	Background

Millions of individuals arrive in the United States every year and undergo  an inspection to ensure they are entering the country lawfully and not  transporting any illegal goods or harmful pests and prohibited agricultural  products. Prior to the creation of DHS in 2003, passengers were required to undergo  separate customs, immigration, and agriculture quarantine inspections  (AQI), which were performed by the United States Customs Service, the  United States Immigration and Naturalization Service (INS), and APHIS. The fees are still governed by separate,  dissimilar authorizing legislation and are administered by multiple  executive branch agencies and overseen by multiple congressional  committees. Finally, airports and airlines play an important role in both  facilitating inspections and in fee collection and remittance, but they have  limited substantive interaction with the three agencies. This contributes to  misunderstandings, skepticism, and confusion about how the fees work  and what activities they may fund. A Complicated Network of Decision Makers Administer and Oversee These Fees

Although the passenger inspections themselves have largely been  consolidated, administrative authority remains divided. However, stakeholders report that these disjointed  mechanisms for two-way communication are insufficient. As a  result, they feel they lack data necessary to know whether the passenger  inspection fees are set fairly or accurately, or are being spent on the  appropriate activities. First of all, by statute, the customs fees are available for  limited purposes. Even if all  the costs were reimburseable, according to CBP, the fees collected still  would not cover the full inspection costs. Therefore, under  current law not all activities that may be funded from the customs fee (see  table 4) are necessarily associated with conducting air passenger  inspections (see table 5), and not all inspection activities are reimbursable,  that is, can be covered by funds from the user fee account. Therefore, CBP cannot match the fees paid to individual  passengers. According to CBP officials many foreign-owned airlines already remit the  fees based on passengers transported, though these payments are in  violation of the statute, and the International Air Transport Association  (IATA) reports that the manifest-based remittance system is common in  other countries that collect similar fees. In addition, airlines that  do not remit the customs fee timely—or not at all—are charged liquidated  damages for breach of bond conditions that are equal to twice the fee  amount owed for each violation, whether it is the first violation or a repeat  violation. CBP is also authorized to deny landing rights if the airline does not remit  customs and immigration fees. These issues should be considered regardless of  whether the fees are consolidated. Recommendations for Executive Action

We recommend that the Secretaries of Agriculture and Homeland Security  take the following seven actions:    direct CBP, ICE, and APHIS to make information on the estimated cost of  inspections as well as the basis for these cost estimates readily available to  affected parties to improve the transparency and credibility—and hence  the acceptance by stakeholders and payers—of the processes for setting,  collecting, and distributing the fees;    direct CBP, ICE, and APHIS to collaborate on agendas, presentations, and  discussions with stakeholders for the CBP Airport and Seaport Inspections  User Fee Advisory Committee (Advisory Committee) meetings in order to  improve the usefulness of these meetings for both agencies and fee  stakeholders;    consolidate reporting of the passenger inspection fees, 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 passenger inspection process;    develop a legislative proposal in consultation with Congress on a  consolidated, graduated penalty system that reflects airline payment  history and includes specific administrative procedures regarding when  penalties should be invoked in order to improve the effectiveness of the  tools for enforcing payment of passenger inspection fees;    develop a legislative proposal in consultation with Congress on a single,  common set of airline record-keeping requirements for all three passenger  inspection fees that reflects the consolidated audit function for these fees  and reduces the administrative burden on airlines;    develop a legislative proposal in consultation with Congress to eliminate  key differences among the fourth quarter remittance requirement for the  immigration fee; and    develop and implement common assumptions used to forecast the  collections of agriculture quarantine inspection activities in order to more  closely tie the fee rate to CBP’s and APHIS’s agriculture fee distribution to  actual collections. Appendix I: Objectives, Scope, and Methodology

The objectives of this report were to identify how the three separate  passenger inspection user fees are set, collected, and distributed and the  benefits and challenges of this process for agencies and stakeholders, and  implications of consolidating these fees under the Department of  Homeland Security (DHS).
Why GAO Did This Study

International air passengers arriving in the United States are subject to an inspection to ensure they possess legal entry and immigration documents and do not bring in contraband, such as illegal drugs, counterfeit goods, or harmful pests and prohibited agriculture products. With the creation of the Department of Homeland Security (DHS) in 2003, the customs, immigration, and agriculture inspections activities were integrated into one program led by DHS's office of Customs and Border Protection (CBP). However, the three fees--whose collections totaled about $1 billion in fiscal year 2006--linked to these inspections remain statutorily distinct and are coadministered by CBP, Immigration and Customs Enforcement (ICE), both within DHS, and the Department of Agriculture's Animal Plant Health Inspection Service (APHIS). GAO was asked to examine how the fees are set, collected, and distributed, and the benefits and challenges of this process to agencies and stakeholders, including implications of consolidating these fees under the authority of DHS.

What GAO Found

The process of setting, collecting, and distributing separate, dissimilar fees creates challenges for agencies and stakeholders. Although air passenger inspections were integrated within CBP, the fees supporting these inspections were created and are still governed by separate, dissimilar authorizing legislation. Two fee amounts are set in statute and one is set by regulation; all are collected by the airlines, deposited into three separate accounts and distributed among the agencies. As a result, the fees are administered and overseen by a complicated network of executive branch agencies and congressional committees, creating a series of challenges. For example, neither CBP nor ICE know whether the fees collected are recovering the full cost of the immigration inspection activities or whether the fees are properly divided between them, because ICE does not have finalized cost calculations for its inspection-related activities. In addition, certain passengers are exempt from some fees but not others, making it difficult for agencies to administer the fees. Further, although airports and airlines play an important role in facilitating inspections and the process of collecting and remitting the fees, opportunities for two-way communication are fragmented and limited, reducing stakeholder buy-in and acceptance of the fees and contributing to confusion about how the three fees work and what activities they may fund. Other challenges are due to the statutory structure of the individual passenger inspection fees. For example, the customs inspection fees are available for limited purposes: not all reimbursable activities may be associated with inspections, and not all inspection activities are reimbursable. However, CBP officials said even if the customs fees were spent on inspection-related activities, they still would only recover about 72 percent of costs in fiscal year 2006. Therefore, customs inspection-related activities are mainly funded by appropriations from general revenues. Further, without auditing each airline, CBP cannot independently verify the amount owed by airlines, partly because airlines are required to remit the fees based on ticket sales rather than passengers transported. CBP said it is developing a legislative proposal that would address these and other challenges by requiring airlines to remit based on passengers transported, but airline industry stakeholders said this change would complicate their collection process and create substantial transition costs. Although a number of options for addressing these fees have been raised, regardless of whether these fees are consolidated in whole, in part, or not at all, certain problems specific to the individual fees can and should be resolved first, and in a manner consistent with principles of effective user fee design, on which GAO has previously reported. Moreover, although partly or fully consolidating the fees under DHS's authority could provide opportunities to address some of the many challenges identified in this report, consolidation in-and-of-itself will not solve all of the problems we have identified.