[Federal Register Volume 87, Number 205 (Tuesday, October 25, 2022)]
[Proposed Rules]
[Pages 64385-64397]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-22806]


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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. 87, No. 205 / Tuesday, October 25, 2022 / 
Proposed Rules  

[[Page 64385]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 984

[Doc. No. 22-J-0011; AMS-SC-22-0010; SC22-981-1]


Marketing Order for Walnuts Grown in California; Recommended 
Decision and Opportunity To File Written Exceptions

AGENCY: Agricultural Marketing Service, Department of Agriculture 
(USDA).

ACTION: Proposed rule and opportunity to file exceptions.

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

SUMMARY: This recommended decision proposes amendments to Marketing 
Order No. 984 (Order), which regulates the handling of walnuts grown in 
California. The proposed amendments are based on the record of a public 
hearing held via videoconference technology on April 19 and 20, 2022. 
The California Walnut Board (Board), which locally administers the 
Order, recommended proposed amendments that would eliminate mandatory 
inspection and certification of inshell and shelled walnuts, and of 
shelled walnuts for processing; create a new mechanism for determining 
and collecting handler assessments; add authority to charge interest 
for late payments; establish an assessment rate of $0.0125 per inshell 
pound of walnuts; expand the definition of ``to handle'' to include 
``receive''; and remove volume control authority. In addition, the 
Agricultural Marketing Service (AMS) proposed to make any such changes 
to the Order as may be necessary to conform to any amendment that may 
result from the hearing.

DATES: Written exceptions must be filed by November 25, 2022.

ADDRESSES: Written exceptions should be filed with the Hearing Clerk, 
U.S. Department of Agriculture, Room 1031-S, Washington, DC 20250-9200; 
Fax: (202) 720-9776 or via the internet at https://www.regulations.gov. 
All comments should reference the docket number and the date and page 
number of this issue of the Federal Register. Comments will be made 
available for public inspection in the Office of the Hearing Clerk 
during regular business hours or can be viewed at https://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Geronimo Quinones, Market Development 
Division, Specialty Crops Program, AMS, USDA, 1400 Independence Avenue 
SW, Stop 0237, Washington, DC 20250-0237; Telephone: (202)308-2339 or 
Matthew Pavone, Market Development Division, Specialty Crops Program, 
AMS, USDA, 1400 Independence Avenue SW, Stop 0237, Washington, DC 
20250-0237; Telephone: (202) 720-2491, or Email: 
[email protected] or [email protected].
    Small businesses may request information on this proceeding by 
contacting Richard E. Lower, Market Development Division, Specialty 
Crops Program, AMS, USDA, 1400 Independence Avenue SW, Stop 0237, 
Washington, DC 20250-0237; Telephone: (202) 720-2491, or Email: 
[email protected].

SUPPLEMENTARY INFORMATION: Prior documents in this proceeding: Notice 
of Hearing published in the April 1, 2022, issue of the Federal 
Register (87 FR 19020).
    The recommendation is in conformance with the provisions of 
sections 556 and 557 of title 5 of the United States Code and, 
therefore, is excluded from the requirements of Executive Orders 12866, 
13563, and 13175.
    Notice of this rulemaking action was provided to tribal governments 
through the Department of Agriculture's (USDA) Office of Tribal 
Relations.

Preliminary Statement

    Notice is hereby given of the filing with the Hearing Clerk of this 
recommended decision with respect to the proposed amendments to 7 CFR 
part 948 (hereinafter referred to as ``Marketing Order 984'' or the 
``Order'') regulating the handling of walnuts grown in California and 
the opportunity to file written exceptions thereto. Copies of this 
decision can be obtained from Geronimo Quinones, whose address is 
listed above.
    This recommended decision is issued pursuant to the provisions of 
the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 
601-674), hereinafter referred to as the ``Act,'' and the applicable 
rules of practice and procedure governing the formulation and amendment 
of marketing agreements and orders (7 CFR part 900).
    The proposed amendments are based on the record of a public hearing 
held via videoconference technology on April 19 and 20, 2022. Notice of 
this hearing was published in the Federal Register on April 1, 2022 (87 
FR 19020). The notice of hearing contained five proposals submitted by 
the Board and one submitted by USDA.
    The proposed amendments were recommended to the Secretary by the 
Board on October 28, 2021. After reviewing the proposals and other 
information submitted by the Board, USDA decided to schedule this 
matter for a hearing. The Board's proposed amendments to the Order 
would amend quality control provisions to remove inspection and 
certification requirements, create a new mechanism for determining and 
collecting handler assessments, add authority to charge interest for 
late payments, establish an assessment rate of $0.0125 per inshell 
pound of walnuts; expand the definition of ``to handle'' to include 
``receive'', and remove volume control authority.
    As proposed, inspection and certification of outbound walnuts would 
no longer be required, and handler assessments would be calculated 
based on a proposed assessment rate, recommended by the Board, and 
applied to handler's inbound walnuts receipts instead of outbound 
walnuts certified.
    USDA proposed to make any such changes as may be necessary to the 
Order to conform to any amendment that may be adopted, or to correct 
minor inconsistencies and typographical errors.
    Ten witnesses testified at the hearing. Nine witnesses represented 
walnut producers and handlers in the production area, as well as the 
Board, and one witness was from USDA. All nine industry witnesses 
supported the proposed amendments. The USDA witness remained neutral. 
After the notice of hearing was published in the Federal Register, AMS 
received a substantive email from the Board. In

[[Page 64386]]

accordance with Sec.  900.16 of the Rules of Practice governing this 
proceeding (7 CFR 900.16), the email constituted an ex parte 
communication and was entered into the record but did not constitute 
testimony and was not considered in the drafting of this recommended 
decision.
    Under the Order, quality control provisions require inspection and 
certification of outbound walnuts, volume regulation is stayed 
indefinitely, and the authority to charge for late payments does not 
exist. The Board's proposed amendments would eliminate the inspection 
and certification of outbound walnuts, remove volume authority, 
establish a new mechanism for the collection of assessments and provide 
authority to charge interest for late payments.
    Currently, a moratorium on the enforcement of inspection is in 
effect, and while under the moratorium, the Board is unable to collect 
assessments. If implemented, the proposed amendments would allow the 
Board to resume the collection of assessments applied to walnuts 
received and to charge interest for late payments. Assessments would be 
determined by handler receipts for total walnuts received for the crop 
year, multiplied by the proposed new assessment rate of $0.0125, and 
billings would be staggered throughout the marketing year to allow 
handlers to pay in three installments.
    Witnesses at the hearing explained that the proposed amendments are 
necessary to streamline the Order and would make the industry more 
efficient by eliminating redundancies in inspection, reducing costs and 
administrative burden to handlers and the Board, and providing a cost 
saving to growers. Therefore, proponents support the need to modernize 
the Order to better meet current and future industry needs.
    As an indicator for the need to eliminate inspection and 
certification of outbound walnuts, witnesses stated that the moratorium 
issued by USDA on September 2, 2021, of mandatory inspections has not 
adversely affected the quality of California walnuts produced and 
handled. Witnesses testified that a common practice for the industry is 
to conduct quality assurance inspections on inbound shipments of 
walnuts and that the current regulations require inspections on the 
outbound walnuts. The end result of industry practice and regulatory 
requirements is two forms of inspection being conducted in the 
industry. Further, witnesses contended that significant investments and 
advancement in processing, storage, technology, and equipment have 
ensured better programs that are able to maintain higher walnut quality 
and condition that exceed the minimum grades and standards currently 
set forth in the Order.
    At the conclusion of the hearing, the Administrative Law Judge 
established a deadline of May 19, 2022, for the submission of 
corrections to the transcript, and June 23, 2022, as a deadline for 
interested persons to file proposed findings and conclusions or written 
arguments and briefs based on the evidence received at the hearing. The 
Board filed a brief in support of the proposed amendments.

Material Issues

    The material issues presented on the record of hearing are as 
follows:
    1. Whether to modify Sec.  984.50, Grade, quality, and size 
regulations, to remove quality and size regulations and include only 
the Board's authority and eliminate Sec. Sec.  984.51 and 984.52 
inspection and certification of inshell and shelled walnuts and shelled 
walnuts for processing. This includes revising: Sec. Sec.  984.12, 
984.32, 984.64, 984.69, 984.77, 984.459(a)(3), and 984.472(b) and 
removing: Sec. Sec.  984.450(c), 984.451(a) and (b), 984.452, and 
984.464(b) and (c).
    2. Whether to revise Sec.  984.69 by changing the calculation of 
assessments from kernelweight to inshell pound in paragraph (a) and 
revising paragraph (c) to include an authority to charge for late 
payments and/or interest as prescribed by the Board with approval from 
the Secretary. Corresponding changes would be made to Sec. Sec.  
984.37, 984.48, 984.69, and 984.347.
    3. Whether to revise Sec.  984.347 to establish an assessment rate 
of $0.0125 per inshell pound of walnuts.
    4. Whether to modify the definition in Sec.  984.13 of ``to 
handle'' to include ``receive''.
    5. Whether to remove Sec.  984.49, Volume regulation, reserve pool 
authority, and subsequent sections including provisions for volume 
control. This includes removing: Sec. Sec.  984.23, 984.26, 984.33, 
984.54, 984.56, 984.66, 984.69(b), 984.450(a) and (b), 984.451(c), 
984.456, and 984.464(a) and revising: Sec. Sec.  984.48 and 984.67.
    6. Whether any conforming changes need to be made as a result of 
the above proposed amendments. Conforming changes may also include 
correction of non-substantive, typographical errors.

