WSR 20-11-069

PROPOSED RULES

DEPARTMENT OF AGRICULTURE

[Filed May 20, 2020, 8:19 a.m.]

Original Notice.

Preproposal statement of inquiry was filed as WSR 20-04-087.

Title of Rule and Other Identifying Information: Revisions to chapter 16-390 WAC, Fruit and vegetable inspection fees and other charges. The department is proposing to increase the apple maggot survey fee specified in WAC 16-390-230. The survey fee is used to fund annual apple maggot survey efforts and is assessed on all apples grown or packed in Washington state and introduced into commerce for sale or shipment as fresh apples.

Hearing Location(s): On July 7, 2020, at 1:00 p.m.

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On July 8, 2020, at 5:00 p.m.

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Due to the mandated social distancing requirements in place during the current COVID-19 outbreak, the public hearings will be held solely over video and teleconference.

Date of Intended Adoption: July 15, 2020.

Submit Written Comments to: Gloriann Robinson, Rules Coordinator, P.O. Box 42560, Olympia, WA 98504-2560, email wsdarulescomments@agr.wa.gov, fax 360-902-2092, by 5:00 p.m., July 8, 2020.

Assistance for Persons with Disabilities: Contact Deanna Painter, phone 360-902-2061, TTY 800-833-6388 or 711, email dpainter@agr.wa.gov, by June 30, 2020.

Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: RCW 17.24.131 requires Washington state department of agriculture (WSDA) to set fees at a level that "…as closely as practical, cover the cost of the service rendered, including the salaries and expenses of the personnel involved." The current apple maggot survey fee is $0.015 per CWT (hundredweight). The fee was last increased in 2006 in order to conduct expanded apple maggot surveys to comply with international standards. In recent years, the apple maggot survey fund balance has decreased to the point that the program cannot continue to provide the same level of survey. Additionally, the program has recently experienced increased operational costs. Growers and packers benefit from the survey, as it allows the department to monitor the movement of apple maggot and address any necessary changes to the quarantine or other measures that may be required to further protect the apple industry.

Under the proposed rule amendment, businesses which grow or pack apples in Washington state and introduce them into commerce for sale or shipment as fresh apples will be required to pay an increased fee of $0.020 per CWT (a $0.005 increase). On the first business day of February each year, the minimum operating fund balance (MOFB) for the program will be determined. If the program fund balance falls below the MOFB at the time it is established, the fee rate shall increase to $0.025 per CWT beginning July 1 of that year. Once the fee has been set at $0.025 per CWT, it will remain at that rate and the MOFB will no longer be determined. The MOFB is six months of the projected operating expenses for the apple maggot survey program. The expenses used to calculate this figure include projected program staff salary and benefits, costs of the program's goods and services, transportation costs, administrative support costs, and any additional costs associated with the program. In addition to expected future costs, WSDA may consider previously incurred operating expenses to estimate projected operating expenses. By February 10 of each year, WSDA will post notice on their website of the rate established for that year. The MOFB will also be posted on the WSDA website by February 10th of each year, until the $0.025 per CWT rate is established.

Reasons Supporting Proposal: Apple maggot, specifically the larval stage, is a pest that threatens commercial and homegrown fruit, especially apples. Over time, apple maggot species have spread throughout much of North America, threatening fruit crops from coast to coast. Apple maggot hosts include apples, crabapples, native and ornamental hawthorns, cherries, prunes, plums, pears, and quinces. Apple maggot adults look similar to and disperse like small house flies. In Washington, the active adults mate and lay their eggs in July and August. Apple maggot females puncture the skin of host fruit and lay their eggs under the surface. While the initial damage is easily overlooked, it eventually leads to dimpling of the fruit surface. In three to seven days, the eggs hatch and apple maggot larvae emerge. The larvae eat and tunnel their way through the fruit, leaving brown trails behind. Once mature, the larvae exit the fruit and drop to the ground. They overwinter as pupae in the soil, emerging the next summer as adults, starting the cycle over again. Apple maggot has the potential to survive in the soil as a pupae for at least two years, if not longer. Once apple maggot has become established, treatment is costly. Apples are the top agricultural commodity in Washington. This makes the threat of apple maggot significant, as fruit from the pest free areas has greater access to international markets.

