Walnuts Grown in California; Increased Assessment Rate and Changes to Regulations Governing Reporting and Recordkeeping, 56693-56697 [E9-26368]

Agencies

• Agricultural Marketing Service
• DEPARTMENT OF AGRICULTURE

[Federal Register Volume 74, Number 211 (Tuesday, November 3, 2009)]
[Rules and Regulations]
[Pages 56693-56697]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-26368]



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Rules and Regulations
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Federal Register / Vol. 74, No. 211 / Tuesday, November 3, 2009 / 
Rules and Regulations

[[Page 56693]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 984

[Doc. No. AMS-FV-09-0020; FV09-984-3 FR]


Walnuts Grown in California; Increased Assessment Rate and 
Changes to Regulations Governing Reporting and Recordkeeping

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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

SUMMARY: This rule increases the assessment rate established for the 
California Walnut Board (Board) for the 2009-10 and subsequent 
marketing years from $0.0131 to $0.0177 per kernelweight pound of 
assessable walnuts. This rule also changes reporting and recordkeeping 
regulations in conformance with amendments made on March 3, 2008, to 
the marketing order that regulates the handling of walnuts grown in 
California. The Board locally administers the marketing order. 
Assessments upon walnut handlers are used by the Board to fund 
reasonable and necessary expenses of the program. The marketing year 
begins September 1 and ends August 31. The assessment rate will remain 
in effect indefinitely unless modified, suspended, or terminated.

DATES: Effective Date: November 4, 2009.

FOR FURTHER INFORMATION CONTACT: Debbie Wray, Marketing Specialist, or 
Kurt J. Kimmel, Regional Manager, California Marketing Field Office, 
Marketing Order Administration Branch, Fruit and Vegetable Programs, 
AMS, USDA; Telephone: (559) 487-5901, Fax: (559) 487-5906, or E-mail: 
Debbie.Wray@ams.usda.gov or Kurt.Kimmel@ams.usda.gov.
    Small businesses may request information on complying with this 
regulation 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, or E-mail: Jay.Guerber@ams.usda.gov.

SUPPLEMENTARY INFORMATION: This rule is issued under Marketing Order 
No. 984, as amended (7 CFR part 984), regulating the handling of 
walnuts grown in California, hereinafter referred to as the ``order.'' 
The order is effective under the Agricultural Marketing Agreement Act 
of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the 
``Act.''
    The Department of Agriculture (USDA) is issuing this rule in 
conformance with Executive Order 12866.
    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. Under the marketing order now in effect, California 
walnut handlers are subject to assessments. Funds to administer the 
order are derived from such assessments. It is intended that the 
assessment rate as established herein will be applicable to all 
assessable walnuts beginning on September 1, 2009, and continue until 
amended, suspended, or terminated.
    The Act provides that administrative proceedings must be exhausted 
before parties may file suit in court. Under section 608c(15)(A) of the 
Act, any handler subject to an order may file with USDA a petition 
stating that the order, any provision of the order, or any obligation 
imposed in connection with the order is not in accordance with law and 
request a modification of the order or to be exempted therefrom. Such 
handler is afforded the opportunity for a hearing on the petition. 
After the hearing, USDA would rule on the petition. The Act provides 
that the district court of the United States in any district in which 
the handler is an inhabitant, or has his or her principal place of 
business, has jurisdiction to review USDA's ruling on the petition, 
provided an action is filed not later than 20 days after the date of 
the entry of the ruling.
    This rule increases the assessment rate established for the Board 
for the 2009-10 and subsequent marketing years from $0.0131 to $0.0177 
per kernelweight pound of assessable walnuts. It also makes conforming 
changes to reporting and recordkeeping regulations, which are needed to 
reflect recent marketing order amendments.
    The California walnut marketing order provides authority for the 
Board, with the approval of USDA, to formulate an annual budget of 
expenses and collect assessments from handlers to administer the 
program. The members of the Board are growers and handlers of 
California walnuts. They are familiar with the Board's needs and with 
the costs for goods and services in their local area and are thus in a 
position to formulate an appropriate budget and assessment rate. The 
assessment rate is formulated and discussed in a public meeting. Thus, 
all directly affected persons have an opportunity to participate and 
provide input.
    For the 2008-09 and subsequent marketing years, the Board 
recommended, and USDA approved, an assessment rate of $0.0131 per 
kernelweight pound of assessable walnuts that would continue in effect 
from year to year unless modified, suspended, or terminated by USDA 
upon recommendation and information submitted by the Board or other 
information available to USDA.
    The Board met on May 18, 2009, and unanimously recommended 2009-10 
expenditures of $5,894,100 and an assessment rate of $0.0177 per 
kernelweight pound of assessable walnuts. In comparison, last year's 
budgeted expenditures were $3,809,000. The assessment rate of $0.0177 
is $0.0046 per pound higher than the rate currently in effect. The 
increased assessment rate is necessary to cover increased expenses for 
domestic market promotion, research activities, and administrative 
expenses. The higher assessment rate should generate sufficient income 
to cover anticipated 2009-10 expenses.
    The following table compares major budget expenditures recommended 
by the Board for the 2008-09 and 2009-10 marketing years:

