Federal User Fees
Key Aspects of International Air Passenger Inspection Fees Should Be Addressed Regardless of Whether Fees Are Consolidated Gao ID: GAO-07-1131 September 24, 2007International air passengers arriving in the United States are subject to an inspection to ensure they possess legal entry and immigration documents and do not bring in contraband, such as illegal drugs, counterfeit goods, or harmful pests and prohibited agriculture products. With the creation of the Department of Homeland Security (DHS) in 2003, the customs, immigration, and agriculture inspections activities were integrated into one program led by DHS's office of Customs and Border Protection (CBP). However, the three fees--whose collections totaled about $1 billion in fiscal year 2006--linked to these inspections remain statutorily distinct and are coadministered by CBP, Immigration and Customs Enforcement (ICE), both within DHS, and the Department of Agriculture's Animal Plant Health Inspection Service (APHIS). GAO was asked to examine how the fees are set, collected, and distributed, and the benefits and challenges of this process to agencies and stakeholders, including implications of consolidating these fees under the authority of DHS.
The process of setting, collecting, and distributing separate, dissimilar fees creates challenges for agencies and stakeholders. Although air passenger inspections were integrated within CBP, the fees supporting these inspections were created and are still governed by separate, dissimilar authorizing legislation. Two fee amounts are set in statute and one is set by regulation; all are collected by the airlines, deposited into three separate accounts and distributed among the agencies. As a result, the fees are administered and overseen by a complicated network of executive branch agencies and congressional committees, creating a series of challenges. For example, neither CBP nor ICE know whether the fees collected are recovering the full cost of the immigration inspection activities or whether the fees are properly divided between them, because ICE does not have finalized cost calculations for its inspection-related activities. In addition, certain passengers are exempt from some fees but not others, making it difficult for agencies to administer the fees. Further, although airports and airlines play an important role in facilitating inspections and the process of collecting and remitting the fees, opportunities for two-way communication are fragmented and limited, reducing stakeholder buy-in and acceptance of the fees and contributing to confusion about how the three fees work and what activities they may fund. Other challenges are due to the statutory structure of the individual passenger inspection fees. For example, the customs inspection fees are available for limited purposes: not all reimbursable activities may be associated with inspections, and not all inspection activities are reimbursable. However, CBP officials said even if the customs fees were spent on inspection-related activities, they still would only recover about 72 percent of costs in fiscal year 2006. Therefore, customs inspection-related activities are mainly funded by appropriations from general revenues. Further, without auditing each airline, CBP cannot independently verify the amount owed by airlines, partly because airlines are required to remit the fees based on ticket sales rather than passengers transported. CBP said it is developing a legislative proposal that would address these and other challenges by requiring airlines to remit based on passengers transported, but airline industry stakeholders said this change would complicate their collection process and create substantial transition costs. Although a number of options for addressing these fees have been raised, regardless of whether these fees are consolidated in whole, in part, or not at all, certain problems specific to the individual fees can and should be resolved first, and in a manner consistent with principles of effective user fee design, on which GAO has previously reported. Moreover, although partly or fully consolidating the fees under DHS's authority could provide opportunities to address some of the many challenges identified in this report, consolidation in-and-of-itself will not solve all of the problems we have identified.
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.
Director: Team: Phone:GAO-07-1131, Federal User Fees: Key Aspects of International Air Passenger Inspection Fees Should Be Addressed Regardless of Whether Fees Are Consolidated
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Report to Congressional Requesters:
United States Government Accountability Office:
GAO:
September 2007:
Federal User Fees:
Key Aspects of International Air Passenger Inspection Fees Should Be
Addressed Regardless of Whether Fees Are Consolidated:
Federal User Fees:
GAO-07-1131:
GAO Highlights:
Highlights of GAO-07-1131, a report to congressional committees.
Why GAO Did This Study:
International air passengers arriving in the United States are subject
to an inspection to ensure they possess legal entry and immigration
documents and do not bring in contraband, such as illegal drugs,
counterfeit goods, or harmful pests and prohibited agriculture
products. With the creation of the Department of Homeland Security
(DHS) in 2003, the customs, immigration, and agriculture inspections
activities were integrated into one program led by DHS‘s office of
Customs and Border Protection (CBP). However, the three fees”whose
collections totaled about $1 billion in fiscal year 2006”linked to
these inspections remain statutorily distinct and are coadministered by
CBP, Immigration and Customs Enforcement (ICE), both within DHS, and
the Department of Agriculture‘s Animal Plant Health Inspection Service
(APHIS). GAO was asked to examine how the fees are set, collected, and
distributed, and the benefits and challenges of this process to
agencies and stakeholders, including implications of consolidating
these fees under the authority of DHS.
What GAO Found:
The process of setting, collecting, and distributing separate,
dissimilar fees creates challenges for agencies and stakeholders.
Although air passenger inspections were integrated within CBP, the fees
supporting these inspections were created and are still governed by
separate, dissimilar authorizing legislation. Two fee amounts are set
in statute and one is set by regulation; all are collected by the
airlines, deposited into three separate accounts and distributed among
the agencies. As a result, the fees are administered and overseen by a
complicated network of executive branch agencies and congressional
committees, creating a series of challenges. For example, neither CBP
nor ICE know whether the fees collected are recovering the full cost of
the immigration inspection activities or whether the fees are properly
divided between them, because ICE does not have finalized cost
calculations for its inspection-related activities. In addition,
certain passengers are exempt from some fees but not others, making it
difficult for agencies to administer the fees. Further, although
airports and airlines play an important role in facilitating
inspections and the process of collecting and remitting the fees,
opportunities for two-way communication are fragmented and limited,
reducing stakeholder buy-in and acceptance of the fees and contributing
to confusion about how the three fees work and what activities they may
fund.
Other challenges are due to the statutory structure of the individual
passenger inspection fees. For example, the customs inspection fees are
available for limited purposes: not all reimbursable activities may be
associated with inspections, and not all inspection activities are
reimbursable. However, CBP officials said even if the customs fees were
spent on inspection-related activities, they still would only recover
about 72 percent of costs in fiscal year 2006. Therefore, customs
inspection-related activities are mainly funded by appropriations from
general revenues. Further, without auditing each airline, CBP cannot
independently verify the amount owed by airlines, partly because
airlines are required to remit the fees based on ticket sales rather
than passengers transported. CBP said it is developing a legislative
proposal that would address these and other challenges by requiring
airlines to remit based on passengers transported, but airline industry
stakeholders said this change would complicate their collection process
and create substantial transition costs.
Although a number of options for addressing these fees have been
raised, regardless of whether these fees are consolidated in whole, in
part, or not at all, certain problems specific to the individual fees
can and should be resolved first, and in a manner consistent with
principles of effective user fee design, on which GAO has previously
reported. Moreover, although partly or fully consolidating the fees
under DHS‘s authority could provide opportunities to address some of
the many challenges identified in this report, consolidation in-and-of-
itself will not solve all of the problems we have identified.
What GAO Recommends:
GAO is making 10 recommendations to the Secretaries of Agriculture and
Homeland Security to improve cost estimates, collection, distribution,
remittance, and compliance of the user fees. Both agencies concurred
with our recommendations. Further, GAO suggests Congress consider
eliminating key differences among the user fees.
To view the full product, including the scope and methodology, click on
GAO-07-1131. For more information, contact Susan J. Irving at (202) 512-
9142 or irvings@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Separate, Dissimilar Fees Create Administrative, Operational, and
Oversight Challenges:
Specific Aspects of the Individual Passenger Inspection Fees Should Be
Addressed Prior to or in Concert with Any Consolidation Effort:
Conclusions:
Recommendations for Executive Action:
Matter for Congressional Consideration:
Agency Comments:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Comments from the Department of Homeland Security:
Appendix III: Comments from the Department of Agriculture:
Appendix III: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Passenger Inspection Fees' Legislative Authorities,
Congressional Jurisdiction, and Fee Adjustments:
Table 2: Bimonthly Transfers of Agriculture Fees from APHIS to CBP,
Including Additional Lump Sum in August.
Table 3: Air Passenger Exemptions:
Table 4: Legal Availability of Customs Passenger User Fee:
Table 5: Actual Customs Air Passenger Inspection Activities:
Figure:
Figure 1: Process for Setting, Collecting, and Distributing Air
Passenger Inspection Fees (Simplified):
Abbreviations:
Advisory Committee: Airport and Seaport Inspections User Fee Advisory
Committee:
APHIS: Department of Agriculture's Animal and Plant Health Inspection
Service:
APIS: Advance Passenger Information System:
AQI: agriculture quarantine inspections:
ATA: Air Transport Association:
CBP: U.S. Customs and Border Protection:
CFO Act: Chief Financial Officers Act of 1990:
DHS: Department of Homeland Security:
FAA: Federal Aviation Administration:
FTE: full-time equivalent:
IATA: International Air Transport Association:
ICE: U.S. Immigration and Customs Enforcement:
INS: United States Customs Service, the Immigration and Naturalization
Service:
MOU/ MOAmemorandum of understanding / memorandum of agreement:
OMB: Office of Management and Budget:
PFC: passenger facility charge:
SABPOE: Securing America's Borders at Ports of Entry:
United States Government Accountability Office:
Washington, DC 20548:
September 24, 2007:
The Honorable John L. Mica:
Ranking Member:
Committee on Transportation and Infrastructure:
House of Representatives:
The Honorable Daniel E. Lungren:
Ranking Member:
Subcommittee on Transportation, Security, and Infrastructure:
Protection:
Committee on Homeland Security:
House of Representatives:
The Honorable Thomas Petri:
Ranking Member:
Subcommittee on Aviation:
Committee on Transportation and Infrastructure:
House of Representatives:
International air passengers arriving in the United States are subject
to an inspection to ensure they possess legal entry and immigration
documents and do not bring in contraband, such as illegal drugs,
counterfeit goods, or harmful pests and prohibited agriculture
products.[Footnote 1] With the creation of the Department of Homeland
Security (DHS) in 2003, the customs, immigration, and agriculture
quarantine inspection activities were integrated into a unified
inspection program--often referred to as Securing America's Borders at
Ports of Entry (SABPOE)--led by DHS's U.S. Customs and Border
Protection (CBP). However, the three fees charged for these
inspections--for which collections totaled about $1 billion in fiscal
year 2006--remain statutorily distinct and are coadministered by CBP,
U.S. Immigration and Customs Enforcement (ICE), both within DHS, and
the Department of Agriculture's Animal and Plant Health Inspection
Service (APHIS), referred to in this report as agencies.
Although CBP now conducts primary and secondary passenger inspections,
ICE and APHIS each still conduct inspection-related activities. APHIS
retained responsibility for 17 plant inspection stations, smuggling
interdiction and trade compliance, pest and disease identification and
notification, and risk analysis, in addition to agriculture inspection
policy and training. ICE is responsible for the investigation,
detention, and removal activities for inadmissible aliens.
You asked us to review how the three user fees charged for the
inspection of arriving international airline passengers are set,
collected, and distributed and the benefits and challenges of this
process for agencies and stakeholders, including examining the
implications of consolidating these fees under DHS's authority.
To meet these objectives, we reviewed the passenger inspection user fee
legislation, regulations, guidance, agency documents, prior GAO
reports, and literature on principles of effective user fee design and
implementation characteristics. We observed the inspections process and
interviewed CBP officials responsible for port management and airport
and airline officials involved with international passenger processing
for the three passenger inspection fees. We did not assess the
effectiveness of these inspections. We reviewed audit and cost data
related to air passenger inspection activities. We also interviewed
APHIS, CBP, and ICE officials responsible for managing the user fees
and auditing the user fee collections at DHS and the Department of
Agriculture. We asked questions about CBP's and APHIS's internal
controls for the data we used and determined that the data are
sufficiently reliable for the purposes of this report. However, it was
beyond the scope of this report to evaluate the reliability of the cost
data for purposes beyond this report.
For more information on our scope and methodology, see appendix I. We
performed our work from October 2006 through August 2007 in Washington,
D.C; San Francisco, California; Miami, Florida; Boston, Massachusetts;
Newark, New Jersey; New York, New York; Dallas and Houston, Texas; and
Seattle, Washington in accordance with generally accepted government
auditing standards.
We reviewed the passenger inspection fees taking into consideration
principles of effective user fee design. These principles, on which we
have previously reported, can inform efforts to design or redesign user
fees by helping to clarify the trade-offs associated with various fee
design elements.[Footnote 2] These principles include:[Footnote 3]
Equity: An equitable user fee is one in which the consumers pay for the
cost of the services received, or the burden imposed on the program.
