This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

11472 

Vol. 75, No. 47 

Thursday, March 11, 2010 

1Public Law 104–48, 109 Stat. 427(1995). 

2 7 U.S.C. 499c(b)(2). 

3 Id. 

4Sec. 203, Public Law 106–224. 

DEPARTMENT OF AGRICULTURE 

Agricultural Marketing Service 

7 CFR Part 46 

[Document No. AMS–FV–08–0098] 

RIN # 0581–AC92 

Perishable Agricultural Commodities 

Act: Increase in License Fees 

AGENCY: Agricultural Marketing Service, 

USDA. 

ACTION: Proposed rule. 

SUMMARY: The Department of 

Agriculture (USDA) is proposing to 

amend the regulations under the 

Perishable Agricultural Commodities 

Act (PACA or Act) to increase license 

fees. Current annual license fees of $550 

would increase to $995. Fees for branch 

locations would increase from $200 for 

branch locations in excess of nine to 

$600 for each branch location. The 

maximum amount a licensee would pay 

per year would increase from $4,000 to 

$8,000. Additionally, the regulations 

would be amended to remove the 

provisions to phase out license fees by 

retailers and grocery wholesalers and 

the provisions to phase in triennial 

license renewal for retailers and grocery 

wholesalers as these processes have 

already occurred. We also propose to 

eliminate the multi-year license renewal 

option for commission merchants, 

brokers, and dealers. 

DATES: Written or electronic comments 

received by May 10, 2010 will be 

considered prior to issuance of a final 

rule. 

ADDRESSES: You may submit written or 

electronic comments to: 

(1) PACA License Fee Comments, 

AMS, F&V Programs, PACA Branch, 

1400 Independence Avenue, SW., Room 

2095–S, Washington, DC 20250–0242. 

(2) Fax: 202–690–4413. 

(3) E-mail comments to 

Pacalicensefee@ams.usda.gov. 

(4) Internet: http:// 

www.regulations.gov. 

Instructions: All comments will 

become a matter of public record and 

should be identified as ‘‘PACA License 

Fee Comments’’. Comments will be 

available for public inspection from the 

Agricultural Marketing Service at the 

above address or over the Agency’s Web 

site at http://www.ams.usda.gov/paca. 

Web site questions can be addressed to 

the PACA Webmaster, 

christine.tipton@ams.usda.gov. 

FOR FURTHER INFORMATION CONTACT: 

Jeffrey F. Davis, Assistant Director, 

National License Center, PACA Branch, 

Fruit and Vegetable Programs (703) 331– 

4575. 

SUPPLEMENTARY INFORMATION: This 

proposal is issued under authority of 

section 15 of the PACA (7 U.S.C. 499o). 

The Perishable Agricultural 

Commodities Act (PACA or Act) of 1930 

establishes a code of fair trade practices 

covering the marketing of fresh and 

frozen fruits and vegetables in interstate 

and foreign commerce. The PACA 

protects growers, shippers, distributors, 

and retailers dealing in those 

commodities by prohibiting unfair and 

fraudulent trade practices. In this way, 

the law fosters an efficient nationwide 

distribution system for fresh and frozen 

fruits and vegetables, benefiting the 

whole marketing chain from farmer to 

consumer. USDA’s Agricultural 

Marketing Service (AMS) administers 

and enforces the PACA. 

The PACA Branch proactively works 

for the fruit and vegetable industry 

promoting interstate and foreign 

commerce through dispute resolution, 

licensing, and outreach programs 

facilitating fair trade practices. The 

PACA enforces Federal regulations 

outside the civil court system by 

upholding contract requirements. The 

PACA also mandates full and prompt 

payment, removes unscrupulous 

individuals from the trade when 

needed, and provides expert advice on 

trust protection. 

