User Fees; Agricultural Quarantine and Inspection Services

DEPARTMENT OF AGRICULTURE

Animal and Plant Health Inspection Service

7 CFR Part 354

[Docket No. 98-073-2]

RIN 0579-AB05

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. The adjusted fees cover part of fiscal

year 2000 and all of fiscal years 2001 through 2002. We have determined

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

of providing these services through FY 2002.

EFFECTIVE DATE: December 16, 1999.

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, PPQ User Fees Section Head, FSSB, BASE, ABS, APHIS, 4700

River Road Unit 54, Riverdale, MD 20737-1232; (301) 734-8351.

SUPPLEMENTARY INFORMATION:

Background

Section 2509(a) of the Food, Agriculture, Conservation, and Trade

Act of 1990 (21 U.S.C. 136a), referred to below as the FACT Act,

authorizes the Animal and Plant Health Inspection Service (APHIS) to

collect user fees for agricultural quarantine and inspection (AQI)

services. The FACT Act was amended by section 504 of the Federal

Agricultural Improvement and Reform Act of 1996 (Pub. L. 104-127) on

April 4, 1996.

The FACT Act, as amended, authorizes APHIS to collect user fees for

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.

International airline passengers.

According to the FACT Act, as amended, these user fees should

recover the costs of:

Providing the AQI services listed above.

Providing preclearance or preinspection at a site outside

the customs territory of the United States to such passengers and

vehicles.

Administering the user fee program.

Maintaining a reasonable balance in the Agricultural

Quarantine Inspection User Fee Account (AQI account).

On July 24, 1997, we published in the Federal Register (62 FR

39747-39755, Docket No. 96-038-3) a rule amending the user fees and

setting user fees in advance for AQI services for fiscal years 1997

through 2002.

APHIS has had to provide AQI services beyond what we anticipated

when the currently scheduled fees were set in 1997. The increases in

services stem from an increase in international trade and travel,

necessitating more inspections at ports of arrival; changes in our

regulations that result in our having to inspect additional imported

articles; and enhanced efforts to crack down on the smuggling of

agricultural commodities.

On August 9, 1999, we published in the Federal Register (64 FR

43103-43114, Docket No. 98-073-1) a proposal to amend the existing user

fees for 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. We proposed to amend

the user fees for these services for fiscal years 2000 through 2002 to

ensure that we recover the anticipated actual cost of providing these

services through FY 2002.

We solicited comments concerning our proposal for 60 days ending

October 8, 1999. We received eight comments by that date. They were

from State Government officials and representatives of the produce and

airline industries. Four of the comments were supportive. One of the

comments requested us to clarify part of our proposal. Three commenters

opposed the rule. Concerns and questions raised by the commenters are

discussed below by topic.

Collection of International Airline Passenger User Fees

Two commenters asked us to clarify what fee airlines, travel

agents, and others who issue international air travel tickets should

collect from ticket purchasers or passengers if the passenger is

traveling after the effective date of a new fee but is purchasing a

ticket before the effective date of the new fee.

Under Sec. 354.3(f)(4)(i), persons who issue international airline

tickets or travel documents are responsible for collecting the APHIS

international airline passenger user fee from ticket purchasers. In

order to make the implementation of new user fees easier for those who

issue tickets, APHIS requires that when user fees are paid by

passengers to ticket issuers in advance of travel, the proper user fee

to be collected from a passenger is the fee applicable at the time

tickets are sold. Further, under Sec. 354.3(f)(4)(i)(A), in the event

that ticket sellers do not collect the APHIS user fee when tickets are

sold, the air carrier must collect the user fee from the passenger upon

departure. Under this scenario, the proper user fee to be collected

from a passenger by the carrier is the fee applicable at the time of

departure. We are adding a footnote to the table of fees for airline

passengers to make these requirements clearer.

Rationale and Need for Amending AQI User Fees

One commenter suggested that APHIS should be able to pay the cost

of providing new and additional AQI services and equipment with user

fees collected under the existing fee schedule, based on the rationale

that

[[Page 62090]]

increasing volumes of user fee collections that result from increasing

numbers of airline passengers will pay for additional AQI services by

themselves.

We do not agree with the commenter's position. As stated in our

proposal, APHIS has been required to process increased volumes of

international air passengers and aircraft and has struggled to maintain

an adequate level of service to some airports due to terminal

expansions and reorganizations. We need to establish additional

inspection facilities, purchase necessary x-ray equipment, and add

personnel in order to process passengers and aircraft quickly and

efficiently. Further, additional personnel are needed not only to staff

new inspection facilities, but also to supplement existing inspection

crews. By increasing the proportion of inspectors available in relation

to the number of users requiring services, APHIS will be able to

conduct more inspections, thereby better ensuring against the

introduction into the United States of harmful plant pests. Since the

currently scheduled user fees do not contain an allowance for

purchasing additional x-ray equipment and increasing the numbers of AQI

inspectors, we need to revise the fees to ensure that we have the

necessary funds available to provide an adequate level of AQI service.

