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<body><p>Animal and Plant Health Inspection Service
</p>
<p>Final Economic Analysis for Significant Rulemaking and Final Regulatory Flexibility Analysis
</p>
<p>Final Rule:
Agricultural Inspection and AQI User Fees Along the U.S./Canada Border</p>
<p>Docket No. 2006-0096</p>
<p>February 25, 2009</p>
<p><b>Introduction
</b></p>
<p>Historically, the United States Department of Agriculture’s (USDA) Animal and Plant Health Inspection Service (APHIS) performed limited inspections of commercial vessels, commercial trucks, commercial railroad cars, commercial aircraft, and international air passengers entering the United States from Canada.  It was our understanding that such conveyances and passengers posed little risk of introducing plant or animal pests or diseases into the United States.  Consequently, when APHIS established user fees for inspections of commercial conveyances and international air passengers in 1991, we exempted conveyances and passengers from Canada from those fees.
  Following the creation of the Department of Homeland Security (DHS) in 2002, the United States Customs and Border Protection (CBP) assumed responsibility to inspect agricultural goods arriving at U.S. ports beginning in March 2003, while APHIS retained responsibility for agriculture-related policies and procedures.</p>
<p>APHIS has reevaluated its agricultural quarantine and inspection (AQI) activities at the U.S./Canada border, given increasing levels of trade, particularly the re-export of products originating in countries other than Canada that may present a higher risk of introducing plant or animal pests or diseases into the United States.  The need for reevaluation was underscored by three extensive inspection operations along the U.S./Canada border (two at Buffalo, NY, and one at Blaine, WA).  The inspection “blitzes” resulted in numerous interceptions of prohibited or restricted articles that included untreated Argentine citrus, mangoes, tropical fruits from Asia, and many other commodities of third-country origin such as meat, live birds, and plants in soil.  Plant pests such as fruit flies, scales, and several species of mealy bugs were also intercepted.  </p>
<p>The quantity and variety of prohibited material found during these inspections strongly indicated that we needed to expand and strengthen our pest exclusion and smuggling interdiction efforts at the U.S./Canada border.</p>
<p>Preclearance interceptions at Canadian airports of prohibited agricultural products that otherwise would have entered the United States also supported this conclusion.  Data gathered at four airports (Calgary, Toronto, Vancouver, and Montréal) over a four-year period (FY 2001-FY 2004) showed that over 6 percent of all U.S.-bound passengers (Canadian and non-Canadian origin) carried prohibited agricultural products.  Most of these passengers were taking flights to States such as California, Florida, Arizona, and Texas, where the prohibited products could place major agricultural industries at risk.
</p>
<p>With the objective of mitigating these sanitary and phytosanitary risks, we published in the <u>Federal Register</u> on August 25, 2006, an interim rule to amend the foreign quarantine and user fee regulations.  The objectives of the interim rule were to remove the exemption from AQI inspections for agricultural products imported from Canada, as well as the exemption from user fees for commercial vessels, commercial trucks, commercial railroad cars, commercial aircraft, and international air passengers entering the United States from Canada.
</p>
<p><b>Background
</b></p>
<p>The U.S./Canada border stretches nearly 4,000 miles from the Atlantic to the Pacific, and the two countries are the world’s largest and most extensive trading partners.  In 2007, U.S. trade with Canada accounted for approximately 16 percent of U.S. imports and 21 percent of U.S. exports, by value.  Products valued at more than $560 billion were traded between the United States and Canada in 2007, translating into over $1.5 billion in goods crossing the border every day, on average.
  </p>
<p>The bulk of U.S. imports from Canada enter by truck or rail.  In 2007, goods entering by truck accounted for 50 percent of the value of all U.S. imports from Canada; goods entering by rail, 20 percent; by water, 6 percent; by air, 4 percent; and by other means (such as by pipeline), 20 percent.
  CBP estimates that about 82 million individuals entered the United States from Canada in FY 2007.
 </p>
<p>Table 1 shows the value of U.S. agricultural imports from Canada since 1991.  Between 1991 and 2007, the nominal value of these imports increased over fourfold, from $3.3 billion in 1991, to $15.2 billion in 2007.  Except in 2003, when the value declined by 0.6 percent, agricultural imports from Canada grew steadily, with an average annual increase in value of about 10 percent over the 17 years.  The largest single-year increase in value, in absolute terms, was $1.8 billion (from $13.4 billion in 2006, to $15.2 billion in 2007).</p>
<p>The period shown in table 1 includes five milestones related to AQI activities: (A) 1991 - APHIS established user fees for inspections of commercial conveyances and international air passengers arriving in the United States from all foreign countries except Canada.  (B) 1994 – The North America Free Trade Agreement (NAFTA) took effect on January 1.
  (C) 1994 – World Trade Organization (WTO) members adopted the Agreement on the Application of Sanitary & Phytosanitary Measures (SPS Agreement).
   (D) 2003 – Front-line AQI functions were transferred from APHIS to CBP on March 1.  (E) 2006 - APHIS published an interim rule to remove the exemption from inspection for imported agricultural products from Canada and the exemption from AQI user fees on August 25.  </p>
<p><b>Table 1.  The value of U.S. agricultural imports from Canada, 1991-2007 (million dollars)</b></p>
<table><tbody><tr>	<td><p>Calendar Year</p>
</td>	<td><p>Value of Imports</p>
</td>	<td><p>Index (1991=100)</p>
</td></tr>
<tr>	<td><p>2007</p>
</td>	<td><p>$15,245</p>
</td>	<td><p>458</p>
</td></tr>
<tr>	<td><p>2006 (E)</p>
</td>	<td><p>13,432</p>
</td>	<td><p>403</p>
</td></tr>
<tr>	<td><p>2005</p>
</td>	<td><p>12,270 </p>
</td>	<td><p>368</p>
</td></tr>
<tr>	<td><p>2004</p>
</td>	<td><p>11,453 </p>
</td>	<td><p>344</p>
</td></tr>
<tr>	<td><p>2003 (D)</p>
</td>	<td><p>10,286 </p>
</td>	<td><p>309</p>
</td></tr>
<tr>	<td><p>2002</p>
</td>	<td><p>10,350 </p>
</td>	<td><p>311</p>
</td></tr>
<tr>	<td><p>2001</p>
</td>	<td><p>9,863 </p>
</td>	<td><p>296</p>
</td></tr>
<tr>	<td><p>2000</p>
</td>	<td><p>8,661</p>
</td>	<td><p>260</p>
</td></tr>
<tr>	<td><p>1999</p>
</td>	<td><p>7,990 </p>
</td>	<td><p>240</p>
</td></tr>
<tr>	<td><p>1998</p>
</td>	<td><p>7,787</p>
</td>	<td><p>234</p>
</td></tr>
<tr>	<td><p>1997</p>
</td>	<td><p>7,446</p>
</td>	<td><p>224</p>
</td></tr>
<tr>	<td><p>1996</p>
</td>	<td><p>6,789</p>
</td>	<td><p>204</p>
</td></tr>
<tr>	<td><p>1995</p>
</td>	<td><p>5,629 </p>
</td>	<td><p>169</p>
</td></tr>
<tr>	<td><p>1994 (B), (C)</p>
</td>	<td><p> 5,298 </p>
</td>	<td><p>159</p>
</td></tr>
<tr>	<td><p>1993</p>
</td>	<td><p>4,658 </p>
</td>	<td><p>140</p>
</td></tr>
<tr>	<td><p>1992</p>
</td>	<td><p>4,143 </p>
</td>	<td><p>124</p>
</td></tr>
<tr>	<td><p>1991 (A)</p>
</td>	<td><p> 3,330</p>
</td>	<td><p>100</p>
</td></tr>
</tbody></table>
<p>Source: USDA Economic Research Service, Foreign Agricultural Trade of the United States (FATUS), Top 15-ranked country import sources for total U.S. agricultural imports, Feb 2008.</p>
<p> (A) 1991 – APHIS established user fees for inspections of commercial conveyances and international air passengers arriving in the United States from all foreign countries except Canada.
