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U.S. CROSS BORDER FEES FROM THE CANADIAN PERSPECTIVE`

U.S. CROSS BORDER FEES FROM THE CANADIAN PERSPECTIVE`. April 19, 2008 Canadian – United States Law Institute Case Western Reserve School of Law Cleveland, Ohio Presented by David Hamill, Arent Fox LLP. TOPICS. Types of U.S. Cross Border Fees U.S. fees from the Canadian perspective

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U.S. CROSS BORDER FEES FROM THE CANADIAN PERSPECTIVE`

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  1. U.S. CROSS BORDER FEES FROM THE CANADIAN PERSPECTIVE` April 19, 2008 Canadian – United States Law Institute Case Western Reserve School of Law Cleveland, Ohio Presented by David Hamill, Arent Fox LLP

  2. TOPICS • Types of U.S. Cross Border Fees • U.S. fees from the Canadian perspective • Deficiencies in border fee data and analysis • Example of estimated data from existing sources • Gaps in U.S. legal requirements for border fee data collection and analysis • 2008 GAO Study and other recommendations

  3. BORDER FEES • COBRA Fee • Funds inspection services • Paid by carrier (air, rail, vessel, truck) per crossing • Merchandise Processing Fee (“MPF”) • Funds non-inspection commercial customs services rotation mode • Paid by importer per entry • Harbor Maintenance Fee (“HMF”) • Funds harbor dredging • Paid by importer for merchandise transported and entered by vessel • APHIS Fee • Funds agricultural inspections at border • Paid by carrier (air, rail, vessel, truck) per crossing • Special Agriculture Fees

  4. Historically Special Status of Canada • NAFTA • Special trading relationship • NAFTA – no increases to “customs user fees” • Canada shipments exempt from MPF • Canada historically was exempt from APHIS fees BUT…..

  5. CANADA LOSING ITS SPECIAL STATUS • Must claim NAFTA in order to be exempt from MPF (even if duty rate is “zero”) • NAFTA is not claimed on approximately 45 percent of shipments from Canada • APHIS exemption for Canada removed in 2007 • Canada pays disproportionate amount of COBRA and HMF fees

  6. BORDER FEE DATA AND STUDIES LACKING • U.S. law does not require Customs and Census to maintain data on user fees by specific country • Customs is not required to maintain information regarding the number of border crossings by transportation mode (vessel, truck, rail, air) • Census maintains import values for Canadian into the U.S. for air and vessel conveyances only • Neither Customs nor Census maintains import values by rail or truck

  7. HMF • $3.3 BILLION surplus • Canada: • FY 2006 - $223,202,547 • FY 2005 - $203,285,162 • FY 2004 - $169,591,309 • China • FY 2006 - $142,367,030 • FY 2005 - $116,312,644 • FY 2004 - $100,885,086

  8. HMF CHART

  9. PERCENTAGE OF ENTRY VALUE OF SHIPMENTS BY VESSEL • FY 2006 • Canada – 5.3 percent • China – 73.5 percent • Germany – 58.7 percent • Japan – 77.7 percent • United Kingdom – 50.2 percent These countries, other than Canada, do not pay user fees for rail and truck conveyances, including COBRA and APHIS

  10. COBRA FEES • COBRA fees raised 10 percent in 2007 • Canada: • FY 2006 - $62,171,089 • FY 2005 - $62,985,068 • FY 2004 - $61,316,089 • China • FY 2006 - $39,655,073 • FY 2005 - $36,037,848 • FY 2004 - $36,475,212

  11. COBRA FEE CHART

  12. APHIS Fees • APHIS may raise fees to cover the cost of agricultural inspections • APHIS is unable to determine whether inspections of international airline passengers and commercial aircraft, vessels, truck and rail cars are being funded from the revenue of the user fee • Customs is unable to separate costs related to agricultural activities • However, U.S. Government is removing Canadian exemption for APHIS fees, because it claims agricultural costs for inspecting Canadian shipments are increasing

  13. OTHER FINDINGS • U.S. law does not require Customs and Census to maintain data on user fees by specific country • Customs is not required to maintain information regarding the number of border crossings by transportation mode (vessel, truck, rail, air) • Census maintains import values for Canadian into the U.S. for air and vessel conveyances only • Neither Customs nor Census maintains import values by rail or truck

  14. OTHER FINDINGS (Con’t) • While no hard data is available, Canada pays more in COBRA and HMF fees than China and Mexico • Customs cannot demonstrate that the proceeds from border user fees proportionately benefit the payers of these fees • While proceeds are deposited in special accounts, U.S. Congressional approval is required to spend the proceeds

  15. FEBRUARY 2008 GAO STUDY ON CUSTOMS FEES • Covered only air and sea customs fees; still no comprehensive study on land border crossing fees • Confirmed that U.S. Customs cannot fully account for the fees collected and that they are used for the purpose for which they are assessed • User Fee Advisory Committee recommended • Conclusion: Without regular, substantive fee, reviews, agencies, payers, and Congress lack complete information about changing program costs and whether authorized, reimbursable activities align with program activities

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