[Federal Register Volume 81, Number 180 (Friday, September 16, 2016)]
[Proposed Rules]
[Pages 63718-63721]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-22249]


 ========================================================================
 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. 81, No. 180 / Friday, September 16, 2016 / 
Proposed Rules  

[[Page 63718]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 984

[Doc. No. AMS-SC-16-0062; SC16-984-2 PR]


Walnuts Grown in California; Increased Assessment Rate

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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

SUMMARY: This proposed rule would implement a recommendation from the 
California Walnut Board (Board) to increase the assessment rate 
established for the 2016-17 and subsequent marketing years from $0.0379 
to $0.0465 per kernelweight pound of assessable walnuts. The Board 
locally administers the marketing order and is comprised of growers and 
handlers of walnuts operating within the area of production. 
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 October 17, 2016.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this proposed rule. Comments must be sent to the Docket 
Clerk, Marketing Order and Agreement Division, Specialty Crops Program, 
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 
proposed 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: Terry Vawter, Senior Marketing 
Specialist, or Jeffrey Smutny, Regional Director, California Marketing 
Field Office, Marketing Order and Agreement Division, Specialty Crops 
Program, AMS, USDA; Telephone: (559) 487-5901, Fax: (559) 487-5906, or 
Email: [email protected] or [email protected].
    Small businesses may request information on complying with this 
regulation by contacting Richard Lower, Marketing Order and Agreement 
Division, Specialty Crops Program, AMS, USDA, 1400 Independence Avenue 
SW., STOP 0237, Washington, DC 20250-0237; Telephone: (202) 720-2491, 
Fax: (202) 720-8938, or Email: [email protected].

SUPPLEMENTARY INFORMATION: This proposed 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 proposed rule 
in conformance with Executive Orders 12866, 13563, and 13175.
    This proposed rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. Under the 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, 2016, and continue until amended, suspended, 
or terminated.
    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 proposed rule would increase the assessment rate for the 2016-
17 and subsequent marketing years from $0.0379 to $0.0465 per 
kernelweight pound of assessable walnuts.
    The 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. All members of the Board, but 
one, 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 2015-16 and subsequent marketing years, the Board 
recommended, and USDA approved, an assessment rate of $0.0379 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 June 9, 2016, and unanimously recommended 2016-17 
expenditures of $23,143,050 and an assessment rate of $0.0465 per 
kernelweight pound of assessable walnuts. In comparison, last year's 
budgeted expenditures were $22,668,980. The assessment rate of $0.0465 
is $0.0086 per pound higher than the rate currently in effect. The 
quantity of assessable walnuts for the 2016-17 marketing year is 
estimated at 553,000 tons inshell or 497,700,000 kernelweight pounds, 
which is the five-year average of walnut production. At

[[Page 63719]]

the recommended higher assessment rate of $0.0465 per kernelweight 
pound, the Board should collect approximately $23,143,050 in assessment 
income, making income and expenses equal. The Board estimates it will 
begin the 2016-17 marketing year with $9,827,284 in their monetary 
reserve, which is well within the requirements of the order.
    The Board noted that sales of California walnuts in the domestic 
market have been declining in recent years, and embarked upon an 
enhanced market development and promotion program that would reverse 
the trend. Noting that making such a commitment for a single year would 
likely not result in long-term gains, they voted to continue such 
market development and promotion programs yet another year. Thus, they 
are maintaining their programs at a level near that of the 2015-16 
marketing year.
    In addition, personnel changes will result in an overlap of duties 
and expenses, as some positions will be added so that experience and 
continuity can be maintained in spite of staff retirements. Thus, 
employee costs are expected to be higher this marketing year. Added to 
that, the implementation of the Food Safety Modernization Act (FSMA) 
may result in added costs to the industry, and in some cases, to the 
Board as well. For that reason, the Grades and Standards Committee and 
the Research Committee requested increased budgets.
    The following table compares major budget expenditures recommended 
by the Board for the 2015-16 and 2016-17 marketing years:

------------------------------------------------------------------------
        Budget expense categories             2015-16         2016-17
------------------------------------------------------------------------
Employee Expenses.......................     $ 1,846,500     $ 2,292,000
Travel/Board Expenses/Annual Audit......         191,000         206,000
Office Expenses.........................         254,000         262,000
Controlled Purchases....................          10,000          10,000
Crop Acreage Survey.....................         100,000               0
Crop Estimate...........................         130,000         130,000
Production Research Director............          94,500         175,000
Production Research.....................       1,700,000       1,800,000
Sustainability Project..................          75,000          75,000
Grades and Standards Research...........         600,000         800,000
Domestic Market Development.............      18,478,440      18,398,040
Reserve for Contingency.................          32,790          59,010
------------------------------------------------------------------------

    The assessment rate recommended by the Board was derived by 
dividing anticipated assessment revenue needed by estimated shipments 
of California walnuts certified as merchantable. The 553,000 ton 
(inshell) estimate for merchantable shipments is an average of 
shipments during three prior years. Pursuant to Sec.  984.51(b) of the 
order, this figure is converted to a merchantable kernelweight basis 
using a factor of 0.45 (553,000 tons x 2,000 pounds per ton x 0.45), 
which yields 497,700,000 kernelweight pounds. At $0.0465 per pound, the 
new assessment rate should generate $23,143,050 in assessment income, 
which is equal to estimated expenses.
    Section 984.69 of the order authorizes the Board to carry over 
excess funds into subsequent marketing years as a reserve, provided 
that funds already in the reserve do not exceed approximately two 
years' budgeted expenses. Current reserve funds total $9,827,284 and 
are well within that requirement.
    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 effective 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 2016-17 budget and those for 
subsequent marketing years would be reviewed, and, as appropriate, 
approved by USDA.

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 proposed 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 
businesses 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 5,700 growers of California walnuts in the 
production area and approximately 90 handlers subject to regulation 
under the order. The Small Business Administration (SBA) defines small 
agricultural businesses (13 CFR 121.201) as those having annual 
receipts of less than $750,000, and small agricultural service firms 
are defined as those having annual receipts of less than $7,500,000.
    According to USDA's National Agricultural Statistics Service's 
(NASS's) 2012 Census of Agriculture, approximately 86 percent of 
California's walnut farms were smaller than 100 acres. Further, NASS 
reports that the average yield for 2014 was 1.97 tons per acre, and the 
average price received for 2014 was $3,230 per ton.
    A 100-acre farm with an average yield of 1.97 tons per acre would 
therefore have been expected to produce about 197 tons of walnuts 
during 2014-15 marketing year. At $3,230 per ton, that farm's 
production would have had an approximate value of $636,310. Since 
Census of Agriculture information indicates that the majority of 
California's walnut farms are smaller than 100 acres, it could be 
concluded that the majority of the growers had receipts of less than 
$636,310 in 2014-15, which 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 Board, approximately two-
thirds of California's walnut handlers shipped

[[Page 63720]]

