[Federal Register Volume 64, Number 220 (Tuesday, November 16, 1999)]
[Rules and Regulations]
[Pages 62089-62096]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-29868]



 ========================================================================
 Rules and Regulations
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains regulatory documents 
 having general applicability and legal effect, most of which are keyed 
 to and codified in the Code of Federal Regulations, which is published 
 under 50 titles pursuant to 44 U.S.C. 1510.
 
 The Code of Federal Regulations is sold by the Superintendent of Documents. 
 Prices of new books are listed in the first FEDERAL REGISTER issue of each 
 week.
 
 ========================================================================
 

  Federal Register / Vol. 64, No. 220 / Tuesday, November 16, 1999 / 
Rules and Regulations  

[[Page 62089]]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF AGRICULTURE

Animal and Plant Health Inspection Service

7 CFR Part 354

[Docket No. 98-073-2]
RIN 0579-AB05


User Fees; Agricultural Quarantine and Inspection Services

AGENCY: Animal and Plant Health Inspection Service, USDA.

ACTION: Final rule.

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

SUMMARY: We are amending the user fee regulations by adjusting the fees 
charged for certain agricultural quarantine and inspection services we 
provide in connection with certain commercial vessels, commercial 
trucks, commercial railroad cars, commercial aircraft, and 
international airline passengers arriving at ports in the customs 
territory of the United States. The adjusted fees cover part of fiscal 
year 2000 and all of fiscal years 2001 through 2002. We have determined 
that the fees must be adjusted to reflect the anticipated actual cost 
of providing these services through FY 2002.

EFFECTIVE DATE: December 16, 1999.

FOR FURTHER INFORMATION CONTACT: For information concerning program 
operations, contact Mr. Jim Smith, Operations Officer, Program Support, 
PPQ, APHIS, 4700 River Road Unit 60, Riverdale, MD 20737-1236; (301) 
734-8295. For information concerning rate development, contact Ms. 
Donna Ford, PPQ User Fees Section Head, FSSB, BASE, ABS, APHIS, 4700 
River Road Unit 54, Riverdale, MD 20737-1232; (301) 734-8351.

SUPPLEMENTARY INFORMATION:

Background

    Section 2509(a) of the Food, Agriculture, Conservation, and Trade 
Act of 1990 (21 U.S.C. 136a), referred to below as the FACT Act, 
authorizes the Animal and Plant Health Inspection Service (APHIS) to 
collect user fees for agricultural quarantine and inspection (AQI) 
services. The FACT Act was amended by section 504 of the Federal 
Agricultural Improvement and Reform Act of 1996 (Pub. L. 104-127) on 
April 4, 1996.
    The FACT Act, as amended, authorizes APHIS to collect user fees for 
providing AQI services in connection with the arrival, at a port in the 
customs territory of the United States, of:
     Commercial vessels.
     Commercial trucks.
     Commercial railroad cars.
     Commercial aircraft.
     International airline passengers.
    According to the FACT Act, as amended, these user fees should 
recover the costs of:
     Providing the AQI services listed above.
     Providing preclearance or preinspection at a site outside 
the customs territory of the United States to such passengers and 
vehicles.
     Administering the user fee program.
     Maintaining a reasonable balance in the Agricultural 
Quarantine Inspection User Fee Account (AQI account).
    On July 24, 1997, we published in the Federal Register (62 FR 
39747-39755, Docket No. 96-038-3) a rule amending the user fees and 
setting user fees in advance for AQI services for fiscal years 1997 
through 2002.
    APHIS has had to provide AQI services beyond what we anticipated 
when the currently scheduled fees were set in 1997. The increases in 
services stem from an increase in international trade and travel, 
necessitating more inspections at ports of arrival; changes in our 
regulations that result in our having to inspect additional imported 
articles; and enhanced efforts to crack down on the smuggling of 
agricultural commodities.
    On August 9, 1999, we published in the Federal Register (64 FR 
43103-43114, Docket No. 98-073-1) a proposal to amend the existing user 
fees for providing AQI services in connection with the arrival, at a 
port in the customs territory of the United States, of commercial 
vessels, commercial trucks, commercial railroad cars, commercial 
aircraft, and international airline passengers. We proposed to amend 
the user fees for these services for fiscal years 2000 through 2002 to 
ensure that we recover the anticipated actual cost of providing these 
services through FY 2002.
    We solicited comments concerning our proposal for 60 days ending 
October 8, 1999. We received eight comments by that date. They were 
from State Government officials and representatives of the produce and 
airline industries. Four of the comments were supportive. One of the 
comments requested us to clarify part of our proposal. Three commenters 
opposed the rule. Concerns and questions raised by the commenters are 
discussed below by topic.

Collection of International Airline Passenger User Fees

    Two commenters asked us to clarify what fee airlines, travel 
agents, and others who issue international air travel tickets should 
collect from ticket purchasers or passengers if the passenger is 
traveling after the effective date of a new fee but is purchasing a 
ticket before the effective date of the new fee.
    Under Sec. 354.3(f)(4)(i), persons who issue international airline 
tickets or travel documents are responsible for collecting the APHIS 
international airline passenger user fee from ticket purchasers. In 
order to make the implementation of new user fees easier for those who 
issue tickets, APHIS requires that when user fees are paid by 
passengers to ticket issuers in advance of travel, the proper user fee 
to be collected from a passenger is the fee applicable at the time 
tickets are sold. Further, under Sec. 354.3(f)(4)(i)(A), in the event 
that ticket sellers do not collect the APHIS user fee when tickets are 
sold, the air carrier must collect the user fee from the passenger upon 
departure. Under this scenario, the proper user fee to be collected 
from a passenger by the carrier is the fee applicable at the time of 
departure. We are adding a footnote to the table of fees for airline 
passengers to make these requirements clearer.

