### Analysis in Support of Certification that the Rule will not have a Significant Economic Impact on a Substantial Number of Small Entities Proposed Rule Importation of Live Birds , Poultry, Eggs for Hatching, and Poultry Products from a Region in the European Union APHIS -2009-0094

U.S. Department of Agriculture Animal and Plant Health Inspection Service June 2010, Updated April 20112 

### Summary
This analysis provides the basis, as required by the Regulatory Flexibility Act, for certification by the APHIS Administrator that the proposed rule, if promulgated, would not have a significant economic impact on a substantial number of small entities. The analysis examines impacts for U.S. small entities of a rule that would amend 9 CFR 94.6 by adding a region comprised of the 25 Member States that constituted the European Union in 2006 (EU-25) to the list of regions considered to be free of Newcastle disease and highly pathogenic avian influenza (HPAI). This region would be designated as a single region, the European Union Poultry Trade Region (EU- PTR), for which import restrictio ns for live birds and poultry, hatching eggs, poultry meat, and other poultry products, including eggs (other than hatching eggs) , and egg products would be uniformly applied. If outbreaks of either disease were to occur, this proposed rule would facilitate the continuation of imports from regions within the EU

- PTR free of Newcastle disease and HPAI. We expect the proposed rule to have negligib le economic effects for U.S. entities, large or small, because of the relatively small quantities of poultry and poultry products likely to be imported from the EU-PTR. In addition, the poultry industry in the United States is highly concentrated and vertically integrated, with extensive use of contractual agreements for production, an industry structure that will tend to mitigate any economic effects of the rule for small entities. The United States is the world’s largest producer and exporter of poultry meat; about 20 percent of U.S. poultry production was exported in 2009. Imports from the EU- PTR would face a highly competitive U.S. market. The EU -25 region is a large producer of live poultry, poultry meat and other poultry products, but two-thirds of the region’s trade in poultry and poultry products is between Member3 States; 13 of the 25 Member States had a within-region trade of 70 percent or more. More than half of the Member States are net importers of live poultry and poultry products (13 are net importers of live poultry, 16 of poultry meat, and 17 of hatching eggs). Nine Member States are currently recognized by APHIS as free of Newcastle disease; however, the quantities of poultry or poultry products exported to the United States are small. In aggregate , only 40 metric tons (MT) of poultry meat were exported to the United States in 2009, led by France . The 40 MT comprised only 0.07 percent of poultry meat imports by the United States in 2009. U.S. imports of live poultry and hatching eggs fr om EU

- 25 Member States has been sporadic and at insignificant levels. Over 99 percent of live poultry import, 97 percent of poultry meat imports , and 91 percent of hatching egg imports were imported from Canada in
2009. To quantify the effects of potential levels of poultry meat exports to the United States from the EU

- PTR , we model three scenarios based on the Member States’ combined average annual global exports of 3,116,400 MT (the sum of exports within and external to the EU -25 region, 2007-2009): (1) an amount proportional to the average percentage of France ’s global poultry meat exports sent to the United States (0.045 percent); (2) an amount proportional to the highest single

- year percentage of France ’s global poult ry meat exports sent to the United States (0.098 percent); and (3) an amount equal to 0.5 percent of the total global poultry meat exports by the EU

- PTR countries. Amounts of poultry meat shipped to the United States under the three scenarios would be 1,402 MT , 3,054 MT , and 15,582 MT. In all three scenarios, consumer welfare gains slightly outweigh producer welfare losses. Even in the third scenario, in which we assume the EU

- PTR would export 15,582 MT to the United States, the decline in producer welf are would represent less than 0.1 percent of revenue4 received from the sale of domestically produced poultry meat. The price decline in this third scenario would also be less than 0.1 percent. The price and welfare effects are likely to be even smaller t han are indicated by the three scenarios, to the extent that poultry meat imports from the
EU

- PTR displace poultry meat imports from other countries. The quantity of poultry and poultry products expected to be imported from the EU- PTR is not significant. We do not expect the proposed rule to have any appreciable impact on U.S. poultry and egg producers, regardless of the size of their operations. Therefore, t he proposed rule will not have a significant economic impact on a substantial number of small enti ties

