[Federal Register Volume 69, Number 149 (Wednesday, August 4, 2004)]
[Notices]
[Pages 47201-47203]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-17744]



[[Page 47201]]

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

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration


Notice of FAA Final Order Directing the Disposition of Certain 
Overflight Fees Collected by the FAA

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Notice of FAA Final Order Directing the Disposition of Certain 
Overflight Fees Collected by the FAA.

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

SUMMARY: The FAA is publishing a Final Order issued on July 21, 2004 
disposing of certain overflight fees collected by the FAA pursuant to 
49 U.S.C. 45301.

SUPPLEMENTARY INFORMATION: The FAA issued a Final Order on July 21, 
2004 disposing of certain overflight fees collected by the FAA pursuant 
to 49 U.S.C. 45301. The Order addresses the manner in which provisions 
of the recently enacted Vision 100--Century of Aviation Reauthorization 
Act, Public Law 108-176, affecting overflight fees will be implemented 
and how overflight fees previously collected shall be treated by the 
FAA. The final Order follows this notice.

Michael Chase,
Regulations Division, Office of the Chief Counsel.

Overflight Fees

    Order Directing the Disposition of Certain Fees Collected by the 
Federal Aviation Administration Pursuant to 49 U.S.C. Section 45301.

I. Summary

     The Federal Aviation Reauthorization Act of 1996 directed the 
Federal Aviation Administration (FAA) to establish a fee schedule and 
collection process for air traffic control and related services 
provided to aircraft, other than military and civilian aircraft of the 
U.S. Government or of a foreign government, that fly in U.S.-controlled 
airspace but neither take off from, nor land in, the United States, 49 
U.S.C. 45301, as amended by Public Law 104-264. Such flights are 
commonly referred to as ``Overflights'' and the fees collected for 
services provided to them are known as ``Overflight Fees''.
     Although the courts have vacated the rules adopted by the FAA to 
implement this statutory directive, Congress has enacted recently 
Vision 100--Century of Aviation Reauthorization Act, Public Law 108-176 
(Vision 100), that legislatively adopts the FAA rules, as well as the 
fees established by those rules, as of the date of their original 
issuance. This Order addresses the manner in which the new statute 
shall be implemented by the FAA and how Overflight Fees previously 
collected shall be treated by the agency.

II. Background

A. The Judicial Challenge to the Initial Interim Final Rule

     The FAA began charging Overflight fees in May 1997 pursuant to an 
Interim Final Rule issued by the FAA. Those fees were challenged before 
the United States Court of Appeals for the District of Columbia Circuit 
by the Air Transport Association of Canada and seven foreign air 
carriers. On January 30, 1998, the D.C. Circuit vacated the FAA's 
Interim Final Rule, holding that the FAA's specific methodology for 
allocating certain costs did not comport with the requirements of the 
1996 statute. Asiana Airlines v. FAA, 134 F.3d 393 (D.C. Cir. 1998). 
Following that decision, the FAA refunded approximately $40 million in 
Overflight Fees that it had collected under its Interim Final Rule.

B. The May 2000 Interim Final Rule and August 2001 Final Rule

     On May 30, 2000, the FAA issued a new Interim Final Rule imposing 
Overflight Fees beginning on August 1, 2000, derived from cost data 
produced by the FAA's newly developed Cost Accounting System. The Air 
Transport Association of Canada and seven foreign air carriers 
challenged the new Rule before the D.C. Circuit. While the appeal was 
pending before the D.C. Circuit, on August 13, 2001, the FAA issued a 
Final Rule that was effective on August 20, 2001. Reflecting accounting 
adjustments, the Final Rule reduced Overflight Fees by more than 15%. 
The Air Transport Association of Canada and the seven foreign air 
carriers challenged the Final Rule as well, and the two challenges were 
consolidated before the D.C. Circuit.
    On April 8, 2003, the D.C. Circuit set aside the Interim Final Rule 
and the Final Rule, holding that the FAA had failed to demonstrate that 
the Overflight fees established in the Rules met what the Court read to 
be the applicable statutory requirement, that is, that Overflight Fees 
must be ``directly related'' to the FAA's costs. Air Transport 
Association of Canada v. FAA, 323 F.3d 1093 (D.C. Cir. 2003). The Court 
declined to use the congressionally modified ``reasonably related'' 
standard set forth in a recently enacted amendment to the FAA's 
statutory authority, finding that the more flexible ``reasonably 
related'' standard was inapplicable to litigation pending at the time 
the new standard was enacted.

