### United States

Department of Agriculture Animal and Plant Health Inspection Service July 2014 **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 2014** **- 0041**  **RIN 0579 -** **AE01 Importation of**  **Oncidium spp. Plants in**  **Growing Media from Taiwan (7 CFR 319.37)**

Policy & Program Development Policy Analysis & Developmenti



### Summary
APHI S is amending the regulations in 7 CFR 319.37

- 8(e), which restrict the importation of orchids of the genus Oncidium to those plants that are free of sand, soil, earth, and other growing media. The proposed rule would amend the regulation s to include On cidium spp. from Taiwan on the list of plants that may enter the United States established in approved growing media, subject to specified growing, inspection, and certification requirements. Eliminating the requirement that Oncidium spp. from Taiwan mus t be bare

- rooted is expected to increase the number and quality of these plants imported b y U.S. growers , who then finish the plants for the retail market. It is also expected to reduce the production time for growers. H owever , gains due to improved produc t quality and reduced production time are likel y to lead to compensating price adjustments, assuming a competitive market. With a shorter shelf life and slower production process, Oncidium spp. represent a relativel y small portion of the orchid market and orchid trade, with a market share of between 15 and 25 percent
. While many of the entities that may

be affected by

the final rule, such as importers of orchids for the potted plant market, are small by SBA standards, we expect any impact to be minimal, given Oncidium spp. small share of the U.S. orchid market and their small share of total orchid imports from Taiwan. Allowing importation of Oncidium spp. from Taiwan in growing media could also lead to an expanded market for this genus, but any increase is likely to be limited given the flower’s distinctive ly unusual appearance . The APHI S administrator has determined that this action, if promulgated, will not have a significant economic imp act on a substantial number of small entities.ii



### Table of Contents Summary

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

................................ ................................ ................................ ......................... 1 Potential Impact on Small Entities

................................ ................................ ...................... 11



### Introduction This analy sis 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 substantial number of small entities. The regulations in 7 CFR part 319 prohibit or restrict the importation into the United States of certain plants and plant products to prevent the introduction of plant pests. The current regulations allow the importation of orchids from all countries of the world, but only under certain conditions , including the condition that some plants be free of sand, soil, earth, and other growing media. Such plants are generall y imported bare

- rooted into the United States, and are rooted and potted for sale by U.S. nurseries. The proposed rule would amend 7 CFR 319.37

- 8(e) by adding Oncidium spp. from Taiwan to the lis t of plants that may enter the United States established in approved growing media, subject to specified growing, inspection, and certification requirements. We are taking this action in response to a request b y Taiwan. 

### Potential Impact on Small Entities The current p olicy

requires all growing media to be removed from Oncidium plants prior to import ation into the United States . This is accomplished through the use of a water stream that is directed to the roots of the plants. This power washing process damages or destroy s the plant’s root structure causing transplant shock and a setback of the production process. Damaged roots also create a pathway

for disease to enter the plant and can cause plant death. Plants established in growing media are less prone to transplant shock and adjust more quickly to the U.S production site. This amendment would enable U.S. growers to produc e a higher

- quality finished product that requires less production time for plant health recovery . In2

addition, allowing importation of Oncidium plants established in media would allow U.S. growers access to species and hy brids that would otherwise perform poorl y as a result of transportation and media removal. Statistics on U.S. production of potted Oncidium plants, as a separate genus, are not avail able. In 2013, the largest U.S. producers sold 30.3 million potted orchids of all genera, including Oncidium. Of the 30.3 million potted orchids sold, 18.8 million were less than 5 inches in diameter, and 11.5 million were 5 inches or more in diameter. The average wholesale price of the smaller plants was $7.31 per pot, and the average wholesale price of the larg er plants was $9.44 per pot. The value of 2013 sales of all genera of potted orchids was $245 million. Three S tates, California, Florida, and Hawaii, together accounted for 68 percent of all large growers, and 75 percent of all the orchids sold by these growers. Potted orchid sales statistics in 2013 for each of these three S tates and nationally are shown in t able 1. Table 1

