[Federal Register: October 17, 2006 (Volume 71, Number 200)]
[Rules and Regulations]
[Page 60805-60807]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17oc06-1]
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Rules and Regulations
Federal Register
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[[Page 60805]]
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 58
[Docket Number DA-05-04]
RIN 0581-AC55
Increase in Fees for Federal Dairy Grading and Inspection
Services
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Final rule.
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SUMMARY: The Agricultural Marketing Service (AMS) will increase, by
approximately 10 percent, the hourly fees charged for Federal dairy
grading and inspection services. Dairy grading and inspection services
are voluntary and are financed through user-fees assessed to
participants in the program. These revisions are necessary in order to
recover, as nearly as practicable, the increase in salaries of Federal
employees and increases in Agency costs, and to ensure that the Dairy
Grading Branch operates on a financially self-supporting basis.
DATES: Effective October 18, 2006.
FOR FURTHER INFORMATION CONTACT: Dana H. Coale, Deputy Administrator,
Dairy Programs, Agricultural Marketing Service, U.S. Department of
Agriculture, Stop 0225, room 2968-South, 1400 Independence Avenue, SW.,
Washington, DC 20250-0225, or call (202) 720-4392.
SUPPLEMENTARY INFORMATION:
Executive Orders 12866 and 12988
This rule 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).
This rule has been reviewed under Executive Order 12988, Civil
Justice Reform. This action is not retroactive. 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.
Regulatory Flexibility Act and Paperwork Reduction Act
Pursuant to the requirement set forth in the Regulatory Flexibility
Act, AMS has considered the economic impact of this action on small
entities. It has been determined that its provisions would not have a
significant economic effect on a substantial number of small entities.
For the purpose of the Regulatory Flexibility Act, a dairy products
manufacturer is a ``small business'' if it has fewer than 500
employees. If a plant is part of a larger company operating multiple
plants that collectively exceed the 500 employee limit, the plant will
be considered a large business even if the local plant has fewer than
500 employees.
Under the Agricultural Marketing Act of 1946, the Dairy Grading
Branch, AMS, provides voluntary Federal inspection and dairy product
grading services to about 350 plants. About 210 of these users are
small businesses under the criteria established by the Small Business
Administration (13 CFR 121.201). Manufacturing plants participating in
the voluntary plant inspection program have their facility inspected
against established USDA ``General Specifications for Dairy Plants
Approved for USDA Inspection and Grading Service'' construction and
sanitation requirements. Dairy products manufactured in facilities
complying with the USDA inspection requirements are eligible to have
their output graded against official quality standards and
specifications established by AMS and certain contract provisions
between buyer and seller. Products tested and graded by the Dairy
Grading Branch have certificates issued describing the product's
quality and condition.
AMS continually reviews its cost structure to assure it is
operating efficiently while maintaining the resources necessary to meet
industry's demand for services. Periodically, fees must be adjusted to
ensure that the program remains financially self-supporting. To reduce
costs, the Dairy Grading Branch has continued to automate its business
practices. Progress to date has been significant and has resulted in
savings equal to two staff years to the program. Further enhancements
in automated business practices will continue to improve the efficiency
and timeliness of providing inspection and grading services and
information to users of these services.
Employee salaries and benefits now account for nearly 73 percent of
the operating costs of the Dairy Grading Branch. Grading fees were
adjusted last in 2004 (69 FR 8797). Salary increases and locality
adjustments, effective January 2005 and January 2006, have resulted in
an increase in employee cost of 6.1 percent. As a result, annual salary
and benefit costs to the program for Fiscal Year (FY) 2006 are
approximately $240,000 more than for the same number of employees in FY
2004. Inflation raised non-salary costs approximately 6.8 percent for
the two-year period ending December 2005. It is expected that non-
salary operating expenses will continue to increase at a rate of 3.0
percent per year. Current revenue projections using Dairy Grading
Branch's current fee schedule will not provide income sufficient to
cover these escalating program operation costs and maintain reserves (4
months of costs) according to AMS policy (AMS Directive 408.1).
Since projected revenues will not cover program costs while
maintaining an adequate reserve, the Dairy Grading Branch will be put
in an unstable financial position that will adversely affect the
ability to provide dairy inspection and grading services. Without a fee
increase, total revenue projections for FY 2006 are $4.980 million.
