Federal User Fees: Substantive Reviews Needed to Align Port-Related Fees with the Programs They Support
Published: 2008-02-22T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: America's port infrastructure is vital to U.S. foreign trade and a bulwark for national security. One way the federal government funds port-related programs is to levy user fees. GAO was asked to examine (1) what is known about the way selected fees assessed on air and sea port users are set, collected, used, and reviewed and (2) the effects of these attributes on program operations. GAO examined the Harbor Maintenance Fee (HMF), the Merchandise Processing Fee (MPF), and the Customs, Immigration, and Agricultural Quarantine Inspection (AQI) user fees assessed on air and cruise passengers and commercial vessels using criteria that have often been used to assess user fees and taxes--equity, efficiency, revenue adequacy, and administrative burden.
section_title: What GAO Found
paragraphs: The port-related fees GAO examined vary in how they are set, collected, used, and reviewed, creating misalignments between the fees and corresponding services, as well as administrative and oversight challenges. Although the customs, immigration, and AQI inspections have largely been consolidated under U.S. Customs and Border Protection (CBP), the corresponding fees remain separate and distinct and differ in how the rates are set and adjusted, the portion of costs they recover, and on whom the fees are levied. For example, overtime charges are handled differently for each type of inspection, creating confusion about the circumstances under which overtime must be paid, at what rate, and for which services. Certain collection methods increase administrative costs and reduce compliance. For example, quarterly remittance delays availability of funds and failure to charge interest and penalties on certain late payments is costly and discourages compliance. Further, lack of coordination between CBP and the U.S. Army Corps of Engineers inhibits oversight of certain HMF payments. All of the fees GAO reviewed suffer from some misalignment--for example, with their respective costs or activities--which affects how the fees are used. For example, since 2003, HMF collections have far exceeded funds appropriated for harbor maintenance, resulting in a large and growing surplus in the trust fund. Also, not all MPF and customs inspection activities are reimbursable and not all reimbursable activities are inspection related. Finally, agency user fee reviews are not always comprehensive. For example, CBP's review of the MPF does not detail program costs, project collections, or provide enough information to determine if the amount, structure, or authorized uses of the fee should be updated. Further, limited opportunities for substantive communication with HMF stakeholders hamper their understanding of the fee.

section_title: Letter
paragraphs: The United States has long depended on its port infrastructure to facilitate  both the import and export of manufactured goods; agricultural products;  and other commodities such as gravel, oil, and liquefied natural gas.  Access to world markets is important to the nation’s economy: for  example, more than 80 percent of U.S. foreign trade flows through the  nation’s 361 seaports. Port infrastructure is also important to America’s  national security: transportation of personnel and supplies supports  America’s military services during national emergencies. At the same time,  ports are potential targets for terrorists and potential conduits for  weapons concealed in cargo.
One of the means by which the federal government generates funding to  support and secure America’s port infrastructure is by levying  assessments, including user fees, on port users. These fees include ship  registry fees, commercial fishing fees, and inspection charges; they are  levied on various air and sea port users, including shippers, vessel owners  and operators, brokers, and individual passengers.
In response to your request and to provide context and insights as you  consider funding options for port programs, we examined (1) what is  known about the way selected fees assessed on air and sea port users are  set, collected, used, and reviewed (including the views of stakeholders)  and (2) the effects of these attributes on program operations.
To achieve our objectives, we examined several fees assessed on air and  sea port users—which vary in the ways in which they are set, collected,  used, and reviewed—related to maritime, safety, and homeland security  programs. Specifically, we examined the Harbor Maintenance Fee; the  Merchandise Processing Fee; and the Customs, Immigration, and  Agricultural Quarantine Inspection (AQI) user fees assessed on air and  cruise passengers and commercial vessels. We examined the fees using  the following criteria that have often been used to assess user fees and  taxes.
Efficiency: By requiring identifiable beneficiaries to pay for services, user  fees can simultaneously constrain demand and reveal the value that  beneficiaries place on the service. If those benefiting from a service do not  bear the full social cost of the service, they may seek to have the  government provide more of the service than is economically efficient.  User fees may also foster production efficiency by increasing awareness of  the costs of publicly provided services, and therefore increasing incentives  to reduce costs where possible.
Equity: Equity has multiple facets, in part because beneficiaries and users  may not be the same. Under the benefits-received principle, the  beneficiaries of a service should pay for the service. Under the cost- imposed principle, fees should be designed to impose a cost on the user in  proportion to the cost that that user imposes on the program. Under the  ability-to-pay principle, those who are more capable of bearing the burden  of fees should pay more in fees than those with less ability to pay.
Revenue Adequacy: The extent to which the fee collections cover the  intended share of costs. It encompasses the extent to which collections  may diminish over time relative to the cost of the program. For the  purposes of our work, revenue adequacy also incorporates the concept of  revenue stability, which generally refers to the degree to which short-term  fluctuations in economic activity and other factors affect the level of fee  collections.
Administrative Burden: The cost of administering the fee, including the  cost of collection and enforcement, as well as the compliance burden (the  administrative costs imposed on the payers of the fee).
These criteria interact and are often in conflict with each other; as such,  there are tradeoffs to consider between the criteria when designing a fee.  Every fee design will have pluses and minuses, and no design will satisfy  everyone on all dimensions. The weight that different policymakers may  place on different criteria will vary, depending on how they value different  attributes. Focusing only on the pros and cons of each element of reform  could make it difficult to build the bridges necessary to achieve  consensus. Policymakers will ultimately have to balance the relative  importance they place on each of these criteria and focus on the overall  fee design. To that end, understanding the tradeoffs associated with  different aspects of a fee’s design can provide decision makers with better  information and support more robust deliberations about user fee  financing.
We reviewed user fee legislation, implementing regulations, agency  documents and guidance, and literature on user fee design and  implementation characteristics. To better understand the programs and  services on which the fees are levied, as well as how the fees are  administered, we observed vessel, passenger, and cargo inspection  processes at eight U.S. seaports. We also interviewed officials at the  Department of Homeland Security’s (DHS) U.S. Customs and Border  Protection (CBP), U.S. Army Corps of Engineers (Corps), and the U.S.  Department of Agriculture’s Animal and Plant Health Inspection Service  (APHIS) involved in administering these fees and the programs the fees  support, including regional officials at the ports we visited. CBP  administers the Merchandise Processing and Customs inspection fees, and  it collects the Harbor Maintenance Fee on behalf of the Corps. CBP  administers the immigration user fees jointly with U.S. Immigration and  Customs Enforcement (ICE) and the Agricultural Quarantine Inspection  user fees jointly with APHIS. To obtain stakeholder perspectives on the  impacts of the designs of the fees, we interviewed entities involved with  the fees and the programs that they support, including cruise lines,  shipping lines, customs brokers, shipping agents, and port authorities. In  addition, we spoke with national organizations, including the American  Association of Port Authorities, the World Shipping Council, and the  Cruise Lines International Association. We asked questions about APHIS,  CBP, and Corps internal controls for the data we used and determined that  the data were sufficiently reliable for the purposes of this report.
