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### United States Department of Agriculture Animal and Plant Health Inspection Service March 2012 Regulatory Impact Analysis and Analysis in Support of Certification that the Rule will not have a Significant Ec onomic Impact on a Substantial Number of Small Entities

Final Rule APHIS-2007-0039 RIN 0579-AC61 Recordkeeping for Ap proved Livestock Facilities and Slaugh tering and Rendering Establishments

Policy & Program Development Policy Analysis & Developmenti 

### Summary
This rule will amend the regulations regardi ng the interstate movement of livestock to require approved livestock facili ties and listed slaughtering and rendering establishments to maintain certain records for 5 years. Current ly, approved livestock f acilities are required to retain certain records for 2 years. No record retention provisions cu rrently apply to listed slaughtering and rendering establishments. For some livestock diseases, the incubati on period (the time from when an animal becomes infected until the disease is evident) can last for years before clinical or behavioral signs become apparent. A prime example is bovi ne tuberculosis, a cont agious disease of both animals and humans caused by specific types of b acteria that are part of the Mycobacterium group. The incubation period for bovine tuberculos is can range from months to years. By requiring record retention for 5 years, the rule will benefit APHIS and State animal health authorities, the operators of livestock, slaughtering, and rende ring facilities, and livestock producers, generally, in the event that a traceback is required to locate the source herd of an animal discovered to have a dise ase such as bovine tuberculosis. The rule is not expected to result in significan t costs for the affected entities. An analysis of similar recordkeeping costs expected to be incurred because of a recent Food Safety and Inspection Service rulemaking found the costs to be minimal. For approved livestock facilities that are already required to retain records for 2 years, and rendering faci lities that are currently maintain relevant records per Food and Drug Ad ministration requirements, the costs will be smaller still. The alternative to the rule would be to l eave the regulations unchanged. In doing so, possible reductions in losses associated with anim al diseases that have long incubation periodsii would not be realized. The rule is preferred to the current regulat ions, given the relatively minor recordkeeping costs that woul d be incurred to achieve impr oved traceback capabilities. The benefits of the rule w ill justify its costs. There were no comments received on the economic analysis prepared for the proposed rule , nor were other significant economic issues raised. While the majority of approved livesto ck facilities, slaughter ing establishments, and rendering establishments are small entities, costs incurred because of the rule are also expected to be small. The Administrator of the An imal and Plant Health Inspection Service has determined that this action will not have a sign ificant economic impact on a substantial number of small entities.iii 

### Table of Contents Summary ....................................................................................................................... ....... i Introduction .................................................................................................................. ....... 1 Benefits of the Rule .......................................................................................................... .. 2 Costs of the Rule ............................................................................................................. .... 3 Alternative to the Rule ....................................................................................................... . 4 Potential Impact on Small Entities ...................................................................................... 41 

### Introduction
This analysis examines economic impacts of a rule that will require approved livestock facilities and listed slaughtering and rendering establishments to maintain certain records for 5 years. Currently, approved livestock facilities are required to retain certain records for 2 years. No record retention provisions are required of listed slaughtering and re ndering establishments. Benefits and costs of the rule are examined in this analysis in accordance with Executive Orders 12866 and 13563, and the benefits are expected to justify the costs. Possible impacts on small entities are considered in accordance wi th the Regulatory Flexibility Act. An approved livestock facility is defined in the Code of Federal Regulations (9 CFR §71.1) as a stockyard, livestock market, buying station, concentration point, or any other premises under State or Federal veterinary supervision where livestock are assembled and that has been approved under §71.20. These establishm ents range widely in size and function, although the tendency is toward increased i ndustry concentration. There are about 1,500 approved livestock facilities (“ma rkets”) listed by APHIS. The 2007 Economic Census reports that th ere were 1,597 animal (except poultry) slaughtering establishments that year. At all federally inspected slaughter facilities, USDA’s Food Safety and Inspection Servi ce conducts carcass-by-car cass inspections and verifies that the establishments follow all food safety and humane handling regulations. In the United States in 2009, there were 34.3 million ca ttle and calves, 113.6 million hogs, and 2.5 million sheep and lamb commercially slaughtered. There were also 228 rendering and meat byproduct processing establishments in 2007, according to the Economic Census. Renderers provi de an essential service to the increasingly competitive U.S. animal and meat industries, in converting dead livesto ck into a variety of2 materials, including edible and inedible tallow and lard, and pr oteins such as meat and bone meal. In 2004, it was reported that rendering es tablishments annually convert 47 billion pounds or more of raw animal materials into approximately 18 billion pounds of products. 1 APHIS has a listing agreement for slaughtering and rendering facilities; however, it is not currently required that operators agree in writing to meet the requirements in § 71.21 of the regulations for becoming a listed es tablishment. Under this rule, they will have to agree in writing to meet the requirements in § 71.21 of the regulations to become a listed establishment. To the extent that these operations already fo llow listing requirements, there should not be any cost associated with signing a listing agreement. Requiring operators to ag ree in writing to meet the requirement for an approved slaughtering or rendering facility will increase accountability. 

