Case: SEAFARERS INTERNATIONAL UNION OF NORTH AMERICA et al., Appellants/Cross-Appellees, v. UNITED STATES COAST GUARD et al., Appellees/Cross-Appellants
Abbreviation: Seafarers International Union v. United States Coast Guard
Decision Date: 1996-04-12
Docket Number: Nos. 95-5016, 95-5017
Citation: 317 U.S. App. D.C. 84
Volume: 317
Reporter: United States Court of Appeals for the District of Columbia Circuit
Court: United States Court of Appeals for the District of Columbia Circuit
Jurisdiction: District of Columbia
Parties: SEAFARERS INTERNATIONAL UNION OF NORTH AMERICA et al., Appellants/Cross-Appellees, v. UNITED STATES COAST GUARD et al., Appellees/Cross-Appellants.
Judges: Before: EDWARDS, Chief Judge, HENDERSON and ROGERS, Circuit Judges.
Pages: 84–100

Head Matter:
81 F.3d 179
SEAFARERS INTERNATIONAL UNION OF NORTH AMERICA et al., Appellants/Cross-Appellees, v. UNITED STATES COAST GUARD et al., Appellees/Cross-Appellants.
Nos. 95-5016, 95-5017.
United States Court of Appeals, District of Columbia Circuit.
Argued Nov. 7, 1995.
Decided April 12, 1996.
David E. Frulla, Washington, DC, argued the cause for appellants/cross-appellees, with whom Stanley M. Brand was on the briefs.
Frank A. Rosenfeld, Washington, DC, United States Department of Justice, argued the cause for appellees/cross-appellants, with whom Frank W. Hunger, Assistant Attorney General, Eric H. Holder, Jr., United States Attorney, and William G. Kanter, Deputy Director, were on the briefs. Alfred Mollin, Senior Counsel, entered an appearance.
Before: EDWARDS, Chief Judge, HENDERSON and ROGERS, Circuit Judges.

Opinion:
Opinion for the Court filed by Chief Judge EDWARDS.
Separate opinion concurring in part and dissenting in part filed by Circuit Judge HENDERSON.
HARRY T. EDWARDS, Chief Judge:
This case arises out of the Coast Guard's establishment of fees for maritime licensing, certification of registry, and merchant mariner documentation. In 1990, with the passage of section 10,401 of the Omnibus Budget Reconciliation Act of 1990 ("OBRA 1990"), Pub.L. No. 101-508, 104 Stat. 1388-397 (Nov. 5, 1990) (codified as amended at 46 U.S.C. § 2110(a) (Supp. IV 1992)), Congress authorized the Coast Guard to collect "user" fees, so long as any such fees were collected in accordance with the Independent Offices Appropriations Act ("IOAA"), 31 U.S.C. § 9701 (1988). A coalition of unions now challenges the fee schedule, arguing that the Coast Guard has no statutory authorization to impose the particular fees in question.
The Supreme Court has made it clear that, as a general matter, a person who seeks to obtain an occupational license may be charged a fee to reimburse the licensing agency for the cost of processing the license. See National Cable Television Ass'n v. United States, 415 U.S. 336, 340-41, 94 S.Ct. 1146, 1148-49, 39 L.Ed.2d 370 (1974) ("NCTA"). The only question we face, therefore, is whether the actual licensing scheme adopted by the Coast Guard is reasonably necessary to fulfill the substantive demands underlying the licensing process authorized by OBRA 1990 and related statutes. If so, then, under the IOAA, the agency may charge the applicant a fee to process the license. If not, a user fee is impermissible.
Under this test, we hold that the bulk of the fees being challenged by the unions are permissible under the IOAA, and we therefore affirm the District Court's finding to that effect. However, we reverse the trial judge's ruling that the Coast Guard cannot charge a first-time applicant a fee to perform a Federal Bureau of Investigation ("FBI") background check, because we find that the agency is statutorily required to determine whether an applicant has a disqualifying criminal record. Therefore, to the extent that the FBI check is limited to the criminal history of the applicant, the fee is permissible. Nevertheless, we remand on this question so that the District Court can determine whether the actual check performed by the FBI sweeps more broadly than is required by the underlying statute, thereby rendering part of the fee excessive.
