Air Transport Assoc iation 

July 28, 2010 

VIA HAND DELIVERY AND E-MAIL 

The Honorable Susan L. Kurland 

Assistant Secretary for Aviation and 

International Affairs 

Office of the Secretary 

U.S. Department of Transportation 

1200 New Jersey Ave, SE 

Washington, DC 20590 

Re: Petition for Declaratory Order Regarding Hawaii Freight Fee Law 

Dear Assistant Secretary Kurland: 

..., -1 _J 

The Air Transportation Association of America, Inc. ("AT A"),l on behalf of itself 

and its air carrier members, hereby respectfully petitions the U.S. Department of Transportation 

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"), 

currently codified at 49 U.S.c. § 41713(b)(1). 

'The AT A 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 Air Lines, Inc., Evergreen International Airlines, Inc., Federal Express Corporation, 

Hawaiian Airlines, Inc., JetBlue Airways Corp., Southwest Airlines 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 not join in 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 of Subtitle VII of Title VII of Title 49 of the 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 of Tinicum v. United States, 582 F.3d 482 (3d Cir. 2009); Hawaiian Airlines, Inc. Declaratory Order, 

Docket OST-2006-25612, Order 2007-4-4 (April 4, 2007). 
The Honorable Susan L. Kurland 

July 28, 20 10 

Page 2 

INTRODUCTION 

As amended by Act 173, the Freight Fee Law requires air carriers which sell 

transportation of freight into Hawaii by aircraft to bill their customers a freight inspection fee 

based on the net weight of the freight determined by pounds (the "Freight Fee"), and imposes a 

fine of $50 or more per transaction if the 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, 

Exhibit 2 hereto, at 2. 

By requiring air carriers to invoice and remit the Freight Fee, the Freight Fee 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 of taxes, fees, and charges by state and local jurisdictions on airlines. 

Congress intended the AHT A to prevent the undue burden on interstate commerce and the 

economic harm on airlines, passengers and shippers that would be the natural result if state 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 

prohibition may state and local authorities impose and collect such fees 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 other things, the Freight Fee and the 

associated fines "relate" to the "price" being charged by the air carriers because such charges 

must either be borne by the air carrier or passed on to its air freight customers, and "relate" to the 

"service" of the air carriers which must provide the "service" of billing, collecting and remitting 

fees on behalf of their shipper customers. 

The Department should exercise its jurisdiction over this dispute and act quickly. 

The Department is the appropriate forum to resolve this controversy due to its broad authority in 

this area of law 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 preeminent body that enforces the federal aviation laws (including the AHTA and the ADA). 

DOT action here will ensure administrative expertise and uniformity in 

application of the AHT A. In particular, DOT is in a position to consider the significant policy 

implications of Hawaii's failure to comply with the AHTA and the ADA and impose its Freight 

Fee on air carriers, including the impact of multiple jurisdictions imposing similar fees or taxes 

on airlines and our national air transportation system. As the Supreme Court has acknowledged, 

the Department of Transportation "is equipped, as courts are not, to survey the field nationwide, 
The Honorable Susan L. Kurland 

July 28, 20 I 0 

Page 3 

and to regulate based on a full view of the relevant facts and circumstances." Northwest Airlines, 

Inc. v. County a/Kent, Mich., 510 U.S. 355,367 n. 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 subject to 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 cripple the national air transportation system. 

Finally, DOT action is critical because some courts have held that there is no 

private right of action to enforce the AHT A and the ADA. Although AT A believes that it and its 

member carriers should have the ability to file suits to enforce the AHT A 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 if other state or local governments 

seek to impose similar fees or taxes. 

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 

originally enacted, Section 150A-5.3 stated: 

Inspection, quarantine, and eradication service fee and charge. 

There is imposed a fee for the inspection, quarantine, and eradication of invasive 

species contained in any freight, including but not limited to marine commercial 

container shipment, air freight, or any other means of transporting 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 not paid by the 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 under section 150A-4.5. 

