Fees for Commodity Inspection

SUMMARY: The Federal Grain Inspection Service (FGIS), a program of the

Grain Inspection, Packers and Stockyards Administration (GIPSA), is

increasing and establishing new fees charged for inspection services

for commodities, other than rice, performed under the Agricultural

Marketing Act of 1946 (AMA).

These revisions are designed to generate revenue sufficient to

cover, as nearly as practicable, the projected operating costs,

including related supervisory and administrative costs, for commodity

inspection services rendered and to maintain an appropriate operating

reserve.

EFFECTIVE DATE: February 18, 1997.

FOR FURTHER INFORMATION CONTACT: George Wollam, USDA-GIPSA-ART, Room

0623-South Building, Stop 3649, 1400 Independence Avenue, S.W.,

Washington, D.C., 20250-3649, Telephone (202) 720-0292, or FAX (202)

720-4628, or E-M[email protected].

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This rule has been determined to be significant for the purposes of

Executive Order 12866 and, therefore, has been reviewed by the Office

of Management and Budget. The revisions are designed to generate

revenue sufficient to recover the operating costs for commodity

inspection services and to maintain an appropriate operating reserve.

FGIS is making the following changes: increase the hourly and unit fees

for commodity inspection services; begin charging actual travel costs

for airlines, rental cars, etc., and per diem for travel beyond 25

miles of an official assigned duty location; begin charging for

sanitation inspections, pre-inspection conferences, and related

services; establish new hourly fees at time and one-half for service

provided on Saturdays, Sundays, and Federal holidays; eliminate the

provisions for entering into a contract for service; and change the fee

structure for stowage examinations from an hourly rate to a unit fee.

Fees for commodity inspection services were last increased on June

28, 1984 (49 FR 26547). For nearly 10 years, the 1984 fee schedule

sufficiently recovered operating expenses and maintained a minimum 3-

month operating reserve. However, by fiscal year (FY) 95, increased

operating costs, coupled with reductions in the number of services

requested, rendered the 1984 fee schedule inadequate for generating

sufficient revenue to cover operating expenses. The operating reserve,

which has been funding losses to the commodity inspection program for

the past 4 years, was drawn down to the minimum 3-month operating

reserve. Given these conditions, the Administrator of GIPSA determined

that a fee revision was necessary to meet rising costs and maintain an

adequate reserve balance.

Executive Order 12998

This final rule has been reviewed under Executive Order 12998,

Civil Justice Reform. It is not intended to have a retroactive effect,

nor will this final rule preempt any State or local laws, regulations,

or policies unless they present irreconcilable conflict with this rule.

No administrative procedures must be exhausted prior to any judicial

challenge to the provisions of this rule.

Regulatory Flexibility Act Certification

Pursuant to the requirements set forth in the Regulatory

Flexibility Act (5 U.S.C. 601 et seq.) (RFA), GIPSA has considered the

economic impact of this action on small entities. The main users of

GIPSA's official commodity inspection services are under contract from

the Department of Agriculture. Some of these are small entities under

the criteria established by the Small Business Administration (13 CFR

121.601). This rule will revise the fees charged to businesses for

voluntary commodity inspection services. Even though fees will be

raised, the increase is small and will not significantly affect these

entities. These businesses are under no obligation to use the

inspection services, and any decision on their part to discontinue use

of the services would not prevent them from marketing their products.

The final rule reflects fee revisions needed to cover the costs of

commodity inspection services rendered in accordance with the AMA.

James R. Baker, Administrator, GIPSA, has certified that this final

rule will not have a significant economic impact on a substantial

number of small entities, as defined in the RFA.

Since FY 90, there has been a 40 percent decrease in the amount of

commodity inspections requested. The commodity inspection program

experienced a $1,642,720 loss (revenue $4,011,116 and cost $5,468,059)

during FY 95. The commodity program's retained earnings are currently

-$60,383. Further losses are projected if adjustments to the existing

fee schedule are not made.

