Marketing Order for Walnuts Grown in California; Recommended Decision and Opportunity To File Written Exceptions, 64385-64397 [2022-22806]
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64385
Proposed Rules
Federal Register
Vol. 87, No. 205
Tuesday, October 25, 2022
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.
comments should reference the docket
number and the date and page number
of this issue of the Federal Register.
Comments will be made available for
public inspection in the Office of the
Hearing Clerk during regular business
hours or can be viewed at https://
www.regulations.gov.
DEPARTMENT OF AGRICULTURE
FOR FURTHER INFORMATION CONTACT:
Agricultural Marketing Service
7 CFR Part 984
[Doc. No. 22–J–0011; AMS–SC–22–0010;
SC22–981–1]
Marketing Order for Walnuts Grown in
California; Recommended Decision
and Opportunity To File Written
Exceptions
Agricultural Marketing Service,
Department of Agriculture (USDA).
ACTION: Proposed rule and opportunity
to file exceptions.
AGENCY:
This recommended decision
proposes amendments to Marketing
Order No. 984 (Order), which regulates
the handling of walnuts grown in
California. The proposed amendments
are based on the record of a public
hearing held via videoconference
technology on April 19 and 20, 2022.
The California Walnut Board (Board),
which locally administers the Order,
recommended proposed amendments
that would eliminate mandatory
inspection and certification of inshell
and shelled walnuts, and of shelled
walnuts for processing; create a new
mechanism for determining and
collecting handler assessments; add
authority to charge interest for late
payments; establish an assessment rate
of $0.0125 per inshell pound of walnuts;
expand the definition of ‘‘to handle’’ to
include ‘‘receive’’; and remove volume
control authority. In addition, the
Agricultural Marketing Service (AMS)
proposed to make any such changes to
the Order as may be necessary to
conform to any amendment that may
result from the hearing.
DATES: Written exceptions must be filed
by November 25, 2022.
ADDRESSES: Written exceptions should
be filed with the Hearing Clerk, U.S.
Department of Agriculture, Room 1031–
S, Washington, DC 20250–9200; Fax:
(202) 720–9776 or via the internet at
https://www.regulations.gov. All
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SUMMARY:
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Geronimo Quinones, Market
Development Division, Specialty Crops
Program, AMS, USDA, 1400
Independence Avenue SW, Stop 0237,
Washington, DC 20250–0237;
Telephone: (202)308–2339 or Matthew
Pavone, Market Development Division,
Specialty Crops Program, AMS, USDA,
1400 Independence Avenue SW, Stop
0237, Washington, DC 20250–0237;
Telephone: (202) 720–2491, or Email:
Geronimo.Quinones@usda.gov or
Matthew.Pavone@usda.gov.
Small businesses may request
information on this proceeding by
contacting Richard E. Lower, Market
Development Division, Specialty Crops
Program, AMS, USDA, 1400
Independence Avenue SW, Stop 0237,
Washington, DC 20250–0237;
Telephone: (202) 720–2491, or Email:
Richard.Lower@usda.gov.
SUPPLEMENTARY INFORMATION: Prior
documents in this proceeding: Notice of
Hearing published in the April 1, 2022,
issue of the Federal Register (87 FR
19020).
The recommendation is in
conformance with 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.
Notice of this rulemaking action was
provided to tribal governments through
the Department of Agriculture’s (USDA)
Office of Tribal Relations.
Preliminary Statement
Notice is hereby given of the filing
with the Hearing Clerk of this
recommended decision with respect to
the proposed amendments to 7 CFR part
948 (hereinafter referred to as
‘‘Marketing Order 984’’ or the ‘‘Order’’)
regulating the handling of walnuts
grown in California and the opportunity
to file written exceptions thereto. Copies
of this decision can be obtained from
Geronimo Quinones, whose address is
listed above.
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This recommended decision is issued
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
and amendment of marketing
agreements and orders (7 CFR part 900).
The proposed amendments are based
on the record of a public hearing held
via videoconference technology on
April 19 and 20, 2022. Notice of this
hearing was published in the Federal
Register on April 1, 2022 (87 FR 19020).
The notice of hearing contained five
proposals submitted by the Board and
one submitted by USDA.
The proposed amendments were
recommended to the Secretary by the
Board on October 28, 2021. After
reviewing the proposals and other
information submitted by the Board,
USDA decided to schedule this matter
for a hearing. The Board’s proposed
amendments to the Order would amend
quality control provisions to remove
inspection and certification
requirements, create a new mechanism
for determining and collecting handler
assessments, add authority to charge
interest for late payments, establish an
assessment rate of $0.0125 per inshell
pound of walnuts; expand the definition
of ‘‘to handle’’ to include ‘‘receive’’, and
remove volume control authority.
As proposed, inspection and
certification of outbound walnuts would
no longer be required, and handler
assessments would be calculated based
on a proposed assessment rate,
recommended by the Board, and
applied to handler’s inbound walnuts
receipts instead of outbound walnuts
certified.
USDA proposed to make any such
changes as may be necessary to the
Order to conform to any amendment
that may be adopted, or to correct minor
inconsistencies and typographical
errors.
Ten witnesses testified at the hearing.
Nine witnesses represented walnut
producers and handlers in the
production area, as well as the Board,
and one witness was from USDA. All
nine industry witnesses supported the
proposed amendments. The USDA
witness remained neutral. After the
notice of hearing was published in the
Federal Register, AMS received a
substantive email from the Board. In
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accordance with § 900.16 of the Rules of
Practice governing this proceeding (7
CFR 900.16), the email constituted an ex
parte communication and was entered
into the record but did not constitute
testimony and was not considered in the
drafting of this recommended decision.
Under the Order, quality control
provisions require inspection and
certification of outbound walnuts,
volume regulation is stayed indefinitely,
and the authority to charge for late
payments does not exist. The Board’s
proposed amendments would eliminate
the inspection and certification of
outbound walnuts, remove volume
authority, establish a new mechanism
for the collection of assessments and
provide authority to charge interest for
late payments.
Currently, a moratorium on the
enforcement of inspection is in effect,
and while under the moratorium, the
Board is unable to collect assessments.
If implemented, the proposed
amendments would allow the Board to
resume the collection of assessments
applied to walnuts received and to
charge interest for late payments.
Assessments would be determined by
handler receipts for total walnuts
received for the crop year, multiplied by
the proposed new assessment rate of
$0.0125, and billings would be
staggered throughout the marketing year
to allow handlers to pay in three
installments.
Witnesses at the hearing explained
that the proposed amendments are
necessary to streamline the Order and
would make the industry more efficient
by eliminating redundancies in
inspection, reducing costs and
administrative burden to handlers and
the Board, and providing a cost saving
to growers. Therefore, proponents
support the need to modernize the
Order to better meet current and future
industry needs.
As an indicator for the need to
eliminate inspection and certification of
outbound walnuts, witnesses stated that
the moratorium issued by USDA on
September 2, 2021, of mandatory
inspections has not adversely affected
the quality of California walnuts
produced and handled. Witnesses
testified that a common practice for the
industry is to conduct quality assurance
inspections on inbound shipments of
walnuts and that the current regulations
require inspections on the outbound
walnuts. The end result of industry
practice and regulatory requirements is
two forms of inspection being
conducted in the industry. Further,
witnesses contended that significant
investments and advancement in
processing, storage, technology, and
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equipment have ensured better
programs that are able to maintain
higher walnut quality and condition
that exceed the minimum grades and
standards currently set forth in the
Order.
At the conclusion of the hearing, the
Administrative Law Judge established a
deadline of May 19, 2022, for the
submission of corrections to the
transcript, and June 23, 2022, as a
deadline for interested persons to file
proposed findings and conclusions or
written arguments and briefs based on
the evidence received at the hearing.
The Board filed a brief in support of the
proposed amendments.
Material Issues
The material issues presented on the
record of hearing are as follows:
1. Whether to modify § 984.50, Grade,
quality, and size regulations, to remove
quality and size regulations and include
only the Board’s authority and eliminate
§§ 984.51 and 984.52 inspection and
certification of inshell and shelled
walnuts and shelled walnuts for
processing. This includes revising:
§§ 984.12, 984.32, 984.64, 984.69,
984.77, 984.459(a)(3), and 984.472(b)
and removing: §§ 984.450(c), 984.451(a)
and (b), 984.452, and 984.464(b) and (c).
2. Whether to revise § 984.69 by
changing the calculation of assessments
from kernelweight to inshell pound in
paragraph (a) and revising paragraph (c)
to include an authority to charge for late
payments and/or interest as prescribed
by the Board with approval from the
Secretary. Corresponding changes
would be made to §§ 984.37, 984.48,
984.69, and 984.347.
3. Whether to revise § 984.347 to
establish an assessment rate of $0.0125
per inshell pound of walnuts.
4. Whether to modify the definition in
§ 984.13 of ‘‘to handle’’ to include
‘‘receive’’.
5. Whether to remove § 984.49,
Volume regulation, reserve pool
authority, and subsequent sections
including provisions for volume control.
This includes removing: §§ 984.23,
984.26, 984.33, 984.54, 984.56, 984.66,
984.69(b), 984.450(a) and (b),
984.451(c), 984.456, and 984.464(a) and
revising: §§ 984.48 and 984.67.
6. Whether any conforming changes
need to be made as a result of the above
proposed amendments. Conforming
changes may also include correction of
non-substantive, typographical errors.
Findings and Conclusions
The following findings and
conclusions on the material issues are
based on evidence presented at the
hearing and the record thereof.
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Material Issue Number 1—Grade,
Quality, and Size Regulations and
Inspection and Certification
Section 984.50 ‘‘Grade, quality and
size regulations’’ should be amended to
remove quality and size regulations and
only the authority should remain.
Removing quality and size regulations
would remove the minimum grade and
size requirements for shelled and
inshell walnuts. Retaining the authority
would allow the Board to recommend
handling regulations and establish
inspection and certification
requirements if market conditions
warrant regulations in the future,
subject to the approval of the Secretary.
Sections 984.51 ‘‘Inspection and
certification of inshell and shelled
walnuts’’ and 984.52 ‘‘Processing of
shelled walnuts’’ should be removed.
Removing inspection and certification
would eliminate mandatory outbound
inspections for all varieties of walnuts,
walnuts for processing, and inspections
applied to walnuts imported into the
United States under section 608e of the
Act. In addition, multiple sections of the
Order with provisions for quality, grade
and size, and inspection and
certification should be revised. This
includes revising: §§ 984.12, 984.32,
984.64, 984.69, 984.77, 984.459(a)(3),
and 984.472(b). Conforming changes
would include removing §§ 984.450(c),
984.451(a) and (b), 984.452, and
984.464(b) and (c). Furthermore, a
conforming change to completely
remove the word ‘‘merchantable’’ from
§§ 984.22, 984.72, and 984.472(a) and
(c) is necessary to add clarity to the
Order. This conforming change will be
further discussed in Material Issue #6.
Currently, § 984.50 requires that
handlers must meet minimum grade,
quality, and size regulations and
§§ 984.51 and 984.52 require that
outbound walnuts must be inspected
and certified. The outbound inspection
is carried out by the Dried Fruit
Association of California (DFA), the
Board’s inspection agency of record.
DFA supplies to the Board inspection
records used to calculate handler
assessment obligations.
Witnesses at the hearing, either
serving as Board members and/or as
members of the Board’s Marketing Order
Revision Committee explained that the
proposed amendments would
modernize and align the Order with
current market-driven practices. This
would result in a more efficient
industry. Witnesses further explained
that advancements in processing and
packaging technologies have improved
product quality, consistency and shelflife and if implemented, the proposed
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amendments would remove
redundancies, as well as reduce costs
and administrative burden for both
handlers and the Board. Evidence
introduced at the hearing suggests that
mandatory inspection and certification
are no longer necessary to ensure
orderly marketing; however, the
authority should be retained in the
Order in the event market conditions
change and inspections and certification
are deemed necessary to be
reintroduced.
According to the hearing record,
walnut production and sales have
grown substantially over the past 73
years. The initial varieties regulated by
the Order no longer exist and are not
viable in either domestic or
international markets. In addition,
handlers have made significant
investments in the technology and
equipment necessary to maintain high
quality walnuts that customers demand
and that consumers expect. These
investments helped to manage over
300,000 tons in increased production,
according to a witness. Witnesses
testified that current customer
specifications exceed the grades and
standards established when the Order
was promulgated in 1948. The industry
considers the minimum grade and size
regulations as outdated and obsolete,
and that the mandated outbound
inspection has resulted in inefficient
redundancies. The costs of the
duplicative inspections outweigh their
benefit to industry.
A moratorium of enforcement on
mandatory inspection requirements is
currently in effect. Under the
moratorium, USDA’s enforcement of
mandatory inspection requirements
under the Order are suspended.
Accordingly, inspection and
certification requirements for walnuts
imported into the United States are also
suspended. USDA exercised its
discretion to issue the moratorium,
effective September 1, 2021, following
discussions with the Board. These
discussions took place after the Board’s
Grades and Standards Committee
recommended an action, subsequently
passed by the Board, to request that
USDA forego mandatory inspections in
response to market disruptions
associated with the Covid–19 pandemic,
including labor and transportation
interruptions, and ongoing tariff issues
that have adversely affected market
conditions across the California walnut
industry. Witnesses explained that, in
addition to external shipping
constraints, DFA inspector shortages
caused huge operational inefficiencies,
because handlers cannot ship product
that is not inspected, certified, and
stamped. Further, eliminating outbound
inspections would remove large
expenditures by eliminating the
duplicative inspections.
According to the record, mandated
inspections identified as duplicative by
witnesses cost the industry
approximately $6 million annually
(discussed further under Economic
Impact of Eliminating Mandatory
Inspection). Witnesses testified that the
elimination of mandatory outgoing
inspection would benefit all handlers
immediately through lower
expenditures and avoidance of shipping
delays due to inspector unavailability.
These handler benefits could also be
passed on to producers and consumers.
According to the record, market
demand for California walnuts
continues to grow. Evidence introduced
suggests that increased industry
investments in infrastructure, as well as
marketing and promotion, were in
response to growing domestic and
global walnut production. Over the past
five years, increases in international
production have affected U.S. market
prices and net grower returns. Record
evidence also indicates that total world
production increased by over 235,000
metric tons from 2017/18 to 2021/22;
however, California walnuts, even with
increases in production, accounted for a
smaller share of total world production,
decreasing from 29 to 27 percent during
the same time period. Other countries
have experienced growth; most notably,
China now accounts for 49 percent of
world production compared to 42
percent in 2017/18. China’s share of
world trade has risen to 13 percent, a
significant increase from 2 percent in
2016/17. Consequently, California
walnuts account for a smaller share of
world trade, falling from 68 to 54
percent between 2016/17 and 2020/21.
Hearing evidence included data from
studies conducted by the University of
California-Davis Cooperative Extension
(UC Davis) that highlight changes in
walnut farm profitability by comparing
farm revenue per acre and cost of
production. The UC Davis data,
illustrated in Table 1, include two cost
of production studies conducted in the
2011–2014 time period, and three
studies between 2015 and 2018.
Table 1 shows the decline in walnut
farm profitability by comparing two
four-year periods with very different
financial outcomes, 2011 to 2014 and
2015 to 2018. The average production
cost per acre for 2011–2014 and 2015–
2018 were $3,667 and $5,122,
respectively, which appear in column
(d) of Table 1. Average yields (1.83 and
2.01 tons per acre in the same time
periods) appear in column(b) of Table 1.
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).
TABLE 1—CALIFORNIA WALNUTS: PRODUCER GROSS RETURN, COST OF PRODUCTION, NET RETURN
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Range of years
Season average
producer
price, $/ton 1
Average yield:
tons per acre 2
Average
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:
National Agricultural Statistics Service (NASS), USDA.
averages computed in Table 1, based on annual NASS yield data.
3 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
The two producer net return numbers
in column (e) of Table 1 are the key
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results of this cost and return analysis.
Four years of walnut farm profitability,
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represented by producer net return per
acre of $2,264 for 2011–2014, were
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followed by four years of difficult
market conditions (2015–2018), with a
negative average net return of (–$1,458).
This analysis provides a numerical
estimate that bears out witness
testimony that emphasized a dramatic
downward shift in their economic wellbeing.
The hearing record indicates that
grower prices in 2019/20 and 2020/21,
when compared to the cost of
production in recent years shown in
Table 1, indicate continuing negative
net returns to California walnut growers,
on average.
In 2020/21, walnut crop value fell to
approximately $957 million, and the
season average grower price of $1,220
per ton was the lowest since 2003/04.
One witness testified that walnut
farmers face challenging market
conditions and that he does not foresee
improvement in the current season
(2021/22). Approximately, 80 percent of
the Board’s budget is allocated to
domestic marketing; however, domestic
consumption of walnuts has stayed the
same for many years, at approximately
one-half pound per person. Witnesses
stated that handlers are struggling, and
growers are losing their farms.
Witnesses explained that if the proposal
were implemented, the approximately
$6 million in savings at the handler
level could be distributed across the
market through higher grower returns.
Consumers are also expected to benefit
through improved pricing.
