[Federal Register Volume 65, Number 43 (Friday, March 3, 2000)]
[Proposed Rules]
[Pages 11486-11488]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-5166]


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DEPARTMENT OF AGRICULTURE

Food Safety and Inspection Service

9 CFR Part 590

[Docket No. 99-012P]
RIN 0583-AC71


Fee Increase for Egg Products Inspection--Year 2000

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 egg products plants for providing 
overtime and holiday inspection services. These proposed fee increases 
reflect the total cost of inspection, including the national and 
locality pay raise for Federal employees, applicable overhead costs, 
and other inspection costs. FSIS is proposing to make the fee increases 
effective thirty days after the final rule is published. The Agency is 
also proposing to delete the reference to regulations governing the 
voluntary grading of eggs.

DATES: Comments must be received by May 2, 2000.

ADDRESSES: Submit one original and two copies of written comments to 
FSIS Docket Clerk, Docket #99-012P, 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 Egg Products Inspection Act (EPIA) (21 U.S.C. 1031 et seq.), 
provides for the inspection of egg products by Federal inspectors at 
official plants. Federal inspection protects the health and welfare of 
consumers by assuring that egg products are wholesome, not adulterated, 
and properly labeled and packaged.
    The Agricultural Marketing Service (AMS) was responsible for 
administering the EPIA from its enactment in 1970 until 1995. At that 
time, the Federal Crop Insurance Reform and Department of Agriculture 
Reorganization Act of 1994 (Pub. L. 103-354; 7 U.S.C. 6981) delegated 
food safety responsibilities to the Under Secretary of Agriculture for 
Food Safety. The Department subsequently revised its regulations to 
transfer egg product inspection functions under the EPIA to FSIS. AMS 
retained those functions related to the shell egg surveillance program. 
The regulations governing the inspection of eggs and egg products (9 
CFR part 590) were transferred to Part 9 of the Code of Federal 
Regulations on December 31, 1998 (63 FR 72352).
    The cost of mandatory inspection (excluding such services performed 
on holidays or on an overtime basis) is borne by FSIS. However, plants 
pay for inspection services performed on holidays or on an overtime 
basis. There has not been a change in overtime and holiday fees for egg 
products inspection services since the transfer of program functions 
from AMS to FSIS in May 1995. AMS established and implemented the 
current fees in November 1994. These fees reflect only the direct costs 
of inspection at that time and are insufficient to recover FSIS's 
current costs for delivery of inspection service.
    In order to recover the full cost of inspection, FSIS is proposing 
overtime and holiday fees for egg products inspection services that are 
the same as overtime and holiday fees for meat and poultry inspection.
    In its analysis of projected costs for January 1, 2000 to September 
30, 2000, FSIS has identified increases in the

[[Page 11487]]

costs that it will incur in providing overtime and holiday inspection 
services. Based on its analysis, FSIS is proposing to amend 
Sec. 590.126 of 9 CFR to increase the fee for providing overtime 
inspection services from $26.16 per hour per program employee to $39.76 
per hour per program employee. For holiday services, FSIS proposes to 
amend Sec. 590.128(a) to increase the fee from $17.44 per hour per 
program employee to $39.76 per hour per program employee. Although 
these proposed fee increases are large, they reflect the total cost of 
inspection, including national and locality pay raises for Federal 
employees, applicable overhead costs, and other inspection costs. The 
current fees and the proposed increases are reported in Table 1.

 Table 1.--Current and Proposed Fees for Overtime and Holiday Inspection
                                Services
------------------------------------------------------------------------
               Service ($/hr.)                   Current      Proposed
------------------------------------------------------------------------
Overtime Inspection Services................         26.16         39.76
Holiday Inspection Services.................         17.44         39.76
------------------------------------------------------------------------

    The proposed fees are based on the full Agency cost for meat, 
poultry and egg products inspection services (Table 2). These costs are 
then divided by the total hours of inspection to obtain the hourly 
rate. FSIS intends to charge egg products establishments requesting 
overtime and holiday inspection services the same rate charged meat and 
poultry establishments for these services. Table 2 shows salary, 
overhead, and other inspections costs for FY 98 and the added inflation 
and Federal pay increase used to obtain the total amount from which the 
proposed rates are derived. Overhead costs are the indirect costs for 
administration and management associated with providing inspection 
services. Other inspection costs include direct costs for travel and 
laboratory support costs associated with inspection services.

      Table 2.--Components of Proposed Fee--Agency Inspection Costs
------------------------------------------------------------------------
                  Component                     $Thousand      Percent
------------------------------------------------------------------------
Direct Salaries.............................        57,242         56.86
Inflation and Pay Increase..................         7,951          7.91
Overhead....................................        22,197         22.05
Other Inspection Costs (Travel and                  13,282         13.17
 Laboratory Support.........................
                                             ---------------------------
  Total.....................................       100,671           100
------------------------------------------------------------------------

    Beginning with the Federal fiscal year 2001, which starts October 
1, 2000, FSIS intends to review annually its fees for overtime and 
holiday egg products inspection services to allow for necessary 
adjustments on a fiscal year basis. The fiscal year approach is an 
accepted accounting principle and will facilitate more consistent and 
timely proposals to adjust fees and assist the Agency and affected 
industry to plan for these fee adjustments.
    The Agricultural Marketing Act of 1946, as amended, provides the 
authority for collection of fees approximately equal to the cost of 
voluntary egg grading programs. Therefore, AMS retains the 
responsibility of changing the fees set out in the regulations 
governing the grading of eggs (7 CFR Part 55). FSIS is proposing to 
amend 9 CFR 590.130 to delete the reference to regulations governing 
the collection of fees associated with the voluntary grading of eggs.

