[Federal Register: May 26, 2000 (Volume 65, Number 103)]
[Rules and Regulations]
[Page 34040-34042]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr26my00-2]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 54
[Docket No. LS-98-12]
RIN 0581-AB83
Changes in Fees for Federal Meat Grading and Certification
Services
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Final rule.
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SUMMARY: The Agricultural Marketing Service (AMS) is revising the
hourly fee rates for voluntary Federal meat grading and certification
services. The hourly fees will be adjusted by this final rule to
reflect the increased cost of providing service, and ensure that the
Federal meat grading and certification program is operated on a
financially self-supporting basis as required by law.
EFFECTIVE DATE: June 26, 2000.
FOR FURTHER INFORMATION CONTACT: Larry R. Meadows, Chief, Meat Grading
and Certification (MGC) Branch (202) 720-1246.
SUPPLEMENTARY INFORMATION:
A. Executive Order 12866
This action has been determined to be not significant for purposes
of Executive Order 12866, and has not been reviewed by the Office of
Management and Budget (OMB).
B. Regulatory Flexibility
Pursuant to the requirements set forth in the Regulatory
Flexibility Act (RFA) (5 U.S.C. 601 et seq.), the Administrator of AMS
has considered the economic impact of this proposed action on small
entities.
AMS, through its MGC Branch, provides voluntary Federal meat
grading
[[Page 34041]]
and certification services to a total of 370 business of which 264 are
small entities. Small entities, which account for approximately 38
percent of the MGC Branch's total revenues, are defined as those that
employ less than 500 employees. The breakdown of small entities that
AMS provides meat grading and certification services to are as follows:
93 meat processors, 90 livestock slaughterers, 52 facilities that
further process federally donated products, 13 trade associations, 9
livestock feeders, 3 trucking companies, and 4 brokers. These small
entities are under no obligation to use meat grading and certification
services provided under the authority of the Agricultural Marketing Act
of 1946 (AMA), as amended, 7 USC 1621 et seq.
Voluntary 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 for conformance
with the grades of an official U.S. Standard for each species.
Approximately 21 billion pounds of meat is graded each year.
Certification services consist of the evaluation of meat and meat
products for compliance with specification and contractual
requirements. Certification services are used most often by large-scale
meat purchasers to ensure that the quality and yields of the products
they purchase comply with their stated requirements. Approximately 17
billion pounds of meat and meat products are certified each year.
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 would not generate sufficient revenues to recover
program costs for current and near-term periods while maintaining an
adequate reserve balance. Without a fee increase, the projected
operating losses for fiscal year (FY) 2000, FY 2001, and FY 2002 will
be $1.9 million, $2.9 million, and $4.1 million respectively. Operating
losses at these levels will deplete MGC Branch's operating reserve and
place the Branch in an unstable financial position that will adversely
affect its ability to provide the current level of grading and
certification services. Any reduction in Branch services has the
potential to substantially harm small and limited resource firms that
rely on grading and certification services to market their products and
compete in a global marketplace.
This action will raise the fees charged to all users of grading and
certification services. AMS estimates that overall, this will yield an
additional $175 thousand in revenue for the balance of FY 2000. Of this
$175 thousand, small businesses would pay approximately $66,500 or an
average of $255 per month. In FY 2001 and 2002, small entities will pay
approximately $798,000, an average of $255 per month or $3,058 per
year. However, due to increased program and industry efficiencies, the
FY 2000-2002 unit costs of program services (revenue/total pounds
graded and certified) will remain virtually unchanged at approximately
$0.0006 per pound for each fiscal year. Accordingly, the Administrator
of AMS has determined that this proposal would not have a significant
economic effect on a substantial number of small business entities.
This fee increase, only the second since November 1993, is
necessary to offset increased program operating costs resulting from:
(1) The congressionally-mandated, governmentwide salary increases for
1998, 1999, and 2000; (2) inflation of nonsalary operating costs; (3)
accumulated increases in CONUS per diem rates; (4) increased costs of
servicing less than full-time applicants; and (5) costs associated with
updating the MGC Branch's automated information management system to
ensure compliance with year 2000 operating requirements.
Since 1993, in an ongoing effort to control operating costs, the
MGC Branch has closed 3 field offices, reduced mid-level supervisory
staff by over 50 percent, and reduced the number of support staff by 38
percent. At the same time, the MGC Branch has become more reliant on
automated information management systems for data collection,
retrieval, and dissemination, account billing, and disbursement of
employee entitlements. The reduction in field offices, supervisory
staff, support personnel, and the increased reliance on automated
systems has enabled the MGC Branch to absorb a substantial portion of
the increased operating costs and minimize increases in user-fees over
the past 7 years.
Despite the MGC Branch's vigilant cost reduction efforts since
1993, the operating expenses projected for FY 2000 and beyond can only
be balanced by adjusting the hourly fee rate charged to users of meat
grading and certification services. Any further reduction in personnel,
services, or management infrastructure beyond those already implemented
would have a detrimental effect on the program's ability to provide
meat grading and certification services and ensure the accurate and
uniform application of such services. The hourly rate increase is
necessary to recover the costs of providing voluntary Federal meat
grading and certification services and for the program to continue
serving all segments of the industry.
C. Civil Justice Reform
This action has been reviewed under Executive Order 12988, Civil
Justice Reform. This action is not intended to have retroactive effect.
This rule will not pre-empt 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.
