User Fees; Agricultural Quarantine and Inspection Services

DEPARTMENT OF AGRICULTURE

Animal and Plant Health Inspection Service

7 CFR Part 354

[Docket No. 96-038-3]

RIN 0579-AA81

User Fees; Agricultural Quarantine and Inspection Services

AGENCY: Animal and Plant Health Inspection Service, USDA.

ACTION: Final rule.

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SUMMARY: We are amending the user fee regulations by adjusting the fees

charged for certain agricultural quarantine and inspection services we

provide 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. We are setting user fees in advance for

these services for fiscal years 1997 through 2002. We have determined

that the fees must be adjusted to reflect the anticipated actual cost

of providing these services through fiscal year 2002.

EFFECTIVE DATE: September 1, 1997.

FOR FURTHER INFORMATION CONTACT: For information concerning Program

Operations, contact Mr. Jim Smith, Operations Officer, Program Support,

PPQ, APHIS, 4700 River Road Unit 60, Riverdale, MD 20737-1236, (301)

734-8295.

For information concerning rate development, contact Ms. Donna

Ford, User Fees Section Head, FSSB, BAD, APHIS, 4700 River Road Unit

54, Riverdale, MD 20737-1232, (301) 734-8351.

SUPPLEMENTARY INFORMATION:

Background

The regulations in 7 CFR 354.3 (referred to below as the

``regulations'') contain provisions for the collection of user fees for

certain agricultural quarantine and inspection (AQI) services provided

by the Animal and Plant Health Inspection Service (APHIS). These

services include, among other things, inspecting 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 from points outside the United

States. (The customs territory of the United States is defined in the

regulations as the 50 States, the District of Columbia, and Puerto

Rico.)

These user fees are authorized by section 2509(a) of the Food,

Agriculture, Conservation, and Trade Act of 1990 (21 U.S.C. 136a). This

statute, known as the Farm Bill, was amended by section 504 of the

Federal Agriculture Improvement and Reform Act of 1996 (Pub. L. 104-

127), on April 4, 1996.

As amended, the Farm Bill provides that APHIS may prescribe and

collect fees sufficient to cover the cost of providing AQI services 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 airline

passengers. The Farm Bill, as amended, also provides that APHIS may

prescribe and collect fees sufficient to cover the cost of providing

preclearance or preinspection at a site outside the customs territory

of the United States to such passengers and vehicles. The Farm Bill, as

amended, further states that the fees should be sufficient to cover the

cost of administering the fee program, and sufficient to maintain a

reasonable balance in the Agricultural Quarantine Inspection User Fee

Account. In addition to user fees, the Farm Bill, as amended,

authorizes APHIS to assess late payment penalties and interest charges

if a person fails to pay a fee when due. The Farm Bill, as amended,

establishes a no-year fund, known as the ``Agricultural Quarantine

Inspection User Fee Account'' (Account), in the Treasury of the United

States. All fees, late payment penalties, and interest charges

collected by APHIS through fiscal year (FY) 2002 are to be deposited in

the Account. For each FY 1997 through 2002, funds in the Account are

available to APHIS, until expended, to cover the costs of providing AQI

services and administering the AQI program.

For each of FYs 1997 through 2002, fees collected in excess of $100

million may be used to cover the costs of providing AQI services and

are automatically available.

Under the Farm Bill, as amended, we may spend all AQI user fees we

collect in excess of $100 million for FYs 1997 through 2002, as long as

we spend the money only to provide AQI services. Any money we do not

spend must remain in the Account. After FY 2002, any unobligated

balance in the Account and any other amounts collected but not

disbursed will be credited to APHIS for future AQI activities.

On January 27, 1997, we published in the Federal Register (62 FR

3823-3830, Docket No. 96-038-1) a proposal to amend the regulations by

adjusting our user fees for servicing 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 from points outside the United States

and setting user fees in advance for these services for FY 1997 through

2002.

We solicited comments concerning our proposal for 60 days ending

March 28, 1997. We received 15 comments by that date. They were from

county and State government agencies, airline industry representatives,

maritime representatives, and agriculture representatives, including

producers and farmers.

Five commenters approved of the proposal as written. Ten commenters

opposed some portion of the proposal, supported part of the proposal,

or offered suggestions for improvements. Several commenters disagreed

with the amount of our fees, questioned our projections, or questioned

fees such as the annual truck decal, the vessel fee, and the aircraft

fee versus the international passenger fee. We carefully considered the

comments, all of which are discussed below by topic, and reviewed our

analysis. However, none of the commenters offered additional

information to revise our analysis. In the absence of any new

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information, we continue to believe that the analysis presented in the

proposal is sound and that the proposed fees are appropriate.

Therefore, based on the rationale set forth in the proposed rule and in

this document, we are adopting the provisions of the proposed rule as a

final rule without change.

Fees for 6 Years in Advance

Two commenters disliked our proposal to adopt user fees for 6 years

in advance; three commenters liked the idea.

By proposing user fees in advance for a 6-year period, we are

responding to comments we received in response to past proposals. Those

commenters stated that it was difficult to make business plans without

knowing in advance when fees would change and by how much. Also,

commenters have, in the past, objected to large fee increases, even

though they occurred infrequently. We believe adopting user fees for 6

years in advance alleviates these concerns. Under this rule, business

planning should be easier and fee increases will be more gradual.

Vessel Inspection Fee

Two commenters objected to the increase in the vessel inspection

fee. They based their objections on the small percentage of ships that

are boarded in the Port of Hampton Roads in Virginia.

We inspect almost all internationally arriving vessels at ports of

entry in the United States. The user fees for these inspections are

based on the total cost of the vessel inspection program. The type of

inspection ranges from an exterior inspection from outside the vessel

to a boarding of the vessel for full-scale inspection of the interior

and cargo. The decision to board a vessel is based on numerous

variables, including the origin, cargo, and type of the vessel, which

indicate the risk presented by a vessel of introducing foreign pests

and diseases into the United States. A system that attempted to account

for every possible inspection situation would be unwieldy and expensive

to administer and would most likely result in higher user fees.