Another commenter stated that we have ``attributed cost overruns to

a reduction in the rate of international passengers paying an

inspection fee.'' This is incorrect. In our proposal, we stated that we

have had to provide AQI services beyond what we anticipated when the

currently scheduled fees were set in 1997. The increases in services

stem from an increase in international trade and travel, among other

things.

One commenter claimed that the existing AQI user fee schedule will

provide APHIS with adequate funds to pay for program costs, including

the new costs explained in our proposal. The commenter interpreted the

information provided in our proposal to mean that APHIS needs to

increase user fees and receipts because not all of the user fees

collected from users over the past few years have been available to

APHIS due to appropriations shortfalls. The commenter was concerned

that APHIS will not spend additional money collected to provide

additional AQI services.

The commenter is correct that, because expenditures are linked to

appropriations, not all of the user fees collected from users over the

past few years have been available to APHIS. However, this is not the

reason we are increasing our AQI user fees. Over the past several

years, demand for our AQI services has increased. Serious pests have

entered the United States despite our efforts. In order to ensure

continuous AQI services, we have been forced to draw on our reserve

fund. Our reserve fund is now insufficient to ensure continuous and

effective service and needs to be gradually rebuilt. User fee

collections are the only means APHIS has to fund the AQI program. Under

these circumstances, we have no choice but to amend our fees

accordingly, both to fund services we provide and ensure an adequate

reserve.

Setting AQI User Fees in Advance

One commenter noted that continual adjustment of AQI user fees is

problematic for the industry and does not allow for adequate business

planning.

When we published our 1997 proposal to set user fees in advance for

AQI services for fiscal years 1997 through 2002 (62 FR 3823-3830,

Docket No. 96-038-1), we stated that we were acting on behalf of

affected industries who suggested that industry would be able to plan

for the effects of fee changes more effectively if fees were set in

advance. However, as stated previously in this document and in our

proposal, APHIS has had to provide AQI services beyond what we

anticipated when the currently scheduled fees were set in 1997. To

recover the costs of providing these services, we must amend our fees.

In our 1997 proposal, we stated that if reserve levels were drawn too

low, we would publish, for public comment, proposed fee increases in

the Federal Register. We regret any inconvenience these fee adjustments

may cause affected industries, but they are necessary to ensure an

adequate level of AQI service.

Need for Additional Equipment and Personnel

One commenter questioned whether additional personnel and equipment

are necessary to provide adequate AQI services and stated that APHIS

had not adequately explained the basis for some additional equipment

purchases and personnel increases or justified the corresponding need

for fee increases.

Particularly at airports, APHIS has struggled to maintain an

adequate level of service due to new and expanding air terminals and

demands for faster processing time. As explained in our proposal, along

with other agencies in the Federal Inspection Service (FIS), our goal

is to clear international airline passengers through all required FIS

inspections in 30 minutes or less. To accomplish this goal, we need

additional personnel and equipment to process increasing volumes of

international air passengers and imported agricultural commodities

effectively and efficiently.

As stated in the proposed rule, we anticipate hiring 511 new

inspectors. They will be assigned to high-volume, high-risk ports, with

distribution as follows: 51 at seaports; 57 at land border ports (39 to

inspect commercial trucks and 18 to inspect railroad cars); and 403 at

airports (137 to inspect commercial aircraft and 266 to inspect

passengers). Our projected costs for these new positions include both

salaries and vehicles, since many of these inspectors must travel from

one location to another to perform inspections. These costs were set

out in the proposed rule, and the costs associated with the additional

inspectors are discussed further, below, under the heading ``Personnel

Costs.''

Our projected costs for new x-ray equipment include the costs of

both new, advanced technology equipment for our busiest ports

(primarily airports) and additional and replacement equipment for other

ports. The costs of this equipment were set out in the proposed rule

and are discussed further, below, under the heading ``Cost of X-ray

Equipment.''

Funding for the additional inspectors and equipment can only come

from user fees. Use of user fees for these purposes is fully compatible

with the recommendations of the newly completed report, ``Safeguarding

American Plant Resources.'' \1\ This report is based on a review of

APHIS' safeguarding systems that was conducted at APHIS' request by a

panel of external stakeholders assembled by the National Plant Board,

an organization of State plant regulatory officials. The review was

prompted by the recognition, both within and outside the Agency, that

our safeguading systems are being increasingly challenged by changes in

global travel and trade.

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\1\ This report is available on the Internet at http://

www.aphis.usda.gov/ppq/safeguarding/. Copies of this report may also

be obtained by contacting Mr. Jim Smith at the address listed under

FOR FURTHER INFORMATION CONTACT.

