CWC Fall 2018 California Walnut News

WALNUT NEWS FALL 2018

TARIFF UPDATE AND U.S. MITIGATION MEASURES

IN THIS ISSUE

Tariff issues have been in the news almost daily for the past four months and remain a top priority for the California Walnut Commission (CWC). In July, the CWC was again in Washington, D.C. to discuss the challenges facing industry with key officials at the office of the United States Trade Representative (USTR) and the United States Department of Agriculture (USDA). “Retaliatory tariffs have been imposed in several of our key export markets including China, India and Turkey which threaten the stability of our industry, our producers and our competitiveness in the global market” stated Michelle Connelly, CEO. “The CWC and our Issues Management Committee are working with the USDA, USTR and Congressional officials to keep walnuts in the forefront of discussions in addition to working with USDA to provide some interim relief to our producers and processors.”

How Much is the Tariff and What Countries are Affected?

Base Rate 1/1/18

Base Rate Change

China

25%

NA

China

20%

NA

India

30.9%

100%

India

30.9%

(inshell) (shelled)

(inshell)

(shelled)

(Effective 5/23/18)

NA

Compounding the situation, the Indian Ministry of Finance changed the base tariff rate for imported inshell walnuts to 100% effective May 23, 2018. Shelled walnuts were not included in this base rate change. The table below shows the original base rate and all of the actions listed above to show the new applied rate not including VAT, GST, CESS or other additional import costs.

The Turkish government levied a new retaliatory tariff which changed the retaliatory tariff rate from 10% to 20%.

Retaliatory tariffs (232 Rate) have been imposed in three of our key export markets in response to the March 23, 2018 U.S. import tax on steel and aluminum products.

Country

India has delayed implementation Correction 3 of this tariff until Letter from the Chair 4 September 18, Chlorpyrifos 4 2018. Furthermore, Walnut Short Course 5 China imposed Funding to Replace an additional Older Ag Equipment 5 retaliatory tariff Upcoming Events 6 (301 Rate) on July 6th in response to other U.S. tariff actions. Other countries have not followed suit and no additional retaliatory tariffs have been filed at this time.

CO N T IN U E D

Additional 232 Rate

Applied Rate

15%

40%

15%

(Effective 4/2/18) (Effective 4/2/18)

20%

(Proposed Effective on 9/1818)

20% (Proposed Effective on 9/18/18)

O N

PA G E

Additional 301 Rate

New Applied Rate

25%

NOW 65%

35%

25%

NOW 60%

120%

NA

30.9%

NA

(Effective 7/6/18)

2

NOW 100%

Proposed 9/18/18 120%

NOW 30.9%

Proposed 9/18/18 50.9%

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Country

Base Rate 1/1/18

Base Rate Change

Turkey

15%

NA

For any shipments leaving on August 15, 2018 or later, the effective rate will be 35%. Additionally, the U.S. Embassy has informed us that they understand all products from the United States are reportedly still excluded from the inward processing regime, which is the system facilitating tariff-free imports for products which will be used as inputs for exports. This puts California walnuts at an additional trade disadvantage vs. walnuts from other origins. There is no official word from the Turkish government regarding this and the Embassy’s ATO personnel are working to get a definitive answer on the status of this process.

Additional 232 Rate

(Shipments already on Water)

10%

(Effective 6/25/18)

Applied Rate

25%

What is Being Done About these Tariffs?

The U.S. has filed disputes against China, Turkey, the EU, Mexico and Canada with the World Trade Organization (WTO) challenging the retaliatory tariffs imposed, as a breach of the member agreements under WTO. The dispute process is not swift, however, the filings urge members to “work constructively” with the U.S. to find resolution. This has already begun with the recent meeting between President of the European Commission, Jean-Claude Juncker and President Trump where they agreed to open talks to tear down

Revised 232 Rate

(New Shipments leaving On or After 8/15/18)

20%

(Effective 8/15/18)

Effective Rate

35%

trade barriers between the United States and the European Union.

India and the U.S. remain engaged in ongoing dialog with a series of bilateral talks, most recently in Washington D.C. Within India, the Forum of Food Importers (FIFI) has been fervently advocating with the Indian Ministries to demonstrate the need for walnut imports as well as correct inaccurate production data that was presented to the Indian Ministries that was likely a contributing factor to the increase in the base rate tariff from 30% to 100%.

The USTR has informed cooperators that dialog with China has resumed.

Some good news is that walnuts were not included on the most recent list of proposed additional retaliatory tariffs in response to the Administration’s recent announcement of a proposed additional 10% tariff in $200BN in goods from China.

Turkish traders have expressed that they are disappointed by the tariff action and are also talking with their respective government officials.

