### United States

Department of Agriculture Animal and Plant Health Inspection Service December 2014 Initial Regulatory Flexibility Analysis

Proposed Rule APHIS - 2014 - 0088 RIN 0579 - A E05



### Mexic an Hass a vocado ; c omprehensive r evision to authorize import s from beyond the S tate of Michoacán

Policy & Program Development Policy Analysis & Developmenti



### Summary

Mexican officials have requested that additional States in Mexico be allowed to export
Hass a vocados to the United States under the same systems approach that was implemented for Michoacán and has successfully kept pest infestations out of the United States

. U.S. imports of avocado from Mexico have increased significantly over the years, from 311 million po unds in
200 3 to over 1.2 billion pounds in 2013. U.S. avocado production over the 10 years, 2002/03 to 2011/12, averaged 423 million pounds per year, of which California accounted for 8 7.5 percent or over 375 million pounds. N early all of California ’s pr oduction is of the Hass variety . While APHIS does not have information on the size distribution of U.S. avocado producers, according to the Census of Agriculture, there were a total of 9 3,020 Fruit and Tree Nut farms (NAICS 1113) in the United States in 20 12

. The average value of agricultural products sold by these farms was less than $274,000, which is well below the SBA’s small

- entity standard of $750,000. It is reasonable to assume that most avocado farms qualify as small entities. Between 2002 and 2012, the number of avocado operations in California grew by approximately 17 percent, from 4,801 to 5,602 operations. Avocados produced in the State of Jalisco , north of Michoacán , are expected to be the first that would be exported to the United States under this rule

. These imports would help meet the increasing year

- round U.S. demand for avocado . Avocado per capita consumption in the United States grew from 1.1 pounds in 1989 to 4.5 pounds in 2011. A growing Hispanic population and greater aw areness of the avocado’s health benefits have helped to spur demand

. In 2012 , Jalisco produced about 90 million pounds of Hass a vocados

. Given required phytosanitary safeguards, o nly a fraction of this quantity is expected to qualify for importation by the United States. But even if all of Jalisco ’s avocado production were to me e t theii

requirements for U.S. entry, the total quantity would be equivalent to less than 8 percent of U.S.
Hass a vocado import s in 201 3 of over 1. 2 billion pounds. The proposed r ule is not expected to have a large impact on the U.S. avocado market or California producers because of potential imports from Jalisco. Any m arket effects are as likely to be borne by other foreign suppliers, such as Chile and Peru, as by U.S. producers.iii



### Table of Contents Summary

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

................................ ................................ ................................ ......................... 1 Reasons Action is Being Considered

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

................................ ................................ ........ 8 Potentially Affected Small Entities

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

................... 10 Duplication, Overlap, or Conflict with Existing Ru les and Regulations

.......................... 10 Alternatives to minimize Significant Economic Impacts of the Rule

............................... 101



### Introduction

Michoacán is the only Mexican State from which Hass a vocados are allowed to be imported into the United States. The proposed rule would allow importation of fresh Hass avocados from other regions of Mexico. The Regulatory Flexibility Act requires agencies to evaluate the potential ef

fects of their proposed and final rules on small businesses, small organizations and small governmental jurisdictions. This initial regulatory flexibility analysis describes exp ected impacts of this proposed rule on small entities, as required by section 603 of the Act.
In this introduction, we briefly describe the history of a vocado import s from Mexico , followed by an overview of U.S. production, consumption , and trade of Hass avocados

. Likely effects of the rule in terms of U.S. avocado import volumes are also discussed. History of U.S. Imports of Mexican Hass Avocados Fresh Hass avocados from Mexico were granted entry into the United States in stages due to concerns regarding the possible introduction of certain pests . In 1993, APHIS authorized the entry of Mexican Hass avocados into Alaska. Then in November 1997, fresh Hass avocados from Mexico were allowed entry into 19 n ortheastern States and the District of Columbia during a four

- month period, November through February

. After four years , the a rea and period approved for fresh Hass avocado imports from Mexico were expanded to 31 e astern States and the District of Columbia, October 15 through April 15. I n 2004, fresh Hass avocados from Mexico were allowed entry year

- round into all States with access to California, Florida, and Hawaii delayed for two years. Throughout these years of expanded access, only commercial consignments of Hass avocados grown in approved municipalities in Michoacán were allowed entry

. Ongoing p est2

mitigation meas ures include orchard and grower registration, surveys including trapping, orchard sanitation, registration of packing houses, biometric sampling and culling of fruit, and phytosanitary certification. The proposed rule would allow Hass a vocado import s by the United
States under the same systems approach that has successfully prevented the introduction of pest s via avocado shipments from Michoacán. Jalisco would be the first additional Mexican State from which Hass avocados would be imported.
U . S . Hass Avocado Production
U.S. avocado production over the 10 years, 2002/03 to 2011/12, averaged 211,600 tons per year, and California accounted for 8 7.5 percent or 187,800 tons

