Walnuts Grown in California; Increased Assessment Rate, 49930-49933 [2015-20395]

Agencies

• Agricultural Marketing Service
• DEPARTMENT OF AGRICULTURE

[Federal Register Volume 80, Number 159 (Tuesday, August 18, 2015)]
[Proposed Rules]
[Pages 49930-49933]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-20395]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 984

[Doc. No. AMS-FV-15-0026; FV15-984-1 PR]


Walnuts Grown in California; Increased Assessment Rate

AGENCY:  Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would implement a recommendation from the 
California Walnut Board (Board) to increase the assessment rate 
established for the 2015-16 and subsequent marketing years from $0.0189 
to $0.0379 per kernelweight pound of assessable walnuts. The Board 
locally administers the marketing order and is comprised of growers and 
handlers of walnuts operating within the area of production. 
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 would remain 
in effect indefinitely unless modified, suspended, or terminated.

DATES: Comments must be received by September 17, 2015.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this proposed rule. Comments must be sent to the Docket 
Clerk, Marketing Order and Agreement Division, Fruit and Vegetable 
Program, AMS, USDA, 1400 Independence Avenue SW., STOP 0237, 
Washington, DC 20250-0237; Fax: (202) 720-8938; or Internet: https://www.regulations.gov. Comments should reference the document number and 
the date and page number of this issue of the Federal Register and will 
be available for public inspection in the Office of the Docket Clerk 
during regular business hours, or can be viewed at: https://

[[Page 49931]]

www.regulations.gov. All comments submitted in response to this 
proposed 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: Terry Vawter, Senior Marketing 
Specialist, or Martin Engeler, Regional Manager, California Marketing 
Field Office, Marketing Order and Agreement Division, Fruit and 
Vegetable Program, AMS, USDA; Telephone: (559) 487-5901, Fax: (559) 
487-5906, or Email: Terry.Vawter@ams.usda.gov or 
Martin.Engeler@ams.usda.gov.
    Small businesses may request information on complying with this 
regulation by contacting Jeffrey Smutny, Marketing Order and Agreement 
Division, Fruit and Vegetable Program, AMS, USDA, 1400 Independence 
Avenue SW., STOP 0237, Washington, DC 20250-0237; Telephone: (202) 720-
2491, Fax: (202) 720-8938, or Email: Jeffery.Smutny@ams.usda.gov.

SUPPLEMENTARY INFORMATION: This proposed 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 proposed rule 
in conformance with Executive Orders 12866, 13563, and 13175.
    This proposed 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 proposed herein would be applicable to all 
assessable walnuts beginning on September 1, 2015, 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 proposed rule would increase the assessment rate established 
for the Board for the 2015-16 and subsequent marketing years from 
$0.0189 to $0.0379 per kernelweight pound of assessable walnuts.
    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 2013-14 and subsequent marketing years, the Board 
recommended, and USDA approved, an assessment rate of $0.0189 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 June 4, 2015, and unanimously recommended 2015-16 
expenditures of $22,668,980, and an assessment rate of $0.0379 per 
kernelweight pound of assessable walnuts. In comparison, last year's 
budgeted expenditures were $9,861,810. The assessment rate of $0.0379 
is $0.019 per pound higher than the rate currently in effect. The 
quantity of assessable walnuts for the 2015-16 marketing year is 
estimated at 518,000 tons inshell or 466,200,000 kernelweight pounds, 
which is the five-year average of walnut production. At the recommended 
higher assessment rate of $0.0379 per kernelweight pound, the Board 
should collect approximately $17,668,980 in assessment income. The 
Board also recommended using $5,000,000 from its monetary reserve to 
help fund the increase in proposed expenditures. Assessments and funds 
from the reserve would be adequate to cover its 2015-16 budgeted 
expenses of $22,668,980.
    The Board noted that sales of California walnuts in the domestic 
market have been declining in recent years, and believes that more 
market development and promotion would reverse the trend. Thus, they 
are committed to increasing expenditures on domestic marketing 
promotion projects and programs.
    The following table compares major budget expenditures recommended 
by the Board for the 2014-15 and 2015-16 marketing years:

------------------------------------------------------------------------
     Budget expense categories           2014-15            2015-16
------------------------------------------------------------------------
Employee Expenses.................         $1,711,000         $1,846,500
Travel/Board Expenses/Annual Audit            190,000            191,000
Office Expenses...................            241,000            254,000
Controlled Purchases..............             10,000             10,000
Crop Acreage Survey...............                  0            100,000
Crop Estimate.....................            126,000            130,000
Production Research Director......             94,500             94,500
Production Research...............          1,600,000          1,700,000
Sustainability Project............             75,000             75,000
Grades and Standards Research.....            600,000            600,000
Domestic Market Development.......          5,742,000         18,478,440
Reserve for Contingency...........            166,310             32,790
------------------------------------------------------------------------

