[Federal Register Volume 67, Number 212 (Friday, November 1, 2002)]
[Proposed Rules]
[Pages 66576-66578]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-27766]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
 ========================================================================
 

  Federal Register / Vol. 67, No. 212 / Friday, November 1, 2002 / 
Proposed Rules  

[[Page 66576]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 54

[Docket Number LS-02-06]
RIN 0581-AC13


Changes in Fees for Federal Meat Grading and Certification 
Services

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: The Agricultural Marketing Service (AMS) proposes to increase 
the hourly fees charged for voluntary Federal meat grading and 
certification services performed by the Meat Grading and Certification 
(MGC) Branch. The hourly fees would be adjusted by this action to 
reflect the increased cost of providing service and to ensure that the 
MGC Branch operates on a financially self-supporting basis.

DATES: Comments must be received on or before December 31, 2002.

ADDRESSES: Interested persons are invited to submit written comments to 
Larry R. Meadows, Chief; USDA, AMS, LS, MGC Branch, STOP 0248, Room 
2628-S, 1400 Independence Avenue, SW., Washington, DC 20250-0248. 
Telephone number (202) 720-1246. Comments may also be submitted 
electronically to [email protected] or faxed to (202) 690-4119.
    All comments should reference docket number LS-02-06 and note the 
date and page number of this issue of the Federal Register.
    Comments received may be inspected at the above address, between 8 
a.m. and 4:30 p.m., e.s.t., Monday through Friday, except legal 
holidays.

FOR FURTHER INFORMATION CONTACT: Larry R. Meadows, Chief, MGC Branch, 
(202) 720-1246.

SUPPLEMENTARY INFORMATION:

Background

    The Secretary of Agriculture is authorized by the Agricultural 
Marketing Act of 1946 (AMA), as amended (7 U.S.C. 1621, et seq.), to 
provide voluntary Federal meat grading and certification services to 
facilitate the orderly marketing of meat and meat products and to 
enable consumers to obtain the quality of meat they desire. The AMA 
also provides for the collection of fees from users of the Federal meat 
grading and certification services that are approximately equal to the 
cost of providing these services. The hourly fees are established by 
equitably distributing the program's projected operating costs over the 
estimated hours of service--revenue hours--provided to users of the 
service on a yearly basis. Program operating costs include employee 
salaries and benefits, which account for nearly 80 percent of the 
operating costs, and travel, training, and administrative costs. 
Periodically, the fees must be adjusted to ensure that the program 
remains financially self-supporting.
    AMS regularly reviews its user-fee-financed programs to determine 
if the fees are adequate. The most recent review determined that the 
existing fee schedule for the MGC Branch would not generate sufficient 
revenues to recover operating costs for current and near-term periods 
while maintaining an adequate reserve balance. The operating loss for 
fiscal year (FY) 2002 is projected to total $1.6 million. Without a fee 
increase, the operating loss for FY 2003 is projected to reach $2.9 
million. These combined losses will deplete MGC Branch's operating 
reserve and place the MGC Branch in an unstable financial position that 
will adversely affect its ability to provide meat grading and 
certification services.
    This proposal is necessary to offset decreased revenue hours and 
increased program operating expenses incurred since the last fee 
increase. The MGC Branch has lost revenue due to the implementation of 
more efficient audit-based and pilot certification programs and the 
continued consolidation within the livestock and meat industry. Audit-
based and pilot certification programs employ fewer personnel and, 
therefore, generate fewer revenue hours as compared to traditional 
certification services.
    MGC Branch operating expenses have increased due to (1) information 
system upgrades mandated by changes in information system technology; 
(2) congressionally mandated salary increases for all Federal 
Government employees in 2001, 2002, and 2003; (3) inflation of 
nonsalary operating costs; and (4) accumulated increases in continental 
United States (CONUS) per diem rates, mileage rates, and office 
maintenance costs. In the past 9 years, the MGC Branch has made efforts 
to control operating costs by closing 3 field offices, reducing mid-
level supervisory staff by over 50 percent, and reducing the number of 
support staff by 38 percent. At the same time, the MGC Branch has 
utilized automated information management systems for data collection, 
retrieval, and dissemination, applicant billing, and disbursement of 
employee entitlements. The reduction in field offices, supervisory 
staff, and support personnel and the increased use of automated systems 
has enabled the MGC Branch to absorb a substantial portion of the 
operating costs and minimize hourly fee increases during these years.
    Despite these cost reduction efforts and hourly fee increases in 
1998 and 2000, the MGC Branch incurred a $657,000 operating loss in FY 
2001. Furthermore, AMS projects that without an hourly fee increase, 
the MGC Branch will lose approximately $8.6 million from FY 2002 
through FY 2004 and totally deplete program reserves to the point of 
deficit operations (i.e. FY 2002, $1.6 million; FY 2003, $2.9 million; 
and FY 2004, $4.1 million).
    In view of these increased costs, AMS proposes to increase the 
hourly fees. The base hourly fee for commitment applicants would 
increase from $45 to $55. A commitment applicant is a user of meat 
grading and certification services who agrees to pay for five 
continuous 8 hour days, Monday through Friday between the hours of 6 
a.m. and 6 p.m., excluding legal holidays. The base hourly fee for 
noncommitment applicants would increase from $52 to $64. A 
noncommitment applicant is a user of meat grading and certification 
services, who agrees to pay an hourly fee without committing to a 
certain number of service hours. The premium hourly fee would increase 
from $57 to $70. The premium hourly fee is charged to

