[Federal Register Volume 65, Number 31 (Tuesday, February 15, 2000)]
[Proposed Rules]
[Pages 7462-7465]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-3424]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
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 

  Federal Register / Vol. 65, No. 31 / Tuesday, February 15, 2000 / 
Proposed Rules  

[[Page 7462]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Parts 46 and 47

[Docket No. FV99-362]
RIN #0581-AB76


Perishable Agricultural Commodities Act: Increase in License and 
Complaint Filing Fees

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: The Department of Agriculture (USDA) is proposing to amend the 
regulations under the Perishable Agricultural Commodities Act (PACA or 
Act) and the PACA Rules of Practice (other than formal disciplinary 
proceedings) to increase license and complaint filing fees. 
Specifically, the proposed revisions would increase the current annual 
license fee of $550 to $600 for very small businesses and would 
increase the license fee from $550 to $850 for all other licensees. 
Informal complaint filing fees would be increased from $60 to $100. 
This notice also announces USDA's intention to request an extension for 
and revision to a currently approved information collection for the 
Reporting and Recordkeeping Requirements under Regulations (Other Than 
Rules of Practice) under the PACA.

DATES: Comments must be received by April 17, 2000.

ADDITIONAL INFORMATION CONTACT: Charles W. Parrott, Acting Chief, PACA 
Branch, Fruit and Vegetable Programs, AMS, USDA, Room 2095-So. Bldg., 
PO Box 96456, Washington, DC 20090-6456, phone (202) 720-2272. Email--
[email protected]. All comments should reference the docket 
number and the date and page number of this issue in the Federal 
Register and will be made available for public inspection in the PACA 
Branch during regular business hours and posted on the internet at 
www.ams.usda.gov/fv/paca.htm.

SUPPLEMENTARY INFORMATION: This proposal is issued under authority of 
section 15 of the PACA (7 U.S.C. 499o).
    The Perishable Agricultural Commodities Act (PACA or Act) 
establishes a code of fair trade 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 trade 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.
    The PACA Amendments of 1995 (1995 Amendments) \1\ increased the 
annual license fee from $400 to $550 (up to a maximum fee of $4000) for 
all licensees except retailers and grocery wholesalers, who were phased 
out of paying license fees over a 3-year period that concluded on 
November 14, 1998. Retailers account for approximately 30 percent of 
all PACA licensees, and provided about 35 percent of the program's 
revenue prior to being phased out of the license fee requirement.
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    \1\ P.L. 104-48, 109 Stat. 427(1995)
---------------------------------------------------------------------------

    The 1995 Amendments grant USDA the authority to increase fees 
through rulemaking after November 14, 1998, provided that the PACA 
program's operating reserves fall below 25 percent of the projected 
annual program costs. Because of the loss of revenue from retailers and 
grocery wholesalers over the past four years, PACA program budget 
projections for fiscal years 2000 and 2001 show that the program's 
assets will fall below the required 25 percent of projected 
expenditures in fiscal year 2001. Without a fee increase, the program 
will exhaust its reserves by the end of Fiscal Year 2003, and would 
soon need to begin reducing its level of services to the industry. 
Therefore, USDA is proposing an increase in the PACA license fee from 
$550 to $850. Branch fees would remain at $200 per branch, but the 
maximum fee would increase from $4,000 to $6,000. However, very small 
businesses would pay a license fee of $600. The parameters for a very 
small business to qualify for the $600 license fee will be further 
addressed when we discuss the effects that this proposed rule would 
have on small businesses. In addition, AMS would also raise the 
informal reparation complaint filing fee from $60 to $100. AMS would 
amend Sec. 46.46 of the PACA Regulations and Sec. 47.3 of the PACA 
Rules of Practice to reflect the proposed changes to the license and 
reparation complaint filing fees. In addition, the language in 
Sec. 46.46 of the regulations regarding the phase-out of retailers and 
grocery wholesalers from paying license fees would be deleted, since 
the 3-year phase-out mandated by the 1995 Amendments has been 
concluded.
    Additionally, a number of definitions would be amended in the 
regulations. Due to the reorganization of AMS, a definition of the 
``Fruit and Vegetable Programs'' would be substituted for the 
definition of ``Division,'' a definition of ``Associate Administrator'' 
would be substituted for the definition of ``Deputy Administrator,'' 
and a definition of ``Deputy Administrator'' would be substituted for 
the definition of ``Director.'' Additionally, the words ``Program'' and 
``Deputy Administrator'' would be substituted for ``Division'' and 
``Director'' respectively, wherever they appear in part 46.

