United States

Department of Agriculture Animal and Plant Health Inspection Service June 2014 **Initial Regulatory Flexibility Analysis Proposed Rule**  **APHIS 2014 -**  **0 0**  **15 RIN 0579**  **- AD95**  **South Africa Citrus from Citrus Black Spot Infested Areas** 

Policy & Program Development Policy Anal ys is & Developmenti



### Summary The proposed rule would allow the importati on of g rapefruit, lemon, mandarin, sweet orange, and tangelo from areas of South Africa affected by citrus black spot (CBS)

. Importation would require a s ys tems approach to pest risk mitigation, equivalent to U.S. requirements that govern the interstate movement of citrus from domestic CBS

- affected areas, in addition to cold treatment. Because CBS is present in most citrus

- prod ucing areas in South Africa, this action would greatl y expand the area where citrus may be grown for shipment to the United States. C hanges in imports of South African citrus and impacts for U.S. producers and consumers would depend on a variet y of facto rs. Additional imports would compete with U.S. domestic production as well as with citrus imports from other countries, particularl y ones also located in the Southern Hemisphere that have export seasons similar to those of South Africa. The extent to whi ch the United States may become a more prominent export destination for South African citrus could also be influenced b y South Africa’s export prospects elsewhere, particularl y to the European Union (EU). The EU is an important market for South African ci trus, but imports were recentl y suspended for one growing season due to concerns over CBS. While the suspension was temporary , more recently the EU has imposed more stringent import restrictions to mitigate the risk of CBS introduction

. On the demand sid e, consumers base their purchasing decisions for fresh citrus on the price and a number of qualitative attributes such as variet y, flavor, juiciness, ease of peeling, appearance, freshness, perceived health benefits, production method, and product origin. Consumers would benefit from additional fresh citrus imported from South Africa, and importers and distributors of South African fresh citrus would also benefit from new businessii

opportunities. U.S. producers would face increased competition from the addi tional imports. For all affected entities, effects can be expected to vary by citrus species. The U.S. import market for oranges has been expanding, even though per capita consumption of oranges has remained relativel y constant. As with other citrus, the peak U.S. demand for imported oranges occurs as the U.S. production and marketing season is ending, and corresponds to South Africa’s peak in orange exports to the world. Strong competition from domestically

produced Valencia oranges is likel y to limit a dditional imports of this variety from South Africa, whereas we expect there may be better opportunities for increased navel orange imports. South African exporters may find opportunities to expand sales of fresh grapefruit to the United States with publ ication of this rule. Less than 4 percent of grapefruit production areas in South Africa are considered to be CBS

- free and therefore currentl y eligible to send citrus to the United States. However, U.S. per capita consumption has been relatively flat ove r the last decade, and imports represent a small proportion of the overall domestic supply of grapefruit. South African exporters would be constrained to some extent by the same market

- clearing price faced b y all suppliers, although fresh grapefruit from South Africa have generall y commanded a price premium relative to imports from other sources. A significant portion of South Africa’s tangelo and mandarin varieties is grown in areas that are CBS

- free and already eligible for importation by the United St ates . Therefore , any increase in tangelo and mandarin variet y imports as a result of the proposed rule is likely to be limited. U.S. per capita consumption of these species has increased over the last decade, as have imports.iii No lemons are currently imported from South Africa , even though lemons grown in CBS

free areas are eligible. All citrus imported from South Africa must be cold treated, and lemons do not survive this cold treatment in a marketable condition. Therefore, n o new lemon imports are expected as a result of this proposed rule. We have identified industries that could be affected by the proposed rule based on the North American Industry Classification Sy stem. Based on Small Business Administration size standards , small entities are prominent in those industries for which information on business size composition is available.iv

Table of Contents Summary

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

................................ ................................ ................................ ................................ ..... 1 Citrus Production and Trade

................................ ................................ ................................ ....... 1 Fr esh Oranges

................................ ................................ ................................ ......................... 3 Fresh Grapefruit

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

.............. 8 South Africa’s Citrus Industry

................................ ................................ ................................ .. 11 Fresh Oranges

................................ ................................ ................................ ....................... 12 Fresh Grapefru it

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

............ 14 Reasons Action is Being Considered

................................ ................................ ............................ 15 Objectives of and Legal Basis for the Rule

................................ ................................ .................. 15 Potentially

Affected Small Entities and Potential Effects

................................ ............................ 16 Projected Reporting, Recordkeeping, and Other Compliance Requirements

............................... 25 Duplication, Overlap, or Conflict with Existing Rules and Regulations

................................ ...... 25 Alternat ives to minimize Significant Economic Im pacts of the Rule

................................ ........... 251



### Introduction The proposed rule would allow the importation of five species of Citrus ( g rapefruit, l emon, m andarin, s weet o range, and t ange lo ) from areas in South Africa not free of citrus black spot (CBS). I mportation would require a s ys tems approach to pest risk mitigati on to prevent the introduction of CBS , in addition to cold treatment . The sy stems approach would need to be equivalent to U.S. requirements that govern the interstate movement of citrus from domestic CBS

- affected areas. Currently , the five citrus species are allowed to be imported from South Africa ’s CBS

- f

ree a reas, as long as the fruit has undergone c old t reatment to control for false codling moth , fruit flies of the genera Ceratitis and Pterandrus , and the fruit fly Bactrocera inv adens

