[Federal Register Volume 70, Number 248 (Wednesday, December 28, 2005)]
[Rules and Regulations]
[Pages 76671-76674]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-24338]



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  Federal Register / Vol. 70, No. 248 / Wednesday, December 28, 2005 / 
Rules and Regulations  

[[Page 76671]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 51

[Docket Number FV-04-310]
RIN 0581-AC46


Revision of Fees for the Fresh Fruit and Vegetable Terminal 
Market Inspection Services

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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

SUMMARY: This rule revises the regulations governing the inspection and 
certification for fresh fruits, vegetables and other products by 
increasing by approximately 15 percent certain fees charged for the 
inspection of these products at destination markets. These revisions 
are necessary in order to recover, as nearly as practicable, the costs 
of performing inspection services at destination markets under the 
Agricultural Marketing Act of 1946 (AMA of 1946). The fees charged to 
persons required to have inspection on imported commodities are in 
accordance with the Agricultural Marketing Agreement Act of 1937 and 
for imported peanuts under section 1308 of the Farm Security and Rural 
Investigation Act of 2002.

DATES: Effective January 27, 2006.

FOR FURTHER INFORMATION CONTACT: Rita Bibbs-Booth, Program Support 
Section, Fresh Products Branch, Fruit and Vegetable Programs, USDA, 
1400 Independence Ave., SW., Room 0640-S, Washington, DC 20250-0295, or 
call (202) 720-0391.

SUPPLEMENTARY INFORMATION:

Executive Order 12866 and Regulatory Flexibility Act

    This rule has been determined to be ``non-significant'' for the 
purposes of Executive Order 12866, and therefore, has not been reviewed 
by the Office of Management and Budget.
    Also, pursuant to the requirement set forth in the Regulatory 
Flexibility Act (RFA), AMS has considered the economic impact of this 
action on small entities. Accordingly, AMS proposed this initial 
regulatory flexibility analysis.
    The purpose of the RFA is to fit regulatory actions to the scale of 
businesses subject to such actions in order that small businesses will 
not be unduly or disproportionately burdened. The action described 
herein is being taken for several reasons, including that additional 
user fee revenues are needed to cover the costs of: (1) Providing 
current program operations and services; (2) improving the timeliness 
in which inspection services are provided; and (3) improving the work 
environment.
    AMS regularly reviews its user-fee financed programs to determine 
if the fees are adequate. The Fresh Products Branch (FPB) has and will 
continue to seek out cost saving opportunities and implement 
appropriate changes to reduce its costs. Such actions can provide 
alternatives to fee increases. However, even with these efforts, FPB's 
existing fee schedule will not generate sufficient revenue to cover 
program costs while maintaining the Agency mandated reserve balance. 
Current revenue projections for FPB's destination market inspection 
work during FY 2005 are $14.6 million with costs projected at $20.9 
million and an end-of-year reserve balance of $17.6 million. However, 
this reserve balance is due to appropriated funding received in October 
2001, and for infrastructure, workplace, and technological 
improvements. FPB's costs of operating the destination market program 
are expected to increase to approximately $22.4 million during FY 2006 
and $23.1 million during FY 2007. The current fee structure with the 
infusion of the appropriated funding is expected to fund the terminal 
market inspection program until FY 2008, when FPB will fall below the 
Agency's mandated four-month reserve level.
    This fee increase should result in an estimated $1.4 million in 
additional revenues per year (effective in FY 2006). This will not 
cover all of FPB's costs. FPB will need to continue to increase fees in 
order to cover the program's operating cost and maintain the required 
reserve balance. FPB believes that increasing fees incrementally is 
appropriate at this time. Additional fee increases beyond FY 2006 will 
be needed to sustain the program in the future.
    Employee salaries and benefits are major program costs that account 
for approximately 80 percent of FPB's total operating budget. A general 
and locality salary increase for Federal employees, ranging from 3.71 
to 4.87 percent depending on locality, effective January 2005, has 
significantly increased program costs. In addition, general and 
locality salary increases for Federal employees ranging from 3.90% to 
4.92% depending on locality, effective from January 2004, also 
significantly increased program costs. These salary adjustments have 
increased FPB's costs by over $700,000 per year. Increases in health 
and life insurance premiums, along with workers compensation will also 
increase program costs. In addition, inflation also impacts FPB's non-
salary costs. These factors have increased FPB's costs of operating 
this program by over $600,000 per year.
    Additional funds of approximately $155,000 are necessary in order 
for FPB to continue to cover the costs associated with additional staff 
and to maintain office space and equipment. Additional revenues are 
also necessary to improve the work environment by providing training 
and purchasing needed equipment. In addition, FPB began, in 2001, 
developing (with appropriated funds) the Fresh Electronic Inspection 
Reporting/Resource System (FEIRS) to replace its manual paper and pen 
inspection reporting process. FEIRS was implemented in 2004. This 
system has been put in place to enhance and streamline FPB's fruit and 
vegetable inspection process, however, additional revenue is required 
to maintain FEIRS.
    This rule should increase user fee revenue generated under the 
destination market program by approximately 15 percent. This action is 
authorized under the Agricultural Marketing Act of 1946 (AMA of 1946) 
(See 7 U.S.C. 1622(h)), which provides that the Secretary of 
Agriculture may assess and collect ``such fees as will be reasonable 
and as nearly as may be to cover the costs of services rendered * * *'' 
There are more than 2,000 users of FPB's

