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[Federal Register Volume 89, Number 228 (Tuesday, November 26, 2024)]
[Rules and Regulations]
[Pages 93148-93151]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-27605]

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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 984

[Doc. No. AMS-SC-24-0039]

Walnuts Grown in California; Increased Assessment Rate

AGENCY: Agricultural Marketing Service, Department of Agriculture 
(USDA).

ACTION: Final rule.

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SUMMARY: This final rule implements a recommendation from the 
California Walnut Board (Board) to increase the assessment rate 
established for the 2024-2025 and subsequent marketing years from 
$0.011 to $0.0125 per inshell pound of California walnuts. The 
assessment rate will remain in effect indefinitely unless modified, 
suspended, or terminated.

DATES: Effective December 26, 2024.

FOR FURTHER INFORMATION CONTACT: Joshua R. Wilde, Marketing Specialist, 
or Barry Broadbent, Chief, Northwest Region Branch, Market Development 
Division, Specialty Crops Program, AMS, USDA; Telephone: (503) 326-
2724, or Email: [email protected] or [email protected].
    Small businesses may request information on complying with this 
regulation by contacting Richard Lower, Market Development Division, 
Specialty Crops Program, AMS, USDA, 1400 Independence Avenue SW, STOP 
0237, Washington, DC 20250-0237; Telephone: (202) 720-8085, or Email: 
[email protected].

SUPPLEMENTARY INFORMATION: This action, pursuant to 5 U.S.C. 553, 
amends regulations issued to carry out a marketing order as defined in 
7 CFR 900.2(j). This rule is issued under Marketing Order No. 984, as 
amended (7 CFR part 984), regulating the handling of walnuts grown in 
California. Part 984 (referred to as 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 Board locally 
administers the Order and comprises growers and handlers of California 
walnuts operating within the area of production, and a public member.
    The Agricultural Marketing Service (AMS) is issuing this final rule 
in conformance with Executive Orders 12866, 13563, and 14094. Executive 
Orders 12866 and 13563 direct agencies to assess all costs and benefits 
of available regulatory alternatives and, if regulation is necessary, 
to select regulatory approaches that maximize net benefits (including 
potential economic, environmental, public health and safety effects, 
distributive impacts and equity). Executive Order 13563 emphasizes the 
importance of quantifying both costs and benefits, reducing costs, 
harmonizing rules, and promoting flexibility. Executive Order 14094 
reaffirms, supplements, and updates Executive Orders 12866 and further 
directs agencies to solicit and consider input from a wide range of 
affected and interested parties through a variety of means. This action 
falls within a category of regulatory actions that the Office of 
Management and Budget (OMB) exempted from Executive Order 12866 review.
    This final rule has been reviewed under Executive Order 13175--
Consultation and Coordination with Indian Tribal Governments, which 
requires Federal agencies to consider whether their rulemaking actions 
would have Tribal implications. AMS has determined that this rule is 
unlikely to have substantial direct effects on one or more Indian 
Tribes, on the relationship between the Federal Government and Indian 
Tribes, or on the distribution of power and responsibilities between 
the Federal Government and Indian Tribes.
    This final rule has been reviewed under Executive Order 12988--
Civil Justice Reform. Under the 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 
will be applicable to all assessable California walnuts for the 2024-
2025 marketing year, 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

[[Page 93149]]

