Exceptions to Geographic Boundaries, 27685-27692 [2023-08957]

Agencies

• Agricultural Marketing Service
• DEPARTMENT OF AGRICULTURE

[Federal Register Volume 88, Number 85 (Wednesday, May 3, 2023)]
[Rules and Regulations]
[Pages 27685-27692]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-08957]



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Rules and Regulations
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains regulatory documents 
having general applicability and legal effect, most of which are keyed 
to and codified in the Code of Federal Regulations, which is published 
under 50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by the Superintendent of Documents. 

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Federal Register / Vol. 88, No. 85 / Wednesday, May 3, 2023 / Rules 
and Regulations

[[Page 27685]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 800

[Doc. No. AMS-FGIS-19-0062]
RIN 0581-AD90


Exceptions to Geographic Boundaries

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This final rule sets forth a process by which applicants for 
official grain inspection services (applicants) may request a service 
exception, allowing an official agency (OA) to cross boundary lines and 
perform services outside of its assigned geographic area. While four 
exception types are authorized in the United States Grain Standards Act 
(USGSA or Act), this final rule focuses on two: the inability to 
provide services in a timely manner and the nonuse of service from the 
OA assigned to the applicant's geographic area (assigned OA). This 
final rule establishes a three-tiered system under which applicants can 
request a one-time, 90-day, or long-term timely service exception due 
to untimely service issues. This rule provides that nonuse of service 
exception requests must be preceded by ninety days without service from 
the assigned OA. This final rule further amends the regulations to 
provide criteria the Federal Grain Inspection Service (``FGIS'' or 
``the Service'') will use to review, validate, and determine whether to 
grant service exception requests. This final rule also establishes a 
process that allows an assigned OA to challenge requests for service 
exceptions. Finally, this rule provides for FGIS review to ensure the 
validity of requests.

DATES:  Effective August 1, 2023.

FOR FURTHER INFORMATION CONTACT: Karla Whalen, Director, Quality 
Assurance and Compliance Division, Federal Grain Inspection Service, 
AMS, USDA: telephone: (202) 720-7312, email: [email protected].

SUPPLEMENTARY INFORMATION: Under the USGSA (7 U.S.C. 71 et seq.), each 
OA that is designated to provide inspection and weighing services in 
the United States is assigned a specific geographic area where it 
performs such services for applicants within that geographic area (7 
U.S.C. 79(f)(2)(A)). This ensures effective and efficient delivery of 
official services to applicants within the assigned OA's geographic 
area and enhances the orderly marketing of grain. The USGSA also 
provides that applicants may obtain inspection and weighing services 
from another OA (gaining OA) under certain circumstances. OAs may cross 
geographic boundaries to provide services to applicants if: (1) the 
assigned OA is unable to provide inspection services in a timely manner 
(timely service exception); (2) the applicant has not been receiving 
official inspection services from the assigned OA (nonuse of service 
exception); (3) the applicant requests a probe inspection on a barge-
lot basis; or (4) the assigned OA agrees in writing with the adjacent 
OA to waive the current geographic area restriction at the applicant's 
request (7 U.S.C. 79(f)(2)(B)). The regulations at 7 CFR 800.117 
provide further clarification for requesting these exceptions.

Background on the Nonuse of Service Exception

    In the past, under a nonuse of service exception, an applicant who 
had not obtained official inspection or weighing services from the 
assigned OA for a specified length of time could obtain services from 
another designated OA. Over time, the procedural variance on whether a 
request for nonuse of service exceptions was approved or not caused 
concern for applicants and OAs.
    In 2015, Congress eliminated the nonuse of service exception from 
the USGSA.\1\ FGIS subsequently removed that exception provision from 
the regulations in 2016.\2\ As a result, FGIS terminated existing 
nonuse of service exceptions. However, in 2018, Congress reinstated 
authority to allow a nonuse of service exception through an amendment 
to the USGSA in the 2018 Farm Bill.\3\ The 2018 Farm Bill directed USDA 
to allow for restoration of the terminated nonuse of service 
exceptions, where appropriate. Interested parties were given an 
opportunity to submit restoration requests to FGIS, as described in a 
Notice to Trade published on March 5, 2019.\4\
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    \1\ 7 U.S.C. Ch. 3 Grain Standards; January 1, 2016.
    \2\ 81 FR 49855; July 29, 2016.
    \3\ 7 U.S.C. Ch. 3 Grain Standards; December 11, 2020.
    \4\ https://www.ams.usda.gov/content/restoring-certain-exceptions-us-grain-standards-act; accessed 08/10/2022.
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    The amended USGSA also provides that the nonuse of service 
exception may only be terminated if all parties to the exception 
jointly agree on the termination. This means that the applicant, the 
assigned OA, the gaining OA, and FGIS must agree to terminate the 
exception. Such provision ensures all parties are aware of the change 
and the assigned OA will resume providing service to the applicant.
    On April 1, 2020, FGIS published an advanced notice of proposed 
rulemaking \5\ to solicit industry comments on how FGIS should amend 
its criteria for reviewing, approving, and implementing exceptions to 
the USGSA's requirements for geographic boundaries. FGIS received 
responses from six commenters. FGIS sought to incorporate industry 
feedback from the advanced notice of proposed rulemaking, along with 
input received during industry meetings, to develop a proposed rule, 
which was published on August 19, 2021.\6\ FGIS requested comment on 
proposed options for timely service and nonuse of service exceptions. 
Particularly, FGIS sought input from industry participants, who use, 
and OAs, who provide, official services and are familiar with grain 
inspection services under the USGSA. FGIS received comments from four 
entities. This final rule includes the AMS review and consideration of 
those comments on this process.
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    \5\ 85 FR 18155; April 1, 2020.
    \6\ 86 FR 46606; August 19, 2021.
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Amended Exception Provisions: Inability To Provide Timely Service