[[Page 76672]]

destination market grading services (including applicants who must meet 
import requirements \1\--inspections which amount to under 2.5 percent 
of all lot inspections performed). A small portion of these users are 
small entities under the criteria established by the Small Business 
Administration (13 CFR 121.201). There would be no additional 
reporting, recordkeeping, or other compliance requirements imposed upon 
small entities as a result of this rule. In compliance with the 
Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), the information 
collection and recordkeeping requirements in part 51 have been approved 
previously by OMB and assigned OMB No. 0581-0125. FPB has not 
identified any other Federal rules which may duplicate, overlap or 
conflict with this rule.
---------------------------------------------------------------------------

    \1\ Section 8e of the Agricultural Marketing Agreement Act of 
1937, as amended (7 U.S.C. 601-674), requires that whenever the 
Secretary of Agriculture issues grade, size, quality or maturity 
regulations under domestic marketing orders for certain commodities, 
the same or comparable regulations on imports of those commodities 
must be issued. Import regulations apply during those periods when 
domestic marketing order regulations are in effect. Section 1308 of 
the Farm Security and Rural Investment Act of 2002 (Pub. L. 107-
171), 7 U.S.C. 7958, required USDA among other things to develop new 
peanut quality and handling standards for imported peanuts marketed 
in the United States.
    Currently, there are 14 commodities subject to 8e import 
regulations: Avocados, dates (other than dates for processing), 
filberts, grapefruit, kiwifruit, olives (other than Spanish-style 
green olives), onions, oranges, potatoes, prunes, raisins, table 
grapes, tomatoes and walnuts. A current listing of the regulated 
commodities can be found under 7 CFR parts 944, 980, 996, and 999.
---------------------------------------------------------------------------

    The destination market grading services are voluntary (except when 
required for imported commodities) and the fees charged to users of 
these services vary with usage. However, the impact on all businesses, 
including small entities, is very similar. Further, even though fees 
will be raised, the increase is not excessive and should not 
significantly affect these entities. Finally, except for those persons 
who are required to obtain inspections, most of these businesses are 
typically under no obligation to use these inspection services, and, 
therefore, any decision on their part to discontinue the use of the 
services should not prevent them from marketing their products.

Executive Order 12988

    This 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.

