Walnuts Grown in California; Increased Assessment Rate

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 984

[Docket No. FV99-984-1 FR]

Walnuts Grown in California; Increased Assessment Rate

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This rule increases the assessment rate established for the

Walnut Marketing Board (Board) under Marketing Order No. 984 for the

1998-99 and subsequent marketing years from $0.0116 to $0.0133 per

kernelweight pound of certified merchantable walnuts. The Board is

responsible for local administration of the marketing order which

regulates the handling of walnuts grown in California. Authorization to

assess walnut handlers enables the Board to incur expenses that are

reasonable and necessary to administer the program. The marketing year

began on August 1 and ends July 31. The assessment rate will remain in

effect indefinitely unless modified, suspended, or terminated.

EFFECTIVE DATE: December 19, 1998.

FOR FURTHER INFORMATION CONTACT: Diane Purvis, Marketing Assistant, or

Mary Kate Nelson, Marketing Specialist, California Marketing Field

Office, Fruit and Vegetable Programs, AMS, USDA, 2202 Monterey Street,

suite 102B, Fresno, California 93721; telephone: (559) 487-5901; Fax:

(559) 487-5906; or George Kelhart, Technical Advisor, Marketing Order

Administration Branch, Fruit and Vegetable Programs, AMS, USDA, room

2525-S, P.O. Box 96456, Washington, DC 20090-6456; telephone: (202)

720-2491, Fax: (202) 205-6632. Small businesses may request information

on complying with this regulation, or obtain a guide on complying with

fruit, vegetable, and specialty crop marketing agreements and orders by

contacting Jay Guerber, Marketing Order Administration Branch, Fruit

and Vegetable Programs, AMS, USDA, P.O. Box 96456, room 2525-S,

Washington, DC 20090-6456; telephone (202) 720-2491, Fax: (202) 205-

6632, or E-mail: Jay__N__G[email protected]. You may view the marketing

agreement and order small business compliance guide at the following

web site: http://www.ams.usda.gov/fv/moab.html.

SUPPLEMENTARY INFORMATION: 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, hereinafter

referred to as the ``order.'' The marketing agreement and order are

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 (Department) 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 issued herein will be applicable to all assessable

walnuts beginning on August 1, 1998, and continue until amended,

suspended, or terminated. This rule will not preempt any State or local

laws, regulations, or policies, unless they present an irreconcilable

conflict with this rule.

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 Secretary 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 the Secretary 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 the

Secretary'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 1998-99 and subsequent marketing years from $0.0116 to $0.0133

per kernelweight pound of certified merchantable walnuts.

The California walnut marketing order provides authority for the

Board, with the approval of the Department, to formulate an annual

budget of expenses and collect assessments from handlers to administer

the program. The members of the Board are producers 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 1997-98 and subsequent marketing years, the Board

recommended, and the Department approved, an assessment rate that would

continue in effect from marketing year to marketing year unless

modified, suspended, or terminated by the Secretary upon recommendation

and information submitted by the Board or other information available

to the Secretary.

The Board met on September 11, 1998, and unanimously recommended

1998-99 expenditures of $2,620,274 and an assessment rate of $0.0133

per kernelweight pound of certified merchantable walnuts. In

comparison, last year's budgeted expenditures were $2,391,289. The

assessment rate of $0.0133 is $0.0017 higher than the rate currently in

effect. The quantity of assessable walnuts for 1998-99 is estimated at

198,000,000 kernelweight pounds, which is 9,000,000 kernelweight pounds

less than 1997-98. With the anticipated decrease in assessable walnuts

and increased budget expenditures, a higher assessment rate is needed

to generate sufficient revenue to administer the program for the 1998-

99 marketing year as shown in the following table.

[[Page 69995]]

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Assessment

income 1998-99 budget Difference

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Current Rate--$0.0116........................................... $2,296,800 $2,620,274 -$323,474

New Rate--$0.0133............................................... 2,633,400 2,620,274 +$13,126

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The following table compares major budget expenditures recommended

by the Board for the 1998-99 and 1997-98 marketing years:

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

Budget expense categories 1998-99 1997-98

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General Expenses........................ $246,643 $240,326

Office Expenses......................... 163,815 147,126

Research Expenses....................... 2,115,016 2,128,837

Production Research Director............ 59,800 50,000

Reserve for Contingencies............... 35,000 25,000

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The assessment rate recommended by the Board was derived by

dividing anticipated expenses by expected merchantable certifications

of California walnuts. As mentioned earlier, merchantable

certifications for the year are estimated at 198,000,000 kernelweight

pounds which should provide $2,663,400 in assessment income. 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 five months after the end of the year (Sec. 984.69).

The assessment rate established in this rule will continue in

effect indefinitely unless modified, suspended, or terminated by the

Secretary 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 the Department.

Board meetings are open to the public and interested persons may

express their views at these meetings. The Department 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 1998-99 budget

and those for subsequent marketing years will be reviewed and, as

appropriate, approved by the Department.

