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Improve Collection of Antidumping and Countervailing Duties Would Be 
Difficult and Ineffective' which was released on July 24, 2008.

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GAO-08-876R: 

Washington, DC 20548:
United States Government Accountability Office: 

July 24, 2008: 

The Honorable Robert C. Byrd:
Chairman:
The Honorable Thad Cochran:
Ranking Member:
Committee on Appropriations:
United States Senate: 

The Honorable David R. Obey:
Chairman:
The Honorable Jerry Lewis:
Ranking Member:
Committee on Appropriations:
House of Representatives: 

Subject: Agencies Believe Strengthening International Agreements to 
Improve Collection of Antidumping and Countervailing Duties Would Be 
Difficult and Ineffective: 

The United States and many of its trading partners have enacted laws to 
remedy the unfair trade practices of other countries and foreign 
companies that cause injury to domestic industries. U.S. law authorizes 
the imposition of additional duties on importers to remedy these unfair 
trade practices.[Footnote 1] Specifically, antidumping (AD) duties are 
imposed on imports that are "dumped" in the United States (i.e., sales 
in the U.S. market at less than the market price in the item's home 
market) and countervailing (CV) duties are imposed on imports that are 
subsidized by foreign governments. Importers are responsible for paying 
all duties, taxes, and fees on products when they are brought into the 
United States (including AD/CV duties). Importers can be located either 
domestically or overseas. 

Since fiscal year 2001, U.S. Customs and Border Protection (CBP), which 
is responsible for collecting import duties, has been unable to collect 
hundreds of millions of dollars in AD/CV duties.[Footnote 2] In March 
2008, we reported that over $600 million in AD/CV duties were 
uncollected.[Footnote 3] Our analysis revealed four key factors 
contributing to uncollected AD/CV duties: (1) the retrospective 
component of the U.S. AD/CV duty system, (2) "new shipper" reviews, (3) 
insufficiency of CBP's standard bond requirements for importers, and 
(4) minimal information required from importers. We identified two sets 
of options for Congress and agencies to consider in attempting to 
improve the collection of AD/CV duties. One option was to eliminate the 
retrospective component of the U.S. AD/CV duty system and make it 
prospective; the other was to adjust specific aspects of the current 
U.S. AD/CV duty system while retaining its retrospective nature. 

Under the current U.S. AD/CV duty system, importers pay cash deposits 
equal to the estimated AD/CV duties at the time of importation, but the 
final duty amount is determined much later and may exceed the amount of 
cash deposited. On average, this process takes more than 3 years, 
during which importers could cease operations or become unable to pay 
additional duties. To address this situation and help improve the 
collection of AD/CV duties, we suggested several improvements to 
Congress and executive branch agencies.[Footnote 4] For example, we 
suggested Congress consider requiring the relevant agencies to perform 
an analysis and report to Congress on the relative advantages and 
disadvantages of prospective and retrospective AD/CV duty systems. 

The Committees on Appropriations directed us to conduct a comprehensive 
review, as described in Senate Report 110-84, of uncollected AD/CV 
duties and specified several issues on which we were to report. 
[Footnote 5] Our March 2008 report addressed most of the issues, except 
how international agreements to which the United States is a party 
could be strengthened to improve the collection of AD/CV duties. As a 
result, this report describes agencies' views on (1) obstacles (if any) 
to strengthening international agreements to help the United States 
collect AD/CV duties from importers without attachable assets in the 
United States and (2) whether strengthened international agreements 
would improve duty collection. 

To address these objectives, we obtained and reviewed relevant 
documents and interviewed knowledgeable officials from the Departments 
of Commerce, Justice, State, and the Treasury, the Department of 
Homeland Security's U.S. Customs and Border Protection and U.S. 
Immigration and Customs Enforcement, and the Office of the U.S. Trade 
Representative. Each has a role in the AD/CV duty process or in 
negotiating international agreements. To determine the obstacles to 
strengthening international agreements to improve duty collection, we 
obtained U.S. agencies' views on whether international agreements could 
be strengthened to help collect AD/CV duties. To determine agencies' 
views on whether strengthening international agreements would improve 
duty collection, we interviewed knowledgeable agency officials and 
reviewed prior GAO work regarding uncollected AD/CV duties. We 
conducted this performance audit from April 2008 to July 2008 in 
accordance with generally accepted government auditing standards. Those 
standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. (See enclosure I for 
additional detail regarding our scope and methodology.) 

