[Federal Register Volume 79, Number 80 (Friday, April 25, 2014)]
[Proposed Rules]
[Pages 22895-22908]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-09466]


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DEPARTMENT OF AGRICULTURE

Animal and Plant Health Inspection Service

7 CFR Part 354

[Docket No. APHIS-2013-0021]
RIN 0579-AD77


User Fees for Agricultural Quarantine and Inspection Services

AGENCY: Animal and Plant Health Inspection Service, USDA.

ACTION: Proposed rule.

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

DATES: We will consider all comments that we receive on or before June 
24, 2014.

ADDRESSES: You may submit comments by either of the following methods:
     Federal eRulemaking Portal: Go to http://www.regulations.gov/#!docketDetail;D=APHIS-2013-0021.
     Postal Mail/Commercial Delivery: Send your comment to 
Docket No. APHIS-2013-0021, Regulatory Analysis and Development, PPD, 
APHIS, Station 3A-03.8, 4700 River Road Unit 118, Riverdale, MD 20737-
1238.
    Supporting documents and any comments we receive on this docket may 
be viewed at http://www.regulations.gov/#!docketDetail;D=APHIS-2013-
0021 or in our reading room, which is located in room 1141 of the USDA 
South Building, 14th Street and Independence Avenue SW., Washington, 
DC. Normal reading room hours are 8 a.m. to 4:30 p.m., Monday through 
Friday, except holidays. To be sure someone is there to help you, 
please call (202) 799-7039 before coming.

FOR FURTHER INFORMATION CONTACT: For information concerning program 
operations, contact Mr. William E. Thomas, Senior Agriculturist, Office 
of the Deputy Administrator, PPQ, APHIS, 4700 River Road Unit 130, 
Riverdale, MD 20737 1231; (301) 851-2306. For information concerning 
rate development, contact Mr. Michael Peranio, Chief, User Fees, 
Financial Services Branch, FMD, MRPBS, APHIS, 4700 River Road Unit 55, 
Riverdale, MD 20737; (301) 851-2852.

SUPPLEMENTARY INFORMATION: 

Background

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

[[Page 22896]]

AQI services provided in connection with the arrival, at a port in the 
customs territory of the United States, of commercial vessels, 
commercial trucks, commercial railroad cars, commercial aircraft, and 
international passengers. According to the FACT Act, as amended, these 
user fees should recover the costs of:
     Providing the AQI services for the conveyances and the 
passengers listed above;
     Providing preclearance or preinspection at a site outside 
the customs territory of the United States to international passengers, 
commercial vessels, commercial trucks, commercial railroad cars, and 
commercial aircraft;
     Administering the user fee program; and
     Maintaining a reasonable reserve.
    In addition, the FACT Act, as amended, contains the following 
requirements:
     The fees should be commensurate with the costs with 
respect to the class of persons or entities paying the fees. This is 
intended to avoid cross-subsidization of AQI services.
     The cost of AQI services with respect to passengers as a 
class should include the cost of related inspections of the aircraft or 
other vehicle.
    APHIS' regulations regarding overtime services and user fees 
relating to imports and exports are found in 7 CFR part 354. The user 
fees for the AQI activities described above are contained in Sec.  
354.3, ``User fees for certain international services.''
    In an interim rule published in Federal Register on December 9, 
2004 (69 FR 71660-71683, Docket No. 04-042-1), and effective on January 
1, 2005, we amended the user fee regulations in Sec.  354.3 by 
adjusting the fees charged for certain AQI services provided by APHIS 
and the Customs and Border Protection (CBP) bureau of the Department of 
Homeland Security 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 AQI user fees contained in that 
interim rule covered fiscal years (FY) 2005 through 2010. A final rule 
affirming the interim rule without change was published in the Federal 
Register on August 24, 2006 (71 FR 49984-49986, Docket No. 04-042-2). 
Those fees are still in effect today. We published an interim rule to 
increase AQI fees 10 percent across the board on September 28, 2009 (74 
FR 49311-49315, Docket No. APHIS-2009-0048), but withdrew that interim 
rule before it became effective in order to explore other regulatory 
alternatives.

Introduction

    The AQI fees have not been adjusted since FY 2010 and do not 
reflect the current cost of providing AQI services. In addition, the 
AQI fee reserve account has decreased because fees collected have not 
been sufficient to cover current costs, in part due to the recent 
economic recession. As a result, CBP has relied more heavily on its 
appropriated funds to supplement fee revenue.
    APHIS recently conducted a comprehensive fee review to determine 
the current cost of specific AQI services supported by these fees. That 
review determined that the AQI program was not recovering the full cost 
of its fee services, including costs of administering the user fee 
program and maintaining a reasonable reserve in the fee accounts. Some 
of this non-recovery is because most of the current fees do not 
accurately reflect the current full cost of the services related to 
those fees. However, some of this non-recovery is also due to prior 
APHIS policy decisions to:
     Cap fees collected for commercial trucks (with 
transponders), commercial vessels, and commercial railroad cars;
     Exempt certain commercial vessels, commercial trucks, 
commercial railroad cars, commercial aircraft, and international 
passengers as authorized in AQI regulations;
     Exempt international passengers arriving as rail 
passengers, bus passengers, in privately owned vehicles (POV), private 
aircraft, and private vessels; and
     Exempt individuals arriving as pedestrians.
    The fee caps refer to current AQI user fee regulations that limit 
the number of times a specific truck (with transponder), vessel, or 
railroad car must pay the AQI fee in a given year. As part of the AQI 
fee review, we reviewed the financial and workload implications of 
those caps. We also considered the financial, workload, and policy 
implications of creating new fees for international passengers arriving 
by cruise ship, bus, private vehicle, private aircraft, and private 
vessel, and for pedestrians. We also considered the financial, 
workload, and policy implications of establishing fees for commodity 
(plant and plant product) import permits, pest import permits, and 
conducting and monitoring treatments.
    Based on the findings of the AQI user fee review, we are proposing 
to amend the AQI user fee regulations to reflect the projected cost of 
providing AQI services, including expected changes in cost and workload 
for the period the revised fees will be in effect. Specifically, we are 
proposing to:
     Adjust the fees charged for the following conveyances or 
persons to whom AQI services are provided: Commercial vessels, 
commercial trucks, commercial railroad cars, commercial aircraft, and 
international air passengers. However, because commercial truck 
inspections have separate fees for trucks with and without decals 
(transponders), we are actually proposing to adjust a total of six 
current fees.
     Add a new fee to be charged for international commercial 
sea (cruise vessel) passengers, who were previously funded through fees 
collected for commercial vessels. The FACT Act gives APHIS authority to 
charge a fee for all international passengers.
     Add a new fee for conducting and monitoring treatments, 
which is a significant cost that should be paid by those who use and 
benefit from these services.
     Remove the caps for vessels and railcars.
     Adjust the caps on fees for trucks with transponders.
    These proposed adjustments are designed to recover the full cost of 
providing these AQI services, commensurate with the class of persons or 
entities paying the fees, and are based on an analysis of our costs for 
providing services in FY 2010 and FY 2011, as well as our best 
projections of what it will cost to provide these services in FYs 2013 
through 2016. The proposed adjustments will also allow us to maintain 
the AQI reserve account. These user fee adjustments are necessary to 
recover the costs of the current level of activity, to account for 
actual and projected increases in the cost of doing business, and to 
more accurately align fees with the costs associated with each fee 
service.
    AQI services are provided by a combination of APHIS and CBP 
personnel. Because of this arrangement, the AQI user fees collected 
will be shared with CBP based on the related respective costs for each 
agency.

AQI User Fee Accounting

    We maintain all AQI user fees that we collect in a distinct 
account. We carefully monitor the balance in this account and use these 
funds to pay for our actual costs for providing these distinct AQI 
services. Any surpluses in the various AQI accounts carry forward from 
year to year. The AQI user fees are not subject to appropriation by 
Congress, although actual collections

[[Page 22897]]

and estimates of future collections are expressed in each year's 
President's Budget. Collected funds are available until expended to 
fund appropriate AQI activities.

AQI Program Costs

    For AQI user fee purposes, we are required to capture the full cost 
of the AQI services that we provide. This is required by:
     The FACT Act;
     Office of Management and Budget (OMB) Circular A-25, User 
Charges;
     Statement of Federal Financial Accounting Standards 
4 (SFFAS 4), Managerial Cost Accounting Standards and 
Concepts;
     OMB Circular A-11, Preparation, Submission, and Execution 
of the Budget; and
     The Chief Financial Officers (CFO) Act.
    Full cost includes programmatic costs and overhead costs as well as 
imputed costs, which are costs (such as certain current benefits costs 
and future retirement costs and other post-employment benefits) paid by 
agencies other than APHIS and CBP. OMB Circular A-25 and SFFAS 
4 require the inclusion of imputed costs when determining the 
full cost of an output, such as an AQI service, so that the full cost 
to the Federal Government is recovered. Full cost also includes 
depreciation costs related to facilities and equipment used in 
delivering AQI services.