Information Collection and Record Keeping Requirements

In compliance with the Paperwork Reduction Act of 1980 (44 U.S.C.

35), the previously approved information collection and recordkeeping

requirements for applications for inspection services, including

official commodity inspections, have been approved by the Office of

Management and Budget under control number 0580-0013.

Background

On July 8, 1996, FGIS proposed in the Federal Register (61 FR

35687) to revise fees charged for inspection services for commodities,

other than rice, performed under the AMA: Increase hourly and unit

fees; charge actual travel and per diem costs; charge for sanitation

inspections, pre-inspection conferences, and related services;

establish hourly fees at time and one-half for service provided on

Saturdays, Sundays, and Federal holidays; eliminate the provisions for

entering into a contract for service; and change the fee structure

[[Page 66534]]

for stowage examinations from an hourly rate to a unit fee.

The commodity inspection fees were last amended effective June 28,

1984 (49 FR 26547). These fees were to cover, as nearly as practicable,

the operating costs for the program.

The majority of processed commodity inspections performed under the

AMA are on purchases made by the Department of Agriculture's Farm

Service Agency (FSA), formerly the Agricultural Stabilization and

Conservation Service. Historically, approximately 92 percent of the

services performed have been for FSA purchases. Defense Personnel

Support Center (DPSC) inspections account for approximately 2 percent

of the inspections; the remaining 6 percent are performed under

nongovernment contracts. Approximately 65 percent of graded commodity

inspections are for government purchases, and the remaining 35 percent

are for commercial sales.

Several actions have caused a general decrease in the number of

inspections performed for both graded and processed commodities.

Beginning in FY 92, FSA commodity purchases began to decline as a

result of the success of a market-oriented farm program that virtually

eliminated government-owned commodity grain stocks and, in turn, the

portion of processed commodities derived from these stocks. In

addition, in FY 94, responsibility for inspecting many products for

DPSC was transferred from FGIS to the Agricultural Marketing Service.

Processed commodities comprise approximately 90 percent of the

program's revenue. In FY 91, FGIS inspected 26,218 lots. By FY 92, the

number of inspected lots dropped to 24,004; in FY 93, 17,494 lots were

inspected; and FY 94 saw a slight increase to 19,664. In FY 95,

however, the total again decreased to 15,065, or a 43 percent reduction

from the number of lots inspected in FY 91. Corresponding decreases

have also been experienced for graded commodities.

Revenue collected in FY 91 totaled $6,562,940 and operating costs

totaled $5,987,299, for a positive margin of $575,570. Revenue in FY 92

dropped to $5,158,903 due to the decrease in inspections and resulted

in a $179,396 loss to the program. Losses were incurred in each of the

following years: $1,184,602 in FY 93, $764,865 in FY 94, and $1,456,944

in FY 95. At the same time, FGIS reduced operating costs for the

program from $5,987,370 in FY 91 to $5,468,059 in FY 95.

FGIS maintains an operating reserve specifically to cover the cost

of shutting down the program in case of an emergency. Agency policy is

to maintain the reserve at a level equal to 3 months of operating

expenses. In FY 91, the reserve was $4,942,934, which represented 10

months of operating costs. The loss of $179,396 in FY 92 was covered by

this reserve.

In FY 92, FGIS reviewed the program's operating reserve to

determine if the fund was being maintained at an adequate level. The

Agency determined that, while the level exceeded the 3-month reserve

minimum, it would not be prudent to decrease the reserve because of

anticipated downturns in the number of service requests and the

consequent need to cover program losses while restructuring the

program.

Again in FY 93, the $1,184,602 loss was covered by the reserve,

which was drawn down to a year-end total of $3,889,429. Even with the

loss, the fund still represented an 8.5-month reserve. By FY 94, the

reserve had dropped to $3,173,033, or the equivalent of 7 months'

operating costs. The losses incurred in FY 95 reduced the margin to

$1,716,090, which is a 3.2-month reserve and represents the target

level for the fund.

