[Federal Register Volume 65, Number 196 (Tuesday, October 10, 2000)]
[Rules and Regulations]
[Pages 60093-60095]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-25945]



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Rules and Regulations
                                                Federal Register
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Federal Register / Vol. 65, No. 196 / Tuesday, October 10, 2000 / 
Rules and Regulations

[[Page 60093]]



DEPARTMENT OF AGRICULTURE

Food Safety and Inspection Service

9 CFR Parts 391 and 590

[Docket No. 00-025F]
RIN 0583-AC74


Increases in Fees for Meat, Poultry, and Egg Products Inspection 
Services--Fiscal Year (FY) 2001

AGENCY: Food Safety and Inspection Service, USDA.

ACTION: Final rule.

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

SUMMARY: The Food Safety and Inspection Service (FSIS) is increasing 
the fees that it charges meat and poultry establishments, egg products 
plants, importers, and exporters for providing voluntary inspection 
services, overtime and holiday inspection services, identification 
services, certification services, and laboratory services. These 
increases in fees reflect the national and locality pay raise for 
Federal employees (proposed 3.7 percent effective January 2001) and 
inflation. The Agency will make the increases in fees effective October 
8, 2000. At this time, FSIS is not proposing to amend the fee for the 
Accredited Laboratory Program.

EFFECTIVE DATE: October 8, 2000.

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 20250-3700, 
(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 20250-3700, (202) 720-3552.

SUPPLEMENTARY INFORMATION:

Background

    The Federal Meat Inspection Act (FMIA) (21 U.S.C. 601 et seq.), the 
Poultry Products Inspection Act (PPIA) (21 U.S.C. 451 et seq.), and the 
Egg Products Inspection Act (EPIA) (21 U.S.C. 1031 et seq.) provide for 
mandatory Federal inspection of meat and poultry slaughter and 
processing at official establishments and of egg products at official 
plants. FSIS bears the cost of mandatory inspection. Establishments and 
plants pay for inspection services performed on holidays or on an 
overtime basis.
    In addition, under the Agricultural Marketing Act of 1946, as 
amended (7 U.S.C. 1621 et seq.), FSIS provides a range of voluntary 
inspection, certification, and identification 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, such as antelope and elk. FSIS is 
required to recover the costs of voluntary inspection, certification, 
and identification services.
    Under the Agricultural Marketing Act of 1946, FSIS also provides 
certain voluntary laboratory services that establishments and others 
may request the Agency to perform. Laboratory services are provided for 
four types of analytic testing: microbiological testing, residue 
chemistry tests, food composition tests, and pathology testing. FSIS 
must recover these costs.
    Every year FSIS reviews the fees that it charges for providing 
overtime and holiday inspection services; voluntary inspection, 
identification, and certification services; and laboratory services. 
The Agency performs a cost analysis to determine whether the fees that 
it has established are adequate to recover the costs that it incurs in 
providing these services. In the Agency's analysis of projected costs 
for October 1, 2000 to September 30, 2001, the Agency has identified 
increases in the costs of these nonmandatory inspection services due 
specifically to the national and locality pay raise for Federal 
employees (proposed 3.7 percent effective January 2001) and inflation.
    FSIS calculated the new fees by adding the projected increase in 
salaries and inflation for FY 2000 and FY 2001 to the actual cost of 
the services in FY 1999. The Agency calculated inflation to be 1.55% 
for FY 2000 and 1,90% for FY 2001. The Agency considered the costs that 
it will incur because of the pay raise in January 2001 and averaged its 
pay costs out over the entire FY 2001.
    FSIS did not use the fees currently charged as a base for 
calculating the new fees for FY 2001 because the current fees are based 
on estimates of costs to the Agency for FY 1999 and FY 2000. The Agency 
now knows the actual cost of inspection services for FY 1999 and used 
the actual costs in calculating the new fees.
    The current and new fees are listed by type of service in Table 1.

    Table 1.--Current and New Fees--Per Hour Per Employee--By Type of
                                 Service
------------------------------------------------------------------------
                                                  Previous
                    Service                         rate       New rate
------------------------------------------------------------------------
Base time.....................................       $37.88       $38.44
Overtime & holiday............................        39.76        41.00
Laboratory....................................        58.52        60.04
------------------------------------------------------------------------

    The differing fee increase for each type of service is the result 
of the different amount that it costs FSIS to provide these three types 
of services. The differences in costs stem from various factors 
including different salary levels of the program employees who perform 
the services. See Table 2.

