[Federal Register Volume 60, Number 184 (Friday, September 22, 1995)]
[Proposed Rules]
[Pages 49242-49245]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-23484]
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DEPARTMENT OF COMMERCE
National Oceanic and Atmospheric Administration
50 CFR Part 260
[Docket No. 950915231-5231-01; I.D. 091495E]
RIN 0648-AI45
Privatization of In-plant Seafood Inspections and Related
Services
AGENCY: National Marine Fisheries Service, National Oceanic and
Atmospheric Administration (NOAA), Commerce.
ACTION: Notice of inquiry.
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SUMMARY: NOAA announces that it will change the way it delivers in-
plant seafood inspections and related services under the Agricultural
Marketing Act of 1946 (the Act). Currently, these services are provided
by NOAA employees on a fee-for-service basis which enables NOAA to
fully recover the service costs. NOAA is considering that some of these
services would no longer be provided directly by NOAA employees, but
rather be offered by private parties. This document outlines the action
NOAA contemplates to assure that the privatized program conducted under
Federal oversight will be the full equivalent of the current program.
NOAA is issuing this notice to inform the public of its ideas on
restructuring the way it provides services under the Act; to describe
the method by which it would assure continued availability of the
benefits of these services through private inspectors certified by
NOAA; and to invite submission of written recommendations and comments.
DATES: Comments must be received on or before November 21, 1995.
ADDRESSES: Director, Office of Industry Services, 1315 East-West
Highway, Room 12553, Silver Spring, MD 20910.
FOR FURTHER INFORMATION CONTACT: James W. Brennan, NOAA Deputy General
Counsel at (202) 482-3044.
SUPPLEMENTARY INFORMATION: Comments should take into account the
following criteria that will fundamentally affect the viability of a
privatized inspection program: (i) Fair treatment of Government
inspectors currently
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providing the services; (ii) minimum modification of relationships with
customers subscribing to the current program, and assurance that the
internal operations of these customers need not be changed to
accommodate a privatized system; (iii) continued recognition by foreign
governments of official indicia as indicating safety, wholesomeness and
acceptability of products to which the indicia are affixed or to which
they relate; (iv) acceptance of the integrity of the privatized
inspection program by harvesters, processors, wholesalers, retailers
and consumers; and (v) likelihood of the continued economic viability
of the private entity (or entities) providing the services into the
indefinite future.
In furtherance of Administration efforts to ``reinvent'' and
improve the way services are delivered to the public, and to comply
with the personnel reductions mandated by the Federal Work Force
Restructuring Act, NOAA is considering privatization of inspections and
related services for fish and fishery products currently conducted
under its voluntary fee-for-service program. By the end of FY 1996,
NOAA would discontinue direct involvement by Federal employees in
performing these services under authority of the Act (7 U.S.C. 1621 et
seq.). However, NOAA will retain oversight to maintain public
confidence in the continued integrity of the program. One or more
qualified entities in the private sector would be officially recognized
and authorized by NOAA to provide inspection services. NOAA would no
longer conduct inspection services to be performed by Federal and
cross-licensed State employees, but would certify the competence of
each private entity authorized to provide these services to members of
the public.
The current voluntary program has been a notable success. It
promotes domestic and foreign commerce in American seafood in several
important ways. It is a tool available to exporters to provide a known,
reliable assurance that seafood exported from the United States to
foreign markets conforms to the agreed contract specifications between
the domestic exporter and the foreign purchaser. It provides a
governmental assurance of the safety, wholesomeness, and acceptability
to officials of other nations, thereby speeding customs clearance at
foreign borders. In those countries that require certification from a
Federal entity, NMFS certification has routinely satisfied these
requirements. The program also serves domestic purchasers at the
import, wholesale, retail or consumer level who desire assurance from a
disinterested expert that fishery products in the market place meet
appropriate standards, and fishery products that they have purchased
meet their requirements. In addition, the official marks (e.g., U.S.
Grade A, Packed Under Federal Inspection) associated with this program
are often used in the trade and at retail to market the product to its
best advantage and allow consumers to choose product of the desired
quality. During 1994, the NOAA program inspected more than 984 million
lb (446,000 mt) of fishery products for domestic and foreign use.
It is important to foreign governments, in particular, that the
assurances conveyed by the voluntary fee-for-service activities under
the Act are backed by a disinterested entity of unimpeachable
integrity. During 1994, NOAA inspected and certified 156.4 million lb
(70,900 mt) of fishery products for export. While the Federal
Government may need to retain involvement in providing assurances to
foreign governments, many of the services that NOAA currently provides
can be assumed by qualified, knowledgeable and disinterested private
inspectors, provided that NOAA retains the oversight necessary to
foster public confidence in the system of private inspection and
related services.
