[Federal Register Volume 61, Number 22 (Thursday, February 1, 1996)]
[Rules and Regulations]
[Pages 3571-3572]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-1977]



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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

21 CFR Part 80

[Docket No. 94C-0041]


Color Additive Certification; Increase in Fees For Certification 
Services

AGENCY: Food and Drug Administration, HHS.

ACTION: Final rule.

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SUMMARY: The Food and Drug Administration (FDA) is amending the color 
additive regulations by increasing the fees for certification services. 
The change in fees will allow FDA to continue to maintain an adequate 
color certification program as required by the Federal Food, Drug, and 
Cosmetic Act (the act). The fees are intended to recover the full costs 
of operation of FDA's color certification program, including the 
unfunded liability of the Civil Service Retirement Fund and the 
appropriate overhead costs of the Public Health Service (PHS) and the 
Department of Health and Human Services (DHHS).

DATES: Effective March 4, 1996.

FOR FURTHER INFORMATION CONTACT: David R. Petak, Accounting Branch 
(HFA-120), Food and Drug Administration, 5600 Fishers Lane, Rockville, 
MD 20857, 301-443-1766.

SUPPLEMENTARY INFORMATION:

I. Background

    In the Federal Register of November 29, 1994 (59 FR 60898), FDA 
issued an interim rule to amend the color additive regulations by 
increasing the fee for certification services. The change in fees was 
necessary so that FDA could recover the full costs of operation of its 
color certification program, including the unfunded liability of the 
Civil Service Retirement Fund and the appropriate overhead costs of PHS 
and DHHS. The fee schedule in effect before publication of the interim 
rule had been in place since 1982. While costs of the certification 
program have increased through the years, until 1991, the steady growth 
of the color additive market and corresponding increase in the batches 
certified generated sufficient revenue to cover these increased costs. 
The fee schedule is designed to cover the costs involved in the 
certifying of batches of color additive. These costs include both the 
cost of specific tests required by the regulations and the general 
costs associated with the certification program, such as costs of 
accounting, reviewing data, issuing certificates, and conducting 
research and establishment inspections.
    Since 1991, however, the volume of batches certified has leveled 
off, while the costs have continued to rise at approximately 10 percent 
per year. Moreover, the old fee schedule did not reflect all applicable 
overhead costs for the program. It did not reflect the costs of 
management support provided by both PHS and DHHS, personnel costs for 
the unfunded liability portion of the Civil Service Retirement Fund, 
and ancillary costs of space, equipment, travel, and supplies. The 
agency announced in the November 1994 notice that it concluded that it 
is necessary to include these costs in the calculation of the fees to 
ensure that the fees fully cover the costs of certification. Because 
section 721(e) of the act (21 U.S.C. 379e(e)) requires payment of such 
fees necessary to provide, maintain, and equip an adequate 
certification service, an immediate increase was necessary.
    The fee for straight colors including lakes is $.30 per pound (a 
$.05 per pound increase) with a minimum fee of $192. There are similar 
increases in fees for repacks of certified color additives and color 
additive mixtures. In addition, the interim rule announced the agency's 
tentative conclusion that fees would increase at a rate that is 
proportional to Federal salary increases, commencing with pay raises on 
or after January 1, 1996. This provision would permit FDA to set 
initial fees lower than they would otherwise be set. Interested persons 
were given until February 13, 1995, to comment on the interim rule. One 
letter was received in response to the interim rule from the 
International Association of Color Manufacturers (IACM). A description 
of the comment and the agency's response is as follows.