. 1 N early all of California ’s production i s of the Hass variety . The value of U.S. avocado production over this period averaged $ 35 5.5 million , with California account ing for over 9 5 percent , or $3 39.9 million per
year . During development of the 2004 rule that removed regional and seasonal access restrictions for Mexican Hass avocados, the rule's expected effects on California avocado producers were the focus of much industry comment

. A fear that significant losses would be suffered by California avocado growers , however, proved to be unwarranted. California avo cado growers have not seen major changes in their volume s of production or the prices they receive

. Notwithstanding significant season

- to

- season variation in production and prices, California avocado growers saw slight upward trends in production and nomi nal prices over the 10 years,
2002 /03 to 2011 /12

.

1 USDA National Agricultural Statistics Service, 2013 Agricultural Statistics Annual, Table 5

- 16. Seasons are from Nov 1 to Oct 31 for California and June 20 to March 1 for Florida. Tons are short tons (2,000 pounds). http://www.nass.usda.gov/Publications/Ag_Statistics/2013/chapter05.pdf3

U.S. Imports of Hass Avocados The United States is the largest importer of avocados in the world. Over the three years, 2011 through 2013, the United States imported an average of 1.1 billion pounds of avocados per
year, valued at $954 million ($0.87 per pound) (table 1)

. 2 More than 84 percent of imported
Hass avocados came from the Mexican State of Michoacán. Table 1

. Average annual U

. S

. i mports of Hass a vocados , by source country, 201 1

- 2013

Value (millions) Pounds

(millions) Price per

pound Percentage

of Total Quantity World $954 .2 1,094 .4 $0.87 100 .0 %
Mexico $841 .5 92 4 $0.91 84.4%
Chile $59 .5 97 .9 $0.61 8.9%
Dominican Republic $18 .2 35 .8 $0.51 3. 3 %
Peru $34 .7 34 .2 $1.02 3.1% Source: U.S. Census Bureau, as reported by Global Trade Information Services, Inc.

The dramatic increase in U.S. demand for Hass avocados over the past decade has enabled domestic producers to maintain production levels while allowing for large increases in avocado import s. During 2003 and 2004, the United States imported an average of 316 million pounds of avocados per year , valued at $157 million ($0.50 per pound). In 2005 and 2006, the United States imported an average of 452 million pounds of avocad os per year , valued at $292 million ($0.65 per pound). Even greater growth was realized in subsequent years. The average annual quantity of avocados imported, 2007

- 2010, was 75 percent more than the average import

2 All data in this section are from the U.S. Census Bureau, as reported by Global Trade Information Services, Inc. The data are for all avocados, fresh or dried. However, nearly all U.S. avocado imports are fresh and of the Hass variety. All prices and v alues reported are nominal, that is, they have not been adjusted for inflation.4

levels for 2005 and 2006, and the average value was greater by 107 percent. In 2013, Hass avocado imports exceeded 1.26 billion pounds, four times the 311 million pounds imported in
2003. The average nominal price increased from $0.50 per pound in 2003

- 2004 to $0.87 per pound in 2011

- 2013 . The average rate of inflation according to the United States Department of
L abor was approximately two percent per year over this period ; based solely on the inflation rate , we would expect the price of Hass avocados to have increased to around $0.64 pe r pound. Hass

a vocado prices increased at a rate of about 5.7 percent per year , reflecting the strong consumer demand for this fruit

. Mexico has significantly increased its market share as a foreign supplier. In 2004, when U.S. avocado imports totaled 320 million pounds, Chile accounted for 64 percent of those imports and Mexico 27 percent. From 2005 to 2010, th e se relative shares were approximately reversed, with Mexico suppl ying 67 percent of the total and Chile 29 percent. As shown in table 1, Mexi co supplied over 84 percent of U.S. H ass avocado import s, 201 1

- 2013, followed by Chile with approximately 9 percent of the U.S. import market, and the Dominican Republic and Peru together supplying the remaining 7 percent

. As Mexico’s market share has incr eased, the quantity supplied by Chile has continued to decline , from 257 million pounds valued at $122 million in 2009 , to less than 52 million pounds valued at $34 million in 2013. Figure s 1 and 2 show how the quantity and value of U.S. imports of Hass avocados from Mexico have been increasing since 2003 , while imports from Chile have been in decline since 2009.5 0 200,000,000 400,000,000 600,000,000 800,000,000 1,000,000,000 1,200,000,000 1,400,000,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Figure 1. 

### Quantity of Hass Avacado Imports, 2003
- 2013

(pounds)

World Mexico Chile DR

$0 $200,000,000 $400,000,000 $600,000,000 $800,000,000 $1,000,000,000 $1,200,000,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Figure 2. 

