Federal User Fees
Substantive Reviews Needed to Align Port-Related Fees with the Programs They Support Gao ID: GAO-08-321 February 22, 2008America's port infrastructure is vital to U.S. foreign trade and a bulwark for national security. One way the federal government funds port-related programs is to levy user fees. GAO was asked to examine (1) what is known about the way selected fees assessed on air and sea port users are set, collected, used, and reviewed and (2) the effects of these attributes on program operations. GAO examined the Harbor Maintenance Fee (HMF), the Merchandise Processing Fee (MPF), and the Customs, Immigration, and Agricultural Quarantine Inspection (AQI) user fees assessed on air and cruise passengers and commercial vessels using criteria that have often been used to assess user fees and taxes--equity, efficiency, revenue adequacy, and administrative burden.
The port-related fees GAO examined vary in how they are set, collected, used, and reviewed, creating misalignments between the fees and corresponding services, as well as administrative and oversight challenges. Although the customs, immigration, and AQI inspections have largely been consolidated under U.S. Customs and Border Protection (CBP), the corresponding fees remain separate and distinct and differ in how the rates are set and adjusted, the portion of costs they recover, and on whom the fees are levied. For example, overtime charges are handled differently for each type of inspection, creating confusion about the circumstances under which overtime must be paid, at what rate, and for which services. Certain collection methods increase administrative costs and reduce compliance. For example, quarterly remittance delays availability of funds and failure to charge interest and penalties on certain late payments is costly and discourages compliance. Further, lack of coordination between CBP and the U.S. Army Corps of Engineers inhibits oversight of certain HMF payments. All of the fees GAO reviewed suffer from some misalignment--for example, with their respective costs or activities--which affects how the fees are used. For example, since 2003, HMF collections have far exceeded funds appropriated for harbor maintenance, resulting in a large and growing surplus in the trust fund. Also, not all MPF and customs inspection activities are reimbursable and not all reimbursable activities are inspection related. Finally, agency user fee reviews are not always comprehensive. For example, CBP's review of the MPF does not detail program costs, project collections, or provide enough information to determine if the amount, structure, or authorized uses of the fee should be updated. Further, limited opportunities for substantive communication with HMF stakeholders hamper their understanding of the fee.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
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Report to Congressional Requesters:
United States Government Accountability Office:
GAO:
February 2008:
Federal User Fees:
Substantive Reviews Needed to Align Port-Related Fees with the Programs
They Support:
GAO-08-321:
GAO Highlights:
Highlights of GAO-08-321, a report to congressional requesters.
Why GAO Did This Study:
America‘s port infrastructure is vital to U.S. foreign trade and a
bulwark for national security. One way the federal government funds
port-related programs is to levy user fees. GAO was asked to examine
(1) what is known about the way selected fees assessed on air and sea
port users are set, collected, used, and reviewed and (2) the effects
of these attributes on program operations. GAO examined the Harbor
Maintenance Fee (HMF), the Merchandise Processing Fee (MPF), and the
Customs, Immigration, and Agricultural Quarantine Inspection (AQI) user
fees assessed on air and cruise passengers and commercial vessels using
criteria that have often been used to assess user fees and
taxes”equity, efficiency, revenue adequacy, and administrative burden.
What GAO Found:
The port-related fees GAO examined vary in how they are set, collected,
used, and reviewed, creating misalignments between the fees and
corresponding services, as well as administrative and oversight
challenges.
* Although the customs, immigration, and AQI inspections have largely
been consolidated under U.S. Customs and Border Protection (CBP), the
corresponding fees remain separate and distinct and differ in how the
rates are set and adjusted, the portion of costs they recover, and on
whom the fees are levied (see table below). For example, overtime
charges are handled differently for each type of inspection, creating
confusion about the circumstances under which overtime must be paid, at
what rate, and for which services.
* Certain collection methods increase administrative costs and reduce
compliance. For example, quarterly remittance delays availability of
funds and failure to charge interest and penalties on certain late
payments is costly and discourages compliance. Further, lack of
coordination between CBP and the U.S. Army Corps of Engineers inhibits
oversight of certain HMF payments.
* All of the fees GAO reviewed suffer from some misalignment”for
example, with their respective costs or activities”which affects how
the fees are used. For example, since 2003, HMF collections have far
exceeded funds appropriated for harbor maintenance, resulting in a
large and growing surplus in the trust fund. Also, not all MPF and
customs inspection activities are reimbursable and not all reimbursable
activities are inspection related.
* Finally, agency user fee reviews are not always comprehensive. For
example, CBP‘s review of the MPF does not detail program costs, project
collections, or provide enough information to determine if the amount,
structure, or authorized uses of the fee should be updated. Further,
limited opportunities for substantive communication with HMF
stakeholders hamper their understanding of the fee.
Select Fees Levied on Vessel Owner/Operators and Passengers:
Payer: Vessel owners/operators (for inspection of vessel and vessel
crew);
Inspection fees: Customs: [Check];
Inspection fees: Agricultural quarantine: [Check];
Inspection fees: Immigration: By statute, no fee, although the crew is
inspected.
Payer: Sea passengers;
Inspection fees: Customs: [Check];
Inspection fees: Agricultural quarantine: Costs of inspecting sea
passengers are charged to vessel owners/operators as part of the vessel
fee;
Inspection fees: Immigration: [Check].
Payer: Air passengers;
Inspection fees: Customs: [Check];
Inspection fees: Agricultural quarantine: [Check];
Inspection fees: Immigration: [Check].
Source: GAO analysis of information from the Departments of Homeland
Security and Agriculture.
[End of table]
What GAO Recommends:
GAO suggests Congress review the link between the HMF fee and
expenditures, and establish an HMF stakeholder advisory body. GAO is
making eight recommendations to the Secretaries of Homeland Security,
Agriculture, and the Army to better align the fees with the activities
they support, and to improve collections, oversight, and reporting. All
three agencies generally agreed with our findings and recommendations.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.GAO-08-321]. For more information, contact Susan
J. Irving at (202) 512-9142 or irvings@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
The Inspection Process Is Largely Consolidated but the Inspection Fees
Vary in How Rates Are Set and Adjusted, the Portion of Costs Recovered,
and How Costs Are Assigned to Users:
Costly, Ineffective Collection Methods and Lack of Interagency
Coordination Increase Noncompliance for Harbor Maintenance and Vessel
Inspection Fees:
Misalignments Exist between Fee Collections and Activities for Which
They May Be Used:
Lack of Substantive Review and Mechanisms for Substantive Stakeholder
Input Impede Agency and Congressional Oversight and Ability to Align
Program Costs and Activities:
Conclusions:
Matters for Congressional Consideration:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Summary of Fees by Payer:
Appendix III: Comments from the Department of Homeland Security:
Appendix IV: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Comparison of Selected Port-Related Fees:
Table 2: Inspection Fees Levied on Vessel Owner/Operators and
Passengers:
Table 3: Fees Charged to Vessel Operators:
Table 4: Fees Charged to Passengers:
Table 5: Fees Charged to Shippers:
Figures:
Figure 1: Fees Levied on Commercial Vessel Operators for CBP
Inspections:
Figure 2: Collection Methods for the Customs, AQI, and Immigration
Inspection Fees:
Figure 3: Collection Methods for the Harbor Maintenance and Merchandise
Processing Fees:
Figure 4: HMF Collections Increasingly Exceed Program Expenditures:
Figure 5: HMTF Actual and Projected Year-End Balances:
Figure 6: Total Annual Merchandise Processing Fee Collections and
Program Costs:
Abbreviations:
APHIS: Animal and Plant Health Inspection Service:
AQI: Agricultural Quarantine Inspection:
CBP: U.S. Customs and Border Protection:
CFO Act: Chief Financial Officers Act of 1990:
CMTS: Committee on the Marine Transportation System:
Corps: U.S. Army Corps of Engineers:
DHS: Department of Homeland Security:
DOD: Department of Defense:
FDA: Food and Drug Administration:
HMF: Harbor Maintenance Fee:
HMTF: Harbor Maintenance Trust Fund:
ICE: U.S. Immigration and Customs Enforcement:
IOAA: Independent Offices Appropriation Act of 1952:
MPF: Merchandise Processing Fee:
OMB: Office of Management and Budget:
OPM: Office of Personnel Management:
RABA: Revenue Aligned Budget Authority:
USDA: U.S. Department of Agriculture:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
February 22, 2008:
Congressional Requesters:
The United States has long depended on its port infrastructure to
facilitate both the import and export of manufactured goods;
agricultural products; and other commodities such as gravel, oil, and
liquefied natural gas. Access to world markets is important to the
nation's economy: for example, more than 80 percent of U.S. foreign
trade flows through the nation's 361 seaports.[Footnote 1] Port
infrastructure is also important to America's national security:
transportation of personnel and supplies supports America's military
services during national emergencies. At the same time, ports are
potential targets for terrorists and potential conduits for weapons
concealed in cargo.
One of the means by which the federal government generates funding to
support and secure America's port infrastructure is by levying
assessments, including user fees, on port users. These fees include
ship registry fees, commercial fishing fees, and inspection charges;
they are levied on various air and sea port users, including shippers,
vessel owners and operators, brokers, and individual
passengers.[Footnote 2]
In response to your request and to provide context and insights as you
consider funding options for port programs, we examined (1) what is
known about the way selected fees assessed on air and sea port users
are set, collected, used, and reviewed (including the views of
stakeholders) and (2) the effects of these attributes on program
operations.
To achieve our objectives, we examined several fees assessed on air and
sea port users--which vary in the ways in which they are set,
collected, used, and reviewed--related to maritime, safety, and
homeland security programs. Specifically, we examined the Harbor
Maintenance Fee; the Merchandise Processing Fee; and the Customs,
Immigration, and Agricultural Quarantine Inspection (AQI) user fees
assessed on air and cruise passengers and commercial vessels.[Footnote
3] We examined the fees using the following criteria that have often
been used to assess user fees and taxes.[Footnote 4]
* Efficiency: By requiring identifiable beneficiaries to pay for
services, user fees can simultaneously constrain demand and reveal the
value that beneficiaries place on the service. If those benefiting from
a service do not bear the full social cost of the service, they may
seek to have the government provide more of the service than is
economically efficient. User fees may also foster production efficiency
by increasing awareness of the costs of publicly provided services, and
therefore increasing incentives to reduce costs where possible.
* Equity: Equity has multiple facets, in part because beneficiaries and
users may not be the same. Under the benefits-received principle, the
beneficiaries of a service should pay for the service. Under the cost-
imposed principle, fees should be designed to impose a cost on the user
in proportion to the cost that that user imposes on the program. Under
the ability-to-pay principle, those who are more capable of bearing the
burden of fees should pay more in fees than those with less ability to
pay.
* Revenue Adequacy: The extent to which the fee collections cover the
intended share of costs. It encompasses the extent to which collections
may diminish over time relative to the cost of the program. For the
purposes of our work, revenue adequacy also incorporates the concept of
revenue stability, which generally refers to the degree to which short-
term fluctuations in economic activity and other factors affect the
level of fee collections.
* Administrative Burden: The cost of administering the fee, including
the cost of collection and enforcement, as well as the compliance
burden (the administrative costs imposed on the payers of the
fee).[Footnote 5]
These criteria interact and are often in conflict with each other; as
such, there are tradeoffs to consider between the criteria when
designing a fee. Every fee design will have pluses and minuses, and no
design will satisfy everyone on all dimensions. The weight that
different policymakers may place on different criteria will vary,
depending on how they value different attributes. Focusing only on the
pros and cons of each element of reform could make it difficult to
build the bridges necessary to achieve consensus. Policymakers will
ultimately have to balance the relative importance they place on each
of these criteria and focus on the overall fee design. To that end,
understanding the tradeoffs associated with different aspects of a
fee's design can provide decision makers with better information and
support more robust deliberations about user fee financing.
We reviewed user fee legislation, implementing regulations, agency
documents and guidance, and literature on user fee design and
implementation characteristics. To better understand the programs and
services on which the fees are levied, as well as how the fees are
administered, we observed vessel, passenger, and cargo inspection
processes at eight U.S. seaports.[Footnote 6] We also interviewed
officials at the Department of Homeland Security's (DHS) U.S. Customs
and Border Protection (CBP), U.S. Army Corps of Engineers (Corps), and
the U.S. Department of Agriculture's Animal and Plant Health Inspection
Service (APHIS) involved in administering these fees[Footnote 7] and
the programs the fees support, including regional officials at the
ports we visited. CBP administers the Merchandise Processing and
Customs inspection fees, and it collects the Harbor Maintenance Fee on
behalf of the Corps. CBP administers the immigration user fees jointly
with U.S. Immigration and Customs Enforcement (ICE) and the
Agricultural Quarantine Inspection user fees jointly with APHIS. To
obtain stakeholder perspectives on the impacts of the designs of the
fees, we interviewed entities involved with the fees and the programs
that they support, including cruise lines, shipping lines, customs
brokers, shipping agents, and port authorities. In addition, we spoke
with national organizations, including the American Association of Port
Authorities, the World Shipping Council, and the Cruise Lines
International Association. We asked questions about APHIS, CBP, and
Corps internal controls for the data we used and determined that the
data were sufficiently reliable for the purposes of this report.
We performed our work from February 2007 through February 2008 in
Washington, D.C.; Los Angeles and Long Beach, California; Miami and
Port Everglades, Florida; Baltimore, Maryland; Boston, Massachusetts;
Newark, New Jersey; New York, New York; Charleston, South Carolina; and
Seattle, Washington, in accordance with generally accepted government
auditing standards. Those standards require that we plan and perform
the audit to obtain sufficient, appropriate evidence to provide a
reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a reasonable
basis for our findings and conclusions based on our audit objectives.
For more information on our scope and methodology, see appendix I.
Results in Brief:
Although all of the fees we examined vary in how they are set and
adjusted, these differences are a particular issue with the inspection
fees. Specifically, the passenger and vessel inspection processes in
both the air and sea environments have been largely consolidated within
CBP, but the legacy fees for passenger and vessel inspections remain
separate and distinct, which increases administrative costs and creates
confusion. In addition, the fees are not uniform in terms of the
portion of costs they recover or on whom the fees are levied. For
example, the Agricultural Quarantine Inspection (AQI) fees are adjusted
through the regulatory process and the customs and immigration fees are
set in statute. According to APHIS officials, the AQI fee rates are set
to recover all program costs except for certain indirect and imputed
costs.[Footnote 8] In contrast, the customs and immigration inspection
fees are structured to recover partial costs. Furthermore, the
statutory authorities governing overtime charges are different for each
type of inspection, creating confusion about the circumstances under
which vessel owners/operators must pay overtime charges, at what rate,
and for which services. This complicates how and when overtime charges
are both calculated and paid.
