### United States

Department of Agriculture Animal and Plant Health Inspection Service January 201 2 Analysis in Support of Certification that the

Rule will not have a Significant Economic Impact on a Substantial Number of Small Entitie s Final Rule APHIS - 2011 - 0012 RIN 0579 -AD48 Importation of Tomatoes from the 15 Countries that comprise the Economic Community of West African States (ECOWAS)

Policy & Program Development Policy Analysis & Development1

Summary This analysis examines impacts for U.S. small entities of a rule that will allow fresh tomato imports from member countries of the Economic Community of West African States (ECOWAS) . The United States has no history of importing tomatoes from these countries. We model thre e levels of tomato exports to the United States from ECOWAS member States: (i) 5 percent of ECOWAS average annual world exports, 2003

- 2008 (484 metric tons (MT)); (ii) 10 percent of ECOWAS average annual world exports, 2003

- 2008 (967 MT); and (iii) 20 perc ent of ECOWAS average annual world exports, 2003

- 2008 (1,934 MT). Even when assuming the largest import quantity

and no displacement of tomato imports from other countries, the welfare loss for U.S. small

- entity producers would be equivalent to about 0.05 percent of their average annual revenue , that is, about $4.00

. While U.S. tomato producers are predominantly small, this rule will not have a significant economic impact on a substantial number of small entities.2



### Introduction This analysis examines impacts for U.S. small entities of allowing the importation of fresh tomatoes (Solanum lycopersicum ) from the 15 countries that comprise the Economic Community

of West African States (ECOWAS) . This action will provide market access into the continental Unit ed States for tomatoes without stems and cal yx es from ECOWAS member States under conditions that will prevent the introduction of plant pests. The rule will amend 7 CFR 319.56 , and is part of a continuing program to allow the importation of foreign agricultural products that APHI S has determined are without significant risk of introducing exotic plant pests into the United States. The rule is in response to a request from the Government of Senegal to allow fresh tomato imports from Senegal. In responding to this request, APHI S produced a regional pest risk anal ys is and risk management document. The latter document identifies the risk mitigation measures that will prevent the plant pests associated with tomatoes in commercial shipments from ECOWAS member S tates from being introduced into the continental United States. These measures include production in specified regions and in pest

- free growing structures such as greenhouses, trapping requirements, shipping date restrictions, and safeguarding of the packinghouse. Also, the rule will require that the tomatoes be accompanied by a phytosanitary certificate with an additional declaration to ensure that all measures of the sy stems approach have been followed

. The Regulatory

Flexibility

Act requires agencies to evaluate the potential effects of their proposed and final rules on small businesses, small organizations and small governmental3

jurisdictions. Section 60 4 of the Act requires an agency to prepare an final regulatory flexibility anal ys is ( F RFA) that de scrib es the expected impact of the rule on small entities and the steps the agency has taken to minimize significant economic impact s on small entities . In place of the F RFA, the head of the agency may certif y that a rule will not have a significant econo mic impact on a substantial number of small entities . This analysis provides the factual basis for certification of this rule

. As background, we provide a brief overview of tomato production and trade by the United States and ECOWAS . This is followed with an estimate of price and welfare effects of the rule based on assumed levels of tomato imports from ECOWAS
. W e then describe the expected impact on small entities. 

### U.S. Tomato Production and Trade The United States is a major tomato producer and impor ter. The U.S. produced 1,670,643 metric tons (MT) of fresh tomatoes valued at $1.3 billion in 2009, while imports that ye ar totaled 1,189,604 MT. Tomato production occurs in many States. The top ten States (FL, CA, VA, GA, OH, TN, NC, AL , NJ, and MI) ac counted for 95 percent of total cash receipts in 2009. 1 As shown in table 1, both U.S. tomato production and consumption have fluctuated over recent ye ars. U.S. total production totaled 1,891,318 MT in 2004 and declined to 1,670,643 MT in 2009. Consump tion increased over this same period, from 2,655,584 MT to 2,689,876 MT, and U.S. imports increased from 931,779 MT to 1,189,604 MT. Mexico is the source of the largest share of imports (88 percent in 2009), followed distantly by Canada (11 percent). Oth er minor suppliers include the Netherlands, Spain, Dominican Republic, Belgium, I srael, Costa

1 USDA/NASS, Ve getables 2010 Summary, January 2011.4

Rica, and Guatemala. The U.S. was a net importer throughout the period with average annual imports ( 1,042,101 MT) dwarfing exports ( 160,052 MT). Imports provide for 39 percent of consumption. Table 1: U.S

