Larry R. Meadows, Chief
USDA, AMS, LS, MGC
Stop 0248, Room 2628-S
1400 Independence Avenue, SW
Washington, DC 20250-0248
Dear Mr. Meadows:
In the above-referenced rulemaking, the Agricultural Marketing Service (AMS) proposes revising the hourly fee rates for voluntary federal meat grading and certification services. Although AMS may have a legitimate need and statutory obligation to raise fees to continue to provide service to the affected entities, the agency also has an obligation to abide by other statutory procedural requirements to accomplish its objectives. In the instant case, AMS has not complied with the procedural requirements for certification of a rule under the Regulatory Flexibility Act (RFA). (1)
The Office of the Chief Counsel for Advocacy of the U.S. Small Business Administration was created in 1976 to represent the views and interests of small business in federal policy making activities.(2) The Chief Counsel participates in rulemakings when he deems it necessary to ensure proper representation of small business interests. In addition to these responsibilities, the Chief Counsel monitors compliance with the RFA, and works with federal agencies to ensure that their rulemakings demonstrate an analysis of the impact that their decisions will have on small businesses.
Pursuant to the RFA, AMS certified that the proposed rule will not have a significant economic impact on a substantial number of small entities. However, AMS has not complied with the procedural requirement outlined in section 605(b) of the RFA to accompany its certification with a statement of factual basis. AMS provides information as to why the increase is required, but states nothing about why there will be no significant impact on a substantial number of small entities. Moreover, AMS provides no information as to the total or incremental costs to the industry, or in particular, to small entities. There is no industry data detailing the number of entities likely to be affected.
The Office of Advocacy is not saying that AMS cannot raise its fees, but the agency must adhere to certain minimum requirements. The purpose of these requirements is not to overburden agencies, but to provide transparency to the rulemaking process and to ensure that small entities are not being disproportionately impacted by federal regulations. The RFA is intended to provide flexibility to regulations-to accomplish the policy objectives of the agency while minimizing the impact on small entities.
Therefore, at a minimum, AMS should provide a statement of factual basis (not a boilerplate statement) with reasons supporting its certification in the final rule. In the future, as a matter of policy, AMS might consider ways to minimize the impact of fee increases. Is it possible, for instance, to charge fees based on the number of pounds inspected versus the number of hours worked? Currently, there is minimum 8-hour requirement for all establishments. The volume-based approach may reduce the burden on small entities because they typically would have a lower volume of production than large entities. Is it possible that some of the smaller entities are paying for unused services? Moreover, since costs are fairly fixed under the current system, the smaller entities have fewer resources to absorb costs than large entities do.
If the rule is properly certified, then there is no requirement under the RFA that the agency analyze alternatives to reduce burden. However, as a practical matter, it makes sense to do so and avoid underestimating the impact. In addition, many agencies underestimate impact. To avoid potential legal challenges to certifications, Advocacy urges agencies to err on the side of caution and analyze alternatives to demonstrate that the impact on small entities is minimized.
Thank you for your consideration. Please do not hesitate to contact me or Ms. Shawne Carter McGibbon of my staff if you have questions concerning this matter, 202-205-6933.
Sincerely,
Jere W. Glover
Chief Counsel for Advocacy
Shawne Carter McGibbon
Asst. Chief Counsel for Advocacy
ENDNOTES
1. Regulatory Flexibility Act, 5 U.S.C. § 601, as amended by the Small Business Regulatory Enforcement Fairness Act of 1996, Pub. L. No. 104-121, 110 Stat. 866.
2. Pub. L. No. 94-305, 90 Stat. 668 (codified as amended at 15 U.S.C. §§ 634a-g, 637).