Fees for Official Inspection and Official Weighing Services

DEPARTMENT OF AGRICULTURE

Grain Inspection, Packers and Stockyards Administration

7 CFR Part 800

RIN 0580-AA56

Fees for Official Inspection and Official Weighing Services

AGENCY: Grain Inspection, Packers and Stockyards Administration, USDA.

ACTION: Final rule.

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SUMMARY: The Grain Inspection, Packers and Stockyards Administration

(GIPSA) is implementing, effective October 1, 1997, a 12.5-percent

increase in the administrative service fee for official inspection and

weighing services performed in the United States under the United

States Grain Standards Act (USGSA), as amended. The fee

[[Page 48937]]

adjustment is necessary to cover indirect field office and headquarters

operational costs and to maintain a 3-month operational reserve. GIPSA

is also deleting from the fee schedule the unit fees for submitted

samples and factor only analysis performed online at an applicant's

facility.

EFFECTIVE DATE: October 1, 1997.

FOR FURTHER INFORMATION CONTACT: George Wollam, USDA, GIPSA, at (202)

720-4628.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This rule has been determined to be nonsignificant for the purpose

of Executive Order 12866 and, therefore, has not been reviewed by the

Office of Management and Budget.

Executive Order 12988

This rule has been reviewed under Executive Order 12988, Civil

Justice Reform. This action is not intended to have a retroactive

effect. The USGSA provides in Section 87g that no subdivision may

require or impose any requirements or restrictions concerning the

inspection, weighing, or description of grain under the Act. Otherwise,

this rule will not preempt any State or local laws, regulations, or

policies unless they present irreconcilable conflict with this proposed

rule. There are no administrative procedures which must be exhausted

prior to any judicial challenge to provisions of this rule.

Effects on Small Entities

James R. Baker, Administrator, GIPSA, has determined that this rule

will not have a significant economic impact on a substantial number of

small entities as defined in the Regulatory Flexibility Act (5 U.S.C.

601 et seq.). Most users of the official inspection and weighing

services do not meet the requirements for small entities. FGIS is

required by statute to make services available and to recover costs of

providing such services, as nearly as practicable.

The fee revision applies to entities engaged in the export of

grain. Under provisions of the USGSA, most grain exported from U.S.

export port locations must be officially inspected and weighed.

Mandatory inspection and weighing services are provided by FGIS on a

fee basis at 37 export facilities. All of the export facilities are

owned and managed by multi-national corporations, large cooperatives,

or public entities that do not meet the criteria for small entities as

defined under the Regulatory Flexibility Act and the regulations issued

thereunder. A 3-percent increase in hourly and certain unit fees went

into effect June 15, 1997, and will recover the increased operational

costs caused by mandated cost-of-living increases to Federal salaries.

That increase is anticipated to generate $218,100 in additional

revenue, bringing to $22.21 million the projected total revenue for

fiscal year 1997. This 12.5-percent increase in the administrative fee

is designed to generate sufficient revenue to cover indirect costs

associated with field office and headquarters operations and to

maintain the retained earnings at a 3-month operating reserve for the

inspection and weighing program. Additional revenue estimated for

fiscal year 1998 is projected to be $440,000 at an 85.6 million metric

ton level. The 12.5-percent increase will not have a significant

economic impact on small entities.

Information Collection and Recordkeeping Requirements

In compliance with the Paperwork Reduction Act of 1995 (44 U.S.C.

Chapter 35), the information collection and recordkeeping requirements

contained in Part 800 have been previously approved by the Office of

Management and Budget under control number 0580-0013.

Background

The USGSA requires GIPSA to charge and collect reasonable fees for

performing official inspection and weighing services. The fees are to

cover, as nearly as practicable, FGIS' costs for performing these

services, including related administrative and supervisory costs.

Effective October 1, 1996, GIPSA changed the methodology it uses

for fees charged for its inspection and weighing services. The current

fee structure for these services consists of three basic components:

(1) An hourly rate charged to recover the direct labor costs of

providing service; (2) a unit test or service rate; and (3) a per

metric ton administrative charge to recover the indirect costs, such as

salaries and benefits for office management and support staff and rent,

incurred both at field offices and headquarters. Fees charged in the

first two components of the structure were increased by approximately 3

percent effective June 15, 1997 (62 FR 31701, June 11, 1997, corrected

at 62 FR 34342, June 25, 1997), to cover increased costs due to

mandated Federal cost-of-living increases. At that time, GIPSA noted

that a further adjustment of fees, including an adjustment to the

administrative fee to recover the indirect costs of field offices and

headquarters and to replenish the operating reserve, would be addressed

in future rulemaking.

The current USGSA administrative fee was published in the August

22, 1996, Federal Register (61 FR 43301) and became effective on

October 1, 1996. The per metric ton administrative charge recovers the

indirect costs and administrative costs of FGIS field offices and

headquarters such as the salaries and benefits for office management

and support staff, Departmental charges, Animal and Plant Health

Inspection Service and Agricultural Marketing Service charges,

management of computers and software, utilities, and rent. The 3-

percent increase that became effective June 15, 1997, was intended to

recover only increases to the salaries of service personnel responsible

for inspection and weighing of grain. The administrative fee is

assessed on all outbound grain inspected and/or weighed at an

applicant's facility.

