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Federal Register / Vol. 86, No. 42 / Friday, March 5, 2021 / Proposed Rules
assessment burden on handlers. Funds from assessments and from the Boards reserve would be sufficient to cover proposed expenses, while maintaining the Boards reserve within the requirements of the Order at no more than two years budgeted expenses.
The major expenditures recommended by the Board for the 202021 marketing year include $1,930,000 for employee expenses, $283,000 for office expenses, $1,600,000
for production research, $825,000 for grades and standards activities, and $13,112,000 for domestic market development. Budgeted expenses for these items in 201920 were $1,896,000, $293,000, $2,000,000, $825,000, and $20,700,000, respectively.
The Board derived the recommended assessment rate by considering anticipated expenses; estimated certification certification means having the walnuts inspected of 650,000 tons inshell, based on a threeyear average; and the amount of funds available in the authorized reserve.
Pursuant to 984.51b of the Order, the estimated production is converted to a merchantable kernelweight basis using a factor of 0.45 650,000 tons 2,000
pounds per ton 0.45, which yields 585,000,000 kernelweight pounds. At $0.0250 per pound, the new assessment rate should generate $14,625,000 in assessment income, along with funds from the reserve should meet estimated expenses of $17,990,000.
Funds in the reserve currently $20,133,075 would be kept within the maximum permitted in 984.69 of the Order of approximately two marketing years budgeted expenses. The reserve at the end of the 202021 marketing year is anticipated to be $13,258,075.
The assessment rate proposed in this rule 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 the modified assessment rate would be effective for an indefinite period, the Board would 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
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necessary. The Boards 202021 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. 601612, the Agricultural Marketing Service AMS has considered the economic impact of this proposed rule 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 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 90 handlers subject to regulation under the Order and approximately 4,400 walnut growers in the production area. The Small Business Administration SBA
defines small agricultural service firms as those having annual receipts of less than $30,000,000, and small agricultural producers as those having annual receipts of less than $1,000,000 13 CFR
121.201.
The Board reported that approximately 82 percent of Californias walnut handlers shipped merchantable walnuts valued under $30 million during the 20182019 marketing year and would, therefore, be considered small handlers according to the SBA
definition.
Data from the 2017 Agricultural Census, published by USDAs National Agricultural Statistics Service NASS, show that 86 percent of California farms growing walnuts had walnut sales of less than $1 million.
An alternative computation that includes more recent NASS data starting with three-year average value of utilized production of $1.263 billion for the most recent seasons for which data is available 2017/18 through 2019/20.
Dividing that figure by the number of walnut growers 4,400 yields an average annual crop value per grower of approximately $287,045. This figure is well below the SBA small agricultural producer threshold of $1,000,000 in annual sales. Assuming a normal distribution, this provides evidence that a large majority of walnut growers can be considered small agricultural producers according to the SBA
definition.

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This proposal would decrease the assessment rate collected from handlers for the 202021 and subsequent marketing years from $0.0400 to $0.0250
per kernelweight pound of assessable walnuts. The Board unanimously recommended 202021 expenditures of $17,990,000 and an assessment rate of $0.0250 per kernelweight pound of assessable walnuts. The proposed assessment rate of $0.0250 is $0.0150
lower than the rate currently in effect.
The quantity of assessable walnuts for the 202021 marketing year is estimated at 650,000 tons inshell, which is equivalent to 585,000,000 kernelweight pounds. Thus, the $0.0250 rate should provide $14,625,000 in assessment income. The Board anticipates that the income derived from handler assessments, along with funds from the Boards authorized reserve, would be adequate to cover budgeted expenses for the 20202021 marketing year.
The major expenditures recommended by the Board for the 202021 marketing year include $1,930,000 for employee expenses, $283,000 for office expenses, $1,600,000
for production research, $825,000 for grades and standards activities, and $13,112,000 for domestic market development. Budgeted expenses for these items in 201920 were $1,896,000, $293,000, $2,000,000, $825,000, and $20,700,000, respectively.
The Board unanimously recommended decreasing the assessment rate to reduce the assessment burden on handlers, and recommended utilizing funds from the authorized reserve to help cover the portion of the Board expenses.
Prior to arriving at this budget and assessment rate, the Board considered information from various sources, such as the Boards Executive Committee.
The Board discussed alternative expenditure levels, based upon the relative value of various activities to the California walnut industry. The Board recommended the assessment rate of $0.0250 to provide $14,625,000 in assessment income based on the estimation. The Board determined that assessment revenue, along with funds from the authorized reserve would be adequate to cover budgeted expenses for the 202021 marketing year.
Based upon information from the National Agricultural Statistics Service NASS, the grower price reported for walnuts in 2019 was $1,970 per ton $0.99 per pound of walnuts. In order to determine the estimated assessment revenue as a percentage of the total grower revenue, we calculate the assessment rate $0.0250 per kernelweight pound times the
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