[[Page 56694]]



------------------------------------------------------------------------
          Budget expense categories              2008-09       2009-10
------------------------------------------------------------------------
Employee Expenses...........................      $410,500      $535,000
Travel/Board Expenses.......................       100,000       120,000
Office Costs/Annual Audit...................       142,500       164,750
Program Expenses Including Research:
    Controlled Purchases....................         5,000         5,000
    Crop Estimate...........................       110,000       120,000
    Production Research *...................       805,000       805,000
    Contingency-Research Issues.............        30,000       100,000
    Domestic Market Development.............     2,135,000     4,030,500
    Reserve for Contingency.................        71,000        13,850
------------------------------------------------------------------------
* Includes Research Director's compensation.

    The assessment rate recommended by the Board was derived by 
dividing anticipated expenses by expected shipments of California 
walnuts certified as merchantable. Merchantable shipments for the year 
are estimated at 333,000,000 kernelweight pounds, which should provide 
$5,894,100 in assessment income and allow the Board to cover its 
expenses. Unexpended funds may be retained in a financial reserve, 
provided that funds in the financial reserve do not exceed 
approximately two year's budgeted expenses. If not retained in a 
financial reserve, unexpended funds may be used temporarily to defray 
expenses of the subsequent marketing year, but must be made available 
to the handlers from whom collected within 5 months after the end of 
the year, according to Sec.  984.69 of the order.
    The estimate for merchantable shipments is based on historical 
data, which is an average of the three prior years' production of 
370,000 tons (inshell). Pursuant to Sec.  984.51(b) of the order, this 
figure was converted to a merchantable kernelweight basis using a 
factor of .45 (370,000 tons x 2,000 pounds per ton x .45).
    The assessment rate established in this rule will continue in 
effect indefinitely unless modified, suspended, or terminated by USDA 
upon recommendation and information submitted by the Board or other 
available information.
    Although this assessment rate will be in effect for an indefinite 
period, the Board will continue to meet prior to or during each 
marketing year to recommend a budget of expenses and consider 
recommendations for modification of the assessment rate. The dates and 
times of Board meetings are available from the Board or USDA. Board 
meetings are open to the public and interested persons may express 
their views at these meetings. USDA will evaluate Board recommendations 
and other available information to determine whether modification of 
the assessment rate is needed. Further rulemaking will be undertaken as 
necessary. The Board's 2009-10 budget and those for subsequent 
marketing years will be reviewed and, as appropriate, approved by USDA.
    Recent amendments to the order (73 FR 11328, March 3, 2008) changed 
the Board's name to ``California Walnut Board'' (CWB), changed the 
Board's marketing year from August 1 through July 31 to September 1 
through August 31, and replaced the term ``handler carryover'' with the 
term ``handler inventory.'' To reflect these changes, the Board 
unanimously recommended conforming changes to the order's reporting and 
recordkeeping regulations at a meeting on February 27, 2009.
    Section 984.456(a) is revised to specify that beginning on 
September 1 of any marketing year, a handler may become an agent of the 
Board to dispose of reserve walnuts in that marketing year. Section 
984.471 is revised by changing the term ``carryover'' to ``inventory'', 
by requiring handlers to report September 1 inventory information by 
September 15, and by changing the names of the related inventory forms 
to ``CWB Form No. 4'' and ``CWB Form No. 5.'' Section 984.476 is 
revised to require that handlers file reports of walnut import receipts 
with the Board by December 5 for receipts between September 1 and 
November 30, by March 5 for receipts between December 1 and the end of 
February, by June 5 for receipts between March 1 and May 31, and by 
September 5 for receipts between June 1 and August 31; and to change 
the name of the reporting form to ``CWB Form No. 7.'' Section 
984.480(d) is revised to specify that inventories of all walnut 
quantities held on September 1 must be reported to the Board. The 
acronym ``WMB'' is replaced with ``CWB'' in form names described in the 
following sections not previously listed above: Sec. Sec.  984.456(b), 
984.464(c), 984.472(a), and 984.472(b). Finally, in order to update the 
regulations, gender-specific language is changed in Sec. Sec.  
984.456(b) and 984.472(a) to replace ``he'' and ``his'' with ``he/she'' 
and ``his/her.''

