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[Federal Register Volume 76, Number 158 (Tuesday, August 16, 2011)]
[Proposed Rules]
[Pages 50703-50706]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-20788]

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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.

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Federal Register / Vol. 75, No. 158 / Tuesday, August 16, 2011 / 
Proposed Rules

[[Page 50703]]

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 984

[Doc. No. AMS-FV-11-0062; FV11-984-1 PR]

Walnuts Grown in California; Increased Assessment Rate

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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

SUMMARY: This rule would increase the assessment rate established for 
the California Walnut Board (Board) for the 2011-12 and subsequent 
marketing years from $0.0174 to $0.0175 per kernelweight pound of 
assessable walnuts. The Board locally administers the marketing order 
which regulates the handling of walnuts grown in California. 
Assessments upon walnut handlers are used by the Board to fund 
reasonable and necessary expenses of the program. The marketing year 
begins September 1 and ends August 31. The assessment rate would remain 
in effect indefinitely unless modified, suspended, or terminated.

DATES: Comments must be received by September 15, 2011.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this rule. Comments must be sent to the Docket Clerk, 
Marketing Order Administration Branch, Fruit and Vegetable Programs, 
AMS, USDA, 1400 Independence Avenue, SW., STOP 0237, Washington, DC 
20250-0237; Fax: (202) 720-8938; or Internet: http://www.regulations.gov. Comments should reference the document number and 
the date and page number of this issue of the Federal Register and will 
be available for public inspection in the Office of the Docket Clerk 
during regular business hours, or can be viewed at: http://www.regulations.gov. All comments submitted in response to this rule 
will be included in the record and will be made available to the 
public. Please be advised that the identity of the individuals or 
entities submitting the comments will be made public on the Internet at 
the address provided above.

FOR FURTHER INFORMATION CONTACT: Jeff Smutny, Marketing Specialist, or 
Kurt J. Kimmel, Regional Manager, California Marketing Field Office, 
Marketing Order Administration Branch, Fruit and Vegetable Programs, 
AMS, USDA; Telephone: (559) 487-5901, Fax: (559) 487-5906, or E-mail: 
Jeffrey.Smutny@ams.usda.gov or Kurt.Kimmel@ams.usda.gov.
    Small businesses may request information on complying with this 
regulation by contacting Laurel May, Marketing Order Administration 
Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence 
Avenue, SW., Stop 0237, Washington, DC 20250-0237; Telephone: (202) 
720-2491, Fax: (202) 720-8938, or E-mail: Laurel.May@ams.usda.gov.

SUPPLEMENTARY INFORMATION: This rule is issued under Marketing Order 
No. 984, as amended (7 CFR part 984), regulating the handling of 
walnuts grown in California, hereinafter referred to as the ``order.'' 
The order is effective under the Agricultural Marketing Agreement Act 
of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the 
``Act.''
    The Department of Agriculture (USDA) is issuing this rule in 
conformance with Executive Order 12866.
    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. Under the marketing order now in effect, California 
walnut handlers are subject to assessments. Funds to administer the 
order are derived from such assessments. It is intended that the 
assessment rate as proposed herein would be applicable to all 
assessable walnuts beginning on September 1, 2011, and continue until 
amended, suspended, or terminated.
    The Act provides that administrative proceedings must be exhausted 
before parties may file suit in court. Under section 608c(15)(A) of the 
Act, any handler subject to an order may file with USDA a petition 
stating that the order, any provision of the order, or any obligation 
imposed in connection with the order is not in accordance with law and 
request a modification of the order or to be exempted therefrom. Such 
handler is afforded the opportunity for a hearing on the petition. 
After the hearing, USDA would rule on the petition. The Act provides 
that the district court of the United States in any district in which 
the handler is an inhabitant, or has his or her principal place of 
business, has jurisdiction to review USDA's ruling on the petition, 
provided an action is filed not later than 20 days after the date of 
the entry of the ruling.
    This rule would increase the assessment rate established for the 
Board for the 2011-12 and subsequent marketing years from $0.0174 to 
$0.0175 per kernelweight pound of assessable walnuts.
    The California walnut marketing order provides authority for the 
Board, with the approval of USDA, to formulate an annual budget of 
expenses and collect assessments from handlers to administer the 
program. The members of the Board are growers and handlers of 
California walnuts. They are familiar with the Board's needs and with 
the costs for goods and services in their local area and are thus in a 
position to formulate an appropriate budget and assessment rate. The 
assessment rate is formulated and discussed in a public meeting. Thus, 
all directly affected persons have an opportunity to participate and 
provide input.
    For the 2010-11 and subsequent marketing years, the Board 
recommended, and USDA approved, an assessment rate of $0.0174 per 
kernelweight pound of assessable walnuts that would continue in effect 
from year to year unless modified, suspended, or terminated by USDA 
upon recommendation and information submitted by the Board or other 
information available to USDA.
    The Board met on June 9, 2011, and unanimously recommended 2011-12 
expenditures of $7,402,450 and an assessment rate of $0.0175 per 
kernelweight pound of assessable walnuts. In comparison, last year's 
budgeted expenditures were $6,812,000. The assessment rate of $0.0175 
is $0.0001 per pound higher than the rate currently in effect. The 
quantity of assessable walnuts for the 2011-12 marketing year is 
estimated at 470,000 tons (inshell), which is 35,000 tons more than the 
435,000 during the 2010-11 marketing year. At the recommended higher 
assessment rate of $0.0175 per kernelweight pound, the Board should