Total costs for the same period of time are projected to be $5.778
million. The shortfall will reduce the trust fund balance to $1.578
million or 3.3 months of operating reserve at the end of FY 2006 which
is below Agency policy.
AMS estimates these fee increases will provide the Dairy Grading
Branch an additional $504,000 annually to recover program costs and to
provide for continued automation of business practices.
This rule will raise the fees charged to businesses for voluntary
plant inspections, grading services for dairy and related products, and
the evaluation of food processing equipment. However,
[[Page 60806]]
the impact on all businesses, including small entities is very similar.
Even though fees will be increased approximately 9.7% for non-resident
services and 10.5% for continuous resident services, these fee
increases should not significantly affect these entities. Adjusted for
inflation, the new fee schedule is actually less than in 1998. These
businesses are under no obligation to use these voluntary user-fee
based services and any decision on their part to discontinue the use of
the services would not prevent them from marketing their products.
A review of reporting requirements was completed under the
Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35). It was
determined that this rule would have no impact on reporting,
recordkeeping, or other compliance requirements for entities currently
using voluntary Federal dairy inspection and grading services because
they would remain identical to the current requirements.
This action does not require additional information collection that
requires clearance by OMB. The primary sources of data used to complete
the forms are routinely used in most business transactions. Forms
require only a minimal amount of information which can be supplied
without data processing equipment or a trained statistical staff. Thus,
the information collection and reporting burden is relatively small.
Requiring the same information from all participating dairy plants does
not significantly disadvantage any plant that is smaller than the
industry average.
Action
The Secretary of Agriculture is authorized by the Agricultural
Marketing Act of 1946 (AMA), as amended (7 U.S.C. 1621, et seq.), to
provide voluntary Federal dairy inspection and grading services to
facilitate the orderly marketing of dairy products and to enable
consumers to obtain the quality of dairy products they desire. The AMA
also provides for the collection of reasonable fees from users of the
Federal dairy inspection and grading services to cover the cost of
providing these services. The hourly fees are established by
distributing the program's projected operating costs over the estimated
service-revenue hours provided to users. AMS continually reviews its
cost structure to assure it is operating efficiently while maintaining
the resources necessary to meet industry's demand for services.
Periodically, fees must be adjusted to ensure that the program remains
financially self-supporting.
To reduce costs, the Dairy Grading Branch has continued to automate
its business practices. Progress to date has been significant and has
resulted in savings equal to two staff years to the program. Further
enhancements in automated business practices will continue to improve
the efficiency and timeliness of providing inspection and grading
services and information to users of these services.
Employee salaries and benefits now account for nearly 73 percent of
the operating costs of the Dairy Grading Branch. Grading fees were last
adjusted in 2004 (69 FR 8797). Salary increases and locality
adjustments, effective January 2005 and January 2006, have resulted in
an increase in employee cost of 6.1 percent. As a result, annual salary
and benefit costs to the program for FY 2006 are approximately $240,000
more than for the same number of employees in FY 2004. Inflation raised
non-salary costs approximately 6.8 percent for the two-year period
ending December 2005. It is expected that non-salary operating expenses
will continue to increase at an annual rate of 3.0 percent and that
salary and benefits will increase by 2.1 percent in January 2007.
Current revenue projections using Dairy Grading Branch's current fee
schedule will not provide income sufficient to cover these escalating
program operation costs and maintain reserves (4 months of costs)
according to AMS policy (AMS Directive 408.1).
Since projected revenues will not cover program costs while
maintaining an adequate reserve, the Dairy Grading Branch will be put
in an unstable financial position that will adversely affect the
ability to provide dairy inspection and grading services. Without a fee
increase, total revenue projections for FY 2006 are $4.980 million.
Total costs for the same period of time are projected to be $5.778
million. The shortfall, if allowed to continue, would have reduced the
trust fund balance to $1.578 million or 3.3 months of operating reserve
at the end of FY 2006 which is below Agency policy.
