[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]
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Rules and Regulations
Federal Register
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This section of the FEDERAL REGISTER contains regulatory documents
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Federal Register / Vol. 63, No. 189 / Wednesday, September 30, 1998 /
Rules and Regulations
[[Page 52131]]
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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.
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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:
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Service Current Proposed
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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
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\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
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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