The PACA Amendments of 1995 1

increased the annual license fee from 

$400 to $550 (up to a maximum annual 

fee of $4000) for all licensees except 

retailers and grocery wholesalers.2 The 

1995 Amendments granted USDA the 

authority to increase fees through 

rulemaking after November 14, 1998 

provided that the PACA program’s 

operating reserves fall below 25 percent 

of PACA’s projected annual program 

costs.3 Because of the loss of revenue to 

the Agency caused by the amendment’s 

requirement that fees for retailers and 

grocery wholesalers be phased out, 

PACA program budget projections for 

FY 2000 and 2001 indicated the 

program’s assets would have fallen 

below the required 25 percent of 

projected expenditures in FY 2001. 

However, on June 20, 2000 President 

Clinton signed Public Law 106–224 

which included $30.45 million to be 

deposited into USDA’s PACA reserve 

fund on October 1, 2000, in order to 

maintain PACA license and complaint 

filing fees at their 1995 levels.4 The onetime appropriation (expected to last a 

few years) has lasted almost 11 years 

through concentrated cost-cutting 

measures, including office restructuring 

and staff reductions. In FY 2006, the 

PACA Branch restructured its regional 

offices and consolidated nationwide 

licensing functions into one office, 

resulting in over $1 million in annual 

savings. In January, 2000, the PACA 

Branch operated with 116 employees. 

As a result of gains in technology and 

office consolidations this program now 

employs approximately 80 full time staff 

members in three regional offices and 

Washington, DC. The 2007 U.S. 

Department of Commerce Bureau of 

Economic Analysis report indicates the 

total retail value of fruits and vegetables 

for at-home and away-from-home 

consumption was $80–$95 billion. The 

PACA Branch operating expenses in FY 

2008 were $10.6 million, constituting a 

sound value in cost-efficiency and 

productivity dedicated to the service of 

the fruit and vegetable industry. 

During the last quarter of FY 2010, or 

possibly the first quarter of FY 2011, the 

PACA Branch operating fund will fall 

below 25 percent of projected annual 

program costs. Without a fee increase in 

FY 2011, the program will exhaust its 

reserves by the second quarter of FY 

2011, and would soon need to begin 

reducing its level of services to the 

industry. We propose to increase the 

current base annual license fee for 

commission merchants, brokers, and 

dealers from $550 to $995. We also 

propose to increase the current $200 

additional fee for branch locations in 


srobinson on DSKHWCL6B1PROD with PROPOSALS
Federal Register / Vol. 75, No. 47 / Thursday, March 11, 2010 / Proposed Rules 11473 

excess of nine to $600 for each branch 

location starting from the first branch. 

We further propose to increase the 

current aggregate fee maximum from 

$4,000 to $8,000. We propose that the 

fee increase become effective October 1, 

2010. The proposed funding increase, 

provided that there is no significant 

increase in multi-year license renewals 

prior to its effective date, is expected to 

allow the PACA Branch to maintain its 

current level of services until FY 2015. 

Financial Impact/Costs 

The PACA is enforced through a 

licensing system and is user-fee 

financed through a license fee. The 

PACA requires commission merchants, 

wholesale dealers, grower’s agents, food 

processors, and brokers buying or 

selling fruits and/or vegetables in 

interstate or foreign commerce to be 

licensed. Those who engage in practices 

prohibited by the PACA may have their 

licenses suspended or revoked by USDA 

[7 CFR 46.9(a)–(h)]. Currently, licensees 

may choose to renew their licenses on 

an annual, biennial, or triennial basis. 

Wholesalers, processors, food service 

companies, and grocery wholesalers are 

considered to be dealers and subject to 

license when they buy or sell more than 

2,000 pounds of fresh and/or frozen 

fruits and vegetables in any given day. 

Dealers whose fruit and vegetable 

purchases or sales do not exceed the 

2,000 pound threshold are exempt from 

the license requirement. A retailer is 

considered to be a dealer and subject to 

license when purchases exceed the 

2,000 pound threshold and the invoice 

cost of its perishable agricultural 

commodities exceeds $230,000 in a 

calendar year. 

