Original Notice.

     Preproposal statement of inquiry was filed as WSR 12-11-122.

     Title of Rule and Other Identifying Information: The department of agriculture (DOA) is proposing an amendment to chapter 16-240 WAC, WSDA grain inspection program -- Definitions, standards, and fees.

     Hearing Location(s): Spokane County Cooperative Extension, 222 North Havana, Room F, Spokane, WA 99202, on October 8, 2012, at 10:00 a.m.; and at the Natural Resources Building, 1111 Washington Street S.E., Room 175 A&V, Olympia, WA 98504, on October 1, 2012, at 10:00 a.m.

     Date of Intended Adoption: October 17, 2012.

     Submit Written Comments to: Teresa Norman, P.O. Box 42560, Olympia, WA 98504, e-mail WSDA RuleComments@agr.wa.gov, fax (360) 902-2085, by 5:00 p.m., October 8, 2012.

     Assistance for Persons with Disabilities: Contact WSDA agency receptionist by calling TTY 1-800-822-6388 or 711.

     Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: The purpose of the purposed rules is to ensure that the fees charged can build and maintain a reserve of six months of operating costs for the grain inspection program.

     Reasons Supporting Proposal: Fees for the grain inspection program have not been increased since 2005. Since that time the operational costs have increased dramatically. It is necessary to increase the fees to fully cover these costs.

     Statutory Authority for Adoption: RCW 22.09.020(13), 22.09.790, chapter 34.05 RCW; 3ESHB 2127, chapter 7, Laws of 2012.

     Statute Being Implemented: Chapter 22.09 RCW, Agricultural commodities.

     Rule is not necessitated by federal law, federal or state court decision.

     Name of Proponent: DOA, governmental.

     Name of Agency Personnel Responsible for Drafting, Implementation and Enforcement: Keith Angerman, Acting Grain Program Manager, Regional Offices, Tacoma, (253) 593-2064.

     A small business economic impact statement has been prepared under chapter 19.85 RCW.

     The purpose of this chapter is to establish a schedule of fees for services provided by the grain inspection program. User fees fund the grain inspection program as set forth in the rules. The fees established in this chapter are to be set at a level that will ensure full cost recovery for services rendered.

     The proposed amendments to this chapter include:

•	Combination inspection and weighing services increased from $0.20 to $0.26 per metric ton.
•	Inspection of bagged commodities increased from $0.080 to $0.100 per hundredweight.
•	Sample pick-up fee on department-established routes increased from $0.85 to $1.25.
•	Official analysis for protein, oil or other official constituents increased from $7 to $9.
•	Submitted sample inspection increased from $9 to $12.
•	Falling number determinations, including liquefaction numbers, increased from $15 to $20.
•	Trucks or containers sampled by USDA-approved grain probes increased from $17 to $20.
•	Inspection of trucks or containers increased from $22 to $25.
•	Grain straight-time service rate increased from $30 to $56 per employee.
•	Vessels/barges stowage examination, original/reinspection increased from $300 to $500.

     All other proposed fee increases were set on an individual basis taking into account the potential impact on small businesses and the frequency of fee use. The intent of the proposed rule is to raise fees across the board in a fair and consistent manner, fully recover costs, and maintain a minimum of a six-month operating fund balance.

     One proposed change includes the process for determining revenue minimum. If the actual volume of work at the established fees does not generate revenue equivalent to the straight time service rate per hour, per employee the customer is responsible for the difference. The customer has the option to select a daily or monthly averaging under the existing rules. This proposal includes a change to allow only weekly averaging. This change affects those companies that request on-site, prescheduled service and usually applies to larger export offices. However, if a small company requests on-site, prescheduled service weekly averaging would apply.

     A significant proposed change is removal of the tier discount system. This process was a solution implemented at the last fee rule revision to reduce an operating fund balance that had become excessive. A mechanism was not included at that time to discontinue the adjustment once the fund returned to an appropriate level. This has contributed to an accelerated reduction of the fund balance. Currently, the fund is about one-half of the six-month operating balance needed.

