### United States

Department of Agriculture

Animal and Plant Health Inspection Service
September 2011 Analysis in Support of Certification T hat the

Rule W ill N ot H ave a Significant Economic Impact on a Substantial Number of Small Entities

Final Rule 2008
- 0085 RIN 0579
- AD17

Importation of F resh ( Chilled or F rozen) Ovine M eat from Uruguay

Policy & Program Development Policy Analysis & Development1



### Summary

This rule will allow the importation of fresh (chilled or frozen) lamb and mutton from
Uruguay under certain conditions

. U.S. production of lamb and mutton averaged 79,561 metr ic
tons (MT) over the five years, 2006

- 2010. Over this same period, imports averaged almost
75,100 MT (equivalent to about 94 percent of U.S. production). Uruguay expects its annual
lamb and mutton exports to the United States not to exceed 2,000 MT. Th is quant ity is
equivalent to less than three percent of U.S. lamb an d mutton imports and less than two percent
of U.S. domestic supply of these commodities. A percentage of the imports from Uruguay are likely to displace some of the lamb and mutton imported from existing foreign suppliers, further

dam p ening any possible effects for U.S. businesses.

While m ost businesses that may be impacted by this rule
, including U.S. sheep farms and
meat processing es tablishments, are small entities , the APHIS Administrator has determined that

this action will not have a significant economic impact on a substantial number of small entities.2



### Introduction

This analysis provides the basis for certification by the APHIS Administrator that the
importation of fresh (chilled or frozen) ovine meat from Uruguay rule will not have a significant
economic impact on a substantial number of small entities. We provide an overview of
production and trade of lamb and mutton by the United States and Uruguay before discussing
potential effects for small entities.
Sheep production in the United States ha s been marked by smaller inventories, fewer
operations, and shrinking revenues during the last few decades. U.S. production o f lamb and
mutton averaged 79,561 metric tons (MT) over the five years, 2006

- 2010. 1 Over this same
period, imports averaged almost 75,100 MT (equivalent to about 94 percent of U.S. production),
and were valued at $434.5 million (table 1).

U.S. lamb and mutton imports dwarf U.S. exports of these commodities (table 1) . By
quantity, U.S. lamb and mutton exports, 2006

- 2010, were equivalent to only about eight percent
of imports. In terms of value, U.S. lamb and mutton exports over this period were equivale nt to
only about four percent of imports, implying that the overall value of lamb and mutton products
imported by the United States is of generally higher value than is the mix of U.S. lamb and

mutton exports.
As shown in table 2, about two

- thirds of U.S. lamb and mutton imports are supplied by

Australia and about one

- third by New Zealand, with negligible amounts coming from Canada,
Iceland, and Mexico.

1 USDA ERS, “Livestock, Dairy, and Poultry Outlook,” LDP

- M

- 204, June 15, 2011, p. 17. http://www.ers.usda.gov/publications/ldp/2011/06Jun/ldpm204.pdf L amb is defined as meat from sheep less than one year old , and m utton is defined as meat from sheep one year or older.3

Table 1. Quantity and value of U.S. imports and exports of lamb and mutton, 2006

- 2010 Year Quantity in Metric Tons Value in Million Dollars

Imports Exports Net Imports Imports Exports Net Imports

2006 78,878.9 7,942.5 70,936.4 424.9 20.9 404.0

2007 83,421.3 3,955.2 79,466.1 453.4 11.2 442.2

2008 75,741.8 5,003.8 70,738.0 442.5 21.1 421.4

2009 69,585.4 6,975.0 62,610.4 431.1 21.5 409.6

2010 67,876.6 6,963.5 60,913.1 510.7 15.6 495.1

5

- year average 75,100.8 6,168.0 68,932.8 452.5 18.1 434.5
Source: U.S. Census Bureau, as reported by USDA Foreign Agricultural Service. Sum of harmonized tariff schedule categories 020410, 020421, 020422, 020423, 020430, 020441, 020442, and 020443.4 Table 2. P ercentage of U.S. lamb and mutton imports
, by source country, 2006

- 2010

Quantity Value Australia 66.8% 70.7% New Zealand 33.0% 29.0% Other 1 0.2% 0.3% Source: Based on U.S. Census Bureau data, as reported by USDA Foreign Agricultural Service. Sum of harmonized tariff schedule categories 020410, 020421, 020422, 020423, 020430, 020441, 020442, and 020443. 1 Canada, Iceland, and Mexico.5

Uruguay’s annual exports of lamb and mutton total between 20,000 MT and 25,000 MT. 2
The European Union and Brazil are the major destinations and account for about 50 percent of
the quantity exported. The remainder is sold to 34 other countries. Ur uguay expects its annual
lamb and mutton exports to the United States not to exceed 2,000 MT. This quantity is
equivalent to about 2.7 percent of U.S. lamb and mutton yearly imports, 2006

- 2010, and about
1.3 percent of annual U.S. domestic supply over the se five years.



### Potential Impact on Small Entities

Entities that could be affected by this rule include sheep farmers, categorized within the
North American Industry Classification System (NAICS) code 112410. The Small Business
Administration (SBA) small

- entity standard for this industry is annual receipts of not more than
$750,000. The 2007 Census of Agriculture reports that there were 30,974 sheep farms that year,

and the market value of the products sold by them totaled $435,107,000

. 3 Thus, aver age receipts
per farm were about $14,050, well below the small

- entity standard.
Establishments primarily engaged in processing meat and meat byproducts (except
poultry and small game) from purchased meats could also be affected by this rule

. They are

clas sified within NAICS code 311612, for which the SBA small

- entity standard is not more than
500 employees. In 2007, 1,338 of the 1,381 establishments that comprised this industry (97
percent) had fewer than 500 employees. 4
Clearly, most U.S. businesses that may be affected by this rule are small. However, the
impact of allowing fresh (chilled or frozen) ovine meat imports from Uruguay will be minor. As

2 Information on Uruguay’s trade in ovine products and expected exports to the United States was provided in comment on the proposed rule by the Uruguayan Wool Secretariat ( Secretariado Uruguayo de la Lama ). 3 http://www.agcensus.usda.gov/Publications/2007/Full_Report/Volume_1,_Chapter_1_US/st99_1_046_046.pdf 4 U.S. Census Bureau, 2007 Economic Census. http://factfinder.census.gov/servlet/IBQTable?_bm=y&

- geo_id=01000US&

- fds_name=EC0700A1&

- _skip=300&

- ds_name=EC0731SA11&

- _lang=en6

indicated, expected imports from Uruguay are equivalent to less than th ree percent of U.S. lamb
and mutton yearly imports in recent years and less than two percent of the U.S. domestic supply
of these commodities. A percentage of the imports from Uruguay is likely to displace some of
the lamb and mutton imported from existin g suppliers, further dampening any possible effects

for U.S. businesses. Under these circumstances, the APHIS Administrator has determined that

this action will not have a significant economic impact on a substantial number of small entities.