[Federal Register Volume 62, Number 157 (Thursday, August 14, 1997)]
[Rules and Regulations]
[Pages 43453-43455]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-21523]



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Rules and Regulations
                                                Federal Register
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Federal Register / Vol. 62, No. 157 / Thursday, August 14, 1997 / 
Rules and Regulations

[[Page 43453]]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 46

[Docket Number FV96-351A]
RIN Number: 0581-AB48


Amendments to the Perishable Agricultural Commodities Act (PACA)

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: The Department of Agriculture (USDA) is revising the 
Regulations (other than Rules of Practice) Under the Perishable 
Agricultural Commodities Act (PACA) in order to implement legislative 
changes signed into law by President Clinton. Specifically, the 
legislative changes phase retailers and grocery wholesalers out of 
license fee payments over a 3-year period; establish that retailers and 
grocery wholesalers making an initial application during the 3-year 
period pay no fee for the renewal of the license for subsequent years; 
establish a one-time administrative fee for new retailers and grocery 
wholesalers entering the program after the 3-year phase-out period; and 
increase license fees from $400 to $550 annually for all other 
licensees.

EFFECTIVE DATE: September 15, 1997.

FOR FURTHER INFORMATION CONTACT: James R. Frazier, Chief, PACA Branch, 
Room 2095-So. Bldg., Fruit and Vegetable Division, AMS, USDA, 1400 
Independence Avenue, S.W., Washington, DC 20250, Phone (202) 720-2272.

SUPPLEMENTARY INFORMATION:

Background

    The PACA establishes a code of fair trading 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 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 was amended by the Perishable Agricultural Commodities Act 
Amendments of 1995 (P.L. 104-48). The regulations implementing the PACA 
(other than the Rules of Practice) are published in the Code of Federal 
Regulations at Title 7, Part 46 (7 CFR part 46). On September 10, 1996, 
the proposed revisions to the PACA regulations implementing P.L. 104-48 
were published in the Federal Register. The finalized regulatory 
revisions became effective on April 30, 1997, with the exception of 
Sec. 46.6, License Fees.
    During the comment period on the proposal, the Food Marketing 
Institute (FMI), Food Distributors International (FDI), and the 
National Grocers Association (NGA), objected to the proposed revisions 
to Sec. 46.6. They wrote that the proposed rule requiring that certain 
retailers and grocery wholesalers pay renewal fees was incorrect. They 
referred to section 499c(b)(3) of the statute designated, ``One-Time 
Fee for Retailers and Grocery Wholesalers that are Dealers'', which 
specifies the fees to be paid by a retailer or a grocery wholesaler 
making an initial application during the phase-out period and after 
such period ends. The commentors emphasized the statutory language at 
the end of section 499c(b)(3) which states: ``* * * a retailer or 
grocery wholesaler paying a fee under this paragraph shall not be 
required to pay any fee for renewal of the license for subsequent 
years.''
    Our interpretation of the statutory language, as well as our 
understanding of the agreement between the various industry groups 
which preceded the final legislation, was that all retailers and 
grocery wholesalers would pay a license renewal fee during the 3-year 
phase-out period. After the end of the phase-out period, no renewal fee 
would be required. This interpretation treats all retailers and grocery 
wholesalers equally and does not discriminate against those who had 
complied with the licensing requirements prior to the law's enactment 
on November 15, 1995.
    Since the commentors' interpretation of the legislative amendment 
was substantially different from our view but appeared plausible, we 
separated Sec. 46.6 from the rest of the proposed regulations, and 
addressed the issue independently by reopening that part of the 
proposed rule in order to allow other interested parties to comment. 
Since the publication of the reopening of the comment period on March 
31, 1997, we have collected renewal fees from retailers and grocery 
wholesalers which had received initial licenses during the phase-out 
period. However, in that document, we stated that in the event a 
determination is made that the law excludes those entities from paying 
renewal fees during the 3-year phase-out period, the collected renewal 
fees would be refunded with interest.

