[Federal Register Volume 68, Number 123 (Thursday, June 26, 2003)]
[Rules and Regulations]
[Pages 37954-37957]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-16167]


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DEPARTMENT OF AGRICULTURE

Food Safety and Inspection Service

9 CFR Parts 391, 590, and 592

[Docket No. 02-034F]
RIN 0583-AC94


Changes in Fees for Meat, Poultry, and Egg Products Inspection 
Services--Calendar Year (CY) 2003

AGENCY: Food Safety and Inspection Service, USDA.

ACTION: Final rule.

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SUMMARY: The Food Safety and Inspection Service (FSIS) is amending its 
regulations to change the fees that it charges meat and poultry 
establishments, egg products plants, importers, and exporters for 
providing voluntary inspection services, overtime and holiday 
inspection services, identification services, certification services, 
and laboratory services. The Agency is raising the fees for voluntary 
base time and holiday and overtime inspection services. These increases 
in fees reflect, among other factors, the national and locality pay 
raise for Federal employees (4.1 percent increase effective January 
2003) and inflation. FSIS is also decreasing the fee for laboratory 
services because of greater efficiencies realized. The Agency is not 
changing the annual fee it charges for the Accredited Laboratory 
Program.

DATES: This final rule is effective on June 29, 2003.

FOR FURTHER INFORMATION CONTACT: For further information concerning 
policy issues contact Lynn Dickey, Ph.D., Director, Regulations and 
Directives Development Staff, Office of Policy and Program Development, 
FSIS, U.S. Department of Agriculture, Room 112, Cotton Annex Building, 
300 12th Street, SW., Washington, DC 20250-3700; telephone (202) 720-
5627, fax (202) 690-0486.
    For information concerning fees, contact Raymond M. Saunders, 
Director, Budget Division, Office of Management, FSIS, U.S. Department 
of Agriculture, 2158 South Building, 1400 Independence Avenue, SW., 
Washington, DC 20250-3700, (202) 720-3367, fax (202) 690-4155.

SUPPLEMENTARY INFORMATION:

Background

    The Federal Meat Inspection Act (FMIA) (21 U.S.C. 601 et seq.), the 
Poultry Products Inspection Act (PPIA) (21 U.S.C. 451 et seq.), and the 
Egg Products Inspection Act (EPIA) (21 U.S.C. 1031 et seq.) provide for 
mandatory Federal inspection of livestock and poultry slaughter at 
official establishments, and meat and poultry processing at official 
establishments and egg products processing at official plants. FSIS 
bears the cost of mandatory inspection that occurs during an 
establishment or plant's regular hours of operation. Establishments and 
plants pay for inspection services performed on holidays or on an 
overtime basis.
    In addition, under the Agricultural Marketing Act of 1946, as 
amended (7 U.S.C. 1621 et seq.) (AMA), FSIS provides a range of 
voluntary inspection, certification, and identification services to 
assist in the orderly marketing of various animal products and 
byproducts. These services include the certification of technical 
animal fats and the inspection of exotic animal products, such as 
antelope and elk. FSIS is required to recover the costs of voluntary 
inspection, certification, and identification services.
    Under the AMA, FSIS also provides certain voluntary laboratory 
services that establishments and others may request the Agency to 
perform. Laboratory services are provided for four types of analytic 
testing: microbiological testing, residue chemistry tests, food 
composition tests, and pathology testing. FSIS must recover these 
costs.
    Additionally, FSIS conducts an accreditation program for non-
Federal analytical laboratories who are qualified under the Accredited 
Laboratory Program to conduct analyses of official meat and poultry 
samples. The Food,

[[Page 37955]]

