[Federal Register Volume 63, Number 61 (Tuesday, March 31, 1998)]
[Rules and Regulations]
[Pages 15274-15278]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-8391]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 51

[Docket Number FV-97-302]
RIN 0581-AB51


Fees for Destination Market Inspections of Fresh Fruits, 
Vegetables and Other Products

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This rule revises the regulations governing the inspection and 
certification for fresh fruits, vegetables and other products by 
increasing by approximately 10 percent the fees charged for the 
inspection of these products at destination markets. These revisions 
are necessary in order to recover, as nearly as practicable, the costs 
of performing inspection services at destination markets under the 
Agricultural Marketing Act of 1946. The fees charged to persons 
required to have inspections on imported commodities in accordance with 
the Agricultural Marketing Agreement Act of 1937 and for imported 
peanuts under the Agricultural Act of 1949 are also affected. This rule 
also revises the regulations with regard to the disposition of 
inspection certificates to require that one copy of the certificate be 
delivered or mailed to the shipper of the inspected product.

EFFECTIVE DATE: April 6, 1998.


FOR FURTHER INFORMATION CONTACT: Rob Huttenlocker, Fresh Products 
Branch, Fruit and Vegetable Programs, Agricultural Marketing Service, 
U.S. Department of Agriculture, PO Box 96456, Room 2049 South Building, 
Washington, DC 20090-6456, (202) 720-0297.

SUPPLEMENTARY INFORMATION:

Executive Order 12866 and Regulatory Flexibility Act

    This rule has been reviewed by the Office of Management and Budget 
(OMB) and has been determined not significant for purposes of Executive 
Order 12866.
    Also, pursuant to the requirements set forth in the Regulatory 
Flexibility Act (RFA), the Agricultural Marketing Service (AMS) has 
considered the economic impact of this action on small entities.
    AMS regularly reviews its user-fee financed programs to determine 
if the fees are adequate. The Fresh Products Branch (FPB) of the Fruit 
and Vegetable Programs, AMS, has and will continue to seek out cost 
saving opportunities and implement appropriate changes to reduce its 
costs. Such actions can provide alternatives to fee increases. However, 
even with these efforts, the existing fee schedule will not generate 
sufficient revenues to cover program costs while maintaining an 
adequate reserve balance (four months of costs) as called for by Agency 
policy (AMS Directive 408.1). Current revenue projections for 
destination market inspection work during FY 97 are $12.0 million with 
costs projected at $11.9 million and an end-of-year reserve of $3.0 
million. However, FPB's trust fund balance for this program will be 
approximately $1.0 million under the four-month level of approximately 
$4.0 million. Further, FPB's costs of operating the destination market 
program are expected to increase to approximately $12.9 million during 
FY 98 and to approximately $13.2 million in FY 99. These cost increases 
will result from both inflationary increases with regard to current FPB 
operations

[[Page 15275]]

