```

[Federal Register Volume 78, Number 181 (Wednesday, September 18, 2013)]
[Rules and Regulations]
[Pages 57227-57250]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-22616]

========================================================================
Rules and Regulations
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains regulatory documents 
having general applicability and legal effect, most of which are keyed 
to and codified in the Code of Federal Regulations, which is published 
under 50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by the Superintendent of Documents. 
Prices of new books are listed in the first FEDERAL REGISTER issue of each 
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Federal Register / Vol. 78, No. 181 / Wednesday, September 18, 2013 / 
Rules and Regulations

[[Page 57227]]

DEPARTMENT OF AGRICULTURE

Animal and Plant Health Inspection Service

9 CFR Parts 1 and 2

[Docket No. APHIS-2011-0003]
RIN 0579-AD57

Animal Welfare; Retail Pet Stores and Licensing Exemptions

AGENCY: Animal and Plant Health Inspection Service, USDA.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: We are revising the definition of retail pet store and related 
regulations in order to ensure that the definition of retail pet store 
in the regulations is consistent with the Animal Welfare Act (AWA), 
thereby bringing more pet animals sold at retail under the protection 
of the AWA. Specifically, we are narrowing the definition of retail pet 
store to mean a place of business or residence at which the seller, 
buyer, and the animal available for sale are physically present so that 
every buyer may personally observe the animal prior to purchasing and/
or taking custody of that animal after purchase, and where only certain 
animals are sold or offered for sale, at retail, for use as pets. 
Retail pet stores are not required to be licensed and inspected under 
the AWA. In addition, we are removing the limitation on the source of 
gross income from the licensing exemption in the regulations for any 
person who does not sell or negotiate the sale of any wild or exotic 
animal, dog, or cat and who derives no more than $500 gross income from 
the sale of the animals other than wild or exotic animals, dogs, or 
cats during any calendar year. We are also increasing from three to 
four the number of breeding female dogs, cats, and/or small exotic or 
wild mammals that a person may maintain on his or her premises and be 
exempt from the licensing and inspection requirements if he or she 
sells only the offspring of those animals born and raised on his or her 
premises, for pets or exhibition. This exemption applies regardless of 
whether those animals are sold at retail or wholesale. These actions 
are necessary so that all animals sold at retail for use as pets are 
monitored for their health and humane treatment.

DATES: Effective Date: November 18, 2013.

FOR FURTHER INFORMATION CONTACT: Dr. Gerald Rushin, Veterinary Medical 
Officer, Animal Care, APHIS, 4700 River Road Unit 84, Riverdale, MD 
20737-1236; (301) 851-3751.

SUPPLEMENTARY INFORMATION:

I. Purpose of the Regulatory Action

Need for the Regulatory Action

    The Animal Welfare Act (AWA or the Act, 7 U.S.C. 2131 et seq.), 
seeks to ensure the humane handling, care, treatment, and 
transportation of certain animals that are sold at wholesale and retail 
for use in research facilities, for exhibition purposes, or for use as 
pets by means of Federal licensing and inspection. When Congress passed 
the AWA in 1966, it specifically exempted retail pet stores from such 
licensing and inspection. At that time, retailers of pets covered under 
the exemption consisted mostly of traditional ``brick-and-mortar'' pet 
stores, as well as small-scale breeders whose place of business was 
typically their residence. Both types of retail outlets were exempted 
by the AWA as ``retail pet stores'' because, despite the many 
dissimilarities in how pet shops and small-scale residential breeders 
conduct business, they share in common a business model in which buyers 
visit their places of business and personally observe the animals 
available for sale prior to purchasing and/or taking custody of them.
    Enforcement of the Act has been delegated by the Secretary of 
Agriculture to the Animal and Plant Health Inspection Service (APHIS) 
of the United States Department of Agriculture (USDA). APHIS has issued 
regulations pursuant to the Act; these regulations, which we refer to 
below as the AWA regulations, are found in 9 CFR parts 1, 2, and 3. 
Part 1 contains definitions for terms used in parts 2 and 3; part 2 
provides administrative requirements and sets forth institutional 
responsibilities for regulated parties; and part 3 contains 
specifications for the humane handling, care, treatment, and 
transportation of animals covered by the AWA.
    Part 2 requires most dealers to be licensed by APHIS; classes of 
individuals who are exempt from such licensing are listed in paragraph 
(a)(3) of Sec.  2.1.
    Since the AWA regulations were issued, most retailers of pet 
animals have been exempt from licensing by virtue of our considering 
them to be ``retail pet stores'' as defined in Sec.  1.1 of the AWA 
regulations.
    Because the previous definition of retail pet store in the AWA 
regulations covered nearly all retail outlets, retailers selling 
animals by any means, including sight unseen sales conducted over the 
Internet or by mail, telephone, or any other method where customers do 
not personally observe the animals available for sale prior to 
purchasing and/or taking custody of them, were considered to be retail 
pet stores and as such had been exempt from licensing and inspection 
under Sec.  2.1(a)(3)(i) and Sec.  2.1(a)(3)(vii).\1\
---------------------------------------------------------------------------

    \1\ Both the retail pet store exemption in Sec.  2.1(a)(3)(i) 
and the direct retail sales exemption in Sec.  2.1(a)(3)(vii) derive 
their authority from the AWA exemption for retail pet stores. We 
discuss this at greater length later in this document.
---------------------------------------------------------------------------

    With the growth of the Internet in the 1990s, technology brought 
with it new and unforeseen opportunities to buy and sell pets. More 
retailers began offering pets for sale sight unseen and to sell and 
ship them nationwide. While pet animals were sometimes sold sight 
unseen via telephone and mail order decades before passage of the AWA, 
the Internet has made it possible for many more persons throughout the 
United States to buy pets online from retailers without ever having to 
be physically present at the seller's place of business or residence 
and personally observe the animals offered for sale as the AWA 
intended. With the dramatic rise in sight unseen sales have come 
increasing complaints from the public about the lack of monitoring and 
oversight of the health and humane treatment of those animals.
    In order to ensure that the definition of retail pet store in the 
AWA regulations is consistent with the AWA and that all animals sold at 
retail for use

[[Page 57228]]

as pets are monitored for their health and humane treatment, we 
published in the Federal Register (77 FR 28799-28805, Docket No. APHIS-
2011-0003), on May 16, 2012, a proposal \2\ to revise the definition of 
retail pet store and related regulations to bring more pet animals sold 
at retail under the protection of the AWA. This rule finalizes that 
proposed rule while also making changes to its provisions based on the 
comments we received (see the section below titled ``Summary of the 
Major Provisions of the Regulatory Action'').
---------------------------------------------------------------------------

    \2\ To view the proposed rule, its supporting documents, and the 
comments we received, go to http://www.regulations.gov/#!docketDetail;D=APHIS-2011-0003.
---------------------------------------------------------------------------

Legal Authority for the Regulatory Action

    Under the AWA, the Secretary of Agriculture is authorized to 
promulgate standards and other requirements governing the humane 
handling, care, treatment, and transportation of certain animals by 
dealers, research facilities, exhibitors, operators of auction sales, 
and carriers and intermediate handlers. As we mentioned previously in 
this document, the Secretary has delegated responsibility for 
administering the AWA to the Administrator of APHIS. Within APHIS, the 
responsibility for administering the AWA has been delegated to the 
Deputy Administrator for Animal Care.

II. Summary of the Major Provisions of the Regulatory Action

Key Changes to the Proposed Rule

    Based on the comments we received and our own reevaluation of the 
proposed rule, we are finalizing the proposed rule with the following 
key changes to its provisions:
     Revising our proposed definition of retail pet store so 
that it means a place of business or residence (not necessarily that of 
the seller's) at which the seller, buyer, and the animal available for 
sale are physically present so that every buyer may personally observe 
the animal available for sale prior to purchasing and/or taking custody 
of that animal after purchase and where only certain animals are sold 
or offered for sale, at retail, for use as pets.
     Amending the exemption from licensing for persons 
maintaining four or fewer breeding females in Sec.  2.1(a)(3)(iii) to 
apply only to wholesalers (for whom the exemption was originally 
intended).
     Restoring and amending the exemption in Sec.  
2.1(a)(3)(vii) so that any person including, but not limited to, 
purebred dog or cat fanciers, who maintains a total of four or fewer 
breeding female dogs, cats, and/or small exotic or wild mammals, and 
who sells, at retail, only the offspring of these dogs, cats, and/or 
small exotic or wild mammals, which were born and raised on his or her 
premises, for pets or exhibition, and is not otherwise required to 
obtain a license, is also considered a retail pet store for regulatory 
purposes.
     Explaining in detail the effects of the proposed 
provisions on cat and rabbit breeders.

III. Costs and Benefits

    The benefits of this rule justify its costs. More pet animals sold 
at retail will be brought under the protection of the AWA and monitored 
for their health and humane treatment. Improved animal welfare will 
benefit buyers of pets and the general public in various ways. 
Monitoring the health and humane treatment of pet animals should reduce 
the number of pets receiving inadequate care and reduces the 
possibility of sick or injured pet animals being purchased sight 
unseen. When a buyer receives a sick or abused pet animal, sight 
unseen, the responsibility for correcting inadequate care has been 
effectively transferred from the seller to the buyer without the 
buyer's knowledge or consent. If that buyer is unable or unwilling to 
provide the pet animal with needed care, a shelter may become the 
default caregiver for that animal. A reduction in the number of sick or 
abused pet animals received by buyers may reduce the number of such 
animals sent to shelters. Public shelters provide for the care of these 
unwanted pet animals, usually at local taxpayer expense. Also, as noted 
by several commenters, neglected or abused pet animals confiscated from 
substandard breeding operations are often sent to shelters to provide 
for their care. Newly regulated commercial breeders working to comply 
with AWA regulations will increase the health and well-being of the pet 
animals under their care.
    In addition, when breeding operations for which regulatory 
oversight is insufficient fail to adequately provide veterinary care 
for their animals, the buyer may subsequently incur greater costs 
associated with providing that care because needed care has been 
delayed. The rule will benefit buyers of animals by providing 
regulatory oversight to ensure that breeders provide necessary 
veterinary care.
    Animals can carry zoonotic diseases (diseases that can be 
transmitted between, or are shared by animals and humans). The 
possibility of an animal carrying a zoonotic disease is reduced with 
adequate veterinary care, including vaccinations. To the extent that 
improved oversight reduces the likelihood of pet-to-human transmission 
of zoonotic diseases such as rabies, the public as a whole will benefit 
from the rule. The rule will also address the competitive disadvantage 
of retail breeders who incur certain costs by adhering to AWA standards 
while retail breeders who do not operate their facilities according to 
AWA standards may bear lower costs.
    There is a great deal of uncertainty surrounding the number of 
facilities that will be affected by this rule, as we acknowledged in 
the proposed rule, and as evidenced in the public comments. There are 
hundreds of distinct dog breeds, and correspondingly large numbers of 
dog breeders in the United States. Breeders with an online presence are 
those most likely to be selling the offspring sight unseen and thus are 
more likely to be affected by this rule. We estimate that there could 
be between 8,400 and 15,000 such breeders in the United States. This 
estimate is based on the assumption that for every five breeders 
identified by APHIS in online breeder registries there is one other 
breeder that has not been identified who also uses remote marketing 
methods.
    However, this rule will only affect those dog breeders who sell 
dogs as pets, not for hunting, security, breeding, or other purposes; 
who maintain more than four breeding females on their property; and 
whose buyers are not all physically present to observe the animals 
prior to purchase and/or to take custody of that animal after purchase. 
When these conditions are taken into account, we estimate that there 
are between 2,600 and 4,640 dog breeders that may be affected by this 
rule.
    The rule will also affect cat breeders who maintain more than four 
breeding females at their facilities and sell the offspring as pets, 
sight unseen. Fewer than 2 percent of cats in the United States are 
purebred and raised by breeders. We estimate that about 325 cat 
breeders may be affected by this rule.
    The rule will also affect rabbit breeders who sell the offspring as 
pets, sight unseen, which is not a common practice because rabbits are 
usually sold face-to-face at auctions, exhibits, and fairs where buyers 
are physically present. We estimate that no more than 75 rabbitries may 
be affected by this rule.
    Newly regulated breeders will be subject to licensing, animal 
identification and recordkeeping requirements. In addition, affected 
entities will be subject to standards for

[[Page 57229]]

facilities and operations, animal health and husbandry, and 
transportation. One set of costs attributable to the rule will be 
incurred annually by all newly regulated entities, such as licensing 
fees. Other costs will depend on the manner and extent to which 
entities are not complying with the basic standards of the AWA. Some of 
these costs will be one-time costs in the first year, such as providing 
adequate shelter; others will recur yearly, such as providing adequate 
veterinary care.
    The cost of a license for breeders is based on 50 percent of gross 
sales during the preceding business year. As an example, if 50 percent 
of gross sales are more than $500 but not more than $2,000, the annual 
cost of a license is $70. Identification tags for dogs and cats cost 
from $1.12 to $2.50 each. Other animals such as rabbits can be 
identified by a label attached to the primary enclosure containing a 
description of the animals in the enclosure. We estimate that the 
average licensed breeder requires about 10 hours annually to comply 
with the licensing paperwork and recordkeeping requirements. All newly 
licensed breeders will incur these costs. We estimate these costs would 
be between about $284 and $550 for a typical dog breeder. Costs at the 
3,000 to 5,000 newly licensed dog, cat, and rabbit breeders for animal 
licensing, animal identification and recordkeeping could range between 
$853,000 and $2.8 million annually.
    The newly regulated breeders will also need to meet regulatory 
standards concerning facilities and operations, animal health and 
husbandry, and transportation. However, as acknowledged by a wide 
spectrum of commenters on the proposed rule, most breeders maintain 
their facilities well above the minimum standards of the AWA. 
Therefore, the vast majority of newly regulated breeders will only need 
to incur licensing, animal identification, and recordkeeping costs and 
not need to make structural and/or operational changes in order to 
comply with the standards. Neither the number of entities that will 
need to make changes nor the extent of those changes is known. 
Therefore, the overall cost of structural and operational changes that 
will be incurred due to this rule is also unknown. However, we can 
estimate the general magnitude of these costs by assuming the newly 
regulated entities exhibit patterns of noncompliance similar to those 
of currently regulated wholesale breeders. We agree with many comments 
we received that most breeders that may be affected by this rule are 
already substantially in compliance.
    Based on our experience regulating wholesale breeders, the most 
common areas of regulatory noncompliance at prelicensing and compliance 
inspections are veterinary care, facility maintenance and construction, 
shelter construction, primary enclosure minimum space requirements, and 
cleaning and sanitation. We apply percentages of noncompliance for 
these areas, multiplied by likely unit costs or cost ranges, to the 
estimated number of affected breeders described above to arrive at a 
total cost range for the rule. We estimate that costs for coming into 
compliance for currently noncompliant breeders could range from $2.9 
million to $12.1 million in the first year, when both one-time 
structural changes will occur and annual operational changes will 
start.
    The rule will also affect some currently licensed wholesale 
breeders. Expanding the licensing exemption from three or fewer 
breeding females to four or fewer breeding females could reduce the 
number of these licensees. We expect that the number of current 
licensees that will fall below the exemption threshold following the 
implementation of this rule will be very small.
    The majority of businesses affected are likely to be small 
entities. As explained, this wide range in total cost is mainly derived 
from the uncertainty surrounding the total number of breeders that will 
need to become licensed as a result of this rule and the number that 
will then need to make structural or operational changes. It derives to 
a lesser degree from the ranges in costs that are assumed will be 
incurred by the newly licensed facilities to remedy instances of 
noncompliance.

IV. Discussion of Comments

    We solicited comments on the proposed rule for 60 days ending July 
16, 2012. On July 16, 2012, we published in the Federal Register (77 FR 
41716, Docket No. APHIS-2011-0003) a document \3\ announcing a 30-day 
extension of the comment period to give the public more time to submit 
comments. We also announced in that document the availability of a 
factsheet \4\ regarding the provisions of the proposed rule.
---------------------------------------------------------------------------

    \3\ To view this document, go to http://www.regulations.gov/#!documentDetail;D=APHIS-2011-0003-8841.
    \4\ To view the factsheet, go to http://www.aphis.usda.gov/publications/animal_welfare/2012/retail_pets_faq.pdf.
---------------------------------------------------------------------------

    We received 75,584 individual comments, 134,420 signed form 
letters, and 213,000 signatures on petitions submitted by organizations 
supporting or opposing the proposed rule. The comments were from animal 
welfare organizations, kennel clubs, breed registries, organizations 
representing owners and trainers of working dogs, not-for-profit animal 
rescue and sheltering organizations, animal transporters, purebred dog 
and cat fanciers, residential breeders of dogs, cats, rabbits, rats, 
and other animals, USDA-licensed breeders, pet and pet supply stores, 
pet owners, farmers, veterinarians and veterinary organizations, horse 
and livestock owners and producers, raptor propagators, State 
governments, elected officials, including U.S. Senators and 
Representatives, and members of the public. The issues raised by the 
commenters are discussed below by topic. We address the issues in the 
order that they pertain to the regulatory text of the proposed rule, 
then address comments pertaining to oversight and enforcement, 
constitutionality and legality, and other topics.