.5 

### Introduction
This analysis provides the basis, as required by the Regulatory Flexibility Act, for certification by the APHIS Administrator that the proposed rule, if promulgated, would not have a significant economic impact on a substantial number of small entities. The analysis examines impacts for U.S. small entities of a rule that would amend 9 CFR 94.6 by adding a region comprised of the 25 Member States that constituted the European Union in 2006 (EU-25) to the list of regions considered to b e free of Newcastle disease and highly pathogenic avian influenza (HPAI). 1

APHIS received a request from the European Commission (EC) to recognize the EU-25 as free of Newcastle disease and HPAI. The agency conducted a risk evaluation that concluded that the region is free of both Newcastle disease and HPAI and has an adequate veterinary infrastructure in place to prevent, control, and manage Newcastle disease or HPAI outbreaks sh ould they occur. EC animal health regulations are uniformly applied and harmonized across all EU -25 Member States. These measures include surveillance, epidemiological investigations, diagnostic capability, and emergency response capacity, which APHIS re cognizes as sufficient to identify poultry diseases rapidly, establish appropriate control zones, and implement all measures This region would be designated as a single region, the European Union Poultry Trade Region (EU-PTR), for which import restrictions for live birds and poultry, hatchin g eggs, poultry meat, and other poultry products, including eggs (other than hatching eggs), and egg products would be uniformly applied. The rule is part of a continuing program to allow the importation of foreign agricultural products that APHIS has det ermined are without significant risk of introducing exotic animal diseases into the United States.

1 The EU -25 Member States are Austria, Belgium, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, the Netherlands, and the United Kingdom.6 necessary to effectively limit spread of the disease out of the affected zone. Nevertheless, APHIS would apply the movement restrictions found in 9 CFR 92.3 to recognize the quarantine restrictions established by the EC in the EU -PTR, with the additional requirement that no regulated articles from a restriction zone implemented by the EC because of an outbreak of Newcastle disease or HPAI in domestic poultry would be imported until 90 days following depopulation, cleaning, and disinfection of the last affected premises. If outbreaks of either disease were to occur, this rule would facilitate the continuation of imports from region s within the EU

- PTR free of Newcastle disease and HPAI. The Regulatory Flexibility Act requires agencies to evaluate the potential effects of their proposed and final rules on small businesses, small organizations, and small governmental jurisdictions. Section 603 of the Act requires an agency to prepare an initial regulatory flexibility analysis that describes the expected impact of the rule on small entities and any significant alternatives to the proposed rule which accomplish the stated objectives and that minimize any significant economic impact of the proposed rule on small entities. In place of the IRFA, the head of the agency may certify that a rule will not have a significant economic impact on a substantial number of small entities. This analysis provides the factual basis for certification of this rule. As background, we provide a brief overview of poultry production and trade by the United States and the EU

- 25 Member States . This is followed with an estimate of price and welfare effects of the rule based on assumed levels of poultry and poultry product imports from the EU -25 . We then describe the expected impact on small entities.7 

### U.S. Poultry Industry

Production
The United States is the world's largest poultry producer, the second-largest egg producer , and second-largest exporter of poultry meat. U.S. poultry meat production totals over 43 billion pounds annually; over four- fifths is broiler meat, most of the remainder is turkey meat, and a small fraction is other chicken meat. Cash receipts from sales of poultry and eggs (broilers, farm chickens, eggs, turkey, ducks, and other poultry) were $36.8 billion in 2008, about 13 percent more than the previous year. 2

Broiler production is concentrated in a group of States stretching from Delaware, south along the Atlantic coast to Georgia, then westward through Alabama, Mississippi, and Arkansas. The t op broiler-producing State is Georgia, followed by Arkansas, Alabama, North Carolina, Mississippi, and Texas. Operations in these States account for over 65 percent of broiler cash receipts. Of this total, 63 percent was from the sale of broilers, 22 percent from eggs, 12 percent from turkeys and 3 percent from other poultry.

