Egg, Poultry, and Rabbit Grading Increase in Fees and Charges

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Parts 56 and 70

[Docket No. PY-97-001]

Egg, Poultry, and Rabbit Grading Increase in Fees and Charges

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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

fees and charges for Federal voluntary egg, poultry, and rabbit

grading. These fees and charges are increased to cover the increase in

salaries of Federal employees, salary increases of State employees

cooperatively utilized in administering the programs, and other

increased Agency costs.

EFFECTIVE DATE: May 1, 1997.

FOR FURTHER INFORMATION CONTACT: Douglas C. Bailey, Chief,

Standardization Branch, (202) 720-3506.

SUPPLEMENTARY INFORMATION: This rule has been determined not-

significant for purposes of Executive Order 12866 and has not been

reviewed by the Office of Management and Budget (OMB).

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.

Pursuant to the requirements set forth in the Regulatory

Flexibility Act (RFA), the AMS has considered the economic impact of

this action on small entities.

There are more than 400 users of the Poultry Division's grading

services. Many of these users are small entities under the criteria

established by the Small Business Administration (13 CFR 121.601). This

rule raises the fees charged to all businesses for voluntary grading

services for eggs, poultry, and rabbits. The AMS estimates that overall

this rule will yield an additional $1.2 million during fiscal year (FY)

1998. Without the fee increase, anticipated revenue will not cover

program costs and projected FY 98 revenues for grading services are

$21.7 million with costs projected at $23.1 million. Trust fund

balances would be below appropriate levels. With a fee increase,

projected FY 98 revenues are $22.9 million with costs projected at

$23.1 million. The hourly resident rate will increase by approximately

5.5 percent while the hourly nonresident rate for grading service will

increase by approximately 15.8 percent. The costs to

[[Page 18020]]

entities will be proportional to their use of service, so that costs

are shared equitably by all users. Furthermore, entities are under no

obligation to use these grading services.

The AMS has certified that this action will not have a significant

impact on a substantial number of small entities, as defined in the RFA

(5 U.S.C. 601).

The information collection requirements that appear in the sections

amended by this rule have been previously approved by OMB and assigned

OMB Control Numbers under the Paperwork Reduction Act of 1980 as

follows: Sec. 56.52(a)(4)--No. 0581-0128; and Sec. 70.77(a)(4)--No.

0581-0127.

Background

The Agricultural Marketing Act (AMA) of 1946 authorizes official

grading and certification on a user-fee basis of eggs, poultry, and

rabbits. The AMA provides that reasonable fees be collected from the

user of the program services to cover, as nearly as practicable, the

costs of services rendered. AMS regularly reviews these programs to

determine if fees are adequate and if costs are reasonable. This rule

will amend the schedule for fees and charges for grading services

rendered to the egg, poultry, and rabbit industries to reflect the

costs currently associated with the program.

In 1995 the egg products inspection program was transferred to the

Food Safety and Inspection Service. In order to offset the loss of

efficiencies and to avoid an increase in user fees for the remaining

shell egg and poultry grading programs, AMS took several streamlining

actions in supervisory and support activities. These actions included

reducing the number of supervisory visits; consolidating and closing

submanagement offices; consolidating the billing and support functions

into two regional offices; realigning regional boundaries; and

substantially reducing the Washington, DC headquarters staff. As a

result, no fee increase was necessary due to the reorganization.

However, increased salaries and other costs and a substantial shift

from resident to nonresident grading services now require an increase

in fees.

Employee salaries and benefits are major program costs that account

for approximately 82 percent of the total operating budget. Materially

affecting program costs were general and locality salary increases for

Federal employees which, depending on locality, ranged from 3.09 to

6.25 percent in January 1995, 2.39 to 2.87 percent in January 1996, and

2.24 to 4.66 percent in January 1997. Also, from November 1994 through

September 1997, salaries and fringe benefits of federally licensed

State employees will have increased by about 7 percent. Further, since

October 1993, standardization program costs must be recovered from

grading program user fees. As a result, the hourly resident rate for

grading services will increase by approximately 5.5 percent. The hourly

resident rate covers graders' salaries, fringe benefits, and related

costs.