CO N T IN U E D

California Walnut Commission Issues Management Committee meeting with United States Secretary of Agriculture Sonny Perdue. Left to right: Jack Mariani, Sonny Perdue, William Tos, Bill Carriere, Michelle Connelly 2

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What Mitigation Measures are being Offered to U.S. Farmers?

On July 24, the USDA announced mitigation measures to assist farmers impacted by tariff retaliation, which the CWC was able to have input on in the weeks prior to the announcement.

The package of assistance includes $12BN for three programs including a Food Purchase & Distribution Program, Agricultural Trade Promotion Program and Market Facilitation Program. Following are details of the status of these programs and CWB/ CWC involvement.

Food Purchase & Distribution Program The USDA will purchase affected commodities for food bank and nutrition programs. On August 9, 2018, the CWB submitted its request to the USDA to purchase 40,000 short tons of California walnuts over the December 2018 – December 2019 period. Four tenders are expected over the period.

After reviewing all requests, in late August, the USDA announced its first tender where a purchase $34.6MM of California walnuts was included. The USDA has increased its staffing and resources to assist potential vendors in becoming qualified to sell to USDA. Handlers have been encouraged to begin the process as soon as possible if they think they may want to sell to USDA. Details from the USDA

regarding this program were provided on August 9th through a Handler Bulletin along with contact information for the USDA New Vendor and Small Business Coordinator.

Agricultural Trade Promotion Program (ATP) Through the Foreign Agricultural Service, the USDA will provide funding for affected commodities for export development programs. The final rule for this program published on August 30th in the Federal Register outlines eligibility requirements, activities eligible for reimbursement, contribution requirements, and application procedures for the ATP. The CWC will partake in the program to assist export markets/programs where feasible.

Market Facilitation Program This program will provide direct payment to growers of specified commodities including: soybeans, sorghum, corn, wheat, cotton, dairy, and hogs. Several commodity groups, including the CWB/CWC, have been engaged in discussions to expand the list of commodities receiving relief.

However, most are not optimistic this will happen given the sheer number of commodities/programs. The CWB/ CWC will remain in these discussions should this effort move forward.

What is the CWC Doing?

The industry remains committed to our customers and consumers in all of our markets, therefore, our programs are

continuing in tariff affected countries.

The industry has made significant investments developing these markets, as have our trade partners, and to withdraw would send the wrong message. The CWC will continue to evaluate as we move through the coming year and programs will remain intact for the immediate term.

The CWC is strengthening export programs in non-affected markets to continue to move volume through them. Domestically, our consumer TV ad campaign has been moved up and will begin in September to support domestic volume movement. As you have seen in recent announcements, domestic retail partnerships have continued to expand in our effort to grow U.S. consumption. In all markets, our health research program continues to play a vital role in our communications efforts to keep California walnuts top of mind with both consumers and the trade. Most recently, significant media attention has been received worldwide in publications and online sites regarding new research announcements in the areas of Type 2 diabetes and cardiovascular disease.

While the industry is optimistic for swift resolution to the ongoing tariff issues, we will continue to work to both ensure that industry’s concerns are heard with Administration officials and advocate on the industry’s behalf for some interim relief to our producers and processors.

CORRECTION KASUMIN In the Summer issue of the newsletter an article on Kasumin incorrectly stated, “Kasumin is a plant-specifc antibiotic, and as such, has human or animal antibiotic resistance concerns.” The word “no” was omitted. Please see corrected article below.

Walnut blight is one of the devastating diseases that could affect walnut trees, particularly in wet winter years, and cause severe losses. Recently, EPA and CDPR approved the use of antibiotic kasugamycin (kasumin) for use in walnuts against blight. With growing concerns over resistance to copper compounds, this is a welcome news for walnut farmers who will have an additional option against blight. Kasumin is a plant-specific antibiotic, and as such, has no issue with human or animal antibiotic resistance concerns.

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LETTER FROM THE CHAIR

By Frank Guerra, Grades & Standards Committee Chairperson

Dear Walnut Growers, The California Walnut Board strives to fund research that will allow our growers to continue producing the best quality product possible. The Grades & Standards Committee is tasked with reviewing the standards for walnut grades and could recommend changes to those standards.

The committee is also involved in vetting research project proposals that would benefit the industry by addressing food safety, quality, and related regulatory issues. For example, the Grades & Standards Committee recognized the need for helping walnut growers fulfill their Food Safety Modernization Act (FSMA) training requirements (at least one person trained per farm) and allocated funds for complimentary grower training. To date, we have had 13 trainings throughout the Central Valley, attended by some 900 walnut growers. I hope you took advantage of this sponsored training. We are the only commodity group so far to fund grower trainings.

For the past few years, we have been focused on basic food safety research, to better understand what our challenges are in the growing, harvesting, hulling, dehydrating, and processing steps, so they can be better addressed. In addition, we have funded annual pesticide surveys to assess maximum residue level (MRL) in California walnuts. Results show that MRL levels are not being exceeded, which is an indication that chemicals are being

applied responsibly by California walnut growers in their farming practices.

