# User Fees for Agricultural Quarantine and Inspection Services

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/fr%3A2015-27363

## Record

- **Collection:** Federal Register
- **Document type:** Rule
- **Published:** October 29, 2015
- **Citation:** 80 FR 66748

## Text

DEPARTMENT OF AGRICULTURE
Animal and Plant Health Inspection Service
7 CFR Part 354
[Docket No. APHIS-2013-0021]
RIN 0579-AD77
User Fees for Agricultural Quarantine and Inspection Services

AGENCY:

Animal and Plant Health Inspection Service, USDA.

ACTION:

Final rule.

SUMMARY:

We are amending the user fee regulations by adding new fee categories and adjusting current fees charged for certain agricultural quarantine and inspection services that are provided in connection with certain commercial vessels, commercial trucks, commercial railroad cars, commercial aircraft, and international passengers arriving at ports in the customs territory of the United States. We are also adjusting or removing the fee caps associated with commercial trucks, commercial vessels, and commercial railcars. We have determined that revised user fee categories and revised user fees are necessary to recover the costs of the current level of activity, to account for actual increases in the cost of doing business, and to more accurately align fees with the costs associated with each fee service.

DATES:

Effective December 28, 2015.

FOR FURTHER INFORMATION CONTACT:

Ms. Diane L. Schuble, AQI User Fee Coordinator, Office of the Executive Director-Policy Management, PPQ, APHIS, 4700 River Road, Unit 131, Riverdale, MD 20737 1231; (301) 851-2338; Email:
AQI.User.Fees@aphis.usda.gov.

SUPPLEMENTARY INFORMATION:

Background

Section 2509(a) of the Food, Agriculture, Conservation, and Trade (FACT) Act of 1990 (21 U.S.C. 136a) authorizes the Animal and Plant Health Inspection Service (APHIS) to collect user fees for certain agricultural quarantine and inspection (AQI) services. The FACT Act was amended on April 4, 1996, and May 13, 2002.

The FACT Act, as amended, authorizes APHIS to collect user fees for AQI services provided in connection with the arrival, at a port in the customs territory of the United States, of commercial vessels, commercial trucks, commercial railroad cars, commercial aircraft, and international passengers. According to the FACT Act, these user fees should recover the costs of:

• Providing the AQI services for the conveyances and the passengers listed above;

• Providing preclearance or preinspection at a site outside the customs territory of the United States to international passengers, commercial vessels, commercial trucks, commercial railroad cars, and commercial aircraft;

• Administering the user fee program; and

• Maintaining a reasonable balance, also referred to by APHIS as a “reserve,” to ensure that funding is available in the event that there are temporary reductions in the demand for AQI services leading to reduced fee collections, as was experienced in 2008 (Pub. L. 101-624, Section 2509). As there are fixed costs related to providing AQI services (
i.e.,
costs that do not fluctuate with demand for AQI services) that the program incurs, a reasonable balance/reserve is needed to ensure continuity of service in times of reduced fee collection. This provides certainty to importers regarding the availability of inspection services. Specifically, the Act states, “The Secretary shall adjust the amount of the fees to be assessed under this subsection to reflect the cost to the Secretary in administering such subsection, in carrying out the activities at ports in customs territory of the United States and preclearance and preinspection sites outside the customs territory of the United States in connection with the provision of agricultural quarantine inspection services, and in maintaining a reasonable balance in the Account.” The level of the reserve is determined by the Secretary.

In addition, the FACT Act, as amended contains the following requirements:

• The fees should be commensurate with the costs with respect to the class of persons or entities paying the fees. This is intended to avoid cross-subsidization of AQI services.

• The cost of AQI services with respect to passengers as a class should include the cost of related inspections of the aircraft or other conveyance.

APHIS' regulations regarding overtime services and user fees relating to imports and exports are found in 7 CFR part 354. The user fees for the AQI activities described above are contained in § 354.3, “User fees for certain international services.”

The AQI program is a Federal program that is designed to identify and address threats to U.S. agriculture and to facilitate safe agricultural trade, such as the accidental or intentional introduction of animal diseases and plant pests. Direct animal agriculture hazards include, but are not limited to, foot and mouth disease, avian influenza, and classical swine fever. Plant pests include foreign noxious weeds such as hogweed and insects such as long-horned beetles related to the Asian long-horned beetle that has caused millions of dollars in losses in numerous communities in the United States. Fruit flies, such as the Mediterranean fruit fly, if introduced, would cause significant direct damage to U.S. fruit crops and have major impacts on export markets. Diseases such as powdery mildews on corn and its relatives, wheat blast on wheat and its related grains, and exotic rice diseases could cause major impacts on staple food supplies and create trade barriers. The fees that pay for the AQI program help protect our country from these threats at a very small cost in relation to the economic harm that would be caused by any new introduction of pests and diseases.

Under the FACT Act, the Secretary of Agriculture has the authority to prescribe and collect user fees sufficient to cover the cost of providing AQI services. By U.S. law, APHIS is designated as the Agency with the authority to establish and collect fees related to work undertaken in the AQI program. Other Federal agencies undertake activities that support the AQI program mission. APHIS followed Federal guidance, including the Office of Management and Budget (OMB) Circular A-25 and Federal Accounting Standards Advisory Board Statement of Accounting Standards Number 4, to appropriately account for these costs in order to determine the appropriate fees. Those costs not recovered through the AQI fees are paid for through appropriated funding. The use of activity based costing (ABC) methodology in establishing fees ensures that no cost is double counted. AQI program costs incurred by APHIS include:

• Program costs directly attributable to the delivery of AQI services;

• Program delivery-related costs (known as distributable costs) at the State level and below, at the regional and headquarters levels, the APHIS Agency level, and the U.S. Department of Agriculture (USDA) Departmental level. These costs are necessary to support the direct delivery of AQI services; and

• Depreciation of various equipment and facilities that directly support, in whole or in part, APHIS' delivery of AQI services and other imputed costs that other Federal agencies incur in providing services to APHIS and the

AQI program. Imputed costs are the costs of goods or services incurred on behalf of an agency that are paid by another Federal entity, such as certain retirement benefits paid to retirees by the Office of Personnel Management.

The AQI fees have not been adjusted since FY 2010 and do not reflect the current cost of providing AQI services. As a result, U.S. Customs and Border Protection (CBP) of the Department of Homeland Security, which collaborates with APHIS in providing the AQI services referred to above, has relied more heavily on its appropriated funds to provide AQI services that are not paid for by AQI revenue or to cover the cost of services for which the current fee revenue is insufficient. The FACT Act provides that USDA may prescribe and collect fees that are sufficient to cover the cost of providing AQI services, and Federal guidance for fee setting states that, where possible, a user fee should recover the full cost to the government.

On April 25, 2014, we published in the
Federal Register
(79 FR 22895-22908, Docket No. APHIS-2013-0021) a proposal
1

to amend the regulations by adjusting existing fees and adding some new ones in order to enable us to recover the costs of providing AQI services and to allow us to maintain the AQI reserve account. Specifically, we proposed to:

1
To view the proposed rule, supporting documents, and the comments we received, go to
http://www.regulations.gov/#!docketDetail;D=APHIS-2013-0021.

• Adjust the fees charged for the following conveyances or persons to whom AQI services are provided: Commercial vessels, commercial trucks, commercial railroad cars, commercial aircraft, and international air passengers. (Because commercial truck inspections have separate fees for trucks with and without decals (transponders), we actually proposed to adjust a total of six current fees.)

• Add a new fee to be charged for international commercial vessel (cruise) passengers.

• Add a new fee for conducting and monitoring treatments.

• Remove the caps (limits on the number of times a specific conveyance must pay the AQI fee in a given year) for vessels and railcars.

• Adjust the caps on fees for trucks with transponders. APHIS and CBP determined that there was a benefit to the use of transponders in speeding truck traffic through inspection at the border and thereby reducing the cost to the Federal Government for providing AQI services. The intent of a cap for truck transponders is to create an incentive for trucking firms to use a transponder. The difference between the cost of providing inspections for trucks with transponders and the revenue collected from trucks with transponders will be covered by appropriations. This ensures that there will be no cross-subsidization of AQI services.

There are other AQI program costs for which APHIS did not propose to establish user fees in the April 2014 document and never has done so. The costs of providing these AQI services are paid for through the CBP appropriation. These AQI services are:

• Private vehicle inspections at border crossings,

• Pedestrian inspections at border crossings,

• Bus inspections,

• Private vessel inspections,

• Private aircraft inspections,

• Military inspections, and

• Rail passenger inspections.

APHIS follows Federal guidance in determining the appropriateness of charging AQI user fees, specifically the guidance from OMB's Circular A-25. Factors influencing our decisions not to charge user fees for the above-listed services include lack of authority (
e.g.
to collect fees for bus-passenger inspections); conflict with other Federal regulations (
e.g.
such as those that affect private aircraft); and the potential for the costs of collecting fees for services to exceed the revenues generated by the fees (
e.g.
such as inspecting private vessels and pedestrians); and the costs of putting in place the infrastructure required to collect fees.

We base the fees on cost data from FYs 2010, 2011, and 2012, and use inflationary factors to project our costs through FY 2017.

We solicited comments concerning our proposal for 60 days ending June 24, 2014. We reopened and extended the deadline for comments until July 24, 2014, in a document published in the
Federal Register
on July 1, 2014 (79 FR 37231, Docket No. APHIS-2013-0021). We received 234 comments by that date. They were from trucking companies, maritime shipping companies, commercial cruise lines, airlines, and associations representing all of those industries; producers of flowers, fruits, and vegetables and importers and shippers of those commodities; companies providing fumigation treatments; port officials; Federal, State, and foreign government representatives; and individuals. They are discussed below by topic.

Calculation of Fees

Many commenters requested greater transparency regarding our calculation and/or allocation of the proposed user fee adjustments and new user fees. Commenters sought more documentation and detailed information on how we calculated AQI costs and fees. A more detailed explanation of our ABC methodology was requested by some commenters. Commenters also requested more specific information on, among other topics, how our costs correlated with the AQI services performed, how we determined our support costs, and our justification for including those costs in our calculation of our fees. These issues are discussed individually in the paragraphs that follow.

One commenter asked that we provide all final reports, presentations, or other decisional material from each of the fiscal years (FY) 2010 to the present regarding AQI inspection costs and revenue prepared by APHIS, by contractor Grant Thornton, or by any other contractor or other internal or external party.

AQI User Fee analysis reports used to calculate the new user fees, stakeholder outreach documents, and the proposed rule are available for public review on the APHIS Web site at:
http://www.aphis.usda.gov/plant-health/aqi-userfee-review.
The fee analysis reports were also made available on Regulations.gov along with the proposed rule as part of the rule's supporting documents and will remain posted there when this final rule is published.

Commenters stated that, because the cost data provided by APHIS did not provide specifics regarding the calculation of the individual user class fees, the validity of the cost calculations overall is questionable. The commenter stated further that the lack of transparency unfairly inhibits industry's ability to respond knowledgeably to the proposal.

APHIS provided the rationale, data, and calculations for the preferred alternative fee schedule in the proposed rule. However, to provide additional clarification on how the individual user fees were determined, we are providing a breakdown of the costs that went into calculating each new user fee in Tables 2, 5, 7, 8, 9, 10, and 11 below.

One commenter expressed concern that the proposed rule does not provide sufficient background information on how the burden of the new AQI user fee costs should be shared by all parties concerned or how the new fees will be applied and/or charged to shipments, or batches of agricultural products of different sizes.

As stated in the proposed rule, we used the ABC methodology to determine

the cost of AQI activities and their associated outputs and services. APHIS incorporated ABC methodologies to ensure that the full cost of providing AQI services can be appropriately assigned to AQI user fees. The AQI expenses are captured in the USDA and CBP financial accounting systems. These systems conform to generally accepted accounting principles, and each system is subject to accounting audits to ensure its correctness in support of statements of financial positions. The ABC methodology incorporates industry standards to ensure correctness, transparency, and repeatability in the assignment of costs from the APHIS and CBP financial systems to activities directly related to the delivery of AQI services. The costs of our AQI activities are contingent upon the time and effort required of APHIS and CBP staff to perform those activities. Those activities must be performed regardless of the size or volume of the shipment.

