WSR 23-07-010

PROPOSED RULES

DEPARTMENT OF AGRICULTURE

[Filed March 2, 2023, 11:45 a.m.]

Original Notice.

Preproposal statement of inquiry was filed as WSR 22-05-093.

Title of Rule and Other Identifying Information: Chapter 16-401 WAC, Nursery inspection fees and chapter 16-470 WAC, Quarantine—Agricultural pests. The Washington state department of agriculture (WSDA) is proposing restructuring, increasing, and consolidating fees for inspections requested by stakeholders, nursery licenses fees, nematode laboratory fees, and plant pathology laboratory fees. WSDA is also proposing revising the language in these chapters to increase clarity and readability and to better serve industry inspection needs.

Hearing Location(s): On April 25, 2023, at 10:00 a.m. Microsoft Teams website link and phone number/access code. Join on your computer, mobile app, or room device https://teams.microsoft.com/l/meetup-join/19%3ameeting_MjQzYzFkOGMtOTMzMC00YzUwLWFlNjUtMzYyNzkzZTkzZWFl%40thread.v2/0?context=%7b%22Tid%22%3a%2211d0e217-264e-400a-8ba0-57dcc127d72d%22%2c%22Oid%22%3a%22838c55c7-c187-44ae-8de0-2be684ce5d4a%22%7d, Meeting ID 277 702 634 883, Passcode 67e2SY; or call-in (audio only) +1 564-999-2000, Phone Conference ID 531 749 746#.

Date of Intended Adoption: May 2, 2023.

Submit Written Comments to: Gloriann Robinson, Agency Rules Coordinator, P.O. Box 42560, Olympia, WA 98504-2560, email wsdarulescomments@agr.wa.gov, fax 360-902-2092, by 5:00 p.m., April 25, 2023.

Assistance for Persons with Disabilities: Contact Deanna Painter, phone 360-902-2061, TTY 800-833-6388, email deanna.painter@agr.wa.gov, by April 18, 2023.

Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: WSDA is proposing to amend the following fees:

Reasons Supporting Proposal: WSDA's plant services program facilitates agricultural trade and ensures consumer protection by providing accurate and reliable inspection, testing, and certification of agricultural plant products, and serves on the front line of defense against the introduction and spread of plant pests and diseases. Some of the services provided by the program include the inspection, sampling, and testing of a wide variety of agricultural commodities for export and issuing export certificates that allow the commodity to enter another state or country. The program also provides regulatory inspection of licensed nurseries, conducting hundreds of physical and virtual inspections annually to ensure plants for sale meet Washington's quarantine requirements and are free of pests and diseases. Over 5,000 nurseries pay an annual licensing fee based on the value of plant sales. These fees are the primary funds supporting the nursery inspection program. The plant services program also maintains an official nematode laboratory in Prosser that tests a number of exported agricultural commodities for quarantine species of nematodes and provides testing services to WSDA's seed certification program as well.

WSDA's plant pathology and molecular diagnostics lab (PPMDL) and nematology lab provide a number of testing services necessary for both domestic and international export of many plants. Diagnostic services are also available, primarily on agricultural crops, but also nursery stock and some other hosts. The laboratories participate in plant disease surveys in cooperation with the United States Department of Agriculture (USDA) and other agencies. These activities directly support the agricultural industry by keeping unwanted pests out of Washington, protecting growers and the natural environment, and facilitating the movement of agricultural products.

Fees for these programs were last increased in 2015; however, cost projections indicate that at the current rates, the programs will not have enough revenue to meet operating expenses within the next year. There has been an 11 percent increase in employee salaries and benefits since 2015. In addition, the agency overhead cost has recently increased from 16.4 percent to 24.6 percent. For 2023, the Washington Federation of State Employees (WFSE) has negotiated an additional 10 percent salary increase for the environmental specialist job classification, which will affect all 11 plant services inspectors and the scientific technician position in the PPMDL. Similar salary increases will be necessary for the associated program supervisors and managers to prevent salary compression or inversion. Expenses for vehicles and other costs associated with providing services have increased as well. An additional inspector was added to the plant services program in 2021, utilizing 60 percent grant funding to enable online enforcement of plant quarantines, something the industry has greatly encouraged WSDA to undertake. Current fees in rule are well below competitive rates and do not allow for additional staff to be hired to meet demand. Additionally, some of the current fees charged for services are not adequate to cover the costs of providing such services.

