[Federal Register Volume 63, Number 158 (Monday, August 17, 1998)]
[Proposed Rules]
[Pages 43893-43897]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-22004]
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DEPARTMENT OF JUSTICE
28 CFR Part 25
[AG Order No. 2172-98]
RIN 1105-AA51
National Instant Criminal Background Check System User Fee
Regulation
AGENCY: Department of Justice.
ACTION: Proposed rule.
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SUMMARY: The rule will provide for and establish a user fee to be
assessed to Federal Firearms Licensees (FFLs) for the processing by the
FBI of National Instant Criminal Background Check System (NICS)
background checks. A NICS background check will determine whether
information available to the system provides reasonable cause to
believe that transfer of a firearm to an individual would violate state
or federal law. In states in which the state government has not agreed
to designate a Point of Contact (POC) to receive and process requests
from FFLs for NICS background checks, FFLs will be required to contact,
either by telephone or other electronic means, the NICS Operations
Center at the FBI to initiate and process a NICS background check.
There are substantial costs associated with operating the FBI's
NICS Operations Center. The $200 million authorized to be appropriated
by the Brady Handgun Violence Prevention Act, Public L. 103-159,
section 106(b) was limited to the purpose of improving the criminal
history record systems of the states. A small portion of those funds
was made available to the FBI to help design the NICS. The funds are
not available, however, to cover the FBI's annual operating cost for
the NICS. Therefore, FFLs will be assessed a processing fee for each
NICS background check processed by the FBI's NICS Operations Center.
The purpose of the fee is to recover the full cost of providing this
service to FFLs doing business in states where the FBI is contacted
directly by the FFLs. This rulemaking sets forth the FBI's legal
authority to charge a user fee for NICS background checks and the cost
analysis to be used to calculate the fee.
DATES: Written comments must be received on or before September 16,
1998.
ADDRESSES: All comments concerning this proposed rule should be mailed
to: Mr. Emmet A. Rathbun, Unit Chief, Federal Bureau of Investigation,
CJIS Division, Module C-3, 1000 Custer Hollow Road, Clarksburg, West
Virginia 26306-0147.
FOR FURTHER INFORMATION CONTACT: Mr. Emmet A. Rathbun, Unit Chief,
telephone number (304) 625-2000.
SUPPLEMENTARY INFORMATION: On November 30, 1993, Public L. 103-159 (107
Stat. 1536) was enacted, amending the Gun Control Act of 1968 (GCA), as
amended (18 U.S.C. Chapter 44). Title I of Public L. 103-159, the
``Brady Handgun Violence Prevention Act'' (Brady Act) requires the
Attorney General to establish by November 30, 1998, ``a national
instant criminal background check system that any [firearms] licensee
may contact, by telephone or by other electronic means in addition to
the telephone, for information, to be supplied immediately, on whether
receipt of a firearm by a prospective transferee would violate section
922 of title 18, United States Code, or State law.'' In order to
provide this service directly to certain FFLs and to recover the
associated costs, the FBI will assess FFLs a user fee in states where
the FBI is contacted directly by the FFLs.
NICS Background Checks
The Brady Act provides that before a firearm may be transferred,
FFLs must request a NICS background check on a prospective firearm
purchaser who is not licensed under 18 U.S.C. 923. A Notice of Proposed
Rulemaking establishing regulations to protect the security and privacy
of the information in the NICS and describing the manner in which the
system will function was published in the Federal Register on June 4,
1998, 63 FR 30430, ``National Instant Criminal Background Check System
Regulations.'' Generally, a NICS background check will consist of a
search of the NICS Index (an FBI database containing information
concerning certain individuals prohibited by law from possessing
firearms), the National Crime Information Center (NCIC), and the
Interstate Identification Index (III), for matching records that may
provide reason to believe that the transfer of a firearm to a
prospective purchaser would violate Federal or state law.
The method by which an FFL will request background checks will
depend upon the state where the FFL is conducting business. In states
that agree to designate a POC, state or local law enforcement agencies
will serve as POCs for the purpose of processing NICS checks. As POCs,
these agencies will receive inquiries by FFLs, check state and local
record systems for disqualifying records, initiate NICS background
checks through electronic access to the NICS via the NCIC
communications network, analyze any matching records, provide responses
back to the FFL, and process appeals. The FBI will not charge the state
agencies or the FFLs a fee for NICS background checks processed by
state POCs. The comparatively minor cost to the FBI of providing
automated record responses to POCs (who research and analyze the
records) will be covered by funds appropriated to the FBI rather than
by a NICS user fee. Charging FFLs a fee to recover the POC's cost of
processing NICS background checks is at the discretion of the state.