APHIS Costs

    AQI program costs incurred by APHIS include:
     Direct charge costs;
     Program delivery related costs (known as distributable 
costs) at the State level and below, at the regional and headquarters 
levels, the APHIS agency level, and the U.S. Department of Agriculture 
(USDA) departmental level (these costs are described in greater detail 
below); and
     Depreciation and other imputed costs.
    As part of our accounting procedures, we maintain separate 
accounting codes to record costs that can be directly charged to an AQI 
activity. APHIS functions that are directly charged to AQI accounts 
include salary and benefits and other costs (e.g., travel, supplies, 
rents, and equipment) for various personnel, including:
     Personnel in plant inspection stations inspecting 
propagative materials (e.g., seeds and bulbs) and conducting and 
monitoring treatments;
     Personnel performing pest identification services 
(insects, pathogens, plants);
     Personnel performing investigative, enforcement, and 
smuggling interdiction and trade compliance activities;
     Personnel performing risk analysis, science and 
technology, policy development, training, and methods development 
activities relating to AQI work; and
     Personnel performing training of CBP Agricultural 
Specialists, CBP Officers, and CBP Agriculture Specialist Canine 
Officers.
    Other program delivery related costs that cannot be directly 
charged to individual AQI accounts are charged to distributable 
accounts established at the State, regional, headquarters, agency, and 
departmental levels. These costs are driven to the AQI activities using 
staffing level (full time equivalents or FTE) counts as the cost 
driver. This then provides for a ``fully loaded'' activity cost. The 
activity costs are then driven to program outputs (such as inspections) 
based upon work counts.
    Distributable accounts typically contain the following types of 
costs: Salaries and benefits, utilities, rent, telephone, vehicles, 
office supplies, etc. The costs in these distributable accounts are 
distributed within the APHIS accounting system to all the programs and 
activities that benefit from the expense. This is based on a formula 
under which the costs that are directly charged to each activity are 
divided by the total costs directly charged to each account. For 
example, if a work unit performs work on both domestic programs and AQI 
user fee programs, the distributable account costs are allocated to 
each of these programs based on the percentage of the costs directly 
charged to that activity.
    Headquarters-level costs include costs for employees of APHIS' 
Plant Protection and Quarantine (PPQ) and International Services (IS) 
programs who are based at those programs' headquarters in Riverdale, 
MD, and Washington, DC. We incur agency-level support costs through 
activities that support APHIS, such as recruitment and development; 
legislative and public affairs; regulation development; regulatory 
enforcement; and budget, accounting, payroll, purchasing, billing, and 
collection services. Departmental charges are assessed for various AQI 
program costs including Federal telephone service, mail, processing of 
payroll and money management, unemployment compensation, Office of 
Workers Compensation Programs, and central supply for storing and 
issuing commonly used supplies and forms. Because the agency and 
department level costs are costs for all of APHIS, we assign a 
proportional amount to the AQI program, primarily based on the staffing 
level used in the AQI program.
    Imputed costs include Office of Workers' Compensation costs from 
the Department of Labor; costs of employee leave earned in a prior 
fiscal year and used in the current fiscal year; headquarters space 
operation and maintenance costs; Office of Personnel Management (OPM) 
and State Department costs to provide retirement, health, and life 
insurance benefits to employees; unemployment compensation costs; and 
Department of Justice judgment fund costs. Fee revenue collected that 
is based on imputed costs is not retained in the AQI account but is 
forwarded to the U.S. Treasury.

CBP Costs

    CBP program costs are similar to those for APHIS. CBP costs that 
are directly charged to AQI activities include salaries and benefits 
for CBP Agriculture Specialists, CBP Officers, CBP Agriculture 
Specialist Canine Officers, supervisors (such as port directors), CBP 
Technicians, and mission support staff; equipment and supplies used in 
connection with services subject to AQI user fees; contracts used for 
AQI services; and large supply items such as uniforms, laboratory and 
examination equipment, and non-intrusive inspection equipment used for 
AQI services.
    CBP activities that are directly charged to AQI accounts include 
various personnel at ports of entry, headquarters, and field offices, 
including:
     Personnel deployed to international airports and seaports 
to perform regulatory enforcement activities that include:
     Processing for entry of passengers, baggage, and personal 
effects;
     Examination for entry of aircraft, containers, and 
vessels;
     Administration of wood packaging material and regulated 
garbage compliance monitoring activities; and
     Examination for entry of commercial cargo and parcels.
     Personnel deployed to land border ports of entry to 
perform regulatory enforcement activities including examination for 
entry of commercial trucks, railcars, containers, and commercial cargo 
and parcels.
     Personnel conducting pre-arrival analysis, targeting, and 
selection for examination of baggage, commodities, conveyances, 
packages, etc., that present a risk to American agriculture and natural 
resources; including agricultural and biological terrorism agents.

[[Page 22898]]

     Personnel providing expert guidance, training, and 
technical advice to CBP Officers, other CBP personnel, trade, industry, 
and other stakeholders on regulatory requirements pertaining to 
compliance with agricultural regulations and the processing of 
agriculture-related cargo and material.
     Personnel performing pre- and post-academy training for 
CBP Agriculture Specialists, CBP Officers, other CBP personnel, and the 
performance of recruitment and agriculture-related outreach.
    Summary level costs for APHIS and CBP are shown in table 1 below.

                             Table 1--FY 2011 Estimated Costs by Category and Agency
----------------------------------------------------------------------------------------------------------------
                          Cost category                                APHIS            CBP            Total
----------------------------------------------------------------------------------------------------------------
Direct..........................................................    $140,210,651    $418,647,765    $558,858,416
Overhead........................................................      12,220,530     223,776,057     235,996,587
Imputed.........................................................      12,572,451      53,764,878      66,337,329
                                                                 -----------------------------------------------
    Total.......................................................     165,003,632     696,188,700     861,192,332
----------------------------------------------------------------------------------------------------------------

AQI Cost Analysis

    In order to determine the current cost of AQI services and 
understand the potential impact of alternative fee schedules, we first 
calculated the costs of the current AQI program by fee category, using 
the activity-based-costing (ABC) methodology. We were then able to 
project volumes and perform detailed cost analysis for potential 
changes to the AQI fee schedule. This cost modeling effort included 
developing historical cost information using FY 2010 and FY 2011 
financial and workload data to provide the full cost of AQI activities 
and outputs. We used the ABC methodology because it supports the 
philosophy of full cost recovery, provides the functional elements and 
data for cost and business process analysis, and complies with 
regulatory guidance regarding full cost recovery.
    ABC uses a two-step methodology to assign an organization's costs 
to its work activities and then to its related outputs. Costs are those 
things on which an organization spends its budget, such as salaries and 
benefits for employees, rent, equipment, etc. Work activities are the 
various endeavors that people in the organization undertake (e.g., air 
passenger inspection, pest identification), and outputs are the goods 
or services that the organization produces through its activities.
    In the first step of ABC, we assigned costs to activities using 
resource drivers, which typically represent a cause-and-effect 
relationship to establish how much of a resource is consumed by each 
activity. For example, if an organization spends 10 percent of its 
effort performing a particular activity, we assigned 10 percent of 
certain costs (e.g., salary and benefits) to that activity because the 
level of effort is a good indicator of resources consumed. In support 
of this step, we conducted an activity labor survey for APHIS State, 
regional, and headquarters organizations to estimate the level of 
effort devoted to AQI activities. We also incorporated activity cost 
information for CBP from their existing cost model.
    In the second step, we assigned APHIS and CBP activity costs to the 
outputs produced by performing the activities. We performed this cost 
assignment using activity drivers, again based on a cause-and-effect 
relationship. For example, if an activity is performed for more than 
one type of output, we assigned the cost of the activity to the outputs 
proportionately based on the workload data (volume) associated with 
each output. We used workload data from several APHIS and CBP systems 
as the activity drivers.
    While our AQI cost model design is based on the standard ABC 
methodology, it also incorporated several additional cost assignment 
layers to provide more transparent cost assignment and reporting. This 
included identifying and costing outputs at levels that were more 
detailed than necessary to capture costs just at current fee service 
levels. For example, we separately determined the cost of APHIS and CBP 
outputs and then combined this information to develop cost information 
for overall AQI services. This then provided us with flexibility for 
restructuring the AQI fee schedule. We also calculated expected future 
costs and workload and added those to the base to estimate the total 
costs and workload for the future periods when the new fees are 
expected to be in effect.
    The data for the AQI cost analysis came from financial and program 
workload information in standard APHIS and CBP records. The financial 
data included direct program costs and overhead costs previously 
discussed. This data was previously captured by those agencies to 
comply with other requirements. CBP already had a detailed cost model 
for its activities, and we used cost data from the CBP cost model. As 
noted above, we used a detailed labor survey to determine the cost of 
APHIS activities.
    Then, in accordance with Office of Management and Budget Circular, 
A-25 ``User Charges,'' and OMB Statement of Federal Financial 
Accounting Standards, Number 30, ``Managerial Cost Accounting Standards 
and Concepts,'' we identified and added an appropriate amount of 
imputed costs. These are costs borne by other Federal agencies (such as 
the U.S. Treasury and the Office of Personnel Management) in support of 
the AQI program. We used employee costs as the basis to identify the 
portion of these costs to attribute to the AQI program.
    We calculated APHIS depreciation by identifying equipment-related 
depreciation expenses. For APHIS-owned buildings where AQI work is 
performed, we used an appropriate portion (based on percent of work 
done in the building that was AQI) of the total depreciation for those 
buildings. CBP provided depreciation data for CBP-owned facilities and 
capital equipment based on similar calculations.
    When the AQI cost model was completed, we were able to determine 
the actual costs of each of the current AQI services, as shown in the 
table below. By matching these costs with the workload volumes for each 
AQI fee service, we were also able to calculate the unit cost of each 
output. We were also able to determine the more detailed costs 
associated with all classes of passengers and treatments. Table 2 shows 
the FY 2011 baseline costs by service activity that resulted from this 
AQI cost analysis.

