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United States Government Accountability Office: 
GAO: 

Report to Congressional Requesters: 

March 2013: 

Agricultural Quarantine Inspection Fees: 

Major Changes Needed to Align Fee Revenues with Program Costs: 

GAO-13-268: 

GAO Highlights: 

Highlights of GAO-13-268, a report to congressional requesters. 

Why GAO Did This Study: 

The AQI program guards against agriculture threats by inspecting 
international passengers and cargo at U.S. ports of entry, seizing 
prohibited material, and intercepting foreign agricultural pests. The 
program, which cost $861 million in 2011, is funded from annual 
appropriations and user fees. GAO has reported several times on the 
need to revise the fees to cover program costs as authorized. In 2010, 
APHIS initiated a review of AQI costs and fee design options. APHIS 
and CBP are considering options for a new fee structure. Pending 
departmental approval, APHIS expects to issue a proposed rule in fall 
2013. GAO was asked to examine issues related to the AQI fees. This 
report examines 1) the fees currently charged and proposed revisions; 
2) how fee revenues are allocated between the agencies; and 3) the 
extent to which fee collection processes provide reasonable assurance 
that all AQI fees due are collected. To do this, GAO reviewed AQI fee 
and cost data, and relevant laws, regulations, and policies; observed 
inspections at ports of entry; and interviewed APHIS and CBP officials. 

What GAO Found: 

GAO’s analysis of the Agricultural Quarantine Inspection (AQI) fee and 
cost data revealed a more than $325 million gap between fee revenues 
and total program costs in fiscal year 2011, or 38 percent of AQI 
program costs. The program, which is co-administered by the Department 
of Agriculture (USDA) Animal and Plant Health Inspection Service 
(APHIS) and Department of Homeland Security (DHS) Customs and Border 
Patrol (CBP), has a gap for several reasons: 1) APHIS’s authority does 
not permit it to charge all persons seeking entry to the United States 
(e.g., pedestrians) and does not permit it to charge the costs of 
those inspections to others; 2) APHIS has chosen not to charge some 
classes of passengers, citing administrative fee collection 
difficulties; 3) CBP does not charge a portion of all primary 
inspections to agriculture functions, as required by CBP guidance; 4) 
APHIS does not consider all imputed costs (that is, costs incurred by 
other agencies on behalf of the AQI program) when setting fees; and 5) 
the allowable rates for overtime services are misaligned with the 
personnel costs of performing those services. APHIS is considering 
fees that would better align many, but not all, AQI fees with related 
inspection activity costs. APHIS and CBP can take additional steps to 
better align fees with costs; however, additional authority will be 
needed to fully recover all program costs. 

Contrary to APHIS-CBP agreements and APHIS policy, the distribution of 
fee collections between CBP and APHIS is significantly misaligned with 
AQI costs. In 2005, CBP and APHIS agreed to divide AQI collections in 
proportion to each agency’s share of AQI costs. However, in fiscal 
year 2011, for example, CBP incurred over 80 percent of total program 
costs but received only 60 percent of collections, while APHIS 
incurred 19 percent of program costs but retained 36 percent of 
collections. CBP bridges the gap between its AQI costs and its share 
of the fee revenues with its annual appropriation. In keeping with its 
authorities and with good practices for fee-funded programs, APHIS 
carries over a portion of AQI collections from year to year to 
maintain a shared APHIS-CBP reserve to provide a cushion against 
unexpected declines in fee collections. APHIS’s stated goal is to 
maintain a 3- to 5-month reserve but the preliminary fee proposal 
would fund the reserve at a level higher than the 5 month maximum. 
Further, the 5-month maximum target balance is the amount officials 
say they would need to completely shut down the program, and therefore 
does not reflect realistic program risks. Further, this is more than 
the amount required to cover shortfalls during both the 2009 financial 
crisis and the events of September 11, 2001, and would increase 
reliance on appropriated funds to cover current program costs. 

APHIS’s and CBP’s collection processes do not provide reasonable 
assurance that all AQI fees due are collected. Specifically, APHIS 
does not collect AQI fees for railcars consistent with its 
regulations, resulting in a revenue loss of $13.2 million in 2010. 
Further, CBP does not verify that it collects fees due for every 
commercial truck, private aircraft, and private vessel, resulting in 
an unknown amount of revenue loss annually. CBP has tools available to 
help remedy these issues but does not require their use. Until APHIS 
and CBP improve oversight of these collection processes, they will 
continue to forgo revenue due the government, which will increase 
reliance on appropriated funds to cover program costs. 

What GAO Recommends: 

GAO is making a number of recommendations aimed at more fully aligning 
fees with program costs, aligning the division of fees between APHIS 
and CBP with their respective costs, and ensuring that fees are 
collected when due. Further, GAO suggests Congress amend the AQI fee 
authority to allow the Secretary of Agriculture to set fee rates to 
recover the full costs of the AQI program. USDA and DHS generally 
agreed with the recommendations. 

View GAO-13-268. For more information, contact Susan Irving, Director 
for Federal Budget Analysis, 202-512-6806, irvings@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

APHIS Currently Does Not Fully Recover Program Costs: 

The Distribution of Fee Collections among CBP, APHIS, and the AQI 
Reserve Is Misaligned with AQI Costs: 

APHIS and CBP Do Not Ensure that All AQI Fees Due are Collected: 

Conclusions: 

Matters for Congressional Consideration: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Fees Charged for Arrival Inspections: 

Appendix III: Comments from the U.S. Department of Agriculture: 

Appendix IV: Comments from the Department of Homeland Security: 

Appendix V: GAO Contacts and Staff Acknowledgments: 

Tables: 

Table 1: Total Identified Costs and Revenues of AQI Program, Fiscal 
Year 2011: 

Table 2: GAO Illustrative Examples of Fee Rates That Would More 
Closely Align Truck Fees with Full Costs: 

Table 3: APHIS and CBP AQI Costs and Distribution of Fee Revenues, 
Fiscal Year 2011: 

Table 4: Estimated Allocation of AQI Fee Revenues: 

Table 5: Distributions and Obligations of Actual AQI Fee Revenues, 
Fiscal Years 2010 through 2012: 

Figures: 

Figure 1: Current AQI User Fee Rates for People and Vehicles Arriving 
in the United States: 

Figure 2: Total AQI User Fee Collections: 

Figure 3: Distribution of AQI Program Funding Among CBP, APHIS, and 
the AQI Reserve, Fiscal Year 2011: 

Figure 4: Fiscal Year End Total Reserve Balance: 

Abbreviations: 

APHIS: Animal and Plant Health Inspection Service: 

APIS: Advanced Passenger Information System: 

AQI: Agricultural Quarantine Inspection: 

CBP: U.S. Customs and Border Protection: 

CFO: Chief Financial Officer: 

CMIS: Cost Management Information System: 

DHS: Department of Homeland Security: 

FACT: Food, Agriculture, Conservation, and Trade Act of 1990: 

Treasury: Department of the Treasury: 

USDA: U.S. Department of Agriculture: 

WADS: Work Accomplishment Data System: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

March 1, 2013: 

The Honorable Susan M. Collins: 
United States Senate: 

The Honorable Dianne Feinstein: 
United States Senate: 

The Honorable Kirsten E. Gillibrand: 
United States Senate: 

The movement of people and goods across U.S. borders is vital to the 
U.S. economy but also poses risks because imported products sometimes 
contain exotic pests and diseases that have resulted in billions of 
dollars in damages and lost agricultural revenues. Further, the 
terrorist attacks of September 11, 2001, heightened concerns about 
agriculture's vulnerability to terrorism, including the deliberate 
introduction of livestock, poultry, and crop diseases.[Footnote 1] The 
Agricultural Quarantine Inspection (AQI) program helps to guard 
against these threats by inspecting international passengers and 
cargo, seizing prohibited material, and intercepting foreign 
agricultural pests at U.S. ports of entry. The AQI program is co-
administered by the Department of Agriculture's (USDA) Animal and 
Plant Health Inspection Service (APHIS), which has authority to set 
AQI user fees, and the Department of Homeland Security's (DHS) U.S. 
Customs and Border Protection (CBP). The AQI program is funded in part 
with revenues from fees assessed on those subject to inspection and in 
part with monies from CBP's annual Salaries and Expenses 
appropriation. In 2006 we recommended that DHS and USDA work together 
to revise the user fees to ensure that they cover the AQI program's 
costs.[Footnote 2] In 2007 and 2008, we reported on various other 
challenges related to these fees, including that AQI user fees were 
misaligned with program costs.[Footnote 3] In 2010, APHIS hired a 
contractor to conduct a comprehensive fee review to determine the full 
cost of AQI services, identify potential changes to the fee structure, 
and recommend new fees. Efforts to better align fees with costs are 
important, especially in an environment of tightening discretionary 
budgets, because user fees can reduce reliance on taxpayer funding of 
federal programs that provide a service to an identifiable beneficiary. 

In this context, you asked us to examine the AQI user fees. This 
report assesses the following objectives: (1) the AQI fees currently 
charged and how, if at all, the proposed revisions would improve 
efficiency, equity, and revenue adequacy, and reduce administrative 
burden; (2) how, if at all, changes to the allocation of fee revenues 
between USDA and DHS could improve efficiency, equity, and revenue 
adequacy, and reduce administrative burden; and (3) the extent to 
which APHIS and CBP fee collection processes provide reasonable 
assurance that all AQI fees due are collected.[Footnote 4] 

To address these objectives we analyzed the AQI fees using principles 
of effective user fee design--efficiency, equity, revenue adequacy, 
and administrative burden--on which we previously reported.[Footnote 
5] Specifically, 

* Efficiency: "Efficiency" refers to requiring identifiable 
beneficiaries to pay for the costs of services, allowing user fees to 
simultaneously constrain demand and reveal the value that 
beneficiaries place on the service. If those benefiting from a service 
do not bear the full social cost of the service, they may seek to have 
the government provide more of the service than is economically 
efficient. User fees may also foster production efficiency by 
increasing awareness of the costs of publicly provided services and 
therefore increasing incentives to reduce costs where possible. 

* Equity: "Equity" refers to everyone paying their fair share, but the 
definition of fair share can have multiple facets. Under the 
beneficiary-pays principle, the beneficiaries of a service pay for the 
cost of providing the service. Under the ability-to-pay principle, 
beneficiaries who are more capable of bearing the burden of fees 
should pay more for the service than those with less ability to pay. 

* Revenue adequacy: "Revenue adequacy" refers to the extent to which 
the fee collections cover the intended share of costs. It encompasses 
variations in collections over time relative to the cost of the 
program. Revenue adequacy also incorporates the concept of revenue 
stability, which generally refers to the degree to which short-term 
fluctuations in economic activity and other factors affect the level 
of fee collections. 

* Administrative burden: "Administrative burden" refers to the cost of 
administering the fee, including the cost of collection and 
enforcement as well as the compliance burden (the administrative costs 
imposed on the payers of the fee). 

As we reported, these principals interact and are often in conflict 
with each other so that there are tradeoffs to consider among the 
principles when designing a fee. For example, a fee closely aligned 
with the cost of the services provided to a particular user may 
promote efficiency and the beneficiary-pays aspect of equity, but 
could impose a higher administrative burden and conflict with the 
ability-to-pay aspect of equity. 

In addition, the Office of Management and Budget (OMB) provides 
guidance to executive branch agencies through Circular No. A-25. This 
circular establishes federal guidelines regarding user fees including 
the scope and types of activities subject to user fees and the basis 
upon which the fees are set. It also provides guidance for executive 
branch agency implementation of fees and the disposition of 
collections. Further, the Chief Financial Officers (CFO) Act of 1990 
[Footnote 6] requires an agency's CFO to review, on a biennial basis, 
the fees, royalties, rents, and other charges for services and things 
of value and make recommendations on revising those charges to reflect 
costs incurred. The Statement of Federal Financial Accounting 
Standards Number 4, Managerial Cost Accounting Concepts and Standards 
for the Federal Government[Footnote 7] establishes standards for 
federal agencies to use in reporting the costs of their products, 
services, and activities. 

We reviewed APHIS's cost study and proposed revisions, relevant 
statutes and regulations, and AQI cost and fee revenue data. We 
analyzed APHIS and CBP AQI cost data and interviewed APHIS and CBP 
officials. We assessed the reliability of the data and determined that 
they were sufficiently reliable for our purposes. In addition, we 
selected a nonprobability sample of ports of entry to visit: Miami, 
Florida; Port Huron, Michigan; San Diego, California, and its 
surrounding areas; and Seattle and Blaine, Washington. In selecting 
these ports we considered factors including the presence or absence of 
agriculture inspections for which AQI user fees were and were not 
charged; passenger and cargo volumes; the diverse set of inspection 
challenges faced by ports in varied parts of the country; different 
types of ports (e.g., land border, seaports, etc.) and our resource 
constraints. While information from these visits cannot be generalized 
to other ports of entry, themes we identified from the visits allowed 
us to understand commonalities and differences in inspection practices 
and fee collection processes at various ports and provide illustrative 
examples. We also visited APHIS's Plant Protection and Quarantine 
offices in Miami, San Diego, and Seattle to understand the AQI-related 
work conducted by APHIS in the field. More details on our scope and 
methodology appear in appendix I. 

We conducted this performance audit from April 2012 to March 2013 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

Background: 

The AQI program provides for inspections of imported agricultural 
goods, products, passenger baggage, and vehicles, including commercial 
aircraft, ships, trucks, and railcars, to prevent the introduction of 
harmful agricultural pests and diseases. CBP has responsibility for 
inspection activities at ports of entry,[Footnote 8] including: 

* reviewing passenger declarations and cargo manifests and targeting 
high-risk passengers and cargo shipments for agricultural inspection; 

* inspecting international passengers, luggage, cargo, mail, and means 
of conveyance; and: 

* holding suspect cargo and articles for evaluation of plant and 
animal health risk in accordance with USDA regulations, policies, and 
guidelines. 

Inspection procedures vary somewhat depending on what pathway is being 
inspected (e.g., passengers, cargo, vessels, etc.) but, generally, CBP 
officers conduct a combined primary inspection for agriculture, 
customs, and immigration issues,[Footnote 9] and, as needed, make 
referrals to CBP agriculture specialists who conduct more detailed 
secondary inspections. 