Where the state will not be a POC, the FFLs will telephonically
contact the
[[Page 43894]]
NICS Operations Center, a unit run by the FBI. The FBI is also
exploring a plan to make electronic dial-up access to the NICS
Operations Center available to FFLs in the future. Inquiries made by
telephone will be answered by a NICS Customer Service Representative.
The NICS Operations Center will perform the NICS background check,
analyze any matching records, provide a response back to the FFL, and
process appeals. In order to interpret and evaluate matching records,
the FBI will use personnel who are specially trained to analyze records
in the NICS Index, NCIC, and III. FFLs who directly contact the NICS
Operations Center to initiate a background check will be assessed a
fee. This fee will allow the Federal Government to recover the full
cost of processing these background checks conducted by the NICS
Operations Center. Likewise, if electronic FFL access is made available
in the future, a fee will be charged. This fee will be less than the
telephonic access fee since a NICS Customer Service Representative will
not be needed to take a telephone call.
Legislative Authority
The legislative authority for the fee is the Departments of
Commerce, Justice, and State, the Judiciary, and Related Agencies
Appropriations Act, 1991, Public L. 101-515, 104 Stat. 2101, 2113,
(Nov. 5, 1990) which, in relevant part, provides the FBI authority to
establish, collect, and retain fees for processing name checks for non-
criminal justice purposes. Authority is also provided by the
Independent Offices Appropriation Act, 1952 (31 U.S.C. 9701), which
generally requires that a benefit or service provided to or for any
person by a federal agency be self-sustaining to the extent possible.
Charges are to be fair, taking into consideration the costs to the
Government, value to the recipient, public policy or interest served,
and other relevant facts.
Cost Analysis
In accordance with the guidelines issued by the Department of
Justice (DOJ) User Fee Program (Supplement, Department of Justice
Budget Formulation and Execution Calls), and Office of Management and
Budget (OMB) Circular Number A-25 (1993) relating to the assessment of
fees for Federal Government services, the FBI is establishing the user
fee for the processing of a NICS background check by the NICS
Operations Center in order to recover the full cost of providing
service to FFLs doing business in states where the FBI is contacted
directly by the FFLs. The full cost includes both the direct and
indirect costs associated with the FBI's provision of the background
check service to FFLs.
Direct costs are those which are proximate and directly traceable
to the unit of output for which the fee is charged. Direct costs for
the NICS program include the personnel and non-personnel costs of FBI-
employed NICS analysts and technical support. The personnel and non-
personnel costs were calculated using the modular costing tools
described in the FBI's Fiscal Year 1999 budget submission to the OMB.
Additionally, any contractor-supported operator and billing functions
are included within the FBI's direct costs.
Indirect costs are those costs that are more distant, general in
nature, and not directly traceable to the product or service produced.
The FBI has allocated a portion of its general management,
administration, finance, and security functions as indirect costs to
the NICS program. These costs were allocated based on the ratio of
positions in the NICS program to positions in all other Criminal
Justice Information Services Division programs.
The costs to be recovered include, but are not limited to, an
appropriate share of: (a) Direct and indirect personnel costs,
including salaries and fringe benefits such as medical insurance and
retirement, (b) physical overhead, consulting, and other direct costs
including material and supply costs, utilities, insurance, and travel,
(c) management and supervisory costs, and (d) the costs of enforcement,
collection, research, establishment of standards, and regulation.
Cost Figures
Because NICS is a service that has not been previously offered,
cost figures are based on information currently available regarding
firearm background checks, the number of states that are expected to
serve as POCs, and ongoing contracting efforts. Upon the establishment
of the system on November 30, 1998, the FBI anticipates charging a fee
of $14.00 per inquiry. The fee was determined by estimating the
resources needed to satisfy the projected volume of background checks
and related work, determining the direct and indirect costs of these
resources, and working with the FBI's prime developmental contractor to
cost the portion of services which will be furnished by an outside
contractor.
Estimated Fiscal Year 1999 NICS Costs
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Category Yearly total
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Wages and Other Compensation............................ $45,667,596
Appeals................................................. 846,378
Furniture and Supplies.................................. 2,303,491
Travel and Training..................................... 1,824,775
Hardware and Software Maintenance....................... 690,816
Miscellaneous........................................... 3,297,827
Contractor Costs........................................ 37,002,514
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Total............................................... 91,633,397
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In order to estimate the number of NICS background checks that will
be performed, the FBI used the firearms related inquiries of III for
Fiscal Year 1997. These background checks were performed primarily for
handgun sales as required under the Interim Provision of the Brady Act.
