[Federal Register Volume 65, Number 13 (Thursday, January 20, 2000)]
[Proposed Rules]
[Pages 3155-3157]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-1281]


========================================================================
Proposed Rules
                                                Federal Register
________________________________________________________________________

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.

========================================================================


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

[[Page 3155]]



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-fee-financed 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 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

[[Page 3156]]

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-fee-financed 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 near-term 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 non-compliance 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 cost-effective 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

[[Page 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.


Sec. 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