According to the record, walnut
varieties considered during the
establishment of the Order no longer
exist and are not viable in domestic and
international markets. Evidence suggests
that this is due to customer
specifications that exceed the minimum
grade, quality, and size regulations
currently prescribed under the Order for
shelled and inshell walnuts. Witnesses
explained that consumers, especially in
export markets, have high expectations
due to the superior quality attributes of
newer varieties. Production has
declined for older varieties that do not
contain the quality traits desired by
consumers, notably those varieties that
were considered when the Order was
promulgated in 1948. Because they were
based on lower quality walnuts, the
minimum quality requirements
prescribed under the Order are no
longer consistent with current-day
handling operations. In addition,
witnesses testified that product packed
to USDA minimum quality guidelines
would most likely be rejected by their
customers and result in complaints from
consumers.
Increased demand for higher quality
walnuts, both domestically and
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internationally, are driving the
production of new varieties. One
witness testified that over 90 percent of
California walnut production is
composed of three varieties, the
Chandler, the Howard, and the Tulare.
These varieties, notably the Chandler,
which is 58 percent of total California
walnut production, contains much less
inedible material than previous varieties
that were more susceptible to insect
damage and low-quality kernels due to
color and other factors.
According to the record, the harvest
season generally begins in midSeptember and concludes during the
first week of November. Witnesses
explained that when handlers receive
harvested walnuts, they undertake an
inbound inspection. Although the
specific steps may vary between
handlers, inbound inspection is
considered a standard business practice.
Evidence further suggests that due to
consumer expectations and
specifications, inbound inspection and
quality control processes are much more
stringent than the outbound inspection
required under the Order. One witness
testified that during the inbound
inspection, the value of the product is
assessed by taking an initial sample and
testing for moisture, debris, and foreign
material. Evidence suggests that this is
a critical step in the inbound inspection
process performed by almost all
handlers. Witnesses testified that
handlers either have a third-party
perform the inbound inspection or
conduct it themselves in-house, but the
inspection process is routine within
industry. Moisture testing has proven to
be a key indicator of potential microbial
growth, which can increase degradation
rates, an important measurement of
shelf-life.
Further evidence suggests that Board
funding of research on behalf of the
industry has contributed significantly to
the quality advancements of walnuts
produced and handled. According to the
record, handlers consider product to be
at ‘‘equilibrium’’ when moisture is
below 8 percent. This is based on Boardfunded research conducted by the UC
Davis.
In addition, individual handler
investments in technology and storage
have also resulted in improved internal
quality control across the industry.
Evidence suggests that the evolution of
inbound inspections and quality control
processes are also due to higher
customer specifications of quality. Both
large and small handlers testified about
the positive industry impact of adopting
different methodologies that have been
scientifically proven to reduce
degradation, such as modified
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atmosphere storage, pasteurization, and
fumigation. One witness testified that
handlers employ their own quality
assurance or quality control staff to
inspect product, using quality
specifications that exceed the USDA
grade standards used by DFA in
conducting inspections—inspections
that the industry considers to be
duplicative. The in-house quality
control staff also conduct additional
analytical tests for quality and
condition, such as the moisture testing
previously mentioned, microanalysis for
microbial activity and measurement of
peroxide and free fatty acid levels for
rancidity. Additionally, investments in
technology have facilitated
advancements in electronic processing,
such as laser or high-speed camera and
x-ray machines that separate
constituents on conveyor belts
significantly reducing foreign material
counts.
Witnesses explained that these
advancements, coupled with highly
trained quality assurance personnel,
significantly increased walnut quality to
a level that significantly exceeds
USDA’s minimum quality standards
established in 1948. In addition, one
handler witness that utilized both inline (inspection prior to packing) and
floor inspections (inspection after
packing) offered by DFA, testified that
both shelled and inshell walnuts rarely
failed USDA inspection and that
walnuts that do not meet the
requirements of the Order accounted for
a very small percent of total product
processed. Therefore, the witness stated,
handlers were only conducting
outbound inspections to comply with
the Order and to report the quantity of
walnuts handled for the calculation of
assessments as specified in § 984.69.
As evidenced by the record, walnut
sales are driven by consumer demand
for high quality product and
marketplace competition, both
domestically and internationally, which
provide strong incentives to remove all
substandard walnuts.
If implemented, the proposed
amendment would result in greater cost
efficiencies by eliminating inspection
redundancy, significantly lowering cost
and administrative burden for handlers
and the Board.
For the reasons stated above, it is
recommended that § 984.50 be amended
to remove quality and size regulations
and include only the Board’s authority
to recommend regulations in the future
if market conditions warrant and
eliminate §§ 984.51 and 984.52
inspection and certification of inshell
and shelled walnuts and shelled
walnuts for processing.
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Material Issue Number 2—New
Assessment Mechanism and Interest
and/or Charges for Late Payments
Section 984.69 should be revised to
change the calculation of assessments
from kernelweight to inshell pound in
paragraph (a), lift the stay for paragraph
(b) and add authority to establish an
initial assessment rate for the new
assessment mechanism in a new
paragraph (b), and include authority to
charge for late payments and/or interest
as prescribed by the Board with
approval from the Secretary in
paragraph (c). The preamble in the
notice of hearing incorrectly identified
paragraph (b) as the authority to charge
for late payments and/or interest. The
recommended decision and the
proposed regulatory text correctly refer
to paragraph (c). Corresponding changes
should be made to §§ 984.37, 984.48,
984.69, and 984.347. Specifically,
§§ 984.37, 984.48, and 984.347 should
be revised to modify the measure of
weight for assessments from
kernelweight to inshell pound.
In addition to the proposed new
assessment mechanism, the Board is
also recommending an initial
assessment rate of $0.0125 to go into
effect at the conclusion of this
rulemaking. This proposed amendment
is summarized further under Material
Issue No. 3.
According to the record, a new
mechanism for determining and
collecting handler assessments would
need to be established if the proposed
elimination of mandatory inspection
and certification summarized under
Material Issue No. 1 were implemented.
Witnesses at the hearing expressed that
the elimination of mandatory inspection
and certification, or the outgoing
inspection, disables the Board’s ability
to collect assessments. This is due to
provisions in § 984.69 which states that
each handler’s pro rata share is the
assessment rate per kernelweight pound
multiplied by the kernelweight of
walnuts certified. Therefore, the Order
as currently written ties the calculation
of assessments to inspection and
certification.
According to the record, the new
assessment mechanism would be based
on walnuts received instead of walnuts
certified which would allow the Board
to resume collecting assessments. Under
the proposed mechanism, the
calculation of assessments would be
based on receipts submitted to the
Board. All nine witnesses testified their
support for the proposed amendment,
citing that it is an equitable change that
would decrease the administrative
burden for handlers and the Board.
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Witnesses testified that California
Walnut Board (CWB) Form No. 1, which
is supplied to handlers by the Board in
their annual season packets, would be
the basis for the application of the
assessment rate to be paid by handlers
under the proposed new assessment
mechanism, and since this report is
already provided to the Board, it would
ensure there is no additional burden
placed on handlers. On CWB Form No.
1, handlers report walnut receipts by
county and variety in inshell pounds,
and therefore evidence suggests that the
proposed amendment to change the
calculation of assessments from
kernelweight to inshell pounds is to
reflect the new assessment mechanism
that would be based on walnut receipts
reported on CWB Form No. 1.
Under the Order, § 984.473 requires
each handler to report to the Board
walnut receipts from growers on or
before January 15 of each marketing
year. Handlers fill out CWB Form No. 1
or the Crop Acquisition Report to report
all walnuts received during the crop
year. Currently, the Board uses this
information for the purpose of
developing an annual report that shows
total crop acquisition in aggregate for
the marketing year.
Alternatives to CWB Form No. 1 were
also discussed, such as the CWB Form
No. 6, the Report of Merchantable
Walnuts Received, Committed, and
Shipped. This report also includes an
acquisition total; however, witnesses
testified that CWB Form No. 6 is a
monthly report and it conflicts with the
structure of the proposed new
assessment mechanism which would
stagger billing throughout the year. In
addition, using CWB Form No. 1
reduces the administrative burden for
handlers and the Board as it is an
annual report.
Additionally, the new assessment
mechanism is modeled after the
assessment method applied by the
California Walnut Commission
(Commission). One witness explained
that the Commission’s process is also
based on receipts, and that it is a selfreported system where handlers submit
forms during the year on behalf of
growers. The Commission’s assessment
process is also based on inshell weight
received or acquired, and consideration
was taken to ensure that the staggering
of assessments did not match the
Commission’s. This further ensures any
inadvertent undue burden is not place
on handlers.
According to the record, for the first
time for the 2021–2022 marketing year,
the Board has included handler audits
in its compliance plan. This is to ensure
receipts reported on CWB Form No. 1
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are accurate. Under the proposed
assessment mechanism, the Board plans
to audit handler receiving records, and
one witness testified that receipt
numbers can also be cross-checked with
information shared between the Board
and the Commission. This is within the
authority of the Board as § 984.80
provides that each handler shall
maintain records of walnuts received,
held, or disposed of as prescribed by the
Board, and such records shall be
retained and be available for
examination by the Board and Secretary
for a period of two years. In addition,
§ 984.91 provides that the Board may
deliberate, consult, cooperate and
exchange information with the
Commission, whose activities
complement the Board.
Under the proposed new assessment
mechanism, invoicing would not begin
until after January 15 which is when
CWB Form No. 1 is due, and billings
would be staggered later in the year to
allow handlers to pay in three
installments. Billings would be
generated in January, April, and July
and as prescribed by the Board,
payments would be due in February,
May, and August. This is contrary to the
current billing system where handlers
are invoiced monthly. One witness
testified that under the current system,
approximately 48 percent of the total
revenue for the year is invoiced by
January and when compared to the
proposed mechanism, only 33.33
percent of the total annual revenue
would be billed in that same timeframe.
The following is a sample calculation
showing how assessments would be
determined under the new proposed
mechanism. In the sample calculation,
handler A reported receipts of 1 million
inshell pounds on CWB Form No. 1 for
the 2023 crop year. To calculate handler
A’s total annual assessment under the
proposed new assessment mechanism,
multiply the proposed initial
assessment rate by the total pounds
received for a result of $12,500 (1
million × $0.0125 = $12,500). To
calculate handler A’s assessment
billings, multiply the total annual
assessment by 33.33 percent for a result
of $4,166.66 to be invoiced in January,
$4,166.67 to be invoiced in April, and
a final sum of $4,166.67 to be invoiced
in July.
Sample Calculation for Assessments
Handler A reported acquisitions for
2023 marketing year = 1,000,000
pounds multiplied by $.0125 =
$12,500
Assessments to be invoiced as
follows:
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Invoice 1—Jan—$12,500 multiplied by
33.33% = $4,166.66
Invoice 2—Apr—$12,500 multiplied by
33.33% = $4,166.67
Invoice 3—Jul—$12,500 multiplied by
33.33% = $4,166.67
Total invoiced: $12,500.00
During the hearing, USDA sought
testimony on § 984.67 and specifically
on exemptions from assessments and
quality regulations. Currently,
§ 984.67(b)(1) in the Code of Federal
Regulations references a list that is
missing in error. In addition, § 984.67(b)
is missing other exemptions from
assessments and quality regulations—
specifically for green walnuts and
walnuts directed to noncompetitive
outlets. Witnesses testified that § 984.67
provides stipulations for walnuts
handled that are exempt from
assessments and quality regulations
under the Order such as for charitable
institutions, relief agencies,
governmental agencies for school lunch
programs, and diversion to animal feed
or oil manufactures pursuant to an
authorized governmental diversion
program. All industry witnesses
testified in support of adding the
missing text back to § 984.67(b) with
some witnesses stating that they were
unaware that the exemptions list was
missing or incomplete, and that
immediate reinsertion would benefit the
industry as it would be unfair to
penalize handlers for not paying
assessments on product otherwise
considered exempt.
A witness provided a sample
calculation of how exemptions from
assessments would be applied. In the
hypothetical scenario illustrated below,
handler A from the previous example
reported that 10 thousand pounds was
sold to USDA under section 32 of the
Agricultural Adjustment Act
Amendment of 1935. Handler A
reported this after the first invoice for
the marketing year was issued. To
calculate handler A’s exemption,
multiply the total pounds exempt by the
proposed assessment rate for an exempt
amount of $125.00 (10,000 pounds ×
$0.0125 = $125). Subsequently, the next
invoice billed to handler A (in this
scenario it would be April) would show
an adjusted assessment of $4,041.67 as
a result of a $125.00 reduction due to
exemptions.
Sample Calculation for Exemption
Application
On March 31, Handler A reported
10,000 pounds sold to USDA for a
Section 32 purchase.
10,000 pounds multiplied by $.0125 =
$125
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Assessments to be invoiced as
follows:
Invoice 1—Jan—$12,500 multiplied by
33.33% = $4,166.66—was already
invoiced
Invoice 2—Apr—$12,500 multiplied by
33.33% = $4,166.67¥$125.00—less
exemption amount
Invoice 2 adjusted amount =
$4,041.67—new invoice amount
Invoice 3—Jul—$12,500 multiplied by
33.33% = $4,166.67
Total invoiced: $12,375.00
According to the record, for
exemptions that occurred after July, the
last invoice in the marketing year, a
refund check in the amount exempt
would be issued by the Board to
handlers. This ensures handlers receive
a timely refund against current year
assessments. Similarly, handlers that
report adjustments to CWB Form No. 1
after January 15 of the marketing year
would also receive a readjustment to
their total annual assessments.
For the reasons stated above, it is
recommended that § 984.67 be amended
to add the text inadvertently omitted.
Regarding the proposed amendment to
revise § 984.69(c) to add the authority to
charge for late payments and/or interest
as recommended by the Board, subject
to the approval of the Secretary,
witnesses testified that if implemented,
the proposal will enable the Board to
further encourage compliance through
the common business practice of
assessing interest and late-payment
charges.
According to the record, the industry
has minimal issues with collection, but
the standard business practice of
interest and late payment charges is a
tool that would help the Board execute
the collection of assessments and
administer the Order. One witness
testified that currently under the
Board’s compliance plan a past-due
notice is issued at 60 days, a second
notice at 90 days, and then at 150 days
outstanding the assessment is then
referred to USDA. Under the proposed
amendment, the Board may decide to
not implement the authority; however,
witnesses testified that the authority to
recommend late-payment charges in the
future would increase the equitability of
the collection of assessments, as late
fees would be applied equally across all
handlers.
Additionally, the requirements of the
new assessment mechanism and
application of interest and late-payment
charges as recommended by the Board
and approved by the Secretary, would
be communicated to handlers through
their annual handler packets that are
mailed at the beginning of each
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marketing year, and include a
personalized cover letter for each
handler, a copy of the annual handler
regulations, a full set of Board forms,
and a copy of the Order.
On February 24, 2022, the Board
voted unanimously in favor of the
proposed amendments recommended by
the Executive Committee to create a new
assessment mechanism and to add
authority to charge for late payments to
the Order. Board and Committee
meetings are open to the public, and
both large and small operations had an
opportunity to provide input into the
proposed amendments. In addition,
newsletters were mailed to growers and
the proposed changes were discussed at
the annual grower meeting where Board
staff provided presentations on all
potential changes to the Order.
For the reasons stated above, it is
recommended that § 984.69 be revised
to change the calculation of assessments
from kernelweight to inshell pound in
paragraphs (a) and (c) be revised to
include an authority to charge for late
payments and/or interest as
recommended by the Board, subject to
the approval of the Secretary. It is also
recommended that corresponding
changes be made to §§ 984.37, 984.48,
984.69, and 984.347.
Material Issue No. 3—Initial
Assessment Rate
Section 984.69(b) should be revised to
include the authority to establish an
initial assessment rate and § 984.347
should be amended to establish an
initial assessment rate of $0.0125 per
inshell pound of walnuts. The
establishment of an initial assessment
rate would allow the Board to resume
the collection of assessments after the
conclusion of this rulemaking and 30
days after the publication of the final
rule in the Federal Register, if
implemented.
As mentioned in several places
throughout this recommended decision,
the moratorium on the enforcement of
mandatory inspections effective
September 1, 2022, prevents the Board
from collecting assessments due to
§ 984.69(a) which bases the calculation
of assessments on walnuts certified.
While the moratorium is in effect, Board
activities and programs are sustained
through the use of operational funding
from the Board’s existing but depleting
financial reserve funds. Evidence
suggests that the establishment of the
initial assessment rate is to ensure the
Board will have the ability to generate
funds in the upcoming marketing year.
Witnesses explained that the formal
rulemaking process could take between
18 and 24 months, and during this time
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the Board is operating entirely off its
reserves. Therefore, the ability of the
Board to assess upon implementation is
important to be able to resume its full
scope of activities.
According to the record, on November
19, 2021, the Marketing Order Revision
Committee recommended the initial
assessment rate to the Board. Witnesses
testified that discussions were robust,
and several alternatives were proposed.
Rates as high as 2 cents or as low as zero
were considered by the Board.
Ultimately, the Board voted in favor of
an initial assessment rate of $0.0125, 7
to 2. It was concluded that, without an
established rate, programs would be
limited and the Board would not be able
to conduct business in the year the
proposed amendments would take effect
if implemented. Additionally, evidence
suggests that due to low pricing further
consideration was taken to ensure the
proposed rate is reasonable and it does
not appear as though the Board is trying
to recapture years without assessments.
Witnesses testified that the proposed
rate of $0.0125 is lower than the rate
originally proposed for the current
season and is also lower than the rate
for the last 4 out of the 5 years prior to
the 2021/22 season. The Board decided
that an initial assessment rate of $0.0125
would be reasonable for handlers and
would allow the Board to cover
operating costs and conduct the
marketing activities needed for the
domestic market.
