### United States

Department of Agriculture Animal and Plant Health Inspection Service March 2015 Analysis in Support of Certification that the

Rule will not have a Significant Economic Impact on a Substantial Number of Small Entities
Proposed Rule
APHIS 2015 - 0005
RIN 0579 - AE09 Expansion of Areas from w here Fresh Commercial Citrus w ill b e allowed to be i mported from Peru to the Continental United States

Policy & Program Development Policy Analysis & Developmenti



### Summary
Currently, the regulations allow the importation of fresh grapefruit, lime, mandarin, orange, tangerine or hybrids, sweet orange, and tangelo from approved citrus

- producing zones in Peru to the continental United States. The proposed rule would allow the importation of these fruits from the entire country of Peru under the same conditions that are currently in place. The proposed rule is expected to increase the area in Peru approved to produce citrus for export to the United States t o about 1,500 hectares over three years. Additional volumes of citrus expected to be shipped to the United States are 5,000 metric tons (MT) in the first year that the rule is in effect , 6,500 MT in the second year , and 8,000 MT in the third year. Th ese quantit ies are equivalent to less than 1 percent of annual U.S. citrus production or U.S. citrus imports. The primary entities that may be affected by the rule are citrus producers, citrus importers, and support industries such as packing houses. Based on data from the 2012 Census of Agriculture and Small Business Administration small

- entity standards, the majority of these operations are small. Although most entities that may be affected are small, the economic effects of the proposed rule would be mini mal. T he APHIS Administrator certifies that the proposed rule, if promulgated, will not have a significant economic impact on a substantial number of small entities.ii



### Table of Contents Summary

................................ ................................ ................................ .............................. i Introduction

................................ ................................ ................................ ......................... 1 U.S. Citrus Production and Trade

................................ ................................ ....................... 1 Fresh Oranges

................................ ................................ ................................ ............. 2 Fresh Grapefruit

................................ ................................ ................................ .......... 2 Fresh Tangerines, Tangelos, Mandarins, Clementines, and Similar Citrus Hybrids

.. 3 Fresh Limes

................................ ................................ ................................ ................. 4 Peru Citrus Exports

................................ ................................ ................................ ............. 4 Potential Impact on Small Entities

................................ ................................ ...................... 51



### Introduction
This analysis provides the basis, as required by the Regulatory Flexibility Act, for certification by the APHIS Administrator that the proposed rule, if promulgated, will not have a significant economic impact on a substan tial number of small entities.
Cur rently, 7 CFR 319.56

- 41 allows the importation of fresh grapefruit, lime, mandarin, orange, tangerine or hybrids, sweet orange , and tangelo from approved citrus

- producing zones in Peru to the continental United States. The proposed rule would allow importation of these fruits from the entire country of Peru under the same conditions as are currently in place

. The proposed rule is expected to increase the area in Peru approved to produce citrus for export to the United
State s to about 1,500 hectares over three years. Additional v olumes of citrus expected to be shipped to the United States are 5,000 metric tons (MT) in the first year that the rule is in effect , 6,500 MT in the secon d, and 8,000 MT in the third year. 

### U.S. Citrus Production and Trade
Citrus, particularly oranges are among the most popular fresh fruits consumed in the United States and are a significant source of U.S. farm income. In 2012, oranges generated $2.2 billion in farm cash receipts. Lemons generat ed $430 million, tangerines another $414 million, and grapefruit another $269 million. 1 Fresh citrus imports account for about 7 percent of U.S. fresh fruit imports. The major suppliers of fresh citrus are Mexico (42 percent), Chile (17 percent), Spain (1 6 percent), and South Africa (9 percent). 2

1 USDA, Economic Research Service. Fruit and Tree Nuts, Table A

- 8: U.S. Cash Receipts 1980 to date. 2 Huang, Sophia W., “Imports Contribute to Year

- Round Fresh Fruit Availability.” Economic Research Service. USDA 2013. http://www.ers.usda.gov/publications/fts

- fruit

- and

- tree

- nuts

- outlook/fts

- 356

- 01.aspx2

Fresh Oranges The United States is a net exporter of fresh oranges, exporting an average of 8 percent and importing an average of 3 percent of the fresh oranges traded worldwide, 2008/09 through
2012/13. Over this five

