[Federal Register Volume 84, Number 81 (Friday, April 26, 2019)]
[Rules and Regulations]
[Pages 17729-17731]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-08394]



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 Rules and Regulations
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  Federal Register / Vol. 84, No. 81 / Friday, April 26, 2019 / Rules 
and Regulations  

[[Page 17729]]



DEPARTMENT OF AGRICULTURE

Animal and Plant Health Inspection Service

7 CFR Part 354

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


User Fees for Agricultural Quarantine and Inspection Services

AGENCY: Animal and Plant Health Inspection Service, USDA.

ACTION: Interpretative rule and request for comments.

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SUMMARY: On May 13, 2016, the Air Transport Association of America 
filed suit against the Animal and Plant Health Inspection Service 
(APHIS), claiming APHIS' 2015 final rule setting fee structures for its 
Agricultural Quarantine Inspection (AQI) program (Docket No. APHIS-
2013-0021, effective December 28, 2015) violated the Administrative 
Procedure Act. In its March 28, 2018 Order, the U.S District Court for 
the District of Columbia rejected challenges based on the calculations 
and methods for setting the fees and APHIS' adoption of the final rule. 
However, the Court also held that APHIS improperly relied on an expired 
provision in the relevant statute to justify its ability to levy a fee 
to support a reserve account. In so doing, the Court did ``not evaluate 
or rule on the agency's current argument that it has authority to fund 
a reserve'' pursuant to other statutory authority. In this 
clarification to the final rule, APHIS clarifies that, while we accept 
the court's holding that congressional authority under one specific 
provision of the statute to maintain a reasonable balance in the 
reserve account expired in 2002, this expiration does not abrogate our 
authority to collect for a reserve, as that authorization is written 
into other provisions of the statute. This interpretation is consistent 
with APHIS' long-standing precedent as set forth in prior rulemakings. 
The agency is only seeking comments related to the legal authority for 
the reserve component of AQI User Fee Program and is not reexamining 
any other aspect of the program at this time, including the AQI User 
Fee calculation.

DATES: The interpretive rule is issued April 26, 2019. We will consider 
all comments that we receive on or before May 28, 2019.

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

FOR FURTHER INFORMATION CONTACT: 
    Mr. George Balady, AQI User Fee Coordinator, Office of the 
Executive Director-Policy Management, PPQ, APHIS, 4700 River Road, Unit 
131, Riverdale, MD 20737 1231; (301) 851-2338; Email: 
[email protected].

SUPPLEMENTARY INFORMATION:

I. Background

    On May 13, 2016, the Air Transport Association of America filed 
suit against the Animal and Plant Health Inspection Service (APHIS), 
claiming APHIS' 2015, final rule (80 FR 66748-66779, Docket No. APHIS-
2013-0021, effective December 28, 2015) setting fee structures for its 
Agricultural Quarantine Inspection (AQI) program violated the 
Administrative Procedure Act. In its March 28, 2018, Order, the U.S. 
District Court for the District of Columbia affirmed APHIS' cost 
methodology and the sufficiency of its data. The Court remanded to 
APHIS the reserve portion of the final rule updating user fees for the 
AQI program. The Court expressly did not vacate the rule pending 
further explanation by the agency. See Air Transport Ass'n of Am. v. 
U.S. Dep't of Agric, 317 F. Supp. 3d 385, 392 (D.D.C. 2018).
    In its memorandum opinion accompanying that order, the Court stated 
that the agency unreasonably relied on the ``reasonable balance'' 
allowance in 21 U.S.C. 136a(a)(1)(C) of the Food, Agriculture, 
Conservation, and Trade (FACT) Act of 1990, 21 U.S.C. 136a, to justify 
its continued fee collection to maintain a reserve, as that allowance 
expired after fiscal year 2002. The Court did not rule on whether APHIS 
had authority for continued fee collection to maintain a reserve under 
any other subsection of the FACT Act and, therefore, remanded to the 
Agency for ``reconsideration of its authority to charge a surcharge for 
the reserve account.'' See Air Transport Ass'n, 303 F. Supp. 3d at 57. 
The Court expressly declined to consider APHIS' explanation in its 
legal filings that, consistent with its past explanations and practice, 
APHIS justified its authority to collect such fees under other of 
subsections of 21 U.S.C. 136a(a)(1). Air Transport Ass'n of Am., Inc. 
303 F. Supp. 3d at 51; see, e.g., User Fees for Agricultural Quarantine 
& Inspection Services, 71 FR 49984 (August 24, 2006). The Court did 
``not evaluate or rule on the agency's . . . argument that it had 
authority to fund a reserve under'' a different part of the statute, 
and instead remanded the rule to the agency without vacating for 
further consideration of the agency's authority. Id. In this 
clarification to the final rule, APHIS restates its longstanding 
practice and authority under 21 U.S.C. 136a(a)(1)(A) and (B) provide 
for its continued collection of user fees to maintain a reserve in the 
AQI User Fee Account.