CBP's agricultural inspection and safeguarding activities generate the majority of AQI costs. We used information from the CBP ABC model, which has been in existence for more than 10 years, to determine the safeguarding activities' costs. The CBP activity set includes inspection of shipments, monitoring compliance, and performing many other related activities. The costs ascribed to these activities contain the personnel and related non-personnel costs associated with the performance of them. The CBP model identifies activities by certain programs or operational areas, and we used AQI-related activities from the CBP model and certain activities that support the direct delivery of AQI services to the fee payer. The CBP model also provides some activity cost information by mode, so we were able to associate some costs with specific fee schedule services. For example, the CBP model has separate activities for air passenger inspection, air cargo inspection, truck inspection, etc., so we assigned those activity costs directly to the appropriate fee schedule items. However, some CBP and APHIS activities are performed across multiple modes and fee services. Those activity costs were assigned to the appropriate fee services based on AQI workload data. For example, APHIS performs pest identification for shipments across all modes (air cargo, maritime cargo, truck cargo, etc.), and the pest identification costs were assigned to each mode based on the number of pest identifications performed for each mode.

Once all costs, including support costs that are necessary to support the operation of the centralized AQI system as a whole, were assigned to the appropriate fee services and modes, the fees were calculated based on the projected number of conveyances subject to inspection within each mode, using standard units such as a truck or airplane, as has been done in the past. The analysis did not further break down the conveyance classes into large and small shipments. Because of the volume of conveyances and people crossing the U.S. borders, the Government cannot inspect each piece of baggage, package, or conveyance. To deploy its limited resources most effectively, APHIS uses scientific data to target shipments associated with the highest risks of introducing pests or diseases into the United States. Importers and other parties pay the fees for all conveyances subject to inspection under the AQI program, whether or not we inspect the shipment or vessel. Several factors, including number of conveyances, risk targeting, and other criteria, drive inspection costs, but all conveyances subject to inspection contribute to the cost of, and benefit from, the AQI program.

Whether a fee should be set based on the marginal cost or average cost of the service provided is also a consideration. A fee equal to the marginal cost of providing the service would maximize efficiency. Marginal cost is equal to the cost of providing an additional unit of the good or service. Under perfect competition, the marginal cost and average cost of a product are equal to each other and to its price. Given that AQI services are not provided in a perfectly competitive environment, the fee assessed on each class is based on the average cost of the AQI services for that class. Based on historical data, we projected AQI program costs for the various fee classes (
e.g.,
air passenger, commercial aircraft, commercial cargo vessel, treatment, etc.). We then divided each class' total cost by the projected number of times that are expected to be provided to that class based on historical data.

One commenter stated that ABC is not required by Federal accounting guidance. The commenter stated further that there is no evidence that APHIS considered other methods of cost accounting. One commenter expressed concern that the economic model used to determine the new user fees was based on the findings of a single consultant and expressed doubt regarding the level of scrutiny the model received. The commenter also stated that a review of the AQI program should consider whether the ABC methodology is the most appropriate model for this type of operation as well as whether the data entered into the ABC model is consistent not only with current operations but also with international trade agreements.

While the ABC methodology is not required by Federal accounting guidance, it is a preferred cost accounting methodology within the manufacturing and service sectors, as noted by the Federal Accounting Standards Advisory Board in its Statement of Financial Accounting Standards (SFAS) No. 4: Managerial Cost Accounting Concepts and Standards for the Federal Government. SFAS No. 4 specifically directs the Federal Government to use managerial cost accounting identification methods to identify costs. The ABC methodology incorporates industry standards to ensure correctness, transparency, and repeatability in the assignment of costs from the APHIS and CBP financial systems to activities directly related to the delivery of AQI services. Due to the usefulness of ABC analysis in tracing costs through activities, it provides accurate product and service costs, which allows managers to evaluate the efficiency and cost-effectiveness of activities.

In 2009, APHIS set out to determine best practices in the Federal Government for fee setting. We published a statement of work seeking a competitive bid to provide assistance in AQI fee setting. Three major accounting firms proposed approaches to the work. Each firm included ABC as a best practice. The contract allowed a third party to analyze and make recommendations to APHIS and CBP on fee setting using applicable Federal guidance on fee setting. It was determined that managerial accounting was the appropriate approach based on Federal guidance and the use of ABC methods was the best approach to achieve a reasonable, reproducible, and transparent rule for fee setting. One commenter stated that APHIS should provide additional information about the methodology used to calculate the fees because there is reason to question whether costs have been properly calculated or appropriately allocated to specific activities for which user fees are paid. The commenter cited as an example the FY 2011 cost figures cited in the March 2013 Government Accountability Office (GAO) report (GAO-13-268 March 2013), which differs from the FY 2011 costs outlined in the proposed rule.

The commenter also stated that the ABC methodology can result in the over-absorption of overhead costs, and that there is no meaningful method of assigning “headquarters-level” overhead

costs to services. The commenters further stated that such “headquarters-level” costs, among others listed in the proposed rule, are properly considered “business sustaining” and should not be considered AQI program costs at all.

A second commenter, representing the trucking industry, echoed the latter point, stating that AQI fees should apply only when related to the direct inspection of incoming conveyances. The commenter opposed charging carriers for activities not directly related to the costs and activities of inspecting commercial conveyances, such as administrative or headquarters-level costs, as well as costs incurred for pest identification, scientific research, and policy development.

The difference in FY 2011 costs between the proposed rule and the GAO report resulted from the fact that the GAO report used preliminary results from the AQI user fee model,
i.e.,
the model developed by Grant Thornton to calculate costs used to run the AQI program.

In addition, the costs in the proposed rule separately show the cost of treatments, whereas the GAO cost numbers include the cost of treatments in each service or pathway. We followed Federal guidance related to fee setting and managerial cost accounting in determining AQI program costs. Specifically, we followed OMB Circular A-25: User Charges, which provides guidance on setting fees in the Federal government, and SFAS No. 4, which includes, among other things, a definition of full cost. OMB Circular A-25, which may be viewed at
http://www.whitehouse.gov/omb/circulars_default,
establishes the requirement that fees be set at full cost to the government, and provides a definition and examples for full cost. OMB Circular A-25 specifically defines full cost to include the support costs referred to by both commenters above, as well as the other costs listed by the second commenter. Certain Agency-level centralized services support APHIS' programs, including the AQI program. Centralizing these services at the Agency level, rather than having each program area maintain these services individually, increases government efficiency while reducing costs through elimination of redundancy. In the paragraphs that follow, we provide a breakdown of the services that support the AQI program and also discuss the included imputed costs. There are fewer support costs than were included in the April 2014 proposed rule.

The Environmental and Risk Analysis Services staff performs environmental assessments for the AQI program. This staff supports APHIS' mission of protecting and promoting American agriculture and natural resources by developing methodologies and providing documentation, training, advice, and technology for environmental compliance and risk-informed decisionmaking. This is accomplished by using the best available science and analytical methods to enable the Agency to make and implement decisions that are compliant with the U.S. environmental laws, other statutory obligations and policies, and international standards. These assessments are resources that are generally applicable to the AQI process. For example, this could include environmental impacts of methods used for the containment of pests introduced through the imports of goods. The AQI portion of these costs is assigned by the ratio of AQI full-time equivalents (FTEs) as a portion of APHIS' FTEs. (An FTE is the equivalent of the number of hours worked by one employee who works on a full-time basis.)

The Human Resources staff provides central services for human resource services for all APHIS employees. Only the AQI portion of these costs is included in the fees, and is assigned by the ratio of AQI FTEs as a portion of APHIS FTEs. Human Resources' primary services are to help employees accomplish their AQI work by:

• Recruiting and hiring

• Providing insurance and retirements benefits information

• Processing salaries, promotions, recognition, and benefits

• Providing policy guidance on performance and labor management

• Providing supervisors the training and tools they need to carry out their mission

• Promoting the health, safety, and security of employees

• Planning for workforce and succession needs

• Offering seminars on employee and leadership development

• Providing coaching, mentoring, and leadership transition services for managers

• Supporting employee development through USDA's on-line training system, AgLearn

The Information technology (IT) staff supports and maintains, or manages contracts for the various IT systems that are used by the AQI program. These systems include those that gather and analyze data related to threats from various pathways around the world, those that collect data used to support proper fee setting efforts, and those used to support permitting (especially used by importers). The AQI portion of these costs is assigned by the ratio of AQI FTEs as a portion of APHIS FTEs.

Central and shared services include the costs of utilities and telecommunication. Shared services are used by many programs. The shared services include copy services and machines and printing services. Programs such as AQI use these shared services regularly as part of their mission. These are centralized services which increase efficiency and reduce operational cost. Each program pays a portion of the total cost. The AQI portion of these costs is assigned by the ratio of AQI FTEs as a portion of APHIS FTEs.

APHIS depreciation costs are imputed costs and are associated with the square footage of facilities associated with AQI activities,
e.g.,
plant inspection stations. The facilities depreciation is assigned to AQI based upon the square footage of facilities associated with the AQI program. The equipment costs, such as those attributable to equipment used in identification of pests and diseases, are associated with AQI FTEs so that the costs can be distributed to AQI activities.

CBP also captures depreciation expenses, as opposed to the actual purchase price of property, plant and equipment, which is considered a capital expenditure (not an expense). Thus, the purchase is recorded as an asset and is then depreciated. Depreciation expense is the accounting process for capturing the cost of an asset by expensing it periodically throughout its useful life. While CBP frontline personnel/FTEs perform a wide array of activities in addition to agriculture inspections, including border security between the ports, air and marine interdiction, and immigration and customs inspections, CBP distributes depreciation expenses of facilities and equipment across all mission area activities proportionally based on FTEs so that no activity is overcharged.

USDA agencies and CBP also incur a series of costs, as required by law, related to their employees, including those employees who provide services to importers as part of the AQI programs. For example, USDA agencies are responsible for recognizing an imputed cost equal to the difference between the cost of providing retirement, health, and life insurance benefits to foreign employees and the contributions agencies currently remit to the State Department for them. The AQI portion of these costs is assigned by the ratio of AQI FTEs as a portion of APHIS FTEs.

Office of Personnel Management imputed costs include costs for pensions, Federal employee health benefits, and Federal employee life insurance costs. These costs are directly associated with AQI FTEs. These costs are distributed to the AQI program based upon the ratio of AQI FTEs to Agency FTEs. CBP also incurs this expense and distributes this cost across all mission areas proportionally based on FTEs within the CBP ABC model.

The Department allocates part of its imputed costs to each Agency. The AQI portion of these costs is assigned by the ratio of AQI FTEs as a portion of APHIS FTEs. These costs can be found in the USDA fiscal year 2015 Budget Explanatory Notes (Departmental Administration, found at
http://www.obpa.usda.gov/04da2015notes.pdf
).

Unemployment compensation is a financial liability that must be accounted for (all organizations that follow generally accepted accounting principles account for this). These are costs that are associated with FTEs, and, as such, the liability is distributed to AQI based upon the ratio of AQI FTEs as a portion of APHIS FTEs. CBP also incurs this expense and distributes this cost across all mission areas proportionally based on FTEs.

The Federal Employees' Compensation Act (FECA; 5 U.S.C. Chapter 81) provides compensation benefits to Federal employees for work-related injuries or illness and to their surviving dependents if a work-related injury or illness results in the employee's death. The FECA is administered by the Department of Labor (DOL), Office of Workers' Compensation Programs (OWCP). OWCP district offices adjudicate the claims and pay benefits, and the costs of those benefits are charged back to the employing agency. We have two unfunded liability-type costs: FECA unfunded accrual balance and FECA actuarial liability balance.

The FECA unfunded accrual balance is the current year's actual FECA expense paid by the DOL during the current year on APHIS' behalf. The FECA Special Benefits Fund pays benefits on behalf of Federal entities as costs are incurred and bills the Federal entity annually for the costs. The liabilities due to the FECA Special Benefits Fund are considered as unfunded at the time of receipt of the bill. Each Federal entity must record its portion of the FECA unfunded liability based on amounts provided by S. DOL. The entity's unfunded liability balance must equal the amount provided by DOL.

