Walnuts Grown in California; Secretary's Decision and Referendum Order on Amendments to Marketing Order No. 984, 66491-66498 [2020-22334]
Download as PDF
<![CDATA[
66491
Proposed Rules
Federal Register
Vol. 85, No. 203
Tuesday, October 20, 2020
This section of the FEDERAL REGISTER
contains notices to the public of the proposed
issuance of rules and regulations. The
purpose of these notices is to give interested
persons an opportunity to participate in the
rule making prior to the adoption of the final
rules.
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 984
[Docket No. AO–SC–20–J–0011; AMS–SC–
19–0082; SC19–984–1]
Walnuts Grown in California;
Secretary’s Decision and Referendum
Order on Amendments to Marketing
Order No. 984
Agricultural Marketing Service,
USDA.
ACTION: Proposed rule and referendum
order.
AGENCY:
This decision proposes
amendments to Marketing Order No.
984 (Order), which regulates the
handling of walnuts grown in California
and provides growers with the
opportunity to vote in a referendum to
determine if they favor the changes. The
California Walnut Board (Board), which
locally administers the Order,
recommended proposed amendments
that would add authority for the Board
to provide credit for certain market
promotion expenses paid by handlers
against their annual assessments due
under the Order and establish
requirements to effectuate the new
authority. In addition, the Agricultural
Marketing Service (AMS) proposed to
make any such changes as may be
necessary to conform to any amendment
that may result from the public hearing.
DATES: The referendum will be
conducted from November 30, 2020,
through December 11, 2020. The
representative period for the purpose of
the referendum is September 1, 2018,
through August 31, 2019.
ADDRESSES: Marketing Order and
Agreement Division, Specialty Crops
Program, AMS, USDA, 1400
Independence Avenue SW, Stop 0237,
Washington, DC 20250–0237.
FOR FURTHER INFORMATION CONTACT:
Matthew Pavone, Chief, Rulemaking
Services Branch, Marketing Order and
Agreement Division, Specialty Crops
SUMMARY:
VerDate Sep<11>2014
16:48 Oct 19, 2020
Jkt 253001
Program, AMS, USDA, 1400
Independence Avenue SW, Stop 0237,
Washington, DC 2025–0237; Telephone:
(202) 720–2491, Fax: (202) 720–8938, or
Andrew Hatch, Deputy Director,
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:
Matthew.Pavone@usda.gov or
Andrew.Hatch@usda.gov.
Small businesses may request
information on this proceeding by
contacting Richard Lower, 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: Richard.Lower@
usda.gov.
SUPPLEMENTARY INFORMATION: Prior
documents in this proceeding: Notice of
Hearing issued on February 2, 2020, and
published in the February 11, 2020,
issue of the Federal Register (85 FR
7669); a Correction to the Notice of
Hearing issued on April 9, 2020, and
published in the April 10, 2020, issue of
the Federal Register (85 FR 20202); and
a Recommended Decision issued on July
8, 2020, and published in the August 5,
2020, issue of the Federal Register (85
FR 47305).
This action is governed by the
provisions of sections 556 and 557 of
title 5 of the United States Code and,
therefore, is excluded from the
requirements of Executive Orders
12866, 13563, and 13175. Additionally,
because this rule does not meet the
definition of a significant regulatory
action it does not trigger the
requirements contained in Executive
Order 13771. See the Office of
Management and Budget’s (OMB)
Memorandum titled ‘‘Interim Guidance
Implementing Section 2 of the Executive
Order of January 30, 2017, titled
‘Reducing Regulation and Controlling
Regulatory Costs’ ’’ (February 2, 2017).
Notice of this rulemaking action was
provided to tribal governments through
the Department of Agriculture’s (USDA)
Office of Tribal Relations.
Preliminary Statement
The proposed amendments are based
on the record of a public hearing held
via videoconference technology on
PO 00000
Frm 00001
Fmt 4702
Sfmt 4702
April 20 and 21, 2020. The hearing was
held pursuant to the provisions of the
Agricultural Marketing Agreement Act
of 1937, as amended (7 U.S.C. 601–674),
hereinafter referred to as the ‘‘Act,’’ and
the applicable rules of practice and
procedure governing the formulation of
marketing agreements and orders (7 CFR
part 900). Notice of this hearing was
published in the Federal Register on
February 11, 2020 (85 FR 7669)
followed by a Correction to the Notice
of Hearing issued on April 9, 2020, and
published in the April 10, 2020, issue of
the Federal Register (85 FR 20202). The
notice of hearing contained one
proposal submitted by the Board and
one submitted by USDA.
The amendments proposed by the
Board in this decision would add
authority for the Board to provide credit
for certain market promotion expenses
paid by handlers against their annual
assessments due under the Order and
would establish requirements to
effectuate the new authority.
USDA proposed to make any such
changes as may be necessary to 7 CFR
part 984 (referred to as ‘‘the Order’’) to
conform to any amendment that may be
adopted, or to correct minor
inconsistencies and typographical
errors. As such, USDA is recommending
two clarifying changes: One to the
proposed language in § 984.46(a) and
the other to the proposed regulatory text
in § 984.546(e)(5)(iii).
The proposed language in § 984.46(a)
would add credit-back authority to the
Order. USDA has determined that the
language presented in the Notice of
Hearing lacked a reference to the
proposed, new paragraph (b) and only
included a reference to proposed, new
paragraph (c). This correction was
discussed at the hearing and a witness
clarified that proposed, new paragraphs
(b) and (c) were both necessary
references in the proposed revision to
§ 984.46(a), and that the omission of the
reference to paragraph (b) was an
oversight. USDA has revised the
proposed language so that both
proposed new paragraphs are referenced
in the proposed regulatory text of this
decision.
USDA is also recommending a
clarifying change to the proposed
regulatory text in § 984.546(e)(5)(iii).
The originally proposed wording of this
paragraph by the Board does not
adequately state that in all promotional
E:\FR\FM\20OCP1.SGM
20OCP1
66492
Federal Register / Vol. 85, No. 203 / Tuesday, October 20, 2020 / Proposed Rules
activities, regardless of whether a
handler is operating independently or in
conjunction with a manufacturer, or
whether promoting a product that is
solely walnut content or walnuts are a
partial ingredient, the words ‘‘California
Walnuts’’ must be included in the
labeling in order for that activity to
qualify as a creditable expenditure.
USDA is recommending this change in
conformance with witness testimony
clarifying the intent of the proposed
language. The revised language is
included in the proposed regulatory text
of this decision.
Upon the basis of evidence
introduced at the hearing and the record
thereof, the Administrator of AMS on
July 8, 2020, filed with the Hearing
Clerk, USDA, a Recommended Decision
and Opportunity to File Written
Exceptions thereto by September 4,
2020. No exceptions were filed.
Final Regulatory Flexibility Analysis
Pursuant to the requirements set forth
in the Regulatory Flexibility Act (RFA),
AMS has considered the economic
impact of this action on small entities.
Accordingly, AMS has prepared this
final regulatory flexibility analysis.
The purpose of the RFA is to fit
regulatory actions to the scale of
businesses subject to such actions so
that small businesses will not be unduly
or disproportionately burdened.
Marketing orders and amendments
thereto are unique in that they are
normally brought about through group
action of essentially small entities for
their own benefit.
During the hearing held on April 20
and 21, 2020, interested parties were
invited to present evidence on the
probable regulatory impact on small
businesses of the proposed amendment
to the Order. The evidence presented at
the hearing shows that the proposed
amendment would not have a
significant negative economic impact on
a substantial number of small
agricultural producers or handlers.
Eight grower and handler witnesses
testified at the hearing. All eight
witnesses were growers and five were
also handlers. Four testified that they
were small walnut growers according to
the Small Business Administration
(SBA) definition and four were large. Of
the five who were handlers, one was
small, and four were large.
All five who were both handlers and
growers expressed support for the
proposed amendment. Of the three
remaining grower witnesses, two stated
their support. One grower reported that
he had concerns but did not specifically
oppose the amendment. Therefore, in
their role as growers, 7 out of 8
VerDate Sep<11>2014
16:48 Oct 19, 2020
Jkt 253001
witnesses supported the amendment,
and stated that they expected to see
significant benefits from the additional
promotion expenditure that would be
authorized by the amendment and
would not incur additional costs. The
benefits and impacts of the proposed
amendment are explained in the
following three sections: (a) Walnut
Industry Background and Overview, (b)
Domestic Market Demand for Walnuts,
and (c) Estimated Economic Impact of
the Proposed Credit-Back Program.
Walnut Industry Background and
Overview
According to the hearing record, there
are approximately 4,400 producers and
92 handlers in the production area.
Record evidence includes reference to a
study showing that the walnut industry
contributes 85,000 jobs to the economy,
directly and indirectly.
A small handler as defined by the
SBA (13 CFR 121.201) is one that
grosses less than $30,000,000 annually.
A small grower is one that grosses less
than $1,000,000 annually.
Record evidence showed that
approximately 82 percent of California’s
walnut handlers (75 out of 92) shipped
merchantable walnuts valued under $30
million during the 2018–2019 marketing
year and would therefore be considered
small handlers according to the SBA
definition.
Data in the hearing record from the
2017 Agricultural Census, published by
USDA’S National Agricultural Statistics
Service (NASS), showed that 86 percent
of California farms growing walnuts had
walnut sales of less than $1 million.
In an alternative computation using
NASS data from the hearing record, the
3-year average crop value (2016–2017 to
2018–2019) was $1.24 billion. Average
bearing acres over that same 3-year
period were 333,000. Dividing crop
value by acres yields a revenue per acre
estimate of $3,733. Using these
numbers, it would take approximately
268 acres ($1,000,000/$3,733) to yield
$1 million in annual walnut sales. The
2017 Agricultural Census data show that
80 percent of walnut farms in 2017 were
below 260 acres. Therefore, well over
three-fourths of California walnut farms
would be considered small businesses
according to the SBA definition.
Walnuts bloom in March and April,
and the harvest of the earliest varieties
begins in the first part of September. As
later varieties mature, the harvest
continues into November. The crop
comes in from the field at about 25
percent moisture and the hulling and
drying process typically takes place
within 24 hours. The nuts are hulled
(removal of the green husks) and dried
PO 00000
Frm 00002
Fmt 4702
Sfmt 4702
to about seven percent moisture before
delivery to a handler. Some growers
have their own hulling and drying
equipment and others pay for this
service. Drying to seven percent
moisture keeps the nuts stable in storage
and minimizes deterioration.
Once received by the handler,
shelling varieties are shelled and have a
shelf-life of approximately 12 months.
