Amendments to the Perishable Agricultural Commodities Act (PACA)

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 46

[Docket Number FV96-351A]

RIN Number: 0581-AB48

Amendments to the Perishable Agricultural Commodities Act (PACA)

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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

SUMMARY: The Department of Agriculture (USDA) is revising the

Regulations (other than Rules of Practice) Under the Perishable

Agricultural Commodities Act (PACA) in order to implement legislative

changes signed into law by President Clinton. Specifically, the

legislative changes phase retailers and grocery wholesalers out of

license fee payments over a 3-year period; establish that retailers and

grocery wholesalers making an initial application during the 3-year

period pay no fee for the renewal of the license for subsequent years;

establish a one-time administrative fee for new retailers and grocery

wholesalers entering the program after the 3-year phase-out period; and

increase license fees from $400 to $550 annually for all other

licensees.

EFFECTIVE DATE: September 15, 1997.

FOR FURTHER INFORMATION CONTACT: James R. Frazier, Chief, PACA Branch,

Room 2095-So. Bldg., Fruit and Vegetable Division, AMS, USDA, 1400

Independence Avenue, S.W., Washington, DC 20250, Phone (202) 720-2272.

SUPPLEMENTARY INFORMATION:

Background

The PACA establishes a code of fair trading practices covering the

marketing of fresh and frozen fruits and vegetables in interstate and

foreign commerce. The PACA protects growers, shippers, distributors,

and retailers dealing in those commodities by prohibiting unfair and

fraudulent practices. In this way, the law fosters an efficient

nationwide distribution system for fresh and frozen fruits and

vegetables, benefiting the whole marketing chain from farmer to

consumer. USDA's Agricultural Marketing Service (AMS) administers and

enforces the PACA.

The PACA was amended by the Perishable Agricultural Commodities Act

Amendments of 1995 (P.L. 104-48). The regulations implementing the PACA

(other than the Rules of Practice) are published in the Code of Federal

Regulations at Title 7, Part 46 (7 CFR part 46). On September 10, 1996,

the proposed revisions to the PACA regulations implementing P.L. 104-48

were published in the Federal Register. The finalized regulatory

revisions became effective on April 30, 1997, with the exception of

Sec. 46.6, License Fees.

During the comment period on the proposal, the Food Marketing

Institute (FMI), Food Distributors International (FDI), and the

National Grocers Association (NGA), objected to the proposed revisions

to Sec. 46.6. They wrote that the proposed rule requiring that certain

retailers and grocery wholesalers pay renewal fees was incorrect. They

referred to section 499c(b)(3) of the statute designated, ``One-Time

Fee for Retailers and Grocery Wholesalers that are Dealers'', which

specifies the fees to be paid by a retailer or a grocery wholesaler

making an initial application during the phase-out period and after

such period ends. The commentors emphasized the statutory language at

the end of section 499c(b)(3) which states: ``* * * a retailer or

grocery wholesaler paying a fee under this paragraph shall not be

required to pay any fee for renewal of the license for subsequent

years.''

Our interpretation of the statutory language, as well as our

understanding of the agreement between the various industry groups

which preceded the final legislation, was that all retailers and

grocery wholesalers would pay a license renewal fee during the 3-year

phase-out period. After the end of the phase-out period, no renewal fee

would be required. This interpretation treats all retailers and grocery

wholesalers equally and does not discriminate against those who had

complied with the licensing requirements prior to the law's enactment

on November 15, 1995.

Since the commentors' interpretation of the legislative amendment

was substantially different from our view but appeared plausible, we

separated Sec. 46.6 from the rest of the proposed regulations, and

addressed the issue independently by reopening that part of the

proposed rule in order to allow other interested parties to comment.

Since the publication of the reopening of the comment period on March

31, 1997, we have collected renewal fees from retailers and grocery

wholesalers which had received initial licenses during the phase-out

period. However, in that document, we stated that in the event a

determination is made that the law excludes those entities from paying

renewal fees during the 3-year phase-out period, the collected renewal

fees would be refunded with interest.

Comments

USDA received 17 comments on this reopened part of the proposed

rule from 9 industry trade associations, 7 retailers, one grocery

wholesaler, and one comment, signed by Congressman Thomas Ewing,

Chairman of the House of Representatives' Subcommittee on Risk

Management and Specialty Crops and Congressman John Boehner. Three of

these comments were postmarked after the comment period ended on April

30, 1997, and are, therefore, not addressed in this rule.