In 2019, WSDA presented to the industry advisory committee, the apple maggot working group (AMWG), on the fiscal deficit of the program. After some discussion, it was agreed that less traps would be used in the coming survey season in an effort to conserve funds. For the 2019 season, apple maggot traps were reduced by 3,124 traps. Unfortunately, this reduction was not enough to prevent a deficit in funds available to continue the annual survey. Due to repeated annual budget deficits caused by increased operational costs, it has become necessary to increase the fee in order to maintain the current standard of survey trapping. The additional revenue will be used to manage and prevent the possible movement of apple maggot from infested areas into pest free areas, secure continued access to international and interstate markets, and protect the commercial tree fruit industry from an economically significant pest.

Statutory Authority for Adoption: RCW 17.24.101 and 17.24.131.

Statute Being Implemented: Chapter 17.24 RCW.

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

Name of Proponent: Washington state tree fruit association, private.

Name of Agency Personnel Responsible for Drafting, Implementation, and Enforcement: Greg Haubrich, 1111 Washington Street, Olympia, WA 98504, 360-902-2071.

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).

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

Chapter 16-390 WAC

Fruit and Vegetable Inspection Fees and Other Charges

Apple Maggot Survey Fees

Chapter 17.24 RCW mandates "a strong system" to protect the forest, agricultural, horticultural, floricultural, and apiary industries of the state from the impact of insect pests, plant pathogens, noxious weeds, and bee pests and infestations. The Washington state department of agriculture (WSDA) is charged with implementing that mandate by excluding plant and bee pests and diseases from the pest free areas of the state through regulation of movement and quarantine of infested areas. RCW 17.24.101 authorizes WSDA to conduct surveys to determine the presence, absence, or distribution of a pest if there is reason to believe it may adversely impact the forestry, agricultural, horticultural, floricultural, or related industries of the state.

Apple maggot, specifically the larval stage, is a pest that threatens commercial and homegrown fruit, especially apples. Over time, apple maggot species have spread throughout much of North America, threatening fruit crops from coast to coast. Apple maggot hosts include apples, crabapples, native and ornamental hawthorns, cherries, prunes, plums, pears, and quinces. Apple maggot adults look similar to and disperse like small house flies. In Washington, the active adults mate and lay their eggs in July and August. Apple maggot females puncture the skin of host fruit and lay their eggs under the surface. While the initial damage is easily overlooked, it eventually leads to dimpling of the fruit surface. In three to seven days, the eggs hatch and apple maggot larvae emerge. The larvae eat and tunnel their way through the fruit, leaving brown trails behind. Once mature, the larvae exit the fruit and drop to the ground. They overwinter as pupae in the soil, emerging the next summer as adults, starting the cycle over again. Apple maggot has the potential to survive in the soil as a pupae for at least two years, if not longer (Sansford, Mastro, & Reynolds, 2016).

Apple maggot was first detected in Washington in 1980. WSDA initiated a survey to determine how widespread the apple maggot infestation was and to secure continued access to international and interstate markets for Washington's apple industry. Now, each year WSDA conducts apple maggot detection surveys to determine which areas of Washington meet the official "pest free" designation, conducts certification monitoring in or around apple orchards, and implements a detection response plan. While several counties in Washington (primarily in western Washington) have been quarantined, not all counties have apple maggot. Most notably, most of central Washington's prime fruit growing region remains pest free.

