### United States

Department of Agriculture Animal and Plant Health Inspection Service Novem ber 2011 **Final Regulatory Flexibility Analysis**

**Final Rule**  **APHIS -**  **2008 -**  **0112 RIN 0579**  **- AD31**  **Importation of Horses f**  **rom Contagious Equine Metritis**  **- a**  **ffected Countries**

Policy & Program Development Policy Analysis & Developmenti



### Summary This final regulatory

flexibility

anal ys is examines expected impacts for U.S. small entities of amending the regulations under which stallions and mares are im ported from CEM

affected countries. Nearly all operations that rais e horses are considered to be small

. For an importer of a mare from a CEM

- affected country , we expect the additional costs will range from $80 to $255 per mare . For an importer of a stal lion from a CEM

- affected country , we expect the additional costs will range from $ 620 to $ 830 per stallion

. Currently , CEM testing costs vary by State and within State, averaging about $1,760 for mares and $5,070 for stallions. The overall impact of the additional costs for the horse industry is not expected to be significant, given the relatively small number of horses imported from CEM countries (less than 2 percent of imports). The additional costs are also not large when compared to expected benefit s in terms of reduced risk of a CEM outbreak in the United States.ii



### Table of Contents Summary

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

................................ ................................ ................................ ......................... 3 U.S. Horse Industry

................................ ................................ ................................ ......... 2 Costs of Contagious Equine Metritis

................................ ................................ .............. 3 Final Regulatory

Flexibility Anal ys is

................................ ................................ ................. 4 Need for and Objectives of the Rule

................................ ................................ ............... 4 Significant Issues raised by Public Comment in response to the Initial Regulatory Flexibility

Anal ys is

................................ ................................ ................................ ........ 5 Significant Issues raised by the Small Business Administration in response to the Initial Regulatory

Flexibility

Anal ys is

................................ ................................ ........... 5 Potentially

Affected Small Entities

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

................. 6 S teps taken by

APHI S to minimize Significant Economic Impacts on Small Entities

.. 8iii



### Introduction Contagious equine metritis (CEM) is a venereal disease of horses caused by the bacterium Taylorella equigenitalis. This final regulatory flexibility

anal ys is examines impacts for U.S. small entities of amending the regulations under which stallions and mares may be imported to the United States from countries where CEM is present. The final rule affirms several interim rule amen dments for horse imports from CEM

affected countries . The amendments include (1) requiring that the official health certificate state that horses under 731 day s of age have not been used for breeding; (2) requiring an additional culture site, the distal urethra, for stallions; ( 3 ) changing the testing schedule to allow 3 sets of samples be taken over a 12

- day period (compared to the current 7 days) with no fewer than 72 hours between tests for imported mares; ( 4 ) requiring that imported mares be complement

fixation (CF) tested on arrival at a CEM facility ; and ( 5 ) requiring test mares to be CF tested on the twenty

- first day

instead of the fifteenth day after breeding

. The interim rule also required that 2 sets of cultures with negative results be collected from stallions prior to test breeding. In this final rule , APHI S is reinstating the original requirement of collecting 1 set of cultures with negative results prior to test breeding. As a second change from the interim rule, cultures from the endometrial or distal cervix will not be required to be included with all three sets of cultures collected from mares; rather, onl y the third set of cultures will be required to include a swab from the endometrial or distal cervix. As background, we provide a brief o verview of the horse industry in the United States, including imports, and a description of expected benefits of the rule in terms of reduced risk of a CEM outbreak.2

**U.S. Horse Industry** The horse industry

play s an important role in the U.S. economy . Acc ording to the Census of Agriculture, there were about 576,000 farms with 4 million horses valued at $16.3 billion in the United States in 2007. 1 These statistics are low when compared to those from a recent study prepared for the American Horse Council, which found that there are about 2 million people owning 9.2 million horses, with a direct value of about $39 billion. 2 Inaddition, other agricultural and non

- agricultural sectors are dependent on the horse industry for their economic activity

. 3 Horses also play

an important role in U.S. international trade. From 2004 through 2008, the value of U.S. horse exports ($430 million) was much more than the combined export value of cattle, hogs , sheep and goats ($74 million). 4 The United States imported a tot al of 16,714 horses in 2008. Of this total, 2,048 (or about 12.3 percent) were purebred breeding horses, and of these, only 296 (less than 2 percent of all horse imports) were from CEM

- affected countries. 5 Over 95 percent of all horses imported were from Canada, Argentina, Brazil, Mexico, the Netherlands, German y, Chile, Peru, Venezuela, and the United Kingdom. Horses are a highl y valued asset, especially those with specific pedigree. The average per - head import value of n on - pure breeding horses was $1 4,170 between 2004 and 2008, while the import value of pure breeding horses averaged $12,270. Average prices for both domestic and imported thoroughbreds are much higher, with some imports valued at well over $300,000.