We performed our work from February 2007 through February 2008 in  Washington, D.C.; Los Angeles and Long Beach, California; Miami and Port  Everglades, Florida; Baltimore, Maryland; Boston, Massachusetts; Newark,  New Jersey; New York, New York; Charleston, South Carolina; and Seattle,  Washington, in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives. For more information on  our scope and methodology, see appendix I.
subsections: section_title: Background
paragraphs: User financing—in the form of user fees, user charges, or targeted excise  taxes—is one approach to financing federal programs or activities. User  fees assign part or all of the costs of the benefits and services derived from  these programs and activities—above and beyond what is normally  available to the general public—to readily identifiable recipients of those  benefits and services.
subsections: section_title: Definition of User Fees
paragraphs: We have defined “user fees” or “user charges” as fees assessed on users for  goods or services provided by the federal government. Some excise  taxes, however, can also be described as a form of user financing. For  example, the excise taxes on motor fuels, tires, and heavy vehicles accrue  to the Highway Trust Fund, from which Congress appropriates funds for  the interstate highway system, mass transit, and transportation projects.  Similarly, Federal Aviation Administration (FAA) operations are funded in  part by excise taxes assessed on airline tickets, aviation fuel, and certain  cargo.
section_title: Requirements for Reviewing Fees
paragraphs: Both the Chief Financial Officers (CFO) Act and the Office of  Management and Budget (OMB) Circular No. A-25 provide that agencies  review their user fees biennially and make recommendations about any  needed cost adjustments. Circular No. A-25 also states that each agency  should review its programs to determine whether it could charge fees for  any of its services, noting that if imposing such fees is prohibited or  restricted by law, agencies will recommend legislative changes as  appropriate. OMB encourages agencies to examine potential effects of  design alternatives when reviewing and proposing changes to regulations,  even when the regulations are mandated by statute.
The user fees considered in this report, and summarized in table 1, are  assessed under specific statutory authority and levied on air and sea  passengers, vessel operators, or shippers (see app. II for a summary of the  fees by payer). The fees vary in the way they are set, collected, used, and  reviewed, which may affect their efficiency, equity, revenue adequacy, and  administrative costs.
section_title: The Inspection Process Is Largely Consolidated but the Inspection Fees Vary in How Rates Are Set and Adjusted, the Portion of Costs Recovered, and How Costs Are Assigned to Users
paragraphs: Although all of the fees we examined vary in how they are set and  adjusted, these differences are a particular issue with the inspection fees.  Specifically, the passenger and vessel inspection processes in both the air  and sea environments have been largely consolidated within CBP, but the  legacy fees supporting these inspections are still governed by separate,  dissimilar authorizing legislation and vary significantly in how they are set  and adjusted and how they link fee rates to the cost of services. APHIS  uses the federal regulatory process to propose rate increases and invites  comments on its proposals and implementing regulations via a public  notice and comment in the Federal Register. Although various  Congressional committees oversee this process, Congress has delegated to  APHIS the authority and responsibility to set and adjust AQI fee rates to  match program costs over time. In contrast, both the immigration and  customs fee rates are set in statute. These fees can only recoup authorized  program costs to the extent that total reimbursable program costs do not  exceed the rate caps prescribed in statute.
The AQI fee statute grants the Secretary of Agriculture broad discretion to  prescribe and collect fees sufficient to cover the cost of providing  agricultural quarantine and inspection services. In spite of this, in 2006  we reported that financial management issues at CBP and APHIS  adversely affect the AQI program’s ability to perform border inspections  and that, in fiscal years 2003 through 2005, user fees were not sufficient to  cover program costs. Moreover, prior to fiscal year 2006, CBP was unable  to provide APHIS with information on the actual costs of CBP’s portion of  the AQI program broken out by user-fee type—for example, fees paid by  international air passengers or vessels. In 2007, APHIS and CBP further  improved the AQI cost estimates by agreeing on a common set of  assumptions used to forecast the cost of AQI activities.
According to APHIS finance officials, the fee rates are now set to recover  all program costs except for certain indirect and imputed costs, such as  the cost of employee retirement benefits. We have previously found that  OMB Circular No. A-25 guidance and USDA policy require the inclusion of  indirect and imputed costs in setting full-cost recovery fees, and that  unless otherwise specified in statute such collections should be deposited  in the Department of the Treasury’s general fund. However, APHIS  finance officials said that because the AQI authorizing statute does not  authorize APHIS to spend fee collections on such expenses, APHIS does  not include these costs when calculating the fee rate. APHIS also does not  list these costs in the Federal Register when proposing rate increases, but  noted that more transparency in this area could better inform users of the  full cost of the program. APHIS estimates that these indirect and imputed  costs for the AQI user fee program totaled approximately $18.9 million in  fiscal year 2006.
In contrast, the customs and immigration inspection fees are structured to  recover partial costs. While both the immigration and customs statutes  contain language that fees equal or be reasonably related to the cost of  services, the two statutes actually prescribe an exact amount in law to be  charged for their respective inspection services. That is, the immigration  and customs user fees actually limit cost recovery to a sum certain. The  customs statute further restricts cost recovery by limiting the set of  activities for which collections may reimburse appropriations. The  immigration statute makes immigration user fee collections available to  refund any appropriation for expenses incurred in providing immigration  inspection and pre-inspection services as well as certain other expenses,  at least one of which—administration of debt recovery—is not directly  related to immigration inspections according to CBP officials.
According to CBP data, in fiscal year 2006, commercial vessel customs  inspections fee collections covered about 66 percent of related program  costs. DHS does not know the portion of total immigration inspection  costs covered by immigration fee collections. CBP and ICE share  responsibility for reimbursable, immigration-related inspection activities  and, to date, DHS has not reported final costs for ICE’s inspection-related  activities. According to CBP data, in fiscal year 2006, CBP’s portion of  vessel inspection fee collections covered about 67 percent of CBP’s share  of immigration vessel inspection costs, but until ICE’s cost data are  finalized, DHS will not know the total portion of immigration costs  covered by total fee collections, or whether the fees are properly divided  between CBP and ICE.
Since the fees can pay for only some inspection activities and only under  certain circumstances, ensuring proper use of fee collections can require  detailed cost data. Collecting these data, however, can be particularly  costly given the disparate fee structures. For example, to be reimbursed  for time spent on authorized activities for various fees, CBP must track the  time spent on these activities. Because the inspection processes have been  largely combined but the separate distinct fees supporting these activities  are not uniform, correctly tracking which activities can be reimbursed by  which fees can be difficult. To help address the concern that timekeeping  was taking time away from officers’ inspection duties, CBP implemented a  standard process for tracking time in early 2007. The process includes  estimating the amount of time officers conducting different functions (e.g.,  vessel or passenger inspections) spend on different activities, including  customs, immigration, and agriculture inspections. This process, however,  has not completely addressed the problem. At one port we visited, on each  shift, a full-time CBP officer was assigned solely to tracking staff time.  Even with an efficient process for tracking time spent on different  activities, the need to separately track three inspections that have largely  been consolidated adds complexity and increases the potential for error.