Action

    The AMA of 1946 authorizes official inspection, grading, and 
certification, on a user-fee basis, of fresh fruits, vegetables and 
other products such as raw nuts, Christmas trees and flowers. The AMA 
of 1946 provides that reasonable fees be collected from the users of 
the services to cover, as nearly as practicable, the cost of the 
services rendered. This rule would amend the schedule for fees and 
charges for inspection services rendered to the fresh fruit and 
vegetable industry to reflect the costs necessary to operate the 
program.
    The Agricultural Marketing Service (AMS) regularly reviews its 
user-fee programs to determine if the fees are adequate. While FPB 
continues to search for opportunities to reduce its costs, the existing 
fee schedule will not generate sufficient revenues to cover program 
costs while maintaining the Agency mandated reserve balance. Current 
revenue projections for destination market inspection work during FY-05 
are $14.6 million, with costs projected at $20.9 million and an end-of-
year reserve of $17.6 million. However, this reserve balance is due to 
appropriated funding received from Congress in October of 2001. These 
funds were established to build up the terminal market inspection 
reserve fund and for infrastructure improvements including development 
and maintenance of the inspector training center, workplace and 
technological improvements, including digital imaging and automation of 
the inspection process. However, by FY-08, without increasing fees, 
FPB's trust fund balance for this program will be below the agency 
mandated four months of operating reserve (approximately $4.6 million) 
deemed necessary to provide an adequate reserve balance in light of 
increasing program costs. Further, FPB's costs of operating the 
destination market program are expected to increase to approximately 
$22.4 million in FY-06 and to approximately $23.1 million during FY-07. 
These cost increases (which are outlined below) will result from 
inflationary increases with regard to current FPB operations and 
services (primarily salaries and benefits), increased inspection 
demands, and the acquisition and maintenance of computer technology 
(i.e., FEIRS).
    Employee salaries and benefits are major program costs that account 
for approximately 80 percent of FPB's total operating budget. A general 
and locality salary increase for Federal employees, ranging from 3.71 
to 4.87 percent depending on locality, effective January 2005, has 
significantly increased program costs. In addition, general and 
locality salary increases for Federal employees ranging from 3.90% to 
4.92% depending on locality, effective from January 2004, also 
significantly increased program costs. These salary adjustments have 
increased FPB's costs by over $700,000 per year. Increases in health 
and life insurance premiums, along with workers compensation, will also 
increase program costs. In addition, inflation also impacts FPB's non-
salary costs. These factors have increased FPB's costs of operating 
this program by over $600,000 per year.
    Additional revenues (approximately $155,000) are necessary in order 
for FPB to continue to cover the costs associated with additional staff 
and to maintain office space and equipment. Additional revenues are 
also necessary to continue to improve the work environment by providing 
training and purchasing needed equipment. In addition, FPB began, in 
2001, developing (with appropriate funds) an automated system known as 
FEIRS, to replace its manual paper and pen inspection reporting 
process. Approximately $10,000 in additional revenue per month will be 
needed to maintain the system. This system has been put in place to 
enhance FPB's fruit and vegetable inspection processes.
    Based on the aforementioned analysis of this program's increasing 
costs, AMS proposed to increase the fees for destination market 
inspection services. The following table compares current fees and 
charges with the proposed fees and charges for fresh fruit and 
vegetable inspections as found in 7 CFR 51.38. Unless otherwise 
provided for by regulation or written agreement between the applicant 
and the Administrator, the charge in the schedule of fees as found in 
Sec.  51.38 are:

[[Page 76673]]



