Meat and poultry inspection: Inspection services; fee increase,

[Federal Register: March 4, 1999 (Volume 64, Number 42)]

[Proposed Rules]

[Page 10402-10405]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr04mr99-24]

DEPARTMENT OF AGRICULTURE

Food Safety and Inspection Service

9 CFR Part 391

[Docket No. 98-052P]

Fee Increase for Inspection Services

AGENCY: Food Safety and Inspection Service, USDA.

ACTION: Proposed rule.

SUMMARY: The Food Safety and Inspection Service (FSIS) is proposing to increase the fees that FSIS charges meat and poultry establishments, plants, importers, and exporters for providing voluntary inspection, identification, and certification services; laboratory services; and overtime and holiday services. These fee increases are based on the Agency's analysis of its projected costs for Fiscal Year 1999, which identified increased FSIS expenses as a result of national and locality pay raises for Federal employees, and increased travel and overhead costs. The fee increases are being proposed in order to generate the additional revenue that FSIS is required to recover as a result of its projected increased costs.

FSIS also is proposing to reduce the fee it charges for the Accredited Laboratory Program. The Agency's analysis of projected costs for calendar year 1999 has identified decreased operational costs for this program. The Agency is proposing to reduce its fee so that only the actual costs of this program are recovered from the industry.

DATES: Written comments must be received by April 5, 1999.

ADDRESSES: Submit an original and two copies of written comments concerning this proposed rule to: FSIS Docket Clerk, Docket #98-052P, Room 102-Cotton Annex Building, FSIS, U.S. Department of Agriculture, Washington, DC 20250-3700. Persons that want to present oral comments should, as permitted under the Poultry Products Inspection Act, contact Michael B. Zimmerer at (202) 720-3367. FSIS' cost analysis and the comments that it receives will be available for public inspection in the FSIS Docket Room from 8:30 a.m. to 1 p.m. and 2 p.m. to 4:30 p.m., Monday through Friday.

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FOR FURTHER INFORMATION CONTACT: Mr. Michael B. Zimmerer, Director, Financial Management Division, Office of Management, Food Safety and Inspection Service, U.S. Department of Agriculture, Washington, DC 20250-3700, (202) 720-3367.

SUPPLEMENTARY INFORMATION:

Background

The Federal Meat Inspection Act (FMIA) and the Poultry Products Inspection Act (PPIA) provide for mandatory Federal inspection of the slaughter of certain livestock and poultry and of the processing of certain livestock and poultry products. The cost of this inspection (excluding such inspection performed on holidays or on an overtime basis) is borne by FSIS.

In addition to mandatory inspection, FSIS provides a range of voluntary inspection, certification, and identification services. Under the Agricultural Marketing Act of 1946, as amended (7 U.S.C. 1621 et seq.), FSIS provides these 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. FSIS is required to recover the costs of voluntary inspection, certification, and identification services.

FSIS also provides certain voluntary laboratory services which establishments or others may request FSIS to perform. The cost of these services, which are provided under the Agricultural Marketing Act of 1946, as amended (7 U.S.C. 1621 et seq.), must be recovered by FSIS. Laboratory services are provided for four types of analytic testing. These are: microbiological testing, residue chemistry tests, food composition tests, and some pathology testing.

Each year, FSIS reviews the fees that it charges for providing voluntary inspection, identification, and certification services; laboratory services; and overtime and holiday services and performs a cost analysis to determine whether the fees it has established are adequate to recover the costs that FSIS will incur in providing the services. In its analysis of projected costs for Fiscal Year (FY) 1999, FSIS has identified increases in the costs that it will incur in providing voluntary inspection, identification, and certification services; laboratory services; and overtime and holiday services. These increased costs are attributable to the average national and locality pay raise for Federal employees of 3.1% effective January 1999 and projected increased travel and overhead costs of 1.9% for FY 1999 resulting from inflation.

Accordingly, FSIS is proposing to amend 9 CFR section 391.2 to increase the base time rate for providing voluntary inspection, identification, and certification services from $32.88 per hour, per program employee, to $37.00 per hour, per program employee. FSIS is also proposing to amend section 391.3 to increase the rate for providing overtime and holiday services from $33.76 per hour, per program employee, to $36.84 per hour, per program employee. Additionally, FSIS is proposing to amend section 391.4 to increase the rate for laboratory services from $48.56 per hour, per program employee, to $50.88 per hour, per program employee. These rates and the proposed increase are reported in Table 1.

Table 1.--Inspection Service Type and Current and Proposed Rates for FY 1999

Current Proposed FY Proposed Service type

rate $/ 1999 rate increase $/ hour

$/hour

hour

Base time........................

32.88

37.00

4.12 Overtime & Holidays..............

33.76

36.84

3.08 Laboratory.......................

48.56

50.88

2.32

Source: USDA/FSIS/Office of Management/Financial Management Division.

In its analysis of projected costs for FY 1999, FSIS has identified a decrease in the cost of operating the Accredited Laboratory Program (ALP). This projected decreased cost of $1,000 per accreditation results from a number of factors including a projected decrease in accreditations sought and maintained, as well as more efficient operating practices by FSIS. Therefore, FSIS is proposing to amend section 391.5 of the regulations to reduce the fee charged for original accreditations and renewals from $2,500 per accreditation, to $1,500 per accreditation per year. Laboratory accreditation fees that cover the costs of the ALP are mandated by section 1327 (7 U.S.C. 138f) of the Food, Agriculture, Conservation, and Trade Act of 1990 (Public Law 101-624), as amended (the 1990 Farm Bill).