Collection methods for some of the fees not only increase
administrative costs but also may reduce compliance. Specifically,
ineffective and outdated collection methods for vessel inspection fees
increase administrative costs for both agencies and payers. This is
exacerbated by the recent increase in the customs vessel inspection fee
rate without a corresponding increase in the annual fee cap (maximum
payment). A quarterly remittance schedule delays the availability of
certain passenger inspection fees. Furthermore, a lack of coordination
between the Corps and CBP inhibits oversight of Harbor Maintenance Fee
(HMF) payments made by passenger vessel owners/operators, domestic
shippers, and importers shipping into foreign trade zones. When these
HMF payments are late, CBP does not charge interest or penalties,
therefore failing to use an important tool to encourage timely payment.
Collection methods function best when they minimize administrative
costs and maximize compliance, as seen in the automated system CBP uses
to process the Merchandise Processing Fee (MPF) as well as HMF assessed
on imports. This system allows entry summaries to be electronically
transmitted, validated, confirmed, corrected, and paid.
The misalignment between fees and the services for which they are
charged reduces both equity and economic efficiency and does not
provide policymakers with information on the level of service for which
users are willing to pay. All of the fees we reviewed suffer from some
misalignment--although the nature of that misalignment varies--which
affects how the fees are used. For example, as is the case with the
airline passenger inspection fees,[Footnote 9] not all authorized,
reimbursable activities for the sea passenger and vessel inspection
customs fees are associated with conducting inspections, and not all
inspection-related activities may be charged to these fees.
Furthermore, the difference between HMF collections and funds
appropriated for harbor maintenance has resulted in a large and growing
surplus in the Harbor Maintenance Trust Fund (HMTF). Although both
Corps officials and port stakeholders say many federally managed
harbors and channels are undermaintained, the Corps has not yet
completed cost estimates or time frames for addressing the backlog, and
according to Corps officials, they do not know when these estimates
will be finalized. Each fiscal year, CBP receives approximately $3
million in appropriated HMTF funds for its costs to collect the HMF,
but preliminary CBP estimates indicate that it only costs $2 million to
collect the fee.
Without regular, substantive fee reviews, agencies, stakeholders, and
Congress lack complete information about changing program costs and
whether authorized, reimbursable activities align with program
activities. We have previously reported that agencies with shared
responsibilities for common outcomes or related functions should
reinforce agency accountability for collaborative efforts through
common agency planning and reporting.[Footnote 10] However, CBP and
APHIS report separately on the customs, immigration, and AQI vessel
fees, and the reviews generally do not reflect input from the other.
Furthermore, CBP's review of the MPF does not detail program costs and
project fee collections, or provide enough information to determine if
the amount, structure, or authorized uses of the fee should be updated.
Because user fees represent a charge for a service or benefit received
from a specific government program, payers may expect a tight link
between payments and services, including expectations about the quality
of the related service. We have previously reported on both the need to
accommodate stakeholder input as well as various models for doing
so.[Footnote 11] Although there are opportunities at the local level
for payers to provide input on fees and the services they support,
opportunities for payers to communicate with the Corps and CBP at the
national level are either limited or do not encourage substantive, two-
way communication. Ineffective communication may reduce stakeholder
cooperation and support for the fees, contribute to misunderstandings
about how the fees work and what activities they may fund, and inhibit
the agencies' ability to obtain input from stakeholders.
In light of these challenges, we suggest Congress review the link
between the Harbor Maintenance Fee and expenditures, and establish a
harbor maintenance advisory committee to improve communication with
stakeholders. Further, we are making eight recommendations to the
Secretaries of Homeland Security, Agriculture, and the Army to improve
the cost estimates, collection, distribution, remittance, compliance,
and review of these user fees.
We provided a draft of this report to the Secretaries of Homeland
Security and Defense and to the Acting Secretary of Agriculture for
review. We received written comments from the Department of Homeland
Security (DHS), which are reprinted in appendix III, and oral comments
from the Departments of Agriculture (USDA) and Defense (DOD). In
addition, each agency provided technical comments, which we
incorporated as appropriate. We also provided portions of the report to
nonfederal stakeholders for their review and made technical corrections
as appropriate.
DHS characterized the report as balanced and accurate and agreed with
the overall substance and findings of the report. Of the six
recommendations directed at DHS, DHS concurred with five of them and
partially concurred with the sixth. Specifically, DHS concurred in part
with our recommendation to automate collections of the customs and AQI
fees assessed on commercial vessels, stating that the agency will
analyze the feasibility of this approach and work to identify and
obtain funding to implement the recommendation if it is deemed cost
beneficial. We appreciate that DHS recognizes the importance of using
cost-effective methods to collect fees and look forward to receiving
regular updates on DHS's and CBP's progress in this area.
In its oral comments, USDA noted it was impressed with the level of
explanatory detail and analysis contained in the report and said it
generally agreed with our recommendations. Regarding our recommendation
that USDA include certain indirect and imputed costs when setting the
AQI fee rates, the agency said it will review the fee and seek guidance
from its Office of the Chief Financial Officer and Office of General
Counsel on this issue.
USDA noted that it has been APHIS's position that because USDA receives
appropriations to pay for departmental and staff office costs, and the
U.S. Office of Personnel Management (OPM) receives appropriations for
imputed costs such as future retirement benefit expenses, APHIS did not
have the authority to include those costs in the fee. We interpret the
AQI user fee statute, however, as permitting USDA to recover all costs
associated with its program, including imputed and indirect costs. We
recognize that imputed costs such as retirement and unfunded pension
liabilities may be more directly linked to the fee-funded activity and
more easily calculated than seeking to allocate departmental and staff
office costs. Further, "full cost recovery" should be viewed from a
governmentwide perspective. Even though USDA would have to deposit
those portions of user fee collections as miscellaneous receipts in the
general fund of the Treasury, and therefore would not directly
reimburse the relevant appropriation account under a specific statute,
it would still defray a cost that Congress determined should be paid
for by the user fees. If USDA believes that the statutory authority
does not permit it to cover such indirect and imputed costs, then we
believe USDA should seek additional authority from Congress consistent
with our recommendation.
USDA also noted that it will need to (1) work with DHS to identify
DHS's imputed costs for the AQI program and (2) consider the impact of
the fee increase on payers. We recognize that if incorporating these
costs will substantially increase the AQI fees, a measured approach
that incorporates the costs gradually may be appropriate.
DOD provided oral comments, and concurred with the findings,
conclusions, and recommendations of the report related to the Army
Corps' Harbor Maintenance Fee.
Background:
User financing-in the form of user fees, user charges, or targeted
excise taxes-is one approach to financing federal programs or
activities. User fees assign part or all of the costs of the benefits
and services derived from these programs and activities--above and
beyond what is normally available to the general public--to readily
identifiable recipients of those benefits and services.
Definition of User Fees:
We have defined "user fees" or "user charges" as fees assessed on users
for goods or services provided by the federal government.[Footnote 12]
Some excise taxes, however, can also be described as a form of user
financing.[Footnote 13] For example, the excise taxes on motor fuels,
tires, and heavy vehicles accrue to the Highway Trust Fund, from which
Congress appropriates funds for the interstate highway system, mass
transit, and transportation projects. Similarly, Federal Aviation
Administration (FAA) operations are funded in part by excise taxes
assessed on airline tickets, aviation fuel, and certain cargo.[Footnote
14]
Requirements for Reviewing Fees:
Both the Chief Financial Officers (CFO) Act[Footnote 15] and the Office
of Management and Budget (OMB) Circular No. A-25 provide that agencies
review their user fees biennially and make recommendations about any
needed cost adjustments.[Footnote 16] Circular No. A-25 also states
that each agency should review its programs to determine whether it
could charge fees for any of its services, noting that if imposing such
fees is prohibited or restricted by law, agencies will recommend
legislative changes as appropriate.[Footnote 17] OMB encourages
agencies to examine potential effects of design alternatives when
reviewing and proposing changes to regulations, even when the
regulations are mandated by statute.
The user fees considered in this report, and summarized in table 1, are
assessed under specific statutory authority and levied on air and sea
passengers, vessel operators, or shippers (see app. II for a summary of
the fees by payer). The fees vary in the way they are set, collected,
used, and reviewed, which may affect their efficiency, equity, revenue
adequacy, and administrative costs.
Table 1: Comparison of Selected Port-Related Fees:
Fee: Harbor Maintenance Fee[B];
Fee-setting authority: Congress;
Administering agency: CBP, Army Corps of Engineers;
Fee amount: 0.125% of vessel passenger tickets and declared value of
commercial cargo[C];
Fee maximum/minimum: None[D];
Payer: Importers, domestic shippers,
and passenger vessel operators;
Amount collected[A]: $1.4 billion.
Fee: Merchandise Processing Fee;
Fee-setting authority: Congress;
Administering agency: CBP;
Fee amount: Formal entries:[E] 0.21% of declared value of cargo;
Informal entries: generally $2-$9;
Fee maximum/minimum: Formal entries: minimum $25, maximum $485 per
entry; Informal entries: none;
Payer: Importers;
Amount collected[A]: $1.4 billion.
Fee: Customs Passenger Inspection Fees;
Fee-setting authority: Congress;
Administering agency: CBP;
Fee amount: $5.50/passenger with limited exceptions;
Fee maximum/minimum: None;
Payer: International air and sea passengers;
Amount collected[A]: $285.7 million.
Fee: Customs Vessel Inspection Fees;
Fee-setting authority: Congress;
Administering agency: CBP;
Fee amount: Commercial vessels of 100 net tons or more: $437/arrival;
Barges and bulk carriers from Mexico and Canada: $110/arrival[F];
Fee maximum/minimum: Commercial vessels: $5,955/year[G]; Barges and
bulk carriers: $1,500/year[G];
Payer: Commercial vessels owners/operators;
Amount collected[A]: $21.4 million.
Fee: Immigration Inspection Fees [H];
Fee-setting authority: Congress;
Administering agency: CBP, ICE;
Fee amount: $7/passenger with limited exceptions[I];
Fee maximum/minimum: None;
Payer: International air and sea passengers[I];
Amount collected[A]: $586.3 million.
Fee: Agricultural Quarantine Vessel Inspection Fees [J];
Fee-setting authority: USDA;
Administering agency: CBP, APHIS;
Fee amount: $492 per arrival[K];
Fee maximum/minimum: 15 payments per calendar year (equal to $7,380);
Payer: Owners/operators of commercial vessels of 100 net tons or more;
Amount collected[A]: $27.3 million.
Source: GAO analysis.
[A] Total collections data are for fiscal year 2007.
[B] This fee is called both the Harbor Maintenance Tax and the Harbor
Maintenance Fee. The authorizing legislation--The Water Resources
Development Act of 1986, Pub. L. No. 99-662--named it a "tax" and
codified it in the Internal Revenue Code, but specified that it be
considered a "customs duty," not a tax, for jurisdictional,
administrative, and enforcement purposes. However, the label is not
legally determinative. Instead, federal courts examine the assessment's
structure and the context of its application to determine if, as
applied, it is a fee or a tax. It is called a "fee" in agency
regulations and in our prior work (GAO, U.S. Customs Service:
Limitations in Collecting Harbor Maintenance Fees, GAO/GGD-92-25
(Washington, D.C.: Dec. 23, 1991)). OMB's Analytical Perspectives also
calls it a fee and lists it in the President's annual budget proposal
to Congress under user charges, which the report defines as excluding
taxes (Analytical Perspectives, "User Charges and Other Collections",
Budget of the United States Government for Fiscal Year 2008, ch. 18
(Feb. 5, 2007)).
[C] The HMF is applied based on the value of the cargo (ad valorem) to
cargo transported on a commercial vessel, including passengers
transported for compensation, and loaded or unloaded at certain ports.
CBP defines and administers the list of ports subject to the HMF. These
ports include those receiving federal funding for construction or
operation and maintenance since 1977. The fee is not imposed on any
cargo associated with vessel movements on the inland waterways system,
which is supported by a fuel tax. Ferry passengers and certain cargo
are also exempt from the HMF.
[D] The HMF is not assessed on domestic cargo valued at less than
$1,000, and quarterly payment is not required if the total value of all
shipments for which a fee was assessed for the quarter does not exceed
$10,000. No payment is required for imported cargo that is entitled to
be entered under informal entry procedures.
[E] Merchandise entries are foreign shipments that require evidence of
the importer's right to bring the merchandise into the United States.
Formal entries generally refer to merchandise with a value over $2,000.
Informal entries generally refer to merchandise with a value of less
than $2,000 or personal importations regardless of value.
[F] The $110 fee rate only applies to barges and bulk carriers from
Canada and Mexico that are either in ballast or transporting only cargo
laden in Canada or Mexico.
[G] The annual cap is based on the calendar year.
[H] The immigration air and sea passenger inspections are designed to
prevent passengers from entering the United States without legal entry
and immigration documents. CBP officers provide immigration inspections
to individuals entering the country at all U.S. Ports of Entry--
airports, seaports, and land borders--as well as pre-inspection
services at select locations outside of the U.S. The immigration
inspection user fee is charged for air and sea passengers, but in
general, not for people who arrive across the land border, by ferry, or
via a vessel that operates on a regular schedule on the Great Lakes or
connecting waterways. Fees are charged for certain land border
inspection programs.
[I] A $3 per passenger immigration inspection fee is charged to certain
commercial vessel passengers whose journey originated in Canada;
Mexico; the United States, including territories and possessions of the
United States; or specified adjacent islands.
[J] The agriculture vessel inspections are designed to prevent harmful
pests or prohibited agriculture products from entering the United
States. Agriculture inspection services are also provided at land
border ports of entry and fees for the services are charged to
commercial trucks and railcars, but not to private vehicles and
individuals. AQI fees are also charged to arriving international air
passengers and commercial aircraft.
[K] The AQI vessel fee is scheduled to increase by $2 each fiscal year,
through fiscal year 2010, when it will be $496.
[End of table]
The Inspection Process Is Largely Consolidated but the Inspection Fees
Vary in How Rates Are Set and Adjusted, the Portion of Costs Recovered,
and How Costs Are Assigned to Users:
Although all of the fees we examined vary in how they are set and
adjusted, these differences are a particular issue with the inspection
fees. Specifically, the passenger and vessel inspection processes in
both the air and sea environments have been largely consolidated within
CBP, but the legacy fees supporting these inspections are still
governed by separate, dissimilar authorizing legislation and vary
significantly in how they are set and adjusted and how they link fee
rates to the cost of services. APHIS uses the federal regulatory
process to propose rate increases and invites comments on its proposals
and implementing regulations via a public notice and comment in the
Federal Register. Although various Congressional committees oversee
this process, Congress has delegated to APHIS the authority and
responsibility to set and adjust AQI fee rates to match program costs
over time. In contrast, both the immigration and customs fee rates are
set in statute. These fees can only recoup authorized program costs to
the extent that total reimbursable program costs do not exceed the rate
caps prescribed in statute.