Most U.S. broiler production is conducted under contract with b roiler processors. The grower normally supplies the grow-out house with all the necessary heating, cooling, feeding, and watering systems. The grower also supplies the labor needed in growing the birds. The broiler processor supplies the chicks, feed, and veterinary medicines. The processor schedules transportation of the birds from the farm to the processing plant. In many cases, the processor also supplies the crews who place broilers into cages for transportation to the slaughter plant.

2 USDA/ERS, Farm Income: Cash Receipts, 2000-2008 (http://www.ers.usda.gov/data/farmincome/finfidmuxls.htm)

.8 The U.S. turkey industry produces over one-quarter of a billion birds annually, with the live weight of each bird averaging over 25 pounds. Production of turkeys is somewhat more scattered geographically than broiler production. The top five turkey-producing States are Minnesota, North Carolina, Missouri, Arkansas, and Virginia. The United States is by far the world's largest turkey producer, followed by the European Union. Even though exports are a major component of the U.S. turkey industry, the United States consumes more turkey per capita than any other country. U.S. egg operations produced over 90.4 billion eggs annually. Over 85 percent of egg production is for human consumption (the table- egg market). The remainder of production is for the hatching market. 3 These eggs are hatched to provide replacement birds for the egg- laying flocks and broiler chicks for grow -out operations. The top five egg- producing States are Iowa, Ohio, Pennsylvania, Indiana, and California. 4 A measure of the industry’s changing structure has been the decreasing number and increasing size of chicken hatcheries. In 1973, there were 989 facilities that hatched chickens in the United States. Th ose hatcheries had the combined capacity to incubate 436 million eggs at one time, for an average capacity of 440,849 eggs. 5

3 USDA/NASS, Chickens and Eggs: 2009 Summary, February 2010 (http://usda.mannlib.cornell.edu/usda/current/ChickEgg/ChickEgg-02-25-2010.pdf). In 2009 , there were 31 7 chicken hatcheries, with a combined incubator capacity of 898.2 million eggs and an average capacity of 2.83 million eggs. Similarly, there were 203 turkey hatching facilities in 1973, with the capacity to incubate 45 million eggs at one time and an average capacity of 221,675 eggs. In 2009, there

4 USDA/ERS, Livestock, Dairy, and Poultry Outlook/ LDP-M-190, April 21, 2010 (http://www.ers.usda.gov/Publications/LDP/2010/04Apr/LDPM190.pdf). 5 USDA/Statistical Reporting Service, Hatchery Production, Annual Revisions 1974 (http://usda.mannlib.cornell.edu/usda/nass/HatcProdSu//1970s/1975/HatcProdSu-03-18- 1975.pdf)9 were 5 1 turkey hatcheries, with an incubator capacity of 38.3 million eggs and an average capacity of 750,980 eggs. 6 In terms of tonnage, poultry meat production and trade exceeds that of beef or pork. For instance, in 2009, the U.S. produced 41.2 billion pounds of poultry meat compared with 26 billion pounds of beef and 23 billion pounds of pork. Additionally, the U.S. also produced 6.5 billion dozen eggs. Poultry meat per capita consumption (95.5 pounds in 2009 ) exceeds per capita consumption of both beef (61.2 pounds) and pork (50 pounds). Furthermore, the U.S. exports more poultry meat (7.4 billion pounds) than beef and veal (1.9 billion pounds) and pork (4.1 billion pounds) combined. 7 As shown in table 1, both U.S. poultry meat production and consumption have fluctuated

over rec ent years . The most recent data show production and consumption averaged 18,533,197 MT and 15,429,543 MT, respectively, between 2003 and 2009. U.S. imports increased from 16,076 to 59,183 MT , while exports increased from 2,651,068 to 3,738,457 MT.
Ta ble 1

