UNITED STATES OF AMERICA DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C. IN RE HAWAIIAN INSPECTION FEE PROCEEDING Docket DOT-OST-2010-0243



### SUPPLEMENTAL COMMENTS OF THE AIR TRANSPORT ASSOCIATION OF AMERICA, INC. IN SUPPORT OF PETITION FOR DECLARATORY ORDER
Roy Goldberg Sheppard Mullin Richter & Hampton, LLP 1300 I Street, N.W. Suite 1100 East Washington, D.C. 20005-3314 Tel. (202) 218-0007 Facsimile (202) 312-9425 Email: rgoldberg@sheppardmullin.com David A. Berg Doug Mullen Air Transport Association of America, Inc. 1301 Pennsylvania Avenue, N.W. Suite 1100 Washington, D.C. 20004-1278 Tel. (202) 626-4234 Facsimile (202) 626-4139 Email: dberg@airlines.org dmullen@airlines.org
Dated: February 17, 2011The Air Transport Association of America, Inc. ("ATA") respectfully submits

these supplemental comments to the docket in this proceeding to inform the U.S. Department of Transportation ("DOT") of relevant, recent developments — since the filing of ATA's "Reply Comments" on November 16, 2010 — concerning the Hawaiian Freight Fee that is the subject of the DOT's pending consideration of the "Petition for Declaratory Order" submitted by ATA in this matter. Specifically, members of the Hawaiian Legislature on January 24, 2011 introduced new legislation to: (1) double the amount of the Freight Fee imposed by the State of Hawaii on air cargo coming into the State (H.B. 865); and (2) expand the scope of the State's cargo inspection program and fee regime beyond the search for agricultural threats to cover "any material constituting a threat directly or indirectly to the security of life or property," in the State, including, without limitation, "explosives," and "illegal drugs" (H.B. 970). 1 Although the Hawaiian Legislature has yet to act on the proposed bills, the ATA is bringing these developments to the DOT' s attention because they demonstrate that the Hawaiian State government officials who seek to impose costs and administrative burdens on airlines in connection with the transportation of cargo into the State are not stopping with the Freight Fee Law as it currently exists (and is the subject of the pending proceeding before the DOT). Rather, it is clear that the imposition of the Freight Fee Law (Act 170, as amended), was the proverbial "camel's nose under the tent." With the Freight Fee law, the State attempted to establish a precedent for requiring airlines to invoice their cargo customers the Freight Fee, and to remit the collected amounts to the
'Copies of the two bills are enclosed as Exhibits 1 and 2 hereto.State, along with related record-keeping and reporting requirements. However, the

suggestion by the State in its comments to this docket that the impact of the Freight Fee Law on the airlines is de minimis because the amount of the Freight Fee is "only" 50 cents per 1,000 pounds of freight was not only fully rebutted by the ATA in its Reply Comments, but it is also belied by the newly-revealed intention of Hawaiian authorities to double the amount of that fee, and the attempt to broaden the scope of the Fee to cover a new and comprehensive range of perceived threats from cargo being transported into the State. These new attempts by Hawaiian State authorities to further increase the financial and administrative burden on airlines transporting cargo to Hawaii demonstrate that the Freight Fee Law violates and is preempted by the Anti-Head Tax Act and the Airline Deregulation Act (as set forth in the ATA's Opening and Reply Comments). 

### 1. The Proposed Doubling of the Hawaiian Freight Fee.

■ H.B. No. 865 would increase the amount of the Hawaiian Freight Fee from fifty

‘ cents per 1,000 pounds of freight to one dollar per 1,000 pounds of freight — an increase of 100 percent. Section 1 of the proposed law provides that: Section 150A-5.3 is amended to read . . . (b) The fee shall be assessed and collected on the net weight of the imported freight computed on the basis of $1 for every one thousand pounds of freight brought into the State, or part thereof. Section 3 provides that the fee increase "shall take effect upon its approval." Not only would this new law double the amount of the Freight Fee, but it also sets a precedent for the State to systematically increase the amount of the fee. It is impossible to know at what level the State will say that it is collecting enough. What this makes
-2-clear is that the DOT should not assume that the amount of the Freight Fee is only fifty

cents per 1,000 pounds of freight. If the new bill is enacted, the level of the Fee will soon increase to $1.00, and there is no reason to expect that the amount will not continue to rise.
2. The Proposed Expansion of the Scope of the Hawaiian

