[Federal Register Volume 71, Number 221 (Thursday, November 16, 2006)]
[Rules and Regulations]
[Pages 66645-66648]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-9251]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 984

[Docket No. FV06-984-2 IFR]


Walnuts Grown in California; Increased Assessment Rate

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Interim final rule with request for comments.

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SUMMARY: This rule increases the assessment rate established for the 
Walnut Marketing Board (Board) for the 2006-07 and subsequent marketing 
years from $0.0096 to $0.0101 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 August 1 and ends 
July 31. The assessment rate will remain in effect indefinitely unless 
modified, suspended, or terminated.

DATES: November 17, 2006. Comments received by January 16, 2007 will be 
considered prior to issuance of a final rule.

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, E-mail: [email protected], or 
Internet: http://www.regulations.gov. Comments should reference the 
docket number and the date and page number of this issue of the Federal 
Register and will be made available for public inspection in the Office 
of the Docket Clerk during regular business hours, or can be viewed at: 
http://www.ams.usda.gov/fv/moab.html.

FOR FURTHER INFORMATION CONTACT: Shereen Marino, Marketing Specialist, 
or Kurt 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: 
[email protected] or [email protected].
    Small businesses may request information on complying with this 
regulation by contacting Jay Guerber,

[[Page 66646]]

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: 
[email protected].

SUPPLEMENTARY INFORMATION: This rule is issued under Marketing 
Agreement and Order No. 984, both 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 issued herein will be applicable to all assessable 
walnuts beginning on August 1, 2006, and continue until amended, 
suspended, or terminated. This rule will not preempt any State or local 
laws, regulations, or policies, unless they present an irreconcilable 
conflict with this rule.
    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 2006-07 and subsequent marketing years from $0.0096 to $0.0101 
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 producers and handlers of 
California walnuts. They are familiar with the Board's needs and 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 at a public meeting. Thus, 
all directly affected persons have an opportunity to participate and 
provide input.
    For the 2005-06 and subsequent marketing years, the Board 
recommended, and USDA approved, an assessment rate of $0.0096 per 
kernelweight 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 September 8, 2006, and unanimously recommended 
2006-07 expenditures of $3,222,860 and an assessment rate of $0.0101 
per kernelweight pound of assessable walnuts. In comparison, last 
year's budgeted expenditures were $2,937,600. The assessment rate of 
$0.0101 per kernelweight pound of assessable walnuts is $0.0005 per 
pound higher than the rate currently in effect. The higher assessment 
rate is necessary to cover increased expenses including increased 
salaries, operating expenses and research for the 2006-07 marketing 
year.
    The following table compares major budget expenditures recommended 
by the Board for the 2005-06 and 2006-07 marketing years:

------------------------------------------------------------------------
        Budget expense categories             2005-06         2006-07
------------------------------------------------------------------------
Administrative Staff/Field Salaries &           $360,000        $415,000
 Benefits...............................
Travel/Board Expenses...................          80,000          75,000
Office Costs/Annual Audit...............         132,500         142,500
Program Expenses Including Research:
    Controlled Purchases................           5,000           5,000
    Crop Acreage Survey.................          85,000  ..............
    Crop Estimate.......................          95,000         100,000
    Production Research Director........          75,000          75,000
    Production Research.................         500,000         650,000
    Domestic Market Development.........       1,550,000       1,750,000
    Reserve for Contingency.............          55,100          10,360
------------------------------------------------------------------------

    The assessment rate recommended by the Board was derived by 
dividing anticipated expenses by expected shipments of California 
walnuts certified as merchantable. Merchantable shipments for the year 
are estimated at 318,600,000 kernelweight pounds which should provide 
$3,217,860 in assessment income. Assessment income combined with 
interest income should allow the Board to cover its expenses. 
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.
    The estimate for merchantable shipments is based on the California 
Agricultural Statistics Service's crop estimate for the crop year of 
354,000 tons (inshell). Pursuant to Sec.  981.51(b) of the order, this 
figure was converted to a merchantable kernelweight basis using a 
factor of .45 (354,000 tons x 2,000 pounds/ton x .45).
    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

[[Page 66647]]

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 2006-07 budget and those for subsequent 
marketing years will be reviewed and, as appropriate, approved by USDA.

