Original Notice.

     Preproposal statement of inquiry was filed as WSR 09-14-118.

     Title of Rule and Other Identifying Information: Chapter 16-623 WAC, Commission Merchant Act -- Licensing fees, proof of payment, cargo manifests and registration of acreage commitments. The department is proposing to increase the fees for licenses issued under chapter 20.01 RCW, which authorizes the commission merchants program.

     Hearing Location(s): Washington State Department of Agriculture, 21 North First Avenue, Conference Room 238, Yakima, WA 98902, on September 24, 2009, at 1:00 p.m.

     Date of Intended Adoption: October 1, 2009.

     Submit Written Comments to: Henri Gonzales, P.O. Box 42560, Olympia, WA 98504-2560, e-mail hgonzales@agr.wa.gov, fax (360) 902-2094, by September 24, 2009.

     Assistance for Persons with Disabilities: Contact Henri Gonzales by September 17, 2009, TTY (800) 833-6388.

     Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: The department is proposing to increase the licensing fees for commission merchants, dealers, limited dealers, brokers, cash buyers, and agents. During the 2009 legislative session, the Washington state legislature authorized (as required by Initiative 960) the Washington state department of agriculture to increase the commission merchant licensing fees as necessary to meet the actual costs of conducting business (see chapter 564, Laws of 2009).

     Reasons Supporting Proposal: The commission merchants program enforces the Commission Merchants Act; licenses commission merchants, dealers, brokers, agents, and cash buyers; and investigates complaints. The program's revenue is largely derived from license fees. An increase in licensing fees is necessary to cover the costs of operating the program.

     Statutory Authority for Adoption: RCW 20.01.020 and 20.01.040, chapter 34.05 RCW, and chapter 564, Laws of 2009.

     Statute Being Implemented: RCW 20.01.020 and 20.01.040.

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

     Name of Proponent: Washington state department of agriculture, governmental.

     Name of Agency Personnel Responsible for Drafting, Implementation and Enforcement: Kirk Robinson, 1111 Washington Street, Olympia, WA 98504-2560, (360) 902-1856.

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

     Rule Summary: WAC 16-623-010 establishes fees for licenses for commission merchants, dealers, brokers, cash buyers, and agents, all of whom are buyers and sellers of agricultural products. As per the authorizing statute, RCW 20.01.010(3), agricultural product means any unprocessed horticultural, vermicultural and its byproducts, viticultural, berry, poultry, poultry product, grain, bee, or other agricultural product, as well as mint or mint oil, hay and straw baled or prepared for market, livestock, and agricultural or flower seed. These licenses are required of commission merchants, dealers, brokers, cash buyers, and agents as prescribed under chapter 20.01 RCW. The program issues between seven hundred and eight hundred licenses each year. Commission merchant and dealer licenses make up about 65% of the licensees and provide 87% of the program revenue. Brokers, limited dealers, cash buyers and agents make up the balance of program licensees. In addition to licensing buyers and sellers of agricultural products, the program carries out compliance activities; investigates producer complaints; and works with federal, state, and local law enforcement agencies. Staff annually investigate over one hundred cases involving between one and three million dollars in claimed damages.

     The commission merchants program is a fee supported program. Over the last three years, the cost of administering the program has increased, mostly due to higher operation costs, while revenues have remained consistent. For the program to continue to maintain the current level of staffing and services provided to the agricultural industry, the program is proposing to increase license fees. The program is proposing an approximate 18% license fee increase for licenses issued under the Commission Merchants Act, chapter 20.01 RCW, effective for licenses issued January 1, 2010. The increase in license fees is expected to allow the program to continue at its current staff and service levels through 2013.

     No additional reporting, recordkeeping, or other compliance requirements would be put in place by the proposed rule, and no other professional services are likely to be needed in order for a small business to comply with the proposal. Other than the increased fee itself, there are no additional equipment, supplies, labor, professional services, or increased administrative costs associated with the proposal. No businesses should lose sales or revenue due to changes in this rule.

     Affected Groups and Costs: Revising WAC 16-623-010 to increase license fees by approximately 18% will affect buyers and dealers of agricultural products required to be licensed under the Commission Merchants Act, chapter 20.01 RCW. Between seven hundred and eight hundred licenses are issued yearly, with dealers and commission merchants comprising the majority of licensees. Affected business sizes range from large fruit warehouses with greater than fifty employees to individuals licensed as cash buyers. The cost of the proposed changes would be identical within each license type, regardless of the size of the business that holds the license and therefore would appear to have a disproportionate effect on small business.

	Licenses Issued 2009	Current Fee	Annual Revenue	Proposed Fee	Estimated Annual Revenue	Increase in Revenue	Increase Per License
Dealer	364	$474	$172,536	$560	$203,840	$31,304	$86
Commission Merchant	142	$474	67,308	$560	79,520	12,212	$86
Broker	30	$316	9,480	$375	11,250	1,770	$59
Limited Dealer	41	$263	10,783	$310	12,710	1,927	$47
Cash Buyer	78	$105	8,190	$125	9,750	1,560	$20
*Agent	150	$ 52	7,800	$ 61	9,150	1,350	$ 9
	805		$276,097		$326,220	$50,123

     *Number of agent licenses issued each year will vary between 100 and 200.

