Regulations Under the Perishable Agricultural Commodities Act (PACA); Renewal of License

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 46

[Docket Number FV98-359]

Regulations Under the Perishable Agricultural Commodities Act

(PACA); Renewal of License

AGENCY: Agricultural Marketing Service, USDA

ACTION: Proposed rule.

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SUMMARY: The Department of Agriculture (USDA) invites comments on

proposed revisions to the PACA Regulations to provide for a three-year

license renewal period for retailers and grocery wholesalers, and

provide all other licensees the option of renewing their licenses on an

annual, biennial, or triennial basis. The PACA Amendments of 1995 (1995

Amendments) provided for the gradual elimination of license fees for

retailers and grocery wholesalers over a three-year period ending

November 14, 1998. The 1995 Amendments also gave the Secretary of

Agriculture the authority to determine the interval for renewing

licenses and asked the Secretary to take due account of savings to the

program when determining the appropriate intervals for license

renewals.

DATES: Comments must be received by September 14, 1998.

ADDRESSES: Interested persons are invited to submit written comments

concerning this proposal. Comments must be sent to Charles W. Parrott,

Assistant Chief, PACA Branch, Fruit and Vegetable Division, AMS, USDA,

Room 2095-So. Bldg., P.O. Box 96456, Washington, D.C. 20090-6456,

E[email protected]. All comments should reference the

docket number and the date and page number of this issue in the Federal

Register and will be made available for public inspection in the PACA

Branch during regular business hours.

FOR FURTHER INFORMATION CONTACT: Charles W. Parrott, Assistant Chief,

PACA Branch, Room 2095-So. Bldg., Fruit and Vegetable Division, AMS,

USDA, Washington, D.C. 20250, Phone (202) 720-4180, Email_

[email protected].

SUPPLEMENTARY INFORMATION: This proposal is issued under authority of

section 15 of the PACA (7 U.S.C. 499o).

Background

The Perishable Agricultural Commodities Act (PACA or Act)

establishes a code of fair trading practices for the marketing of fresh

and frozen fruits and vegetables in interstate and foreign commerce.

The Act provides a forum to adjudicate private disputes that awards

damages against licensees which fail to meet their contractual

obligations in violation of the PACA. The Act also imposes a statutory

trust on perishable agricultural commodities received but not yet paid

for, products derived from those commodities, and any receivables or

proceeds due from the sale of those commodities or products thereof for

the benefit of unpaid suppliers or sellers. In these ways, the PACA

protects growers, shippers, distributors, and retailers dealing in

those commodities from unfair and fraudulent trade practices, and thus

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.

In accordance with the 1995 Amendments, retailers and grocery

wholesalers will no longer pay a license fee under the PACA after

November 14, 1998, but will still be required to maintain a valid

license. The 1995 Amendments also authorized the Secretary of

Agriculture to determine the interval for renewing licenses for all

licensees, taking into account the likely savings to the program. The

House of Representatives Committee on Agriculture, in it's report

accompanying the 1995 Amendments, asked USDA to promptly examine the

necessity for a yearly renewal requirement for retailers and grocery

wholesalers in an effort to move toward multi-year licenses.

The proposed rule will shift retailers and grocery wholesalers--who

will no longer pay license fees after November 14, 1998--to a triennial

license renewal interval beginning on the effective date of this rule.

We estimate that this will save the program over $40,000 per year based

on processing renewal applications from approximately 5,000 retailers

and grocery wholesalers, at a cost of about $8 per renewal.

Each of the remaining 10,000 licensees (commission merchants,

brokers, wholesalers, processors, truckers, food service), all of which

shall continue to pay license fees, will have the option of renewing

their licenses on an annual, biennial, or triennial basis. The option

will be available to both new license applicants and to existing

licensees at the time of license renewal. By offering the multi-year

renewal option to these licensees, we estimate savings to the PACA

program could be as great as $81,000/year (10,000 businesses paying

license fees x $8 cost to process renewal), depending on the number of

fee-paying licensees that choose a multi-year renewal option.

As reflected in the proposed regulations, beginning on the

effective date of this rule, all new licenses issued to retailer and

grocery wholesaler applicants will be issued with a triennial renewal

term. Retailers and grocery wholesalers that are currently licensed

will be gradually shifted to a triennial license renewal term over the

next three-year period. They would be notified of the change in their

license renewal period through the normal renewal process. Under the

current process, AMS mails each licensee a license renewal application

at least 30 days prior to its PACA license anniversary date and

notifies each licensee of the requirement that the license must be

renewed by its anniversary date.

