Egg, Poultry, and Rabbit Grading Increase in Fees and Charges

SUMMARY: The Agricultural Marketing Service (AMS) proposes to increase

the fees and charges for Federal voluntary egg, poultry, and rabbit

grading. These fees and charges need to be increased to cover the

increase in salaries of Federal employees, salary increases of State

employees cooperatively utilized in administering the programs, and

other increased Agency costs.

DATES: Comments must be received on or before March 3, 1997.

ADDRESSES: Send written comments, in duplicate, to Douglas C. Bailey,

Chief, Standardization Branch, Poultry Division, Agricultural Marketing

Service, U.S. Department of Agriculture, room 3944-South, P.O. Box

96456, Washington, DC 20090-6456. Comments received may be inspected at

this location between 8:00 a.m. and 4:30 p.m., Eastern Time, Monday

thru Friday, except holidays. State that your comments refer to Docket

No. PY-97-001.

FOR FURTHER INFORMATION CONTACT: Rex A. Barnes, Chief, Grading Branch,

(202) 720-3271.

SUPPLEMENTARY INFORMATION: This proposed rule 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).

This proposed rule has been reviewed under Executive Order 12988,

Civil Justice Reform. This action 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. There are no administrative procedures which

must be exhausted prior to any judicial challenge to the provisions of

this rule.

Pursuant to the requirements set forth in the Regulatory

Flexibility Act (RFA), the AMS has considered the economic impact of

this action on small entities.

There are more than 400 users of the Poultry Division's grading

services. Many of these users are small entities under the criteria

established by the Small Business Administration (13 CFR 121.601). This

proposed rule will raise the fees charged to businesses for voluntary

grading services for eggs, poultry, and rabbits. The AMS estimates that

overall this rule would yield an additional $1.2 million during fiscal

year 1998. Even though fees will be raised, the hourly resident rate

for grading services will increase approximately 5.5 percent and will

not significantly affect these entities. These businesses are under no

obligation to use these grading services, and any decision on their

part to discontinue the use of the services would not prevent them from

marketing their products.

The AMS has certified that this action will not have a significant

impact on a substantial number of small entities, as defined in the RFA

(5 U.S.C. 601).

The information collection requirements that appear in the sections

to be amended by the proposed rule have been previously approved by OMB

and assigned OMB Control Numbers under the Paperwork Reduction Act of

1980 as follows: Sec. 56.52(a)(4)--No. 0581-0128; and

Sec. 70.77(a)(4)--No. 0581-0127.

Background and Proposed Changes

The Agricultural Marketing Act (AMA) of 1946 authorizes official

grading and certification on a user-fee basis of eggs, poultry, and

rabbits. The AMA provides that reasonable fees be collected from the

user of the program services to cover, as nearly as practicable, the

costs of services rendered. AMS regularly reviews these programs to

determine if fees are adequate and if costs are reasonable. This

proposal would amend the schedule for fees and charges for grading

services rendered to the egg, poultry, and rabbit industries to reflect

the costs currently associated with the program.

In 1995 the egg products inspection program was transferred to the

Food Safety and Inspection Service. In order to offset the loss of

efficiencies and to avoid an increase in user fees for the remaining

shell egg and poultry grading programs, AMS took several streamlining

actions in supervisory and support activities. These actions included

reducing the number of supervisory visits; consolidating and closing

submanagement offices; consolidating the billing and support functions

into two regional offices; realigning regional boundaries; and

substantially reducing the Washington, D.C. headquarters staff. As a

result, no fee increase was necessary due to the reorganization.

However, increased salaries and other costs and a substantial shift

from resident to nonresident grading services now require an increase

in fees.

Employee salaries and benefits are major program costs that account

for approximately 82 percent of the total operating budget. A general

and locality salary increase for Federal employees, ranging from 3.09

to 6.25 percent depending on locality, effective January 1995, and an

additional general and locality salary increase, ranging from 2.39 to

2.87 percent depending upon locality, effective January 1996, has

materially affected program costs. Another general and locality salary

increase is scheduled in January 1997. The general salary increase will

be 2.3 percent. Also, from November 1994 through September 1997,

salaries and fringe benefits of federally licensed State employees will

have increased by about 7 percent. Further, since October 1993,

standardization program costs must be recovered from user fees. As a

result, the hourly resident rate for grading services will increase by

approximately 5.5 percent. The hourly resident rate covers graders'

salaries, fringe benefits, and related costs.

Another factor affecting the current fee structure is the shift

from resident to nonresident grading services.

Historically, the majority of shell egg and poultry grading has

been done on a resident basis according to the official U.S. quality

grade standards. Today, however, a growing volume of shell eggs and

poultry is being traded according to product-specific purchase

requirements where USDA certification is required, work done

increasingly on a

[[Page 4663]]

nonresident fee basis. This shift has increased the proportion of

overhead costs necessary to administer the nonresident services. As a

result, users of nonresident services are not supporting their share of

the program's overhead costs under the present fee structure.

A recent review of the fee schedule, effective November 1, 1994,

revealed that anticipated revenue will not adequately cover increasing

program costs. Without a fee increase, projected FY 98 revenues for

grading services are $21.7 million with costs projected at $23.1

million, and trust fund balances would be below appropriate levels.

With a fee increase, projected FY 98 revenues are $22.9 million with

costs projected at $23.1 million.