. Tomato Production, Consumption, Price, Exports and Imports, 2004
- 200 9

Year Production in Metric Tons Consumption

in Metric Tons Price per

Metric Ton Exports in

Metric Tons Imports in

Metric Tons 2004 1, 891,318 2,655,584 $825 167,513 931,779 2005 1,903,701 2,707,294 $917 148,099 951,692 2006 1,833,031 2,681,348 $963 144,108 992,425 2007 1,721,673 2,631,316 $767 161,344 1,070,988 2008 1,612,356 2,559,603 $1,003 168,874 1,116,121 2009 1,670,643 2,689,8 76 $895 170,371 1,189,604 6
- Year Average (2004

- 2009) 1,772,120 2,654,170 $895 160,052 1,042,101 Source: USDA/ERS, Vegetables and Melons Situation Outlook Yearbook Data/#89011//May 20, 2010. 

### ECOWAS Tomato Production and Trade Production of tomatoes in the ECOWAS countries increased from 1,527,120 MT in 200 3 , to 2,463,608 MT in 200 8
. 2 The majority of tomatoes are open

- field produced and will not qualify for export to the United States; the tomatoes imported must be produced in pest

exclusionary

structures such as greenhouses. With the exception of Senegal, ECOWAS member countries export very

small amounts of tomatoes, and most of these exports go to neighboring countries. Sen egal’s tomato exports are greenhouse

-produced and are supplied to EU countries with which Senegal has a well

- established market. Over 99 percent of Senegal’s tomato exports were sent to France, Germany , the United Kingdom, the Netherlands, Italy and Belgium.

2 UN/FAO, FAO stat, 2011. While the U.S. and ECOWAS data sets differ by one year (2004

- 2009 vs. 2003
- 2008), the two 6

- year periods are comparable and support the conclusions of the analysis.5

The average quantity of tomatoes exported by the ECOWAS member State s during the period 2003

- 2008 was 9,670 MT. Of this total, Senegal exported an average of 7,449 MT, or 77 percent. 

### Impact of Potential Fresh Tomato Imports We estimate the impact of tomato imports from ECOWAS on U.S. production, consumption, and prices using a net trade welfare model. The data used were obtained from FAO, ERS, and the U.S. Census Bureau (as reported by Global Trade Information Services, In c ). 3 The demand and supply elasticities used are

- 0. 77 and 0. 37 , respectively

. 4 We model three levels of tomato exports to the United States from ECOWAS : (i) 5 percent of ECOWAS average annual world tomato exports, 2003

- 2008 (484 MT); (ii) 10 percent of ECOWAS average annual world tomato exports, 2003

- 2008 (967 MT); and (iii) 20 percent of ECOWAS av erage annual world tomatoes exports, 2003

- 2008 (1,934 MT). The largest assumed level of exports is equivalent to less than 0.2 percent of average annual tomato imports by the United State s during this same period. Table 2 presents the changes we estimat e could result from the assumed levels of U.S. tomato imports from ECOWAS . These include annual changes in U.S. consumption, production, wholesale price, consumer welfare , producer welfare, and net welfare

. The largest assumed level of tomato exports to the United States from ECOWAS member States, 1,934 MT, would result in a decline of $0.66 per MT in the wholesale price of tomatoes and a fall in U.S. production of 437 MT . Consumption c ould increase b y 1,497 MT . Producer welfare c ould

3 UN/FAO, FAO stat data (http://faostat.fao.org) ; USDA/ERS, Vegetables and Melons Yearbook Data/#89011/ May 20, 2010; and Global Trade Atlas, Global Trade Information Services, Inc., country e dition, March 20 11
. 4 The demand elasticity is from K. Huang, “A complete system of U.S. demand for food,” Technical Bulletin No. 182, 1993, USDA/ERS, Washington DC; and the supply elasticity is from S.R. Hammig and R.C. Mettelhammer, “An evaluation of import tariffs in the Canada

- U.S. fresh tomato marke t,” Canadian Journal of Agricultural Economics, Vol. 30 (1982): 133

- 152; S.T. Yen, B. Lin, J.M. Harris, and N. Ballinger, “Demand for differentiated vegetables, ” paper presented at American Agricultural Economic Association economic meeting, Denver Colorad o, August 1
- 4, 2004.6

decline b y $ 1.06 m illion and consumer welfare c ould increase b y $ 1.74 million, yi elding an annual net benefit of about $ 0.68 million