Comments

    USDA received 17 comments on this reopened part of the proposed 
rule from 9 industry trade associations, 7 retailers, one grocery 
wholesaler, and one comment, signed by Congressman Thomas Ewing, 
Chairman of the House of Representatives' Subcommittee on Risk 
Management and Specialty Crops and Congressman John Boehner. Three of 
these comments were postmarked after the comment period ended on April 
30, 1997, and are, therefore, not addressed in this rule.
    We received comments supporting the proposed regulations (i.e., to 
charge all retailers and grocery wholesalers a renewal fee during the 
3-year phase-out period) from the American Farm Bureau Federation, 
United Fresh Fruit and Vegetable Association, Florida Fruit and 
Vegetable Association, and Western Growers Association. They reiterated 
their support for the proposed regulations as originally proposed, and 
urge that we adopt them without change. They argue that any change is 
without basis because there is no support in the statute nor in the 
legislative history to indicate that Congress chose to treat retailers 
and grocery wholesalers that were licensed after November 15, 1995, any 
more favorably than those licensed prior to that date. They point out 
that by changing the proposed regulations, retailers and grocery 
wholesalers would

[[Page 43454]]

pay different license fees based solely upon whether they were licensed 
under the PACA before or after November 15, 1995.
    Two of these commentors state that the retail and grocery wholesale 
industries are incorrectly relying upon the ``plain meaning'' of the 
1995 PACA Amendments; an assertion which the Supreme Court has 
repeatedly ruled that alone is not the sole consideration in 
implementing a statute. The commentors support their argument by 
quoting a Supreme Court decision in part: ``The plain meaning of 
legislation should be conclusive, except in ``rare cases [in which] the 
literal application of a statute will produce a result demonstrably at 
odds with the intentions of its drafters.'' In such cases, the 
intention of the drafters, rather than the strict language, controls.'' 
(United States v. Ron Pair Enterprises, Inc.,) 489 U.S. 235, 242 
(1989), quoting, Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 
#571 (1982).
    The two commentors also argue that the correct reading of the 
Public Law 104-48 is clearly delineated in the House of Representatives 
Report accompanying H.R. 1103, the bill that became the 1995 PACA 
Amendments (H.R. Rep. No. 104-207, 104th Cong., 1st Sess.). They 
emphasize the report language which stated that the legislation ``* * * 
phases retailers and grocery wholesalers out of license fee payments in 
three years, [and] establishes a one-time administrative fee for new 
retailers and grocery wholesalers entering the program after the three-
year phase-out. * * *'' [emphasis added]. They point to other report 
language which states: ``During the phase-out period, new retailer and 
grocery wholesale applicants will pay the specified fee established 
under the phase-out year.'' They maintain that the language in the 
House Report clearly describes two periods of time: the phase-out 
period from November 15, 1995, to November 15, 1998, when new retailers 
and grocery wholesalers will pay the specified fee established for the 
phase out year; and the period after November 15, 1998, when no fee 
will be required.
    We received 11 comments objecting to our original proposal that all 
licensees pay renewal fees during the 3-year phase-out of retailers and 
grocery wholesalers. However, several of these comments were nearly 
identical. In addition to a comment from Congressman Thomas W. Ewing, 
Chairman of the Subcommittee on Risk Management and Specialty Crops, 
which was co-signed by Congressman John Boehner, we received comments 
from FMI, FDI, and NGA which reiterated their original objections to 
our proposal.
    The commentors contend that the statute explicitly provides that 
any retailer or grocery wholesaler making an initial application during 
those years pays just one time and that no renewal fee is required for 
any subsequent year. Each of their arguments centers around the 
statutory language in section 499c(b)(3), ``One-Time Fee for Retailers 
and Grocery Wholesalers that are Dealers'', which states: ``In either 
case, a retailer or grocery wholesaler paying a fee under this 
paragraph shall not be required to pay any fee for renewal of the 
license for subsequent years.''
    One of the commentors contends that by creating a statutory 
subsection for a ``one-time fee'' separate from section 499c(b)(4), the 