Efficiency: An efficient user fee is set at a rate that is in
proportion to the cost that the user imposes on the program. Revenue
Adequacy: The revenue adequacy of a fee is determined by its ability to
cover the costs of the program over time. Administrative Burden: The
burden or cost of administering the user fee should not exceed the
funds generated by the user fee, including any transitional costs
associated with changes to the existing system.
We are currently studying these user fee design issues in more depth
and expect to issue a report in the coming months.
Results in Brief:
The process for setting, collecting, distributing, and using the
customs, immigration, and agriculture passenger inspection fees is
complex and varies for each fee. Although air passenger inspections
were integrated within CBP, the fees supporting these inspections were
created and are still governed by separate, dissimilar authorizing
legislation. The amounts of two fees are set by legislation and the
amount of one fee is set by the agency in regulation. All three are
collected by the airlines and then deposited into three separate
accounts and distributed among the agencies (see fig. 1).
Figure 1: Process for Setting, Collecting, and Distributing Air
Passenger Inspection Fees (Simplified):
[See PDF for image]
Source: GAO.
[A] The fees are remitted to the government quarterly, except for the
last quarter of the year, when the immigration fees collected to-date
are remitted 10 days before the end of the fiscal year, with the
remaining fees collected in the fourth quarter remitted along with the
first quarter payment of the next fiscal year.
[End of figure]
As a result, the fees are administered and overseen by a complicated
network of executive branch agencies and congressional committees,
creating a series of challenges:
* The eight congressional committees that oversee the fees do not have
a unified picture of whether the fees work in concert or conflict with
each other because none of the agencies submit a comprehensive review
of the passenger inspection fees.
Agencies disagree on how to distribute the fees. For example,
* Both conduct immigration inspection activities, but neither CBP nor
ICE know whether the fees collected are recovering the full cost of the
immigration inspection activities or whether the fees are properly
divided between them, because ICE does not have finalized cost
calculations for its inspection-related activities.
* Passengers from Canada, Mexico, and U.S. territories and adjacent
islands are exempt from the customs fee but not from the immigration or
agriculture fees, which complicates the oversight and audit process.
* Finally, although stakeholders--primarily airports and airlines--
play an important role in both facilitating inspections and the process
of collecting and remitting the fees, opportunities for two-way
communication with the three agencies are fragmented and limited. This
reduces stakeholder buy-in and acceptance of the fees, and contributes
to misunderstandings and confusion about how the fees work and what
activities they may fund. For example, the Airport and Seaport
Inspections User Fee Advisory Committee, under the auspices of CBP,
focuses on the passenger inspection activities under CBP's purview but
omits other passenger inspection activities for which ICE and APHIS are
responsible.
Other challenges are not the result of the separate passenger
inspection fees but are related to the specific statutory structures of
the individual fees:
* Under the authorizing statute, the customs passenger inspection fees
collected are only available to reimburse appropriations for a limited
set of activities related to customs inspections, namely overtime and
premium pay, retirement and disability contributions, preclearance
services,[Footnote 4] and foreign language proficiency awards.
Therefore not all activities that may be funded from the customs fee
may be associated with conducting passenger inspections, and not all
inspection activities are reimbursable, that is, can be covered by
funds from the user fee account.
* Even if the customs fee was limited to funding the customs inspection
activities, according to CBP, for fiscal year 2006 it would have only
covered about 72 percent of total inspection costs. After the April
2007 fee increase, CBP estimates the fee would still need to increase
an additional 39 percent to cover total costs. Therefore, customs
inspection-related activities are generally funded by appropriations
from general revenues, limiting funds available for other federal
priorities.
* Without auditing each airline, CBP cannot independently verify the
total amount owed by airlines. Because the user fee statutes or
regulations require airlines and ticket issuers to collect all three
fees based on total ticket sales, rather than number of passengers
actually transported, CBP cannot verify the airlines are appropriately
collecting and remitting the fees. CBP is developing a legislative
proposal that would address several of the challenges identified in
this report, including a proposal to require airlines to remit fees
based on passengers transported along with documentation of passengers
who traveled. Airline industry stakeholders report that this change
would complicate their role in the collection process and create
substantial transition costs.
A number of options for addressing these issues have been
raised.[Footnote 5] Regardless of whether these fees are consolidated
in whole or in part or not at all, the problems resulting from specific
elements in the individual fees--such as those identified above--need
to be resolved first. Moreover, although partly or fully consolidating
the fees under DHS's authority could provide opportunities to address
some of the many challenges identified in this report, consolidation in-
and-of-itself will not solve all of the problems we have identified.
In light of this, we are making 10 recommendations for executive action
to help the Secretaries of Agriculture and of Homeland Security improve
the cost estimates, collection, distribution, remittance, and
compliance of the three user fees. Further, we suggest Congress
consider eliminating key differences among the user fees such as
authority to set the fee rates and the country of origin exemptions
mentioned above, and aspects of individual fees such as the set of
activities on which customs fee collections may be spent. We provided a
draft of this report to DHS and the Department of Agriculture for
comment and both agencies concurred with our recommendations.
Background:
Millions of individuals arrive in the United States every year and
undergo an inspection to ensure they are entering the country lawfully
and not transporting any illegal goods or harmful pests and prohibited
agricultural products.
Prior to the creation of DHS in 2003, passengers were required to
undergo separate customs, immigration, and agriculture quarantine
inspections (AQI), which were performed by the United States Customs
Service, the United States Immigration and Naturalization Service
(INS), and APHIS. Under the Homeland Security Act of 2002, however,
these passenger inspection functions were transferred to DHS. As part
of this realignment, CBP was charged with leading the customs,
immigration, and agriculture quarantine inspection functions, and all
immigration and agriculture quarantine inspectors were transferred to
CBP.[Footnote 6] The newly created CBP officers were cross-trained on
customs, immigration, and agricultural quarantine inspections in what
is now referred to as "SABPOE."[Footnote 7] As a result, all
international passengers are now subject to a single primary
inspection--looking for customs, immigration, and agriculture
quarantine violations--conducted by a CBP officer. If, as a result of
the primary inspection, a passenger requires further scrutiny, that
passenger is referred to another CBP officer who conducts a more in-
depth secondary inspection. Secondary inspection can involve additional
interviews, document reviews, database queries, communication with
other law enforcement agencies, observational techniques, and
heightened physical inspections.[Footnote 8] Although CBP absorbed and
leads the inspection program for customs, immigration, and agriculture
quarantine, other immigration and agriculture responsibilities were not
merged into CBP. (See text box for more information on CBP, ICE, and
APHIS and their missions.)
CBP, ICE, and APHIS:
The Homeland Security Act established DHS by merging 22 disparate
agencies and organizations with multiple missions, values, and
cultures. As part of this transition, both CBP and ICE were newly
created from parts of legacy agencies.
CBP was assigned the border inspection functions of the former
Immigration and Naturalization Service (INS) and former U.S. Customs
Service and the Department of Agriculture's APHIS program. The new
agency's mission is the following:
* interdicting illegal drugs and other contraband;
* apprehending individuals who are attempting to enter the United
States illegally;
* inspecting inbound and outbound people, vehicles, and cargo;
* enforcing all laws of the United States at the border;
* protecting U.S. agricultural and economic interests from harmful
pests and diseases;
* regulating and facilitating international trade;
* collecting import duties; and:
* enforcing U.S. trade laws.
ICE was created by combining the law enforcement arms of the former INS
and the former U.S. Customs Service. Its mission is the following:
* to enforce immigration and customs laws, and:
* to protect the United States against terrorist attacks by targeting
illegal immigrants-- including the people, money, and materials that
support terrorism and other criminal activities.
The APHIS Program remains part of the Department of Agriculture, though
the agriculture quarantine inspection functions have now been
transferred to CBP. The program's mission is to:
* protect and promote U.S. agricultural health, and:
* administer certain domestic and wild animal management programs.
Source: Not available.
[End of table]
Although the inspections were unified in 2002, the Homeland Security
Act did not consolidate the corresponding air passenger inspection
fees. Thus the previous separate processes for setting, collecting, and
distributing the fees remain in place. So, whereas most passengers
likely notice only that they pay "fees" when they purchase a ticket,
they actually pay--among other charges--three separate inspection user
fees: one for the legacy customs inspection, one for the legacy
immigration inspection, and one for the legacy agriculture quarantine
inspection.
What Is a User Fee?
A user fee is a fee assessed to consumers of goods or services provided
by the federal government. User fees generally apply to federal
programs or activities that provide special benefits to identifiable
recipients above and beyond what is normally available to the public.
User fees are normally related to the cost of the goods or services
provided. An example of a user fee is a fee for entering a national
park. In the narrow budgetary sense, a toll for the use of a highway is
considered a user fee because it is related to the specific use of a
particular section of highway. Alternatively, highway excise taxes on
gasoline are considered a form of user charge in the economic sense,
but since the tax must be paid regardless of how the gasoline is used
and since it is not directly linked with the provision of the specific
service, it is considered a tax.
Source: GAO, A Glossary of Terms Used in the Federal Budget Process,
GAO-05-734SP (Washington, D.C.: September 2005).
The Customs Air Passenger Inspection Fee:
The customs air passenger inspection is designed to prevent passengers
from bringing illegal goods--such as narcotics--into the United States.
Passengers pay a customs air passenger inspection fee, currently set in
statute at $5.50 per passenger, when they purchase their tickets. The
fees are remitted to the government quarterly, after which they
reimburse CBP appropriations for a specific set of reimbursable
expenses. The air passenger inspection fee is only one of several types
of customs inspection fees also known as COBRA fees--named for its
authorizing legislation, the Consolidated Omnibus Reconciliation Act of
1985. For example, commercial vessel passengers also pay a customs
inspection fee.
The Immigration Air Passenger Inspection Fee:
The immigration air passenger inspection is designed to prevent
passengers from entering the United States without legal entry and
immigration documents. Passengers pay an inspection fee (set in statute
at $7 per passenger) when they purchase their tickets. The fees are
remitted to the government quarterly, except for the last quarter of
the year, when the immigration fees collected to-date are remitted 10
days before the end of the fiscal year, with the remaining fees
collected in the fourth quarter remitted along with the first quarter
payment of the next fiscal year. The fees are then divided between CBP
and ICE according to the costs of the immigration inspection activities
for which each agency is responsible. The immigration air passenger fee
is one of two immigration inspection fees, the other being the
international passenger commercial vessel fee.
The Agriculture Air Passenger Inspection Fee:
The agriculture air passenger inspection is in place to seize
prohibited materials and intercept foreign agricultural pests.
Passengers pay an inspection fee, set by the agency in regulation at
$5.00 per passenger, when they purchase their tickets. The fees are
remitted to the government quarterly and are made available to APHIS.
The fees are then divided between APHIS and CBP based on the proportion
of costs associated with each agency's agriculture quarantine
inspection activities. The air passenger inspection fee is only one of
several types of APHIS inspection fees, known as AQI fees. For example,
commercial aircraft and vessels also pay AQI fees.
By statute, the authority to collect the three passenger inspection
user fees varies from a legislative grant of broad agency discretion to
set and collect a full-cost recovery fee, to more restrictive authority
to collect a sum-certain amount available for a limited number of
purposes. For example, the agriculture inspection 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 9] APHIS adjusts fees under this
authority through the federal regulatory process by public notice and
comment on proposed rates and implementing regulations in the federal
register. In contrast, the customs passenger inspection fee statute is
the most restrictive of these three fee statutes. It limits both the
fee that may be charged and the set of activities for which collections
may reimburse appropriations.[Footnote 10] Somewhere between these two
margins is the immigration fee statute. It is available to refund any
appropriation for expenses incurred in providing immigration inspection
and preinspection services, but it limits the fee that may be
charged.[Footnote 11] 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.
During our audit work, CBP informed us that they are developing a broad
legislative proposal that would, among other things, partially
consolidate the three passenger inspection user fees and make other
changes to address certain administrative challenges.[Footnote 12] As
of August 2007, the legislative proposal had been reviewed by CBP chief
counsel but officials were still working on estimates of the cost of
ICE's inspection activities. We have not received, reviewed, or
evaluated this proposal, although we have been briefed on elements of
it. Because CBP has widely circulated elements of the proposal among
key stakeholders, we refer to relevant elements of this proposal
throughout this report. Any proposal to consolidate these fees,
however, will be considered in an environment of considerable flux and
controversy. For example, there are proposals before lawmakers to
transfer the agriculture quarantine inspection function back out of DHS
and under the Department of Agriculture's authority.