     The proposal includes a new section to prevent a fund balance from increasing significantly higher than a six-month operating reserve. If the fund balance increases to more than five percent beyond the minimum operating reserve, customers will receive a monthly discount that is distributed over a calendar year.

     SMALL BUSINESS ECONOMIC IMPACT STATEMENT (SBEIS): Chapter 19.85 RCW, the Regulatory Fairness Act, requires an analysis of the economic impact proposed rules will have on regulated businesses. Preparation of an SBEIS is required when proposed rules will impose more than minor costs on businesses.

     "Minor cost" means a cost that is less than one percent of annual payroll or the greater of either 0.3 percent of annual revenue or $100.

     "Small business" means any business entity that is owned and operated independently from all other businesses and has fifty or fewer employees.

     INDUSTRY ANALYSIS: The proposed rule affects both large and small businesses that pay hourly service rates or unit fees. The grain trade serviced by the grain inspection program consists of exporters, transloaders, inland elevators and cooperatives, and stevedoring firms. These businesses fall under the following North American Industry Classification System (NAICS) codes:

•	NAICS 111191 Oilseed and Grain Combination Farming, grain and oilseed producers.
•	NAICS 424510 Grain and Field Bean Merchant Wholesalers, exporters, transloaders, and country or terminal grain elevators.
•	NAICS 488510 Freight Transportation Arrangement, shipping agents.

     The department has analyzed the proposed rule amendments and has determined that costs are more than minor on regulated businesses.

     INVOLVEMENT OF SMALL BUSINESSES: The grain inspection program mailed a small business economic impact survey to five hundred six customers and received sixty-one survey responses over a fourteen day period. Fifty-three responses were from small businesses; eight responses were from large businesses. The grain program has also met with a number of large and small business industry representatives. The program will continue to provide information and obtain input from industry on the proposed rule. Public hearings are scheduled for early October.

     COST OF COMPLIANCE: RCW 19.85.040 directs agencies to analyze the costs of compliance for businesses required to comply with the proposed rule, including costs of equipment, supplies, labor, professional services, and increased administrative costs. Agencies must also consider whether compliance with the rule will result in loss of sales or revenue. RCW 19.85.040 directs agencies to determine whether the proposed rule will have a disproportionate cost impact on small businesses by comparing the cost of compliance for small business with the cost of compliance for the ten percent of the largest businesses required to comply with the proposed rules. Agencies are to use one or more of the following as a basis for comparing costs:

•	Cost per employee;
•	Cost per hour of labor; or
•	Cost per one hundred dollars of sales.

     Analysis of Cost of Compliance: The grain inspection program analyzed the anticipated cost of compliance for regulated small businesses. Sixty-eight percent (thirty-six) of the small businesses that responded indicated that the proposed fee increases would have an impact. These small businesses responded to the following questions:

•	How many employees does your business employ on a full-time, year-around basis?
•	Will the business need to create jobs if the fee increases are implemented? If so, how many?
•	Will the business need to eliminate jobs if the fee increases are implemented? If so, how many?
•	If the increases in the fees are implemented, will it cause your business to lose sales or revenue? If yes, how much revenue will be lost?
•	Will your business incur additional costs to comply with increased inspection rates? Compliance costs to be considered are equipment, supplies, labor and increased administration costs, new or professional services. If yes, how much do you estimate the additional compliance costs to be per $100 of sales?

     An analysis of the survey responses indicated there would not be any jobs added because of the fee increases. Four percent of small business responses, from two small businesses, indicated that one job (each) might be lost resulting from the loss of revenue due to the fee increases.

     Small businesses indicated estimated costs for compliance in differing ways. Some businesses responded that costs for compliance with the proposed rule would be $0.25 to $18.25 per $100 of sales. Other small businesses responded that annual costs for compliance would be between $2,000 and $20,000 overall. One small business estimated compliance costs as "minimal," between $0.02 and $0.03 per bushel of grain. The majority of small businesses that responded, seventy-five percent, indicated they would not incur additional costs or that they would pass on the additional costs to their customers. Thirty-eight percent of small businesses responded that they would incur a loss in sales or revenue due to increased fees.

