Fees for Destination Market Inspections of Fresh Fruits, Vegetables and Other Products

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 51

[Docket Number FV-97-302]

RIN 0581-AB51

Fees for Destination Market Inspections of Fresh Fruits,

Vegetables and Other Products

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would revise the regulations governing the

inspection and certification for fresh fruits, vegetables and other

products by increasing by approximately 10 percent the fees charged for

the inspection of these products at destination markets. These

revisions are necessary in order to recover, as nearly as practicable,

the costs of performing inspection services at destination markets

under the Agricultural Marketing Act of 1946. The fees charged to

persons required to have inspections on imported commodities in

accordance with the Agricultural Marketing Agreement Act of 1937 and

for imported peanuts under the Agricultural Act of 1949 would also be

affected. This rule would also revise the regulations with regard to

the disposition of inspection certificates to require that one copy of

the certificate be delivered or mailed to the shipper of the inspected

product.

DATES: Comments must be postmarked or courier dated on or before

February 17, 1998.

ADDRESSES: Interested persons are invited to submit written comments

concerning this proposal. Comments must be sent to the Program Support

Section, Fresh Products Branch, Fruit and Vegetable Programs,

Agricultural Marketing Service, U.S. Department of Agriculture, P.O.

Box 96456, Room 2049 South Building, Washington, D.C. 20090-6456.

Comments should make reference to the date and page number of this

issue of the Federal Register and will be made available for public

inspection in the above office during regular business hours.

FOR FURTHER INFORMATION CONTACT: Rob Huttenlocker at the above address

or call (202) 720-0297.

SUPPLEMENTARY INFORMATION:

Executive Order 12866 and Regulatory Flexibility Act

This rule has been reviewed by the Office of Management and Budget

and has been determined not significant for purposes of Executive Order

12866.

Also, 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.

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 program costs while maintaining an

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

policy (AMS Directive 408.1). Current revenue projections for

destination market inspection work during FY 97 are $12.0 million with

costs projected at $11.9 million and an end-of-year reserve of $3.0

million. However, the Fresh Products Branch's (FPB) trust fund balance

for this program will be approximately $1.0 million under the four-

month level of approximately $4.0 million. Further, FPB's costs of

operating the destination market program are expected to increase to

approximately $12.9 million during FY 98 and to approximately $13.2

million in FY 99. These cost increases will result from both

inflationary increases with regard to current FPB operations and

services and the need to improve or expand current services.

Employee salaries and benefits are major program costs that account

for approximately 80 percent of FPB's total operating budget. A general

and locality salary increase for Federal employees, ranging from 2.30

to 4.66 percent depending on locality, effective January 1997,

significantly increased program costs. Another general and locality

salary increase is expected to become effective in January 1998. In

addition, inflation also impacts upon FPB's non-salary costs. These

increases will increase FPB's costs of operating this program by

approximately $300,000 per year.

Additional revenues are also needed to enable FPB to cover the

costs of improving program integrity by mailing copies of all

destination market certificates to the shippers of the products

inspected. FPB estimates that it will cost $200,000 per year for the

postage, envelopes and additional staff time to send the approximately

275,000 inspection certificates it issues annually. Additional revenues

are also necessary in order that FPB may cover the costs of securing

the additional staff ($200,000) needed to increase the timeliness of

service delivery in several destination markets which are currently in

need of additional staffing (e.g., Dallas, Texas). Finally, FPB needs

an additional $200,000 per year for three to four years to cover the

costs of securing the equipment (e.g., digital imaging cameras and

computers, inspector notebook computers and Agency-mandated information

systems upgrades) needed to expand FPB's services and to make existing

services more efficient in the future.

This proposed fee increase should result in an estimated $1.2

million in additional revenues per year (only $600,000 during FY 98

since any fee increase would be effective on April 1, 1998) and should

enable FPB to cover its costs while maintaining current program

reserves (at a level below that provided for by Agency policy).

The purpose of the RFA is to fit regulatory actions to the scale of

businesses subject to such actions in order that small businesses will

not be unduly or disproportionately burdened. The action described

herein is being considered for several reasons, including that

additional user fee revenues are needed to cover the costs of: (1)

providing current program operations and services; (2) improving

program integrity by mailing copies of all destination market

certificates to the shippers of the products inspected (the basis for

the proposed change in regulation with regard to the disposition of

inspection certificates to include that one copy be delivered or mailed

to the shipper of the inspected product); (3) improving the timeliness

with which inspection services are provided; and (4) acquiring

technological advancements (e.g., digital imaging cameras and

computers, inspector notebook

[[Page 66034]]

computers and Agency-mandated information systems upgrades) aimed at

expanding FPB's services and making them more efficient in the future.