Separate, Dissimilar Fees Create Administrative, Operational, and
Oversight Challenges:
The complex process for setting, collecting, and distributing the
passenger inspection fees is different for each fee, creating
administrative, operational, and oversight challenges for agencies and
stakeholders, and oversight challenges for Congress. The fees are still
governed by separate, dissimilar authorizing legislation and are
administered by multiple executive branch agencies and overseen by
multiple congressional committees. Agencies involved face difficulties
reimbursing the collections among their various appropriations because
there is disagreement on how to divide the receipts among them and
because the process of transferring the funds from one agency to
another complicates agency budget execution. Finally, airports and
airlines play an important role in both facilitating inspections and in
fee collection and remittance, but they have limited substantive
interaction with the three agencies. This contributes to
misunderstandings, skepticism, and confusion about how the fees work
and what activities they may fund.
A Complicated Network of Decision Makers Administer and Oversee These
Fees:
Although the passenger inspections themselves have largely been
consolidated, administrative authority remains divided. The Treasury
Department, from which the legacy U.S. Customs Service was transferred,
retained administrative authority over the customs fee, although most
of these duties have been delegated to DHS.[Footnote 13] The Department
of Agriculture's APHIS retained administrative authority over the
agriculture inspection fee, although a majority of the fee collections
is transferred to CBP to cover the cost of agriculture quarantine
inspections. The administrative authority for the immigration passenger
inspection fee was transferred to CBP, but CBP and ICE divide the
immigration fee collections.
Table 1 shows the differences in authorizing statute, rate,
congressional committees of jurisdiction, and administrative authority.
Table 1: Passenger Inspection Fees' Legislative Authorities,
Congressional Jurisdiction, and Fee Adjustments:
Passenger inspection fee: Customs;
Authorizing legislation and amendments to rates and disposition of
fees: Consolidated Omnibus Reconciliation Act (COBRA) of 1985, Pub. L.
No. 99-272, as amended by:
* Omnibus Budget Reconciliation Act of 1986, Pub. L. No. 99-509;
* Omnibus Budget Reconciliation Act of 1987, Pub. L. No. 100-203;
* The Customs and Trade Act of 1990, Pub. L. No. 101-382;
*Omnibus Budget Reconciliation Act of 1993, Pub. L. No. 103-66;
* The North American Free Trade Agreement Implementation Act, Pub. L.
No. 103-182;
* Uruguay Round Agreements Act, Pub. L. No. 103-465;
* Miscellaneous Trade and Technical Corrections Act of 1996, Pub. L.
No. 104-295; Pub. L. No. 105-150;
* Miscellaneous Trade and Technical Corrections Act of 1999, Pub. L.
No. 106-36;
* Homeland Security Act of 2002, Pub. L. No. 107-296; and:
* The American Jobs Creation Act of 2004, Pub. L. No. 108-357.
(COBRA customs user fees authority is currently set to expire Sept. 30,
2014.);
Per-passenger fee rates and adjustments: August 1986 through fiscal
year 1993: $5.00.
Fiscal years 1994-1997: $6.50.
Fiscal years 1998-2005: $5.00.
Fiscal years 2006-2014: Congress authorized the Secretary of Treasury
to raise the fee from $5.00 to $5.50 and the Secretary did so;
Authority to adjust fee: Congress; Congressional oversight: House Ways
and Means Committee.
Senate Finance Committee; Administrative authority: Delegated by the
Department of Treasury to the Department of Homeland Security (DHS).
Passenger inspection fee: Immigration;
Authorizing legislation and amendments to rates and disposition of
fees: The Department of Justice Appropriation Act of 1987, Pub. L. No.
99-500, as amended by:
* Departments of Commerce, Justice, and State, the Judiciary, and
Related Agencies Appropriations Act, 1994, Pub. L. No. 103-121; and:
* The Departments of Commerce, Justice, and State, the Judiciary, and
Related Agencies Appropriations Act, 2002, Pub. L. No. 107-77;
Per-passenger fee rates and adjustments: From 1987 to 1993: $5.00.
In 1993: raised from $5.00 to $6.00.
In 2002: raised from $6.00 to $7.00;
Authority to adjust fee: Congress;
Congressional oversight: Judiciary Committees.
Homeland Security Committees.
House Ways and Means Committee.
Senate Finance Committee;
Administrative authority: DHS.
Passenger inspection fee: Agriculture;
Authorizing legislation and amendments to rates and disposition of
fees: The Food, Agriculture, Conservation and Trade (FACT) Act of 1990,
Pub. L. No. 101-624, as amended by:
* Omnibus Reconciliation Act of 1990, Pub. L. No. 101- 508;
* Food, Agriculture, Conservation, and Trade Act Amendments of 1991,
Pub. L. No. 102-237;
* The Federal Agriculture Improvement and Reform Act of 1996, Pub. L.
No. 104-127; and:
* Farm Security and Rural Investment Act of 2002, Pub. L. No. 107-171;
Per-passenger fee rates and adjustments: Set at $2.00 in 1991.
Reduced to $1.45 in 1993.
In 1997, raised to $1.95 for fiscal year 1997, and; raised to $2.00 for
fiscal years 1998-1999; In 1999 raised to $3.00 from January 1, 2000-
September 30, 2001; and to $3.10 after October 1, 2001.
In 2005: raised to $4.95 through September 2005, then to $5.00 (rate
effective through end of fiscal year 2010);
Authority to adjust fee: Department of Agriculture;
Congressional oversight: Agriculture Committees.
House Ways and Means Committee.
Senate Finance Committee;
Administrative authority: Department of Agriculture.
Source: GAO.
[End of table]
Although the agencies are required to report to Congress on their
respective fees, Congress lacks a comprehensive picture of all three
fees because the agencies report separately. Both the Office of
Management and Budget (OMB) Circular A-25 and the Chief Financial
Officers Act of 1990 (CFO Act) require an agency to review its user
fees biennially and make recommendations on topics such as revising the
fees to reflect costs incurred. 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 14]
However, when CBP issued its user fee review it only reported on the
customs fee, the portion of the agriculture fee it received, and the
immigration fee. Further, 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 that time.
APHIS's review included the entire agriculture fee.[Footnote 15] As a
result, the eight congressional committees that oversee the inspection
fees do not have a complete picture as to whether the fees work in
concert or conflict with each other.[Footnote 16]
Agencies Disagree on How to Divide and Distribute the Fees:
Although the immigration fee may be used for any immigration inspection
activity, ICE officials said that they do not receive sufficient
immigration fee collections to cover their reimbursable activities.
Principles of effective user fee design suggest that user fees should
be set at a rate to cover allowable costs as a way of ensuring the fee
is as efficient as possible. Instead, however, ICE officials said they
rely on appropriated funds to cover the gap between fee collections and
costs. By law, ICE uses appropriated money for fee-reimbursable
expenses and then refunds the appropriations when user fees are
received. They are also permitted to use appropriations if fees are
insufficient to cover inspection costs. ICE officials said that
although they have not finalized their activity cost analysis, the
preliminary data shows that ICE's current portion of the fee
collections is not sufficient to fully refund the appropriations used
and demonstrates that ICE should receive a greater proportion of the
immigration user fee funds. CBP officials do not agree with the
preliminary assessment.[Footnote 17] CBP officials told us that the
immigration fee collections CBP receives are sufficient to cover the
cost of CBP's immigration-related reimbursable activities. In fact,
CBP's data show that its portion of the immigration fee collections
were 1 percent more than CBP's immigration inspection costs for fiscal
year 2006. Until ICE completes its cost analysis, it will not be known
whether the immigration fee is set at a rate that covers the total cost
of both CBP and ICE's immigration activities.
CBP and APHIS disagree on how future collections should be estimated
and how the fees are subsequently distributed. CBP and APHIS use
different rates of passenger volume increases to calculate the costs of
covered activities. APHIS--the agency responsible for setting the
agriculture fee--estimates future international air passenger volumes
by extrapolating historical growth, whereas CBP primarily uses Federal
Aviation Administration's (FAA) passenger volume forecast and
collection trends. In the December 2004 interim rule for the January
2005 fee adjustment, for example, APHIS forecast passenger volume to
increase by 1.18 percent per year for fiscal years 2005 through 2010,
which was the average volume increase for fiscal years 1999 through
2003. In contrast, CBP projected a 4.7 to 4.8 percent annual growth.
The resulting higher passenger volume estimate leads to higher total
collections estimates by CBP than the one APHIS uses. CBP officials
said that in 2004, 2005, and 2006 actual collections were higher than
APHIS's forecast by $17 million, $11 million, and $12 million,
respectively. CBP officials said 2007 collections to-date are also $13
million higher than forecasted, and APHIS officials told us they would
make additional transfers to CBP to distribute the extra collections.
CBP officials said that if the agriculture fee estimates tracked actual
collections better, CBP would receive more money earlier in the year
rather than toward the end of the fiscal year, which would allow CBP to
better plan for its use. However, APHIS officials said the more
conservative forecasting approach was appropriate since they do not
receive appropriations for these activities and must be able to provide
the services even if fee collections should decline.[Footnote 18] Table
2 shows the bimonthly transfers for November 2005 through August 2006,
and the additional year-end transfer of additional fees.
Table 2: Bimonthly Transfers of Agriculture Fees from APHIS to CBP,
Including Additional Lump Sum in August:
Bimonthly transfer: November 2005;
Agriculture user fees transferred to CBP: $35,186,667.
Bimonthly transfer: January 2006;
Agriculture user fees transferred to CBP: 35,186,667.
Bimonthly transfer: March 2006;
Agriculture user fees transferred to CBP: 35,186,667.
Bimonthly transfer: May 2006;
Agriculture user fees transferred to CBP: 40,931,000.
Bimonthly transfer: July 2006;
Agriculture user fees transferred to CBP: 40,931,000.
Bimonthly transfer: August 2006;
Agriculture user fees transferred to CBP: 40,930,999.
Bimonthly transfer: August 2006[A] (excess transfer);
Agriculture user fees transferred to CBP: 12,191,000.
Source: CBP and APHIS data.
[A] CBP officials said this transfer was scheduled for August 2006 but
did not occur until September 2006.
[End of table]
Agencies divide and distribute the fees as specified in memoranda. CBP
and APHIS, and CBP and ICE signed a memorandum of agreement (MOA) /
memorandum of understanding (MOU) establishing a process for fee
distribution. The Homeland Security Act of 2002 requires an agreement
between the Secretaries governing the transfer of agriculture user fee
funds from the Department of Agriculture to DHS for DHS's agriculture
quarantine inspection activities. The most recent MOA, dated 2007,
documents the fee distribution: 60.64 percent of total agriculture
passenger inspection fees were allotted to CBP and 39.36 percent to
APHIS.[Footnote 19] Per the MOA, APHIS transfers CBP's portion via a
bimonthly transfer. Although we reported in May 2006 that APHIS did not
always make regular transfers to CBP,[Footnote 20] we found that these
issues have generally been resolved. The CBP/ICE memo allotted 82.63
percent of total immigration fee collections to CBP and 17.37 percent
to ICE, and required CBP to submit monthly warrants to the Treasury to
initiate the distribution of the immigration fees between ICE and CBP.
However, the extent, quality, and results of agency coordination
differ. The CBP/APHIS MOA requires the agencies to periodically
exchange cost information. Specifically, CBP is required to submit to
APHIS at the end of each quarter an accounting of the costs of its
agriculture quarantine inspection activities. APHIS is also required to
submit to CBP a quarterly and annual report on both agriculture user
fee collections by activity and associated costs of the agriculture
quarantine inspection fees. Officials told us that these requirements
are important to help them address issues such as changing workloads
and costs, and the MOA has been updated accordingly. CBP and APHIS's
experience is consistent with our past work on agency coordination,
which states that optimal coordination requires agencies to establish
compatible policies and procedures and communicate frequently.[Footnote
21] Such communication is critical, as evidenced by our recent report
on APHIS and CBP management coordination issues, which found that the
agencies' coordination problems sometimes result in operational
weaknesses that increase the vulnerability of United States agriculture
to foreign pests and disease.[Footnote 22] In contrast, the CBP/ICE MOU
is much less specific and lacks important elements present in the
CBP/APHIS MOA. For example, the CBP/ICE MOU only states that, "ICE and
CBP agree to provide each other reports on the total amounts of
immigration user fees received to ensure that such receipts are
equitably split." ICE officials said the MOU was primarily intended to
set up the initial transfer of immigration fee collections from the
newly formed ICE to CBP and was not designed to address how CBP and ICE
would regularly coordinate on the immigration fee.