More recently, we have started to shift our attention toward projects that can help extend the product shelf-life, while maintaining product quality, as we aim to make walnuts the #1 nut of choice for snacking, processed products (cereals, chips), and everyday usage. To that end, we are trying to understand the relationship between orchard management factors, such as irrigation timing and quantity, and kernel color. We are also studying the effect of alternative drying techniques and modified atmosphere storage conditions on quality and shelf-life. This exciting new phase of research will eventually allow us to position walnuts, as not only a nut with a great nutritional profile, but also with plenty of shelf life, so they can be used in shelf-stable products such as trail mixes, cereals, granola bars, etc.

In addition, we are looking at projects focused on the utilization of walnut hulls and shells as a natural filler in tires, biochar for soil nutrition, bioplastics, and other products, to create a market and maximize the value of our industry’s by-products.

As you can see, the Grades & Standards Committee covers quite a wide range of topics that go beyond setting grading standards. Being a grower and handler myself, I am in a position to know firsthand what some of our needs and challenges are. Moving forward, I will have our collective interest in mind while setting our committee’s direction.

Wishing you a great 2018 harvest season!

Frank Guerra

CHLORPYRIFOS The 9th Circuit Court of Appeal on August 9th ordered EPA to ban the insecticide Chlorpyriphos (e.g., Lorsban) within 60 days. California Walnut Board contacted California Department of Pesticide Regulations (DPR) for clarification on the continued use of Lorsban by walnut growers. DPR clarified that there would be no change for growers as of now and that they can continue to use the pesticide until further notice. This policy will continue until EPA makes a decision whether to ban Lorsban or not. DPR will meet in the fall to discuss a scientific panel’s recent decision to list Chlorpyrifos as a toxic air contaminant. That decision will allow DPR to develop additional restriction on its use but only after consulting other agencies, including the California Air Resources Board (CARB) and local air pollution control districts. The CWB will be monitoring any change in the status of Chlorpyrifos and keep the industry informed.

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FUNDING TO REPLACE OLDER AG EQUIPMENT

WALNUT SHORT COURSE November 5-7, 2018 Join UC faculty, Cooperative Extension specialists and farm advisors, and USDA researchers for this integrated orchard management short course. The three days of instruction will provide in-depth and comprehensive study of all phases of walnut culture and production based on the latest information and research. The program will cover the fundamental principles that form the basis for practical decisions and will include question and answer times following each session to ensure time with instructors and networking opportunities.

Who should attend: New and experienced growers as well as other industry members interested in commercial walnut production.

SESSIONS WILL COVER: • Orchard planning, design and development

• Proper use and maintenance of irrigation systems

• Walnut variety and rootstock selection

• Mineral nutrition and fertilization

• Evaluation and modification of water and soils • Tree propagation, training, pruning and canopy management

• Management of weeds and vertebrate pests • Integrated pest management of insects and diseases • Considerations for replanting orchards

• Tree and root physiology

• Quality & harvest concerns

• Bud development and pollination management

• Economics of walnut farming and marketing

• Irrigation scheduling

• Food safety and more!

The California Air Resources Board is opening its application period to growers for participation in the FARMER grant program, a program that provides funding to “reduce agricultural sector emissions by providing grants, rebates, and other financial incentives for agricultural harvesting equipment, heavy-duty trucks, agricultural pump engines, tractors, and other equipment used in agricultural operations.”

A few things to note regarding this process: • The grants are available statewide but funding and application process may vary by county. To get the most relevant information, please contact your local Air District. You can find your local contacts here: https://ww2.arb.ca.gov/our-work/ programs/farmer-program/farmerprogram-district-contacts • Projects will typically receive funding for up to 50% of the eligible costs of the new equipment based on information submitted with the application. Grant awards are typically capped at $50,000.

If you have any questions regarding this grant, you can reach the Air Resources Board at: Email: farmer@arb.ca.gov Phone: (916) 323-8967

For a full agenda & more information, visit: http://ucanr.edu/sites/WalnutShortCourse/

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CALIFORNIA WALNUT COMMISSION 101 Parkshore Drive, Suite 250 Folsom, CA 95630

UPCOMING EVENTS MEETINGS

CALIFORNIA WALNUT BOARD & CALIFORNIA WALNUT COMMISSION

⊲⊲ California Walnut Board & California Walnut Commission Fall Meeting September 12-13, 2018 Marriott Rancho Cordova Please contact Dana at (916) 932-7070 for more details.

CONTACT INFO California Walnut Board and California Walnut Commission 101 Parkshore Drive, Suite 250 Folsom, CA 95630 phone 916.932.7070 email info@walnuts.org fax 916.932.7071

walnuts.org

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