[Federal Register Volume 63, Number 223 (Thursday, November 19, 1998)]
[Rules and Regulations]
[Pages 64171-64173]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-30906]



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  Federal Register / Vol. 63, No. 223 / Thursday, November 19, 1998 / 
Rules and Regulations  

[[Page 64171]]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 46

[Docket Number FV98-359]


Regulations Under the Perishable Agricultural Commodities Act 
(PACA); Renewal of License

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: The Department of Agriculture (USDA) is revising the PACA 
Regulations to provide for a three-year license renewal period for 
retailers and grocery wholesalers, and provide all other licensees the 
option of renewing their licenses on an annual, biennial, or triennial 
basis. The PACA Amendments of 1995 (1995 Amendments) provided for the 
gradual elimination of license fees for retailers and grocery 
wholesalers over a three-year period ending November 14, 1998. The 1995 
Amendments also gave the Secretary of Agriculture the authority to 
determine the interval for renewing licenses and asked the Secretary to 
take due account of savings to the program when determining the 
appropriate intervals for license renewals.

EFFECTIVE DATE: December 1, 1998.

FOR FURTHER INFORMATION CONTACT: Charles W. Parrott, Assistant Chief, 
PACA Branch, Room 2095-So. Bldg., Fruit and Vegetable Programs, AMS, 
USDA, Washington, D.C. 20250, Phone (202) 720-4180, 
E[email protected].

SUPPLEMENTARY INFORMATION: This proposal is issued under authority of 
section 15 of the PACA (7 U.S.C. 499o).

Background

    The Perishable Agricultural Commodities Act (PACA) establishes a 
code of fair trading practices covering the marketing of fresh and 
frozen fruits and vegetables in interstate and foreign commerce. The 
PACA protects growers, shippers, distributors, and retailers dealing in 
those commodities by prohibiting unfair and fraudulent practices. In 
this way, the law fosters an efficient nationwide distribution system 
for fresh and frozen fruits and vegetables, benefiting the whole 
marketing chain from farmer to consumer. USDA's Agricultural Marketing 
Service (AMS) administers and enforces the PACA.
    In accordance with the 1995 Amendments to the PACA, retailers and 
grocery wholesalers will no longer pay a license fee under the PACA 
after November 14, 1998, but will still be required to maintain a valid 
license. The 1995 Amendments also authorized the Secretary of 
Agriculture to determine the interval for renewing licenses for all 
licensees, taking into account the likely savings to the program. The 
House of Representatives Committee on Agriculture, in it's report 
accompanying the 1995 Amendments, asked USDA to examine promptly the 
necessity for a yearly renewal requirement for retailers and grocery 
wholesalers in an effort to move toward multi-year licenses.
    A proposed rule to amend the regulations was published in the 
Federal Register on July 31, 1998 (63 FR 40842). The proposal provided 
for the shifting of retailers and grocery wholesalers to a mandatory 
three-year license renewal period and provided the option of multi-year 
licensing to all other licensees. Comments on the proposed rule were to 
be submitted by September 14, 1998. AMS received six comments.
    This final rule gradually shifts retailers and grocery wholesalers 
to a triennial license renewal interval. Each of the remaining 10,000 
licensees (commission merchants, brokers, wholesalers, processors, 
truckers, food service), all of which will continue to pay license 
fees, have the option of renewing their licenses every one, two, or 
three years. The option is available to both new license applicants and 
to existing licensees when they renew their license.
    Beginning on the effective date of this rule, all new PACA licenses 
issued to retailers and grocery wholesalers will be valid for three 
years. AMS has determined that this rule will become effective on 
December 1, 1998, in order to give AMS and all licensees sufficient 
time to prepare for the new renewal procedure. Retailers and grocery 
wholesalers that are currently licensed will be shifted to a three year 
license over the next three years. AMS will mail each exisiting 
retailer or grocery wholesaler licensee a license renewal application 
at least 30 days prior to its PACA license anniversary date and notify 
each one of its new anniversary date.
    Staggering the new triennial renewal period for retailers and 
grocery wholesalers over a three-year period will guard against an 
inundation of renewal applications three years from now which would 
increase program administrative costs. The phase-in will be implemented 
as follows: During the first year of the phase-in period, retailers and 
grocery wholesalers holding current licenses ending in the digits 
``0,'' ``3,'' ``6,'' or ``9,'' will renew their licenses on a triennial 
basis; retailers and grocery wholesalers holding licenses that end in 
the digits ``1,'' ``4,'' or ``7,'' will renew their licenses this year 
for a 2-year term, and thereafter on a triennial basis; and retailers 
and grocery wholesalers holding licenses that end in the digits ``2,'' 
``5,'' or ``8,'' will renew their licenses after one year, and 
thereafter on a triennial basis.
    All remaining PACA licensees may choose to renew their licenses 
annually, biennially, or triennially. Licensees that choose biennial or 
triennial renewal will ``lock in'' the current license fee rate for a 
two or three-year period. This rule also provides for a refund of that 
portion of the license fee to those firms required to obtain a new 
license due to a change in legal status (e.g.: a partnership of two 
becomes a partnership of three individuals; a sole proprietor 
incorporates; or a firm re-incorporates), and to those firms that cease 
business operations or whose license terminates because of bankruptcy. 
In those instances, USDA will issue refunds only for the full years 
remaining on the license. To cover the administrative costs associated 
with processing the early termination of a license, USDA will assess 
the entity a $100 processing fee.

