[Federal Register Volume 74, Number 166 (Friday, August 28, 2009)]
[Proposed Rules]
[Pages 44300-44304]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-20770]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
 ========================================================================
 

  Federal Register / Vol. 74, No. 166 / Friday, August 28, 2009 / 
Proposed Rules  

[[Page 44300]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 984

[Doc. No. AMS-FV-09-0020; FV09-984-3 PR]


Walnuts Grown in California; Increased Assessment Rate and 
Changes to Regulations Governing Reporting and Recordkeeping

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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

SUMMARY: This rule would increase the assessment rate established for 
the California Walnut Board (Board) for the 2009-10 and subsequent 
marketing years from $0.0131 to $0.0177 per kernelweight pound of 
assessable walnuts. This rule would also change reporting and 
recordkeeping regulations in conformance with amendments made on March 
3, 2008, to the marketing order that regulates the handling of walnuts 
grown in California. The Board locally administers the marketing order. 
Assessments upon walnut handlers are used by the Board to fund 
reasonable and necessary expenses of the program. The marketing year 
begins September 1 and ends August 31. The assessment rate would remain 
in effect indefinitely unless modified, suspended, or terminated.

DATES: Comments must be received by September 28, 2009.

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 document 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. All comments submitted in response to this rule 
will be included in the record and will be made available to the 
public. Please be advised that the identity of the individuals or 
entities submitting the comments will be made public on the Internet at 
the address provided above.

FOR FURTHER INFORMATION CONTACT: Debbie Wray, 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 September 1, 2009, 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 2009-10 and subsequent marketing years from $0.0131 to 
$0.0177 per kernelweight pound of assessable walnuts. It would also 
make conforming changes to reporting and recordkeeping regulations, 
which are needed to reflect recent marketing order amendments.
    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 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 in a public meeting. Thus, 
all directly affected persons have an opportunity to participate and 
provide input.
    For the 2008-09 and subsequent marketing years, the Board 
recommended, and USDA approved, an assessment rate of $0.0131 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 18, 2009, and unanimously recommended 2009-10 
expenditures of $5,894,100 and an assessment rate of $0.0177 per

[[Page 44301]]

kernelweight pound of assessable walnuts. In comparison, last year's 
budgeted expenditures were $3,809,000. The assessment rate of $0.0177 
is $0.0046 per pound higher than the rate currently in effect. The 
increased assessment rate is necessary to cover increased expenses for 
domestic market promotion, research activities, and administrative 
expenses. The higher assessment rate should generate sufficient income 
to cover anticipated 2009-10 expenses.
    The following table compares major budget expenditures recommended 
by the Board for the 2008-09 and 2009-10 marketing years:

 
------------------------------------------------------------------------
        Budget expense categories             2008-09         2009-10
------------------------------------------------------------------------
Employee Expenses.......................        $410,500        $535,000
Travel/Board Expenses...................         100,000         120,000
Office Costs/Annual Audit...............         142,500         164,750
Program Expenses Including Research:
    Controlled Purchases................           5,000           5,000
    Crop Estimate.......................         110,000         120,000
    Production Research *...............         805,000         805,000
    Contingency-Research Issues.........          30,000         100,000
    Domestic Market Development.........       2,135,000       4,030,500
    Reserve for Contingency.............          71,000          13,850
------------------------------------------------------------------------
* 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 333,000,000 kernelweight pounds, which should provide 
$5,894,100 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.
    The estimate for merchantable shipments is based on historical 
data, which is an average of the three prior years' production of 
370,000 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 (370,000 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 2009-10 budget and those for 
subsequent marketing years would be reviewed and, as appropriate, 
approved by USDA.
    Recent amendments to the order (73 FR 11328, March 3, 2008) changed 
the Board's name to ``California Walnut Board'' (CWB), changed the 
Board's marketing year from August 1 through July 31 to September 1 
through August 31, and replaced the term ``handler carryover'' with the 
term ``handler inventory.'' To reflect these changes, the Board 
unanimously recommended conforming changes to the order's reporting and 
recordkeeping regulations at a meeting on February 27, 2009.
    Section 984.456(a) would be revised to specify that beginning on 
September 1 of any marketing year, a handler may become an agent of the 
Board to dispose of reserve walnuts in that marketing year. Section 
984.471 would be revised by changing the term ``carryover'' to 
``inventory'', by requiring handlers to report September 1 inventory 
information by September 15, and by changing the names of the related 
inventory forms to ``CWB Form No. 4'' and ``CWB Form No. 5.'' Section 
984.476 would be revised to require that handlers file reports of 
walnut import receipts with the Board by December 5 for receipts 
between September 1 and November 30, by March 5 for receipts between 
December 1 and the end of February, by June 5 for receipts between 
March 1 and May 31, and by September 5 for receipts between June 1 and 
August 31; and to change the name of the reporting form to ``CWB Form 
No. 7.'' Section 984.480(d) would be revised to specify that 
inventories of all walnut quantities held on September 1 must be 
reported to the Board. The acronym ``WMB'' would be replaced with 
``CWB'' in form names described in the following sections not 
previously listed above: Sec. Sec.  984.456(b), 984.464(c), 984.472(a), 
and 984.472(b). Finally, in order to update the regulations, gender-
specific language would be changed in Sec. Sec.  984.456(b) and 
984.472(a) to replace ``he'' and ``his'' with ``he/she'' and ``his/
her.''

Initial 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 action 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 there are approximately 4,500 
growers in the production area. Small agricultural service firms are 
defined by the Small Business Administration (SBA) (13 CFR 121.201) as 
those having annual receipts

[[Page 44302]]

of less than $7,000,000, and small agricultural growers are defined as 
those having annual receipts of less than $750,000.
    USDA's National Agricultural Statistics Service (NASS) reports that 
California walnuts were harvested from a total of 218,000 bearing acres 
during 2007-08. The average yield for the 2007-08 crop was 1.50 tons 
per acre, which is slightly lower than the 1.53 tons per acre average 
for the previous five years. NASS reported the value of the 2007-08 
crop at $2,290 per ton, which is considerably higher than the previous 
five-year average of $1,384 per ton.
    At the time of the 2007 Census of Agriculture, which is the most 
recent information available, approximately 89 percent of California's 
walnut farms were smaller than 100 acres. Fifty-four percent were 
between 1 and 15 acres. A 100-acre farm with an average yield of 1.50 
tons per acre would have been expected to produce about 150 tons of 
walnuts during 2007-08. At $2,290 per ton, that farm's production would 
have had an approximate value of $344,000. Assuming that the majority 
of California's walnut farms are still smaller than 100 acres, it could 
be concluded that the majority of the growers had receipts of less than 
$344,000 in 2007-08. This is well below the SBA threshold of $750,000; 
thus, the majority of California's walnut growers would be considered 
small growers according to SBA's definition.
    According to information supplied by the industry, approximately 
two-thirds of California's walnut handlers shipped merchantable walnuts 
valued under $7,000,000 during the 2007-08 marketing year and would 
therefore be considered small handlers according to the SBA definition.
    This rule would increase the assessment rate established for the 
Board and collected from handlers for the 2009-10 and subsequent 
marketing years from $0.0131 to $0.0177 per kernelweight pound of 
assessable walnuts. The Board unanimously recommended 2009-10 
expenditures of $5,894,100 and an assessment rate of $0.0177 per 
kernelweight pound. The proposed assessment rate of $0.0177 is $0.0046 
higher than the 2008-09 rate. The quantity of assessable walnuts for 
the 2009-10 marketing year is estimated at 370,000 tons. Thus, the 
$0.0177 rate should provide $5,894,100 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 2008-09 and 2009-10 marketing years:

 
------------------------------------------------------------------------
        Budget expense categories             2008-09         2009-10
------------------------------------------------------------------------
Employee Expenses.......................        $410,500        $535,000
Travel/Board Expenses...................         100,000         120,000
Office Costs/Annual Audit...............         142,500         164,750
Program Expenses Including Research:
    Controlled Purchases................           5,000           5,000
    Crop Estimate.......................         110,000         120,000
    Production Research *...............         805,000         805,000
    Contingency-Research Issues.........          30,000         100,000
    Domestic Market Development.........       2,135,000       4,030,500
    Reserve for Contingency.............          71,000          13,850
------------------------------------------------------------------------
* Includes Research Director's compensation.