The objective of this proposed rule is to increase user fee revenue

generated under the destination market program by approximately $1.2

million or approximately 10 percent per year. This action is authorized

under the Agricultural Marketing Act (AMA) of 1946 (see 7 U.S.C.

1622(h)) which states that the Secretary of Agriculture may assess and

collect ``such fees as will be reasonable and as nearly as may be to

cover the costs of services rendered * * *''

There are more than 2,000 users of FPB's destination market grading

services (including applicants who must meet import requirements \1\--

inspections which amount to under 2.5 percent of all lot inspections

performed). A small portion of these users are small entities under the

criteria established by the Small Business Administration (13 CFR

121.601). There will be no additional reporting, recordkeeping, or

other compliance requirements imposed upon small entities as a result

of this proposed rule. FPB has not identified any other Federal rules

which may duplicate, overlap or conflict with this proposed rule.

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\1\ Section 8e of the Agricultural Marketing Agreement Act of

1937, as amended (7 U.S.C. 601-674), requires that whenever the

Secretary of Agriculture issues grade, size, quality or maturity

regulations under domestic marketing orders for certain commodities,

the same or comparable regulations on imports of those commodities

must be issued. Import regulations apply only during those periods

when domestic marketing order regulations are in effect.

Currently, there are 15 commodities subject to 8e import

regulations: avocados, dates (other than dates for processing),

filberts, grapefruit, kiwifruit, limes, olives (other than Spanish-

style green olives), onions, oranges, Irish potatoes, prunes,

raisins, table grapes, tomatoes and walnuts. A current listing of

the regulated commodities can be found under 7 CFR Parts 944, 980

and 999. Section 999.600 establishes minimum quality,

identification, certification and safeguard requirements for foreign

produced farmers stock, shelled and cleaned in-shell peanuts

presented for importation into the United States. Import

requirements applicable to peanuts may be found under subparagraph

(f)(2) of section 108B of the Agricultural Act of 1949 (7 U.S.C.

1445c-3), as amended November 28, 1990, and August 10, 1993, and

section 155 of the Federal Agriculture Improvement and Reform Act of

1996 (7 U.S.C. 7271).

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Inasmuch as the destination market grading services are voluntary

(except when required for imported commodities), and since the fees

charged to users of these services vary with usage, the impact on all

businesses, including small entities, is very similar. Further, even

though fees will be raised, the increase is small (approximately ten

percent) and should not significantly affect these entities. Finally,

except for those persons who are required to obtain inspections, most

of these businesses are typically under no obligation to use these

inspection services, and, therefore, any decision on their part to

discontinue the use of the services should not prevent them from

marketing their products.

Executive Order 12988

This 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.

Proposed Action

The AMA authorizes official inspection, grading and certification,

on a user-fee basis, of fresh fruits, vegetables and other products

such as raw nuts, Christmas trees and flowers. The AMA provides that

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

as nearly as practicable, the costs of the services rendered. This

proposed rule will amend the schedule for fees and charges for

inspection services rendered to the fresh fruit and vegetable industry

to reflect the costs necessary to operate the program.

AMS regularly reviews its user-fee programs to determine if the

fees are adequate. While FPB continues to search for opportunities to

reduce its costs, the existing fee schedule will not generate

sufficient revenues to cover program costs while maintaining an

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

policy (AMS Directive 408.1). Current revenue projections for

destination market inspection work during FY 97 are $12.0 million with

costs projected at $11.9 million and an end-of-year reserve of $3.0

million. However, FPB's trust fund balance for this program will be

approximately $1.0 million under the four-month level of approximately

$4.0 million. Further, FPB's costs of operating the destination market

program are expected to increase to approximately $12.9 million during

FY 98 and to approximately $13.2 million in FY 99. These cost increases

(which are outlined below) will result from both inflationary increases

with regard to current FPB operations and services and the need to

improve or expand current services.

Employee salaries and benefits are major program costs that account

for approximately 80 percent of FPB's total operating budget. A general

and locality salary increase for Federal employees, ranging from 2.30

to 4.66 percent depending on locality, effective January 1997,

significantly increased program costs. Another general and locality

salary increase is expected to become effective in January 1998. In

addition, inflation also impacts upon FPB's non-salary costs. These

increases will increase FPB's costs of operating this program by

approximately $300,000 per year.

