[Federal Register Volume 66, Number 100 (Wednesday, May 23, 2001)]
[Rules and Regulations]
[Pages 28359-28361]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-12935]



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 Rules and Regulations
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  Federal Register / Vol. 66, No. 100 / Wednesday, May 23, 2001 / Rules 
and Regulations  

[[Page 28359]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 29

[Docket No. TB-00-04]
RIN 0581-AB86


Tobacco Fees and Charges for Permissive Inspection and 
Certification; Fee Revisions

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Interim final rule with request for comments.

-----------------------------------------------------------------------

SUMMARY: This rule revises the fee structure and increases fees for 
domestic permissive inspection and grading of tobacco. Under the 
Tobacco Inspection Act, fees collected must cover, as nearly as 
practicable, the Department's costs for performing the inspection 
service, including administrative and supervisory costs. The fee for 
permissive inspection of tobacco at receiving points will be based upon 
poundage and will be set at the same rate as for mandatory inspection 
at auction, which is $.01 per pound. The fee for permissive inspection 
at redrying plants will continue to be on an hourly basis and will be 
increased by about 46 percent. These revisions do not affect the fee 
for the mandatory inspection of tobacco sold at designated auction 
markets or permissive export certification.

DATES: Effective May 24, 2001; comments received by June 22, 2001 will 
be considered prior to issuance of a final rule.

ADDRESSES: Send comments to John P. Duncan III, Deputy Administrator, 
Tobacco Programs, Agricultural Marketing Service (AMS), U.S. Department 
of Agriculture (USDA), Room 502 Annex Building, P.O. Box 96456, 
Washington, DC 20090-6456; or Fax: (202) 205-0235. Comments will be 
made available for public inspection at this location during regular 
business hours.

FOR FURTHER INFORMATION CONTACT: John P. Duncan III, Deputy 
Administrator, Tobacco Programs, AMS, USDA, Stop 0280, Room 502 Annex 
Building, P.O. Box 96456, Washington, D.C. 20090-6456; telephone: (202) 
205-0567, Fax: (202) 205-0235.

SUPPLEMENTARY INFORMATION: Permissive inspections, as authorized under 
the Tobacco Inspection Act (7 U.S.C. 511-511q), are made available to 
interested parties on a fee basis sufficient to cover the costs 
incurred by the Department for the inspection and certification, and 
other services, including administrative and supervisory costs. This 
rule revises the fee structure and increase fees for domestic 
permissive inspection and grading of tobacco.
    The AMS conducts reviews of the financial status of this program to 
determine whether a fee is sufficient. As a result of this review, it 
has been determined that, at the current fees, insufficient revenue is 
generated to meet the costs of the program and to maintain an adequate 
reserve fund. The current hourly fee schedule for domestic permissive 
inspection has been in effect since October 1, 1991, as published in 
the Federal Register (56 FR 41921) on August 26, 1991. The major 
factors causing the need for additional funds are increases in 
Government salaries and benefits, travel allowances, and overall 
administrative costs since 1991. The crop-year 2000 revenues for 
permissive inspection and certification services at redrying plants 
were $213,000 and obligations were $300,000. Without a fee increase, 
crop-year 2001 and crop-year 2002 revenues for permissive inspection 
and certification services at redrying plants are projected at about 
$213,000 per year and obligations are projected at about $300,000 per 
year, and with a fee increase, crop-year 2001 and crop-year 2002 
revenues are projected at $312,000 and obligations are projected at 
$300,000. This interim final rule will increase the hourly rates 
charged to users of domestic permissive inspection and certification 
services performed at redrying plants by about 46 percent. The AMS 
estimates that the increase in the hourly rate will yield about an 
additional $100,000 during crop-year 2001 and maintain an adequate 
reserve.
    This rule also revises the fee structure for permissive inspection 
and certification at receiving points from an hourly basis to a 
poundage basis at the same rate as for mandatory inspection at auction. 
A poundage-basis structure is more appropriate for the permissive 
inspection of tobacco at receiving points. Although it is anticipated 
that 60-75 percent of the 2001 tobacco crop will be sold by direct 
contract, and that some of this will be permissively inspected at 
receiving points, it would be difficult to predict the number of pounds 
for which permissive inspection will be requested and the resulting 
revenues. However, based upon the experience of the AMS with mandatory 
inspection at auction, a fee of $.01 per pound is estimated to cover 
costs of $841,115 and an adequate reserve (assuming 120 million pounds 
of contract tobacco will be inspected in crop-year 2001 with revenue of 
$1,200,000). The costs to entities would be proportional to their use 
of the service so that costs are shared equitably by all interested 
parties.
    In the past, virtually all quota tobacco was marketed through the 
auction system under the mandatory inspection program. Mandatory 
inspection, as required under the Act, takes precedence over other 
services and fees are assessed based on the pounds graded. AMS has 
maintained a core grading staff for mandatory inspection and utilized 
personnel from this staff to provide permissive grading. Other than 
recertification services performed at redrying plants, only a small 
amount of tobacco was inspected under the permissive grading program. 
Consequently, overhead costs and a reserve fund for permissive 
inspection were covered by the mandatory inspection fees.
    However, tobacco marketing practices are changing. During the 2000 
marketing year, tobacco companies implemented programs with producers 
to procure tobacco through direct contracting. Permissive grading 
services were requested for tobacco beginning in 2000. Tobacco 
companies also have indicated they will request increased permissive 
grading services for tobacco purchased directly from producers through 
contractual sales during the 2001 marketing year. It is anticipated 
that 60-