Rationale and Need for Amending AQI User Fees

    One commenter suggested that APHIS should be able to pay the cost 
of providing new and additional AQI services and equipment with user 
fees collected under the existing fee schedule, based on the rationale 
that

[[Page 62090]]

increasing volumes of user fee collections that result from increasing 
numbers of airline passengers will pay for additional AQI services by 
themselves.
    We do not agree with the commenter's position. As stated in our 
proposal, APHIS has been required to process increased volumes of 
international air passengers and aircraft and has struggled to maintain 
an adequate level of service to some airports due to terminal 
expansions and reorganizations. We need to establish additional 
inspection facilities, purchase necessary x-ray equipment, and add 
personnel in order to process passengers and aircraft quickly and 
efficiently. Further, additional personnel are needed not only to staff 
new inspection facilities, but also to supplement existing inspection 
crews. By increasing the proportion of inspectors available in relation 
to the number of users requiring services, APHIS will be able to 
conduct more inspections, thereby better ensuring against the 
introduction into the United States of harmful plant pests. Since the 
currently scheduled user fees do not contain an allowance for 
purchasing additional x-ray equipment and increasing the numbers of AQI 
inspectors, we need to revise the fees to ensure that we have the 
necessary funds available to provide an adequate level of AQI service.
    Another commenter stated that we have ``attributed cost overruns to 
a reduction in the rate of international passengers paying an 
inspection fee.'' This is incorrect. In our proposal, we stated that we 
have had to provide AQI services beyond what we anticipated when the 
currently scheduled fees were set in 1997. The increases in services 
stem from an increase in international trade and travel, among other 
things.
    One commenter claimed that the existing AQI user fee schedule will 
provide APHIS with adequate funds to pay for program costs, including 
the new costs explained in our proposal. The commenter interpreted the 
information provided in our proposal to mean that APHIS needs to 
increase user fees and receipts because not all of the user fees 
collected from users over the past few years have been available to 
APHIS due to appropriations shortfalls. The commenter was concerned 
that APHIS will not spend additional money collected to provide 
additional AQI services.
    The commenter is correct that, because expenditures are linked to 
appropriations, not all of the user fees collected from users over the 
past few years have been available to APHIS. However, this is not the 
reason we are increasing our AQI user fees. Over the past several 
years, demand for our AQI services has increased. Serious pests have 
entered the United States despite our efforts. In order to ensure 
continuous AQI services, we have been forced to draw on our reserve 
fund. Our reserve fund is now insufficient to ensure continuous and 
effective service and needs to be gradually rebuilt. User fee 
collections are the only means APHIS has to fund the AQI program. Under 
these circumstances, we have no choice but to amend our fees 
accordingly, both to fund services we provide and ensure an adequate 
reserve.

Setting AQI User Fees in Advance

    One commenter noted that continual adjustment of AQI user fees is 
problematic for the industry and does not allow for adequate business 
planning.
    When we published our 1997 proposal to set user fees in advance for 
AQI services for fiscal years 1997 through 2002 (62 FR 3823-3830, 
Docket No. 96-038-1), we stated that we were acting on behalf of 
affected industries who suggested that industry would be able to plan 
for the effects of fee changes more effectively if fees were set in 
advance. However, as stated previously in this document and in our 
proposal, APHIS has had to provide AQI services beyond what we 
anticipated when the currently scheduled fees were set in 1997. To 
recover the costs of providing these services, we must amend our fees. 
In our 1997 proposal, we stated that if reserve levels were drawn too 
low, we would publish, for public comment, proposed fee increases in 
the Federal Register. We regret any inconvenience these fee adjustments 
may cause affected industries, but they are necessary to ensure an 
adequate level of AQI service.

Need for Additional Equipment and Personnel

    One commenter questioned whether additional personnel and equipment 
are necessary to provide adequate AQI services and stated that APHIS 
had not adequately explained the basis for some additional equipment 
purchases and personnel increases or justified the corresponding need 
for fee increases.
    Particularly at airports, APHIS has struggled to maintain an 
adequate level of service due to new and expanding air terminals and 
demands for faster processing time. As explained in our proposal, along 
with other agencies in the Federal Inspection Service (FIS), our goal 
is to clear international airline passengers through all required FIS 
inspections in 30 minutes or less. To accomplish this goal, we need 
additional personnel and equipment to process increasing volumes of 
international air passengers and imported agricultural commodities 
effectively and efficiently.
    As stated in the proposed rule, we anticipate hiring 511 new 
inspectors. They will be assigned to high-volume, high-risk ports, with 
distribution as follows: 51 at seaports; 57 at land border ports (39 to 
inspect commercial trucks and 18 to inspect railroad cars); and 403 at 
airports (137 to inspect commercial aircraft and 266 to inspect 
passengers). Our projected costs for these new positions include both 
salaries and vehicles, since many of these inspectors must travel from 
one location to another to perform inspections. These costs were set 
out in the proposed rule, and the costs associated with the additional 
inspectors are discussed further, below, under the heading ``Personnel 
Costs.''
    Our projected costs for new x-ray equipment include the costs of 
both new, advanced technology equipment for our busiest ports 
(primarily airports) and additional and replacement equipment for other 
ports. The costs of this equipment were set out in the proposed rule 
and are discussed further, below, under the heading ``Cost of X-ray 
Equipment.''
    Funding for the additional inspectors and equipment can only come 
from user fees. Use of user fees for these purposes is fully compatible 
with the recommendations of the newly completed report, ``Safeguarding 
American Plant Resources.'' \1\ This report is based on a review of 
APHIS' safeguarding systems that was conducted at APHIS' request by a 
panel of external stakeholders assembled by the National Plant Board, 
an organization of State plant regulatory officials. The review was 
prompted by the recognition, both within and outside the Agency, that 
our safeguading systems are being increasingly challenged by changes in 
global travel and trade.
---------------------------------------------------------------------------