. Table 2: Estimated Impact on the U.S. Economy of Tomato Imports from ECOWAS for Three Import Scenarios Assumed annual tomato imports from EC OWAS, MT 484 1 967 2 1,934 3 Change in U.S. consumption, MT 375 749 1,497 Change in U.S. production, MT - 109
- 218
- 437 Change in wholesale price of tomatoes, dollars per MT - $0.16

- $0.33

- $0.66 Change in consumer welfare $435,507 $870,175 $1,740,595 C hange in producer welfare

- $264,487

- $528,410

- $1,056,748 Annual net benefit $171,020 $341,765 $683,847 Note: The baseline data used are five

- ye ar annual averages for production, consumption, prices, exports and imports, as reported in the last row of t a ble 1. The demand and supply elasticities used are

- 0. 77 and 0. 37 , respectivel y ( see footnote 4). 1 Five percent of ECOWAS average annual world exports, 2003

- 2008 (484 MT)

. 2 Ten percent of ECOWAS average annual world exports, 2003

- 2008 (967 MT)

. 3 Twenty percent of ECOWAS average annual world exports, 2003

- 2008 (1,934 MT)

. In all three scenarios, consumer welfare gains outweigh producer welfare losses

. Even in the third scenario, in which we assume imports will be 20 percent of ECOWAS’ average annual
wo rld tomato exports (2003

- 200 8) , the decline in producer welfare represent s less than 0.09 percent of cash receipts received from the sale of domestic ally produced fresh tomatoes

. 5 The price decline in this third scenario is less than 0.08 percent. The price and welfare effects will be even smaller than are indicated b y the three scenarios, to the extent that tomato imports from ECOWAS displace tomato imports from other countries.

5 $1.06 million is less than 0.09 percent of $1.3 billion.7



### Potential Impact on Small Entities The Small Business Administration (SB A) has established guidelines for determining which firms are to be considered small under the Regulatory Flexibility

Act. This rule could affect U.S. producers of fresh tomatoes (classified under Other Vegetable (except Potato) and Melon Farming , NAI CS 1 11219) and importers of fresh tomatoes. Vegetable

-producing establishments are classified as small if their annual receipts are not more than $750,000. 6 According to the 2007 Census of Agriculture (most recent data on farm sizes), there were 25,809 farms producing tomatoes in the United States. About 68 percent of these farms had less than one acre in tomatoes. Overall, 25,128 farms (97.4 percent) had a total of 39,879 acres in tomatoes (about 9 percent of the total planted area) and are considered smal l, with an average of about 1.6 acres and an average annual income of about $8,000 in 2007. The remaining 2.6 percent of the farms planted a total of 402,346 acres in tomatoes (91 percent of the planted area). They averaged 591 acres, with an average annual income of about $3 million. A s shown in t able 3, the impact of potential tomato imports on U.S. small

- entity producers as a result of this rule will be small. The annual decrease in producer welfare per small entity

is estimated to be less than $ 4 or about 0. 05 percent of average annual sales by small entities, when we assume that 1,934 MT of tomatoes will be exported to the United States from ECOWAS because of this rule. The dollar decrease in welfare for most small tomato producers will be even smal ler, given that the majority planted less than an acre in tomatoes.

6 SBA, Small business s ize s tandards matched to the North American Industry Classification System 200 7 , Effective August 22, 200 8 (www.sba.gov/size/sizetable2002 .html).8

Table 3 : The E conomic Impact of P otential Tomato Imports from ECOWAS on U.S. S mall Entities, assuming Annual Exports of 1,934 M etric T ons to the United States, 200 9 dollars Total chang e in producer welfare 1

- $1,056,748 Change in welfare incurred by small entities 2

- $95,107 Average change per acre, small entities 3

- $2.38 Average change per small entity 4

- $3.78 Average change as % of average sales, small entities 5

- 0.05% 1 Fro m t able 2. 2 Change in producer welfare multiplied by 9 percent, the percentage of total acreage planted by

producers with annual revenues of not more than $750,000, that is, small entities. We assume that the change in producer welfare will be proportion al to acreage share. 3 Decrease in producer welfare for small entities divided by 39,879 , the number of acres planted b y small entities. 4 Average decrease per acre multiplied by 1.59 , the average number of acres per small entity