Unshelled varieties are cleaned, sized,
and put into storage. Both shelled and
unshelled nuts are shipped and
distributed to customers throughout the
marketing year. Approximately 75
percent of the California walnut crop is
sold as kernels (shelled). Witnesses
testified that advances in processing and
packaging technologies continue to
improve product quality, consistency,
and shelf-life.
Weather is one of two main factors
driving crop size variability, a
significant feature of the walnut market.
In some years, climatic conditions may
contribute to fungus or other issues that
damage the crop and cause nuts to fall
prior to harvest. With walnuts grown
over a large geographic area, some
regions will have better weather than
others in any particular year. Crops
were larger in 2015 and 2018 and
smaller in 2017 and 2019.
The other key variability factor is
‘‘alternate bearing’’ (a natural tendency
of several types of tree nuts, in which
a large crop is often followed by a small
crop). As trees mature, alternate bearing
can become more pronounced, and for
many years this had a big impact on
crop size variability. With recent new
plantings, the average age of producing
trees in California has dropped. There is
less of an alternate bearing tendency
with younger trees. Crop sizes have
become less variable as younger trees
reach bearing age, which typically
occurs in the fifth year. Older trees are
replaced with varieties with improved
quality characteristics to meet changing
consumer demand. Newer varieties are
generally more productive, contributing
to higher yields per acre and greater
production.
The hearing record shows that crop
size variability, particularly the reduced
availability of walnuts in short crop
years, continues to contribute to loss of
demand, as some buyers of kernels as
ingredients in baked goods and other
products shift to other tree nuts. These
lost market opportunities are additional
factors in the industry’s interest in
product diversification through a creditback program.
Additional factors that affect current
market conditions are the longer-term
supply impacts of growers responding
to market signals. If producers decide to
E:\FR\FM\20OCP1.SGM
20OCP1
Federal Register / Vol. 85, No. 203 / Tuesday, October 20, 2020 / Proposed Rules
plant more trees because of strong
market prices, such as in the 2011–2014
time period, they receive those trees one
or two years later, based on contracts
that vary with the type of nursery stock.
This time lag, and penalties associated
with dropping a planting contract,
contribute to continued planting even
after market prices drop and growers
might otherwise not want to plant. For
these reasons, there is a delayed
response in planting new trees, and a
delayed response in reducing the level
of planting when prices and revenue per
acre decline, such as in 2015–2018. One
witness estimated that the rate of tree
planting in recent years is about three
times greater than tree removal. Another
key factor is that the time from tree
planting to bearing nuts is typically five
years.
Record evidence shows that walnut
production exceeded 600,000 inshell
tons every season starting in 2015–2016.
Witnesses testified that a key factor in
their support of new demand expansion
initiatives is their expectation that
walnut production is likely to be at or
above 700,000 tons within one or two
seasons and may exceed 800,000 tons a
few years later.
The hearing record shows that farm
management decisions made years ago
have a significant impact on walnut
supply for the coming years,
contributing to grower and handler
support for major initiatives meant to
increase demand, including credit-back.
About two-thirds of the walnut crop
is typically exported, and for many
years, increasing international demand
facilitated expansion of the walnut
market. China emerged as a major
walnut buyer, but also began large scale
planting of walnuts. Prices continued to
improve for years, reaching $1.86 per
pound ($3,710 per ton) in 2013–2014.
As China’s new plantings started
coming into production, world walnut
prices began to decline. By 2017–2018,
walnut prices rebounded as Turkey and
other Middle Eastern countries took up
some of the slack in world market
demand, according to the hearing
record.
Hearing evidence provided various
reasons for the decline in walnut crop
value since the peak level of $1.9 billion
in 2014–2015. One was reduced export
market opportunities. With increased
66493
trade barriers from China and India,
significant volumes were shifted into
other export markets, driving prices
downward. Walnut production was also
growing in Chile and Europe. The 2018–
2019 price fell to $0.65 per pound
($1,300 per ton). With the reduced
reliability of the international market,
the industry is increasingly looking for
ways to increase demand in the U.S.
domestic market.
The hearing record shows that most of
the grower and handler witnesses stated
that a key reason for seeking credit-back
authority was the need to increase
demand after years of unfavorable
marketing conditions. Witnesses stated
that a key factor in their support of
seeking new ways to increase market
demand was several years of
deteriorating profitability.
Hearing evidence included data that
facilitated comparing farm revenue per
acre to cost of production, a key
measure of walnut farm profitability.
Tables 2 and 3 illustrate the decline in
profitability by comparing two four-year
periods with very different financial
outcomes, 2011 to 2014 and 2015 to
2018.
TABLE 2—CALIFORNIA WALNUTS: COST OF PRODUCTION DATA FROM UNIVERSITY OF CALIFORNIA EXTENSION
Year
2011
2012
2013
2014
Average yield:
Tons per acre 1
Average yield:
Pounds per
acre
Sample yield
(from Table 5
of UC study)
that is closest
to NASS yield
in column (b) 2
Sample costs
per acre
associated
with yield
shown in
column (c) 2
(a)
(b)
(c)
(d)
.................................................................................................
.................................................................................................
.................................................................................................
.................................................................................................
1.74
1.84
1.76
1.97
3,480
3,680
3,520
3,940
............................
3,400
4,000
............................
............................
$3,318
4,015
............................
2011–2014 avg .........................................................................
1.83
............................
............................
3,667
.................................................................................................
.................................................................................................
.................................................................................................
.................................................................................................
2.02
2.19
1.88
1.93
4,040
4,380
3,760
3,860
4,500
............................
4,500
4,500
4,509
............................
5,574
5,283
2015–2018 avg .........................................................................
2.01
............................
............................
5,122
2015
2016
2017
2018
1 Source:
NASS, USDA.
‘‘Table 5. Ranging Analysis—Walnuts—Costs per Acre and Per Pound at Varying Yields to Produce Walnuts.’’ Table 5 appears in
each of the following five UC Cooperative Extension studies: ‘‘Walnuts Cost and Returns Study, Sacramento Valley,’’ UC Coop. Extension—
2012, 2015, 2018. ‘‘Walnuts Cost and Returns Study, San Joaquin Valley North’’, UC Coop. Extension—2013, 2017. Sample yields appear in
column 2 of Table 5 in each publication.
2 Source:
Table 2 displays cost of production
numbers that represent both time
periods. University of California
Extension conducted two cost of
production studies in the 2011–2014
time period, and three studies between
2015 and 2019. Each of the five studies
had ranges of production cost figures
associated with different yields. To be
VerDate Sep<11>2014
20:29 Oct 19, 2020
Jkt 253001
representative of a typical or average
walnut producer, the costs selected to
present in column (d) were associated
with University of California study
yields (column c) closest to the NASS
average annual yields for that year
(column b).
The average production cost per acre
figures for 2011–2014 and 2015–2018
PO 00000
Frm 00003
Fmt 4702
Sfmt 4702
were $3,667 and $5,122, respectively.
Those figures were transferred to
column (d) of Table 3, and the
associated average yields (1.83 and 2.10
tons per acre) appear in column (b) of
Table 3.
E:\FR\FM\20OCP1.SGM
20OCP1
66494
Federal Register / Vol. 85, No. 203 / Tuesday, October 20, 2020 / Proposed Rules
TABLE 3—CALIFORNIA WALNUTS: PRODUCER GROSS RETURN, COST OF PRODUCTION, NET RETURN
Range of years
Season
average
producer
price,
$/ton 1
Average yield:
Tons per
acre 2
Producer
gross return
per acre
Total cost of
production per
acre 3
Producer net
return per acre
(gross return
minus cost)
(a)
(b)
(c) (a) * (b)
(d)
(e) (c)¥(d)
2011–2014 .......................................................................
2015–2018 .......................................................................
$3,245
1,828
1.83
2.01
$5,930
3,664
$3,667
5,122
$2,264
¥1,458
1 Source:
NASS, USDA.
averages computed in Table 1, based on annual NASS yield data.
in Table 1, based on U. of California Extension cost of production studies. For 2011–2014, the cost of production per acre is a
two-year average (2012, 2013). For 2015–2018, the cost per acre is a 3-year average (2015, 2017, 2018).
2 Four-year
3 Computed
Table 3 uses the data from Table 2 to
show how the walnut farm profitability
declined between the two time periods.
Producer gross returns per acre for each
of the two four-year time periods
(column (c)) were computed by
multiplying average yield by average
price. Subtracting cost of production in
column (d) yields the producer net
return in column (e).
The two producer net return numbers
in column (e) of Table 3 are the key
results of this cost and return analysis.
Four years of walnut farm profitability,
represented by producer net return per
acre of $2,264 for 2011–2014, were
followed by four years of difficult
market conditions (2015–2018), with a
negative average net return figure
(¥$1,458). This analysis provides a
numerical estimate that bears out the
witness testimony that emphasized that
a dramatic downward shift in their
economic fortunes in recent years was a
major factor in their support for a creditback program that would leverage
additional financial resources for
handler-based promotional
expenditures oriented toward increasing
domestic demand for walnut products.
Domestic Market Demand for Walnuts
With reduced export market
opportunities, the California industry
focused in recent years on ways to
expand the domestic market. Record
evidence showed that domestic per
capita consumption has been
approximately one-half pound for many
years.
The Board commissioned a consumer
survey (with 1,000 respondents)
showing that walnut products were
reaching 40 percent of U.S. households,
indicating significant expansion
potential. The study pointed out
significant differences among age
groups, with 22 percent of those aged 18
to 24 being walnut consumers. Certain
age groups are therefore the targets for
demand expansion.
The majority of walnuts going into the
domestic market are kernels (shelled).
One key segment is retail sales, with the
main product being bags of raw kernels.
Another major segment is industrial—
use as an ingredient by food
manufacturers in making pastries and
other products. Record evidence shows
that walnut industry participants
consider these two segments to be a
narrow group of uses which needs to be
expanded.
Witnesses reported that among the
Board’s strategic objectives, the top
priority is retail sector growth, and the
snack category in particular. However,
current Board marketing programs are
generic in nature and focus largely on
the traditional form of walnuts: Raw.
Raw walnuts as a snack product are
important components but expanding
retail market development beyond the
raw product is considered critical by
industry participants, according to the
hearing record. New consumption
growth will mainly be achieved through
new products and forms that appeal to
a larger consumer audience, witnesses
stated.
According to the hearing record,
opportunities for significant walnut
demand expansion include snack
products such as roasted, salted, glazed,
and trail mixes, and other new products
such as beverages, spreads and meat
alternatives. Witnesses stated that these
demand expansion opportunities are
best achieved through brand advertising
and other handler-based promotional
approaches, rather than the generic
promotion currently authorized through
the Order. Witnesses reported that this
is a key reason why adding credit-back
authority would be helpful for demand
expansion—by providing incentives for
handler-based product development and
promotion.
