[Federal Register Volume 75, Number 47 (Thursday, March 11, 2010)]
[Proposed Rules]
[Pages 11472-11474]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-5255]


 ========================================================================
 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. 75, No. 47 / Thursday, March 11, 2010 / 
Proposed Rules  

[[Page 11472]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 46

[Document No. AMS-FV-08-0098]
RIN  0581-AC92


Perishable Agricultural Commodities Act: Increase in License 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) to increase license fees. Current annual license fees of $550 
would increase to $995. Fees for branch locations would increase from 
$200 for branch locations in excess of nine to $600 for each branch 
location. The maximum amount a licensee would pay per year would 
increase from $4,000 to $8,000. Additionally, the regulations would be 
amended to remove the provisions to phase out license fees by retailers 
and grocery wholesalers and the provisions to phase in triennial 
license renewal for retailers and grocery wholesalers as these 
processes have already occurred. We also propose to eliminate the 
multi-year license renewal option for commission merchants, brokers, 
and dealers.

DATES: Written or electronic comments received by May 10, 2010 will be 
considered prior to issuance of a final rule.

ADDRESSES: You may submit written or electronic comments to:
    (1) PACA License Fee Comments, AMS, F&V Programs, PACA Branch, 1400 
Independence Avenue, SW., Room 2095-S, Washington, DC 20250-0242.
    (2) Fax: 202-690-4413.
    (3) E-mail comments to [email protected].
    (4) Internet: http://www.regulations.gov.
    Instructions: All comments will become a matter of public record 
and should be identified as ``PACA License Fee Comments''. Comments 
will be available for public inspection from the Agricultural Marketing 
Service at the above address or over the Agency's Web site at http://www.ams.usda.gov/paca. Web site questions can be addressed to the PACA 
Webmaster, [email protected].

FOR FURTHER INFORMATION CONTACT: Jeffrey F. Davis, Assistant Director, 
National License Center, PACA Branch, Fruit and Vegetable Programs 
(703) 331-4575.

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) of 1930 
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 Branch proactively works for the fruit and vegetable 
industry promoting interstate and foreign commerce through dispute 
resolution, licensing, and outreach programs facilitating fair trade 
practices. The PACA enforces Federal regulations outside the civil 
court system by upholding contract requirements. The PACA also mandates 
full and prompt payment, removes unscrupulous individuals from the 
trade when needed, and provides expert advice on trust protection.
    The PACA Amendments of 1995 \1\ increased the annual license fee 
from $400 to $550 (up to a maximum annual fee of $4000) for all 
licensees except retailers and grocery wholesalers.\2\ The 1995 
Amendments granted 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 PACA's projected annual 
program costs.\3\ Because of the loss of revenue to the Agency caused 
by the amendment's requirement that fees for retailers and grocery 
wholesalers be phased out, PACA program budget projections for FY 2000 
and 2001 indicated the program's assets would have fallen below the 
required 25 percent of projected expenditures in FY 2001. However, on 
June 20, 2000 President Clinton signed Public Law 106-224 which 
included $30.45 million to be deposited into USDA's PACA reserve fund 
on October 1, 2000, in order to maintain PACA license and complaint 
filing fees at their 1995 levels.\4\ The one-time appropriation 
(expected to last a few years) has lasted almost 11 years through 
concentrated cost-cutting measures, including office restructuring and 
staff reductions. In FY 2006, the PACA Branch restructured its regional 
offices and consolidated nationwide licensing functions into one 
office, resulting in over $1 million in annual savings. In January, 
2000, the PACA Branch operated with 116 employees. As a result of gains 
in technology and office consolidations this program now employs 
approximately 80 full time staff members in three regional offices and 
Washington, DC. The 2007 U.S. Department of Commerce Bureau of Economic 
Analysis report indicates the total retail value of fruits and 
vegetables for at-home and away-from-home consumption was $80-$95 
billion. The PACA Branch operating expenses in FY 2008 were $10.6 
million, constituting a sound value in cost-efficiency and productivity 
dedicated to the service of the fruit and vegetable industry.
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    \1\ Public Law 104-48, 109 Stat. 427(1995).
    \2\ 7 U.S.C. 499c(b)(2).
    \3\ Id.
    \4\ Sec. 203, Public Law 106-224.
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    During the last quarter of FY 2010, or possibly the first quarter 
of FY 2011, the PACA Branch operating fund will fall below 25 percent 
of projected annual program costs. Without a fee increase in FY 2011, 
the program will exhaust its reserves by the second quarter of FY 2011, 
and would soon need to begin reducing its level of services to the 
industry. We propose to increase the current base annual license fee 
for commission merchants, brokers, and dealers from $550 to $995. We 
also propose to increase the current $200 additional fee for branch 
locations in

[[Page 11473]]

excess of nine to $600 for each branch location starting from the first 
branch. We further propose to increase the current aggregate fee 
maximum from $4,000 to $8,000. We propose that the fee increase become 
effective October 1, 2010. The proposed funding increase, provided that 
there is no significant increase in multi-year license renewals prior 
to its effective date, is expected to allow the PACA Branch to maintain 
its current level of services until FY 2015.

Financial Impact/Costs

    The PACA is enforced through a licensing system and is user-fee 
financed through a license fee. The PACA requires commission merchants, 
wholesale dealers, grower's agents, food processors, and brokers buying 
or selling fruits and/or vegetables in interstate or foreign commerce 
to be licensed. Those who engage in practices prohibited by the PACA 
may have their licenses suspended or revoked by USDA [7 CFR 46.9(a)-
(h)]. Currently, licensees may choose to renew their licenses on an 
annual, biennial, or triennial basis.
    Wholesalers, processors, food service companies, and grocery 
wholesalers are considered to be dealers and subject to 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 purchases exceed the 2,000 pound threshold 
and the invoice cost of its perishable agricultural commodities exceeds 
$230,000 in a calendar year.
    Although license fees account for the majority of PACA's funding, 
the program also collects about 4.4% of its revenue from fees charged 
to firms that submit disputes to the PACA Branch for resolution. 
Reparation complaint fees (informal and formal) are expected to account 
for $360,000 in revenue per year through FY 2015.
    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, creating revenue as investment income for subsequent years. In FY 
2008, the program generated $6.35 million in license fees, $360,000 in 
complaint fees, and $419,000 in investment income for revenues totaling 
$7.13 million. During FY 2011 the operating reserve will be exhausted, 
generating no investment income. Projections indicate that the program 
must generate approximately $11.425 million per year by FY 2011 and 
$13.04 million by FY 2015 for the program to continue to maintain the 
current level of service to the industry. This equates to a $4.865 
million per year increase in annual program revenues beginning with FY 
2011, up to $6.48 million by FY 2015. Because over 95 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.
    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 due to the phase out 
of the requirement that retailers pay license fees. The following table 
(based on the number of active, paying PACA licensees as of October 1, 
2008) outlines how the proposed fee increase affects the PACA program's 
budget through FY 2015:

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                                                                            License and                        Total                         Months of
                       Fiscal year                         Balance start   complaint fee    Investment       available       Projected       operating
                                                          of fiscal year      revenue         revenue          funds           costs          reserve
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2009....................................................     $11,785,000      $6,662,000        $102,000     $18,447,000     $10,732,000             8.4
2010....................................................       7,545,000       6,580,000          20,000      14,125,000      11,059,000             3.4
2011....................................................       3,065,000      12,399,000               0      15,464,000      11,425,000             4.4
2012....................................................       4,038,000      12,399,000               0      16,437,000      11,808,000             4.9
2013....................................................       4,628,000      12,399,000               0      17,027,000      12,205,000             4.9
2014....................................................       4,822,000      12,399,000               0      17,221,000      12,615,000             4.5
2015....................................................       4,606,000      12,399,000               0      17,005,000      13,040,000             3.8
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    The proposed increase in fees would result in estimated revenue of 
$12.4 million per year. AMS expects the PACA program will have adequate 
financing until FY 2015 (based on the current number of licensees and 
economic factors), when the reserve is again projected to fall below 25 
percent.
    Under Sec.  46.9(k) of the regulations (9 CFR 46.9(k)), commission 
merchants, brokers, and dealers have been given the option since 
December 1, 1998 of renewing their licenses on an annual, biennial, and 
triennial basis. Currently, 17 percent hold the two-year or three-year 
licenses. The above revenue projections assume that there is no 
significant increase in multi-year renewals before the proposed fee 
increase becomes effective. A significant increase in such renewals 
could produce a shortfall in projected revenue for FY 2011 and FY 2012 
that might necessitate a curtailment of services, or even an additional 
fee increase. Accordingly, an amendment terminating the option to renew 
on a biennial or triennial basis, which would become effective thirty 
days after publication of the final rule is proposed. This amendment 
will not apply to retailers and grocery wholesalers, who will continue 
to be licensed on a triennial basis.
    Currently, Section 46.6 of the regulations (9 CFR 46.6) sets out 
the procedure followed to phase out retailers and grocery wholesalers 
from the requirement to pay license fees and Section 46.9(k) (9 CFR 
46.9(k)) contains the procedure followed to phase in the triennial 
license renewal for those entities. Both the phase-in and phase-out 
processes have been completed. Therefore, these provisions are no 
longer needed and we propose to remove them from the regulations.