----------------------------------------------------------------------------------------------------------------
                       Service                                   Current                      Proposed
----------------------------------------------------------------------------------------------------------------
Quality and condition inspections of products each
 in quantities of 51 or more packages and unloaded
 from the same land or air conveyance:
    --Over a half carlot equivalent of each product.  $99.00......................  $114.00
    --Half carlot equivalent or less of each product  83.00.......................  95.00
    --For each additional lot of the same product...  45.00.......................  52.00
Condition only inspections of products each in
 quantities of 51 or more packages and unloaded from
 the same land or air conveyance:
    --Over a half carlot equivalent of each product.  83.00.......................  95.00
    --Half carlot equivalent or less of each product  76.00.......................  87.00
    --For each additional lot of the same product...  45.00.......................  52.00
Quality and condition and condition only inspections
 of products each in quantities of 50 or less
 packages unloaded from the same land or air
 conveyance:
    --For each product..............................  45.00.......................  52.00
    --For each additional lot of any of the same      45.00.......................  52.00
     product.
Lots in excess of carlot equivalents will be charged
 proportionally by the quarter carlot
    Dock side inspections of an individual product
     unloaded directly from the same ship:
    --For each package weighing less than 30 pounds.  2.5 cents...................  2.9 cents
    --For each package weighing 30 or more pounds...  3.8 cents...................  4.4 cents
    --Minimum charge per individual product.........  99.00.......................  114.00
    --Minimum charge for each additional lot of the   45.00.......................  52.00
     same product.
Hourly rate for inspections performed for other
 purposes during the grader's regularly scheduled
 work week:
    --Hourly rate for other work performed during     49.00.......................  56.00
     the grader's regularly scheduled work week will
     be charged at a reasonable rate.
Audit based services:                                 ............................  75.00
    Overtime or holiday premium rate (per hour        25.00.......................  29.00
     additional) for all inspections performed
     outside the grader's regularly scheduled work
     week.
    Hourly rate for inspections performed under 40    49.00.......................  56.00
     hour contracts during the grader's regularly
     scheduled work week.
    Rate for billable mileage, per mile.............  1.00........................  1.00
----------------------------------------------------------------------------------------------------------------

    A notice of proposed rulemaking was published in the Federal 
Register on August 25, 2005 (70 FR 49882). FPB received three comments 
during this period.
    The first comment was received from Western Growers in support of 
the proposed rule to increase fees by approximately 15 percent for the 
inspection of products at destination markets. In addition, Western 
Growers urged the department to utilize an efficient business model to 
help infuse and enhance the program. Western Growers recognized that 
cost saving opportunities had been sought and asked that efforts 
continue to achieve an efficient business model and generate sufficient 
savings.
    The second comment was received from the United Fresh Fruit & 
Vegetable Association (United) in support of the fee increase. However, 
United also requested that other funding options be explored before 
additional fee increases are considered in subsequent years.
    The final comments were received from the North American Perishable 
Agricultural Receivers (NAPAR). NAPAR expressed concern regarding the 
fee increase, stating that a 15 percent increase seems excessive 
compared to inspection fees in Canada. It is difficult to compare the 
USDA fee structure with the Canadian fee structure since both 
operationally and logistically, the programs are different. NAPAR also 
commented on the validity of fees charged on multi-lot inspections. We 
reviewed the charges assessed in the example given and noted that the 
fee was calculated correctly. NAPAR also commented on the Fresh 
Electronic Inspection Reporting/Resource System (FEIRS). First, 
identifying early functionally concerns. Second, noting FEIRS 
improvements and third, recommending that funds from any increase in 
fees be used for continued FEIRS development. Appropriate funding for 
the FEIRS program has been included in the user fee calculations. NAPAR 
also requested a two week extension to allow their members an 
opportunity to file comments, which was granted on October 20, 2005, 
and ended on November 4, 2005. No additional comments from NAPAR 
members were received during the extension period.
    However, during the extended period for comments, two additional 
comments were received. A comment from Frahm Fresh Produce, Inc., urged 
that fees not be increased. The State of Washington Potato Committee 
expressed understanding for the need to increase fees and cited their 
anticipation of greater efficiencies. In addition, we received a 
comment concerning FEIRS noting that the program was appreciated at 
terminal markets and encouraged implementation at shipping point. 
However, the State of Washington Potato Committee does not support an 
increase in fees to maintain FEIRS. Finally, the comment stated that 
the Washington potato industry is feeling funding pressure and has no 
choice but to opt-out of the inspection process. We do note that there 
has been a decline in shipping point inspections.
    Each of the five comments received was carefully considered. 
Nevertheless, FPB's current fees are not adequate and an increase in 
fees is necessary. At the same time, FPB has and continues to realize 
cost savings to the terminal market program by re-assessing hours of 
service and staffing, improved management of overtime charged and 
travel and supply purchases.

List of Subjects in 7 CFR Part 51

    Agricultural commodities, Food grades and standards, Fruits, Nuts, 
Reporting and record keeping requirements, Trees, Vegetables.