APHIS has responsibility for other AQI program activities, including: 

* setting AQI user fee rates and administering the collected fees; 

* setting inspection protocols; 

* providing training; 

* providing pest identification services at plant inspection stations 
and other facilities; and: 

* applying remedial measures other than destruction and re-
exportation, such as fumigation, to commodities, conveyances, and 
passengers. 

APHIS lacks the authority to recover the full costs of the AQI program 
through fees. Section 2509(a) of the Food, Agriculture, Conservation, 
and Trade (FACT) Act of 1990[Footnote 10] authorizes APHIS to set and 
collect user fees sufficient to cover the cost of providing and 
administering AQI services in connection with the arrival of 
commercial vessels, trucks, railcars, and aircraft, and international 
passengers. APHIS does not have the authority to charge AQI fees to 
pedestrians or military personnel and their vehicles, nor to recover 
the costs of these inspections through the fees assessed on others 
(see figure 1). AQI fee collections are divided between CBP and APHIS. 
Gaps between AQI fee collections and program costs are generally 
covered by CBP using its Salaries and Expenses appropriation, which is 
authorized for necessary expenses related to agricultural inspections, 
among other activities. 

Figure 1: Current AQI User Fee Rates for People and Vehicles Arriving 
in the United States: 

[Refer to PDF for image: illustration] 

Bus: $0; 
Bus passenger: $0. 

Commercial truck: $5.25 per arrival or $150 per year. 

Military transportation: $0. 

Cruise ship: $496 per arrival; 
Cruise ship passenger: $0. 

Pedestrians: $0. 

Cargo vessel: $496 per arrival. 

Private vessel: $0; 
Private vessel passenger: $0. 

Private vehicle: $0; 
Private vehicle passenger: $0. 

Private aircraft: $0; 
Private aircraft passenger: $0. 

Commercial aircraft: $70.75 per arrival; 
Commercial aircraft passenger: $5.00 per arrival. 

Freight railcar: $7.75 per arrival or $155 per year. 

Sources: GAO analysis of APHIE and CBP information; Art Explosion 
(art). 

Note: These fee rates took effect on October 1, 2009, and remain in 
effect until new rates are established through rulemaking. The amount 
of fees paid annually by commercial vessels (i.e., cargo vessels and 
cruise ships) is capped at a dollar amount equivalent to15 payments per 
year. 

[End of figure] 

In fiscal year 2012, AQI fee revenues totaled approximately $548 
million (see figure 2). As authorized by the FACT Act, these funds 
remain available without fiscal year limitation and may be used for 
any AQI-related purpose without further appropriation. When funds are 
available until expended, agencies may carry forward unexpended 
collections to subsequent years and match fee collections to average 
program costs over more than 1 year. Such carryovers are one way 
agencies can establish reserve accounts, that is, revenue to sustain 
operations in the event of a sharp downturn in collections. APHIS uses 
some of the AQI fee collections in this way. We have previously 
reported that a reserve can be important when fees are expected to 
cover program costs and program costs do not necessarily decline with 
a drop in fee revenue.[Footnote 11] 

Figure 2: Total AQI User Fee Collections: 

Figure 2: Total AQI User Fee Collections: 

[Refer to PDF for image: vertical bar graph] 

Fiscal year: 2002: $207.2 million; 
Fiscal year: 2003: $227.8 million; 
Fiscal year: 2004: $256.1 million; 
Fiscal year: 2005: $331.6 million; 
Fiscal year: 2006: $417.9 million; 
Fiscal year: 2007: $472.2 million; 
Fiscal year: 2008: $540.7 million; 
Fiscal year: 2009: $494.5 million; 
Fiscal year: 2010: $507.4 million; 
Fiscal year: 2011: $534.7 million; 
Fiscal year: 2012: $548.3 million. 

Source: GAO analysis of APHIS financial data. 

Note: These data include interest collected on late AQI fee payments 
and on-the-spot penalties. According to APHIS officials, APHIS was 
not able to isolate these collections from fee collections, except in 
fiscal year 2011 when they totaled $570,912. For consistency, this 
figure includes these interest and penalty collections in every fiscal 
year. 

[End of figure] 

APHIS maintains two types of reserves. APHIS refers to the first 
reserve as the "shared reserve" because it is meant to cover both 
APHIS and CBP needs in the event that fee collections decline 
unexpectedly. The second reserve is an "APHIS-only" reserve, and is 
funded from APHIS's portion of total AQI collections. The APHIS-only 
reserve is intended to provide APHIS with budgetary flexibility. 
Between the two reserves, APHIS aims to maintain a total reserve 
balance equal to 3 to 5 months of AQI program costs. 

As previously mentioned, in 2010, APHIS engaged a contractor to 
conduct a thorough review of AQI program costs and options for 
redesigning AQI fees. In addition, APHIS contracted for an economic 
analysis to ensure that the proposed fees would not have unintended 
consequences. In reviewing the AQI fees, the contractor identified the 
direct and indirect costs of the AQI program for both APHIS and CBP by 
pathway, to the extent the agencies captured these costs for fiscal 
year 2010. The contractor also conducted activity-based costing to 
serve as the basis for future fee setting.[Footnote 12] These 
practices are consistent with federal cost accounting standards. 

The contractor assumed the accuracy of the data provided from both 
APHIS and CBP. Our recent work[Footnote 13] reported that data quality 
is an ongoing issue with AQI data systems, including the Work 
Accomplishment Data System (WADS), one of the data sources used by the 
contractor.[Footnote 14] However, Office of Management and Budget 
Circular A-25 states that when reviewing user fees, full cost should 
be determined or estimated using the best available records of the 
agency, and new cost accounting systems do not need to be established 
solely for the purpose of rate-setting. The contractor also solicited 
input from stakeholders as part of the fee review process, a practice 
consistent with our User Fee Design Guide.[Footnote 15] 

APHIS is using the AQI cost model developed by the contractor as well 
as the findings from the fee review to update the AQI fee schedule. 
According to APHIS officials, as of February 2013, APHIS and CBP are 
considering staff recommendations for a new fee structure, including 
new fee rates. Pending approval from both USDA and DHS, APHIS expects 
to publish a notice in the Federal Register with a proposed new fee 
schedule in the fall of 2013. As such, it is important to note that 
the current staff recommendations for AQI fees are subject to change 
and that the fee structure and rates APHIS establishes will be 
informed by many factors, including public comments through the 
rulemaking process. 

APHIS Currently Does Not Fully Recover Program Costs: 

In Fiscal Year 2011 There Was a Nearly 40 Percent Gap Between Total 
Identified AQI Costs and Collections: 

In fiscal year 2011--the most recent year for which data were 
available--AQI fee collections covered 62 percent of total identified 
AQI program costs, leaving a gap of more than $325 million between 
total AQI costs and total AQI collections. This gap was covered with 
funds from CBP's Salaries and Expenses appropriation and by funds from 
other agencies to cover imputed costs. Although the AQI program is 
often referred to as a fully fee-funded program, it is not. Fees 
assessed on individual pathways are to be set commensurate with the 
costs of services with respect to a particular pathway. For passenger 
fees, the costs of services include the costs of related inspections 
of the vehicle. Once revenue is earned from one pathway, however, it 
may be spent on any AQI-related program cost. For example, revenue 
earned from commercial airline passenger inspections may be spent on 
private air passenger inspection activities. However, as shown in 
table 1, APHIS has chosen not to charge some classes of passengers, 
and the collections of the AQI program as a whole do not equal total 
identified program costs. 

Table 1: Total Identified Costs and Revenues of AQI Program, Fiscal 
Year 2011: 

Fees currently charged: 

Pathway: 
Commercial aircraft[B]; 
Identified cost: $175,091,488; 
Fee revenue[A]: $49,571,978; 
Percentage fee funded: 28%. 

Pathway: 
Commercial trucks; 
Identified cost: $74,359,800; 
Fee revenue[A]: $15,189,400; 
Percentage fee funded: 20%. 

Pathway: 
Commercial vessels[C]; 
Identified cost: $101,907,247; 
Fee revenue[A]: $26,812,768; 
Percentage fee funded: 26%. 

Pathway: 
Freight rail; 
Identified cost: $5,198,244; 
Fee revenue[A]: $8,905,153; 
Percentage fee funded: 171%. 

Pathway: 
Commercial aircraft passengers[D]; 
Identified cost: $277,838,102; 
Fee revenue[A]: $433,679,205; 
Percentage fee funded: 156%. 

Statutory authority to charge, but fees not charged: 

Pathway: 
Private vehicle passengers; 
Identified cost: $129,356,001; 
Fee revenue[A]: 0; 
Percentage fee funded: 0%. 

Pathway: 
Bus passengers; 
Identified cost: $23,068,027; 
Fee revenue[A]: 0; 
Percentage fee funded: 0%. 

Pathway: 
Cruise vessel passengers; 
Identified cost: $17,860,031; 
Fee revenue[A]: 0; 
Percentage fee funded: 0%. 

Pathway: 
Private vessel passengers; 
Identified cost: $4,935,014; 
Fee revenue[A]: 0; 
Percentage fee funded: 0%. 

Pathway: 
Private aircraft passengers; 
Identified cost: $11,360,258; 
Fee revenue[A]: 0; 
Percentage fee funded: 0%. 

Pathway: 
Rail passengers; 
Identified cost: $1,628,624; 
Fee revenue[A]: 0; 
Percentage fee funded: 0%. 

No statutory authority to charge: 

Pathway: 
Pedestrian; 
Identified cost: $34,628,757; 
Fee revenue[A]: 0; 
Percentage fee funded: 0%. 

Pathway: 
Military; 
Identified cost: $3,960,739; 
Fee revenue[A]: 0; 
Percentage fee funded: 0%. 

Total: 
Identified cost: $861,192,332; 
Fee revenue[A]: $534,158,504; 
Percentage fee funded: 62%. 

Source: GAO analysis of APHIS financial data. 

Notes: 

[A] The overall gap between AQI costs and revenues is currently 
covered by annual appropriations to CBP and to other agencies that pay 
imputed costs of the AQI program. 

[B] The costs listed here include only the costs attributable to cargo 
aircraft. Costs attributed to commercial passenger aircraft are 
included with the costs listed under air passengers, consistent with 
fee authority. However, the revenues listed here include fees assessed 
on cargo aircraft and passenger aircraft in fiscal year 2011. The 
costs of both courier and individual mail inspections are included in 
the cost of cargo aircraft. 

[C] The costs listed for commercial vessels exclude AQI costs 
attributable to cruise vessel passengers (listed separately), but the 
fee revenue listed includes fees assessed on cruise vessels. 

[D] For passenger fees, the costs of services include the costs of 
related inspections of the vehicle. 

[End of table] 

Several other factors also compound the gap between AQI program costs 
and total AQI fee collections, as discussed below. Specifically, CBP's 
AQI costs are understated, AQI fee rates do not reflect imputed costs, 
and CBP and APHIS do not fully recover the costs of AQI-related 
reimbursable overtime services. 

CBP's AQI Costs Are Currently Understated By An Unknown Amount: 

CBP does not capture all time spent on agriculture activities in its 
Cost Management Information System (CMIS)--the system in which CBP 
tracks its activities and determines personnel costs. Both to 
accurately set AQI fee rates to recover program costs and to allocate 
fee revenues between APHIS and CBP proportionate with each agency's 
program costs, CBP must accurately track its expenses related to the 
AQI program. In 2005, CBP agreed to report its AQI-related expenses to 
APHIS quarterly. CBP officers' and agriculture specialists' time is 
generally charged to a mix of CMIS codes to represent the variety of 
activities they perform. Although this mix of codes will 
understandably vary, CBP guidance specifies that time spent by 
officers conducting primary inspections--which, as previously 
discussed, include aspects of agriculture, customs, and immigration 
inspections--is to be attributed to a mix of CMIS codes representing 
each of these three functions. We found, however, that at 31 ports and 
other locations,[Footnote 16] CBP did not charge any primary 
inspection time to agriculture-related CMIS codes for all or a portion 
of fiscal year 2012, which means that AQI costs at these ports are 
being understated. Further, CBP officers at ports we visited described 
different procedures for using CMIS codes and wide variation in the 
extent to which they verify that CMIS codes accurately capture work 
activities. Because CBP's AQI costs are underreported by some unknown 
amount in CMIS, APHIS does not have complete information about CBP's 
AQI-related costs and therefore is unable to consider total program 
costs when setting AQI fee rates. 

CBP headquarters oversees ports' use of CMIS to track AQI expenses by 
providing guidance and training, and by annually reviewing CMIS data 
from about 50 of the highest-volume ports. In addition, CBP field 
offices review CMIS codes for ports in their jurisdiction on a 
quarterly basis. CBP headquarters also produces CMIS guidance, which 
includes a CMIS code dictionary and a notice that the time officers 
spend on primary inspection should be charged to customs, immigration, 
and agriculture codes. Instructions for reviewing the use of CMIS 
codes are also provided to ports. Although the instructions provide 
brief examples, they do not specify how ports should determine the 
appropriate mix of codes to use or the frequency with which ports 
should conduct work studies. At some locations we visited, CBP 
officials said that headquarters does not provide sufficient CMIS 
guidance to enable accurate and consistent reporting of staff 
activities. CBP headquarters officials told us that they provide 
semiannual training which is intended to ensure correct CMIS use at 
ports. However, attendance at these training sessions is not required 
and officials said there is high turnover among CMIS practitioners at 
the ports and field offices. 

AQI Fee Rates Are Currently Not Set to Recover AQI Imputed Costs: 

The current AQI fee rates do not cover imputed AQI program costs. 
[Footnote 17] APHIS estimated that these costs were about $38 million 
in fiscal year 2011, the most recent year for which data were 
available. In 2008 we recommended that the Secretary of Agriculture 
include these costs when setting AQI fees consistent with federal 
accounting standards, OMB Circular No. A-25 guidance, and USDA policy. 
[Footnote 18] APHIS agreed with the recommendation and, as we will 
discuss more fully later on in this report, has included some, but not 
all, of these costs in its recent analysis of AQI costs. Because APHIS 
is authorized to set AQI fees to recover the full cost for each 
pathway,[Footnote 19] it is important that the agency accurately 
captures full program costs. 