. 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. This initial regulatory flexibility

analy sis examin es the prevalence of small businesses in industries that may be affected by

the proposed rule and considers whether small

entity impacts are likel y to be significant, as required by section 603 of the Act. In this introduction, we describe production, co nsumption and trade for the United States and South Africa of the specified citrus species . We then discuss the prevalence of small businesses in industries that may be affected.
**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 $2.22 0 5,000 10,000 15,000 20,000

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0**- -** **1 ,** **0 0** **0 T** **o n** **s -** **- 1** **, 0** **0 0** **A c** **r e** **s -** **-**

**Season** 

### Figure 1. **U.S. Citrus -**  **bearing Acreage**  **and Production** Bearing Acreage Production Linear (Production) billion in farm cash receipts. L emons generated $430 million, tangerines another $414 million, and grapefruit ano ther $2 69 million. 1

U.S. citrus

- bearing acreage has declined b y 15 percent over the last two decades, most notably in Florida where 95 percent of the orange crop is used for juice (figure 1). This decline is due in large part to tree losses associated with weather

- related ev ents, citrus canker eradication efforts, the spread of Huanglongbing (also known as citrus greening) and other diseases, and residential and business expansion. Consequently , U.S. orange production has declined b y 23 percent over the last 20 seasons. Th e decline in Florida’s bearing acreage and production will continue to mainly impact the orange juice market. U.S. fresh citrus is principally grown in California, where production has either remained stable (fresh oranges) or is expanding (fresh tangerin e and mandarin varieties). Any increase in i mpo rts from South Africa would compete with fresh citrus produc ed domestically and import ed from other countries

. Fresh citrus imports account for about 7

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

- 8: U.S. Cash Receipts 1980 to date.3 0 100 200 300 400 500 600 700 800

2008-09 2009-10 2010-11 2011-12 2012-13**1 ,** **0 0** **0 M** **e t** **r i** **c T** **o n** **s**

**Season** 

### Figure 2. **United States**  **- Fresh**  **Or ange T**  **ra de Balance**  Exports Imports percent of U.S. fresh fruit imports. The major suppliers of fresh citrus are Mexico (42 percent), Chile (17 percent), Spain (16 percent), and South Africa (9 percent). 2

Fresh O ranges 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

- ye ar period, U.S. fresh orange exports averaged 657,800 metric tons (MT) and imports averaged 111,000 MT (figure 2). The United States is the third largest exporter of fresh oranges, and its primary foreign markets are South Korea, Canada, Japan, Hong Kong, and China. U.S. e xports ty picall y peak in March.

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

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.aspx 3 Global Trade Information Services, Inc.4 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000

0 200 400 600 800 1,000**- -** **1 ,** **0 0** **0 t** **o n** **s -** **- -** **- 1** **, 0** **0 0** **A c** **r e** **s -** **-**

**Season** 

### Figure 3. **U.S. Or ange Bearing Acres**  **and Production: Seasons** 

**2000/01 through 2011/12**  Bearing acreage Production Linear (Bearing acreage) Linear (Production) While showing fluctuations y ear to y ear, U.S. fresh orange per capita consumption has steadily declined over the last 30 y ears and remained relativel y flat over the past decade. In 2012/13, U.S. fresh orange per capita consumption was 10.9 pounds, down from a high of 14.6 pounds in 1997/98. 4 As with other develo ped countries, competition from eas y - peel citrus varieties and increased orange juice consumption have contributed to this per capita decline. U.S. crop acreage devoted to orange production declined b y 24 percent between 2000/01 and 2011/12, from 815,000 t o 619,200 bearing acres (figure 3). 5 Over that same time period, production declined b y 26 percent, from 12.2 million to 9 million MT. 6

As described above, most of the industry ’s contraction has been in production for the processing sector. In Florida , where more than 95 percent of production is devoted to oranges for processing, the bearing acreage fell b y 28 percent between 1999/2000 and 2011/12, and orange production fell b y 34 percent. In California, where 85 percent of U.S. production for the

4 USDA/ E conomic Research Service, preliminary estimate. 5 USDA, National Agricultural Statistics Service, Florida Agricultural Statistics Service , Florida Citrus Statistics 2011

- 20 12
. 6 Ibid.5

fre sh market is harvested, the quantity produced has been relativel y stable, averaging around 2 million MT annually

even while the bearing acreage has fallen by 10 percent. On average, 27 percent of U.S. produced oranges are sold for fresh consumption, both domestically

and internationally . While only 4 percent of orange production in Florida is utilized fresh, the percentages for California and Texas are 83 and 86 percent, respectivel y. 7 U.S. i mports of fresh oranges tend to increase in late summer to comp lement smaller off

season domestic supplies (figure 4)

. Over the period 2008/09 through 2012/13, the United States imported an average of 33,700 MT of fresh oranges annuall y from South Africa, accounting for about 3 0 percent of total U.S. imports of fresh oranges .

T he United States imported an average of 111,000 MT of fresh oranges annually from the 2008/ 0 9 season through the 2012/ 13 season , accounting for less than 2 percent of U.S. consumption. I mports were fairl y consistent from season to season. Chile and South Africa

7 Fresh utilization refers to the proportion of total fruit sold as fres h citrus. The remainder is considered to be utilized on the processed market. 0 50 100 150 200**1 ,** **0 0** **0 M** **T** 

### Figure 4 **. U.S. Fresh Or**  **ange T ra**  **de Monthly Quantity** 

Exports Imports6

were the top two suppliers of fresh orange imports by the United States during the 2012/ 13
season , followed b y Mexico and Australia

. 8
Fresh Grapefruit
The United States is a large net expor ter of grapefruit (figure 5 )

. The United States imported about 1 percent and exported about 27 percent of the world ’s traded grapefruit , 2008/09 through 2012/13

. Over the period , U.S. export s averaged approximately 222,000 MT
. P rimary foreign markets for U.S. fresh grapefruit are Japan, Canada, France, the Netherlands and South Korea.