Findings and Conclusions

    The following findings and conclusions on the material issues are 
based on evidence presented at the hearing and the record thereof.

Material Issue Number 1--Grade, Quality, and Size Regulations and 
Inspection and Certification

    Section 984.50 ``Grade, quality and size regulations'' should be 
amended to remove quality and size regulations and only the authority 
should remain. Removing quality and size regulations would remove the 
minimum grade and size requirements for shelled and inshell walnuts. 
Retaining the authority would allow the Board to recommend handling 
regulations and establish inspection and certification requirements if 
market conditions warrant regulations in the future, subject to the 
approval of the Secretary.
    Sections 984.51 ``Inspection and certification of inshell and 
shelled walnuts'' and 984.52 ``Processing of shelled walnuts'' should 
be removed. Removing inspection and certification would eliminate 
mandatory outbound inspections for all varieties of walnuts, walnuts 
for processing, and inspections applied to walnuts imported into the 
United States under section 608e of the Act. In addition, multiple 
sections of the Order with provisions for quality, grade and size, and 
inspection and certification should be revised. This includes revising: 
Sec. Sec.  984.12, 984.32, 984.64, 984.69, 984.77, 984.459(a)(3), and 
984.472(b). Conforming changes would include removing Sec. Sec.  
984.450(c), 984.451(a) and (b), 984.452, and 984.464(b) and (c). 
Furthermore, a conforming change to completely remove the word 
``merchantable'' from Sec. Sec.  984.22, 984.72, and 984.472(a) and (c) 
is necessary to add clarity to the Order. This conforming change will 
be further discussed in Material Issue #6.
    Currently, Sec.  984.50 requires that handlers must meet minimum 
grade, quality, and size regulations and Sec. Sec.  984.51 and 984.52 
require that outbound walnuts must be inspected and certified. The 
outbound inspection is carried out by the Dried Fruit Association of 
California (DFA), the Board's inspection agency of record. DFA supplies 
to the Board inspection records used to calculate handler assessment 
obligations.
    Witnesses at the hearing, either serving as Board members and/or as 
members of the Board's Marketing Order Revision Committee explained 
that the proposed amendments would modernize and align the Order with 
current market-driven practices. This would result in a more efficient 
industry. Witnesses further explained that advancements in processing 
and packaging technologies have improved product quality, consistency 
and shelf-life and if implemented, the proposed

[[Page 64387]]

amendments would remove redundancies, as well as reduce costs and 
administrative burden for both handlers and the Board. Evidence 
introduced at the hearing suggests that mandatory inspection and 
certification are no longer necessary to ensure orderly marketing; 
however, the authority should be retained in the Order in the event 
market conditions change and inspections and certification are deemed 
necessary to be reintroduced.
    According to the hearing record, walnut production and sales have 
grown substantially over the past 73 years. The initial varieties 
regulated by the Order no longer exist and are not viable in either 
domestic or international markets. In addition, handlers have made 
significant investments in the technology and equipment necessary to 
maintain high quality walnuts that customers demand and that consumers 
expect. These investments helped to manage over 300,000 tons in 
increased production, according to a witness. Witnesses testified that 
current customer specifications exceed the grades and standards 
established when the Order was promulgated in 1948. The industry 
considers the minimum grade and size regulations as outdated and 
obsolete, and that the mandated outbound inspection has resulted in 
inefficient redundancies. The costs of the duplicative inspections 
outweigh their benefit to industry.
    A moratorium of enforcement on mandatory inspection requirements is 
currently in effect. Under the moratorium, USDA's enforcement of 
mandatory inspection requirements under the Order are suspended. 
Accordingly, inspection and certification requirements for walnuts 
imported into the United States are also suspended. USDA exercised its 
discretion to issue the moratorium, effective September 1, 2021, 
following discussions with the Board. These discussions took place 
after the Board's Grades and Standards Committee recommended an action, 
subsequently passed by the Board, to request that USDA forego mandatory 
inspections in response to market disruptions associated with the 
Covid-19 pandemic, including labor and transportation interruptions, 
and ongoing tariff issues that have adversely affected market 
conditions across the California walnut industry. Witnesses explained 
that, in addition to external shipping constraints, DFA inspector 
shortages caused huge operational inefficiencies, because handlers 
cannot ship product that is not inspected, certified, and stamped. 
Further, eliminating outbound inspections would remove large 
expenditures by eliminating the duplicative inspections.
    According to the record, mandated inspections identified as 
duplicative by witnesses cost the industry approximately $6 million 
annually (discussed further under Economic Impact of Eliminating 
Mandatory Inspection). Witnesses testified that the elimination of 
mandatory outgoing inspection would benefit all handlers immediately 
through lower expenditures and avoidance of shipping delays due to 
inspector unavailability. These handler benefits could also be passed 
on to producers and consumers.
    According to the record, market demand for California walnuts 
continues to grow. Evidence introduced suggests that increased industry 
investments in infrastructure, as well as marketing and promotion, were 
in response to growing domestic and global walnut production. Over the 
past five years, increases in international production have affected 
U.S. market prices and net grower returns. Record evidence also 
indicates that total world production increased by over 235,000 metric 
tons from 2017/18 to 2021/22; however, California walnuts, even with 
increases in production, accounted for a smaller share of total world 
production, decreasing from 29 to 27 percent during the same time 
period. Other countries have experienced growth; most notably, China 
now accounts for 49 percent of world production compared to 42 percent 
in 2017/18. China's share of world trade has risen to 13 percent, a 
significant increase from 2 percent in 2016/17. Consequently, 
California walnuts account for a smaller share of world trade, falling 
from 68 to 54 percent between 2016/17 and 2020/21.
    Hearing evidence included data from studies conducted by the 
University of California-Davis Cooperative Extension (UC Davis) that 
highlight changes in walnut farm profitability by comparing farm 
revenue per acre and cost of production. The UC Davis data, illustrated 
in Table 1, include two cost of production studies conducted in the 
2011-2014 time period, and three studies between 2015 and 2018.
    Table 1 shows the decline in walnut farm profitability by comparing 
two four-year periods with very different financial outcomes, 2011 to 
2014 and 2015 to 2018. The average production cost per acre for 2011-
2014 and 2015-2018 were $3,667 and $5,122, respectively, which appear 
in column (d) of Table 1. Average yields (1.83 and 2.01 tons per acre 
in the same time periods) appear in column(b) of Table 1. Producer 
gross returns per acre for each of the two four-year time periods 
column (c) were computed by multiplying average yield by average price. 
Subtracting cost of production in column (d) yields the producer net 
return in column (e).

                                   Table 1--California Walnuts: Producer Gross Return, Cost of Production, Net Return
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                          Producer net
                                                                 Season average    Average yield:   Average producer    Total cost of    return per acre
                        Range of years                           producer price,   tons per acre 2  gross return per   production per     (gross return
                                                                     $/ton 1                              acre             acre 3          minus cost)
                                                                             (a)               (b)               (c)               (d)               (e)
                                                                ................  ................         (a) * (b)  ................           (c)-(d)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2011-2014.....................................................            $3,245              1.83            $5,930            $3,667            $2,264
2015-2018.....................................................             1,828              2.01             3,664             5,122            -1,458
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 Source: National Agricultural Statistics Service (NASS), USDA.
2 Four-year averages computed in Table 1, based on annual NASS yield data.
3 Based on U. of California Extension cost of production studies. For 2011-2014, the cost of production per acre is a two-year average (2012, 2013). For
  2015-2018, the cost per acre is a 3-year average (2015, 2017, 2018).

    The two producer net return numbers in column (e) of Table 1 are 
the key results of this cost and return analysis. Four years of walnut 
farm profitability, represented by producer net return per acre of 
$2,264 for 2011-2014, were