Dealer Definition

    We proposed to amend the definition of dealer in Sec.  1.1 of the 
AWA regulations to mean: ``Any person who, in commerce, for 
compensation or profit, delivers for transportation, or transports, 
except as a carrier, buys, sells, or negotiates the purchase or sale 
of: Any dog or other animal whether alive or dead (including unborn 
animals, organs, limbs, blood, serum, or other parts) for research, 
teaching, testing, experimentation, exhibition, or for use as a pet, or 
any dog at the wholesale level for hunting, security, or breeding 
purposes. This term does not include: A retail pet store, as defined in 
this section; any retail outlet where dogs are sold for hunting, 
breeding, or security purposes; or any person who does not sell or 
negotiate the purchase or sale of any wild or exotic animal, dog, or 
cat and who derives no more than $500 gross income from the sale of the 
animals other than wild or exotic animals, dogs, or cats during any 
calendar year.'' This proposed amendment to the definition of dealer 
was necessary in order to eliminate inconsistencies between that 
definition and our proposed definition of retail pet store.
    In the paragraphs that follow, we use discrete portions of the 
proposed definition as section headings to organize our discussion of 
the comments we received on various aspects of the proposed definition. 
Later in this document we take the same approach in our discussion of 
the

[[Page 57230]]

comments received on the proposed definition of retail pet store and 
the proposed revisions to the exemptions from licensing contained in 
the AWA regulations.
    Dealer: ``Any person who, in commerce, for compensation or profit . 
. .''
    A number of commenters stated that APHIS had failed to define the 
terms ``commerce'' and ``compensation'' as the terms are used in the 
definition of dealer. Specifically, they noted that private animal 
rescues and shelters that suggest a self-determined donation are not 
operating in commerce or attempting to obtain compensation or profit 
and thus do not fall under the definition of dealer (see also the 
section below titled ``Requests for Additional Exemptions''). Likewise, 
many commenters stated that the business model of rescue and shelter 
organizations is clearly different from that of dealers in that it 
involves neither compensation nor profit, and for that reason all 
rescues and shelters should be exempt from licensing. Several 
commenters stated that it is illegal for 501(c)(3)s to require 
compensation or to attempt to profit from any services that they 
provide; one of these commenters expressed concern that, if requests 
for donations by private animal rescues or shelters are considered to 
be commerce or compensation, those organizations would be forced to pay 
Federal, State, and/or local taxes on every sale of a rescued or 
abandoned animal.
    On the other hand, some commenters noted that animal shelter and 
rescue organizations that transport and offer for adoption rescued dogs 
and cats employ a business model that does not significantly differ 
from those of many dealers. The commenters also noted that rescues 
often request substantial adoption fees for their services and that 
those fees constitute compensation. Many of these commenters concluded 
that such organizations should therefore be regulated as dealers.
    We consider private rescues and shelters that perform any of the 
activities listed in the definition of dealer, including transporting 
or offering animals for compensation, to be dealers. We consider acts 
of compensation to include any remuneration for the animal, regardless 
of whether it is for profit or not for profit. Remuneration thus 
includes, but is not limited to, sales, adoption fees, and donations.
    We note, however, that dealers are only required to be licensed if 
they do not meet any of the exemptions in the regulations. Many private 
rescues and shelters operate under a business model in which 
representatives for the rescue or shelter and the animals available for 
sale or adoption are physically present at a location where the public 
is encouraged to personally observe the animals; this business model is 
consistent with our definition of retail pet store. As a result, 
private rescues and shelters with this business model have historically 
been exempted under the retail pet store exemption in Sec.  
2.1(a)(3)(i) and will continue to be exempted.
    Finally, we consider such rescues and shelters to be retail pet 
stores only for the purposes of our regulations. Whether any other 
Agency or jurisdiction defines such an organization as a retail pet 
store for taxation or any other purpose is beyond our purview.
    One commenter asked whether the proposed rule establishes a new 
class of licensee to be categorized in the same manner as existing 
dealers, and if so, it is unclear how APHIS could treat the new dealers 
differently from those existing licensees.
    We are not establishing a new class of licensee. All newly licensed 
dealers would be subject to the same requirements as dealers who are 
currently licensed.
    Dealer: ``Including unborn animals, organs, limbs, blood, serum, or 
other parts. . . .''
    One commenter stated that she frequently purchases semen in order 
to impregnate female dogs that cannot travel to stud because of 
distance or risk to health. The commenter added that she does not sell 
the female dogs or their offspring and for that reason should not be 
considered a dealer.
    Unless an individual buys or sells, at retail, or transports semen 
or unborn animals for one of the six purposes listed in the definition 
of dealer (research, teaching, testing, experimentation, exhibition, or 
use as a pet), the individual is not a dealer. The activities described 
by the commenter do not fall under any of the listed purposes.
    The same commenter asked whether individuals involved in 
transporting a female dog back from a stud after breeding would be 
considered dealers, since the female dog is presumed to be carrying an 
unborn animal within it at that time.
    We consider persons transporting pregnant female dogs in retail 
commerce for breeding purposes to be exempted from licensing, as this 
purpose is not one of the six purposes listed in the definition of 
dealer.
    Dealer: ``For research, teaching, testing, experimentation, 
exhibition, or for use as a pet[hellip]''
    Several commenters stated that they sold animals at retail for 
purposes other than the six specified in the definition of dealer. 
These commenters stated that they believed themselves to be outside of 
the scope of dealers and thus not subject to licensing but asked for 
clarification. Some of these commenters, including dog, cat, and rabbit 
dealers, stated that they sold or transported animals only in order to 
preserve bloodlines. The commenters who mentioned rabbits also stated 
that most rabbit breeders sell rabbits for one of three purposes: Food, 
fur, or preservation of bloodlines.
    One commenter stated that, if APHIS were to indicate that all 
individuals who buy, sell, or transport animals for the preservation of 
bloodlines (i.e., breeding purposes) are not within the scope of 
dealer, it could provide a loophole for dealers to evade regulatory 
oversight. That being said, the commenter suggested that individuals 
who buy, sell, or transport a dog for which there are fewer than 100 
registered litters in the United States should be allowed to state that 
they are acting solely to preserve rare bloodlines.
    If an individual is selling animals at retail for breeding 
purposes, that individual is not a dealer. We do, however, share the 
commenter's concern that claiming breeding purposes as the purpose for 
an animal's retail sale could be subject to abuse. Therefore, if we 
were to receive word that individuals making such claims are, in fact, 
marketing their animals as pets, we would consider this to be grounds 
for initiating an investigation to resolve the matter.
    Another commenter stated that he bred and sold dogs for 
participation in agility competitions and asked if he would be 
considered a dealer.
    We are making no changes in response to this comment. It has been 
our experience that dogs that participate in agility competitions are 
primarily marketed as personal or family pets. An individual selling 
dogs at retail for use as pets would be considered a dealer.
    Dealer: ``Any retail outlet where dogs are sold for hunting, 
security, or breeding purposes . . .''
    Many commenters stated that if the purpose of this clause is to 
exempt sellers and buyers of working dogs from being dealers, its 
description is too limited in scope. The commenters cited a number of 
different uses for a dog--a companion animal for individuals with 
disabilities, a guide dog, a herd or livestock dog, a sled dog, or a 
rescue

[[Page 57231]]

dog--that do not fall within the scope of these uses but that require a 
dog to be trained to perform a specific function. The commenters urged 
us to expand the exemption to cover additional uses or to amend it to 
specify that it covers dogs sold at retail for work purposes.
    Individuals who sell or buy dogs at retail for any purpose other 
than the six listed in the definition of dealer are not dealers. The 
examples cited in the exemption (hunting, security, or breeding 
purposes) are only intended to illustrate other purposes for buying or 
selling a dog at retail. As commenters pointed out, those examples are 
not exhaustive, and there are many other purposes that a dog can be 
used or trained for that are not included under the definition of 
dealer.
    Finally, we note that persons selling dogs at the wholesale level 
for hunting, security, or breeding purposes are considered to be 
dealers.
    Several commenters stated that they sold dogs at retail only for 
hunting, security, or breeding purposes but that sometimes birth 
defects, genetic anomalies, poor temperament, or other flaws preclude 
them from selling some of the offspring for those purposes. Other 
commenters stated that they imported and maintained dogs for use in 
working dog programs, but occasionally if a dog did not work out as a 
working animal, it would be sold at retail as a pet. The commenters 
asked whether they were covered by the exemption.
    Individuals who intend to breed and sell dogs at retail as working 
dogs may occasionally raise a dog that lacks the characteristics that 
would enable it to be sold or used for its intended working purpose. As 
long as the individual originally intended to raise and sell the dog at 
retail for that purpose and the individual continues to market his or 
her dogs for that purpose, the individual could sell that dog at retail 
and remain exempt.
    Another commenter asked whether a person operating a multi-use 
retail facility, in which some dogs were sold at retail for hunting or 
security and others were sold for other purposes, would be considered a 
dealer.
    Any person selling dogs at retail for one of the six purposes 
stated in the definition of dealer, including as pets, would be 
considered a dealer. If the dogs intended to be sold as pets at a 
multi-use retail facility are commingled with dogs intended to be sold 
for purposes other than one of the six in the definition of dealer, all 
parts of the multi-use facility would be subject to regulation.
    One commenter stated that he sold dogs at retail for hunting, but 
did so from his home rather than from an outlet. The commenter asked 
whether he was still exempt from being considered a dealer.
    An individual selling dogs at retail solely for hunting purposes is 
not a dealer.
    One commenter asked how APHIS determines from a seller that a dog 
sold for hunting, herding, or other work will not also be used as a 
pet.
    In making such a determination, we consider the manner in which the 
seller markets his or her animals and gather feedback from buyers and 
State, county, and local authorities.
    Dealer: ``Who does not sell or negotiate the sale of any wild or 
exotic animal, dog, or cat and who derives no more than $500 gross 
income from the sale of [such animals] during any calendar year.''
    Excluded under the definition of dealer is any person who does not 
sell or negotiate the purchase or sale of any wild or exotic animal, 
dog, or cat and who derives no more than $500 gross income from the 
sale of animals other than wild or exotic animals, dogs, or cats during 
any calendar year. A number of sellers stated that the costs of animal 
breeding have risen significantly in recent years and a $500 limit for 
this exemption is too low. They asked that it be adjusted upwards to 
compensate for inflation. On the other hand, several commenters stated 
that the $500 de minimis exemption is too high.
    The gross income limit is set by the AWA. However, it is important 
to note that, under the proposed rule, there are a number of other ways 
that persons who sell animals covered by this exemption (including 
rabbits, guinea pigs (cavies), and rats) can be exempted from 
licensing, either by not meeting the definition of dealer in Sec.  1.1 
or through one or more of the licensing exemptions in Sec.  2.1 (see 
the section below titled ``Retail Pet Store: ``. . . rabbits, guinea 
pigs . . .'').
    Several commenters asked why sales of dogs or cats are not covered 
by this exemption, and suggested it be amended to exempt individuals 
who derive no more than $500 gross income from the sale of any animals 
listed in the definition of dealer.
    The AWA does not include dogs and cats under this particular 
exemption.
    Dealer: Discrepancy with the definition of ``pet animal''
    One commenter noted a discrepancy between the list of animals 
covered under the definition of pet animal and animals listed in the 
definition of dealer in Sec.  1.1. The commenter stated that this 
discrepancy was likely to result in a degree of confusion among 
breeders regarding whether they fell under the regulations as a dealer. 
In order to clarify the definition of pet animal, the commenter 
suggested amending the definition to read as follows: ``Pet animal'' 
means any animal that has commonly been kept as a pet in family 
households in the United States, such as dogs, cats, guinea pigs, 
rabbits, and hamsters. This term excludes: (1) Any wild or exotic or 
other non-pet species of warm-blooded animals (except birds), such as 
skunks, raccoons, nonhuman primates, ocelots, foxes, coyotes, etc.; and 
(2) animals sold at retail in commerce for any of the following 
purposes: hunting, security, breeding, food, or fiber (including 
fur).''
    We are making no change in response to this comment. Animals listed 
under the definition of dealer are there for the purpose of indicating 
which persons are subject to regulation and focus on the type of animal 
and how it is bought, sold, or transported in commerce. Animals listed 
under the definition of pet animal provide examples of ``pets'' as that 
term is used in the definition of dealer.

Retail Pet Store Definition

    We proposed to revise the definition of retail pet store so that it 
would mean ``a place of business or residence that each buyer 
physically enters in order to personally observe the animals available 
for sale prior to purchase and/or to take custody of the animals after 
purchase, and where only the following animals are sold or offered for 
sale, at retail, for use as pets: Dogs, cats, rabbits, guinea pigs, 
hamsters, gerbils, rats, mice, gophers, chinchillas, domestic ferrets, 
domestic farm animals, birds, and coldblooded species.'' We also 
proposed to specify that persons who meet the criteria for an exemption 
from licensing in Sec.  2.1(a)(3)(iii) of the AWA regulations are 
retail pet stores.
    Retail Pet Store: ``A place of business or residence . . .''
    Several commenters wanted to know why, in revising the definition 
of retail pet store, we had removed the word ``outlet'' and added the 
words ``place of business or residence.''
    ``Outlet'' as used in the definition has always referred simply to 
the activity of retailing animals, not necessarily within the confines 
of a ``brick-and-mortar'' pet store or even a physical location. 
Accordingly, ``outlet'' in this context can include the sale of animals 
sight unseen, which is the retail activity that we proposed to 
regulate. For this reason, we proposed removing the word

[[Page 57232]]

``outlet'' and replacing it with ``place of business or residence.''
    A commenter stated that, by removing the word ``outlet'' and thus 
removing sight unseen sales from the scope of the retail pet store 
definition, we had fundamentally reinterpreted the implicit meaning of 
``retail'' within the AWA. The commenter stated that ``retail'' has 
always been understood to mean sale directly to the consumer and added 
that the method of delivery does not change the underlying structure of 
the retail transaction. Similarly, several commenters pointed out that 
sight unseen sales were fairly common during the time period when 
Congress passed the AWA, but are not mentioned within the Act as an 
activity that contributes to animal neglect or abuse; these commenters 
concluded that the AWA must therefore consider retail sales of pets to 
include sight unseen sales.
    We disagree with the commenters that we reinterpreted the meaning 
of ``retail'' in relation to the AWA, or that the AWA includes sight 
unseen sales within the scope of retail sales. It is our contention 
that the AWA envisioned a retail pet store as a business in which the 
seller, buyer, and animal are physically present so that every buyer 
can personally observe the animal for sale prior to purchasing and/or 
taking custody of that animal, thus ensuring that the animals were 
monitored for humane care and treatment.
    In the factsheet,\5\ we clarified our proposed change to the retail 
pet store definition by noting that pet animal retailers who sell their 
animals to customers in face-to-face transactions at a location other 
than their premises are also subject to some degree of public 
oversight, and therefore we would not regulate them for that activity.
---------------------------------------------------------------------------

    \5\ See footnote 4.
---------------------------------------------------------------------------

    Several commenters stated that the factsheet is inconsistent with 
the proposed rule because a face-to-face transaction at any location 
other than a fixed residence or place of business is substantively 
different from going to that residence or place of business to observe 
animals offered for sale.
    Although the AWA does not define ``retail pet store,'' the Act 
exempted retail sellers of pets from licensing pursuant to the Act. As 
we mentioned above, it is our contention that it did so because 
sellers, buyers, and animals are physically present at retail pet 
stores so that buyers can personally observe the animals before taking 
custody of those animals, thus ensuring that the animals are monitored 
for humane care and treatment. Personal observation of an animal 
offered for sale can and does take place at locations other than a 
``brick-and-mortar'' pet store, so restricting the definition of retail 
pet store to ``brick-and-mortar'' stores is unnecessary and not in 
keeping with the intent of the AWA.
    A few commenters asked for a definition of a ``face-to-face'' 
transaction.
    We consider a face-to-face transaction as one in which the seller, 
buyer, and the animal available for sale are physically present so that 
every buyer may personally observe the animal prior to purchasing and/
or taking custody of that animal. While the seller's presence at this 
transaction was implicit in our proposed definition of retail pet 
store, we are amending the definition to actually include the word 
``seller'' in order to underscore his or her presence.
    Several commenters stated that, while the intent of our proposed 
changes was likely to exempt small-scale residential breeders from 
licensing, labeling such breeders as a retail pet store has unintended 
adverse effects. Many commenters pointed out that local zoning codes 
often prohibit retail stores in areas designated for residential use, 
while others stated that State and local tax codes often require retail 
stores to file differently from ``hobby businesses'' and asked whether 
APHIS had considered these implications. One breeder asked whether, 
pursuant to Internal Revenue Service Code Section 183, being considered 
a retail pet store by APHIS would allow him to claim ``for profit'' 
status and increase the number of itemized deductions he could claim on 
his tax form.
    We used the term retail pet store only for the specific purpose of 
defining certain persons who sell pets at retail as retail pet stores, 
thus exempting them from licensing pursuant to the AWA.
    One commenter suggested that we should remove the words ``or 
residence'' and the reference to Sec.  2.1(a)(3)(iii) from the retail 
pet store definition and instead specify that hobby breeders fall under 
the definition of retail pet store. The commenter stated that we could 
define the term ``hobby breeder'' in the manner specified in current 
USDA Animal Care guidance for dealers, transporters, and researchers: 
``Small-scale breeders with gross sales under $500 per year, provided 
that such sales do not include wild or exotic animals, dogs, or cats; 
and/or small-scale breeders with four or fewer breeding cats and dogs 
who sell the offspring.''
    The definition of ``hobby breeder'' provided by the commenter is 
our longstanding understanding of that term. However, we are retaining 
the word ``residence'' in the definition of retail pet store because we 
established in Doris Day Animal League (DDAL) v. Veneman \6\ that we 
consider residential breeders selling pets at retail to be included 
under the exemption of ``retail pet stores'' in the AWA.