1 2007 Census of Agriculture (NASS). 2 Deloitte Consulting LLP, National Economic Impact of the U.S. Horse Industry, 2005. This study reports that 9 percent of horse imports were for racing, 30 percent for showing, 42 percent for recr eation, and 19 percent for other purposes ( http://www.manesandtailsorganization.org/American_Horse_Council_2005_Report.pdf ) 3 A public comment received from Am erican Horse Council on May 24, 2011 (APHIS 2008

- 0112

- 0016) states that “the horse industry has an annual $102 billion impact on the U.S. economy and supports 1.4 million jobs.” 4 GTIS, World Trade Atlas. 5 Ibid.3

**Costs of Contagious Equine Metriti s**  If CEM were to become established in the United States, the horse industry would suffer great economic loss. Because animals may be asy mptomatic and CEM is highl y contagious, the disease is difficult to detect and control. Direct consequences of a CEM outbreak could include the closure of breeding operations, production losses as a result of abortions, costs of control and restriction of both intrastate and interstate movements, vaccination costs, and surveillance and laboratory

testing costs. Since mares can be bred only during certain seasons, CEM can have a devastating effect on equine reproductive efficiency . For some breeders, an outbreak could
mean the loss of thousands or even millions of dollars in s tud fees and breeding losses. Thoroughbred h orses are more severel y affected by CEM than other breeds. CEM outbreaks in the United States occurred on thoroughbred farms in central Kentucky in March 1978, and in April of the following ye ar in Missouri. The cost of eradicating these two outbreaks to taled more than $4 7 million in 20 11 dollars. 6 More recentl y, there have been two incidents in which current testing methods failed to identify imported horses infected with or exposed to T. equigenitalis: a stallion released from quarantine in 2004 that ha d not cultured positive, and a mare imported in 2008 that showed a positive CF test upon entering CEM quarantine. These incidents are described more full y below. The inadvertent release of a CEM

- infected horse could have a profound effect on the equine in dustry , jeopardizing the United States’ status as CEM free and negativel y impacting exports. The benefits of this final rule are the potential costs forgone through the strengthening of the CEM testing and certification requirements. These amended requir ements will provide

6 USDA/APHIS, A letter addressed to U.S. Se nator, the Honorable Alfonse M. D’Amato, June 30 1995.4

additional safeguards against the importation of CEM

- infected horses through improved detection of the pathogen. 

### Final **Regulatory Flexibility Analysis** The Regulatory

Flexibility

Act requires agencies to evaluate the potential effects of their proposed and final rules on small businesses, small organizations and small governmental jurisdictions. Section 60 4 of the Act requires agencies to prepare a final regulatory flexibility anal ys is that describes expected impacts of a rule on small e ntities. **Need for and Objectives of the Rule** In 2007, APHI S initiated a review and assessment of the CEM program by a team of State, Federal, and university officials, to identify

needed improvements to lessen the risk of release of a CEM

- positive stalli on or mare within the United States. The amendments included in this final rule reflect the findings of the 2007 CEM review. The objective of the rule is to amend 9 CFR part 93 concerning the entry , quarantine and testing of horses from countries that
are affected b y CEM. The authority citations for part 93 are: 7 U.S.C. 1622 and 8301

– 8317; 21 U.S.C. 136 and 136a; and 31 U.S.C. 9701.As mentioned, there have been two recent incidents involving horses infected with or exposed to T. equigenitalis, the first of which led to the CEM review. In 2006, the pathogen was found in a routine breeding soundness exam of a stallion that had been released from CEM quarantine in 2004. During its initial CEM quarantine, the stallion did not culture positive. During the epidemiological investigation of the positive stallion, two other stallions on the premises were identified as infected. This incident jeopardized the U.S. status as CEM free. The second incident occurred in April 2008, when an imported mare showed a p ositive CF test upon arrival at CEM quarantine despite negative cultures. At the time, this test was not5

require d for imported mares. The attending veterinarian initiated the test based on her knowledge of the CEM review. Despite APHI S requirements for pre - import CEM testing in the country of origin, APHIS has identified over 28 CEM

