SUPPLEMENTARY INFORMATION:

This action, pursuant to 5 U.S.C. 553, proposes to amend regulations issued to carry out a marketing order as defined in 7 CFR 900.2(j). This proposed rule is issued under the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674) (the Act), amending Marketing Order No. 986 (7 CFR part 986) (the Order), which regulates the handling of pecans grown in Alabama, Arkansas, Arizona, California, Florida, Georgia, Kansas, Louisiana, Missouri, Mississippi, North Carolina, New Mexico, Oklahoma, South Carolina, and Texas. The Council locally administers the Order and is comprised of growers and handlers of pecans operating within the production area, as well as one accumulator member and one public member.

This proposed action is exempt from the Office of Management and Budget (OMB) review process required by Executive Order 12866. This proposed rule would amend existing Marketing Order No. 986, as amended (7 CFR part 986), “Pecans Grown in the States of Alabama, Arkansas, Arizona, California, Florida, Georgia, Kansas, Louisiana, Missouri, Mississippi, North Carolina, New Mexico, Oklahoma, South Carolina, and Texas,” and is necessary for the continued operation of the Order. Additionally, this proposed action is exempt from the requirements of Executive Order 14192, “Unleashing Prosperity Through Deregulation,” pursuant to section 5(c).

This proposed rule has been reviewed under Executive Order 13175, “Consultation and Coordination with Indian Tribal Governments,” which requires Federal agencies to consider whether their rulemaking actions would have Tribal implications. The Agricultural Marketing Service (AMS) has determined this proposed rule is unlikely to have substantial direct effects on one or more Indian Tribes, on the relationship between the Federal Government and Indian Tribes, or on the distribution of power and responsibilities between the Federal Government and Indian Tribes.

This proposed rule has been reviewed under Executive Order 12988, “Civil Justice Reform.” This proposed rule is not intended to have a retroactive effect.

This proposed rule would eliminate regional and size designations for sheller members, modify the nomination process for sheller members, adjust the requirements of the inter-handler transfer report form, and establish a late fee and interest charges for unpaid assessments. In addition, this proposed rule would make administrative corrections to §  986.178 to remove an inadvertently duplicated paragraph and a paragraph that was previously incorporated under §  986.177(b).

Section 986.45 of the Order establishes Council membership, with two sheller seats currently allocated to each of the three regions as defined in § 986.33: Eastern, Central, and Western. Section 986.45(b)(2) provides that each region is represented by two sheller seats, with one seat allocated to a sheller who handles more than 12.5 million pounds of pecans per year, and one seat allocated to a sheller handling 12.5 million pounds or less of pecans per year. Each member has an alternate. Section 986.45(c) also authorizes the Council to recommend, with the approval of the Secretary, changes to the requirements for grower and sheller seats to accommodate changes within the industry.

Section 986.46 of the Order outlines the nomination procedures for the Council and § 986.46(b)(8) authorizes the Council to recommend, subject to the approval of the Secretary, changes to the member nomination process. Section 986.58 authorizes the Council to recommend, with the approval of the Secretary, reapportionment and reestablishment of the regions specified in § 986.33.

The Council and Order's activities are funded through handler assessments as authorized in § 986.61. Each handler in the production area pays a pro rata share based on their weight of inshell pecans handled. Section 986.61(g) authorizes the Council, with the approval of the Secretary, to establish a late payment and/or interest charge when assessments are not paid on time. The current assessment rates and due ( printed page 70810) dates are codified in §§ 986.161 and 986.177, respectively, of the Order's rules and regulations. Assessments are due at the time of reporting and monthly reports are due on the 10th day of the month following the month the pecans were handled.

Section 986.62 provides for the inter-handler transfers of pecans and allows for the transferring handler to shift the reporting and payment of assessments for these pecans to the receiving handler. Under § 986.162, handlers are required to file reports the month following the first transfer between two handlers to indicate a transfer was completed during the season, regardless of the frequency of transfers or weight transferred.

