Fee Increase for Meat and Poultry Inspection Services

DEPARTMENT OF AGRICULTURE

Food Safety and Inspection Service

9 CFR Part 391

[Docket No. 99-045P]

Fee Increase for Meat and Poultry Inspection Services

AGENCY: Food Safety and Inspection Service, USDA.

ACTION: Proposed rule.

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SUMMARY: The Food Safety and Inspection Service (FSIS) is proposing to

increase the fees FSIS charges meat and poultry establishments,

importers, and exporters for providing voluntary inspection services,

overtime and holiday inspection services, identification services,

certification services, and laboratory services. These fee increases

reflect the increased cost of inspection, the national and locality pay

raise for Federal employees (proposed 4.8 percent effective January

2000), the increased laboratory costs, and the applicable travel and

operating costs. FSIS is proposing to make the fee increases effective

January 2, 2000. At this time, FSIS is not proposing to amend the fee

for the Accredited Laboratory Program.

DATES: Comments must be received by December 10, 1999.

ADDRESSES: Submit one original and two copies of written comments to

FSIS Docket Clerk, Docket #99-045P, U.S. Department of Agriculture,

Food Safety and Inspection Service, Room 102, Cotton Annex, 300 12th

Street, SW., Washington, DC 20250-3700. All comments submitted in

response to this proposal will be available for public inspection in

the Docket Clerk's Office between 8:30 a.m. and 4:30 p.m., Monday

through Friday.

FOR FURTHER INFORMATION CONTACT: For information concerning policy

issues, contact Daniel Engeljohn, Ph.D., Director, Regulations

Development and Analysis Division, Office of Policy, Program

Development, and Evaluation, FSIS, U.S. Department of Agriculture, Room

112, Cotton Annex, 300 12th Street, SW., Washington, DC 20250, (202)

720-5627, fax number (202) 690-0486.

For information concerning fee development, contact Michael B.

Zimmerer, Director, Financial Management Division, Office of

Management, FSIS, U.S. Department of Agriculture, Room 2130-S, 1400

Independence Avenue, SW., Washington, DC 20250, (202) 720-3552.

SUPPLEMENTARY INFORMATION:

Background

The Federal Meat Inspection Act (FMIA) and the Poultry Products

Inspection Act (PPIA) provide for mandatory inspection by Federal

inspectors of meat and poultry slaughtered or processed at official

establishments. Such inspection is required to ensure the safety,

wholesomeness, and proper labeling of meat and poultry. The cost of

mandatory inspection (excluding such services performed on holidays or

on an overtime basis) is borne by FSIS.

In addition to mandatory inspection, FSIS provides a range of

voluntary inspection, certification, and identification services for

meat and poultry. Under the Agricultural Marketing Act of 1946, as

amended (7 U.S.C. 1621 et seq.), FSIS provides these services to assist

in the orderly marketing of various animal products and byproducts not

subject to the FMIA or the PPIA. These services include the

certification of technical animal fats and the inspection of exotic

animal products. FSIS is required to recover the costs of voluntary

inspection, certification, and identification services.

FSIS also provides certain voluntary laboratory services that

establishments or others may request FSIS to perform. The cost of these

services, which are provided under the Agricultural Marketing Act of

1946, must be recovered by FSIS. Laboratory services are provided for

four types of analytic testing. These are: microbiological testing,

residue chemistry tests, food composition tests, and pathology testing.

Each year, FSIS expects to review the fees that it charges for

providing overtime and holiday inspection services, voluntary

inspection, identification, and certification services, and laboratory

services, and to perform a cost analysis to determine whether the fees

it has established are adequate to recover the costs that it incurs in

providing the services. In its analysis of projected costs for January

1, 2000 to September 30, 2000, FSIS has identified increases in the

costs that it will incur. FSIS is not proposing an increase in the fees

for full calendar year 2000 because FSIS intends to propose a new fee

[[Page 61224]]

increase each Federal Fiscal Year (FY), i.e., the next fee increase

after this proposed one should be effective on October 1, 2000. The

proposed fee increases are attributable to the increased cost of

inspection, the national and locality pay raise for Federal employees

(proposed 4.8 percent effective January 2000), the increased laboratory

costs, and the applicable travel and operating costs.

