 
program administration costs than if Arizona and New Mexico were added 
to the existing order.
    Section 983.11, Districts, should be amended to add a new district 
for Committee representation purposes. Expanding the production area to 
include Arizona and New Mexico warrants a change to the order with 
respect to geographic representation on the Committee and membership on 
the Committee. Currently, the order provides for three districts within 
the State of California. Witnesses supported establishing a new 
district encompassing the States of Arizona and New Mexico for 
Committee representation purposes. This new district would be District 
4.
    Witnesses from California, Arizona, and New Mexico testified that 
one member representing Arizona and New Mexico would provide the new 
District 4 with adequate representation on the Committee. One position 
on the Committee is equal to \1/12\ of the Committee positions, or 8.3 
percent. Based on data presented at the hearing, the 5-year average 
production of Arizona and New Mexico production was about 3.5 percent 
of the 5-year average of U.S. production for the period 2002 through 
2006.
    Section 983.32, Establishment and membership, should be amended to 
reflect the addition of a new district and an additional member on the 
Committee. Witnesses testified in support of changes to this section to 
reflect the addition of the new District 4 encompassing the States of 
Arizona and New Mexico, an increase in Committee size from eleven to 
twelve total members, and an increase in the number of producer members 
on the Committee from eight to nine. This section should also be 
redesignated as Sec.  983.41.
    As a result of the inclusion of Arizona and New Mexico under the 
order, it is

[[Page 20633]]

recommended that Sec.  983.34, Procedure, be amended to revise the 
voting requirements necessary to approve certain actions of the 
Committee. Witnesses testified that a unanimous vote of the Committee 
should be required in order to approve actions on research, aflatoxin 
regulations, and quality regulations. This would ensure that broad 
industry support exists before actions of the Committee regarding these 
issues are taken. According to the record, the more stringent voting 
requirements are also intended to ensure support from representatives 
of Arizona and New Mexico. Changes to Sec.  983.34 pertaining to 
unanimous consent are discussed further under Material Issues 3, 4, and 
5 in this recommended decision. Section 983.34 should also be amended 
to require 8 votes on issues concerning inspection programs and the 
establishment of the Committee. Those issues currently require 7 votes; 
the increase to 8 votes reflects the increase in Committee membership 
from 11 to 12 members, thus the proportion of votes to pass actions on 
these issues would remain nearly the same. Section 983.34 should also 
be redesignated as Sec.  983.43.
    Finally, a corresponding change to Sec.  983.21, Part and subpart, 
is necessary to include Arizona and New Mexico as part of the area to 
which the order and regulations pertain. This section should also be 
redesignated as Sec.  983.20.
    Record evidence supports expanding the production area to include 
Arizona and New Mexico. This would help to ensure a uniform and 
consistent quality product from all commercial producing areas in the 
U.S., with the intent of increasing consumer confidence in pistachios, 
leading to increased demand and improved grower returns.
    Record evidence also supports providing for a representative on the 
Committee to represent the proposed addition of the States of Arizona 
and New Mexico, which requires a modification to the representation 
districts and an increase in the size of the Committee from eleven 
members to twelve members. Record evidence also indicates that 
inclusion of Arizona and New Mexico under the existing order would be 
more cost effective and more desirable than establishing separate 
orders. Including Arizona and New Mexico in the production area would 
establish the smallest regional production area that is practicable. 
According to the record, voting requirements should also be changed to 
help ensure broad industry support exists for certain Committee 
actions.
    There was no opposition testimony given against these proposed 
amendments. Witnesses from the producing areas of California, Arizona, 
and New Mexico all expressed support for the proposed amendments. For 
the reasons stated herein, it is recommended that Sec.  983.26, 
Production area, be amended to expand the production area under the 
order to include the States of Arizona and New Mexico. It is also 
recommended that corresponding changes be made to Sec. Sec.  983.11, 
Districts, 983.21, Part and subpart, 983.32, Establishment and 
membership, and 983.34, Procedure. The proposed addition of new 
sections to the order as discussed under material issues 3 and 6 of 
this recommended decision would require numerical redesignation of 
several sections of the order, including some of those discussed under 
this material issue. It is therefore also recommended that Sec. Sec.  
983.21, 983.26, 983.32, and 983.34 be redesignated as Sec. Sec.  
983.20, 983.25, 983.41, and 983.43, respectively.

