UNITED STATES ENVIRONMENTAL PROTECTION AGENCY WASHINGTON, D.C. 20460


### May 25, 2001
:MEMORANDUM OFFICE OF PREVENTION, PESTICIDES AND TOXIC SUBSTANCES 

### SUBJECT: RFA/SBREFA Certification for Import

**Toler~evocation** 

### ,_::----- FROM: DeniseKeehner, Division Director, Biological nomic alysis Division (7503C), Office ofPesticide Programs, OPPTS, U.S Environmental Protection Agency TO: Public Docket concerning Tolerance Revocation Rulemaklng, Proposed orFinal Issue: Becausetolerance revocation is rule-making, the Agency needs to certifY

-- under RFA/SBREFA

-- that the tolerance revocation does not impose a significant adverse impact on a substantial number ofsmall entities or conduct an initial and final regulatory flexibility analysis and convene a review paneL Currently, OPP is trying to update the FR notice from I997 that made a broad, general certification. The same conditions apply nowas they did in 1997, but the supporting documentation is being updated, so it is necessaryto reconstruct thebasis for Agency expectations that import tolerance revocations will not generate significant impacts on substantial numbers of small entities. TheprimaryRFA/SBREFA fo.cus is on U.S. based import businesses who trade in products that may contain one ormore residues being banned under the tolerance revocation. Preliminary Analysis: The arguments for why we would not expect to see significant impacts on a substantial number of small entities can be put into three different categories: 

### I. Cases where substantial numbers ofsmall entities are not affected because: a. Import companies are not small businesses. b. Ifimport companies are small businesses, then too few are affected tobe ineligible for SBREFAcertification. 2. Cases where impact on import commodityprice is not significant (minimal supply effects) because: a. Affected commodity is widely traded on international markets/exchanges, and only a small proportion ofoverall production is treated. b. A small proportion ofa crop is treated within a country, suggested the supply within that country will be relatively unaffected, c. There are sufficient alternatives for the chemical with the cancelled tolerance, and these alternatives have few, 

### ifany, impacts on output or production costs for the raw agricultural commodity.

lntemet A.ddress {URL) •

**http://WW'W.~pa.gov**

**Re-cyclf"dfR~cydable** •

**P~.11&d** with Vegetable Oil Based lnk.s on Recycled

**P;o~per** (.Minimum 25'1'o Postconsumer}3. Cases where there are limited alternatives for the pesticide in a given country, leading to an increase in the supply price, but: a. The supply price is only a proportion ofthe import price, where the majority ofthe pricereflects transportation and other distribution costs. b. The supply price increases for a particular commodityfrom a particular country, but it does not impose a significant impact on importer sales becausetheimport companyhas diversified sales. c. The supplyprice increases for a particular commodityfrom a particular country, but there are other sources ofthe commodity, and the transaction costs ofutilizing other suppliers is sufficiently low that it doesn't significantly affect the overall sales of the importing company.

. . . . Therefore, ifANYofthese eight conditions hold, then we can certifY that there is no SBREFA issue. Conversely, in orderfor there to be consideration ofa SBREFA concernthat would require more detailed analysis, ALL ofthe following have to hold: l. There are importersfor a particularcommodity affected bythe tolerance revocation, who quality 

# as small business under SBAguidelines; AND

. 2. there is a substantial numberofsmall importerswhose sales are affected bythe tolerance. revocation; AND 3. the affected commodity is NOT widely traded on international markets; AND 4. a sizable proportion ofthe production in the limited geographic production region is treated with theparticularpesticide (suggesting potential supply effects); AND 5. there a limited and/or expensive alternatives for the particularpesticide in the limited geographic production region, with a concomitant potential for sizableyield loss orincrease in cost of production; AND 6. the price ofthe raw agricultural commodityis a large component ofthe sales price oftheimport; AND 7. the importing companies are not diversified, and the increase in raw commoditycost will lead to a significantdecline in sales revenue. Thereis a negligiblejoint probability ofall these conditions holding simultaneously, so I believe it appropriate for the Agency to take the position that import to!erance revocations can be certified under RFA/SBREFA. I base this conclusion on several observations: most commodities subject to import tolerance revocation are widely traded on international markets (according to USDA's data on agricultural imports and exports) and BEAD's data on foreign pesticide use suggest it is rare for a single pesticide to be extensively used in each production/export region, such that there is

# aminimal chance ofimport tolerance revocation leading toprice/cost increases for importers with an attendant SBREFA concern. Even in the very unlikely eventthat an import tolerance revocation leads to significant price/cost increases for a particularcommodity, many importers ofagricultural commodities are diversified companies dealing in many commodities, so that a price/cost increase for onecommodity will not significantly affect total company revenues. At the sametime, it will be useful to continue building a set ofdata describing why one or more of these seven conditions is not likely to hold. The plan for the medium to long term is to collect such supporting data, sometimes using general industry profiles and sometimes using analyses ofspecific commodity/chemical combinations. ·

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