The FECA actuarial liability balance is DOL's estimate of FECA payments that will be made by DOL on behalf of APHIS in the future. The balance is periodically adjusted to reflect the current liability estimate. The actuarial estimate for the FECA unfunded liability is determined by the DOL using a method that utilizes historical benefit payment patterns related to a specific incurred period to predict the ultimate payments related to that period. The projected annual benefit payments are discounted to present value using OMB's economic assumptions for 10-year Treasury notes and bonds, and the amount is further adjusted for inflation. The projected number of years of benefit payments is about 35 years. Each federal entity must record its portion of the FECA actuarial liability based on amounts provided by the DOL. The agencies' actuarial liability balance must equal the amounts provided by DOL. The AQI portion of these costs is assigned by the ratio of AQI FTEs as a portion of APHIS FTEs. CBP also incurs this expense and distributes this cost across all mission areas proportionally based on FTEs.

USDA agencies are responsible for recording the unfunded liability for credit hours, annual leave, and compensatory leave. As employees expend credit hours, annual leave, and compensatory leave, these costs are expensed in the account(s) where those employees' salaries are ordinarily charged. Annual expenses of these amounts are thus already included as costs in those accounts. To identify the additional costs we have annually for unfunded leave, APHIS is required to capture the change in the unfunded leave balance from the end of the prior fiscal year. The difference between the 2 years is the amount of leave liability that must be accounted for. APHIS pro-rates this amount based upon the number of AQI FTEs as a portion of the total Agency FTEs. CBP also incurs this expense and distributes this cost across all mission areas proportionally based on FTEs.

Two commenters stated that indirect employee costs, such as workers' compensation expenses, are being incorporated into the new rate structure, but APHIS did not provide sufficient details on those costs. The commenters asked that APHIS provide this information as well as a concise accounting of related expenses associated with any cooperative agreements which utilize other Agency resources to perform AQI functions.

A detailed breakdown of the costs to which the commenters refer has been provided above. OMB Circular A-25, referred to earlier in this document, establishes Federal policy regarding fees assessed for government services. The Circular describes “full cost” as including all direct, support, and imputed costs to any part of the Federal Government of providing a good, resource, or service. This includes all direct and imputed personnel costs, such as worker's compensation costs. Indirect personnel costs are listed under imputed costs in Tables 1, 4, 6, 7, 8, 9, and 10 below. Cooperative agreement costs are completely separate from the AQI user fees. No cooperative agreement costs are included in the user fees and no user fee costs are included in cooperative agreement charges.

One commenter asked that APHIS provide additional data to demonstrate that the user fees charged for one user fee category would not be used to subsidize inspections of another type of user fee category. The commenter asked that we provide the dollar amount, if any, under the proposed rule that each user is projected to pay in AQI costs for a different class or classes of user for FYs 2015 through 2020.

User fees charged to one class of users will not be used to subsidize inspections of another class of users. As noted throughout this document, the use of cost accounting principles ensures that costs are aligned with activities that generate those costs and that costs can only be counted once.

One commenter asked that we provide all inputs into the cost base for the proposed AQI user fees that arise from non-AQI activities.

The AQI costs model calculations for the user fees did not include non-AQI costs. The model captured the non-AQI costs, but did not include them in the fee calculations.

Two commenters asked APHIS to provide the dollar amount of costs included in the AQI cost base for any and all types of users that are incurred at locations outside of U.S. customs territory.

Costs for offshore activities,
i.e.,
those performed outside the customs territory of the United States, are not directly related to the AQI program and are not included in the AQI cost base.

APHIS has provided summary tables by fee class (see Tables 1, 4, 6, 7, 8, 9, and 10 below), that identify the costs to the Federal Government of providing AQI services. These costs, including support and imputed costs, are accounted for in the APHIS and CBP financial systems of record. APHIS and CBP use the ABC methodology to align these costs with the activities of each fee class.

ABC is a two-step approach. First, financial costs are associated with program activities by the level of effort employed for each activity as determined by labor surveys, time and attendance data, and other available data. Second, the activity costs are then aligned with the fee classes to determine the fee class costs. A unit cost is calculated by dividing the total cost of the AQI fee class by the number of passengers or conveyances subject to inspection or other action in a given year, based on historical data. This `raw fee' is rounded up to ensure that revenue is sufficient to maintain the reserve balance. APHIS used data from 3 years of expenditures, FYs 2010 through 2012, to derive the new fee rates.

APHIS and CBP rely on the reserve account in years where program costs are greater than the revenue collected. While these funds can carry over from year to year, they are used for one-time costs associated with the AQI program, such as capital improvements and to cover the program costs when the revenue generated is less than the cost of the program. It is important not to include one-time costs in the calculation of the fees because doing so would overinflate the true cost of providing services. The ABC methodology ensures that the revenue collected will cover program costs and reserve requirements over the period the fees are in effect. While the reserve account is a single fund, the projected reserve amounts that each fee class would contribute to the AQI program reserve are included separately in the summary tables, to transparently show the total revenue generated by each fee class.

In response to concerns expressed by numerous commenters, we have made some changes to our methodology for calculating the AQI reserve amounts. As noted above, in calculating the fees for the April 2014 proposed rule, we relied upon a rounding method for generating the revenue to fund the reserve account. We rounded the fee up to the nearest $1 for fees less than $100 and to the nearest $25 for fees over $100. The use of this rounding method would have enabled us to achieve our reserve funding targets for the AQI program in 3 years. In this final rule, however, the fees by class are based on a 3-year average of the AQI costs, FYs 2010-2012, that have been inflated to FY 2016 dollars. To fund the reserve, these base fees are increased by 3.5 percent. Our use of this method has resulted in the reduction of all the fees contained in the April 2014 proposed rule except the commercial aircraft fee, the commercial cargo vessel fee, and the commercial cargo railcar fee. Under the 3.5 percent funding approach, a greater portion of these fees would have been used for funding the reserve than with the original rounding approach. The 3.5 percent reserve funding approach would have raised these three fees above their proposed levels. In order to ensure sufficient notice for affected entities, however, APHIS has decided not to raise any fees above those contained in the April 2014 proposed rule.

Commercial Air Passenger and Commercial Aircraft User Fees

One commenter asked that APHIS provide data underlying the proposed $4 AQI air passenger user fee.

Using our revised model for calculating the reserve resulted in a reduction of the air passenger fee to $3.96 in this final rule. Further breakdown of the calculations leading to the new air passenger AQI user fee is shown below in Table 1.

Table 1—Air Passenger Fee Calculation

Air Passenger Fee $3.96

FY 2010 data:

APHIS AQI FTEs
223

APHIS Total Cost
$21,711,724

APHIS Imputed Cost
$1,593,447

APHIS and USDA Support Cost
1,910,180

CBP Total Cost
266,497,469

CBP Imputed Cost
21,951,183

CBP and DHS Support Cost
87,468,279

Reserve Amount
$14,527,679

Number of Passengers
76,448,705

Calculated Unit Cost
$3.77

FY 2011 data:

APHIS AQI FTEs
224

APHIS Total Cost
$20,829,319

APHIS Imputed Cost
$1,566,108

APHIS and USDA Support Cost
391,307

CBP Total Cost
270,317,238

CBP Imputed Cost
20,470,874

CBP and DHS Support Cost
84,458,217

Reserve Amount
$21,082,947

Number of Passengers
78,901,506

Calculated Unit Cost
$3.69

FY 2012 data:

APHIS AQI FTEs
225

APHIS Total Cost
$22,604,086

APHIS Imputed Cost
$2,051,921

APHIS and USDA Support Cost
1,779,664

CBP Total Cost
287,962,928

CBP Imputed Cost
20,471,708

CBP and DHS Support Cost
85,405,303

Reserve Amount
$−4,491,747

Number of Passengers
77,255,476

One commenter expressed concern that APHIS may be charging the aircraft fee for passenger flights and suggested working together to secure refunds for those parties who were incorrectly charged.

The international air passenger user fee covers the costs for services related to the inspection of selected passenger baggage and the oversight of the handling of regulated garbage generated on airplanes carrying passengers entering the customs territory of the United States. Our mission is to prevent the entry of foreign agricultural plant pests and diseases into the United States. APHIS can include the cost of inspecting commercial aircraft that carry passengers in the international air passenger user fee if those costs directly relate to passenger baggage or regulated garbage. APHIS does not include the cost of inspecting cargo or the cargo hold area of the plane in the passenger fees.

The commercial aircraft user fee pays the costs of inspecting the aircraft itself, cargo inspection, the cargo hold, and the costs of monitoring aircraft disinfection if: (1) Such services occur during the regular hours of service (8 a.m. to 4:30 p.m. Monday through Friday) or (2) inspection of the cargo is concurrent with inspection of the aircraft.
2

Cargo owners may request inspection outside of regular business hours, but would be subject to reimbursable overtime costs under 7 CFR 354.1 in addition to the applicable AQI user fee. Airlines send their payments to our lockbox quarterly, no more than 31 days after the close of each quarter along with a written statement with required information as detailed in § 354.3(e)(3). The system is based on self-reporting; however, regular audits are conducted to make sure payment is received for all aircraft covered by this fee. If an entity is incorrectly charged a commercial aircraft fee, the entity can direct its refund inquiry to the Supervisor of the Financial Management Division's Debt Management Team. The type of proof or documentation the airline sends to the team to support its refund request depends on the exemption in § 354.3(e)(2) that the airline believes itself entitled to, and the documentation thus varies.

2
Even if a plane carries no cargo, it is subject to inspection because it could carry insect pests, weed seeds, waste material from garbage, or other waste that is capable of harboring animal disease.

One commenter asked that we provide CBP's costs, from each FY from 2010 to the present, for providing preclearance or pre-inspection services to commercial air passengers at locations outside the customs territory of the United States.

Table 2 below contains CBP's preclearance costs for FY 2012 through FY 2014. CBP charges costs appropriately based on activity whether it is immigration, customs, or agriculture.

Table 2—Air Passenger Preclearance Expenses

Data in whole dollars
FY 2012
FY 2013
FY 2014

Preclearance Expenses
$86,600,433
$93,537,883
$105,495,491

Several commenters expressed concern regarding the impact of the rule on express consignment carriers. (As defined in 19 CFR part 128, an express consignment carrier is “an entity . . . moving cargo by special express commercial service under closely integrated administrative control. Its services are offered to the public under advertised reliable, timely delivery on a door-to-door basis. An express consignment operator assumes liability to Customs for the articles in the same manner as if it is the sole carrier.”) One commenter stated that the commercial aircraft user fee is not commensurate with the cost of providing AQI services to express consignment carriers. Several commenters expressed concern that the costs for use of office space, equipment, and supplies, which express consignment carriers are required to provide to CBP under 19 U.S.C. 58c(b)(9)(B)(ii) and 19 CFR. 128.11(b)(7)(iii) in Express Consignment Clearance Facilities (ECCFs), which are essentially bonded warehouses that are able to handle express high volume parcel flows into the United States, have been included in the calculation for the AQI commercial aircraft fee, resulting in duplicate fee assessments.

The Trade Act of 2002 (Pub. L. 107-210) section 337, codified as 19 U.S.C. 58c (b)(9)(A)(ii) and (b)(9)(B), authorized the establishment of the ECCF fee to reimburse CBP for the customs processing costs incurred at those facilities. The original fee was set at 66 cents per individual airway bill or bill of lading and was later increased to $1 effective July 2008. Congress also mandated that 50 percent of the ECCF fee collection be paid to the Secretary of the Treasury. Because the other half of the ECCF fees are deposited in the Customs User Fee Account, for budgetary purposes, they are reported as part of the Consolidated Omnibus Budget Reconciliation Act (COBRA) user fees. Together, the COBRA and ECCF User Fees financially support certain, statutorily-enumerated costs related to customs inspection functions. These user fees support the customs inspection functions performed by CBP and the Customs Broker Program. These user fees support CBP's mission of facilitating legitimate trade and travel while keeping the United States secure. CBP collects Express Consignment Fees to help recover the costs of providing customs cargo processing services to express consignment carriers or centralized hub facilities. The fee is not for agricultural inspection services.