Accordingly, FSIS is proposing to amend 9 CFR section 391.2 to

increase the base time fee for providing meat and poultry voluntary

inspection, identification, and certification services from $37.00 per

hour per program employee to $37.88 per hour per program employee (an

increase of 2.38%). FSIS is also proposing to amend Sec. 391.3 to

increase the rate for providing meat and poultry overtime and holiday

inspection services from $36.84 per hour per program employee to $39.76

per hour per program employee (an increase of 7.93%). Additionally,

FSIS is proposing to amend Sec. 391.4 to increase the rate for meat and

poultry laboratory services from $50.88 per hour per program employee

to $58.52 per hour per program employee (an increase of 15.02%). The

increase in base time and overtime and holiday time rates is

proportional to the salary increase and the inflation index rate

recommended by the Office of Management and Budget for overhead costs

(applicable travel and operating costs). The larger fee increase in

laboratory services relative to the other two fees is due to (1) an

increase in the direct costs of laboratory services and (2) a decrease

in the hours of activity. The lower the usage, the higher the fee,

because there are less hours over which to distribute the overhead

costs.

The differing fee increase for each type of service is the result

of the different amount it costs FSIS to provide these three types of

services. These differences in costs stem from various factors

including the differing salary levels of the personnel who provide the

services.

These fees and the proposed increase are reflected in Table 1.

Table 1.--Inspection Service Type and Current and Proposed Rates for 1/1/00 to 9/30/00

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Proposed Year Proposed

Service type Current rate $/ 2000 rate $/ increase $/

hour hour hour

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Base time....................................................... 37.00 37.88 .88

Overtime and Holiday............................................ 36.84 39.76 2.92

Laboratory...................................................... 50.88 58.52 7.64

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Beginning with the FY 2001, FSIS intends to propose adjustments in

its fees for voluntary and reimbursable inspections effective each

October 1. This approach will facilitate more consistent and timely

proposals to adjust fees, and will assist the Agency and affected

industry to plan for these fee adjustments.

Executive Order 12866 and Regulatory Flexibility Act

Because this proposed rule has been determined to be not

significant, it was not reviewed by the Office of Management and Budget

(OMB) under Executive Order 12866.

The Administrator, FSIS, has determined that this action will not

have a significant economic impact on a substantial number of small

entities as defined by the Regulatory Flexibility Act (5 U.S.C. 601).

The fee increases provided for in this document reflect a small

increase in the costs currently borne by those entities which elect to

utilize certain inspection services voluntarily. These voluntary

services are generally sought by larger establishments because of

larger production volume or because of greater complexity and diversity

in the products they produce; the small establishments do not seek

these services perhaps because they cannot afford them. Therefore, the

small establishments are not likely to be affected adversely by the

increases.

The extent of incremental adverse impact is estimated from the

proposed percentage increases in base time and overtime and holiday

rates. The increase in base time rate from $37.00/hour to $37.88/hour

amounts to 2.38 percent. The overtime and holiday services rate from

$36.84 to $39.76 amounts to 7.93 percent or about 8 percent. These

increases are consistent with similar increases in wages and overtime

rates in the private sector. For example, according to the Bureau of

Labor Statistics web site, the average wage, including overtime, in the

poultry slaughtering and processing industry (SIC 2015) increased by

about 5 percent (from $344.73 per week in July 1998 to $361.70 in July

1999). The average hourly wage, excluding the overtime rate, increased

by 4 percent during the same period. The increase in laboratory fees of

15.02 percent (from $50.88/hour to $58.52/hour) reflects an increase in

the direct cost of these services to FSIS, coupled with lower usage by

industry.

The economic impact of the increase in the fees on small businesses

in the meat and poultry industries would depend on the structure of

these industries. Data from the U.S. Bureau of the Census, Survey of

Industries, 1994, indicate that the meat industry is dominated by small

firms and establishments relative to the poultry industry. For example,

based on the U.S. Small Business Administration's (SBA) definition of

small business by the number of employees (fewer than 500), 96 percent

of 1,226 firms comprising the meat industry (SIC 2011) are small.

Similarly, 90 percent of individual meat establishments or plants in

this industry are small. In 1994, these small businesses accounted for

19 percent of total employment in this industry. Their share of payroll

was 18 percent of the total payroll of $2.777 billion and their

revenues were 16 percent of the total revenues of $55.814 billion. In

contrast, the poultry industry is comprised of relatively larger firms

and establishments. For example, 51 percent of 567 establishments in

this industry are large, according to the SBA definition. This industry

has 332 firms with 207,875 workers and a payroll of $3.5 billion. The

estimated revenue of this industry amounted to $27.111 billion in 1994.

FSIS believes that the small establishments in the meat and poultry

industry would not be affected adversely by the proposed increases in

the fees for four reasons. First, the fee increases are voluntary so

that the establishments do not have to seek the services of FSIS

inspector program personnel. Second, establishments that seek FSIS

services are likely to have calculated that the incremental costs of

voluntary inspection services would be less than the incremental

expected benefits of additional revenues they

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would realize from additional production. Third, the industry is likely

to pass through the costs to consumers without significantly losing its

market because price elasticity of demand for meat and poultry is

inelastic. For example, Huang (1993) analyzed demand for meats and

other products containing meat and poultry. Huang concluded that the

price elasticity was -0.36, i.e., an increase in price of meat or

poultry products by one percent would be associated with a decrease in

its demand by only 0.36 percent. (Huang, Kao S., A Complete System of

U.S. Demand for Food. USDA/ERS Technical Bulletin No. 1821, 1993, p.