and services and the need to improve or expand current services.
    Employee salaries and benefits are major program costs that account 
for approximately 80 percent of FPB's total operating budget. A general 
and locality salary increase for Federal employees, ranging from 2.30 
to 4.66 percent depending on locality, effective January 1997, 
significantly increased program costs. Another general and locality 
salary increase ranging from 2.44 to 6.52 percent became effective in 
January 1998. In addition, inflation also impacts upon FPB's non-salary 
costs. These increases will increase FPB's costs of operating this 
program by approximately $300,000 per year.
    Additional revenues are also needed to enable FPB to cover the 
costs of improving program integrity by mailing copies of all 
destination market certificates to the shippers of the products 
inspected. FPB estimates that it will cost $200,000 per year for the 
postage, envelopes and additional staff time to send the approximately 
275,000 inspection certificates it issues annually. Additional revenues 
are also necessary in order that FPB may cover the costs of securing 
the additional staff ($200,000) needed to increase the timeliness of 
service delivery in several destination markets which are currently in 
need of additional staffing (e.g., Dallas, Texas). Finally, FPB needs 
an additional $200,000 per year for three to four years to cover the 
costs of securing the equipment (e.g., digital imaging cameras and 
computers, inspector notebook computers and Agency-mandated information 
systems upgrades) needed to expand FPB's services and to make existing 
services more efficient in the future.
    This fee increase should result in an estimated $1.2 million in 
additional revenues per year (only $600,000 during FY 98 since the fee 
increase will be effective on April 6, 1998) and should enable FPB to 
cover its costs while maintaining current program reserves (at a level 
below that provided for by Agency policy).
    The purpose of the RFA is to fit regulatory actions to the scale of 
businesses subject to such actions in order that small businesses will 
not be unduly or disproportionately burdened. The action described 
herein is being taken for several reasons, including that additional 
user fee revenues are needed to cover the costs of: (1) Providing 
current program operations and services; (2) improving program 
integrity by mailing copies of all destination market certificates to 
the shippers of the products inspected (the basis for the change in 
regulation with regard to the disposition of inspection certificates to 
include that one copy be delivered or mailed to the shipper of the 
inspected product); (3) improving the timeliness with which inspection 
services are provided; and (4) acquiring technological advancements 
(e.g., digital imaging cameras and computers, inspector notebook 
computers and Agency-mandated information systems upgrades) aimed at 
expanding FPB's services and making them more efficient in the future. 
This rule should increase user fee revenue generated under the 
destination market program by approximately $1.2 million or 
approximately 10 percent per year. This action is authorized under the 
Agricultural Marketing Act (AMA) of 1946 (see 7 U.S.C. 1622(h)) which 
states that the Secretary of Agriculture may assess and collect ``such 
fees as will be reasonable and as nearly as may be to cover the costs 
of services rendered * * *''
    There are more than 2,000 users of FPB's destination market grading 
services (including applicants who must meet import requirements \1\--
inspections which amount to under 2.5 percent of all lot inspections 
performed). A small portion of these users are small entities under the 
criteria established by the Small Business Administration (13 CFR 
121.601). There will be no additional reporting, recordkeeping, or 
other compliance requirements imposed upon small entities as a result 
of this rule. In compliance with the Paperwork Reduction Act of 1995 
(44 U.S.C. Chapter 35), the information collection and recordkeeping 
requirements in part 51 have been approved previously by OMB and 
assigned OMB No. 0581-0125. FPB has not identified any other Federal 
rules which may duplicate, overlap or conflict with this rule.
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    \1\ Section 8e of the Agricultural Marketing Agreement Act of 
1937, as amended (7 U.S.C. 601-674), requires that whenever the 
Secretary of Agriculture issues grade, size, quality or maturity 
regulations under domestic marketing orders for certain commodities, 
the same or comparable regulations on imports of those commodities 
must be issued. Import regulations apply during those periods when 
domestic marketing order regulations are in effect.
    Currently, there are 15 commodities subject to 8e import 
regulations: avocados, dates (other than dates for processing), 
filberts, grapefruit, kiwifruit, limes, olives (other than Spanish-
style green olives), onions, oranges, Irish potatoes, prunes, 
raisins, table grapes, tomatoes and walnuts. A current listing of 
the regulated commodities can be found under 7 CFR Parts 944, 980 
and 999. Section 999.600 establishes minimum quality, 
identification, certification and safeguard requirements for foreign 
produced farmers stock, shelled and cleaned in-shell peanuts 
presented for importation into the United States. Import 
requirements applicable to peanuts may be found under subparagraph 
(f)(2) of section 108B of the Agricultural Act of 1949 (7 U.S.C. 
1445c-3), as amended November 28, 1990, and August 10, 1993, and 
section 155 of the Federal Agriculture Improvement and Reform Act of 
1996 (7 U.S.C. 7271).
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    Inasmuch as the destination market grading services are voluntary 
(except when required for imported commodities), and since the fees 
charged to users of these services vary with usage, the impact on all 
businesses, including small entities, is very similar. Further, even 
though fees will be raised, the increase is small (approximately ten 
percent) and should not significantly affect these entities. Finally, 
except for those persons who are required to obtain inspections, most 
of these businesses are typically under no obligation to use these 
inspection services, and, therefore, any decision on their part to 
discontinue the use of the services should not prevent them from 
marketing their products.

