[Federal Register Volume 61, Number 244 (Wednesday, December 18, 1996)]
[Rules and Regulations]
[Pages 66533-66537]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-32080]



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 Rules and Regulations
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  Federal Register / Vol. 61, No. 244 / Wednesday, December 18, 1996 / 
Rules and Regulations  

[[Page 66533]]



DEPARTMENT OF AGRICULTURE

Grain Inspection, Packers and Stockyards Administration

7 CFR Part 868

RIN 0580-AA48


Fees for Commodity Inspection

AGENCY: Grain Inspection, Packers and Stockyards Administration, USDA.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Federal Grain Inspection Service (FGIS), a program of the 
Grain Inspection, Packers and Stockyards Administration (GIPSA), is 
increasing and establishing new fees charged for inspection services 
for commodities, other than rice, performed under the Agricultural 
Marketing Act of 1946 (AMA).
    These revisions are designed to generate revenue sufficient to 
cover, as nearly as practicable, the projected operating costs, 
including related supervisory and administrative costs, for commodity 
inspection services rendered and to maintain an appropriate operating 
reserve.

EFFECTIVE DATE: February 18, 1997.

FOR FURTHER INFORMATION CONTACT: George Wollam, USDA-GIPSA-ART, Room 
0623-South Building, Stop 3649, 1400 Independence Avenue, S.W., 
Washington, D.C., 20250-3649, Telephone (202) 720-0292, or FAX (202) 
720-4628, or E-M[email protected].

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This rule has been determined to be significant for the purposes of 
Executive Order 12866 and, therefore, has been reviewed by the Office 
of Management and Budget. The revisions are designed to generate 
revenue sufficient to recover the operating costs for commodity 
inspection services and to maintain an appropriate operating reserve. 
FGIS is making the following changes: increase the hourly and unit fees 
for commodity inspection services; begin charging actual travel costs 
for airlines, rental cars, etc., and per diem for travel beyond 25 
miles of an official assigned duty location; begin charging for 
sanitation inspections, pre-inspection conferences, and related 
services; establish new hourly fees at time and one-half for service 
provided on Saturdays, Sundays, and Federal holidays; eliminate the 
provisions for entering into a contract for service; and change the fee 
structure for stowage examinations from an hourly rate to a unit fee.
    Fees for commodity inspection services were last increased on June 
28, 1984 (49 FR 26547). For nearly 10 years, the 1984 fee schedule 
sufficiently recovered operating expenses and maintained a minimum 3-
month operating reserve. However, by fiscal year (FY) 95, increased 
operating costs, coupled with reductions in the number of services 
requested, rendered the 1984 fee schedule inadequate for generating 
sufficient revenue to cover operating expenses. The operating reserve, 
which has been funding losses to the commodity inspection program for 
the past 4 years, was drawn down to the minimum 3-month operating 
reserve. Given these conditions, the Administrator of GIPSA determined 
that a fee revision was necessary to meet rising costs and maintain an 
adequate reserve balance.

Executive Order 12998

    This final rule has been reviewed under Executive Order 12998, 
Civil Justice Reform. It is not intended to have a retroactive effect, 
nor will this final rule preempt any State or local laws, regulations, 
or policies unless they present irreconcilable conflict with this rule. 
No administrative procedures must be exhausted prior to any judicial 
challenge to the provisions of this rule.

Regulatory Flexibility Act Certification

    Pursuant to the requirements set forth in the Regulatory 
Flexibility Act (5 U.S.C. 601 et seq.) (RFA), GIPSA has considered the 
economic impact of this action on small entities. The main users of 
GIPSA's official commodity inspection services are under contract from 
the Department of Agriculture. Some of these are small entities under 
the criteria established by the Small Business Administration (13 CFR 
121.601). This rule will revise the fees charged to businesses for 
voluntary commodity inspection services. Even though fees will be 
raised, the increase is small and will not significantly affect these 
entities. These businesses are under no obligation to use the 
inspection services, and any decision on their part to discontinue use 
of the services would not prevent them from marketing their products.
    The final rule reflects fee revisions needed to cover the costs of 
commodity inspection services rendered in accordance with the AMA. 
James R. Baker, Administrator, GIPSA, has certified that this final 
rule will not have a significant economic impact on a substantial 
number of small entities, as defined in the RFA.
    Since FY 90, there has been a 40 percent decrease in the amount of 
commodity inspections requested. The commodity inspection program 
experienced a $1,642,720 loss (revenue $4,011,116 and cost $5,468,059) 
during FY 95. The commodity program's retained earnings are currently 
-$60,383. Further losses are projected if adjustments to the existing 
fee schedule are not made.

