AirTransport Association 

### July28, 2010

VIAHAND DELIVERYAND E-MAIL 

### TheHonorable Susan L. 

### Kurland Assistant Secretaryfor Aviation and International Affairs Officeofthe Secretary U.S. DepartmentofTransportation 1200 NewJerseyAve, SE Washington, DC 20590 Re: Petitionfor Declaratory OrderRegardingHawaii Freight Fee Law DearAssistant SecretaryKurland: 

## ...,- 1

_J



### The AirTransportation Association ofAmerica, Inc. ("ATA"),l on behalfofitself and its air carrier members, hereby respectfully petitions the U.S. Department ofTransportation to issue a ruling regarding Hawaiian Revised Statute § 

### 150A, as amended by Act 173, S

.B. No. 2523 (2010) (hereafter the "Freight Fee Law,,).2 A copy of Act 173, which amended the previous version of the Freight Fee Law and became effective July 1, 2010, is provided as Exhibit 1 hereto. For the reasons set forth below, the Department should find that the Freight Fee Law, as applied to air carriers, violates and is preempted by the Anti-Head Tax Act ("AHTA"), currently codified at 49 U.S.C. §

### 40116, and the Airline Deregulation Act ("ADA"), currentlycodified at49 U
.S.c. §

### 41713(b)(1).
'The ATA is the principal trade and service organization for the U.S

. scheduled service industry. Members are: ABX Air, AirTran Airways, Inc
., Alaska Airlines, American Airlines, ASTAR Air Cargo, Atlas Air, Inc., Continental Airlines,Inc., Delta AirLines,Inc.,EvergreenInternational Airlines,Inc., Federal Express Corporation, Hawaiian Airlines, Inc., JetBlue Airways Corp., SouthwestAirlines Co., United Airlines,Inc., United Parcel Service Co., and US Airways, Inc. Associate members are Air Canada, Air Jamaica and Mexicana Airlines

. Hawaiian Airlines does notjoinin this Petition. 2The DOT is authorized in 14 C.F.R

. Part 302.400 and its delegated powers to take the necessary actions to enforce the provisions ofSubtitle VII ofTitle VII ofTitle 49 ofthe United States Code (Transportation)

. See, e.g,. Tinicum Township Privilege Fee Proceeding, Order 2008-3-18, Docket OST-2007-2934l, at 15 (March 24, 2008), affd , Township ofTinicum v. United States, 582 F
.3d 482 (3d Cir. 2009); Hawaiian Airlines, Inc. Declaratory Order, DocketOST-2006-25612, Order2007-4-4 (April 4, 2007)

.TheHonorable SusanL. Kurland July28, 2010 Page2


### INTRODUCTION As amended by Act 173, the Freight Fee Law requires air carriers which sell transportation offreight into Hawaii by aircraft to bill their customers a freight inspection fee based onthe net weight ofthe freight determined bypounds (the "Freight Fee"), and imposes a fine of$50 or more per transaction ifthe air carrier fails to timely invoice its customers for the Freight Fee, and remit payment of the Freight Fee to the Hawaii Department of Agriculture ("HDOA"). Exhibit 1 hereto. Moreover, the HDOA asserts that Act 173 renders air carriers liable for these obligations retroactive to August 1, 2008. See 

### July 7, 2010 Memorandum, Exhibit2hereto, at 2. Byrequiring air carriers to invoice and remit the Freight Fee, the FreightFee Law violates and is preempted by the Anti-Head Tax Act ("AHTA"), 49 U.S.C. § 

### 40116, because it imposes a "charge" on the sale of the transportation of "property by aircraft." The AHTA prohibits the imposition oftaxes, fees, and charges by state and local jurisdictions on airlines. Congress intended the AHTA to prevent the undue burden on interstate commerce and the economic harm on airlines, passengers and shippers that would be the natural result ifstate and local governments were left to their own devices to raise general revenues on the back of commercial aviation. Only under certain enumerated exceptions to the statute's general prohibitionmaystate and local authorities impose and collect suchfees and taxes. The Freight Fee Law also violates the Airline Deregulation Act ("ADA"), 49 U.S.C. § 41713(b)(1), because it is a "law

... related to a price, route, or service of an air carrier" for which no statutory exemption applies. Among otherthings, the Freight Fee and the associated fines "relate" to the "price" being charged by the air carriers because such charges musteitherbebornebythe aircarrierorpassedonto its air freight customers, and "relate"to the "service" ofthe air carriers which mustprovide the "service" ofbilling, collecting and remitting fees onbehalfoftheir shippercustomers. The Department should exercise itsjurisdiction overthis dispute and act quickly. TheDepartment is the appropriate forum to resolve this controversy due to its broad authorityin this area oflaw and policy, the important federal interest at stake, and the Department's special expertise regarding fees and charges imposed on the airline industry. DOT is the preeminentbodythat enforces the federal aviationlaws (includingthe AHTA and theADA). DOT action here will ensure administrative expertise and uniformity in application ofthe AHTA. 

### In particular, DOT is in a position to consider the significant policy implications ofHawaii's failure to complywith the AHTA and the ADA and impose its Freight Fee on air carriers, including the impact ofmultiplejurisdictions imposing similar fees ortaxes on airlines and ournational airtransportation system. As the Supreme Courthas acknowledged, the Department ofTransportation "is equipped, as courts are not, to surveythe field nationwide,TheHonorable SusanL. Kurland July28, 20I0 Page 3


### and to regulatebasedon afull view oftherelevant facts and circumstances." NorthwestAirlines, Inc. v. County a/Kent, Mich., 

### 510 U.S. 355,367n. 10 (1994). Allowing the Hawaii situation to continue and be mimicked across the country also would impose significant additional costs on air carriers that are already subjectto enormous cost pressures from operating costs, labor, fuel, landing fees, terminal rents and other airpOli charges, and could force airlines to reduce or eliminate service to Hawaii. It is not difficult to imagine how quickly a proliferation of fees, taxes and other charges by state and local governments which could cripplethe national airtransportation system. Finally, DOT action is critical because some courts have held that there is no privateright ofactionto enforcethe AHTA and the ADA. Although ATA believes that it and its member carriers should have the ability to file suits to enforce the AHTA and the ADA, there is nevertheless the possibility that airlines could end up not having suitable judicial recourse available to them

- either in the situation presented here or ifother state or local governments seekto impose similarfees ortaxes. 

### BACKGROUND The Hawaii Freight Fee Law 

### In 2008 the Hawaiian Legislature enacted HB2843, which was codified as Hawaii Revised Statute Chapter 150A. The effective date of the statute was August 1, 2008. As originallyenacted, Section 150A-5.3 stated: Inspection, quarantine, and eradication service fee and charge. 

### There is imposed a fee for the inspection, quarantine, and eradication ofinvasive species contained in any freight, including but not limited to marine commercial container shipment, air freight, or anyothermeans oftransporting freight, foreign or domestic, that is brought into the state. The fee shall be paid by the person responsible for paying the freight charges to the transportation company, who shall collect the fee and forward the payment to the department at the port of disembarkation; provided that the transportation company shall not be liable for any fee that is notpaidbythe personresponsible for payingthe freight charges to the transportation company. The department shall deposit the fee into the pest inspection, quarantine, and eradicationfund under section 150A-4.5. The fee shall be assessed on the net weight ofthe imported freight computed on the basis of50 cents for everyone thousand pounds offreight brought into the state, orpartthereof.The Honorable Susan L. Kurland July28,2010 Page4
Hawaii Revised Statute § lS0A-2 defines "freight" to mean "non-passenger goods, cargo, orladingtransported for pay." In a letter dated September 12, 2008 to the Airlines Committee of Hawaii, the HDOA stated that "U.S. mail is generally not subject to inspection under federal law and is not subjectto state agricultural inspection and thenew fee." Letter, at 2. 

### Act 173 Amended the FreightFee Law to Impose New Obligations and Fines onAir Carriers Onor aboutJune 23,2010the Hawaiian governor signed Act 173 into law, and it became effective July 1, 2010. Act 173 amended Hawaii Revised Statute 

### § lS0A to impose on transportation companies

- including air carriers "fines for failure to timely pay, bill, orremit thepastinspection, quarantine, and eradication servicefee." Exhibit 1, at 1. As amendedbyAct 173, Hawaii Revised Statute § lS0A-S.3 states that the "fee shall be assessed and collected on the net weight ofthe imported freight computed on the basis ofSO cents for everyonethousand pounds offreight brought into the state, or part thereof." Exhibit 1, at 7. It further provides, interalia:



### Id. at 6.Thetransportation company shall bill thc fcc to thc pcrsonrcsponsiblc for paying the freight charges to the transportation company within fifteen days of the deliveryofthe freight. The fee shall bepaidbythepersonresponsible for paying the freight charges to the transportation companywithin forty-five days ofreceipt of the bill. The transportation company shall collect the fee from the person responsible and forward the payment to the department at the port of disembarkation within forty-five days of receipt of the fee; provided that the transportation company shall not be liable for any fee that is not paid by the personresponsibleforpayingthefreight charges to thetransportation company.