---------------------------------------------------------------------------

    \6\ Doris Day Animal League v. Veneman, 01-5351: published 1/23/
2003. Doris Day Animal League filed a rulemaking petition with the 
Agriculture Department, urging a change in the regulatory definition 
of ``retail pet store'' so that residential operations would not be 
exempted. On March 25, 1997, the Secretary published the petition in 
the Federal Register (62 FR 14044) and received more than 36,000 
comments. On July 19, 1999, when the Secretary announced in the 
Federal Register that he would retain the definition, and stated the 
reasons why (64 FR 38546), Doris Day Animal League and other 
organizations and individuals concerned about the mistreatment of 
dogs brought this action for judicial review.
---------------------------------------------------------------------------

    Retail Pet Store: ``That each buyer physically enters. . . .''
    Many commenters objected to the provision that each buyer be 
required to enter the premises where animals are offered for sale. Some 
of them presented a number of different scenarios in which, they 
stated, it would be impracticable to have each buyer personally observe 
the animal prior to purchasing and/or taking custody of it after 
purchase. Suggested scenarios included sales to foreign customers; 
sales to disabled or elderly customers for whom travel to the buyer is 
a health risk; and sales of a rare breed, with a handful of 
geographically dispersed owners, for preservation of bloodlines. Many 
of these commenters added that personally delivering animals to buyers 
would also be impractical and costly.
    We proposed this provision because it is our contention that the 
AWA considers a retail pet store to be one in which the buyer, seller, 
and animal are physically present so that every buyer can personally 
observe the animal available for sale prior to purchasing and/or taking 
custody of that animal. Animals that are sold at retail sight unseen 
are not personally observed by buyers prior to purchase. However, it is 
important to note that we consider the buyer of a pet animal sold at 
retail to be the person who takes custody of the animal after purchase, 
even if this person is not the ultimate owner of the animal. Bearing 
this in mind, we consider many of the scenarios presented by commenters 
to pertain to issues that would preclude the ultimate owner of the 
animal, not the buyer, from being physically present to observe the 
animals. However, a carrier or intermediate handler cannot be 
designated as the buyer.
    Retailers who, for whatever reason, do not consider it possible for 
each buyer to personally observe their animals prior to purchasing them 
and/or taking

[[Page 57233]]

custody of them may still be exempt from licensing if they do not sell 
the animals at retail for one of the six purposes covered under the 
definition of dealer. If they sell the animals at retail for one of 
those six purposes, but maintain four or fewer breeding females and 
sell only the offspring born and raised on their premises, they are 
also exempt from licensing.
    Those who own more than four breeding females and wish to continue 
selling the offspring as pets, sight unseen, can do so by obtaining a 
license and allowing APHIS inspectors to inspect their facility. As 
explained in the economic analysis prepared for this final rule, the 
costs associated with being licensed will be relatively low for all but 
that small percentage of newly licensed breeders who are not currently 
compliant with the AWA standards.
    Commenters who cited the need to engage in sight unseen sales to 
preserve a bloodline often cited animal health risks associated with 
not doing so. An organization representing a rare dog breed, for 
example, stated that sight-unseen sales of its breed for breeding 
purposes are necessary in order to keep the breed from becoming 
extinct. The commenter stated that when the breed is deprived of a wide 
genetic pool, fatal heritable conditions can begin to appear within the 
breed. Several other breeders of rare dogs, cats, and rabbits made 
similar claims. Several small-scale residential breeders stated that 
their practice of occasionally shipping animals to each other for stud 
services will no longer be possible and result in less genetic 
diversity for their breed.
    We do not expect licensing of some breeders to result in the 
extinction of rare breeds, an increase in health issues, or a decrease 
in genetic diversity. A person who sells and ships animals at retail 
for breeding purposes is not considered a dealer and thus not subject 
to licensing. Such persons could continue selling at retail and 
shipping animals sight unseen as long as the animal is used for 
breeding purposes and not for any of the six purposes listed under the 
definition of dealer in Sec.  1.1.
    One commenter asked how recently buyers must have visited a 
facility before a seller can sell them a pup remotely. As an example, 
the commenter wanted to know whether, if buyers visited her facility 2 
years earlier to buy a pup, she could remain exempt if she shipped them 
a second pup without them visiting her a second time.
    As indicated in our revised definition of retail pet store, each 
purchase of a pet animal requires that the seller, buyer, and the 
animal available for sale are physically present so that every buyer 
may personally observe the animal prior to purchasing and/or taking 
custody of that animal after purchase. Accordingly, if the buyers 
observed this second pup during their visit, this condition is 
fulfilled. If they did not (e.g., if the pup was not yet born when the 
prior transaction took place), this condition is not fulfilled.
    Several commenters opposed to the rule questioned APHIS' basis in 
assuming that sight unseen sales of pet animals necessarily constitute 
a potential risk to animal welfare. To support their point, many of 
these commenters stated that they regularly buy healthy animals sight 
unseen or sell healthy animals sight unseen to satisfied customers. The 
commenters pointed out that in the proposed rule, APHIS had failed to 
quantify the number of complaints that had arisen regarding sight 
unseen sales of animals, the percentage of complaints that came from 
unique customers, and the relative severity of the complaints. The 
commenters also noted that APHIS did not conduct a survey of all 
individuals who buy animals sight unseen to see what percentage of them 
were satisfied with the welfare of the animals they purchased.
    On the other hand, several commenters supporting the rule provided 
accounts of sick and injured pet animals that they had bought sight 
unseen or had been bought by others known to them. Several 
veterinarians commented that pet animals bought sight unseen by their 
owners were often brought to their clinics with a wide range of health 
problems.
    The primary purpose of the proposed rule was to revise the 
definition of retail pet store so that it is consistent with the AWA. 
It is our contention that the AWA exempted pet retailers from licensing 
because the seller, buyer, and animal are physically present in the 
same place so that the buyer can personally observe the animal 
available for sale prior to purchasing and/or taking custody of that 
animal, thus monitoring them for humane care and treatment. This 
physical presence and personal observation does not occur when 
retailers sell and ship pets sight unseen.
    A few commenters stated that they had sold animals sight unseen in 
the past but no longer did so, and asked that, if the proposed rule is 
finalized, whether the scope of this definition should not be 
retroactively applied to them.
    The effect of this rulemaking and its enforcement would not be 
retroactive to any prior actions.
    A number of commenters expressed concern that using the Internet or 
news media to generate customers would result in a loss of the 
exemption from licensing. Many commenters also expressed uncertainty 
whether any remote sales completed over the Internet will automatically 
subject them to licensing requirements, even if the buyer picks up the 
animal in person after buying it online. One commenter expressed 
concern that she would be considered an Internet seller because she has 
posted sales ads online in the past.
    We are not regulating the use of the Internet (or any other method 
of sale). Sellers are free to use the Internet to advertise or sell pet 
animals, provide information to buyers, and conduct other related 
activities. Indeed, a seller who sells over the Internet could still be 
considered a retail pet store provided that, before the buyer takes 
custody of the animals purchased, the seller, buyer, and animals have 
been physically present in one location so that the buyer may 
personally observe the animals.
    A number of commenters stated that they preferred the alternative 
set forth in the proposed rule that considered a regulatory threshold 
based on percentage of sight unseen sales. The commenters challenged 
APHIS' assertion that it has no authority under the AWA to require 
retail pet stores to make and retain sales records, and asked, if this 
is the case, how APHIS currently determines that a person meets the 
exemption from licensing in Sec.  2.1(a)(3)(iv) of the regulations.
    Persons who are exempt from licensing under the AWA cannot be 
required under the AWA regulations to keep records. The commenter's 
question about Sec.  2.1(a)(3)(iv) addresses how we determine a 
person's eligibility for an exemption without requiring them to keep 
records. This exemption applies to persons selling fewer than 25 dogs 
and/or cats each year for research, teaching, or testing purposes. We 
determine a person's exemption eligibility by inspecting records kept 
by the research, teaching, and testing facilities that buy these 
animals. These facilities are required under the AWA to document when 
and from whom the animals are purchased.
    The same commenters pointed out that APHIS' stated second reason 
for not establishing a threshold, that animals sold sight unseen could 
be kept under conditions different from those sold to walk-ins, is not 
resolved by eliminating sight unseen sales from the exemption. The 
commenters pointed out that a large-scale breeder could appear to be in 
compliance with the regulations by

[[Page 57234]]

establishing a ``brick-and-mortar'' facility for walk-ins while 
engaging surreptitiously in sight unseen sales of animals bred at 
another location. The commenters stated that an exemption based on 
percentage of retail sales would be likely to dissuade such abuses. 
Another commenter noted that, for many small-scale residential dog 
breeders, sight unseen sales constitute 20 percent of annual sales. The 
commenter stated that APHIS should therefore adopt an ``80/20'' 
threshold of face-to-face to sight unseen sales.
    We have no evidence to indicate that allowing retail pet stores to 
conduct a percentage of their sales sight unseen would discourage 
large-scale breeders from engaging in fraudulent practices, nor do we 
have information to indicate why an 80/20 ratio of face-to-face to 
sight unseen sales would be appropriate.
    A few commenters asked that the final rule ``grandfather in'' 
existing relationships with remote customers, and specify that after 
the effective date of the rule each new buyer would have to physically 
enter a place of business or residence.
    We are making no changes in response to the comments. As noted 
above, persons who are exempt from licensing under the AWA cannot be 
required under the AWA regulations to maintain the records necessary to 
monitor and enforce such an approach.
    Retail Pet Store: ``That each buyer physically enters. . . .''
    A few commenters asked whether a buyer could use an agent to serve 
in his or her place.
    As we mentioned above, for purposes of our definition of retail pet 
store, we consider the buyer to be the person who takes custody of the 
animal after purchase. This person may differ from the ultimate owner 
of the animal but cannot be acting as a carrier or intermediate 
handler.
    Retail Pet Store: ``That each buyer physically enters. . . . ''
    A number of commenters asked why a buyer's physical presence at a 
place of business or residence was necessary to protect animal welfare. 
The commenters pointed out that Web-based technologies allow buyers to 
``virtually'' observe animals that are for sale. On the other hand, 
several commenters pointed out that virtual technologies can be 
manipulated to provide an inaccurate depiction of animal care at a 
seller's premises.
    While many breeders use Web-based technologies to provide buyers 
with visual and other information about the animals they sell, we agree 
with the commenters' point that such technologies can be used to 
inaccurately depict the health and condition of the animal for sale.
    Several commenters suggested amending the definition to allow 
buyers the option to waive the requirement to physically enter the 
seller's place of business or residence to observe the animals offered 
for sale. The commenters stated that this would prevent buyers who have 
an existing relationship with a seller from having to travel long 
distances to view animals when they felt confident about the care 
standards provided by the seller. A few commenters stated that this 
waiver should be in writing as documentary proof.
    One commenter suggested that the regulations should require that 
the seller have a return policy and that language requiring physical 
entry of the business or place of residence be removed from the 
definition of retail pet store. The commenter suggested that we define 
return policy as ``a written policy provided to a purchaser in a sales 
contract that contains provisions for returning the animal, reimbursing 
the purchaser, and adjudicating disputes.'' The commenter stated that 
return policies ultimately foster animal welfare, since sellers that 
provide poor care for their animals are subject to frequent returns and 
less able to turn a profit.
    We are making no change in response to these comments. Waivers and 
return policies used in place of requiring buyers to observe the 
animals face-to-face would be appropriate for a rule focused on 
consumer protection, not animal welfare, and could result in instances 
in which retail pet stores sold animals to buyers without the buyers 
being physically present to personally observe the animals prior to 
purchasing and/or taking custody of them. This would be inconsistent 
with the AWA.
    Some commenters noted that the proposed rule provides no evidence 
that purchasing or shipping animals sight unseen jeopardizes animal 
welfare and treatment. Several of these commenters pointed to various 
scenarios as examples in which such sales could be conducted sight 
unseen and without significant risk, such as when the buyer is a repeat 
customer with whom the seller has previously done business, when the 
buyer and seller are relatives or close friends for whom a preexisting 
relationship exists, or when the breed is so rare that each breeder is 
personally known within the community of potential buyers. One 
commenter, a State association of dog owners, cited the results of an 
informal survey showing that most of its members buying dogs sight 
unseen over the Internet saw few or no health problems in the dogs they 
purchased. Conversely, a veterinary medical association cited a study 
concluding that breeders who advertise on large-scale puppy sales Web 
sites and sell to customers sight unseen are less knowledgeable about 
breed-specific health issues compared to national parent club breeders, 
and that such breeders are often less likely to perform screening tests 
on their breeding dogs to detect undesirable heritable health risks.
    We are making no changes in response to these comments. Retail 
sales that are entirely sight unseen do not require the buyer to be 
physically present in order to personally observe the animal available 
for sale prior to purchasing and/or taking custody of that animal. It 
is our contention that this concept of physical presence for the 
purposes of personal observation is consistent with the AWA's use of 
the term retail pet store.
    Retail Pet Store: ``That each buyer physically enters. . . . ''
    A significant number of residential breeders objected to this 
provision. Many of the commenters cited human health and safety 
concerns and others cited animal health risks associated with opening 
their residence to buyers. They pointed out that many diseases of dogs, 
in particular, are zoonotic, and that buyers who are ill may transmit 
diseases to animals at their residences. Several of these commenters 
also stated that they had no way of knowing the disease status of any 
animals with which a buyer has recently come in contact, and expressed 
concern that clothing could serve as fomites (inanimate objects or 
substances capable of transmitting infectious organisms from one 
individual to another) for diseases of dogs. A few commenters stated 
that their animals become agitated when strangers enter their premises 
and stated that requiring buyers or inspectors to enter could therefore 
adversely impact animal welfare.
    A place of business can be any location in which the seller, the 
buyer, and the animal are physically present so that every buyer can 
personally observe the animal offered for sale prior to purchasing and/
or taking custody of that animal(s) after purchase.
    On the other hand, several commenters stated that, for the sake of 
animal welfare, buyers need to personally observe the breeding and 
living conditions of animals available for sale prior to purchasing 
and/or taking custody of those animals. The commenters suggested that 
we amend

[[Page 57235]]

the definition of retail pet store to specify that buyers must be able 
to see these conditions.
    Such an amendment would make the definition of retail pet store in 
our regulations significantly more restrictive than its meaning in the 
AWA. The AWA neither authorizes nor requires public oversight of 
breeding stock or the premises on which animals for sale at retail are 
maintained.
    Several commenters stated, both before and after issuance of the 
APHIS factsheet, that face-to-face sales at a mutually agreed-upon 
location should suffice in lieu of physically entering a fixed place of 
business or residence. Animal rescue organizations, in particular, 
supported this point by noting that buyers seldom visit their primary 
location, but that they always have face-to-face interaction with 
buyers at adoption events or when delivering the animal to the buyer.
    Such a face-to-face interaction is consistent with the AWA.
    One commenter suggested that we require a seller to have face-to-
face interaction with the buyer at some point prior to purchase and/or 
taking custody of an animal, but suggested that we decouple this from 
personal observation of the animal. The commenter stated that this 
would allow breeders who had developed long-standing relationships with 
existing buyers to ship dogs sight unseen while meeting the intent of 
the rule as they understood it. Another commenter agreed and pointed 
out a number of scenarios in which the breeder would be known to the 
buyer, but may not visually inspect the animals before purchase (buying 
from a blood relative or close friend, buying from a breeder with whom 
one has previously done business, and buying under time constraints 
that do not allow for visual inspection of the animal).
    We are making no changes in response to these comments. The 
definition of retail pet store is consistent with the AWA in that it 
requires that the seller, buyer, and the animal available for sale be 
physically present so that every buyer can personally observe the 
animal prior to purchasing and/or taking custody of that animal.
    A few commenters stated that, instead of requiring the buyer to 
enter the premises to observe the animal before purchase and/or taking 
custody, we should require all animals sold at a place of business or 
residence to be accompanied by a certificate of veterinary inspection 
attesting to their health and freedom from genetic disorders in order 
for that place of business or residence to meet the definition of 
retail pet store. Other commenters similarly noted that the required 
health certificate currently issued by a veterinarian for animals being 
shipped should be sufficient proof that the animal is in good health 
and that therefore entering the premises to observe the animal before 
purchase is unnecessary. Similarly, another commenter asked that if a 
dog is shipped internationally whether the requirements for shipping 
the dog (airline health certificate, USDA endorsed certificate, shot 
records) could be used in lieu of a face-to-face transaction.
    On the other hand, several commenters questioned the efficacy of 
veterinary certificates generally, stating that they had bought a pet 
that was accompanied by a veterinary certificate only to later discover 
the animal had a genetic condition or longstanding malady. For this 
reason, the commenters stated APHIS should review its policing of 
health certificates issued for dogs in transit to ensure that 
certificates are valid.
    We are making no changes in response to these comments. Persons 
exempted from licensing under the AWA, such as retail pet stores, are 
not required to obtain a veterinary health certificate when shipping an 
animal via commercial transport. For those licensees required to obtain 
such a certificate from a licensed veterinarian, the certificate only 
affirms that transport of the animal is not likely to pose a health 
risk to that animal or to other animals in transit. No relationship 
exists between issuance of a health certificate for an animal and the 
standard of care provided by the seller receiving the certificate. 
Finally, regardless of a certificate, any retail transaction that does 
not include the element of public oversight is inconsistent with the 
AWA.
    Several commenters stated that persons operating foster homes for 
abused or rescued animals should be exempted from having buyers/
adopters physically enter their premises. They stated that requiring 
such entrance would likely dissuade both foster persons and potential 
adopters from accepting dogs and cats and would ultimately adversely 
impact animal welfare.
    Persons who engage solely in face-to-face retail transactions are 
retail pet stores, regardless of whether these transactions occur at a 
residence or at some other location; as we noted above, most animal 
rescues engage solely in such types of retail transactions. Persons who 
foster pet animals in their homes on behalf of these rescues may 
conduct these face-to-face transactions at an alternative location and 
therefore would not be required to allow adopters to enter their 
premises.