[[Page 64388]]

followed by four years of difficult market conditions (2015-2018), with 
a negative average net return of (-$1,458). This analysis provides a 
numerical estimate that bears out witness testimony that emphasized a 
dramatic downward shift in their economic well-being.
    The hearing record indicates that grower prices in 2019/20 and 
2020/21, when compared to the cost of production in recent years shown 
in Table 1, indicate continuing negative net returns to California 
walnut growers, on average.
    In 2020/21, walnut crop value fell to approximately $957 million, 
and the season average grower price of $1,220 per ton was the lowest 
since 2003/04. One witness testified that walnut farmers face 
challenging market conditions and that he does not foresee improvement 
in the current season (2021/22). Approximately, 80 percent of the 
Board's budget is allocated to domestic marketing; however, domestic 
consumption of walnuts has stayed the same for many years, at 
approximately one-half pound per person. Witnesses stated that handlers 
are struggling, and growers are losing their farms. Witnesses explained 
that if the proposal were implemented, the approximately $6 million in 
savings at the handler level could be distributed across the market 
through higher grower returns. Consumers are also expected to benefit 
through improved pricing.
    According to the record, walnut varieties considered during the 
establishment of the Order no longer exist and are not viable in 
domestic and international markets. Evidence suggests that this is due 
to customer specifications that exceed the minimum grade, quality, and 
size regulations currently prescribed under the Order for shelled and 
inshell walnuts. Witnesses explained that consumers, especially in 
export markets, have high expectations due to the superior quality 
attributes of newer varieties. Production has declined for older 
varieties that do not contain the quality traits desired by consumers, 
notably those varieties that were considered when the Order was 
promulgated in 1948. Because they were based on lower quality walnuts, 
the minimum quality requirements prescribed under the Order are no 
longer consistent with current-day handling operations. In addition, 
witnesses testified that product packed to USDA minimum quality 
guidelines would most likely be rejected by their customers and result 
in complaints from consumers.
    Increased demand for higher quality walnuts, both domestically and 
internationally, are driving the production of new varieties. One 
witness testified that over 90 percent of California walnut production 
is composed of three varieties, the Chandler, the Howard, and the 
Tulare. These varieties, notably the Chandler, which is 58 percent of 
total California walnut production, contains much less inedible 
material than previous varieties that were more susceptible to insect 
damage and low-quality kernels due to color and other factors.
    According to the record, the harvest season generally begins in 
mid-September and concludes during the first week of November. 
Witnesses explained that when handlers receive harvested walnuts, they 
undertake an inbound inspection. Although the specific steps may vary 
between handlers, inbound inspection is considered a standard business 
practice. Evidence further suggests that due to consumer expectations 
and specifications, inbound inspection and quality control processes 
are much more stringent than the outbound inspection required under the 
Order. One witness testified that during the inbound inspection, the 
value of the product is assessed by taking an initial sample and 
testing for moisture, debris, and foreign material. Evidence suggests 
that this is a critical step in the inbound inspection process 
performed by almost all handlers. Witnesses testified that handlers 
either have a third-party perform the inbound inspection or conduct it 
themselves in-house, but the inspection process is routine within 
industry. Moisture testing has proven to be a key indicator of 
potential microbial growth, which can increase degradation rates, an 
important measurement of shelf-life.
    Further evidence suggests that Board funding of research on behalf 
of the industry has contributed significantly to the quality 
advancements of walnuts produced and handled. According to the record, 
handlers consider product to be at ``equilibrium'' when moisture is 
below 8 percent. This is based on Board-funded research conducted by 
the UC Davis.
    In addition, individual handler investments in technology and 
storage have also resulted in improved internal quality control across 
the industry. Evidence suggests that the evolution of inbound 
inspections and quality control processes are also due to higher 
customer specifications of quality. Both large and small handlers 
testified about the positive industry impact of adopting different 
methodologies that have been scientifically proven to reduce 
degradation, such as modified atmosphere storage, pasteurization, and 
fumigation. One witness testified that handlers employ their own 
quality assurance or quality control staff to inspect product, using 
quality specifications that exceed the USDA grade standards used by DFA 
in conducting inspections--inspections that the industry considers to 
be duplicative. The in-house quality control staff also conduct 
additional analytical tests for quality and condition, such as the 
moisture testing previously mentioned, microanalysis for microbial 
activity and measurement of peroxide and free fatty acid levels for 
rancidity. Additionally, investments in technology have facilitated 
advancements in electronic processing, such as laser or high-speed 
camera and x-ray machines that separate constituents on conveyor belts 
significantly reducing foreign material counts.
    Witnesses explained that these advancements, coupled with highly 
trained quality assurance personnel, significantly increased walnut 
quality to a level that significantly exceeds USDA's minimum quality 
standards established in 1948. In addition, one handler witness that 
utilized both in-line (inspection prior to packing) and floor 
inspections (inspection after packing) offered by DFA, testified that 
both shelled and inshell walnuts rarely failed USDA inspection and that 
walnuts that do not meet the requirements of the Order accounted for a 
very small percent of total product processed. Therefore, the witness 
stated, handlers were only conducting outbound inspections to comply 
with the Order and to report the quantity of walnuts handled for the 
calculation of assessments as specified in Sec.  984.69.
    As evidenced by the record, walnut sales are driven by consumer 
demand for high quality product and marketplace competition, both 
domestically and internationally, which provide strong incentives to 
remove all substandard walnuts.
    If implemented, the proposed amendment would result in greater cost 
efficiencies by eliminating inspection redundancy, significantly 
lowering cost and administrative burden for handlers and the Board.
    For the reasons stated above, it is recommended that Sec.  984.50 
be amended to remove quality and size regulations and include only the 
Board's authority to recommend regulations in the future if market 
conditions warrant and eliminate Sec. Sec.  984.51 and 984.52 
inspection and certification of inshell and shelled walnuts and shelled 
walnuts for processing.

[[Page 64389]]

Material Issue Number 2--New Assessment Mechanism and Interest and/or 
Charges for Late Payments

    Section 984.69 should be revised to change the calculation of 
assessments from kernelweight to inshell pound in paragraph (a), lift 
the stay for paragraph (b) and add authority to establish an initial 
assessment rate for the new assessment mechanism in a new paragraph 
(b), and include authority to charge for late payments and/or interest 
as prescribed by the Board with approval from the Secretary in 
paragraph (c). The preamble in the notice of hearing incorrectly 
identified paragraph (b) as the authority to charge for late payments 
and/or interest. The recommended decision and the proposed regulatory 
text correctly refer to paragraph (c). Corresponding changes should be 
made to Sec. Sec.  984.37, 984.48, 984.69, and 984.347. Specifically, 
Sec. Sec.  984.37, 984.48, and 984.347 should be revised to modify the 
measure of weight for assessments from kernelweight to inshell pound.
    In addition to the proposed new assessment mechanism, the Board is 
also recommending an initial assessment rate of $0.0125 to go into 
effect at the conclusion of this rulemaking. This proposed amendment is 
summarized further under Material Issue No. 3.
    According to the record, a new mechanism for determining and 
collecting handler assessments would need to be established if the 
proposed elimination of mandatory inspection and certification 
summarized under Material Issue No. 1 were implemented. Witnesses at 
the hearing expressed that the elimination of mandatory inspection and 
certification, or the outgoing inspection, disables the Board's ability 
to collect assessments. This is due to provisions in Sec.  984.69 which 
states that each handler's pro rata share is the assessment rate per 
kernelweight pound multiplied by the kernelweight of walnuts certified. 
Therefore, the Order as currently written ties the calculation of 
assessments to inspection and certification.
    According to the record, the new assessment mechanism would be 
based on walnuts received instead of walnuts certified which would 
allow the Board to resume collecting assessments. Under the proposed 
mechanism, the calculation of assessments would be based on receipts 
submitted to the Board. All nine witnesses testified their support for 
the proposed amendment, citing that it is an equitable change that 
would decrease the administrative burden for handlers and the Board.
    Witnesses testified that California Walnut Board (CWB) Form No. 1, 
which is supplied to handlers by the Board in their annual season 
packets, would be the basis for the application of the assessment rate 
to be paid by handlers under the proposed new assessment mechanism, and 
since this report is already provided to the Board, it would ensure 
there is no additional burden placed on handlers. On CWB Form No. 1, 
handlers report walnut receipts by county and variety in inshell 
pounds, and therefore evidence suggests that the proposed amendment to 
change the calculation of assessments from kernelweight to inshell 
pounds is to reflect the new assessment mechanism that would be based 
on walnut receipts reported on CWB Form No. 1.
    Under the Order, Sec.  984.473 requires each handler to report to 
the Board walnut receipts from growers on or before January 15 of each 
marketing year. Handlers fill out CWB Form No. 1 or the Crop 
Acquisition Report to report all walnuts received during the crop year. 
Currently, the Board uses this information for the purpose of 
developing an annual report that shows total crop acquisition in 
aggregate for the marketing year.
    Alternatives to CWB Form No. 1 were also discussed, such as the CWB 
Form No. 6, the Report of Merchantable Walnuts Received, Committed, and 
Shipped. This report also includes an acquisition total; however, 
witnesses testified that CWB Form No. 6 is a monthly report and it 
conflicts with the structure of the proposed new assessment mechanism 
which would stagger billing throughout the year. In addition, using CWB 
Form No. 1 reduces the administrative burden for handlers and the Board 
as it is an annual report.
    Additionally, the new assessment mechanism is modeled after the 
assessment method applied by the California Walnut Commission 
(Commission). One witness explained that the Commission's process is 
also based on receipts, and that it is a self-reported system where 
handlers submit forms during the year on behalf of growers. The 
Commission's assessment process is also based on inshell weight 
received or acquired, and consideration was taken to ensure that the 
staggering of assessments did not match the Commission's. This further 
ensures any inadvertent undue burden is not place on handlers.
    According to the record, for the first time for the 2021-2022 
marketing year, the Board has included handler audits in its compliance 
plan. This is to ensure receipts reported on CWB Form No. 1 are 
accurate. Under the proposed assessment mechanism, the Board plans to 
audit handler receiving records, and one witness testified that receipt 
numbers can also be cross-checked with information shared between the 
Board and the Commission. This is within the authority of the Board as 
Sec.  984.80 provides that each handler shall maintain records of 
walnuts received, held, or disposed of as prescribed by the Board, and 
such records shall be retained and be available for examination by the 
Board and Secretary for a period of two years. In addition, Sec.  
984.91 provides that the Board may deliberate, consult, cooperate and 
exchange information with the Commission, whose activities complement 
the Board.
    Under the proposed new assessment mechanism, invoicing would not 
begin until after January 15 which is when CWB Form No. 1 is due, and 
billings would be staggered later in the year to allow handlers to pay 
in three installments. Billings would be generated in January, April, 
and July and as prescribed by the Board, payments would be due in 
February, May, and August. This is contrary to the current billing 
system where handlers are invoiced monthly. One witness testified that 
under the current system, approximately 48 percent of the total revenue 
for the year is invoiced by January and when compared to the proposed 
mechanism, only 33.33 percent of the total annual revenue would be 
billed in that same timeframe.
    The following is a sample calculation showing how assessments would 
be determined under the new proposed mechanism. In the sample 
calculation, handler A reported receipts of 1 million inshell pounds on 
CWB Form No. 1 for the 2023 crop year. To calculate handler A's total 
annual assessment under the proposed new assessment mechanism, multiply 
the proposed initial assessment rate by the total pounds received for a 
result of $12,500 (1 million x $0.0125 = $12,500). To calculate handler 
A's assessment billings, multiply the total annual assessment by 33.33 
percent for a result of $4,166.66 to be invoiced in January, $4,166.67 
to be invoiced in April, and a final sum of $4,166.67 to be invoiced in 
July.
Sample Calculation for Assessments
Handler A reported acquisitions for 2023 marketing year = 1,000,000 
pounds multiplied by $.0125 = $12,500

