[Federal Register Volume 62, Number 250 (Wednesday, December 31, 1997)]
[Proposed Rules]
[Pages 68232-68233]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-34095]


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 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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  Federal Register / Vol. 62, No. 250 / Wednesday, December 31, 1997 / 
Proposed Rules  

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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 54

[No. LS-96-006]
RIN 0581-AB44


Changes in Fees for Federal Meat Grading and Certification 
Services

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: The Agricultural Marketing Service (AMS) proposes revising the 
hourly fee rates for voluntary Federal meat grading and certification 
services. The hourly fees would be adjusted by this proposed rule to 
reflect the increased cost of providing service, and ensure that the 
Federal meat grading program is operated on a financially self-
supporting basis as required by law.

DATES: Comments must be received on or before March 2, 1998.

ADDRESSES: Written comments may be mailed to Larry R. Meadows, Chief; 
USDA, AMS, LS, MGC; STOP 0248, Room 2628-S; 1400 Independence Avenue, 
SW.; Washington, DC 20250-0248. (For further information regarding 
comments, see ``Comments'' under SUPPLEMENTARY INFORMATION.)

FOR FURTHER INFORMATION CONTACT: Larry R. Meadows, Chief, Meat Grading 
and Certification (MGC) Branch, 202-720-1246.

SUPPLEMENTARY INFORMATION:

Regulatory Impact Analysis

    This proposed rule was reviewed under the USDA procedures 
established to implement Executive Order 12866, and was determined to 
be not significant. Therefore, it has not been reviewed by the Office 
of Management and Budget.

Effect on Small Entities

    This action was reviewed under the Regulatory Flexibility Act (Pub. 
L. 96-354, 5 U.S.C. 601 et seq.), wherein the Administrator of AMS 
determined that this proposed rule will not have a significant economic 
impact on a substantial number of small entities. The proposed hourly 
rate increase is necessary to recover the costs of providing voluntary 
Federal meat grading and certification services and for the program to 
continue serving the industry. To forestall a rate increase while 
maintaining operating efficiency, the program has significantly 
increased the use of automated information management technologies and 
decreased the number of support personnel and field offices. These 
cost-saving measures have not provided the margin necessary to operate 
the program. Since 1993, program costs have increased by approximately 
$7,620,000 or an average of $1,905,000 per year, and the programs 
required capital reserves are decreasing.
    The program is required to keep at least 4 months of operating 
reserve. If the reserves drop to 4 months, the program must cut 
services. To avoid an interruption in services to our customers, the 
program must maintain more than the minimum reserve. At the beginning 
of fiscal year (FY) 1997, the program had 7.7 months of operating 
reserve. At the end of FY 1997, the program had only 7.23 months of 
operating reserve. Assuming that the rate increase were to take effect 
in April 1998, the capital reserve is projected to fall to 5.87 months 
by the end of FY 98.
    In FY 1997, the unit cost of program services (revenue/total pounds 
graded and certified) was approximately $0.00055 per pound. In FY 1998, 
including the proposed hourly rate increase, program services are 
projected to cost only $0.000617 per pound or $0.000149 per pound less 
than the $0.000766 per pound program services cost in FY 1993.

Paperwork Reduction Act

    The provisions of the Paperwork Reduction Act do not apply to this 
rulemaking as it does not require the collection of any information or 
data.

Comments

    Interested persons are invited to submit written comments 
concerning this proposed rule. Comments must be sent in duplicate to 
the Washington, D.C., Office, MGC Branch, and should bear a reference 
to the date and page number of this issue of the Federal Register. 
Comments submitted in reference to this document will be made available 
for public inspection during regular business hours.

Background

    The Secretary of Agriculture is authorized by the Agricultural 
Marketing Act (AMA) of 1946, as amended, 7 U.S.C. 1621 et seq., to 
provide voluntary Federal meat grading and certification services to 
facilitate the orderly marketing of meat and meat products and to 
enable consumers to obtain the quality of meat they desire. The AMA 
also provides for the collection of fees from users of Federal meat 
grading and certification services that are approximately equal to the 
cost of providing these services. The hourly fees for service are 
established by equitably distributing the projected annual program 
operating costs over the estimated hours of service--revenue hours--
provided to users of the service. Program operating costs include 
salaries and fringe benefits of meat graders, supervision, travel, 
training, and all administrative costs of operating the program. 
Employee salaries and benefits account for approximately 80 percent of 
the total budget. Revenue hours include base hours, premium hours, and 
service performed on Federal legal holidays. As program operating costs 
change, the hourly fees must be adjusted to enable the program to 
remain financially self-supporting as required by law.
    This proposed fee increase, the first since 1993, is necessary to 
offset increased program operating costs resulting from: (1) the 
congressionally-mandated, governmentwide salary increases for 1995, 
1996, and 1997, (2) inflation of nonsalary operating costs since 1993, 
and (3) accumulated increases in CONUS per diem rates for the 4-year 
period from 1994 to 1997. Together, these cost increases total an 
estimated $7,620,000 since 1993.
    Since the last fee increase, the MGC Branch has continued to 
develop more efficient grading and certification procedures and 
services. At the same time, applicants for service have become more 
efficient in their production techniques. These two factors working in 
combination have resulted in the MGC Branch grading and certifying 
larger volumes of products and charging fewer revenue hours. 
Accordingly,

