Increased assessment rate for walnuts grown in California

DEPARTMENT OF AGRICULTURE 3410-02P
Agricultural Marketing Service
7 CFR Part 984
[Doc. No. AMS-FV-11-0062; FV11-984-1 FR]
Walnuts Grown in California; Increased Assessment Rate
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Final rule.
SUMMARY: This rule increases 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 began
September 1 and ends August 31. The assessment rate will
remain in effect indefinitely unless modified, suspended, or
terminated.
EFFECTIVE DATE: [INSERT DATE 1 DAY AFTER THE DATE OF
PUBLICATION IN THE FEDERAL REGISTER].
FOR FURTHER INFORMATION CONTACT: Jeff Smutny, Marketing
Specialist, or Kurt J. Kimmel, Regional Manager, California
Marketing Field Office, Marketing Order and Agreement
Division, Fruit and Vegetable Programs, AMS, USDA;
2
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 and Agreement Division, 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 final 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 issued herein will be applicable to all assessable
3
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 increases 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
4
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),
5
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
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
Crop Acreage Survey
Crop Estimate
Production Research Director
Production Research
Sustainability Project
Grades and Standards Research
Block Grant Research
Domestic Market Development
$ 20,000
$ 95,000
$ 105,000
$ 88,500
$1,042,000
$ -0-
$ 125,000
$ -0-
$4,400,000
$ 20,000
$ 95,000
$ 115,000
$ 88,500
$1,036,000
$ 25,000
$ 150,000
$ 200,000
$4,635,000
6
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 year’s 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 §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
7
made available to the handlers from whom they were collected
within five months after the end of the marketing year.
The assessment rate established in this rule will
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 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 USDA. Board meetings are
open to the public and interested persons may express their
views at these meetings. USDA will evaluate Board
recommendations and other available information to determine
whether modification of the assessment rate is needed.
Further rulemaking will 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.
Final 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
8
of this action 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 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
are 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.
9
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 increases 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 assessment rate of $0.0175 is
$0.0001 higher than the 2010-11 rate. The quantity of
10
assessable walnuts for the 2011-12 marketing year is
estimated at 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:
11
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
Crop Acreage Survey
Crop Estimate
Production Research Director
Production Research
Sustainability Project
Grades and Standards Research
Block Grant Research
Domestic Market Development
Reserve for Contingency
$ 20,000
$ 95,000
$ 105,000
$ 88,500
$1,042,000
$ -0-
$ 125,000
$ -0-
$4,400,000
$ 32,250
$ 20,000
$ 95,000
$ 115,000
$ 88,500
$1,036,000
$ 25,000
$ 150,000
$ 200,000
$4,635,000
$ 8,700
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
12
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 § 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 p rice 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
13
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 increases 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 are 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.
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.
14
Should any changes become necessary, they would be submitted
to OMB for approval.
This final rule imposes 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. As noted in the
initial regulatory flexibility analysis, USDA has not
identified any relevant Federal rules that duplicate,
overlap, or conflict with this final rule.
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.
A proposed rule concerning this action was published in
the Federal Register on August 16, 2011 (75 FR 50703).
Copies of the proposed rule were also mailed or sent via
facsimile to all walnut handlers. Finally, the proposal was
made available through the Internet by USDA and the Office
of the Federal Register. A 30-day comment period ending on
September 15, 2011, was provided for interested persons to
respond to the proposal. No comments were received.
15
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.
After consideration of all relevant material presented,
including the information and recommendation submitted by
the Board and other available information, it is hereby
found that this rule, as hereinafter set forth, will tend to
effectuate the declared policy of the Act.
Pursuant to 5 U.S.C. 553, it also found and determined
that good cause exists for not postponing the effective date
of this rule until 30 days after publication in the Federal
Register because the 2011-12 marketing year began on
September 1, 2011. Further, the marketing order requires
that the rate of assessment for each marketing year apply to
all assessable walnuts handled during the year; the Board
needs to have sufficient funds to meet its expenses which
are incurred on a continuous basis; and handlers are aware
of this rule which was unanimously recommended at a public
meeting. Also, a 30-day comment period was provided for in
the proposed rule.
16
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 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:
§ 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: October 26, 2011
David R. Shipman
Acting Administrator
Agricultural Marketing Service
[FR Doc. 2011-28198 Filed 10/31/2011 at 8:45 am; Publication
Date: 11/01/2011]