The AQI fee statute grants the Secretary of Agriculture broad
discretion to prescribe and collect fees sufficient to cover the cost
of providing agricultural quarantine and inspection services.[Footnote
18] In spite of this, in 2006 we reported that financial management
issues at CBP and APHIS adversely affect the AQI program's ability to
perform border inspections and that, in fiscal years 2003 through 2005,
user fees were not sufficient to cover program costs. Moreover, prior
to fiscal year 2006, CBP was unable to provide APHIS with information
on the actual costs of CBP's portion of the AQI program broken out by
user-fee type--for example, fees paid by international air passengers
or vessels.[Footnote 19] In 2007, APHIS and CBP further improved the
AQI cost estimates by agreeing on a common set of assumptions used to
forecast the cost of AQI activities.[Footnote 20]
According to APHIS finance officials, the fee rates are now set to
recover all program costs except for certain indirect and imputed
costs, such as the cost of employee retirement benefits. We have
previously found that OMB Circular No. A-25 guidance and USDA policy
require the inclusion of indirect and imputed costs in setting full-
cost recovery fees, and that unless otherwise specified in statute such
collections should be deposited in the Department of the Treasury's
general fund.[Footnote 21] However, APHIS finance officials said that
because the AQI authorizing statute does not authorize APHIS to spend
fee collections on such expenses, APHIS does not include these costs
when calculating the fee rate. APHIS also does not list these costs in
the Federal Register when proposing rate increases, but noted that more
transparency in this area could better inform users of the full cost of
the program. APHIS estimates that these indirect and imputed costs for
the AQI user fee program totaled approximately $18.9 million in fiscal
year 2006.
In contrast, the customs and immigration inspection fees are structured
to recover partial costs. While both the immigration and customs
statutes contain language that fees equal or be reasonably related to
the cost of services, the two statutes actually prescribe an exact
amount in law to be charged for their respective inspection services.
That is, the immigration and customs user fees actually limit cost
recovery to a sum certain. The customs statute further restricts cost
recovery by limiting the set of activities for which collections may
reimburse appropriations. The immigration statute makes immigration
user fee collections available to refund any appropriation for expenses
incurred in providing immigration inspection and pre-inspection
services as well as certain other expenses, at least one of which--
administration of debt recovery--is not directly related to immigration
inspections according to CBP officials.
According to CBP data, in fiscal year 2006, commercial vessel customs
inspections fee collections covered about 66 percent of related program
costs.[Footnote 22] DHS does not know the portion of total immigration
inspection costs covered by immigration fee collections. CBP and ICE
share responsibility for reimbursable, immigration-related inspection
activities and, to date, DHS has not reported final costs for ICE's
inspection-related activities. According to CBP data, in fiscal year
2006, CBP's portion of vessel inspection fee collections covered about
67 percent of CBP's share of immigration vessel inspection costs, but
until ICE's cost data are finalized, DHS will not know the total
portion of immigration costs covered by total fee collections, or
whether the fees are properly divided between CBP and ICE.
Since the fees can pay for only some inspection activities and only
under certain circumstances, ensuring proper use of fee collections can
require detailed cost data. Collecting these data, however, can be
particularly costly given the disparate fee structures. For example, to
be reimbursed for time spent on authorized activities for various fees,
CBP must track the time spent on these activities. Because the
inspection processes have been largely combined but the separate
distinct fees supporting these activities are not uniform, correctly
tracking which activities can be reimbursed by which fees can be
difficult. To help address the concern that timekeeping was taking time
away from officers' inspection duties, CBP implemented a standard
process for tracking time in early 2007. The process includes
estimating the amount of time officers conducting different functions
(e.g., vessel or passenger inspections) spend on different activities,
including customs, immigration, and agriculture inspections. This
process, however, has not completely addressed the problem. At one port
we visited, on each shift, a full-time CBP officer was assigned solely
to tracking staff time. Even with an efficient process for tracking
time spent on different activities, the need to separately track three
inspections that have largely been consolidated adds complexity and
increases the potential for error.
In general, the three fees are not levied uniformly, and sometimes
involve cross-subsidization (see table 2). For example, although air
passengers are charged an AQI fee, sea passengers (generally cruise
ship passengers) are not. According to APHIS finance officials, the
costs of these passenger inspections are imbedded in the cost of the
AQI fee levied on vessel owners and operators.
Table 2: Inspection Fees Levied on Vessel Owner/Operators and
Passengers:
Payer: Vessel owners/operators (for inspection of vessel and vessel
crew);
Inspection fees: Customs: [Check];
Inspection fees: Agricultural quarantine: [Check];
Inspection fees: Immigration: By statute, no fee, although the crew is
inspected.
Payer: Sea passengers;
Inspection fees: Customs: [Check];
Inspection fees: Agricultural quarantine: Costs of inspecting sea
passengers are charged to vessel owners/operators as part of the vessel
fee;
Inspection fees: Immigration: [Check].
Payer: Air passengers;
Inspection fees: Customs: [Check];
Inspection fees: Agricultural quarantine: [Check];
Inspection fees: Immigration: [Check].
Source: GAO analysis of information from the Departments of Homeland
Security and Agriculture.
[End of table]
According to APHIS finance officials who calculate the fee rates, the
costs of inspecting sea passengers, fee-exempt vessels, and vessels
that have met the annual fee cap are spread among all payers of the AQI
vessel fees. They said that although it is rare for most commercial
vessels to exceed the annual fee cap of $7,380--a total of 15 payments-
-cruise ships routinely exceed the cap because they arrive in the U.S.
far more than 15 times each year. According to CBP data, fiscal year
2006 CBP costs for the AQI commercial vessel inspections were
approximately $35 million, and included about $2.2 million for
passenger inspections and about $4 million for inspections of exempt
private vessels. The cost data that CBP provides to APHIS does not
indicate what portion of the $35 million is associated with inspecting
cruise ships that have exceeded the fee cap.
Sea and air passengers pay an immigration inspection fee, but no such
fee is levied on vessel crew although they must undergo inspection. As
a general rule, the costs of crew inspection are not charged to vessel
owner/operators, although they may be charged for overtime immigration
inspections of vessel crew at some ports. This makes fees
unpredictable. Predictability of inspection fees enables users to plan,
charge clients for, and account for related costs, but inconsistent
rules for overtime inspections lead to uncertainty. The separate
statutory and regulatory structures of the three overtime inspection
charges are not aligned and overtime is not handled uniformly within
some of the fees (see fig. 1). For immigration inspections conducted on
a Sunday, holiday, or between the hours of 5:00 p.m. and 8:00 a.m. and
when a given inspector is working overtime, CBP must charge a vessel
operator, owner, or agent for the overtime cost of the immigration
inspections. Because regular business hours vary by port, the hours
during which an inspector might be working overtime vary. In addition,
the amount charged depends on the number and pay grade(s) of the
officer(s) performing the inspection and the amount of time spent on
the inspection, adding to unpredictability and increasing DHS's costs
to administer the fee. Overtime charges for agriculture vessel
inspections must, by regulation, be applied at an hourly rate for
overtime inspections on a Sunday or holiday, or whenever the individual
inspector is working overtime. According to CBP officials, collections
for reimbursable overtime agriculture inspections total about $1.2
million annually. Moreover, although vessels must be charged for
overtime inspections, AQI regulations explicitly prohibit charging for
similar overtime inspections of aircraft when passengers have already
paid an AQI fee for that flight.[Footnote 23]
Lastly, according to CBP officials, CBP has limited authority to charge
for overtime for customs inspection services. CBP officials told us
that as a result, in practice, overtime charges are not assessed for
most customs overtime inspections.
Figure 1: Fees Levied on Commercial Vessel Operators for CBP
Inspections:
[See PDF for image]
This figure contains an illustration: Vessels are boarded by CBP
officers and agricultural specialists, who perform customs, AQI, and
immigration inspections. Also contained in the illustration is the
following information:
Agricultural quarantine and customs inspections fees:
Regular port hours:
CBP officers review the vessel‘s payment receipts to determine if caps
have been reached.
* AQI cap: 15 payments per year;
* Customs cap: approximately 13.6 payments per year.
If payment is due, vessel operator or agent pays officer by check or
cash, and receives a paper receipt.
Overtime hours:
* AQI: Overtime charges are assessed for inspections done on a Sunday
or holiday, or if the individual inspector is working overtime,
regardless of the time of day or the operating hours of the port.
* Customs: According to CBP officials, CBP has limited authority to
charge for overtime for customs inspection services.
Immigration inspection fee:
Regular port hours: If inspection is done during regular port hours, no
fee is charged.
Overtime hours: If inspection is done on a Sunday, holiday, or between
5:00 p.m. and 8:00 a.m., and the inspector is working overtime, the
vessel operator or agent must reimburse CBP for the actual overtime
costs.
Source: GAO analysis of CBP information.
[End of figure]
Some payers told us that they often do not know whether or when they
will incur overtime fees and what the charges will be.[Footnote 24]
They said that consistent fees would offer predictability and reduce
confusion. CBP officials also told us that billing vessel owners for
overtime inspections is administratively burdensome. According to CBP
estimates, CBP's costs to process and bill immigration and agriculture
inspection overtime charges totaled 26 percent of those collections in
fiscal year 2007. The statutory authorities governing immigration
overtime inspection charges mandate that the amount of the charge be
dependent upon the amount paid to the inspector, subject to specified
limitations. However, CBP officers are paid under a different statutory
scheme, which does not contain the same limitations. Therefore,
according to CBP, the agency cannot automatically bill the vessel
operator or shipping agent for immigration overtime services. Instead,
CBP must make calculations manually based upon the limitations
contained in the immigration overtime authorities and the amount
actually paid to the CBP officer performing the inspection services.
CBP officials said that although charges for overtime inspections make
sense because the inspections are more costly, a consistent set of
overtime charges for customs, immigration, and agriculture inspections
that did not vary by port or the rank of the inspecting CBP officer
would increase revenue, decrease administrative costs, and improve
CBP's relations with the trade community.
Costly, Ineffective Collection Methods and Lack of Interagency
Coordination Increase Noncompliance for Harbor Maintenance and Vessel
Inspection Fees:
Ineffective and outdated collection methods for vessel inspection fees
increase administrative costs for both agencies and payers.
Furthermore, a lack of coordination between the Corps and CBP inhibits
oversight of HMF payments for passenger vessels, domestic shipments,
and shipments into foreign trade zones. Also, when these HMF payments
are late, CBP does not charge interest or penalties and is therefore
not using an important tool to encourage timely payment. Collections
methods function best when they minimize administrative costs and
maximize compliance, as seen in the automated system CBP uses to
process the MPF as well as HMF assessed on imports. This system allows
entry summaries to be electronically transmitted, validated, confirmed,
corrected, and paid.
Vessel Fee Collection Methods Are Ineffective and Outdated:
The method of collecting the customs and AQI commercial vessel fees
imposes unnecessary administrative costs on CBP and payers and may
increase the likelihood of over-or underpayments. User fees function
best when they minimize, to the extent practicable, administrative
costs. Recognizing this, Treasury's Financial Management Service has
made it a priority to increase the use of electronic collection methods
for government collections. CBP is automating collections for several
user fees but to date, the commercial vessel fees may still only be
paid in person by check or cash (see fig. 2). Moreover, payers must
retain each paper payment receipt and present them at each entry so
that CBP can determine whether that particular vessel has reached the
annual fee cap. If a payer misplaces the receipt proving that the
vessel has reached the fee cap, the fee must be paid. The payer may
request a refund if the receipt is later found, although several
stakeholders told us this process is lengthy and burdensome. Some
stakeholders and CBP field office staff expressed frustration with the
paper-based system and told us that an automated payment and record-
keeping system would speed the collection process, reduce the
likelihood of payment errors, and reduce administrative costs for both
parties.
These administrative challenges are exacerbated by the recent increase
in the customs vessel inspection fee rate without a corresponding
increase in the annual fee cap. Before the fee was raised in April
2007, the annual cap was equal to 15 payments. Some CBP officers told
us that for both the customs and AQI fees, they simply counted the
number of times the fee was paid within a given year to determine if a
vessel had reached the cap. The AQI vessel fee is paid at the same time
as the customs vessel inspection fee and is capped at an amount
equaling 15 payments per year. Because the customs fee was increased
but the cap was not, the cap is now equal to approximately 13.6
payments, meaning that the 14th payment is less than the standard, per
arrival fee amount.[Footnote 25] CBP officers must be aware when
processing payments that the 14th payment will be for a different
amount than the typical fee rate, and that the fee cap is now
structured differently than the AQI vessel fee.
Figure 2: Collection Methods for the Customs, AQI, and Immigration
Inspection Fees:
[See PDF for image]
This figure contains an illustration of fee collections as well as the
following information:
Vessels:
Customs inspection fee: Vessel operator or agent pays CBP by check or
cash at the time of the inspection and receives a paper receipt;
Agricultural quarantine inspection fee: Vessel operator or agent pays
CBP by check or cash at the time of the inspection and receives a paper
receipt;
immigration inspection fee: Not charged under these scenarios.
Sea passengers:
Customs inspection fee: Fees are paid quarterly to CBP;
Agricultural quarantine inspection fee: Not charged under these
scenarios;
immigration inspection fee: Fees are paid quarterly to CBP.
Source: GAO analysis of CBP information.
[End of figure]
Quarterly Remittance Schedule Delays Availability of Certain Passenger
Inspection Fees:
According to CBP officials, the quarterly remittance schedule for the
passenger inspection fees contributes to a several month delay between
the use of appropriated funds and receipt of reimbursement from the
immigration and AQI user fee accounts, which has delayed CBP's ability
to spend funds on critical mission areas such as hiring personnel,
purchasing equipment, or travel. To address this challenge, CBP told us
it has developed a legislative proposal that would, in part, require
monthly instead of quarterly remittance.[Footnote 26] A representative
of a cruise line industry association we spoke with noted that monthly
payments would increase the administrative costs to the cruise lines,
but that if a steadier supply of funding helped CBP to provide better
service, it would be worthwhile.[Footnote 27]
Oversight of Certain HMF Collections Is Insufficient:
Insufficient coordination between CBP and the Corps inhibits CBP's
ability to ensure that certain HMF payments are properly made; without
this information CBP cannot verify compliance with the fee. HMF
payments for passenger vessels, domestic shippers, and shipments into
foreign trade zones are paid quarterly by check to CBP (see fig. 3).