    Several commenters stated that many of the reasons that render it 
difficult for a buyer to physically enter a seller's place of business 
or residence also apply to completing face-to-face transactions (e.g., 
age, health, or physical capacities of the buyer, distance between the 
seller and buyer, geographical isolation of seller).
    The commenters assumed that the buyer of an animal sold at retail 
is the ultimate owner of the animal. However, as noted above, we 
consider the buyer of an animal sold at retail to be the person who 
takes custody of that animal after purchase; this might not be the 
ultimate owner. For purposes of the definition of retail pet store, it 
is this person, not necessarily the ultimate owner, who must be 
physically present to observe animals available for sale. However, a 
carrier or intermediate handler cannot be designated as the buyer.
    One commenter objected to face-to-face transactions off-site on the 
grounds that they would put animal rescues and shelters at a 
competitive advantage over commercial retailers, since the former would 
be able to conduct face-to-face transactions of animals through 
networks of transport volunteers rather than by any employee of the 
rescue group or shelter actually meeting the buyer, while commercial 
retailers would be restricted to having only their employees conduct 
the sale.
    As is the case with commercial pet retailers, representatives of 
rescue groups also must be physically present at a place of business so 
that potential buyers/adoptees can personally observe their animals 
before purchasing and/or taking custody of them.
    A commenter noted that substandard Internet sellers could shift 
their model of business to selling animals face-to-face at a location 
off their premises to avoid licensing, as the proposed rule will not 
impact such activities.
    We carefully considered this comment when we decided to allow the 
seller, buyer, and animal available for sale be physically present at 
the same place, but not necessarily the seller's premises. This does 
not create an incentive for and a means of avoiding licensing for the 
types of dealers the AWA encompasses.
    Internet sellers who shift their model of business in such a manner 
would have to provide buyers with the opportunity to personally observe 
animals for sale prior to purchasing and/or taking custody of them, and 
thus will engage in a retail model that is consistent with the AWA. Our 
analysis

[[Page 57236]]

of the industry is that dealers who currently use an Internet sales 
business model would not find it economically viable to shift their 
business model in such a manner and would instead opt for licensing and 
inspection by USDA. As noted in our economic analysis, we believe that 
between 2,600 and 4,640 dog breeders who currently claim retail pet 
store status will no longer be able to do so under this rule. However, 
USDA will monitor the rule's implementation and consider proposing new 
rules should we determine that the AWA's intent is not being served.
    Another commenter suggested that, if sellers who have face-to-face 
transactions at shows, flea markets, and auctions are exempt from 
licensing, then the shows, flea markets, and auctions themselves should 
have to be licensed. (The commenter stated that events that solely 
serve non-profits should not have to be licensed.)
    If a seller is selling regulated animals to buyers at a show or 
event solely in retail, face-to-face transactions, that seller meets 
the definition of a retail pet store and is exempt from licensing 
regardless of the physical venue in which the animals are offered for 
sale. Auctions and other events in which regulated animals are sold at 
wholesale must be licensed.
    One commenter stated that both APHIS and other commenters may have 
understated the difficulty of meeting in public to purchase dogs or 
cats face-to-face. The commenter pointed to several State and local 
regulations that forbid or restrict sales or commercial transactions in 
public areas. The commenter concluded that, because of these 
difficulties, APHIS should revise the definition of retail pet store to 
allow some sight unseen sales to take place.
    We are making no changes in response to this comment. If local or 
State ordinances prohibit the sale of dogs or other pet animals in 
public areas, roadsides, or other locations, retailers of pet animals 
residing in the States or locales affected would retain the option of 
conducting business in any other location that is not prohibited by 
law.
    One commenter asked what sort of documentation APHIS would ask from 
sellers that a face-to-face transaction had occurred between them and 
the buyer of a pet. The commenter stated that this would almost 
certainly require recordkeeping if the buyer and seller offer differing 
accounts of the transaction.
    In instances where there is some question about the method of sale, 
APHIS will conduct an investigation and determine whether a sight 
unseen sale has occurred.
    Retail Pet Store: ``In order to personally observe the animals . . 
.''
    Several commenters stated that APHIS provided no evidence that 
having individuals personally observe pet animals prior to purchase 
will result in more humane treatment and healthier pets. A number of 
commenters stated that, while personally observing an animal prior to 
purchase and/or taking custody will allow a buyer to visually inspect 
the animal for signs of neglect or symptoms of certain diseases, a 
simple visual inspection will not reveal to the buyer whether the 
animal has genetic conditions or other maladies; several commenters 
pointed out that a number of genetic conditions of dogs and cats have a 
significant latency period. Another commenter pointed out that personal 
testimonials from animal welfare organizations received during the 
comment period have provided evidence that animals sold at retail often 
have genetic conditions that can only result from inbreeding or 
overbreeding.
    Our focus in this rule is to ensure that our definition of retail 
pet store is consistent with the AWA. It is our contention that the AWA 
exempted retail pet stores from Federal licensing and inspection 
requirements because, at such establishments, buyers are physically 
present in order to personally observe the animal available for sale 
prior to purchasing and/or taking custody of that animal, thus 
monitoring them for humane care and treatment.
    As an alternative to requiring buyers to personally observe the 
animals for sale, face-to-face, several commenters stated that all 
retail breeders should have to be licensed pursuant to the AWA 
regulations. On the other hand, a number of commenters pointed out that 
licensing of all such breeders would expand the scope of regulated 
entities far beyond APHIS' capacity to enforce the AWA regulations.
    We are making no change in response to these comments. The AWA 
exempts certain breeders from licensing.
    One commenter asserted that the blind are incapable of personal 
observation of animals.
    As long as the buyer is physically present with the animals prior 
to purchasing them and/or taking custody of them after purchase, it is 
considered an acceptable transaction for the purposes of maintaining 
the status of a retail pet store.
    Retail Pet Store: ``Where only the following animals are sold or 
offered for sale . . .''
    One commenter stated that this phrase is ambiguous because there is 
no distinguishing factor defining the difference between which animals 
are sold and which are offered for sale.
    Animals offered for sale are the property of the seller, while 
animals that are sold are the property of the buyer.
    Retail Pet Store: ``cats . . .''
    Several commenters noted that most pet cats come from sources other 
than small-scale cat breeders and that regulating such breeders is not 
necessary. A cat club representative cited a 2010 survey by the 
American Pet Products Association revealing that fewer than 1 percent 
of cats are obtained through Internet/online contact and only 2 percent 
of owned cats are obtained from breeders of pedigreed cats. The 
commenter stated that there is no need for Federal regulation of small 
or moderate scale home-based breeders of cats who have more than four 
breeding females, regardless of whether or not pet buyers come to their 
places of business.
    Given the presence of commercial cat breeders selling and shipping 
cats sight unseen, we consider some degree of Federal regulation to be 
necessary to ensure adequate oversight.
    Retail Pet Store: ``. . . rabbits, guinea pigs . . .''
    Several commenters asked APHIS to clarify for those who own rabbits 
and guinea pigs (cavies) the conditions under which they are required 
to obtain a USDA license.
    Only a very small number of persons selling rabbits and guinea pigs 
will be affected by this rule. Such persons may be required to obtain a 
license if the following applies to their situation: (1) They sell 
animals sight unseen; (2) They sell the animals as pets and not for 
purposes of food or fiber (including fur) or agricultural purposes; and 
(3) They do not qualify for the $500 gross income limit from licensing.
    Several commenters noted that the regulations were vague on when 
rabbits are to be considered livestock or pets for regulatory purposes.
    If a person sells rabbits only for the purposes of food or fiber 
(including fur), those animals are considered to be farm animals and 
the person is exempt from licensing.
    Some commenters were concerned that the rule would require 
licensing of National and State Future Farmers of America (FFA) 
organizations and 4-H participants who sell their rabbits and limit the 
ability of youth to breed and show rabbits at county fairs and other 
exhibitions.
    FFA and 4-H participants who sell their rabbits for the purposes of 
food or fiber (including fur) or in face-to-face

[[Page 57237]]

transactions at county fairs, rabbit shows, and other agricultural 
exhibitions are exempt from licensing regardless of the number sold.
    One commenter concerned about the sale of rabbits asked whether 
this proposal has any provisions that would stop some rabbit rescue 
organizations from buying rabbits from commercial sources and reselling 
them as ``rescues'' for a substantial profit.
    APHIS investigates all credible reports we receive of unlicensed 
activities involving sales of covered pets.
    A few commenters stated that we should entirely exempt guinea pig 
(cavy) breeders from licensing.
    Guinea pigs (cavies) are under the authority of the AWA, and APHIS 
is tasked with ensuring that all guinea pigs sold as pets are monitored 
for their humane care and treatment.
    Retail Pet Store: ``. . . rats . . .''
    Some commenters asked APHIS to clarify for those who own rats the 
conditions under which they would have to obtain a USDA license.
    Under the regulations, we currently cover rats other than those of 
the genus Rattus bred for use in research. Therefore, persons retailing 
covered rats would need to obtain a license if they are not otherwise 
exempt.
    Retail Pet Store: ``. . . gophers . . .''
    One commenter stated that gophers should be removed from the list 
of pets that can be sold without licensing in the definition of retail 
pet store. The commenter noted that while the other animals listed in 
that definition have historically been sold as pets, gophers have not 
and should more accurately be classified as ``wild animals.''
    We are making no changes in response to this comment. Our research 
shows that gophers have been bought and sold as pets in the United 
States for at least a decade.
    Retail Pet Store: ``. . . domestic farm animals . . .''
    Some commenters were uncertain about how the proposed rule would 
affect the ownership, breeding, and sale of farm animals.
    One commenter stated that the regulations are unclear with respect 
to livestock which may either be reared for utility purposes or kept as 
pets. The commenter noted that transfer of ownership of equids, bovids, 
caprids, lagomorphs, and domestic fowl is regularly conducted sight 
unseen both for utility purposes and as pets, and that sellers are 
sometimes not aware of the buyer's intended use of the animals. The 
commenter asked that APHIS add clarifying language to the regulations 
that allows the free exchange of domestic livestock and clarifies that 
livestock are, in most instances, not pets.
    Farm animals intended for use as food, fiber, or other purposes 
specified under the definition of farm animal in Sec.  1.1 are exempt 
from regulation. Farm animals intended to be used as pets, for 
biomedical research, or other nonagricultural research are regulated 
under the AWA. Persons exhibiting farm animals at agricultural shows, 
fairs, and exhibits are exempt from licensing. However, persons 
exhibiting farm animals for nonagricultural purposes (such as petting 
zoos) are required to be licensed.
    A national livestock organization asked that we include language 
allowing face-to-face transactions of farm animals.
    As noted above, farm animals intended for use as food, fiber, or 
other purposes specified under the definition of farm animal in Sec.  
1.1 are exempt from regulation, regardless of whether those animals are 
sold face-to-face or sight unseen. Farm animals sold specifically as 
pets in face-to-face transactions are also exempt from licensing. On 
the other hand, farm animals used for biomedical or other 
nonagricultural research, or for nonagricultural exhibition, are 
regulated under the AWA and require licensing.
    One commenter suggested that we specifically exempt horses not used 
for research purposes from the retail pet store definition.
    In Sec.  1.1, the term animal excludes horses not used for research 
purposes, which specifically exempts them from regulation.
    One commenter expressed concern that if a breeder maintains both 
farm animals and regulated animals on his residence, and the farm 
animals are deemed responsible for the breeder failing to meet the 
regulatory standards for the regulated animals, the breeder could be 
penalized and APHIS could remove the farm animals from the premises.
    Farm animals intended for use as food, fiber, or other purposes 
specified under the definition of farm animal in Sec.  1.1 are exempt 
from regulation, and therefore cannot be removed from a premises due to 
failure to meet the AWA regulations.
    Another commenter asked if any livestock sold to a buyer who does 
not have a ``farm plan'' on file with USDA would be considered as pets.
    The commenter is referring to a type of business plan required for 
certain Farm Service Agency loans. As noted above, animals sold and 
intended for use as food, fiber, or other purposes under the definition 
of farm animal in Sec.  1.1 are exempt from regulation regardless of 
whether the buyer has such a plan on file.
    Retail Pet Store: ``. . . birds . . .''
    A few commenters requested that APHIS create an exemption in the 
regulations for raptors. One commenter requested that we include 
specific exemptions from licensing and all other regulations 
promulgated under the AWA for falconers, raptor propagators, those that 
conduct education of the public regarding raptors, and raptor 
permittees. The commenter stated that these persons are already subject 
to other stringent Federal regulations designed to ensure the welfare 
of these raptors, including licensing, facility inspections, reporting 
requirements, and permit fees. Another commenter asserted that raptors 
are not pets, and thus do not fall under the scope of the AWA; hence 
their owners do not need to be licensed.
    Another commenter stated that we should exempt parrot breeders from 
licensing on the grounds that subjecting them to licensing will promote 
smuggling of parrots from other countries. Similarly, a commenter 
expressed concern that waterfowl could be affected by the proposed rule 
and requested that we include in our regulations an exemption for birds 
already regulated under the Migratory Bird Treaty Act of 1918.
    Finally, one commenter noted that there is no clear definition of 
``bird(s)'' in part 1. Because of this, the commenter wondered about 
the extent to which the regulations in parts 2 and 3 pertain to birds.
    On June 4, 2004, we published a final rule in the Federal Register 
(69 FR 31513-31514, Docket No. 98-106-3) that amended the definition of 
animal in the AWA regulations to include birds, other than those bred 
for use in research. However, APHIS has not established standards 
specific to birds.
    Retail Pet Store: ``. . . coldblooded species''
    A number of reptile breeders stated that the industry is highly 
self-regulated, and that sight unseen sales of reptiles tend to be of 
high-end, extremely valuable animals where animal welfare is paramount 
for the sake of the sale. The commenter suggested that sellers of cold-
blooded animals should be exempt from licensing, whether their sales 
are face-to-face or sight unseen. Another commenter asked how APHIS 
could require licensing of individuals who sell reptiles sight unseen, 
when the reptiles do not fall under the definition of animal.

[[Page 57238]]

    As the commenter noted, cold-blooded species do not fall under the 
definition of animal in Sec.  1.1 and are therefore not regulated.
    Retail Pet Store: ``A retail pet store also includes any person who 
meets the criteria in Sec.  2.1(a)(3)(iii) of this subchapter.''
    A number of commenters raised questions regarding the reference to 
Sec.  2.1(a)(3)(iii) that we proposed adding to the definition of 
retail pet store. Many of these commenters were unsure why persons 
meeting these criteria were considered retail pet stores. A few of 
these commenters asked whether being considered a retail pet store 
because of these criteria allows a person to claim the exemption in 
Sec.  2.1(a)(3)(i). One commenter, who met the criteria in Sec.  
2.1(a)(3)(iii), asked why he would need two separate exemptions from 
licensing.
    Several commenters surmised that we included this criterion within 
the scope of the proposed definition of retail pet store because we 
proposed to remove the exemption in Sec.  2.1(a)(3)(vii); many of these 
commenters referred to Sec.  2.1(a)(3)(vii) as the ``hobby breeder'' 
exemption, and suggested that our intent was to provide some hobby 
breeders an exemption from licensing.
    However, many of these commenters pointed out that the criteria in 
Sec.  2.1(a)(3)(iii) are significantly more restrictive than those in 
Sec.  2.1(a)(3)(vii). Although a number of these commenters agreed with 
APHIS that retaining the exemption unchanged in Sec.  2.1(a)(3)(vii) 
would continue to allow commercial Internet retailers of dogs and cats 
to remain exempt from licensing, the commenters stated that we had 
failed to provide a rationale for removing the exemption from licensing 
in Sec.  2.1(a)(3)(vii) for certain dog and cat fanciers.
    A number of self-described dog and cat fanciers stated that they 
did not meet any of the criteria in our proposed definition of retail 
pet store, but offered various reasons why they should be exempt from 
licensing. These reasons included: Because their animals are maintained 
in private residences; because dog and cat fanciers provide adequate 
care and treatment for their animals; and because dog and cat fanciers 
are ``known commodities'' among their clientele and that failing to 
provide adequate care for animals they offer for sale would ruin their 
reputations. Several of these commenters suggested that, in the final 
rule, we should specify that all dog and cat fanciers, rather than all 
individuals who meet the criteria in Sec.  2.1(a)(3)(iii), are exempt 
from licensing; a number of these commenters suggested that we keep the 
exemption in Sec.  2.1(a)(3)(vii) in the regulations, but specify that 
it pertains solely to dog and cat fanciers.
    The commenters who surmised that we proposed to include persons 
meeting the criteria of Sec.  2.1(a)(3)(iii) in the definition of 
retail pet store because we proposed to remove Sec.  2.1(a)(3)(vii) 
from the regulations are correct. The AWA exempts retail pet stores 
from licensing pursuant to the Act; this is the only exemption from 
licensing that is specified for retailers within the AWA. The 
exemptions from licensing that had existed in Sec.  2.1(a)(3)(i) and 
Sec.  2.1(a)(3)(vii) were in the AWA regulations because we had 
considered individuals who met the criteria in those paragraphs to be 
retail pet stores.
    In the proposed rule, we proposed to revise the definition of 
retail pet store to make it more restrictive than it had previously 
been; this is because, as we noted above, the existing definition had 
begun to be interpreted in a manner that was inconsistent with the AWA.
    Our proposed revisions to the definition of retail pet store 
conflicted with the criteria in Sec.  2.1(a)(3)(vii). However, as we 
mentioned above, that paragraph of the AWA regulations only could exist 
if we consider all persons who meet the criteria in the paragraph to be 
retail pet stores. Thus, we proposed to remove Sec.  2.1(a)(3)(vii) 
from the regulations, since it would have otherwise provided an 
exemption from licensing for people who did not meet our proposed 
revision to the definition of retail pet store.