</p>
<p>(B) 1994 – The North America Free Trade Agreement (NAFTA) took effect on January 1.
</p>
<p>(C) 1994 – World Trade Organization (WTO) members adopted the Agreement on the Application of Sanitary & Phytosanitary Measures (SPS Agreement.
</p>
<p>(D) 2003 – Front-line AQI functions were transferred from APHIS to CBP on March 1.
</p>
<p>(E) 2006 – APHIS published an interim rule to remove the exemption from inspection for imported agricultural products grown in Canada and the exemption from AQI user fees on August 25.
</p>
<p>Agricultural trade between Canada and the United States has always been relatively unrestricted by phytosanitary regulations due to the similar pest regimes that exist in the two countries.  With the globalization of trade, however, there are increasing quantities of agricultural products re-exported to the United States from Canada, that is, products of third-country origin.  Table 2 compares total exports and re-exports of fruits and vegetables from Canada to the United States in 1998 and in 2007.  Between these two years, total exports of fruits and vegetables to the United States from Canada increased by 167 percent, while Canada’s re-export of fruits and vegetables to the United States increased by 738 percent.  In 2007, Canada re-exported to the United States vegetables valued at $59 million and fruits and nuts valued at $10 million
  </p>
<p><b>Table 2.  Value of Canadian export and re-export of fruits and vegetables to the United States, 1998 and 2007 (thousand dollars)
</b></p>
<table><tbody><tr>	<td><p>Commodity (Harmonized Schedule Code)</p>
</td>	<td><p>Canadian Total Exports to the United States1 </p>
</td>	<td><p>Canadian Re-Exports to the United States and  as a Percentage of Total Exports2</p>
</td></tr>
<tr>	<td><p></p>
</td>	<td><p>1998</p>
</td>	<td><p> 2007</p>
</td>	<td><p>1998</p>
</td>	<td><p>2007</p>
</td></tr>
<tr>	<td><p>Vegetables (07)</p>
</td>	<td><p>413.3</p>
</td>	<td><p>1,098.1</p>
</td>	<td><p>5.0 (1.2%)</p>
</td>	<td><p>58.9 (5.4%)</p>
</td></tr>
<tr>	<td><p>Fruits & Nuts (08)</p>
</td>	<td><p>115.7</p>
</td>	<td><p>314.3</p>
</td>	<td><p>3.2 (2.8%)</p>
</td>	<td><p>9.8 (3.1%)</p>
</td></tr>
<tr>	<td><p>Total</p>
</td>	<td><p>529.0</p>
</td>	<td><p>1,412.4</p>
</td>	<td><p>8.2 (1.6%)</p>
</td>	<td><p>68.7 (4.9%)</p>
</td></tr>
<tr>	<td><p>Percentage Increase from 1998 to 2007</p>
</td>	<td><p>167%</p>
</td>	<td><p>738%</p>
</td></tr>
</tbody></table>
<p>Sources: Statistics Canada and the U.S. Department of Commerce, Census Bureau.
</p>
<p>1 Industry Canada’s definition of Total Exports: The sum of Domestic Exports and Re-Exports.  Domestic Exports consist of the exports of all goods grown, produced, extracted or manufactured in the (trader) country (Canada or the United States) leaving the country (through Customs) for a foreign destination.  Exports of imported merchandise that have been substantially enhanced in value are also included.</p>
<p>2 Industry Canada’s definition of Re-exports: The export of goods that have previously entered the country (Canada or the United states) and are leaving in the same condition as when first imported.  Exports of imported merchandise that has been minimally processed but not substantially enhanced in value are also counted as re-exports.</p>
<p>In addition to the growing volume of legitimate re-exports, shippers have incentive to commingle third-country goods with Canadian-produced goods because of lower U.S. tariffs for goods of Canadian origin.  Opportunities to smuggle goods across the border also have increased as the volume of commercial traffic and number of air passengers have increased.</p>
<p>Finally, while the volume of agricultural trade between the United States and Canada has continued to expand in recent years, the number of U.S. agricultural inspectors has not increased in response.  In fact, the number of agricultural inspectors actually decreased from 2003 to 2006.  In 2006, 136 Customs and Border Protection Agriculture Specialists (CBPAS) staffed 24 ports along the U.S./Canada border, compared to 191 CBPAS when the agricultural inspection function was transferred from APHIS to CBP in March 2003.
</p>
<p>It is USDA’s responsibility, as authorized by the Plant Protection Act and the Animal Health Protection Act, to mitigate sanitary and phytosanitary risks associated with the entry of goods from foreign countries, including Canada.  This analysis examines expected benefits and costs of three objectives of this rule:
</p>
<p>· Ending the phytosanitary inspection exemption for agricultural products entering the United States from Canada;
</p>
<p>· Recovering the costs of AQI services that the United States is already providing at the U.S./Canada border; and
</p>
<p>· Meeting expanded AQI service needs at the U.S./Canada border and recovering the costs of the expanded services.
</p>
<p>We include in the analysis estimated Federal expenditures by the two agencies responsible for AQI activities, CBP and APHIS, and estimated revenues from AQI user fee collections.  Benefits and costs are examined in accordance with Executive Order 12866.  Possible impacts for small entities are considered in a Final Regulatory Flexibility Analysis (FRFA).  A discussion of alternatives to the rule that were considered by APHIS is included in the FRFA.   </p>
<p><b>Benefits of the Rule
</b></p>
<p>The amended regulations will decrease the risk of harmful plant and animal pests and diseases entering the United States from Canada, as well as enable the Federal Government to recover the cost of inspections through user fees.  While instances of pest and disease establishment in the United States cannot be readily traced back to Canada, the large volume of pest and disease host material from Canada, and the potential for infestation of conveyances and cargo containers, make it necessary to strengthen AQI inspection activities at the U.S./Canada border.  CBP officers along the border, for example, have confiscated Asian fruit infested with the Mediterranean fruit fly, citrus from Argentina, and other regulated fruits that may harbor potential pests and diseases.  While Canada is required to label the origin of fruits and vegetables re-exported to the United States, occasionally these commodities are misrepresented as having originated in Canada.  Higher rates of interception of regulated commodities due to increased inspections help to minimize the chance that pests or diseases may become established in the United States, and thereby help prevent costs associated with agricultural damage, pest control, and eradication programs.</p>
<p>Tables 3 and 4 summarize information on the number of Emergency Action Notifications (EANs) issued by CBP Agriculture Specialists for shipments exported from Canada to the United States in FY 2007.
