[Federal Register Volume 88, Number 207 (Friday, October 27, 2023)]
[Proposed Rules]
[Pages 73763-73766]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-23729]


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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. 88, No. 207 / Friday, October 27, 2023 / 
Proposed Rules  

[[Page 73763]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 984

[Doc. No. AMS-SC-23-0030]


Walnuts Grown in California; Decreased Assessment Rate

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would implement a recommendation from the 
California Walnut Board (Board) to decrease the assessment rate 
established for the 2023-2024 and subsequent marketing years. The 
proposed assessment rate would remain in effect indefinitely unless 
modified, suspended, or terminated.

DATES: Comments must be received by November 27, 2023 to be assured 
consideration.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this proposed rule. Comments can be sent to the Docket 
Clerk, Market Development Division, Specialty Crops Program, AMS, USDA, 
1400 Independence Avenue SW, STOP 0237, Washington, DC 20250-0237. 
Comments can also be submitted to the Docket Clerk electronically by 
Email: [email protected] or via the internet at: https://www.regulations.gov. Comments should reference the document number and 
the date and page number of this issue of the Federal Register. 
Comments submitted in response to this proposed rule will be included 
in the record, will be made available to the public, and can be viewed 
at: https://www.regulations.gov. Please be advised that the identity of 
the individuals or entities submitting the comments will be made public 
on the internet at the address provided above.

FOR FURTHER INFORMATION CONTACT: Joshua R. Wilde, Marketing Specialist, 
or Gary Olson, Chief, West Region Branch, Market Development Division, 
Specialty Crops Program, AMS, USDA; Telephone: (503) 326-2724, or 
Email: [email protected] or [email protected].
    Small businesses may request information on complying with this 
regulation by contacting Richard Lower, Market Development Division, 
Specialty Crops Program, AMS, USDA, 1400 Independence Avenue SW, STOP 
0237, Washington, DC 20250-0237; Telephone: (202) 720-8085, or Email: 
[email protected].

SUPPLEMENTARY INFORMATION: This action, pursuant to 5 U.S.C. 553, 
proposes to amend regulations issued to carry out a marketing order as 
defined in 7 CFR 900.2(j). This proposed rule is issued under Marketing 
Agreement and Order No. 984, both as amended (7 CFR part 984), 
regulating the handling of walnuts grown in California. Part 984 
(referred to as the ``Order'') is effective under the Agricultural 
Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), 
hereinafter referred to as the ``Act.'' The Board locally administers 
the Order and is comprised of growers and handlers of California 
walnuts operating within the area of production, and a public member.
    The Agricultural Marketing Service (AMS) is issuing this proposed 
rule in conformance with Executive Orders 12866, 13563, and 14094. 
Executive Orders 12866 and 13563 direct agencies to assess all costs 
and benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and equity). Executive Order 13563 
emphasizes the importance of quantifying both costs and benefits, 
reducing costs, harmonizing rules, and promoting flexibility. Executive 
Order 14094 supplements and reaffirms Executive Orders 12866 and 13563 
and directs agencies to conduct proactive outreach to engage interested 
and affected parties through a variety of means, such as through field 
offices, and alternative platforms and media. This action falls within 
a category of regulatory actions that the Office of Management and 
Budget (OMB) exempted from Executive Orders 12866, 13563, and 14094 
review.
    This proposed rule has been reviewed under Executive Order 13175--
Consultation and Coordination with Indian Tribal Governments, which 
requires Federal agencies to consider whether their rulemaking actions 
would have Tribal implications. AMS has determined that this proposed 
rule is unlikely to have substantial direct effects on one or more 
Indian Tribes, on the relationship between the Federal Government and 
Indian Tribes, or on the distribution of power and responsibilities 
between the Federal Government and Indian Tribes.
    This proposed rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. Under the Order now in effect, California walnut 
handlers are subject to assessments. Funds to administer the Order are 
derived from such assessments. It is intended that the assessment rate 
would be applicable to all assessable California walnuts for the 2023-
2024 marketing year, and continue until amended, suspended, or 
terminated.
    The Act provides that administrative proceedings must be exhausted 
before parties may file suit in court. Under section 608c(15)(A) of the 
Act, any handler subject to an order may file with the U.S. Department 
of Agriculture (USDA) a petition stating that the order, any provision 
of the order, or any obligation imposed in connection with the order is 
not in accordance with law and request a modification of the order or 
to be exempted therefrom. Such handler is afforded the opportunity for 
a hearing on the petition. After the hearing, USDA would rule on the 
petition. The Act provides that the district court of the United States 
in any district in which the handler is an inhabitant, or has his or 
her principal place of business, has jurisdiction to review USDA's 
ruling on the petition, provided an action is filed not later than 20 
days after the date of the entry of the ruling.
    This proposed rule would decrease the assessment rate for 
California walnuts handled under the Order from $0.0125 per inshell 
pound, the rate that was initially established for the 2023-2024 and 
subsequent marketing years, to $0.011 per inshell pound.
    Section 984.68 authorizes the Board, with the approval of AMS, to 
formulate an annual budget of expenses and collect assessments from 
handlers to

