This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

3155

Vol. 65, No. 13

Thursday, January 20, 2000

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 54

[Docket Number LS–98–12]

RIN No. 0581–AB66

Changes in Fees for Federal Meat

Grading and Certification Services

AGENCY: Agricultural Marketing Service,

USDA.

ACTION: Proposed rule.

SUMMARY: The Agricultural Marketing

Service (AMS) proposes revising the

hourly fee rates for voluntary Federal

meat grading and certification services.

The hourly fees would be adjusted by

this proposed rule to reflect the

increased cost of providing service, and

ensure that the Federal meat grading

and certification program is operated on

a financially self-supporting basis as

required by law.

DATES: Comments must be received on

or before March 20, 2000.

ADDRESSES: Send written comments to

Larry R. Meadows, Chief; USDA, AMS,

LS, MGC, STOP 0248, Room 2628–S,

1400 Independence Avenue, SW.,

Washington, DC 20250–0248.

Comments may be faxed to (202) 690–

4119 or E-mailed to Larry.Meadows@–

usda.gov.

State that your comments refer to

Docket No. LS–98–12, and note the date

and page number of this issue of the

Federal Register.

Comments received may be inspected

at the above location between 8 a.m. and

4:30 p.m., Eastern Time, Monday

through Friday, except Holidays.

FOR FURTHER INFORMATION CONTACT:

Larry R. Meadows, Chief, Meat Grading

and Certification (MGC) Branch, 202–

720–1246.

SUPPLEMENTARY INFORMATION:

A. Executive Order 12866

This action 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).

B. Regulatory Flexibility

Pursuant to the requirements set forth

in the Regulatory Flexibility Act (RFA)

(5 U.S.C. 601 et seq.), the Administrator

of AMS has considered the economic

impact of this proposed action on small

entities.

AMS, through its MGC Branch,

provides voluntary meat grading and

certification services to a total of 370

businesses of which 261 are small

entities. Small entities, which account

for approximately 38 percent of the

MGC Branch’s total revenues, are

defined as those that employ less than

500 employees. AMS provides meat

grading and certification services to 93

meat processors, 90 livestock

slaughterers, 52 facilities that further

process federally donated products, 13

trade associations, 9 livestock feeders, 3

trucking companies, and 4 brokers.

These entities are under no obligation to

use meat grading and certification

services provided under the authority of

the Agricultural Marketing Act of 1946

(AMA), as amended, 7 USC 1621 et seq.

Meat grading and certification

services facilitate the orderly marketing

of meat and meat products and enable

consumers to obtain the quality of meat

they desire. Grading services consist of

the evaluation of carcass beef, lamb,

pork, veal, and calf for conformance

with the grades of an official U.S.

Standard for each species.

Approximately 21 billion pounds of

meat are graded each year. Certification

services consist of the evaluation of

meat and meat products for compliance

with specification and contractual

requirements. Certification services are

used most often by large-scale meat

purchasers to ensure that the quality

and yields of the products they

purchase comply with their stated

requirements. Approximately 17 billion

pounds of meat and meat products are

certified each year.

AMS regularly reviews its user-feefinanced programs to determine if the

fees are adequate. The most recent

review determined that the existing fee

schedule would not generate sufficient

revenues to recover program costs for

current and near-term periods while

maintaining an adequate reserve

balance. Without a fee increase, the

projected operating losses for fiscal year

(FY) 2000, FY 2001, and FY 2002 will

be $1.9 million, $2.9 million, and $4.1

million respectively. Operating losses at

these levels will deplete MGC Branch’s

operating reserve and place the Branch

in an unstable financial position that

will adversely affect its ability to

provide the current level of grading and

certification services. Any reduction in

Branch services has the potential to

substantially harm small and limited

resource firms that rely on grading and

certification services to market their

products and compete in a global

marketplace.

This proposed action would raise the

fees charged to all users of grading and

certification services. AMS estimates

that overall, this proposed rule would

yield an additional $175,000 in revenue

per month for the balance of FY 2000.

Of this $175,000, small businesses

would pay approximately $66,500 or an

average of $255 per month. In FY 2001

and 2002, small entities will pay

approximately $798,000, an average of

$255 per month or $3,058 per year.

However, due to increased program and

industry efficiencies, the FY 2000–2002

unit costs of program services (revenue/

total pounds graded and certified) will

remain virtually unchanged at

approximately $0.0006 per pound for

each fiscal year. Accordingly, the

Administrator of AMS has determined

that this proposal would not have a

significant economic effect on a

substantial number of small business

entities.