The United States imports comparativel y little fresh grapefruit, given extensive domestic production. Over the period 2008/09 through 2012/13, fresh grapefruit imports by the United States averaged 7,8 00 MT per y ear , or less than 1 percent of domestic consumption. Mexico , Is rael, and South Africa supplied 83 percent, 9 percent, and 3 percent of imports , respectivel y, du ring the 2012/ 13 season. In terms of value, Mexico accounted for 63 percent; Israel, 22 percent; and South Africa, 12 percent of U.S. fresh grapefruit imports, reflecting the premium

8 Global Trade Information Services, Inc. These Global Trade Atlas estimates include dried lemons as well as fresh lem ons. 0 100 200 300

2008/09 2009/10 2010/11 2011/12 2012/13**1 ,** **0 0** **0 M** **e t** **r i** **c T** **o n** **s**

**Season** 

### Figure 5. **United States**  **- Fresh**  **Gr apefruit T**  **ra de**  **Balance** Exports Imports7

prices received b y South African exporters. 9 Exports are highest in November through March and d ecline thereafter (figure 6 ).

About 80 percent of U.S. fresh grapefruit production was consumed domestically in the 20 12 /13 season. 10 Fresh utilizatio n of grapefruit accounts for about 43 percent of grapefruit production in Florida, about 55 percent in Texas , and nearl y 100 percent in California. 11 D omestically

produced grapefruit are marketed ye ar - round, with seasons vary ing by State and variet y. U.S. grower revenue from fresh grapefruit production in 201 2 /13 was approximately $ 180.2 million. 12 Durin g the 2012/13 season, U.S. per capita fresh grapefruit consumption was 2.6 pounds

. 13 As with fresh oranges, U.S. f resh grapefruit consumption ha s remained relatively flat over the last decade.

9 Global Trade Information Services, Inc. These Gl obal Trade Atlas estimates include dried grapefruit as well as fresh grapefruit. 10 The proportion of U.S. fresh orange production consumed domestically is the ratio of utilized fresh production less exports divided by utilized fresh production

. Data s ou rce: USDA ERS Briefing Room, Fruit and Tree Nut Yearbook

. 11 Fresh utilization refers to the proportion of total fruit sold and/or consumed as fresh citrus. The remainder is considered to be utilized on the processed market. 12 National Agricultural Statist ics Service (NASS), USDA, “Citrus Fruits 2013 Summary,” September 2013

. 13 USDA/ Economic Research Service, preliminary estimate. - 5 10 15 20 25 30 35**1 ,** **0 0** **0 M** **T** 

### Figure 6 **. U.S. Fresh Gr**  **apefruit Tr**  **ade Monthly Quantity** 

Imports Exports8 U.S. crop acreage devoted to grapefruit production has declined b y 5 0 percent since the

2000 /20 01 crop year , going from 1 45 ,000 acres to 73 ,000 acres in 2011/12 (figure 7 )

. 14 Over that same period , production declined by 5 0 percent , from 2. 2 million MT to 1.1 million MT. 15 Grapefruit bearing acreage and produc tion in California and Texas declined to 28,000 acres and 370,000 MT in 2012/13 , reductions of 2 0 percent and 7 percent, respectively

. More extreme declines have taken place in Florida, which accounts for 82 percent of grapefruit used b y the processing se ctor ; grapefruit bearing acreage has fallen to 45,000 acres, a decline of 58 percent since the 2000 / 20 0 1 season , and grapefruit production has fallen by 6 2 percent to 700,000 MT.
Fresh Tangerines, Tangelos, Mandarins, Clementines, and Similar Citrus Hybrids The United States is a net importer of tangerine and mandarin varieties (figure 8 ) . U
. S

. import s average d 7 percent of the world ’s fresh tangerine and mandarin variet y exports, and accounted for an average of 26 percent of domestic fresh consumpt ion over the 2008/09 through 2012/13 seasons. During 2011/12 , the United States imported 154,296 MT of tangerine and mandarin varieties (including satsumas, clementines, and similar citrus h yb rids) with

14 USDA, National Agricultural Statistics Service, Citrus Fruits Summary , various years. 15 Ibid. - 500 1,000 1,500 2,000 2,500

0 20 40 60 80 100 120 140 160**- -** **1 ,** **0 0** **0 t** **o n** **s -** **- 1** **, 0** **0 0** **A c** **r e** **s -** **-** 

### Figure 7 **. U.S. Gr apefruit**  **Bearing Acreage and Production**  acreage Production Linear (acreage) Linear (Production)9 0 50 100 150 200

2008/09 2009/10 2010/11 2011/12 2012/13**1 ,** **0 0** **0 M** **e t** **r i** **c T** **o n** **s**

**Season** 

### Figure 8. **United States**  **- Fresh**  **Ta ngerine**  **Tr ade Balance**  Exports Imports

0.0000 0.1000 0.2000 0.3000 0.4000 0.5000 0.6000

0 10 20 30 40 50 60**M i** **l l** **i o** **n M** **T B** **e a** **r i** **n g** **A c** **r e** **s** 

### Figure 9 **. T**

**angerine Bearing**  **Acres and Production** 

acres Production Linear (acres) Linear (Production) approximately

3 9 percent, 31 percent, 13 percent, and 9 percent arriving from Chile, Spain, Peru , and Morocco, respectively