Results in Brief: 

Agency officials identified two key obstacles to strengthening 
international agreements to improve collection of AD/CV duties from 
importers with no attachable assets in the United States. These 
obstacles are: 

* Finding countries that are willing to enter into negotiations. Unlike 
the United States, other major trading partners have AD/CV duty systems 
that establish the final amount of AD/CV duties when goods enter the 
country. As a result, the existence of significant uncollected AD/CV 
duties is unique to the United States, so other countries do not have a 
shared interest in improving collections after products have entered 
the country. 

* U.S. and foreign government practice. According to CBP and Department 
of Justice (Justice) officials, under the practice of some countries, 
they will not enforce a claim based upon the revenue laws of another 
country.[Footnote 6] According to agency officials, if the United 
States negotiated an international agreement to strengthen its ability 
to collect duties owed by importers whose assets are overseas, there 
may be unintended consequences. For example, since the agreement would 
likely be reciprocal, some agency officials expressed concern that this 
could require the United States to enforce decisions it found 
arbitrary. Our analysis of international agreements to which the United 
States is a party identified agreements that establish rules for 
calculating and assessing AD/CV duties and other agreements that 
outlined mutual assistance between countries' customs administrations, 
some of which explicitly exclude assistance regarding the recovery of 
duties. However, consistent with the challenges posed by negotiations 
and international practice, neither our analysis nor our discussions 
with agency officials identified any international agreements that 
facilitate collecting AD/CV duties from importers with no attachable 
assets in the United States. 

Agency officials believe that strengthening international agreements 
would not substantially improve the collection of AD/CV duties. They 
cited two key reasons why it is likely that this would be ineffective: 

* Retrospective nature of the U.S. AD/CV duty system. Strengthened 
international agreements would not address a key factor we identified 
in our March 2008 report as contributing to uncollected AD/CV duties-- 
the retrospective nature of the U.S. AD/CV duty system. Under this 
system, the final amount of duties owed may exceed the amount of cash 
deposits the importer paid at the time of entry, and CBP must attempt 
to collect from the importer long after the products enter the country. 
By the time CBP is able to take collection action, illegitimate 
importers (foreign or domestic) may have disappeared in order to evade 
the duties, and legitimate importers may be financially unable to pay 
the duties.[Footnote 7] As a result, Justice has advised CBP that 
claims involving a foreign company with no discernible U.S. assets may 
be classified as uncollectible and do not need to be referred to 
Justice. CBP has not referred any cases to Justice involving the 
collection of AD/CV duties from importers with no attachable assets in 
the United States in the past 5 years. 

* High cost of litigation. According to Justice officials, even if 
international agreements were strengthened, Justice would still likely 
have to litigate overseas in order to collect duties owed. Conducting 
litigation in a foreign country can be very expensive because of the 
need to hire foreign counsel. These high costs need to be weighed 
against the amount owed and the amount likely to be collected. However, 
agency officials noted that strong corporate secrecy laws and weak 
pretrial discovery rules in some countries may make it impossible to 
know whether the U.S. government would be able to recoup the costs of 
the litigation. 

We provided a draft of this report to the Departments of Commerce, 
Homeland Security, Justice, State, and the Treasury, as well as the 
Office of the U.S. Trade Representative. The Department of Commerce 
provided written comments (reprinted in enclosure III) and agreed with 
our overall conclusion that strengthening international agreements 
would not substantially improve the collection of AD/CV duties. 
However, Commerce disagreed with our conclusion (based on our March 
2008 report) that the retrospective nature of the U.S. AD/CV duty 
system is a key factor contributing to uncollected AD/CV duties. We 
continue to believe that the retrospective nature of the U.S. AD/CV 
duty system is a key factor contributing to uncollected AD/CV duties as 
we reported earlier because it allows situations where CBP must attempt 
to collect large amounts of duties from importers years after they 
import products into the United States. However, we modified this 
report to provide broader context and additional detail about the key 
factors and options identified in our March 2008 report. In addition, 
we received technical comments from the Departments of Homeland 
Security, Justice, and State, as well as the Office of the U.S. Trade 
Representative. We have incorporated their comments as appropriate. 