This proposed fee increase, only the

second since November 1993, is

necessary to offset increased program

operating costs resulting from: (1) The

congressionally-mandated,

governmentwide salary increases for

1998, 1999, and 2000; (2) inflation of

nonsalary operating costs; (3)

accumulated increases in CONUS per

diem rates; (4) increased costs of

servicing less than full-time applicants;

and (5) costs associated with updating

the MGC Branch’s automated

information management system to

ensure compliance with year 2000

operating requirements.

Since 1993, in an ongoing effort to

control operating costs, the MGC Branch

has closed 3 field offices, reduced midlevel supervisory staff by over 50

percent, and reduced the number of

support staff by 38 percent. At the same

time, the MGC Branch has become more

3156 Federal Register / Vol. 65, No. 13 / Thursday, January 20, 2000 / Proposed Rules

reliant on automated information

management systems for data collection,

retrieval, and dissemination, account

billing, and disbursement of employee

entitlements. The reduction in field

offices, supervisory staff, support

personnel, and the increased reliance on

automated systems has enabled the

MGC Branch to absorb a substantial

portion of the increased operating costs

and minimize increases in user-fees

over the past 7 years.

Despite the MGC Branch’s vigilant

cost reduction efforts since 1993, the

operating expenses projected for FY

2000 and beyond can only be balanced

by adjusting the hourly fee rate charged

to users of meat grading and

certification services. Any further

reduction in personnel, services, or

management infrastructure beyond

those already implemented would have

a detrimental effect on the program’s

ability to provide meat grading and

certification services and ensure the

accurate and uniform application of

such services. The hourly rate increase

is necessary to recover the costs of

providing voluntary Federal meat

grading and certification services and

for the program to continue serving all

segments of the industry.

C. Civil Justice Reform

This proposed action has been

reviewed under Executive Order 12988,

Civil Justice Reform. This action is not

intended to have retroactive effect. This

rule will not pre-empt 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.

D. Paperwork Reduction Act

This proposed action will not impose

any additional reporting or

recordkeeping requirements on either

small or large meat slaughters,

processors, and other applicants who

use Federal meat grading and

certification services.

Background

The Secretary of Agriculture is

authorized by the AMA, 1946 as

amended, 7 U.S.C. 1621 et seq., to

provide voluntary Federal meat grading

and certification services to facilitate the

orderly marketing of meat and meat

products and to enable consumers to

obtain the quality of meat they desire.

The AMA also provides for the

collection of fees from users of the

Federal meat grading and certification

services that are approximately equal to

the cost of providing these services. The

hourly fees for service are established by

equitably distributing the projected

annual program operating costs over the

estimated hours of service—revenue

hours—provided to users of the service.

Program operating costs include salaries

and fringe benefits of meat graders,

supervision, travel, training, and all

administrative costs of operating the

program. Employee salaries and benefits

account for approximately 80 percent of

the total budget. Revenue hours include

base hours, premium hours, and service

performed on Federal legal holidays. As

program operating costs continue to

rise, the hourly fees must be adjusted to

enable the program to remain

financially self-supporting as required

by law.

AMS regularly reviews its user-feefinanced programs to determine if the

fees are adequate. The most recent

review determined that the existing fee

schedule for the meat grading and

certification program would not

generate sufficient revenues to recover

operating costs for current and nearterm periods while maintaining an

adequate reserve balance. Without a fee

increase, the projected operating losses

for FY 2000, FY 2001, and FY 2002 will

be $1.9 million, $2.9 million and $4.1

million respectively. These losses will

totally deplete MGC Branch’s operating

reserve and place the Branch in an

unstable financial position that will

adversely affect its ability to provide the

current level of grading and certification

services.

This proposed fee increase is

necessary to offset increased program

operating costs resulting from: (1)

Congressionally mandated salary

increases for all Federal Government

employees in 1998, 1999, and 2000; (2)

inflation of nonsalary operating costs;

(3) accumulated increases in CONUS

per diem rates; (4) increased costs of

servicing less than full-time applicants;

and (5) costs associated with updating

MGC Branch’s automated information

management system to ensure

compliance with year 2000

requirements.

