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[Federal Register Volume 65, Number 103 (Friday, May 26, 2000)]
[Rules and Regulations]
[Pages 34040-34042]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-13240]

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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 54

[Docket No. LS-98-12]
RIN 0581-AB83

Changes in Fees for Federal Meat Grading and Certification 
Services

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: The Agricultural Marketing Service (AMS) is revising the 
hourly fee rates for voluntary Federal meat grading and certification 
services. The hourly fees will be adjusted by this final 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.

EFFECTIVE DATE: June 26, 2000.

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 Federal meat 
grading

[[Page 34041]]

and certification services to a total of 370 business of which 264 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. The breakdown of small entities that 
AMS provides meat grading and certification services to are as follows: 
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 small 
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.
    Voluntary 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 is 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 action will raise the fees charged to all users of grading and 
certification services. AMS estimates that overall, this will yield an 
additional $175 thousand in revenue for the balance of FY 2000. Of this 
$175 thousand, 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 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 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 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 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.

Comments

    On January 20, 2000, (65 FR 3155) in the Federal Register, the 
Agency published the proposed rule to increase the fees for Federal 
Meat Grading and Certification services and requested comments by March 
20, 2000. The Agency received two comments. The first respondent 
requested that AMS work more closely with industry to identify 
alternatives to current grading and certification operations and 
procedures to stem future rate increases. The respondent went on to 
identify the following as possible areas the Industry and AMS could 
work cooperatively to achieve cost savings or stem future user-fee 
increases: (1) Incorporating technological advances; (2) identifying 
appropriate quality control or process verification activities that 
could be shifted to the Industry; and, (3) identifying plant operation 
alternatives.
    AMS is continually seeking ways to reduce costs to the industry and 
increase operational efficiency. This fee increase, combined with the 
previous increase in 1998, equates to an average annual increase of 3.3 
percent since 1993. However, during this same time the amount of 
product graded and certified has dramatically increased by over 9 
billion pounds per year in comparison to the total graded and certified 
in FY 1993. This amounts to a 48 percent per hour increase in 
efficiency. The increased efficiencies offset the increase in fee rates 
to leave the overall cost per pound to the industry unchanged at 
$0.0006 per

[[Page 34042]]

pound. As requested by the respondent, the Agency is currently and will 
continue seeking ways to increase efficiency and reduce the total cost 
of grading and certification services to the industry. In fact, AMS is 
actively involved in each of the areas identified by the respondent for 
potential cost savings. For example, AMS is cooperating with an 
industry research project to test video-imaging technology for grading 
and certification applications. Additionally, AMS is expanding the role 
of statistical process control as a basis of program verification 
activities in many carcass and meat marketing programs.
    The second respondent questioned the need for revising the fee 
rates and emphasized the effect of the user fees on small entities. 
Small entities generate 38 percent of the Agency's meat grading and 
certification hourly revenues. The Agency is keenly aware of how fee 
increases impact small entities. In the more than 70 years meat grading 
and certification services have been available, the Agency has always 
ensured that every alternative to a fee increase has been considered. 
This 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. Despite the 
MGC Branch's cost reduction efforts and increased efficiency, the 
operating expenses projected for FY2000 and beyond can only be balanced 
by adjusting the hourly fee rate charged to users of voluntary meat 
grading and certification services. Any further reduction in personnel, 
services, or management infrastructure beyond those already in place 
would have a detrimental effect on the program's ability to provide 
meat grading and certification services and ensure the accurate 
application of such services. Further, any reduction in Branch services 
has the potential to substantially (and disproportionally) harm small 
and limited resource firms that rely on grading and certification 
services to market their products and compete in a global marketplace.

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.
    In view of these considerations, the Agency will increase the base 
hourly rate commitment applicants pay for voluntary Federal meat 
grading and certification services 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 will 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, 7 CFR part 54 is 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. In Sec. 54.27, 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 
paragraph (b), ``$39.80'' is removed and ``$45'' 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.

    Dated: May 22, 2000.
Barry L. Carpenter,
Deputy Administrator, Livestock and Seed Program.
[FR Doc. 00-13240 Filed 5-25-00; 8:45 am]
BILLING CODE 3410-02-P
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