  During FY 2007, a total of 1,193 EANs were issued for shipments from Canada.  Nine hundred thirty-three of these EANs (or 78 percent) were issued for Canadian products and 260 of these EANs (22 percent) were issued for products of non-Canadian origin.  As 22 percent is substantially higher than the 4.9 percent of Canada’s fruit and vegetable shipments to the United States in 2007 that were re-exports (table 2), this represents a disproportionately high quantity of EANs for re-exports in comparison to the total number of EANs from Canadian trade.  CBPAS issued 126 EANs at the U.S./Canada border ports for shipments that originated in Asia and, interestingly, 62 EANs for shipments that originated in countries south of the United States, <i>i.e.</i>, Mexico, Central America, and South America.</p>
<p>In terms of product type, 568 of the EANs that were issued for goods of Canadian origin were for animal products and 255 EANs were for plant products.  In contrast, most of the EANs issued for goods of non-Canadian origin were for plant products that originated in Asia, Mexico, or South America.  In addition, a substantial number of the re-exported shipments that were issued EANs were miscellaneous goods, including wooden furniture, handicrafts or art made of natural materials, stone products, mulch, and soil.</p>
<p><b>Table 3.  Number of Emergency Action Notifications issued for shipments from Canada to the United States, FY 2007</b></p>
<table><tbody><tr>	<td><p>Shipment Origin</p>
</td>	<td><p>Plant   Products</p>
</td>	<td><p>Animal Products</p>
</td>	<td><p>Miscellaneous Products1</p>
</td>	<td><p>Total</p>
</td></tr>
<tr>	<td><p>Canada</p>
</td>	<td><p>255</p>
</td>	<td><p>568</p>
</td>	<td><p>110</p>
</td>	<td><p>933</p>
</td></tr>
<tr>	<td><p>Asia</p>
</td>	<td><p>25</p>
</td>	<td><p>21</p>
</td>	<td><p>80</p>
</td>	<td><p>126</p>
</td></tr>
<tr>	<td><p>Europe</p>
</td>	<td><p>9</p>
</td>	<td><p>20</p>
</td>	<td><p>31</p>
</td>	<td><p>60</p>
</td></tr>
<tr>	<td><p>Mexico</p>
</td>	<td><p>29</p>
</td>	<td><p>0</p>
</td>	<td><p>6</p>
</td>	<td><p>35</p>
</td></tr>
<tr>	<td><p>South America</p>
</td>	<td><p>13</p>
</td>	<td><p>4</p>
</td>	<td><p>3</p>
</td>	<td><p>20</p>
</td></tr>
<tr>	<td><p>Africa</p>
</td>	<td><p>6</p>
</td>	<td><p>4</p>
</td>	<td><p>2</p>
</td>	<td><p>12</p>
</td></tr>
<tr>	<td><p>Central America & Caribbean</p>
</td>	<td><p>3</p>
</td>	<td><p>2</p>
</td>	<td><p>2</p>
</td>	<td><p>7</p>
</td></tr>
<tr>	<td><p>Total</p>
</td>	<td><p>340</p>
</td>	<td><p>619</p>
</td>	<td><p>234</p>
</td>	<td><p>1,193</p>
</td></tr>
</tbody></table>
<p>Source: USDA APHIS-PPQ.</p>
<p>Note: Excludes EANs for shipments having U.S.A. (18 shipments) or Unknown (12 shipments) as the origin.
</p>
<p>1Miscellaneous products include such items as wooden furniture, handicrafts or art made of natural materials, stone products, and mulch.
</p>
<p><b>Table 4.  Percentage of Emergency Action Notifications issued for shipments from Canada to the United States, FY 2007
</b></p>
<table><tbody><tr>	<td><p>Shipment Origin</p>
</td>	<td><p>Plant   Products</p>
</td>	<td><p>Animal Products</p>
</td>	<td><p>Miscellaneous Products</p>
</td>	<td><p>Total</p>
</td></tr>
<tr>	<td><p>Canada</p>
</td>	<td><p>21.4%</p>
</td>	<td><p>47.6%</p>
</td>	<td><p>9.2%</p>
</td>	<td><p>78.2%</p>
</td></tr>
<tr>	<td><p>Asia</p>
</td>	<td><p>2.1%</p>
</td>	<td><p>1.8%</p>
</td>	<td><p>6.7%</p>
</td>	<td><p>10.6%</p>
</td></tr>
<tr>	<td><p>Europe</p>
</td>	<td><p>0.8%</p>
</td>	<td><p>1.7%</p>
</td>	<td><p>2.6%</p>
</td>	<td><p>5.0%</p>
</td></tr>
<tr>	<td><p>Mexico</p>
</td>	<td><p>2.4%</p>
</td>	<td><p>-</p>
</td>	<td><p>0.5%</p>
</td>	<td><p>2.9%</p>
</td></tr>
<tr>	<td><p>South America</p>
</td>	<td><p>1.1%</p>
</td>	<td><p>0.3%</p>
</td>	<td><p>0.3%</p>
</td>	<td><p>1.7%</p>
</td></tr>
<tr>	<td><p>Africa</p>
</td>	<td><p>0.5%</p>
</td>	<td><p>0.3%</p>
</td>	<td><p>0.2%</p>
</td>	<td><p>1.0%</p>
</td></tr>
<tr>	<td><p>Central America</p>
</td>	<td><p>0.3%</p>
</td>	<td><p>0.2%</p>
</td>	<td><p>0.2%</p>
</td>	<td><p>0.6%</p>
</td></tr>
<tr>	<td><p>Total</p>
</td>	<td><p>28.5%</p>
</td>	<td><p>51.9%</p>
</td>	<td><p>19.6%</p>
</td>	<td><p>100%</p>
</td></tr>
</tbody></table>
<p>Source: Table 3.</p>
<p>Data collected as of July 15, 2008 (shown in table 5), indicate that there were 385 EAN issuances for plant products for FY 2008 so far, exceeding the FY 2007 full-year total of 340 for plant products.  The most notable increase in FY 2008 was in the number of EANs issued for re-export of plant products from Asia: 60 EANs issued in FY 2008 as of July 15, 2008, compared to 26 EANs issued in FY 2007.  
</p>
<p><b>Table 5.  Number of Emergency Action Notifications issued for shipments from Canada to the United States in FY 2008 as of July 15, 2008
</b></p>
<table><tbody><tr>	<td><p>Shipment Origin</p>
</td>	<td><p>Plant   Products</p>
</td>	<td><p>Animal Products</p>
</td>	<td><p>Miscellaneous Products</p>
</td>	<td><p>Total</p>
</td></tr>
<tr>	<td><p>Canada</p>
</td>	<td><p>262</p>
</td>	<td><p>545</p>
</td>	<td><p>84</p>
</td>	<td><p>891</p>
</td></tr>
<tr>	<td><p>Asia</p>
</td>	<td><p>60</p>
</td>	<td><p>30</p>
</td>	<td><p>86</p>
</td>	<td><p>176</p>
</td></tr>
<tr>	<td><p>Europe</p>
</td>	<td><p>10</p>
</td>	<td><p>24</p>
</td>	<td><p>15</p>
</td>	<td><p>49</p>
</td></tr>
<tr>	<td><p>Mexico</p>
</td>	<td><p>19</p>
</td>	<td><p>4</p>
</td>	<td><p>4</p>
</td>	<td><p>27</p>
</td></tr>
<tr>	<td><p>South America</p>
</td>	<td><p>26</p>
</td>	<td><p>2</p>
</td>	<td><p>3</p>
</td>	<td><p>31</p>
</td></tr>
<tr>	<td><p>Africa</p>
</td>	<td><p>3</p>
</td>	<td><p>0</p>
</td>	<td><p>0</p>
</td>	<td><p>3</p>
</td></tr>
<tr>	<td><p>Central America & Caribbean</p>
</td>	<td><p>5</p>
</td>	<td><p>0</p>
</td>	<td><p>1</p>
</td>	<td><p>36</p>
</td></tr>
<tr>	<td><p>Total</p>
</td>	<td><p>385</p>
</td>	<td><p>605</p>
</td>	<td><p>193</p>
</td>	<td><p>1,183</p>
</td></tr>
</tbody></table>
<p>Source: USDA APHIS-PPQ.</p>
<p>Note: Excludes EANs for shipments having U.S.A. (20 shipments) or Unknown (31 shipments) as the origin.
