[Federal Register Volume 86, Number 42 (Friday, March 5, 2021)]
[Proposed Rules]
[Pages 12837-12839]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-04569]


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 Proposed Rules
                                                 Federal Register
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 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.
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  Federal Register / Vol. 86, No. 42 / Friday, March 5, 2021 / Proposed 
Rules  

[[Page 12837]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 984

[Doc. No. AMS-SC-20-0075; SC20-984-2 PR]


Walnuts Grown in California; Decreased Assessment Rate

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would implement a recommendation from the 
California Walnut Board (Board) to decrease the assessment rate 
established for the 2020-21 and subsequent marketing years. The 
proposed assessment rate would remain in effect indefinitely unless 
modified, suspended, or terminated.

DATES: Comments must be received by April 5, 2021.

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: https://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: https://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: Bianca Bertrand, Management and 
Program Analyst, or Jeffery Rymer, Marketing Specialist, 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 action, pursuant to 5 U.S.C. 553, 
proposes an amendment to regulations issued to carry out a marketing 
order as defined in 7 CFR 900.2(j). This proposed rule is issued under 
Marketing Order No. 984, as amended (7 CFR part 984), regulating the 
handling of walnuts grown in California. Part 984, (referred to as 
``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 Board locally administers the Order and is comprised 
of growers and handlers operating within the area of production, and a 
public member.
    The Department of Agriculture (USDA) is issuing this proposed rule 
in conformance with Executive Orders 13563 and 13175. This proposed 
rule falls within a category of regulatory actions that the Office of 
Management and Budget (OMB) exempted from Executive Order 12866 review.
    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 
would be applicable to all assessable walnuts for the 2020-21 marketing 
year, 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 decrease the assessment rate from $0.0400 
per kernelweight pound assessable walnuts, the rate that was 
established for the 2017-18 and subsequent marketing years, to $0.0250 
per kernelweight pound of assessable walnuts handled for the 2020-21 
and subsequent marketing years.
    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. The members are familiar with 
the Board's needs and with the costs of 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 2017-18 and subsequent marketing periods, the Board 
recommended, and USDA approved, an assessment rate of $0.0400 per 
kernelweight pound of assessable walnuts handled. That assessment rate 
would continue in effect from marketing year to marketing year unless 
modified, suspended, or terminated by USDA upon recommendation and 
information submitted by the Board or other information available to 
USDA.
    On September 11, 2020, the Board unanimously recommended 2020-21 
expenditures of $17,990,000 and an assessment rate of $0.0250 per 
kernelweight pound of assessable walnuts. In comparison, last year's 
budgeted expenditures were $25,760,000. The proposed assessment rate of 
$0.0250 is $0.0150 lower than the rate currently in effect. The Board 
recommended decreasing the assessment rate to reduce the

[[Page 12838]]