    The Board reviewed and unanimously recommended 2009-10 expenditures 
of $5,894,100. 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 333,000,000 kernelweight pounds, which should provide 
$5,894,100 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 prices for the years 
2006 and 2007 were $1,630 and $2,290 per ton, respectively. Although no 
official NASS data is yet available regarding the 2008 average grower 
price, the 2006 and 2007 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 $1.15. 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 $2.56 per 
kernelweight pound of assessable walnuts.
    To calculate the percentage of grower revenue represented by the 
assessment rate, the assessment rate of $0.0177 per kernelweight pound 
is divided by the low and high estimates of the price range. The 
estimated assessment revenue for the 2009-10 marketing year as a 
percentage of total grower revenue would thus likely range between 
0.691 and 0.978 percent.
    As a result of amendments to the order on March 3, 2008 (73 FR 
11328), the Board unanimously recommended conforming changes to the 
order's reporting and recordkeeping regulations at its meeting on 
February 27, 2009. These conforming changes reflect amendments to the 
marketing year, terminology, and Board name. The conforming changes 
include the date when a handler may become an agent of the Board to 
dispose of reserve walnuts. Conforming changes would also change the 
term ``carryover'' to ``inventory'' and modify the first of three dates 
in a marketing year when handlers are required to report their 
inventory to the Board. Further conforming changes include the dates 
that handlers must report to the Board their receipts of walnuts from 
outside of the United States and for what periods. Another conforming 
change would modify the first of three dates in a marketing year

[[Page 44303]]

wherein handlers must indicate in their books and records the quantity 
of walnuts they held. Finally, there would be conforming changes to 
replace the Board name acronym ``WMB'' with ``CWB'' in form numbers. In 
addition to these conforming changes, gender-specific language would 
also be changed from ``he'' and ``his'' to ``he/she'' and ``his/her''. 
There are no viable alternatives to these proposed conforming changes.
    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 growers. However, these costs 
would be offset by the benefits derived by the operation of the 
marketing order. In addition, the Board's meetings were widely 
publicized throughout the California walnut industry, and all 
interested persons were invited to attend the meetings and participate 
in Board deliberations on all issues. Like all Board meetings, the May 
18, 2009, and February 27, 2009, meetings were public meetings, 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 require minor conforming changes to 
several Board forms currently approved by the Office of Management and 
Budget (OMB), under OMB No. 0581-0178, Vegetable and Specialty Crops. 
These changes will not affect the burden currently approved under that 
collection. The revised forms are being submitted to OMB through a 
change of worksheet. This action 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 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[sol]AMSv1.0/
ams.fetchTemplateData.do?template=TemplateN&page=MarketingOrdersSmallBus
inessGuide. 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 30-day comment period is provided to allow interested persons to 
respond to this proposed rule. Thirty days is deemed appropriate 
because: (1) The 2009-10 marketing year begins on September 1, 2009, 
and the marketing order requires that the rate of assessment for each 
marketing 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; (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; and (4) conforming changes made to the reporting and 
recordkeeping regulations should be implemented as quickly as possible 
to assure program continuity.

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 
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 September 1, 2009, an assessment rate of $0.0177 per 
kernelweight pound is established for California merchantable walnuts.
    3. Amend Sec.  984.456 by revising paragraphs (a) and (b) to read 
as follows:


Sec.  984.456  Disposition of reserve walnuts and walnuts used for 
reserve disposition credit.

