Fees for Official Inspection and Weighing Services Under the United Stated Grain Standards Act

<RULE> DEPARTMENT OF AGRICULTURE <SUBAGY>Agricultural Marketing Service</SUBAGY> <CFR>7 CFR Part 800</CFR> <DEPDOC>[Doc. No. AMS-FGIS-24-0010]</DEPDOC> <RIN>RIN 0581-AE28</RIN> <SUBJECT>Fees for Official Inspection and Weighing Services Under the United Stated Grain Standards Act</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Agricultural Marketing Service, Department of Agriculture (USDA). <HD SOURCE="HED">ACTION:</HD> Interim rule; request for comments. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The Agricultural Marketing Service (AMS), Federal Grain Inspection Service (FGIS or the Service) is revising the fee schedule for official inspection and weighing services performed under the United States Grain Standards Act (USGSA), as amended. Specifically, this interim rule announces the new rates for the remainder of fiscal year 2024, and until such time as new fees are set by a final rule. AMS intends to follow this rulemaking with a notice of proposed rulemaking establishing a new regulatory fee formula. The necessary and immediate changes to the current fees will prevent FGIS cessation of services due to insufficient required funding and, most urgently, avoid significant negative impacts to the $54 billion grain export industry. This interim rule will allow FGIS to fully recover the actual costs of providing services and re-establish a 3- to 6-month operating reserve, consistent with the USGSA, and, in doing so, ensure uninterrupted essential grain inspection services that enable U.S. companies to continue exporting and marketing U.S. grain around the world. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> This interim rule is effective July 8, 2024. Comments are due July 8, 2024. </EFFDATE> <HD SOURCE="HED">ADDRESSES:</HD> Interested persons are invited to submit written comments concerning this interim rule. Comments may be submitted through the Federal eRulemaking Portal at <E T="03">https://www.regulations.gov.</E> Follow the online instructions for submitting comments. Please reference Doc. No. AMS-FGIS-24-0010. Comments may also be submitted by email to Anthony Goodeman at <E T="03">Anthony.T.Goodeman@usda.gov.</E> All comments submitted in response to this rule will be included in the record and will be made available to the public on the internet at the address provided above. Please be advised that the identity of the individuals or entities submitting the comments will be made public. Prospective customers can find the fee schedules posted on AMS's public website: <E T="03">https://www.ams.usda.gov/about-ams/fgis-program-directives.</E> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Denise Ruggles, Executive Program Analyst, USDA, AMS, FGIS, Telephone: 816-702-3897, Email: <E T="03">Denise.M.Ruggles@usda.gov;</E> or Anthony Goodeman, Senior Policy Advisor, USDA, AMS, FGIS, Telephone: 202-720-2091, Email: <E T="03">Anthony.T.Goodeman@usda.gov.</E> </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> This rule establishes revised 2024 fees for grain inspection and weighing services provided by the Agricultural Marketing Service's (AMS) Federal Grain Inspection Service (FGIS or the Service). The new fees account for the actual cost of FGIS providing official services. The new fees were calculated using formulas modeled after those in other AMS user-fee grading programs. A forthcoming notice of proposed rulemaking to be published separately will amend FGIS's user fee regulations to incorporate the formulas. <HD SOURCE="HD1">Background</HD> The USGSA authorizes and requires the Secretary 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 a 4.5-month operating reserve would comply with the statutorily required operating reserve of 3 to 6 months. 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. In accordance with the current regulations, annual fees cannot increase or decrease by greater than 5 percent. The intention of this regulatory cap had been to limit the magnitude of an annual fee adjustment. The current regulations provide for FGIS review and revision of fees annually (7 CFR 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 a maintain a sufficient operating reserve. Because of the limitations on the magnitude of the annual increase, 2023 fees were lower than those charged in 2016 ( <E T="03">e.g.,</E> 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 export tonnage over the previous 5 years. <GPOTABLE COLS="5" OPTS="L2,i1" CDEF="s50,13,15,15,13"> <TTITLE>Table 1—FGIS Grain Inspection and Weighing Net Income and Operating Reserve for the Last 5 Fiscal Years</TTITLE> <CHED H="1">Fiscal year</CHED> <ENT>$15.5</ENT> <ENT>5</ENT> <ENT>108</ENT> </ROW> <ROW> <ENT I="01">2020</ENT> <ENT>(5.5)</ENT> <ENT>2.5</ENT> <ENT>137</ENT> </ROW> <ROW> <ENT I="01">2022</ENT> <ENT>(3.5)</ENT> <ENT>(0.5)</ENT> <ENT>(0.3)</ENT> <ENT>97</ENT> </ROW> <TNOTE> <SU>1</SU>  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. </TNOTE> </GPOTABLE> Since 2021, the expected revenue from user fees has been lower than the Service anticipated. Since 2021, the export volume (on which FGIS assesses tonnage fees) has declined year-over-year: by 10 percent in 2022, 22 percent in 2023, and 10 percent year-to-date in 2024. Reduced export volume has also impacted FGIS' 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 year-over-year 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 to feed 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. <HD SOURCE="HD1">2023 Periodic Review</HD> 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 perfor ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 62k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━