A small handler stated that if creditback authority is added to the marketing
order, his firm would likely partner
with another company to create a snack
product, providing evidence that creditback authority would help small
handlers as well as large ones.
Estimated Economic Impact of the
Proposed Credit-Back Program
The hearing record included evidence
of the estimated impact of the creditback program on walnut grower total
revenue and net return. Table 4
illustrates the impact of handlers taking
advantage of the credit-back incentive
by increasing their promotional
spending. Based on the assumptions
shown in the table, walnut growers
would see increased total revenue of
$21.1 million (row K) and increased net
return of $16.8 million (row L). The
table shows that there are four
computational steps that lead up to the
final computations in rows K and L.
The first step is to estimate a typical
annual budget of the Board ($25 million
in row C) by multiplying the current
assessment rate paid to the Board
($0.04) by a number representing an
annual walnut production level
representative of recent years (625
million hundredweight [cwt]).
TABLE 4—CALCULATING THE IMPACT OF THE WALNUT CREDIT-BACK PROGRAM ON PRODUCER TOTAL REVENUE AND NET
RETURN
Calculation
A. Total production (cwt) .................................................................................................................................
B. Assessment rate ($/cwt) .............................................................................................................................
C. Total Board budget .....................................................................................................................................
VerDate Sep<11>2014
16:48 Oct 19, 2020
Jkt 253001
PO 00000
Frm 00004
Fmt 4702
Sfmt 4702
E:\FR\FM\20OCP1.SGM
C=A*B
20OCP1
Value
625,000,000
$0.04
$25,000,000
Federal Register / Vol. 85, No. 203 / Tuesday, October 20, 2020 / Proposed Rules
66495
TABLE 4—CALCULATING THE IMPACT OF THE WALNUT CREDIT-BACK PROGRAM ON PRODUCER TOTAL REVENUE AND NET
RETURN—Continued
Calculation
D. Share of budget allocated to Credit-Back program (%) .............................................................................
E. Credit-Back program budget ......................................................................................................................
F. Credit-Back rate(%) ....................................................................................................................................
G. Total advertising and promotion expenditures with Credit-Back program .................................................
H. Increase in advertising and promotion expenditure ...................................................................................
I. Increase in TOTAL revenue per dollar of advertising/promotion 1 ..............................................................
J. Increase in NET return per dollar of advertising/promotion 1 ......................................................................
K. Increase in TOTAL revenue .......................................................................................................................
L. Increase in NET return ................................................................................................................................
E=C*D
G = E/F
H = G¥E
K=H*I
L=H*J
Value
10%
$2,500,000
70%
$3,571,429
$1,071,429
$19.75
$15.67
$21,160,714
$16,789,286
1 Estimates of total revenue and net return per dollar spent on promotion are from a report prepared for the Board by Dr. Harry M. Kaiser of
Cornell University entitled ‘‘Economic Evaluation of the California Walnut Board’s Advertising and Promotion Programs: An Analysis of the Direct
and Indirect Impacts’’, July 5, 2018.
If the Board allocated 10 percent of a
$25 million annual budget to the creditback program, the funds available to
allocate to pay handlers for eligible
promotional spending would be $2.5
million (row E). According to the
hearing record, this is a level of creditback funding supported by growers and
handlers.
Handlers would receive 70 percent of
the amount they expended on creditable
expenditures. If the Board expended its
full annual credit-back budget of $2.5
million, the total promotional
expenditure would rise to $3.57 million
($2.5/0.70) as shown in row G. The
credit-back expenditure would create
the incentive for handlers to spend the
$2.5 million plus an additional $1.07
million (row H).
The final step is the overall economic
impact on the walnut market of the
increased spending on advertising and
promotion. A 2018 economic analysis of
walnut promotion impacts by Dr. Harry
Kaiser (cited in the footnote of Table 4)
showed that each dollar of walnut
advertising and promotional
expenditure yielded $19.75 in total
revenue and $15.67 in net return to
walnut growers (rows I and J).
Multiplying $1.07 million by those two
promotional impact-per-dollar figures
yields the estimated increase in total
revenue per year and net return per year
of $21.16 million and $16.79 million,
respectively, shown in rows K and L.
Net return is what is returned to walnut
growers after accounting for the cost of
the promotion program.
Record evidence indicates that all
industry members, growers and
handlers, would benefit proportionally
from an increase in demand brought
about due to the credit-back program.
The credit-back program would be
funded by allocating to the credit-back
program a portion of the total Board
promotional budget, funded at the
current assessment rate. With no
increase in the Board’s assessment rate,
VerDate Sep<11>2014
16:48 Oct 19, 2020
Jkt 253001
there would be no increased costs to
growers or handlers.
All handlers, large and small, would
benefit proportionally by participating
in the credit-back program. Handlers
will participate only if they decide that
they will benefit, and would incur no
costs if they choose not to participate.
No handler can benefit
disproportionately from the program,
since a handler’s maximum credit-back
payment from the Board is based on that
handler’s share of total industry
acquisitions from the prior year,
according to the hearing record. As cited
above, a small handler testified that
their smaller size would not be a
hindrance to using the credit-back
program, because his walnut processing
operation could develop a new product
in partnership with another firm.
Consumers would benefit from
product diversification of the walnut
market. They could choose to buy any
of the new products that become
available, thereby adding new foods to
their diet, at prices that fit within their
food budget.
The record shows that the proposal to
add authority to establish the creditback program would, in itself, have no
significant economic impact on
producers or handlers of any size. If the
proposed authority and the
accompanying requirements were
implemented, both benefits and costs
could be anticipated. Costs of
complying with the new program could
include handler maintenance and
delivery of receipts and documentation
for reimbursement of creditable
expenditures, but these would be
minimal and are considered standard
business practices. For the reasons
described above, it is determined that
the benefits of adding authority for a
credit-back program would outweigh
the potential costs of future
implementation.
USDA has not identified any relevant
Federal rules that duplicate, overlap or
PO 00000
Frm 00005
Fmt 4702
Sfmt 4702
conflict with this proposed rule. These
amendments are intended to improve
the operation and administration of the
Order and to assist in the marketing of
California walnuts.
Board meetings regarding these
proposals, as well as the hearing date
and location, were widely publicized
throughout the California walnut
industry, and all interested persons
were invited to attend the meetings and
the hearing to participate in Board
deliberations on all issues. All Board
meetings and the hearing were public
forums, and all entities, both large and
small, were able to express views on
these issues. Interested persons are
invited to submit information on the
regulatory impacts of this action on
small businesses.
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.
Paperwork Reduction Act
Current information collection
requirements that are part of the Federal
marketing order for California walnuts
(7 CFR part 984) are approved under
OMB No. 0581–0178 Vegetables and
Specialty Crops. No changes in these
requirements are anticipated as a result
of this proceeding. Should any such
changes become necessary, they would
be submitted to OMB for approval.
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 Government Paperwork Elimination
Act, which requires Government
agencies in general to provide the public
the option of submitting information or
E:\FR\FM\20OCP1.SGM
20OCP1
66496
Federal Register / Vol. 85, No. 203 / Tuesday, October 20, 2020 / Proposed Rules
transacting business electronically to
the maximum extent possible.
Civil Justice Reform
The amendments to the Order
proposed herein have been reviewed
under Executive Order 12988, Civil
Justice Reform. They are not intended to
have retroactive effect. If adopted, the
proposed amendments would not
preempt any State or local laws,
regulations, or policies, unless they
present an irreconcilable conflict with
this proposal.
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. A 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
no later than 20 days after the date of
entry of the ruling.
Findings and Conclusions
The findings and conclusions, rulings,
and general findings and determinations
included in the Recommended Decision
set forth in the August 5, 2020, issue of
the Federal Register (85 FR 47305) are
hereby approved and adopted.
Marketing Order
Annexed hereto and made a part
hereof is the document entitled ‘‘Order
Amending the Order Regulating the
Handling of Walnuts Grown in
California.’’ This document has been
decided upon as the detailed and
appropriate means of effectuating the
foregoing findings and conclusions.
It is hereby ordered, That this entire
decision be published in the Federal
Register.
Referendum Order
It is hereby directed that a referendum
be conducted in accordance with the
procedure for the conduct of referenda
(7 CFR 900.400 through 900.407) to
determine whether the annexed order
amending the order regulating the
handling of walnuts grown in California
is approved or favored by growers, as
defined under the terms of the order,
who during the representative period
VerDate Sep<11>2014
16:48 Oct 19, 2020
Jkt 253001
were engaged in the production of
walnuts in the production area.
The representative period for the
conduct of such referendum is hereby
determined to be September 1, 2018,
through August 31, 2019.
The agents of the Secretary to conduct
such referendum are hereby designated
to be Terry Vawter and Jeffery Rymer,
California Marketing Field Office,
Marketing Order and Agreement
Division, Specialty Crops Program,
AMS, USDA; telephone: 559–487–5901;
or fax: 559–487–5906 or Email:
Terry.Vawter@usda.gov or
Jefferym.Rymer@usda.gov, respectively.
Order Amending the Order Regulating
the Handling of Walnuts Grown in
California 1
Findings and Determinations
The findings and determinations
hereinafter set forth are supplementary
to the findings and determinations that
were previously made in connection
with the issuance of the marketing
order; and all said previous findings and
determinations are hereby ratified and
affirmed, except insofar as such findings
and determinations may be in conflict
with the findings and determinations set
forth herein.
(a) Findings and Determinations Upon
the Basis of the Hearing Record
Pursuant to the provisions of the
Agricultural Marketing Agreement Act
of 1937, as amended (7 U.S.C. 601–674),
and the applicable rules of practice and
procedure effective thereunder (7 CFR
part 900), a public hearing was held
upon proposed further amendment of
Marketing Order No. 984, regulating the
handling of walnuts grown in
California.
Upon the basis of the record, it is
found that:
(1) The marketing order, as amended,
and as hereby proposed to be further
amended, and all of the terms and
conditions thereof, would tend to
effectuate the declared policy of the Act;
(2) The marketing order, as amended,
and as hereby proposed to be further
amended, regulates the handling of
walnuts grown in the production area in
the same manner as, and is applicable
only to, persons in the respective classes
of commercial and industrial activity
specified in the marketing order upon
which a hearing has been held;
(3) The marketing order, as amended,
and as hereby proposed to be further
1 This order shall not become effective unless and
until the requirements of § 900.14 of the rules of
practice and procedure governing proceedings to
formulate marketing agreements and marketing
orders have been met.
