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[Federal Register Volume 78, Number 180 (Tuesday, September 17, 2013)]
[Proposed Rules]
[Pages 57101-57104]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-22571]

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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 984

[Doc. No. AMS-FV-13-0056; FV13-984-1 PR]

Walnuts Grown in California; Increased Assessment Rate

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would increase the assessment rate 
established for the California Walnut Board (Board) for the 2013-14 and 
subsequent marketing years from $0.0175 to $0.0189 per kernelweight 
pound of merchantable 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 October 17, 2013.

ADDRESSES: Interested persons are invited to submit written comments on 
this proposed rule. Comments must be sent to the Docket Clerk, 
Marketing Order and Agreement Division, Fruit and Vegetable Program, 
AMS, USDA, 1400 Independence Avenue SW., STOP 0237, Washington, DC 
20250-0237; Fax: (202) 720-8938; or Internet: 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 
proposed rule will be included in the record and will be made available 
to the public. Please be advised that the identity of the individuals 
or entities submitting comments will be made public on the Internet at 
the address provided above.

FOR FURTHER INFORMATION CONTACT: Andrea Ricci, Marketing Specialist, or 
Martin Engeler, Regional Director, California Marketing Field Office, 
Marketing Order and Agreement Division, Fruit and Vegetable Program, 
AMS, USDA; Telephone: (559) 487-5901, Fax: (559) 487-5906, or Email: 
Andrea.Ricci@ams.usda.gov or Martin.Engeler@ams.usda.gov.
    Small businesses may request information on complying with this 
regulation by contacting Jeffrey Smutny, Marketing Order and Agreement 
Division, Fruit and Vegetable Program, AMS, USDA, 1400 Independence 
Avenue SW., STOP 0237, Washington, DC 20250-0237; Telephone: (202) 720-
2491, Fax: (202) 720-8938, or Email: Jeffrey.Smutny@ams.usda.gov.

SUPPLEMENTARY INFORMATION: This proposed rule is issued under Marketing 
Order No. 984, as amended (7 CFR part 984), regulating the handling of 
walnuts grown in California, hereinafter referred to as the ``order.'' 
The order is effective under the Agricultural Marketing Agreement Act 
of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the 
``Act.''
    The Department of Agriculture (USDA) is issuing this proposed rule 
in conformance with Executive Order 12866.
    This proposed rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. Under the marketing order now in effect, 
California walnut handlers are subject to assessments. Funds to 
administer the order are derived from such assessments. It is intended 
that the assessment rate as proposed herein would be applicable to all 
assessable walnuts beginning on September 1, 2013, and continue until 
amended, suspended, or terminated.
    The Act provides that administrative proceedings must be exhausted 
before parties may file suit in court. Under section 608c(15)(A) of the 
Act, any handler subject to an order may file with USDA a petition 
stating that the order, any provision of the order, or any obligation 
imposed in connection with the order is not in accordance with law and 
request a modification of the order or to be exempted therefrom. Such 
handler is afforded the opportunity for a hearing on the petition. 
After the hearing, USDA would rule on the petition. The Act provides 
that the district court of the United States in any district in which 
the handler is an inhabitant, or has his or her principal place of 
business, has jurisdiction to review USDA's ruling on the petition, 
provided an action is filed not later than 20 days after the date of 
the entry of the ruling.
    This proposed rule would increase the assessment rate established 
for the Board for the 2013-14 and subsequent marketing years from 
$0.0175 to $0.0189 per kernelweight pound of merchantable 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 of goods and services in their local area and are therefore 
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 2011-12 and subsequent marketing years, the Board 
recommended, and USDA approved, an assessment rate of $0.0175 per 
kernelweight pound of merchantable 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 6, 2013, and unanimously recommended 2013-14 
expenditures of $10,166,860 and an assessment rate of $0.0189 per

[[Page 57102]]