Even if agencies generate complete cost data and agree on how to divide
collections between them, the precise activities associated with
inspections--and the costs of those activities--can change over time.
Legislation, regulations, or agency agreements governing a fee should
ideally contain a mechanism for adjusting user fee rates that is
flexible and timely enough to allow for periodic review and, as
appropriate, adjustment. The CBP/APHIS MOA requires both agencies to
appoint Chief Budget Liaisons who must hold "quarterly and annual face-
to-face meetings where both parties would share and analyze their
respective program costs — " so that the proportions can be reviewed
and adjusted as appropriate. Through this coordination, CBP received an
additional 1.31 percent in agricultural passenger inspection fees,
pursuant to approval by both agencies, after actual fee collections
exceeded projections. ICE officials told us that, at the time of the
transition to DHS, ICE requested that the MOU be renegotiated every 2
years; however, the CBP/ICE MOU does not include any provision to
renegotiate, and CBP and ICE officials have not regularly met to
discuss potential adjustments to each agency's portion of the fee.
Distributing Fees among Agencies Has Implications for Agency Budget
Execution:
Airlines remit collections of the customs and immigration user fees to
CBP and the agriculture fees to APHIS. The three fees are remitted to
the government quarterly, except for the last quarter, when the
immigration fees collected to-date are remitted 10 days before the end
of the fiscal year, with the remaining fees collected in the fourth
quarter remitted along with the first quarter payment of the next
fiscal year. By law, each of the three passenger inspection fees is
deposited into a separate account. Therefore CBP must transfer ICE's
portion of the immigration fees to reimburse ICE's appropriations, and
APHIS must transfer CBP's portion of the agriculture passenger
inspection fee to reimburse CBP's appropriations. CBP officials told us
that CBP has more flexibility in spending customs fees than immigration
and agriculture fees, partly because of the fees' budgetary treatment
and partly because of the interagency transfer process for the APHIS
fee.[Footnote 23] The customs fee is subject to an automatic warrant
process, wherein within 5 business days Treasury confirms the total
amount remitted and then the fees are directly reimbursed to CBP
appropriations to spend from right away. In contrast, CBP's immigration
and agriculture activities are funded on a reimbursable basis by CBP's
portion of the respective fees. Therefore, CBP initially uses
appropriations to cover the cost of the agriculture quarantine and
immigration inspections and then reimburses the appropriations accounts
from the immigration and agriculture user fee accounts. To ensure that
they reimburse from the correct fee account, CBP officers track time
spent on customs, agriculture quarantine, and immigration activities,
respectively.[Footnote 24]
CBP officials said that the quarterly remittance schedule--which is
exacerbated by the fourth quarter remittance schedule for the
immigration fee--contributes to a several-month delay between use of
the appropriated funds and receipt of the reimbursement from the
immigration and agriculture user fee accounts, which has delayed CBP's
ability to spend funds on critical mission areas such as hiring
personnel, purchasing equipment, or travel. For example, CBP officials
told us of instances where they had to delay entering into a contract
because of cash-flow issues resulting from the delay in fee
reimbursement. They also said transferring funds between budget
accounts creates administrative rework. To address these challenges,
CBP told us it is requesting in its draft legislative proposal direct
reimbursement authority for the immigration and agriculture quarantine
activities it conducts.
Inconsistent Passenger Exemptions among the Fees and Record-Keeping
Requirements for Airlines Complicate Remittance and Verification:
Inconsistencies in passenger exemptions and definitions across the
three fees make administering the fees difficult. Each statute
specifies the same standard passenger exemptions for each fee, but
there are additional exemptions for the customs fee. Passengers from
Canada, Mexico, and U.S. territories and adjacent islands are exempt
from the customs fee but not from the immigration or agriculture
fees.[Footnote 25] (See table 3). For instance, a passenger arriving
from the Bahamas must pay the immigration and agriculture fee, but not
the customs fee. Aspects of a fee, such as country of origin
exemptions, may promote certain policy goals. However, complex fee
structures--like the variations in passenger exemptions--can increase
administrative costs and potential for error and complicate the audit
process since CBP must reconcile the remittance for a single passenger
with different exemptions rules. It is important to understand the
likely administrative and operational consequences of a fee's design in
order to address and mitigate challenges.
Table 3: Air Passenger Exemptions:
Geographic exemptions: Passengers originating in Canada, Mexico, a
territory or possession of the United States: American Samoa, Guam, the
Northern Mariana Islands, Puerto Rico, and the U.S. Virgin Islands;
or any adjacent island: Saint Pierre, Miquelon, Cuba, the Dominican
Republic, Haiti, Bermuda, the Bahamas, Barbados, Jamaica, the Windward
and Leeward Islands, Trinidad, Martinique, and other British, French,
and Netherlands territory or possessions in or bordering on the
Caribbean Sea;
Customs: X;
Immigration: [Empty];
Agriculture: [Empty].
Geographic exemptions: Passengers moving from the U.S. Virgin Islands
to Puerto Rico;
Customs: X;
Immigration: X;
Agriculture: X.
Geographic exemptions: Passengers moving between Alaska, Hawaii, Puerto
Rico, Guam, the U.S. Virgin Islands, and the continental United
States[A];
Customs: X;
Immigration: X;
Agriculture: [Empty].
Standard exemptions: On-duty crew members;
Customs: X;
Immigration: X;
Agriculture: X.
Standard exemptions: Airline employees traveling on official business;
Customs: X;
Immigration: X;
Agriculture: X.
Standard exemptions: Diplomats, except U.S. diplomats;
Customs: X;
Immigration: X;
Agriculture: X.
Standard exemptions: Passengers arriving on commercial aircraft used
exclusively in government service (U.S. or foreign);
Customs: X;
Immigration: X;
Agriculture: X.
Standard exemptions: Passengers arriving on an aircraft due to
emergency or forced landing when original destination was a foreign
port;
Customs: X;
Immigration: X;
Agriculture: X.
Source: GAO analysis of authorized statutes and governing regulations.
[A] The agriculture fee exempts passengers from all of these locations
except Guam.
[End of table]
CBP officials said its draft legislative proposal recommends
eliminating the customs-specific country of origin exemptions.[Footnote
26] The airline industry officials we spoke with generally support this
change and said the administrative transition costs would be minimal,
since calculations are automated and could be easily adjusted to
accommodate this type of change.
In response to Treasury Inspector General recommendations, the audit
function was consolidated before the inspection functions themselves
were consolidated, creating efficiencies and simplifying the process
for government and industry alike by having only one agency audit all
three fees concurrently. However, the improvement was limited because
the regulations for each of the fees still specify different airline
record-keeping requirements for audit purposes. Airlines must retain
customs documentation for 5 years and immigration documentation for 2
years. There is no time period specified for airline documentation for
the agriculture fees. Both CBP and airline officials said inconsistent
record-keeping requirements impose an unnecessary administrative burden
on both parties. Airline officials told us that the custom fee's 5-year
document retention requirement is especially burdensome.
Air Travel Stakeholders Play an Important Role in the Process, but
Mechanisms for Ensuring Substantive Stakeholder Communication and
Information Exchange Are Fragmented and Reportedly Insufficient:
The administering agencies use separate, different processes for
communicating with stakeholders, including soliciting stakeholder
feedback on proposed adjustments to the fees, an area of great interest
to stakeholders. However, stakeholders report that these disjointed
mechanisms for two-way communication are insufficient. CBP uses the
Airport and Seaport Inspections User Fee Advisory Committee (Advisory
Committee)[Footnote 27] to solicit stakeholder perspectives, but limits
the breadth of the Advisory Committee by discussing only the customs
fee and CBP's portion of the immigration and agriculture fees.[Footnote
28] ICE is not included in planning these Advisory Committee meetings
even though the legacy Department of Justice immigration fee advisory
committee was combined with the customs advisory committee when
immigration functions were transferred to DHS. ICE officials said they
were not aware that a meeting had been scheduled and were not consulted
on the agenda, even though their user fee statute specifies that they
meet regularly with stakeholders. ICE officials attended the June 2007
Advisory Committee meeting but did not participate in the presentations
and had not been involved in the planning or agenda-setting for the
meeting.[Footnote 29] APHIS is also not included in planning Advisory
Committee meetings. APHIS officials said issues pertaining to the
agricultural inspection fee are handled by CBP's liaison to APHIS, but
no one from this office attended the June 2007 meeting. CBP officials
said CBP met the notification requirements of the Federal Advisory
Committee Act[Footnote 30] by publishing notice of the meeting date and
the agenda in the Federal Register.
APHIS provides information about inspection costs and receives
stakeholder input on proposed changes to the agriculture fee through
public notice and comment under the federal rule-making process. APHIS
officials also told us that they meet informally with stakeholders when
issues arise, particularly in the field, and that this informal
consultation is sufficient for their purposes, but our audit work
indicates otherwise. For the past two adjustments, however APHIS has
adjusted the fees through interim final rules, an option within the
regulatory process that allows an agency, for "good cause" to make a
rule change effective before receiving public comment. That is, the
increase took effect before stakeholders had an opportunity to
comment.[Footnote 31] For example, on December 9, 2004, APHIS published
an interim final rule in the Federal Register proposing to increase the
agriculture passenger inspection fee from $3.10 in 2004 to $4.95 in
2005 and to $5.00 per passenger for 2006 to 2010. The change was
effective January 1, 2005, although comments received by February 7,
2005, would be considered before the final rule was issued. In another
instance, APHIS eliminated the fee exemption for passengers originating
in Canada by means of an interim final rule published in the Federal
Register in August 2006, which stated that it was effective November
24, 2006, and comments received by November 24, 2006, would be
considered.[Footnote 32]
APHIS's use of the "good cause" exemptions to issue interim final rules
limits stakeholder input. Stakeholders said they do not feel their
comments are taken into account since the Department of Agriculture
adjusts the fee before even soliciting feedback and the final rule
matches the interim one regardless of stakeholder feedback.
Furthermore, we have previously reported that nonfederal stakeholders
believe relying solely on notice and comment through the Federal
Register is insufficient for obtaining stakeholder input.[Footnote 33]
When agencies do not effectively communicate their analysis and
results, they miss the opportunity to obtain meaningful comments that
could affect the outcome of their regulatory changes. Without showing
the underlying analysis, the agencies' conclusions may lack
credibility.
ICE and APHIS officials told us that air travel stakeholders have
little information on their respective activities and fees and
generally do not understand how these fees work or what they are
intended to fund. As we will discuss in the next section, CBP
stakeholders also do not have a clear understanding of how the customs
fee works and what activities it may fund.[Footnote 34] For example,
officials said the agriculture quarantine inspection function has
become less transparent to air passengers and stakeholders since CBP
officers all wear the same uniform and conduct the primary customs,
immigration, and agriculture quarantine inspections--and not all
passengers are identified for an agriculture-related secondary
inspection. Similarly, many of the inspection activities retained by
APHIS and ICE are not visible to most passengers or stakeholders during
the actual inspection process.
Stakeholders said the Advisory Committee meetings had declined in value
since INS ran them because cost and full time equivalent (FTE)
information is no longer provided. 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. Airport, airline, and industry officials said they have
requested information about passenger inspection activities or the cost
of these activities. As a result, they feel they lack data necessary to
know whether the passenger inspection fees are set fairly or
accurately, or are being spent on the appropriate activities.
Specific Aspects of the Individual Passenger Inspection Fees Should Be
Addressed Prior to or in Concert with Any Consolidation Effort:
Some difficulties with these fees arise not because the fees are
separate but because of factors that are specific to the individual
passenger inspection fees. First of all, by statute, the customs fees
are available for limited purposes. Not all of these purposes are
associated with conducting inspections, and not all inspection
activities are reimbursable. Even if all the costs were reimburseable,
according to CBP, the fees collected still would not cover the full
inspection costs. This misalignment, coupled with the problems in
stakeholder communication described in the previous section, have
created confusion and misunderstandings, and in some cases the
misimpression among stakeholders that CBP in particular is using the
air passenger fee collections inappropriately. Furthermore, the
collection process itself is complex and presents challenges for CBP
and the airlines. Finally, the tools provided to the agencies to ensure
the airlines' compliance are not applied consistently and, contrary to
strategies associated with effective incentives and penalties, do not
provide progressively stronger disincentives for noncompliance (i.e., a
graduated penalty system).