[[Page 28360]]

75 percent of the 2001 tobacco crop will be sold by contractual sales. 
With the projected increase in permissive grading requests from 
contractual tobacco sales, it is necessary for the permissive grading 
program to be self-supporting. The procedures for grading tobacco and 
the associated costs are virtually the same at both auction markets and 
receiving points. The National Advisory Committee for Tobacco 
Inspection Services, which is mandated by the Omnibus Budget 
Reconciliation Act of 1981, met on March 6, 2001, and unanimously 
recommended that the fee structure and rates for permissive inspection 
at receiving points be the same as for mandatory inspection at auction. 
Accordingly, the fee structure for permissive inspection at receiving 
points will be based on poundage and will be set at the same level as 
for mandatory inspection, which is $.01 per pound.
    It is also necessary to increase the hourly rates for permissive 
inspection and to specify that the hourly rates are for permissive 
inspection at redrying plants. In the past, virtually all permissive 
inspection was provided at redrying plants for grower cooperatives. 
These grading services involve confirming the grade previously assigned 
to tobacco sold on the auction markets to maintain blend consistency 
for the grower cooperatives. Accordingly, the hourly fee structure will 
be retained. However, as necessary, the hourly rate will be increased 
to recover costs. The base hourly rate of $32.40 is raised to $47.40, 
the overtime rate of $38.70 is raised to $53.70, and Sunday and holiday 
rate of $48.45 is raised to $64.45. These fees would cover expenses and 
maintain a reserve that would meet any reasonable contingency. The 
Department is required by law to fix and collect fees and charges to 
cover the Department s cost in operating the permissive tobacco 
inspection program.
    Finally, although the provisions are seldom used, the same changes 
in hourly rates are made for the inspection and certification of 
nonquota tobacco produced and marketed in a quota area, because this is 
a similar kind of permissive inspection.
    Further, it is hereby found and determined upon good cause that it 
is impracticable, unnecessary, and contrary to the public interest to 
give preliminary notice prior to putting this rule into effect and that 
good cause exists for not postponing the effective date of this rule 
until 30 days after publication in the Federal Register because: (1) 
The tobacco marketing season will begin in June and this action is 
needed, as soon as possible, so as to treat all types of tobacco on an 
equal basis, (2) the National Advisory Committee for Tobacco Inspection 
Services unanimously recommended that the fee structure and rates for 
permissive inspection at receiving points be the same as for mandatory 
inspection at auction, and (3) this interim final rule provides a 30-
day comment period, which is considered appropriate in this action, and 
all comments timely received will be considered prior to the 
finalization of this rule.

Executive Order 12866

    This rule has been determined to be not significant for purposes of 
Executive Order 12866, and therefore, has not been reviewed by the 
Office of Management and Budget.