PO 00000
Frm 00006
Fmt 4702
Sfmt 4702
amended, is limited in its application to
the smallest regional production area
that is practicable, consistent with
carrying out the declared policy of the
Act, and the issuance of several orders
applicable to subdivisions of the
production area would not effectively
carry out the declared policy of the Act;
(4) The marketing order, as amended,
and as hereby proposed to be further
amended, prescribes, insofar as
practicable, such different terms
applicable to different parts of the
production area as are necessary to give
due recognition to the differences in the
production and marketing of walnuts
grown in California; and
(5) All handling of walnuts grown in
the production area as defined in the
marketing order is in the current of
interstate or foreign commerce or
directly burdens, obstructs, or affects
such commerce.
Order Relative to Handling
It is therefore ordered, that on and
after the effective date hereof, all
handling of walnuts grown in California
shall be in conformity to, and in
compliance with, the terms and
conditions of the said order as hereby
proposed to be amended as follows:
The provisions of the proposed
marketing order amending the order
contained in the Recommended
Decision issued on July 8, 2020, and
published in the August 5, 2020, issue
of the Federal Register (85 FR 47305)
will be and are the terms and provisions
of this order amending the order and are
set forth in full herein.
List of Subjects in 7 CFR Part 984
Marketing agreements, Nuts,
Reporting and recordkeeping
requirements, Walnuts.
Recommended Further Amendment of
the Marketing Order
For the reasons set out in the
preamble, 7 CFR part 982 is proposed to
be amended as follows:
PART 984—WALNUTS GROWN IN
CALIFORNIA
1. The authority citation for 7 CFR
part 984 continues to read as follows:
■
Authority: 7 U.S.C. 601–674.
■
2. Revise § 984.46 to read as follows:
§ 984.46
Research and development.
(a) Research and development
authorities. The Board, with the
approval of the Secretary, may establish
or provide for the establishment of
production research, marketing research
and development projects, and
marketing promotion, including paid
E:\FR\FM\20OCP1.SGM
20OCP1
Federal Register / Vol. 85, No. 203 / Tuesday, October 20, 2020 / Proposed Rules
advertising, designed to assist, improve,
or promote the marketing, distribution,
and consumption or efficient
production of walnuts. The expenses of
such projects shall be paid from funds
collected pursuant to §§ 984.69 and
984.70 and may be credited back
pursuant to paragraphs (b) and (c) of
this section.
(b) Credit-back for promotion
expenses. The Board may provide for
crediting the pro rata expense
assessment obligations of a handler with
such portion of his or her direct
expenditure for marketing promotion,
including paid advertising, as may be
authorized. The credit-back amount
available to each handler shall be
determined by that handler’s percent of
the industry’s total volume of walnuts
handled during the prior marketing year
multiplied by the current marketing
year’s credit-back program budget. No
handler shall receive credit-back for any
creditable expenditures that would
exceed the total amount of credit-back
available to him or her for the
applicable marketing year. Further, no
handler shall receive credit-back in an
amount that exceeds that handler’s
assessments paid in the applicable
marketing year at the time the creditback application is made. Marketing
promotion expenses shall be credited at
a rate recommended by the Board and
approved by the Secretary, where the
credit rate is based on the amount per
dollar of marketing promotion expenses
for creditable expenditures paid by a
handler during the applicable marketing
year. Credit may be paid directly to the
handler as a reimbursement of
assessments paid or may be issued as
recommended by the Board and
approved by the Secretary. The Board
may also establish, subject to the
approval of the Secretary, different
credit rates for different products or
different marketing promotion activities
according to priorities determined by
the Board and its marketing plan.
(c) Creditable expenditures. The
Board, with the approval of the
Secretary, may credit-back all or any
portion of a handler’s direct
expenditures for marketing promotion
including paid advertising that
promotes the sale of walnuts, walnut
products or their uses. Such
expenditures may include, but are not
limited to, money spent for advertising
space or time in newspapers, magazines,
radio, television, transit, and outdoor
media, including the actual standard
agency commission costs not to exceed
15 percent, or as otherwise
recommended by the Board and
approved by the Secretary.
■ 3. Add subpart D to read as follows:
VerDate Sep<11>2014
16:48 Oct 19, 2020
Jkt 253001
Subpart D—Research and Development
Requirements
Sec.
984.546 Credit for marketing promotion
activities, including paid advertising.
984.547 [Reserved]
Subpart D—Research and
Development Requirements
§ 984.546 Credit for marketing promotion
activities, including paid advertising.
(a) Timeliness of reimbursement claim
and credit-back rate. For a handler to
receive credit-back for his or her own
marketing promotional activities
pursuant to § 984.46, the Board shall
determine that such expenditures meet
the applicable requirements of this
section. Credit-back may be granted in
the form of reimbursement for all
creditable expenditures paid within the
applicable marketing year subject to the
effective credit-back rate; Provided, that
such creditable expenditures are
documented to the satisfaction of the
Board within 15 days after the end of
that marketing year. Credit may be
granted for a handler’s creditable
expenditures in an amount not to
exceed that handler’s pro-rata share of
the credit-back fund. No more than 70
cents ($0.70) shall be credited back to a
handler for every dollar spent on
qualified activities.
(b) Assessment payments. The
handler assessment is due as defined in
§ 984.69. A handler shall be current on
all assessment payments prior to
receiving credit-back for creditable
expenditures.
(c) Handler eligibility for
reimbursement. The Board shall grant
credit-back for qualified activities only
to the handler who performed such
activities and who filed a claim for
credit-back in accordance with this
section.
(d) Applicability to marketing year.
Credit-back shall be granted only for
creditable expenditures for qualified
activities that are conducted and
completed during the marketing year for
which credit-back is requested.
(e) Qualified activities. The following
requirements shall apply to all
creditable expenditures resulting from
qualified activities:
(1) Credit-back granted by the Board
shall be that which is appropriate when
compared to accepted professional
practices and rates for the type of
activity conducted. In the case of claims
for credit-back activities not covered by
specific and established criteria, the
Board shall grant the claim if it is
consistent with practices and rates for
similar activities.
(2) The clear and evident purpose of
each qualified activity shall be to
PO 00000
Frm 00007
Fmt 4702
Sfmt 4702
66497
promote the sale, consumption or use of
California walnuts.
(3) No credit-back will be given for
any activity that targets the farming or
grower trade.
(4) Credit-back will not be allowed in
any case for travel expenses, or for any
promotional activities that result in
price discounting.
(5) Credit-back shall be granted for
those qualified activities specified in
paragraphs (e)(5)(i) through (iv) of this
section:
(i) Credit-back shall be granted for
paid media directed to end-users, trade
or industrial users, and for money spent
on paid advertising space or time,
including, but not limited to,
newspapers, magazines, radio,
television, online, transit and outdoor
media, and including the standard
agency commission costs not to exceed
15 percent of gross.
(ii) Credit-back shall be granted for
market promotion other than paid
advertising, for the following activities:
(A) Marketing research (except pretesting and test-marketing of paid
advertising);
(B) Trade and consumer product
public relations: Provided, that no
credit-back shall be given for related
fees charged by an advertising or public
relations agency;
(C) Sales promotion (in-store
demonstrations, production of
promotional materials, sales and
marketing presentation kits, etc.,
excluding couponing); and
(D) Trade shows (booth rental,
services, and promotional materials).
(iii) For any qualified activity
involving a handler promoting branded
products, a handler selling multiple
complementary products, including
other nuts, with such activity including
the handler’s name or brand, or joint
participation by a handler and a
manufacturer or seller of a
complementary product(s), the amount
allowed for credit-back shall reflect that
portion of the activity represented by
walnuts. If the product is owned or
distributed by the handler, in order to
receive any amount of credit-back, the
product must list the ownership or
distributorship on the package and
display the handler’s name and the
handler’s brand. The words ‘‘California
Walnuts’’ must be included on the
primary, face label. Such activities must
also meet the requirements of
paragraphs (e)(1), (2), (3), (4), and (5) of
this section.
(iv) If the handler is engaged in
marketing promotion activities pursuant
to a contract with the Foreign
Agricultural Service (FAS), USDA, and/
or the California Department of Food
E:\FR\FM\20OCP1.SGM
20OCP1
66498
Federal Register / Vol. 85, No. 203 / Tuesday, October 20, 2020 / Proposed Rules
and Agriculture (CDFA), unless the
Board is administering the foreign
marketing program, such activities shall
not be eligible for credit-back unless the
handler certifies that he or she was not
and will not be reimbursed by either
FAS or CDFA for the amount claimed
for credit-back, and has on record with
the Board all claims for reimbursement
made to FAS and/or the CDFA. Foreign
market expenses paid by third parties as
part of a handler’s contract with FAS or
CDFA shall not be eligible for creditback.
(6) A handler must file claims with
the Board to obtain credit-back for
creditable expenditures, as follows:
(i) All claims submitted to the Board
for any qualified activity must include:
(A) A description of the activity and
when and where it was conducted;
(B) Copies of all invoices from
suppliers or agencies;
(C) Copies of all canceled checks or
other proof of payment issued by the
handler in payment of these invoices;
and
(D) An actual sample, picture or other
physical evidence of the qualified
activity.
(ii) Handlers may receive
reimbursement of their paid
assessments up to their pro-rata share of
available dollars to be based on their
percentage of the prior marketing year
crop total. In all instances, handlers
must remit the assessment to the Board
when billed, and reimbursement will be
issued to the extent of proven, qualified
activities.
(iii) Checks from the Board in
payment of approved credit-back claims
will be mailed to handlers within 30
days of receipt of eligible claims.
(iv) Final claims for the marketing
year pertaining to such qualified
activities must be submitted with all
required elements within 15 days after
the close of the Board’s marketing year.
(f) Appeals. If a determination is made
by the Board staff that a particular
marketing promotional activity is not
eligible for credit-back because it does
not meet the criteria specified in this
section, the affected handler may
request the Executive Committee review
the Board staff’s decision. If the affected
handler disagrees with the decision of
the Executive Committee, the handler
may request that the Board review the
Executive Committee’s decision. If the
handler disagrees with the decision of
the Board, the handler, through the
Board, may request that the Secretary
review the Board’s decision. Handlers
have the right to request anonymity in
the review of their appeal. The Secretary
maintains the right to review any
VerDate Sep<11>2014
16:48 Oct 19, 2020
Jkt 253001
decisions made by the aforementioned
bodies at his or her discretion.
§ 984.547
[Reserved]
Bruce Summers,
Administrator, Agricultural Marketing
Service.
[FR Doc. 2020–22334 Filed 10–19–20; 8:45 am]
BILLING CODE P
NUCLEAR REGULATORY
COMMISSION
10 CFR Part 50
[Docket No. PRM–50–110; NRC–2015–0028;
NRC–2009–0196]
Risk-Informed Categorization and
Treatment of Structures, Systems, and
Components for Nuclear Power
Reactors
Nuclear Regulatory
Commission.