    Applicants may request a timely service exception when service is 
not timely. Service is not timely when the assigned OA cannot provide 
the requested official services within 6 hours of request or cannot 
provide the

[[Page 27686]]

results and certificate in accordance with 7 CFR 800.160(c). The 
applicant must submit a request for a timely service exception to FGIS. 
The applicant may make this request orally or in writing. If the 
applicant orally requests a timely service exception, the applicant 
must submit a written request to the Service within two business days 
after the oral request. The applicant must clearly state and support 
the identified reason for the requested exception.
    Applicants may also request an exception for delays caused by 
weather events or requests for official services that are not offered 
by the assigned OA, as they would not be able to offer such services in 
a timely manner. Thus, for the inability to provide timely service, 
FGIS intends to grant a timely service exception when: (1) the assigned 
OA is unable to provide official services to an applicant within 6 
hours; (2) or the assigned OA is unable to provide results and 
certificates in accordance with 7 CFR 800.160(c); or (3) a request for 
official services not offered by the assigned OA would result in an 
inability to receive timely service; or (4) a weather event or other 
short term disruption impacts the ability of an assigned OA to provide 
timely service; with consideration that granting an exception is in the 
best interest of the official system.
    This final rule implements a tiered application process for 
requesting exceptions when an assigned OA is unable to provide timely 
service. The first tier is a one-time, timely service exception. In 
this instance, a one-time exception to use another official agency 
(gaining OA) may be allowed for applicants that have a pending service 
request that meets the timely service exception criteria. The second 
tier is a 90-day timely service exception due to the assigned OA's 
inability to provide timely service. If, after the first-tier one-time, 
timely service exception request is granted, a second instance occurs 
in which an assigned OA is not able to provide timely service within 
180 days of the first instance, the applicant may request a 90-day 
exception. In this instance, a 90-day exception to use the gaining OA 
may be allowed. Lastly, the third tier is a long-term timely service 
exception due to the repeated inability of the assigned OA to provide 
timely service. If there is another occurrence within 365 days of the 
applicant's return to the assigned OA after their 90-day timely service 
exception period has expired, the applicant may request a long-term 
exception, extending until the termination date of the gaining OA's 
designation. Along with the required data to support their timely 
service exception request, the applicants may elect to send any 
supporting documentation they feel would aid in the agency's 
determination process. FGIS will then review and verify the accuracy 
and thoroughness of each package.
    If the applicant has an urgent timely service exception request, 
outside of the Service's customary business hours, an OA from outside 
the geographic area may provide one-time service. When providing an 
urgent service, the gaining OA must provide written notification to the 
Service within two business days after service. Upon returning to 
official office hours, FGIS will review and verify the circumstances of 
the urgent request, as well as its consistency with the USGSA and 
implementing regulations.
    For 90-day and long-term timely service exception requests, FGIS 
will have a determination review period. Once the applicant has 
provided all required information, FGIS will notify the applicant and 
begin reviewing the service exception request. FGIS will make every 
attempt to issue a determination within 15 business days of receipt for 
90-day and long-term timely service exceptions, barring a challenge 
from the assigned OA. To challenge a 90-day or long-term timely 
exception, the assigned OA must submit the challenge and any supporting 
documents within 14 calendar days of the date of notification of the 
exception request. The challenge and supporting documentation must 
clearly identify the objection to the exception request and support the 
identified reason for the challenge. While awaiting a final decision on 
90-day and long-term timely service exceptions, the applicant may 
receive service from the potential gaining OA.
    FGIS will provide its decision in writing to the assigned OA, the 
applicant, and the potential gaining OA. The assigned OA may challenge 
a request for a timely service exception for any reason. To challenge a 
request for a timely service exception, the assigned OA must object, in 
writing, and submit the challenge and any supporting documents to FGIS 
within 14 calendar days.
    If an applicant submits a request for a timely service exception 
that FGIS determines to be false or misleading, FGIS will not grant the 
exception and may elect to limit the applicant from submitting further 
requests for a period of up to 180 days. If an urgent request for a 
timely service exception, outside of customary business hours, was 
granted on the basis of a false or misleading request, FGIS may deny 
the applicant from future urgent timely service exceptions for a period 
of up to 180 days.
    The applicant maintains the option of returning to the assigned OA 
within 60 days of notification of termination of the timely service 
exception to all parties. The applicant must submit a written 
notification requesting to terminate the exception to FGIS, the 
assigned OA and the gaining OA. The exception will be cancelled, and 
future exception requests must be considered at the beginning of 
successive-tiered system.
    If FGIS determines that the assigned OA's inability to provide a 
specific service is limited due to weather events or the issue of 
service availability has been resolved, FGIS, in consultation with all 
the parties, may terminate the 90-day or long-term exception. If FGIS 
terminates a timely service exception, the applicant, the assigned OA, 
and the gaining OA, will be notified in writing, via any written form 
to include email or autogenerated response, and the applicant will 
resume service with the assigned OA within 60 days of notification. 
However, if the existing exception was associated with the assigned 
OA's inability to provide service in 6 hours or less, or with timely 
issuance of the results and certificate, FGIS might elect not to 
terminate the exception. During the duration of exceptions caused by a 
failure of the assigned OA to supply timely service, this exception 
period gives assigned OAs an opportunity to improve.

