[Federal Register Volume 63, Number 189 (Wednesday, September 30, 1998)]
[Rules and Regulations]
[Pages 52131-52134]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-26222]



 ========================================================================
 Rules and Regulations
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains regulatory documents 
 having general applicability and legal effect, most of which are keyed 
 to and codified in the Code of Federal Regulations, which is published 
 under 50 titles pursuant to 44 U.S.C. 1510.
 
 The Code of Federal Regulations is sold by the Superintendent of Documents. 
 Prices of new books are listed in the first FEDERAL REGISTER issue of each 
 week.
 
 ========================================================================
 

  Federal Register / Vol. 63, No. 189 / Wednesday, September 30, 1998 / 
Rules and Regulations  

[[Page 52131]]


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

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Parts 56 and 70

[Docket No. PY-98-002]


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: October 1, 1998.

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

SUPPLEMENTARY INFORMATION: The Department of Agriculture (Department) 
is issuing this rule in conformance with Executive Order 12866. This 
rule has been determined to be not significant for purposes of 
Executive Order 12866, and therefore, 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 about 400 users of Poultry Programs' 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 $1.5 million during FY 1999. The hourly 
resident rate for grading services will increase by approximately 4.1 
percent while the hourly nonresident rate for grading service will 
increase by approximately 15 percent. The costs to 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 grading services as authorized under the Agricultural Marketing 
Act of 1946.
    The AMS regularly reviews its user fee financed programs to 
determine if the fees are adequate. 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). The Agency has engaged in 
streamlining efforts to reduce costs including staff and space 
reductions or closing of field offices. However, overall, costs are 
increasing despite these efforts.
    Without a fee increase, revenue projections for FY 1999 would be 
$19.8 million, with costs projected at $22.3 million. The shortfall, if 
allowed to continue, would translate into an approximate 3.8 month 
operating reserve at the end of FY 1999 or $7.1 million, which is less 
than Agency policy requires. With the fee increase, FY 1999 revenue is 
projected to be $21.3 million and costs are projected at $22.3 million. 
Trust fund balances would be $8.5 million or 4.3 months.
    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 
to be amended by this rule have been previously approved by OMB and 
assigned OMB Control Numbers under the Paperwork Reduction Act (44 
U.S.C. Chapter 35) 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 users 
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.
    Several streamlining actions to be completed in FY 1998 will result 
in cost savings. They include staff and space reductions or closing of 
field offices. However, overall, costs are increasing despite these 
efforts.
    Employee salaries and benefits account for approximately 82 percent 
of the total operating budget. A general and locality salary increase 
for Federal employees, ranging from 2.57 to 6.52 percent, depending on 
locality, became effective in January 1998 and has materially affected 
program costs. Another general and locality salary increase estimated 
at 3.0 percent is expected in January 1999. Also, from October 1997 
through September 1999, salaries and fringe benefits of federally 
licensed State employees will have increased by about 6 percent. As a 
result, the hourly resident rate for grading services will increase by 
approximately 4.1 percent. The hourly resident rate covers graders' 
salaries, fringe benefits, and related costs.
    Another factor affecting the current fee structure is the increased 
demand for grading services on a fee basis. Resident grading service is 
provided by a grader with a regular tour of duty in a plant, while fee 
grading service is provided by a grader on an intermittent, as-needed 
basis. 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. In recent years, however, there has been an increase 
in the volume of shell eggs and poultry being traded according to 
product-specific purchase requirements where USDA certification is 
required, and this

[[Page 52132]]

work is done predominantly on a fee basis. Fee services for many plants 
require more supervisory time and travel to staff, train, and supervise 
graders. As a result, a greater proportion of overhead costs for 
supervision and support staff must be charged to fee services. Rates to 
cover these costs were only minimally raised in years prior to the last 
fee increase effective May 1, 1997. Current analysis shows that these 
rates need to be increased an additional 15 percent to totally support 
their fair share of the program's overhead costs.
    Additionally, rates for appeal grading and review of a grader's 
decision are only occasionally used, currently accounting for less than 
$5,000 revenue annually. A separate rate for this service would be 
discontinued and these services would be charged using fee service 
rates for the time required to perform such service. This amendment 
would simplify the rate structure and any change in revenue would be 
negligible.
    A recent review of the current fee schedule, effective May 1, 1997, 
revealed that anticipated revenue will not adequately cover increasing 
program costs. Without a fee increase, projected FY 1999 revenues for 
grading services are $19.8 million, with costs projected at $22.3 
million, and trust fund balances would be $7.1 million, below 
appropriate levels. With a fee increase, projected FY 1999 revenues 
would be $21.3 million and costs are projected at $22.3 million. Trust 
fund balances would be $8.5 million or 4.3 months of operating costs.
    The following table compares current fees and charges with proposed 
fees and charges for egg, poultry, and rabbit grading as found in 7 CFR 
Parts 56 and 70:

------------------------------------------------------------------------
                 Service                      Current        Proposed
------------------------------------------------------------------------
Resident Service:
    Inauguration of service.............       310             310
    Hourly charges
        Regular hours...................        26.56           27.64
    Administrative charges--Poultry
     grading
        Per pound of poultry............          .00033          .00034
        Minimum per month...............       225             225
        Maximum per month...............     2,250           2,500
    Administrative charges--Shell egg
     grading
        Per 30-dozen case of shell eggs.          .038            .040
        Minimum per month...............       225             225
        Maximum per month...............     2,250           2,500
    Administrative charges--Rabbit
     grading
        Based on 25% of grader's salary,
         Minimum per month..............       225             250
Nonresident Service: \1\
    Hourly charges
        Regular hours...................        26.56           27.64
    Administrative charges
        Based on 25% of grader's salary,
         Minimum per month..............       225             250
Fee and Appeal Service:
    Hourly charges
        Regular hours...................        38.96           44.80
        Weekend and holiday hours.......        43.24           51.60
------------------------------------------------------------------------
\1\ For poultry and shell egg grading.