merchantable walnuts valued under $7,500,000 during the 2014-15 
marketing year, and would, therefore, be considered small businesses 
according to the SBA definition.
    This proposed rule would increase the assessment rate and collected 
from handlers for the 2016-17 and subsequent marketing years from 
$0.0379 to $0.0465 per kernelweight pound of assessable walnuts. The 
Board unanimously recommended 2016-17 expenditures of $23,143,050 and 
an assessment rate of $0.0465 per kernelweight pound of assessable 
walnuts. The proposed assessment rate of $0.0465 is $0.0086 higher than 
the 2015-16 rate. The quantity of assessable walnuts for the 2016-17 
marketing year is estimated at 553,000 tons inshell weight, or 
497,700,000 kernelweight pounds. Thus, the $0.0465 rate should provide 
$23,143,050 in assessment income.
    The increased assessment rate is due to continuing domestic 
marketing and promotion programs, as well as to increased personnel and 
committee expenses. The Board believes that California walnut sales can 
be improved in the domestic market through continued promotional 
activities. In addition, the Grades and Standards and Research 
Committees have asked for additional funds in case the implementation 
of FSMA requires new methods or processes for growing, harvesting, and 
shipping walnuts.
    The major expenses for the 2016-17 marketing year include: 
$2,292,000 for employee expenses; $206,000 for travel, board expenses, 
and annual audit expenses; $262,000 for office expenses; $10,000 for 
controlled purchases; $0 for the crop acreage survey; $130,000 for the 
crop estimate; $175,000 for the salary of the Production Research 
Director; $1,800,000 for production research; $75,000 for 
sustainability; $800,000 for grades and standards research; $18,398,040 
for domestic market development projects; and $59,010 for the 
contingency reserve.
    By comparison, the major expenses for the 2015-16 marketing year 
include: $1,846,500 for employee expenses; $191,000 for travel, board 
expenses, and annual audit expenses; $254,000 for office expenses; 
$10,000 for controlled purchases; $100,000 for the crop acreage survey; 
$130,000 for the crop estimate; $94,500 for the salary of the 
Production Research Director; $1,700,000 for production research; 
$75,000 for sustainability; $600,000 for grades and standards research; 
$18,478,440 for domestic market development projects; and $32,790 for 
the contingency reserve.
    The Board reviewed and unanimously recommended 2016-17 expenditures 
of $23,143,050. Prior to arriving at this budget, the Board considered 
a recommendation from the Budget and Personnel Committee (committee), 
which also reviewed the proposed budget. The committee debated the 
relative value of the increased assessment rate, given the focus on 
domestic promotion programs. They also considered information from 
various other committees, who deliberated and formulated their own 
budgets of expenses and made their recommendations to the committee. 
Those committees include the Market Development, Production Research, 
and Grades and Standards Committees.
    The Budget and Personnel Committee considered alternative 
expenditure levels, such as reducing the proposed budgets recommended 
by the other committees, and changing the funding for domestic 
marketing projects, as well as not increasing the assessment rate. The 
committee ultimately decided that the proposed expenditures and 
assessment rate were reasonable and necessary to assist in improving 
domestic sales, maintaining staff continuity, and preparing for 
potential FSMA mandates. Thus, the committee unanimously agreed to 
recommend the proposed budget to the Board.
    The assessment rate of $0.0465 per kernelweight pound of assessable 
walnuts was derived by dividing anticipated assessment revenue needed 
by expected shipments of California walnuts certified as merchantable. 
Merchantable shipments for the year are estimated at 497,700,000 
pounds. It was determined that $23,143,050 in assessment income was 
needed, and assessment income would equal expenses of $23,143,050.
    Unexpended funds may be retained in a financial reserve, provided 
that funds in the financial reserve do not exceed approximately two 
years' budgeted expenses.
    According to NASS, the season average grower prices for the years 
2013 and 2014 were $3,710 and $3,230 per ton, respectively. These 
prices provide a range within which the 2016-17 season average price 
could fall. Dividing these average grower prices by 2,000 pounds per 
ton provides an inshell price per pound range of $1.62 to $1.86. 
Dividing these inshell per pound prices by the 0.45 conversion factor 
(inshell to kernelweight) established in the order yields a 2016-17 
price range estimate of $3.60 to $4.13 per kernelweight pound of 
assessable walnuts.
    To calculate the percentage of grower revenue represented by the 
assessment rate, the assessment rate of $0.0465 per kernelweight pound 
is divided by the low and high estimates of the price range. The 
estimated assessment revenue for the 2016-17 marketing year as a 
percentage of total grower revenue will thus likely range between 1.13 
and 1.29 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. 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 encouraged to participate in 
Board deliberations on all issues. Like all Board meetings, the June 9, 
2016, meeting was a public meeting and all entities, both large and 
small, were free 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.
    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
Chapter 35), the order's information collection requirements have been 
previously approved by the Office of Management and Budget (OMB) and 
assigned OMB No. 0581-0178 (Walnuts Grown in California). No changes in 
those requirements as a result of this action are necessary. Should any 
changes become necessary, they would be submitted to OMB for approval.
    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 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 action.
    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/rules-regulations/moa/small-businesses. Any questions 
about the compliance guide should be sent to Richard Lower

[[Page 63721]]

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 2016-17 marketing year begins on September 1, 2016, 
and the marketing order requires that the rate of assessment for each 
marketing year apply to all assessable walnuts handled during the year; 
and (2) 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

    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

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, 2016, an assessment rate of $0.0465 per 
kernel weight pound is established for California merchantable walnuts.

    Dated: September 12, 2016.
Elanor Starmer,
Administrator, Agricultural Marketing Service.
[FR Doc. 2016-22249 Filed 9-15-16; 8:45 am]
BILLING CODE 3410-02-P