</p>
<p>Of all EANs issued for plant products in FY 2008 as of July 15, 2008, 114 were for pest interceptions, compared to 92 reported pest interceptions in FY 2007.  Altogether, over 100 pest species were intercepted in FY 2007 and in FY 2008 as of July 15, 2008.  Examples include the Mexican fruit fly (<i>Anastrepha ludens</i> Loew (Tephritidae)), found in containers that originated in Mexico (EAN issue date: 6/2/2008), and gypsy moth (<i>Lymantria dispar</i> Linnaeus (Lymantriidae)), found in shipments of firewood of Canadian origin (EAN issue date: 2/11/2008).</p>
<p>The 1,193 shipments for which EANs were issued in FY 2007 at the U.S./Canada border originated in 55 different countries.  Table 6 identifies the top 15 countries of origin of the re-exported shipments that were issued EANs.  China, Mexico, and India accounted for more than half of the EANs issued for re-exports.</p>
<p><b>Table 6.  Countries of origin - Emergency Action Notifications issued for shipments from Canada to the United States, FY 2007
</b></p>
<table><tbody><tr>	<td><p>Country of Origin</p>
</td>	<td><p>Number of EANs</p>
</td>	<td><p>% of EANs issued for Re-exports</p>
</td>	<td><p>% of Total EANs</p>
</td></tr>
<tr>	<td><p>China</p>
</td>	<td><p>55</p>
</td>	<td><p>28.6%</p>
</td>	<td><p>4.6%</p>
</td></tr>
<tr>	<td><p>Mexico</p>
</td>	<td><p>35</p>
</td>	<td><p>18.2%</p>
</td>	<td><p>2.9%</p>
</td></tr>
<tr>	<td><p>India</p>
</td>	<td><p>19</p>
</td>	<td><p>9.9%</p>
</td>	<td><p>1.6%</p>
</td></tr>
<tr>	<td><p>Italy</p>
</td>	<td><p>15</p>
</td>	<td><p>7.8%</p>
</td>	<td><p>1.3%</p>
</td></tr>
<tr>	<td><p>Germany</p>
</td>	<td><p>12</p>
</td>	<td><p>6.3%</p>
</td>	<td><p>1.0%</p>
</td></tr>
<tr>	<td><p>Colombia</p>
</td>	<td><p>11</p>
</td>	<td><p>5.7%</p>
</td>	<td><p>0.9%</p>
</td></tr>
<tr>	<td><p>Viet Nam</p>
</td>	<td><p>10</p>
</td>	<td><p>5.2%</p>
</td>	<td><p>0.8%</p>
</td></tr>
<tr>	<td><p>Turkey</p>
</td>	<td><p>55</p>
</td>	<td><p>2.6%</p>
</td>	<td><p>0.4%</p>
</td></tr>
<tr>	<td><p>Guatemala</p>
</td>	<td><p>5</p>
</td>	<td><p>2.6%</p>
</td>	<td><p>0.4%</p>
</td></tr>
<tr>	<td><p>Netherlands</p>
</td>	<td><p>4</p>
</td>	<td><p>2.6%</p>
</td>	<td><p>0.4%</p>
</td></tr>
<tr>	<td><p>Cameroon</p>
</td>	<td><p>4</p>
</td>	<td><p>2.1%</p>
</td>	<td><p>0.3%</p>
</td></tr>
<tr>	<td><p>South Africa</p>
</td>	<td><p>4</p>
</td>	<td><p>2.1%</p>
</td>	<td><p>0.3%</p>
</td></tr>
<tr>	<td><p>Iran</p>
</td>	<td><p>4</p>
</td>	<td><p>2.1%</p>
</td>	<td><p>0.3%</p>
</td></tr>
<tr>	<td><p>Israel</p>
</td>	<td><p>4</p>
</td>	<td><p>2.1%</p>
</td>	<td><p>0.3%</p>
</td></tr>
<tr>	<td><p>France</p>
</td>	<td><p>4</p>
</td>	<td><p>2.1%</p>
</td>	<td><p>0.3%</p>
</td></tr>
<tr>	<td><p>Top 15 Countries Sub-Total</p>
</td>	<td><p>192</p>
</td>	<td><p>100%</p>
</td>	<td><p>16.1%</p>
</td></tr>
<tr>	<td><p></p>
</td>	<td><p></p>
</td>	<td><p></p>
</td>	<td><p></p>
</td></tr>
<tr>	<td><p>Canada</p>
</td>	<td><p>933</p>
</td>	<td><p>-</p>
</td>	<td><p>78.2%</p>
</td></tr>
<tr>	<td><p>Other</p>
</td>	<td><p>68</p>
</td>	<td><p>-</p>
</td>	<td><p>5.7%</p>
</td></tr>
<tr>	<td><p></p>
</td>	<td><p></p>
</td>	<td><p></p>
</td>	<td><p></p>
</td></tr>
<tr>	<td><p>Total</p>
</td>	<td><p>1,193</p>
</td>	<td><p>-</p>
</td>	<td><p>100%</p>
</td></tr>
<tr>	<td><p>Total number of countries</p>
</td>	<td><p>55</p>
</td>	<td><p>-</p>
</td>	<td><p></p>
</td></tr>
</tbody></table>
<p>Source: USDA APHIS-PPQ.</p>
<p>Data generated by the Agricultural Quarantine Inspection Monitoring (AQIM) program also reflect the sanitary and phytosanitary risks associated with agricultural products that enter the United States from Canada.  Table 7 summarizes AQIM sampling results for passenger vehicles over three years.
  “Approach rate” is defined as the number of instances in which prohibited agricultural items are seized (number of Quarantine Material Interceptions, or QMIs) as a percentage of the number of vehicles inspected.