Amended Exception Provisions: Nonuse of Service Exceptions

    For nonuse of service exception requests, this rule defines the 
period of nonuse as 90-days prior to application for a nonuse of 
service exception. The rule defines areas of inquiry but does not limit 
factors FGIS will take into consideration when reviewing requests for 
nonuse of service exceptions. These considerations include: (1) the 
location of the service need(s); (2) the impact of expanding the 
applicant/customer base for the gaining OA; (3) the types of services 
requested by the applicant and offered by the assigned OA; (4) whether 
the applicant has ever utilized the official system (i.e., a facility 
that has never used the official system before may not qualify for 
nonuse of service exception, nor may a facility that is under new 
ownership by a company with no history of use of the official system); 
and (5) the impact on the applicant in the event it continues services 
with the assigned OA.
    For a nonuse of service exception request, FGIS intends to grant an 
exception when: (1) the applicant has

[[Page 27687]]

not received service from the assigned OA within the established time 
period, (2) the applicant submits, to FGIS, its request for a nonuse of 
service exception, and (3) granting an exception is in the best 
interest of the official system. FGIS will notify the assigned OA in 
writing upon receipt of the request for a nonuse of service exception. 
At the completion of the process, FGIS will issue written notification 
of the determination on the request to the applicant, the assigned OA, 
and the gaining OA.
    If an applicant submits a request that FGIS determines is false or 
misleading, FGIS will not grant the nonuse of service exception and may 
elect to limit the applicant from submitting further requests for a 
period of up to 180 days.
    A nonuse of service exception will remain in place during the 
period of the gaining OA's designation. At the end of the designation, 
FGIS will review current information concerning the exception. Unless 
the applicant, the assigned OA, the gaining OA, and FGIS request to 
terminate the exception, the FGIS will renew the exception for the 
gaining OA's new designation period, if applicable. In the event the 
gaining OA is no longer designated, the exception will automatically 
terminate, and the applicant will return to the assigned OA. If the 
applicant transfers ownership of its facility, the exception will 
automatically terminate, and the new applicant/owner of the facility 
must request a new nonuse of service exception, if it wishes to receive 
service from an OA other than the assigned OA for that geographic area. 
At any point in the designation cycle, if the applicant, the assigned 
OA, the gaining OA, and FGIS agree to terminate the nonuse of service 
exception, FGIS will terminate the exception. In this case, the 
assigned OA must resume service within 60 days of notification.
    FGIS recognizes there may be instances where granting an exception 
may impact the assigned OA. For example, in some cases, the cost of the 
equipment necessary to provide the requested service is more than the 
assigned OA would be able to recoup, due to the infrequency of the 
requests for such a special service. Therefore, as stated in the 
proposed rule, FGIS is establishing a challenge process for requested 
nonuse of service exceptions. The timeline for the challenge initiates 
when FGIS notifies the assigned OA of the requested nonuse of service 
exception. FGIS will consider factors provided by an assigned OA in 
such challenge. Requests for a challenge must state and support the 
identified reason for the challenge. FGIS may request additional 
documentation to support the challenge.

Comment Summary and Analysis

    AMS received a total of four comments on the proposed rule, one 
from a State department of agriculture OA and three industry 
associations. While generally supportive, three of the commenters 
offered suggestions for improving or clarifying processes.
    Comment: One commenter expressed support and congratulated FGIS on 
the overall nature of the proposed rule. The commenter noted that 
multiple revisions to the OA boundary exception provisions of the USGSA 
and the FGIS regulations had created uncertainty among both applicants 
and OAs for some time. The commenter suggested that the proposed rule 
would accomplish FGIS's goal to create a clear, consistent, and fair 
framework for considering and granting exceptions for customer needs 
and offered no concerns or suggestions.
    Comment: Comments from two associations recommended additional 
procedural changes. The commenters urged FGIS to develop a template for 
submitting exception requests due to an inability to provide timely 
service and nonuse of service. The commenters stated that the template 
should outline the necessary information for FGIS to review and process 
the request, as well as identify the persons at FGIS and the respective 
OAs that should receive the application. The commenters also suggested 
that such template should be available online.
    Further, the commenters recommended that FGIS and the assigned OA 
be required to acknowledge receipt of the request and determine, within 
12 hours, whether services can be provided by an alternate OA. The 
commenters noted that although the proposed rule states that an 
applicant can notify FGIS verbally or in writing to request a service 
exception, it does not offer an alternative contact in the event the 
applicant cannot reach a live person. Commenters recommended FGIS 
provide a secondary contact option. The commenters also recommended 
that the point of contact at the grain handling facility requesting the 
service exception should be notified by verbal and written 
communication regarding the decision on the request.
    AMS response: In 2023, FGIS will create a web page with 
instructions and templates for requesting designation service 
exceptions due to the inability to provide timely service and nonuse of 
service. For one-time, timely service exception requests, if the 
request is made during customary business hours, FGIS will provide its 
decision that day. FGIS will acknowledge receipt of the request in 
writing, via any written form to include email or autogenerated 
response. Notably, the newly designed regulations allow applicants to 
proceed with one-time urgent timely service exception requests outside 
of business hours without prior approval from FGIS to avoid a delay in 
the marketing of grain.
    Since urgent timely service exception requests submitted outside of 
business hours can proceed without prior approval, AMS determined it is 
not necessary to provide a second point of contact in the regulations. 
Further, the request template is to be submitted to a group recipient 
office inbox monitored by multiple staff. FGIS will make every effort 
to issue its determination for 90-day and long-term timely service 
exceptions within 15 business days, barring a challenge from the 
assigned OA. To ensure the applicant's receipt of service is not 
delayed, it may utilize the potential gaining OA while awaiting a final 
determination from FGIS.
    Regarding exception requests for nonuse of service, AMS has 
determined not to include a 12-hour response time for such requests 
because of the 14-day challenge period that has been established for 
the assigned OA to challenge the exception request and the time 
required for the FGIS to review the matter. AMS intends to reconcile 
appropriate FGIS directives in conjunction with the release of this 
rule. However, AMS has included wording in the regulations that 
addresses the timeline.
    Comment: An association asked AMS to explain, in the final rule or 
in the FGIS Directive, who within the agency is responsible for 
reviewing exception applications and whether applications would be 
reviewed by more than one office.
    AMS response: 7 CFR 800.0(b) clarifies that the Federal Grain 
Inspection Service is referred to in the regulations as the 
``Service.'' The Service administers the regulations pertaining to 
Federal grain inspection, including those established by this final 
rule. The request template will not further define the FGIS 
representative responsible for receiving these requests as FGIS 
organizational structure and staffing responsibilities can change 
rapidly. This also ensures no undue external pressure is placed on an 
individual staff member while allowing for AMS executives to be 
consulted and apprised of individual situations. FGIS may have other 
offices involved in decision making, as appropriate. FGIS