Apples are Washington state's top commodity, producing around fifty-eight percent of the total apples grown in the United States, with around thirty percent of the crop being exported to international markets (WSU Extention, n.d.). It's estimated that the apple industry contributes between $4.38 billion and $4.58 billion in value added contributions to the Washington economy (Galinato, Gallardo, Granatstein, & Willett, 2018). Left unchecked, apple maggot could have far reaching impacts on the tree fruit industry and the general economy of Washington state. These impacts could include an increased cost of pesticide control in apple orchards, apples requiring additional time in cold storage, and losses due to the effects on export markets (Galinato, Gallardo, Granatstein, & Willett, 2018). It is estimated that if apple maggot were to spread into pest free areas of the state, it could cost the apple industry anywhere between $510 million to $557 million annually (Galinato, Gallardo, Granatstein, & Willett, 2018).

Why the Rule Change is Needed: WAC 16-390-230 specifies the currently applicable apple maggot survey fee, which is used to fund the annual apple maggot survey efforts. The fee is assessed on all apples grown or packed in Washington state and introduced into commerce for sale or shipment as fresh apples. Growers and packers benefit from the survey, as it allows the department to monitor the movement of apple maggot and address any necessary changes to the quarantine or other measures that may be required to further protect the apple industry. The apple maggot survey fee is used to fund apple maggot detection across the state. WSDA uses the funds to purchase apple maggot traps, employ staff to deploy and monitor the traps, employ lab technicians to analyze suspect specimens, inspect threatened apple orchards, collect and manage program data, as well as other costs associated with travel and equipment. WSDA also uses the funds to conduct general survey trapping, which assists county pest boards in tracking the movement of apple maggot in their area; allowing them to more effectively treat and control the spread of this pest.

RCW 17.24.131 requires WSDA to set fees at a level that "…as closely as practical, cover the cost of the service rendered, including the salaries and expenses of the personnel involved." The current apple maggot survey fee is $0.015 per CWT (hundredweight). The fee was last increased in 2006 in order to conduct expanded apple maggot surveys to comply with international standards. In recent years, the apple maggot survey fund balance has decreased to the point that the program's ability to administer the apple maggot survey program is jeopardized. Additionally, the program has recently experienced increased operational costs.

In 2019, WSDA presented to the industry advisory committee, AMWG, on the fiscal deficit of the program. After some discussion, it was agreed that less traps would be used in the coming survey season in an effort to conserve funds. For the 2019 season, apple maggot traps were reduced by 3,124 traps. Unfortunately, this reduction was not enough to prevent a deficit in funds available to continue the annual survey. Due to repeated annual budget deficits caused by increased operational costs, it has become necessary to increase the fee in order to continue administering the survey program at a level sufficient to accurately detect apple maggot.

Table 1 shows the projected decrease in traps and personnel that will be required if the fee stays at the current amount of $0.015 per CWT. The projected program cuts shown in Table 1 for 2020, would equal around $211,588 in cost savings.

These program cuts will result in a weakened survey program that could leave pest free areas of the state at risk for the spread of apple maggot. Under the 2020 projections, the number of traps deployed will be decreased by another 1,946 traps from the 2019 season. This reduction in trap deployment density could result in limited access to international and domestic markets for some businesses. Additionally, all trapping programs will likely be negatively impacted. This includes general survey trapping in the quarantine area, which helps county pest boards identify infested host material so it can be treated or removed. General survey trapping in the pest free area will also be impacted. It may become necessary for pest free counties to implement trapping every other year. All of this could impact a county pest board's effectiveness at slowing the spread of or preventing apple maggot infestations. Due to staffing cuts, general survey traps will be visited less frequently. Rather than every two weeks, traps will be checked every four weeks. This could reduce the efficiency of traps, as they become dirty and compromised from the longer period of exposure to the elements. In addition, trapping in the area of low pest prevalence (ALPP) would be at a minimum, with only four traps used per registered block. These reductions could result in some apple maggot flies going undetected, allowing them to more easily spread to pest free areas of the state.