    The assessment rate recommended by the Board was derived by 
dividing anticipated assessment revenue needed by estimated shipments 
of California walnuts certified as merchantable. The 518,000 ton 
(inshell) estimate for

[[Page 49932]]

merchantable shipments is an average of shipments during five prior 
years, and that volume has routinely been used in recent years to 
formulate the crop estimate. Pursuant to Sec.  984.51(b) of the order, 
this figure is converted to a merchantable kernelweight basis using a 
factor of 0.45 (518,000 tons x 2,000 pounds per ton x 0.45), which 
yields 466,200,000 kernelweight pounds. At $0.0379 per pound, the new 
assessment rate should generate $17,668,980 in assessment income. Along 
with $5,000,000 from the Board's reserve fund, this assessment rate 
would allow the Board to cover its expenses.
    Section 984.69 of the order authorizes the Board to carry over 
excess funds into subsequent marketing years as a reserve, provided 
that funds already in the reserve do not exceed approximately two 
years' budgeted expenses. By using $5,000,000 from their reserve, the 
Board is ensuring that the funds within the reserve remain within the 
requirements of the marketing order.
    The proposed assessment rate would 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 would be effective for an indefinite 
period, the Board would 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 would evaluate Board 
recommendations and other available information to determine whether 
modification of the assessment rate is needed. Further rulemaking would 
be undertaken as necessary. The Board's 2015-16 budget and those for 
subsequent marketing years would be reviewed, and, as appropriate, 
approved by USDA.

Initial 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 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, 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 approximately 4,500 growers of California walnuts in the 
production area and approximately 90 handlers subject to regulation 
under the marketing order. The Small Business Administration (SBA) 
defines small businesses (13 CFR 121.201) as those having annual 
receipts of less than $750,000, and small agricultural service firms 
are defined as those having annual receipts of less than $7,000,000.
    According to USDA's National Agricultural Statistics Service's 
(NASS's) 2012 Census of Agriculture, approximately 89 percent of 
California's walnut farms were smaller than 100 acres. Further, NASS 
reports that the average yield for 2014 was 1.95 tons per acre, and the 
average price received for 2013 was $3,710 per ton. No average price 
for 2014 has been reported yet.
    A 100-acre farm with an average yield of 1.95 tons per acre would 
therefore have been expected to produce about 195 tons of walnuts 
during 2010-11. At $3,710 per ton, that farm's production would have 
had an approximate value of $723,450. Since Census of Agriculture 
information indicates that the majority of California's walnut farms 
are smaller than 100 acres, it could be concluded that the majority of 
the growers had receipts of less than $723,450 in 2014-15, well below 
the SBA threshold of $750,000. Thus, the majority of California's 
walnut growers would be considered small growers according to SBA's 
definition.
    According to information supplied by the Board, approximately two-
thirds of California's walnut handlers shipped merchantable walnuts 
valued under $7,000,000 during the 2014-15 marketing year; and would, 
therefore, be considered small handlers according to the SBA 
definition.
    This proposed rule would increase the assessment rate established 
for the Board and collected from handlers for the 2015-16 and 
subsequent marketing years from $0.0189 to $0.0379 per kernelweight 
pound of assessable walnuts. The Board unanimously recommended 2015-16 
expenditures of $22,668,980 and an assessment rate of $0.0379 per 
kernelweight pound of assessable walnuts. The proposed assessment rate 
of $0.0379 is $0.019 higher than the 2014-15 rate. The quantity of 
assessable walnuts for the 2015-16 marketing year is estimated at 
518,000 tons inshell weight, or 466,200,000 kernelweight pounds. Thus, 
the $0.0379 rate should provide $17,668,980 in assessment income.
    The Board also recommended using $5,000,000 from its monetary 
reserve to augment the assessment income. Thus, assessments plus the 
$5,000,000 would be adequate to meet this year's expenses. The 
increased assessment rate is primarily due to increased domestic 
marketing promotion and programs. The Board has become concerned with 
the declining sales of California walnuts in the domestic market, and 
believes that sagging sales can be improved through increased 
promotional activities. Thus, they recommended an increase in domestic 
market development from approximately $5.7 million during the 2014-15 
marketing year to approximately $18.4 million for the 2015-16 marketing 
year.
    The major expenses for the 2015-16 marketing year include: 
$1,846,500 for employee expenses; $191,000 for travel, board, and 
annual audit expenses; $254,000 for office expenses; $10,000 for 
controlled purchases; $100,000 for the crop acreage survey; $130,000 
for the crop estimate; $94,500 for the salary of the Production 
Research Director; $1,700,000 for production research; $75,000 for a 
sustainability project; $600,000 for grades and standards research; 
$18,478,440 for domestic market development projects; and $32,790 for 
the contingency reserve.
    In comparison, these expenditures for the 2014-15 marketing year 
were: $1,711,000 for employee expenses; $190,000 for travel, board, and 
annual audit expenses; $241,000 for office expenses; $10,000 for 
controlled purchases; $126,000 for the crop estimate; $94,500 for the 
salary of the Production Research Director; $1,600,000 for production 
research; $75,000 for the sustainability project; $600,000 for grades 
and standards research; $5,742,000 for domestic market development 
projects; and $166,310 for the contingency reserve. There was no 
acreage survey expense in the 2014-15 marketing year.
    The Board reviewed and unanimously recommended 2015-16 expenditures 
of $22,668,980. Prior to arriving at this budget, the Board considered 
alternative expenditure levels, such as spending an additional 
$5,000,000, or $10,000,000 for domestic market development projects, as 
well as alternate assessment rate levels. They ultimately decided that 
the recommended expenditure and assessment levels were reasonable and 
necessary to assist in improving domestic sales, as well as properly 
administering the order. The assessment rate of $0.0379 per 
kernelweight pound of assessable walnuts was derived by

