[Federal Register Volume 75, Number 163 (Tuesday, August 24, 2010)]
[Rules and Regulations]
[Pages 51917-51919]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-20978]



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  Federal Register / Vol. 75, No. 163 / Tuesday, August 24, 2010 / 
Rules and Regulations  

[[Page 51917]]



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: Final rule.

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SUMMARY: The Department of Agriculture (USDA) is amending the 
regulations issued under the Perishable Agricultural Commodities Act 
(PACA or Act) to increase license fees. Specifically, annual license 
fees of $550 are increased to $995. Fees for branch locations are 
increased from $200 for branch locations in excess of nine, to $600 for 
each branch location. The maximum amount a licensee will pay per year 
has increased from $4,000 to $8,000. Additionally, the regulations have 
been 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 been completed. Finally, the regulations have been 
amended to eliminate the multi-year license renewal option for 
commission merchants, brokers, and dealers.

DATES: Effective Date: This rule is effective September 23, 2010, 
except for the amendment to Sec.  46.6(b), which is effective on 
October 1, 2010.

FOR FURTHER INFORMATION CONTACT: Jeffrey F. Davis, Office of the Chief, 
PACA Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence 
Ave., SW., Room 2098-A South Bldg., Washington, DC 20250-0242. (202) 
205-7847. [email protected].

SUPPLEMENTARY INFORMATION: This rule 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 $4,000) 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, Pub. L. 106-224.
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    During 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. Therefore, USDA is increasing the 
current base annual license fee for commission merchants, brokers, and 
dealers from $550 to $995. USDA is also increasing the current $200 
additional fee for branch locations in excess of nine, to $600 for each 
branch location starting from the first branch. USDA is also increasing 
the current aggregate fee maximum from $4,000 to $8,000. The new fees 
are effective October 1, 2010. The license fee increase will allow the 
PACA Branch to maintain its current level of services through FY 2015.
    USDA is also amending the regulations by removing sections of 
46.6(a) and 46.9(1) of the regulations (7 CFR 46.6 and 46.9(1)) that 
phased out license fees for retailers and grocery wholesalers and that 
phased in triennial

[[Page 51918]]

license renewal for retailers and grocery wholesalers. And USDA is 
removing the multi-year license renewal option for commission 
merchants, dealers, and brokers in section 46.9(k) of the regulations 
(7 CFR 46.9(k)).