Material Issue Number 2--Reimbursement of Handler Inspection Costs

    Section 983.44 of the order should be amended to provide authority 
for the Committee to reimburse handlers for certain costs associated 
with aflatoxin testing of pistachios, with approval of USDA. This 
section should also be redesignated as Sec.  983.56. Under this 
proposed amendment, the Committee could recommend to USDA informal 
rulemaking that would specify parameters for such reimbursement to 
handlers operating in areas where inspection costs for inspector travel 
and shipment of samples of pistachios for aflatoxin testing exceed the 
average of those same costs for comparable handling operations in 
Districts 1 and 2.
    The order requires pistachios to be sampled and tested at a USDA 
laboratory or a USDA-approved laboratory to determine the aflatoxin 
level prior to shipment. Section 983.44 of the order currently provides 
that all inspections shall be at the expense of the handler. According 
to hearing evidence, typical costs associated with aflatoxin inspection 
include: travel for inspectors, charges for retrieving samples, 
shipment of samples to laboratories, laboratory analysis, and the value 
of the product utilized during the testing process.
    Witness testimony indicates that in the State of California, 
handler's facilities are typically in close proximity to Federal-State 
Inspection Service (Inspection) offices. Inspectors therefore have 
relatively short distances to travel to perform the necessary services 
related to the aflatoxin program. In most cases, there is little or no 
cost for inspectors to travel to handler's facilities for aflatoxin 
inspections. In addition, handler's facilities are relatively close to 
laboratories that perform the analytical aflatoxin testing of the 
product. In some cases, handler facilities have on-site laboratories. 
Costs of shipping samples to laboratories for analyses are thus 
relatively minor and in some instances non-existent.
    In contrast, witnesses testified that the pistachio handling 
operations in Arizona and New Mexico are located sizeable distances 
from Inspection personnel. According to the record, in some instances 
the nearest available inspector is over 200 miles from the handler's 
facility. Costs for inspector travel would thus be significant in 
Arizona and New Mexico in such cases.
    Witnesses also testified that that there are no approved 
laboratories in Arizona or New Mexico for analyzing pistachio samples 
for aflatoxin. Further, the volume of pistachios produced and handled 
in Arizona and New Mexico would not warrant the establishment of 
analytical laboratories for testing pistachios for aflatoxin in those 
states. Samples of pistachios would therefore need to be shipped to 
California to an approved laboratory for aflatoxin analysis. As a 
result, costs of shipping samples would also be higher in Arizona and 
New Mexico than in California. According to the record, there would be 
no appreciable difference in other costs associated with the aflatoxin 
program in Arizona, New Mexico, and California.
    Data was presented at the hearing to illustrate the potential 
difference in costs associated with aflatoxin inspections in 
California, Arizona, and New Mexico. As discussed above, these 
differences are attributed to inspector travel costs and shipping 
costs. Individual costs can vary depending on individual circumstances, 
but inspection costs associated with the aflatoxin program would be 
significantly higher in Arizona and New Mexico than California. A 
detailed analysis of the costs and possible reimbursement is discussed 
in the Regulatory Flexibility Analysis section of this recommended 
decision, as well as the benefits.
    Record evidence supports adding authority to the order to allow the 
Committee to equitably reimburse handlers for certain costs associated 
with aflatoxin testing. The intent of this proposed amendment is to 
recognize potential differences in costs, and provide a method whereby 
the costs of inspection for the aflatoxin program can be more equitably 
distributed so that

[[Page 20634]]

Arizona and New Mexico industry members would not be unduly burdened as 
a result of their inclusion under the order. As previously discussed, 
this proposal would only provide authority for the Committee to 
recommend to USDA criteria for reimbursement, and informal rulemaking 
would be required prior to implementation.
    There was no opposition testimony to this proposed amendment. For 
the reasons stated above, it is recommended that Sec.  983.44, 
Inspection, certification, and identification, be amended to authorize 
the Committee, with approval of the Secretary, to reimburse handlers 
for inspection costs for inspector travel and shipment of samples for 
aflatoxin testing that exceed the average of those same inspection 
costs for comparable handling operations in Districts 1 and 2. Informal 
rulemaking to establish rules and regulations outlining the parameters 
of reimbursement would be required to implement this authority. Section 
983.44 would also be redesignated as Sec.  983.56.