The fee shall be assessed on the net weight of the imported freight computed on 

the basis of 50 cents for everyone thousand pounds of freight brought into the 

state, or part thereof. 
The Honorable Susan L. Kurland 

July 28,2010 

Page 4 

Hawaii Revised Statute § lS0A-2 defines "freight" to mean "non-passenger 

goods, cargo, or lading transported 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 

subject to state agricultural inspection and the new fee." Letter, at 2. 

Act 173 Amended the Freight Fee Law to Impose 

New Obligations and Fines on Air Carriers 

On or about June 23,2010 the 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, or remit 

the past inspection, quarantine, and eradication service fee." Exhibit 1, at 1. As amended by Act 

173, Hawaii Revised Statute § lS0A-S.3 states that the "fee shall be assessed and collected on 

the net weight of the imported freight computed on the basis of SO cents for everyone thousand 

pounds of freight brought into the state, or part thereof." Exhibit 1, at 7. It further provides, 

inter alia: 

Id. at 6. 

The transportation company shall bill thc fcc to thc pcrson rcsponsiblc for paying 

the freight charges to the transportation company within fifteen days of the 

delivery of the freight. The fee shall be paid by the person responsible for paying 

the freight charges to the transportation company within forty-five days of receipt 

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 

person responsible for paying the freight charges to the transportation company. 

As amended by Act 173, the Freight Fee Law now provides that if a 

"transportation company ... fails to [b Jill the fee, within fifteen days of the delivery of the 

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 of collecting the fee" the 

transportation company must "pay a fine of two times the amount of the inspection, quarantine, 

and eradication service fee or $SO, whichever is 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, 

inter alia, "[s]ervice fees, charges, and penalties collected under section lS0A-S.3," and "[fJines 

for violations of this chapter." Exhibit 1, at 4. In addition, the "moneys in the pest inspection, 
The Honorable Susan L. Kurland 

July 28,2010 

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 of emergency remedial measures when pests are detected in the course of 

inspection and quarantine activities by the department, training of inspectors, education of the 

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 of this 

chapter." Id. at 5. 

In a memorandum "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 of August 1, 2008, pursuant to Act 3, Session Laws of Hawaii, 2008." Exhibit 2 

hereto, at 1. The HDOA added that: 

As a result of Act 173, from July 1, 2010, all transportation companies bringing 

freight into the State ... must bill the above-referenced service fee, within 15 

days of freight 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 of disembarkation. Transportation 

companies that do not comply with this requirement will be subject to the fine [set 

forth in Act 173]. 

Id. at 2 (emphasis in original). The agency further stated that "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 due 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 

collection period dates; port of entry for the freight for which the fees were collected; net weight 

of the freight for which each fee was collected, by flight/voyage; total net weight of all freight 

reported for the collection period; and the total fee amount paid." Exhibit 2, at 2; see also the 

"Service Fee Reporting Form" attached thereto. 

The Freight Fee Law Subjects Air Carriers to Onerous 

Fiscal and Administrative Burdens 

The Freight Fee Law imposes severe fiscal and administrative burdens on air 

carriers. Prior to the enactment of Act 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 of time and capital to conceive, design, plan, develop, test and implement the 
The Honorable Susan L. 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" of the 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 

operational purposes because packaging weight is 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 specified in the Freight Fee 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 of Animal 

and Plant Health Inspection Service ("APHIS") fees to the U.S. Department of Agriculture. 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, 

aircraft passengers arriving from foreign countries are charged $5.00 in APHIS fees. 7 C.F.R. § 

354.3(f). 

THE ANTI-HEAD TAX ACT 

The Anti-Head Tax Act ("AHTA") prohibits a "charge" on the sale of 

transportation of "property by aircraft." Under the AHTA, no State may "levy or collect a tax, 

fee, head charge, or other charge on ... the sale of air transportation." 49 U.S.C. § 40116(b). 

Subsection (b) of the 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 of a State, and any person that has purchased or leased an airport 

under [49 U.S.C. § 47134] may not levy or collect a tax, fee, head charge, or other charge on-

(1) an individual traveling in air commerce; 

(2) the transportation of an individual traveling in air commerce; 

(3) the sale of air transportation; or 

(4) the gross receipts from that air commerce or transportation." 

