Clearit.ca's Blog on Customs Brokerage and News Updates
The Canadian Trucking Alliance (CTA) has come out strongly against an April proposal by the U.S. Department of Agriculture (USDA) to more than triple Agricultural Quarantine and Inspection (AQI) program fees for trucks entering the U.S. from Canada. The fees are supposed to pay for the work of U.S. Customs and Border Protection (CBP) and the USDA’s Animal and Plant Health Inspection Service (APHIS) in preventing entry of invasive plant and animal pests and diseases into the country.
However, the USDA says that revenue from the current fees is not sufficient to cover the actual costs of the program. Aside from minor adjustments for inflation, the fees have been held steady for almost a decade; meanwhile, cross-border shipments have risen and the CBP has hired several hundred new inspectors to deal with the increase.
Proposed fee changes are based on an independent audit
The proposed fee changes are based on an independent 2010 audit that attempted to determine the actual cost of each AQI service. The yearly fee for trucks with a transponder would increase from $105 to $320, while trucks without transponders would pay $8 per crossing instead of the $5.25 they pay now. Fees for aircraft and cargo ships would also rise significantly (from $70.75 to $225 and from $496 to $825 respectively). Rail cargo, on the other hand, would get a break, with the fee for each railcar dropping from $7.75 to $2.
The CTA has a number of issues with AQI fees besides what it feels is an unreasonably large hike. A primary objection is that every incoming truck must pay the fee, whether or not it is carrying agricultural products – and even if it is empty and not carrying anything at all. The Alliance’s president, David Bradley, used the example of inspection of a truck loaded with car parts stacked on synthetic pallets to question the utility of this approach. The CTA argues that it would be fairer to charge the fees not to truckers but to importers whose goods actually present some risk of biological pollution or disease.
This across-the-board imposition of AQI fees regardless of whether inspection is necessary or actually carried out is the basis of a legal argument against the fees prepared by law firm Gowling Lafleur Henderson at the CTA’s request. Under the General Agreement on Tariffs and Trade (GATT) such fees must be approximately equal to the cost of the service for which they are charged, and Gowlings says that because the AQI program charges a flat rate there is no relationship between the fees and the service provided for any given shipment.
APHIS had a credible counterargument
APHIS appears to have a credible counterargument in that it is only proposing to raise fees for services – such as truck inspections – which are currently operating in the red overall, while reducing inspection fees in categories that have actually been making money, like airline passengers and rail cargo. But we may not get the chance to watch the issue explored in the WTO’s dispute settlement process: similar fee increase proposals in 2009 and 1999 were withdrawn without being implemented in the face of CTA opposition.
Nor is the CTA the only group that is upset about the proposal. The Canadian government has also warned the USDA that increasing AQI fees would conflict with America’s international trade obligations under GATT and NAFTA (whose Article 310 prohibits the imposition of new customs fees). Ottawa also expressed concern that the change would disproportionately affect Canadian exporters, putting them at a disadvantage in relation to their competitors in other countries.
The CTA’s Bradley welcomed the support and noted that the Chrétien government’s opposition to the 1999 proposal was a significant factor in its defeat.