### United States

Department of Agriculture Anim al and Plant Health Inspection Service October 201 4 **Analysis in Support of Certification that the** 

**Rule will not have a Significant Economic Impact on a Substantial Number of Small**  **Entities**
**Final Rule**  **APHIS 2006 -**  **0074 RIN 0579**  **- AC36**  **Restrictions on the Importation of Poultry and Poultry Products from Regions Affected**  **with Highly Pathogenic Avian Influenza (HPAI)** 

Policy & Program Development Policy Analysis & Developmenti



### Summary In response to the 2003 outbreaks of the highl y pathogenic avian influenza (HPAI) H5N1 virus and to prevent the introduction of HPAI into the United States, APHIS published an interim rule that amended the regulations in 9 CFR parts 93, 94, and 95, to prohibit or restrict the importation of birds and poultry products from regions where an y subt yp e of HPAI exists. APHI S is adopting the rule with changes: The final rule will permit the importation of live zoological birds that have bee n vaccinated for avian influenza as part of an official program and under specific conditions , and will allow the importation of pigeons, doves, and other Columbiform avians under permit and controlled conditions from regions considered to have HPAI
. P o ten tial impacts on small entities are considered in accordance with the Regulatory Flexibility

Act. Because of the substantial overlap between existing restrictions to prevent the importation of articles that could introduce Newcastle disease and the new res trictions to prevent the importation of articles that could spread HPAI, this final rule is not expected to have significant economic impacts. Poultry and poultry product imports are minor compared to domestic production. The importation of live zoologic al birds that have been vaccinated for avian influenza as part of an official program and under specific conditions, and the importation of HPAI

- resistant pigeons, doves, and other Columbiform species under certain conditions from regions where HPAI is con sidered to exist , are not expected to have any significant impact. Compliance costs will be incurred onl y with respect to imports from regions where HPAI is discovered and there are no existing restrictions for HPAI or Newcastle disease. Although most U. S
. poultry

and egg producers and importers are small entities, this rule will not have a significant economic impact on a substantial number of small entities

.ii



### Table of Contents Summary
................................ ................................ ................................ .............................. i Introduction

................................ ................................ ................................ ......................... 1 The U.S. Poultry

and Poultry

Product Industries

................................ ................................ 2 Potential I mpact on Small Entities

................................ ................................ ...................... 41



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

Flexibility

Act, for certification by

the APHIS Administrator that the rule will not have a significant economic impact on a substantial number of small entities. In response to the 2003 outbreaks of the highl y pat hogenic avian influenza (HPAI) H5N1 virus and to prevent the introduction of HPAI into the United States, APHIS published an interim rule effective January

24, 2011. The interim rule amended the regulations in 9 CFR parts 93, 94, and 95, to prohibit or r estrict the importation of birds and poultry products from regions where an y subtype of HPAI exists. The same mitigations as applied for Newcastle disease have been adopted, with the additional stipulation that certain poultry products be cooked to a mini mum internal temperature of 74°C and be accompanied by a certificate verify ing compliance with this requirement. This rule also prohibits the importation of live commercial birds or poultry vaccinated for avian influenza, hatching eggs that were laid b y b irds or poultry vaccinated for avian influenza, and live birds or poultry , and hatching eggs, that transit regions where HPAI of an y subt ype is known to exist. APHI S is adopting the interim rule, with changes: the final rule will permit the importation of live zoological birds that have been vaccinated for avian influenza as part of an official program and under specific conditions, and allow the importation of pigeons, doves, and other Columbiform avians under permit and controlled conditions from regi ons considered to have HPAI. The economic anal ys is examines the potential economic effects of this rule on small entities, as required b y the Regulatory Flexibility

Act.2



### The U.S. Poultry and Poultry Product Industries **1**
The United States is the world's largest poultry producer and the second

- largest egg producer. Over 43 billion pounds of poultry meat are produced annuall y in the United States. Eight y percent is broiler meat, most of the remainder is turkey meat, and a small fraction is other
c hicken meat. The total value of U.S. poultry production exceeds $20 billion annually . Broiler production accounts for the majority of this value, followed by eggs, turkey, and other chicken. Broiler production is concentrated in a group of States stret ching from Delaware, south along the Atlantic coast to Georgia, then westward through Alabama, Mississippi, and Arkansas. Georgia is the top broiler

- producing State, followed b y Arkansas, Alabama, Mississippi, and North Carolina. Since the 1960s, the pou ltry industry has undergone substantial changes and become increasingl y vertically integrated, with most U.S. broiler production under contract with a broiler processor. The grower normally supplies the grow

- out house with all the necessary heating, cooli ng, feeding, and watering s ys tems. Regarding turkey

production, the United States produces over one

- quarter of a billion birds annually , with the live weight of each bird averaging over 25 pounds. Turkey production is more scattered geographically than b roiler production. The top five turkey

- producing States are Minnesota, North Carolina, Missouri, Arkansas, and Virginia. The United States is by far the world's largest turkey

producer, followed by

the European Union. Although U.S. turkey exports
are su bstantial, the United States consumes more turkey per capita than any other country

. Over 90 billion eggs are produced in the United States annuall y. Over 75 percent is for human consumption (the table