We received comments supporting the proposed regulations (i.e., to

charge all retailers and grocery wholesalers a renewal fee during the

3-year phase-out period) from the American Farm Bureau Federation,

United Fresh Fruit and Vegetable Association, Florida Fruit and

Vegetable Association, and Western Growers Association. They reiterated

their support for the proposed regulations as originally proposed, and

urge that we adopt them without change. They argue that any change is

without basis because there is no support in the statute nor in the

legislative history to indicate that Congress chose to treat retailers

and grocery wholesalers that were licensed after November 15, 1995, any

more favorably than those licensed prior to that date. They point out

that by changing the proposed regulations, retailers and grocery

wholesalers would

[[Page 43454]]

pay different license fees based solely upon whether they were licensed

under the PACA before or after November 15, 1995.

Two of these commentors state that the retail and grocery wholesale

industries are incorrectly relying upon the ``plain meaning'' of the

1995 PACA Amendments; an assertion which the Supreme Court has

repeatedly ruled that alone is not the sole consideration in

implementing a statute. The commentors support their argument by

quoting a Supreme Court decision in part: ``The plain meaning of

legislation should be conclusive, except in ``rare cases [in which] the

literal application of a statute will produce a result demonstrably at

odds with the intentions of its drafters.'' In such cases, the

intention of the drafters, rather than the strict language, controls.''

(United States v. Ron Pair Enterprises, Inc.,) 489 U.S. 235, 242

(1989), quoting, Griffin v. Oceanic Contractors, Inc., 458 U.S. 564,

#571 (1982).

The two commentors also argue that the correct reading of the

Public Law 104-48 is clearly delineated in the House of Representatives

Report accompanying H.R. 1103, the bill that became the 1995 PACA

Amendments (H.R. Rep. No. 104-207, 104th Cong., 1st Sess.). They

emphasize the report language which stated that the legislation ``* * *

phases retailers and grocery wholesalers out of license fee payments in

three years, [and] establishes a one-time administrative fee for new

retailers and grocery wholesalers entering the program after the three-

year phase-out. * * *'' [emphasis added]. They point to other report

language which states: ``During the phase-out period, new retailer and

grocery wholesale applicants will pay the specified fee established

under the phase-out year.'' They maintain that the language in the

House Report clearly describes two periods of time: the phase-out

period from November 15, 1995, to November 15, 1998, when new retailers

and grocery wholesalers will pay the specified fee established for the

phase out year; and the period after November 15, 1998, when no fee

will be required.

We received 11 comments objecting to our original proposal that all

licensees pay renewal fees during the 3-year phase-out of retailers and

grocery wholesalers. However, several of these comments were nearly

identical. In addition to a comment from Congressman Thomas W. Ewing,

Chairman of the Subcommittee on Risk Management and Specialty Crops,

which was co-signed by Congressman John Boehner, we received comments

from FMI, FDI, and NGA which reiterated their original objections to

our proposal.

The commentors contend that the statute explicitly provides that

any retailer or grocery wholesaler making an initial application during

those years pays just one time and that no renewal fee is required for

any subsequent year. Each of their arguments centers around the

statutory language in section 499c(b)(3), ``One-Time Fee for Retailers

and Grocery Wholesalers that are Dealers'', which states: ``In either

case, a retailer or grocery wholesaler paying a fee under this

paragraph shall not be required to pay any fee for renewal of the

license for subsequent years.''

One of the commentors contends that by creating a statutory

subsection for a ``one-time fee'' separate from section 499c(b)(4), the

law is clear, both in title and in substance, that first-time licensees

after November 15, 1995, pay only one fee and that no renewal fee can

be imposed. The commentor asserts that no other explanation exists for

having a separate section for initial licenses. The commentor points

out that the subsection contains only three sentences: the first

applies to those who make an initial application during each 3-year

phase-out period; the second applies to those who make an initial

application after November 14, 1998; and the third sentence is

explicit--``In either case, a retailer or grocery wholesaler paying a

fee under this paragraph shall not be required to pay any fee for

renewal of the license for subsequent years.''