assessment burden on handlers. Funds from assessments and from the 
Board's reserve would be sufficient to cover proposed expenses, while 
maintaining the Board's reserve within the requirements of the Order at 
no more than two years' budgeted expenses.
    The major expenditures recommended by the Board for the 2020-21 
marketing year include $1,930,000 for employee expenses, $283,000 for 
office expenses, $1,600,000 for production research, $825,000 for 
grades and standards activities, and $13,112,000 for domestic market 
development. Budgeted expenses for these items in 2019-20 were 
$1,896,000, $293,000, $2,000,000, $825,000, and $20,700,000, 
respectively.
    The Board derived the recommended assessment rate by considering 
anticipated expenses; estimated certification (``certification'' means 
having the walnuts inspected) of 650,000 tons (inshell), based on a 
three-year average; and the amount of funds available in the authorized 
reserve.
    Pursuant to Sec.  984.51(b) of the Order, the estimated production 
is converted to a merchantable kernelweight basis using a factor of 
0.45 (650,000 tons x 2,000 pounds per ton x 0.45), which yields 
585,000,000 kernelweight pounds. At $0.0250 per pound, the new 
assessment rate should generate $14,625,000 in assessment income, along 
with funds from the reserve should meet estimated expenses of 
$17,990,000.
    Funds in the reserve (currently $20,133,075) would be kept within 
the maximum permitted in Sec.  984.69 of the Order of approximately two 
marketing years' budgeted expenses. The reserve at the end of the 2020-
21 marketing year is anticipated to be $13,258,075.
    The assessment rate proposed in this rule 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 the modified 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 2020-21 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 90 handlers subject to regulation under the 
Order and approximately 4,400 walnut growers in the production area. 
The Small Business Administration (SBA) defines small agricultural 
service firms as those having annual receipts of less than $30,000,000, 
and small agricultural producers as those having annual receipts of 
less than $1,000,000 (13 CFR 121.201).
    The Board reported that approximately 82 percent of California's 
walnut handlers shipped merchantable walnuts valued under $30 million 
during the 2018-2019 marketing year and would, therefore, be considered 
small handlers according to the SBA definition.
    Data from the 2017 Agricultural Census, published by USDA's 
National Agricultural Statistics Service (NASS), show that 86 percent 
of California farms growing walnuts had walnut sales of less than $1 
million.
    An alternative computation that includes more recent NASS data 
starting with three-year average value of utilized production of $1.263 
billion for the most recent seasons for which data is available (2017/
18 through 2019/20). Dividing that figure by the number of walnut 
growers (4,400) yields an average annual crop value per grower of 
approximately $287,045. This figure is well below the SBA small 
agricultural producer threshold of $1,000,000 in annual sales. Assuming 
a normal distribution, this provides evidence that a large majority of 
walnut growers can be considered small agricultural producers according 
to the SBA definition.
    This proposal would decrease the assessment rate collected from 
handlers for the 2020-21 and subsequent marketing years from $0.0400 to 
$0.0250 per kernelweight pound of assessable walnuts. The Board 
unanimously recommended 2020-21 expenditures of $17,990,000 and an 
assessment rate of $0.0250 per kernelweight pound of assessable 
walnuts. The proposed assessment rate of $0.0250 is $0.0150 lower than 
the rate currently in effect. The quantity of assessable walnuts for 
the 2020-21 marketing year is estimated at 650,000 tons (inshell), 
which is equivalent to 585,000,000 kernelweight pounds. Thus, the 
$0.0250 rate should provide $14,625,000 in assessment income. The Board 
anticipates that the income derived from handler assessments, along 
with funds from the Board's authorized reserve, would be adequate to 
cover budgeted expenses for the 2020-2021 marketing year.
    The major expenditures recommended by the Board for the 2020-21 
marketing year include $1,930,000 for employee expenses, $283,000 for 
office expenses, $1,600,000 for production research, $825,000 for 
grades and standards activities, and $13,112,000 for domestic market 
development. Budgeted expenses for these items in 2019-20 were 
$1,896,000, $293,000, $2,000,000, $825,000, and $20,700,000, 
respectively.
    The Board unanimously recommended decreasing the assessment rate to 
reduce the assessment burden on handlers, and recommended utilizing 
funds from the authorized reserve to help cover the portion of the 
Board expenses.
    Prior to arriving at this budget and assessment rate, the Board 
considered information from various sources, such as the Board's 
Executive Committee. The Board discussed alternative expenditure 
levels, based upon the relative value of various activities to the 
California walnut industry. The Board recommended the assessment rate 
of $0.0250 to provide $14,625,000 in assessment income based on the 
estimation. The Board determined that assessment revenue, along with 
funds from the authorized reserve would be adequate to cover budgeted 
expenses for the 2020-21 marketing year.
    Based upon information from the National Agricultural Statistics 
Service (NASS), the grower price reported for walnuts in 2019 was 
$1,970 per ton ($0.99 per pound) of walnuts. In order to determine the 
estimated assessment revenue as a percentage of the total grower 
revenue, we calculate the assessment rate ($0.0250 per kernelweight 
pound) times the

[[Page 12839]]

estimated production (585,000,000 kernelweight pounds), which equals 
the assessment revenue of $14,625,000. The grower revenue is calculated 
by multiplying the grower price of $1,970 per ton ($0.99 per 
kernelweight pound) times the estimated production (585,000,000 
kernelweight pounds), which equals the grower revenue of $579,150,000. 
In the final step, dividing the assessment revenue by the grower 
revenue, indicates that, for the 2020-21 marketing year, the estimated 
assessment revenue as a percentage of total grower revenue would be 
about 2.5 percent.
    This proposed rule would decrease 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 also reduce the 
burden on growers.
    The Board's meeting was widely publicized throughout the California 
walnut industry. All interested persons were invited to attend the 
meeting and participate in Board deliberations on all issues. Like all 
Board meetings, the September 11, 2020, meeting was a public meeting 
and all entities, both large and small, were able to express views on 
this issue. Interested persons are invited to submit comments on this 
proposed rule, including the regulatory and information collection 
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 OMB and assigned OMB No. 0581-0178 Vegetable 
and Specialty Crops. No changes in those requirements would be 
necessary as a result of this proposed rule. Should any changes become 
necessary, they would be submitted to OMB for approval.
    This proposed rule would not impose any 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 proposed rule.
    A small business guide on complying with fruit, vegetable, and 
specialty crop marketing agreements and orders may be viewed at: 
https://www.ams.usda.gov/rules-regulations/moa/small-businesses. Any 
questions about the compliance guide should be sent to Richard Lower 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.

List of Subjects in 7 CFR Part 984

    Marketing agreements, Reporting and recordkeeping requirements, and 
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, 2020, an assessment rate of $0.0250 per 
kernelweight pound is established for California merchantable walnuts.

Bruce Summers,
Administrator, Agricultural Marketing Service.
[FR Doc. 2021-04569 Filed 3-4-21; 8:45 am]
BILLING CODE P