Material Issue Number 3--Research

    A new section 983.46, Research, should be added to the order. This 
proposed amendment would provide authority for the Committee to engage 
in research projects with the approval of USDA. Corresponding changes 
should be made to existing Sec.  983.46, Modification or suspension of 
regulations, to reflect changes to other sections of the order. 
Corresponding changes should also be made to Sec.  983.54, 
Contributions, to add authority for the Committee to accept voluntary 
contributions for research purposes. Additionally, corresponding 
changes to Sec.  983.34, Procedure, should be made to establish voting 
requirements for Committee recommendations concerning research. 
Finally, existing Sec. Sec.  983.34, 983.46, and 983.54 should be 
redesignated as Sec. Sec.  983.43, 983.59, and 983.72, respectively.
    Currently, the order does not contain authority for the Committee 
to recommend or conduct research projects. Witnesses testified that at 
the time the order was promulgated, the California Pistachio Commission 
(CPC), a state marketing program, supported the industry's production 
and nutrition research. Therefore, the industry did not believe that 
providing research authority in the order was necessary. However, CPC 
was discontinued in 2007, and the responsibility for production 
research was temporarily assumed by individual entities and other 
industry organizations in order to provide for continuity of ongoing 
projects. In December 2007, the California Pistachio Research Program 
(CPRP), a state program, was enacted under the authority of the 
California Marketing Act of 1937, Chapter 1, Part 2, Division 21 of the 
California Food and Agriculture Code, as amended. CPRP is authorized to 
conduct production and post-harvest research, for which it may collect 
limited assessment revenues.
    The record indicates that CPRP is not authorized to conduct 
nutrition research. According to witnesses, nutrition research, which 
is designed to determine the effects of pistachio consumption on human 
health, is critical to the marketing of pistachios. To fill this 
critical need, witnesses supported amending the order to authorize the 
Committee to recommend, conduct, and fund research projects designed to 
determine the effects of pistachio consumption on human health.
    One witness described previous industry research on the effects of 
cholesterol on heart health as related to pistachio consumption. The 
witness suggested that that type of research might be pursued by the 
Committee.
    Witness testimony also supported the addition of authority to 
recommend, conduct, and fund research projects to improve the efficient 
production and postharvest handling of pistachios. The record shows 
that the ability to establish production research projects in response 
to immediate needs is important to the industry. Witnesses cited two 
examples of critical production research needs in the past. In the 
1970's and 1980's, Verticillium wilt, which ultimately leads to tree 
death, threatened the existence of the pistachio industry in 
California. Through collaborative research efforts, rootstocks 
resistant to Verticillium wilt were developed and are today widely used 
in the industry. In the 1990's, Botryosphaeria blight, which attacks 
the nut clusters and foliage, reached epidemic proportions in northern 
California. According to witness testimony, industry-funded research 
efforts led to the development of cultural practices and fungicides 
that now effectively control the disease. One witness emphasized the 
fact that it is difficult to anticipate what production problems could 
arise in the future, but that the Committee could best prepare itself 
for emergencies by maintaining a stable funding source to address those 
needs.
    Witnesses testified that the Committee does not intend to duplicate 
activities conducted by the CPRP if it is authorized to conduct 
research programs under the order. Witnesses explained that the 
Committee manager and staff, as well as many Committee members, are 
informed about CPRP's activities and that their participation in 
Committee deliberations would ensure that research activities would not 
be duplicative. In addition, witnesses testified that the CPRP program 
has a cap on the amount of assessments it may collect. This cap could 
limit the industry's ability to fund research projects at a level 
necessary to address certain issues, especially in emergency 
situations. Nonetheless, if a situation occurred where the CPRP could 
not fund critical production or post harvest research needed by the 
industry, the research could be funded under the Federal marketing 
order and still avoid duplication.
    Funding for the Committee's projects would come from the collection 
of assessments from pistachio handlers, which is authorized under the 
order. Currently, the Committee's assessments cover the costs of 
administration of the order and operation of its other program 
activities. Although the Committee's assessment rate could increase to 
cover the costs of any research projects they might establish, record 
evidence indicates that the benefits to be derived from such research 
are expected to exceed related assessment costs.
    In conjunction with the authority to establish research programs, 
the Committee proposed amending Sec.  983.54, Contributions, to provide 
authority to accept voluntary contributions toward research programs. 
Currently, the Committee is authorized to accept voluntary 
contributions toward the administrative costs of the order. Witnesses 
testified that voluntary contributions could augment or replace 
assessment funds used for research projects. According to witnesses, 
contributors could designate that contributions be used for the 
Committee's research programs, but they would not retain control of how 
the Committee uses the funds. It would be the responsibility of the 
Committee to allocate those funds appropriately.
    Addition of the authority to conduct research programs would merely 
authorize the Committee to recommend such programs and, following USDA 
approval, to plan and conduct those projects. Witnesses explained that 
if authority to conduct research programs is added to the order, the 
Committee might appoint a new subcommittee to consider research 
proposals and make recommendations for specific projects to the 
Committee.
    The Committee's amendment proposals included a revision to their 
voting procedures under Sec.  983.34 that