In general, the three fees are not levied uniformly, and sometimes involve  cross-subsidization (see table 2). For example, although air passengers are  charged an AQI fee, sea passengers (generally cruise ship passengers) are  not. According to APHIS finance officials, the costs of these passenger  inspections are imbedded in the cost of the AQI fee levied on vessel  owners and operators.
According to APHIS finance officials who calculate the fee rates, the costs  of inspecting sea passengers, fee-exempt vessels, and vessels that have  met the annual fee cap are spread among all payers of the AQI vessel fees.  They said that although it is rare for most commercial vessels to exceed  the annual fee cap of $7,380—a total of 15 payments—cruise ships  routinely exceed the cap because they arrive in the U.S. far more than 15  times each year. According to CBP data, fiscal year 2006 CBP costs for the  AQI commercial vessel inspections were approximately $35 million, and  included about $2.2 million for passenger inspections and about $4 million  for inspections of exempt private vessels. The cost data that CBP provides  to APHIS does not indicate what portion of the $35 million is associated  with inspecting cruise ships that have exceeded the fee cap.
Sea and air passengers pay an immigration inspection fee, but no such fee  is levied on vessel crew although they must undergo inspection. As a  general rule, the costs of crew inspection are not charged to vessel  owner/operators, although they may be charged for overtime immigration  inspections of vessel crew at some ports. This makes fees unpredictable.  Predictability of inspection fees enables users to plan, charge clients for,  and account for related costs, but inconsistent rules for overtime  inspections lead to uncertainty. The separate statutory and regulatory  structures of the three overtime inspection charges are not aligned and  overtime is not handled uniformly within some of the fees (see fig. 1). For  immigration inspections conducted on a Sunday, holiday, or between the  hours of 5:00 p.m. and 8:00 a.m. and when a given inspector is working  overtime, CBP must charge a vessel operator, owner, or agent for the  overtime cost of the immigration inspections. Because regular business  hours vary by port, the hours during which an inspector might be working  overtime vary. In addition, the amount charged depends on the number  and pay grade(s) of the officer(s) performing the inspection and the  amount of time spent on the inspection, adding to unpredictability and  increasing DHS’s costs to administer the fee. Overtime charges for  agriculture vessel inspections must, by regulation, be applied at an hourly  rate for overtime inspections on a Sunday or holiday, or whenever the  individual inspector is working overtime. According to CBP officials,  collections for reimbursable overtime agriculture inspections total about  $1.2 million annually. Moreover, although vessels must be charged for  overtime inspections, AQI regulations explicitly prohibit charging for  similar overtime inspections of aircraft when passengers have already paid  an AQI fee for that flight.
Lastly, according to CBP officials, CBP has limited authority to charge for  overtime for customs inspection services. CBP officials told us that as a  result, in practice, overtime charges are not assessed for most customs  overtime inspections.
Some payers told us that they often do not know whether or when they  will incur overtime fees and what the charges will be. They said that  consistent fees would offer predictability and reduce confusion. CBP  officials also told us that billing vessel owners for overtime inspections is  administratively burdensome. According to CBP estimates, CBP’s costs to  process and bill immigration and agriculture inspection overtime charges  totaled 26 percent of those collections in fiscal year 2007. The statutory  authorities governing immigration overtime inspection charges mandate  that the amount of the charge be dependent upon the amount paid to the  inspector, subject to specified limitations. However, CBP officers are paid  under a different statutory scheme, which does not contain the same  limitations. Therefore, according to CBP, the agency cannot automatically  bill the vessel operator or shipping agent for immigration overtime  services. Instead, CBP must make calculations manually based upon the  limitations contained in the immigration overtime authorities and the  amount actually paid to the CBP officer performing the inspection  services. CBP officials said that although charges for overtime inspections  make sense because the inspections are more costly, a consistent set of  overtime charges for customs, immigration, and agriculture inspections  that did not vary by port or the rank of the inspecting CBP officer would  increase revenue, decrease administrative costs, and improve CBP’s  relations with the trade community.
section_title: Costly, Ineffective Collection Methods and Lack of Interagency Coordination Increase Noncompliance for Harbor Maintenance and Vessel Inspection Fees
paragraphs: Ineffective and outdated collection methods for vessel inspection fees  increase administrative costs for both agencies and payers. Furthermore, a  lack of coordination between the Corps and CBP inhibits oversight of  HMF payments for passenger vessels, domestic shipments, and shipments  into foreign trade zones. Also, when these HMF payments are late, CBP  does not charge interest or penalties and is therefore not using an  important tool to encourage timely payment. Collections methods function  best when they minimize administrative costs and maximize compliance,  as seen in the automated system CBP uses to process the MPF as well as  HMF assessed on imports. This system allows entry summaries to be  electronically transmitted, validated, confirmed, corrected, and paid.
subsections: section_title: Vessel Fee Collection Methods Are Ineffective and Outdated
paragraphs: The method of collecting the customs and AQI commercial vessel fees  imposes unnecessary administrative costs on CBP and payers and may  increase the likelihood of over- or underpayments. User fees function best  when they minimize, to the extent practicable, administrative costs.  Recognizing this, Treasury’s Financial Management Service has made it a  priority to increase the use of electronic collection methods for  government collections. CBP is automating collections for several user  fees but to date, the commercial vessel fees may still only be paid in  person by check or cash (see fig. 2). Moreover, payers must retain each  paper payment receipt and present them at each entry so that CBP can  determine whether that particular vessel has reached the annual fee cap. If  a payer misplaces the receipt proving that the vessel has reached the fee  cap, the fee must be paid. The payer may request a refund if the receipt is  later found, although several stakeholders told us this process is lengthy  and burdensome. Some stakeholders and CBP field office staff expressed  frustration with the paper-based system and told us that an automated  payment and record-keeping system would speed the collection process,  reduce the likelihood of payment errors, and reduce administrative costs  for both parties.
These administrative challenges are exacerbated by the recent increase in  the customs vessel inspection fee rate without a corresponding increase in  the annual fee cap. Before the fee was raised in April 2007, the annual cap  was equal to 15 payments. Some CBP officers told us that for both the  customs and AQI fees, they simply counted the number of times the fee  was paid within a given year to determine if a vessel had reached the cap.  The AQI vessel fee is paid at the same time as the customs vessel  inspection fee and is capped at an amount equaling 15 payments per year.  Because the customs fee was increased but the cap was not, the cap is  now equal to approximately 13.6 payments, meaning that the 14th payment  is less than the standard, per arrival fee amount. CBP officers must be  aware when processing payments that the 14th payment will be for a  different amount than the typical fee rate, and that the fee cap is now  structured differently than the AQI vessel fee.
section_title: Quarterly Remittance Schedule Delays Availability of Certain Passenger Inspection Fees
paragraphs: According to CBP officials, the quarterly remittance schedule for the  passenger inspection fees contributes to a several month delay between  the use of appropriated funds and receipt of reimbursement from the  immigration and AQI user fee accounts, which has delayed CBP’s ability to  spend funds on critical mission areas such as hiring personnel, purchasing  equipment, or travel. To address this challenge, CBP told us it has  developed a legislative proposal that would, in part, require monthly  instead of quarterly remittance. A representative of a cruise line industry  association we spoke with noted that monthly payments would increase  the administrative costs to the cruise lines, but that if a steadier supply of  funding helped CBP to provide better service, it would be worthwhile.
