[Federal Register Volume 82, Number 139 (Friday, July 21, 2017)]
[Rules and Regulations]
[Pages 33775-33778]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-15304]



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 Rules and Regulations
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  Federal Register / Vol. 82, No. 139 / Friday, July 21, 2017 / Rules 
and Regulations  

[[Page 33775]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 984

[Doc. No. AMS-SC-17-0031; SC17-984-1 IR]


Walnuts Grown in California; Decreased Assessment Rate

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Interim rule with request for comments.

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

SUMMARY: This rule implements a recommendation from the California 
Walnut Board (Board) to decrease the assessment rate established for 
the 2017-18 and subsequent marketing years from $0.0465 to $0.0400 per 
kernelweight pound of assessable walnuts. The Board is comprised of 
growers and handlers of walnuts and locally administers the marketing 
order that regulates the handling of walnuts grown in California. The 
Board also has a public member who has no financial interest in walnut 
production or handling. 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 will remain in effect indefinitely unless modified, suspended, or 
terminated.

DATES: Effective July 24, 2017. Comments received by September 19, 2017 
will be considered prior to issuance of a final rule.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this 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 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 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 Orders 12866, 13563, and 13175. 
Additionally, because this rule does not meet the definition of a 
significant regulatory action, it does not trigger the requirements 
contained in Executive Order 13771. See the Office of Management and 
Budget's (OMB) Memorandum titled ``Interim Guidance Implementing 
Section 2 of the Executive Order of January 30, 2017, titled `Reducing 
Regulation and Controlling Regulatory Costs'[thinsp]'' (February 2, 
2017).
    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 will be applicable to all assessable walnuts beginning 
on September 1, 2017, 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 will 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 decreases the assessment rate established for the Board 
for the 2017-18 and subsequent marketing years from $0.0465 to $0.0400 
per kernelweight pound of assessable walnuts.
    The California walnut marketing order provides authority for the 
Board, with the approval of USDA, to formulate an annual budget of 
expenses and collect assessments from handlers to administer the 
program. All members of the Board, except the public member, 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 2016-17 and subsequent marketing years, the Board 
recommended, and USDA approved, an assessment rate of $0.0465 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

[[Page 33776]]

submitted by the Board or other information available to USDA.
    The Board met on May 31, 2017, and unanimously recommended 2017-18 
expenditures of $24,140,000 and a decreased assessment rate of $0.0400 
per kernelweight pound of assessable walnuts. In comparison, last 
year's budgeted expenditures were $23,143,050. The assessment rate of 
$0.0400 is $0.0065 per pound lower than the rate currently in effect. 
The quantity of assessable walnuts for the 2017-18 marketing year is 
estimated at a three-year average of 615,000 tons (inshell) or 
553,500,000 kernelweight pounds, which is 62,000 tons more than the 
553,000 tons assessed during the 2016-17 marketing year. At the 
recommended lower assessment rate of $0.0400 per kernelweight pound, 
the Board should collect approximately $22,140,000 in assessment 
income, which, when augmented with funds from the Board's monetary 
reserve, would be adequate to cover its 2017-18 budgeted expenses of 
$24,140,000.
    The following table compares major budget expenditures recommended 
by the Board for the 2016-17 and 2017-18 marketing years:

------------------------------------------------------------------------
        Budget expense categories             2016-17         2017-18
------------------------------------------------------------------------
Employee Expenses.......................      $2,292,000      $1,787,000
Travel/Board Expenses/Annual Audit......         206,000         192,000
Office Expenses.........................         262,000         265,000
Program Expenses, Including Research:
    Controlled Purchases................          10,000          10,000
    Crop Acreage Survey.................               0         103,000
    Crop Estimate.......................         130,000         146,000
    Production Research Director........         175,000          98,000
    Production Research.................       1,800,000       2,000,000
    Sustainability Project..............          75,000               0
    Grades and Standards Research.......         800,000         825,000
    Domestic Market Development.........      18,398,040      19,447,830
    Reserve for Contingency.............          59,010          47,170
------------------------------------------------------------------------

    The assessment rate recommended by the Board was derived by 
dividing anticipated expenses by expected volumes of California walnuts 
certified as merchantable. The 615,000-ton (inshell) estimate for 
merchantable walnut receipts is an average of the three prior years' 
shipments.
    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. The reserve is estimated to be $14,909,800 at 
the end of the marketing year, well within the authorized reserve 
amount.
    The Board met on May 31, 2017, and unanimously approved using a 
three prior years' average walnut production volume to formulate the 
2017-18 crop estimate. Pursuant to Sec.  984.51(b) of the order, this 
figure is converted to a merchantable kernelweight basis using a factor 
of 0.45 (615,000 tons x 2,000 pounds per ton x 0.45), which yields 
553,500,000 kernelweight pounds. At $0.0400 per pound, the new 
assessment rate should generate $22,140,000 in assessment income. The 
assessment income, plus $2,000,000 from the Board's reserve, will be 
adequate to cover its budgeted expenses.
    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 is effective 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 are encouraged 
to 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 2017-18 budget and those for 
subsequent marketing years will 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 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 
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 marketing order. Small agricultural growers are defined by 
the Small Business Administration (SBA) as those whose annual receipts 
are less than $750,000, and small agricultural service firms are 
defined as those whose annual receipts are less than $7,500,000 (13 CFR 
121.201).
    According to USDA's National Agricultural Statistics Service's 
(NASS) 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 2015 was 2.01 tons per acre, and the 
average price received for 2015 was $1,620 per ton. A 100-acre farm 
with an average yield of 2.01 tons per acre would, therefore, have been 
expected to produce about 201 tons of walnuts. At $1,620 per ton, that 
farm's production would have had an approximate value of $325,620. This 
is well below the SBA threshold of $750,000; thus, it may be concluded 
that the majority of California's walnut growers are 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 $7,500,000 during the 2016-17 marketing year and would, 
therefore, be