AQI user fees reimburse agriculture inspections in ECCFs because these activities are separate from the customs processing costs incurred at those facilities. The ABC model uses a series of financial and workload data to derive CBP program costs. The ECCF fees under COBRA only support the customs inspections and the AQI user fees only support the agriculture inspections. CBP charges, tracks, and reports this activity using its ABC systems and analyses.

The user fee does not differ based on the class of aircraft inspected because the risks we are seeking to address and nature of the AQI services provided do not differ based on the class of aircraft inspected. The costs associated with the inspection of commercial aircraft are averaged, and all flights pay the same user fee. CBP also does not differentiate between types of commercial aircraft carrying cargo. There is no duplication of costs in the fees. The ABC model gathers costs by activity type and drives those costs to the cost pools by fee type. The costs from the financial systems of APHIS and CBP are entered into the ABC model, and the output of the model must equal those costs entered into the model, thereby ensuring that all costs are accounted for and that no cost was duplicated. Therefore, the costs for use of office space, equipment, and supplies, which express consignment carriers are required to provide to CBP under 19 U.S.C. 58c(b)(9)(B)(ii) and 19 CFR 128.11(b)(7)(iii) in ECCFs, have not been included in the calculation for the AQI commercial aircraft fee.

Several commenters asked APHIS to explain its claimed cost differentials between private and commercial aircraft inspections. The commenters stated that exempting private aircraft from paying user fees creates a competitive distortion because private aircraft compete with commercial aircraft to some extent. The commenters also stated that exempting private aircraft from the user fees is contrary to the FACT Act.

The Airport and Airway Development Act of 1970 limits charges to private aircraft to $25.00. Private aircraft are defined by the Act as not being used to transport passengers or property for compensation. Currently, no AQI fees are collected for the inspection of private aircraft and their passengers. The cost is less than $13 million, and the additional cost of creating and operating fee collections led us to recommend that private aircraft and their passengers continue not to be subject to an AQI user fee. APHIS is not required to charge fees to any specific group of service users. The FACT Act authorizes APHIS to establish fees in a reasonable manner to recover funds spent on safeguarding activities. As stated previously, those costs not recovered through a user fee are paid for through appropriated funding.

One commenter asked that APHIS provide information concerning the penalty collections and how they may offset our AQI costs.

Penalty collections do not offset the costs we incur in administering the AQI program. Penalties are assessed separately under a different authority than the authority under which APHIS conducts its AQI user fee program. Any amounts the Federal Government assesses in fines to individuals or parties whom we catch attempting to smuggle prohibited items, such as fruits, vegetables, plant pests or flower bulbs, into the United States are sent to a general fund at the U.S. Treasury Department. The fines are not deposited into any AQI account or used to pay for AQI services.

The same commenter requested more information on how the Agency projects the pool of users from which it proposes to recover costs. Specifically, the commenter asked that APHIS provide the source of data and any assumptions made regarding the annual number of both international airline passenger arrivals and international aircraft arrivals in the United States that APHIS anticipates will be subject to AQI fees. The commenter also asked for a description of any internal or external review of this data or quality control of this data.

A second commenter also asked that APHIS identify the base numbers used

for airline passenger and aircraft arrivals in the Grant Thornton study and the regulatory impact analysis (RIA) that accompanied the proposed rule and compare them to industry-standard sources such as the U.S. Department of Transportation's T-100 data. The commenter also asked that APHIS verify the reliability of data derived from the workload projections listed in Table 6 of the proposed rule and asked for the number of users of AQI services that do not pay AQI fees.

We used data provided by the International Air Transport Association (IATA) regarding the annual number of international aircraft and international airline passenger arrivals in the United States. The T-100 data includes data provided by IATA. The Grant Thornton study used preliminary results from the AQI model in order to provide information for APHIS decisionmaking for the proposed user fee rates. The study had many fee structure options for AQI cost recovery. Once the decisions on fees were made, Grant Thornton finalized the ABC model that provided the figures found in the proposed rule based on the user fee setting guidance provided by GAO. Based on the data we received, APHIS determined that the actual and estimated volumes of passengers and conveyances provided in Table 6 of the proposed rule are accurate and the amount of service users that do not pay user fees can be readily calculated.

One commenter asked for a description and the number of any and all types of aircraft not subject to AQI fees. The commenter also asked what the costs were of inspecting types of aircraft not subject to AQI fees.

Under § 354.3(e)(2)(iv), all passenger aircraft originating in any country that have 64 or fewer seats and that do not carry certain regulated articles are exempt from paying the aircraft AQI user fee. APHIS maintains the 64-seat plane size distinction in harmony with CBP and other U.S. Government agencies with jurisdiction over civil aviation. APHIS does not maintain data on the number of exempted arrivals because the airlines do not report those flights. In FY 2012, the most recent year for which we have data, the cost of inspecting aircraft not subject to AQI fees was $12,361,173.16. Those costs not recovered through a user fee are paid for through appropriated funding.

Commenters requested information regarding the number of penalties and the dollar amount of any and all penalties assessed or paid for AQI violations for: (1) Commercial aircraft carrying only passengers and passenger baggage (no cargo), (2) commercial aircraft engaged solely in the transportation of cargo, (3) commercial aircraft carrying passengers and passenger baggage and cargo, and (4) private aircraft for each year between FY 2010 and the present. It was requested that we provide the number of pest interceptions for each of these types of AQI aircraft inspection for each year between FY 2010 and the present.

The collection of civil penalties and assessments is authorized under 31 U.S.C. 3806. Under this authority, APHIS and CBP assess penalties for AQI violations and remit the funds as miscellaneous receipts in the Treasury of the United States. The dollar amount of penalties assessed for AQI violations between FY 2010 and FY 2013 are shown below in Table 3. Please note that this data is not limited to aircraft. Because APHIS does not track penalties in accordance with the categories the commenters provided (commercial airline, noncommercial airline, etc.), we are not able to provide that level of specificity.

Table 3—Penalties Assessed for AQI Violations
[Figures in whole dollars]

Dept. of Agriculture
FY 2010
FY 2011
FY 2012
FY 2013

Fines, Fees, and Forfeitures
$3,881,627
$3,466,238
$2,860,793
$2,857,019

All arriving international commercial flights are subject to the commercial airline clearance fee and inspection. APHIS does not collect pest interception data in a manner that allows distinction based upon the airline flight categorization model. For example, we do not distinguish carriers carrying special express items from others. We maintain pest interception data only to make risk decisions using applicable risk data such as country of origin, transit country, host material, etc. Collecting pest interception data for the categories suggested by the commenter would be administratively burdensome to maintain and would not improve our ability to make risk-based decisions.

Two commenters asked for specific information related to commercial aircraft and airline passenger AQI user fees. The commenters asked that APHIS provide, for each FY from 2010 to the present, the total cost of AQI inspections for each type of aircraft operation, the number of AQI inspections performed, broken out by type of inspection if there are different types, and the time spent on AQI inspections performed for each type of aircraft operation. The commenters asked that the aircraft operation types be quantified and broken down into the following categories: Commercial aircraft carrying only passengers and passenger baggage (no cargo), commercial aircraft engaged solely in the transportation of cargo, commercial aircraft carrying passengers and passenger baggage and cargo (“combination” services), private aircraft, and any other categories of aircraft not included elsewhere.

APHIS designed its AQI user fee structure to be simple and easily understood. This allows our stakeholders to save on effort and cost for determining fee costs and what would be payable to APHIS under a complex fee structure. APHIS and CBP save resources and costs by not having to design a process for administering a complex fee structure. This helps to keep the fee costs to the payer as low as possible. A simple fee structure benefits both the stakeholders and the Federal Government. As mentioned above, it would be administratively burdensome to charge and audit a multitude of fees for the many different types of commercial aircraft and their cargo that enter the United States. Federal guidance states that costs should be estimated from the best available records and that new systems need not be established solely for the purpose of fee setting. Further breakdown of the cost calculations for the commercial aircraft AQI user fee is shown below in Table 4. This fee did not change as a result of the modification in our method of calculating the reserve.

Table 4—Commercial Aircraft Fee Calculation

Commercial Aircraft Fee $225.00

FY 2010 data:

APHIS AQI FTEs
295.38

APHIS Total Cost
$56,315,442

APHIS Imputed Cost
$4,217,943

APHIS and USDA Support Cost
$5,427,502

CBP Total Cost
$98,929,370

CBP Imputed Cost
$8,089,831

CBP and DHS Support Cost
$32,682,288

Reserve Amount
$−7,323,737

Number of Aircraft
657,427

Calculated Unit Cost
$236.14

FY 2011 data:

APHIS AQI FTEs
290.68

APHIS Total Cost
$55,601,929

APHIS Imputed Cost
$4,203,426

APHIS and USDA Support Cost
$2,266,408

CBP Total Cost
$105,721,353

CBP Imputed Cost
$7,783,047

CBP and DHS Support Cost
$32,007,936

Reserve Amount
$−3,678,381

Number of Aircraft
700,644

Calculated Unit Cost
$230.25

FY 2012 data:

APHIS AQI FTEs
290

APHIS Total Cost
$54,520,540

APHIS Imputed Cost
$4,153,439

APHIS and USDA Support Cost
$2,554,914

CBP Total Cost
$103,225,589

CBP Imputed Cost
$7,340,236

CBP and DHS Support Cost
$30,530,745

Reserve Amount
$4,085,346

Number of Aircraft
719,251

Calculated Unit Cost
$219.32

Several commenters asked for a detailed description of the categories of costs that are covered by the aircraft AQI fee applicable to commercial passenger aircraft (cargo inspections, inspections of cargo hold area, passenger baggage, etc.).

The commercial passenger aircraft AQI fee covers the following categories of costs:

Table 5—APHIS and CBP AQI Activities Related to Commercial Air Passengers

APHIS AQI Activities Related to Commercial Air Passengers:

—Asian Gypsy Moth Offshore (AGM) Mitigation Program Coordination and Operations.

—AQI Outreach.

—CITES program and enforcement.

—Containment Facilities.

—Database Management Operations.

—Design, present, receive non AQI-related training (Department required training).

—Develop Quarantine Policy for the Ports of Entry.

—Develop Regulations, Manuals and Standards.

—Emergency Action Notifications.

—Manage Agency Quality Assurance Program.

—Manage the Import Permitting Process.

—Manage the Pest Permitting Process.

—National Clean Plant Network (import).

—Offshore Pest Information Program (OPIP) operations.

—Perform pest and disease identification.

—Perform Trend Analysis.

—Policy Development and Implementation.

—Port Environs Survey.

—Post-entry Quarantine Operations (PEQ).

—Propagative Plants and Plant Materials Inspection Operations.

—Provide Investigative Enforcement Services.

—Safeguarding.

—Smuggling, Interdiction, & Trade Compliance (SITC) Operations.

—Support overseas programs.

—Trade.

—Verification of Compliance Agreements, Accreditation and Certification Programs.

CBP AQI Activities Related to Commercial Air Passengers:

—Cargo—Air.

—Compliance Checks—Air.

—Non-Intrusive Technology—Passenger—Air.

—Examine—Compliant Passengers—Air.

—Interception Process—Air.

—Individual Mail.

—Interception Process—Mail.

—Safeguarding.

—Antiterrorism—Trade.

—NTC (National Targeting Center).

—Courier Mail.

—Compliance Checks—Misc.

—Cut Flower Release—Air.

—Informed Compliance—Air.

—Antiterrorism—Passenger—Air.

—Identify—Air.

—Examine—Noncompliant Passengers—Air.

—Personnel Management & Development.

Several commenters asked for an explanation and data supporting the manner in which the proposed rule allocates AQI user fees between air passenger and aircraft operators in the case of expenses listed twice (once for each type of user) in the proposed rule, namely monitoring and storage of regulated garbage and removal of regulated garbage from the aircraft and inspection of the aircraft hold, as well as any other AQI cost categories that are attributed to more than one payer.

Both the structure of the official financial accounting system of record, which follows Federal accounting standards, and the ABC analysis software do not allow the counting of costs more than once. The use of the ABC model as well as the software program used ensures that costs are not counted twice. The ABC methodology uses a causal relation between resources (general ledger costs) and activities and activities and user fees. We used workload data associated with each activity, based on a causal relationship, to “drive” the costs to the appropriate fee area. In addition, the modeling software ensures that the cost coming into the model (data from the official financial accounting system of record) is equal to the costs that are assigned to each “layer” of the model (activities and fees/services).