Although license fees account for the 

majority of PACA’s funding, the 

program also collects about 4.4% of its 

revenue from fees charged to firms that 

submit disputes to the PACA Branch for 

resolution. Reparation complaint fees 

(informal and formal) are expected to 

account for $360,000 in revenue per 

year through FY 2015. 

The initial increase in receipts from 

fees collected following the enactment 

of the 1995 Amendments allowed the 

PACA fund to build up operating 

reserves. Those reserves peaked at $7.48 

million in July, 1998, creating revenue 

as investment income for subsequent 

years. In FY 2008, the program 

generated $6.35 million in license fees, 

$360,000 in complaint fees, and 

$419,000 in investment income for 

revenues totaling $7.13 million. During 

FY 2011 the operating reserve will be 

exhausted, generating no investment 

income. Projections indicate that the 

program must generate approximately 

$11.425 million per year by FY 2011 

and $13.04 million by FY 2015 for the 

program to continue to maintain the 

current level of service to the industry. 

This equates to a $4.865 million per 

year increase in annual program 

revenues beginning with FY 2011, up to 

$6.48 million by FY 2015. Because over 

95 percent of the program’s revenue is 

generated through the collection of 

license fees, a majority of these funds 

would have to be raised through an 

increase in license fees. 

When USDA proposed revisions to 

the PACA regulations implementing the 

1995 Amendments (61 FR 47674, 

September 10, 1996), it noted that the 

next fee increase would need to be 

significant due to the phase out of the 

requirement that retailers pay license 

fees. The following table (based on the 

number of active, paying PACA 

licensees as of October 1, 2008) outlines 

how the proposed fee increase affects 

the PACA program’s budget through FY 

2015: 

Fiscal year Balance start 

of fiscal year 

License and 

complaint fee 

revenue 

Investment 

revenue 

Total available 

funds 

Projected 

costs 

Months of operating reserve 

2009 ......................................................... $11,785,000 $6,662,000 $102,000 $18,447,000 $10,732,000 8.4 

2010 ......................................................... 7,545,000 6,580,000 20,000 14,125,000 11,059,000 3.4 

2011 ......................................................... 3,065,000 12,399,000 0 15,464,000 11,425,000 4.4 

2012 ......................................................... 4,038,000 12,399,000 0 16,437,000 11,808,000 4.9 

2013 ......................................................... 4,628,000 12,399,000 0 17,027,000 12,205,000 4.9 

2014 ......................................................... 4,822,000 12,399,000 0 17,221,000 12,615,000 4.5 

2015 ......................................................... 4,606,000 12,399,000 0 17,005,000 13,040,000 3.8 

The proposed increase in fees would 

result in estimated revenue of $12.4 

million per year. AMS expects the 

PACA program will have adequate 

financing until FY 2015 (based on the 

current number of licensees and 

economic factors), when the reserve is 

again projected to fall below 25 percent. 

Under § 46.9(k) of the regulations (9 

CFR 46.9(k)), commission merchants, 

brokers, and dealers have been given the 

option since December 1, 1998 of 

renewing their licenses on an annual, 

biennial, and triennial basis. Currently, 

17 percent hold the two-year or threeyear licenses. The above revenue 

projections assume that there is no 

significant increase in multi-year 

renewals before the proposed fee 

increase becomes effective. A significant 

increase in such renewals could 

produce a shortfall in projected revenue 

for FY 2011 and FY 2012 that might 

necessitate a curtailment of services, or 

even an additional fee increase. 

Accordingly, an amendment terminating 

the option to renew on a biennial or 

triennial basis, which would become 

effective thirty days after publication of 

the final rule is proposed. This 

amendment will not apply to retailers 

and grocery wholesalers, who will 

continue to be licensed on a triennial 

basis. 

