[Federal Register: March 4, 1999 (Volume 64, Number 42)]

[Proposed Rules]               

[Page 10402-10405]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr04mr99-24]



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



DEPARTMENT OF AGRICULTURE



Food Safety and Inspection Service



9 CFR Part 391



[Docket No. 98-052P]



 

Fee Increase for Inspection Services



AGENCY: Food Safety and Inspection Service, USDA.



ACTION: Proposed rule.



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



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

increase the fees that FSIS charges meat and poultry establishments, 

plants, importers, and exporters for providing voluntary inspection, 

identification, and certification services; laboratory services; and 

overtime and holiday services. These fee increases are based on the 

Agency's analysis of its projected costs for Fiscal Year 1999, which 

identified increased FSIS expenses as a result of national and locality 

pay raises for Federal employees, and increased travel and overhead 

costs. The fee increases are being proposed in order to generate the 

additional revenue that FSIS is required to recover as a result of its 

projected increased costs.

    FSIS also is proposing to reduce the fee it charges for the 

Accredited Laboratory Program. The Agency's analysis of projected costs 

for calendar year 1999 has identified decreased operational costs for 

this program. The Agency is proposing to reduce its fee so that only 

the actual costs of this program are recovered from the industry.



DATES: Written comments must be received by April 5, 1999.



ADDRESSES: Submit an original and two copies of written comments 

concerning this proposed rule to: FSIS Docket Clerk, Docket #98-052P, 

Room 102-Cotton Annex Building, FSIS, U.S. Department of Agriculture, 

Washington, DC 20250-3700. Persons that want to present oral comments 

should, as permitted under the Poultry Products Inspection Act, contact 

Michael B. Zimmerer at (202) 720-3367. FSIS' cost analysis and the 

comments that it receives will be available for public inspection in 

the FSIS Docket Room from 8:30 a.m. to 1 p.m. and 2 p.m. to 4:30 p.m., 

Monday through Friday.





[[Page 10403]]





FOR FURTHER INFORMATION CONTACT: Mr. Michael B. Zimmerer, Director, 

Financial Management Division, Office of Management, Food Safety and 

Inspection Service, U.S. Department of Agriculture, Washington, DC 

20250-3700, (202) 720-3367.



SUPPLEMENTARY INFORMATION:



Background



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

Inspection Act (PPIA) provide for mandatory Federal inspection of the 

slaughter of certain livestock and poultry and of the processing of 

certain livestock and poultry products. The cost of this inspection 

(excluding such inspection 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. 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. 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 which 

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

services, which are provided under the Agricultural Marketing Act of 

1946, as amended (7 U.S.C. 1621 et seq.), 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 some pathology testing.

    Each year, FSIS reviews the fees that it charges for providing 

voluntary inspection, identification, and certification services; 

laboratory services; and overtime and holiday services and performs a 

cost analysis to determine whether the fees it has established are 

adequate to recover the costs that FSIS will incur in providing the 

services. In its analysis of projected costs for Fiscal Year (FY) 1999, 

FSIS has identified increases in the costs that it will incur in 

providing voluntary inspection, identification, and certification 

services; laboratory services; and overtime and holiday services. These 

increased costs are attributable to the average national and locality 

pay raise for Federal employees of 3.1% effective January 1999 and 

projected increased travel and overhead costs of 1.9% for FY 1999 

resulting from inflation.

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

increase the base time rate for providing voluntary inspection, 

identification, and certification services from $32.88 per hour, per 

program employee, to $37.00 per hour, per program employee. FSIS is 

also proposing to amend section 391.3 to increase the rate for 

providing overtime and holiday services from $33.76 per hour, per 

program employee, to $36.84 per hour, per program employee. 

Additionally, FSIS is proposing to amend section 391.4 to increase the 

rate for laboratory services from $48.56 per hour, per program 

employee, to $50.88 per hour, per program employee. These rates and the 

proposed increase are reported in 

Table 1.



 Table 1.--Inspection Service Type and Current and Proposed Rates for FY

                                  1999

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

                                     Current    Proposed FY    Proposed

           Service type              rate  $/    1999 rate   increase  $/

                                       hour        $/hour        hour

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

Base time........................        32.88        37.00         4.12

Overtime & Holidays..............        33.76        36.84         3.08

Laboratory.......................        48.56        50.88        2.32

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

Source: USDA/FSIS/Office of Management/Financial Management Division.



    In its analysis of projected costs for FY 1999, FSIS has identified 

a decrease in the cost of operating the Accredited Laboratory Program 

(ALP). This projected decreased cost of $1,000 per accreditation 

results from a number of factors including a projected decrease in 

accreditations sought and maintained, as well as more efficient 

operating practices by FSIS. Therefore, FSIS is proposing to amend 

section 391.5 of the regulations to reduce the fee charged for original 

accreditations and renewals from $2,500 per accreditation, to $1,500 

per accreditation per year. Laboratory accreditation fees that cover 

the costs of the ALP are mandated by section 1327 (7 U.S.C. 138f) of 

the Food, Agriculture, Conservation, and Trade Act of 1990 (Public Law 

101-624), as amended (the 1990 Farm Bill).



