CTA says it has the law on its side in the fight against USDA inspection fees

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TORONTO, Ont. – The Canadian Trucking Alliance (CTA) is stocking its arsenal for a fight against the US department of agriculture, and its latest weapon is a legal opinion saying the fees the government agency wants to impose are illegal.

As reported earlier, the USDA’s Animal and Plant Health Inspection Service (APHIS) says it needs to collect fees from every vehicle and person crossing the US border in order to fund agricultural quarantine inspections (AQIs). On trucks, that would mean a jump up from US$105 to US$320 for those carrying transponders and an increase from US$5.25 to US$8.00 for those without.

The CTA has already raised a formal objection about the fees as part of the process under the Notice of Proposed Rulemaking (NPRM) process, but now it is backing up its objections with a legal opinion. The industry association commissioned Gowlings, a noted Canadian law firm, to study the legalities of the proposed fee increase.

According to Gowlings, the fee goes against the rules outlined in both the North American Free Trade Agreement (NAFTA) and the General Agreement on Tariffs and Trade (GATT).

In a statement, the CTA explains “NAFTA Article 310 prohibits the adoption of customs user fees, defined as ‘an amount of money charged for processing goods through customs’. The AQI fees, which are charged regardless of the origin of the goods and whether they are actually inspected, clearly fall under this definition.”

According to the CTA, the Gowlings report says “the basic effect of NAFTA Article 310 is to prohibit the United States, as a Party to the NAFTA, from adopting any customs user fees other than those that existed at the date of the coming into force of NAFTA, which ultimately were eliminated for goods originating in Canada.”

As for how the fees can be viewed under the GATT, the CTA says the USDA intends to charge for something it isn’t doing, namely inspecting every item that enters the US.

“GATT requires customs fees to be ‘limited in amount to the approximate cost of the service.’ Therefore, they must first involve a ‘service’ rendered, and the level of the charge must not exceed the approximate cost of that “service.”

Gowlings says, “the AQI fees cannot be considered as GATT-compliant customs users fees in that the fees are applied irrespective of whether an individual conveyance is actually inspected, and irrespective of the actual need for an inspection to be performed given the nature of the shipment and the goods.”

The law firm also argues the AQI violate this requirement by charging a flat fee against the vast majority of shipments regardless of whether an inspection takes place. Because the fee for commercial trucks can be paid on an annualized basis, Gowlings says this makes it clear that the AQI fees are not in any sense relatable to the costs of services provided to an individual shipment.

The legal opinion also addresses APHIS’ argument that it needed to hire more inspectors saying, “if inspections were based on a reasonable, risk-based approach, APHIS presumably would not need to constantly increase the number of inspectors it employs. Given the availability of pre-clearance inspections and other targeted risk assessment measures, it is difficult to justify a level of inspection that warrants the existing fees, much less the proposed increased fees.”

Gowlings also presented a trucking-specific argument as to why the fees are inappropriate.

“The AQI fees applicable to commercial trucking de facto discriminate against Canadian manufacturers and exporters as compared to other countries which export goods to the United States, because the vast majority of Canadian goods are shipped to the United States by road.”

Gowlings refers to this as a “disguised restriction on trade by placing Canadian manufacturers and exporters at a significant disadvantage as compared to their US counterparts, who do not incur such fees … [and] compared to their foreign counterparts, given that the fees for commercial truck shipments are effectively much higher than for other modes of transportation.”

In releasing the news about the Gowlings report, the CTA cites the formal objection raised by the Canadian government and submitted to the NPRM that states, “the proposed fee increases and application to conveyance modes would cause an unintended disproportionate negative effect on US-Canada trade.

“The magnitude of the proposed fee increases would negatively affect US imports from Canada, focusing as they do on the primary modes of conveyance in our trading relationship.”

“Canadian commercial enterprises would be placed at a competitive disadvantage and could suffer de facto discrimination as compared to enterprises of other foreign countries under international trade obligations.”

The federal government also argues the “cost recovery for these services should follow the ‘beneficiary-pays’ principle and reflect the benefits provided to the American public.”

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