[[Page 20635]]

would specify that recommendations regarding research projects should 
require the approval of the entire Committee. Witnesses testified that 
requiring unanimous approval would ensure consensus from all sectors of 
the industry. Witnesses testifying in favor of expanding the production 
area to include Arizona and New Mexico (Material Issue No. 1) explained 
that requiring unanimous Committee approval for research 
recommendations would assure the industry in those states that their 
interests are considered in Committee decision-making with regard to 
potential research projects.
    The Committee also recommended amending the existing Sec.  983.46, 
Modification or suspension of regulations. These changes would update 
cross-references to other sections of the order that are being proposed 
to change, and removes a redundant reference to voting requirements 
that is already included under another section of the order.
    No testimony opposing this proposal was provided at the hearing. 
For the reasons stated above, it is recommended that a new Sec.  
983.46, Research, be added to the order to provide authority to 
establish and conduct production, post harvest, and nutrition research 
projects. Corresponding changes should be made to Sec.  983.34, 
Procedure, to establish voting requirements for Committee 
recommendations concerning research; Sec.  983.46, Modification or 
suspension of regulations, to update cross-references and remove 
redundant provisions; and to Sec.  983.54, Contributions, to authorize 
the Committee to accept voluntary contributions toward research 
programs. Finally, existing Sec. Sec.  983.34, 983.46, and 983.54 
should be redesignated as Sec. Sec.  983.43, 983.59, and 983.72, 
respectively.

Material Issue Number 4--Aflatoxin Regulation

    Section 983.38, Aflatoxin levels, should be renamed Aflatoxin 
regulations, and amended to provide broad authority for aflatoxin 
regulation under the order. This would require removing extensive 
specific regulatory provisions in the order and replacing them with a 
provision providing general authority for aflatoxin regulation and 
authority to issue specific regulatory requirements through the 
informal rulemaking process. The current regulatory provisions that are 
removed from the order could then be proposed as rules and regulations 
through the informal rulemaking process. This section should also be 
redesignated as Sec.  983.50. Corresponding changes to Sec.  983.40, 
Failed lots/rework procedure and Sec.  983.1, Accredited laboratory, 
should also be made, and Sec.  983.40 should be redesignated as Sec.  
983.52. In addition, Sec.  983.34, Procedure, should be amended to 
require unanimous consent by the Committee to approve actions 
concerning aflatoxin levels, and Sec.  983.34 should be redesignated as 
Sec.  983.43.
    Currently, the order provides authority for regulation of aflatoxin 
levels in pistachios, and specific regulatory requirements such as 
sampling, testing, and certification are also included in the order. 
The order provisions also allow for modification of the regulatory 
requirements by issuing rules and regulations through the informal 
rulemaking process.
    Witness testimony indicated that including specific regulatory 
details in the order language, with authority to change such 
requirements through the informal rulemaking process, is not the most 
desired way to structure a marketing order for another reason also. If 
specific regulatory requirements in the order are subsequently modified 
through informal rulemaking, regulatory language in the order would be 
different than regulatory language in the rules and regulations, which 
might cause confusion.
    Witness testimony stated that a more appropriate approach is to 
provide general authority for aflatoxin regulations in the order 
language, and provide authority to issue rules and regulations through 
the informal rulemaking process to implement specific regulations and 
procedures. Witnesses testified that it is important to maintain 
continuity in the existing aflatoxin regulations at this time. With 
this approach, the existing aflatoxin requirements could be proposed in 
the informal rulemaking process.
    Hearing testimony also supported amending Sec.  983.34 to require a 
unanimous vote of the Committee on any recommendations concerning 
aflatoxin regulations. The record indicates that it is important to 
have widespread industry support prior to implementing or changing 
aflatoxin regulations. With the unanimous consent provision, the States 
of Arizona and New Mexico would be entitled to a voting representative 
on the Committee and would need to vote in favor of any recommendation 
by the Committee with respect to regulations in order for such action 
to be approved.
    A witness testified that a corresponding amendment to Sec.  983.40, 
Failed lots/rework procedure should be made. General authority would be 
provided in this section of the order to authorize establishment of 
procedures to rework product that failed the aflatoxin requirements. 
Similar to the preceding amendment to Sec.  983.38, detailed procedures 
currently contained in Sec.  983.40 would be established as rules and 
regulations through informal rulemaking in order to avoid an 
interruption in the existing procedures. Section 983.40 should also be 
redesignated as Sec.  983.52.
    Witnesses also testified in support of amending the order to 
incorporate a corresponding change to Sec.  983.1, Accredited 
laboratory. This change would revise the definition of accredited 
laboratory by removing a restriction that limited accredited 
laboratories to only aflatoxin testing. Testimony noted that this 
change would give flexibility to this definition, given the previously 
discussed changes to quality regulation. This discussion appears in 
material issue number 5.
    Record evidence supports amending Sec.  983.38, Aflatoxin levels, 
renaming it Aflatoxin regulations, and redesignating it as Sec.  
983.50. Corresponding changes to Sec.  983.40, Failed lots/rework 
procedure and Sec.  983.1, Accredited laboratory, are also recommended, 
and Sec.  983.40 should be redesignated as 983.52. Record evidence also 
supports amending Section 983.34, Procedure, and redesignating it as 
983.43. No opposition testimony was given regarding these proposed 
amendments, and they are thus recommended for adoption.