### Benefits of the Rule

Efficient animal disease traceb ack capabilities are critical to successfully maintaining the health of the Nation’s livestock resources. Epid emiological investigations of occurrences of bovine tuberculosis (TB) demonstrate the importan ce of recordkeeping at liv estock facilities and slaughtering and rendering establishments. Traceback of animals found infected at slaughter is still the main method used to locate TB-affected herds. In fiscal year (FY) 2010, 13 TB-affected cattle herds were confirmed in the United States, in Colorado (2), Kentucky (1), Mich igan (5), Mississippi (1), Nebraska (1), Ohio (1), and South Dakota (2). The States of Kentucky, Mississippi, Ohio and South Dakota had held accredited free status for TB for over 20 ye ars. All affected he rds identified in FY 2010 were depopulated with Federal indemnity excep t for two beef herds in Michigan that are

1 Becker, Geoffrey S. “Animals and Rendering: Economi cs and Policy.” CRS Report for Congress, Order Code RS21771, updated March 17, 2004.3 undergoing test-and-remove herd plans. The Ohio herd was detected during a dispersal sale and is no longer in existence. During the first half of FY 2011, six TB-aff ected cattle herds were confirmed in the United States. TB-affected herds were identified in Colorado (4), Indiana (1), and Michigan (1). All the affected herds in Colorado have been depopulated with Federal indemnity, and the disposition of the herds in Indi ana and Michigan are pending. Without recordkeeping, these tracebacks from slaughter coul d not have been accomplished. By requiring record retention for 5 years, the rule will benefit APHIS and State animal health authorities, operators of livestock, sl aughtering, and rendering f acilities, and livestock producers, generally, in the even t that tracebacks are required to locate the source herds of diseased animals ill from diseases that ha ve long incubation periods, such as TB. The rule will enable more focused tracebacks for animal diseases with long incubation periods. Federal and State authorities will benefit from more efficient investigations and resulting resource savings. Livestock industrie s will benefit from traceback investigations that require information on animal movements through approved livestock facilities that took place between 2 and 5 years before the present, and movements to slaughtering and rendering establishments that took place up to 5 years before the present. The rule will also help to retain access to international markets in the aftermat h of disease outbreaks through more rapid conclusion of traceback investigations. 

### Costs of the Rule
The rule is not expected to result in significant costs for the affected entities. For approved livestock facilities that are already required to maintain records for 2 years, and for slaughtering and rendering facilitie s that are already voluntarily ma intaining records, the costs4 will be smaller still. A recent rulemaking by USDA’s Food Safety and Inspection Service provides insight regarding the magn itude of costs of recordkeeping. 2 The economic analysis for the FSIS rule estimated recordkeeping and storage costs (labor and materials) for one year, for 6,300 establishments, to total about $83,000, or le ss than $15 per establishment. When these costs were extended for a total of 5 years, th e estimate totaled $130,000, that is, less than $21 per
establishment. The FSIS rule concerned recordkeeping n eeded for required notification when an adulterated or misbranded meat or poultry product had entered commerce. The analysis for the FSIS rule suggests that recordkeeping costs attrib utable to this rule will be relatively minor. 

### Alternative to the Rule

The alternative to the rule would be to leav e the regulations uncha nged, that is, continue to require approved livestock facilities to retain records for 2 years and not require slaughtering and rendering establishments to maintain reco rds. In doing so, possi ble reductions in losses associated with animal diseases that have l ong incubation periods would not be realized. The rule is preferred to the current regulations, given th e relatively minor recordkeeping costs that would be incurred to achieve improved traceback capabilities. 