24). In short, consumers are unlikely to reduce their demand for meat

and poultry significantly when meat or poultry prices are increased by

a few pennies a pound. Finally, the supply of beef and poultry products

is likely to be very price elastic because, as noted above, there are

hundreds of firms in these industries. Any single producer cannot raise

the price of its products without losing its market share

significantly.

Executive Order 12988

This proposed rule has been reviewed by FSIS under Executive Order

12988, Civil Justice Reform. This rule: (1) Preempts State and local

laws and regulations that are inconsistent with this rule; (2) has no

retroactive effect; and (3) does not require administrative proceedings

before parties may file suit in court challenging this rule. However,

the administrative procedures specified in 9 CFR 306.5 and 381.35 of

the FMIA and PPIA regulations, respectively, must be exhausted prior to

any judicial challenge of the application of the provisions of this

proposed rule, if the challenge involves any decision of an FSIS

employee relating to inspection services provided under the FMIA or

PPIA.

Additional Public Notification

Pursuant to Department Regulation 4300-4, ``Civil Rights Impact

Analysis,'' dated September 22, 1993, FSIS has considered the potential

civil rights impact of this proposed rule on minorities, women, and

persons with disabilities. FSIS anticipates that this proposed rule

will not have a negative or disproportionate impact on minorities,

women, or persons with disabilities. However, proposed rules generally

are designed to provide information and receive public comments on

issues that may lead to new or revised agency regulations or

instructions. Public involvement in all segments of rulemaking and

policy development are important. Consequently, in an effort to better

ensure that minorities, women, and persons with disabilities are aware

of this proposed rule and are informed about the mechanism for

providing their comments, FSIS will announce it and provide copies of

this Federal Register publication in the FSIS Constituent Update.

FSIS provides a weekly FSIS Constituent Update, which is

communicated via fax to over 300 organizations and individuals. In

addition, the update is available on line through the FSIS web page

located at http://www.fsis.usda.gov. The update is used to provide

information regarding FSIS policies, procedures, regulations, Federal

Register notices, FSIS public meetings, recalls, and any other types of

information that could affect or would be of interest to our

constituents/stakeholders. The constituent fax list consists of

industry, trade, and farm groups, consumer interest groups, allied

health professionals, scientific professionals, and other individuals

that have requested to be included. Through these various channels,

FSIS is able to provide information to a much broader, more diverse

audience. For more information and to be added to the constituent fax

list, fax your request to the Congressional and Public Affairs Office,

at (202) 720-5704.

Executive Order 12898, Environmental Justice

Currently, FSIS has no data on the number of minority-owned FMIA or

PPIA official establishments, nor can the Agency identify which FMIA or

PPIA official establishments are minority owned. The Agency is looking

into ways of collecting such data.

List of Subjects in 9 CFR Part 391

Fees and charges, Government employees, Meat inspection, Poultry

products.

PART 391--FEES AND CHARGES FOR INSPECTION AND LABORATORY SERVICES

1. The authority citation for part 391 continues to read as

follows:

Authority: 7 U.S.C. 138f; 7 U.S.C. 394, 1622 and 1624; 21 U.S.C.

451 et seq.; 21 U.S.C. 601-695; 7 CFR 2.18 and 2.53.

2. Sections 391.2, 391.3, and 391.4 are proposed to be revised to

read as follows:

Sec. 391.2 Base time rate.

The base time rate for inspection services provided pursuant to

Secs. 350.7, 351.8, 351.9, 352.5, 354.101, 355.12, and 362.5 shall be

$37.88 per hour per program employee.

Sec. 391.3 Overtime and holiday rate.

The overtime and holiday rate for inspection services provided

pursuant to Secs. 307.5, 350.7, 351.8, 351.9, 352.5, 354.101, 355.12,

362.5 and 381.38 shall be $39.76 per hour per program employee.

Sec. 391.4 Laboratory services rate.

The rate for laboratory services provided pursuant to Secs. 350.7,

351.9, 352.5, 354.101, 355.12 and 362.5 shall be $58.52 per hour per

program employee.

Done in Washington, DC on: November 5, 1999.

Thomas J. Billy,

Administrator.

[FR Doc. 99-29418 Filed 11-9-99; 8:45 am]

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