Probable Compliance Requirements: Under the proposed rule amendment, businesses which grow or pack apples in Washington state and introduce them into commerce for sale or shipment as fresh apples will be required to pay an increased fee of $0.020 per CWT (a $0.005 increase). On the first business day of February each year, the minimum operating fund balance (MOFB) for the program will be determined. If the program fund balance falls below the MOFB at the time it is established, the fee rate shall increase to $0.025 per CWT beginning July 1 of that year. Once the fee has been set at $0.025 per CWT, it will remain at that rate and the MOFB will no longer be determined. The MOFB is six months of the projected operating expenses for the apple maggot survey program. The expenses used to calculate this figure include projected program staff salary and benefits, costs of the program's goods and services, transportation costs, administrative support costs, and any additional costs associated with the program. In addition to expected future costs, WSDA may consider previously incurred operating expenses to estimate projected operating expenses. By February 10 of each year, WSDA will post notice on their website of the rate established for that year. The MOFB will also be posted on the WSDA website by February 10 of each year, until the $0.025 per CWT rate is established.

No professional services will be required for businesses to comply with the proposed rule amendment.

Proposed amendments to chapter 16-390 WAC increase the apple maggot survey fee from $0.015 per CWT to $0.020 per CWT until the first business day of February 2021, after which the fee will be established annually based on the MOFB. If the program fund balance is below the determined MOFB, then the fee rate will be $0.025 per CWT beginning on July 1 of that year. Once the $0.025 per CWT rate is set, the MOFB will no longer be determined and the fee will stay at the established rate. The fee increase will not cause businesses to lose sales or decrease their revenue; however, it will likely increase overall expenses for each business. Additionally, there will be no increased cost for businesses to comply with the proposed rule in terms of extra costs for equipment, supplies, labor, professional services, or administrative costs.

Under the increased fee, the total cost to businesses will depend on the amount of fresh apples they ship annually. The overall financial impact to each business will depend on the proportion of apples sold in relation to other inventory. For some businesses, fresh apples may consist of only a small portion of their inventory, whereas others may only grow or pack apples. Small and large businesses will be assessed based on the amount of fresh apples shipped. Apple maggot survey fees collected from individual businesses in 2019 ranged from $0.02 to $55,541.11, with the total amount collected from all businesses equaling $742,426.06. There were an estimated sixteen small businesses which paid the fee, with the cost paid by each business ranging from $0.02 to $18,293.48. An estimated forty-one large businesses also paid the fee, with the cost paid by each business ranging from $802.45 to $55,541.11.

After February 2021, the fee assessed will either be $0.020 per CWT or $0.025 per CWT depending on the established MOFB and fund balance. Table 3.1 shows the estimated low and high costs for individual small and large businesses under the proposed rule amendment. The projected totals for all apple maggot survey fees collected from businesses under the $0.020 and $0.025 rates would be $989,901.41 and $1,203,916.17, respectively.

The increased totals would enable the apple maggot survey program to function at the current level without making further reductions in the number of traps or staff. In turn, this would more effectively prevent the possible movement of apple maggot into pest free areas of the state; securing continued access to international and interstate markets, and protecting the commercial tree fruit industry from an economically significant pest.

Businesses that paid the $0.015 per CWT fee in 2019 were analyzed. The estimated annual revenue for small businesses which paid the fee averaged around $14,672,635 and for large businesses averaged around $55,834,238 (calculated using data from Buzzfile). The total projected costs for each business were calculated under the proposed increases of the fee to $0.020 per CWT ($0.005) and $0.025 per CWT ($0.010). These calculated totals were averaged by size and industry type. Tables 4.1 (large businesses) and 4.2 (small businesses) show the estimated average fee costs for each NAICS category compared to the minor cost thresholds. The tables show the average fee cost per NAICS category, as well as the cost difference between the current fee cost ($0.015) and the proposed fee increases ($0.020 and $0.025). When comparing the estimated average fee costs to the minor cost thresholds listed for each category, there is indication that the proposed fee increase will impose more than minor costs on large and small businesses in some of the business classifications.

