[Federal Register Volume 64, Number 217 (Wednesday, November 10, 1999)]
[Proposed Rules]
[Pages 61223-61225]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-29418]


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DEPARTMENT OF AGRICULTURE

Food Safety and Inspection Service

9 CFR Part 391

[Docket No. 99-045P]


Fee Increase for Meat and Poultry 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 FSIS charges meat and poultry establishments, 
importers, and exporters for providing voluntary inspection services, 
overtime and holiday inspection services, identification services, 
certification services, and laboratory services. These fee increases 
reflect the increased cost of inspection, the national and locality pay 
raise for Federal employees (proposed 4.8 percent effective January 
2000), the increased laboratory costs, and the applicable travel and 
operating costs. FSIS is proposing to make the fee increases effective 
January 2, 2000. At this time, FSIS is not proposing to amend the fee 
for the Accredited Laboratory Program.

DATES: Comments must be received by December 10, 1999.

ADDRESSES: Submit one original and two copies of written comments to 
FSIS Docket Clerk, Docket #99-045P, U.S. Department of Agriculture, 
Food Safety and Inspection Service, Room 102, Cotton Annex, 300 12th 
Street, SW., Washington, DC 20250-3700. All comments submitted in 
response to this proposal will be available for public inspection in 
the Docket Clerk's Office between 8:30 a.m. and 4:30 p.m., Monday 
through Friday.

FOR FURTHER INFORMATION CONTACT: For information concerning policy 
issues, contact Daniel Engeljohn, Ph.D., Director, Regulations 
Development and Analysis Division, Office of Policy, Program 
Development, and Evaluation, FSIS, U.S. Department of Agriculture, Room 
112, Cotton Annex, 300 12th Street, SW., Washington, DC 20250, (202) 
720-5627, fax number (202) 690-0486.
    For information concerning fee development, contact Michael B. 
Zimmerer, Director, Financial Management Division, Office of 
Management, FSIS, U.S. Department of Agriculture, Room 2130-S, 1400 
Independence Avenue, SW., Washington, DC 20250, (202) 720-3552.

SUPPLEMENTARY INFORMATION:

Background

    The Federal Meat Inspection Act (FMIA) and the Poultry Products 
Inspection Act (PPIA) provide for mandatory inspection by Federal 
inspectors of meat and poultry slaughtered or processed at official 
establishments. Such inspection is required to ensure the safety, 
wholesomeness, and proper labeling of meat and poultry. The cost of 
mandatory inspection (excluding such services 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 for 
meat and poultry. 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 not 
subject to the FMIA or the PPIA. 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 that 
establishments or others may request FSIS to perform. The cost of these 
services, which are provided under the Agricultural Marketing Act of 
1946, 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 pathology testing.
    Each year, FSIS expects to review the fees that it charges for 
providing overtime and holiday inspection services, voluntary 
inspection, identification, and certification services, and laboratory 
services, and to perform a cost analysis to determine whether the fees 
it has established are adequate to recover the costs that it incurs in 
providing the services. In its analysis of projected costs for January 
1, 2000 to September 30, 2000, FSIS has identified increases in the 
costs that it will incur. FSIS is not proposing an increase in the fees 
for full calendar year 2000 because FSIS intends to propose a new fee

[[Page 61224]]

increase each Federal Fiscal Year (FY), i.e., the next fee increase 
after this proposed one should be effective on October 1, 2000. The 
proposed fee increases are attributable to the increased cost of 
inspection, the national and locality pay raise for Federal employees 
(proposed 4.8 percent effective January 2000), the increased laboratory 
costs, and the applicable travel and operating costs.
    Accordingly, FSIS is proposing to amend 9 CFR section 391.2 to 
increase the base time fee for providing meat and poultry voluntary 
inspection, identification, and certification services from $37.00 per 
hour per program employee to $37.88 per hour per program employee (an 
increase of 2.38%). FSIS is also proposing to amend Sec. 391.3 to 
increase the rate for providing meat and poultry overtime and holiday 
inspection services from $36.84 per hour per program employee to $39.76 
per hour per program employee (an increase of 7.93%). Additionally, 
FSIS is proposing to amend Sec. 391.4 to increase the rate for meat and 
poultry laboratory services from $50.88 per hour per program employee 
to $58.52 per hour per program employee (an increase of 15.02%). The 
increase in base time and overtime and holiday time rates is 
proportional to the salary increase and the inflation index rate 
recommended by the Office of Management and Budget for overhead costs 
(applicable travel and operating costs). The larger fee increase in 
laboratory services relative to the other two fees is due to (1) an 
increase in the direct costs of laboratory services and (2) a decrease 
in the hours of activity. The lower the usage, the higher the fee, 
because there are less hours over which to distribute the overhead 
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. These differences in costs stem from various factors 
including the differing salary levels of the personnel who provide the 
services.
    These fees and the proposed increase are reflected in Table 1.

             Table 1.--Inspection Service Type and Current and Proposed Rates for 1/1/00 to 9/30/00
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                                                                                  Proposed  Year     Proposed
                          Service type                            Current rate $/  2000  rate $/   increase  $/
                                                                       hour            hour            hour
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Base time.......................................................           37.00           37.88             .88
Overtime and Holiday............................................           36.84           39.76            2.92
Laboratory......................................................           50.88           58.52            7.64
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    Beginning with the FY 2001, FSIS intends to propose adjustments in 
its fees for voluntary and reimbursable inspections effective each 
October 1. This approach will facilitate more consistent and timely 
proposals to adjust fees, and will assist the Agency and affected 
industry to plan for these fee adjustments.