Final Regulatory Flexibility Analysis

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA) (5 U.S.C. 601-612), the Agricultural Marketing Service (AMS) 
has considered the economic impact of this action on small entities. 
Accordingly, AMS has prepared this final regulatory flexibility 
analysis.
    The purpose of the RFA is to fit regulatory actions to the scale of 
business subject to such actions in order that small businesses will 
not be unduly or disproportionately burdened. Marketing orders issued 
pursuant to the Act, and the rules issued thereunder, are unique in 
that they are brought about through group action of essentially small 
entities acting on their own behalf.
    There are currently 58 handlers of California walnuts subject to 
regulation under the marketing order, and there are approximately 4,500 
growers in the production area. Small agricultural service firms are 
defined by the Small Business Administration (SBA) (13 CFR 121.201) as 
those having annual receipts of less than $7,000,000, and small 
agricultural growers are defined as those having annual receipts of 
less than $750,000.
    USDA's National Agricultural Statistics Service (NASS) reports that 
California walnuts were harvested from a total of 223,000 bearing acres 
during 2008-09. The average yield for the 2008-09 crop was 1.96 tons 
per acre, which is higher than the 1.56 tons per acre average for the 
previous five years. NASS reported the value of the 2008-09 crop at 
$1,210 per ton, which is lower than the previous five-year average of 
$1,608 per ton.
    At the time of the 2007 Census of Agriculture, which is the most 
recent information available, approximately 89 percent of California's 
walnut farms were smaller than 100 acres. Fifty-four percent were 
between 1 and 15 acres. A 100-acre farm with an average yield of

[[Page 56695]]

1.50 tons per acre would have been expected to produce about 150 tons 
of walnuts during 2007-08. At $2,290 per ton, that farm's production 
would have had an approximate value of $344,000. Assuming that the 
majority of California's walnut farms are still smaller than 100 acres, 
it could be concluded that the majority of the growers had receipts of 
less than $344,000 in 2007-08. This is well below the SBA threshold of 
$750,000; thus, the majority of California's walnut growers could be 
considered small growers according to SBA's definition.
    According to information supplied by the industry, approximately 
two-thirds of California's walnut handlers shipped merchantable walnuts 
valued under $7,000,000 during the 2007-08 marketing year and could 
therefore be considered small handlers according to the SBA definition.
    This rule increases the assessment rate established for the Board 
and collected from handlers for the 2009-10 and subsequent marketing 
years from $0.0131 to $0.0177 per kernelweight pound of assessable 
walnuts. The Board unanimously recommended 2009-10 expenditures of 
$5,894,100 and an assessment rate of $0.0177 per kernelweight pound of 
assessable walnuts. The assessment rate of $0.0177 is $0.0046 higher 
than the 2008-09 assessment rate. The quantity of assessable walnuts 
for the 2009-10 marketing year is estimated at 370,000 tons. Thus, the 
$0.0177 rate should provide $5,894,100 in assessment income and be 
adequate to meet this year's expenses. The increased assessment rate is 
primarily due to increased budget expenditures.
    The following table compares major budget expenditures recommended 
by the Board for the 2008-09 and 2009-10 marketing years:

------------------------------------------------------------------------
          Budget expense categories              2008-09       2009-10
------------------------------------------------------------------------
Employee Expenses...........................      $410,500      $535,000
Travel/Board Expenses.......................       100,000       120,000
Office Costs/Annual Audit...................       142,500       164,750
Program Expenses Including Research:
    Controlled Purchases....................         5,000         5,000
    Crop Estimate...........................       110,000       120,000
    Production Research *...................       805,000       805,000
    Contingency-Research Issues.............        30,000       100,000
    Domestic Market Development.............     2,135,000     4,030,500
    Reserve for Contingency.................        71,000        13,850
------------------------------------------------------------------------
* Includes Research Director's compensation.

    The Board reviewed and unanimously recommended 2009-10 expenditures 
of $5,894,100. Prior to arriving at this budget, the Board considered 
alternative expenditure levels but ultimately decided that the 
recommended levels were reasonable to properly administer the order. 
The assessment rate recommended by the Board was derived by dividing 
anticipated expenses by expected shipments of California walnuts 
certified as merchantable. Merchantable shipments for the year are 
estimated at 333,000,000 kernelweight pounds, which should provide 
$5,894,100 in assessment income and allow the Board to cover its 
expenses. Unexpended funds may be retained in a financial reserve, 
provided that funds in the financial reserve do not exceed 
approximately two years' budgeted expenses. If not retained in a 
financial reserve, unexpended funds may be used temporarily to defray 
expenses of the subsequent marketing year, but must be made available 
to the handlers from whom collected within 5 months after the end of 
the year, according to Sec.  984.69 of the order.
    According to NASS, the season average grower prices for the years 
2007 and 2008 were $2,290 and $1,210 per ton, respectively. These 
prices provide a range within which the 2009-10 season average price 
could fall. Dividing these average grower prices by 2,000 pounds per 
ton provides an inshell price per pound range of $0.605 to $1.15. 
Dividing these inshell prices per pound by the 0.45 conversion factor 
(inshell to kernelweight) established in the order yields a 2009-10 
price range estimate of $1.34 to $2.56 per kernelweight pound of 
assessable walnuts.
    To calculate the percentage of grower revenue represented by the 
assessment rate, the assessment rate of $0.0177 per kernelweight pound 
is divided by the low and high estimates of the price range. The 
estimated assessment revenue for the 2009-10 marketing year as a 
percentage of total grower revenue would thus likely range between 
0.691 and 1.321 percent.
    As a result of amendments to the order on March 3, 2008 (73 FR 
11328), the Board unanimously recommended conforming changes to the 
order's reporting and recordkeeping regulations at its meeting on 
February 27, 2009. These conforming changes reflect amendments to the 
marketing year, terminology, and Board name. The conforming changes 
include the date when a handler may become an agent of the Board to 
dispose of reserve walnuts. Conforming changes replace the term 
``carryover'' with ``inventory'' and modify the first of three dates in 
a marketing year when handlers are required to report their inventory 
to the Board. Further conforming changes include the dates that 
handlers must report to the Board their receipts of walnuts from 
outside of the United States and for what periods. Another conforming 
change modifies the first of three dates in a marketing year wherein 
handlers must indicate in their books and records the quantity of 
walnuts they held. Finally, conforming changes replace the Board name 
acronym ``WMB'' with ``CWB'' in form numbers. In addition to these 
conforming changes, gender-specific language is changed from ``he'' and 
``his'' to ``he/she'' and ``his/her''. There are no viable alternatives 
to these proposed conforming changes.
    This action increases the assessment obligation imposed on 
handlers. While assessments impose some additional costs on handlers, 
the costs are minimal and uniform on all handlers. Some of the 
additional costs may be passed on to growers. However, these costs are 
offset by the benefits derived by the operation of the marketing order. 
In addition, the Board's meetings were widely publicized throughout the 
California walnut industry, and all interested persons were invited to 
attend the meetings and participate in Board deliberations on all 
issues. Like all Board meetings, the May 18, 2009, and February 27, 
2009, meetings were public meetings, and all entities, both

