[Federal Register Volume 73, Number 144 (Friday, July 25, 2008)]
[Proposed Rules]
[Pages 43378-43381]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-17088]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 984

[Docket No. AMS-FV-08-0054; FV08-984-1 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 California Walnut Board (Board) for the 2008-09 marketing year from 
$0.0122 to $0.0158 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 2008-09 marketing year begins August 1, 
2008. The assessment rate would remain in effect indefinitely unless 
modified, suspended, or terminated.

DATES: Comments must be received by August 11, 2008.

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: Martin J. Engeler, Senior Marketing 
Specialist, 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 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 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, 2008, 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 2008-09 and subsequent marketing years from $0.0122 to 
$0.0158 per kernelweight pound of assessable walnuts. The 2008-09 
marketing year begins on August 1, 2008, and ends on August 31, 2009. 
Due to a recent amendment to the order changing the definition of 
marketing year, the 2008-09 marketing year will cover a 13-month period 
(73 FR 11328, March 3, 2008). Subsequent marketing years will cover a

[[Page 43379]]

12-month period from September 1 through August 31.
    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 2007-08 and subsequent marketing years, the Board 
recommended, and USDA approved, an assessment rate of $0.0122 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 28, 2008, and unanimously recommended 2008-09 
expenditures of $4,594,300 and an assessment rate of $0.0158 per 
kernelweight pound of assessable walnuts. In comparison, 2007-08 
budgeted expenditures were $3,777,120. The assessment rate of $0.0158 
per kernelweight pound of assessable walnuts is $0.0036 per pound 
higher than the rate currently in effect. The increased assessment rate 
is necessary to cover increased expenses in the areas of domestic 
market promotion, production research activities, and Board operating 
expenses. The higher assessment rate should generate sufficient income 
to cover anticipated 2008-09 expenses.
    The following table compares major budget expenditures recommended 
by the Board for the 2007-08 and 2008-09 marketing years:

------------------------------------------------------------------------
        Budget expense categories             2007-08         2008-09
------------------------------------------------------------------------
Employee Expenses.......................        $438,600        $410,500
Travel/Board Expenses...................          86,000         100,000
Office Costs/Annual Audit...............         139,500         142,500
Program Expenses Including Research                5,000           5,000
 Controlled Purchases...................
Crop Acreage Survey.....................          85,000
Crop Estimate...........................         100,000         110,000
Production Research *...................         730,000         805,000
Domestic Market Development.............       2,002,000       2,935,000
Reserve for Contingency.................         191,020          56,300
------------------------------------------------------------------------
* Includes Research Director's compensation.

    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 290,773,800 kernelweight pounds which should provide 
$4,594,300 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 year's 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.
    The estimate for merchantable shipments is based on historical 
data, which is the prior year's production of 323,082 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 (323,082 tons x 
2,000 pounds per 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 2008-09 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 currently 58 handlers of California walnuts subject to 
regulation under the marketing order and approximately 4,000 producers 
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.
    Industry information for the most recent complete season indicates 
that 18 of 53 handlers (34 percent) shipped over $6,500,000 of 
merchantable walnuts and could be considered large handlers by the SBA. 
Thirty-five of 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 287 
acres with an average yield of

[[Page 43380]]

1.63 tons per acre would produce approximately 468 tons. The season 
average of grower prices for 2005 and 2006 published by NASS is $1,600 
per ton. At that average price, the 468 tons produced on 287 acres 
would yield slightly less than $750,000 in annual revenue. The 2002 
Agricultural Census indicated two percent of walnut farms were between 
250 and 500 acres in size. The 287 acres would produce, on average, 
slightly less than the small business threshold level of $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 was likely 
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 2008-09 and subsequent 
marketing years from $0.0122 per kernelweight pound of assessable 
walnuts to $0.0158 per kernelweight pound of assessable walnuts. The 
Board unanimously recommended 2008-09 expenditures of $4,594,300 and an 
assessment rate of $0.0158 per kernelweight pound of assessable 
walnuts. The proposed assessment rate of $0.0158 is $0.0036 higher than 
the rate currently in effect. The quantity of assessable walnuts for 
the 2008-09 marketing year is estimated at 323,082 tons. Thus, the 
$0.0158 rate should provide $4,594,300 in assessment income and be 
adequate to meet the 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 2007-08 and 2008-09 fiscal years:

------------------------------------------------------------------------
        Budget expense categories             2007-08         2008-09
------------------------------------------------------------------------
Employee Expenses.......................        $438,600        $410,500
Travel/Board Expenses...................          86,000         100,000
Office Costs/Annual Audit...............         139,500         142,500
Program Expenses Including Research                5,000           5,000
 Controlled Purchases...................
Crop Acreage Survey.....................          85,000  ..............
Crop Estimate...........................         100,000         110,000
Production Research *...................         730,000         805,000
Domestic Market Development.............       2,002,000       2,935,000
Reserve for Contingency.................         191,020         56,300
------------------------------------------------------------------------
* Includes Research Director's compensation.

    The Board reviewed and unanimously recommended 2008-09 expenditures 
of $4,954,300. 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 290,773,800 kernelweight pounds which should provide 
$4,954,300 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 price for 2006 was 
$1,630 per ton. Although no official NASS data is available regarding 
the 2007 average grower price, industry information indicates that it 
could be higher than the 2006 average grower price. Dividing the 2006 
price of $1,630 by 2,000 pounds per ton provides an inshell equivalent 
price per pound of $0.815. Dividing this inshell price per pound by the 
0.45 conversion factor (inshell to kernelweight) established in the 
order yields a 2006 average equivalent grower price of $1.81 per 
kernelweight pound of assessable walnuts.
    To calculate the percentage of grower revenue represented by the 
assessment rate for 2006, the assessment rate of $0.0122 (per 
kernelweight pound) is divided by the estimated average grower price. 
This results in estimated assessment revenue for the 2006 marketing 
year as a percentage of total grower revenue of .674 percent. As 
previously mentioned, NASS data for 2007 is not yet available. However, 
applying the same calculations above utilizing 2006 price levels and 
the proposed assessment rate would result in estimated assessment 
revenue as a percentage of total grower revenue of 0.873 percent for 
the 2008 season. Because 2007 average grower prices are expected to be 
higher than 2006 levels, and could continue at the higher level into 
the 2008 season, it is expected that 2008 assessment revenue as a 
percentage of grower revenue will be less than the 0.873 percent 
expressed above. In any event, it is estimated that assessment revenue 
will be well below one percent of estimated grower revenue in 2008.
    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 28, 2008, 
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

[[Page 43381]]

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/AMSv1.0/ams.fetchTemplateData.do?template=TemplateN&page=MarketingOrdersSmallBusinessGuide. 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 2008-09 marketing year will begin on August 1, 2008, 
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, 2008, an assessment rate of $0.0158 per 
kernelweight pound is established for California merchantable walnuts.

    Dated: July 22, 2008.
Lloyd C. Day,
Administrator, Agricultural Marketing Service.
 [FR Doc. E8-17088 Filed 7-24-08; 8:45 am]
BILLING CODE 3410-02-P