The notice of hearing incorrectly had
an assessment rate of $.125 in the
regulatory text. The recommended
decision corrects the assessment rate to
reflect the Board’s intent and testimony.
In addition, § 984.68 of the Order
provides that the Board must file a
proposed budget of expenses and a rate
of assessment at the beginning of each
marketing year and the determination of
the initial rate would not supersede
that.
For the reasons stated above, it is
recommended that § 984.69(b) be
revised to include the authority to
establish an initial assessment rate
which may be modified by the Secretary
and § 984.347 be amended to establish
the initial assessment rate of $0.0125
per inshell pound of walnuts.
Material Issue No. 4—The Definition of
To Handle
Section 984.13 should be modified to
include the word ‘‘receive’’ in the
definition of ‘‘to handle’’. Modifying the
definition would broaden its scope to
include the receipt of either inshell or
shelled walnuts (except as a common
contract carrier or walnuts owned by
another person) to be put into the
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current of commerce either within the
area of production or from such area to
any point outside thereof, or for a
manufacturer or retailer within the area
of production to purchase directly from
a grower. This does not include sales
and deliveries within the area of
production by grower to handlers, or
between handlers.
According to the record, expanding
the definition would allow the Board to
use the Acquisition Report, or CWB
Form No. 1, required by each handler
before January 15 of each marketing
year, as the basis for the calculation of
assessments to be collected under the
proposed new assessment mechanism
summarized in Material Issue No. 2.
Currently, handlers are assessed on
product certified, and evidence suggests
that the Board’s intention for expanding
the definition to include ‘‘receive’’ is to
ensure all handlers that receive walnuts
are assessed under the proposed new
assessment mechanism and also to
clearly tie assessments with walnuts
received. Witnesses testified that the act
of handling begins when a handler
receives and takes possession of the
product and therefore expanding the
definition would ensure product does
not slip through the system unassessed
or unaccounted.
According to the record, this is a
necessary change that is a result of the
proposed elimination of inspections and
certification that currently ties
assessments with walnuts certified, and
that modifying the definition would
enable the alignment of the proposed
amendments discussed in this
recommended decision. Additionally,
handlers are expected to benefit from
the modified definition as it allows for
the application of the proposed
assessment mechanism which would
reduce the administrative burden for
both handlers and the Board.
For the reasons stated above, it is
recommended that § 984.13 be modified
to include the word ‘‘receive’’ in the
definition of ‘‘to handle’’.
Material Issue No. 5—Volume Control
Authority
Section 984.49 ‘‘Volume regulation’’,
reserve pool authority, and subsequent
sections including provisions for
volume control should be removed. This
includes removing: §§ 984.23, 984.26,
984.33, 984.54, 984.56, 984.66,
984.69(b), 984.450(a) and (b),
984.451(c), 984.456, and 984.464(a) and
revising: §§ 984.48 and 984.67.
Removing volume control authority
would modernize the Order by
eliminating regulations the industry
considers no longer necessary to ensure
orderly marketing.
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Witnesses testified that the industry is
fundamentally different than it was 30
years ago and does not foresee using
volume regulation in the future.
Currently, volume regulation is
suspended indefinitely, effective May 7,
2020 (85 FR 27109). According to the
record, volume regulations were
suspended because they had not been
used in over 30 years. As previously
stated under Material Issue No. 1,
witnesses argued that in the current
economic environment, low pricing is a
result of increases in global supply.
Therefore, restricting sales of California
walnuts would not be in the best
interest of the industry which is
primarily focused on increasing market
demand through research and
promotion.
For the reasons stated above, it is
recommended that § 984.49 ‘‘Volume
regulation’’ and reserve pool authority
should be removed. Corresponding
changes to subsequent sections
including provisions for volume control
should also be removed. This includes
removing: §§ 984.23, 984.26, 984.33
984.54, 984.56, 984.66, 984.69(b),
984.450(a) and (b), 984.451(c), 984.456,
and 984.464(a) and revising: §§ 984.48
and 984.67.
Material Issue No. 6—USDA’s
Conforming Changes
Based on record evidence, USDA is
recommending the following
conforming changes to the Order:
adding language regarding exemptions
to § 984.67; removing the reference to
‘‘merchantable’’ in § 984.22 and from
the headings and paragraphs in
§§ 984.72 and 984.472(a) and (c);
revising the heading in § 984.21;
revising §§ 984.69(e) and 984.89(b)(4) to
replace the term ‘‘fiscal period’’ with
‘‘marketing year’’; and revising the
figure in § 984.347.
As described above in Material Issue
#2, USDA is recommending a
conforming change to § 984.67 to add
language inadvertently omitted in a
prior rulemaking conducted in May
2020. Witnesses testified in support of
adding exemptions that had been
inadvertently omitted back to § 984.67.
A conforming change to remove the
word ‘‘merchantable’’ from § 984.22 and
from the headings and paragraphs in
§§ 984.72 and 984.472(a) and (c) is
necessary to add clarity to the Order. In
§ 984.11, ‘‘merchantable walnuts’’ are
defined as ‘‘walnuts meeting the
minimum grade and size regulations
effective pursuant to § 984.50.’’ If the
proposed amendments described in
Material Issue #1 are implemented,
there would be no ‘‘merchantable
walnuts’’ because there would be no
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grade and size regulations in effect.
Witnesses testified that this was their
understanding of the effect of the
proposed amendments described in
Material Issued #1. Witnesses also
testified in favor of removing numerous
references to the term ‘‘merchantable’’
in various sections, including § 984.48.
Similarly, witnesses testified to
amendment of § 984.472(b) to ensure
that reporting requirements for shipped
walnuts would continue.
Accordingly, USDA proposes that
references to ‘‘merchantable’’ be
removed from other reporting
requirements to ensure that such
reporting requirements continue to be in
place. USDA proposes that the reference
to ‘‘merchantable’’ be removed from
§ 984.22 to ensure that the marketing
policy in § 984.48 includes an estimate
of trade demand. USDA proposes that
the reference to ‘‘merchantable’’ be
removed from the heading and text of
§ 984.72 to make clear that the authority
for reports extends to walnuts rather
than the subset of ‘‘merchantable
walnuts’’. Similarly, USDA proposes
conforming changes to remove
references to the term ‘‘merchantable’’
in § 984.472(a) and (c). This would
ensure that walnuts that are received
and that are committed continue to be
reported to the Board.
Section 984.50 would continue to
provide authority for grade, quality, and
size regulations in the event that such
regulations are warranted in the future.
If specific grade, quality, and size
regulations are promulgated and
implemented in the future, the term
‘‘merchantable walnuts’’ (‘‘walnuts
meeting the minimum grade and size
regulations effective pursuant to
§ 984.50’’) would once again have
meaning and effect. Accordingly, the
definition for ‘‘merchantable walnuts’’
and similarly related sections that
reference the word ‘‘merchantable’’ in
the Order would not be affected by the
proposed amendments. Specifically,
§§ 984.11, 984.12, and 984.64 would
continue to reference ‘‘merchantable
walnuts.’’
In addition, as noted in the notice of
hearing, the heading in § 984.21 would
be revised to reflect the purpose of the
provision. The provision defines
handler inventory and accordingly,
USDA proposes to rename the heading
‘‘Handler inventory’’ from ‘‘Eligibility.’’
USDA proposes to revise §§ 989.69(e)
and 984.89(b)(4) to replace the term
‘‘fiscal period’’ with ‘‘marketing year.’’
‘‘Marketing year’’ is already used in
another provision of § 989.69. Moreover,
‘‘marketing year’’ is defined in and used
throughout the Order.
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Finally, as discussed in Material Issue
#3 USDA notes that there was an error
in § 984.347 in the notice of hearing, in
which the assessment rate was listed as
$.125. Witnesses testified that the
assessment rate should be $.0125, and
the recommended decision reflects this.
Initial 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
initial 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 April 19–20,
2022, interested parties were invited to
present evidence on the probable
regulatory impact on small businesses of
the proposed amendments to the Order.
The evidence presented at the hearing
shows that the proposed amendments
would not have a significant negative
economic impact on a substantial
number of small agricultural producers
or handlers.
A small handler, as defined by the
Small Business Administration (SBA)
(13 CFR 121.201), is one that grosses
less than $30 million annually. A small
walnut producer is one that grosses less
than $3.25 million annually.
Effective May 2, 2022, SBA issued a
final rule updating small business size
standards for agriculture (86 FR 18607).
The tree nut farming (North American
Industry Classification System (NAICS)
code 111335) size standard changed
from $1 million to $3.25 million. The
witnesses that identified themselves as
small producers did so using the SBA
size standard in effect at the time of the
hearing ($1.0 million); they are also
small under the new standard of $3.25
million.
A total of nine witnesses testified at
the hearing. Of the nine witnesses,
seven appeared and offered testimony as
growers or handlers. Five of these seven
witnesses were growers and four of the
growers were also handlers. Two of five
grower witnesses testified that they
were small walnut growers according to
the former SBA definition of $1.0
million, and three were large.
Of the six handler witnesses, two
were small and four were large. Of the
four grower witnesses who were also
handlers, one was a small handler, and
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three were large. There were two
additional handler witnesses, one small
and one large.
Of the remaining two witnesses, one
provided testimony from the
perspective of academia and the other
witness provided testimony as a
representative of the California Walnut
Board.
All witnesses expressed their support
for the proposed amendments and
stated that they expected to see
significant benefits (cost savings) from
the amendments.
Walnut Industry Background and
Overview
According to the hearing record there
are approximately 4,500 producers and
85 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.
Record evidence showed that
approximately 82 percent of California’s
walnut handlers (70 out of 85) 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 the California farms growing walnuts
had walnut sales of less than $1 million.
In the 2017 Agricultural Census, the
largest sales value size category for
walnuts was $1.0 million.
To estimate the percentage of small
walnut farms, using NASS data from the
hearing record, the first step was
computing a 3-year average crop value,
which was $1.077 billion for the period
2018/19 to 2020/21. Average bearing
acres over that same 3-year period were
372,500. Dividing crop value by acres
yields a revenue per acre estimate of
$2,892. Using these numbers, it would
take approximately 1,124 acres
($3,250,000/$2,892) to yield $3,250,000
in annual walnut sales. The 2017
Agricultural Census data show that 94
percent of walnut farms in 2017 were
below 1,000 acres. Therefore, 94 percent
or more of California walnut farms
would be considered small businesses
according to the current SBA definition.
Hearing evidence showed that the
period from walnut tree planting
production ranges from 5 to 7 years, and
that production levels each year are
somewhat affected by the alternate
bearing tendency. The pricing downturn
that began in 2015 somewhat
diminished the rate of new plantings,
but about 36,000 previously planted
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acres are expected to come into
production in the next 3 years (2023 to
2026). These are high-yield varieties,
and therefore the new acres will be
more productive than the walnut
acreage being removed.
According to the record, generally all
domestic production of walnuts is
grown in the Central Valley region,
which includes the Sacramento Valley
and the San Joaquin Valley. The San
Joaquin Valley is one of only five major
Mediterranean-type climates in the
world that is ideal for growing nuts.
Over the past 10 years, walnut acreage
has migrated north for better water
availability. Production in the northern
part of the Central Valley is expected to
grow significantly, and the proportion of
total production in the south is expected
to decline.
Walnut trees bloom in the spring and
the harvest for early varieties starts in
September. Harvesting for later varieties
starts in October and sometimes
continue into November. The Chandler
variety is 58 percent of total walnut
production. Three varieties (Chandler,
Howard, and Tulare) make up eightyfive percent of total walnut volume. As
soon as the nuts are harvested, they
must be hulled (removal of the green
husk) and dried. The hulled nuts have
too high a moisture content for longterm storage, and they need to be dried
quickly to preserve quality and to
minimize mold and rancidity. Growers
still own the nut at that point, according
to hearing evidence.
The processor (handler) then buys the
nuts based on the cleaned, hulled and
dried weight. The handlers process and
store them before and after the valueadded steps, before shipping them into
distribution channels.
Once received by the handler, the
walnuts go into refrigerated or bulk
storage, depending on the type of
product that the handler intends to
produce. Smaller lots (such as for minor
varieties) are put into bin storage. Once
the walnuts are warehoused and
fumigated (to eliminate insects) a
sample is taken to determine the value
of the product to the producer. The
walnuts are tested for kernel content,
edible kernel content, defect levels, and
color. The lighter the color, the greater
the value. The three predominant colors
are light, light amber and amber.
The shelling process removes most of
the shell, typically leaving about 98
percent kernel and 2 percent shell. The
resulting lot has nuts with a mixture of
colors and approximately six different
sizes, ranging from eight-of-an-inch
square up to a half kernel.
Walnuts generally have a 12-month
shelf life, which can be moderately
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increased through improved storage
conditions and may be reduced if
storage conditions are not ideal. Cold
storage has facilitated year-round sales
and marketing. Witnesses stated that
advancements in processing and
packaging technologies continue to
improve product quality, consistency
and shelf life.
Some packaging methods, including
vacuum packing, will increase shelf life
and help maintain quality. Walnuts can
also be pasteurized to reduce pathogens.
Modified atmosphere storage requires
substantial capital, including
automation of storage chamber loading
and unloading because the low oxygen
environment is dangerous for forklift
drivers.
On the handler process lines, key
pieces of equipment are laser sorters
and optical camera sorters, which can
sort by color and shape. Broad spectrum
analyses (using infrared and ultraviolet)
are increasingly effective at identifying
defects. Mechanical air injection
systems use jets of air to remove
individual nuts identified as defective.
A key factor in quality improvement
are new varieties, including Chandler,
Howard, Pillory, Ivanhoe and Sawano.
With these varieties, shell removal is
much easier, leaving far fewer fragments
and pieces. Recent technology
improvements have also greatly reduced
the incidence of foreign material and
shell pieces to a level that is far below
what is allowed under USDA standards,
which were established decades earlier.
With the new varieties, the kernel
color is much lighter, and the nuts are
larger. In addition, advances in
processing equipment produce a much
higher percentage of ‘‘pristine halves’’.
Witnesses testified that these three key
characteristics yield more money to
industry stakeholders but are not
accounted for in USDA standards.
According to hearing evidence, prior
to the inspection moratorium, large
volume handlers typically had DFA staff
working from a space close to their own
quality assurance (QA) staff. DFA
conducted quality tests from in-line
samples with processes that largely
paralleled those of the handler QA staff,
but DFA applied the less stringent
USDA standards. For smaller volume
handlers, the DFA staff tested nuts
based on samples from packaged
products on the packing floor (floor
inspection). For the mandatory
outbound inspection, no product could
leave the processing facility without
USDA certification issued by DFA.
Before the inspection moratorium,
operational inefficiencies for handlers
included sometimes having to wait for
qualified DFA inspection staff to show
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up to certify lots in a timely manner,
adding to an already challenging
shipping environment. Hearing
evidence suggests that the elimination
of mandatory inspection, and being able
to self-certify according to customer
specifications that are well above USDA
standards, would be a significant benefit
of the proposed changes to handlers of
all sizes. Some handlers may continue
to use DFA inspection service for
quality control; however, hearing
evidence shows industry is undergoing
a transition away from the traditional
practice of third party inspections for
greater cost savings.
Witnesses reported that another
improvement in operational efficiency,
and reduced paperwork burden, that
would result from the proposed
amendments is changing from monthly
handler assessments to three
installments to be paid in February,
May, and August.
In summary, hearing evidence points
to major technological improvements in
sorting, processing and storage, and
adoption of new varieties, as key
evidence of how current industry
practices result in walnut quality that
exceeds USDA standards, making
mandatory outgoing inspection
unnecessary.
Estimated Economic Impact of
Eliminating Mandatory Inspection
A key economic impact of the
marketing order amendment is the cost
reduction to industry stakeholders of
eliminating mandatory inspection.
Hearing evidence showed that an
estimate of the inspection cost is
approximately $6 million per year. This
cost reduction figure represents a key
benefit to the industry of implementing
these amendments.
Table 2 illustrates the inspection cost
estimate. Multiplying the total quantity
of California walnuts marketed in 2020
(783,500 tons) times the average
inspection cost of $7.7024 per ton)
yields the total annual mandatory
inspection cost estimate of $6,034,830
shown in Table 2. These numbers
represent the costs incurred by handlers
for the inspection services supplied by
DFA, the Board’s inspection agency of
record.
The proportion of the crop marketed
as inshell and shelled are 42 and 58
percent, respectively. These proportions
are used to show how the $6.035
million inspection cost is allocated to
the inshell and shelled portions of the
total U.S. walnut market.
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TABLE 2—ESTIMATED ANNUAL COST MANDATORY WALNUT INSPECTION 1
Share of sales (%) ...................................................................
Volume (tons) ...........................................................................
Inspection Cost ($ per ton) 2 ....................................................
Total inspection cost 2’ .............................................................
Inshell
Shelled
42%
329,070
$6.09
$2,004,036
58%
454,430
$8.87
$4,030,794
Total
100%
783,500
$7.7024
$6,034,830
Computational detail
A
B A * total volume.
C
D B * C.
1 This
table is based on Exhibit 16A of the walnut marketing order amendment hearing, which used data supplied by California Walnut Board.
inspection cost of $6,034,830 in this table is the sum of the inshell and shelled cost and represents a slight upward adjustment from the
total cost figure of $6,032,950 in hearing Exhibit 16A. This revised total cost figure was used to compute a revised inspection cost per ton of
$7.7024, representing an average industry cost, combining inshell and shelled. This is slightly higher than the $7.70 cost figure presented in Exhibit 16A.