For purposes of this calculation, the FBI estimates that it will
perform handgun checks and/or long gun checks in approximately 34 non-
POC states and territories. Using III inquiries in these states for
firearms checks performed under the Interim Provision of the Brady Act,
the FBI extrapolated the estimated number of total firearms (handguns
and long guns) sold annually in these states to be 4,217,227. In
addition, the FBI estimates there are 2,500,000 pawnshop redemptions
per year that will require a background check. Therefore, the total
number of inquiries per year is 6,717,227. Based on the cost of the
estimated resources necessary to process 6,717,227 inquiries per year,
the FBI estimates that its total annual costs will
[[Page 43895]]
be $91,633,397. Therefore, the cost per inquiry, rounded to the nearest
dollar, is $14.00. This transaction cost includes both the direct and
indirect cost categories of the NICS, set forth in the chart above and
described generally below. To be assured that these cost figures were
accurately calculated, the FBI hired an independent accounting firm to
review the FBI's fee analysis. The firm validated the FBI's methodology
in developing this user fee.
The Wages and Other Compensation category includes NICS Customer
Service Representatives' salaries and benefits and support staff's
salaries and benefits. Based on the projected number of inquiries per
year, the NICS Operations Center will require an estimated staff of
586. This staffing level is required in order to provide prompt service
to FFLs seven days a week.
When an individual is denied the purchase of a firearm, the
individual may appeal that decision. If an individual resides in a POC
state, it is anticipated that the individual will appeal the denial to
the state according to the state's appeals procedures. If the denial
was given by the NICS Operations Center, the individual would appeal
directly to the FBI. The estimated cost to the FBI of processing
appeals is incorporated into the initial user fee; individuals who
appeal a denial will not be charged a separate fee. The estimated
appeals cost anticipates that, in the appeals process, individuals may
need to submit a fingerprint card to verify their identity. Fingerpoint
cards submitted for appeals will be processed using the FBI's current
procedure for handling first-person requests for one's own fingerprint-
based record. The existing (and separate) fee of $18.00 for processing
such submissions will be waived.
The Furniture and Supplies category is comprised of a combination
of NICS staff and support staff requirements for these items. These
costs are based upon the OMB's 1999 Cost Module, which sets a per-
employee rate to be used for these calculations. An additional amount
has been added for the purchase of telephone headsets for the NICS
Customer Service Representatives.
The Travel & Training category includes costs for NICS personnel
who need to travel to meet with FFLs and obtain feedback on the NICS.
Specially trained NICS Representatives will need to report to various
governmental agencies that have a direct interest in the NICS,
including Congress. The Training category will allow NICS personnel to
be trained on new NICS developments and techniques in order to improve
service to the FFLs. Indirect travel and training expenses are also
included in this category. These costs are also based upon the OMB's
1999 Cost Module, which sets a per-employee rate to be used for these
calculations.
The Hardware and Software Maintenance category includes the
maintenance on computer terminals and software that the NICS
Representatives will need in order to perform this service for FFLs.
Software license renewals and maintenance agreements are required for
software products used on FBI computers. Because these software
products are proprietary and specialized, licensing and maintenance
contracts must be executed with the original developer. Contract
hardware maintenance will be necessary for the efficient and continued
operation of the NICS computers and peripheral equipment. This will
include preventive and on-call hardware maintenance support for FBI
computers and peripheral equipment. Without this preventive and on-call
hardware maintenance, the NICS could experience disruptions in service.
The Miscellaneous category is composed of FBI employee background
investigation contract costs, physical location costs (based on the
standard Government Services Administration (GSA) rate for government
office space), and depreciation.
The Contractor Cost category includes the cost of all contractor
services provided to support the operation and maintenance of the NICS
Operations Center, including, but not limited to, telecommunication,
billing, and call center service costs. Such telephone-intensive
functions are subject to workload variations that may be more
economically managed using contractor support. The FBI therefore is
engaging a private contractor with an appropriate number of Customer
Service Representatives to answer phone calls from FFLs, forward
information to NICS, and respond to FFLs with proceed or delay
messages.