In FY 94, FGIS responded to the decline in services requests by

initiating a field restructuring plan that continued into FY 95. During

this time period, three field offices and one suboffice that were

directly involved with providing services were closed and consolidated.

This eliminated the cost of maintaining a field office and streamlined

overall operations. On two separate occasions, retirement incentives

(buyouts) were offered to employees which reduced the staffing levels

in this program. Other personnel were transferred to field offices and

redirected to other programs. In FY 91, approximately 103 staff years

were devoted to this program. By FY 95, the staffing level had been

reduced by 35 percent to 67 staff years. The FY 95 level of 15,065

services performed is expected to remain fairly constant in the future.

Large numbers of service requests, as seen in the late 1980's and early

1990's, are not forecasted. However, further losses are projected if

adjustments to the fee schedule are not made.

Due to reduced and sporadic FSA purchases, efficiencies gained

through volume inspections have disappeared. Fluctuations in service

demand have increased, even at locations that routinely requested

service on a daily basis. These changes have impacted on FGIS' ability

to maintain qualified staff at some locations and especially those that

are large distances from a field office. In addition, there has been an

increase in the proportion of inspections requested by facilities that

may need service only one or two weeks per year. Many of these

locations are far from field offices. The result is a great deal of

long-distance travel from field offices to remote locations for one or

two week jobs. Such travel has increased operating costs and, in some

instances, has offset the savings gained through the restructuring.

The 1984 fee schedule was designed to recover all costs associated

with performing commodity inspection service, including overtime,

travel, per diem, and other related services. For nearly 10 years, the

1984 fee schedule generated sufficient revenue to cover operating

expenses. This was due, in large part, to continuously improved

efficiencies in service delivery and strong market demand for

inspection services. Although additional cost saving measures were

implemented during FYs 94 and 95, operating expenses and service demand

have reached a level at which the 1984 fee schedule no longer generates

sufficient revenue to cover costs of providing service.

Since FY 90, there has been a 40 percent decrease in the amount of

commodity inspections requested. The commodity inspection program

experienced a $1,681,261 loss (revenue $4,011,116 and cost $5,468,059)

during FY 95. During FY 96, the commodity program experienced a

$1,741,644 loss (revenue $3,458,751 and cost $5,200,395) resulting in

an end-of-year operating reserve of -$60,383, and forcing GIPSA to

borrow funds from other fee programs.

Based on this information, GIPSA has determined that, under the

proposed fee structure, it will be unable to reach a 3-month operating

reserve until FY 99. Once the 3-month reserve is attained, fees will be

adjusted at least once every 2 years, either upward or downward as

necessary, to keep the program operating on a financially sound basis.

Comment Review

FGIS received two comments during the 30-day comment period. One

commentor agreed with all proposed increases of existing fees and the

establishment of new fees with the exception of charging for travel at

actual cost to the Agency. The commentor urged FGIS to consider

implementing a more balanced rate structure that will allocate travel

costs on a more equitable basis between nearby and remote facilities.

FGIS must recover all costs associated with the inspection process in

order to be able to provide quality

[[Page 66535]]

inspection services. There will always be applicants that are far

removed from an office no matter how many offices are maintained. FGIS

can contemplate no other more equitable rate structure than recovery of

actual travel costs in the manner it charges for travel necessary for

official inspections.

The other commentor dealt exclusively with the proposed change in

payment for stowage examinations from an hourly rate to a unit fee.

They suggested that FGIS increase its hourly rate to recover its cost

for this service. They suggest that implementing a unit fee will result

in poorer service and higher costs that will negatively impact the

Nation's farmers and the shipping industry transporting those

commodities, and reduce the Nation's role in foreign trade with respect

to grain and other agricultural commodities. FGIS does not agree that

implementation of a unit fee will result in poorer service; in fact, it

should have the opposite effect. It is true that some applicants for

stowage examinations will see significant increases over currently

charged fees, the current rate structure was not recovering costs for

stowage examinations and, therefore, needed revision.