[[Page 64172]]

Comments

    We received comments from North American Perishable Agricultural 
Receivers, Baltimore, Maryland; Western Growers Association, Newport 
Beach, California; Food Marketing Institute, Washington, D.C.; Food 
Distributors International (FDI), Falls Church, Virginia; National 
Grocers Association, Reston, Virginia; and Nardella, Inc., 
Philadelphia, Pennsylvania. All of the commentors strongly support the 
Department of Agriculture (USDA) proposal to amend the (PACA) 
regulations to provide for a three-year license renewal period for 
retailers and grocery wholesalers, and provide all other licensees the 
option of renewing their licenses for one, two, or three years.
    In its favorable comment, FDI, however, questions the provision in 
the proposed rule that USDA would assess an entity a $100 processing 
fee for the early termination of a multi-year PACA license if the 
licensee was required to obtain a new license because of a change in 
legal status, ceased business operations, or whose license terminated 
because of bankruptcy. FDI states that USDA sets forth no rationale why 
the costs of early termination of a license is more than eight times 
USDA's $8 cost of renewing a license. In addition, FDI argues that in 
instances involving bankruptcy, USDA is claiming an asset of a 
bankrupt, i.e. a portion of the receivable refunded license fee. Such 
an asset, FDI states, should be returned to the bankrupt estate to 
ensure payment of claims against the estate--some of which may have 
arisen under PACA for which trust protection was not preserved.
    USDA disagrees with FDI and believes that a $100 processing fee for 
early termination of a multi-year license is justified in that the 
refund request must be handled outside of the normal cycle of renewals 
and terminations. Early termination of a license includes updating 
agency records to show the reasons for early termination, preparing 
refund documentation for the National Finance Center along with an 
audit trail to verify that the refund was made, validating claims, 
responding to inquiries and disputes, and providing notice to trade 
publications that circumstances warranted the early termination of a 
firm's license. Because of the special handling required to refund 
multi-year license fees when an early termination occurs, USDA believes 
that the $100 processing fee is justified. USDA believes that the $100 
fee is minimal in comparison to the net amount of $450 or $1000 that 
would be refunded to the licensee holding a biennial or triennial 
license. In any event, the multi-year license option is not mandatory 
for all licensees. An applicant or licensee that does not want to risk 
losing a $100 processing fee because of early termination of its 
license does have the option of annual renewal. Finally, USDA does not 
believe that the costs incurred by one licensee because of early 
license termination should be borne by all licensees. Under the 
circumstances, USDA is making no change to the final rule based on this 
comment.

Executive Orders 12866 and 12988

    This final rule is issued under the Perishable Agricultural 
Commodities Act (7 U.S.C. 499 et seq.), as amended, and has been 
determined to be not significant for the purposes of Executive Order 
12866.
    This final rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. The final rule is not intended to have 
retroactive effect. The final rule will not preempt any State or local 
laws, regulations, or policies, unless they present an irreconcilable 
conflict with this rule. There are no administrative procedures which 
must be exhausted prior to any judicial challenge to the provisions of 
this rule.

