[Federal Register Volume 62, Number 71 (Monday, April 14, 1997)]
[Rules and Regulations]
[Pages 18019-18021]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-9478]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Parts 56 and 70

[Docket No. PY-97-001]


Egg, Poultry, and Rabbit Grading Increase in Fees and Charges

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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

SUMMARY: The Agricultural Marketing Service (AMS) is increasing the 
fees and charges for Federal voluntary egg, poultry, and rabbit 
grading. These fees and charges are increased to cover the increase in 
salaries of Federal employees, salary increases of State employees 
cooperatively utilized in administering the programs, and other 
increased Agency costs.

EFFECTIVE DATE: May 1, 1997.

FOR FURTHER INFORMATION CONTACT: Douglas C. Bailey, Chief, 
Standardization Branch, (202) 720-3506.

SUPPLEMENTARY INFORMATION: This rule has been determined not-
significant for purposes of Executive Order 12866 and has not been 
reviewed by the Office of Management and Budget (OMB).
    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This action is not intended to have retroactive effect. 
This rule will not preempt any State or local laws, regulations, or 
policies, unless they present an irreconcilable conflict with this 
rule. There are no administrative procedures which must be exhausted 
prior to any judicial challenge to the provisions of this rule.
    Pursuant to the requirements set forth in the Regulatory 
Flexibility Act (RFA), the AMS has considered the economic impact of 
this action on small entities.
    There are more than 400 users of the Poultry Division's grading 
services. Many of these users are small entities under the criteria 
established by the Small Business Administration (13 CFR 121.601). This 
rule raises the fees charged to all businesses for voluntary grading 
services for eggs, poultry, and rabbits. The AMS estimates that overall 
this rule will yield an additional $1.2 million during fiscal year (FY) 
1998. Without the fee increase, anticipated revenue will not cover 
program costs and projected FY 98 revenues for grading services are 
$21.7 million with costs projected at $23.1 million. Trust fund 
balances would be below appropriate levels. With a fee increase, 
projected FY 98 revenues are $22.9 million with costs projected at 
$23.1 million. The hourly resident rate will increase by approximately 
5.5 percent while the hourly nonresident rate for grading service will 
increase by approximately 15.8 percent. The costs to

[[Page 18020]]

entities will be proportional to their use of service, so that costs 
are shared equitably by all users. Furthermore, entities are under no 
obligation to use these grading services.
    The AMS has certified that this action will not have a significant 
impact on a substantial number of small entities, as defined in the RFA 
(5 U.S.C. 601).
    The information collection requirements that appear in the sections 
amended by this rule have been previously approved by OMB and assigned 
OMB Control Numbers under the Paperwork Reduction Act of 1980 as 
follows: Sec. 56.52(a)(4)--No. 0581-0128; and Sec. 70.77(a)(4)--No. 
0581-0127.

Background

    The Agricultural Marketing Act (AMA) of 1946 authorizes official 
grading and certification on a user-fee basis of eggs, poultry, and 
rabbits. The AMA provides that reasonable fees be collected from the 
user of the program services to cover, as nearly as practicable, the 
costs of services rendered. AMS regularly reviews these programs to 
determine if fees are adequate and if costs are reasonable. This rule 
will amend the schedule for fees and charges for grading services 
rendered to the egg, poultry, and rabbit industries to reflect the 
costs currently associated with the program.
    In 1995 the egg products inspection program was transferred to the 
Food Safety and Inspection Service. In order to offset the loss of 
efficiencies and to avoid an increase in user fees for the remaining 
shell egg and poultry grading programs, AMS took several streamlining 
actions in supervisory and support activities. These actions included 
reducing the number of supervisory visits; consolidating and closing 
submanagement offices; consolidating the billing and support functions 
into two regional offices; realigning regional boundaries; and 
substantially reducing the Washington, DC headquarters staff. As a 
result, no fee increase was necessary due to the reorganization. 
However, increased salaries and other costs and a substantial shift 
from resident to nonresident grading services now require an increase 
in fees.
    Employee salaries and benefits are major program costs that account 
for approximately 82 percent of the total operating budget. Materially 
affecting program costs were general and locality salary increases for 
Federal employees which, depending on locality, ranged from 3.09 to 
6.25 percent in January 1995, 2.39 to 2.87 percent in January 1996, and 
2.24 to 4.66 percent in January 1997. Also, from November 1994 through 
September 1997, salaries and fringe benefits of federally licensed 
State employees will have increased by about 7 percent. Further, since 
October 1993, standardization program costs must be recovered from 
grading program user fees. As a result, the hourly resident rate for 
grading services will increase by approximately 5.5 percent. The hourly 
resident rate covers graders' salaries, fringe benefits, and related 
costs.
    Another factor affecting the current fee structure is the shift 
from resident to nonresident grading services. Historically, the 
majority of shell egg and poultry grading has been done on a resident 
basis according to the official U.S. quality grade standards. Today, 
however, a growing volume of shell eggs and poultry is being traded 
according to product-specific purchase specifications where USDA 
certification is required, and this work is done increasingly on a 
nonresident fee basis. This shift has increased the proportion of 
overhead costs necessary to administer the nonresident services. As a 
result, users of nonresident services are not supporting their share of 
the program's overhead costs under the present fee structure. For this 
reason, the hourly nonresident rate for grading service will increase 
by approximately 15.8 percent.
    A recent review of the current fee schedule, effective since 
November 1, 1994, revealed that anticipated revenue will not adequately 
cover increasing program costs. Without a fee increase, projected FY 98 
revenues for grading services are $21.7 million with costs projected at 
$23.1 million, and trust fund balances would be below appropriate 
levels. With a fee increase, projected FY 98 revenues are $22.9 million 
with costs projected at $23.1 million.

