[Federal Register Volume 64, Number 42 (Thursday, March 4, 1999)]
[Proposed Rules]
[Pages 10402-10405]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-5318]


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DEPARTMENT OF AGRICULTURE

Food Safety and Inspection Service

9 CFR Part 391

[Docket No. 98-052P]


Fee Increase for Inspection Services

AGENCY: Food Safety and Inspection Service, USDA.

ACTION: Proposed rule.

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SUMMARY: The Food Safety and Inspection Service (FSIS) is proposing to 
increase the fees that FSIS charges meat and poultry establishments, 
plants, importers, and exporters for providing voluntary inspection, 
identification, and certification services; laboratory services; and 
overtime and holiday services. These fee increases are based on the 
Agency's analysis of its projected costs for Fiscal Year 1999, which 
identified increased FSIS expenses as a result of national and locality 
pay raises for Federal employees, and increased travel and overhead 
costs. The fee increases are being proposed in order to generate the 
additional revenue that FSIS is required to recover as a result of its 
projected increased costs.
    FSIS also is proposing to reduce the fee it charges for the 
Accredited Laboratory Program. The Agency's analysis of projected costs 
for calendar year 1999 has identified decreased operational costs for 
this program. The Agency is proposing to reduce its fee so that only 
the actual costs of this program are recovered from the industry.

DATES: Written comments must be received by April 5, 1999.

ADDRESSES: Submit an original and two copies of written comments 
concerning this proposed rule to: FSIS Docket Clerk, Docket #98-052P, 
Room 102-Cotton Annex Building, FSIS, U.S. Department of Agriculture, 
Washington, DC 20250-3700. Persons that want to present oral comments 
should, as permitted under the Poultry Products Inspection Act, contact 
Michael B. Zimmerer at (202) 720-3367. FSIS' cost analysis and the 
comments that it receives will be available for public inspection in 
the FSIS Docket Room from 8:30 a.m. to 1 p.m. and 2 p.m. to 4:30 p.m., 
Monday through Friday.


[[Page 10403]]


FOR FURTHER INFORMATION CONTACT: Mr. Michael B. Zimmerer, Director, 
Financial Management Division, Office of Management, Food Safety and 
Inspection Service, U.S. Department of Agriculture, Washington, DC 
20250-3700, (202) 720-3367.

SUPPLEMENTARY INFORMATION:

Background

    The Federal Meat Inspection Act (FMIA) and the Poultry Products 
Inspection Act (PPIA) provide for mandatory Federal inspection of the 
slaughter of certain livestock and poultry and of the processing of 
certain livestock and poultry products. The cost of this inspection 
(excluding such inspection performed on holidays or on an overtime 
basis) is borne by FSIS.
    In addition to mandatory inspection, FSIS provides a range of 
voluntary inspection, certification, and identification services. Under 
the Agricultural Marketing Act of 1946, as amended (7 U.S.C. 1621 et 
seq.), FSIS provides these services to assist in the orderly marketing 
of various animal products and byproducts. These services include the 
certification of technical animal fats and the inspection of exotic 
animal products. FSIS is required to recover the costs of voluntary 
inspection, certification, and identification services.
    FSIS also provides certain voluntary laboratory services which 
establishments or others may request FSIS to perform. The cost of these 
services, which are provided under the Agricultural Marketing Act of 
1946, as amended (7 U.S.C. 1621 et seq.), must be recovered by FSIS. 
Laboratory services are provided for four types of analytic testing. 
These are: microbiological testing, residue chemistry tests, food 
composition tests, and some pathology testing.
    Each year, FSIS reviews the fees that it charges for providing 
voluntary inspection, identification, and certification services; 
laboratory services; and overtime and holiday services and performs a 
cost analysis to determine whether the fees it has established are 
adequate to recover the costs that FSIS will incur in providing the 
services. In its analysis of projected costs for Fiscal Year (FY) 1999, 
FSIS has identified increases in the costs that it will incur in 
providing voluntary inspection, identification, and certification 
services; laboratory services; and overtime and holiday services. These 
increased costs are attributable to the average national and locality 
pay raise for Federal employees of 3.1% effective January 1999 and 
projected increased travel and overhead costs of 1.9% for FY 1999 
resulting from inflation.
    Accordingly, FSIS is proposing to amend 9 CFR section 391.2 to 
increase the base time rate for providing voluntary inspection, 
identification, and certification services from $32.88 per hour, per 
program employee, to $37.00 per hour, per program employee. FSIS is 
also proposing to amend section 391.3 to increase the rate for 
providing overtime and holiday services from $33.76 per hour, per 
program employee, to $36.84 per hour, per program employee. 
Additionally, FSIS is proposing to amend section 391.4 to increase the 
rate for laboratory services from $48.56 per hour, per program 
employee, to $50.88 per hour, per program employee. These rates and the 
proposed increase are reported in 
Table 1.

