Grading and Inspection, General Specifications for Approved Plants and Standards for Grades of Dairy Products; Proposed Increase in Fees

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 58

[DA-97-13]

RIN 0581-AB50

Grading and Inspection, General Specifications for Approved

Plants and Standards for Grades of Dairy Products; Proposed Increase in

Fees

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: The Agricultural Marketing Service proposes to increase the

fees charged for services provided under the dairy inspection and

grading program. The program is a voluntary, user-fee program conducted

under the authority of the Agricultural Marketing Act of 1946, as

amended. The proposed increases would result in a fee of $51.00 per

hour for continuous resident services and $56.00 per hour for

nonresident services between the hours of 6:00 a.m. and 6:00 p.m. The

fee for nonresident services between the hours of 6:00 p.m. and 6:00

a.m. would be $61.60 per hour. These proposed fees represent an

increase of four dollars per hour. The fees are being increased to

cover the costs of anticipated salary increases and locality

adjustments, the costs necessary to maintain adequate levels of service

during changing production and purchasing patterns within the dairy

industry, the continued full funding for standardization activities,

and other operating costs.

DATES: Comments should be mailed by November 17, 1997.

ADDRESSES: Comments should be mailed to: Richard McKee, Office of the

Director, USDA/AMS/Dairy Division, Room 2968-S, P.O. Box 96456,

Washington, DC 20090-6456. Comments received will be available for

public inspection at this location during regular business hours.

FOR FURTHER INFORMATION CONTACT: Lynn G. Boerger, USDA/AMS/Dairy

Division, Dairy Grading Branch, Room 2750-South Building, P.O. Box

96456, Washington, DC 20090-6456, (202) 720-9381.

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.

This proposed rule has been reviewed under Executive Order 12988,

Civil Justice Reform. This rule is not intended to have preemptive

effect with respect to any State or local laws, regulations, or

policies. This rule is not intended to have retroactive effect. There

are no administrative procedures which must be exhausted prior to any

judicial challenge to this rule or the application of its provisions.

Pursuant to the requirements set forth in the Regulatory

Flexibility Act (RFA), the Agricultural Marketing Service (AMS) has

considered the economic impact of this action on small entities.

There are more than 600 users of Dairy Grading Branch's inspection

and grading services. Many of these users are small entities under the

criteria established by the Small Business Administration (13 CFR

121.601). This rule will raise the fee charged to businesses for

voluntary inspection services and grading services for dairy and

related products. Even though the fee will be raised, the increase is

approximately 8.0 percent and will not significantly affect these

entities. These businesses are under no obligation to use these

services, and any decision on their part to discontinue the use of the

services would not prevent them from marketing their products. The

Agricultural Marketing Service (AMS) estimates that overall this rule

will yield an additional $343,000 during 1998. The proposed rule

reflects certain fee increases needed to recover the cost of inspection

and grading services rendered in accordance with the Agricultural

Marketing Act (AMA) of 1946.

AMS regularly reviews its user-fee financed programs to determine

if the fees are adequate. The existing fee schedule will not generate

sufficient revenues to cover programs costs while maintaining an

adequate reserve balance (four months of costs) as called for by Agency

policy (AMS Directive 408.1). Without a fee increase, revenue

projections for FY 1998 would remain constant at $4.695 million. Costs

are projected to increase to $5.628 million. The shortfall, if allowed

to continue, would translate into an approximate 1.6 month operating

reserve at the end of FY 1998, which is less than Agency policy

requires.

The Agricultural Marketing Service (AMS) has determined that this

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

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

601).

The Agricultural Marketing Act of 1946, as amended, authorizes the

Secretary of Agriculture to provide Federal dairy grading and

inspection services that facilitate marketing and help consumers obtain

the quality of dairy products they desire. The Act provides that

reasonable fees be collected from the users of the services to cover,

as nearly as practicable, the cost of maintaining the program.

FY 1997 revenue was projected to be $4.733 million and costs to be

$5.240 million. The shortfall during the year reduced the operating

reserve from 5.6 months at the beginning of the year to 3.8 months at

the end of August, and is projected to further reduce the operating

reserve to approximately 1.6 months at the end of FY 1998. With this

proposed increase, assuming a slightly increased workload, revenue for

FY 1998 is projected to be $5.540 million with costs totaling $5.628

million. Of these costs, the general salary increase represents

$110,000 per year and is scheduled to be effective in January, 1998.