Final Action

Section 203 of the AMA (7 U.S.C. 1622) provides for the

establishment and collection of fees that are reasonable and, as nearly

as practicable, cover the costs of the services rendered. In accordance

with this section, FGIS makes the following changes to maintain the

current commodity inspection program: (1) increase hourly and unit

fees; (2) charge actual travel and per diem costs; (3) charge for

sanitation inspections, pre-inspection conferences, and related

services; (4) establish hourly fees at time and one-half for service

provided on Saturdays, Sundays, and Federal holidays; (5) eliminate the

provisions for entering into a contract for service; and (6) change the

fee structure for stowage examinations from an hourly rate to a unit

fee.

1. Hourly Rates

The new hourly rates are divided into two categories: Regular

Workday (Monday through Friday) and Nonregular Workday (Saturday,

Sunday, and Holiday). Section 868.90, Table 1 and 3, currently define

Saturday as a Regular Workday. The revised Table 1 defines a Nonregular

Workday as a Saturday, Sunday, and Holiday, and the hourly rate

reflects time and one-half paid to employees. In addition, the two

separate hourly rates for Regular and Nonregular Workdays contained in

Tables 1 and 3 are combined into one set of hourly rates in a revised

Table 1 that covers all services.

Section 868.90, Tables 1 and 3, currently provide for reduced

hourly fees for applicants who elect to enter into a contract with

FGIS. No applicants have used this provision since it was introduced in

1984. Because the current trends of decreasing service requests and

increasing demand fluctuations indicate less likelihood for applicants

to use this provision in the future, it is eliminated.

The rate for a Regular Workday will increase to $33.00 and a

Nonregular Workday will increase to $42.80. These new hourly fees cover

FGIS' administrative and supervisory costs for the performance of

official services. These costs include personnel compensation and

benefits, rent, communications, utilities, contractual services,

supplies, and equipment.

2. Unit Rates

Section 868.90, Table 2, currently provides unit fees for the

grading of beans, peas, lentils, hops, and other nongraded,

nonprocessed commodities. These rates are increased and the current

Table 2 is deleted and combined with proposed Table 1. The new unit

rates cover FGIS' administrative and supervisory costs for performing

the official service, including costs for personnel compensation and

benefits, rent, communication, utilities, contractual services,

supplies, and equipment.

3. Travel and Per Diem

FGIS is making changes to Sec. 868.92 of the regulations concerning

the application of fees covered in Table 1. Specifically, service, as

provided under Sec. 868.90, Table 1, will include service provided

within 25 miles of the employee's assigned duty point. Travel, per

diem, and other related costs will be assessed for providing service

beyond the 25-mile limit. Section 868.91, Table 1, Fees for certain

Federal rice inspection services, remains unchanged; travel, per diem,

and other related costs continue to be included in the hourly rate.

4. Services Other Than Inspections

FGIS is changing the fee structure for stowage examinations from an

hourly fee that recovers all costs to a service-specific fee structure

currently funded by the hourly rate. The service-specific fee will be a

unit fee and applies only to stowage examinations.

FGIS is revising Table 1, Footnote 1 to include provisions for

charging for sanitation examinations, pre-inspection conferences, and

other related services for which FGIS does not currently charge.

5. Fees for Laboratory Testing Services

Fees for Laboratory Test Services, Table 4, Fees for Official

Laboratory Test Services Performed at the FGIS Commodity Testing

Laboratory at Beltsville, Maryland, for Processed Agricultural

Products, is revised to read: Table 2--Commodity Testing Laboratory,

Kansas City, Missouri. Also, this final rule makes a conforming change

to delete reference to ``noncontract'' hourly rates from Footnote 2.

List of Subjects in 7 CFR Part 868

Administrative practice and procedure, Agricultural commodities.

