### United States

Department of Agriculture
Animal and Plant Health Inspection Service April 2011 Analysis in Support of Certification that the

Rule will not have a Significant Economic Impact on a Substantial Number of Small Entities
Proposed Rule 2011 - 0030 RIN 0579 - AD43 Require Horse Industry Organizations to Assess and E nforce Minimum Penalties for Violations

Policy & Program Development Policy Analysis & Development0

Summary The Horse Protection Act is a Federal law that prohibits horses subjected to a practice called soring (intentional injuring of a horse’s limbs to produce a high

- stepping gait ) from participating in shows, sales, exhibitions, or auctions. Walking h orses are prized for th is distinctive high

- stepping gait

. Horse Industry Organizations ( HIOs ), groups formally engaged in the promotion of shows and similar activities, are responsible for licensing Designated Qualified Persons ( DQPs ), who are authorized to enforce the prohibition on participation of horses subjected to soring. Participants found to be in violation of the Horse Protection Act are

asse ss ed penalties by the DQPs , as set by the HIOs

. E fforts to eliminat e s oring have been hindered by the non

- uniform assessment of penalties for Horse Protection Act violations. This proposed rule would provid e USDA with clear authority to require a uniform minimum penalty protocol

. T he rule would also give USDA the authority to decertify HIOs that refuse to implement the minimum penalty protocol.
Since the HIOs already administer their own individual penalty protoc ol for violations of
the Horse Protection Act , the proposed rule is not expected to impose additional costs upon HIOs or show particip ants ( other than those individuals who incur more severe penalt ies because of the
rule )

. T he proposed rule will not have a significant economic impact on a substantial number of
small entities. The proposed uniform penalty protocol may benefit the walking horse industry by:

 Helping to e nsur e more humane treatment of the horses;
 Reducing uncertainty about penalties for infractions of the Horse Protection Act ;
 Enhancing the reputation and integrity of the walking horse industry;

 Providing for more fair competit ion at shows , which may positively impact attendance and region al econom ies ; and

 Improving the value of the walking horse breeds.1



### Introduction
The Horse Protection Act is a Federal law that prohibits horses subjected to a practice called soring (intentional injuring of a horse’s limbs to produce a high

- stepping gait ) from participating in shows, sales, exhibitions, or auctions. Horse Industry Organizations ( HIOs ), that is, groups formally engaged in the promotion of shows and similar activities, are responsible for licensing Designated Qualified Persons ( DQPs ), who are aut horized to enforce the prohibition on participation of horses subjected to soring. Participants found to be in violation of the Horse
Protection Act are assess ed penalties by the DQPs , as set by the HIOs

. I n September 2010, USDA’s Office of Inspector Gene ral (OIG) released an audit report stating that efforts to eliminat e the inhumane and cruel practice of s oring had been ineffective
and recommended that all HIOs should assess uniform penalties for violations. 1 This proposed
rule addresses the OIG recommendation by provid ing USDA with clear authority to require a uniform minimum penalty protocol

. HIOs c ould still require penalties that are more severe than those in the penalty protocol. In addition, the rule would give USDA the a uthority to decertify
HIOs that refuse to implement the minimum penalty protocol. This analysis provides the basis, as required by the Regulatory Flexibility Act, for certification by the APHIS Administrator that the proposed rule, if promulgated, will n ot have a significant economic impact on a substantial number of small entities. We first present background information on the U.S. horse industry, generally, and in increasing detail, on the

1 Office of the Inspector General. Animal and Plant Health Inspection Service Administration of the Horse Protection Program and the Slaughter Horse Transport Program

. Office of Inspector General, USDA, Washington, D.C., Audit Report 33601

- 2

- KC , September 2010

.2

show and competition horse industry and the walking horse indu stry. We then address expected
effects of the proposed rule for small entities. 

### The U.S. Horse Industry

T here are approximately 9.2 million horses in the United States , of which about 4
million are located on farms and ranches , according to surveys conducted by Deloitte Consulting LLP in 2005 for the American Horse Council , and the National Agricultural Statistics Service, respectively. 2 T here are horses in every S tate , with 45 S tates each having at least 20,000 horses. A bout 2 million Americans ow n horses and another 2 .6 million are involved in the horse industry as service providers, employees , and volunteers. One out of every 63 Americans is involved with horses and the horse industry

. T he American Horse Council survey and a 2010 study by the University of Kentucky for the American Horse Publication found that while about 42 percent of the respondents indicated
that their association with the horse industry was through recreational and leisure riding, almost

one
- third of the respondents were in volved in show and competitive riding. 3 The studies found
that a pproximately 46 percent of horse owners ha d income s between $25,000 and $75,000

. Although the majority of horses (57 percent ) are concentrated in communities with less than 20,000 people , 26 percent of horses were located in areas with population s over 50,000

. Seventy

- two percent of the horse owners are between the ages of 35 and 64, with 56 percent over 45 years of age

.