Staggering the new triennial renewal period for retailers and

grocery wholesalers over a three-year period will guard against an

inundation of renewal applications three years from now which would

likely increase program administrative costs. The phase-in will be

implemented as follows: During the first year of the phase-in period,

retailers and grocery wholesalers holding current licenses ending in

the digits ``0,'' ``3,'' ``6,'' or ``9,'' would renew their licenses on

a triennial basis; retailers and grocery wholesalers holding licenses

that end in

[[Page 40843]]

the digits ``1,'' ``4,'' or ``7,'' would renew their licenses this year

for a 2-year term, and thereafter on a triennial basis; and retailers

and grocery wholesalers holding licenses that end in the digits ``2,''

``5,'' or ``8,'' would renew their licenses after one year, and

thereafter on a triennial basis.

As proposed, the regulations will provide all remaining licensees

with the option of renewing licenses on an annual, biennial, or

triennial basis. By choosing the biennial or triennial renewal option,

licensees would ``lock in'' the current license fee rate for a two or

three-year period, thus guarding against paying any additional license

fees resulting from a fee increase during that interval. The proposed

regulations also provide for a refund of any unused annual license fees

to those firms required to obtain a new license due to a change in

legal status (e.g.: a partnership of two becomes a partnership of three

individuals; a sole proprietor incorporates; or a firm re-

incorporates), and to those firms that cease business operations or

whose license terminates because of bankruptcy. In those instances,

USDA would issue refunds only for the full years remaining on the

license. For example, a wholesaler that obtains a three year license

and then ceases business operations within the first year of the

license would be issued a refund of license fees for years two and

three. However, to cover the administrative costs associated with

processing the early termination of a license, USDA would assess the

entity licensee a $100 processing fee.

Executive Orders 12866 and 12988

This rule, issued under the Perishable Agricultural Commodities Act

(7 U.S.C. 499 et. seq.), as amended, has been determined to be not

significant for the purposes of Executive Order 12866.

This proposed rule has been reviewed under Executive Order 12988,

Civil Justice Reform. This proposed rule is not intended to have

retroactive effect. This proposed 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.

Effects on Small Businesses

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 proposed 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 all

businesses that operate subject to its provisions maintain a license

issued by USDA. There are approximately 15,700 PACA licensees, a

majority of which may be classified as small entities.

In accordance with the PACA Amendments of 1995, retailers and

grocery wholesalers will no longer pay a fee to be licensed under the

PACA after November 14, 1998. The proposed regulations would establish

a 3-year renewal cycle for all retailers and grocery wholesalers

licensed under the PACA. Given that those PACA licensees would renew

their licenses on a triennial rather than an annual basis as is

currently required, we anticipate that they would have lower

administrative costs and a reduction in their record keeping and

reporting burden.

In addition, we project that the administrative costs and record

keeping requirements for the remaining fee-paying licensees would, like

the retailers and grocery wholesalers, be reduced if they choose the

biennial or triennial renewal options. We believe that their greatest

savings would result from choosing the triennial renewal option, with a

lesser degree of savings resulting from the biennial renewal option.

Finally, we project that all fee-paying licensees would indirectly

benefit from the cost savings realized from the proposed revisions to

the PACA program, which is funded through the fees paid by licensees.

Any cost savings to the program would help delay the need for an

increase in fees to fund the program.

Accordingly, based on the information in the above discussion, USDA

has 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 record

keeping requirements covered by this proposed rule were approved by OMB

on April 1, 1998, and expire on April 30, 2001.

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

proposed to be 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. In Sec. 46.9, paragraphs, (j), (k), and (l) would be added, as

follows:

Sec. 46.9 Termination, suspension, revocation, cancellation of

licenses; notices; renewal.

* * * * *

(j) Beginning on [the effective date of the final rule] the renewal

period for new licenses issued to retailers and grocery wholesalers is

three years.

(k) Beginning on [the effective date of the final rule] commission

merchants, brokers, and dealers (other than grocery wholesalers and

retailers) who are new or existing licensees, may choose to renew their

licenses on an annual, biennial, or triennial basis. In the event that

the holder of a multi-year license ceases business operations or

undergoes a change in legal status that results in the issuance of a

new license prior to the next license renewal date, a refund will be

issued of any remaining full-year portion of advance fee paid, minus a

$100 processing fee.

(l) Retailers and grocery wholesalers who are existing licensees as

of [the effective date of the final rule] will be phased into the three

year renewal process during the succeeding one-year as follows:

(1) Licenses held by retailers and grocery wholesalers ending in

the digits ``0,'' ``3,'' ``6,'' or ``9,'' will be renewed on a

triennial basis.

(2) Licenses held by retailers and grocery wholesalers ending in

the digits ``1,'' ``4,'' or ``7,'' will be renewed after two years and

thereafter on a triennial basis.

(3) Licenses held by retailers and grocery wholesalers ending in

the digits ``2,'' ``5,'' or ``8,'' will renew their licenses after one

year and thereafter on a triennial basis.

Dated: July 27, 1998.

Robert C. Keeney,

Deputy Administrator, Fruit and Vegetable Programs.

[FR Doc. 98-20453 Filed 7-30-98; 8:45 am]

BILLING CODE 3410-02-P