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-98-002]

RIN 0581-AB54

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

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: The Agricultural Marketing Service (AMS) proposes to increase

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

grading. These fees and charges need to be 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.

DATES: Comments must be received on or before August 10, 1998.

ADDRESSES: Send written comments, in duplicate, to Douglas C. Bailey,

Chief, Standardization Branch, Poultry Programs, Agricultural Marketing

Service, U.S. Department of Agriculture, STOP 0259, room 3944-South,

1400 Independence Avenue, SW, Washington, DC 20250-0259. Comments

received may be inspected at this location between 8:00 a.m. and 4:30

p.m., Eastern Time, Monday thru Friday, except holidays. State that

your comments refer to Docket No. PY-98-002.

FOR FURTHER INFORMATION CONTACT: Rex A. Barnes, Chief, Grading Branch,

(202) 720-3271.

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 (OMB).

This proposed 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 about 400 users of Poultry Programs' grading services.

Many of these users are small entities under the criteria established

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

rule will raise the fees charged to businesses for voluntary grading

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

this rule would yield an additional $1.5 million during FY 1999. The

hourly resident rate for grading services will increase by

approximately 4.1 percent while the hourly nonresident rate for grading

service will increase by approximately 15 percent. The costs to

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 grading services as authorized under 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). The Agency has engaged in

streamlining efforts to reduce costs including staff and space

reductions or closing of field offices. However, overall, costs are

increasing despite these efforts.

Without a fee increase, revenue projections for FY 1999 would be

$19.8 million, with costs projected at $22.3 million. The shortfall, if

allowed to continue, would translate into an approximate 3.8 month

operating reserve at the end of FY 1999 or $7.1 million, which is less

than Agency policy requires. With the fee increase, FY 1999 revenue is

projected to be $21.3 million and costs are projected at $22.3 million.

Trust fund balances would be $8.5 million or 4.3 months.

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

to be amended by the proposed rule have been previously approved by OMB

and assigned OMB Control Numbers under the Paperwork Reduction Act (44

U.S.C. Chapter 35) as follows: Sec. 56.52(a)(4)--No. 0581-0128; and

Sec. 70.77(a)(4)--No. 0581-0127.

Background and Proposed Changes

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 users

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 proposal would

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.

Several streamlining actions to be completed in FY 1998 will result

in cost savings. They include staff and space reductions or closing of

field offices. However, overall, costs are increasing despite these

efforts.

Employee salaries and benefits account for approximately 82 percent

of the total operating budget. A general and locality salary increase

for Federal employees, ranging from 2.57 to 6.52 percent, depending on

locality, became effective in January 1998 and has materially affected

program costs. Another general and locality salary increase estimated

at 3.0 percent is expected in January 1999. Also, from October 1997

through September 1999, salaries and fringe benefits of federally

licensed State employees will have increased by about 6 percent. As a

result, the hourly resident rate for grading services will increase by

approximately 4.1 percent. The hourly resident rate covers graders'

salaries, fringe benefits, and related costs.

Another factor affecting the current fee structure is the increased

demand for grading services on a fee basis. Resident grading service is

provided by a grader with a regular tour of duty in

[[Page 31363]]

a plant, while fee grading service is provided by a grader on an

intermittent, as-needed basis. 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. In recent years, however, there

has been an increase in the volume of shell eggs and poultry being

traded according to product-specific purchase requirements where USDA

certification is required, and this work is done predominantly on a fee

basis. Fee services for many plants require more supervisory time and

travel to staff, train, and supervise graders. As a result, a greater

proportion of overhead costs for supervision and support staff must be

charged to fee services. Rates to cover these costs were only minimally

raised in years prior to the last fee increase effective May 1, 1997.

Current analysis shows that these rates need to be increased an

additional 15 percent to totally support their fair share of the

program's overhead costs.