    \1\ This report is available on the Internet at http://
www.aphis.usda.gov/ppq/safeguarding/. Copies of this report may also 
be obtained by contacting Mr. Jim Smith at the address listed under 
FOR FURTHER INFORMATION CONTACT.
---------------------------------------------------------------------------

Cost of Services

    One commenter questioned why commercial aircraft inspection fees 
cost nearly 15 times as much as commercial truck fees.
    In our experience, inspecting a commercial aircraft is much more 
involved than inspecting a commercial

[[Page 62091]]

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

Cost of X-ray Equipment

    One commenter questioned why the high resolution x-ray equipment 
that APHIS plans to purchase with funds from additional user fee 
collections are so much more costly than equipment being deployed by 
the Federal Aviation Administration (FAA).
    The cost of high-definition x-ray machines sought by APHIS is 
different than the cost of some machines deployed by the FAA because 
the machines are able to detect smaller volumes of agricultural 
products in passenger luggage at faster belt speeds than x-ray 
technology currently used by FAA at many airports. The development and 
use of high-definition x-ray technology could help us to identify as 
little as 10 grams of agricultural products in passenger baggage while 
maintaining a fast belt speed. Most x-ray technologies currently used 
by FAA can only detect agricultural products in passenger baggage if 
200 or more grams of the products are present, but smaller quantities 
can carry pests that have the potential to cause significant economic 
losses to agriculture. Further, it is our hope that, in the future, we 
will be able to x-ray every piece of international passenger luggage 
that passes through a given airport without unreasonably delaying the 
passenger clearance process. The development and implementation of 
these high-definition x-ray technologies will allow us to see small 
quantities of agricultural products in baggage while processing them at 
high speeds. We believe these new technologies will benefit air 
passengers by decreasing FIS processing times while simultaneously 
increasing the effectiveness of the AQI program.

Personnel Costs

    Two commenters questioned the calculations contained in the table 
in our proposed rule entitled ``Agricultural Quarantine Inspection 
(AQI) Program Projected Costs FY1999-2002.'' The commenters noted that 
it appears that, for FY 1999, $2,779,000 is allotted for 116 new 
employees for 2 months, suggesting that the annual salaries of these 
employees would be upwards of $140,000. The commenters further noted 
that, based on the information provided in the table, the average 
annual salary per new employee would then drop to approximately $75,000 
in FY 2000, and then increase to approximately $87,000 and $98,000 in 
fiscal years 2001 and 2002, respectively.
    In labeling the table in question, we neglected to state that the 
``personnel increase'' estimates for fiscal years 1999 through 2002 
also include increased pay costs for progressive promotions and within-
grade increases for both current and future employees. To clarify the 
information provided in our proposal, the breakdown of our annualized 
personnel cost estimates for fiscal years 1999 through 2002 is shown in 
the table below.

   Personnel Pay Cost Increases; Agricultural Quarantine Inspection (AQI) Program Projected Costs FY 1999-2002
----------------------------------------------------------------------------------------------------------------
                                                           New employees              Current
                                   Number of new --------------------------------    employees         Total
           Fiscal year               employees                                   ----------------    increased
                                   (cumulative)     Cumulative    Cumulative pay  Cumulative pay  employee costs
                                                   salaries \1\      costs \2\       costs \2\          \3\
----------------------------------------------------------------------------------------------------------------
1999............................             116      $1,158,000               0      $1,620,000      $2,779,000
2000............................       315 + 116      24,690,000      $2,057,000       5,402,000      32,149,000
2001............................        40 + 431      26,958,000       3,530,000      10,515,000      41,003,000
2002............................        40 + 471      29,226,000       5,295,000      15,506,000     50,027,000
----------------------------------------------------------------------------------------------------------------
\1\ As stated in our proposal, new salaries for FY 1999 would have reflected 2 months of service for 116
  employees.
\2\ Pay costs include allocations for progressive promotions and within-grade increases.
\3\ These figures were provided in our proposal in the table entitled ``Agricultural Quarantine Inspection (AQI)
  Program Projected Costs FY 1999-2002.''

Agency Support and Departmental Charges

    One commenter stated that APHIS has not justified the level of 
support costs and departmental charges shown in the proposed rule and 
questioned how we arrived at the percentage rate for support costs and 
departmental charges shown in the table entitled ``Agricultural 
Quarantine Inspection (AQI) Program Projected Costs FY1999-2002.''
    In that table, support costs, including Agency overhead and 
departmental charges, are approximately 10.63 percent of the total AQI 
program cost, not 10.63 percent of the AQI program cost before support 
costs are added.
    As we have stated in previous rulemakings, in addition to direct 
inspection activity costs, each user fee activity also includes the 
costs of program delivery, which are incurred at the State level and 
below. Also included was a pro rata share of the program direction and 
support costs, which includes items at the regional and headquarters 
program staff levels. Finally, each projection includes a pro rata 
share of Agency level support and departmental charges, which includes 
activities that support the entire Agency, such as recruitment and 
development, legislative and public affairs, regulations development, 
regulatory enforcement, budget and accounting services, and payroll and 
purchasing services. Costs for billing and collection services and 
legal counsel that are directly related to user fee activities are 
directly added to the user fee activities they support and are not 
included in the proration of Agency level costs. No government program 
or business entity can operate without overhead, and including such 
costs in pricing goods or services is a standard cost accounting 
principle.