Executive Order 12988

    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.

Action

    The AMA authorizes official inspection, grading and certification, 
on a user-fee basis, of fresh fruits, vegetables and other products 
such as raw nuts, Christmas trees and flowers. The AMA provides that 
reasonable fees be collected from the users of the services to cover, 
as nearly as practicable, the costs of the services rendered. This rule 
will amend the schedule for fees and charges for inspection services 
rendered to the fresh fruit and vegetable industry to reflect the costs 
necessary to operate the program.
    AMS regularly reviews its user-fee programs to determine if the 
fees are adequate. While FPB continues to search for opportunities to 
reduce its costs, the existing fee schedule will not generate 
sufficient revenues to cover program costs while maintaining an 
adequate reserve balance (four months of costs) as called for by Agency 
policy (AMS Directive 408.1). Current revenue projections for 
destination market inspection work during FY 97 are $12.0 million with 
costs projected at $11.9 million and an end-of-year reserve of $3.0 
million.

[[Page 15276]]

    However, FPB's trust fund balance for this program will be 
approximately $1.0 million under the four-month level of approximately 
$4.0 million. Further, FPB's costs of operating the destination market 
program are expected to increase to approximately $12.9 million during 
FY 98 and to approximately $13.2 million in FY 99. These cost increases 
(which are outlined below) will result from both inflationary increases 
with regard to current FPB operations and services and the need to 
improve or expand current services.
    Employee salaries and benefits are major program costs that account 
for approximately 80 percent of FPB's total operating budget. A general 
and locality salary increase for Federal employees, ranging from 2.30 
to 4.66 percent depending on locality, effective January 1997, 
significantly increased program costs. Another general and locality 
salary increase ranging from 2.44 to 6.52 percent became effective in 
January 1998. In addition, inflation also impacts upon FPB's non-salary 
costs. These increases will increase FPB's costs of operating this 
program by approximately $300,000 per year.
    Additional revenues are also needed to enable FPB to cover the 
costs of improving program integrity by mailing copies of all 
destination market certificates to the shippers of the products 
inspected. This is an essential step in FPB's ongoing effort to improve 
the integrity of the inspection process. This action will assist in 
preventing industry participants from using falsified inspection 
certificates to alter the terms of sales between shippers and 
receivers. In accordance with this effort, the regulations with regard 
to the disposition of inspection certificates in 7 CFR 51.21 are to be 
revised to require that one copy of the certificate be provided to the 
shipper of the inspected product. FPB estimates that it will cost 
$200,000 per year for the postage, envelopes and additional staff time 
to send the approximately 275,000 inspection certificates it issues 
annually.
    Additional revenues are also necessary in order that FPB may cover 
the costs of securing the additional staff ($200,000) needed to 
increase the timeliness of service delivery in several destination 
markets which are currently in need of additional staffing (e.g., 
Dallas, Texas). This action responds to industry feedback to FPB's FY 
1996 Customer Service Survey which emphasized the importance of 
timeliness far more than cost containment.
    Finally, FPB needs an additional $200,000 per year for three to 
four years to cover the costs of securing the equipment (e.g., digital 
imaging cameras and computers, inspector notebook computers and Agency-
mandated information systems upgrades) needed to expand FPB's services 
and to make existing services more efficient in the future.
    This fee increase should result in an estimated $1.2 million in 
additional revenues per year (only $600,000 during FY 98 since the fee 
increase will be effective on April 6, 1998) and should enable FPB to 
cover its costs while maintaining current program reserves. In order to 
reach a four month reserve, further increases in fees will be likely in 
future years.
    Based on the aforementioned analysis of this program's increasing 
costs, AMS is hereby increasing the fees for destination market 
inspection services. The following table compares current fees and 
charges with the revised fees and charges for fresh fruit and vegetable 
inspection as found in 7 CFR 51.38. Unless otherwise provided for by 
regulation or written agreement between the applicant and the 
Administrator, the charges in the schedule of fees as found in 
Sec. 51.38 are:

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                Service                               Current                              Revised              
----------------------------------------------------------------------------------------------------------------
Quality and condition inspections of                                                                            
 one to four products each in                                                                                   
 quantities of 51 or more packages and                                                                          
 unloaded from the same land or air                                                                             
 conveyance:                                                                                                    
    --Over a half carlot equivalent of  $78................................  $86.                               
     each product.                                                                                              
    --Half carlot equivalent or less    $65................................  $72.                               
     of each product.                                                                                           
    --For each additional lot of the    $13................................  $14.                               
     same product.                                                                                              
Condition only inspections of one to                                                                            
 four products each in quantities of                                                                            
 51 or more packages and unloaded from                                                                          
 the same land or air conveyance:                                                                               
    --Over a half carlot equivalent of  S65................................  $72.                               
     each product.                                                                                              
    --Half carlot equivalent or less    $60................................  $66.                               
     of each product.                                                                                           
    --For each additional lot of the    $13................................  $14.                               
     same product.                                                                                              
Quality and condition and condition                                                                             
 only inspections of five or more                                                                               
 products each in quantities of 51 or                                                                           
 more packages and unloaded from the                                                                            
 same land or air conveyance:                                                                                   
    --For the first five products.....  $277...............................  $305.                              
    --For each additional product.....  $39................................  $43.                               
    --For each additional lot of any    $13................................  $14.                               
     of the same product.                                                                                       
Quality and condition and condition                                                                             
 only inspections of products each in                                                                           
 quantities of 50 or less packages                                                                              
 unloaded from the same land or air                                                                             
 conveyance:                                                                                                    
    --For each product................  $39................................  $43.                               
    --For each additional lot of any    $13................................  $14.                               
     of the same product.                                                                                       
Dock-side inspections of an individual                                                                          
 product unloaded directly from the                                                                             
 same ship:                                                                                                     
    --For each package weighing less    1 cent.............................  1.1 cents.                         
     than 15 pounds.                                                                                            
    --For each package weighing 15 to   2 cents............................  2.2 cents.                         
     29 pounds.                                                                                                 
    --For each package weighing 30 or   3 cents............................  3.3 cents.                         
     more pounds.                                                                                               
    --For each additional lot of any    $13................................  $14.                               
     of the same product.                                                                                       
    --Minimum charge per individual     $78................................  $86.                               
     product.                                                                                                   
Inspections performed for other         $39 per hour.......................  $43 per hour.                      
 purposes during the grader's                                                                                   
 regularly scheduled work week.                                                                                 
Overtime or holiday premium rate (per   $19.50 per hour....................  21.50 per hour.                    
 hour additional) for all inspections                                                                           
 performed outside the grader's                                                                                 
 regularly scheduled work week.                                                                                 
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    A notice of proposed rulemaking was published in the Federal 
Register (62 FR 66033) on December 17, 1997, with a 60-day comment 
period. The comment period closed on February 17, 1998. Interested 
persons were invited to participate in this rulemaking by submitting 
written comments on the proposal to AMS. One comment in opposition to 
the fee increase was received.

[[Page 15277]]