According to Corps officials, the Corps gathers information on domestic
vessel movements and could provide this information to CBP. However,
CBP does not request and the Corps does not share information with CBP
on these types of domestic freight movements, which would help ensure
that proper payments are made. An official from CBP's Revenue Division
said if CBP had information on freight movements it could reconcile
them to HMF payments in order to monitor compliance rather than relying
on self-reported payer information. The Revenue Division receives this
type of "front-end reporting" for other, similar fees and, the official
noted, front-end reporting is one of the best ways to establish a
receivable and ensure proper payment.
Furthermore, CBP does not systematically review late or improper HMF
payments for passenger vessels, domestic shippers, and shipments into
foreign trade zones or charge interest for these late payments and
therefore is not using an important tool to encourage timely payment.
CBP's Revenue Division does not track whether these HMF payments are
paid on time or late. During the course of our work, CBP officials said
that CBP should be tracking and assessing interest and penalties on
these late payments. CBP reviewed recent payment history and found that
42 percent of payments--representing approximately 18 percent of the
total dollar value--were late. According to these officials, they are
taking steps to begin collecting interest on past and future late
payments. They estimate interest collections for last year to be about
$182,000; they do not yet have an estimate for annual penalties.
Further, they said that they have begun reviewing the authority related
to penalties in order to determine an appropriate dollar threshold that
would trigger assessment and collection actions.
Figure 3: Collection Methods for the Harbor Maintenance and Merchandise
Processing Fees:
[See PDF for image]
This figure contains an illustration of agents at a harbor, as well as
the following information:
Formal customs entry:
Harbor maintenance fee: Fees are generally paid electronically, along
with customs duties, by a customs broker;
Merchandise processing fee: Fees are generally paid electronically,
along with customs duties, by a customs broker.
Informal customs entry:
Harbor maintenance fee: Not charged under these scenarios;
Merchandise processing fee: Fees are paid to CBP by cash, check, or at
some ports, credit card.
Imported merchandise enters the U.S. through a foreign trade zone:
Harbor maintenance fee: Fees are paid quarterly to CBP;
Merchandise processing fee: Fees are generally paid electronically,
along with customs duties, by a customs broker.
Sea passengers:
Harbor maintenance fee: Fees are paid quarterly to CBP;
Merchandise processing fee: Not charged under these scenarios.
Domestic shipments:
Harbor maintenance fee: Fees are paid quarterly to CBP;
Merchandise processing fee: Not charged under these scenarios.
Source: GAO analysis of CBP information.
[End of figure]
Finally, CBP's Regulatory Audits division has not conducted any audits
specific to the HMF since 1996; rather, the fee is audited incidentally
during the course of audits related to other fees or duties. Although
CBP's audit selection strategy includes referrals from within and
outside CBP,[Footnote 28] CBP has not requested and the Corps has not
offered any HMF-related referrals.
In contrast to the HMF collections process for passenger vessels,
domestic shippers, and shipments into foreign trade zones, CBP's
collection process for both the MPF and HMF assessed on formal customs
entries has several advantages.[Footnote 29] CBP accepts electronic
payment for these fees along with customs duties, which are typically
paid by a customs broker on behalf of an importer. CBP's automated
system allows entry summaries to be electronically transmitted,
validated, confirmed, corrected, and paid, which expedites the release
of merchandise. Customs brokers we spoke with said that the system
works well, is efficient, and imposes minimal administrative costs. It
is less costly for the government and payers of the fee for CBP to
collect the fee as part of the formal entry process than it would be
for the Corps or another entity to establish a new collections process
because CBP already values cargo for the assessment of duties, so there
is no duplication of effort. Further, when CBP conducts audits on the
value of cargo to determine if the declared value of the goods is
correct, CBP also determines if the correct amount was paid for HMF and
MPF. Because these are ad valorem fees, if the value of the goods is
understated, additional HMF and MPF fees may be due.[Footnote 30]
Misalignments Exist between Fee Collections and Activities for Which
They May Be Used:
All of the fees we reviewed suffer from some misalignment--although the
nature of that misalignment varies--which affects how the fees are
used. Similar to the airline passenger inspection fees,[Footnote 31]
not all authorized, reimbursable activities for the sea passenger and
vessel inspection customs fees and MPF are associated with conducting
inspections, and not all inspection-related activities may be charged
to these fees. HMF collections far exceed funds appropriated for harbor
maintenance, resulting in a large and growing surplus in the Harbor
Maintenance Trust Fund (HMTF), while Corps officials and port
stakeholders assert that many federally managed channels are
undermaintained.
For Customs Inspection and Merchandise Processing Fees There Are
Disconnects between Reimbursable Activities and Activities Involved in
Inspections:
The customs inspection activities and the authorized uses for the
customs passenger and vessel fee collections are misaligned. For
example, under the customs authorizing statute, passenger inspection
fee collections are only available to reimburse appropriations for a
limited, prioritized set of activities--including foreign language
proficiency awards and transfers to the Treasury's General Fund of not
more than $18 million for the purposes of deficit reduction.[Footnote
32] Further, as we discussed earlier, by statute customs inspection-
related activities that occur while a CBP officer is earning overtime
or premium pay, or during preclearance,[Footnote 33] can be funded by
the user fees, but the same activities conducted during regular time
cannot be funded by the fee. Therefore, not all of the activities that
may be funded from the customs fee are associated with conducting
customs inspections, and not all customs inspection activities are
reimbursable (i.e., can be covered by funds from the user fee account).
Moreover, use of the customs vessel and sea passenger fee collections
is not restricted to vessel and sea passenger inspections. Rather, they
may be used to reimburse authorized inspection activities conducted at
air, sea, or land ports of entry.
Similar alignment issues exist with the MPF. CBP officials said that
since the events of September 11, 2001, the focus of merchandise
processing has shifted toward security and away from the original focus
on trade compliance.[Footnote 34] They said that certain activities
associated with merchandise processing and performed by CBP officers,
including screening and inspecting conveyances (including nonintrusive
searches), processing seized narcotics, and inspecting vessels and
containers, are not reimbursable MPF activities, but should be.
According to CBP officials, the legislation governing the MPF should be
explicitly consistent with CBP's mission--that revenue and commercial
functions should include commercial as well as security and
antiterrorism elements.
There Is No Link between the Amount of Annual HMF Collections and
Expenditures:
Since 2003, HMF collections have significantly exceeded funds
appropriated for harbor maintenance, resulting in a large and growing
surplus in the trust fund. This may be inconsistent with users'
expectations of the fee's purpose as laid out in statute and the
principles of effective user fee design. Specifically, the authorizing
legislation generally designates the use of HMF collections for harbor
maintenance activities.[Footnote 35] Furthermore, according to
stakeholders, this misalignment between fee collections and
expenditures undermines the credibility of the HMF. According to CBP
data and Treasury reports, in 2001 HMF collections exceeded
expenditures by about $44 million, and by 2007 that gap had grown to
over $506 million (see fig. 4).[Footnote 36]
There are several reasons why growth in collections has outpaced growth
in expenditures. Total collections grew 101 percent from $704 million
to $1.416 billion from 2001 to 2007. Corps officials told us this was
driven by the ad valorem nature of the fee--receipts grow with both
volume and value of shipments. Annual harbor maintenance project
expenditures, which are subject to annual appropriation, grew more
slowly--from $660 million in 2001 to $910 million in 2007 (38 percent).
Figure 4: HMF Collections Increasingly Exceed Program Expenditures
(dollars in millions):
[See PDF for image]
This figure is a multiple line graph depicting the following data:
Fiscal year: 2001;
Total collections: $704;
Total expenditures: $660.
Fiscal year: 2002;
Total collections: $685;
Total expenditures: $656.
Fiscal year: 2003;
Total collections: $771;
Total expenditures: $586.
Fiscal year: 2004;
Total collections: $889;
Total expenditures: $648.
Fiscal year: 2005;
Total collections: $1048;
Total expenditures: $706.
Fiscal year: 2006;
Total collections: $1207;
Total expenditures: $798.
Fiscal year: 2007;
Total collections: $1416;
Total expenditures: $910.
Sources: GAO analysis of total HMF collections data from the CBP
Revenue Division and expenditures data from Department of the Treasury
HMTF Annual Reports, 2001-2007.
Note: Total collections exclude HMF assessments on exports, which were
declared unconstitutional in 1998 and for which refunds and adjustments
of collections were still being processed during these years. Total
expenditures include an annual payment to CBP for its costs for
collecting the HMF.
[End of figure]
The difference between the amount collected and the amount expended has
led to a growing balance in the HMTF. In addition, the HMTF is credited
with interest on its surplus. Between fiscal years 2001 and 2007, the
balance in the HMTF grew from $1.8 billion to $3.8 billion and Corps
officials told us they expect it to reach $8 billion in fiscal year
2011 (see fig. 5).
Since 1996, the President has included in his annual budget requests
and Congress has appropriated $3 million from the HMTF to compensate
CBP for costs associated with collecting the fee. However, CBP finance
officials told us that they estimate the annual cost of collecting the
HMF to be approximately $2 million. Officials at the Corps and CBP were
unable to explain why the President's budget request for this activity
was higher than the estimated cost of collecting the fee. The Corps
prepares an annual report to Congress on the Harbor Maintenance Trust
Fund, which includes a substantive review of the fee, but does not
include information on these costs.
Figure 5: HMTF Actual and Projected Year-End Balances (dollars in
millions):
[See PDF for image]
This figure is a line graph depicting the following data:
Fiscal year: 2001;
Balance: $1819.
Fiscal year: 2002;
Balance: $1873.
Fiscal year: 2003;
Balance: $2092.
Fiscal year: 2004;
Balance: $2366.
Fiscal year: 2005;
Balance: $2783.
Fiscal year: 2006;
Balance: $3306.
Fiscal year: 2007;
Balance: $3812.
Fiscal year: 2008;
Balance: $4728.
Fiscal year: 2009;
Balance: $5624.
Fiscal year: 2010;
Balance: $6704.
Fiscal year: 2011;
Balance: $7947.
Sources: GAO analysis of total HMF collections data from the CBP
Revenue Division and expenditures data from Department of the Treasury
HMTF Annual Reports, 2001-2007.
Note: The annual balances and projections include interest accrued
during each fiscal year.
[End of figure]
The HMTF is not the only fund for which revenues flow in automatically
from earmarked taxes or fees and spending must be appropriated. In the
1990s the Highway Trust Fund also built up a surplus. At the time,
Congress and the President modified the discretionary spending caps to
provide for a separate cap on highway funding. In 1998, Congress
specified a more automatic link between spending from the Highway Trust
Fund and receipts into the Trust Fund. The experience with these annual
adjustments, known as Revenue Aligned Budget Authority (RABA),
highlights some problems with such links. Spending was tied to
estimated receipts with a retroactive adjustment; this worked only as
long as the adjustments were positive--when receipts came in below
estimated levels and would have resulted in an automatic cut in highway
program funding levels, the cut was overridden.[Footnote 37] A
different mechanism is used for the Food and Drug Administration (FDA)
prescription drug user fee: if actual FDA fee collections are higher
than the amount appropriated, FDA must adjust fee rates in a subsequent
year to reduce its anticipated fee collections by that amount.[Footnote
38]
Even if there were a tighter link between collections and expenditures,
the HMTF should not necessarily aim for a zero balance. Corps officials
and some stakeholders agreed that there are good reasons to consider
maintaining a positive balance in the trust fund.[Footnote 39] Where
fees are expected to cover program costs and program costs do not
necessarily decline with a drop in fee revenue, a reserve can be
important. For example, the AQI fees are maintained with a reserve of
approximately 3 months worth of program costs in case of emergency.
According to APHIS, the reserve is necessary because the AQI program is
funded solely through user fee collections.
As with similar situations, deciding whether and how to link HMF
collections with expenditures is complicated. On the one hand, aligning
collections and expenditures can promote economic efficiency and
enhance stakeholder support for the fee.[Footnote 40] On the other
hand, increased spending on harbors or reduced fee collections would
increase the federal deficit, unless spending in other areas was
decreased or other collections or revenues were increased. Moreover,
our prior work shows that providing guaranteed funding levels to any
one activity in the budget protects that activity from competition with
other areas for scarce resources and limits Congressional discretion to
make trade-offs in spending priorities.[Footnote 41] Regardless of the
approach taken, a reduction in fee receipts or an increase in
appropriations--absent offsetting changes elsewhere--will increase the
federal deficit.[Footnote 42] Given the fiscal pressures imposed by the
nation's large and growing structural deficits, decisions about
changing the HMF should consider its continued relevance and relative
priority within the context of reexamining the base of all major
federal spending and tax programs.
Despite the Harbor Maintenance Trust Fund Balance, Backlogs Result in
Costly Delays and Could Affect Shipping Conditions:
Despite large and growing balances in the harbor maintenance trust
fund, both Corps officials and other stakeholders told us that there is
a backlog of harbor maintenance, which can result in costly delays and
more dangerous shipping conditions. A recent Corps analysis of the 59
busiest commercial federal channels in the U.S. found that the
authorized depth was available in the middle of the channel only
approximately 35 percent of the time in fiscal year 2005 and 33 percent
of the time in fiscal year 2006.[Footnote 43] Although ships continue
to use these channels and harbors, not maintaining them to their
justified design dimensions can cause problems. For example, according
to Corps officials in one port we visited, some vessels are delayed
because they have to wait for high tide in order to pass through the
channels. They also reported instances where ships skipped a port of
call altogether if such a delay would have caused the ship to miss its
scheduled appointment at the Panama Canal. These types of disruptions
affect both regional commerce and port profits. A 2007 report by the
U.S. Committee on the Marine Transportation System (CMTS) found that
vessels often deal with the challenges of poorly dredged and maintained
channels and harbors by "light loading," i.e., loading less cargo than
their full capacity, in order to reduce their sailing draft[Footnote
44]; this in turn increases shipping costs. Furthermore, if a port is
not well maintained, it may lack the capacity to handle increasingly
larger vessels and therefore lose business or drive up costs. For
example, according to South Carolina State Ports Authority officials,
the authorized depth of the Port of Georgetown is 27 feet, but the
channel has silted in to 25 feet on numerous occasions over the past
several years. With the channel at only 25 feet, a company bringing in
rock for the regional construction industry can only bring in about
24,000 tons per vessel, down from 28,000 tons with a 27-foot channel.
They said that this "light-loading" of vessels significantly drives up
its operating cost and impacts construction costs.