Additional revenues are also needed to enable FPB to cover the

costs of improving program integrity by mailing copies of all

destination market certificates to the shippers of the products

inspected. This is an essential step in FPB's ongoing effort to improve

the integrity of the inspection process. This action will assist in

preventing industry participants from using falsified inspection

certificates to alter the terms of sales between shippers and

receivers. In accordance with this effort, the regulations with regard

to the disposition of inspection certificates in 7 CFR 51.21 are

proposed to be revised to require that one copy of the certificate be

provided to the shipper of the inspected product. FPB estimates that it

will cost $200,000 per year for the postage, envelopes and additional

staff time to send the approximately 275,000 inspection certificates it

issues annually.

Additional revenues are also necessary in order that FPB may cover

the costs of securing the additional staff ($200,000) needed to

increase the timeliness of service delivery in several destination

markets which are currently in need of additional staffing (e.g.,

Dallas, Texas). This action responds to industry feedback to FPB's FY

1996 Customer Service Survey which emphasized the importance of

timeliness far more than cost containment.

Finally, FPB needs an additional $200,000 per year for three to

four years to cover the costs of securing the equipment (e.g., digital

imaging cameras and computers, inspector notebook computers and Agency-

mandated information systems upgrades) needed to expand FPB's services

and to make existing services more efficient in the future.

This proposed fee increase should result in an estimated $1.2

million in additional revenues per year (only $600,000 during FY 98

since any fee

[[Page 66035]]

increase would be effective on April 1, 1998) and should enable FPB to

cover its costs while maintaining current program reserves. In order to

reach a four month reserve, further increases in fees will be likely in

future years.

Based on the aforementioned analysis of this program's increasing

costs, AMS proposes to increase the fees for destination market

inspection services. The following table compares current fees and

charges with proposed fees and charges for fresh fruit and vegetable

inspection as found in 7 CFR 51.38. Unless otherwise provided for by

regulation or written agreement between the applicant and the

Administrator, the charges in the schedule of fees as found in

Sec. 51.38 are:

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Service Current Proposed

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Quality and condition inspections of one to

four products each in quantities of 51 or more

packages and unloaded from the same land or

air conveyance:

Over a half carlot equivalent of each $78.............................. $86.

product.

Half carlot equivalent or less of each 65............................... 72.

product.

For each additional lot of the same product 13............................... 14.

Condition only inspections of one to four

products each in quantities of 51 or more

packages and unloaded from the same land or

air conveyance:

Over a half carlot equivalent of each 65............................... 72.

product.

Half carlot equivalent or less of each 60............................... 66.

product.

For each additional lot of the same product 13............................... 14.

Quality and condition and condition only

inspections of five or more products each in

quantities of 51 or more packages and unloaded

from the same land or air conveyance:

For the first five products................ 277.............................. 305.

For each additional product................ 39............................... 43.

For each additional lot of any of the same 13............................... 14.

product.

Quality and condition and condition only

inspections of products each in quantities of

50 or less packages unloaded from the same

land or air conveyance:

For each product........................... 39............................... 43.

For each additional lot of any of the same 13............................... 14.

product.

Dock-side inspections of an individual product

unloaded directly from the same ship:

For each package weighing less than 15 1 cent........................... 1.1 cents.

pounds.

For each package weighing 15 to 29 pounds.. 2 cents.......................... 2.2 cents.

For each package weighing 30 or more pounds 3 cents.......................... 3.3 cents.

For each additional lot of any of the same 13............................... 14.

product.

Minimum charge per individual product...... 78............................... 86.

Inspections performed for other purposes 39 per hour...................... 43 per hour.

(except for contract work) during the grader's

regularly scheduled work week.

Overtime or holiday premium rate (per hour 19.50 per hour................... 21.50 per hour.

additional) for all inspections performed

outside the grader's regularly scheduled work

week.

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List of Subjects in 7 CFR Part 51

Agricultural commodities, Food grades and standards, Fruits, Nuts,

Reporting and record keeping requirements, Trees, Vegetables.

For reasons set forth in the preamble, 7 CFR Part 51 is proposed to

be amended as follows:

PART 51--[AMENDED]

1. The authority citation for 7 CFR part 51 continues to read as

follows:

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

2. Section 51.21 is revised to read as follows:

Sec. 51.21 Disposition of inspection certificates.

The original certificate, and not to exceed four copies (if

requested by applicant prior to issuance), shall be delivered or mailed

promptly to the applicant or to a person designated by him. One copy

shall be delivered or mailed to the shipper of the inspected product.