As amended by Act 173, the Freight Fee Law now provides that if a "transportation company ... fails to [bJill the fee, within fifteen days ofthe delivery ofthe freight, to the person responsible for paying the freight charges to the transportation company," or to "[r]emit the fee to the [state] department within forty-five days ofcollecting the fee" the transportation companymust "pay a fine oftwo times the amount ofthe inspection, quarantine, and eradication service fee or$SO, whicheveris higher." Exhibit 1, at 2-3. As amended by Act 173, Hawaii Revised Statute 

### § lS0A-4.S establishes "in the state treasury" "the pest inspection, quarantine, and eradication fund," which shall consist of, interalia, "[s]ervice fees, charges, and penalties collectedunder section lS0A-S.3," and "[fJines for violations ofthis chapter." Exhibit 1, at 4. In addition, the "moneys in the pest inspection,TheHonorable Susan L. Kurland July28,2010 Page 5 

### quarantine, and eradication fund shall be expended by [HDOA] for [inter alia] 

### the operation of biosecurity and pest inspection, quarantine, eradication, and monitoring programs, related facilities, the execution ofemergencyremedial measures when pests are detected inthe course of inspection and quarantine activities by the department, training ofinspectors, education ofthe agricultural industry, permit and certificate holders, and the general public as to import requirements, and for any other purposes deemed necessary to carry out the purposes ofthis chapter." Id. 

### at 5. In amemorandum "to Transportation Companies" dated July 7,2010, the HDOA Plant Quarantine Branch ("PQB") stated that "both air and marine transportation companies that bring freight into the State have been required to collect the current service fee on incoming freight as ofAugust 1, 2008, pursuant to Act 3, Session Laws ofHawaii, 2008." Exhibit 2 hereto, at 1. TheHDOA added that: As a result ofAct 173, from July 1, 2010, 

### all transportation companies bringing freight into the State

... must bill the above-referenced service fee, within 15 days offreight delivery, to the person responsible for paying the freight charges and remit the payment, within 45 days of collecting it, to the HDOA, Plant Quarantine Branch (HDOA-PQB) at the port ofdisembarkation. Transportation companies that do not complywiththis requirement will be subjectto the fine [set forth inAct 173]. Id. 

### at 2 (emphasis in original). The agencyfurther stated that "transportation companies continue to be subject to the fee collection requirement as ofAugust 1, 2008, and are responsible for payment ofcurrent and pastdue

### fees." Id. 

### (emphasis added). The HDOA also has instructed that, "[a]long with the fee payments, a written statement" by transportation companies "should be provided to HDOA-PQ that reflects the collectionperiod dates; port ofentryfor the freight for which the fees were collected; net weight ofthe freight for which each fee was collected, by flight/voyage; total net weight ofall freight reported for the collection period; and the total fee amount paid." Exhibit 2, at 2; see also 

### the "ServiceFeeReportingForm" attachedthereto. TheFreightFee Law SubjectsAir Carriers to Onerous Fiscal andAdministrativeBurdens 

### The Freight Fee Law imposes severe fiscal and administrative burdens on air carriers. Prior to the enactment ofAct 173, airlines did not obtain from their customers the information that is necessary to comply with the billing requirement under the new law. To be able to bill their customers for the Freight Fee, as now required by the Hawaiian government, most if not all of air carriers which transport freight to Hawaii will be required to expend enormous amounts oftime and capital to conceive, design, plan, develop, test and implementtheTheHonorable SusanL. Kurland July 28,2010 Page 6

new infonnation technology and accounting infrastructures necessary for such a task. The requirement that the fees be imposed on the "net weight" ofthe imported freight is especially burdensome. It will require airlines to alter significantly the business practices they employ for their freight customers. The airline industry generally does not use "net weight" for its operationalpurposesbecausepackagingweightis a factor. Rather, airlines use "gross weight"to calculate and track freight shipments. In addition, freight shipped via international air transportation is typically weighed in kilograms rather than pounds. Accordingly, the infonnation that air carriers obtain from shippers is not provided in pounds, which is the measurement specifiedin theFreightFee Law. Furthennore, the Freight Fee creates a duplicative burden for air carriers flying into Hawaii from foreign countries because they already are responsible for payment ofAnimal and Plant Health Inspection Service ("APHIS") fees to the U.S. Department ofAgriculture. 21 U.S.C. § 136a(a)(A). The current APHIS fee imposed on aircraft entering the United States (including Hawaii) is $70.75 per commercial aircraft landing. 7 C.F.R. § 354.3(e). In addition, aircraftpassengers arriving from foreign countries are charged $5.00 in APHIS fees. 7 C.F.R. § 354.3(f). 

### THEANTI-HEAD TAXACT The Anti-Head Tax Act ("AHTA") prohibits a "charge" on the sale of transportation of"propertyby aircraft." Under the AHTA, no State may "levy or collect a tax, fee, head charge, orothercharge on ...the sale ofairtransportation." 49 U.S.C. §40116(b). Subsection (b) ofthe Anti-Head Tax Act, as amended, provides that "Except as provided in subsection (c)

... and [49 U.S.C. § 40117; relating to passenger facility charges], a State, a political subdivision ofa State, and any person that has purchased or leased an airport under [49 U.S.C. §47134] maynotlevyorcollect atax, fee, head charge, orotherchargeon- (1) an individualtravelingin air commerce; (2) thetransportationofan individual travelinginair commerce; (3) 

### the sale ofair transportation; or (4) the grossreceipts from that aircommerceortransportation." 49 U.S.C. §40116(b) (emphasis added).TheHonorable Susan L. Kurland July28,2010 Page 7


### The prohibition against the imposition of a "tax, fee, head charge, or other charge" on the "sale ofair transportation" applies to the sale oftransportation offreight by air. The term "airtransportation" includes "interstate airtransportation," "foreign air transportation," and "the transportation ofmail by aircraft." 49 § 40102(a)(5). "Interstate air transportation" includes the "transportation of

... 

### property by 

### aircraft as a common carrier for compensation, or the transportation of mail by aircraft" between two American states. § 

### 40102(a)(25) (emphasis added). In addition, "Foreign air transportation" includes the "transportation of

... 

### property by 

### aircraft as a common carrier for compensation, or the transportation ofmail by aircraft, between aplace inthe United States and aplace outsidethe United States when anypart ofthetransportation isbyaircraft." §40102(a)(23) (emphasis added). TheAHTAwas passedbyCongress in 1973 as areactionto a 1972 U.S. Supreme Court decision that upheld a locally imposed "head" tax on airline passengers. 

### EvansvilleVanderburgh AirportAuth. Dist. v. Delta Airlines, Inc., 405 U.S. 707, 709 (1972). Following 

### Evansville-Vanderburgh, "Committees in both Houses of Congress held hearings on local taxation ofair transportation." 

### AlohaAirlines, Inc. v. Director 

### 0.[Taxation of Hawaii, 464 U.S. 7, 9 (1983).3 "Both Committees concluded that the proliferation of local taxes burdened interstate air transportation, and, when coupled with the federal Trust Fund levies, imposed doubletaxation on airtravelers." 

### Id. To deal with theseproblems, Congress passed § 

### 7(a) ofthe Airport Development Acceleration Act of 1973, which became known as the Anti-Head Tax Act.4 

### Congress intended the AHTA to "ensure

... that local 'head' taxes will not be permitted to inhibitthe flow ofinterstate commerce." 

### See id.; S. Rep. No. 93-12, p. 4, 1973 U.S.C.C.A.N. 1434 (1973). 

### See also IndianapolisAirportAuth. v. AmericanAirlines, 733 F.2d 1262 (i h 

### Cir. 1984) (Anti-Head Tax Act was passed in order to prevent placing ofunreasonable burdens on interstate airtransportation). The Hawaii Legislature was aware ofthe AHTA when it enacted Act 173. The House Committee on Agriculture amended an earlier version of the new bill to change the Freight Fee from a tax to a fee, acknowledging concerns that a tax "may conflict with federal laws, such as the Anti-Head Tax Act." Standing Committee Report No. 393-10 on H.B. No. 2294 (Feb. 12,2010). However, the AHTA covers fees as well as taxes.