    However, we recognized that if we were to remove Sec.  
2.1(a)(3)(vii) from the regulations, we would expose to licensing a 
subcategory of individuals, those with four or fewer breeding female 
dogs, cats, and/or small exotic or wild mammals who sell at least some 
of the offspring of these animals sight unseen, that we consider to 
present a low risk of noncompliance with the AWA. It has been our 
experience that such individuals maintain few enough breeding females 
on their premises to offer adequate care and treatment to each animal. 
To continue to exempt these individuals from licensing, we included the 
``breeding females'' exemption in Sec.  2.1(a)(3)(iii) within the scope 
of the definition of retail pet store.
    During preparation of this final rule, we then realized that Sec.  
2.1(a)(3)(iii), as written, applied both to retailers and to 
wholesalers with regard to breeding females. If we were to finalize the 
proposed definition of retail pet store to include persons who meet the 
criteria in Sec.  2.1(a)(3)(iii), this could mistakenly allow 
wholesalers to consider themselves to be retail pet stores, although 
they do not engage in retail sales. For these reasons, we are not 
removing Sec.  2.1(a)(3)(vii) from the regulations in this final rule. 
Instead, we are revising that exemption so that it duplicates the 
criteria contained in Sec.  2.1(a)(3)(iii) but specifies that those 
criteria moved into Sec.  2.1(a)(3)(vii) pertain only to retailers. 
Conversely, we are amending the exemption in Sec.  2.1(a)(3)(iii) to 
specify that it pertains only to wholesalers. Because of these 
amendments, we are in turn amending our proposed definition of retail 
pet store so that it includes individuals who meet the criteria in 
Sec.  2.1(a)(3)(vii) under the definition of retail pet store. We are 
also making a nonsubstantive change to the definition of retail pet 
store based on our inclusion under that definition of persons who meet 
the criteria in Sec.  2.1(a)(3)(vii). (These revisions are set forth in 
the regulatory text at the end of this rule.)
    Finally, it is not possible under the AWA to exempt a purebred dog 
or cat fancier from licensing solely because he or she is a purebred 
dog or cat fancier. However, dog and cat fanciers who meet the criteria 
in Sec.  2.1(a)(3)(vii) will be exempt from licensing because we 
consider them to be retail pet stores for the purposes of the AWA 
regulations.

$500 Gross Income Limit

    We also proposed to remove the limitation concerning the source of 
gross income in Sec.  2.1(a)(3)(ii) of the regulations, which exempts 
from licensing ``any person who sells or negotiates the sale of or 
purchase of any animal except wild or exotic animals, dogs, or cats, 
and who derives no more than $500 gross income from the sale of any 
animal except wild or exotic animals, dogs, or cats to a research 
facility, an exhibitor, a dealer, or a pet store during any calendar 
year and is not otherwise required to obtain a license.'' We proposed 
removing the limitation on the source of sales so that such persons 
could also sell their animals at retail if they wish and remain exempt 
under the $500 limit.
    Several commenters stated that the $500 gross income limit should 
be much higher because of inflation and the rising costs of animal 
breeding. Conversely, some commenters stated that the $500 limit for 
the exemption is too high because no animal breeder selling his or her 
animals should be exempt from licensing.
    We are making no changes in response to these comments. The $500 
gross income limit was mandated by Congress within the AWA. However, it 
is important to note that under the

[[Page 57239]]

proposed rule, there are a number of ways that persons who sell animals 
covered by this exemption (including rabbits, guinea pigs (cavies), and 
rats) can be exempted from licensing, either by not meeting the 
definition of dealer in Sec.  1.1 or through one or more of the 
licensing exemptions in Sec.  2.1 (see the section below titled 
``Retail Pet Store: ``. . . rabbits, guinea pigs . . .'').
    A number of dog and cat breeders stated that the $500 gross income 
limit was too low for such animals.
    The $500 gross income limit exemption does not apply to dogs or 
cats.

Breeding Females and Offspring

    Section 2.1(a)(3) of the AWA regulations exempts certain persons 
from licensing requirements. Prior to this final rule, paragraph 
(a)(3)(iii) had exempted ``any person who maintains a total of three 
(3) or fewer breeding female dogs, cats, and/or small exotic or wild 
mammals, such as hedgehogs, degus, spiny mice, prairie dogs, flying 
squirrels, and jerboas, and who sells only the offspring of these dogs, 
cats, or small exotic or wild mammals, which were born and raised on 
his or her premises, for pets or exhibition, and is not otherwise 
required to obtain a license.'' The paragraph further provided that the 
exemption did not extend to anyone in a household who collectively 
maintains a total of more than three breeding female dogs, cats, and/or 
small exotic or wild mammals, regardless of ownership, nor to any 
person maintaining breeding female dogs, cats, and/or small exotic or 
wild mammals, on premises on which more than three breeding female 
dogs, cats, and/or small exotic or wild mammals are maintained, nor to 
any person acting in concert with others where they collectively 
maintain a total of more than three breeding females, cats, and/or 
small exotic or wild mammals, regardless of ownership. In the proposed 
rule, we increased the number of breeding females that may be 
maintained to four.
    (As noted earlier, we have revised our proposed definition of 
retail pet store so that it no longer includes individuals who meet the 
criteria in Sec.  2.1(a)(3)(iii). However, we are revising and 
retaining the direct retail exemption in Sec.  2.1(a)(3)(vii), linking 
it to the retail pet store definition, and adding to the direct retail 
exemption the criteria in Sec.  2.1(a)(3)(iii). In other words, the 
requirement regarding the number of breeding females remains part of 
the retail pet store definition.)
    In the proposed rule, we solicited comments on our proposed change 
to the exemption limit. We also invited comments regarding the 
variability of litter size by breed and the impact that variability may 
have on the setting of size thresholds, as well as comments on whether 
to regulate breeders by number of offspring sold or by number of 
breeding females.
    A few commenters stated that we should substantially revise the 
exemption. One commenter stated that the exemption should cover only 
those breeders who breed their animals no more than once annually; 
other commenters suggested breeding intervals of 12, 18, and 24 months. 
Another commenter stated that the exemption should specify the 
conditions under which breeding females must be raised on their 
premises in order to qualify for an exemption from licensing, rather 
than set a limit on the number of breeding females on the premises.
    As we discuss at greater length below, this exemption is based upon 
our determination that individuals who maintain four or fewer breeding 
females on their premises and sell only the offspring of these females 
are likely to provide adequate care for these animals. Breeding Females 
and Offspring: ``Any person who maintains a total of four or fewer 
breeding female dogs, cats, and/or small exotic or wild mammals. . . 
.''
    A number of commenters asked what constitutes maintaining a 
breeding female on a premises. Several commenters asked if breeding 
females that stay temporarily at a residence are considered to be 
maintained at the residence. A few of the commenters stated that 
breeders should only be considered to maintain a breeding female at 
their residence when the breeding female's stay at the residence does 
not have a fixed end date. All of these commenters asked APHIS to 
define or otherwise explain ``maintain'' in the final rule.
    A breeding female is considered to be maintained at their premises 
if it resides at that premises, even if temporarily. That being said, 
as we discuss below, the threshold in this exemption applies only to 
dogs, cats, and/or small exotic or wild mammals that an APHIS inspector 
has determined to be breeding females, and only applies to such females 
if their offspring are sold as pets.
    Breeding Females and Offspring: ``Any person who maintains a total 
of four or fewer breeding female dogs, cats, and/or small exotic or 
wild mammals. . . .''
    A number of commenters asked whether, by ``total,'' we meant four 
or fewer breeding female dogs, in total, four or fewer breeding female 
cats, in total, and four or fewer breeding female small exotic or wild 
mammals, in total, or the total number of breeding female dogs, cats, 
and small exotic or wild mammals on the premises that is four or fewer. 
In the latter case, the commenters stated that this exemption was too 
stringent for many 4-H, FFA, and rural families, particularly given our 
decision to remove Sec.  2.1(a)(3)(vii), which exempted any person who 
breeds and raises domestic pet animals for direct retail sales to 
another person for the buyer's own use and who buys no animals for 
resale. The commenters stated that APHIS should engage in dialog with 
FFA and 4-H families and set a more reasonable number based on that 
dialog.
    Another commenter asked whether we meant four breeding female dogs 
of each breed on the premises, or four breeding female dogs, total, 
regardless of breed.
    A number of commenters suggested that, if the term ``total'' is 
meant in a partitive sense (i.e., four or fewer breeding female dogs, 
four or fewer breeding female cats, four or fewer breeding female small 
exotic or wild mammals), the sentence should be amended to make this 
clear.
    The exemption refers to the aggregate number of female dogs, cats, 
and/or small exotic or wild mammals on the premises who are bred and 
whose offspring are sold as pets. As we stated in the proposed rule, we 
consider someone who maintains four or fewer such females to be a low-
risk facility. What we meant by this was that, based on our experience, 
an individual who maintains four or fewer such females on his or her 
premises has demonstrated that they are capable of providing adequate 
care and treatment for the animals on their premises, so we do not 
consider Federal oversight to be necessary.
    Furthermore, interpreting the exemption in such a manner is not 
likely to adversely impact rural families or anyone participating in 
FFA or 4-H activities. Most FFA and 4-H exhibitors sell their animals 
for agricultural purposes and/or in face-to-face transactions and thus 
are not dealers. They therefore do not need to claim an exemption from 
licensing.
    A number of commenters stated that litter sizes for hobby breeds 
and small breeds are considerably smaller than those for larger breeds, 
that four breeding females are therefore too few to maintain a viable 
breeding program, and that setting the exemption at four would 
accordingly encourage overbreeding of the animals. They also stated 
that a lack

[[Page 57240]]

of genetic diversity from having four or fewer breeding females would 
result in offspring that would be less desirable to buyers seeking 
strong breed characteristics. Others noted that small-scale breeders 
typically do not breed their dogs every estrus cycle. As a female will 
produce offspring with the same strengths and weaknesses each time, 
such breeders will often wait until her female pups mature and then 
breed the best of them in order to further improve the breed line. For 
these reasons, several breeders stated that 6 breeding females is the 
minimum necessary to have a viable breeding program for their breed; 
other breeders stated that it should be 10, 12, or 20 for their breed. 
One commenter stated that USDA has historically acknowledged a 
``tipping point'' at 60 breeding females after which animal welfare 
violations become disproportionately common. The commenter asked why 60 
had not been selected as the cut-off.
    On the other hand, a few commenters opposed our proposal to 
increase the maximum number of breeding females allowed under the 
licensing exemptions in Sec.  2.1(a)(3)(iii) from three to four. Most 
of those commenters stated that this change would allow breeders to 
produce greater numbers of pets that could potentially be abandoned or 
sent to shelters and euthanized. One commenter opposed the changes 
because the current number was put in place years ago for a reason, and 
that reason, the commenter stated, has not changed.
    Rather than simply raising the number of breeding females allowed 
under the exemption to one of the numbers suggested by commenters, a 
number of commenters suggested alternate amendments that, they stated, 
would better serve the needs of the regulated community. One commenter 
supporting this approach stated that raising the number from three to 
four or fewer breeding females for pet fanciers is irrelevant, because 
numbers change within fancier practices in ways that are different from 
a wholesale operation. Similarly, a commenter stated that one set of 
regulations for all breeds of cats fails to consider the differences in 
growth rates and breeding ages among breeds. These commenters stated 
that we should establish breed-specific thresholds, or, at least, breed 
categories with various thresholds (e.g., ``Breeders of a Category A 
dog may have no more than four breeding females; Category B, six 
breeding females,'' and so on).
    Another commenter stated that we should set the exemption from 
licensing at 4, but should create subclasses of licensees, set at 
thresholds based on the total number of breeding females, and should 
specify the standards in part 3 that apply to each class, e.g., ``A 
class A-1 breeder has between 5 and 10 breeding females, and must meet 
the requirements of Sec. Sec.  3.7-11.''
    We are making no changes based on these comments. The number of 
offspring that breeding females are likely to produce annually did not 
factor into our determination to propose raising the threshold in the 
exemption to four breeding females. Rather, this decision was based on 
our experience that an individual with four or fewer breeding females 
can generally be considered a low-risk facility with regard to animal 
welfare, so we do not consider Federal oversight to be necessary.
    In addition, we recognize that depending on the species and the 
breeds within the species, animals can mature at different rates. In 
determining the number of eligible breeding females maintained by a 
breeder, an APHIS inspector would consider each animal's age, health, 
and fitness for breeding. We consider it impractical and unnecessary to 
establish specific growth rate and breeding age standards for every 
breed and every species of pet animal.
    Breeding Females and Offspring: ``Any person who maintains a total 
of four or fewer breeding female dogs, cats, and/or small exotic or 
wild mammals. . . .''
    A considerable number of commenters expressed uncertainty about 
what APHIS considers to be a breeding female and asked us to define the 
term in the final rule. Many of these commenters stated that 
``breeding'' should not be considered equivalent to ``sexually mature 
and sexually intact.'' Several commenters cited health concerns with 
having their dogs breed. One of the commenters pointed out that her 
female dogs become sexually mature at 6 months of age, but that 
breeding them at that age would pose a serious health risk to the 
female dog and had little possibility of resulting in a live litter. 
Other commenters raised a similar point regarding older female dogs. A 
number of these commenters stated that ``retired'' female dogs should 
not count towards the total; many of these commenters cited peer-
reviewed articles \7\ stating that keeping a retired female sexually 
intact is conducive to animal health and welfare. A number of 
commenters stated that a female dog should be considered a breeding 
female only when it is an age at which it is generally agreed her breed 
is capable of producing a live litter.
---------------------------------------------------------------------------

    \7\ The documents cited were: (1) Parvene Farhoody and M. 
Christine Zink. Behavioral and Physical Effects of Spaying and 
Neutering Domestic Dogs (Canis familiaris). (2) Laura J. Sanborn, 
M.S. Health Risks and Benefits Associated with Spay/Neuter in Dogs.
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    A few commenters stated that most breeders do not breed their 
female dogs until they are old enough to have a viable litter and have 
passed all relevant health inspections, and stated that a female should 
not be considered a breeding female until both of these conditions have 
been fulfilled.
    Other commenters agreed that a female dog that is sexually mature 
and intact should not necessarily be considered a breeding female, but 
did so for different reasons. Breeders of female show dogs stated that 
many competitions require the animals to be sexually intact in order to 
be shown, but that few show breeders breed their animals during the 
time period that they are exhibiting them. Other commenters pointed out 
that a female dog may be retired for any number of reasons (age, number 
of litters produced to date, producing offspring with undesirable 
characteristics), but still reside on a residence. These commenters 
stated that a female dog should be considered a breeding female only 
when it is actually being bred.
    However, a number of commenters pointed out the limitations of such 
an interpretation of ``breeding female'': Just because a breeding 
female is not currently being bred does not mean that she will never be 
bred. The commenters also noted that this interpretation could result 
in enforceability issues for APHIS: A breeder could qualify for an 
exemption one year, need to be licensed the next, and again qualify for 
an exemption the third. Another commenter pointed out that breeders do 
have ``accident'' litters from time to time, so a breeder's intent to 
not breed a female in a certain year may not actually mean that the 
female dog is not bred.
    While we recognize that breeders have several reasons for not 
breeding an intact female, for the purposes of enforcement, APHIS has 
to assume that a female that is capable of breeding may be bred. 
However, in determining whether an animal is capable of breeding, an 
APHIS inspector will take into consideration a variety of factors, 
including the animal's age, health, and fitness for breeding.
    A few commenters pointed out that any definition of ``breeding 
female'' would likely exclude animals that should fall within its scope 
and include animals that should not. They stated that the determination 
that an animal is a breeding female should ultimately be at an 
inspector's discretion. Other

[[Page 57241]]

commenters agreed that the determination must be the inspector's, but 
stated that APHIS should provide certain considerations that factor 
into this determination, at the risk of otherwise appearing arbitrary 
and capricious. One commenter stated that these considerations should 
include frequency of estrous cycles and the age at which the female 
could bear a litter. Two other commenters stated that tests, such as 
the OFA, Penn Hip, thyroid, and recognized breed-related tests, should 
factor into our determination regarding whether an animal has the 
capacity to breed.
    It is ultimately an APHIS inspector's responsibility to decide 
whether an animal is a breeding female, and this decision must rely on 
a variety of factors. Inspectors currently rely on factors such as the 
animal's age, health, and fitness for breeding in deciding whether an 
animal is a breeding female. Moreover, in determining the animal's 
health status, inspectors may have recourse to recognized breed-related 
tests.
    However, inspectors do not rely on the frequency of estrous cycles, 
which are variable and influenced by many factors.
    One commenter stated that, since the decision that an animal is a 
breeding female is ultimately an inspector's, this exemption 
presupposes that all breeding females will be inspected by APHIS, which 
the commenter stated cannot be done.
    APHIS does not intend to conduct inspections of all potentially 
regulated entities and their breeding females all at once. We discuss 
this matter in greater detail below.
    Another commenter asked how APHIS is able to determine that a 
female dog has been spayed based on visual inspection.
    APHIS inspectors rely on a variety of means to determine whether a 
female has been spayed. One means is visual inspection. Other options 
include reviewing veterinary records or other documentary evidence, 
such as sales receipts.
    Some commenters stated that certain types of animals should not be 
considered breeding females for purposes of determining the total 
number of breeding females on their premises. One commenter stated that 
purebred dogs and show dogs should not count towards the total number, 
since the medical care and husbandry provided to such animals exceed 
the standards set forth in the regulations. Similarly, other commenters 
stated that, if the breeder belongs to a registry or breeding 
organization for a particular breed, breeding females of that breed 
that reside on his or her premises should not be considered breeding 
females for purposes of this exemption, since the codes of ethics and 
guidance for those registries and organizations already provide 
adequate assurances of animal welfare.
