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: Final rule.

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SUMMARY: This rule revises 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 are also affected. This rule

also revises 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.

EFFECTIVE DATE: April 6, 1998.

FOR FURTHER INFORMATION CONTACT: Rob Huttenlocker, Fresh Products

Branch, Fruit and Vegetable Programs, Agricultural Marketing Service,

U.S. Department of Agriculture, PO Box 96456, Room 2049 South Building,

Washington, DC 20090-6456, (202) 720-0297.

SUPPLEMENTARY INFORMATION:

Executive Order 12866 and Regulatory Flexibility Act

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

(OMB) 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 Fresh Products Branch (FPB) of the Fruit

and Vegetable Programs, AMS, has and will continue to seek out cost

saving opportunities and implement appropriate changes to reduce its

costs. Such actions can provide alternatives to fee increases. However,

even with these efforts, 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

will result from both inflationary increases with regard to current FPB

operations

[[Page 15275]]

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 ranging from 2.44 to 6.52 percent became 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 fee increase should result in an estimated $1.2 million in

additional revenues per year (only $600,000 during FY 98 since the fee

increase will be effective on April 6, 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 taken 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 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

computers and Agency-mandated information systems upgrades) aimed at

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

This rule should 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 rule. In compliance with the Paperwork Reduction Act of 1995

(44 U.S.C. Chapter 35), the information collection and recordkeeping

requirements in part 51 have been approved previously by OMB and

assigned OMB No. 0581-0125. FPB has not identified any other Federal

rules which may duplicate, overlap or conflict with this 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 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.

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 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.

[[Page 15276]]

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 ranging from 2.44 to 6.52 percent became 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 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 fee increase should result in an estimated $1.2 million in

additional revenues per year (only $600,000 during FY 98 since the fee

increase will be effective on April 6, 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 is hereby increasing the fees for destination market

inspection services. The following table compares current fees and

charges with the revised 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 Revised

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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 $78................................ $86.

each product.

--Half carlot equivalent or less $65................................ $72.

of each product.

--For each additional lot of the $13................................ $14.

same product.

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 S65................................ $72.

each product.

--Half carlot equivalent or less $60................................ $66.

of each product.

--For each additional lot of the $13................................ $14.

same product.

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 $13................................ $14.

of the same 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 $13................................ $14.

of the same product.

Dock-side inspections of an individual

product unloaded directly from the

same ship:

--For each package weighing less 1 cent............................. 1.1 cents.

than 15 pounds.

--For each package weighing 15 to 2 cents............................ 2.2 cents.

29 pounds.

--For each package weighing 30 or 3 cents............................ 3.3 cents.

more pounds.

--For each additional lot of any $13................................ $14.

of the same product.

--Minimum charge per individual $78................................ $86.

product.

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

purposes during the grader's

regularly scheduled work week.

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

hour additional) for all inspections

performed outside the grader's

regularly scheduled work week.

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A notice of proposed rulemaking was published in the Federal

Register (62 FR 66033) on December 17, 1997, with a 60-day comment

period. The comment period closed on February 17, 1998. Interested

persons were invited to participate in this rulemaking by submitting

written comments on the proposal to AMS. One comment in opposition to

the fee increase was received.

[[Page 15277]]

The comment was received from a law firm representing an

association (of producers) which exports products into the U.S. The

comment opposed the increase in fees for inspections of fresh fruits

and vegetables at destination markets. The commentor went on to

reiterate its long-standing opposition to mandatory marketing orders

based upon general economic principles such as their promotion of anti-

competitive practices in restraint of trade and because different

inspection criteria are applied to foreign product than are applied to

domestic product at comparable points in the distribution chain,

thereby violating principles of free trade. Lastly, the commentor went

on to conclude that the mandatory inspections and their costs would

further enhance unfair trade practices. The comment argued that the

increased fees would have a disproportionate impact on commodities such

as table grapes and kiwifruit subject to section 8e requirements

because foreign shippers cannot elect to discontinue the use of

inspections, unlike domestic shippers.

The Agency disagrees with the positions taken in the comment and

the conclusions reached therein. 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 during those

periods when domestic marketing order regulations are in effect. The

regulations governing the section 8e program, including requirements

for inspections and the fees charged in connection therewith, are

consistent with the provisions of its authorizing statute and other

applicable law.

Further, the tremendous growth in demand for fruits and vegetables

in the U.S. market strongly supports the need to provide consumers with

consistent, quality products. Quality standards are in the best

interest of both U.S. producers and those who export products to the

U.S. market.

Under the marketing order program, fruit and vegetable producers

agree in a referendum vote to authorize minimum quality requirements on

their products. Domestic shippers subject to marketing order minimum

quality requirements must, in fact, have their product inspected and

certified, under the supervision of the Agency, meeting the applicable

requirements. Under section 8e, comparable quality requirements are

simply extended to imported fruits and vegetables.

For most imported commodities subject to minimum quality

requirements, U.S. total and per capita consumption has increased

significantly. The association's exporter members generally ship

products into the U.S. which are produced during a growing season that

is different from that of the U.S. Thus, in large measure, such

production is complimentary to U.S. production and not subject to

mandatory requirements. By making quality product available to U.S.

consumers on a consistent basis, the agricultural sectors in both

countries benefit.

Accordingly, in light of the continuing need to maintain the AMS

grading program on a financially sound basis, the Agency has decided to

proceed with the fee increase as set forth in the proposal.

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

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

30 days after publication in the Federal Register because: (1) The

fiscal year 1998 reserve balance of the program's trust fund is

projected to be approximately $1 million under the desired level

necessary to ensure the program's fiscal viability; (2) the fee changed

adopted herein should be implemented as soon as possible to begin

replenishing the operating reserve and bring revenue in line with

costs; and (3) the first available billing cycle begins April 6, 1998.

Accordingly, the effective date is April 6, 1998.

List of Subjects in 7 CFR Part 51

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

Reporting and recordkeeping requirements, Trees, Vegetables.

For reasons set forth in the preamble, 7 CFR part 51 is 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.

(a) 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.

(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.

[[Page 15278]]

(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: March 25, 1998.

Sharon Bomer Lauritsen,

Acting Deputy Administrator, Fruit and Vegetable Programs.

[FR Doc. 98-8391 Filed 3-30-98; 8:45 am]

BILLING CODE 3410-02-P