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Cost of Services

One commenter questioned why commercial aircraft inspection fees

cost nearly 15 times as much as commercial truck fees.

In our experience, inspecting a commercial aircraft is much more

involved than inspecting a commercial

[[Page 62091]]

truck and, therefore, takes longer. The result is a higher user fee for

aircraft.

Cost of X-ray Equipment

One commenter questioned why the high resolution x-ray equipment

that APHIS plans to purchase with funds from additional user fee

collections are so much more costly than equipment being deployed by

the Federal Aviation Administration (FAA).

The cost of high-definition x-ray machines sought by APHIS is

different than the cost of some machines deployed by the FAA because

the machines are able to detect smaller volumes of agricultural

products in passenger luggage at faster belt speeds than x-ray

technology currently used by FAA at many airports. The development and

use of high-definition x-ray technology could help us to identify as

little as 10 grams of agricultural products in passenger baggage while

maintaining a fast belt speed. Most x-ray technologies currently used

by FAA can only detect agricultural products in passenger baggage if

200 or more grams of the products are present, but smaller quantities

can carry pests that have the potential to cause significant economic

losses to agriculture. Further, it is our hope that, in the future, we

will be able to x-ray every piece of international passenger luggage

that passes through a given airport without unreasonably delaying the

passenger clearance process. The development and implementation of

these high-definition x-ray technologies will allow us to see small

quantities of agricultural products in baggage while processing them at

high speeds. We believe these new technologies will benefit air

passengers by decreasing FIS processing times while simultaneously

increasing the effectiveness of the AQI program.

Personnel Costs

Two commenters questioned the calculations contained in the table

in our proposed rule entitled ``Agricultural Quarantine Inspection

(AQI) Program Projected Costs FY1999-2002.'' The commenters noted that

it appears that, for FY 1999, $2,779,000 is allotted for 116 new

employees for 2 months, suggesting that the annual salaries of these

employees would be upwards of $140,000. The commenters further noted

that, based on the information provided in the table, the average

annual salary per new employee would then drop to approximately $75,000

in FY 2000, and then increase to approximately $87,000 and $98,000 in

fiscal years 2001 and 2002, respectively.

In labeling the table in question, we neglected to state that the

``personnel increase'' estimates for fiscal years 1999 through 2002

also include increased pay costs for progressive promotions and within-

grade increases for both current and future employees. To clarify the

information provided in our proposal, the breakdown of our annualized

personnel cost estimates for fiscal years 1999 through 2002 is shown in

the table below.

Personnel Pay Cost Increases; Agricultural Quarantine Inspection (AQI) Program Projected Costs FY 1999-2002

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New employees Current

Number of new -------------------------------- employees Total

Fiscal year employees ---------------- increased

(cumulative) Cumulative Cumulative pay Cumulative pay employee costs

salaries \1\ costs \2\ costs \2\ \3\

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1999............................ 116 $1,158,000 0 $1,620,000 $2,779,000

2000............................ 315 + 116 24,690,000 $2,057,000 5,402,000 32,149,000

2001............................ 40 + 431 26,958,000 3,530,000 10,515,000 41,003,000

2002............................ 40 + 471 29,226,000 5,295,000 15,506,000 50,027,000

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\1\ As stated in our proposal, new salaries for FY 1999 would have reflected 2 months of service for 116

employees.

\2\ Pay costs include allocations for progressive promotions and within-grade increases.

\3\ These figures were provided in our proposal in the table entitled ``Agricultural Quarantine Inspection (AQI)

Program Projected Costs FY 1999-2002.''

Agency Support and Departmental Charges

One commenter stated that APHIS has not justified the level of

support costs and departmental charges shown in the proposed rule and

questioned how we arrived at the percentage rate for support costs and

departmental charges shown in the table entitled ``Agricultural

Quarantine Inspection (AQI) Program Projected Costs FY1999-2002.''

In that table, support costs, including Agency overhead and

departmental charges, are approximately 10.63 percent of the total AQI

program cost, not 10.63 percent of the AQI program cost before support

costs are added.

As we have stated in previous rulemakings, in addition to direct

inspection activity costs, each user fee activity also includes 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 includes items at the regional and headquarters

program staff levels. Finally, each projection includes a pro rata

share of Agency level support and departmental charges, 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 and

legal counsel 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. No government program

or business entity can operate without overhead, and including such

costs in pricing goods or services is a standard cost accounting

principle.

Productivity and Efficiency in the AQI Program

One commenter suggested that APHIS should make every effort

possible to improve the productivity of the existing AQI workforce

before increasing user fees to purchase new equipment and hire

additional personnel. The commenter further stated that APHIS has not

adequately explained how the additional resources that it plans to

acquire with new fees will increase productivity.

We are always looking for innovative approaches to improve our

efficiency and productivity. Along with manual inspections, we use

alternative inspection methods and technologies such as automated

information systems, x-ray systems, and specially trained detector

dogs.