Air Cargo Inspection Regime. H.B. 970, which is proposed to take effect July 1, 2011, would authorize the Hawaiian Department of Transportation ("HDOT") to inspect all air cargo containers coming into the state to search for material posing a threat to the State, and to assess a fee on air cargo to cover the cost of the inspections. Section 1 states that it "is imperative that the State broaden its authority to inspect incoming cargo to safeguard airport facilities, air passengers, and Hawaii residents against dangerous cargo arriving in the State," and that the "purpose of this Act is to enhance inspections of incoming air cargo containers." Section 2 would amend Chapter 261, Hawaii Revised Statutes, by adding the following new section: 261. Air cargo container inspections. (a) In addition to any other powers provided by law, the Department may: (1) Inspect any incoming air cargo container to detect and confiscate any material constituting a threat directly or indirectly to the security of life or property in the State, including explosives, invasive plant and animal species, and illegal drugs. (2) Collaborate with any federal, state, or county agency to effectuate air cargo container inspections under this section; and( 3 ) Assess and collect a reasonable fee upon any article of air cargo for the cost of conducting inspections under this section. Thus, the State officials are proposing to dramatically expand the scope of current inspection activities targeting perceived agricultural threats to cover any and all cargo that the State believes constitutes a direct or indirect threat "to the security of life or property in the State," including, without limitation, such non-agricultural items as "explosives" and "illegal drugs." The Hawaiian government is entirely without legal authority to conduct inspections, which is the sole province of the federal government. The U.S. Department of Homeland Security is responsible for the screening and security of air cargo. 

### See 49 U.S.C. §§ 44901(a) ("The Under Secretary of Transportation for Security shall provide for the screening of all passengers and property, including United States mail, cargo, carry-on and checked baggage, and other articles, that will be carried aboard a passenger aircraft operated by an air carrier or foreign air carrier in air transportation or intrastate air transportation"), and (f) ("a system must be in operation to screen, inspect, or otherwise ensure the security of all cargo that is to be transported in all-cargo aircraft in air transportation and intrastate air transportation as soon as practicable after the date of enactment of the Aviation and Transportation Security Act"). The State cannot charge shippers or airlines for the State's duplication of these functions. This new attempt by Hawaiian authorities to impose additional financial and administrative burdens on airlines transporting cargo into the State by significantly increasing the scope and breadth of the State's air cargo inspection regime beyond agricultural concerns demonstrates why it is so vital that the DOT grant ATA's Petition

-4-for Declaratory Order and rule that the Freight Fee Law violates and is preempted by the

AHTA and the ADA. 2 As demonstrated in ATA's Opening and Reply Comments, the Freight Fee Law as it currently exists is inconsistent with and preempted by the AHTA and the ADA. The State's new efforts to further increase the financial and administrative burden on airlines transporting cargo into Hawaii only serves to demonstrate further how the State intends to continue to impose fees on the "sale of air transportation" (in violation of the AHTA) and inflict fiscal and administrative burdens on air carriers that relate to the price, service and routes of carriers transporting air cargo into Hawaii. Respectfully submitted:

Roy Gold Sheppard ullin Richter & Hampton, LLP 1300 I Street, N.W. Suite 1100 East Washington, D.C. 20005-3314 Tel. .(202) 218-0007 Facsimile (202) 312-9425 Email: rgoldberg@sheppardmullin.com 

# Nod David A. Berg Doug Mullen Air Transport Association of America, Inc. 1301 Pennsylvania Avenue, N.W. Suite 1100 Washington, D.C. 20004-1278 Tel. (202) 626-4234 Facsimile (202) 626-4139 Email: dberg@airlines.org dmullen@airlines.org
Dated: February 17, 2011

2 In a letter to Hawaiian legislative leaders dated January 31, 2011 (Exhibit 3 hereto), ATA objected to H.B. 970 and requested that it "be withdrawn because it would be prohibited and preempted by federal law." -5-

### Roy Go erg CERTIFICATE OF SERVICE 

### I hereby certify that on February 17, 2011, I caused a true and accurate copy of these Supplemental Comments to be filed on the regulations.gov website with regard to the docket number of this matter, and that a copy of these Supplemental Comments was emailed to the State of Hawaii via its representative, Deputy Attorney General Myra M. Kaichi, at the email address: Myra.M.Kaichi@hawaii.gov
.