Executive Orders 12866 and 12988

    This proposed rule, issued under the Perishable Agricultural 
Commodities Act (7 U.S.C. 499 et seq.), as amended, has been determined 
to be not significant for the purposes of Executive Order 12866, and 
therefore, has not been reviewed by the Office of Management and Budget 
(OMB).
    This proposed rule has been reviewed under Executive Order 12988, 
Civil Justice Reform and is not intended to have retroactive effect. 
This proposed 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.), AMS has considered the economic 
impact of this proposed

[[Page 7463]]

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 (SBA) (13 CFR 121.601) as those whose 
annual receipts are less than $5,000,000.
    The PACA is enforced through a licensing system and is user-fee 
financed primarily through a license fee. The PACA requires commission 
merchants, dealers, and brokers buying or selling fruits and/or 
vegetables in interstate or foreign commerce who meet certain threshold 
requirements to be licensed. There are approximately 16,695 PACA 
licensees. Separating licensees by the nature of business, there are 
approximately 5,800 wholesalers, 5,100 retailers, 2,000 brokers, 1,300 
processors, 700 commission merchants, 420 food service businesses, 130 
grocery wholesalers, and 40 truckers licensed under PACA. In addition, 
there are approximately 1,100 other licensees with multiple types of 
business. The PACA license is effective for three years for retailers 
and grocery wholesalers, and must be renewed on a triennial basis. The 
license for all other licensees is effective for up to three years. 
These licensees must also renew their licenses, but have the option of 
a 1-year, 2-year, or 3-year license term. Those who engage in practices 
prohibited by the PACA may have their licenses suspended or revoked by 
USDA (7 CFR 46.9 (a)-(h)). Many of the licensees may be classified as 
small entities.
    Wholesalers, processors, food service companies, grocery 
wholesalers, and truckers are considered to be dealers and subject to a 
license when they buy or sell more than 2,000 pounds of fresh and/or 
frozen fruits and vegetables in any given day. Dealers whose fruit and 
vegetable purchases or sales do not exceed the 2,000 pound threshold 
are exempt from the license requirement. A retailer is considered to be 
a dealer and subject to license when the invoice cost of its perishable 
agricultural commodities exceeds $230,000 in a calendar year. Brokers, 
negotiating the sale of frozen fruits and vegetables on behalf of the 
seller, are exempt from licensing in any calendar year when the invoice 
value of the transactions are below $230,000.
    The 1995 Amendments grant USDA the authority to increase fees 
through rulemaking after November 14, 1998, provided that the PACA 
program's operating reserves fall below 25 percent of the projected 
annual program costs. The initial increase in receipts from fees 
collected following the enactment of the 1995 Amendments allowed the 
PACA fund to build up operating reserves. Those reserves peaked at 
$7.48 million in July 1998. However, due to the loss of revenue from 
retailers and grocery wholesalers over the past four years, PACA 
program budget projections for fiscal years 2000 and 2001 show that the 
program's assets will fall below the required 25 percent of projected 
expenditures in fiscal year 2001. Budget projections indicate that the 
program must generate approximately $9.101 million per year over each 
of the next five years for the program to stay above the 25 percent 
threshold. This equates to a $2.7 million per year increase in annual 
program revenues beginning with fiscal year 2000. Because 93 percent of 
the program's revenue is generated through the collection of license 
fees, a majority of these funds would have to be raised through an 
increase in license fees. Without a fee increase, the program will 
exhaust its reserves by the end of fiscal year 2003, and would soon 
need to begin reducing its level of services to the industry.
    Accordingly, it will be necessary for USDA to implement a PACA fee 
increase in fiscal year 2001. A significant increase will be necessary 
to compensate for the loss of the license revenue from retailers and 
grocery wholesalers. When USDA proposed revisions to the PACA 
regulations implementing the 1995 Amendments (61 FR 47674, September 
