Formulas for Calculating Hourly and Unit Fees for FGIS Services

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.