One commenter suggested that all options to reduce costs should be

considered before raising vessel inspection fees.

We agree with the commenter's approach. We are constantly trying to

reduce costs and minimize necessary cost increases. We raise our user

fees only when necessary to reflect unavoidable cost increases.

Likewise, because APHIS user fees reflect the actual cost of providing

a service, if we can reduce the cost of a service, we can reduce the

user fee for that service.

User Fees for Commercial Trucks

One commenter questioned why commercial trucks entering the United

States from Canada are exempt from paying an APHIS user fee and

suggested that trucks from Canada should pay the same fee as trucks

entering from Mexico.

APHIS restricts the importation of plants and animals and/or plant

and animal products from foreign countries based on the pest or disease

risk associated with those imports. In many cases, such imports from

Canada present a very low risk, and few restrictions apply. Under these

circumstances it is not necessary for APHIS to provide inspection

services for commercial trucks from Canada. Because APHIS provides no

inspection services, an APHIS user fee is not justified.

One commenter agreed that the lower truck decal price for FY 1997

is warranted. However, the commenter suggested that equity might call

for a 1-year moratorium on increasing the individual truck crossing fee

so that the two fees would not have a noticeable difference. Another

commenter questioned who is subsidizing the shortfall in user fees for

providing AQI inspections for trucks using the annual decal during FY

1997.

As explained in the proposed rule, both the truck decal and

individual truck crossing fees must be raised. The FY 1997 truck decal

cannot be changed because the decals have already been printed and many

have been sold. Therefore, APHIS is covering the FY 1997 truck decal

shortfall from the reserve fund. However, we believe the individual

crossing fee must be increased for FY 1997, to help ensure that the

full cost of inspecting these trucks is covered by user fees. It should

be noted that, by the date this rule is effective, FY 1997 will be more

than half over, and most truck decals are purchased early in the year.

Therefore, the disparity between the FY 1997 truck decal fee and the

individual crossing fee will be temporary and most likely minimal.

In addition, it is less expensive and more efficient to allow

prepayment of fees for commercial trucks than to attempt to collect and

process a fee for each arrival. It is possible that individual trucks

might pay more in user fees if there were no prepayment provisions.

However, the possible loss that will be incurred in FY 1997 if there is

a shortfall is more than offset by the savings of a more efficient

collection system.

One commenter stated that the annual decal for commercial trucks

violates the law, stating that the decal user fee would not cover the

cost of inspections. For example, if the truck with a decal entered the

United States enough times, then the average fee per inspection would

be lower than the actual cost for the service.

Our user fees cover the cost of providing services for the entire

inspection program. Therefore, sometimes fees may be more or less than

the actual cost of services received for individual cases. As explained

in our proposal, the user fee for the annual decal for commercial

trucks is calculated as 20 times the individual crossing fee. The total

collected for commercial truck user fees for annual decals and

individual crossing fees is expected to recover the cost of providing

those inspection services.

Commercial Truck Versus Commercial Aircraft User Fees

One commenter stated that inspecting a commercial truck takes

approximately the same amount of time as inspecting a commercial

aircraft and implied that the fees should be the same.

In our experience, inspecting a commercial aircraft is much more

involved than inspecting a commercial truck, and, therefore, takes

longer. The result is a higher user fee for aircraft.

One commenter complained that commercial airlines should be offered

quantity discounts similar to that offered commercial trucks through

our decal system.

The annual decal available for trucks is a joint APHIS-U.S. Customs

Service (Customs) decal covering fees for inspections by both agencies.

Commercial trucks may purchase an annual decal for APHIS inspections

when they purchase an annual decal from Customs. Although this exact

approach would probably not be applicable to aircraft, we appreciate

the commenter's suggestion. If we decide to make any changes based on

this comment, we will publish a proposal in the Federal Register for

public comment.

Commercial Aircraft and Airline Passenger User Fees

One commenter pointed out that passenger and aircraft inspection

fees would represent a large percent of AQI collections in each year

from FY 1997 through 2002. The commenter implied that passenger and

aircraft inspection fees subsidize other AQI services. Further, the

commenter asserted that

[[Page 39749]]

since we do not charge user fees for private vehicles entering the

United States at land border ports, it appears that those individuals

and vehicles who do pay user fees are subsidizing the inspection

process.

Each service category was considered separately. Each category

must, through user fee receipts, return enough money to APHIS to cover

the cost of providing AQI services to that particular category. Costs

were assigned directly to a category when the cost directly related to

providing the service. For example, our detector dog program only

applies to passenger inspections. Therefore, the passenger inspection

fees includes the full costs for the detector dog program. However,

where a cost benefits all categories of service, it was pro-rated among

the categories based on historic direct labor staff hours.

AQI user fees are used only for user fee related activities. APHIS

receives appropriated funds to cover the costs of those AQI services

not covered by user fees. This includes, among other things, inspection

of passengers and aircraft from Hawaii and Puerto Rico, and certain

Mexican land border activities, including pedestrian and personal

vehicle inspections. Commercial aircraft and aircraft passenger fees do

not subsidize any other AQI services.

One commenter stated that the air passenger fee should cover the

inspection of the aircraft as well. Two commenters stated that a

separate fee for inspection of the aircraft and its passengers violates

the law. The commenters asserted that the inspection of the aircraft

for food items and garbage is specifically passenger related. The

commenters point out that neither Customs nor the Immigration and

Naturalization Service (INS) assess a commercial aircraft fee separate

from a passenger fee.

