[Federal Register Volume 73, Number 193 (Friday, October 3, 2008)]
[Rules and Regulations]
[Pages 57485-57488]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-23390]



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  Federal Register / Vol. 73, No. 193 / Friday, October 3, 2008 / Rules 
and Regulations  

[[Page 57485]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 984

[Docket No. AMS-FV-08-0054; FV08-984-1 FR]


Walnuts Grown in California; Increased Assessment Rate

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This rule increases 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 began on September 
1, 2008, and ends on August 31, 2009. The assessment rate will remain 
in effect indefinitely unless modified, suspended, or terminated.

DATES: Effective Date: October 6, 2008.

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 established herein will be applicable to all 
assessable walnuts beginning on September 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 increases 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 September 1, 2008, and ends on August 31, 2009.
    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 2007-08 assessment rate. 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:

[[Page 57486]]



------------------------------------------------------------------------
     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
    Controlled Purchases..........              5,000              5,000
    Crop Acreage Survey...........             85,000
    Crop Estimate.................            100,000            110,000
    Production Research*..........            730,000            835,000
    Domestic Market Development...          2,002,000          2,935,000
    Reserve for Contingency.......            191,020            56,300
------------------------------------------------------------------------
*Includes Research Director's compensation and a contingency for
  production research issues.

    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 0.45 (323,082 tons 
x 2,000 pounds per ton x 0.45).
    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 
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 2008-09 budget and those for subsequent fiscal 
periods will be reviewed and, as appropriate, approved by USDA.

Final Regulatory Flexibility Analysis

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (5 U.S.C. 601-612) (RFA), 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 
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 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 increases 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 assessment rate of $0.0158 is $0.0036 higher than the 
2007-08 assessment rate. The quantity of assessable walnuts for the 
2008-09 marketing year is estimated at 323,082 tons, or 290,773,800 
kernelweight pounds. 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:

[[Page 57487]]



------------------------------------------------------------------------
     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:
    Controlled Purchases..........              5,000              5,000
    Crop Acreage Survey...........             85,000  .................
    Crop Estimate.................            100,000            110,000
    Production Research *.........            730,000            835,000
    Domestic Market Development...          2,002,000          2,935,000
    Reserve for Contingency.......            191,020            56,300
------------------------------------------------------------------------
* Includes Research Director's compensation and contingency for
  production research issues.

    The Board reviewed and unanimously recommended 2008-09 expenditures 
of $4,594,300. 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 
$4,594,300 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.
    According to NASS, the season average grower price for years 2006 
and 2007 were $1,630 and $2,320 per ton, respectively. These prices 
provide a range within which the 2008-09 season average price could 
fall. Dividing these average grower prices by 2,000 pounds per ton 
provides an inshell price per pound range of $0.815 to $1.16. Dividing 
these inshell prices per pound by the 0.45 conversion factor (inshell 
to kernelweight) established in the order yields a 2008-09 price range 
estimate of $1.81 to $2.58 per kernelweight pound of assessable 
walnuts.
    To calculate the percentage of grower revenue represented by the 
assessment rate, the assessment rate of $0.0158 per kernelweight pound 
is divided by the low and high estimates of the price range. The 
estimated assessment revenue for the 2008-09 marketing year as a 
percentage of total grower revenue would thus likely range between 
0.612 and 0.873 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 
are 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 provided the opportunity to express views on this issue.
    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.
    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.
    As noted in the initial regulatory flexibility analysis, USDA has 
not identified any relevant Federal rules that duplicate, overlap, or 
conflict with this rule.
    A proposed rule concerning this action was published in the Federal 
Register on July 25, 2008 (73 FR 43378).
    Copies of the proposed rule were also mailed or sent via facsimile 
to walnut handlers. Finally, the proposal was made available through 
the Internet by USDA and the Office of the Federal Register. A 15-day 
comment period ending August 11, 2008, was provided to allow interested 
persons to respond to the proposal.
    One comment was received during the comment period in response to 
the proposed rule. The comment was submitted by the Executive Director 
of the Board. The commenter points out that the proposed rule would 
establish the 2008-09 marketing year as a 13-month period from August 
1, 2008, through August 31, 2009, and the assessment rate increase 
would be effective as of August 1, 2008. The commenter further states 
that the order was recently amended to change the marketing year from 
August through July to September through August. Accordingly, when the 
Board formulated its 2007-08 budget in May 2007, it established a 13-
month period beginning on August 1, 2007, and ending on August 31, 
2008, as its marketing year to accommodate the order amendment. 
Expenditures were planned and budgeted accordingly. The Board 
subsequently recommended its 2008-09 marketing year budget in May 2008 
to cover a 12-month period beginning September 1, 2008, and ending 
August 31, 2009. The Board also intended for the assessment rate to be 
effective with the new marketing year beginning September 1, 2008.
    The commenter also noted that one section of the proposed rule 
incorrectly references total budgeted expenses of $4,954,300. The 
correct amount, as referenced correctly in another section of rule 
should be $4,594,300. The commenter also states that Budget Expense 
Category tables in the proposed rule are incorrect because it omits a 
$30,000 item for production research contingencies and should need 
$835,000 instead of $805,000. Finally, the commenter indicated that the 
statement at the asterisk, which explains that the Research Director's 
compensation is included in the Production Research budget, should be 
modified to state that production research contingencies are also 
included in that budget.
    As a result of this comment, modifications to the proposed rule are 
being made in this final rule. In order

[[Page 57488]]

to ensure consistency and continuity in the Board's financial planning 
and operations, and to recognize the recent order amendment revising 
the marketing year, the assessment rate change and the 2008-09 
marketing year will become effective September 1, 2008. Additional 
modification is made to correct the erroneous references to the total 
expenditures. Finally, the rule is further modified to change the 
Budget Expense Category tables to include the amount budgeted for 
production research contingencies and the statement at the asterisk to 
indicate the production research contingencies are part of the 
Production Research budget. Although the tables were not necessarily 
intended to capture all the Board's expenses, the modifications may 
provide more clarity.
    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.
    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 is 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 the 2008-09 
marketing year began on September 1, 2008, and the marketing order 
requires that the rate of assessment for each year apply to all 
assessable walnuts handled during the year; the Board needs to have 
sufficient funds to pay its expenses which are incurred on a continuous 
basis; and 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 15-day comment 
period was provided for in the proposed rule and no comments in 
opposition to the rule were received.

List of Subjects in 7 CFR Part 984

    Walnuts, Marketing agreements, 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 September 1, 2008, an assessment rate of $0.0158 per 
kernelweight pound is established for California merchantable walnuts.

    Dated: September 29, 2008.
Lloyd C. Day,
Administrator, Agricultural Marketing Service.
[FR Doc. E8-23390 Filed 10-2-08; 8:45 am]
BILLING CODE 3410-02-P