49 U.S.C. § 40116(b) (emphasis added). 
The Honorable Susan L. Kurland 

July 28,2010 

Page 7 

The prohibition against the imposition of a "tax, fee, head charge, or other 

charge" on the "sale of air transportation" applies to the sale of transportation of freight by air. 

The term "air transportation" includes "interstate air transportation," "foreign air transportation," 

and "the transportation of mail 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. § 401 02( 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 of mail by 

aircraft, between a place in the United States and a place outside the United States when any part 

of the transportation is by aircraft." § 40102(a)(23) (emphasis added). 

The AHTA was passed by Congress in 1973 as a reaction to a 1972 U.S. Supreme 

Court decision that upheld a locally imposed "head" tax on airline passengers. EvansvilleVanderburgh Airport Auth. 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 of air transportation." Aloha Airlines, 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 

double taxation on air travelers." Id. To deal with these problems, Congress passed § 7(a) of the 

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 inhibit the flow of interstate commerce." See id.; S. Rep. No. 93-12, p. 4, 1973 U.S.C.C.A.N. 

1434 (1973). See also Indianapolis Airport Auth. v. American Airlines, 733 F.2d 1262 (ih Cir. 

1984) (Anti-Head Tax Act was passed in order to prevent placing of unreasonable burdens on 

interstate air transportation). 

The Hawaii Legislature was aware of the AHT A 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 of the 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 of the House Committee on Interstate and Foreign Commerce, 92d Cong., 2d Sess. (1972). 

4The Act was originally codified at 49 U.S.c. app. § 1513. The original statute was eventually superseded by 49 

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 Statutory Notes, 49 U.S.c. § 40116(b) (2000). 
The Honorable Susan L. Kurland 

July 28,2010 

Page 8 

THE AIRLINE DEREGULATION ACT 

The Airline Deregulation Act provides: 

(b) Preemption.--(l) Except as provided in this subsection, a State, political 

subdivision of a State, or political authority of at least 2 States may not enact or 

enforce a law, regulation, or other provision having the force and effect of law 

related to a price, route, or service of an air carrier that may provide air 

transportation under this subpart. 

49 U.S.c. § 41713(b)(1). As used in the ADA, "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." The Supreme Court in Morales v. Trans 

World Airlines, Inc., 504 U.S. 374, 383 (1992), stated that the use of the words "related to" in the 

preemption provisions of the ADA "express a broad pre-emptive purpose" and prohibit all state 

laws "relating to" the rates, routes or services of an 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 at p. 83 (1994); see also Sanchez v. Aerovias de 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 of Travel 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 of other individuals or entities, if such regulation will have an 

effect on price, route or service of a direct 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 or reference to airline rates, routes or services are preempted by the ADA. The 

laws do not have to actually prescribe rates, routes or service); cf Rowe v. NH Motor Transp. 

Ass 'n, 552 U.S. 364 (2008) (preemption unqer Federal Aviation Administration Authorization 

Act even if the state law's effect on rates, routes or services is indirect). 
The Honorable Susan L. Kurland 

July 28, 2010 

Page 9 

THE DEPARTMENT'S PRIMARY JURISDICTION 

The Department has primary jurisdiction over the issue of whether the Freight Fee 

Law, as applied to air carriers, violates and is preempted by the AHTA and ADA. There is clear 

precedent for the exercise of primary jurisdiction by DOT with regard to the lawfulness of the 

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 of Tinicum 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 

(AHT A) and to issue declaratory rulings interpreting that provision. The Administrative 

Procedure Act authorizes us to issue declaratory orders"); Declaratory Order, 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 regarding meaning of Shelby Amendment 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 within primary jurisdiction of the DOT); New England Legal Found. v. Mass. Port Auth., 

883 F.2d 157 (1st Cir. 1989) (DOT had primary jurisdiction over whether landing fees at Boston 

airport violated federal statute). 