                   Table 2--AQI FY 2011 Baseline Costs
------------------------------------------------------------------------
                Fee service activity                   2011 Actual cost
------------------------------------------------------------------------
Air Passenger.......................................        $291,434,620
Cruise Ship Passenger...............................          20,205,868
Rail Passenger......................................           1,630,302
Bus Passenger.......................................          23,091,799

[[Page 22899]]

 
POV Passenger.......................................         129,489,305
Pedestrian..........................................          34,664,442
Commercial Aircraft.................................         156,242,180
Commercial Maritime Cargo Vessel....................          91,152,480
Commercial Truck....................................          73,529,394
Commercial Cargo Railcar............................           5,150,585
Private Aircraft....................................          11,371,965
Private Maritime Vessel.............................           4,940,099
Treatments..........................................          14,324,472
Military Clearance Operations.......................           3,964,821
                                                     -------------------
    Total...........................................         861,192,332
------------------------------------------------------------------------

    To project costs beyond FY 2011, we considered two changes to these 
baseline costs. The first change was any initiative which would 
increase APHIS or CBP costs in those years. Both APHIS and CBP have 
implemented various initiatives aimed at reducing redundancy in data 
input requirements for importers, increasing transparency, reducing 
wait times or expediting inspections, and eliminating or changing 
treatment requirements. The APHIS initiatives are:
     A Web-based permit system that allows users to submit 
permit applications, track applications, apply for renewals and 
amendments, and receive copies of their import/interstate movement/
transit/release permits.
     AQI outreach, an effort to provide information and 
education to travelers and importers in order to reduce the risk of 
bringing prohibited agricultural items into the United States.
     Critical upgrades to plant inspection station equipment 
that will enable us to do plant inspections more effectively.
     A more robust risk assessment capacity that will enable 
APHIS to increase its capacity to perform risk assessments through 
increasing the quality and reliability of its data.
     Development of new treatment techniques by APHIS 
scientists that can be used on agricultural products coming into the 
United States. These methods can save cost and time as well as reduce 
the risk of invasive pests entering the country.
    The CBP initiatives are:
     Border security supplemental, which is related to a FY 
2010 law intended to bolster border security, specifically along the 
U.S./Mexican border, and represents the AQI cost associated with the 
law. The initiative funding supports Federal agents, judges, courts, 
and other various agencies.
     Increase in the journeyman grade for CBP Officers, CBP 
Agriculture Specialists, and Border Patrol Agents to account for 
increasing scope of responsibilities of officers and agents and to 
bring parity across Federal agencies. The AQI fee review incorporated 
journeyman upgrade costs specifically related to AQI.
     National Targeting Center that filters advanced 
information on people and products to identify threats and risks and 
allows CBP to target higher risk trade and travelers for detailed 
inspection prior to their arrival at a U.S. port of entry.
     Address increased activity at ports of entry by hiring 
additional personnel.
    The data for these initiatives came from APHIS and CBP budget 
offices and is shown in Table 3.

                                       Table 3--APHIS and CBP Initiatives
----------------------------------------------------------------------------------------------------------------
       Future initiatives              2012            2013            2014            2015            2016
----------------------------------------------------------------------------------------------------------------
                                                      APHIS
----------------------------------------------------------------------------------------------------------------
Web-based permits system........      $1,200,000      $1,204,680      $1,226,364      $1,237,279      $1,248,291
AQI outreach....................       5,000,000       5,019,500       5,109,851       5,155,329       5,201,211
Plant inspection station                  23,600          23,692          24,118          24,333          24,550
 equipment......................
Risk assessment capacity........         120,000         120,468         122,636         123,728         124,829
Treatment development...........         180,000         180,702         183,955         185,592         187,244
----------------------------------------------------------------------------------------------------------------
                                                       CBP
----------------------------------------------------------------------------------------------------------------
Border security supplemental....       5,676,640       5,676,640       5,773,143       5,802,009       5,831,019
Journeyman increase.............      38,550,379      38,550,379      39,205,735      39,401,764      39,598,773
National Targeting Center.......       6,895,000       6,919,133       7,042,985       7,102,850       7,163,225
Port of entry staff expansion...       7,752,437       7,752,437       7,884,228       7,923,649       7,963,267
                                 -------------------------------------------------------------------------------
    Totals......................      65,398,056      65,447,630      66,573,016      66,956,533      67,342,408
----------------------------------------------------------------------------------------------------------------

    The second change that we considered in calculating future costs 
was projected cost growth. Table 4 shows the growth rates used to 
project future cost increases. These growth rates represent guidance 
provided by OMB for use in developing budgets and other forecasts of 
future costs. They are broken out by payroll and non-payroll costs, and 
we applied them accordingly to the baseline costs and initiatives.

                          Table 4--Growth Rates
------------------------------------------------------------------------
                                              Payroll       Non-payroll
               Fiscal year                   (percent)       (percent)
------------------------------------------------------------------------
2012....................................             0.0             1.3
2013....................................             0.0             1.6
2014....................................             1.7             2.1
2015....................................             0.5             2.1
2016....................................             0.5             2.1
------------------------------------------------------------------------

    Based on these growth rates, we projected the costs shown in Table 
5 for FYs 2014 through 2016.

                                 Table 5--Projected Costs FYs 2014 Through 2016
----------------------------------------------------------------------------------------------------------------
                      Fee service activity                             2014            2015            2016
----------------------------------------------------------------------------------------------------------------
Air passenger...................................................    $322,591,452    $324,996,118    $327,426,378

[[Page 22900]]

 
Sea passenger...................................................      22,421,487      22,589,194      22,758,727
Rail passenger..................................................       1,805,242       1,818,103       1,831,085
Bus passenger...................................................      25,573,198      25,758,827      25,946,311
POV passenger...................................................     143,333,256     144,384,916     145,447,319
Pedestrian......................................................      38,357,661      38,635,543      38,916,167
Commercial aircraft.............................................     170,836,038     172,855,461     174,912,526
Commercial maritime.............................................      99,783,440     100,995,859     102,232,305
Commercial truck................................................      81,018,003      81,789,820      82,573,152
Commercial cargo railcar........................................       5,679,995       5,732,572       5,785,904
Private aircraft................................................      12,602,768      12,690,860      12,779,754
Private maritime vessel.........................................       5,486,025       5,526,987       5,568,398
Treatments......................................................      15,086,074      15,421,466      15,765,008
Military clearance..............................................       4,331,642       4,371,639       4,412,236
                                                                 -----------------------------------------------
    Total.......................................................     948,906,281     957,567,365     966,355,270
----------------------------------------------------------------------------------------------------------------

Volume Projections

    To develop potential fee scenarios, we also projected workload 
growth and resulting workload volumes for each fiscal year from 2013 to 
2016. We were able to identify FY 2011 and 2012 actual workload from 
data previously captured by APHIS and CBP. To forecast expected changes 
in imports and tourist traffic across the nation's borders, we 
researched a variety of data sources and used the following:
     We used projections from the International Air Transport 
Association Industry Forecast Summary Report to project air passengers 
and air cargo.
     We used projections from a market research site, Cruise 
Market Watch, to project sea passengers.
     We used a U.S. Department of Transportation report that 
forecast the number of border crossings by mode of traffic at selected 
ports of entry and extrapolated to get projections for pedestrians and 
POV and bus passengers.
     We used a USDA report on Agricultural Sector Aggregate 
Indicators to project maritime cargo, truck cargo, rail cargo, mail 
packages, commodity import permits, and treatments.
     We did not forecast any changes for rail passengers, 
private aircraft, or private sea vessels because a change rate for 
these conveyances cannot be tied to any import data or other 
independent variable.
    Table 6 shows the resulting volumes for the various fee service 
activities.

