WSR 97-20-077

PROPOSED RULES

DEPARTMENT OF AGRICULTURE

[Filed September 26, 1997, 11:36 a.m.]

Original Notice.

Preproposal statement of inquiry was filed as WSR 97-16-066.

Title of Rule: Chapter 16-156 WAC, Organic producer and transition to organic producer certification.

Purpose: The goals of the amendments are to provide sufficient revenue to effectively administer and enforce the Organic Food Products Act, chapter 15.86 RCW.

Statutory Authority for Adoption: RCW 15.86.070.

Statute Being Implemented: Chapter 15.86 RCW.

Summary: The 1997 legislature passed a bill which allows the organic food program to increase fees in excess of the fiscal growth factor. The proposed amendments would increase fees by ten percent for producers with gross sales up to $750,000 and increase fees for producers with gross sales over $750,000 to $2,000 plus one-tenth of one percent (0.10%) of gross sales.

Reasons Supporting Proposal: The organic food program has doubled in size since 1993 and needs increased revenues to meet current workload demands. The fee increase will allow the program to put more resources into enforcement and providing technical assistance.

Name of Agency Personnel Responsible for Drafting, Implementation and Enforcement: Miles McEvoy, Olympia, (360) 902-1924.

Name of Proponent: Organic Food Program, Washington State Department of Agriculture, governmental.

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

Explanation of Rule, its Purpose, and Anticipated Effects: Organic producer and transition to organic producer certification, chapter 16-156 WAC, provides the procedural framework for certifying producers of organic and transition to organic food. The procedural requirements include specifying conditions of inspection, sampling, certification and decertification as well as specifying the application fees for organic certification. Amendments to WAC 16-156-060 are proposed to increase application fees in order to obtain more revenue for program activities. Increased revenue will be used for increased enforcement and technical assistance in the organic food program.

Proposal Changes the Following Existing Rules: The proposal would amend WAC 16-156-060 to increase fees. The proposal raises fees for organic food producer certification by 10% for producers with less than $750,000 in gross sales. It raises fees for producers with gross sales over $750,000 to $2,000 plus one-tenth of one percent (0.10%) of gross sales.

A small business economic impact statement has been prepared under chapter 19.85 RCW.

Introduction: Organic producer and transition to organic producer certification, chapter 16-156 WAC, provides the procedural framework for certifying producers of organic and transition to organic food in Washington state. The procedural requirements include specifying conditions of inspection, sampling, certification and decertification as well as outlining the application fees for organic certification. Amendments to chapter 16-156 WAC are needed to amend the fee schedule. The revised fee schedule raises the application fees to provide adequate revenue for the full recovery of the cost of producer certification in the organic food program.

Purpose for the Rule Amendment: The organic food industry has had a number of developments as the industry has matured from greater consumer interest in organic food. The organic certification program has doubled in size since 1992 and now includes additional food categories that were not covered in 1992 including milk, mushrooms, bakery items, and eggs. To compensate for the amount of growth in the organic food program, the fees need to be increased to provide adequate resources to effectively administer and enforce the organic food program rules.

The 55th legislature passed an amendment to the Washington State Organic Food Products Act in July 1997 that allows for the increase of fees in excess of the fiscal growth factor, RCW 15.86.070(2). The proposed amendment to chapter 16-156 WAC increases fees at the rate of ten percent (10%) for producers with gross sales up to $750,000 and assesses application fees at $2,000 plus one-tenth of one percent (0.10%) of gross sales for producers with gross sales over $750,000. In addition, the cost for inspections (beyond the two inspections provided) has been raised from $20/hr. to $30/hr.

Businesses Affected by the Rule Amendment: Chapter 16-156 WAC affects all individuals and businesses that produce organic food and transition to organic food in Washington state. All producers of organic and transition to organic food are small businesses (less than fifty full-time, year-round employees). The proposed fee structure would impact all producers of organic and transition to organic food and would not impose a disproportionate impact on small businesses.

Reporting and Record-keeping Requirements: No new record-keeping requirements would be imposed; the amendments would merely increase annual fees.

Compliance Requirements: Organic and transition to organic producer certification standards will not be altered by the proposed amendments.

Professional Services: The reporting, record-keeping and compliance requirements would not necessitate the need for professional services. No professional service expenses would be incurred by the small businesses affected by chapter 16-156 WAC.