Since 1993, in an ongoing effort to

control operating costs, the MGC Branch

has closed three field offices, reduced

mid-level supervisory staff by over 50

percent, and reduced the number of

support staff by 38 percent. At the same

time, the MGC Branch has become more

reliant on automated information

management systems for data collection,

retrieval, and dissemination, account

billing, and disbursement of employee

entitlements. The reduction in field

offices, supervisory staff and support

personnel and the increased reliance on

automated systems has enabled the

MGC Branch to absorb a substantial

portion of the increased operating costs

and minimize increases in user-fees

over the past 7 years.

In addition to increases in salary,

nonsalary and employee entitlement

costs, the MGC Branch can no longer

absorb less than full cost recovery for

providing service to noncommitment

applicants. A noncommitment applicant

is a less than full-time user of the meat

grading and certification services who

only pays for the actual time service is

provided. Almost always, the cost of

providing service to a noncommitment

applicant is significantly more than

providing service to a commitment

applicant (full-time user of meat grading

and certification services), and this

difference has become more pronounced

in the past several years. The cost of

servicing noncommitment applicants is

significantly increased by the

nonrevenue and travel time of the meat

graders assigned to provide service.

Additionally, administrative and travel

costs associated with supervising

noncommitment applicants are

significantly higher. This places an

undue burden on commitment

applicants and other users of the

service. Under the current fee structure,

these additional costs are not fully

recovered and must be absorbed by the

program. In addition to recovering all

costs from commitment applicants, the

proposed action will fully recover all

costs associated with servicing less than

full-time (noncommitment) applicants.

In FY 1999, the MGC Branch incurred

significant unfunded costs in updating

its automated information management

system to ensure compliance with year

2000 requirements. These updates are

complete and program managers do not

anticipate any delays or lapses in

service delivery as a result of noncompliance with year 2000

requirements. Additionally, automated

administrative functions have been

improved and are more efficient.

Therefore, AMS can deliver services to

customers in a more efficient and costeffective manner which will help

minimize future cost increases to

applicants.

Despite the cost reduction efforts

since 1993 and a user-fee increase in

1998, AMS has determined that the

MGC Branch incurred a $852,000

operating loss in FY 1999. Further, AMS

projects that without the proposed fee

increase the MGC Branch will incur

combined losses totaling over $9 million

over the next three fiscal years and

deplete program reserves. Such

operating deficits can only be balanced

by adjusting the hourly fee rate charged

to users of the service. Any further

Federal Register / Vol. 65, No. 13 / Thursday, January 20, 2000 / Proposed Rules 3157

reduction in personnel, services, or

management infrastructure beyond

those already implemented would have

a detrimental effect on the program’s

ability to provide meat grading and

certification services and support the

accurate and uniform application of

such services.

In view of these increases in costs,

AMS is proposing to increase the base

hourly rate charged to commitment

applicants from $39.80 to $45. A

commitment applicant is a user of meat

grading and certification services who

agrees to pay for five continuous 8 hour

days, Monday through Friday between

the hours of 6 a.m. and 6 p.m.,

excluding legal holidays. The base

hourly rate for noncommitment

applicants will increase from $42.20 to

$52. A noncommitment applicant is a

user of meat grading and certification

services for eight consecutive hours or

less per day between the hours of 6 a.m.

and 6 p.m., excluding legal holidays.

The hourly rate for premium hours

would increase from $47.80 to $57, and

will be charged to users of the service

for hours worked in excess of 8 hours

per day for each assigned official grader

and for work performed before 6 a.m.

and after 6 p.m., Monday through

Friday, and any time on Saturday or

Sunday, except on Federal legal

holidays. The holiday rate for all

applicants will increase from $79.60 to

$90, and will be charged to users of the

service for all hours worked on legal

holidays.

List of Subjects in 7 CFR Part 54

Food grades and standards, Food

labeling, Meat and meat products.

For the reasons set forth in the

preamble, it is proposed that 7 CFR Part

54 be amended as follows:

PART 54—MEATS, PREPARED

MEATS, AND MEAT PRODUCTS

(GRADING, CERTIFICATION, AND

STANDARDS)

1. The authority citation for part 54

continues to read as follows:

Authority: 7 U.S.C. 1621–1627.

§ 54.27 [Amended]

2. Section 54.27 is amended as

follows:

a. In paragraph (a), ‘‘$42.20’’ is

removed and ‘‘$52’’ is added in its

place, ‘‘$47.80’’ is removed and ‘‘$57’’ is

added in its place, ‘‘$79.60’’ is removed

and ‘‘$90’’ is added in its place, and

b. In paragraph (b), ‘‘$39.80’’ is

removed and ‘‘$45’’ is added in its

place, ‘‘$47.80’’ is removed and ‘‘$57’’ is

added in its place, and ‘‘$79.60’’ is

removed and ‘‘$90’’ is added in its

place.