   The approach rate for passenger vehicles at the U.S./Canada border was relatively high, at about 10 percent over the three-year period, FY 2005-FY 2007.  In FY 2007, significant pests were found in 34 of the QMIs.  Of those 34 QMIs, 5 of the pest interceptions were found in re-exported agricultural products from Columbia, Mexico, Ireland, Bulgaria and Turkey.</p>
<p><b>Table 7.  AQIM results for passenger vehicles at the U.S./Canada border, FY 2005-FY 2007</b></p>
<table><tbody><tr>	<td><p></p>
</td>	<td><p>Number of Sites</p>
</td>	<td><p>AQIM Sample Size</p>
</td>	<td><p>QMI1</p>
</td>	<td><p>Approach Rate</p>
</td></tr>
<tr>	<td><p>FY 2005</p>
</td>	<td><p>21</p>
</td>	<td><p>31,607</p>
</td>	<td><p>3,266</p>
</td>	<td><p>10.3%</p>
</td></tr>
<tr>	<td><p>FY 2006</p>
</td>	<td><p>25</p>
</td>	<td><p>55,506</p>
</td>	<td><p>6,558</p>
</td>	<td><p>11.8%</p>
</td></tr>
<tr>	<td><p>FY 2007</p>
</td>	<td><p>26</p>
</td>	<td><p>56,075</p>
</td>	<td><p>5,095</p>
</td>	<td><p>9.1%</p>
</td></tr>
</tbody></table>
<p>Source: APHIS-PPQ-AQAS.  AQIM data as of 8/19/2008, collected by CBP.  Vehicles exclude buses.</p>
<p>1 Quarantine Material Interceptions.</p>
<p>Table 8 summarizes the AQIM results for commercial trucks in FY 2006 and FY 2007.  Approach rates for commercial trucks are significantly lower than approach rates for passenger vehicles.  However, the approach rate for commercial trucks in FY 2007 was twice as large as it was in FY 2006.  Applying the FY 2007 approach rate of 1.73 percent to the 6.6 million trucks that CBP reports show as having entered the United States from Canada that year implies that over 100,000 of the trucks may have been carrying quarantine material.</p>
<p><b>Table 8.  AQIM results for commercial trucks at the U.S./Canada border, FY 2006 and FY 2007</b></p>
<table><tbody><tr>	<td><p></p>
</td>	<td><p>Number of Sites</p>
</td>	<td><p>AQIM Sample Size </p>
</td>	<td><p>Actions1</p>
</td>	<td><p>Approach Rate</p>
</td></tr>
<tr>	<td><p>FY 2006</p>
</td>	<td><p>7</p>
</td>	<td><p>1,768</p>
</td>	<td><p>12</p>
</td>	<td><p>0.68%</p>
</td></tr>
<tr>	<td><p>FY 2007</p>
</td>	<td><p>7</p>
</td>	<td><p>1,912</p>
</td>	<td><p>33</p>
</td>	<td><p>1.73%</p>
</td></tr>
</tbody></table>
<p>Source: APHIS-PPQ-AQAS.  AQIM data as of 8/19/2008 collected by CBP.</p>
<p>Cargo excludes grains and fresh fruits and vegetables covered under the National Agricultural Release Program (NARP). </p>
<p>1 Findings of pests, smuggled items, or mismanifested items.</p>
<p>As an example of the risk of foreign pest introduction, plum pox is a disease that was introduced into the United States.  It is a devastating viral disease of stone fruit, such as peaches, apricots, plums, nectarines, almonds, and cherries.  It is transmitted within an orchard by aphids and over long distances through the movement of infected nursery stock, propagative material, and fruit.  The plum pox virus first appeared in the United States in Pennsylvania in October 1999.  In 2006, it was detected in New York and Michigan.  </p>
<p>APHIS established an eradication program to prevent the spread of plum pox to noninfested areas of the United States.  Since 2000, APHIS has set aside $50.7 million to address plum pox disease.
  We do not have evidence that plum pox was introduced from Canada where it is also known to exist.  However, the expenses incurred because of this disease exemplify the types of costs that may be avoided or reduced by removing the inspection exemption and providing additional resources for AQI inspections at the U.S./Canada border.</p>
<p><b>Costs of the Rule
</b></p>
<p>The amended regulations impose a direct fee on all commercial conveyances crossing the U.S./Canada border, except in three instances: (i) Barges operating solely between U.S. and Canadian ports that carry non-containerized cargo that does not originate outside of the United States or Canada and that do not carry any plants or plant products or animal or animal products, and that do not carry soil or quarry products from areas in Canada listed in § 319.77-3 as being infested with gypsy moth; (ii) railroad cars that are part of a train that originates and terminates in Canada and does not load or unload passengers or cargo while in the United States;
,
 and (iii) vessels returning to the United States after traveling to Canada solely to take on fuel.</p>
<p>In the preliminary economic analysis for the interim rule, we noted the possibility of shipping delays because of the AQI inspections.  Additional costs that might arise due to shipping delays were one of the most frequently raised concerns among our stakeholders.   However, since the interim rule became effective, we are not aware of any significant delays that have been experienced due to this rule.
  </p>
<p><u>User Fees</u></p>
<p>Four modes of conveyance—trucks, railroad cars, maritime vessels, and aircraft—and international air passengers are assessed AQI user fees, as shown in table 9.  </p>
<p class="footer"><b>Table 9.  AQI user fees for conveyances and air passengers entering the United States, fiscal years 2007, 2008, and 2009</b></p>
<table><tbody><tr>	<td><p></p>
</td>	<td><p>FY 2007</p>
</td>	<td><p>FY 2008</p>
</td>	<td><p>FY 2009</p>
</td></tr>
<tr>	<td><p>Maritime vessels</p>
</td>	<td><p>$490 per crossing
</p>
<p>(max 15 payments per year)</p>
</td>	<td><p>$492 per crossing
</p>
<p>(max 15 payments per year)</p>
</td>	<td><p>$494 per crossing
</p>
<p>(max 15 payments per year)</p>
</td></tr>
<tr>	<td><p>Trucks 1</p>
</td>	<td><p>$5.25 per crossing or $105 per year</p>
</td>	<td><p>$5.25 per crossing or $105 per year</p>
</td>	<td><p>$5.25 per crossing or $105 per year</p>
</td></tr>
<tr>	<td><p>Railroad cars 2</p>
</td>	<td><p>$7.75 crossing</p>
</td>	<td><p>$7.75 per crossing</p>
</td>	<td><p>$7.75 per crossing</p>
</td></tr>
<tr>	<td><p>Aircraft</p>
</td>	<td><p>$70.50 per arrival</p>
</td>	<td><p>$70.50 per arrival</p>
</td>	<td><p>$70.75 per arrival</p>
</td></tr>
<tr>	<td><p>Air passengers</p>
</td>	<td><p>$5 per passenger</p>
</td>	<td><p>$5 per passenger</p>
</td>	<td><p>$5 per passenger</p>
</td></tr>
</tbody></table>
<p class="footer">Source: <u>Federal Register</u> 7 CFR Part 354, User Fees for Agricultural Quarantine and Inspection Services: Interim Rule, USDA-APHIS, December 9, 2004.</p>
<p class="footer">1. Truck operators have the choice of paying per crossing or purchasing a yearly decal.  The cost of the yearly decal ($105) is 20 times the fee for an individual crossing ($5.25).</p>
<p class="footer">2. If the AQI user fee is prepaid for all arrivals of a commercial railroad car during a calendar year, the AQI user fee is an amount 20 times the AQI user fee for each arrival.
</p>
<p><i>Surface conveyances</i>.  All trucks and trains transporting goods to the United States are subject to inspection.  A user fee of $5.25 per crossing, or $105 per year, is charged for each truck, and a fee of $7.75 per crossing is charged for each loaded rail car, other than for railroad cars in transit, as described above. </p>
<p>Trucks, trains and all other commercial surface conveyances transported goods valued at approximately $511 billion across the U.S./Canada border in 2007, with $285 billion in imports into the United States from Canada and $226 billion in exports from the United States to Canada.
  Trucks remain the dominant commercial mode of transportation, carrying $150 billion in U.S. imports and $174 billion in U.S. exports across the U.S./Canada border in 2007.  That same year, railroads transported $66 billion in U.S. imports and $25 billion in U.S. exports across the U.S./Canada border.  While agricultural shipments are generally the focus of AQI inspections, all commercial surface conveyances crossing the border are subject to inspection.  
</p>
<p class="footer"><i>Waterborne conveyances.  </i>Commercial vessels transporting goods to the United States (100 net tons or more) are subject to inspection.  Beginning March 1, 2007, waterborne conveyances were charged a user fee of $490 per crossing in FY 2007.  In FY 2008, the fee was $492 per crossing, and it increased to $494 per crossing in FY 2009.  Total waterborne trade with Canada was valued at $18 billion in 2005, $14 billion in U.S. imports and $4 billion in U.S. exports.
  Commodities transported by waterborne conveyances comprised 26 percent of total tonnage crossing the U.S./Canada border in 2005, with this mode of conveyance especially suitable for heavy bulk products such as grain and crude petroleum.  As with the surface conveyances, we expect the focus of inspections of waterborne conveyances to be shipments of agricultural commodities.  </p>
<p class="footer"><i>Aircraft and air passengers.</i>  All air cargo and conveyances arriving in the United States are subject to inspection.  Commercial aircraft are charged a user fee of $70.50 per arrival.  The modal share of air cargo as a percentage of total U.S. imports from Canada steadily declined to 4.1 percent in 2006, from a peak of 6.6 percent in 2000.  Preliminary data for 2007 indicate a slight increase in air cargo’s modal share, to 4.4 percent.
