[Federal Register: March 14, 2007 (Volume 72, Number 49)]
[Rules and Regulations]
[Page 11773-11776]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14mr07-1]
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Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
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[[Page 11773]]
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Parts 56 and 70
[Docket No. AMS 2006-0142; PY-06-002]
RIN 0581-AC64
Increase in Fees and Charges for Egg, Poultry, and Rabbit Grading
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Final rule.
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SUMMARY: The Agricultural Marketing Service (AMS) is increasing the
fees and charges for Federal voluntary egg, poultry, and rabbit
grading, certification, and audit services, and establishing a separate
billing rate for the audit services. The fees and charges are being
increased to cover the increase in salaries of Federal employees,
salary increases of State employees cooperatively utilized in
administering the programs, and other increased Agency costs. The AMS
is required to collect fees from users of these services to cover the
costs of services rendered.
DATES: Effective Date: April 1, 2007.
FOR FURTHER INFORMATION CONTACT: David Bowden, Jr., Chief, USDA, AMS,
PY, Standards, Promotion and Technology Branch, (202) 690-3148.
SUPPLEMENTARY INFORMATION:
Background and Proposed Changes
The Agricultural Marketing Act of 1946 (AMA), as amended, (7 U.S.C.
1621, et seq.), gives AMS the authority to provide services so that
agricultural products may be marketed to their best advantage, that
global marketing and trade may be facilitated, and that consumers may
be able to ascertain characteristics involved in the production and
processing of products and obtain the quality of product they desire.
The AMA also provides for the collection of fees from users of these
services that are reasonable and cover the cost of providing services.
Voluntary grading and certification of eggs, poultry, and rabbits and
verification and conformance audits, fall within this authorization.
A recent review determined that the existing fee schedule,
effective September 25, 2005, will not generate sufficient revenue to
cover program costs while maintaining an adequate trust fund reserve
balance in FY 2007. Revenue in FY 2005 was $30.1 million while expenses
were $33.8 million. After factoring in investment income, the result
was a loss of $3.4 million. This loss reduced the trust fund reserve
balance to $12.4 million. FY 2006 revenue is currently projected at
$33.8 million and expenses in FY 2006 are projected at $34.8 million,
which will reduce the trust fund reserve balance to $12.0 million.
However, prior-year adjustments and projected investment income will
increase the projected end-of-year trust fund reserve balance to $13.3
million. Without a fee increase, FY 2007 revenue is projected to be
$33.8 million. Expenses are projected to be $36.6 million. After
factoring in investment income, this loss would leave a reserve of
$11.1 million, which is below the required minimum level.\1\ With a fee
increase, FY 2007 revenue is projected at $35.1 million.
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\1\ The required minimum level for the trust fund reserve is
equal to four months of the revenue projected from collecting
inspection fees during that fiscal year. With FY 2007 revenue
projected to be $33.8 million, four months of the revenue in FY2007
equals $11.3 million. Therefore a reserve of $11.1 million would
fall short of the required minimum level.
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Over $1 million in cost cutting measures will be taken by the
Agency in FY 2006 and FY 2007 to maintain acceptable trust fund reserve
levels. These cost reductions will include reorganization of field
offices and not filling targeted vacancies. The fee increase in
conjunction with cost reductions will result in trust fund reserve
balances that would be maintained at the required minimum level.
The review also included an in-depth analysis of expenses
specifically related to auditing services. The audit program, initiated
in 1999, was developed to provide industry, as well as domestic and
foreign governmental entities, with verification of quality management
systems, label claims, and other industry-developed standards.
The number of audits has grown from five in FY 1999 to 524 in FY
2005. They are presently conducted by 30 full-time auditors. Audit fees
are based on the approved hourly nonresident fee rate established for
egg, poultry, and rabbit grading and certification services provided by
the Agency pursuant to 7 CFR parts 56 and 70. The review revealed that
this rate did not sufficiently cover the cost of providing audit
services, primarily due to the use of higher-salaried employees to
perform audits. Consequently, a separate billing rate for performing
audits has been established.