section_title: Oversight of Certain HMF Collections Is Insufficient
paragraphs: Insufficient coordination between CBP and the Corps inhibits CBP’s  ability to ensure that certain HMF payments are properly made; without  this information CBP cannot verify compliance with the fee. HMF  payments for passenger vessels, domestic shippers, and shipments into  foreign trade zones are paid quarterly by check to CBP (see fig. 3).  According to Corps officials, the Corps gathers information on domestic  vessel movements and could provide this information to CBP. However,  CBP does not request and the Corps does not share information with CBP  on these types of domestic freight movements, which would help ensure  that proper payments are made. An official from CBP’s Revenue Division  said if CBP had information on freight movements it could reconcile them  to HMF payments in order to monitor compliance rather than relying on  self-reported payer information. The Revenue Division receives this type  of “front-end reporting” for other, similar fees and, the official noted, front- end reporting is one of the best ways to establish a receivable and ensure  proper payment.
Furthermore, CBP does not systematically review late or improper HMF  payments for passenger vessels, domestic shippers, and shipments into  foreign trade zones or charge interest for these late payments and  therefore is not using an important tool to encourage timely payment.  CBP’s Revenue Division does not track whether these HMF payments are  paid on time or late. During the course of our work, CBP officials said that  CBP should be tracking and assessing interest and penalties on these late  payments. CBP reviewed recent payment history and found that   42 percent of payments—representing approximately 18 percent of the  total dollar value—were late. According to these officials, they are taking  steps to begin collecting interest on past and future late payments. They  estimate interest collections for last year to be about $182,000; they do not  yet have an estimate for annual penalties. Further, they said that they have  begun reviewing the authority related to penalties in order to determine an  appropriate dollar threshold that would trigger assessment and collection  actions.
Finally, CBP’s Regulatory Audits division has not conducted any audits  specific to the HMF since 1996; rather, the fee is audited incidentally  during the course of audits related to other fees or duties. Although CBP’s  audit selection strategy includes referrals from within and outside CBP,  CBP has not requested and the Corps has not offered any HMF-related  referrals.
In contrast to the HMF collections process for passenger vessels, domestic  shippers, and shipments into foreign trade zones, CBP’s collection process  for both the MPF and HMF assessed on formal customs entries has several  advantages. CBP accepts electronic payment for these fees along with  customs duties, which are typically paid by a customs broker on behalf of  an importer. CBP’s automated system allows entry summaries to be  electronically transmitted, validated, confirmed, corrected, and paid,  which expedites the release of merchandise. Customs brokers we spoke  with said that the system works well, is efficient, and imposes minimal  administrative costs. It is less costly for the government and payers of the  fee for CBP to collect the fee as part of the formal entry process than it  would be for the Corps or another entity to establish a new collections  process because CBP already values cargo for the assessment of duties, so  there is no duplication of effort. Further, when CBP conducts audits on  the value of cargo to determine if the declared value of the goods is  correct, CBP also determines if the correct amount was paid for HMF and  MPF. Because these are ad valorem fees, if the value of the goods is  understated, additional HMF and MPF fees may be due.
section_title: Misalignments Exist between Fee Collections and Activities for Which They May Be Used
paragraphs: All of the fees we reviewed suffer from some misalignment—although the  nature of that misalignment varies—which affects how the fees are used.  Similar to the airline passenger inspection fees, not all authorized,  reimbursable activities for the sea passenger and vessel inspection  customs fees and MPF are associated with conducting inspections, and  not all inspection-related activities may be charged to these fees. HMF  collections far exceed funds appropriated for harbor maintenance,  resulting in a large and growing surplus in the Harbor Maintenance Trust  Fund (HMTF), while Corps officials and port stakeholders assert that  many federally managed channels are undermaintained.
subsections: section_title: For Customs Inspection and Merchandise Processing Fees There Are Disconnects between Reimbursable Activities and Activities Involved in Inspections
paragraphs: The customs inspection activities and the authorized uses for the customs  passenger and vessel fee collections are misaligned. For example, under  the customs authorizing statute, passenger inspection fee collections are  only available to reimburse appropriations for a limited, prioritized set of  activities—including foreign language proficiency awards and transfers to  the Treasury’s General Fund of not more than $18 million for the purposes  of deficit reduction. Further, as we discussed earlier, by statute customs  inspection-related activities that occur while a CBP officer is earning  overtime or premium pay, or during preclearance, can be funded by the  user fees, but the same activities conducted during regular time cannot be  funded by the fee. Therefore, not all of the activities that may be funded  from the customs fee are associated with conducting customs inspections,  and not all customs inspection activities are reimbursable (i.e., can be  covered by funds from the user fee account). Moreover, use of the  customs vessel and sea passenger fee collections is not restricted to vessel  and sea passenger inspections. Rather, they may be used to reimburse  authorized inspection activities conducted at air, sea, or land ports of  entry.
Similar alignment issues exist with the MPF. CBP officials said that since  the events of September 11, 2001, the focus of merchandise processing has  shifted toward security and away from the original focus on trade  compliance. They said that certain activities associated with merchandise  processing and performed by CBP officers, including screening and  inspecting conveyances (including nonintrusive searches), processing  seized narcotics, and inspecting vessels and containers, are not  reimbursable MPF activities, but should be. According to CBP officials, the  legislation governing the MPF should be explicitly consistent with CBP’s  mission—that revenue and commercial functions should include  commercial as well as security and antiterrorism elements.
section_title: There Is No Link between the Amount of Annual HMF Collections and Expenditures
paragraphs: Since 2003, HMF collections have significantly exceeded funds  appropriated for harbor maintenance, resulting in a large and growing  surplus in the trust fund. This may be inconsistent with users’ expectations  of the fee’s purpose as laid out in statute and the principles of effective  user fee design. Specifically, the authorizing legislation generally  designates the use of HMF collections for harbor maintenance activities.  Furthermore, according to stakeholders, this misalignment between fee  collections and expenditures undermines the credibility of the HMF.  According to CBP data and Treasury reports, in 2001 HMF collections  exceeded expenditures by about $44 million, and by 2007 that gap had  grown to over $506 million (see fig. 4).
There are several reasons why growth in collections has outpaced growth  in expenditures. Total collections grew 101 percent from $704 million to  $1.416 billion from 2001 to 2007. Corps officials told us this was driven by  the ad valorem nature of the fee—receipts grow with both volume and  value of shipments. Annual harbor maintenance project expenditures,  which are subject to annual appropriation, grew more slowly—from   $660 million in 2001 to $910 million in 2007 (38 percent).
The difference between the amount collected and the amount expended  has led to a growing balance in the HMTF. In addition, the HMTF is  credited with interest on its surplus. Between fiscal years 2001 and 2007,  the balance in the HMTF grew from $1.8 billion to $3.8 billion and Corps  officials told us they expect it to reach $8 billion in fiscal year 2011 (see  fig. 5).