3See Hearings on S. 2397 et al. before the Subcommittee on Aviation ofthe Senate Committee on Commerce, 92d Cong., 2d Sess., 129-198 (1972); Hearings on H.R. 2337 et al. before the Subcommittee on Transportation and Aeronautics ofthe House Committee onInterstate and ForeignCommerce, 92dCong., 2d Sess. (1972).
4The Act was originally codified at 49 U.S.c. app. § 1513. The original statute was eventually superseded by49 U.S.c. § 40116(b), which retained essentially the same language as the original statute, save that the "directly or indirectly" language was deleted "as surplus." Historical and StatutoryNotes, 49 U.S.c. §40116(b) (2000).TheHonorable Susan L. Kurland July28,2010 Page 8


### THEAIRLINE DEREGULATIONACT 

### TheAirlineDeregulation Actprovides: (b) Preemption.--(l) 

### Except as provided in this subsection, a State, political subdivision ofa State, or political authority ofat least 2 States may not enact or enforce a law, regulation, or other provision having the force and effect oflaw related to a price, route, or service of an air carrier that may provide air transportationunderthis subpart. 49 U.S.c. §

### 41713(b)(1). As used in the ADA, "Relatedto"

... "express[es] abroad preemptive purpose"; a state law or enforcement action is "related to" a "price, route, or service" ifit has a connectionwithreferenceto a "price, route, or service." TheSupremeCourt in

### Morales v. Trans WorldAirlines, Inc., 504 U.S. 374, 383 (1992), stated that the use ofthe words "relatedto" inthe preemption provisions ofthe ADA "express a broad pre-emptive purpose" and prohibit all state laws "relatingto"therates, routes or services ofan air carrier. Congress expressly endorsed the holding in 

### Morales in 1994 when it enacted the recodified Title 49 into law, noting that it "did not intend to alter the broad preemption interpretation adopted by the United States Supreme Court in 

### Morales." H.R. Conf. Rep. No. 103-677 atp. 83 (1994); 

### see also Sanchez v. Aeroviasde Mexico, SA., 590 F.3d 1027, 1029 (9th Cir. 2010) ("Related to"

. . . "express[es] a broad preemptive purpose"; a state law or enforcement action is "related to" a "price, route, or service" if it "has a connection with reference to a "price, route, or service") (citing 

### Buck v. Am. Airlines, Inc., 476 F.3d 29,36 (1st Cir. 2007)). ADA preemption applies to both direct and indirect effects on air carriers. 

### ABC Charters, Inc. v. Bronson, 591 F. Supp. 2d 1272, 1300 (S.D. Fla. 2008) (the ADA preempted amendments to Florida Sellers ofTravel Act

- the amendments directly affected travel agents as "indirect" air carriers and "for a state law to be preempted,

... amendments need not directly regulate an air carrier. Regulation ofotherindividuals orentities, ifsuch regulation will have an effect on price, route or service ofadirect or indirect air carrier, is preempted");

### Marlow v. AMR Services Corp., 870 F. Supp. 295,298 (D. Haw. 1994) (state enforcement actions which have a connection with orreference to airline rates, routes or services are preempted bythe ADA. The laws do not have to actually prescribe rates, routes or service); 

### cfRowe v. NH Motor Transp. Ass 'n, 552 U.S. 364 (2008) (preemption unqer Federal Aviation Administration Authorization Act even ifthe statelaw's effect onrates, routes orservicesis indirect).TheHonorable SusanL. Kurland July28, 2010 Page 9


### THE DEPARTMENT'S PRIMARYJURISDICTION 

### The Departmenthas primaryjurisdictionoverthe issue ofwhetherthe Freight Fee Law, as applied to air carriers, violates and is preempted bythe AHTA and ADA. There is clear precedent for the exercise ofprimaryjurisdiction by DOT with regard to the lawfulness ofthe Freight Fee Law as applied to air carriers. See, e.g., Tinicum Township Privilege Fee Proceeding, Order 2008-3-18, Docket OST-2007-29341, at 15 (March 24, 2008), aJJ'd, Township ofTinicum v. United States, 582 F.3d 482 (3d Cir. 2009) (DOT has "authority over the" Tinicum Township "privilege fee" on airlines landing at Philadelphia International Airport "under the Secretary's authority to rule on questions pertaining to the Anti-Head Tax Act (AHTA) and to issue declaratory rulings interpreting that provision. The Administrative ProcedureAct authorizes us to issue declaratoryorders"); DeclaratoryOrder, Docket OST-2006- 25612, Order 2007-4-4 (April 4, 2007) (DOT granted a petition for declaratory order by Hawaiian Airlines, and ruled that the attempts by American Samoa to prevent the carrier from serving the territory violated the ADA); Instituting Order, Love Field Service Interpretation Proc., OST-98-4363, Order 98-8-29 (Aug. 25, 1998) (dealing with Love Field usage); American Airlines, Inc. v. DOT, 202 F.3d 788 (5th Cir.), cert. denied, 530 U.S. 1284 (2000) (affirming DOT ruling regardingmeaning ofShelbyAmendment for Love Field); Fontan-de-Maldonado v. Lineas Aereas Costarricenses, S.A., 936 F.2d 630 (1st Cir. 1991) (validity of airline's tariff provision precluding airline's liability for information given by employee to passenger was matter withinprimaryjurisdiction ofthe DOT); New EnglandLegalFound. v. Mass. PortAuth., 883 F.2d 157 (1st Cir. 1989) (DOT had primaryjurisdiction overwhether landing fees at Boston airportviolated federal statute). The Department's exercise ofits primaryjurisdiction to consider challenges to state laws like the Hawaiian Freight Fee Law promotes the efficient and uniform application of federal aviation laws to the conduct ofstate and local governments when they attempt to impose fees, taxes and charges on airlines and their customers in connection with the sale of air transportation. The Department is ideally suited to resolve such issues and its exercise of primaryjurisdiction is a better method for handling such challenges than requiring the airline industryto resort to case-by-case (and potentially conflicting) adjudication by different courts of the same orsimilarlegal issues.The Honorable Susan L. Kurland July28,2010 Page 10


### ARGUMENT I. THE HAWAIIAN FREIGHT FEE LAW, AS APPLIED TO AIR CARRIERS, VIOLATES AND IS PREEMPTED BYTHEANTI-HEAD TAXACT. As applied to air carriers, the Freight Fee Law violates and is preempted by the Anti-Head Tax Act because it is a "tax, fee, head charge, or other charge on ... the sale ofair transportation . ..." 49 U.S.c. § 40116(b)(3) (emphasis added). Because "airtransportation" is defined to include the transportation offreight, 49 U.S.C. §§ 40102(a)(5), (22), (25), it is clear that the AHTA applies to state taxes, fees and charges that are sought to be imposed on the transportation offreight by air. The Freight Fee violates the AHTA because it attaches a fee wheneverfreight is transported via air into the State ofHawaii. Moreover, the Freight Fee is not a flat charge but rather is assessed on the "net weight ofthe imported freight computed on the basis of50 cents for everyonethousand pounds offreight broughtinto the state, orpartthereof." 

### See Tinicum Township Privilege Fee Proceeding, Order 2008-3-18, Docket OST-2007-29341, at 5 (holding that airport landing "privilege fee" as applied to cargo carriers violated and was preempted by the AHTA and suggesting that a fee would "constitute a prohibited charge on the sale ofair transportation" ifit was "imposed in connection with the sale ofa ticket 

### or waybilf') (emphasis added). The potential fine for an air carrier violating the Freight Fee Law also may be determinedbased onthe net weight ofthetransported freight. Thefine is "twotimes the amount ofthe inspection, quarantine, and eradication service fee or $50, whichever is higher" for each occurrencewhenthe aircarrierfails to bill orremittheFreightFee. TheU.S. Supreme Courthas construed the Anti-Head Tax Act broadlyin orderto effectuate Congress' intent. Thus, the ban applies even ifthe charge is directly imposed on the carriersrather than their passengers. 

