[Federal Register Volume 78, Number 12 (Thursday, January 17, 2013)]
[Proposed Rules]
[Pages 3851-3853]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-00916]


 ========================================================================
 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. 78, No. 12 / Thursday, January 17, 2013 / 
Proposed Rules  

[[Page 3851]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 58

[Doc. No. AMS-DA-10-0002]


Increase in Fees for Voluntary 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 the fees for voluntary Federal dairy grading and inspection 
services. The fee increases proposed are 15 percent during fiscal year 
(FY) 2013 and 5 percent during FY 2014. These fees were last adjusted 
in 2006. Dairy grading and inspection services are voluntary and are 
financed in their entirety through user fees assessed to participants 
using the program. Despite the adoption of technologies that have 
improved services, additional changes in operations that enhanced 
efficiencies, and reduced employee numbers, increases in salaries, 
technology investments, and general inflation have more than offset 
savings resulting in the need to increase fees. AMS estimates the 
proposed fee increase will result in an overall cost increase to the 
industry of less than $0.0004 per pound of dairy product graded. This 
increase is needed to avoid a reduction in the services offered that 
aid the dairy industry in effectively marketing their products.

DATES: Comments must be received on or before: February 19, 2013.

ADDRESSES: Interested persons are invited to submit comments for public 
viewing using the electronic process available at the Federal 
eRulemaking portal: http://www.regulations.gov. Reference should be 
made to the title of the action and docket number, AMS-DA-10-0002, and 
note the date and page number of this issue of the Federal Register. 
Written comments may also be submitted to Diane Lewis, Director, 
Grading and Standards Division, 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. All comments received will be available for 
public inspection at: http://www.regulations.gov

FOR FURTHER INFORMATION CONTACT: Diane Lewis, Director, Grading and 
Standards Division, Dairy Programs, Agricultural Marketing Service, 
U.S. Department of Agriculture, Stop 0225, Room 2968--South, 1400 
Independence Avenue SW., Washington, DC 20250-0225, or call (202) 720-
4392.

SUPPLEMENTARY INFORMATION: 

Executive Orders 12866 and 12988

    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 (OMB).
    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This action is not retroactive. 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 and 
Inspection Branch, AMS, provides voluntary Federal inspection and dairy 
product grading services to about 360 plants. An estimated 345 of these 
users are small businesses under the criteria established by the Small 
Business Administration (13 CFR 121.201).
    This proposed rule will raise the fees charged to businesses for 
voluntary plant inspections, grading services for dairy and related 
products. This proposal will affect all businesses that use these 
services equally. Dairy processing 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. 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. It is estimated that the proposed fee 
increases will result in an increase to plants of $0.0004 per pound of 
graded product. Therefore, AMS has determined that this proposed rule 
will not have a significant economic impact on small businesses.
    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 action does not request 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 small. Requiring the 
same information from all participating dairy plants does not 
significantly disadvantage any plant that is smaller than the industry 
average.

Description of Program

    Plants participating in the voluntary AMS Dairy Grading and 
Inspection Program process milk into dairy foods that enter commerce as 
retail products, ingredients for further processing, purchases for 
Federal food assistance programs, or exports to other countries.

[[Page 3852]]