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2 Total
Hearing evidence also pointed to
other benefits, such as lower indirect
costs to handlers. Witnesses stated that
handlers would benefit from reduced
operational process redundancies,
resulting in lower associated costs and
administrative burdens. An additional
efficiency for handlers is that the
proposed new marketing order
assessment mechanism utilizes the same
process already in use by handlers for
their payment to the California Walnut
Commission.
In addition, producers may also
benefit from higher grower returns
through cost savings passed on from
increased handler efficiencies.
The record shows that there would be
no negative quality implications from
implementing the proposed
amendments, and consumers already
benefit from California walnut quality
that surpasses USDA grade standards.
Consumers may also benefit from lower
prices resulting from reduced handler
costs. If the proposed amendments and
accompanying conforming changes were
implemented, both benefits and costs
savings could be anticipated. For the
reasons described above, it is
determined that the benefits of
eliminating mandatory inspection and
certification of inshelled and shelled
walnuts, and of shelled walnuts for
processing; creating a new mechanism
for determining and collecting handler
assessments; adding authority to charge
interest for late payments; establishing
an assessment rate of $0.0125 per
inshell pound of walnuts; expanding the
definition of ‘‘to handle’’ to include
‘‘receive’’, and removing volume control
authority would modernize and align
the Order with current market-driven
practices that would result in a more
efficient industry.
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
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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
Office of Management and Budget
(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.
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
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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.
Rulings on Briefs of Interested Persons
Briefs, proposed findings and
conclusions, and the evidence in the
record were considered in making the
findings and conclusions set forth in
this recommended decision. To the
extent that the suggested findings and
conclusions filed by interested persons
are inconsistent with the findings and
conclusions of this recommended
decision, the requests to make such
findings or to reach such conclusions
are denied.
General Findings
The findings hereinafter set forth are
supplementary to the findings and
determinations which were previously
made in connection with the issuance of
the marketing agreement and 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.
(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;
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(2) The marketing order, as amended,
and as hereby proposed to be further
amended, regulates the handling of
walnuts grown in the production area
(California) 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
which 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 the production area; 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.
A 30-day comment period is provided
to allow interested persons to respond
to this proposal. All written exceptions
received within the comment period
will be considered, and a producer
referendum will be conducted before
any of these proposals are implemented.
§ 984.13
List of Subjects in 7 CFR Part 984
§ 984.33
Marketing agreements, Nuts,
Reporting and recordkeeping
requirements.
For the reasons set out in the
preamble, the Agricultural Marketing
Service proposes to amend 7 CFR part
984 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.
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■
2. Revise § 984.12 to read as follows:
§ 984.12
Substandard walnuts.
Substandard walnuts means all
walnuts (whether inshell or shelled)
that do not meet the minimum standard
prescribed for merchantable walnuts
whenever regulations are in effect
pursuant to § 984.50.
■ 3. Revise § 984.13 to read as follows:
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To handle.
To handle means to receive, pack,
sell, consign, transport, or ship (except
as a common or contract carrier of
walnuts owned by another person), or in
any other way to put walnuts, inshell or
shelled, into the current of commerce
either within the area of production or
from such area to any point outside
thereof, or for a manufacturer or retailer
within the area of production to
purchase directly from a grower.
However, sales and deliveries by a
grower to handlers, hullers, or other
processors within the area of production
shall not, in itself, be considered as
handling by a grower. The term ‘‘to
handle’’ shall not include sales and
deliveries within the area of production
between handlers.
■ 4. In § 984.21, revise the section
heading to read as follows:
§ 984.21
*
*
§ 984.22
Handler inventory.
*
*
*
[Amended]
5. In § 984.22(a) and (b), remove the
word ‘‘merchantable’’.
■
§§ 984.23 and 984.26
Reserved]
[Removed and
6. In §§ 984.23 and 984.26, lift the
stays of May 7, 2020, and remove and
reserve the sections.
■ 7. Revise § 984.32 to read as follows:
■
§ 984.32
To certify.
To certify means the issuance of a
certification of inspection of walnuts in
accordance with regulations issued
pursuant to § 984.50.
[Removed and Reserved]
8. In § 984.33, lift the stay of May 7,
2020, and remove and reserve the
section.
■ 9. In § 984.37, revise paragraphs (b)
and (c)(4) to read as follows:
■
§ 984.37
Nominations.
*
*
*
*
*
(b) Nominations for handler members
shall be submitted on ballots mailed by
the Board to all handlers in their
respective Districts. All handlers’ votes
shall be weighted by the weight of
inshell walnuts handled by each
handler during the preceding marketing
year. Each handler in the production
area may vote for handler member
nominees and their alternates. However,
no handler with less than 35% of the
crop shall have more than one member
and one alternate member. The person
receiving the highest number of votes
for each handler member position shall
be the nominee for that position.
(c) * * *
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64395
(4) Nominations for handler members
representing handlers that do not
handle 35% or more of the crop shall be
submitted on ballots mailed by the
Board to those handlers. The votes of
these handlers shall be weighted by the
weight of inshell walnuts handled by
each handler during the preceding
marketing year. Each handler in the
production area may vote for handler
member nominees and their alternates
of this paragraph (c)(4). However, no
handler shall have more than one
person on the Board either as member
or alternate member. The person
receiving the highest number of votes
for a handler member position of this
paragraph (c)(4) shall be the nominee for
that position.
*
*
*
*
*
■ 10. In § 984.48:
■ a. Revise the introductory text of
paragraph (a);
■ b. Remove the words ‘‘merchantable
and substandard’’ in paragraph (a)(3);
■ c. Lift the stays of May 7, 2020, on
paragraphs (a)(6) and (7) and remove
both paragraphs; and
■ d. Redesignate paragraphs (a)(8) and
(9) as paragraphs (a)(6) and (7),
respectively.
The revision reads as follows:
§ 984.48 Marketing estimates and
recommendations.
(a) Each marketing year the Board
shall hold a meeting, prior to October
20, for the purpose of recommending to
the Secretary a marketing policy for
such year. Each year such
recommendation shall be adopted by
the affirmative vote of at least 60% of
the Board and shall include the
following:
*
*
*
*
*
§ 984.49
[Removed and Reserved]
11. In § 984.49, lift the stays of August
7, 1995, and May 7, 2020, and remove
and reserve the section.
■ 12. In § 984.50, lift the stay of May 7,
2020, on paragraph (e) and revise the
section to read as follows:
■
§ 984.50 Grade, quality, and size
regulations.
(a) The Board may recommend,
subject to the approval of the Secretary,
regulations that:
(1) Establish handling requirements
for particular grades, sizes, or qualities,
or any combination thereof, of any or all
varieties or classifications of walnuts
during any period;
(2) Establish different handling
requirements and tolerance limits for
particular grades, sizes, or qualities, or
any combination thereof, for different
market destinations;
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(3) Establish different handling
requirements for the processing of
shelled walnuts and the handling
thereof; and
(4) Establish inspection and
certification requirements for the
purposes of this paragraph (a) and
paragraph (b) of this section.
(b) During any period regulations
issued under this section are in effect,
no handler shall handle or process
walnuts into manufactured items or
products unless they meet the
applicable requirements under this
section as evidenced by certification
acceptable to the Board.
(c) Regulations issued under this
section may be amended, modified,
suspended, or terminated whenever it is
determined:
(1) That such action is warranted
upon recommendation of the Board and
approval by the Secretary, or other
available information; or
(2) That regulations issued under this
section no longer tend to effectuate the
declared policy of the Act.
§§ 984.51 and 984.52
Reserved]
[Removed and
13. Remove and reserve §§ 984.51 and
984.52.
■
§§ 984.54 and 984.56
Reserved]
[Removed and
14. In §§ 984.54 and 984.56, lift the
stays of May 7, 2020, and remove and
reserve the sections.
■ 15. Revise § 984.64 to read as follows:
■
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§ 984.64 Disposition of substandard
walnuts.
During any period when regulations
are in effect pursuant to § 984.50,
substandard walnuts may be disposed of
only for manufacture into oil livestock
feed, or such others uses as the Board
determines to be noncompetitive with
existing domestic and export markets
for merchantable walnuts and with
proper safeguards to prevent such
walnuts from thereafter entering
channels of trade in such markets. Each
handler shall submit, in such form and
at such intervals as the Board may
determine, reports of his production and
holdings of substandard walnuts and
the disposition of all substandard
walnuts to any other person, showing
the quantity, lot, date, name and address
of the person to whom delivered, the
approved use and such other
information pertaining thereto as the
Board may specify.
§ 984.66
[Removed and Reserved]
16. In § 984.66, lift the stay of May 7,
2020, and remove and reserve the
section.
■ 17. In § 984.67:
■
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a. Lift the stay of May 7, 2020, on
paragraph (a) and remove the paragraph;
■ b. Redesignate paragraphs (b) and (c)
as paragraphs (a) and (b), respectively;
and
■ c. Revise newly redesignated
paragraph (a).
The revision reads as follows:
■
§ 984.67
Exemptions.
(a) Exemptions from assessments and
quality regulations—(1) Sales by
growers direct to consumers. Any
walnut grower may handle walnuts of
his production free of the regulatory and
assessment provisions of this part if he
sells such walnuts in the area of
production directly to consumers under
the following types of exemptions:
(i) At roadside stands and farmers’
markets;
(ii) In quantities not exceeding an
aggregate of 500 pounds of inshell
walnuts of 200 pounds of shelled
walnuts during any marketing year (at
locations other than those specified in
paragraph (a)(1)(i) of the section); and
(iii) If shipped by parcel post or
express in quantities not exceeding 10
pounds of inshell walnuts or 4 pounds
of shelled walnuts to any one consumer
in any one calendar day.
(2) Green walnuts. Walnuts which are
green and which are so immature that
they cannot be used for drying and sale
as dried walnuts may be handled
without regard to the provisions of this
part.
(3) Noncompetitive outlets. Any
person may handle walnuts, free of the
provisions of this part, for use by
charitable institutions, relief agencies,
governmental agencies for school lunch
programs, and diversion to animal feed
or oil manufacture pursuant to an
authorized governmental diversion
program.
*
*
*
*
*
■ 18. In § 984.69, lift the stay of May 7,
2020, on paragraph (b) and revise the
section to read as follows:
§ 984.69
Assessments.
(a) Requirement for payment. Each
handler shall pay the Board, on
demand, his or her pro rata share of the
expenses authorized by the Secretary for
each marketing year. Each handler’s pro
rata share shall be the rate of assessment
per inshell pound of walnuts fixed by
the Secretary times the pounds of
walnuts received by him or her for his
or her own account (except as to receipt
from other handlers on which
assessments have been paid). At any
time during or after the marketing year
the Secretary may increase the
assessment rate as necessary to cover
authorized expenses and each handler’s
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pro rata share shall be adjusted
accordingly.
(b) Assessment rate. The assessment
rate set out may be modified by the
Secretary, based upon a
recommendation of the Board or other
available data.
(c) Late payment. If a handler does not
pay assessments within the time
prescribed by the Board, the assessment
may be increased by a late payment
charge and/or an interest rate charge at
amounts prescribed by the Board with
approval of the Secretary.
(d) Accounting. If at the end of a
marketing year the assessments
collected are in excess of expenses
incurred, such excess shall be
accounted for in accordance with one of
the following:
(1) If such excess is not retained in a
reserve, as provided in paragraph (d)(2)
or (3) of this section, it shall be refunded
to handlers from whom collected, and
each handler’s share of such excess
funds shall be the amount of
assessments he or she has paid in excess
of his or her pro rata share of the actual
expenses of the Board.
(2) Excess funds may be used
temporarily by the Board to defray
expenses of the subsequent marketing
year provided each handler’s share of
such excess shall be made available to
him or her by the Board within five
months after the end of the year.
(3) The Board may carry over such
excess into subsequent marketing years
as a reserve: Provided, that funds
already in reserve do not exceed
approximately two years’ budgeted
expenses. In the event that funds exceed
two marketing years’ budgeted
expenses, future assessments will be
reduced to bring the reserves to an
amount that is less than or equal to two
marketing years’ budgeted expenses.
Such reserve funds may be used:
(i) To defray expenses, during any
marketing year, prior to the time
assessment income is sufficient to cover
such expenses;
(ii) To cover deficits incurred during
any year when assessment income is
less than expenses;
(iii) To defray expenses incurred
during any period when any or all
provisions of this part are suspended;
and
(iv) To meet any other such costs
recommended by the Board and
approved by the Secretary.
(e) Advanced assessments and
commercial loans. To provide funds for
the administration of the provisions of
this part during the part of a marketing
year when neither sufficient operating
reserve funds nor sufficient revenue
from assessments on the current
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season’s certifications are available, the
Board may accept payment of
assessments in advance or may borrow
money from a commercial lending
institution for such purposes.
(f) Termination. Any money collected
from assessments hereunder and
remaining unexpended in the
possession of the Board upon
termination of this part shall be
distributed in such manner as the
Secretary may direct.
■ 19. Revise § 984.72 to read as follows:
§ 984.450
§ 984.72
■
Reports of walnuts handled.
Each handler who handles walnuts,
inshell or shelled, at any time during a
marketing year shall submit to the Board
in such form and at such intervals as the
Board may prescribe, reports showing
the quantity so handled and such other
information pertinent thereto as the
Board may specify.
■ 20. Revise § 984.77 to read as follows:
§ 984.77
Verification of reports.
For the purpose of verifying and
checking reports filed by handlers or the
operations of handlers, the Secretary
and the Board through its duly
authorized representatives shall have
access to any premises where walnuts
and walnut records are held. Such
access shall be available at any time
during reasonable business hours.
Authorized representatives shall be
permitted to inspect any walnuts held
and any and all records of the handler
with respect to matters within the
purview of this part. Each handler shall
maintain complete records on the
receiving, holding, and disposition of
both inshell and shelled walnuts. Each
handler shall furnish all labor necessary
to facilitate such inspections at no
expense to the Board or the Secretary.
Each handler shall store all walnuts
held by him or her in such manner as
to facilitate inspection and shall
maintain adequate storage records,
which will permit accurate
identification of respective lots and of
all such walnuts held or disposed of
theretofore. The Board, with the
approval of the Secretary, may establish
any methods and procedures needed to
verify reports.
§ 984.89
[Amended]
21. In § 984.89(b)(4), remove the term
‘‘fiscal period’’ and add in its place the
term ‘‘marketing year’’.
■ 22. Revise § 984.347 to read as
follows:
khammond on DSKJM1Z7X2PROD with PROPOSALS
■
§ 984.347
Assessment rate.
On and after September 1, 2023, an
assessment rate shall be fixed at $0.0125
per inshell pound of California walnuts.
VerDate Sep<11>2014
16:19 Oct 24, 2022
Jkt 259001
[Removed and Reserved]
23. In § 984.450, lift the stays of May
7, 2020, on paragraphs (a) and (b) and
remove and reserve the section.
■
§ 984.451
[Removed and Reserved]
24. In § 984.451, lift the stay of May
7, 2020, on paragraph (c) and remove
and reserve the section.
■
§ 984.452
■
[Removed and Reserved]
25. Remove and reserve § 984.452.
§ 984.456
[Removed and Reserved]
26. In § 984.456, lift the stay of May
7, 2020, and remove and reserve the
section.
§ 984.459
[Amended]
27. In § 984.459, remove and reserve
paragraph (a)(3).
■
§ 984.464
[Removed and Reserved]
28. In § 984.464, lift the stay of May
7, 2020, on paragraph (a) and remove
and reserve the section.
■ 29. Revise § 984.472 to read as
follows:
■
§ 984.472 Reports of walnuts, received,
shipped, and committed.
(a) Reports of walnuts shipped during
a month shall be submitted to the Board
on California Walnut Board (CWB) Form
No. 6 not later than the 5th day of the
following month. Such reports shall
include all shipments during the
preceding month and shall show for
inshell and shelled walnuts: the
quantity shipped; whether they were
shipped into domestic or export
channels; and for exports, the quantity
by country of destination. If a handler
makes no shipments during any month
he/she shall submit a report marked
‘‘None.’’ If a handler has completed his/
her shipments for the season, he/she
shall mark the report ‘‘Completed,’’ and
he/she shall not be required to submit
any additional CWB Form No. 6 reports
during the remainder of that marketing
year.
(b) Reports of walnuts purchased
directly from growers by handlers who
are manufacturers or retailers shall be
submitted to the Board on CWB Form
No. 6, not later than the 5th day of the
month following the month in which
the walnuts were purchased. Such
reports shall show the quantity of
walnuts purchased.
(c) Reports of walnuts on which
handlers have made purchase
commitments with buyers during the
month, but which have not yet been
shipped, shall be submitted to the Board
on CWB Form No. 6, not later than the
5th day of the month following the
month in which the walnuts were
committed. Such reports shall show the
PO 00000
Frm 00013
Fmt 4702
Sfmt 4702
64397
quantity of walnuts committed in either
inshell or shelled pounds. If the handler
made no commitments during any
month, he/she shall mark ‘‘None’’ in the
‘‘Purchase Commitments’’ section of
CWB Form No. 6.
■ 30. Revise § 984.476 to read as
follows:
§ 984.476 Report of walnut receipts
produced outside California or the United
States.