RCW 17.24.131 authorizes WSDA to charge a fee for requested services and dictates that the fee charged shall, as closely as practical, cover the cost of the service rendered, including the salaries and expenses of the personnel involved. Increasing fees is necessary to cover the costs of services rendered and to maintain the financial stability of the programs so that the program may continue to meet current demand and provide valuable services to businesses across the state.

Statutory Authority for Adoption: RCW 15.13.260, 15.13.280, 15.14.015, and 17.24.131.

Statute Being Implemented: Chapters 15.13, 15.14, and 17.24 RCW.

Rule is not necessitated by federal law, federal or state court decision.

Name of Proponent: WSDA, governmental.

Name of Agency Personnel Responsible for Drafting, Implementation, and Enforcement: Scott Brooks, 1111 Washington Street S.E., Olympia, WA 98504, 360-485-1235.

A school district fiscal impact statement is not required under RCW 28A.305.135.

A cost-benefit analysis is not required under RCW 34.05.328. WSDA is not a listed agency under RCW 34.05.328 (5)(a)(i).

Scope of exemption for rule proposal:

Is not exempt.

The proposed rule does impose more-than-minor costs on businesses.

Chapter 16-401 WAC, Nursery inspection fees and

Chapter 16-470 WAC, Quarantine—Agricultural pests plant services and pest program fee increase

February 24, 2023

Overview and Background: WSDA plant services program facilitates agricultural trade and ensures consumer protection by providing accurate and reliable inspection, testing, and certification of agricultural plant products and serves on the front line of defense against the introduction and spread of plant pests and diseases. Some of the services provided by the program include the inspection, sampling, and testing of a wide variety of agricultural commodities for export and issuing export certificates that allow the commodity to enter another state or country. The program also provides regulatory inspection of licensed nurseries, conducting hundreds of physical and virtual inspections annually to ensure plants for sale meet Washington's quarantine requirements and are free of pests and diseases. Over 5,000 nurseries pay an annual licensing fee based on the value of plant sales. These fees are the primary funds supporting the nursery inspection program. The plant services program also maintains an official nematode laboratory in Prosser that tests a number of exported agricultural commodities for quarantine species of nematodes and provides testing services to WSDA's seed certification program as well.

WSDA's PPMDL and nematology lab provide a number of testing services necessary for both domestic and international export of many plants. Diagnostic services are also available, primarily on agricultural crops, but also nursery stock and some other hosts. The laboratories participate in plant disease surveys in cooperation with USDA and other agencies. These activities directly support the agricultural industry by keeping unwanted pests out of Washington, protecting growers and the natural environment, and facilitating the movement of agricultural products.

Fees for these programs were last increased in 2015; however, cost projections indicate that at the current rates, the programs will not have enough revenue to meet operating expenses within the next year. There has been an 11 percent increase in employee salaries and benefits since 2015. In addition, the agency overhead cost has recently increased from 16.4 percent to 24.6 percent. For 2023, WFSE has negotiated an additional 10 percent salary increase for the environmental specialist job classification, which will affect all 11 plant services inspectors and the scientific technician position in the PPMDL. Similar salary increases will be necessary for the associated program supervisors and managers to prevent salary compression or inversion. Expenses for vehicles and other costs associated with providing services have increased as well. An additional inspector was added to the plant services program in 2021, utilizing 60 percent grant funding, to enable online enforcement of plant quarantines, something the industry has greatly encouraged WSDA to undertake. Current fees in rule are well below competitive rates and do not allow for additional staff to be hired to meet demand. Additionally, some of the current fees charged for services are not adequate to cover the costs of providing such services. RCW 17.24.131 authorizes WSDA to charge a fee for requested services and dictates that the fee charged shall, as closely as practical, cover the cost of the service rendered, including the salaries and expenses of the personnel involved. Increasing fees is necessary to cover the costs of providing services and to maintain the financial stability of the programs, so that the programs may continue to meet current demand and provide valuable services to businesses across the state.