Six levels of fees exist, ranging from 1 metric ton or less to over

7,000,001 metric tons, with fees decreasing as the number of metric

tons inspected increases. The charge is assessed in addition to the

hourly rate. At the beginning of each fiscal year (October 1), all

applicants pay the same per metric-ton-fee. Once a level has been

reached, the fee for additional metric tons is reduced until the

maximum volume is reached.

Administrative Fees

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Current Proposed

Metric tons fees fees

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1-1,000,000...................................... $0.090 $0.1013

1,000,000-1,500,000.............................. .082 .0923

1,500,001-2,000,000.............................. .042 .0473

2,000,001-5,000,000.............................. .032 .0360

5,000,001-7,000,000.............................. .017 .0192

7,000,000 +...................................... .002 .0023

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This 12.5-percent increase in the administrative fee is designed to

generate additional revenue to cover the indirect costs associated with

field office and headquarters operations and maintain the retained

earnings at a 3-month operating reserve for the inspection and weighing

program.

GIPSA estimates collecting $22.2 million in revenue for fiscal year

1997 under the current fee schedule. This is $1 million less than the

$23.2 million estimated cost of operations for fiscal year 1997.

Similar losses have occurred for the past 3 years, with $753,000 in

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fiscal year 1994; $630,000 in fiscal year 1995; and $1,273,000 in

fiscal year 1996. These losses resulted in a retained earning balance

of only $922,000 at the beginning of fiscal year 1997, significantly

below a desired 3-month operating reserve of $6 million.

Indirect costs for the inspection and weighing program are

estimated at $4.68 million, or 20 percent of the total $23.2 obligation

for the program. Because of a downturn in metric tons exported, the

current administrative fee will generate only an estimated $3.5 million

for fiscal year 1997, resulting in an estimated loss of $1.18 million.

The administrative fee must be increased to ensure sufficient revenue

is collected to recover indirect costs for an average export volume

year. This will permit any excess revenue collected during high volume

years, such as 89.9 million metric tons in fiscal year 1996, to offset

low volume years such as this year, estimated at 76 million metric

tons.

The current administrative fee generates an estimated $4.09 million

at the 5-year average export volume of 85.6 million metric tons. The

12.5-percent increase will generate an estimated $4.53 million at the

85.6 million metric ton level, or increase actual revenue by $440,000,

or 10.75 percent.

Comment Review

A proposed rule was published in the Federal Register on July 18,

1997, (62 FR 38488). GIPSA received five comments from trade

associations and industry representatives during the 30-day comment

period. All five commentors opposed the 12.5-percent increase.

In general, the commentors recommended that GIPSA initiate action

to reduce administrative costs prior to any fee increase and that fee

increases should not be used as the primary tool to reverse declining

financial conditions. GIPSA agrees that all efforts should be taken to

control administrative costs before proposing fee increases. This has

been done in the past and GIPSA will continue to contain costs, as

practicable, in the future.

The administrative fee implemented on October 1, 1996, was designed

to collect sufficient revenue to recover fiscal year 1993 indirect

costs which were $4.09 million. Since fiscal year 1993, the Agency has

experienced an estimated $1.7 million increase in indirect costs

primarily due to Federal pay increases, coupled with a redistribution

of indirect costs associated with headquarters operations beginning in

fiscal year 1995. GIPSA has reduced its indirect costs by $1.1 million

by staff reductions, consolidating financial management into the

Department's Animal and Plant Health Inspection Service, and reducing

the number of field locations from 31 to 23.

Despite the Agency's aggressive cost containment efforts, indirect

costs have increased $590,000 over the $4.09 million fiscal year 1993

base and must be recovered. The suggestions by several commentors that

overhead (indirect costs) be further reduced in general or by specific

percentages, is not practical at this time. GIPSA has and will continue

to reduce costs as is appropriate and cost effective where feasible.

While the fee increase generally addresses cost recovery by GIPSA

for original inspection and weighing services performed at export

locations, several commentors suggested that these costs be passed on

to all users of GIPSA services. In addition, commentors stated that the

proposed fee increase would adversely impact on the competitive

position of U.S. grain exports. Further, references were made that

increased costs associated with export operations would be passed on to

other industry members, including farmers, with one commentor

indicating that the fees would have an economic impact on small

entities as defined in the Regulatory Flexibility Act.

With regard to expanding the base for cost recovery to all users of

GIPSA's services, GIPSA has gone to great lengths to identify specific

costs associated with the vast number of different customers we serve.

This has allowed us to develop separate fee schedules that specifically

address services to these unique customers. This process has worked

well and GIPSA sees no need to change it based on the suggestions.

