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the Secretary of Agriculture from nominations submitted by the industry. The Council will be made up of 14 wholesale handlers of cut flowers or cut greens, 3 producer-handlers, 3 importer- handlers, 3 members representing retailers, and 2 members representing producers.

Activities under the order will be paid for by assessments uniformly applied throughout the industry on sales of cut flowers and cut greens by non-exempt handlers to retailers. Small handlers will be exempted from paying assessments, as would products that are exported. The small company exemption would cover any handler whose total sales of cut flowers and cut greens to retailers or other exempt handlers are less than $750,000 annually. Refunds would be provided retroactively if handlers decide not to continue the program in the initial referendum on the order.

The initial assessment rate would be 2 of 1 percent of the gross sales price. The PromoFlor Council would be authorized to increase or decrease the assessment by as much as 14 of 1 percent annually, with the maximum assessment level being 1 percent of the gross sales price. Any such increase or decrease could be made only with the approval of the Secretary of Agriculture.

The order will not be continued unless it is approved by assessment-paying handlers in a referendum conducted within 3 years after the order is issued. Also, the bill will authorize the conduct of follow-up, or reconfirmation, referenda. In all referendum_votes, approval will be by a simple majority of all votes cast, and each handler will be entitled to cast one vote for each separate facility with gross sales of cut flowers and greens to retailers or exempt handlers annually of $750,000 or more.

PURPOSE AND NEED

Description and condition of the industry

The floral industry is primarily made up of small to medium sized businesses located throughout the United States. The industry consists of domestic producers, importers, wholesalers, shippers and retailers of all types. The Society of American Florists reports that the floral industry consists of approximately 35,000 businesses that employ 170,000 people. Of those businesses approximately 30,000 are traditional retail florists. In addition, there are now 21,800 supermarkets in the U.S. that sell cut flowers and cut greens according to the Floral Marketing Association. The Wholesale Florist and Florist Suppliers of America report that there are nearly 2,000 wholesalers of fresh cut flowers and fresh cut greens. Cut flowers and greens are primarily grown in 36 States with California producing approximately 60 percent of the domestic crop followed by Florida, Colorado, New York, Hawaii and Pennsylvania. Imports of fresh cut flowers and greens in the United States are led by Columbia, The Netherlands, Mexico and Costa Rica. There are just under 2,500 domestic producers of cut flowers and cut greens in the U.S. and approximately 200 importers.

While there has been an increase in the number of retail outlets selling cut flowers and cut greens, the floriculture industry has not enjoyed a corresponding increase in overall sales. According to the American Floral Endowment the sale of fresh cut flowers and fresh

cut greens account for more than 62 percent of retail florist sales. Nationwide over the past twelve months, the sales of fresh cut flowers and fresh cut greens have increased by only 1.7 percent. However, some parts of the country show a drop in sales of as much as 4.8 percent. In response to the drop in sales the floriculture industry reduced the number of employees by 7.6 percent in the last year.

According to a study by the Flower Council of Holland the United States ranks twelfth in the world for the per capita consumption of floral products. The per capita consumption of flowers in Norway is $154 per year compared to only $48 in the United States. The same study reported that the per capita consumption in some other countries are: Switzerland $143, Sweden $125, Denmark $116, Italy $112, and Germany $101. The floriculture industry is therefore optimistic that sales could be increased by a national promotion program.

Industry support

The bill has the broad-based support of all segments of the floriculture industry, including producers, importers, wholesalers and retailers. Because the industry is primarily made up of small businesses, most companies are not large enough to develop and implement their own advertising campaigns. The floriculture industry believes that the creation of a research and promotion program will provide a base of national advertising on which the industry can grow.

COMMITTEE CONSIDERATION

The Committee met in open session on November 18, 1993 to markup legislation including S. 994, the Fresh Cut Flowers and Fresh Cut Greens Promotion and Information Act of 1993. A motion was made to favorably report the bill with an amendment in the nature of a substitute and the motion was agreed to by voice

vote.