Executive Order 12866 and Regulatory Flexibility Act

    Because this proposed rule has been determined to be not 
significant, the Office of Management and Budget (OMB) did not review 
it under Executive Order 12866.
    The Administrator, FSIS, has determined that this action will not 
have a significant economic impact, as defined by the Regulatory 
Flexibility Act (5 U.S.C. 601), on a substantial number of small 
entities. There are 73 egg products firms, and all but 5 would be 
classified as small on the basis of the Small Business Administration 
size definitions (having under 100 employees in a stand-alone 
establishment or under 500 employees in an in-line establishment).
    FSIS believes that the small plants in the egg products industry 
would not be affected adversely by the fee increases provided for 
because they reflect only a small increase in the costs currently borne 
by those entities that elect to use overtime and holiday inspection 
services. These holiday and overtime inspection services are generally 
sought by plants with larger production volume, greater complexity and 
diversity in the products they produce, and the need for on time 
delivery of large volumes of product by their clients--generally large 
commercial or institutional establishments. Plants with smaller 
production are unlikely to use a significant amount of overtime and 
holiday inspection services. FSIS expects that plants seeking FSIS 
services are likely to have calculated that the incremental costs of 
overtime and holiday inspection services would be less than the 
incremental expected benefits of additional revenues they would realize 
from additional production.

Economic Effects

    Under the proposed fees, the Agency expects to collect nearly $2.5 
million in revenues for FY 2000, compared to the $1.5 million under 
current fees. The total volume of U.S. egg product production in 1998 
was 3.2 billion pounds. The increase in cost per pound of product 
associated with the overtime and holiday fee increase is $0.0003. Even 
in a competitive industry like egg products, this amount of increase in 
annual production costs, if firms choose to use the service, would have 
an insignificant impact on profits and prices. The increase in costs 
per firm would be about $13,700. On average, this would not be a 
significant increase in annual production costs given the volume of 
production. Egg product

[[Page 11488]]

firms produce an average of 44.3 million pounds of product annually.

               Table 3.--Revenues for Inspection Services
------------------------------------------------------------------------
                          Current                              Proposed
------------------------------------------------------------------------
                                $Thousand
------------------------------------------------------------------------
1,482......................................................       2,460
------------------------------------------------------------------------

    The industry is also likely to pass through a significant portion 
of the fee increase to consumers because of the inelastic nature of the 
demand curve facing these firms. Research has shown that consumers are 
unlikely to significantly reduce demand for meat and poultry products, 
including egg products, when prices increase. Huang estimates that 
demand would fall by .36 percent for a one percent increase in price 
(Huang, Kao S., A Complete System of U.S. Demand for Food. USDA/ERS 
Technical Bulletin No. 1821, 1993, p.24). Because of this inelastic 
nature of demand and the competitive nature of the industry, individual 
firms are not likely to experience any change in market share due to an 
increase in inspection fees.

Executive Order 12988

    This proposed rule has been reviewed 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 590.320 through 
590.370 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 EPIA.

Additional Public Notification

    Public awareness of all segments of rulemaking and policy 
development is important. FSIS provides a weekly FSIS Constituent 
Update 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 than would be otherwise possible. For more information or 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 590

    Eggs and egg products, Exports, Food labeling, Imports.

    Accordingly, FSIS proposes to amend 9 CFR Part 590 as follows:

PART 590--INSPECTION OF EGGS AND EGG PRODUCTS (EGG PRODUCTS 
INSPECTION ACT)

    1. The authority citation for part 590 continues to read as 
follows:

    Authority: 21 U.S.C. 1031-1056.

    2. Section 590.126 is revised to read as follows:


Sec. 590.126  Overtime inspection service.

    When operations in an official plant require the services of 
inspection personnel beyond their regularly assigned tour of duty on 
any day or on a day outside the established schedule, such services are 
considered as overtime work. The official plant must give reasonable 
advance notice to the inspector of any overtime service necessary and 
must pay the Agency for such overtime at an hourly rate of $39.76.
    3. Section 590.128(a) is revised to read as follows:


Sec. 590.128  Holiday inspection service.

    (a) When an official plant requires inspection service on a holiday 
or a day designated in lieu of a holiday, such service is considered 
holiday work. The official plant must, in advance of such holiday work, 
request the inspector in charge to furnish inspection service during 
such period and must pay the Agency for such holiday work at an hourly 
rate of $39.76.
* * * * *


Sec. 590.130  [Amended]

    4. Section 590.130 is amended by removing the last sentence.

    Done in Washington, DC on: February 28, 2000.
Thomas J. Billy,
Administrator.
[FR Doc. 00-5166 Filed 3-2-00; 8:45 am]
BILLING CODE 3410-DM-P