UNITED STATES OF AMERICA 

DEPARTMENT OF TRANSPORTATION 

OFFICE OF THE SECRETARY 

WASHINGTON, D.C. 

Issued by the Department of Transportation 

on the 23"" day of January, 2012 

Order 2012-1-18 

Served: January 24, 2012 

HAWAII INSPECTION FEE PROCEEDING Docket DOT-OST-2010-0243 

DECLARATORY ORDER 

The State of Hawaii (Hawaii) inspects incoming freight, from both foreign and domestic sources, 

in order to protect its natural environment from invasive plant and animal species. Until 

recently, Hawaii itself absorbed the cost of this program. In 2008, Hawaii enacted a statute 

imposing a fee on air and maritime shippers in order to fund these inspections. Under the statute, 

air and ocean carriers are responsible for billing shippers for the fee, collecting payment, and 

remitting the funds to Hawaii. In 2010, Hawaii amended the statute to impose fines on carriers 

that fail to comply with these obligations. 

On July 28, 2010, the Air Transport Association, now known as Airlines for America (Petitioner) 

petitioned the Department for a declaratory ruling that the amended Hawaiian statute as applied 

to air carriers is preempted by the Airline Deregulation Act (ADA), 49 U.S.C. § 41713, and the 

Anti-Head Tax Act (AHTA), 49 U.S.C. § 40116. 

On September 29, 2010, we issued an order instituting a proceeding to determine the lawfulness 

of the Hawaiian statute as applied to air carriers. We deferred a ruling on the petition for a 

declaratory order pending our receipt and consideration of comments to the instituting order, 

reply comments, and supplemental comments. Order 2010-9-29 (served September 30, 2010). 

Our Instituting Order stated that we planned to rule on the following issues: 

1. Whether the Hawaii Plant Quarantine Law as amended, Hawaiian Revised Statutes 

§ 150A (Act 173), and accompanying program requirements are preempted by the ADA 

preemption provision, 49 U.S.C. § 41713; and, 

2. Whether the Hawaii Plant Quarantine Law as amended, Hawaiian Revised Statutes 

§ 150A (Act 173), and accompanying program requirements are preempted by the 

AHTA, 49 U.S.C. §40116. 
The parties submitted opening comments, reply comments, and supplemental submissions. 

Other interested parties submitted comments as well. In total, excluding the petition and our 

institutmg order, we received 26 submissions to the docket (DOT-OST-2010-0243), all of which 

are publicly available at www.regulations.gov. 

SUMMARY OF DECISION 

We have carefully considered the arguments of the parties as to whether or not the Hawaii Plant 

Quarantine Law as amended, Hawaiian Revised Statutes §150A (Act 173), and accompanying 

program requkements (hereinafter the "Inspection Fee Statute") as applied to air carriers is 

preempted by the ADA and AHTA. 

We find that the Inspection Fee Statute as applied to air carriers (including as to the inspection 

fee and potential fines) is preempted by the ADA imder 49 U.S.C. § 41713. Under applicable 

law, the Inspection Fee Statute is related to air carrier services, and thus preempted by the ADA, 

because it directly regulates air carriers by commanding air carriers to conform their service of 

shipping freight by an- transportation in ways not dictated by the market to bill, collect, and remit 

fees on behalf of its shipper customers. We also find that the Inspection Fee Statute is preempted 

by the ADA because it is related to air carrier prices. The Inspection Fee Statute indkectly (if 

not directly) regulates how air carriers are likely to price the shipment of freight to Hawaii by air 

transportation, as well as how air carriers collect those prices. The Inspection Fee Statute 

imposes costs on air carriers that are likely to be recovered by increased pricing for air 

transportation. 

We also find that that the Inspection Fee Statute as applied to air carriers (including as to the 

inspection fee and potential fines) is preempted by the AHTA, 49 U.S.C. § 40116, because 

Hawaii may not levy or collect a fee or other charge, directly or indirectly, on the sale of "air 

transportation," a term which Congress defined in the statute as including the transportation of 

"property," a term which includes the air transportation of freight here. 

We are very sensitive to Hawaii's efforts to combat invasive species and recognize Hawaii's 

need to protect its ecosystem. Our decision is based on the record before us. We take no 

position on other ways Hawaii may structure its inspection program that may not be preempted 

under the ADA or AHTA. But we are responsible for administering the federal statutes 

applicable to the airline industry, including the ADA preemption provision and the AHTA. And 

we have concluded that the way Hawaii has structured its program here as to air carriers is 

preempted under both statutes. 
BACKGROUND 

Factual Introduction 

Hawaii has long engaged in inspection and quarantine programs to fend off the introduction of 

invasive species of many varieties. See, e.g., William C. Look, Hawaii's Plant Quarantine 

Service - Past, Present, and Future, Proceedings, Hawaiian Entomological Society, Vol. XVIII, 

No.l (August 1962). Hawaii is vulnerable to invasive species not only from foreign countries 

but from the mainland United States. For that reason, Hawaii maintains its own inspection 

program independent of the Federal government, which scrutinizes freight from foreign sources 

through the U.S. Department of Agriculture Animal Plant and Health Inspection Service 

(APHIS).' Hawaii's inspection program is administered by the Hawaii Department of 

Agriculture (HDOA).^ 

As noted above, imtil recently Hawaii fimded these services from general revenues. In 2008, the 

Hawaii State Legislature enacted H.B. 2843, now codified at Hawaii Revised Statutes Chapter 

150A (effective August 1, 2008). In that legislation, Hawaii imposed a fee of 50 cents (now 75 

cents)'' per thousand pounds of freight (net weight) on "the person responsible for paying the 

freight charges" (i.e., the shipper in most instances) to the "transportation company" (i.e., the 

carrier by air and water). "Freight" is defined in the Inspection Fee Statute as "nonpassenger 

goods, cargo, or lading, transported for pay." Haw. Rev. Stat. § 150A-2.'^ 

' The record demonstrates that APHIS does not presently inspect for the same inbound pests as Hawaii, and 

Hawaii and APHIS presendy have different areas of inspection responsibility. The Federal government also 

inspects domestic freight outbound from Hawaii to the continental United States. 

^ State inspectors identify shipments which should be inspected for possible invasive species based upon a 

review of air waybills. See Hawaii Opening Comments, Exhibit 1, Decl. of Domingo Cravalho, Compliance Section 

Chief, Plant Quarantine Branch (State), HDOA, at f 6. Air waybills are the contracts of carriage and contain the 

essential terms between the shipper and the air carrier in connection with shipping freight by air transportation. They 

are widely used in the industry. "If a shipper sends the State a manifest of the shipment, State staff... are able to 

predetermine, subject to any changes prompted by a visual inspection of the cargo at unloading, which containers 

will be inspected. Id. f 9. Hawaii does not inspect all containers for inspection. Id. f 10. State inspectors prioritize 

which waybills and shipments to inspect, and carrier cargo unloading personnel "often assist the State inspectors 

with identifying high risk or suspect containers that should be inspected." Id. fH 11, 12. 

^ During the pendency of this proceeding, on January 26, 2011, the Hawaii House of Representatives 

introduced H.B. 865, proposing to amend the Inspection Fee Statute to increase the fee from 50 cents for every 

1,000 pounds of freight to 75 cents for every 1,000 pounds of freight. On May 5, 2011, the Governor of Hawaii 

signed H.B. 865 into law. H.B. 865 took effect upon approval, and the remainder of this order will refer to the now 

current 75 cent per 1,000 pounds of freight fee set forth in the statute. 

