81 FR 63721 - Walnuts Grown in California; Proposed Amendment to Marketing Order

DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service

Federal Register Volume 81, Issue 180 (September 16, 2016)

This proposed rule invites public comments on a proposed amendment to Marketing Order No. 984, which regulates the handling of walnuts grown in California. The California Walnut Board (Board), which is responsible for the local administration of the order and is comprised of walnut producers and handlers operating within the production area, recommended an amendment that would authorize the Board to borrow from a commercial lending institution to fund operations and marketing/research expenses. Allowing the Committee to utilize this customary business practice would provide flexibility for the Board while increasing its effectiveness.

[Federal Register Volume 81, Number 180 (Friday, September 16, 2016)]
[Proposed Rules]
[Pages 63721-63723]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-22247]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 984

[Doc. No. AMS-SC-16-0053, SC-16-984-1 PR]


Walnuts Grown in California; Proposed Amendment to Marketing 
Order

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This proposed rule invites public comments on a proposed 
amendment to Marketing Order No. 984, which regulates the handling of 
walnuts grown in California. The California Walnut Board (Board), which 
is responsible for the local administration of the order and is 
comprised of walnut producers and handlers operating within the 
production area, recommended an amendment that would authorize the 
Board to borrow from a commercial lending institution to fund 
operations and marketing/research expenses. Allowing the Committee to 
utilize this customary business practice would provide flexibility for 
the Board while increasing its effectiveness.

DATES: Comments must be received by November 15, 2016.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this rule. Comments must be sent to the Docket Clerk, 
Marketing Order and Agreement Division, Specialty Crops Program, 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 proposal 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: Geronimo Quinones, Marketing 
Specialist, or Michelle P. Sharrow, Rulemaking Branch Chief, Marketing 
Order and Agreement Division, Specialty Crops Program, AMS, USDA; 1400 
Independence Avenue SW., Stop 0237, Washington, DC 20250-0237; 
Telephone: (202) 720-2491, Fax: (202) 720-8938, or Email: 
[email protected] or [email protected].
    Small businesses may request information on complying with this 
regulation by contacting Antoinette Carter, Marketing Order and 
Agreement Division, Specialty Crops Program, AMS, USDA, 1400 
Independence Avenue SW., STOP 0237, Washington, DC 20250-0237; 
Telephone: (202) 720-2491, Fax: (202) 720-8938, or Email: 
[email protected].

SUPPLEMENTARY INFORMATION: This proposal 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 Orders 12866, 13563, and 13175.
    This proposal has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule is not intended to have retroactive effect.
    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.
    Section 1504 of the Food, Conservation, and Energy Act of 2008 
(2008 Farm Bill) (Pub. L. 110-246) amended section 18c(17) of the Act, 
which in turn required the addition of supplemental rules of practice 
to 7 CFR part 900 (73 FR 49307; August 21, 2008). The additional 
supplemental rules of practice authorize the use of informal rulemaking 
(5 U.S.C. 553) to amend Federal fruit, vegetable, and nut marketing 
agreements and orders. USDA may use informal rulemaking to amend 
marketing orders based on the nature and complexity of the proposed 
amendments, the potential regulatory and economic impacts on affected 
entities, and any other relevant matters.
    AMS has considered these factors and has determined that the 
amendment proposal is not unduly complex and the nature of the proposed 
amendment is appropriate for utilizing the informal rulemaking process 
to amend the order. A discussion of the potential regulatory and 
economic impacts on affected entities is discussed later in the 
``Initial Regulatory Flexibility Analysis'' section of this rule.
    The proposed amendment was unanimously recommended by the Board 
following deliberations at a public meeting held on February 19,

[[Page 63722]]

2016. Currently, the order does not allow the Board to borrow funds 
from a commercial lending institution. Allowing the Board to utilize 
this customary business practice would help to improve administration 
of the order by providing it with the means for ensuring continuity of 
operations when its obligations are greater than available assessment 
revenue and reserve funds.

Proposal--Borrowing From a Commercial Lending Institution

    Section 984.69 of the order, Assessments, authorizes the Board to 
collect assessments from handlers to administer the program.
    This proposal would provide the Board with authority to borrow from 
a commercial lending institution during times of cash shortages. In the 
past, the Board has utilized reserve funds collected through handler 
assessments, to help finance the advertising/marketing program. 
However, due to the increased size of the domestic advertising program; 
relying on reserve funds as a means to meet obligations would make the 
program unsustainable in the long term. History shows, the most costly 
part of the program runs during the first six months of the marketing 
year and those expenditures must be paid by mid-year. Since the 
payments must be made before all assessment fees are invoiced and 
collected, a cash shortage may occur during the year. Authorizing the 
Board to borrow from a commercial lending institution would help manage 
and sustain the program during times of low income while also ensuring 
continuity of operations.
    Therefore, for the reasons stated above, it is proposed that Sec.  
984.69, Assessments, be amended by adding a new paragraph that would 
provide the Board with authority to borrow from a commercial lending 
institution when no other funding is available.

