Grain Inspection: Industry Views on the Decline in Official Inspections and Inspection Costs

GAO discussed the Federal Grain Inspection Service's (FGIS) official grain inspection system, focusing on: (1) the decline of official inspections in the domestic grain market and its impact; (2) official domestic inspection fees; (3) export inspection fees; and (4) options for reducing inspection fees. GAO noted that: (1) from 1985 to 1992, the number of official domestic inspections has declined by about 19 percent due to grain industry consolidation, a trend to in-house grading by grain merchandisers, greater buyer confidence in sellers' grain quality, and fewer government grain acquisitions; (2) the decline in inspections has not compromised grain merchandising integrity because the official inspection system serves as a safety net; (3) domestic official inspection fees vary widely because each inspection agency sets its own rates; (4) FGIS export grain inspection fees are higher than designated state agencies' inspection fees; (5) FGIS undercharges for indirect costs of inspections because of its flawed methodology for allocating indirect costs; (6) domestic inspection fees could be reduced by lowering operating costs through consolidation of inspection services, encouraging charter applications, emphasizing fee reasonableness in agency evaluations, and eliminating exclusive territories; and (7) turning FGIS export inspections over to state agencies may not reduce inspection fees, since FGIS supervision fees would be added to state fees.