 Table 1.--Inspection Service Type and Current and Proposed Rates for FY
                                  1999
------------------------------------------------------------------------
                                     Current    Proposed FY    Proposed
           Service type              rate  $/    1999 rate   increase  $/
                                       hour        $/hour        hour
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Base time........................        32.88        37.00         4.12
Overtime & Holidays..............        33.76        36.84         3.08
Laboratory.......................        48.56        50.88        2.32
------------------------------------------------------------------------
Source: USDA/FSIS/Office of Management/Financial Management Division.

    In its analysis of projected costs for FY 1999, FSIS has identified 
a decrease in the cost of operating the Accredited Laboratory Program 
(ALP). This projected decreased cost of $1,000 per accreditation 
results from a number of factors including a projected decrease in 
accreditations sought and maintained, as well as more efficient 
operating practices by FSIS. Therefore, FSIS is proposing to amend 
section 391.5 of the regulations to reduce the fee charged for original 
accreditations and renewals from $2,500 per accreditation, to $1,500 
per accreditation per year. Laboratory accreditation fees that cover 
the costs of the ALP are mandated by section 1327 (7 U.S.C. 138f) of 
the Food, Agriculture, Conservation, and Trade Act of 1990 (Public Law 
101-624), as amended (the 1990 Farm Bill).

Executive Order 12866 and Regulatory Flexibility Act

    This proposed rule has been determined to be not significant and 
was not reviewed by the Office of Management and Budget (OMB) under 
Executive Order 12866. The proposed fee increases for voluntary 
inspection, identification, and certification services; laboratory 
services; and overtime and holiday inspection services are primarily 
the result of increases in the salaries of Federal employees 
established by Congress under the Federal Employees Pay Comparability 
Act of 1990. The proposed increase also includes projected increased 
travel costs and overhead costs. This Section analyzes the economic 
impact of these increased costs on the meat and poultry industry.

Economic Impact

    The Administrator, Food Safety and Inspection Services, has 
determined that this action will not have a significant economic impact 
on a substantial number of small entities as defined by the Regulatory 
Flexibility Act (5 U.S.C. 601). The fee increases provided for in this 
document will result in only a minimal increase in the costs currently 
borne by those entities that choose to voluntarily utilize certain 
inspection services. These services are generally used by large 
establishments. Small establishments generally do not seek these 
services. This is most likely the result of a number of factors, 
including the cost of services. Nevertheless, FSIS is required to 
recover the full cost of the services provided by it.
    Table 2 shows the economic impact of the proposed fee increases, 
other than those for laboratory services. This impact has been 
estimated by

[[Page 10404]]

multiplying the expected number of hours of base time or overtime 
service to be provided by their respective incremental rates estimated 
in Table 1. FSIS does not have the data needed to estimate the impact 
of increases in the laboratory service rates because the number of 
hours of this service that will be provided are difficult to predict. 
Table 2 shows that total reimbursements to FSIS are estimated to be 
$7,676,936 in FY 1999.

                        Table 2.--Estimated Economic Impact of Proposed Increase in Rates
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                                                                     Incremental
                            Service type                               rate  $/      Estimated     Reimbursement
                                                                         hour       hours used     or impact ($)
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Overtime & Holidays................................................        $3.08       2,355,000      $7,253,400
Base...............................................................         4.12         102,800         423,536
                                                                    --------------------------------------------
Total Reimbursement................................................  ...........  ..............       7,676,936
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    The economic impact of the increase in the fees on small businesses 
in the meat and poultry industries would depend on the structure of 
these industries. Data from the U.S. Bureau of the Census, Survey of 
Industries, 1994, for example, indicate that the beef industry has more 
small firms and establishments than the poultry industry. Using the 
U.S. Small Business Administration's definition of a small business 
(fewer than 500 employees), 96 percent of the 1,226 firms comprising 
the beef industry are small. Similarly, 90 percent of the individual 
meat establishments or plants in this industry are small. In 1994, 
these small businesses accounted for 19 percent of total employment in 
this industry. Their share of payroll was 18 percent of the total 
payroll of $2.777 billion, and their revenues were 16 percent of the 
total revenues of $55.814 billion.
    FSIS believes that small establishments would not be affected 
adversely by the proposed fee increases for four reasons. First, the 
use of the services is voluntary, and, therefore, establishments do not 
have to utilize these services. Second, establishments that seek FSIS' 
services are likely to have determined that the costs of voluntary 
inspection services would be less than the benefits they would get from 
the additional revenues they would realize as a result of services 
provided. Third, the industry is likely to pass through the increased 
costs to consumers without significantly losing market share because 
price elasticity of demand for meat and poultry is inelastic. For 
example, Huang (1993) analyzed demand for meats and other animal 
proteins consisting of products, including beef and poultry and 
concluded that the price elasticity was (-0.36), i.e., an increase in 
price of beef or poultry products by one percent would be associated 
with a decrease in its demand by only 0.36 percent. (Huang, Kao S., A 
Complete System of U.S. Demand for Food. USDA/ERS Technical Bulletin 
No. 1821, 1993, p. 24). In short, consumers are unlikely to reduce 
their demand for meat and poultry significantly when prices are 
increased for these products by only a few pennies per pound. Finally, 
the supply of meat and poultry products is likely to be very price 
elastic because of the existence of hundreds of firms in these 
industries. Any single producer cannot raise the price of its products 
above those of the rest of the industry without losing its market share 
significantly.
    The decrease in the accredited laboratory program fee reflects a 
projected decrease in operational costs which may be passed through to 
users of the laboratory services. To the extent that these fees are 
reduced, their economic impact would be reduced.