There Is a Disconnect between What Customs User Fees Can Pay for and
Activities Involved in Customs Inspections:
The activities that can be funded by passenger inspection collections
vary among the fees and are specified in statute. Principles of
effective user fee design suggest that fees should be aligned with the
costs of the activities for which the fee is collected. The agriculture
and immigration statutes generally permit the Secretaries of
Agriculture and Homeland Security to cover costs associated with
agricultural and immigration inspection activities.[Footnote 35] In
contrast, the customs user fee collections are available for limited
purposes. Under the customs authorizing statute, passenger inspection
fee collections are only available to reimburse appropriations for a
limited, prioritized set of activities, including general deficit
reduction, overtime and premium pay, retirement and disability
contributions, preclearance services, and foreign language proficiency
awards. Customs inspection-related activities that occur while a CBP
officer is earning overtime, premium pay, or during preclearance can be
funded by the user fees, but the customs fee is not authorized to fund
customs-inspection activities that occur beyond these times.[Footnote
36] Moreover, the customs air passenger fee can be used for overtime
and premium pay as well as retirement and disability contributions for
CBP officers for time spent conducting inspections regardless of
whether the CBP officers are inspecting passengers at air, sea, or land
ports of entry. Therefore, under current law not all activities that
may be funded from the customs fee (see table 4) are necessarily
associated with conducting air passenger inspections (see table 5), and
not all inspection activities are reimbursable, that is, can be covered
by funds from the user fee account.[Footnote 37]
Table 4: Legal Availability of Customs Passenger User Fee[A]:
Customs user fees availability limited to (in specified order of
priority):
(1) 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.
(2) Reimbursements to appropriations for:
* overtime compensation;
* certain premium pay costs;
* retirement and disability contributions;
* all unreimburseable preclearance services, and;
* foreign language proficiency awards.
(3) To the extent funds remain available after reimbursements to
appropriations (listed in (2) above), user fees are further available
for:
* providing full-and part-time salaries for inspections personnel and
equipment that enhance customs services for persons or entities
required to pay fees generally for commercial vessels; trucks; railroad
cars; private vessels or private aircraft; commercial passenger
inspections; dutiable mail; customs broker permits; and barge or other
bulk carriers.
(4) To the extent funds remain available after reimbursements to
appropriations (listed in (3) above), user fees are further available
for:
* 50 full-time equivalent inspectional positions to provide
preclearance services.
Source: GAO analysis of legislation and CBP data.
[A] 19 U.S.C. § 58c(f).
[End of table]
Table 5: Actual Customs Air Passenger Inspection Activities:
Air fee audits--passenger.
Antiterrorism--passenger;
For customs-related passenger analysis unit activities and customs-
related anti-terrorism-passenger/nonpassenger activities.
Contraband enforcement team activities in passenger: seizure processing
by canine officers;
All canine officer activities involving the removing, testing, weighing
of narcotics during seizure processing. And CBP officer (canine)
functions: all activities involving the daily or reoccurring needs of
detector dogs such as veterinary exams, feeding, grooming, etc.
Entrance--aircraft: entrance/clearance - commercial aircraft (PAX);
Processing of entry control documents, general declarations, clearance
numbers, and collection of fees.
Examine--compliant passengers;
For customs-related primary inspection.
Examine--noncompliance passengers;
For customs-related seizure/ penalty case processing, for customs-
related processing of seizures and arrests, for customs-related
secondary inspections, hospital detail: processing and transporting of
passengers to the hospital for examination/detention; monitoring and
security of detainees and arrestees at the hospital, and for customs-
related court time.
Identify--for customs-related roving.
Informed compliance--for customs canine-related (K9) informed
compliance and outreach and for customs-related informed compliance and
outreach.
Military personnel--military aircraft;
All activities associated with the processing of military personnel and
military aircraft. Includes primary and secondary functions and also
includes CARNETS, informal entry, Temporary Importation under Bond
(TIB), other government agency processing, left over baggage clearance,
duty calculations, collections, 14-point intensive exams, currency
forms, currency verification, STOP, Blitzes, 7/14s inspections, COMPEX;
sanctions and embargos for OFAC; munitions, dual use materials, with
military applications and chemicals. Military Vessels: all activities
associated with the processing of military personnel and military
vessels. Includes primary and secondary functions. Also includes
CARNETS, informal entry, TIB, other government agency processing, left
over baggage clearance, duty calculations, collections, 14-point
intensive exams, currency forms, currency verification, STOP, Blitzes,
7/14s inspections, COMPEX; sanctions and embargos for OFAC; munitions,
dual- use materials, with military applications and chemicals.
Nonintrusive technology--passenger: for customs-related non-intrusive
technology--(PAX).
Other Activities--airport security and safety;
Officers assigned to work within the airport security office,
processing of applications and fingerprinting of airport applicants;
ramp security; internal conspiracy operations. Program administration
for shared intelligence operations. Multi-agency taskforce,
information, participation in technical training with foreign
governments. Coordination, integration, cooperation with other federal
agencies and international task forces.
Source: CBP.
[End of table]
Even if the customs fee was limited to funding the customs air
passenger inspection activities, according to CBP, for fiscal year 2006
it would have only covered about 72 percent of total inspection costs.
After the April 2007 fee increase, CBP estimates that the fee would
still need to increase an additional 39 percent to cover total costs.
Therefore, customs inspection-related activities are generally funded
by appropriations from general revenues, limiting funds available for
other federal priorities. However, CBP officials also said that customs
fee collections would fully cover current inspection costs if the
country-of-origin exemption for Canada, Mexico, and the adjacent
islands were lifted.
Another difference between the customs fee and the other two passenger
inspection fees is that although the immigration and agriculture fees
are to be used for any costs related to inspection activities (referred
to in this report as full cost recovery fees), the customs fee is
structured to recover only a portion of the cost of the customs
inspection activities (referred to in this report as a partial cost
recovery fee). In its draft legislative proposal, CBP officials said it
will request both the authority to recover the full costs of the
customs inspections and to fund all international air passenger
inspection-related activities. Stakeholders said they would support
these changes, which helps bring the customs fee more in line with
principles of effective user fee design, but were concerned that the
agencies do not have reliable cost data to determine the actual cost of
conducting inspections.[Footnote 38]
Passenger exemptions are also factors in whether fee collections can
recover the costs of inspections. As previously discussed, passengers
whose travel into the United States originates in Canada are exempt
from paying the customs fee. Since exempt passengers receive but do not
pay for inspections, either nonexempt passengers bear these costs by
paying higher fees, or the inspections must be funded with
appropriations.[Footnote 39] Although passengers originating in Canada
are often "precleared"--meaning that passengers are inspected before
departing Canada rather than upon arrival in the United States[Footnote
40]--preclearance inspections are allowable reimbursable activities per
the customs inspection fee statute. Therefore, passengers originating
in Canada are exempted from paying the customs inspection fee, even
though their inspections are funded by it.
Airlines Collect Fees When Tickets Are Sold Rather Than When Passengers
Travel, Which Makes It Difficult for Agencies to Verify Collection and
Payment:
Despite a unified collection process for the three fees, CBP faces
challenges in verifying individual passenger payment and accurately
determining each airline's liability. By law, the ticket seller (i.e.,
the airline or ticket agent) must collect the applicable passenger
inspection fees from the passenger at the time the ticket is
sold.[Footnote 41] Tickets can be sold up to a year in advance, and CBP
has no independent documentation on which to calculate liability.
Therefore, CBP cannot match the fees paid to individual
passengers.[Footnote 42] The only way CBP can independently confirm
that passengers traveling to the United States have paid the requisite
inspection fees is through postremittance audits. To remedy this, CBP
would like to move to a system wherein airlines remit fees based on the
passengers transported into the United States. CBP could then track the
remittances to the number of passengers per flight by comparing them to
the airplane manifest data and "onboard" counts that airlines already
provide to CBP. According to CBP officials, if the fees were remitted
based on passengers transported, there would be little need for
auditing carrier remittance since CBP would be able to automatically
calculate and verify airline liability.
Airline and Air Transport Association (ATA) officials with whom we
spoke said that changing from a ticket-based collection system to a
passenger-transported collection system poses challenges to airlines.
First, the airline that transports the passenger is not always the
airline that sold the ticket. This means that in a manifest-based
system the airline responsible for remitting a fee might not be the
airline that collected it from the passenger. Nearly all United States
airlines use the "interlining" system, in which one airline can
contract with another to provide transportation for one or more
segments of a passenger's journey. Under the current ticket-based
collection system, on an interlined ticket the airline that sells the
ticket remits the fee, regardless of which airline transports the
passenger into the United States. For example, a passenger who
purchases a Madrid-Paris-New York ticket from ABC airline pays the fee
to ABC airline even if he flies ABC from Madrid to Paris and XYZ from
Paris to New York. Airline ABC is liable for the fee and remits it to
the U.S. government. However, under CBP's original proposed passenger-
transported system, the liability for remitting the fee would fall on
airline XYZ--the airline that brought the passenger into the country--
even though ABC airline sold the ticket and collected the fee.[Footnote
43] As a result, airline XYZ--the airline that transported the
passenger into the United States--would have to ensure not only that
ABC paid airline XYZ for the ticket but also that it collected and
transferred the correct fees.
According to CBP officials many foreign-owned airlines already remit
the fees based on passengers transported, though these payments are in
violation of the statute, and the International Air Transport
Association (IATA) reports that the manifest-based remittance system is
common in other countries that collect similar fees.[Footnote 44]
Nevertheless, airlines and ATA officials said that transition costs
would be significant--though limited to the first year--because
airlines begin selling tickets for a flight 1 year in advance, and as a
result they would have to maintain two separate remittance systems--
ticket-based and passenger-transported-based--for a full year. Airlines
question the need for such a change. Officials from two major airlines
noted that CBP's audits put their remittance error rate at less than 1
percent. CBP officials concur that for the six to seven major domestic
airlines the remittance error rate is extremely low, but as we will
discuss, error and timely remittance rates for small and medium-sized
airlines are more problematic. A shift to a passenger- transported
system would, they argue, increase the ability of CBP's finance office
to determine the compliance of smaller airlines and potentially reduce
CBP's audit costs.
In addition, the airlines also see fee collection as a cost they incur
over and above the cost of the audits. To help offset collection costs,
airlines are permitted to keep the "interest float"--that is, the
interest income that accrues between the quarterly remittances. Airline
representatives view this as minimal for two reasons. First, in the
recent era of low interest rates, the interest float is small; airline
officials told us that it covered as little as 38 percent of collection
costs. This would decline even further if CBP moves to monthly
remittance as it suggests it will in its legislative proposal. Second,
airline and airline industry officials said credit card transaction
fees averaging 2.15 percent on the total transaction--including taxes
and fees as well as the ticket price--further reduce the benefit.
Another user fee collected by airlines on behalf of the government--the
passenger facility charges[Footnote 45] (PFC)--has a provision that is
designed to compensate for the actual cost of collections, in addition
to the interest float. The airlines told us they would prefer this type
of direct compensation for their collection role, similar to the PFC.
Compliance Tools Do Not Provide a Graduated Penalty System to Encourage
Airline Remittance:
The tools used to ensure airline compliance do not provide optimal
incentives for airlines to make accurate and timely payments. We have
previously reported that rewards and penalties should correspond to
performance.[Footnote 46] Although each fee contains enforcement
mechanisms meant to encourage airlines to remit the correct fee amount
on time--namely the carrier bond associated with the customs fee, the
denial of landing rights for the customs and immigration fees, and the
penalties and interest associated with the agriculture and immigration
fees--none are designed in this manner. For the customs fee, CBP is
authorized to require airlines to maintain a carrier bond, which is
used both to enforce payment of inspection fees and to encourage
airlines to comply with inspection-related requirements, such as
submitting complete Advance Passenger Information System (APIS) data
prior to takeoff. In addition, airlines that do not remit the customs
fee timely--or not at all--are charged liquidated damages for breach of
bond conditions that are equal to twice the fee amount owed for each
violation, whether it is the first violation or a repeat violation. CBP
officials said they have issued liquidated damages against 20-25
airlines on average per quarter since 2003 for late payment or
nonpayment.[Footnote 47]
For the immigration and agriculture fees, the agencies may require
airlines to pay interest and penalties because of late payment or
nonpayment. CBP officials said the interest and penalty rates charged
for late payments are set by the Treasury Department and do not provide
for increasing interest or penalty rates, or both, for repeated
instances of late or nonpayment.[Footnote 48] Thus an airline that
repeatedly pays late--or not at all--is charged the same interest and
penalty amount each time, which may just offset the interest the
airline earned by not remitting user fee collections in the first
place. Therefore, CBP officials said the penalty is not high enough to
discourage violations.