Information Collection and Record Keeping Requirements

    In compliance with the Paperwork Reduction Act of 1980 (44 U.S.C. 
35), the previously approved information collection and recordkeeping 
requirements for applications for inspection services, including 
official commodity inspections, have been approved by the Office of 
Management and Budget under control number 0580-0013.

Background

    On July 8, 1996, FGIS proposed in the Federal Register (61 FR 
35687) to revise fees charged for inspection services for commodities, 
other than rice, performed under the AMA: Increase hourly and unit 
fees; charge actual travel and per diem costs; charge for sanitation 
inspections, pre-inspection conferences, and related services; 
establish hourly fees at time and one-half for service provided on 
Saturdays, Sundays, and Federal holidays; eliminate the provisions for 
entering into a contract for service; and change the fee structure

[[Page 66534]]

for stowage examinations from an hourly rate to a unit fee.
    The commodity inspection fees were last amended effective June 28, 
1984 (49 FR 26547). These fees were to cover, as nearly as practicable, 
the operating costs for the program.
    The majority of processed commodity inspections performed under the 
AMA are on purchases made by the Department of Agriculture's Farm 
Service Agency (FSA), formerly the Agricultural Stabilization and 
Conservation Service. Historically, approximately 92 percent of the 
services performed have been for FSA purchases. Defense Personnel 
Support Center (DPSC) inspections account for approximately 2 percent 
of the inspections; the remaining 6 percent are performed under 
nongovernment contracts. Approximately 65 percent of graded commodity 
inspections are for government purchases, and the remaining 35 percent 
are for commercial sales.
    Several actions have caused a general decrease in the number of 
inspections performed for both graded and processed commodities. 
Beginning in FY 92, FSA commodity purchases began to decline as a 
result of the success of a market-oriented farm program that virtually 
eliminated government-owned commodity grain stocks and, in turn, the 
portion of processed commodities derived from these stocks. In 
addition, in FY 94, responsibility for inspecting many products for 
DPSC was transferred from FGIS to the Agricultural Marketing Service.
    Processed commodities comprise approximately 90 percent of the 
program's revenue. In FY 91, FGIS inspected 26,218 lots. By FY 92, the 
number of inspected lots dropped to 24,004; in FY 93, 17,494 lots were 
inspected; and FY 94 saw a slight increase to 19,664. In FY 95, 
however, the total again decreased to 15,065, or a 43 percent reduction 
from the number of lots inspected in FY 91. Corresponding decreases 
have also been experienced for graded commodities.
    Revenue collected in FY 91 totaled $6,562,940 and operating costs 
totaled $5,987,299, for a positive margin of $575,570. Revenue in FY 92 
dropped to $5,158,903 due to the decrease in inspections and resulted 
in a $179,396 loss to the program. Losses were incurred in each of the 
following years: $1,184,602 in FY 93, $764,865 in FY 94, and $1,456,944 
in FY 95. At the same time, FGIS reduced operating costs for the 
program from $5,987,370 in FY 91 to $5,468,059 in FY 95.
    FGIS maintains an operating reserve specifically to cover the cost 
of shutting down the program in case of an emergency. Agency policy is 
to maintain the reserve at a level equal to 3 months of operating 
expenses. In FY 91, the reserve was $4,942,934, which represented 10 
months of operating costs. The loss of $179,396 in FY 92 was covered by 
this reserve.
    In FY 92, FGIS reviewed the program's operating reserve to 
determine if the fund was being maintained at an adequate level. The 
Agency determined that, while the level exceeded the 3-month reserve 
minimum, it would not be prudent to decrease the reserve because of 
anticipated downturns in the number of service requests and the 
consequent need to cover program losses while restructuring the 
program.
    Again in FY 93, the $1,184,602 loss was covered by the reserve, 
which was drawn down to a year-end total of $3,889,429. Even with the 
loss, the fund still represented an 8.5-month reserve. By FY 94, the 
reserve had dropped to $3,173,033, or the equivalent of 7 months' 
operating costs. The losses incurred in FY 95 reduced the margin to 
$1,716,090, which is a 3.2-month reserve and represents the target 
level for the fund.
    In FY 94, FGIS responded to the decline in services requests by 
initiating a field restructuring plan that continued into FY 95. During 
this time period, three field offices and one suboffice that were 
directly involved with providing services were closed and consolidated. 
This eliminated the cost of maintaining a field office and streamlined 
overall operations. On two separate occasions, retirement incentives 
(buyouts) were offered to employees which reduced the staffing levels 
in this program. Other personnel were transferred to field offices and 
redirected to other programs. In FY 91, approximately 103 staff years 
were devoted to this program. By FY 95, the staffing level had been 
reduced by 35 percent to 67 staff years. The FY 95 level of 15,065 
services performed is expected to remain fairly constant in the future. 
Large numbers of service requests, as seen in the late 1980's and early 
1990's, are not forecasted. However, further losses are projected if 
adjustments to the fee schedule are not made.
    Due to reduced and sporadic FSA purchases, efficiencies gained 
through volume inspections have disappeared. Fluctuations in service 
demand have increased, even at locations that routinely requested 
service on a daily basis. These changes have impacted on FGIS' ability 
to maintain qualified staff at some locations and especially those that 
are large distances from a field office. In addition, there has been an 
increase in the proportion of inspections requested by facilities that 
may need service only one or two weeks per year. Many of these 
locations are far from field offices. The result is a great deal of 
long-distance travel from field offices to remote locations for one or 
two week jobs. Such travel has increased operating costs and, in some 
instances, has offset the savings gained through the restructuring.
    The 1984 fee schedule was designed to recover all costs associated 
with performing commodity inspection service, including overtime, 
travel, per diem, and other related services. For nearly 10 years, the 
1984 fee schedule generated sufficient revenue to cover operating 
expenses. This was due, in large part, to continuously improved 
efficiencies in service delivery and strong market demand for 
inspection services. Although additional cost saving measures were 
implemented during FYs 94 and 95, operating expenses and service demand 
have reached a level at which the 1984 fee schedule no longer generates 
sufficient revenue to cover costs of providing service.
    Since FY 90, there has been a 40 percent decrease in the amount of 
commodity inspections requested. The commodity inspection program 
experienced a $1,681,261 loss (revenue $4,011,116 and cost $5,468,059) 
during FY 95. During FY 96, the commodity program experienced a 
$1,741,644 loss (revenue $3,458,751 and cost $5,200,395) resulting in 
an end-of-year operating reserve of -$60,383, and forcing GIPSA to 
borrow funds from other fee programs.
    Based on this information, GIPSA has determined that, under the 
proposed fee structure, it will be unable to reach a 3-month operating 
reserve until FY 99. Once the 3-month reserve is attained, fees will be 
adjusted at least once every 2 years, either upward or downward as 
necessary, to keep the program operating on a financially sound basis.

