Animal and Plant Health Inspection Service

Preliminary Regulatory Impact Analysis and Initial Regulatory
Flexibility Analysis

Proposed Rule: Movement of Certain Genetically Engineered Organisms (7
CFR 340)

Docket Number: 08-023-1

September 2008

Table of Contents

[Executive Summary iii](#__RefHeading___Toc201667253)[Introduction
3](#__RefHeading___Toc201667254)[Background
3](#__RefHeading___Toc201667255)[The Current Regulatory Environment
3](#__RefHeading___Toc201667256)[The Proposed Rule
3](#__RefHeading___Toc201667257)[Benefits and Costs of the Proposed Rule
3](#__RefHeading___Toc201667258)[Benefits of the Proposed Rule
3](#__RefHeading___Toc201667259)[Costs of the Proposed Rule
3](#__RefHeading___Toc201667260)[Regulated Community Costs
3](#refheading___toc201667261)[Government Costs
3](#__RefHeading___Toc201667262)[Initial Regulatory Flexibility Analysis
3](#__RefHeading___Toc201667263)[Reasons Action is being Considered
3](#__RefHeading___Toc201667264)[Objective and Legal Basis for the Rule
3](#__RefHeading___Toc201667265)[Description and Estimate of the Number
of Small Entities Regulated 3](#__RefHeading___Toc201667266)[Description
and Estimate of Compliance Requirement
3](#__RefHeading___Toc201667267)[Duplication, Overlap, and Conflict with
Existing Rules and Regulations
3](#__RefHeading___Toc201667268)[Significant Alternatives to the Rule
3](#__RefHeading___Toc201667269)[References
3](#__RefHeading___Toc201667270)

[]{#__RefHeading___Toc201667253 .anchor}[Executive Summary]{.underline}

Under various statutes, regulatory oversight of biotechnology is shared
by the Food and Drug Administration (FDA), the Environmental Protection
Agency (EPA), and the Department of Agriculture (USDA). The proposed
rule among other things would clarify USDA APHIS' role in the regulatory
process. Currently, APHIS monitors field-testing, movement, and
importation of GE products under the Plant Protection Act (PPA, 7 USC
7701-7772) and regulations found in 7 CFR 340. Under the PPA, the USDA
has the authority to regulate the movement, importation, or release of
plant pests or potential plant pests. Since the regulations in 7 CFR 340
were first promulgated in 1987, and with the advancements in technology
and the experience gained in over 20 years of oversight, it has become
necessary to update the regulations. In addition, the 2008 Farm Bill
(The Food, Conservation, and Energy Act of 2008) enacted most recently
contains provisions that need to be incorporated into the proposed rule.
The proposed changes are intended to improve the clarity and
transparency of the regulations and provide clearer understanding of
APHIS's role in the regulatory process.

Benefits of the proposed regulations would be improved efficiency,
improved public confidence in the regulatory system, and improved
clarity and transparency of the regulations. Many provisions of the
proposed rule would improve the efficiency of the biotech regulatory
process. Various exemptions are proposed along with a streamlined permit
system, performance-based shipping standards, and a provision to provide
for additional exemptions without amending the regulations. Overall,
these regulatory amendments are likely to benefit consumers, producers,
public and private research, and the Agency.

The proposed rule's greater clarity and transparency in comparison to
the existing regulations is expected to enhance the general public's
perception of APHIS' regulation of the importation, interstate movement,
and release into the environment of GE organisms. In particular,
public-sector biotech research that is generally conducted on a much
smaller scale than that of large agri-business enterprises can be
expected to benefit from the proposed procedural changes to part 340.

There are several potential costs associated with the proposed rule.
USDA APHIS would incur costs associated with outreach activities,
developing guidance documents, training, and upgrading the current
permit system. In addition, because of the new definition of the scope
of the regulations, APHIS may devote more resources to consultations if
regulated parties request consultation in order to determine whether
particular GE organisms are or are not subject to the regulations. Such
consultation should decrease after the first year or two of
implementation, as such determinations of regulated status accumulate
and become the basis for guidance of general applicability.

Regulated entities would incur costs associated with rule
familiarization, recordkeeping and reporting, and providing information
during the application process. However, these costs may be offset by
costs savings due to various exemptions and performance-based shipping
standards provided in the proposed regulations. Currently, there are no
estimates of the Agency's costs of outreach activities, development of
guidance documents, and employee training related to the proposed rule.
It is estimated that changes to the current permit system during the
transition period may cost APHIS approximately \$500,000. However, the
current permit system can be adapted to accommodate applications during
the transition period.

Potentially affected entities fall under various categories of the North
American Industry Classification System and while economic data was not
available on business size for most entities, based on the industry
estimates obtained from the Economic Census and the Census of
Agriculture we can assume the majority of the businesses that may be
affected by the proposed rule would be small. In terms of economic
impacts, we anticipate that the proposed rule would only impose minimal
costs on the regulated entities through rule familiarization, the
provision of required information during the application process, and
recordkeeping and reporting. However, the level of increased costs
associated with record keeping and reporting costs are not clear because
much of the required information, although not formerly an explicit
requirement of the regulations, is the type of information that GE
organism developers keep for business and research purposes. The cost of
rule familiarization is also not expected to be significant; the
regulated community would already be familiar with the current
regulations. In addition, affected entities may also incur costs related
to changes necessitated by the new permitting system. APHIS welcomes
public comment on the proposed rule's possible impacts.