For reasons set out in the preamble, 7 CFR part 868 is amended as

follows:

PART 868--GENERAL REGULATIONS AND STANDARDS FOR CERTAIN

AGRICULTURAL COMMODITIES

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

follows:

Authority: Secs. 202-208, 60 Stat. 1087, as amended (7 U.S.C.

1621 et. seq.)

2. Section 868.90 is revised to read as follows:

Sec. 868.90 Fees for certain Federal inspection services.

(a) The fees shown in Table 1 apply to Federal Commodity Inspection

Services specified below.

[[Page 66536]]

Table 1.--Hourly Rates \1\ \3\

[Fees for Inspection of Commodities Other Than Rice]

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

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

Hourly Rates (per service representative):

Monday to Friday --$33.00

Saturday, Sunday, and Holidays--$42.80

Miscellaneous Processed Commodities \2\:

(1) Additional Tests (cost per test, assessed in

addition to the hourly rate):

(i) Aflatoxin Test (Thin Layer Chromatography)... $51.40

(ii) Falling Number.............................. $12.00

(iii) Aflatoxin Test Kit......................... $7.50

Graded Commodities (Beans, Peas, Lentils, Hops, and

Pulses):

(1) Additional Tests--Unit Rates (Beans, Peas,

Lentils):

(i) Field run (per lot or sample)................ $22.70

(ii) Other than field run (per lot or sample).... $13.50

(iii) Factor analysis (per factor)............... $5.50

(2) Additional Tests--Unit Rates (Hops):

(i) Lot or sample (per lot or sample)............ $29.00

(3) Additional Tests--Unit Rates (Nongraded

Nonprocessed Commodities):

(i) Factor analysis (per factor)................. $5.50

(4) Stowage examination (service-on- request) \4\

(i) Ship (per stowage space)..................... Sec. 50.00 (minimum $250 per ship)

(ii) Subsequent ship examinations (same as (minimum $150 per ship)

original).

(iii) Barge (per examination).................... $40.00

(iv) All other carriers (per examination)........ $15.00

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

\1\ Fees for original commodity inspection and appeal inspection services include, but are not limited to,

sampling, grading, weighing, stowage examinations, pre-inspection conferences, sanitation inspections, and

other services requested by the applicant and that are performed within 25 miles of the field office. Travel

and related expenses (commercial transportation costs, mileage, and per diem) will be assessed in addition to

the hourly rate for service beyond the 25-mile limit. Refer to Sec. 868.92, Explanation of service fees and

additional fees, for all other service fees except travel and per diem.

\2\ When performed at a location other than the Commodity Testing Laboratory.

\3\ Faxed and extra copies of certificates will be charged at $1.50 per copy.

\4\ If performed outside of normal business, 1\1/2\ times the applicable unit fee will be charged.

(b) In addition to the fees, if any, for sampling or other

requested service, a fee will be assessed for each laboratory test

(original, retest, or appeal) listed in Table 2 of this section.

(c) If a requested test is to be reported on a specified moisture

basis, a fee for a moisture test will also be assessed.

(d) Laboratory tests referenced in Table 2 of this section will be

charged at the applicable laboratory fee when performed at field

locations other than at the applicant's facility.