                                                  Table 6--Workload Projections, FYs 2013 Through 2016
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Expected
                    Fee                        2011 Actual     2012 Actual     changes         2013            2014            2015            2016
                                                  count           count        (annual)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Air passenger..............................      78,901,506      77,255,476        3.60%      80,036,673      82,917,993      85,903,041      88,995,551
Sea passenger..............................      12,931,271      13,532,465         3.15      13,958,738      14,398,438      14,851,989      15,319,826
Rail passenger.............................         276,722         276,855           --         276,855         276,855         276,855         276,855
Bus passenger..............................       5,222,786       5,318,382        -1.69       5,228,501       5,140,140       5,053,271       4,967,871
POV passenger..............................     169,834,015     175,428,545         0.76     176,761,802     178,105,192     179,458,791     180,822,678
Pedestrian.................................      40,609,235      41,375,736        -3.49      39,931,723      38,538,106      37,193,126      35,895,086
Commercial aircraft........................         700,644         719,251         3.60         745,144         771,969         799,760         828,551
Commercial maritime cargo vessel...........         101,794         113,727         3.15         117,309         121,005         124,816         128,748
Commercial truck...........................      10,348,791      10,664,770         3.83      11,073,231      11,497,335      11,937,683      12,394,897
Commercial cargo railcar...................       2,912,210       3,230,167         3.83       3,353,882       3,482,336       3,615,710       3,754,191
Private aircraft...........................         121,221         116,240           --         116,240         116,240         116,240         116,240
Private maritime vessel....................          80,529          80,949           --          80,949          80,949          80,949          80,949
Treatments.................................          29,713          38,517         5.36          40,582          42,757          45,048          47,463
--------------------------------------------------------------------------------------------------------------------------------------------------------

Fee Computation

    With the total costs and the workload projections, we were able to 
project fee requirements for each potential fee service activity. 
However, in addition to the fee revenue required to cover current and 
projected AQI service costs, we need to generate revenue to replenish 
the AQI account reserve. The reserve components were established simply 
by rounding up the raw fee calculations (projected unit cost) for each 
fee. All projected unit costs less than $10 were rounded up to the next 
$1, and all unit costs greater than $200 were rounded up to the next 
$25. No proposed fees fall between $10 and $200. This approach provides 
a proportionate rounding for all fees. We then calculated the estimated 
number of days that the reserve could support costs on a noncumulative 
basis. We estimate that by the end of FY 2016 the AQI reserve will have 
approximately a 90 day reserve, which is consistent with our 
established AQI fund reserve policy.

Proposed Fee Amounts

    APHIS is proposing significant changes to the AQI user fee 
structure and the fee rates. As previously mentioned, we employed 
activity based costing (ABC) as our methodology to determine the cost 
of AQI services, and this information, along with other factors, was 
used to define an appropriate fee structure and fee rates. The ABC 
methodology is a derivative of the managerial cost accounting, which is 
recommended by OMB and

[[Page 22901]]

Government Accountability Office guidance on government fee setting. 
Previously, APHIS relied on an estimation methodology to determine the 
fee rates, and we believe that the estimation methodology did not 
provide enough information to properly establish the correct fee 
structure and fee rates. We also believe that the use of the ABC 
methodology provides significantly greater accuracy and transparency in 
fee setting. The use of ABC has enabled APHIS to more accurately 
identify the true costs of providing each of the AQI services.
    The costs incurred by both APHIS and CBP have been analyzed using 
the ABC methodology. APHIS was able to determine activity costs for 
each AQI service by collecting related financial and workload data for 
APHIS and CBP, and using this information to properly assign AQI 
program costs to each activity. The AQI program costs include program 
delivery activities such as inspections, inspection targeting analysis, 
staff training, plant and pest identification, and risk assessments. 
The majority of activity costs are for salary and benefits, but they 
also include costs such as the training of CBP Agriculture Specialists, 
CBP Officers, training and care of CBP Agriculture Specialist Canine 
Officers and canines, replacement or new equipment, utilities, rent, 
replacement or new vehicles, and office supplies; and imputed costs 
that APHIS and CBP are responsible for recovering such as workman's 
compensation, health, retirement, and life insurance benefits.
    Using the data and methodology discussed above, we calculated the 
proposed fees shown in table 7. Each fee service activity is explained 
in greater detail in the paragraphs that follow. If these proposed fees 
become effective, we would continue to monitor the costs of AQI 
services, our collections, and the level of the reserve and would 
undertake rulemaking to adjust the fees if we determined that costs 
were not being appropriately recovered or the reserve levels were on a 
path to be either greater or less than our established AQI fund 90-day 
reserve policy.

                         Table 7--Proposed Fees
------------------------------------------------------------------------
       Fee service activity               Current            Proposed
------------------------------------------------------------------------
Air passenger....................  $5...................              $4
Commercial aircraft..............  70.75................             225
Commercial maritime cargo vessel.  496..................             825
Commercial truck.................  5.25.................               8
Commercial truck transponder.....  105..................             320
Commercial cargo railcar.........  7.75.................               2
Sea passenger....................  no fee...............               2
Treatments.......................  no fee...............             375
------------------------------------------------------------------------

    Air passenger. Millions of travelers pass through U.S. airports 
daily. Inspecting air passengers includes pre-arrival analysis of 
incoming passengers and screening arriving air passengers for 
agricultural products by CBP Agriculture Specialists and CBP Officers; 
inspection of passenger baggage using CBP agriculture canines and 
specialized non-intrusive inspection equipment; inspecting the interior 
of the passenger aircraft; monitoring the storage and removal of 
regulated international garbage from the aircraft to ensure consistency 
with all regulatory requirements; safeguarding and appropriately 
disposing of any seized or abandoned prohibited agricultural products; 
and identifying pests found on prohibited agricultural products brought 
into the country by air passengers. The ABC data indicated that the 
current fee was going to generate revenues in excess of what will be 
required to support anticipated costs. As a result, we are proposing a 
20 percent decrease in this fee (from $5 to $4) to better align the fee 
with the cost of activities related to air passengers.
    Commercial aircraft. We also inspect international commercial 
aircraft arriving at airports in the customs territory of the United 
States. Inspecting commercial aircraft includes reviewing manifests and 
documentation accompanying incoming cargo; targeting higher risk cargo 
for inspection or clearance; inspecting various types of agricultural 
and agricultural-related commodities, international mail, expedited 
courier packages, containers, compliant wood packaging material, and 
packing materials to screen for the presence of plant pests and 
contaminants, compliance with regulations, and determining entry 
status; inspecting the aircraft hold or exterior for contaminants, 
pests, or invasive species; monitoring the storage and removal of 
regulated international garbage from the aircraft to ensure consistency 
with all regulatory requirements; identifying pests found during 
inspection; and safeguarding shipments pending PPQ determination for 
treatment or final disposition. The ABC data indicated that the current 
fee being charged does not reflect the actual costs incurred in the 
performance of those activities and would result in a significant 
shortfall in what will be required to cover the anticipated costs of 
this activity. Accordingly, we are proposing a 218 percent increase in 
this fee (from $70.75 to $225) to more accurately align the fee with 
the actual cost of activities related to commercial aircraft inspection 
described above as those costs were identified using our ABC 
methodology.
    Commercial maritime cargo vessel. We inspect commercial vessels of 
100 net tons or more arriving at ports of entry into the customs 
territory of the United States. Inspecting commercial maritime cargo 
vessels involves reviewing manifests and documentation accompanying 
incoming cargo; targeting higher risk cargo for inspection or 
clearance; inspecting various types of agricultural and agricultural-
related commodities, containers, compliant wood packaging material, and 
packing materials to screen for the presence of plant pests and 
contaminants, compliance with regulations, and determining entry 
status; inspecting the vessel to ensure that contaminants, pests, or 
invasive pests are not present or are properly safeguarded; inspecting 
the ship's stores to ensure that prohibited items are not present; 
monitoring the storage and removal of regulated international garbage 
from the vessel to ensure consistency with all regulatory requirements; 
identifying pests found during inspection; and safeguarding shipments 
pending PPQ determination for treatment or final disposition. The 
current regulations cap the number of arrivals for which a single 
vessel would be charged at 15 per calendar year, i.e., a vessel is not 
charged for its 16th or subsequent arrival in any 1 year. The ABC data