Pursuant to the authorities listed above, the Council recommended revising the rules and regulations under the Order. The Council met on August 14, 2025, and unanimously recommended, with a vote of 14 in favor and none opposed, to eliminate the regional and size designation requirements for sheller seats and modify the nomination process to reflect these changes; to revise the inter-handler transfer report from an annual to monthly submission and include information on the weight and type of inshell of pecans transferred; and to establish a five percent one-time late fee for unpaid assessments and a one percent monthly interest charge on any outstanding balances. The Council recommended these changes to increase sheller representation on the Council, improve data collection accuracy, and encourage timely payment of assessments.

During the original promulgation of the Order in 2016 (81 FR 51298, August 4, 2016), representative membership was a principal issue. As a result, Council membership structure was established to represent distinctive production areas as well as maintain a balance between grower and handler interests. To represent handlers, the Order included six regional seats for shellers and one at-large seat for accumulators. Understanding the dynamic nature of the industry, the Order included provisions for reapportionment and reestablishment if needed in the future.

Since the current membership requirements were established in 2016, the pecan industry has experienced consolidation and change, particularly among shelling operations. As of August 2025, fewer than 30 shellers remain in business, down from 50 in 2016. Due to the decline in the number of shellers, the Council has experienced challenges filling sheller member positions during its nomination cycles, resulting in several vacancies on the Council over the last few years.

When sheller seat vacancies occur, the Council believes it lacks the benefit of additional perspectives in its deliberations. The Council considered solutions to resolve the issue of sheller vacancies, including reducing the weight of inshell pecans required to be considered a large sheller. However, after reviewing the breakdown of active shellers, the Council determined this adjustment would not fully address the problem and that there would still be a shortage of eligible shellers to fill available seats.

At the August 14, 2025, meeting, the Council indicated that many of the remaining shellers now source pecans from multiple regions, operating multiple facilities with some in multiple regions. These changes make the regional affiliations for sheller members required under the Order less applicable. Further, the distribution of shellers throughout the regions is not uniform, making filling seats in some regions more challenging.

During its discussions, the Council also determined that the large and small designations on the sheller seats reduced the number of candidates available for nomination. Because there are fewer large shellers than small, the Council reported that it was difficult finding enough large shellers to fill all the available large sheller member and alternate seats. Consequently, the Council determined that the three regions and size distinctions are no longer representative of the sheller portion of the industry and impede the Council's nominations process.

Accordingly, this proposal would combine the three sheller regions into one sheller region, which would consist of all states within the production area, and remove the large and small sheller seat allocations. All six sheller seats would be open to any qualified sheller, regardless of location or size. This is similar to the accumulator seat on the Council, which is an at-large position that is not limited by location or size. The Council believes these proposed changes would help increase participation on the Council and ensure full sheller representation. During Council discussions on August 14, 2025, it was noted the National Pecan Shellers Association had also expressed support for the proposal.

Implementing these changes would require changes to the sheller member nomination process. Therefore, this proposal would adjust the nomination process to reflect one region with six sheller member seats and six alternate seats. All shellers would be able to nominate and vote on all seats regardless of their size or location. To implement this proposed change, the Council also recommended staggering the initial terms of the new sheller seats, with half serving two-year terms of office and the other half serving the full four-year term of office, so that half of the sheller seats will be up for nomination every two years. Accordingly, this proposed rule would add §§ 986.145 and 986.146 to the administrative provisions under the Order's rules and regulations to establish a single region for sheller seats and a modified nomination process, respectively.

Because the grower segment of industry has not experienced the same level of changes that the sheller segment has, these changes would pertain solely to the sheller seats and nomination process. Thus, the proposal would not redefine the existing regions for growers or modify the grower nomination qualifications and process.

The Order also authorizes specific reporting requirements, with handlers reporting pecans received, shipped, and in inventory to the Council to provide valuable aggregated data to the industry. Assessments are paid according to the reports of pecans received by handlers. The Order's inter-handler transfer provisions allow handlers to shift responsibility for reporting and payment of assessments to another handler when transferring loads of pecans. Having this flexibility has been particularly useful for small entities selling to larger handlers.