Current AQI-related Reimbursable Overtime Costs and Fee Rates Are 
Misaligned: 

The AQI program does not fully recover costs for reimbursable overtime 
agriculture inspection services in part because (1) the reimbursement 
rates paid by users are set by APHIS regulations and do not cover the 
agencies' overtime costs, (2) CBP does not consistently charge for 
these services, and (3) when CBP does charge it does not timely 
collect payments for these services. CBP is authorized to charge for 
overtime for agriculture inspection and related services in some 
situations, known as reimbursable overtime. When a CBP officer or 
agriculture specialist performs an inspection service on a Sunday or 
holiday or while the employee performing the inspection is on 
overtime, CBP is to bill the user for the service. This can happen, 
for example, when an importer requests an inspection of agricultural 
produce outside of normal duty hours. 

Reimbursable overtime collection rates are not aligned with the 
agencies' current staff costs, which means any reimbursable overtime 
collections do not fully cover costs to perform these services. APHIS 
has the authority to set reimbursable charges to recover the full 
costs of overtime services, but the reimbursement rates have not been 
adjusted since 2005. Under the APHIS regulations, CBP may charge $51 
per hour for agriculture-related overtime Monday through Saturday and 
holidays, and $67 per hour on Sunday. When we asked CBP officials for 
their average annual costs for overtime agriculture inspections they 
told us that they have not calculated these costs. However, CBP was 
able to create such an analysis for us using August 2012 as an 
example. CBP estimated that its average salary cost for overtime 
agricultural inspections in August 2012 was approximately $85 per 
hour, and it billed approximately $55 per hour for those services. 
They further estimated that for that month, reimbursable agriculture 
overtime services cost the agency approximately $58,000, while the 
agency only billed approximately $37,000 for those services--or about 
64 percent of the cost.[Footnote 20] APHIS's rates for reimbursable 
agriculture overtime services are similarly misaligned with its costs. 
APHIS and CBP officials worked together to develop a draft proposed 
rule to update the overtime rates, but according to APHIS officials it 
has been on hold since summer 2011. 

CBP headquarters encourages ports to charge for reimbursable overtime 
services and provides guidance clarifying how they should do so. This 
practice is consistent with effective fee design principles; as we 
have previously reported, if a service primarily benefits identifiable 
users, users should pay for that service.[Footnote 21] However, CBP 
personnel at some ports told us they do not charge for reimbursable 
agriculture services provided because their port does not get to keep 
the reimbursable overtime funds.[Footnote 22] In addition, officials 
at three ports said it is administratively burdensome to process the 
reimbursable overtime forms. 

CBP does not ensure that reimbursable overtime is collected when 
charged. APHIS regulations require that agriculture-related 
reimbursable overtime be paid for in advance and that overtime 
services be denied to anyone whose account is more than 90 days 
delinquent.[Footnote 23] Nonetheless, according to CBP data, as of 
August 31, 2012, the agency had more than $200,000 in past-due 
overtime agriculture inspection bills, of which more than $160,000 is 
more than a year past-due. Some bills are as old as 2004, and one 
company has more than $9,000 in past-due bills that were issued from 
2004 through 2012. Although CBP can and does assess interest for past-
due reimbursable overtime bills, it does not consistently deny 
overtime services to entities with accounts more than 90 days 
delinquent. 

The Fees Currently under Consideration Would Not Fully Recover Costs 
for All Pathways nor Directly Charge the Users of Certain Services: 

APHIS Might Remove Caps on Commercial Rail and Vessels but Not Trucks, 
Leaving a Revenue Gap: 

APHIS is considering new or updated fees for AQI services. However, 
the fees might not recover the costs of all commercial trucks. APHIS 
lost $85 million in revenue in fiscal year 2010 due to capping the 
annual amount of AQI fees paid by commercial rail, vessels, and 
trucks, but as of February 2013, the staff recommendations APHIS is 
considering would remedy only the revenue loss for commercial rail and 
vessels. According to APHIS data, in fiscal year 2010, the caps on 
rail and vessel fees resulted in a combined revenue loss of about $46 
million, while the caps on truck entries resulted in a $39 million 
loss for that year. These revenue losses are currently covered by CBP 
through its annual appropriation or by AQI user fees collected from 
other pathways. As we have previously reported, charging users the 
full cost of the inspection they are receiving can promote economic 
efficiency and equity by assigning costs to those who both use and 
benefit from the services being provided.[Footnote 24] 

Commercial trucks seeking entry into the United States can either pay 
the $5.25 AQI fee each time they cross the border, or they can pay a 
one-time flat AQI fee of $105 each calendar year. To pay the annual 
AQI fee, trucks must use an electronic transponder which must be 
purchased in advance. Although the $105 annual AQI truck transponder 
fee is equivalent to paying for 20 arrivals each year, according to 
APHIS data, in 2010, trucks with a transponder cross the border 106 
times a year on average.[Footnote 25] In Otay Mesa, California, for 
example, we observed trucks which CBP officers told us typically make 
up to three to four border crossings a day, dropping off their cargo 
nearby and returning for another shipment. 

APHIS is considering raising the per-entry truck fees to more closely 
align fees with costs. To encourage use of truck transponders, APHIS 
is considering setting the fee rate for transponders at a rate 
equivalent to the price of 40 arrivals but still well below the 
average number of arrivals for trucks with transponders. In this way, 
APHIS hopes to provide a financial incentive to use transponders to 
both minimize CBP's administrative burden (by reducing the number of 
fee collection transactions at the border) and to reduce wait times at 
border crossings. According to a CBP estimate, trucks with 
transponders save at least 10 minutes when crossing the border because 
they do not have to pay the fee at the time of crossing, benefiting 
trucking firms and shippers. This time savings is, in and of itself, 
another incentive for truck transponder use. Shorter wait times at the 
border also support the CBP mission to foster international trade. 

The contractor assisting APHIS with its fee review did not propose a 
way for APHIS to better align truck fees with the full cost of truck 
inspections while still incentivizing the use of transponders, but 
noted that for the long term, APHIS should look into other possible 
alternatives, including examining the feasibility of implementing toll-
based transponders, which would allow trucks to pay for each crossing 
while still retaining a low administrative burden for CBP and time 
savings of the current transponder system. Table 2 demonstrates, for 
illustrative purposes only, various combinations of per-entry and 
annual transponder fee rates to more closely align commercial truck 
fees with costs under the current system. For example, one example 
adds a portion of the cost of inspecting trucks with transponders to 
the per-arrival fee for trucks, which would provide an incentive for 
the use of transponders (see table 2). In another example, trucks 
could purchase different "packages" of arrivals at a discounted rate 
(50 arrivals, 100 arrivals, 200 arrivals, etc.). In commenting on a 
draft of this report, APHIS officials said that because the 
distribution around the mean number of arrivals is unknown, it would 
be difficult to determine the effects of a change in truck transponder 
pricing. 

Table 2: GAO Illustrative Examples of Fee Rates That Would More 
Closely Align Truck Fees with Full Costs: 

Example 1: Transponders pay the full cost of their average crossings. 

Per-arrival fee: $7.00; 
Estimated AQI fee rate for transponders if fee was set to collect full 
cost of inspections: $707.50. 

Example 2: Per-entry fees are increased to cover the costs of 
incentivizing transponders. 

Estimated AQI fee rate if the revenue loss from the transponder cap 
was added to the non-transponder AQI fee: $48.00; 
Transponder fee: $280.00. 

Example 3: Tiered levels of service. 

Per-arrival fee: $7.00; 
Transponders fees by "package": 
50 arrivals: $250; 
100 arrivals: $500; 
200 arrivals: $1000. 

Source: GAO analysis of APHIS data from fiscal year 2011 AQI Cost 
Model. 

[End of table] 

APHIS Might Not Include Fees for Additional Passengers Due to 
Anticipated Collection Challenges: 

As previously discussed, although APHIS has authority to charge AQI 
fees to all international passengers, it currently only charges fees 
to international commercial air passengers.[Footnote 26] As of 
February 2013, APHIS is not considering fees for international 
passengers aboard private aircraft, private vessels, buses, and 
railcars, citing administrative burdens and anticipated challenges 
relating to collecting these fees. Because APHIS does not currently 
charge fees to inspect these passengers, these costs are covered by 
CBP's annual appropriations or AQI fees paid by other users. This 
reduces economic efficiency and equity of the fees because the costs 
of the inspections are not assigned to those who both use and benefit 
from them. 

APHIS's authority permits it to charge all passengers for the cost of 
inspecting both passengers and the vehicle in which they arrive, but 
does not always permit APHIS to do the reverse; that is, to include in 
the vehicle AQI fees the cost of inspecting the passengers arriving in 
the vehicle. Charging the cost of inspecting bus, private aircraft, 
private vessel, and rail passengers and the vehicles in which they 
arrive to the passengers themselves would be administratively 
burdensome because there is no existing mechanism for collecting fees 
from these classes of passengers. However, in several instances, CBP 
can and does charge customs fees--fees collected to help offset the 
costs of customs inspections--to private vehicles rather than the 
passengers. If APHIS had statutory authority to charge all vehicles in 
which passengers travel, rather than only the passengers themselves, 
then APHIS could leverage existing customs fee collection mechanisms 
to minimize administrative burden in collecting AQI fees.[Footnote 27] 
We previously recommended that USDA and DHS develop a legislative 
proposal, in consultation with Congress, to harmonize customs, 
immigration, and AQI fees.[Footnote 28] To date, a proposal to 
harmonize these three fees has not been introduced.[Footnote 29] 

Bus passengers. The cost of bus passenger inspections totaled about 
$23 million, or about $4 per passenger, in fiscal year 2011. CBP 
officials told us that it would be difficult to collect the fee from 
individual passengers. In June 2012, our limited observations of the 
inspection process for bus passengers at San Ysidro, California, 
revealed logistical challenges consistent with these concerns. In this 
port, bus passengers get off the bus and are processed along with 
pedestrians crossing the border, which would make it difficult to 
properly separate out and charge a fee only to bus passengers. 

To avoid these kinds of logistical challenges, bus passenger fees 
could be collected using the air passenger fee model in which the fee 
is collected by the airline and then remitted to APHIS periodically. 
However, APHIS's fee review noted that barriers to entry for the bus 
passenger industry are lower than air and cruise vessel industries--
which could mean a large and changing list of bus companies from which 
APHIS would need to collect fees. Because of this, an APHIS official 
stated, this type of remittance model could be burdensome to maintain 
and audit. The official also told us that APHIS has discussed both a 
possible transponder approach to collect fees for buses, and an 
approach in which buses with over 15 seats and buses with fewer than 
15 seats pay different fee rates. In commenting on a draft of this 
report, APHIS officials said that due to logistical challenges, they 
would have to seek new legislative authority to allow for the 
collection of fees for the bus rather than charging a fee for the 
individual passenger. 

Private aircraft and private sea vessels. The total cost of inspecting 
private aircraft passengers[Footnote 30] in fiscal year 2011 was about 
$11 million, which equates to approximately $34 per passenger or $93 
per aircraft for each arrival. The cost of inspecting private vessel 
sea passengers[Footnote 31] for fiscal year 2011 was about $4.9 
million, which equates to approximately $20 per passenger or $61 per 
vessel for each arrival. As stated above, AQI's statute authorizes it 
to charge passengers, but not the private aircraft or vessels in which 
those passengers arrive. However, CBP charges a customs fee of $27.50 
per year for each private plane and vessel at least 30 feet long. 
[Footnote 32] Absent a change in APHIS's statutory authority allowing 
it to charge private aircraft and vessels for AQI services, APHIS and 
CBP cannot leverage the CBP infrastructure already used to collect 
customs inspections fees for private aircraft and vessels. 

APHIS considered the effect of charging new fees for private aircraft 
and vessels, but as of February 2013, the fees APHIS is considering 
might not recover the costs of AQI services for these users. APHIS's 
fee review noted that it would be relatively easy to administer an 
annual fee on private aircraft or vessels using CBP's current process, 
but concluded that the potential revenue would be very small. However, 
the potential revenue from such a fee would be greater than the AQI 
fees currently assessed on freight rail. 

It is also worth noting that even if an AQI vessel fee was piggybacked 
onto the customs vessel fee, vessels presenting similar agriculture 
risks may not all be subject to an AQI fee. As mentioned above, CBP's 
customs fee applies to private vessels that are at least 30 feet long. 
However, one CBP official told us that many private vessels arriving 
at his port are only about 20 feet long and thus are not required to 
pay the customs fee, but that these vessels still present agriculture 
risks similar to larger vessels because 20-foot vessels are large 
enough to store food. According to APHIS officials, APHIS has not 
assessed the agricultural risks posed by smaller vessels and said that 
the risks would likely vary at each port. 

Rail passengers. Rail passenger inspections cost the AQI program about 
$1.6 million in fiscal year 2011, or almost $6 per passenger. As 
stated previously, AQI's statute authorizes it to charge rail 
passengers seeking to enter the country for the costs of inspecting 
the passengers as well as the railcar in which they are riding. CBP 
charges a customs inspection fee for each passenger railcar, but APHIS 
does not charge an AQI fee. Absent a change, APHIS and CBP cannot 
leverage the infrastructure used for a per-car fee for customs 
inspections currently charged for the arrival of each railroad car 
carrying passengers. 