ACTION: Petition for rulemaking;
consideration in the rulemaking
process.
AGENCY:
The U.S. Nuclear Regulatory
Commission (NRC) will consider,
within the scope of a Commissiondirected rulemaking (Incorporation of
Lessons Learned from New Reactor
Licensing Process (Parts 50 and 52
Licensing Process Alignment)), the issue
raised in a petition for rulemaking
(PRM) submitted by Michael D.
Tschiltz, on behalf of the Nuclear
Energy Institute (NEI), dated January 15,
2015. The petitioner requested that the
NRC amend its regulations to clarify and
extend the applicability of its
regulations related to risk-informed
categorization and treatment of
structures, systems, and components
(SSCs) for nuclear power reactors. The
petition was docketed by the NRC on
February 6, 2015, and was assigned
Docket No. PRM–50–110. The NRC has
determined that the PRM has merit and
is appropriate for consideration in the
rulemaking process.
DATES: The docket for the petition for
rulemaking, PRM–50–110, is closed on
October 20, 2020.
ADDRESSES: Please refer to Docket IDs
NRC–2015–0028 and NRC–2009–0196
when contacting the NRC about the
availability of information for this
petition. You may obtain publiclyavailable information related to this
action by any of the following methods:
• Federal Rulemaking Website: Go to
https://www.regulations.gov and search
for Docket IDs NRC–2015–0028 and
NRC–2009–0196. Address questions
about NRC dockets to Dawn Forder;
SUMMARY:
PO 00000
Frm 00008
Fmt 4702
Sfmt 4702
telephone: 301–415–3407; email:
Dawn.Forder@nrc.gov. For technical
questions, contact the individual listed
in the FOR FURTHER INFORMATION
CONTACT section of this document.
• The NRC’s Agencywide Documents
Access and Management System
(ADAMS): You may obtain publiclyavailable documents online in the
ADAMS Public Document collection at
https://www.nrc.gov/reading-rm/
adams.html. For problems with
ADAMS, please contact the NRC’s
Public Document Room (PDR) reference
staff at 1–800–397–4209, 301–415–4737,
or by email to pdr.resource@nrc.gov. For
the convenience of the reader,
instructions about obtaining materials
referenced in this document are
provided in the ‘‘Availability of
Documents’’ section.
• Attention: The PDR, where you may
examine and order copies of public
documents, is currently closed. You
may submit your request to the PDR via
email at PDR.Resource@nrc.gov or call
1–800–397–4209 between 8:00 a.m. and
4:00 p.m. (EST), Monday through
Friday, except Federal holidays.
FOR FURTHER INFORMATION CONTACT:
James O’Driscoll, Office of Nuclear
Material Safety and Safeguards; U.S.
Nuclear Regulatory Commission,
Washington, DC 20555–0001; telephone:
301–415–1325; email:
James.O’Driscoll@nrc.gov.
SUPPLEMENTARY INFORMATION:
I. The Petition
The NRC received and docketed a
PRM 1 dated January 15, 2015,
submitted by Michael D. Tschiltz, on
behalf of NEI. On March 27, 2015, the
NRC published a notice of docketing in
the Federal Register (80 FR 16308). The
NRC held a public meeting on
September 16, 2015, to gain further
1 On February 25, 2014, Anthony Pietrangelo, on
behalf of NEI (petitioner), submitted a letter
(ADAMS Accession No. ML14056A278) requesting
that the NRC issue a direct final rulemaking to
amend § 50.69, ‘‘Risk-informed categorization and
treatment of structures, systems and components for
nuclear power reactors,’’ making it applicable to
holders of combined licenses (COLs). The NRC staff
reviewed the petitioner’s request and concluded
that it did not meet the NRC’s acceptance criteria
in § 2.802(c) for a PRM because the request did not
include a description of the petitioner’s grounds for
and interest in the requested action. On April 11,
2014, under § 2.802(c), the NRC offered the
petitioner an opportunity to meet the NRC’s
petition acceptance criteria within 90 days. On
January 15, 2015, Michael D. Tschiltz, on behalf of
NEI, filed a PRM on the same topic, and included
a description of the petitioner’s grounds for and
interest in the requested action. The NRC
determined that the petition met the threshold
sufficiency requirements for a petition for
rulemaking under § 2.802, ‘‘Petition for
rulemaking,’’ and the petition was docketed as
PRM–50–110.
E:\FR\FM\20OCP1.SGM
20OCP1
]]>Agencies
[Federal Register Volume 85, Number 203 (Tuesday, October 20, 2020)]
[Proposed Rules]
[Pages 66491-66498]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-22334]
========================================================================
Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
========================================================================
Federal Register / Vol. 85, No. 203 / Tuesday, October 20, 2020 /
Proposed Rules
[[Page 66491]]
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 984
[Docket No. AO-SC-20-J-0011; AMS-SC-19-0082; SC19-984-1]
Walnuts Grown in California; Secretary's Decision and Referendum
Order on Amendments to Marketing Order No. 984
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Proposed rule and referendum order.
-----------------------------------------------------------------------
SUMMARY: This decision proposes amendments to Marketing Order No. 984
(Order), which regulates the handling of walnuts grown in California
and provides growers with the opportunity to vote in a referendum to
determine if they favor the changes. The California Walnut Board
(Board), which locally administers the Order, recommended proposed
amendments that would add authority for the Board to provide credit for
certain market promotion expenses paid by handlers against their annual
assessments due under the Order and establish requirements to
effectuate the new authority. In addition, the Agricultural Marketing
Service (AMS) proposed to make any such changes as may be necessary to
conform to any amendment that may result from the public hearing.
DATES: The referendum will be conducted from November 30, 2020, through
December 11, 2020. The representative period for the purpose of the
referendum is September 1, 2018, through August 31, 2019.
ADDRESSES: Marketing Order and Agreement Division, Specialty Crops
Program, AMS, USDA, 1400 Independence Avenue SW, Stop 0237, Washington,
DC 20250-0237.
FOR FURTHER INFORMATION CONTACT: Matthew Pavone, Chief, Rulemaking
Services Branch, Marketing Order and Agreement Division, Specialty
Crops Program, AMS, USDA, 1400 Independence Avenue SW, Stop 0237,
Washington, DC 2025-0237; Telephone: (202) 720-2491, Fax: (202) 720-
8938, or Andrew Hatch, Deputy Director, 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: [email protected] or
[email protected].
Small businesses may request information on this proceeding by
contacting Richard Lower, 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: [email protected].
SUPPLEMENTARY INFORMATION: Prior documents in this proceeding: Notice
of Hearing issued on February 2, 2020, and published in the February
11, 2020, issue of the Federal Register (85 FR 7669); a Correction to
the Notice of Hearing issued on April 9, 2020, and published in the
April 10, 2020, issue of the Federal Register (85 FR 20202); and a
Recommended Decision issued on July 8, 2020, and published in the
August 5, 2020, issue of the Federal Register (85 FR 47305).
This action is governed by the provisions of sections 556 and 557
of title 5 of the United States Code and, therefore, is excluded from
the requirements of Executive Orders 12866, 13563, and 13175.
Additionally, because this rule does not meet the definition of a
significant regulatory action it does not trigger the requirements
contained in Executive Order 13771. See the Office of Management and
Budget's (OMB) Memorandum titled ``Interim Guidance Implementing
Section 2 of the Executive Order of January 30, 2017, titled `Reducing
Regulation and Controlling Regulatory Costs' '' (February 2, 2017).
Notice of this rulemaking action was provided to tribal governments
through the Department of Agriculture's (USDA) Office of Tribal
Relations.
Preliminary Statement
The proposed amendments are based on the record of a public hearing
held via videoconference technology on April 20 and 21, 2020. The
hearing was held pursuant to the provisions of the Agricultural
Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674),
hereinafter referred to as the ``Act,'' and the applicable rules of
practice and procedure governing the formulation of marketing
agreements and orders (7 CFR part 900). Notice of this hearing was
published in the Federal Register on February 11, 2020 (85 FR 7669)
followed by a Correction to the Notice of Hearing issued on April 9,
2020, and published in the April 10, 2020, issue of the Federal
Register (85 FR 20202). The notice of hearing contained one proposal
submitted by the Board and one submitted by USDA.
The amendments proposed by the Board in this decision would add
authority for the Board to provide credit for certain market promotion
expenses paid by handlers against their annual assessments due under
the Order and would establish requirements to effectuate the new
authority.
USDA proposed to make any such changes as may be necessary to 7 CFR
part 984 (referred to as ``the Order'') to conform to any amendment
that may be adopted, or to correct minor inconsistencies and
typographical errors. As such, USDA is recommending two clarifying
changes: One to the proposed language in Sec. 984.46(a) and the other
to the proposed regulatory text in Sec. 984.546(e)(5)(iii).
The proposed language in Sec. 984.46(a) would add credit-back
authority to the Order. USDA has determined that the language presented
in the Notice of Hearing lacked a reference to the proposed, new
paragraph (b) and only included a reference to proposed, new paragraph
(c). This correction was discussed at the hearing and a witness
clarified that proposed, new paragraphs (b) and (c) were both necessary
references in the proposed revision to Sec. 984.46(a), and that the
omission of the reference to paragraph (b) was an oversight. USDA has
revised the proposed language so that both proposed new paragraphs are
referenced in the proposed regulatory text of this decision.
USDA is also recommending a clarifying change to the proposed
regulatory text in Sec. 984.546(e)(5)(iii). The originally proposed
wording of this paragraph by the Board does not adequately state that
in all promotional
[[Page 66492]]
activities, regardless of whether a handler is operating independently
or in conjunction with a manufacturer, or whether promoting a product
that is solely walnut content or walnuts are a partial ingredient, the
words ``California Walnuts'' must be included in the labeling in order
for that activity to qualify as a creditable expenditure. USDA is
recommending this change in conformance with witness testimony
clarifying the intent of the proposed language. The revised language is
included in the proposed regulatory text of this decision.
Upon the basis of evidence introduced at the hearing and the record
thereof, the Administrator of AMS on July 8, 2020, filed with the
Hearing Clerk, USDA, a Recommended Decision and Opportunity to File
Written Exceptions thereto by September 4, 2020. No exceptions were
filed.
Final Regulatory Flexibility Analysis
Pursuant to the requirements set forth in the Regulatory
Flexibility Act (RFA), AMS has considered the economic impact of this
action on small entities. Accordingly, AMS has prepared this final
regulatory flexibility analysis.
The purpose of the RFA is to fit regulatory actions to the scale of
businesses subject to such actions so that small businesses will not be
unduly or disproportionately burdened. Marketing orders and amendments
thereto are unique in that they are normally brought about through
group action of essentially small entities for their own benefit.
