[Federal Register Volume 89, Number 159 (Friday, August 16, 2024)]
[Proposed Rules]
[Pages 66639-66641]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-18287]


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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. 89, No. 159 / Friday, August 16, 2024 / 
Proposed Rules  

[[Page 66639]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 984

[Doc. No. AMS-SC-24-0039]


Walnuts Grown in California; Increased Assessment Rate

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

ACTION: Proposed rule.

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SUMMARY: This proposed rulemaking would implement a recommendation from 
the California Walnut Board (Board) to increase the assessment rate 
established for the 2024-2025 and subsequent marketing years from 
$0.011 to $0.0125 per inshell pound of California walnuts. The proposed 
assessment rate would remain in effect indefinitely unless modified, 
suspended, or terminated.

DATES: Comments must be received by September 16, 2024.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this proposed rulemaking. 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 sent 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 rulemaking 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 Barry Broadbent, Chief, Northwest 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 rulemaking is issued under 
Marketing Order No. 984, as amended (7 CFR part 984), regulating the 
handling of walnuts grown in California. Part 984 (referred to as the 
``Order'') is effective under the Agricultural Marketing Agreement Act 
of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the 
``Act.'' The Board locally administers the Order and comprises 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 
rulemaking 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 
Orders 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 proposed rulemaking 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 rulemaking 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 rulemaking 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 2024-2025 marketing year, and continue until amended, 
suspended, or terminated.
    The Act provides that administrative proceedings must be exhausted 
before parties may file suit in court. Under section 608c(15)(A) of the 
Act, any handler subject to an order may file with USDA a petition 
stating that the order, any provision of the order, or any obligation 
imposed in connection with the order is not in accordance with law and 
request a modification of the order or to be exempted therefrom. Such 
handler is afforded the opportunity for a hearing on the petition. 
After the hearing, USDA would rule on the petition. The Act provides 
that the district court of the United States in any district in which 
the handler is an inhabitant, or has his or her principal place of 
business, has jurisdiction to review USDA's ruling on the petition, 
provided an action is filed not later than 20 days after the date of 
the entry of the ruling.
    This proposed rulemaking would increase the assessment rate for 
California walnuts handled under the Order from $0.011 per inshell 
pound, the rate that was established for the 2023-2024 and subsequent 
marketing years, to $0.0125 per inshell pound for the 2024-2025 and 
subsequent marketing years.
    Sections 984.68 and 984.69 authorize the Board, with the approval 
of AMS, to formulate an annual budget of expenses

[[Page 66640]]

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.
    For the 2023-2024 and subsequent marketing years, the Board 
recommended, and AMS approved, an assessment rate of $0.011 per inshell 
pound of California walnuts within the production area. That rate 
continues in effect from marketing year to marketing year until 
modified, suspended, or terminated by AMS upon recommendation and 
information submitted by the Board or other information available to 
AMS.
    The Board met on May 15, 2024, and unanimously recommended 2024-
2025 marketing year expenditures of $19,886,800 and an assessment rate 
of $0.0125 per inshell pound of California walnuts for the 2024-2025 
marketing year. In comparison, last year's budgeted expenditures were 
$16,811,250. The proposed assessment rate of $0.0125 per inshell pound 
is $0.0015 higher than the rate currently in effect. The Board 
recommended increasing the assessment rate to better align assessment 
revenue with budgeted expenses, due in part to a smaller estimated 
crop. The Board projects handler receipts of 730,000 tons (equivalent 
to 1.46 billion pounds) of assessable California walnuts for the 2024-
2025 marketing year, down from the approximately 820,000 tons (1.64 
billion pounds) handled during the 2023-2024 marketing year.
    The major expenditures recommended by the Board for the 2024-2025 
marketing year include $13,330,200 for domestic marketing, $2,838,600 
for employee expenses, $2,425,000 for production and post-harvest 
research, $435,000 for office expenses, $473,000 for travel and other 
operating expenses, and $385,000 for crop and acreage reporting. For 
comparison, budgeted expenses for these items during the 2023-2024 
marketing year were $10,588,750, $2,472,500, $2,425,000, $350,000, 
$390,000, and $585,000, respectively.
    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 
730,000 tons (1.46 billion pounds) of California walnuts from the 2024-
2025 marketing year crop would generate $18,250,000 in assessment 
revenue at the proposed assessment rate (1.46 billion pounds multiplied 
by the $0.0125 assessment rate). The remaining $1,636,800 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 $19,886,800. Funds 
available in the financial reserve (currently about $14,665,274) would 
be kept within the maximum permitted by the Order (approximately two 
years' budgeted expenses as authorized in Sec.  984.69).
    The 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 2024-2025 marketing year budget, and those 
for subsequent marketing years, will be reviewed and, as appropriate, 
approved by AMS.