Small business classifications with costs expected to exceed minor cost thresholds at the $0.020 fee level include: 425120 - Wholesale trade agents and brokers. When the fee increases to the $0.025 level, the cost for the following business classifications is expected to exceed the minor cost threshold identified: 425120 - Wholesale trade agents and brokers; and 484230 - Specialized freight (except used goods) trucking, long-distance.

Large business classifications with costs expected to exceed minor cost thresholds at the $0.020 fee level include: 111331 - Apple orchards and 111339 - Other noncitrus fruit farming. When the fee increases to the $0.025 level, the cost for the following business classifications is expected to exceed the minor cost threshold identified: 111331 - Apple orchards; 111339 - Other noncitrus fruit farming; 493190 - Other warehousing and storage; and 541930 – Translation and interpretation services.

The costs will not exceed the minor cost threshold identified for other business classifications affected by the proposed rule amendments.

Minor cost thresholds listed in tables 4.1 and 4.2 are based off average annual payroll, except for those used for NAICS code 488991 which is based off revenue due to lack of data available regarding payroll.

Sources: DOR and ESD.

Sources: DOR and ESD.

RCW 19.85.040(1) requires the department to compare the cost of compliance for small businesses with the cost of compliance for the largest ten percent of businesses affected by the proposed rule amendment. One or more of the following methods can be used as a basis for comparing costs: (a) Cost per employee; (b) cost per hour of labor; or (c) cost per one hundred dollars of sales. The department 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.

As demonstrated in Table 5.1 the cost per employee is lower for small businesses in NAICS code 111339 – Other noncitrus fruit farming. This means that costs are not expected to disproportionately impact small businesses in this industry classification.

Small businesses in the following classifications are expected to be disproportionately impacted by the proposed fee increase: 111331 - Apple orchards; 111998 – All other miscellaneous crop farming; 115114 - Postharvest crop activities (except cotton ginning); 424480 - Fresh fruit and vegetable merchant wholesalers; and 493120 - Refrigerated warehousing and storage.

There are no large businesses impacted by this rule in the following classifications: 325612 - Polish and other sanitation good manufacturing; 425120 - Wholesale trade agents and brokers; 484230 - Specialized freight (except used goods) trucking, long-distance; 488991 - Packing and crating; and 541990 – All other professional, scientific, and technical services. 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: 493130 - Farm product warehousing and storage; 493190 - Other warehousing and storage; and 541930 - Translation and interpretation services. 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 apple maggot survey fee is assessed on all apples which are grown or packed in Washington state and introduced into commerce for sale or shipment as fresh apples. Under the increased fee, the total cost to businesses will depend on the amount of fresh apples they ship annually. The overall financial impact to each business will depend on the proportion of apples sold in relation to other inventory. For some businesses, apples may consist of only a small portion of their inventory, whereas others may only grow or pack apples. The amount a business will pay is based on the amount of fresh apples shipped.

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 apple maggot into the pest free area, according to the findings of the pest risk analysis. This could potentially close international and domestic markets to some businesses in Washington state, leading to reductions in revenue. Additionally, any reduction or modification to the proposed rule may result in lower standards of survey, which will increase the risk of entry of apple maggot into pest free areas of the state.

(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: There are no inspection requirements associated with the proposed rule amendment.

(d)Delaying compliance timetables: Delaying compliance timetables is not a viable mitigation measure. RCW 17.24.131 requires WSDA to set fees at a level that "…as closely as practical, cover the cost of the service rendered, including the salaries and expenses of the personnel involved."

Budgetary concerns were discussed with the AMGW meeting in early 2019. The AMWG is comprised of member associations that represent both small and large businesses in the affected industry. At that time, the group asked WSDA to delay any fee increase. Concerns were again discussed with the AMWG in early 2020. At this meeting, WSDA shared budgetary records showing that the cost of conducting the survey program at an acceptable trapping and staffing level to meet regulatory standards exceeds program revenue. Current projections show that the apple maggot survey fund balance will be in the red during the 2021 survey season. Any delay in adopting a higher fee to sustain the program will result in a longer time to recover a heathy [healthy] fund balance. If the program is not able to fund the level of trap deployment necessary to demonstrate pest free status, the shipment of fresh apples to foreign markets may be jeopardized.