APHIS Might Revise the Vessel Inspection Fees to Recover the Costs of 
Sea Vessel Passenger Inspections: 

In 2005 APHIS set AQI commercial vessel fees--which are levied on 
cruise and cargo vessels alike--to cover the costs of inspecting 
vessel passengers. According to its authorizing statute, APHIS may set 
fees to cover the costs of AQI services for arriving international 
passengers, and commercial aircraft, trucks, vessels, and railcars. 
The amount of the fee must be commensurate with the costs of AQI 
services for each pathway (i.e., class of passengers or entities 
paying the fees), preventing cross-subsidization of costs between 
users in setting the fee rates. The way the fees are currently set, 
the vessel fee includes the cost of inspecting vessel passengers, such 
as passengers arriving on cruise ships. APHIS is considering replacing 
the cruise vessel fee with a sea passenger fee that would recover the 
costs of inspecting both sea passengers and the cruise vessels. The 
cost of inspecting cruise passengers for fiscal year 2011 was about 
$17.9 million. Charging an inspection fee to sea passengers would not 
require a new collections infrastructure because commercial vessel 
passengers currently pay user fees for customs inspections, which are 
remitted to CBP by the party--such as the cruise line--issuing the 
ticket or travel document. As we mentioned previously, in 2008 we 
recommended that DHS develop a legislative proposal, in consultation 
with Congress, to harmonize the customs, immigration, and AQI 
fees.[Footnote 33] To date, a proposal to harmonize these three fees 
has not been introduced.[Footnote 34] In addition, we previously 
reported that existing collection mechanisms can be leveraged to 
minimize administrative burden in collecting fees.[Footnote 35] 

APHIS Might Create User Specific Fees For Some, But Not All, 
Specialized AQI Services: 

APHIS is considering a new fee for treatments and monitoring but might 
not change current AQI policy for two other specialized AQI services--
permits for importing commodities and monitoring of garbage compliance 
agreements--that benefit only a limited set of users yet the costs are 
borne by other AQI fee payers. By continuing to include the costs of 
these specialized services in the regular AQI fees for each pathway, 
the users that benefit most from these services do not know how much 
they are paying for these services--which may encourage overuse of 
these services--while other fee payers are paying for services they do 
not use. As we have previously reported, a more tailored, user-
specific approach to fee-setting better promotes equity and economic 
efficiency by assigning costs to those who use or benefit from the 
services.[Footnote 36] 

Treatments and treatment monitoring. APHIS is considering a new fee 
for conducting and monitoring treatments, for example, fumigation. 
APHIS's treatment and monitoring costs combined were about $14 million 
in fiscal year 2011.[Footnote 37] Treatments may be required when a 
pest is identified on or in a shipment, or, treatment may be required 
as a condition of entry for certain commodities. Treatments are 
obtained in one of two ways. First, and most commonly, treatments are 
provided by a private third-party company who charges the importer 
accordingly. APHIS monitors these treatments, generally at no 
additional costs to the importer, to ensure compliance with APHIS 
policies and procedures. Second, and less commonly, in certain 
instances APHIS provides both treatment and monitoring services for 
certain commodities, generally at no additional cost to the importer. 
Because the cost of treatment and monitoring provided by APHIS is 
bundled into the AQI fees for air cargo, maritime cargo, commercial 
trucks and rail cargo, these services--including those for repeat 
offenders who require treatments regularly--are subsidized by other 
shippers. Further, importers may not be aware of the costs being 
incurred for APHIS's treatment and monitoring services. Directly 
charging importers for these services may encourage importers to work 
with growers whose products do not regularly require treatment because 
importers would directly incur the costs of the treatments. In keeping 
with basic economic principles, this may also improve the economic 
efficiency of the fees. 

Import commodity permits. Permits are required to import and transport 
certain agricultural commodities. Although APHIS has authority to 
charge for permits, under the current system these services are paid 
for indirectly through the AQI fees. In fiscal year 2011, APHIS issued 
12,152 permits for the import of commodities such as wood products, 
plants, and soil. Multiple commodities can be listed on a single 
permit, which is valid for that importer for a year. APHIS spent about 
$13 million in fiscal year 2011 on permit-related activities; as 
mentioned previously, the cost of these permits is included in the 
regular inspection fees for air cargo, maritime cargo, trucks, and 
rail cargo. As such, importers may not be aware of the cost incurred 
for their permit application and adjudication, which may lead to 
inefficient use of APHIS resources if importers "overpurchase" permit 
applications. According to APHIS officials, importers sometimes obtain 
permits that they do not use. The contractor's report proposed a 
charge of $1,075 for each commodity permit and $1,775 for each pest 
permit. However, APHIS officials were concerned that charging for 
permits may create an unintended barrier to trade and retaliatory 
actions by other countries with which we trade. 

Monitoring of compliance agreements for regulated garbage. Costs 
related to monitoring compliance with regulated garbage agreements 
were projected to be about $36 million in fiscal year 2013. CBP 
monitors compliance agreements for disposal of regulated international 
garbage but does not currently charge additional fees for these 
services. APHIS guidance requires that agriculture specialists monitor 
all facilities with compliance agreements quarterly--generally 
airports and seaports that serve international travel. In addition, 
officials stated that certain ships, such as cruise ships, have 
compliance agreements and the disposal of their garbage is regularly 
overseen by CBP agriculture specialists. APHIS might continue to 
include these costs in inspection fees for air, maritime, truck, and 
rail cargo rather than capture them under a separate fee for 
monitoring compliance agreements. 

The Fees Currently under Consideration Might Include Some, But Not 
All, Imputed Costs: 

The fees APHIS is considering would recover imputed costs paid by the 
Office of Personnel Management and the Department of Labor on behalf 
of APHIS and CBP and attributable to the AQI program.[Footnote 38] By 
incorporating some imputed costs in its analysis of AQI program costs, 
APHIS makes progress in implementing our 2008 recommendation. However, 
APHIS's analysis does not include costs of processing AQI collections 
borne by the Department of the Treasury (Treasury) for costs related 
to collecting, depositing, and accounting for certain AQI fee 
collections. We previously reported that agencies authorized to charge 
full-cost recovery fees could include the Treasury's cost of 
collections in their fee rates and deposit these funds into the 
Treasury.[Footnote 39] APHIS officials told us that Treasury has not 
yet provided APHIS with a statement of these costs.[Footnote 40] 
However, federal accounting standards specify that when such costs are 
unknown, a reasonable estimate may be used. 

The Distribution of Fee Collections among CBP, APHIS, and the AQI 
Reserve Is Misaligned with AQI Costs: 

APHIS's and CBP's Shares of Fee Revenues Are Misaligned: 

CBP's share of AQI fee revenue is significantly lower than its share 
of program costs.[Footnote 41] For example, in fiscal year 2011 (the 
most recent year for which APHIS could provide this data), CBP 
incurred 81 percent of total AQI program costs, but received only 60 
percent of fee revenues; APHIS incurred 19 percent of program costs 
but retained 36 percent of the revenues, as shown in table 3. Further, 
although AQI costs exceeded AQI fee revenues by more than $288 million 
in fiscal year 2011--a gap that was bridged in part using amounts from 
CBP's annual Salaries and Expenses appropriation--APHIS used more than 
$25 million of the AQI fee collections to increase the AQI reserve 
balance that year. 

Table 3: APHIS and CBP AQI Costs and Distribution of Fee Revenues, 
Fiscal Year 2011: 

AQI costs[A]: 
CBP: $667.1 million; 
APHIS: $156.2 million; 
AQI reserve: 0; 
Total: $823.3 million. 

AQI costs (percentage of total AQI costs): 
CBP: 81%; 
APHIS: 19%; 
AQI reserve: 0; 
Total: 100%. 

Distribution of fee revenues: 
CBP: $319.1 million; 
APHIS: $190.3 million[B]; 
AQI reserve: $25.3 million[C]; 
Total: $534.7 million. 

Distribution of fee revenues (percentage of total): 
CBP: 60%; 
APHIS: 36%; 
AQI reserve: 5%; 
Total: 100%. 

Source: GAO analysis of AQI cost model data and APHIS financial data. 

Notes: Totals may not add due to rounding. 

[A] AQI costs listed here exclude imputed costs paid by another 
agency. In fiscal year 2011, total AQI costs including imputed costs 
were $861.6 million ($696.2 million for CBP and $165.4 for APHIS). 

[B] In fiscal year 2011, APHIS obligated $190.3 million of fiscal year 
2011 fee revenues and an additional $0.4 million from the APHIS 
reserve, for total APHIS AQI obligations of $190.7 million. 

[C] Near the beginning of the fiscal year, APHIS and CBP agreed to the 
percentage split of fee revenues based on their estimate that AQI fee 
collections would total $507.4 million in fiscal year 2011. Actual 
collections were $534.7 million. Of the additional $27.3 million of 
fee collections, $1 million each was distributed to APHIS and CBP and 
$25.3 million was added to the shared AQI reserve. APHIS also added an 
additional $4.2 million to its reserve balance in 2011 from prior year 
recoveries and made another adjustment that increased the APHIS 
reserve by an additional $1.0 million. 

[End of table] 

In 2005, CBP and APHIS agreed that user fee collections should be 
allocated based on each agency's expected annual costs. Each fiscal 
year, APHIS and CBP agree to an estimate of total AQI revenues for 
that year and how those funds will be allocated between the agencies. 
For 2006, the agencies agreed on a 61/39 percent split for CBP and 
APHIS, respectively. Table 4 shows the planned division of revenues 
between CBP and APHIS for 2010 to 2013. The 63/37 percent split has 
changed little since the 2006 distribution.[Footnote 42] 

Table 4: Estimated Allocation of AQI Fee Revenues: 

Fiscal year: 2010; 
Fee revenues allocated to CBP: $312.2 million; 
Percent of estimated fee revenues allocated to CBP: 63%; 
Fee revenues allocated to APHIS: $185.8 million; 
Percent of estimated fee revenues allocated to APHIS: 37%; 
Total estimate of AQI fee revenues: $498.0 million. 

Fiscal year: 2011; 
Fee revenues allocated to CBP: $318.1 million; 
Percent of estimated fee revenues allocated to CBP: 63; 
Fee revenues allocated to APHIS: $189.3 million; 
Percent of estimated fee revenues allocated to APHIS: 37%; 
Total estimate of AQI fee revenues: $507.4 million. 

Fiscal year: 2012; 
Fee revenues allocated to CBP: $344.8 million; 
Percent of estimated fee revenues allocated to CBP: 63; 
Fee revenues allocated to APHIS: $205.2 million; 
Percent of estimated fee revenues allocated to APHIS: 37%; 
Total estimate of AQI fee revenues: $550.0 million. 

Fiscal year: 2013; 
Fee revenues allocated to CBP: $349.6 million; 
Percent of estimated fee revenues allocated to CBP: 63; 
Fee revenues allocated to APHIS: $208.1 million; 
Percent of estimated fee revenues allocated to APHIS: 37%; 
Total estimate of AQI fee revenues: $557.7 million. 

Source: GAO analysis of APHIS and CBP agreements. 

[End of table] 

Although the 2005 agreement states that AQI funds will be distributed 
between CBP and APHIS in proportion to each agency's AQI-related 
costs, this does not happen in practice. Rather, the 63/37 percent 
split means that APHIS retains AQI fee revenues sufficient to cover 
all of its estimated AQI costs--including costs attributable to AQI 
services for which no fees are authorized or charged--and transfers 
the remainder of the estimated fee revenues to CBP.[Footnote 43] In 
other words, APHIS covers all its AQI costs with AQI fee revenues, 
while CBP does not. To bridge the resulting gap, CBP uses its annual 
appropriation. 

Because the 63/37 percent split is based on estimated revenues, APHIS 
and CBP developed an adjustment process for when actual AQI fee 
collections differ from the amount that was expected. When total 
actual fee collections for the year exceed (or fall short of) the 
estimate, the difference is added to (or taken from) the shared 
reserve. As previously mentioned, the shared reserve is money that is 
carried over each year and is meant to cover both APHIS and CBP needs 
in the event that fee collections decline unexpectedly. If, however, 
APHIS's costs are greater or less than the estimated 37 percent, the 
difference is added to or taken from a second reserve; as mentioned 
previously, this is known as the APHIS-only reserve. For example, 
according to APHIS officials, a USDA hiring freeze has resulted in 
lower-than-expected APHIS AQI spending in recent years. Specifically, 
because APHIS costs were lower than the estimated 37 percent in fiscal 
year 2012, APHIS took a portion of the 37 percent allocated to it and 
put some of those funds into this second reserve. Figure 3 shows the 
total actual distribution of AQI program funding among CBP, APHIS, and 
both reserve funds in fiscal year 2011. 

Figure 3: Distribution of AQI Program Funding Among CBP, APHIS, and 
the AQI Reserve, Fiscal Year 2011: 

[Refer to PDF for image: illustration] 

Agricultural Quarantine Inspection User Fee Account: 
Air passengers: $434 million;
Aircraft: $50 million; 
Vessels: $27 million; 
Railcars: $9 million; 
Trucks: $15 million. 

Agricultural Quarantine Inspection User Fee Account: to: 
APHIS Reserve: $0; 
Shared Reserve: $25 million. 

APHIS AQI activities: 
From Agricultural Quarantine Inspection User Fee Account: $190 million; 
From APHIS Reserve: $0.4 million; 
From Shared Reserve: $0. 

CBP AQI activities: 
From Agricultural Quarantine Inspection User Fee Account: $319 million; 
From Shared Reserve: $0; 
From General fund appropriations to CBP: $153 million. 

Source: GAO analysis of APHIS and CBP information; Art Explosion (art). 

[End of figure] 

APHIS and CBP also adjust the 63/37 percent split as they see how 
actual revenues compare with estimates. For example, in fiscal year 
2011, fee revenues were higher than estimated and APHIS and CBP each 
received distributions of $1 million more than the initial estimate. 
Table 5 shows the distributions and obligations of actual AQI fee 
revenues for recent years. 

Table 5: Distributions and Obligations of Actual AQI Fee Revenues, 
Fiscal Years 2010 through 2012: 

Fiscal year: 2010; 
Fee revenues obligated by CBP: $312.2 million; 
Percentage of fee revenues obligated by CBP: 62%; 
Fee revenues obligated by APHIS: $185.8 million[A]; 
Percentage of fee revenues obligated by APHIS: 37%; 
Fee revenues added to the reserve: $9.4 million[B]; 
Percentage of fee revenues added to the reserve: 2%; 
Total AQI fee revenues collected: $507.4 million. 

Fiscal year: 2011; 
Fee revenues obligated by CBP: $319.1 million; 
Percentage of fee revenues obligated by CBP: 60%; 
Fee revenues obligated by APHIS: $190.3 million[C]; 
Percentage of fee revenues obligated by APHIS: 36%; 
Fee revenues added to the reserve: $25.3 million[D]; 
Percentage of fee revenues added to the reserve: 5%; 
Total AQI fee revenues collected: $534.7 million. 