The nonresident fee rate for audits was developed using the salary
and fringe benefit information for Agricultural Commodity Graders
stationed in the field, the employees typically assigned to perform fee
grading service. Most of these employees are full-time at the GS-8/9
pay grade classifications. However, due to the complexity of planning,
performing, and interpreting the results of assessments, audits are
typically performed by employees at the GS-11/12 pay grade.
Upon considering all audit operational expenses, the Agency
determined that the actual cost of audit services, excluding travel
costs, to be $82.16 per hour. Included in the analysis were employee
salaries and benefits, overhead; total revenue hours available, and
other anticipated costs such as federally mandated pay raises through
FY 2007, rent, communications, utilities, contractual services,
supplies, and equipment. Also, this action adds to the regulations a
definition of auditing services and description of such services as
appropriate.
The Agency considered alternatives to creating a separate user-fee
for audit services, but found that none were sufficient. Maintaining
the same user-fee for audit services that is currently used for
conventional egg, poultry, and rabbit grading and certification
services would not sufficiently cover the cost of providing audit
services. Another option was to terminate all audit services, which
would adversely affect producers, businesses, and consumers who desire
audit services and those entities with already-established programs.
[[Page 11774]]
Employee salaries and benefits account for approximately 85 percent
of the total operating budget. The last general and locality salary
increase for Federal employees became effective on January 1, 2006, and
it materially affected program costs. Projected cost estimates for that
increase were based on a salary increase of 2.2 percent; however, the
increase was actually 3.89 to 5.35 percent, depending on locality. The
average increase in salary over the past five years has been 3.71
percent and was used for the projected salary increase for January
2007. Also, from October 2005 through September 2007, salaries and
fringe benefits of federally-licensed State employees will increase by
about 6.0 percent.
The following table compares current and proposed fees and charges
and shows the new audit fees. To offset projected cost increases, the
hourly resident and nonresident rate would be increased by
approximately 7.0 percent and the fee rate would also be increased by
approximately 7.0 percent. The hourly rate for resident and nonresident
service covers graders' salaries and benefits. The hourly rate for fee
service covers graders' salaries and benefits, plus the cost of travel
and supervision. The minimum monthly administrative volume charge for
resident shell egg, poultry, and rabbit grading would be changed to
$275. The billing rates for auditing services would be $82.16 for
regular hours and $102.84 for weekend and holiday hours.
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Service Current Proposed
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Resident Service (Egg, Poultry, and Rabbit Grading)
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Inauguration of service................. 310 310
Hourly charges:
Regular hours....................... 36.36 39.04
Administrative charges--Poultry grading:
Per pound of poultry................ .00039 .00043
Minimum per month................... 260 275
Maximum per month................... 2,875 3,075
Administrative charges--Shell egg
grading:
Per 30-dozen case of shell eggs..... .051 .053
Minimum per month................... 260 275
Maximum per month................... 2,875 3,075
Administrative charges--Rabbit grading:
Based on 25% of grader's salary, 260 275
minimum per month..................
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Nonresident Service (Egg and Poultry Grading)
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Hourly charges:
Regular hours....................... 36.36 39.04
Administrative charges:
Based on 25% of grader's salary, 260 275
minimum per month..................
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Nonresident Fee and Appeal Service (Egg, Poultry, and Rabbit Grading)
------------------------------------------------------------------------
Hourly charges:
Regular hours....................... 65.00 69.68
Weekend and holiday hours........... 75.12 80.12
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Audit Fee (Verification of Standards and Quality Systems)
------------------------------------------------------------------------
Hourly charges:
Regular hours....................... 65.00 82.16
Weekend and holiday hours........... 75.12 102.84
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Comments
Based on the analysis of costs to provide these services, a
proposed rule to increase the fees for these services was published in
the Federal Register (71 FR 59028) on October 6, 2006. Comments on the
proposed rule were solicited from interested parties until November 6.