- year period, U.S. fresh orange exports averaged 657,800 metric tons (MT) and imports averaged 111,000 MT . The United States is the third largest exporter of fresh oranges, and its primary foreign markets are South Korea, Canada, Japan, Hong Kon g, and China. Eight percent of the fresh oranges consumed in the United States are imported. Chile and South Africa, followed by Mexico and Australia, supply the largest shares of U.S. fresh orange imports. 3 While showing fluctuations year to year, U.S . fresh orange per capita consumption has steadily declined over the last 30 years and remained relatively flat over the past decade. In 2012/13, U.S. per capita fresh orange consumption was 10.9 pounds, down from a high of 14.6 pounds in 1997/98. 4 As wit h other developed countries, competition from easy

- peel citrus varieties and increased orange juice consumption have contributed to this per capita decline. About one

- fourth of U.S. produced oranges are sold for fresh consumption, both domestically and int ernationally. While only 4 percent of orange production in Florida is utilized fresh, the percentages for California and Texas are 83 and 86 percent, respectively. 5
Fresh Grapefruit The United States is a large net export er of grapefruit . The United State s imported about 1 percent and exported about 27 percent of the world’s traded grapefruit, 2008/09 through

3 Global Trade Information Services, Inc. 4 USDA/ Economic Research Service, preliminary estimate. 5 Fr esh utilization refers to the proportion of total fruit sold as fresh citrus. The remainder is considered to be utilized on the processed market.3

2012/13. Over the period, U.S. exports averaged approximately 222,000 MT. Primary foreign markets for U.S. fresh grapefruit are Japan, Canada, Fran ce, the Netherlands, and South Korea. The United States imports comparatively little fresh grapefruit, given extensive domestic production. Over the period 2008/09 through 2012/13, fresh grapefruit imports by the United States averaged 7,800 MT per year , or less than 1 percent of domestic consumption. Mexico, Israel, and South Africa supplied 83 percent, 9 percent, and 3 percent of imports, respectively, during the 2012/13 season. About 80 percent of U.S. fresh grapefruit production was consumed domes tically in the
2012/13 season and U.S. per capita fresh grapefruit consumption was 2.6 pounds. 6 As with fresh oranges, U.S. fresh grapefruit consumption has remained relatively flat over the last decade.
Fresh Tangerines, Tangelos, Mandarins, Clementi nes, and Similar Citrus Hybrids
U.S. demand for tangerine and mandarin varieties has increased rapidly in recent years. Over the last decade, U.S. per capita consumption of these fruits increased from 2.73 pounds in 2002/03, to 4.5 pounds in 2012/13. 7 The United States produced 661,000 MT of tangerine and mandarin varieties in 2012/13, an increase of 47 percent from 2008/09. Over that same time period, imports increased by 18 percent and total domestic supply increased by 40 percent. About 92 percent of U.S. fresh tangerine and mandarin variety production was consumed domestically in 2012/13, including processed production

. 8

6 USDA/ Economic Research Service, preliminary estimate. 7 USDA/Economic Research Service, preliminary estima te for 2012/13. 8 The proportion of U.S. fresh tangerine and mandarin variety production consumed domestically i s the ratio of utilized fresh production minus exports divided by utilized fresh production . Data Source: Foreign Agricultural Service, Product ion, Supply, and Distribution Online.4

The United States is a net importer of tangerine and mandarin varieties. During 2011/12 , the United States imported 154,296 M T of tangerine and mandarin varieties (including satsumas, clementines, and similar citrus hybrids) with approximately 3 9 percent, 31 percent, 13 percent, and 9 percent arriving from Chile, Spain, Peru , and Morocco, respectively. That same season , the Uni ted States exported approximately 42,175 MT of tangerine and mandarin varieties

. Canada is the largest importer of U.S. fresh tangerine and mandarin varieties , accounting for 48 percent of U.S. exports. The second largest importer is Japan, accounting fo r approximately 2 5 percent. 9

Fresh Limes The U.S. lime industry once thrived as a niche market. However, due to citrus canker disease and other issues , the lime industry has contracted significantly, with little commercial production after 2002.
U.S. per capita consumption of limes increase d from 0.42 pounds in 1980/81 to 2.96 pounds in 2012/13. From 2011 to 2013, the United States imported over 413,000 MT of limes. Mexico is our largest supplier with over 90 percent of the U.S. import market, followed by Guatemala, Honduras, and the Bahamas among other countries. 10 

### Peru ’s Citrus Exports
Peru emerged as an important fruit and vegetable exporter beginning in the mid

- 1980s. From 2011 to 2013, Peru exported an average of 92,000 MT of citrus fruit , with Grea t Britain accounting for 33 percent of the shipments ; t he Netherlands , 23 percent ; the U nited States , 20

9 U.S. Census Bureau, as reported by Global Trade Information Services, Inc. 10 Plattner, Kristy, “Fresh

- market Limes.” Fruit and Tree Nuts Outlook: Economic Insight. Economic Research Service, USDA 2014 http://www.ers.usda.gov/media/1679187/fresh