### See, e.g, AlohaAirlines, supra, 464 U.S. 7, 12-13 (statetax onthe annual gross income ofairlines operatingwithin Hawaii was preempted and barredbythe AHTA despite the fact that the tax at issue was styled as a property tax and was imposed on airlines rather than their passengers). Lower courts consistently have given the AHTA broad application.5

5 See, e.g., New EnglandLegalFound., supra, 883 F.2d at 170 n. 22 ("The prohibition is broader thanjust against head taxes"); Interface Group v. Massachusetts PortAuthority, 816 F.2d 9,16 (1't Cir. 1986) (even ifthe "primary beneficiaries ofthe [Anti-HeadTax Act] are ... air travelers,

...byprohibiting the levying oftaxes onthe carriage of persons, the statute, at least in some instances gives air carriers a 'benefit' that is 'especial,' at least when compared with the benefit conferred on the general public. The ban on head taxes means that air carriers will neither have to face diminished demand for costlier services norhave to absorb all orpartofthe chargebyreducing ticketprices."); IndianapolisAirportAuth., supra, 733 F.2d at 1267 ("Whether airline orpassenger ultimatelybears the cost of an airport fee depends on the conditions of supply and demand rather than on who is assessed the charge"); and see 119 Congo Rec. 3349 (1973) ("The bill prohibits the levying ofState or local head taxes, fees, 

### (footnote continued)TheHonorable Susan L. Kurland July28,2010 Page 11



### In 

### AlleghenyAirlines, Inc. v. City ofPhiladelphia, 453 Pa. 181, 309 A.2d 157 (1973), airlines challenged a City ofPhiladelphia ordinance which established a$3.00 "headtax" on some (but not all) passengers departing from Philadelphia airports, excluding continuous flight passengers who remained in Philadelphianot more than six hours. 

### Id. at 183, 309 A.2d at 158. In rulingthatthe AHTA preempted and prohibited the charge, the court stated: This legislation, enacted pursuant to Congress' constitutional authority to regulate interstate commerce, has undeniably pre-empted any state, or local, intervention in the field of airport head taxes. . .. The Act renders constitutionally invalid and impermissible existing state or local airport head taxes. The Federal Govemment, having exercised its express constitutional authority over interstate commerce, that field is not available for state orlocal action. Here
... stateintrusionis precluded. 

### Id. at 186, 309 A.2d at 159. Similarly here, the Hawaiian Freight Fee Law imposes impermissible charges onthe transportation offreight byair, and should be declaredunlawful on thatbasis.6 

### In its briefto the Third Circuit in the 

### Tinicum case, the Department emphasized that the purpose ofthe AHTA was to "limit state and local taxation ofaviation

...." Briefof Respondent DOT, July 29, 2008, available at 2008 WL 5583551 (C.A.3) (Appellate Brief), at 11. In connection with its ruling that the Tinicum "privilege fee" ran afoul ofthat purpose, the Departmentexplained: The Department's reasonable interpretation of the [AHTA] comports with the AHTA's purpose to limit state and local taxation of aviation, and is consistent with long-standingjudicialinterpretationofthe AHTA. 

### See, e.g., County of Kent, 510 U.S. at 363 ("[c]oncemed that our decision in 

### Evansville might prompt a proliferation oflocal taxes burdensome to interstate air transportation, Congress enacted the AHTA"); 

### Western AirLines, Inc. v. Boardof Equalization of State of South Dakota, 480 U.S. 123, 126 (1987) ("Congress acted [in the AHTA] to limit state taxation ofair transportation"); 

### Aloha Airlines, Inc.
. .. ("[n]othing in the
gross receipts, taxes or other such charges whether onpassengers or on the carriage ofsuch passengers in interstate commerce"). 6The fact that the amount of the Freight Fee in connection with the net weight of subject shipments may be considered to be relatively small is no basis for determining that the Fee is not preempted bythe AHTA. The fine for violating the Freight Fee Law

- at least $50 per transaction

- is certainly not small. In addition, the landing "privilege fee" in Tinicum was also relatively small. State and local governments should not be permitted to avoid the preemptive effect ifthe AHTA by initially setting fees at a relatively small level, only to subsequently increase the amount ofthe fees.The Honorable Susan L. Kurland July28,2010 Page 12 legislative history ofthe [Airport Development Acceleration Act] suggests that Congress intended to limit 1513(a)'s preemptive effect to taxes on airline passengers or to save gross receipts taxes"); 

### Southwest Air Ambulance, Inc. v. 

### City of Las Cruces, 268 F.3d 1162, 1173 (lOth Cir.) ("[i]t is unambiguously clear that Congress intended the AHT A to protect airlines from illegal state or municipal taxationbased ongrossreceipts")

.... (Id.) The same considerations apply here as well. The Department's ruling that the Hawaiian Freight Fee Law, as applied to air carriers, violates and is preemptedbythe Anti-Head TaxActis critical to protectthe airline industry and its members from aproliferation ofstate and local taxes on the transportation of freight into a state from either another state or a foreign country. II. THEHAWAIIAN FREIGHT FEE LAW,AS APPLIED TO AIR CARRIERS, VIOLATES AND IS PREEMPTED BYTHEAIRLINE DEREGULATIONACT. Under the Airline Deregulation Act, with certain limited (and inapplicable) exceptions, "aState

...maynotenactorenforce a law, regulation, orotherprovisionhavingthe force and effect oflaw related to a price, route, or service ofan air carrier that mayprovide air transportationunderthis subpart." 49 U.S.C. §41713(b)(l). The Freight Fee Law, as applied to air carriers, also violates and is preempted by the Airline Deregulation Act because both the Freight Fee which air carriers must bill, collect and remit to the HDOA, and the large fines for failure to do so, relateto the "price," "route" and "service" ofthe aircarriers that aretransporting freight into Hawaii. 

### A. The FreightFee LawRelates to the "Price" Chargedby

### Air Carriers. The Freight Fee and the associated fines "relate" to the "price" being charged by the air carriers because such charges must eitherbebornebythe air carrier orpassed onto its air freight customers. In 

### Buck v. 

### American Airlines, supra, 476 F.3d 29, purchasers of unused nonrefundable airline tickets sought to recover the various fees and taxes they had paid when they bought their tickets. In holding that the claims were preempted by the ADA, the First Circuitrejected theplaintiffs' assertion that the taxes and fees were notpart ofthe "price" ofthe tickets because they are separate from the 

### ''fareprices (or rates) set bythe airlines." 

### Id. at 35. The court stated that "theADApreemptsbothlaws that explicitlyreferto an airline'sprices and those that have a significant effect upon prices," and that the "dichotomy" between (l) fares or rates charged for transportation, and (2) fees or taxes imposed by the government "blurs when conceptualized within the contours ofthe 'significant effect' doctrine." 

### Id. at 34-35. The court explained:TheHonorable Susan L. Kurland July28,2010 Page 13 

### Although the fees are in one sense separate from the base fare, the two are inextricablyintertwined. In all events, an air traveler's concern is with the overall cost ofhis or her ticket. Thus, when an airline establishes the base fare, it must take cognizance ofany surcharges that will be imposed by operation of law. 

### It is freshman-year economics that higherprices mean lower demand, and that consumers are sensitive to the full price that they must pay, not just the portion of the price that will stay in the seller's coffers. For that reason, an airline must accountfor the fees when settingits own rates. 

### Id. at 35-36 (emphasis added) (cited with approval bytheNinth Circuit in Sanchez, supra, 590 at 1030). Similarly here, even ifthe Freight Fee is in "one sense separate from the base" charge imposed for transportation of the freight, the imposition of the Freight Fee may nevertheless impact the "overall cost" ofthe air transportation being provided. For preemption to apply, there is no requirement that the Freight Fee Law "explicitlyrefer to" the amount ofthe rates charged by air carriers for transportation offreight into Hawaii. Rather, it is sufficientthat the Freight Fee law may have "a significant effect upon" such rates. As in Buck, the air carriers subject to the Freight Fee law must "account for the" Freight Fees "when setting [their] own rates." B. TheFreightFeeLawRelates to the "Service" ofAir Carriers. 

### The Freight Fee and the associated fines also relate to the "service" ofthe air carrier because they require the air carrier

- under threat of significant monetary fines

- to providethe "service"ofbilling, collecting and remitting fees onbehalfofits shippercustomers. In UnitedParcel Service, Inc. v. Flores-Galarza, 318 F.3d 323 (1

### st Cir. 2003), a Puerto Rico lawprohibited air carriers from delivering anypackageunless the carrierprovided a "certificate" that the package's addressee had paid the appropriate state excise tax, orthe carrier had instead prepaid the tax on the addressee's behalf. Ifa carrier delivered "apackage without obtaining this certificate, the carrier [could] be required to pay an administrative fine to the [commonwealth], a tax on the package's contents, and any surcharges and interest accrued from the date the times were introduced into Puerto Rico." !d. 