  All air passengers arriving in the United States are charged a user fee of $5.  In FY 2007, the total number of air passengers traveling from Canada to the United States was 11.9 million, an increase over the previous year and a return to pre-9/11 levels for the first time.
  </p>
<p class="footer"><u>Estimated User Fee Collection and Federal Expenditures </u></p>
<p class="footer">Table 10 shows FY 2008 estimated user fee collection and expenditures for the AQI inspection of conveyances and air passengers arriving from Canada.  Expected AQI expenditures for the U.S./Canada border set forth in this final rule differ from those presented in the preliminary economic analysis for the interim rule.  In the interim rule, we projected that the annual Federal expenditures totaled about $74.8 million, with about $68.5 million for additional CBP staffing and direct support, and about $6.3 million for indirect support (Agency, Departmental, and other administrative costs).
  In Table 10, we explicitly acknowledge the complementary roles that CBP and APHIS play in fulfilling the AQI mission at the U.S./Canada border by estimating FY 2008 expenditures separately for the two agencies.  Broadly speaking, CBP is responsible for AQI inspection activities, while APHIS is responsible for setting policy, providing training, and establishing and collecting user fees to pay for the CBP inspections.
</p>
<p>As shown in Table 10, we estimated Federal expenditures for the AQI activities for conveyances and air passengers from Canada to total about $98.7 million, about $78.6 million to fund the CBP program and about $20.1 million to fund the APHIS program.  The CBP expenditures are based on the estimated volume of inbound border crossings from Canada for the various modes of conveyance covered by the rule and for airline passengers.
</p>
<p>APHIS performs a number of functions in support of AQI activities at the U.S./Canada border that can be categorized within the following areas: Port operations and policy, science and technical support, import analysis and risk management, pest and disease identification, and regulatory enforcement and anti-smuggling programs.  The overall cost for APHIS is composed of expenditures on these various functions.  Expenditures for both APHIS and CBP also include administrative and other overhead costs.
</p>
<p><b>Table 10.  Estimated user fee collection and Federal expenditures for the U.S./Canada border AQI services, FY 2008 (million dollars)</b></p>
<table><tbody><tr>	<td><p>AQI user fee collection</p>
</td>	<td><p>$89.3</p>
</td></tr>
<tr>	<td><p>CBP expenditure</p>
</td>	<td><p>$78.6</p>
</td></tr>
<tr>	<td><p>APHIS expenditure</p>
</td>	<td><p>$20.1</p>
</td></tr>
<tr>	<td><p>Total Federal expenditures</p>
</td>	<td><p>$98.7</p>
</td></tr>
</tbody></table>
<p>Sources: APHIS-Financial Management Division, CBP-Budget Cost Management Division, APHIS-PPQ and APHIS-Budget & Program Analysis.</p>
<p><b>Regulatory Flexibility Analysis</b></p>
<p>The Regulatory Flexibility Act of 1980 (Public Law 96-354) requires agencies to evaluate the potential effects of proposed and final rules on small businesses, small organizations, and small governmental jurisdictions.  Section 604 of the Act prescribes the content of the final regulatory flexibility analysis (FRFA) of impacts of a final rule on small entities.  Section 604(a) of the Act specifies the content of an FRFA.  Each FRFA must contain:</p>
<p>1.   A succinct statement of the objectives of, and legal basis for, the rule;</p>
<p>2. A summary of the significant issues raised by the public comments in response to the initial regulatory flexibility analysis, a summary of the assessment of the agency of such issues, and a statement of any changes made in the rule as a result of such comments;</p>
<p>3. A description and, where feasible, an estimate of the number of small entities to which the rule will apply;
</p>
<p>4. A description of the projected reporting, recordkeeping and other compliance requirements of the rule, including an estimate of the classes of small entities that will be subject to the requirement and the type of professional skills necessary for preparation of the report or record; and
</p>
<p>5. A description of the steps the agency has taken to minimize the significant economic impact on small entities consistent with the stated objectives of applicable statutes, including a statement of the factual, policy, and legal reasons for selecting the alternatives adopted in the final rule and why each one of the other significant alternatives to the rule considered by the agency which affect the impact on small entities was rejected.
</p>
<p>1.  <u>Objective and Legal Basis</u></p>
<p>We are amending the agricultural inspection and quarantine regulations and user fee regulations by removing the exemptions from phytosanitary inspection for fruits and vegetables imported from Canada and the exemptions from user fees for commercial vessels, commercial trucks, commercial railroad cars, commercial aircraft, and international air passengers entering the United States from Canada.  As a result of this action, all agricultural products imported from Canada are subject to inspection, and commercial conveyances, as well as airline passengers arriving on flights from Canada, are subject to inspection and user fees.</p>
<p>We are taking this action based on our need to expand and strengthen our pest exclusion and smuggling interdiction efforts at U.S./Canada ports.  This need is evident from the large and increasing number of interceptions at the U.S./Canada border and at preclearance operations in Canadian airports.  Our specific concern is the increasing number of interceptions of prohibited material from countries other than Canada.  The interceptions indicate that there is a high risk of introduction of animal and plant pests and diseases into the United States unless we expand and strengthen our pest exclusion and smuggling interdiction efforts.  Revenue from user fees is needed to recover the costs of our existing AQI inspection activities as well as to pay for expanded AQI inspection of commercial conveyances and international air passengers entering the United States from Canada.</p>
<p>2.  <u>Significant Issues Raised by Public Comments</u></p>
<p>In accordance with 5 U.S.C. 603, we prepared an initial regulatory flexibility analysis for the interim rule.  We invited comments about the interim rule as it relates to small entities and stated that we were interested in determining the number and kind of small entities that may receive benefits or incur costs from implementation of the interim rule.</p>
<p>Many commenters expressed concern that the interim rule would cause border delays and heavily tax the existing infrastructure due to traffic congestion resulting from increased AQI inspections.  Delays were of a particular concern for those entities shipping perishable items such as food products or live animals.  Some commenters stated that delays at the U.S./Canada border could have a negative effect on transshipments to Mexico or that they could lead to increased fuel costs or job losses.  One commenter expressed concern regarding expected delays due to an insufficient number of inspectors.  Since implementation of the interim rule, we are not aware of any increase in delays at the U.S./Canada border because of AQI inspections.
</p>
<p>Several commenters stated that APHIS failed to satisfy the requirements of Executive Order 12866 because we did not provide a quantitative comparison of expected benefits and costs of the rule.  The commenters are correct that we are unable to project quantitatively the direct benefits attributable to this rule in terms of the reduced risk of animal and plant pests and diseases entering from Canada.  We are unable to quantify either the risk that existed prior to implementation of the interim rule, nor the reduction in risk following its implementation.  Our knowledge of the disease and pest threats posed by goods entering from Canada and the extent to which the AQI inspection activities mitigate those threats is currently imperfect.  Rarely are we able to precisely trace an established infestation by an invasive species to its country of origin.