-- U.S. Poultry Meat : Supply, Utilization and Price, 2003-2009

Year Production in 1,000 Metric Tons Consumption in 1,000 Metric Tons Wholesale Price in $ per MT Exports in Metric Tons Imports in Metric Tons
2003 17,414 14,479 1,367 2,651,068 16,076
2004 17,761 1 5,248 1,634 2,534,689 21,306
2005 18,538 15,812 1,561 2,752,326 26,476
2006 18,680 15,934 1,420 2,784,256 38,209
2007 19,089 15,819 1,684 3,318,818 48,238

6 USDA/NASS, Hatchery Production 2009 Summary, April 2010 (http://usda.mannlib.cornell.edu/usda/current/HatcProdSu/HatcProdSu-04-16-2010.pdf). 7 USDA/ERS, Livestock, Dairy and Poultry Outlook/LDP-M-190/April 21, 2010 (http://www.ers.usda.gov/publications/ldp/2010/04Apr/ldpm190tables.pdf).10 Year Production in 1,000 Metric Tons Consumption in 1,000 Metric Tons Wholesale Price in $ per MT Exports in Metric Tons Imports in Metric Tons
2008 19,574 15,718 1,757 3,929,986 54,533
2009 18,676 14,997 1,711 3,738,457 59,183

7- Year Average (2003

- 2009) 18,533 15,469 1,5 91 3,101,371 37,717 Sources: USDA/ERS, Livestock, Dairy, and Poultry Outlook, LDP -M-190, April 21, 2010, for production, and wholesale price data; export and import data are from USDA FAS’s Global Agricultural Trade System (GATS), http://www.fas.usda.gov/gats/default.aspx (5/14/10). Consumption data is computed as production plus imports minus exports. Trade As can be seen from table 1, the United States was a net exporter throughout the period with average annual exports (3,101,371 MT) dwarfing imp orts ( 37,717 MT). Imports of poultry meat represent less than 0.3 percent of consumption. Similarly, U.S . exports of live poultry, hatching eggs , and eggs other than hatching eggs are by far larger than imports of these products. As stated above, t he United States is the world's second- largest exporter of poultry meat. Annual poultry meat exports totaled about 3.7 m illion MT in 2009, which is about 20 percent of U.S. production. Demand for U.S. poultry meat products has fluctuated over the last several years due to changing economic conditions and currency exchange rates in major importing countries. Exports are widely distributed. The largest import ers of U.S. broiler products are Russia, China, Mexico, Canada, Ukraine, Hong Kong, and Taiwan. Together, these markets accounted for over 73 percent of U.S. poultry meat exports in 2009, on a quantity basis. The United States imported about 59,000 MT of poultry meat in 2009, the equivalent of less than four-tenths of a percent of domestic production. Over 84 percent of imports in 2009 came from Canada and 14 percent from Chile.11 As in the case of poultry meat, U.S. exports of live poultry, fresh shelled eggs and hatching eggs are widely distributed and significantly outweigh imports of these products. The U.S. exported 73.8 million and imported 11.1 million live poultry in 2009. Imports were from Canada (99.88 percent) and the United Kingdom (0.12 percent). Export destinations included Canada, China, Mexico, Brazil, Indonesia, Thailand, Peru, Philippines, Egypt and Japan. These countries accounted for 60 percent of the total live poultry exports. The U.S exported 894 million and imported 36 million ta ble eggs in 2009. Major destinations of table eggs included Canada, Hong Kong, United Arab Emirates, China, Mexico, Bahamas and Israel. These countries together accounted for about 89 percent of U.S. egg exports. All of U.S. table egg imports were from Canada, China, New Zealand, Taiwan and Thailand . The U.S. also exported 138 million and imported 14 million hatching eggs in 2009. Major destinations included Canada, Mexico, Jamaica, United Kingdom, Trinidad and Tobago, Saudi Arabia, Dominican Republic, Nicaragua and Guatemala. These countries accounted for 77 percent of U.S. total hatching egg exports. U.S. hatching egg imports came from Canada (over 90 percent), France, Australia, Germany, the United Kingdom, and the Netherlands

