[Federal Register: August 17, 1998 (Volume 63, Number 158)] [Proposed Rules] [Page 43893-43897] From the Federal Register Online via GPO Access [wais.access.gpo.gov] [DOCID:fr17au98-15] ======================================================================= ----------------------------------------------------------------------- DEPARTMENT OF JUSTICE 28 CFR Part 25 [AG Order No. 2172-98] RIN 1105-AA51 National Instant Criminal Background Check System User Fee Regulation AGENCY: Department of Justice. ACTION: Proposed rule. ----------------------------------------------------------------------- SUMMARY: The rule will provide for and establish a user fee to be assessed to Federal Firearms Licensees (FFLs) for the processing by the FBI of National Instant Criminal Background Check System (NICS) background checks. A NICS background check will determine whether information available to the system provides reasonable cause to believe that transfer of a firearm to an individual would violate state or federal law. In states in which the state government has not agreed to designate a Point of Contact (POC) to receive and process requests from FFLs for NICS background checks, FFLs will be required to contact, either by telephone or other electronic means, the NICS Operations Center at the FBI to initiate and process a NICS background check. There are substantial costs associated with operating the FBI's NICS Operations Center. The $200 million authorized to be appropriated by the Brady Handgun Violence Prevention Act, Public L. 103-159, section 106(b) was limited to the purpose of improving the criminal history record systems of the states. A small portion of those funds was made available to the FBI to help design the NICS. The funds are not available, however, to cover the FBI's annual operating cost for the NICS. Therefore, FFLs will be assessed a processing fee for each NICS background check processed by the FBI's NICS Operations Center. The purpose of the fee is to recover the full cost of providing this service to FFLs doing business in states where the FBI is contacted directly by the FFLs. This rulemaking sets forth the FBI's legal authority to charge a user fee for NICS background checks and the cost analysis to be used to calculate the fee. DATES: Written comments must be received on or before September 16, 1998. ADDRESSES: All comments concerning this proposed rule should be mailed to: Mr. Emmet A. Rathbun, Unit Chief, Federal Bureau of Investigation, CJIS Division, Module C-3, 1000 Custer Hollow Road, Clarksburg, West Virginia 26306-0147. FOR FURTHER INFORMATION CONTACT: Mr. Emmet A. Rathbun, Unit Chief, telephone number (304) 625-2000. SUPPLEMENTARY INFORMATION: On November 30, 1993, Public L. 103-159 (107 Stat. 1536) was enacted, amending the Gun Control Act of 1968 (GCA), as amended (18 U.S.C. Chapter 44). Title I of Public L. 103-159, the ``Brady Handgun Violence Prevention Act'' (Brady Act) requires the Attorney General to establish by November 30, 1998, ``a national instant criminal background check system that any [firearms] licensee may contact, by telephone or by other electronic means in addition to the telephone, for information, to be supplied immediately, on whether receipt of a firearm by a prospective transferee would violate section 922 of title 18, United States Code, or State law.'' In order to provide this service directly to certain FFLs and to recover the associated costs, the FBI will assess FFLs a user fee in states where the FBI is contacted directly by the FFLs. NICS Background Checks The Brady Act provides that before a firearm may be transferred, FFLs must request a NICS background check on a prospective firearm purchaser who is not licensed under 18 U.S.C. 923. A Notice of Proposed Rulemaking establishing regulations to protect the security and privacy of the information in the NICS and describing the manner in which the system will function was published in the Federal Register on June 4, 1998, 63 FR 30430, ``National Instant Criminal Background Check System Regulations.'' Generally, a NICS background check will consist of a search of the NICS Index (an FBI database containing information concerning certain individuals prohibited by law from possessing firearms), the National Crime Information Center (NCIC), and the Interstate Identification Index (III), for matching records that may provide reason to believe that the transfer of a firearm to a prospective purchaser would violate Federal or state law. The method by which an FFL will request background checks will depend upon the state where the FFL is conducting business. In states that agree to designate a POC, state or local law enforcement agencies will serve as POCs for the purpose of processing NICS checks. As POCs, these agencies will receive inquiries by FFLs, check state and local record systems for disqualifying records, initiate NICS background checks through electronic access to the NICS via the NCIC communications network, analyze any matching records, provide responses back to the FFL, and process appeals. The FBI will not charge the state agencies or the FFLs a fee for NICS background checks processed by state POCs. The comparatively minor cost to the FBI of providing automated record responses to POCs (who research and analyze the records) will be covered