Since 1996, the President has included in his annual budget requests and  Congress has appropriated $3 million from the HMTF to compensate CBP  for costs associated with collecting the fee. However, CBP finance officials  told us that they estimate the annual cost of collecting the HMF to be  approximately $2 million. Officials at the Corps and CBP were unable to  explain why the President’s budget request for this activity was higher  than the estimated cost of collecting the fee. The Corps prepares an annual  report to Congress on the Harbor Maintenance Trust Fund, which includes  a substantive review of the fee, but does not include information on these  costs.
The HMTF is not the only fund for which revenues flow in automatically  from earmarked taxes or fees and spending must be appropriated. In the  1990s the Highway Trust Fund also built up a surplus. At the time,  Congress and the President modified the discretionary spending caps to  provide for a separate cap on highway funding. In 1998, Congress specified  a more automatic link between spending from the Highway Trust Fund  and receipts into the Trust Fund. The experience with these annual  adjustments, known as Revenue Aligned Budget Authority (RABA),  highlights some problems with such links. Spending was tied to estimated  receipts with a retroactive adjustment; this worked only as long as the  adjustments were positive—when receipts came in below estimated levels  and would have resulted in an automatic cut in highway program funding  levels, the cut was overridden. A different mechanism is used for the  Food and Drug Administration (FDA) prescription drug user fee: if actual  FDA fee collections are higher than the amount appropriated, FDA must  adjust fee rates in a subsequent year to reduce its anticipated fee  collections by that amount.
Even if there were a tighter link between collections and expenditures, the  HMTF should not necessarily aim for a zero balance. Corps officials and  some stakeholders agreed that there are good reasons to consider  maintaining a positive balance in the trust fund. Where fees are expected  to cover program costs and program costs do not necessarily decline with  a drop in fee revenue, a reserve can be important. For example, the AQI  fees are maintained with a reserve of approximately 3 months worth of  program costs in case of emergency. According to APHIS, the reserve is  necessary because the AQI program is funded solely through user fee  collections.
As with similar situations, deciding whether and how to link HMF  collections with expenditures is complicated. On the one hand, aligning  collections and expenditures can promote economic efficiency and  enhance stakeholder support for the fee. On the other hand, increased  spending on harbors or reduced fee collections would increase the federal  deficit, unless spending in other areas was decreased or other collections  or revenues were increased. Moreover, our prior work shows that  providing guaranteed funding levels to any one activity in the budget  protects that activity from competition with other areas for scarce  resources and limits Congressional discretion to make trade-offs in  spending priorities. Regardless of the approach taken, a reduction in fee  receipts or an increase in appropriations—absent offsetting changes  elsewhere—will increase the federal deficit. Given the fiscal pressures  imposed by the nation’s large and growing structural deficits, decisions  about changing the HMF should consider its continued relevance and  relative priority within the context of reexamining the base of all major  federal spending and tax programs.
section_title: Despite the Harbor Maintenance Trust Fund Balance, Backlogs Result in Costly Delays and Could Affect Shipping Conditions
paragraphs: Despite large and growing balances in the harbor maintenance trust fund,  both Corps officials and other stakeholders told us that there is a backlog  of harbor maintenance, which can result in costly delays and more  dangerous shipping conditions. A recent Corps analysis of the 59 busiest  commercial federal channels in the U.S. found that the authorized depth  was available in the middle of the channel only approximately 35 percent  of the time in fiscal year 2005 and 33 percent of the time in fiscal year  2006. Although ships continue to use these channels and harbors, not  maintaining them to their justified design dimensions can cause problems.  For example, according to Corps officials in one port we visited, some  vessels are delayed because they have to wait for high tide in order to pass  through the channels. They also reported instances where ships skipped a  port of call altogether if such a delay would have caused the ship to miss  its scheduled appointment at the Panama Canal. These types of  disruptions affect both regional commerce and port profits. A 2007 report  by the U.S. Committee on the Marine Transportation System (CMTS)  found that vessels often deal with the challenges of poorly dredged and  maintained channels and harbors by “light loading,” i.e., loading less cargo  than their full capacity, in order to reduce their sailing draft; this in turn  increases shipping costs. Furthermore, if a port is not well maintained, it  may lack the capacity to handle increasingly larger vessels and therefore  lose business or drive up costs. For example, according to South Carolina  State Ports Authority officials, the authorized depth of the Port of  Georgetown is 27 feet, but the channel has silted in to 25 feet on numerous  occasions over the past several years. With the channel at only 25 feet, a  company bringing in rock for the regional construction industry can only  bring in about 24,000 tons per vessel, down from 28,000 tons with a 27-foot  channel. They said that this “light-loading” of vessels significantly drives  up its operating cost and impacts construction costs.
The 2007 CMTS report found that channel limitations may lead to unsafe  conditions and interaction with other vessels. Consistent with this finding,  according to a Corps after-action report, a full oil tanker ran aground in  East Rockaway, New York, in 2006 due in part to a lack of maintenance.  Corps officials said the Corps now uses a performance-based budgeting  model to set harbor maintenance priorities, in which projects are  prioritized primarily by the amount and value of commercial tonnage  moving through the harbor or channel. As part of this effort, the Corps is  developing a national estimate of the cost to make the 59 busiest channels  available 95 percent of the time at their full-use dimensions, but there is no  timeline for completing that study.
section_title: Lack of Substantive Review and Mechanisms for Substantive Stakeholder Input Impede Agency and Congressional Oversight and Ability to Align Program Costs and Activities
paragraphs: Without regular, substantive fee reviews, agencies, stakeholders, and  Congress lack complete information about changing program costs and  whether authorized, reimbursable activities align with program activities.  For example, CBP and APHIS report separately on the customs,  immigration, and AQI vessel fees, and the reviews generally do not reflect  input from the other. Furthermore, CBP’s review of the MPF does not  detail program costs and project fee collections, or provide enough  information to determine if the amount, structure, or authorized uses of  the fee should be updated. Because user fees represent a charge for a  service or benefit received from a specific government program, payers  may expect a tight link between payments and services, including  expectations about the quality of the related service. Although there are  opportunities at the local level for payers to provide input on fees and the  services they support, opportunities for payers to communicate with the  Corps and CBP at the national level are limited. Ineffective communication  may reduce stakeholder cooperation and support for the fees, contribute  to misunderstandings and confusion about how the fees work and what  activities they may fund, and inhibit the agencies’ ability to obtain input  from stakeholders about fees and the programs that they fund.