[]{#__RefHeading___Toc201667254 .anchor}[Introduction]{.underline}

This Regulatory Impact Analysis (RIA) and Regulatory Flexibility
Analysis examine the costs and benefits of the proposed amendments to 7
CFR 340, "Introduction of organisms and products altered or produced
through genetic engineering which are plant pests or which there is
reason to believe are plant pests." The regulations in 7 CFR 340 are
administered by the Biotechnology Regulatory Services of the United
States Department of Agriculture, Animal and Plant Health Inspection
Service (USDA APHIS). As an introduction to the analysis, background
information on the recent growth of biotechnology and the current
regulatory environment are presented. Potential impacts of the proposed
rule are then described.

[]{#__RefHeading___Toc201667255 .anchor}[Background]{.underline}

The adoption of genetically engineered (GE) crops by farmers worldwide
has become increasingly widespread. In 2005, 8.5 million farmers in 21
countries planted 222 million acres of GE crops. The United States,
Argentina, Brazil, Canada, and China are the major GE crop adopters. In
2007, 91 percent of soybean, 73 percent of corn, and 87 percent of
cotton acreages planted in the United States were genetically engineered
(NASS 2008). In addition to the major field crops, some fruits and
vegetables in the United States are GE varieties.

The benefits associated with the use of some GE crops already in
production include higher yields, lower pesticide costs, and overall
savings in management time. There are also environmental benefits from
reduced pesticide use. Attempts have been made to quantify the benefits
that have occurred as a result of the adoption of GE crops and,
according to a recent survey, farm-level net economic benefits worldwide
from the adoption of GE crops were estimated to be \$7 billion in 2006
(Brookes and Barfoot 2008). Total net benefits, 1996-2006, were
estimated to be \$34 billion. Of this total estimated net welfare gains,
the United States experienced the largest benefit, with \$15.8 billion;
followed by Argentina, \$6.6 billion; China, \$5.8 billion; and Brazil,
\$1.9 billion (Brookes and Barfoot 2008). U.S. farmers' welfare gains
from the adoption of biotechnology ranged from 29 to 42 percent of total
net welfare gains (Price *et al*. 2005; Falck-Zepeda, Traxler, and
Nelson 2000).

The high rate of GE crop adoption by farmers has been driven by an
increase in consumption of product developed with the use of GE
techniques. However, studies that quantify consumers' benefits from the
use of biotechnology are limited, as most studies tend to focus on the
direct adopters of biotechnology, i.e., the producers. Price *et al.*
(2006) found consumers do benefit from the adoption of *Bt* cotton.

Overall, consumers' gains from the adoption of various GE crops have
been estimated to range from 4 to 17 percent of total net welfare gains
(Price *et al.* 2005; Falck-Zepeda, Traxler, and Nelson 2000).

Crop producers and consumers are not the only beneficiaries of recent
advances in biotechnology. The providers of biotechnology have also
benefited from the increased adoption and consumer demand for GE
products. Intellectual property right laws have offered incentives for
the private sector to invest in research and development of GE products,
and as a result, plant breeding expenditures have largely shifted from
the public to the private sector (Fuglie and Heisey 2007). As private
research spending has increased, so has the number of firms engaged in
this type of research. However, consolidation and mergers during the
1990's resulted in an industry dominated by large companies. Currently,
80 percent of biotech traits that have been approved are owned or
co-owned by four firms (Bayer Crop Science, DuPont, Monsanto, and
Syngenta) or their subsidiaries (Kalaitzandonakes, Alston, and Bradford
2007).

With regard to the beneficial effects for the environment of GE plants
in commercial production, their production has resulted since 1996 in
decreases in the global use of pesticides by 286 million kg (Brookes and
Barfoot 2008). These declines represent 7.9 percent reductions. In terms
of greenhouse gases, one study estimated cultivation using no-tillage
systems associated with GE crops modified for herbicide tolerance to
reduce fuel use by 32.52 liters/ha (89 percent)[^1] compared to
conventional methods, and 14.7 liters/ha (76 percent) compared to
reduced tillage methods. These fuel-use reductions translate into
reductions of carbon dioxide emissions of 89.44 kg/ha and 40.43 kg/ha,
respectively. An American Soybean Association survey[^2] showed
significant reductions in tillage, and therefore in fuel use, by growers
of glyphosate-tolerant soybeans. The fuel reductions were estimated as
1.26 gallons per acre, or, for the 56 million acres of
glyphosate-tolerant soybeans planted in 2001, 70 million gallons of fuel
saved and associated greenhouse gas emissions avoided. Overall in 2006,
the total global carbon dioxide savings associated with the use of GE
crops were 1.2 billion kg. This is equivalent to removing 540,000 cars
from the streets for a year.