Another commentor presents a similar analysis of the statutory

language--that there are two classes of license applicants specifically

identified in section 499c(b)(3): a retailer or grocery wholesaler

making an initial application for a license during the 3-year period

beginning on the date of enactment of the 1995 PACA amendments; and a

retailer or grocery wholesaler making an initial application for a

license after the end of the 3-year period. The commentor emphasizes

that the statute goes on to remove the requirement for license renewal

fees by providing that ``a retailer or grocery wholesaler paying a fee

under this paragraph shall not be required to pay any fee for renewal

of the license for subsequent years.'' The commentor states that the

plain language of the phrase, ``[i]n either case,'' must refer to the

two classes of license applicants noted in section 499c(b)(3), and as

such, neither of these two classes of entities can be held liable for

license renewal fees.

Both commentors insist that the statute is explicit, clear, and

leaves no room for interpretation. Under the circumstances, the

commentors demand that USDA implement the straight-forward statutory

language, issue regulations which state that retailers and wholesalers

who were licensed during the 3-year phase-out period shall not pay any

renewal fees, and refund with interest license fees paid by affected

licensees.

In their joint comment, Congressmen Ewing and Boehner state that

the law requires that retailers and grocery wholesalers applying for a

license during the first three years following enactment of P.L. 104-48

pay only the fee in effect for that year, and nothing in any subsequent

year. With respect to these initial applicants, the Congressmen insist

that subparagraph 3 of section 3(b) clearly states that the 3-year

phase-out period is just that--a single period--and that whether the

initial application is made in year 1, 2, or 3 of the phase-out period,

the fee to be paid is a one-time event. They state that had Congress

intended for retail and grocery wholesale applicants to pay the

applicable fee in each year of the phase-out period, they would have

written the first sentence of subparagraph 3 to state ``* * * the

license fee required under paragraphs (A), (B) and (C) * * *'' rather

than ``* * * the license fee required under subparagraph (A), (B) or

(C) * * *'' They also stated that if Congress had intended initial

applicants to pay a fee in each of the phase-out years, it would have

never included the last sentence of subparagraph 3. The congressmen

point out that USDA's interpretation of this paragraph, as reflected in

the proposed rule, has the effect of ignoring this sentence, which does

not differentiate between pre- or post-phase-out period when it states

that a retailer or wholesaler shall not be required to pay any fee for

renewal in subsequent years.

Based on full consideration of the comments received during the

initial and reopened comment periods, USDA has determined that a change

to the proposed revisions to Sec. 46.6 is appropriate in order to

harmonize the implementing regulation with the statutory language.

Therefore, in the final rule, USDA is amending the regulatory language

in Sec. 46.6 to reflect that retailers and grocery wholesalers making

an initial application during the 3-year phase-out period beginning on

November 15, 1995, shall not be required to pay any fee for renewal of

their licenses in subsequent years.

Executive Orders 12866 and 12988

This final rule is issued under the Perishable Agricultural

Commodities

[[Page 43455]]

Act (7 U.S.C. 499 et seq.), as amended. USDA is issuing this final rule

in conformance with Executive Order 12866.

This final rule has been reviewed under Executive Order 12988,

Civil Justice Reform. It is not intended to have retroactive effect.

The final rule will not preempt any State or local laws, regulations,

or policies, unless they present an irreconcilable conflict with this

rule. There are no administrative procedures which must be exhausted

prior to any judicial challenge to the provisions of this rule.

Regulatory Flexibility Act

Pursuant to requirements set forth in the Regulatory Flexibility

Act (RFA) (5 U.S.C. 601 et seq.), USDA has considered the economic

impact of this rule on small entities. The purpose of the RFA is to fit

regulatory actions to the scale of businesses subject to such actions

in order that small businesses will not be unduly or disproportionately

burdened. Small agricultural service firms have been defined by the

Small Business Administration (13 CFR 121.601) as those whose annual

receipts are less than $5,000,000. The PACA requires that wholesalers,

processors, food service companies, grocery wholesalers, and truckers

be considered dealers and subject to a license when they buy or sell

more than 2,000 pounds of fresh and/or frozen fruits and vegetables in

any given day. A retailer is considered to be a dealer and subject to

license when the invoice cost of its perishable agricultural

commodities exceeds $230,000 in a calendar year. Brokers negotiating

the sale of frozen fruits and vegetables on behalf of the seller are

also exempt from licensing when the invoice value of the transactions

is below $230,000 in any calendar year.

