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 agricultures vulnerability to terrorism, including the deliberate introduction of livestock, poultry, and crop diseases. The Agricultural Quarantine Inspection program helps to guard against these threats by inspecting international passengers and cargo at U.S. ports of entry, seizing prohibited material, and intercepting foreign agricultural pests. The Agricultural Quarantine Inspection program is coadministered by the United States Department of Agricultures (USDA) Animal and Plant Health Inspection Service (APHIS), which has authority to set Agricultural Quarantine Inspection user fees, and the Department of Homeland Securitys (DHS) U.S. Customs and Border Protection (CBP), which has responsibility for inspection activities at ports of entry. The program, which cost $861 million in 2011, is funded in part with revenues from fees assessed on those arriving vessels, trucks, railcars, aircraft, and international passengers subject to inspection and in part with funds from CBPs annual Salaries and Expenses appropriation. GAO has reported several times on the need to revise the fees to cover program costs as authorized. In May 2006, GAO recommended that DHS and USDA work together to revise the user fees to ensure that revenues cover the Agricultural Quarantine Inspection programs costs. In September 2007 and February 2008, GAO reported on various other challenges related to these fees, including that Agricultural Quarantine Inspection user fees were misaligned with program costs. In 2010, APHIS hired a contractor to conduct a comprehensive fee review to determine the full cost of Agricultural Quarantine Inspection services, identify potential changes to the fee structure, and recommend new fees. On the basis of this review, APHIS and CBP are currently considering options for a new fee structure; pending departmental approval, APHIS expects to issue a proposed rule in fall 2013.
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 light of increased congressional interest in user fee financing, GAO developed a normative framework for examining user fee design characteristics that may influence the effectiveness of user fees. Specifically, GAOs federal user fee design guide examined how the four key design and implementation characteristics of user feeshow fees are set, collected, used, and reviewedmay affect the economic efficiency, equity, revenue adequacy, and administrative burden of cost-based fees. Since 2007, GAO has examined a variety of federal user feesincluding the Agricultural Quarantine Inspection feesin the context of this framework.
In March 2013, GAO reported that its analysis of the Agricultural Quarantine Inspection 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 Agricultural Quarantine Inspection program costs. The gap exists for three reasons: (1) APHIS does not set fee rates to recover the full costs of the programpartly because of gaps in APHISs statutory authority and partly because APHIS chooses not to fully exercise the Agricultural Quarantine Inspection fee authorities, (2) CBPs program costs are understated, and (3) APHISs and CBPs collection processes do not provide reasonable assurance that all Agricultural Quarantine Inspection fees due are collected.
GAO found that APHIS does not set fee rates to recover the full costs of the program. Specifically,
GAO also found that CBPs program costs are understated. CBP does not capture all time spent on agriculture activities in its Cost Management Information Systemthe system in which CBP tracks its activities and determines personnel costs. CBP guidance specifies that time spent by officers conducting inspectionswhich include aspects of agriculture, customs, and immigration inspectionsis to be attributed to a mix of codes representing each of these three functions. In analyzing countrywide data, GAO found that at 31 ports and other locations, CBP did not charge any primary inspection time to agriculture-related codes for all or a portion of fiscal year 2012, which means that Agricultural Quarantine Inspection costs at these ports are understated. Because CBPs Agricultural Quarantine Inspection costs are underreported by an unknown amount, APHIS does not have complete information about CBPs Agricultural Quarantine Inspection-related costs and therefore is unable to consider total program costs when setting Agricultural Quarantine Inspection fee rates.
Finally, GAO found that APHISs and CBPs collection processes do not provide reasonable assurance that all Agricultural Quarantine Inspection fees due are collected. Specifically, APHIS does not collect Agricultural Quarantine Inspection fees for railcars consistent with its regulations. According to the regulations, railcars seeking to enter the United States may either pay a $7.75 fee per arrival of a loaded commercial railcar or they can prepay an annual $155 flat fee for a specific railcar. The $155 annual fee is equal to the cost of 20 arrivals. According to APHIS officials, all railcar companies choose to pay the $7.75 per arrival fee. However, rather than collecting this fee for each arrival APHIS only collects fees for the first 20 arrivals a railcar makes each year. This resulted in a revenue loss of $13.2 million in 2010 because 1.7 million railcar arrivals did not pay a fee even though a fee was due. 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.
To more closely recover the costs of the Agricultural Quarantine Inspection program, in March 2013, GAO recommended that the Secretaries of Agriculture and Homeland Security take a series of specific steps, which are summarized below.
The Secretary of Agriculture should take the following action:
The Secretary of Homeland Security should take the following action:
The Secretaries of Agriculture and Homeland Security should take the following two actions:
Further, GAO suggested in March 2013 that Congress should consider the following action:
Taking these actions would position the Departments of Agriculture and Homeland Security to more closely recover the costs of the Agricultural Quarantine Inspection program. Doing so would achieve $325 million in savings by reducing the reliance on CBPs annual Salaries and Expenses appropriation.
The information contained in this analysis is based on findings from the March 2013 report listed in the related GAO products section. GAO reviewed APHISs cost study and proposed revisions, relevant statutes and regulations, and Agricultural Quarantine Inspection cost and fee revenue data. GAO analyzed APHIS and CBP Agricultural Quarantine Inspection cost data and interviewed APHIS and CBP officials. GAO assessed the reliability of the data and determined that they were sufficiently reliable for our purposes. In addition, GAO 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, GAO considered factors including the presence or absence of agriculture inspections for which Agricultural Quarantine Inspection 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 GAO identified from the visits allowed GAO to understand commonalities and differences in inspection practices and fee collection processes at various ports and provide illustrative examples. GAO also visited APHISs Plant Protection and Quarantine offices in Miami, San Diego, and Seattle to understand the Agricultural Quarantine Inspection-related work conducted by APHIS in the field.
In commenting on the March 2013 report, DHS concurred with GAOs recommendations and described corrective actions the agency plans to take to implement them. USDA generally agreed with the recommendations GAO made to the Secretary of Agriculture. USDA also noted that the agency has gathered data regarding a number of different Agricultural Quarantine Inspection fees as it considers initiating a notice and comment rulemaking regarding the Agricultural Quarantine Inspection fees. Given the number of factors that go into the rulemaking process, including considering stakeholder comments, GAO recognizes that any particular component or a specific amount of fees is dependent on that process. USDA and DHS also provided technical comments, which GAO incorporated as appropriate.
GAO provided a draft of this report section to USDA and DHS for review and comment. USDA provided no comments on this report section. DHS provided technical comments, which GAO incorporated as appropriate.
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