APHIS does not track the action of removing and disposing of regulated garbage, but rather captures those costs through various activities. There is no need or requirement within the cost model to use such information because the actions relative to regulated garbage are included within the existing activities, and therefore, do not provide information for decisionmaking in fee setting. Compliance checks and verification of compliance agreements are two key activities related to regulated garbage. ABC analysis captures the cost of compliance checks for various conveyance modes in separate activities and assigns the costs to the appropriate fees. Compliance checks performed by CBP cost approximately $15 million, and this activity cost was assigned to the calculation of the fee for passenger aircraft and cargo aircraft based on the number of compliance inspections performed for each type of aircraft. Verification of compliance agreements, performed by APHIS, costs approximately $4.5 million, and is assigned to all cargo outputs (modes) because this cost is not initially captured by mode. Another example of an activity that is not explicitly counted and tracked is pest identification performed by APHIS employees. This activity is performed for all modes, and the cost of the activity is assigned to each mode based on the number of pest identifications performed for each mode using workload data recorded by APHIS.

Several commenters asked for an explanation of the types of aircraft operations subject to the fee variously referred to in the proposed rule, RIA, and supporting documents as “Commercial Air (Cargo only),” “Commercial Aircraft,” and “air cargo fee.”

The regulations in 7 CFR 354.3 define a “commercial aircraft” as any aircraft used to transport persons or property for compensation or hire. This term may refer to aircraft carrying either passengers or cargo or a mixture of both

passengers and cargo. The term “commercial air (cargo only)” refers to those commercial aircraft carrying only cargo. The term “air cargo fee” may be used interchangeably with “commercial aircraft user fee,” and applies to aircraft carrying passengers (and cargo).

Commercial Vessel (Cruise) Passenger and Commercial Vessel User Fees

One commenter asked that APHIS provide data underlying the proposed $2 AQI commercial vessel (cruise) passenger user fee.

As a result of the change in our method for calculating the reserve amount, this fee has been reduced to $1.75 in this final rule, while the vessel fee remains unchanged from that contained in the proposed rule. Further breakdown of the calculations leading to the new sea passenger and commercial vessel AQI user fees are shown below in Tables 6 and 7.

Table 6—Commercial Vessel (Cruise) Passenger Fee Calculation

Commercial Vessel (Cruise) Passenger Fee $1.75

FY 2010 data:

APHIS AQI FTEs
7

APHIS Total Cost
$2,011,416

APHIS Imputed Cost
$149,332

APHIS and USDA Support Cost
$175,193

CBP Total Cost
$16,315,113

CBP Imputed Cost
$1,348,650

CBP and DHS Support Cost
$4,892,097

Reserve Amount
$1,971,842

Number of Passengers
11,599,069

Calculated Unit Cost
$1.58

FY 2011 data:

APHIS AQI FTEs
9

APHIS Total Cost
$2,352,414

APHIS Imputed Cost
$179,034

APHIS and USDA Support Cost
$94,061

CBP Total Cost
$21,322,812

CBP Imputed Cost
$1,405,434

CBP and DHS Support Cost
$5,269,074

Reserve Amount
$−1,034,502

Number of Passengers
12,931,271

Calculated Unit Cost
$1.83

FY 2012 data:

APHIS AQI FTEs
9

APHIS Total Cost
$2,301,838

APHIS Imputed Cost
$171,207

APHIS and USDA Support Cost
$95,235

CBP Total Cost
$19,891,404

CBP Imputed Cost
$1,405,065

CBP and DHS Support Cost
$5,326,912

Reserve Amount
$1,488,571

Number of Passengers
13,532,465

Calculated Unit Cost
$1.64

Table 7—Commercial Vessel Fee Calculation

Commercial Vessel Fee $825.00

FY 2010 data:

APHIS AQI FTEs
188

APHIS Total Cost
$34,609,899

APHIS Imputed Cost
$2,552,290

APHIS and USDA Support Cost
$3,502,650

CBP Total Cost
$54,959,507

CBP Imputed Cost
$4,522,814

CBP and DHS Support Cost
$17,740,837

Reserve Amount
$7,171,744

Number of Vessels
117,262

Calculated Unit Cost
$763.84

FY 2011 data:

APHIS AQI FTEs
183

APHIS Total Cost
$31,795,471

APHIS Imputed Cost
$2,383,368

APHIS and USDA Support Cost
$1,392,632

CBP Total Cost
$62,330,388

CBP Imputed Cost
$4,490,189

CBP and DHS Support Cost
$17,602,759

Reserve Amount
$−10,145,808

Number of Vessels
101,794

Calculated Unit Cost
$924.67

FY 2012 data:

APHIS AQI FTEs
182

APHIS Total Cost
$30,714,122

APHIS Imputed Cost
$2,320,790

APHIS and USDA Support Cost
$1,730,986

CBP Total Cost
$62,745,589

CBP Imputed Cost
$4,440,037

CBP and DHS Support
$17,605,694

Reserve Amount
$365,064

Number of Vessels
113,727

Calculated Unit Cost
$821.79

The current regulations provide an exemption from the payment of user fees for the crew members on duty on an arriving aircraft. In the proposed rule, we proposed to allow the same exemption for crew members on duty aboard an arriving cruise ship. One commenter asked for clarification as to the definition of a crew member on duty, since ships have operations, maintenance and inspection requirements, and schedules that are radically different than the air industry. Therefore, migrating the exemption for airlines to the shipping industry may not be the most precise and effective way to address this matter. The commenter asked that this exemption be reworded or clarified, for example, to apply to “all persons onboard for purposes related to the operation of the ship.”

We agree with the commenter that clarification is necessary regarding the definition of a crew member on duty. Therefore, we are amending the regulations to exempt from the sea passenger AQI user fee “all vessel crew members onboard for purposes related to the operation of the vessel.” Such crew members include those that provide support for dining and entertainment.

Commercial Truck User Fees

APHIS used CBP data associated with truck crossings at the border to determine the appropriate fee. We found that 91 percent of truck crossings at the border use transponders, and the remaining 9 percent of trucks pay the per-crossing commercial truck inspection fee. We are able to associate the total cost of commercial truck inspections with the transponder and per- crossing inspection fee based upon these percentages. Based upon the data CBP provided to Grant Thornton, it was determined that 9 percent of the total cost associated with the per-crossing fee equated to the proposed fee of $8. As a result of the change in our methodology for calculating the reserve, however, the per-crossing fee has been reduced to $7.55 in this final rule. The transponder fee has undergone a corresponding reduction from $320 in the April 2014 proposed rule to $301.67 in this final rule. Approximately 64 percent of the cost of inspecting trucks with transponders will be covered by CBP's annual appropriation. Further breakdown of the calculations leading to the new commercial truck AQI user fee is shown below in Table 8.

Table 8—Commercial Truck Fee Calculation

Commercial Truck Fee

FY 2010 data:

Per crossing @ $7.55:

APHIS AQI FTEs
8.9

APHIS Total Cost
$1,333,487

APHIS Imputed Cost
$98,765

APHIS and USDA Support Cost
$124,512

CBP Total Cost
$5,075,771

CBP Imputed Cost
$417,721

CBP and DHS Support Cost
$1,258,435

Reserve Amount
$656,425

Number of Trucks
911,701

Calculated Unit Cost
$7.03

Transponder @ $301.67

APHIS AQI FTEs
80.1

APHIS Total Cost
$13,483,031

APHIS Imputed Cost
$998,620

APHIS and USDA Support Cost
$1.258,950

CBP Total Cost
$51,236,081

CBP Imputed Cost
$4,223,618

CBP and DHS Support Cost
$18,153,846

Amount Paid through Appropriation
$31,838,590

Number of Transponders Sold
108,995

Calculated Unit Cost
N/A

FY 2011 data:

Per crossing @ $7.55:

APHIS AQI FTEs
8.3

APHIS Total Cost
$1,204,362

APHIS Imputed Cost
$91,087

APHIS and USDA Support Cost
$488,231

CBP Total Cost
$5,510,967

CBP Imputed Cost
$398,917

CBP and DHS Support Cost
$1,742,792

Reserve Amount
$276,673

Number of Trucks
931,391

Calculated Unit Cost
$7.21

Transponder @ $301.67

APHIS AQI FTEs
74.7

APHIS Total Cost
$12,177,737

APHIS Imputed Cost
$920,996

APHIS and USDA Support Cost
$488,231

CBP Total Cost
$55,709,551

CBP Imputed Cost
$4,033,489

CBP and DHS Support Cost
$17,621,560

Amount Paid through Appropriation
$35,006,766

Number of Transponders sold
108,995

Calculated Unit Cost
N/A

FY 2012 data:

Per crossing @ $7.55:

APHIS AQI FTEs
8.3

APHIS Total Cost
$1,291,233

APHIS Imputed Cost
$95,921

APHIS and USDA Support Cost
$64,961

CBP Total Cost
$6,029,614

CBP Imputed Cost
$430,024

CBP and DHS Support Cost
$1,891,285

Reserve Amount
$8,051,901

Number of Trucks
1,066,477

Calculated Unit Cost
$7.63

Transponder @ $301.67:

APHIS AQI FTEs
74.7

APHIS Total Cost
$13,055,804

APHIS Imputed Cost
$969,871

APHIS and USDA Support Cost
$654,099

CBP Total Cost
$60,966,102

CBP Imputed Cost
$4,348,022

CBP and DHS Support Cost
$19,122,988

Amount Paid through Appropriation
$40,684,656

Number of Transponders Sold
110,509

Calculated Unit Cost
N/A

One commenter asked for further clarification of wording in the final rule to make it clear that inspections of commodities that are imported under existing phytosanitary agreements would be considered commercial truck inspections and would be subject to the commercial truck fee rather than the proposed new treatment fee.

Any inspection undertaken after the new AQI user fees become effective would be subject to all applicable fees. Commercial trucks crossing the border are subject to inspection of both the trucks and their contents, and therefore subject to the commercial truck fees. If the contents of the shipment are required to undergo treatment to be eligible for U.S. entry, then the treatment fee would apply as well.

Commercial Rail User Fees

Although we did not receive any comments regarding the new commercial rail AQI user fee, we are providing a further breakdown of the calculations leading to that user fee below in Table 9. That commercial rail fee remains the same as we proposed in the April 2014 proposed rule.

Table 9—Commercial Rail Fee Calculation

Commercial Rail Fee $2.00

FY 2010 data:

APHIS AQI FTEs
5

APHIS Total Cost
$2,745,539

APHIS Imputed Cost
$204,796

APHIS and USDA Support Cost
$281,810

CBP Total Cost
$3,860,112

CBP Imputed Cost
$317,174

CBP and DHS Support Cost
$1,380,312

Reserve Amount
$−1,168,901

Number of Rail Cars
2,718,375

Calculated Unit Cost
$2.43

FY 2011 data:

APHIS AQI FTEs
5

APHIS Total Cost
$1,122,289

APHIS Imputed Cost
$85,461

APHIS and USDA Support Cost
$45,039

CBP Total Cost
$5,983,503

CBP Imputed Cost
$317,650

CBP and DHS Support Cost
$1,402,576

Reserve Amount
$−1,281,372

Number of Rail Cars
2,912,210

Calculated Unit Cost
$2.44

FY 2012 data:

APHIS AQI FTEs
5

APHIS Total Cost
$1,147,199

APHIS Imputed Cost
$85,432

APHIS and USDA Support Cost
$57,455

CBP Total Cost
$5,765,358

CBP Imputed Cost
$412,247

CBP and DHS Support Cost
$1,810,754

Reserve Amount
$−452,233

Number of Rail Cars
3,230,167

Calculated Unit Cost
$2.14

Treatment User Fees

Many commenters expressed concern regarding a perceived lack of transparency in how APHIS calculated the new cost category for treatments and lack of rationale for establishing the $375 treatment fee level.