[]{#__RefHeading___Toc201667256 .anchor}[The Current Regulatory
Environment]{.underline}

Under the 1986 Coordinated Framework for the Regulation of
Biotechnology, the regulation of GE products is shared by the Food and
Drug Administration (FDA), the Environmental Protection Agency (EPA),
and the Department of Agriculture (USDA).

Under the Federal Food, Drug, and Cosmetic Act (FFDCA) FDA regulates the
safety of all food (other than meat, poultry and egg products),
including food and feed developed from biotechnology. Under FFDCA § 301
(Prohibited Acts), the adulteration of food and the introduction of
adulterated food into interstate commerce are prohibited. Under FFDCA §
402, foods are considered to be adulterated, for example, if they
contain any poisonous or deleterious substance which may render the food
injurious to health, or if they contain an unapproved food additive. FDA
has authority to remove food that has been found to be unsafe from the
market.

The Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) provides
the EPA with regulatory authority over pesticides. Certain features of
the FIFRA are applicable when considering the regulation of pesticidal
substances produces by certain GE plants. Pesticides are defined as
substances intended for preventing, destroying, repelling, or mitigating
any pest such as an insect, rodent, fungus, or weed. FIFRA generally
prohibits the distribution and sale of pesticides in the United States
unless the pesticide is registered for a particular use or exempt from
regulation. The registration process requires the submission of
substantial data and supporting evidence that the pesticide "will
perform its intended function without unreasonable adverse effects on
the environment." Pesticide registration is not required when EPA issues
an experimental use permit. A permit is issued only if the applicant
needs the field tests to accumulate the data necessary to register the
pesticide. General authority to promulgate regulations for the
enforcement of FIFRA is assigned to the Administrator of EPA.

USDA APHIS regulates field-testing, movement, and importation of GE
organisms under the Plant Protection Act (PPA, 7 U.S.C. 7701-7772) and
regulations found in 7 CFR 340. Under the PPA, the USDA has the
authority to regulate the movement, importation, or release of plant
pests or potential plant pests. The Secretary of Agriculture has
authority to restrict importation and interstate movement of plants,
plant products, biological control organisms, noxious weeds, or other
articles when necessary, to prevent the dissemination of plant pests or
noxious weeds. This includes genetically engineered plants that may pose
damage to crops, public health, or the environment. Under the current
regulation, APHIS determines whether to authorize the field-testing of
agricultural biotechnology products through either a permit or
notification procedures. The decision to authorize the test is based on
whether the item will pose a risk to the environment or agriculture.
After several years of field testing, a petition may be submitted to
USDA APHIS to deregulate the crop and allow commercialization of the
product (Fernandez-Cornejo and Caswell 2006).

To date, APHIS has authorized over 13,000 environmental releases. From
1987 to April 2005, APHIS received over 11,600 applications and over 92
percent or approximately 10,672 have been approved (Fernandez-Cornejo
and Caswell 2006). The peak year for approval was 2002, when 1,190
applications were approved. Over the same period, the majority of the
applications approved for environmental release were for corn (5,000),
followed by soybeans (2,560), potatoes (843), cotton (747), tomatoes
(724), and wheat (552). In terms of GE traits, the majority of the
applications approved were for varieties tested for herbicide tolerance
(3,587), followed by insect resistance (3,141), improved product quality
such as flavor, appearance or nutrition (2,314), virus resistance
(1,239), agronomic properties such as drought resistance (1,843), and
fungal resistance (647).

Because the regulations in 7 CFR 340 were first promulgated by APHIS in
1987, and were based on the authority of the Federal Plant Pest Act of
1957 (FPPA, Pub. L. 85-36) and the Plant Quarantine Act of 1912 (PQA),
and there are additional statutory authorities in the PPA that were not
in these Acts, it is desirable to consider revisions that would better
align the regulations with the Plant Protection Act of 2000. APHIS has
also gained biotech regulatory experience that should be incorporated
into the regulations to improve the processes. Many technological
advances have occurred, and these advances and potential future advances
should be considered in developing the new regulations. In addition,
APHIS is proposing changes to the regulations to reflect provisions of
the 2008 Farm Bill recently enacted.

[]{#__RefHeading___Toc201667257 .anchor}[The Proposed Rule]{.underline}

The proposed amendments to 7 CFR 340 are based on issues addressed in
the Draft Environment Impact Statement (DEIS) (July 13, 2007) and
administrative changes necessary to align the regulations with the Plant
Protection Act (PPA) of 2000 and provisions of the recently enacted 2008
Farm Bill. Details of the proposed changes can be found in the preamble
of the regulations.

