### 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 Litchi from Australia

APHIS - 2009 - 0084 RIN 0579 -AD56

U.S. Department of Agriculture Animal and Plant Health Inspection Service

August 2010ii



### Summary This proposed rule is in response to a request from Australia to export fresh litchis to all S tates in the United States except Florida. Litchi is grown in Fl orida, Hawaii, and California , and U.S. production is estimated to be about 500 metric tons (MT) per ye ar. Based on available information, m ost if not all litchi farms are small entities. The United States imports litchis from such countries as Taiwan , China, Israel, and Mexico. Australia expects to export about 400 MT of litchis to the United Stat es annually . This amount is equivalent to less than 3 percent of the quantity of litchi s that was import ed by the United States in 2004, the latest year for which we have data. Most likely , the quantity of litchis expected to be imported from Australia i s of even lesser significan ce when compared to current litchi imports by

the United States, given the expan ding demand for this fruit

. Any litchi price declines that might result from this rule would be insignificant, especiall y if as is likely , at least s ome litchi imports from Australia were to displace imports from other countries. Moreover, given that the agricultural seasons in the Southern Hemisphere are generall y the opposite of those in the Northern Hemisphere, the proposed imports from Australia l ikely would not directl y compete with U.S. litchi production. Based on this information, the APHI S Administrator certifies that the proposed rule, if promulgated, will not have a significant economic impact on a substantial number of small entities.1



### Introduction This analy sis provides the basis, as required by the Regulatory

Flexibility

Act, for certification by

the APHIS Administrator that the proposed ru le, if promulgated, will not have a significant economic impact on a substantial number of smal l entities. In response to a request from Australia, APHIS is proposing to allow the importation of l itchis into all S tates in the United States except Florida. Currentl y l itchis are prohibited entry from Australia due to pest risk concerns. Based on a pest risk anal ys is, APHI S has determined that it is not necessary

to prohibit or restrict the movement of l itchis from Australia to the United States provided certain pest mitigation measures are taken. Litchis would not be allowed into Florida due to th e risk associated with the l itchi rust mite. World production of litchi is estimated to be 2.11 million metric tons (MT) , with China accounting for approximately 50 percent (0.6 million to 1.5 million MT ) followed by India (0.5 million MT ) and Taiwan (0.1 million MT )

. The United States produces approximately 500 MT per year , which represents less than 0. 03 percent of world production

. U.S. l itchi production is concentrated in the S tates of Florida , Hawaii, and California

. Florida has the largest area under production ( 1,200 acres ) , followed by Hawaii ( 300 acres ) and California ( 60 acres ) (Evans et al. 2002)

. Currentl y, Australia produces 3,500 MT of litchis. 1 Australia is proposing to export approximately 20 forty- foot containers of litchis per year to the United States , which is equivalent to about 400 MT

. In 2004, the United States imported a total of 14, 854 MT of litchis from China, Taiwan , and Mexico. Australia’s proposed export quantity represents about 2.7 percent of U.S. imports in 2004.

1 Lychee Production in Australia: http://www.fao.org/docrep/005/ac684e/ac684e05.htm2



### Pot ential Impact on Small Entities For the purpose of this analy sis and following the Small Business Administration (SBA) guidelines, the entities potentially affected by

the proposed rule are classified within the following industries: Other Non Citrus Fruit Farming (NAICS 111339), Posth arvest Crop Activities (except cotton ginning) (NAICS 11511 4 ), and Fresh Fruit and Vegetable Merchant Wholesalers (NAICS 424480). Establishments classified within Other Non Citrus Fruit Farming are considered small b y SBA standards if annual sales are not more than $750,000. APHI S does not have the size distribution of litchi producers in particular but according to the Census of Agriculture there were 23,641 farms classified as Other No n Citrus Fruit Farming in 2007. 2 The market value of crops sold by these farms that year was about $111,000, well below the small

entity standard. We infer that most if not all U.S. litchi farms are small. Establishments classified with in Posth arvest C rop Activities (except cotton ginning) are considered small by SBA standards if annual sales are not more than $7 million . The percentage of establishments that meet this standard is not known; neither the Census of Agriculture nor the Economic Census repo rts revenue for these establishments. Establishments classified with in Fresh Fruit and Vegetable Merchant Wholesalers (NAICS 424480) are considered small by SBA standards if they employ not more than 100 persons

. According to the 2002 Survey of Business Owners, 97 percent of the establishments in this category employed fewer than 100 people. From 1998 to 2004 the most current information available U.S. import s of litchi increased from about 1,000 MT to approximately 15,000 MT
. D uring the same time fram e, the price of litchis declined from $5.07/lb to $1.05/lb. This increase in imports can be attributed to

2 USDA NASS. 2007 Census of Agriculture, Table 46. Selected Characteristics of Farms by North American Industry Classification System: 2007 , http://www.agcensus.usda.gov/Publications/2007/Full_Report/Volume_1,_Chapter_1_US/st99_1_046_046.pdf3

improvements of post harvest activities that have increased the shelf life of the fruit , along with facilitating trade regulations. Also, the increase in litchi imports is in part attributable to expanding demand as a result of growing Asian and Hispanic populations in the United States (Evans et al. 2002)

. Australia is expecting to export 20 forty

- foot container s (400 MT ) of litchi s per year to the United States

. This represents less than 3 percent of U.S. litchi imports in 2004. Most likely, th is quantity

of litchis is of even lesser significance when compared to current litchi imports by the United States, given the expanding demand for this frui t. Given that the agricultural seasons in the Southern Hemisphere are generally the opposite of those in the Northern Hemisphere, the proposed imports from Australia likely would not directly compete with U.S. litchi production. The litchis that are grown in Florida, California, and Hawaii are produced primarily for local market s. Itis unlikel y that an additional 400 MT of imports would have a significant impact on the U.S. litchi market

. Any litchi price declines that might result , if at all, from this rule would be insignificant, especially as at least some litchi imports from Australia are expected to displace imports from other countries. Under these circumstances, the Administrator of the Animal and Plant Health Inspection Service has de termined that this action would not have a significant economic impact on a substantial number of small entities.4



### References Census of Agriculture, 2007, http:// www.agcens us.usda.gov/Publications/2007/Full_Report/index.asp Evans, E.A., Degner, R.L., Crane, J.H., Rafie, A.R., & Balerdi, C.F. (2004). Is It Still Profitable to Grow Lychee in Florida?. Electronic data information source of food and resource economics departmen t, florida cooperative extension service, institute of food and agricultural sciences, university of florida . Retrieved (2010, June 15) from http://edis.ifas.ufl.edu/fe496 Evans, E.A., & Degner, R.L . (2005). Re cent Developments in W orld Production and Trade of Lychee (litchi chinensis): Implications for Florida Growers. Proceedings of the Florida State Horticultural Society , 118 . Retrieved from http://brokert10.fcla.edu/DLData/HP/HP00000118/SN00971219 U.S. Small Business Administration. U.S. Small Business Administration: Table of Small Business Size Standard s Match to North American Industry Classification Sy stem http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf