Changes in Fees for Federal Meat Grading and Certification Services

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 54

[No. LS-96-006]

RIN 0581-AB44

Changes in Fees for Federal Meat Grading and Certification

Services

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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

SUMMARY: The Agricultural Marketing Service (AMS) proposes revising the

hourly fee rates for voluntary Federal meat grading and certification

services. The hourly fees would be adjusted by this proposed rule to

reflect the increased cost of providing service, and ensure that the

Federal meat grading program is operated on a financially self-

supporting basis as required by law.

DATES: Comments must be received on or before March 2, 1998.

ADDRESSES: Written comments may be mailed to Larry R. Meadows, Chief;

USDA, AMS, LS, MGC; STOP 0248, Room 2628-S; 1400 Independence Avenue,

SW.; Washington, DC 20250-0248. (For further information regarding

comments, see ``Comments'' under SUPPLEMENTARY INFORMATION.)

FOR FURTHER INFORMATION CONTACT: Larry R. Meadows, Chief, Meat Grading

and Certification (MGC) Branch, 202-720-1246.

SUPPLEMENTARY INFORMATION:

Regulatory Impact Analysis

This proposed rule was reviewed under the USDA procedures

established to implement Executive Order 12866, and was determined to

be not significant. Therefore, it has not been reviewed by the Office

of Management and Budget.

Effect on Small Entities

This action was reviewed under the Regulatory Flexibility Act (Pub.

L. 96-354, 5 U.S.C. 601 et seq.), wherein the Administrator of AMS

determined that this proposed rule will not have a significant economic

impact on a substantial number of small entities. The proposed hourly

rate increase is necessary to recover the costs of providing voluntary

Federal meat grading and certification services and for the program to

continue serving the industry. To forestall a rate increase while

maintaining operating efficiency, the program has significantly

increased the use of automated information management technologies and

decreased the number of support personnel and field offices. These

cost-saving measures have not provided the margin necessary to operate

the program. Since 1993, program costs have increased by approximately

$7,620,000 or an average of $1,905,000 per year, and the programs

required capital reserves are decreasing.

The program is required to keep at least 4 months of operating

reserve. If the reserves drop to 4 months, the program must cut

services. To avoid an interruption in services to our customers, the

program must maintain more than the minimum reserve. At the beginning

of fiscal year (FY) 1997, the program had 7.7 months of operating

reserve. At the end of FY 1997, the program had only 7.23 months of

operating reserve. Assuming that the rate increase were to take effect

in April 1998, the capital reserve is projected to fall to 5.87 months

by the end of FY 98.

In FY 1997, the unit cost of program services (revenue/total pounds

graded and certified) was approximately $0.00055 per pound. In FY 1998,

including the proposed hourly rate increase, program services are

projected to cost only $0.000617 per pound or $0.000149 per pound less

than the $0.000766 per pound program services cost in FY 1993.

Paperwork Reduction Act

The provisions of the Paperwork Reduction Act do not apply to this

rulemaking as it does not require the collection of any information or

data.

Comments

Interested persons are invited to submit written comments

concerning this proposed rule. Comments must be sent in duplicate to

the Washington, D.C., Office, MGC Branch, and should bear a reference

to the date and page number of this issue of the Federal Register.

Comments submitted in reference to this document will be made available

for public inspection during regular business hours.

Background

The Secretary of Agriculture is authorized by the Agricultural

Marketing Act (AMA) of 1946, as amended, 7 U.S.C. 1621 et seq., to

provide voluntary Federal meat grading and certification services to

facilitate the orderly marketing of meat and meat products and to

enable consumers to obtain the quality of meat they desire. The AMA

also provides for the collection of fees from users of Federal meat

grading and certification services that are approximately equal to the

cost of providing these services. The hourly fees for service are

established by equitably distributing the projected annual program

operating costs over the estimated hours of service--revenue hours--

provided to users of the service. Program operating costs include

salaries and fringe benefits of meat graders, supervision, travel,

training, and all administrative costs of operating the program.

Employee salaries and benefits account for approximately 80 percent of

the total budget. Revenue hours include base hours, premium hours, and

service performed on Federal legal holidays. As program operating costs

change, the hourly fees must be adjusted to enable the program to

remain financially self-supporting as required by law.

This proposed fee increase, the first since 1993, is necessary to

offset increased program operating costs resulting from: (1) the

congressionally-mandated, governmentwide salary increases for 1995,

1996, and 1997, (2) inflation of nonsalary operating costs since 1993,

and (3) accumulated increases in CONUS per diem rates for the 4-year

period from 1994 to 1997. Together, these cost increases total an

estimated $7,620,000 since 1993.