law is clear, both in title and in substance, that first-time licensees 
after November 15, 1995, pay only one fee and that no renewal fee can 
be imposed. The commentor asserts that no other explanation exists for 
having a separate section for initial licenses. The commentor points 
out that the subsection contains only three sentences: the first 
applies to those who make an initial application during each 3-year 
phase-out period; the second applies to those who make an initial 
application after November 14, 1998; and the third sentence is 
explicit--``In either case, a retailer or grocery wholesaler paying a 
fee under this paragraph shall not be required to pay any fee for 
renewal of the license for subsequent years.''
    Another commentor presents a similar analysis of the statutory 
language--that there are two classes of license applicants specifically 
identified in section 499c(b)(3): a retailer or grocery wholesaler 
making an initial application for a license during the 3-year period 
beginning on the date of enactment of the 1995 PACA amendments; and a 
retailer or grocery wholesaler making an initial application for a 
license after the end of the 3-year period. The commentor emphasizes 
that the statute goes on to remove the requirement for license renewal 
fees by providing that ``a retailer or grocery wholesaler paying a fee 
under this paragraph shall not be required to pay any fee for renewal 
of the license for subsequent years.'' The commentor states that the 
plain language of the phrase, ``[i]n either case,'' must refer to the 
two classes of license applicants noted in section 499c(b)(3), and as 
such, neither of these two classes of entities can be held liable for 
license renewal fees.
    Both commentors insist that the statute is explicit, clear, and 
leaves no room for interpretation. Under the circumstances, the 
commentors demand that USDA implement the straight-forward statutory 
language, issue regulations which state that retailers and wholesalers 
who were licensed during the 3-year phase-out period shall not pay any 
renewal fees, and refund with interest license fees paid by affected 
licensees.
    In their joint comment, Congressmen Ewing and Boehner state that 
the law requires that retailers and grocery wholesalers applying for a 
license during the first three years following enactment of P.L. 104-48 
pay only the fee in effect for that year, and nothing in any subsequent 
year. With respect to these initial applicants, the Congressmen insist 
that subparagraph 3 of section 3(b) clearly states that the 3-year 
phase-out period is just that--a single period--and that whether the 
initial application is made in year 1, 2, or 3 of the phase-out period, 
the fee to be paid is a one-time event. They state that had Congress 
intended for retail and grocery wholesale applicants to pay the 
applicable fee in each year of the phase-out period, they would have 
written the first sentence of subparagraph 3 to state ``* * * the 
license fee required under paragraphs (A), (B) and (C) * * *'' rather 
than ``* * * the license fee required under subparagraph (A), (B) or 
(C) * * *'' They also stated that if Congress had intended initial 
applicants to pay a fee in each of the phase-out years, it would have 
never included the last sentence of subparagraph 3. The congressmen 
point out that USDA's interpretation of this paragraph, as reflected in 
the proposed rule, has the effect of ignoring this sentence, which does 
not differentiate between pre- or post-phase-out period when it states 
that a retailer or wholesaler shall not be required to pay any fee for 
renewal in subsequent years.
    Based on full consideration of the comments received during the 
initial and reopened comment periods, USDA has determined that a change 
to the proposed revisions to Sec. 46.6 is appropriate in order to 
harmonize the implementing regulation with the statutory language. 
Therefore, in the final rule, USDA is amending the regulatory language 
in Sec. 46.6 to reflect that retailers and grocery wholesalers making 
an initial application during the 3-year phase-out period beginning on 
November 15, 1995, shall not be required to pay any fee for renewal of 
their licenses in subsequent years.

Executive Orders 12866 and 12988

    This final rule is issued under the Perishable Agricultural 
Commodities

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Act (7 U.S.C. 499 et seq.), as amended. USDA is issuing this final rule 
in conformance with Executive Order 12866.
    This final rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. It is not intended to have retroactive effect. 
The final 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.