Comments

    A proposed rule to amend PACA regulations was published in the 
Federal Register on March 11, 2010 (75 FR 11472). The proposal sought 
to amend Title 7, Part 46 to increase license fees. The comment period 
closed on May 10, 2010. We received timely comments from Western 
Growers Association (WGA), Newport Beach, California; Produce Marketing 
Association (PMA), Newark, Delaware; Washington State Potato Commission 
(WSPC), Moses Lake, Washington; and three individuals.
    The WGA and PMA strongly supported the PACA Branch and the 
proposal. The PMA and the 3,000 companies it represents--from grower-
shippers and supermarket retailers to foodservice operators and 
importers--supports the proposed fee increases as outlined in the 
proposed rule. The WGA and its 2,500 members strongly support the 
proposed fee increase, but requested branch fees be waived on the first 
and second branch locations. The WGA felt reducing the current 
exemption from nine branches down to zero was too dramatic a change.
    In its unfavorable comment, Matt Harris, Director of Trade for the 
WSPC requested further economic analysis to identify the true impact to 
small business. The WPSC feels an 81% increase in fees is uncalled for. 
The WPSC cited 45 potato handlers in Washington State who need up to 12 
different licenses and audits totaling $9,125 yearly already; adding an 
additional $450 in PACA fees understates the incremental impact this 
federal increase means to the small business owner. In response, the 
PACA Branch has not raised license fees since 1995. The 1995 amendments 
preclude PACA from increasing fees until the funds on hand as of the 
end of the fiscal year in which the increase will take effect will be 
less than 25 percent of the projected budget. The PACA Branch achieved 
tremendous success over the past fifteen years minimizing costs and 
improving service to the fruit and vegetable industry. Through the PACA 
Branch's use of improved technology, strong centralized management, and 
aggressive cost-cutting methods (including the closing of two regional 
offices and consolidation of licensing functions), the one-time 
congressional appropriation of $30.45 million expected to last a few 
years has lasted for over ten years. These efforts delayed the need to 
request a license fee increase without curtailing services, another 
benefit to the fruit and vegetable industry. The criteria set forth in 
the statute have now been met, authorizing the fee increase. The amount 
of the increase is necessary to permit PACA to continue to provide 
services to the industry at current levels. Given the above discussion, 
the USDA is making no change to the final rule based on this comment.
    In his unfavorable comment, one commenter indicated he feels the 
fee increase is unfair, discriminately excessive, and monopolistically 
disproportionate. He feels the fee increase should have been proposed 
gradually over ten years. The commenter also feels licensees who use 
PACA services should bear more of the financial burden to pay for the 
fee increase. As outlined previously, PACA may only by law, institute a 
fee increase under certain circumstances. By being PACA licensed, all 
PACA licensees enjoy the same benefit of the federal protection of the 
Act. Since 2001, over 20% of all licensees have filed an action with 
the PACA. Since 2004, PACA has resolved 7,660 complaints involving 
claims of over $155 million within four months 91% of the time. 
Currently 14,508 PACA licensees have a total of 5,365 branch locations. 
The increased branch fees will affect 1,102 licensees; 10.6% of the 
largest firms will bear the greatest burden of the fee increase. Based 
on this discussion, the USDA will be making no changes to the final 
rule based on this comment.
    Another commenter requested that the fee remain the same for small 
entities. Small agricultural business firms are defined by the Small 
Business Administration (SBA) (13 CFR 121.601) as those whose annual 
receipts are less than $7,000,000. The majority of PACA licensees fall 
within this classification. The fee structure is designed so most firms 
would only see the annual license fee increase from $550 to $995. This 
$445 fee increase is believed to be a minor increase to operating costs 
for firms of all sizes. The USDA will be making no changes to the final 
rule based on this comment.
    Another commenter suggested the license fees are passed on to the 
consumer, the cost of commodities are too expensive now, and PACA is a 
burden to the people. No direct complaint against the proposed rule was 
provided, so the USDA will be making no changes to the final rule based 
on this comment.
    No comments were received on our proposal to remove sections of 
46.6(a) of the regulations (7 CFR 46.6) that phased out license fees 
for retailers and grocery wholesalers, to remove section 46.9(1) (7 CFR 
46.9(1)) that phased out triennial license renewal for retailers and 
grocery wholesalers, or to remove the multi-year license renewal option 
for commission merchants, dealers, and brokers in section 46.9(k) of 
the regulations (7 CFR 46.9(k)). Therefore, these changes are finalized 
as proposed.

Executive Orders 12866 and 12988

    This final 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 final rule has been reviewed under Executive Order 12988, 
Civil Justice Reform, and is not intended to have retroactive effect. 
This 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. 601-612), the Agricultural Marketing Service has 
considered the economic impact of this final rule on small entities, 
and accordingly has prepared this 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 May 21, 2010 there were 14,508 PACA licensees, a majority of 
which may be classified as small entities. Retailers and grocery 
wholesalers represent 4,147 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

[[Page 51919]]

for about 35% of program revenue before their fees were phased out by 
the 1995 Amendments to the Act. Today, retailers account for 28.6% of 
all PACA licensees. However, since only new applicants pay a processing 
fee, retailers contribute little to PACA's annual operating revenue. 
The 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 final rule.
    Wholesalers, processors, food service companies, commission 
merchants, dealers, brokers, and truckers 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. This group 
represents the remaining 10,361 active, ``paying'' PACA licensees and 
is the only group impacted by the 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 will be impacted 
by the PACA license fee increase. While the maximum amount of the 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 final rule was designed so most firms would only 
see the annual fee increase from $550 per year to $995. 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 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 the availability of online forms.

List of Subjects in 7 CFR Part 46

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

0
For reasons set forth in the preamble, 7 CFR part 46 is amended as 
follows:

PART 46--[AMENDED]

0
1. The authority citation for part 46 is revised to read as follows:

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


0
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.
* * * * *

0
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: August 17, 2010.
Rayne Pegg,
Administrator, Agricultural Marketing Service.
[FR Doc. 2010-20978 Filed 8-23-10; 8:45 am]
BILLING CODE 3410-02-P