[[Page 50704]]

collect approximately $7,402,500 in assessment income, which would be 
adequate to cover its 2011-12 budgeted expenses of $7,402,450.
    The following table compares major budget expenditures recommended 
by the Board for the 2010-11 and 2011-12 marketing years:

------------------------------------------------------------------------
      Budget expense categories            2010-11           2011-12
------------------------------------------------------------------------
Employee Expenses...................          $577,500          $693,500
Travel/Board Expenses/Annual Audit..           208,000           218,000
Office Expenses.....................           118,850           117,750
Program Expenses Including Research:
    Controlled Purchases............            20,000            20,000
    Crop Acreage Survey.............            95,000            95,000
    Crop Estimate...................           105,000           115,000
    Production Research Director....            88,500            88,500
    Production Research.............         1,042,000         1,036,000
    Sustainability Project..........                 0            25,000
    Grades and Standards Research...           125,000           150,000
    Block Grant Research............                 0           200,000
    Domestic Market Development.....         4,400,000         4,635,000
    Reserve for Contingency.........            32,250             8,700
------------------------------------------------------------------------

    The assessment rate recommended by the Board was derived by 
dividing anticipated expenses by expected shipments of California 
walnuts certified as merchantable. The 470,000 ton (inshell) estimate 
for merchantable shipments is an average of the two prior years' 
shipments. The Board met on June 9, 2011, and unanimously approved 
using a two prior years' average to formulate the 2011-12 estimate. 
Pursuant to Sec.  984.51(b) of the order, this figure is converted to a 
merchantable kernelweight basis using a factor of 0.45 (470,000 tons x 
2,000 pounds per ton x 0.45), which yields 423,000,000 kernelweight 
pounds. At $0.0175 per pound, the new assessment rate should generate 
$7,402,500 in assessment income and allow the Board to cover its 
expenses.
    Section 984.69 of the order authorizes the Board to maintain a 
financial reserve of not more than two years' budgeted expenses. Excess 
assessment funds may be retained in the reserve or may be used 
temporarily to defray expenses of the subsequent marketing year, but if 
so used, must be made available to the handlers from whom they were 
collected within five months after the end of the marketing year.
    The proposed assessment rate would continue in effect indefinitely 
unless modified, suspended, or terminated by USDA upon recommendation 
and information submitted by the Board or other available information.
    Although this assessment rate is effective for an indefinite 
period, the Board will continue to meet prior to or during each 
marketing year to recommend a budget of expenses and consider 
recommendations for modification of the assessment rate. The dates and 
times of Board meetings are available from the Board or USDA. Board 
meetings are open to the public and interested persons may express 
their views at these meetings. USDA would evaluate Board 
recommendations and other available information to determine whether 
modification of the assessment rate is needed. Further rulemaking would 
be undertaken as necessary. The Board's 2011-12 budget and those for 
subsequent marketing years would be reviewed and, as appropriate, 
approved by USDA.

