The Clinton administration Wednesday unveiled a controversial proposal to increase U.S. Customs user fees to make up the revenue that will be lost under the North American free-trade agreement.

Separately, Reuters reported that Ontario, Canada's most populous province, announced Wednesday it will file a court challenge to the North American free-trade agreement on grounds that the federal government has infringed the province's jurisdiction.Ontario Premier Bob Rae said his government "believes that the Nafta violates the division of powers in the Canadian constitution."

In Washington, Deputy U.S. Trade Representative Representative Rufus Yerxa told the House Ways and Means Committee that doubling the current $5 fee for incoming airline and ship passengers will raise nearly enough to cover the estimated $2.3 billion in tariff revenue that will be lost to free trade with Mexico over the next five years.

The difference will be made up by what Mr. Yerxa called "a small" increase in the fee Customs now charges for incoming truck and rail traffic at the Canadian and Mexican borders. The exact amount of this cargo processing fee will be revealed when the Nafta funding proposal is formally presented to the Ways and Means Committee next week, he said.

The airline industry Wednesday blasted the administration proposal as an unfair tax that will hurt the Nafta's chances for approval in Congress.

"It is . . . with astonishment that we learn of administration proposals to increase passenger processing user fees to pay for the North American free- trade agreement," said James Landry, president of the Air Transport Association, in a letter to Ways and Means Committee chairman Dan Rostenkowski, D-Ill.

"Inclusion of these fees will only give ammunition to opponents of the Nafta when thousands of additional employees in the airline aerospace and travel and tourism industries need to be furloughed as a result of these additional costs being placed on the industry," he said.

Mr. Landry said the proposal contradicted the recommendations of President Clinton's National Aviation Commission, which has urged tax cuts for the beleaguered industry.

A U.S. trade official said Wednesday that the current air and ship passenger processing fee is $12 - consisting of the $5 Customs fee, a $5 fee that helps fund the Immigration and Naturalization Service, and a $2 fee to fund Agriculture Department inspection at the border. This $12 would be increased to $17 under the administration's proposal, raising about $180 million in 1994, when the Nafta is scheduled to take effect.

According to estimates by the Office of Management and Budget, the Nafta will "cost" the U.S. Treasury $210 million in its first year, suggesting that the fee for rail and truck traffic will be about $30 million that first year.

The term "cost" in this case is misleading, because the Nafta will not really reduce Customs receipts nearly this much. Half of all imports from Mexico are now entering the United States duty free under the Generalized System of Preferences, and U.S. tax revenue will probably rise due to expanded exports to Mexico. Under the strict budget rules adopted by Congress in 1990, however, the Clinton administration is not allowed to count these factors in its budget-making.

A U.S trade official said the passenger fee was the most attractive option for funding the Nafta. "What are you going do, tax social security?" he asked, making it clear that all the other options would be more risky politically for the Clinton administration.

Administration officials are avoiding the "T-word" in discussing their funding proposal but Republicans could attack it as a tax because the money will not go into to the aviation trust fund, as the current Customs fee does.