       Table 2.--Calculations for the Different Types of Services
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Base Time:
Actual FY 1999 cost..........................................     $35.52
Inflation and salary increases...............................       2.91
Adjustment for divisibility by quarter hours.................        .01
                                                              ----------
    Total....................................................     $38.44
Overtime and Holiday Inspection Services:
Actual FY 1999 cost..........................................     $37.88
Inflation and salary increases...............................       3.10
Adjustment for divisibility by quarter hours.................        .02
                                                              ----------
    Total....................................................     $41.00

[[Page 60094]]

 
Laboratory Services:
Actual FY 1999 cost..........................................     $55.50
Inflation and salary increases...............................       4.54
                                                              ----------
    Total....................................................     $60.04
------------------------------------------------------------------------

    An increase in fees for egg products overtime and holiday 
inspection services recently became effective on July 30, 2000. 
However, FSIS is publishing a new fee because the Agency has moved to a 
FY basis for reviewing fees and is charging the same fee for meat, 
poultry, and egg products overtime and holiday inspection services. 
FSIS calculated the new fees based on the presumption that they would 
become effective at the beginning of FY 2001.
    FSIS is exploring the possibility of proposing a three to five year 
plan of fee rate adjustments based on estimates of cost escalation.
    The Agency must recover the actual cost of voluntary inspection 
services covered by this rule. These fee increases are essential to 
continued sound financial management of the Agency's costs. FSIS 
announces in its July 24, 2000 proposed rule (65 FR 45545) that it 
intended to implement the fee increases provided for in this final rule 
effective October 8. The Agency believes adequate notice has been given 
to affected parties. Accordingly, the Administrator has determined that 
these amendments should be effective less than 30 days after 
publication in the Federal Register. Therefore, the increases in fees 
will be effective October 8, 2000.

Proposed Rule and Comments

    On July 24, 2000 FSIS published a proposed rule (65 FR 45545) 
increase the fees it charges for meat, poultry, and egg products 
voluntary inspection services. FSIS provided 30 days for public 
comment, ending on August 23, 2000.
    The Agency received two comments from industry organizations 
opposing the increase in fees. The Agency addresses their specific 
objections.
    Comment: The commenter stated that the fees increases, though 
moderate, are unnecessary because just one year ago FSIS imposed a 
12.5% increase in voluntary program base rates and a 9% increase in 
overtime and holiday inspection services rates. Furthermore, these new 
rates are being proposed at a time when FSIS appropriations are at a 
record high and HACCP--which is supposed to result in inspection cost 
savings--has been implemented.
    Response: The Agency did increase inspection fees for meat and 
poultry in a final rule published last December 28, 1999 [64 FR 72492] 
and more recently for egg products overtime and holiday inspection 
services in a final rule published on July 20, 2000 [65 FR 44948]. The 
actual percentage of increases last December was 2.3% for base time 
meat and poultry voluntary inspection, 7.93% increase for meat and 
poultry overtime and holiday inspection services, and 15.02% increase 
for meat and poultry laboratory services. However, the new increase in 
fees represents the raise in inspection costs since the promulgation of 
the two previous fee increases.
    FSIS appropriations do not cover voluntary inspection services or 
overtime and holiday inspection services. Any cost savings that might 
be realized through more effective use of inspection resources in HACCP 
do not translate into lower expenses for voluntary inspection services 
or overtime and holiday inspection services.
    Comment: The commenter takes exception to FSIS exploring the 
possibility of proposing a three to five year plan of rate adjustments 
when the Agency should be realizing inspection cost savings.
    Response: FSIS is merely announcing that it is exploring the 
possibility of proposing a three to five year plan of rate adjustments. 
The Agency would not introduce such a plan without formally proposing 
it through rulemaking procedures.
    Comment: The commenter maintains that the Agency should reconsider 
its proposed increase in fees after addressing global issues like 
inspection resource allocation.
    Response: The allocation of inspection resources does not have a 
direct effect on the cost of holiday and overtime inspection services 
or voluntary inspection services.
    Comment: The commenter suggests that the Agency should provide a 
detailed explanation of its proposed fee increases to allow for 
meaningful comment.
    Response: The agency believes that it has presented adequate 
information to explain how the new increases in fees were arrived at.

Summary of the Final Rule

    FSIS is amending 9 CFR 391.2 to increase the base time fee for 
providing meat and poultry voluntary inspection, identification, and 
certification services from $37.88 per hour per employee to $38.44 per 
hour per program employee. FSIS is also amending Secs. 391.3, 590.126, 
and 590.128(a) to increase the rate for providing meat, poultry, and 
egg products overtime and holiday inspection services from $39.76 per 
hour per employee to $41.00 per hour per employee. In addition, FSIS is 
amending Sec. 391.4 to increase the rate for laboratory services from 
$58.52 per hour per employee to $60.04 per hour per employee.