0
For reasons set forth in the preamble, 7 CFR part 51 is amended as 
follows:

PART 51--[AMENDED]

0
1. The authority citation for 7 CFR part 51 continues to read as 
follows:

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


0
2. Section 51.38 is revised to read as follows:


Sec.  51.38  Basis for fees and rates.

    (a) When performing inspections of product unloaded directly from 
land or air transportation, the charges shall be determined on the 
following basis:

[[Page 76674]]

    (1) Quality and condition inspections of products in quantities of 
51 or more packages and unloaded from the same air or land conveyance:
    (i) $114 for over a half carlot equivalent of an individual 
product;
    (ii) $95 for a half carlot equivalent or less of an individual 
product;
    (iii) $52 for each additional lot of the same product.
    (2) Condition only inspections of products each in quantities of 51 
or more packages and unloaded from the same land or air conveyance:
    (i) $95 for over a half carlot equivalent of an individual product;
    (ii) $87 for a half carlot equivalent or less of an individual 
product;
    (iii) $52 for each additional lot of the same product.
    (3) For quality and condition inspections and condition only 
inspections of products in quantities of 50 or less packages unloaded 
from the same conveyance:
    (i) $52 for each individual product:
    (ii) $52 for each additional lot of any of the same product. Lots 
in excess of carlot equivalents will be charged proportionally by the 
quarter carlot.
    (b) When performing inspections of palletized products unloaded 
directly from sea transportation or when palletized product is first 
offered for inspection before being transported from the dock-side 
facility, charges shall be determined on the following basis:
    (1) Dock side inspections of an individual product unloaded 
directly from the same ship:
    (i) 2.9 cents per package weighing less than 30 pounds;
    (ii) 4.4 cents per package weighing 30 or more pounds;
    (iii) Minimum charge of $114 per individual product;
    (iv) Minimum charge of $52 for each additional lot of the same 
product.
    (2) [Reserved]
    (c) When performing inspections of products from sea containers 
unloaded directly from sea transportation or when palletized products 
unloaded directly from sea transportation are not offered for 
inspection at dock-side, the carlot fees in (a) of this section shall 
apply.
    (d) When performing inspections for Government agencies, or for 
purposes other than those prescribed in paragraphs (a) through (c) of 
this section, including weight-only and freezing-only inspections, fees 
for inspections shall be based on the time consumed by the grader in 
connection with such inspections, computed at a rate of $56 per hour: 
Provided, that:
    (1) Charges for time shall be rounded to the nearest half hour;
    (2) The minimum fee shall be two hours for weight-only inspections, 
and one-half hour for other inspections;
    (3) When weight certification is provided in addition to quality 
and/or condition inspections, a one hour charge shall be added to the 
carlot fee;
    (4) When inspections are performed to certify product compliance 
for Defense Personnel Support Centers, the daily or weekly charge shall 
be determined by multiplying the total hours consumed to conduct 
inspections by the hourly rate. The daily or weekly charge shall be 
prorated among applicants by multiplying the daily or weekly charge by 
the percentage of product passed and/or failed for each applicant 
during that day or week. Waiting time and overtime charges shall be 
charged directly to the applicant responsible for their incurrence.
    (e) When performing inspections at the request of the applicant 
during periods which are outside the grader's regularly scheduled work 
week, a charge for overtime or holiday work shall be made at the rate 
of $29.00 per hour or portion thereof in addition to the carlot 
equivalent fee, package charge, or hourly charge specified in this 
subpart. Overtime or holiday charges for time shall be rounded to the 
nearest half hour.
    (f) When an inspection is delayed because product is not available 
or readily accessible, a charge for waiting time shall be made at the 
prevailing hourly rate in addition to the carlot equivalent fee, 
package charge, or hourly charge specified in this subpart. Waiting 
time shall be rounded to the nearest half hour.

    Dated: November 16, 2005.
Lloyd C. Day,
Administrator, Agricultural Marketing Service.
[FR Doc. 05-24338 Filed 12-27-05; 8:45 am]
BILLING CODE 3410-02-P