Executive Order 12866 and Regulatory Flexibility Act



    This proposed rule has been determined to be not significant and 

was not reviewed by the Office of Management and Budget (OMB) under 

Executive Order 12866. The proposed fee increases for voluntary 

inspection, identification, and certification services; laboratory 

services; and overtime and holiday inspection services are primarily 

the result of increases in the salaries of Federal employees 

established by Congress under the Federal Employees Pay Comparability 

Act of 1990. The proposed increase also includes projected increased 

travel costs and overhead costs. This Section analyzes the economic 

impact of these increased costs on the meat and poultry industry.



Economic Impact



    The Administrator, Food Safety and Inspection Services, 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 will result in only a minimal increase in the costs currently 

borne by those entities that choose to voluntarily utilize certain 

inspection services. These services are generally used by large 

establishments. Small establishments generally do not seek these 

services. This is most likely the result of a number of factors, 

including the cost of services. Nevertheless, FSIS is required to 

recover the full cost of the services provided by it.

    Table 2 shows the economic impact of the proposed fee increases, 

other than those for laboratory services. This impact has been 

estimated by



[[Page 10404]]



multiplying the expected number of hours of base time or overtime 

service to be provided by their respective incremental rates estimated 

in Table 1. FSIS does not have the data needed to estimate the impact 

of increases in the laboratory service rates because the number of 

hours of this service that will be provided are difficult to predict. 

Table 2 shows that total reimbursements to FSIS are estimated to be 

$7,676,936 in FY 1999.



                        Table 2.--Estimated Economic Impact of Proposed Increase in Rates

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

                                                                     Incremental

                            Service type                               rate  $/      Estimated     Reimbursement

                                                                         hour       hours used     or impact ($)

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

Overtime & Holidays................................................        $3.08       2,355,000      $7,253,400

Base...............................................................         4.12         102,800         423,536

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

Total Reimbursement................................................  ...........  ..............       7,676,936

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



    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, for example, indicate that the beef industry has more 

small firms and establishments than the poultry industry. Using the 

U.S. Small Business Administration's definition of a small business 

(fewer than 500 employees), 96 percent of the 1,226 firms comprising 

the beef industry are small. Similarly, 90 percent of the 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.

    FSIS believes that small establishments would not be affected 

adversely by the proposed fee increases for four reasons. First, the 

use of the services is voluntary, and, therefore, establishments do not 

have to utilize these services. Second, establishments that seek FSIS' 

services are likely to have determined that the costs of voluntary 

inspection services would be less than the benefits they would get from 

the additional revenues they would realize as a result of services 

provided. Third, the industry is likely to pass through the increased 

costs to consumers without significantly losing market share because 

price elasticity of demand for meat and poultry is inelastic. For 

example, Huang (1993) analyzed demand for meats and other animal 

proteins consisting of products, including beef and poultry and 

concluded that the price elasticity was (-0.36), i.e., an increase in 

price of beef 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 prices are 

increased for these products by only a few pennies per pound. Finally, 

the supply of meat and poultry products is likely to be very price 

elastic because of the existence of hundreds of firms in these 

industries. Any single producer cannot raise the price of its products 

above those of the rest of the industry without losing its market share 

significantly.

    The decrease in the accredited laboratory program fee reflects a 

projected decrease in operational costs which may be passed through to 

users of the laboratory services. To the extent that these fees are 

reduced, their economic impact would be reduced.



Executive Order 12988



    This proposed rule has been reviewed under Executive Order 12988, 

Civil Justice Reform. This proposed rule is not intended to have 

retroactive effect. States and local jurisdictions are preempted by the 

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

Act (PPIA) from imposing any marking, labeling, packaging, or 

ingredient requirements on federally inspected livestock and poultry 

products that are in addition to, or different than, those imposed 

under the FMIA and PPIA. States and local jurisdictions may, however, 

exercise concurrent jurisdiction over livestock and poultry products 

that are outside official establishments for the purpose of preventing 

the distribution of livestock and poultry products that are misbranded 

or adulterated under the FMIA and PPIA, or, in the case of imported 

articles, that are not at such an establishment, after their entry into 

the United States.

    State or local laws, regulations, or policies are preempted by the 

Agricultural Marketing Act of 1946, as amended, if they present 

irreconcilable conflict with the provisions of this rule proposed under 

the Agricultural Marketing Act of 1946, as amended.

    If this proposed rule is adopted, administrative proceedings will 

not be required 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.



List of Subjects in 9 CFR Part 391



    Fees and charges, Government employees, Meat inspection, Poultry 

products.



    For the reasons set out in the preamble, 9 CFR Part 391 is proposed 

to be amended as set forth below:



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

ACCREDITATION



    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, 391.4 and 391.5 are 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 

$37.00 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 $36.84 per hour, per program employee.



[[Page 10405]]



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 $50.88 per hour, per 

program employee.





Sec. 391.5  Laboratory accreditation fees.



    (a) The annual fee for the initial accreditation and maintenance of 

accreditation provided pursuant to Secs. 318.21 and 381.153 shall be 

$1,500 per accreditation.

* * * * *

    Done at Washington, DC, on February 25, 1999.

Thomas J. Billy,

Administrator.

[FR Doc. 99-5318 Filed 3-3-99; 8:45 am]

BILLING CODE 3410-DM-P