[Federal Register Volume 71, Number 76 (Thursday, April 20, 2006)]
[Proposed Rules]
[Pages 20351-20353]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-5941]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 58

[Docket Number DA-05-04]
RIN 0581-AC55


Increase in Fees for Federal Dairy Grading and Inspection 
Services

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: The Agricultural Marketing Service (AMS) is proposing to 
increase, by approximately 10 percent, the hourly fees charged for 
Federal dairy grading and inspection services. Dairy grading and 
inspection services are voluntary and are financed through user-fees 
assessed to participants in the program. These revisions are necessary 
in order to recover, as nearly as practicable, the increase in salaries 
of Federal employees, the increase in Agency costs, and to ensure that 
the Dairy Grading Branch operates on a financially self-supporting 
basis.

DATES: Comments must be received on or before May 22, 2006.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this proposed rule to Dana H. Coale, Deputy Administrator, 
Dairy Programs, Agricultural Marketing Service, U.S. Department of 
Agriculture, Stop 0225, room 2968--South, 1400 Independence Avenue, 
SW., Washington, DC 20250-0225. Comments may be faxed to (202) 690-
3410. Comments should be submitted in duplicate. Comments may also be 
electronically submitted to [email protected] or http://www.regulations.gov. All comments should reference docket number DA-05-
04 and note the date and page number of this issue of the Federal 
Register. All comments received will be available for public inspection 
at the above location during regular business hours. Comments received 
also will be made available over the Internet in the rulemaking section 
of the AMS Web site http://www.ams.usda.gov/rulemaking.

FOR FURTHER INFORMATION CONTACT: Dana H. Coale, Dairy Programs (202) 
720-4392.

[[Page 20352]]


SUPPLEMENTARY INFORMATION:

Executive Orders 12866 and 12988

    This proposed 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 (OMB).
    This proposed rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. This action is not retroactive. 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.

Regulatory Flexibility Act and Paperwork Reduction Act

    Pursuant to the requirement set forth in the Regulatory Flexibility 
Act, AMS has considered the economic impact of this action on small 
entities. It has been determined that its provisions would not have a 
significant economic effect on a substantial number of small entities. 
For the purpose of the Regulatory Flexibility Act, a dairy products 
manufacturer is a ``small business'' if it has fewer than 500 
employees. If a plant is part of a larger company operating multiple 
plants that collectively exceed the 500 employee limit, the plant will 
be considered a large business even if the local plant has fewer than 
500 employees.
    Under the Agricultural Marketing Act of 1946, the Dairy Grading 
Branch, AMS, provides voluntary Federal inspection and dairy product 
grading services to about 350 plants. About 210 of these users are 
small businesses under the criteria established by the Small Business 
Administration (13 CFR 121.201). Manufacturing plants participating in 
the voluntary plant inspection program have their facility inspected 
against established USDA ``General Specifications for Dairy Plants 
Approved for USDA Inspection and Grading Service'' construction and 
sanitation requirements. Dairy products manufactured in facilities 
complying with the USDA inspection requirements are eligible to have 
their output graded against official quality standards and 
specifications established by AMS and certain contract provisions 
between buyer and seller. Products tested and graded by the Dairy 
Grading Branch have certificates issued describing the product's 
quality and condition.
    AMS continually reviews its cost structure to assure it is 
operating efficiently while maintaining the resources necessary to meet 
industry's demand for services. Periodically, fees must be adjusted to 
ensure that the program remains financially self-supporting. To reduce 
costs, the Dairy Grading Branch has continued to automate its business 
practices. Progress to date has been significant and has resulted in 
savings equal to two staff years to the program. Further enhancements 
in automated business practices will continue to improve the efficiency 
and timeliness of providing inspection and grading services and 
information to users of these services.
    Employee salaries and benefits account for nearly 73 percent of the 
operating costs of the Dairy Grading Branch. Since the last fee 
increase in 2004 (69 FR 8797), annual salary increases and locality 
adjustments have resulted in an increase in employee salaries of 8.3 
percent. As a result, annual salary and benefit costs to the program 
for 2006 are approximately $240,000 more. Inflation raised non-salary 
costs approximately 6.0 percent through 2005, and it is expected that 
non-salary operating expenses will increase an additional 3.0 percent 
in 2006. Current revenue projections using Dairy Grading Branch's 
current fee schedule will not provide income sufficient to cover these 
escalating program operation costs and maintain reserves (4 months of 
costs) according to AMS policy (AMS Directive 408.1).
    Since projected revenues will not cover program costs while 
maintaining an adequate reserve, the Dairy Grading Branch will be put 
in an unstable financial position that will adversely affect the 
ability to provide dairy inspection and grading services. Without a fee 
increase, total revenue projections for Fiscal Year (FY) 2006 are 
$4.980 million. Total costs for the same period of time are projected 
to be $5.778 million. The shortfall, if allowed to continue, will 
reduce the trust fund balance to $1.578 million or 3.3 months of 
operating reserve at the end of FY 2006 which is below Agency policy. 
With the proposed fee increase effective April 1, 2006, FY 2006 
revenues are projected at $5.227 million.
    AMS estimates these fee increases will provide the Dairy Grading 
Branch an additional $504,000 annually to recover program costs and to 
provide for continued automation of business practices.
    This rule will raise the fees charged to businesses for voluntary 
plant inspections, grading services for dairy and related products, and 
the evaluation of food processing equipment. However, the impact on all 
businesses, including small entities is very similar. Even though fees 
will be increased approximately 9.7% for non-resident services and 
10.5% for continuous resident services, these fee increases should not 
significantly affect these entities. These businesses are under no 
obligation to use these voluntary user-fee based services and any 
decision on their part to discontinue the use of the services would not 
prevent them from marketing their products.
    A review of reporting requirements was completed under the 
Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35). It was 
determined that this rule would have no impact on reporting, 
recordkeeping, or other compliance requirements for entities currently 
using voluntary Federal dairy inspection and grading services because 
they would remain identical to the current requirements.
    This notice does not require additional information collection that 
requires clearance by OMB. The primary sources of data used to complete 
the forms are routinely used in most business transactions. Forms 
require only a minimal amount of information which can be supplied 
without data processing equipment or a trained statistical staff. Thus, 
the information collection and reporting burden is relatively small. 
Requiring the same information from all participating dairy plants does 
not significantly disadvantage any plant that is smaller than the 
industry average.