II. Clarification of Authority

A. The Rulemaking at Issue

    The FACT Act authorizes APHIS to collect user fees to fully fund 
its AQI Program. These user fees must be sufficient to cover the costs 
of:
     Providing AQI services to commercial vessels, commercial 
trucks, commercial railroad cars, commercial aircraft, and 
international passengers in connection with the arrival, at a port in

[[Page 17730]]

the customs territory of the United States (21 U.S.C. 136a(a)(1)(A));
     Providing preclearance or preinspection at a site outside 
the customs territory of the United States to international passengers, 
commercial vessels, commercial trucks, commercial railroad cars, and 
commercial aircraft (21 U.S.C. 136a(a)(1)(A)); and
     Administering the AQI Program (21 U.S.C. 136a(a)(1)(B)).
    In the April 25, 2014, Federal Register (79 FR 22895), we issued a 
proposal to update the methodology by which APHIS would calculate user 
fees across user fee classes. Such a change was necessary to address 
historic underfunding for the AQI Program and to create a system 
whereby future adjustments to the user fee schedule could be easily 
made to more accurately reflect actual costs. In the 2015 final rule 
(80 FR 66748), we applied an activity-based-costing methodology to 
determine the appropriate user fee for each user fee group in a manner 
that accurately reflects individual user fee costs and protects users 
against cross-subsidization across user fee groups.
    The 2014 proposed rule cited APHIS's authority to maintain a 
``reasonable reserve,'' without specifically articulating which 
subsection of the FACT Act granted it authority to do so; however, the 
2015 final rule used the phrase ``reasonable balance.'' While not 
explicitly citing 21 U.S.C. 136a(a)(1)(C) to justify continued 
collection with respect to the AQI Reserve, APHIS acknowledges the 
unexplained change in nomenclature could lead to an interpretation of 
the rule to mean that APHIS was, in fact, relying on that subsection, 
which states that the Secretary of Agriculture may prescribe and 
collect fees sufficient, ``through fiscal year 2002, to maintain a 
reasonable balance in the Agricultural Quarantine Inspection User Fee 
Account established under paragraph (5)'' 21 U.S.C. 136a(a)(1)(C) 
(emphasis added).

B. Further Clarification of APHIS' Authority To Maintain a Reserve in 
Response to the Court's Orders

    In light of the Court's remand, and after further review, APHIS is 
clarifying that subsections 136a(a)(1)(A) and (B) of the FACT Act 
provide adequate authority to continue setting user fees in amounts to 
maintain the AQI Reserve. This conclusion is consistent with APHIS' 
longstanding practice, which has been explained to the public through 
multiple rulemaking proceedings, beginning in 2002.
    In a November 16, 1999, final rule, APHIS amended the regulations 
but inadvertently indicated that the fees would only remain in effect 
through September 30, 2002. See 64 FR 62089. To remedy the oversight, 
APHIS published an interim rule and request for comments on September 
3, 2002. See 67 FR 56217. In this interim rule, APHIS stated that its 
authority to maintain a reasonable balance expired on September 30, 
2002. See id. Still, APHIS reiterated that it had authority to collect 
user fees for ``providing AQI services in connection with the arrival 
at a port in the customs territory of the United States'' and for 
``administering the user fee program[.]'' Id. (emphasis added). APHIS 
stated further that, ``[t]his interim rule will extend existing user 
fee rates and continue to allow the collection of the fees beyond 
September 30, 2002. Collection of these fees is necessary for the 
continuance of specific border inspection activities that are essential 
to protect U.S. agriculture from plant and animal disease and pest 
threats.'' Id. (emphasis added). The existing fees included the cost of 
maintaining the reserve, which was in place at this time. Id. On 
January 24, 2003, this interim rule became final without revision after 
no comments were received.
    On December 9, 2004, APHIS revised its user fee regulations in 
another interim rule and request for comments. See 69 FR 71660. In this 
rule, APHIS did not mention its ability to maintain a reasonable 
reserve balance in its background section; however, it did state that 
the Act gives it the authority to collect user fees for ``providing AQI 
services in connection with the arrival at a port in the customs 
territory of the United States'' and for ``administering the user fee 
program[.]'' Id. (emphasis added). To explain its rationale for wanting 
a reserve balance equal to 25 percent of annual operating costs for 
APHIS and CBP AQI activities in the AQI account, APHIS stated:

    The reserve fund provides us with a means to ensure the 
continuity of AQI services in cases of fluctuations in activity 
volumes, bad debt, carrier insolvency, or other unforeseen events, 
such as those of September 11, 2001, which, as noted earlier, 
resulted in substantial cost increases for the AQI programs and 
lower-than-anticipated revenues. Maintaining an adequate reserve 
fund is, therefore, essential for the AQI program.

Id. at 71664.
    In the final rule, published August 24, 2006, APHIS responded (71 
FR 49985) to comments regarding the need to maintain a 25 percent 
reserve fund. In our response, we explained that a 25 percent reserve 
is needed to ensure continuity of AQI services in cases of fluctuations 
in activity volumes. Without this reserve, a significant drop in 
international passenger travel, such as occurred post 9/11, would be 
catastrophic to the program. Full-time personnel would have to be 
furloughed and services would have to be reduced. As travel volumes 
returned to normal, the AQI program would need to recruit, replace, 
and/or rehire the furloughed employees. This disruptive and costly 
process would increase the cost of AQI services and, consequently, 
necessitate higher user fees going forward. Moreover, during this time, 
there would be a drastically increased risk of the introduction of 
harmful plant pests in the United States. Conversely, the 25 percent 
reserve also allows for growth in the AQI program should APHIS find it 
necessary to supplement inspection services due to, for example, a 
sudden increase in demand.
    Finally, a 25 percent reserve is needed to account for the lag in 
AQI user fee collections. Payments are made into AQI user fee accounts 
for commercial aircraft and international airline passengers on a 
quarterly basis, with monies not remitted to APHIS until 1 month after 
the end of the quarter in which they were collected. Since the fourth 
quarter fees are not due, and therefore not received, until after the 
fiscal year is over, we are not able to use those funds to pay for 
providing AQI services for commercial airlines and international air 
passengers in the fiscal year in which they are earned.
    So, while not explicitly stated, APHIS had ceased relying on 21 
U.S.C. 136a(1)(C) to justify its collection for the reserve in favor of 
reliance on sections (1)(A) and (1)(B). That same reasoning holds true 
today.
    Title 21 U.S.C. 136a(a)(1)(A) permits the Secretary of Agriculture 
to prescribe and collect fees sufficient to ``cover the cost of 
providing agricultural quarantine and inspection services in connection 
with the arrival at a port in the customs territory of the United 
States, or the preclearance or preinspection at a site outside the 
customs territory of the United States, of an international passenger, 
commercial vessel, commercial aircraft, commercial truck, or railroad 
car'' (emphasis added). Title 21 U.S.C. 136a(a)(1)(B), extends this 
authority to ``cover the cost of administering'' the AQI Program as 
well. As noted in both the 2014 proposed rule and the 2015 final rule, 
APHIS sets fees based on Federal guidance found in Office of Management 
and Budget Circular A-25 and Federal Accounting Standards Advisory 
Board Statement of Accounting Standards Number 4, which

[[Page 17731]]