CBP is also authorized to deny landing rights if the airline does not
remit customs and immigration fees. However, this tool suffers from the
very opposite design flaw: it is perceived to be too severe to invoke.
CBP officials said that denying landing rights is such a severe penalty
that its very existence--infrequent application notwithstanding--is
effective enough to discourage late payment or nonpayment of passenger
inspection fees by the airlines. However, even in cases of carrier
nonremittance or chronic late remittance, CBP officials said CBP has
threatened to use this authority to deny landing rights on four
occasions--twice against the same airline--in nearly 20 years. Three of
these instances occurred in 2007. We have previously reported that
penalties may lose their effectiveness and credibility over time if
they are not executed consistently.[Footnote 49]
CBP Does Not Employ a Systematic Process for Selecting Airlines for
Audit:
Officials said there is no standard set of criteria used to guide the
selection of airlines for audit. The audit function for all three
inspection fees is consolidated within CBP's Office of Regulatory
Audit, and all audits cover all three fees. Approximately 385 airlines
remit immigration and agriculture fees, and 290 airlines remit the
customs fee. CBP audits about 50 carriers annually to test for
compliance. CBP's Office of Finance recommends airlines for audit based
on a number of factors, including whether a carrier's remittance
dropped substantially from one quarter to the next, news articles about
changes in flights or airline financial issues, and prior audit
findings. Experience and judgment also come into play. Officials are
responsible for processing the same airlines' payments every quarter
and become "experts" on those airlines and the normal trends in their
remittances. Although this flexibility and individualized understanding
of the airlines is important, we have previously reported that
developing internal controls is key to minimizing the risks that may
prevent an agency from meeting its objective.[Footnote 50] Documenting
selection criteria could also protect the agency when experienced
officials leave the agency. CBP officials told us that although the
larger airlines generally present a much lower risk of noncompliance or
incomplete remittance, they are audited every couple of years because
the record-keeping requirements are so burdensome. In addition, if CBP
audited a large airline only once every 5 years, the audit would be
very resource-intensive. Nevertheless, the fact that there is
significantly more volatility in compliance by small and mid- sized
airlines and those offering seasonal flights means they require more
audit attention. For context, in a 5-year sample of 16
airlines,[Footnote 51] the 11 airlines with the smallest passenger
volume rate remitted the passenger inspection fees late 35 times. These
11 airlines represented 14.6 percent of total international passenger
volume--slightly larger than that of the single largest airline in the
sample.
Certain Elements Have the Potential to Undermine Any Effort to
Consolidate the Fees:
As we have discussed, the challenges related to the passenger
inspection user fees result both from inconsistencies among the fees--
making them difficult to administer--and from specific design elements
within the individual fees. For example, agencies face difficulties
distributing the fee collections, both because they disagree on how to
allocate the receipts among them, and because the process of
transferring the funds from one agency or appropriation to another
complicates agency budget execution. Moreover, the statutory structure
does not permit the administering agencies to easily verify collection
and payment, and the customs fee does not permit reimbursement for many
activities directly associated with air passenger inspections. These
issues should be considered regardless of whether the fees are
consolidated.
As discussed earlier, we have previously reported on a number of
principles that could inform efforts such as these to redesign or
consolidate these fees. Understanding the trade-offs inherent in
various fee design elements and the likely consequences of various
design choices with respect to efficiency, equity, revenue adequacy and
administrative burden can help policy makers carefully weigh the likely
effects of various policy decisions and move discussion and debate to a
more informed plane.
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. Any changes made to one fee should be designed to complement
rather than conflict with the other two fees. Moreover, although
whether and how to consolidate the international passenger inspection
fees is ultimately a policy decision Congress must make, it is
important to note that consolidating the passenger inspection fees
absent other changes will not eliminate some of the administrative and
operational challenges agencies and stakeholders currently encounter.
In some cases the origins of these challenges lie in the statutory
structure of the fees themselves, and not their lack of consolidation.
Any consolidation effort that neglects to consider these issues is
unlikely to have the desired effect:
* Unless agencies present a comprehensive picture of the three fees,
including the full scope of inspection activities and their costs,
Congress will 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 cost data and regular, formal opportunities to
share such information can prevent the agencies from addressing
existing issues, including differences in forecasting assumptions and
lack of agreement on activity costs, standardized audit selection
criteria, and the design and implementation of a graduated penalty
system to encourage and enforce airline compliance.
* More broadly, if agencies cannot determine whether these fees are
recovering costs, Congress cannot be sure that resources are allocated
to the activities it most values.
* Likewise, without substantive, transparent coordination between
agencies and stakeholders, agencies will not be able to effectively
address administrative burdens such as disparate airline record-keeping
requirements among the fees.
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 trade-
offs associated with various policy choices available to Congress
associated with amending the individual statutes related to passenger
inspection fees or consolidating all or part of them into a single
passenger inspection fee. 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.
Recommendations for Executive Action:
We recommend that the Secretaries of Agriculture and Homeland Security
take the following seven actions:
* direct CBP, ICE, and APHIS to make information on the estimated cost
of inspections as well as the basis for these cost estimates readily
available to affected parties to improve the transparency and
credibility--and hence the acceptance by stakeholders and payers--of
the processes for setting, collecting, and distributing the fees;
* direct CBP, ICE, and APHIS to collaborate on agendas, presentations,
and discussions with stakeholders for the CBP Airport and Seaport
Inspections User Fee Advisory Committee (Advisory Committee) meetings
in order to improve the usefulness of these meetings for both agencies
and fee stakeholders;
* consolidate reporting of the passenger inspection fees, 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 passenger inspection process;
* develop a legislative proposal in consultation with Congress on a
consolidated, graduated penalty system that reflects airline payment
history and includes specific administrative procedures regarding when
penalties should be invoked in order to improve the effectiveness of
the tools for enforcing payment of passenger inspection fees;
* develop a legislative proposal in consultation with Congress on a
single, common set of airline record-keeping requirements for all three
passenger inspection fees that reflects the consolidated audit function
for these fees and reduces the administrative burden on airlines;
* develop a legislative proposal in consultation with Congress to
eliminate key differences among the fourth quarter remittance
requirement for the immigration fee; and:
* develop and implement common assumptions used to forecast the
collections of agriculture quarantine inspection activities in order to
more closely tie the fee rate to CBP's and APHIS's agriculture fee
distribution to actual collections.
Further, we make the following three recommendations to the Secretary
of Homeland Security:
* develop and implement formal written guidance on factors to be
considered in selecting airlines for audit, including factors intended
to reflect the risk of non-or incomplete payment;
* complete development of and report on ICE's activity costs to ensure
the immigration fee is divided between ICE and CBP according to their
respective proportion of immigration inspection activity costs.
Further, if the study shows that immigration activity costs exceed
collections, develop a legislative proposal in consultation with
Congress to adjust the immigration fee to recover costs as closely as
possible, per statute; and:
* direct CBP and ICE to develop and implement a fee-sharing memorandum
of understanding (MOU) to include time frames for when funds would be
transferred and to provide for periodic review and update.
Matter for Congressional Consideration:
Congress should consider:
* harmonizing the passenger exemption and statutory definitions across
the various inspections fees,
* eliminating the differences among the three fees in the authority to
set fee rates,
* whether it wishes the customs fee to be a full cost recovery fee,
and:
* reviewing the activities that may be reimbursed by the customs fee
collections.
Agency Comments & Our Evaluation:
We provided a draft of this report to the Secretaries of the
Departments of Homeland Security (DHS) and Agriculture for review and
received comments from both agencies that are reprinted in appendixes
II and III. In addition, DHS provided technical corrections, which were
incorporated as appropriate. DHS and USDA concurred with our
recommendations, and provided additional comments for our
consideration. We also provided portions of the report for non-federal
stakeholder review and made technical corrections where appropriate.
While DHS concurred with our recommendations to work with Congress to
(1) develop a graduated penalty system, (2) develop a common set of
airline record-keeping requirements, (3) eliminate the differences in
the fourth quarter remittance requirements for airlines, and, if
needed, (4) increase the immigration passenger inspection fee, by
developing legislative proposals to address these issues, DHS officials
said implementing these individually could take several years and only
address the challenges in the air passenger environment. In
recommending these separately we did not intend to imply that they
should be addressed separately and recognize that the agencies could
address these issues in a single legislative proposal. Further, since
this engagement only reviewed air passenger inspection fees we limited
our recommendations to those fees.
We are sending copies of this report to the Secretaries of Homeland
Security and Agriculture 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 at (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 making major contributions to this report are listed
in appendix IV.
Signed by:
Susan J. Irving:
Director for Federal Budget Analysis, Strategic Issues:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
The objectives of this report were to identify how the three separate
passenger inspection user fees are set, collected, and distributed and
the benefits and challenges of this process for agencies and
stakeholders, and implications of consolidating these fees under the
Department of Homeland Security (DHS).
To meet these objectives, we reviewed the passenger inspection user fee
legislation and guidance, agency documents, and literature on user fee
design and implementation characteristics, and interviewed officials
responsible for managing user fees at the Customs and Border Protection
(CBP) offices in Washington, D.C., and from the New York/New Jersey,
Miami and Seattle Regional Offices, Immigration and Customs Enforcement
(ICE), and Animal and Plant Health Inspection Service (APHIS). We
observed the inspections process and interviewed CBP officials
responsible for port management and certain airport and airline
officials involved with international passenger processing or the three
passenger inspection fees. We did not assess the effectiveness of these
inspections. We reviewed audit and cost data related to air passenger
inspection activities. We also asked questions about CBP's and APHIS's
internal controls for the data we used and determined that the data are
sufficiently reliable for the purposes of this report. However, it was
beyond the scope of this report to evaluate the reliability of the cost
data for purposes beyond this report.
We also interviewed APHIS, CBP, and ICE officials responsible for
managing the user fees and auditing the user fee collections at DHS and
the Department of Agriculture.
We also met with officials from Continental Airlines, American
Airlines, Air Transport Association, International Air Transport
Association, Airports Council International-North America, Miami-Dade
County International Airport, New York/New Jersey Port Authority, Bush
Houston-Intercontinental International Airport, Dallas-Fort Worth
International Airport, San Francisco International Airport, and Seattle-
Tacoma International Airport. We also met with and reviewed documents
from the travel industry organization, the Discover America
Partnership.
To select the airlines and airports to meet with, we reviewed Bureau of
Transportation Statistics data on the volume of international air
passengers and number of international flights and consulted with
officials from government and industry associations. To select industry
stakeholders to meet with, we consulted government agency officials and
reviewed CBP's Airport and Seaport User Fee Advisory Committee
membership.
We performed our work from October 2006 through August 2007 in
accordance with generally accepted government auditing standards.
[End of section]
Appendix II Comments from the Department of Homeland Security:
U.S. Department of Homeland Security:
Washington, DC 20528:
Homeland Security:
September 6, 2007:
Ms. Susan Irving:
Director, Strategic Issues:
U.S. Government Accountability Office:
Washington, DC 20548:
Dear Ms. Irving:
Thank you for providing us with a copy of the draft report entitled,
"Federal User Fees: Key Aspects of International Air Passenger
Inspection Fees Should Be Addressed Regardless of Whether Fees are
Consolidated," GAO-07-1131, dated September 2007. This report addresses
how the three user fees charged for the inspection of arriving
international airline passengers are set, collected, arid distributed
and the benefits and challenges of this process for agencies and
stakeholders, including examining the implications of consolidating
these fees under the Department of Homeland Security's (DHS) authority.
The U.S. Customs and Border Protection (CBP) appreciated the
opportunity to work with the Government Accountability Office (GAO)
team in constructing a balanced and accurate report. CBP agrees with
the overall substance and findings of the report. DHS is pleased that
the report highlights the same operational and coordination problems
CBP has identified and has been working to resolve. As stated in the
report "the process of setting fees, collections, and distributing
separate, dissimilar fees creates challenges for agencies and
stakeholders." DHS notes that the challenges described in the report
are not limited to the air passenger inspection user fees. CBP faces
these and other challenges in managing user fees collected for
inspecting passengers, conveyances, animals, plants, and agriculture
goods entering the United States.
CBP concurs with the ten recommendations for Executive Action included
in the draft report. CBP realizes the benefits that the adoption and
implementation of these recommendations will produce for DHS, CBP, U.S.
Immigration and Customs Enforcement (ICE), the US Department of
Agriculture's Animal and Plant Health Inspection Service (APHIS), and
nonfederal stakeholders. However, if the recommendations were adopted
separately, as suggested by GAO, DHS would need to develop and submit
at least four legislative proposals to the Congress. In addition, a
series of regulations will need to be issued to implement some of the
recommendations. If GAO's recommendations were implemented
individually, their full implementation will take several years and
only address the challenges in the air passenger environment.