Each handler who receives walnuts
from outside California or the United
States shall file with the Board, on CWB
Form No. 7, a report of the receipt of
such walnuts. The report shall be filed
as follows: On or before December 5 for
such walnuts received during the period
September 1 to November 30; on or
before March 5 for such walnuts
received during the period December 1
to February 28 (February 29 in a leap
year); on or before June 5 for such
walnuts received during the period
March 1 to May 31; and on or before
September 5 for such walnuts received
during the period June 1 to August 31.
The report shall include the quantity of
such walnuts received, the country of
origin for such walnuts, and whether
such walnuts are inshell or shelled.
Erin Morris,
Associate Administrator, Agricultural
Marketing Service.
[FR Doc. 2022–22806 Filed 10–24–22; 8:45 am]
BILLING CODE P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
[Docket No. FAA–2022–1306; Project
Identifier AD–2022–01040–E]
RIN 2120–AA64
Airworthiness Directives; Pratt &
Whitney Turbofan Engines
Federal Aviation
Administration (FAA), DOT.
ACTION: Notice of proposed rulemaking
(NPRM).
AGENCY:
The FAA proposes to adopt a
new airworthiness directive (AD) for all
Pratt & Whitney (PW) PW1519G,
PW1521G, PW1521G–3, PW1521GA,
PW1524G, PW1524G–3, PW1525G, and
PW1525G–3 model turbofan engines.
This proposed AD was prompted by an
uncommanded dual engine shutdown
upon landing, resulting in compromised
braking capability due to the loss of
engine power and hydraulic systems.
This proposed AD would require
SUMMARY:
E:\FR\FM\25OCP1.SGM
25OCP1
]]>Agencies
[Federal Register Volume 87, Number 205 (Tuesday, October 25, 2022)]
[Proposed Rules]
[Pages 64385-64397]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-22806]
========================================================================
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. 87, No. 205 / Tuesday, October 25, 2022 /
Proposed Rules
[[Page 64385]]
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 984
[Doc. No. 22-J-0011; AMS-SC-22-0010; SC22-981-1]
Marketing Order for Walnuts Grown in California; Recommended
Decision and Opportunity To File Written Exceptions
AGENCY: Agricultural Marketing Service, Department of Agriculture
(USDA).
ACTION: Proposed rule and opportunity to file exceptions.
-----------------------------------------------------------------------
SUMMARY: This recommended decision proposes amendments to Marketing
Order No. 984 (Order), which regulates the handling of walnuts grown in
California. The proposed amendments are based on the record of a public
hearing held via videoconference technology on April 19 and 20, 2022.
The California Walnut Board (Board), which locally administers the
Order, recommended proposed amendments that would eliminate mandatory
inspection and certification of inshell and shelled walnuts, and of
shelled walnuts for processing; create a new mechanism for determining
and collecting handler assessments; add authority to charge interest
for late payments; establish an assessment rate of $0.0125 per inshell
pound of walnuts; expand the definition of ``to handle'' to include
``receive''; and remove volume control authority. In addition, the
Agricultural Marketing Service (AMS) proposed to make any such changes
to the Order as may be necessary to conform to any amendment that may
result from the hearing.
DATES: Written exceptions must be filed by November 25, 2022.
ADDRESSES: Written exceptions should be filed with the Hearing Clerk,
U.S. Department of Agriculture, Room 1031-S, Washington, DC 20250-9200;
Fax: (202) 720-9776 or via the internet at https://www.regulations.gov.
All comments should reference the docket number and the date and page
number of this issue of the Federal Register. Comments will be made
available for public inspection in the Office of the Hearing Clerk
during regular business hours or can be viewed at https://www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: Geronimo Quinones, Market Development
Division, Specialty Crops Program, AMS, USDA, 1400 Independence Avenue
SW, Stop 0237, Washington, DC 20250-0237; Telephone: (202)308-2339 or
Matthew Pavone, Market Development Division, Specialty Crops Program,
AMS, USDA, 1400 Independence Avenue SW, Stop 0237, Washington, DC
20250-0237; Telephone: (202) 720-2491, or Email:
[email protected] or [email protected].
Small businesses may request information on this proceeding by
contacting Richard E. Lower, Market Development Division, Specialty
Crops Program, AMS, USDA, 1400 Independence Avenue SW, Stop 0237,
Washington, DC 20250-0237; Telephone: (202) 720-2491, or Email:
[email protected].
SUPPLEMENTARY INFORMATION: Prior documents in this proceeding: Notice
of Hearing published in the April 1, 2022, issue of the Federal
Register (87 FR 19020).
The recommendation is in conformance with 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.
Notice of this rulemaking action was provided to tribal governments
through the Department of Agriculture's (USDA) Office of Tribal
Relations.
Preliminary Statement
Notice is hereby given of the filing with the Hearing Clerk of this
recommended decision with respect to the proposed amendments to 7 CFR
part 948 (hereinafter referred to as ``Marketing Order 984'' or the
``Order'') regulating the handling of walnuts grown in California and
the opportunity to file written exceptions thereto. Copies of this
decision can be obtained from Geronimo Quinones, whose address is
listed above.
This recommended decision is issued 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 and amendment
of marketing agreements and orders (7 CFR part 900).
The proposed amendments are based on the record of a public hearing
held via videoconference technology on April 19 and 20, 2022. Notice of
this hearing was published in the Federal Register on April 1, 2022 (87
FR 19020). The notice of hearing contained five proposals submitted by
the Board and one submitted by USDA.
The proposed amendments were recommended to the Secretary by the
Board on October 28, 2021. After reviewing the proposals and other
information submitted by the Board, USDA decided to schedule this
matter for a hearing. The Board's proposed amendments to the Order
would amend quality control provisions to remove inspection and
certification requirements, create a new mechanism for determining and
collecting handler assessments, add authority to charge interest for
late payments, establish an assessment rate of $0.0125 per inshell
pound of walnuts; expand the definition of ``to handle'' to include
``receive'', and remove volume control authority.
As proposed, inspection and certification of outbound walnuts would
no longer be required, and handler assessments would be calculated
based on a proposed assessment rate, recommended by the Board, and
applied to handler's inbound walnuts receipts instead of outbound
walnuts certified.
USDA proposed to make any such changes as may be necessary to the
Order to conform to any amendment that may be adopted, or to correct
minor inconsistencies and typographical errors.
Ten witnesses testified at the hearing. Nine witnesses represented
walnut producers and handlers in the production area, as well as the
Board, and one witness was from USDA. All nine industry witnesses
supported the proposed amendments. The USDA witness remained neutral.
After the notice of hearing was published in the Federal Register, AMS
received a substantive email from the Board. In
[[Page 64386]]
accordance with Sec. 900.16 of the Rules of Practice governing this
proceeding (7 CFR 900.16), the email constituted an ex parte
communication and was entered into the record but did not constitute
testimony and was not considered in the drafting of this recommended
decision.
Under the Order, quality control provisions require inspection and
certification of outbound walnuts, volume regulation is stayed
indefinitely, and the authority to charge for late payments does not
exist. The Board's proposed amendments would eliminate the inspection
and certification of outbound walnuts, remove volume authority,
establish a new mechanism for the collection of assessments and provide
authority to charge interest for late payments.
Currently, a moratorium on the enforcement of inspection is in
effect, and while under the moratorium, the Board is unable to collect
assessments. If implemented, the proposed amendments would allow the
Board to resume the collection of assessments applied to walnuts
received and to charge interest for late payments. Assessments would be
determined by handler receipts for total walnuts received for the crop
year, multiplied by the proposed new assessment rate of $0.0125, and
billings would be staggered throughout the marketing year to allow
handlers to pay in three installments.
Witnesses at the hearing explained that the proposed amendments are
necessary to streamline the Order and would make the industry more
efficient by eliminating redundancies in inspection, reducing costs and
administrative burden to handlers and the Board, and providing a cost
saving to growers. Therefore, proponents support the need to modernize
the Order to better meet current and future industry needs.
As an indicator for the need to eliminate inspection and
certification of outbound walnuts, witnesses stated that the moratorium
issued by USDA on September 2, 2021, of mandatory inspections has not
adversely affected the quality of California walnuts produced and
handled. Witnesses testified that a common practice for the industry is
to conduct quality assurance inspections on inbound shipments of
walnuts and that the current regulations require inspections on the
outbound walnuts. The end result of industry practice and regulatory
requirements is two forms of inspection being conducted in the
industry. Further, witnesses contended that significant investments and
advancement in processing, storage, technology, and equipment have
ensured better programs that are able to maintain higher walnut quality
and condition that exceed the minimum grades and standards currently
set forth in the Order.
At the conclusion of the hearing, the Administrative Law Judge
established a deadline of May 19, 2022, for the submission of
corrections to the transcript, and June 23, 2022, as a deadline for
interested persons to file proposed findings and conclusions or written
arguments and briefs based on the evidence received at the hearing. The
Board filed a brief in support of the proposed amendments.
Material Issues
The material issues presented on the record of hearing are as
follows:
1. Whether to modify Sec. 984.50, Grade, quality, and size
regulations, to remove quality and size regulations and include only
the Board's authority and eliminate Sec. Sec. 984.51 and 984.52
inspection and certification of inshell and shelled walnuts and shelled
walnuts for processing. This includes revising: Sec. Sec. 984.12,
984.32, 984.64, 984.69, 984.77, 984.459(a)(3), and 984.472(b) and
removing: Sec. Sec. 984.450(c), 984.451(a) and (b), 984.452, and
984.464(b) and (c).
2. Whether to revise Sec. 984.69 by changing the calculation of
assessments from kernelweight to inshell pound in paragraph (a) and
revising paragraph (c) to include an authority to charge for late
payments and/or interest as prescribed by the Board with approval from
the Secretary. Corresponding changes would be made to Sec. Sec.
984.37, 984.48, 984.69, and 984.347.
3. Whether to revise Sec. 984.347 to establish an assessment rate
of $0.0125 per inshell pound of walnuts.
4. Whether to modify the definition in Sec. 984.13 of ``to
handle'' to include ``receive''.
5. Whether to remove Sec. 984.49, Volume regulation, reserve pool
authority, and subsequent sections including provisions for volume
control. This includes removing: Sec. Sec. 984.23, 984.26, 984.33,
984.54, 984.56, 984.66, 984.69(b), 984.450(a) and (b), 984.451(c),
984.456, and 984.464(a) and revising: Sec. Sec. 984.48 and 984.67.
6. Whether any conforming changes need to be made as a result of
the above proposed amendments. Conforming changes may also include
correction of non-substantive, typographical errors.
Findings and Conclusions
The following findings and conclusions on the material issues are
based on evidence presented at the hearing and the record thereof.
Material Issue Number 1--Grade, Quality, and Size Regulations and
Inspection and Certification
Section 984.50 ``Grade, quality and size regulations'' should be
amended to remove quality and size regulations and only the authority
should remain. Removing quality and size regulations would remove the
minimum grade and size requirements for shelled and inshell walnuts.
Retaining the authority would allow the Board to recommend handling
regulations and establish inspection and certification requirements if
market conditions warrant regulations in the future, subject to the
approval of the Secretary.
Sections 984.51 ``Inspection and certification of inshell and
shelled walnuts'' and 984.52 ``Processing of shelled walnuts'' should
be removed. Removing inspection and certification would eliminate
mandatory outbound inspections for all varieties of walnuts, walnuts
for processing, and inspections applied to walnuts imported into the
United States under section 608e of the Act. In addition, multiple
sections of the Order with provisions for quality, grade and size, and
inspection and certification should be revised. This includes revising:
Sec. Sec. 984.12, 984.32, 984.64, 984.69, 984.77, 984.459(a)(3), and
984.472(b). Conforming changes would include removing Sec. Sec.
984.450(c), 984.451(a) and (b), 984.452, and 984.464(b) and (c).
Furthermore, a conforming change to completely remove the word
``merchantable'' from Sec. Sec. 984.22, 984.72, and 984.472(a) and (c)
is necessary to add clarity to the Order. This conforming change will
be further discussed in Material Issue #6.
Currently, Sec. 984.50 requires that handlers must meet minimum
grade, quality, and size regulations and Sec. Sec. 984.51 and 984.52
require that outbound walnuts must be inspected and certified. The
outbound inspection is carried out by the Dried Fruit Association of
California (DFA), the Board's inspection agency of record. DFA supplies
to the Board inspection records used to calculate handler assessment
obligations.
Witnesses at the hearing, either serving as Board members and/or as
members of the Board's Marketing Order Revision Committee explained
that the proposed amendments would modernize and align the Order with
current market-driven practices. This would result in a more efficient
industry. Witnesses further explained that advancements in processing
and packaging technologies have improved product quality, consistency
and shelf-life and if implemented, the proposed
[[Page 64387]]
amendments would remove redundancies, as well as reduce costs and
administrative burden for both handlers and the Board. Evidence
introduced at the hearing suggests that mandatory inspection and
certification are no longer necessary to ensure orderly marketing;
however, the authority should be retained in the Order in the event
market conditions change and inspections and certification are deemed
necessary to be reintroduced.
According to the hearing record, walnut production and sales have
grown substantially over the past 73 years. The initial varieties
regulated by the Order no longer exist and are not viable in either
domestic or international markets. In addition, handlers have made
significant investments in the technology and equipment necessary to
maintain high quality walnuts that customers demand and that consumers
expect. These investments helped to manage over 300,000 tons in
increased production, according to a witness. Witnesses testified that
current customer specifications exceed the grades and standards
established when the Order was promulgated in 1948. The industry
considers the minimum grade and size regulations as outdated and
obsolete, and that the mandated outbound inspection has resulted in
inefficient redundancies. The costs of the duplicative inspections
outweigh their benefit to industry.
A moratorium of enforcement on mandatory inspection requirements is
currently in effect. Under the moratorium, USDA's enforcement of
mandatory inspection requirements under the Order are suspended.
Accordingly, inspection and certification requirements for walnuts
imported into the United States are also suspended. USDA exercised its
discretion to issue the moratorium, effective September 1, 2021,
following discussions with the Board. These discussions took place
after the Board's Grades and Standards Committee recommended an action,
subsequently passed by the Board, to request that USDA forego mandatory
inspections in response to market disruptions associated with the
Covid-19 pandemic, including labor and transportation interruptions,
and ongoing tariff issues that have adversely affected market
conditions across the California walnut industry. Witnesses explained
that, in addition to external shipping constraints, DFA inspector
shortages caused huge operational inefficiencies, because handlers
cannot ship product that is not inspected, certified, and stamped.
Further, eliminating outbound inspections would remove large
expenditures by eliminating the duplicative inspections.
According to the record, mandated inspections identified as
duplicative by witnesses cost the industry approximately $6 million
annually (discussed further under Economic Impact of Eliminating
Mandatory Inspection). Witnesses testified that the elimination of
mandatory outgoing inspection would benefit all handlers immediately
through lower expenditures and avoidance of shipping delays due to
inspector unavailability. These handler benefits could also be passed
on to producers and consumers.
According to the record, market demand for California walnuts
continues to grow. Evidence introduced suggests that increased industry
investments in infrastructure, as well as marketing and promotion, were
in response to growing domestic and global walnut production. Over the
past five years, increases in international production have affected
U.S. market prices and net grower returns. Record evidence also
indicates that total world production increased by over 235,000 metric
tons from 2017/18 to 2021/22; however, California walnuts, even with
increases in production, accounted for a smaller share of total world
production, decreasing from 29 to 27 percent during the same time
period. Other countries have experienced growth; most notably, China
now accounts for 49 percent of world production compared to 42 percent
in 2017/18. China's share of world trade has risen to 13 percent, a
significant increase from 2 percent in 2016/17. Consequently,
California walnuts account for a smaller share of world trade, falling
from 68 to 54 percent between 2016/17 and 2020/21.
Hearing evidence included data from studies conducted by the
University of California-Davis Cooperative Extension (UC Davis) that
highlight changes in walnut farm profitability by comparing farm
revenue per acre and cost of production. The UC Davis data, illustrated
in Table 1, include two cost of production studies conducted in the
2011-2014 time period, and three studies between 2015 and 2018.
Table 1 shows the decline in walnut farm profitability by comparing
two four-year periods with very different financial outcomes, 2011 to
2014 and 2015 to 2018. The average production cost per acre for 2011-
2014 and 2015-2018 were $3,667 and $5,122, respectively, which appear
in column (d) of Table 1. Average yields (1.83 and 2.01 tons per acre
in the same time periods) appear in column(b) of Table 1. 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).
Table 1--California Walnuts: Producer Gross Return, Cost of Production, Net Return
--------------------------------------------------------------------------------------------------------------------------------------------------------
Producer net
Season average Average yield: Average producer Total cost of return per acre
Range of years producer price, tons per acre 2 gross return per production per (gross return
$/ton 1 acre acre 3 minus cost)
(a) (b) (c) (d) (e)
................ ................ (a) * (b) ................ (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: National Agricultural Statistics Service (NASS), USDA.
2 Four-year averages computed in Table 1, based on annual NASS yield data.
3 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).
The two producer net return numbers in column (e) of Table 1 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
[[Page 64388]]
followed by four years of difficult market conditions (2015-2018), with
a negative average net return of (-$1,458). This analysis provides a
numerical estimate that bears out witness testimony that emphasized a
dramatic downward shift in their economic well-being.
The hearing record indicates that grower prices in 2019/20 and
2020/21, when compared to the cost of production in recent years shown
in Table 1, indicate continuing negative net returns to California
walnut growers, on average.