[[Page 62092]]

We try to allocate our inspection personnel and equipment as

efficiently as possible, based on risk assessment. With statistics

obtained via the AQI Monitoring Program, we are able to determine which

ports are relatively more likely to present high pest risks, and we use

those statistics to determine how to allocate resources. For example,

under the AQI monitoring program, we conduct a fixed number of detailed

inspections each day for each category of service. Hypothetically, we

might survey every 25th international air passenger bag by pulling it

aside and performing the same detailed inspection that we would perform

if there were reason to suspect that the bag contained a plant pest. We

compile the data from these surveys at each port and rate the relative

effectiveness of the inspection system at those ports. Then we compare

the effectiveness ratings of various ports and determine how to

allocate inspectors from there.

As stated in our proposal, APHIS is continually requested to

process international airline passengers faster, although we need to

inspect passengers and their baggage thoroughly to safeguard against

the introduction of harmful pests and diseases of animals and plants.

We are committed to processing passengers as quickly as possible,

without jeopardizing the success of the AQI program, whose purpose is

to prevent the introduction of foreign plant and animal pests and

diseases which are harmful to this country's agriculture; however,

faster processing requires additional personnel and equipment.

As stated previously in this document, we need to purchase new x-

ray equipment for placement in new inspection stations in new airport

terminals. All the new x-ray equipment is destined for use at airports

around the country to speed up the passenger inspection process and

make it more efficient.

In cases where we are replacing old x-ray equipment, we are doing

so to increase the effectiveness of our inspection program. Many x-ray

machines currently in use are outdated and are not always able to help

us detect agricultural commodities in passenger luggage or cargo. As

stated earlier in this document, due to the increased risk of pest

introduction that follows from increased levels of international travel

and trade, we need to upgrade these older machines in order to protect

American agriculture and serve the best interests of our stakeholders.

Rebuilding the Reserve and Additional Collections

One commenter suggested that the size of the AQI reserve fund (25

percent of annual costs) is unreasonable and that a smaller reserve (5

percent of annual costs) is all that is necessary. The commenter also

questioned why the additional collections we receive due to rounding of

fees are no longer sufficient to maintain a reasonable balance in the

reserve.

APHIS' user fee authority provides for the maintenance of a

reasonable balance in the user fee account. As stated in our proposal,

we believe it is necessary to maintain a reserve of 25 percent of the

annual AQI program costs due to the fact that approximately 85 percent

of the fees we collect are remitted, in arrears, on a quarterly basis.

Based on our experience, 25 percent is a reasonable reserve balance and

is consistent with the size of reserve funds established by other

agencies within the Department of Agriculture. Further, over the last

several years, we attempted to maintain reserve levels with additional

funds received due to the rounding of fees. However, as shown in our

proposal, this practice has not provided us with a sufficient reserve.

We included a reserve building component in the amended fees to ensure

that reserve can gradually be rebuilt to an adequate level by 2002. 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.

One commenter questioned what APHIS does with the unearned money it

receives in the first quarter of a fiscal year for services provided

during the last quarter of the previous fiscal year. The commenter

implied that though APHIS cannot use fees it collects after the close

of a fiscal year for services provided in that fiscal year, it still

has fees collected from after the close of the prior fiscal year to

make up for those unavailable collections, and therefore cannot say

that it is annually ``short'' one quarter's collections.

The commenter is correct in suggesting that APHIS typically uses

collections received after the close of a given fiscal year to pay for

services provided during the next fiscal year. However, it does not

follow that the AQI program is therefore fully funded as a result.

Since both user fees and the volume of users change annually, the costs

of providing AQI services in the fourth quarter of one fiscal year can

be markedly different from costs of providing services in the fourth

quarter of the prior fiscal year. Essentially, APHIS must make up for

the difference in fee collections between the fourth quarters of a

given year and the prior year with funds from the reserve. For this

reason, maintaining an adequate reserve fund is essential to the AQI

program.

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

U.S. Customs Service's (Customs) and Immigration and Naturalization

Service's (INS) advisory committees.

Both Customs and INS are mandated to establish advisory committees.

The FACT Act, as amended, does not authorize or direct us to form an

advisory committee for AQI user fees. Since the establishment of an

advisory committee is outside the scope of this rulemaking proceeding,

we are taking no action based on these comments at this time. However,

if in the future we determine that an advisory committee is necessary

for effective management of the AQI program, we will consider

establishing one.

Additional AQI Activities and User Fees

Two commenters suggested that we should consider requiring

commercial trucks and railcars entering the United States from Canada

to be inspected for plant pests and pay a user fee for AQI services as

is required for trucks and railcars entering the United States from

Mexico. The commenters stated that due to an increased risk of plant

pests being introduced into the United States from prohibited areas via

land border ports along the northern U.S. border with Canada, APHIS

should propose to eliminate the inspection and user fee exemption for

Canadian trucks and railcars in the current user fee regulations. One

commenter also stated that APHIS should develop a user fee program for

the inspection of cargo containers.