Table 2.--Fees for Laboratory Test Services \1\

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

Laboratory tests Fees

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

(1) Alpha monoglycerides....................................... $18.00

(2) Aflatoxin test (other than TLC or Minicolumn method)....... 22.50

(3) Aflatoxin (TLC)............................................ 48.00

(4) Aflatoxin (Minicolumn method).............................. 25.00

(5) Appearance & odor.......................................... 3.00

(6) Ash........................................................ 8.50

(7) Bacteria count............................................. 10.00

(8) Baking test (cookies)...................................... 28.00

(9) Bostwick (cooked).......................................... 12.60

(10) Bostwick (uncooked/cook test/dispersibility).............. 6.50

(11) Brix...................................................... 8.00

(12) Calcium................................................... 12.50

(13) Carotenoid color.......................................... 12.50

(14) Cold test (oil)........................................... 10.00

(15) Color test (syrups)....................................... 6.50

(16) Cooking test (other than corn soy blend).................. 7.00

(17) Crude fat................................................. 10.00

(18) Crude fiber............................................... 13.00

(19) Dough handling (baking)................................... 8.50

(20) E. coli................................................... 19.00

(21) Falling number............................................ 12.00

(22) Fat (acid hydrolysis)..................................... 14.00

(23) Fat stability (A.O.M.).................................... 27.00

(24) Flash point (open & close cup)............................ 14.00

(25) Free fatty acid........................................... 12.00

(26) Hydrogen ion activity (ph)................................ 9.50

(27) Iron enrichment........................................... 15.00

(28) Iodine number/value....................................... 9.50

(29) Linolenic acid (fatty acid profile)....................... 50.00

(30) Lipid phosphorous......................................... 47.00

(31) Livibond color............................................ 10.00

(32) Margarine (nonfat solids)................................. 23.60

(33) Moisture.................................................. 6.00

(34) Moisture average (crackers)............................... 4.00

(35) Moisture & volatile matter................................ 8.50

(36) Performance test (prepared bakery mix).................... 32.00

(37) Peroxide value............................................ 13.50

(38) Phosphorus................................................ 14.00

(39) Popcorn kernels (total defects)........................... 19.00

(40) Popping ratio/value popcorn............................... 19.00

(41) Potassium bromate......................................... 20.00

(42) Protein................................................... 7.50

(43) Rope spore count.......................................... 31.50

(44) Salmonella................................................ 40.00

(45) Salt or sodium content.................................... 12.50

(46) Sanitation (filth light).................................. 24.00

(47) Sieve test................................................ 5.00

(48) Smoke point............................................... 22.00

(49) Solid fat index........................................... 85.00

(50) Specific volume (bread)................................... 21.80

(51) Staphylococcus aureus..................................... 24.50

(52) Texture................................................... 6.50

(53) Tilletia controversa kuhn (TCK) (Qualitative)............. 25.20

(54) Tilletia controversa kuhn (TCK) (Quantitative)............ 76.00

(55) Unsaponifiable matter..................................... 25.00

(56) Urease activity........................................... 12.50

(57) Visual exam (hops pellet)................................. 7.50

(58) Visual exam (insoluable impurities oils & shortenings).... 5.00

(59) Visual exam (pasta)....................................... 10.50

(60) Visual exam (processed grain products).................... 12.00

(61) Visual exam (total foreign material other than cereal

grains)....................................................... 6.50

(62) Vitamin enrichment........................................ 7.00

(63) Vomitoxin (TLC)........................................... 40.00

(64) Vomitoxin (Qualitative)................................... 30.00

(65) Vomitoxin (Quantitative).................................. 40.00

(66) Water activity............................................ 20.00

(67) Wiley melting point....................................... 12.50

(68) Other laboratory tests.................................... \2\

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

\1\ When laboratory test service is provided for GIPSA by a private

laboratory, the applicant will be assessed a fee which, as nearly as

practicable, covers the costs to GIPSA for the service provided.

\2\ Fees for other laboratory tests not referenced in this table will be

based on the applicable hourly rate listed in Table 1 of this section.

3. Section 868.92(a)(2) is revised to read as follows:

[[Page 66537]]

Sec. 868.92 Explanation of service fees and additional fees.

(a) * * *

(2) The cost of per diem, subsistence, mileage, or commercial

transportation to perform the service for rice inspection only in

Sec. 868.91, Table 1. See Sec. 868.90, Table 1, footnote 1, for fees

for inspection of commodities other than rice.

* * * * *

Dated: December 13, 1996.

Michael V. Dunn,

Assistant Secretary, Marketing and Regulatory Programs.

[FR Doc. 96-32080 Filed 12-17-96; 8:45 am]

BILLING CODE 3410-EN-P