[Federal Register Volume 85, Number 20 (Thursday, January 30, 2020)]
[Rules and Regulations]
[Pages 5299-5302]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-01205]



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 Rules and Regulations
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 This section of the FEDERAL REGISTER contains regulatory documents 
 having general applicability and legal effect, most of which are keyed 
 to and codified in the Code of Federal Regulations, which is published 
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  Federal Register / Vol. 85, No. 20 / Thursday, January 30, 2020 / 
Rules and Regulations  

[[Page 5299]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 868

[Doc. No. AMS-FGIS-18-0088]
RIN 0581-AD85


Fees for Rice Inspection Services and Removal of Specific Fee 
References

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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

SUMMARY: This final rule revises the regulations governing the 
sampling, inspection, weighing, and certification of rice performed 
under authority of the Agricultural Marketing Act of 1946 (AMA), as 
amended, by decreasing fees by 20 percent for fiscal year (FY) 2020 and 
by another 20 percent for FY 2021. These revisions are necessary to 
lower the balance in the program's operating reserve to a level 
adequate to cover three to six months' expenses. AMS is implementing 
the standardized AMS user-fee calculations used in other AMS programs 
for rice inspection services beginning in FY 2022.

DATES: Effective January 30, 2020, and applicable beginning January 1, 
2020.

FOR FURTHER INFORMATION CONTACT: Denise Ruggles, FGIS Executive Program 
Analyst, AMS, USDA; Telephone: (816) 659-8406; Email: 
[email protected].

SUPPLEMENTARY INFORMATION: The AMA (7 U.S.C. 1621-1638) authorizes the 
Federal Grain Inspection Service (FGIS) to provide official inspection 
and weighing services--on a user-fee basis--for rice (7 U.S.C. 
1622(h)). The AMA provides for the assessment and collection of 
reasonable fees from the users of the services to cover, as nearly as 
practicable, the costs of the services rendered. AMS receives no 
directly appropriated funds to provide inspection and weighing 
services. AMS ability to provide these services depend on user fees.
    The fees reflect direct and indirect costs of providing services. 
Direct costs include employee salaries and benefits, and certain 
operating expenses, such as travel. Indirect overhead costs include 
expenses related to FGIS and AMS activities supporting the services 
provided to the industry, including administrative and supervisory 
expenses, rent, communication, utilities, contractual services, 
supplies, and equipment. The formula used to calculate the fee rates 
also includes the cost of building and maintaining an operating 
reserve, as required by AMS. Reserves are held to meet financial 
obligations in case of program closure or other unexpected events.
    AMS invited comments on the proposed rule identifying changes to 
the FGIS user fees for rice inspection and weighing services (84 FR 
45439). AMS received no comments.
    The fees for rice inspection services were last revised in 2007 (72 
FR 1931). The fee schedule at 7 CFR 868.91 provides for fee increases 
at set intervals, the most recent taking effect in October 2010 for the 
2011 fiscal year and beyond. Although fees have not increased since 
then, the current fee structure has generated a recurring annual 
operating surplus for several years, resulting in an estimated reserve 
balance at the end of FY 2019 that would cover 21 months of rice 
inspection program expenses, exceeding AMS's target of maintaining 
funds to cover 3 to 6 months' expenses. Estimated monthly costs to 
operate the rice inspection program in FY 2019 are $457,000. Thus, AMS 
would consider an operating reserve of between $1.37 million and $2.74 
million (3 and 6 times the monthly operating cost, respectively) at the 
end of FY 2019 to be appropriate. Financial data for the rice 
inspection program for fiscal years 2015 through 2019 is reviewed in 
Table 1.

                                    Table 1--Rice Program Financial Analysis
                                             [Millions of Dollars] *
----------------------------------------------------------------------------------------------------------------
                                       FY 15           FY 16           FY 17           FY 18         FY 19 **
----------------------------------------------------------------------------------------------------------------
Revenue.........................           $6.93           $5.79           $5.84           $5.50           $5.49
Obligations.....................            5.13            5.36            5.44            5.39            5.48
Annual Surplus or (Deficit).....            1.80            0.43            0.40            0.11            0.01
Operating Reserve--running                  8.45            8.88            9.28            9.38            9.39
 balance........................
----------------------------------------------------------------------------------------------------------------
* Figures may not sum due to rounding and adjustments of prior year obligations.
** FY 2019 values are projections.