The Department's exercise of its primary jurisdiction 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 of state 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 

primary jurisdiction is a better method for handling such challenges than requiring the airline 

industry to resort to case-by-case (and potentially conflicting) adjudication by different courts of 

the same or similar legal issues. 
The Honorable Susan L. Kurland 

July 28,2010 

Page 10 

ARGUMENT 

I. THE HAWAIIAN FREIGHT FEE LAW, AS APPLIED TO AIR CARRIERS, 

VIOLATES AND IS PREEMPTED BY THE ANTI-HEAD TAX ACT. 

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 of air 

transportation . ... " 49 U.S.c. § 40116(b)(3) (emphasis added). Because "air transportation" 

is defined to include the transportation of freight, 49 U.S.C. §§ 40102(a)(5), (22), (25), it is clear 

that the AHT A applies to state taxes, fees and charges that are sought to be imposed on the 

transportation of freight by air. The Freight Fee violates the AHTA because it attaches a fee 

whenever freight is transported via air into the State of Hawaii. Moreover, the Freight Fee is not 

a flat charge but rather is assessed on the "net weight of the imported freight computed on the 

basis of 50 cents for everyone thousand pounds of freight brought into the state, or part thereof." 

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 AHT A and suggesting that a fee would "constitute a prohibited charge on the 

sale of air transportation" if it was "imposed in connection with the sale of a ticket or waybilf') 

(emphasis added). 

The potential fine for an air carrier violating the Freight Fee Law also may be 

determined based on the net weight of the transported freight. The fine is "two times the amount 

of the inspection, quarantine, and eradication service fee or $50, whichever is higher" for each 

occurrence when the air carrier fails to bill or remit the Freight Fee. 

The U.S. Supreme Court has construed the Anti-Head Tax Act broadly in order to 

effectuate Congress' intent. Thus, the ban applies even if the charge is directly imposed on the 

carriers rather than their passengers. See, e.g, Aloha Airlines, supra, 464 U.S. 7, 12-13 (state tax 

on the annual gross income of airlines operating within Hawaii was preempted and barred by the 

AHT A 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 England Legal Found., supra, 883 F.2d at 170 n. 22 ("The prohibition is broader than just against 

head taxes"); Interface Group v. Massachusetts Port Authority, 816 F.2d 9,16 (1't Cir. 1986) (even if the "primary 

beneficiaries of the [Anti-Head Tax Act] are ... air travelers, ... by prohibiting the levying of taxes on the 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 nor have to absorb all or part of the charge by reducing 

ticket prices."); Indianapolis Airport Auth., supra, 733 F.2d at 1267 ("Whether airline or passenger ultimately bears 

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 of State or local head taxes, fees, 

(footnote continued) 
The Honorable Susan L. Kurland 

July 28,2010 

Page 11 

In Allegheny Airlines, Inc. v. City of Philadelphia, 453 Pa. 181, 309 A.2d 157 

(1973), airlines challenged a City of Philadelphia ordinance which established a $3.00 "head tax" 

on some (but not all) passengers departing from Philadelphia airports, excluding continuous 

flight passengers who remained in Philadelphia not more than six hours. Id. at 183, 309 A.2d at 

158. In ruling that the 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 or local action. Here ... state intrusion is precluded. 

Id. at 186, 309 A.2d at 159. Similarly here, the Hawaiian Freight Fee Law imposes 

impermissible charges on the transportation of freight by air, and should be declared unlawful on 

that basis.6 

In its brief to the Third Circuit in the Tinicum case, the Department emphasized 

that the purpose of the AHT A was to "limit state and local taxation of aviation .... " Brief of 

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 of that purpose, the 

Department explained: 

The Department's reasonable interpretation of the [AHT A] comports with the 

AHTA's purpose to limit state and local taxation of aviation, and is consistent 

with long-standing judicial interpretation of the AHT A. See, e.g., County of Kent, 

510 U.S. at 363 ("[c]oncemed that our decision in Evansville might prompt a 

proliferation of local taxes burdensome to interstate air transportation, Congress 

enacted the AHT A"); Western Air Lines, Inc. v. Board of Equalization of State of 