### at 326. In holding that the ADA preemptedthe Puerto Rico law, the court stated: The challenged scheme both refers to and has a forbidden significant effect on UPS's prices, routes or services. Section 9066

- the linchpin ofthe scheme

- forbids delivery unless and until a recipient produces a certificate from theThe Honorable SusanL. Kurland July28, 2010 Page 14 

### Secretary. Compliance with this provision significantly affects the timeliness and effectiveness ofUPS's service, which includes the delivery ofpackages on an express or time-guarantee basis. Likewise, the pre-payment mechanism imposes extensive requirements that must be met before a carrier may make a lawful delivery. These requirements create a substantial burden on UPS, in the form of labor, costs, and delays. The undisputed record

. . . shows that this burden directly and significantly affects UPS's routes and services, which depend upon an orderlyflow ofpackages. Id. 

### at 335-36 (emphasis in original). Here too, the Freight Fee Law has a forbidden significant effect on air carriers' services because, inter alia, 

### the carriers must conform their billing infrastructure to accommodate the obligation to bill their freight customers the Freight Fee based on the net weight ofthe transported freight, and to report such shipments on a monthly or more frequent basis to the HDOA. Such requirements "create a substantial burden" on the air carriers in the form oflaborand costs. In Sanchez 

### v. Compania Mexicana de Aviacion SA., 

### Case No. CV-07-7196 R (RCx), 2008 U.S. Dist. LEXIS 86822 (March 25,2008), aff'don othergrds., 

### 361 Fed. App. 751 (9th Cir. Jan. 5, 2010), the court held that a claim that an airline improperly imposed a Mexican tourism tax on passengers transported from the United States to Mexico who were exempt from thetax was preemptedbythe ADA because, amongotherthings: As the tourism tax is charged only on routes between Mexico and other countries and as the collection of the tourism tax at the time of ticketing is a service facilitating the flow ofpassengers through the airports in Mexico, [the claims] are preempted by the Airline Deregulation Act on the grounds that the claims are relatedto Mexican'sroutes and services. Id. 

### at *9-10. Similarly here, the Freight Fee is charged only on routes between Hawaii and other states or countries and the billing and collection ofthe Fee "is a service facilitating the flow" offreight into Hawaii. See also Federal Express Corp. 

### v. California Public Utilities Comm 'n, 

### 936 F.2d 1075, 1078 (9th Cir. 1991) (state regulation oftrucking operations of air carrier

- including "rates," "bills oflading," and "freightbills"

- preempted by ADA) ("Most of theregulations

... are obviouslyeconomic

- theybearonprice. Thoseregulations which are not patently economic

- the rules on claims and bills oflading, for example

- relate to the terms on whichthe aircarrieroffers its services").TheHonorable Susan L. Kurland July28, 2010 Page 15


### In Rowe, supra, 

### 552 U.S. 364, the Supreme Court held that Maine's tobacco delivery law

- which required delivery trucks to verify the lawful status ofrecipients oftobacco shipped into the state was preempted by Federal Aviation Administration Authorization Act (theversion ofthe ADA which applies to motor carriers) because the law would "require [motor] carriers to offer a system ofservices that the market does not now provide and which the carriers wouldprefernotto offer." Id. 

### at 372. The Court stated: We concede that the regulation here is less "direct" than it might be, for it tells shippers 

### what to chose rather than carriers 

### what to do. Nonetheless, the effect of the regulation is that carriers will have to offer tobacco delivery services that deliver significantly from those that, in the absence ofthe regulation, the market might dictate. And that being so, treating sales restrictions and purchase restrictions differently forpre-emptionpurposes would makeno sense. Id. 

### (citation and internal quotation marks omitted). Maine contended that the "regulation will impose no significant additional costs upon carriers." Id. 

### at 373. The Court rejected this argument, stating that "even were that so (and the carriers deny it), Maine's reply is off the mark," because to "allow Maine to insist that the carriers provide a special checking system would allow other States to do the same," which "could easily lead to a patchwork of state service-determining laws, rules, and regulations" that would be "inconsistent with Congress' major legislative effort to leave such decisions, where federally unregulated, to the competitive marketplace." 

### Id. The same holds true here. The Freight Fee Law would impose significant additional costs upon air carriers. But even ifthat were not the case it would still be unlawful under the ADA for Hawaii to insist that carriers provide a special system for billing, collecting and remitting the Freight Fee. Indeed, such obligations by multiple states or local governments could easily lead to a "patchwork of state" laws that require such services to be performed throughout the 50 states, perhaps with each state or local government imposing some variant on how the fee is to be calculated, billed, collected and remitted. Thehuge burden inflictedby such a "patchwork" of state laws is anathema to Congress' legislative intention of rendering the aviation industryfree from federal intrusiveregulationby state and local governments. C. The FreightFee LawRelates to the "Routes" ofAir Carriers. 

### TheFreightFee and the associated fines also relateto the "route" ofthe air carrier because the Freight Fee only applies to flights to Hawaii and the financial and administrative burden imposed by the new law may impact whether and how the carrier chooses to serve the Hawaiian market. See Sanchez v. Campania Mexicana de Aviacion, supra, 

### at *9-10 (challenge to airline collection ofMexican tourism tax preempted byADA where it related to "route" ofairThe Honorable Susan L. Kurland July 28, 2010 Page 16



### carner because the subject tax was "charged only on routes between Mexico and other countries"). CONCLUSION 

### IfHawaii is successful and allowed to impose its Freight Fee Law on air carriers it will create a model for the other 49 states to raise revenue on the backs ofairlines and their customers. There is no telling how much financial damage will be inflicted on airlines, but the Freight Fee clearly is an imposition on interstate commerce in general, and the national air transportation system specifically, and the potential consequences clearly would be dramatic. Thisprecedent shouldnotbe allowedto happen. For the reasons set forth above, ATA, on behalf of its member airlines, respectfully requests that the DOT grant this Petition for Declaratory Order and rule that the Hawaiian Freight Fee Law, as applied to air carriers, is preempted and prohibited by the AntiHead Tax Act and the AirlineDeregulationAct. Sincerely, AirTransportAssociation ofAmerica, Inc.

# ~/('~-

Enclosures Exhibit 1 - Act 173 David A. 

### Berg VicePresident & 

### General Counsel DougMullen SeniorAttorney

- RegulatoryAffairs

Exhibit 2 - July7, 2010 Memorandumto Transportation Companies

cc: The Hon. Governor LindaLingle State ofHawaii TheHon. Sandra Lee Kunimoto Chairperson Hawaii DepartmentofAgriculture Roy Goldberg, Esq. Sheppard MullinRichter & 

### Hampton, LLP

## EXHIBIT 1. 1 THE SENATE TWENTY-FIFTH LEGISLATURE, 2010 STATE OF HAWAII 

# S.B. NO. A BILL FOR AN ACT

RELATING TO AGRICULTURAL INSPECTIONS.
BE IT ENACTEDBYTHELEGISLATURE OF THESTATE OF HAWAII: 2523 S.D. 2 H.D.2

SECTION 1. The purpose of this**Ac~** is to address the issue 

### 2 of agriculture in Hawaii. More specifically, this Act, includes 3 the following major amendments; 4 (1) Exempts aggregate bulk freight I cement bulk freight I 

### 5 coal bulk freightl and liquid bulk freight from the 6 pest inspection, quarantine, and eradication service 7 8 (2) Imposes fines for failure to timely paYI bill, or 9 remit the past inspectionl quarantine, and eradication 10 service feej 11 (3) Clarifies and expands the purposes for which funds may 12 be expended from the pest inspectionl quarantine, and 13 eradication fund; 14 (4) Requires the deposit of fees and fines relating to 15 agricultural inspections into the pest inspection, 16 quarantine, and eradication fundi 17 (5) Repeals the permit revolving fund and microorganism 18 import certification revolving fund and transfers SB2523 HD2 HMS 2010-3021

## '1IIIIIIIImlmlllllm~lmmIIIUIU1 2 3 4 

### 5 6 7 Page 2 

# S.B. NO.

moneys in those funds into the pest inspection, quarantine, and eradication fund; and (6) Directs the department of agriculture to adopt or 2523 S.D.2 HD.2

amend rules to impose or increase fees under chapter 150A, and sets a fee schedule to go into effect if the department fails to dO.so in a timely manner. SECTION 2. Chapter 150A, Hawaii Revised Statutes, 

### is 8 amended by adding a new section to be appropriately designated 9 and read as follows: 10 "§150A- Failure to payor remit the inspection, 11 quarantine, and eradication service fee; fines. (a) The 12 following fines shall be imposed for failure to pay, bill, or .13 remit the inspection, quarantine, and eradication service fee as