Material Issue Number 5--Quality Regulation

    Section 983.39, Minimum quality levels, should be renamed Quality 
regulations, and should be amended to provide broad authority for 
quality regulation under the order. This would require removing 
extensive regulatory provisions in the order pertaining to minimum 
quality levels and replacing them with a provision providing general 
authority for quality regulation and authority to issue specific 
quality regulatory requirements through the informal rulemaking 
process. Section 983.39 should also be redesignated as Sec.  983.51. 
Corresponding changes should also be made to Sec.  983.6, Assessed 
weight; Sec.  983.7, Certified pistachios; Sec.  983.31, Substandard 
pistachios; Sec.  983.41, Testing of minimal quantities; Sec.  983.42, 
Commingling; and Sec.  983.45, Substandard pistachios. Sections 983.19 
and 983.20 should be removed as a result of this amendment. Section 
983.34, Procedure, should be amended to require a unanimous vote of the 
Committee to approve actions concerning quality regulations. Finally, 
Sections 983.31, 983.41, 983.42, and

[[Page 20636]]

983.45 would be redesignated as sections 983.30, 983.53, 983.54, 
983.57, respectively.
    Witnesses testified that specific requirements pertaining to 
quality levels are contained in the provisions of the order. These 
provisions were in effect from 2004 through 2007. In December of 2007, 
the requirements were suspended because they were no longer meeting the 
industry's needs. Witness testimony indicated that while there is no 
desire to reinstate the specific quality regulations previously in 
effect or any intent at this time to recommend any form of quality 
regulation, the industry would like to retain authority to implement 
some form of quality regulation in the future if circumstances warrant. 
Adding broad authority for quality regulation would provide flexibility 
in the order because it would enable the industry to establish 
additional requirements for quality regulations in addition to the 
current requirements in the order.
    Witnesses also testified that adding broad authority for quality 
regulation, with the ability to implement and change requirements 
through informal rulemaking, could be especially beneficial in the 
event the proposal to expand the production area to include Arizona and 
New Mexico is adopted. Growing conditions and other factors that impact 
the quality of pistachios may vary in different states. Record 
testimony indicates this proposal provides flexibility to take into 
account factors affecting the quality of pistachios from different 
areas, and other pertinent information in developing quality 
regulations that may be recommended in the future. Any regulations, if 
established, could be revised through the informal rulemaking process 
to adapt to changing industry conditions and to accommodate the various 
growing regions, if necessary.
    Witnesses also testified that Sec.  983.34 should be amended to 
require a unanimous vote of the Committee in order to recommend 
adopting or changing potential quality regulations established under 
this proposed new order authority. Witnesses testified that it was 
important to have widespread industry support prior to implementing any 
new quality regulations. According to testimony, the unanimous consent 
provision would help to ensure that any potential quality regulations 
would meet the needs of the States of Arizona and New Mexico, as well 
as California. Arizona and New Mexico would be entitled to a voting 
representative on the Committee and would need to vote in favor of any 
recommendation by the Committee with respect to quality regulations in 
order for such action to be approved.
    Witness testimony supported several corresponding changes to 
certain definitions in the order that are associated with the existing 
quality provisions in the order. The definition of Assessed weight, 
Sec.  983.6, should be amended by removing references to the existing 
quality regulations and replacing such references with a provision that 
would allow assessed weight to be based on such quality requirements 
that may be established in the future. The definition of Certified 
pistachios, Sec.  983.7, should also be amended by removing a reference 
to specific existing aflatoxin inspection and minimum quality 