Agriculture, Conservation, and Trade Act of 1990, as amended, mandates 
laboratory accreditation fees that cover the costs of the Accredited 
Laboratory Program. The same Act mandates annual payment of the fees on 
the anniversary date of each accreditation.
    Every year, FSIS reviews the fees that it charges for providing 
overtime and holiday inspection services; voluntary inspection, 
identification, and certification services; and laboratory services. 
The Agency performs a cost analysis to determine whether the fees that 
it has established are adequate to recover the costs that it incurs in 
providing these services. In the Agency's analysis of projected costs 
for January 12, 2003 to January 10, 2004, the Agency has identified 
increases in the costs of providing voluntary base time inspection 
services and overtime and holiday inspection services. FSIS has also 
identified decreases in the costs of providing laboratory services 
because of greater efficiencies. The Agency is not changing the annual 
fee it charges for the Accredited Laboratory Program.
    FSIS calculated the new fees for base time and overtime and holiday 
inspection services by adding the projected increase in salaries and 
inflation for 2003 to the actual cost of the services in 2002. The 
national and locality pay raise for Federal employees was a 4.1 percent 
increase effective January 2003. The Agency calculated inflation to be 
2.1% for 2003. Section 10703 of the 2002 Farm bill authorizes the 
Secretary of Agriculture to set the hourly rate of compensation for 
FSIS employees exempt from the Fair Labor Standards Act (i.e., 
veterinarians) working in establishments subject to the FMIA and PPIA 
at one and one-half times the employee's hourly rate of base pay. FSIS 
has adjusted the overtime fees to include the costs of time-and-a-half 
for all in-plant employees doing overtime work. Previously, 
veterinarians were limited to the time-and-a-half rate paid to 
employees at grade level GS-10, step 1. Finally, because of 
improvements in accessing data from the accounting system, the Agency 
has been able to estimate the employee benefits ascribable to overtime 
work and include these in the fee calculation. These costs were 
formerly only included in the base rate.
    The previous and new fees are listed by type of service in Table 1.

   Table 1.--Previous and New Fees--Per Hour Per Employee--By Type of
                                 Service
------------------------------------------------------------------------
                                                       Previous    New
                       Service                           rate      rate
------------------------------------------------------------------------
Base time...........................................     $42.64   $43.64
Overtime & holiday..................................      44.40    50.04
Laboratory..........................................      68.32    61.80
------------------------------------------------------------------------

    The differing proposed fee increase for each type of service is the 
result of the different amount that it costs FSIS to provide these 
three types of services. The differences in costs stem from various 
factors, including different salary levels of the program employees who 
perform the services. See Table 2.

       Table 2.--Calculations for the Different Types of Services
------------------------------------------------------------------------
                           Base time                             Amount
------------------------------------------------------------------------
Actual CY 2002 cost...........................................   $22.54
Pay raise (4.1%)..............................................     0.92
Benefits......................................................     6.10
Travel, operating & lab costs, & inflation....................     2.26
Program overhead..............................................     4.27
Agency overhead...............................................     7.03
Allowance for bad debt........................................     0.52
                                                               ---------
    Total.....................................................    43.64
                                                               =========
Overtime and Holiday Inspection Services:
    Actual CY 2002 cost.......................................    30.10
    Time & a half for veterinarians...........................     2.73
    Pay raise (4.1%)..........................................     1.35
    Benefits..................................................     1.71
    Travel, operating & lab costs, & inflation................     2.26
    Program overhead..........................................     4.27
    Agency overhead...........................................     7.03
    Allowance for bad debt....................................     0.60
    Adjustment for divisibility into quarter hours............    (0.01)
                                                               ---------
        Total.................................................    50.04
                                                               =========
Laboratory Services:
    FY 2001 hourly salaries & benefits........................    32.05
    Pay raises in 2002 & 2003.................................     2.85
    Travel & operating costs for 2002 & 2003..................     5.72
    Program overhead..........................................    14.13
    Agency overhead...........................................     6.32
    Allowance for bad debt....................................     0.74
    Adjustment for divisibility by quarter hours..............    (0.01)
                                                               ---------
        Total.................................................    61.80
------------------------------------------------------------------------

