[Federal Register Volume 89, Number 195 (Tuesday, October 8, 2024)]
[Proposed Rules]
[Pages 81396-81403]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-23192]


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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.

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Federal Register / Vol. 89, No. 195 / Tuesday, October 8, 2024 / 
Proposed Rules

[[Page 81396]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 800

[Doc. No. AMS-FGIS-24-0027]
RIN 0581-AE28


Formulas for Calculating Hourly and Unit Fees for FGIS Services

AGENCY: Agricultural Marketing Service, Department of Agriculture 
(USDA).

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Agricultural Marketing Service (AMS), Federal Grain 
Inspection Service (FGIS or Service) proposes to amend its user fee 
regulations to establish standardized formulas the agency would use to 
calculate hourly and unit fees. The proposed changes would allow FGIS 
to charge reasonable fees sufficient to cover the costs of providing 
official services and re-establish a 3-to 6-month operating reserve, as 
required by the United States Grain Standards Act (USGSA). This 
proposed rulemaking would also make specified conforming changes and 
minor technical changes to the regulations to correct two typographical 
errors.

DATES: Comments are due on or before November 22, 2024.

ADDRESSES: Interested persons are invited to submit written comments on 
this proposed rulemaking. AMS encourages comments to be submitted 
through the Federal eRulemaking Portal at https://www.regulations.gov. 
Please go to https://www.regulations.gov and follow the online 
instructions at that site for submitting comments for AMS-FGIS-24-0027. 
All comments submitted in response to this proposal are part of the 
public record and will be posted for public viewing without change at 
https://www.regulations.gov. All personal identifying information 
(e.g., name, address), confidential business information, or otherwise 
sensitive information submitted voluntarily by the commenter will be 
publicly accessible. AMS will accept anonymous comments (enter ``N/A'' 
in the required fields if you wish to remain anonymous).

FOR FURTHER INFORMATION CONTACT: Denise Ruggles, Executive Program 
Analyst, USDA, AMS, FGIS, Telephone: 816-702-3897, Email: 
<a href="/cdn-cgi/l/email-protection#eaae8f8483998fc4a7c4b89f8d8d868f99aa9f998e8bc48d859c"><span class="__cf_email__" data-cfemail="2561404b4c56400b680b7750424249405665505641440b424a53">[email protected]</span></a>; or Anthony Goodeman, Senior Policy Advisor, 
USDA, AMS, FGIS, Telephone: 202-720-2091, Email: 
<a href="/cdn-cgi/l/email-protection#cd8ca3b9a5a2a3b4e399e38aa2a2a9a8a0aca38db8bea9ace3aaa2bb"><span class="__cf_email__" data-cfemail="ebaa859f83848592c5bfc5ac84848f8e868a85ab9e988f8ac58c849d">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION:  This proposed rulemaking would amend FGIS's 
user fee regulations to establish standardized formulas the agency 
would use to calculate hourly and unit fees. The proposed new formulas, 
which are similar to the standardized formulas used in other AMS user-
fee funded grading programs, would amend the regulations at 7 CFR 
800.71. The formulas proposed here would enable the agency to sustain 
operations and comply with the USGSA, which requires FGIS to charge 
fees sufficient to cover the costs of the official services it provides 
and to adjust fees annually in order to maintain an operating reserve 
of not less than 3 and not more than 6 months. Prospective customers 
can find the fee schedules posted on AMS's public website at: https://www.ams.usda.gov/about-ams/fgis-program-directives.

Background

    The USGSA authorizes and requires the Secretary of Agriculture to 
charge and collect reasonable fees to cover the estimated costs for 
performing official grain inspection and weighing services (which are 
mandatory under the Act for U.S. grain exports). In 2015, Congress 
amended the USGSA to provide that ``[i]n order to maintain an operating 
reserve of not less than 3 and not more than 6 months, the Secretary 
shall adjust the fees . . . not less frequently than annually.'' (7 
U.S.C. 79(j)(4) and 79a(l)(3)). To comply with these provisions, FGIS, 
then the Grain Inspection, Packers, and Stockyards Administration 
(GIPSA), issued regulations requiring the agency to review and adjust 
fees annually in order to maintain a 3- to 6-month reserve of operating 
expenses. (81 FR 49855).
    Through those regulations, the Service determined that maintaining 
the operating reserve at 4.5-months of operating expenses would comply 
with the statutory requirement that FGIS maintain an operating reserve 
of 3 to 6 months. Under the current regulation, in years when the 
operating reserve has been sufficient, for each $1 million that the 
reserve's balance exceeded 4.5 months, the Service reduced fees by 2 
percent, and no greater than 5 percent. Conversely, in years when the 
operating reserve was projected to be insufficient, for each $1 million 
that the balance fell short of the 4.5-month target, the Service 
increased fees by 2 percent, while also capping such increases at 5 
percent. The current regulations limit annual fee increases or 
decreases to no greater than 5 percent.
    The current regulations provide for FGIS review and revision of 
fees annually (800.71(b)) to establish the tonnage fees (national and 
local) and supervision fees. The annual adjustment of fees is based on 
the operating reserve total at the end of the prior fiscal year. Fees 
are increased or decreased to maintain an operating reserve of 4.5 
months of operating expenses. Historically, the operating reserve 
balance remained higher than the 4.5-month target, so FGIS annually 
reduced fees by the maximum amount, 5 percent, in 2017 (81 FR 96339), 
2018 (83 FR 6451), and 2019 (84 FR 11926); and by 2 percent in 2020 (85 
FR 8536).
    However, at the close of FY 2020, FGIS was operating at a loss of 
$5 million and had an operating reserve balance below 4.5 months of 
operating expenses. In accordance with current regulations, FGIS 
increased fees by 5 percent in 2021 (86 FR 1475), 2022 (87 FR 920), and 
2023 (88 FR 18512). These annual fee increases were not sufficient to 
both cover operating costs and maintain a sufficient operating reserve. 
Because of the cap on how much the annual increase could be, 2023 fees 
were lower than those charged in 2016 (e.g., the contract regular 
hourly rate in 2016 was $40.20 and, in 2023, the rate was $39.20). A 
drop in export tonnage (and its associated revenue) further increased 
the FGIS deficit. Table 1 below illustrates the interplay between FGIS 
revenues, reserve balances, and fee adjustments over the previous 5 
years.