'^ Hawaii states 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." See Pet. Opening Comments, Attachment D, Sept. 12,2008 Letter of 

Sandra Kunimoto, Chairperson, Board of Agriculture, State of Hawaii, to the Airline Committee of Hawaii, at 2. 
As structured, the Inspection Fee Statute provides that air and ocean carriers are themselves not 

liable for any fees. However, paragraph (a) of the statute specifically provides that the carriers 

are required to bill, collect and remit the fee within specific time periods:^ 

(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 fortyfive 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 150A4.5.^ 

(b) The fee shall be assessed and collected on the net weight of the imported 

freight computed on the basis of 75 cents for every one thousand poimds of 

freight brought into the State, or part thereof. 

Haw. Rev. Stat. § 150A-5.3 (Emphasis added).^ 

Hawaii states that "the entity responsible for collecting the fee is the entity that brings the freight into 

Hawaii. Air freight consolidators and transportation companies are free to work out their own financial 

arrangements if they feel the need to make adjustments because of the fee. These are matters outside the HDOA." 

See Pet. Opening Comments, Attachment D, Sept. 12, 2008 Letter of Sandra Kunimoto, Chairperson, Board of 

Agriculture, State of Hawaii, to the Airline Committee of Hawaii, at 2. In July 7, 2010 guidance from HDOA, 

Hawaii also advises that "[ajlong with the fee payments, a written statement should be provided to HDOA-PQ that 

reflects the collection period dates; port of entty 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 die total fee amount paid." See Pet. For Decl. Order at Exhibit. 2, July 7, 2010 Letter of Sandra 

Kunimoto, Chairperson, Board of Agriculture, State of Hawaii, to Transportation Companies, "Requirements of Act 

173, SLH 2010 - Relating to Agricultural Inspections," at 3. 

Hawaii has established "in the state freasury the pest inspection, quarantine, and eradication fund." Haw. 

Rev. Stat. § 150A-4.5. The monies deposited into this fund include, among others, "[s]ervice fees, charges, and 

penalties collected under section 150A-5.3." Id. at § 150A-4.5(a)(2). These monies fund, among other things, "the 

operation of biosecurity and pest inspection, quarantine, eradication, and monitoring programs." Id. at § 150A4.5(b). 

"Net weight" is defined as "the gross weight of the freight minus the container weight, if any." Haw. Rev. 

Stat. § 150A-2. 

* There do not appear to be any accompanying Hawaiian regulations further implementing the statute, and 

none were identified to us during this proceeding. 
In addition to being responsible under the Inspection Fee Statute for billing, collecting and 

remitting fees, air carriers are subject to specified monetary penalties for failure to do so and 

within the statute's required time periods. Effective July 1, 2010, Hawaii amended the 

Inspection Fee Statute to penalize carriers that fail to comply and within the specified periods of 

time by imposing a fine equal to the higher of twice the inspection fee or $50: 

(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 fund imder section 150A-4.5. 

Haw. Rev. Stat. § 150A-5.4. 

Pending Litigation in Federal Court in Hawaii 

On July 29, 2010, one day after submitting its petition to the Department, Petitioner filed suit 

against Hawaii in the United States District Court for the District of Hawaii, in an action styled 

Air Transport Association v. Abercrombie, Case No. lO-CV-00444. The complaint states that 

the fees and fines imposed by the Inspection Fee Statute are preempted by the AHTA and the 

ADA, raises other Federal constitutional and statutory causes of action, and seeks both 

declaratory and injunctive relief. The complaint also asserts that the Department has primary 

jurisdiction over this matter. On August 26, 2010, Hawaii filed its answer. Hawaii denies the 

allegations of the complaint, offers various constitutional and statutory defenses, and denies that 

the Department has primary jurisdiction. As of the date of this order, by stipulation of the 

parties, the district court action is stayed pending our decision in this proceeding. 
OUR PROCEEDING 

Summary of Petitioner's Comments 

Petitioner contends that the Inspection Fee Statute as applied to air cartiers is preempted by the 

ADA, which prohibits political subdivisions and States from enacting or enforcing any law that 

has the force and effect of being "related to a price, route, or service of an air carrier." 49 U.S.C. 

§ 41713(b)(1). Relying on Morales v. Trans World Airlines, Inc., 504 U.S. 374 (1992) and its 

progeny. Petitioner claims the mspection fee is related to airline prices, routes and services. 

Petitioner argues that the Inspection Fee Statute as applied to air cartiers are related to: (1) 

"prices" because the fees must be borne by the air cartiers or passed on to their shipping 

customers; (2) "routes" because the fees may influence an air carrier's decision whether and how 

to serve Hawaii; and (3) "services" because the fees would require air carriers to adopt 

burdensome billing, collection, and remitting services that they do not now provide. Petitioner 

claims that the Inspection Fee Statute will impose onerous fiscal and administrative burdens on 

air carriers in order to comply with its requirements. Petitioner also maintains that acceptance of 

the Inspection Fee Statute would lead to a patchwork of similar regimes by other States at odds 

with the overall objective of the ADA. 

The AHTA does not permit State and local governments to "levy or collect a tax, fee, head 

charge, or other charge" on, among other things, "the sale of air transportation." 49 U.S.C. § 

40116(b)(3). Petitioner contends that the Inspection Fee Statute as applied to an: carriers violates 

the AHTA because the fees and fmes are prohibited "charges" on "the sale of air transportation" 

within the plain language of the statute. Petitioner contends that the AHTA was adopted by 

Congress to prevent the proliferation of financial charges from burdening interstate air 

transportation. See, e.g.. Aloha Airlines v. Director of Taxation of Hawaii, 464 U.S. 7 (1983). 

Petitioner also contends that Hawaii's inspection fee somewhat duplicates fees air cartiers 

already pay APHIS (although it does not explain how, even if true, this bears on ADA or AHTA 

preemption). Petitioner further contends that the Inspection Fee Statute is not saved by 

49 U.S.C. § 40116(e)(1), which nevertheless allows States to levy or collect certain taxes, 

"including property taxes, net income taxes, franchise taxes, and sales and use taxes on the sale 

of goods or services." 

Summary of Hawaii's Comments 

Hawaii argues that the Inspection Fee Statute as applied to air cartiers is not preempted by the 

ADA because it is not related to a price, route, or service of an air carrier. Hawaii contends that 

the Inspection Fee Statute does not substitute for market forces in air carrier's determinations of 

how to bill, collect or remit fees. Accordingly, Hawaii argues that the Inspection Fee Statute as 

applied to air carriers is not related to: (1) "prices" because Petitioner has made no showmg that 

air carriers, as a matter of industry practice, curtently price (or would price in the future) the 

shipment of freight by air transportation in such a way that costs or logistics under the Inspection 

Fee Statute will increase the overall cost of freight shipment rates to Hawaii paid by shippers; (2) 

"routes" because the fees will not influence ak carrier route plaiming; and (3) "services" 

because, under applicable law, the collection of fees and fines under the Inspection Fee Statute 

were not the kind of activity Congress sought to preempt in the ADA. 
Hawaii also argues that the AHTA does not prohibit agricultural inspection fees, even if such 

fees may result in increased pricing of air transportation. Hawaii further suggests that 49 U.S.C. 