I. Background
A. The Statutory Scheme
The Coast Guard is authorized by statute to issue merchant mariner licenses, certificates of registry, or merchant mariner documentation (depending on the specific job classification) to qualified individuals seeking to work aboard a United States merchant marine vessel. See generally 46 U.S.C. Subtitle II, Part E (1988). These documents serve as occupational licenses, because an individual must possess one to work in the merchant marine.
The Coast Guard began charging fees for issuing the documents in question following the passage of OBRA 1990, which authorized the Coast Guard to establish user fees in accordance with the IOAA. Originally passed in 1951, the IOAA directs that "[t]he head of each agency . may prescribe regulations establishing the charge for a service or thing of value provided by the agency." 31 U.S.C. 9701(b) (1988). The only limitations on the fees are that they be "fair," and based on "(A) the costs to the Government; (B) the value of the service or thing to the recipient; (C) public policy or interest served; and (D) other relevant facts." Id.
B. The Fee Structure
On June 20, 1991, the Coast Guard issued a Notice of Proposed Rulemaking ("NPRM") to establish fees for the issuance of merchant mariner licenses, certificates of registry, and merchant mariner documents. 56 Fed.Reg. 28,448. The NPRM proposed a fee schedule based on the three phases of the licensing process: (1) an evaluation fee (covering the cost of processing and evaluating the application); (2) an examination fee (covering the cost of scheduling, proctoring, and grading examinations and then notifying examinees of the test results); and (3) an issuance fee (covering the cost of issuing original, duplicate, or replacement licenses, certificates, or documents). In addition, the Coast Guard proposed to charge all first-time applicants a $17 fee to cover the cost of an FBI criminal record check.
On March 19,1993, the Coast Guard issued a final rule entitled "User Fees for Marine Licensing, Certification of Registry and Merchant Mariner Documentation." 58 Fed.Reg. 15,228 (codified in scattered sections of 46 C.F.R. (1993)). While revising some of the fees downward, the final rule retained the fee schedule essentially intact.
C. The District Court's Decision
On April 15, 1993, a coalition of United States maritime labor organizations and individual merchant seamen and boatmen filed this action challenging the final rule imposing the fees. Subsequently, both parties filed cross-motions for summary judgment. On November 23,1994, the District Court denied the Government's motion for summary judgment, and granted the unions' motion for summary judgment in part and denied it in part. Seafarers Int'l Union v. United States Coast Guard, 871 F.Supp. 9 (D.D.C.1994).
The District Court rejected the unions' claim that the Coast Guard has no authority under the IOAA and OBRA 1990 to assess any fees for its licensing and documentation services. The unions had argued that the fees were impermissible under the IOAA because they primarily benefitted the public rather than the regulated individuals or entities. While acknowledging the "impressive array of historical materials" indicating that the purpose of merchant mariner licensing is to protect various public interests, the District Court nevertheless determined that the Coast Guard's "central contention that the license confers the benefit of professional employment is not irrational." Id. at 15-16. Therefore, the court ruled that the Coast Guard had established a private benefit sufficient to justify the fees.
The District Court did, however, grant the unions' motion for summary judgment with respect to the required FBI background check. The court found that, "[i]n contrast to the license itself, the FBI check does not confer a private benefit upon the individual applicant. The reason the agency conducts the FBI check is primarily maritime safety." Id. at 16-17. Accordingly, the court prohibited the Coast Guard from charging applicants for the background checks.