[[Page 73764]]

administer the program. The members of the Board are familiar with the 
Board's needs and with the costs of goods and services in their local 
area and are able to formulate an appropriate budget and assessment 
rate. The assessment rate is formulated and discussed in a public 
meeting, and all directly affected persons have an opportunity to 
participate and provide input.
    On September 21, 2021, at the request of the Board, AMS issued a 
temporary moratorium on the enforcement of the Order's grading and 
assessment requirements as the Board considered multiple amendments to 
modify the Federal marketing order for California walnuts through the 
formal rulemaking process. On April 19 and 20, 2022, AMS held a public 
hearing on the proposed amendments, including a recommendation by the 
Board to establish an assessment rate of $0.0125 per inshell pound of 
walnuts. The Board recommended the assessment rate of $0.0125 per 
inshell pound to ensure the Board would have the ability to collect 
assessments to generate funds needed to sustain Board activities and 
programs moving forward. The Board determined $0.0125 as appropriate 
given the available data at that time and with the understanding that a 
rate change may be necessary if updated market data indicates such an 
adjustment is necessary after the completion of the formal rulemaking. 
The formal rulemaking was completed when a final rule was published in 
the Federal Register on August 21, 2023 (88 FR 56745), and effective 
September 20, 2023, an assessment rate of $0.0125 per inshell pound of 
walnuts was established.
    Prior to the publication of the final rule, the Board met on June 
9, 2023, and unanimously recommended 2023-2024 marketing year 
expenditures of $16,811,250 and agreed to amend the 2023-2024 marketing 
year assessment rate to $0.011 per inshell pound of California walnuts 
handled. By comparison, the 2022-2023 budgeted expenditures were 
$5,275,000 and the 2021-2022 budgeted expenditures were $18,892,500.
    Assessments are applied uniformly on all handlers, and some of the 
costs may be passed on to growers. The assessment rate of $0.0125 per 
inshell pound of walnuts along with non-assessment revenue is 
sufficient to cover the upcoming marketing year's budgeted 
expenditures; however, during Board meetings, industry members 
expressed that the cost of production is greater than grower revenue 
and that growers are struggling. The Board then deliberated on a rate 
that would provide a cost relief for handlers while balancing the 
Board's assessment income with budgeted expenses for the 2023-24 and 
subsequent marketing years.
    The Board ultimately recommended decreasing the assessment rate to 
$0.011 per inshell pound. The proposed assessment rate of $0.011 per 
inshell pound is $0.0015 lower than the rate established by the August 
21, 2023, final rule, with an effective date of September 20, 2023. The 
Board believes the decreased assessment rate would balance assessment 
income with budgeted expenditures and provide some financial relief to 
walnut growers after industry members expressed concern over the 
increasing cost of production as outpacing grower revenue, leading to 
tighter operating margins.
    For the past two years, the Board has operated using available 
financial reserves to meet its expenses. The Board expects to enter the 
2023-2024 marketing year with a reserve balance of approximately 
$10,043,811, which is within the maximum permitted under Sec.  984.69 
of the Order of approximately two marketing years' budgeted expenses. 
The Board projects handler receipts of 700,000 tons (1.4 billion 
pounds) of assessable California walnuts for the 2023-2024 marketing 
year, which is the same quantity that was projected for the 2022-2023 
marketing year.
    The major expenditures recommended by the Board for the 2023-2024 
marketing year include $10,588,750 for domestic marketing; $2,472,500 
for employee expenses; $1,700,000 for production research; $725,000 for 
grades and standards activities; $585,000 for industry crop/acreage 
reporting; $350,000 for office expenses; and $390,000 for other 
operating expenses. For comparison, there were no Board-authorized 
expenses for domestic marketing for the 2022-2023 marketing year due to 
the moratorium. Instead, the Board authorized reserve funding during 
the 2022-2023 marketing year for budgeted expenses, which included 
$1,894,000 for employee expenses; $1,700,000 for production research; 
$725,000 for grades and standard activities; $184,000 for industry 
crop/acreage reporting; $282,000 for office expenses; and $284,000 for 
operating expenses.
    The Board derived the recommended assessment rate by considering 
anticipated expenses, the estimated volume of assessable walnuts, and 
the amount of funds available in the authorized reserve. The expected 
700,000 tons (1.4 billion pounds) of California walnuts from the 2023-
2024 marketing year crop would generate $15,400,000 in assessment 
revenue at the proposed assessment rate (1.4 billion pounds multiplied 
by the $0.011 assessment rate). The remaining $1,411,250 needed to 
cover budgeted expenditures would come from an approved administrative 
services agreement with the California Walnut Commission, which shares 
staff and office expenses with the Board. The income generated from 
assessments, along with non-assessment revenue, should be sufficient to 
meet the Board's estimated program expenditures of $16,811,250.
    Prior to arriving at this budget and assessment rate 
recommendation, the Board considered information from various sources, 
such as the Board's Executive Committee. The Board discussed various 
alternatives to its recommended action, including maintaining the 
current assessment rate of $0.0125 per inshell pound of assessable 
walnuts and decreasing the assessment rate by a different amount. 
However, the Board determined that the recommended assessment rate 
would be necessary to effectively achieve the Board's goals of covering 
budgeted expenses for the 2023-2024 marketing year and maintaining 
adequate funds in its financial reserve while providing a cost relief 
to handlers which may be passed on to growers.
    This new proposed assessment rate would continue in effect 
indefinitely unless modified, suspended, or terminated by AMS upon 
recommendation and information submitted by the Board or other 
available information.
    Although this assessment rate would be in effect for an indefinite 
period, the Board will continue to meet prior to or during each 
marketing year to recommend a budget of expenses and consider 
recommendations for modification of the assessment rate. The dates and 
times of Board meetings are available from the Board or AMS. Board 
meetings are open to the public and interested persons may express 
their views at these meetings. AMS would evaluate Board recommendations 
and other available information to determine whether modification of 
the assessment rate is needed. Further rulemaking would be undertaken 
as necessary. The Board's 2023-2024 marketing year budget, and those 
for subsequent marketing years, will be reviewed and, as appropriate, 
approved by AMS.