[[Page 27688]]

contact information is available on the FGIS website.
    Comment: An association commented that, in some cases, an assigned 
OA can be delayed in providing timely service due to weather conditions 
over which it has no control. The commenter recommended that FGIS take 
this factor into consideration and ``not penalize the OA if there is 
another request from the same grain handling facility for a different 
reason.''
    AMS response: FGIS acknowledges that some situations requiring 
timely service exceptions may be temporary and out of the control of 
the assigned OA. Accordingly, FGIS will consider relevant factors 
related to the reason(s) for the inability to provide timely service 
during the decision-making process. As stated in the proposed rule, the 
long-term exceptions may be cancelled by FGIS, in consultation with the 
parties, if the issue that caused the lack of timely service has been 
addressed.
    Comment: A commenter recommended that nonuse of service exceptions 
should be strictly limited to situations where the OA is unable to 
provide the service requested by the facility in a timely manner. The 
commenter asserted that allowing the requesting facility to receive a 
nonuse of service exception for the sake of convenience or other 
arbitrary or subjective reasons undermines the integrity of the grain 
inspection system, as well as the purpose behind the designated 
geographic boundaries. The comment supported adding a challenge process 
to review newly requested and previously issued nonuse of service 
exceptions. This commenter provided specific situational details 
regarding four elevators.
    AMS response: FGIS concurs that requests for exceptions should be 
evidence-based and provide the assigned OA an opportunity to 
demonstrate the ability to deliver timely service. The process takes 
this need into account through a variety of factors in the revised 
evaluation criteria that governs how exception requests will be 
determined. Regarding the commenter's reference to the four applicants 
that elected to return to out-of-State service providers, those 
applicants were allowed to revert back to those service providers based 
on their previously approved nonuse of service exceptions that were 
reinstated in accordance with amendments to the USGSA.
    Comment: A State department of agriculture comment suggested AMS 
further clarify the definition of ``period of nonuse as 90 days'' in 
the proposed rule. The commenter also asked AMS to specify what factor 
determines the start of the 90-day period. The comment further 
suggested that 120 days would be a more reasonable period for defining 
nonuse, explaining that 120 days would give the assigned OAs sufficient 
time to resolve staffing or equipment deficiencies, which, according to 
the comment, have become more challenging in the last 18 months.
    AMS response: FGIS will require an applicant to demonstrate, 
through documentation, the last date of official inspection service 
from the assigned OA. FGIS also believes that a period of 90 days 
nonuse is reasonable and sufficient for establishing a period of 
nonuse, prior to submission of a nonuse of service exception request 
and accounting for review time. As a point of reference, the proposed 
rule stated that the feedback on the number of days without official 
service (for nonuse of service exceptions) had a wide range, from 30 to 
180 days. As stated in the advanced notice of proposed rulemaking, 
prior ranges allowed were between 90 to 180 days in length. A period of 
90 days is within timeframes used for the nonuse of service exceptions 
in the past and is a compromise based on timeframes suggested in the 
public comments. FGIS also considered that during the time it takes 
FGIS to review the request, the applicant must continue with nonuse of 
service, so the period of nonuse will extend beyond the applicant's 
original 90 days of nonuse. Due to the strictly defined timely service 
exceptions criteria, FGIS believes most applicant issues will be 
satisfied under that category. Allowing this full nonuse of service 
time period enables the assigned OA additional time to work out any 
service difficulty with its customer. Applicant requests that meet the 
requirements of timely service exceptions, may be handled under the 
timely service exception tiers.

Executive Orders 12866 and 13563

    Executive Orders 12866--Regulatory Planning and Review, and 13563--
Improving Regulation and Regulatory Review, direct agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits of reducing costs, harmonizing rules, and promoting 
flexibility.
    This action has been determined to be not significant for the 
purposes of Executive Order 12866, as supplemented by Executive Order 
13563. The final rule is not expected to create any new material costs 
for industry.