2 Deloitte Consulting, LLP

. National Economic Impact of the U.S. Horse Industry . American Horse Council Foundation, 1616 H S treet NW, Washington, D.C., 2005. http://www.horsecouncil.org/nationaleconomics.php USDA

- NASS, Census of Agriculture, 2007. Washington, D.C.: National Agricultural Statistics Service. http://www.agcensus.usda.gov/Publications/2007/Full_Report/Volume_1,_Chapter_2_US_State_Level/st99_2_015_ 015.pdf 3 C. Jill Stowe. 20 09

- 2010 AHP Equine Industry Survey American Horse Publication , Department of Agricultural Economics, University of Kentucky, 2010. http://www.americanhorsepubs.org/reso urces/AHP

- Equine

- Survey

Final.pdf3

According to the 2002 Census of Agriculture, the number of farms oper ated primarily by
women more than doubled since 1978

. 4 By 2002, women were the primary operators of almost a
third of all U.S. horse farms. Women farmers, singly or jointly, operated over 65 percent of all horse farms, compared with 37 percent of all far ms. O f all the farms operated primarily by

women in 2002 , 20 percent were horse farms. 5
The U.S. horse industry supports a wide variety of equine

- related activities in all regions of the country, including racing, showing, competition, sport, breeding, recreation and work (table 1). The horse industry combines the primarily rural activities of breeding, training, maintaining and riding horses with the more urban activities of operating racetracks , off

- track betting parlors, horse shows and public sales. Direct economic effects of h orse
- related activit ies
derive from the purchase of goods and services from a variety of businesses and individuals.
Indirect economic effects occur when these busines ses and individuals , in turn, buy various goods and services from other businesses and individuals

.

Table 1

– Number and Percentage of H orses in the U.S. by A ctivity , 2005

Activity Number Percent Racing 844,531 9 Showing 2,718,954 30 Recreation 3,906,923 42 Other 1,752,439 19 Total 9,222,847 Source: American Horse Council Foundation, 2005

. Note: “Other” activities include farm and ranch work, rodeo, carriage horses, polo, police work, informal competitions, etc.

4 USDA

- NASS, Census of Agriculture, 200 2 . Washington, D.C.: National Agricultural Statistics Service. http://www.agc ensus.usda.gov/Publications/2002/Volume_1,_Chapter_1_US/st99_1_048_048.pdf 5 Susan Offutt and Penni Korb. Mor e Women Turning to Horse Farming. Amber Waves

. Economic Research Service, USDA, Vol. 4 Issue 4 p. 34 , September 2006. http://www.ers.usda.gov/AmberWaves/September06/PDF/DataFeatureSeptember06.pdf4

According t he Deloitte Consulting study , the horse industry contributes more than $38 billion directly to the gross domestic product (GDP) and another $73 billion indirectly (table 2)

. In addition, it was estimate d that the horse industry directly generate d around 460,000 full

- time equivalent (FTE) jobs and another 700,000 indirect FTE jobs. Independent studies by universities in the major horse industry S tates also show similar results concerning the
industr y’s contribution to the S tates ’ econom ies and employment.

Table 2

– Horse Industry’s Direct and Indirect Contributions to the Gross Domestic Product by Activity , 2005

Activity Direct Indirect

--- Billion Dollars

--- Racing 10.6 26.1 Showing 10.8 28.7 Recreation 11.8 32.9 Other 5.5 14.6 Total 38.8 101.6 Source: American Horse Council Foundation, 2005

. Note: “Other” activities include farm and ranch work, rodeo, carriage horses, polo, police work, informal competitions, etc.