As discussed in greater detail below, we have decided to lower the treatment fee from the $375 that we originally proposed to $237 and phase it in over a 5-year period. The fee will be set initially at $47 and then rise to $95 in the second year, $142 in the third, $190 in the fourth, and $237 in the fifth. APHIS recognizes that there are additional costs for providing treatment services during non-business hours. APHIS has determined that an equitable fee would provide a flat fee for services rendered during normal business hours, and the normal fee plus overtime costs for services rendered after hours. A breakdown of the calculations leading to the new treatment AQI user fee is shown below in Table 10.

Table 10—Treatment Fee Calculation

Treatment Fee $47.00 *

FY 2010 data:

APHIS AQI FTEs
82

APHIS Total Cost
$8,596,204

APHIS Imputed Cost
$605,763

APHIS and USDA Support Cost
$918,924

CBP Total Cost
N/A

CBP Imputed Cost
N/A

CBP and DHS Support Cost
N/A

Reserve Amount
$−6,815,750

Number of Treatments
37,882

Calculated Unit Cost
$226.92

Treatment Fee $95.00 *

FY 2011 data:

APHIS AQI FTEs
80

APHIS Total Cost
$6,657,765

APHIS Imputed Cost
$479,722

APHIS and USDA Support Cost
$306,391

CBP Total Cost
N/A

CBP Imputed Cost
N/A

CBP and DHS Support Cost
N/A

Reserve Amount
$−3,058,975

Number of Treatments
29,713

Calculated Unit Cost
$ 226.92

Treatment Fee $142.00 *

FY 2012 data:

APHIS AQI FTEs
79.61

APHIS Total Cost
$5,915,416

APHIS Imputed Cost
$512,688

APHIS and USDA Support Cost
$344,521

CBP Total Cost
N/A

CBP Imputed Cost
N/A

CBP and DHS Support Cost
N/A

Reserve Amount
$−536,172

Number of Treatments
38,517

Calculated Unit Cost
$285.92

* Table 10 shows how APHIS derived the treatment user fee for the first 3 years of the 5-year implementation period.

APHIS used the actual data to analyze the potential fee rates. We then applied

inflationary factors for those years that would be impacted by the fees in order to determine the correct fee amount, initially using the rounding method to ensure proper reserve funding. As noted above, in this final rule, APHIS has used a different method to calculate the reserve amounts, applying a flat 3.5 percent increase above the unit cost of providing AQI services to fund the AQI reserve.

Stakeholders can use the methodology present in these tables by referring the projected total activity cost and projected counts of activities to replicate the data found in this table.

One commenter stated that while APHIS indicates that there are certain activities related to the proposed new treatment fee, the exact components of conducting and monitoring treatments that warrant a $375 fee are unclear. The commenter asked that APHIS clarify specific elements incorporated into the calculation of the treatment fee level and the costs associated with each component.

As we have noted, in this final rule, we are lowering the treatment fee to $237. APHIS will phase this fee in over a 5-year period. APHIS prescribes different types of treatments for pests of quarantine significance when found upon inspection or for commodities that present high risk. There are various approved chemical treatments: Fumigants, dips, and sprays. The fumigants include methyl bromide, phosphine, and sulfuryl fluoride. Non-chemical treatments include cold treatment, hot water immersion, vapor heat treatment, steam sterilization, and irradiation. All the treatment types require specific methods and monitoring by APHIS personnel. APHIS determines the necessary resources (FTEs) put forth toward the treatment fee activity. This enables the ABC model to accurately assign costs to the treatments. This cost is then divided by the number of treatments that the APHIS personnel conduct or monitor.

One commenter stated that some commodities require treatment, such as cold treatment or fumigation, as a condition of entry into the United States. The commenter suggested that, rather than assessing an additional fee for those commodities already treated prior to arrival at the U.S. port of entry, such commodities should only be subject to the treatment fee if a quarantine pest is found at the port of entry necessitating additional treatment and direct supervision by APHIS.

The fee will be charged as the commenter suggests. Entities will be assessed the fee only if treatment is required and is performed in the United States and monitored by an APHIS inspector.

One commenter asked whether the treatment fees also apply to oversight provided by APHIS for fumigations on commodities exported from the United States that require a phytosanitary certificate.

Treatment services provided to facilitate export of U.S. commodities to foreign countries are not part of the calculated fee schedules. Exporters of U.S. commodities are charged a separate fee for export certification.

Stakeholder Input and Peer Review

Several commenters stated that the process to develop the proposed rule was not transparent because APHIS failed to provide and share data and information used in developing the proposed rule with affected stakeholders prior to the proposal's publication. The commenters referred to Executive Order 13563, which requires regulatory agencies to seek out public participation in rulemaking, including affected stakeholders.

Executive Order 13563 requires that regulatory agencies adopt regulations through a process involving public participation. To this end, APHIS held several stakeholder briefings to keep stakeholders informed during the evaluation of our user fee program and the development of the new user fees:

• September 9, 2011—Stakeholder Briefing: APHIS/Grant Thornton presented the preliminary findings from the AQI user fee review;

• May 1, 2013—Stakeholder Briefing: APHIS/Grant Thornton presented costs to deliver AQI services and factors that drive costs;

• April 22, 2014—APHIS announced proposed adjustments to AQI user fees;

• May 29, 2014—Stakeholder Briefing (two webinars): APHIS presented proposed adjustments to AQI user fees; and

• July 9, 2014—Stakeholder Briefing (webinar): APHIS presented proposed adjustments to AQI user fees.

Invitations to all of the 2014 events were distributed via the APHIS stakeholder registry and via direct email. The last email invitation was sent on June 27, 2014, to 11,164 unique subscribers.

In addition, APHIS provided the opportunity for comment on the proposed rule for 60 days, which was then extended another 30 days to allow for additional public comment.

APHIS provided two documents, “Fee Setting Process Documentation and Recommendation” (dated October 25, 2011), and “AQI Fee Schedule Assessments and Alternatives, Revised” (dated May 21, 2012), along with the proposed rule to help clarify APHIS' costing methodology. Two commenters expressed concern that the documents were not peer reviewed or reviewed by the USDA's Chief Economist and that APHIS failed to seek public comment on either the documents or the models that form the basis of the change in implementation of the AQI user fee program.

The documents provided by Grant Thornton, which were made available along with the proposed rule for public review and comment, were to advise APHIS and CBP on decisionmaking only. These were information-gathering documents used to help inform APHIS' decisionmaking and, as such, were not required to be peer-reviewed. The documents led to detailed policy discussions that took place at the Agency and Department levels with both APHIS and CBP. USDA and the OMB reviewed the proposed rule and the RIA. Several meetings and briefings that included Department and OMB personnel took place on several occasions, and discussions included issues such as fee alternatives, methodologies employed by Grant Thornton, and work the contractor did to support the economic analysis. The final decisions were well-informed, including reviews that included GAO.

Overtime

Several commenters requested that detailed information be provided on how much revenue overtime services generate and how CBP determines which officers fall into the overtime category. The commenters asked why Sundays have a higher overtime rate than other days.

CBP revenue overtime services generated through the end of the month of July (for 2014) totaled $379,506.82 for the Agriculture Reimbursable Overtime and $19,525.50 for the Wood Inspection Reimbursable Overtime. CBP utilizes the National Treasury Employees Union (NTEU)/CBP collective bargaining agreement contract for employees in determining employee eligibility and overtime assignment. In general, overtime assignments are based on the lowest earner and availability of personnel. CBP officers are paid under the authority of the Customs Officer Pay Reform Act (19 U.S.C. 267, as amended). Under that authority, customs officers are entitled to 1.5 times the rate of their base pay for Sunday work if Sunday is one of their regularly scheduled work days. Customs officers whose regular work days are Sundays who work in excess of 8 hours on a Sunday are entitled to 2 times their base pay for that

day's work, but are not eligible to receive Sunday premium pay differentials. The Sunday overtime rate is higher for APHIS officers than for other days of the week because our officers are paid a higher rate for their work time on Sundays. Because our fees were developed to cover the full cost of inspections, including employee salaries, the Sunday fees are correspondingly higher. APHIS and CBP do not factor reimbursable overtime fees into the costs of the AQI user fees. Reimbursable costs are charged separately from the user fee.

As stated in the proposed rule, we used the ABC methodology to determine the cost of AQI activities and their associated outputs and services. One commenter expressed concern regarding a perceived lack of clarity regarding the alignment of the proposed fee schedule with the increase in overtime rates that was concurrently proposed. The commenter stated that, before either proposal moves forward, APHIS must document, for public review, the cumulative effect of these increases.

In calculating the flat treatment fee for the proposed rule, we did initially factor in the overtime component to arrive at the figure of $375. We did not anticipate charging overtime fees in addition to that flat fee. Because the required RIA accompanying the proposed rule was based on that original proposed fee of $375, the analysis did examine the full economic impact of the new fee, including the overtime component.

In this final rule, we are removing the overtime component from the flat fee, thus lowering the flat fee to $237. This fee will be phased in over a 5-year period. The difference between the proposed fee and the final $237 fee is $138. This difference represents the costs that are projected to be recovered through charging for reimbursable overtime. When treatment-related AQI services are applied outside of normal business hours, both the flat fee and overtime charges will apply. This manner of assessing these fees is consistent with the way we assess our other AQI user fees. APHIS can identify the amount of reimbursable overtime attributed to AQI treatments based upon the accounting attributes in the financial system. We will also continually review our business practices in relation to our treatment operations with the goal of reducing our costs and thereby reducing the fees.

APHIS/CBP Partnership

One commenter expressed concern regarding how much AQI user fees would go to APHIS compared to the amount kept by CBP.

APHIS and CBP maintain ABC models that accurately assign costs for activities related to each fee area. The basis for distribution of AQI user fees between APHIS and CBP is the cost to each agency of performing the AQI functions covered by a particular fee. Section 421(f) of the Homeland Security Act of 2002 mandates that CBP and USDA agree on a periodic transfer of funds from the latter to the former. In FY 2013, CBP received $366 million from AQI user fees. APHIS collects fees to recover the costs of providing inspection activities for international arrivals of passengers, conveyances, animals, plants, and agricultural goods at ports of entry. AQI fees reimburse the costs of CBP Agriculture Specialists, CBP officers performing agriculture inspection services, and support costs. In FY 2013, the revenues from the current fee levels covered 80 percent of CBP's costs incurred providing inspection activities associated with the passengers and conveyances that are subject to fees.

CBP will receive the collections provided by the rate adjustments for maintaining the existing operations of agricultural inspection functions. A small portion of the collections will fund treatment functions performed by APHIS. In addition, APHIS will maintain a small balance,
i.e.,
“reserve,” of user fee funds to cover costs during collection lag periods and for unanticipated changes in volumes and potential bad debt costs. As stated previously, the FACT Act authorizes APHIS to maintain a reasonable balance in the AQI account.

One commenter pointed out that the “AQI Cost Analysis” section of the proposed rule lists the National Targeting Center (NTC) as a CBP initiative, implemented since 2011, that is contributing to the necessity to raise user fees. However, the commenter stated that, since the NTC has been in existence for over 10 years, it is not a new initiative and asked why the costs of the NTC have led to the need to raise AQI fees now. The commenter stated that Table 3 of the proposed rule lists over $7 million in 2014 NTC costs that were factored into the AQI Cost Analysis and asked whether this amount represents the entire cost of the NTC or if it is only for some portion related to AQI activities.

To expedite the processing of travelers and cargo, CBP officers deploy pre-departure screening through a variety of programs and activities. The NTC, in particular, screens relevant traveler and cargo information, including the examination of manifest data, prior to their admission into the United States. This approach is a key part of CBP's layered security strategy to protect the homeland by extending U.S. borders outward to identify and mitigate threats, interdict possible terrorists, criminals, and suspect cargo before they can board or be loaded on a conveyance destined for the United States. Through use of targeting, CBP decreases costs, including AQI user fee costs, by identifying low-risk and high-risk travelers and shipments prior to their presentation at a U.S. port of entry for admission.