Initial Regulatory Flexibility Analysis

    Pursuant to the 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 
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 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 5,700 growers of California walnuts in the 
production area and approximately 90 handlers subject to regulation 
under the marketing order. The Small Business Administration (SBA) 
defines small agricultural producers 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 $7,500,000. (13 CFR 121.201)
    According to USDA's National Agricultural Statistics Service's 
(NASS's) 2012 Census of Agriculture, approximately 86 percent of 
California's walnut farms were smaller than 100 acres. Further, NASS 
reports that the average yield for 2014 was 1.97 tons per acre, and the 
average price received for 2014 was $3,230 per ton.
    A 100-acre farm with an average yield of 1.97 tons per acre would 
therefore have been expected to produce about 197 tons of walnuts 
during 2014-15 marketing year. At $3,230 per ton, that farm's 
production would have had an approximate value of $636,310. Since 
Census of Agriculture information indicates 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 
$636,310 in 2014-15, 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 Board, approximately two-
thirds of California's walnut handlers shipped merchantable walnuts 
valued under $7,500,000 during the 2014-15 marketing year; and would, 
therefore, be considered small handlers according to the SBA 
definition.
    The proposed rule would authorize the Board to borrow from 
commercial lending institutions. This would help to ensure continuity 
in operations.
    The Board reviewed and identified the most costly portion of its 
domestic advertising program. That portion of the program operates 
during the first six months of the Board's marketing year and costs 
must be paid by mid-year. Since assessment revenues are collected 
throughout the marketing year, not enough is on hand when these large 
payments are due. In the past, the Board has used reserve funds to help 
pay for marketing and advertising expenses. However, due to the 
increased size of the advertising program, the Board cannot rely on 
reserve funds to cover the costs. Based on this fact, the Board 
believes the program could become unsustainable in the long term.
    While this action could result in a temporary increase in handler 
assessment costs, these increases would be small and uniform on all 
handlers and proportional to the size of their businesses. These costs 
are expected to be offset by the benefits derived from a sustained 
marketing and advertising program. Additionally, these costs would help 
to ensure that the Board has sufficient funds to meet its financial 
obligations. Such stability is expected to allow the Board to conduct a 
program that would benefit all entities, regardless of size. California 
walnut producers should see an improved business environment and a more 
sustainable business model because of the improved business efficiency.
    Alternatives were considered to this proposal, including making no 
change at this time. However, the Board believes it would be beneficial 
to have the means and funds necessary to effectively administer the 
program.

Paperwork Reduction Act

    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, ``Vegetable and Specialty Crops.'' 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.
    The Board's meeting was widely publicized throughout the California 
walnut production area. All interested persons were invited to attend 
the meeting and encouraged to participate in Board deliberations on 
this issue. Like all Board meetings, the February 19, 2016, meeting was 
public, and all entities, both large and small, were encouraged to 
express their views on the proposal.
    Finally, interested persons are invited to submit comments on the 
proposed amendment to the order, including comments on the regulatory 
and informational impacts of this action on small businesses.

[[Page 63723]]

    Following analysis of any comments received on the proposed 
amendment, AMS will evaluate all available information and determine 
whether to proceed. If appropriate, a proposed rule and referendum 
order would be issued, and producers would be provided the opportunity 
to vote for or against the proposed amendment. Information about the 
referendum, including dates and voter eligibility requirements, would 
be published in a future issue of the Federal Register. A final rule 
would then be issued to effectuate the amendment if favored by 
producers participating in the referendum.
    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 action. 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/MarketingOrdersSmallBusinessGuide. Any questions about the compliance 
guide should be sent to Antoinette Carter at the previously mentioned 
address in the FOR FURTHER INFORMATION CONTACT section.

General Findings

    The findings hereinafter set forth are supplementary to the 
findings and determinations which were previously made in connection 
with the issuance of the marketing order; and all said previous 
findings and determinations are hereby ratified and affirmed, except 
insofar as such findings and determinations may be in conflict with the 
findings and determinations set forth herein.
    1. The marketing order as hereby proposed to be amended, and all of 
the terms and conditions thereof, would tend to effectuate the declared 
policy of the Act;
    2. The marketing order as hereby proposed to be amended regulates 
the handling of walnuts grown in California and is applicable only to 
persons in the respective classes of commercial and industrial activity 
specified in the marketing order;
    3. The marketing order as hereby proposed to be amended is limited 
in application to the smallest regional production area which is 
practicable, consistent with carrying out the declared policy of the 
Act, and the issuance of several orders applicable to subdivisions of 
the production area would not effectively carry out the declared policy 
of the Act;
    4. The marketing order as hereby proposed to be amended prescribes, 
insofar as practicable, such different terms applicable to different 
parts of the production area as are necessary to give due recognition 
to the differences in the production and marketing of walnuts produced 
or packed in the production area; and
    5. All handling of walnuts produced or packed in the production 
area as defined in the marketing order is in the current of interstate 
or foreign commerce or directly burdens, obstructs, or affects such 
commerce.
    A 60-day comment period is provided to allow interested persons to 
respond to the proposal. Any comments received on the amendment 
proposed in this rule will be analyzed, and if AMS determines to 
proceed based on all the information presented, a producer referendum 
would be conducted to determine producer support for the proposed 
amendment. If appropriate, a final rule would then be issued to 
effectuate the amendment favored by producers participating in the 
referendum.

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

0
1. The authority citation for 7 CFR part 984 continues to read as 
follows:

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

0
 2. Amend Sec.  984.69 by redesignating paragraph (d) as (e) and adding 
a new paragraph (d) to read as follows:


Sec.  984.69  Assessments.

* * * * *
    (d) To provide funds for the administration of the provisions of 
this part during the part of a fiscal period when neither sufficient 
operating reserve funds nor sufficient revenue from assessments on the 
current season's certifications are available, the Board may accept 
payment of assessments in advance or may borrow money from a commercial 
lending institution for such purposes.
* * * * *

    Dated: September 12, 2016.
Elanor Starmer,
Administrator, Agricultural Marketing Service.
[FR Doc. 2016-22247 Filed 9-15-16; 8:45 am]
 BILLING CODE 3410-02-P