If fees are not increased, the programs will need to implement a reduction in force resulting in delayed inspection and testing response time. This could delay exports or cause businesses to cancel orders. There are no other local alternatives to certify export inspections. USDA provides minimal inspections, similar to the services provided by WSDA at a rate four times higher, but does not have the personnel to provide this service to Washington state industries currently.

Proposed Rule Amendments:

Probable Compliance Requirements: Probable compliance requirements include paying the fee associated with the service requested from the program under the new fee structure.

Required Professional Services: The proposed rule amendment does not require businesses to obtain professional services to comply.

SECTION 2: Identify which businesses are required to comply with the proposed rule using the North American Industry Classification System (NAICS) codes and what the minor cost thresholds are.

The table above includes industries in which businesses requested services or a combination of services and nursery licenses, but it does not include industries that only purchased nursery licenses. Businesses in an additional 189 industries purchased nursery licenses without any other services. For these 189 industries, WSDA will use a minor cost threshold of $100, which is the minimum stated cost for "minor costs" as defined in RCW 19.85.020(2).

For many of the businesses in industries represented in the table above, such as goat farming, child care services, drinking places, etc., the services requested from the programs are rare and a very small portion of their business.

The proposed amendments restructure, increase, and consolidate fees for inspections requested by stakeholders, nursery license fees, nematode laboratory fees, and plant pathology laboratory fees. The proposed changes will not cause businesses to lose sales or decrease their revenue; however, they will increase fees for most businesses. Whether a business experiences increased costs due to this depends on what services a business uses and the frequency of that usage. For instance, businesses that have a large number of phytosanitary certificates issued will generally see a greater cost increase than those who only purchase a nursery license. There will be no increased cost for businesses to comply with the proposed rule in terms of costs for equipment, supplies, labor, professional services, or administrative costs. Compliance with the proposed rule amendments will not cause businesses to lose sales or revenue.

Table 3.1 shows the average cost differences for requested services fees and nursery license fees (if applicable) that small businesses will pay under the proposed fee increases versus the current fee structure.

Table 3.2 shows the average cost differences for requested services fees and nursery license fees (if applicable) that large businesses will pay under the proposed fee increases versus the current fee structure.

Table 3.3 shows the cost differences between the current nursery license fees and the proposed nursery license fees. One hundred eighty-nine businesses that purchase nursery licenses, without any other services, will see a fee increase that ranges from $10.00 for an exempt organization to $64.00 for a larger wholesale operation.

Current costs were compared with costs under the proposed rule amendments for businesses that paid fees in 2021. From this, WSDA was able to determine what the estimated cost would be for each business under the proposed fee changes if those businesses requested the exact same services as they did in 2021. Table 4.1 shows the largest cost increase to businesses for each industry and compares it to their minor cost threshold as mandated in RCW 19.85.030.

WSDA determined that the costs to a single business in the hay farming industry, NAICS code 111940, would exceed the minor cost threshold. However, the business that exceeded the threshold had requested an unusually high number of inspections due to selling a particular type of weed-free hay. The business is not expected to need the same level of service each year.

The proposed fee increase would not impose more-than-minor costs on any other business in any industry.

RCW 19.85.040(1) requires WSDA to compare the cost of compliance for small businesses with the cost of compliance for the 10 percent of businesses that are the largest businesses required to comply with the proposed rules using one or more of the following as a basis for comparing costs: (a) Cost per employee; (b) cost per hour of labor; or (c) cost per $100 of sales. WSDA used the cost per employee method to determine if the proposed fee increase will have a disproportionate impact on small businesses. Since the proposed rule amendment affects multiple industry classifications, the costs are analyzed separately for each NAICS code.