During the hearing held on April 20 and 21, 2020, interested
parties were invited to present evidence on the probable regulatory
impact on small businesses of the proposed amendment to the Order. The
evidence presented at the hearing shows that the proposed amendment
would not have a significant negative economic impact on a substantial
number of small agricultural producers or handlers.
Eight grower and handler witnesses testified at the hearing. All
eight witnesses were growers and five were also handlers. Four
testified that they were small walnut growers according to the Small
Business Administration (SBA) definition and four were large. Of the
five who were handlers, one was small, and four were large.
All five who were both handlers and growers expressed support for
the proposed amendment. Of the three remaining grower witnesses, two
stated their support. One grower reported that he had concerns but did
not specifically oppose the amendment. Therefore, in their role as
growers, 7 out of 8 witnesses supported the amendment, and stated that
they expected to see significant benefits from the additional promotion
expenditure that would be authorized by the amendment and would not
incur additional costs. The benefits and impacts of the proposed
amendment are explained in the following three sections: (a) Walnut
Industry Background and Overview, (b) Domestic Market Demand for
Walnuts, and (c) Estimated Economic Impact of the Proposed Credit-Back
Program.
Walnut Industry Background and Overview
According to the hearing record, there are approximately 4,400
producers and 92 handlers in the production area. Record evidence
includes reference to a study showing that the walnut industry
contributes 85,000 jobs to the economy, directly and indirectly.
A small handler as defined by the SBA (13 CFR 121.201) is one that
grosses less than $30,000,000 annually. A small grower is one that
grosses less than $1,000,000 annually.
Record evidence showed that approximately 82 percent of
California's walnut handlers (75 out of 92) shipped merchantable
walnuts valued under $30 million during the 2018-2019 marketing year
and would therefore be considered small handlers according to the SBA
definition.
Data in the hearing record from the 2017 Agricultural Census,
published by USDA'S National Agricultural Statistics Service (NASS),
showed that 86 percent of California farms growing walnuts had walnut
sales of less than $1 million.
In an alternative computation using NASS data from the hearing
record, the 3-year average crop value (2016-2017 to 2018-2019) was
$1.24 billion. Average bearing acres over that same 3-year period were
333,000. Dividing crop value by acres yields a revenue per acre
estimate of $3,733. Using these numbers, it would take approximately
268 acres ($1,000,000/$3,733) to yield $1 million in annual walnut
sales. The 2017 Agricultural Census data show that 80 percent of walnut
farms in 2017 were below 260 acres. Therefore, well over three-fourths
of California walnut farms would be considered small businesses
according to the SBA definition.
Walnuts bloom in March and April, and the harvest of the earliest
varieties begins in the first part of September. As later varieties
mature, the harvest continues into November. The crop comes in from the
field at about 25 percent moisture and the hulling and drying process
typically takes place within 24 hours. The nuts are hulled (removal of
the green husks) and dried to about seven percent moisture before
delivery to a handler. Some growers have their own hulling and drying
equipment and others pay for this service. Drying to seven percent
moisture keeps the nuts stable in storage and minimizes deterioration.
Once received by the handler, shelling varieties are shelled and
have a shelf-life of approximately 12 months. Unshelled varieties are
cleaned, sized, and put into storage. Both shelled and unshelled nuts
are shipped and distributed to customers throughout the marketing year.
Approximately 75 percent of the California walnut crop is sold as
kernels (shelled). Witnesses testified that advances in processing and
packaging technologies continue to improve product quality,
consistency, and shelf-life.
Weather is one of two main factors driving crop size variability, a
significant feature of the walnut market. In some years, climatic
conditions may contribute to fungus or other issues that damage the
crop and cause nuts to fall prior to harvest. With walnuts grown over a
large geographic area, some regions will have better weather than
others in any particular year. Crops were larger in 2015 and 2018 and
smaller in 2017 and 2019.
The other key variability factor is ``alternate bearing'' (a
natural tendency of several types of tree nuts, in which a large crop
is often followed by a small crop). As trees mature, alternate bearing
can become more pronounced, and for many years this had a big impact on
crop size variability. With recent new plantings, the average age of
producing trees in California has dropped. There is less of an
alternate bearing tendency with younger trees. Crop sizes have become
less variable as younger trees reach bearing age, which typically
occurs in the fifth year. Older trees are replaced with varieties with
improved quality characteristics to meet changing consumer demand.
Newer varieties are generally more productive, contributing to higher
yields per acre and greater production.
The hearing record shows that crop size variability, particularly
the reduced availability of walnuts in short crop years, continues to
contribute to loss of demand, as some buyers of kernels as ingredients
in baked goods and other products shift to other tree nuts. These lost
market opportunities are additional factors in the industry's interest
in product diversification through a credit-back program.
Additional factors that affect current market conditions are the
longer-term supply impacts of growers responding to market signals. If
producers decide to
[[Page 66493]]
plant more trees because of strong market prices, such as in the 2011-
2014 time period, they receive those trees one or two years later,
based on contracts that vary with the type of nursery stock. This time
lag, and penalties associated with dropping a planting contract,
contribute to continued planting even after market prices drop and
growers might otherwise not want to plant. For these reasons, there is
a delayed response in planting new trees, and a delayed response in
reducing the level of planting when prices and revenue per acre
decline, such as in 2015-2018. One witness estimated that the rate of
tree planting in recent years is about three times greater than tree
removal. Another key factor is that the time from tree planting to
bearing nuts is typically five years.
Record evidence shows that walnut production exceeded 600,000
inshell tons every season starting in 2015-2016. Witnesses testified
that a key factor in their support of new demand expansion initiatives
is their expectation that walnut production is likely to be at or above
700,000 tons within one or two seasons and may exceed 800,000 tons a
few years later.
The hearing record shows that farm management decisions made years
ago have a significant impact on walnut supply for the coming years,
contributing to grower and handler support for major initiatives meant
to increase demand, including credit-back.
About two-thirds of the walnut crop is typically exported, and for
many years, increasing international demand facilitated expansion of
the walnut market. China emerged as a major walnut buyer, but also
began large scale planting of walnuts. Prices continued to improve for
years, reaching $1.86 per pound ($3,710 per ton) in 2013-2014. As
China's new plantings started coming into production, world walnut
prices began to decline. By 2017-2018, walnut prices rebounded as
Turkey and other Middle Eastern countries took up some of the slack in
world market demand, according to the hearing record.
Hearing evidence provided various reasons for the decline in walnut
crop value since the peak level of $1.9 billion in 2014-2015. One was
reduced export market opportunities. With increased trade barriers from
China and India, significant volumes were shifted into other export
markets, driving prices downward. Walnut production was also growing in
Chile and Europe. The 2018-2019 price fell to $0.65 per pound ($1,300
per ton). With the reduced reliability of the international market, the
industry is increasingly looking for ways to increase demand in the
U.S. domestic market.
The hearing record shows that most of the grower and handler
witnesses stated that a key reason for seeking credit-back authority
was the need to increase demand after years of unfavorable marketing
conditions. Witnesses stated that a key factor in their support of
seeking new ways to increase market demand was several years of
deteriorating profitability.
Hearing evidence included data that facilitated comparing farm
revenue per acre to cost of production, a key measure of walnut farm
profitability. Tables 2 and 3 illustrate the decline in profitability
by comparing two four-year periods with very different financial
outcomes, 2011 to 2014 and 2015 to 2018.
Table 2--California Walnuts: Cost of Production Data From University of California Extension
----------------------------------------------------------------------------------------------------------------
Sample yield
(from Table 5 Sample costs
Average yield: of UC study) per acre
Year Tons per acre Average yield: that is closest associated with
\1\ Pounds per acre to NASS yield yield shown in
in column (b) column (c) \2\
\2\
(a) (b) (c) (d)
----------------------------------------------------------------------------------------------------------------
2011.................................... 1.74 3,480 ................ ................
2012.................................... 1.84 3,680 3,400 $3,318
2013.................................... 1.76 3,520 4,000 4,015
2014.................................... 1.97 3,940 ................ ................
-----------------------------------------------------------------------
2011-2014 avg....................... 1.83 ................ ................ 3,667
----------------------------------------------------------------------------------------------------------------
2015.................................... 2.02 4,040 4,500 4,509
2016.................................... 2.19 4,380 ................ ................
2017.................................... 1.88 3,760 4,500 5,574
2018.................................... 1.93 3,860 4,500 5,283
-----------------------------------------------------------------------
2015-2018 avg....................... 2.01 ................ ................ 5,122
----------------------------------------------------------------------------------------------------------------
\1\ Source: NASS, USDA.
\2\ Source: ``Table 5. Ranging Analysis--Walnuts--Costs per Acre and Per Pound at Varying Yields to Produce
Walnuts.'' Table 5 appears in each of the following five UC Cooperative Extension studies: ``Walnuts Cost and
Returns Study, Sacramento Valley,'' UC Coop. Extension--2012, 2015, 2018. ``Walnuts Cost and Returns Study,
San Joaquin Valley North'', UC Coop. Extension--2013, 2017. Sample yields appear in column 2 of Table 5 in
each publication.
Table 2 displays cost of production numbers that represent both
time periods. University of California Extension conducted two cost of
production studies in the 2011-2014 time period, and three studies
between 2015 and 2019. Each of the five studies had ranges of
production cost figures associated with different yields. To be
representative of a typical or average walnut producer, the costs
selected to present in column (d) were associated with University of
California study yields (column c) closest to the NASS average annual
yields for that year (column b).
The average production cost per acre figures for 2011-2014 and
2015-2018 were $3,667 and $5,122, respectively. Those figures were
transferred to column (d) of Table 3, and the associated average yields
(1.83 and 2.10 tons per acre) appear in column (b) of Table 3.
[[Page 66494]]
Table 3--California Walnuts: Producer Gross Return, Cost of Production, Net Return
----------------------------------------------------------------------------------------------------------------
Season average Producer net
producer Average yield: Producer gross Total cost of return per acre
Range of years price, $/ton Tons per acre return per production per (gross return
\1\ \2\ acre acre \3\ minus cost)
(a) (b) (c) (a) * (b) (d) (e) (c)-(d)
----------------------------------------------------------------------------------------------------------------
2011-2014..................... $3,245 1.83 $5,930 $3,667 $2,264
2015-2018..................... 1,828 2.01 3,664 5,122 -1,458
----------------------------------------------------------------------------------------------------------------
\1\ Source: NASS, USDA.
\2\ Four-year averages computed in Table 1, based on annual NASS yield data.
\3\ Computed in Table 1, based on U. of California Extension cost of production studies. For 2011-2014, the cost
of production per acre is a two-year average (2012, 2013). For 2015-2018, the cost per acre is a 3-year
average (2015, 2017, 2018).