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 final rule increases the assessment rate for California 
walnuts handled under the Order from $0.011 per inshell pound, the rate 
that was established for the 2023-2024 and subsequent marketing years, 
to $0.0125 per inshell pound for the 2024-2025 and subsequent marketing 
years.
    Sections 984.68 and 984.69 authorize the Board, with the approval 
of AMS, to formulate an annual budget of expenses and collect 
assessments from handlers to administer the program. The members of the 
Board are familiar with the Board's needs and with the costs of goods 
and services in their local area and are able to formulate an 
appropriate budget and assessment rate. The assessment rate is 
formulated and discussed in a public meeting, and all directly affected 
persons have an opportunity to participate and provide input.
    For the 2023-2024 and subsequent marketing years, the Board 
recommended, and AMS approved, an assessment rate of $0.011 per inshell 
pound of California walnuts within the production area. That rate 
continues in effect from marketing year to marketing year until 
modified, suspended, or terminated by AMS upon recommendation and 
information submitted by the Board or other information available to 
AMS.
    The Board met on May 15, 2024, and unanimously recommended 2024-
2025 marketing year expenditures of $19,886,800 and an assessment rate 
of $0.0125 per inshell pound of California walnuts for the 2024-2025 
marketing year. In comparison, last year's budgeted expenditures were 
$16,811,250. The assessment rate of $0.0125 per inshell pound is 
$0.0015 higher than the rate currently in effect. The Board recommended 
increasing the assessment rate to better align assessment revenue with 
budgeted expenses, due in part to a smaller estimated crop. The Board 
projects handler receipts of 730,000 tons (equivalent to 1.46 billion 
pounds) of assessable California walnuts for the 2024-2025 marketing 
year, down from the approximately 820,000 tons (1.64 billion pounds) 
handled during the 2023-2024 marketing year.
    The major expenditures recommended by the Board for the 2024-2025 
marketing year include $13,330,200 for domestic marketing, $2,838,600 
for employee expenses, $2,425,000 for production and post-harvest 
research, $435,000 for office expenses, $473,000 for travel and other 
operating expenses, and $385,000 for crop and acreage reporting. For 
comparison, budgeted expenses for these items during the 2023-2024 
marketing year were $10,588,750, $2,472,500, $2,425,000, $350,000, 
$390,000, and $585,000, respectively.
    The Board derived the recommended assessment rate by considering 
anticipated expenses, the estimated volume of assessable walnuts, and 
the amount of funds available in the authorized reserve. The estimated 
730,000 tons (1.46 billion pounds) of California walnuts from the 2024-
2025 marketing year crop is expected to generate approximately 
$18,250,000 in assessment revenue at the amended assessment rate (1.46 
billion pounds multiplied by the $0.0125 assessment rate). The 
remaining $1,636,800 needed to cover budgeted expenditures will come 
from an approved administrative services agreement with the California 
Walnut Commission, which shares staff and office expenses with the 
Board. The income generated from assessments, along with non-assessment 
revenue, is expected to be sufficient to meet the Board's estimated 
program expenditures of $19,886,800. Funds available in the financial 
reserve (currently about $14,665,274) will be kept within the maximum 
permitted by the Order (approximately two years' budgeted expenses as 
authorized in Sec.  984.69).
    The assessment rate established herein will continue in effect 
indefinitely unless modified, suspended, or terminated by AMS 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 AMS. 
Board meetings are open to the public and interested persons may 
express their views at these meetings. AMS will 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 2024-2025 marketing year 
budget, and those for subsequent marketing years, will be reviewed and, 
as appropriate, approved by AMS.

Final Regulatory Flexibility Analysis

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA) (5 U.S.C. 601-612), AMS has considered the economic impact of 
this final rule on small entities. Accordingly, AMS has prepared this 
final regulatory flexibility analysis.
    The purpose of the RFA is to fit regulatory actions to the scale of 
businesses subject to such actions 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 68 handlers subject to regulation under the 
Order and approximately 4,500 growers of California walnuts in the 
production area. At the time this analysis was prepared, the Small 
Business Administration (SBA) defined small agricultural service firms 
as those having annual receipts of less than $34,000,000 (North 
American Industry Classification System (NAICS) code 115114, 
Postharvest Crop Activities), and small agricultural producers of 
walnuts as those having annual receipts of less than $3,750,000 (NAICS 
code 111335, Tree Nut Farming) (13 CFR 121.201).
    Data from USDA's National Agricultural Statistics Service (NASS), 
indicate a three-year average value of utilized walnut production of 
$828.2 million for the most recent seasons for which data is available 
(2020-2021 through 2022-2023 marketing years). Dividing that figure by 
the number of walnut growers (4,500) yields an average annual crop 
value per grower of approximately $184,000. This figure is well below 
the SBA small agricultural producer threshold of $3,750,000 in annual 
sales. Assuming a normal distribution, this provides evidence that a 
large majority of walnut growers would likely be considered small 
agricultural producers according to the SBA definition. Additionally, 
data from NASS's 2017 Agricultural Census show that 86 percent of 
California farms growing walnuts at the time had walnut sales of less 
than $1 million.

[[Page 93150]]