[[Page 73765]]

Initial Regulatory Flexibility Analysis

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA) (5 U.S.C. 601-612), AMS has considered the economic impact of 
this proposed rule on small entities. Accordingly, AMS has prepared 
this initial regulatory flexibility analysis.
    The purpose of the RFA is to fit regulatory actions to the scale of 
businesses subject to such actions in order that small businesses will 
not be unduly or disproportionately burdened. Marketing orders issued 
pursuant to the Act, and the rules issued thereunder, are unique in 
that they are brought about through group action of essentially small 
entities acting on their own behalf.
    There are approximately 4,500 walnut growers in the production area 
and 80 handlers subject to regulation under the Order. Small 
agricultural growers of California walnuts are defined by the Small 
Business Administration (SBA) as those having annual receipts of less 
than $3,750,000, and small agricultural service firms are defined as 
those whose annual receipts are less than $34,000,000 (13 CFR 121.201).
    Data from USDA's National Agricultural Statistics Service (NASS), 
indicate a three-year average value of utilized walnut production of 
$1.069 billion for the most recent seasons for which data is available 
(2019-2020 through 2021-2022 marketing years). Dividing that figure by 
the number of walnut growers (4,400) yields an average annual crop 
value per grower of approximately $243,045. This figure is well below 
the SBA small agricultural producer threshold of $3,750,000 in annual 
sales. Assuming a normal distribution, this provides evidence that a 
large majority of walnut growers would likely be considered small 
agricultural producers according to the SBA definition. Additionally, 
data from NASS's 2017 Agricultural Census show that 86 percent of 
California farms growing walnuts at the time had walnut sales of less 
than $1 million.
    Based on information from the Board, approximately 70 percent of 
California's walnut handlers shipped assessable walnuts valued under 
$34 million during the 2022-2023 marketing year and would, therefore, 
be considered small handlers according to the SBA definition. In light 
of the foregoing, it is reasonable to conclude that a substantial 
majority of both walnut growers and handlers would be considered small 
business entities according to current SBA definitions.
    This proposed rule would decrease the assessment rate collected 
from handlers for the 2023-2024 and subsequent marketing years from 
$0.0125 to $0.011 per inshell pound of California walnuts. Authority 
for this action can be found under Sec.  984.68 of the Order. The Board 
unanimously recommended 2023-2024 marketing year expenditures of 
$16,811,250 and an assessment rate of $0.011 per inshell pound of 
California walnuts. The proposed assessment rate of $0.011 is $0.0015 
lower than the current rate. The Board expects the industry to handle 
700,000 tons (1.4 billion pounds) of California walnuts during the 
2023-2024 marketing year. Thus, the $0.011 per inshell pound assessment 
rate should provide $15,400,000 in assessment income (1.4 billion 
pounds multiplied by $0.011). The Board also expects to receive 
$1,411,250 from an administrative services agreement with the 
California Walnut Commission. Income derived from these sources should 
be adequate to meet budgeted expenditures for the 2023-2024 marketing 
year.
    The major expenditures recommended by the Board for the 2023-2024 
marketing year include $10,588,750 for domestic marketing, $2,472,500 
for employee expenses, $1,700,000 for production research, $725,000 for 
grades and standards activities, $585,000 for industry crop/acreage 
reporting, $350,000 for office expenses, and $390,000 for other 
operating expenses. For comparison, there were no Board-authorized 
expenses for domestic marketing for the 2022-2023 marketing year while 
assessment collection was temporarily suspended. The other 2022-2023 
marketing year budgeted expenses were $1,894,000, $1,700,000, $725,000, 
$184,000, $282,000, and $284,000 respectively.
    The Board recommended decreasing the assessment rate in order to 
provide relief to California walnut growers while still generating 
adequate income to cover all of the Board's budgeted expenses for the 
2023-2024 marketing year. Prior to arriving at this budget and 
assessment rate recommendation, the Board considered information from 
