Grading and Inspection, General Specifications for Approved Plants and Standards for Grades of Dairy Products: Revision of User 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: Revision of User

Fees

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: The Agricultural Marketing Service (AMS) is increasing the

fees charged for services provided under the dairy inspection and

grading program. This rule will yield an estimated $343,000 during

1998. The program is a voluntary, user fee program conducted under the

authority of the Agricultural Marketing Act of 1946, as amended. This

action increases the hourly rate to $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 fees represent an increase of four dollars per hour.

The fees are being increased to cover the costs of recent 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 nonpay operating costs.

EFFECTIVE DATE: January 4, 1998.

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

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

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

SUPPLEMENTARY INFORMATION: This 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 final 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), 5 U.S.C. 601 et seq., the 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 fees will be raised, the increase is

approximately 8 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 should not prevent them from marketing their products. The AMS

estimates that overall this rule will yield an additional $343,000

during 1998. The rule reflects certain fee increases needed to recover

the cost of inspection and grading services rendered in accordance with

the Agricultural Marketing Act of 1946.

The 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). 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 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 four months.

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

fees, it is 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, the salaries of

[[Page 66258]]

Federal employees increased by 3 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 3 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.

On October 16, 1997, the AMS published in the Federal Register (62

FR 53760), a proposed rule for public comment. Only one comment was

received. A U.S. Senator forwarded a constituent comment from a dairy

product manufacturer to the Department for its review. That commenter

opposed the proposed fee increase as harmful to the dairy industry.

The commenter was of the view that the proposed fee increase

coupled with the most recent increase made effective on January 5, 1997

(61 FR 68997), is far out of line with the general economic conditions

in the United States. The commenter went on to conclude that

manufacturers who must have USDA inspection to sell their products

domestically or internationally would bear the brunt of the fee

increase. The commenter discussed passing the fee increase on to

customers but stated that it would be unable to pass though the

increases to its customers. The commenter further stated that it would

not accept price increases from its suppliers unless it was an absolute

last resort. As stated previously, 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 service to cover, as nearly as practicable, the cost of maintaining

the program. The fees, as proposed in this rulemaking, are consistent

with the provisions of the 1946 Act. The Agency conducts continuing fee

analyses and has instituted annual fee increases, when necessary, to

recover salary and other routine costs. The programs' financial

situation described herein requires implementation of the fee increase.

Even so, every effort has been and will continue to be made to operate

the program as efficiently as possible and to seek cost-cutting

measures that are consistent with the Agency's mission under this

program.

With regard to the commenters passing increases forward or

backward, such actions are subject to agreement between buyers and

sellers as is any provision between the parties to require inspection.

This program is a voluntary program under the 1946 Act. Even though the

fees will be revised, the increase is approximately 8 percent and will

not significantly affect the industry. Accordingly, consistent with the

provisions of the Agricultural Marketing Act of 1946, the fees as

proposed are made final in this rule.

Pursuant to 5 U.S.C. 553, it is hereby found that good cause exists

for not delaying the effective date of this action until 30 days after

publication of this final rule in the Federal Register. A revenue

shortfall warrants putting the higher rates into effect as quickly as

possible. The increase in fees is essential for effective management

and operation of the program and to satisfy the intent of the

Agricultural Marketing Act of 1946. A proposed rule setting forth

proposed fee increases was published in the Federal Register on October

16, 1997 (62 FR 53760).

Accordingly, the program fees are being increased as set forth

below.

Program Changes Adopted in the Final Rule

This rule document makes the following changes in the regulations

implementing the dairy inspection and grading program:

1. Increases 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. Increases 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.

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, 7 CFR part 58 is 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 between 6:00 a.m. and 6:00

p.m. and $61.60 for service performed between 6:00 p.m. and 6:00 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: December 12, 1997.

Enrique E. Figueroa,

Acting Administrator, Agricultural Marketing Service.

[FR Doc. 97-33005 Filed 12-17-97; 8:45 am]

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