Walnuts Grown in California; Increased Assessment Rate, 65883-65886 [2015-27359]

Agencies

• Agricultural Marketing Service
• DEPARTMENT OF AGRICULTURE

[Federal Register Volume 80, Number 208 (Wednesday, October 28, 2015)]
[Rules and Regulations]
[Pages 65883-65886]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-27359]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 984

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


Walnuts Grown in California; Increased Assessment Rate

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This rule implements a recommendation from the California 
Walnut Board (Board) for an increase of the assessment rate established 
for the 2015-16 and subsequent marketing years from $0.0189 to $0.0379 
per kernelweight pound of walnuts handled under the marketing order. 
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 will 
remain in effect indefinitely unless modified, suspended, or 
terminated.

DATES: Effective October 29, 2015.

FOR FURTHER INFORMATION CONTACT: Terry Vawter, Senior Marketing 
Specialist, or Martin Engeler, Regional Manager, California Marketing 
Field Office, Marketing Order and Agreement Division, Specialty Crops 
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, Specialty Crops 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 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 Orders 12866, 13563, and 13175.

[[Page 65884]]

    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 issued herein will 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 rule increases 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 handled.
    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 marketing year to marketing 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 the expenditures. Assessments and funds from 
the reserve will 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:

                                 Chart 1
------------------------------------------------------------------------
     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 merchantable shipments is an average of 
shipments during five prior years. 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 monetary reserve, this 
assessment rate will 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. Using $5,000,000 of reserve funds would leave 
an estimated $5,895,932 in reserve at the end of the 2015-16 marketing 
year, well within the requirements of the marketing order.
    The assessment rate will be 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 established by this rule 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

[[Page 65885]]

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.

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 rule 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 
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 agricultural producers 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. (13 CFR 121.201)
    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. The average price 
for 2014 has not 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, 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 each 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 rule increases the assessment rate established by the Board 
and applicable to 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 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, assessment income plus 
the $5,000,000 should 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, as outlined in 
Chart 1 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 determined 
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 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 should 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.
    Unspent 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. Prices have 
not yet been reported for 2014. The 2012 and 2013 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

[[Page 65886]]

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 increases the assessment obligation imposed on 
handlers. While assessments impose some additional costs on handlers, 
the costs are minimal and uniform on all handlers. These costs are 
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.
    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 are necessary as a result of this action. Should any 
changes become necessary, they would be submitted to OMB for approval.
    This rule 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. As noted in the 
initial regulatory flexibility analysis, USDA has not identified any 
relevant Federal rules that duplicate, overlap, or conflict with this 
action.
    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.
    A proposed rule concerning this action was published in the Federal 
Register on August 18, 2015, (80 FR 49930). Copies of the proposed rule 
were also provided to all 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 17, 2015, 
was provided for interested persons to respond to the proposal. No 
complete comments were received. Accordingly, no changes will be made 
to the rule as proposed.
    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.
    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 handlers are 
already receiving 2015-16 crop walnuts from growers, the marketing year 
began on September 1, 2015, and the assessment rate applies to all 
walnuts received during the 2015-16 and subsequent marketing years. 
Further, handlers are aware of this rule which was recommended at a 
public meeting. Also, a 30-day comment period was provided in the 
proposed rule.

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 
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: October 22, 2015.
Rex A. Barnes,
Associate Administrator, Agricultural Marketing Service.
[FR Doc. 2015-27359 Filed 10-27-15; 8:45 am]
BILLING CODE 3410-02-P