§ 40116(b)(3), which prohibits a charge on "the sale of air transportation," does not include 

freight. Alternatively, Hawaii argues that the Inspection Fee Statute is an allowable "tax" 

pursuant to the savings clause of 49 U.S.C. § 40116(e)(1), which allows States to levy or collect 

certain taxes, "including property taxes, net income taxes, franchise taxes, and sales and use 

taxes on the sale of goods or services." 

DECISION 

Pursuant to 49 U.S.C. § 40113(a) and 49 U.S.C. § 46101(a), the Department has jurisdiction to 

determine violations of both the ADA and the AHTA. In cartying out that function, it has the 

power to "issue a declaratory ruling to terminate a controversy or remove uncertainty." 5 U.S.C. 

§ 554(e); see also American Airlines, Inc. v. Dep't of Transportation, 202 F.3d 788, 796-797 (5th 

Cir. 2000); United Trans. Union-Illinois Legislative Bd. v. ICC, 52 F.3d 1074,1080 n. 10 (D.C. 

Cir. 1995); Texas v. United States, 866 F.2d 1546, 1554 (5th Cir. 1989). 

The Department has consistently exercised this authority when appropriate to ensure the proper 

application of the ADA, the AHTA, and other federal aviation statutes. See Tinicum Township 

Privilege Fee Proceeding, Order 2008-3-18, Docket OST-2007-29341, affd. Township of 

Tinicum v. United States, 582 F.3d 482 (3d Cir. 2009) (declaratory order holding that a fee on air 

carriers for landing at auport within boundaries of township, a non-auport proprietor, violated 

AHTA); Hawaiian Airlines Declaratory Order Proceeding, Order 2007-4-4, Docket OST-2006-

2612 (declaratory order holding that ADA preempted an executive order issued by the Governor 

of American Samoa purporting to regulate Hawaiian Airlines' service at Pago Pago); Love Field 

Service Interpretation Proceeding, Orders 98-12-27 (December 12, 1998) and 99-4-13 (April 13, 

1999), ajfd, American Airlines v. DOT, 202 F.3d 788 (5* Cir. 2000), cert, denied, 530 U.S. 1274 

and 530 U.S. 1284 (declaratory proceeding; City of Dallas could not block airlines' operations 

authorized by a federal statute, the Shelby Amendment, out of Dallas Love Field). 

The Secretary of Transportation is responsible for administering the aviation laws, including the 

ADA. The Supreme Court has recognized that the Department of Transportation is the 

"superintending agency" of the ADA and its "experienced administrator." Wolens v. American 

Airlines, 513 U.S. 219, 229, n. 6 and 234 (1995). See also New England Legal Foundation v. 

Massachusetts Port Authority, 883 F.2d 157, 171-73 (1st Cir. 1989) (acknowledging the 

Department's primary jurisdiction). 

The Department of Transportation is also responsible for administering the AHTA. Northwest 

Airlines v. County of Kent, 510 U.S. 355, 366-367 (1994) ("The Secretary of Transportation is 

charged with administering the federal aviation laws, including the AHTA .. . [and the] 

Department is equipped, as courts are not, to survey the field nationwide, and to regulate based 

on a full view of the relevant facts and circumstances.").^ 

' See also, e.g.. Township of Tinicum v. United States, 582 F.3d 482,484 (3d Cir. 2009); Port Authority of 

New York and New Jersey v. U.S. Department of Transportation, 479 F.3d 21, 27 (D.C. Cir., 2007); Southwest Air 

Ambulance, Inc. v. City of Las Cruces, 268 F.3d 1162, 1170 (10* Cir. 2001); City of Los Angeles v. U.S. Dept. of 
We may, therefore, resolve this controversy with respect to the Inspection Fee Statute as applied 

to air cartiers under both statutes. Our exercise of primary jurisdiction in this controversy is 

informed by our expertise and entitled to deference by the courts. Chevron U.S.A., Inc. v. 

Natural Resources Defense Council, Inc., 467 U.S. 837, 842-845 (1984). 

As we noted in the institutmg order, this is an issue of first impression for the Department. For 

the reasons set forth below, we find that the Inspection Fee Statute as applied to air carriers is 

preempted by the ADA and the AHTA. 

The Inspection Fee Statute As Applied to Air Carriers Is Preempted by the ADA. 

Petitioner contends that the Inspection Fee Statute is related to air carrier services because it 

requires "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." Pet. Opening 

Comments at 36; see also Pet. Reply Conmients at 23. Under the Inspection Fee Statute, air 

carriers "must conform their billing infrastructure to accommodate the obligation to bill freight 

customers" the inspection fee and remit those monies to Hawaii, such that the Inspection Fee 

Statute will "'create a substantial burden' on the air cartiers in the form of labor and costs." Id. 

at 37 (quoting United Parcel Serv., Inc. v. Flores-Galarza, 318 F.3d 323, 336 (1st Cir. 2003)). 

Petitioner principally relies on the Supreme Court's decision in Rowe and the First Circuit's 

decision in Flores-Galarza in support of its argument. 

Petitioner submitted three declarations attached to its Opening Comments and one declaration 

attached to its Reply Comments setting forth the logistical and financial impact of the Inspection 

Fee Statute on operations that two air cartiers. United Air Lines, Inc. and Federal Express 

Corporation, expect to encounter imder the Inspection Fee Statute. See Pet. Opening Comments, 

Exhibit A, Decl. of Jesse Cohen, Managing Director for Cargo Plaiming and Revenue 

Management, United An: Lines, Inc.; Exhibit B, Decl. of Aashish Gahlaut, Director of 

Marketing, FedEx Corporate Services, Inc., Federal Express Corporation; Exhibit C, Decl. of 

Thomas Parker, Managing Director for Express Business Solutions, Global Air Ops, Manifesting 

and Movement Applications, Federal Express Corporation; Pet. Reply Comments, Exhibit A. 

Supp. Decl. of Jesse Cohen, United Air Lines, Inc. 

The declarants state that there will be substantial increased financial and administrative 

requirements imposed on air carriers to comply with the Inspection Fee Statute. Petitioner 

contends, as set forth in the United Air Lines and Federal Express declarations, that since its 

members "will have to make tremendously costly system-wide programming and personnel 

changes in order to attempt compliance with [the law], it is inevitable that these cartiers will 

have to raise the 'price' they charge in order to finance these changes." Pet. Opening Comments 

at 35-36. 

Transp.. 165 F.3d 972,978 (D. C. Cir. \999); Air Canada v. U.S.Dept.ofTransp., 148F.3d 1142, 1150-1151 (D.C. 

Cir. 1998); and New England Legal Foundation v. Massachusetts Port Authority, 883 F.2d 157, 172 (l " Cir. 1989). 
Petitioner also contends that the imposition of the fee on freight in this matter will require 

extensive administrative and logistical requirements and systems and will "impact the 'overall 

cost' of the air transportation being provided." Pet. Openmg Comments at 35. The declarants 

state that there will be substantial increased financial and administrative requirements imposed 

on air carriers to comply with the Inspection Fee Statute. Petitioner contends, as set forth in the 

United Air Lines and Federal Express declarations, that since its members "will have to make 

tremendously costly system-wide programming and persoimel changes in order to attempt 

compliance with [the law], it is inevitable that these carriers will have to raise the 'price' they 

charge in order to finance these changes." Id. at 35-36. 

Hawaii did not contest the information set forth in these declarations, and stated that it deferted 

to the Department "to scrutinize [Petitioner's] representations as to the actual unavoidable 

burdens [air carriers] will incur to implement their responsibilities" under the Inspection Fee 

Statute. Hawaii Reply at 10. 