To address the challenges described in the draft report, CBP in
consultation with DHS, ICE, and APHIS, initiated an effort to develop a
legislative proposal to consolidate the authorities that govern the
customs, immigration, and agriculture inspection user fees. 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 APHIS and the House Agriculture Committee to
any effort aimed at transferring the authority over the agriculture
inspection fees to DHS. The resulting proposal's main goal is to create
DHS/CBP user fees that recover, to the extent possible, CBP and ICE's
costs of providing inspection services. Under this proposal, APHIS
retains the authority to set and adjust user fees to recover their
costs associated with agriculture inspections. If the legislative
proposal is enacted 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. Attached to this memorandum is a table that summarizes
the GAO recommendations that CBP will address in the proposal to
consolidate the authorities that govern the customs, immigration, and
agriculture inspection user fees.
The ten recommendations and CBP's corrective actions to address these
recommendations are included below:
Recommendation I:
Direct CBP, ICE, and the Animal and Plant Health Inspection Service
(APHIS) to make infonnation on the estimated cost of inspections as
well as the basis for these cost estimates readily available to
affected parties to improve the transparency and credibility ” and
hence the acceptance by stakeholders and payers ” of the process for
setting, collecting, and distributing the fees.
CBP Response:
In an effort to simplify and streamline the process of setting,
collecting, and distributing user fees, CBP has begun developing
legislation that will consolidate current user fee authorities. During
the user fee consolidation proposal requirements process, stakeholders
had been actively involved in providing their input and CBP has been
diligent in maintaining open dialogue to increase transparency and ease
understanding and adherence to the revised legislation.
Advisory committee meetings afford stakeholders an opportunity to
address CBP representatives with questions and comments on the status
of collections and cost data for each fee and activity. At the last
advisory committee meeting, CBP provided the membership with
documentation showing CBP's costs and collections for the various user
fees. CBP will continue to work with ICE and APHIS to streamline the
reporting process and collaborate on improving the availability and
accessibility of data. CBP will also explore additional opportunities
for sharing this information with the trade community.
Recommendation 2:
Direct CBP, ICE, and APHIS to collaborate on agendas, presentations,
and discussions with stakeholders for the CBP Airport and Seaport
Inspections User Fee Advisory Committee meetings in order to improve
the usefulness of these meetings for both agencies and fee
stakeholders.
CBP Response:
CBP agrees that the advisory committee should address issues related to
airport and seaport passenger inspection fees that are relevant to its
membership. Prior to each meeting, CBP asks the membership for input on
the agenda. To date, CBP has not received requests for information on
ICE or APHIS functions.
In the future, CBP will strive to communicate the usefulness and
importance of these meetings to the committee members, as well as the
services offered by ICE and APHIS that are relevant to the fee
stakeholders. CBP will work with ICE and APHIS to determine the level
of involvement they desire and with DHS to determine whether the
charter of the committee should be amended to include these agencies or
if their role can be broadened under the current committee charter.
Recommendation 3:
Consolidate reporting of the passenger inspection fees, 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 passenger inspection process.
CBP Response:
In keeping with CBP's Memorandum of Agreement (MOA) 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, starting in
FY 2007, APHIS and CBP are submitting a joint report to the Office of
Management and Budget (OMB) on the Agriculture Quarantine Inspection
(AQI) user fees, for use in evaluating the agencies' budget requests.
This report includes current and projected collections and costs by
activity, FTE to be funded from the user fees, and performance measures
on the effectiveness of the AQI 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. Now that this data is available from ICE, we can
start submitting a joint Immigration User Fee (IUF) report to Congress.
For the required biennial user fee review, we will continue to follow
DHS' guidance by submitting CBP's fee costs and collections to DHS,
which then issues a consolidated user fee report for the entire
Department.
Recommendation 4:
Develop a legislative proposal in consultation with Congress on a
consolidated, graduated penalty system that reflects airline payment
history and includes specific administrative procedures regarding when
penalties should be invoked in order to improve the effectiveness of
the tools for enforcing payment of passenger inspection fees.
CBP Response:
The absence of a strong and cohesive penalty system does not
effectively deter air carriers for failing to comply with CBP rules and
regulations. Under the status quo CBP's authority to issue penalties to
air carriers are dispersed across three different user fee regulations.
This fact reduces CBP's ability to effectively enforce penalty
provisions. CBP is addressing this problem in the short term by working
to incorporate more definitive enforcement provisions into the existing
Immigration and Customs user fee regulations. For a more complete
solution to this problem, DHS is proposing to establish a penalty
provision by statute as a part of its Unified User Fee legislative
proposal. This proposed authority will give the Secretary of DHS the
ability to create a robust system of penalties via regulation and also
provide the trade appropriate opportunities to comment on the proposed
changes.
Recommendation 5:
Develop a legislative proposal in consultation with Congress on a
single, common set of airline record-keeping requirements for all three
passenger inspection fees that reflects the consolidated audit function
for these fees and reduces the administrative burden on airlines.
CBP Response:
CBP plans to solve this problem as part of the Unified User Fee
initiative. The proposed authority will give the Secretary of DHS the
ability to establish record keeping requirements via regulation, giving
the trade appropriate opportunities to comment on the proposed changes.
Recommendation 6:
Develop a legislative proposal in consultation with Congress to
eliminate key differences among the fourth quarter remittance
requirement for the immigration fee.
CBP Response:
The current cycle of payments is problematic because air passenger
inspection expenses occur throughout the year, but payments are
received far less often. The Immigration User Fee's provision for the
fourth quarterly payment further complicates the matter as it leaves an
even longer gap in collections. CBP plans to solve these payment
problems as part of the Unified User Fee initiative. Under our proposed
payment system, payments will be due 30 days after the month in which
the fees are collected.
Recommendation 7:
Develop and implement common assumptions used to forecast the costs of
agriculture quarantine inspection activities in order to more closely
tie the fee rate to CBP's and APHIS' agriculture inspection costs.
CBP Response:
Projecting collections accurately is important because it affects how
much revenue the agencies can spend on agriculture inspections and also
when CBP receives the revenue. Now that CBP is submitting a joint
report to OMB, it has become even more important that we agree on how
to project collections. CBP has already brought this matter to APHIS's
attention in the past and we will work to schedule a meeting to come to
an agreement on the assumptions used. At CRP's next quarterly meeting
with APHIS in September 2007, CBP will suggest that those responsible
for the forecasting meet separately to make sure the agencies use the
same assumptions.
Recommendation 8:
Develop and implement formal written guidance on factors to be
considered in selecting airlines for audit, including factors intended
to reflect the risk on non-or incomplete payment.
CBP Response:
Formal written guidance on factors to be considered in selecting
airlines for audit will be completed and implemented. Recommendation9
Complete development of and report on ICE's activity costs to ensure
the immigration fee is divided between ICE and CBP according to their
respective proportion of immigration inspection activity costs.
Further, if the study shows that immigration activity costs exceed
collections, develop a legislative proposal in consultation with
Congress to adjust the immigration fee to recover costs as closely as
possible.
CBP Response:
CBP plans to adjust the fees to cover the full costs both agencies
incur in providing inspection services as part of the Unified User Fee
legislative proposal. CBP has already included ICE's estimated costs
for the new fee calculation in our draft proposal. When we receive
their final costs, CBP will update the legislative package as
necessary.
Recommendation 10:
Direct CBP and ICE to develop and implement a fee-sharing memorandum of
understanding to include timeframes for when funds would be reimbursed
and to provide for periodic review and update.
CBP Response:
As noted in the report, ICE is finalizing its cost analysis. Once the
analysis is complete, CBP will revisit the split of user fees and
expand the scope of the existing MOU to provide for periodic review and
update. CBP would also take advantage of the available cost data by
including provisions for periodic meetings and data sharing between the
agencies. Timeframes for when funds will be transferred are included in
the current MOU. In drafting the MOU language, CBP will follow the
guidance already provided by DHS.
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 III Comments from the Department of Agriculture:
USDA:
United States Department of Agriculture:
Office at the Secretary:
Washington, D.C. 20250:
September 17, 2007:
Ms. Susan J. Irving, Director:
Strategic Issues:
United States Government Accountability Office:
441 G Sweet, NW:
Washington, DC 20548:
Dear Ms. Irving:
The United States Department of Agriculture (USDA) has reviewed the
U.S. Government Accountability Office's (GAO) draft report, "Federal
User Fees: Key Aspects of International Air Passenger Inspection Fees
Should Be Addressed Regardless of Whether Fees Are Consolidated (07-
1131)." We are impressed with the high level of detail contained in
this report and the thorough explanations and charts that covered some
of the highly complex issues and differences between the USDA,
Department of Homeland Security's Office of Customs and Border
Protection (DHS, CBP), and Immigration and Customs Enforcement's (ICE)
authorities, fees, penalties, and exemptions. The well- organized
explanations and visual diagrams make this report useful for purposes
beyond GAO's original intention to examine how fees are set, collected,
and distributed; to evaluate the impact of these Federal processes on
the industry; and to discuss any implications of consolidating fees.
USDA considers fair and efficient user fees and related administrative
processes a high priority for the Department. While we concur with each
recommendation that pertains to USDA, we also offer the following
perspectives on each recommendation.
Direct CBP, ICE and APHIS to make information on the estimated cost of
inspections as well as the basis for these cost estimates readily
available to affected parties to improve the transparency and
credibility-and hence the acceptance by stakeholders and payers-of the
processes for setting collecting, and distributing the fees.
USDA concurs with this recommendation. However, we believe it is
important to note that the funds we collect in our international air
passenger user fees are used to fund all direct and indirect costs for
this program. International air passengers pay our user fees because
all air passengers are subject to inspection, regardless of whether
they are actually inspected.
Further, we believe that full disclosure of all costs and what the user
fees were used for is the best way to add credibility and acceptance of
the user fees for the industry. Starting in Fiscal Year 2007, USDA's
Animal and Plant Health Inspection Service (APHIS) filed reports with
the U.S. Office of Management and Budget to not only marry our actual
costs with our upcoming budget submissions, but to provide outputs and
outcomes to the public on the results of our Agriculture Quarantine and
Inspection (AQI) Program. This contains information on the number of
plant pest interdictions to protect the fruit, vegetable, and grain
industries in the U.S. and other valuable accomplishments.
Regarding the action to make information available on setting fees, we
already provide full disclosure on exactly how we set our international
airline passenger user fees in our fee proposal rules in the "Federal
Register." In our last rate-setting, we provided detailed calculations
for each and every penny of each and every AQI user fee including any
amounts included in the fees for rounding. We remain, of course, open
to any suggestions for enhancements or improvements on rate-setting.
Regarding the action to make information available on our process for
distributing the fees, we currently provide this information through a
Memorandum of Agreement (MOA) between USDA and DHS. As shown by your
later suggestion for DHS and ICE to use a similar vehicle for this
process, we believe a MOA between USDA and DHS is our proper course of
action. We can make that information available on a wider basis as
needed.
Direct CBP, ICE, and APHIS to collaborate on agendas, presentations,
and discussions with stakeholders for the CBI' Airport and Seaport
Inspections User Fee Advisory Committee meetings in order to improve
the usefulness of these meetings for both agencies and fee
stakeholders.
USDA concurs with this recommendation. We are happy to cooperate,
participate, and provide any assistance we can. We agree our
participation on certain agenda topics could be mutually beneficial to
both the industry and to USDA.
Consolidate reporting of the passenger inspection fees, 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 passenger inspection process.
USDA concurs with this recommendation. We realize that it is essential
for Congress to have a complete source of information on how the
interrelated inspection functions of all three agencies work together,
so Congress can properly oversee our programs and their related user
fees.
Develop a legislative proposal in consultation with Congress on a
consolidated graduated penalty system that reflects airline payment
history and includes specific administrative procedures regarding when
penalties should be invoked in order to improve the effectiveness of
the tools for enforcing payment of passenger inspection fees.
USDA concurs with this recommendation. In accordance with the Debt
Collection Act, as codified in 31 U.S.C. 3701, we do charge penalties
and interest though not using a potentially more effective graduated
penalty system as recommended here. As our current process allows us to
make changes of this nature directly to our regulations without a
change in our legislative authority, as DHS obtains such authority and
establishes a GAO- recommended graduated penalty system, USDA will
amend our regulations to be consistent.