- positive horses intended for importation . The regulatory changes in this final rule are needed promptly to lessen the risk of introduction and spread of CEM. **Significant I ssues**  **raised by**  **Public Comment in response to the Initial**  **Regulatory Flexibility Analysis** APHI S solicited comments concerning the interim rule for 60 day s ending May 25, 2011, and then extended the comment period until September 7, 2011. APHIS received 18 comments. Many of the commenters raised financial concerns and questioned the necessity of the rule’s increase of the number of negative culture tests for stallions prior to test breeding from one to two . APHI S agrees with the commenters and is reinstat ing the requirement that only one negative culture needs to be collected from the stallion prior to test breeding. A few commenters also raised concerns regarding the validity of having the endometrial or distal cervix of the test mares cultured on three separate occasions due to the potential of overgrowth and contamination. The commenters suggested that cultures from the endometrial or distal cervix be collected on the third set of cultures only . APHIS agrees with the commenters and is amending the interim rule to require that only the third set of cultures include a swab from the endometrial or distal cervix. **Significant Issues raised by the Small Business Administration in response to the Initial Regulatory Flexibility Analysis**  No significant issues w ere raised b y the Small Business Administration in response to the Initial Regulatory

Flexibility

Anal ys is.6

**Potentially Affected**  **Small Entities** The Small Business Administration (SBA) has established guidelines for determining firms considered to be small under the Regulatory Flexibility Act. This rule will directly affect U.S. importers of mares and stallions from CEM countries. These entities will face increased quarantine and testing costs. The final rule will also indirectly affect all U.S. owners of mares and stallions, by

reducing the risk of a CEM outbreak. SBA classifies these operations (horses and other equine production, North American Industry Classification Sy stem code 112920) as small entities if their annual receipts are not more than $75 0,000. According to the 2007 Census of Agriculture, there were 575,942 horse farms with 4,028,827 horses in the United States that year, of which 133,472 farms sold 506,503 horses that had a total value of over $2.06 billion. 7 These data impl y an average price per horse of about $4,070. For those farms that s old horses, annual revenue from horse sales averaged less than $15,500 per farm. Nearl y all operations that rais e horses are considered to be small , although some of the horses imported and exported are highl y valued. **Projected Reporting, Recordkeeping, and Other**  **Compliance Requirement**  **s** U.S. entities that may

be directly

affected by

the rule voluntarily

engage in import transactions. An y reporting or other requirements will be those normally assoc iated with the regular transactions involved in doing business. However, we expect the following additional testing and quarantine costs due to the amended CEM regulations: Certification: Official health certification that horses under 731 days of age have not been used for breeding

– no additional cost.

7 USDA/NASS, 2007 Census of Agriculture ( http://www.agcensus.usda.gov/Publications/2007/Full_Report/Volume_1,_Chapter_1_US/st99_1_029_031.pdf )7

Imported mares:

 Three sets of samples over a possible 12

- day period (compared to the current 7 day s), with no fewer than 3 day s between tests. The decision to take advantage of the extended testing perio d of five day s is at the discretion of the importer. A potential additional cost of up to $175 per imported mare ($35 per day x 5 day s).

 Samples from the distal or endometrial cervix

– no additional cost.

 CF test upon arrival at the CEM facility . An addi tional cost of $80 per imported
mare. Imported stallions:

 Culture the distal urethra

– no additional cost.

 One culture to be collected from the stallion prior to test breeding with negative results . An additional cost of $ 200 per imported stallion ($40 pe r day x 5 day s per imported stallion)

. Test mares:

 Culture test mares using the same sites and intervals as imported mares. The decision to take advantage of the extended testing period of three day s is at the discretion of the importer. A potential additional cost of up to $210 ($35 per day x 3 days per test mare x 2 test mares).

 CF test on day

21 instead of day

15. An additional cost of $420 ($35 per day x 6 day s per test mare x 2 test mares). For an importer of a mare from a CEM

- affected country , the s um of the additional costs will range from $80 to $255 per mare , depending upon whether the five additional testing day s are used. For an importer of a stallion from a CEM

- affected country , the sum of the additional8

costs will range from $ 620 to $ 830 per stallion , depending upon whether the test mares are sampled over the three additional day s possible. Currently , CEM testing costs vary by State and within State, averaging about $1,760 for mares and $5,070 for stallions. The additional costs are also no t large when compared to expected benefits of the rule in terms of reduced risk of a CEM outbreak in the United States. Approximately

2,500 horses undergo CEM testing in the United States each year. **Steps taken by APHIS to minimize Significant Economic Im pact**  **s on**  **Small Entities** Based on our review of available information, APH IS does not expect the rule to have a significant economic impact on small entities. In the absence of significant economic impacts, we have not identified alternatives that would minimize such impacts.