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ucts inspection regulations are limited to those that are "national" in scope. Since such waivers also may better enable FSIS to take appropriate and necessary action in response to an emergency in a smaller geographic area and the focus of concern here is assuring adequate public health protection, the Administrator has determined that the words "public health" should be substituted for "national" in § 381.3(b) of the regulations (9 CFR 381.3(b)).

These amendments to the Federal meat inspection regulations and the poultry products inspection regulations include rules and statements that are being issued to advise the public of the Agency's interpretation of recent amendments to the FMIA and provisions of the PPIA and to advise the public of the Agency's policy and procedures for implementing those amendments and initiating changes to institute a DI system for processing operations under the FMIA and PPIA. Notice and public procedure thereon are not required under the Administrative Procedure Act (APA) as to such rules and statements (5 U.S.C. 553(b)(A); see also 5 U.S.C. 553(d)(2)). In addition, FSIS has concluded that in order to execute its functions in a due and timely manner while avoiding serious dislocation in the inspection program, it should begin pilot testing in the near future. Congress has directed the Department to take action to improve the efficiency and effectiveness of the inspection program in utilizing available resources in its coverage of processing operations so that, among other things, it is in a better position to respond to budgetary constraints and industry growth and development. Thus FSIS must move as quickly as possible to institutue a DI system. Yet, at the same time, it must protect the integrity and effectiveness of the inspection program in protecting the public health and welfare by assuring an orderly transition to the new system. It is the Agency's view that, given the scope and complexity of the issues and program variables involved, this can be accomplished only through a multi-stage process, with the first implementation action consisting of an experimentation period, and FSIS must act now if full implementation and the benefits anticipated by Congress are to be achieved within a reasonable time.

This approach is consistent with the Agency's policy of testing new procedures and other possible improvements affecting the inspection program in order to assure that they are feasible and will not adversely affect protection of the public health and welfare. Moreover, while the conduct of persons, firms, and corporations regulated as operators of those federally inspected establishments selected for pilot testing may be affected, any effects will be of limited scope and duration, and restrictions may be relieved rather than imposed.

For these reasons, the Agency finds that giving advance notice and public procedure thereon beyond what is provided herein is impracticable and contrary to the public interest. Therefore, there is good cause, in accordance with the APA (5 U.S.C. 553(b)(B) and (d) (1) and (3)), for publishing an interim final rule with a request for comments which will become effective before the publication of a further notice.

INTERIM FINAL RULE

LIST OF SUBJECTS

9 CFR Part 303.-Meat inspection.

9 CFR Part 381.-Poultry products inspection.

On the basis of the foregoing, the Federal meat inspection regulations (Part 303) and the poultry products inspection regulations (Part 381) are amended as follows: 1. The authority citation for Part 303 is added to read as follows and the authority citation following § 303.1 is removed:

Authority: 34 Stat. 1260, 79 Stat. 903, as amended, 81 Stat. 584, 84 Stat. 91, 438 (21 U.S.C. 71 et seq., 601 et seq., Pub. L. 99-641, Title IV, 100 Stat. 3556, 3567-72, 33 U.S.C. 406-466k); Pub. L. 96-511, 94 Stat. 2812 (44 U.S.C. 3501 et seq.).

2. Section 303.1(g) is revised to read as follows:

§ 303.1 Exemptions.

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(g) The Administrator may in specific classes of cases waive for limited periods any provisions of the regulations in this subchapter in order to permit appropriate and necessary action in the event of a public health emergency or to permit experimentation so that new procedures, equipment, and/or processing techniques may be tested to facilitate definite improvements: Provided, That such waivers of the provisions of such regulations are not in conflict with the purposes or provisions of the Act.

3. Part 303 is further amended by adding a new § 303.2 to read as follows:

§ 303.2 Experimentation: Intensity of Inspection coverage.

(a) Pursuant to the Processed Products Inspection Improvement Act of 1986, Title IV of the Futures Trading Act of 1986 (Pub. L. 99-641), in establishments preparing products at which inspection under the Act and regulations is required, the frequency with which and the manner in which meat food products made from livestock previously slaughtered in official establishments are examined and inspected by Program employees is to be based on considerations relevant to effective regulation of meat food products and protection of the health and welfare of consumers. In order to test procedures for use in making such determinations, and, in particular, for determining whether and, if so, to what extent the intensity of inspection coverage exceeds that which should be considered necessary pursuant to section 6 of the Act, as amended by section 403(a) of the Futures Trading Act of 1986, the Administrator is initiating experimentation of a new system of inspection for reviewing the performance of establishments and for designing the supervision and other conditions and methods of inspection coverage. For the period of such experimentation, the Administrator shall identify establishments for review, and the frequency and the manner of inspection by Program employees shall be determined on the basis of the results of those reviews and be otherwise in accordance with this section.