An exporters' ability to compete in the international market place

is influenced by many factors, not just the cost of inspection and

weighing services. All inspection and weighing costs, regardless of

where they are incurred in the marketing chain, i.e., farmer to

exporter, are just one item used to determine the overall cost of a

product. The additional $440,000 in fees, when spread over the total

volume of grain traded in both the domestic and export markets, will

not create a significant impact.

Several commentors questioned whether the fees and the expenses

upon which they are based were reasonable under the USGSA. GIPSA has

reviewed this issue and determined that the proposed fees and expenses

are consistent and reasonable under the provisions of the USGSA.

One commentor suggested that the projected revenue from the

proposed fee increase did not represent an across the board 12.5-

percent increase and should be $510,000 instead of the stated $440,000.

They apparently based this on a straightline projection of 12.5 percent

of total cost. They further questioned how the proposed increase will

offset the projected $1.18 million loss.

In order to calculate additional revenue for the administrative

fee, one must first consider the existing fee structure. With the

administrative fee decreasing as the number of metric tons increases

and the volume of grain handled by export elevators varies, the

estimated revenue collected from a 12.5 percent fee increase cannot be

determined using a straightline projection. As stated in the proposal,

an increase of 12.5 percent will generate an estimated $4.53 million at

the 85.6 million metric ton level, or increase actual revenue by

$440,000, or 10.75 percent.

Also, as stated in the proposal, GIPSA expected to collect only

$3.5 million in administrative fees in fiscal year 1997. With projected

costs at $4.68 million, there is a $1.18 million shortfall. The current

fees are set to collect $4.09 million at 85.6 million tons. As stated

in the proposal, the proposed fee level is designed to collect $4.53

million at an export volume of 85.6 million metric tons. Consequently,

a revenue shortfall such as $1.18 million in 1997 with exports at 76

million metric tons will be offset by increased revenue during high-

volume years such as 89.9 million metric tons in 1996. GIPSA is setting

its fees at a reasonable level based on a 5-year level of exports.

One commentor suggested that GIPSA make previously recommended

program changes prior to proposing fee increases. The commentor had

recommended the suggested program changes during GIPSA's overall review

of existing regulations. The suggested program changes are being

considered and will be addressed in a separate rulemaking, as

appropriate.

GIPSA has and will continuously monitor and adjust its resources to

obtain optimum utilization of its personnel, in both direct and

indirect areas, prior to proposing fee increases. However, as

previously stated, GIPSA must recover its expenses for providing

services and maintenance of a 3-month operating reserve and therefore

must do so by implementing a 12.5-percent increase in the

administrative fees.

No comments were received in response to the proposal to delete

Table I (3)(ii), fees for submitted samples and

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factor only analysis performed online at an applicant's facility.

Final Action

Effective October 1, 1997, the Agency will apply a 12.5-percent

increase to Administrative Fees in 7 CFR 800.71, Table 1 (3), and will

delete fees for Additional Service (assessed in addition to all other

fees) in Table 1 (3)(ii).

Good cause exists for not postponing the effective date of this

rule until 30 days after publication in the Federal Register (5 U.S.C.

553) because an October 1, 1997, effective date corresponds to the

beginning of the 1998 fiscal year and the start of a new accounting

cycle.

List of Subjects in 7 CFR Part 800:

Administrative practice and procedure; Grain.

For the reasons set out in the preamble, 7 CFR Part 800 is amended

as follows:

PART 800--GENERAL REGULATIONS

1. The authority citation for Part 800 continues to read as

follows:

Authority: Pub. L. 94-582, 90 Stat. 2867, as amended (7 U.S.C.

71 et seq.)

2. Section 800.71 is amended by revising Table 1(3) in Schedule A

of paragraph (a) to read as follows:

Sec. 800.71 Fees assessed by the Service.

(a)

* * * * *

Schedule A--Fees for Official Inspection and Weighing Services

Performed in the United States

Table 1.--Fees For Official Services Performed at an Applicant's

Facility in an Onsite FGIS Laboratory \1\

* * * * *

(3) Administrative Fee (assessed in addition to all other applicable

fees, only one administrative fee will be assessed when inspection and

weighing services are performed on the same carrier).

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(i) All outbound carriers (per-metric-ton) \4\

(a) 1-1,000,000............................................ $0.1013

(b) 1,000,001-1,500,000.................................... .0923

(c) 1,500,001-2,000,000.................................... .0473

(d) 2,000,001-5,000,000.................................... .0360

(e) 5,000,001-7,000,000.................................... .0192

(f) 7,000,001 +............................................ .0023

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\1\ Fees for original inspection and weighing, reinspection, and appeal

inspection service include, but are not limited to, sampling, grading,

weighing, prior to loading stowage examinations, and certifying

results performed within 25 miles of an employee's assigned duty

station. Travel and related expenses will be charged for service

outside 25 miles as found in Sec. 800.72 (a).

* * * * *

\4\ The administrative fee is assessed on an accumulated basis beginning

at the start of the Service's fiscal year (October 1 each year).

* * * * *

Dated: September 12, 1997.

James R. Baker,

Administrator.

[FR Doc. 97-24814 Filed 9-17-97; 8:45 am]

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