In view of the above considerations, AMS proposed to increase the
hourly fees associated with Federal dairy grading and inspection
services. Currently the fees are $57.00 per hour for continuous
resident services and $62.00 per hour for non-resident services. The
proposed increases result in fees of $63.00 per hour for continuous
resident services and $68.00 per hour for non-resident services between
the hours of 6 a.m. and 6 p.m. The proposed fees represent increases of
$6.00 per hour (10.5 percent) for continuous resident and $6.00 per
hour (9.7 percent) for non-resident services. The fee for non-resident
services between the hours of 6 p.m. and 6 a.m. would be $74.80 per
hour. For services performed in excess of 8 hours per day and for
services performed on Saturday, Sunday, and legal holidays, 1\1/2\
times the base fees would apply and result in increases to $94.50 per
hour for resident grading and to $102.00 per hour for non-resident
grading services.
AMS estimates these fee increases will provide the Dairy Grading
Branch an additional $504,000 annually to recover program costs
including providing for continued automation of business practices.
A notice of proposed rulemaking was published in the Federal
Register on April 20, 2006 (70 FR 20351). Dairy Programs received two
comments during this period.
The first comment received was a public submission in opposition to
the fee increase. The commenter expressed concern that these fee
increases would increase dairy product prices, and suggested that other
methods of increasing revenue, such as increased use of appropriated
funds, be explored. Dairy inspection and grading services are
voluntary, and while they are used extensively by manufacturers of
certain dairy products, they are not used by all segments of the dairy
industry. This modest increase in fees is not likely to generate
substantial price increases. Further, dairy inspection and grading
programs are supported entirely by these user fees, not through
appropriated funds. This fee increase is necessary for the program to
remain self-sufficient and maintain reasonable operating reserves.
The second comment was received from the American Butter Institute
(ABI). ABI expressed concern that the rate of increase in grading and
inspection fees exceeds the rate of inflation since 2004, and that when
combined with the 2004 fee increase, constitutes fees that are 25
percent higher than they were 30 months ago. ABI also encourages that
further automation of business practices be explored to offset a larger
portion of the projected revenue shortfall, rather than a large
increase in fees. By our calculation, this increase will result in
grading fees that are about 21 (resident grader) to 24 percent (non-
resident grader) higher than that in March 2004. Prior to the April
2004 increase, grading fees had remained unchanged for 75 months. Thus
on average, grading fees will have increased only about 2.4 to 2.7
percent annually since 1998, when this increase becomes effective. This
longer
[[Page 60807]]
term rate of increase is lower than average rate of inflation since
1998. Adjusted for inflation, grading fees after this increase will be
lower in real dollars than they were in 1998. Dairy Programs continues
to evaluate the business practices of its grading and inspection
programs, and will implement, as they are identified, measures that
should result in increased program efficiency.
Each of the comments received was carefully considered.
Nevertheless, Dairy Programs' current grading and inspection fees are
not adequate, and this increase in fees is necessary. Dairy Programs
has and continues to seek cost savings by reducing overhead and travel
costs, and increasing program efficiency through enhanced automation of
business practices.
Pursuant to the Administrative Procedures Act (5 U.S.C. 553), good
cause is found to make this effective less than 30 days after
publication in the Federal Register. This rule will take effect the
next day following publication to minimize financial losses for dairy
grading and inspection services. Revenues are not sufficient to cover
program costs or allow the Dairy Grading Branch to maintain adequate
operating reserves. The Branch is currently operating with a monthly
revenue loss of $42,000, which will adversely affect its ability to
provide inspection and grading services.
List of Subjects in 7 CFR Part 58
Dairy products, Food grades and standards, Food labeling, Reporting
and recordkeeping requirements.
0
For the reason set forth in the preamble, 7 CFR part 58 is amended as
follows:
PART 58--GRADING AND INSPECTION, GENERAL SPECIFICATIONS FOR
APPROVED PLANTS AND STANDARDS FOR GRADES OF DAIRY PRODUCTS
0
1. The authority citation for 7 CFR part 58 continues to read as
follows:
Authority: 7 U.S.C. 1621-1627.
Subpart A--[Amended]
Sec. 58.43 [Amended]
0
2. In Sec. 58.43, ``$62.00'' is removed and ``$68.00'' is added in its
place, and ``$68.20'' is removed and ``$74.80'' is added in its place.
Sec. 58.45 [Amended]
0
3. In Sec. 58.45, ``$57.00'' is removed and ``$63.00'' is added in its
place.
Dated: October 10, 2006.
Lloyd C. Day,
Administrator, Agricultural Marketing Service.
[FR Doc. E6-17191 Filed 10-16-06; 8:45 am]
BILLING CODE 3410-02-P