     RCW 20.01.130 mandates that these fees be used solely for the purpose of carrying out the chapter and the rules adopted under this chapter. The proposed license fee increase would enable the program to maintain the current level of program services. The level of program services is not determined by the size of the licensed business. There is no feasible way to mitigate by means listed in RCW 19.85.030(2) the effects of this license fee increase on small business.

     Since the maximum fee increase in this proposal is $86 per year and other fees would increase less, it does not appear any jobs would be lost or created by this change.

     Industry Outreach: The proposal to increase license fees by approximately 18% was discussed with businesses, growers, and associations, which represent many businesses varying in size from large to small. They include the commission merchants program advisory committee; the Washington State Hay Growers Association; the Yakima Valley Growers and Shippers Association; numerous fruit and vegetable packers, processors, and warehouses; and the livestock industry.

     Each of these businesses, growers, and association representatives were given information on the proposal for a fee increase, and impacts it would have on industry. The program received positive feedback on the proposal to increase fees and on the value of the program to the affected industries and growers. The program did not receive any comments against the proposal.

     This proposal, as required by I-960, received legislative approval during the 2009 session (see chapter 564, Laws of 2009) to increase fees paid by individuals and businesses under the Commission Merchants Act, chapter 20.01 RCW, through the rule-making process.

     Alternatives: The alternative to increasing the license fees is to leave the fees unchanged and reduce program staff and services. This is a very small, fee-supported program of four FTEs. Any reduction in staffing would reduce the ability of the program to perform compliance activities and investigations mandated by statute.

     Conclusions: The Washington state agricultural industry generates over five hundred million dollars to our state's economy. The proposed license fee increase will allow the commission merchants program to continue to provide the same level of service and support to the agricultural community as it has done for the last nine years. The role of the commission merchants program is important in facilitating the movement of Washington agricultural products in domestic and international markets. This proposal will allow the program to continue to protect agricultural producers from theft, fraud, and unfair business practices.

     A copy of the statement may be obtained by contacting Henri Gonzales, P.O. Box 42560, Olympia, WA 98504-2560, phone (360) 902-2061, fax (360) 902-2094, e-mail hgonzales@agr.wa.gov.

     A cost-benefit analysis is not required under RCW 34.05.328. The Washington state department of agriculture is not a listed agency under RCW 34.05.328 (5)(a)(i).

August 19, 2009

Mary A. Martin Toohey

Assistant Director

OTS-2624.1

AMENDATORY SECTION(Amending WSR 07-13-097, filed 6/20/07, effective 7/21/07)

WAC 16-623-010   What requirements apply to licenses for commission merchants, dealers, brokers, cash buyers and agents?   (1) The following table summarizes the license fee requirements for commission merchants, dealers, brokers, cash buyers, or agents:

License Class	License Fee	Annual Expiration Date	Annual Renewal Date	Penalty Amount for Not Renewing Before January 1
Commission merchant	$((474.00)) 560.00	December 31	Before January 1	A late renewal penalty of twenty-five percent of the total fees
Dealer	$((474.00)) 560.00	December 31	Before January 1	A late renewal penalty of twenty-five percent of the total fees
Limited dealer	$((263.00)) 310.00	December 31	Before January 1	A late renewal penalty of twenty-five percent of the total fees
Broker	$((316.00)) 375.00	December 31	Before January 1	A late renewal penalty of twenty-five percent of the total fees
Cash buyer	$((105.00)) 125.00	December 31	Before January 1	A late renewal penalty of twenty-five percent of the total fees
Agent	$((52.00)) 61.00	December 31	Before January 1	A late renewal penalty of twenty-five percent of the total fees
Additional license per class	$25.00	December 31	Before January 1	A late renewal penalty of twenty-five percent of the total fees

     (2) A licensee can be licensed in more than one class for an additional fee of twenty-five dollars per class. The principal license must be in the class requiring the greatest fee and all requirements must be met for each class in which a license is being requested.

     (3) All fees and penalties must be paid before the department issues a license.

     (4) Applications for licenses are considered incomplete unless an effective bond or other acceptable form of security is also filed with the director.

     (5) Licenses may be obtained by contacting the department's commission merchants program at 360-902-1854 or e-mail at: commerch@agr.wa.gov. Application forms, bond forms, and forms for securities in lieu of a surety bond are available on the department's web site at: http://www.agr.wa.gov/Inspection/CommissionMerchants/((default.asp)).

[Statutory Authority: Chapters 20.01 and 34.05 RCW. 07-13-097, § 16-623-010, filed 6/20/07, effective 7/21/07. Statutory Authority: Chapters 20.01 and 34.05 RCW, 2003 1st sp.s. c 25. 05-09-094, § 16-623-010, filed 4/20/05, effective 5/21/05. Statutory Authority: RCW 20.01.040, [20.01.]125, [20.01.]370, [20.01.]380, [20.01.]410, [20.01.]510. 00-22-071, § 16-623-010, filed 10/30/00, effective 11/30/00.]

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