    The comment was received from a law firm representing an 
association (of producers) which exports products into the U.S. The 
comment opposed the increase in fees for inspections of fresh fruits 
and vegetables at destination markets. The commentor went on to 
reiterate its long-standing opposition to mandatory marketing orders 
based upon general economic principles such as their promotion of anti-
competitive practices in restraint of trade and because different 
inspection criteria are applied to foreign product than are applied to 
domestic product at comparable points in the distribution chain, 
thereby violating principles of free trade. Lastly, the commentor went 
on to conclude that the mandatory inspections and their costs would 
further enhance unfair trade practices. The comment argued that the 
increased fees would have a disproportionate impact on commodities such 
as table grapes and kiwifruit subject to section 8e requirements 
because foreign shippers cannot elect to discontinue the use of 
inspections, unlike domestic shippers.
    The Agency disagrees with the positions taken in the comment and 
the conclusions reached therein. Section 8e of the Agricultural 
Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), 
requires that whenever the Secretary of Agriculture issues grade, size, 
quality or maturity regulations under domestic marketing orders for 
certain commodities, the same or comparable regulations on imports of 
those commodities must be issued. Import regulations apply during those 
periods when domestic marketing order regulations are in effect. The 
regulations governing the section 8e program, including requirements 
for inspections and the fees charged in connection therewith, are 
consistent with the provisions of its authorizing statute and other 
applicable law.
    Further, the tremendous growth in demand for fruits and vegetables 
in the U.S. market strongly supports the need to provide consumers with 
consistent, quality products. Quality standards are in the best 
interest of both U.S. producers and those who export products to the 
U.S. market.
    Under the marketing order program, fruit and vegetable producers 
agree in a referendum vote to authorize minimum quality requirements on 
their products. Domestic shippers subject to marketing order minimum 
quality requirements must, in fact, have their product inspected and 
certified, under the supervision of the Agency, meeting the applicable 
requirements. Under section 8e, comparable quality requirements are 
simply extended to imported fruits and vegetables.
    For most imported commodities subject to minimum quality 
requirements, U.S. total and per capita consumption has increased 
significantly. The association's exporter members generally ship 
products into the U.S. which are produced during a growing season that 
is different from that of the U.S. Thus, in large measure, such 
production is complimentary to U.S. production and not subject to 
mandatory requirements. By making quality product available to U.S. 
consumers on a consistent basis, the agricultural sectors in both 
countries benefit.
    Accordingly, in light of the continuing need to maintain the AMS 
grading program on a financially sound basis, the Agency has decided to 
proceed with the fee increase as set forth in the proposal.
    Pursuant to 5 U.S.C. 553, it is found and determined that good 
cause exists for not postponing the effective date of this action until 
30 days after publication in the Federal Register because: (1) The 
fiscal year 1998 reserve balance of the program's trust fund is 
projected to be approximately $1 million under the desired level 
necessary to ensure the program's fiscal viability; (2) the fee changed 
adopted herein should be implemented as soon as possible to begin 
replenishing the operating reserve and bring revenue in line with 
costs; and (3) the first available billing cycle begins April 6, 1998. 
Accordingly, the effective date is April 6, 1998.

List of Subjects in 7 CFR Part 51

    Agricultural commodities, Food grades and standards, Fruits, Nuts, 
Reporting and recordkeeping requirements, Trees, Vegetables.
    For reasons set forth in the preamble, 7 CFR part 51 is amended as 
follows:

PART 51--[AMENDED]

    1. The authority citation for 7 CFR part 51 continues to read as 
follows:

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

    2. Section 51.21 is revised to read as follows:


Sec. 51.21  Disposition of inspection certificates.

    (a) The original certificate, and not to exceed four copies (if 
requested by applicant prior to issuance), shall be delivered or mailed 
promptly to the applicant or to a person designated by him. One copy 
shall be delivered or mailed to the shipper of the inspected product. 
One copy shall be filed in the office of the inspector when the 
inspection is made by a Federal Government employee, otherwise, it 
shall be filed in the appropriate office of the cooperating Federal-
State Inspection Agency. Unless otherwise directed by the 
Administrator, two copies of each official certificate issued on 
products received in destination markets shall be forwarded to the 
Administrator to be kept on file in Washington and no copies of 
official certificates issued at shipping point need be so forwarded. In 
the case of any product covered by a marketing agreement and/or order 
effective pursuant to the Agricultural Marketing Agreement Act of 1937, 
as amended (7 U.S.C. 601 et seq.), at least one copy of each 
certificate covering the inspection of such product shall, on request, 
be delivered to the administrative agency established thereunder, 
subject to such terms and conditions as the Administrator may 
prescribe. Copies may be furnished to other interested parties as 
outlined in Sec. 51.41.
    3. Section 51.38 is revised to read as follows:


Sec. 51.38  Basis for fees and rates.