# EXHIBIT 1HOUSE OF REPRESENTATIVES

TWENTY-SIXTH LEGISLATURE, 2011 STATE OF HAWAII 

# KB. NO. 1365 A BILL FOR AN ACT

RELATING TO INSPECTION FEES. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII: 1 SECTION 1. Section 150A-5.3 is amended to read as 2 follows: 3 "5150A-5.3 Inspection, quarantine, and eradication service 4 fee and charge. (a) There is imposed a fee for the inspection, 5 quarantine, and eradication of invasive species contained in any 6 freight, including marine commercial container shipment, air 7 freight, or any other means of transporting freight, foreign or 8 domestic, but not including aggregate bulk freight, cement bulk 9 freight, coal bulk freight, or liquid bulk freight, that is 10 brought into the State. The transportation company shall bill 11 the fee to the person responsible for paying the freight charges 12 to the transportation company within fifteen days of the 13 delivery of the freight. The fee shall be paid by the person 14 responsible for paying the freight charges to the transportation 15 company within forty-five days of receipt of the bill. The 16 transportation company shall collect the fee from the person 17 responsible and forward the payment to the department at the 18 port of disembarkation within forty-five days of receipt of theINTRODUCED BY:

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# H.B. NO. 

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1 fee; provided that the transportation company shall not be 2 liable for any fee that is not paid by the person responsible 3 for paying the freight charges to the transportation company. 4 The department shall deposit the fee into the pest 5 inspection, quarantine, and eradication fund under section 150A6 4.5. 7 (b) The fee shall be assessed and collected on the net 8 weight of •he imported freight computed on the basis of [§4 9 ccnts] $1 for every one thousand pounds of freight brought into 10 the State, or part thereof." 11 SECTION 2. Statutory material to be repealed is bracketed 12 and stricken. New statutory material is underscored. 13 SECTION 3. This Act shall take effect upon its approval. 14



# • C 1)119 

# : -. 2::: : :!! 7- 

# 7 JAN 2 4 2011 HB HMS 2011-1428 

# 1111111111111111111111111111111111111111111Page 3 

# H.B. NO. $65

Report Title: Relating to Inspection Fees Description: Increases the fee assessed for the inspection, quarantine and eradication of . invasive species contained in any freight from 50 cents to $1 for every 1,000 pounds of freight brought into the State.
The summary description of legislation appearing on this page is for informational purposes only and Is not legislation or evidence of legislative intent.

# EXHIBIT 2HOUSE OF REPRESENTATIVES

TWENTY-S1XTH LEGISLATURE, 2011 STATE OF HAWAII 

# H.B. NO. 110 A BILL FOR AN ACT

RELATING TO CARGO INSPECTIONS. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII: 1 

### SECTION 1. The legislature finds that in light of the 2 

### State's geographical isolation and the numerous cargo containers 3 

### arriving by air, it is imperative that the State broaden its 4 

### authority to inspect incoming cargo to safeguard airport 5 

### facilities, air passengers, and Hawaii residents against 6 

### dangerous cargo arriving in the State. 7 The purpose of this Act is to enhance inspections of 8 

### incoming air cargo containers. 9 

### SECTION 2. Chapter 261, Hawaii Revised Statutes, is 10 

### amended by adding a new section to be appropriately designated 11 

### and to read as follows: 12 "§261- Air cargo container inspections. (a) In 13 addition to any other powers provided by law, the department 14 may: 15 

### (1) Inspect any incoming air cargo container to detect and 16 confiscate any material constituting a threat directly 17 or indirectly to the security of life or property in