[]{#__RefHeading___Toc201667258 .anchor}[Benefits and Costs of the
Proposed Rule]{.underline}

[]{#__RefHeading___Toc201667259 .anchor}Benefits of the Proposed Rule

Benefits of the proposed rule include more efficient regulation of
entities by APHIS under part 340; improved public understanding of and
confidence in APHIS' biotech regulatory program; and improved clarity
and transparency of the regulatory process. Several amendments of the
proposed rule would improve the efficiency of APHIS' biotech regulatory
process. These include the elimination of courtesy permits, the
continued issuance of multi-year commercial permits, and the provisions
of exemptions, performance-based shipping standards, and the inclusion
of a provision that allows for exemptions to be established without
having to amend the regulations.

Since the regulations were promulgated in 1987, there have been two
major amendments; one took 5 months from proposed to final rule and the
other took 20 months. Under the proposed regulations, exemptions could
be provided without amending the regulations, resulting in considerable
time savings. In addition there are several exemptions that are included
in the proposed rule. Both the listing of exemptions and the provision
to provide for exemptions without going through the rulemaking process
would help reduce APHIS' rulemaking costs.

APHIS commits considerable resources to issuing courtesy permits for
items that are not covered under part 340. The elimination of this
process would improve efficiency and reduce the regulatory workload for
APHIS. The Agency would not have to spend resources and the regulated
entities would save time in not making unnecessary courtesy permit
requests.

The Agency currently issues environmental release permits, including
permits that are used for production of pharmaceutical and industrial
compounds sold in commerce. In general, permits for releases of plants
producing pharmaceutical or industrial compounds have been limited to a
one-year duration. However, the proposed regulations provide a more
useful and efficient approach to setting appropriate risk-related
conditions in multi-year environmental release permits. Under the
proposed system, APHIS would likely increase issuance of multi-year
environmental release permits, thereby reducing the time the regulated
entities need to spend submitting applications as well as the time APHIS
spends reviewing the permit applications.

The proposal includes provisions to minimize unnecessary recordkeeping
and reporting and to fine-tune this burden through particularized permit
conditions to require only what is needed to ensure regulatory
compliance based on individual cases. This should contribute to greater
efficiency.

APHIS' biotech operations would be more streamlined under the proposed
rule, in terms of required data submissions and administrative
procedures. Lengthy descriptions of required applicant information would
be replaced with more general information categories. These changes,
along with more clearly defined categories for the environmental release
permits, would potentially reduce the time entities, large or small,
spend on the application process.

The proposed rule's greater clarity and transparency in comparison to
the existing regulations is expected to enhance the general public's
perception of APHIS' regulation of the importation, interstate movement,
and release into the environment of GE organisms. In particular,
public-sector biotech research that is generally conducted on a much
smaller scale than that of large agri-business enterprises can be
expected to benefit from the proposed procedural changes to part 340.

In addition to the information provided in the regulation itself,
guidance documents would be provided by USDA APHIS to assist in the
preparation and submission of applications. Exemptions included in the
proposed rule would yield time savings because the permit application
process in those instances would be eliminated. Overall, the reporting
burden would be minimized and this would allow for greater efficiency in
the regulatory process.

[]{#__RefHeading___Toc201667260 .anchor}Costs of the Proposed Rule

There are several costs associated with the proposed rule. The regulated
entities would incur costs of becoming familiar with the regulatory
amendments, providing additional information during the permit
application process, and additional recordkeeping provisions of the
proposed rule. In addition, there may be costs incurred in making any
changes necessitated by the new permit process. Because in some
instances the provisions of the proposed regulations are simply
revisions of the current regulations, it is not expected that
familiarization costs would be substantial. However, APHIS invites
public comment on the costs the regulated community may incur with
respect to rule familiarization and changes to their application
systems. Various exemptions, performance-based shipping standards, and a
streamlined permit process for the environmental release permits would
provide cost savings to the regulated community.

USDA APHIS would incur costs in developing the guidance documents and
providing outreach activities to inform the regulated community of
provisions of the proposed rule. Training costs are expected to be
incurred to familiarize the staff with the new permit system and
provisions of the regulations. As another area of cost to APHIS, the
proposed rule would require that changes be made to the current system
of permits.

The sections below outline the costs faced by regulated entities and the
Federal government of current regulations and changes in costs that may
occur with the proposed rule.

[]{#refheading___toc201667261 .anchor}Regulated Community Costs

Regulated entities would incur costs through various recordkeeping,
reporting and informational requirements of the proposed rule.
Specifically, there are costs associated with rule familiarization.
Entities in the regulated community that are unfamiliar with the
regulations would have no transition costs. Another potential cost is
the information that would have to be provided during the application
process. The costs of collecting or developing this additional
information and recording it in an application and records would vary,
depending on current practices on the regulated entities. However, on
average it is estimated that it would take an average of 2 hours to
record this information in the permit application. Annual costs
resulting from the additional recordkeeping may be estimated as the
salary and associated costs for 640 additional hours of recordkeeping
divided among 160 respondents. APHIS anticipates that any incremental
costs to the regulated entities associated with record keeping and
provision of information related to the proposed rule would not be
large. In addition, the regulated entities may incur additional costs in
updating their systems to allow for compatibility with APHIS' revised
system of permits. Estimates of these costs are not available and
therefore, APHIS invites public comments of the potential costs that
affected entities may incur.

