Final Agency Determination: FAD-009

FAD-009

Subject: The Definition of "Wholesale" Used in the Term "Nursery" in Section 1 of the Nursery Crop Provisions, 7 C.F.R. 457.162.

On August 23, 2001, the Risk Management Agency was asked for a final agency determination on an interpretation for the 2000 and succeeding crop years of the term "wholesale"in the policy language quoted below. The request was submitted pursuant to 7 C.F.R. part 400, subpart X and section 506(s) of the Federal Crop Insurance Act, 7 U.S.C. 1506(s). The definition of "nursery" contained in Section 1 of the Nursery Crop Provisions, 7 C.F.R. 457.162 is as follows:

Nursery - A business enterprise that derives as least 50 percent of its gross income from the wholesale marketing of plants.

Because the term "wholesale" is not defined in the Nursery Crop Provisions, the ordinary and common meaning shall apply. Furthermore, if in a single transaction, a nursery sells plants to a specialized buyer, such as a landscape contractor or orchard operator, the nursery qualifies as a wholesaler. Finally, a state-issued wholesale license is regarded as persuasive evidence that the nursery operating under said license is a wholesale, rather than retail, enterprise.

The requester's interpretation is not wholly in accordance with the terms of the policy. The policy does not require the nursery to be identified as a wholesale nursery enterprise. It only requires that the nursery derive 50 percent or more of its gross income from the marketing of plants on a wholesale basis. Since nurseries can hold both a retail and wholesale license, the type of license is not dispositive. It is the responsibility of the company to determine the basis on which plants are sold and whether the income from wholesale plant sales equals or exceeds 50 percent of the gross income generated by all plant sales.

The ordinary and common meaning of the term "wholesale" must be applied to determine if the plants are marketed for wholesale. Numerous dictionaries define "wholesale" as "the sale of commodities in quantity for the purpose of resale." Sales of plants to persons or entities who subsequently sell the plants to consumers, either directly or through a related service, e.g., a landscape contractor, would be considered wholesale. However, in those cases where the plants are sold directly to the consumer, e.g., large quantity sales directly to the individual orchard operators, those sales would not be considered wholesale. In accordance with 7 C.F.R. 400.765(c), this constitutes the final agency determination and is binding on all participants in the Federal crop insurance program.

Date of Issue: October 29, 2001