### IIIII R I B linilifiii 6 ilifill HB )INTRODUCED BY:

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# H.B. NO. 6 110

1 the State, including explosives, invasive plant and 2 animal species, and illegal drugs; 3 (2) Collaborate with any federal, state, or county agency 4 to . effectuate air cargo container inspections under 5 this section; and 6 (3) Assess and collect a reasonable fee upon any article 7 of air cargo for the cost of conducting inspections 8 under this section. 9 (b) The department shall adopt rules pursuant to chapter 10 91 necessary to implement this section." 11 SECTION 3. There is appropriated out of the airport 12 revenue fund the sut of or so much thereof as may 13 be necessary for fiscal year 2011-2012 and the same sum or so 14 much thereof as may be necessary for fiscal year 2012-2013 15 for permanent full-time equivalent ( FTE) air cargo 16 inspector positions. 17 The sums appropriated shall be expended by the department 18 of transportation for the purposes of this Act. 19 SECTION 4. New statutory material is underscored. 20 SECTION 5. This Act shall take effect on July 1, 2011. 21

# H. B. NO. 110

Report Title: DOT; Air Cargo Container Inspections; Fee Description: Authorizes DOT to conduct incoming air cargo container inspections to detect and confiscate material posing a threat to the State and to assess a fee on air cargo to cover the costs of inspections.
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.



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# EXHIBIT 3AIR TRANSPORT ASSOCIATION
1301 PENNYINA NIA AvmIE, NW SUITE I 100 13(.2 20004-1707 202.626.4000 www.airluw:.org • David A. Berg Vice President, General Counsel and Secretary January 31, 2011 By Hand Delivery Rep. Henry J.C. Aquino House Public Safety & Military Affairs Chair Hawaii State Capitol Room 419 Honolulu, HI 96813 Rep. Joseph M. Souki House Transportation Chair Hawaii State Capitol Room 433 Honolulu, HI 96813 Re: H.B. 970 Dear Chairmen Aquino and Souki: The Air Transportation Association of America is the principal trade association of the U.S. scheduled airline industry. Our members include all of the major U.S. passenger and cargo airlines, which together carry more than 90% of domestic and passenger cargo traffic.' One of our primary missions is to advocate for laws and policies that foster a stable and economically viable U.S. airline industry. H.B. 970 would establish a new State air cargo container inspection program to detect and confiscate any material constituting a threat to the security of life or property in Hawaii, including explosives, invasive plant and animal species, and illegal drugs. The bill would also require the State to collaborate with federal, state, or county agencies to effectuate air cargo

1 ATA member carriers are ABX Air, Inc.; AirTran Airways; Alaska Airlines, Inc.; American Airlines, Inc.; ASTAR Air Cargo, Inc.; Atlas Air, Inc.; Continental Airlines, Inc.; Delta Air Lines, Inc.; Evergreen International Airlines, Inc.; Federal Express Corporation; Hawaiian Airlines; JetBlue Airways Corp.; Southwest Airlines Co.; United Air Lines, Inc.; United Parcel Service Co.; and US Airways, Inc. ATA Airline Associate Members are Air Canada and Air Jamaica Ltd.Hon. Henry J.C. Aquino

Hon. Joseph M. Souki January 31, 2011 Page 2 container inspections and assess and collect a fee upon any article of air cargo for the cost of conducting inspections under this section. This bill should be withdrawn because it would be prohibited and preempted by federal law. Federal law provides that the Department of Homeland Security (DHS) is responsible for the screening and security of air cargo. See 49 U.S.C. 44901(a) and (f). In implementing this statutory directive, DHS has developed a multilayered air cargo screening initiative. 2 State legislation that attempts to impose an additional air cargo security screening and inspection process would be inconsistent with and preempted by federal law. The bill's directive to collaborate with federal officials would not save this legislation because DHS has fully occupied the field of air cargo screening and collaboration on a preempted statute has no impact. In addition, the Anti-Head Tax Act (AHTA) prohibits the imposition of taxes, fees, and charges by state and local jurisdictions on airlines. See 49 U.S.C. 40116. Therefore the imposition of a State cargo screening fee upon "any article of air cargo" also would be prohibited by the AHTA because it would impose a "charge" on the sale of transportation of "property by aircraft." As you may know, ATA has challenged the validity of Act 173 (S.B.2523), 2010, before the U.S. Department of Transportation and the federal courts on this and other grounds. Should you have any questions, we would be happy to meet with you to discuss this matter further. Very truly yours,



## 74—d e ------Th David A. Berg

2 http://www.tsa.gov/what we do/tsnm/air cargo/index.shtm