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[Federal Register Volume 78, Number 246 (Monday, December 23, 2013)]
[Rules and Regulations]
[Pages 77327-77329]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-30414]

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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 984

[Doc. No. AMS-FV-13-0056; FV13-984-1 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 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 on September 1 and ends on August 31. The assessment rate will 
remain in effect indefinitely unless modified, suspended, or 
terminated.

DATES: Effective Date: December 24, 2013.

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 Smutney, 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.Smutney@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 Orders 12866 and 13563.
    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 issued herein will 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 rule increases 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 handled.
    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 
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

[[Page 77328]]

$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 include $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 per pound. Income derived from handler 
assessments, combined with funds from the Board's financial reserve and 
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 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 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.

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 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 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 rule increases the assessment rate established by the Board 
and applicable to merchantable walnut handlers for the 2013-14 and 
subsequent marketing years from $0.0175 to $0.0189 per kernelweight 
pound. 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 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 project would 
adequately cover its 2013-14 anticipated expenditures.
    The major expenditures recommended by the Board for the 2013-14 
marketing year include $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,

[[Page 77329]]

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 recommended the increased assessment rate because the 
rate currently in effect would not generate sufficient revenue to meet 
its budgeted expenses. The increased assessment rate applied to 
estimated assessable walnuts in the 2013-14 marketing year is expected 
to generate sufficient revenue to meet expenses, when combined with 
funds from the financial reserve and grant funds from FAS.
    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.
    According to the National Agricultural Statistical Service (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).
    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 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.
    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 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 
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 
more opportunities for citizens to access Government information and 
services, and for other purposes.
    A proposed rule concerning this action was published in the Federal 
Register on September 17, 2013 (78 FR 57101). Copies of the proposed 
rule were also made available to all walnut handlers by Board staff. 
Finally, the proposal was made available through the internet by the 
USDA and the Office of Federal Register. A 30-day comment period ending 
October 17, 2013, was provided for interested persons to respond to the 
proposal. One comment was received. The commenter raised a question 
about the effect of this action in regard to black walnut trees. Black 
walnut trees aren't regulated by the marketing order; therefore, no 
changes will be made 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: 
www.ams.usda.gov/MarketingOrderSmallBusinessGuide. Any questions about 
the compliance guide should be sent to Jeffrey Smutney 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, and 
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: (1) The 
2013-14 marketing year began 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. Also, a 30-day comment period was provided for in the proposed 
rule.

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, 2013, an assessment rate of $0.0189 per 
kernelweight pound is established for California merchantable walnuts.

    Dated: December 17, 2013.
Rex A. Barnes,
Associate Administrator, Agricultural Marketing Service.
[FR Doc. 2013-30414 Filed 12-20-13; 8:45 am]
BILLING CODE 3410-02-P
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