### Value of Hass Avocado Imports, 2003
- 2013

(dollars)

World Mexico Chile DR6

Expected Impact of the Rule on Hass Avocado Imports from Mexico The proposed rule would allow fresh Mexican Hass avocado imports from region s in Mexico beyond the State of Michoacán

. Avocados produced in the State of Jalisco , north of Michoacán , are expected to be the first that would be exported to the United States under this rule (f igure 3 ) . In 2012 , Jalisco produced about 90 million pounds of Hass a vocados valued at $ 38 million

. Given required phytosanitary safeguards, o nly a fraction of this quantity is expected

to qualify for importation by the United States. But even if all of Jali sco ’s production met the import requirements for U.S. entry, the total quantity would be equivalent to less than 8 percent of U.S. Hass a vocado import s in 201 3 of over 1. 2 billion pounds. The proposed rule is not expected to have a large impact on the U.S . avocado market because of potential imports from Jalisco. Any m arket effects are as likely to be borne by other foreign suppliers, such as Chile and Peru, as by U.S. producers.7 Figure 3. Map of Mexico8



### Reasons Action is Being Considered

The action is being considered because Mexico has demonstrated that it can meet phytosanitary requirements for the export of fresh H ass avocados to the United States. 

### Objectives of and Legal Basis for the Rule
The objective of the rule is to allow the importation of fresh Hass avocados from regions in Mexico beyond Michoacán , starting with the State of Jalisco. This action is based on a pest risk assessment and risk management document prepared by APHIS. The Plant Protection Act authorizes the Secreta ry to prohibit or restrict the importation of plants and plant products only when it is necessary to prevent the introduction of plant pests or noxious weeds into the United
States . The systems approach in place , with the exception of the proposed removal of mandatory fruit cutting at land and maritime borders, will continue to satisfy our commitment under the International Plant Protection Convention to allow the importation of plants and plant products subject to the least restrictive measures con sistent with ensuring phytosanitary security. 

### Potentially Affected Smal l Entities

The number of avocado farms in California increased by nearly 17 percent between 2002 and 2012, from 4,801 to 5,602 operations. 3 Total acreage , however , decreased by 20 perc ent during the same time period, from 75,570 acres to 59,814 acres . Despite the decrease in acreage, higher yields have allowed producers to maintain overall production levels. In 2012 , nearly one

half of California’s avocado farms were in San Diego Coun ty (2,778 operations and 20,506 acres), followed by Ventura County (1,129 operations and 17,053 acres), Riverside County (670

3 National Agricultural Statistics Service (NASS), United States Department of Agriculture (USDA), “California: State and County Data, Census of Agriculture. ”9

operations and 6,883 acres), Santa Barbara County (466 operations and 7,171 acres), and San Luis Obispo County (216 operations and 5,141 acres) (figure 4)

.

According to the Census of Agriculture, there were a total of 7 , 495 avocado farms in the United States in 2012, of which 75 percent were in California. 4 N early all U.S. production of Hass avocados takes place in California, where Hass is the dominant variety grown. APHIS does not have information on the size distribution of U.S. avocado producers, but according to the 2012 Census of Agriculture, there wer e a total of 93,020 Fruit and Tree Nut farms (NAICS 1113) in the United States in 2012. Of this number, nearly 92 percent had annual sales in 2012 of less than $500,000, which is well below the SBA’s small

- entity threshold of $750,000. 5 While cash receip ts by size for avocado farms were not reported in the 2012 Census of Agriculture, it is reasonable to assume that most avocado farms qualify as small entities.

4 NASS, USDA, “U nited States: Summary and State Data, Volume 1,” 20 12 Census of Agriculture

. 5 Source: SBA and 20 12 Census of Agriculture

. 0 500 1000 1500 2000 2500 3000 3500

San Diego Ventura Riverside Santa Barbara San Luis

Obispo 

## Figure 4. 

## Number of Avocado Operations by County, 2002, 2007, and 2012

2002 2007 201210



### Projected Reporting, Recordkeeping, and Other Compliance Requirement s
Reporting and recordkee ping requirements associated with the proposed rule are discussed in the rule under the heading "Paperwork Reduction Act." 

### Duplication, Overlap , or Conflict with Existing Rules and Regulations

APHIS has not identified any duplication, overlap, or conflict of the proposed rule with other Federal rules. 

### Alternatives to minimize Significant Economic Impacts of the Rule

We have prepared this initial regulatory flexibility analysis because of our limited understanding of the potential additional quantity of Ha ss avocados that may be imported from Mexico over the longer term, as more States in Mexico meet the import requirements . In the absence of apparent significant economic impacts in the near term , we have not identified alternatives that would minimize suc h impacts.