. That same season , the United States exported approximately 42,175 MT of tangerine and mandarin varieties . Canada is the largest importer of U.S. fresh tang erine and mandarin varieties , accounting for 48 percent of U.S. exports. The second largest importer is Japan,10

accounting for approximately 2 5 percent. 16 U.S. bearing acreage for tangerines has increased by 29 percent since the 1999/2000 crop ye ar, from 4 1,000 to 5 3,000 acres in 2011/12 (figure 9 ). Over that same time period, production increased b y 63 percent from, 298,000 to 486,000 MT. 17 About 92 percent of U.S. fresh tangerine and mandarin variet y production was consumed domestically

in 2012/13, includ ing processed production

. 18 U.S. imports of tangerine and mandarin varieties supplement domestic production in satisfy ing increased domestic demand. U.S. per capita consumption of fresh tangerine and mandarin varieties has increased, on average, 5.5 percent annuall y over the last 30 years. Over the last decade, per capita consumption of fresh tangerine and mandarin varieties in the United States increased from 2.73 pounds in 2002/03, to 4.5 pounds per capita i n 2012/13. 19 E asy - peel, seedless fresh citrus varieties are particularl y appealing to consumers. On average, 80 percent of tangerine and mandarin varieties produced in the United States are consumed fresh, domestically and internationally . Production in tended for fresh market consumption is concentrated in California, Florida, and Arizona. California harvests approximately

75 percent of U.S. fresh production. The value of production increased 22 percent from 2011/12 ($349.1 million) to 2012/13 ($425.5 million), with most of the increase in the fresh sector. 20 Imports of tangerine and mandarin varieties are highest in July through January . They
are at their lowest between February and May , when the domestic season and U.S. exports are at

16 U.S. Census Bureau, as report ed by Global Trade Information Services, Inc. 17 Source: USDA, National Agricultural Statistics Service, Citrus Fruits Summary , various years. 18 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 s ource: Foreign Agricultural Service, Production, Supply, and Distribution Online. 19 USDA/Economic Research Service, preliminary estimate for 2012/13. 20 Nati onal Agricultural Statistics Service (NASS), USDA, “Citrus Fruits 2013 Summary,” September 2013

.11

their peak (figu re 1 0 )

. N et imports (imports minus exports) suppl ied about 15 percent of U.S. consumption over the five y ears, 2008/09 through 2012/2013

.

The United States produced 661,000 MT of tangerines 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 increase d by

40 percent. Over the period 2008/09 through 2012/13, the United States imported an average of 5, 7 00 MT of tangerine and mandarin varie ties from South Africa, about 4 percent of U.S. imports. Since a significant portion of tangerine and mandarin varieties grown in South Africa are in areas that are CBS

- free and already eligible to ship citrus to the United States, any increase in tangeri ne and mandarin imports as a result the of this proposed rule is likely to be limited.
**South Africa ’s Citrus Industry**  South Africa has the weather and climatic conditions conducive to the cultivation of a variet y of t ypes of citrus , and is an important p layer in world citrus markets

. It is at or near the top of citrus

- exporting countries even though it is not among the world’s larger producers . Sout h Africa produced just 3 percent of the world ’s oranges, grapefruit, tangerines and mandarin varieties, and lemons, and y et accounted for 20 percent of world exports of those fruits. 21 A very

21 USDA/Foreign Agricultural Service, production, supply and distribution, online. 0 5 10 15 20 25**1 ,** **0 0** **0 M** **T Figure 10**  **. U.S Fresh T angerine and Mandarin T**  **rade Monthly Quantity** 

Exports Imports12

large proportion of South Africa’s citrus production is exported to other countries ; only 9 percent is consumed domestic ally as fresh produce. Twenty
- seven percent of South Africa’s fresh citrus is processed into juice and other secondary products. 22 The Western Cape Province and parts of the Eastern Cape Province are better suited for citrus such as mandarins and lemons, as these fruits prefer cooler regions. The othe r provinces have a warm climate and are ideal for orange and grapefruit production. Currently , citrus is only allowed to be im ported from South Africa ’s CBS

- free a reas , which are principall y found in the Western Cape and Northern Cape Provinces. 23
Fresh Oranges In 2012/13, South Africa produced 1.4 million MT of fresh oranges , accounting for 63 percent of the country ’s citrus production

. On av erage, from 2007 through 2011, 7 4 percent of oranges ( 1.1 million MT ) were exported

. 24 Northern Europe remains the largest destination market for South African oranges. About 24 percent of South Africa’s fresh orange exports were to the Netherlands and the United Kingdom in 2012, 18 percent were to Saudi Arabia and the United Arab Emirates, and 11 percent were to Russia

. 25 Over the period 2008/09 through 2012/13, South Africa exported an average of 33,700 MT of fresh oranges annually to the United States , accounting for about 3 0 percent of U.S. imports and about 3 percent of South African exports

.