While we acknowledge this increasing risk of pest introduction, the

creation of new user fees is outside the scope of this rulemaking.

However, we are taking the matter under consideration.

Separation of Costs for Various Categories of AQI Service

One commenter suggested that APHIS may be using fees collected from

airlines and air passengers to pay for other AQI services and

activities. The commenter implied that a clear link between the fees

airlines pay and the

[[Page 62093]]

services they receive is not apparent in our proposal. The commenter

specifically questioned our using fees collected from airlines to help

pay for border blitzes and market surveys.

As stated in previous rulemakings on this subject and in our

proposal, each service category is 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

are assigned directly to a category when the cost is directly related

to providing the service. For example, our beagle brigade program only

applies to passenger inspections. Therefore, the passenger inspection

fees includes the full costs for the beagle brigade program. However,

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

the categories based on historic direct labor staff hours. Border

blitzes (inspections) and market surveys, which are ways we test the

efficacy and efficiency of our AQI programs, are supported by all of

our AQI user fees. As we explained in our proposed rule, we are using

data obtained from these inspections and searches to build a database

on violations. The database will help us target specific commodities

that are smuggled and importers who have a history of smuggling

prohibited commodities, while allowing legitimate importers and

exporters to move their products through commerce without undue delay.

As a result, we will be able to more efficiently serve all those who

pay user fees, including airlines.

Another commenter questioned how new equipment and personnel would

be allocated among the various categories of AQI service. As stated

above and in our proposal, the projected allocation of new personnel to

the various categories of service is as follows:

Anticipated AQI Program Hires FY 2000-2002, By Category of Service

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

Commercial Commercial Commercial Commercial International

vessels trucks railcars aircraft air passenger

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New hires....................... 51 39 18 137 216

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New and replacement x-ray equipment will be allocated first to

expanded airport terminals and to replace outdated machines currently

in use. It is possible that a small number of new x-ray machines could

be employed at U.S.-Mexico land border ports if we determine that there

is sufficient risk to necessitate additional inspection activities and

improved technologies there.

New and replacement vehicles will be allocated to AQI operations at

airports, land border ports, and sea ports, but again, most of those

vehicles will be allocated to airports.

We would like to restate that costs for each category of service

are determined separately. A particular category of service does not

pay for vehicles that are allocated to other categories of service. We

have accounting methods in place to ensure the proper assignment of

costs so that each category of service pays only for services provided

to that same category of service.

Computer Programming, Y2K Concerns, and Postponement of Effective Date

One commenter suggested that APHIS should delay the implementation

of fee changes until at least 6 months after the effective date of the

final rule to allow airlines and other ticket issuers time to reprogram

their computer systems to account for the revised fees.

The commenter also requested that APHIS either withdraw its

proposal to amend existing AQI user fees or delay action for 6 months

to provide time for the Agency to respond to a request for additional

information that the commenter has submitted under the Freedom of

Information Act.

We do not believe that delaying the effective date of this

rulemaking is appropriate. If sufficient revenue is not available to

fund AQI services, we must reduce service or take money from other

programs, either of which would negatively affect our customers.

Changes in Program Collection and Cost Estimates

In our proposed rule, we made certain collection and cost estimates

based on the best data available at the time. Actual collections and

costs varied somewhat from the estimates, but did not cause a

significant difference in the scope of the program or the need to

revise the fees as proposed. Our full analysis has been updated to

reflect the new data.

The calculations underlying the proposed rule assumed an October 1,

1999, implementation date. Implementing the rule on January 1, 2000,

will reduce the anticipated FY 2000 collections by $13,289,865. Also,

the FY 2000 Agriculture Appropriation Act made $13,000,000 of FY 2000

collections unavailable instead of the $5,000,000 assumed in the

proposed rule. Together, these changes reduce the amount available from

FY 2000 collections by $21,288,865. However, changes in program

collections and costs for FY 1999 substantially offset this loss and

will allow the Agency to proceed with the program enhancements noted in

the proposed rule. In FY 1999, the collections actually received

totaled $171,904,404 instead of the $159,727,857 assumed in the

proposed rule. Also, FY 1999 program costs totaled $152,232,527 instead

of the $158,457,857 assumed in the proposed rule. Together, these

changes added $18,401,877 to the available reserve, which is available

to recover the cost of fees that we could not collect from October 1,

1999 to December 31, 1999.

We now anticipate FY 2000 program costs will total $194,607,291

instead of the $199,965,458 assumed in the proposed rule. The hiring of

315 new inspectors will begin slightly later in the fiscal year than

assumed in the proposed rule.