[[Page 66577]]

applicants when meat grading and certification services (1) exceed 8 
hours per day, (2) are performed before 6 a.m. and after 6 p.m. Monday 
through Friday, and (3) any time on Saturday or Sunday, except on legal 
holidays. The legal holiday fee would increase from $90 to $110 and is 
charged to applicants for meat grading and certification services 
provided on legal holidays.

Executive Order 12866

    This action has been determined to be not significant for purposes 
of Executive Order 12866, and 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.), the Administrator of AMS 
considered the economic impact of this proposed action on small 
entities and determined that it will not have a significant economic 
effect on a substantial number of small entities.
    AMS, through its MGC Branch, provides voluntary Federal meat 
grading and certification services to 450 businesses, including 152 
livestock slaughterers, 79 facilities that process federally donated 
products, 74 meat processors, 46 livestock producers and feeders, 28 
brokers, 26 organic certifying companies, 25 trade associations, 17 
State and Federal entities, and 3 distributors. Seventy-two percent of 
these businesses qualify as small entities, a company that employs less 
than 500 employees. Small entities generate approximately 17 percent of 
the MGC Branch's revenues and are under no obligation to use voluntary 
Federal meat grading and certification services provided under the 
authority of the AMA.
    Federal meat grading and certification services facilitate the 
orderly marketing of meat and meat products and enable consumers to 
obtain the quality of meat they desire. Grading services consist of the 
evaluation of carcass beef, lamb, pork, veal, and calf for compliance 
with the grades of the appropriate official U.S. Standard. The MGC 
Branch grades approximately 21.1 billion pounds of meat each year. 
Certification services consist of the evaluation of meat and meat 
products for compliance with specification and contractual 
requirements. Certification services are regularly used by meat 
purchasers to ensure that the quality and yields of the products they 
purchase comply with their stated requirements. The MGC Branch 
certifies approximately 18.1 billion pounds of meat and meat products 
each year.
    This action would raise the hourly fees charged to users of Federal 
meat grading and certification services. AMS estimates that this action 
would provide the MGC Branch an additional $401,000 per month in FY 
2003. Since small entities account for 17 percent of MGC Branch 
revenues, they would pay an average of $212 per month per applicant. 
This action and the projected increase in revenue hours would increase 
revenues by $4.8 million per year and replenish operating revenues for 
the projected losses of $2.6 million in FY 2002 and $2.3 million in FY 
2003. Even with this action, the unit cost for MGC Branch service 
(revenue/total pounds graded and certified) would remain unchanged at 
approximately $0.0006 per pound.
    This action is necessary to offset decreased revenue hours and 
increased program operating costs incurred since the last fee increase. 
The MGC Branch has lost revenue due to the implementation of more 
efficient audit-based and pilot certification programs and the 
continued consolidation within the livestock and meat industry. Audit-
based and pilot certification programs employ fewer personnel and, 
therefore, generate fewer revenue hours as compared to traditional 
certification services.
    MGC Branch operating expenses have increased due to (1) information 
system upgrades mandated by the information system technology; (2) 