</p>
<p>We do know that these risks are genuine, as reflected by the recent history of interceptions of regulated articles and quarantine pests at the U.S./Canada border presented in the regulatory impact analysis.  The disproportionately large number of Emergency Action Notifications issued for shipments of third-country origin and the approach rates indicated by information on conveyances and air passengers sampled through the Agricultural Quarantine Inspection Monitoring (AQIM) program point to significant and growing risks of disease and pest introduction.  The intentional or unintentional commingling of products of third-country origin with goods of Canadian origin heightens these risks.  Outright smuggling of goods across the U.S./Canada border is also a growing threat due to the increasing volume of commodities and number of travelers that cross the border into the United States each year.  U.S. agriculture and other sectors of the economy are unfortunately well acquainted with the costs associated with pest and disease introductions when interception fails.  Large public and private expenditures have been devoted to animal and plant pest and disease control and eradication programs for invasive species, as exemplified by the costs of plum pox described in the regulatory impact analysis.</p>
<p>Executive Order 12866 does not require that we quantify benefits and costs, only that we evaluate them as completely as possible.
  Although we are not able to quantify the expected benefits of this rule in terms of the expected costs forgone, we are confident that they outweigh the costs of AQI resources expended to mitigate risks of pest and disease entry from Canada.  This conclusion satisfies a principal requirement of Executive Order 12866:  
</p>
<p>Each agency shall assess both the costs and the benefits of the intended regulation and, recognizing that some costs and benefits are difficult to quantify, propose or adopt a regulation only upon a reasoned determination that the benefits of the intended regulation justify its costs.
  
</p>
<p>Several commenters on the interim rule expressed concern regarding the cost projection for the initial staffing plan: 65 airport preclearance inspectors in Canada, costing $46 million, and 136 inspectors along the U.S./Canada border, costing $22.45 million.  At the time that the interim rule was published, budgetary interactions between APHIS and CBP were still in transition, and these cost projections were preliminary estimates by APHIS.  Now that CBP is fully functional and its AQI responsibilities have become established, we are able to present cost estimates in this final rule that are provided by CBP. </p>
<p>3.  <u>Description and Estimate of the Number of Affected Small Entities</u> 
</p>
<p><i>Surface Conveyances</i></p>
<p>
For commercial trucking, the Small Business Administration (SBA) defines a small entity as one having not more than $25.5 million in annual receipts.  According to the 2002 Economic Census (the most recent available), there were 29,220 general long-distance freight trucking firms in the United States (North American Industry Classification System [NAICS] code 484121).  A total of 371 of these firms, or less than 2 percent, had annual receipts of $25.5 million or more, the largest revenue category identified.  Thus, not less than 98 percent of trucking firms in the United States are small entities.  We do not know the number or size of trucking firms that transport products across the border from Canada, but can reasonably assume that they are also mostly small entities.
  </p>
<p>
For commercial railroad transportation, the SBA defines a small entity as one having not more than 1,500 employees for long-haul railroads (NAICS code 482111) and not more than 500 employees for short-line railroads (NAICS code 482112).  Of the 571 firms operating as railroad transportation companies in the United States, 18 firms employed more than 500 workers.  Therefore, approximately 97 percent of commercial railroad companies in the United States are considered small entities.  We can reasonably assume that this percentage applies to railroad companies that transport products into the United States from Canada.  
</p>
<p><i>Waterborne Conveyances</i></p>
<p>
For commercial water transportation, the SBA defines a small business entity as one having not more than 500 employees.  According to the 2002 U.S. Economic Census for Transportation and Warehousing, 724 firms operated in the United States for the entire year providing “deep sea, coastal, and Great Lakes water transportation” (NAICS codes 483111 and 483113).  Nine of these firms employed 500 to 999 employees and 5 firms employed 1,000 or more employees.  Thus, over 98 percent of water transportation firms in the United States employed fewer than 500 employees and can be considered small.
</p>
<p>
Approximately 1,895 vessels were used to move cargo from Canada to the United States in 2005.  We can assume that most if not all of the firms owning these vessels are small entities. </p>
<p><i>Air Conveyances
</i></p>
<p>
For commercial air transportation, the SBA defines a small business entity as one having not more than 1,500 employees.  According to the 2002 U.S. Economic Census for Transportation and Warehousing, there were 513 firms in the United States classified under “scheduled air transportation” (NAICS code 48111), of which only 12 firms employed more than 1,000 employees.  Thus, 98 percent of all air transportation firms in the United States are small.
</p>
<p>Clearly, most of the surface, waterborne, and air conveyance entities that are directly affected by the rule are small, although we do not have precise estimates of their numbers.  </p>
<p>4.  <u>Reporting, Recordkeeping, and Other Compliance Requirements for Small Entities</u></p>
<p>The rule contains, under the heading “Paperwork Reduction Act,” a description of the information collection and recordkeeping requirements associated with the rule.  </p>
<p>5.  <u>Alternatives</u></p>
<p>Four possible alternatives to the interim rule were identified, none of which would accomplish the objectives of the rule or minimize effects for small entities.
</p>
<p>One alternative would have been to make no changes to the current regulations.  However, inspections along the U.S./Canada border have resulted in an increasing number of interceptions of prohibited material that originated from countries other than Canada.  The growth in imports and in the number of air passengers arriving from Canada has placed increased demands on CBP staff at U.S./Canada border ports and airports.  This rule is necessary in order to strengthen our AQI activities and lessen the risk of introduction of plant and animal pests and diseases.  Removing the Canadian exemption from AQI user fees is necessary to recover the costs of our existing inspection activities and to implement an expanded inspection program. </p>
<p>Another alternative to the interim rule would have been to limit our inspections to commercial conveyances and not include international passengers entering the United States from Canada in the AQI inspection program.  However, results of recent AQI preclearance activities at Canadian airports have demonstrated that air passengers from Canada represent an important pest pathway.  In addition, in surveys and inspection blitzes conducted on passenger baggage at destination airports in the United States, significant amounts of prohibited agricultural materials were found, such as tropical and exotic fruits and vegetables purchased at Canadian markets, as well as prohibited animal products.  We would not be able to prevent or control the movement of such regulated articles into the United States if we did not increase our passenger inspection activities at airports, along with our conveyance inspection activities, at the U.S./Canada border.  We could not recover the costs of passenger inspections if we did not charge passengers AQI user fees.
</p>
<p>A third alternative would have been to only charge AQI user fees for inspections of commercial conveyances transporting agricultural goods.  This alternative would have eliminated impacts on conveyances that do not transport agricultural goods.  However, animal and plant pests may be found on or in conveyances even if they are not carrying agricultural products and even if they are empty.  For example, solid wood packing material, estimated to be present in some 70 percent of all Canadian rail containers, can be a pathway for the Asian and citrus longhorned beetles, pine shoot beetle, emerald ash borer, and other pests.   In addition, restricted non-agricultural products, such as Italian tile shipments that could be carrying hitchhiking snails, seat cushions stuffed with restricted grasses, or wooden handicrafts that could be harboring wood boring insects pose a risk to American agriculture if they enter the United States.  Therefore, APHIS employees familiar with the risks presented by the conveyances themselves and by containers and packing material used for non-agricultural products determined that it is necessary for all conveyances from Canada to be inspected.  In order to recover the costs of these inspections, AQI user fees are necessary, except as otherwise noted. </p>
<p>A fourth alternative would have been to develop new user fees specific to Canada that would be different from the user fees charged to all other countries.  However, we concluded that it was not a valid alternative as our intention in the interim rule was to harmonize the inspection requirements and the AQI user fees charged for conveyances entering the United States from Canada with the inspection requirements and AQI user fees charged for conveyances entering the United States from all other countries in the world.  In addition, we have determined that charging different user fees for Canada would result in potential delays and increased expenses as a new collection system would have to be developed specifically to collect Canadian fees.   </p>
<p><b>Conclusion
</b></p>
<p>This analysis has looked at economic impacts of removing the exemption for inspections of certain agricultural products entering the United States from Canada, charging a user fee to conveyances and air passengers arriving from Canada, and expanding the AQI program at U.S./Canada border ports and Canadian airports.  APHIS has established the user fees for affected conveyances and air passengers.  However, possible impacts of the user fees on business margins and air passenger traffic are not well understood.  Expected benefits of the rule are difficult to quantify, although it is apparent that resources devoted to AQI inspection efforts along the U.S./Canada border prior to implementation of the interim rule were insufficient.</p>
<p>The amended regulations decrease the risk of harmful plant and animal pests and diseases entering the United States from Canada, and enable the Federal Government to recover AQI costs through user fees and expand AQI activities along the U.S./Canada border.  We expect the impact to be a lower likelihood of pest and disease introduction and establishment, and therefore reduced agricultural losses and reduced expenditures for pest and disease control and eradication.  Without additional information on sanitary and phytosanitary risks posed by cargo, conveyances, and air passengers arriving from Canada, we cannot quantitatively compare expected benefits and costs of this rule.  As additional information is generated regarding the risks of pests and diseases entering from Canada and becoming established in the United States, the net benefits of this action may become more definitive.