Since the last fee increase, the MGC Branch has continued to

develop more efficient grading and certification procedures and

services. At the same time, applicants for service have become more

efficient in their production techniques. These two factors working in

combination have resulted in the MGC Branch grading and certifying

larger volumes of products and charging fewer revenue hours.

Accordingly,

[[Page 68233]]

fewer revenue dollars are available to offset increases in operating

expenses. In FY 1993, MGC Branch employees graded or certified

23,445,219,703 pounds of meat at an average of 49,902 pounds per

revenue hour. In FY 1997, MGC Branch employees graded or certified

33,029,179,286 pounds of meat at an average of 73,699 pounds per

revenue hour. While the average number of pounds graded and certified

per hour have increased, the total number of revenue hours generated by

Branch employees decreased from 469,819 in FY 1993 to 448,162 in FY

1997. In FY 1997, the program had a net operating loss of $737,000. If

revenues remain constant and costs continue to increase, program

operating costs are projected to exceed total revenue by $1,519,000 in

FY 1998 and $2,124,000 in FY 1999.

Since 1993, in an effort to control overhead costs, the MGC Branch

has closed three field offices, reduced mid-level supervisory staff by

43 percent, and reduced the number of support staff by 29 percent. At

the same time, the MGC Branch has become more reliant on automated

information management systems for data collection and dissemination,

account billing, and disbursements of employee entitlements. The

reduction of field offices, supervisory staff, and support personnel

and the increased reliance on automated systems enabled the MGC Branch

to absorb increased operating costs in 1994, 1995, 1996, and 1997.

Despite the cost reduction efforts, the decrease in revenue hours

plus the increase in salaries, nonsalary operating costs, and CONUS per

diem rates have already resulted in a net operating loss for FY 1997,

and will result in a net operating loss for FY 1998. Such operating

deficits can only be balanced by adjusting the hourly fee rate charged

to users of the service. Any further reduction in personnel, services,

or management infrastructure beyond those already implemented would

have a detrimental effect on the program's ability to provide meat

grading and certification services and support the accurate and uniform

application of such services.

In view of these considerations, the Agency proposes to increase

the base hourly rate commitment applicants pay for voluntary Federal

meat grading and certification services from $36.60 to $39.80. A

commitment applicant is a user of the service who agrees, by commitment

or agreement memorandum, to use meat grading and certification services

for 8 consecutive hours per day, Monday through Friday, between the

hours of 6 a.m. and 6 p.m., excluding legal holidays. The base hourly

rate noncommitment applicants would pay for voluntary Federal meat

grading and certification services would increase from $39.00 to

$42.20, and would be charged to applicants who utilize the service for

8 consecutive hours or less per day, Monday through Friday, between the

hours of 6 a.m. and 6 p.m., excluding legal holidays. The premium

hourly rate for all applicants would increase from $44.60 to $47.80,

and would be charged to users of the service for the hours worked in

excess of 8 hours per day between the hours of 6 a.m. and 6 p.m.; for

hours worked between 6 p.m. and 6 a.m., Monday through Friday; and for

any time worked on Saturday and Sunday, except on legal holidays. The

holiday rate for all applicants would increase from $73.20 to $79.60,

and would be charged to users of the service for all hours worked on

legal holidays.

List of Subjects in 7 CFR Part 54

Food grades and standards, Food labeling, Meat and meat products.

For the reasons set forth in the preamble, 7 CFR part 54 is amended

as follows:

PART 54--MEATS, PREPARED MEATS, AND MEAT PRODUCTS (GRADING,

CERTIFICATION, AND STANDARDS)

1. The authority citation for part 54 continues to read as follows:

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

Sec. 54.27 [Amended]

2. In Sec. 54.27, paragraph (a), ``$39.00'' is removed and

``$42.20'' is added in its place, ``$44.60'' is removed and ``$47.80''

is added in its place, ``$73.20'' is removed ``$79.60'' is added in its

place, and in paragraph (b), ``$36.60'' is removed and ``$39.80'' is

added in its place, ``$44.60'' is removed and ``$47.80'' is added in

its place, and ``$73.20'' is removed and ``$79.60'' is added in its

place.

Barry L. Carpenter,

Deputy Administrator, Livestock and Seed Program.

[FR Doc. 97-34095 Filed 12-30-97; 8:45 am]

BILLING CODE 3410-02-P