II. Comment

    IACM, a trade association representing firms that manufacture 
certified color additives for use in foods, drugs, cosmetics, and 
medical devices, objected to the fee escalation provision, supported 
refunds of surplus fees, and suggested alternatives to the 
certification program.
    In support of its objection to the escalator provision, IACM stated 
that it was opposed to an automatic annual increase in the color 
certification fees because it was contrary to section 721(e) of the 
act. IACM argued that Congress clearly intended that such fee increases 
would have to be specified in a proposed regulation with an opportunity 
for public notice and comments. IACM further stated that the fee study 
that FDA made available does not support the need for automatic fee 
increases and requested clarification of all the factors (e.g., local 
pay rate increase) that FDA intended to use as a basis for the 
automatic fee increase. IACM also requested more time to comment on 
these factors. In addition, IACM supported refunds of surplus fees but 
requested that FDA include a statement that it is ``* * * committed to 
making refunds.'' Lastly, IACM suggested that, in light of FDA's 
decision to increase the fee and provide for an automatic fee 
escalator, FDA should consider alternative methods of certification 
such as certifying private laboratories or certifying an individual 
company to conduct its own certification.
    After due consideration FDA finds that it is persuaded by IACM's 
comments in support of its objection to the escalator provision, and 
the agency will not implement this provision. The agency will continue 
with its past policy of monitoring color certification costs and set 
fees as required by section 721(e) of the act as necessary to provide, 
maintain, and equip an adequate certification service. FDA will 
continue to closely monitor the certification fee structure and will 
continue with its policy of refunding any excess of funds in proportion 
to workload of each company that sought color certification. 
Accordingly, FDA is removing Sec. 80.10(c) (21 CFR 80.10(c)) from the 
regulations.
    IACM's request that FDA consider alternatives to the certification 
program are outside the scope of interim rule, and since the agency is 
returning to the past procedure for determining color additive 
certification fees, the issue needs no further consideration at this 
time. Thus, FDA is not making any additional modifications to 
Sec. 80.10. The interim rule adopted on November 29, 1994, is therefore 
permanent, with the only modification that Sec. 80.10(c) is withdrawn, 
and Sec. 80.10(d) is redesignated as Sec. 80.10(c) to replace it.

III. Analysis of Impacts

    FDA has examined the impacts of the final rule under Executive 
Order 12866 and the Regulatory Flexibility Act (Pub. L. 96-354). 
Executive Order 12866 

[[Page 3572]]
directs agencies to assess all costs and benefits of available 
regulatory alternatives and, when regulation is necessary, to select 
regulatory approaches that maximize net benefits (including potential 
economic, environmental, public health and safety, and other 
advantages; distributive impacts; and equity). The agency believes that 
this final rule is consistent with the regulatory philosophy and 
principles identified in the Executive Order. In addition, the final 
rule is not a significant regulatory action as defined by the Executive 
Order and so is not subject to review under the Executive Order.
    The Regulatory Flexibility Act requires agencies to analyze 
regulatory options that would minimize any significant impact of a rule 
on small entities. The entire cost of this fee increase would be 
approximately $450,000 per year and would be distributed among 
approximately 30 companies who would pay an increased fee that is 
proportional to the number of pounds of color that they certify. 
Because the great majority of these costs will be borne by a few firms 
that have a dominant share of the market, the agency certifies that the 
final rule will not have a significant economic impact on a substantial 
number of small entities. Therefore, under the Regulatory Flexibility 
Act, no further analysis is required.

IV. Environmental Impact

    The agency has determined under 21 CFR 25.24 (a)(8) that this 
action is of a type that does not individually or cumulatively have a 
significant effect on the human environment. Therefore, neither an 
environmental assessment nor an environmental impact statement is 
required.

List of Subjects in 21 CFR Part 80

    Color additives, Cosmetics, Drugs, Reporting and recordkeeping 
requirements.
    Therefore, under the Federal Food, Drug, and Cosmetic Act and under 
authority delegated to the Commissioner of Foods and Drugs, the interim 
rule published in the Federal Register of November 29, 1994 (59 FR 
60898) is confirmed with the following changes to 21 CFR part 80:

PART 80--COLOR ADDITIVE CERTIFICATION

    1. The authority citation for 21 CFR part 80 continues to read as 
follows:

    Authority: Secs. 701, 721 of the Federal Food, Drug, and 
Cosmetic Act (21 U.S.C. 371, 379e).


Sec. 80.10  [Amended]

    2. Section 80.10 Fees for certification services is amended by 
removing paragraph (c) and by redesignating paragraphs (d), (e), and 
(f) as paragraphs (c), (d), and (e), respectively.

    Dated: January 25, 1996.
William K. Hubbard,
Associate Commissioner for Policy Coordination.
[FR Doc. 96-1977 Filed 1-31-96; 8:45 am]
BILLING CODE 4160-01-F