Proposed Action

    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 dairy inspection and grading services to 
facilitate the orderly marketing of dairy products and to enable 
consumers to obtain the quality of dairy products they desire. The AMA 
also provides for the collection of reasonable fees from users of the 
Federal dairy inspection and grading services to cover the cost of 
providing these services. The hourly fees are established by 
distributing the program's projected operating costs over the estimated 
service-revenue hours provided to users. AMS continually reviews its 
cost structure to assure it is operating efficiently while maintaining 
the resources necessary to meet industry's demand for services. 
Periodically, fees must be adjusted to ensure that the program remains 
financially self-supporting.
    To reduce costs, the Dairy Grading Branch has continued to automate 
its business practices. Progress to date has been significant and has 
resulted in

[[Page 20353]]

savings equal to two staff years to the program. Further enhancements 
in automated business practices will continue to improve the efficiency 
and timeliness of providing inspection and grading services and 
information to users of these services.
    Employee salaries and benefits account for nearly 73 percent of the 
operating costs of the Dairy Grading Branch. Since the last fee 
increase in 2004 (69CFR8797), annual salary increases and locality 
adjustments have resulted in an increase in employee salaries of 8.3 
percent. As a result, annual salary and benefit costs to the program 
for 2006 are approximately $240,000 more. Inflation raised non-salary 
costs approximately 6.0 percent through 2005, and it is expected that 
non-salary operating expenses will increase an additional 3.0 percent 
in 2006. Current revenue projections using Dairy Grading Branch's 
current fee schedule will not provide income sufficient to cover these 
escalating program operation costs and maintain reserves (4 months of 
costs) according to AMS policy (AMS Directive 408.1).
    Since projected revenues will not cover program costs while 
maintaining an adequate reserve, the Dairy Grading Branch will be put 
in an unstable financial position that will adversely affect the 
ability to provide dairy inspection and grading services. Without a fee 
increase, total revenue projections for FY 2006 are $4.980 million. 
Total costs for the same period of time are projected to be $5.778 
million. The shortfall, if allowed to continue, will reduce the trust 
fund balance to $1.578 million or 3.3 months of operating reserve at 
the end of FY 2006 which is below Agency policy. With the proposed fee 
increase effective April 1, 2006, FY 2006 revenues are projected at 
$5.227 million.
    In view of the above considerations, AMS proposes to increase the 
hourly fees associated with Federal dairy grading and inspection 
services. Currently the fees are $57.00 per hour for continuous 
resident services and $62.00 per hour for non-resident services. The 
proposed increases would result in fees of $63.00 per hour for 
continuous resident services and $68.00 per hour for non-resident 
services between the hours of 6 a.m. and 6 p.m. The proposed fees 
represent increases of $6.00 per hour (10.5 percent) for continuous 
resident and $6.00 per hour (9.7 percent) for non-resident services. 
The fee for non-resident services between the hours of 6 p.m. and 6 
a.m. would be $74.80 per hour. For services performed in excess of 8 
hours per day and for services performed on Saturday, Sunday, and legal 
holidays, 1\1/2\ times the base fees would apply and result in 
increases to $94.50 per hour for resident grading and to $102.00 per 
hour for non-resident grading services.
    AMS estimates these fee increases will provide the Dairy Grading 
Branch an additional $504,000 annually to recover program costs 
including providing for continued automation of business practices.
    A 30-day comment period is provided for interested persons to 
comment on this proposed rule. This period is appropriate in order to 
implement, as early as possible in FY 2006, any fee changes adopted as 
a result of this rulemaking action.

List of Subjects in 7 CFR Part 58

    Dairy Products, Food grades and standards, Food labeling, Reporting 
and recordkeeping requirements.

    For the reason set forth in the preamble, it is proposed that 7 CFR 
part 58 be amended as follows:

PART 58--GRADING AND INSPECTION, GENERAL SPECIFICATIONS FOR 
APPROVED PLANTS AND STANDARDS FOR GRADES OF DAIRY PRODUCTS

    1. The authority citation for 7 CFR part 58 continues to read as 
follows:

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


Sec.  58.43  [Amended]

    2. In Sec.  58.43, ``$62.00'' is removed and ``$68.00'' is added in 
its place, and ``$68.20'' is removed and ``$74.80'' is added in its 
place.


Sec.  58.45  [Amended]

    3. In Sec.  58.45 ``$57.00'' is removed and ``$63.00'' is added in 
its place.

    Dated: April 14, 2006.
Lloyd C. Day,
Administrator, Agricultural Marketing Service.
 [FR Doc. E6-5941 Filed 4-19-06; 8:45 am]
BILLING CODE 3410-02-P