Productivity and Efficiency in the AQI Program

    One commenter suggested that APHIS should make every effort 
possible to improve the productivity of the existing AQI workforce 
before increasing user fees to purchase new equipment and hire 
additional personnel. The commenter further stated that APHIS has not 
adequately explained how the additional resources that it plans to 
acquire with new fees will increase productivity.
    We are always looking for innovative approaches to improve our 
efficiency and productivity. Along with manual inspections, we use 
alternative inspection methods and technologies such as automated 
information systems, x-ray systems, and specially trained detector 
dogs.

[[Page 62092]]

    We try to allocate our inspection personnel and equipment as 
efficiently as possible, based on risk assessment. With statistics 
obtained via the AQI Monitoring Program, we are able to determine which 
ports are relatively more likely to present high pest risks, and we use 
those statistics to determine how to allocate resources. For example, 
under the AQI monitoring program, we conduct a fixed number of detailed 
inspections each day for each category of service. Hypothetically, we 
might survey every 25th international air passenger bag by pulling it 
aside and performing the same detailed inspection that we would perform 
if there were reason to suspect that the bag contained a plant pest. We 
compile the data from these surveys at each port and rate the relative 
effectiveness of the inspection system at those ports. Then we compare 
the effectiveness ratings of various ports and determine how to 
allocate inspectors from there.
    As stated in our proposal, APHIS is continually requested to 
process international airline passengers faster, although we need to 
inspect passengers and their baggage thoroughly to safeguard against 
the introduction of harmful pests and diseases of animals and plants. 
We are committed to processing passengers as quickly as possible, 
without jeopardizing the success of the AQI program, whose purpose is 
to prevent the introduction of foreign plant and animal pests and 
diseases which are harmful to this country's agriculture; however, 
faster processing requires additional personnel and equipment.
    As stated previously in this document, we need to purchase new x-
ray equipment for placement in new inspection stations in new airport 
terminals. All the new x-ray equipment is destined for use at airports 
around the country to speed up the passenger inspection process and 
make it more efficient.
    In cases where we are replacing old x-ray equipment, we are doing 
so to increase the effectiveness of our inspection program. Many x-ray 
machines currently in use are outdated and are not always able to help 
us detect agricultural commodities in passenger luggage or cargo. As 
stated earlier in this document, due to the increased risk of pest 
introduction that follows from increased levels of international travel 
and trade, we need to upgrade these older machines in order to protect 
American agriculture and serve the best interests of our stakeholders.

Rebuilding the Reserve and Additional Collections

    One commenter suggested that the size of the AQI reserve fund (25 
percent of annual costs) is unreasonable and that a smaller reserve (5 
percent of annual costs) is all that is necessary. The commenter also 
questioned why the additional collections we receive due to rounding of 
fees are no longer sufficient to maintain a reasonable balance in the 
reserve.
    APHIS' user fee authority provides for the maintenance of a 
reasonable balance in the user fee account. As stated in our proposal, 
we believe it is necessary to maintain a reserve of 25 percent of the 
annual AQI program costs due to the fact that approximately 85 percent 
of the fees we collect are remitted, in arrears, on a quarterly basis. 
Based on our experience, 25 percent is a reasonable reserve balance and 
is consistent with the size of reserve funds established by other 
agencies within the Department of Agriculture. Further, over the last 
several years, we attempted to maintain reserve levels with additional 
funds received due to the rounding of fees. However, as shown in our 
proposal, this practice has not provided us with a sufficient reserve. 
We included a reserve building component in the amended fees to ensure 
that reserve can gradually be rebuilt to an adequate level by 2002. We 
continue to believe that a fully funded reserve in each category's user 
fee account is essential to ensure the continuity of service in cases 
of bad debt, carrier insolvency, and fluctuations in activity volumes.
    One commenter questioned what APHIS does with the unearned money it 
receives in the first quarter of a fiscal year for services provided 
during the last quarter of the previous fiscal year. The commenter 
implied that though APHIS cannot use fees it collects after the close 
of a fiscal year for services provided in that fiscal year, it still 
has fees collected from after the close of the prior fiscal year to 
make up for those unavailable collections, and therefore cannot say 
that it is annually ``short'' one quarter's collections.
    The commenter is correct in suggesting that APHIS typically uses 
collections received after the close of a given fiscal year to pay for 
services provided during the next fiscal year. However, it does not 
follow that the AQI program is therefore fully funded as a result. 
Since both user fees and the volume of users change annually, the costs 
of providing AQI services in the fourth quarter of one fiscal year can 
be markedly different from costs of providing services in the fourth 
quarter of the prior fiscal year. Essentially, APHIS must make up for 
the difference in fee collections between the fourth quarters of a 
given year and the prior year with funds from the reserve. For this 
reason, maintaining an adequate reserve fund is essential to the AQI 
program.

Advisory Committee

    Two commenters suggested that APHIS should establish an advisory 
committee to assist in determining appropriate changes to the user fee 
amounts and expenditure of user fee funds. Both commenters referred to 
U.S. Customs Service's (Customs) and Immigration and Naturalization 
Service's (INS) advisory committees.
    Both Customs and INS are mandated to establish advisory committees. 
The FACT Act, as amended, does not authorize or direct us to form an 
advisory committee for AQI user fees. Since the establishment of an 
advisory committee is outside the scope of this rulemaking proceeding, 
we are taking no action based on these comments at this time. However, 
if in the future we determine that an advisory committee is necessary 
for effective management of the AQI program, we will consider 
establishing one.