The NICS fee is being established in order for the Federal
Government to recover the full cost of processing NICS background
checks for FFLs doing business in states in which the FBI is contacted
directly by the FFLs. This fee will not generate a profit. Evaluation
of the NICS fee will be an ongoing process. The validity of this
estimate will be evaluated during Fiscal Year 1999, and the results of
this evaluation and any appropriate changes to the NICS fee will be
published in the Federal Register no later than November 30, 1999.
Subsequently, the NICS fee(s) will be periodically evaluated and
adjusted as may be warranted. The Director of the FBI may also clarify,
supplement, or amend provisions related to these fees. The FBI Director
shall provide appropriate notice to affected persons of any exercise of
the foregoing authorities; notice relating to provisions of general
applicability shall be published in the Federal Register.
Billing FFLs for NICS User Fees
It is general Federal policy that user charges will be collected in
advance of, or simultaneously with, the rendering of services. However,
strict adherence to this policy here would conflict with the Brady
Act's mandate for ``instant'' checks, and the following procedures are
accordingly established as an exception to this general policy. FFLs
being serviced by the FBI will incur a non-refundable user fee charge
for each requested NICS check immediately upon issuance by the FBI of
the unique NICS Transaction Number (NTN) associated with the check.
However, such FFLs will be afforded two payment options, real-time
credit card charges by individual transaction or monthly invoicing.
Prior to initiating its first NICS check, an FFL will notify the
FBI, via an enrollment process, as to which payment option it will use.
Only a single payment option can be used. FFLs will be able to direct
the FBI to change their payment option with a minimum of 30 days notice
before the beginning of the changed billing period.
Under the real-time credit card payment option, the FFL's credit
card will be billed for each NICS check at the time the FBI issues the
associated NTN. A record of each NICS check, including the fee,
transaction date, and NTN, will be provided on the FFL's monthly credit
card bill. The FBI will accept the following major credit cards: VISA,
Master Card, American Express, and Discover.
Under the invoicing payment option, a record will be compiled of
all NICS checks initiated by the FFL during the billing period for
which an NTN was issued, and the FFL will be invoiced for payment. The
invoice will include a record of transactions including the date and
time of each NICS check, the charge, and the NTN. Invoice billing
periods will be on a calendar month basis. Payment will be due within
30 days of the invoice date. Invoices will be dated according to their
mailing date, which will be approximately 15 days after the close of
the subject billing period. The FFL will forward invoice payment
(either in check form or via Electronic Fund Transfer (EFT)) to a
[[Page 43896]]
``Lock Box'' or other Automated Clearing House (ACH) depository
identified by the FBI. Remittances must be drawn on a bank or other
institution located in the United States and be payable in United
States currency. A charge may be imposed if a check in payment of an
invoice or any other matter is not honored by the bank or other
financial institution on which it is drawn.
The FBI will discontinue service, i.e., providing NICS checks, to
FFLs whose NICS financial accounts are not in good standing.
Waiver of Fee in Cases of Successful Appeal
Individuals who are denied the purchase of a firearm by the NICS
Operations Center may appeal the denial by challenging the record upon
which the denial is made. When the appeal is successful and less than
30 days has elapsed since the date of the initial NICS check, a
``proceed'' response and an NTN is forwarded to the FFL, which will
allow the transfer of the firearm. If more than 30 days have elapsed
before a denial is overturned, the FFL must perform a new NICS check
before transferring the firearm. In such cases, the purchaser will be
provided a written statement by the NICS Operations Center that will
allow the FFL to request the new NICS check without charge.
Regulatory Flexibility Act (RFA)
In compliance with the Regulatory Flexibility Act, 5 U.S.C. 601-12,
the FBI has evaluated the effects of this rule on small entities. A
small firearm retailer is defined as having under $5.0 million in
annual gross receipts as defined by 13 CFR 121.201. Firearm retailers
are included in the Standard Industrial Class (SIC) Code 5941. Based on
the evaluation under 605(b) of the RFA, the Department certifies that
this action will not have a significant economic impact on a
substantial number of small entities. While this proposed rule may
generate up to $92 million annually in fees, these fees will not have a
significant economic impact on businesses. The ultimate impact of the
fee will likely be on firearm purchasers since FFLs are expected to
recoup NICS user fees from the purchasers in the same way FFLs recoup
the cost of fees today in connection with checks under the interim
provisions of the Brady Act.