certificates and replacing such reference with a reference to general 
inspection and certification requirements. The definition of 
Substandard pistachios, Sec.  983.31, should similarly be amended by 
removing a reference to existing aflatoxin and minimum quality 
regulations and replacing such reference with a reference to sections 
of the order under which regulations may be established. Section 983.31 
should also be redesignated as 983.30.
    Witness testimony also supported amending Sec.  983.41, Testing of 
minimal quantities, to remove a provision pertaining to an exemption 
from minimum quality requirements for handlers handling less than one 
million pounds of pistachios. That provision would be replaced by a 
more general provision that would allow the Committee, with approval of 
the Secretary, to establish regulations regarding minimal quantities in 
the event quality regulations are established in the future. The 
proposed language for this section published in the Notice of Hearing 
referenced specific aflatoxin levels. However, at the hearing, a 
witness clarified that the language should be revised to conform with 
other proposed amendments to the order, specifically by replacing 
references to specific levels of aflatoxin with references to levels of 
aflatoxin that may be established by the committee and approved by the 
Secretary. Therefore, AMS has revised the proposed language 
accordingly. Finally, this section should also be redesignated as Sec.  
983.53.
    Witnesses also testified in support of amending Sec.  983.42, 
Commingling, to clarify that if a lot of certified pistachios is 
commingled with a lot of uncertified pistachios, the resulting lot 
would lose its certification. This section should be redesignated as 
Sec.  983.54.
    The record also supports amending Sec.  983.45, Substandard 
pistachios, by removing a reference to specific existing aflatoxin 
requirements and quality requirements and replacing that reference with 
a more general reference to aflatoxin and quality requirements. This 
section should be redesignated as Sec.  983.57.
    Finally, the existing Sec.  983.19, Minimum quality requirements, 
should be removed from the order because it pertains to requirements 
that would no longer be in effect as a result of the recommended 
amendments to the order. Similarly, existing Sec.  983.20, Minimum 
quality certificate, should be removed from the order because it 
references a certificate that would no longer exist as a result of 
these amendments.
    Record evidence supports amending the order to add broad authority 
for quality regulations and removing provisions concerning specific 
minimum quality levels. This would provide authority for the Committee 
to develop and recommend quality regulations in the future, if deemed 
appropriate, and any such regulations could take into account the new 
producing areas being proposed for addition to the order. Informal 
rulemaking would be required to implement any future quality 
regulations, and modifications thereto could also be accomplished 
through informal rulemaking. Record evidence also supports the 
corresponding changes as discussed in this material issue.
    No testimony in opposition to this proposed amendment and 
corresponding changes was given. For the reasons stated above, it is 
recommended that Sec.  983.39, Minimum quality levels, be renamed 
Minimum quality regulation, amended, and redesignated as 983.51. It is 
also recommended that corresponding changes be made to Sec.  983.6, 
Assessed weight; and Sec.  983.7, Certified pistachios. Corresponding 
changes are also recommended to Sec.  983.31, Substandard pistachios; 
Sec.  983.41, Testing of minimal quantities; Sec.  983.42, Commingling; 
and Sec.  983.45, Substandard pistachios, and those sections be 
redesignated as Sec. Sec.  983.30, 983.53, 983.54, and 983.57, 
respectively. It is also recommended that Sec.  983.34, Procedure be 
amended. Finally, it is recommended that Sec.  983.19, Minimum quality 
requirements and Sec.  983.20, Minimum quality certificate, be removed.

Material Issue Number 6--Interhandler Transfers

    A new section, Sec.  983.58, Interhandler Transfers, should be 
added to the order. This recommended section would allow handlers to 
transfer marketing order obligations such as aflatoxin testing 
requirements, assessments, inspection

[[Page 20637]]