Executive Orders 12866 and 12988

    This proposed rule 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.
    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

[[Page 11474]]

U.S.C. 601-612), the Agricultural Marketing Service has considered the 
economic impact of this proposed rule on small entities, and 
accordingly 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. Small agricultural 
service firms have been defined by the Small Business Administration 
(SBA) (13 CFR 121.201) as those having annual receipts of less than 
$7,000,000. The PACA is enforced through a licensing system and is 
user-fee financed primarily through a license fee. USDA's Agricultural 
Marketing Service administers and enforces the PACA.
    As of October 1, 2008 there were 14,418 PACA licensees, a majority 
of which may be classified as small entities. Retailers and grocery 
wholesalers represent 4,125 licensees. Internally, PACA refers to 
retailers and grocery wholesalers as ``non-paying'' licensees, and all 
other licensees as ``paying''. Since November 1998, retailers and 
grocery wholesalers pay a $100 application processing fee. Their PACA 
license is effective for three years, renewed at no cost. Retailers 
accounted for about 35% of program revenue before their fees were 
phased out by Congress. Today, retailers account for 28.5% of all PACA 
licensees. However, since only new applicants pay a processing fee, 
retailers contribute little to PACA's annual operating revenue. The 
proposed fee increase will have no impact on operating costs of 
retailers and grocery wholesalers. Therefore, retailers and grocery 
wholesalers will not be unduly burdened by the proposed rule.
    Wholesalers, processors, food service companies, commission 
merchants, dealers, brokers, 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. This 
group represents the remaining 10,293 active, ``paying'' PACA licensees 
and is the only group impacted by the proposed fee increase.
    While the annual revenues of this group of agricultural service 
firms is unknown, we estimated a significant percentage of these firms 
have annual receipts less than $7,000,000. Therefore, the businesses 
are ``small businesses'' within the meaning of that term in the RFA. A 
large number of these small agricultural service firms would be 
impacted by this proposed PACA fee increase. While the maximum amount 
of the proposed PACA license fee is to be $8,000, this increase will 
impact a small number of larger firms with multiple branches. 
Currently, only 56 licensees (or 0.0039%) of all PACA licensees would 
pay the $8,000 maximum. The fee structure in the proposal was designed 
so firms would only see the annual fee increase from $550 per year to 
the proposed $995 per year. This $445 fee increase is believed to be a 
minor increase in operating costs to these firms and is more than 
offset by the protection provided to these firms under the PACA. Larger 
firms operating at multiple branch locations would face larger fee 
increases. As the renewal of PACA licenses has become highly automated 
and renewal notices are sent to all licensees well before the renewal 
date, elimination of the option biennial or triennial licenses should 
not impose a substantial burden upon small businesses holding such 
licenses.
    All fruit and vegetable traders that handle less than 2,000 pounds 
of fresh and/or frozen fruits and vegetables are exempt from the PACA 
license requirement and would not be subject to this proposed fee 
increase. These firms would be considered very small and handle a 
relatively minor volume of total fresh and/or frozen fruits and/or 
vegetables marketed.
    On February 24, 2009 the USDA Fruit and Vegetable Industry Advisory 
Committee unanimously recommended to the Secretary of Agriculture their 
approval of the proposed license fee increase.

Paperwork Reduction Act

    In accordance with Office of Management and Budget (OMB) 
regulations (5 CFR Part 1320) that implement the Paperwork Reduction 
Act of 1995 (44 U.S.C. Chapter 35), the information collection and 
recordkeeping requirements are currently approved under OMB number 
0581-0031. The forms covered under this information collection require 
the minimum information necessary to effectively carry out the 
requirements of the order, and their use is necessary to fulfill the 
intent of the PACA as expressed in the order, and the rules and 
regulations issued under the order.

E-Government Act Compliance

    AMS is committed to complying with the E-Government Act, which 
requires Government agencies in general to provide the public the 
option of submitting information or transacting business electronically 
to the maximum extent possible. License application forms are available 
on our PACA Web site at http://www.ams.usda.gov/PACA and can be 
printed, completed, and faxed. Currently, forms are transmitted by fax 
machine and postal delivery. The PACA Branch is working towards 
furthering its availability of online forms.

List of Subjects in 7 CFR Part 46

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

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

PART 46--[AMENDED]

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

    Authority: 7 U.S.C. 499a-499t.

    2. In Sec.  46.6, paragraphs (a) and (b) are 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) For commission merchants, brokers, and dealers (other than 
grocery wholesalers and retailers) the annual license fee is $995 plus 
$600 for each branch or additional business facility. In no case shall 
the aggregate annual fees paid by any such applicant exceed $8,000.
* * * * *
    3. In Sec.  46.9, paragraph (k) is revised and paragraph (l) is 
removed to read as follows:


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

* * * * *
    (k) Only a commission merchant, broker, or dealer holding a multi-
year license, prior to phase-out of this option, will receive a refund 
if business operations cease or a change in legal status occurs that 
requires issuance of a new license prior to the next license renewal 
date. If a refund is due, it will be issued for any remaining full-year 
portion of advance fee paid, minus a $100 processing fee.

    Dated: March 5, 2010.
Rayne Pegg,
Administrator, Agricultural Marketing Service.
[FR Doc. 2010-5255 Filed 3-10-10; 8:45 am]
BILLING CODE 3410-02-P