Therefore, for the reasons given in the proposed rule and in this

document, we are adopting the proposed rule as a final rule, with the

change discussed in this document.

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.

The economic analysis prepared for this rule provides a cost-

benefit analysis as required by Executive Order 12866 and an analysis

of economic effects on small entities as required by the Regulatory

Flexibility Act. The analysis is summarized below. Copies of the full

analysis are available by contacting Ms. Donna Ford at the address

listed under FOR FURTHER INFORMATION CONTACT.

Introduction

APHIS is revising existing agricultural quarantine and inspection

(AQI) user fees to recover additional and unanticipated program costs

and to rebuild the AQI reserve. The AQI user fee revisions will become

effective

[[Page 62094]]

January 1, 2000, and will be in effect through FY 2002.

International air passengers, commercial aircraft, commercial

vessels, commercial trucks, and commercial railroad cars arriving at

ports in the customs territory of the United States will be affected by

the increase in AQI user fees.

The FACT Act, as amended, provides that APHIS may prescribe and

collect fees to cover the cost of providing quarantine and inspection

services in connection with the arrival of international airline

passengers, commercial aircraft, commercial vessels, commercial trucks,

and commercial railroad cars at ports in the customs territory of the

United States. The FACT Act further states that the fees should be

sufficient to cover the cost of administering the program and

sufficient to maintain a reasonable balance (or reserve) in the AQI

User Fee Account.

Need for Regulation

The purpose of agricultural quarantine inspections at U.S. ports of

entry is to prevent international travelers and conveyances from

introducing harmful plant and animal pests that could damage U.S.

agriculture and cause substantial economic losses to domestic

producers, consumers, exporters, and to a range of allied agricultural

industries. In the case of AQI user fees, those international travelers

or conveyances who may carry agricultural pests or diseases from abroad

are required to pay for AQI program activities.

Generating revenues to operate public programs by charging users is

widely practiced by Federal, State, and local government agencies and

is based on the premise that the beneficiaries or users of a public

system, and not the public at large, should pay for its operation. User

fees can be an equitable way of matching program costs to program users

or beneficiaries.

Composition of Proposed Fees

Computation of AQI user fees is based on direct program delivery

costs, program support costs, Agency-level support costs, anticipated

user fee administrative costs, and reserve fund costs.

Direct Program Costs

Direct program costs include, but are not limited to: Salary and

benefits for inspectors, canine officers, supervisory and clerical

staff, uniform allowances, local travel expenses, and specialized

equipment purchases.

Program Support Costs

Program support costs include all expenditures necessary to

maintain regional and headquarters support staffs and offices,

including APHIS program staff, detection methods development, plant

risk assessments, and automatic data processing (ADP) support.

Agency-level Costs

In addition to salary and benefit costs, Agency-level support costs

include, but are not limited to: Recruitment and development,

legislative and public affairs, regulatory enforcement, communications,

postage, budget and accounting services, and the cost for USDA's

National Finance Center to provide payroll, purchasing, and other

related financial services.

Administrative Costs

The FACT Act, as amended, allows the Agency to recover

administrative costs that the Agency incurs as a direct result of

developing, collecting, and monitoring AQI user fees.

The Reserve Fund

The FACT Act allows for a reasonable balance in the AQI User Fee

Account. The reserve fund serves several purposes. The reserve fund

ensures that the Agency has access, through the AQI User Fee Account,

to funds for normal operating expenses. Second, the reserve fund

ensures that the Agency has sufficient operating funds in cases of bad

debt, carrier insolvency, or fluctuations in activity volumes. Further,

in the July 1997 final rule, we explained that it is also necessary to

maintain a reasonable reserve balance in the AQI account in order to

account for fees earned for providing AQI services in a given fiscal

year that were not received until after that fiscal year ended.

Regulatory Flexibility Analysis

The effects of increased fees on small entities in each of the

affected industries are discussed separately below. The fee changes

will also affect international airline passengers arriving at ports in

the customs territory of the United States; however, passengers are not

included in this analysis because the Regulatory Flexibility Act does

not cover individuals.

Commercial Vessels

We are amending the scheduled user fees for inspecting commercial

vessels by increasing the fees by $3.75 in FY 2000, by $3.25 in FY

2001, and by $0.25 in FY 2002. APHIS inspects vessels of 100 net tons

or more arriving from all foreign ports, except Canada. Typically,

APHIS inspects (and charges) dry cargo vessels operating between the

United States and foreign ports. At the beginning of 1996 there were

192 U.S. dry cargo vessels.

Bureau of the Census data compiled by the Small Business

Administration (SBA) in 1995 show that the affected industry, U.S.

commercial vessels engaged in deep sea foreign transportation of

freight, was composed mostly of small firms (less than 500 employees,

according to the SBA definition). In 1995, there were 125 firms

engaging in deep sea transportation of freight and 111 of them, or 89

percent of the affected industry, employed less than 500 employees.