The 2007 CMTS report found that channel limitations may lead to unsafe
conditions and interaction with other vessels. Consistent with this
finding, according to a Corps after-action report, a full oil tanker
ran aground in East Rockaway, New York, in 2006 due in part to a lack
of maintenance. Corps officials said the Corps now uses a performance-
based budgeting model to set harbor maintenance priorities, in which
projects are prioritized primarily by the amount and value of
commercial tonnage moving through the harbor or channel.[Footnote 45]
As part of this effort, the Corps is developing a national estimate of
the cost to make the 59 busiest channels available 95 percent of the
time at their full-use dimensions, but there is no timeline for
completing that study.[Footnote 46]
Lack of Substantive Review and Mechanisms for Substantive Stakeholder
Input Impede Agency and Congressional Oversight and Ability to Align
Program Costs and Activities:
Without regular, substantive fee reviews, agencies, stakeholders, and
Congress lack complete information about changing program costs and
whether authorized, reimbursable activities align with program
activities. For example, CBP and APHIS report separately on the
customs, immigration, and AQI vessel fees, and the reviews generally do
not reflect input from the other. Furthermore, CBP's review of the MPF
does not detail program costs and project fee collections, or provide
enough information to determine if the amount, structure, or authorized
uses of the fee should be updated. Because user fees represent a charge
for a service or benefit received from a specific government program,
payers may expect a tight link between payments and services, including
expectations about the quality of the related service. Although there
are opportunities at the local level for payers to provide input on
fees and the services they support, opportunities for payers to
communicate with the Corps and CBP at the national level are limited.
Ineffective communication may reduce stakeholder cooperation and
support for the fees, contribute to misunderstandings and confusion
about how the fees work and what activities they may fund, and inhibit
the agencies' ability to obtain input from stakeholders about fees and
the programs that they fund.
CBP Reviews of Inspection Fees Do Not Include Information from APHIS
and ICE:
Congress does not have a comprehensive view of the vessel and passenger
AQI, customs, and immigration inspection fees and how they work
together, and may therefore lack important context for reviewing them.
As we found in our recent review of the related air passenger
fees,[Footnote 47] despite integration of the inspection processes for
the three sea passenger and vessel fees, the administering agencies
report separately on their respective fees. DHS has acknowledged that
the challenges described in our previous work extend beyond air
passenger inspections to other fees managed by the agency. In the case
of the AQI, customs, and immigration vessel and sea passenger fees, the
agencies and Congress lack information on the total costs of the
combined inspections, and therefore do not know whether fee collections
cover the costs of the consolidated inspection program. We have
previously reported that agencies with shared responsibilities for
common outcomes or related functions should reinforce agency
accountability for collaborative efforts through common planning and
reporting.[Footnote 48] CBP prepares a biennial report with summaries
and key points for each of the user fees that it administers. CBP's
user fee review includes the customs fee, the portion of the AQI fee
CBP receives, and the immigration fee. However, the information
provided about the immigration fee did not include any input from ICE,
which did not have cost information about its portion of the
immigration fee at the time.[Footnote 49] APHIS's review includes the
entire AQI fee, but does not include any information from CBP on its
portion of the agriculture inspections and is based only on APHIS's
analysis of the fee collections and inspection costs.
CBP Reviews of the MPF Do Not Provide Sufficient Information on
Collections and Program Costs:
Although CBP includes the MPF in its biennial user fee review, the
information provided is not sufficient to project fee collections or to
provide assurance that the amount of the fee is aligned with program
costs. Without this information, CBP is not able to determine if the
amount, structure, or authorized uses of the fee should be updated or
to recommend changes to the fee statute. According to CBP Office of
Finance officials, CBP has reliable information on the extent to which
MPF collections cover the costs of related activities only for the past
few years. These officials noted that as recently as 2003, cost
calculations have included activities that are not directly associated
with processing cargo or that are covered by other fee programs.
Furthermore, CBP cannot reliably project future MPF collections because
the agency has not estimated the effects of exemptions, entries made
through foreign trade zones, the decline in the constant dollar value
of the minimum and maximum fees, or changes in import demographics on
total MPF collections. CBP data on MPF collections and program costs
indicate that since fiscal year 2004 collections have increased
relative to program costs and in fiscal years 2006 and 2007 collections
exceeded costs by a total of approximately $221 million (see fig. 6).
Figure 6: Total Annual Merchandise Processing Fee Collections and
Program Costs (dollars in millions):
[See PDF for image]
This figure is a vertical bar graph depicting the following data:
Fiscal year: 2004;
Collections: $1134;
Costs: $1359.
Fiscal year: 2005;
Collections: $1261;
Costs: $1310.
Fiscal year: 2006;
Collections: $1350;
Costs: $1334.
Fiscal year: 2007;
Collections: $1434;
Costs: $1229.
Source: GAO analysis of CBP data.
[End of figure]
CBP's most recent biennial report notes that a detailed analysis of the
current and projected effects of MPF exemptions and an accurate cost
estimate for processing merchandise is needed. CBP officials told us
that they plan to conduct a detailed review of the MPF in the second
phase of a three-phase review of the agency's user fees. They said that
they estimate beginning the MPF review in early 2008, but the timeline
depends on when the first phase is completed.[Footnote 50]
Stakeholders Have Limited Opportunities for Input on Fee Programs:
Agencies can accommodate stakeholder input in various ways. We have
previously reported on both the need to accommodate stakeholder input
as well as various models for doing so.[Footnote 51] Some Corps and CBP
officials have established successful, two-way communication practices
at the local level. For example, some Corps division offices publicly
post survey results and maps showing the controlling depth reports for
local harbors and channels. One local Corps official said this practice
encourages more dialogue with stakeholders, noting that they will e-
mail the office to find out when highlighted areas will be dredged.
Also, several of the CBP field offices we visited hold regular meetings
with port stakeholders to share information and address stakeholder
concerns.
However, there is currently no formal vehicle for payers of the HMF and
other port stakeholders to provide input to the Corps on the HMF itself
or on national harbor maintenance projects and priorities supported by
the fees. The HMF authorizing legislation did not establish an HMF
advisory committee, though it did establish an advisory committee for a
similar program that funds new work construction and rehabilitation on
inland waterways. The purpose of this Inland Waterways Users Board is
to make recommendations on priorities and spending for inland waterway
construction and rehabilitation projects.
As we have previously reported, both the customs and immigration
passenger inspection fee statutes required the establishment of
advisory committees consisting of industry representatives to advise
the agency on issues related to inspection services, including fee
levels.[Footnote 52] CBP's Airport and Seaport Inspections User Fee
Advisory Committee meets biannually to advise the commissioner of CBP
on issues related to the performance of airport and seaport
agriculture, customs, or immigration inspections. The committee members
represent entities subject to the fees, including airlines, airports,
cruise lines, and industry associations. We recently reported that
stakeholders felt that the advisory committee provided only limited
opportunities for substantive two-way communication.[Footnote 53] As a
result, they said they lack data necessary to know whether the
passenger inspection fees are set fairly or accurately, or are being
spent on the appropriate activities.
Our prior work found that federal advisory committees play an important
role in shaping public policy by providing advice on a wide array of
issues.[Footnote 54] Their advice can enhance the quality and
credibility of federal decision making. Despite the strengths
associated with the federal advisory committees as a means to
facilitate effective stakeholder input, agencies also need to be
careful to maintain their mission to promote the public interest and
take measures to safeguard against actual or perceived agency capture
by the entities paying the fee. According to a Congressional Research
Service report on the FDA prescription drug user fees, some critics
said that giving the pharmaceutical industry a role in setting program
performance goals creates conflicts of interest and gives the industry
too much influence over FDA actions.[Footnote 55] Agencies also need to
ensure that all stakeholders are given the opportunity to engage
substantively. Some smaller businesses have raised concerns that FAA
only consults with selected major airlines and manufacturers, ignoring
commuter airlines and smaller businesses also affected by FAA
regulations.
Stakeholders Have Concerns about Port-Related Fees and the Services
They Support:
Many of the stakeholders we spoke with said that although the ad
valorem structure of the HMF makes it relatively easy to administer, it
raises concerns about equity. Specifically, they noted there is no link
between the value of their cargo and the depth or width of the harbor
needed by the ship on which it is carried. For example, importers of
high-value goods, such as natural gas and pharmaceuticals, told us they
essentially pay a much greater share of dredging costs than importers
of low-value cargo. Stakeholders said that a ship's size and draft
combined with harbor conditions drive harbor maintenance costs, and
therefore may more closely link benefits received with the cost of
providing the benefits. Other stakeholders noted that a benefit of the
ad valorem structure is that it may better reflect the users' ability
to pay.
Some stakeholders also said that because the HMF fee structure does not
reflect the individual dredging needs of ports, i.e., lower for
naturally deep west coast ports that require very little dredging and
higher for shallower eastern seaboard and river ports that require
annual dredging, the overall cost of moving goods through the nation's
marine transportation system is artificially high. On the other hand,
applying the fee equally to all eligible ports offers a relatively
simple collection mechanism and helps to create a level playing field
for all ports, which in turn helps minimize competition between
individual ports.[Footnote 56] Even so, officials from ports located
near international borders told us the HMF disadvantages them relative
to nearby foreign ports. For example, Seattle Port Authority officials
consider the HMF to be a "punitive assessment" because they said it
decreases Seattle's competitiveness against Canadian ports (which do
not charge the fee). These officials said that the Port of Vancouver
actively promotes itself as not charging the HMF, and said this partly
explains why the Port of Vancouver is growing at a faster rate than the
Seattle port.
Whether the fee is based on the value of the cargo (ad valorem) or on
the size and draft of the ship is a separate decision from whether fees
should vary by the dredging needs and condition of a given port. In
other words, Congress could decide to impose a uniform fee structure at
all ports even if it chooses to change the design of that fee from ad
valorem to one based on a ship's size or draft.
Stakeholders expect that inspections will occur in a timely manner.
Cruise lines, importers, and ships' agents all said that delays for
passenger and vessel inspections are costly to industry. Because crew
members cannot disembark and, in some ports, the cargo cannot be
unloaded until a ship is cleared, these delays can be expensive. One
agent said that a 1-hour delay can cost a carrier $15,000 in
longshoreman labor costs. Another agent said that crew changes cannot
occur until a vessel has cleared its immigration inspection. During
this time, the ship must pay expenses for two crews. Stakeholders told
us that when multiple ships arrive at the same time, ships have waited
up to 4 hours before being cleared. CBP officials told us that these
types of inspection delays are generally caused by staff shortages,
outdated or crowded facilities, clustered arrivals, or some combination
of these factors. We recently reported similar findings related to
delays for arriving international air passengers.[Footnote 57]
Conclusions:
Although the need to address some of the user fee challenges presented
in this report may appear obvious, how to accomplish this is less
clear. Where appropriate, changes made to one fee should be designed to
complement rather than conflict with the other fees. The separate,
disparate fees supporting the largely consolidated inspection process
appear to aggravate disconnects between the customs passenger and
vessel fees and the corresponding inspection activities, and do not
adequately account for the costs imposed by different users. Unless
remedied, differences such as the way overtime charges are assessed for
commercial vessel inspections, as well as misalignments between actual
and reimbursable inspection activities, will persist, causing confusion
and raising equity concerns. Moreover, unless CBP automates its
collection methods, requires monthly remittance, and aligns fee rate
increases with the annual fee caps, CBP will continue to incur
unnecessary administrative costs and needlessly expose itself to
delayed remittance and potential errors that can result in revenue
losses. Similarly, until CBP fully implements a system to assess and
collect interest and penalties on late HMF payments, the federal
government will continue to incur revenue losses.
The extent and nature of the link between HMF collections and
expenditures are policy choices only Congress can make. However, vital
information about the tradeoffs associated with such a link is lacking.
Further, absent a vehicle for substantive HMF stakeholder input and
two-way communication at the national level, stakeholder cooperation as
well as support and understanding of the fee will continue to suffer.
Moreover, funds requested and appropriated in excess of CBP's
collection costs for the HMF reduces the amount of money available in
the HMTF to be appropriated for other purposes.
Unless agencies present a comprehensive picture of the customs,
immigration, and AQI fees, including the full scope of inspection
activities and their costs, Congress will continue to lack a complete
picture of whether the fees work in concert or conflict with each
other, which could hamper oversight. Furthermore, agencies will be less
able to develop and maintain the partnerships necessary to collect and
distribute the fees as efficiently and effectively as possible.
The lack of complete, transparent cost and collections data for the MPF
and AQI fees, and regular, formal opportunities to share such
information can prevent the agencies from addressing existing issues,
including possible misalignments between fee collections and program
costs. More broadly, if agencies cannot determine the extent to which
these fees are recovering costs, Congress cannot be sure that resources
are allocated to the activities it most values.
The principles of effective user fee design discussed earlier in this
report can both offer a framework for considering the implications of
various statutory structures and help clarify and illuminate the
tradeoffs associated with various policy choices available to Congress
associated with amending the individual statutes related to the fees
discussed in this report. Such a framework could also provide the basis
for future reviews of federal user fees as Congress works to ensure
that user fee financing mechanisms remain relevant and up-to-date.
Matters for Congressional Consideration:
To support the efficiency and equity of the Harbor Maintenance Fee as
well as its credibility among stakeholders, Congress should consider:
* reviewing the link between the amount of the HMF and the amount of
expenditures for the harbor maintenance program; and:
* establishing an advisory committee on the HMF and the activities that
it funds, that includes payers of the fee.
Recommendations for Executive Action:
We recommend that the Secretary of Homeland Security take the following
four actions:
* Develop a legislative proposal, in consultation with Congress, to
harmonize the customs, immigration, and agricultural quarantine
inspections fees. Harmonizing the fees could include:
- eliminating the differences in the way charges for overtime
inspections are assessed to commercial vessel operators;
- raising the cap on customs inspection fees for commercial vessels, in
line with the 2007 increase in this fee, so that the cap once again
corresponds to a whole number, rather than a fraction of payments;
- revising the customs passenger and vessel inspection fees so that the
inspection activities the fees are authorized to fund are more closely
aligned with actual inspection activities; and:
- requiring monthly, rather than quarterly, collection of the customs
and immigration inspection sea and air passenger fees.
* Direct CBP to automate its systems for collecting commercial vessel
fees to reduce the reliance on paper receipts for tracking payments and
to support electronic payments, rather than payment by check or cash.
* Direct CBP to include in its biennial report on the Merchandise
Processing Fee information on total program collections relative to
total program costs, over time, as well as any recommendations for
updating the amount and authorized uses of the fee.
* Assess interest and penalties on late HMF payments for domestic
shipments, shipments into foreign trade zones, and sea passengers.
We recommend that the Secretary of Agriculture take the following two
actions:
* Improve the transparency of the regulatory process of setting the AQI
fee rates by providing clearer information about how the rates for each
of the fee types (vessel, air passenger, aircraft, etc.) are
determined.
* In accordance with OMB Circular No. A-25 guidance and U.S. Department
of Agriculture policy, include in AQI fees the indirect and imputed
costs currently not considered when setting AQI fee rates and either
transfer the appropriate portions of those collections to the general
fund of the Treasury as required, or seek Congressional approval to
spend these monies on related AQI program costs.