[[Page 22902]]

indicated that the limitation on collections imposed by the cap, as 
well as the amount of the current fee, was going to lead to a shortfall 
in what will be required to support anticipated costs. As a result, we 
are proposing to remove the 15-arrival cap and increase the fee by 71 
percent (from $496 to $825) to align the fee with the cost of 
activities related to commercial maritime cargo vessels.
    Commercial truck. We inspect commercial trucks arriving at land 
ports in the customs territory of the United States from Mexico and 
Canada. Inspecting trucks involves reviewing manifests and 
documentation accompanying incoming cargo; targeting higher risk cargo 
for inspection; inspecting various types of agricultural and 
agricultural-related commodities, compliant wood packaging material, 
and packing materials to screen for the presence of plant pests and 
contaminants, compliance with regulations, and determining entry 
status; inspecting the truck and conveyance for contaminants, pests, or 
invasive species; identifying pests found during inspection; and 
safeguarding shipments pending final determination for treatment or 
final disposition. The ABC data indicated that the current fee was 
going to result in a shortfall in what will be required to support 
anticipated costs. As a result, we are proposing a 52 percent increase 
in this fee (from $5.25 to $8) to align the fee with the cost of 
activities related to commercial trucks.
    Commercial truck transponder. We estimate that the use of 
transponders corresponds to a 10 minute reduction in the border 
crossing time for trucks. The proposed fee will maintain an incentive 
for trucks to continue the use of transponders while recovering a 
greater portion of the Government's cost to provide inspection 
services. Based on data about how many times a commercial truck with a 
responder came into the country, we propose to increase the truck 
transponder fee from 20 to 40 times the individual truck fee. We are 
proposing this change based on our analysis indicating that trucks with 
transponders cross an average of 106 times per year. Increasing the 
truck transponder fee to 40 times the individual truck fee, along with 
the increase in the commercial truck fee, results in an increase of 205 
percent (from $105 to $320) for the transponder fee.
    Commercial cargo railcar. We inspect loaded commercial railroad 
cars arriving at land ports in the customs territory of the United 
States from Mexico and Canada. Inspecting railcars involves reviewing 
manifests and documentation accompanying incoming cargo; targeting 
higher risk cargo for inspection or clearance; inspecting various types 
of agricultural and agricultural-related commodities, containers, 
compliant wood packaging material, and packing materials to screen for 
the presence of plant pests and contaminants, compliance with 
regulations, and determining entry status; inspecting the railcars for 
contaminants, pests or invasive species; identifying pests found during 
inspection; monitoring the storage and removal of regulated 
international garbage from the railcar to ensure consistency with all 
regulatory requirements; and safeguarding shipments pending PPQ 
determination for treatment or final disposition. The ABC data 
indicated that the current fee was going to generate revenues 
significantly in excess of what will be required to support anticipated 
costs. Accordingly, we are proposing a 74 percent decrease in this fee 
(from $7.75 to $2) to align the fee with the cost of activities related 
to commercial cargo railcars.
    We also analyzed those fee service activities for which there was 
not currently a fee even though significant workload and/or costs were 
being generated:
    Sea passenger. Inspecting a cruise vessel and its passengers 
includes pre-arrival analysis of incoming passengers; screening 
arriving sea passengers for agricultural products by CBP Agriculture 
Specialists and CBP Officers; inspection of passenger baggage using CBP 
agriculture canines and specialized non-intrusive inspection equipment; 
inspection of the vessel itself to ensure that contaminants, prohibited 
articles, or invasive pests are not present; inspecting the ship's 
stores to ensure that prohibited items are not present or are properly 
safeguarded; and monitoring the storage and removal of regulated 
international garbage from the vessel to ensure consistency with all 
existing regulatory requirements. (Consistent with our AQI fee 
authority, the costs of inspecting the cruise ships themselves would be 
covered by the proposed sea passenger fee rather than a separate fee 
similar to the commercial maritime cargo vessel fee, just as the 
international air passenger user fee covers the costs associated with 
inspecting the aircraft on which they arrived.) We also analyze 
information that allows us to perform targeted inspections in order to 
reduce the risk of a dangerous plant, plant pest, contaminant, or 
foreign animal disease from entering the United States. This 
information is used in our training and in the development of 
inspection guidance and policies. Similar information is used 
extensively by CBP to help distinguish levels of risk. We believe that 
this effort helps us to provide the highest level of protection at the 
lowest cost. No fees are currently collected for this category of 
passenger. Based on the costs associated with inspecting these 
passengers (projected at approximately $22.4 million to $22.8 million 
in FYs 2014 to 2016, as noted in table 5 above) and the ease of 
collection from the direct beneficiary (i.e., the passenger) through 
the sea vessel ticket, we are proposing to implement a $2 user fee, 
which is sufficient to recover the projected costs of this AQI 
activity. This new fee would allow us to recover the costs associated 
with this inspection activity.
    The new sea passenger user fee would be added to paragraph (f) of 
Sec.  354.3, which currently contains the provisions regarding the 
airline passenger AQI user fee, as the collection and remittance 
procedures for both the sea passenger and airline passenger user fees 
would be the same. The current regulations provide an exemption from 
the payment of user fees for the crew members on duty on an arriving 
aircraft; we would make the same exemption for crew members on duty 
aboard an arriving cruise ship. Similarly, the current regulations 
provide that airlines will not be charged reimbursable overtime for 
passenger inspection services required for any aircraft on which a 
passenger arrived who has paid the international passenger AQI user fee 
for that flight. We would provide the same limitation on overtime 
charges for cruise lines.
    Treatments. Treatments are performed on some agricultural goods as 
a condition of entry, and others are performed when an actionable pest 
(i.e., a plant pest that should not be allowed to be introduced into or 
disseminated within the United States) is detected during a port-of-
entry inspection. The objective of these AQI treatments is to ensure 
that agricultural goods and commodities entering the United States are 
free from viable plant pests and noxious weeds that would pose a risk 
to the health of the U.S. domestic agriculture and natural resources. 
Treatment methods include fumigation, cold treatment, irradiation, and 
heat treatment. APHIS activities related to the application of AQI 
treatments include personnel determining the appropriate treatment 
schedule, monitoring the treatment to ensure it is conducted as 
specified so that the treatment takes place in the prescribed manner, 
and determining whether the treatment was successful. These AQI 
services focus on ensuring the

[[Page 22903]]

effectiveness of a given treatment regardless of its methodology. While 
AQI treatments are usually provided by private entities who charge the 
importer for their services, from time to time APHIS will provide the 
treatment, especially for propagative materials. We also develop new 
methods of treatments. These methods increase the effectiveness of 
treating agricultural goods and reduce the risk of dangerous pests 
entering the United States. No fees are currently collected for this 
activity.
    Based on our analysis of the costs (projected at approximately $15 
million to $15.8 million in FYs 2014 to 2016, as noted in table 5 
above) and the relative ease of collection when the treatment is 
ordered, we are proposing a $375 fee for each treatment. The AQI 
treatment fee is designed to recover the costs of APHIS services for 
monitoring the treatment to ensure it is conducted as specified so that 
the treatment takes place in the prescribed manner and determining 
whether the treatment was successful. Should a treatment prove 
unsuccessful and have to be reapplied, that subsequent AQI treatment 
would also be subject to an AQI treatment fee, as APHIS incurs costs by 
providing AQI treatment-related services regardless of the success or 
failure of the treatment. Similarly, if there was a particularly large 
consignment that had to be treated in two or more lots, each lot would 
be subject to an AQI treatment fee. Finally, along those lines, if 
there were two or more small consignments from different importers that 
required the same treatment and could be combined and treated together 
at the same time, there would be only one AQI treatment fee charged, 
with each importer being responsible for a share of that fee.
    The provisions for the payment of AQI user fees for conducting and 
monitoring treatments would be added to Sec.  354.3 as a new paragraph 
(h). Most treatment services are provided by private companies that 
charge importers a fee for their services. Because those companies are 
already invoicing the importers whose consignments are being treated, 
we are proposing that the treatment companies would also collect the 
AQI user fee and subsequently remit the fee to APHIS. This is the same 
model used for the collection of the AQI user fees for international 
airline passengers and that we are proposing to use for cruise ship 
passengers. In those instances where APHIS itself performs the 
treatment, we would collect the fee directly from the importer for whom 
the treatment is being provided.