### Potential Impact on Small Entities
The Regulatory Flexibility Act requires that agencies consider the economic impact of rule changes on small businesses, organizations, and governmental jurisdic tions. Section 604 of the Act requires agencies to prepare and make ava ilable to the public a final regulatory flexibility analysis (FRFA) describing any changes made to the rule as a result of comments received and the steps the agency has taken to minimize any significant economic impacts on small entities.

2 Federal Register, Volume 75, No. 57, Thursday, March 25, 2010, pp. 14361-1468.5 In place of the FRFA, the head of the agency ma y certify that a rule will not have a significant economic impact on a substantial number of small entities. This analys is provides the factual basis for certification of this rule. The Small Business Administration (SBA) has established guidelines for determining which firms are considered small under the Regulato ry Flexibility Act. This rule will affect approved livestock facilities, which are defined as stockyards, livestock ma rkets, buying stations, concentration points, or any other premises under State or Federal veteri nary supervision where livestock are assembled and that have been approved under § 71.20. Many of these entities are classified by the North American Industry Cl assification System as Livestock Merchant Wholesalers (NAICS 424520), for which the small-entity standa rd is not more than 100 employees. According to the 2007 Economic Census, of a total number of 1,012 establishments in this industry, only 2 of them had 100 or more employees. 3 As another indication that most approved livesto ck facilities qualify as small entities, the U.S. Department of Agriculture’s Grain Insp ection, Packers, and Stockyards Administration (GIPSA) recorded a total of 1,209 posted stockyards, 4 for which the APHIS employees who work closely with GIPSA estimate the majority of these industries qualify as small entities under the SBA standard. Establishments primarily engaged in operati ng stockyards for transportation rather than for buying, selling, or auctioning livestock ar e classified within NAICS 488999, All Other Support Activities for Transportation, for which th e small-entity standard is annual receipts of not more than $7 million. While we do not have sale s data for entities within this industry that

3 U.S. Census Bureau, 2007 Economic Census. http://factfinder.census.gov/ servlet/IBQTable?_bm=y&- fds_name=EC0700A1&-_skip=3100&-ds_name=EC0742SSSZ2&-_lang=en 4 USDA GIPSA, 2010 Annual Report, March 2011, http://a rchive.gipsa.usda.gov/pubs/2010_psp_annual_report.pdf6 will be directly affected by the rule, the 2007 Ec onomic Census reports that the annual revenue for the industry totaled $1.65 b illion. Based on a total of 1,418 establishments, the average revenue per establishment was less than $1.2 m illion, well below the small-entity standard. 5 Livestock slaughtering and renderi ng facilities are classified, respectively, within Animal (except Poultry) Slaughtering (NAICS 311611) and Rendering and Meat Byproduct Processing (NAICS 311613). For both of thes e industries, the SBA small-entity standard is not more than 500 employees. According to the 2007 Economic Census, th ere were 1,597 animal (except poultry) slaughtering establishments, of which 1,466 ( 92 percent) had fewer than 100 employees. 6 Similarly, for rendering establishments in 2007, of a total of 228 establishments, there were 208 (91 percent) that had fewer than 100 employees. 7
It is evident that most of the businesses that will be directly affected by the rule are small entities. However, costs incurred because of th e rule will also be small. Approved livestock facilities are already required to retain for a peri od of 2 years documents such as weight tickets, sales slips, and records of origin, identification, and destination that relate to livestock that are or that have been in the facilities. Incremental cost s for these facilities of continuing to retain the documents for an additional three years will be minor. Many slaughtering and rendering facilities are also already voluntarily maintaining such records. Requiring the retention of certain records for 5 years will allow tracebacks further into the past than is currently possibl e, thus providing the opportunity to locate potentially infected or exposed livestock that might otherwise remain unidentified. There were no comments received

5 U.S. Census Bureau, 2007 Economic Census. h ttp://factfinder.census.gov/se rvlet/IBQTable?_bm=y&- fds_name=EC0700A1&-_skip=1900&-ds_name=EC0748SSSZ1&-_lang=en 6 U.S. Census Bureau, 2007 Economic Census, http ://factfinder.census.gov/se rvlet/IBQTable?_bm=y&- fds_name=EC0700A1&-geo_id=&-_skip=0&-ds_name=EC0731I1&-_lang=en 7 Ibid.7 on the economic analysis prepared for the propo sed rule, nor were othe r significant economic issues raised. Based on the information presente d, the Administrator of the Animal and Plant Health Inspection Service has determined that this action will not ha ve a significant economic impact on a substantial number of small entities.