subsections: section_title: CBP Reviews of Inspection Fees Do Not Include Information from APHIS and ICE
paragraphs: Congress does not have a comprehensive view of the vessel and passenger  AQI, customs, and immigration inspection fees and how they work  together, and may therefore lack important context for reviewing them. As  we found in our recent review of the related air passenger fees, despite  integration of the inspection processes for the three sea passenger and  vessel fees, the administering agencies report separately on their  respective fees. DHS has acknowledged that the challenges described in  our previous work extend beyond air passenger inspections to other fees  managed by the agency. In the case of the AQI, customs, and immigration  vessel and sea passenger fees, the agencies and Congress lack information  on the total costs of the combined inspections, and therefore do not know  whether fee collections cover the costs of the consolidated inspection  program. We have previously reported that agencies with shared  responsibilities for common outcomes or related functions should  reinforce agency accountability for collaborative efforts through common  planning and reporting. CBP prepares a biennial report with summaries  and key points for each of the user fees that it administers. CBP’s user fee  review includes the customs fee, the portion of the AQI fee CBP receives,  and the immigration fee. However, the information provided about the  immigration fee did not include any input from ICE, which did not have  cost information about its portion of the immigration fee at the time.  APHIS’s review includes the entire AQI fee, but does not include any  information from CBP on its portion of the agriculture inspections and is  based only on APHIS’s analysis of the fee collections and inspection costs.
section_title: CBP Reviews of the MPF Do Not Provide Sufficient Information on Collections and Program Costs
paragraphs: Although CBP includes the MPF in its biennial user fee review, the  information provided is not sufficient to project fee collections or to  provide assurance that the amount of the fee is aligned with program  costs. Without this information, CBP is not able to determine if the  amount, structure, or authorized uses of the fee should be updated or to  recommend changes to the fee statute. According to CBP Office of  Finance officials, CBP has reliable information on the extent to which  MPF collections cover the costs of related activities only for the past few  years. These officials noted that as recently as 2003, cost calculations have  included activities that are not directly associated with processing cargo  or that are covered by other fee programs. Furthermore, CBP cannot  reliably project future MPF collections because the agency has not  estimated the effects of exemptions, entries made through foreign trade  zones, the decline in the constant dollar value of the minimum and  maximum fees, or changes in import demographics on total MPF  collections. CBP data on MPF collections and program costs indicate that  since fiscal year 2004 collections have increased relative to program costs  and in fiscal years 2006 and 2007 collections exceeded costs by a total of  approximately $221 million (see fig. 6).
CBP’s most recent biennial report notes that a detailed analysis of the  current and projected effects of MPF exemptions and an accurate cost  estimate for processing merchandise is needed. CBP officials told us that  they plan to conduct a detailed review of the MPF in the second phase of a  three-phase review of the agency’s user fees. They said that they estimate  beginning the MPF review in early 2008, but the timeline depends on when  the first phase is completed.
section_title: Stakeholders Have Limited Opportunities for Input on Fee Programs
paragraphs: Agencies can accommodate stakeholder input in various ways. We have  previously reported on both the need to accommodate stakeholder input  as well as various models for doing so. Some Corps and CBP officials  have established successful, two-way communication practices at the local  level. For example, some Corps division offices publicly post survey  results and maps showing the controlling depth reports for local harbors  and channels. One local Corps official said this practice encourages more  dialogue with stakeholders, noting that they will e-mail the office to find  out when highlighted areas will be dredged. Also, several of the CBP field  offices we visited hold regular meetings with port stakeholders to share  information and address stakeholder concerns.
However, there is currently no formal vehicle for payers of the HMF and  other port stakeholders to provide input to the Corps on the HMF itself or  on national harbor maintenance projects and priorities supported by the  fees. The HMF authorizing legislation did not establish an HMF advisory  committee, though it did establish an advisory committee for a similar  program that funds new work construction and rehabilitation on inland  waterways. The purpose of this Inland Waterways Users Board is to make  recommendations on priorities and spending for inland waterway  construction and rehabilitation projects.
As we have previously reported, both the customs and immigration  passenger inspection fee statutes required the establishment of advisory  committees consisting of industry representatives to advise the agency on  issues related to inspection services, including fee levels. CBP’s Airport  and Seaport Inspections User Fee Advisory Committee meets biannually  to advise the commissioner of CBP on issues related to the performance of  airport and seaport agriculture, customs, or immigration inspections. The  committee members represent entities subject to the fees, including  airlines, airports, cruise lines, and industry associations. We recently  reported that stakeholders felt that the advisory committee provided only  limited opportunities for substantive two-way communication. As a  result, they said they lack data necessary to know whether the passenger  inspection fees are set fairly or accurately, or are being spent on the  appropriate activities.
Our prior work found that federal advisory committees play an important  role in shaping public policy by providing advice on a wide array of  issues. Their advice can enhance the quality and credibility of federal  decision making. Despite the strengths associated with the federal  advisory committees as a means to facilitate effective stakeholder input,  agencies also need to be careful to maintain their mission to promote the  public interest and take measures to safeguard against actual or perceived  agency capture by the entities paying the fee. According to a  Congressional Research Service report on the FDA prescription drug user  fees, some critics said that giving the pharmaceutical industry a role in  setting program performance goals creates conflicts of interest and gives  the industry too much influence over FDA actions. Agencies also need to  ensure that all stakeholders are given the opportunity to engage  substantively. Some smaller businesses have raised concerns that FAA  only consults with selected major airlines and manufacturers, ignoring  commuter airlines and smaller businesses also affected by FAA  regulations.
section_title: Stakeholders Have Concerns about Port- Related Fees and the Services They Support
paragraphs: Many of the stakeholders we spoke with said that although the ad valorem  structure of the HMF makes it relatively easy to administer, it raises  concerns about equity. Specifically, they noted there is no link between  the value of their cargo and the depth or width of the harbor needed by the  ship on which it is carried. For example, importers of high-value goods,  such as natural gas and pharmaceuticals, told us they essentially pay a  much greater share of dredging costs than importers of low-value cargo.  Stakeholders said that a ship’s size and draft combined with harbor  conditions drive harbor maintenance costs, and therefore may more  closely link benefits received with the cost of providing the benefits. Other  stakeholders noted that a benefit of the ad valorem structure is that it may  better reflect the users’ ability to pay.
Some stakeholders also said that because the HMF fee structure does not  reflect the individual dredging needs of ports, i.e., lower for naturally deep  west coast ports that require very little dredging and higher for shallower  eastern seaboard and river ports that require annual dredging, the overall  cost of moving goods through the nation’s marine transportation system is  artificially high. On the other hand, applying the fee equally to all eligible  ports offers a relatively simple collection mechanism and helps to create a  level playing field for all ports, which in turn helps minimize competition  between individual ports. Even so, officials from ports located near  international borders told us the HMF disadvantages them relative to  nearby foreign ports. For example, Seattle Port Authority officials  consider the HMF to be a “punitive assessment” because they said it  decreases Seattle’s competitiveness against Canadian ports (which do not  charge the fee). These officials said that the Port of Vancouver actively  promotes itself as not charging the HMF, and said this partly explains why  the Port of Vancouver is growing at a faster rate than the Seattle port.
Whether the fee is based on the value of the cargo (ad valorem) or on the  size and draft of the ship is a separate decision from whether fees should  vary by the dredging needs and condition of a given port. In other words,  Congress could decide to impose a uniform fee structure at all ports even  if it chooses to change the design of that fee from ad valorem to one based  on a ship’s size or draft.