requirements, or any other marketing order requirements, to the 
receiving handler if pistachios are transferred from one handler to 
another. The recommended provisions would also allow the Committee, 
with approval of the Secretary, to establish methods and procedures, 
including reports, to maintain an accurate accounting of the pistachios 
and accompanying marketing order obligations. The existing Sec.  983.58 
should be redesignated as Sec.  983.80. Section 983.53, Assessments, 
should also be amended to provide an exception from assessment payment 
for those handlers who transfer the obligation to another handler 
pursuant to the proposed new Sec.  983.58. Section 983.53 should also 
be redesignated as Sec.  983.71.
    According to witness testimony, this provision would provide 
flexibility in administering the marketing order, especially with 
regard to the proposed new District 4, the States of Arizona and New 
Mexico. Under the order, hulling and drying of pistachios is considered 
a handling function. Persons performing handling functions are 
considered to be handlers, and marketing order obligations are applied 
to handlers.
    Witnesses testified that in the proposed District 4, some small 
producers may not have access to nearby processing facilities, and as a 
result must hull and dry their product prior to delivery to a facility 
that further processes and packages it and puts it into the stream of 
commerce. Under the order, such small producers would be considered 
handlers by definition, and would be subject to marketing order 
obligations such as reporting, aflatoxin testing, and payment of 
assessments. This proposed amendment would allow such grower/handlers 
to transfer the marketing order obligations to the subsequent handler 
that further processes the pistachios and places them into the current 
of commerce. This would help to ensure that marketing order obligations 
are met.
    According to testimony, this amendment would provide flexibility 
under the order to allow producers and handlers in District 4 to 
continue their current business practices.
    Witness testimony also supported a corresponding change to Sec.  
983.53, Assessments. This section of the order requires each handler to 
pay assessments under the order. The proposed change corresponds with 
the interhandler transfer authority by excepting from assessment 
payment those handlers who transfer the obligation to another handler 
pursuant to the proposed new Sec.  983.58. Section 983.53 should also 
be redesignated as Sec.  983.71.
    Record evidence supports these changes to the order. No testimony 
in opposition to the proposed changes was given at the hearing. For the 
reasons stated above, it is recommended that a new Sec.  983.58, 
Interhandler transfers, be added to the order; a corresponding change 
be made to Sec.  983.53, Assessments; and that Sec.  983.53 be 
redesignated as Sec.  983.71.

Material Issue Number 7--Administrative Changes

    The proposed amendments discussed in Material Issues 1 through 6 
necessitate several administrative changes to the order. Such changes 
include numerical redesignations to several sections of the order, 
changes to cross references of section numbers in regulatory text as a 
result of the numerical redesignations, and removal of obsolete 
provisions. These changes are summarized below.
    Section 983.8, Committee, should be amended by removing a reference 
to Sec.  983.32 and replacing it with a reference to Sec.  983.41. 
Section 983.23, Pistachios, should be redesignated as Sec.  983.22 and 
amended by adding ``and species'' after the word ``genus'', as this was 
inadvertently omitted when the order was promulgated. Section 983.33, 
Initial members and nomination of successor members, should be 
redesignated as Sec.  983.42 and amended by removing the word 
``grower'' and replacing it with the word ``producer'', as that term is 
defined in the order; and references to Sec. Sec.  983.32, 983.33, and 
983.34 should be removed and replaced with references to Sec. Sec.  
983.41, 983.42, and 983.43, respectively. Section 983.34 should be 
redesignated as Sec.  983.43 and in paragraphs (a)(1) and (2), the word 
``level'' should be removed and replaced with the word ``regulation'' 
to correspond to changes made to the titles of Sec. Sec.  983.51 and 
983.52. Section 983.56 should be redesignated as Sec.  983.74 and 
amended by removing the reference to Sec.  983.53 and replacing it with 
a reference to Sec.  983.71. Section 983.57 should be redesignated as 
Sec.  983.75 and amended by removing the reference to ``Sec. Sec.  
983.47 through 983.56'' and replacing it with ``Sec. Sec.  983.64 
through 983.74''. Section 983.58, Compliance, should be redesignated as 
Sec.  983.80 as a result of the proposed new Sec.  983.58, Interhandler 
transfers. Section 983.65 should be redesignated as Sec.  983.87 and 
amended to remove a reference to ``Sec.  983.66 or Sec.  983.67'' and 
replacing it with ``Sec.  983.88 or Sec.  983.89''.
    Section 983.70 should be redesignated as Sec.  983.92 and amended 
by removing references to Sec. Sec.  983.38, 983.45, and 983.53 and 
replacing them with references to Sec. Sec.  983.50, 983.58, and 
983.71, respectively. Redesignated Sec.  983.92 should further be 
amended to remove the words ``marketing'' and ``subpart'' and replacing 
them with ``production'' and ``section'', respectively. These changes 
would correct technical errors in the existing order provisions. This 
section also should be amended by replacing a reference to an exemption 
of 1,000 pounds with reference to an exemption of 5,000 pounds to 
update this order provision, given the current rules and regulations 
that were implemented under that section after the order was 
promulgated.
    AMS is rewording the language that appears in the redesignated 
Sec. Sec.  983.50, 983.52, 983.53(a), 983.59(c), and 983.92 to conform 
to other references to informal rulemaking that currently appear in the 
order. This language clarifies that the committee may establish, with 
the Secretary's approval, rules and regulations regarding 
implementation of authorities provided in those sections. AMS is also 
rewording the language in Sec.  983.56 to correctly state that handlers 
may be ``reimbursed'' rather than ``compensated'' by the committee 
regarding inspection costs.
    The following table identifies changes that should be made 
regarding redesignation of sections to the order that have not been 
previously discussed in this recommended decision.