Currently, Section 46.6 of the 

regulations (9 CFR 46.6) sets out the 

procedure followed to phase out 

retailers and grocery wholesalers from 

the requirement to pay license fees and 

Section 46.9(k) (9 CFR 46.9(k)) contains 

the procedure followed to phase in the 

triennial license renewal for those 

entities. Both the phase-in and phaseout processes have been completed. 

Therefore, these provisions are no 

longer needed and we propose to 

remove them from the regulations. 

Executive Orders 12866 and 12988 

This proposed rule has been 

determined to be not significant for the 

purposes of Executive Order 12866, and 

therefore, has not been reviewed by the 

Office of Management and Budget. 

This proposed rule has been reviewed 

under Executive Order 12988, Civil 

Justice Reform, and is not intended to 

have retroactive effect. This proposed 

rule will not preempt any State or local 

laws, regulations, or policies, unless 

they present an irreconcilable conflict 

with this rule. There are no 

administrative procedures which must 

be exhausted prior to any judicial 

challenge to the provisions of this rule. 

Effects on Small Businesses 

Pursuant to requirements set forth in 

the Regulatory Flexibility Act (RFA) (5 


srobinson on DSKHWCL6B1PROD with PROPOSALS
11474 Federal Register / Vol. 75, No. 47 / Thursday, March 11, 2010 / Proposed Rules 

U.S.C. 601–612), the Agricultural 

Marketing Service has considered the 

economic impact of this proposed rule 

on small entities, and accordingly has 

prepared this initial regulatory 

flexibility analysis. 

The purpose of the RFA is to fit 

regulatory actions to the scale of 

businesses subject to such actions in 

order that small businesses will not be 

unduly or disproportionately burdened. 

Small agricultural service firms have 

been defined by the Small Business 

Administration (SBA) (13 CFR 121.201) 

as those having annual receipts of less 

than $7,000,000. The PACA is enforced 

through a licensing system and is userfee financed primarily through a license 

fee. USDA’s Agricultural Marketing 

Service administers and enforces the 

PACA. 

As of October 1, 2008 there were 

14,418 PACA licensees, a majority of 

which may be classified as small 

entities. Retailers and grocery 

wholesalers represent 4,125 licensees. 

Internally, PACA refers to retailers and 

grocery wholesalers as ‘‘non-paying’’ 

licensees, and all other licensees as 

‘‘paying’’. Since November 1998, 

retailers and grocery wholesalers pay a 

$100 application processing fee. Their 

PACA license is effective for three years, 

renewed at no cost. Retailers accounted 

for about 35% of program revenue 

before their fees were phased out by 

Congress. Today, retailers account for 

28.5% of all PACA licensees. However, 

since only new applicants pay a 

processing fee, retailers contribute little 

to PACA’s annual operating revenue. 

The proposed fee increase will have no 

impact on operating costs of retailers 

and grocery wholesalers. Therefore, 

retailers and grocery wholesalers will 

not be unduly burdened by the 

proposed rule. 

Wholesalers, processors, food service 

companies, commission merchants, 

dealers, brokers, and truckers are 

considered to be dealers and subject to 

a license when they buy or sell more 

than 2,000 pounds of fresh and/or 

frozen fruits and vegetables in any given 

day. This group represents the 

remaining 10,293 active, ‘‘paying’’ PACA 

licensees and is the only group 

impacted by the proposed fee increase. 

While the annual revenues of this 

group of agricultural service firms is 

unknown, we estimated a significant 

percentage of these firms have annual 

receipts less than $7,000,000. Therefore, 

the businesses are ‘‘small businesses’’ 

within the meaning of that term in the 

RFA. A large number of these small 

agricultural service firms would be 

impacted by this proposed PACA fee 

increase. While the maximum amount 

of the proposed PACA license fee is to 

be $8,000, this increase will impact a 

small number of larger firms with 

multiple branches. Currently, only 56 

licensees (or 0.0039%) of all PACA 

licensees would pay the $8,000 

maximum. The fee structure in the 

proposal was designed so firms would 

only see the annual fee increase from 

$550 per year to the proposed $995 per 

year. This $445 fee increase is believed 

to be a minor increase in operating costs 

to these firms and is more than offset by 

the protection provided to these firms 

under the PACA. Larger firms operating 

at multiple branch locations would face 

larger fee increases. As the renewal of 

PACA licenses has become highly 

automated and renewal notices are sent 

to all licensees well before the renewal 

date, elimination of the option biennial 

or triennial licenses should not impose 

a substantial burden upon small 

businesses holding such licenses. 