22 South African Fruit Trade Flow, Issue No. 8, January 2013. National Agricul tural Marketing Council. 23 http://www.aphis.usda.gov/import_export/plants/manuals/ports/downloads/DesignatedPestFreeAreas.pdf 24 Ibid. 25 Global Trade Atlas, Global Trade Information Services, Inc.13 The U.S. production season for early, mid

- season, and navel oranges runs from about

November 1 through the middle of June, and the U.S. season for Valencia oranges runs from about January

1 throug h the en d of July . The peak U.S. demand for imported oranges occurs as the U.S. production and marketing season for oranges is e nding. This peak correspond s to the peak of South African orange exports to the world (figure 1 1 )

. Fresh Grapefruit South Africa prod uced 410,000 MT of fresh grapefruit in 2012/13, and exporte d 242,000 MT. The largest single export destination for South African fresh grapefruit is Japan , at 28 percent
. As with oranges, n orthern Europe is a significant export destination for fresh grap efruit. About 32 percent of total fresh grapefruit exports from South Africa were to the Netherlands and the United Kingdom in 2012. Another 8 percent was exported to Russia. 26 Over the period 2008/09 through 2012/13, South Africa exported an average of 1 71 MT of fresh grapefruit annually to the United States , accounting for about 2 percent of total U.S.

26 Ibid. 0 50 100 150 200 250 300 350**1 ,** **0 0** **0 M** **T Figure 11**  **. US Orange growing season; Orange T rade** 

South Africa orange exports - world South Africa orange exports - US US orange imports - world Early, mid

- season, navel Orange Growing Season Nov 1
- Jun 15

Valencia Orange Growing Season Jan 1
- July 3114

imports of fresh grapefruit, and for less than 1 percent of total South African exports of grapefruit. Fresh Tangerines, Tangelos, Mandarins, Clementines, and Similar Citrus Hybrids South Africa produced 160,000 MT of fresh tangerine and mandarin varieties in 2012/13, and exported 126,000 MT. Northern Europe is the largest export destination for South African fresh tangerines and m andarin varieties. About 39 percent of total fresh tangerine and mandarin exports were to the United Kingdom, and 20 percent were to the Netherlands. Another 10 percent were exported to Russia. 27 Over the period 2008/09 through 2012/13, South Africa expo rted an average of 5,7 00 MT of tangerine and mandarin varieties to the United States , about 4 percent of total U.S. imports of tangerine and mandarin varieties , and less than 2 percent of total South African exports of tangerines and mandarin varieties

.

The U.S. production season for tangerine and mandarin varieties runs from about October 1 through the middle of May. The peak U.S. demand for imported tangerine and mandarin

27 Ibid. 0 5 10 15 20 25 30 35**1 ,** **0 0** **0 M** **T Figure 12**  **. Fresh T angerine and Mandarin V**  **arieties; U.S. Growing**  **season; T rade** 

South Africa Tangerine exports - world South Africa Tangerine exports - US US Tangerine imports - world Tangerine Growing Season Oct 1
- May 1515

varieties occurs as the U.S. production and marketing season for tangerines and mandarin varieties is ending. This peak correspond s to the peak of South African tangerine and mandarin variet y exports to the world (figure 1 2 )

. 

### Reasons Action is Being Considered The proposed rule is in response to a request made by the n ational p lant p rotection
o rganization of the Republic of South Africa, the Department of Agriculture, Forestry & Fisheries, to grant the importation of citrus from CBS

- affected areas into the United States. A sy stems approach would be used to mitigate the risks posed by this disease. The proposed combination of mitigations satisfies APHI S commitment under the International Plant Protection Convention to allow the importation of plants and plant products subje ct to the least restrictive measures consistent with ensuring ph yt osanitary securit y. 

### Objectives of and Legal Basis for the Rule The objective of the proposed rule is to amend the regulations to allow the importation of five species of citrus from CBS

- affe cted areas of South Africa utilizing a systems approach that is equivalent to U.S. requirements for movement of citrus from domestic CBS

- affected areas . The legal basis for this action is the Plant Protection Act (7 U.S.C. 7701

- 7772), which authorizes the Secretary

of Agriculture to prohibit or restrict the importation of any plant product if the Secretary determines that the prohibition or restriction is necessary to prevent the introduction of a plant pest or noxious weed into the United States. The prop osed rule is part of a continuing program to allow the importation of foreign agricultural products that APHIS has determined are without significant risk of introducing pests or diseases into the United States.16



### Potentially Affected Small Entities **and Pote ntial Effects**  Entities potentially

affected by

the proposed rule are classified within the following industries, according to the North American Industry Classification S ys tem (NAICS): Orange Groves (NAICS 111310), Citrus Groves (except orange groves) (NAICS 111320), Postharvest Crop Activities (except cotton ginning) (NAI CS 115114), Fresh Fruit and Vegetable Merchant Wholesalers (NAICS 424480), Pesticide and Other Agricultural Chemical Manufacturing (NAICS 3 25 320), Farm Product Warehousing and Storage (NA IC S 493130), Nursery and Tree Production (NAICS 111421), Fruit and Vegetable Markets (NAI CS 445230), Packing and Crating (NAICS 488991), General Freight Trucking, local (NAICS 484110), and Wood Container and Pallet Manufacturing (NAICS 321920). Accord ing to 20 12 Census of Agriculture data, there were a total of 9,437 operations producing oranges in the United States that y ear . 28 In that year, 6,141 farms produc ed oranges as their primary

product and were thus classified as Orange Groves according to the NAI CS. 29 More than 72 percent of orange producers had fewer than 25 acres , and 2 percent had 500 or
more acres . However, the farms with fewer than 25 acres accoun t ed for less than 6 percent of the total acreage devoted to orange production, while those with 500 or more acres accounted for
over 5 8 percent . The national average acreage for orange producers was 71 acres in 20 12 ; for orange producers with fewer than 2 5 acres , the average was 5.3 acres per farm.