Comment Review

    FGIS received two comments during the 30-day comment period. One 
commentor agreed with all proposed increases of existing fees and the 
establishment of new fees with the exception of charging for travel at 
actual cost to the Agency. The commentor urged FGIS to consider 
implementing a more balanced rate structure that will allocate travel 
costs on a more equitable basis between nearby and remote facilities. 
FGIS must recover all costs associated with the inspection process in 
order to be able to provide quality

[[Page 66535]]

inspection services. There will always be applicants that are far 
removed from an office no matter how many offices are maintained. FGIS 
can contemplate no other more equitable rate structure than recovery of 
actual travel costs in the manner it charges for travel necessary for 
official inspections.
    The other commentor dealt exclusively with the proposed change in 
payment for stowage examinations from an hourly rate to a unit fee. 
They suggested that FGIS increase its hourly rate to recover its cost 
for this service. They suggest that implementing a unit fee will result 
in poorer service and higher costs that will negatively impact the 
Nation's farmers and the shipping industry transporting those 
commodities, and reduce the Nation's role in foreign trade with respect 
to grain and other agricultural commodities. FGIS does not agree that 
implementation of a unit fee will result in poorer service; in fact, it 
should have the opposite effect. It is true that some applicants for 
stowage examinations will see significant increases over currently 
charged fees, the current rate structure was not recovering costs for 
stowage examinations and, therefore, needed revision.