Table 3 uses the data from Table 2 to show how the walnut farm
profitability declined between the two time periods. Producer gross
returns per acre for each of the two four-year time periods (column
(c)) were computed by multiplying average yield by average price.
Subtracting cost of production in column (d) yields the producer net
return in column (e).
The two producer net return numbers in column (e) of Table 3 are
the key results of this cost and return analysis. Four years of walnut
farm profitability, represented by producer net return per acre of
$2,264 for 2011-2014, were followed by four years of difficult market
conditions (2015-2018), with a negative average net return figure (-
$1,458). This analysis provides a numerical estimate that bears out the
witness testimony that emphasized that a dramatic downward shift in
their economic fortunes in recent years was a major factor in their
support for a credit-back program that would leverage additional
financial resources for handler-based promotional expenditures oriented
toward increasing domestic demand for walnut products.
Domestic Market Demand for Walnuts
With reduced export market opportunities, the California industry
focused in recent years on ways to expand the domestic market. Record
evidence showed that domestic per capita consumption has been
approximately one-half pound for many years.
The Board commissioned a consumer survey (with 1,000 respondents)
showing that walnut products were reaching 40 percent of U.S.
households, indicating significant expansion potential. The study
pointed out significant differences among age groups, with 22 percent
of those aged 18 to 24 being walnut consumers. Certain age groups are
therefore the targets for demand expansion.
The majority of walnuts going into the domestic market are kernels
(shelled). One key segment is retail sales, with the main product being
bags of raw kernels. Another major segment is industrial--use as an
ingredient by food manufacturers in making pastries and other products.
Record evidence shows that walnut industry participants consider these
two segments to be a narrow group of uses which needs to be expanded.
Witnesses reported that among the Board's strategic objectives, the
top priority is retail sector growth, and the snack category in
particular. However, current Board marketing programs are generic in
nature and focus largely on the traditional form of walnuts: Raw. Raw
walnuts as a snack product are important components but expanding
retail market development beyond the raw product is considered critical
by industry participants, according to the hearing record. New
consumption growth will mainly be achieved through new products and
forms that appeal to a larger consumer audience, witnesses stated.
According to the hearing record, opportunities for significant
walnut demand expansion include snack products such as roasted, salted,
glazed, and trail mixes, and other new products such as beverages,
spreads and meat alternatives. Witnesses stated that these demand
expansion opportunities are best achieved through brand advertising and
other handler-based promotional approaches, rather than the generic
promotion currently authorized through the Order. Witnesses reported
that this is a key reason why adding credit-back authority would be
helpful for demand expansion--by providing incentives for handler-based
product development and promotion.
A small handler stated that if credit-back authority is added to
the marketing order, his firm would likely partner with another company
to create a snack product, providing evidence that credit-back
authority would help small handlers as well as large ones.
Estimated Economic Impact of the Proposed Credit-Back Program
The hearing record included evidence of the estimated impact of the
credit-back program on walnut grower total revenue and net return.
Table 4 illustrates the impact of handlers taking advantage of the
credit-back incentive by increasing their promotional spending. Based
on the assumptions shown in the table, walnut growers would see
increased total revenue of $21.1 million (row K) and increased net
return of $16.8 million (row L). The table shows that there are four
computational steps that lead up to the final computations in rows K
and L.
The first step is to estimate a typical annual budget of the Board
($25 million in row C) by multiplying the current assessment rate paid
to the Board ($0.04) by a number representing an annual walnut
production level representative of recent years (625 million
hundredweight [cwt]).
Table 4--Calculating the Impact of the Walnut Credit-Back Program on Producer Total Revenue and Net Return
----------------------------------------------------------------------------------------------------------------
Calculation Value
----------------------------------------------------------------------------------------------------------------
A. Total production (cwt)............................... .................................... 625,000,000
B. Assessment rate ($/cwt).............................. .................................... $0.04
C. Total Board budget................................... C = A * B $25,000,000
[[Page 66495]]
D. Share of budget allocated to Credit-Back program (%). .................................... 10%
E. Credit-Back program budget........................... E = C * D $2,500,000
F. Credit-Back rate(%).................................. .................................... 70%
G. Total advertising and promotion expenditures with G = E/F $3,571,429
Credit-Back program.
H. Increase in advertising and promotion expenditure.... H = G-E $1,071,429
I. Increase in TOTAL revenue per dollar of advertising/ .................................... $19.75
promotion \1\.
J. Increase in NET return per dollar of advertising/ .................................... $15.67
promotion \1\.
K. Increase in TOTAL revenue............................ K = H * I $21,160,714
L. Increase in NET return............................... L = H * J $16,789,286
----------------------------------------------------------------------------------------------------------------
\1\ Estimates of total revenue and net return per dollar spent on promotion are from a report prepared for the
Board by Dr. Harry M. Kaiser of Cornell University entitled ``Economic Evaluation of the California Walnut
Board's Advertising and Promotion Programs: An Analysis of the Direct and Indirect Impacts'', July 5, 2018.
If the Board allocated 10 percent of a $25 million annual budget to
the credit-back program, the funds available to allocate to pay
handlers for eligible promotional spending would be $2.5 million (row
E). According to the hearing record, this is a level of credit-back
funding supported by growers and handlers.
Handlers would receive 70 percent of the amount they expended on
creditable expenditures. If the Board expended its full annual credit-
back budget of $2.5 million, the total promotional expenditure would
rise to $3.57 million ($2.5/0.70) as shown in row G. The credit-back
expenditure would create the incentive for handlers to spend the $2.5
million plus an additional $1.07 million (row H).
The final step is the overall economic impact on the walnut market
of the increased spending on advertising and promotion. A 2018 economic
analysis of walnut promotion impacts by Dr. Harry Kaiser (cited in the
footnote of Table 4) showed that each dollar of walnut advertising and
promotional expenditure yielded $19.75 in total revenue and $15.67 in
net return to walnut growers (rows I and J). Multiplying $1.07 million
by those two promotional impact-per-dollar figures yields the estimated
increase in total revenue per year and net return per year of $21.16
million and $16.79 million, respectively, shown in rows K and L. Net
return is what is returned to walnut growers after accounting for the
cost of the promotion program.
Record evidence indicates that all industry members, growers and
handlers, would benefit proportionally from an increase in demand
brought about due to the credit-back program. The credit-back program
would be funded by allocating to the credit-back program a portion of
the total Board promotional budget, funded at the current assessment
rate. With no increase in the Board's assessment rate, there would be
no increased costs to growers or handlers.
All handlers, large and small, would benefit proportionally by
participating in the credit-back program. Handlers will participate
only if they decide that they will benefit, and would incur no costs if
they choose not to participate. No handler can benefit
disproportionately from the program, since a handler's maximum credit-
back payment from the Board is based on that handler's share of total
industry acquisitions from the prior year, according to the hearing
record. As cited above, a small handler testified that their smaller
size would not be a hindrance to using the credit-back program, because
his walnut processing operation could develop a new product in
partnership with another firm.
Consumers would benefit from product diversification of the walnut
market. They could choose to buy any of the new products that become
available, thereby adding new foods to their diet, at prices that fit
within their food budget.
The record shows that the proposal to add authority to establish
the credit-back program would, in itself, have no significant economic
impact on producers or handlers of any size. If the proposed authority
and the accompanying requirements were implemented, both benefits and
costs could be anticipated. Costs of complying with the new program
could include handler maintenance and delivery of receipts and
documentation for reimbursement of creditable expenditures, but these
would be minimal and are considered standard business practices. For
the reasons described above, it is determined that the benefits of
adding authority for a credit-back program would outweigh the potential
costs of future implementation.
USDA has not identified any relevant Federal rules that duplicate,
overlap or conflict with this proposed rule. These amendments are
intended to improve the operation and administration of the Order and
to assist in the marketing of California walnuts.
Board meetings regarding these proposals, as well as the hearing
date and location, were widely publicized throughout the California
walnut industry, and all interested persons were invited to attend the
meetings and the hearing to participate in Board deliberations on all
issues. All Board meetings and the hearing were public forums, and all
entities, both large and small, were able to express views on these
issues. Interested persons are invited to submit information on the
regulatory impacts of this action on small businesses.
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.
Paperwork Reduction Act
Current information collection requirements that are part of the
Federal marketing order for California walnuts (7 CFR part 984) are
approved under OMB No. 0581-0178 Vegetables and Specialty Crops. No
changes in these requirements are anticipated as a result of this
proceeding. Should any such changes become necessary, they would be
submitted to OMB for approval.
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 Government Paperwork
Elimination Act, which requires Government agencies in general to
provide the public the option of submitting information or
[[Page 66496]]
transacting business electronically to the maximum extent possible.
Civil Justice Reform
The amendments to the Order proposed herein have been reviewed
under Executive Order 12988, Civil Justice Reform. They are not
intended to have retroactive effect. If adopted, the proposed
amendments would not preempt any State or local laws, regulations, or
policies, unless they present an irreconcilable conflict with this
proposal.
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. A
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 no later than 20 days after the date of
entry of the ruling.
Findings and Conclusions
The findings and conclusions, rulings, and general findings and
determinations included in the Recommended Decision set forth in the
August 5, 2020, issue of the Federal Register (85 FR 47305) are hereby
approved and adopted.
Marketing Order
Annexed hereto and made a part hereof is the document entitled
``Order Amending the Order Regulating the Handling of Walnuts Grown in
California.'' This document has been decided upon as the detailed and
appropriate means of effectuating the foregoing findings and
conclusions.
It is hereby ordered, That this entire decision be published in the
Federal Register.
Referendum Order
It is hereby directed that a referendum be conducted in accordance
with the procedure for the conduct of referenda (7 CFR 900.400 through
900.407) to determine whether the annexed order amending the order
regulating the handling of walnuts grown in California is approved or
favored by growers, as defined under the terms of the order, who during
the representative period were engaged in the production of walnuts in
the production area.
The representative period for the conduct of such referendum is
hereby determined to be September 1, 2018, through August 31, 2019.
The agents of the Secretary to conduct such referendum are hereby
designated to be Terry Vawter and Jeffery Rymer, California Marketing
Field Office, Marketing Order and Agreement Division, Specialty Crops
Program, AMS, USDA; telephone: 559-487-5901; or fax: 559-487-5906 or
Email: [email protected] or [email protected], respectively.
Order Amending the Order Regulating the Handling of Walnuts Grown in
California \1\
---------------------------------------------------------------------------
\1\ This order shall not become effective unless and until the
requirements of Sec. 900.14 of the rules of practice and procedure
governing proceedings to formulate marketing agreements and
marketing orders have been met.