. 8
EU - 25 Poultry Industry
The EU -PTR region, in aggregate, is one of the largest producers of live poultry, poultry meat and other poultry products. The region has the third largest poultry stock (1,381 million), and is the second largest producer of eggs in shell (105 billion), and third largest producer of poultry meat (10.23 million MT). Although over 90 percent of production is for domestic consumption by the EU-25 Member States, the region is the largest exporter of eggs in shell and

8 Global Trade Atlas, 2010 (http://www.gtis.com/g ta/secure/gateway.cfm)12 the third largest exporter of po ultry meat. Also, the region is the largest importer of poultry

meat. 9
Two -thirds of EU-25 trade in poultry and poultry products is within the region, and 13 of the 25 countries had a within-region trade of 70 percent or more. More than half of the Mem ber States are net importers of live poultry and poultry products (13 are net importers of live poultry, 16 of poultry meat, and 17 of hatching eggs). In poultry meat trade, 6 countries (the Netherlands, France, Germany, Belgium, the United Kingdom and Poland) account for about 80 of the export trade of the region. Most of the remaining trade is with other European countries, Russia and Middle Eastern countries. The larger Member States have a more diversified export trade than do the smaller ones. 10 Currently, only a few EU-25 Member States export poultry or poultry products to the United States and the quantities exported are small. The United States imported 11,104,806 live poultry, 14,040,288 hatching eggs and 59,183 MT of poultry meat in 2009. Of these total imports, over 99 percent of live poultry, 97 percent of poultry meat and 91 percent of hatching eggs were imported from Canada. Included among the remaining quantities were imports from nine EU- 25 Member States. Several EU

- 25 Member States w ere sources of hatching eggs, and four were sources of live poultry and poultry meat. Over 99 and 97 percent of poultry meat and hatching eggs, respectively, exported to the United States from EU- 25 Member States came from France. All live poultry exports came from the United Kingdom. Imports from the EU-25 Member States in 2009 were very small compared to U.S. stocks of live poultry (2.3 billion), hatching eggs (12.7 billion), and total poultry meat production (18.7

9 UN/FAO, Trade (FAOstat@fao.org) 10 Global Trade Atlas, Global Trade Information Services, Inc., country edition, May, 2010.13 million MT). 11

Although consumers would benefit from any inc rease in imports from the EU -25 in term s of greater choice, they are expected to gain little from lower prices. With respect to live poultry imports, there also may be long- term benefits that arise from genetic diversification. In many cases, import s from the EU

- 25 Member States may not be competitively priced, but rather supplying niche markets at prices two or three times higher than comparable domestic products.

Potential Economic Impact of the Rule Imports of live poultry and hatching eggs are likely to remain sporadic even with the expansion of EU-25 potential sources. Imports of breeding stock and hatching eggs are often

one- time events from a specific source. That is, once a producer’s needs for breeding stock are met during a given period, the producer may not be in the market again for several years. Import data reflect this sporadic pattern. For example, during the ten-year period 2000 to 2009, there were live poultry imports from Spain (2001), France (2004), and the United Kingdom (between 2005 and 2009). The amount imported from each country varied year- by

- year. There was a similar pattern for hatching egg imports. Imports of poultry meat have been somewhat more regular. France exported poultry meat to the United States each year (2000 to 2009), and we assume a continuing yearly flow of poultry meat from the EU

- PTR. Therefore, this analysis of potential economic effects of the rule relies on poultry meat trade data. We estimate the im pact of poultry meat imports from the
EU

- PTR on U.S. production, consumption, and prices using a non- spatial partial equilibrium model. The data used were obtained from the USDA Foreign Agricultural Service, the Global

11 USDA/NASS, Chicken and Eggs: 2009 Summary, February 2010 (http://usda.mannlib.cornell.edu/usda/current/ChickEgg/ChickEgg-02-25-2010.pdf); UN/FAO, Trade (FAOstat@fao.org).14 Trade Atlas, and FAO STAT . The dema nd and supply elasticities used are -0.56 and 0.65, respectively

. 12 We model three potential levels of poultry meat exports to the United States from the
EU