</p>
<p>
</p>
<p>
</p>
<p>� Federal Register/Vol. 56, No. 39/February 27, 1991/Proposed Rule: Exemptions, Prepayments, and Maximum Fees, page 8150: “We are proposing to exempt passengers, commercial vessels, commercial trucks, commercial aircraft, and commercial railroad cars moving solely between the United States and Canada from paying user fees.  These means of conveyance pose little animal or plant disease or pest risk to United States agriculture, and we do not provide AQI services for them.  Therefore we do not believe a user fee is justified.”
</p>
<p>� APHIS-PPQ, Agricultural Quarantine Inspection Monitoring (AQIM) program.  The AQIM program was instituted to assist with the mandate of the Government Performance and Results Act (GPRA) of 1993.  Source: APHIS Agricultural Quarantine Inspection Monitoring (AQIM) Handbook 
</p>
<p>� Federal Register/Vol. 71, No. 165/August 25, 2006/Interim Rule, page 50320: 7 CFR Parts 319 and 354 (Docket No. APHIS 2006-0096), Agricultural inspection and AQI user fees along the U.S./Canada border.
</p>
<p>� U.S. Department of Commerce, Bureau of Census, as reported by the World Trade Atlas.  In 2007, U.S. imports from Canada were valued at $313 billion and U.S. exports to Canada were valued at $248 billion.
</p>
<p>� Transportation in Canada 2007, Table EC6: Modal shares in Canada-United States Trade, Transport Canada,  http://www.tc.gc.ca/policy/report/aca/anre2007/pdf/add2007-e.pdf
</p>
<p>� CBP reports that about 72.4 million individuals entered via surface and water transportation modes and 9.2 million passengers entered via air in FY 2007.
</p>
<p>� “The agricultural provisions of the U.S./Canada Free Trade Agreement, in effect since 1989, were incorporated into NAFTA.  Under these provisions, all tariffs affecting agricultural trade between the United States and Canada, with a few exceptions for items covered by tariff-rate quotas, were removed by January 1, 1998.”  http://www.fas.usda.gov/itp/Policy/NAFTA/nafta.asp
</p>
<p>� If the AQI user fee regulations had become effective after 1994, Canada’s exemption would not have been permitted under the SPS Agreement, Annex C (1)(f), Articles 2(2) and 2(3).
</p>
<p>� Statistics Canada. Date modified, 2008-02-20.
</p>
<p>� Source: U.S. Customs and Border Protection, January 11, 2007.
</p>
<p>� An EAN is an APHIS form used by CBP to communicate to the importers the sanitary or phytosanitary reason for emergency action required for their shipment and what the action entails, such as treatment, re-export, or destruction of the goods.
</p>
<p>� Agricultural inspection of passenger vehicles at the U.S./Canada border is not funded by AQI user fees, but by legislative appropriation, as the Food, Agriculture, Conservation and Trade (FACT) Act of 1990 does not give APHIS the authority to collect user fees from private vehicles.
</p>
<p>� Quarantine Material Interceptions (QMIs) are regulated agricultural materials seized because of prohibition, permit denial, pest risk, or abandonment.  The source of the quarantine materials may be baggage, cargo, mail, quarters, stores for destruction, or stores for immediate exportation.  QMIs exclude material allowed to remain on board the conveyance under condition that the material remains sealed or otherwise safeguarded.
</p>
<p>� Per communication with Don Albright, APHIS-PPQ Plum Pox Project, 7/03/08.
</p>
<p>� Definition of barge: Any non-self propelled vessel that transports cargo that is not contained in shipping containers.  This definition does not include Integrated Tug Barge (ITB) combinations..
</p>
<p>� The railroad cars are required to be part of the same train when they return to Canada.  The current AQI user fee regulations (7 CFR Part 354.3) provide a similar exemption for all U.S. railcars that transit Canada or Mexico and return to the United States.  Sanitary and phytosanitary risks are minimal for these types of shipments.
</p>
<p>� Current wait times at all ports of entry, including the 27 U.S./Canada border ports are posted at � HYPERLINK "http://apps.cbp.gov/bwt/" �http://apps.cbp.gov/bwt/� and are updated hourly.
</p>
<p>� Bureau of Transportation Statistics, TransBorder Surface Freight dataset, http://www.bts.gov/transborder/
</p>
<p>� Bureau of Transportation Statistics, North American Freight Transportation, June 2006.
</p>
<p>� Transport Canada, Transportation in Canada 2007 � HYPERLINK "http://www.tc.gc.ca/pol/en/report/anre2007/add/table-ec6.htm" ��http://www.tc.gc.ca/pol/en/report/anre2007/add/table-ec6.htm�.  Exports to the U.S. include re-exports and domestic exports.
</p>
<p>� CBP.  The data includes air passengers and crews.
</p>
<p>� The staffing plan in the interim rule was developed in 2001 before the transfer of inspection duties from APHIS to CBP.  CBP staffs all ports according to current and anticipated needs.
</p>
<p>� CBP uses an Activity Based Costing (ABC) methodology, whereby data are collected from various CBP sources and compiled for a cost-of-operations perspective of the organization.  ABC is a means of operationally analyzing how an organization consumes its resources (direct and indirect).  The focus is on activities performed within given processes. 
</p>
<p>� CBP officers perform agriculture-related functions and a portion of those activities is reflected within these cost estimates.  DHS Secretary Chertoff in FY 2008 requested that CBP agriculture inspectors address solely agriculture-related issues.  This mandate has resulted in an increase in CBP’s agricultural activities.  An increase in the number of CBP agriculture specialists and other officers at the Canadian border has also contributed to an increase in CBP costs.
</p>
<p>� “Costs and benefits shall be understood to include both quantifiable measures (to the fullest extent that these can be usefully estimated) and qualitative measures of costs and benefits that are difficult to quantify, but essential to consider.”   Executive Order 12866 of September 30, 1993, “Regulatory Planning and Review,” Federal Register, Vol. 58, No. 190, October 4, 1993, p.51736. 
</p>
<p>�.Ibid., p.51735.
</p>
<p>� Public Comment by American Trucking Associations dated 11/24/06 states: “According to U.S. Department of Transportation Federal Motor Carrier Safety Administration records, there are 579,000 interstate motor carriers in the U.S.  Of these: 87% operate 6 or fewer trucks, 8.7% operate 7 to 20 trucks, and 4.2% operate more than 20 trucks.  Additionally, the number of people employed in trucking-related industries is 8.6 million, with 3.28 million truck drivers included in that figure.”
</p>
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