[Federal Register Volume 89, Number 20 (Tuesday, January 30, 2024)]
[Rules and Regulations]
[Pages 5757-5760]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-01609]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 984

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


Walnuts Grown in Califfornia; Decreased Assessment Rate

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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

DATES: Effective February 29, 2024.

FOR FURTHER INFORMATION CONTACT: Joshua R. Wilde, Marketing Specialist, 
or Barry Broadbent, Acting 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, 
amends regulations issued to carry out a marketing order as defined in 
7 CFR 900.2(j). This 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 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 
reaffirms, supplements, and updates Executive Order 12866 and further 
directs agencies to solicit and consider input from a wide range of 
affected and interested parties through a variety of means. This 
proposed action falls within a category of regulatory actions that the 
Office of Management and Budget (OMB) exempted from Executive Order 
12866 review.
    This 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 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 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 
will 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 rule decreases 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 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

[[Page 5758]]

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 completed when a final rule published in the 
Federal Register on August 21, 2023 (88 FR), 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 recommended amending 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 (and by extension to 
walnut growers) while balancing the Board's assessment income with 
budgeted expenses for the 2023-2024 and subsequent marketing years.
    The Board ultimately recommended decreasing the assessment rate to 
$0.011 per inshell pound. The 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 will 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 2021-2022 through 2022-2023 marketing 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 budgeted 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 will generate $15,400,000 in assessment 
revenue at the decreased assessment rate (1.4 billion pounds multiplied 
by the $0.011 assessment rate). The remaining $1,411,250 needed to 
cover budgeted expenditures will 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 budgeted 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 decreased assessment rate will 
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.
    The assessment rate will 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 will 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.

Final 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 rule on small entities. Accordingly, AMS has prepared this final 
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

[[Page 5759]]

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 (NAICS Code 111335), and small agricultural service 
firms are defined as those whose annual receipts are less than 
$34,000,000 (NAICS Code 115114) (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 walnuts 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 rule decreases 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 
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 will 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 will be adequate to meet budgeted expenditures for the 
2023-2024 marketing year.
    The major expenditures budgeted 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 included 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 decreased assessment rate will 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 
will 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 will be about 
1.5 percent.
    This action decreases the assessment obligation imposed on 
handlers. Assessments are applied uniformly on all handlers, and some 
of the costs may be passed on to growers. However, 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 
were invited to submit comments on this 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 will be necessary 
as a result of this rule. Should any changes become necessary, they 
would be submitted to OMB for approval.
    This rule will 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 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 rule.
    A proposed rule concerning this action was published in the Federal 
Register on October 27, 2023 (88 FR 73763). Copies of the proposed rule 
were also mailed or sent via email to all walnut handlers. A copy of 
the proposed rule was made available through the internet by AMS via 
https://www.regulations.gov. A 30-day comment period ending November 
27, 2023, was provided for interested persons to respond to the 
proposal. AMS received one comment in support

[[Page 5760]]

of the decreased assessment rate. Accordingly, no changes have been 
made to the rule as proposed.
    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, AMS has determined that this rule tends to 
effectuate the declared policy of the Act.

List of Subjects in 7 CFR Part 984

    Marketing agreements, Nuts, Reporting and recordkeeping 
requirements.

    For the reasons set forth in the preamble, the Agricultural 
Marketing Service amends 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. 2024-01609 Filed 1-29-24; 8:45 am]
BILLING CODE P