28 The number of orange farms in the United S tates, as reported by the 20 12 Census of Agriculture , includes operations that produced oranges for processed utilization ; in Florida, the majority of oranges are processed

. USDA NASS. 2012 Census of Agriculture, Table 39. Specified Fruits and Nuts by Acres: 2012 and 2007, http://www.agcensus.usda.gov/Publications/2012/Full_Report/Volume_1,_Chapter_1_US/st99_1_039_039.pdf 29 USDA NASS. 2012 Census of Agriculture, Table 51
. Selected Characteristics of Farms by North American Industry Classification System: 20 12, http://www.agcensus.usda.gov/Publications/201 2/Full_Report/Volume_1,_Chapter_1_US/st99_1_051_052.pdf

. This is also the source for e stablishments classified within Citrus Groves (except orange groves) and Nursery and Tree Production.17 Establishments classified as Orange Groves are considered small by the Small Business Administration (SBA) if annual sales are not more than $750,000. The average market value of crops sold by

orange groves that y ear was approximately $ 318 ,000 , well below the small

- entity standard of $750,000 . C learl y , orange growers are predominantly small entities according to the SBA standard. According to 20 12 Census of Agriculture data, there were a total of 3,007 ope rations producing lemons, 1,395 operations producing tangerines, and 2,144 operations producing grapefruit in the United States in 20 12 **.** 30 In that y ear , a total of 2,839 farms produc ed citrus other than oranges as their primary product and were thus classified as Citrus Groves (except orange groves) according to the NAI CS. Establishments classified within NAI CS Citrus Groves (except orange groves) are considered small by the SBA standa rd of annual sales not more than $750,000. The average market value of crops sold by non - orange citrus groves in 20 12 was about $22 3 ,000, well below the small

- entity standard of $750,000. Clearly, citrus growers are predominantly

small entities according to the SBA standard of $750,000. Establishments classified within Postharvest Crop Activities (except cotton ginning) (NAICS 115114), are considered small by SBA standards if annual sales are not more than $7 million. The percentage of establishments th at meet this standard is not known; neither the Census of Agriculture nor the Economic Census reports revenue for these establishments. This industry

comprises establishments primarily engaged in performing services on crops, subsequent to their harvest , with the intent of preparing them for market or further processing. These establishments provide postharvest activities, such as crop cleaning, sun dry ing, shelling, fumigating, curing, sorting, grading, packing, and cooling. The available information o n

30 The number of citrus farms in the United States, as reported by the 20 12 C ensus of Agriculture , includes operations that produced citrus for process ing as well as fresh utilization

.18

packinghouse establishments engaged in postharvest crop activities indicates these entities to be predominantly

small. In Florida, there were at least 142 packinghouses registered in 2007. 31 While the classification of these establishments b y sales volu me is not available, it is estimated that approximately

42 of the 142 registered packinghouses are large commercial citrus packinghouses with the remainder being small establishments known as gift packers in Florida. The Fresh Shippers Report, issued by F lorida’s Citrus Administrative Committee, details quantities of fresh citrus shipments of the top 35 to 45 shippers of each season. 32 At least 95 percent of Florida fresh citrus shipments are packed by the top 35 to 45 packinghouses in the State. 33 During the 2012/13 citrus season, annual sales for at least 21 of the top 42 shippers (50 percent) were below the SBA size standard of $7 million. I t is estimated that at least 85 percent of Florida’s citrus packers, including small gift packers, would be consi dered small according to the SBA size standard. In 2010, there were 74 packinghouses in California. 34 Traditionally , approximately

60 percent of these packinghouses market the final product through such cooperatives as Sunkist Growers, Inc., the Central Ca lifornia Orange Growers Cooperative, and DNE World Fruit Sales. 35 The remaining packinghouses market their final product independentl y. We do not have a definitive number of small

- entit y packinghouses that may be affected b y this rule, and welcome public comment on their number and size, and how they may be affected.

31 Florida Department of Agriculture and Consumer Services, Division of Fruit & Vegetable Inspection. <http://www.doacs.state.fl.us/fruits > 32 “Fresh Shippers Report: 2012

- 13 Season Through July 31, 2013,” Citrus Administrative Committee, August 22, 2013. <http://www.citrusadministrativecommittee.org/> 33 Ibid. 34 California Citrus Mutual Report to the CDFA Board

- June 30, 2010. Bob Blakely, Director of Industry Relations. < http://www.californiacitrusmutual.com/pdf/CDFA_Board_Report_6302010.pdf > Date accessed: September 9, 2011. 35 United States International Trade Commission (USITC), “Conditions of Competition for Certain Orang es and Lemons in the U.S. Fresh Market, Inv 332

- 469,” Publication 3863, Washington, D.C., July 2006.19 Establishments classified within Fresh Fruit and Vegetable Merchant Wholesalers

(NAICS 424480) are considered small by SBA standards if they

employ not more than 100 persons . 36 In 2012 , there were 4,854 fresh fruit and vegetable merchant wholesalers in the United States with a total of 101,854 paid employ ees, or on average, 21 paid employ ees per establishment. Out of the 4,854 vegetable merchant wholesalers, about 96 percent of the esta blishments in this category employ ed fewer than 100 people. 37 It is likel y that domestic fruit merchant wholesalers that may be affected b y the rule are predominantl y, if not entirely, small entities. Establishments classified within Pesticide and Other Agr icultural Chemical Manufacturing (NAICS 3 25 320) are considered small by SBA if they

employ no more than 500 employ ees. In 2012 , there were 2 10 Pesticide and other agricultural chemical manufacturers in the United States with a total of 10,0 75 paid employ ee s or on average, 4 8 paid employ ees per establishment. In 2012 about 87 percent of establishments in Pesticide and Other Agricultural Chemical Manufacturing employ ed fewer than 100 people