Additional AQI Activities and User Fees

    Two commenters suggested that we should consider requiring 
commercial trucks and railcars entering the United States from Canada 
to be inspected for plant pests and pay a user fee for AQI services as 
is required for trucks and railcars entering the United States from 
Mexico. The commenters stated that due to an increased risk of plant 
pests being introduced into the United States from prohibited areas via 
land border ports along the northern U.S. border with Canada, APHIS 
should propose to eliminate the inspection and user fee exemption for 
Canadian trucks and railcars in the current user fee regulations. One 
commenter also stated that APHIS should develop a user fee program for 
the inspection of cargo containers.
    While we acknowledge this increasing risk of pest introduction, the 
creation of new user fees is outside the scope of this rulemaking. 
However, we are taking the matter under consideration.

Separation of Costs for Various Categories of AQI Service

    One commenter suggested that APHIS may be using fees collected from 
airlines and air passengers to pay for other AQI services and 
activities. The commenter implied that a clear link between the fees 
airlines pay and the

[[Page 62093]]

services they receive is not apparent in our proposal. The commenter 
specifically questioned our using fees collected from airlines to help 
pay for border blitzes and market surveys.
    As stated in previous rulemakings on this subject and in our 
proposal, each service category is considered separately. Each category 
must, through user fee receipts, return enough money to APHIS to cover 
the cost of providing AQI services to that particular category. Costs 
are assigned directly to a category when the cost is directly related 
to providing the service. For example, our beagle brigade program only 
applies to passenger inspections. Therefore, the passenger inspection 
fees includes the full costs for the beagle brigade program. However, 
where a cost benefits all categories of service, it is pro-rated among 
the categories based on historic direct labor staff hours. Border 
blitzes (inspections) and market surveys, which are ways we test the 
efficacy and efficiency of our AQI programs, are supported by all of 
our AQI user fees. As we explained in our proposed rule, we are using 
data obtained from these inspections and searches to build a database 
on violations. The database will help us target specific commodities 
that are smuggled and importers who have a history of smuggling 
prohibited commodities, while allowing legitimate importers and 
exporters to move their products through commerce without undue delay. 
As a result, we will be able to more efficiently serve all those who 
pay user fees, including airlines.
    Another commenter questioned how new equipment and personnel would 
be allocated among the various categories of AQI service. As stated 
above and in our proposal, the projected allocation of new personnel to 
the various categories of service is as follows:

                       Anticipated AQI Program Hires FY 2000-2002, By Category of Service
----------------------------------------------------------------------------------------------------------------
                                    Commercial      Commercial      Commercial       Commercial    International
                                      vessels         trucks         railcars        aircraft      air passenger
----------------------------------------------------------------------------------------------------------------
New hires.......................              51              39              18             137             216
----------------------------------------------------------------------------------------------------------------

    New and replacement x-ray equipment will be allocated first to 
expanded airport terminals and to replace outdated machines currently 
in use. It is possible that a small number of new x-ray machines could 
be employed at U.S.-Mexico land border ports if we determine that there 
is sufficient risk to necessitate additional inspection activities and 
improved technologies there.
    New and replacement vehicles will be allocated to AQI operations at 
airports, land border ports, and sea ports, but again, most of those 
vehicles will be allocated to airports.
    We would like to restate that costs for each category of service 
are determined separately. A particular category of service does not 
pay for vehicles that are allocated to other categories of service. We 
have accounting methods in place to ensure the proper assignment of 
costs so that each category of service pays only for services provided 
to that same category of service.

Computer Programming, Y2K Concerns, and Postponement of Effective Date

    One commenter suggested that APHIS should delay the implementation 
of fee changes until at least 6 months after the effective date of the 
final rule to allow airlines and other ticket issuers time to reprogram 
their computer systems to account for the revised fees.
    The commenter also requested that APHIS either withdraw its 
proposal to amend existing AQI user fees or delay action for 6 months 
to provide time for the Agency to respond to a request for additional 
information that the commenter has submitted under the Freedom of 
Information Act.
    We do not believe that delaying the effective date of this 
rulemaking is appropriate. If sufficient revenue is not available to 
fund AQI services, we must reduce service or take money from other 
programs, either of which would negatively affect our customers.

Changes in Program Collection and Cost Estimates

    In our proposed rule, we made certain collection and cost estimates 
based on the best data available at the time. Actual collections and 
costs varied somewhat from the estimates, but did not cause a 
significant difference in the scope of the program or the need to 
revise the fees as proposed. Our full analysis has been updated to 
reflect the new data.
    The calculations underlying the proposed rule assumed an October 1, 
1999, implementation date. Implementing the rule on January 1, 2000, 
will reduce the anticipated FY 2000 collections by $13,289,865. Also, 
the FY 2000 Agriculture Appropriation Act made $13,000,000 of FY 2000 
collections unavailable instead of the $5,000,000 assumed in the 
proposed rule. Together, these changes reduce the amount available from 
FY 2000 collections by $21,288,865. However, changes in program 
collections and costs for FY 1999 substantially offset this loss and 
will allow the Agency to proceed with the program enhancements noted in 
the proposed rule. In FY 1999, the collections actually received 
totaled $171,904,404 instead of the $159,727,857 assumed in the 
proposed rule. Also, FY 1999 program costs totaled $152,232,527 instead 
of the $158,457,857 assumed in the proposed rule. Together, these 
changes added $18,401,877 to the available reserve, which is available 
to recover the cost of fees that we could not collect from October 1, 
1999 to December 31, 1999.
    We now anticipate FY 2000 program costs will total $194,607,291 
instead of the $199,965,458 assumed in the proposed rule. The hiring of 
315 new inspectors will begin slightly later in the fiscal year than 
assumed in the proposed rule.
    Therefore, for the reasons given in the proposed rule and in this 
document, we are adopting the proposed rule as a final rule, with the 
change discussed in this document.