Baseline

    Under the USGSA, the USDA regulates the inspection of barley, 
canola, corn, flaxseed, mixed grain, oats, rye, sorghum, soybeans, 
sunflower seed, triticale, and wheat. This rule impacts the 41 OAs that 
provide USDA-regulated grain certification and the over 5,000 
commercial entities they serve. In FY2021, OAs performed 3,150,029 
grain inspections of 257.8 million metric tons of grain. Based on 
current data, FGIS expects fewer than one percent of the entities 
served by OAs to request and be granted exceptions under the two types 
of exceptions detailed in this rule.
    Official inspection costs represent a very small percentage of the 
total value of grain shipments. In 2021, FGIS calculated the weighted 
average costs for inspections for different carriers as follows: $18.68 
for a semi-truck capable of carrying 58,000 pounds, $30.75 for a 
railcar capable of carrying 220,000 pounds, and $316.90 for a barge 
capable of carrying 3,000,000 pounds of grain. For example, if the 
price of wheat was $8 for a 60-pound bushel, the cost of the inspection 
would represent 0.24% of the revenue for a truck load, 0.11% of the 
revenue for a railcar load, and 0.08% of the revenue for a barge load 
of wheat.

Need for the Rule

    Federally regulated grain inspection is designed to remedy two 
competing sources of market failure--asymmetric information and market 
power--while preserving the ability of small producers to access 
markets. This rule increases the flexibility of the existing inspection 
program without affecting the program's quality standards or the 
ability of small sellers to access inspection services. The rule's 
greater flexibility in allowing producers to obtain inspection 
services, however, will save costs and provide them greater ability to 
meet potential market opportunities and inspection challenges.
    Many agricultural products, including grain, vary in important 
quality characteristics due to both farm production decisions and 
idiosyncratic factors. In the absence of a quality verification 
process, sellers in a transaction may have more knowledge of a 
product's quality than buyers, a condition called asymmetric

[[Page 27689]]

information. Akerlof (1978) showed asymmetric information can cause 
economic inefficiencies in which producers forego investments that are 
less costly to implement than the benefit they provide consumers.\7\ 
Third-party inspection that verifies a product's quality resolves this 
source of market failure.
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    \7\ Akerlof, George A. ``The market for ``lemons'': Quality 
uncertainty and the market mechanism.'' Uncertainty in economics. 
Academic Press, 1978. 235-251.
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    Grain inspectors certify the protein content, kernel size, and 
other quality factors related to product's market value to simplify 
transactions. Since the outcome of grain inspections directly affects 
the sale price, biases and inconsistences in inspection methods might 
potentially redistribute the gains to trade from seller to buyer, or 
vice versa. Market power might exacerbate biases and inconsistencies 
if, for instance, large sellers or buyers can influence the outcome of 
quality inspections in their favor. In addition to fairness concerns, 
such opportunistic behavior creates economic inefficiencies by reducing 
the returns on investment in quality improvement and creating costs for 
downstream producers (i.e., bakers and food processors) expecting 
products of certain quality.
    Domestic grain inspection is an optional service. When information 
asymmetries are a concern, inspection facilitates simpler, more rapid, 
and less risky transaction of final product. By allowing producers to 
recoup the costs of quality improvement, grain inspection also 
encourages investment in quality improvement.
    Under its regulatory authority, the USDA approves grain inspection 
standards and monitors their uniform application by OAs in a variety of 
ways, including inspection sample review, fee schedule approvals, and 
periodic OA audits. To promote a competitive market for grain in which 
all producers have access to inspection services, FGIS requires that 
OAs provide inspection services to all producers in an assigned area 
and regulates marketing fee schedules charged by OAs for these 
services. FGIS approves rates to cover various labor, laboratory, and 
travel costs and only approves differential rates across geographic 
areas if the underlying costs differ across assigned regions. For this 
reason, FGIS does not expect this rule to impact the price paid by 
inspection users or the fees received by OAs. Instead, FGIS expects 
this rule will allow the small fraction of inspection users who need 
timely service and nonuse of service exceptions greater flexibility in 
obtaining inspections services to meet immediate business requirements.

Benefits and Costs of the Rule

    FGIS assesses the economic benefits of this rule as being three-
fold. First, the rule provides clarity to grain inspection applicants 
(e.g., producers, elevators, merchandisers, etc.), as well as OAs, 
regarding the terms under which exceptions are granted. Second, the 
rule increases the options to producers, elevators, merchandisers, 
etc., who require inspection services to market their grain. FGIS 
expects that this option will be utilized by fewer than one percent of 
applicants who need inspections services, quickly, but face service 
constraints by OAs. Third, the rule may heighten attention to service 
issues among OAs that have received nonuse of service exception 
requests. The validation process FGIS will establish and maintain to 
review all exception requests will ensure all granted requests are in 
the best interest of the official system and confirm an exception will 
not undermine the congressional policies in Sec. 2 of the USGSA. OAs 
may offer additional services, such as a broader range of testing, as a 
result.
    FGIS does not ascribe any direct compliance costs to either OAs or 
producers as a result of the potential increase for timely service and 
nonuse of service exceptions under this rule. FGIS does not expect that 
the inspection fees it approves will change as a result of this rule. 
To the extent that this rule provides greater flexibility to how 
applicants can obtain inspection services, it will provide improved 
services or reduce total costs to producers by, for instance, allowing 
those needing immediate inspections to get them from an OA other than 
the one to which they are assigned. Moreover, FGIS does not believe the 
rule will create significant indirect costs, aside from the minor costs 
to market participants learning the rule and documenting exception 
requests.
    To the extent that some OAs conduct fewer inspections because 
applicants in their assigned area have requested more exceptions, other 
OAs will conduct more inspections. FGIS believes that any business 
losses to an OA will be small and that any losses will be offset by 
gains to other OAs. This rearrangement of business activity constitutes 
a transfer of benefits from one OA to another and has a neutral effect 
on total costs and benefits of the rule.
    To summarize, FGIS believes that the total impact of the rule on 
the grain inspection industry is not economically significant and that 
the benefits of this rule exceed its costs, which are negligible.