Executive Order 12988

    This proposed rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. This proposed rule is not intended to have 
retroactive effect. States and local jurisdictions are preempted by the 
Federal Meat Inspection Act (FMIA) and the Poultry Products Inspection 
Act (PPIA) from imposing any marking, labeling, packaging, or 
ingredient requirements on federally inspected livestock and poultry 
products that are in addition to, or different than, those imposed 
under the FMIA and PPIA. States and local jurisdictions may, however, 
exercise concurrent jurisdiction over livestock and poultry products 
that are outside official establishments for the purpose of preventing 
the distribution of livestock and poultry products that are misbranded 
or adulterated under the FMIA and PPIA, or, in the case of imported 
articles, that are not at such an establishment, after their entry into 
the United States.
    State or local laws, regulations, or policies are preempted by the 
Agricultural Marketing Act of 1946, as amended, if they present 
irreconcilable conflict with the provisions of this rule proposed under 
the Agricultural Marketing Act of 1946, as amended.
    If this proposed rule is adopted, administrative proceedings will 
not be required before parties may file suit in court challenging this 
rule. However, the administrative procedures specified in 9 CFR 306.5 
and 381.35 of the FMIA and PPIA regulations, respectively, must be 
exhausted prior to any judicial challenge of the application of the 
provisions of this proposed rule, if the challenge involves any 
decision of an FSIS employee relating to inspection services provided 
under the FMIA or PPIA.

List of Subjects in 9 CFR Part 391

    Fees and charges, Government employees, Meat inspection, Poultry 
products.

    For the reasons set out in the preamble, 9 CFR Part 391 is proposed 
to be amended as set forth below:

PART 391--FEES AND CHARGES FOR INSPECTION SERVICES AND LABORATORY 
ACCREDITATION

    1. The authority citation for Part 391 continues to read as 
follows:

    Authority: 7 U.S.C. 138f; 7 U.S.C. 394, 1622 and 1624; 21 U.S.C. 
451 et seq.; 21 U.S.C. 601-695; 7 CFR 2.18 and 2.53.

    2. Sections 391.2, 391.3, 391.4 and 391.5 are revised to read as 
follows:


Sec. 391.2  Base time rate.

    The base time rate for inspection services provided pursuant to 
Secs. 350.7, 351.8, 351.9, 352.5, 354.101, 355.12, and 362.5 shall be 
$37.00 per hour, per program employee.


Sec. 391.3  Overtime and holiday rate.

    The overtime and holiday rate for inspection services provided 
pursuant to Secs. 307.5, 350.7, 351.8, 351.9, 352.5, 354.101, 355.12, 
362.5 and 381.38 shall be $36.84 per hour, per program employee.

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Sec. 391.4  Laboratory services rate.

    The rate for laboratory services provided pursuant to Secs. 350.7, 
351.9, 352.5, 354.101, 355.12 and 362.5 shall be $50.88 per hour, per 
program employee.


Sec. 391.5  Laboratory accreditation fees.

    (a) The annual fee for the initial accreditation and maintenance of 
accreditation provided pursuant to Secs. 318.21 and 381.153 shall be 
$1,500 per accreditation.
* * * * *
    Done at Washington, DC, on February 25, 1999.
Thomas J. Billy,
Administrator.
[FR Doc. 99-5318 Filed 3-3-99; 8:45 am]
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