    (a) Beginning September 1 of any marketing year, a handler may 
become an agent of the Board to dispose of reserve walnuts of such 
marketing year. The agency shall be established upon execution of an 
``Agency Agreement for Reserve Walnuts'' setting forth the terms and 
conditions specified by the Board for the sale of reserve walnuts in 
authorized outlets.
    (b) Any handler who desires to transfer disposition credit in 
excess of his/her reserve obligation to another handler shall submit a 
request to the Board for such transfer on CWB Form No. 17 signed by 
both handlers and the Board shall credit such transfer.
* * * * *
    4. Amend Sec.  984.464 by revising paragraph (c) to read as 
follows:


Sec.  984.464  Disposition of substandard walnuts.

* * * * *
    (c) Each handler who disposes of substandard walnuts to an approved 
crusher, livestock feed manufacturer or livestock feeder shall upon 
shipment report to the Board on CWB Form No. 20, the quantities 
disposed of or shipped.
    5. Section 984.471 is revised to read as follows:


Sec.  984.471  Reports of handler inventory.

    Reports of handler inventory as of September 1, January 1, and 
April 1 of each marketing year shall be submitted to the Board on CWB 
Form No. 4 for inshell walnuts and on CWB Form No. 5 for shelled 
walnuts, on or before September 15, January 15, and April 15 
respectively, of that marketing year.
    6. Section 984.472 is revised to read as follows:


Sec.  984.472  Reports of merchantable walnuts shipped.

    (a) Reports of merchantable walnuts shipped during a month shall be 
submitted to the Board on CWB Form No. 6 not later than the 5th day of 
the following month. Such reports shall include all shipments during 
the preceding month and shall show for inshell and shelled walnuts the 
quantity shipped, whether they were shipped into domestic or export 
channels, and for exports, the quantity by country of destination. If a 
handler makes no shipments during any month he/she shall submit a 
report marked ``None.'' If a handler has completed his/her shipments 
for the season, he/she shall mark the report ``Completed,'' and he/she 
shall not be required to submit any additional CWB Form No. 6 reports 
during the remainder of that marketing year.
    (b) Reports of walnuts purchased directly from growers by handlers 
who are manufacturers or retailers shall be submitted to the Board on 
CWB Form No. 6, not later than the 5th day of the month following the 
month in which the walnuts were purchased. Such reports shall show the 
quantity of

[[Page 44304]]

walnuts purchased and the quantity inspected and certified as 
merchantable walnuts.
    7. Section 984.476 is revised to read as follows:


Sec.  984.476  Report of walnut receipts from outside of the United 
States.

    Each handler who receives walnuts from outside of the United States 
shall file with the Board, on CWB Form No. 7, a report of the receipt 
of such walnuts. The report shall be filed as follows: On or before 
December 5 for such walnuts received during the period September 1 to 
November 30; on or before March 5 for such walnuts received during the 
period December 1 to February 28 (February 29 in a leap year); on or 
before June 5 for such walnuts received during the period March 1 to 
May 31; and on or before September 5 for such walnuts received during 
the period June 1 to August 31. The report shall include the quantity 
of such walnuts received, the country of origin for such walnuts, and 
whether such walnuts are inshell or shelled. With each report, the 
handler shall submit a copy of a product tag issued by a DFA of 
California inspector for each receipt of such walnuts that includes the 
name of the person from whom such walnuts were received, the date such 
walnuts were received by the handler, the number of containers and the 
U.S. Custom's Service entry number, whether such walnuts are inshell or 
shelled, the quantity of such walnuts received, the country of origin 
for such walnuts, the name of the DFA of California inspector who 
issued the product tag, and the date such tag was issued.
    8. Amend Sec.  984.480 by revising paragraph (d) to read as 
follows:


Sec.  984.480  Books and other records.

* * * * *
    (d) The quantities held on September 1, January 1, and April 1 of 
each marketing year.

    Dated: August 24, 2009.
Rayne Pegg,
Administrator, Agricultural Marketing Service.
[FR Doc. E9-20770 Filed 8-27-09; 8:45 am]
BILLING CODE 3410-02-P