Another factor affecting the current fee structure is the shift

from resident to nonresident grading services. Historically, the

majority of shell egg and poultry grading has been done on a resident

basis according to the official U.S. quality grade standards. Today,

however, a growing volume of shell eggs and poultry is being traded

according to product-specific purchase specifications where USDA

certification is required, and this work is done increasingly on a

nonresident fee basis. This shift has increased the proportion of

overhead costs necessary to administer the nonresident services. As a

result, users of nonresident services are not supporting their share of

the program's overhead costs under the present fee structure. For this

reason, the hourly nonresident rate for grading service will increase

by approximately 15.8 percent.

A recent review of the current fee schedule, effective since

November 1, 1994, revealed that anticipated revenue will not adequately

cover increasing program costs. Without a fee increase, projected FY 98

revenues for grading services are $21.7 million with costs projected at

$23.1 million, and trust fund balances would be below appropriate

levels. With a fee increase, projected FY 98 revenues are $22.9 million

with costs projected at $23.1 million.

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Service Revised

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Resident shell egg and poultry grading

Administrative charges (supervision, other overhead and

administrative costs) assessed on the volume of product

handled:

Per pound of poultry.................................. .00033

Per 30-dozen case of shell eggs....................... .038

Minimum per month..................................... 225

Maximum per month..................................... 2,250

Nonresident shell egg and poultry grading and Resident

rabbit grading

Administrative charge based on 25% of grader's salary,

minimum per month........................................ 225

Nonresident fee basis poultry, shell egg and rabbit

grading

Regular time, rate per hour............................... 38.96

Saturdays, Sundays, and legal holidays, rate per hour..... 43.24

Appeal grading and Review of grader's decision

Rate per hour............................................. 30.56

Inauguration of resident grading service.................. 310

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Comments

Based on an analysis of costs to provide these services, a proposed

rule to increase the fees for these services was published in the

Federal Register (62 FR 4662) on January 31, 1997. Comments on the

proposed rule were solicited from interested parties until March 3,

1997.

During the 30-day comment period, the Agency received five comments

in opposition to the proposal; three from egg producers, one from a

national egg industry organization, and one from a poultry processor.

They expressed a general concern about the cost of the grading program.

Several commentors encouraged AMS to find and implement additional

cost-saving measures in lieu of a fee increase. Although AMS has

implemented significant cost-saving actions over the past several years

as described above and remains committed to controlling program costs

wherever possible, implementation of the proposed fee increases remains

necessary to ensure the financial stability of the grading program.

Pursuant to 5 U.S.C. 553, it is found and determined that good

cause exists for not postponing the effective date of the action until

30 days after publication in the Federal Register, because the proposed

fees need to be implemented on an expedited basis in order to avoid

financial losses in the grading program this fiscal year. Also, the

effective date of the fee increase will be set to coincide with the

next billing cycle beginning on May 1, 1997.

List of Subjects

7 CFR Part 56

Eggs and egg products, Food grades and standards, Food labeling,

Reporting and recordkeeping requirements.

7 CFR Part 70

Food grades and standards, Food labeling, Poultry and poultry

products, Rabbits and rabbit products, Reporting and recordkeeping

requirements.

[[Page 18021]]

For reasons set forth in the preamble, title 7, Code of Federal

Regulations, parts 56 and 70 is amended as follows:

PART 56--GRADING OF SHELL EGGS

1. The authority citation for part 56 continues to read as follows:

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

2. Section 56.46 is amended by revising paragraphs (b) and (c) to

read as follows:

Sec. 56.46 On a fee basis.

* * * * *

(b) Fees for grading services will be based on the time required to

perform the services. The hourly charge shall be $38.96 and shall

include the time actually required to perform the grading, waiting

time, travel time, and any clerical costs involved in issuing a

certificate.

(c) Grading services rendered on Saturdays, Sundays, or legal

holidays shall be charged for at the rate of $43.24 per hour.

Information on legal holidays is available from the Supervisor.