Pursuant to requirements set forth in the Regulatory Flexibility

Act (RFA), the Agricultural Marketing Service (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

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. Thus, both statutes have small

entity orientation and compatibility.

There are approximately 5,000 producers of walnuts in the

production area and approximately 48 handlers subject to regulation

under the marketing order. Small agricultural producers have been

defined by the Small Business Administration (13 CFR 121.601) as those

having annual receipts less than $500,000, and small agricultural

service firms are defined as those whose annual receipts are less than

$5,000,000.

Last year, as a percentage, 33 percent of the handlers shipped over

2.4 million kernelweight pounds of walnuts, and 67 percent of the

handlers shipped under 2.4 million kernelweight pounds. Based on an

average price of $2.10 per kernelweight pound at point of first sale,

the majority of handlers of California walnuts may be classified as

small entities.

This rule increases the assessment rate established for the Board

and collected from handlers for the 1998-99 and subsequent marketing

years from $0.0116 to $0.0133 per kernelweight pound of certified

merchantable walnuts. The Board unanimously recommended 1998-99

expenditures of $2,620,274 and an assessment rate of $0.0133 per

kernelweight pound of certified merchantable walnuts. The assessment

rate of $0.0133 is $0.0017 higher than the current rate. The quantity

of assessable walnuts for the 1998-99 marketing year is estimated at

198,000,000 kernelweight pounds. Thus, the $0.0133 rate should provide

$2,633,400 in assessment income and be adequate to meet this year's

expenses. 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 five months after the end of the

year (Sec. 984.69).

The following table compares major budget expenditures recommended

by the Board for the 1998-99 and 1997-98 marketing years:

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

Budget expense categories 1998-99 1997-98

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

General Expenses........................ $246,643 $240,326

Office Expenses......................... 163,815 147,126

Research Expenses....................... 2,115,016 2,128,837

Production Research Director............ 59,800 50,000

Reserve for Contingencies............... 35,000 25,000

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

[[Page 69996]]

The higher assessment rate is needed to provide sufficient revenue

to administer the program for the 1998-99 marketing year as shown in

the following table.

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

Assessment

income 1998-99 budget Difference

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

Current Rate--$0.0116........................................... $2,296,800 $2,620,274 -$323,474

New Rate--$0.0133............................................... 2,633,400 2,620,274 +$13,126

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

The Board reviewed and unanimously recommended 1998-99 expenditures

of $2,620,274 which included increases in administrative and office

expenses, and production research salary, and a decrease for research

programs. Prior to arriving at this budget, the Board considered

information and recommendations from various sources, such as the

Board's Budget and Personnel Committee, the Research Committee, and the

Market Development Committee. Alternative expenditure levels were

discussed by these groups, based upon the relative value of various

research projects to the walnut industry. After a desired expenditure

level was determined, the assessment rate of $0.0133 per kernelweight

pound of assessable walnuts was determined by dividing the total

recommended budget by the quantity of assessable walnuts, estimated at

198,000,000 kernelweight pounds for the 1998-99 marketing year. This is

approximately $13,000 above the anticipated expenses, which the Board

determined to be acceptable.

A review of historical information and information pertaining to

the current marketing year indicates that the grower price for the

1998-99 season could range between $1.45 and $1.58 per kernelweight

pound of walnuts. Therefore, the estimated assessment revenue for the

1998-99 marketing year as a percentage of total grower revenue should

be less than one 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 producers. 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 September 11,

1998, meeting was a public meeting and all entities, both large and

small, were able to express views on this issue.

This 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.

The Department 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 November 3, 1998 (63 FR 59246). 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 the Office of

the Federal Register. A 15-day comment period ending November 18, 1998,

was provided for interested persons to respond to the proposal. No

comments were received. Another proposed rule duplicating the earlier

proposal was published on November 6, 1998 (63 FR 59891). The duplicate

proposal also provided a 15-day comment period which ended November 23,

1998. No comments were received in response to the duplicate proposal.

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 is 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: (1) The

Board needs to have sufficient funds to pay its expenses which are

incurred on a continuous basis; (2) the marketing year began on August

1, 1998, and the marketing order requires that the rate of assessment

for each marketing year apply to all assessable walnuts handled during

such marketing year; (3) handlers are aware of this rule which was

recommended at a public meeting; and (4) a 15-day comment period was

provided for interested persons to provide input on the assessment rate

increase and no comments were received.

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:

Sec. 984.347 Assessment rate.

On and after August 1, 1998, an assessment rate of $0.0133 per

kernelweight pound is established for California merchantable walnuts.

Dated: December 14, 1998.

Robert C. Keeney,

Deputy Administrator, Fruit and Vegetable Programs.

[FR Doc. 98-33574 Filed 12-17-98; 8:45 am]

BILLING CODE 3410-02-P