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 rulemaking 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 68 handlers subject to regulation under the 
Order and approximately 4,500 growers of California walnuts in the 
production area. At the time this analysis was prepared, the Small 
Business Administration (SBA) defined small agricultural service firms 
as those having annual receipts of less than $34,000,000 (North 
American Industry Classification System (NAICS) code 115114, 
Postharvest Crop Activities), and small agricultural producers of 
walnuts as those having annual receipts of less than $3,750,000 (NAICS 
code 111335, Tree Nut Farming) (13 CFR 121.201).
    Data from USDA's National Agricultural Statistics Service (NASS), 
indicate a three-year average value of utilized walnut production of 
$828.2 million for the most recent seasons for which data is available 
(2020-2021 through 2022-2023 marketing years). Dividing that figure by 
the number of walnut growers (4,500) yields an average annual crop 
value per grower of approximately $184,000. 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 78 percent of 
California's walnut handlers shipped assessable walnuts valued under 
$34 million during the 2023-2024 marketing year and would, therefore, 
be considered small handlers according to the SBA definition. 
Considering the abovementioned, 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 proposal would increase the assessment rate collected from 
handlers for the 2024-2025 and subsequent marketing years from $0.011 
to $0.0125 per inshell pound of California walnuts. The Board 
unanimously recommended 2024-2025 marketing year expenditures of 
$19,886,800 and an assessment rate of $0.0125 per inshell pound of 
California walnuts. The proposed assessment rate of $0.0125 is $0.0015 
higher than the rate currently in effect. The Board expects the 
industry to handle 730,000 tons (1.46 billion pounds) of California 
walnuts during the 2024-2025

[[Page 66641]]

marketing year. Thus, the $0.0125 per inshell pound assessment rate 
should provide $18,250,000 in assessment income (1.4 billion pounds 
multiplied by $0.0125). The Board also expects to receive $1,636,800 
from an administrative services agreement with the California Walnut 
Commission. Income derived from these sources should be adequate to 
meet budgeted expenditures for the 2024-2025 marketing year.
    The major expenditures recommended by the Board for the 2024-2025 
marketing year include $13,330,200 for domestic marketing, $2,838,600 
for employee expenses, $2,425,000 for production and post-harvest 
research, $435,000 for office expenses, $473,000 for travel and other 
operating expenses, and $385,000 for crop and acreage reporting. For 
comparison, budgeted expenses for these items during the 2023-2024 
marketing year were $10,588,750, $2,472,500, $2,425,000, $350,000, 
$390,000, and $585,000, respectively.
    The Board recommended increasing the assessment rate to meet 
necessary expenses, due in part to a smaller estimated crop for the 
2024-2025 marketing year. The Board estimates shipments for the 2024-
2025 marketing year to be approximately 730,000 tons (equivalent to 
1.46 billion pounds). Given the Board's estimate for 2024-2025 
marketing year walnut shipments, the current assessment rate of $0.011 
would generate $16,060,000 in assessment income (1.46 billion pounds 
multiplied by $0.011 assessment rate), which would not cover budgeted 
expenses. By increasing the assessment rate to $0.0125, assessment 
income would be $18,250,000 (1.46 billion pounds multiplied by $0.0125 
assessment rate). This amount should provide sufficient funds to meet 
anticipated 2024-2025 marketing year expenses without needing to draw 
from the Board's financial reserve.
    Prior to arriving at this budget and assessment rate 
recommendation, the Board considered information from various sources, 
such as the Board's Executive Committee, and discussed various 
alternatives, including maintaining the current assessment rate of 
$0.011 per inshell pound of assessable walnuts and increasing 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 2024-
2025 marketing year and maintaining adequate funds in its financial 
reserve. Consequently, these alternative assessment rates were 
rejected.
    Based upon information from the National Agricultural Statistics 
Service (NASS), the average grower price reported for walnuts over the 
past three crop years (2020-2023) was approximate $1,093 per ton 
($0.547 per pound). In order to determine the estimated assessment 
revenue as a percentage of the total grower revenue, we calculate the 
assessment rate ($0.0125 per inshell pound) divided by the grower price 
($0.547 per pound) and multiply that number by 100. Therefore, 
estimated assessment revenue as a percentage of total grower revenue 
for the 2024-2025 marketing year would be about 2.3 percent (0.0125/
0.547 * 100 = 2.29)
    This proposed action would increase 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 
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 May 15, 2024, 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 rulemaking, 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 rulemaking. Should any changes 
become necessary, they would be submitted to OMB for approval.
    This proposed rulemaking would not impose any additional reporting 
or recordkeeping requirements on either small or large California 
walnut handlers. As with all Federal marketing order programs, reports 
and forms are periodically reviewed to reduce information requirements 
and duplication by industry and public sector agencies.
    AMS is committed to complying with the E-Government Act, to promote 
the use of the internet and other information technologies to provide 
increased opportunities for citizen access to Government information 
and services, and for other purposes.
    AMS has not identified any relevant Federal rules that duplicate, 
overlap, or conflict with this proposed rulemaking.
    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 Committee and 
other available information, AMS has determined that this proposed 
rulemaking is consistent with and would effectuate the purposes of the 
Act.
    A 30-day comment period is provided to allow interested persons to 
respond to this proposed rulemaking. All written comments timely 
received will be considered before a final determination is made on 
this rulemaking.

List of Subjects in 7 CFR Part 984

    Marketing agreements, Reporting and recordkeeping requirements, and 
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 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, 2024, an assessment rate of $0.0125 per 
inshell pound is established for California walnuts.

Erin Morris,
Associate Administrator, Agricultural Marketing Service.
[FR Doc. 2024-18287 Filed 8-15-24; 8:45 am]
BILLING CODE P