---------------------------------------------------------------------------
Findings and Determinations
The findings and determinations hereinafter set forth are
supplementary to the findings and determinations that were previously
made in connection with the issuance of the marketing order; and all
said previous findings and determinations are hereby ratified and
affirmed, except insofar as such findings and determinations may be in
conflict with the findings and determinations set forth herein.
(a) Findings and Determinations Upon the Basis of the Hearing Record
Pursuant to the provisions of the Agricultural Marketing Agreement
Act of 1937, as amended (7 U.S.C. 601-674), and the applicable rules of
practice and procedure effective thereunder (7 CFR part 900), a public
hearing was held upon proposed further amendment of Marketing Order No.
984, regulating the handling of walnuts grown in California.
Upon the basis of the record, it is found that:
(1) The marketing order, as amended, and as hereby proposed to be
further amended, and all of the terms and conditions thereof, would
tend to effectuate the declared policy of the Act;
(2) The marketing order, as amended, and as hereby proposed to be
further amended, regulates the handling of walnuts grown in the
production area in the same manner as, and is applicable only to,
persons in the respective classes of commercial and industrial activity
specified in the marketing order upon which a hearing has been held;
(3) The marketing order, as amended, and as hereby proposed to be
further amended, is limited in its application to the smallest regional
production area that is practicable, consistent with carrying out the
declared policy of the Act, and the issuance of several orders
applicable to subdivisions of the production area would not effectively
carry out the declared policy of the Act;
(4) The marketing order, as amended, and as hereby proposed to be
further amended, prescribes, insofar as practicable, such different
terms applicable to different parts of the production area as are
necessary to give due recognition to the differences in the production
and marketing of walnuts grown in California; and
(5) All handling of walnuts grown in the production area as defined
in the marketing order is in the current of interstate or foreign
commerce or directly burdens, obstructs, or affects such commerce.
Order Relative to Handling
It is therefore ordered, that on and after the effective date
hereof, all handling of walnuts grown in California shall be in
conformity to, and in compliance with, the terms and conditions of the
said order as hereby proposed to be amended as follows:
The provisions of the proposed marketing order amending the order
contained in the Recommended Decision issued on July 8, 2020, and
published in the August 5, 2020, issue of the Federal Register (85 FR
47305) will be and are the terms and provisions of this order amending
the order and are set forth in full herein.
List of Subjects in 7 CFR Part 984
Marketing agreements, Nuts, Reporting and recordkeeping
requirements, Walnuts.
Recommended Further Amendment of the Marketing Order
For the reasons set out in the preamble, 7 CFR part 982 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. Revise Sec. 984.46 to read as follows:
Sec. 984.46 Research and development.
(a) Research and development authorities. The Board, with the
approval of the Secretary, may establish or provide for the
establishment of production research, marketing research and
development projects, and marketing promotion, including paid
[[Page 66497]]
advertising, designed to assist, improve, or promote the marketing,
distribution, and consumption or efficient production of walnuts. The
expenses of such projects shall be paid from funds collected pursuant
to Sec. Sec. 984.69 and 984.70 and may be credited back pursuant to
paragraphs (b) and (c) of this section.
(b) Credit-back for promotion expenses. The Board may provide for
crediting the pro rata expense assessment obligations of a handler with
such portion of his or her direct expenditure for marketing promotion,
including paid advertising, as may be authorized. The credit-back
amount available to each handler shall be determined by that handler's
percent of the industry's total volume of walnuts handled during the
prior marketing year multiplied by the current marketing year's credit-
back program budget. No handler shall receive credit-back for any
creditable expenditures that would exceed the total amount of credit-
back available to him or her for the applicable marketing year.
Further, no handler shall receive credit-back in an amount that exceeds
that handler's assessments paid in the applicable marketing year at the
time the credit-back application is made. Marketing promotion expenses
shall be credited at a rate recommended by the Board and approved by
the Secretary, where the credit rate is based on the amount per dollar
of marketing promotion expenses for creditable expenditures paid by a
handler during the applicable marketing year. Credit may be paid
directly to the handler as a reimbursement of assessments paid or may
be issued as recommended by the Board and approved by the Secretary.
The Board may also establish, subject to the approval of the Secretary,
different credit rates for different products or different marketing
promotion activities according to priorities determined by the Board
and its marketing plan.
(c) Creditable expenditures. The Board, with the approval of the
Secretary, may credit-back all or any portion of a handler's direct
expenditures for marketing promotion including paid advertising that
promotes the sale of walnuts, walnut products or their uses. Such
expenditures may include, but are not limited to, money spent for
advertising space or time in newspapers, magazines, radio, television,
transit, and outdoor media, including the actual standard agency
commission costs not to exceed 15 percent, or as otherwise recommended
by the Board and approved by the Secretary.
0
3. Add subpart D to read as follows:
Subpart D--Research and Development Requirements
Sec.
984.546 Credit for marketing promotion activities, including paid
advertising.
984.547 [Reserved]
Subpart D--Research and Development Requirements
Sec. 984.546 Credit for marketing promotion activities, including
paid advertising.
(a) Timeliness of reimbursement claim and credit-back rate. For a
handler to receive credit-back for his or her own marketing promotional
activities pursuant to Sec. 984.46, the Board shall determine that
such expenditures meet the applicable requirements of this section.
Credit-back may be granted in the form of reimbursement for all
creditable expenditures paid within the applicable marketing year
subject to the effective credit-back rate; Provided, that such
creditable expenditures are documented to the satisfaction of the Board
within 15 days after the end of that marketing year. Credit may be
granted for a handler's creditable expenditures in an amount not to
exceed that handler's pro-rata share of the credit-back fund. No more
than 70 cents ($0.70) shall be credited back to a handler for every
dollar spent on qualified activities.
(b) Assessment payments. The handler assessment is due as defined
in Sec. 984.69. A handler shall be current on all assessment payments
prior to receiving credit-back for creditable expenditures.
(c) Handler eligibility for reimbursement. The Board shall grant
credit-back for qualified activities only to the handler who performed
such activities and who filed a claim for credit-back in accordance
with this section.
(d) Applicability to marketing year. Credit-back shall be granted
only for creditable expenditures for qualified activities that are
conducted and completed during the marketing year for which credit-back
is requested.
(e) Qualified activities. The following requirements shall apply to
all creditable expenditures resulting from qualified activities:
(1) Credit-back granted by the Board shall be that which is
appropriate when compared to accepted professional practices and rates
for the type of activity conducted. In the case of claims for credit-
back activities not covered by specific and established criteria, the
Board shall grant the claim if it is consistent with practices and
rates for similar activities.
(2) The clear and evident purpose of each qualified activity shall
be to promote the sale, consumption or use of California walnuts.
(3) No credit-back will be given for any activity that targets the
farming or grower trade.
(4) Credit-back will not be allowed in any case for travel
expenses, or for any promotional activities that result in price
discounting.
(5) Credit-back shall be granted for those qualified activities
specified in paragraphs (e)(5)(i) through (iv) of this section:
(i) Credit-back shall be granted for paid media directed to end-
users, trade or industrial users, and for money spent on paid
advertising space or time, including, but not limited to, newspapers,
magazines, radio, television, online, transit and outdoor media, and
including the standard agency commission costs not to exceed 15 percent
of gross.
(ii) Credit-back shall be granted for market promotion other than
paid advertising, for the following activities:
(A) Marketing research (except pre-testing and test-marketing of
paid advertising);
(B) Trade and consumer product public relations: Provided, that no
credit-back shall be given for related fees charged by an advertising
or public relations agency;
(C) Sales promotion (in-store demonstrations, production of
promotional materials, sales and marketing presentation kits, etc.,
excluding couponing); and
(D) Trade shows (booth rental, services, and promotional
materials).
(iii) For any qualified activity involving a handler promoting
branded products, a handler selling multiple complementary products,
including other nuts, with such activity including the handler's name
or brand, or joint participation by a handler and a manufacturer or
seller of a complementary product(s), the amount allowed for credit-
back shall reflect that portion of the activity represented by walnuts.
If the product is owned or distributed by the handler, in order to
receive any amount of credit-back, the product must list the ownership
or distributorship on the package and display the handler's name and
the handler's brand. The words ``California Walnuts'' must be included
on the primary, face label. Such activities must also meet the
requirements of paragraphs (e)(1), (2), (3), (4), and (5) of this
section.
(iv) If the handler is engaged in marketing promotion activities
pursuant to a contract with the Foreign Agricultural Service (FAS),
USDA, and/or the California Department of Food
[[Page 66498]]
and Agriculture (CDFA), unless the Board is administering the foreign
marketing program, such activities shall not be eligible for credit-
back unless the handler certifies that he or she was not and will not
be reimbursed by either FAS or CDFA for the amount claimed for credit-
back, and has on record with the Board all claims for reimbursement
made to FAS and/or the CDFA. Foreign market expenses paid by third
parties as part of a handler's contract with FAS or CDFA shall not be
eligible for credit-back.
(6) A handler must file claims with the Board to obtain credit-back
for creditable expenditures, as follows:
(i) All claims submitted to the Board for any qualified activity
must include:
(A) A description of the activity and when and where it was
conducted;
(B) Copies of all invoices from suppliers or agencies;
(C) Copies of all canceled checks or other proof of payment issued
by the handler in payment of these invoices; and
(D) An actual sample, picture or other physical evidence of the
qualified activity.
(ii) Handlers may receive reimbursement of their paid assessments
up to their pro-rata share of available dollars to be based on their
percentage of the prior marketing year crop total. In all instances,
handlers must remit the assessment to the Board when billed, and
reimbursement will be issued to the extent of proven, qualified
activities.
(iii) Checks from the Board in payment of approved credit-back
claims will be mailed to handlers within 30 days of receipt of eligible
claims.
(iv) Final claims for the marketing year pertaining to such
qualified activities must be submitted with all required elements
within 15 days after the close of the Board's marketing year.
(f) Appeals. If a determination is made by the Board staff that a
particular marketing promotional activity is not eligible for credit-
back because it does not meet the criteria specified in this section,
the affected handler may request the Executive Committee review the
Board staff's decision. If the affected handler disagrees with the
decision of the Executive Committee, the handler may request that the
Board review the Executive Committee's decision. If the handler
disagrees with the decision of the Board, the handler, through the
Board, may request that the Secretary review the Board's decision.
Handlers have the right to request anonymity in the review of their
appeal. The Secretary maintains the right to review any decisions made
by the aforementioned bodies at his or her discretion.
Sec. 984.547 [Reserved]
Bruce Summers,
Administrator, Agricultural Marketing Service.
[FR Doc. 2020-22334 Filed 10-19-20; 8:45 am]
BILLING CODE P