Fiscal year: 2012; 
Fee revenues obligated by CBP: $348.8 million[E]; 
Percentage of fee revenues obligated by CBP: 64%; 
Fee revenues obligated by APHIS: $188.2 million[E]; 
Percentage of fee revenues obligated by APHIS: 34%; 
Fee revenues added to the reserve: $11.3 million; 
Percentage of fee revenues added to the reserve: 2%; 
Total AQI fee revenues collected: $548.3 million. 

Source: GAO analysis of APHIS financial data. 

Notes: Totals may not add due to rounding. 

[A] In addition, APHIS spent $3.6 million from its reserve balance for 
total 2010 APHIS AQI obligations of $189.4 million. 

[B] APHIS added an additional $7.4 million to its reserve balance in 
2010 from prior year recoveries from APHIS accounts and funds released 
by the FACT Act. 

[C] In addition, APHIS spent $0.4 million from its reserve balance for 
total 2011 APHIS AQI obligations of $190.7 million. 

[D] APHIS added an additional $4.2 million to its reserve balance in 
2011 from prior year recoveries and made another adjustment that 
increased the reserve by an additional $1 million. 

[E] APHIS transferred $4 million from its initial allocation to CBP. 

[End of table] 

The Fees APHIS is Currently Considering Would Overfund the Total AQI 
Reserve, Increasing Reliance on CBP's Appropriated Funds to Cover 
Program Costs: 

We have previously reported that maintaining a reserve balance is 
important for fee programs to ensure that program operations can be 
sustained in case fee revenues decline but workload does not. 
According to APHIS officials, APHIS's target balance for the total 
reserve is 3 to 5 months worth of AQI costs. Officials told us that 
this level would ensure the stability of the program in case of 
potential fluctuations in fee volumes, bad debts, unanticipated 
crises, or the need for one time capital expenditures. The upper end 
of the target--5 months--is the amount APHIS officials estimate would 
be needed to completely shut down the inspection program if it were to 
cease. However, a maximum target balance aligned with more realistic 
program risks would also allow for lower reserve levels. The rationale 
for maintaining a reserve balance as a buffer against a complete 
program shutdown is not as compelling when a fee-funded program also 
has access to annual appropriations from the general fund, as Congress 
has an opportunity to weigh its funding priorities on an annual basis. 

Moreover, our analysis of APHIS's cost and collection projections 
shows a higher total reserve balance than the 3-to 5-month target. The 
total reserve balance was approximately $107 million at the end of 
fiscal year 2012, which represents about 2.4 months of the AQI program 
costs paid with AQI fee revenues that year.[Footnote 44] Our analysis 
of APHIS data shows that the balance in the total AQI reserve would 
grow by an estimated $55 million, $75 million, and $96 million in 
fiscal years 2013, 2014, and 2015, respectively. This would bring the 
reserve balance to approximately $333 million--or more than triple the 
fiscal 2012 balance. To further put this amount in perspective, $333 
million would have paid more than 7 months of AQI costs paid with fee 
revenues in fiscal year 2012.[Footnote 45] An unnecessarily high total 
reserve balance means that monies that could be used to pay for AQI 
program costs would instead be carried over for possible future needs. 
This strategy would increase reliance on CBP's annual appropriation to 
pay for current AQI-related costs. 

APHIS's projected level for the shared reserve fund exceeds the 
historical use of the fund (see figure 4). In past crises, APHIS and 
CBP used much less than APHIS's total reserve balance target of 3 to 5 
months worth of AQI costs. During the financial crisis in fiscal year 
2009, AQI collections dropped by more than $46 million compared to the 
prior year and the reserve fund dropped by about $50 million, reducing 
the reserve from 2.3 months of fiscal year 2008 costs paid with fee 
revenues to 1.1 months of fiscal year 2009 costs paid with fee 
revenues, as shown in figure 4. In addition, after the events of 
September 11, 2001, the reserve fund dropped from approximately $68 
million on October 1, 2001, to just less than $45 million on September 
30, 2002, reducing the reserve to about 2.5 months of fiscal year 2002 
costs paid with fee revenues. 

Figure 4: Fiscal Year End Total Reserve Balance: 

[Refer to PDF for image: combined vertical bar and line graph] 

Fiscal year: 2002; 
Balance: $44.8 million; 
Months: 2.5. 

Fiscal year: 2003; 
Balance: $40.3 million; 
Months: 1.7. 

Fiscal year: 2004; 
Balance: $59.2 million; 
Months: 2.3. 

Fiscal year: 2005; 
Balance: $59.5 million; 
Months: 2.1. 

Fiscal year: 2006; 
Balance: $71.7 million; 
Months: 1.9. 

Fiscal year: 2007; 
Balance: $83.5 million; 
Months: 2.2. 

Fiscal year: 2008; 
Balance: $100.6 million; 
Months: 2.3. 

Fiscal year: 2009; 
Balance: $50.9 million; 
Months: 1.1. 

Fiscal year: 2010; 
Balance: $64.2 million; 
Months: 1.5. 

Fiscal year: 2011; 
Balance: $94.2 million; 
Months: 2.2. 

Fiscal year: 2012; 
Balance: $106.8 million; 
Months: 2.4. 

Source: GAO analysis of APHIS financial data. 

Note: Data on months of APHIS and CBP AQI costs exclude AQI costs 
funded with CBP’s appropriation. The reserve balance includes both the 
shared reserve and the APHIS reserve. In fiscal year 2012, the APHIS 
reserve balance was $50.7 million and the shared reserve balance was 
$56.1 million. 

[End of figure] 

APHIS and CBP Do Not Ensure that All AQI Fees Due are Collected: 

APHIS Does Not Collect AQI Railcar Fees Consistent with Its 
Regulations: 

APHIS's collection practices for the AQI fees assessed on railcars are 
not consistent with APHIS regulations. According to the APHIS fee 
regulations,[Footnote 46] railcars seeking to enter the United States 
may pay AQI fees in one of two ways. First, they can pay a $7.75 fee 
for each arrival of a loaded commercial railcar. Second, they can 
prepay a flat fee of $155 annually for a specific railcar. The $155 
annual fee is equal to the cost of 20 individual arrivals. According 
to APHIS officials, no railcar companies choose the $155 flat fee; 
rather, all choose to pay the $7.75 per arrival fee. However, rather 
than collecting this fee for each arrival of a loaded railcar (as 
required by APHIS regulations), APHIS only collects fees for the first 
20 arrivals a railcar makes each year.[Footnote 47] Because of this, 
in fiscal year 2010, APHIS lost $13.2 million in railcar fee revenue 
because about 1.7 million railcar arrivals did not pay a fee even 
though a fee was due. 

CBP Does Not Verify Payment for Commercial Truck, Private Vessel, and 
Private Aircraft Fees: 

CBP does not verify that it collects applicable user fees for every 
commercial truck, private aircraft, and private vessel for which the 
fees are due, resulting in an unknown amount of lost revenue. We have 
previously reported that internal controls should generally be 
designed to assure that ongoing monitoring occurs in the course of 
operations.[Footnote 48] Per APHIS and CBP regulations, commercial 
trucks entering the United States must pay AQI and customs user fees 
by purchasing an annual transponder or paying the fees upon each 
arrival. Trucks without transponders pay fees upon arrival by cash, 
check, or credit card. CBP personnel at ports we visited compared the 
amount of cash deposited for AQI and customs user fees to the number 
of cash register transactions to ensure against theft, but did not 
verify that all trucks that were supposed to pay the fees actually 
paid the fees. In other words, CBP cannot be sure that it collected 
these fees from all trucks required to pay them. The Automated 
Commercial Environment system alerts CBP when an arriving truck does 
not have a transponder and therefore owes the fee at the time of 
crossing, but CBP does not require officers to record in the system 
that the truck has paid the fee, or review this information to verify 
whether all trucks paid the fees. 

Similarly, CBP does not consistently verify that all arriving private 
aircraft and private vessels have a customs user fee decal, as 
required. As we stated previously in this report, per CBP regulations, 
private aircraft and private vessels more than 30 feet long arriving 
in the United States must pay an annual $27.50 customs user fee. As 
proof of payment, these aircraft and vessels receive a customs user 
fee decal.[Footnote 49] As APHIS's fee review noted, the customs decal 
could provide an administratively simple mechanism on which to 
piggyback an AQI fee for private aircraft and vessels. However, absent 
more rigorous oversight of proper payment for customs decals this 
strategy would not be as effective as it otherwise could be. 

For private aircraft, the Advanced Passenger Information System (APIS) 
can show the customs user fee decal number before arrival. However, 
APIS neither requires that the decal number be entered nor flags 
aircraft for which decal numbers are not entered. For private vessels, 
the Pleasure Boat Reporting System and the Small Vessel Arrival System 
both include a field for the customs user fee decal number. However, 
the decal number is not a required field in either system and the 
systems do not link to the Decal and Transponder Online Procurement 
System to provide an automated mechanism to verify the decal number. 
According to CBP officials, CBP officers are to physically verify the 
decal during their inspection of the aircraft or vessel upon arrival. 
However, CBP does not verify that this actually occurs, nor are 
procedures in place nationwide to ensure that CBP officers collect the 
decal user fee as required if arriving vessels and aircraft lack a 
valid decal. Further, on one of our site visits to a small airport, 
the CBP officers conducting the inspections were unfamiliar with the 
process they should follow if an aircraft arrived without a decal; 
port records showed that the last time a customs user fee decal had 
been sold at that airport was in 2010. Later that day, port officials 
informed us that shortly after our visit an aircraft arrived without a 
decal and the officers collected the decal fee. We also observed 
inspections of private vessels that arrived without customs decals; 
the CBP officer conducting the inspections did not collect the decal 
user fees, but instead informed the vessel owners of the requirement 
to get a decal. 

Conclusions: 

The AQI program is a key component in the nation's efforts to protect 
against exotic diseases and pests and the billions of dollars in 
damage they can cause. Analyzing and understanding the costs of 
providing these important services--for which CBP and APHIS have joint 
responsibility--are important so that the agencies and Congress have 
the best possible information available to them when designing, 
reviewing, and overseeing AQI fees and operations. This is especially 
true given the increasing need for fiscal restraint in an environment 
of tightening discretionary budgets. By conducting a thorough review 
of AQI program costs and options for redesigning AQI fees, APHIS has 
taken important steps in identifying and strengthening the link 
between AQI program costs and fee collections. However, the current 
AQI fee structure does not (1) recover full costs from some users, as 
authorized; (2) charge fees to some passengers that APHIS is 
authorized to charge but chooses not to for policy reasons; and (3) 
align fees with the program costs to maximize economic efficiency and 
equity. As of February 2013, the fees APHIS is considering would not 
fully remedy these issues (partly because of gaps in AQI's statutory 
authority and partly because APHIS chooses not to fully exercise the 
AQI fee authorities), thus requiring APHIS and CBP to continue to rely 
on appropriated funds to bridge the historical gap of nearly 40 
percent between AQI program costs and collections. Similarly, because 
the reimbursable overtime rates for agriculture inspections are not 
aligned with personnel costs to perform the inspections and because 
not all ports consistently charge for those reimbursable services or 
collect payment in a timely way, a portion of those costs are 
subsidized by CBP's appropriation. 

Absent authority to either charge all pathways for AQI services or to 
permit cross-subsidization among pathways when setting fees--that is, 
allowing fees paid by some users to be set to recover the costs of 
services provided to other users--the AQI program cannot recover its 
full costs and must continue to rely on appropriated funds. 
Furthermore, APHIS does not charge fees in all instances in which the 
authority exists to do so because administrative costs for collecting 
fees from certain passengers would be high and the statutory authority 
limits the recovery of such costs through fees assessed on vehicles in 
which passengers travel (a method CBP uses for some other inspection 
fees). 

Regular, timely, and substantive fee reviews are especially critical 
for programs--like AQI--that are mostly or solely fee funded to ensure 
that fee collections and program costs remain aligned. Although APHIS 
is to be commended for its in-depth review of the AQI user fees and 
program costs, until APHIS includes all imputed costs when setting fee 
rates and CBP ensures that its CMIS cost data accurately reflect 
program costs at all ports, APHIS will not be able to set fees to 
recover the full costs of AQI services. 

Because the fee revenues distributed to each agency are not aligned 
with costs and funding of the AQI reserve is greater than the level 
needed to address realistic program risks, CBP relies more heavily on 
its appropriation to fund AQI costs that could otherwise be funded 
with AQI fee revenues. APHIS and CBP have not followed their 2005 
agreement to allocate fee collections based on each agency's costs, 
essentially overfunding APHIS and underfunding CBP. 

Finally, the AQI program is forgoing revenues because CBP and APHIS do 
not ensure that all fees due are collected. APHIS does not collect 
railcar fees for the arrival of all railcars in accordance with 
regulations, and CBP does not use available controls to verify that 
commercial trucks have paid the AQI fee. Similarly, because CBP does 
not use available information to verify that all arriving private 
aircraft and private vessels have valid customs decals, the agency 
does not have assurance that it is collecting all fees that are due. 
Until APHIS and CBP improve oversight of these collection processes, 
they will continue to forgo revenue due the government, which will 
increase reliance on appropriated funds to cover program costs. 

Matters for Congressional Consideration: 

In light of declining discretionary budgets, to reduce or eliminate 
the reliance of the AQI program on taxpayer funding, Congress should 
consider allowing USDA to set AQI fees to recover the aggregate 
estimated costs of AQI services--thereby allowing the Secretary of 
Agriculture to set fee rates to recover the full costs of the AQI 
program. 

Congress should consider amending USDA's authorization to assess AQI 
fees on bus companies, private vessels, and private aircraft and 
include in those fees the costs of AQI services for the passengers on 
those buses, private vessels, and private aircraft. 

Recommendations for Executive Action: 

To help ensure that USDA considers full AQI program costs when setting 
AQI fee rates, we recommend that: 

* the Secretary of Agriculture include all imputed costs borne by 
other federal agencies and attributable to the AQI program, and: 

* the Secretary of Homeland Security direct CBP to update and widely 
disseminate comprehensive guidance to ports on the correct use and 
review of CMIS codes. Specifically, the guidance should reiterate that 
a portion of CBP officers' primary inspection time should be charged 
to agriculture and cover how, and with what frequency, ports should 
conduct work studies to determine the correct allocation of staff 
time. CBP should also consider making CMIS training mandatory for CMIS 
practitioners. 