Stakeholders expect that inspections will occur in a timely manner. Cruise  lines, importers, and ships’ agents all said that delays for passenger and  vessel inspections are costly to industry. Because crew members cannot  disembark and, in some ports, the cargo cannot be unloaded until a ship is  cleared, these delays can be expensive. One agent said that a 1-hour delay  can cost a carrier $15,000 in longshoreman labor costs. Another agent said  that crew changes cannot occur until a vessel has cleared its immigration  inspection. During this time, the ship must pay expenses for two crews.  Stakeholders told us that when multiple ships arrive at the same time,  ships have waited up to 4 hours before being cleared. CBP officials told us  that these types of inspection delays are generally caused by staff  shortages, outdated or crowded facilities, clustered arrivals, or some  combination of these factors. We recently reported similar findings related  to delays for arriving international air passengers.
section_title: Conclusions
paragraphs: Although the need to address some of the user fee challenges presented in  this report may appear obvious, how to accomplish this is less clear.  Where appropriate, changes made to one fee should be designed to  complement rather than conflict with the other fees. The separate,  disparate fees supporting the largely consolidated inspection process  appear to aggravate disconnects between the customs passenger and  vessel fees and the corresponding inspection activities, and do not  adequately account for the costs imposed by different users. Unless  remedied, differences such as the way overtime charges are assessed for  commercial vessel inspections, as well as misalignments between actual  and reimbursable inspection activities, will persist, causing confusion and  raising equity concerns. Moreover, unless CBP automates its collection  methods, requires monthly remittance, and aligns fee rate increases with  the annual fee caps, CBP will continue to incur unnecessary administrative  costs and needlessly expose itself to delayed remittance and potential  errors that can result in revenue losses. Similarly, until CBP fully  implements a system to assess and collect interest and penalties on late  HMF payments, the federal government will continue to incur revenue  losses.
The extent and nature of the link between HMF collections and  expenditures are policy choices only Congress can make. However, vital  information about the tradeoffs associated with such a link is lacking.  Further, absent a vehicle for substantive HMF stakeholder input and two- way communication at the national level, stakeholder cooperation as well  as support and understanding of the fee will continue to suffer. Moreover,  funds requested and appropriated in excess of CBP’s collection costs for  the HMF reduces the amount of money available in the HMTF to be  appropriated for other purposes.
Unless agencies present a comprehensive picture of the customs,  immigration, and AQI fees, including the full scope of inspection activities  and their costs, Congress will continue to lack a complete picture of  whether the fees work in concert or conflict with each other, which could  hamper oversight. Furthermore, agencies will be less able to develop and  maintain the partnerships necessary to collect and distribute the fees as  efficiently and effectively as possible.
The lack of complete, transparent cost and collections data for the MPF  and AQI fees, and regular, formal opportunities to share such information  can prevent the agencies from addressing existing issues, including  possible misalignments between fee collections and program costs. More  broadly, if agencies cannot determine the extent to which these fees are  recovering costs, Congress cannot be sure that resources are allocated to  the activities it most values.
The principles of effective user fee design discussed earlier in this report  can both offer a framework for considering the implications of various  statutory structures and help clarify and illuminate the tradeoffs  associated with various policy choices available to Congress associated  with amending the individual statutes related to the fees discussed in this  report. Such a framework could also provide the basis for future reviews  of federal user fees as Congress works to ensure that user fee financing  mechanisms remain relevant and up-to-date.
section_title: Matters for Congressional Consideration
paragraphs: To support the efficiency and equity of the Harbor Maintenance Fee as  well as its credibility among stakeholders, Congress should consider  reviewing the link between the amount of the HMF and the amount of  expenditures for the harbor maintenance program; and    establishing an advisory committee on the HMF and the activities that it  funds, that includes payers of the fee.
section_title: Recommendations for Executive Action
paragraphs: We recommend that the Secretary of Homeland Security take the  following four actions:    Develop a legislative proposal, in consultation with Congress, to  harmonize the customs, immigration, and agricultural quarantine  inspections fees. Harmonizing the fees could include    eliminating the differences in the way charges for overtime inspections  are assessed to commercial vessel operators;  raising the cap on customs inspection fees for commercial vessels, in  line with the 2007 increase in this fee, so that the cap once again  corresponds to a whole number, rather than a fraction of payments;  revising the customs passenger and vessel inspection fees so that the  inspection activities the fees are authorized to fund are more closely  aligned with actual inspection activities; and  requiring monthly, rather than quarterly, collection of the customs and  immigration inspection sea and air passenger fees.
Direct CBP to automate its systems for collecting commercial vessel fees  to reduce the reliance on paper receipts for tracking payments and to  support electronic payments, rather than payment by check or cash.
Direct CBP to include in its biennial report on the Merchandise Processing  Fee information on total program collections relative to total program  costs, over time, as well as any recommendations for updating the amount  and authorized uses of the fee.
Assess interest and penalties on late HMF payments for domestic  shipments, shipments into foreign trade zones, and sea passengers.
We recommend that the Secretary of Agriculture take the following two  actions:  Improve the transparency of the regulatory process of setting the AQI fee  rates by providing clearer information about how the rates for each of the  fee types (vessel, air passenger, aircraft, etc.) are determined.  In accordance with OMB Circular No. A-25 guidance and U.S. Department  of Agriculture policy, include in AQI fees the indirect and imputed costs  currently not considered when setting AQI fee rates and either transfer the  appropriate portions of those collections to the general fund of the  Treasury as required, or seek Congressional approval to spend these  monies on related AQI program costs.
Further, we recommend that the Secretaries of Agriculture and Homeland  Security conduct joint reviews of the customs, immigration, and  agricultural quarantine inspection fees and consolidate reporting, to  include the activities and proportion of fees for which CBP, ICE, and  APHIS are each responsible, to provide a comprehensive picture of the  user fees supporting the sea passenger and vessel inspections processes.
Further, we recommend that the Secretaries of Homeland Security and the  Army direct CBP and the Corps to improve oversight of the HMF  collections by working together to develop    a method for the Corps to provide information on domestic vessel  movements to CBP;    a method for the Corps to provide referrals of audit candidates to the CBP  Office of Regulatory Audit to be considered in the context of CBP’s risk- based system for selecting audit candidates;  information on CBP’s costs to collect and administer the HMF, for  inclusion in the Corps’ annual report to Congress on the Harbor  Maintenance Trust Fund; and    an annual budget request for CBP-related salaries and expenses equal to,  rather than in excess of, CBP’s actual costs associated with collecting the  HMF.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to the Secretaries of Homeland Security  and Defense, and to the Acting Secretary of Agriculture for review. We  received written comments from the Department of Homeland Security  (DHS), which are reprinted in appendix III, and oral comments from the  Departments of Agriculture (USDA) and Defense (DOD). In addition, each  agency provided technical comments, which we incorporated as  appropriate. We also provided portions of the report to nonfederal  stakeholders for their review and made technical corrections as  appropriate.