    We are making no changes in response to these comments. Sexually 
mature and intact show dogs can always be used as breeding females at 
some point after they are no longer shown. Additionally, breed 
registries vary widely in how they oversee and inspect breeders within 
their organizations.
    Several commenters suggested that sexually intact working dogs 
should not count towards the total number of breeding females.
    If sellers of such dogs also sell dogs at retail for pets, any 
female dogs bred to produce puppies for sale would be counted as 
breeding females.
    A cat breeder stated that, because only 2 percent of owned cats are 
obtained from pedigree breeders, breeding female cats should not count 
towards the number of total breeding females on the premises for 
purposes of the regulations.
    As we mentioned above, this exemption is intended for certain 
breeders who maintain few enough breeding females on their premises 
that we consider them capable of providing adequate care and oversight 
for all animals on their premises. We have determined that this 
threshold is four breeding female dogs, cats, and/or small exotic or 
wild mammals. We have no evidence suggesting that cats should not 
factor into the threshold, nor do we consider the percentage of cats 
obtained from pedigree breeders to be relevant to determining the 
threshold.
    One commenter stated that she intended to have several of her dogs 
spayed in order to qualify for the exemption, but would need some time 
in order to accomplish this. She asked how much time APHIS would afford 
breeders to spay their dogs following publication of a final rule 
before we began enforcing the ``four breeding female'' limit.
    The revisions to the exemption will be effective when this final 
rule becomes effective.
    A number of commenters stated that all breeders with sexually 
intact females on their premises should have to be licensed, and the 
exemption should therefore be removed from the regulations.
    We conclude from our experience with currently regulated entities 
that breeders who maintain four or fewer breeding females can generally 
be considered low-risk facilities with regard to animal welfare.
    Several commenters stated that purebred breeders and breeders of 
``custom'' mixed breeds (e.g., cockapoos) should be required to be 
licensed, regardless of the number of breeding females on their 
premises, stating that these breeders were most likely to overbreed 
their animals.
    Our data suggests that it is the total number of breeding female 
dogs maintained on the premises, rather than the breed of dogs 
maintained, that is the primary determinant in whether the premises is 
a low-risk facility.
    Several commenters suggested that we consider the number of puppies 
sold per year instead of counting the breeding females at a premises. 
Most of the commenters suggested that this number should be 50 puppies 
produced per year; a few commenters suggested adjusting this number up 
or down, depending on the breed. Two commenters suggested that the 
exemption be based on number of litters and puppies sold; one of the 
commenters suggested setting the exemption at 10 litters and 50 
puppies, the other at 15 and 50. One commenter suggested, instead of 
the proposed amendments to exemptions in Sec.  2.1(a)(3)(iii) in the 
proposed rule, that we amend (a)(3)(iv) to read as follows: ``Any 
person who sells fewer than 50 dogs and/or cats per year, which were 
born and raised on the premises of a co-owner of the breeding female or 
at a facility owned by a licensed veterinarian in the jurisdiction 
either as pets or for research, teaching or testing purposes and is not 
otherwise required to obtain a license. This exemption does not extend 
to any person residing in a household that collectively sells 50 or 
more dogs and/or cats, regardless of ownership, nor to any person 
acting in concert with others, where they collectively sell 50 or more 
dogs and/or cats from a single property. The sale of any dog or cat not 
born and raised on the premises for research purposes requires a 
license.'' The commenter stated that this would effectively return the 
number of regulated entities to that of the time period before the 
Internet.
    As we explained in the proposed rule, we have enforceability 
concerns regarding an exemption based on number of puppies sold: We 
cannot require individuals who are exempt from licensing to keep 
records regarding animal sales, but would need such recordkeeping in 
order to enforce the exemption. No commenters suggested that such 
recordkeeping was unnecessary for enforcement purposes, nor did 
commenters suggest alternate

[[Page 57242]]

means of obtaining the necessary information.
    Breeding Females and Offspring: ``And who sells only the offspring 
of these dogs, cats, or small exotic or wild mammals, which were born 
and raised on his or her premises. . . .''
    Several commenters stated that it is common for a breeder to 
receive a puppy as compensation for lending an animal out for stud 
services and then sell that puppy at a later date. The commenters 
pointed out that, in order to qualify for the exemption in Sec.  
2.1(a)(3)(iii), these breeders could not resell such puppies, and 
suggested that, if breeders stopped engaging in this practice in order 
to qualify for the exemption, this would ultimately impact genetic 
diversity in several breeds.
    While such individuals cannot qualify for the exemption in Sec.  
2.1(a)(3)(iii), this does not necessarily mean that they need to stop 
engaging in this practice in order to be exempt from licensing. The 
stud services may constitute brokering or breeding purposes and we 
would need more information to determine the purpose for licensing 
purposes. They may be exempt from licensing under another exemption in 
the AWA regulations.
    Several commenters stated that breeders often sell a breeding 
female to individuals who are aspiring breeders or who wish to add new 
bloodlines to their breeding program; one commenter stated that the 
occasional addition of such bloodlines is necessary in order to 
preserve genetic diversity in his breed. Other commenters stated that 
they occasionally sold ``retired'' breeding females to friends or 
acquaintances as pets. A number of commenters suggested that we amend 
the paragraph so that both the breeding females and their offspring may 
be sold.
    We are not amending the paragraph in the manner suggested by the 
commenter. The paragraph pertains to a distinct category of breeders 
that APHIS has evaluated and determined to be low risk for 
noncompliance with the AWA. The amendments requested by the commenters 
would expand the paragraph's scope to include breeders that APHIS has 
not evaluated.
    We note, however, that the commenters who stated that they sold 
breeding females as pets did not specify where the breeding females 
were born and raised. The exemption allowance on the number of breeding 
females only applies when dogs are sold that are born and raised on the 
seller's premises. If the breeding females were not born and raised on 
the premises, the seller does not qualify for this exemption regardless 
of the number of breeding females they maintain, but may still be 
exempt from licensing as a retail pet store depending on the manner in 
which they sell the animals (i.e., face-to-face). Breeders who sell 
breeding females for purposes other than the six uses listed in the 
definition of dealer may also be exempt under this rule.
    Several commenters stated that the requirement that breeders can 
only sell the offspring of dogs, cats, and other small mammals born and 
raised on their premises for pets or exhibition is vague or unclear. 
One commenter, a dog breeding club, asked APHIS to provide a clear 
statement of the meaning of ``born and raised on his or her premises.'' 
Several commenters were uncertain how to apply the requirement for 
puppies or other animals that were born at a veterinarian's office, off 
premises, and then returned with their mother to the premises.
    ``Born and raised on his or her premises'' means that a breeding 
female gives birth on the premises and that the offspring are raised on 
that premises. When enforcing this requirement, we consider the 
ownership of the animal and the ability to maintain control over the 
animal. This would include medical contingencies that may require a 
female animal to deliver its offspring at a veterinarian's office. In 
such cases, APHIS may request additional information to determine where 
the animals are born and raised.
    Breeding Females and Offspring: ``This exemption does not apply . . 
. to any person acting in concert with others where they collectively 
maintain a total of more than three breeding female dogs, cats, and/or 
small exotic or wild mammals regardless of ownership. . . .''
    Several commenters stated that co-ownership is common in the hobby 
and show dog breeding community. Many small-scale residential breeders 
co-own animals with people who live in other locations. One commenter, 
a dog breeding club, asked APHIS to explain the meaning of ``acting in 
concert with'' and whether the term applies to co-ownership of breeding 
females. One commenter noted that when puppies are raised for show or 
breeding, the breeder will sometimes co-own a puppy with its new owner 
and mentor the owner on how to breed or show the dog. Another commenter 
noted that when a show dog is sold, breeding rights for the dog are 
often part of the sale, so that an animal that is owned by the buyer 
remains on the breeder's property until it produces a litter.
    One commenter noted that to deprive retail breeders of a feasible 
exemption for co-ownership would not only significantly affect for-
profit breeding operations, but would disrupt and change longstanding, 
useful practices among pet fanciers that actually ensure welfare 
through educating newcomers and sharing expertise in the long-term 
interest of better breeding. The commenter added that the proposed rule 
would leave fanciers and all retail-sale breeders the options of 
selling only to on-premises buyers or limiting themselves to four 
breeding females.
    One commenter asked whether, if a breeder has multiple premises but 
has no more than four breeding females at any one location, he or she 
would be required to be licensed. Another commenter pointed out that, 
if this exemption applies to each premises rather than to each breeder, 
regardless of the number of premises on which the breeding females are 
maintained, this could create a significant loophole that would allow 
puppy mills and other mass-producers to retain an exemption from 
licensing by distributing their breeding females among multiple 
premises. Several of these commenters asked us to specify in the final 
rule that co-ownership does not constitute acting in concert with 
another person to maintain a breeding female.
    We acknowledge that co-ownership of breeding females is a standard 
practice among small-scale residential breeders. Provided that no more 
than four breeding females are maintained on his or her premises, these 
individuals would qualify for the exemption in Sec.  2.1(a)(3)(iii).

Comments on Removing Sec.  2.1(a)(3)(vii)

    As noted above, we proposed to remove Sec.  2.1(a)(3)(vii), which 
exempted from licensing any person who breeds and raises domestic pet 
animals for direct retail sales to another person for the buyer's own 
use and who buys no animals for resale and who sells no animals to a 
research facility, an exhibitor, a dealer, or a pet store (e.g., ``dog 
and cat fanciers''), on the grounds that it was inconsistent with our 
proposed revision to the definition of retail pet store.
    One commenter stated that we should state in the final rule that 
removing the exemption in Sec.  2.1(a)(3)(vii) will subject dog and cat 
fanciers to licensing and the possibility of inspections, but will not 
force them to comply with the standards in 9 CFR part 3. Several 
commenters suggested that we require dog and cat fanciers to follow the 
standards in part 3 that pertain to grouping, exercise, feeding, 
watering, and cleaning, but that we exempt them from the facility 
standards of that part, which are

[[Page 57243]]

impracticable for breeders who raise animals in their homes. 
Specifically, a number of commenters cited the standards in Sec.  3.2 
regarding impervious materials and Sec.  3.6 regarding whelping areas 
as being cost-prohibitive for most residential breeders. Several of 
these commenters suggested that we amend part 3 in the final rule to 
establish alternate, performance-based standards for dog and cat 
fanciers and other small-scale residential breeders.
    We are making no changes in response to these comments. The 
comments were predicated on an assumption that it will be cost-
prohibitive for most residential breeders who are regulated as a result 
of this rule to meet the standards in part 3; we do not consider that 
to be the case. We discuss this at greater length in the economic 
analysis that accompanies this final rule.
    One commenter suggested that we should delay the effective date for 
removing the exemption until we consult with residential breeders and 
explain what structural modifications they will need to make to their 
residences so that they comply with the regulations in part 3.
    We are not delaying the effective date. As we note in the economic 
analysis, many residential breeders will continue to be exempt from the 
regulations, and as noted by several commenters, many who are not 
exempt are already operating in a manner that is consistent with the 
AWA. Accordingly, they will likely need to make only minor structural 
changes to their facilities to be in compliance with AWA standards.
    One commenter suggested that we ``grandfather in'' all existing 
residential breeders as retail pet stores, and require licensing only 
for new residential breeders.
    We are making no change in response to this comment. The 
commenter's suggestion would privilege existing breeders over new 
breeders.
    A number of commenters stated that, if APHIS needed to require them 
to be regulated and licensed in order to ensure animal welfare, APHIS 
should take measures to ensure that the impact of such licensing has as 
minimal an effect on such breeders as possible. One commenter suggested 
that we limit the licensing fee for purebred dog and cat fanciers and 
other small-scale breeders to $10 yearly.
    We expect that many small-scale breeders will remain exempt from 
licensing and will therefore not need to pay a licensing fee. However, 
we note in the economic analysis prepared for this rule that the costs 
of licensing are likely to be lower than most breeders figure them to 
be.
    Finally, a commenter stated that the rollout of the final rule 
should be accompanied by a supporting document or educational campaign 
for small-scale residential dog and cat breeders in best practices for 
breeding and care. The commenter said that many breeders will want to 
comply with the regulations, but, because of unfamiliarity with the 
AWA, will need instruction.
    APHIS already provides such education as part of its prelicensing 
process and existing stakeholder outreach.

Requests for Additional Exemptions

    A few commenters stated that we needed to add additional exemptions 
to paragraph (a)(3) of Sec.  2.1.
    Many commenters stated that we should amend the regulations to 
specify that animal rescue groups should be exempt from licensing 
because such groups have business models that are vastly different from 
those of retail dealers. They pointed out that the goal of such groups 
is to preserve animal welfare rather than to breed animals for profit. 
A few commenters stated that we should make a distinction between non-
profit and for-profit rescue groups, and exempt the former from 
licensing.
    On the other hand, several commenters stated that rescue groups 
should not be exempt from licensing solely because of their mission. 
Some of these commenters pointed out that both profit and non-profit 
rescue groups often request substantial adoption fees to recoup the 
costs of maintaining the group. Several other commenters acknowledged 
the good intentions of rescue groups, but stated that many groups 
overreach and end up overcrowded with rescued animals. The commenters 
also pointed out that many rescues rely on volunteers to provide care 
for the animals and that reliance on volunteer efforts could result in 
gaps or significant disparities in the care provided.
    Some commenters suggested alternatives. One commenter suggested 
that we require rescue groups to be licensed, but that we waive 
licensing fees for such groups. Another commenter suggested exempting 
them from the facility standards of part 3. A third commenter suggested 
that we amend the regulations so that all ``Class A'' breeders have to 
enter into a trust fund agreement with APHIS at licensing and renewal, 
with the money in the agreement dedicated to licensing for non-profit 
rescue groups and other non-profits. Another commenter suggested that 
we define non-profit organization in the final rule, include rescue 
groups within the definition, and exempt all non-profit organizations 
from licensing.
    As we noted earlier, private rescues and shelters tend to operate 
under a business model in which animals available for sale or adoption 
are physically present at a predetermined location where the public is 
encouraged to meet and inspect the animals; this business model is 
consistent with what we consider a retail pet store to be, and fits 
within the scope of our definition of a retail pet store. As a result, 
most private rescues and shelters have historically been exempted under 
the retail pet store exemption and will continue to be exempted as long 
as they meet the amended definition of retail pet store.
    However, private rescues or shelters that are operating in a manner 
that requires them to be licensed as dealers must be treated in a 
manner that is consistent with our regulation of all other licensed 
dealers. This includes paying licensing fees and adhering to the 
standards in part 3 of the AWA regulations.

Oversight and Enforcement

    A number of commenters believed that we had greatly underestimated 
the number of newly regulated entities in our initial regulatory impact 
assessment and questioned whether we had sufficient personnel to 
enforce the provisions of the proposed rule. A number of commenters 
stated that, before conducting all the inspections necessary to enforce 
the proposed rule, APHIS would have to hire additional inspectors. One 
commenter stated that our ability to enforce the proposed rule is 
hampered by our restrictive definition of inspector in Sec.  1.1, and 
that we should expand the definition to include State employees and 
third parties authorized by APHIS. Other commenters noted that APHIS 
had provided no indication of how it will fund expenditures for 
additional personnel.
    On the other hand, a commenter supporting the proposed rule 
commented that APHIS is capable of handling the enforcement 
responsibility of the proposed rule without hiring large numbers of 
additional personnel. The commenter acknowledged that the number of 
additional facilities that would be subject to licensing under this 
rule would be difficult to determine. They noted, however, that even if 
the new regulation doubled the number of operations subject to USDA 
regulation, the inspection burden would merely return to approximately 
the level that was handled by USDA in 2008.

[[Page 57244]]

    APHIS' plan is to incorporate newly affected entities into our 
existing regulatory structure using a phased implementation for 
conducting initial prelicensing inspections and compliance inspections. 
Factors we would consider when determining when and how frequently such 
inspections would take place include, but are not limited to: (1) 
Whether an entity has applied for a USDA license; (2) whether an entity 
is already subject to some degree of State, county, or local oversight, 
and the nature of that oversight; and (3) whether an entity is the 
subject of a legitimate complaint and the nature or severity of that 
complaint. We will conduct periodic compliance inspections based on a 
risk-based inspection system that calculates the level of risk of 
noncompliance.
    Because of this phased implementation, we do not consider it 
necessary to amend the definition of inspector to allow APHIS to use 
non-APHIS employees to serve as inspectors.
    A number of commenters asked how we would identify newly regulated 
entities. One commenter suggested that we conduct spot checks of 
advertised breeders to confirm that they are either licensed or qualify 
for an exemption. Several commenters suggested that we develop a dealer 
registry and require all sellers or breeders to submit contact 
information, along with the appropriate licensing fee or a written 
statement explaining why they were exempt from licensing. However, a 
commenter warned that adding newly regulated entities to our database 
will take a sizable investment of Animal Care workforce hours and asked 
if APHIS considered the costs of doing so.
    We will identify newly regulated entities using our current 
methods, which include reviewing marketing or promotional material in 
the public domain, self-identification, and complaints. Implementation 
of this rule will take into consideration the workforce hours that it 
will take to add newly regulated entities to our database.
    A commenter requested that we investigate unlicensed ``puppy 
brokers'' who transport and sell puppies for commercial breeders who 
raise puppies in rural, remote areas. The commenter stated that such 
brokers are transporting puppies to more populated areas so that they 
can be sold out of private homes, for which the residents receive a 
percentage of the profit.
    APHIS investigates all credible reports we receive of unlicensed 
activities involving sales of covered pets.