The following table compares current fees and charges with proposed

fees and charges for egg, poultry, and rabbit grading as found in 7 CFR

Parts 56 and 70:

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

Service Current Proposed

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

Resident shell egg and poultry grading--

Administrative charges (supervision, other

overhead and administrative costs) assessed

on the volume of product handled:

Per pound of poultry.................... .00031 .00033

Per 30-dozen case of shell eggs......... .036 .038

Minimum per month....................... 215 225

Maximum per month....................... 2,150 2,250

Nonresident shell egg and poultry grading

and Resident rabbit grading--Administrative

charge based on 25% of grader's salary,

minimum per month.......................... 215 225

Nonresident fee basis poultry, shell egg and

rabbit grading:

--Regular time, rate per hour........... 33.64 38.96

--Saturdays, Sundays, and legal

holidays, rate per hour................ 35.52 43.24

Appeal grading and Review of grader's

decision--Rate per hour.................... 27.36 30.56

Inauguration of resident grading service.... 310 310

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

List of Subjects

7 CFR Part 56

Eggs and egg products, Food grades and standards, Food labeling,

Reporting and recordkeeping requirements.

7 CFR Part 70

Food grades and standards, Food labeling, Poultry and poultry

products, Rabbits and rabbit products, Reporting and recordkeeping

requirements.

For reasons set forth in the preamble, it is proposed that 7 CFR,

Parts 56 and 70 be amended as follows:

PART 56--GRADING OF SHELL EGGS

1. The authority citation for Part 56 continues to read as follows:

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

2. In Sec. 56.46, paragraphs (b) and (c) are revised to read as

follows:

Sec. 56.46 On a fee basis.

* * * * *

(b) Fees for grading services will be based on the time required to

perform the services. The hourly charge shall be $38.96 and shall

include the time actually required to perform the grading, waiting

time, travel time, and any clerical costs involved in issuing a

certificate.

(c) Grading services rendered on Saturdays, Sundays, or legal

holidays shall be charged for at the rate of $43.24 per hour.

Information on legal holidays is available from the Supervisor.

3. Sec. 56.47 is revised to read as follows:

Sec. 56.47 Fees for appeal grading or review of a grader's decision.

The cost of an appeal grading or review of a grader's decision

shall be borne by the appellant at an hourly rate of $30.56 for the

time spent in performing the appeal and travel time to and from the

site of the appeal, plus any additional expenses. If the appeal grading

or review of a grader's decision discloses that a material error was

made in the original determination, no fee or expenses will be charged.

4. In Sec. 56.52, paragraph (a)(4) is revised to read as follows:

Sec. 56.52 Continuous grading performed on resident basis.

* * * * *

(a) * * *

(4) An administrative service charge based upon the aggregate

number of 30-dozen cases of all shell eggs handled in the plant per

billing period multiplied by $0.038, except that the minimum charge per

billing period shall be $225 and the maximum charge shall be $2,250.

The minimum charge also applies where an approved application is in

effect and no product is handled.

* * * * *

5. In Sec. 56.54, paragraph (a)(2) is revised to read as follows:

Sec. 56.54 Charges for continuous grading performed on a nonresident

basis.

* * * * *

(a) * * *

(2) An administrative service charge equal to 25 percent of the

grader's total salary costs. A minimum charge of $225 will be made each

billing period. The minimum charge also applies where an approved

application is in effect and no product is handled.

* * * * *

PART 70--VOLUNTARY GRADING OF POULTRY PRODUCTS AND RABBIT PRODUCTS

6. The authority citation for Part 70 continues to read as follows:

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

7. In Sec. 70.71, paragraphs (b) and (c) are revised to read as

follows:

Sec. 70.71 On a fee basis.

* * * * *

(b) Fees for grading services will be based on the time required to

perform such services for class, quality, quantity (weight test), or

condition, whether ready-to-cook poultry, ready-to-cook rabbits, or

specified poultry food products are involved. The hourly charge shall

be $38.96 and shall include the time actually required to perform the

work, waiting time, travel time, and any clerical costs involved in

issuing a certificate.

(c) Grading services rendered on Saturdays, Sundays, or legal

holidays shall be charged for at the rate of $43.24 per hour.

Information on legal holidays is available from the Supervisor.

8. Sec. 70.72 is revised to read as follows:

Sec. 70.72 Fees for appeal grading, or examination or review of a

grader's decision.

The costs of an appeal grading, or examination or review of a

grader's decision, will be borne by the appellant at an hourly rate of

$30.56 for the time spent in performing the appeal and

[[Page 4664]]

travel time to and from the site of the appeal, plus any additional

expenses. If the appeal grading, or examination or review of a grader's

decision, discloses that a material error was made in the original

determination, no fee or expenses will be charged.

9. In Sec. 70.76, paragraph (a)(2) is revised to read as follows:

Sec. 70.76 Charges for continuous poultry grading performed on a

nonresident basis.

* * * * *

(a) * * *

(2) An administrative service charge equal to 25 percent of the

grader's total salary costs. A minimum charge of $225 will be made each

billing period. The minimum charge also applies where an approved

application is in effect and no product is handled.

* * * * *

10. In Sec. 70.77, paragraphs (a)(4) and (a)(5) are revised to read

as follows:

Sec. 70.77 Charges for continuous poultry or rabbit grading performed

on a resident basis.

* * * * *

(a) * * *

(4) For poultry grading: An administrative service charge based

upon the aggregate weight of the total volume of all live and ready-to-

cook poultry handled in the plant per billing period computed in

accordance with the following: Total pounds per billing period

multiplied by $0.00033, except that the minimum charge per billing

period shall be $225 and the maximum charge shall be $2,250. The

minimum charge also applies where an approved application is in effect

and no product is handled.

(5) For rabbit grading: An administrative service charge equal to

25 percent of the grader's total salary costs. A minimum charge of $225

will be made each billing period. The minimum charge also applies where

an approved application is in effect and no product is handled.

* * * * *

Dated: January 27, 1997.

Lon Hatamiya,

Administrator.

[FR Doc. 97-2404 Filed 1-30-97; 8:45 am]

BILLING CODE 3410-02-P