In 2020/21, walnut crop value fell to approximately $957 million,
and the season average grower price of $1,220 per ton was the lowest
since 2003/04. One witness testified that walnut farmers face
challenging market conditions and that he does not foresee improvement
in the current season (2021/22). Approximately, 80 percent of the
Board's budget is allocated to domestic marketing; however, domestic
consumption of walnuts has stayed the same for many years, at
approximately one-half pound per person. Witnesses stated that handlers
are struggling, and growers are losing their farms. Witnesses explained
that if the proposal were implemented, the approximately $6 million in
savings at the handler level could be distributed across the market
through higher grower returns. Consumers are also expected to benefit
through improved pricing.
According to the record, walnut varieties considered during the
establishment of the Order no longer exist and are not viable in
domestic and international markets. Evidence suggests that this is due
to customer specifications that exceed the minimum grade, quality, and
size regulations currently prescribed under the Order for shelled and
inshell walnuts. Witnesses explained that consumers, especially in
export markets, have high expectations due to the superior quality
attributes of newer varieties. Production has declined for older
varieties that do not contain the quality traits desired by consumers,
notably those varieties that were considered when the Order was
promulgated in 1948. Because they were based on lower quality walnuts,
the minimum quality requirements prescribed under the Order are no
longer consistent with current-day handling operations. In addition,
witnesses testified that product packed to USDA minimum quality
guidelines would most likely be rejected by their customers and result
in complaints from consumers.
Increased demand for higher quality walnuts, both domestically and
internationally, are driving the production of new varieties. One
witness testified that over 90 percent of California walnut production
is composed of three varieties, the Chandler, the Howard, and the
Tulare. These varieties, notably the Chandler, which is 58 percent of
total California walnut production, contains much less inedible
material than previous varieties that were more susceptible to insect
damage and low-quality kernels due to color and other factors.
According to the record, the harvest season generally begins in
mid-September and concludes during the first week of November.
Witnesses explained that when handlers receive harvested walnuts, they
undertake an inbound inspection. Although the specific steps may vary
between handlers, inbound inspection is considered a standard business
practice. Evidence further suggests that due to consumer expectations
and specifications, inbound inspection and quality control processes
are much more stringent than the outbound inspection required under the
Order. One witness testified that during the inbound inspection, the
value of the product is assessed by taking an initial sample and
testing for moisture, debris, and foreign material. Evidence suggests
that this is a critical step in the inbound inspection process
performed by almost all handlers. Witnesses testified that handlers
either have a third-party perform the inbound inspection or conduct it
themselves in-house, but the inspection process is routine within
industry. Moisture testing has proven to be a key indicator of
potential microbial growth, which can increase degradation rates, an
important measurement of shelf-life.
Further evidence suggests that Board funding of research on behalf
of the industry has contributed significantly to the quality
advancements of walnuts produced and handled. According to the record,
handlers consider product to be at ``equilibrium'' when moisture is
below 8 percent. This is based on Board-funded research conducted by
the UC Davis.
In addition, individual handler investments in technology and
storage have also resulted in improved internal quality control across
the industry. Evidence suggests that the evolution of inbound
inspections and quality control processes are also due to higher
customer specifications of quality. Both large and small handlers
testified about the positive industry impact of adopting different
methodologies that have been scientifically proven to reduce
degradation, such as modified atmosphere storage, pasteurization, and
fumigation. One witness testified that handlers employ their own
quality assurance or quality control staff to inspect product, using
quality specifications that exceed the USDA grade standards used by DFA
in conducting inspections--inspections that the industry considers to
be duplicative. The in-house quality control staff also conduct
additional analytical tests for quality and condition, such as the
moisture testing previously mentioned, microanalysis for microbial
activity and measurement of peroxide and free fatty acid levels for
rancidity. Additionally, investments in technology have facilitated
advancements in electronic processing, such as laser or high-speed
camera and x-ray machines that separate constituents on conveyor belts
significantly reducing foreign material counts.
Witnesses explained that these advancements, coupled with highly
trained quality assurance personnel, significantly increased walnut
quality to a level that significantly exceeds USDA's minimum quality
standards established in 1948. In addition, one handler witness that
utilized both in-line (inspection prior to packing) and floor
inspections (inspection after packing) offered by DFA, testified that
both shelled and inshell walnuts rarely failed USDA inspection and that
walnuts that do not meet the requirements of the Order accounted for a
very small percent of total product processed. Therefore, the witness
stated, handlers were only conducting outbound inspections to comply
with the Order and to report the quantity of walnuts handled for the
calculation of assessments as specified in Sec. 984.69.
As evidenced by the record, walnut sales are driven by consumer
demand for high quality product and marketplace competition, both
domestically and internationally, which provide strong incentives to
remove all substandard walnuts.
If implemented, the proposed amendment would result in greater cost
efficiencies by eliminating inspection redundancy, significantly
lowering cost and administrative burden for handlers and the Board.
For the reasons stated above, it is recommended that Sec. 984.50
be amended to remove quality and size regulations and include only the
Board's authority to recommend regulations in the future if market
conditions warrant and eliminate Sec. Sec. 984.51 and 984.52
inspection and certification of inshell and shelled walnuts and shelled
walnuts for processing.
[[Page 64389]]
Material Issue Number 2--New Assessment Mechanism and Interest and/or
Charges for Late Payments
Section 984.69 should be revised to change the calculation of
assessments from kernelweight to inshell pound in paragraph (a), lift
the stay for paragraph (b) and add authority to establish an initial
assessment rate for the new assessment mechanism in a new paragraph
(b), and include authority to charge for late payments and/or interest
as prescribed by the Board with approval from the Secretary in
paragraph (c). The preamble in the notice of hearing incorrectly
identified paragraph (b) as the authority to charge for late payments
and/or interest. The recommended decision and the proposed regulatory
text correctly refer to paragraph (c). Corresponding changes should be
made to Sec. Sec. 984.37, 984.48, 984.69, and 984.347. Specifically,
Sec. Sec. 984.37, 984.48, and 984.347 should be revised to modify the
measure of weight for assessments from kernelweight to inshell pound.
In addition to the proposed new assessment mechanism, the Board is
also recommending an initial assessment rate of $0.0125 to go into
effect at the conclusion of this rulemaking. This proposed amendment is
summarized further under Material Issue No. 3.
According to the record, a new mechanism for determining and
collecting handler assessments would need to be established if the
proposed elimination of mandatory inspection and certification
summarized under Material Issue No. 1 were implemented. Witnesses at
the hearing expressed that the elimination of mandatory inspection and
certification, or the outgoing inspection, disables the Board's ability
to collect assessments. This is due to provisions in Sec. 984.69 which
states that each handler's pro rata share is the assessment rate per
kernelweight pound multiplied by the kernelweight of walnuts certified.
Therefore, the Order as currently written ties the calculation of
assessments to inspection and certification.
According to the record, the new assessment mechanism would be
based on walnuts received instead of walnuts certified which would
allow the Board to resume collecting assessments. Under the proposed
mechanism, the calculation of assessments would be based on receipts
submitted to the Board. All nine witnesses testified their support for
the proposed amendment, citing that it is an equitable change that
would decrease the administrative burden for handlers and the Board.
Witnesses testified that California Walnut Board (CWB) Form No. 1,
which is supplied to handlers by the Board in their annual season
packets, would be the basis for the application of the assessment rate
to be paid by handlers under the proposed new assessment mechanism, and
since this report is already provided to the Board, it would ensure
there is no additional burden placed on handlers. On CWB Form No. 1,
handlers report walnut receipts by county and variety in inshell
pounds, and therefore evidence suggests that the proposed amendment to
change the calculation of assessments from kernelweight to inshell
pounds is to reflect the new assessment mechanism that would be based
on walnut receipts reported on CWB Form No. 1.
Under the Order, Sec. 984.473 requires each handler to report to
the Board walnut receipts from growers on or before January 15 of each
marketing year. Handlers fill out CWB Form No. 1 or the Crop
Acquisition Report to report all walnuts received during the crop year.
Currently, the Board uses this information for the purpose of
developing an annual report that shows total crop acquisition in
aggregate for the marketing year.
Alternatives to CWB Form No. 1 were also discussed, such as the CWB
Form No. 6, the Report of Merchantable Walnuts Received, Committed, and
Shipped. This report also includes an acquisition total; however,
witnesses testified that CWB Form No. 6 is a monthly report and it
conflicts with the structure of the proposed new assessment mechanism
which would stagger billing throughout the year. In addition, using CWB
Form No. 1 reduces the administrative burden for handlers and the Board
as it is an annual report.
Additionally, the new assessment mechanism is modeled after the
assessment method applied by the California Walnut Commission
(Commission). One witness explained that the Commission's process is
also based on receipts, and that it is a self-reported system where
handlers submit forms during the year on behalf of growers. The
Commission's assessment process is also based on inshell weight
received or acquired, and consideration was taken to ensure that the
staggering of assessments did not match the Commission's. This further
ensures any inadvertent undue burden is not place on handlers.
According to the record, for the first time for the 2021-2022
marketing year, the Board has included handler audits in its compliance
plan. This is to ensure receipts reported on CWB Form No. 1 are
accurate. Under the proposed assessment mechanism, the Board plans to
audit handler receiving records, and one witness testified that receipt
numbers can also be cross-checked with information shared between the
Board and the Commission. This is within the authority of the Board as
Sec. 984.80 provides that each handler shall maintain records of
walnuts received, held, or disposed of as prescribed by the Board, and
such records shall be retained and be available for examination by the
Board and Secretary for a period of two years. In addition, Sec.
984.91 provides that the Board may deliberate, consult, cooperate and
exchange information with the Commission, whose activities complement
the Board.
Under the proposed new assessment mechanism, invoicing would not
begin until after January 15 which is when CWB Form No. 1 is due, and
billings would be staggered later in the year to allow handlers to pay
in three installments. Billings would be generated in January, April,
and July and as prescribed by the Board, payments would be due in
February, May, and August. This is contrary to the current billing
system where handlers are invoiced monthly. One witness testified that
under the current system, approximately 48 percent of the total revenue
for the year is invoiced by January and when compared to the proposed
mechanism, only 33.33 percent of the total annual revenue would be
billed in that same timeframe.
The following is a sample calculation showing how assessments would
be determined under the new proposed mechanism. In the sample
calculation, handler A reported receipts of 1 million inshell pounds on
CWB Form No. 1 for the 2023 crop year. To calculate handler A's total
annual assessment under the proposed new assessment mechanism, multiply
the proposed initial assessment rate by the total pounds received for a
result of $12,500 (1 million x $0.0125 = $12,500). To calculate handler
A's assessment billings, multiply the total annual assessment by 33.33
percent for a result of $4,166.66 to be invoiced in January, $4,166.67
to be invoiced in April, and a final sum of $4,166.67 to be invoiced in
July.
Sample Calculation for Assessments
Handler A reported acquisitions for 2023 marketing year = 1,000,000
pounds multiplied by $.0125 = $12,500
Assessments to be invoiced as follows:
[[Page 64390]]
Invoice 1--Jan--$12,500 multiplied by 33.33% = $4,166.66
Invoice 2--Apr--$12,500 multiplied by 33.33% = $4,166.67
Invoice 3--Jul--$12,500 multiplied by 33.33% = $4,166.67
Total invoiced: $12,500.00
During the hearing, USDA sought testimony on Sec. 984.67 and
specifically on exemptions from assessments and quality regulations.
Currently, Sec. 984.67(b)(1) in the Code of Federal Regulations
references a list that is missing in error. In addition, Sec.
984.67(b) is missing other exemptions from assessments and quality
regulations--specifically for green walnuts and walnuts directed to
noncompetitive outlets. Witnesses testified that Sec. 984.67 provides
stipulations for walnuts handled that are exempt from assessments and
quality regulations under the Order such as for charitable
institutions, relief agencies, governmental agencies for school lunch
programs, and diversion to animal feed or oil manufactures pursuant to
an authorized governmental diversion program. All industry witnesses
testified in support of adding the missing text back to Sec. 984.67(b)
with some witnesses stating that they were unaware that the exemptions
list was missing or incomplete, and that immediate reinsertion would
benefit the industry as it would be unfair to penalize handlers for not
paying assessments on product otherwise considered exempt.
A witness provided a sample calculation of how exemptions from
assessments would be applied. In the hypothetical scenario illustrated
below, handler A from the previous example reported that 10 thousand
pounds was sold to USDA under section 32 of the Agricultural Adjustment
Act Amendment of 1935. Handler A reported this after the first invoice
for the marketing year was issued. To calculate handler A's exemption,
multiply the total pounds exempt by the proposed assessment rate for an
exempt amount of $125.00 (10,000 pounds x $0.0125 = $125).
Subsequently, the next invoice billed to handler A (in this scenario it
would be April) would show an adjusted assessment of $4,041.67 as a
result of a $125.00 reduction due to exemptions.
Sample Calculation for Exemption Application
On March 31, Handler A reported 10,000 pounds sold to USDA for a
Section 32 purchase.
10,000 pounds multiplied by $.0125 = $125
Assessments to be invoiced as follows:
Invoice 1--Jan--$12,500 multiplied by 33.33% = $4,166.66--was already
invoiced
Invoice 2--Apr--$12,500 multiplied by 33.33% = $4,166.67-$125.00--less
exemption amount
Invoice 2 adjusted amount = $4,041.67--new invoice amount
Invoice 3--Jul--$12,500 multiplied by 33.33% = $4,166.67
Total invoiced: $12,375.00
According to the record, for exemptions that occurred after July,
the last invoice in the marketing year, a refund check in the amount
exempt would be issued by the Board to handlers. This ensures handlers
receive a timely refund against current year assessments. Similarly,
handlers that report adjustments to CWB Form No. 1 after January 15 of
the marketing year would also receive a readjustment to their total
annual assessments.
For the reasons stated above, it is recommended that Sec. 984.67
be amended to add the text inadvertently omitted. Regarding the
proposed amendment to revise Sec. 984.69(c) to add the authority to
charge for late payments and/or interest as recommended by the Board,
subject to the approval of the Secretary, witnesses testified that if
implemented, the proposal will enable the Board to further encourage
compliance through the common business practice of assessing interest
and late-payment charges.
According to the record, the industry has minimal issues with
collection, but the standard business practice of interest and late
payment charges is a tool that would help the Board execute the
collection of assessments and administer the Order. One witness
testified that currently under the Board's compliance plan a past-due
notice is issued at 60 days, a second notice at 90 days, and then at
150 days outstanding the assessment is then referred to USDA. Under the
proposed amendment, the Board may decide to not implement the
authority; however, witnesses testified that the authority to recommend
late-payment charges in the future would increase the equitability of
the collection of assessments, as late fees would be applied equally
across all handlers.
Additionally, the requirements of the new assessment mechanism and
application of interest and late-payment charges as recommended by the
Board and approved by the Secretary, would be communicated to handlers
through their annual handler packets that are mailed at the beginning
of each marketing year, and include a personalized cover letter for
each handler, a copy of the annual handler regulations, a full set of
Board forms, and a copy of the Order.
On February 24, 2022, the Board voted unanimously in favor of the
proposed amendments recommended by the Executive Committee to create a
new assessment mechanism and to add authority to charge for late
payments to the Order. Board and Committee meetings are open to the
public, and both large and small operations had an opportunity to
provide input into the proposed amendments. In addition, newsletters
were mailed to growers and the proposed changes were discussed at the
annual grower meeting where Board staff provided presentations on all
potential changes to the Order.
For the reasons stated above, it is recommended that Sec. 984.69
be revised to change the calculation of assessments from kernelweight
to inshell pound in paragraphs (a) and (c) be revised to include an
authority to charge for late payments and/or interest as recommended by
the Board, subject to the approval of the Secretary. It is also
recommended that corresponding changes be made to Sec. Sec. 984.37,
984.48, 984.69, and 984.347.
Material Issue No. 3--Initial Assessment Rate
Section 984.69(b) should be revised to include the authority to
establish an initial assessment rate and Sec. 984.347 should be
amended to establish an initial assessment rate of $0.0125 per inshell
pound of walnuts. The establishment of an initial assessment rate would
allow the Board to resume the collection of assessments after the
conclusion of this rulemaking and 30 days after the publication of the
final rule in the Federal Register, if implemented.
As mentioned in several places throughout this recommended
decision, the moratorium on the enforcement of mandatory inspections
effective September 1, 2022, prevents the Board from collecting
assessments due to Sec. 984.69(a) which bases the calculation of
assessments on walnuts certified. While the moratorium is in effect,
Board activities and programs are sustained through the use of
operational funding from the Board's existing but depleting financial
reserve funds. Evidence suggests that the establishment of the initial
assessment rate is to ensure the Board will have the ability to
generate funds in the upcoming marketing year. Witnesses explained that
the formal rulemaking process could take between 18 and 24 months, and
during this time
[[Page 64391]]
the Board is operating entirely off its reserves. Therefore, the
ability of the Board to assess upon implementation is important to be
able to resume its full scope of activities.
According to the record, on November 19, 2021, the Marketing Order
Revision Committee recommended the initial assessment rate to the
Board. Witnesses testified that discussions were robust, and several
alternatives were proposed. Rates as high as 2 cents or as low as zero
were considered by the Board. Ultimately, the Board voted in favor of
an initial assessment rate of $0.0125, 7 to 2. It was concluded that,
without an established rate, programs would be limited and the Board
would not be able to conduct business in the year the proposed
amendments would take effect if implemented. Additionally, evidence
suggests that due to low pricing further consideration was taken to
ensure the proposed rate is reasonable and it does not appear as though
the Board is trying to recapture years without assessments. Witnesses
testified that the proposed rate of $0.0125 is lower than the rate
originally proposed for the current season and is also lower than the
rate for the last 4 out of the 5 years prior to the 2021/22 season. The
Board decided that an initial assessment rate of $0.0125 would be
reasonable for handlers and would allow the Board to cover operating
costs and conduct the marketing activities needed for the domestic
market.