    One commenter suggested that APHIS require breeders to maintain a 
record of whenever they move interstate and to allow spot audits of 
those records to determine which breeders to inspect. Another commenter 
stated that breeders should have to report any land or storage spaces 
they maintain and go through a background check and provide references 
in order to maintain a license.
    APHIS does not require exempted breeders to report such information 
cited by the commenters. However, we are authorized to inspect the 
records of licensed entities.
    Several commenters supporting the rule asked why pet stores are not 
subject to licensing and inspection under the regulations. Some of 
those commenters expressed concern about inhumane conditions in pet 
stores and recommended that they be subject to monitoring and 
inspection. Some commenters stated that pet stores should be prohibited 
from selling puppies and adult dogs, and to lesser extent cats, as a 
means to reduce the demand for animals from commercial breeders.
    Under the AWA, retail pet stores are exempt from regulation.
    Another commenter stated that all locations in which pet animals 
are sold should be required to have a licensee on-site at all times, 
and that this licensee should have all veterinary records of the 
animals on the premises available for review at all times; the records 
maintained by this licensee would facilitate traceback in the event of 
possible animal welfare abuses.
    Under the AWA, APHIS already requires licensed breeders to maintain 
such records, but we only require that a licensee be available to 
present records during business hours. Breeders exempted from licensing 
have no such recordkeeping requirements.
    One commenter suggested that APHIS pilot a voluntary inspection 
program for newly regulated dealers, in which dealers would agree to be 
inspected in exchange for assurances from APHIS that violations 
discovered during this inspection would not result in fines or 
penalties. Other dealers would be inspected based on complaints of 
abuse, and would not be exempt from penalties.
    We have no plans to institute a voluntary inspection program. APHIS 
will provide information upon request to persons to help them assess 
whether they need to apply for licensing and to offer guidance on 
complying with AWA regulations.
    A number of commenters suggested that the need for inspections 
would be greatly reduced if APHIS increased penalties for dealers who 
violate existing AWA regulations. One commenter pointed out that the 
2010 USDA OIG audit \8\ (referred to below as the OIG audit) referenced 
in the proposed rule found that few, if any, first-time violators of 
the AWA were subject to an enforcement action, even for those found to 
be in direct violation of the Act. The commenter suggested that 
penalizing all first-time offenders would decrease recidivism, would 
further animal welfare within the United States, and could obviate the 
need for the proposed rule.
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    \8\ To view this audit, go to http://www.usda.gov/oig/webdocs/33002-4-SF.pdf. The major objectives of the OIG audit were to 
examine Animal Care's enforcement process against dealers that 
violated the AWA and to review the impact of recent changes that 
APHIS made to the penalty assessment process.
---------------------------------------------------------------------------

    We continue to review and improve the manner in which we assess 
penalties, consistent with our response to the OIG audit. However, we 
continue to maintain that this rulemaking is necessary in order to 
ensure that our definition of retail pet store is consistent with the 
AWA.
    We invited comments on an alternative regulatory scheme presented 
in the proposed rule that would minimize APHIS oversight of entities 
already subject to State, local, or industry oversight. A number of 
commenters, including several State agricultural officials, noted that 
many States already require licensing of commercial dog and cat 
breeders. The commenters stated that Federal oversight of breeders 
would likely be duplicative, contradictory, and confusing. Several 
commenters stated that APHIS should withdraw the rule in favor of 
establishing a cooperative Federal-State program that relies primarily 
on State officials to provide oversight of dealers and breeders, with 
APHIS providing guidance and coordination at the Federal level. 
However, a number of commenters disagreed, noting that State 
regulations are in many cases insufficient to provide for the welfare 
of animals sold as pets. Many of these commenters pointed out that 
withdrawing the proposed rule and deferring to States would simply 
maintain the status quo, and that the OIG audit clearly indicates that 
the status quo does not adequately provide for animal welfare. For this 
reason, a number of the commenters stated that State animal welfare 
officials should not be used as inspectors for purposes of enforcing 
APHIS regulations.
    A few breeders stated that, while they were not regulated 
stringently at the State level, they were subject to very stringent 
city or local regulations, and

[[Page 57245]]

that these regulations obviated the need for further Federal 
regulation. The breeders suggested a locality-by-locality review of 
existing regulations prior to issuance of a Federal rule, and also 
encouraged us to claim selective preemption.
    As we noted in the proposed rule, to our knowledge 27 States and 
the District of Columbia have enacted laws that establish some form of 
humane welfare standards for animals kept at pet stores and sold at 
retail. We have provided many of these States with guidance on 
developing and enforcing their animal welfare regulations. But while 
these States and several municipalities have such laws, none actually 
address all categories of welfare required under the AWA, including 
veterinary care, food and water, proper sanitation, and housing. As a 
consequence, Federal oversight is necessary to ensure that AWA 
regulations are consistently applied across all States.
    We should add, however, that if a State has issued and is enforcing 
several of its regulations under a category of welfare required under 
the AWA, we can adjust our own inspection frequency and procedures in 
that category in ways that will reduce the burden of duplicative 
regulations on breeders in that State.
    In the proposed rule, we also invited comments from the public 
regarding the idea of an exemption based on oversight from private 
organizations. Many commenters stated that industry-run programs 
provide adequate oversight of certain breeders and dealers, and that 
licensing and oversight by APHIS is therefore unnecessary for these 
entities. One commenter, a national dog breeder and fancier 
organization, noted that they maintain a purebred dog registry, that 
members of that registry are subject to routine inspections, and that 
ongoing enrollment in the registry requires continued adherence to a 
comprehensive care and conditions policy. Several commenters noted that 
they belonged to the registry or a similar breed-specific registry, and 
that inclusion on the registries is in fact dependent on agreeing to 
regular inspections, recordkeeping requirements, and other welfare 
safeguards.
    However, a number of commenters disagreed, stating that private 
organizations are not always capable of adequate oversight of breeders. 
One commenter conducted a study on oversight by pet registry 
organizations and concluded that self-regulation attempts have been 
largely ineffective. They also noted that registry organizations only 
monitor breeders of purebred dogs, while mixed-breed and ``designer'' 
dogs such as yorkie-poos, puggles, and labradoodles, which are among 
the most popular varieties sold online, appear to have no self-policing 
registries.
    We are making no changes in response to the comments. While some 
breed registries and other organizations maintain programs for 
oversight of breeders, few, if any, have requirements that address all 
categories of animal welfare required under the AWA. Furthermore, as 
the one commenter noted, many mixed-breed dog breeders appear to have 
no self-policing registries.
    Other commenters pointed out that a number of States have puppy 
``lemon laws'' that protect consumers from the financial losses 
incurred when buying a sick dog, and stated that these consumer 
protection laws have the effect of securing animal welfare through 
market forces. Similarly, a few other commenters pointed out that, 
while not all States have puppy ``lemon laws,'' all States have laws 
that protect consumers from fraud and deceptive marketing practices, 
and that these laws could be enforced at the State level in a manner 
that results in State inspections of dealers and breeders and imposes 
civil and criminal penalties for those dealers and breeders who do not 
provide adequate care for their animals. Several of these commenters 
suggested that APHIS conduct a State-by-State review of animal welfare 
and consumer protection laws prior to issuing a final rule, and should 
claim preemption of State laws only for those States that have less 
stringent standards than those that dealers would have to adhere to 
under the provisions of the proposed rule. On the other hand, a few 
commenters stated that consumer protection laws do not provide 
assurances that animals are bred and raised humanely, but solely 
provide remedies for consumers when they purchase animals that turn out 
to be unhealthy or are otherwise not what they were portrayed to be.
    We are making no changes in response to the comments. ``Lemon 
laws'' protect the economic interests of the buyer and do not meet the 
goals of the AWA.
    Finally, one commenter suggested that APHIS petition Congress to 
amend the AWA so that private entities could bring suit against 
breeders, brokers, and handlers for AWA violations. The commenter 
stated that any damages awarded in a lawsuit could far exceed the 
penalties under the AWA, and would serve as a strong incentive to 
follow the regulations. However, a few commenters disagreed, pointing 
out that APHIS has limited ability to petition Congress to enact 
legislation.
    APHIS does not consider it necessary to amend the AWA in order to 
meet the request of the commenter.

Constitutionality and Legal Authority

    Several commenters expressed concerns about the constitutionality 
of the proposed rule. One commenter stated that Congress is not 
permitted to delegate authority to Agencies to issue rules with the 
force of law, and that the rule therefore violates Section 1 of the 
Constitution.
    Congress is permitted to delegate authority to Agencies to issue 
rules.
    Another commenter stated that, because APHIS has no evidence that 
all individuals engaged in Internet or sight unseen sales are guilty of 
violations of the AWA, subjecting those who are not guilty to licensing 
amounts to a tax. The commenter pointed out that, as an Agency of the 
Executive Branch, APHIS has no authority under the Constitution to 
impose or collect taxes.
    The AWA specifically authorizes the assessment of licensing fees, 
which do not constitute a tax.
    A number of commenters stated that any change to the definition of 
retail pet store that subjects their homes to possible unannounced 
government inspections for AWA compliance violates their Fourth 
Amendment rights against unlawful search and seizure.
    Section 2146 of the AWA explicitly authorizes inspections of 
licensees to determine compliance with the AWA. However, such 
inspections are limited to only those areas that impact the well-being 
of the animals, such as areas where food and medicine for the animals 
are stored.
    One commenter stated that most animals sold as pets are born and 
moved within State boundaries. The commenter suggested that, since 
interstate commerce does not occur in those instances, attending to the 
welfare of those animals is outside of Federal jurisdiction under the 
Tenth Amendment and solely a State prerogative.
    In issuing the AWA, Congress found that such intrastate commerce 
often substantially affects interstate commerce.
    One commenter stated that the AWA does not address privately owned 
property, nor does it provide that a retail business must permit 
customers to personally visit the seller's property to be considered a 
retail pet store. The commenter also stated that there is no assumption 
in the AWA that animal welfare entails customers visiting a

[[Page 57246]]

seller's property and monitoring the property for compliance with the 
AWA.
    The AWA does not require retail pet sellers to allow customers to 
enter their property. A seller exempted as a retail pet store can 
indicate a place of business separate from his or her premises at which 
to sell pet animals at retail.
    One commenter stated that the rule essentially restricts the 
ability to advertise the availability of animals for sale by rendering 
it difficult to use the Internet to engage in such sales, and that 
APHIS had failed to provide a compelling reason for such restrictions. 
The commenter stated that using the Internet to sell the animal 
constitutes commercial speech and concluded that the rule violated the 
First Amendment right to free speech.
    The rule does not restrict the use of the Internet as a marketing 
or communications tool. Rather, it revises the definition of retail pet 
store to ensure that it stays consistent with the AWA.
    A few commenters noted that that the 2010 OIG audit mentioned in 
the proposed rule focused on large-scale, AWA-licensed problematic 
dealers and not on small-scale breeders, and that APHIS inappropriately 
extrapolated from the report that breeders of all sizes should be under 
Federal oversight for the purpose of animal welfare. One commenter 
noted that the USDA OIG's finding regarding remote, Internet sales 
(Finding 5) was that ``some large breeders circumvented [the] AWA by 
selling animals over the Internet,'' and stated that the OIG audit had 
broadly referred to these large-scale breeders as ``Internet breeders'' 
later in the report for the sake of brevity. The commenter stated that, 
in the proposed rule, APHIS had construed the term ``Internet breeder'' 
in an unqualified sense that is at odds with the meaning of the term in 
the OIG audit.
    In the proposed rule, we used the term ``Internet breeders'' only 
for the purpose of passing along factual information regarding the OIG 
audit's findings and were not attempting to assign a specialized 
meaning to the term.
    The same commenter stated that the OIG audit had heavily redacted 
statements made by former Secretary of Agriculture Ann Veneman in DDAL 
v. Veneman in order to suggest that Internet sellers need to be 
licensed. The commenter provided Secretary Veneman's full transcript, 
which stated that oversight is necessary but is already being exercised 
by breed and registry organizations. The commenter concluded that APHIS 
had either taken these statements in the report out of context or 
relied on statements that were taken out of context in order to justify 
the proposed rule, and that this was tantamount to legal dishonesty.
    APHIS drafted the proposed rule because the term retail pet store 
was being understood and applied in a manner that was inconsistent with 
the AWA, in order to ensure that the definition of retail pet store in 
our regulations was consistent with the AWA.
    A commenter noted that the proposed rule makes references and 
comparisons to the Puppy Uniform Protection and Safety (PUPS) Act. The 
commenter stated that APHIS had assumed that the bill represents the 
will of Congress, and pointed out that the bill has not been signed 
into law and should not be considered to have the force of law for the 
sake of issuing regulations.
    The proposed rule made no statements suggesting the PUPS Act had 
the force of law.
    Two commenters stated that APHIS had failed to comply with the 
National Environmental Policy Act (NEPA) in issuing the proposed rule. 
The first commenter stated that we had failed to examine the aggregate 
effects on the environment that may occur if many breeders throughout 
the United States have to significantly alter their residences in order 
to meet AWA standards. In a similar manner, the other commenter stated 
that we had failed to consider the environmental impacts on local 
communities that may occur because of the proposed rule.
    We followed NEPA and determined the proposed rule was categorically 
exempt from preparation of NEPA documentation because it outlined 
routine measures. The commenters who stated that the rule would have 
such environmental effects believed that most residential breeders 
would have to make significant structural changes to their homes in 
order to comply with 9 CFR part 3; for reasons specified above and in 
the economic analysis that accompanies this rule, we do not consider 
that to be the case.
    Similarly, a few commenters stated that APHIS failed to fulfill a 
statutory duty to ensure full compliance with the Small Business Act, 
including a determination of impact under zoning laws presented by 
federalizing a hobby and converting small-scale breeders to home-based 
businesses, and submitting certification to the Small Business 
Administration (SBA) with a detailed statement on the impact of the 
proposed rule on the affected ``Small Businesses.''
    APHIS submitted the proposed rule and its accompanying regulatory 
impact analysis, which included an initial regulatory flexibility 
analysis produced in accordance with the Regulatory Flexibility Act, to 
SBA prior to the publication of the proposed rule.
    A number of commenters stated that the factsheet \9\ contained 
several responses that contradicted the provisions of the proposed 
rule. Many of these commenters stated that the average person would not 
interpret the ``physical entry'' provision of the definition of retail 
pet store to allow face to face off-site transactions to occur. One of 
these commenters also asserted that the factsheet appears to grant a 
blanket exemption from licensing to all rescue groups, and that this 
exemption was neither explicit nor inferred within the proposed rule.
---------------------------------------------------------------------------

    \9\ See footnote 4.
---------------------------------------------------------------------------

    In a similar manner, a number of commenters stated that the 
factsheet interprets the facility construction standards of 9 CFR part 
3 in a performance-based manner that the regulations themselves, which 
are highly prescriptive, do not support. Several commenters concluded 
that the factsheet materially contradicts both existing regulations and 
the provisions of the proposed rule. The commenters added that APHIS 
had made no attempt, in issuing the factsheet, to specify that it is a 
``pararegulatory'' document which, by definition, cannot have the force 
of law. The commenters further stated that the factsheet provides 
evidence that APHIS' interpretation of the proposed rule will be 
arbitrary and capricious. For these reasons, the commenters stated that 
the proposed rule cannot be finalized and must be withdrawn.
    The factsheet was simply intended to provide additional explanation 
about the provisions of the proposed rule for the public. It did not 
contradict the provisions of the proposed rule.
    Several commenters cited DDAL v. Veneman as supporting an exemption 
from licensing for all small-scale residential breeders. The commenters 
asserted that APHIS had stated in DDAL v. Veneman that hobby breeders 
do not need to be licensed.
    As we state elsewhere in this document, we do not consider the term 
``hobby breeder'' to be equivalent to a small-scale residential 
breeder, nor was it used in such a manner in DDAL v. Veneman.
    One commenter stated that Congress has amended the AWA several 
times since its promulgation, but never sought to define ``retail pet 
store'' or otherwise restrict certain entities from considering 
themselves to be retail pet stores.

[[Page 57247]]

    It is our contention that our proposed definition of the term 
retail pet store is consistent with the AWA.
    One commenter stated that the rule had not been issued in 
accordance with Executive Order 13563. The commenter stated that APHIS 
failed to provide the scientific and technical basis for the rule and 
allow for a critique and evaluation of these bases. The commenter 
stated that it would be reasonable for someone to infer that the 
proposed rule was based on anecdotal evidence. The commenter also 
stated that this failure to provide the technical and scientific basis 
for the rule, and to apparently rely on anecdotal evidence, was in 
violation of Section (2)(b) of the Executive Order.
    Executive Order 13563 only requires regulatory Agencies such as 
APHIS to state the scientific and technical basis for a rule if that 
basis exists. The proposed rule was based on our determination that 
certain parties were construing the definition of retail pet store in 
the AWA regulations in a manner inconsistent with the AWA.
    The commenter further stated that, by failing to engage in dialog 
with those who would be potentially regulated by the rule, we failed to 
meet the objectives of Section (2)(c) of the Executive Order, which 
suggests that, where feasible and appropriate, Agencies should seek the 
views of entities likely to be affected. The commenter stated that he 
was not aware that we had engaged in any meaningful dialog with 
potentially regulated entities prior to issuance of the rule, and 
certainly not in a manner proportionate to the scope of the rule.
    APHIS engaged the potentially regulated industries at length before 
issuing the proposed rule. Our outreach activities included personal 
communications by telephone and in person.

Other Comments

    We received many comments on subjects that are outside the scope of 
this rulemaking. Several of the comments also requested changes that 
are also outside the scope of the AWA, among them a ban on the sale of 
pets, mandatory spaying or neutering and microchipping of all pets sold 
at retail, regulation of the Internet as a marketing tool for pets, 
licensing of individuals who buy animals as pets and imposing minimum 
requirements on those individuals, and titling for animals used in 
agility competitions.