II. Analysis
The IOAA itself provides little specific direction on how to assess the propriety of user fees. However, the Supreme Court long ago set' forth the considerations that control agency determinations to assess fees for Government services:
Taxation is a legislative function, and Congress, which is the sole organ for levying taxes, may act arbitrarily and disregard benefits bestowed by the Government on a taxpayer and go solely on ability to pay, based on property or income. A fee, however, is incident to a voluntary act, e.g., a request that a public agency permit an applicant to practice law or medicine or construct a house or run a broadcast station. The public agency performing those services normally may exact a fee for a grant which, presumably, bestows a benefit on the applicant, not shared by other members of society. It would be . a sharp break with our traditions to conclude that Congress had bestowed on a federal agency the taxing power.... A "fee" connotes a "benefit" and the [IOAA] by its use of the standard "value to the recipient" carries that connotation.
NCTA, 415 U.S. at 340-41, 94 S.Ct. at 1149 (footnote omitted). As is obvious from the foregoing quotation, the Court in NCTA carefully distinguished between a permissible user fee and an unconstitutional tax. In so doing, the Court made it clear that a user fee will be justified under the IOAA if there is a sufficient nexus between the agency service for which the fee is charged and the individuals who are assessed.
This same analytical framework, focusing on the value of the service to the recipient, was adopted by the Court in a companion ease decided the same day, Federal Power Commission v. New England Power Co., 415 U.S. 345, 94 S.Ct. 1151, 39 L.Ed.2d 383 (1974) ("NEPCO"). There the Court held that fees are valid so long as the agency levies "specific charges for specific services to specific individuals or companies." Id. at 349, 94 S.Ct. at 1154. Under this test, it does not matter whether the ultimate purpose of the regulatory scheme giving rise to the license requirement (and accompanying user fee) is to benefit the public. Indeed, the Supreme Court in NCTA rightly recognized that a regulatory scheme would be a "failure" if some benefits did not ultimately inure to the public. NCTA 415 U.S. at 343, 94 S.Ct. at 1150.
Although the Court's rulings in NCTA and NEPCO broadly permit user fees in connection with the provision of specific services, the Court was careful to caution against a literal reading of the IOAA, which, by its terms, also permits fees based on "public policy or interest served." 31 U.S.C. § 9701(b)(2)(C). Such policy decisions, whereby an agency could, for example, adjust assessments to encourage or discourage a particular activity, would, according to the Court, "carr[y] an agency far from its customary orbit" and infringe on Congress's exclusive power to levy taxes. NCTA, 415 U.S. at 341, 94 S.Ct. at 1149. In particular, the Court in NEPCO made it absolutely clear that an agency could not assess fees, purportedly in the "public interest," to recoup some of the general costs to the Government of operating a particular regulatory scheme. On this point, the Court said:
if we are to construe the [IOAA] to cover only "fees" and not "taxes"—as we held should be done in the National Cable Television case, ante, p. [415 U.S.] 336 [94 S.Ct. 1146]—the "fee" presupposes an application whether by a single company or by a group of companies. The Office of Management and Budget (then known as the Bureau of the Budget) issued a circular in 1959 construing the Act. That circular stated that a reasonable charge "should be made to each identifiable recipient for a measurable unit or amount of Government service or property from which he derives a special benefit." (Emphasis added). The circular also states that no charge should be made for services rendered, "when the identification of the ultimate beneficiary is obscure and the service can be primarily considered- as benefitting broadly the general public."
We believe that is the proper construction of the Act. NEPCO, 415 U.S. at 349-51, 94 S.Ct. at 1154-55 (footnotes omitted). Accordingly, the Court made "value to the recipient" the measure of any fees imposed under the IOAA and essentially read the "public policy or interest served" language out of the statute. See NCTA 415 U.S. at 341-43, 94 S.Ct. at 1149-50. Thus, fees cannot be charged based on a perceived furthering of public policy goals if those fees are unrelated to a specific service provided by the agency to an identifiable recipient.
Unfortunately, in applying this Supreme Court precedent, we have sometimes faltered in offering reformulations of the Court's test. In Electronic Industries Ass'n v. FCC, 554 F.2d 1109 (D.C.Cir.1976), this court stated that "[e]xpenses incurred [by the agency] to serve some independent public interest cannot, under NCTA be included in the cost basis for a fee, although the [agency] is not prohibited from charging an applicant or grantee the full cost of services rendered to an applicant which also result in some incidental public benefits." Id. at 1115. This statement is consistent with the Supreme Court's ruling that user fees must be based on the cost of providing actual services without regard to any incidental public benefits that flow from, say, a licensing scheme. The court's purported distinction between "independent public interests" and "incidental public benefits," reflects a slight variation on the Supreme Court's test, but the deci sion in Electronic Industries is otherwise faithful to NCTA and NEPCO.