On January 9, 1992, we published a final rule in the Federal

Register (57 FR 755-773, Docket No. 91-135) that amended our user fees

to shift all passenger-related inspection costs from the aircraft user

fee to the airline passenger user fee. The airline passenger user fee

includes the cost of inspections related to the presence of passengers

on aircraft, such as inspection of the passenger cabin. Specifically,

the airline passenger user fee covers inspection of the aircraft

galley, including garbage, the passenger compartment, the baggage hold,

and all related administrative and overhead expenses. The aircraft fee

covers the inspection of the aircraft and its cargo.

Passengers and aircraft, and the cargo it carries, pose different

risks of bringing foreign diseases and pests into the United States.

For example, passengers may have visited a farm that may present

agricultural concerns, or they may be carrying infested fruits or

vegetables or infected meat on their persons or in their baggage.

Aircraft may be infested with a pest that has escaped from infested

cargo or entered the aircraft when it was in an infested locality.

Therefore, aircraft or cargo may need to be fumigated or disinfected.

For all these reasons, passengers and their baggage must be inspected

separately and in a different manner than the aircraft and its cargo.

It seems appropriate that passengers themselves pay the APHIS user

fees for passengers. Although airlines collect the APHIS passenger user

fee along with the price of the ticket and then remit the APHIS user

fee to APHIS, the airlines could be charged a user fee that would cover

the entire cost of both aircraft and passenger inspections. If we

decide to consider such a change, we will publish a proposal in the

Federal Register for public comment.

International Trade

One commenter asserted that raising user fees could decrease

exports.

Although some countries do not currently charge for export-related

services, such as inspections, user fees for these services are being

adopted by more and more countries. Therefore, we do not believe that

U.S. exporters are at a competitive disadvantage compared with

exporters in other countries.

Unrestricted Access to Resources

One commenter suggested that APHIS should not have unrestricted

access to resources.

We do not have unrestricted access to the funds collected through

our user fees. Congress only gives access to the amount appropriated

plus any amount of collected user fees above $100 million. Our access

is also restricted in that we may only use the funds for AQI services

rendered.

Congressional Funding

One commenter suggested that ``if Congress stopped funding APHIS as

a cost cutting measure, then APHIS should reduce spending and

expenses.''

Congress still funds APHIS with appropriated funds; however, the

source of most of the appropriations for AQI services is collected user

fees. The cost of providing AQI services is projected to exceed $100

million for each of the years 1997 through 2002, and the AQI user fees

should generate enough funds to cover these costs. As explained in the

proposed rule, APHIS automatically has access to user fee funds in

excess of $100 million that are collected each year, but it takes

appropriation action to make that first $100 million available to APHIS

each year. If the full $100 million is not appropriated during any year

between 1997 and 2002, APHIS may find it necessary to increase the

amounts of individual user fees through rulemaking, thereby increasing

the amount of fees collected in excess of $100 million. Increasing the

fees by the proper amount would generate enough funds to compensate for

the user fee funds diverted by an appropriation of less than $100

million, and would ensure that APHIS has enough funds to cover the

costs of providing the AQI services.

Automated Commercial System Investment in FY 1997 and 1998

One commenter approved of our dedicating funds to fully implement

our use of Customs' Automated Commercial System (ACS). Several other

commenters expressed confusion about how and when the $3.175 million

investment would be made.

We understand the confusion. To clarify, the implementation costs

totaling $6.35 million were originally intended to be spent in FY 1996.

Due to technology constraints, we did not implement the system in FY

1996. Therefore, our plan is to spread the implementation over 2 years

with a one-time investment of $3.175 million each year. In the proposed

rule, the spending estimates for FYs 1997 and 1998 included $3.175

million in each year for a total investment of $6.35 million for ACS

implementation.

Cost Cutting and Changes in Inspection Process

One commenter suggested a USDA-wide reorganization in an effort to

streamline costs.

A USDA-wide reorganization is outside the scope of our control and

beyond the scope of the proposed rule. Nonetheless, we would like to

point out that USDA has and is still undergoing reorganization to

reduce costs and increase efficiency. As part of this reorganization,

APHIS has taken actions to reduce costs and increase efficiency. Many

of these actions are discussed later on in this document in response to

other comments.

Several commenters questioned increasing the number of inspectors.

One commenter asserted the percentage of these increases during FY 1996

did not relate to the growth in airline operations or a change in the

form of the agricultural inspections. The commenter also questioned

whether the large increase in staff in FY 1996 was a one

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time augmentation or a new rate of growth.

The large increase in staff in FY 1996 was mandated by Congress to

bring APHIS up to a reasonable level of service. With these new hires,

we staffed new terminals, extended service hours, and provided more and

better service. We increased staff based on need; however, we do not

foresee increases such as in FY 1996 to become the trend. In fact, as

stated in our proposal, we are planning to hire only 30 additional

officers each year, which is fully in line with our estimates of volume

increases.

Several commenters suggested that we should cut costs before

raising user fees.

We are always looking for ways to reduce our costs. One cost

cutting change we made this year was to centralize our detector dog

training program. Previously, we had three separate training centers.

These have all been combined into a single facility in Orlando, FL.

This facility trains dogs to detect agricultural products.

We are planning in the near future to combine our regional offices

into regional hubs over the next several years. Cost savings and better

program delivery are two factors considered in this and other

reorganizations. In addition, we have reduced Headquarters staffing,

which lowers overhead costs.

Several commenters suggested that we should improve efficiency

before raising user fees. One commenter specifically suggested that we

should find new methods to improve efficiency and enforcement via risk

assessment and selective or targeted inspection. One commenter

suggested that we need a new approach to the inspection process and

should look for innovative ways of performing inspections. One

commenter complained that APHIS currently does not seem to use

computers for its work. One commenter stated that cost estimates need

to consider the need for technology upgrades, such as the development

and use of tomographic X-ray equipment.