    As illustrated by Table 1, even though revenues have generally 
declined due to varying requests for service and increased 
efficiencies, and obligations have generally increased over the last 
five years due to inflation and costs of living adjustments, year-
after-year surpluses have continued to increase. The result is an 
operating reserve running balance exceeding the range AMS deems 
appropriate.
    AMS addresses the surplus by reducing fees for rice inspection 
services by 20 percent across the board for FY 2020 and by another 20 
percent for FY 2021. AMS expects that reducing fees in this manner 
would gradually reduce the balance in the reserve fund while also 
allowing FGIS to continue making strategic operational expenditures to 
meet industry expectations and achieve United States Department of 
Agriculture (USDA) goals.
    The rates in this rule are for Federal inspection services only. 
Third-party inspection service providers establish their rates 
independently.
    Fees for fiscal years 2020 and 2021 are shown in Tables 2 and 3 
below:

[[Page 5300]]



                 Table 2--Hourly Rates/Unit Rate Per CWT
------------------------------------------------------------------------
                                              Regular       Nonregular
                                              workday         workday
                Service 1                    (Monday-       (Sunday and
                                             Saturday)       Holiday)
------------------------------------------------------------------------
FY 2020 (Effective 01/01/2020):
    Contract (per hour per Service                $49.40          $68.50
     representative)....................
    Noncontract (per hour per Service              60.20           82.90
     representative)....................
                                         -------------------------------
    Export Port Services (per
     hundredweight) \2\.................               0.059
                                         -------------------------------
FY 2021 (Effective 10/01/2020):
    Contract (per hour per Service                 39.50           54.80
     representative)....................
    Noncontract (per hour per Service              48.20           66.30
     representative)....................
                                         -------------------------------
    Export Port Services (per
     hundredweight) \2\.................               0.047
------------------------------------------------------------------------


                      Table 3--Unit Rates Service 3
------------------------------------------------------------------------
                                              FY 2020         FY 2021
Inspection for quality (per lot, sublot,   effective 01/   effective 10/
          or sample inspection)               01/2020         01/2020
------------------------------------------------------------------------
    (a) Rough rice......................          $37.80          $30.20
    (b) Brown rice for processing.......           32.50           26.00
    (c) Milled rice.....................           23.40           18.70
Factor analysis for any single factor
 (per factor):
    (a) Milling yield (per sample)                 29.30           23.40
     (Rough or Brown rice)..............
    (b) All other factors (per factor)             14.10           11.30
     (all rice).........................
        Total free and fatty acid.......           45.80           36.60
Stowage Examination (service-on-
 request):
    (a) Ship (per stowage space)                   40.40           32.30
     (minimum 5 spaces per ship)........
    (b) Subsequent ship examination                40.40           32.30
     (same as original) (minimum 3
     spaces per ship)...................
    (c) Barge (per examination).........           32.40           25.90
    (d) All other carriers (per                    12.40            9.90
     examination).......................
------------------------------------------------------------------------

    For FY 2022 and beyond, AMS will determine rice inspection service 
fees by using the standardized formulas AMS has established for 
calculating user fees for Cotton, Dairy, Fruits and Vegetables, Meat 
and Livestock, Poultry, Science and Technology, and Tobacco. 
Established in 2014 (79 FR 67313), the standardized method enables AMS 
to use current information about resource needs and projected costs of 
providing services to update rates for services on an annual basis, 
thus better avoiding unexpected financial shortfalls or unintended 
reserve surpluses. AMS announces the fees pertaining to all the AMS 
inspection-related services for the coming year annually through a 
notice in the Federal Register by the preceding June 1. AMS posts the 
fees on the Agency's website for customer reference during the year. 
AMS believes this action for rice would help FGIS adjust the rice 
inspection reserve account as necessary and provide its customers with 
information they need for planning purposes. Once the reserve balance 
has reached an appropriate level, AMS anticipates that the standardized 
formula for fee rates will appropriately account for increases in the 
actual costs of providing inspection services.
---------------------------------------------------------------------------

    \1\ Original and appeal inspection services include: Sampling, 
grading, weighing, and other services requested by the applicant 
when performed at the applicant's facility.
    \2\ Services performed at export port locations on lots at rest.
    \3\ Fees apply to determinations (original or appeals) for kind, 
class, grade, factor analysis, equal to type, milling yield, or any 
other quality designation as defined in the U.S. Standards for Rice 
or applicable instructions, whether performed singly or in 
combination at other than the applicant's facility.
---------------------------------------------------------------------------