Dated: January 13, 2000.

Barry L. Carpenter,

Deputy Administrator, Livestock and Seed

Program.

[FR Doc. 00–1281 Filed 1–19–00; 8:45 am]

BILLING CODE 3410–02–P

DEPARTMENT OF THE TREASURY

Office of the Comptroller of the

Currency

12 CFR Part 5

[Docket No. 00–03]

RIN 1557–AB80

Financial Subsidiaries and Operating

Subsidiaries

AGENCY: Office of the Comptroller of the

Currency, Treasury.

ACTION: Proposed rule.

SUMMARY: The Office of the Comptroller

of the Currency (OCC) is proposing to

amend its regulations to implement

section 121 of the Gramm-Leach-Bliley

Act, which authorizes national banks to

conduct expanded financial activities

through financial subsidiaries. The OCC

also is revising its operating subsidiary

rule to make conforming changes and

streamline procedures for banks that

engage in activities through operating

subsidiaries.

DATES: Comments must be received by

February 14, 2000.

ADDRESSES: Please direct comments to:

Docket No. 00–03, Communications

Division, Third Floor, Office of the

Comptroller of the Currency, 250 E

Street, SW, Washington, DC, 20219.

Comments are available for inspection

and photocopying at that address. In

addition, comments may be sent by

facsimile transmission to FAX number

(202) 874–5274, or by electronic mail to

REGS.COMMENTS@OCC.TREAS.GOV.

FOR FURTHER INFORMATION CONTACT:

Stuart Feldstein, Assistant Director,

Legislative and Regulatory Activities or

Mitchell Plave, Senior Attorney,

Legislative and Regulatory Activities

Division, (202) 874–5090.

SUPPLEMENTARY INFORMATION:

Background

Prior to the enactment of the GrammLeach-Bliley Act, Public Law 106–102,

(GLBA or the Act), national banks

generally conducted activities in the

bank itself, in an operating subsidiary,

or in a subsidiary authorized for

national banks to own pursuant to a

specific statute (e.g., a bank service

company authorized under 12 U.S.C.

1861 et seq.). Section 5.34 of the OCC’s

regulations governs national bank

operating subsidiaries. Under § 5.34, an

operating subsidiary may engage in

activities that are part of, or incidental

to, the business of banking as

determined by the OCC. A national bank

may acquire or establish an operating

subsidiary, or commence a new activity

in an existing operating subsidiary, by

following specific filing procedures that

vary depending upon the nature of the

activity and whether the bank meets

certain eligibility standards.

Section 5.34(f) also permits national

banks to engage through a special type

of operating subsidiary in activities that

are part of, or incidental to, the business

of banking but that are not permissible

for the national bank to conduct

directly, if the bank satisfies certain

safety and soundness conditions. In

addition, the bank must meet the

definition of ‘‘eligible bank’’ in § 5.3(g)

if the subsidiary is to engage in those

activities as principal.

On November 12, 1999, the President

signed the GLBA, which

comprehensively restructures the

statutory framework that governs the

financial services industry. Section 121

of the Act adds a new section 5136A to

the Revised Statutes that authorizes a

national bank to acquire control of, or

hold an interest in, a new type of

subsidiary called a ‘‘financial

subsidiary.’’ The GLBA defines a

financial subsidiary as a company that

is controlled by one or more insured

depository institutions, other than a

subsidiary that engages solely in

activities that national banks may

engage in directly (under the same terms

and conditions that govern the conduct

of these activities by national banks) or

a subsidiary that a national bank is

specifically authorized to control by the

express terms of a Federal statute. A

financial subsidiary may engage in

specified activities that are financial in

nature and in activities that are

incidental to financial activities if the

bank and the subsidiary meet certain

requirements and comply with stated

safeguards. A financial subsidiary also

may combine these newly authorized

activities with activities that are

permissible for national banks to engage

in directly.

The GLBA does not affect a national

bank’s authority to own and control an

operating subsidiary that engages in

activities that are part of, or incidental

to, the business of banking and that are

permissible for national banks to engage

in directly. Thus, once the financial

subsidiary provisions of the GLBA take