[[Page 81397]]



    Table 1--FGIS Grain Inspection and Weighing Net Income and Operating Reserve for the Last 5 Fiscal Years
----------------------------------------------------------------------------------------------------------------
                                                 Operating
                             ------------------------------------------------   Annual export     Fee adjustment
         Fiscal year                                  Reserve balance         tons \1\ (million    (fiscal year
                              Net (millions) --------------------------------    metric tons)        end) (%)
                                                (millions)       (months)
----------------------------------------------------------------------------------------------------------------
2019........................            ($6)           $15.5               5                108  Reduced 5.
2020........................           (5.5)              10               3                110  Reduced 2.
2021........................             (3)               7             2.5                137  Increased 5.
2022........................             (4)               3               1                124  Increased 5.
2023........................           (3.5)           (0.5)           (0.3)                 97  Increased 5.
----------------------------------------------------------------------------------------------------------------
\1\ The data in this column represent export grain officially inspected and/or weighed (excluding land carrier
  shipments to Canada and Mexico inspected or weighed by delegated States and designated agencies), and outbound
  grain officially inspected and/or weighed by FGIS.

    Since 2021, the expected revenue from user fees has been lower than 
FGIS anticipated. During this time, the export volume (on which FGIS 
assesses tonnage fees) has declined year-over-year: by 10 percent in 
2022, and 22 percent in 2023. Through June 20, 2024, export volumes are 
5 percent higher than the same period in 2023, but still 6 percent 
lower than the five-year average. Reduced export volume has also 
impacted FGIS's ability to reestablish a sufficient operating reserve. 
This decline has been, in part, impacted by natural disasters. Though 
export volumes vary depending on weather, prices, and global demand, 
export volumes had risen in consecutive years since 2018. This 
significant decline was not expected, and the hurricane and severe 
drought were major unexpected events that contributed to the sudden 
decline in export volume.
    In August 2021, Hurricane Ida struck the coast of Louisiana just 
prior to the high-volume harvest season. The lower Mississippi River 
handles over half of U.S. grain exports, and many of the major grain 
exporters sustained damage and could not return to normal operations 
for months. Grain export inspection volume declined by 10 percent in 
2022, and corresponding FGIS user fee revenue dropped by $3 million in 
FY 2022.
    Then, in 2022, a severe drought struck the midwestern U.S., and 
parts of the Mississippi River, which handles the barge traffic that 
feeds the nation's largest export market, sunk to the lowest levels in 
recorded history, dating back 143 years. Those record-low river levels 
hindered barge and vessel loading operations, and export volumes 
declined by another 22 percent year-over-year from 2022 to 2023. FGIS 
experienced another $3.5 million reduction in revenue for the same 
period. In the two years following the hurricane and drought, FGIS 
revenue was down a combined $6.5 million. Agency operating costs were 
also significantly impacted by the COVID-19 Pandemic, as well as 
information technology and cost-of-living expenses increases.
    While the above discussed conditions individually presented 
significant challenges, their unprecedented, cumulative effect over a 
short time span limited FGIS's ability to recover its costs and 
contributed to the depletion of FGIS's reserves, jeopardizing its 
current ability to sustain and provide inspection and weighing 
services.

2023 Periodic Review

    Under the current regulations, FGIS can review all fees to ``ensure 
they reflect the true cost of providing and supervising official 
service.'' (7 CFR 800.71(c)). Given the confluence of events outside 
the agency's control, FGIS performed a periodic review in 2023 that 
examined the costs of all services offered. The review disclosed that 
most FGIS fees were misaligned with the actual costs of services and 
that the current regulatory fee formulas did not account for all agency 
costs and operating expenses. This misalignment and failure to account 
for actual costs and expenses has contributed to the current financial 
situation. The operating reserves for grain inspection and weighing 
activities at the end of FY 2023 were $0.

New Fee Formulas

    This proposed rulemaking would amend FGIS's user fee regulations at 
7 CFR 800.71 to revise the formulas the agency uses to calculate fees 
annually. The proposed changes would enable FGIS to assess fees for 
official services that are sufficient to cover its costs and maintain a 
3- to 6-month operating reserve. The proposed changes would also 
provide transparency and predictability to the grain industry, and 
allow FGIS to plan effectively for staffing, equipment investments, and 
procurement or development of inspection technology.
    The formulas in this proposed rulemaking are modeled after the 
standardized formulas AMS uses to calculate user fees in other user-fee 
funded grading programs (e.g., AMS's dairy, beef, poultry, egg, cotton, 
and specialty crops grading programs). Established in 2014 (79 FR 
67313), the standardized method enables AMS to use current information 
about resource needs and projected costs of providing services to 
update rates for services, thus better avoiding unexpected financial 
shortfalls or unintended reserve surpluses. AMS believes that adopting 
similar formulas to calculate user fees for grain inspection and 
weighing services would help FGIS adjust the operating reserve account 
as necessary and provide its customers with information they need for 
planning purposes. Once the reserve balance has reached an appropriate 
level, FGIS anticipates that the standardized formulas for fee rates 
will appropriately account for increases or decreases in the actual 
costs of providing inspection services.
    The primary purpose of this proposed rulemaking is to address gaps 
in the current fee formulas. The current FGIS tonnage formula accounts 
only for fees assessed on grain tonnage and supervision of official 
agencies (Sec.  800.71(b)(1) and (b)(2)); it excludes direct service 
costs and unit fees. In addition, the current formulas only account for 
an adjustment based on the operating reserve balance, and do not 
consider other factors or include any projection for the next year's 
costs. In an environment where costs are generally going up (even if 
slowly), FGIS fees compared to costs would lag at least one year 
behind, since the formulas are looking at prior years without 
projection toward potential cost increases. The formulas proposed in 
this document would address these gaps; specifically, the proposed 
formulas would consider