The notice of hearing incorrectly had an assessment rate of $.125
in the regulatory text. The recommended decision corrects the
assessment rate to reflect the Board's intent and testimony.
In addition, Sec. 984.68 of the Order provides that the Board must
file a proposed budget of expenses and a rate of assessment at the
beginning of each marketing year and the determination of the initial
rate would not supersede that.
For the reasons stated above, it is recommended that Sec.
984.69(b) be revised to include the authority to establish an initial
assessment rate which may be modified by the Secretary and Sec.
984.347 be amended to establish the initial assessment rate of $0.0125
per inshell pound of walnuts.
Material Issue No. 4--The Definition of To Handle
Section 984.13 should be modified to include the word ``receive''
in the definition of ``to handle''. Modifying the definition would
broaden its scope to include the receipt of either inshell or shelled
walnuts (except as a common contract carrier or walnuts owned by
another person) to be put into the current of commerce either within
the area of production or from such area to any point outside thereof,
or for a manufacturer or retailer within the area of production to
purchase directly from a grower. This does not include sales and
deliveries within the area of production by grower to handlers, or
between handlers.
According to the record, expanding the definition would allow the
Board to use the Acquisition Report, or CWB Form No. 1, required by
each handler before January 15 of each marketing year, as the basis for
the calculation of assessments to be collected under the proposed new
assessment mechanism summarized in Material Issue No. 2.
Currently, handlers are assessed on product certified, and evidence
suggests that the Board's intention for expanding the definition to
include ``receive'' is to ensure all handlers that receive walnuts are
assessed under the proposed new assessment mechanism and also to
clearly tie assessments with walnuts received. Witnesses testified that
the act of handling begins when a handler receives and takes possession
of the product and therefore expanding the definition would ensure
product does not slip through the system unassessed or unaccounted.
According to the record, this is a necessary change that is a
result of the proposed elimination of inspections and certification
that currently ties assessments with walnuts certified, and that
modifying the definition would enable the alignment of the proposed
amendments discussed in this recommended decision. Additionally,
handlers are expected to benefit from the modified definition as it
allows for the application of the proposed assessment mechanism which
would reduce the administrative burden for both handlers and the Board.
For the reasons stated above, it is recommended that Sec. 984.13
be modified to include the word ``receive'' in the definition of ``to
handle''.
Material Issue No. 5--Volume Control Authority
Section 984.49 ``Volume regulation'', reserve pool authority, and
subsequent sections including provisions for volume control should be
removed. This includes removing: Sec. Sec. 984.23, 984.26, 984.33,
984.54, 984.56, 984.66, 984.69(b), 984.450(a) and (b), 984.451(c),
984.456, and 984.464(a) and revising: Sec. Sec. 984.48 and 984.67.
Removing volume control authority would modernize the Order by
eliminating regulations the industry considers no longer necessary to
ensure orderly marketing.
Witnesses testified that the industry is fundamentally different
than it was 30 years ago and does not foresee using volume regulation
in the future. Currently, volume regulation is suspended indefinitely,
effective May 7, 2020 (85 FR 27109). According to the record, volume
regulations were suspended because they had not been used in over 30
years. As previously stated under Material Issue No. 1, witnesses
argued that in the current economic environment, low pricing is a
result of increases in global supply. Therefore, restricting sales of
California walnuts would not be in the best interest of the industry
which is primarily focused on increasing market demand through research
and promotion.
For the reasons stated above, it is recommended that Sec. 984.49
``Volume regulation'' and reserve pool authority should be removed.
Corresponding changes to subsequent sections including provisions for
volume control should also be removed. This includes removing:
Sec. Sec. 984.23, 984.26, 984.33 984.54, 984.56, 984.66, 984.69(b),
984.450(a) and (b), 984.451(c), 984.456, and 984.464(a) and revising:
Sec. Sec. 984.48 and 984.67.
Material Issue No. 6--USDA's Conforming Changes
Based on record evidence, USDA is recommending the following
conforming changes to the Order: adding language regarding exemptions
to Sec. 984.67; removing the reference to ``merchantable'' in Sec.
984.22 and from the headings and paragraphs in Sec. Sec. 984.72 and
984.472(a) and (c); revising the heading in Sec. 984.21; revising
Sec. Sec. 984.69(e) and 984.89(b)(4) to replace the term ``fiscal
period'' with ``marketing year''; and revising the figure in Sec.
984.347.
As described above in Material Issue #2, USDA is recommending a
conforming change to Sec. 984.67 to add language inadvertently omitted
in a prior rulemaking conducted in May 2020. Witnesses testified in
support of adding exemptions that had been inadvertently omitted back
to Sec. 984.67.
A conforming change to remove the word ``merchantable'' from Sec.
984.22 and from the headings and paragraphs in Sec. Sec. 984.72 and
984.472(a) and (c) is necessary to add clarity to the Order. In Sec.
984.11, ``merchantable walnuts'' are defined as ``walnuts meeting the
minimum grade and size regulations effective pursuant to Sec.
984.50.'' If the proposed amendments described in Material Issue #1 are
implemented, there would be no ``merchantable walnuts'' because there
would be no
[[Page 64392]]
grade and size regulations in effect. Witnesses testified that this was
their understanding of the effect of the proposed amendments described
in Material Issued #1. Witnesses also testified in favor of removing
numerous references to the term ``merchantable'' in various sections,
including Sec. 984.48. Similarly, witnesses testified to amendment of
Sec. 984.472(b) to ensure that reporting requirements for shipped
walnuts would continue.
Accordingly, USDA proposes that references to ``merchantable'' be
removed from other reporting requirements to ensure that such reporting
requirements continue to be in place. USDA proposes that the reference
to ``merchantable'' be removed from Sec. 984.22 to ensure that the
marketing policy in Sec. 984.48 includes an estimate of trade demand.
USDA proposes that the reference to ``merchantable'' be removed from
the heading and text of Sec. 984.72 to make clear that the authority
for reports extends to walnuts rather than the subset of ``merchantable
walnuts''. Similarly, USDA proposes conforming changes to remove
references to the term ``merchantable'' in Sec. 984.472(a) and (c).
This would ensure that walnuts that are received and that are committed
continue to be reported to the Board.
Section 984.50 would continue to provide authority for grade,
quality, and size regulations in the event that such regulations are
warranted in the future. If specific grade, quality, and size
regulations are promulgated and implemented in the future, the term
``merchantable walnuts'' (``walnuts meeting the minimum grade and size
regulations effective pursuant to Sec. 984.50'') would once again have
meaning and effect. Accordingly, the definition for ``merchantable
walnuts'' and similarly related sections that reference the word
``merchantable'' in the Order would not be affected by the proposed
amendments. Specifically, Sec. Sec. 984.11, 984.12, and 984.64 would
continue to reference ``merchantable walnuts.''
In addition, as noted in the notice of hearing, the heading in
Sec. 984.21 would be revised to reflect the purpose of the provision.
The provision defines handler inventory and accordingly, USDA proposes
to rename the heading ``Handler inventory'' from ``Eligibility.''
USDA proposes to revise Sec. Sec. 989.69(e) and 984.89(b)(4) to
replace the term ``fiscal period'' with ``marketing year.'' ``Marketing
year'' is already used in another provision of Sec. 989.69. Moreover,
``marketing year'' is defined in and used throughout the Order.
Finally, as discussed in Material Issue #3 USDA notes that there
was an error in Sec. 984.347 in the notice of hearing, in which the
assessment rate was listed as $.125. Witnesses testified that the
assessment rate should be $.0125, and the recommended decision reflects
this.
Initial 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 initial
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 April 19-20, 2022, interested parties were
invited to present evidence on the probable regulatory impact on small
businesses of the proposed amendments to the Order. The evidence
presented at the hearing shows that the proposed amendments would not
have a significant negative economic impact on a substantial number of
small agricultural producers or handlers.
A small handler, as defined by the Small Business Administration
(SBA) (13 CFR 121.201), is one that grosses less than $30 million
annually. A small walnut producer is one that grosses less than $3.25
million annually.
Effective May 2, 2022, SBA issued a final rule updating small
business size standards for agriculture (86 FR 18607). The tree nut
farming (North American Industry Classification System (NAICS) code
111335) size standard changed from $1 million to $3.25 million. The
witnesses that identified themselves as small producers did so using
the SBA size standard in effect at the time of the hearing ($1.0
million); they are also small under the new standard of $3.25 million.
A total of nine witnesses testified at the hearing. Of the nine
witnesses, seven appeared and offered testimony as growers or handlers.
Five of these seven witnesses were growers and four of the growers were
also handlers. Two of five grower witnesses testified that they were
small walnut growers according to the former SBA definition of $1.0
million, and three were large.
Of the six handler witnesses, two were small and four were large.
Of the four grower witnesses who were also handlers, one was a small
handler, and three were large. There were two additional handler
witnesses, one small and one large.
Of the remaining two witnesses, one provided testimony from the
perspective of academia and the other witness provided testimony as a
representative of the California Walnut Board.
All witnesses expressed their support for the proposed amendments
and stated that they expected to see significant benefits (cost
savings) from the amendments.
Walnut Industry Background and Overview
According to the hearing record there are approximately 4,500
producers and 85 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.
Record evidence showed that approximately 82 percent of
California's walnut handlers (70 out of 85) 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 the California farms growing walnuts had
walnut sales of less than $1 million. In the 2017 Agricultural Census,
the largest sales value size category for walnuts was $1.0 million.
To estimate the percentage of small walnut farms, using NASS data
from the hearing record, the first step was computing a 3-year average
crop value, which was $1.077 billion for the period 2018/19 to 2020/21.
Average bearing acres over that same 3-year period were 372,500.
Dividing crop value by acres yields a revenue per acre estimate of
$2,892. Using these numbers, it would take approximately 1,124 acres
($3,250,000/$2,892) to yield $3,250,000 in annual walnut sales. The
2017 Agricultural Census data show that 94 percent of walnut farms in
2017 were below 1,000 acres. Therefore, 94 percent or more of
California walnut farms would be considered small businesses according
to the current SBA definition.
Hearing evidence showed that the period from walnut tree planting
production ranges from 5 to 7 years, and that production levels each
year are somewhat affected by the alternate bearing tendency. The
pricing downturn that began in 2015 somewhat diminished the rate of new
plantings, but about 36,000 previously planted
[[Page 64393]]
acres are expected to come into production in the next 3 years (2023 to
2026). These are high-yield varieties, and therefore the new acres will
be more productive than the walnut acreage being removed.
According to the record, generally all domestic production of
walnuts is grown in the Central Valley region, which includes the
Sacramento Valley and the San Joaquin Valley. The San Joaquin Valley is
one of only five major Mediterranean-type climates in the world that is
ideal for growing nuts. Over the past 10 years, walnut acreage has
migrated north for better water availability. Production in the
northern part of the Central Valley is expected to grow significantly,
and the proportion of total production in the south is expected to
decline.
Walnut trees bloom in the spring and the harvest for early
varieties starts in September. Harvesting for later varieties starts in
October and sometimes continue into November. The Chandler variety is
58 percent of total walnut production. Three varieties (Chandler,
Howard, and Tulare) make up eighty-five percent of total walnut volume.
As soon as the nuts are harvested, they must be hulled (removal of the
green husk) and dried. The hulled nuts have too high a moisture content
for long-term storage, and they need to be dried quickly to preserve
quality and to minimize mold and rancidity. Growers still own the nut
at that point, according to hearing evidence.
The processor (handler) then buys the nuts based on the cleaned,
hulled and dried weight. The handlers process and store them before and
after the value-added steps, before shipping them into distribution
channels.
Once received by the handler, the walnuts go into refrigerated or
bulk storage, depending on the type of product that the handler intends
to produce. Smaller lots (such as for minor varieties) are put into bin
storage. Once the walnuts are warehoused and fumigated (to eliminate
insects) a sample is taken to determine the value of the product to the
producer. The walnuts are tested for kernel content, edible kernel
content, defect levels, and color. The lighter the color, the greater
the value. The three predominant colors are light, light amber and
amber.
The shelling process removes most of the shell, typically leaving
about 98 percent kernel and 2 percent shell. The resulting lot has nuts
with a mixture of colors and approximately six different sizes, ranging
from eight-of-an-inch square up to a half kernel.
Walnuts generally have a 12-month shelf life, which can be
moderately increased through improved storage conditions and may be
reduced if storage conditions are not ideal. Cold storage has
facilitated year-round sales and marketing. Witnesses stated that
advancements in processing and packaging technologies continue to
improve product quality, consistency and shelf life.
Some packaging methods, including vacuum packing, will increase
shelf life and help maintain quality. Walnuts can also be pasteurized
to reduce pathogens. Modified atmosphere storage requires substantial
capital, including automation of storage chamber loading and unloading
because the low oxygen environment is dangerous for forklift drivers.
On the handler process lines, key pieces of equipment are laser
sorters and optical camera sorters, which can sort by color and shape.
Broad spectrum analyses (using infrared and ultraviolet) are
increasingly effective at identifying defects. Mechanical air injection
systems use jets of air to remove individual nuts identified as
defective.
A key factor in quality improvement are new varieties, including
Chandler, Howard, Pillory, Ivanhoe and Sawano. With these varieties,
shell removal is much easier, leaving far fewer fragments and pieces.
Recent technology improvements have also greatly reduced the incidence
of foreign material and shell pieces to a level that is far below what
is allowed under USDA standards, which were established decades
earlier.
With the new varieties, the kernel color is much lighter, and the
nuts are larger. In addition, advances in processing equipment produce
a much higher percentage of ``pristine halves''. Witnesses testified
that these three key characteristics yield more money to industry
stakeholders but are not accounted for in USDA standards.
According to hearing evidence, prior to the inspection moratorium,
large volume handlers typically had DFA staff working from a space
close to their own quality assurance (QA) staff. DFA conducted quality
tests from in-line samples with processes that largely paralleled those
of the handler QA staff, but DFA applied the less stringent USDA
standards. For smaller volume handlers, the DFA staff tested nuts based
on samples from packaged products on the packing floor (floor
inspection). For the mandatory outbound inspection, no product could
leave the processing facility without USDA certification issued by DFA.
Before the inspection moratorium, operational inefficiencies for
handlers included sometimes having to wait for qualified DFA inspection
staff to show up to certify lots in a timely manner, adding to an
already challenging shipping environment. Hearing evidence suggests
that the elimination of mandatory inspection, and being able to self-
certify according to customer specifications that are well above USDA
standards, would be a significant benefit of the proposed changes to
handlers of all sizes. Some handlers may continue to use DFA inspection
service for quality control; however, hearing evidence shows industry
is undergoing a transition away from the traditional practice of third
party inspections for greater cost savings.
Witnesses reported that another improvement in operational
efficiency, and reduced paperwork burden, that would result from the
proposed amendments is changing from monthly handler assessments to
three installments to be paid in February, May, and August.
In summary, hearing evidence points to major technological
improvements in sorting, processing and storage, and adoption of new
varieties, as key evidence of how current industry practices result in
walnut quality that exceeds USDA standards, making mandatory outgoing
inspection unnecessary.
Estimated Economic Impact of Eliminating Mandatory Inspection
A key economic impact of the marketing order amendment is the cost
reduction to industry stakeholders of eliminating mandatory inspection.
Hearing evidence showed that an estimate of the inspection cost is
approximately $6 million per year. This cost reduction figure
represents a key benefit to the industry of implementing these
amendments.
Table 2 illustrates the inspection cost estimate. Multiplying the
total quantity of California walnuts marketed in 2020 (783,500 tons)
times the average inspection cost of $7.7024 per ton) yields the total
annual mandatory inspection cost estimate of $6,034,830 shown in Table
2. These numbers represent the costs incurred by handlers for the
inspection services supplied by DFA, the Board's inspection agency of
record.
The proportion of the crop marketed as inshell and shelled are 42
and 58 percent, respectively. These proportions are used to show how
the $6.035 million inspection cost is allocated to the inshell and
shelled portions of the total U.S. walnut market.
[[Page 64394]]
Table 2--Estimated Annual Cost Mandatory Walnut Inspection \1\
----------------------------------------------------------------------------------------------------------------
Inshell Shelled Total Computational detail
----------------------------------------------------------------------------------------------------------------
Share of sales (%).................... 42% 58% 100% A
Volume (tons)......................... 329,070 454,430 783,500 B A * total volume.
Inspection Cost ($ per ton) \2\....... $6.09 $8.87 $7.7024 C
Total inspection cost \2\'............ $2,004,036 $4,030,794 $6,034,830 D B * C.
----------------------------------------------------------------------------------------------------------------
\1\ This table is based on Exhibit 16A of the walnut marketing order amendment hearing, which used data supplied
by California Walnut Board.
\2\ Total inspection cost of $6,034,830 in this table is the sum of the inshell and shelled cost and represents
a slight upward adjustment from the total cost figure of $6,032,950 in hearing Exhibit 16A. This revised total
cost figure was used to compute a revised inspection cost per ton of $7.7024, representing an average industry
cost, combining inshell and shelled. This is slightly higher than the $7.70 cost figure presented in Exhibit
16A.