------------------------------------------------------------------------
            Old section                          New section
------------------------------------------------------------------------
                  983.22                               983.21
                  983.24                               983.23
                  983.25                               983.24
                  983.27                               983.26
                  983.28                               983.27
                  983.29                               983.28
                  983.30                               983.29
                  983.35                               983.44
                  983.36                               983.45
                  983.37                               983.47
                  983.43                               983.55
                  983.47                               983.64
                  983.48                               983.65
                  983.49                               983.66
                  983.50                               983.67
                  983.51                               983.68
                  983.52                               983.70
                  983.55                               983.73
                  983.59                               983.81
                  983.60                               983.82
                  983.61                               983.83
                  983.62                               983.84
                  983.63                               983.85
                  983.64                               983.86
                  983.66                               983.88
                  983.67                               983.89
                  983.68                               983.90
                  983.69                               983.91
------------------------------------------------------------------------


[[Page 20638]]

    There was no opposition testimony to these proposed changes. Record 
evidence supports these changes and they are therefore recommended for 
adoption.

Conforming Changes

    AMS also proposed to make such changes as may be necessary to the 
order to conform to any amendment that may result from the hearing. 
Other than previously discussed, no additional conforming changes have 
been made.

Small Business Considerations

    Pursuant to the requirements set forth in the Regulatory 
Flexibility Act (RFA), AMS has considered the economic impact of this 
action on small entities. Accordingly, AMS has prepared this initial 
regulatory flexibility analysis.
    The purpose of the RFA is to fit regulatory actions to the scale of 
business subject to such actions so that small businesses will not be 
unduly or disproportionately burdened. Marketing orders and amendments 
thereto are unique in that they are normally brought about through 
group action of essentially small entities for their own benefit.
    Small agricultural service firms, which include handlers regulated 
under the order, have been defined by the Small Business Administration 
(SBA) (13 CFR 121.201) as those having annual receipts of less than 
$7,000,000. Small agricultural producers have been defined as those 
with annual receipts of less than $750,000.
    There are approximately 24 handlers and approximately 800 producers 
of pistachios in the State of California. It is estimated that 
approximately 50 percent of the processing handlers had annual receipts 
of less than $7,000,000, according to information presented at the 
hearing. In addition, based on the number of producers, the size of the 
2007 crop, and the average producer price per pound data reported by 
the National Agricultural Statistics Service (NASS), the average 
producer revenue for the 2007 crop was $702,000. It is estimated that 
85% of the producers in California produced less than $750,000 worth of 
pistachios and would thus be considered small businesses according to 
the SBA definition.
    Based on information presented at the hearing, it is estimated that 
there are approximately 40 to 50 growers of pistachios in Arizona and 
approximately 30 growers in New Mexico. It is also estimated that there 
are 2 handlers in Arizona and 3 handlers in New Mexico. Although no 
official data is available, based on hearing testimony it is estimated 
that the majority of producers in Arizona and New Mexico are small 
businesses according to SBA's definition. It is also estimated that all 
of the handlers in New Mexico are small businesses and one of the 
handlers in Arizona is a small business.
    California accounts for the vast majority of pistachio acreage and 
production in the U.S. According to data from the National Agricultural 
Statistics Service (NASS), California's total acreage in 2007 was 
reported at 176,400 acres. While no 2007 acreage data is available from 
NASS for Arizona and New Mexico, in 2006, Arizona acreage was reported 
at 2,500 acres while New Mexico acreage was reported at 1,350 acres in 
2002. Two witnesses from New Mexico testified that they estimate 
acreage in New Mexico to be about 450 acres in 2007. Pistachios are 
also grown in small quantities in Texas, Utah, and Nevada. However, 
witnesses testified that pistachios produced in those states are 
considered to be the result of hobby farming and are not commercially 
significant in volume. California, Arizona, and New Mexico account for 
over 99.99 percent of domestic pistachio production and essentially all 
of the production used for commercial purposes, according to the 
record.
    The order regulating the handling of pistachios grown in the State 
of California was established in 2004. The primary feature of the order 
is a quality provision that requires pistachios to be sampled and 
tested for aflatoxin prior to ship