     Analysis of Disproportionate Economic Impact: When costs associated with proposed rules are more than minor, the Regulatory Fairness Act requires a comparison of the costs to small businesses with those of ten percent of the largest businesses in the regulated industry. The costs small businesses will incur to comply with the proposed rules are more than minor, but not disproportionately weighted toward small businesses.

     Historically, the revenue generated from the inland elevators that are primarily small businesses, has not covered the costs of the program services provided them. The larger export companies pay a greater proportion of overall fees which helps sustain the program's ability to provide service to the state's grain industry as a whole.

     JOBS CREATED OR LOST: Responses from small businesses to WSDA's small business economic impact survey indicate that there will not be any jobs added because of the fee increases. Four percent of small business responses, or two small businesses, indicated that one job (each) might be lost due to the fee increase.

     CONCLUSION: The grain inspection program has analyzed the economic impact of the proposed rules on small businesses and has concluded that the costs small businesses will incur to comply with the proposed rules are more than minor, but not disproportionately weighted toward small businesses.

     One proposed change in particular would positively affect small businesses compared to the existing fee structure. Currently, the tier system discount reduces the fund by offering volume discounts. This essentially limits the return of excess fees to the largest companies by volume. The new section proposes every company participate in future fee discounts based on the percentage of fees previously paid to the department.

     Please contact Keith Angerman, Acting Grain Program Manager, Regional Offices, if you have any questions at kangerman@agr.wa.gov or at (253) 593-2064.

     A copy of the statement may be obtained by contacting Keith Angerman, Acting Grain Program Manager, Regional Offices, 11 Schuster Parkway, Tacoma, WA 98402, phone (253) 593-2064, fax (360) 902-2085, e-mail kangerman@agr.wa.gov.

     A cost-benefit analysis is not required under RCW 34.05.328. DOA is not a listed agency in RCW 34.05.328 (5)(a)(i).

August 22, 2012

Brad J. Avy

Assistant Director

OTS-4952.3

AMENDATORY SECTION(Amending WSR 05-11-058, filed 5/17/05, effective 6/17/05)

WAC 16-240-010   Definitions.   "Department" means the Washington state department of agriculture.

     "Fee" means any charge made by the department for:

     (1) Inspecting and handling any commodity; or

     (2) Any service related to weighing or storing grains or commodities.

     "GIPSA, FGIS" means the Grain Inspection, Packers and Stockyards Administration, Federal Grain Inspection Service.

     "Metric ton" means two thousand two hundred four and six-tenths pounds.

     "Minimum operating fund balance" means six months of grain inspection program operating expenses.

     "Official commercial inspection services" means a contractual agreement between the applicant and the department for services specified by the applicant that will be provided at an applicant's facility.

     "Revenue minimum" means the amount of revenue that must be collected by the department to offset expenses. In order to act as an official inspection agency under the United States Grain Standards Act and the Agricultural Marketing Act of 1946, the program must collect revenue to offset expenses. The grain inspection program is supported entirely by the fees it generates from the services it provides as required by RCW 22.09.790. The circumstances under which charges occur to collect the revenue minimum are stated in WAC 16-240-038.

     "Service point" means the Washington state department of agriculture offices and surrounding service areas authorized by the Federal Grain Inspection Service to provide sampling, inspecting, weighing, and certification services.

     "USDA" means the United States Department of Agriculture.

[Statutory Authority: 2003 1st sp.s. c 25 § 309(2); RCW 22.09.790, chapter 34.05 RCW and The United States Department of Agriculture has oversight of fees charged under the Federal Grain Inspection, Packers and Stockyards Administration. 05-11-058, § 16-240-010, filed 5/17/05, effective 6/17/05.]

     (1) Service points:

     (a) Colfax.

     (b) Kalama.

     (c) Longview.

     (d) Olympia.

     (((d))) (e) Pasco.