    The Agency must recover the actual cost of the services covered by 
this final rule. These fee increases are essential for the continued 
sound financial management of the Agency's costs. FSIS announced in its 
February 26, 2003, proposed rule [68 FR 8858] the fee changes provided 
for in this final rule. The Agency believes that adequate notice has 
been given to affected parties. The Administrator has determined that 
these amendments should be effective less than 30 days after 
publication in the Federal Register in order for FSIS to recover the 
costs of the services provided and reduce the possibility of monetary 
loses for the Agency. Therefore, the changes in fees will be effective 
on June 29, 2003.

Proposed Rule and Comments

    FSIS published a proposed rule [68 FR 8858] on February 26, 2003, 
stating that it was proposing changing fees for inspection services for 
CY 2003. The Agency provided for a thirty day comment period, ending 
March 28, 2003. FSIS received two comments on the proposed rule; one 
from a government employee and one from an industry group.
    Comment: The Government commenter said that changes made in the 
administration of the Accredited Laboratory Program have depleted the 
surplus of funds in the Accredited Laboratory Program account. 
Consequently, the Agency should not decrease the amount it charges for 
the Accredited Laboratory Program.
    Response: The Agency agrees with the comment and, therefore, will 
not amend its regulations to decrease the fee charged Accredited 
Laboratories.
    The industry commenter raised several objections to raising fees 
for voluntary inspection services.
    Comment: Contrary to the Agency's assertion, the increase for 
overtime and holiday inspection service is well beyond what the 
industry would anticipate for inflation and wage increases.
    Response: The increase in fees result from inflation and greater 
salary costs that are not dissimilar to industry's. FSIS will now be 
reimbursing veterinarians a full time and half over their base rate of 
pay for holiday and overtime. This accounts in part for the size of the 
increase for overtime and holiday pay. The change in holiday and 
overtime pay for veterinarians was authorized by the 2002 Farm Bill.
    Comment: FSIS has not considered the incremental cost per pound for 
mandatory overtime and holiday inspection.
    Response: FSIS has considered the incremental cost per pound and 
acknowledges that it will differ from establishment to establishment, 
depending upon how much overtime and holiday inspection they use, and 
whether they use voluntary inspection services. This has been discussed 
in the economic analysis.

[[Page 37956]]

    Comment: More information is needed to fully assess the economic 
impact of the proposed increases.
    Response: The Agency believes it has presented adequate information 
to explain the assessment of the economic impact of the fee increases.
    Comment: Automatic fee increases for mandatory inspection eliminate 
any pressure to optimize the use of limited inspection services.
    Response: FSIS appropriations do not cover voluntary inspection 
services or overtime and holiday inspection services. The Agency is 
required by statute to recover the full cost of voluntary and overtime 
and holiday inspection services.
    Comment: FSIS should fulfill its goal of implementing risk-based 
inspection and eliminate fees for overtime and holiday inspection.
    Response: FSIS is moving toward a more risk-based allocation of 
inspection resources. However, a risk-based inspection approach does 
not mean the elimination of holiday and overtime inspection fees. These 
fees are required by statute.

Executive Order 12866 and Regulatory Flexibility Act

    Because this final 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 final rule 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.
    Establishments and plants that seek FSIS services are likely to 
have calculated that the incremental costs of overtime and holiday 
inspection services will be less than the incremental expected benefits 
of additional revenues that they would realize from additional 
production.