------------------------------------------------------------------------
                          Service                              Revised  
------------------------------------------------------------------------
          Resident shell egg and poultry grading                        
                                                                        
Administrative charges (supervision, other overhead and                 
 administrative costs) assessed on the volume of product                
 handled:                                                               
    Per pound of poultry..................................        .00033
    Per 30-dozen case of shell eggs.......................        .038  
    Minimum per month.....................................     225      
    Maximum per month.....................................   2,250      
                                                                        
  Nonresident shell egg and poultry grading and Resident                
                      rabbit grading                                    
                                                                        
Administrative charge based on 25% of grader's salary,                  
 minimum per month........................................     225      
                                                                        
    Nonresident fee basis poultry, shell egg and rabbit                 
                          grading                                       
                                                                        
Regular time, rate per hour...............................      38.96   
Saturdays, Sundays, and legal holidays, rate per hour.....      43.24   
                                                                        
      Appeal grading and Review of grader's decision                    
                                                                        
Rate per hour.............................................      30.56   
Inauguration of resident grading service..................     310      
------------------------------------------------------------------------

Comments

    Based on an analysis of costs to provide these services, a proposed 
rule to increase the fees for these services was published in the 
Federal Register (62 FR 4662) on January 31, 1997. Comments on the 
proposed rule were solicited from interested parties until March 3, 
1997.
    During the 30-day comment period, the Agency received five comments 
in opposition to the proposal; three from egg producers, one from a 
national egg industry organization, and one from a poultry processor. 
They expressed a general concern about the cost of the grading program. 
Several commentors encouraged AMS to find and implement additional 
cost-saving measures in lieu of a fee increase. Although AMS has 
implemented significant cost-saving actions over the past several years 
as described above and remains committed to controlling program costs 
wherever possible, implementation of the proposed fee increases remains 
necessary to ensure the financial stability of the grading program.
    Pursuant to 5 U.S.C. 553, it is found and determined that good 
cause exists for not postponing the effective date of the action until 
30 days after publication in the Federal Register, because the proposed 
fees need to be implemented on an expedited basis in order to avoid 
financial losses in the grading program this fiscal year. Also, the 
effective date of the fee increase will be set to coincide with the 
next billing cycle beginning on May 1, 1997.

List of Subjects

7 CFR Part 56

    Eggs and egg products, Food grades and standards, Food labeling, 
Reporting and recordkeeping requirements.

7 CFR Part 70

    Food grades and standards, Food labeling, Poultry and poultry 
products, Rabbits and rabbit products, Reporting and recordkeeping 
requirements.


[[Page 18021]]


    For reasons set forth in the preamble, title 7, Code of Federal 
Regulations, parts 56 and 70 is amended as follows:

PART 56--GRADING OF SHELL EGGS

    1. The authority citation for part 56 continues to read as follows:

    Authority: 7 U.S.C. 1621-1627.

    2. Section 56.46 is amended by revising paragraphs (b) and (c) to 
read as follows:


Sec. 56.46  On a fee basis.