. 38 Establishments classified within Farm Product Warehousing and Stor age (NAI CS 493130), are considered small by SBA standards if annual sales are not more than $25.5 million. The latest sales receipt information from the Economic Census shows that in 2007 there were 713 establishments in this category and 48 percent had sa les revenue less than $25 million. 39 Nursery and Tree Production (NAI CS 111421) are considered to be small by SBA standards if annual sales are not more than $750 , 000. According to the 2012 Census of Agriculture , there

36 U.S. Small Business Administration, Table of Small Business Size Standards http://www.sba.gov/content/table

sm all

- business

- size

- standards 37 U.S. Census Bureau . 2012 County Business Patterns

. http://www.census.gov/econ/cbp/index.html 38 Ibid. 39 Receipts data from the 2012 Economic Census is not yet availa ble. U.S. Census Bureau. 2007 County Business Patterns and 2007 Economic Census

. http://www.census.gov/econ/susb/data/susb2007.html20

were 32,048 of these establishments with average sales revenue of about $ 221,000, well below the small

- entity

standard of $750,000 . Clearl y, nursery and tree producers are predominantly small entities according to the SBA standard. Fruit and Vegetable Markets (NAICS 445230) are considered small by SBA standards if annual sales are not more than $7.0 million. A ccording to the 2007 Economic Census there were 3,314 establishments in this category and more than 92 percent had annual sale s of less than $5 million, well below the SBA standard for small entities. Establishments in Packing and Crating (NAICS 488991) are considered to be small by SBA standards if annual sales are not more than $25.5 million. The latest sales receipt informatio n from the Economic Census shows that in 2007 there were 1,432 establishments in this category

and about 93 percent had sales revenue less than $25 million. 40 General Freight Trucking, local (NAICS 484110) are considered to be small by SBA standards if annu al sales are not mare than $25.5 million

. The latest sales receipt information from the Economic Census shows that in 2007 there were 28,595 establishments in this category and about 95 percent had sales revenue less than $25 million. 41 Wood Container and P allet Manufacturing (NAICS 321920) are considered to be small if establishments employ no more than 500 employ ees . In 2012, there were 2,666 establishments in this category in the United States with a total of 49,155 paid employ ees, or an average of 18 pe r establishment. I n 2012, nearl y 100 percent of these establishments employ ed fewer than 500 people

. 42 Additional import volumes because of the proposed rule would be influenced by current trends of citrus production, consumption and trade in South Africa and the United States. Actual

40 U.S. Census Bureau. 2007 County Business Patterns and 2007 Economic Census

. http://www.census.gov/econ/susb/data/susb2007.html 41 Ibid 42 U.S. Census Bureau. 2012 County Business Patterns

. http://www.census.gov/econ/cbp/index.html21

changes in imports of South African citrus that occur would depend on a variety of factors. Consumers
ma ke their purchasing decisions for fresh citrus based on a number of factors besides prices, including qualitative attrib utes such as variety, flavor, juiciness, ease of peeling, appearance (color, shape and size), freshness, 43 perceived health benefits, production methods (organic or traditional), and product origin (local, regional, domestic, and if imported, from what coun try). 44 , 45 Consumers would benefit from additional purchasing options associated with additional f resh citrus imports from South Africa. I mporters and distributors of South African fresh citrus would also benefit from the proposed rule as it would provide them with new business opportunities. This action would greatly expand the area in South Africa where citrus may be grown and shipped to the United States. The majority of citrus production acreage in South Africa is in areas where CBS is present: 97 perc ent of grapefruit acreage, 91 percent of Valencia orange acreage, 85 percent of lemon acreage, 72 percent of navel orange acreage, and 54 percent of tangerine and mandarin variet y acreage . 46 The United States could become an even more prominent export dest ination for South African citrus as a result of this proposed rule. However, additional South African citrus imports would compete with U.S. domestic production as well as with other citrus imports, particularl y those from the Southern Hemisphere. Over t he period 2008/09 through 2012/13, annual U.S. imports from countries in the Southern Hemisphere other than South Africa averaged 55,900 MT for oranges, 61,400 MT for tangerines and mandarin varieties, 181 MT for grapefruit, and 18,400

43 Con sumers crave farm

- to
- table freshness

– A.T. Kearny Study Feb 2013. http://www.foodbu sinessne ws.net/articles/news_home/Consumer_Trends/2013/02/Consumers_crave_farm

- to
table.aspx?ID={4BE088F7

- 6672

- 4934

- B3DF

- 6175753725B2} 44 National Restaurant Association “ What’s Hot in 2014 Culinary Forecast ,” December 2014. http://www.restaurant.org/News

- Research/Research/What

- s - Hot 45 Food Business Ne ws, “ Local sourcing, nutrition to top 2013 restaurant trends ” December 11, 2013 http://www.foodbusinessne ws.net/articles/news_home/Food

- Service

Retail/2012/12/Local_sourcing_nutrition_to_to.aspx?ID=%7b6B48 F136

- 3E21

- 4016

- 88E1

- 7B502BB981A1%7d&cck=1 46 Production and trade statistics from the Citrus Growers Association of Southern Africa , USDA Foreign Agriculture Service , and Global Trade Information Services, Inc