10, 1996), it noted that the next fee increase would need to be 
significant.
    The following table outlines how the proposed fee increase would 
affect the PACA program's budget through fiscal 2006:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                    Balance     License &                                               End of year
                              Year                                  start of    complaint    Investment     Total      Projected  ----------------------
                                                                  fiscal year  fee revenue    revenue      revenue       costs       Reserve     Percent
--------------------------------------------------------------------------------------------------------------------------------------------------------
2001............................................................    3,642,000    9,101,000      269,000   13,012,000    9,009,000    4,003,000        44
2002............................................................    4,003,000    9,101,000      450,000   13,554,000    9,153,000    4,401,000        46
2003............................................................    4,401,000    9,101,000      450,000   13,952,000    9,489,000    4,462,000        45
2004............................................................    4,462,000    9,101,000      415,000   13,978,000    9,816,000    4,162,000        41
2005............................................................    4,162,000    9,101,000      381,000   13,645,000   10,128,000    3,516,000        34
2006............................................................    3,516,000    9,101,000      346,000   12,963,000   10,351,000    2,612,000        25
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    USDA officials have discussed this issue with representatives from 
numerous trade associations, most of whom expressed a preference for a 
single, significant fee increase, rather than a series of smaller 
increases implemented over several years to maintain the 25 percent 
reserve balance. Taking that into account, USDA is proposing an 
increase in the PACA license fee from $550 to $850. Branch fees would 
remain at $200 per branch, but the maximum fee would increase from 
$4,000 to $6,000. The proposed fees would result in total collections 
of $9.1 million with a projected end-of-year reserve of approximately 
44 percent for fiscal year 2001, or about $1.75 million above the level 
needed to achieve a reserve of 25 percent. With this revenue, AMS 
expects that the PACA program should have adequate financing through 
fiscal year 2006 when the reserve is again projected to fall below 25 
percent. In order to moderate the financial burden for small 
businesses, AMS is also proposing that very small businesses with gross 
sales of less than $1 million per year pay a license fee of $600, a 
modest increase of $50 from the current $550 license fee. In order to 
qualify for the $600 license fee, AMS may require that a firm submit a 
copy of its last income tax return filed with the Internal Revenue 
Service. Because very small businesses have limited financial 
resources, USDA believes that such a fee structure is more equitable 
for those firms and should increase the likelihood the firms would 
voluntarily comply with the PACA licensing requirements.
    Although license fees account for the majority of PACA's funding, 
the program also collects about 3.5 percent of its revenue from fees 
charged to firms that submit disputes to the PACA branch for 
resolution. Under section 6(a)(2) of the Act, the Secretary may alter 
the complaint filing and handling fees by rulemaking. In order to help

[[Page 7464]]

offset the revenue loss from the lower license fee for very small 
businesses, USDA proposes that the informal reparation complaint filing 
fee be raised from $60 to $100. USDA believes that this will also place 
a larger percentage of the financial burden on those firms that 
directly use PACA dispute resolution services. Furthermore, USDA does 
not believe that a modest $40 increase in the complaint filing fee 
would affect the decision of a business, regardless of its gross sales, 
to seek to recover damages by filing an informal reparation complaint.
    Given the preceding discussion, AMS has made an initial 
determination that the provisions of this proposed rule would not have 
a significant economic impact on a substantial number of small 
entities.

