Federal Register, Volume 79 Issue 80 (Friday, April 25, 2014)

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

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

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.

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

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