C. Section 229 of Vision 100

    In response to the D.C. Circuit's decision, Congress enacted a 
specific provision in Vision 100 that directly addresses Overflight 
Fees. Vision 100 was signed into law by the President on December 12, 
2003. Section 229 of that Act provides as follows:
    (a) Adoption and Legalization of Certain Rules--
    (1) Applicability and Effect of Certain Law--Notwithstanding 
section 141(d)(1) of the Aviation and Transportation Security Act (49 
U.S.C. 44901 note), section 45301(b)(1)(B) of title 49, United States 
Code, is deemed to apply to and to have effect with respect to the 
authority of the Administrator of the Federal Aviation Administration 
with respect to the interim final rule and final rule, relating to 
overflight fees, issued by the Administrator on May 30, 2000, and 
August 13, 2001, respectively.
    (2) Adoption and Legalization--The interim final rule and final 
rule referred to in subsection (a), including the fees issued pursuant 
to those rules, are adopted, legalized, and confirmed as fully to all 
intents and purposes as if the same had, by prior Act of Congress, been 
specifically adopted, authorized, and directed as of the date those 
rules were originally issued.
    (3) Fees to Which Applicable--This subsection applies to fees 
assessed after November 19, 2001, and before April 8, 2003, and fees 
collected after the requirements of subsection (b) have been met.
    (b) Deferred Collection of Fees--The Administrator shall defer 
collecting fees under section 45301(a)(1) of title 49, United States 
Code, until the Administrator (1) reports to Congress responding to the 
issues raised by the court in Air Transport Association of Canada v. 
Federal Aviation Administration and Administrator, FAA, decided on 
April 8, 2003, and (2) consults with users and other interested parties 
regarding the consistency of the fees established under such section 
with the international obligations of the United States.
    (c) Enforcement--The Administrator shall take an appropriate 
enforcement action under subtitle VII of title 49, United States Code, 
against any user that does not pay a fee under section 45301(a)(1) of 
such title.
    Section 229 has a direct impact on the Overflight Fees that FAA has 
collected since August 1, 2000. First, in subsection (a)(1) it 
establishes that the ``reasonably related'' standard for evaluating 
Overflight Fees applies to

[[Page 47202]]

both the Interim Final Rule and Final Rule. Second, in subsection 
(a)(2), it adopts legislatively the Interim Final Rule and accompanying 
fees, in effect from August 1, 2000 to August 20, 2001; and the Final 
Rule and accompanying fees, in effect from August 20, 2001 to the 
present. Third, subsection (a)(3) provides that subsection (a) applies 
to fees assessed after November 19, 2001, the date on which the 
Aviation Transportation and Security Act was adopted, and before April 
8, 2003, the date of the Court of Appeals decision setting aside the 
Interim Final Rule and Final Rule. Fourth, section 229 defers actual 
collection of Overflight Fees until the FAA Administrator has reported 
to Congress on the issues raised by the court in its April 8th decision 
and consults with users and interested parties regarding consistency of 
the FAA's fees with the international obligations of the United States.
    First and foremost, section 229 express Congress' determinations to 
put back into place, by means of legislation, the rules adopted 
administratively by the FAA for the assessment and collection of 
Overflight Fees. Section 229 does raise an interpretive question, 
however, because while subsection (a)(2) adopts the FAA's Interim Final 
Rule and Final Rule ``as of the date those rules were originally 
issued,'' subsection (a)(3) states that subsection (a) ``applies to 
fees assessed after November 19, 2001 and before April 9, 2003. * * * 
'' If the intended meaning of subsection (a)(3) is that all of 
subsection (a) applies only to fees ``assessed after November 19, 
2001,'' the first half of subsection (a)(2) would become a nullity; all 
of the fees assessed under the Interim Final Rule were assessed before 
November 19, 2001, since the rule expired on August 20, 2001, when the 
Final Rule took effect. If subsection (a)(3) were to be interpreted as 
limiting the reach of the entire subsection to the period of time post 
November 19, 2001, the legislative adoption of an Interim Final Rule 
and fees under subsection (a)(2) would have no meaning. Clearly, one 
section of the statute, subsection (a)(3), should not be read to 
nullify the express provisions of another subsection, subsection 
(a)(2), that legislatively adopts the Interim Final Rule and fees 
without limitation from the date of its issuance.
    The dichotomy found in the text of section 229 is mirrored in the 
Conference Report accompanying the provision. There, Congress explained 
that it ``agreed to ratify the interim final rule and final rule issued 
by the FAA on May 30, 2000, and August 13, 2001'' but then states that 
``[t]his ratification applies to fees collected after the date of 
enactment of [ATSA],'' i.e., November 19, 2001. Importantly, however, 
Congress goes on to state that ``to clarify that the FAA has complied 
with its statutory mandate regarding overflight fees in the Interim 
Final Rule and Final Rule,'' Congress ``retroactively as well as 
prospectively'' in section 229 has proceeded to ``legalize and ratify 
both the Interim Final Rule and the Final Rule, effective as of the 
dates those rules were originally issued by the FAA.'' (Emphasis 
supplied.)
    Following adoption of Section 229, FAA renewed its efforts to 
resolve an ongoing and lengthy dispute with regard to the overflight 
fees that were subject of litigation in the D.C. Circuit, Air Transport 
Association of Canada v. FAA. FAA has entered into a settlement 
agreement with the Air Transport Association of Canada and all of the 
foreign air carriers in that suit that will resolve all of the claims 
in the litigation made by these parties, and disputed by the FAA, for 
refunds of overflight fees, as well as potential claims by these 
carriers challenging the FAA's ability to impose and collect overflight 
fees authorized by the provisions of Section 229. Under the terms of 
the settlement agreement, the FAA would make payments to the litigating 
carries from previously collected fees (and in some instances receive 
payments from such carriers), in addition to whatever refunds and 
credits these carriers are to receive pursuant to this Order. Each of 
these carriers has signed a complete release in which they agree to 
forgo any further litigation on these claims and also they have agreed 
not to challenge the imposition and collection of the current 
overflight fees as described in this Order and authorized by Section 
229.