Hearing evidence also pointed to other benefits, such as lower
indirect costs to handlers. Witnesses stated that handlers would
benefit from reduced operational process redundancies, resulting in
lower associated costs and administrative burdens. An additional
efficiency for handlers is that the proposed new marketing order
assessment mechanism utilizes the same process already in use by
handlers for their payment to the California Walnut Commission.
In addition, producers may also benefit from higher grower returns
through cost savings passed on from increased handler efficiencies.
The record shows that there would be no negative quality
implications from implementing the proposed amendments, and consumers
already benefit from California walnut quality that surpasses USDA
grade standards. Consumers may also benefit from lower prices resulting
from reduced handler costs. If the proposed amendments and accompanying
conforming changes were implemented, both benefits and costs savings
could be anticipated. For the reasons described above, it is determined
that the benefits of eliminating mandatory inspection and certification
of inshelled and shelled walnuts, and of shelled walnuts for
processing; creating a new mechanism for determining and collecting
handler assessments; adding authority to charge interest for late
payments; establishing an assessment rate of $0.0125 per inshell pound
of walnuts; expanding the definition of ``to handle'' to include
``receive'', and removing volume control authority would modernize and
align the Order with current market-driven practices that would result
in a more efficient industry.
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 Office of Management and Budget (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.
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.
Rulings on Briefs of Interested Persons
Briefs, proposed findings and conclusions, and the evidence in the
record were considered in making the findings and conclusions set forth
in this recommended decision. To the extent that the suggested findings
and conclusions filed by interested persons are inconsistent with the
findings and conclusions of this recommended decision, the requests to
make such findings or to reach such conclusions are denied.
General Findings
The findings hereinafter set forth are supplementary to the
findings and determinations which were previously made in connection
with the issuance of the marketing agreement and 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.
(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;
[[Page 64395]]
(2) The marketing order, as amended, and as hereby proposed to be
further amended, regulates the handling of walnuts grown in the
production area (California) 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 which 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 the production area; 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.
A 30-day comment period is provided to allow interested persons to
respond to this proposal. All written exceptions received within the
comment period will be considered, and a producer referendum will be
conducted before any of these proposals are implemented.
List of Subjects in 7 CFR Part 984
Marketing agreements, Nuts, Reporting and recordkeeping
requirements.
For the reasons set out in the preamble, the Agricultural Marketing
Service proposes to amend 7 CFR part 984 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. 984.12 to read as follows:
Sec. 984.12 Substandard walnuts.
Substandard walnuts means all walnuts (whether inshell or shelled)
that do not meet the minimum standard prescribed for merchantable
walnuts whenever regulations are in effect pursuant to Sec. 984.50.
0
3. Revise Sec. 984.13 to read as follows:
Sec. 984.13 To handle.
To handle means to receive, pack, sell, consign, transport, or ship
(except as a common or contract carrier of walnuts owned by another
person), or in any other way to put walnuts, inshell or shelled, into
the current of commerce either within the area of production or from
such area to any point outside thereof, or for a manufacturer or
retailer within the area of production to purchase directly from a
grower. However, sales and deliveries by a grower to handlers, hullers,
or other processors within the area of production shall not, in itself,
be considered as handling by a grower. The term ``to handle'' shall not
include sales and deliveries within the area of production between
handlers.
0
4. In Sec. 984.21, revise the section heading to read as follows:
Sec. 984.21 Handler inventory.
* * * * *
Sec. 984.22 [Amended]
0
5. In Sec. 984.22(a) and (b), remove the word ``merchantable''.
Sec. Sec. 984.23 and 984.26 [Removed and Reserved]
0
6. In Sec. Sec. 984.23 and 984.26, lift the stays of May 7, 2020, and
remove and reserve the sections.
0
7. Revise Sec. 984.32 to read as follows:
Sec. 984.32 To certify.
To certify means the issuance of a certification of inspection of
walnuts in accordance with regulations issued pursuant to Sec. 984.50.
Sec. 984.33 [Removed and Reserved]
0
8. In Sec. 984.33, lift the stay of May 7, 2020, and remove and
reserve the section.
0
9. In Sec. 984.37, revise paragraphs (b) and (c)(4) to read as
follows:
Sec. 984.37 Nominations.
* * * * *
(b) Nominations for handler members shall be submitted on ballots
mailed by the Board to all handlers in their respective Districts. All
handlers' votes shall be weighted by the weight of inshell walnuts
handled by each handler during the preceding marketing year. Each
handler in the production area may vote for handler member nominees and
their alternates. However, no handler with less than 35% of the crop
shall have more than one member and one alternate member. The person
receiving the highest number of votes for each handler member position
shall be the nominee for that position.
(c) * * *
(4) Nominations for handler members representing handlers that do
not handle 35% or more of the crop shall be submitted on ballots mailed
by the Board to those handlers. The votes of these handlers shall be
weighted by the weight of inshell walnuts handled by each handler
during the preceding marketing year. Each handler in the production
area may vote for handler member nominees and their alternates of this
paragraph (c)(4). However, no handler shall have more than one person
on the Board either as member or alternate member. The person receiving
the highest number of votes for a handler member position of this
paragraph (c)(4) shall be the nominee for that position.
* * * * *
0
10. In Sec. 984.48:
0
a. Revise the introductory text of paragraph (a);
0
b. Remove the words ``merchantable and substandard'' in paragraph
(a)(3);
0
c. Lift the stays of May 7, 2020, on paragraphs (a)(6) and (7) and
remove both paragraphs; and
0
d. Redesignate paragraphs (a)(8) and (9) as paragraphs (a)(6) and (7),
respectively.
The revision reads as follows:
Sec. 984.48 Marketing estimates and recommendations.
(a) Each marketing year the Board shall hold a meeting, prior to
October 20, for the purpose of recommending to the Secretary a
marketing policy for such year. Each year such recommendation shall be
adopted by the affirmative vote of at least 60% of the Board and shall
include the following:
* * * * *
Sec. 984.49 [Removed and Reserved]
0
11. In Sec. 984.49, lift the stays of August 7, 1995, and May 7, 2020,
and remove and reserve the section.
0
12. In Sec. 984.50, lift the stay of May 7, 2020, on paragraph (e) and
revise the section to read as follows:
Sec. 984.50 Grade, quality, and size regulations.
(a) The Board may recommend, subject to the approval of the
Secretary, regulations that:
(1) Establish handling requirements for particular grades, sizes,
or qualities, or any combination thereof, of any or all varieties or
classifications of walnuts during any period;
(2) Establish different handling requirements and tolerance limits
for particular grades, sizes, or qualities, or any combination thereof,
for different market destinations;
[[Page 64396]]
(3) Establish different handling requirements for the processing of
shelled walnuts and the handling thereof; and
(4) Establish inspection and certification requirements for the
purposes of this paragraph (a) and paragraph (b) of this section.
(b) During any period regulations issued under this section are in
effect, no handler shall handle or process walnuts into manufactured
items or products unless they meet the applicable requirements under
this section as evidenced by certification acceptable to the Board.
(c) Regulations issued under this section may be amended, modified,
suspended, or terminated whenever it is determined:
(1) That such action is warranted upon recommendation of the Board
and approval by the Secretary, or other available information; or
(2) That regulations issued under this section no longer tend to
effectuate the declared policy of the Act.
Sec. Sec. 984.51 and 984.52 [Removed and Reserved]
0
13. Remove and reserve Sec. Sec. 984.51 and 984.52.
Sec. Sec. 984.54 and 984.56 [Removed and Reserved]
0
14. In Sec. Sec. 984.54 and 984.56, lift the stays of May 7, 2020, and
remove and reserve the sections.
0
15. Revise Sec. 984.64 to read as follows:
Sec. 984.64 Disposition of substandard walnuts.
During any period when regulations are in effect pursuant to Sec.
984.50, substandard walnuts may be disposed of only for manufacture
into oil livestock feed, or such others uses as the Board determines to
be noncompetitive with existing domestic and export markets for
merchantable walnuts and with proper safeguards to prevent such walnuts
from thereafter entering channels of trade in such markets. Each
handler shall submit, in such form and at such intervals as the Board
may determine, reports of his production and holdings of substandard
walnuts and the disposition of all substandard walnuts to any other
person, showing the quantity, lot, date, name and address of the person
to whom delivered, the approved use and such other information
pertaining thereto as the Board may specify.
Sec. 984.66 [Removed and Reserved]
0
16. In Sec. 984.66, lift the stay of May 7, 2020, and remove and
reserve the section.
0
17. In Sec. 984.67:
0
a. Lift the stay of May 7, 2020, on paragraph (a) and remove the
paragraph;
0
b. Redesignate paragraphs (b) and (c) as paragraphs (a) and (b),
respectively; and
0
c. Revise newly redesignated paragraph (a).
The revision reads as follows:
Sec. 984.67 Exemptions.
(a) Exemptions from assessments and quality regulations--(1) Sales
by growers direct to consumers. Any walnut grower may handle walnuts of
his production free of the regulatory and assessment provisions of this
part if he sells such walnuts in the area of production directly to
consumers under the following types of exemptions:
(i) At roadside stands and farmers' markets;
(ii) In quantities not exceeding an aggregate of 500 pounds of
inshell walnuts of 200 pounds of shelled walnuts during any marketing
year (at locations other than those specified in paragraph (a)(1)(i) of
the section); and
(iii) If shipped by parcel post or express in quantities not
exceeding 10 pounds of inshell walnuts or 4 pounds of shelled walnuts
to any one consumer in any one calendar day.
(2) Green walnuts. Walnuts which are green and which are so
immature that they cannot be used for drying and sale as dried walnuts
may be handled without regard to the provisions of this part.
(3) Noncompetitive outlets. Any person may handle walnuts, free of
the provisions of this part, for use by charitable institutions, relief
agencies, governmental agencies for school lunch programs, and
diversion to animal feed or oil manufacture pursuant to an authorized
governmental diversion program.
* * * * *
0
18. In Sec. 984.69, lift the stay of May 7, 2020, on paragraph (b) and
revise the section to read as follows:
Sec. 984.69 Assessments.
(a) Requirement for payment. Each handler shall pay the Board, on
demand, his or her pro rata share of the expenses authorized by the
Secretary for each marketing year. Each handler's pro rata share shall
be the rate of assessment per inshell pound of walnuts fixed by the
Secretary times the pounds of walnuts received by him or her for his or
her own account (except as to receipt from other handlers on which
assessments have been paid). At any time during or after the marketing
year the Secretary may increase the assessment rate as necessary to
cover authorized expenses and each handler's pro rata share shall be
adjusted accordingly.
(b) Assessment rate. The assessment rate set out may be modified by
the Secretary, based upon a recommendation of the Board or other
available data.
(c) Late payment. If a handler does not pay assessments within the
time prescribed by the Board, the assessment may be increased by a late
payment charge and/or an interest rate charge at amounts prescribed by
the Board with approval of the Secretary.
(d) Accounting. If at the end of a marketing year the assessments
collected are in excess of expenses incurred, such excess shall be
accounted for in accordance with one of the following:
(1) If such excess is not retained in a reserve, as provided in
paragraph (d)(2) or (3) of this section, it shall be refunded to
handlers from whom collected, and each handler's share of such excess
funds shall be the amount of assessments he or she has paid in excess
of his or her pro rata share of the actual expenses of the Board.
(2) Excess funds may be used temporarily by the Board to defray
expenses of the subsequent marketing year provided each handler's share
of such excess shall be made available to him or her by the Board
within five months after the end of the year.
(3) The Board may carry over such excess into subsequent marketing
years as a reserve: Provided, that funds already in reserve do not
exceed approximately two years' budgeted expenses. In the event that
funds exceed two marketing years' budgeted expenses, future assessments
will be reduced to bring the reserves to an amount that is less than or
equal to two marketing years' budgeted expenses. Such reserve funds may
be used:
(i) To defray expenses, during any marketing year, prior to the
time assessment income is sufficient to cover such expenses;
(ii) To cover deficits incurred during any year when assessment
income is less than expenses;
(iii) To defray expenses incurred during any period when any or all
provisions of this part are suspended; and
(iv) To meet any other such costs recommended by the Board and
approved by the Secretary.
(e) Advanced assessments and commercial loans. To provide funds for
the administration of the provisions of this part during the part of a
marketing year when neither sufficient operating reserve funds nor
sufficient revenue from assessments on the current
[[Page 64397]]
season's certifications are available, the Board may accept payment of
assessments in advance or may borrow money from a commercial lending
institution for such purposes.
(f) Termination. Any money collected from assessments hereunder and
remaining unexpended in the possession of the Board upon termination of
this part shall be distributed in such manner as the Secretary may
direct.
0
19. Revise Sec. 984.72 to read as follows:
Sec. 984.72 Reports of walnuts handled.
Each handler who handles walnuts, inshell or shelled, at any time
during a marketing year shall submit to the Board in such form and at
such intervals as the Board may prescribe, reports showing the quantity
so handled and such other information pertinent thereto as the Board
may specify.
0
20. Revise Sec. 984.77 to read as follows:
Sec. 984.77 Verification of reports.
For the purpose of verifying and checking reports filed by handlers
or the operations of handlers, the Secretary and the Board through its
duly authorized representatives shall have access to any premises where
walnuts and walnut records are held. Such access shall be available at
any time during reasonable business hours. Authorized representatives
shall be permitted to inspect any walnuts held and any and all records
of the handler with respect to matters within the purview of this part.
Each handler shall maintain complete records on the receiving, holding,
and disposition of both inshell and shelled walnuts. Each handler shall
furnish all labor necessary to facilitate such inspections at no
expense to the Board or the Secretary. Each handler shall store all
walnuts held by him or her in such manner as to facilitate inspection
and shall maintain adequate storage records, which will permit accurate
identification of respective lots and of all such walnuts held or
disposed of theretofore. The Board, with the approval of the Secretary,
may establish any methods and procedures needed to verify reports.
Sec. 984.89 [Amended]
0
21. In Sec. 984.89(b)(4), remove the term ``fiscal period'' and add in
its place the term ``marketing year''.
0
22. Revise Sec. 984.347 to read as follows:
Sec. 984.347 Assessment rate.
On and after September 1, 2023, an assessment rate shall be fixed
at $0.0125 per inshell pound of California walnuts.
Sec. 984.450 [Removed and Reserved]
0
23. In Sec. 984.450, lift the stays of May 7, 2020, on paragraphs (a)
and (b) and remove and reserve the section.
Sec. 984.451 [Removed and Reserved]
0
24. In Sec. 984.451, lift the stay of May 7, 2020, on paragraph (c)
and remove and reserve the section.
Sec. 984.452 [Removed and Reserved]
0
25. Remove and reserve Sec. 984.452.
Sec. 984.456 [Removed and Reserved]
0
26. In Sec. 984.456, lift the stay of May 7, 2020, and remove and
reserve the section.
Sec. 984.459 [Amended]
0
27. In Sec. 984.459, remove and reserve paragraph (a)(3).
Sec. 984.464 [Removed and Reserved]
0
28. In Sec. 984.464, lift the stay of May 7, 2020, on paragraph (a)
and remove and reserve the section.
0
29. Revise Sec. 984.472 to read as follows:
Sec. 984.472 Reports of walnuts, received, shipped, and committed.
(a) Reports of walnuts shipped during a month shall be submitted to
the Board on California Walnut Board (CWB) Form No. 6 not later than
the 5th day of the following month. Such reports shall include all
shipments during the preceding month and shall show for inshell and
shelled walnuts: the quantity shipped; whether they were shipped into
domestic or export channels; and for exports, the quantity by country
of destination. If a handler makes no shipments during any month he/she
shall submit a report marked ``None.'' If a handler has completed his/
her shipments for the season, he/she shall mark the report
``Completed,'' and he/she shall not be required to submit any
additional CWB Form No. 6 reports during the remainder of that
marketing year.
(b) Reports of walnuts purchased directly from growers by handlers
who are manufacturers or retailers shall be submitted to the Board on
CWB Form No. 6, not later than the 5th day of the month following the
month in which the walnuts were purchased. Such reports shall show the
quantity of walnuts purchased.
(c) Reports of walnuts on which handlers have made purchase
commitments with buyers during the month, but which have not yet been
shipped, shall be submitted to the Board on CWB Form No. 6, not later
than the 5th day of the month following the month in which the walnuts
were committed. Such reports shall show the quantity of walnuts
committed in either inshell or shelled pounds. If the handler made no
commitments during any month, he/she shall mark ``None'' in the
``Purchase Commitments'' section of CWB Form No. 6.
0
30. Revise Sec. 984.476 to read as follows:
Sec. 984.476 Report of walnut receipts produced outside California or
the United States.
Each handler who receives walnuts from outside California or the
United States shall file with the Board, on CWB Form No. 7, a report of
the receipt of such walnuts. The report shall be filed as follows: On
or before December 5 for such walnuts received during the period
September 1 to November 30; on or before March 5 for such walnuts
received during the period December 1 to February 28 (February 29 in a
leap year); on or before June 5 for such walnuts received during the
period March 1 to May 31; and on or before September 5 for such walnuts
received during the period June 1 to August 31. The report shall
include the quantity of such walnuts received, the country of origin
for such walnuts, and whether such walnuts are inshell or shelled.
Erin Morris,
Associate Administrator, Agricultural Marketing Service.
[FR Doc. 2022-22806 Filed 10-24-22; 8:45 am]
BILLING CODE P