Further, we recommend that the Secretaries of Agriculture and Homeland
Security conduct joint reviews of the customs, immigration, and
agricultural quarantine inspection fees and consolidate reporting, to
include the activities and proportion of fees for which CBP, ICE, and
APHIS are each responsible, to provide a comprehensive picture of the
user fees supporting the sea passenger and vessel inspections
processes.
Further, we recommend that the Secretaries of Homeland Security and the
Army direct CBP and the Corps to improve oversight of the HMF
collections by working together to develop:
* a method for the Corps to provide information on domestic vessel
movements to CBP;
* a method for the Corps to provide referrals of audit candidates to
the CBP Office of Regulatory Audit to be considered in the context of
CBP's risk-based system for selecting audit candidates;
* information on CBP's costs to collect and administer the HMF, for
inclusion in the Corps' annual report to Congress on the Harbor
Maintenance Trust Fund; and:
* an annual budget request for CBP-related salaries and expenses equal
to, rather than in excess of, CBP's actual costs associated with
collecting the HMF.
Agency Comments and Our Evaluation:
We provided a draft of this report to the Secretaries of Homeland
Security and Defense, and to the Acting Secretary of Agriculture for
review. We received written comments from the Department of Homeland
Security (DHS), which are reprinted in appendix III, and oral comments
from the Departments of Agriculture (USDA) and Defense (DOD). In
addition, each agency provided technical comments, which we
incorporated as appropriate. We also provided portions of the report to
nonfederal stakeholders for their review and made technical corrections
as appropriate.
DHS characterized the report as balanced and accurate and agreed with
the overall substance and findings of the report. Of the six
recommendations directed at DHS, DHS concurred with five of them and
partially concurred with the sixth. Specifically, DHS concurred in part
with our recommendation to automate collections of the customs and AQI
fees assessed on commercial vessels, stating that the agency will
analyze the feasibility of this approach and work to identify and
obtain funding to implement the recommendation if it is deemed cost
beneficial. We appreciate that DHS recognizes the importance of using
cost-effective methods to collect fees and look forward to receiving
regular updates on DHS's and CBP's progress in this area.
In its oral comments, USDA noted it was impressed with the level of
explanatory detail and analysis contained in the report and said it
generally agreed with our recommendations. Regarding our recommendation
that USDA include certain indirect and imputed costs when setting the
AQI fee rates, the agency said it will review the fee and seek guidance
from its Office of the Chief Financial Officer and Office of General
Counsel on this issue.
USDA noted that it has been APHIS's position that because USDA receives
appropriations to pay for departmental and staff office costs and OPM
receives appropriations for imputed costs such as future retirement
benefit expenses, APHIS did not have the authority to include those
costs in the fee. We interpret the AQI user fee statute, however, as
permitting USDA to recover all costs associated with its program,
including imputed and indirect costs. We recognize that imputed costs,
such as retirement and unfunded pension liabilities, may be more
directly linked to the fee-funded activity and more easily calculated
than seeking to allocate departmental and staff office costs. Further,
"full cost recovery" should be viewed from a governmentwide
perspective. Even though USDA would have to deposit those portions of
user fee collections as miscellaneous receipts in the general fund of
the Treasury, and therefore would not directly reimburse the relevant
appropriation account under a specific statute, it would still defray a
cost that Congress determined should be paid for by the user fees. If
USDA believes that the statutory authority does not permit it to cover
such indirect and imputed costs, then we believe USDA should seek
additional authority from Congress consistent with our recommendation.
USDA also noted that it will need to (1) work with DHS to identify
DHS's imputed costs for the AQI program and (2) consider the impact of
the fee increase on payers. We recognize that if incorporating these
costs will substantially increase the AQI fees, a measured approach
that incorporates the costs gradually may be appropriate.
DOD provided oral comments, and concurred with the findings,
conclusions, and recommendations of the report related to the Army
Corps' Harbor Maintenance Fee.
As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days
after its date. At that time, we will send copies to the Secretaries of
Homeland Security, Agriculture, Army, and Defense and interested
Congressional committees. We will also make copies available to others
on request. In addition, this report will be available at no charge on
the GAO Web site at [hyperlink, http://www.gao.gov].
If you or your staff have any questions about this report, please
contact me on (202) 512-9142 or irvings@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. GAO staff who made major contributions to
this report are listed in appendix IV.
Signed by:
Susan J. Irving:
Director for Federal Budget Analysis Strategic Issues:
List of Requesters:
The Honorable Bennie G. Thompson:
Chairman:
The Honorable Peter T. King:
Ranking Member:
Committee on Homeland Security:
House of Representatives:
The Honorable Charles B. Rangel:
Chairman:
The Honorable Jim McCrery:
Ranking Member:
Committee on Ways and Means:
House of Representatives:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
In order to provide context as Congress considers funding options for
port programs, we examined (1) what is known about the way selected
fees assessed on air and sea port users are set, collected, used, and
reviewed (including the views of stakeholders) and (2) the effects of
these attributes on program operations.
To meet this objective, we examined selected fees that are assessed on
port users; specifically the Harbor Maintenance Fee (HMF), Merchandise
Processing Fee (MPF), Customs Inspection Fees, Immigration User Fee,
and Agricultural Quarantine Inspection (AQI) User Fees. In selecting
the fees, we reviewed relevant policy and economic literature,
interviewed user fee experts, and examined Office of Management and
Budget data on user charges. We chose these fees because they are
levied upon port users, and are related to maritime, safety, and
homeland security programs. Additionally, we chose them because they
vary in their key design characteristics, specifically in the way in
which they are set, collected, used, and reviewed.
In examining the fees, we reviewed user fee legislation and guidance,
agency documents, and literature on user fee design and implementation
characteristics. We interviewed officials responsible for managing the
selected user fees at the U.S. Army Corps of Engineers (Corps), the
U.S. Department of Agriculture's Animal and Plant Health Inspection
Service (APHIS), and the U.S. Customs and Border Protection (CBP)
offices in Washington, D.C. CBP administers the MPF and Customs
inspection fees, and it collects the HMF on behalf of the Corps. CBP
administers the Immigration user fees jointly with U.S. Immigration and
Customs Enforcement (ICE) and the AQI user fees jointly with APHIS.
To select the ports that we visited, we consulted with port security
experts from within and outside of GAO, with CBP and Corps officials,
and with outside stakeholders, in order to choose ports that varied in
their type and volume of trade and commerce (including cruise lines,
container ships, petroleum products, and liquefied natural gas);
maintenance dredging needs, and specific issues facing them such as a
high volume of commercial cargo, security challenges, or proximity to a
land border or intricate river system. We also considered travel costs
in selecting the site visits. In light of the significant amount of
ongoing audit work in the Gulf region, and because other ports in our
selection are representative of important characteristics associated
with Gulf ports, we did not include a Gulf port in our selection so as
not to unnecessarily burden an area in crisis. The ports we selected
include medium and large ports, natural deepwater ports, and those that
require frequent dredging. We visited the ports of Boston,
Massachusetts; Charleston, South Carolina; Newark, New Jersey/New York,
New York; Baltimore, Maryland; Miami, Florida; Port Everglades,
Florida; Seattle, Washington; and Los Angeles/Long Beach, California.
At these ports, we observed passenger, vessel, and cargo inspections,
and interviewed officials from CBP and Corps field offices. At each
port, we spoke with various stakeholders, including port authority
officials, customs brokers, shipping agents, harbor pilots, importers,
and cruise line officials. We also met with the following national
stakeholder organizations: the American Association of Port
Authorities, the Cruise Lines International Association, the
Association of Ship Brokers and Agents, the National Association of
Maritime Organizations, and the World Shipping Council. We coordinated
our work with another GAO team that was examining the customs, AQI, and
immigration air passenger inspection fees, and drew upon their audit
findings as appropriate.
In addition, we reviewed collections and cost data for each of the
fees, data on balances in the Harbor Maintenance Trust Fund, and data
on channel availability provided by the Corps. We asked questions about
APHIS, CBP, and Corps internal controls for the data we used and
determined that the data were sufficiently reliable for the purposes of
this report. We performed our work from February 2007 through February
2008 in accordance with generally accepted government auditing
standards.
[End of section]
Appendix II: Summary of Fees by Payer:
Table 3: Fees Charged to Vessel Operators:
Design elements/selected fees: Authorizing legislation;
Customs Inspection Fees: Consolidated Omnibus Budget Reconciliation Act
(COBRA) of 1985;
Agricultural Quarantine Inspection Fees: The Food, Agriculture,
Conservation, and Trade (FACT) Act of 1990;
Immigration Inspection Fees: No commercial vessel fee for immigration
inspection, except overtime charges.
Design elements/selected fees: Fee-setting authority;
Customs Inspection Fees: Congress;
Agricultural Quarantine Inspection Fees: APHIS, via regulation.
Design elements/selected fees: Administering agency/agencies;
Customs Inspection Fees: CBP;
Agricultural Quarantine Inspection Fees: CBP, in coordination with
APHIS.
Design elements/selected fees: Fee amount;
Customs Inspection Fees: Per arrival: commercial vessels of 100 net
tons or more: $437; barges and bulk carriers from Mexico and Canada:
$110[A];
Agricultural Quarantine Inspection Fees: $492 per arrival[B].
Design elements/selected fees: Fee maximum/minimum;
Customs Inspection Fees: Commercial vessels: $5,955 annually; barges
and bulk carriers: $1,500 annually;
Agricultural Quarantine Inspection Fees: 15 payments per year (equal to
$7,380).
Design elements/selected fees: Payer;
Customs Inspection Fees: Vessel operator or agent;
Agricultural Quarantine Inspection Fees: Owners/operators of commercial
vessels. Payment is typically made by a shipping agent on behalf of the
vessel owner/operator.
Design elements/selected fees: Collecting entity;
Customs Inspection Fees: CBP;
Agricultural Quarantine Inspection Fees: CBP collects the fee on behalf
of APHIS.
Design elements/selected fees: Remitting process;
Customs Inspection Fees: Payment is made to CBP at the time and place
of inspection, usually by check;
Agricultural Quarantine Inspection Fees: Payment is at the time and
place of inspection, usually via check to CBP.
Design elements/selected fees: Authorized uses of fee collections;
Customs Inspection Fees: Fee collections are authorized to reimburse
appropriation for a prioritized set of activities--including general
deficit reduction, overtime and premium pay, retirement and disability
contributions, preclearance services, and foreign language proficiency
awards;
Agricultural Quarantine Inspection Fees: The fee is designed to cover
the cost of providing agriculture inspections of commercial vessels.
Design elements/selected fees: Overtime;
Customs Inspection Fees: According to CBP officials, CBP has limited
authority to charge for overtime for customs inspection services;
Agricultural Quarantine Inspection Fees: AQI overtime charges for
vessel inspections must be applied at an hourly rate specified in
regulation whenever inspection services are provided on a Sunday or
holiday, or whenever the individual inspector is working overtime;
Immigration Inspection Fees: For inspections conducted on a Sunday,
holiday, or between the hours of 5:00 p.m. and 8:00 a.m. and when the
inspector is working overtime, CBP must charge vessel operators for
overtime costs. The amount charged depends on the number and pay
grade(s) of the officer(s) performing the inspection and the amount of
time spent on the inspection. Because regular business hours vary by
port, the hours during which an inspector might be working overtime
vary.
Source: GAO analysis.
[A] The $110 fee rate only applies to barges and bulk carriers from
Canada and Mexico that are either in ballast or transporting only cargo
laden in Canada or Mexico.
[B] The AQI vessel fee is scheduled to increase by $2 each fiscal year,
through fiscal year 2010, when it will be $496.
[End of table]
Table 4: Fees Charged to Passengers:
Design elements/selected fees: Authorizing legislation;
Customs Inspection Fees: Consolidated Omnibus Budget Reconciliation Act
(COBRA) of 1985;
Immigration Inspection Fees: The Department of Justice Appropriation
Act of 1987;
Harbor Maintenance Fee: Water Resources Development Act of 1986.
Design elements/selected fees: Fee-setting authority;
Customs Inspection Fees: Congress;
Immigration Inspection Fees: Congress;
Harbor Maintenance Fee: Congress.
Design elements/selected fees: Administering agency/agencies;
Customs Inspection Fees: CBP;
Immigration Inspection Fees: CBP, in coordination with ICE;
Harbor Maintenance Fee: Collected by CBP on behalf of the Corps.
Design elements/selected fees: Fee amount;
Customs Inspection Fees: $5.50 per passenger, but sea passengers whose
journeys originate in certain locations are charged $1.93;
Immigration Inspection Fees: $7.00 per passenger, but sea passengers
whose journeys originate in certain locations are charged $3.00;
Harbor Maintenance Fee: 0.125% of the price of sea passenger ticket.
Design elements/selected fees: Fee maximum/minimum;
Customs Inspection Fees: No;
Immigration Inspection Fees: No;
Harbor Maintenance Fee: No.
Design elements/selected fees: Payer;
Customs Inspection Fees: International air and sea passengers;
Immigration Inspection Fees: International air and sea passengers;
Harbor Maintenance Fee: Commercial vessel passengers.
Design elements/selected fees: Collecting entity;
Customs Inspection Fees: Ticket sellers;
Immigration Inspection Fees: Ticket sellers;
Harbor Maintenance Fee: Vessel operators remit to CBP.
Design elements/selected fees: Remitting process;
Customs Inspection Fees: Payment is made quarterly to CBP via cash,
check, or money order;
Immigration Inspection Fees: Payment is made quarterly to CBP via check
or money order;
Harbor Maintenance Fee: Payment is made quarterly to CBP by check.
Design elements/selected fees: Authorized uses of fee collections;
Customs Inspection Fees: Fee collections are authorized to reimburse
appropriation for a prioritized set of activities--including general
deficit reduction, overtime and premium pay, retirement and disability
contributions, preclearance services, and foreign language proficiency
awards;
Immigration Inspection Fees: The fee is authorized to cover expenses
incurred in providing inspection and preinspection services and other
costs specified in statute;
Harbor Maintenance Fee: Fee collections are authorized to be used,
subject to appropriation, to recover 100 percent of eligible operations
and maintenance expenditures for commercial navigation in harbors and
the St. Lawrence Seaway and administration of the fee.
Source: GAO analysis.
Note: There is no AQI fee charged to commercial vessel passengers,
though commercial air passengers pay a fee.
[End of table]
Table 5: Fees Charged to Shippers:
Design elements/selected fees: Authorizing legislation;
Harbor Maintenance Fee: Water Resources Development Act of 1986;
Merchandise Processing Fee: Omnibus Budget Reconciliation Act of 1986.