* * * * *
    (b) Fees for grading services will be based on the time required to 
perform the services. The hourly charge shall be $38.96 and shall 
include the time actually required to perform the grading, waiting 
time, travel time, and any clerical costs involved in issuing a 
certificate.
    (c) Grading services rendered on Saturdays, Sundays, or legal 
holidays shall be charged for at the rate of $43.24 per hour. 
Information on legal holidays is available from the Supervisor.
    3. Section 56.47 is revised to read as follows:


Sec. 56.47  Fees for appeal grading or review of a grader's decision.

    The cost of an appeal grading or review of a grader's decision 
shall be borne by the appellant at an hourly rate of $30.56 for the 
time spent in performing the appeal and travel time to and from the 
site of the appeal, plus any additional expenses. If the appeal grading 
or review of a grader's decision discloses that a material error was 
made in the original determination, no fee or expenses will be charged.
    4. Section 56.52 is amended by revising paragraph (a)(4) to read as 
follows:


Sec. 56.52  Continuous grading performed on resident basis.

* * * * *
    (a) * * *
    (4) An administrative service charge based upon the aggregate 
number of 30-dozen cases of all shell eggs handled in the plant per 
billing period multiplied by $0.038, except that the minimum charge per 
billing period shall be $225 and the maximum charge shall be $2,250. 
The minimum charge also applies where an approved application is in 
effect and no product is handled.
* * * * *
    5. Section 56.54 is amended by revising paragraph (a)(2) to read as 
follows:


Sec. 56.54  Charges for continuous grading performed on a nonresident 
basis.

* * * * *
    (a) * * *
    (2) An administrative service charge equal to 25 percent of the 
grader's total salary costs. A minimum charge of $225 will be made each 
billing period. The minimum charge also applies where an approved 
application is in effect and no product is handled.
* * * * *

PART 70--VOLUNTARY GRADING OF POULTRY PRODUCTS AND RABBIT PRODUCTS

    6. The authority citation for part 70 continues to read as follows:

    Authority: 7 U.S.C. 1621-1627.

    7. Section 70.71 is amended by revising paragraphs (b) and (c) to 
read as follows:


Sec. 70.71  On a fee basis.

* * * * *
    (b) Fees for grading services will be based on the time required to 
perform such services for class, quality, quantity (weight test), or 
condition, whether ready-to-cook poultry, ready-to-cook rabbits, or 
specified poultry food products are involved. The hourly charge shall 
be $38.96 and shall include the time actually required to perform the 
work, waiting time, travel time, and any clerical costs involved in 
issuing a certificate.
    (c) Grading services rendered on Saturdays, Sundays, or legal 
holidays shall be charged for at the rate of $43.24 per hour. 
Information on legal holidays is available from the Supervisor.
    8. Section 70.72 is revised to read as follows:


Sec. 70.72  Fees for appeal grading, or examination or review of a 
grader's decision.

    The costs of an appeal grading, or examination or review of a 
grader's decision, will be borne by the appellant at an hourly rate of 
$30.56 for the time spent in performing the appeal and travel time to 
and from the site of the appeal, plus any additional expenses. If the 
appeal grading, or examination or review of a grader's decision, 
discloses that a material error was made in the original determination, 
no fee or expenses will be charged.
    9. Section 70.76 is amended by revising paragraph (a)(2) to read as 
follows:


Sec. 70.76  Charges for continuous poultry grading performed on a 
nonresident basis.

* * * * *
    (a) * * *
    (2) An administrative service charge equal to 25 percent of the 
grader's total salary costs. A minimum charge of $225 will be made each 
billing period. The minimum charge also applies where an approved 
application is in effect and no product is handled.
* * * * *
    10. Section 70.77 is amended by revising paragraphs (a)(4) and 
(a)(5) to read as follows:


Sec. 70.77  Charges for continuous poultry or rabbit grading performed 
on a resident basis.

* * * * *
    (a) * * *
    (4) For poultry grading: An administrative service charge based 
upon the aggregate weight of the total volume of all live and ready-to-
cook poultry handled in the plant per billing period computed in 
accordance with the following: Total pounds per billing period 
multiplied by $0.00033, except that the minimum charge per billing 
period shall be $225 and the maximum charge shall be $2,250. The 
minimum charge also applies where an approved application is in effect 
and no product is handled.
    (5) For rabbit grading: An administrative service charge equal to 
25 percent of the grader's total salary costs. A minimum charge of $225 
will be made each billing period. The minimum charge also applies where 
an approved application is in effect and no product is handled.
* * * * *
    Dated: April 7, 1997.
Lon Hatamiya,
Administrator.
[FR Doc. 97-9478 Filed 4-11-97; 8:45 am]
BILLING CODE 3410-02-P