Regulatory Flexibility Act

    Pursuant to the requirements set forth in the Regulatory 
Flexibility Act (5 U.S.C. 601 et seq.), full consideration has been 
given to the potential economic impact upon small business. Small 
agricultural producers have been defined by the Small Business 
Administration (13 CFR 121.201) as those having annual receipts of less 
than $500,000 and small agricultural service firms are defined as those 
whose annual receipts are less than $5,000,000. There are about 300 
tobacco warehouses and about 90,000 producers and almost all warehouses 
and producers may be classified as small entities. The AMS has 
determined that this action will not have a significant economic impact 
on a substantial number of small entities.
    This rule revises the fee structure and increases fees for domestic 
permissive grading of tobacco. Under the Tobacco Inspection Act of 
1935, as amended (7 U.S.C. 511-511q), fees collected must cover, as 
nearly as practicable, the Department s cost for performing the 
inspection service, including administrative and supervisory costs. 
These revisions do not affect the fee for the mandatory inspection of 
tobacco sold at designated auction markets or permissive export 
certification.
    The AMS conducts reviews of the financial status of this program to 
determine whether the fee is sufficient. As a result of this review, it 
has been determined that, at the current fees, insufficient revenue is 
generated to meet the costs of the program and to maintain an adequate 
reserve fund. The major factors causing the need for additional funds 
are increases in Government salaries and benefits, travel allowances, 
and overall administrative costs since 1991. The crop-year 2000 
revenues for permissive inspection and certification services at 
redrying plants were $213,000 and obligations were $300,000. Without a 
fee increase, crop-year 2001 and crop-year 2002 revenues for permissive 
inspection and certification services at redrying plants are projected 
at about $213,000 per year and obligations are projected at about 
$300,000 per year, and with a fee increase, crop-year 2001 and crop-
year 2002 revenues are projected at $312,000 and obligations are 
projected at $300,000. This interim final rule will increase the hourly 
rates charged to users of domestic permissive inspection and 
certification services performed at redrying plants by about 46 
percent. The AMS estimates that the increase in the hourly rate will 
yield about an additional $100,000 during crop-year 2001 and maintain 
an adequate reserve.
    This rule also revises the fee structure for permissive inspection 
and certification at receiving points from an hourly basis to a 
poundage basis at the same rate as for mandatory inspection at auction. 
The procedures for grading tobacco and associated costs are virtually 
the same at both auction markets and receiving points. The National 
Advisory Committee for Tobacco Inspection Services, which is mandated 
by the Omnibus Reconciliation Act of 1981, met on March 6, 2001, and 
unanimously recommended that the fee structure and rates for permissive 
inspection at receiving points be the same as for mandatory inspection 
at auction.
    Although it is anticipated that 60-75 percent of the 2001 tobacco 
crop will be sold by direct contract, and that some of this will be 
permissively inspected at receiving points, it would be difficult to 
predict the number of pounds for which permissive inspection will be 
requested and the resulting revenues. However, based upon the 
experience of the AMS with mandatory inspection at auction, a fee of 
$.01 per pound is estimated to cover the costs of $841,115 and an 
adequate reserve (assuming 120 million pounds of contract tobacco will 
be inspected in crop-year 2001 with the revenue of $1,200,000). The 
costs to entities would be proportional to their use of the service so 
that costs are shared equitably by all interested parties.
    Finally, although the provisions are seldom used, the same changes 
in hourly rates are made for the inspection and certification of 
nonquota tobacco produced and marketed in a quota area, because this is 
a similar kind of permissive inspection.
    These fees represent the minimum level needed to cover costs for 
the 2001

[[Page 28361]]

crop-year. In the future, AMS will continue to review the program to 
ensure that fees are adequate. Accordingly, we believe that the impact 
of this rule would not be significant on the users of the inspection 
and certification services.

Civil Justice Reform

    This interim final rule has been reviewed under Executive Order 
12988, Civil Justice Reform. This action is not intended to have 
retroactive effect. This rule will not preempt any State or local laws, 
regulations, or policies, unless they present an irreconcilable 
conflict with this rule. There are no administrative procedures which 
must be exhausted prior to any judicial challenge to the provisions of 
this rule.

Lists of Subjects in 7 CFR Part 29

    Administrative practice and procedure, Advisory committees, 
Government publications, Imports, Pesticides and pests, Reporting and 
recordkeeping requirements, Tobacco.

    For the reasons set forth in the preamble, 7 CFR part 29 is amended 
as follows:

PART 29--TOBACCO INSPECTION

Subpart B--Regulations

    1. The authority citation for Part 29, subpart B continues to read 
as follows:

    Authority: 7 U.S.C. 511m and 511r.


    2. In Sec. 29.123, paragraph (b) is revised to read as follows:


Sec. 29.123  Fees and charges.

* * * * *
    (b) Domestic permissive inspection and certification. (1) Fees and 
charges for inspection at redrying plants shall comprise the cost of 
salaries, travel, per diem, and related expenses to cover the cost of 
performing the service. Fees shall be for the actual time required to 
render the service calculated to the nearest 30-minute period. The 
hourly rate shall be $47.40 per hour. The overtime rate for service 
performed outside the inspector's regularly scheduled tour of duty 
shall be $53.70 per hour. The rate of $64.45 per hour shall be charged 
for work performed on Sundays and holidays. These same fees shall be 
applicable for hogshead, bale, cases or sample inspections. (2) Fees 
and charges for inspection of tobacco performed at receiving points is 
$.01 per pound.

Subpart F--Policy Statement and Regulations Governing the 
Identification and Certification of Nonquota Tobacco Produced and 
Marketed in a Quota Area

    3. The authority citation for subpart F continues to read as 
follows:

    Authority: Pub. L. 97-98. 95 Stat. 1266, as amended (7 U.S.C. 
1314f).


Sec. 29.9251  Fees and charges.

    4. In Sec. 29.9251 the words ``$32.40'', ``$38.70'' and ``$48.45'' 
are removed and the words ``$47.40'' ``$53.70'' and ``$64.45'' are 
added in their place, respectively.

    Dated: May 17, 2001.
Kenneth C. Clayton,
Acting Administrator, Agricultural Marketing Service.
[FR Doc. 01-12935 Filed 5-22-01; 8:45 am]
BILLING CODE 3410-02-P