    Assessments to be invoiced as follows:


[[Page 64390]]


Invoice 1--Jan--$12,500 multiplied by 33.33% = $4,166.66
Invoice 2--Apr--$12,500 multiplied by 33.33% = $4,166.67
Invoice 3--Jul--$12,500 multiplied by 33.33% = $4,166.67
Total invoiced: $12,500.00

    During the hearing, USDA sought testimony on Sec.  984.67 and 
specifically on exemptions from assessments and quality regulations. 
Currently, Sec.  984.67(b)(1) in the Code of Federal Regulations 
references a list that is missing in error. In addition, Sec.  
984.67(b) is missing other exemptions from assessments and quality 
regulations--specifically for green walnuts and walnuts directed to 
noncompetitive outlets. Witnesses testified that Sec.  984.67 provides 
stipulations for walnuts handled that are exempt from assessments and 
quality regulations under the Order such as for charitable 
institutions, relief agencies, governmental agencies for school lunch 
programs, and diversion to animal feed or oil manufactures pursuant to 
an authorized governmental diversion program. All industry witnesses 
testified in support of adding the missing text back to Sec.  984.67(b) 
with some witnesses stating that they were unaware that the exemptions 
list was missing or incomplete, and that immediate reinsertion would 
benefit the industry as it would be unfair to penalize handlers for not 
paying assessments on product otherwise considered exempt.
    A witness provided a sample calculation of how exemptions from 
assessments would be applied. In the hypothetical scenario illustrated 
below, handler A from the previous example reported that 10 thousand 
pounds was sold to USDA under section 32 of the Agricultural Adjustment 
Act Amendment of 1935. Handler A reported this after the first invoice 
for the marketing year was issued. To calculate handler A's exemption, 
multiply the total pounds exempt by the proposed assessment rate for an 
exempt amount of $125.00 (10,000 pounds x $0.0125 = $125). 
Subsequently, the next invoice billed to handler A (in this scenario it 
would be April) would show an adjusted assessment of $4,041.67 as a 
result of a $125.00 reduction due to exemptions.
Sample Calculation for Exemption Application
    On March 31, Handler A reported 10,000 pounds sold to USDA for a 
Section 32 purchase.

10,000 pounds multiplied by $.0125 = $125

    Assessments to be invoiced as follows:

Invoice 1--Jan--$12,500 multiplied by 33.33% = $4,166.66--was already 
invoiced
Invoice 2--Apr--$12,500 multiplied by 33.33% = $4,166.67-$125.00--less 
exemption amount
Invoice 2 adjusted amount = $4,041.67--new invoice amount
Invoice 3--Jul--$12,500 multiplied by 33.33% = $4,166.67
Total invoiced: $12,375.00

    According to the record, for exemptions that occurred after July, 
the last invoice in the marketing year, a refund check in the amount 
exempt would be issued by the Board to handlers. This ensures handlers 
receive a timely refund against current year assessments. Similarly, 
handlers that report adjustments to CWB Form No. 1 after January 15 of 
the marketing year would also receive a readjustment to their total 
annual assessments.
    For the reasons stated above, it is recommended that Sec.  984.67 
be amended to add the text inadvertently omitted. Regarding the 
proposed amendment to revise Sec.  984.69(c) to add the authority to 
charge for late payments and/or interest as recommended by the Board, 
subject to the approval of the Secretary, witnesses testified that if 
implemented, the proposal will enable the Board to further encourage 
compliance through the common business practice of assessing interest 
and late-payment charges.
    According to the record, the industry has minimal issues with 
collection, but the standard business practice of interest and late 
payment charges is a tool that would help the Board execute the 
collection of assessments and administer the Order. One witness 
testified that currently under the Board's compliance plan a past-due 
notice is issued at 60 days, a second notice at 90 days, and then at 
150 days outstanding the assessment is then referred to USDA. Under the 
proposed amendment, the Board may decide to not implement the 
authority; however, witnesses testified that the authority to recommend 
late-payment charges in the future would increase the equitability of 
the collection of assessments, as late fees would be applied equally 
across all handlers.
    Additionally, the requirements of the new assessment mechanism and 
application of interest and late-payment charges as recommended by the 
Board and approved by the Secretary, would be communicated to handlers 
through their annual handler packets that are mailed at the beginning 
of each marketing year, and include a personalized cover letter for 
each handler, a copy of the annual handler regulations, a full set of 
Board forms, and a copy of the Order.
    On February 24, 2022, the Board voted unanimously in favor of the 
proposed amendments recommended by the Executive Committee to create a 
new assessment mechanism and to add authority to charge for late 
payments to the Order. Board and Committee meetings are open to the 
public, and both large and small operations had an opportunity to 
provide input into the proposed amendments. In addition, newsletters 
were mailed to growers and the proposed changes were discussed at the 
annual grower meeting where Board staff provided presentations on all 
potential changes to the Order.
    For the reasons stated above, it is recommended that Sec.  984.69 
be revised to change the calculation of assessments from kernelweight 
to inshell pound in paragraphs (a) and (c) be revised to include an 
authority to charge for late payments and/or interest as recommended by 
the Board, subject to the approval of the Secretary. It is also 
recommended that corresponding changes be made to Sec. Sec.  984.37, 
984.48, 984.69, and 984.347.

Material Issue No. 3--Initial Assessment Rate

    Section 984.69(b) should be revised to include the authority to 
establish an initial assessment rate and Sec.  984.347 should be 
amended to establish an initial assessment rate of $0.0125 per inshell 
pound of walnuts. The establishment of an initial assessment rate would 
allow the Board to resume the collection of assessments after the 
conclusion of this rulemaking and 30 days after the publication of the 
final rule in the Federal Register, if implemented.
    As mentioned in several places throughout this recommended 
decision, the moratorium on the enforcement of mandatory inspections 
effective September 1, 2022, prevents the Board from collecting 
assessments due to Sec.  984.69(a) which bases the calculation of 
assessments on walnuts certified. While the moratorium is in effect, 
Board activities and programs are sustained through the use of 
operational funding from the Board's existing but depleting financial 
reserve funds. Evidence suggests that the establishment of the initial 
assessment rate is to ensure the Board will have the ability to 
generate funds in the upcoming marketing year. Witnesses explained that 
the formal rulemaking process could take between 18 and 24 months, and 
during this time

[[Page 64391]]

the Board is operating entirely off its reserves. Therefore, the 
ability of the Board to assess upon implementation is important to be 
able to resume its full scope of activities.
    According to the record, on November 19, 2021, the Marketing Order 
Revision Committee recommended the initial assessment rate to the 
Board. Witnesses testified that discussions were robust, and several 
alternatives were proposed. Rates as high as 2 cents or as low as zero 
were considered by the Board. Ultimately, the Board voted in favor of 
an initial assessment rate of $0.0125, 7 to 2. It was concluded that, 
without an established rate, programs would be limited and the Board 
would not be able to conduct business in the year the proposed 
amendments would take effect if implemented. Additionally, evidence 
suggests that due to low pricing further consideration was taken to 
ensure the proposed rate is reasonable and it does not appear as though 
the Board is trying to recapture years without assessments. Witnesses 
testified that the proposed rate of $0.0125 is lower than the rate 
originally proposed for the current season and is also lower than the 
rate for the last 4 out of the 5 years prior to the 2021/22 season. The 
Board decided that an initial assessment rate of $0.0125 would be 
reasonable for handlers and would allow the Board to cover operating 
costs and conduct the marketing activities needed for the domestic 
market.
    The notice of hearing incorrectly had an assessment rate of $.125 
in the regulatory text. The recommended decision corrects the 
assessment rate to reflect the Board's intent and testimony.
    In addition, Sec.  984.68 of the Order provides that the Board must 
file a proposed budget of expenses and a rate of assessment at the 
beginning of each marketing year and the determination of the initial 
rate would not supersede that.
    For the reasons stated above, it is recommended that Sec.  
984.69(b) be revised to include the authority to establish an initial 
assessment rate which may be modified by the Secretary and Sec.  
984.347 be amended to establish the initial assessment rate of $0.0125 
per inshell pound of walnuts.