After "determining that 'maximum reliance on competitive market forces' would best further 

'efficiency, innovation, and low prices,' as well as 'variety [and] quality... of air transportation 

services,' " Congress enacted the ADA. Morales v. Trans World Airlines, Inc., 504 U.S. 374, 

378 (1992) (alteration and omission in original; citations omitted). To ensure that the States 

would not defeat the ADA's goals by filling the void with regulations of their own. Congress 

included an express preemption provision in the ADA. It provides: 

Except as provided in this subsection [related to air transportation in Alaska] 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 cartier that may provide 

air transportation under this subpart. 

49 U.S.C. § 41713(b)(1). 

The words "relating to" express "a broad pre-emptive purpose." Morales, 504 U.S. at 383. 

"[P]re-emption may occur even if a state law's effect on rates, routes, or services is only 

indirect." Rowe v. New Hampshire Motor Transport Ass'n, 552 U.S. 364, 370 (2008) (quoting 

Morales, 504 U.S. at 386). The ADA preemption provision thus "stops States from miposing 

their own substantive standards with respect to rates, routes, or services." American Airlines, 

Inc. V. Wolens, 513 U.S. 219, 232 (1995). And Section 41713(b)(1) preempts not only State laws 

directly addressing aviation, but all "State enforcement actions having a connection with or 

reference to airline 'rates, routes, or services.'" Morales, 504 U.S. at 384. The Court has 

considered the ADA preemption provision several times. 
Morales 

In Morales, the Court reviewed "Air Travel Industry Enforcement Guidelines" prepared by the 

National Association of Attorneys General (NAAG), which contained detailed standards aimed 

at allegedly deceptive airline advertisements. The guidelines governed airline advertising, 

frequent flyer awards, and consumer compensation for overbooked flights, and NAAG sought to 

enforce the guidelines through its respective State members. The Court determined that the 

NAAG guidelines impermissibly related to akline pricing. 504 U.S. at 387-88. The Court in 

Morales rejected the argument that only State laws that actually prescribe prices, routes, or 

services are ADA preempted. It construed the ADA to preempt not only State laws that 

"actually prescrib[e] rates, routes, or services," but also laws that have a "significant effect upon 

fares." 504 U.S. at 385, 388. 

Specifically, the Court in Morales held that State laws regulating airline price advertising were 

preempted, fmding it "clear as an economic matter" that such laws would affect fares in ways 

incompatible with the ADA's deregulatory, market-oriented goals— that is, that they "would have 

a significant impact upon the airlines' ability to market their product." Id. at 389, 390. At the 

same time. Morales recognized that not all laws that might have some effect upon airline prices, 

routes or service are preempted: "'[s]ome state actions may affect [airline fares] in too tenuous, 

remote, or peripheral a maimer' to have pre-emptive effect." Id. at 390 (brackets in the original). 

The Court "express[ed] no views about where it would be appropriate to draw the line" between 

laws that significantly affected the preempted subject-matter and laws that had only a tenuous, 

remote or peripheral effect. Id. at 390 (quotation omitted). Nonetheless, the Court held that the 

NAAG guidelines, as applied through various State laws, directly substituted States' own 

government commands for competitive market forces in determining, to a significant degree, air 

carrier prices. Id. at 388-89. 

Wolens 

In Wolens, the Court considered whether claims based on the Illinois Consumer Fraud and 

Deceptive Business Practices Act and State contract law challenging aspects of American 

Airlines' frequent flyer program had been preempted by the ADA. The Court held that a suit 

under the Illinois consumer fraud statute was preempted because it related to airline pricing in 

terms of frequent flyer mileage credits for free tickets and upgrades. 513 U.S. at 226.'° The 

Court held that the States' use of those statutes "to guide and police the marketing practices of 

the airlines" conflicted with "the ADA's purpose to leave largely to the airlines themselves, and 

not at all to States, the selection and design of marketing mechanisms appropriate to the 

furnishing of air transportation services." Id. at 228. Like the NAAG guidelines in Morales, the 

Illinois consumer fraud statute, if applied to American Airlines, "would control the primary 

conduct of those falling within its governance." Id. at 227. In other words, it would directly 

substitute Illinois' own government commands for competitive market forces in determining, to 

a significant degree, air cartier prices (and services). Id. 

The Court also found Uiat a suit under the Illinois consumer fraud statute was preempted because it related 

to airline services in the form of flight access, class upgrades and avoidance of blackout dates. 513 U.S. at 226. 

10 
However, the Court held that the ADA preemption provision allowed enforcement of State 

common-law principles enforcmg contract terms set by the parties themselves, notwithstanding 

that such enforcement obviously has some effect on airline prices, routes and service. In so 

holding, the Court recognized the need for a "sensible construction of the ADA," one "calculated 

to carty out the congressional design." Id. at 230, 234. The Court concluded that "the ban on 

enacting or enforcing any law 'relating to rates, routes, or services,' is most sensibly read, in 

light of the ADA'S overarching deregulatory purpose, to mean 'States may not seek to impose 

their own public policies or theories of competition or regulation on the operations of an air 

carrier.'" Id. at 229 n. 5 (internal citation omitted). 

Rowe 

In Rowe, the Court unanimously held that the phrase "related to" in the preemption provision in 

the Federal Aviation Administration Authorization Act (FAAAA), modeled after the ADA 

preemption provision, expresses a broad preemptive purpose. The Court reiterated its central 

holding in Morales regarding the reach of preemption in federal preemption statutes. 552 U.S. at 

371-73. In Rowe, the Court reviewed a Maine law that mandated State-licensed shippers of 

tobacco products to utilize a delivery company that provides a recipient-verification service 

confirming that the buyer was of legal age. The shippers were allowed no choice but to use a 

recipient verification service by the Maine law. In holding that the Maine statute was preempted, 

the Court stated that the State law "produces the very effect that the [ADA] sought to avoid, 

namely, a State's direct substitution of its own governmental commands for 'competitive market 

forces' in determining (to a significant degree) the services that motor cartier will provide." Id. 

at 372 (quoting Morales, 504 U.S. at 378). The Court emphasized that "the state laws whose 

'effect' is 'forbidden' under federal law are those with a 'significant impact' on carrier rates, 

routes, or services." Id. at 375 (quoting Morales, 504 U.S. at 390) (Emphasis in the original). 

And the Court's consideration of Maine's law as to motor carriers did not require it to explore 

the outer limits of preemption because "[g]iven the circumstances, from the perspective of 

preemption, this case is no more 'borderlme' than was Morales'' Id. at 376 (quoting Morales, 

504 U.S. at 390). 

Additionally, the Court observed that the Maine statute would frustrate Congress's preemptive 

intent because it "could easily lead to a patchwork of state service-determining laws, rules, and 

regulations," noting that a "state regulatory patchwork is inconsistent with Congress' major 

legislative effort to leave such decisions, where federally unregulated, to the competitive 

marketplace." Id. at 373. Moreover, the Court rejected the contention that there should be a 

public health exception under the FAAAA preemption provision, holding that the statute does 

not allow exceptions based upon the type or objectives of State law. Id. at 373-75. 