Other Fees Considered

    APHIS considered, but is not proposing at this time, fees for the 
following AQI services:
     Rail passenger: No fees are currently collected for this 
category of passenger. Because the total cost is less than $2 million, 
and there would be additional cost of creating and operating fee 
collections, we are not proposing any fees for this category of 
passenger.
     Bus passenger: No fees are currently collected for this 
category of passenger, even though annual costs are over $25 million 
for this service. We considered proposing a new bus passenger fee, but 
recognized that this would require establishing the infrastructure and 
process for bus companies to collect and remit the fees since CBP does 
not have a comparable fee. In addition, the barriers for entry into the 
bus passenger industry are much lower compared to air and cruise vessel 
industries. As a result, there are more bus companies entering and 
exiting the industry, which would make fee collection and monitoring 
difficult. However, we intend to gather additional information to 
determine if there are other ways to collect this fee in the future, 
which would be addressed through a future rulemaking.
     POV passenger: No fees are currently collected for this 
category of passenger, even though annual costs are over $160 million. 
The high cost of creating and operating fee collections, and 
considerations about potential backups of POVs at the ports of entry, 
led us to recommend that POV passengers continue to not be subject to 
an AQI user fee.
     Pedestrians: No fees are currently collected for the 
inspection of pedestrians arriving in the United States, even though 
the annual costs are over $38 million for this service. The high cost 
of creating and operating fee collections and considerations about 
potential backups of pedestrians at the ports of entry led us to 
recommend that arriving pedestrians continue to not be subject to an 
AQI user fee at this time.
     Private aircraft: No fees are currently collected for the 
inspection of private aircraft and their passengers. The cost of less 
than $13 million, and the additional cost of creating and operating fee 
collections, led us to recommend that private aircraft and their 
passengers continue to not be subject to an AQI user fee.
     Private maritime vessel: No fees are currently collected 
for the inspection of private maritime vessels and their passengers. 
The cost of less than $6 million, and the additional cost of creating 
and operating fee collections, led us to recommend that private 
maritime vessel passengers continue to not be subject to an AQI user 
fee.
     Commodity import permit: No fee is currently charged for 
commodity import permits. We considered establishing a separate fee, 
but concerns about the impact on importers and relationships with 
trading partners led us to not propose this fee.
     Pest import permit: No fee is currently charged for pest 
import permits. We considered establishing a separate fee, but we did 
not want to discourage the research associated with pest import permits 
because this research benefits United States agriculture and ecosystem 
overall.
    Accordingly, the costs of these AQI services will continue to be 
covered through appropriated funding.

Periodic Updates to User Fees

    The Department is seeking public comment on the frequency and 
methodology for updating the AQI user fees. Currently there is no 
established schedule for updating the fees, which has led to long gaps 
between updates and substantial increases in fees when updates are 
made. The Department is particularly interested in comments on whether 
fees should be updated more frequently, e.g., every 2 years, and 
whether the updates should be made through a rulemaking or some other 
means such as a notice-based process that provides an opportunity for 
public comment. We are also interested in comments regarding the 
possibility of phasing in the updated fees when there may be an 
economic hardship due to factors such as substantial increases due to 
long gaps between updates or, as in the case with this proposed rule, a 
comprehensive review to determine the current cost of specific AQI 
services indicates that the AQI program is not recovering the full cost 
of its fee services.

Executive Orders 12866 and 13563 and Regulatory Flexibility Act

    This proposed rule has been determined to be economically 
significant for the purposes of Executive Order 12866 and, therefore, 
has been reviewed by OMB.
    We have prepared a regulatory impact analysis (RIA) for this rule. 
The RIA provides a cost-benefit analysis, as required by Executive 
Orders 12866 and 13563, which direct agencies to assess all costs and 
benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic,

[[Page 22904]]

environmental, public health and safety effects, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. The RIA also provides an initial regulatory flexibility 
analysis that examines the potential economic effects of this rule on 
small entities, as required by the Regulatory Flexibility Act. The RIA 
is summarized below. Copies of the full analysis are available by 
contacting the person listed under FOR FURTHER INFORMATION CONTACT or 
on the Regulations.gov Web site (see ADDRESSES above for instructions 
for accessing Regulations.gov).
    APHIS is proposing to amend the user fee regulations by adding new 
fee categories and adjusting current fees charged for certain 
agricultural quarantine and inspection (AQI) services. We are also 
proposing to alter or remove certain fee caps. We have determined that 
revised user fee categories and revised user fees are necessary to 
recover the costs of the current level of activity, to account for 
actual and projected increases in the cost of doing business, and to 
more accurately align fees with the costs associated with each fee 
service.
    AQI fees are mandated to be cost-based and paid by the users of the 
AQI services to ensure that recipients bear the costs of the services 
instead of the American taxpayer. In our RIA, benefits and costs of the 
proposed changes to the AQI user fee schedule are evaluated in 
accordance with Executive Orders 12866 and 13563. Expected effects for 
small entities are evaluated as required by the Regulatory Flexibility 
Act.
    AQI services benefit U.S. agricultural and natural resources by 
protecting them from the inadvertent introduction of foreign pests and 
diseases that may enter the country and the threat of intentional 
introduction of pests or pathogens as a means of agroterrorism. Failure 
to adjust these fees to account for full cost recovery, particularly in 
the present fiscal climate, has the potential to cause a decrease in 
AQI services provided. Efforts would be made to address the greatest 
risk and minimize, to the extent allowed by available resources, 
significant negative impact on U.S. industries.
    The proposed changes in user fees would more closely align, by 
class, the cost of AQI services provided and user fee revenue received. 
The proposed fee schedule would better reflect the costs of AQI 
services provided commercial vessels, commercial trucks, commercial 
railcars, commercial aircraft, and international air passengers 
arriving at U.S. ports; newly include fees for additional classes of 
recipients of AQI services; remove user fee caps for commercial vessels 
and commercial railcars; and increase the fee cap for commercial 
trucks. Fee caps refer to limits on the number of times a fee must be 
paid for a specific truck (with transponder), vessel, or railcar in a 
calendar year. The current and proposed AQI user fee rates are shown in 
table 8.

            Table 8--Current and Proposed AQI User Fee Rates
                                [Dollars]
------------------------------------------------------------------------
          User fee class                  Current            Proposed
------------------------------------------------------------------------
Air passenger....................  $5...................              $4
Commercial aircraft..............  70.75................             225
Commercial cargo vessel..........  496..................             825
Commercial truck.................  5.25.................               8
Commercial truck with transponder  105..................             320
 (one) annual payment).
Commercial cargo railcar.........  7.75.................               2
Sea passenger....................  no fee...............               2
Treatment........................  no fee...............             375
------------------------------------------------------------------------

    APHIS used activity-based costing to determine the proposed rate 
adjustments for classes that currently pay user fees and the proposed 
rates for newly charged classes. The two classes that would be newly 
charged user fees under the proposed rule are international sea 
(cruise) passengers and recipients of AQI treatment services. 
Currently, the cost of AQI services received by these entities is borne 
by other user fee classes and/or taxpayers through appropriated 
funding. Elimination of the user fee caps for commercial railcars and 
commercial vessels would more closely align the user fee revenue 
received with the cost of providing AQI services for rail and vessel 
cargo. We propose to retain the cap for commercial trucks because of 
the increased efficiency gained through the use of transponders at 
border inspections. The cap for commercial trucks would be increased, 
however, and these businesses would pay in fees a larger share of the 
cost of the AQI services they receive.
    Under the proposed fee structure, it is expected that AQI user fee 
revenue for fiscal year (FY) 2014 would be about $700.1 million, as 
compared to about $573.1 million under the current fee schedule, an 
increase of $127 million (table 9), of which $94.5 million is due to 
the change in fees and fee structure and $32.5 million is due to 
workload changes as valued at the proposed fee rates. Reliance on 
appropriated funds to finance certain AQI services is expected to be 
reduced by $46.8 million, assuming that the total cost of AQI services, 
$948.9 million, would be the same with or without adoption of the 
proposed fee schedule, since the level of AQI services provided would 
not change with the fee collections under the proposed rule available 
to APHIS and CBP. A projected AQI program deficit of $54.5 million 
under the current fee schedule would not be incurred. Net revenue of 
the AQI program under the proposed fee schedule is expected to total 
about $25.7 million, which would be used to maintain the AQI program's 
reserve fund. The reserve fund ensures that AQI program operations can 
continue without interruption when service volumes fluctuate due to 
economic conditions or other circumstances and CBP and APHIS are able 
to adjust their activity to account for the changed economic 
conditions.