- PTR , based on the Member States’ average annual global exports of 3,116 thousand MT (the sum of exp orts within and external to the EU -25 region, 2007-2009): (1) an amount proportional to the average percentage of France ’s poultry meat exports that was sent to the United States (0. 045 percent); (2) an amount proportional to the highest one- year percentag e of France ’s global poultry meat exports sent to the United States ( 0.098 percent); 13

Table 2 presents the changes resulting from the assumed U.S. poultry meat imports from the EU

- PTR . These include annual changes in U.S. consumption, production, wholesale price,

consumer w elfare, producer welfare, and net welfare. Our medium level of poultry meat imports of 3,054 MT (assuming poultry meat imports proportional to the highest single

- year imports from France ) would result in a decline of $0.25 per metric ton in the wholesale price of poultry and (3) an amount equal to 0.5 percent of global poultry meat exports by the EU

- PTR countries. Notwithstanding a history of imports from France , poultry products from the EU

- 25 Member States are generally priced higher than domestically produced poultry meat, but for this analysis we assume that poultry meat imports from the EU -PTR would be competitively priced. Amounts of poultry meat shipped to the United States under the three scenarios would be 1,402 MT , 3,054 MT , and 15,582 MT

.

12 Global Trade Atlas, Global Trade Information Services, Inc., country edition, May 2010; John Sullivan, John Wainio, and Vernon Roningen. A Database for Trade Liberalization Studies, #AGES89 -12, March 1989; and UN/FAO, FAO stat data (http://faostat.fao.org). 13 France’s poultry industry is export- oriented , has FSIS equivalence, and supplied poultry meat products to the United States in each year during the period between 2000 and 2009. The hy pothetical import levels based on France’s exports may overstate potential shipments to the United States from the EU

- PTR.15 meat and a fall in U.S. production of 1,639 metric tons. Consumption would increase by 1,415 metric tons. Producer welfare would decline by about $3.915 million and consumer welfare would increase by about $3.925 million, yielding an ann ual net benefit of about $10,000. Table 2: Estimated Impact on the U.S. Economy of Poultry Meat Imports from EU

- PTR for Three Import Scenarios Assumed annual poultry meat imports from the EU

- PTR 1,402 1 3,054 2 15,582 3 Change in U.S. consumption, MT 650 1,415 7,221 Change in U.S. production, MT -752 -1,639 -8,361 Change in wholesale price of poultry meat, dollars per MT -$0.12 -$0.25 -$1.29 Change in consumer welfar e ($1,000) $1,802 $3,925 $20,030 Change in producer welfare ($1,000) -$1,797 -$3,915 -$19,971
Annual net benefit $4,475 $9,957 $58,910 Note: The baseline data used are seven -year annual averages for production, consumption, prices, exports and imports, as reported in the last row of table 1. The demand and supply elasticities used are -0.56 and 0.65, respectively (USDA/NASS, Chicken and Eggs: 2009 Summary, February 2010 (http://usda.mannlib.cornell.edu/usda/current/ChickEgg/ChickEgg-02-25-2010.pdf); UN/FAO, Trade (FAOstat@fao.org) ). 1 An amount proportional to the average percentage of the France’s global poultry exports sent to the United States (0.045 percent). 2 An amount proportional to the highest single- year percentage of France’s global poultry meat exports sent to the United States (0.098 percent). 3 An amount equal to 0.5 perc ent of the total global poultry meat exports by the EU -PTR countries. In all three scenarios, consumer welfare gains slightly outweigh producer welfare losses. Even in the third scenario, in which we assume EU

- PTR would export 15,582 MT to the United
St ates, the decline in producer welfare represents less than 0.1 percent of revenue received from the sale of domestically produced poultry meat. 14

14 $20 million divided by $21.8 billion equals 0.092 percent. The price decline in this third scenario is also less than 0.1 percent. The price and welfare effects are likely to be even smaller than are16 indicated by the three scenarios, to the extent that poultry meat imports from the EU