Although the court in Electronic Industries applied the Supreme Court's test correctly, it also reformulated the Court's language in NCTA "to require a certain nexus, a threshold level of private benefit, between the regulatee and the agency before a fee can be assessed against the recipient of the service." Id. at 1114. The notion of a "private benefit," first employed in Electronic Industries, was then expanded in Central & Southern Motor Freight Tariff Ass'n v. United States, 777 F.2d 722 (D.C.Cir.1985), where the court said:
As a general matter, an agency may charge a fee for a specific service that confers a special, "private benefit" on an identifiable beneficiary. See New England Power, supra, 415 U.S. at 349, 94 S.Ct. at 1154 (quoting with approval Circular A-25).
777 F.2d at 729. The problem with this statement of the test is that it suggests that a specific service to an identifiable beneficiary can form the basis for a fee only if the service confers such a private benefit. This idea finds no support in either NCTA or NEPCO; indeed, neither decision even refers to "private benefits."
The further problem raised by Central & Southern is that, because of the misguided reference to "private benefits," the decision can be misread to mean that an agency must weigh "public" versus "private" benefits in determining whether and in what amount to charge fees. That is exactly what the parties have done in this case.
Both parties have expended considerable energy trying to persuade the court that the public benefits derived from the licensing scheme are weightier than the private benefits, or vice-versa. The plaintiff unions argue persuasively that merchant mariner licensing, from its inception, has been designed to further public goals: to ensure passenger safety on the water, to provide a convenient list of available draftees in time of war, and, more recently, to combat the possibility that unqualified crew members could cause environmental harms. See generally Brief of Appellants/Cross-Appellees at 26-34. On the other hand, the Coast Guard contends, also quite reasonably, that the licenses, certificates, and documentation that can be obtained under the licensing regime provide a private employment benefit by enabling the recipient to hold specific jobs not open to the public at large. However, given the importance of both the public and the private interests at stake, it is pointless for a court to inquire which set of interests predominate. Weighing "public" versus "private" benefits is not what the Supreme Court intended in NCTA and NEPCO.
There is another point that the parties seem to miss: neither Congress nor an administrative agency could legitimately institute a licensing process were it not deemed to be in the "public interest." Given this fact, it is nonsensical to attempt to weigh the public versus private benefits of receiving the license. No license would even be necessary (or justified) were it not for the public benefits that prompted the licensing requirement in the first place. Indeed, as a philosophical matter, "private benefits" (as distinguished from "public benefits") has no real meaning in this context. This was highlighted in Mississippi Power & Light Co. v. NRC, 601 F.2d 223 (5th Cir.1979), cert. denied, 444 U.S. 1102, 100 S.Ct. 1066, 62 L.Ed.2d 787 (1980), where the court said that it was "not impressed by the petitioners' argument that they [should not be required to pay a license fee because they] receive no benefit from conferral of [a] license." Id. at 229. To accept such an argument, the court said, "would mean that no federal agency could assess any fees, since all public agencies are constituted in the public interest." Id. In other words, arguments about the presence or absence of "private benefits" go nowhere. That is why the IOAA and the Supreme Court in NCTA and NEPCO focus, instead, on identifiable recipients of a government service for which charges are being assessed, without regard to whether the services are perceived by the recipient to be personally beneficial. In short, the measure of fees is the cost to the government of providing the service, not the intrinsic value of the service to the recipient.