Final Action

    Section 203 of the AMA (7 U.S.C. 1622) provides for the 
establishment and collection of fees that are reasonable and, as nearly 
as practicable, cover the costs of the services rendered. In accordance 
with this section, FGIS makes the following changes to maintain the 
current commodity inspection program: (1) increase hourly and unit 
fees; (2) charge actual travel and per diem costs; (3) charge for 
sanitation inspections, pre-inspection conferences, and related 
services; (4) establish hourly fees at time and one-half for service 
provided on Saturdays, Sundays, and Federal holidays; (5) eliminate the 
provisions for entering into a contract for service; and (6) change the 
fee structure for stowage examinations from an hourly rate to a unit 
fee.

1. Hourly Rates

    The new hourly rates are divided into two categories: Regular 
Workday (Monday through Friday) and Nonregular Workday (Saturday, 
Sunday, and Holiday). Section 868.90, Table 1 and 3, currently define 
Saturday as a Regular Workday. The revised Table 1 defines a Nonregular 
Workday as a Saturday, Sunday, and Holiday, and the hourly rate 
reflects time and one-half paid to employees. In addition, the two 
separate hourly rates for Regular and Nonregular Workdays contained in 
Tables 1 and 3 are combined into one set of hourly rates in a revised 
Table 1 that covers all services.
    Section 868.90, Tables 1 and 3, currently provide for reduced 
hourly fees for applicants who elect to enter into a contract with 
FGIS. No applicants have used this provision since it was introduced in 
1984. Because the current trends of decreasing service requests and 
increasing demand fluctuations indicate less likelihood for applicants 
to use this provision in the future, it is eliminated.
    The rate for a Regular Workday will increase to $33.00 and a 
Nonregular Workday will increase to $42.80. These new hourly fees cover 
FGIS' administrative and supervisory costs for the performance of 
official services. These costs include personnel compensation and 
benefits, rent, communications, utilities, contractual services, 
supplies, and equipment.

2. Unit Rates

    Section 868.90, Table 2, currently provides unit fees for the 
grading of beans, peas, lentils, hops, and other nongraded, 
nonprocessed commodities. These rates are increased and the current 
Table 2 is deleted and combined with proposed Table 1. The new unit 
rates cover FGIS' administrative and supervisory costs for performing 
the official service, including costs for personnel compensation and 
benefits, rent, communication, utilities, contractual services, 
supplies, and equipment.

3. Travel and Per Diem

    FGIS is making changes to Sec. 868.92 of the regulations concerning 
the application of fees covered in Table 1. Specifically, service, as 
provided under Sec. 868.90, Table 1, will include service provided 
within 25 miles of the employee's assigned duty point. Travel, per 
diem, and other related costs will be assessed for providing service 
beyond the 25-mile limit. Section 868.91, Table 1, Fees for certain 
Federal rice inspection services, remains unchanged; travel, per diem, 
and other related costs continue to be included in the hourly rate.

4. Services Other Than Inspections

    FGIS is changing the fee structure for stowage examinations from an 
hourly fee that recovers all costs to a service-specific fee structure 
currently funded by the hourly rate. The service-specific fee will be a 
unit fee and applies only to stowage examinations.
    FGIS is revising Table 1, Footnote 1 to include provisions for 
charging for sanitation examinations, pre-inspection conferences, and 
other related services for which FGIS does not currently charge.

5. Fees for Laboratory Testing Services

    Fees for Laboratory Test Services, Table 4, Fees for Official 
Laboratory Test Services Performed at the FGIS Commodity Testing 
Laboratory at Beltsville, Maryland, for Processed Agricultural 
Products, is revised to read: Table 2--Commodity Testing Laboratory, 
Kansas City, Missouri. Also, this final rule makes a conforming change 
to delete reference to ``noncontract'' hourly rates from Footnote 2.

List of Subjects in 7 CFR Part 868

    Administrative practice and procedure, Agricultural commodities.