congressionally mandated salary increases for all Federal Government 
employees in 2001, 2002, and 2003; (3) inflation of nonsalary operating 
costs; and (4) accumulated increases in continental United States 
(CONUS) per diem rates, mileage rates, and office maintenance costs. 
Since 1993, the MGC Branch has made efforts to control operating costs 
by closing 3 field offices, reducing mid-level supervisory staff by 
over 50 percent, and reducing the number of support staff by 38 
percent. At the same time, the MGC Branch has utilized automated 
information management systems for data collection, retrieval, and 
dissemination, applicant billing, and disbursement of employee 
entitlements. The reduction in field offices, supervisory staff and 
support personnel and the increased use of automated systems has 
enabled the MGC Branch to absorb a substantial portion of the operating 
costs and minimize hourly fee increases over the past 9 years.
    Despite these cost reduction efforts and hourly fee increases in 
1998 and 2000, the MGC Branch incurred a $657,000 operating loss in FY 
2001. Furthermore, AMS projects that without an hourly fee increase; 
the MGC Branch would lose approximately $8.6 million from FY 2002 
through FY 2004 and totally deplete program reserves to the point of 
deficit operations.
    In view of these increased costs, AMS proposes to increase the 
hourly fees for Federal meat grading and certification services. The 
base hourly fee for commitment applicants would increase from $45 to 
$55. A commitment applicant is a user of meat grading and certification 
services who agrees to pay for five continuous 8 hour days, Monday 
through Friday between the hours of 6 a.m. and 6 p.m., excluding legal 
holidays. The base hourly fee for noncommitment applicants would 
increase from $52 to $64. A noncommitment applicant is a user of meat 
grading and certification services, who agrees to pay an hourly fee 
without committing to a certain number of service hours. The premium 
hourly fee would increase from $57 to $70. The premium hourly fee is 
charged to applicants when meat grading and certification services (1) 
exceed 8 hours per day, (2) are performed before 6 a.m. and after 6 
p.m. Monday through Friday, and (3) any time on Saturday or Sunday, 
except on legal holidays. The legal holiday fee would increase from $90 
to $110 and is charged to applicants for meat grading and certification 
services provided on legal holidays.

Civil Justice Reform

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

Paperwork Reduction Act

    This action would not impose any additional reporting or 
recordkeeping requirements on users of Federal meat grading and 
certification services.

List of Subjects in 7 CFR Part 54

    Food grades and standards, Food labeling, Meat and meat products.

    For the reasons set forth in the preamble, it is proposed that 7 
CFR part 54 be amended as follows:

PART 54--MEATS, PREPARED MEATS, AND MEAT PRODUCTS (GRADING, 
CERTIFICATION, AND STANDARDS)

    1. The authority citation for 7 CFR part 54 continues to read as 
follows:


[[Page 66578]]


    Authority: 7 U.S.C. 1621-1627.


Sec.  54.27  [Amended]

    2. Section 54.27 is amended as follows:
    a. In paragraph (a), remove ``$52'' and add ``$64'' in its place, 
remove ``$57'' and add ``$70'' in its place, remove ``$90'' and add 
``$110'' in its place.
    b. In paragraph (b), remove ``$45'' and add ``$55'' in its place, 
remove ``$57'' and add ``$70'' in its place, remove ``$90'' and add 
``$110'' in its place.

    Dated: October 28, 2002.
A.J. Yates,
Administrator, Agricultural Marketing Service.
[FR Doc. 02-27766 Filed 10-31-02; 8:45 am]
BILLING CODE 3410-02-P