The inter-handler transfer provides a way to document the transfer of pecans, ensure transferred pecans are reported as received, and that the associated assessments are paid. Council members agreed these provisions are useful to handlers of all sizes, particularly when lots of pecans need to be redistributed to meet customer needs. Without this record, it would be difficult for the Council to verify which pecans have already been reported and assessed.

Currently, the Order requires the inter-handler transfer form, APC Form #4, to be submitted once during the season, in the month following the initial transfer between the handlers involved. In practice, however, the Council reported the submission of this report is frequently delayed. This creates difficulty for the Council when verifying assessments due and completing handler compliance audits, as there may have been transfers that have not yet been reported. Further, because the current reporting requirement does not include the weight ( printed page 70811) or type of inshell pecans transferred, the Council must conduct additional follow-up with handlers to determine if the proper assessments are being paid and to ensure the transferred pecans are not being overreported when tracking industry inventory.

During discussions on the issue, the Council reflected on the original intent of the inter-handler transfer report and determined that a monthly report documenting the handler parties involved, as well as the weight and type of inshell pecans transferred, would ensure proper and more accurate accounting of pecans handled and assessments paid. The Council anticipates this proposed change to § 986.162 would enable handlers to better maintain complete records, as required under the Order, as well as assist Council staff in identifying reporting discrepancies. Additionally, because transfers typically occur from November to February, for many handlers, this monthly reporting requirement would only apply to about four months of the year. The Council also noted that the proposed change would not be overly burdensome for handlers and their operations, as the report is completed using readily available information. Accordingly, on August 14, 2025, the Council unanimously recommended making the inter-handler transfer report due monthly and requiring that the weight and type of inshell pecans transferred be reported.

Regarding the timely payment of assessments, the Council reported that some handlers are repeatedly late in paying assessments. Chronic late payments increase administrative burden, disrupt cash flow, and force the Council to devote additional staff resources to collections. Currently, there are no consequences for late payments unless a full compliance case is filed with USDA for consideration of civil penalties, as would be warranted and appropriate under the Act. Although it does not wish to create a financial burden on the industry, the Council believes it is unfair to handlers paying on time to allow handlers who are late submitting their payments to incur no penalty.

To address this, the Council discussed adding a five percent one-time late fee for each occurrence of unpaid assessments that are 30 days past due, as well as a one percent monthly interest charge on the outstanding balance until paid. While late payment penalties and interest fees might be more burdensome on small handlers that are already experiencing cash flow problems, just as assessments are based on a pro rata share of the program's cost, the Council believes the proposed penalties should also apply proportionally. While it is an additional cost, the Council agreed this type of penalty would ensure fairness for all handlers, promote on-time assessment payments, and reduce Council resources spent managing delinquent handlers. The proposed late fee and interest charge would also be consistent with those in place for the industry's Federal research and promotion program. After discussing various options, including extending the allowable payment period, the Council unanimously recommended on August 14, 2025, implementing a five percent one-time late fee for each occurrence of assessments that are 30 days past due and a one percent monthly interest charge on the outstanding balance until paid. These requirements would be codified in a new § 986.163 of the Order's administrative provisions.

Additionally, this rule would also make administrative corrections to §  986.178. A final rule published in the Federal Register on April 8, 2020 (85 FR 19651, 19654), made changes to several reporting requirements prescribed under the Order, and inadvertently duplicated a paragraph in §  986.178 and failed to remove language from this section that was incorporated under §  986.177(b). This rule would remove paragraph (b) from §  986.178, which was inadvertently duplicated from paragraph (a) in the section, as well as remove paragraph (c), which was previously consolidated under §  986.177(b). These corrections are administrative in nature and would not have an effect on the other changes proposed in this rulemaking and would not alter reporting requirements.

Therefore, this proposed rule would revise the rules and regulations under the Order by eliminating the regional and size designation requirements for sheller seats and modifying the nomination process to reflect these changes; revising the inter-handler transfer report from an annual to monthly submission and to include information on the weight and type of inshell pecans transferred; and establishing a five percent one-time late fee for unpaid assessments and a one percent monthly interest charge on any outstanding balances. The proposal would also include administrative corrections to §  986.178 to remove an inadvertently duplicated paragraph and a paragraph that was previously incorporated under §  986.177(b).