    (a) When performing inspections of product unloaded directly from 
land or air transportation, the charges shall be determined on the 
following basis:
    (1) For products in quantities of 51 or more packages:
    (i) Quality and condition inspection of 1 to 4 products unloaded 
from the same conveyance:
    (A) $86 for over a half carlot equivalent of an individual product.
    (B) $72 for a half carlot equivalent or less of an individual 
product.
    (C) $14 for each additional lot of the same product.
    (ii) Condition only inspection of 1 to 4 products unloaded from the 
same conveyance:
    (A) $72 for over a half carlot equivalent of an individual product.
    (B) $66 for a half carlot equivalent or less of an individual 
product.
    (C) $14 for each additional lot of the same product.
    (iii) Quality and condition inspection and/or condition only 
inspection of 5 or more products unloaded from the same conveyance:
    (A) $305 for the first 5 products.
    (B) $43 for each additional product.
    (C) $14 for each additional lot of any of the same product.
    (2) For quality and condition inspection and/or condition only 
inspection of products in quantities of 50 or less packages unloaded 
from the same conveyance:
    (i) $43 for each individual product.

[[Page 15278]]

    (ii) $14 for each additional lot of any of the same product.
    (b) When performing inspections of palletized products unloaded 
directly from sea transportation or when palletized product is first 
offered for inspection before being transported from the dock-side 
facility, charges shall be determined on the following basis:
    (1) For each package inspected according to the following rates:
    (i) 1.1 cent per package weighing less than 15 pounds;
    (ii) 2.2 cents per package weighing 15 to 29 pounds; and
    (iii) 3.3 cents per package weighing 30 or more pounds.
    (2) $14 for each additional lot of any of the same product.
    (3) A minimum charge of $86 for each product inspected.
    (c) When performing inspections of products from sea containers 
unloaded directly from sea transportation or when palletized products 
unloaded directly from sea transportation are not offered for 
inspection at dockside, the carlot fees in Sec. 51.38(a) shall apply.
    (d) When performing inspections for Government agencies, or for 
purposes other than those prescribed in the preceding paragraphs, 
including weight-only and freezing-only inspections, fees for 
inspection shall be based on the time consumed by the grader in 
connection with such inspections, computed at a rate of $43 an hour: 
Provided, That:
    (1) Charges for time shall be rounded to the nearest half hour;
    (2) The minimum fee shall be two hours for weight-only inspections, 
and one-half hour for other inspections; and
    (3) When weight certification is provided in addition to quality 
and/or condition inspection, a one-hour charge shall be added to the 
carlot fee.
    (4) When inspections are performed to certify product compliance 
for Defense Personnel Support Centers, the daily or weekly charge shall 
be determined by multiplying the total hours consumed to conduct 
inspections by the hourly rate. The daily or weekly charge shall be 
prorated among applicants by multiplying the daily or weekly charge by 
the percentage of product passed and/or failed for each applicant 
during that day or week. Waiting time and overtime charges shall be 
charged directly to the applicant responsible for their incurrence.
    (e) When performing inspections at the request of the applicant 
during periods which are outside the grader's regularly scheduled work 
week, a charge for overtime or holiday work shall be made at the rate 
of $21.50 per hour or portion thereof in addition to the carlot 
equivalent fee, package charge, or hourly charge specified in this 
subpart. Overtime or holiday charges for time shall be rounded to the 
nearest half hour.
    (f) When an inspection is delayed because product is not available 
or readily accessible, a charge for waiting time shall be made at the 
prevailing hourly rate in addition to the carlot equivalent fee, 
package charge, or hourly charge specified in this subpart. Waiting 
time shall be rounded to the nearest half hour.

    Dated: March 25, 1998.
Sharon Bomer Lauritsen,
Acting Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 98-8391 Filed 3-30-98; 8:45 am]
BILLING CODE 3410-02-P