III. Determination

    The FAA must if possible accomplish the clear intent of Section 
229, which is to impose new fees at the levels previously set in the 
FAA Overflight Fees rules set aside by the D.C. Circuit's April 8, 2003 
decision. It could be argued under the terms of section 229 that, 
notwithstanding the D.C. Circuit's decision, all Overflight Fees 
previously paid to and collected by the United Stats should be retained 
by the FAA pursuant to the rules and fees enacted by Congress and 
signed into law last December. However, as noted above, section 229 
contains specific, but arguably ambiguous directions as to when the 
fees authorized and approved by the statute may be collected.
    In light of the ambiguous and potentially conflicting provisions of 
the statute, and in order to fashion a fair and reasonable approach to 
applying section 229, it is my judgment that this issue should be 
resolved by interpreting the statute to permit the FAA to retain only 
those fees collected for services provided after November 19, 2001. I 
have therefore decided that the FAA shall credit or refund: (1) All 
Overflight Fees paid under the Interim Final Rule, and (2) those fees 
paid under the Final Rule for services rendered prior to November 20, 
2001.
    As to those fees previously collected under the Final Rule for 
services provided after November 19, 2001, section 229 is clear and 
unambiguous: Congress has mandated under its legislatively enacted rule 
that fees matching those imposed under the FAA's Final Rule are due and 
collectible. Given this, and at the direction of Congress, I hereby 
determine that, except as otherwise ordered by the Administrator, the 
FAA will not refund any fees collected for services received after 
November 19, 2001.
    Additionally, I have determined that the FAA will begin collecting 
Overflight Fees for the time period beginning March 1, 2003, the first 
day for which Overflight Fees have not yet been billed, as soon as the 
agency has complied with the requirements of subsection (b) of section 
229, that is, as soon as the FAA ``(1) reports to Congress'' concerning 
matters raised in the most recent D.C. Circuit decision, and ``(2) 
consults with users and other interested parties regarding the 
consistency of the fees established * * * with the international 
obligations of the United States.'' In the meantime, the FAA will issue 
invoices to all affected air carriers that reflect the Overflight Fees 
assessed by FAA for services provided between March 1, 2003, and 
February 29, 2004. FAA will begin collection of such assessed fees upon 
completion of the Report to Congress and the consultation process.
    Accordingly, once the requirements of subsection (b) have been 
completed, FAA will use the following procedure to implement this 
Order:
    Each air carrier or system user (hereafter ``air carrier'') who 
paid fees under the Interim Final Rule and/or the Final Rule will 
receive a refund or credit in an amount equal to the fees paid for 
services provided through November 19, 2001, offset or reduced by: (1) 
The amount due for any Overflight Fees invoices that remain unpaid by 
that air carrier for flights operated after November 19, 2001 through 
February 28, 2003; and (2) the amount due for new Overflight Fees

[[Page 47203]]

assessments for flights operated between march 1, 2003 and February 29, 
2004.
    If the amount of the air carrier's credit exceeds the amounts of 
unpaid liability in (1) and (2), the air carrier may request a direct 
refund in lieu of a credit. If it does not have a net credit, than the 
FAA will invoice the air carrier for the remaining amount owed for the 
period ending February 29, 2004. Any air carrier that does not pay any 
remaining invovice amount owed for the period ending February 29, 2004, 
may be subject to enforcement action by the FAA as authorized by 
section 229(c) of Vision 100. Overflight Fees for services provided 
beginning on March 1, 2004 will be separately assessed and invoiced.
    This determination is administratively final. Any person seeking 
judicial review of this order must file a petition for review within 60 
days of the date of issuance of this order in the United States Court 
of Appeals for the District of Columbia Circuit, or in the court of 
appeals of the United States for the circuit in which the person 
resides or has its principal place of business.

    Dated: July 21, 2004.
Marion C. Blakey,
Administrator.
[FR Doc. 04-17744 Filed 8-3-04; 8:45 am]
BILLING CODE 4910-13-M