[[Page 81398]]

the previous year's expenses and project future year costs by including 
a cost-of-living adjustment and an operating reserve adjustment. These 
specific formulas are described further in this section.
    As with other programs, FGIS would perform financial analyses each 
year to determine whether the current fees are adequate to recover the 
costs incurred by providing grain inspection and weighing services. 
FGIS would use historical or prior year cost and workload data, along 
with applicable projections, to generate estimates of future 
obligations and revenues, as described further below in this proposed 
rulemaking. On the bases of these analyses and formulas, FGIS would 
determine the rates necessary to sustain grain inspection and weighing 
services. Using the proposed formulas to calculate the fees, and 
reviewing the fees on an annual basis would more accurately reflect the 
actual cost of providing services each year and would provide greater 
transparency and predictability to the grain industry. FGIS would 
publish the fees for each upcoming year in an annual user-fee notice in 
the Federal Register. The yearly notice would include both the per-hour 
rates and the per-unit rates. Updated fees schedules would no longer 
appear in the Code of Federal Regulations but would be available on the 
FGIS website.

Definitions

    In order to provide additional clarity, FGIS defines the following 
terms used throughout this document as follows:
    Bad debt--accounts receivable that will likely remain uncollectable 
and will be written off.
    Benefits--various non-wage compensation provided to employees in 
addition to their normal wages or salaries.
    Cost of living--the cost of maintaining a certain standard of 
living based on economic assumptions issued by the Office of Management 
and Budget (OMB).
    Direct hours--the regular hours worked by employees of FGIS. This 
does not include overtime or holiday hours.
    Direct pay--monetary compensation paid to employees of FGIS for 
work performed. Pay is based on the U.S. Office of Personnel Management 
pay rate tables. It may include night and Sunday differential costs.
    Field Office administrative costs--the costs of management, 
support, and maintenance of a Field Office, including, but not limited 
to, the management and administrative support personnel, rent, and 
utilities. This does not include any costs directly related to 
providing original or review inspection or weighing services.
    Holiday--the legal public holidays specified in paragraph (a) of 
section 6103, title 5, of the United States Code (5 U.S.C. 6103(a)) and 
any other day declared to be a holiday by Federal statute or Executive 
order. Under section 6103(b) and Executive Order 10358 as amended, if 
the specified legal public holiday falls on a Saturday, the preceding 
Friday shall be considered to be the holiday, or if the specified legal 
public holiday falls on a Sunday, the following Monday shall be 
considered to be the holiday.
    Hour--measure by which grading, certification, inspection, 
classification, laboratory, or other services cost is based and 
expenses are charged.
    Indirect costs--the costs of FGIS activities that support the 
services provided to the industry and are not covered by FGIS tonnage 
fees.
    National program administrative costs--the costs of national 
management and support of official grain inspection and/or weighing. 
This does not include the Field Office administrative costs and any 
costs directly related to providing service.
    Operating reserve--the amount of funds the Service has available to 
provide official grain inspection and/or weighing services.
    Operating costs--costs attributed to performing grading, 
inspection, certification, or laboratory services duties (i.e., 
training, equipment, local travel, and other such costs), plus 
operating reserve, plus indirect costs. This term is interchangeable 
with ``Operating expenses''.
    Overtime--hours worked in excess of the approved schedule. Work 
performed after the first 8 hours per day or 40 hours per week is 
considered overtime.
    Regular rate--the cost per hour for work provided in accordance 
with an applicant contract. Under Federal labor laws, this rate applies 
to the first 8 hours per day, or first 40 hours worked per week by AMS 
employees.
    Unit--any measurement that there is one of. For example, one 
submitted sample, one barge, one aflatoxin test or one appeal 
inspection.

Formulas for the Regular Rate, Overtime Rate, and Holiday Rate

    This proposed rulemaking would revise FGIS's regulations at 7 CFR 
800.71 to implement a new formula for calculating user fees. FGIS would 
publish the specific inputs used to calculate service fees on its 
public website. FGIS would expect to announce the actual annual fee 
rates in a Federal Register notice during the first quarter of each 
year and would also publish the fees on its website.
    Salaries, hours, and most rates \1\ used in the formulas would be 
based on the prior fiscal year's actual costs and hours of service. 
FGIS would round the final rates to the nearest $0.10. Currently, some 
fees are charged on a per unit basis and others are charged on a per 
hour basis. FGIS would continue to provide costs based on a per hour 
and per unit basis to maintain consistency.
---------------------------------------------------------------------------

    \1\ Some rates, such as those for equipment use and specialist 
laboratory services, are based on unique cost components that are 
not accounted for in the prior fiscal year's obligations and service 
hours.
---------------------------------------------------------------------------