All fruit and vegetable traders that 

handle less than 2,000 pounds of fresh 

and/or frozen fruits and vegetables are 

exempt from the PACA license 

requirement and would not be subject to 

this proposed fee increase. These firms 

would be considered very small and 

handle a relatively minor volume of 

total fresh and/or frozen fruits and/or 

vegetables marketed. 

On February 24, 2009 the USDA Fruit 

and Vegetable Industry Advisory 

Committee unanimously recommended 

to the Secretary of Agriculture their 

approval of the proposed license fee 

increase. 

Paperwork Reduction Act 

In accordance with Office of 

Management and Budget (OMB) 

regulations (5 CFR Part 1320) that 

implement the Paperwork Reduction 

Act of 1995 (44 U.S.C. Chapter 35), the 

information collection and 

recordkeeping requirements are 

currently approved under OMB number 

0581–0031. The forms covered under 

this information collection require the 

minimum information necessary to 

effectively carry out the requirements of 

the order, and their use is necessary to 

fulfill the intent of the PACA as 

expressed in the order, and the rules 

and regulations issued under the order. 

E-Government Act Compliance 

AMS is committed to complying with 

the E-Government Act, which requires 

Government agencies in general to 

provide the public the option of 

submitting information or transacting 

business electronically to the maximum 

extent possible. License application 

forms are available on our PACA Web 

site at http://www.ams.usda.gov/PACA 

and can be printed, completed, and 

faxed. Currently, forms are transmitted 

by fax machine and postal delivery. The 

PACA Branch is working towards 

furthering its availability of online 

forms. 

List of Subjects in 7 CFR Part 46 

Agricultural commodities, Brokers, 

Penalties, Reporting and recordkeeping 

requirements. 

For reasons set forth in the preamble, 

7 CFR part 46 is proposed to be 

amended as follows: 

PART 46—[AMENDED] 

1. The authority citation for part 46 

continues to read as follows: 

Authority: 7 U.S.C. 499a–499t. 

2. In § 46.6, paragraphs (a) and (b) are 

revised to read as follows: 

§ 46.6 License fees. 

(a) Retailers and grocery wholesalers 

making an initial application for license 

shall pay a $100 administrative 

processing fee. 

(b) For commission merchants, 

brokers, and dealers (other than grocery 

wholesalers and retailers) the annual 

license fee is $995 plus $600 for each 

branch or additional business facility. In 

no case shall the aggregate annual fees 

paid by any such applicant exceed 

$8,000. 

* * * * * 

3. In § 46.9, paragraph (k) is revised 

and paragraph (l) is removed to read as 

follows: 

§ 46.9 Termination, suspension, 

revocation, cancellation of licenses; 

notices; renewal. 

* * * * * 

(k) Only a commission merchant, 

broker, or dealer holding a multi-year 

license, prior to phase-out of this 

option, will receive a refund if business 

operations cease or a change in legal 

status occurs that requires issuance of a 

new license prior to the next license 

renewal date. If a refund is due, it will 

be issued for any remaining full-year 

portion of advance fee paid, minus a 

$100 processing fee. 

Dated: March 5, 2010. 

Rayne Pegg, 

Administrator, Agricultural Marketing 

Service. 

[FR Doc. 2010–5255 Filed 3–10–10; 8:45 am] 

BILLING CODE 3410–02–P 


srobinson on DSKHWCL6B1PROD with PROPOSALS