Since 2009, we have seen growth in both trade and travel leading to an increase in passenger and cargo volumes. Total passenger volume in FY 2013 was 6.4 percent higher than in FY 2011, and non-immigrant arrivals during the same period increased by nearly 9 percent. Total import value in FY 2013 was nearly 5 percent higher than FY 2011. Based on available industry and government data, we expect these trends to continue and estimate that total air passenger volume for FY 2015 will increase 4 percent (approximately 3.7 million air passengers) at the top 10 U.S. airports when compared to FY 2012 data. Because the conveyance fees cover the inspection costs of the cargo during the normal tour of duty of our employees, increases in cargo volumes necessitate increases in the conveyance fees to recover these expanded cargo inspection costs. Note that the costs of inspection of cargo occurring outside the normal tour of duty of our employees are recovered separately through reimbursable overtime collections, costs not included in the AQI fees. The $7 million listed as 2014 NTC costs represent that portion of NTC that relates specifically to AQI activities on imports.

Two commenters stated that APHIS should address several issues identified during review of the AQI program, such as inconsistent data between APHIS and CBP. One commenter stated that it is not acceptable for APHIS to raise user fees without addressing its own internal issues and communication with CBP. A second commenter stated that, with additional funds generated by the user fees, APHIS should have the resources necessary to address these issues.

APHIS and CBP identified the correct data to use in the model and eliminated the identified inconsistencies. Issues such as these in a very large operation are continuous in nature as the activities change, new systems become available, priorities change, or new demands for information arise. The data is relevant and it is part of official government systems. APHIS and CBP are

continually working together to enhance data collection. In addition, CBP will continue the implementation of the business transformation initiative of the International Trade Data System (ITDS). CBP will use ITDS to report data for the importation and disposition of arriving and transiting fresh fruits and vegetables cleared at ports of entry. The source-verifiable data provided by the trade prior to arrival will result in increased accuracy and simplified data entry. ITDS will allow for the elimination of duplicative data entry and will significantly reduce the overall amount of time currently spent by CBP agriculture specialists or CBP officers entering data. The agencies will not fund through AQI user fees those activities that are not associated with AQI services.

Cost Savings Measures

One commenter requested that APHIS provide an analysis of the cost savings achieved when one agent, typically a CBP officer, provides inspection services for AQI, customs clearance, and immigration processing. The commenter stated that such a review should be undertaken to ensure that cost savings achieved by sharing employee resources are passed along to the fee-paying users in the form of fee reductions or exemptions.

The ABC analysis relied on actual personnel expenses to identify the staffing cost for border stations of all sizes. CBP costs in support of the AQI mission include training and technical advice to CBP officers and other CBP personnel on regulatory requirements pertaining to compliance with agricultural regulations and the processing of passengers with regard to compliance with agriculture regulations, primarily at low volume ports of entry in the passenger environment. In the absence of a CBP Agriculture Specialist, CBP and APHIS have consistently committed to ensuring that CBP officers have been provided with the knowledge and information needed to identify possible pest risks and to make the appropriate decision to mitigate that pest risk. Therefore, the cost savings realized by lower staffing levels at some border crossings is somewhat offset by the expense of additional training needed by those officers.

One commenter stated that no analysis was made to see if cost savings could be achieved through more efficient operations.

We are constantly working to improve our efficiency and cut costs. For example, we have taken steps to reduce our personnel-related expenditures, thereby reducing the costs of inspection, by using lower-salary-grade employees to perform certain tasks when doing so would not compromise effectiveness, and implementing shift work to reduce our overtime costs. The use of X-ray technology, the Internet, online databases, and specially trained detector dogs has helped make our inspection and clearance processes more efficient. Nevertheless, the costs of providing AQI services do rise from year to year due to inflation and staffing increases. The proposed user fee increases will enable us to recover the full costs of maintaining the AQI program. We welcome the submission of information at any time that would help us contain costs or enhance our efficiency.

One commenter asked to see the computations that show how APHIS initiatives to increase efficiencies and overall effectiveness to save cost and time work to offset any increase in costs as a result of increased AQI expenditures. As an example, the commenter pointed out that the proposed rule states that the development of new treatment techniques will save time and costs, but Table 3 within the proposal appears to show a continued annual increase in costs. The commenter asked for an explanation of this apparent disparity.

APHIS PPQ has recently realigned its core functional areas into three components: Policy Management, Field Operations, and Science and Technology. By realigning this way, we were able to eliminate many redundancies within different units and keep our AQI budget static while doing more AQI work. For example, plant inspection station management is handled by Field Operations. By having Field Operations handle management of what is essentially an operational program, we are better able to collect data via a risk-based sampling method, which will help inform future inspection rates of commodity-country combinations. In Policy Management, we were able to better centralize management structures of AQI policy, enabling us to get information to CBP more quickly than before our reorganization.

As APHIS assesses its user fees, volumes, collections, and ongoing reserve balances, it will initiate rulemaking to increase or decrease the fees as necessary. We review our fees on a biennial basis to ensure that the fees charged are commensurate with the costs of inspection and inspection-related activities and, if necessary, undertake rulemaking to amend them. We will adjust a fee up or down, as appropriate, depending on the actual cost of providing services. In most cases, we propose user fee increases so that the fees will keep up with inflationary costs as well as any new expenses, and propose user fee decreases when efficiencies are implemented.

One commenter stated that APHIS should develop specific accounting processes in order to ensure that the increased fees are properly collected and that such fees remain appropriate related to modifications in agency activity. The commenter further stated that specific details should be provided regarding the anticipated improvements in clearance and efficiency at the borders related to the fee increase so that overall effectiveness can be easily monitored.

APHIS and CBP continue to invest in resources that will improve our customer services and ability to safeguard American agriculture. However, we have determined that revised user fees are necessary to recover the costs of the current level of activity, to account for increases in the cost of doing business, and to improve how fees align with the costs associated with each fee service. In FY 1992, APHIS established accounting procedures to segregate AQI user fee program costs from all other costs. We published a detailed description of these procedures in the
Federal Register
on December 31, 1992 (57 FR 62469-62471, Docket No. 92-148-1), as part of an interim rule amending some of our user fees. APHIS maintains all AQI fees we collect in distinct accounts, carefully monitors the balances in these accounts, and only uses these funds to pay for our actual costs for providing these distinct services. In addition to the ABC analysis to develop the proposed user fee schedule, one of the objectives of the Grant Thornton contract was to create a method that was repeatable. We are currently updating the ABC model annually with cost and activity data so that we can monitor, measure, and model for management and decisionmaking.

Additional Comments

Three commenters asked APHIS to make public its current and historic reserve levels by user class.

The AQI reserve levels by user fee category for FY 2010 through 2012 are provided in Tables 1, 4, 6, 7, 8, 9, and 10. Grant Thornton used the ABC method to develop fees and inform APHIS decisionmaking. Grant Thornton developed the ABC data through time-sensitive surveys to determine current and forecast future program costs and revenue recovery potential of fee schedules. Prior to Grant Thornton's

ABC model, APHIS did not use the fee classes to track historical reserve levels.

The fees established in this final rule will align funds collected through user fees and the AQI reserve with the actual cost of safeguarding activities performed by the agencies.

Two commenters asked for a description of how APHIS ensures that reserve funds collected from commercial aircraft passengers and for commercial aircraft inspections are spent only on inspections of passengers and aircraft, respectively, in subsequent years.

As noted above, Grant Thornton developed the ABC data through time-sensitive surveys to determine current and forecast future program costs and revenue recovery potential of fee schedules. This forecasting will ensure that reserve funds are collected and spent only on inspections related to the relevant class of user. APHIS did not use the fee classes to track historical reserve levels, and the retroactive application of the ABC method analysis is not a valid use of the data.

Several commenters stated that APHIS should justify the timing of apparent salary increases that increase proposed fees. Specifically, one commenter noted that anticipated salary increases for the CBP journeyman officers would add $40 million to baseline costs.

Salary increases are set by law, Department leadership, or collective bargaining agreements. When provided, cost of living increases for government employees take effect at the beginning of each calendar year. The timing of salary increases is in no way related to the proposed rates. APHIS and CBP forecast known increases based upon Federal Government forecast guidance issued by OMB, and by known salary increases that would be in place at the time that the user fee rule was finalized.

Further, APHIS and CBP do not coordinate employee compensation levels and the agencies did not increase salaries to inflate AQI user fee costs. OPM issued a revised GS-1800 Inspections, Investigation, Enforcement and Compliance Standard for CBP officers and Border Patrol agents during April 2011. The new standard provides detailed descriptions based on the audits and interviews that the OPM position classifiers learned from on-site visits to field locations and operational and human resources staffs. CBP also conducted a rigorous review of the work responsibilities and expectations of frontline personnel that have continuously increased since CBP became the principal border control agency. OPM and CBP found that the officer's daily work is consistent with that of individuals working at the GS-12 level. The work factors that merit the salary increase include the wide variety of laws that are enforced, a shift to proactive, intelligence-driven work using sophisticated technology and infrastructure, increased violence at the borders and focus on terrorist activities, and work with other law enforcement agencies and enforcement-related activities.

One commenter asked APHIS to list, by AQI user fee category, any costs paid by AQI user fees that are also paid through appropriations.

No costs that are paid for by user fees are also paid for using APHIS appropriations, nor will they be as a result of this rule.

On May 1, 2013, APHIS held a stakeholder meeting to discuss AQI program costs. Two commenters asked that APHIS describe the data sources underlying the 2010 AQI program study, including defining the following terms referred to in the stakeholder meeting: AQI program costs, APHIS support, cost by activity from the CBP cost model, APHIS workforce labor survey, and workload data for outputs and drivers (Operations Management Recording (OMR), Pest ID, Work Accomplishment Data System (WADS)). The commenters asked that the briefing document discussed during the meeting be included in the docket.

AQI program costs are the costs incurred by APHIS and CBP to provide inspection and other services that prevent the introduction of harmful plant pests and animal diseases.

APHIS support costs encompass both Agency administrative support and program support functions. The ABC model used by CBP has costs by activities tracked by expenditures. APHIS used a workforce labor survey to generate data comparable to the CBP ABC model. A workforce labor survey is a method of collecting information on the level of effort that an organization expends in a set of activities such that labor costs found in a financial system can be allocated to the activities of an organization. The ABC model collects costs into cost pools and uses workload data to drive the costs to the fee classes. Workload data for outputs and cost drivers are data used to establish a cause and effect relationship between an organization's activities and what it produces. The workload data enables an organization to allocate the costs of its activities to what it produces. The document referred to by the commenter was made available alongside the proposed rule and therefore is already included as part of the official docket. It can be viewed by visiting the link listed in footnote 1.

Several commenters noted in the proposed rule that APHIS “rounds up” projected costs by user by either $1 or $25 in setting AQI fee levels. The commenters stated that the legal justifications for this rounding-up are not evident and needs to be explained fully.

As previously mentioned, the FACT Act authorizes the Secretary of Agriculture to prescribe and collect fees to cover the cost of providing the AQI services covered in the proposed rule. This authority provides that the funds collected will be available until expended. GAO states in its Federal User Fee Design guide that “with permanent authority, funds are available until expended, which enables agencies to carry forward unexpended collections to subsequent years and match fee collections to average program costs over more than 1 year.” This enables agencies to carry forward unexpended collections to subsequent years in a reserve fund and match fee collections to average program costs over more than 1 year. AQI policy is to maintain a 3- to 5-month reserve, but when the AQI fee study was conducted, that reserve had been significantly diminished due to the economic downturn. As a result, one of the requirements of the fee study was to allow for the replenishment of the AQI fund reserve. To do so, we rounded the projected unit cost to collect additional revenue for the reserve. While there is no specific guidance regarding rounding up for fees, it is a common practice when setting fees, especially for programs that maintain a reserve, but also for administrative simplicity.

In this final rule, however, we did not use the rounding method described above to fund the reserve. APHIS has applied a 3.5 percent increase above the unit cost of providing AQI services in order to fund the AQI reserve. The new fees, other than those for commercial aircraft, commercial cargo vessels, and commercial cargo railcars, include a 3.5 percent increase for replenishment of the reserve. For these three fee classes, a 3.5 percent increase would raise the new fees above their proposed levels. In this final rule, these three fees are kept at their proposed levels, and therefore will provide smaller shares of their revenue to the reserve replenishment.