by funds appropriated to the FBI rather than by a NICS user fee. Charging FFLs a fee to recover the POC's cost of processing NICS background checks is at the discretion of the state. Where the state will not be a POC, the FFLs will telephonically contact the [[Page 43894]] NICS Operations Center, a unit run by the FBI. The FBI is also exploring a plan to make electronic dial-up access to the NICS Operations Center available to FFLs in the future. Inquiries made by telephone will be answered by a NICS Customer Service Representative. The NICS Operations Center will perform the NICS background check, analyze any matching records, provide a response back to the FFL, and process appeals. In order to interpret and evaluate matching records, the FBI will use personnel who are specially trained to analyze records in the NICS Index, NCIC, and III. FFLs who directly contact the NICS Operations Center to initiate a background check will be assessed a fee. This fee will allow the Federal Government to recover the full cost of processing these background checks conducted by the NICS Operations Center. Likewise, if electronic FFL access is made available in the future, a fee will be charged. This fee will be less than the telephonic access fee since a NICS Customer Service Representative will not be needed to take a telephone call. Legislative Authority The legislative authority for the fee is the Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1991, Public L. 101-515, 104 Stat. 2101, 2113, (Nov. 5, 1990) which, in relevant part, provides the FBI authority to establish, collect, and retain fees for processing name checks for non- criminal justice purposes. Authority is also provided by the Independent Offices Appropriation Act, 1952 (31 U.S.C. 9701), which generally requires that a benefit or service provided to or for any person by a federal agency be self-sustaining to the extent possible. Charges are to be fair, taking into consideration the costs to the Government, value to the recipient, public policy or interest served, and other relevant facts. Cost Analysis In accordance with the guidelines issued by the Department of Justice (DOJ) User Fee Program (Supplement, Department of Justice Budget Formulation and Execution Calls), and Office of Management and Budget (OMB) Circular Number A-25 (1993) relating to the assessment of fees for Federal Government services, the FBI is establishing the user fee for the processing of a NICS background check by the NICS Operations Center in order to recover the full cost of providing service to FFLs doing business in states where the FBI is contacted directly by the FFLs. The full cost includes both the direct and indirect costs associated with the FBI's provision of the background check service to FFLs. Direct costs are those which are proximate and directly traceable to the unit of output for which the fee is charged. Direct costs for the NICS program include the personnel and non-personnel costs of FBI- employed NICS analysts and technical support. The personnel and non- personnel costs were calculated using the modular costing tools described in the FBI's Fiscal Year 1999 budget submission to the OMB. Additionally, any contractor-supported operator and billing functions are included within the FBI's direct costs. Indirect costs are those costs that are more distant, general in nature, and not directly traceable to the product or service produced. The FBI has allocated a portion of its general management, administration, finance, and security functions as indirect costs to the NICS program. These costs were allocated based on the ratio of positions in the NICS program to positions in all other Criminal Justice Information Services Division programs. The costs to be recovered include, but are not limited to, an appropriate share of: (a) Direct and indirect personnel costs, including salaries and fringe benefits such as medical insurance and retirement, (b) physical overhead, consulting, and other direct costs including material and supply costs, utilities, insurance, and travel, (c) management and supervisory costs, and (d) the costs of enforcement, collection, research, establishment of standards, and regulation. Cost Figures Because NICS is a service that has not been previously offered, cost figures are based on information currently available regarding firearm background checks, the number of states that are expected to serve as POCs, and ongoing contracting efforts. Upon the establishment of the system on November 30, 1998, the FBI anticipates charging a fee of $14.00 per inquiry. The fee was determined by estimating the resources needed to satisfy the projected volume of background checks and related work, determining the direct and indirect costs of these resources, and working with the FBI's prime developmental contractor to cost the portion of services which will be furnished by an outside contractor. Estimated Fiscal Year 1999 NICS Costs ------------------------------------------------------------------------ Category Yearly total ------------------------------------------------------------------------ Wages and Other Compensation............................ $45,667,596 Appeals................................................. 846,378 Furniture and Supplies.................................. 