    Currently, 7 CFR 868.91--Fees for certain Federal rice inspection 
services--provides the fees for rice inspections. Section 868.91 lists 
the fees in two tables: Hourly rates or per unit rates per 
hundredweight for contract and noncontract services, and unit rates for 
inspecting, analyzing, or providing other related services. The tables 
give annual rates effective in 2007, 2008, 2009, and 2010. The current 
rates have not been adjusted since October 1, 2010. AMS is removing the 
two tables from Sec.  868.91 for FY 2020. AMS will publish instead 
reduced fees--as described in Tables 2 and Table 3 above--on the AMS 
website for FY 2020 and FY 2021.
    For FY 2022 and beyond, AMS adds a new Sec.  868.91(b) specifying 
the formulas for calculating rice inspection fees on an annual basis. 
As with other programs, AMS would perform financial analyses each year 
to determine whether the current fees are adequate to recover the costs 
incurred by providing rice inspection services. AMS would use 
historical or prior year cost and workload data, along with applicable 
projections to generate estimates of future obligations and revenues. 
On the bases of these analyses and formulas, AMS would determine the 
rates necessary to sustain rice inspection program services. Using the 
formulas to calculate the fees, and reviewing the fees on an annual 
basis, would more accurately reflect the actual cost of providing 
inspection services each year and would provide greater transparency 
and predictability to the rice industry. AMS would publish the fees for 
each upcoming fiscal year in the annual AMS user-fee notice in the 
Federal Register by the preceding June 1. The yearly notice would 
include both the per-hour rates and the per-unit rates. Updated fees 
schedules would no longer appear in the Code of Federal Regulations but 
would be available on the AMS website.

Calculations

    AMS will base salary, hours, and most factors used in the 
calculations on the

[[Page 5301]]

prior year's actual costs, workload data, projection of expenses 
impacting program costs, cost of living increase, and inflation. AMS 
would base cost of living increase and inflation factors on the most 
recent economic data released by the Office of Management and Budget 
(OMB) for budget development purposes. AMS would round the final rates 
up to make the amounts divisible by the quarter hour (15 minutes). 
Under the rate formulas, the minimum charge for services covered by the 
inspection fee rates would be for 15 minutes. As explained later in 
this document, the applicant requesting inspection service would be 
charged travel costs on an actual basis. AMS chose to use these 
formulas for rice inspection fees, so they would be consistent with the 
formulas used agency wide in other AMS programs.
    Currently, some rice inspection service fees are charged on a per 
hour basis, and some are charged on a per unit basis. AMS will continue 
providing costs on both bases to maintain continuity. As well, AMS 
would provide the specific amounts used to calculate each year's rates 
upon request.
    AMS adds a new paragraph Sec.  868.91(b)(1) to include the formulas 
for calculating regular, overtime, and holiday fee rates for FY 2022 
and succeeding fiscal years. AMS further adds a new paragraph Sec.  
868.91(b)(2) to include the component formulas for benefits, operating, 
and allowance for bad debt rates.
    Finally, AMS adds a new Sec.  868.91(b)(3), which specifies that 
AMS will use the most recently released OMB economic data to generate 
the cost of living and inflation factors used in the above formulas.

Travel Expense

    One factor that may have contributed to the operating reserve 
buildup over time is the incorporation of an allowance for travel 
expenses in the current rice inspection fee rates that may not have 
reflected actual travel costs. AMS addresses this by specifying in the 
fee calculation formulas that travel expenses related to providing 
inspection services, such as commercial transportation costs, mileage, 
and per diem, will be based on actual travel costs incurred to perform 
the service. The fee rate calculations in Sec.  868.91(b) will specify 
that actual travel expenses for rice inspection services may be added 
to the cost of providing the service, consistent with current practice 
under most other AMS programs. This change will be applicable to fee 
rates beginning in FY 2022.
    As a conforming change, AMS removes the language in Sec.  
868.92(a)(2)--Explanation of service fees and additional fees, which 
makes specific reference to the inclusion of travel expenses in the 
current rice inspection fee calculations, as that language would be 
obsolete.

Effective Date

    This is a substantive rule that relieves restrictions and, pursuant 
to the provisions of 5 U.S.C. 553, may be made effective less than 30 
days after publication in the Federal Register. Retroactive 
implementation of this rule is necessary to provide relief to those 
persons who are adversely affected by being assessed a user fee rate 
higher than would be collected under this rule. Making this rule 
effective retroactively will allow interested producers and others in 
the marketing chain to benefit from the reduced user fee assessment 
immediately. Therefore, the Administrator of the Agricultural Marketing 
Service has determined that this rule should be effective retroactively 
starting January 1, 2020.