To help ensure that fee rates are set to recover program costs, as 
authorized, and to enhance economic efficiency and equity with 
consideration of the administrative burden, we recommend that the 
Secretary of Agriculture: 

* establish an AQI cruise passenger fee aligned with the costs of 
inspecting cruise passengers and vessels and collected using the 
existing processes for collecting cruise passenger customs fees; 

* establish a fee for passenger railcars aligned with the costs of 
inspecting rail passengers and railcars and collected using the 
existing processes for collecting passenger railcar customs fees; 

* eliminate caps on the commercial vessel and commercial rail AQI fees; 

* set truck fee rates to recover the costs of AQI services for trucks 
while maintaining a financial incentive for trucks to use 
transponders; and: 

* recover the costs of AQI services for buses and bus passengers by 
either establishing a bus passenger fee that is remitted by the bus 
companies or seeking legislative authority to establish a bus fee that 
covers the costs of bus passenger inspections. 

To align reimbursable overtime revenues with the costs of those 
agriculture inspections, we recommend that: 

* the Secretaries of Agriculture and Homeland Security work together 
to amend overtime regulations for agriculture services so that 
reimbursable overtime rates that CBP and APHIS charge are aligned with 
the costs of those services; and: 

* the Secretary of Homeland Security: 

- ensure that ports consistently charge for agriculture overtime 
services that are eligible for reimbursement and: 

- deny agriculture-related reimbursable overtime inspection services 
to entities with bills more than 90 days past due, consistent with 
APHIS regulations. 

To help ensure that AQI fee rates are structured to maximize economic 
efficiency and equity while minimizing administrative burden, we 
recommend that the Secretary of Agriculture: 

* charge user fees for AQI permit applications; 

* charge user fees for treatment services; and: 

* charge user fees for the costs of monitoring compliance agreements 
for regulated garbage. 

To better align the distribution of AQI fee revenues with AQI costs, 
we recommend that: 

* the Secretaries of Agriculture and Homeland Security work together 
to allocate AQI fee revenues consistent with each agency's AQI costs, 
and: 

* the Secretary of Agriculture establish an AQI reserve target that is 
more closely aligned with program needs and risks, based on past 
experience. 

To ensure that inspection fees are collected when due, we recommend 
that: 

* the Secretary of Agriculture revise its processes for collecting AQI 
railcar fees to conform to USDA regulation and: 

* the Secretary of Homeland Security establish internal controls to 
alert personnel when fees are not paid, and use available information 
to verify that arriving trucks, private aircraft, and private vessels 
pay applicable inspection user fees. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to the Secretaries of Agriculture 
and Homeland Security for their review and comment. We received 
written comments from USDA and DHS, which are reprinted in appendixes 
III and IV, respectively. In addition, both agencies provided 
technical comments, which we incorporated as appropriate. 

DHS concurred with our recommendations and described corrective 
actions the agency plans to take to implement them. 

USDA agreed with the majority of the recommendations we made to the 
Secretary of Agriculture. However, USDA said that with respect to nine 
of the recommendations, the agency is preparing to initiate notice and 
comment rulemaking regarding the AQI fees. Therefore, USDA stated, it 
would be inappropriate to firmly commit to any particular component or 
a specific amount of fees at this time. USDA commented that, at this 
time, they cannot agree with our recommendation to establish a fee to 
recover the costs of AQI services for buses and bus passengers, but 
that they would work with CBP to assess whether USDA should seek 
authority to establish a bus fee that covers the cost of bus passenger 
inspections and whether such a fee would be practical. As we stated in 
our report, we recognize that USDA may not currently have the 
authority to assess this fee on the vehicles rather than the 
passenger. We continue to believe that APHIS should recover the costs 
of AQI services for bus passengers, as authorized, or seek legislative 
authority to establish a bus fee that covers the costs of bus 
passenger inspections. We continue to encourage APHIS and CBP to 
explore options for implementing such a fee in a way that would 
minimize the administrative burden of the fee. 

USDA disagreed with our recommendation to charge user fees for the 
costs of monitoring compliance agreements for regulated garbage, 
stating that compliance agreements save money because the agency does 
not need to provide a service, and that charging a fee to those that 
provide the service would be a disincentive to enter into such an 
agreement. However, APHIS regulations state that any person engaged in 
the business of handling or disposing of garbage must first enter into 
a compliance agreement with APHIS. USDA further asserted that 
recovering the costs of compliance agreements through the current AQI 
fees is fair and simple. However, the costs of compliance agreements 
being paid through AQI fees assessed on cargo pathways (air, vessels, 
trucks, and rail) benefit entities that handle garbage for users that 
do not pay AQI fees, including private aircraft and private vessels. 
We continue to believe that the users of these specialized services 
should be charged directly, consistent with Circular A-25, promoting 
efficiency and equity by ensuring that the beneficiaries of the 
service pay for the service. 

We are sending copies of this report to the Secretaries of Agriculture 
and Homeland Security, the appropriate congressional committees, and 
other interested parties. In addition, the report is available at no 
charge on GAO's website at [hyperlink, http://www.gao.gov]. 

Should you or your staff have any questions about this report, please 
contact me on (202) 512-6806 or irvings@gao.gov. Contact points for 
our Offices of Congressional Relations and Public Affairs may be found 
on the last page of this report. GAO staff who made major 
contributions to this report are listed in appendix V. 

Signed by: 

Susan J. Irving: 
Director for Federal Budget Analysis, Strategic Issues: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

To analyze the Agricultural Quarantine Inspection (AQI) fees, we 
assessed (1) the AQI fees currently charged and how, if at all, the 
proposed revisions would improve efficiency, equity, and revenue 
adequacy, and reduce administrative burden; (2) how, if at all, 
changes to the allocation of fee revenues between the Department of 
Agriculture (USDA) and the Department of Homeland Security (DHS) could 
improve efficiency, equity, and revenue adequacy, and reduce 
administrative burden; and (3) the extent to which Animal and Plant 
Health Inspection Service (APHIS) and U.S. Customs and Border 
Protection (CBP) fee collection processes provide reasonable assurance 
that all AQI fees due are collected. 

To address these objectives we analyzed the AQI fees using principles 
of effective user fee design--specifically, efficiency, equity, 
revenue adequacy, and administrative burden--on which we previously 
reported.[Footnote 50] These principles draw on various laws and 
federal guidance.[Footnote 51] To assess the current AQI fees and 
proposed revisions, we examined documentation provided by APHIS 
related to the activity-based cost model APHIS and the contractor used 
to analyze AQI costs and the AQI fee structure; observed a 
demonstration of CostPerform, the software used for the activity-based 
costing; and analyzed cost and fee revenue data and documentation 
provided by both APHIS and CBP. We also interviewed APHIS officials 
responsible for the review and fee-setting process. To assess the 
reliability of data from the activity-based costing model, we reviewed 
whether costs were ascribed to activities in a logical manner and 
discussed the reliability of the data with knowledgeable agency 
officials. Based on these assessments, we determined that the AQI cost 
data from the activity-based costing model were sufficiently reliable 
for our purposes. We reviewed the analysis of the economic impact of 
proposed changes to fee rates, which was performed as part of the fee 
review. This analysis evaluated the economic impact of proposed fee 
scenarios on both the U.S. economy and selected industries to 
determine if any fee scenarios considered would create an unreasonable 
burden on these industries or consumers. Specifically, a contractor 
analyzed short and long-run economic impacts by evaluating the impact 
on the price of individual goods and services, corresponding changes 
in U.S. consumer purchases, and the resulting impact throughout the 
U.S. economy. All scenarios showed economic impacts that were very 
small relative to the size of the affected sectors and had an overall 
minimal impact on the national economy. Because the contractor found 
the effects to be minimal, it did not apply behavioral responses to 
changes in fee prices to the proposed fees. 

To examine how changes to the allocation of fee revenue could improve 
efficiency, equity, and revenue adequacy, and reduce administrative 
burden, we compared the existing and proposed fee structures to 
applicable statutes and regulations and to criteria from GAO's User 
Fee Design Guide.[Footnote 52] We used APHIS and CBP data to analyze 
AQI costs and fee collections. We also discussed fee design options 
with APHIS and CBP officials. Further, we analyzed the extent to which 
CBP attributes a portion of primary inspection time to agriculture-
related cost accounting codes by analyzing data from CBP's cost 
management information system. In addition, to examine how APHIS and 
CBP fee collection processes have ensured that all AQI fees are 
collected, we interviewed APHIS and CBP officials, examined documents 
related to fee collection procedures, and observed fee collection 
processes at ports of entry. To assess the reliability of the CBP and 
APHIS data, we analyzed the data for internal consistency and 
discussed the data with CBP and APHIS officials. We also compared the 
APHIS data on collections and obligations of AQI fee revenue and AQI 
reserve balances to another published source of this information and 
found them to be consistent. Based on these assessments, we determined 
that the CBP and APHIS data were sufficiently reliable for our 
purposes. 

To address all of these objectives, we visited a nonprobability sample 
of seven ports of entry to observe CBP inspection procedures and 
discuss issues related to AQI user fees. We determined that, for our 
purposes and considering resource constraints, seven is a sufficient 
number of site visit ports. We visited the ports of Blaine, 
Washington; Miami, Florida; Otay Mesa in San Diego, California; Port 
Huron, Michigan; San Diego, California; San Ysidro, California; and 
Seattle, Washington. We selected these ports of entry based on entry 
pathways, particularly those that charge fees, such as commercial rail 
and commercial vessels; volume of entries; diversity of inspection 
challenges; and geographic proximity to each other. We also visited 
APHIS Plant Protection and Quarantine (PPQ) offices in Miami, San 
Diego, and Seattle to understand the AQI-related work being conducted 
by APHIS in the field. We determined that a nonprobability sample was 
sufficient for our purposes because we used the site visit information 
to understand commonalities and differences in inspection practices 
and fee collection processes at various ports and for illustrative 
examples of how fee design and implementation affect equity, 
efficiency, revenue adequacy, and administrative burden. Because we 
used a nonprobability sample, the information we obtained from these 
visits cannot be generalized to other CBP ports of entry. On the site 
visits, we interviewed CBP and APHIS officials and observed 
agriculture inspections and AQI fee collection processes. We also 
interviewed AQI program stakeholders, including ship agents and 
customs brokers. We conducted a content analysis on our site visit 
interviews and observations to identify common themes. 

We conducted this performance audit from April 2012 to March 2013 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: Fees Charged for Arrival Inspections: 

Users: Commercial aircraft; 
AQI Fees [A]: $70.75; 
Customs Fees [B]: [Empty]; 
Immigration Fees [C]: [Empty]. 

Users: Commercial trucks; 
AQI Fees [A]: $5.25 per arrival or $105 per year; 
Customs Fees [B]: $5.50 per arrival or $100 per year; 
Immigration Fees [C]: [Empty]. 

Users: Commercial vessels; 
AQI Fees [A]: $496; 
Customs Fees [B]: $437; 
Immigration Fees [C]: [Empty]. 

Users: Freight railcar; 
AQI Fees [A]: $7.75 per arrival or $155 per year; 
Customs Fees [B]: $8.25 per arrival or $100 per year; 
Immigration Fees [C]: [Empty]. 

Users: Passenger railcar; 
AQI Fees [A]: [Empty]; 
Customs Fees [B]: $8.25 per arrival or $100 per year; 
Immigration Fees [C]: [Empty]. 

Users: Commercial aircraft passengers; 
AQI Fees [A]: $5; 
Customs Fees[B]: $5.50; 
Immigration Fees [C]: $7. 

Users: Private vehicle passengers; 
AQI Fees [A]: [Empty]; 
Customs Fees[B]: [Empty]; 
Immigration Fees [C]: [Empty]. 

Users: Bus passengers; 
AQI Fees [A]: [Empty]; 
Customs Fees [B]: [Empty]; 
Immigration Fees [C]: [Empty]. 

Users: Cruise vessel passengers; 
AQI Fees [A]: [Empty]; 
Customs Fees [B]: $5.50; 
Immigration Fees [C]: $7. 

Users: Private vessel passengers; 
AQI Fees [A]: [Empty]; 
Customs Fees [B]: [Empty]; 
Immigration Fees [C]: [Empty]. 

Users: Private aircraft passengers; 
AQI Fees [A]: [Empty]; 
Customs Fees [B]: [Empty]; 
Immigration Fees [C]: [Empty]. 

Users: Rail passengers; 
AQI Fees [A]: [Empty]; 
Customs Fees [B]: [Empty]; 
Immigration Fees [C]: [Empty]. 

Users: Pedestrian; 
AQI Fees [A]: [Empty]; 
Customs Fees [B]: [Empty]; 
Immigration Fees [C]: [Empty]. 

Users: Military; 
AQI Fees [A]: [Empty]; 
Customs Fees [B]: [Empty]; 
Immigration Fees [C]: [Empty]. 

Users: Private Aircraft; 
AQI Fees [A]: [Empty]; 
Customs Fees [B]: $27.50; 
Immigration Fees [C]: [Empty]. 

Users: Private Vessel; 
AQI Fees [A]: [Empty]; 
Customs Fees [B]: $27.50; 
Immigration Fees [C]: [Empty]. 

Users: Dutiable Mail; 
AQI Fees [A]: [Empty]; 
Customs Fees [B]: $5.50; 
Immigration Fees [C]: [Empty]. 

Source: GAO analysis of relevant laws and regulations. 

[A] 7 C.F.R. § 354.3. The amount of AQI fees paid annually by 
commercial vessels is capped at a dollar amount equivalent to 15 
payments per year. Certain vessels, railcars, commercial aircraft, and 
commercial aircraft passengers are exempted from the AQI fees. 

[B] 19 C.F.R. § 24.22. The customs inspection commercial vessel fee is 
capped at $5,955 for a vessel in a calendar year and barges and other 
bulk carriers from Canada or Mexico pay a reduced fee of $110 per 
arrival, but not more than $1,500 in a calendar year. Certain vessels, 
railcars, air passengers, vessel passengers, and private vessels are 
exempted from the fees. 

[C] 8 U.S.C. § 1356. Air and vessel passengers from certain locations, 
including Canada and Mexico, pay a reduced immigration inspection fee 
of $3 per arrival. 

