[Federal Register Volume 64, Number 248 (Tuesday, December 28, 1999)]
[Rules and Regulations]
[Pages 72492-72494]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-33667]


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DEPARTMENT OF AGRICULTURE

Food Safety and Inspection Service

9 CFR Part 391

[Docket No. 99-045F]


Fee Increase for Meat and Poultry 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 that 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. The fee increases will be effective January 1, 2000. At this 
time, FSIS is not amending the fee for the Accredited Laboratory 
Program.

EFFECTIVE DATE: January 1, 2000.

FOR FURTHER INFORMATION CONTACT: For information concerning policy 
issues, contact Daniel L. 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

    On November 10, 1999, FSIS published a proposed rule (64 FR 61223) 
to increase the fees that 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. FSIS provided 30 days 
for public comment, ending the comment period on December 10, 1999.
    FSIS received one comment from a Canadian firm in response to the 
proposal. The concerns raised by the commenter addressed inspections 
performed by the Animal and Plant Health Inspection Service, and 
therefore, do no fall within the scope of this rulemaking.
    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

[[Page 72493]]

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.
    FSIS is making final the proposed regulations by amending 9 CFR 
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 amending 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 amending 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 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.
    To recover the increased costs in an expeditious manner, the 
Administrator has determined that these amendments should be effective 
less than 30 days after publication in the Federal Register. Therefore, 
the fee increases will be effective January 1, 2000.

Executive Order 12866 and Regulatory Flexibility Act

    Because this final 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 
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 will not be affected adversely by the 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 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 final 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 
final rule, if the challenge involves any decision of an

[[Page 72494]]

FSIS employee relating to inspection services provided under the FMIA 
or PPIA.

Additional Public Notification

    Public awareness of all segments of rulemaking and policy 
development is important. Consequently, in an effort to better ensure 
that minorities, women, and persons with disabilities are aware of this 
final rule, 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.

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 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 December 21, 1999.

Thomas J. Billy,
Administrator.
[FR Doc. 99-33667 Filed 12-27-99; 8:45 am]
BILLING CODE 3410-DM-P