The Federal Grain Inspection Service (FGIS) on June 6 published an interim rule to increase the hourly and unit fees for official inspection services that are performed under the U.S. Grain Standards Act (USGSA). The new fees will be in effect on July 8, 2024.
Under the rule, the hourly contract rate will increase from $41.20 to $65, and the non-contract rate will increase from $73 to $93.30. The contract rate for weekends and overtime will increase from $49.10 to $81.30. The non-contract rate will increase from $73 to 116.60.
The rates are based on the total direct pay of FGIS personnel performing grading, weighing, laboratory services, and equipment testing divided by the total direct hours for the previous year, which is then multiplied by the next year’s percentage of cost-of-living increase, plus the benefits rate, plus the operating rate, plus the allowance for bad debt rate. If applicable, travel expenses will be added to the cost of providing the service through the operating rate or the travel will be billed separately.
Without adjusting hourly and unit-based fees, FGIS anticipates a deficit in its fiscal year 2024 operating reserves of nearly $9 million. With such a shortfall, FGIS will not have sufficient revenue to meet obligations and will cease operations. According to FGIS, the following factors that have contributed to the current financial shortfall:
- eight years of low fees (i.e., 2024 fees (before April 1) at $39.20/hour are lower than 2016 fees at $40.20/hour);
- regulatory provisions that limit annual fee increases and do not fully account for the actual cost of services provided;
- inflation;
- cost-of-living adjustments for the federal workforce;
- increased service delivery costs driven by unprecedented weather events;
- declining global demand for grain; and
- an increased volume of U.S. grain being distributed to domestic processing plants (which excludes them from mandatory inspection and weighing under the USGSA).
A 30-day comment period is provided on the interim rule until July 8.
FGIS also plans to publish a proposed rule for public comment later this summer that will establish a new fee formula for calculating hourly and unit fees.
April 1 Fee Adjustment: The fee revision published this week does not include an additional tonnage fee adjustment for 2024 that was originally published on March 7 and went into effect on April 1.
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). FGIS is required to annually review its fees for service, including national and local tonnage, and supervision tonnage fees. The agency calculates its tonnage fees, which, by regulation, consist of the national tonnage and local tonnage fees. FGIS also reviews the amount of funds available in its operating reserve at the end of each fiscal year to ensure that it has 4.5 months of operating expenses, which is also required by regulation. However, the current regulatory process has prevented FGIS from increasing fees to the degree that the grain industry paid less for service in 2023 than it did in 2016.
Effective April 1, FGIS increased inspection and weighing service fees by five percent since FGIS’ operating reserve was below 4.5 months of operating expenses.