Design elements/selected fees: Fee-setting authority;
Harbor Maintenance Fee: Congress;
Merchandise Processing Fee: Congress[A].
Design elements/selected fees: Administering agency/agencies;
Harbor Maintenance Fee: Collected by CBP on behalf of the Corps;
Merchandise Processing Fee: CBP.
Design elements/selected fees: Fee amount;
Harbor Maintenance Fee: 0.125% of declared value of commercial cargo
entering the U.S. and domestic cargo on vessels using federally
maintained harbor projects;
Merchandise Processing Fee: 0.21% of declared value of formal
merchandise entries[A].
Design elements/selected fees: Fee maximum/minimum;
Harbor Maintenance Fee: No[B];
Merchandise Processing Fee: Minimum payment of $25 and maximum of $485
per entry.
Design elements/selected fees: Payer;
Harbor Maintenance Fee: Passenger vessel operators and shippers of
imported and domestic cargo;
Merchandise Processing Fee: Importers of cargo.
Design elements/selected fees: Collecting entity;
Harbor Maintenance Fee: Usually customs brokers;
Merchandise Processing Fee: Customs brokers may pay on behalf of
importers.
Design elements/selected fees: Remitting process;
Harbor Maintenance Fee: Payments for imported cargo are generally made
electronically to CBP, due within 10 days of merchandise's release.
Payments for other cargo are made quarterly;
Merchandise Processing Fee: Payments are generally made electronically
to CBP, within 10 working days of cargo's release.
Design elements/selected fees: Authorized uses of fee collections;
Harbor Maintenance Fee: Fee collections are authorized to be used,
subject to appropriation, to recover 100 percent of eligible operations
and maintenance expenditures for commercial navigation in harbors and
the St. Lawrence Seaway and administration of the fee;
Merchandise Processing Fee: The fee is designed to offset the cost of
"customs revenue functions," as defined in statute, as well as the
automation of customs systems.
Source: GAO analysis.
[A] The Secretary of the Treasury may adjust the fee within certain set
limits.
[B] The HMF is not assessed on domestic cargo valued at less than
$1,000, and quarterly payment is not required if the total value of all
shipments for which a fee was assessed for the quarter does not exceed
$10,000. No payment is required for imported cargo that is entitled to
be entered under informal entry procedures.
[End of table]
[End of section]
Appendix III: Comments from the Department of Homeland Security:
U.S. Department of Homeland Security:
Washington, DC 20528:
[hyperlink, http://www.dhs.gov]:
January 24, 2008:
Ms. Susan J. Irving:
Director, Strategic Issues:
U.S. Government Accountability Office:
Washington, DC 20548:
Dear Ms. Irving:
Thank you for the opportunity to review and comment on the Government
Accountability Office's (GAO) draft report entitled, "Federal User
Fees: Substantive Reviews Needed to Align Port-Related Fees with the
Programs They Support," GAO-08-321. GAO was asked by the House
Committee on Homeland Security and the House Committee on Ways and
Means to examine (1) what is known about the way selected fees assessed
on air and sea port users are set, collected, used, and reviewed and
(2) the effects of these attributes on program operations. GAO examined
the Harbor Maintenance Fee (HMF), the Merchandise Processing Fee (MPF),
and the Customs, Immigration, and Agricultural Quarantine Inspection
(AQI) user fees assessed on air and cruise passengers and commercial
vessels using criteria that have often been used to assess user fees
and taxes ” equity, efficiency, revenue adequacy, and administrative
burden.
GAO found that the port-related fees examined vary in how they are set,
collected, used, and reviewed, creating both misalignments between the
fees and corresponding services, as well as administrative and
oversight challenges.
The U.S. Customs and Border Protection (CBP) appreciated the
opportunity to work with the GAO team in developing a balanced and
accurate report. DHS and CBP agree with the overall substance and
findings of the report. CBP is pleased that the report highlights the
same operational and coordination problems that CBP has identified and
has been working to resolve.
As GAO noted in its most recent report on air passenger user fees,
[Footnote 58] the fact that the primary inspection process has been
integrated under the One-Face-at-the-Border Initiative, but the
unification of the user fees that financially support this function has
not occurred yet, has created additional administrative and oversight
problems for CBP and federal and non-federal stakeholders. These
problems have been echoed in a recent study by the Discovery America
Partnership, a policy institute. The report asked for single fee to
provide more transparency to CBP's cost of operations and to minimize
the cost of collection and accounting for the fees." [Footnote 59]
Representatives from the American Air Transport Association have also
expressed their desire to streamline the current user fee scheme.
[Footnote 60]
To address some of the challenges described in the draft report, CBP in
consultation with the Department of Homeland Security (DHS), U.S.
Immigration and Customs Enforcement (ICE), and the U.S. Department of
Agriculture/Animal and Plant Health Inspection Service (USDA/APHIS),
initiated an effort to develop a legislative proposal to consolidate
the authorities that govern the customs, immigration, and agriculture
inspection user fees for passengers, conveyances, plants, animals, and
agriculture goods entering the United States. CBP's original proposal
included the consolidation of the customs, immigration, and agriculture
inspection user fees authorities into a single law. However, CBP
decided to restructure its proposal due to the expressed opposition by
USDA/APHIS and the House Agriculture Committee to any effort aimed at
transferring the agriculture inspection fees authority to DHS. The
resulting proposal's main goal is to create DHS/CBP user fees that
recover, to the extent possible, the inspection services, detention and
removal, and investigative costs attributable to CBP and ICE. Under
this proposal, USDA/APHIS retains the authority to set and adjust user
fees to recover their costs associated with agriculture inspections. If
the legislative proposal is enacted, USDA/APHIS will no longer have to
transfer a portion of their user fee collections to CBP. Meanwhile, CBP
will split a portion of the consolidated user fees with ICE to ensure
that both agencies fully recover the costs related to immigration
inspection at airports and seaports.
In its report, GAO suggests Congress review the link between the HMF
fee and expenditures, and establish an advisory committee for the HMF
to improve stakeholder communication. GAO also makes eight
recommendations to the Secretaries of Homeland Security, Agriculture,
and the Army to better align the fees with the activities they support,
and to improve collections, oversight, and reporting.
Six recommendations were directed to CBP. Regarding the report's
recommendations on the HMF, CBP will conduct a comprehensive cost
review to estimate the Agency incurred and projected cost in collecting
and administrating HMF. On the MPF, CBP agrees with the need to conduct
a comprehensive study on this fee. Changes in import trends, the
expansion of Free Trade Agreements, and the expansion of pre-clearance
and risk based inspection programs may have an impact on MPF
collections and costs.
The six recommendations and CBP's corrective actions to address these
recommendations are included below:
Recommendation 1:
GAO recommends that the Secretary of Homeland Security develop a
legislative proposal, in consultation with Congress, to harmonize the
commercial vessel inspections fees. Harmonizing the fees could include:
* Eliminating the differences in the way charges for overtime
inspections are assessed to commercial vessel operators;
* Raising the cap on customs inspection fees for commercial vessels, in
line with the 2007 increase in this fee, so that the cap once again
corresponds to a whole number, rather than a fraction of payments;
* Revising the customs passenger and vessel inspection fees so that the
inspection activities the fees are authorized to fund are more closely
aligned with actual inspection activities; and;
* Requiring monthly, rather than quarterly, collection of the customs
and immigration inspection sea and air passenger fees.
Response:
Concur. The DHS/CBP proposal to consolidate the customs, immigration,
and agriculture inspection user fees for passengers, conveyances,
plants, animals, and agriculture goods entering the United States
includes legislative language to change and consolidate current
Reimbursable Overtime (ROT) authorities. The proposal aims at striking
current legislation on ROT and inserts a provision that will authorize
CBP to bill for ROT in cases where a carrier's pattern of arrivals is
continually outside the port regular hours of operation. CBP wants to
retain the authority to charge ROT under certain conditions to provide
commercial vessel operators with an incentive to align their arrival
schedules with the port regular hours of operation. Costs related to
overtime inspection services, previously subjected to ROT, will be
recovered by a consolidated DHS/CBP commercial vessel user fee.
The DHS/CBP proposal to consolidate certain inspection user fees
includes legislative language that will authorize the Agency to adjust
the fee caps in proportion to changes to proposed DHS/CBP commercial
vessel user fee.
The DHS/CBP proposal to consolidate certain inspection user fees
includes legislative language to align the current customs passenger
and vessel fees with the inspection services provided at ports of
entry. If enacted, the proposed legislation will strike the
spending hierarchy established in 19 USC 58c (f)(3)(A) [Footnote 61]
and replace it with a provision that authorizes DHS/CBP user fees to be
set at a level that recovers the full cost of providing passenger and
vessel inspections.
The DHS/CBP proposal to consolidate certain inspection user fees
includes legislative language to amend the current quarterly remittance
schedule in order to establish a monthly remittance mandate. The
proposal states that DHS/CBP passenger inspection fees shall be remit
thirty days after the end of the month in which the fees were required
to be collected from the individual passengers.
Due Date: September 30, 2009.
Recommendation 2:
GAO recommends that the Secretary of Homeland Security direct CBP to
automate its systems for collecting commercial vessel fees to reduce
the reliance on paper receipts for tracking payments and to support
electronic payments, rather than payment by check or cash.
Response:
Concur in part with this recommendation. CBP will conduct a feasibility
analysis to determine whether this recommendation is cost beneficial.
CBP has consistently worked to automate many of our collection
processes and to convert revenue streams from cash and checks to
electronic means. However, system changes to fully implement this
recommendation will be extensive. Within the next few months, CBP will
conduct a detailed analysis of requirements and constraints, develop
cost estimates, and evaluate the economic feasibility of automating its
system for collecting commercial vessel fees. If this analysis shows
that implementation of the recommendation is cost beneficial, CBP will
work to identify and obtain funding to implement the recommendation.
Due Date: September 30, 2008.
Recommendation 3:
GAO recommends that the Secretary of Homeland Security direct CBP to
include in its biennial report on the MPF information on total program
collections relative to total program costs, over time, as well as any
recommendations for updating the amount and authorized uses of the fee.
Response:
Concur. CBP will include a section on the MPF in the next biennial
report due later this year. Meanwhile, CBP will initiate a
comprehensive study on MPF collections and costs. Based on the findings
derived from the study, CBP will recommend that Congress take the
necessary corrective action(s) to ensure that the fee charges are
commensurate with the costs of processing merchandise entering the
United States.
Due Date: December 30, 2008.
Recommendation 4:
GAO recommends that the Secretary of Homeland Security assess interest
and penalties on late HMF payments for domestic shipments, shipments
into foreign trade zones, and sea passengers.
Response:
Concur. CBP has commenced with implementation of this recommendation.
CBP has developed procedures and plans to immediately begin billing for
current delinquencies on a quarterly basis. We expect to assess
interest and penalties for an estimated 4,000 prior year delinquencies
over the next twelve months.
Due Date: September 30, 2008.
Recommendation 5:
GAO recommends that the Secretaries of Agriculture and Homeland
Security conduct joint reviews of the customs, immigration, and
agriculture quarantine inspection fees and consolidate reporting, to
include the activities and proportion of fee for which CBP, ICE, and
APHIS are each responsible, to provide a comprehensive picture of the
user fees supporting the sea passenger and vessel inspections
processes.
Response:
Concur. In keeping with CBP's Memorandum of Agreement with APHIS, CBP
shares the costs of our agriculture fee activities with APHIS on a
periodic basis, which they can use in their reports. Also, in Fiscal
Year 2008 APHIS and CBP submitted a joint report to the Office of
Management and Budget on the AQI user fees for use in evaluating the
agencies' budget requests. This report included current and projected
collections and costs by activity, full-time equivalents to be funded
from the user fees, and performance measures on the effectiveness of
the Agriculture Quarantine Inspection program.
In the past, CBP has only reported its own costs and collections in its
reports, in part because ICE did not have data available on the costs
of their activities. When this data is available from ICE, CBP will
consider submitting a joint Immigration User Fee (IUF) report to
Congress. For the required biennial user fee review, we will continue
to follow DHS's guidance by submitting CBP's fee costs and collections
to DHS, which will issue a consolidated user fee report for the entire
Department.
Due Date: March 30, 2008.
Recommendation 6:
GAO recommends that the Secretaries of Homeland Security and the Army
direct CBP and the U.S. Army Corps of Engineers (Corps) to improve
oversight of the HMF collections by working together to develop:
* A method for the Corps to provide information on domestic vessel
movements to CBP;
* A method for the Corps to provide referrals of audit candidates to
the CBP Office of Regulatory Audit;
* Information on CBP's costs to collect and administer the HMF and
include it in its biennial user fee review; and;
* An annual budget request for CBP-related salaries and expenses equal
to, rather than in excess of, CBP's actual costs associated with
collecting the HMF.
Response:
Concur. CBP plans to contact the Corps and schedule meetings to discuss
the exchange of information. CBP will subsequently work with the Corps
to implement an oversight system of the HMF collections.
CBP will conduct a comprehensive review of the costs the organization
incurs when collecting and administering the HMF. The results from the
review will be included in the biennial user fee review.
Based on the results derived the aforementioned review CBP will adjust
its budget request in relation to the costs CBP expects to incur in
collecting and administrating the HMF.
In an effort to improve oversight of HMF collections, the Office of
International Trade, Office of Regulatory Audit (OT RA) will work
together with the Corps to develop a method for the Corps to provide
referrals of audit candidates to OT RA. These audit candidates will be
considered in the context of the OT Risk Based System for selecting
audit candidates and referrals.
RA's Program Manager User Fees initiated discussions on January 14,
2008 with RA's Field Oversight Director East and the Annual Audit
Planning Team Representative for Oversight East on the development of
the referral process. The Program Manager will formally meet with the
Annual Audit Planning Representative to develop a method of
incorporating the Corps into our Risked Based process. The due date for
completion of this section of the process is a proposed date of
February 11, 2008. We will then meet with Field Oversight Director East
for final approval of the proposed audit referral process. The due date
for this final approval process is a proposed date of February 29,
2008.
RA's Program Manager User Fees initiated contact on January 14, 2008 by
telephone and email with Corps POCs to start the process in developing
a method for the Corps to provide audit candidates as per the
recommendation above. The proposed due date for an initial meeting with
the Corps is set as March 14, 2008 and a follow-up meeting of April 30,
2008.
Final approval of the method for the Corps to provide referrals of
audit candidates to the CBP Office of Regulatory Audit to be considered
in the context of CBP's risk-based system for selecting audit
candidates is the proposed due date of June 13, 2008.
Due Date: September 30, 2008.
We thank you for the opportunity to review the draft report and provide
comments.