Table 5.1 shows the average cost per employee for large and small businesses by NAICS code. The average cost increase was divided by the average number of employees in each NAICS code (small and large businesses calculated separately). WSDA was not able to determine employee numbers for all businesses which paid fees in 2021. Of the 194 small businesses analyzed, WSDA was able to determine employee information for 154 of them. Of the 19 large businesses analyzed, WSDA was able to determine employee information for 11 of them.

Small businesses in the following NAICS classifications are expected to be disproportionately impacted by the proposed amendments: 111421 Nursery and Tree Production; 423310 Lumber, Plywood, Millwork, and Wood Panel Merchant Wholesalers; 424930 Flower, Nursery Stock, and Florists' Supplies Merchant Wholesalers; and 444220 Nursery, Garden Center, and Farm Supply Stores. Those industries are highlighted in Table 5.1 below.

There are no large businesses impacted by this rule in the following classifications: 11121 Potato Farming; 111219 Other Vegetable (except Potato) and Melon Farming; 111332 Grape Vineyards; 111334 Berry (except Strawberry) Farming; 111998 All Other Miscellaneous Crop Farming; 112420 Goat Farming; 115112 Soil Preparation, Planting, and Cultivating; 115113 Crop Harvesting, Primarily by Machine; 115310 Support Activities for Forestry; 236115 New Single-Family Housing Construction (except For-Sale Builders); 312120 Breweries; 321114 Wood Preservation; 321214 Truss Manufacturing; 325411 Medicinal and Botanical Manufacturing; 333414 Heating Equipment (except Warm Air Furnaces) Manufacturing; 339920 Sporting and Athletic Goods Manufacturing; 339992 Musical Instrument Manufacturing; 424480 Fresh Fruit and Vegetable Merchant Wholesalers; 424490 Other Grocery and Related Products Merchant Wholesalers; 424510 Grain and Field Bean Merchant Wholesalers; 424590 Other Farm Product Raw Material Merchant Wholesalers; 424910 Farm Supplies Merchant Wholesalers; 424990 Other Miscellaneous Nondurable Goods Merchant Wholesalers; 444110 Home Centers; 445230 Fruit and Vegetable Markets; 445299 All Other Specialty Food Stores; 446191 Food (Health) Supplement Stores; 452319 All Other General Merchandise Stores; 453110 Florists; 453998 All Other Miscellaneous Store Retailers (except Tobacco Stores); 488510 Freight Transportation Arrangement; 493110 General Warehousing and Storage; 493120 Refrigerated Warehousing and Storage; 541320 Landscape Architectural Services; 541618 Other Management Consulting Services; 541940 Veterinary Services; 561499 All Other Business Support Services; 561730 Landscaping Services; 721214 Recreational and Vacation Camps (except Campgrounds); 722410 Drinking Places (Alcoholic Beverages); 813910 Business Associations; and 813920 Professional Organizations. Since there are no large businesses in these classifications, the proposed fee increase is expected to disproportionately impact small businesses in these classifications.

There are no small businesses impacted by this rule in the following classifications: 113310 Logging; 311423 Dried and Dehydrated Food Manufacturing; 311999 All Other Miscellaneous Food Manufacturing; and 321912 Cut Stock, Resawing Lumber, and Planing. Since there are no small businesses in these classifications, the proposed fee increase is not expected to disproportionately impact small businesses in these classifications.

The current fee structure for nursery licenses is already designed to allow smaller businesses to pay less for their licenses while the costs for nursery licenses increase along with the gross business sales of the business. The proposed rule will not disproportionately impact any of the small businesses that only purchase nursery licenses, as the fees will increase by 28 percent across all pricing levels, which will not alter the tiered system that is already in place.