Regulatory Flexibility Analysis

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires 
agencies to consider the impact of their rules on small entities and to 
evaluate alternatives that would accomplish the objectives of the rule 
without unduly burdening small entities when the rules impose a 
significant economic impact on a substantial number of small entities. 
This rule has an economic impact on farms selling grain that require 
inspections (classified under North American Industry Classification 
System, or NAICS, codes 111110, 111120, 111130, 111140, 111150, 111191, 
111160, 111191, and 111199), grain elevators and grain certifiers that 
conduct post-harvest crop activities (NAICS code 115114) and either 
require or perform inspections. The Small Business Administration 
considers grain farms to be small if their sales are less than $1 
million and grain elevators and grain certifiers (OAs) to be small if 
their sales are less than $30 million (13 CFR 121.201).
    The AMS Administrator certifies that this rule does not have a 
significant economic impact on small businesses. This determination is 
made based on the expectation that any small entities requiring grain 
inspection, including grain farms and grain elevators, or entities 
performing grain inspection, including OAs, will see neither a change 
in prices paid or fees charged nor a loss in access to inspection 
services or change in territorial boundaries for which they can perform 
inspections. Further, FGIS believes the new challenge process addresses 
the concern that some small OAs may lose economic viability when 
exceptions are granted to applicants under the exceptions to geographic 
boundary requirement. Finally, AMS does not believe that OAs qualifying 
as small business will be any more likely to be subject to exception 
requests than those OAs not qualifying as small businesses.

Executive Order 12988

    This rule has been reviewed under Executive Order 12988--Civil 
Justice Reform. This rule is not intended to have retroactive effect. 
The USGSA provides in sec. 87g that no State or subdivision thereof may 
require or impose any requirements or restrictions concerning the 
inspection, weighing, or description of grain under the Act.
    This rule will not preempt any State or local laws, regulations, or 
policies,

[[Page 27690]]

unless they represent an irreconcilable conflict with this rule. No 
administrative proceedings would be required before parties could file 
suit in court challenging the provisions of this rule.

Executive Order 13175

    This rule has been reviewed in accordance with the requirements of 
Executive Order 13175, Consultation and Coordination with Indian Tribal 
Governments. Executive Order 13175 requires Federal agencies to consult 
and coordinate with Tribes on a government-to-government basis on: (1) 
Policies that have Tribal implications, including regulations, 
legislative comments or proposed legislation; and (2) other policy 
statements or actions that have substantial direct effects on one or 
more Indian Tribes, on the relationship between the Federal Government 
and Indian Tribes, or on the distribution of power and responsibilities 
between the Federal Government and Indian Tribes.
    AMS has assessed the impact of this rule on Indian Tribes and 
determined that this rule will not have Tribal implications that 
require consultation under Executive Order 13175. AMS hosts a quarterly 
teleconference with Tribal leaders where matters of mutual interest 
regarding the marketing of agricultural products are discussed. 
Information about the proposed changes was shared during the quarterly 
call on July 22, 2021, and Tribal leaders were informed about the 
proposed revisions to the regulation and the opportunity to submit 
comments. AMS received no questions or requests for additional 
information or outreach. If requested, AMS will provide additional 
support and information.

Congressional Review Act

    Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), 
the Office of Information and Regulatory Affairs designated this final 
rule as not a major rule as defined by 5 U.S.C. 804(2).

Paperwork Reduction Act and E-Government Act

    In compliance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
Chapter 35), there are no information collection and record keeping 
requirements implications associated with this rule. Should any changes 
become necessary, they will be submitted to OMB for approval.
    USDA is committed to complying with the E-Government Act (44 U.S.C. 
3601 et seq.) by promoting the use of the internet and other 
information technologies to provide increased opportunities for citizen 
access to Government information and services, and for other purposes.

List of Subjects in 7 CFR Part 800

    Administrative practice and procedure, Exports, Grains, Reporting 
and recordkeeping requirements.

    For the reasons set forth in the preamble, AMS amends 7 CFR part 
800 as follows:

PART 800--GENERAL REGULATIONS

0
1. The authority citation for part 800 continues to read as follows:

    Authority: 7 U.S.C. 71-87k.


0
2. Amend Sec.  800.117 by:
0
a. Adding paragraph (b) introductory text;
0
b. Revising paragraph (b)(1);
0
c. Redesignating paragraphs (b)(2) and (3) as paragraphs (b)(3) and 
(4), respectively; and
0
d. Adding a new paragraph (b)(2).
    The additions and revisions read as follows:


Sec.  800.117  Who shall perform original services.

