Fee increase for destination f/v inspections

Big Apple of the Fresh Produce Industry Discussion Group was first to note the final rule in the Federal Register today that raises the fee for destination inspections of fruits and vegetables.

From the Aug. 1 rule:

This rule would revise the regulations governing the inspection and certification for fresh fruits, vegetables and other products by increasing certain fees charged for the inspection of these products at destination markets for the next two fiscal years (FY-2007 and FY-2008) by approximately 15 percent each fiscal year. This rule would increase fees 30 days after publication in FY-2007 and again in March 2008. These revisions are necessary in order to recover, as nearly as practicable, the costs of performing inspection services at destination markets under the Agricultural Marketing Act of 1946 (AMA of 1946). The fees charged to persons required to have inspection on imported commodities in accordance with the Agricultural Marketing Agreement Act of 1937 and for imported peanuts under section 1308 of the Farm Security and Rural Investigation Act of 2002.
DATES: Effective Date: August 31, 2007

TK: Why the increase? AMS FPB reserve funds are dwindling fast. From the rule:

The Fresh Products Branch (FPB) has and will continue to seek out cost saving opportunities and implement appropriate changes to reduce its costs. Such actions can provide alternatives to fee increases. FPB has reduced costs by approximately $2 million. However, even with these efforts, FPB's existing fee schedule will not generate sufficient revenue to cover program costs while maintaining the Agency mandated reserve balance. Revenue projections for FPB's destination market inspection work during FY-2006 are $15.3 million with costs projected at $20.4 million and an end-of- year reserve balance of approximately $12.7 million. However, this reserve balance is due in part, to appropriated funding received in October 2001, for infrastructure, workplace, and technological improvements. FPB's costs of operating the destination market program are expected to increase to approximately $21.6 million during FY-2007 and $22.5 million during FY-2008. Revenues are projected to be $15.3 million for end of the fiscal year. The reserve balance for FY-2007 and FY-2008, will fall below the Agency's mandated four-month reserve level. The reserve balance is projected to be approximately $6.5 million for FY-2007 (3.6 months) and approximately negative $600,000 for FY-2008 (-0.3 months). This fee increase should result in an estimated average of $2.4 million in additional revenues per year (effective in FY-2007, if the fees were implemented by October 1, 2006). However, fees would not be increased until later in FY-2007. Further, as a result, the next fee increase is delayed until March 2008 instead of the start of FY-2008. These increases will not cover all of FPB's costs. FPB will need to continue to increase fees in order to cover the program's operating cost and maintain the required reserve balance. FPB believes that increasing fees incrementally is appropriate at this time. Additional fee increases beyond FY-2008 will be needed to sustain the program in the future. However, we will continue to reduce costs, wherever possible.

TK: The appropriated funding that Congress gave the FPB in October 2001 delayed the onset of fee increases for the industry, but now they come in rapid succession. Another increase of at least 15% is likely to be required for fiscal year 2009, based on my untrained assessment of rapidly dwindling reserves. Reducing costs - such as cutting overtime pay - may make the service less attractive and accessible to the trade. FPB is trying to sound out possible trade demand for GAP/GHP audits, reportedly distributing flyers about their service on wholesale markets. USDA comments welcome here....