Executive Order 12866 and Regulatory Flexibility Act

    Because this final rule has been determined to be not significant, 
the Office of Management and Budget (OMB) did not review it under 
Executive Order 12866.
    The Administrator, FSIS, has determined that this final rule would 
not have a significant economic impact, as defined by the Regulatory 
Flexibility Act (5 U.S.C. 601), on a substantial number of small 
entities.
    Small establishments and plants should not be affected adversely by 
the increases in fees because the new fee increases provided for 
reflect only a small increase in the costs currently borne by those 
entities that choose to use certain inspection services. These 
inspection services are generally sought by larger establishments and 
plants because of larger production volume, greater complexity and 
diversity in the products they produce, and the need for on-time 
delivery of large volumes of product by their clients-generally large 
commercial or institutional establishments.
    Moreover, smaller establishments and plants are unlikely to use a 
significant amount of overtime and holiday inspection services. 
Establishments and plants that seek FSIS services are likely to have 
calculated that the incremental costs of overtime and holiday 
inspection services would be less than the incremental expected 
benefits of additional revenues they would realize from additional 
production.

Economic Effects

    Under the new fees, the Agency expects to collect an estimated 
$106.2 million in revenues for FY 2001, compared to $103 million under 
the current fee structure.
    The costs that industry would experience by the raise in fees are 
similar to other increases the industry faces due to inflation and wage 
increases.
    The total volume of meat and poultry slaughtered under Federal 
inspection in 1998 was about 81 billion pounds. The

[[Page 60095]]

total volume of U.S. egg product production in 1998 was about 3.2 
billion pounds. The increase in cost per pound of product associated 
with these proposed fees increases is $.00004. Even in competitive 
industries like meat, poultry, and egg products, this amount of 
increase in costs would have an insignificant impact on profits and 
prices.
    The industry is likely to pass through a significant portion of the 
fee increase to consumers because of the inelastic nature of the demand 
curve facing these firms. Research has shown that consumers are 
unlikely to reduce demand significantly for meat and poultry products, 
including egg products, when prices increase. Huang estimates that 
demand would fall by .36 percent for a one percent increase in price 
(Haung, Kao S., A Complete System of U.S. Demand for Food. USDA/ERS 
Technical Bulletin No. 1821, 1993, p.24). Because of the inelastic 
nature of demand and the competitive nature of the industry, individual 
firms are not likely to experience any change in market share to 
response to an increase in inspection fees.

Executive Order 12988

    This final rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. This final 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, 381.35, and 
590.320 through 590.370, respectively, must be exhausted before 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 FMIA, PPIA, or 
EPIA.

Additional Public Notification

    Public awareness of all segments of rulemaking and policy 
development is important. Consequently, in an effort to better ensure 
that minorities, women, and persons with disabilities are aware of this 
final rule, FSIS will announce and provide copies of this Federal 
Register publication in the FSIS Constituent Update. FSIS provides a 
weekly FSIS Constituent Update 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 than would be otherwise possible. For more information 
or to be added to the constituent fax list, fax your request to the 
Congressional and Public Affairs Office, at (202) 720-5704.

List of Subjects

9 CFR Part 391

    Fees and charges, Government employees, Meat inspection, Poultry 
products.

9 CFR Part 590

    Eggs and egg products, Exports, Food labeling, Imports.

    For the reasons set forth in the preamble, FSIS is amending 9 CFR 
chapter III as follows:

PART 391--FEES AND CHARGES FOR INSPECTION 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, and 391.4 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 is $38.44 
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 is $41.00 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 is $60.44 per hour per program 
employee.

PART 590--INSPECTION OF EGGS AND EGG PRODUCTS (EGG PRODUCTS 
INSPECTION ACT)

    3. The authority citation for part 590 continues to read as 
follows:

    Authority:  21 U.S.C. 1031-1056.


    4. Section 590.126 is revised to read as follows:


Sec. 590.126  Overtime inspection service.

    When operations in an official plant require the services of 
inspection personnel beyond their regularly assigned tour of duty on 
any day or on a day outside the established schedule, such services are 
considered as overtime work. The official plant must give reasonable 
advance notice to the inspector of any overtime service necessary and 
must pay the Agency for such overtime at an hourly rate of $41.00.

    5. In Sec. 590.128, paragraph (a) is revised to read as follows:


Sec. 590.128  Holiday inspection service.

    (a) When an official plant requires inspection service on a holiday 
or a day designated in lieu of a holiday, such service is considered 
holiday work. The official plant must, in advance of such holiday work, 
request the inspector in charge to furnish inspection service during 
such period and must pay the Agency for such holiday work at an hourly 
rate of $41.00.
* * * * *

    Done at Washington, DC, on: October 3, 2000.
Thomas J. Billy,
Administrator.
[FR Doc. 00-25945 Filed 10-4-00; 3:37 pm]
BILLING CODE 3410-DM-M