Industries Impacted by the Rule Amendment: All producers of organic and transition to organic food products in Washington state within the following SIC codes are impacted by chapter 16-156 WAC: 019 general farms, primarily crop; 0241 dairy farms; 029 general farms, primarily livestock and animal specialties; 201 meat products; 202 dairy products; 203 canned, frozen, preserved fruits, vegetables and food specialties; 205 bakery products; 515 farm product--raw materials; 542 meat and fish (seafood) markets; and 545 dairy product stores.

Two hundred and ninety producers of organic and transition to organic food products in Washington state are currently affected by chapter 16-156 WAC. Approximately 1,450 persons are employed by the producers of organic and transition to organic food products in Washington state. All producers of organic and transition to organic food are small businesses (less than fifty full-time, year-round employees); 290 small businesses are affected by chapter 16-156 WAC.

Cost of Compliance: The proposed amendments to the fee schedule increases fees at the rate of ten percent for producers with gross sales up to $750,000 and assesses application fees at $2,000 plus one-tenth of one percent (0.10%) of gross sales for producers with gross sales over $750,000. See explanation below:

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Impact On Small Businesses: The fee increases at the same rate of ten percent for all producers that gross up to $750,000 in organic sales. The fee for the high-end producers (over $750,000) increases proportionately at $2,000 plus assessment of one-tenth of one percent on gross organic sales. The proposed amendments to chapter 16-156 WAC would not impose a disproportionate economic impact on small businesses because all producers of organic and transition to organic food in Washington state are considered small businesses (less than fifty full-time, year-round employees).

Presolicitation and Research Efforts: The organic food program has worked with the Washington State Department of Agriculture appointed Organic Advisory Board over the past four years in the development of the proposed amendments. In addition, rule amendment memos are sent to all producers of certified organic and transition to organic food as well as individuals and organizations involved in the organic food industry.

Memos to constituents:

July 27, 1993, memo to certified organic growers and handlers regarding state budget situation and shift of administrative costs to local fund programs.

November 3, 1993, memo to certified organic growers regarding changes to chapter 16-156 WAC.

November 24, 1993, FS/AH management initiatives/tasks regarding application fees and additional inspection fees.

February 22, 1994, Organic Advisory Board (OAB) meeting minutes.

May 2, 1994, memo to OAB regarding WAC amendment process and limitations on fee increase.

August 15, 1996, OAB meeting minutes regarding legislative proposal to raise fees beyond the fiscal growth factor.

November 13, 1996, OAB meeting minutes regarding approaching Washington state legislature for allocation of general funds to the organic food program.

December 24, 1996, memo to OAB regarding revised fee schedule proposal.

January 1997, organic food program update regarding legislative proposal for raising application fees above the fiscal growth factor.

January 15, 1997, OAB meeting minutes regarding legislative proposal for raising application fees above the fiscal growth factor.

February 1997, Washington State Department of Agriculture's Bill Draft Z-0158/Z-0588, explanation of SB 5514 and HB 1528.

A copy of the statement may be obtained by writing to Washington State Department of Agriculture, Organic Food Program, P.O. Box 42560, Olympia, WA 98504-2560, phone (360) 902-1877, or FAX (360) 902-2087.

Section 201, chapter 403, Laws of 1995, does not apply to this rule adoption. Washington State Department of Agriculture is not a listed agency in section 201.

Hearing Location: Natural Resources Building, 1111 Jefferson, Room 259, Olympia, WA 98504, on November 15, 1997, at 10 a.m.

Assistance for Persons with Disabilities: Contact Julie Carlson by October 27, 1997, TDD (360) 902-1996, or (360) 902-1880.

Submit Written Comments to: Miles McEvoy, P.O. Box 42560, Olympia, WA 98504-2560, FAX (360) 902-2087, by November 5, 1997.

Date of Intended Adoption: November 14, 1997.

September 27 [26], 1997

Candace Jacobs, DVM

Assistant Director

AMENDATORY SECTION (Amending Order 6011, filed 12/20/96, effective 1/20/97)

WAC 16-156-060 Fee schedule. (1) The cost per application shall be based on the following fee schedule.

For renewal applicants -

Application fees shall be based on the previous calendar year's gross sales of organic and transition to organic food. In the event that the current calendar year's gross sales exceed the previous year's gross sales, the department may bill the producer for the additional fee. In the event that the current calendar year's gross sales is less than the previous year's gross sales, the producer may request a refund for the reduced fee. In addition, renewal applications postmarked after March 1, shall pay a late fee of fifty dollars.