APHIS' analysis of methods of providing sufficient revenue to include a reasonable reserve identified 3.5 percent as a level that provides for funding the reserve while minimizing the impact on the payers of the fees to the greatest extent possible. APHIS further believes that using a flat rate of

3.5 percent without raising any fees above those originally proposed meets the needs and expectations of both the Federal Government and of those who pay the AQI fee.

Several commenters asked for the number of FTEs, for both APHIS and CBP, committed to each class of user for FY 2010 to the present.

The number of APHIS FTEs for FYs 2010 through 2012 can be found in Tables 1, 4, 6, 7, 8, 9, and 10. The numbers of APHIS FTEs dedicated to each class of user for FY 2013 are listed below in Table 11. The number of CBP FTEs dedicated to each class of user for FYs 2010 through 2013 is listed below in Table 12. The number of CBP FTEs dedicated to sea passengers is not available as those user fee classes were not tracked prior to the proposed rule. CBP is not involved in treatment activities that are covered under the treatment fee. CBP does oversee disinfection activities for conveyances or equipment. However, disinfection activity costs are not included in the calculation of the treatment fee.

Table 11—APHIS Full-Time Equivalent Employees (FTE) for FY 2013

Commercial Aircraft
289.96

Commercial Rail
5.42

Commercial Truck
83.18

Commercial Vessel
181.76

Commercial Vessel Passenger
9.01

Treatments
79.61

Table 12—CBP Full-Time Equivalent Employees (FTE) for FY 2010 Through 2013

User fee class
2010
2011
2012
2013

Air Passenger
1,412
1,403
1,433
1,276

Commercial Aircraft
265
276
267
254

Commercial Rail
21
25
23
19

Commercial Truck
330
314
340
301

Commercial Vessel
304
314
269
284

On September 28, 2009, we published in the
Federal Register
(74 FR 49311-49315, Docket No. APHIS-2009-0048), an interim rule that amended the user fee regulations by adjusting the fees charged for certain AQI services that are provided in connection with certain commercial vessels, commercial trucks, commercial railroad cars, commercial aircraft, and international airline passengers arriving at ports in the customs territory of the United States. The rule was published to help recover the costs of inspections and related support services, in response to the economic downturn, as well as to maintain a reasonable reserve balance. On November 4, 2009, we published in the
Federal Register
(74 FR 57057, Docket No. APHIS-2009-0048) a document withdrawing the interim rule prior to its effective date in order to explore other regulatory alternatives. One commenter asked what the results were of that exploration, specifically whether the results were published and whether viable alternatives were available.

The regulatory alternatives we considered for revising the AQI user fees were described in the proposed rule as well as the supporting analysis published along with the proposed rule entitled “AQI Fee Schedule Assessment and Alternatives (May 21, 2012).” These alternatives included several that were rejected because they either would not meet the objective of better ensuring that the fees paid by users in the various fee classes are commensurate with the costs of the AQI services provided for each class or because the transaction costs of creating and operating fee collection systems would be overly burdensome. The proposed rule represented our preferred alternative.

Three commenters stated that APHIS and CBP must provide more timely invoices for all fees. The commenters stated that, when invoices are delayed, there is no guarantee that the local contact, such as a vessel agent, will be able to collect the funds from the carrier, which means these agents can be held liable for those costs. The commenters suggested that the regulations be amended to stipulate that invoices will be provided within 30 days of performing AQI services.

APHIS does not provide invoices. Customers pay at the time of entry into the United States or when they purchase an airline ticket or transponder. CBP provides a CBP Form 368 Collection Receipt at the time of the entrance of the vessel with payment of the AQI user fee. Vessels are required to submit payment receipts covering the current calendar year at each port of call, with the cycle recommencing the next calendar year. We do not provide invoices for aircraft clearance or arriving international air passenger fee collections either. Air carriers remit theses collections on an honor basis in accordance with our current regulations.

Several commenters asked whether APHIS can demonstrate that it is currently collecting all the revenues it is entitled to receive through the AQI program. The commenters stated that, if there are shortcomings in internal processes which result in lost revenues from some sources, other program fees should not be increased to compensate.

As mentioned in the proposed rule, APHIS recently conducted a comprehensive fee review to determine the current cost of specific AQI services supported by user fees. That review determined that the AQI program was not recovering the full cost of its fee services, including costs of administering the user fee program and maintaining a reasonable reserve in the fee accounts. Some of this non-recovery is due to the fact that most of the current fees do not accurately reflect the current full cost of the services related to those fees. However, some of this non-recovery is also due to prior APHIS policy that capped fee collection for certain classes of commercial conveyances within a calendar year and that exempted certain classes of users from fee collection. The adjustments to the current AQI user fees are designed to recover the full cost of providing AQI services, commensurate with the class of persons or entities paying the fees, and are based on an analysis of our costs for providing services in FYs 2010 through 2012, as well as our best projections of what it will cost to provide these services in FYs 2015 through 2017. The adjustments will also allow us to maintain the AQI reserve account. These user fee adjustments are necessary to recover the costs of the current level of activity, to account for actual and projected increases in the cost of doing business, and to more accurately align fees with the costs associated with each fee service.

Two commenters asked for confirmation that the reserves will be kept within the AQI user fee program and not used for any other APHIS program. One commenter asked for additional information regarding how AQI user fee reserves are dispersed. The commenter noted that the AQI reserve is

intended for use during periods of low import flow, but asked for clarification of what specifically constitutes a lower flow of imported products. One commenter asked if there is a way for stakeholders to have input on when and how the reserves are used and asked whether the reserves will be carried over from each fiscal year and be allowed to accumulate.

By law APHIS collects AQI fees to fund the AQI program. These funds may not be used to supplement or pay for any program in APHIS or CBP that is not directly related to the AQI program. Any excess of user fee collections over costs remains available from year to year in a dedicated reserve account to be used only to fund AQI and related program costs. OMB actively monitors AQI reserve levels keeping in mind our goal of maintaining a 90- to 150-day operating reserve. OMB provides oversight of the AQI funds and the funded reserve. Low import flow occurs when the number of imports diminishes enough that we are unable to meet the 3- to 5-month reserve. As we have noted, we have sought stakeholder input throughout this rulemaking process and would do so again in any future rulemaking involving AQI user fees.

Economic Impacts

Numerous commenters stated their opposition to the proposed AQI user fee increases on the grounds that they would create economic burdens on U.S. small businesses.

The increases in AQI user fees have been methodically derived using activity-based costing. With the rule, AQI service recipients will pay fees that more closely match the costs of providing those services. We do not expect the AQI fee increases to create significant economic burdens for a substantial number of U.S. small businesses. The additional burden will vary by user fee class (mode of transportation) because the cost of providing the AQI services varies by class and each user fee class has its own current fee deficit (or in the case of air passengers and cargo railcars, fee surplus). By user fee class, the burden will be proportional to the extent to which an entity is engaged in transporting goods to the United States, that is, the cost to businesses that make fewer entries at ports will be proportionally less than the cost to businesses that make a greater number of entries. Small businesses within each class will not be disproportionately impacted. We discuss the potential impacts of the rule on small businesses later in this document, beneath the heading “Executive Orders 12866 and 13563 and Regulatory Flexibility Act.”

A few commenters stated that the imposition of new user fees could set back the maritime industry's slow recovery from the recession, particularly small and medium firms involved in the trade of perishable goods throughout southern Florida. In particular, several of these commenters stated that the fees we proposed could cause economic hardship on flower producers and the cut flower industry.

A few commenters acknowledged that user fee increases were necessary, but opposed the magnitude of the increases we proposed, citing concerns to small businesses involved in importation and transportation.

Also, several commenters stated that the fees we proposed will have a negative effect on trade relations between Peru and the United States. They stated that the proposed fees affect jobs and consumers in the United States as well as in Peru and specifically noted that the Peruvian asparagus industry is connected with American consumers through a large chain of importers, carriers, organizations, and retailers.

In addition, the Government of Chile expressed concern that the compounding effect of our proposed fee increases for overtime services (contained in a separate proposed rule published in the
Federal Register
on April 25, 2014 (79 FR 22887-22895, Docket No. APHIS-2009-0047)), for conveyances and for treatment will have a negative effect on trade between Chile and the United States. Particular concern was expressed about how the new treatment fee proposed in this rulemaking could disproportionately affect Chile's agricultural exports, because shipments of fresh fruits from Chile are subject to fumigation requirements.

As noted above, we are lowering the treatment fee in this final rule from the $375 originally proposed to $237 while we attempt to develop additional cost-cutting measures in our treatment operations. APHIS will phase this fee in over a period of 5 years. This change will reduce the burden caused by the introduction of the treatment fee on affected entities, including Chilean exporters. As we have already noted, overtime fees will only apply to treatments conducted outside normal business hours. Under the FACT Act, the Secretary of Agriculture has the discretionary authority to prescribe and collect user fees sufficient to cover the cost of providing AQI services. As amended, the Act stipulates that the fees be commensurate with the costs of AQI services, with respect to the class of persons or entities paying the fees. With the exception of the treatment fee and cruise passenger fee, the fees in the proposed rule are long-established fees, and, as explained in the rules that established them, the fees are necessary for us to recover the costs of providing AQI services to the conveyances and passengers to which they apply. Similarly, for the reasons explained in the preamble to the April 2014 proposed rule and in this document, we have determined that the new cruise passenger and treatment fees are necessary to recover the costs we incur in connection with providing AQI services to such passengers and cargo.

Several commenters stated that the proposed fee for AQI treatment services and the proposed increases in fees for cargo vessel and aircraft inspections will result in significant trade barriers for importers of perishable products such as cut flowers and fresh produce.

We have statutory obligations under the Animal Health Protection Act and Plant Protection Act to prevent the introduction or dissemination of animal and plant pests and diseases into the United States. When we consider a shipment of plants or plant products to pose an unacceptable plant pest risk, whether because of a pest discovery at the port of arrival or otherwise, phytosanitary treatment can allow the shipment to enter the United States. If the shipment is not considered to pose an unacceptable plant pest risk, no treatment is required and no fee for AQI treatment services will be incurred. AQI services, including those for overseeing treatments, enable trade that would not be able to otherwise take place. The fee for AQI treatment services and the increases in user fees for truck, cargo vessel, and aircraft inspections have been calculated using the ABC methodology to ensure that the fees collected, by class, are commensurate with the costs of the AQI services provided.

One commenter stated that APHIS should quantify benefits of inspections with results and workload projections.

The collection and analysis of data on pest interceptions and workload trends are mainstays of the AQI program. CBP and APHIS use the data in numerous ways to inform operational and staffing decisions and planning. As noted elsewhere in this rule, workload projections were used in setting the AQI user fees. While that data is indispensable for those purposes, our RIA for this rule did not quantify, in an economic sense, the benefits associated with pest detections (as the avoided costs of a pest outbreak would be speculative) or workload projections.

A number of commenters pointed out that, in the preamble of the proposed rule, we cited the impact of the 2010 economic recession on AQI user fees collected. The commenters stated that levels of imports and exports have increased significantly since 2010, and asked whether there was still a basis for the rule given this increase in trade. Similarly, another commenter stated that the proposed fee raises are based on dated information, and that since the time of the study, many inspection costs have gone down.

The 2010 recession decreased our AQI fee reserve account. The account has been used to ensure the AQI program continued to fully operate when there were instances in which the fees we assessed did not provide revenue sufficient to support the AQI services rendered. The recession underscored the inefficiency of using the reserve to recover ongoing AQI-related costs in such a manner, and highlighted the need to charge user fees that ensure full cost recovery for those services, especially in times of economic downturn. It also highlighted the need to ensure that all user fee schedules are set using a methodology that will result in cost recovery for those services. The ABC method used to inform the fee schedules in the proposed rule is such a methodology. It is important to note that AQI services increase when imports increase. We have set our fees based upon the activity cost of the services delivered. Revenue generated from the fees will reflect the change in services delivered. In the economic short run, the reserve may be used to support temporary increased AQI program levels so that fees would not require an emergency adjustment.

In addition, we note that an increase in trade, in and of itself, would not increase our user fee reserve. In fact, insofar as we would have to provide AQI-related services more

[Text truncated at 120,000 characters. The full text is on the page linked above.]

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2015-27363. Public record. Not legal advice.