Services provided by the program enhance the marketability and add 
value to dairy and dairy-containing foods. Dairy products manufactured 
in facilities complying with the USDA inspection requirements are 
eligible to be graded against official quality standards and 
specifications established by AMS and certain contract provisions 
between buyer and seller. Dairy products tested and graded by AMS have 
certificates issued describing the product's quality and condition.
    AMS continually reviews cost structures to assure it is operating 
efficiently while maintaining the resources necessary to meet the dairy 
industry's demand for services. Periodically, fees must be adjusted to 
ensure that the program remains financially self-supporting. The AMS 
Dairy Grading and Inspection Program has made great efforts to reduce 
the costs associated with providing grading and inspection services 
since the last fee increase in 2006 (71 FR 60805). Cost-saving 
initiatives to date have resulted in substantial gains in the 
efficiency of service delivery. In 2006, total costs for the program 
were $5.2 million to grade and certify 1.5 billion pounds of dairy 
products-a per pound cost of $0.0035. In 2011, the program's total 
costs were $5.3 million to grade and certify 2.0 billion pounds of 
dairy products--a per pound cost of product certified of $0.0026, a 25 
percent improvement in efficiency. Further enhancements will continue 
to improve the efficiency, quality and timeliness of providing 
inspection and grading services.
    In an effort to minimize the costs associated with managing its 
workforce, the Dairy Grading and Inspection Program has restructured. 
The number of administrative personnel has been reduced from 14 full 
time employees to 5 resulting in annual savings of over $400,000. The 
National Field Office, located in the suburbs of Chicago, co-located 
with other USDA offices in Lisle, Illinois, saving about $32,000 
annually. One supervisor and one training position were eliminated 
allowing about $170,000 to be redirected to cover cost increases for 
additional grading staff needed to provide requested services. In 
addition, incorporation of system automation has resulted in faster 
customer service with less staff involvement, especially in the 
delivery of export certificates. Advances in electronic submissions and 
deliveries allowed nearly 20,000 export certificates to be issued with 
only 2.0 staff positions during FY 2011.
    Although significant effort has been directed at reducing expenses, 
savings from these efforts have not offset increasing operating 
expenses incurred over the past 6 years. Consequently, existing fee 
rates are no longer adequate to cover current obligations. The program 
is depleting reserve funds at a rate that jeopardizes its ability to 
ensure effective delivery of services to meet industry needs. Given 
these trends, services will have to be significantly reduced if revenue 
is not increased. Fees must be adjusted to cover current and projected 
operating costs. Without a fee increase, AMS anticipates that it will 
have to reduce Federal Dairy Grading and Inspection Services in 2013.

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 the dairy industry's demand for 
services. Periodically, fees must be adjusted to ensure that the 
program remains financially self-supporting.
    As part of its financially self-supporting status, agency 
requirements necessitate that the program maintain a reserve trust fund 
with a minimum of 4 months of operating funds to account for program 
closure or an unexpected decrease in revenues. Since revenues have not 
covered program costs for several years, the trust fund has gradually 
been depleted. The fund first dipped below its mandated 4-month reserve 
level in FY 2010. Fiscal year 2012 revenue was $5.190 million with 
operating expenses at $5.333 million, resulting in an end of year trust 
fund balance of $83,000 or 0.2 months of operating reserve. Similar 
financial performance in FY 2013 will create a deficit of $198,000. 
Without a fee increase, the AMS Dairy Grading and Inspection Branch 
will be put in an unstable financial position that will adversely 
affect the ability to provide dairy inspection and grading services.
    In an effort to reduce costs and delay depletion of reserve funds, 
AMS has continued to automate its business practices, consolidate 
facilities, limit personnel, and implement other efficiencies. As 
detailed earlier, progress to date for the AMS Dairy Grading and 
Inspection Program has been significant and has resulted in decreasing 
costs per pound of graded product from $0.0035 to $0.0026. This is 
equivalent to a savings of approximately $816,000 on every one billion 
pounds of product graded. Further enhancements in automated business 
practices will continue to improve the efficiency and timeliness of 
providing inspection and grading services as well as information to 
users of these services.
    In view of the above considerations, AMS proposes to increase the 
hourly fees associated with Federal dairy grading and inspection 
services. This proposed rule includes a two-part incremental fee 
increase consisting of 15 percent beginning in February 2013 and an 
additional 5 percent in October 2013. Currently the fees are $63.00 per 
hour for continuous resident services and $68.00 per hour for non-
resident services. The proposed increases result in fees of $72.00 per 
hour for continuous resident services effective February 2013 and 
$76.00 per hour effective October 2013. The proposed fee for non-
resident services between the hours of 6 a.m. and 6 p.m. would be 
$78.00 per hour beginning February 2013 and $82.00 per hour as of 
October 2013. The fee for non-resident services between the hours of 6 
p.m. and 6 a.m. would be $85.80 per hour effective February 2013 and 
$90.20 as of October 2013. 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 $108.00 per hour for resident grading beginning February 
2013 and $114.00 per hour effective October 2013. Similarly, a fee of 
$117.00 per hour for non-resident grading services effective February 
2013 and $123.00 as of October 2013 would also apply. The following 
table summarizes the proposed fee changes:

[[Page 3853]]



----------------------------------------------------------------------------------------------------------------
          Service (all rates in dollars per hour)                Current        February 2013     October 2013
----------------------------------------------------------------------------------------------------------------
Continuous resident services..............................            $63.00            $72.00            $76.00
Non-resident services.....................................             68.00             78.00             82.00
Non-resident services 6 p.m.-6 a.m. (10 percent night                  74.80             85.80             90.20
 differential)............................................
Continuous resident services--in excess of 8 hours (1\1/2\             94.50            108.00            114.00
 x base)..................................................
Non-resident--in excess of 8 hours........................            102.00            117.00            123.00
----------------------------------------------------------------------------------------------------------------

    AMS estimates that dairy grading and inspection fees including the 
proposed increases will generate the following revenue (in thousands of 
dollars): FY 2013 ($5,618); FY 2014 ($6,199); FY 2015 ($6,254); and FY 
2016 ($6,296). Program costs are estimated as follows (in thousands of 
dollars): FY 2013 ($5,522); FY 2014 ($5,517); FY 2015 ($5,583); FY 2016 
($5,800). The additional cost to the industry will represent less than 
$0.0004 per pound of product certified. Even at this increased rate, 
program analysis estimate that trust fund reserves will not reach its 
required minimum level before FY 2016. Trust fund reserves are 
estimated as follows (in thousands of dollars): FY 2013 ($113); FY 2014 
($795); FY 2015 ($1,466); FY 2016 ($1,961).

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, 7 CFR part 58 is proposed 
to be amended as follows:

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

0
1. The authority citation for 7 CFR part 58 continues to read as 
follows:

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

0
2. Section 58.43 is revised to read as follows:


Sec.  58.43  Fees for inspection, grading, and sampling.

    Except as otherwise provided in Sec. Sec.  58.38 through 58.46 and 
through the last day of September 2013 inclusive, charges shall be made 
for inspection, grading, and sampling service at the hourly rate of 
$78.00 for services performed between 6:00 a.m. and 6:00 p.m. and at 
$85.80 for services performed between 6:00 p.m. and 6:00 a.m. for 
service performed for the time required to perform the service 
calculated to the nearest 15-minute period, including the time required 
for preparation of certificates and reports and the travel time of the 
inspector or grader in connection with the performance of the service. 
Following the last day of September 2013, the hourly rate will be equal 
to $82.00 for service performed between 6:00 a.m. and 6:00 p.m. and 
$90.20 for services performed between 6:00 p.m. and 6:00 a.m. 
calculated in the same manner. A minimum charge of one-half hour shall 
be made for service pursuant to each request or certificate issued. 
Charges for service performed in excess of the assigned tour of duty 
shall be made at a rate of 1\1/2\ times the rate stated in this 
section.

0
3. Section 58.45 is revised to read as follows:


Sec.  58.45  Fees for continuous resident services.

    Irrespective of the fees and charges provided in Sec. Sec.  58.39 
and 58.43, charges for the inspector(s) and grader(s) assigned to a 
continuous resident program shall be made at the rate of $72.00 per 
hour for services performed during the assigned tour of duty until the 
last day of September 2013. Following the last day of September 2013, 
the hourly rate shall be assessed at $76.00 for services calculated in 
the same manner. Charges for service performed in excess of the 
assigned tour of duty shall be made at a rate of 1\1/2\ times the rate 
stated in this section.

    Dated: January 14, 2013.
David R. Shipman,
Administrator, Agricultural Marketing Service.
[FR Doc. 2013-00916 Filed 1-16-13; 8:45 am]
BILLING CODE 3410-02-P