Fee increases making up for lost ground - The Packer

Fee increases making up for lost ground

01/25/2008 12:00:00 AM
Tom Karst

(Jan. 25) The reason behind four double-digit increases in U.S. Department of Agriculture destination inspection fees in five years is tied to a long period when the industry experienced no price bumps.

While 15% fee increases were enacted in 2004, 2006, 2007 and another will take effect in March, there were no fee hikes from 1998 to 2004. A proposed fee increase of 14% was dropped soon after the Hunts Point bribery scandal of November 1999.

In response to the scandal, Congress appropriated $29 million in 2001 to cover the cost of the inspection program and provide money to invest in a new training center, among other purposes.

That infusion of cash prevented fee increases for several years, because federal rules don’t allow user fee increases for programs with large surpluses.

That reserve fund — absorbing shortfalls in operating revenue that averaged close to $4 million in fiscal years 2006 and 2007 — has been dwindling fast.

At the end of fiscal year 2007, budget documents from the USDA Fresh Products Branch showed a remaining reserve of $10.6 million, or about 6.3 months of operating reserves.

In general, federal agencies are expected to have at least four months of reserves on hand at any given time.

Any single fee increase typically causes a slight drop in demand for the federal inspection service but that effect is usually short-lived, said Leanne Skelton, chief of the standardization section of the Fresh Products Branch of the USDA’s Agricultural Marketing Service.

USDA officials say the number of fresh fruit and vegetable destination inspection certificates issued declined from 125,003 in fiscal year 2006 to 119,430 in fiscal year 2007. Other statistics provided by the USDA reveal the number of fruit and vegetable destination market inspections dropped from more than 212,000 in 2003 to about 186,000 in 2005.

However, the volume of fruits and vegetables inspected by the agency increased from 24.2 million hundredweight in fiscal year 2006 to 28.8 million hundredweight in fiscal year 2007.

Beside fee increases, industry consolidation and changes in business relationships have influenced the demand for destination inspections, said Robert Keeney, deputy administrator for the AMS’ fruit and vegetable programs.

“More buyers and sellers try to work things out without calling for an inspection,” he said.

Keeney also said Perishable Agricultural Commodities Act complaints have trended lower in recent years, perhaps for some of the same reasons that inspections have declined.

Given the budget shortfall, Keeney and Skelton said the agency is always looking at ways to save money.

Keeney said federally mandated increases in salary levels, plus fixed overhead costs, restrict the ability to find big savings.

“We want to make sure we have enough inspectors to do the job,” he said.

While the USDA does not have an ongoing survey to gauge customer satisfaction with the service, he said the agency was keen to respond to the needs of the industry.

Keeney said the agency has formed a business development unit to meet with receivers, foodservice operations and growers shippers to determine what types of services the industry requires from the USDA.

So far, Keeney said the need for food safety inspection services seem to be the top point of discussion among industry leaders.

“That is the biggest concern by far at the moment, ” he said.



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