[End of table] 

[End of section] 

Appendix III: Comments from the U.S. Department of Agriculture: 

USDA: 
United States Department of Agriculture: 
Office of the Secretary: 
Washington, D.C. 20250: 

February 20, 2013: 

Ms. Susan J. Irving, Director: 
Federal Budget Analysis: 
Strategic Issues: 
United States Government Accountability Office: 
441 G Street, 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, 
"Agricultural Quarantine Inspection Fees: Major Changes Needed to 
Align Fee Revenues with Program Costs" (GAO 13-268). While USDA agrees 
with the majority of the GAO Recommendations, we offer the following 
perspectives on each Recommendation. 

GAO Recommendation 1: 

To help ensure USDA considers full AQI program costs when setting AQI 
fee rates, GAO recommends that the Secretary of Agriculture include 
all imputed costs borne by other federal agencies and attributable to 
the AQI program. 

USDA Response: 

USDA acknowledges this recommendation and has gathered imputed costs 
data with the potential outcome being the initiation of notice and 
comment rulemaking regarding the AQI fees. Many factors are involved 
in notice and comment rulemaking, including consideration of comments. 
It would be inappropriate to firmly commit to any particular component 
or a specific amount of fees at this time since the proposed 
rulemaking has not been publicly issued. 

GAO Recommendation 2: 

To help ensure that fee rates are set to recover program costs, as 
authorized, and to enhance economic efficiency and equity with 
consideration of the administrative burden, GAO recommends that the 
Secretary of Agriculture establish an AQI cruise passenger fee aligned 
with the costs of inspecting cruise passengers and vessels and 
collected using the existing processes for collecting cruise passenger 
customs fees. 

USDA Response: 

USDA acknowledges this recommendation and has gathered data to 
consider regarding a cruise ship passenger fee with the potential 
outcome being the initiation of notice and comment rulemaking 
regarding the AQI fees. Many factors are involved in notice and 
comment rulemaking, including consideration of comments. It would be 
inappropriate to firmly commit to any particular component or a 
specific amount of fees at this time since the proposed rulemaking has 
not been publicly issued. 

GAO Recommendation 3: 

To help ensure that fee rates are set to recover program costs, as 
authorized, and to enhance economic efficiency and equity with 
consideration of the administrative burden, GAO recommends that the 
Secretary of Agriculture establish a fee for passenger rail cars 
aligned with the costs of inspecting all rail passengers and railcars 
and collected using the existing processes for collecting passenger 
railcar customs fees. 

USDA Response: 

USDA acknowledges this recommendation and has gathered data to 
consider regarding a passenger rail fee with the potential outcome 
being the initiation of notice and comment rulemaking regarding the 
AQI fees. Many factors are involved in notice and comment rulemaking, 
including consideration of comments. It would be inappropriate to 
firmly commit to any particular component or a specific amount of fees 
at this time since the proposed rulemaking has not been publicly 
issued. USDA will work with Customs and Border Protection (CBP) to 
conduct studies to determine if collection of the fee is economically 
efficient. APHIS would need to seek new legislative authority to allow 
for the collection of fees for the inspection of the vehicle of 
transportation itself rather than the current authority that allows 
only for charging a fee for the individual passenger. 

GAO Recommendation 4: 

To help ensure that fee rates are set to recover program costs, as 
authorized, and to enhance economic efficiency and equity with 
consideration of the administrative burden, GAO recommends that the 
Secretary of Agriculture eliminate caps on the commercial vessel and 
commercial rail AQI fees. 

USDA Response: 

USDA acknowledges this recommendation and has gathered data to 
consider eliminating or modifying the caps with the potential outcome 
being the initiation of notice and comment rulemaking regarding the 
AQI fees. Many factors are involved in notice and comment rulemaking, 
including consideration of comments. It would be inappropriate to 
firmly commit to any particular component or a specific amount of fees 
at this time since the proposed rulemaking has not been publicly 
issued. 

GAO Recommendation 5: 

To help ensure that fee rates are set to recover program costs, as 
authorized, and to enhance economic efficiency and equity with 
consideration of the administrative burden, GAO recommends that the 
Secretary of Agriculture set truck fees rates to recover the costs of 
AQI services for trucks while maintaining a financial incentive for 
trucks to use transponders. 

USDA Response: 

USDA acknowledges this recommendation and has gathered data to 
consider regarding a financial incentive for trucks to use 
transponders with the potential outcome being the initiation of notice 
and comment rulemaking regarding the AQI fees. Many factors are 
involved in notice and comment rulemaking, including consideration of 
comments. It would be inappropriate to firmly commit to any particular 
component or a specific amount of fees at this time since the proposed 
rulemaking has not been publicly issued. 

GAO Recommendation 6: 

To help ensure that fee rates are set to recover program costs, as 
authorized, and to enhance economic efficiency and equity with 
consideration of the administrative burden, GAO recommends that the 
Secretary of Agriculture recover the costs of AQI services for buses 
and bus passengers by either establishing a bus passenger fee that is 
remitted by the bus companies or seek legislative authority to 
establish a bus fee that covers the costs of bus passenger inspections. 

USDA Response: 

Because our CBP partners have deemed such fees impractical for 
collection purposes, USDA cannot agree with this recommendation at 
this time. APHIS would need to seek new legislative authority to allow 
for the collection of fees for the inspection of the vehicle of 
transportation itself rather than the current authority that allows 
only for charging a fee for the individual passenger. USDA will work 
with CBP to identify data needed to analyze whether we should seek 
authority and whether the practical considerations can be overcome. 

GAO Recommendation 7: 

To align reimbursable overtime revenues with the costs of those 
agriculture inspections, GAO recommends that the Secretaries of 
Agriculture and Homeland Security work together to amend overtime 
regulations for agriculture services so that reimbursable overtime 
rates that CBP and APHIS charge are aligned with the costs of those 
services. 

USDA Response: 

USDA acknowledges this recommendation and has gathered data to 
consider amended overtime rates with the potential outcome being the 
initiation of notice and comment rulemaking regarding the AQI fees. 
Many factors are involved in notice and comment rulemaking, including 
consideration of comments. It would be inappropriate to firmly commit 
to any particular component or a specific amount of fees at this time 
since the proposed rulemaking has not been publicly issued. 

GAO Recommendation 8: 

To help ensure that AQI fee rates are structured to maximize economic 
efficiency and equality while minimizing administrative burden, GAO 
recommends that the Secretary of Agriculture charge user fees for AQI 
permit applications. 

USDA Response: 

USDA acknowledges this recommendation and has gathered data to 
consider charging fees for permit applications with the potential 
outcome being the initiation of notice and comment rulemaking 
regarding the AQI fees. Many factors are involved in notice and 
comment rulemaking, including consideration of comments. It would be 
inappropriate to firmly commit to any particular component or a 
specific amount of fees at this time since the proposed rulemaking has 
not been publicly issued. 

GAO Recommendation 9: 

To help ensure that AQI fee rates are structured to maximize economic 
efficiency and equality while minimizing administrative burden, GAO 
recommends that the Secretary of Agriculture charge user fees for 
treatment services. 

USDA Response: 

USDA acknowledges this recommendation and has gathered data to 
consider charging fees for treatment services with the potential 
outcome being the initiation of notice and comment rulemaking 
regarding the AQI, fees. Many factors are involved in notice and 
comment rulemaking, including consideration of comments. It would be 
inappropriate to firmly commit to any particular component or a 
specific amount of fees at this time since the proposed rulemaking has 
not been publicly issued. User fees for treatments are currently under 
consideration by APHIS. 

GAO Recommendation 10: 

To help ensure that AQI fee rates are structured to maximize economic 
efficiency and equality while minimizing administrative burden, GAO 
recommends that the Secretary of Agriculture charge user fees for the 
costs of monitoring compliance agreements for regulated garbage. 

USDA Response: 

USDA does not agree with this Recommendation. Compliance agreements 
actually save money since the Agency does not have to provide a 
service. Charging a fee to those that provide the service would be a 
disincentive to enter into such an agreement. Further, USDA believes 
that if a fee was to be charged directly to those that enter into a 
compliance agreement with APHIS, those firms would charge the cost of 
the agreement plus an overhead cost back to the users of the services 
provided. Therefore, USDA believes that burdening AQI fees with this 
cost is not the most efficient means of recovering the costs fairly. 
The current method of recovering costs allows APHIS to retain a simple 
fee structure. 

GAO Recommendation 11: 

To better align the distribution of AQI fee revenues with AQI costs, 
GAO recommends that the Secretaries of Agriculture and Homeland 
Security work together to allocate AQI fee revenues consistent with 
each agency's AQI costs. 

USDA Response: 
USDA agrees with this Recommendation. AQI fee revenues should be 
allocated consistent with each agency's costs using activity based 
costing models and with consideration of continual cost containment 
and business process improvement. We will implement this 
recommendation as soon as we have a revised user fee schedule in place. 

GAO Recommendation 12: 

To better align the distribution of AQI fee revenues with AQI costs, 
GAO recommends that the Secretary of Agriculture establish an AQI 
reserve target that is more closely aligned with program needs and 
risks, based on past experience. 

USDA Response: 

USDA agrees with this Recommendation. APHIS and CBP have determined 
that based upon the risks presented by invasive plants and pests, as 
well as other threats to agriculture, retaining a three to five month 
reserve will provide a safeguard to allow continuous services for both 
Agencies--in the event of unforeseen decrease in user fee collections 
due to natural disasters, deliberate attacks, reductions in 
international trade and traffic resulting from changed economic 
conditions, or other instances that could cause an increase in 
workload for the AQI program or a sudden decrease in volumes and fees 
needed to fund operations. 

GAO Recommendation 13: 

To ensure that inspection fees are collected when due, GAO recommends 
that the Secretary of Agriculture revise its processes for collecting 
AQI railcar fees to conform to USDA regulation. 

USDA Response: 

USDA acknowledges this recommendation and has gathered data to 
consider how to more appropriately collect these fees with the 
potential outcome being the initiation of notice and comment 
rulemaking regarding the AQI fees. Many factors are involved in notice 
and comment rulemaking, including consideration of comments. It would 
be inappropriate to firmly commit to any particular component or a 
specific amount of fees at this time since the proposed rulemaking has 
not been publicly issued. 

Sincerely, 

Signed by: 

Edward Avalos: 
Under Secretary: 
Marketing and Regulatory Programs: 

[End of section] 

Appendix IV: Comments from the Department of Homeland Security: 

U.S. Department of Homeland Security: 
Washington. DC 20528: 

February 8, 2013: 

Ms. Susan J. Irving: 
Director for Federal Budget Analysis, Strategic Issues: 
U.S. Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 

Re: Draft Report, GAO-13-268, "Agricultural Quarantine Inspection 
Fees: Major Changes Needed to Align Fee Revenues with Program Costs" 

Dear Ms. Irving: 

Thank you for the opportunity to review and comment on this draft 
report. The U.S. Department of Homeland Security (DHS) appreciates the 
U.S. Government Accountability Office's (GAO's) work in planning and 
conducting its review and issuing this report. 

The Department is pleased to note GAO's positive recognition of U.S. 
Customs and Border Protection's (CBP's) vital role at U.S. ports and 
its partnership with the U.S. Department of Agriculture (USDA) in 
protecting the nation against exotic diseases and foreign agricultural 
pests. CBP collaborates regularly with USDA concerning the 
Agricultural Quarantine Inspection (AQI) program and is committed to 
continuing to improve internal business process that will further 
strengthen the programs overall accountability and transparency. 

The draft report contained 19 recommendations, 6 of which were 
directed to DHS and with which the Department concurs. Specifically, 
GAO recommended that: 

Recommendation 1: The Secretary of Homeland Security direct CBP to 
update and widely disseminate comprehensive guidance to ports on the 
correct use and review of Cost Management Information System (CMIS) 
codes. Specifically, the guidance should reiterate that a portion of 
CBP officers' primary inspection time should be charged to agriculture 
and cover how, and with what frequency, ports should conduct work 
studies to determine the correct allocation of staff time. CBP should 
also consider making CMIS training mandatory for CMIS practitioners. 

Response: Concur. In 2007, CBP implemented the Unified CBP Overtime 
Scheduling System (COSS) Location Rotation Process (UCLRP) throughout 
CBP's 300-plus ports. This process was created to further refine the 
process of aligning CBP Officers' primary inspection work between the 
customs, immigration, and agriculture functions. The UCLRP was 
designed to ensure accurate capture of activities being performed by 
CBP Officers while being mindful of the burden that having several 
hundred activity codes can have on operations if implemented 
incorrectly. CBP is committed to continuing to refine this process and 
maximize accuracy across field office locations. 

CBP's milestones for corrective actions are outlined below. 

* Review and revise current policies and guidance for the UCLRP, 
emphasizing the requirement to distribute activities among customs, 
immigration, and agriculture functions. 

* Develop methodology and reporting requirements, to be signed off by 
Port Directors or their equivalent. This will determine the 
distribution of primary inspection activities between customs, 
immigration, and agriculture functions. 

* Conduct regular reviews of UCLRP implementation to ensure ports are 
appropriately allocating activity hours to the customs, immigration, 
and agriculture functions on the basis of their methodologies 
submitted as part of item 2. 

* Review current Cost Management Information System training policies 
and require the completion of training in order to retain access to 
create schedules at the port or higher levels. 

Estimated Completion Date (ECD): April 30, 2014. 

Recommendation 2: The Secretaries of Agriculture and Homeland Security 
work together to amend overtime regulations for agriculture services 
so that reimbursable overtime rates that CBP and APHIS charge are 
aligned with the costs of those services. 

Response: Concur. CBP has examined the reimbursement rates for 
overtime and proposed a rule on revised overtime rates. USDA's and 
CBP's legal teams have reached an agreement in regards to the language 
of the draft rule. CBP is committed to continue the efforts with the 
USDA to meet and discuss finalizing the rule for overtime rate 
adjustments. 

To monitor the progress and milestones needed to implement AQI 
overtime rate adjustments, CBP will: 

* Conduct discussions on reimbursable overtime rate adjustments and 
overtime billing/charges. 

* Meet and discuss CBP recommendations with USDA 

* Reconcile responses from all parties. 

* Implement recommendations to address overtime rate adjustments and 
charging/collecting for reimbursable overtime. 

ECD: January 31, 2014. 