     (((e))) (f) Seattle.

     (((f))) (g) Spokane.

     (((g))) (h) Tacoma.

     (((h))) (i) Vancouver.

     (2) Aberdeen has been delegated to Washington state as a service point by the Federal Grain Inspection Service. Services for Aberdeen are as follows:

     (a) Services for Aberdeen may be requested through the Tacoma grain inspection office.

     (b) Travel time and mileage will be assessed from Tacoma to Aberdeen for all services requested at Aberdeen until a permanent staff is established.

     (3) Inspection points may be added or deleted within the department's delegated and designated service area.

[Statutory Authority: 2003 1st sp.s. c 25 § 309(2); RCW 22.09.790, chapter 34.05 RCW and The United States Department of Agriculture has oversight of fees charged under the Federal Grain Inspection, Packers and Stockyards Administration. 05-11-058, § 16-240-020, filed 5/17/05, effective 6/17/05.]

     (1) The grades and standards established by the United States Department of Agriculture from August 1, 1984, ((to the present)) and as subsequently amended, that apply to all grains and commodities regulated by this chapter.

     (2) The procedures to sample, grade, test and weigh grains and commodities, established by the regulations and instructions under the United States Grain Standards Act and the Agricultural Marketing Act of 1946, and as subsequently amended.

[Statutory Authority: 2003 1st sp.s. c 25 § 309(2); RCW 22.09.790, chapter 34.05 RCW and The United States Department of Agriculture has oversight of fees charged under the Federal Grain Inspection, Packers and Stockyards Administration. 05-11-058, § 16-240-032, filed 5/17/05, effective 6/17/05.]

     (1) Requests for permanent staffing of day, night, swing, or graveyard shifts must be made in writing at least seven business days prior to the beginning of the month for which the shift(s) are requested.

     (a) Requests for permanent staffing of any night, swing or graveyard shift will be deemed to include a request for permanent staffing of the day shift.

     (b) The requested shift(s) will be established if the department has an adequate number of trained personnel.

     (c) Confirmation of staffing requirements must be received by the inspection office by 2:00 p.m. each day Monday through Friday, for the next service day, and by 2:00 p.m. of the last business day before a Saturday, Sunday, or holiday (see WAC 16-240-034).

     (d) Failure to meet the notification requirement may result in denial of service.

     (2) When the department is able to staff the permanent night, swing, or graveyard shift(s) requested by the applicant, the overtime rate established under WAC 16-240-048 will be waived for the requested shift(s).

     (3) Once established, permanent shifts will continue ((for a minimum of one calendar month)) until canceled by the requesting party or canceled by the department for good cause.

     (a) ((The request for a permanent shift will remain in effect until canceled.

     (b))) Cancellation requests must be received, in writing, giving at least fifteen business ((days prior to the end of the month)) days' notice.

     (((c))) (b) Applicants will be assessed for any shifts established at their request until the cancellation notice period has expired.

[Statutory Authority: 2003 1st sp.s. c 25 § 309(2); RCW 22.09.790, chapter 34.05 RCW and The United States Department of Agriculture has oversight of fees charged under the Federal Grain Inspection, Packers and Stockyards Administration. 05-11-058, § 16-240-036, filed 5/17/05, effective 6/17/05.]

     (1) When the volume of work at the established fees does not generate revenue ((equivalent)) at least equal to the straight time hourly rate per hour, per employee, a sufficient additional amount, calculated by using the straight time hourly rate ((will be assessed)) per hour, per employee, will be added to the established fee amount to meet the revenue minimum.

     (2) ((Daily)) Work volume averaging at export locations will be determined as follows:

     (a) When the ((daily)) weekly volume of work at the established fees does not generate revenue equivalent to the straight time hourly rate per hour, per employee, including applicable supervisory and clerical employee hours, according to the staffing needs at the facility, the department ((charges a)) may charge an additional fee ((to recover expenses)), as described in subsection (1) of this section. The weekly volume will be based on the applicable shift from Monday through the following Monday.