Executive Order 12866 and Regulatory Flexibility Act

This proposed rule has been determined to be not significant and was not reviewed by the Office of Management and Budget (OMB) under Executive Order 12866. The proposed fee increases for voluntary inspection, identification, and certification services; laboratory services; and overtime and holiday inspection services are primarily the result of increases in the salaries of Federal employees established by Congress under the Federal Employees Pay Comparability Act of 1990. The proposed increase also includes projected increased travel costs and overhead costs. This Section analyzes the economic impact of these increased costs on the meat and poultry industry.

Economic Impact

The Administrator, Food Safety and Inspection Services, has determined that this action will not have a significant economic impact on a substantial number of small entities as defined by the Regulatory Flexibility Act (5 U.S.C. 601). The fee increases provided for in this document will result in only a minimal increase in the costs currently borne by those entities that choose to voluntarily utilize certain inspection services. These services are generally used by large establishments. Small establishments generally do not seek these services. This is most likely the result of a number of factors, including the cost of services. Nevertheless, FSIS is required to recover the full cost of the services provided by it.

Table 2 shows the economic impact of the proposed fee increases, other than those for laboratory services. This impact has been estimated by

[[Page 10404]]

multiplying the expected number of hours of base time or overtime service to be provided by their respective incremental rates estimated in Table 1. FSIS does not have the data needed to estimate the impact of increases in the laboratory service rates because the number of hours of this service that will be provided are difficult to predict. Table 2 shows that total reimbursements to FSIS are estimated to be $7,676,936 in FY 1999.

Table 2.--Estimated Economic Impact of Proposed Increase in Rates

Incremental Service type

rate $/ Estimated Reimbursement hour hours used or impact ($)

Overtime & Holidays................................................

$3.08 2,355,000 $7,253,400 Base...............................................................

4.12

102,800

423,536

Total Reimbursement................................................ ........... .............. 7,676,936

The economic impact of the increase in the fees on small businesses in the meat and poultry industries would depend on the structure of these industries. Data from the U.S. Bureau of the Census, Survey of Industries, 1994, for example, indicate that the beef industry has more small firms and establishments than the poultry industry. Using the U.S. Small Business Administration's definition of a small business (fewer than 500 employees), 96 percent of the 1,226 firms comprising the beef industry are small. Similarly, 90 percent of the individual meat establishments or plants in this industry are small. In 1994, these small businesses accounted for 19 percent of total employment in this industry. Their share of payroll was 18 percent of the total payroll of $2.777 billion, and their revenues were 16 percent of the total revenues of $55.814 billion.

FSIS believes that small establishments would not be affected adversely by the proposed fee increases for four reasons. First, the use of the services is voluntary, and, therefore, establishments do not have to utilize these services. Second, establishments that seek FSIS' services are likely to have determined that the costs of voluntary inspection services would be less than the benefits they would get from the additional revenues they would realize as a result of services provided. Third, the industry is likely to pass through the increased costs to consumers without significantly losing market share because price elasticity of demand for meat and poultry is inelastic. For example, Huang (1993) analyzed demand for meats and other animal proteins consisting of products, including beef and poultry and concluded that the price elasticity was (-0.36), i.e., an increase in price of beef or poultry products by one percent would be associated with a decrease in its demand by only 0.36 percent. (Huang, Kao S., A Complete System of U.S. Demand for Food. USDA/ERS Technical Bulletin No. 1821, 1993, p. 24). In short, consumers are unlikely to reduce their demand for meat and poultry significantly when prices are increased for these products by only a few pennies per pound. Finally, the supply of meat and poultry products is likely to be very price elastic because of the existence of hundreds of firms in these industries. Any single producer cannot raise the price of its products above those of the rest of the industry without losing its market share significantly.

The decrease in the accredited laboratory program fee reflects a projected decrease in operational costs which may be passed through to users of the laboratory services. To the extent that these fees are reduced, their economic impact would be reduced.

Executive Order 12988

This proposed rule has been reviewed under Executive Order 12988, Civil Justice Reform. This proposed rule is not intended to have retroactive effect. States and local jurisdictions are preempted by the Federal Meat Inspection Act (FMIA) and the Poultry Products Inspection Act (PPIA) from imposing any marking, labeling, packaging, or ingredient requirements on federally inspected livestock and poultry products that are in addition to, or different than, those imposed under the FMIA and PPIA. States and local jurisdictions may, however, exercise concurrent jurisdiction over livestock and poultry products that are outside official establishments for the purpose of preventing the distribution of livestock and poultry products that are misbranded or adulterated under the FMIA and PPIA, or, in the case of imported articles, that are not at such an establishment, after their entry into the United States.

State or local laws, regulations, or policies are preempted by the Agricultural Marketing Act of 1946, as amended, if they present irreconcilable conflict with the provisions of this rule proposed under the Agricultural Marketing Act of 1946, as amended.

If this proposed rule is adopted, administrative proceedings will not be required before parties may file suit in court challenging this rule. However, the administrative procedures specified in 9 CFR 306.5 and 381.35 of the FMIA and PPIA regulations, respectively, must be exhausted prior to 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 the FMIA or PPIA.

List of Subjects in 9 CFR Part 391

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

For the reasons set out in the preamble, 9 CFR Part 391 is proposed to be amended as set forth below:

PART 391--FEES AND CHARGES FOR INSPECTION SERVICES 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, 391.4 and 391.5 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 shall be $37.00 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 shall be $36.84 per hour, per program employee.

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   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 shall be $50.88 per hour, per program employee.

   Sec. 391.5 Laboratory accreditation fees.

   (a) The annual fee for the initial accreditation and maintenance of accreditation provided pursuant to Secs. 318.21 and 381.153 shall be $1,500 per accreditation. * * * * *

   Done at Washington, DC, on February 25, 1999. Thomas J. Billy, Administrator.

   [FR Doc. 99-5318Filed3-3-99; 8:45 am]

   BILLING CODE 3410-DM-P