### Show and Competition Horse Industry

The s how and c ompetition h orse i ndustry represents about 30 percent of the horse industry and provides economic benefits to the local communities that host the shows. A recent study by the University of Kentucky found that over 81 percent of the responding shows
involved more than 50 competitors, and almost half involved more than 100 competitors

. 6
R espondents competed on average five times in 2009, although respondents in A rkansas ,

6 C. Jill Stowe and Kenny Burdine. Understanding the Impact of Horse Shows and Compet itions in Kentucky. Department of Agricultural Economics, University of Kentucky, Lexington, Kentucky, Extension No. 2009

- 29. September 2009. http://www.ca .uky.edu/cmspubsclass/files/cjstowe/Horse%20Shows%20AEC%202009

- 29.pdf5

L ouisiana , O klahoma , and T exas competed more frequently, on average

. I ncome and age were positively correlated to the number of times the respondents competed each year.
The University of Kentucky study found that all shows charged entry fees , which
consisted of gate fees, per class or horse fees, or a combination . M ost shows distributed some sort of prize money from sponsors, entry fees, or some other source. The survey also found that
the total amount of prize mon ey distributed average d $10,39 9 , with a median of $3,987 (for the time period 2005 to 2008), not includ ing the value of ribbons, trophies, buckles, or saddles that

are o ften given as prizes. 7 T he shows spent money for announcers, show managers, staff, farriers, emergency personnel (medical and fire), security, and musicians. Also , shows often purchase d or rent ed services from loca l vendors such as for food , advertising , hotel services , and show equipment. 

### The Walking Horse Industry

In 2004 , the Tennessee Agricultural Statistics Service estimated there were 62,000
Tennessee w alking h orses in the S tate of Tennessee and the primary use for the breed was for pleasure/sport ( 40 percent ), followed by competition ( 25 percent ), breeding ( 24 percent ), and other ( 11 percent )

. 7 Although it is difficult to determine the number of Walking Horse competitors in the United States or enterprises that support them , horse shows provide an
economic benefit for the communities where these events are held. The Tennessee Walking Horse National Celebration is a premier event , where some 20 World Champions are named and more than $650,000 in prizes are aw arded. 8 The event has a

7 Debra Kenerson and Joel Moore

. A Tennessee Tradition, Equine 2004 , Tennessee Agricultural Statistics Service , Nashville, Tennessee, p. 13, 2004

. http://www.nass.usda.gov/Statistics_by_State/Tennessee/Special_Surveys/2004equine.pdf 8 Bob Womack. Walking Horse National Celebration. The Tennessee Encyclopedia of History and Culture, Version6

large economic impact on the entire m iddle Tennessee region. Winning the Celebration enhances the value of the horse and the reputations of the trainers and owners. In 1996, there are more than 2,170 entries at the Tennessee Walk ing Horse National Celebration from throughout
the United States and an attendance of more than 150,000. Although the Tennessee walking horse is probably the best known, there are other walking horse breeds as well. All walking horse breeds are known for t heir unique smooth gaits,
but Tennessee w alking h orses also are prized for their distinctive high

- stepping gait, known as the “big lick.” The exaggerated gait can be achieved with proper training and considerable time and effort, but some horse exhibitors, owners, and trainers attempt to shorten the training time by using soring. “Soring” is the practice of intentionally injuring a horse’ s front legs to cause pain so intense that the horse instantly jerks its legs up to relieve the pain when the horse’s hoo ves come into contact with the ground , thereby producing the “big lick.” Similar results also are achieved by using certain types o f mechanical devices. Since an exaggerated "big lick" gait is highly rewarded by the judges at walking horse show events, t here is an incentive to use soring to gain a competitive advantage

. Although some in the walking horse industry d is agree that soring of horses is a problem,
all but three horses in the World Grand Championship class a t the 2006 Tennessee Walking
Horse Na tional Celebration were disqualified due to Horse Protection Act violations. Show management cancelled the final class, failing to name a 2006 World Grand Champion for the first time in 68 years. As a result of the issue of soring and inspections, there are growing
concerns about negative perceptions of the walking horse industry by organizations and

2. The Tennessee Historical Society, Nashville, Tennessee Middle Tennessee State University February 28, 2011. http://tennes seeencyclopedia.net/entry.php?rec=14557

individuals outside of the walking horse community and the affect that this negative perception
will have on the future success of w alking h orse events. 9 , 10 

### Effects for Small Entities
The Regulatory Flexibility Act requires agencies to consider whether a rule will “have a significant economic impact on a substantial number of small entities.” 11 The Small Business Administration’s (SBA) small

