Federal Register, Volume 76 Issue 158 (Tuesday, August 16, 2011)

[Federal Register Volume 76, Number 158 (Tuesday, August 16, 2011)]
[Proposed Rules]
[Pages 50703-50706]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-20788]

========================================================================
Proposed Rules
Federal Register
________________________________________________________________________

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.

========================================================================

Federal Register / Vol. 75, No. 158 / Tuesday, August 16, 2011 /
Proposed Rules

[[Page 50703]]

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 984

[Doc. No. AMS-FV-11-0062; FV11-984-1 PR]

Walnuts Grown in California; Increased Assessment Rate

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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

SUMMARY: This rule would increase the assessment rate established for
the California Walnut Board (Board) for the 2011-12 and subsequent
marketing years from $0.0174 to $0.0175 per kernelweight pound of
assessable walnuts. The Board locally administers the marketing order
which regulates the handling of walnuts grown in California.
Assessments upon walnut handlers are used by the Board to fund
reasonable and necessary expenses of the program. The marketing year
begins September 1 and ends August 31. The assessment rate would remain
in effect indefinitely unless modified, suspended, or terminated.

DATES: Comments must be received by September 15, 2011.

ADDRESSES: Interested persons are invited to submit written comments
concerning this rule. Comments must be sent to the Docket Clerk,
Marketing Order Administration Branch, Fruit and Vegetable Programs,
AMS, USDA, 1400 Independence Avenue, SW., STOP 0237, Washington, DC
20250-0237; Fax: (202) 720-8938; or Internet: http://www.regulations.gov. Comments should reference the document number and
the date and page number of this issue of the Federal Register and will
be available for public inspection in the Office of the Docket Clerk
during regular business hours, or can be viewed at: http://www.regulations.gov. All comments submitted in response to this rule
will be included in the record and will be made available to the
public. Please be advised that the identity of the individuals or
entities submitting the comments will be made public on the Internet at
the address provided above.

FOR FURTHER INFORMATION CONTACT: Jeff Smutny, Marketing Specialist, or
Kurt J. Kimmel, Regional Manager, California Marketing Field Office,
Marketing Order Administration Branch, Fruit and Vegetable Programs,
AMS, USDA; Telephone: (559) 487-5901, Fax: (559) 487-5906, or E-mail:
Jeffrey.Smutny@ams.usda.gov or Kurt.Kimmel@ams.usda.gov.
Small businesses may request information on complying with this
regulation by contacting Laurel May, Marketing Order Administration
Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence
Avenue, SW., Stop 0237, Washington, DC 20250-0237; Telephone: (202)
720-2491, Fax: (202) 720-8938, or E-mail: Laurel.May@ams.usda.gov.

SUPPLEMENTARY INFORMATION: This rule is issued under Marketing Order
No. 984, as amended (7 CFR part 984), regulating the handling of
walnuts grown in California, hereinafter referred to as the ``order.''
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 Department of Agriculture (USDA) is issuing this rule in
conformance with Executive Order 12866.
This rule has been reviewed under Executive Order 12988, Civil
Justice Reform. Under the marketing 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 as proposed herein would be applicable to all
assessable walnuts beginning on September 1, 2011, 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 rule would increase the assessment rate established for the
Board for the 2011-12 and subsequent marketing years from $0.0174 to
$0.0175 per kernelweight pound of assessable walnuts.
The California walnut marketing order provides authority for the
Board, with the approval of USDA, to formulate an annual budget of
expenses and collect assessments from handlers to administer the
program. The members of the Board are growers and handlers of
California walnuts. They are familiar with the Board's needs and with
the costs for goods and services in their local area and are thus in a
position to formulate an appropriate budget and assessment rate. The
assessment rate is formulated and discussed in a public meeting. Thus,
all directly affected persons have an opportunity to participate and
provide input.
For the 2010-11 and subsequent marketing years, the Board
recommended, and USDA approved, an assessment rate of $0.0174 per
kernelweight pound of assessable walnuts that would continue in effect
from year to year unless modified, suspended, or terminated by USDA
upon recommendation and information submitted by the Board or other
information available to USDA.
The Board met on June 9, 2011, and unanimously recommended 2011-12
expenditures of $7,402,450 and an assessment rate of $0.0175 per
kernelweight pound of assessable walnuts. In comparison, last year's
budgeted expenditures were $6,812,000. The assessment rate of $0.0175
is $0.0001 per pound higher than the rate currently in effect. The
quantity of assessable walnuts for the 2011-12 marketing year is
estimated at 470,000 tons (inshell), which is 35,000 tons more than the
435,000 during the 2010-11 marketing year. At the recommended higher
assessment rate of $0.0175 per kernelweight pound, the Board should

[[Page 50704]]

collect approximately $7,402,500 in assessment income, which would be
adequate to cover its 2011-12 budgeted expenses of $7,402,450.
The following table compares major budget expenditures recommended
by the Board for the 2010-11 and 2011-12 marketing years:

------------------------------------------------------------------------
Budget expense categories 2010-11 2011-12
------------------------------------------------------------------------
Employee Expenses................... $577,500 $693,500
Travel/Board Expenses/Annual Audit.. 208,000 218,000
Office Expenses..................... 118,850 117,750
Program Expenses Including Research:
Controlled Purchases............ 20,000 20,000
Crop Acreage Survey............. 95,000 95,000
Crop Estimate................... 105,000 115,000
Production Research Director.... 88,500 88,500
Production Research............. 1,042,000 1,036,000
Sustainability Project.......... 0 25,000
Grades and Standards Research... 125,000 150,000
Block Grant Research............ 0 200,000
Domestic Market Development..... 4,400,000 4,635,000
Reserve for Contingency......... 32,250 8,700
------------------------------------------------------------------------

The assessment rate recommended by the Board was derived by
dividing anticipated expenses by expected shipments of California
walnuts certified as merchantable. The 470,000 ton (inshell) estimate
for merchantable shipments is an average of the two prior years'
shipments. The Board met on June 9, 2011, and unanimously approved
using a two prior years' average to formulate the 2011-12 estimate.
Pursuant to Sec. 984.51(b) of the order, this figure is converted to a
merchantable kernelweight basis using a factor of 0.45 (470,000 tons x
2,000 pounds per ton x 0.45), which yields 423,000,000 kernelweight
pounds. At $0.0175 per pound, the new assessment rate should generate
$7,402,500 in assessment income and allow the Board to cover its
expenses.
Section 984.69 of the order authorizes the Board to maintain a
financial reserve of not more than two years' budgeted expenses. Excess
assessment funds may be retained in the reserve or may be used
temporarily to defray expenses of the subsequent marketing year, but if
so used, must be made available to the handlers from whom they were
collected within five months after the end of the marketing year.
The proposed assessment rate would continue in effect indefinitely
unless modified, suspended, or terminated by USDA upon recommendation
and information submitted by the Board or other available information.
Although this assessment rate is effective 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 USDA. Board
meetings are open to the public and interested persons may express
their views at these meetings. USDA would evaluate Board
recommendations and other available information to determine whether
modification of the assessment rate is needed. Further rulemaking would
be undertaken as necessary. The Board's 2011-12 budget and those for
subsequent marketing years would be reviewed and, as appropriate,
approved by USDA.

Initial Regulatory Flexibility Analysis

Pursuant to requirements set forth in the Regulatory Flexibility
Act (RFA) (5 U.S.C. 601-612), the Agricultural Marketing Service (AMS)
has considered the economic impact of this 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
business 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 growers of California walnuts in the
production area and approximately 74 handlers subject to regulation
under the marketing order. Small agricultural producers are defined by
the Small Business Administration (SBA) (13 CFR 121.201) as those
having annual receipts of less than $750,000, and small agricultural
service firms are defined as those having annual receipts of less than
$7,000,000.
According to the 2007 Census of Agriculture, approximately 89
percent of California's walnut farms were smaller than 100 acres.
USDA's National Agricultural Statistics Service (NASS) reports that
the average yield for the 2010-11 crop was 2.22 tons per acre. NASS
also reported the average price received for the 2010-11 crop was
$2,110 per ton.
A 100-acre farm with an average yield of 2.22 tons per acre would
therefore have been expected to produce about 222 tons of walnuts
during 2010-11. At $2,110 per ton, that farm's production would have
had an approximate value of $468,420. Assuming that the majority of
California's walnut farms are smaller than 100 acres, it could be
concluded that the majority of the growers had receipts of less than
$468,420 in 2010-11, which is well below the SBA threshold of $750,000.
Thus, the majority of California's walnut growers would be considered
small growers according to SBA's definition.
According to information supplied by the industry, approximately
two-thirds of California's walnut handlers shipped merchantable walnuts
valued under $7,000,000 during the 2010-11 marketing year and would
therefore be considered small handlers according to the SBA definition.
This rule would increase the assessment rate established for the
Board and collected from handlers for the 2011-12 and subsequent
marketing years from $0.0174 to $0.0175 per kernelweight pound of
assessable walnuts. The Board unanimously recommended 2011-12
expenditures of $7,402,450 and an assessment rate of $0.0175 per
kernelweight pound of assessable walnuts. The proposed assessment rate
of $0.0175 is $0.0001 higher than the 2010-11 rate. The quantity of
assessable walnuts for the 2011-12 marketing year is estimated at

[[Page 50705]]

470,000 tons inshell weight, or 423,000,000 pounds kernelweight. Thus,
the $0.0175 rate should provide $7,402,500 in assessment income and be
adequate to meet this year's expenses. The increased assessment rate is
primarily due to increased budget expenditures.
The following table compares major budget expenditures recommended
by the Board for the 2010-11 and 2011-12 marketing years:

The Board reviewed and unanimously recommended 2011-12 expenditures
of $7,402,450. Prior to arriving at this budget, the Board considered
alternative expenditure levels but ultimately decided that the
recommended levels were reasonable to properly administer the order.
The assessment rate of $0.0175 per kernelweight pound of assessable
walnuts was derived by dividing anticipated expenses of $7,402,450 by
expected shipments of California walnuts certified as merchantable.
Merchantable shipments for the year are estimated at 423,000,000
pounds, which should provide $7,402,500 in assessment income and allow
the Board to cover its expenses. Unexpended funds may be retained in a
financial reserve, provided that funds in the financial reserve do not
exceed approximately two years' budgeted expenses. If not retained in a
financial reserve, unexpended funds may be used temporarily to defray
expenses of the subsequent marketing year, but must be made available
to the handlers from whom collected within 5 months after the end of
the year, according to Sec. 984.69 of the order.
According to NASS, the season average grower prices for the years
2009 and 2010 were $1,710 and $2,110 per ton, respectively. These
prices provide a range within which the 2011-12 season average price
could fall. Dividing these average grower prices by 2,000 pounds per
ton provides an inshell price per pound range of $0.86 to $1.06.
Dividing these inshell prices per pound by the 0.45 conversion factor
(inshell to kernelweight) established in the order yields a 2011-12
price range estimate of $1.91 to $2.36 per kernelweight pound of
assessable walnuts.
To calculate the percentage of grower revenue represented by the
assessment rate, the assessment rate of $0.0175 per kernelweight pound
is divided by the low and high estimates of the price range. The
estimated assessment revenue for the 2011-12 marketing year as a
percentage of total grower revenue will thus likely range between .74
and .92 percent.
This action would increase the assessment obligation imposed on
handlers. While assessments impose some additional costs on handlers,
the costs are minimal and uniform on all handlers. Some of the
additional costs may be passed on to growers. However, these costs
would be offset by the benefits derived by the operation of the
marketing order. In addition, the Board's meeting was widely publicized
throughout the California walnut industry, and all interested persons
were invited to attend the meeting and participate in Board
deliberations on all issues. Like all Board meetings, the June 9, 2011,
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 informational impacts of this action on small
businesses.
In accordance with the Paperwork Reduction Act of 1995, (44 U.S.C.
chapter 35), the order's information collection requirements have been
previously approved by the Office of Management and Budget (OMB) and
assigned OMB No. 0581-0178 (Walnuts Grown in California). No changes in
those requirements as a result of this action are necessary. Should any
changes become necessary, they would be submitted to OMB for approval.
This proposed rule would impose no additional reporting or
recordkeeping requirements on either small or large California walnut
handlers. As with all Federal marketing order programs, reports and
forms are periodically reviewed to reduce information requirements and
duplication by industry and public sector agencies.
AMS is committed to complying with the E-Government Act, to promote
the use of the Internet and other information technologies to provide
increased opportunities for citizen access to Government information
and services, and for other purposes.
USDA has not identified any relevant Federal rules that duplicate,
overlap, or conflict with this rule.
A small business guide on complying with fruit, vegetable, and
specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/MarketingOrderSmallBusinessGuide. Any questions about
the compliance guide should be sent to Laurel May at the previously
mentioned address in the FOR FURTHER INFORMATION CONTACT section.
A 30-day comment period is provided to allow interested persons to
respond to this proposed rule. Thirty days is deemed appropriate
because: (1) The 2011-12 marketing year begins on September 1, 2011,
and the marketing order requires that the rate of assessment for each
marketing year apply to all assessable walnuts handled during the year;
(2) the Board needs to have sufficient funds to pay its expenses, which
are incurred on a continuous basis; and (3) handlers are aware of this
action, which was unanimously recommended by the Board at a public
meeting and is similar to other assessment rate actions issued in past
years.

[[Page 50706]]

List of Subjects in 7 CFR Part 984

Marketing agreements, Nuts, Reporting and recordkeeping
requirements, Walnuts.

For the reasons set forth in the preamble, 7 CFR part 984 is
proposed to be amended as follows:

PART 984--WALNUTS GROWN IN CALIFORNIA

1. The authority citation for 7 CFR part 984 continues to read as
follows:

Authority: 7 U.S.C. 601-674.

2. Section 984.347 is revised to read as follows:

Sec. 984.347 Assessment rate.

On and after September 1, 2011, an assessment rate of $0.0175 per
kernelweight pound is established for California merchantable walnuts.

Dated: August 10, 2011.
David R. Shipman,
Acting Administrator, Agricultural Marketing Service.
[FR Doc. 2011-20788 Filed 8-15-11; 8:45 am]
BILLING CODE 3410-02-P