For new applicants -

Application fees shall be based on an estimate of the current year's gross sales of organic and transition to organic food. In the event that the current calendar year's gross sales exceed the estimate, the department may bill the producer for the additional fee. In the event that the current calendar year's gross sales is less than the estimate, the producer may request a refund for the reduced fee. In addition, new applicants pay a seventy-five dollar new applicant fee. The fee shall accompany the application.

Gross Sales Annual Fee

$ 0 - $ 12,000 (($ 150))

$ 165

$ 12,001 - $ 15,000 (($ 185))

$ 200

$ 15,001 - $ 20,000 (($ 200))

$ 220

$ 20,001 - $ 25,000 (($ 250))

$ 275

$ 25,001 - $ 30,000 (($ 300))

$ 330

$ 30,001 - $ 35,000 (($ 350))

$ 385

$ 35,001 - $ 42,500 (($ 425))

$ 465

$ 42,501 - $ 50,000 (($ 500))

$ 550

$ 50,001 - $ 65,000 (($ 600))

$ 660

$ 65,001 - $ 80,000 (($ 750))

$ 825

$ 80,001 - $ 100,000 (($ 900))

$ 990

$ 100,001 - $ 125,000 (($ 1,000))

$ 1,100

$ 125,001 - $ 150,000 (($ 1,044))

$ 1,150

$ 150,001 - $ 175,000 (($ 1,200))

$ 1,320

$ 175,001 - $ 200,000 (($ 1,251))

$ 1,375

$ 200,001 - $ 240,000 (($ 1,400))

$ 1,540

$ 240,001 - $ 280,000 (($ 1,450))

$ 1,595

$ 280,001 - $ 325,000 (($ 1,500))

$ 1,650

$ 325,001 - $ 375,000 (($ 1,565))

$ 1,720

$ 375,001 - $ 425,000 (($ 2,000))

$ 2,200

$ 425,001 - $ 500,000 (($ 2,089))

$ 2,300

$ 500,001 - $ 750,000 (($ 2,500))

$ 2,750

$ 750,001 and up (($ 2,611))

$ 2,000

plus one-tenth

of one percent

(0.10%) of gross

organic sales

((As of December 1, 1997 for gross sales:

$ 0 - $ 12,000 $ 150

$ 12,001 - $ 15,000 $ 185

$ 15,001 - $ 20,000 $ 200

$ 20,001 - $ 25,000 $ 250

$ 25,001 - $ 30,000 $ 300

$ 30,001 - $ 35,000 $ 350

$ 35,001 - $ 42,500 $ 425

$ 42,501 - $ 50,000 $ 500

$ 50,001 - $ 65,000 $ 600

$ 65,001 - $ 80,000 $ 750

$ 80,001 - $ 100,000 $ 900

$ 100,001 - $ 125,000 $ 1,000

$ 125,001 - $ 150,000 $ 1,085

$ 150,001 - $ 175,000 $ 1,200

$ 175,001 - $ 200,000 $ 1,300

$ 200,001 - $ 240,000 $ 1,400

$ 240,001 - $ 280,000 $ 1,450

$ 280,001 - $ 325,000 $ 1,500

$ 325,001 - $ 375,000 $ 1,625

$ 375,001 - $ 425,000 $ 2,000

$ 425,001 - $ 500,000 $ 2,171

$ 500,001 - $ 750,000 $ 2,500

$ 750,001 and up $ 2,714))

(2) Two inspections per year within the state of Washington are provided for under the above fee schedule. Additional inspections (in addition to two inspections provided for), if required for certification or maintenance of certification by the director, or requested by the producer, shall be at (($20/hr.)) $30/hr. plus mileage set at the rate established by the state office of financial management.

Out-of-state inspections, if necessary or requested, shall be at the rate of (($20/hr.)) $30/hr. plus transportation costs.

(3) One sample per year is provided for under the above fee schedule. Additional samples (in addition to one sample provided for), if required for certification or maintenance of certification by the director, or requested by the organic producer, shall cost an additional lab fee of one hundred ten dollars. If an additional visit must be arranged to obtain a sample, it shall be at (($20/hr.)) $30/hr. plus mileage set at the rate established by the state office of financial management.