- egg market). The rest is for the hatching market to provide

1 Background information on U.S. poultry and egg production and trade obtained from the Economic Research Service: http://www. ers.usda.gov/Briefing/Poultry/3

replacement birds for the egg

- lay ing flocks and to produce broiler chicks for grow

- out operations. The top five egg

- producing States are Iowa, Ohio, Penns yl vania, Indiana, and Texas. Most table eggs are consumed domestically , with only a small share exported. U.S. per capita consumption of eggs and egg products is around 250 eggs per person. In terms of trade, the United States is the world's second

- largest exporter of broiler meat behind Brazil. Between 2004 and 2008, exports ranged from 4.8 to 7.0 billion pounds, and accounted for 14 to 17 percent of total production. Demand for U.S. broiler products has fluctuated over the last several ye ars due to changing economic conditions and currency exchange rates in major importing countries. The largest importers of U.S. broiler products are Russia, China (including Hong Kong), and Mexico. In terms of quantit y, these markets accounted for over half of U.S. broiler product exports. The United States imports only small amounts of broiler products, equivalent to less than one percent of domestic production. The United States is the world's largest exporter of turkey products. U.S. turkey

exports total between 500 and 600 million pounds. L ess than one percent of turkey exports are as whole birds; the majority

of shipments are lower

- valued turkey parts or ground or mechanically deboned meat. Man y importing countries mix this meat with other meats in sausage production. Mexico is by

far the largest importer of U.S. turkey meat, accounting for over half of U.S. turkey exports. The United States imports only a small amount of turkey products, with most imported products coming from Canada. U.S. egg exports include 1) table eggs for consumption, with Canada and Mexico the major markets; 2) shell eggs for hatching, primarily to Canada and Hong Kong; and 3) egg products (dried and non

- dried albumin and dried and non

- dried yolk), used mainly by restaurants and in the baking and prepared

- foods industries. Major destinations for U.S. exports of dried4

albu min are Japan, Spain, and Israel, while Canada is the largest importer of non

- dried albumin. Japan, Mexico, and Canada are the top destinations for dried yolk, while Japan, Canada, and South Korea are the top importers of non

- dried y olk. 

### Potential Impact **on Small Entities** The Regulatory

Flexibility

Act requires agencies to evaluate the potential effects of their proposed and final rules on small businesses, small organizations and small governmental jurisdictions. Section 604 of the Act requires an agenc y to prepare a final regulatory flexibility anal ys is (FRFA) that describes the expected impact of the rule on small entities and the steps the agency has taken to minimize significant economic impacts on small entities. In place of the FRFA, the head of the agency may certify that a rule will not have a significant economic impact on a substantial number of small entities. Most entities that may

be affected are small according to Small Business Administration (SBA) guidelines and based on 2007 Census o f Agriculture and 2007 Economic Census data. For entities categorized within the industries: broilers and other meat ty pe chicken production (North American Industry Classification S ys tem (NAI CS) code 112320), turkey production (NAICS 112330), poultry hatcheries (NAICS 112340), and other poultry production (NAICS 112390), the SBA small

- entity standard is annual sales of not more than $750,000. For entities classified within chicken egg production (NAI CS 112310), the SBA small

- entity standard is annual sa les not exceeding $12.5 million. According to the 2007 Census of Agriculture, 2 there were a total of 148,911 farms producing poultry and eggs that y ear. The percentage breakdown between those producing poultry and those producing eggs is not known. Howe ver,

2 Census of Agriculture: Retrieved from http://www.agcensus.usda.gov/Publications/2007/Full_Report/i ndex.asp5

approximately

86 percent had annual sales in 2007 of less than $500,000, well below the SBA standards for the listed industries. 3 For live poultry

merchant wholesalers (NAICS 4244401) and poultry and poultry

product (except live) merchant wholesale rs (NAICS 4244402), establishments with not more than 100 employ ees are considered small by SBA standards. I n 2007, there were a total of 41 live poultry wholesale trade establishments in the United States. 4 All were in operation the entire ye ar, and onl y two (less than 5 percent) emplo yed more than 100 employees. There were a total of 536 poultry and poultry

product wholesale trade establishments in the United States in 2007. Of the 501 firms that were in operation the entire ye ar, 479 or 96 percent employ ed fewer than 100 employ ees. Entities classified within the industry zoos and botanical gardens (NAICS 712130) are considered small if their annual sales are not more than $7 million. In 2007, average sales b y the 569 enterprises in this industry were less than $5 million. The objective of this rule is to establish requirements that allow the safe importation of birds, poultry , and bird and poultry products from countries where HPAI of any subty pe exists. While most entities that may be affected by

this rule are small, costs of complying with the rule will not be significant. There were no significant issues raised in public comment regarding the economic analy sis conducted for the interim rule or by SBA’s Office of Advocacy regarding the initial regulatory

flexibility

analy sis. T he APHI S Administrator has determined that this action will not have a significant economic impact on a substantial number of small entities.

3 Source: SBA and 2007 Census of Agriculture

. http://www.sba.gov/size/sizetable2002.html 4 Source: SBA and 2007 Economic Census , Survey of Business Owners retrieved from: http://factfinder.census.gov/servlet/IBQTable?_bm=y&

- geo_id=D&

- ds_name=SB07 00CSA09&
- _lang=en