Why This Area Is Important

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. 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 Agriculture’s (USDA) Animal and Plant Health Inspection Service (APHIS), which has authority to set Agricultural Quarantine Inspection user fees, and the Department of Homeland Security’s (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 CBP’s 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 program’s 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, GAO’s federal user fee design guide examined how the four key design and implementation characteristics of user fees—how fees are set, collected, used, and reviewed—may affect the economic efficiency, equity, revenue adequacy, and administrative burden of cost-based fees.[1] Since 2007, GAO has examined a variety of federal user fees—including the Agricultural Quarantine Inspection fees—in the context of this framework.

What GAO Found

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 program—partly because of gaps in APHIS’s statutory authority and partly because APHIS chooses not to fully exercise the Agricultural Quarantine Inspection fee authorities, (2) CBP’s program costs are understated, and (3) APHIS’s and CBP’s 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,

• APHIS has chosen not to charge some classes of passengers for which it has authority to charge fees. In particular, although APHIS has authority to charge Agricultural Quarantine Inspection fees to all international passengers, it currently charges fees only to international commercial air passengers, citing administrative burdens and anticipated challenges relating to collecting fees from other passengers. Furthermore, APHIS’s authority permits it to charge all passengers for the cost of inspecting both passengers and the vehicles in which they arrive, but does not always permit APHIS to do the reverse; that is, to include in the vehicle Agricultural Quarantine Inspection fees the cost of inspecting the passengers arriving in the vehicles. 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 Agricultural Quarantine Inspection 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 the administrative burden in collecting Agricultural Quarantine Inspection fees.

• APHIS does not consider all imputed costs (that is, costs incurred by other agencies on behalf of the Agricultural Quarantine Inspection program) when setting fees. APHIS estimated that these costs were about $38 million in fiscal year 2011, the most recent year for which data were available. In February 2008, GAO recommended that the Secretary of Agriculture include these costs when setting Agricultural Quarantine Inspection fees consistent with federal accounting standards, Office of Management and Budget guidance, and USDA policy. APHIS agreed with the recommendation and has included some, but not all, of these costs in its current analysis of Agricultural Quarantine Inspection costs.

• The allowable rates for overtime services are misaligned with the personnel costs of performing those services. CBP is authorized to charge for overtime for agriculture inspection and related services in some situations, known as reimbursable overtime. 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; hence, the rates charged do not cover current costs. Further, GAO reported that CBP does not consistently charge for these services, and when CBP does charge for these services, it does not collect payments in a timely manner.

• APHIS’s authority does not permit it to charge all persons seeking entry to the United States and does not permit it to charge the costs of those inspections to others. While APHIS can take additional steps within its existing authority to better align fees with costs, APHIS lacks the authority to recover the full costs of the Agricultural Quarantine Inspection program through fees. Specifically, APHIS does not have the authority to charge Agricultural Quarantine Inspection fees to pedestrians or military personnel and their vehicles, or to recover the costs of these inspections through the fees assessed on others. Gaps between Agricultural Quarantine Inspection 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. Absent authority to either charge all pathways for Agricultural Quarantine Inspection 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 Agricultural Quarantine Inspection program cannot recover its full costs and must continue to rely on appropriated funds.

GAO also found that CBP’s program costs are understated. CBP does not capture all time spent on agriculture activities in its Cost Management Information System—the system in which CBP tracks its activities and determines personnel costs. CBP guidance specifies that time spent by officers conducting inspections—which include aspects of agriculture, customs, and immigration inspections—is 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 CBP’s Agricultural Quarantine Inspection costs are underreported by an unknown amount, APHIS does not have complete information about CBP’s 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 APHIS’s and CBP’s 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.

Actions Needed

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:

• ensure that fee rates are set to recover program costs, including imputed costs, as authorized;

The Secretary of Homeland Security should take the following action:

• direct CBP to update and widely disseminate guidance to ensure that all ports of entry correctly charge time spent on agriculture-related functions;

The Secretaries of Agriculture and Homeland Security should take the following two actions:

• work together to amend overtime regulations for agriculture services so that reimbursable overtime rates are aligned with the costs of those services; and


• ensure that all inspection fees are collected when due, including fees for agriculture overtime services that are eligible for reimbursement.

Further, GAO suggested in March 2013 that Congress should consider the following action:

• take steps to allow the Secretary of Agriculture to set fee rates to recover the full costs of the Agricultural Quarantine Inspection program.

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 CBP’s annual Salaries and Expenses appropriation.

How GAO Conducted Its Work

The information contained in this analysis is based on findings from the March 2013 report listed in the related GAO products section. GAO reviewed APHIS’s 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 APHIS’s 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.

Agency Comments & GAO Contact

In commenting on the March 2013 report, DHS concurred with GAO’s 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.

For more information about this area, contact Susan J. Irving at (202) 512-6806, or irvings@gao.gov.

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