kernelweight pound of merchantable walnuts. In comparison, last year's 
budgeted expenditures were $8,840,000. The assessment rate of $0.0189 
is $0.0014 per pound higher than the rate currently in effect. The 
quantity of assessable walnuts for the 2013-14 marketing year is 
estimated at 486,000 tons (inshell), which is 6,000 tons higher than 
last year's. At the recommended higher assessment rate of $0.0189 per 
kernelweight pound, the Board should collect approximately $8,266,860 
in assessment income. Assessment income plus funds from the Board's 
authorized prior year's carry-in financial reserve and Foreign 
Agricultural Service (FAS) funding would be adequate to cover its 2013-
14 anticipated expenditures of $10,166,860.
    The major expenditures recommended by the Board for the 2013-14 
marketing year includes $830,000 for employee expenses, $146,500 for 
office expenses, $225,000 for operating expenses, and $8,965,360 for 
program expenses which include domestic market development, production 
research, post-harvest research, and industry communications. In 
comparison, budgeted expenses for these items for the 2012-13 marketing 
year were $797,000, $119,000, $219,000, and $7,705,000, respectively.
    The assessment rate recommended by the Board was derived by 
evaluating expected shipments of California walnuts certified as 
merchantable, budgeted expenses, the level of available prior year's 
carry-in financial reserve, and the desired 2013-14 ending financial 
reserve. The Board met on June 6, 2013, and unanimously approved using 
a three prior years' average to formulate the 2013-14 estimate of 
486,000 tons (inshell) for merchantable shipments. Pursuant to Sec.  
984.51(b) of the order, this figure is converted to a merchantable 
kernelweight basis using a factor of 0.45 (486,000 tons x 2,000 pounds 
per ton x 0.45), which yields 437,400,000 kernelweight pounds. The 
Board determined that it could utilize $1.9 million from its carry-in 
financial reserve and still maintain an adequate 2013-2014 ending 
financial reserve. The remaining $8,266,860 needed to meet budgeted 
expenses would need to be raised through assessments. Dividing the 
$8,266,860 in necessary assessment revenue by 2013 estimated 
merchantable shipments of 437,400,000 kernelweight pounds, results in 
an assessment rate of $0.0189. Income derived from handler assessments, 
combined with funds from the Board's authorized prior year's carry-in 
financial reserve, plus FAS funding for the last year of a three year 
project would adequately cover budgeted expenses.
    Reserve funds by the end of the 2013-14 marketing year are 
projected to be $6,234,895, which is well within the maximum permitted 
by the order of approximately two marketing years' 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 to modify 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 2013-14 budget and those for subsequent 
marketing years would be reviewed and, as appropriate, approved by 
USDA.

Initial Regulatory Flexibility Analysis

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA) (5 U.S.C. 601-612), the Agricultural Marketing Service (AMS) 
has considered the economic impact of this proposed rule on small 
entities. Accordingly, AMS has prepared this initial regulatory 
flexibility analysis.
    The purpose of the RFA is to fit regulatory actions to the scale of 
businesses subject to such actions in order that small businesses will 
not be unduly or disproportionately burdened. Marketing orders issued 
pursuant to the Act, and the rules issued thereunder, are unique in 
that they are brought about through group action of essentially small 
entities acting on their own behalf.
    There are approximately 4,100 growers of California walnuts in the 
production area and approximately 90 handlers subject to regulation 
under the marketing order. Small agricultural producers are defined by 
the Small Business Administration (SBA) as those having annual receipts 
of less than $750,000, and small agricultural service firms are defined 
as those whose annual receipts are less than $7,000,000. (13 CFR 
121.201)
    Current census data from the USDA's National Agricultural 
Statistics Service (NASS), indicates that approximately 90 percent of 
California's walnut farms are smaller than 100 acres.
    NASS reports that the average yield for the 2011-12 crop was 1.88 
tons per acre and the average price received for the 2011-12 crop was 
$2,900 per ton.
    A 100-acre farm with an average yield of 1.88 tons per acre would 
therefore have been expected to produce about 188 tons of walnuts 
during the 2011-12 season. At $2,900 per ton, that farm's production 
would have had an approximate value of $545,200. 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 $545,200 in 2011-12, which is well below the SBA threshold of 
$750,000. Thus, the majority of California's walnut growers would be 
classified as small growers according to SBA's definition.
    According to information supplied by the industry, approximately 40 
percent of California's walnut handlers shipped merchantable walnuts 
valued under $7,000,000 during the 2011-12 marketing year and would 
therefore be considered small handlers according to the SBA definition.
    This proposed rule would increase the assessment rate established 
for the Board and collected from handlers for the 2013-14 and 
subsequent marketing years from $0.0175 to $0.0189 per kernelweight 
pound of merchantable walnuts. The Board unanimously recommended 2013-
14 expenditures of $10,166,860 and an assessment rate of $0.0189 per 
kernelweight pound of merchantable walnuts. The proposed assessment 
rate of $0.0189 is $0.0014 higher than the 2012-13 rate. The quantity 
of merchantable walnuts for the 2013-14 marketing year is estimated at 
486,000 tons inshell weight, or 437,400,000 pounds kernelweight. Thus, 
the $0.0189 rate should provide $8,266,860 in assessment income. 
Assessment income, along with funds from the Board's authorized prior 
year's carry-in financial reserve, plus FAS funding for the last year 
of a three year

