91ST CONGRESS 1st Session } SENATE { REPORT No. 91-490 LICENSE FEES AND EXEMPTIONS UNDER THE PERISHABLE AGRICULTURAL COMMODITIES ACT OCTOBER 22, 1969.-Ordered to be printed Mr. JORDAN of North Carolina, from the Committee on Agriculture and Forestry, submitted the following REPORT [To accompany H.R. 9857] The Committee on Agriculture and Forestry, to which was referred the bill (H.R. 9857) to amend the provisions of the Perishable Agricultural Commodities Act, 1930, to authorize an increase in license fee, and for other purposes, having considered the same, reports favorably thereon without amendment and recommends that the bill do pass. SHORT EXPLANATION This bill would amend the Perishable Agricultural Commodities Act to (1) Increase the maximum annual license fee to $100 (from $50); and (2) Extend the retailer and frozen food broker exemptions to those doing less than $100,000 worth of covered business annually (now $90,000). BACKGROUND The basic objective of the Perishable Agricultural Commodities Act is to establish a code of fair trading practices governing the marketing in interstate and foreign commerce of fresh and frozen fruits and vegetables and cherries in brine and to aid in the enforcement of contracts for marketing these commodities. Under this act, it is unlawful for any commission merchant, dealer, or broker in connection with any transaction in interstate or foreign commerce to engage in certain unfair trade practices. Among these are: (1) To reject or fail to deliver in accordance with terms of his contract, without reasonable cause; (2) To dump, discharge, or destroy without reasonable cause any lot received on consignment; (3) To fail or refuse to account correctly and to pay promptly for any lot; (4) To fail to perform any specification or duty arising out of a contract without reasonable cause; (5) To misrepresent or misbrand as to character, kind, grade, quality, quantity, size, pack, weight, condition, degree of maturity, or State, country, or region of origin; and (6) To fail to maintain adequate records and accounts. Enforcement is through a system of licenses. Every commission merchant, broker, and dealer, including certain retailers and processors, operating subject to the act is required to be licensed. Most applicants encounter no problems in obtaining licenses. However, the Secretary may deny licenses to certain individuals for specific. reasons spelled out in the law, including false or misleading statements in the application, a history of repeated violations of the act, the criminal record of the applicant, the failure to pay reparation awards, or the failure to furnish required surety bonds. Licenses may be suspended or revoked for violations of the act. There are two main phases of activity in administering the act. First, the Secretary is authorized to hear and decide disputes which involve claims for damages resulting from any violation of the fair trading principles. Complaints are filed with the Secretary; investigations are made as warranted; and, if possible, amicable settlements are worked out between the parties. If a dispute cannot be settled informally, it may become a formal proceeding in which the parties are given an opportunity to submit evidence in support of their positions, either at an oral hearing or by written submissions of evidence. If the Secretary concludes that a violation has occurred, he determines the amount of damages sustained and issues an order requiring the offender to pay such damages to the injured party by a specified date. The offender's license is automatically suspended unless he pays the amount of the award or appeals the Secretary's decision to a district court of the United States, as provided in the act. The second main phase of activity relates to disciplinary measures. These include administrative proceedings by the Secretary to suspend or revoke licenses for violations of the act, and court actions to collect civil penalties for operating without a license, together with injunctions to restrain further operations. The act is self-supporting from annual license fees. These fees are deposited in a special PACA fund and all costs of administration of the act-except for legal services-are financed from these fees. The Secretary is authorized to set the level of the annual license fee, within the maximum provided in the act, at an amount sufficient to provide the revenue to meet anticipated expenses for administering the act. Before the license fee has been raised, the Secretary has published the proposed rate and given all interested persons an opportunity to file their comments or objections. The present maximum fee authorization of $50 was established in an amendment to the act of October 1, 1962. Under this authorization, the annual license fee was increased to $36 on January 1, 1963, to $42 on January 1, 1965, and to $50 on January 1, 1969. S. Rept. 91-490 NEED FOR INCREASE IN MAXIMUM LICENSE FEE The statutory ceiling on license fees must be raised because of (1) the declining number of firms operating subject to license, and (2) the increasing cost of administering the act. At present, the number of firms licensed is approximately 19,285, compared with an alltime peak of about 27,000 in 1956. This trend toward fewer licensees results from the continuing mergers and consolidations in the fruit and vegetable industry and the closing of many small firms. During