    FGIS proposes to establish the following formulas:
    Regular rate--The total direct pay of FGIS personnel performing 
grading, weighing, laboratory services, and equipment testing divided 
by the total direct hours for the previous year, which is then 
multiplied by the next year's percentage of cost-of-living increase, 
plus the benefits rate, plus the operating rate, plus the allowance for 
bad debt rate. If applicable, travel expenses would be added to the 
cost of providing the service through the operating rate or the travel 
would be billed separately. An example of the calculation would look 
like this: [Total direct pay divided by total direct hours ($2,663,407/
82,985) = $32.10, multiplied by 1.7% (cost-of-living increase) = 
$32.64, + $10.04 (benefits rate) + $28.90 (operating rate) + $0.01 (bad 
debt allowance rate) = $71.59 (rounded to $71.60); rounding is done to 
the nearest $0.10.]
    Overtime rate--The total direct pay of FGIS personnel performing 
grading, weighing, laboratory services, and equipment testing divided 
by the total direct hours for the previous year, which is then 
multiplied by the next year's percentage of cost-of-living increase and 
then multiplied by 1.5, plus the benefits rate, plus the operating 
rate, plus the allowance for bad debt rate. If applicable, travel 
expenses would be added to the cost of providing the service through 
the operating rate or the travel would be billed separately. An example 
of the calculation would look like this: [Total direct pay divided by 
total direct hours ($2,663,407/82,985) = $32.10, multiplied by 1.7% 
(cost-of-living increase) = $32.64, multiplied by 1.5 (overtime rate) = 
$48.96 + $10.04 (benefits rate) + 28.90 (operating rate) + $0.01 (bad 
debt allowance rate) = $87.91 (rounded to $87.90); rounding is done to 
the nearest $0.10.]
    Holiday rate--The total direct pay of FGIS personnel performing 
grading,

[[Page 81399]]

weighing, laboratory services, and equipment testing divided by the 
total direct hours for the previous year, which is then multiplied by 
the next year's percentage of cost-of-living increase and then 
multiplied by 2, plus the benefits rate, plus the operating rate, plus 
the allowance for bad debt rate. If applicable, travel expenses would 
be added to the cost of providing the service through the operating 
rate or the travel would be billed separately. An example of the 
calculation would look like this: [Total direct pay divided by total 
direct hours ($2,663,407/82,985) = $32.10, multiplied by 1.7% (cost-of-
living increase) = $32.64, multiplied by 2 (double time or Holiday 
rate) = $65.28, + $10.04 (benefits rate) + $28.90 (operating rate) + 
$0.01 (bad debt allowance rate) = $104.23 (rounded to $104.20); 
rounding is done to the nearest $0.10.]
    Formula calculations would be based on the prior fiscal year's 
actual costs or historical costs, workload data, projection of expenses 
impacting program costs, cost-of-living increases, and inflation. Cost-
of-living increases and inflation factors would be based on economic 
assumptions from OMB. Rather than codifying a reference to an OMB 
budget document in the regulations, each year AMS would use the most 
recent economic factors released by OMB for budget development purposes 
to determine cost impacts for these user fee activities.
    FGIS would continue to calculate adjusted fees for each calendar 
year and would publish a corresponding notice in the Federal Register 
and post the fees on its public website. The yearly notice would 
include a per-hour rate and, in some instances, the equivalent per-unit 
rate. The per-unit rate would be provided for functions that 
historically use a unit-cost basis for payment (e.g., price per 
submitted sample). In those cases where a per-unit rate is necessary, 
the formulas would have an additional step to convert per-hour costs 
into a per-unit rate.

Formulas for the Benefits Rate, Operating Rate, and Allowance for Bad 
Debt Rate

    FGIS would derive the components of the formulas above using the 
previous fiscal year's actual costs, as follows:
    Benefits rate--The total direct benefits costs of FGIS personnel 
performing grading, weighing, laboratory services, and equipment 
testing divided by the total hours worked (regular, overtime, and 
holiday), which is then multiplied by the next calendar year's 
percentage cost-of-living increase. An example of the calculation would 
look like this [Total direct benefits costs/(total regular hours + 
total overtime hours + total holiday hours) ($819,207/82,985)] = $9.87, 
multiplied by 1.7% (cost-of-living increase) = $10.04.]
    Operating rate--The total operating costs (including user fee 
adjustment) of FGIS personnel performing grading, weighing, laboratory 
services, and equipment testing divided by total hours worked (regular, 
overtime, and holiday), which is then multiplied by the percentage of 
inflation. The operating rate would include an adjustment for the 
operating reserve as an operating cost. For the purposes of this 
example, FGIS will call out the reserve adjustment separately. This 
example will assume $1,000,000 is needed for the reserve and assume all 
other operating costs are $42,000,000, divided by 630,000 total hours. 
An example of the calculation would look like this: [Total operating 
costs/(total regular hours + total overtime hours + total holiday 
hours) ($42,000,000 + 1,000,000)/630,000 = $69.61, multiplied by 2% 
(inflation) = $69.62.]
    Allowance for bad debt rate--Total bad debt for grading, weighing, 
laboratory services, and equipment testing divided by total hours 
worked (regular, overtime, and holiday). An example of the calculation 
would look like this: [Total bad debt cost/(total regular hours + total 
overtime hours + total holiday hours) ($1,000/82,985) = $ 0.01.]
    As noted above, the proposed formulas reflect that the costs of 
providing services include both direct and indirect costs. Direct costs 
include the costs of salaries, employee benefits, and if applicable, 
travel and some operating costs. Indirect costs include the costs of 
program and AMS activities supporting the services provided to the 
industry and are not covered by FGIS tonnage fees. For purposes of 
these proposed formulas, indirect costs have been included as part of 
operating costs.