.22

MT for lemons and li mes. These quantities accounted for about 50 percent of U.S. orange imports, about 43 percent of U.S. tangerine and mandarin variety imports, about 2 percent of U.S. grapefruit imports, and about 4 percent of U.S. lemon and lime imports. The extent to whi ch the United States may become a more prominent export destination for South African citrus could also be influenced by South Africa’s export prospects to the European Union. The EU suspended imports of citrus from South Africa in November 2013 due to co ncerns over CBS. While the suspension only applied to citrus from the 2012/13 season, more recentl y the EU has imposed more stringent import restrictions to mitigate the risk of CBS introduction. 47 As described, t he European Union, particularl y northern Europe, is an important destination for South African citrus exports, accounting for about 40 percent of South African citrus exports annually . South Africa is also experiencing increased competition for the European fresh orange market from countries suc h as Egy pt. Because an y new imports of Valencia oranges would face strong competition from domestically

produced fruit, the returns are not likely to be sufficient to make additional imports of Valencia oranges profitable for South African exporters. There fore, we expect additional imports of Valencia oranges as a result of this rule to be limited. There may

be an increase in navel orange imports as South Africa in response to the proposed rule, since 72 percent of the area in production could be newl y el ig ible. Based on information provided b y the Citrus Growers’ Association of Southern Africa, an additional 7,500 MT of fresh oranges could be imported from South Africa. 48 While domestic per capita consumption of oranges has been relativel y constant, U.S. imports of oranges have increased from an annual average of about 80,000 MT from 2003/04 through 2007/08 to about 111,000

47 http://europa.eu/rapid/press

- release_IP

- 14

- 614_en.htm 48 500,000 cartons of oranges at 15kg per carton. Personal communication, Justin Chadwick, CEO Citrus Grow ers’ Association of Southern Africa.23

MT annually

from 2008/09 through 2012/13, a 40 percent increase. An increase in orange imports of 7,500 MT is equivalent to about 6 percent of 2012/13 fresh orange imports from all sources, would represent an increase of 22 percent over current import levels from South Africa, and 0.1 percent of U.S. fresh orange consumption. South African exporters are likel y to find opportunities t o expand sales of fresh grapefruit to the United States with publication of this rule. About 97 percent of grapefruit production areas in South Africa are not considered to be CBS

- free and therefore not currentl y eligible to send citrus to the United States. Based on information provided by the Citrus Growers’ Association of Southern Africa, an additional 8,500 MT of fresh grapefruit could be imported from South Africa following the implementation o f this rule. 49 However, U.S. per capita consumption has been relatively flat over the last decade, and imports represent a small proportion of the overall domestic supply of grapefruit. South African exporters would be constrained to some extent by the s ame market

clearing price faced b y all suppliers. U.S. imports of fresh grapefruit from South Africa have generall y commanded a price premium relative to imports from other sources

. This level of increase would roughl y double U.S. fresh grapefruit import s, which averaged was about 8,700 MT from all sources from 2008/09 through 2012/13. A doubling of current U.S. fresh grapefruit import levels would return imports to the level they were over the period 2003/04 through 2007/08, about 17,000 MT. An increase in grapefruit imports of 8,500 MT would be equivalent to 0.95 percent of U.S. fresh grapefruit consumption and would represent a 43

- fold increase in imports from South Africa.

49 500,000 cartons of grapefruit at 17kg per carton. Personal communication, Justin Chadwick, CEO Citrus Grow ers’ Association of Southern Africa.24 A significant portion of tangerine and mandarin varieties grown in South Africa is in

areas that are CBS

- free . The Western Cape Province, for example, account s for about 46 percent of total South African easy

- peeler production. Therefore , any increase in tangerine and mandarin imports as a result of the proposed rule is likel y to b e limited. Based on information provided b y the Citrus Growers’ Association of Southern Africa, an additional 4,500 MT of fresh tangerine and mandarin varieties could be imported from South Africa following the implementation of this rule. 50 As noted, dom estic per capita consumption and tangerine and mandarin variet y imports have increased over the last decade, from an annual average of about 102,000 MT over the period 2003/04 through 2007/08 to about 142,500 MT annually from 2008/09 through 2012/13, a 40 percent increase. An increase in tangerine and mandarin variety imports of 4,500 MT would be equivalent to about 3 percent of current fresh tangerine and mandarin variet y imports from all sources, about 0.6 percent of U.S. consumption of fresh tangerine a nd mandarin varieties, and would represent an increase of 79 percent over current import levels from South Africa. No lemons from South Africa are currently imported into the United States, even though lemons grown in CBS

- free areas are eligible. All citr us imported from South Africa must be cold treated, and lemons do not survive this cold treatment in a marketable condition. Therefore, no new lemon imports are expected following as a result of this proposed rule.

50 300,000 cartons of soft citrus varieties at 15kg per carton. Personal communication, Justin Chadwick, CEO Citrus Grow ers’ Association of Southern Africa.25



### Projected Reporting, Recordkeeping, and **Ot h**  

### er Compliance **Requirements** Reporting and recordkeeping requirements associated with the proposed rule are discussed in the rule under the heading "Paperwork Reduction Act." 

### Duplication, Overlap, or Conflict with Existing Rules and **Regulations** APHI S has not identified any duplication, overlap, or conflict of the proposed rule with other Federal rules. 

### Alternatives to minimize Significant Economic Impacts of **the Rule** Based on our review of available information, APHI S does not expect the proposed rule to h ave a significant econ omic impact on small entities. We have prepared this initial regulatory flexibility anal ys is because our understanding of possible economic effects of the rule on small entities is incomplete. In the absence of apparent significant ec onomic impacts, we have not identified alternatives that would minimize such impacts.