     (b) ((The straight time hourly rate will be assessed per hour, per employee.

     (c))) Service cancellation fees, WAC 16-240-054, are not considered to be revenue under ((daily)) weekly averaging.

     (((3) Monthly averaging at export locations:

     (a) When the applicant has requested the department to establish one or more permanent shifts, the applicant may request, in writing, that the revenue minimum required for staffing at the location be determined based on the completed invoices for the calendar month, instead of paying the fees for daily volumes of work.

     (b) When the monthly volume of work at the established fees does not generate revenue equivalent to the straight time hourly rate per hour, per employee, including applicable supervisory and clerical employee hours, the department charges a fee to recover expenses.

     (c) The straight time hourly rate will be assessed per hour, per employee.

     (d) At export locations, the request for monthly averaging stays in effect until canceled.

     (e) Requests to establish or cancel monthly averaging for the coming month must be received by 2:00 p.m. of the last business day in the month.

     (f) Service cancellation fees, WAC 16-240-054, are not considered to be revenue under monthly averaging.))

[Statutory Authority: 2003 1st sp.s. c 25 § 309(2); RCW 22.09.790, chapter 34.05 RCW and The United States Department of Agriculture has oversight of fees charged under the Federal Grain Inspection, Packers and Stockyards Administration. 05-11-058, § 16-240-038, filed 5/17/05, effective 6/17/05.]

     (2) If the department does not receive payment within thirty days:

     (((1))) (a) Services may be withheld until the delinquent account is paid; or

     (((2))) (b) Cash payment for subsequent services may be required.

     ((The department assesses a penalty of twelve percent per annum on all delinquent account balances.))

[Statutory Authority: 2003 1st sp.s. c 25 § 309(2); RCW 22.09.790, chapter 34.05 RCW and The United States Department of Agriculture has oversight of fees charged under the Federal Grain Inspection, Packers and Stockyards Administration. 05-11-058, § 16-240-042, filed 5/17/05, effective 6/17/05.]

     (2) The discount will be made available to qualified customers as follows. The department will establish the percent of discount available to qualified customers as based on each customer's fees paid over the previous three calendar years in relation to the total amount determined to be in excess of the revenue minimum. During the discount calendar year, each qualified customer will be entitled to receive a discount in the amount of one-twelfth of its total potential discount amount during each month that it incurs fees. No discount will be available in any month where the discount amount would be in excess of the total fees charged. No discount will accrue if not used during any month of the applicable calendar year.

[]

     (1) An hourly fee is specified in the schedule of fees.

     (2) No other fee is established in the schedule of fees.

     (3) The revenue minimum under WAC 16-240-038 applies.

     (4) The revenue minimum required for staffing at export locations determined on a ((daily or monthly)) weekly basis under WAC 16-240-038 applies.

     (5) No contractual agreement supersedes the straight time rate.

     (6) Straight time is assessed in one-half hour increments.

[Statutory Authority: 2003 1st sp.s. c 25 § 309(2); RCW 22.09.790, chapter 34.05 RCW and The United States Department of Agriculture has oversight of fees charged under the Federal Grain Inspection, Packers and Stockyards Administration. 05-11-058, § 16-240-046, filed 5/17/05, effective 6/17/05.]

     (1) When a service is requested before or after the inspection office's established hours, a cancellation fee would apply as follows:

     (a) When a service is requested before or after an office's standard Monday through Friday shifts, or anytime on Saturdays, Sundays, or holidays; and

     (b) The requested service is canceled after 2:00 p.m. of the last business day before the requested service; then

     (c) A service cancellation fee according to WAC 16-240-060, Table 1, will be assessed per employee scheduled.

     (2) ((At locations where monthly averaging has been instituted, a cancellation fee would apply as follows:

     (a) A request for service must be filed by 2:00 p.m. on the last business day before service to guarantee full staffing at the service location;

     (b) When full staff at the location is requested and then canceled or services are not actually performed through no fault of the department; then

     (c) The service cancellation fee will be assessed per employee scheduled.