We are always looking for innovative approaches to improve our

efficiency. Along with manual inspections, we use alternative

inspection methods and technologies such as automated information

systems, X-ray systems, and specially trained detector dogs. Examples

of what we are doing in these areas and planned enhancements are

described below.

We determine where we need our resources based on risk assessment.

We are focusing on facilitation, education, and compliance.

Technology and other more efficient approaches facilitate inspections.

Education informs the public of our mission.

To facilitate passenger clearance, we use the Interagency Border

Inspection System (IBIS), where it is available. IBIS contains incoming

passenger information. To facilitate cargo movement, we use Customs'

ACS and Automated Targeting Systems (ATS), where they are available.

Today, more ports are using these systems, and we are continuing to

expand the use of these systems to all of our ports. In addition, we

are developing a system that will be integrated to ACS and ATS, so we

will provide better information and communication with the public about

the release and approval of cargo.

In addition, we, along with other Federal inspection agencies, are

negotiating with the airlines to develop an advance passenger

information system to provide better technology to facilitate passenger

clearance.

We continue to expand the use of X-ray equipment as a screening

tool in passenger baggage clearance at major international airports.

There are X-ray scanning machines located at all foreign-arrival and

predeparture sites. X-ray machines are used at international airports

and on the U.S.-Mexico border. We replaced old X-ray equipment with

modern X-rays which have integrated computers and provide improved

quality through enhanced imaging.

In partnership with the Federal Aviation Administration and the

Department of the Army, we are developing a tomographic X-ray system

that will automatically detect agricultural products in luggage and

alert inspectors. When operational, we expect this system to provide

more accurate images of the contents of baggage than current X-ray

equipment can. We expect to improve our ability to make decisions about

inspecting passenger baggage prior to passengers' picking up their

baggage. Therefore, we expect to decrease the number of passengers in

the inspection area and over time decrease the size of the inspection

area thus reducing costs and time delays associated with the inspection

process.

The prototype for this tomographic X-ray system is scheduled to be

tested in San Juan, PR, in April 1998. As with all of our enhancements,

after the pilot test, we plan to implement this new technology at the

largest, most active airports where the most people will benefit and

there will be the greatest impact. We will adapt the implementation, as

needed, to other locations and gradually incorporate this tool

throughout all international airports.

We continue to use specially trained dogs to detect prohibited

items at major international airports. Detector dogs have proven useful

in selecting bags to inspect and we plan to expand this program to meet

increased risk.

Several commenters questioned the apparent change in APHIS' role as

compared to other Federal inspection agencies. One commenter asserted

that APHIS' function in the airport environment is secondary to

Customs, as Customs inspectors perform all primary inspections. The

comment further asserted that this serves the needs of all agencies

adequately without multiplying the hurdles confronting the arriving

passenger.

In the past, Customs inspectors opened passenger baggage and

notified our inspectors when agricultural products were found. Customs

has shifted their focus away from passenger processing to other areas

that are more important from its perspective. Our priority continues to

be finding agricultural products that could introduce foreign pests and

diseases. One of the highest risks is from agricultural products in

passenger baggage. Passengers may inadvertently carry infested fruits

or vegetables or infected meat in their baggage. Therefore, we still

need to open baggage to check for these agricultural products.

In conjunction with both Customs and INS, we find ways to improve

processing of passengers and cargo. Along with other Federal inspection

agencies, we meet with the aircraft industry at least once a month as a

member of the Federal Inspection Committee. As a result of the efforts

of these groups and our continued attention to modernizing and

improving our inspections, we have several efforts underway to improve

efficiency and cut costs.

One commenter questioned whether user fees have any correlation to

the amount of services received by the user. One commenter questioned

the relative efficiency of one port operation over another. One

commenter suggested a sliding scale of fees based on location,

efficiency, and general overhead.

We realize that the amount of service for each user varies.

However, the number of variables that determines the amount of service

or length of time required to provide service is virtually infinite. A

system that attempted to account for every possible inspection

situation would be unwieldy and expensive to administer and would

require the additional expenses to be included in the fee calculation.

[[Page 39751]]

Interpretations/Violations

One commenter stated that the Farm Bill, as amended, does not

eliminate the annual review requirement.

Since the inception of our user fees, we have performed annual

reviews of our user fees and adjusted fees as required. As stated in

our proposed rule, we not only intend to monitor our fees throughout

each year, but we intend to look closely at adjustments to fees that

may be needed in future years. If we determine that any fees are too

high and are contributing to unreasonably high reserve levels, we will

publish lower fees in the Federal Register and make them effective as

quickly as possible. If it becomes necessary to increase any fees

because reserve levels are being drawn too low, we will publish

proposed fee increases in the Federal Register for public comment.

One commenter asserted that the Farm Bill, as amended, does not

permit adjustment in advance of a determination of need.

We disagree with the commenter's interpretation of the requirements

of the Farm Bill, as amended. The Secretary is under no formal

obligation to make a specific determination of need prior to the

adjustment of fees. Nonetheless, the user fee adjustments we propose

for FYs 1997 through 2002 were all based on cost estimates (i.e. a

determination of need) for providing AQI services for future years.

None of the fee adjustments will be effective until the fiscal year for

which they were proposed. As we stated in our proposed rulemaking (see

62 FR 3824), ``(w)e * * * plan to publish a notice in the Federal

Register prior to the beginning of each fiscal year to remind or notify

the public of the user fees for that particular fiscal year * * *. If

we determine that any fees are too high and are contributing to

unreasonably high reserve levels, we will publish lower fees in the

Federal Register and make them effective as quickly as possible. If it

becomes necessary to increase any fees because reserve levels are being

drawn too low, we will publish, for public comment, proposed fee

increases in the Federal Register.'' Therefore, contrary to the

commenter's assertions, no fees are being adjusted ``in advance of a

determination of need.''

One commenter suggested that by proposing user fees for 6 years, we

avoid notice and comment rulemaking mandated by the Administrative

Procedure Act (APA) (5 U.S.C. 551 et seq.). The commenter also stated

that APHIS should be held accountable for timely rulemaking.