    For reasons set out in the preamble, 7 CFR part 868 is amended as 
follows:

PART 868--GENERAL REGULATIONS AND STANDARDS FOR CERTAIN 
AGRICULTURAL COMMODITIES

    1. The authority citation for part 868 continues to read as 
follows:

    Authority: Secs. 202-208, 60 Stat. 1087, as amended (7 U.S.C. 
1621 et. seq.)

    2. Section 868.90 is revised to read as follows:


Sec. 868.90  Fees for certain Federal inspection services.

    (a) The fees shown in Table 1 apply to Federal Commodity Inspection 
Services specified below.

[[Page 66536]]



                                         Table 1.--Hourly Rates \1\ \3\                                         
                              [Fees for Inspection of Commodities Other Than Rice]                              
----------------------------------------------------------------------------------------------------------------
                                                                                                                
----------------------------------------------------------------------------------------------------------------
Hourly Rates (per service representative):                                                                      
  Monday to Friday --$33.00                                                                                     
  Saturday, Sunday, and Holidays--$42.80                                                                        
Miscellaneous Processed Commodities \2\:                                                                        
  (1) Additional Tests (cost per test, assessed in                                                              
   addition to the hourly rate):                                                                                
      (i) Aflatoxin Test (Thin Layer Chromatography)...  $51.40                                                 
      (ii) Falling Number..............................  $12.00                                                 
      (iii) Aflatoxin Test Kit.........................  $7.50                                                  
Graded Commodities (Beans, Peas, Lentils, Hops, and                                                             
 Pulses):                                                                                                       
  (1) Additional Tests--Unit Rates (Beans, Peas,                                                                
   Lentils):                                                                                                    
      (i) Field run (per lot or sample)................  $22.70                                                 
      (ii) Other than field run (per lot or sample)....  $13.50                                                 
      (iii) Factor analysis (per factor)...............  $5.50                                                  
  (2) Additional Tests--Unit Rates (Hops):                                                                      
      (i) Lot or sample (per lot or sample)............  $29.00                                                 
  (3) Additional Tests--Unit Rates (Nongraded                                                                   
   Nonprocessed Commodities):                                                                                   
      (i) Factor analysis (per factor).................  $5.50                                                  
  (4) Stowage examination (service-on- request) \4\                                                             
      (i) Ship (per stowage space).....................  Sec.  50.00 (minimum $250 per ship)                    
      (ii) Subsequent ship examinations (same as         (minimum $150 per ship)                                
       original).                                                                                               
      (iii) Barge (per examination)....................  $40.00                                                 
      (iv) All other carriers (per examination)........  $15.00                                                 
----------------------------------------------------------------------------------------------------------------
\1\ Fees for original commodity inspection and appeal inspection services include, but are not limited to,      
  sampling, grading, weighing, stowage examinations, pre-inspection conferences, sanitation inspections, and    
  other services requested by the applicant and that are performed within 25 miles of the field office. Travel  
  and related expenses (commercial transportation costs, mileage, and per diem) will be assessed in addition to 
  the hourly rate for service beyond the 25-mile limit. Refer to Sec.  868.92, Explanation of service fees and  
  additional fees, for all other service fees except travel and per diem.                                       
\2\ When performed at a location other than the Commodity Testing Laboratory.                                   
\3\ Faxed and extra copies of certificates will be charged at $1.50 per copy.                                   
\4\ If performed outside of normal business, 1\1/2\ times the applicable unit fee will be charged.              

    (b) In addition to the fees, if any, for sampling or other 
requested service, a fee will be assessed for each laboratory test 
(original, retest, or appeal) listed in Table 2 of this section.
    (c) If a requested test is to be reported on a specified moisture 
basis, a fee for a moisture test will also be assessed.
    (d) Laboratory tests referenced in Table 2 of this section will be 
charged at the applicable laboratory fee when performed at field 
locations other than at the applicant's facility.