One comment was received which was outside of the scope of the
rulemaking.
Executive Order 12866
This action has been determined to be not significant for purposes
of Executive Order 12866 and, therefore, has not been reviewed by the
Office of Management and Budget (OMB).
Regulatory Flexibility Act
Pursuant to the requirements set forth in the Regulatory
Flexibility Act (RFA)(5 U.S.C. 601 et seq.), the AMS has considered the
economic impact of this action on small entities. It is determined that
its provisions would not have a significant economic impact on a
substantial number of small entities.
There are about 378 users of Poultry Programs' grading services.
These official plants can pack eggs, poultry, and rabbits in packages
bearing the USDA grade shield when AMS graders are present to certify
that the products meet the grade requirements as labeled. Many of these
users are small entities under the criteria established by the Small
Business Administration (13 CFR 121.201). These entities are under no
obligation to use grading services as authorized under the Agricultural
Marketing Act of 1946.
The AMS regularly reviews its user fee financed programs to
determine if fees are adequate and if costs are reasonable. A recent
review determined that the existing fee schedule, effective September
25, 2005, will not generate sufficient revenue to cover program costs
while maintaining an adequate reserve balance in FY 2007. Costs in FY
2007 are projected at $36.6 million. Without a fee increase, FY 2007
revenue is projected at $33.8 million and the trust fund reserve
balance would be below minimum required levels. With a fee increase, FY
2007 revenues are projected at $35.1 million. Strategic
[[Page 11775]]
cost-cutting measures will be taken by the program to ensure sufficient
trust fund levels. Cost reductions will include reorganization of field
offices and not filling targeted vacancies.
This action will raise the fees charged to users of grading and
auditing services. Also, this action adds to the regulations a
definition of auditing services and description of such services as
appropriate. The AMS estimates that, overall, this rule will yield an
additional $1.3 million during FY 2007. The hourly rate for resident
and nonresident service will also increase by approximately 7.0 percent
and the fee rate will also increase by approximately 7.0 percent. The
impact of these rate changes in a poultry plant will not be substantial
and will range from about $0.00013 to $0.0011 per pound of poultry
handled. In a shell egg plant, the range will be $0.00022 to $0.00224
per dozen eggs handled.
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 preempt 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.
Paperwork Reduction
The information collection requirements that appear in the sections
to be amended by this action have been previously approved by OMB and
assigned OMB Control Numbers under the Paperwork Reduction Act (44
U.S.C. Chapter 35) as follows: Sec. 56.52(a)(4)--No. 0581-0128; and
Sec. 70.77(a)(4)--No. 0581-0127.
Pursuant to 5 U.S.C. 533, it is found and determined that good
cause exists for not postponing the effective date of this action until
30 days after publication in the Federal Register. The revised fees
need to be implemented on an expedited basis in order to avoid further
financial losses in the grading program. The effective date of the fee
increase, is April 1, 2007.
List of Subjects
7 CFR Part 56
Eggs and egg products, Food grades and standards, Food labeling,
Reporting and recordkeeping requirements.
7 CFR Part 70
Food grades and standards, Food labeling, Poultry and poultry
products, Rabbits and rabbit products, Reporting and recordkeeping
requirements.
0
For reasons set forth in the preamble, Title 7, Code of Federal
Regulations, parts 56 and 70 is amended as follows:
PART 56--VOLUNTARY GRADING OF SHELL EGGS
0
1. The authority citation for part 56 continues to read as follows:
Authority: 7 U.S.C. 1621-1627.
0
2. Section 56.1 is amended by adding ``Auditing Services'' to read as
follows:
Sec. 56.1 Meaning of words of words and terms.