. 5 Average decrease per small entity divided by

$ 7,990 , the average annual revenue per small entity

. The 2007 Census of Agriculture also contains data on certain sub

- categories of tomato producers , namel y, small family farms including limited resource farms, and farms having operators who belong to socially disadvantaged groups. 7 Most farms that produce tomatoes qualify as small family

farm s (gross farm sales of less than $ 250 ,000), and many of the small family farms also qualify as limited resource farms (gross farm sales of not more than $100,000 and low household income). Categories of socially disadvantaged operators are women , persons of Hispanic origin , American Indian or Alaska Native , Asian , African American , and Native Hawaiian or other Pacific. As described above for small t omato farms generall y, any economic impacts of the rule for operations categorized as small family farms or farms having operators

7 For de finitions and information, see : USDA ERS. Structure and Finances of U.S. Farms: Family Farm Report, 20 10 edition , EIB

- 66, July 2010

. http://www.ers.usda.gov/Publications/EIB66/EIB66.pdf9

who belong to socially

disadvantaged groups will be insignificant , given the small quantity of tomatoes expected to be import ed from ECOWAS compared to domestic production and current imports. Table 4 shows that among the 25,809 farms that produced tomatoes in 2007 , 22,522 (over 87 percent) were small family farms. It is notable that the combined number of retirement farms ( 5,0 17 farms) and residential/lifestyle farms ( 6,996 farms) accounted for over 46 percent of all tomato farms. Table 5 shows the number and percentage of tomato farms that had operators belonging to socially

disadvantaged groups in 2007. There were 4,311 tom ato farms ( 16.7 percent) for which the principal operator was a woman. In terms of ethnicity , 958 tomato farms ( 3.7 percent) were operated b y Hispanics and 820 tomato farms ( 3.2 percent) had an operator who was American Indian or Alaskan Native. The perc entage of tomato farms operated by African Americans was 2.7 percent. Although most tomato producers are small famil y farms and there are tomato growers who belong to socially

disadvantaged groups, economic effects of the rule for these farms are not expec ted to differ from the effects for tomato producers generall y. We do not expect the rule to have any appreciable impact on U.S. tomato producers regardless of the size of operation or operator classification. The quantity

of tomatoes expected to be import ed from ECOWAS is not significant; any effect on prices will be insignificant. Based on the above information and analysis , the rule will not have a significant economic impact on a substantial number of small entities

.10 Table 4 . Number and percentage of small famil y tomato farms, 2007 Li mited Resource F arms Retirement F arms Residential/ lifestyle Farms Farming

Occupation/Lower

Sales Farming

O ccupation/ Higher

S ales All

S mall F amily Tomato F arms All

Tomato Farms

Number 4,443 5,017 6,996 4,850 1,216 22,522 25,809

Percent age 17.2 19.4 27.1 18.8 4.7 87.3 100% Source: USDA NASS, 2007 Census of Agriculture. Note: A l imited resource farm is a small family farm that has gross sales of less than $100,000 (indexed after 2003), and a household income less than the poverty level for a family of four with two children or less than half the county median income. A r etirement farm is a small family farm whose operators report they are retired (excludes limited resource farms operated by retired farmers). A r esidential/lifestyle farm is a small family farm whose operators report a major occupation other than farming (excludes limited resource farms who se operators report a major occupation other than farming). A f arming occupation/lower - sales farm is a small family farm with sales less than $100,000 whose operators report farming as their major occupation (excludes limited resource farms whose operators report farming as their major occupation). A f

arming occupation/higher

- sales farm is a small family farm with sales between $100,000 and $249,000 whose operators report farming as their major occupation. Table 5 . Number and percentage of tomato farms with operators belonging to sociall y disadvantaged group s , 2007

Farms where the P ri ncipal Operator is F emale Farms where an Operator reports Spanish, Hispanic, or Latino origin Farms

where an Operator reports race as Am erican I

ndian or Alaska Native Farms where an operator reports race as Asian Farms

where an operator reports race as Bla ck or African American Farms where an operator reports race as Native Hawaiian or Other Pacific I slander All

Tomato Farms

Number 4,311 958 820 600 704 50 25,809 Percentage 16.7 3.7 3.2 2.3 2.7 0.2 100% Source: USDA NASS, 2007 Census of Agriculture. Note: For the ethnic/racial categories, farms reported for their top

- three operators. An operator may report as belonging to more than one ethic/racial category, and a farm may report having operators belonging to more than one category.