DHS characterized the report as balanced and accurate and agreed with  the overall substance and findings of the report. Of the six  recommendations directed at DHS, DHS concurred with five of them and  partially concurred with the sixth. Specifically, DHS concurred in part  with our recommendation to automate collections of the customs and AQI  fees assessed on commercial vessels, stating that the agency will analyze  the feasibility of this approach and work to identify and obtain funding to  implement the recommendation if it is deemed cost beneficial. We  appreciate that DHS recognizes the importance of using cost-effective  methods to collect fees and look forward to receiving regular updates on  DHS’s and CBP’s progress in this area.
In its oral comments, USDA noted it was impressed with the level of  explanatory detail and analysis contained in the report and said it  generally agreed with our recommendations. Regarding our  recommendation that USDA include certain indirect and imputed costs  when setting the AQI fee rates, the agency said it will review the fee and  seek guidance from its Office of the Chief Financial Officer and Office of  General Counsel on this issue.
USDA noted that it has been APHIS’s position that because USDA receives  appropriations to pay for departmental and staff office costs and OPM  receives appropriations for imputed costs such as future retirement  benefit expenses, APHIS did not have the authority to include those costs  in the fee. We interpret the AQI user fee statute, however, as permitting  USDA to recover all costs associated with its program, including imputed  and indirect costs. We recognize that imputed costs, such as retirement  and unfunded pension liabilities, may be more directly linked to the fee- funded activity and more easily calculated than seeking to allocate  departmental and staff office costs. Further, “full cost recovery” should be  viewed from a governmentwide perspective. Even though USDA would  have to deposit those portions of user fee collections as miscellaneous  receipts in the general fund of the Treasury, and therefore would not  directly reimburse the relevant appropriation account under a specific  statute, it would still defray a cost that Congress determined should be  paid for by the user fees. If USDA believes that the statutory authority  does not permit it to cover such indirect and imputed costs, then we  believe USDA should seek additional authority from Congress consistent  with our recommendation.
USDA also noted that it will need to (1) work with DHS to identify DHS’s  imputed costs for the AQI program and (2) consider the impact of the fee  increase on payers. We recognize that if incorporating these costs will  substantially increase the AQI fees, a measured approach that  incorporates the costs gradually may be appropriate.
DOD provided oral comments, and concurred with the findings,  conclusions, and recommendations of the report related to the Army  Corps’ Harbor Maintenance Fee.
As agreed with your office, unless you publicly announce its contents  earlier, we plan no further distribution of this report until 30 days after its  date. At that time, we will send copies to the Secretaries of Homeland  Security, Agriculture, Army, and Defense and interested Congressional  committees. We will also make copies available to others on request. In  addition, this report will be available at no charge on the GAO Web site at  http://www.gao.gov.
If you or your staff have any questions about this report, please contact me  on (202) 512-9142 or irvings@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made major contributions to this report are  listed in appendix IV.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: In order to provide context as Congress considers funding options for port  programs, we examined (1) what is known about the way selected fees  assessed on air and sea port users are set, collected, used, and reviewed  (including the views of stakeholders) and (2) the effects of these attributes  on program operations.
To meet this objective, we examined selected fees that are assessed on  port users; specifically the Harbor Maintenance Fee (HMF), Merchandise  Processing Fee (MPF), Customs Inspection Fees, Immigration User Fee,  and Agricultural Quarantine Inspection (AQI) User Fees. In selecting the  fees, we reviewed relevant policy and economic literature, interviewed  user fee experts, and examined Office of Management and Budget data on  user charges. We chose these fees because they are levied upon port users,  and are related to maritime, safety, and homeland security programs.  Additionally, we chose them because they vary in their key design  characteristics, specifically in the way in which they are set, collected,  used, and reviewed.
In examining the fees, we reviewed user fee legislation and guidance,  agency documents, and literature on user fee design and implementation  characteristics. We interviewed officials responsible for managing the  selected user fees at the U.S. Army Corps of Engineers (Corps), the U.S.  Department of Agriculture’s Animal and Plant Health Inspection Service  (APHIS), and the U.S. Customs and Border Protection (CBP) offices in  Washington, D.C. CBP administers the MPF and Customs inspection fees,  and it collects the HMF on behalf of the Corps. CBP administers the  Immigration user fees jointly with U.S. Immigration and Customs  Enforcement (ICE) and the AQI user fees jointly with APHIS.
To select the ports that we visited, we consulted with port security experts  from within and outside of GAO, with CBP and Corps officials, and with  outside stakeholders, in order to choose ports that varied in their type and  volume of trade and commerce (including cruise lines, container ships,  petroleum products, and liquefied natural gas); maintenance dredging  needs, and specific issues facing them such as a high volume of  commercial cargo, security challenges, or proximity to a land border or  intricate river system. We also considered travel costs in selecting the site  visits. In light of the significant amount of ongoing audit work in the Gulf  region, and because other ports in our selection are representative of  important characteristics associated with Gulf ports, we did not include a  Gulf port in our selection so as not to unnecessarily burden an area in  crisis. The ports we selected include medium and large ports, natural  deepwater ports, and those that require frequent dredging. We visited the  ports of Boston, Massachusetts; Charleston, South Carolina; Newark, New  Jersey/New York, New York; Baltimore, Maryland; Miami, Florida; Port  Everglades, Florida; Seattle, Washington; and Los Angeles/Long Beach,  California. At these ports, we observed passenger, vessel, and cargo  inspections, and interviewed officials from CBP and Corps field offices. At  each port, we spoke with various stakeholders, including port authority  officials, customs brokers, shipping agents, harbor pilots, importers, and  cruise line officials. We also met with the following national stakeholder  organizations: the American Association of Port Authorities, the Cruise  Lines International Association, the Association of Ship Brokers and  Agents, the National Association of Maritime Organizations, and the World  Shipping Council. We coordinated our work with another GAO team that  was examining the customs, AQI, and immigration air passenger  inspection fees, and drew upon their audit findings as appropriate.
In addition, we reviewed collections and cost data for each of the fees,  data on balances in the Harbor Maintenance Trust Fund, and data on  channel availability provided by the Corps. We asked questions about  APHIS, CBP, and Corps internal controls for the data we used and  determined that the data were sufficiently reliable for the purposes of this  report. We performed our work from February 2007 through February  2008 in accordance with generally accepted government auditing  standards.
section_title: Appendix II: Summary of Fees by Payer
paragraphs: Appendix II: Summary of Fees by Payer The HMF is not assessed on domestic cargo valued at less than $1,000, and quarterly payment is  not required if the total value of all shipments for which a fee was assessed for the quarter does not  exceed $10,000. No payment is required for imported cargo that is entitled to be entered under  informal entry procedures.
section_title: Appendix III: Comments from the Department of Homeland Security
section_title: Appendix IV: GAO Contact and Staff Acknowledgments
subsections: section_title: Staff Acknowledgments
paragraphs: Jacqueline M. Nowicki (Assistant Director) and Susan E.M. Etzel managed  this assignment. Jessica Nierenberg, Kathleen Padulchick, and Amy  Rosewarne made key contributions to all aspects of the report. Jay  Cherlow, Chelsa Gurkin, Terrance N. Horner, Alessandra Rivera, and Jack  Warner also provided assistance. In addition, Pedro Briones and Carlos  Diz provided legal support and Donna Miller developed the report’s  graphics.