Executive Orders 12866, 13563, and 13771

    Executive Orders 12866--Regulatory Planning and Review, and 13563--
Improving Regulation and Regulatory Review, direct agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits of reducing costs, harmonizing rules, and promoting 
flexibility. This rule does not meet the criteria of a significant 
regulatory action under Executive Order 12866 as supplemented by 
Executive Order 13563. Therefore, OMB has not reviewed this rule under 
those Orders. Additionally, because this rule does not meet the 
definition of a significant regulatory action under Executive Order 
12866, it does not trigger the requirements contained in Executive 
Order 13771. See OMB's memorandum titled ``Interim Guidance 
Implementing Section 2 of the E.O. of January 30, 2017, titled 
`Reducing Regulation and Controlling Regulatory Costs''' (February 2, 
2017).
    AMS considered several alternatives to the changes in this rule, 
including making larger decreases to the FY 2020 and FY 2021 rates to 
bring the reserve balance down more quickly or making a larger fee rate 
decrease for FY 2020 only. Ultimately, AMS determined that the approach 
of making smaller--but still significant--reductions two years in a row 
before transitioning to the standardized fee calculations would be the 
alternative least disruptive to the industry while moving toward 
desirable reserve levels. AMS expects the changes to benefit the rice 
industry by reducing rates by 20% for each of the next two years and 
then adjusting rates as needed annually thereafter to reflect actual 
expenses related to rice inspections. Under the rule, rice inspection 
service users would likely enjoy further savings since most inspection 
sites are near FGIS field offices and charges for travel will be based 
on actual expenses rather than the standard flat amount incorporated 
into the current fee rates. AMS does not expect the rule to provide any 
environmental, public health, or safety benefits. AMS has not 
identified any costs related to this action.

Executive Order 12988

    This rule has been reviewed under Executive Order 12988--Civil 
Justice Reform. This rule 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. No administrative proceedings would be required before parties 
could file suit in court challenging the provisions of this rule.

Congressional Review Act

    Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), 
the Office of Information and Regulatory Affairs designated this rule 
as not a major rule, as defined by 5 U.S.C. 804(2).

Regulatory Flexibility Analysis

    Pursuant to the requirements set forth in the Regulatory 
Flexibility Act (RFA) (5 U.S.C. 601-602), AMS has considered the 
economic impact of this action on small entities. 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.
    There are approximately 169 applicants who receive rice inspection 
services. AMS estimates 42 percent of these users would be considered 
small businesses based on criteria established by the Small Business 
Administration (13 CFR 121.201) to differentiate between large and 
small business entities. SBA uses the North American Industry 
Classification System (NAICS) to categorize various industry 
businesses. SBA defines small rice farmers, NAICS code 111160, as those

[[Page 5302]]

whose annual receipts do not exceed $750,000 and small rice millers, 
NAICS code 311212, as those with no more than 500 employees.
    When the current rice inspection fees were set in 2007, an 18 
percent increase was implemented to cover program deficits caused by 
increases in employee salaries and benefits, the replacement of aging 
rice inspection equipment, and upgrading the information technology 
system used to generate certificates. The increase also was intended to 
create the operating reserve. However, as explained earlier in this 
document, revenues have continued to exceed expenditures, indicating 
that an adjustment to the fee schedule is now warranted. In addition, 
travel expenses were built into the hourly and unit fees currently 
charged by the program, resulting in higher than necessary revenues to 
cover the actual service provided.
    Changes to the fees will reduce the cost of rice inspections by 20 
percent for all services in FY 2020 across the board, regardless of the 
business entity's size, for a projected savings of approximately $1.17 
million to the industry. A further 20 percent reduction for FY 2021 
will net approximately $2.13 million in savings to the industry. All 
entities using rice inspection services, large and small, would be 
expected to benefit from reduced expenses for these services. Savings 
would be proportionate to the number of inspection services an entity 
requests each year. Use of standardized AMS user-fee rate calculations 
for FY 2022 and beyond would benefit all inspection applicants, 
regardless of size, as fees would more closely reflect the current cost 
of inspections, and the fee calculation process would be more 
transparent. Through its annual review, AMS would be able to monitor 
the financial status of the rice inspection program to determine 
whether further adjustments are necessary.
    AMS has determined this rule would not have a significant economic 
impact on a substantial number of entities as defined under the RFA 
because fewer than half the applicants for rice inspection services 
meet the definition of small entities. Further, rice inspection and 
weighing services are provided upon request, and rice industry 
businesses are under no obligation to use these services.
    Finally, USDA has not identified any relevant Federal rules that 
duplicate, overlap, or conflict with this rule.