Executive Order 12866 and Regulatory Flexibility Act

    This rule has been reviewed under Executive Order 12866. The rule 
has been determined to be significant for the purposes of Executive 
Order 12866 and, therefore, has been reviewed by the Office of 
Management and Budget.
    The economic analysis prepared for this rule provides a cost-
benefit analysis as required by Executive Order 12866 and an analysis 
of economic effects on small entities as required by the Regulatory 
Flexibility Act. The analysis is summarized below. Copies of the full 
analysis are available by contacting Ms. Donna Ford at the address 
listed under FOR FURTHER INFORMATION CONTACT.

Introduction

    APHIS is revising existing agricultural quarantine and inspection 
(AQI) user fees to recover additional and unanticipated program costs 
and to rebuild the AQI reserve. The AQI user fee revisions will become 
effective

[[Page 62094]]

January 1, 2000, and will be in effect through FY 2002.
    International air passengers, commercial aircraft, commercial 
vessels, commercial trucks, and commercial railroad cars arriving at 
ports in the customs territory of the United States will be affected by 
the increase in AQI user fees.
    The FACT Act, as amended, provides that APHIS may prescribe and 
collect fees to cover the cost of providing quarantine and inspection 
services in connection with the arrival of international airline 
passengers, commercial aircraft, commercial vessels, commercial trucks, 
and commercial railroad cars at ports in the customs territory of the 
United States. The FACT Act further states that the fees should be 
sufficient to cover the cost of administering the program and 
sufficient to maintain a reasonable balance (or reserve) in the AQI 
User Fee Account.

Need for Regulation

    The purpose of agricultural quarantine inspections at U.S. ports of 
entry is to prevent international travelers and conveyances from 
introducing harmful plant and animal pests that could damage U.S. 
agriculture and cause substantial economic losses to domestic 
producers, consumers, exporters, and to a range of allied agricultural 
industries. In the case of AQI user fees, those international travelers 
or conveyances who may carry agricultural pests or diseases from abroad 
are required to pay for AQI program activities.
    Generating revenues to operate public programs by charging users is 
widely practiced by Federal, State, and local government agencies and 
is based on the premise that the beneficiaries or users of a public 
system, and not the public at large, should pay for its operation. User 
fees can be an equitable way of matching program costs to program users 
or beneficiaries.

Composition of Proposed Fees

    Computation of AQI user fees is based on direct program delivery 
costs, program support costs, Agency-level support costs, anticipated 
user fee administrative costs, and reserve fund costs.

Direct Program Costs

    Direct program costs include, but are not limited to: Salary and 
benefits for inspectors, canine officers, supervisory and clerical 
staff, uniform allowances, local travel expenses, and specialized 
equipment purchases.

Program Support Costs

    Program support costs include all expenditures necessary to 
maintain regional and headquarters support staffs and offices, 
including APHIS program staff, detection methods development, plant 
risk assessments, and automatic data processing (ADP) support.

Agency-level Costs

    In addition to salary and benefit costs, Agency-level support costs 
include, but are not limited to: Recruitment and development, 
legislative and public affairs, regulatory enforcement, communications, 
postage, budget and accounting services, and the cost for USDA's 
National Finance Center to provide payroll, purchasing, and other 
related financial services.

Administrative Costs

    The FACT Act, as amended, allows the Agency to recover 
administrative costs that the Agency incurs as a direct result of 
developing, collecting, and monitoring AQI user fees.

The Reserve Fund

    The FACT Act allows for a reasonable balance in the AQI User Fee 
Account. The reserve fund serves several purposes. The reserve fund 
ensures that the Agency has access, through the AQI User Fee Account, 
to funds for normal operating expenses. Second, the reserve fund 
ensures that the Agency has sufficient operating funds in cases of bad 
debt, carrier insolvency, or fluctuations in activity volumes. Further, 
in the July 1997 final rule, we explained that it is also necessary to 
maintain a reasonable reserve balance in the AQI account in order to 
account for fees earned for providing AQI services in a given fiscal 
year that were not received until after that fiscal year ended.

Regulatory Flexibility Analysis

    The effects of increased fees on small entities in each of the 
affected industries are discussed separately below. The fee changes 
will also affect international airline passengers arriving at ports in 
the customs territory of the United States; however, passengers are not 
included in this analysis because the Regulatory Flexibility Act does 
not cover individuals.

Commercial Vessels

    We are amending the scheduled user fees for inspecting commercial 
vessels by increasing the fees by $3.75 in FY 2000, by $3.25 in FY 
2001, and by $0.25 in FY 2002. APHIS inspects vessels of 100 net tons 
or more arriving from all foreign ports, except Canada. Typically, 
APHIS inspects (and charges) dry cargo vessels operating between the 
United States and foreign ports. At the beginning of 1996 there were 
192 U.S. dry cargo vessels.
    Bureau of the Census data compiled by the Small Business 
Administration (SBA) in 1995 show that the affected industry, U.S. 
commercial vessels engaged in deep sea foreign transportation of 
freight, was composed mostly of small firms (less than 500 employees, 
according to the SBA definition). In 1995, there were 125 firms 
engaging in deep sea transportation of freight and 111 of them, or 89 
percent of the affected industry, employed less than 500 employees. 
Also in 1995, the average or typical small U.S. firm engaged in deep 
sea transportation of freight had roughly 31 employees, a payroll of 
less than $1.6 million, and annual receipts of $28 million. Data on the 
number of dry cargo vessels per firm or firms exclusively operating dry 
cargo vessels are not available.
    Anecdotal information suggests that many of the companies that are 
subject to AQI inspections are not U.S. firms. Further, it is unclear 
how many of the 125 U.S. firms will actually be affected by the 
increase in AQI user fees and how many of the affected firms are small 
entities. We do know that total daily operating costs for dry cargo 
vessels idle in port average between $23,600 and $26,800. The user fee 
increases of $3.75 in FY 2000, $3.25 in FY 2001, and $0.25 in FY 2002 
are very insignificant fractions of daily operating costs, suggesting 
that the fee revision will not have a significant economic effect on 
small firms operating vessels.