Private inspectors would be required to maintain complete records
of their activities under the Act, which NOAA would review as it audits
performance under the program. NOAA contemplates that it would charge
certified entities a fee to cover the oversight, audit and
certification costs.
Prior to privatization, NOAA would amend certain inspection and
certification provisions to expand the fee-for-service activities that
may be conducted under the Act by persons who are not Federal
employees.
The simplest way to privatize these services would be to certify
each private person who satisfies applicable qualification standards to
perform services under the Act as a private inspector (subject to
oversight of NOAA). This approach could result in such a large number
of geographically dispersed, qualified inspection firms that the
quality of NOAA's oversight would be impaired, thereby affecting the
integrity of the system. Furthermore, the size of some firms conducting
inspections could be so small that it would raise legitimate concerns
that decisions of these firms could be subject to undue influence by a
customer who provides a significant portion of their income. Such cases
would adversely affect the perceived credibility of the private
inspection program by members of the seafood industry, by consumers and
by foreign governments. Such a course of action could also seriously
disrupt ongoing activities of existing customers. For those reasons,
NOAA has determined that this approach is so unacceptable to customers,
consumers, and the domestic industry in general that it would be
unworkable.
NOAA believes that a better approach would be the establishment of
a private, employee-owned Corporation (the Corporation) that would
acquire the program and operate it subject to the oversight of NOAA.
NOAA employees currently performing these services could become
employees of the Corporation if they so elected, and would acquire an
ownership interest therein by means of an Employee Stock Ownership Plan
(ESOP). Under this alternative, NOAA would terminate its inspection
services and would eliminate its inspector positions soon after the
Corporation is established. This option has four important advantages:
(1) Current employees would be treated fairly, (2) customer relations
would be fostered, (3) NOAA oversight would be simplified, and (4) the
integrity of the program would be maintained. Because NOAA inspectors
would be represented in the process of establishing the ESOP and would
have a stake in the ownership of the Corporation, the morale and
productivity of inspectors would likely be high. Furthermore, ongoing
relationships with current customers would not be disrupted. NOAA would
deal with one major certified entity, and perhaps a small number of
reasonably sized competing entities. Oversight would be far less
burdensome this way compared to dealing with a large number of small
certified entities. Furthermore, the inspectors employed by the
employee-owned Corporation, being former NOAA inspectors, would be
familiar with the procedures that will govern the conduct of
inspections by private inspectors. These inspectors would also
understand the overriding importance of maintaining the integrity of
the inspection process.
The ESOP proposal would require more preparatory work in legal/
financial areas that are unfamiliar to NOAA, and would perhaps involve
greater initial costs to the Government. However, once the
infrastructure is in place, the transition should go smoothly and
rapidly. The inspectors employed by the Corporation would be highly
qualified, as noted above, and these former NOAA inspectors would fully
appreciate the necessity for complete impartiality in performing their
duties. They would also have a comprehensive knowledge
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of the inspection manual used by NOAA that would continue as the
standard reference to ensure consistency by all inspectors throughout
the program.
NOAA is in the process of contracting for a study of the
feasibility of establishing a new Corporation, owned in whole or part
by an ESOP, to undertake inspection services. The contractor will be
encouraged to seek the views of affected employees, current customers,
other members of the seafood industry and consumers.
At this point, NOAA assumes that the study will conclude that the
approach contemplated is feasible. However, if the study, discussions
with affected or interested persons, or comments resulting from this
notice indicate that the five criteria essential for the success of a
privatized system are not likely to be met, NOAA will pursue other
options. Any option likely to be successful will probably require
legislation, and will therefore have to be pursued as a matter of
urgency if the deadline of September 30, 1996, is to be met.
In addition to providing services under the Act, the possibility
exists that the Corporation could also be authorized to conduct similar
services on behalf of other Federal or state agencies engaged in
seafood inspection or in quality inspection of other foods, provided
suitable arrangements could be made with other interested agencies.
This raises the following questions: How should the privatized program
mesh with the mandatory seafood inspection program now being operated
by the U.S. Food and Drug Administration: Currently, NOAA has memoranda
of understanding with FDA which include inspection and research. FDA is
converting its inspection regime to one that is based on the Hazard
Analysis Critical Control Point (HACCP) principles. Should the
Corporation conduct inspections that could qualify under FDA's
mandatory program? If so, how should this work? Should consultative
services that the Corporation conducts under the NOAA voluntary program
include training and technical assistance to facilitate compliance with
the FDA mandatory program, especially by small businesses?