[[Page 57103]]

project would adequately cover its 2013-14 anticipated expenditures of 
$10,166,860.
    The major expenditures recommended by the Board for the 2013-14 
marketing year includes $830,000 for employee expenses, $146,500 for 
office expenses, $225,000 for operating expenses, and $8,965,360 for 
program expenses which include domestic market development, production 
research, post-harvest research, and industry communications. In 
comparison, budgeted expenses for these items for the 2012-13 marketing 
year were $797,000, $119,000, $219,000, and $7,705,000, respectively.
    The Board reviewed and unanimously recommended 2013-14 expenditures 
of $10,166,860. 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 recommended by the Board was derived by evaluating 
expected shipments of California walnuts certified as merchantable, 
budgeted expenses, the level of available prior year's carry-in 
financial reserve, and the desired 2013-14 ending financial reserve. 
The Board met on June 6, 2013, and unanimously approved using a three 
prior years' average to formulate the 2013-14 estimate of 486,000 tons 
(inshell) for merchantable shipments. Pursuant to Sec.  984.51(b) of 
the order, this figure is converted to a merchantable kernelweight 
basis using a factor of 0.45 (486,000 tons x 2,000 pounds per ton x 
0.45), which yields 437,400,000 kernelweight pounds. The Board 
determined that it could utilize $1.9 million from its carry-in 
financial reserve and still maintain an adequate 2013-2014 ending 
financial reserve. The remaining $8,266,860 necessary to meet budgeted 
expenses would need to be raised through assessments. Thus, dividing 
the $8,266,860 in necessary assessment revenue by 2013 estimated 
shipments of 437,400,000 kernelweight pounds results in an assessment 
rate of $0.0189.
    Based on the crop estimate of 486,000 tons inshell weight, or 
437,400,000 pounds kernelweight, the Board determined that the revenue 
generated from an assessment rate of $0.0189 per kernelweight pounds of 
merchantable walnuts, combined with funds from the prior years' carry-
in financial reserve, plus FAS funding for the last year of a three 
year project would adequately cover budgeted expenses while providing 
an adequate 2013-14 ending financial reserve.
    According to NASS, the season average grower prices for the years 
2010 and 2011 were $2,040 and $2,900 per ton, respectively. These 
prices provide a range within which the 2013-14 season average prices 
could fall. Dividing these average grower prices by 2,000 pounds per 
ton provides an inshell price per pound range of $1.02 to $1.45. 
Dividing these inshell prices per pound by the 0.45 conversion factor 
(inshell to kernelweight) established in the order, yields a 2013-14 
price range estimate of $2.27 to $3.22 per kernelweight pound of 
merchantable walnuts.
    Utilizing these estimates and the assessment rate of $0.0189 per 
kernelweight pound, estimated assessment revenue as a percentage of 
total estimated grower revenue should likely range between 0.59 and 
0.83 percent for the 2013-14 marketing year (assessment rate divided by 
price per kernelweight pound). Thus, the assessment revenue should be 
well below one percent of estimated grower revenue for the 2013-14 
marketing year.
    This proposal 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 from the operation of the 
marketing order. In addition, the Board's meeting was widely publicized 
throughout the California walnut industry. All interested persons were 
invited to attend the meeting and participate in Board deliberations on 
all issues. Like all Board meetings, the June 6, 2013, meeting was a 
public meeting. All entities, both large and small, were able to 
express their 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 
more opportunities for citizens to access Government information and 
services, and for other purposes.
    USDA has not identified any relevant Federal rules that duplicate, 
overlap, or conflict with this action.
    A small business guide on complying with fruit, vegetable, and 
specialty crop marketing agreements and orders may be viewed at: 
www.ams.usda.gov/MarketingOrderSmallBusinessGuide. Any questions about 
the compliance guide should be sent to Jeffery Smutny at the previously 
mentioned address in the FOR FURTHER INFORMATION CONTACT section.
    A 30-day comment period is provided to allow interested persons to 
respond to this proposed rule. Thirty days is deemed appropriate 
because: (1) The 2013-14 marketing year begins on September 1, 2013, 
and the marketing order requires that the rate of assessment for each 
marketing year apply to all merchantable walnuts handled during the 
year; (2) the Board needs to have sufficient funds to pay its expenses, 
which are incurred on a continuous basis; and (3) handlers are aware of 
this action, which was unanimously recommended by the Board at a public 
meeting and is similar to other assessment rate actions issued in past 
years.

List of Subjects in 7 CFR Part 984

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

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

PART 984--WALNUTS GROWN IN CALIFORNIA

0
1. The authority citation for 7 CFR part 984 continues to read as 
follows:

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

0
2. Section 984.347 is revised to read as follows:

Sec.  984.347  Assessment rate.

    On and after September 1, 2013, an assessment rate of $0.0189 per 
kernelweight pound is established for California merchantable walnuts.

[[Page 57104]]

    Dated: September 11, 2013.
Rex A. Barnes,
Associate Administrator, Agricultural Marketing Service.
[FR Doc. 2013-22571 Filed 9-16-13; 8:45 am]
BILLING CODE 3410-02-P
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