[[Page 22905]]



    Table 9--Expected AQI User Fee Revenue, Appropriated AQI Funding Under the Current and Proposed User Fee
                                  Schedules, and Cost of AQI Services, FY 2014
                                                [Million dollars]
----------------------------------------------------------------------------------------------------------------
                                                                    Current fee    Proposed fee
                                                                     schedule        schedule         Change
----------------------------------------------------------------------------------------------------------------
AQI revenue:
    User fees...................................................          $573.1          $700.1          $127.0
    Appropriated funding........................................           321.3           274.5           -46.8
AQI total revenue...............................................           894.4           974.6            80.2
AQI total cost..................................................           948.9           948.9               0
AQI revenue minus cost..........................................           -54.5            25.7            80.2
----------------------------------------------------------------------------------------------------------------

    Tables showing similar expected AQI revenue effects of the proposed 
fee schedule for FYs 2015-2017 are presented in the body of the RIA. 
Respectively for these 3 years, in comparison to projections under the 
current fee schedule, AQI user fee revenue is expected to be larger by 
$130.7 million, $134.5 million, and $138.4 million; appropriated 
funding of AQI services is expected to be smaller by $37.6 million, 
$78.2 million, and $78.6 million; and net revenue of $39.0 million, 
$39.1 million, and $60.3 million is expected to be available to 
maintain the AQI reserve fund.\1\
---------------------------------------------------------------------------

    \1\ All values in the RIA are nominal, that is, they include 
projected inflation.
---------------------------------------------------------------------------

    APHIS considered a number of alternatives for revising the AQI user 
fees. Some of the alternatives, such as increasing all current fees by 
the same percentage, were rejected because they clearly would not meet 
the objective of making the fees paid by users in the various fee 
classes more commensurate with the costs of the AQI services provided 
for each class. Other alternatives were rejected because the 
transaction costs of creating and operating fee collection systems for 
certain classes, such as bus passengers, private vehicles, and 
pedestrians, would be overly burdensome.
    APHIS then focused on three remaining alternatives composed of 
different combinations of paying classes. The first or preferred 
alternative is the proposed rule, with user fee classes as shown in 
table 8. The second alternative differs from the first by not including 
user fees for recipients of AQI treatment services. Under the third 
alternative, recipients of commodity import permits and pest import 
permits would pay user fees, in addition to the classes that would pay 
fees under the proposed rule.
    Under all three alternatives, international sea (cruise) passengers 
would pay a user fee for services they receive that are currently 
funded by other AQI service recipients and/or through appropriated 
funding. In addition, the preferred alternative would newly include 
payment of fees by users of AQI treatment services. Under alternative 
2, the cost of providing AQI treatment services would continue to be 
covered by user fees paid by other classes. For this reason, 
Alternative 2 was rejected because AQI costs and revenues would be less 
commensurable by class than under the preferred alternative.
    Alternative 3 would include user fees for recipients of commodity 
import permits and pest import permits, classes not charged fees under 
the preferred alternative. In these instances, APHIS found that there 
are overriding concerns. Charging a user fee for commodity import 
permits could be counterproductive in terms of our relations with 
trading partners; negative reactions by other countries could 
potentially affect U.S. export markets. Pest import permits are 
normally requested for research purposes. Charging a fee for pest 
import permits, which activity-based costing indicates would need to be 
set at more than $2,000, could have the unintended consequence of 
discouraging research that directly benefits U.S. agriculture. For 
these reasons, APHIS decided against the selection of alternative 3.
    In table 10, we compare the cumulative expected revenue changes 
over 4 years for the alternatives. In all cases, the baseline for 
comparison is continuation of the current AQI user fee schedule. AQI 
services performed and the cost of providing those services would be 
the same under each alternative. All three alternatives would ensure 
that the costs of providing AQI services are covered and the reserve 
fund is maintained. Relative to the other alternatives, the preferred 
alternative would result in the smallest increase in user fee receipts 
and, less noteworthy, the largest decrease in appropriated funding.

  Table 10--Changes in Expected AQI User Fee Revenue, Appropriated AQI Funding, and Net Revenue Under the Three
                            Alternative User Fee Schedules, Summed Over FYs 2014-2017
                                                [Million dollars]
----------------------------------------------------------------------------------------------------------------
                                                                Preferred
                    Expected change in:                        alternative      Alternative 2     Alternative 3
                                                             (proposed rule)
----------------------------------------------------------------------------------------------------------------
                                                  FYs 2014-2017
----------------------------------------------------------------------------------------------------------------
AQI revenue:..............................................
    User fees.............................................            $530.6            $570.2            $584.7
    Appropriated funding..................................            -241.2            -236.5            -236.5
AQI total revenue.........................................             289.5             333.7             348.3
AQI total cost............................................                 0                 0                 0

[[Page 22906]]

 
AQI revenue minus cost....................................             289.5             333.7             348.3
----------------------------------------------------------------------------------------------------------------
Note: Columns may not sum due to rounding.

    Economic effects under each of the three alternatives would derive 
from the increase or reduction in costs borne by affected importers and 
international passengers because of the changes in AQI user fees and 
concurrent reduced reliance on appropriated funding of AQI user fees. 
Impacts would depend on the magnitude of the changes, and for 
importers, on the ability of suppliers to pass along or absorb the 
costs, and for inbound international passengers, on the ability of 
airlines and vessels to do likewise. In theory, higher user fees 
increase the cost of imports and the supplier may have incentive to 
send fewer goods to the United States or international passengers may 
have less incentive to travel to the United States. Lower user fees, in 
theory, create the opposite incentives.
    The proposed changes in user fees are very small in comparison to 
the overall value of the commodities imported or the price of an 
international ticket, and therefore are expected to have negligible 
impact on imports or the number of international passengers. Estimated 
changes in user fee revenue relative to the output of the affected 
sectors represent, in total, a decline of about two-hundredths of one 
percent, and range from a decline of about six-thousandths of one 
percent in the trucking industry to a decline of about one-tenth of one 
percent in the airline industry.\2\ We cannot determine what would be 
the effect of the projected reductions in appropriated funding of AQI 
services, but observe that the reductions may counterbalance the 
negligible impacts of the user fee increases to some extent.
---------------------------------------------------------------------------

    \2\ Short-run impacts of the proposed fee changes are estimated 
to represent the following percentage changes from current output, 
by affected industry: Trucking industry, -0.006 percent; rail 
industry, 0.035 percent; vessel cargo industry, -0.005 percent; 
cruise ship industry, 0.003 percent; and air cargo and passenger 
industry, -0.102 percent.
---------------------------------------------------------------------------

    Output and employment impacts for FY 2014 under the three 
alternatives, shown in table 11, were modeled for APHIS by a contracted 
consultancy. The model results indicate that U.S. output and employment 
would decline under all three alternatives, with the smallest declines 
expected under the preferred alternative. Modeled output and employment 
effects for FYs 2015-2017, as well as output effects by class for FY 
2014, are similarly shown in the body of the RIA. We expect the 
economic effects of the proposed user fee revisions for several of the 
classes, if they occur at all, to be extremely small.

