[Federal Register Volume 63, Number 116 (Wednesday, June 17, 1998)]
[Rules and Regulations]
[Pages 32965-32966]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-16010]



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  Federal Register / Vol. 63, No. 116 / Wednesday, June 17, 1998 / 
Rules and Regulations  

[[Page 32965]]


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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: Final rule.

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SUMMARY: The Agricultural Marketing Service (AMS) is revising the 
hourly fee rates for voluntary Federal meat grading and certification 
services. The hourly fees will be adjusted by this final 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.

EFFECTIVE DATE: June 18, 1998.

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

SUPPLEMENTARY INFORMATION:

Regulatory Impact Analysis

    This final 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 will not require any additional or new recordkeeping. 
The final rule 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 final rule will not have a significant economic 
impact on a substantial number of small entities.
    AMS provides meat grading and certification services to a total of 
370 businesses of which 261 are small entities. Small entities are 
defined as those which employ less than 500 employees. The Agency 
provides meat grading and certification services to 93 meat processors, 
90 livestock slaughterers, 52 reprocessors of Federally donated 
products, 13 trade associations, 9 livestock feeders, 3 trucking 
companies, and 1 broker.
    Small entities generate 38 percent of the Agency's meat grading and 
certification hourly revenues. In fiscal year (FY) 1998, the fee 
increase will cost small entities approximately $336,840 or an average 
of $1,290 per small entity. In FY 1999, small entities will pay 
approximately $627,000 or an average of $2,402 per small entity.
    We have limited the impact fee increases have had on small entities 
during the more than 70 years that we have charged hourly fees. On 
numerous occasions, the Agency considered charging applicants based on 
production volume. This alternative has not been adopted because it 
would increase the documentation required by the applicant, the amount 
of time required for the AMS employee to complete the task, and the 
related nonproductive administrative costs of such a fee system. Each 
of these factors would increase the total cost of the service. Also 
considered was the fact that the Agency incurs direct employee costs by 
the hour. Based on all of the involved information, the Agency 
concluded that charging for service by the hour remains the most cost-
effective and equitable method for basing fees.
    This 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. Since 1993, costs increased an average of 
$1,905,000 per year or a total of $7,620,000.
    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, 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. 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 hourly rate increase, program services 
are projected to cost only $0.000617 per pound as compared to the 
$0.000766 per pound program services cost in FY 1993. While the unit 
cost of program services decreased and the average number of pounds 
graded and certified per hour increased, the total number of revenue 
hours generated by Branch employees decreased from 469,819 in FY 1993 
to 448,162 in FY 1997. These factors resulted in a loss of $737,000 in 
FY 1997. 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 disbursement 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 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

[[Page 32966]]

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. The 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.

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

    On December 31, 1997, in the Federal Register, the Agency published 
the proposed rule to increase the fees and requested comments by March 
2, 1998. The Agency received two comments. The first respondent 
requested additional information about the effect of the fee increase 
on small entities. Additional information has been provided in the 
Effect on Small Entities section of this final rule. Respondent # 1 
also alleged that the program charges a minimum of 8 hours per day, and 
suggested that charges should be based on volume of production. As 
identified in 7 CFR 54.27 (a), noncommitment applicants, of which 
almost all are small entities, are charged to the nearest quarter hour, 
and the minimum charge is half an hour. For reasons cited in the Effect 
on Small Entities section, the Agency determined that the current 
hourly fee method of charging applicants provides the best alternative 
for businesses who need less than 8 hours of service.
    Respondent # 2 asked the Agency to continue to find ways to reduce 
costs and to refrain from imposing higher grading costs on the 
industry. The Agency is continually seeking ways to reduce costs and 
increase efficiency. This fee increase amounts to an average annual 
increase of 2.2 percent since the last increase in 1993. Even though 
businesses will pay more for hourly services, the Agency has increased 
the amount of service provided by over 9,580,000,000 pounds per year in 
comparison to FY 1993. This amounts to a 48 percent per hour increase 
in efficiency which reduces the cost of services by 0.0149 cents per 
pound. As requested by the respondent, the Agency will continue seeking 
way to increase efficiency, quality, and timeliness of services.

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.
    In view of these considerations, the Agency will 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 for noncommitment applicants for voluntary Federal meat grading 
and certification services will increase from $39.00 to $42.20, and 
will 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 will increase from $44.60 to $47.80, and will 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 will increase from $73.20 to $79.60, and will be charged to 
users of the service for all hours worked on legal holidays.
    Pursuant to 5 U.S.C. 553, it is hereby found that since the program 
is operating at a loss, good cause exists for not delaying the 
effective action until 30 days after publication of this final rule in 
the Federal Register. Therefore, this final rule will be effective on 
June 18, 1998.

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.

    Dated: June 11, 1998.
Robert L. Leverette,
Acting Deputy Administrator, Livestock and Seed Program.
[FR Doc. 98-16010 Filed 6-16-98; 8:45 am]
BILLING CODE 3410-02-P