Initial Regulatory Flexibility Analysis

Pursuant to requirements set forth in the Regulatory Flexibility Act (RFA) (5 U.S.C. 601-612), AMS has considered the economic impact of this proposed rule 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 businesses subject to such actions in order that small businesses will not be unduly or disproportionately burdened. Marketing orders issued pursuant to the Act are unique regulations in that they are brought about through group action of typically small entities acting on their own behalf.

There are approximately 4,500 growers of pecans in the production area and approximately 110 handlers subject to regulation under the Order. At the time this analysis was prepared, the Small Business Administration (SBA) defined small agricultural growers as those having annual receipts equal to or less than $3,750,000 (North American Industry Classification System (NAICS) code 111335, Tree Nut Farming) (13 CFR 121.201). Small agricultural service firms a were defined by the SBA as those having annual receipts equal to or less than $34,000,000 (NAICS code 115114, Postharvest Crop Activities).

Based on data from the National Agricultural Statistics Service (NASS), the average annual grower price for pecans utilized for processing during the 2023-2024 season was approximately $1.77 per pound. With a total utilization of 264,980,000 pounds for the 2023-2024 fiscal year, the total 2023-2024 value of the crop utilized for processing is estimated at $469,014,600 ($1.77 per pound multiplied by $264,980,000 pounds). Dividing the crop value by the estimated number of pecan growers yields an estimated average receipt per grower of $104,225 ($469,014,600 divided by 4,500 pecan growers). Thus, the majority of growers would be classified as small entities.

Based on AMS Market News shipping point and terminal market data for 2024 and 2025, AMS has determined a grower to handler price markup estimate of 25 percent. Adding this margin to the average grower price of $1.77 for in-shell pecans yields an estimated handler price of $2.21 per pound ($1.77 per pound multiplied by 0.25 equals $0.44, added to $1.77). With a total 2023-2024 utilization of 264,980,000 pounds, the total value of handled pecans for the fiscal year was $585,605,800 ($2.21 per pound multiplied by 264,980,000 pounds). Dividing this figure by the number of ( printed page 70812) handlers yields an estimated average annual handler receipt of $5,323,689 ($585,605,800 divided by 110 pecan handlers). Thus, the majority of handlers would be classified as small entities.

This proposed rule would eliminate regional and size designations for sheller members, modify the nomination process for sheller members, adjust the requirements of the inter-handler transfer report form, and establish a late fee and interest charges for unpaid assessments. In addition, this proposed rule would include administrative corrections to §  986.178 to remove an inadvertently duplicated paragraph and a paragraph that was previously incorporated under §  986.177(b). At its August 14, 2025, meeting, the Council unanimously voted 14 in favor, and none opposed to recommend the proposed changes.

Apart from imposing late fees and interest charges for unpaid assessments, it is not anticipated that this proposed rule would result in any additional cost for the industry. This proposed rule would combine the three sheller regions into one region and remove the designated seats for small and large shellers. While this proposal would modify the nomination process for sheller seats, it would not prohibit any qualified sheller, regardless of size or location, from seeking nomination on the Council. The Council believes this change would help increase sheller representation and participation and create opportunities for more shellers to serve on the Council. Grower seats and regions would remain unchanged.

The proposed rule would also modify the reporting requirements for inter-handler transfers. Rather than be submitted annually, the report would instead be submitted monthly and would include the weight and type of inshell pecans transferred. While this could increase the reporting burden for some handlers, this change would contribute to ensuring the Council's monthly industry reports are accurate and assist with program compliance, which would be beneficial to the industry. Additionally, because transfers typically occur from November to February, the monthly reporting requirement for handlers would apply to about four months of the year. The Council also noted that the proposed change would not be overly burdensome for handlers and their operations, as the report is completed using readily available information. The Council anticipates this change would enable handlers to better maintain complete records, as required under the Order, as well as assist Council staff in identifying reporting discrepancies.