Material Issue No. 4--The Definition of To Handle

    Section 984.13 should be modified to include the word ``receive'' 
in the definition of ``to handle''. Modifying the definition would 
broaden its scope to include the receipt of either inshell or shelled 
walnuts (except as a common contract carrier or walnuts owned by 
another person) to be put into the current of commerce either within 
the area of production or from such area to any point outside thereof, 
or for a manufacturer or retailer within the area of production to 
purchase directly from a grower. This does not include sales and 
deliveries within the area of production by grower to handlers, or 
between handlers.
    According to the record, expanding the definition would allow the 
Board to use the Acquisition Report, or CWB Form No. 1, required by 
each handler before January 15 of each marketing year, as the basis for 
the calculation of assessments to be collected under the proposed new 
assessment mechanism summarized in Material Issue No. 2.
    Currently, handlers are assessed on product certified, and evidence 
suggests that the Board's intention for expanding the definition to 
include ``receive'' is to ensure all handlers that receive walnuts are 
assessed under the proposed new assessment mechanism and also to 
clearly tie assessments with walnuts received. Witnesses testified that 
the act of handling begins when a handler receives and takes possession 
of the product and therefore expanding the definition would ensure 
product does not slip through the system unassessed or unaccounted.
    According to the record, this is a necessary change that is a 
result of the proposed elimination of inspections and certification 
that currently ties assessments with walnuts certified, and that 
modifying the definition would enable the alignment of the proposed 
amendments discussed in this recommended decision. Additionally, 
handlers are expected to benefit from the modified definition as it 
allows for the application of the proposed assessment mechanism which 
would reduce the administrative burden for both handlers and the Board.
    For the reasons stated above, it is recommended that Sec.  984.13 
be modified to include the word ``receive'' in the definition of ``to 
handle''.

Material Issue No. 5--Volume Control Authority

    Section 984.49 ``Volume regulation'', reserve pool authority, and 
subsequent sections including provisions for volume control should be 
removed. This includes removing: Sec. Sec.  984.23, 984.26, 984.33, 
984.54, 984.56, 984.66, 984.69(b), 984.450(a) and (b), 984.451(c), 
984.456, and 984.464(a) and revising: Sec. Sec.  984.48 and 984.67. 
Removing volume control authority would modernize the Order by 
eliminating regulations the industry considers no longer necessary to 
ensure orderly marketing.
    Witnesses testified that the industry is fundamentally different 
than it was 30 years ago and does not foresee using volume regulation 
in the future. Currently, volume regulation is suspended indefinitely, 
effective May 7, 2020 (85 FR 27109). According to the record, volume 
regulations were suspended because they had not been used in over 30 
years. As previously stated under Material Issue No. 1, witnesses 
argued that in the current economic environment, low pricing is a 
result of increases in global supply. Therefore, restricting sales of 
California walnuts would not be in the best interest of the industry 
which is primarily focused on increasing market demand through research 
and promotion.
    For the reasons stated above, it is recommended that Sec.  984.49 
``Volume regulation'' and reserve pool authority should be removed. 
Corresponding changes to subsequent sections including provisions for 
volume control should also be removed. This includes removing: 
Sec. Sec.  984.23, 984.26, 984.33 984.54, 984.56, 984.66, 984.69(b), 
984.450(a) and (b), 984.451(c), 984.456, and 984.464(a) and revising: 
Sec. Sec.  984.48 and 984.67.

Material Issue No. 6--USDA's Conforming Changes

    Based on record evidence, USDA is recommending the following 
conforming changes to the Order: adding language regarding exemptions 
to Sec.  984.67; removing the reference to ``merchantable'' in Sec.  
984.22 and from the headings and paragraphs in Sec. Sec.  984.72 and 
984.472(a) and (c); revising the heading in Sec.  984.21; revising 
Sec. Sec.  984.69(e) and 984.89(b)(4) to replace the term ``fiscal 
period'' with ``marketing year''; and revising the figure in Sec.  
984.347.
    As described above in Material Issue #2, USDA is recommending a 
conforming change to Sec.  984.67 to add language inadvertently omitted 
in a prior rulemaking conducted in May 2020. Witnesses testified in 
support of adding exemptions that had been inadvertently omitted back 
to Sec.  984.67.
    A conforming change to remove the word ``merchantable'' from Sec.  
984.22 and from the headings and paragraphs in Sec. Sec.  984.72 and 
984.472(a) and (c) is necessary to add clarity to the Order. In Sec.  
984.11, ``merchantable walnuts'' are defined as ``walnuts meeting the 
minimum grade and size regulations effective pursuant to Sec.  
984.50.'' If the proposed amendments described in Material Issue #1 are 
implemented, there would be no ``merchantable walnuts'' because there 
would be no

[[Page 64392]]

grade and size regulations in effect. Witnesses testified that this was 
their understanding of the effect of the proposed amendments described 
in Material Issued #1. Witnesses also testified in favor of removing 
numerous references to the term ``merchantable'' in various sections, 
including Sec.  984.48. Similarly, witnesses testified to amendment of 
Sec.  984.472(b) to ensure that reporting requirements for shipped 
walnuts would continue.
    Accordingly, USDA proposes that references to ``merchantable'' be 
removed from other reporting requirements to ensure that such reporting 
requirements continue to be in place. USDA proposes that the reference 
to ``merchantable'' be removed from Sec.  984.22 to ensure that the 
marketing policy in Sec.  984.48 includes an estimate of trade demand. 
USDA proposes that the reference to ``merchantable'' be removed from 
the heading and text of Sec.  984.72 to make clear that the authority 
for reports extends to walnuts rather than the subset of ``merchantable 
walnuts''. Similarly, USDA proposes conforming changes to remove 
references to the term ``merchantable'' in Sec.  984.472(a) and (c). 
This would ensure that walnuts that are received and that are committed 
continue to be reported to the Board.
    Section 984.50 would continue to provide authority for grade, 
quality, and size regulations in the event that such regulations are 
warranted in the future. If specific grade, quality, and size 
regulations are promulgated and implemented in the future, the term 
``merchantable walnuts'' (``walnuts meeting the minimum grade and size 
regulations effective pursuant to Sec.  984.50'') would once again have 
meaning and effect. Accordingly, the definition for ``merchantable 
walnuts'' and similarly related sections that reference the word 
``merchantable'' in the Order would not be affected by the proposed 
amendments. Specifically, Sec. Sec.  984.11, 984.12, and 984.64 would 
continue to reference ``merchantable walnuts.''
    In addition, as noted in the notice of hearing, the heading in 
Sec.  984.21 would be revised to reflect the purpose of the provision. 
The provision defines handler inventory and accordingly, USDA proposes 
to rename the heading ``Handler inventory'' from ``Eligibility.''
    USDA proposes to revise Sec. Sec.  989.69(e) and 984.89(b)(4) to 
replace the term ``fiscal period'' with ``marketing year.'' ``Marketing 
year'' is already used in another provision of Sec.  989.69. Moreover, 
``marketing year'' is defined in and used throughout the Order.
    Finally, as discussed in Material Issue #3 USDA notes that there 
was an error in Sec.  984.347 in the notice of hearing, in which the 
assessment rate was listed as $.125. Witnesses testified that the 
assessment rate should be $.0125, and the recommended decision reflects 
this.

Initial Regulatory Flexibility Analysis

    Pursuant to the requirements set forth in the Regulatory 
Flexibility Act (RFA), 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 so that small businesses will not be 
unduly or disproportionately burdened. Marketing orders and amendments 
thereto are unique in that they are normally brought about through 
group action of essentially small entities for their own benefit.
    During the hearing held April 19-20, 2022, interested parties were 
invited to present evidence on the probable regulatory impact on small 
businesses of the proposed amendments to the Order. The evidence 
presented at the hearing shows that the proposed amendments would not 
have a significant negative economic impact on a substantial number of 
small agricultural producers or handlers.
    A small handler, as defined by the Small Business Administration 
(SBA) (13 CFR 121.201), is one that grosses less than $30 million 
annually. A small walnut producer is one that grosses less than $3.25 
million annually.
    Effective May 2, 2022, SBA issued a final rule updating small 
business size standards for agriculture (86 FR 18607). The tree nut 
farming (North American Industry Classification System (NAICS) code 
111335) size standard changed from $1 million to $3.25 million. The 
witnesses that identified themselves as small producers did so using 
the SBA size standard in effect at the time of the hearing ($1.0 
million); they are also small under the new standard of $3.25 million.
    A total of nine witnesses testified at the hearing. Of the nine 
witnesses, seven appeared and offered testimony as growers or handlers. 
Five of these seven witnesses were growers and four of the growers were 
also handlers. Two of five grower witnesses testified that they were 
small walnut growers according to the former SBA definition of $1.0 
million, and three were large.
    Of the six handler witnesses, two were small and four were large. 
Of the four grower witnesses who were also handlers, one was a small 
handler, and three were large. There were two additional handler 
witnesses, one small and one large.
    Of the remaining two witnesses, one provided testimony from the 
perspective of academia and the other witness provided testimony as a 
representative of the California Walnut Board.
    All witnesses expressed their support for the proposed amendments 
and stated that they expected to see significant benefits (cost 
savings) from the amendments.