APHIS has been actively pursuing different avenues to make user fee

rulemaking more timely. Although beneficial for the result, the time

spent to develop the user fees, analyze their potential impacts, and

have other government organizations review our documents can cause

significant delays in implementing our user fees. Therefore, in the

past, our user fees have been out of date by the time they are

effective. Proposing potential user fees in advance is an attempt to

ensure timely rulemaking. Our 6-year proposal has gone through the

standard notice and comment rulemaking process as required by the APA.

Also, by proposing user fees for a 6-year period, we are responding to

comments received in the past by providing information sooner for

planning purposes and phasing in gradual increases rather than large

increases.

Projections and Cost Estimates

Several commenters stated that our proposed fees were either too

high or too low.

We have determined, using the best data available, the cost of each

of the services for which we will charge an APHIS user fee. In

addition, the services we provide and the cost of providing those

services will change over time. Therefore, as stated in our proposal,

we intend to monitor our fees throughout the year and review them at

least annually. If we determine that any fees are too high and are

contributing to unreasonably high reserve levels, we will publish lower

fees in the Federal Register and make them effective as quickly as

possible. If it becomes necessary to increase any fees because reserve

levels are being drawn too low, we will publish proposed fee increases

in the Federal Register for public comment.

To calculate the proposed user fees, we projected the direct costs

of providing AQI services in FYs 1997 through 2002 for each category of

service: Commercial vessels, commercial trucks, commercial railroad

cars, commercial aircraft, and international airline passengers. The

cost of providing these services in prior FYs served as a basis for

calculating our projected costs.

In FY 1992, APHIS established accounting procedures to segregate

AQI user fee program costs. On December 31, 1992, we published a final

rule in the Federal Register (57 FR 62469-62471, Docket No. 92-148-1)

that amended some of our user fees and included a detailed description

of these accounting procedures.

As part of our accounting procedures, we established distinct

accounting codes to record costs that can be directly related to each

inspection activity.

Other costs that cannot be directly charged to individual accounts

are charged to ``distributable'' accounts. The costs in these

distributable accounts are prorated (or distributed) among all the

activities that benefit from the expense, based on the ratio of the

costs that are directly charged to each activity divided by the total

costs directly charged to each account at the field level.

Using these accounting procedures, we calculated the total cost of

providing AQI services in each past year by determining the amounts in

each direct-charge account, then adding the pro rata share of the

distributable accounts.

We then projected total costs to provide each category of service

during each future year. Each projection included the costs of program

delivery, which are incurred at the State level and below. Also

included was a pro rata share of the program direction and support

costs, which include items at the regional and headquarters program

staff levels. Finally, each projection included a pro rata share of

agency-level support costs, which includes activities that support the

entire agency, such as recruitment and development, legislative and

public affairs, regulations development, regulatory enforcement, budget

and accounting services, and payroll and purchasing services. Costs for

billing and collection services, legal counsel, and rate development

services that are directly related to user fee activities are directly

added to the user fee activities they support and are not included in

the proration of agency-level costs.

Each service category was considered separately. Each category

must, through user fee receipts, return enough money to APHIS, to cover

the cost of providing AQI services to that particular category.

Several commenters questioned our cost estimates and variances

between years. Specifically, commenters questioned the use of volumes,

past estimates, and differences between FYs 1995, 1996, and 1997.

In the proposed rule, different components were included in

different categories. For example, because FY 1996 spending was used as

the basis for calculations, the base amount did not include all of the

components that were added to estimated projected costs for FY 1997.

As explained in our proposed rule, we hired 217 new inspectors in

FY 1996. Therefore, there was a large increase between FYs 1995 and

1996. In addition, there were differences in the

[[Page 39752]]

per employee costs for new employees in various years, because all new

hires were not employed for the full year.

The information regarding spending estimates that we provided in

the proposed rule was, in scope, the same information that we used to

set the new user fees. Our user fees are based on data gathered at the

work unit, region, and headquarters levels. For members of the public

who, like the commenters, wish to obtain additional information, the

names, addresses, and telephone numbers of knowledgeable APHIS

personnel were provided in the proposed rule, and are provided in this

document, under the heading FOR FURTHER INFORMATION CONTACT.

One commenter stated APHIS' vessel volume was a low figure compared

with the number that Customs reported entering in FY 1996. A similar

comment was received comparing APHIS' international air passenger

volume with INS' international air passenger volume.

We acknowledge that our volume figures are lower, but it is easy to

explain. First, the Customs number of vessels entering the United

States for FY 1996 was for all vessel arrivals. APHIS only charges for

the first 15 arrivals of vessels over 100 net tons and exempts vessels

sailing solely between the United States and Canada. Secondly, the INS

international air passenger volumes include all arriving international

passengers. Again, APHIS is interested in a different portion of total

international passengers and various passengers are exempt, including

all passengers arriving from Canada. Therefore, our projections are and

should be different from other Federal inspection agencies.

Reserve Fund

Commenters suggested that the size of the APHIS reserve fund is

unjustified. Two commenters stated that a far smaller reserve fund

would be adequate. Both of these commenters compared APHIS' reserve

fund with INS', which, according to one commenter, maintains a reserve

fund of approximately 8 percent of annual operating expenses, or,

according to the other commenter, maintains a reserve fund of

approximately 1 month's worth of operating costs.

APHIS' user fee authority provides for the maintenance of a

reasonable balance in the user fee account. We link the reserve

requirement in each category to the category's collection schedule. The

reserves for the commercial aircraft and international air passenger

user fee accounts are one-fourth of their respective annual costs

because those fees are collected in arrears on a quarterly basis. The

reserve requirement for commercial vessels and trucks is one-twelfth of

that category's annual costs because those fees are remitted to APHIS

monthly. The reserve requirement for loaded railroad cars is one-sixth

of that category's annual costs because those fees are remitted to

APHIS 2 months in arrears. We continue to believe that a fully funded

reserve in each category's user fee account is essential to ensure the

continuity of service in cases of bad debt, carrier insolvency, and

fluctuations in activity volumes.