Finally, the proposed rule would add a five percent one-time late fee on assessments that are more than 30 days past due and a one percent monthly interest charge on the outstanding balance until paid. However, these additional costs would only apply to those handlers who are not timely complying with the Order's assessment requirements. Handler assessments represent a pro rata share of the costs of operating the Order and are applied based on the weight of inshell pecans handled. Similarly, the penalties for delinquent assessments would be proportional to the weight of inshell of pecans handled and assessments due. The Council anticipates that establishing these penalties would help deter nonpayment of assessments.

The Council considered alternatives to the recommended changes made at its August 14, 2025, meeting. Regarding sheller membership, the Council previously recommended removing the regional distinctions but leaving the large and small seat designations. However, Council records indicated such a change would not solve the issue of repeated vacancies, as few remaining shellers meet the large sheller definition.

In reviewing the inter-handler transfer provisions, the Council considered removing the inter-handler transfer reporting requirement altogether but determined that small handlers may have difficulty complying with the additional reporting and tracking of assessments due on their own. The Council also considered leaving the report unchanged but found with more frequent reporting and the inclusion of the weight and type of inshell pecans transferred, the Council could improve its compliance processes and industry reports.

When discussing penalties for delinquent assessments, the Council considered changing the due dates for assessments, applying a longer period before assessing penalties, or not taking any additional action. However, the Council determined that these alternatives would not encourage timely payments or resolve the issue of unpaid assessments. For these reasons, the Council rejected all other alternatives.

Council meetings are widely publicized throughout the pecan industry. All interested persons are invited to attend meetings and participate in Council deliberations. Like all Council meetings, the August 14, 2025, meeting was a public meeting and all entities, both large and small, were able to express their views on these issues. Finally, interested persons are invited to submit comments on this proposed rule, including the regulatory and informational impacts of this action on small businesses.

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35), the Order's information collection requirements have been previously approved by OMB and assigned OMB No. 0581-0291, “Federal Marketing Order for Pecans.” This proposed rule would require changes to the Council's existing forms. Specifically, the proposed rule would make nominal adjustments to two sheller nomination forms, Forms SC-308 and SC-310, and the inter-handler transfer form, APC Form #4. The proposed changes to the sheller nomination forms would not increase the reporting burden. For the inter-handler transfer report, the changes would be minor and the currently approved burden for the form would be minimally increased by the proposed changes. The revised forms have been submitted to OMB for approval.

This proposed rule, if finalized, may impose some additional reporting or recordkeeping requirements on either small or large pecan handlers. However, the Council anticipates the changes to APC Form #4 and the inter-handler transfer reporting requirements would help ensure the Council's monthly industry reports are accurate and assist with program compliance, which would be beneficial to the industry. Additionally, because transfers typically occur from November to February, for many handlers, this monthly reporting requirement would only apply to about four months of the year. The Council also noted that the proposed change would not be overly burdensome for handlers and their operations, as the report is completed using readily available information. The Council anticipates this change would enable handlers to better maintain complete records, as required under the Order, as well as assist Council staff in identifying reporting discrepancies. As with all Federal marketing order programs, reports and forms are periodically reviewed to reduce information requirements and duplication by industry and public sector agencies.

AMS is committed to complying with the E-Government Act to promote the use of the internet and other information technologies to provide increased opportunities for citizen access to Government information and services and for other purposes.

AMS has not identified any relevant Federal rules that duplicate, overlap, or conflict with this proposed rule. ( printed page 70813)

After consideration of all relevant material presented, including the information and recommendations submitted by the Council and other available information, AMS has determined that this proposed rule would be consistent with and would effectuate the purposes of the Act.

A 30-day comment period is provided to allow interested persons to respond to this proposed rule. All written comments timely received will be considered before a final determination is made on this action.

For the reasons set forth in the preamble, AMS proposes to amend 7 CFR part 986 as follows:

1. The authority citation for part 986 continues to read as follows:

Authority: 7 U.S.C. 601-674.

2. Add § 986.145 to subpart B to read as follows:

3. Add § 986.146 to subpart B to read as follows:

4. Revise § 986.162 to read as follows:

5. Add § 986.163 to read as follows:

6. Revise § 986.178 to read as follows:

91 FR 70809