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 (63 FR 31362) on June 9, 1998. Comments on the 
proposed rule were solicited from interested parties until August 10, 
1998.
    During the 60-day comment period, the Agency received two comments, 
one from a State commissioner of agriculture and one from a poultry 
processor. Both were in opposition to the proposal, expressing a 
general concern about the cost of the grading program in light of 
financial difficulties faced by the industry.
    The State commissioner of agriculture went on to suggest that the 
Agency give each State more supervisory grading authority and decrease 
the number of federal supervisors. The commissioner also suggested that 
the Agency promote greater consumer demand for graded product as an 
incentive for industry's continued use of grading services.
    A cornerstone of the grading program is the uniform interpretation 
and application of the official USDA grade standards and grades 
nationwide. This uniformity enables buyers and sellers to trade graded 
products sight-unseen in domestic and international marketing channels 
with confidence. The current supervisory network starts at headquarters 
and reaches through regional and Federal-State offices to the 
individual graders. State supervisors are used in conjunction with, but 
not in lieu of Federal supervisors. The Federal supervisory chain 
ensures that the training of both Federal and State graders and their 
application of grade standards and grades is impartial and consistent 
nationwide. Delegating Federal supervisory functions to State employees 
would weaken existing supervisory accountability and program 
uniformity, which over time would likely erode user confidence in the 
programs.
    The issue of explaining the value of grading to consumers has been 
raised over the years by the Agency and by members of the food 
industry. In 1996, the Agency conducted focus groups to better 
understand the issue. Using the focus group findings, the Agency 
developed new educational materials and strategies targeted at 
consumers and volume buyers. Although these efforts are expected to 
provide long-term benefits to users of the grading programs, they do 
not provide an alternative to a fee increase.
    Although the Agency seeks to minimize or negate any fee increases 
for the poultry, rabbit, and egg grading programs, it must also operate 
these programs on a sound financial basis. Accordingly, the Agency is 
implementing the proposed increases to ensure the financial stability 
of these grading programs.

[[Page 52133]]

    During the review of the comments and proposal, one error was 
discovered. In the proposed rule, Sec. 70.72 refers to a fee for 
laboratory analysis that is no longer performed by this program. 
References to this service were deleted from Sec. 70.72 in April 1997, 
but were inadvertently reinserted into the proposed rule. Therefore, 
the text of the final rule has been corrected by removing the phrase 
``laboratory analysis,'' each time it appears in the heading and 
regulatory text of Sec. 70.72 of the proposed rule.
    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.

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.

    For reasons set forth in the preamble, Title 7, Code of Federal 
Regulations, parts 56 and 70 are 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 revised to read as follows:


Sec. 56.46  On a fee basis.

    (a) Unless otherwise provided in this part, the fees to be charged 
and collected for any service performed, in accordance with this part, 
on a fee basis shall be based on the applicable rates specified in this 
section.
    (b) Fees for grading services will be based on the time required to 
perform the services. The hourly charge shall be $44.80 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 $51.60 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 on a fee basis at rates set forth in 
Sec. 56.46, plus any travel and 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. In Sec. 56.52, paragraph (a)(4) is revised 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 $0.040, except that the minimum charge per 
billing period shall be $225 and the maximum charge shall be $2,500. 
The minimum charge also applies where an approved application is in 
effect and no product is handled.
* * * * *
    5. In Sec. 56.54, paragraph (a)(2) is revised 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 $250 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 revised to read as follows:


Sec. 70.71  On a fee basis.

    (a) Unless otherwise provided in this part, the fees to be charged 
and collected for any service performed, in accordance with this part, 
on a fee basis shall be based on the applicable rates specified in this 
section.
    (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 $44.80 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 $51.60 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 on a fee basis at 
rates set forth in Sec. 70.71, plus any travel and 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. In Sec. 70.76, paragraph (a)(2) is revised 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 $250 will be made each 
billing period. The minimum charge also applies where an approved 
application is in effect and no product is handled.
* * * * *
    10. In Sec. 70.77, paragraphs (a)(4) and (a)(5) are revised 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 $0.00034, except that the minimum charge per billing 
period shall be $225 and the maximum charge shall be $2,500. 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

[[Page 52134]]

25 percent of the grader's total salary costs. A minimum charge of $250 
will be made each billing period. The minimum charge also applies where 
an approved application is in effect and no product is handled.
* * * * *
    Dated: September 25, 1998.
Thomas O'Brien,
Acting Administrator, Agricultural Marketing Service.
[FR Doc. 98-26222 Filed 9-29-98; 8:45 am]
BILLING CODE 3410-02-P