Conforming Regulatory Changes

    In an interim rule published in the June 6, 2024, edition of the 
Federal Register (89 FR 48257), FGIS established revised fees for the 
remainder of 2024 (and until new fees are established pursuant to a 
final rule). To implement the revised fees, the interim rule imposed a 
stay on Sec. Sec.  800.71 and 800.72(b). To amend these sections, if 
finalized, this rulemaking would first lift the stay imposed on them by 
the interim rule.
    This proposed rulemaking also proposes to make certain conforming 
changes in 7 CFR part 800. Specifically, this proposal would restore 
references to Sec. Sec.  800.71 and 800.72 that were amended by the 
interim rule. In order to implement revised fees for 2024, the interim 
rule replaced references to Sec.  800.71, which was stayed, with 
references to a newly added temporary section, Sec.  800.74. Because 
Sec.  800.72(b) was also stayed, the interim rule replaced a reference 
to that section in Sec.  800.73(d) with a reference to Sec. Sec.  
800.72(a) and 800.74. As this rulemaking would revise Sec.  800.71 to 
incorporate the proposed formulas, these internal substitutions would 
no longer be needed. Accordingly, if finalized, this proposed 
rulemaking would replace references to Sec.  800.74 with references to 
Sec.  800.71 in Sec. Sec.  800.34, 800.36, 800.156(d)(5), and 
800.197(b)(3). The proposal, if finalized, would also replace the 
reference to Sec. Sec.  800.72(a) and 800.74 in Sec.  800.73(d) with a 
reference to Sec.  800.72. Finally, because the proposed changes to 
Sec.  800.71 would render Sec.  800.74 obsolete, this proposal also 
removes that section.

Technical Corrections

    This proposed rulemaking would also correct two typographical 
errors--a reference to 5 U.S.C. 6103 and a reference to Executive Order 
10358--in the definition of Holiday in 7 CFR 800.0--Meaning of terms. 
These corrections do not create new or amend existing requirements or 
interpretations.

Required Regulatory Analyses

Executive Orders 12866, 13563, and 14094

    This proposed rulemaking is being issued in conformance with 
Executive Order 12866, ``Regulatory Planning and Review,'' Executive 
Order 13563, ``Improving Regulation and Regulatory Review,'' and 
Executive Order 14094, ``Modernizing Regulatory Review.'' Executive 
Orders 12866 and 13563 direct agencies to assess all costs and benefits 
of available regulatory alternatives and, if regulation is necessary, 
to select regulatory approaches that maximize net benefits (including 
potential economic, environmental, public health and safety effects, 
distributive impacts, and equity). Executive Order 13563 emphasizes the 
importance of quantifying both costs and benefits, reducing costs, 
harmonizing rules, and promoting flexibility. Executive Order 14094 
reaffirms, supplements, and updates Executive Order 12866 and further 
directs agencies to solicit and consider input from a wide range of 
affected and interested parties through a variety of means.

[[Page 81400]]

    OMB has designated this proposed rulemaking as not significant 
under Executive Orders 12866, 13563, and 14094. Accordingly, OMB has 
not reviewed this proposed rule under those orders. Since grain export 
volume can vary significantly from year to year, estimating the impact 
of future fee changes can be difficult. FGIS recognizes the need to 
provide predictability to the industry for inspection and weighing 
fees. The statutory requirement to maintain an operating reserve 
between 3 to 6 months of operating expenses ensures that FGIS can 
adequately cover its costs without imposing an undue burden on its 
customers.
    FGIS regularly reviews its user-fee financed programs to determine 
whether the fees charged for performing official inspection and 
weighing services adequately cover the costs of providing those 
services. Due to limitations in the current regulations (7 CFR 
800.71(b)(3)), which permit fee increases of no more than 5 percent per 
year, combined with four years of rate decreases, and noneconomic 
factors that led to the 2020-2023 period having highest inflation in 
more than 40 years,\2\ FGIS is now experiencing a deficit which is 
forecasted to grow without corrective action.
---------------------------------------------------------------------------

    \2\ For example, the Consumer Price Index (CPI) Calculator 
(https://data.bls.gov/cgi-bin/cpicalc.pl) shows prices up 20 percent 
between January 2020 and February 2024, and up 31 percent between 
January 2016 and February 2024.
---------------------------------------------------------------------------

    This proposed rule would revise the formulas under which FGIS 
adjusts fees annually to ensure stability of the program. The proposal 
would also ensure that FGIS complies with the USGSA, which requires the 
agency to charge fees sufficient to cover its costs and maintain a 3- 
to 6-month operating reserve. FGIS will continue to seek out cost-
saving measures and implement appropriate changes to reduce its costs 
to provide alternatives to fee increases.
    This proposed rulemaking is unlikely to have an annual effect of 
$200 million or more or adversely affect the economy. FGIS has operated 
at a net loss for five consecutive years, and even with the maximum fee 
increases permitted under the current regulations, the agency has been 
unable to reduce the deficits and rebuild the operating reserve. While 
FGIS's interim final rule, published separately in the Federal Register 
(89 FR 48257), addresses the agency's current deficit, this proposed 
rulemaking seeks to prevent additional deficits in future years by 
revising FGIS's user fee regulations to enable more accurate 
calculation of its costs and greater flexibility in future rate 
changes.
    FGIS believes that the U.S. grain industry would be best served by 
revising the regulation at 7 CFR 800.71, which addresses the 
calculation of fees for official inspection and weighing services 
performed by FGIS in the U.S. and Canada. The industry is already 
familiar with the annual process for evaluating and updating fees and 
anticipates the changes in this proposal. This proposed rulemaking, if 
finalized, would allow FGIS to continue providing mandatory and 
voluntary grain inspection services that facilitate international and 
domestic trade. This proposal would also allow FGIS to adjust fees in 
the future in response to unforeseeable climate, logistical, and market 
conditions, and to maintain required operating reserves.
    A 45-day comment period is provided to allow interested parties to 
submit written comments on this proposed rulemaking.