Walnut Industry Background and Overview

    According to the hearing record there are approximately 4,500 
producers and 85 handlers in the production area. Record evidence 
includes reference to a study showing that the walnut industry 
contributes 85,000 jobs to the economy, directly and indirectly.
    Record evidence showed that approximately 82 percent of 
California's walnut handlers (70 out of 85) 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 in the hearing record from the 2017 Agricultural Census, 
published by USDA's National Agricultural Statistics Service (NASS), 
showed that 86 percent of the California farms growing walnuts had 
walnut sales of less than $1 million. In the 2017 Agricultural Census, 
the largest sales value size category for walnuts was $1.0 million.
    To estimate the percentage of small walnut farms, using NASS data 
from the hearing record, the first step was computing a 3-year average 
crop value, which was $1.077 billion for the period 2018/19 to 2020/21. 
Average bearing acres over that same 3-year period were 372,500. 
Dividing crop value by acres yields a revenue per acre estimate of 
$2,892. Using these numbers, it would take approximately 1,124 acres 
($3,250,000/$2,892) to yield $3,250,000 in annual walnut sales. The 
2017 Agricultural Census data show that 94 percent of walnut farms in 
2017 were below 1,000 acres. Therefore, 94 percent or more of 
California walnut farms would be considered small businesses according 
to the current SBA definition.
    Hearing evidence showed that the period from walnut tree planting 
production ranges from 5 to 7 years, and that production levels each 
year are somewhat affected by the alternate bearing tendency. The 
pricing downturn that began in 2015 somewhat diminished the rate of new 
plantings, but about 36,000 previously planted

[[Page 64393]]

acres are expected to come into production in the next 3 years (2023 to 
2026). These are high-yield varieties, and therefore the new acres will 
be more productive than the walnut acreage being removed.
    According to the record, generally all domestic production of 
walnuts is grown in the Central Valley region, which includes the 
Sacramento Valley and the San Joaquin Valley. The San Joaquin Valley is 
one of only five major Mediterranean-type climates in the world that is 
ideal for growing nuts. Over the past 10 years, walnut acreage has 
migrated north for better water availability. Production in the 
northern part of the Central Valley is expected to grow significantly, 
and the proportion of total production in the south is expected to 
decline.
    Walnut trees bloom in the spring and the harvest for early 
varieties starts in September. Harvesting for later varieties starts in 
October and sometimes continue into November. The Chandler variety is 
58 percent of total walnut production. Three varieties (Chandler, 
Howard, and Tulare) make up eighty-five percent of total walnut volume. 
As soon as the nuts are harvested, they must be hulled (removal of the 
green husk) and dried. The hulled nuts have too high a moisture content 
for long-term storage, and they need to be dried quickly to preserve 
quality and to minimize mold and rancidity. Growers still own the nut 
at that point, according to hearing evidence.
    The processor (handler) then buys the nuts based on the cleaned, 
hulled and dried weight. The handlers process and store them before and 
after the value-added steps, before shipping them into distribution 
channels.
    Once received by the handler, the walnuts go into refrigerated or 
bulk storage, depending on the type of product that the handler intends 
to produce. Smaller lots (such as for minor varieties) are put into bin 
storage. Once the walnuts are warehoused and fumigated (to eliminate 
insects) a sample is taken to determine the value of the product to the 
producer. The walnuts are tested for kernel content, edible kernel 
content, defect levels, and color. The lighter the color, the greater 
the value. The three predominant colors are light, light amber and 
amber.
    The shelling process removes most of the shell, typically leaving 
about 98 percent kernel and 2 percent shell. The resulting lot has nuts 
with a mixture of colors and approximately six different sizes, ranging 
from eight-of-an-inch square up to a half kernel.
    Walnuts generally have a 12-month shelf life, which can be 
moderately increased through improved storage conditions and may be 
reduced if storage conditions are not ideal. Cold storage has 
facilitated year-round sales and marketing. Witnesses stated that 
advancements in processing and packaging technologies continue to 
improve product quality, consistency and shelf life.
    Some packaging methods, including vacuum packing, will increase 
shelf life and help maintain quality. Walnuts can also be pasteurized 
to reduce pathogens. Modified atmosphere storage requires substantial 
capital, including automation of storage chamber loading and unloading 
because the low oxygen environment is dangerous for forklift drivers.
    On the handler process lines, key pieces of equipment are laser 
sorters and optical camera sorters, which can sort by color and shape. 
Broad spectrum analyses (using infrared and ultraviolet) are 
increasingly effective at identifying defects. Mechanical air injection 
systems use jets of air to remove individual nuts identified as 
defective.
    A key factor in quality improvement are new varieties, including 
Chandler, Howard, Pillory, Ivanhoe and Sawano. With these varieties, 
shell removal is much easier, leaving far fewer fragments and pieces. 
Recent technology improvements have also greatly reduced the incidence 
of foreign material and shell pieces to a level that is far below what 
is allowed under USDA standards, which were established decades 
earlier.
    With the new varieties, the kernel color is much lighter, and the 
nuts are larger. In addition, advances in processing equipment produce 
a much higher percentage of ``pristine halves''. Witnesses testified 
that these three key characteristics yield more money to industry 
stakeholders but are not accounted for in USDA standards.
    According to hearing evidence, prior to the inspection moratorium, 
large volume handlers typically had DFA staff working from a space 
close to their own quality assurance (QA) staff. DFA conducted quality 
tests from in-line samples with processes that largely paralleled those 
of the handler QA staff, but DFA applied the less stringent USDA 
standards. For smaller volume handlers, the DFA staff tested nuts based 
on samples from packaged products on the packing floor (floor 
inspection). For the mandatory outbound inspection, no product could 
leave the processing facility without USDA certification issued by DFA.
    Before the inspection moratorium, operational inefficiencies for 
handlers included sometimes having to wait for qualified DFA inspection 
staff to show up to certify lots in a timely manner, adding to an 
already challenging shipping environment. Hearing evidence suggests 
that the elimination of mandatory inspection, and being able to self-
certify according to customer specifications that are well above USDA 
standards, would be a significant benefit of the proposed changes to 
handlers of all sizes. Some handlers may continue to use DFA inspection 
service for quality control; however, hearing evidence shows industry 
is undergoing a transition away from the traditional practice of third 
party inspections for greater cost savings.
    Witnesses reported that another improvement in operational 
efficiency, and reduced paperwork burden, that would result from the 
proposed amendments is changing from monthly handler assessments to 
three installments to be paid in February, May, and August.
    In summary, hearing evidence points to major technological 
improvements in sorting, processing and storage, and adoption of new 
varieties, as key evidence of how current industry practices result in 
walnut quality that exceeds USDA standards, making mandatory outgoing 
inspection unnecessary.

Estimated Economic Impact of Eliminating Mandatory Inspection

    A key economic impact of the marketing order amendment is the cost 
reduction to industry stakeholders of eliminating mandatory inspection. 
Hearing evidence showed that an estimate of the inspection cost is 
approximately $6 million per year. This cost reduction figure 
represents a key benefit to the industry of implementing these 
amendments.
    Table 2 illustrates the inspection cost estimate. Multiplying the 
total quantity of California walnuts marketed in 2020 (783,500 tons) 
times the average inspection cost of $7.7024 per ton) yields the total 
annual mandatory inspection cost estimate of $6,034,830 shown in Table 
2. These numbers represent the costs incurred by handlers for the 
inspection services supplied by DFA, the Board's inspection agency of 
record.
    The proportion of the crop marketed as inshell and shelled are 42 
and 58 percent, respectively. These proportions are used to show how 
the $6.035 million inspection cost is allocated to the inshell and 
shelled portions of the total U.S. walnut market.

[[Page 64394]]



                         Table 2--Estimated Annual Cost Mandatory Walnut Inspection \1\
----------------------------------------------------------------------------------------------------------------
                                            Inshell         Shelled          Total        Computational detail
----------------------------------------------------------------------------------------------------------------
Share of sales (%)....................             42%             58%            100%  A
Volume (tons).........................         329,070         454,430         783,500  B A * total volume.
Inspection Cost ($ per ton) \2\.......           $6.09           $8.87         $7.7024  C
Total inspection cost \2\'............      $2,004,036      $4,030,794      $6,034,830  D B * C.
----------------------------------------------------------------------------------------------------------------
\1\ This table is based on Exhibit 16A of the walnut marketing order amendment hearing, which used data supplied
  by California Walnut Board.
\2\ Total inspection cost of $6,034,830 in this table is the sum of the inshell and shelled cost and represents
  a slight upward adjustment from the total cost figure of $6,032,950 in hearing Exhibit 16A. This revised total
  cost figure was used to compute a revised inspection cost per ton of $7.7024, representing an average industry
  cost, combining inshell and shelled. This is slightly higher than the $7.70 cost figure presented in Exhibit
  16A.