Also in 1995, the average or typical small U.S. firm engaged in deep

sea transportation of freight had roughly 31 employees, a payroll of

less than $1.6 million, and annual receipts of $28 million. Data on the

number of dry cargo vessels per firm or firms exclusively operating dry

cargo vessels are not available.

Anecdotal information suggests that many of the companies that are

subject to AQI inspections are not U.S. firms. Further, it is unclear

how many of the 125 U.S. firms will actually be affected by the

increase in AQI user fees and how many of the affected firms are small

entities. We do know that total daily operating costs for dry cargo

vessels idle in port average between $23,600 and $26,800. The user fee

increases of $3.75 in FY 2000, $3.25 in FY 2001, and $0.25 in FY 2002

are very insignificant fractions of daily operating costs, suggesting

that the fee revision will not have a significant economic effect on

small firms operating vessels.

Commercial Trucks

APHIS inspects trucks entering the United States from Mexico. It is

unclear how many of these trucks entering the United States from Mexico

are owned and operated by U.S. firms. According to a recent General

Accounting Office report, roughly 11,000 trucks cross the border each

week day (a total of 3,113,091 in FY 1996) from Mexico into the United

States. The bulk (93 percent) of northbound truck traffic comes through

seven major customs ports: Otay Mesa, California; Calexico, California;

Nogales, Arizona; El Paso, Texas; Laredo, Texas; McAllen, Texas; and

Brownsville, Texas. Many of these trucks are owned and operated by

Mexican firms. At present, trucks from Mexico are limited to commercial

zones along the border and many make multiple daily crossings. Mexican

brokers tend to control much of the truck traffic at some border

locations.

[[Page 62095]]

Reliable data on future traffic patterns are not available.

It is unclear how many U.S. trucking firms will be affected by the

increase in AQI user fees. Anecdotal evidence from APHIS employees

indicates that many of the AQI truck decals, which are good for

multiple inspections, are being purchased by U.S. trucking firms

operating in Texas, California, and Arizona. Bureau of the Census data

for 1995 show that the overwhelming majority of trucking firms in these

States would be considered small firms by SBA standards (less than

$18.5 million in receipts annually). SBA data also show that the

typical small trucking firm in one of these border States had 10

employees and earned a little less than $1 million in receipts

annually.

If we assume that any small U.S. trucking firm that regularly

transports freight from Mexico would purchase an APHIS truck decal,

which is good for an unlimited number of entries during the calendar

year, the increase in user fees could cost a small firm, at most, an

additional $5 per truck or an estimated $55 per firm in FY 2000; and

$10 per truck or an estimated $110 per firm in FY 2001 and FY 2002.

This estimate is based on the assumption that a small firm owns a

maximum of 11 trucks. There are no official statistics on the fleet

size of small trucking firms either for selected border States or for

the United States as a whole. This assumption is based on private

sector trucking industry data on 256,223 U.S. trucking firms

representing a combined fleet of over 2.3 million vehicles. These data

show that 91 percent of firms own 11 or fewer trucks.

SBA data show that the typical small trucking firm in Arizona,

California, or Texas has annual receipts of $932,000. We, therefore,

believe that the increase in cost, as explained above ($110 for the

average small firm), will not result in a significant new burden on

small commercial trucking firms.

Loaded Commercial Railroad Cars

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

across the U.S.-Mexico border. Two of these railroad companies meet the

SBA criteria for small entities (fewer than 1,500 employees). As of

1991, the smaller railroad companies transported between 960 and 2,000

loaded railcars into the United States from Mexico annually. Data on

operating expenses and profit margins for these companies are not

available; but user fees will not increase in FY 2000 and FY 2002 and

will only increase by $0.25 in FY 2001, suggesting that there will not

be a significant economic effect on these two small U.S. railroad

companies.

Commercial Airlines

We are amending the scheduled user fees for inspecting commercial

aircraft by increasing the fees by $3.75 in FY 2000, $3.50 in FY 2001,

and $3.00 in FY 2002. International scheduled and unscheduled

(chartered) air passenger, air cargo, and air courier carriers arriving

at U.S. customs ports are subject to AQI inspections. Bureau of the

Census data compiled by the SBA show that there were a total of 6,107

firms in the U.S. air transportation industry in 1995 and that more

than 5,893 (or more than 96.5 percent) would have met the SBA criteria

for small entity (employing fewer than 1,500 employees). The typical

small firm in the air transportation industry had 15 employees, an

annual payroll of $398,000, and estimated annual receipts of $2.1

million.