South Dakota, 480 U.S. 123, 126 (1987) ("Congress acted [in the AHTA] to limit 

state taxation of air transportation"); Aloha Airlines, Inc. . .. ("[ n ]othing in the 

gross receipts, taxes or other such charges whether on passengers or on the carriage of such 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 by the 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 if the AHT A by initially setting fees at a relatively small level, only to subsequently increase 

the amount of the fees. 
The Honorable Susan L. Kurland 

July 28,2010 

Page 12 

legislative history of the [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 taxation based on gross receipts") .... (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 preempted by the Anti-Head 

Tax Act is critical to protect the airline industry and its members from a proliferation of state and 

local taxes on the transportation of freight into a state from either another state or a foreign 

country. 

II. THE HAWAIIAN FREIGHT FEE LAW, AS APPLIED TO AIR CARRIERS, 

VIOLATES AND IS PREEMPTED BY THE AIRLINE DEREGULATION ACT. 

Under the Airline Deregulation Act, with certain limited (and inapplicable) 

exceptions, "a State ... may not enact or enforce a law, regulation, or other provision having the 

force and effect of law related to a price, route, or service of an air carrier that may provide air 

transportation under this 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, relate to the "price," "route" and "service" of the air carriers that are transporting 

freight into Hawaii. 

A. The Freight Fee Law Relates to the "Price" Charged by Air Carriers. 

The Freight Fee and the associated fines "relate" to the "price" being charged by 

the air carriers because such charges must either be borne by the air carrier or passed on to 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 

Circuit rejected the plaintiffs' assertion that the taxes and fees were not part ofthe "price" of the 

tickets because they are separate from the ''fare prices (or rates) set by the airlines." Id. at 35. 

The court stated that "the ADA preempts both laws that explicitly refer to an airline's prices 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 of the 'significant effect' doctrine." Id. at 34-35. The court 

explained: 
The Honorable Susan L. Kurland 

July 28,2010 

Page 13 

Although the fees are in one sense separate from the base fare, the two are 

inextricably intertwined. In all events, an air traveler's concern is with the overall 

cost of his or her ticket. Thus, when an airline establishes the base fare, it 

must take cognizance of any surcharges that will be imposed by operation of 

law. 

It is freshman-year economics that higher prices 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 account for the fees when setting its own rates. 

Id. at 35-36 (emphasis added) (cited with approval by the Ninth Circuit in Sanchez, supra, 590 at 

1030). 

Similarly here, even if the 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" of the air transportation being provided. For preemption 

to apply, there is no requirement that the Freight Fee Law "explicitly refer to" the amount of the 

rates charged by air carriers for transportation of freight into Hawaii. Rather, it is sufficient that 

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. The Freight Fee Law Relates to the "Service" of Air Carriers. 

The Freight Fee and the associated fines also relate to the "service" of the air 

carrier because they require the air carrier - under threat of significant monetary fines - to 

provide the "service" of billing, collecting and remitting fees on behalf of its shipper customers. 

In United Parcel Service, Inc. v. Flores-Galarza, 318 F .3d 323 (1 st Cir. 2003), a 

Puerto Rico law prohibited air carriers from delivering any package unless the carrier provided a 

"certificate" that the package's addressee had paid the appropriate state excise tax, or the carrier 

had instead prepaid the tax on the addressee's behalf. If a carrier delivered "a package 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 

preempted the 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 of the scheme -

forbids delivery unless and until a recipient produces a certificate from the 
The Honorable Susan L. Kurland 

July 28, 2010 

Page 14 

Secretary. Compliance with this provision significantly affects the timeliness and 

effectiveness of UPS's service, which includes the delivery of packages 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 orderly flow of packages. 