Additional Uses for Fees

One commenter suggested additional services that could be funded

from the AQI user fees.

We have made no change to the rule based upon this comment since it

is ouside the scope of this rulemaking proceeding.

Advisory Committee

Two commenters suggested that APHIS should establish an advisory

committee to assist in determining appropriate changes to the user fee

amounts and expenditure of user fee funds. Both commenters referred to

Customs' and INS' advisory committees.

Both Customs and INS are mandated to establish advisory committees.

The Farm Bill, as amended, has not authorized an advisory committee for

APHIS' AQI user fees. We are taking no action based on these comments

at this time. The establishment of an advisory committee is outside the

scope of this rulemaking proceeding.

Miscellaneous Comments

Two commenters questioned a USDA reorganization, which would

consolidate the labs into five ``super-labs'' to reduce USDA expenses.

They questioned the effect this would have on ship inspections.

APHIS is not involved in any such reorganization. In addition, we

are not aware of any such planned USDA reorganization to establish five

``super-labs.'' However, if there was a USDA reorganization to reduce

the Department's expenses, that reorganization might not reduce APHIS'

vessel inspection expenses.

Miscellaneous

We have made a correction to a typographical error in the user fee

for vessel inspections for FY 1997. In the proposed rule, the user fee

was shown as $447.00 in the Supplementary Information under the

background and as $447.50 in the rule portion. The correct fee should

be $447.00; we have changed the rule portion accordingly.

Executive Order 12866 and Regulatory Flexibility Act

This rule has been reviewed under Executive Order 12866. The rule

has been determined to be significant for the purposes of Executive

Order 12866 and, therefore, has been reviewed by the Office of

Management and Budget.

This rule, will, over a 6-year period, generally increase user fees

for certain international airline passengers, commercial aircraft,

commercial vessels, commercial trucks, and commercial railroad cars, in

order to recover the cost to APHIS of providing services. Some user

fees are initially reduced. Amendments to user fees are necessary to

adjust for changes in service volume and in costs.

These fee changes will directly affect international commercial

maritime vessels of 100 net tons or more, commercial trucks, loaded

commercial railroad cars, and commercial aircraft arriving at ports in

the customs territory of the United States. The impact of adjusting

each fee is discussed separately below.

The fee changes will also directly impact international airline

passengers arriving at ports in the customs territory of the United

States. However, we have not included a discussion of the effect on

airline passengers, as individuals are not covered by the Regulatory

Flexibility Act.

Commercial Vessels

According to the Bureau of the Census, there were 334 U.S.

businesses in 1992 engaged in water transportation of freight

internationally between the United States and foreign ports. Of these

businesses, at least 93 percent would be considered small according to

SBA criteria for a small entity in this category (i.e., an entity that

employs fewer than 500 persons).

APHIS user fees for commercial vessels apply only to those of 100

net tons or more arriving from foreign ports, except vessels sailing

solely between Canadian and U.S. ports. All of the United States'

oceangoing fleet exceeds 100 net tons, but only a limited portion

engages in foreign trade. Data from the Department of Transportation's

Maritime Administration shows that there were 319 private oceangoing

merchant vessels in the United States at the beginning of 1996. Of

these vessels, 127 are tankers and the remainder are dry cargo vessels.

The vast majority of the tankers operate nearly exclusively between

United States ports. They are therefore not subject to the APHIS

[[Page 39753]]

commercial vessel user fee. Those vessels subject to the APHIS user fee

are mostly dry cargo vessels operating between the United States and

foreign ports. We believe, however, that the impact of the revised

APHIS user fees on these vessels is likely to be minimal, whether a

vessel is operated by a small or a large entity. Total daily operating

costs for dry cargo vessels idle in port averages between $23,600 and

$26,800. The $77.50 user fee increase for FY 1997 represents less than

0.4 percent of one day's operating costs of an average dry cargo vessel

while in port, and remains $97.00 below the original fee set in 1991.

For subsequent years, there is either no fee increase (FY 1999) or

much smaller increases ($7.50, FY 1998; $7.25, FY 2000; $9.50, FY 2001;

and $9.00, FY 2002). Therefore, we believe the impact of our commercial

vessel user fees on small businesses will be minimal.

Commercial Trucks

The SBA criterion for a small trucking firm is one whose annual

receipts are less than $18.5 million. We are unable to accurately

estimate the number of U.S. firms that would be considered small by

this criterion. However, we believe U.S. firms will be largely

unaffected by the proposed fee changes. In 1991, transportation

expenses for commercial U.S. trucks traveling from Mexico to the United

States varied between $85.00 and $175.00 per trip for trucks carrying

non-agricultural commodities. Assuming constant costs, adding $2.00 to

the user fee per truck, per crossing,1 will represent an

increase in operating expenses of between 1.1 and 2.4 percent for

trucks carrying non-agricultural commodities. Transportation expenses

for trucks hauling agricultural commodities ranged from $300.00 to

$1,700.00 per trip in 1991. Again, assuming constant costs, our user

fee increases will represent operating expense increases of between

0.12 and 0.67 percent for trucks hauling agricultural goods. It

therefore appears that the impact on small U.S. independent trucking

firms will not be significant.

---------------------------------------------------------------------------

\1\ A decal is also available which allows unlimited border

crossings per year for one fee. This decal is available only for

trucks which prepay the Customs user fee which applies to them.

---------------------------------------------------------------------------

Commercial Railroad Cars

There are five U.S. railroad companies currently transporting goods

across the U.S.-Mexican border. These railroad companies will be

directly affected by our reduced user fee for this service. These

railroad companies will also be directly affected by the subsequent fee

increases. However, we are not increasing this fee until FY 2002, at

which time the fee will increase to an amount equal to the current fee.