There are approximately 15,700 PACA licensees. Separating licensees

by the nature of business, there are approximately 6,000 wholesalers,

4,750 retailers, 2,100 brokers, 1,200 processors, 550 commission

merchants, 450 food service businesses, 150 grocery wholesalers, and 50

truckers licensed under PACA. The license is effective for 1 year

unless suspended or revoked by USDA for valid reasons [7 CFR 46.9 (a)-

(h)], and must be renewed annually by the licensee. Many of the

licensees may be classified as small entities.

Approximately 650 to 700 retailers and grocery wholesalers who made

an initial license application after November 15, 1995, and

subsequently paid a fee to renew their license, will be affected by

this rule. The renewal fees collected by USDA from each of the affected

retailers and grocery wholesalers ($300, plus $150 for each branch in

excess of nine) will be refunded with interest.

Accordingly, based on the information and the above discussion, it

is determined that the provisions of this rule would not have a

significant economic impact on a substantial number of small entities.

Paperwork Reduction Act

In compliance with Office of Management and Budget (OMB)

regulations (5 CFR part 1320) which implement the Paperwork Reduction

Act of 1995 (Pub. L. 104-13), the information collection and

recordkeeping requirements covered by this proposed rule were approved

by OMB on October 31, 1996, and expire on October 31, 1999.

List of Subjects in 7 CFR Part 46

Agricultural commodities, Brokers, Penalties, Reporting and record

keeping requirements.

For the reasons set forth in the preamble, 7 CFR part 46 is amended

as follows:

PART 46--[AMENDED]

1. The authority citation for part 46 continues to read as follows:

Authority: Sec. 15, 46 Stat. 537; 7 U.S.C. 499o.

2. Section 46.6 is revised to read as follows:

Sec. 46.6 License fees.

(a) For retailers and grocery wholesalers making an initial

application for license, the license fee is as follows:

(1) During the period November 15, 1995 through November 14, 1996,

the license fee is $400 plus $200 dollars for each branch or additional

business facility operated by the applicant in excess of nine. In no

case shall the aggregate annual fees paid by any retailer or grocery

wholesaler during such period exceed $4,000.

(2) The license fee during the period November 15, 1996 through

November 14, 1997, is $300 plus $150 for each branch or additional

business facility operated by the retailer or grocery wholesaler in

excess of nine. In no case shall the aggregate fees paid by any

retailer or grocery wholesaler during such period exceed $3,000.

(3) The license fee during the period November 15, 1997 through

November 14, 1998, is $200 plus $100 for each branch or additional

business facility operated by any retailer or grocery wholesaler in

excess of nine. In no case shall the aggregate fees paid by any

retailer or grocery wholesaler during such period exceed $2,000.

(4) Any retailer or grocery wholesaler making an initial license

application during the 3-year phase-out period shall pay no fee for

renewal of the license for subsequent years.

(5) A retailer or grocery wholesaler that holds a license as of

November 15, 1995, shall pay the license fee required in paragraphs (a)

(1), (2), and (3) of this section for the renewal of the license during

the phase-out period.

(6) No license fee will be required after November 14, 1998 for

making an initial application for, or for renewal of a license by a

retailer or grocery wholesaler. However, a retailer or grocery

wholesaler making an initial application for a license after November

14, 1998, shall pay a $100 administrative processing fee.

(b) For commission merchants, brokers, and dealers (other than

grocery wholesalers and retailers) the annual license fee is $550 plus

$200 dollars for each branch or additional business facility in excess

of nine. In no case shall the aggregate annual fees paid by any such

applicant exceed $4,000.

(c) The Director may require that fees be paid in the form of a

money order, bank draft, cashier's check, or certified check made

payable to ``USDA-AMS''. Authorized representatives of the Division may

accept fees and issue receipts.

Dated: August 8, 1997.

Robert C. Keeney,

Director, Fruit and Vegetable Division.

[FR Doc. 97-21523 Filed 8-13-97; 8:45 am]

BILLING CODE 3410-02-P