(b) The determinations referred to in paragraph (a) of this section shall be made by the Program and shall reflect evaluations of the performance and the characteristics of such establishments.

(1) In assessing the performance of an establishment, the following factors are appropriate for consideration:

(i) The history of compliance with applicable regulatory requirements by the person conducting operations at such establishment or by anyone responsibly connected with the business conducting operations at such establishment, as "responsibly connected" is defined in section 401(g) of the Act.

(ii) The competence of the person conducting operations at such establishment, as indicated by:

(A) Knowledge of appropriate manufacturing practices and applicable regulatory requirements;

(B) Demonstrated ability to apply such knowledge in a timely and consistent manner, and

(C) Commitment to correcting deficiencies noted by Program employees and otherwise assuring compliance with applicable regulatory requirements, and

(iii) The procedures used in such establishment to control the production process, environment, and resulting product in order to assure and monitor compliance with the requirements of the Act and the rules and regulations promulgated thereunder. (2) In assessing the characteristics of an establishment, the following factors are appropriate for consideration:

(i) The complexity of the processing operation(s) conducted at such establishment, (ii) The frequency with which each such operation is conducted at such establishment,

(iii) The volume of product resulting from each such operation at such establishment,

(iv) Whether and to what extent slaughter operations also are conducted at such establishment,

(v) What, if any, food products not regulated under this Act or the Poultry Products Inspection Act also are prepared at such establishment, and

(vi) The size of such establishement.

(c)(1) For the period of experimentation described in paragraph (a) of this section, the frequency of inspection of Program employees of operations other than slaughter may be reduced in an establishment in which the procedures referred to therein are being tested if and only if the evaluation of the performance of such establishment described in paragraph (b)(1) of this section indicates that there are:

(i) No instances, documented in records compiled no earlier than 10 years before, of substantial and recent noncompliance with applicable regulatory requirements (taking into account both the nature and frequency of any such noncompliance), and (ii) The competence and control procedures needed to assure and monitor compliance with applicable regulatory requirements.

(2)(i) The frequency of Federal inspection and other conditions and methods of inspection coverage in any establishment in which the Federal inspection is reduced shall be based on:

(A) The evaluation of characteristics of such establishment described in paragraph (b)(2) of this section,2

(B) The significance of potential public health consequences of noncompliance, and (C) The availability of Program employees.

(ii) To the extent that such frequency of inspection or other conditions and methods of inspection coverage are identified as conflicting with provisions of the regulations in this subchapter, the Administrator will waive such provisions for the period of experimentation, in accordance with § 503.1(g) of this subchapter.

PART 381-[AMENDED]

4. The authority citation for Part 381 continues to read as follows:

Authority: 71 Stat. 441, 82 Stat. 791, as amended, 21 U.S.C. 451 et seq.; 76 Stat. 663 (7 U.S.C. 450 et seq.), unless otherwise noted.

5. Section 381.3(b) is amended by removing the word "national" and inserting, in its place, the words "public health".

6. Section 381.3 is further amended by adding new paragraphs (c) through (e) to read as follows:

§ 381.3 Administration.

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(c) Pursuant to section 6 of the Act, the Administrator believes that, in establishments processing poultry products at which inspection under the Act and regulations is required, the frequency with which and the manner in which poultry products made from poultry previously slaughtered and eviscerated in official establishments are reinspected by Inspection Service employees should be based on considerations relevant to effective regulation of poultry products and protection of the health and welfare of consumers. In order to test procedures for use in making such determinations and, in particular, for determining whether and, if so, to what extent the intensity of inspection coverage exceeds that which should be deemed necessary pursuant to section 6 of the Act, the Administrator is initiating experimentation of a new system of inspection for reviewing the performance of establishments and for designing the supervision and other conditions and methods of inspection coverage. For the period of such experimentation, the Administrator shall identify establishments for review, and the frequency and the manner of inspection by Inspection Service employees shall be determined on the basis of the results of those reviews and be otherwise in accordance with this section.

(d) The determinations referred to in paragraph (c) of this section shall be made by the Inspection Service and shall reflect evaluations of the performance and the characteristics of such establishments.