APHIS regulations affect international flights, many of which are

operated by foreign-owned firms. Those U.S. air transport firms that do

not operate international flights are not subject to the rule. Agency

records show that, in 1995, only 123 of the 6,107 firms in the air

transportation industry were subject to agricultural quarantine

inspections because they operated international flights. This data

suggest that the increased user fees will not affect a substantial

number of small air transportation companies. Even if all 123 U.S.

airline firms were small entities (which they are not), the fee

revision would be applicable to only 2 percent of small firms in the

industry. Using information on the number of firms inspected, the

number of projected inspections, and the assumption that firms subject

to inspection are distributed by size in a fashion consistent with the

industry as a whole, we can develop very rough estimates of effect on

small firms.

Each of the 123 U.S. companies would have had an airplane inspected

between 1,600 and 1,700 times per year if inspections were prorated

equally between large and small firms. In practice, small firms with

fewer aircraft would probably have substantially fewer annual

inspections, so we are overestimating the effect of fee revisions on

small firms. Given the assumptions above, the increased fees listed

above will likely translate into additional costs per firm of between

$5,000 and $6,000 per year, which are less than three-tenths of one

percent of estimated annual receipts for the average small air

transportation firm.

Given the data, assumptions, and calculations above, it is

reasonable to conclude that fee revisions will not have a significant

economic effect on a substantial number of small air transportation

firms.

Other Costs and Benefits

Additional reporting costs to private airlines associated with

revising user fees are likely to be very small because mechanisms are

already in place for collecting fees. There should be no additional

recordkeeping costs for ticketing agents and tour operators who are not

involved in remitting fees and are not expected to remit fees in the

future. Further, there will be no additional reporting burdens on

vessel, aircraft, railcar, and truck operators as a result of revisions

to user fees.

The benefit of user fees is the shift in the payment of services

from taxpayers as a whole to those persons who are receiving the

government services. While taxes may not change by the same amount as

the change in user fee collections, there is a related shift in

appropriations, which allows tax dollars to be applied to other

programs that benefit the public in general.

The administrative cost involved in obtaining these savings will be

minimal. APHIS already has a user fee program and a mechanism for

collecting user fees in place, and since this rule simply updates

existing user fees, increases in administrative costs will be small.

Because the savings are sufficiently large and the administrative costs

will be small, it is likely that the net gain in reducing the burden on

taxpayers as a whole will outweigh the cost of administering the

revisions of the user fees.

Under these circumstances, the Administrator of the Animal and

Plant Health Inspection Service has determined that this action will

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 final 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

[[Page 62096]]

before parties may file suit in court challenging this rule.

Paperwork Reduction Act

This final rule contains no new information collection or

recordkeeping requirements under the Paperwork Reduction Act of 1995

(44 U.S.C. 3501 et seq.).

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 the tables in paragraphs

(b)(1), (c)(1), (d)(1), (e)(1), and (f)(1) to read as follows:

Sec. 354.3 User fees for certain international services.

* * * * *

(b) * * *

(1) * * *

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

Effective dates Amount

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

January 1, 2000 through September 30, 2000................... 465.50

October 1, 2000 through September 30, 2001................... 474.50

October 1, 2001 through September 30, 2002................... 480.50

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

* * * * *

(c) * * *

(1) * * *

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

Effective dates Amount

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

January 1, 2000 through September 30, 2000................... 4.25

October 1, 2000 through September 30, 2001................... 4.50

October 1, 2001 through September 30, 2002................... 4.75

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

* * * * *

(d) * * *

(1) * * *

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

Effective dates Amount

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

January 1, 2000 through September 30, 2000................... 6.75

October 1, 2000 through September 30, 2001................... 7.00

October 1, 2001 through September 30, 2002................... 7.00

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

* * * * *

(e) * * *

(1) * * *

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

Effective dates Amount

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

January 1, 2000 through September 30, 2000................... 64.00

October 1, 2000 through September 30, 2001................... 64.75

October 1, 2001 through September 30, 2002................... 65.25

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

* * * * *

(f) * * *

(1) * * *

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

Effective dates \1\ Amount

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

January 1, 2000 through September 30, 2000................... 3.00

October 1, 2000 through September 30, 2001................... 3.00

October 1, 2001 through September 30, 2002................... 3.10

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

\1\ Persons who issue international airline tickets or travel documents

are responsible for collecting the APHIS international airline

passenger user fee from ticket purchasers. Issuers must collect the

fee applicable at the time tickets are sold. In the event that ticket

sellers do not collect the APHIS user fee when tickets are sold, the

air carrier must collect the user fee from the passenger upon

departure. Carriers must collect the fee applicable at the time of

departure from the traveler.

* * * * *

3. In Sec. 354.3, paragraph (c)(3)(i) would be amended by removing

the words ``,except, that through September 30, 1997, the amount to be

paid is $40.00''.

Done in Washington, DC, this 9th day of November 1999.

Bobby R. Acord,

Acting Administrator, Animal and Plant Health Inspection Service.

[FR Doc. 99-29868 Filed 11-15-99; 8:45 am]

BILLING CODE 3410-34-P