Trade Compliance

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Are Proposed APHIS Inspection Fees “Illegal”?

Posted June 25, 2014

In a submission to the U.S. Department of Agriculture (USDA) concerning its proposal to substantially raise the Animal Plant and Health Inspection Service (APHIS) fees, the Canadian Trucking Alliance raised a number of strong objections to “the way in which the APHIS program is administered, applied and funded.” (Click here to read more about the proposed fee increase, and here for the latest CTA press release.)

In addition to its various criticisms of the APHIS program, the CTA also states that it “believes the fees may be illegal under the North American Free Trade Agreement (NAFTA), which prohibits customs user fees.” This belief, however, appears to be in error.  Although Article 310 (1) of the NAFTA dealing with “existing fees” (i.e., those in effect at the time of the agreement) prohibits the adoption of “any customs user fee of the type referred to in Annex 310.1 for originating goods,” the fee specifically referred to in Annex 310.1, Section B (that which is applicable to the United States) is the U.S. Merchandise Processing Fee (MPF). As such, the APHIS fees (and any other fees collected by CBP on behalf of other federal agencies such as, for example, the Harbor Maintenance Fee) are outside the scope of the NAFTA.

The CTA likewise believes that the fees may also be an illegal violation of the General Agreement on Tariffs and Trade (GATT), “which says that all fees and charges shall not represent an indirect protection to domestic products or a taxation of imports or exports for fiscal purposes.” This assertion would also seem to be mistaken.

Subsection 1(a) to Article VIII of the GATT related to “Fees and Formalities connected with Importation and Exportation” states that “All fees and charges of whatever character... imposed by contracting parties on or in connection with importation or exportation shall be limited in amount to the approximate cost of services rendered and shall not represent an indirect protection to domestic products or a taxation of imports or exports for fiscal purposes.” CTA omitted a key aspect of the provision (emphasized above) when claiming the AQI fees are not GATT compliant and because APHIS states the fees are simply meant to adequately fund the actual costs of running its inspection program (however flawed or suboptimal the approach may be), they would appear to be clearly permitted within the GATT guidelines.