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
Chapter 35), this notice announces AMS' intention to request an 
extension for and revision to a currently approved information 
collection for the Reporting and Recordkeeping Requirements under 
Regulations (Other Than Rules of Practice) Under the Perishable 
Agricultural Commodities Act (PACA) (7 U.S.C. 499a-499t).
    Title: Reporting and Recordkeeping Requirements Under Regulations 
(Other Than Rules of Practice) Under the Perishable Agricultural 
Commodities Act, 1930.
    OMB Number: 0581-0031.
    Expiration Date of Approval: April 30, 2001.
    Type of Request: Extension and revision of a currently approved 
information collection.
    Abstract: The PACA was enacted by Congress in 1930 to establish a 
code of fair trading practices covering the marketing of fresh and 
frozen fruits and vegetables in interstate or foreign commerce. It 
protects growers, shippers, and distributors dealing in those 
commodities by prohibiting unfair and fraudulent trade practices.
    The law provides for the enforcement of contracts by providing a 
forum for resolving contract disputes, and a mechanism for the 
collection of damages from anyone who fails to meet contractual 
obligations and for excluding from the industry firms or individuals 
who violate the law's standards for fair business practices. In 
addition, the PACA imposes a statutory trust on licensees for 
perishable agricultural commodities received, products derived from 
them, and any receivables or proceeds due from the sale of the 
commodities for the benefit of produce suppliers, sellers, or agents 
that have not been paid.
    The PACA is enforced through a licensing system and substantially 
through a license fee. All commission merchant, dealers, and brokers 
engaged in business subject to the PACA must be licensed. Retailers and 
grocery wholesalers must renew their licenses every three years. All 
other licensees have the option of a one, two, or three-year license 
term. Those who engage in practices prohibited by the PACA may have 
their licenses suspended or revoked.
    The information collected from respondents is used to administer 
licensing provisions under the PACA. The records maintained are used to 
adjudicate contract disputes and administrative complaints filed 
against licensees to impose sanctions on firms and responsibly 
connected individuals who have engaged in unfair trade practices.
    We estimate the paperwork and time burden on the above to be as 
follows:
    Form FV-211 (or 211-1, or 211-2, or 211-3, or 211-4, or 211-5), 
Application for License: Average of .25 hours per application per 
response.
    Form FV-231-1 (or 231-1A, or 231-2, or 231-2A), Application for 
Renewal or Reinstatement of License: Average of .05 hours per 
application per response.
    Regulations Section 46.13--Letters to Notify USDA of Changes in 
Business Operations: Average of .05 hours per notice per response.
    Regulations Section 46.4--Limited Liability Company Articles of 
Organization and Operating Agreement: Average of .083 hours with 
approximately 160 recordkeepers.
    Regulations Section 46.18-Record of Produce Received: Average of 5 
hours with approximately 14,700 recordkeepers.
    Regulations Section 46.20--Records Reflecting Lot Numbers: Average 
of 8.25 hours with approximately 1,000 recordkeepers.
    Regulations Section 46.46(d)(2)--Waiver of Rights to Trust 
Protection: Average of .25 hours per notice with approximately 100 
principals.
    Regulations Sections 46.46(f) and 46.2(aa)(11)--Copy of Written 
Agreement Reflecting Times for Payment: Average of 20 hours with 
approximately 2,000 recordkeepers.
    Estimate of Burden: The total public reporting burden for this 
collection of information is estimated to average 3.85334 hours per 
response.
    Respondents: Commission merchants, dealers, and brokers engaged in 
the business of buying, selling, or negotiating the purchase or sale of 
commercial quantities of fresh and/or frozen fruits and vegetables in 
interstate or foreign commerce are required to be licensed under the 
PACA (7 U.S.C. 499(c)(a)).
    Estimated Number of Respondents: 11,209.
    Estimated Number of Responses per Respondent: 2.7415.
    Estimated Total Annual Burden on Respondents: 118,371 hours.
    Comments are invited on: (1) Whether the proposed collection of 
information is necessary for the proper performance of the functions of 
the agency, including whether the information will have practical 
utility; (2) the accuracy of the agency's estimate of the burden of the 
proposed collection of information including the validity of the 
methodology and assumptions used; (3) ways to enhance the quality, 
utility and clarity of the information to be collected; and (4) ways to 
minimize the burden of the collection of information on those who are 
to respond, including through the use of appropriate automated, 
electronic, mechanical, or other technological collection techniques or 
other forms of information technology. Comments may be sent to Charles 
W. Parrott, Acting Chief, PACA Branch, Fruit and Vegetable Programs, 
AMS, USDA, Room 2095-So. Bldg., PO Box 96456, Washington, DC 20090-
6456. [email protected]. All comments received will be 
available for public inspection during regular business hours at the 
same address.
    All responses to this notice concerning reporting and recordkeeping 
requirements will be summarized and included in the request for OMB 
approval. All comments will also become a matter of public record.