2,303,491 Travel and Training..................................... 1,824,775 Hardware and Software Maintenance....................... 690,816 Miscellaneous........................................... 3,297,827 Contractor Costs........................................ 37,002,514 --------------- Total............................................... 91,633,397 ------------------------------------------------------------------------ In order to estimate the number of NICS background checks that will be performed, the FBI used the firearms related inquiries of III for Fiscal Year 1997. These background checks were performed primarily for handgun sales as required under the Interim Provision of the Brady Act. For purposes of this calculation, the FBI estimates that it will perform handgun checks and/or long gun checks in approximately 34 non- POC states and territories. Using III inquiries in these states for firearms checks performed under the Interim Provision of the Brady Act, the FBI extrapolated the estimated number of total firearms (handguns and long guns) sold annually in these states to be 4,217,227. In addition, the FBI estimates there are 2,500,000 pawnshop redemptions per year that will require a background check. Therefore, the total number of inquiries per year is 6,717,227. Based on the cost of the estimated resources necessary to process 6,717,227 inquiries per year, the FBI estimates that its total annual costs will [[Page 43895]] be $91,633,397. Therefore, the cost per inquiry, rounded to the nearest dollar, is $14.00. This transaction cost includes both the direct and indirect cost categories of the NICS, set forth in the chart above and described generally below. To be assured that these cost figures were accurately calculated, the FBI hired an independent accounting firm to review the FBI's fee analysis. The firm validated the FBI's methodology in developing this user fee. The Wages and Other Compensation category includes NICS Customer Service Representatives' salaries and benefits and support staff's salaries and benefits. Based on the projected number of inquiries per year, the NICS Operations Center will require an estimated staff of 586. This staffing level is required in order to provide prompt service to FFLs seven days a week. When an individual is denied the purchase of a firearm, the individual may appeal that decision. If an individual resides in a POC state, it is anticipated that the individual will appeal the denial to the state according to the state's appeals procedures. If the denial was given by the NICS Operations Center, the individual would appeal directly to the FBI. The estimated cost to the FBI of processing appeals is incorporated into the initial user fee; individuals who appeal a denial will not be charged a separate fee. The estimated appeals cost anticipates that, in the appeals process, individuals may need to submit a fingerprint card to verify their identity. Fingerpoint cards submitted for appeals will be processed using the FBI's current procedure for handling first-person requests for one's own fingerprint- based record. The existing (and separate) fee of $18.00 for processing such submissions will be waived. The Furniture and Supplies category is comprised of a combination of NICS staff and support staff requirements for these items. These costs are based upon the OMB's 1999 Cost Module, which sets a per- employee rate to be used for these calculations. An additional amount has been added for the purchase of telephone headsets for the NICS Customer Service Representatives. The Travel & Training category includes costs for NICS personnel who need to travel to meet with FFLs and obtain feedback on the NICS. Specially trained NICS Representatives will need to report to various governmental agencies that have a direct interest in the NICS, including Congress. The Training category will allow NICS personnel to be trained on new NICS developments and techniques in order to improve service to the FFLs. Indirect travel and training expenses are also included in this category. These costs are also based upon the OMB's 1999 Cost Module, which sets a per-employee rate to be used for these calculations. The Hardware and Software Maintenance category includes the maintenance on computer terminals and software that the NICS Representatives will need in order to perform this service for FFLs. Software license renewals and maintenance agreements are required for software products used on FBI computers. Because these software products are proprietary and specialized, licensing and maintenance contracts must be executed with the original developer. Contract hardware maintenance will be necessary for the efficient and continued operation of the NICS computers and peripheral equipment. This will include preventive and on-call hardware maintenance support for FBI computers and peripheral equipment. Without this preventive and on-call hardware maintenance, the NICS could experience disruptions in service. The Miscellaneous category is composed of FBI employee background investigation contract costs, physical location costs (based on the standard Government Services Administration (GSA) rate for government office space), and depreciation. The Contractor Cost category includes the cost of all contractor services provided to support the