    Hearing evidence also pointed to other benefits, such as lower 
indirect costs to handlers. Witnesses stated that handlers would 
benefit from reduced operational process redundancies, resulting in 
lower associated costs and administrative burdens. An additional 
efficiency for handlers is that the proposed new marketing order 
assessment mechanism utilizes the same process already in use by 
handlers for their payment to the California Walnut Commission.
    In addition, producers may also benefit from higher grower returns 
through cost savings passed on from increased handler efficiencies.
    The record shows that there would be no negative quality 
implications from implementing the proposed amendments, and consumers 
already benefit from California walnut quality that surpasses USDA 
grade standards. Consumers may also benefit from lower prices resulting 
from reduced handler costs. If the proposed amendments and accompanying 
conforming changes were implemented, both benefits and costs savings 
could be anticipated. For the reasons described above, it is determined 
that the benefits of eliminating mandatory inspection and certification 
of inshelled and shelled walnuts, and of shelled walnuts for 
processing; creating a new mechanism for determining and collecting 
handler assessments; adding authority to charge interest for late 
payments; establishing an assessment rate of $0.0125 per inshell pound 
of walnuts; expanding the definition of ``to handle'' to include 
``receive'', and removing volume control authority would modernize and 
align the Order with current market-driven practices that would result 
in a more efficient industry.
    USDA has not identified any relevant Federal rules that duplicate, 
overlap or conflict with this proposed rule. These amendments are 
intended to improve the operation and administration of the Order and 
to assist in the marketing of California walnuts.
    Board meetings regarding these proposals, as well as the hearing 
date and location, were widely publicized throughout the California 
walnut industry, and all interested persons were invited to attend the 
meetings and the hearing to participate in Board deliberations on all 
issues. All Board meetings and the hearing were public forums, and all 
entities, both large and small, were able to express views on these 
issues. Interested persons are invited to submit information on the 
regulatory impacts of this action on small businesses.
    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.

Paperwork Reduction Act

    Current information collection requirements that are part of the 
Federal marketing order for California walnuts (7 CFR part 984) are 
approved under Office of Management and Budget (OMB) No. 0581-0178, 
Vegetables and Specialty Crops. No changes in these requirements are 
anticipated as a result of this proceeding. Should any such changes 
become necessary, they would be submitted to OMB for approval.
    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.

Civil Justice Reform

    The amendments to the Order proposed herein have been reviewed 
under Executive Order 12988, Civil Justice Reform. They are not 
intended to have retroactive effect. If adopted, the proposed 
amendments would not preempt any State or local laws, regulations, or 
policies, unless they present an irreconcilable conflict with this 
proposal.
    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. A 
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 no later than 20 days after the date of 
entry of the ruling.

Rulings on Briefs of Interested Persons

    Briefs, proposed findings and conclusions, and the evidence in the 
record were considered in making the findings and conclusions set forth 
in this recommended decision. To the extent that the suggested findings 
and conclusions filed by interested persons are inconsistent with the 
findings and conclusions of this recommended decision, the requests to 
make such findings or to reach such conclusions are denied.

General Findings

    The findings hereinafter set forth are supplementary to the 
findings and determinations which were previously made in connection 
with the issuance of the marketing agreement and order; and all said 
previous findings and determinations are hereby ratified and affirmed, 
except insofar as such findings and determinations may be in conflict 
with the findings and determinations set forth herein.
    (1) The marketing order, as amended, and as hereby proposed to be 
further amended, and all of the terms and conditions thereof, would 
tend to effectuate the declared policy of the Act;

[[Page 64395]]

    (2) The marketing order, as amended, and as hereby proposed to be 
further amended, regulates the handling of walnuts grown in the 
production area (California) in the same manner as, and is applicable 
only to, persons in the respective classes of commercial and industrial 
activity specified in the marketing order upon which a hearing has been 
held;
    (3) The marketing order, as amended, and as hereby proposed to be 
further amended, is limited in its application to the smallest regional 
production area which is practicable, consistent with carrying out the 
declared policy of the Act, and the issuance of several orders 
applicable to subdivisions of the production area would not effectively 
carry out the declared policy of the Act;
    (4) The marketing order, as amended, and as hereby proposed to be 
further amended, prescribes, insofar as practicable, such different 
terms applicable to different parts of the production area as are 
necessary to give due recognition to the differences in the production 
and marketing of walnuts grown in the production area; and
    (5) All handling of walnuts grown in the production area as defined 
in the marketing order is in the current of interstate or foreign 
commerce or directly burdens, obstructs, or affects such commerce.
    A 30-day comment period is provided to allow interested persons to 
respond to this proposal. All written exceptions received within the 
comment period will be considered, and a producer referendum will be 
conducted before any of these proposals are implemented.

List of Subjects in 7 CFR Part 984

    Marketing agreements, Nuts, Reporting and recordkeeping 
requirements.

    For the reasons set out in the preamble, the Agricultural Marketing 
Service proposes to amend 7 CFR part 984 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. Revise Sec.  984.12 to read as follows:


Sec.  984.12  Substandard walnuts.

    Substandard walnuts means all walnuts (whether inshell or shelled) 
that do not meet the minimum standard prescribed for merchantable 
walnuts whenever regulations are in effect pursuant to Sec.  984.50.
0
3. Revise Sec.  984.13 to read as follows:


Sec.  984.13  To handle.

    To handle means to receive, pack, sell, consign, transport, or ship 
(except as a common or contract carrier of walnuts owned by another 
person), or in any other way to put walnuts, inshell or shelled, into 
the current of commerce either within the area of production or from 
such area to any point outside thereof, or for a manufacturer or 
retailer within the area of production to purchase directly from a 
grower. However, sales and deliveries by a grower to handlers, hullers, 
or other processors within the area of production shall not, in itself, 
be considered as handling by a grower. The term ``to handle'' shall not 
include sales and deliveries within the area of production between 
handlers.
0
4. In Sec.  984.21, revise the section heading to read as follows:


Sec.  984.21  Handler inventory.

* * * * *


Sec.  984.22  [Amended]

0
5. In Sec.  984.22(a) and (b), remove the word ``merchantable''.


Sec. Sec.  984.23 and 984.26  [Removed and Reserved]

0
6. In Sec. Sec.  984.23 and 984.26, lift the stays of May 7, 2020, and 
remove and reserve the sections.
0
7. Revise Sec.  984.32 to read as follows:


Sec.  984.32  To certify.

    To certify means the issuance of a certification of inspection of 
walnuts in accordance with regulations issued pursuant to Sec.  984.50.


Sec.  984.33   [Removed and Reserved]

0
8. In Sec.  984.33, lift the stay of May 7, 2020, and remove and 
reserve the section.
0
9. In Sec.  984.37, revise paragraphs (b) and (c)(4) to read as 
follows:


Sec.  984.37  Nominations.

* * * * *
    (b) Nominations for handler members shall be submitted on ballots 
mailed by the Board to all handlers in their respective Districts. All 
handlers' votes shall be weighted by the weight of inshell walnuts 
handled by each handler during the preceding marketing year. Each 
handler in the production area may vote for handler member nominees and 
their alternates. However, no handler with less than 35% of the crop 
shall have more than one member and one alternate member. The person 
receiving the highest number of votes for each handler member position 
shall be the nominee for that position.
    (c) * * *
    (4) Nominations for handler members representing handlers that do 
not handle 35% or more of the crop shall be submitted on ballots mailed 
by the Board to those handlers. The votes of these handlers shall be 
weighted by the weight of inshell walnuts handled by each handler 
during the preceding marketing year. Each handler in the production 
area may vote for handler member nominees and their alternates of this 
paragraph (c)(4). However, no handler shall have more than one person 
on the Board either as member or alternate member. The person receiving 
the highest number of votes for a handler member position of this 
paragraph (c)(4) shall be the nominee for that position.
* * * * *
0
10. In Sec.  984.48:
0
a. Revise the introductory text of paragraph (a);
0
b. Remove the words ``merchantable and substandard'' in paragraph 
(a)(3);
0
c. Lift the stays of May 7, 2020, on paragraphs (a)(6) and (7) and 
remove both paragraphs; and
0
d. Redesignate paragraphs (a)(8) and (9) as paragraphs (a)(6) and (7), 
respectively.
    The revision reads as follows:


Sec.  984.48  Marketing estimates and recommendations.

    (a) Each marketing year the Board shall hold a meeting, prior to 
October 20, for the purpose of recommending to the Secretary a 
marketing policy for such year. Each year such recommendation shall be 
adopted by the affirmative vote of at least 60% of the Board and shall 
include the following:
* * * * *


Sec.  984.49   [Removed and Reserved]

0
11. In Sec.  984.49, lift the stays of August 7, 1995, and May 7, 2020, 
and remove and reserve the section.
0
12. In Sec.  984.50, lift the stay of May 7, 2020, on paragraph (e) and 
revise the section to read as follows:


Sec.  984.50  Grade, quality, and size regulations.

    (a) The Board may recommend, subject to the approval of the 
Secretary, regulations that:
    (1) Establish handling requirements for particular grades, sizes, 
or qualities, or any combination thereof, of any or all varieties or 
classifications of walnuts during any period;
    (2) Establish different handling requirements and tolerance limits 
for particular grades, sizes, or qualities, or any combination thereof, 
for different market destinations;

[[Page 64396]]

    (3) Establish different handling requirements for the processing of 
shelled walnuts and the handling thereof; and
    (4) Establish inspection and certification requirements for the 
purposes of this paragraph (a) and paragraph (b) of this section.
    (b) During any period regulations issued under this section are in 
effect, no handler shall handle or process walnuts into manufactured 
items or products unless they meet the applicable requirements under 
this section as evidenced by certification acceptable to the Board.
    (c) Regulations issued under this section may be amended, modified, 
suspended, or terminated whenever it is determined:
    (1) That such action is warranted upon recommendation of the Board 
and approval by the Secretary, or other available information; or
    (2) That regulations issued under this section no longer tend to 
effectuate the declared policy of the Act.