We are not increasing the user fee beyond the current rate. User fee

changes will affect direct operating expenses. Two of these railroad

companies met the SBA criterion for small entities (i.e., fewer than

1,500 employees). As of 1991, the most recent year for which figures

are available, these small railroad companies were transporting between

960 and 2,000 loaded railroad cars into the United States from Mexico

annually. These cars were all subject to the APHIS user fee. Assuming a

similar number of cars subject to inspection in future years, in FY

1997 reduced user fees will result in a cost savings for these railroad

companies of between $480.00 and $1,000.00. Specific data on the

operating expenses or profit margins of these railroad companies is not

available to us. However, we believe the fee changes will not have any

significant economic effect on small railroad companies.

Commercial Airlines

We received a comment that suggested that there were basic flaws in

our analysis of the impact on commercial airlines required by the

Regulatory Flexibility Act. Specifically, the commenter suggested that

the analysis should have analyzed the impact on the airline industry's

component parts. In addition, the analysis should have taken into

consideration that the impact will fall disproportionately on certain

airlines.

In the Regulatory Flexibility Analysis prepared for the proposed

rule, we used information available from the Bureau of the Census on

domestic and international airlines. Our user fees are spread evenly

across all incoming international flights, both domestic and

international carriers are charged the same fee, regardless of size or

location. Certain exceptions are specified in our regulations. All

exemptions have been added over time based on suggestions and analysis

that their pest risk is close to zero. In response to the comment, we

have reviewed the available data and revised our analysis on commercial

airlines.

In FY 1995, 241 different companies, both foreign and domestic, had

accounts with APHIS to pay user fees for commercial aircraft

inspections. The separation of these companies into large and small

categories according to Small Business Administration size

classifications cannot be determined. While the size distribution of

these carriers that enter the continental United States and subject to

the user fee 2 is unknown, APHIS still anticipates that the

impact of the user fee increase will be small regardless of carrier

size. The increase of $6.25 in the first year, and a total increase of

$9.25 over the 6-year period should represent a very small portion of

operating costs for an international flight arriving in the United

States.

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\2\ The following are exempt from the user fee: aircraft moving

solely between the United States and Canada, aircraft used

exclusively in governmental purposes of the United States or a

foreign government, aircraft making an emergency landing, any

passenger plane with 64 or fewer seats not carrying cargo such as

fresh fruit, aircraft moving from the U.S. Virgin Islands to Puerto

Rico, and aircraft making an in transit stop at a port of entry, but

not required to go through any portion of the federal clearance

process.

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In addition to user fees paid directly by airlines for aircraft

inspection, airlines collect user fees on our behalf from passengers.

Airlines already have collection and disbursement systems in place for

international passengers. We believe it is unlikely that there would be

any significant increase in the costs of maintaining these systems as a

result of our rule. Airlines will establish trust accounts for user

fees collected from passengers. However, airlines may retain any

interest earned by monies in such accounts.

Under these circumstances, the Administrator of the Animal and

Plant Health Inspection Service has determined that this action would

not have a significant economic impact on a substantial number of small

entities.

Executive Order 12372

This program/activity is listed in the Catalog of Federal Domestic

Assistance under No. 10.025 and is subject to Executive Order 12372,

which requires intergovernmental consultation with State and local

officials. (See 7 CFR part 3015, subpart V.)

Executive Order 12988

This rule has been reviewed under Executive Order 12988, Civil

Justice Reform. This rule: (1) Preempts all State and local laws and

regulations that are inconsistent with this rule; (2) has no

retroactive effect; and (3) does not require administrative proceedings

before parties may file suit in court challenging this rule.

Paperwork Reduction Act

This rule contains no new information collection or recordkeeping

requirements under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501

et seq.).

[[Page 39754]]

List of Subjects in 7 CFR Part 354

Exports, Government employees, Imports, Plant diseases and pests,

Quarantine, Reporting and recordkeeping requirements, Travel and

transportation expenses.

Accordingly, 7 CFR part 354 is amended as follows:

PART 354--OVERTIME SERVICES RELATING TO IMPORTS AND EXPORTS; AND

USER FEES

1. The authority citation for part 354 continues to read as

follows:

Authority: 7 U.S.C. 2260; 21 U.S.C. 136 and 136a; 49 U.S.C.

1741; 7 CFR 2.22, 2.80, and 371.2(c).

2. Section 354.3 is amended by revising paragraphs (b)(1), (c)(1),

(c)(3)(i) introductory text, (d)(1), (e)(1), and (f)(1) and by adding a

new paragraph (f)(4)(i)(C) to read as follows:

Sec. 354.3 User fees for certain international services.

* * * * *

(b) * * * (1) Except as provided in paragraph (b)(2) of this

section, the master, licensed deck officer, or purser of any commercial

vessel which is subject to inspection under part 330 of this chapter or

9 CFR chapter I, subchapter D, and which is either required to make

entry at the customs house under 19 CFR 4.3 or is a United States-flag

vessel proceeding coastwise under 19 CFR 4.85, shall, upon arrival,

proceed to Customs and pay an APHIS user fee. The APHIS user fee for

each arrival, not to exceed 15 payments in a calendar year, is shown in

the following table. The APHIS user fee shall be collected at each port

of arrival.