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 of the 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 of labor and 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'd on other grds., 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 

the tax was preempted by the ADA because, among other things: 

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 of passengers through the airports in Mexico, [the claims] are 

preempted by the Airline Deregulation Act on the grounds that the claims are 

related to Mexican's routes 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 of the Fee "is a service facilitating the 

flow" of freight into Hawaii. See also Federal Express Corp. v. California Public Utilities 

Comm 'n, 936 F.2d 1075, 1078 (9th Cir. 1991) (state regulation of trucking operations of air 

carrier - including "rates," "bills of lading," and "freight bills" - preempted by ADA) ("Most of 

the regulations ... are obviously economic - they bear on price. Those regulations which are not 

patently economic - the rules on claims and bills of lading, for example - relate to the terms on 

which the air carrier offers its services"). 
The Honorable Susan L. Kurland 

July 28, 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 of recipients of tobacco 

shipped into the state was preempted by Federal Aviation Administration Authorization Act 

(the version of the ADA which applies to motor carriers) because the law would "require [motor] 

carriers to offer a system of services that the market does not now provide and which the carriers 

would prefer not to 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 of the regulation, the market 

might dictate. And that being so, treating sales restrictions and purchase 

restrictions differently for pre-emption purposes would make no 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 if that 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. The huge burden inflicted by such 

a "patchwork" of state laws is anathema to Congress' legislative intention of rendering the 

aviation industry free from federal intrusive regulation by state and local governments. 

C. The Freight Fee Law Relates to the "Routes" of Air Carriers. 

The Freight Fee and the associated fines also relate to the "route" of the 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 of Mexican tourism tax preempted by ADA where it related to "route" of air 
The 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 

If Hawaii 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 of airlines 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. 

This precedent should not be allowed to 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 Airline Deregulation Act. 

Sincerely, 

Air Transport Association of America, Inc. 

~/('~-

Enclosures 

Exhibit 1 - Act 173 

David A. Berg 

Vice President & General Counsel 

Doug Mullen 

Senior Attorney - Regulatory Affairs 

Exhibit 2 - July 7, 2010 Memorandum to Transportation Companies 

cc: The Hon. Governor Linda Lingle 

State of Hawaii 

The Hon. Sandra Lee Kunimoto 

Chairperson 

Hawaii Department of Agriculture 

Roy Goldberg, Esq. 

Sheppard Mullin Richter & 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 ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII: 

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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 maj or 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 inspection l 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 

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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 

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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 

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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. 

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Page 4 S.B. NO. 

1 "Coal bulk freight" means unpackaged, homogenous coal, 

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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 2010-3021 
Page 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. 

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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 

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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 wi thin 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. 

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1 The department shall deposit the fee into the pest 

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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 

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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 2010-3021 
Page 9 S.B. NO. 

1 as established by rule and shall be deposited into the pest 

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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; 

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-f-3+ Comply with monitoring activities; 

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-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 b 1" the department to 

20 remediate any impending danger or actual emergencies 

21 iW001ving microorganisms imported pursuant to 

22 certificate; 

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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 

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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 

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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 

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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 2010-3021 
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1 (7) 

8.B. NO. 

A storage fee of $5 per day shall be charged for 

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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~llllle 
Page 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 summary description of legislation appearing on this page is for informational purposes only and is 

not legislation or evidence of legislative intent. 

SB2523 HD2 HMS 2010-3021 
EXHIBIT 2 
LINDA LINGLE 

Governor 

State of Hawaii 

DEPARTMENT OF AGRICULTURE 

1849 Auiki 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. Because this 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 amendments that directly 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 or added the following sections in chapter 150A, Hawaii Revised Statutes 

(HRS) in which new text is shown, below, in italics): 

"§150A-2 Definitions. 

"Aggregate bulk freight" means man-made, unpackaged, pre-processed, inspected and 

certified, homogenous particulate material, without mark or count, that is usually free-flowing 

and bought and sold by weight or volume, such as clean sand, gravel, crushed stone, slag, 

recycled concrete, and geosynthetic aggregates. 

"Cement bulk freight" means unpackaged, homogenous cement, without mark or count, 

that is usually free-flowing and bought and sold by weight or volume. 