the past 5 years, for example, the net decline in the number of firms licensed has averaged over 670 per year. Despite the decline in number of firms, licensed, the number of complaints filed under the act and the requests for advice and assistance have remained relatively constant. During the past fiscal year, for example, a total of 2,272 reparation complaints were handled by the Department under this act. Informal amicable settlements were arranged in 930 such cases resulting in payments to the parties of approximately $2.3 million. In addition, 341 formal orders were issued by the Department's judicial officer awarding reparations amounting to over $777,000. The Department makes no charge for the handling of these complaints. Also, more than 9,800 requests for advice were received last year from members of the industry seeking assistance, mostly with problems concerning marketing contracts. Many disputes are settled on the basis of these informal recommendations by the Department and the necessity of filing complaints is avoided. The Department also conducted 15 marketing seminars for various trade groups during this period to encourage compliance with the law, minimize marketing disputes, and discuss procedures followed in administering the act. Costs of administration have been increasing, largely because of adjustments in employees' salary scales and fringe benefits which account for over 80 percent of the expenditures under this act. The costs have increased even though there has been a reduction in the number of employees engaged in the administration of the act, and this number now is at the lowest level in over 10 years. The PACA fund incurred a deficit of over $12,000 in fiscal year 1968 and a deficit of approximately $58,000 during the first 6 months of fiscal year 1969. With the increase in the license fee that became effective January 1, 1969, it is estimated that income and expenditures for fiscal year 1969 as a whole about balanced out. With continued decline in numbers of licensees it is likely that deficits will occur in fiscal years 1970 and 1971. The Department estimates it will be necessary to increase the license fee again in the amount of approximately $10 about January 1, 1971, in order to obtain sufficient revenue to meet the anticipated costs of administration. The small reserve in the PACA fund would soon be depleted if such deficits continue. NEED TO INCREASE THE EXEMPTION FOR RETAILERS AND FROZEN FOOD BROKERS Since the Perishable Agricultural Commodities Act was enacted in 1930, the great majority of food retailers have always been exempt from the licensing provisions. From 1930 to 1962 this exemption was expressed in terms of tonnage of perishable agricultural commodities S. Rept. 91-490 purchased by retailers. When the act was amended in 1962, the exemption was broadened and was converted from a tonnage to a dollar volume basis. At present, all retailers are exempt whose purchases of perishable agricultural commodities amount to $90,000 or less per year. Also, in 1962 an exemption from license was added for the first time for frozen food brokers who negotiate sales for and on behalf of vendors and whose sales of frozen fruits and vegetables have an invoice value of $90,000 or less per year. H.R. 9857 would raise the exemption for both retailers and frozen food brokers to $100,000. The proposed increase in the amount of the exemption would approximate the increase in the index of wholesale food prices that has taken place since 1962 when the $90,000 exemption was established. There are an estimated 200,000 retail food firms operating at present. Only approximately 4,000 of these firms currently are licensed under PACA in view of the exemption which excludes all those whose purchases of perishable agricultural commodities total less than $90,000 per year. Since fresh and frozen fruits and vegetables account, on the average, for about 9 percent of retail food store gross sales, this means that raising the exemption to $100,000 would exclude most retail firms with gross sales of less than $1.5 million per year. Therefore, it is estimated that fewer than 2 percent of all food retail firms would be subject to license under the bill as proposed. The Department's records indicate that there are fewer than 300 frozen food brokers currently subject to license under PACA. Consequently, an increase in the exemption for these brokers from $90,000 to $100,000 would affect a relatively small number of such firms. COST This bill involves no additional cost to the Government. In fact, its enactment would continue the self-financing principle that has been followed under the PACA program since its inception. Conversely, the failure to enact this bill would result in a continued deficit in the PACA fund which would in time require an appropriation by the Congress. DEPARTMENTAL POSITION The Department of Agriculture submitted the following favorable report in support of this bill: DEPARTMENT OF AGRICULTURE, Hon. W. R. POAGE, OFFICE OF THE SECRETARY, Chairman, Committee on Agriculture, House of Representatives. DEAR MR. CHAIRMAN: This is in reply to your request of April 12, 1969, for a report on H.R. 9857, a bill to amend the provisions of the Perishable Agricultural Commodities Act, 1930, to authorize an increase in license fee, and for other purposes. This Department recommends that the bill be passed. S. Rept. 91-490 |