             Table 2.--Fees for Laboratory Test Services \1\            
------------------------------------------------------------------------
                        Laboratory tests                           Fees 
------------------------------------------------------------------------
(1) Alpha monoglycerides.......................................   $18.00
(2) Aflatoxin test (other than TLC or Minicolumn method).......    22.50
(3) Aflatoxin (TLC)............................................    48.00
(4) Aflatoxin (Minicolumn method)..............................    25.00
(5) Appearance & odor..........................................     3.00
(6) Ash........................................................     8.50
(7) Bacteria count.............................................    10.00
(8) Baking test (cookies)......................................    28.00
(9) Bostwick (cooked)..........................................    12.60
(10) Bostwick (uncooked/cook test/dispersibility)..............     6.50
(11) Brix......................................................     8.00
(12) Calcium...................................................    12.50
(13) Carotenoid color..........................................    12.50
(14) Cold test (oil)...........................................    10.00
(15) Color test (syrups).......................................     6.50
(16) Cooking test (other than corn soy blend)..................     7.00
(17) Crude fat.................................................    10.00
(18) Crude fiber...............................................    13.00
(19) Dough handling (baking)...................................     8.50
(20) E. coli...................................................    19.00
(21) Falling number............................................    12.00
(22) Fat (acid hydrolysis).....................................    14.00
(23) Fat stability (A.O.M.)....................................    27.00
(24) Flash point (open & close cup)............................    14.00
(25) Free fatty acid...........................................    12.00
(26) Hydrogen ion activity (ph)................................     9.50
(27) Iron enrichment...........................................    15.00
(28) Iodine number/value.......................................     9.50
(29) Linolenic acid (fatty acid profile).......................    50.00
(30) Lipid phosphorous.........................................    47.00
(31) Livibond color............................................    10.00
(32) Margarine (nonfat solids).................................    23.60
(33) Moisture..................................................     6.00
(34) Moisture average (crackers)...............................     4.00
(35) Moisture & volatile matter................................     8.50
(36) Performance test (prepared bakery mix)....................    32.00
(37) Peroxide value............................................    13.50
(38) Phosphorus................................................    14.00
(39) Popcorn kernels (total defects)...........................    19.00
(40) Popping ratio/value popcorn...............................    19.00
(41) Potassium bromate.........................................    20.00
(42) Protein...................................................     7.50
(43) Rope spore count..........................................    31.50
(44) Salmonella................................................    40.00
(45) Salt or sodium content....................................    12.50
(46) Sanitation (filth light)..................................    24.00
(47) Sieve test................................................     5.00
(48) Smoke point...............................................    22.00
(49) Solid fat index...........................................    85.00
(50) Specific volume (bread)...................................    21.80
(51) Staphylococcus aureus.....................................    24.50
(52) Texture...................................................     6.50
(53) Tilletia controversa kuhn (TCK) (Qualitative).............    25.20
(54) Tilletia controversa kuhn (TCK) (Quantitative)............    76.00
(55) Unsaponifiable matter.....................................    25.00
(56) Urease activity...........................................    12.50
(57) Visual exam (hops pellet).................................     7.50
(58) Visual exam (insoluable impurities oils & shortenings)....     5.00
(59) Visual exam (pasta).......................................    10.50
(60) Visual exam (processed grain products)....................    12.00
(61) Visual exam (total foreign material other than cereal              
 grains).......................................................     6.50
(62) Vitamin enrichment........................................     7.00
(63) Vomitoxin (TLC)...........................................    40.00
(64) Vomitoxin (Qualitative)...................................    30.00
(65) Vomitoxin (Quantitative)..................................    40.00
(66) Water activity............................................    20.00
(67) Wiley melting point.......................................    12.50
(68) Other laboratory tests....................................      \2\
------------------------------------------------------------------------
\1\ When laboratory test service is provided for GIPSA by a private     
  laboratory, the applicant will be assessed a fee which, as nearly as  
  practicable, covers the costs to GIPSA for the service provided.      
\2\ Fees for other laboratory tests not referenced in this table will be
  based on the applicable hourly rate listed in Table 1 of this section.

    3. Section 868.92(a)(2) is revised to read as follows:

[[Page 66537]]

Sec. 868.92  Explanation of service fees and additional fees.

    (a) * * *
    (2) The cost of per diem, subsistence, mileage, or commercial 
transportation to perform the service for rice inspection only in 
Sec. 868.91, Table 1. See Sec. 868.90, Table 1, footnote 1, for fees 
for inspection of commodities other than rice.
* * * * *
    Dated: December 13, 1996.
Michael V. Dunn,
Assistant Secretary, Marketing and Regulatory Programs.
[FR Doc. 96-32080 Filed 12-17-96; 8:45 am]
BILLING CODE 3410-EN-P