* * * * *
    (b) Exceptions for official agencies to provide service. Under an 
exception, an official agency may provide service to an applicant 
outside of their geographic area. The Service may grant exceptions in 
instances when: the assigned official agency is unable to provide 
inspection services in a timely manner; a person requesting inspection 
services in that geographic area has not been receiving official 
inspection services from the official agency for that geographic area; 
a person requesting inspection services in that geographic area 
requests a probe inspection on a barge-lot basis; or, the assigned 
official agency for that geographic area agrees in writing with the 
adjacent official agency to waive the current geographic area 
restriction at the request of the applicant for service. Excluding 
requests for probe inspections on a barge-lot basis, applicants 
requesting an exception must submit requests for a service exception to 
the Service.
    (1) Timely service. Service is not timely when an official agency 
cannot provide the requested official services within 6 hours or cannot 
provide the results and certificate in accordance with Sec.  
800.160(c). Timely service exception requests will also be considered 
for delays caused by weather events or for official services that the 
assigned official agency does not offer. The applicant must submit a 
request for a timely service exception to the Service. The applicant 
may make this request orally or in writing. If the applicant requests a 
timely service exception orally, the applicant must submit a written 
request to the Service within two business days of the request. The 
applicant must clearly state and support the identified reason for the 
requested timely service exception. There are three consecutive tiers 
of timely service exceptions: one-time, 90-day, and long-term. 
Applicants requesting 90-day or long-term timely service exceptions 
must progress through each previous tier sequentially. The Service will 
review timely service exception requests and may contact the applicant, 
the assigned official agency, or potential gaining official agency with 
questions during its review.
    (i) One-time. In the case of an assigned official agency's 
inability to provide timely service, an applicant may be granted a one-
time approval to use another official agency for the associated pending 
service request, as applicable.
    (A) For one-time, timely service exception requests, if the request 
is made during customary business hours, the Service will provide its 
decision that day.
    (B) If the applicant has an urgent timely service exception 
request, outside of the Service's customary business hours, an official 
agency from outside the geographic area may provide one-time service. 
When providing an urgent service, the gaining official agency must 
provide written notification to the Service within two business days 
after service.
    (C) Upon returning to official office hours, the Service will 
review and verify the circumstances of the urgent request, as well as 
its consistency with the U.S. Grain Standards Act and implementing 
regulations.
    (ii) 90-day. If there is an occurrence of untimely service within 
180 days of the date of the occurrence in paragraph (b)(1)(i) of this 
section, the applicant may request a 90-day timely service exception. 
This 90-day window will begin the day the exception is granted.
    (iii) Long-term. If there is an occurrence of untimely service 
within 365 days after the applicant's return to service with the 
assigned official agency, following an exception granted under 
paragraph (b)(1)(ii) of this section, the applicant may request a long-
term timely service exception. When granting this exception, the 
Service may continue the exception up to the date on which the gaining 
official agency's designation terminates.
    (iv) Supporting documentation. The applicant must submit a request 
for a timely service exception to the Service.

[[Page 27691]]

This request may include any associated supporting documentation the 
applicant feels is warranted. After receipt of the request, the Service 
will provide the applicant, assigned official agency, and potential 
gaining official agency an opportunity to submit any additional 
information in support of the timely service exception request in 
writing. The Service will request additional information, if needed.
    (v) Review and verification. Except as provided in paragraph 
(b)(1)(i) of this section, prior to granting a timely service 
exception, the Service must review and verify information submitted 
with the request. When a timely service exception request is received, 
the Service will issue a written notification to acknowledge the 
receipt of the request to the applicant, the assigned official agency, 
and the potential gaining official agency. When possible, the Service 
should also attempt to make oral contact.
    (vi) Timeline. Once the applicant's request is received, the 
Service will notify the applicant and begin the review timeline. The 
Service will issue a determination within 15 business days for 90-day 
and long-term timely service exceptions, barring a challenge from the 
assigned official agency. While awaiting a final decision on 90-day and 
long-term timely service exceptions, the applicant may receive service 
from the potential gaining official agency.
    (vii) Notification. The Service must notify the assigned official 
agency in writing upon receipt of the request for a timely service 
exception. At the completion of the request review process, the Service 
will issue written notification of the determination on the request to 
the applicant, the assigned official agency, and the gaining official 
agency. When possible, the Service should also attempt to make oral 
contact.
    (viii) Challenge. The assigned official agency may challenge a 
request for a timely service exception for any reason. To challenge a 
request for a timely service exception, the assigned official agency 
must object, in writing, and submit the challenge and any supporting 
documents to the Service.
    (A) Given the urgency of a one-time service request, if the 
assigned official agency wishes to challenge the request, it must be 
done in a manner which does not further delay the applicant from 
receiving the pending service. If the one-time timely service exception 
has already been granted or used, the assigned official agency may 
still challenge the Service's determination within 14 calendar days.
    (B) To challenge a 90-day or long-term timely service exception, 
the assigned official agency must submit the challenge and any 
supporting documents within 14 calendar days of the date of 
notification of the timely service exception request. The documents 
must clearly identify the objection and support the identified reason 
for the challenge.
    (ix) Determination. In the event the Service determines that the 
assigned official agency is unable to provide official services in a 
timely manner, the Service will grant a timely service exception.
    (x) False or misleading requests. If an applicant submits a request 
for a timely service exception that the Service determines to be false 
or misleading, the Service will not grant the exception and may elect 
to limit the applicant from submitting further requests for a period of 
up to 180 days. If an urgent request for a timely service exception, 
outside of customary business hours, was granted on the basis of a 
false or misleading request, the Service may deny the applicant from 
future timely service exceptions for a period of up to 180 days.
    (xi) Return to the assigned official agency. The applicant 
maintains the option of returning to the assigned official agency 
within 60 days of notification of termination of the timely service 
exception to all parties. The applicant must submit a written 
notification requesting to terminate the timely service exception to 
the Service, the assigned official agency and the gaining official 
agency. The timely service exception will be cancelled, and future 
timely service exception requests must be considered at the beginning 
of successive-tiered system.
    (xii) Termination. If the Service determines the assigned official 
agency's inability to provide a specific service was limited due to 
weather events or for official services that the assigned official 
agency does (did) not offer, the cause of which has been resolved, the 
Service, in consultation with all the parties, may terminate the 90-day 
or long-term timely service exception. However, if the timely service 
exception was associated with the official agency's inability to 
provide service in 6 hours or less, or with its failure to issue the 
results and certificate in a timely manner, then the Service might 
elect not to terminate the timely service exception. The Service must 
notify the applicant, the assigned official agency, and the potential 
gaining official agency of all timely service exception termination 
decisions in writing. The assigned official agency must resume service 
within 60 days of notification.
    (2) Nonuse of service exception. If an applicant has not received 
official inspection services from the assigned official agency within 
the last 90 days, the applicant may request, in writing, a nonuse of 
service exception. Periods of nonuse resulting from timely service 
exceptions will not qualify as part of a period of nonuse.
    (i) Supporting documentation. Along with the request for an 
exception, the applicant must submit supporting documentation pursuant 
to paragraph (b)(2)(i)(A) of this section and may submit any additional 
supporting material the applicant wishes to submit to the Service. 
After receipt of the request, the Service will provide the applicant, 
assigned official agency, and potential gaining official agency an 
opportunity to submit any additional information in writing. The 
Service will request additional information, if needed.
    (A) Required information. The applicant's request for a nonuse of 
service exception must include the following information:
    (1) The last date of service from the assigned official agency;
    (2) The reason service has not been received during this time 
frame; and
    (3) The identified reason for the request.
    (B) Additional relevant information. Applicants may submit any 
additional relevant supporting information. This may include, but is 
not limited to:
    (1) The location of the specified service need(s);
    (2) The types of services requested by the applicant and offered by 
the assigned official agency;
    (3) The ability of the assigned official agency to provide the 
requested service;
    (4) Whether the applicant's facility has ever used the official 
system; and
    (5) The impact on the applicant in the event it continues with the 
assigned official agency.
    (ii) Review and verification. The Service will review the request 
for a nonuse of service exception and supporting documentation, then 
conduct any necessary analysis to estimate the exception's impact prior 
to making a determination, as defined in paragraph (b)(2)(vi) of this 
section. When the Service receives a nonuse of service exception 
request, the Service will issue a written notification to acknowledge 
the receipt of the request to the applicant, the assigned official 
agency, and the potential gaining official agency.
    (iii) Timeline. The Service will make every attempt to complete the