Sincerely,
Signed by:
Steven J. Pecinovsky:
Director:
Departmental GAO/OIG Liaison Office:
[End of section]
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO Contact:
Susan J. Irving, (202) 512-9142 or irvings@gao.gov:
Staff Acknowledgments:
Jacqueline M. Nowicki (Assistant Director) and Susan E.M. Etzel managed
this assignment. Jessica Nierenberg, Kathleen Padulchick, and Amy
Rosewarne made key contributions to all aspects of the report. Jay
Cherlow, Chelsa Gurkin, Terrance N. Horner, Alessandra Rivera, and Jack
Warner also provided assistance. In addition, Pedro Briones and Carlos
Diz provided legal support and Donna Miller developed the report's
graphics.
[End of section]
Footnotes:
[1] See GAO, Maritime Security: The SAFE Port Act and Efforts to Secure
Our Nation's Seaports, GAO-08-86T (Washington, D.C.: Oct. 4, 2007).
[2] See GAO, Commercial Maritime Industry: Updated Information on
Federal Assessments, GAO/RCED-99-260 (Washington, D.C.: Sept. 16,
1999).
[3] The rates for all but the AQI fees are set in statute; the AQI fee
rates are set by the Department of Agriculture through regulation.
Further, some of these fees are a flat dollar amount and some are ad
valorem (i.e., a percentage of value). For more information on these
fees, see table 1 in this report.
[4] See GAO, Understanding the Tax Reform Debate: Background, Criteria
& Questions, GAO-05-1009SP (Washington, D.C.: September 2005).
[5] An important factor to consider when establishing a fee to recover
costs associated with an agency program or service is the agency's
capability to record and accumulate timely, reliable data relating to
those costs, consistent with applicable accounting standards, and
analyze that data. The costs associated with financial management
systems needed to provide this capability must be considered. According
to the Statement on Federal Financial Accounting Standard 4 (July 31,
1995), reliable information on the costs of federal programs and
activities is crucial for effective management of government
operations, which includes setting user fees.
[6] To select the ports that we visited, we consulted with port
security experts from within and outside of GAO, with CBP and Corps
officials, and with outside stakeholders, in order to choose ports that
varied in their type and volume of trade and commerce (including cruise
lines, container ships, petroleum products, and liquefied natural gas);
maintenance dredging needs; and specific issues facing them such as a
high volume of commercial cargo, security challenges, or proximity to a
land border or intricate river system. We also considered travel costs
in selecting the site visits. In light of the significant amount of
ongoing audit work in the Gulf region, and because other ports in our
selection are representative of important characteristics associated
with Gulf ports, we did not include a Gulf port in our selection so as
not to unnecessarily burden an area in crisis. The ports we selected
include medium and large ports, natural deepwater ports, and those that
require frequent dredging. The eight ports at which we conducted site
visits were (1) Los Angeles/Long Beach, California; (2) Miami, Florida;
(3) Port Everglades, Florida; (4) Baltimore, Maryland; (5) Boston,
Massachusetts; (6) Newark, New Jersey/New York, New York; (7)
Charleston, South Carolina; and (8) Seattle, Washington.
[7] By "administer" we mean that the agency has some administrative
responsibility for the fee, which could include collecting the fee,
adjusting the fee, tracking program costs, or reporting requirements.
[8] Imputed costs of an agency are costs of goods or services incurred
on behalf of the agency that are paid by another federal entity, such
as certain retirement benefits paid to retirees by the U.S. Office of
Personnel Management.
[9] See GAO, Federal User Fees: Key Aspects of International Air
Passenger Inspection Fees Should Be Addressed Regardless of Whether
Fees Are Consolidated, GAO-07-1131 (Washington, D.C.: Sept. 24, 2007).
[10] See GAO, Results-Oriented Government: Practices That Can Help
Enhance and Sustain Collaboration among Federal Agencies, GAO-06-15
(Washington, D.C.: Oct. 21, 2005).
[11] See GAO, Reexamining Regulations: Opportunities Exist to Improve
the Effectiveness and Transparency of Retrospective Reviews, GAO-07-791
(Washington, D.C.: July 16, 2007) and Federal Advisory Committees:
Additional Guidance Could Help Agencies Better Ensure Independence and
Balance, GAO-04-328 (Washington, D.C.: Apr. 16, 2004).
[12] See GAO, A Glossary of Terms Used in the Federal Budget Process,
GAO-05-734SP (Washington, D.C.: September 2005).
[13] The legal distinction between a "fee" and a "tax" can be
complicated and depends largely on the context of the particular
assessment. Generally, a tax arises from the government's sovereign
power to raise revenue, need not be related to any specific benefit,
and its payment is not optional, whereas a user fee is typically
related to some voluntary transaction or request for government goods
or services above and beyond what is normally available to the public.
For more information see GAO, User Fee Design Guide, GAO-08-386SP.
[14] See GAO, Aviation Finance: Observations on the Current FAA Funding
Structure's Support for Aviation Activities, Issues Affecting Future
Costs, and Proposed Funding Changes, GAO-07-1163T (Washington, D.C.:
Aug. 1, 2007).
[15] The CFO Act of 1990 requires an agency's CFO to review on a
biennial basis the fees, royalties, rents, and other charges for
services and things of value and make recommendations on revising those
charges to reflect costs incurred. 31 U.S.C. § 902(a)(8).
[16] OMB Circular No. A-25 provides that each agency will review user
charges biennially to include (1) assurance that existing charges are
adjusted to reflect unanticipated changes in costs or market values and
(2) a review of other programs within the agency to determine whether
fees should be initiated for government services or goods for which it
is not currently charging fees. Circular No. A-25 further states that
agencies should discuss the results of the user fee reviews and any
resultant proposals in the CFO annual report required by the CFO Act.
[17] User fees may be assessed under specific statutory authority or
under the broad authority of the Independent Offices Appropriation Act
(IOAA) of 1952, 31 U.S.C. § 9701. IOAA requires that agency regulations
establishing a user charge be subject to policies prescribed by the
President. OMB provides such guidance to executive branch agencies
under this authority through Circular No. A-25. User fees assessed
under specific statutory authority should also be construed consistent
with IOAA (the general, governmentwide user fee authority) to the
extent possible as part of an overall statutory scheme. Thus, OMB
Circular No. A-25 provides guidance regarding assessments of user
charges not only under IOAA, but also under other more specific fee
statutes to the extent permitted by law--that is, the provisions of a
more specific user fee statute take precedence over the Circular's
guidance, and indeed over the more general provisions of IOAA itself.
[18] 21 U.S.C. § 136a(a)(1).
[19] See GAO, Homeland Security: Management and Coordination Problems
Increase the Vulnerability of U.S. Agriculture to Foreign Pests and
Disease, GAO-06-644 (Washington, D.C.: May 19, 2006).
[20] See GAO-07-1131.
[21] See GAO, Managerial Cost Accounting Practices: Department of
Agriculture and the Department of Housing and Urban Development,
GAO-06-1002R (Washington, D.C.: Sept. 21, 2006).
[22] According to CBP, the balance of the related program costs are
covered by appropriations.
[23] 7 CFR § 354.3(f)(8).
[24] Payers also noted that CBP does not bill for these charges in a
timely manner, which exacerbates this uncertainty and undermines the
payer's ability to account for these costs.
[25] During 2007, this issue was particularly problematic. Because the
fee increase took effect April 1, 2007, vessels arriving before and
after that date paid two different rates. Since the fee cap applies to
payments received within a calendar year, it was even more difficult
for CBP officers to calculate the total amount paid in order to
determine if a vessel had reached the cap. This increased the burden on
CBP officers (who must calculate payments by calculator or by hand), as
well as the potential for errors.
[26] We have not reviewed or evaluated this proposal, although we have
been briefed on elements of it.
[27] Airline officials also noted that changing to a monthly remittance
schedule would not be a problem.
[28] For example, referrals for value and classification audits can be
made by CBP's Office of Field Operations and Office of International
Trade when they have concerns that importers or brokers may be
reporting erroneous values on imported goods, and referrals for
passenger user fees are made by agencies involved with passenger
processing, including APHIS, CBP, and ICE.
[29] As noted, the electronic payment system works well once goods have
been formally entered into U.S. commerce. However, we recently reported
on problems with CBP's management of the in-bond system--a system which
allows importers to delay formal entry of goods into U.S. commerce.
These problems may affect CBP's ability to ensure proper collection of
trade revenue, including fees. See GAO, International Trade: Persistent
Weaknesses in the In-Bond Cargo System Impede Customs and Border
Protection's Ability to Address Revenue, Trade, and Security Concerns,
GAO-07-561 (Washington, D.C.: Apr. 17, 2007).
[30] According to a CBP official, of the over 200 value and
classification of goods audits conducted between 2004 and 2007, the
importer had paid the HMF incorrectly more than 60 percent of the time.
[31] See GAO-07-1131.
[32] The first use in the list of activities for which customs user
fees are legally available is transfers to the Treasury's General Fund
for deficit reduction purposes, of the difference between estimated
overtime compensation for customs inspections and actual overtime,
premium pay, agency retirement contributions, and foreign language
proficiency awards, or $18,000,000 whichever is less.
[33] Precleared passengers are inspected in the departing country
rather than in the United States.
[34] The Homeland Security Act of 2002 required DHS to maintain at
least the March 2003 level of staff in each of nine specific customs
revenue positions and their associated support positions. Pub. L. No.
107-296, § 412, 116 Stat. 2135, 2179. The nine designated customs
revenue positions are import specialists, entry specialists, drawback
specialists, national import specialists, fines and penalties
specialists, attorneys of the Office of Regulations and Rulings,
customs (regulatory) auditors, international trade specialists, and
financial systems specialists. In recent work, we found that although
many staff other than those in the nine covered positions perform tasks
related to customs revenue functions, overall staff resources
contributing to customs revenue functions have declined since the
formation of DHS. See GAO, Customs Revenue: Customs and Border
Protection Needs to Improve Workforce Planning and Accountability,
GAO-07-529 (Washington, D.C.: Apr. 12, 2007).
[35] The authorizing statute limits expenditures from the HMTF to (1)
eligible harbor operations and maintenance costs assigned to commercial
navigation, (2) eligible operations and maintenance costs of certain
portions of the Saint Lawrence Seaway, (3) certain rebates of tolls or
charges, and (4) administrative expenses related to the administration
of the fee, but not in excess of $5 million for any fiscal year (26
U.S.C. § 9505 and 33 U.S.C. § 2238).
[36] CBP provided us with HMF collections data, by type (imported
cargo, shipments into foreign trade zones, domestic movements, and
vessel passengers) beginning with fiscal year 2001.
[37] See GAO, Highway Financing: Factors Affecting Highway Trust Fund
Revenues, GAO-02-667T (Washington, D.C.: May 9, 2002). To even out the
swings when calculating RABA, the Safe, Accountable, Flexible,
Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU)
now "looks back" at the average of the past 2 years of revenue. Also,
SAFETEA-LU allows a negative adjustment only when the balance of the
Highway Trust Fund highway account is less than $6 billion.
[38] 21 U.S.C. 379h(g)(4).
[39] As we have previously reported, the vast majority of dedicated, or
"earmarked" trust funds take in more than their current needs. See GAO,
Federal Trust and Other Earmarked Funds, Answers to Frequently Asked
Questions, GAO-01-199SP (Washington, D.C.: January 2001).
[40] See GAO-08-386SP.
[41] See GAO-01-199SP and GAO, Budget Issues: Trust Funds in the
Budget, GAO/T-AIMD/RCED-99-110 (Washington, D.C.: March 1999).
[42] Trust fund surpluses add to the unified budget totals (increasing
a surplus or reducing a deficit), and any trust fund deficits subtract
from them (GAO-01-199SP).
[43] The study analyzed federal channels through which 10 million tons
of cargo or greater are moved annually.
[44] A ship's "draft" is the depth of the vessel in the water.
[45] Secondary criteria the Corps uses to set harbor maintenance
priorities include whether or not the harbor is a subsistence harbor or
a critical harbor of refuge.
[46] Although each port and district can report on what it would cost
to complete all backlogged work, these estimates cannot be summed
because all projects identified by the regions could not be completed
simultaneously.
[47] See GAO-07-1131.
[48] See GAO, Results-Oriented Government: Practices That Can Help
Enhance and Sustain Collaboration among Federal Agencies, GAO-06-15
(Washington, D.C.: Oct. 21, 2005).
[49] As we recently reported, ICE does not have finalized cost
calculations for inspection-related activities. As a result, neither
agency is aware if collections cover program costs, or if collections
are appropriately shared between the two agencies.
[50] According to CBP officials, in the first phase of the user fees
review, CBP is examining and proposing changes to the customs,
immigration, and AQI inspection fees.
[51] See GAO-07-791.
[52] See GAO-07-1131.
[53] CBP officials said that in the post-September 11 environment,
airport inspector staffing information is "law-enforcement sensitive"
and therefore not shared with airports and airlines.
[54] See GAO-04-328.
[55] See Congressional Research Service, The Prescription Drug User Fee
Act (PDUFA): Background and Issues for PDUFA IV Reauthorization,
(Washington, D.C:. Apr. 30, 2007). Under the framework established by
the Prescription Drug User Fee Act, FDA works with various
stakeholders, including representatives from consumer, patient, and
health provider groups and the pharmaceutical and biotechnology
industries, to develop performance goals for the FDA prescription drug
review program. See GAO, Food and Drug Administration: Effect of User
Fees on Drug Approval Times, Withdrawals, and Other Agency Activities,
GAO-02-958 (Washington, D.C.: Sept. 17, 2002).
[56] The HMF is not assessed on shippers entering into ports that have
not received federal funding for construction, maintenance, or
operation since 1977. Some Port Authority officials said that these
ports enjoy a competitive advantage over those ports that are subject
to the HMF.
[57] See GAO, International Air Passengers: Staffing Model for Airport
Inspections Personnel Can Be Improved, GAO-05-663 (Washington, D.C.:
July 15, 2005) and Border Security: Despite Progress, Weaknesses in
Traveler Inspections Exist at Our Nation's Ports of Entry, GAO-08-219
(Washington, D.C.: Nov. 5, 2007).
[58] U.S. GAO, Federal User Fees: Key Aspects of International Air
Passenger Inspection Fees Should Be Addressed Regardless of Whether
Fees Are Consolidated, GAO-07-1131, September 2007.
[59] Discover America Partnership, A Blue Print to Discover America,
January 30, 2007, page 18.
[60] Visit [hyperlink, http://www.regulations.gov] and conduct a search
for Document ID APHIS-2004-0023-0313 and APHIS-2006-0096-0067.
[61] Under the authorizing statute, the customs inspection fees
collected are only available to reimburse appropriations for a limited
set of activities (i.e., overtime and premium pay, retirement and
disability contributions, preclearance services, foreign language
proficiency awards, and enhanced positions and equipment).
[End of section]
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