[[Page 49933]]

dividing anticipated assessment revenue needed by expected shipments of 
California walnuts certified as merchantable. Merchantable shipments 
for the year are estimated at 466,200,000 pounds. It was determined 
that $17,668,980 in assessment income was needed, and assessment income 
combined with funds from the monetary reserve would allow the Board to 
cover its expenses of $22,668,980.
    The Board also considered information from various committees who 
deliberate and formulate their own budgets of expenses and make 
recommendations to the Board. The committees include the Market 
Development, Production Research, Budget and Personnel, and Grades and 
Standards committees.
    Unexpended funds may be retained in a financial reserve, provided 
that funds in the financial reserve do not exceed approximately two 
years' budgeted expenses.
    According to NASS, the season average grower prices for the years 
2012 and 2013 were $3,030 and $3,710 per ton, respectively. No prices 
have yet been reported for 2014. These prices provide a range within 
which the 2015-16 season average price could fall. Dividing these 
average grower prices by 2,000 pounds per ton provides an inshell price 
per pound range of $1.52 to $1.86. Dividing these inshell per pound 
prices by the 0.45 conversion factor (inshell to kernelweight) 
established in the order yields a 2015-16 price range estimate of $3.38 
to $4.13 per kernelweight pound of assessable walnuts.
    To calculate the percentage of grower revenue represented by the 
assessment rate, the assessment rate of $0.0379 per kernelweight pound 
is divided by the low and high estimates of the price range. The 
estimated assessment revenue for the 2015-16 marketing year as a 
percentage of total grower revenue will thus likely range between 0.92 
and 1.11 percent.
    This action would increase 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 
would be offset by the benefits derived by the operation of the 
marketing order. In addition, the Board's meeting was widely publicized 
throughout the California walnut industry, and all interested persons 
were invited to attend the meeting and encouraged to participate in 
Board deliberations on all issues. Like all Board meetings, the June 4, 
2015, meeting was a public meeting and all entities, both large and 
small, were free to express views on this issue. 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 the Office of Management and Budget (OMB) and 
assigned OMB No. 0581-0178 (Walnuts Grown in California). No changes in 
those requirements as a result of this action are necessary. Should any 
changes become necessary, they would be submitted to OMB for approval.
    This proposed rule would impose 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 action.
    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/MarketingOrderSmallBusinessGuide. Any questions about 
the compliance guide should be sent to Jeffrey Smutny at the previously 
mentioned address in the FOR FURTHER INFORMATION CONTACT section.
    A 30-day comment period is provided to allow interested persons to 
respond to this proposed rule. Thirty days is deemed appropriate 
because: (1) The 2015-16 marketing year begins on September 1, 2015, 
and the marketing order requires that the rate of assessment for each 
marketing year apply to all assessable walnuts handled during the year; 
(2) the Board needs to have sufficient funds to pay its expenses, which 
are incurred on a continuous basis; and (3) 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.

List of Subjects in 7 CFR Part 984

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

    For the reasons set forth in the preamble, 7 CFR part 984 is 
proposed to be 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, 2015, an assessment rate of $0.0379 per 
kernelweight pound is established for California merchantable walnuts.

    Dated: August 13, 2015.
Rex A. Barnes,
Associate Administrator, Agricultural Marketing Service.
[FR Doc. 2015-20395 Filed 8-17-15; 8:45 am]
 BILLING CODE 3410-02--P