[Federal Register: November 10, 1999 (Volume 64, Number 217)]

[Proposed Rules]               

[Page 61223-61225]

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

[DOCID:fr10no99-16]                         



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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



[[Page 61225]]



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]

BILLING CODE 3410-DM-P