- PTR displace poultry meat imports from other countries. Potential Impact on Small Entities As a part of the rulemaking process, APHIS evaluates whether regulations are likely to have a significant economic impact on a substantial number of small entities. The Small Business Administration (SBA) has established guidelines for determining the nu mber of firms considered small under the Regulatory Flexibility Act. E ntities that may be affected by the rule include ones engaged in the production of breeding stock, hatcher y operations, and producers of table -egg layers. T here are four major firms th at produce breeding stock of egg- type chickens, three breeders of meat -type chickens, two breeders of turkeys, and one firm producing breeding stock of both egg- type and meat

- type chickens. 15

Since the analysis is of potential effects of poultry meat imports from the EU

- PTR, we consider possible effects for broiler and turkey farms and other poultry meat producers, as well as poultry processors. The SBA defines small poultry processing plants as those plants with no more than 500 employees. All of these firms have multiple facilities headquartered in the United States and operat ing in domestic and international markets . They do not qualify as small entities.

16

15 Mary E. Delany, Genetic Diversity and Conservation of Poultry, p.261, in W.M. Muir and S. E. Aggrey, Poultry Genetics, Breeding and Biotechnology, August 2003; Susanne Gura, Livestock Genetics Companies: Concentration and Proprietary Strategies of an Emerging Power in the Global Economy (hhtp://pastoralpeoples.org/docs/Livestock_genetics.pdf) According to the 2002 Economic Census (most recent data on establishment sizes), there were 536 poultry processors with annual total sales of about $38 billion and average annual sales of $70 million. Of the above number of establishments, about

16 Small Business Administration, http://www.SBA.gov/size. Small poultry processing operations (NAICS 311615) include establishments engaged in slaughtering poultry and small game and/or preparing processed poultry and small game meat.17 64 percent had fewer than 500 employees. Small operations had total sales of $8.17 b illion ( 21 percent) , with average annual sales of $24 million, while large operations had sales of $29.5 b illion ( 78 percent) , with average annual sales of about $154 million. Broiler operations (NAICS 112320), turkey operations (NAICS 112330), hatcheries (NAICS 112340), and other poultry operations (NAICS 112390) may be affected indirectly by the supply of breeding stock from the EU

- PTR . These operations are considered to be small if they have annual sales of $750,000 or less. 17

According to the 2007 Census of Agriculture (most recent data on farm sizes), a total of 27,091 farms sold 8.9 billion broilers. Commercial egg producers (NAICS 112310) are considered small if they have annual sales of not more than $12.5 million.

18 Of these farms, 15,747 operations (58 percent) that sold nearly 1.0 billion birds (11 percent) are considered small entities , with average sale s of about 64,128 birds and average annual gross receipts of about $155,665. The remaining 42 percent of the farms had total sale s of 7 .9 billion birds. The se larger entities averaged sales of 696,845 birds and average annual gross receipts of about $1.7 million. Thirty

- six percent of broiler operations (9,743 operations) sold fewer than 2,000 broilers and other meat- type chickens , on average, for average annu al gross receipts of $294. In sum, a majority of the farms that could be affected by this rule are small according to SBA guidelines, while bearing in mind that vertically integrated production systems account for about 90 percent of poultry sales

. 19 The 2007 Census of Agriculture also contains data on certain sub- categories of poultry operations , namely, small family farms including limited resource farms, and farms having

17 U.S. Small Business Administration Table of Small Business Size Standards (http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf)

. 18 http://www.agcensus.usda.gov/Publications/2007/Full_Report/Volume_1,_Chapter_1_ US/st99_1_027_028.pdf 19 Contracts and vertical integration account for over 90 percent of broiler, turkey, and egg production. (http://www.ers.usda.gov/AmberWaves/June03/findings/USHogandPoultry.htm)18 operators who belong to socially disadvantaged groups. 20