WSDA has analyzed the impacts of the proposed rule as required by RCW 19.85.040 and has determined that there are disproportionate impacts to some small businesses in the following industries: 111421 Nursery and Tree Production, 423310 Lumber; Plywood; Millwork; and Wood Panel Merchant Wholesalers, 424930 Flower; Nursery Stock; and Florists' Supplies Merchant Wholesalers, and 444220 Nursery; Garden Center; and Farm Supply Stores, when comparing the average cost increases to small and large businesses in Table 5.1.

RCW 19.85.030(2) requires consideration of the following methods of reducing the impact of the proposed amendment on small businesses:

(a) Reducing, modifying, or eliminating substantive regulatory requirements: Any reduction, modification, or elimination of the regulatory requirements of the proposed rule amendment could increase the risk of the entry of unwanted pests and plant diseases into the state. This could potentially close international and domestic markets to some businesses in Washington state, leading to reductions in revenue.

(b) Simplifying, reducing, or eliminating recordkeeping and reporting requirements: There are no recordkeeping or reporting requirements associated with the proposed rule amendment.

(c) Reducing the frequency of inspections: Inspections directly support the agricultural industry by keeping unwanted pests and plant diseases out of Washington, protecting growers and the natural environment, and facilitating the movement of agricultural products. Generally, any reduction of the frequency of inspections could increase the risk of entry of an unwanted pest or plant disease into the state. However, the plant services program does collaborate with departments of agriculture in neighboring states to try to reduce the number of inspection and phytosanitary certifications needed to export plant material safely into those states when appropriate. For example, the program clarified with the Oregon department of agriculture that it will accept a single phytosanitary certificate for grapevine shipments from a nursery that covers a given time frame, like spring or fall. Previously, it required a phytosanitary certificate for each shipment and for a couple of businesses that added up to a lot of phytosanitary certificates (and a large expense) over the course of the season. This new approach will reduce costs for the nurseries involved going forward.

(d) Delaying compliance timetables: Delaying compliance timetables is not a viable option, as cost projections indicate that at the current rates, the programs will not have enough revenue to meet operating expenses within the next year. There has been an 11 percent increase in employee salaries and benefits since 2015. Expenses for vehicles and agency overhead costs have increased as well. An additional inspector was added to the plant services program in 2021, utilizing 60 percent grant funding, to enable online enforcement of plant quarantines, something the industry has greatly encouraged WSDA to undertake. Current fees are well below competitive rates and do not allow for additional staff to be hired to meet demand. The current fees charged for services are not adequate to compensate the program for the costs of providing such services.

(e) Reducing or modifying fine schedules for noncompliance: Chapter 17.24 RCW specifies the penalty for violations of the chapter and rules adopted thereunder. Reducing or modifying fine schedules would involve a legislative change and is not part of this rule making.

(f) Any other mitigation techniques including those suggested by small businesses or small business advocates: Small businesses can request inspections be done when inspectors are in their area for other business, reducing time and mileage costs. All parties save on costs as they are prorated between businesses when multiple inspections can be done in one geographic area. The program also works with businesses that need frequent export services to establish a compliance agreement, when practical, that will reduce expenses throughout the year over what they would normally be paying under the fee schedule in rule.

The proposal to increase fees was shared with the nursey [nursery] advisory committee, Christmas tree advisory committee, grapevine advisory committee, seed potato commission, grapevine foundation block advisory group, and fruit tree advisory committee. These groups have members that represent small businesses in their respective industries.

No jobs are expected to be created or lost because of compliance with the proposed rule amendment.

A copy of the statement may be obtained by contacting Gloriann Robinson, Agency Rules Coordinator, P.O. Box 42560, Olympia, WA 98504-2560, phone 360-902-1802, fax 360-902-2092, TTY 800-833-6388, email wsdarulescomments@agr.wa.gov.

March 2, 2023

Brad White

Assistant Director

OTS-4373.1

OTS-4374.1