* * * * *
Auditing services means the act of providing independent
verification of written quality assurance and value added standards for
production, processing and distribution of shell eggs. Auditing
services are performed by graders authorized by the Secretary to
perform such audits and the service provided will be in accordance with
the provisions of this part for grading services, as appropriate.
* * * * *
0
3. In Sec. 56.28,the section heading is revised and paragraph (d) is
added to read as follows:
Sec. 56.28 Types of service.
* * * * *
(d) Auditing service. This type of service is performed when an
applicant requests independent verification of written quality
assurance and value added standards for production, processing, and
distribution of shell eggs. Charges or fees are based on time, travel,
and expenses needed to perform the work.
0
4. Section 56.46 is amended by:
0
A. Removing in paragraph (b), ``$65.00'' and adding ``$69.68'' in its
place.
0
B. Removing in paragraph (c), ``$75.12'' and adding ``$80.12'' in its
place.
0
C. Adding new paragraphs (d) and (e) to read as follows:
Sec. 56.46 On a fee basis.
* * * * *
(d) Fees for audit services will be based on the time and expenses
required to perform the audit. The hourly charge shall be $82.16 and
shall include the time actually required to perform the audit, waiting
time, travel time, travel expenses and any clerical costs involved in
issuing an audit report.
(e) Audit services rendered on Saturdays, Sundays, or legal
holidays shall be charged for at the rate of $102.84 per hour.
Information on legal holidays is available from the Supervisor.
0
5. Section 56.52 is amended by removing in paragraph (a)(4), ``$0.051''
and adding ``$0.053'' in its place, removing ``$260'' and adding
``$275'' in its place, and removing ``$2,875'' and adding ``$3,075'' in
its place.
PART 70--VOLUNTARY GRADING OF POULTRY PRODUCTS AND RABBIT PRODUCTS
0
6. The authority citation for part 70 continues to read as follows:
Authority: 7 U.S.C. 1621-1627.
0
7. Section 70.1 is amended by revising the section heading and by
adding ``Auditing Services'' to read as follows:
Sec. 70.1 Definitions.
* * * * *
Auditing services means the act of providing independent
verification of written quality assurance and value added standards for
production, processing and distribution of poultry and rabbits.
Auditing services are performed by graders authorized by the Secretary
to perform such audits and the service provided will be in accordance
with the provisions of this part for grading services, as appropriate.
* * * * *
0
8. In Sec. 70.4 the section heading is revised, and paragraph (c) is
added to read as follows:
Sec. 70.4 Services available.
* * * * *
(c) Auditing service. This type of service is performed when an
applicant requests independent verification of written quality
assurance and value added standards for production, processing, and
distribution of poultry and rabbits. Charges or fees are based on time,
travel, and expenses needed to perform the work.
0
9. Section 70.71 is amended by:
0
A. Removing in paragraph (b) ``$65.00'' and adding ``$69.68'' in its
place.
0
B. Removing in paragraph (c) ``$75.12'' and adding ``$80.12'' in its
place.
0
C. Adding new paragraphs (d) and (e) to read as follows:
Sec. 70.71 On a fee basis.
* * * * *
(d) Fees for audit services will be based on the time and expenses
required to perform the audit. The hourly charge shall be $82.16 and
shall include the time actually required to
[[Page 11776]]
perform the audit, waiting time, travel time, travel expenses and any
clerical costs involved in issuing a certificate.
(e) Audit services rendered on Saturdays, Sundays, or legal
holidays shall be charged for at the rate of $102.84 per hour.
Information on legal holidays is available from the Supervisor.
0
10. Section 70.77 is amended by removing in paragraph (a)(4)
``$0.00039'' and adding ``$0.00043'' in its place, removing ``$260''
and adding ``$275'' in its place, and removing ``$2,875'' and adding
``$3,075'' in its place.
Dated: March 9, 2007.
Lloyd C. Day,
Administrator, Agricultural Marketing Service.
[FR Doc. E7-4657 Filed 3-13-07; 8:45 am]
BILLING CODE 3410-02-P