Table 3 shows that among the 148,911 farms that produced poultry and eggs in 2007, 119,815 (over 80 percent) were small family farms. It is notable that the combined number of retirement farms ( 20,017 farms) and residential/lifestyle farms ( 54,500 farms) accounted for almost half of all poultry and egg farms. Most farms that produc e poultry qualify as small family farm s (gross farm sales of less than $ 250,000), and many also qualify as limited resource farms (gross farm sales of not more than $100,000 and low household income). Categories of socially disadvantaged operators are wom en , persons of Hispanic origin, American Indian or Alaska Native , Asian , African American , and Native Hawaiian or other Pacific groups. A poultry and egg producer may qualify as a small family farm and also be counted among those for which one or more of the operators belong to a socially disadvantaged group. A ny economic impacts of the rule for operations categorized as small family farms including limited resource farms, or farms having operators who belong to socially disadvantaged groups would be insi gnificant , given the small quantity of poultry meat expected to be import ed from the EU

- PTR compared to domestic production and current imports.

Table 4 shows the number and percentage of poultry and egg farms that had operators belonging to socially disadvantaged groups in 2007 . There were 27,950 poultry and egg farms (1 8.8 percent) for which the principal operator was a woman. In terms of ethnicity, 5,133 poultry and egg farms ( 3.4 percent) were operated by Hispanics and 4,655 poultry and egg farms ( 3.1 percent) had an operator who was American Indian or Alaskan Native . The percentage of poultry and egg farms operated by African Americans was 1.2 percent.

20 For definitions and information, see: USDA ERS. Structure and Finances of U.S. Family Farms: Family Farm Report, 2007 edition , EIB -24.19 Although most poultry and egg operations are small family farms and significant percentages of poultry and egg operators belong to socially disadvantaged groups, economic effects of the rule for these farms are not expected to differ from the effects for p oultry and egg producers generally. We do not expect the proposed rule to have any appreciable impact on U.S. poultry and eggs producers regardless of the size of operation or operator classification. Based on the above i nformation and analysis , the propo sed rule will not have a significant economic impact on a substantial number of small entities , regardless of the size of the operation or whether the operators belong to socially disadvantaged groups. The quantity of poultry and poultry products expected to be imported from the EU- PTR is not significant.20 Table 3. Number and percentage of small family poultry and egg farms, 2007

Limited Resource Farms Retirement Farms Resi dential/ life Style Farms Farming Occupation/Lower Sales Farming Occupation/ Higher Sales All Small Family Poultry and Egg Farms All Poultry and

Egg Farms

Number 22,719 20,017 54,500 17,884 4,695 119,815 148,911

Percentage 15.3 13.4 36.6 12.0 3.2 80.5 100% Source: USDA NASS, 2007 Census of Agriculture. Note: A l imited -resource farm is a small family farm that has gross sales of less than $100,000 (indexed after 2003), and a household income less than the poverty level for a family of four with two children or less than half the county median income. A retirement farm is a small family farm whose operators report they are retired (excludes limited

- resource farms operated by retired farmers). A residential/lifestyle farm is a small family farm whose operators report a major occupation other than farming (excludes limited resource farms whose operators report a major occupation other than farming). A farming occupation/lower- sales farm is a small family farm with sales less than $100,000 whose operators report farmi ng as their major occupation (excludes limited

- resource farms whose operators report farming as their major occupation). A farming occupation/higher- sales farm is a small family farm with sales between $100,000 and $249,000 whose operators report farming as their major occupation.21 Table 4. Number and percentage of poultry and egg farms with operators belonging to socially disadvantaged groups, 2007

Farms where the Principal Operator is Female Farms where an Operator reports Spanish, Hispanic, or Latino origin Farms where an Operator reports race as American Indian or Alaska Native Farms where an

operator reports race as Asian Farms where an

operator reports race as Black or

African American Farms where an

operator reports race as Native Hawaiian or Other Pacific Islander All Poultry and Egg Farms

Number 27,950 5,133 4,655 1,591 1,797 238 148,911

Percentage 18.8 3.4 3.1 1.1 1.2 0.2 100% Source: USDA NASS, 2007 Census of Agriculture. Note: For the ethnic/racial categories, farms reported for their top -three categories. An operator may report as belonging to more than one ethic/racial category, and a farm may report having operators belonging to more than one category.