Thus, we do not believe the distinction between private and public benefits is useful to the resolution of this case, nor do we find that such a distinction is mandated by the Supreme Court's decisions in NCTA and NEPCO. Although the Court indicated that an agency can charge fees only for those services conferred upon an identifiable recipient, see NCTA, 415 U.S. at 343, 94 S.Ct. at 1150, this requirement does not entail determining whether the private benefits of those services outweigh their public benefits. Rather, the Court in NCTA and NEPCO was only concerned that agencies might assess fees that would be unmoored to actual services. Because there is no question here that the Coast Guard is performing specific services to identifiable recipients, this concern is not applicable.
Furthermore, the dissent's suggestion that we are "rewriting" circuit precedent is entirely unwarranted. Our approach is absolutely consistent, not only with the Supreme Court's formulations, but also this court's most recent IOAA decision, Engine Manufacturers Ass'n v. EPA 20 F.3d 1177 (D.C.Cir.1994). In that case, the court made passing reference to "private benefits," but nevertheless relied only on the correct test: "If the agency does confer a specific benefit upon an identifiable beneficiary . then it is of no moment that the service may incidentally confer a benefit upon the general public as well." Id. at 1180. In short, the notion of "private benefits" had no bearing whatsoever on the court's ultimate resolution of the case. This is the law, and we follow it.
Notwithstanding any confusion that may have been introduced with this court's (possibly inadvertent) reference to "private benefits," the original formulation in NCTA and NEPCO continues to provide a sound basis upon which to rest principled decisions in this area of the law. As a general matter, a person who is lawfully required to obtain an occupational license may be charged afee to reimburse the agency for the cost of processing the license. See NCTA 415 U.S. at 340-41, 94 S.Ct. at 1148-49. Therefore, a reviewing court, in deciding whether an agency may exact a fee in connection with a particular licensing scheme, need not pause to weigh the relative public and private interests underlying the scheme, but can instead turn to the relevant statute to determine the substantive requirements underlying the license. Then, the proper inquiry is whether the actual licensing procedures adopted by the agency are sufficiently related to the statutory criteria to justify assessing a fee. For example, if an agency is charged with ensuring that all those receiving licenses meet certain job-related eligibility criteria, the agency may exact a fee for administering any procedures reasonably necessary to ensure that those particular eligibility criteria have been met. See Electronic Indus., 554 F.2d at 1115 (The court ruled that the FCC can assess fees because the regulatory services in question "are required by statute, and the FCC is entitled to charge for services which assist a person in complying with his statutory duties.").
Where Congress has specifically laid out the relevant eligibility criteria, the inquiry is relatively simple. For example, 46 U.S.C. § 7503(b)(1) (1988) authorizes the Coast Guard to deny documentation to any person who, "within 10 years before applying for the license, certificate, or document, has been convicted of violating a dangerous drug law of the United States or of a State." In addition, other statutory provisions generally permit the Coast Guard to "review the criminal record" of an individual who applies for a license, certificate, or document. See 46 U.S.C. § 7101(h), 7302(d) (Supp. IV 1992). Such specific grants of authority permit the Coast Guard to take reasonable steps to ensure that the particular requirements have been met; therefore, it is logical that the agency should also be permitted to charge the applicant a fee to recover the expense of whatever reasonable procedure is employed by the Coast Guard to comply with the statute. Thus, if the FBI background check at issue is strictly limited to ensuring compliance with statutory requirements, then the $17 fee can be assessed. If, however, the FBI check sweeps more broadly than the statutory authorization, then a question arises whether the full cost of the background check can be passed on to the applicant. This matter must be considered on remand.
When Congress has authorized a license requirement, but has not specified the criteria for qualifications, the issue is more complicated. Then, the appropriate question is whether the fee charged is sufficiently related to the interests underlying the license requirement. In order to assess the general licensing and documentation fees in this case, for example, we can look to several statutory provisions setting forth qualifications for obtaining various licenses and documents. See, e.g., 46 U.S.C. § 7101(e)(4) (1988) (This provision requires that certain licenses be issued only to a person who "demonstrates, to the satisfaction of the Secretary, that the applicant has the requisite general knowledge and skill to hold the license."). Given that these requirements are relatively broad, a reviewing court must examine the specific licensing and documentation procedures for which the fee is charged and determine whether they are reasonably related to the qualification at issue. Because nothing in the record indicates that the licensing scheme being challenged is unrelated to ensuring adherence to the qualifications that Congress established, we find that exacting a reasonable fee for those procedures is permissible under the IOAA.