Morales, Wolens, and Rowe do not state at what point "it would be appropriate to draw the line" 

between laws that significantly affect air carrier prices, routes or services, and laws that only 

have a "tenuous, remote or peripheral" effect. Morales, 504 U.S. at 390. But at bottom, 

Morales, Wolens, and Rowe all teach that the ADA preemption provision "related to" language is 

to be read broadly. Indeed, the language of this "broadly worded" provision "displaces all state 

laws that fall within its sphere, even including state laws that are consistent with [the federal 

Act's] substantive requirements.'" Morales, 504 U.S. at 386. Moreover, in 1994, Congress 

11 
expressly endorsed the holding in Morales when it enacted the recodified Title 49 into positive 

law, noting that it "did not intend to alter the broad preemption mterpretation adopted by the 

United States Supreme Court in Morales ... " H.R. Conf. Rep. No. 103-677, at 83 (1994). 

The Inspection Fee Statute Is Preempted by the ADA Because It Is Related to Air 

Carrier Services. 

The Inspection Fee Statute as applied to aur carriers (including as to the inspection fee and 

potential fines) is "related to" air carrier services, and thus preempted by the ADA, because it 

directly regulates air carriers by commanding air cartiers to conform their service of shipping 

freight by air transportation in ways not dictated by the market to bill, collect, and remit fees on 

behalf of its shipper customers. 

First, the Inspection Fee Statute cannot be squared with Rowe and Flores-Galarza, as it imposes 

obligations on air carriers that are analogous to the requirements that were imposed on the motor 

carriers in those cases. As the United States has explained, in Rowe, Maine's recipientverification service was preempted under the ADA because it directly and impermissibly 

substituted the State's commands for how motor carriers would provide their delivery services: 

Applying the Morales analysis, the Court in Rowe found that an identically 

worded preemption provision governing the trucking industry preempted Maine's 

Tobacco Delivery Law, which required that tobacco retailers use delivery services 

that followed certain specific procedures in verifying the age of recipients of 

tobacco products. Although the Maine law on its face applied to tobacco retailers, 

rather than to motor carriers directly, the statute was preempted because it 

"require[d] cartiers to offer a system of services that the market does not now 

provide." Rowe, 128 S. Ct. at 995. As the Court explamed, "[t]he Maine law 

thereby produces the very effect that the federal law sought to avoid, namely, a 

State's durect substitution of its own governmental commands for 'competitive 

market forces' in determining .. .the services that motor carriers will provide." 

Ibid, (emphases added). 

U.S. Amicus Br. at 11-12, US Airways, Inc. v. O'Donnell, 627 F.3d 1318 (10th Cir. 2010)." 

Similarly, in Flores-Galarza, the court considered whether a Puerto Rican statutory scheme that 

prohibited interstate air carriers from delivering packages unless the carrier provided proof that 

excise taxes had been paid was preempted under the FAAAA. The court held that the FAAAA 

preempted a Puerto Rican law that directly regulated the provision of air and motor cartier 

service by forbidding deliveries unless the cartiers complied with the local law's requirement of 

In O'Donnell, the district court had held that New Mexico could subject US Airways to state alcoholic 

beverage regulations if the airline serves alcoholic beverages on flights into and out of New Mexico. The Tenth 

Circuit reversed on the grounds that the FAA aviation safety regulations impliedly preempted the New Mexico law, 

and remanded for die district court to conduct a balancing of state and federal interests. While the court did not 

decide die issue of express preemption under the ADA, US Airways and the United States argued that New 

Mexico's alcoholic beverage regulations as applied to an airline were preempted by the ADA because they related to 

airline "services." 

12 
proof of an excise tax payment. 318 F.3d at 335-36. Moreover, the court rejected the view that 

that there should be a presumption against ADA preemption. "This presumption only arises, 

however, if Congress legislates in a field traditionally occupied by the states .. . No presumption 

agamst preemption is appropriate in this case because of Congress's significant ~ and undisputed 

~ presence in the field of air transportation." Id. at 336. 

Here, like the statutes at issue in both Rowe and Flores-Galarza, the Inspection Fee Statute 

directly regulates air cartiers by commanding air carriers to conform their service of shipping 

freight by an: transportation in ways not dictated by the market to bill, collect, and remit fees on 

behalf of its shipper customers. Air cartiers will be requned to provision labor to bill, collect 

and remit the inspection fee in connection with the air transportation of freight. We find on the 

record before us that "[a]ir carriers serving Hawaii must offer billing, collection and remittance 

services that differ significantly from that which, in the absence of regulation, the market might 

dictate." Pet. Reply Conmients at 25. Moreover, the Inspection Fee Statute "aim[s] directly at 

the carriage of goods, a commercial field where carriage by [air carriers] plays a major role," 

Rowe, 552 U.S. at 376, by requiring air carriers to bill, collect, and remit fees to fund Hawaii's 

invasive species inspection program. "Given these circumstances, from the perspective of preemption, this case is no more 'borderline' than was Morales." Id. 

Second, we reject Hawaii's contention that the term "service" in the ADA preemption provision 

should be construed narrowly under Ninth Circuit cases such as Charas v. Trans World Airlines, 

Inc., 160 F.3d 1259 (9th Cir. 1998) zcoA Duncan v. Northwest Airlines, Inc., 208 F.3d 1112 (9th 

Cir. 2000). "Charas's approach .. . is inconsistent with the Supreme Court's recent decision in 

Rowe." Air Transp. Ass'n of Am., Inc. v. Cuomo, 520 F.3d 218, 223 (2d Cir. 2008). The United 

States has explained that "service" is to be interpreted broadly. U.S. Amicus Br. at 5,9-13, US 

Airways, Inc. v. O'Donnell, 627 F.3d 1318 (10th Cir. 2010). And as noted by the Second 

Circuit, that is the view adopted by a majority of the circuits which have construed the term 

"service" in the ADA preemption clause. Air Transp. Ass'n of Am., 520 F.3d at 223.'^ 

The United States recently explained that ""Charas's limited definition of 'services" is .. . on 

unstable ground in the wake of Rowe, a point that has been recognized by judges both within this 

district and elsewhere." U.S. Statement of Interest at 13, National Federation of the Blind v. 

United Airlines, Inc., No. lO-CV-04816, 2011 WL 1544524 (N.D. Cal. April 25, 2011). 

"Overall, Charas's limited reading of the Deregulation Act is no longer valid." Id. at 14.'^ 

'^ See also Hodges v. Delta Airlines, 44 F.3d 334, 336 (5th Cir. 1995) (en banc) ('"Services' generally 

represent a bargained-for or anticipated provision of labor from one party to another," including "items such as 

ticketing, boarding procedures, provision of food and drink, and baggage handling, in addition to the transportation 

itself."). See also, e.g.. Air Transp. Ass'n of Am., 520 F.3d at 223 (adopting the Fifdi Circuit's interpretation); 

Branche v. Airtran Airways, Inc., 342 F.3d 1248, 1256-59 (lldi Cir. 2003) (same); Smith v. Comair, 134F.3d 254, 

259 (4di Cir. 1998) (same); Travel All Over the World, Inc. v. Kingdom of Saudi Arabia, 73 F.3d 1423, 1434 (7di 

Cir. 1996) (same). 

'^ See also Quinten Fernald v. Southwest Airlines Co., Case No. 3:1 l-cv-000453, slip op. at 5 (S.D. Cal. Sept. 

28,2011) ("As Rowe and its progeny demonstrate, Charas" more limited definition is no longer good law.") (citing 

Air Transp. Ass'n of Am., 520 F.3d at 223 and National Federation of the Blind v. United Airlines, Inc., 2011 WL 

1544524 (N.D. Cal. April 25, 2011)). 