Initial Regulatory Flexibility Analysis

    Under the requirements set forth in the Regulatory Flexibility Act 
(RFA) (5 U.S.C. 601-12), FGIS has considered the economic impact of 
this proposed rulemaking on small entities. Accordingly, FGIS has 
prepared this initial regulatory flexibility analysis. The purpose of 
the Regulatory Flexibility Act is to fit regulatory actions to the 
scale of businesses subject to such actions. This ensures that small 
businesses will not be unduly or disproportionately burdened.
    The Small Business Administration (SBA) defines small businesses by 
their North American Industry Classification System Codes (NAICS). This 
proposed rulemaking would affect customers of FGIS's official 
inspection and weighing services in the domestic and export grain 
markets (NAICS code 115114). Current guidance from the SBA provides a 
revenue cutoff at $34 million to differentiate large and small firms in 
this industry. Fees for the program which apply to this industry are 
provided on the FGIS website.
    Under the USGSA, all grain exported from the United States must be 
officially inspected and weighed, with few exceptions. FGIS provides 
mandatory inspection and weighing services at 29 export facilities in 
the United States. Five delegated State agencies provide mandatory 
inspection and weighing services at 20 facilities. All of these 
facilities are owned by multinational corporations, large cooperatives, 
or public entities that do not meet the requirements for small entities 
established by the SBA.
    The USGSA requires the registration of all persons engaged in the 
business of buying grain for sale in foreign commerce. In addition, 
those persons who handle, weigh, or transport grain for sale in foreign 
commerce must also register. The regulations found at 7 CFR 800.30 and 
800.31 define a foreign commerce grain business as the business of 
regularly buying, handling, weighing, or transporting grain for sale in 
foreign commerce totaling 15,000 metric tons or more during the 
preceding or current calendar year. Currently, there are 174 businesses 
registered to export grain, most of which are not small businesses.
    Although most exporters are not small businesses, most users of 
FGIS's official inspection and weighing services (which include 
domestic grain businesses as well as exporters) meet the SBA 
requirements for small entities. Data on user fee receipts from FGIS 
for the past 5 years, plus 2024 to date, show a total of 2,123 
different accounts over this time, though many firms are represented by 
multiple accounts. For the purpose of this initial regulatory 
flexibility analysis, FGIS will consider accounts as representing 
establishments, with multiple establishments associated with larger 
firms.
    FGIS identified a total of 31 large firms, as defined by the SBA 
firm size classification of receipts in excess of $34 million. FGIS 
also identified the total number of establishments affiliated with the 
31 large firms to be 133. With a total number of establishments of 
2,123, this means 1,990, or 94 percent, of the establishments that paid 
fees to FGIS over the 2019-2024 period are small businesses according 
to the SBA definition.
    Table 2 shows that while only 6 percent of the firms are considered 
large, in total they have contributed the vast majority of the fees 
paid to the program. In each of the five previous years, and for the 
year 2024 to date, the 31 large firms paid between 86 and 90 percent of 
all FGIS fees, with an average of 89 percent. The remaining 1,990 
establishments paid on average 11 percent of total fees.

[[Page 81401]]



Table 2--FGIS Billed Accounts Summary Table for Regulatory Flexibility Analysis by Small Business Administration
                                               Size Classification
----------------------------------------------------------------------------------------------------------------
                                     All firms              Large firms                     Small firms
                                 -------------------------------------------------------------------------------
           Fiscal year              Total fees      Total fees                      Total fees
                                       paid            paid       Share paid (%)       paid       Share paid (%)
----------------------------------------------------------------------------------------------------------------
2019............................     $32,314,848     $27,694,899              86      $4,619,949              14
2020............................      30,746,015      27,386,467              89       3,359,547              11
2021............................      34,320,110      30,693,195              89       3,626,915              11
2022............................      31,663,547      28,183,027              89       3,480,520              11
2023............................      27,734,760      25,069,234              90       2,665,526              10
Oct 2023-Feb 2024...............      10,702,712       9,679,943              90       1,022,769              10
                                 -------------------------------------------------------------------------------
    Grand Total.................     167,481,991     148,706,765              89      18,775,226              11
----------------------------------------------------------------------------------------------------------------

    The proposed amendments to FGIS's user fee regulations would not 
change the relative burden of fees on small businesses. The provisions 
of this proposed rulemaking would apply equally to all entities. In 
addition, use of standardized user-fee rate calculations would benefit 
all inspection applicants, regardless of size, as fees would more 
closely reflect the current costs of inspections, and the fee 
calculation process would be more transparent. Through its annual 
review, FGIS would be able to monitor the financial status of the grain 
inspection and weighing program to determine whether further 
adjustments are necessary. Finally, this proposed rulemaking would not 
impose additional reporting, record keeping, or other compliance 
requirements on small entities. FGIS has not identified any other 
Federal rules which may duplicate, overlap, or conflict with this 
proposed rulemaking.

Executive Order 12988

    This proposed rulemaking has been reviewed under Executive Order 
12988--Civil Justice Reform. It is not intended to have retroactive 
effect. Section 18 of the USGSA (7 U.S.C. 87g) provides that no State 
or subdivision thereof may require or impose any requirements or 
restrictions concerning the inspection, weighing, or description of 
grain under the USGSA. Otherwise, this proposed rulemaking would not 
preempt any State or local laws, regulations, or policies unless they 
present an irreconcilable conflict with this proposed rulemaking. There 
are no administrative procedures that must be exhausted prior to any 
judicial challenge to the provisions of this proposed rulemaking.

Executive Order 13175

    This proposed rulemaking has been reviewed under Executive Order 
13175--Consultation and Coordination with Indian Tribal governments, 
which requires agencies to consider whether their rulemaking actions 
would have Tribal implications. FGIS has determined that this proposed 
rulemaking is unlikely to have substantial direct effects on one or 
more Indian Tribes, on the relationship between the Federal Government 
and Indian Tribes, or on the distribution of power and responsibilities 
between the Federal Government and Indian Tribes.