The matter does not end here, however, for the Government apparently seeks to claim boundless authority under the IOAA. At oral argument, in response to a hypothetical question, Government counsel asserted that the agency should be permitted to charge a fee for any procedures, such as the inspection of boats, so long as those procedures are conducted as part of the requirements for obtaining a license. The Government's contention is absurd, for the Supreme Court in NCTA and NEPCO made it clear that an agency cannot load on expenses in the guise of collecting licensing fees. The reason these costs cannot be passed on to license applicants is that boat inspections are not materially related to the requirements for a license established by Congress, which only address various personal qualifications of the applicant (not the seaworthiness of the boat on which he or she will work). See 46 U.S.C. § 7101 (1988 & Supp. III 1991). In other words, a user fee for license applicants is only permissible if the procedures in question are related to the qualifications set forth in .the licensing statute.
Moreover, it should be clear that an agency is not free to add extra licensing procedures and then charge a user fee merely because the agency has general authority to regulate in a particular area. Cf. Railway Labor Executives' Ass'n v. National Mediation Bd., 29 F.3d 655, 670 (D.C.Cir.1994) (en banc) (An agency does not "possess[ ] plenary authority to act within a given area simply because Congress has endowed it with some authority to act in that area."), cert. denied, — U.S. -, 115 S.Ct. 1392, 131 L.Ed.2d 243 (1995). Thus, there must always be a statutory basis for any requirements giving rise to a fee.
III. Conclusion
For the foregoing reasons, we hold that, in general, the Coast Guard is authorized to charge reasonable fees for the pro cessing of applications from persons seeking merchant mariner licenses, certificates, and documents to work aboard United States merchant marine vessels. In addition, the agency may charge a fee to cover the cost of an FBI investigation to determine whether an applicant has a disqualifying criminal record. However, we remand the case to allow the District Court to consider whether the FBI check sweeps more broadly than is required by the underlying statute, and, if so, whether the fee charged is excessive.
So ordered.
. The IOAA is the statute that generally governs user fees collected by the federal government.
. In addition, the District Court denied the Government's motion for summary judgment, because it found that the record showed a likelihood that the data the Coast Guard used to calculate its overall costs was flawed. Therefore, the court remanded the case to the Coast Guard so that the agency could recalculate its costs, subject to a new notice and comment period. The Government does not appeal the remand order. Despite the remand, this court has appellate jurisdiction pursuant to 28 U.S.C. § 1292(a)(1) (1994), because the District Court denied the unions' request for a preliminary and permanent injunction.
. The court also applied the Supreme Court's test correctly in a companion case decided the same day. See National Cable Television Ass'n v. FCC, 554 F.2d 1094, 1104 (D.C.Cir.1976) ("[W]e find no fault with the idea that a fee may be charged for an activity . despite the fact that the general public secondarily benefits from it.").
. There is also an element of "fairness" that must be applied in assessing fees under the IOAA. 31 U.S.C. § 9701(b)(1). We have no occasion to address that factor in this case.
. Our dissenting colleague argues that, because the Coast Guard's rule refers to the FBI check as a "criminal record check[]," see 58 Fed.Reg. 15,228, 15,231 (1993), the court should find, as a matter of law, that the FBI check sweeps no more broadly than the agency's statutory authorization. Such a conclusion misconceives our role as appellate judges. In this case, the District Court made no factual findings regarding the scope of the FBI check. Therefore, there is no basis for deciding whether the check is limited to what the statute requires. The rule promulgated by the Coast Guard may indicate that the FBI inquires only into the criminal record of each applicant. However, the District Court must determine, on remand, what the scope of the FBI check is, in actual practice. We simply cannot dispose of this question based on the vague language of the Coast Guard's regulations without any factual basis.