13 
The court in National Federation of the Blind agreed, and held that plaintiffs' claims against 

United for allegedly violating California disability law for failing to make automatic airline 

ticketing kiosks accessible to the blind were preempted by the ADA. The court agreed with the 

position of the United States, submitted at the court's request: "[w]hile Charas defined 'service" 

narrowly, Rowe put forth a more expansive view." 2011 WL 1544524, at *5. The court was 

therefore "duty bound to follow Rowe and to reject the Charas definition of 'service,'" holding 

that the kiosks provide a "service" within the meaning of the ADA. Id. 

On October 18,2011, the United States once again reiterated its position that the term "service" 

in the ADA preemption clause is to be interpreted broadly. U.S. Amicus Br. at 25-27, National 

Federation of the Blind v. United Airlines, Inc., Case No. 11-16240 (9th Cir.). The United States 

further explained that if plaintiffs were to succeed "on [their] state-law discrimination claims, the 

court would substitute state law for competitive market forces, by requiring United to offer a 

kiosk service in California that it does not now provide, contrary to Congress's intent in the 

Deregulation Act." Id. at 27. 

These principles apply with equal force here. We do not question the important objectives of 

Hawaii to protect its ecosystem from the threat of invasive species. But the Inspection Fee 

Statute here cannot survive ADA preemption. Under the broad interpretation of "service," the 

Inspection Fee Statute is related to air carrier services because it directly regulates air carriers by 

commanding air carriers to conform their service of shipping freight by air transportation in ways 

not dictated by the market to bill, collect, and remit fees on behalf of its shipper customers. 

Moreover, requiring air carriers to bill, collect and remit fees under the Inspection Fee statute is 

preempted under the ADA because Hawaii effectively seeks to require air cartiers "to offer a 

system of services that the market does not now provide (and which the cartiers would prefer not 

to offer)." U.S. Statement of Interest at 14, National Federation of the Blind v. United Airlines, 

Inc., No. lO-CV-04816, 2011 WL 1544524 (N.D. Cal. April 25, 2011) (quotmg Rowe, 552 U.S. 

at 372). The Inspection Fee Statute is similarly preempted by the ADA because it requires air 

cartiers to perform a service - billing, collecting and remitting fees from each of their shipper 

customers (or face applicable fines) - that the market otherwise would not provide, and which air 

carriers would prefer not to offer, and indeed, fines air carriers if they do not do so. 

Finally, even if Charas somehow survived Rowe, air cartier billing, collecting, and remitting fees 

are closely related to air carrier services in connection with the air shipment of freight for the 

purposes of ADA preemption, consistent with that case. Air carriers' billing, collection and 

remittance systems are utilized to perform functions that are directly connected to the air 

shipment of freight. Therefore, those systems are "closely related to 'the provision of air 

transportation to and from various markets at various times,' unlike 'the dispensing of food and 

drinks' and 'flight attendant assistance' once onboard the aircraft. Charas, 160 F.3d at 1266." 

U.S. Amicus Br. at 28-29, National Federation of the Blind v. United Airlines, Inc., Case No. 11-

16240 (9th Cir.). 

14 
The Inspection Fee Statute Is Also Preempted by the ADA Because It Is Related to 

Air Carrier Prices. 

Under Morales and its progeny, we have concluded that the Inspection Fee Statute is related to 

air cartier prices and, therefore, is preempted by the ADA on that basis as well. Unlike the state 

laws at issue in either Morales or Wolens, the Inspection Fee Statute does not reference an air 

cartier's pricing of shipping freight by air transportation, and commands no particular air carrier 

conduct. But the Supreme Court is clear that "pre-emption may occur even if a state law's effect 

on rates, routes or services 'is only indirect.'" Rowe, 552 U.S. at 370 (quoting Morales, 504 U.S. 

at 386). 

Hawaii contends that air carriers use "yield-management" systems of pricing (see, e.g., Hawaii 

Opening Comments at 9-10), and argues that such pricing systems for freight would not be 

affected by the fee assessed on the net weight of freight paid by shippers. But as set forth by 

Petitioner in its declarations - which Hawaii did not contest - air cartiers are likely to raise the 

prices themselves to recover the costs of complying with the Inspection Fee Statute. Thus, the 

Inspection Fee Statute indkectly (if not directly) regulates how air cartiers are likely to price the 

shipment of freight to Hawaii by air transportation, as well as how air cartiers collect those 

prices. Here, Hawaii has imposed a cost on air carriers that is likely to be recovered by increased 

pricing for air transportation. As a result, the requirements imposed on air cartiers under the 

Inspection Fee Statute are analogous to the Air Travel Industry Enforcement Guidelines that 

NAAG sought to impose on air carrier advertising in Morales, which were preempted under the 

ADA because the NAAG guidelines affected air carrier prices. 504 U.S. at 387-88. 

Whether the Inspection Fee Statutes is Related to Air Carrier Routes. 

We have sufficient authority under the ADA to prevent Hawaii from enforcing the Inspection 

Fee Statute against air cartiers if it is related to any one of the three categories set forth in 49 

U.S.C. § 41713(b)(1). However, we do not believe Petitioner has established in this proceeding 

that the Inspection Fee Statute is preempted by the ADA because it is related to air cartier routes. 

As structured, the Inspection Fee Statute does not command any particular air carrier conduct as 

to its routes, into Hawaii or otherwise. Petitioner did not argue that any air carrier would alter its 

routes into Hawaii, or alter its routes in the continental United States or other locations offisland, and the record does not suggest that air carriers are even considering changing routes into 

Hawaii in light of the Inspection Fee Statute. On this record, the Inspection Fee Statute may 

have a tenuous impact, at best, on air carrier "routes." 

15 
The Inspection Fee Does Not Fall Within the Scope of the ADA Proprietor's 

Exception, 49 U.S.C. § 41713(b)(3). 

While it is not clear, Hawaii's comments seem to imply that, in enacting and enforcing the 

Inspection Fee Statute, Hawaii is acting as an airport proprietor which might bring the statute 

within the ambit of the so-called "proprietor's exception" of the ADA preemption provision, 49 

U.S.C. § 41713(b)(3). Hawaii Opening Comments at 9. That provision "does not limit a State, 

political subdivision of a State, or political authority of at least 2 States that owns or operates an 

auport served by an air carrier holding a certificate issued by the Secretary of Transportation 

from cartying out its proprietary powers and rights." 

The inspection fee and fines are imposed on all shippers and both air cartiers and marine carriers 

to fund an invasive species inspection program administered by HDOA. In doing so, Hawaii is 

exercising its police powers through the invasive species inspection program and the Inspection 

Fee Statute. Hawaii, through the HDOA, is not carrying out its proprietary powers in connection 

with bemg the owner or operator of an airport. 49 U.S.C. § 41713(b)(3) does not apply to nonairport-related fees, such as those imposed under the Inspection Fee Statute. Therefore, to the 

extent Hawaii has raised this argument (and it is not clear that it has) the Inspection Fee Statute 

does not fall within the ADA proprietor's exception. 

For all the foregoing reasons, we conclude that the Inspection Fee Statute as applied to air 

cartiers is preempted by the ADA. 

The Inspection Fee Statute As Applied to Air Carriers Is Preempted by the AHTA. 

The Inspection Fee Statute as applied to air carriers (including as to the inspection fee and 

potential fines) is also preempted by the AHTA, 49 U.S.C. § 40116(b)(3), because Hawaii may 

not levy or collect a fee or other charge, directly or indirectly, on the sale of "air transportation," 

a term which Congress defined in the statute as including the transportation of air freight within 

the term "property." The plain language of the statutory text resolves this question. 