    Based on information from the Board, approximately 78 percent of 
California's walnut handlers shipped assessable walnuts valued under 
$34 million during the 2023-2024 marketing year and would, therefore, 
be considered small handlers according to the SBA definition. 
Considering the abovementioned, it is reasonable to conclude that a 
substantial majority of both walnut growers and handlers would be 
considered small business entities according to current SBA 
definitions.
    This final rule increases the assessment rate collected from 
handlers for the 2024-2025 and subsequent marketing years from $0.011 
to $0.0125 per inshell pound of California walnuts. The Board 
unanimously recommended 2024-2025 marketing year expenditures of 
$19,886,800 and an assessment rate of $0.0125 per inshell pound of 
California walnuts. The $0.0125 assessment rate is $0.0015 higher than 
the rate previously in effect. The Board expects the industry to handle 
730,000 tons (1.46 billion pounds) of California walnuts during the 
2024-2025 marketing year. Thus, the $0.0125 per inshell pound 
assessment rate is expected to provide $18,250,000 in assessment income 
(1.4 billion pounds multiplied by $0.0125). The Board also expects to 
receive $1,636,800 from an administrative services agreement with the 
California Walnut Commission. Income derived from these sources should 
be adequate to meet budgeted expenditures for the 2024-2025 marketing 
year.
    The major expenditures recommended by the Board for the 2024-2025 
marketing year include $13,330,200 for domestic marketing, $2,838,600 
for employee expenses, $2,425,000 for production and post-harvest 
research, $435,000 for office expenses, $473,000 for travel and other 
operating expenses, and $385,000 for crop and acreage reporting. For 
comparison, budgeted expenses for these items during the 2023-2024 
marketing year were $10,588,750, $2,472,500, $2,425,000, $350,000, 
$390,000, and $585,000, respectively.
    The Board recommended increasing the assessment rate to meet 
necessary expenses, due in part to a smaller estimated crop for the 
2024-2025 marketing year. The Board estimates shipments for the 2024-
2025 marketing year to be approximately 730,000 tons (equivalent to 
1.46 billion pounds). Given the Board's estimate for 2024-2025 
marketing year walnut shipments, the current assessment rate of $0.011 
would generate $16,060,000 in assessment income (1.46 billion pounds 
multiplied by $0.011 assessment rate), which would not cover budgeted 
expenses. By increasing the assessment rate to $0.0125, assessment 
income is expected to be $18,250,000 (1.46 billion pounds multiplied by 
$0.0125 assessment rate). This amount should provide sufficient funds 
to meet anticipated 2024-2025 marketing year expenses without needing 
to draw from the Board's financial reserve.
    Prior to arriving at this budget and assessment rate 
recommendation, the Board considered information from various sources, 
such as the Board's Executive Committee, and discussed various 
alternatives, including maintaining the current assessment rate of 
$0.011 per inshell pound of assessable walnuts and increasing the 
assessment rate by a different amount. However, the Board determined 
that the recommended assessment rate is necessary to effectively 
achieve the Board's goals of covering budgeted expenses for the 2024-
2025 marketing year and maintaining adequate funds in its financial 
reserve. Consequently, these alternative assessment rates were 
rejected.
    Based upon information from the National Agricultural Statistics 
Service (NASS), the average grower price reported for walnuts over the 
past three crop years (2020-2023) was approximate $1,093 per ton 
($0.547 per pound). In order to determine the estimated assessment 
revenue as a percentage of the total grower revenue, we calculate the 
assessment rate ($0.0125 per inshell pound) divided by the grower price 
($0.547 per pound) and multiply that number by 100. Therefore, 
estimated assessment revenue as a percentage of total grower revenue 
for the 2024-2025 marketing year is expected to be about 2.3 percent 
(0.0125/0.547 * 100 = 2.29)
    This action increases the assessment obligation imposed on 
handlers. Assessments are applied uniformly on all handlers, and some 
of the costs may be passed on to growers. However, these costs are 
expected to be offset by the benefits derived by the operation of the 
Order.
    The Board's meetings are widely publicized throughout the 
California walnut industry and all interested persons are invited to 
attend the meetings and participate in Board deliberations on all 
issues. Like all Board meetings, the May 15, 2024, meeting was a public 
meeting and all entities, both large and small, were able to express 
views on this issue. Finally, interested persons were invited to submit 
comments on this rule, including the regulatory and information 
collection 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 OMB and assigned OMB No. 0581-0178, Vegetable 
and Specialty Crops. No changes in those requirements will be necessary 
as a result of this action. Should any changes become necessary, they 
would be submitted to OMB for approval.
    This rule will not impose any 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.
    AMS has not identified any relevant Federal rules that duplicate, 
overlap, or conflict with this rule.
    A proposed rule was published in the Federal Register on August 16, 
2024 (89 FR 66639). A 30-day comment period ending September 16, 2024, 
was provided to all interested persons to respond to the proposal. AMS 
received one comment in opposition to the proposal from a walnut grower 
who expressed that the Board should rely on financial reserve funds 
during difficult years, instead of increasing assessments, because the 
Board is ``flush with money.'' However, consideration of the Board's 
reserve fund was part of the Board's public deliberations. In recent 
years, the Board has relied more on its financial reserves to fund 
expenditures, and the current reserve balance is now below what the 
Board generally considers to be ideal. The Order authorizes the Board 
to maintain a financial reserve ``not to exceed two years' budgeted 
expenses.'' The Board's financial reserve at the end of the 2024-25 
marketing year is expected to be approximately $14,665,274, which is 
within the maximum amount permitted under the Order. Accordingly, AMS 
made no changes to the rule as proposed.
    A small business guide on complying with fruit, vegetable, and 
specialty crop marketing agreements and orders may be viewed at: 
https://www.ams.usda.gov/rules-regulations/moa/small-businesses. Any 
questions

[[Page 93151]]

about the compliance guide should be sent to Richard Lower at the 
previously mentioned address in the FOR FURTHER INFORMATION CONTACT 
section.
    After consideration of all relevant material presented, including 
the information and recommendations submitted by the Board and other 
available information, AMS has determined that this rule is consistent 
with and will effectuate the declared policy of the Act.

List of Subjects in 7 CFR Part 984

    Marketing agreements, Nuts, Reporting and recordkeeping 
requirements.

    For the reasons set forth in the preamble, the Agricultural 
Marketing Service amends 7 CFR part 984 as follows:

PART 984--WALNUTS GROWN IN CALIFORNIA

0
1. The authority citation for 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, 2024, an assessment rate of $0.0125 per 
inshell pound is established for California walnuts.

Erin Morris,
Associate Administrator, Agricultural Marketing Service.
[FR Doc. 2024-27605 Filed 11-25-24; 8:45 am]
BILLING CODE P
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