     Table 11--Modeled Short-Run Direct Effects for U.S. Output and
       Employment of the Three AQI User Fee Alternatives, FY 2014
------------------------------------------------------------------------
                                Change in output    Change in employment
                                (million dollars)          (jobs)
------------------------------------------------------------------------
Preferred alternative                         -$94                -1,090
 (proposed rule)............
Alternative 2...............                  -122                -1,301
Alternative 3...............                  -126                -1,400
------------------------------------------------------------------------

    The fee increases themselves and the newly charged fees for cruise 
passengers and for monitoring and conducting treatments are not costs 
to the economy as a whole, but rather transfer payments. Transfer 
payments are monetary payments from one group to another that do not 
affect total resources available to society. While individual importers 
or passengers may experience financial burden from an increase in user 
fees (or relief when a fee is reduced), the AQI services are already 
being provided and therefore they are already counted as government 
costs. A fee rate adjustment to support full cost recovery is 
consistent with the intent of the relevant statues and regulations.
    The increase in user fee funding of AQI services and closer 
alignment, by class, of user fee revenues and costs would be the 
principal outcomes of the proposed rule. For the 4 years FYs 2014-2017, 
user fee funding of AQI services under the proposed rule is projected 
to be $530.6 million more and appropriated funding of AQI services is 
projected to be $241.2 million less than would occur with continuation 
of the current fee schedule.
    Increased reliance on user fee funding means that APHIS would more 
fully meet its statutory mandate to prescribe and collect cost-based 
fees for providing AQI services, including maintaining a reasonable 
reserve. It also means that appropriated funds that would be used to 
pay for AQI services under the existing user fee schedule may be 
available for other Federal uses. We are unable to determine how those 
appropriated funds that would no longer be used to pay for AQI services 
under the proposed rule may be otherwise used. We expect that the 
proposed increase in user fee funding and the decrease in appropriated 
funding would have small distributional effects that may be largely 
offsetting.
    Firms most likely to be impacted by this rule are transportation 
businesses within the truck, rail, sea, and air cargo sectors that 
import goods into the United States. While the Small Business 
Administration has set guidelines for the definition of small 
businesses within each of those sectors, the size data do not 
distinguish between transportation firms that operate internationally 
and those firms that only

[[Page 22907]]

operate within the United States. However, the effects of the proposed 
rule on firms within the transportation sector are expected to be 
limited, regardless of firm size. In addition, at least some portion of 
increased user fees may be passed on to consumers.
    We invite public comment on the proposed rule, including comments 
on the expected impacts for small entities and how the proposed rule 
may be modified to reduce the burden for small entities consistent with 
the rule's objectives. Any comment suggesting changes to the proposed 
rule should be accompanied by supporting evidence and an explanation of 
why the changes should be considered and supporting evidence.

Executive Order 12988

    This proposed rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. If this proposed rule is adopted: (1) All State 
and local laws and regulations that are inconsistent with this rule 
will be preempted; (2) no retroactive effect will be given to this 
rule; and (3) administrative proceedings will not be required 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.).

List of Subjects in 7 CFR Part 354

    Animal diseases, Exports, Government employees, Imports, Plant 
diseases and pests, Quarantine, Reporting and recordkeeping 
requirements, Travel and transportation expenses.

    Accordingly, we are proposing to amend 7 CFR part 354 as follows:

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

0
1. The authority citation for part 354 continues to read as follows:

    Authority: 7 U.S.C. 7701-7772, 7781-7786, and 8301-8317; 21 
U.S.C. 136 and 136a; 49 U.S.C. 80503; 7 CFR 2.22, 2.80, and 371.3.

0
2. Section 354.3 is amended as follows:
0
a. By revising the tables in paragraphs (b)(1), (c)(1), (d)(1), and 
(e)(1).
0
b. In paragraph (b)(1), by removing the words ``, not to exceed 15 
payments in a calendar year (i.e., no additional fee will be charged 
for a 16th or subsequent arrival in a calendar year),''.
0
c. In paragraph (c)(3)(i), by removing the words ``20 times'' and 
adding the words ``40 times'' in their place.
0
d. By revising paragraphs (f)(1), (f)(2)(i), (f)(8), and adding 
paragraph (h).
    The revisions and additions read as follows:


Sec.  354.3  User fees for certain international services.

* * * * *
    (b) Fee for inspection of commercial vessels of 100 net tons or 
more. (1) * * *

------------------------------------------------------------------------
                       Effective dates                           Amount
------------------------------------------------------------------------
Beginning [effective date of final rule].....................       $825
------------------------------------------------------------------------

* * * * *
    (c) Fee for inspection of commercial trucks. (1) * * *

------------------------------------------------------------------------
                       Effective dates                           Amount
------------------------------------------------------------------------
Beginning [effective date of final rule].....................         $8
------------------------------------------------------------------------

* * * * *
    (d) Fee for inspection of commercial railroad cars. (1) * * *

------------------------------------------------------------------------
                       Effective dates                           Amount
------------------------------------------------------------------------
Beginning [effective date of final rule].....................         $2
------------------------------------------------------------------------

* * * * *
    (e) Fee for inspection of commercial aircraft. (1) * * *

------------------------------------------------------------------------
                       Effective dates                           Amount
------------------------------------------------------------------------
Beginning [effective date of final rule].....................       $225
------------------------------------------------------------------------

* * * * *
    (f) Fee for inspection of international passengers. (1) Except as 
specified in paragraph (f)(2) of this section, each passenger aboard a 
commercial aircraft or cruise ship 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 AQI user fee. The AQI user fee for each arrival is 
shown in the following table:

------------------------------------------------------------------------
         Effective dates \1\               Passenger type        Amount
------------------------------------------------------------------------
Beginning [effective date of final    Commercial aircraft....         $4
 rule].
Beginning [effective date of final    Cruise ship............          2
 rule].
------------------------------------------------------------------------
\1\ Persons who issue international airline and cruise line tickets or
  travel documents are responsible for collecting the AQI international
  airline passenger user fee and the international cruise ship 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 AQI user fee when tickets are sold, the air
  carrier or cruise line must collect the user fee that is applicable at
  the time of departure from the passenger upon departure.

    (2) * * *
    (i) Crew members who are on duty aboard a cruise ship;
* * * * *
    (8) Limitation on charges. Airlines and cruise lines will not be 
charged reimbursable overtime for passenger inspection services 
required for any aircraft or cruise ship on which a passenger arrived 
who has paid the international passenger AQI user fee for that flight 
or cruise.
* * * * *
    (h) Fee for conducting and monitoring treatments. (1) Each importer 
of a consignment of articles that require treatment upon arrival from a 
place outside of the customs territory of the United States, either as 
a preassigned condition of entry or as a remedial measure ordered 
following the inspection of the consignment, must pay an AQI user fee. 
The AQI user fee is charged on a per-treatment basis, i.e., if two or 
more consignments are treated together, only a single fee will be 
charged, and if a single consignment is split or must be retreated, a 
fee will be charged for each separate treatment conducted. The AQI user 
fee for each treatment is shown in the following table:

------------------------------------------------------------------------
                       Effective dates                           Amount
------------------------------------------------------------------------
Beginning [effective date of final rule].....................       $375
------------------------------------------------------------------------

    (2) Treatment provider. (i) Private entities that provide AQI 
treatment services to importers are responsible for collecting the AQI 
treatment user fee from the importer for whom the service is provided. 
Treatment providers must collect the AQI treatment fee applicable at 
the time the treatment is applied.

[[Page 22908]]

    (ii) When AQI treatment services are provided by APHIS, APHIS will 
collect the AQI treatment fee applicable at the time the treatment is 
applied from the person receiving the services. Remittances must be 
made by check or money order, payable in United States dollars, through 
a United States bank, to ``The Animal and Plant Health Inspection 
Service.''
    (3) Collection of fees. (i) In cases where APHIS is not providing 
the AQI treatment and collecting the associated fee, AQI user fees 
collected from importers pursuant to paragraph (h) 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. AQI user 
fees collected from importers 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 AQI treatment 
user fees, 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 from the person holding such user fees for 
late remittance.
    (4) Remittance and statement procedures. (i) The treatment provider 
that collects the AQI treatment user fee must remit the fee to [address 
to be added in final rule].
    (ii) AQI treatment user fees must be remitted to [address to be 
added in final rule] for receipt no later than 31 days after the close 
of the calendar quarter in which the AQI user fees were collected. Late 
payments will be subject to interest, penalty, and handling charges as 
provided in the Debt Collection Act of 1982, as amended by the Debt 
Collection Improvement Act of 1996 (31 U.S.C. 3717).
    (iii) The remitter must mail with the remittance a written 
statement to [address to be added in final rule]. The statement must 
include the following information:
    (A) Name and address of the person remitting payment;
    (B) Taxpayer identification number of the person remitting payment;
    (C) Calendar quarter covered by the payment; and
    (D) Amount collected and remitted.
    (iv) Remittances must be made by check or money order, payable in 
United States dollars, through a United States bank, to ``The Animal 
and Plant Health Inspection Service.''
* * * * *

    Done in Washington, DC, this 21st day of April 2014.
Gary Woodward,
Deputy Under Secretary for Marketing and Regulatory Programs.
[FR Doc. 2014-09466 Filed 4-24-14; 8:45 am]
BILLING CODE 3410-34-P