Sec. Sec.  984.51 and 984.52   [Removed and Reserved]

0
13. Remove and reserve Sec. Sec.  984.51 and 984.52.


Sec. Sec.  984.54 and 984.56  [Removed and Reserved]

0
14. In Sec. Sec.  984.54 and 984.56, lift the stays of May 7, 2020, and 
remove and reserve the sections.
0
15. Revise Sec.  984.64 to read as follows:


Sec.  984.64  Disposition of substandard walnuts.

    During any period when regulations are in effect pursuant to Sec.  
984.50, substandard walnuts may be disposed of only for manufacture 
into oil livestock feed, or such others uses as the Board determines to 
be noncompetitive with existing domestic and export markets for 
merchantable walnuts and with proper safeguards to prevent such walnuts 
from thereafter entering channels of trade in such markets. Each 
handler shall submit, in such form and at such intervals as the Board 
may determine, reports of his production and holdings of substandard 
walnuts and the disposition of all substandard walnuts to any other 
person, showing the quantity, lot, date, name and address of the person 
to whom delivered, the approved use and such other information 
pertaining thereto as the Board may specify.


Sec.  984.66  [Removed and Reserved]

0
16. In Sec.  984.66, lift the stay of May 7, 2020, and remove and 
reserve the section.
0
17. In Sec.  984.67:
0
a. Lift the stay of May 7, 2020, on paragraph (a) and remove the 
paragraph;
0
b. Redesignate paragraphs (b) and (c) as paragraphs (a) and (b), 
respectively; and
0
c. Revise newly redesignated paragraph (a).
    The revision reads as follows:


Sec.  984.67  Exemptions.

    (a) Exemptions from assessments and quality regulations--(1) Sales 
by growers direct to consumers. Any walnut grower may handle walnuts of 
his production free of the regulatory and assessment provisions of this 
part if he sells such walnuts in the area of production directly to 
consumers under the following types of exemptions:
    (i) At roadside stands and farmers' markets;
    (ii) In quantities not exceeding an aggregate of 500 pounds of 
inshell walnuts of 200 pounds of shelled walnuts during any marketing 
year (at locations other than those specified in paragraph (a)(1)(i) of 
the section); and
    (iii) If shipped by parcel post or express in quantities not 
exceeding 10 pounds of inshell walnuts or 4 pounds of shelled walnuts 
to any one consumer in any one calendar day.
    (2) Green walnuts. Walnuts which are green and which are so 
immature that they cannot be used for drying and sale as dried walnuts 
may be handled without regard to the provisions of this part.
    (3) Noncompetitive outlets. Any person may handle walnuts, free of 
the provisions of this part, for use by charitable institutions, relief 
agencies, governmental agencies for school lunch programs, and 
diversion to animal feed or oil manufacture pursuant to an authorized 
governmental diversion program.
* * * * *
0
18. In Sec.  984.69, lift the stay of May 7, 2020, on paragraph (b) and 
revise the section to read as follows:


Sec.  984.69  Assessments.

    (a) Requirement for payment. Each handler shall pay the Board, on 
demand, his or her pro rata share of the expenses authorized by the 
Secretary for each marketing year. Each handler's pro rata share shall 
be the rate of assessment per inshell pound of walnuts fixed by the 
Secretary times the pounds of walnuts received by him or her for his or 
her own account (except as to receipt from other handlers on which 
assessments have been paid). At any time during or after the marketing 
year the Secretary may increase the assessment rate as necessary to 
cover authorized expenses and each handler's pro rata share shall be 
adjusted accordingly.
    (b) Assessment rate. The assessment rate set out may be modified by 
the Secretary, based upon a recommendation of the Board or other 
available data.
    (c) Late payment. If a handler does not pay assessments within the 
time prescribed by the Board, the assessment may be increased by a late 
payment charge and/or an interest rate charge at amounts prescribed by 
the Board with approval of the Secretary.
    (d) Accounting. If at the end of a marketing year the assessments 
collected are in excess of expenses incurred, such excess shall be 
accounted for in accordance with one of the following:
    (1) If such excess is not retained in a reserve, as provided in 
paragraph (d)(2) or (3) of this section, it shall be refunded to 
handlers from whom collected, and each handler's share of such excess 
funds shall be the amount of assessments he or she has paid in excess 
of his or her pro rata share of the actual expenses of the Board.
    (2) Excess funds may be used temporarily by the Board to defray 
expenses of the subsequent marketing year provided each handler's share 
of such excess shall be made available to him or her by the Board 
within five months after the end of the year.
    (3) The Board may carry over such excess into subsequent marketing 
years as a reserve: Provided, that funds already in reserve do not 
exceed approximately two years' budgeted expenses. In the event that 
funds exceed two marketing years' budgeted expenses, future assessments 
will be reduced to bring the reserves to an amount that is less than or 
equal to two marketing years' budgeted expenses. Such reserve funds may 
be used:
    (i) To defray expenses, during any marketing year, prior to the 
time assessment income is sufficient to cover such expenses;
    (ii) To cover deficits incurred during any year when assessment 
income is less than expenses;
    (iii) To defray expenses incurred during any period when any or all 
provisions of this part are suspended; and
    (iv) To meet any other such costs recommended by the Board and 
approved by the Secretary.
    (e) Advanced assessments and commercial loans. To provide funds for 
the administration of the provisions of this part during the part of a 
marketing year when neither sufficient operating reserve funds nor 
sufficient revenue from assessments on the current

[[Page 64397]]

season's certifications are available, the Board may accept payment of 
assessments in advance or may borrow money from a commercial lending 
institution for such purposes.
    (f) Termination. Any money collected from assessments hereunder and 
remaining unexpended in the possession of the Board upon termination of 
this part shall be distributed in such manner as the Secretary may 
direct.
0
19. Revise Sec.  984.72 to read as follows:


Sec.  984.72  Reports of walnuts handled.

    Each handler who handles walnuts, inshell or shelled, at any time 
during a marketing year shall submit to the Board in such form and at 
such intervals as the Board may prescribe, reports showing the quantity 
so handled and such other information pertinent thereto as the Board 
may specify.
0
20. Revise Sec.  984.77 to read as follows:


Sec.  984.77  Verification of reports.

    For the purpose of verifying and checking reports filed by handlers 
or the operations of handlers, the Secretary and the Board through its 
duly authorized representatives shall have access to any premises where 
walnuts and walnut records are held. Such access shall be available at 
any time during reasonable business hours. Authorized representatives 
shall be permitted to inspect any walnuts held and any and all records 
of the handler with respect to matters within the purview of this part. 
Each handler shall maintain complete records on the receiving, holding, 
and disposition of both inshell and shelled walnuts. Each handler shall 
furnish all labor necessary to facilitate such inspections at no 
expense to the Board or the Secretary. Each handler shall store all 
walnuts held by him or her in such manner as to facilitate inspection 
and shall maintain adequate storage records, which will permit accurate 
identification of respective lots and of all such walnuts held or 
disposed of theretofore. The Board, with the approval of the Secretary, 
may establish any methods and procedures needed to verify reports.


Sec.  984.89  [Amended]

0
21. In Sec.  984.89(b)(4), remove the term ``fiscal period'' and add in 
its place the term ``marketing year''.
0
22. Revise Sec.  984.347 to read as follows:


Sec.  984.347  Assessment rate.

    On and after September 1, 2023, an assessment rate shall be fixed 
at $0.0125 per inshell pound of California walnuts.


Sec.  984.450  [Removed and Reserved]

0
23. In Sec.  984.450, lift the stays of May 7, 2020, on paragraphs (a) 
and (b) and remove and reserve the section.


Sec.  984.451  [Removed and Reserved]

0
24. In Sec.  984.451, lift the stay of May 7, 2020, on paragraph (c) 
and remove and reserve the section.


Sec.  984.452   [Removed and Reserved]

0
25. Remove and reserve Sec.  984.452.


Sec.  984.456   [Removed and Reserved]

0
26. In Sec.  984.456, lift the stay of May 7, 2020, and remove and 
reserve the section.


Sec.  984.459  [Amended]

0
27. In Sec.  984.459, remove and reserve paragraph (a)(3).


Sec.  984.464   [Removed and Reserved]

0
28. In Sec.  984.464, lift the stay of May 7, 2020, on paragraph (a) 
and remove and reserve the section.
0
29. Revise Sec.  984.472 to read as follows:


Sec.  984.472  Reports of walnuts, received, shipped, and committed.

    (a) Reports of walnuts shipped during a month shall be submitted to 
the Board on California Walnut Board (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 walnuts purchased.
    (c) Reports of walnuts on which handlers have made purchase 
commitments with buyers during the month, but which have not yet been 
shipped, 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 committed. Such reports shall show the quantity of walnuts 
committed in either inshell or shelled pounds. If the handler made no 
commitments during any month, he/she shall mark ``None'' in the 
``Purchase Commitments'' section of CWB Form No. 6.
0
30. Revise Sec.  984.476 to read as follows:


Sec.  984.476  Report of walnut receipts produced outside California or 
the United States.

    Each handler who receives walnuts from outside California or 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.

Erin Morris,
Associate Administrator, Agricultural Marketing Service.
[FR Doc. 2022-22806 Filed 10-24-22; 8:45 am]
BILLING CODE P