The FBI will be sending a notice, including a letter describing
NICS and a NICS brochure, to each FFL in the 34 states and territories
that are currently expected to be serviced directly by the FBI. The FBI
has also met with FFLs at regional firearm seminars conducted by the
Bureau of Alcohol, Tobacco and Firearms to inform FFLs about NICS plans
and to solicit comments needed to finalize these plans. These efforts
were made by the FBI to also satisfy the ``outreach'' provisions of 5
U.S.C. 609. The obligation of FFLs to contact the NICS before
transferring a firearm is imposed by Title I of the Brady Act. The fee
charged for the NICS checks allows the Federal Government full recovery
of costs to process NICS checks for FFLs doing business in states where
the FBI is contacted directly by the FFLs. In addition, the user fee
will be evaluated from time to time to account for any changes that may
affect the fee.
Executive Order 12866
This proposed rule has been drafted and reviewed in accordance with
Executive Order 12866, Sec. 1(b), Principles of Regulation. The DOJ has
determined that this proposed rule is a ``significant regulatory
action'' under Section 3(f) of Executive Order 12866, Regulatory
Planning and Review, and thus the proposed rule has been reviewed by
the Office of Management and Budget.
Executive Order 12612
This regulation will not have a substantial direct effect on the
states, on the relationship between the national government and the
states, or on the distribution of power and responsibilities among the
various levels of government. Therefore, in accordance with Executive
Order 12612, it is determined that this rule does not have sufficient
federalism applications to warrant the preparation of a Federal
Assessment.
Unfunded Mandates Reform Act of 1995
This rule will not result in the expenditure by state, local, and
tribal governments, in the aggregate, or by the private sector, of
$100,000,000 or more in any one year, and it will not significantly or
uniquely affect small governments. Therefore, no actions were deemed
necessary under the provisions of the Unfunded Mandates Reform Act oaf
1995.
Small Business Regulatory Enforcement Fairness Act of 1996
This proposed rule is not a major rule as defined by the Small
Business Regulatory Enforcement Fairness Act of 1996, 5 U.S.C. 804(2).
This proposed rule will not result in an annual effect on the economy
of $100,000,000 or more, a major increase in costs or prices, or have
significant adverse effects on competition, employment, investment,
productivity, innovation, or on the ability of the United States-based
companies to compete with foreign-based companies in domestic and
export markets. The cost to the FFLs is expected to be inconsequential,
because the FFLs are likely to recoup the fees from firearm purchasers.
Paperwork Reduction Act of 1995
This proposed rule does not contain collection of information
requirements and would not be subject to the Paperwork Reduction Act of
1980, as amended (44 U.S.C. 3501-20).
Executive Order 12988--Civil Justice Reform
The proposed rule meets the applicable standards set forth in
Sections 3(a) and 3(b)(2) of Executive Order 12988.
List of Subjects in 28 CFR Part 25
Administrative practice and procedure, Automatic data processing,
Business and industry, Courts, Credit, Firearms, Information, Law
enforcement officers, Reporting and recordkeeping requirements, and
Telecommunications.
Accordingly, Part 25 of Title 28 of the Code of Federal
Regulations, which was proposed to be added to 63 FR 30434 (June 4,
1998) is proposed to be amended as follows:
PART 25--DEPARTMENT OF JUSTICE INFORMATION SYSTEMS
Subpart A--The National Instant Criminal Background Check System
1. The authority citation for Part 25 is revised to read as
follows:
Authority: Pub. L. 103-159, 107 Stat. 1536 18 U.S.C. 922; Pub.
L. 101-515, 104 Stat. 2101, 2112; 31 U.S.C. 9701.
2. Section 25.12 is added to read as follows:
Sec. 25.12 User Fee Charge.
(a) FFLs who directly contact the NICS Operations Center to request
a NICS background check will be assessed a fee that represents the
reasonable costs of the associated services.
(b) In cases where a denial of a firearm transaction has been
overturned through an appeal and more than 30 days have passed since
the initial NICS check, the purchaser will be provided a written
statement that will allow the FFL to contact the NICS Operations Center
and request that a new NICS check be performed without charge.
(c) The Director of the FBI may from time to time determine and
establish the reasonable amount of the fee or fees to
[[Page 43897]]
be assessed under this authority. The Director of the FBI may also
clarify, supplement, or amend the provisions of this section. The
Director of the FBI shall provide appropriate notice to affected
persons of any exercise of the foregoing authorities; notice relating
to provisions of general applicability shall be published in the
Federal Register.
Dated: August 12, 1998.
Janet Reno,
Attorney General.
[FR Doc. 98-22004 Filed 8-14-98; 8:45 am]
BILLING CODE 4410-02-M