[[Page 68233]]

fewer revenue dollars are available to offset increases in operating 
expenses. In FY 1993, MGC Branch employees graded or certified 
23,445,219,703 pounds of meat at an average of 49,902 pounds per 
revenue hour. In FY 1997, MGC Branch employees graded or certified 
33,029,179,286 pounds of meat at an average of 73,699 pounds per 
revenue hour. While the average number of pounds graded and certified 
per hour have increased, the total number of revenue hours generated by 
Branch employees decreased from 469,819 in FY 1993 to 448,162 in FY 
1997. In FY 1997, the program had a net operating loss of $737,000. If 
revenues remain constant and costs continue to increase, program 
operating costs are projected to exceed total revenue by $1,519,000 in 
FY 1998 and $2,124,000 in FY 1999.
    Since 1993, in an effort to control overhead costs, the MGC Branch 
has closed three field offices, reduced mid-level supervisory staff by 
43 percent, and reduced the number of support staff by 29 percent. At 
the same time, the MGC Branch has become more reliant on automated 
information management systems for data collection and dissemination, 
account billing, and disbursements of employee entitlements. The 
reduction of field offices, supervisory staff, and support personnel 
and the increased reliance on automated systems enabled the MGC Branch 
to absorb increased operating costs in 1994, 1995, 1996, and 1997.
    Despite the cost reduction efforts, the decrease in revenue hours 
plus the increase in salaries, nonsalary operating costs, and CONUS per 
diem rates have already resulted in a net operating loss for FY 1997, 
and will result in a net operating loss for FY 1998. Such operating 
deficits can only be balanced by adjusting the hourly fee rate charged 
to users of the service. Any further reduction in personnel, services, 
or management infrastructure beyond those already implemented would 
have a detrimental effect on the program's ability to provide meat 
grading and certification services and support the accurate and uniform 
application of such services.
    In view of these considerations, the Agency proposes to increase 
the base hourly rate commitment applicants pay for voluntary Federal 
meat grading and certification services from $36.60 to $39.80. A 
commitment applicant is a user of the service who agrees, by commitment 
or agreement memorandum, to use meat grading and certification services 
for 8 consecutive hours per day, Monday through Friday, between the 
hours of 6 a.m. and 6 p.m., excluding legal holidays. The base hourly 
rate noncommitment applicants would pay for voluntary Federal meat 
grading and certification services would increase from $39.00 to 
$42.20, and would be charged to applicants who utilize the service for 
8 consecutive hours or less per day, Monday through Friday, between the 
hours of 6 a.m. and 6 p.m., excluding legal holidays. The premium 
hourly rate for all applicants would increase from $44.60 to $47.80, 
and would be charged to users of the service for the hours worked in 
excess of 8 hours per day between the hours of 6 a.m. and 6 p.m.; for 
hours worked between 6 p.m. and 6 a.m., Monday through Friday; and for 
any time worked on Saturday and Sunday, except on legal holidays. The 
holiday rate for all applicants would increase from $73.20 to $79.60, 
and would be charged to users of the service for all hours worked on 
legal holidays.

List of Subjects in 7 CFR Part 54

    Food grades and standards, Food labeling, Meat and meat products.

    For the reasons set forth in the preamble, 7 CFR part 54 is amended 
as follows:

PART 54--MEATS, PREPARED MEATS, AND MEAT PRODUCTS (GRADING, 
CERTIFICATION, AND STANDARDS)

    1. The authority citation for part 54 continues to read as follows:

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


Sec. 54.27  [Amended]

    2. In Sec. 54.27, paragraph (a), ``$39.00'' is removed and 
``$42.20'' is added in its place, ``$44.60'' is removed and ``$47.80'' 
is added in its place, ``$73.20'' is removed ``$79.60'' is added in its 
place, and in paragraph (b), ``$36.60'' is removed and ``$39.80'' is 
added in its place, ``$44.60'' is removed and ``$47.80'' is added in 
its place, and ``$73.20'' is removed and ``$79.60'' is added in its 
place.
Barry L. Carpenter,
Deputy Administrator, Livestock and Seed Program.
[FR Doc. 97-34095 Filed 12-30-97; 8:45 am]
BILLING CODE 3410-02-P