- entity standard fo r the 12 Horse Industry Organizations (as business associations that promote horses through the showing, exhibiting, sale, auction, registry, or any activity which contributes to the advancement of the horse) is not more than $7 million in annual receipts (North American Industry Classification System (NAICS) 813910). We do not have an estimate of average annual receipts for the 12 HIOs that may be affected by the proposed rule, and welcome information that may be submitted by HIOs and the public.
The SB A small

- entity standard for entities involved in Horses and Other Equine
Production is $750,000 or less in annual receipts (NAICS 112920 ) , while the small

- entity standard is $ 7 million or less in annual receipts for businesses classified within Support
Activities for Animal Production (NAICS 115210)

. 12 According to the 2007 Census of Agriculture, the average market value of livestock sales by farms classified within Horse and Other Equine Production was about $12,300

. 13 Also a ccording to the Agricultur al Census , 93

9 Brian Mosely. “What a Horse” seeks city funding. Shelbyville Times

- Gazette, Shelbyville, Tennessee Wednesday July 8, 2009. http://www.t

- g.com/story/1553026.html 10 Kentucky Horse Council

. Walking Horse Breeder's Kentucky Incentive Fund Tied To HPA Compliance. The Horse.com, Kentucky Horse Council, 1500 Bull Lea Rd. Suite, Lexington, Kentucky, September 16, 2009. http://www.thehorse.com/ViewArticle.aspx?ID=14877 11 SBA

- Office of Advocacy, A Guide for Government Agencies: How to Comply with the Regulatory Flexibility Act

. Washington DC, U.S. Small Business Administration, p. 8, September 2009. 12 Table of Size Standards based on NAICS 2002 [ Horses and Other Equine Production : NAICS code 112920] and [ Support Activities for Animal Production: NAICS Code 115210] Washington, D.C.: U.S. Small Busine ss Administration, effective October 1, 2007. 13 2007 Census of Agriculture, Table 46: Special Characteristics of Farms by North American Industry Classification System: 2007,8

percent of farms with horse inventories had sales of less than $2 50 , 000 and of these, 65 percent of the farms had sales less than $10,000, well below the SBA threshold for small entities. 14 We do not have an estimate of the average income for e nterprises classified within the industry,
S upport A ctivities for A nimal P roduction.
R iding stables and other equestrian recreational facilities are not included as horse farm s;
t he Census of Agriculture defines a horse farm as an operation that sells at least $1,000 of agricultural products in a year and generates 50 percent or more of its sales from horses. While

m ost of the horses in the United States are privately owned and not located on farms and ranches , horses that compete are subject to the Hors e Protection Act

. The proposed rule would provid e USDA with clear authority to require a uniform minimum penalty protocol

. HIOs c ould still require penalties that are more severe than those in the penalty protocol. T he rule would also give USDA the authority to decertify HIOs that refuse to implement the minimum penalty protocol.
T he proposed rule would not impose costs on the HIOs or show participants (owners, trainers, riders, or transporters) , other than those individuals who incur more severe p enalt ies
because of the rule . Any costs of administering the current regulations already are directly or indirectly passed along to all participants that compete in the walking horse shows. A uniform penalty protocol w ould benefit the walking horse indu stry through improved
welfare of the horses by helping to ensur e their more humane treatment. Soring intentionally injur es the horses to produc e the “big lick” gait. A uniform minimum penalty removes uncertainty for show participants and the administrati ve burden for HIOs of setting penalty

http://www.agcensus.usda.gov/Publications/2007/Full_Report/Volume_1,_Chapter_1_US /st99_1_046_046.pdf 14 USDA

- NASS, 2007 Census of Agriculture: Small Farms . Washington, D.C.: National Agricultural Statistics Service. http://www.a gcensus.usda.gov/Publications/2007/Online_Highlights/Fact_Sheets/small_farm.pdf9

amounts

. Reduction in soring due to the f oreknowledge of uniform penalties would help create a

more level playing field for show participants and enhance competition. A uniform minimum penalty should enhance the reputation of the walking horse industry and help to restore the integrity of the walking horse shows and breeds. Competitive shows encourage more competitors and draw enthusiastic fans. Successful walking hor se shows can have a positive impact on a region’s economy. H orses with the natural ability to produce the distinctive high

- stepping gait would be more highly prized for breeding, thereby improving the
overall value of the breed

. The proposed rule is not e xpected to have a significant economic impact on the HIOs ,

s how m anagers, horse owners, trainers , or any other industry entities

. Under these circumstances, the Administrator of the Animal and Plant Health Inspection Service has
determined that this acti on will not have a significant economic impact on a substantial number
of small entities.