Commercial Trucks

    APHIS inspects trucks entering the United States from Mexico. It is 
unclear how many of these trucks entering the United States from Mexico 
are owned and operated by U.S. firms. According to a recent General 
Accounting Office report, roughly 11,000 trucks cross the border each 
week day (a total of 3,113,091 in FY 1996) from Mexico into the United 
States. The bulk (93 percent) of northbound truck traffic comes through 
seven major customs ports: Otay Mesa, California; Calexico, California; 
Nogales, Arizona; El Paso, Texas; Laredo, Texas; McAllen, Texas; and 
Brownsville, Texas. Many of these trucks are owned and operated by 
Mexican firms. At present, trucks from Mexico are limited to commercial 
zones along the border and many make multiple daily crossings. Mexican 
brokers tend to control much of the truck traffic at some border 
locations.

[[Page 62095]]

Reliable data on future traffic patterns are not available.
    It is unclear how many U.S. trucking firms will be affected by the 
increase in AQI user fees. Anecdotal evidence from APHIS employees 
indicates that many of the AQI truck decals, which are good for 
multiple inspections, are being purchased by U.S. trucking firms 
operating in Texas, California, and Arizona. Bureau of the Census data 
for 1995 show that the overwhelming majority of trucking firms in these 
States would be considered small firms by SBA standards (less than 
$18.5 million in receipts annually). SBA data also show that the 
typical small trucking firm in one of these border States had 10 
employees and earned a little less than $1 million in receipts 
annually.
    If we assume that any small U.S. trucking firm that regularly 
transports freight from Mexico would purchase an APHIS truck decal, 
which is good for an unlimited number of entries during the calendar 
year, the increase in user fees could cost a small firm, at most, an 
additional $5 per truck or an estimated $55 per firm in FY 2000; and 
$10 per truck or an estimated $110 per firm in FY 2001 and FY 2002. 
This estimate is based on the assumption that a small firm owns a 
maximum of 11 trucks. There are no official statistics on the fleet 
size of small trucking firms either for selected border States or for 
the United States as a whole. This assumption is based on private 
sector trucking industry data on 256,223 U.S. trucking firms 
representing a combined fleet of over 2.3 million vehicles. These data 
show that 91 percent of firms own 11 or fewer trucks.
    SBA data show that the typical small trucking firm in Arizona, 
California, or Texas has annual receipts of $932,000. We, therefore, 
believe that the increase in cost, as explained above ($110 for the 
average small firm), will not result in a significant new burden on 
small commercial trucking firms.

Loaded Commercial Railroad Cars

    There are four U.S. railroad companies currently transporting goods 
across the U.S.-Mexico border. Two of these railroad companies meet the 
SBA criteria for small entities (fewer than 1,500 employees). As of 
1991, the smaller railroad companies transported between 960 and 2,000 
loaded railcars into the United States from Mexico annually. Data on 
operating expenses and profit margins for these companies are not 
available; but user fees will not increase in FY 2000 and FY 2002 and 
will only increase by $0.25 in FY 2001, suggesting that there will not 
be a significant economic effect on these two small U.S. railroad 
companies.

Commercial Airlines

    We are amending the scheduled user fees for inspecting commercial 
aircraft by increasing the fees by $3.75 in FY 2000, $3.50 in FY 2001, 
and $3.00 in FY 2002. International scheduled and unscheduled 
(chartered) air passenger, air cargo, and air courier carriers arriving 
at U.S. customs ports are subject to AQI inspections. Bureau of the 
Census data compiled by the SBA show that there were a total of 6,107 
firms in the U.S. air transportation industry in 1995 and that more 
than 5,893 (or more than 96.5 percent) would have met the SBA criteria 
for small entity (employing fewer than 1,500 employees). The typical 
small firm in the air transportation industry had 15 employees, an 
annual payroll of $398,000, and estimated annual receipts of $2.1 
million.
    APHIS regulations affect international flights, many of which are 
operated by foreign-owned firms. Those U.S. air transport firms that do 
not operate international flights are not subject to the rule. Agency 
records show that, in 1995, only 123 of the 6,107 firms in the air 
transportation industry were subject to agricultural quarantine 
inspections because they operated international flights. This data 
suggest that the increased user fees will not affect a substantial 
number of small air transportation companies. Even if all 123 U.S. 
airline firms were small entities (which they are not), the fee 
revision would be applicable to only 2 percent of small firms in the 
industry. Using information on the number of firms inspected, the 
number of projected inspections, and the assumption that firms subject 
to inspection are distributed by size in a fashion consistent with the 
industry as a whole, we can develop very rough estimates of effect on 
small firms.
    Each of the 123 U.S. companies would have had an airplane inspected 
between 1,600 and 1,700 times per year if inspections were prorated 
equally between large and small firms. In practice, small firms with 
fewer aircraft would probably have substantially fewer annual 
inspections, so we are overestimating the effect of fee revisions on 
small firms. Given the assumptions above, the increased fees listed 
above will likely translate into additional costs per firm of between 
$5,000 and $6,000 per year, which are less than three-tenths of one 
percent of estimated annual receipts for the average small air 
transportation firm.
    Given the data, assumptions, and calculations above, it is 
reasonable to conclude that fee revisions will not have a significant 
economic effect on a substantial number of small air transportation 
firms.