14 provided for in section 150A-5.3: 15 (1) A person responsible for paying the freight charges to 16 the transportation company who fails to pay the fee; 17 or 18**~** A transportation company that fails to: 19 (A) Bill the fee, within fifteen days of the delivery 20 of the freight, to the person responsible for 21 paying the freight charges to the transportation 22 company; or SB2523 HD2 HMS 2010-3021Page 3 

# S.B. NO. 2523 S.D.2 H.D.2

1**~** Remit the fee to the department within forty-five 2 days of collecting the fee from the eerson 3 reseonsible for eaying the freight charges to the 

### 4 transportation company, 

### 5 shall pay a fine of two times the amount of the inspection, 6 quarantine, and eradication service fee or $50, whichever is 7 higher. 8 (b) All fines shall be paid to the department and deposited 9 into the pest inspection, quarantine, and eradication fund under 10 section 150A-4.5. II 11 SECTION 3. Section 150A-2, Hawaii Revised Statutes, is 12 amended by adding four new definitions to be appropriately 13 inserted and to read; 14 IIIIAggregate bulk freight" means man-made, unpackaged, pre-

. 15 processed, inspected and certified, homogenous particulate

16 material, without mark or count, that is usually free-flowing 17 and bought and sold by weight or volume, such as clean sand, 18 gravel, crushed stone, slag, recycled concrete, and geosynthetic 19 aggregates. 20 "Cement bulk freight" means unpackaged, homogenous cement, 21 without mark or count, that is usually free-flowing and bought 22 and sold by weight or volume. SB2523 HD2 HMS 2010-3021Page 4 

# S.B. NO.

1 "Coal bulk freight" means unpackaged, homogenous coal, 2523 S.D. 2 H.D.2

2 without mark or count, that is usually free-flowing, bought and 3 sold by weight or volume, and used as a fuel. 4 ilLiquid bulk freight" means unpackaged, homogenous liquid 5 goods, without mark or count, that are usually free-flowing and 6 bought and sold by weight or volume, such as oil, or other 7 complex mixture of petroleum hydrocarbons, bituminous liquids 8 such as asphalt, gasoline, and fuel oils. II 9 SECTION 4. Section 150A-4.5, Hawaii Revised Statutes, is 10 amended to read as follows: 11 H§lSOA-4.S Pest inspection, quarantine, and eradication 12 fund. (a) There is established in the state treasury the pest 13 inspection, quarantine, and eradication fund, into which shall 14 be deposited: 15 (1) Legislative appropriations for biosecurity and 

### 16 inspection, quarantine, and eradication services; 17 (2) Service fees, charges, and penalties collected under 18 section 150A-5.3[']L 19 

## ill Fees imposed for services pursuant to this chapter or 

### 20 rules adopted under this chapter; 21 

## lil Fines for violations of this chapter;

SB2523 HD2 HMS 2010-3021Page 5 

# S.B. NO.

1**[~] ~**  Federal funds received for biosecurity, pest 2 inspection, control, management, quarantine, and 3 eradication programs; 4 [-f4+] 

### ill Grants and gifts; 5 [+5+] 

## ill All interest earned or accrued on moneys 6 deposited in the fund; and 7 [+6+]**~** Any other moneys made available to the fund. 2523 S.D. 2 H.D.2

8 (b) The moneys in the pest inspection, quarantine, and 9 eradication fund shall be expended by the department for the 10 operation of biosecurity and pest inspection, quarantine, 11 eradication, [biosecurity,] and monitoring programs, related 12 facilities, [aad] the execution of emergency remedial measures 13 when pests are detected in the course of inspection and 14 quarantine activities by the department [
...], training of 

### 15 inspectors, education of the agricultural industry, permit and 16 certificate holders, and the general public as to import 17 requirements, and for any other purposes deemed necessary to 18 carry out the purposes of this chapter. In addition, the moneys 19 shall be expended to facilitate the processing and issuance of 20 permits and microorganism import documents and for the 21 operations, activities, and monitoring of permitted and 22 certified plants, animals, and microorganisms. II SB2523 HD2 HMS 2010-3021Page 6 

# 8.B. NO. 2523 S.D. 2 H.D.2

1 SECTION 5. Section lS0A-S.3, Hawaii Revised Statutes, is 2 amended to read as follows: 3 H§150A-5.3 Inspection, quarantine, and eradication service 4 fee and charge.**~** There is imposed a fee for the inspection, 5 quarantine, and eradication of invasive species contained in any 6 freight, including [but net limited te] marine commercial 

### 7 container shipment, air freight, or any other means of 8 transporting freight, foreign or domestic, but not including 9 aggregate bulk freight, cement bulk freight, coal bulk freight, 

### 10 or liquid bulk freight, that is brought into the [State.] state. 11 The transportation company shall bill the fee to the person 

### 12 responsible for paying the freight charges to the transportation 13 company within fifteen days of the delivery of the freight. The 14, fee shall be paid by the person responsible for paying the 15 freight charges to the transportation company [, '

.. 'he] within 

### 16 forty-five days of receipt of the bill. The transportation 17 company shall collect the fee from the person responsible and 18 forward the payment to the department at the port of 19 disembarkation[-:-1 within forty-five days of receipt of the fee i 20 provided that the transportation company shall not be liable for 

### 21 any fee that is not paid by the person responsible for paying 22 the freight charges to the transportation company. SB2523 HD2 HMS 2010-3021

## 1llllllfilllnllm~lIllllmlllllnlUPage 7 

# 8.B. NO.

1 The department shall deposit the fee into the pest 2523 S.D.2 H.D.2

2 inspection, quarantine, and eradication fund under section 150A3 4.5. 4 (b) The fee shall be assessed and collected on the net 5 weight of the imported freight computed on the basis of 50 cents 6 for everyone thousand pounds of freight brought into the 7 [State,] state, or part thereof." 8 SECTION 6. Section 150A-21, Hawaii Revised Statutes, is 9 amended to read as follows: 

### 10 " [-f] §150A-21 [j-] Certification for shipment. The 11 department may certify as to the pest condition or post 12 treatment of shipments when officially required. Fees may be 13 charged for certificates in certain**instances[~]** and shall be 14 deposited into the pest inspection, quarantine, and eradication 15 fund." 

### 16 SECTION 7. Section 150A-23, Hawaii Revised Statutes is 17 amended to read as follows: 18 "[-f] §150A-23 [.j-] Nursery stock certificate. The department 19 may issue and authorize the use of nursery stock certificates by 

### 20 any shipper complying with its regulation for nursery 21 inspection. Shipments accompanied by these certificates may 22 move to other localities within the county or to other counties SB2523 HD2 HMS 2010-3021 

# 111111011110111111111111111111Page 8 

# 8.B. NO. 2523 S.D.2 H.D.2

1 without inspection at destination. Nursery stock certificates 2 may be issued for interstate shipments. Fees may be charged for 3 nursery certification[7] and shall be deposited into the pest 4 inspection, quarantine, and eradication fund. Nursery stock 5 certificates shall not be altered or misused. 6 The department may revoke or suspend the right to use any 

### 7 nursery stock certificate which is issued to any person who 8 fails to comply with requirements for [their] use of the 9 certificate. If 10 SECTION 8. Section 150A-31', Hawaii Revised Statutes, is 11 amended to read as follows: 12 "[-f]§150A-31[-}-J Certificate for shipment. The department 13 may certify as to the pest condition of honey bee shipments when 14 health certificates are officially required. Fees to cover the 15 department's certification costs may be charged for health 16 certificates as provided by rule [7] and shall be deposited into 17 the pest inspection, quarantine, and eradication fund. Health 18 certificates shall not be altered or misused." 19 SECTION 9. Section lS0A-42, Hawaii Revised Statutes, is 20 amended by amending subsection (b) to read as follows: 21 II (b) Fees may be assessed for the processing and issuance 22 of a certificate and for inspections related to the certificate, SB2523 HD2 HMS 2010-3021Page 9 

# S.B. NO.

1 as established by rule and shall be deposited into the pest 2523 S.D. 2 H.D.2



### 2 inspection, quarantine, and eradication fund. Fees may vary 3 according to the type of certification issued and the costs 4 incurred for inspections." 5 SECTION 10. Section 150A-6.7, Hawaii Revised Statutes, is 6 repealed. 7 ["S150A 6.7 Permit revolving E'Ulld. (a) There is 8 established in the state treasury a revolving fund to be lmown 9 as the permit revolving fund to be administered by the 10 department. The permit reT,wlving fund shall consist ef: 11 

### +±+ Legislative appropriations, 12**~** User fees as authorised by rule, 13 

### +3+ All interest earned on or accrued to moneys deposited 14 in the permit rmrolving fund, 15 +4+ Grants and gifts, and 16 -f-5+ Any other moneys made available to the permit 17 revolving fund from other sources. 18 (b) The department shall expend moneys in the permit 19 revolving fund to. 20 

### +±+ Facilitate the precessing'and issuance of permits, 21 +2+ Amend lists of creatures prohibited or allo'ded for 22 iffiport; SB2523 HD2 HMS 2010-30211 

### 2 3 4 5 6 Page 10 

# 8.B. NO.

-f-3+ Comply with monitoring activities; 2523 S.D. 2 H.D.2

-f4+ Train personnel, and provide educational '.lOrlwhops, materials, and equipment, and 

## +s+ For any other purpose deemed necessary to carry cut the purposes of this part. II] SECTION 11. Section 150A-48, Hawaii Revised Statutes, is 7 repealed, 8 [II [§150A 48] Microorganism import certification revolving 9 fWld. (a) There is established in the state treasury the 10 microorganism import certification revolving fund which shall be 11 administered by the department for the purposes of this 12 section. The microorganism import certification revolving fund 13 shall consist of. 

### 14**~** Legislative appropriations to the microorganism import 15 certification revolving fund, 16**~** Certification and inspection fees, as authorized by 17 rule, 

### 18 -f-3+ All fines collected pursuant to this part, 19 +4+ Reimbursements for any costs paid b1" the department to 20 remediate any impending danger or actual emergencies 21 iW001ving microorganisms imported pursuant to 

### 22 certificate; SB2523 HD2 HMS 2010-3021

## IDIII~II~IIIIIIIIIIIIIIII~IUIIUPage 11 

# S.B. NO. 2523 S.D. 2 H.D.2

1 

### +s+ 1"111 interest earned on or accrued to moneys deposited 2 in the microorganism import certification revolving 3 fund, 4 

### +6+ Grants and gifts to the microorganism import 5 certification revolving fund; and 6 

### .f!7+ Any other moneys made available to the microorganism 7 import certification revolving fund from other 8 sources. 9 (b) The balance in the microorganism import certi:Hcation 10 revolving fund shall not exceed $500,000.**~ll** amounts in excess 11 of $500,000 shall be deposited to the credit of the state 12 general fund.

, 13 (c) The department shall eJl:pend moneys in the 14 microorganism import certification revolving fund for the 15 development, administration, and operation of the microorganism 16 import certification program, including but not limited to 17 personnel, training, materials and equipment, compliance 18 monitoring activities, educational 'h'orltshops for certified 19 'importers and applicants for certification, evaluation and 

### 20 remediation of impending threat or actual emergencies related to 21 microorganisms imported pursuant to certificate, and for any

SB2523 HD2 HMS 2010-3021

## ~IIPage 12 

# S.B. NO. 2523 S.D. 2 H.D.2

1 other purpose deemed necessary to carry out the purposes of this 2 part. 3 (d) The department may set fees, by rule, for educat:ional 4 vorlwhops for certified importers or applicants for 5 certification. "] 6 SECTION 12. On July 1, 2010: 7 (1) All moneys in the permit revolving fund and 8 microorganism import certification revolving fund as 9 of June 30, 2010, shall be transferred to the pest 10 inspection, quarantine, and eradication fundi 11 (2) All unpaid obligations of the permit revolving fund 12 and microorganism import certification revolving fund 13 as of June 30, 2010, shall become payable from the 14 pest inspection, quarantine, and eradication fund; and 15 (3) The permit revolving fund and microorganism import 

### 16 certification revolving fund shall ccase to exist. 17 SECTION 13. (a) Between July 1, 2010, and September 30, 18 2010, the department of agriculture shall adopt new or amend 19 existing rules to impose or increase the fees authorized to be 20 charged under chapter 150A, Hawaii Revised Statutes, without 21 regard to the public notice and public hearing requirements of 22 section 91-3, Hawaii Revised Statutes, the small business impact SB2523 HD2 HMS 2010-3021Page 13 

# 8.B. NO. 2523 S.D.2 H.D.2

1 review requirements of chapter 201M, Hawaii Revised Statutes, or 2 the limit on fee increases under section 92-28, Hawaii Revised 3 Statutes. The department shall set the fees at amounts intended 4 to generate, together with the inspection, quarantine, and 5 eradication service fee, sufficient revenues to pay the 6 operation and maintenance costs of implementing the agriculture 7 inspection and biosecurity programs of chapter 150A, Hawaii 8 Revised Statutes/ and the central services and departmental 9 administrative expense assessments of section 36-27 and section 10 36-30 f Hawaii Revised Statutes. 11 (b) If, by September 30, 2010, the department of 12 agriculture has not complied with subsection (a)/ then the fee 13 charged for each inspection or certification conducted under 14 authority of chapter 150A shall be as follows, effective October 15 1, 2010: 16 (1) A fee for inspection/ safeguarding/ witnessing 17 departure/ witnessing treatment/ or certification 18 requiring the services of personnel beyond regular 19 work hours/ including pre-shift/ post-shift, holidays/ 20 or days off shall be $50 plus mileage reimbursement/ 21 and an additional fee shall be assessed, which shall

SB2523 HD2 HMS 2010-30211 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Page 14

(2)

(3) (4)

(5)

(6) 

# S.B. NO. 2523 S.D. 2 H.D.2

include applicable charges for overtime wages, fixed charges for personnel services, and meals; A fee for any inspection during regular work hours conducted away from the port or department office that is conducted pursuant to requirements for export, certification, inter-island or intra-island movement,

or disposition other than release at a port of arrival, such as witnessing departure, destruction, or treatment, shall be $50 per hour plus mileage reimbursement; An annual fee for nursery certification shall be $100;
A fee for follow-up inspections required to correct deficiencies found in a certification inspection or inspections to remedy out-of-state rejections shall be $50 per hour plus mileage reimbursement; A fee for treatment or destruction of infested commodities performed by the department's plant quarantine branch shall be $50 per parceli A fee for the use of a quarantine house operated by the department's plant quarantine branch shall be $50 per room' per month; and

SB2523 HD2 HMS 2010-3021Page 15

1 (7) 

# 8.B. NO.

A storage fee of $5 per day shall be charged for 2523 S.D.2 H.D.2

2 commodities stored at any department plant quarantine 3 branch office, forty-eight hours after written 

### 4 notification. 5 The fee shall be deposited into the pest inspection, 

### 6 quarantine, and eradication fund. 7 (c) Any subsequent amendments to the rules adopted or 

### 8 amended pursuant to subsection (a) or the fees established under 

### 9 subsection (b) shall be subject to all applicable provisions of 10 chapter 91, chapter 201M, and section 92-28, Hawaii Revised 11 Statutes. 12 SECTION 14. Statutory material to be repealed is bracketed 13 and stricken. New statutory material is underscored. 14 SECTION 15. This Act shall take effect on July 1, 2010; 15 provided that section,3 and the exemption in section 5 relating 16 to aggregate bulk freight, cement bulk freight, coal bulk 17 freight, and liquid bulk freight shall take effect retroactive 18 to July 1, 2007.

SB2523 HD2 HMS 2010-3021

## Il1gnllmnlDHIIUlnlllmlml~lllllePage 16 

# S.B. NO.

Report Title: Pest Inspection, Quarantine, and Eradication Service Fee Description:

. 2523 S.D.2 H.D.2

Makes various amendments to the agricultural inspection and biosecurity laws, including the following: (1) Exempts aggregate bulk freight, cement bulk freight, coal bulk freight, and liquid bulk freight from the Pest Inspection, Quarantine,

. and Eradication Service fee; (2) Imposes fines for failure to timely pay, bill, or remit the pest inspection, quarantine, and eradication service fee; (3) Expands the purposes for expenditures from the Pest Inspection, Quarantine, and Eradication Fund; (4) Requires the deposit of fees and fines relating to agricultural inspections into the Pest Inspection, Quarantine, and Eradication Fund; and (5) Repeals the Permit Revolving Fund and Microorganism Import Certification Revolving Fund and transfers the moneys in those funds into the Pest Inspection, Quarantine, and Eradication Fund. Effective July 1, 2010. (SB2523 HD2)

The summarydescription oflegislation appearing on thispageis forinformationalpurposes onlyandis notlegislation orevidence oflegislative intent.