Executive Order 12866 and Regulatory Flexibility Act

    Because this proposed rule has been determined to be not 
significant, it was not reviewed by the Office of Management and Budget 
(OMB) under Executive Order 12866.
    The Administrator, FSIS, 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 reflect a small 
increase in the costs currently borne by those entities which elect to 
utilize certain inspection services voluntarily. These voluntary 
services are generally sought by larger establishments because of 
larger production volume or because of greater complexity and diversity 
in the products they produce; the small establishments do not seek 
these services perhaps because they cannot afford them. Therefore, the 
small establishments are not likely to be affected adversely by the 
increases.
    The extent of incremental adverse impact is estimated from the 
proposed percentage increases in base time and overtime and holiday 
rates. The increase in base time rate from $37.00/hour to $37.88/hour 
amounts to 2.38 percent. The overtime and holiday services rate from 
$36.84 to $39.76 amounts to 7.93 percent or about 8 percent. These 
increases are consistent with similar increases in wages and overtime 
rates in the private sector. For example, according to the Bureau of 
Labor Statistics web site, the average wage, including overtime, in the 
poultry slaughtering and processing industry (SIC 2015) increased by 
about 5 percent (from $344.73 per week in July 1998 to $361.70 in July 
1999). The average hourly wage, excluding the overtime rate, increased 
by 4 percent during the same period. The increase in laboratory fees of 
15.02 percent (from $50.88/hour to $58.52/hour) reflects an increase in 
the direct cost of these services to FSIS, coupled with lower usage by 
industry.
    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, indicate that the meat industry is dominated by small 
firms and establishments relative to the poultry industry. For example, 
based on the U.S. Small Business Administration's (SBA) definition of 
small business by the number of employees (fewer than 500), 96 percent 
of 1,226 firms comprising the meat industry (SIC 2011) are small. 
Similarly, 90 percent of 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. In 
contrast, the poultry industry is comprised of relatively larger firms 
and establishments. For example, 51 percent of 567 establishments in 
this industry are large, according to the SBA definition. This industry 
has 332 firms with 207,875 workers and a payroll of $3.5 billion. The 
estimated revenue of this industry amounted to $27.111 billion in 1994.
    FSIS believes that the small establishments in the meat and poultry 
industry would not be affected adversely by the proposed increases in 
the fees for four reasons. First, the fee increases are voluntary so 
that the establishments do not have to seek the services of FSIS 
inspector program personnel. Second, establishments that seek FSIS 
services are likely to have calculated that the incremental costs of 
voluntary inspection services would be less than the incremental 
expected benefits of additional revenues they

[[Page 61225]]

would realize from additional production. Third, the industry is likely 
to pass through the costs to consumers without significantly losing its 
market because price elasticity of demand for meat and poultry is 
inelastic. For example, Huang (1993) analyzed demand for meats and 
other products containing meat and poultry. Huang concluded that the 
price elasticity was -0.36, i.e., an increase in price of meat 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 meat or poultry prices are increased by 
a few pennies a pound. Finally, the supply of beef and poultry products 
is likely to be very price elastic because, as noted above, there are 
hundreds of firms in these industries. Any single producer cannot raise 
the price of its products without losing its market share 
significantly.

Executive Order 12988

    This proposed rule has been reviewed by FSIS under Executive Order 
12988, Civil Justice Reform. This rule: (1) Preempts State and local 
laws and regulations that are inconsistent with this rule; (2) has no 
retroactive effect; and (3) does not require administrative proceedings 
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.

Additional Public Notification

    Pursuant to Department Regulation 4300-4, ``Civil Rights Impact 
Analysis,'' dated September 22, 1993, FSIS has considered the potential 
civil rights impact of this proposed rule on minorities, women, and 
persons with disabilities. FSIS anticipates that this proposed rule 
will not have a negative or disproportionate impact on minorities, 
women, or persons with disabilities. However, proposed rules generally 
are designed to provide information and receive public comments on 
issues that may lead to new or revised agency regulations or 
instructions. Public involvement in all segments of rulemaking and 
policy development are important. Consequently, in an effort to better 
ensure that minorities, women, and persons with disabilities are aware 
of this proposed rule and are informed about the mechanism for 
providing their comments, FSIS will announce it and provide copies of 
this Federal Register publication in the FSIS Constituent Update.
    FSIS provides a weekly FSIS Constituent Update, which is 
communicated via fax to over 300 organizations and individuals. In 
addition, the update is available on line through the FSIS web page 
located at http://www.fsis.usda.gov. The update is used to provide 
information regarding FSIS policies, procedures, regulations, Federal 
Register notices, FSIS public meetings, recalls, and any other types of 
information that could affect or would be of interest to our 
constituents/stakeholders. The constituent fax list consists of 
industry, trade, and farm groups, consumer interest groups, allied 
health professionals, scientific professionals, and other individuals 
that have requested to be included. Through these various channels, 
FSIS is able to provide information to a much broader, more diverse 
audience. For more information and to be added to the constituent fax 
list, fax your request to the Congressional and Public Affairs Office, 
at (202) 720-5704.

Executive Order 12898, Environmental Justice

    Currently, FSIS has no data on the number of minority-owned FMIA or 
PPIA official establishments, nor can the Agency identify which FMIA or 
PPIA official establishments are minority owned. The Agency is looking 
into ways of collecting such data.

List of Subjects in 9 CFR Part 391

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

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

    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, and 391.4 are proposed to be 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 
$37.88 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 $39.76 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 $58.52 per hour per 
program employee.

    Done in Washington, DC on: November 5, 1999.
Thomas J. Billy,
Administrator.
[FR Doc. 99-29418 Filed 11-9-99; 8:45 am]
BILLING CODE 3410-DM-P