[Federal Register Volume 64, Number 78 (Friday, April 23, 1999)]
[Rules and Regulations]
[Pages 19865-19868]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-10239]


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DEPARTMENT OF AGRICULTURE

Food Safety and Inspection Service

9 CFR Part 391

[Docket No. 98-052F]
RIN 0583-AC54


Fee Increase for Inspection Services

AGENCY: Food Safety and Inspection Service, USDA.

ACTION: Final rule.

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SUMMARY: The Food Safety and Inspection Service (FSIS) is increasing 
the fees charged to meat and poultry establishments, plants, importers, 
and exporters for providing voluntary inspection, identification, and 
certification services; laboratory services; and overtime and holiday 
services. These fees are being increased in order to generate the 
additional revenue that FSIS is required to recover. Despite increased 
costs each year, these rates have not been adjusted since 1996.
    FSIS is reducing the fee it charges for the Accredited Laboratory 
program. The Agency's analysis has identified decreased operational 
costs for this program. Accordingly, the Agency is reducing its fee.

DATES: Effective April 25, 1999.


[[Page 19866]]


FOR FURTHER INFORMATION CONTACT: 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) 720-3552.

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.
    In 1998, FSIS reviewed the fees that it charged for providing 
voluntary inspection, identification, and certification services; 
laboratory services; and overtime and holiday services and performed a 
cost analysis to determine whether the fees it established were 
adequate to recover the costs that FSIS would incur in providing the 
services. As reflected in the proposed rule published on March 4, 1999, 
(64 FR 10402), FSIS has determined that the fees it currently charges 
are not adequate to recover the costs of providing the services.
    Comments submitted in response to the proposed rule questioned why 
the base time fee for voluntary inspection, certification, and 
identification services and the fee for overtime and holiday services 
were being increased more than FSIS' projected increased FY 1999 costs 
of 3.1% for Federal employees pay raises and 1.9% for inflation. 
Comments submitted also questioned why the base time fee, the overtime 
and holiday fee, and the laboratory service fee were not being raised 
the same percentage.
    FSIS has not raised the fees that it charges for providing 
voluntary inspection, identification, and certification services, 
overtime and holiday services, and laboratory services since December 
1996 (61 FR 65459; 62 FR 6111). The cost of providing these services 
has risen since that time. FSIS has been absorbing these increased 
costs in various ways. FSIS cannot continue to absorb these increased 
costs.
    As discussed below in the Agency's response to comments, since the 
1996 rate change, FSIS has experienced increased costs in providing 
voluntary inspection, identification, and certification services; 
laboratory services; and overtime and holiday services. These increased 
costs are attributable to the national and locality pay raises given to 
Federal employees each year, the increased travel and overhead costs 
each year, and other factors such as higher-salaried personnel 
certifying product during base time. These increased costs necessitate 
a 12.53% increase in base time costs, a 9.12% increase in overtime and 
holiday costs, and a 4.78% increase in laboratory services costs. The 
differing fee increase for each type of service is the result of the 
different amount it costs FSIS to provide these three types of 
services. As reflected in the response to comments, these differences 
in costs stem from various factors including the differing salary 
levels of the personnel who provide the services.
    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 is 
based upon the difference in actual costs since the 1996 increase and 
projected costs. The decreased cost of accreditation is the result of a 
number of factors, including a projected decrease in accreditations 
sought and maintained, as well as more efficient operating practices by 
FSIS.
    A full analysis of the economic impact of this rule was presented 
in the proposed rule (64 FR 10402).

Proposed Rule and Comments

    On March 4, 1999, FSIS published a proposed rule at 64 FR 10402 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. FSIS received 19 comments from the meat 
and poultry industries. All commenters were opposed to the proposal, 
objecting to the proposed fee increases for the affected inspection 
services. The commenters' specific concerns and the Agency's responses 
follow.
    Comment: All commenters stated that the proposed raise of 12.53% 
and 9.12% in fees, respectively for base time and overtime/holiday time 
services, which appeared to be based upon an actual cost increase of 
5.0% (3.1% for wages and 1.9% for overhead adjustments), was excessive. 
Most of the commenters stated that they were opposed to any rate 
increase in excess of 5.0%.
    Response: The fee increases that FSIS proposed were not solely 
based upon FSIS' projected increased FY 1999 costs of 3.1% for wages 
and 1.9% for overhead. The last time FSIS increased reimbursable rates 
was in December of 1996 (61 FR 65459). FSIS is required to recover all 
of the costs associated with providing services in its voluntary 
inspection programs (i.e. voluntary inspection, identification, and 
certification services and overtime and holiday services). New rates 
were not proposed in 1997 and 1998 because of major reorganizations 
within the Agency and other factors, even though all Federal employees 
received pay raises, and travel and overhead costs increased in each of 
those years. This resulted in the industry being underbilled in each of 
these years and the Agency not recovering the full costs it incurred in 
operating its voluntary programs.
    Since FY 1996, all Federal employees have received across the board 
average salary increases as follows: January, 1997--3.0%; January, 
1998--2.8%; and January, 1999--3.6%. The compounded annual effect of 
all 3 years of salary increases total 9.7%. The compounded effect 
calculates the increase in a given year on top of the previous years' 
increases. That is, for every dollar earned by a Federal employee in 
1996, he now is earning almost 10 cent more in 1999. Specifically, each 
dollar earned by a Federal employee in 1996, because of salary raises, 
increased to $1.03 in 1997 (a 3% increase), $1.06 in 1998 (a 2.8% 
increase) and $1.10 in 1999 (a 3.6% increase).
    Additionally, there were other factors that were taken into account 
in determining the increased rate of 12.53% and 9.12% for base and 
overtime/holiday time services, respectively, beyond the calculated