List of Subjects

7 CFR Part 46

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

7 CFR Part 47

    Administrative practice and procedure, Agricultural commodities, 
Brokers.

    For the reasons set forth in the preamble, 7 CFR parts 46 and 47 
are proposed to be 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. 46.2, paragraphs (e), (f), and (g) are revised to read 
as follows:

[[Page 7465]]

Sec. 46.2  Definitions.

* * * * *
    (e) Associate Administrator means the Associate Administrator of 
the Service, or any officer or employee of the Service to whom 
authority has heretofore lawfully been delegated, or to whom authority 
may hereafter lawfully be delegated, to act in his or her stead.
    (f) Fruit and Vegetable Programs means the Fruit and Vegetable 
Programs of the Service.
    (g) Deputy Administrator means the Deputy Administrator of the 
Fruit and Vegetable Programs or any officer or employee of the Fruit 
and Vegetable Programs to whom authority has heretofore lawfully been 
delegated, or to whom authority may hereafter lawfully be delegated by 
the Deputy Administrator, to act in his stead.
* * * * *
    3. Section 46.6 is revised to read as follows:


Sec. 46.6  License fees.

    (a) Retailers and grocery wholesalers making an initial application 
for license shall pay a $100 administrative processing fee.
    (b) Commission merchants, brokers, and dealers (other than grocery 
wholesalers and retailers), provided that they do not meet specific 
criteria of a very small business as set forth in paragraph (c) of this 
section, shall pay an annual license fee of $850 plus $200 for each 
branch or additional business facility in excess of nine. In no case 
shall the aggregate annual fees paid by any such applicant exceed 
$6,000.
    (c) To qualify as a very small business and pay a license fee of 
$600, the business must have had gross sales of $1,000,000 in the 
immediate preceding calendar year. Any applicant may be required to 
provide a copy of its most recent income tax return filed with the 
Internal Revenue Service as verification that its gross sales are less 
than $1,000,000. In no case shall the aggregate annual fees paid by any 
such applicant exceed $6,000.
    4. Part 46 is amended by removing the word ``Deputy Administrator'' 
and adding in its place the words ``Associate Administrator'', 
everywhere they appear.
    5. Part 46 is amended by removing the word ``Division'' and adding 
in its place the words ``Fruit and Vegetable Programs'', everywhere 
they appear.
    6. Part 46 is amended by removing the words ``Director'' and 
``Director's'', and adding in their place the words ``Deputy 
Administrator'' and ``Deputy Administrator's'' respectively, everywhere 
they appear.

PART 47--[AMENDED]

    1. The authority citation for part 47 is revised to read as 
follows:

    Authority: 7 U.S.C. 499o; 7 CFR 2.22(a)(1)(viii)(L), 
2.79(a)(8)(xiii).

    2. In Sec. 47.3, paragraph (a)(4) is revised to read as follows:


Sec. 47.3  Institution of proceedings.

    (a) * * *
    (4) The informal complaint shall be accompanied by a filing fee of 
$100 as authorized by the Act.
* * * * *

    Dated: February 9, 2000.
Robert C. Keeney,
Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 00-3424 Filed 2-14-00; 8:45 am]
BILLING CODE 3410-02-P