operation and maintenance of the NICS Operations Center, including, but not limited to, telecommunication, billing, and call center service costs. Such telephone-intensive functions are subject to workload variations that may be more economically managed using contractor support. The FBI therefore is engaging a private contractor with an appropriate number of Customer Service Representatives to answer phone calls from FFLs, forward information to NICS, and respond to FFLs with proceed or delay messages. The NICS fee is being established in order for the Federal Government to recover the full cost of processing NICS background checks for FFLs doing business in states in which the FBI is contacted directly by the FFLs. This fee will not generate a profit. Evaluation of the NICS fee will be an ongoing process. The validity of this estimate will be evaluated during Fiscal Year 1999, and the results of this evaluation and any appropriate changes to the NICS fee will be published in the Federal Register no later than November 30, 1999. Subsequently, the NICS fee(s) will be periodically evaluated and adjusted as may be warranted. The Director of the FBI may also clarify, supplement, or amend provisions related to these fees. The FBI Director shall provide appropriate notice to affected persons of any exercise of the foregoing authorities; notice relating to provisions of general applicability shall be published in the Federal Register. Billing FFLs for NICS User Fees It is general Federal policy that user charges will be collected in advance of, or simultaneously with, the rendering of services. However, strict adherence to this policy here would conflict with the Brady Act's mandate for ``instant'' checks, and the following procedures are accordingly established as an exception to this general policy. FFLs being serviced by the FBI will incur a non-refundable user fee charge for each requested NICS check immediately upon issuance by the FBI of the unique NICS Transaction Number (NTN) associated with the check. However, such FFLs will be afforded two payment options, real-time credit card charges by individual transaction or monthly invoicing. Prior to initiating its first NICS check, an FFL will notify the FBI, via an enrollment process, as to which payment option it will use. Only a single payment option can be used. FFLs will be able to direct the FBI to change their payment option with a minimum of 30 days notice before the beginning of the changed billing period. Under the real-time credit card payment option, the FFL's credit card will be billed for each NICS check at the time the FBI issues the associated NTN. A record of each NICS check, including the fee, transaction date, and NTN, will be provided on the FFL's monthly credit card bill. The FBI will accept the following major credit cards: VISA, Master Card, American Express, and Discover. Under the invoicing payment option, a record will be compiled of all NICS checks initiated by the FFL during the billing period for which an NTN was issued, and the FFL will be invoiced for payment. The invoice will include a record of transactions including the date and time of each NICS check, the charge, and the NTN. Invoice billing periods will be on a calendar month basis. Payment will be due within 30 days of the invoice date. Invoices will be dated according to their mailing date, which will be approximately 15 days after the close of the subject billing period. The FFL will forward invoice payment (either in check form or via Electronic Fund Transfer (EFT)) to a [[Page 43896]] ``Lock Box'' or other Automated Clearing House (ACH) depository identified by the FBI. Remittances must be drawn on a bank or other institution located in the United States and be payable in United States currency. A charge may be imposed if a check in payment of an invoice or any other matter is not honored by the bank or other financial institution on which it is drawn. The FBI will discontinue service, i.e., providing NICS checks, to FFLs whose NICS financial accounts are not in good standing. Waiver of Fee in Cases of Successful Appeal Individuals who are denied the purchase of a firearm by the NICS Operations Center may appeal the denial by challenging the record upon which the denial is made. When the appeal is successful and less than 30 days has elapsed since the date of the initial NICS check, a ``proceed'' response and an NTN is forwarded to the FFL, which will allow the transfer of the firearm. If more than 30 days have elapsed before a denial is overturned, the FFL must perform a new NICS check before transferring the firearm. In such cases, the purchaser will be provided a written statement by the NICS Operations Center that will allow the FFL to request the new NICS check without charge. Regulatory Flexibility Act (RFA) In compliance with the Regulatory Flexibility Act, 5 U.S.C. 601-12, the FBI has evaluated the effects of this rule on small entities. A small firearm retailer is defined as having under $5.0 million in annual gross receipts as defined by 13 CFR 121.201. Firearm retailers are included in the Standard Industrial Class (SIC) Code 5941. Based on the evaluation under 605(b) of the RFA, the Department certifies that this action will not have a significant economic impact on a substantial number of small