Effects on Small Businesses

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA) (5 U.S.C. 601 et seq.), USDA has considered the economic 
impact of this final rule on small entities. 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. Small agricultural service firms have been 
defined by the Small Business Administration (13 CFR 121.601) as those 
whose annual receipts are less than $5,000,000. The PACA requires all 
businesses that operate subject to its provisions maintain a license 
issued by USDA. There are approximately 15,700 PACA licensees, a 
majority of which may be classified as small entities.
    In accordance with the PACA Amendments of 1995, retailers and 
grocery wholesalers will no longer pay a fee to be licensed under the 
PACA after November 14, 1998. The final rule establishes a 3-year 
renewal cycle for all retailers and grocery wholesalers licensed under 
the PACA. Given that those PACA licensees will now renew their licenses 
every three years rather than annually as is currently required, we 
anticipate that they will have lower administrative costs and a 
reduction in their record keeping and reporting burden.
    In addition, we project that the administrative costs and record 
keeping requirements for the remaining fee-paying licensees will, like 
the retailers and grocery wholesalers, be reduced if they choose the 
biennial or triennial renewal options. We believe that their greatest 
savings will result from choosing the triennial renewal option, with a 
lesser degree of savings resulting from the biennial renewal option.
    Finally, we believe that that all fee-paying licensees would 
indirectly benefit from the cost savings realized from these revisions 
to the PACA program, which is funded through the fees paid by 
licensees. Any cost savings to the program will help delay the need for 
an increase in fees to fund the program.
    Accordingly, based on the information in the above discussion, USDA 
has determined that the provisions of this rule would not have a 
significant economic impact on a substantial number of small entities.

Paperwork Reduction Act

    In compliance with Office of Management and Budget (OMB) 
regulations (5 CFR part 1320) which implement the Paperwork Reduction 
Act of 1995 (Pub. L. 104-13), the information collection and record 
keeping requirements covered by this final rule were approved by OMB on 
April 1, 1998, and expire on April 30, 2001.

List of Subjects in 7 CFR Part 46

    Agricultural commodities, Brokers, Penalties, Reporting and 
recordkeeping requirements.

    For the reasons set forth in the preamble, 7 CFR part 46 is amended 
as follows:

PART 46--[AMENDED]

    1. The authority citation for part 46 continues to read as follows:

    Authority: Sec. 15, 46 Stat. 537; 7 U.S.C. 499o.

    2. In Sec. 46.9, paragraphs, (j), (k), and (l) are added to read as 
follows:


Sec. 46.9  Termination, suspension, revocation, cancellation of 
licenses; notices; renewal.

* * * * *
    (j) Beginning on December 1, 1998, the renewal period for new 
licenses issued to retailers and grocery wholesalers is three years.
    (k) Beginning on December 1, 1998, commission merchants, brokers, 
and dealers (other than grocery wholesalers

[[Page 64173]]

and retailers) who are new or existing licensees, may choose to renew 
their licenses on an annual, biennial, or triennial basis. In the event 
that the holder of a multi-year license ceases business operations or 
undergoes a change in legal status that results in the issuance of a 
new license prior to the next license renewal date, a refund will be 
issued of any remaining full-year portion of advance fee paid, minus a 
$100 processing fee.
    (l) Retailers and grocery wholesalers who are existing licensees as 
of December 1, 1998, will be phased into the three-year renewal process 
during the succeeding one-year as follows:
    (1) Licenses held by retailers and grocery wholesalers ending in 
the digits ``0,'' ``3,'' ``6,'' or ``9,'' will be renewed on a 
triennial basis.
    (2) Licenses held by retailers and grocery wholesalers ending in 
the digits ``1,'' ``4,'' or ``7,'' will be renewed for two years and 
thereafter on a triennial basis.
    (3) Licenses held by retailers and grocery wholesalers ending in 
the digits ``2,'' ``5,'' or ``8,'' will renew their licenses after one 
year, and thereafter on a triennial basis.

    Dated: November 13, 1998.
Larry B. Lace,
Acting Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 98-30906 Filed 11-18-98; 8:45 am]
BILLING CODE 3410-02-P