[[Page 19867]]

9.7% increased salary amount for Federal employees. For base time, an 
additional 3.37% increase was added to the 9.16% compounded salary cost 
increase (estimated in mid-1998) to provide for the fact that base time 
services are performed by higher salaried employees doing certification 
of product for exports, instead of lower salaried employees in previous 
years, plus the projected inflated travel and overhead costs. The 
proposed increase of 9.12% for overtime/holiday services is less than 
the compounded effect of the 3 years of Federal pay raises (9.7%) by 
the amount of .58% due to the fact that when the proposed rate 
increases were originally calculated in mid-1998, the projected pay 
increase for January 1999 was calculated at the anticipated 3.1%, 
instead of the later approved actual raise of 3.6% that occurred.
    Commenters were not opposed to the proposed increase cost for 
laboratory services. The increase of 4.78% for laboratory service fees 
is due to increased efficiencies in the laboratories, which in turn 
keep down operating costs. Operating costs constitute a significant 
portion of the fee for laboratory services. Operating costs have been 
kept in check over the last three years.
    The fees being finalized reflect the difference between the last 
fee change in 1996 and projected costs incurred by FSIS for FY 1999. If 
those fees were recalculated to reflect all actual costs through FY 
1999, they would probably increase. However, the Agency has decided to 
finalize the fee rates it proposed. It will make appropriate 
adjustments in a new proposal it expects to publish in late 1999 
regarding the fees that need to be charged for the inspection programs 
it operates. This new proposal will reflect the Federal pay raise and 
inflation rate for travel and overhead costs anticipated for January 
2000, and any other relevant factors.
    Comment: Two commenters stated that in the proposed rule, there is 
an attempt to rationalize that small establishments would not be 
affected adversely. Some commenters stated that the rule will have a 
detrimental effect on small establishments trying to develop a growing 
market. Additionally, some commenters stated that some small 
establishments are not selling directly to consumers, but instead are 
selling to food service or retail establishments. Therefore, these 
commenters indicated that it was highly unlikely that the excessive 
cost increases being proposed could be passed through, especially in 
today's low inflation or even deflationary environment.
    Response: FSIS does not have data on specific small establishments 
that sell their products directly to food service or retail 
establishments. Therefore, FSIS could not estimate the economic impact 
of the proposed fee increase on small establishments who engaged in 
this type of business, i.e., the potential impact of the increase in 
prices on their sales or the price elasticity. Price elasticity is the 
percentage change in demand for a product associated with a one percent 
change in its price. FSIS relied on the overall elasticity of demand 
for the product, i.e., responsiveness or sensitivity of demand to 
changes in prices of the product sold by all establishments. FSIS would 
welcome specific data on this issue for considering future adjustments. 
However, it must be understood that FSIS is required to recover the 
full costs of operating its voluntary programs.
    Comment: Four commenters said that the increase in fees does not 
take into consideration the cooperative certification programs of the 
Agricultural Marketing Service, USDA, such as the Certified Angus Beef 
or the Certified American Lamb program.
    Response: The certification services provided by other agencies and 
the rates that other agencies charge for the services that they provide 
has no impact upon the fees charged by FSIS.
    Comment: Some commenters raised issues about FSIS inspection 
structure and the possible operation of HACCP plants outside normal 
inspection hours without the requirement for overtime inspection.
    Response: These issues are not within the scope of this rulemaking 
and, thus, are not being addressed in this docket.
    Accordingly, FSIS is amending Sec. 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 amending Sec. 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. FSIS is also amending Sec. 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. Further, FSIS is amending 
Sec. 391.5 to reduce the fee charged for accreditations and renewals 
from $2,500 per accreditation, to $1,500 per accreditation per year.
    To recover the increased costs in an expeditious manner, the 
Administrator has determined that these amendments should be effective 
on the first day of the pay period (Sunday) after publication of this 
rule. Therefore, the effective date for this rule is April 25, 1999.

Executive Order 12866 and Regulatory Flexibility Act

    This 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 fee increases for voluntary inspection, 
identification, and certification services, laboratory services, and 
overtime and holiday inspection services are the result of increases in 
the salaries of Federal employees established by Congress under the 
Federal Employees Pay Comparability Act of 1990. The increase also 
includes projected increased travel costs and overhead costs due to 
inflation, higher-salaried employees working more base time than 
overtime, and various other factors.
    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).

Executive Order 12988

    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule is not intended to have a 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 under the 
Agricultural Marketing Act of 1946, as amended.
    Administrative proceedings will not be required before parties may 
file suit

[[Page 19868]]

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, part 391 of title 9 of the 
Code of Federal Regulations is amended as follows:

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 paragraph (a) in Sec. 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.


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 in Washington, DC on: April 20, 1999.
Thomas J. Billy,
Administrator.
[FR Doc. 99-10239 Filed 4-20-99; 3:49 pm]
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