[]{#__RefHeading___Toc201667262 .anchor}Government Costs

This section considers costs to USDA APHIS associated with the proposed
rule. At present, costs to the Agency are incurred in the regulatory
assessment and review of submitted materials. Under the current
regulations, USDA APHIS activities include reviewing requests for and
issuing permits and notifications, reviewing petitions, and developing
environmental impact statements, and conducting environmental
assessments. The proposal would change some of the information submitted
and evaluated in the permit application process, but the activities
associated with the process would remain largely similar to the current
process, and it is not expected that permit process changes would
increase the costs to USDA APHIS. The proposals to establish additional
exemptions that could take the place of some permits and to discontinue
courtesy permits, which have generally been issued at the rate of
several hundred per year, would reduce permitting costs to a degree
proportionate to the number of permits that no longer need to be issued.

USDA APHIS would potentially incur incremental costs conducting outreach
activities for the proposed rule, developing guidance documents to
ensure that the regulated community is familiar with the requirements of
the rule, responding to information requests and providing staff
training that may be necessary. In addition, in changing the permit
system to accommodate requirements of the proposed rule, APHIS may
potentially incur a one-time additional cost of \$500,000. However the
current system is adaptable to the new regulations and it is not
anticipated that there would be any efficiency loss during the
transitional period.

[]{#__RefHeading___Toc201667263 .anchor}[Initial Regulatory Flexibility
Analysis]{.underline}

In accordance with the Regulatory Flexibility Act of 1980 (Public Law
96-354), this analysis considers the economic impact of the proposed
rule on small businesses, small organizations, and small governmental
jurisdictions. Section 603 of the Act requires that the initial
regulatory flexibility analysis (IRFA) be made available for public
comments. This section addresses the IRFA requirements, as stated in
Sections 603 (b) and 603(c) of the Act.

[]{#__RefHeading___Toc201667264 .anchor}Reasons Action is being
Considered

APHIS is taking action to amend 7 CFR 340, which regulates the
interstate movement, importation, and environmental release of GE
organisms that may be plant pests or that there is reason to believe are
plant pests. The regulations in 7 CFR part 340 were promulgated in 1987
under the authority of the Federal Plant Pest Act of 1957 and the Plant
Quarantine Act of 1912. These acts were subsequently subsumed within the
Plant Protection Act (PPA) of 2000. The proposed revisions would be the
first undertaken since enactment of the PPA and would bring part 340 in
alignment with this Act. Advances in biotechnology and oversight
experience gained by USDA APHIS have made it necessary to revise and
update the regulations. The proposed changes would improve the
regulatory process by providing greater transparency, flexibility, and
efficiency.

[]{#__RefHeading___Toc201667265 .anchor}Objective and Legal Basis for
the Rule

The objective of this rule is to amend 7 CFR 340 to provide consistency
with the 2000 PPA. In addition, the experience gained over the years
would be incorporated into the proposed rule, yielding a more efficient
process while controlling potential risk to plant health and the
environment. This action is authorized by the Plant Protection Act of
June 2000, as amended. The Plant Protection Act authorizes the Secretary
of Agriculture to implement programs and policies designed to prevent
the introduction and spread of plant pests and diseases. Specifically,
the Secretary of Agriculture is given the authority under the PPA to
prevent the importation and interstate dissemination of plant pest and
noxious weeds.

[]{#__RefHeading___Toc201667266 .anchor}Description and Estimate of the
Number of Small Entities Regulated

The proposed rule may affect a wide range of public and private biotech
research facilities, biotech crop production, biotech seed production,
food processors, grain processors, and paper producers that fall into
various categories of the North American Industry Classification System
(NAICS). For the purpose of this analysis and following the Small
Business Administration (SBA) guidelines, the potentially affected
entities are classified within the following sectors: Agriculture,
Forestry, Fishing and Hunting (Sector 11), Manufacturing (Sectors
31-33), Wholesale Trade (Sector 42), Retail Trade (Sector 44 and 45),
Transportation (Sectors 48 and 49), and Professional, Scientific and
Technical Services (Sector 54).

For the Agriculture, Forestry, Fishing and Hunting sector, the
subsectors of Crop Production, Animal Production, Forestry and Logging,
and Support Activities for Agriculture and Forestry are potentially
affected by this rule. The proposed rule may affect a wide range of
establishments in the Crop Production category. Establishments in this
category are considered small by SBA standards if annual sales are not
more than \$0.75 million. According to the 2002 Census of Agriculture,
97 percent of the farming businesses are considered small. Potentially
affected crop-producing industries, with their NAICS codes in
parentheses, are as follows: Soybean Farming (111110); Oilseed Farming
(except soybean) (111120); Dry Pea and Bean Farming (111130); Wheat
Farming (111140); Corn Farming (111150); Rice Farming (111160); Oilseed
and Grain Combination Farming (111191); All Other Grain Farming
(111199); Potato Farming (111211); Other Vegetable (except potato) and
Melon Farming (111219); Orange Groves (111310); Citrus (except orange)
Groves (111320); Apple Orchards (111331); Grape Vineyards (111332);
Strawberry Farming (111333); Berry (except Strawberry) Farming (111334);
Tree Nut Farming (111335); Fruit and Tree Nut Combination Farming
(111336); Other Noncitrus Fruit Farming (111337); Mushroom Production
(111411); Other Food Crops Grown Under Cover (111419); Nursery and Tree
Production (111421); Floriculture Production (111422); Tobacco Farming
(111910); Cotton Farming (111920); Sugarcane Farming (111930); Hay
Farming (111940); Sugar Beet Farming (111950); Peanut Farming (111960);
and All other Miscellaneous Crop Farming (111970).