The AHTA was a direct response to the 1972 Supreme Court decision upholding airport perpassenger charges. See Evansville-Vanderburgh Airport Authority Dist. v. Delta Airlines, Inc., 

405 U.S. 707 (1972). In that case, the Court found that the charges were based on a fanapproximation of use of the airport facilities and not excessive in relation to the costs inciured by 

airport authorities, and ruled against airline claims that the charges constituted an unreasonable 

burden on interstate commerce in violation of the U.S. Constitution. 

The AHTA's purpose was to limit State and local taxation of aviation. See, e.g.. Northwest 

Airlines, Inc. v. County of Kent, 510 U.S. 355, 363 (1994) ("Concerned that our decision in 

Evansville might prompt a proliferation of local taxes burdensome to interstate air transportation. 

Congress enacted the AHTA"); 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"). 

16 
Congress originally enacted the AHTA as the Airport and Airway Development Acceleration 

(AADA) Act of 1973, Pub. L. No. 93-44, 87 Stat. 88 (1973), originally codified as amended at 

49U.S.C.§ 1513(a): 

No State (or political subdivision thereof, including the Commonwealth of Puerto 

Rico, the Virgin Islands, Guam, the District of Columbia, the territories or 

possessions of the United States or political agencies of two or more States) shall 

levy or collect a tax, fee, head charge, or other charge, directly or indirectly, on 

persons traveling in air commerce or on the cartiage of persons traveling in air 

commerce or on the sale of air transportation or on the gross receipts derived 

therefrom * * * 

In 1994, the AHTA was reenacted and recodified at 49 U.S.C. § 40116(a), (b), and (e) without 

substantive change. The AHTA now appears in Chapter 401 of Title 49 of the U.S. Code at 49 

U.S.C. §40116(b):''^ 

Prohibitions.—Except as provided in subsection (c) of this section and section 

40117 of this title [provisions which are not applicable to this proceeding], a 

State, a political sub-division of a State, and any person that has purchased or 

leased an airport under section 47134 of this title, 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. 

The term "air transportation" includes "property."'^ Air transportation "means foreign air 

transportation, interstate air transportation, or the transportation of mail by aircraft." 49 U.S.C. § 

40102(a)(5). "Interstate air transportation," in turn, is defined as "the transportation of 

passengers or property by aircraft as a common carrier for compensation, or the transportation of 

mail by aircraft" between two States. 49 U.S.C. § 40102(a)(25) (Emphasis added). "Foreign air 

'•* The prohibition against charges on the sale of air transportation continues to embrace both direct and 

indirect charges. The words "directly or indirectly" were "omitted as surplus." Historical and Statutory Notes, 49 

U.S.C. 40116(b). Section 1(a) of the codification act declares that it is a codification "without substantive change," 

P.L. 103-272, 108 Stat. 745 (July 5, 1994), and section 6(a), entided "Legislative Purpose and Construction," 

explicitly provides that it "may not be construed as making a substantive change in the laws replaced." 108 Stat. 

1378. 

'^ Hawaii's contention that "property" means only "those tangible things owned or possessed by air 

passengers, such as luggage or baggage to be transported with a passenger" lacks merit. Hawaii Opening Comments 

at 19-20. The term "property" is not defined in the statute, but other definitions in both in 49 U.S.C. Chapter 401, 

the chapter including the AHTA, and in Title 14 of the Code of Federal Regulations, Aeronautics and Space, support 

the conmion-sense conclusion that the term "property" includes air freight. For example, "all-cargo air 

transportation" means "the transportation by aircraft in interstate air transportation of only property or only mail, or 

bodi." 49 U.S.C. § 40102(10). "[C]argo" means "property, mail, or both." Id. at § 40102(12). "Cargo. All traffic 

other than passengers." 14C.F.R. Part241,Sec. 03. "Freight. Property, other than mail, transported by air." Id. 

Therefore, the term "property" as used in the AHTA includes air freight. 

17 
transportation" is similarly defined as "the transportation of passengers ox 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." 49 U.S.C. § 40102(a)(23) (Emphasis added).'^ 

With this understanding, the inspection fee and associated fines imposed imder the Inspection 

Fee Statute are direct charges on the sale of air transportation prohibited by the AHTA. Here, 

while the net weight of the freight is the measurement used to calculate the inspection fee, it is 

directly imposed in connection with the sale of air transportation because the fee is charged to 

the shipper incident to the "sale" itself, i.e., an air carrier transferring air freight into Hawaii for 

a shipper for a price. 

Indeed, the language of the Inspection Fee Statute itself makes clear that the fee is a direct charge 

on a sale. "Freight" is defined as "nonpassenger goods, cargo, or lading, transported for pay." 

Haw. Rev. Stat. § 150A-2 (Emphasis added). "There is imposed a/ee for the inspection, 

quarantine, and eradication of invasive species contained in any freight, including .. . airfreight 

[ ]." Haw. Rev. Stat. § 150A-5.3(a) (Emphasis added). "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." Id. (Emphasis added). "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." Id. (Emphasis added). The Inspection Fee Statute also 

makes clear that fines for which shippers are potentially liable are direct charges on a sale: "The 

following fines shall be imposed for failure to pay, bill, or remit the inspection, quarantme, and 

eradication service fee as provided for in section 150A-5.3: "A person responsible for paying the 

freight charges to the transportation company who fails to pay the fee .. . shall pay a fine of two 

times the amount of the inspection, quarantine, and eradication service fee or $50, whichever is 

higher. Haw. Rev. Stat. § 150A-5.4(a)(1) (Emphasis added). Accordingly, the inspection fee is 

a charge paid by the shipper as a part of the sale of air transportation, falling squarely within the 

plain language of 49 U.S.C. § 40116(b)(3).'^ 

Hawaii argues that we should look to the purpose of the Inspection Fee Statute to protect against 

invasive species. Hawaii Opening Comments at 16-17. Hawaii also urges that we should look to 

'* In Arizona Dep 't of Revenue v. Cochise Airlines, 128 Ariz. 432, 626 P.2d 596 (Ariz. Ct. App. 1980), an 

older state case involving intrastate air transportation, the court correctiy concluded diat "the relevant prohibition in 

49 U.S.C. § 1513(a) [now 49 U.S.C. 40116(b)] refers only to the carriage of persons in air commerce," such that the 

AHTA does not apply to a state fee imposed on the transport of freight carried in intrastate air transportation. 128 

Ariz, at 437. The court's determination does not affect our decision that the AHTA prohibits a state fee imposed on 

the sale of freight carried in "air transportation." 

" In Tinicum Township Privilege Fee Proceeding, Order 2008-3-18 (Docket OST-2007-29341), available at 

2008 WL 5550458 (March 24, 2008), afTd, Township of Tinicum v. United States, 582 F.3d 482 (3d Cir. 2009), we 

held that Tinicum Township's "privilege fee" was prohibited because, among other reasons, it constituted an 

impermissible landing fee that, under the AHTA, may only be imposed by an airport owner or operator. However, 

while finding that Tinicum Township's privilege fee was not a prohibited charge on the sale of air transportation, 

consistent with our decision here, we recognized that the air transportation of property fell nonetheless within the 

scope of 49 U.S.C. § 40116(b)(3). Id. at *3. 

18 
Congress's purpose in enacting that AHTA, and argues that Congress was concerned about the 

imposition of local and State head taxes on passengers, not charges on property. Id. at 17. 