Background: 

Under the U.S. AD/CV duty system, all importers (foreign and domestic) 
pay cash deposits equal to the estimated amount of AD/CV duties at the 
time of importation, but the final amount of duties is not determined 
until later, often after the Department of Commerce (Commerce) conducts 
an administrative review of the imports. As a result, the final amount 
of duties owed can exceed the cash deposit made at the time of 
importation. In these cases, CBP must attempt to collect the duties 
from importers who are, at times, unable or unwilling to pay. Some 
importers are unable to pay the additional amount because it exceeds 
their available assets. Other importers expect that their final 
assessment will exceed their cash deposit and plan to avoid their final 
duty obligation by disappearing or declaring bankruptcy, according to 
officials from the Department of the Treasury (Treasury).[Footnote 8] 

To help protect the U.S. government from revenue loss, all importers 
are required to post a security, usually a general obligation bond when 
they import products into the United States.[Footnote 9] This bond, 
which an importer obtains from a surety company, is (in general) equal 
to 10 percent of the amount the importer was assessed in duties, taxes, 
and fees over the preceding year (or $50,000, whichever is greater). 
Our March 2008 report found, however, that CBP's standard bond formula 
is insufficient to protect AD/CV duty revenue in some cases. For 
example, of the top 20 importers with uncollected AD/CV duties, 1 
importer had outstanding AD/CV duty bills amounting to $35 million, 
which was secured by a bond of $500,000.[Footnote 10] 

If CBP does not receive payment within 1 year of issuing the first 
bill, CBP's Office of Finance (which is responsible for collecting 
payment) refers the case to CBP's Office of Chief Counsel, which 
determines the next course of action. According to CBP officials, this 
may include taking additional collection action, such as identifying 
importers' assets or demanding payment from the surety company that 
provided the bond. The Office of Chief Counsel could also refer a case 
to Justice for further legal action if attachable assets are 
identified. If the Office of Chief Counsel determines that the debt is 
uncollectible, it can recommend that it be written off. CBP's Office of 
Chief Counsel takes steps to collect all bills referred to it, 
regardless of the location of the importer's assets. 

As shown in table 1, several U.S. government agencies have roles 
related to the AD/CV duty process or the negotiation of international 
agreements. 

Table 1: Relevant U.S. Government Agencies and Their Role in the AD/CV 
Duty Process or in Negotiating International Agreements: 

Agency: International Trade Commission; 
Role in duty collection: Determines whether an industry in the United 
States is being injured by imports. 

Agency: Department of Commerce; 
Role in duty collection: Calculates estimated and final AD/CV duty 
rates. 

Agency: Department of Homeland Security's U.S. Customs and Border 
Protection; 
Role in duty collection: Assesses and collects estimated and final 
AD/CV duties from importers based on instructions from Commerce and 
identifies/addresses circumvention of the AD/CV duty law by companies 
attempting to evade the payment of lawfully owed AD/CV duties. 

Agency: Department of Homeland Security's U.S. Immigration and Customs 
Enforcement; 
Role in duty collection: Investigates alleged schemes by importers to 
avoid the payment of AD/CV duties. 

Agency: Department of Justice; 
Role in duty collection: Represents U.S. government in litigation. 

Agency: Office of the U.S. Trade Representative; 
Role in duty collection: Negotiates international trade agreements and 
represents the United States in the World Trade Organization. 

Agency: Department of State; 
Role in duty collection: Negotiates international agreements and 
maintains records of international agreements to which the United 
States is a party. 

Agency: Department of the Treasury; 
Role in duty collection: Has statutory authority regarding duty 
collections (delegated day-to-day operations to the Department of 
Homeland Security in 2003; Treasury retains control over regulations 
governing the process). 

Source: GAO discussions with agency officials. 

[End of table] 

Agencies Identified Two Obstacles to Strengthening International 
Agreements to Improve Collection of AD/CV Duties: 

Agency officials identified two key obstacles that would make 
strengthening international agreements difficult. These obstacles 
relate to finding willing negotiating partners and U.S. and foreign 
government practice. 