Economic Effects

    As a result of the new fees, the Agency expects to collect an 
estimated $119 million in revenues for 2003, compared to $101 million 
under the previous fee structure. The costs that industry will 
experience by the raise in fees are similar to other increases that the 
industry faces because of inflation and wage increases.
    The total volume of meat and poultry slaughtered under Federal 
inspection in 2001 was about 83 billion pounds (Livestock, Dairy, Meat, 
and Poultry Outlook Report, Economic Research Service, USDA, August 15, 
2002). The total volume of U.S. egg product production in 2001 was 
about 2.319 billion pounds (2002 Agriculture Statistics, USDA). The 
increase in cost per pound of product associated with the new fees 
increases is, in general, $.0002. Even in competitive industries like 
meat, poultry, and egg products, this amount of increase in costs would 
have an insignificant impact on profits and prices.
    The industry is likely to pass through a significant portion of the 
new fee increases to consumers because of the inelastic nature of the 
demand curve facing these firms. Research has shown that consumers are 
unlikely to reduce demand significantly 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 the inelastic 
nature of demand and the competitive nature of the industry, individual 
firms are not likely to experience any change in market share in 
response to an increase in inspection fees.

Executive Order 12988

    This final rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. This final 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, 381.35, and 
590.300 through 590.370, respectively, must be exhausted before 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, PPIA, 
or EPIA.

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 make copies of this Federal 
Register publication available through the FSIS Constituent Update. 
FSIS provides a weekly Constituent Update, which is communicated via 
Listserv, a free e-mail subscription service. 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, 
public meetings, recalls, and any other types of information that could 
affect or would be of interest to our constituents/stakeholders. The 
constituent Listserv 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 the Listserv and Web page, FSIS is able to provide 
information to a much broader, more diverse audience than would 
otherwise be possible.
    For more information contact the Congressional and Public Affairs 
Office, at (202) 720-9113. To be added to the free e-mail subscription 
service (Listserv) go to the ``Constituent Update'' page on the FSIS 
Web site at http://www.fsis.usda.gov/oa/update/update.htm. Click on the 
``Subscribe to the Constituent Update Listserv'' link, then fill out 
and submit the form.

List of Subjects

9 CFR Part 391

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

9 CFR Part 590

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

9 CFR Part 592

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

0
For the reasons set forth in the preamble, FSIS is amending 9 CFR 
Chapter III as follows:

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

0
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.

0
2. Sections 391.2, 391.3, and 391.4, are revised to read as follows:
Sec.
391.2 Base time rate.
391.3 Overtime and holiday rate.
391.4 Laboratory service rate.

Sec.  391.2  Base time rate.

    The base time rate for inspection services provided pursuant to 
Sec. Sec.  350.7, 351.8, 351.9, 352.5, 354.101, 355.12, and 362.5 is 
$43.64 per hour per program employee.


Sec.  391.3  Overtime and holiday rate.

    The overtime and holiday rate for inspection services provided 
pursuant

[[Page 37957]]

to Sec. Sec.  307.5, 350.7, 351.8, 351.9, 352.5, 354.101, 355.12, 362.5 
and 381.38 is $50.04 per hour per program employee.


Sec.  391.4  Laboratory services rate.

    The rate for laboratory services provided pursuant to Sec. Sec.  
350.7, 351.9, 352.5, 354.101, 355.12, and 362.5 is $61.80 per hour per 
program employee.

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

0
3. The authority citation for Part 590 continues to read as follows:

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

0
4. 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 $50.04.

0
5. In Sec.  590.128, paragraph (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 $50.04.

PART 592--VOLUNTARY INSPECTION OF EGG PRODUCTS

0
6. The authority citation for Part 592 continues to read as follows:

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

0
7. Sections 592.2, 592.3, and 592.4 are revised to read as follows:
Sec.
592.2 Base time rate.
592.3 Overtime rate.
592.4 Holiday rate.
592.2 Base time rate.

    The base time rate for voluntary inspection services of egg 
products is $43.64 per hour per program employee.


Sec.  592.3  Overtime rate.

    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 $50.04.


Sec.  592.4  Holiday rate.

    When an official plant requires voluntary 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 $50.04.

    Done at Washington, DC on: June 23, 2003.
Garry L. McKee,
Administrator.
[FR Doc. 03-16167 Filed 6-25-03; 8:45 am]
BILLING CODE 3410-DM-P