Some aspects of animal production may be affected because some GE plants
are used for animal feeds and may have enhanced nutritional value or
other benefits. In terms of animal production, potentially affected
entities include ones within the following industries: Beef Cattle
Ranching and Farming (NAICS 112111); Cattle Feedlots (NAICS 112112); Hog
and Pig Farming (NAICS 112210); Sheep Farming (NAICS 112410); Goat
Farming (NAICS 112420); and Apiculture (NAICS 112910). Except for Cattle
Feedlots, entities in all of these industries are considered small by
SBA standards if annual sales are not more than \$0.75 million. Cattle
Feedlot establishments are considered small by SBA standards if annual
sales are not more than \$2 million. According to the 2002 Census of
Agriculture, 93 percent of Cattle Feedlot businesses, 99 percent of Beef
Cattle Ranching and Farming businesses, 81 percent of Hog and Pig
Farming businesses, 99 percent of Sheep and Goat farming businesses, and
99 percent of Apiculture businesses are considered small.

For the Forestry and Logging subsector the potentially affected
establishments are classified within Timber Tract Operations (NAICS
113110); Forest Nursery and Gathering of Forest Products (NAICS 113210);
and Logging (NAICS 113310). Establishments in the category of Timber
Tract Operations and Forest Nursery and Gathering of Forest Products are
considered small by SBA standards if annual sales are not more than
\$6.5 million and establishments in the category of Logging are
considered small if employment is not more than 500. According to the
2002 Survey of Business Owners, 99 percent of establishments in the
Logging category are considered small. Neither the Census of Agriculture
nor the Economic Census tracks revenue for establishments classified
within Timber Tract Operations and Forest Nursery and Gathering of
Forest Products.

In terms of Support Activities for Agriculture and Forestry, the
potentially affected establishments are classified within Cotton Ginning
(NAICS 11511); Soil Preparation, Planting, and Cultivating (NAICS
115112); Crop Harvesting (NAICS 115113); Postharvest Crop Activities
(NAICS 115114); Farm Management Services (115116) Support Activities for
Animal Production (NAICS 115210); and Support Activities for Forestry
(NAICS 115310). Establishments in these categories are considered small
by SBA standards if annual sales are not more than \$6.5 million.
However, neither the Census of Agriculture nor the Economic Census
reports revenue for these establishments.

Entities that may be directly affected by the proposed rule in the
Manufacturing Sector are classified within Ethyl Alcohol Manufacturing
(NAICS 325193); Pesticide and Other Agricultural Chemical Manufacturing
(NAICS 325320); Pharmaceutical Preparation Manufacturing (NAICS 325412);
and Medicinal and Botanical Manufacturing (NAICS 325411). Establishments
in the Ethyl Alcohol Manufacturing category are considered small if they
employ not more than 1,000 persons and those in the category of
Pesticide and Other Agricultural Chemical Manufacturing (NAICS 325320)
are considered small if they employ not more than 500 persons. For both
the Pharmaceutical Preparation Manufacturing (NAICS 325412); and
Medicinal and Botanical Manufacturing (NAICS 325411) categories,
establishments are considered small if they employ not more than 750
persons. According to the 2002 Economic Census, 98 percent of the
establishments in the Chemical Manufacturing Sector had fewer than 500
employees and 99 percent had fewer than 1000. Therefore, businesses in
the chemical manufacturing are predominantly small by SBA standards.

In terms of Wholesale Trade, entities that would be potentially affected
may be found in the following categories: Fresh Fruit and Vegetable
Merchant Wholesalers (NAICS 424480); Other Grocery and Related Products
Merchant Wholesalers (NAICS 424490); Grain and Field Bean Merchant
Wholesalers (NAICS 424510); Other Farm Product Raw Material Merchant
Wholesalers (NAICS 424590); Farm Supplies and Merchant Wholesalers
(NAICS 424910); and Flower, Nursery Stock, and Florists' Supplies
Merchant Wholesalers (NAICS 424930). Establishments in the above
categories are considered small by SBA standards if they employ not more
than 100 persons. According to the 2002 Survey of Business Owners, 97
percent of the establishments in this category employed fewer than 100
people and are considered small by SBA standards.