[[Page 27692]]

determination process in a timely manner, during which the applicant 
must continue with nonuse of service. This time period will include the 
allotted 14 calendar days in which the assigned official agency may 
challenge the request. The Service may extend the determination 
timeline when necessary.
    (iv) Notification. The Service must notify the assigned official 
agency in writing upon receipt of the request for a nonuse of service 
exception. At the completion of the process, the Service will issue 
written notification of the determination on the request to the 
applicant, the assigned official agency, and the gaining official 
agency. When possible, the Service should also attempt to make oral 
contact.
    (v) Challenge. The assigned official agency may challenge a request 
for a nonuse of service exception for any reason. To challenge a nonuse 
of service exception, the assigned official agency must object in 
writing and must submit the challenge and any supporting documentation 
to the Service within 14 calendar days from the date of notification 
from the Service of receipt of the request for a nonuse of service 
exception for the applicant. The documents must clearly identify the 
objection and support the identified reason for the challenge.
    (vi) Determination. The Service will consider impacts on the 
applicant, the assigned official agency, and the potential gaining 
official agency when deciding whether to grant a nonuse of service 
exception. These impacts may include, but are not limited to, the 
viability of the assigned official agency given the loss of business. 
The Service will also consider the impact on the official system and 
confirm a nonuse of service exception will not undermine the 
congressional policies in section 2 of the United States Grain 
Standards Act. The Service will provide its decision, in writing, to 
the applicant, the assigned official agency, and the potential gaining 
official agency. If approved, the applicant can receive service from 
either the originally assigned official agency or the gaining official 
agency.
    (vii) False or misleading requests. If an applicant submits a 
request that the Service determines is false or misleading, the Service 
will not grant the nonuse of service exception and may elect to limit 
the applicant from submitting further requests for a period of up to 
180 days.
    (viii) Renewal or termination of exception. The nonuse of service 
exception is for the period of the gaining official agency's 
designation. At the end of the designation, the Service will review the 
nonuse if service exception and verify the information. Unless the 
applicant, the assigned official agency, the gaining official agency, 
and the Service all agree to terminate the nonuse of service exception, 
the Service will renew the nonuse of service exception for the gaining 
official agency's new designation period. In the event the gaining 
official agency is no longer designated, the nonuse of service 
exception will automatically terminate, and the applicant will return 
to the assigned official agency. If the applicant transfers ownership 
of its facility, the nonuse of service exception will automatically 
terminate, and the new applicant/owner of the facility must request a 
new nonuse of service exception to receive service from an official 
agency other than the assigned official agency for that geographic 
area. At any point in the designation cycle, if the applicant, the 
assigned official agency, the gaining official agency, and FGIS jointly 
agree to terminate nonuse of service exception in writing, the Service 
will terminate the exception. In this case, the assigned official 
agency must resume service within 60 days of notification that the 
nonuse of service exception has been terminated.
    (ix) Historic exceptions. All nonuse of service exceptions that 
were in place as of March 30, 2019, and that are currently active as of 
the date of effectuation of this rule, are incorporated within the list 
of active nonuse of service exceptions.
* * * * *

Melissa Bailey,
Associate Administrator, Agricultural Marketing Service.
[FR Doc. 2023-08957 Filed 5-2-23; 8:45 am]
BILLING CODE P