[Federal Register Volume 71, Number 60 (Wednesday, March 29, 2006)]
[Proposed Rules]
[Pages 15631-15633]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-4519]


 ========================================================================
 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.
 
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 

  Federal Register / Vol. 71, No. 60 / Wednesday, March 29, 2006 / 
Proposed Rules  

[[Page 15631]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 54

[Docket Number LS-05-06]
RIN 0581-AC49


Changes in Fees for Voluntary 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 May 30, 2006.
    Additional Information or Comments: 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]; faxed 
to (202) 690-1062; or Internet: http://www.regulations.gov.
    All comments should reference docket number LS-05-06 and note the 
date and page number of this issue of the Federal Register.
    Comments received will be posted at http://www.ams.usda.gov/lsg/mgc/rule.htm, or 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.

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 80 percent of the operating 
costs, with travel, training, and administrative costs making up the 
remainder. 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) 2005 totaled $1.8 million. Without a fee increase, the 
operating loss for FY 2006 is projected to be $1.1 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, while providing the same or a 
higher level of assurance, employ fewer personnel and, therefore, 
generate fewer revenue hours as compared to traditional certification 
services.
    MGC Branch operating expenses have increased due to: (1) Cyber 
Security upgrades mandated by the Department and system technologies; 
(2) mandated salary increases for all Federal Government employees in 
2004, 2005, and 2006; (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 the last fee increase in 2003, the MGC Branch has made 
efforts to control operating costs by closing 3 field offices and 
reducing the number of support staff by 33 percent. The MGC Branch has 
also increased the use of computer information systems for data 
collection, retrieval, and dissemination; applicant billing; and 
disbursement of employee entitlements. This reduction in field offices 
and support personnel, and the increased use of automated systems to 
process data has enabled the MGC Branch to absorb a substantial portion 
of the operating costs and minimize the need for hourly fee increases 
in past years. However, these management efforts have not negated the 
need to maintain trust fund balances to assure operating expenses are 
met in the future.
    Despite the cost reduction efforts, the MGC Branch incurred a $1.8 
million operating loss in FY 2005. Furthermore, AMS projects that 
without an hourly fee increase, the MGC Branch will lose approximately 
$6.5 million from FY 2006 through FY 2009, and totally deplete program 
reserves to the point of deficit operations (i.e. FY 2006, $1.1 
million; FY 2007, $1.2 million; FY 2008, $1.8 million; and FY 2009, 
$2.4 million).
    In view of the increased costs and decreased revenues, AMS proposes 
to increase the hourly fees to cover the operating deficits. The base 
hourly fee for commitment applicants would increase from $55 to $61. 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 $64 to $71. A noncommitment applicant is a user of meat 
grading and certification services, who agrees to pay an hourly fee 
without committing to a certain

[[Page 15632]]

number of service hours. The premium hourly fee would increase from $70 
to $78. 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 $110 to $122 and is charged to 
applicants for meat grading and certification services provided on 
legal holidays.

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.), 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 285 businesses, including 100 
livestock slaughterers, 66 facilities that process federally donated 
products, 62 meat processors, 28 livestock producers and feeders, 9 
brokers, 11 trade associations, and 9 State and Federal entities. 
Eighty seven percent of these businesses qualify as small entities; a 
company that employs less than 500 employees. Small entities generate 
approximately 33 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 in accordance 
with the appropriate official U.S. Standard. The MGC Branch grades 
approximately 20.0 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 yield of the products they purchase comply with 
the stated requirements. The MGC Branch certifies approximately 22.4 
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 $210,210 in revenue per 
month in FY 2006. Since 245 small entities account for 33 percent of 
MGC Branch revenues, this action would result in an average increase of 
$65 per week per applicant. This action would increase revenues by 
almost $2.5 million per year and offset the projected losses of $1.1 
million in FY 2006 and $1.2 million in FY 2007. Even with this action, 
the unit cost for MGC Branch service (revenue/total pounds graded and 
certified) would actually decrease from $0.0006 to $0.0005 per pound, 
due to increased projected grading and certification volumes.
    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. The implementation of audit-based programs has 
decreased overall costs to smaller entities.
    MGC Branch operating expenses have increased due to (1) Cyber 
Security upgrades mandated by the Department and system technologies; 
(2) congressionally mandated salary increases for all Federal 
Government employees in 2004, 2005, and 2006; (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 2003, the MGC Branch has made efforts to control operating 
costs by closing 3 field offices and reducing the number of support 
staff by 33 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 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 
delay hourly fee increases.
    Despite these cost reduction efforts and previous hourly fee 
increases, the MGC Branch incurred a $1.8 million operating loss in FY 
2005. Furthermore, AMS projects that without an hourly fee increase; 
the MGC Branch would lose approximately $6.5 million from FY 2006 
through FY 2009 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 $55 to 
$61. 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 $64 to $71. 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 $70 to $78. 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 
$110 to $122 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:

[[Page 15633]]

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:

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

    2. Section 54.27 is amended by:
    A. Removing in paragraph (a), ``$64'' and adding ``$71'' in its 
place, removing ``$70'' and adding ``$78'' in its place, and removing 
``$110'' and adding ``$122'' in its place.
    B. Removing in paragraph (b), ``$55'' and adding ``$61'' in its 
place, removing ``$70'' and adding ``$78'' in its place, and removing 
``$110'' and adding ``$122'' in its place.

    Dated: March 23, 2006.
Lloyd C. Day,
Administrator, Agricultural Marketing Service.
[FR Doc. E6-4519 Filed 3-28-06; 8:45 am]
BILLING CODE 3410-02-P