Because the inspection fee is imposed on shippers and not air cartiers, Hawaii essentially argues 

that the Inspection Fee Statute falls outside the scope of the AHTA. 

Again, we recognize the important objectives of Hawaii to protect its ecosystem from the threat 

of invasive species. But Hawaii's argument, and the Inspection Fee Statute as applied to air 

carriers, cannot be squared with the plain language of the AHTA. This is the approach set forth 

by the Supreme Court m Aloha Airlines, Inc. v. Director of Taxation of Hawaii, 464 U.S. 7 

(1983). In that case, Aloha Airlines and Hawaiian Airlines sought refunds of public service 

company taxes of four percent of its yearly gross income imposed on airlines by the Hawaii State 

Legislature. The Hawaii Supreme Court held that the legislative history of the AHTA supported 

that the statute is directed to charges on passengers. Because the public service company tax was 

directed at air carriers and not passengers, the Hawaii Supreme Court reasoned that the tax "did 

not come within the ambit" of the AHTA. Id. at 12. 

The Supreme Court unanimously rejected the Hawaii Supreme Court's approach and set forth 

three reasons why the plain language of the AHTA controlled. "First, when a federal statute 

imambiguously forbids the States to impose a particular kind of tax on an industry affecting 

interstate conmierce, coiuts need not look beyond the plam language of the federal statute to 

determine whether a state statute that imposes such a tax is preempted." Id. As a result, "the 

Hawaii Supreme Court erred in failing to give effect to the plain meaning of § 1513(a) [now 49 

U.S.C. 40116(b)]." Id. "Second, even if die absence of an express proscription made it 

necessary to go beyond the plain language of § 1513(a), nothing in the 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." Id. at 13. Third, 

"the manner in which the state legislature has described and categorized [a statute] cannot mask 

the fact that the purpose and effect of the provision is to impose" a prohibited charge on ancarriers. Id. at 13-14. 

Here, Hawaii's argument is akin to the one the Supreme Court rejected in Aloha Airlines. The 

purpose, description and category of the Inspection Fee Statute are not relevant in analyzing 

whether or not it is prohibited under the AHTA. Rather, the plain language of the statute 

establishes that the AHTA prohibits charges on the sale of "air transportation," a term which 

plainly includes the transportation of air freight (i.e., property) by aircraft. 

The Inspection Fee is Not Permitted by 49 U.S.C. § 40116(e)(1). 

Contrary to Hawaii's contention, the Inspection Fee Statute also does not fall within the scope of 

the AHTA "savings clause" set forth at 49 U.S.C. § 40116(e)(1): 

Except as provided in subsection (d) of this section, a State or political 

subdivision of a State may levy or collect... taxes (except those taxes 

enumerated in subsection (b) of this section), including property taxes, net income 

taxes, franchise taxes, and sales or use taxes on the sale of goods or services. 

19 
The inspection fee and associated fines imposed by the Inspection Fee Statute are not within the 

category of the usual and unobjectionable "property taxes, net income taxes, franchise taxes, or 

sales or use taxes on the sale of goods and services" set forth in the "savings" clause of 49 U.S.C. 

§ 40116(e)(1). In Tinicum Township Privilege Fee Proceeding, Order 2008-3-18, Docket OST2007-29341, affd. Township of Tinicum v. United States, 582 F.3d 482 (3d Cir. 2009). There, 

we rejected Tinicum Township's contention that the privilege fee at issue in that proceeding was 

permissible under Subsection 40116(e)(1). Id. at 25 (citing Wardair Canada, Inc. v. Florida 

Department of Revenue, All U.S. 1,15-16 (1986); Continental Airlines, Inc. v. Department of 

Revenue, 12 Or. Tax 349, 351 (Or. Tax Ct. 1992). Like the prohibited privilege fee in Tinicum 

Township Privilege Fee Proceeding, the inspection fees and fines are not within the category of 

the usual and unobjectionable taxes set forth in 49 U.S.C. § 40116(e)(1). 

Hawaii's reliance on Alaska Airlines, Inc. v. Dep't of Food and Agriculture, 33 Cal.App. 4 506, 

39 Cal.Rptr.2d 426 (1995), cert, denied, 516 U.S. 1009 (1995) is similarly misplaced. There, in 

the face of an AHTA challenge, the California Court of Appeal upheld a "service charge" 

assessed on aircraft arriving from foreign coimtries upon artival in California to fund a state 

agricultural pest mspection program. But the Court of Appeal erroneously concluded that the 

service charge fell outside the scope of the enumerated prohibited AHTA charges. In reaching 

that conclusion, the court erroneously relied on United Air Lines, Inc. v. County of San Diego, 1 

Cal.App.4th 418,429-31, 2 Cal.Rptr.2d 212 (1991), a case involving a property tax expressly 

permitted by 49 U.S.C. 40116(e) (formerly 49 U.S.C. 1513(b)). 

In any event, California subsequently disbanded the program. Later that same year, the 

California Supreme Coiut struck down the California agricultural pest inspection program on the 

grounds that the $200 per ship service charge assessed on foreign marine carriers violated the 

Commerce Clause of the U.S. Constitution. See Pacific Merchant Shipping Ass'n v. Voss, 12 

Cal.4 503 (1995), cert, denied sub nom. Veneman v. Pacific Merchant Shipping Ass'n, 517 U.S. 

1221 (1996). California refunded $22.5 million collected under the program to both maritime 

and airlme carriers. See Protecting California from Biological Pollution, at p. 19, available at 

http://www.cdfa.ca.gov/files/pdf/ProtectCalLegisReport.pdf. These decisions further underscore 

the infirmities of the Inspection Fee Statute as presently structured. And in the 15 years since 

these two court decisions, there appears to have been no further efforts by California to establish 

a program funded by such a service charge. 

For all the foregoing reasons, we conclude that the Inspection Fee Statute as applied to air 

cartiers is prohibited by the AHTA. 

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FINAL ORDER 

The parties have had ample opportunity to present arguments and evidence to us in this 

proceeding. They submitted comments, declarations, reply comments, and supplemental 

comments. We have thoroughly considered the entire record. Therefore, we declare this order to 

be a final order of the Department, and will prohibit the filing of petitions for reconsideration or 

any other pleadings on this docket. Pursuant to 49 U.S.C. § 46110, a person disclosing 

substantial interest in this order may apply for review of the order by filmg a petition for review 

in the United States Court of Appeals for the District of Columbia Circuit or in the court of 

appeals of the United States for the circuit in which the person resides or has its principal place 

of business. 

ACCORDINGLY: 

1. The Department holds that the Hawaii Plant Quarantine Law as amended, Hawaiian 

Revised Statutes §150A (Act 173), and accompanying program requirements are 

preempted by the ADA, 49 U.S.C. § 41713. 

2. The Department holds that the Hawaii Plant Quarantme Law as amended, Hawaiian 

Revised Statutes § 150A (Act 173), and accompanying program requirements are 

preempted by the AHTA, 49 U.S.C. § 40116. 

3. The Department holds that Hawaii may not enforce the Hawaii Plant Quarantine Law as 

amended, Hawaiian Revised Statutes §150A (Act 173), and accompanying program 

requirements against air carriers. 

4. No petitions for reconsideration or any other pleadings will be accepted on this docket. 

5. We will serve this order on the parties to this docket. 

By: 

SUSAN L. KURLAND 

Assistant Secretary for Aviation 

and International Affairs 

(SEAL) 

An electronic version of this document is available at: http://www. regulations, gov. 

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