[[Page 56696]]

large and small, were able to express views on this issue.
    This final rule implements conforming changes to several Board 
forms previously approved by the Office of Management and Budget (OMB), 
under OMB No. 0581-0178, Vegetable and Specialty Crops. These changes 
will not affect the burden approved under that collection. The revised 
forms were submitted to OMB through a change of worksheet and approved 
on July 23, 2009. This action imposes no additional reporting or 
recordkeeping requirements on either small or large California walnut 
handlers. 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.
    USDA has not identified any relevant Federal rules that duplicate, 
overlap, or conflict with this rule.
    A proposed rule concerning this action was published in the Federal 
Register on August 28, 2009 (74 FR 44300). Copies of the proposed rule 
were also mailed or sent via facsimile to walnut handlers. Finally, the 
proposal was made available through the Internet by USDA and the Office 
of the Federal Register. A 30-day comment period ending September 28, 
2009, was provided to allow interested persons to respond to the 
proposal. No comments were received.
    A small business guide on complying with fruit, vegetable, and 
specialty crop marketing agreements and orders may be viewed at: https://www.ams.usda.gov/AMSv1.0/ams.fetchTemplateData.do?template=TemplateN&page=MarketingOrdersSmallBusinessGuide. Any questions about the compliance guide should be sent to 
Jay Guerber at the previously mentioned address in the FOR FURTHER 
INFORMATION CONTACT section.
    After consideration of all relevant material presented, including 
the information and recommendation submitted by the Board and other 
available information, it is hereby found that this rule, as 
hereinafter set forth, will tend to effectuate the declared policy of 
the Act.
    Pursuant to 5 U.S.C. 553, it is also found and determined that good 
cause exists for not postponing the effective date of this rule until 
30 days after publication in the Federal Register because the 2009-10 
marketing year began on September 1, 2009, and the marketing order 
requires that the rate of assessment for each year apply to all 
assessable walnuts handled during the year; the Board needs to have 
sufficient funds to pay its expenses which are incurred on a continuous 
basis; and handlers are aware of this action, which was unanimously 
recommended by the Board at a public meeting and is similar to other 
assessment rate actions issued in past years. Also, the reporting and 
recordkeeping regulations need to be brought into conformance with 
amendments made to the order in 2008, and revised forms need to be used 
by handlers in the 2009-10 marketing year. Finally, a 30-day comment 
period was provided for in the proposed rule, and no comments in 
opposition to the rule were received.

List of Subjects in 7 CFR Part 984

    Marketing agreements, Nuts, Reporting and recordkeeping 
requirements, Walnuts.

0
For the reasons set forth in the preamble, 7 CFR part 984 is amended as 
follows:

PART 984--WALNUTS GROWN IN CALIFORNIA

0
1. The authority citation for 7 CFR part 984 continues to read as 
follows:

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


0
2. Section 984.347 is revised to read as follows:


Sec.  984.347  Assessment rate.

    On and after September 1, 2009, an assessment rate of $0.0177 per 
kernelweight pound is established for California merchantable walnuts.

0
3. Amend Sec.  984.456 by revising paragraphs (a) and (b) to read as 
follows:


Sec.  984.456  Disposition of reserve walnuts and walnuts used for 
reserve disposition credit.