Congressional Review Act

    Pursuant to the Congressional Review Act (5 U.S.C. 801-808), the 
Office of Information and Regulatory Affairs designated this proposed 
rulemaking as not a major rule, as defined by 5 U.S.C. 804(2).

E-Government Act

    USDA is committed to complying with the provisions of the E-
Government Act (44 U.S.C. 3601-3616) by promoting the use of the 
internet and other information technologies to provide increased 
opportunities for citizen access to government information and 
services, and for other purposes.

Paperwork Reduction Act

    This proposed rulemaking would not impose any additional reporting 
or recordkeeping requirements on either small or large FGIS customers. 
In compliance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
chapter 35), FGIS reports and forms are periodically reviewed to reduce 
information collection requirements and duplication.

List of Subjects in 7 CFR Part 800

    Administrative practice and procedure, Conflict of interests, 
Exports, Freedom of information, Grains, Intergovernmental relations, 
Penalties, Reporting and recordkeeping requirements.

    For the reasons set forth in the preamble, the Agricultural 
Marketing Service proposes to amend 7 CFR part 800 as follows:

PART 800--GENERAL REGULATIONS

0
1. The authority citation for part 800 continues to read as follows:

    Authority:  7 U.S.C. 71-87K, 1621-1627.


Sec.  800.0  [Amended]

0
2. In Sec.  800.0, in the definition of ``Holiday'', remove the text 
``Under section 610 and Executive Order No. 10357'' and add in its 
place the text ``Under section 6103 and Executive Order No. 10358''.


Sec.  800.34  [Amended]

0
3. In Sec.  800.34, in the first sentence, remove the citation ``Sec.  
800.74'' and add in its place the citation ``Sec.  800.71''.


Sec.  800.36  [Amended]

0
4. In Sec.  800.36, the last sentence, remove the citation ``Sec.  
800.74'' and add in its place the citation ``Sec.  800.71''.
0
5. Lift the stay on Sec.  800.71 and revise Sec.  800.71 to read as 
follows:


Sec.  800.71  Fees assessed by the Service.

    (a) Official inspection and weighing services. The fees described 
for Direct Service in paragraph (a)(1) of this section apply to 
official inspection and weighing services performed by the Service in 
the U.S. and Canada. The fees described for Supervision in paragraph 
(a)(2) of this section apply to official domestic inspection and 
weighing services performed by delegated States and designated 
agencies, including land carrier shipments to Canada and Mexico. The 
fees charged to delegated States by the Service are set forth in the 
State's Delegation of Authority document. Failure of a delegated State 
or designated agency to pay the appropriate fees to the Service within 
30 days after becoming due will result in an automatic termination of 
the delegation or designation. The delegation or designation may be 
reinstated by the Service if fees that are

[[Page 81402]]