One copy shall be filed in the office of the inspector when the

inspection is made by a Federal Government employee, otherwise, it

shall be filed in the appropriate office of the cooperating Federal-

State Inspection Agency. Unless otherwise directed by the

Administrator, two copies of each official certificate issued on

products received in destination markets shall be forwarded to the

Administrator to be kept on file in Washington and no copies of

official certificates issued at shipping point need be so forwarded. In

the case of any product covered by a marketing agreement and/or order

effective pursuant to the Agricultural Marketing Agreement Act of 1937,

as amended (7 U.S.C. 601 et seq.), at least one copy of each

certificate covering the inspection of such product shall, on request,

be delivered to the administrative agency established thereunder,

subject to such terms and conditions as the Administrator may

prescribe. Copies may be furnished to other interested parties as

outlined in Sec. 51.41.

3. Section 51.38 is revised to read as follows:

Sec. 51.38 Basis for fees and rates.

(a) When performing inspections of product unloaded directly from

land or air transportation, the charges shall be determined on the

following basis:

(1) For products in quantities of 51 or more packages:

(i) Quality and condition inspection of 1 to 4 products unloaded

from the same conveyance:

(A) $86 for over a half carlot equivalent of an individual product.

(B) $72 for a half carlot equivalent or less of an individual

product.

(C) $14 for each additional lot of the same product.

(ii) Condition only inspection of 1 to 4 products unloaded from the

same conveyance:

(A) $72 for over a half carlot equivalent of an individual product.

(B) $66 for a half carlot equivalent or less of an individual

product.

(C) $14 for each additional lot of the same product.

(iii) Quality and condition inspection and/or condition only

inspection of 5 or more products unloaded from the same conveyance:

(A) $305 for the first 5 products.

(B) $43 for each additional product.

(C) $14 for each additional lot of any of the same product.

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(2) For quality and condition inspection and/or condition only

inspection of products in quantities of 50 or less packages unloaded

from the same conveyance:

(i) $43 for each individual product.

(ii) $14 for each additional lot of any of the same product.

(b) When performing inspections of palletized products unloaded

directly from sea transportation or when palletized product is first

offered for inspection before being transported from the dock-side

facility, charges shall be determined on the following basis:

(1) For each package inspected according to the following rates:

(i) 1.1 cent per package weighing less than 15 pounds;

(ii) 2.2 cents per package weighing 15 to 29 pounds; and,

(iii) 3.3 cents per package weighing 30 or more pounds.

(2) $14 for each additional lot of any of the same product.

(3) A minimum charge of $86 for each product inspected.

(c) When performing inspections of products from sea containers

unloaded directly from sea transportation or when palletized products

unloaded directly from sea transportation are not offered for

inspection at dockside, the carlot fees in Sec. 51.38(a) shall apply.

(d) When performing inspections for Government agencies, or for

purposes other than those prescribed in the preceding paragraphs,

including weight-only and freezing-only inspections, fees for

inspection shall be based on the time consumed by the grader in

connection with such inspections, computed at a rate of $43 an hour:

Provided, That:

(1) Charges for time shall be rounded to the nearest half hour;

(2) The minimum fee shall be two hours for weight-only inspections,

and one-half hour for other inspections; and

(3) When weight certification is provided in addition to quality

and/or condition inspection, a one-hour charge shall be added to the

carlot fee.

(4) When inspections are performed to certify product compliance

for Defense Personnel Support Centers, the daily or weekly charge shall

be determined by multiplying the total hours consumed to conduct

inspections by the hourly rate. The daily or weekly charge shall be

prorated among applicants by multiplying the daily or weekly charge by

the percentage of product passed and/or failed for each applicant

during that day or week. Waiting time and overtime charges shall be

charged directly to the applicant responsible for their incurrence.

(e) When performing inspections at the request of the applicant

during periods which are outside the grader's regularly scheduled work

week, a charge for overtime or holiday work shall be made at the rate

of $21.50 per hour or portion thereof in addition to the carlot

equivalent fee, package charge, or hourly charge specified in this

subpart. Overtime or holiday charges for time shall be rounded to the

nearest half hour.

(f) When an inspection is delayed because product is not available

or readily accessible, a charge for waiting time shall be made at the

prevailing hourly rate in addition to the carlot equivalent fee,

package charge, or hourly charge specified in this subpart. Waiting

time shall be rounded to the nearest half hour.

Dated: December 11, 1997

Robert C. Keeney,

Deputy Administrator, Fruit and Vegetable Programs.

[FR Doc. 97-32813 Filed 12-16-97; 8:45 am]

BILLING CODE 3410-02-P