SB2523 HD2 HMS 2010-3021

## EXHIBIT2LINDA LINGLE Governor

State of Hawaii DEPARTMENT OF AGRICULTURE 1849Auiki Street Honolulu. Hawaii 96819 Phone: (808) 832-0568 Fax: (808) 832·0584 July 7,2010 TO: Transportation Companies FROM: Carol L. Okada, Manager**('/7~** Plant Quarantine Branch SANDRA LEE KUNIMOTO Chairperson. Board of Agriculture DUANE OKAMOTO Deputy to the Chairperson

SUBJECT: Requirements of Act 173, SLH 2010 • Relating to Agricultural Inspections
This is to inform you that Governor Lingle recently signed into law Act 173, Session Laws of Hawaii, 2010, which amends the law pertaining to the pest inspection, quarantine, and eradication service fee. As you know, both air and marine transportation companies that bring freight into the State have been required to collect the current service fee on incoming freight as of August 1, 2008, pursuant to Act 3, Session Laws of Hawaii, 2008. Becausethis fee provides the means for funding Hawaii Department of Agriculture (HDOA) inspection, quarantine, and eradication services, it is vitally important that all affected transportation companies comply in this endeavor. Act 173 contains two amendmentsthatdirectly affect Hawaii transportation companies by: 1. Exempting aggregate bulk freight, cement bulk freight, coal bulk freight, and liquid bulk freight from the pest inspection, quarantine, and eradication service tee retroactive to July 1, 2007; and 2. Imposing fines for failure to timely pay, bill, or remit the inspection, quarantine, and eradication service fee, effective July 1, 2010. Act 173 amended oradded thefollowing sections in chapter 150A, Hawaii Revised Statutes (HRS) in which newtext is shown, below, in italics): "§150A-2 Definitions. "Aggregate bulkfreight"means man-made, unpackaged, pre-processed, inspectedand certified, homogenousparticulate material, withoutmarkorcount, that is usuallyfree-flowing andboughtandsoldbyweightor volume, such as clean sand, gravel, crushedstone, slag, recycledconcrete, andgeosyntheticaggregates. "Cementbulkfreight"means unpackaged, homogenous cement, withoutmark orcount, thatis usuallyfree-flowing andboughtandsoldby weightorvolume. "Coalbulkfreight"means unpackaged, homogenous coal, withoutmarkorcount, thatis usuallyfree-flowing, boughtandsoldby weightor volume, andusedas fuel, "Liquidbulk freight"means unpackaged, homogenous liquidgoods, withoutmarkor count, thatare usuallyfree-flowing andboughtandsoldby weightor volume, such as oil, or othercomplexmixture of petroleum hydrocarbons, bituminous liquids such as asphalt, gasoline, andfui=J! oils. nAct 173 Requirements July 7, 2010 Page 2 "§150A-5.3 Inspection, quarantine, and eradication servicefee and charge. (a) There is imposed afee for the inspection, quarantine, and eradication of invasive species contained in any freight, including marine commercial container shipment, airfreight, or any other means of transporting freight, foreign or domestic, butnotincluding aggregate bulk freight, cementbulkfreight, coalbulkfreight, orliquidbulkfreight, that is brought into the state. The transportation companyshallbillthe fee to theperson responsible forpaying the freightcharges to the transportation company within fifteen days ofthe deliveryofthe freight. The fee shall be paid by the person responsible for paying the freight charges to the transportation company within forty-five days ofreceipt ofthe bill. The transportation company shall collect the fee from the person responsible and forward the payment to the department at the port of disembarkation within forty-five days ofreceiptofthe fee; provided that the transportation company shall not be liable for any fee that is not paid bythe person responsible for paying the freight charges to the transportation company. The department shall deposit the fee into the pest inspection, quarantine, and eradication fund undersection 150A-4.5. (b) Thefee shall be assessed andcol/ectedon the net weight of the imported freight computed on the basis of50 cents for everyonethousand pounds of freight brought into the state, or part thereof." U§150A-_ Failure topayorremit the inspection, quarantine, anderadication service fee; fines. (a) The following fines shallbe imposedforfailure topay, bill, orremit the inspection, quarantine, anderadication service fee asprovidedforin section 150A-5.3: (1) Aperson responsible forpaying the freightcharges to the transportation company who fails topaythe fee; or (2) A transportation companythatfails to: (A) Billthe fee, within fifteen days ofthe deliveryofthe freight, to theperson responsible forpaying the freightcharges to the transportation company; or (B) Remitthe fee to the department within forty-five days ofcollecting the fee from theperson responsible forpaying the freightcharges to the transportation company, shallpaya fine oftwo times the amountofthe inspection, quarantine, anderadication service fee or$50, whicheveris higher. (b) Allfines shallbepaid to the departmentanddepositedinto the pestinspection, quarantine, anderadication service fundundersection 150A-4.S."
As a result of Act 173, from July 1, 2010, all transportation companies bringing freight into the State, otherthan aggregate bulk freight, cement bulk freight, coal bulk freight, and liquid bulk freight, must bill the above-referenced service fee, within 15 days offreight delivery, to the person responsible for paying the freight charges and remit the payment, within 45 days of collecting it, to the HDOA, Plant Quarantine Branch (HDOA-PQB) atthe port of disembarkation. Transportation companies that do not comply with this requirement will besubjectto the fine described above. Although Act 173 exempts the above-mentioned bulk freight carriers from the service fee back to the date of its inception, aI/ other transportation companies continue to be subject to the fee collection requirement as of August 1, 2008, and are responsible for payment of current and past duefees.Act 173 Requirements July 7,2010 Page 3
The law defines "freighr' as "nonpassenger goods, cargo or lading, transported for pay"; and "net weighf' as "gross weight of the freight minus the container weight, if any." The basis for computing the service tee has also not changed since 2008 and applies whetherthe imported freight is delivered by ship or aircraft or any other means of transporting freight. Section 150A5.3(b), HRS, requires the service fee to be assessed on the net weight of the imported freight computed on the basis of 50 cents for every 1000 pounds of freight imported, or part thereof. Table 1, below, illustrates how the service fee is computed.
Table 1. Fee Schedule NetWeight Fee Upto 1,00Opounds $0.50 1,001 to 2000 pounds $1.00 2,001 to 3000 pounds $1.50 3,001 to 4,000 pounds $2.00 Again, the transportation company is responsible for billing the importerwithin fjfteen days of delivery of the freight, as well as for collecting the fee from the importer, and then forwarding this fee to HDOA-PQB within forty-five days of receipt of the fee. HDOA-PQ will accept fee payments on a monthly basis or more frequently, if desired by the transportation company, and will also accept payment at our Oahu address in the eventthat the transportation company provides statewide service. Along with the fee payments, awritten statement should be provided to HDOA-PQthat reflects the collection period dates; port of entry for the freight for which the fees were collected; netweight ofthe freight for which each fee was collected, by flight/voyage; total net weight of all freight reported forthe collection period; and the total fee amount paid. To betterassist you with the fee remittance requirement, please seethe attached sample reporting form which, upon request, can be sent via electronic mail for your use or adaptation. Receipts for fee remittances received will be issued bye-mail unless written receipts are requested. Thank you in advance for your compliance in this matter. If you have anyquestions, please contact Mr. Melvin Takahashi, Supervisor, at (808) 832-0566. For your convenience, the remittance addresses of the various ports are as follows: Oahu: 1849Auiki Street Honolulu, Hawaii 96819 Kauai: 4398A Pua Loke Street Lihue, Hawaii 96766-1673
Enc. PIQEF_Report_10-0707 Maul: 635 Mua Street Kahului, Hawaii 96732 Hilo/Kona: 16-E Lanikaula Street Hilo, Hawaii 96720

# SERVICE FEE REPORTING FORM

State of Hawaii DepartmentofAgriculture Plant Quarantine Branch DATE: REPORTNO: FOR: JUly?,2010 201O-mo-xxxx r J AIR FREIGHT I CARGO 1849 Auiki Street ( 1MARITIME FREIGHT ICARGO Honolulu, HI 96819 Checkapplicablebox Phone: 808.832.0566 FROM: Company Name Fax: 808.832.0584 Street Address City, ST ZIP Code CONTACTPERSON: Person's Name PHONE: (xxx) XXX·XXXX Reporting Period: MM·DD·YY to MM·DD·YY E·MAIL: DESCRIPTION Total in Pounds Total net weight of Freight lor Reporting Period 0.00

Less exempt Freight, Freight in transit or not for HI entry(enteras a mlnua figure -xxx,xxx)

Make al/checks payable 10: SUBTOTAL 0

Hawaii Department ofAgriculture Service Fee (subtotalx .0Q()5) 0.00 THANK YOU FOR YOUR PA YMENT Due & payable45 days from fee collection date. Non-compliance is subject topenalty oftwotimestheamount ofthe fee, or$50, whichever is greater. TOTAL $