states that fees shall recover the full cost incurred by the 
government.
    Congress has been made expressly aware of the fact that the agency 
has been setting fees at a level to maintain a reasonable balance in 
the account since at least FY 2002. Each year since FY 2002, Congress 
asked APHIS to submit information on AQI user fee collections, 
including the balance in the reserve, and each year, APHIS has advised 
that its collections have resulted in a positive reserve balance. 
Additionally, on several occasions, the U.S. Government Accountability 
Office (GAO) has reported to Congress on APHIS' maintenance of the 
reserve. See GAO, Federal User Fees: A Design Guide, GAO-08-386SP (May 
2008) noting that ``the AQI fee statute gives APHIS permanent authority 
to use the collected fees and APHIS maintains a reserve in case of 
emergency''; GAO, Agricultural Quarantine Inspection Fees: Major 
Changes Needed to Align Fee Revenues with Program Costs, GAO-13-268 
(March 2013) discussing maintenance of AQI reserve; GAO, Federal User 
Fees: Fee Design Options and Implications for Managing Revenue 
Instability, GAO-13-820 (September 2013) discussing same; GAO, Federal 
User Fees: Key Considerations for Designing and Implementing Regulatory 
Fees, GAO-15-718 (September 2015) discussing same.
    APHIS has consistently explained in past rules that the reserve 
fund provides ``a means to ensure the continuity of AQI services in 
cases of fluctuations in activity volumes, bad debt, carrier 
insolvency, or other unforeseen events, such as those of September 11, 
2001, which . . . resulted in substantial cost increases for AQI 
programs and lower-than-anticipated revenues.'' See, e.g., 69 FR 71660-
71664. At various times since AQI user fees were established, as a 
result of service demands, APHIS has had to rely on the AQI reserve 
fund to maintain its operations, nearly draining the reserve on at 
least one occasion. See 64 FR 62090. In December 2004, APHIS reported 
in an interim rulemaking that it was close to running out of money 
altogether. See 69 FR 71661. The reserve fund allows the program to 
ensure the continuity of services even under these service constraints, 
and therefore constitutes a cost of providing the services, as 
permitted by subsection 136a(a)(1)(A).
    Even when user fees are set at a level that keeps pace with current 
costs, the 3-month temporal lag between the end of the fiscal year and 
the conclusion of the calendar year inherently results in a significant 
delay in fee remittances. See 64 FR 43106. Because of cash management 
issues inherent in the program, the bulk of users remit their payments 
on a quarterly basis ``with monies not remitted to APHIS until 1 month 
after the end of the quarter in which they were collected,'' which is 
long after APHIS and U.S. Customs and Border Protection (CBP) have 
performed their necessary services in connection with the AQI program. 
See 71 FR 49984. This remittance process was developed to offset some 
of the burden on the users for collecting fees on the government's 
behalf, such as with the airline passenger fee, by allowing them to 
retain any interest paid on collections they hold in trust. Collecting 
fees to cover these costs required to run the AQI program, which may go 
over and beyond the specific operational costs of a particular 
inspection but nonetheless fall within the scope of operating the 
program, reasonably constitutes ``the costs of administering this 
subsection'' within the meaning of 21 U.S.C. 136a(a)(1)(B).
    Because Congress has not provided specific guidance to APHIS on how 
to interpret 21 U.S.C. 136a(a)(1)(A) and (B), we construe these 
sections as providing authority to continue funding a reserve in order 
to ensure continuity of services as well as to protect the program from 
instability resulting from funding flow uncertainty, bad debt, and non-
recurring financial obligations. Section (1)(A) provides congressional 
authority to set and collect fees to cover the cost of providing AQI 
services ``in connection'' with the arrival at a port in the customs 
territory of the United States. See 21 U.S.C. 136a(1)(A). Certain 
costs, such as upgrading facilities and replacing broken equipment, are 
not reoccurring costs and are therefore impossible to account for as 
line items in the court-approved ABC methodology for setting user fees. 
These onetime costs are still incurred ``in connection'' with the AQI 
program and must be factored into the overall user fees, as the statute 
demands full cost recovery. As such, there is no way to fund these 
obligations other than by accessing the AQI reserve.
    Additionally, section (1)(B) demands that APHIS ``cover the cost of 
administering [the AQI program].'' See 21 U.S.C. 136a(a)(1)(B). As 
stated above, there is a significant temporal lag between the rendering 
of services by APHIS and CBP and the collection of fees to cover these 
services. Sometimes, fees are not collected at all even though the 
services have already been performed. For instance, bad debt may result 
from a commercial airline filing for bankruptcy. See 71 FR 49985. 
Administratively, if a bad debt arises, the Act requires APHIS to cover 
it since the services have already been performed and the costs have 
already been incurred. Therefore, a reserve is essential to prevent the 
AQI program from running a deficit, which could result in personnel 
furloughs or interruptions in service. Such interruptions would 
significantly increase the risk that the United States could be exposed 
to animal and plant pests from foreign countries.
    The Court affirmed APHIS' cost methodology and the sufficiency of 
its data, and expressly did not vacate any portion of the existing 
rule. This interpretative rule relates only to the legal authority for 
the reserve component of the AQI User Fee Program. The final rule, 
which took effect in 2015, 80 FR 66748, remains in force, Air Transport 
Ass'n, 317 F. Supp. 3d at 392. Accordingly, this interpretive rule does 
not affect, inter alia, the user fee calculation with respect to the 
AQI Reserve.

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

    Done in Washington, DC, this 22nd day of April 2019.
Kevin Shea,
Administrator, Animal and Plant Health Inspection Service.
[FR Doc. 2019-08394 Filed 4-25-19; 8:45 am]
BILLING CODE 3410-34-P