Additionally, rates for appeal grading and review of a grader's

decision are only occasionally used, currently accounting for less than

$5,000 revenue annually. A separate rate for this service would be

discontinued and these services would be charged using fee service

rates for the time required to perform such service. This amendment

would simplify the rate structure and any change in revenue would be

negligible.

A recent review of the current fee schedule, effective May 1, 1997,

revealed that anticipated revenue will not adequately cover increasing

program costs. Without a fee increase, projected FY 1999 revenues for

grading services are $19.8 million, with costs projected at $22.3

million, and trust fund balances would be $7.1 million, below

appropriate levels. With a fee increase, projected FY 1999 revenues

would be $21.3 million and costs are projected at $22.3 million. Trust

fund balances would be $8.5 million or 4.3 months of operating costs.

The following table compares current fees and charges with proposed

fees and charges for egg, poultry, and rabbit grading as found in 7 CFR

Parts 56 and 70:

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Service Current Proposed

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Resident service:

Inauguration of service................... 310 310

Hourly charges--Regular hours............. 26.56 27.64

Administrative charges--Poultry grading:

Per pound of poultry.................. .00033 .00034

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

Maximum per month..................... 2,250 2,500

Administrative charges--Shell egg grading:

Per 30-dozen case of shell eggs....... .038 .040

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

Maximum per month..................... 2,250 2,500

Administrative charges--Rabbit grading:

Based on 25% of grader's salary,

minimum per month 225 250

Nonresident Service: \1\

Hourly charges:

Regular hours......................... 26.56 27.64

Administrative charges:

Based on 25% of grader's salary,

minimum per month.................... 225 250

Fee and appeal service:

Hourly charges:

Regular hours......................... 38.96 44.80

Weekend and holiday hours............. 43.24 51.60

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\1\ For poultry and shell egg grading.

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.

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

Code of Federal Regulations, parts 56 and 70 be 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 revised to read as follows:

Sec. 56.46 On a fee basis.

(a) Unless otherwise provided in this part, the fees to be charged

and collected for any service performed, in accordance with this part,

on a fee basis shall be based on the applicable rates specified in this

section.

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

perform the services. The hourly charge shall be $44.80 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 $51.60 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 on a fee basis at rates set forth in

Sec. 56.46, plus any travel and 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. In Sec. 56.52, paragraph (a)(4) is revised to read as follows:

Sec. 56.52 Continuous grading performed on a resident basis.

* * * * *

(a) * * *

(4) An administrative service charge based upon the aggregate

number of 30-

[[Page 31364]]

dozen cases of all shell eggs handled in the plant per billing period

multiplied by $0.040, except that the minimum charge per billing period

shall be $225 and the maximum charge shall be $2,500. The minimum

charge also applies where an approved application is in effect and no

product is handled.

* * * * *

5. In Sec. 56.54, paragraph (a)(2) is revised 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 $250 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 revised to read as follows:

Sec. 70.71 On a fee basis.

(a) Unless otherwise provided in this part, the fees to be charged

and collected for any service performed, in accordance with this part,

on a fee basis shall be based on the applicable rates specified in this

section.

(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 $44.80 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 $51.60 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, laboratory analysis, or

examination or review of a grader's decision.

The costs of an appeal grading, laboratory analysis, or examination

or review of a grader's decision, will be borne by the appellant on a

fee basis at rates set forth in Sec. 70.71, plus any travel and

additional expenses. If the appeal grading, laboratory analysis, 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. In Sec. 70.76, paragraph (a)(2) is revised 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 $250 will be made each

billing period. The minimum charge also applies where an approved

application is in effect and no product is handled.

* * * * *

10. In Sec. 70.77, paragraphs (a)(4) and (a)(5) are revised 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 $0.00034, except that the minimum charge per billing

period shall be $225 and the maximum charge shall be $2,500. 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 $250

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

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

* * * * *

Dated: June 3, 1998.

Enrique E. Figueroa,

Administrator, Agricultural Marketing Service.

[FR Doc. 98-15205 Filed 6-8-98; 8:45 am]

BILLING CODE 3410-02-P