Initial Regulatory Flexibility Analysis

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA) (5 U.S.C. 601-612), the Agricultural Marketing Service (AMS) 
has considered the economic impact of this 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 
business subject to such actions in order that small businesses will 
not be unduly or disproportionately burdened. Marketing orders issued 
pursuant to the Act, and the rules issued thereunder, are unique in 
that they are brought about through group action of essentially small 
entities acting on their own behalf.
    There are approximately 4,500 growers of California walnuts in the 
production area and approximately 74 handlers subject to regulation 
under the marketing order. Small agricultural producers are defined by 
the Small Business Administration (SBA) (13 CFR 121.201) as those 
having annual receipts of less than $750,000, and small agricultural 
service firms are defined as those having annual receipts of less than 
$7,000,000.
    According to the 2007 Census of Agriculture, approximately 89 
percent of California's walnut farms were smaller than 100 acres.
    USDA's National Agricultural Statistics Service (NASS) reports that 
the average yield for the 2010-11 crop was 2.22 tons per acre. NASS 
also reported the average price received for the 2010-11 crop was 
$2,110 per ton.
    A 100-acre farm with an average yield of 2.22 tons per acre would 
therefore have been expected to produce about 222 tons of walnuts 
during 2010-11. At $2,110 per ton, that farm's production would have 
had an approximate value of $468,420. Assuming that the majority of 
California's walnut farms are smaller than 100 acres, it could be 
concluded that the majority of the growers had receipts of less than 
$468,420 in 2010-11, which is well below the SBA threshold of $750,000. 
Thus, the majority of California's walnut growers would be considered 
small growers according to SBA's definition.
    According to information supplied by the industry, approximately 
two-thirds of California's walnut handlers shipped merchantable walnuts 
valued under $7,000,000 during the 2010-11 marketing year and would 
therefore be considered small handlers according to the SBA definition.
    This rule would increase the assessment rate established for the 
Board and collected from handlers for the 2011-12 and subsequent 
marketing years from $0.0174 to $0.0175 per kernelweight pound of 
assessable walnuts. The Board unanimously recommended 2011-12 
expenditures of $7,402,450 and an assessment rate of $0.0175 per 
kernelweight pound of assessable walnuts. The proposed assessment rate 
of $0.0175 is $0.0001 higher than the 2010-11 rate. The quantity of 
assessable walnuts for the 2011-12 marketing year is estimated at

[[Page 50705]]

470,000 tons inshell weight, or 423,000,000 pounds kernelweight. Thus, 
the $0.0175 rate should provide $7,402,500 in assessment income and be 
adequate to meet this year's expenses. The increased assessment rate is 
primarily due to increased budget expenditures.
    The following table compares major budget expenditures recommended 
by the Board for the 2010-11 and 2011-12 marketing years:

------------------------------------------------------------------------
      Budget expense categories            2010-11           2011-12
------------------------------------------------------------------------
Employee Expenses...................          $577,500          $693,500
Travel/Board Expenses/Annual Audit..           208,000           218,000
Office Expenses.....................           118,850           117,750
Program Expenses Including Research:
    Controlled Purchases............            20,000            20,000
    Crop Acreage Survey.............            95,000            95,000
    Crop Estimate...................           105,000           115,000
    Production Research Director....            88,500            88,500
    Production Research.............         1,042,000         1,036,000
    Sustainability Project..........                 0            25,000
    Grades and Standards Research...           125,000           150,000
    Block Grant Research............                 0           200,000
    Domestic Market Development.....         4,400,000         4,635,000
    Reserve for Contingency.........            32,250             8,700
------------------------------------------------------------------------