(1) In assessing the performance of an establishment, the following factors are appropriate for consideration:

(i) The history of compliance will applicable regulatory requirements by the person operating such establishments or by anyone responsibly connected with the business operating such establishment, as "responsibly connected" is defined in section 18(a) of the Act,

(ii) The competence of the person operating such establishment, as indicated by: (A) Knowledge of appropriate manufacturing practices and applicable regulatory requirements,

(B) demonstrated ability to apply such knowledge in a timely and consistent manner, and

(C) Commitment to correcting deficiencies noted by Inspection Service employees and otherwise assuring compliance with applicable regulatory requirements, and (iii) The procedures used in such establishment to control the production process, environment, and resulting product in order to assure and monitor compliance with the requirements of the Act and the rules and regulations promulgated thereunder. (2) In assessing the characteristics of an establishment, the following factors are appropriate for consideration.

(i) The complexity of the processing operation(s) conducted at such establishment,

2 These evaluations will be based upon guidelines developed by FSIS and the complexity categorization in FSIS Directive 1030.2 (Documentation of Processing and Combination Assignments, 4/22/85). The guidelines and Directive will be available for public inspection and copying in the Policy Office, Room 3168, South Agriculture Building, 14th Street and Independence Avenue, SW., Washington, DC.

(ii) The frequency with which each such operation is conducted at such establishment,

(iii) The volume of product resulting from each such operation at such establishment,

(iv) Whether and to what extent slaughter and evisceration operations also are conducted at such establishment,

(v) What, if any, food products not regulated under this Act or the Federal Meat Inspection Act also are processed at such establishment, and

(vi) The size of such establishment.

(e)(1) For the period of experimentation described in paragraph (c) of this section, the frequency of inspection by Inspection Service employees of operations other than slaughter and evisceration may be reduced in an establishment in which the procedures referred to therein are being tested if and only if the evaluation of the performance of such establishment described in paragraph (d)(1) indicates that there

are:

(i) No instances, documented in records complied no earlier than 10 years before, of substantial and recent noncompliance with applicable regulatory requirements (taking into account both the nature and frequency of any such noncompliance), and (ii) The competence and control procedures needed to assure and monitor compliance with applicable regulatory requirements.

(2)(i) The frequency of Federal inspection and other conditions and methods of inspection coverage in any establishment in which the Federal inspection is reduced shall be based on;

(A) The evaluation of the characteristics of such establishment described in paragraph (d)(2) of this section.

(B) The significance of potential public health consequences of noncompliance, and (C) The availability of Inspection Service employees;

(ii) To the extent that frequency of inspection or other conditions and methods of inspection coverage are identified as conflicting with provisions of the regulations in this part, the Administrator will waive such provisions for the period of experimentation, in accordance with paragraph (b) of this section.

Done at Washington, DC, on March 25, 1987.

DONALD L. HOUSTON,

Administrator, Food Safety and Inspection Service.

[FR Doc. 87-6866 Filed 3-27-87; 8:45 am].

Billing Code 0410-DM-M.

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This report presents the results of our audit of the Meat and Poultry Inspection (MPI) Program administered by your agency. The objective of the audit was to evaluate Food Safety and Inspection Service's (FSIS) management of the MPI Program. During the audit, we visited 132 federally inspected meat and poultry plants and performed work at the FSIS national office, all 5 regional offices, and 2 of the 27 area offices.

We found that generally FSIS had been effective in fulfilling its mission of ensuring that the nation's meat and poultry supply was wholesome and unadulterated. However, we did identify areas of concern which need attention by FSIS management, including two areas which should be addressed through legislative changes. We belleve that FSIS needs additional authority to impose appropriate and meaningful "middle-ground" sanctions in instances where educational efforts fail to bring about voluntary compliance but violations are not severe enough to justify criminal prosecution or judicial seizure. Additionally, the legislative requirement for continuous inspection in all federally inspected meat and poultry plants, regardless of the degree of risk present, has limited FSIS's ability to maximize the effectiveness of inspection efforts. We also identified weaknesses in internal administrative controls relating to the Domestic Residue Monitoring Program, labeling, and plant inspection activities.

On June 25, 1986, we discussed the audit results with you and members of
your staff. Based on additional discussions held with staff members
regarding the findings reported, we revised the draft report in some
areas. In your September 5, 1986 written response to the draft report
(attached as Exhibit B), you indicated general agreement with our
findings and recommendations and reported that you intend to include most
of our recommendations in your short- and long-range planning. Portions
of your comments have been incorporated into relevant sections of the
audit report.
We closed Recommendation No. 10 based on your response.

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