Paperwork Reduction Act and E-Government Act

    In compliance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
Chapter 35), the information collection and record keeping requirements 
of the rice inspection program have previously been approved by OMB 
under control number 0580-0013. No additional reporting, record 
keeping, or other compliance requirements would be imposed as a result 
of this rule.
    AMS is committed to complying with the E-Government Act (44 U.S.C. 
3601, et seq.), to promote the use of the internet and other 
information technologies to provide increased opportunities for citizen 
access to Government information and services, and for other purposes.

List of Subjects in 7 CFR Part 868

    Administrative practice and procedure, Agricultural commodities.

    For the reasons set out in the preamble, AMS amends 7 CFR part 868 
as follows:

PART 868--GENERAL REGULATIONS AND STANDARDS FOR CERTAIN 
AGRICULTURAL COMMODITIES

0
 1. The authority citation for part 868 continues to read as follows:

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


0
 2. Revise Sec.  868.91 to read as follows:


Sec.  868.91  Fees for certain Federal rice inspection services.

    The fees for services in paragraph (a) apply to Federal inspection 
services. Starting with fiscal year 2022, calculations provided in 
paragraph (b) will be used to determine annual fee rates.
    (a) Fees for services are published on the Service's website.
    (b) For each fiscal year, starting with 2022, the Administrator 
will calculate the rates for services, issue a public notice, and 
publish fees on the Service's website with an effective date of October 
1 of each year.
    (1) For each year, the Administrator will calculate the rates for 
services, per hour per inspection program employee using the following 
formulas:
    (i) Regular rate. The Service's total inspection program personnel 
direct pay divided by direct hours, which is then multiplied by the 
next year's percentage of cost of living increase, plus the benefits 
rate, plus the operating rate, plus the allowance for bad debt rate. If 
applicable, actual travel expenses may also be added to the cost of 
providing the service.
    (ii) Overtime rate. The Service's total inspection program 
personnel direct pay divided by direct hours, which is then multiplied 
by the next year's percentage of cost of living increase and then 
multiplied by 1.5, plus the benefits rate, plus the operating rate, 
plus an allowance for bad debt. If applicable, actual travel expenses 
may also be added to the cost of providing the service.
    (iii) Holiday rate. The Service's total inspection program 
personnel direct pay divided by direct hours, which is then multiplied 
by the next year's percentage of cost of living increase and then 
multiplied by 2, plus the benefits rate, plus the operating rate, plus 
an allowance for bad debt. If applicable, actual travel expenses may 
also be added to the cost of providing the service.
    (2) For each year, based on previous year/historical actual costs, 
the Administrator will calculate the benefits, operating, and allowance 
for bad debt components of the regular, overtime, and holiday rates as 
follows:
    (i) Benefits rate. The Service's total inspection program direct 
benefits costs divided by the total hours (regular, overtime, holiday) 
worked, which is then multiplied by the next year's percentage of cost 
of living increase. Some examples of direct benefits are health 
insurance, retirement, life insurance, and Thrift Savings Plan (TSP) 
retirement basic and matching contributions.
    (ii) Operating rate. The Service's total inspection program 
operating costs divided by total hours (regular, overtime, and holiday) 
worked, which is then multiplied by the percentage of inflation.
    (iii) Allowance for bad debt rate. Total allowance for bad debt, 
divided by total hours (regular, overtime, holiday) worked.
    (3) The Administrator will use the most recent economic factors 
released by the Office of Management and Budget for budget development 
purposes to derive the cost of living expenses and percentage of 
inflation factors used in the formulas in this section.


Sec.  868.92  [Amended]

0
 3. Amend Sec.  868.92 by removing paragraph (a)(2) and redesignating 
paragraphs (a)(3) through (5) as paragraphs (a)(2) through (4), 
respectively.

    Dated: January 21, 2020.
Bruce Summers,
Administrator, Agricultural Marketing Service.
[FR Doc. 2020-01205 Filed 1-29-20; 8:45 am]
BILLING CODE 3410-02-P