First, some agency officials indicated it may be difficult to find 
willing partners to enter into negotiations. Unlike the United States, 
other major trading partners have AD/CV duty systems that establish the 
final amount of AD/CV duties owed at the time goods enter their 
country. As a result, the existence of significant uncollected AD/CV 
duties is unique to the United States, so other countries do not have a 
shared interest in improving collections after the fact. Therefore, the 
United States may need to make concessions to trading partners in other 
areas in order for them to be willing to negotiate an agreement related 
to collecting AD/CV duties from companies without attachable assets in 
the United States. 

Second, it would likely be difficult to reach such an agreement because 
the United States would be negotiating for provisions that are 
different from U.S. and foreign government practice, which could have 
unintended consequences. According to officials from CBP's Office of 
Chief Counsel and from Justice, under the practice of some countries, 
they will not enforce a claim based upon the revenue laws of another 
country.[Footnote 11] In the United States, this principle has taken 
the form of the "revenue rule," which allows the nonrecognition "of tax 
liabilities of one sovereign in the courts of another sovereign, such 
as a suit to enforce a tax judgment."[Footnote 12] Since any 
international agreement the United States negotiated would likely be 
reciprocal, the U.S. courts would likely be required to enforce the 
revenue laws and decisions of other countries. Some agency officials 
expressed concern that this could require the United States to enforce 
decisions it found arbitrary. 

Our analysis of international agreements to which the United States is 
a party identified agreements that affirm the right of countries to 
collect AD/CV duties and establish frameworks for international 
cooperation on customs issues. For example, the World Trade 
Organization's Antidumping and Subsidies and Countervailing Measures 
agreements establish multilateral rules regarding the processes and 
standards for calculating AD/CV duties and expressly provide the 152 
World Trade Organization members with the right to collect AD/CV 
duties. In addition, Chapter 19 of the North American Free Trade 
Agreement addresses the review of AD/CV duties and establishes a 
process for binational panels to review AD/CV duty determinations 
involving goods covered by the agreement. We also identified 37 
bilateral agreements regarding mutual assistance between countries' 
customs administrations. These agreements typically include commitments 
for customs agencies to exchange information to assist in administering 
their own customs laws, but some of these agreements specifically 
exclude exchanging information for the purpose of duty collection. 
[Footnote 13] 

In addition, consistent with the challenges posed by international 
negotiations and international practice, neither our analysis nor our 
discussions with relevant agency officials identified any international 
agreements that facilitate the collection of AD/CV duties from 
importers with no attachable assets in the United States. Specifically, 
we did not identify any agreements that establish a process or a 
mechanism for assisting the United States in collecting AD/CV duties 
from companies without assets in the United States that are unable or 
unwilling to pay them. 

Strengthened International Agreements Would Not Substantially Improve 
Collection of AD/CV Duties: 

Agency officials believe, and our analysis supports, that strengthening 
international agreements would not substantially improve the collection 
of AD/CV duties for two key reasons--the retrospective nature of the 
U.S. AD/CV duty system and the high cost of litigation. 

First, strengthened international agreements would not address the 
challenges associated with the retrospective nature of the U.S. AD/CV 
duty system, in which the final amount of duties owed may exceed the 
amount of cash deposited at the time of entry. In those cases, CBP must 
often attempt to collect from importers long after they import products 
into the country.[Footnote 14] Financially able and willing importers 
will pay duties owed regardless of their location. However, legitimate 
importers may be unable to pay duty bills, and illegitimate importers 
may disappear in order to evade the duties. 

In our March 2008 report, we found that about $350 million in AD/CV 
duty bills owed by all importers were in various stages of the 
collection process as of the end of fiscal year 2007. Approximately 
$290 million of the unpaid AD/CV duty bills had been sent to CBP's 
Office of Chief Council to determine further collection options, such 
as identifying attachable assets (domestic or overseas); however, CBP 
officials expected that most of these unpaid bills would be written off 
after legal review. 