Retail Trade, establishments that would be affected by the rules are in
the following categories: Nursery and Garden Centers (NAICS 444220);
Supermarkets and Other Grocery Stores (NAICS 445110); Fruit and
Vegetable Markets (NAICS 445230); All Other Specialty Food Stores (NAICS
445299); Food (Health) Supplement Stores (NAICS 446191); Warehouse Clubs
and Superstores (NAICS 452910); and Florist (NAICS 453110).
Establishments in the Nursery and Garden Center, Fruit and Vegetable
Markets, All other Specialty Food Stores, Food (Health) Supplement
Stores; and Florist categories are considered small by SBA standards if
annual sales are not more than \$6.5 million. Supermarkets and Other
Grocery Stores are considered small by SBA standards if annual sales are
not more than \$25 million. While the Economic Census reports total
annual sales, the Census does not provide a breakdown of these
establishments by revenue categories.

In terms of the Transportation sector, the potentially affected entities
are in the category Farm Product Warehousing and Storage (NAICS 493130).
Establishments in this category are considered small by SBA standards if
annual sales are not more than \$23.5 million. However, the Economic
Census reports only total revenue for all establishments in this
category.

In terms of Professional, Scientific and Technical Services,
establishments in the category of Research and Development in the
Physical, Engineering, and Life Sciences (NAICS 54170) may be affected.
Establishments in this category are considered small by SBA standards if
they employ not more than 500 persons. According to 2002 Economic
Census, 82 percent of the establishments in this category are considered
small.

Although data were not available on the business sizes for all
potentially affected establishments, based on the foregoing information
we can assume that the majority of the entities that may be affected by
the proposed rule are small by SBA standards.

Given the aforementioned, a review of entities that have made
application requests to APHIS shows that of the 420 applicants for the
last 6 years, 263 were universities and colleges and public and private
research institutions. The remainder of the applicants fall under
various NAICS classification codes specified above but given time
constraints their business size could not be readily determined. We were
able to ascertain that the 263 institutions (63 percent) are large by
SBA standards as they fall under NAICS code 54170 Research and
Development in Physical Science. Establishments in this category are
considered small by SBA standards if they employ not more than 500
persons. Even though the 2002 Economic Census suggests that 82 percent
of the establishments in this category are considered small, the
majority of applicants to APHIS are large by SBA standards.[^3]

[]{#__RefHeading___Toc201667267 .anchor}Description and Estimate of
Compliance Requirement

The proposed rule would require additional and modified information
collections through recordkeeping, reporting, and notifications to APHIS
when certain events occur. The proposed application process requires
certain new information. The current and proposed rules both require
submission of reports following an environmental release or field test,
but the proposed requirement is more specific about the contents of such
reports. Both the current and proposed rules require APHIS to be
notified if an unauthorized release occurs or if during release the GE
organism is found to have characteristics substantially different from
those anticipated by the permit. The proposed rule is more specific
about the types of records that must be kept for importations,
interstate movements, and environmental releases, where the current
regulations left more of these details to be specified only in permit
conditions. In terms of record retention requirements, the proposed rule
spells out a 2-year retention for records indicating that a GE organism
imported or moved interstate reached its intended destination, and a
5-year retention for all other required records. By providing more
specific information on what records are required, the proposed rule
should alleviate some current burden that may result from persons
keeping unnecessary records. In addition, APHIS has established the
Biotechnology Quality Management System (BQMS), which is a voluntary
compliance assistance unit within USDA APHIS. BQMS would facilitate the
regulatory efforts of USDA APHIS by conducting outreach activities and
providing compliance assistance to the regulated community. This would
lessen any burden of the proposed rule to the regulated community.

[]{#__RefHeading___Toc201667268 .anchor}Duplication, Overlap, and
Conflict with Existing Rules and Regulations

APHIS has identified areas where the proposed rule will need to be
closely coordinated with other Federal rules and statutory authorities.
Coordination has been an important aspect of the daily implementation of
the current regulation, and APHIS foresees additional areas for
coordination under the proposed rule. In particular, APHIS will
coordinate with the Food and Drug Administration (FDA) and the
Environmental Protection Agency (EPA). FDA regulates GE organisms under
the authority of the Federal Food, Drug and Cosmetic Act and the Public
Health Service Act (42 U.S.C. 262 et seq.), as appropriate. The EPA
regulates plant-incorporated protectants under the Federal Insecticide,
Fungicide, and Rodenticide Act (FIFRA) and certain biological control
organisms under the Toxic Substances Control Act (TSCA). As examples of
areas that need coordination, some of the plant-incorporated protectants
regulated by EPA are also subject to APHIS requirements under the PPA.
Also, FDA is the primary U.S. agency responsible for ensuring the safety
of commercial food and food additives, and FDA authority extends to any
nonpesticidal substance that may be introduced into a new GE plant and
that is expected to become a component of food. The proposed regulations
would clarify the regulatory scope and procedures used by APHIS relative
to these other agencies and improve the coordination process.

[]{#__RefHeading___Toc201667269 .anchor}

Significant Alternatives to the Rule

APHIS considered several significant alternatives during development of
this proposed rule. We have compared the selected alternatives to others
that were not selected to evaluate their feasibility and to consider
whether any alternatives provide ways to minimize significant economic
impacts on small entities. We have not identified any selected
alternative that imposes disproportionate costs on small businesses, or
any non-selected alternative that would both achieve the regulatory
purposes and reduce costs for small businesses.