[[Page 33777]]

considered small handlers according to the SBA definition.
    This rule decreases the assessment rate established for the Board 
and collected from handlers for the 2017-18 and subsequent marketing 
years from $0.0465 to $0.0400 per kernelweight pound of assessable 
walnuts. The Board unanimously recommended 2017-18 expenditures of 
$24,140,000 and an assessment rate of $0.0400 per kernelweight pound of 
assessable walnuts, which is $0.0065 lower than the assessment rate 
currently in effect. The quantity of assessable walnuts for the 2017-18 
marketing year is estimated to be 615,000 tons, 62,000 tons greater 
than the quantity estimated for the 2016-17 marketing year. Therefore, 
even at the reduced assessment rate, the Board should collect 
approximately $22,140,000 in assessment income, which, when combined 
with $2,000,000 from its reserves, should be adequate to cover its 
budgeted expenses.
    The following table compares major budget expenditures recommended 
by the Board for the 2016-17 and 2017-18 marketing years:

------------------------------------------------------------------------
        Budget Expense Categories             2016-17         2017-18
------------------------------------------------------------------------
Employee Expenses.......................      $2,292,000      $1,787,000
Travel/Board Expenses/Annual Audit......         206,000         192,000
Office Expenses.........................         262,000         265,000
Program Expenses, Including Research:...
    Controlled Purchases................          10,000          10,000
    Crop Acreage Survey.................               0         103,000
    Crop Estimate.......................         130,000         146,000
    Production Research Director........         175,000          98,000
    Production Research.................       1,800,000       2,000,000
    Sustainability Project..............          75,000               0
    Grades and Standards Research.......         800,000         825,000
    Domestic Market Development.........      18,398,040      19,447,830
    Reserve for Contingency.............          59,010          47,170
------------------------------------------------------------------------

    The Board reviewed and unanimously recommended 2017-18 expenditures 
of $24,140,000. Prior to arriving at this budget, the Board considered 
alternative expenditure and assessment levels, as well as a 
recommendation from the Budget and Personnel Committee (Committee). The 
Committee considered the estimated income and expenses, given the 
requests from other committees, such as the Production Research, Market 
Development, and Grades and Standards Committees. The other committees 
each deliberated, formulated their own budgets of expenses, and made 
their recommendations to the Committee. The Committee also considered 
the recommendations and various assessment rates and expenses, then 
made a recommendation to the Board. The Board ultimately determined 
that the recommended levels were reasonable and necessary to properly 
administer the order.
    The assessment rate of $0.0400 per kernelweight pound of assessable 
walnuts was derived by dividing anticipated expenses of $24,140,000 by 
expected 2017-18 volumes of California walnuts certified as 
merchantable. Merchantable walnuts certified for the year are estimated 
at 553,500,000 kernelweight pounds, which should provide $22,140,000 in 
assessment income. Assessment income, coupled with $2,000,000 from the 
Board's reserve funds, should 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. The anticipated reserve should be $14,909,800, which 
is well within the order's requirement.
    According to NASS, the season average grower price for 2015 was 
$1,620 per ton. Dividing this average grower price by 2,000 pounds per 
ton provides an inshell price per pound of $0.81. Dividing this inshell 
price per pound by the 0.45 conversion factor (inshell to kernelweight) 
established in the order yields a potential 2017-18 price of about 
$1.80 per kernelweight pound of assessable walnuts.
    To calculate the percentage of grower revenue represented by the 
assessment rate, the assessment rate of $0.0400 per kernelweight pound 
is divided by the price. The estimated assessment revenue for the 2017-
18 marketing year, stated as a percentage of total grower revenue, 
would be approximately 2 percent.
    This action decreases the assessment obligation imposed on 
handlers. Assessments are applied uniformly on all handlers, and some 
of the costs may be passed on to growers. However, decreasing the 
assessment rate reduces the burden on handlers and may reduce the 
burden on growers.
    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 May 31, 2017, 
meeting was a public meeting, and all entities, both large and small, 
were able to express their views on this issue. Finally, interested 
persons are invited to submit comments on this interim 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 information collection requirements have been 
previously reviewed by 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 action 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 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/rules-regulations/moa/small-businesses. Any questions 
about the compliance guide should be sent to Richard Lower

[[Page 33778]]

at the previously mentioned address in the FOR FURTHER INFORMATION 
CONTACT section.
    After consideration of all relevant material presented, including 
the Board's recommendation, and other information, it is 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 upon good 
cause that it is impracticable and contrary to the public interest to 
give preliminary notice prior to putting this rule into effect and that 
good cause exists for not postponing the effective date of this rule 
until 30 days after publication in the Federal Register because: (1) 
The action decreases the assessment rate for merchantable walnuts; (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; and (3) this interim rule provides a 60-
day comment period, and all comments timely received will be considered 
prior to finalization of this rule.

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 
amended as follows:

PART 984--WALNUTS GROWN IN CALIFORNIA

0
1. The authority citation for 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, 2017, an assessment rate of $0.0400 per 
kernelweight pound is established for California merchantable walnuts.

    Dated: July 17, 2017.
Bruce Summers,
Acting Administrator, Agricultural Marketing Service.
[FR Doc. 2017-15304 Filed 7-20-17; 8:45 am]
 BILLING CODE 3410-02-P