[Federal Register Volume 72, Number 159 (Friday, August 17, 2007)]
[Proposed Rules]
[Pages 46183-46185]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-16199]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 984

[Docket No. AMS-FV-07-0089; FV07-984-1 PR]


Walnuts Grown in California; Increased Assessment Rate

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This rule would increase the assessment rate established for 
the Walnut Marketing Board (Board) for the 2007-08 and subsequent 
fiscal periods from $0.0101 to $0.0122 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 would remain in 
effect indefinitely unless modified, suspended, or terminated.

DATES: Comments must be received by September 4, 2007.

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; 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 available for public inspection in the Office of the Docket Clerk 
during regular business hours, or can be viewed at: http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Shereen Marino, Marketing Specialist, 
California Marketing Field Office, or Kurt J. 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, 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 proposed herein would be applicable to all 
assessable walnuts beginning on August 1, 2007, 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 would increase the assessment rate established for the 
Board for the 2007-08 and subsequent fiscal periods from $0.0101 to 
$0.0122 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

[[Page 46184]]

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 2006-07 and subsequent fiscal periods, the Board 
recommended, and USDA approved, an assessment rate of $0.0101 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 May 31, 2007, and unanimously recommended 2007-08 
expenditures of $3,777,120 and an assessment rate of $0.0122 per 
kernelweight pound of assessable walnuts. In comparison, last year's 
budgeted expenditures were $3,222,860. The assessment rate of $0.0122 
per kernelweight pound of assessable walnuts is $0.0021 per pound 
higher than the rate currently in effect. The increased assessment rate 
is necessary to cover increased expenses including increased salaries, 
operating expenses and research for the 2007-08 marketing year. The 
higher assessment rate should generate sufficient income to cover 
anticipated 2007-08 expenses.
    The following table compares major budget expenditures recommended 
by the Board for the 2006-07 and 2007-08 marketing years:

------------------------------------------------------------------------
           Budget expense categories              2006-07      2007-08
------------------------------------------------------------------------
Administrative Staff/Field Salaries & Benefits     $415,000     $438,600
Travel/Board Expenses.........................       75,000       86,000
Office Costs/Annual Audit.....................      142,500      139,500
Program Expenses Including Research Controlled        5,000        5,000
 Purchases....................................
Crop Acreage Survey...........................  ...........       85,000
Crop Estimate.................................      100,000      100,000
Production Research...........................      725,000      730,000
Domestic Market Development...................    1,750,000    2,002,000
Reserve for Contingency.......................       10,360      191,020
------------------------------------------------------------------------

    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 309,600,000 kernelweight pounds which should provide 
$3,777,120 in assessment income and 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 historical 
data, which is the prior year's production of 344,000 tons (inshell). 
Pursuant to Sec.  984.51(b) of the order, this figure was converted to 
a merchantable kernelweight basis using a factor of .45 (344,000 tons x 
2,000 pounds/ton x .45).
    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 would be in effect for an indefinite 
period, the Board would 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 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 2007-08 budget and those for 
subsequent fiscal periods would 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.
    There are approximately 53 handlers of California walnuts subject 
to regulation under the marketing order and approximately 4,800 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 shows that 18 of the 53 handlers (34 
percent) shipped over $6,500,000 of merchantable walnuts and could be 
considered large handlers by the SBA. Thirty-five of the 53 walnut 
handlers (66 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 two-year average yield per 
acre for 2005 and 2006 is approximately 1.63 tons. A grower with 290 
acres with an average yield of 1.63 tons per acre would produce 
approximately 473 tons. The season average of grower prices for 2005 
and 2006 (published by NASS) is $1,585 per ton. At that average price, 
the 473 tons produced on 290 acres would yield approximately $750,000 
in annual revenue. The 2002 Agricultural Census indicated two percent 
of walnut farms were between 250 and 500 acres in size. The 290 acres 
would produce, on average, about $750,000 in annual revenue from 
walnuts and is near the lower end of the 250 to 500 acreage range 
category of the 2002 census. Thus, it can be concluded that the number 
of large walnut farms in 2006 is likely to be around two 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 would increase the assessment rate established for the 
Board and collected from handlers for the 2007-08 and subsequent 
marketing years from $0.0101 per kernelweight pound of assessable 
walnuts to $0.0122 per kernelweight pound of assessable walnuts. The 
Board unanimously recommended 2007-08 expenditures of $3,777,120 and an 
assessment rate of $0.0122 per kernelweight pound of assessable 
walnuts. The proposed assessment rate of $0.0122 is $0.0021 higher than 
the rate currently in effect. The quantity of assessable walnuts for 
the 2007-08 marketing year is estimated

[[Page 46185]]

at 344,000 tons. Thus, the $0.0122 rate should provide $3,777,120 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 2006-07 and 2007-08 fiscal years:

------------------------------------------------------------------------
           Budget expense categories              2006-07      2007-08
------------------------------------------------------------------------
Administrative Staff/Field Salaries & Benefits     $415,000     $438,600
Travel/Board Expenses.........................       75,000       86,000
Office Costs/Annual Audit.....................      142,500      139,500
Program Expenses Including Research Controlled        5,000        5,000
 Purchases....................................
Crop Acreage Survey...........................  ...........       85,000
Crop Estimate.................................      100,000      100,000
Production Research...........................      725,000      730,000
Domestic Market Development...................    1,750,000    2,002,000
Reserve for Contingency.......................       10,360      191,020
------------------------------------------------------------------------

    The Board reviewed and unanimously recommended 2007-08 expenditures 
of $3,777,120. 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 dividing 
anticipated expenses by expected shipments of California walnuts 
certified as merchantable. Merchantable shipments for the year are 
estimated at 309,600,000 kernelweight pounds which should provide 
$3,777,120 in assessment income and 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.
    According to NASS, the season average grower prices for years 2005 
and 2006 were $1,570 and $1,600 per ton respectively. These prices 
provide a reasonable price range within which the 2007-08 season 
average price is likely to fall. Dividing these average grower prices 
by 2,000 pounds per ton provides an inshell price per pound range of 
between $0.785 and $0.80. Dividing these inshell prices per pound by 
the 0.45 conversion factor (inshell to kernelweight) established in the 
order yields a 2007-08 price range estimate of $1.74 and $1.78 per 
kernelweight pound of assessable walnuts.
    To calculate the percentage of grower revenue represented by the 
assessment rate, the assessment rate of $0.0122 (per kernelweight 
pound) is divided into the low and high estimates of the price range. 
The estimated assessment revenue for the 2007-08 marketing year as a 
percentage of total grower revenue would likely range between 0.701 and 
0.685 percent.
    This action 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 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 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 May 31, 2007, 
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 comments on this proposed rule, including the 
regulatory and informational impacts of this action on small 
businesses.
    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 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.
    A 15-day comment period is provided to allow interested persons to 
respond to this proposed rule. Fifteen days is deemed appropriate 
because: (1) The 2007-08 marketing year will begin on August 1, 2007, 
and the marketing order requires that the rate of assessment for each 
year apply to all assessable 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

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

    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

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

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

    2. Section 984.347 is revised to read as follows:


Sec.  984.347  Assessment rate.

    On and after August 1, 2007, an assessment rate of $0.0122 per 
kernelweight pound is established for California merchantable walnuts.

    Dated: August 13, 2007.
Kenneth C. Clayton,
Acting Administrator, Agricultural Marketing Service.
[FR Doc. E7-16199 Filed 8-16-07; 8:45 am]
BILLING CODE 3410-02-P