Develop a legislative proposal in consultation with Congress on a
single, common set of airline record-keeping requirements for all three
passenger inspection fees that reflects the consolidated audit function
for these fees and reduces the administrative burden on airlines.
USDA concurs with this recommendation. Although our regulations are
silent in this regard, we plan to propose rulemaking for a five year
record retention requirement. We believe it would be beneficial for all
three entities to require a common set of airline record-keeping
requirements not just for the airlines, but to also help our joint
Federal audit programs run smoothly. As our current process allows us
to make changes of this nature directly to our regulations without a
change in our legislative authority, as DHS obtains such authority and
establishes a new record-keeping requirement, USDA will amend our
regulations to be consistent.
Develop and implement common assumptions used to forecast the
collections of agriculture quarantine inspection fee in order to more
closely tie to CBP's and APHIS' agriculture fee distribution to actual
collections.
USDA concurs with this recommendation. USDA fully understands the
benefits for DHS, CBP to receive more money earlier in the year to
better plan and meet mission goals. Because no appropriated funding is
available to pay for inspection work, APHIS has been conservative in
volume projections. In fact, if we had based volume projections on the
Canadian exemption taking place on November 24, 2006, we would have
over- estimated the available funding and subsequently overspent. As
the reserve balance continues to slowly build in the AQI Program's
account, and a better projection of the Canadian passenger volumes can
be made, APHIS will be more comfortable using less conservative
forecasting approaches as long as there is no compromise in our ability
to provide the necessary program services.
Sincerely,
Signed by:
Bruce I. Knight:
Under Secretary:
Marketing and Regulatory Programs:
[End of section]
Appendix IV GAO Contact and Staff Acknowledgments:
GAO Contact:
Susan Irving, (202) 512-9142 or irvings@gao.gov:
Acknowledgments:
Jacqueline M. Nowicki (Assistant Director) and Chelsa Gurkin managed
this assignment. Robin Freshwater and Amy Rosewarne made key
contributions to all aspects of the report. Susan Etzel, Terrance N.
Horner Jr., Jessica Nierenberg, Kathleen Padulchick, and Jack Warner
also provided assistance. In addition, Carlos Diz and Pedro Briones
provided legal support and Donna Miller developed the report's
graphics.
[End of section]
Footnotes:
[1] International arrivals at sea and land ports are also subject to
inspection.
[2] For characteristics useful for reviewing user fees in general, see
GAO, Aviation Finance: Observations on Potential FAA Funding Options,
GAO-06-973 (Washington, D.C.: Sept. 29, 2006).
[3] This is an abbreviated description of the principles relating to
the passenger inspection fees. There are many specific factors to be
considered within each of these principles; for example, when assessing
the equity of a fee, one can consider whether it is based on the
individual's ability to pay for the service, and when assessing a fee's
efficiency, one can consider whether the rate is set to encourage or
discourage consumption of a resource.
[4] Precleared passengers are inspected in the departing country rather
than in the United States.
[5] See for example, S. 1160, 110TH Cong. (2007); H. Amend. 704, 110TH
Cong. (2007); H.R. 1706, 110TH Cong. (2007); H.R. 2629, 110TH Cong.
(2007); S. 887, 110TH Cong. (2007).
[6] For more information on the AQI program, as well as (1) the extent
to which the Department of Agriculture and DHS have changed the
inspection program since the transfer, (2) how the agencies have
managed and coordinated their responsibilities, and (3) how funding for
agricultural inspections has been managed since the transfer, 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).
[7] Similar transitions took place at land ports and seaports of entry.
[8] Agriculture secondary inspections are performed by CBP Agriculture
Specialists.
[9] 21 U.S.C. § 136a(a)(1).
[10] 19 U.S.C. §§ 58c(a)(5), (f)(3). These activities include: overtime
and premium pay generally (i.e., not limited solely to international
passenger inspection but for all customs inspections); retirement and
disability contributions; preclearance service; and foreign language
proficiency awards.
[11] 8 U.S.C. §§ 1356(d), (h).
[12] CBP aims to fully consolidate the authorities that govern the
three inspection user fees that support CBP inspection functions, but
officials said they are proposing a partial consolidation of the
customs, immigration, and CBP's portion of the agriculture fee because
the Department of Agriculture does not support consolidating the
portion of the agriculture fee that APHIS retained.
[13] CBP has proposed formally moving these authorities to DHS in its
draft legislative proposal.
[14] GAO, Results-Oriented Government: Practices That Can Help Enhance
and Sustain Collaboration among Federal Agencies, GAO-06-15
(Washington, D.C.: Oct. 21, 2005).
[15] However, APHIS's report did not include CBP's analysis of its
agriculture inspection costs. APHIS's report is based only on APHIS's
analysis of the agriculture fee collections and inspection costs.
[16] Starting in fiscal year 2007, APHIS and CBP are submitting a joint
report to OMB on the AQI user fees, for use in evaluating the agencies'
budget requests. This report will include current and projected
collections and costs by activity, FTE to be funded from the user fees,
and performance measures on the effectiveness of the AQI program.
[17] At the end of our audit, CBP and ICE officials agreed to work
together to address the immigration inspection user fee.
[18] The agriculture inspection fee also authorizes APHIS to maintain a
user fee reserve fund equal to 3 months of agriculture quarantine
inspection costs for use in the event of a decline in fee collections.
[19] In addition to the base collections, this MOA documents the
distribution of the agriculture passenger inspection fees collected
from passengers originating in Canada, as a result of the January 2007
elimination of the Canadian exemption. Per MOA, for fiscal year 2007,
CBP will receive 75.5 percent and APHIS will receive 24.5 percent of
these new collections.
[20] GAO-06-644.
[21] GAO-06-15.
[22] GAO-06-644.
[23] The customs and immigration fees are both classified as offsetting
receipts and the agriculture fee is a governmental receipt. Offsetting
receipts are collections that are offset against gross outlays but are
not authorized to be credited to expenditure accounts. Offsetting
receipts are deposited in receipt accounts and cannot be used without
being appropriated.
[24] Generally, CBP uses a standard system to estimate the amount of
time an inspector spends on customs, immigration, and agriculture
inspection activities per shift, and files exception reports as
necessary.
[25] There was an exemption from the agricultural fee for air
passengers arriving from Canada, but it was eliminated effective
January 1, 2007.
[26] According to CBP officials, CBP's draft proposal does not
recommend eliminating the exemption for passengers arriving from U.S.
territories.
[27] The Advisory Committee is a standing committee that meets
biannually to advise the Commissioner of CBP on issues related to the
performance of airport and seaport agriculture, customs, or immigration
inspections. The 14 committee members and chairperson are nominated as
representatives from their organizations--generally airlines, airports,
cruise lines, and associations with each of these industries. Both the
customs and immigration passenger inspection fee statutes required the
establishment and periodic meetings of advisory committees consisting
of industry representatives to advise the agency on issues related to
inspectional services, including fee levels. See 8 U.S.C. 1356(k); 19
U.S.C. 58c(k).
[28] CBP officials said they also regularly meet with officials from
ATA and IATA, however, as we will discuss later, stakeholders said they
do not feel these interactions are substantive.
[29] According to the Advisory Committee sign-in sheet, ICE officials
also attended the August 2006 Advisory Committee meeting, but we do not
know the extent of their participation.
[30] 5 U.S.C. App. 2., § 10.
[31] See 5 U.S.C. § 553(b)(B) and (d)(3).
[32] The elimination of the Canadian exemption for air passengers
actually went into effect January 1, 2007, allowing affected groups
more time to make necessary preparations in order to comply with the
inspection and collection procedures.
[33] GAO, Reexamining Regulations: Opportunities Exist to Improve the
Effectiveness and Transparency of Retrospective Reviews, GAO-07-791
(Washington, D.C.: July 16, 2007).
[34] CBP provided information on the costs of performing air passenger
inspections at the aggregated level at the Advisory Committee meetings.
However, the information provided--fiscal year 2006 total costs and
collections for each of the three air passenger inspections, and the
forecasted collections for fiscal years 2007and 2008--was at too high
of a level to be useful to stakeholders.
[35] The agriculture statute permits the Secretary of Agriculture to
"prescribe and collect fees sufficient to cover the cost of providing
agricultural quarantine and inspection services in connection with the
arrival at a port in the customs territory of the United States, or the
preclearance or preinspection . . . " 21 U.S.C. § 136a(a)(1).
Similarly, although the immigration user fee statute prescribes the
exact amount of the fee, the statutory language is broadly available to
refund any appropriation for the amount paid out of such appropriation
for expenses incurred in providing immigration inspection and
preinspection services. 8 U.S.C. § 1356(d) and 1356(h).
[36] According to CBP, of the customs user fee funds spent on overtime
and premium pay, more than 66 percent of the overtime and nearly 12
percent of premium pay was used for CBP officers in airports in fiscal
year 2006. COBRA fees can be spent on other types of inspection
overtime and premium pay for inspections related to barges, broker
permits, commercial vehicles, dutiable mail, private aircraft/vessels,
rail cars, and sea passengers. COBRA overtime is paid at a rate of 100
percent for any time worked outside the 40-hour workweek. Premium pay
is additional compensation employees receive for working nights,
Sundays, and holidays.
[37] In fact, although the Customs Service Inspector General once
questioned the agency's use of user fees to cover costs of activities
unrelated to actual services provided, the Comptroller General ruled
that the Customs Service was permitted by law to cover other expenses
as specified by the user fee statute. B-279865, Apr. 22, 1999.
[38] Reliable cost information is critical to setting user fees because
if the data are wrong, the resulting analysis can lead to improper fee-
setting decisions.
[39] Currently, only the customs fee exempts air passengers originating
in Canada and Mexico from paying the inspection fee. The Canadian
agriculture air passenger exemption was eliminated in January 2007.
[40] The United States preclears passengers at 15 airports around the
world.
[41] According to CBP, if the fees are not collected at the time of
purchase, the airline is responsible for collecting the fee from the
passenger at the airport. If the ticket is sold by a travel agent or
online travel service, they collect and transfer the fee as part of the
overall ticket transaction to the airline. The Court of Federal Claims
has ruled that the immigration and agriculture user fee statutes and
implementing regulations do not impose liability on airlines for
payment of any uncollected inspection fees. American Airlines v. United
States, 68 Fed. Cl. 723 (2005); Continental Airlines v. United States,
No. 06-432C (Fed. Cl. July 12, 2007). CBP and APHIS argue that airlines
must remit immigration and agriculture fees, regardless of whether
airlines collected them from passengers. CBP reported to us that it is
appealing both cases, as well as submitting a legislative proposal to
Congress that would hold carriers liable even for those fees that
should have been collected but were not.
[42] Since fees are collected when the ticket is sold, fees may be
remitted in advance of passenger travel.
[43] According to CBP officials, CBP's draft legislative proposal has
been amended such that "when feasible," the Secretary of DHS may
establish an alternative system to remit user fees.
[44] According to airline officials we spoke with, domestically-owned
carriers--responsible for 60 percent of the international flights into
the United States--generally believe their positions are better
represented by ATA, while IATA is more in line with foreign-owned
carriers, which represent 40 percent of the international flights into
the United States.
[45] Passenger facility charges are fees airports use to fund FAA-
approved projects that enhance safety, security, or capacity; reduce
noise; or increase air carrier competition. In evaluating how much the
carrier compensation should be for the collection of PFCs, the FAA
asked carriers to submit their incremental costs associated with PFC
collection, handling, remittance, reporting, recordkeeping, and
auditing. These categories consisted of the following: credit card
fees, audit fees, PFC disclosure, reservations, passenger service,
revenue accounting, data entry, accounts payable, tax, legal, corporate
property department, training reservations, ticket agents, and other
departments, carrier ongoing information systems, computer reservation
systems ongoing, PFC absorption, airline tariff publishing company,
airline reporting corporation, and interest income. From the analysis
of these data, the FAA determined the average carrier cost was $0.11
per PFC.
[46] GAO, Grants Management: Enhancing Performance Accountability
Provisions Could Lead to Better Results, GAO-06-1046 (Washington, D.C.:
Sept. 29, 2006).
[47] Because customs fees are treated as duties for administration and
enforcement purposes, CBP also has the authority to charge interest on
unremitted customs user fees at the tariff rate of interest, however,
in practice interest charges are included in the liquidated damages
calculation.
[48] 31 U.S.C. Section 3717(a)(1).
[49] GAO-06-1046.
[50] GAO, Internal Control Management and Evaluation Tool, GAO-01-1008G
(Washington, D.C.: August 2001).
[51] The sample included airlines whose total passengers transported
represented top, middle, and low shares or segments of total passenger
volume.
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