To address the concerns of traditional retail florists advanced by the Florists' Transworld Delivery Association (FTD), the largest traditional retail florist' organization, the Committee substitute amendment included a provision to add two retailer seats to the PromoFlor Council to be nominated by traditional retail florist organizations. Traditional retail florists are the small independent "mom and pop" florist shops who sell floral products to the consumer. These traditional retail florists are attuned to the consumer and the types of marketing programs that work. The traditional retail florists can contribute their marketing experience and insight to the PromoFlor Council. For these reasons, the Committee believes that allowing for the participation of three retailers on a board of 25 industry participants is a positive change in the legislation. The Committee is also aware that other organizations such as 800 Flowers, TeleFlora, American Floral Services, Flowers Direct and the American Floral Marketing Council assist in marketing floral products.

SECTION-BY-SECTION ANALYSIS

Section 1-Short title

Section 1 provides that the bill may be cited as the "Fresh Cut Flowers and Fresh Cut Greens Promotion and Information Act of 1993".

Section 2-Findings and declaration of policy

Subsection (a) of section 2 contains findings of Congress regarding the need for the fresh cut flowers and fresh cut greens promotion and information order authorized under the bill (hereinafter referred to as the "cut flowers and cut greens order”).

Specifically, the findings are that

(1) fresh cut flowers and fresh cut greens are an integral part of life in the United States, are enjoyed by millions of persons every year for a multitude of special purposes (especially important personal events), and contribute a natural and beautiful element to the human environment;

(2) cut flowers and cut greens are produced by many individual producers throughout the United States, as well as in other countries, and are handled and marketed by thousands of small-sized and medium-sized businesses, and such production, handling, and marketing constitute a key segment of the United States horticultural industry and thus a significant part of the Nation's overall agricultural economy;

(3) handlers play a vital role in the marketing of cut flowers and cut greens in that they purchase most of the cut flowers and cut greens marketed by producers, prepare the cut flowers and cut greens for retail consumption, serve as intermediary between source of product and retailer, otherwise facilitate the entry of cut flowers and cut greens into the current of domestic commerce, and add efficiencies to the market process that ensure the availability of a much greater variety of product to retailers and consumers;

(4) it is widely recognized that it is in the public interest and important to the Nation's agricultural economy to provide an adequate, steady supply of cut flowers and cut greens at reasonable prices to the consumers of the Nation;

(5) cut flowers and cut greens move in interstate and foreign commerce, and cut flowers and cut greens that do not move in such channels of commerce but only in intrastate commerce directly affect interstate commerce in these articles;

(6) the maintenance and expansion of existing markets and the development of new or improved markets or uses for cut flowers and cut greens are needed to preserve and strengthen the economic viability of the domestic cut flowers and cut greens industry for the benefit of producers, handlers, retailers, and the entire floral industry;

(7) generic programs of promotion and consumer information can be effective in maintaining and developing markets for cut flowers and cut greens, and have the advantage of equally enhancing the market position for all cut flowers and cut greens;

(8) because cut flowers and cut greens producers are primarily agriculture- oriented rather than promotion-oriented,

and because the floral marketing industry within the United States is comprised mainly of small-sized and medium-sized businesses, the development and implementation of an adequate and coordinated national program of generic promotion and consumer information necessary for the maintenance of existing markets and the development of new markets for cut flowers and cut greens have been prevented;

(9) there exist established State and commodity-specific producer-funded programs of promotion and research that are valuable efforts to expand markets for domestic producers of cut flowers and cut greens and that will benefit from the promotion and consumer information program authorized by the bill to enhance their market development efforts for domestic producers;

(10) an effective and coordinated method for ensuring cooperative and collective action in providing for and financing a nationwide program of generic promotion and consumer information is needed to ensure that the cut flowers and cut greens industry will be able to provide, obtain, and implement programs of promotion and consumer information necessary to maintain, expand, and develop markets for these articles; and

(11) the most efficient method of financing such a nationwide program is to assess cut flowers and cut greens at the point they are sold by handlers into the retail market.