In certain areas, NOAA utilizes cross-licensed state and Federal
inspectors from the Department of Agriculture to provide inspection
services. In order to enhance the success of the Corporation, work that
is currently performed by these governmental bodies could be directed
to the new Corporation. The Corporation may wish to continue to utilize
state or Federal personnel. NOAA would have no objection to this as
long as these individuals meet the qualification standards that will be
maintained by NOAA. To facilitate this transition NOAA would recognize
a cross-licensed state and Federal inspector who has demonstrated
satisfactory performance during the last year in a specific inspection
function(s) as a certified entity for such activity(ies) to provide the
Corporation with the ability to use these individuals. Future
certification of state and Federal employees would be dependent on
meeting the previously stated qualification standards.
NOAA contemplates establishing or authorizing the establishment of
additional service marks to inform consumers of the official assurances
provided by certified private inspectors, to provide other information
useful to consumers, and to encourage foreign governments to rely on
those logos for the government-backed assurance of safety,
wholesomeness and quality. For entry into a foreign country where a
governmental certificate may be required as a condition of acceptance
by the importing foreign government, NOAA would either countersign the
certificate of compliance or retain responsibility for certification
for specific countries. In the latter case, NOAA certification would be
based upon inspections conducted by the Corporation acting under
contract with NOAA. The oversight and standard-setting roles of NOAA
could eventually be assumed by a government Corporation. However, in
the context of an inspection program conducted by a certified private
entity, that must be considered a long-range possibility, not a short-
term or medium-term goal.
The Corporation itself would need to comply with practices and
standards established by NOAA. Its employees conducting inspections and
related services would also be required to meet appropriate standards
of education, training, or experience established by NOAA. The major
source of qualified employees would be the NOAA employees performing
fee-for-service activities under the Act. NOAA currently has 168
inspectors providing inspection services. These inspectors are
classified in two personnel series: (1) Consumer Safety Officer (GS-
696) series--there are currently 131 NOAA field inspectors in this
series (this is the same series as Food and Drug Administration
Consumer Safety Officers); and (2) Consumer Safety Inspector (GS-
1862)--there are currently 40 NOAA field inspectors in this series. The
basic requirements for the two series are as follows:
(1) Consumer Safety Officer (entry level)
A. Bachelor's degree that includes at least 30 semester hours in
one or a combination of the following: Biological sciences, chemistry,
pharmacy, physical sciences, food technology, nutrition, medical
science, engineering, epidemiology, veterinary medical science, or
related scientific fields that provide knowledge directly related to
consumer safety officer work, or
B. Combination of education and experience--courses consisting of
at least 30 semester hours in the fields of study described in A, plus
appropriate experience or additional education.
(2) Consumer Safety Inspector (lowest entry level)
A. Successful completion of 2 years of study, which includes at
least 12 semester hours in any combination of courses such as those in
the agricultural, biological, or physical sciences, food technology,
epidemiology, home economics, pharmacy, engineering, or nutrition.
(3) Consumer Safety Inspector (above lowest entry level)
A. Successful completion of a 4-year course of study leading to a
bachelor's degree with at least 24 semester hours in any combination of
courses in subjects as listed under A; or
B. Specialized experience in work that has provided knowledge of
the properties and characteristics of the commodities and substances
regulated in the position to be filled, skill in applying proper
techniques for collecting samples and performing field tests and
examinations, skill in reporting both orally and in writing, and skill
in maintaining effective personal contacts. Such experience may be
acquired in work such as the following: Food inspector, public health
inspector, and quality inspection specialist.
The qualifications of all persons applying for certification would
be examined to assure that they meet minimal agency standards of
competence. NOAA anticipates that any person who has successfully
performed as a Federal Consumer Safety Officer or Consumer Safety
Inspector for more than 1 year and has successfully completed the
necessary training courses for the activities for which certification
is requested would qualify to conduct like services under the program
as a certified entity or as an employee of such entity. Periodic review
of the qualifications of all certified inspectors, and attendance at
approved training courses to keep
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current with advances in the art will be required in order to maintain
a current certification.
Although the Corporation currently contemplated by NOAA is likely
to meet the criteria needed for authorization to provide privatized
inspection services, it would not necessarily be the only authorized
entity. Other entities could apply to the Secretary of Commerce for
authorization, and if they meet applicable requirements, they would be
authorized to conduct the services. However, as noted previously, it is
assumed that authorization of entities employing a small number of
employees would make the system unworkable. Therefore, NOAA
contemplates that one of the authorization criteria would be that the
applicant must employ a minimum number of certified inspectors, perhaps
in the range of 50 to 60. Comments on the number of certified
inspectors needed to qualify a firm would be particularly useful.