entities. While this proposed rule may generate up to $92 million annually in fees, these fees will not have a significant economic impact on businesses. The ultimate impact of the fee will likely be on firearm purchasers since FFLs are expected to recoup NICS user fees from the purchasers in the same way FFLs recoup the cost of fees today in connection with checks under the interim provisions of the Brady Act. The FBI will be sending a notice, including a letter describing NICS and a NICS brochure, to each FFL in the 34 states and territories that are currently expected to be serviced directly by the FBI. The FBI has also met with FFLs at regional firearm seminars conducted by the Bureau of Alcohol, Tobacco and Firearms to inform FFLs about NICS plans and to solicit comments needed to finalize these plans. These efforts were made by the FBI to also satisfy the ``outreach'' provisions of 5 U.S.C. 609. The obligation of FFLs to contact the NICS before transferring a firearm is imposed by Title I of the Brady Act. The fee charged for the NICS checks allows the Federal Government full recovery of costs to process NICS checks for FFLs doing business in states where the FBI is contacted directly by the FFLs. In addition, the user fee will be evaluated from time to time to account for any changes that may affect the fee. Executive Order 12866 This proposed rule has been drafted and reviewed in accordance with Executive Order 12866, Sec. 1(b), Principles of Regulation. The DOJ has determined that this proposed rule is a ``significant regulatory action'' under Section 3(f) of Executive Order 12866, Regulatory Planning and Review, and thus the proposed rule has been reviewed by the Office of Management and Budget. Executive Order 12612 This regulation will not have a substantial direct effect on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government. Therefore, in accordance with Executive Order 12612, it is determined that this rule does not have sufficient federalism applications to warrant the preparation of a Federal Assessment. Unfunded Mandates Reform Act of 1995 This rule will not result in the expenditure by state, local, and tribal governments, in the aggregate, or by the private sector, of $100,000,000 or more in any one year, and it will not significantly or uniquely affect small governments. Therefore, no actions were deemed necessary under the provisions of the Unfunded Mandates Reform Act oaf 1995. Small Business Regulatory Enforcement Fairness Act of 1996 This proposed rule is not a major rule as defined by the Small Business Regulatory Enforcement Fairness Act of 1996, 5 U.S.C. 804(2). This proposed rule will not result in an annual effect on the economy of $100,000,000 or more, a major increase in costs or prices, or have significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of the United States-based companies to compete with foreign-based companies in domestic and export markets. The cost to the FFLs is expected to be inconsequential, because the FFLs are likely to recoup the fees from firearm purchasers. Paperwork Reduction Act of 1995 This proposed rule does not contain collection of information requirements and would not be subject to the Paperwork Reduction Act of 1980, as amended (44 U.S.C. 3501-20). Executive Order 12988--Civil Justice Reform The proposed rule meets the applicable standards set forth in Sections 3(a) and 3(b)(2) of Executive Order 12988. List of Subjects in 28 CFR Part 25 Administrative practice and procedure, Automatic data processing, Business and industry, Courts, Credit, Firearms, Information, Law enforcement officers, Reporting and recordkeeping requirements, and Telecommunications. Accordingly, Part 25 of Title 28 of the Code of Federal Regulations, which was proposed to be added to 63 FR 30434 (June 4, 1998) is proposed to be amended as follows: PART 25--DEPARTMENT OF JUSTICE INFORMATION SYSTEMS Subpart A--The National Instant Criminal Background Check System 1. The authority citation for Part 25 is revised to read as follows: Authority: Pub. L. 103-159, 107 Stat. 1536 18 U.S.C. 922; Pub. L. 101-515, 104 Stat. 2101, 2112; 31 U.S.C. 9701. 2. Section 25.12 is added to read as follows: Sec. 25.12 User Fee Charge. (a) FFLs who directly contact the NICS Operations Center to request a NICS background check will be assessed a fee that represents the reasonable costs of the associated services. (b) In cases where a denial of a firearm transaction has been overturned through an appeal and more than 30 days have passed since the initial NICS check, the purchaser will be provided a written statement that will allow the FFL to contact the NICS Operations Center and request that a new NICS check be performed without charge. (c) The Director of the FBI may from time to time determine and establish the reasonable amount of the fee or fees to [[Page 43897]] be assessed under this authority. The Director of the FBI may also clarify, supplement, or amend the provisions of this section. The Director of the FBI shall provide appropriate notice to affected persons of any exercise of the foregoing authorities; notice relating to provisions of general applicability shall be published in the Federal Register. Dated: August 12, 1998. Janet Reno, Attorney General. [FR Doc. 98-22004 Filed 8-14-98; 8:45 am] BILLING CODE 4410-02-M