    (a) Beginning September 1 of any marketing year, a handler may 
become an agent of the Board to dispose of reserve walnuts of such 
marketing year. The agency shall be established upon execution of an 
``Agency Agreement for Reserve Walnuts'' setting forth the terms and 
conditions specified by the Board for the sale of reserve walnuts in 
authorized outlets.
    (b) Any handler who desires to transfer disposition credit in 
excess of his/her reserve obligation to another handler shall submit a 
request to the Board for such transfer on CWB Form No. 17 signed by 
both handlers and the Board shall credit such transfer.
* * * * *

0
4. Amend Sec.  984.464 by revising paragraph (c) to read as follows:


Sec.  984.464  Disposition of substandard walnuts.

* * * * *
    (c) Each handler who disposes of substandard walnuts to an approved 
crusher, livestock feed manufacturer or livestock feeder shall upon 
shipment report to the Board on CWB Form No. 20, the quantities 
disposed of or shipped.

0
5. Section 984.471 is revised to read as follows:


Sec.  984.471  Reports of handler inventory.

    Reports of handler inventory as of September 1, January 1, and 
April 1 of each marketing year shall be submitted to the Board on CWB 
Form No. 4 for inshell walnuts and on CWB Form No. 5 for shelled 
walnuts, on or before September 15, January 15, and April 15 
respectively, of that marketing year.

0
6. Section 984.472 is revised to read as follows:


Sec.  984.472  Reports of merchantable walnuts shipped.

    (a) Reports of merchantable walnuts shipped during a month shall be 
submitted to the Board on CWB Form No. 6 not later than the 5th day of 
the following month. Such reports shall include all shipments during 
the preceding month and shall show for inshell and shelled walnuts: the 
quantity shipped; whether they were shipped into domestic or export 
channels; and for exports, the quantity by country of destination. If a 
handler makes no shipments during any month he/she shall submit a 
report marked ``None.'' If a handler has completed his/her shipments 
for the season, he/she shall mark the report ``Completed,'' and he/she 
shall not be required to submit any additional CWB Form No. 6 reports 
during the remainder of that marketing year.
    (b) Reports of walnuts purchased directly from growers by handlers 
who are manufacturers or retailers shall be submitted to the Board on 
CWB Form No. 6, not later than the 5th day of the month following the 
month in which the walnuts were purchased. Such reports shall show the 
quantity of walnuts purchased and the quantity inspected and certified 
as merchantable walnuts.

0
7. Section 984.476 is revised to read as follows:


Sec.  984.476  Report of walnut receipts from outside of the United 
States.

    Each handler who receives walnuts from outside of the United States 
shall

[[Page 56697]]

file with the Board, on CWB Form No. 7, a report of the receipt of such 
walnuts. The report shall be filed as follows: On or before December 5 
for such walnuts received during the period September 1 to November 30; 
on or before March 5 for such walnuts received during the period 
December 1 to February 28 (February 29 in a leap year); on or before 
June 5 for such walnuts received during the period March 1 to May 31; 
and on or before September 5 for such walnuts received during the 
period June 1 to August 31. The report shall include the quantity of 
such walnuts received, the country of origin for such walnuts, and 
whether such walnuts are inshell or shelled. With each report, the 
handler shall submit a copy of a product tag issued by a DFA of 
California inspector for each receipt of such walnuts that includes the 
name of the person from whom such walnuts were received, the date such 
walnuts were received by the handler, the number of containers and the 
U.S. Custom's Service entry number, whether such walnuts are inshell or 
shelled, the quantity of such walnuts received, the country of origin 
for such walnuts, the name of the DFA of California inspector who 
issued the product tag, and the date such tag was issued.

0
8. Amend Sec.  984.480 by revising paragraph (d) to read as follows:


Sec.  984.480  Books and other records.

* * * * *
    (d) The quantities held on September 1, January 1, and April 1 of 
each marketing year.

    Dated: October 27, 2009.
Rayne Pegg,
Administrator, Agricultural Marketing Service.
[FR Doc. E9-26368 Filed 11-2-09; 8:45 am]
BILLING CODE 3410-02-P