Initial Regulatory Flexibility Analysis

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA), the Agricultural Marketing Service (AMS) has considered the 
economic impact of this 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 
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. Thus, both statutes have small 
entity orientation and compatibility.
    There are currently 44 handlers of California walnuts subject to 
regulation under the marketing order and approximately 5,150 growers in 
the production area. Small agricultural service firms are defined by 
the Small Business Administration (SBA) (13 CFR 121.201) as those whose 
annual receipts are less than $6,500,000, and small agricultural 
producers are defined as those whose annual receipts are less than 
$750,000.
    Current industry information suggests that 16 of the 44 handlers 
(36 percent) shipped over $6,500,000 of merchantable walnuts and could 
be considered large handlers by the SBA. Twenty-eight of the 44 walnut 
handlers (64 percent) shipped under $6,500,000 of merchantable walnuts 
and could be considered small handlers.
    The number of large walnut growers (annual walnut revenue greater 
than $750,000) can be estimated as follows. According to the National 
Agricultural Statistics Service (NASS), the average yield per acre for 
2003-05 is 1.567 tons. A grower with 353 acres with average yields 
would produce approximately 553 tons. The average of grower prices for 
2003-05 (published by NASS) is $1,357 per ton. At that average price, 
the 553 tons produced on 353 acres would yield approximately $750,000 
in annual revenue. The 2002 Agricultural Census indicated 56 walnut 
farms (just under one percent of the 7,025 walnut farmers in 2002) were 
500 acres or larger. The 500 acre threshold in the census data is 
somewhat larger than the 353 acres that would produce $750,000 in 
revenue with average yields and average prices. Thus, it can be 
concluded that the number of large walnut farms in 2006 is still likely 
to be not much above one percent. Based on the foregoing, it can be 
concluded that the majority of California walnut handlers and producers 
may be classified as small entities.
    This rule increases the assessment rate established for the Board 
and collected from handlers for the 2006-07 and subsequent marketing 
years from $0.0096 to $0.0101 per kernelweight pound of assessable 
walnuts. The Board unanimously recommended 2006-07 expenditures of 
$3,222,860 and an assessment rate of $0.0101 per kernelweight pound of 
assessable walnuts. The assessment rate of $0.0101 is $0.0005 higher 
than the 2005-06 rate. The quantity of assessable walnuts for the 2006-
07 marketing year is estimated at 318,600,000 merchantable kernelweight 
pounds. Thus, the $0.0101 rate should provide $3,217,860 in assessment 
income. Assessment income combined with interest income should 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 2005-06 and 2006-07 marketing years:

------------------------------------------------------------------------
        Budget expense categories             2005-06         2006-07
------------------------------------------------------------------------
Administrative Staff/Field Salaries &           $360,000        $415,000
 Benefits...............................
Travel/Board Expenses...................          80,000          75,000
Office Costs/Annual Audit...............         132,500         142,500
Program Expenses Including Research:
    Controlled Purchases................           5,000           5,000
    Crop Acreage Survey.................          85,000
    Crop Estimate.......................          95,000         100,000
    Production Research Director........          75,000          75,000
    Production Research.................         500,000         650,000
    Domestic Market Development.........       1,550,000       1,750,000
    Reserve for Contingency.............          55,100          10,360
------------------------------------------------------------------------

    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. 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.
    According to NASS, the season average grower prices for years 2004 
and 2005 were $1,390 and $1,520 per ton, respectively. Dividing these 
average grower prices by 2,000 pounds per ton provides an inshell price 
per pound range of between $.70 and $.76. Adjusting by a few cents 
above and below those prices ($0.67 to $0.79 per inshell pound) 
provides a reasonable price range within which the 2006-07 season 
average price is likely to fall. Dividing these inshell prices per 
pound by the 0.45 conversion factor designated in the order yields a 
2006-07 price range estimate of $1.49 and $1.76 per kernelweight pound 
of assessable walnuts.
    To calculate the percentage of grower revenue represented by the 
assessment rate, the assessment rate of $0.0101 (per kernelweight 
pound) is divided by the low and high estimates of the price range and 
then multiplied by 100. The estimated assessment revenue for the 2006-
07 marketing year as a percentage of total grower revenue would likely 
range between .7 and .6 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 producers. 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

[[Page 66648]]

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 September 8, 2006, 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 information on the regulatory and informational impacts of this 
action on small businesses.
    This action 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.
    The 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/fv/moab.html. Any questions about the compliance 
guide should be sent to Jay Guerber 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 upon good 
cause that it is impracticable, unnecessary, and contrary to the public 
interest to give preliminary notice prior to putting this rule into 
effect, and that good cause exists for not postponing the effective 
date of this rule until 30 days after publication in the Federal 
Register because handlers have begun shipping walnuts for the 2006-07 
marketing year. The marketing year began on August 1, 2006, and the 
assessment rate applies to all walnuts shipped during the 2006-07 and 
subsequent seasons. With the assessment rate in effect prior to 
publication of this rule, the Board would not generate sufficient 
revenue to meet its budgeted expenses for the 2006-07 marketing year. 
The Board needs to have sufficient funds to pay its expenses which are 
incurred on a continuous basis. Further, handlers are aware of this 
rule which was unanimously recommended at a public meeting and is 
similar to other assessment rate actions issued in prior years. This 
interim final rule provides a 60-day comment period, and any comments 
received will be considered prior to finalization of this rule.

List of Subjects in 7 CFR Part 984

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


0
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 August 1, 2006, an assessment rate of $0.0101 per 
kernelweight pound is established for California merchantable walnuts.

    Dated: November 14, 2006.
Lloyd C. Day,
Administrator, Agricultural Marketing Service.
[FR Doc. 06-9251 Filed 11-14-06; 1:09 pm]
BILLING CODE 3410-02-P