Regulatory Flexibility Act

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA) (5 U.S.C. 601 et seq.), USDA has considered the economic 
impact of this rule on small entities. 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 (13 CFR 121.601) as those whose annual 
receipts are less than $5,000,000. The PACA requires that wholesalers, 
processors, food service companies, grocery wholesalers, and truckers 
be considered 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. A retailer is considered to be a dealer and subject to 
license when the invoice cost of its perishable agricultural 
commodities exceeds $230,000 in a calendar year. Brokers negotiating 
the sale of frozen fruits and vegetables on behalf of the seller are 
also exempt from licensing when the invoice value of the transactions 
is below $230,000 in any calendar year.
    There are approximately 15,700 PACA licensees. Separating licensees 
by the nature of business, there are approximately 6,000 wholesalers, 
4,750 retailers, 2,100 brokers, 1,200 processors, 550 commission 
merchants, 450 food service businesses, 150 grocery wholesalers, and 50 
truckers licensed under PACA. The license is effective for 1 year 
unless suspended or revoked by USDA for valid reasons [7 CFR 46.9 (a)-
(h)], and must be renewed annually by the licensee. Many of the 
licensees may be classified as small entities.
    Approximately 650 to 700 retailers and grocery wholesalers who made 
an initial license application after November 15, 1995, and 
subsequently paid a fee to renew their license, will be affected by 
this rule. The renewal fees collected by USDA from each of the affected 
retailers and grocery wholesalers ($300, plus $150 for each branch in 
excess of nine) will be refunded with interest.
    Accordingly, based on the information and the above discussion, it 
is determined that the provisions of this rule would not have a 
significant economic impact on a substantial number of small entities.

Paperwork Reduction Act

    In compliance with Office of Management and Budget (OMB) 
regulations (5 CFR part 1320) which implement the Paperwork Reduction 
Act of 1995 (Pub. L. 104-13), the information collection and 
recordkeeping requirements covered by this proposed rule were approved 
by OMB on October 31, 1996, and expire on October 31, 1999.

List of Subjects in 7 CFR Part 46

    Agricultural commodities, Brokers, Penalties, Reporting and record 
keeping requirements.

    For the reasons set forth in the preamble, 7 CFR part 46 is amended 
as follows:

PART 46--[AMENDED]

    1. The authority citation for part 46 continues to read as follows:

    Authority: Sec. 15, 46 Stat. 537; 7 U.S.C. 499o.

    2. Section 46.6 is revised to read as follows:


Sec. 46.6  License fees.

    (a) For retailers and grocery wholesalers making an initial 
application for license, the license fee is as follows:
    (1) During the period November 15, 1995 through November 14, 1996, 
the license fee is $400 plus $200 dollars for each branch or additional 
business facility operated by the applicant in excess of nine. In no 
case shall the aggregate annual fees paid by any retailer or grocery 
wholesaler during such period exceed $4,000.
    (2) The license fee during the period November 15, 1996 through 
November 14, 1997, is $300 plus $150 for each branch or additional 
business facility operated by the retailer or grocery wholesaler in 
excess of nine. In no case shall the aggregate fees paid by any 
retailer or grocery wholesaler during such period exceed $3,000.
    (3) The license fee during the period November 15, 1997 through 
November 14, 1998, is $200 plus $100 for each branch or additional 
business facility operated by any retailer or grocery wholesaler in 
excess of nine. In no case shall the aggregate fees paid by any 
retailer or grocery wholesaler during such period exceed $2,000.
    (4) Any retailer or grocery wholesaler making an initial license 
application during the 3-year phase-out period shall pay no fee for 
renewal of the license for subsequent years.
    (5) A retailer or grocery wholesaler that holds a license as of 
November 15, 1995, shall pay the license fee required in paragraphs (a) 
(1), (2), and (3) of this section for the renewal of the license during 
the phase-out period.
    (6) No license fee will be required after November 14, 1998 for 
making an initial application for, or for renewal of a license by a 
retailer or grocery wholesaler. However, a retailer or grocery 
wholesaler making an initial application for a license after November 
14, 1998, 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 $550 plus 
$200 dollars for each branch or additional business facility in excess 
of nine. In no case shall the aggregate annual fees paid by any such 
applicant exceed $4,000.
    (c) The Director may require that fees be paid in the form of a 
money order, bank draft, cashier's check, or certified check made 
payable to ``USDA-AMS''. Authorized representatives of the Division may 
accept fees and issue receipts.

    Dated: August 8, 1997.
Robert C. Keeney,
Director, Fruit and Vegetable Division.
[FR Doc. 97-21523 Filed 8-13-97; 8:45 am]
BILLING CODE 3410-02-P