Other Costs and Benefits

    Additional reporting costs to private airlines associated with 
revising user fees are likely to be very small because mechanisms are 
already in place for collecting fees. There should be no additional 
recordkeeping costs for ticketing agents and tour operators who are not 
involved in remitting fees and are not expected to remit fees in the 
future. Further, there will be no additional reporting burdens on 
vessel, aircraft, railcar, and truck operators as a result of revisions 
to user fees.
    The benefit of user fees is the shift in the payment of services 
from taxpayers as a whole to those persons who are receiving the 
government services. While taxes may not change by the same amount as 
the change in user fee collections, there is a related shift in 
appropriations, which allows tax dollars to be applied to other 
programs that benefit the public in general.
    The administrative cost involved in obtaining these savings will be 
minimal. APHIS already has a user fee program and a mechanism for 
collecting user fees in place, and since this rule simply updates 
existing user fees, increases in administrative costs will be small. 
Because the savings are sufficiently large and the administrative costs 
will be small, it is likely that the net gain in reducing the burden on 
taxpayers as a whole will outweigh the cost of administering the 
revisions of the user fees.
    Under these circumstances, the Administrator of the Animal and 
Plant Health Inspection Service has determined that this action will 
not have a significant economic impact on a substantial number of small 
entities.

Executive Order 12372

    This program/activity is listed in the Catalog of Federal Domestic 
Assistance under No. 10.025 and is subject to Executive Order 12372, 
which requires intergovernmental consultation with State and local 
officials. (See 7 CFR part 3015, subpart V.)

Executive Order 12988

    This final rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. This rule: (1) Preempts all State and local laws 
and regulations that are inconsistent with this rule; (2) has no 
retroactive effect; and (3) does not require administrative proceedings

[[Page 62096]]

before parties may file suit in court challenging this rule.

Paperwork Reduction Act

    This final rule contains no new information collection or 
recordkeeping requirements under the Paperwork Reduction Act of 1995 
(44 U.S.C. 3501 et seq.).

List of Subjects in 7 CFR Part 354

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

    Accordingly, 7 CFR part 354 is amended as follows:

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

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

    Authority: 7 U.S.C. 2260; 21 U.S.C. 136 and 136a; 49 U.S.C. 
1741; 7 CFR 2.22, 2.80, and 371.2(c).

    2. Section 354.3 is amended by revising the tables in paragraphs 
(b)(1), (c)(1), (d)(1), (e)(1), and (f)(1) to read as follows:


Sec. 354.3  User fees for certain international services.

* * * * *
    (b) * * *
    (1) * * *

------------------------------------------------------------------------
                       Effective dates                           Amount
------------------------------------------------------------------------
January 1, 2000 through September 30, 2000...................     465.50
October 1, 2000 through September 30, 2001...................     474.50
October 1, 2001 through September 30, 2002...................     480.50
------------------------------------------------------------------------

* * * * *
    (c) * * *
    (1) * * *

------------------------------------------------------------------------
                       Effective dates                           Amount
------------------------------------------------------------------------
January 1, 2000 through September 30, 2000...................       4.25
October 1, 2000 through September 30, 2001...................       4.50
October 1, 2001 through September 30, 2002...................       4.75
------------------------------------------------------------------------

* * * * *
    (d) * * *
    (1) * * *

------------------------------------------------------------------------
                       Effective dates                           Amount
------------------------------------------------------------------------
January 1, 2000 through September 30, 2000...................       6.75
October 1, 2000 through September 30, 2001...................       7.00
October 1, 2001 through September 30, 2002...................       7.00
------------------------------------------------------------------------

* * * * *
    (e) * * *
    (1) * * *

------------------------------------------------------------------------
                       Effective dates                           Amount
------------------------------------------------------------------------
January 1, 2000 through September 30, 2000...................      64.00
October 1, 2000 through September 30, 2001...................      64.75
October 1, 2001 through September 30, 2002...................      65.25
------------------------------------------------------------------------

* * * * *
    (f) * * *
    (1) * * *

------------------------------------------------------------------------
                     Effective dates \1\                         Amount
------------------------------------------------------------------------
January 1, 2000 through September 30, 2000...................       3.00
October 1, 2000 through September 30, 2001...................       3.00
October 1, 2001 through September 30, 2002...................      3.10
------------------------------------------------------------------------
\1\ Persons who issue international airline tickets or travel documents
  are responsible for collecting the APHIS international airline
  passenger user fee from ticket purchasers. Issuers must collect the
  fee applicable at the time tickets are sold. In the event that ticket
  sellers do not collect the APHIS user fee when tickets are sold, the
  air carrier must collect the user fee from the passenger upon
  departure. Carriers must collect the fee applicable at the time of
  departure from the traveler.

* * * * *
    3. In Sec. 354.3, paragraph (c)(3)(i) would be amended by removing 
the words ``,except, that through September 30, 1997, the amount to be 
paid is $40.00''.

    Done in Washington, DC, this 9th day of November 1999.
Bobby R. Acord,
Acting Administrator, Animal and Plant Health Inspection Service.
[FR Doc. 99-29868 Filed 11-15-99; 8:45 am]
BILLING CODE 3410-34-P