various sources and discussed various alternatives to its recommended 
action. These include maintaining the current assessment rate of 
$0.0125 per inshell pound of assessable walnuts and decreasing the 
assessment rate by a different amount. However, the Board determined 
that the recommended assessment rate would be necessary to effectively 
achieve the Board's goals of covering budgeted expenses for the 2023-
2024 marketing year and maintaining adequate funds in its financial 
reserve. This action would maintain the Board's reserve balance at a 
level that the Board believes is appropriate and is compliant with the 
provisions of the Order.
    Based upon information from NASS, the grower price reported for 
walnuts in the 2021 crop year was $1,410 per ton ($0.71 per pound). To 
determine the estimated assessment revenue as a percentage of the total 
grower revenue, we calculate the assessment rate ($0.011 per inshell 
pound) divided by the grower price ($0.71 per pound) and multiply that 
number by 100. Therefore, estimated assessment revenue as a percentage 
of total grower revenue for the 2023-2024 marketing year would be about 
1.5 percent.
    This proposed action would decrease the assessment obligation 
imposed on handlers. Assessments are applied uniformly on all handlers, 
and some of the costs may be passed on to growers. However, these costs 
are expected to be offset by the benefits derived by the operation of 
the Order.
    The Board's meetings are widely publicized throughout the 
production area. The California walnut industry and all interested 
persons are invited to attend the meetings and participate in Board 
deliberations on all issues. Like all Board meetings, the June 9, 2023, 
meeting was a public meeting and all entities, both large and small, 
were able to express views on this issue. Finally, interested persons 
are invited to submit comments on this proposed rule, including the 
regulatory and information collection impacts of this action on small 
businesses.
    In accordance with the Paperwork Reduction Act of 1995, (44 U.S.C. 
chapter 35), the Order's information collection requirements have been 
previously approved by OMB and assigned OMB No. 0581-0178, Vegetable 
and Specialty Crops. No changes in those requirements would be 
necessary as a result of this proposed rule. Should any changes become 
necessary, they would be submitted to OMB for approval.
    This proposed rule would not impose any additional reporting or 
recordkeeping requirements on either small or large California walnut 
handlers. As with all Federal marketing order programs, reports and 
forms are periodically reviewed to reduce information requirements and 
duplication by industry and public sector agencies.
    AMS is committed to complying with the E-Government Act, to promote 
the use of the internet and other information technologies to provide 
decreased opportunities for citizen

[[Page 73766]]

access to Government information and services, and for other purposes.
    AMS has not identified any relevant Federal rules that duplicate, 
overlap, or conflict with this proposed rule.
    A small business guide on complying with fruit, vegetable, and 
specialty crop marketing agreements and orders may be viewed at: 
https://www.ams.usda.gov/rules-regulations/moa/small-businesses. Any 
questions about the compliance guide should be sent to Richard Lower at 
the previously mentioned address in the FOR FURTHER INFORMATION CONTACT 
section.
    After consideration of all relevant material presented, including 
the information and recommendations submitted by the Board and other 
available information, USDA has determined that this proposed rule is 
consistent with and will effectuate the purposes of the Act.
    A 30-day comment period is provided to allow interested persons to 
respond to this proposed rule. All written comments timely received 
will be considered before a final determination is made on this 
proposal.

List of Subjects in 7 CFR Part 984

    Marketing agreements, Reporting and recordkeeping requirements, 
Walnuts.

    For the reasons set forth 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. Section 984.347 is revised to read as follows:


Sec.  984.347  Assessment rate.

    On and after September 1, 2023, an assessment rate of $0.011 per 
inshell pound is established for California walnuts.

Erin Morris,
Associate Administrator, Agricultural Marketing Service.
[FR Doc. 2023-23729 Filed 10-26-23; 8:45 am]
BILLING CODE P