Additionally, NOAA probably would require that an entity authorized
under the program could not receive more than a fixed percentage of its
annual income from performing these services for any one seafood
processor or group of related seafood processors. And, of course, a
certified entity could not inspect its own seafood as a Federally
certified entity.
Initially, it is contemplated that the private inspectors conduct
one or more of the following services under the Act:
Sampling;
Determination of essential characteristics;
Determination of class, quality or condition; and
Continuous in-plant inspection.
Under the changes contemplated, inspectors probably would not be
certified initially to approve HACCP plans. Because of the inherent
complexity in approving HACCP plans, the variety of the plans
themselves, and the relative novelty of the application of HACCP to
seafood quality programs, it is contemplated that approval of HACCP
plans will not be delegated until the process of privatization has
matured. Under currently approved HACCP plans, firms have assumed
significant responsibilities for assuring the safety, wholesomeness and
quality of their own products, subject to periodic audits by NOAA. This
will continue whether NOAA or a certified entity is responsible for the
audit. Monitoring of approved HACCP programs by qualified certified
private inspectors is being considered. Even if it were decided that
they would not initially oversee HACCP plans as a certified inspector
under the Act, certified private inspectors could assist their
customers in designing HACCP programs as a private consultation service
in much the same manner as NOAA currently does. Comments on this point
are particularly desired.
It is anticipated that functions such as specification and label
approval, as well as training functions in specialized activities such
as sensory evaluation, will initially be retained by NOAA. The
performance of appeal inspections is also considered to be a function
that must be retained by NOAA to resolve issues of conflict between a
certified entity and a party that requests an inspection service. NOAA
will maintain the development of voluntary grade standards, functions
associated with agency and trade interests in international activities,
and performance of laboratory analyses to ensure the integrity of the
NOAA program.
NOAA's role in providing for-fee services not initially included
would be reexamined as the program proceeds. Ultimately, it is
envisioned that NOAA's role could diminish to the point that it would
issue voluntary standards and audit the performance of private
inspectors, and, as noted, even those functions may eventually be
assigned to a government Corporation or even be privatized if the right
vehicle for doing so could be designed.
At first glance, it would seem that the possibility of having a
single private entity authorized to conduct most of the services on
behalf of NOAA could raise concerns about inflated pricing unless NOAA
regulated the prices that could be charged. NOAA does not contemplate
doing that for several reasons. Subscription to the service is not
mandated by law. Less than 25 percent of the seafood in the domestic
market place is now covered by the program; that suggests that the
majority of seafood producers find that the value of the current
service as a marketing tool does not exceed the cost of participation.
It is unlikely that the privatized service would be able to charge fees
that significantly exceed fees for similar services under the current
program.
NOAA is considering a variation to ease the transition to the
privatized system. Under the variation, NOAA would continue existing
contracts with customers to provide inspection services but would
negotiate a contract with the Corporation to actually conduct these
services as a subcontractor to NOAA. (The inspectors employed by the
Corporation would likely be the very inspectors who provided the
services as Government employees). NOAA would pay the Corporation for
services provided and bill and receive payment from the customers.
Contracts with new customers would be established between the
Corporation and those customers as the need arises. Over the course of
the 1-year transition period, the Corporation gradually would assume
full responsibility for existing NOAA contracts, on a time schedule
that would be mutually convenient to the customers and the Corporation.
In addition to offering a phased process, fully transparent to existing
customers, this approach may provide a contractual vehicle to allow the
transfer of control to the Corporation of some NOAA property currently
used by its inspectors. Comments on the desirability of the variation
would be helpful.
Request for Comments and Views
Affected employees, domestic and foreign consumers, seafood
harvesters, processors, traders, retailers, importers and exporters, as
well as entities interested in qualifying as certified inspection
entities, are invited to submit comments and suggestions on the points
discussed above, or any related topic.
Under NOAA Administrative Order 205-11, 7.01, dated December 17,
1990, the Under Secretary for Oceans and Atmosphere has delegated
authority to sign material for publication in the Federal Register to
the Assistant Administrator for Fisheries, NOAA.
This notice has been determined to be not significant for purposes
of E.O. 12866.
Dated: September 15, 1995.
Gary Matlock,
Program Management Officer, National Marine Fisheries Service.
[FR Doc. 95-23484 Filed 9-21-95; 8:45 am]
BILLING CODE 3510-22-F