Subsection (b) of section 2 expresses the policy of Congress and the purpose of the legislation, as follows: That it is in the public interest and the purpose of the bill to authorize the establishment, through the exercise of the powers provided in the bill, of an orderly procedure for the development and financing (through an adequate assessment on cut flowers and cut greens sold by handlers to retailers and related entities in the United States) of an effective and coordinated program of generic promotion, consumer information, and related research designed to strengthen the cut flowers and cut greens industry's position in the marketplace and to maintain, develop, and expand markets for cut flowers and cut greens.

Section 3-Definitions

Section 3 contains definitions of 15 terms used in the bill.

The definitions in paragraphs (1), (8), and (9) describe the types of program activities to be covered by the cut flowers and cut greens order, that is, consumer information, promotion, and research.

Paragraph (1) defines the term "consumer information" to mean any action or program to provide information to consumers and other persons on appropriate uses under varied circumstances, and on the care and handling, of cut flowers or cut greens.

Paragraph (8) defines the term "promotion" to mean any action determined by the Secretary of Agriculture to advance the image, desirability, or marketability of cut flowers or cut greens, and specifically includes paid advertising in the definition.

Paragraph (9) defines the term "research" to mean market research and studies limited to the support of advertising, market development, and other promotion efforts and consumer information

efforts relating to cut flowers or cut greens, including educational activities.

Paragraph (2) defines the terms "cut flowers" and "cut greens" as used in the bill, and in doing so sets out a special substantial portion rule.

The definitions are as follows: The term "cut flowers" will include all flowers cut from growing plants and used as fresh-cut flowers, produced either under cover or in field operations; and the term "cut greens" will include all cultivated or non-cultivated decorative foliage cut from growing plants and used as fresh-cut decorative foliage (except Christmas trees) produced either under cover or in field operations. Neither term will include foliage plants, floral supplies, or flowering plants.

The substantial portion rule is that, in any case in which a handler packages cut flowers or cut greens with hard goods in an article such as a gift basket or similar presentation for sale to retailers, the PromoFlor Council may determine, under procedures set out in the cut flowers and cut greens order, that the cut flowers or cut greens in the article do not constitute a substantial portion of the value of the article and that, based on such determination, such article shall not be treated as an article of cut flowers or cut greens subject to assessment under such order.

Section 3 also provides definitions for the various types of entities that will be affected by the establishment of the cut flowers and cut greens order: Qualified handlers, exempt handlers, and retailers. In brief, under the bill, qualified handlers, who as a general rule are those that sell cut flowers or cut greens to retailers, will be assessed on such sales, except that certain smaller handlers will be exempt handlers and not required to pay assessments. Exempt handlers could be required to submit reports to the Promo Flor Council under the order, and certain distribution operations of retailers could be considered qualified handler operations subject to

assessment.

Paragraph (4), in subparagraph (A), defines the term "qualified handler" to mean a person (including a cooperative) operating in the cut flowers or cut greens marketing system that sells domestic or imported cut flowers or cut greens to retailers and exempt hanIdlers and whose annual sales of such articles to retailers and exempt handlers are $750,000 or more. Subparagraph (A) also provides that the term will include

(1) bouquet manufacturers (subject to the "substantial portion" rule under paragraph (2) of this section and described above);

(2) auction houses that clear sales of cut flowers and cut greens to retailers and exempt handlers through a central clearinghouse; and

(3) any distribution center operated at the wholesale level that is owned or controlled by a retailer if the predominant retail business activity of the retailer is floral sales. (Note that obverse definitional terms regarding distribution centers are contained in the definition of "retailer" in paragraph (10) of section 3, which is described below.) Since at least some of the distribution center transactions with retailers are not sales but only transfers, as described below, this provision also states

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