     (3))) When service is requested for a vessel inspection, a cancellation fee would apply as follows:

     (a) When a vessel inspection is requested and then canceled after 2:00 p.m. of the last business day before the requested service, a cancellation fee will apply.

     (b) The service cancellation fee will be assessed per employee scheduled to inspect the vessel.

[Statutory Authority: 2003 1st sp.s. c 25 § 309(2); RCW 22.09.790, chapter 34.05 RCW and The United States Department of Agriculture has oversight of fees charged under the Federal Grain Inspection, Packers and Stockyards Administration. 05-11-058, § 16-240-054, filed 5/17/05, effective 6/17/05.]

[Statutory Authority: 2003 1st sp.s. c 25 § 309(2); RCW 22.09.790, chapter 34.05 RCW and The United States Department of Agriculture has oversight of fees charged under the Federal Grain Inspection, Packers and Stockyards Administration. 05-11-058, § 16-240-060, filed 5/17/05, effective 6/17/05.]

     (2) Fees that are not ((specifically cited in WAC)) otherwise provided for in this chapter for services under the United States Grain Standards Act are described below.

     (a) Fees for other services under the United States Grain Standards Act not specifically cited in WAC 16-240-070 are provided at the rates contained in WAC 16-240-080 or 16-240-090 ((and/))or at the published rates of the laboratory or organization providing the official service or analysis. The program will require the recipient of services to provide advance consent to the rate for any service necessary to be performed at an external laboratory or organization.

     (b) An applicant may be required to provide the necessary supplies and equipment when requesting a new or special type of analysis.

[Statutory Authority: 2003 1st sp.s. c 25 § 309(2); RCW 22.09.790, chapter 34.05 RCW and The United States Department of Agriculture has oversight of fees charged under the Federal Grain Inspection, Packers and Stockyards Administration. 05-11-058, § 16-240-070, filed 5/17/05, effective 6/17/05.]

     (2) Fees that are not ((specifically cited in WAC)) otherwise provided for in this chapter for services under the Agricultural Marketing Act of 1946 are described below.

     (a) Fees for other services under the Agricultural Marketing Act of 1946 not contained in WAC 16-240-080 are contained in WAC 16-240-070 or 16-240-090 and/or at the published rates of the laboratory or organization providing the official service or analysis.

     (b) An applicant may be required to provide the necessary supplies and/or equipment when requesting a new or special type of analysis.

AMA Table 1
Fees for Combination Sampling, Inspection and Weighing Services, and Additional Factors

AMA Table 2
Fees for Official Sampling and Inspection Without Weighing Services, and Additional Factors

AMA Table 3
Fees for Official Weighing Services without Inspections

AMA Table 4
Fees for Inspecting Submitted Samples

AMA Table 5
Fees for Miscellaneous Services

[Statutory Authority: 2003 1st sp.s. c 25 § 309(2); RCW 22.09.790, chapter 34.05 RCW and The United States Department of Agriculture has oversight of fees charged under the Federal Grain Inspection, Packers and Stockyards Administration. 05-11-058, § 16-240-080, filed 5/17/05, effective 6/17/05.]

     (2) Applicant-defined analysis may be available from the department.

     (a) Hourly fees for sampling and/or sample preparation may be assessed.

     (b) The analysis will be provided at the established hourly rate or may be provided at the cost quoted by the laboratory or organization providing the service or analysis.

     (c) Applicant may be required to provide supplies and equipment when requesting a new analysis or special service.

     (3) Official samples, as defined under 7 C.F.R. 800.75, may be provided upon timely request by an interested party, specifying the number of samples requested. Samples are provided in up to five pound bags and are charged the fee stated in Table 3.

[Statutory Authority: 2003 1st sp.s. c 25 § 309(2); RCW 22.09.790, chapter 34.05 RCW and The United States Department of Agriculture has oversight of fees charged under the Federal Grain Inspection, Packers and Stockyards Administration. 05-11-058, § 16-240-090, filed 5/17/05, effective 6/17/05.]