"Coal bulk freight" means unpackaged, homogenous coal, without mark or count, that is 

usually free-flowing, bought and sold by weight or volume, and used as fuel, 

"Liquid bulk freight" means unpackaged, homogenous liquid goods, without mark or 

count, that are usually free-flowing and bought and sold by weight or volume, such as oil, or 

other complex mixture of petroleum hydrocarbons, bituminous liquids such as asphalt, 

gasoline, and fui=J! oils. n 
Act 173 Requirements 

July 7, 2010 

Page 2 

"§150A-5.3 Inspection, quarantine, and eradication service fee and charge. (a) There 

is imposed a fee for the inspection, quarantine, and eradication of invasive species 

contained in any freight, including marine commercial container shipment, air freight, or any 

other means of transporting freight, foreign or domestic, but not including aggregate bulk 

freight, cement bulk freight, coal bulk freight, or liquid bulk freight, that is brought into the 

state. The transportation company shall bill the fee to the person responsible for paying the 

freight charges to the transportation company within fifteen days of the delivery of the 

freight. The fee shall be paid by the person responsible for paying the freight charges to the 

transportation company within forty-five days of receipt 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 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 under section 

150A-4.5. 

(b) The fee shall be assessed and col/ected on the net weight of the imported freight 

computed on the basis of 50 cents for everyone thousand pounds of freight brought into the 

state, or part thereof." 

U§150A-_ Failure to payor remit the inspection, quarantine, and eradication service 

fee; fines. (a) The following fines shall be imposed for failure to pay, bill, or remit the 

inspection, quarantine, and eradication service fee as provided for in section 150A-5.3: 

(1) A person responsible for paying the freight charges to the transportation company 

who fails to pay the fee; or 

(2) A transportation company that fails to: 

(A) Bill the fee, within fifteen days of the delivery of the freight, to the person 

responsible for paying the freight charges to the transportation company; or 

(B) Remit the fee to the department within forty-five days of collecting the fee 

from the person responsible for paying the freight charges to the 

transportation company, 

shall pay a fine of two times the amount of the inspection, quarantine, and eradication 

service fee or $50, whichever is higher. 

(b) All fines shall be paid to the department and deposited into the pest inspection, 

quarantine, and eradication service fund under section 150A-4.S." 

As a result of Act 173, from July 1, 2010, all transportation companies bringing freight into the 

State, other than aggregate bulk freight, cement bulk freight, coal bulk freight, and liquid bulk 

freight, must bill the above-referenced service fee, within 15 days of freight 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 of disembarkation. 

Transportation companies that do not comply with this requirement will be subject to 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 due fees. 
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 whether the 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 

Net Weight 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 importer within 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 event that the transportation company 

provides statewide service. Along with the fee payments, a written statement should be 

provided to HDOA-PQ that reflects the collection period dates; port of entry for the freight for 

which the fees were collected; net weight of the freight for which each fee was collected, by 

flight/voyage; total net weight of all freight reported for the collection period; and the total fee 

amount paid. To better assist you with the fee remittance requirement, please see the 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 any questions, please 

contact Mr. Melvin Takahashi, Supervisor, at (808) 832-0566. 

For your convenience, the remittance addresses of the various ports are as follows: 

Oahu: 1849 Auiki 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 

Department of Agriculture 

Plant Quarantine Branch 

DATE: 

REPORT NO: 

FOR: 

JUly?,2010 

201O-mo-xxxx 

r J AIR FREIGHT I CARGO 

1849 Auiki Street ( 1 MARITIME FREIGHT I CARGO 

Honolulu, HI 96819 Check applicable box 

Phone: 808.832.0566 FROM: Company Name 

Fax: 808.832.0584 Street Address 

City, ST ZIP Code 

CONTACT PERSON: 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 (enter as a mlnua figure -xxx,xxx) 

Make al/ checks payable 10: SUBTOTAL 0 

Hawaii Department of Agriculture Service Fee (subtotal x .0Q()5) 0.00 

THANK YOU FOR YOUR PA YMENT 

Due & payable 45 days from fee collection date. Non-compliance is subject 

to penalty of two times the amount of the fee, or $50, whichever is greater. 

TOTAL $