- market

- limes

- special

- article.pdf5

percent ; and Canada , 12 percent

. Fifty

- six percent of the shipments were tangerines, 31 percent

were tangelos, 10 percent were oranges , and 3 percent were grapefruit and lemons

. 11 

### Potential Impact on Small Entities

The entities tha t c ould be affected by the proposed rule are U.S. producers of fresh citrus

. Other stakeholders that could be affected include industries that support the production and distr ibution of fresh citrus in the United States, and importers of fresh citrus. More specifically, entities potentially affected by the rule are classified within the following industries, according to the North American Industry Classification System (NAICS): Orange Groves (NAICS 111310), Citrus Groves (except orange groves) (NAICS 1 11320), Postharvest Crop Activities (except cotton ginning) (NAICS 115114), Fresh Fruit and Vegetable Merchant Wholesalers (NAICS 424480), Pesticide and Other Agricultural Chemical Manufacturing (NAICS 325320), Farm Product Warehousing and Storage (NAICS 4 93130), Nursery and Tree Production (NAICS 111421), Fruit and Vegetable Markets (NAICS 445230), Packing and Crating (NAICS 488991), General Freight Trucking, local (NAICS 484110), and Wood Container and Pallet Manufacturing (NAICS 321920). According to 2 012 Census of Agriculture data, there were a total of 9,437 operations producing oranges in the United States that year. In the same year, 6,141 farms produced oranges as their primary product and were thus classified as Orange Groves according to the
NAI CS. More than 72 percent of orange producers had fewer than 25 acres, and 2 percent had 500 or more acres. The farms with fewer than 25 acres accounted for less than 6 percent of the total acreage devoted to orange production, while those with 500 or mor e acres accounted for

11 Global Trade Information Services, Inc. These Global Trade Atlas estimates include dried citrus, as well as fresh citrus.6

over 58 percent. The national average acreage for orange producers was 71 acres in 2012; for orange producers with fewer than 25 acres, the average was 5.3 acres per farm. Establishments classified as Orange Groves are considered sm all by the Small Business Administration (SBA) if annual sales are not more than $750,000. The average market value of crops sold by orange growers in 2012 was approximately $318,000, well below the small

- entity standard of $750,000. Clearly, orange grower s are predominantly small entities. According to Census of Agriculture data, there were a total of 1,395 operations producing tangerine and mandarin varieties and 2,144 operations producing grapefruit in the United States in 2012. 12 In the same year, a total of 2,839 farms produced citrus other than oranges as their primary product and were thus classified as Citrus Groves (except orange groves) according to the NAICS. Establishments classified within NAICS Citrus Groves (except orange groves) are consid ered small by the SBA standards if annual sales are not more than $750,000. The average market value of crops sold by non

- orange citrus groves in 2012 was about $223,000, which is
well below the small

- entity standard of $750,000. Similarly, all of the ot her industries identified above are predominantly com posed of small entities , including over 95 percent of establishments classified as Fresh Fruit and Vegetable Merchant Wholesalers , over 85 percent of establishments classified within Pesticide and Other Agricultural Chemical Manufacturing , about 48 percent of establishments classified within Farm Product Warehousing and Storage , more than 92 percent of establishments classified within Fruit and Vegetable Markets , virtually all establishments classified wi thin Nursery and Tree Production , over 90 percent of establishments classified within Packing and

12 The number of citrus farms in the United States, as reported by the 2012 Census of Agriculture , includes operations that produced citrus for process ing as well as fresh utilization

.7

Crating , about 95 percent of establishments classified within General Freight Trucking ( local ), and virtually all establishments classified within Wood Contai ner and Pallet Manufacturing

. Peru’s citrus exports to the United States are expected to increase by an additional 5,000, 6,500, and 8,000 MT, respectively, during the first three years that the proposed rule would be in effect

. The se quantities are equivalent to 0.56, 0.73 , and 0.89 percent of U.S. average annual citrus production , and 1.18, 2.4 , and 2.9 percent of U.S. average citrus imports (2011/12 to 2013/14) 13

. These relatively small additional import quantities would have a minor impact on t he citrus industry ; all the more so given that at least some share of the increase in citrus imports from Peru can be expected to displace imports from other sources

. T he APHIS Administrator has determined that this action , if promulg ated, will not have a significant economic impact on a substantial number of small entities.

13 Average citrus production, 2011/12 to 2013/14 is approximately 8,961,565 metric tons and ave rage citrus imports 2011/12 to 2013/14 is approximately 273,000 metric tons.