(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: The AMWG suggested an initial fee increase and then a secondary increase dependent on the program's fund balance. In response to their suggestion, the proposed rule amendment reflects a two tiered fee approach that is based on the program's fund balance. If the program's fund balance exceeds the MOFB on the first business day in February, then the lower fee rate will be in effect the following July. If the program's fund balance is less than the established MOFB, then the higher fee rate will be in effect. Once the higher fee rate is triggered, the fee will continue at the higher level. The program is currently mitigating costs at the recommendation of the AMWG by decreasing the number of traps used, reducing the frequency in which traps are checked, and reducing the number of staff employed. Any further decrease in trap deployment may undermine the program's ability to demonstrate pest free status to trading partners which may limit access to international and domestic markets.

AMWG, which consists of members that represent both large and small businesses within the affected industry, was consulted throughout the development of the proposed rule.

At the February 2019 AMWG meeting, WSDA notified the working group of the low fund balance for the apple maggot survey program and the possibility of a rule amendment to increase the fee. After some discussion, the AMWG recommended cutting costs and streamlining the program rather than raising the fee. WSDA followed this recommendation and made adjustments to the program.

In January 2020, WSDA spoke with key stakeholder representatives in the tree fruit industry to discuss the continued budget deficit for the program, despite the recommended adjustments made the previous year, and the possibility of increasing the fee.

Also in February 2020, WSDA sent out a mass email to the AMWG, notifying them of the need for a fee increase in order to continue operating the survey program at the standard necessary to prevent the spread of apple maggot.

At the February 2020 AMWG meeting, WSDA informed the working group of the program's impending negative fund balance and the necessity to increase the fee, despite the recommended adjustments that were made the previous year. A discussion was held and the AMWG supported the fee increase.

On April 16, 2020 the Washington state tree fruit association sent a letter to WSDA stating that a fee increase was necessary. The letter outlined recommendations for the new fee rate and a timeline for a possible secondary increase.

No jobs are expected to be created or lost as a result of compliance with the proposed rule amendment. However, job losses may occur if apple maggot were to spread to pest free areas of the state. According to a 2016 study conducted by Community Attributes Inc., an estimated two thousand nine hundred jobs would be at risk if apple maggot were to spread. Of these, nine hundred seventy jobs would be at risk due to shortfalls in domestic sales, with a further one thousand nine hundred forty at risk due to shortfalls in export sales (Community Attributes Inc., 2016). This could result in a potential loss of $125 million in lost wages.

Buzzfile. (2020). Buzzfile Information Database. Retrieved from Buzzfile: https://www.buzzfile.com/Home/Basic.

Community Attributes Inc. (2016). Economic Impact of Invasive Species: Direct Costs Estimates and Economic Impact for Washington State. Seattle: Community Attributes Inc.

Galinato, S., Gallardo, K., Granatstein, D., & Willett, M. (2018). Economic Impact of a Potential Expansion of Pest Infestation: Apple Maggot in Washington State. HortTechnology.

Infogroup. (2010). Find Washington State Employers web page. Retrieved from Employment Security Department Washington State - Search data provided by Infogroup: https://esd.wa.gov/find-an-employer#/.

Sansford, C., Mastro, V., & Reynolds, J. (2016). Pest Risk Analysis (PRA) for apple maggot (Rhagoletis pomonella) moving on municipal green waste into the Pest-Free Area (PFA) of the state of Washington, USA. Olympia: Washington State Department of Agriculture.

WSU Extension. (n.d.). Apples in Washington State. Retrieved from Washington State University Extension: https://extension.wsu.edu/chelan-douglas/agriculture/treefruit/horticulture/apples_in_washington_state/.

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.

May 13, 2020

Brad White

Assistant Director