3. Section 56.47 is revised to read as follows:

Sec. 56.47 Fees for appeal grading or review of a grader's decision.

The cost of an appeal grading or review of a grader's decision

shall be borne by the appellant at an hourly rate of $30.56 for the

time spent in performing the appeal and travel time to and from the

site of the appeal, plus any additional expenses. If the appeal grading

or review of a grader's decision discloses that a material error was

made in the original determination, no fee or expenses will be charged.

4. Section 56.52 is amended by revising paragraph (a)(4) to read as

follows:

Sec. 56.52 Continuous grading performed on resident basis.

* * * * *

(a) * * *

(4) An administrative service charge based upon the aggregate

number of 30-dozen cases of all shell eggs handled in the plant per

billing period multiplied by $0.038, except that the minimum charge per

billing period shall be $225 and the maximum charge shall be $2,250.

The minimum charge also applies where an approved application is in

effect and no product is handled.

* * * * *

5. Section 56.54 is amended by revising paragraph (a)(2) to read as

follows:

Sec. 56.54 Charges for continuous grading performed on a nonresident

basis.

* * * * *

(a) * * *

(2) An administrative service charge equal to 25 percent of the

grader's total salary costs. A minimum charge of $225 will be made each

billing period. The minimum charge also applies where an approved

application is in effect and no product is handled.

* * * * *

PART 70--VOLUNTARY GRADING OF POULTRY PRODUCTS AND RABBIT PRODUCTS

6. The authority citation for part 70 continues to read as follows:

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

7. Section 70.71 is amended by revising paragraphs (b) and (c) to

read as follows:

Sec. 70.71 On a fee basis.

* * * * *

(b) Fees for grading services will be based on the time required to

perform such services for class, quality, quantity (weight test), or

condition, whether ready-to-cook poultry, ready-to-cook rabbits, or

specified poultry food products are involved. The hourly charge shall

be $38.96 and shall include the time actually required to perform the

work, waiting time, travel time, and any clerical costs involved in

issuing a certificate.

(c) Grading services rendered on Saturdays, Sundays, or legal

holidays shall be charged for at the rate of $43.24 per hour.

Information on legal holidays is available from the Supervisor.

8. Section 70.72 is revised to read as follows:

Sec. 70.72 Fees for appeal grading, or examination or review of a

grader's decision.

The costs of an appeal grading, or examination or review of a

grader's decision, will be borne by the appellant at an hourly rate of

$30.56 for the time spent in performing the appeal and travel time to

and from the site of the appeal, plus any additional expenses. If the

appeal grading, or examination or review of a grader's decision,

discloses that a material error was made in the original determination,

no fee or expenses will be charged.

9. Section 70.76 is amended by revising paragraph (a)(2) to read as

follows:

Sec. 70.76 Charges for continuous poultry grading performed on a

nonresident basis.

* * * * *

(a) * * *

(2) An administrative service charge equal to 25 percent of the

grader's total salary costs. A minimum charge of $225 will be made each

billing period. The minimum charge also applies where an approved

application is in effect and no product is handled.

* * * * *

10. Section 70.77 is amended by revising paragraphs (a)(4) and

(a)(5) to read as follows:

Sec. 70.77 Charges for continuous poultry or rabbit grading performed

on a resident basis.

* * * * *

(a) * * *

(4) For poultry grading: An administrative service charge based

upon the aggregate weight of the total volume of all live and ready-to-

cook poultry handled in the plant per billing period computed in

accordance with the following: Total pounds per billing period

multiplied by $0.00033, except that the minimum charge per billing

period shall be $225 and the maximum charge shall be $2,250. The

minimum charge also applies where an approved application is in effect

and no product is handled.

(5) For rabbit grading: An administrative service charge equal to

25 percent of the grader's total salary costs. A minimum charge of $225

will be made each billing period. The minimum charge also applies where

an approved application is in effect and no product is handled.

* * * * *

Dated: April 7, 1997.

Lon Hatamiya,

Administrator.

[FR Doc. 97-9478 Filed 4-11-97; 8:45 am]

BILLING CODE 3410-02-P