    The Board reviewed and unanimously recommended 2011-12 expenditures 
of $7,402,450. Prior to arriving at this budget, the Board considered 
alternative expenditure levels but ultimately decided that the 
recommended levels were reasonable to properly administer the order. 
The assessment rate of $0.0175 per kernelweight pound of assessable 
walnuts was derived by dividing anticipated expenses of $7,402,450 by 
expected shipments of California walnuts certified as merchantable. 
Merchantable shipments for the year are estimated at 423,000,000 
pounds, which should provide $7,402,500 in assessment income and allow 
the Board to cover its expenses. Unexpended funds may be retained in a 
financial reserve, provided that funds in the financial reserve do not 
exceed approximately two years' budgeted expenses. If not retained in a 
financial reserve, unexpended funds may be used temporarily to defray 
expenses of the subsequent marketing year, but must be made available 
to the handlers from whom collected within 5 months after the end of 
the year, according to Sec.  984.69 of the order.
    According to NASS, the season average grower prices for the years 
2009 and 2010 were $1,710 and $2,110 per ton, respectively. These 
prices provide a range within which the 2011-12 season average price 
could fall. Dividing these average grower prices by 2,000 pounds per 
ton provides an inshell price per pound range of $0.86 to $1.06. 
Dividing these inshell prices per pound by the 0.45 conversion factor 
(inshell to kernelweight) established in the order yields a 2011-12 
price range estimate of $1.91 to $2.36 per kernelweight pound of 
assessable walnuts.
    To calculate the percentage of grower revenue represented by the 
assessment rate, the assessment rate of $0.0175 per kernelweight pound 
is divided by the low and high estimates of the price range. The 
estimated assessment revenue for the 2011-12 marketing year as a 
percentage of total grower revenue will thus likely range between .74 
and .92 percent.
    This action would increase the assessment obligation imposed on 
handlers. While assessments impose some additional costs on handlers, 
the costs are minimal and uniform on all handlers. Some of the 
additional costs may be passed on to growers. However, these costs 
would be offset by the benefits derived by the operation of the 
marketing order. In addition, the Board's meeting was widely publicized 
throughout the California walnut industry, and all interested persons 
were invited to attend the meeting and participate in Board 
deliberations on all issues. Like all Board meetings, the June 9, 2011, 
meeting was a public meeting and all entities, both large and small, 
were able to express views on this issue. Finally, interested persons 
are invited to submit comments on this proposed rule, including the 
regulatory and informational impacts of this action on small 
businesses.
    In accordance with the Paperwork Reduction Act of 1995, (44 U.S.C. 
chapter 35), the order's information collection requirements have been 
previously approved by the Office of Management and Budget (OMB) and 
assigned OMB No. 0581-0178 (Walnuts Grown in California). No changes in 
those requirements as a result of this action are necessary. Should any 
changes become necessary, they would be submitted to OMB for approval.
    This proposed rule would impose no additional reporting or 
recordkeeping requirements on either small or large California walnut 
handlers. As with all Federal marketing order programs, reports and 
forms are periodically reviewed to reduce information requirements and 
duplication by industry and public sector agencies.
    AMS is committed to complying with the E-Government Act, to promote 
the use of the Internet and other information technologies to provide 
increased opportunities for citizen access to Government information 
and services, and for other purposes.
    USDA has not identified any relevant Federal rules that duplicate, 
overlap, or conflict with this rule.
    A small business guide on complying with fruit, vegetable, and 
specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/MarketingOrderSmallBusinessGuide. Any questions about 
the compliance guide should be sent to Laurel May at the previously 
mentioned address in the FOR FURTHER INFORMATION CONTACT section.
    A 30-day comment period is provided to allow interested persons to 
respond to this proposed rule. Thirty days is deemed appropriate 
because: (1) The 2011-12 marketing year begins on September 1, 2011, 
and the marketing order requires that the rate of assessment for each 
marketing year apply to all assessable walnuts handled during the year; 
(2) the Board needs to have sufficient funds to pay its expenses, which 
are incurred on a continuous basis; and (3) handlers are aware of this 
action, which was unanimously recommended by the Board at a public 
meeting and is similar to other assessment rate actions issued in past 
years.

[[Page 50706]]

List of Subjects in 7 CFR Part 984

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

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

PART 984--WALNUTS GROWN IN CALIFORNIA

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

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

    2. Section 984.347 is revised to read as follows:

Sec.  984.347  Assessment rate.

    On and after September 1, 2011, an assessment rate of $0.0175 per 
kernelweight pound is established for California merchantable walnuts.

    Dated: August 10, 2011.
David R. Shipman,
Acting Administrator, Agricultural Marketing Service.
[FR Doc. 2011-20788 Filed 8-15-11; 8:45 am]
BILLING CODE 3410-02-P
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