Recommendation 3: The Secretary of Homeland Security should ensure 
that ports consistently charge for agriculture overtime services that 
are eligible for reimbursement. 

Response: Concur. CBP's Office of Field Operations (OFO) will 
collaborate with the CBP Office of Administration (OA) to review OFO's 
current policy as it relates to charging agriculture overtime services 
that are eligible for reimbursement. In addition, OFO will provide 
additional training and guidance as required and ensure proper 
administrative controls and oversight is included. 

ECD: September 30, 2013. 

Recommendation 4: The Secretary of Homeland Security deny agriculture-
related reimbursable overtime inspection services to entities with 
bills more than 90 days past due, consistent with APHIS regulations. 

Response: Concur. CBP OFO will collaborate with the CBP OA to review 
OFO's current policy as it relates to charging agriculture overtime 
services that are eligible for reimbursement. In addition, OFO will 
provide additional training and guidance to field personnel to ensure 
that agriculture-related reimbursable overtime inspection services to 
entities with bills more than 90 days past due are denied in 
accordance with USDA APHIS regulations. 

ECD: September 30, 2013. 

Recommendation 5: The Secretaries of Agriculture and Homeland Security 
work together to allocate AQI fee revenues consistent with each 
agency's AQI costs. 

Response: Concur. CBP has been meeting with USDA on a quarterly basis 
to discuss fluctuations in AQI fee revenue. Specifically, if 
collections have increased over anticipated amounts, then a discussion 
is held in regard to increasing the CBP codicil agreement. Conversely, 
if collections decline, the topic changes to mitigating the risks 
relating to the shortfalls. CBP intends to continue having regular 
meetings with USDA to ensure that the resources are properly 
distributed between the two agencies. A study examining the AQI fee 
rates and costs is underway with an advisory services firm and USDA. 
Once complete, the findings will be used by USDA to support 
adjustments to the existing AQI fee rates. Because the fee rate 
adjustments would increase revenue, CBP intends to engage USDA to 
ensure that the fee-sharing percentage will be based upon the 
agricultural inspection costs incurred by each agency. 

CBP believes that the timeline for the revised fee-sharing process 
should be based on the same timeframe used in negotiating the annual 
codicil for each year's fee-sharing agreement. Further, CBP believes 
there should be discussions on the results of the final advisory 
services firm study with the USDA, incorporating the findings into the 
revenue-sharing percentage into the annual codicil. At this time, the 
advisory services firm has not specified a completion date for the 
study. 

ECD: October 31, 2014. 

Recommendation 6: The Secretary of Homeland Security establish 
internal controls to alert personnel when fees are not paid, and use 
available information to verify that arriving trucks, private 
aircraft, and private vessels pay applicable inspection user fees. 

Response: Concur. CBP OFO will collaborate with CBP's OA and CBP's 
Office of Information and Technology to develop an automated mechanism 
to verify that trucks, private aircraft, and private vessels pay 
applicable inspection user fees and alert personnel when fees are not 
paid. Upon completion of the automated mechanism, OFO and OA will 
distribute appropriate guidance and training to field personnel 
regarding the use of the system and reminding them to take appropriate 
action to collect fees. 

ECD: January 3, 2014. 

Again, thank you for the opportunity to review and comment on this 
draft report. Technical comments were previously provided under 
separate cover. We look forward to working with you in the future. 

Sincerely, 

Signed by: 

Jim H. Crumpacker: 
Director: 
Departmental GAO-OIG Liaison Office: 

[End of section] 

Appendix V: GAO Contacts and Staff Acknowledgments: 

GAO Contact: 

Susan J. Irving, (202) 512-6806 or irvings@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, Jacqueline M. Nowicki, 
Assistant Director, and Susan Etzel, Senior Analyst in Charge, managed 
all aspect of this assignment. Laurel Plume and Alexandra Edwards made 
key contributions to this report. Michelle Cooper, Kate Lenane, 
Felicia Lopez, Mary Denigan-Macauley, Rebecca Gambler, Sarah McGrath, 
Donna Miller, Cynthia Saunders, Anne Stevens, and Jack Warner also 
made important contributions. 

[End of section] 

Footnotes: 

[1] GAO, Homeland Security: Actions Needed to Improve Response to 
Potential Terrorist Attacks and Natural Disasters Affecting Food and 
Agriculture, [hyperlink, http://www.gao.gov/products/GAO-11-652] 
(Washington, D.C.: Aug. 19, 2011). 

[2] GAO, Homeland Security: Management and Coordination Problems 
Increase the Vulnerability of U.S. Agriculture to Foreign Pests and 
Disease, [hyperlink, http://www.gao.gov/products/GAO-06-644] 
(Washington, D.C.: May 19, 2006). 

[3] GAO, Federal User Fees: Key Aspects of International Air Passenger 
Inspection Fees Should Be Addressed Regardless of Whether Fees Are 
Consolidated, [hyperlink, http://www.gao.gov/products/GAO-07-1131] 
(Washington, D.C.: Sept. 24, 2007) and Federal User Fees: Substantive 
Reviews Needed to Align Port-Related Fees with the Programs They 
Support, [hyperlink, http://www.gao.gov/products/GAO-08-321] 
(Washington, D.C.: Feb. 22, 2008). 

[4] Also at your request, in September 2012, we reported more broadly 
on AQI program challenges. See GAO, Homeland Security: Agriculture 
Inspection Program Has Made Some Improvements, but Management 
Challenges Persist, [hyperlink, 
http://www.gao.gov/products/GAO-12-885] (Washington, D.C.: Sept. 27, 
2012). 

[5] See GAO, Federal User Fees: A Design Guide, [hyperlink, 
http://www.gao.gov/products/GAO-08-386SP] (Washington, D.C.: May 29, 
2008). 

[6] Pub. L. No. 101-576, 104 Stat. 2838 (Nov. 15, 1990), relevant 
sections codified at, 31 U.S.C. § 902. 

[7] Federal Accounting Standards Advisory Board, Statement of Federal 
Financial Accounting Standards No. 4: Managerial Cost Accounting 
Standards and Concepts (July 31, 1995). 

[8] The Homeland Security Act of 2002 transferred certain AQI 
activities from APHIS to the then newly-created CBP. Whenever USDA 
prescribes regulations, policies, or procedures for administering the 
activities transferred to CBP, USDA is to coordinate with DHS (6 
U.S.C. § 231(d)(2)). 

[9] See Appendix II for a summary of the three fees charged for these 
inspection activities. 

[10] 21 U.S.C. 136a. 

[11] [hyperlink, http://www.gao.gov/products/GAO-08-386SP]. 

[12] Activity-based costing (ABC) uses cost drivers to assign costs 
through activities to outputs. The ABC cost assignment is a two-stage 
procedure. The first stage assigns the costs of resources to 
activities and the second stage assigns activity costs to outputs. 

[13] [hyperlink, http://www.gao.gov/products/GAO-12-885]. 

[14] A majority of the CBP data was derived from the agency's APHIS 
Discoverer data-warehouse and additional information came from the 
agency's Operations Management Report data warehouse. These data-
warehouses aggregate data from a number of databases including the 
WADS module of the Agriculture Quarantine Activity Systems (AQAS). 
According to APHIS officials, although a data quality assessment was 
not in the scope of the AQI fee review contract, the contractor 
inquired about potential data quality issues. 

[15] [hyperlink, http://www.gao.gov/products/GAO-08-386SP]. 

[16] Other locations include CBP operations outside of the United 
States. 

[17] Imputed costs are costs of goods or services incurred on behalf 
of an agency that are paid by another federal entity, such as certain 
retirement benefits paid to retirees by the U.S. Office of Personnel 
Management. 

[18] In [hyperlink, http://www.gao.gov/products/GAO-08-321] we 
recommended that USDA include all indirect and imputed costs when 
setting AQI fee rates and either transfer the appropriate portions of 
those collections to the general fund of the Treasury or seek 
congressional approval to spend those monies on related AQI program 
costs. This recommendation is consistent with the Statement of Federal 
Financial Accounting Standards Number 4, Managerial Cost Accounting 
Concepts and Standards for the Federal Government. 

[19] 21 U.S.C. 136a. 

[20] According to CBP officials, CBP officers and agriculture 
specialists are paid overtime pursuant to the Customs Officer Pay 
Reform Act (19 U.S.C. § 267) and, in some instances, the amount paid 
by CBP under this Act for overtime work exceeds the amount that CBP is 
authorized to bill for the reimbursable overtime services. 

[21] In addition, taxpayer funding can be less economically efficient 
than user fee funding. See [hyperlink, 
http://www.gao.gov/products/GAO-08-386SP]. 

[22] CBP personnel at two ports of entry we visited said that although 
there is a demand for these services, they sometimes do not offer 
these services at all. They said that this is because the cost of 
providing these services comes out of a portion of the port's general 
overtime budget but that payments collected are not returned to the 
port; rather, reimbursable overtime collections are credited to CBP's 
Salaries and Expenses account. They said that they generally 
prioritize use of their overtime budgets to backfill for personnel on 
leave and support mission-critical activities. 

[23] 7 C.F.R. § 354.1. 

[24] [hyperlink, http://www.gao.gov/products/GAO-08-386SP]. 

[25] The contractor could not determine the distribution around that 
average. 

[26] 21 U.S.C. 136a(a)(1)(A). 

[27] [hyperlink, http://www.gao.gov/products/GAO-08-386SP]. 

[28] [hyperlink, http://www.gao.gov/products/GAO-08-321]. 

[29] In fiscal year 2011, CBP submitted a legislative proposal to 
consolidate customs and immigration inspection user fees. 

[30] The cost of inspecting private airplane passengers includes the 
cost of inspecting the private airplane in which the passengers arrive. 

[31] The cost of inspecting private sea vessel passengers includes the 
cost of inspecting the private vessel in which the passengers arrive. 

[32] 19 C.F.R. § 24.22(e). 

[33] [hyperlink, http://www.gao.gov/products/GAO-08-321]. 

[34] In fiscal year 2011, CBP submitted a legislative proposal to 
consolidate customs and immigration inspection user fees. 

[35] [hyperlink, http://www.gao.gov/products/GAO-08-386SP]. 

[36] We have previously reported on the tension between the desire for 
an administratively simpler fee design that sets rates based on the 
average cost of services provided to all users and the desire for a 
more tailored, user-specific approach to fee-setting that better 
promotes equity and economic efficiency by assigning costs to those 
who use or benefit from the services. See [hyperlink, 
http://www.gao.gov/products/GAO-08-386SP]. 

[37] APHIS does not track costs separately for conducting and 
monitoring of treatments, so it cannot identify the specific costs 
related to each activity. The contractor's report recommended that 
they do so. 

[38] APHIS estimated these imputed costs would total $28.6 million in 
fiscal year 2013. If the AQI fees were set to cover imputed costs, 
APHIS would transfer the APHIS portion of those fee revenues to the 
miscellaneous receipts account of the Treasury. 

[39] See GAO, Budget Issues: Electronic Processing of Non-IRS 
Collections Has Increased but Better Understanding of Cost Structure 
is Needed, [hyperlink, http://www.gao.gov/products/GAO-10-11] 
(Washington, D.C.: Nov. 20, 2009). These receipts would be credited to 
the general fund of the Treasury as miscellaneous receipts consistent 
with guidance in OMB Circular A-25. 

[40] Treasury plans to provide a statement of the costs of processing 
collections to each agency in fiscal year 2013. 

[41] As discussed earlier in this report, total costs of the AQI 
program and, in particular, CBP's costs are understated by an unknown 
amount. 

[42] The funding split was changed from the 61/39 percent split to a 
63/37 percent split in fiscal year 2007 to adjust for the lifting of 
AQI fee exemptions for flights and air passengers arriving from Canada. 

[43] APHIS estimates that in fiscal year 2012, it had more than $39 
million in AQI costs attributable to inspection services for which no 
fees are charged. Under the fees APHIS is considering, this amount 
would drop to approximately $21 million in 2013 if a new fee structure 
was in place. 

[44] This excludes AQI costs covered by the appropriation to CBP's 
Salary and Expenses Account. 

[45] In February 2013 APHIS provided us with various sets of updated 
projections of amounts it would add to the reserve but not in time for 
us to assess the reliability of the data and incorporate it into this 
report. 

[46] 7 C.F.R. § 354.3. 

[47] The regulations specify that no credit toward the annual railcar 
AQI fee is given for user fees paid for individual arrivals. In other 
words, if, for example, a rail company makes and pays for 7 arrivals, 
then decides midway through the year that they wish to instead pay the 
flat $155 fee, the 7 individual arrival fees they already paid do not 
count toward the flat fee. 

[48] GAO, Standards for Internal Control in the Federal Government, 
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1] 
(Washington, D.C., November 1999). 

[49] 19 C.F.R. § 24.22(e). 

[50] See GAO, Federal User Fees: A Design Guide, [hyperlink, 
http://www.gao.gov/products/GAO-08-386SP] (Washington, D.C.: May 29, 
2008). 

[51] Office of Management and Budget Circular No. A-25 establishes 
federal guidelines regarding user fees including the scope and types 
of activities subject to user fees, the basis upon which the fees are 
set, and the disposition of collections. The Chief Financial Officers 
(CFO) Act of 1990 requires an agency's CFO to review, on a biennial 
basis, the fees, royalties, rents, and other charges for services and 
things of value and make recommendations on revising those charges to 
reflect costs incurred (Pub. L. No. 101-576, 104 Stat. 2838 (Nov. 15, 
1990), relevant sections codified at, 31 U.S.C. § 902). The Statement 
of Federal Financial Accounting Standards No. 4: Managerial Cost 
Accounting Standards and Concepts establishes standards for federal 
agencies to use in reporting the costs of their products, services, 
and activities (Federal Accounting Standards Advisory Board, Statement 
of Federal Financial Accounting Standards No. 4: Managerial Cost 
Accounting Standards and Concepts (July 31, 1995). 

[52] [hyperlink, http://www.gao.gov/products/GAO-08-386SP]. 

[End of section] 

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441 G Street NW, Room 7125: 
Washington, DC 20548. 

Public Affairs: 
Chuck Young, Managing Director, youngc1@gao.gov: 
(202) 512-4800: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7149: 
Washington, DC 20548. 

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