------------------------------------------------------------------------

Effective dates Amount

------------------------------------------------------------------------

September 1, 1997 through September 30, 1997................. $447.00

October 1, 1997 through September 30, 1998................... 454.50

October 1, 1998 through September 30, 1999................... 454.50

October 1, 1999 through September 30, 2000................... 461.75

October 1, 2000 through September 30, 2001................... 471.25

October 1, 2001.............................................. 480.25

------------------------------------------------------------------------

* * * * *

(c) * * * (1) Except as provided in paragraph (c)(2) of this

section, the driver or other person in charge of a commercial truck

which is entering the customs territory of the United States and which

is subject to inspection under part 330 of this chapter or under 9 CFR,

chapter I, subchapter D, must, upon arrival, proceed to Customs and pay

an APHIS user fee for each arrival, as shown in the following table:

------------------------------------------------------------------------

Effective dates Amount

------------------------------------------------------------------------

September 1, 1997 through September 30, 1997................. $3.75

October 1, 1997 through September 30, 1998................... 4.00

October 1, 1998 through September 30, 1999................... 4.00

October 1, 1999 through September 30, 2000................... 4.00

October 1, 2000 through September 30, 2001................... 4.00

October 1, 2001.............................................. 4.25

------------------------------------------------------------------------

* * * * *

(3) * * *

(i) The owner or operator of a commercial truck, if entering the

customs territory of the United States from Mexico and applying for a

prepaid Customs permit for a calendar year, must apply for a prepaid

APHIS permit for the same calendar year. Applicants must apply to

Customs for prepaid APHIS permits.\1\ The following information must be

provided, together with payment of an amount 20 times the APHIS user

fee for each arrival, except, that through September 30, 1997, the

amount to be paid is $40.00:

---------------------------------------------------------------------------

\1\ Applicants should refer to Customs Service regulations (19

CFR part 24) for specific instructions.

---------------------------------------------------------------------------

* * * * *

(d) * * * (1) Except as provided in paragraph (d)(2) of this

section, an APHIS user fee will be charged for each loaded commercial

railroad car which is subject to inspection under part 330 of this

chapter or under 9 CFR chapter I, subchapter D, upon each arrival. The

railroad company receiving a commercial railroad car in interchange at

a port of entry or, barring interchange, the railroad company moving a

commercial railroad car in line haul service into the customs territory

of the United States, is responsible for paying the APHIS user fee. The

APHIS user fee for each arrival of a loaded railroad car is shown in

the following table. If the APHIS user fee is prepaid for all arrivals

of a commercial railroad car during a calendar year, the APHIS user fee

is an amount 20 times the APHIS user fee for each arrival.

------------------------------------------------------------------------

Effective dates Amount

------------------------------------------------------------------------

September 1, 1997 through September 30, 1997................. $6.50

October 1, 1997 through September 30, 1998................... 6.50

October 1, 1998 through September 30, 1999................... 6.50

October 1, 1999 through September 30, 2000................... 6.75

October 1, 2000 through September 30, 2001................... 6.75

October 1, 2001.............................................. 7.00

------------------------------------------------------------------------

* * * * *

(e) * * * (1) Except as provided in paragraph (e)(2) of this

section, an APHIS user fee will be charged for each commercial aircraft

which is arriving, or which has arrived and is proceeding from one

United States airport to another under a United States Customs Service

``Permit to Proceed,'' as specified in title 19, Code of Federal

Regulations, Secs. 122.81 through 122.85, or an ``Agricultural

Clearance or Safeguard Order'' (PPQ Form 250), used pursuant to title

7, Code of Federal Regulations, Sec. 330.400 and title 9, Code of

Federal Regulations, Sec. 94.5, and which is subject to inspection

under part 330 of this chapter or 9 CFR chapter I, subchapter D. Each

carrier is responsible for paying the APHIS user fee. The APHIS user

fee for each arrival is shown in the following table:

------------------------------------------------------------------------

Effective dates Amount

------------------------------------------------------------------------

September 1, 1997 through September 30, 1997................. $59.25

October 1, 1997 through September 30, 1998................... 59.75

October 1, 1998 through September 30, 1999................... 59.75

October 1, 1999 through September 30, 2000................... 60.25

October 1, 2000 through September 30, 2001................... 61.25

October 1, 2001.............................................. 62.25

------------------------------------------------------------------------

* * * * *

(f) * * * (1) Except as specified in paragraph (f)(2) of this

section, each passenger aboard a commercial aircraft who is subject to

inspection under part 330 of this chapter or 9 CFR, chapter I,

subchapter D, upon arrival from a place outside of the customs

territory of the United States, must pay an APHIS user fee. The APHIS

user fee for each arrival is shown in the following table:

------------------------------------------------------------------------

Effective dates Amount

------------------------------------------------------------------------

September 1, 1997 through September 30, 1997................. $1.95

October 1, 1997 through September 30, 1998................... 2.00

October 1, 1998 through September 30, 1999................... 2.00

October 1, 1999 through September 30, 2000................... 2.05

October 1, 2000 through September 30, 2001................... 2.10

October 1, 2001.............................................. 2.15

------------------------------------------------------------------------

* * * * *

(4) * * *

(i) * * *

[[Page 39755]]

(C) APHIS user fees collected from international passengers

pursuant to paragraph (f) of this section shall be held in trust for

the United States by the person collecting such fees, by any person

holding such fees, or by the person who is ultimately responsible for

remittance of such fees to APHIS. APHIS user fees collected from

international passengers shall be accounted for separately and shall be

regarded as trust funds held by the person possessing such fees as

agents, for the beneficial interest of the United States. All such user

fees held by any person shall be property in which the person holds

only a possessory interest and not an equitable interest. As

compensation for collecting, handling, and remitting the APHIS user

fees for international passengers, the person holding such user fees

shall be entitled to any interest or other investment return earned on

the user fees between the time of collection and the time the user fees

are due to be remitted to APHIS under this section. Nothing in this

section shall affect APHIS' right to collect interest for late

remittance.

* * * * *

Done in Washington, DC, this 18th day of July 1997.

Terry L. Medley,

Administrator, Animal and Plant Health Inspection Service.

[FR Doc. 97-19499 Filed 7-23-97; 8:45 am]

BILLING CODE 3410-34-P