The selected alternative regarding the scope of the regulatory oversight
was to add considerations of noxious weed risk in addition to evaluating
plant pest risks, and to use genetic transformation, coupled with a
determination by the Administrator as to whether a GE organism met
certain risk-based criteria, as the trigger for regulation. Other
alternatives considered included continuing to base the scope of
regulation only on plant pest risks, or trying to develop a set of
solely trait-based criteria that could be used to predict what articles
would be regulated without the need for determinations by the
Administrator. The first of these alternatives could have resulted in
costs from damages caused by a GE plant with noxious weed aspects that
was not regulated under the plant pest risks standard. The second
alternative was not considered technically feasible, and could also have
resulted in costs for persons who erroneously decide their GE plant is
not within the scope of the regulations, but are overruled by a later
determination by the Administrator that the GE plant is regulated.

The selected alternative for providing transparency and predictability
to the permitting system was to establish permit categories for
environmental releases of plants based on newly devised criteria. We
also considered evaluating all requests for environmental release
permits on a case-by-case basis, without categories. This alternative
would have resulted in less predictability for applicants, and likely
would have increased their costs for information collection because
applications known to be in a particular category can contain less
information about non-relevant areas.

The selected alternative regarding the duration period for permits was
to make multi-year permits for interstate movement and importation more
feasible by removing the one-year limit for interstate movement permits
and the requirement to obtain a new importation permit for each imported
shipment. We also considered alternatives to maintain either the current
or alternative specific time limits for such permits. These alternatives
would have resulted in additional costs for applicants who would have to
reapply for permits, rather than having the original permit issued with
an appropriate duration.

[]{#__RefHeading___Toc201667270 .anchor}References

Brookes, G. and P. Barfoot. *Global Impact of Biotech Crops:
Socio-Economic and Environmental Effects, 1996-2006*. AgBioForum 11 (1):
pp 21-38.

Boccaletti, S., and D. Morro. Consumers Willingness-To-Pay For GM Food
Products in Italy, AgBioForum, 3(4)(2000): 259-267.

Census of Agriculture, 2002,
[*http://www.nass.usda.gov/Census_of_Agriculture/index.asp*](http://www.nass.usda.gov/Census_of_Agriculture/index.asp)

Economic Census, 2002, <http://www.census.gov/econ/census02/>

Falck-Zepeda, J. B., Greg Traxler, and Robert G. Nelson, *Surplus
Distribution from the Introduction of Biotechnology Innovation*.
American Journal of Agricultural Economics. 82 (May 2000): pp360-369

Fernendez-Cornejo, Jorge and M. Caswell. *The First Decade of
Genetically Engineered Crops in the United States*. United States
Department of Agriculture, Economic Research Service, Bulletin Number
11, April 2006

Fuglie Keith. O., and Paul W. Heisey. *Economic Returns to Public
Agricultural Research,* United States Department of Agriculture,
Economic Research Service, Economic Brief Number 10, September 2007.

Kalaitzandonakes, N. J. Alston, and K. Bradford, *Compliance Costs for
Regulatory Approval of New Biotech Crops*, Nature Biotechnology 25 (5),
pp 509-510: May, 2007

Li, Q., K. R. Curtis, J.J. McClusky, and T.I. Wahl. "Consumers Attitudes
Towards Genetically Modified Foods in Beijing China." AgBioForum.
54(4)(2002): pp 145-152

Lusk, J.L. "*Effects of Cheap Talk on Willingness to Pay for Golden
Rice*." American Journal of Agricultural Economics, 85 (4)(November
2003): pp 840-846

National Agricultural Statistic Service, Agricultural Statistics Board,
United States Department of Agriculture, Acreage Report, June 2008

Price, G.K., W. Lin, J.B. Falck-Zepeda, and J Fernandez-Cornejo. *The
Size and Distribution of Market Benefits from Adopting Agricultural
Biotechnology*, United States Department of Agriculture, Economic
Research Service, Technical Bulletin Number 1906, November 2003

Small Business Administration. *A Guide for Government Agencies How to
Comply with the Regulatory Flexibility Act.
<http://www.sba.gov/advo/laws/regflex.html>*

Small Business Administration. *Small Business Standard Match to North
American Industry Classification System
<http://www.sba.gov/size/sizetable2002.html>*

[^1]: Calculations of percentage reductions in fuel use were based on an
    on-farm survey for various row crops in Nebraska. This survey was
    conducted by Paul J. Jasa, University of Nebraska

[^2]: Cited in Fawcett, Richard and Towery, Dan. Conservation Tillage
    and Plant Biotechnology: How New Technologies Can Improve the
    Environment By Reducing the Need to Plow. Conservation Technology
    Information Center, West Lafayette, Indiana.

[^3]: The size determination was made using public information about
    these entities. This information was primarily obtained for the
    entities' websites.