due, plus interest and any further expenses incurred by the Service 
because of the termination, are paid within 60 days of the termination.
    (1) Direct Service--Fees for official inspection and weighing 
services performed by the Service in the United States and Canada. For 
each calendar year, the Service will calculate Direct Service fees as 
provided in paragraphs (b) and (c) of this section. The Service will 
publish a notice in the Federal Register and post Direct Service fees 
on its public website.
    (2) Supervision--Fees for supervision of official inspection and 
weighing services performed by delegated States and designated agencies 
in the United States. The Service will assess a Supervision fee per 
metric ton of domestic U.S. grain shipments inspected or weighed, or 
both, including land carrier shipments to Canada and Mexico. For each 
calendar year, the Service will calculate Supervision fees as provided 
in paragraph (d) of this section. The Service will publish a notice in 
the Federal Register and post the Supervision fees on its public 
website.
    (b) Annual review of tonnage fees. For each calendar year, the 
Service will review and adjust fees included in this section and 
publish fees each year according to the following:
    (1) Tonnage fees. Tonnage fees for Direct Service in paragraph 
(a)(1) of this section will consist of the national tonnage fee and 
local tonnage fees and the Service will calculate and round the fee to 
the nearest $0.001 per metric ton. All outbound grain officially 
inspected and/or weighed by the Field Offices will be assessed the 
national tonnage fee plus the appropriate local tonnage fee. Export 
grain officially inspected and/or weighed by delegated States and 
official agencies, excluding land carrier shipments to Canada and 
Mexico, will be assessed the national tonnage fee only. The fees will 
be set according to the following:
    (i) National tonnage fee. The national tonnage fee is the national 
program administrative costs for the previous fiscal year divided by 
the average yearly tons of export grain officially inspected and/or 
weighed by delegated States and designated agencies, excluding land 
carrier shipments to Canada and Mexico, and outbound grain officially 
inspected and/or weighed by the Service during the previous 5 fiscal 
years.
    (ii) Local tonnage fee. The local tonnage fee is the Field Office 
administrative costs for the previous fiscal year divided by the 
average yearly tons of outbound grain officially inspected and/or 
weighed by the Field Office during the previous 5 fiscal years. The 
local tonnage fee is calculated individually for each Field Office.
    (c) Annual review of hourly and unit fees. The Service will 
calculate the rate for program services, per hour per program employee 
using the following formulas:
    (1) Regular rate. The total direct pay of program personnel 
performing grading, weighing, laboratory services, and equipment 
testing divided by the total direct hours for the previous year, which 
is then multiplied by the next year's percentage of cost-of-living 
increase, plus the benefits rate, plus the operating rate, plus the 
allowance for bad debt rate. If applicable, travel expenses will be 
added to the cost of providing the service through the operating rate 
or the travel will be billed separately.
    (2) Overtime rate. The total direct pay of program personnel 
performing grading, weighing, laboratory services, and equipment 
testing divided by the total direct hours for the previous year, which 
is then multiplied by the next year's percentage of cost-of-living 
increase and then multiplied by 1.5, plus the benefits rate, plus the 
operating rate, plus the allowance for bad debt rate. If applicable, 
travel expenses will be added to the cost of providing the service 
through the operating rate or the travel will be billed separately.
    (3) Holiday rate. The total direct pay of program personnel 
performing grading, weighing, laboratory services, and equipment 
testing divided by the total direct hours for the previous year, which 
is then multiplied by the next year's percentage of cost-of-living 
increase and then multiplied by 2, plus the benefits rate, plus the 
operating rate, plus the allowance for bad debt rate. If applicable, 
travel expenses will be added to the cost of providing the service 
through the operating rate or the travel will be billed separately.
    (4) Benefits rate, operating rate, and allowance for bad debt rate. 
For each calendar year, based on previous fiscal year costs, the 
Service will calculate the benefits rate, operating rate, and allowance 
for bad debt rate as follows:
    (i) Benefits rate. The total direct benefits costs of program 
personnel performing grading, weighing, laboratory services, and 
equipment testing divided by the total hours (regular, overtime, and 
holiday) worked, which is then multiplied by the next calendar year's 
percentage cost-of-living increase.
    (ii) Operating rate. The total operating costs of program personnel 
performing grading, weighing, laboratory services, and equipment 
testing divided by total hours (regular, overtime, and holiday) worked, 
which is then multiplied by the percentage of inflation.
    (iii) Allowance for bad debt rate. The total allowance for bad debt 
for personnel performing grading, weighing, laboratory services, and 
equipment testing divided by total hours (regular, overtime, and 
holiday) worked.
    (5) Cost of living and inflation factors. The Service will use the 
most recent economic factors released by the Office of Management and 
Budget for budget development purposes to derive the cost-of-living 
expenses and percentage of inflation factors used in the formulas in 
this section.
    (6) Operating reserve adjustment. The Service will review the 
operating reserve at the end of each fiscal year and adjust the fees as 
needed to ensure an operating reserve of 3 to 6 months of expenses. 
This adjustment is included in the calculation for operating cost.
    (d) Annual review of supervision fees. Fees for Supervision in 
paragraph (a)(2) of this section will be set according to the 
following:
    (1) Supervision tonnage fee. The supervision tonnage fee is the sum 
of the prior fiscal year program costs plus an operating reserve 
adjustment divided by the average yearly tons of domestic U.S. grain 
shipments inspected or weighed, or both, including land carrier 
shipments to Canada and Mexico during the previous 5 fiscal years. If 
the calculated value is zero or a negative value, the Service will 
suspend the collection of supervision tonnage fees for 1 calendar year.
    (2) Operating reserve adjustment. The operating reserve adjustment 
is the supervision program costs for the previous fiscal year divided 
by 2, less the end of previous fiscal year operating reserve balance.
    (e) Periodic review. The Service will periodically review and 
adjust all Direct Service and Supervision fees in paragraphs (a)(1) and 
(2) of this section, respectively, as necessary to ensure they reflect 
the true cost of providing and supervising official service. This 
process will incorporate any fee adjustments from paragraphs (b) 
through (d) of this section.
    (f) Miscellaneous fees for other services. For each calendar year, 
the Service will review fees included in this section and publish fees 
in the Federal Register and on its public website.
    (1) Registration certificates and renewals. The fee for 
registration certificates and renewals will be published annually in 
the Federal Register and on the Service's public

[[Page 81403]]

website, and the Service will calculate the fee using the noncontract 
hourly rate published pursuant to paragraph (a)(1) of this section 
multiplied by 5. If you operate a business that buys, handles, weighs, 
or transports grain for sale in foreign commerce, or you are in a 
control relationship with respect to a business that buys, handles, 
weighs, or transports grain for sale in interstate commerce, you must 
complete an application and pay the published fee.
    (2) Designation amendments. The fee for amending designations will 
be published annually in the Federal Register and on the Service's 
public website. The Service will calculate the fee using the cost of 
publication plus 1 hour at the noncontract hourly rate. If submitting 
an application to amend a designation, the published fee must be paid.
0
6. In Sec.  800.72:
0
a. Lift the stay on paragraph (b); and
0
b. Revise paragraph (b).
    The revision reads as follows:


Sec.  800.72  Explanation of additional service fees for services 
performed in the United States only.

* * * * *
    (b) In addition to a 2-hour minimum charge for service on 
Saturdays, Sundays, and holidays, an additional charge will be assessed 
when the revenue from the services in Sec.  800.71(a)(1) does not equal 
or exceed what would have been collected at the applicable hourly rate. 
The additional charge will be the difference between the actual unit 
fee revenue and the hourly fee revenue. Hours accrued for travel and 
standby time shall apply in determining the hours for the minimum fee.


Sec.  800.73  [Amended]

0
7. In Sec.  800.73, in paragraph (d), in the second sentence remove the 
citation ``Sec. Sec.  800.72(a) and 800.74'' and add in its place the 
citation ``Sec.  800.72''.


Sec.  800.74  [Removed]

0
8. Remove Sec.  800.74.


Sec.  800.156  [Amended]

0
9. In Sec.  800.156, in paragraph (d)(5), in the last sentence remove 
the citation ``Sec.  800.74'' and add in its place the citation ``Sec.  
800.71''.


Sec.  800.197  [Amended]

0
10. In Sec.  800.197, in paragraph (b)(3), remove the citation ``Sec.  
800.74'' and add in its place the citation ``Sec.  800.71''.

Melissa Bailey,
Associate Administrator, Agricultural Marketing Service.
[FR Doc. 2024-23192 Filed 10-7-24; 8:45 am]
BILLING CODE P


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