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[Federal Register Volume 76, Number 211 (Tuesday, November 1, 2011)]
[Rules and Regulations]
[Pages 67320-67323]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-28198]

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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 984

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

Walnuts Grown in California; Increased Assessment Rate

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This rule increases 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 
began September 1 and ends August 31. The assessment rate will remain 
in effect indefinitely unless modified, suspended, or terminated.

DATES: Effective Date: November 2, 2011.

FOR FURTHER INFORMATION CONTACT: Jeff Smutny, Marketing Specialist, or 
Kurt J. Kimmel, Regional Manager, California Marketing Field Office, 
Marketing Order and Agreement Division, 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 and Agreement 
Division, 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 final rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. Under the marketing order now in effect, 
California walnut handlers are subject to assessments. Funds to 
administer the order are derived from such assessments. It is intended 
that the assessment rate as issued herein will be applicable to all 
assessable walnuts beginning on September 1, 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 increases 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 
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:

[[Page 67321]]

------------------------------------------------------------------------
     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             200,00
    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 year's 
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 assessment rate established in this rule will 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 will be in effect for an indefinite 
period, the Board will continue to meet prior to or during each 
marketing year to recommend a budget 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 will evaluate Board recommendations 
and other available information to determine whether modification of 
the assessment rate is needed. Further rulemaking will 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.

Final Regulatory Flexibility Analysis

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA) (5 U.S.C. 601-612), the Agricultural Marketing Service (AMS) 
has considered the economic impact of this action on small entities. 
Accordingly, AMS has prepared this final regulatory flexibility 
analysis.
    The purpose of the RFA is to fit regulatory actions to the scale of 
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 increases 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 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 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:

[[Page 67322]]

------------------------------------------------------------------------
     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 increases 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 are 
offset by the benefits derived by the operation of the marketing order. 
In addition, the Board's meeting was widely publicized throughout the 
California walnut industry, and all interested persons were invited to 
attend the meeting and 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.
    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 final rule imposes no additional reporting or recordkeeping 
requirements on either small or large California walnut handlers. As 
with all Federal marketing order programs, reports and forms are 
periodically reviewed to reduce information requirements and 
duplication by industry and public sector agencies. As noted in the 
initial regulatory flexibility analysis, USDA has not identified any 
relevant Federal rules that duplicate, overlap, or conflict with this 
final rule.
    AMS is committed to complying with the E-Government Act, to promote 
the use of the Internet and other information technologies to provide 
increased opportunities for citizen access to Government information 
and services, and for other purposes.
    A proposed rule concerning this action was published in the Federal 
Register on August 16, 2011 (75 FR 50703). Copies of the proposed rule 
were also mailed or sent via facsimile to all walnut handlers. Finally, 
the proposal was made available through the Internet by USDA and the 
Office of the Federal Register. A 30-day comment period ending on 
September 15, 2011, was provided for interested persons to respond to 
the proposal. No comments were received.
    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.
    After consideration of all relevant material presented, including 
the information and recommendation submitted by the Board and other 
available information, it is hereby found that this rule, as 
hereinafter set forth, will tend to effectuate the declared policy of 
the Act.
    Pursuant to 5 U.S.C. 553, it also found and determined that good 
cause exists for not postponing the effective date of this rule until 
30 days after publication in the Federal Register because the 2011-12 
marketing year began on September 1, 2011. Further, the marketing order 
requires that the rate of assessment for each marketing year apply to 
all assessable walnuts handled during the year; the Board needs to have 
sufficient funds to meet its expenses which are incurred on a 
continuous basis; and handlers are aware of this rule which was 
unanimously recommended at a public meeting. Also, a 30-day comment 
period was provided for in the proposed rule.

[[Page 67323]]

List of Subjects in 7 CFR Part 984

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

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

PART 984--WALNUTS GROWN IN CALIFORNIA

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

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

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

Sec.  984.347  Assessment rate.

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

    Dated: October 26, 2011.
David R. Shipman,
Acting Administrator, Agricultural Marketing Service.
[FR Doc. 2011-28198 Filed 10-31-11; 8:45 am]
BILLING CODE 3410-02-P
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