    Therefore, for the reasons given in the proposed rule and in this 
document, we are adopting the proposed rule as a final rule, with the 
changes discussed in this document.

Executive Orders 12866 and 13563 and Regulatory Flexibility Act

    This final rule has been determined to be significant for the 
purposes of Executive Order 12866 and, therefore, has been reviewed by 
the Office of Management and Budget.
    We have prepared an economic analysis for this rule. The economic 
analysis provides a cost-benefit analysis, as required by Executive 
Orders 12866 and 13563, which direct agencies to assess all costs and 
benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, and equity). Executive Order 13563 emphasizes the importance 
of quantifying both costs and benefits, of reducing costs, of 
harmonizing rules, and of promoting flexibility. Executive Order 13563 
also emphasizes the need for retrospective analysis of rulemaking. 
Accordingly, USDA will carefully monitor the implementation of this 
rule and will propose any changes that may be necessary to both protect 
the welfare of covered animals and to minimize undue burdens on the 
public. The economic analysis also examines the potential economic 
effects of this rule on small entities, as required by the Regulatory 
Flexibility Act. The economic analysis is summarized below. Copies of 
the full analysis are available on the Regulations.gov Web site (see 
footnote 2 in this document for a link to Regulations.gov) or by 
contacting the person listed under FOR FURTHER INFORMATION CONTACT.
    This rule will primarily affect dog breeders who maintain more than 
four breeding females at their facilities, sell the offspring as pets, 
and whose buyers are not all physically present to observe the animals 
prior to purchase and/or to take custody of those animals after 
purchase. The rule may also affect some cat and rabbit breeders. While 
the scope of this rule applies to certain other animals, based on our 
experience, most retailers of animals other than dogs will meet the 
amended definition of retail pet store and continue to be exempt from 
regulation.
    The benefits of this rule justify its costs. More pet animals sold 
at retail will be brought under the protection of the AWA and monitored 
for their health and humane treatment. Improved animal welfare will 
benefit buyers of pets and the general public in various ways. 
Monitoring the health and humane treatment of pet animals should reduce 
the number of pets receiving inadequate care and reduces the 
possibility of sick or injured pet animals being purchased sight 
unseen. When a buyer receives a sick or abused pet animal, sight 
unseen, the responsibility for correcting inadequate care has been 
effectively transferred from the seller to the buyer without the 
buyer's knowledge or consent. If that buyer is unable or unwilling to 
provide the pet animal with needed care, a shelter may become the 
default caregiver for that animal. A reduction in the number of sick or 
abused pet animals received by buyers may reduce the number of such 
animals sent to shelters. Public shelters provide for the care of these 
unwanted pet animals, usually at local taxpayer expense. Also, as noted 
by several commenters, neglected or abused pet animals confiscated from 
substandard breeding operations are often sent to shelters to provide 
for their care. Newly regulated commercial breeders working to comply 
with AWA regulations will increase the health and well-being of the pet 
animals under their care.
    In addition, when breeding operations for which regulatory 
oversight is insufficient fail to adequately provide veterinary care 
for their animals, the buyer may subsequently incur greater costs 
associated with providing that care because needed care has been 
delayed. The rule will benefit buyers of animals by providing 
regulatory oversight to ensure that breeders provide necessary 
veterinary care.
    Animals can carry zoonotic diseases (diseases that can be 
transmitted between, or are shared by animals and humans). The 
possibility of an animal carrying a zoonotic disease is reduced with 
adequate veterinary care, including vaccinations. To the extent that 
improved oversight reduces the likelihood of pet-to-human transmission 
of zoonotic diseases such as rabies, the public as a whole will benefit 
from the rule. The rule will also address the competitive disadvantage 
of retail breeders who incur certain costs by adhering to the AWA 
standards regulations while retail breeders who do not operate their 
facilities according to AWA standards may bear lower costs.
    There is a great deal of uncertainty surrounding the number of 
facilities that will be affected by this rule, as we acknowledged in 
the proposed rule, and as evidenced in the public comments. There are 
hundreds of distinct dog breeds, and correspondingly large numbers of 
dog breeders in the United States. Breeders with an online presence are 
those most likely to be selling the offspring sight unseen and thus are 
more likely to be affected by this rule. We estimate that there could 
be between 8,400 and 15,000 such dog breeders in

[[Page 57248]]

the United States. This estimate is based on the assumption that for 
every five breeders identified by APHIS in online breeder registries 
there is one other breeder that has not been identified who also uses 
remote marketing methods.
    However, this rule will only affect those dog breeders who sell 
dogs as pets, not for hunting, security, breeding, or other purposes; 
who maintain more than four breeding females on their property; and 
whose buyers are not all physically present to observe the animals 
prior to purchase and/or to take custody of the animals after purchase. 
When these conditions are taken into account, we estimate that there 
are between 2,600 and 4,640 dog breeders that may be affected by this 
rule. The following table highlights the criteria used for identifying 
dog breeders potentially affected by this rule and the process used to 
calculate the number of such breeders:

  Potentially Affected Dog Breeder Calculations--A Breeder Must Meet All Criteria Before Licensing Is Required
----------------------------------------------------------------------------------------------------------------
                                         Criteria for
     Row             Category           inclusion \2\             Calculation                    Range
----------------------------------------------------------------------------------------------------------------
(a)..........  Number of Listed      All listed.........  ..........................  7,000 to 12,500.
                Breeders \1\.
(b)..........  Inclusion of          For every five       (a) * 1.2.................  8,400 to 15,000.
                breeders not listed.  breeders listed,
                                      we assume one more
                                      not listed who
                                      also has a remote
                                      marketing presence.
(c)..........  Breeder sells pets..  75% of breeders      (b) * 0.75................  6,300 to 11,250.
                                      sell dogs as pets,
                                      i.e., not for
                                      hunting, security,
                                      breeding, etc.
(d)..........  AND Breeder has more  55% of breeders      (c) * 0.55................  3,465 to 6,188.
                than 4 breeding       have more than 4
                females.              breeding females.
(e)..........  AND Buyer purchases   75% of breeders      (d) * 0.75................  2,599 to 4,641.
                dog sight unseen.     sell one or more
                                      dogs without the
                                      purchaser
                                      physically
                                      observing the dog
                                      before purchase
                                      and/or taking
                                      custody.
----------------------------------------------------------------------------------------------------------------
\1\ Two multi-breed breeder listings: www.puppysites.com and www.dogbreederregistry.com, and individual breed
  breeder listings for 160 individual breeds.
\2\ Expert judgment based on online breeder registries, public comments, and APHIS' knowledge of industry
  practices.

    The rule will also affect cat breeders who maintain more than four 
breeding females at their facilities and sell the offspring as pets, 
sight unseen. Fewer than 2 percent of cats in the United States are 
purebred and raised by breeders. We estimate that about 325 cat 
breeders may be affected by this rule.
    The rule will also affect rabbit breeders who sell the offspring as 
pets, sight unseen, which is not common. Rabbits are usually sold at 
auctions, exhibits, and fairs where the buyers are physically present. 
We estimate that no more than 75 rabbitries may be affected by this 
rule.
    Newly regulated breeders will be subject to licensing, animal 
identification, and recordkeeping requirements. In addition, affected 
entities will be subject to standards for facilities and operations, 
animal health and husbandry, and transportation. One set of costs 
attributable to the rule will be incurred annually by all newly 
regulated entities, such as licensing fees. Other costs will depend on 
the manner and extent to which entities are not complying with the 
basic standards of the AWA. Some of these costs will be one-time costs 
in the first year, such as providing adequate shelter; others will 
recur yearly, such as providing adequate veterinary care.
    The cost of a license for breeders is based on 50 percent of gross 
sales during the preceding business year. As an example, if 50 percent 
of gross sales are more than $500 but not more than $2,000, the annual 
cost of a license is $70. Identification tags for dogs and cats cost 
from $1.12 to $2.50 each. Other animals such as rabbits can be 
identified by a label attached to the primary enclosure containing a 
description of the animals in the enclosure. We estimate that the 
average licensed breeder requires about 10 hours annually to comply 
with the licensing paperwork and recordkeeping requirements. All newly 
licensed breeders will incur these costs. We estimate these costs would 
be between about $284 and $550 for a typical dog breeder. Costs at the 
3,000 to 5,000 newly licensed dog, cat, and rabbit breeders for animal 
licensing, animal identification and recordkeeping could range between 
$853,000 and $2.8 million annually.
    The newly regulated breeders will also need to meet regulatory 
standards concerning facilities and operations, animal health and 
husbandry, and transportation. However, as acknowledged by a wide 
spectrum of commenters on the proposed rule, most breeders maintain 
their facilities well above the minimum standards of the AWA. 
Therefore, the vast majority of newly regulated breeders will only need 
to incur licensing, animal identification, and recordkeeping costs and 
not need to make structural and/or operational changes in order to 
comply with the standards. Neither the number of entities that will 
need to make changes nor the extent of those changes is known. 
Therefore, the overall cost of structural and operational changes that 
will be incurred due to this rule is also unknown. However, we can 
estimate the general magnitude of these costs by assuming the newly 
regulated entities exhibit patterns of noncompliance similar to those 
of currently regulated wholesale breeders. We agree with many comments 
we received that most breeders that may be affected by this rule are 
already substantially in compliance.
    Based on our experience regulating wholesale breeders, the most 
common areas of regulatory noncompliance at prelicensing and compliance 
inspections are veterinary care, facility maintenance and construction, 
shelter construction, primary enclosure minimum space requirements, and 
cleaning and sanitation. We apply percentages of noncompliance for 
these areas, multiplied by likely unit costs or cost ranges, to the 
estimated number of affected breeders described above to arrive at a 
total cost range for the rule. We estimate that costs for coming into 
compliance for currently noncompliant breeders could range from $2.9 
million to $12.1 million in the first year, when both one-time 
structural changes will occur and annual operational changes will 
start.
    The rule will also affect some currently licensed wholesale 
breeders. Expanding the licensing exemption from three or fewer 
breeding females to four or fewer breeding females could reduce the 
number of these licensees. We expect that the number of current 
licensees that will fall below the

[[Page 57249]]

exemption threshold following the implementation of this rule will be 
very small.
    The majority of businesses affected are likely to be small 
entities. As explained, this wide range in total cost is mainly derived 
from the uncertainty surrounding the total number of breeders that will 
need to become licensed as a result of this rule and the number that 
will then need to make structural or operational changes. It derives to 
a lesser degree from the ranges in costs that are assumed will be 
incurred by the newly licensed facilities to remedy instances of 
noncompliance.

Executive Order 12372

    This program/activity is listed in the Catalog of Federal Domestic 
Assistance under No. 10.025 and is subject to Executive Order 12372, 
which requires intergovernmental consultation with State and local 
officials. (See 7 CFR part 3015, subpart V.)

Executive Order 12988

    This final rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. It is not intended to have retroactive effect. 
The Act does not provide administrative procedures which must be 
exhausted prior to a judicial challenge to the provisions of this rule.

Paperwork Reduction Act

    In accordance with section 3507(d) of the Paperwork Reduction Act 
of 1995 (44 U.S.C. 3501 et seq.), the information collection or 
recordkeeping requirements included in this final rule, which were 
filed under 0579-0392, have been submitted for approval to the Office 
of Management and Budget (OMB). When OMB notifies us of its decision, 
if approval is denied, we will publish a document in the Federal 
Register providing notice of what action we plan to take.

E-Government Act Compliance

    The Animal and Plant Health Inspection Service is committed to 
compliance with the E-Government Act to promote the use of the Internet 
and other information technologies, to provide increased opportunities 
for citizen access to Government information and services, and for 
other purposes. For information pertinent to E-Government Act 
compliance related to this rule, please contact Mrs. Celeste Sickles, 
APHIS' Information Collection Coordinator, at (301) 851-2908.

List of Subjects in 9 CFR Parts 1 and 2

    Animal welfare, Pets, Reporting and recordkeeping requirements, 
Research.

    Accordingly, we are amending 9 CFR parts 1 and 2 as follows:

PART 1--DEFINITION OF TERMS

0
1. The authority citation for part 1 continues to read as follows:

    Authority: 7 U.S.C. 2131-2159; 7 CFR 2.22, 2.80, and 371.7.

0
2. In Sec.  1.1, the definitions of dealer and retail pet store are 
revised to read as follows:

Sec.  1.1  Definitions.

* * * * *
    Dealer means any person who, in commerce, for compensation or 
profit, delivers for transportation, or transports, except as a 
carrier, buys, or sells, or negotiates the purchase or sale of: Any dog 
or other animal whether alive or dead (including unborn animals, 
organs, limbs, blood, serum, or other parts) for research, teaching, 
testing, experimentation, exhibition, or for use as a pet; or any dog 
at the wholesale level for hunting, security, or breeding purposes. 
This term does not include: A retail pet store, as defined in this 
section; any retail outlet where dogs are sold for hunting, breeding, 
or security purposes; or any person who does not sell or negotiate the 
purchase or sale of any wild or exotic animal, dog, or cat and who 
derives no more than $500 gross income from the sale of animals other 
than wild or exotic animals, dogs, or cats during any calendar year.
* * * * *
    Retail pet store means a place of business or residence at which 
the seller, buyer, and the animal available for sale are physically 
present so that every buyer may personally observe the animal prior to 
purchasing and/or taking custody of that animal after purchase, and 
where only the following animals are sold or offered for sale, at 
retail, for use as pets: Dogs, cats, rabbits, guinea pigs, hamsters, 
gerbils, rats, mice, gophers, chinchillas, domestic ferrets, domestic 
farm animals, birds, and coldblooded species. In addition to persons 
that meet these criteria, retail pet store also includes any person who 
meets the criteria in Sec.  2.1(a)(3)(vii) of this subchapter. Such 
definition excludes--
    (1) Establishments or persons who deal in dogs used for hunting, 
security, or breeding purposes;
    (2) Establishments or persons, except those that meet the criteria 
in Sec.  2.1(a)(3)(vii), exhibiting, selling, or offering to exhibit or 
sell any wild or exotic or other nonpet species of warmblooded animals 
(except birds), such as skunks, raccoons, nonhuman primates, squirrels, 
ocelots, foxes, coyotes, etc.;
    (3) Any establishment or person selling warmblooded animals (except 
birds, and laboratory rats and mice) for research or exhibition 
purposes;
    (4) Any establishment wholesaling any animals (except birds, rats, 
and mice); and
    (5) Any establishment exhibiting pet animals in a room that is 
separate from or adjacent to the retail pet store, or in an outside 
area, or anywhere off the retail pet store premises.
* * * * *

PART 2--REGULATIONS

0
3. The authority citation for part 2 continues to read as follows:

    Authority: 7 U.S.C. 2131-2159; 7 CFR 2.22, 2.80, and 371.7.

0
4. Section 2.1 is amended as follows:
0
a. By revising paragraph (a)(3)(i);
0
b. In paragraph (a)(3)(ii), by removing the words ``to a research 
facility, an exhibitor, a dealer, or a pet store'';
0
c. By revising paragraphs (a)(3)(iii) and (a)(3)(vii); and
0
d. In the OMB citation at the end of the section, by removing the words 
``number 0579-0254'' and adding the words ``numbers 0579-0254 and 0579-
0392'' in their place.
    The revisions read as follows:

Sec.  2.1  Requirements and application.

    (a) * * *
    (3) * * *
    (i) Retail pet stores as defined in part 1 of this subchapter;
* * * * *
    (iii) Any person who maintains a total of four or fewer breeding 
female dogs, cats, and/or small exotic or wild mammals, such as 
hedgehogs, degus, spiny mice, prairie dogs, flying squirrels, and 
jerboas, and who sells, at wholesale, only the offspring of these dogs, 
cats, and/or small exotic or wild mammals, which were born and raised 
on his or her premises, for pets or exhibition, and is not otherwise 
required to obtain a license. This exemption does not extend to any 
person residing in a household that collectively maintains a total of 
more than four breeding female dogs, cats, and/or small exotic or wild 
mammals, regardless of ownership, nor to any person maintaining 
breeding female dogs, cats, and/or small exotic or wild mammals on 
premises on which more than four breeding female dogs, cats, and/or 
small exotic or wild mammals are maintained, nor to any person acting 
in concert with others where they collectively maintain a total of more

[[Page 57250]]

than four breeding female dogs, cats, and/or small exotic or wild 
mammals regardless of ownership;
* * * * *
    (vii) Any person including, but not limited to, purebred dog or cat 
fanciers, who maintains a total of four or fewer breeding female dogs, 
cats, and/or small exotic or wild mammals, such as hedgehogs, degus, 
spiny mice, prairie dogs, flying squirrels, and jerboas, and who sells, 
at retail, only the offspring of these dogs, cats, and/or small exotic 
or wild mammals, which were born and raised on his or her premises, for 
pets or exhibition, and is not otherwise required to obtain a license. 
This exemption does not extend to any person residing in a household 
that collectively maintains a total of more than four breeding female 
dogs, cats, and/or small exotic or wild mammals, regardless of 
ownership, nor to any person maintaining breeding female dogs, cats, 
and/or small exotic or wild mammals on premises on which more than four 
breeding female dogs, cats, and/or small exotic or wild mammals are 
maintained, nor to any person acting in concert with others where they 
collectively maintain a total of more than four breeding female dogs, 
cats, and/or small exotic or wild mammals regardless of ownership.
* * * * *

    Done in Washington, DC, this 11th day of September 2013.
Edward Avalos,
Under Secretary for Marketing and Regulatory Programs.
[FR Doc. 2013-22616 Filed 9-17-13; 8:45 am]
BILLING CODE 3410-34-P
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