Employee salaries and benefits are major program costs and account for

approximately 70 percent of the total operating budget. Program travel

costs (of which approximately 80 percent are reimbursed by the

industry), general contract obligations and Agency overhead account for

another 24 percent of the budget. Changing workloads are analyzed on a

regular basis in order to maximize grading assignment efficiency and to

minimize grader and supervisory costs. Future increases would be

proposed as necessary in following years to cover any annual increases

in program costs and to maintain the capital reserve at 4 months.

Since the costs of the grading program are covered entirely by user

fees, it is

[[Page 53761]]

essential that fees be increased when necessary to cover the cost of

maintaining a financially self-supporting program. The last fee

increase under this program became effective on January 5, 1997. On the

same effective date, Congress increased the salaries of Federal

employees by 3.0 percent which included locality pay. Also, there have

been normal increases in other nonpay operating costs that include

utilities, office space, and reimbursable travel. In addition, recent

congressional action will result in additional salary increases of

appoximately 3.0 percent in 1998. Although the program's operating

reserves were adequate to cover the January 5, 1997, salary increase,

this will not be the case for 1998 salary increases, and a fee increase

is needed.

The grading program fees need to be increased to cover the costs

associated with maintaining adequate levels of service during shifting

production patterns within the dairy industry. The industry changes

include plant consolidations, geographical shifts of dairy production

areas, and changes in the types of dairy products being manufactured

and offered for inspection and grading services. To minimize the

necessary fee increase, the Department has initiated cost-reduction

efforts which include the reduction of staff and program overhead.

Proposed Changes

This rule proposes the following changes in the regulations

implementing the dairy inspection and grading program:

1. Increase the hourly fee for nonresident services from $52.00 to

$56.00 for services performed between 6:00 a.m. and 6:00 p.m. The

nonresident hourly rate is charged to users who request an inspector or

grader for particular dates and amounts of time to perform specific

grading and inspection activities. These users of nonresident services

are charged for the amount of time required to perform the task and

undertake related travel plus travel costs.

2. Increase the hourly fee for continuous resident services from

$47.00 to $51.00. The resident hourly rate is charged to those who are

using grading and inspection services performed by an inspector or

grader assigned to a plant on a continuous, year-round resident basis.

Timing of Fee Increase

It is contemplated that the proposed fee increases would be

implemented on an expedited basis in order to minimize the period of

revenue shortfall. Accordingly, it is anticipated that the fee

increases, if adopted, would become effective upon publication, or very

soon after publication, of the final rule in the Federal Register. An

approximate effective date would be January 4, 1998.

Also, a thirty day comment period is deemed appropriate in view of

the need to implement any fee increases as early as possible in FY

1998.

All written submissions made pursuant to this notice will be made

available for public inspection in the Dairy Division during regular

business hours.

List of Subjects in 7 CFR Part 58

Dairy products, Food grades and standards, Food labeling, Reporting

and recordkeeping requirements.

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

CFR Part 58 be amended as follows:

PART 58--GRADING AND INSPECTION, GENERAL SPECIFICATIONS FOR

APPROVED PLANTS AND STANDARDS FOR GRADES OF DAIRY PRODUCTS

1. The authority citation for Part 58 continues to read as follows:

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

Subpart A--[Amended]

2. In subpart A, Sec. 58.43 is revised to read as follows:

Sec. 58.43 Fees for inspection, grading, and sampling.

Except as otherwise provided in Secs. 58.38 through 58.46, charges

shall be made for inspection, grading, and sampling service at the

hourly rate of $56.00 for service performed 6 a.m., for the time

required to perform the service calculated to the nearest 15-minute

period, including the time required for preparation of certificates and

reports and the travel time of the inspector or grader in connection

with the performance of the service. A minimum charge of one-half hour

shall be made for service pursuant to each request or certificate

issued.

3. Section 58.45 is revised to read as follows:

Sec. 58.45 Fees for continuous resident services.

Irrespective of the fees and charges provided in Secs. 58.39 and

58.43, charges for the inspector(s) and grader(s) assigned to a

continuous resident program shall be made at the rate of $51.00 per

hour for services performed during the assigned tour of duty. Charges

for service performed in excess of the assigned tour of duty shall be

made at a rate of 1\1/2\ times the rate stated in this section.

Dated: October 8, 1997.

Lon Hatamiya,

Administrator, Agricultural Marketing Service.

[FR Doc. 97-27324 Filed 10-15-97; 8:45 am]

BILLING CODE 3410-02-P