Grain Inspection:

Industry Views on the Decline in Official Inspections and Inspection Costs

RCED-93-147: Published: Apr 30, 1993. Publicly Released: Apr 30, 1993.

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Pursuant to a congressional request, GAO reviewed the Federal Grain Inspection Service's (FGIS) federal grain inspection system, focusing on the: (1) decline in official domestic grain market inspections and the impact of the decline; (2) inspection fees charged by official inspection agencies; (3) FGIS fees for export inspections; and (4) options for reducing inspection fees.

GAO found that: (1) the number of official grain inspections has declined about 19 percent from fiscal year (FY) 1985 to FY 1992 due to fewer changes in grain ownership because of market consolidation, a trend towards in-house grading because of costs and internal quality assurance needs, greater buyer confidence in sellers' integrity, and fewer grain acquisitions under farm commodity programs; (2) the decline in grain inspections has not caused a decline in grain quality or merchandising integrity; (3) unofficial grain inspection agencies ensure inspection accuracy by having official agencies regrade test samples; (4) the grain industry is unanimously opposed to requiring more official domestic grain inspections; (5) each official inspection agency sets its own fees with FGIS approval, and fees vary widely among agencies; (6) the FGIS fee for supervising official inspection agencies does not significantly impact the agencies' inspection fees; (7) FGIS has developed a less costly inspection alternative for official inspection agencies so they can compete with unofficial inspection agencies; (8) FGIS charges higher inspection fees for exported grain than the official state agencies; (9) FGIS does not correctly allocate indirect costs when setting its export inspection fee; (10) FGIS could reduce domestic grain inspection fees by actively encouraging applications during charter awards, emphasizing fee reasonableness in evaluating the incumbent's performance and selecting the designated inspection agency, and eliminating exclusive territories; and (11) FGIS could reduce export inspection fees by having state-operated and private inspection agencies perform grain inspections, but FGIS believes that its operations have a high level of productivity and that other agencies could not perform the inspections at less cost.

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