D. Paperwork Reduction Act
This action will not impose any additional reporting or
recordkeeping requirements on either small or large meat slaughters,
processors, and other applicants who use Federal meat grading and
certification services.
Comments
On January 20, 2000, (65 FR 3155) in the Federal Register, the
Agency published the proposed rule to increase the fees for Federal
Meat Grading and Certification services and requested comments by March
20, 2000. The Agency received two comments. The first respondent
requested that AMS work more closely with industry to identify
alternatives to current grading and certification operations and
procedures to stem future rate increases. The respondent went on to
identify the following as possible areas the Industry and AMS could
work cooperatively to achieve cost savings or stem future user-fee
increases: (1) Incorporating technological advances; (2) identifying
appropriate quality control or process verification activities that
could be shifted to the Industry; and, (3) identifying plant operation
alternatives.
AMS is continually seeking ways to reduce costs to the industry and
increase operational efficiency. This fee increase, combined with the
previous increase in 1998, equates to an average annual increase of 3.3
percent since 1993. However, during this same time the amount of
product graded and certified has dramatically increased by over 9
billion pounds per year in comparison to the total graded and certified
in FY 1993. This amounts to a 48 percent per hour increase in
efficiency. The increased efficiencies offset the increase in fee rates
to leave the overall cost per pound to the industry unchanged at
$0.0006 per
[[Page 34042]]
pound. As requested by the respondent, the Agency is currently and will
continue seeking ways to increase efficiency and reduce the total cost
of grading and certification services to the industry. In fact, AMS is
actively involved in each of the areas identified by the respondent for
potential cost savings. For example, AMS is cooperating with an
industry research project to test video-imaging technology for grading
and certification applications. Additionally, AMS is expanding the role
of statistical process control as a basis of program verification
activities in many carcass and meat marketing programs.
The second respondent questioned the need for revising the fee
rates and emphasized the effect of the user fees on small entities.
Small entities generate 38 percent of the Agency's meat grading and
certification hourly revenues. The Agency is keenly aware of how fee
increases impact small entities. In the more than 70 years meat grading
and certification services have been available, the Agency has always
ensured that every alternative to a fee increase has been considered.
This fee increase, only the second since November 1993, is necessary to
offset increased program operating costs resulting from: (1) The
congressionally-mandated, governmentwide salary increases for 1998,
1999, and 2000; (2) inflation of nonsalary operating costs; (3)
accumulated increases in CONUS per diem rates; (4) increased costs of
servicing less than full-time applicants; and, (5) costs associated
with updating the MGC Branch's automated information management system
to ensure compliance with year 2000 operating requirements. Despite the
MGC Branch's cost reduction efforts and increased efficiency, the
operating expenses projected for FY2000 and beyond can only be balanced
by adjusting the hourly fee rate charged to users of voluntary meat
grading and certification services. Any further reduction in personnel,
services, or management infrastructure beyond those already in place
would have a detrimental effect on the program's ability to provide
meat grading and certification services and ensure the accurate
application of such services. Further, any reduction in Branch services
has the potential to substantially (and disproportionally) harm small
and limited resource firms that rely on grading and certification
services to market their products and compete in a global marketplace.
Background
The Secretary of Agriculture is authorized by the AMA, 1946 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 for service are established by equitably distributing the
projected annual program operating costs over the estimated hours of
service--revenue hours--provided to users of the service. Program
operating costs include salaries and fringe benefits of meat graders,
supervision, travel, training, and all administrative costs of
operating the program. Employee salaries and benefits account for
approximately 80 percent of the total budget. Revenue hours include
base hours, premium hours, and service performed on Federal legal
holidays. As program operating costs continue to rise, the hourly fees
must be adjusted to enable the program to remain financially self-
supporting as required by law.
In view of these considerations, the Agency will increase the base
hourly rate commitment applicants pay for voluntary Federal meat
grading and certification services from $39.80 to $45. 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 rate for noncommitment applicants will increase from $42.20
to $52. A noncommitment applicant is a user of meat grading and
certification services for eight consecutive hours or less per day
between the hours of 6 a.m. and 6 p.m., excluding legal holidays. The
hourly rate for premium hours will increase from $47.80 to $57, and
will be charged to users of the service for hours worked in excess of 8
hours per day for each assigned official grader and for work performed
before 6 a.m. and after 6 p.m., Monday through Friday, and any time on
Saturday or Sunday, except on Federal legal holidays. The holiday rate
for all applicants will increase from $79.60 to $90, and will be
charged to users of the service for all hours worked on legal holidays.
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, 7 CFR part 54 is amended
as follows:
PART 54--MEATS, PREPARED MEATS, AND MEAT PRODUCTS (GRADING,
CERTIFICATION, AND STANDARDS)
1. The authority citation for part 54 continues to read as follows:
Authority: 7 U.S.C. 1621-1627.
Sec. 54.27 [Amended]
2. In Sec. 54.27, paragraph (a), ``$42.20'' is removed and ``$52''
is added in its place, ``$47.80'' is removed and ``$57'' is added in
its place, ``$79.60'' is removed and ``$90'' is added in its place, and
paragraph (b), ``$39.80'' is removed and ``$45'' is added in its place,
``$47.80'' is removed and ``$57'' is added in its place, ``$79.60'' is
removed and ``$90'' is added in its place.
Dated: May 22, 2000.
Barry L. Carpenter,
Deputy Administrator, Livestock and Seed Program.
[FR Doc. 00-13240 Filed 5-25-00; 8:45 am]
BILLING CODE 3410-02-P
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