Rule2024-01609
Walnuts Grown in Califfornia; Decreased Assessment Rate
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
January 30, 2024
Effective
February 29, 2024
Issuing agencies
Agriculture DepartmentAgricultural Marketing Service
Abstract
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.
Full Text
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<title>Federal Register, Volume 89 Issue 20 (Tuesday, January 30, 2024)</title>
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[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 [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[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: <a href="/cdn-cgi/l/email-protection#9ed4f1edf6ebffb0ccb0c9f7f2fafbdeebedfaffb0f9f1e8"><span class="__cf_email__" data-cfemail="ca80a5b9a2bfabe498e49da3a6aeaf8abfb9aeabe4ada5bc">[email protected]</span></a> or
<a href="/cdn-cgi/l/email-protection#92d0f3e0e0ebbcd0e0fdf3f6f0f7fce6d2e7e1f6f3bcf5fde4"><span class="__cf_email__" data-cfemail="04466576767d2a46766b656066616a7044717760652a636b72">[email protected]</span></a>.
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:
<a href="/cdn-cgi/l/email-protection#3a685359525b485e1476554d5f487a4f495e5b145d554c"><span class="__cf_email__" data-cfemail="386a515b50594a5c1674574f5d4a784d4b5c59165f574e">[email protected]</span></a>.
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
<a href="https://www.regulations.gov">https://www.regulations.gov</a>. 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:
<a href="https://www.ams.usda.gov/rules-regulations/moa/small-businesses">https://www.ams.usda.gov/rules-regulations/moa/small-businesses</a>. 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
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