- Potted Orchids of All Genera Grown by L arge U.S. Producers

– 2013 Pots Sold (000) Avg.Wholesale Price/Po t Wholesale Value of All Sales (000) Producers <5 in. 5 in. or mo re Total <5 in. 5 in or mo re California 36 13,257 828 14,085 $7.66 $14.27 $113,364 Florida 43 2,598 4,381 6,979 6.85 9.67 60,161 Hawaii 37 1,471 94 1,565 6.62 10.15 10,692 Other S tates 54 1528 6147 7,675 61,608 U.S. Total 170 18,854 11,450 30,304 7.31 9.44 245,825 Source: Floriculture Crops 2013 Summary (NASS) The proposed rule would likely result in Oncidium spp. imports from Taiwan shifting from lower

- value bare

- rooted plants to higher

- value potted plants. Although the rule would theoreticall y enable Taiwan ese exporters to by pass U.S. grow er s altogether and provide finished plants directly

to retailers, such a scenario is considered unlikel y, given the additional marketing3

support associated with shipping finished plants in pots. 1 The more likely scenario is that Taiwan would continue to expo rt immature plants to U.S. growers who would then grow them out for sale as finished plants. Allowing the importation of Oncidium spp. in growing media would affect the quality

and health of th e imported plants , and would likely result in related price adj ustments . It is unlikely that the rule would shorten the marketing chain by eliminating the role of intermediate handlers of plants. In 2013, Taiwan’s orchid plant exports to the United States were valued at $54 million. By comparison, the wholesale value of all potted orchid plants (all genera) sold b y large U.S. growers in 2013 was $246 million. As indicated, the exact percentage of all potted orchid plants produced in the United States that fall within the Oncidium genus is unknown. However, th at percentage is believed to be between 15 and 25 percent

. 2 According to the Taiwanese Council of Agriculture, Taiwan ’s export s of Oncidium spp. in 2010 were valued at $14.74 million , with 94 percent of the revenues earned from exports to Japan. In 2010, Taiwan ’s orchid export s to the United States were valued at $41.4 million. If the entirety of the remaining 6 percent of Oncidium spp. orchids exported by Taiwan that year
were shipped to the United States , their value would have totaled about $880,000, or 2 percent of the value of all orchids imported from Taiwan. The SBA small

- entity standard for entities involved in Floriculture Production is $750,000 or less in annual receipts (NAICS 111422). 3 The number of entities participating in this broadly defined industry

was 26,963 in 2012, with $5.9 billion in sales. Large
- scale o rchid

1 According to ARS, finished plants tend to lose flower buds during shipment. Also, Taiwanese exporters of finished plants would be faced with the issue of having to provide ancillary services to U.S. retailers, such as setting up in

- store displays and wate ring plants. Mass merchandise retailers in the U.S. require their grower suppliers to provide these services.

2 Personal communication with Ron McHatton, American Orchid Society , 8/6/2014

. 3 Ta ble of Size Standards based on NAICS 2014 [Floriculture Production: NAICS code 111422]. Washington, D.C.: U.S. Small Business Administration, effective July 14, 2014.4

producers numbered 170 in 2013, comprising 0.6 percent of industry establishments

. Given the sparse data available for U.S. orchid production , we are limited to examining the average wholesale value of orchids produced b y the largest producers , which was $1.4 million in 2013 , well above the SBA threshold for small entities. This average value of sales was only for the larg e establishments; it is probable that there are orchid producers that would be considered small entities by

the SBA standard

. We expect any impact of the proposed rule for U.S. orchid producers , large or small, would be minimal, given Oncidium spp. small s hare of the U.S. orchid market and their small share of orchid imports from Taiwan. Growers who import Oncidium spp. from Taiwan may benefit from the rule ; however g ains due to improved product quality and reduced production time are likel y to lead to compensating price adjustments, assuming a competitive market. Allowing importation of Oncidium spp. from Taiwan in growing media may also lead to an expanded market for this genus , but any increase is likely to be limited given the f

lower’s distinctively unusual appearance . The APHIS Administrator has determined that this action , if promulgated, will not have a significant economic impact on a substantial number of small entities.