CBP's recent efforts to collect payments from importers located outside 
the United States illustrate the difficulty in collecting from those 
unwilling to pay their AD/CV duty bills. Since fiscal year 2003, CBP's 
Office of Finance referred 570 unpaid AD/CV duty bills (totaling 
approximately $20 million, including accumulated interest) involving 
importers located outside the United States to the Office of Chief 
Counsel for additional collection action.[Footnote 15] As a result, the 
Office of Chief Counsel opened 31 cases involving 28 importers--with 
many cases involving multiple bills for the same importer. The Office 
of Chief Counsel closed 21 of these cases, which involved approximately 
$14 million in unpaid bills.[Footnote 16] However, CBP was only able to 
collect approximately $600,000, or 4 percent of the amount owed. (See 
enclosure II for additional information on the results of these 21 
closed cases.) 

None of the closed cases was referred to Justice because, according to 
CBP's Office of Chief Counsel, Justice has advised CBP that many claims 
involving a foreign company with no discernible U.S. assets may be 
classified as uncollectible. CBP has not determined whether it will 
refer any of the 10 open cases to Justice. According to CBP, it has not 
referred any cases to Justice involving the collection of AD/CV duties 
from importers with no attachable assets in the United States in the 
past 5 years. According to Justice officials, CBP has not referred to 
them any cases involving the collection of AD/CV duties in foreign 
courts. 

A second reason agency officials cited is the high cost of litigation. 
According to Justice officials, even if the United States successfully 
negotiated an agreement with another country to assist in the 
collection of AD/CV duties, they may still have to litigate overseas in 
order to collect duties owed. Conducting litigation in a foreign 
country can be very expensive because of the need to hire foreign 
counsel. These high costs need to be weighed against the amount owed 
and the amount likely to be collected. Because of this, Justice would 
likely want to ensure that the importer owing the duties can be found 
and has sufficient assets to pay the duties if the U.S. government 
prevails. However, according to Justice officials, some countries have 
strong corporate secrecy laws or otherwise make it very difficult to 
obtain the information necessary to make this determination, and 
significant costs can be incurred by the government to investigate the 
collectibility of the debt from the foreign debtor. Also according to 
Justice, even if litigation was initiated, many foreign courts have 
very limited ability to discover evidence during the litigation 
process. As a result, it may be extremely difficult to determine the 
likelihood of recouping the costs of the foreign litigation, even if 
the United States prevails. 

While agency officials believe strengthening international agreements 
would not substantially improve the collection of AD/CV duties, our 
March 2008 report included several recommendations to the executive 
branch to improve collections under the current U.S. AD/CV duty system: 
(1) re-evaluate CBP's bonding requirements, (2) improve communication 
from Commerce to CBP, and (3) develop a strategic human capital plan to 
ensure that Commerce has sufficient human capital to perform its roles 
in the AD/CV duty process. The Departments of Homeland Security and 
Commerce generally agreed with our recommendations and indicated a 
willingness to take steps to address them. In addition, we suggested 
that Congress consider (1) requiring the relevant agencies to conduct 
an analysis of the relative advantages and disadvantages of different 
AD/CV duty systems, (2) requiring CBP to publicly report annually on 
uncollected AD/CV duties, and (3) providing Commerce with discretion to 
establish minimum thresholds for the amount or value of exports when 
conducting certain AD/CV duty reviews of "new shippers." 

Concluding Observations: 

Strengthening international agreements does not appear to be a viable 
option for substantially reducing the amount of uncollected AD/CV 
duties. There are important trade-offs to consider before the U.S. 
government undertakes an effort to improve AD/CV duty collection from 
importers with no attachable assets in the United States, especially 
since it does not appear that such an effort will substantially improve 
the U.S. government's ability to collect on unpaid bills. Our previous 
work identified four key factors contributing to uncollected AD/CV 
duties, including the retrospective nature of the duty collection 
process, which makes it difficult for CBP to collect outstanding 
duties, regardless of where an importer's assets are located. As long 
as the United States maintains a system that involves attempting to 
collect duties from importers years after they import products into the 
United States, it will have difficulties collecting the full amount of 
duties owed. Because of this, agency and congressional efforts to 
improve the collection of AD/CV duties should focus on the 
recommendations laid out in our March 2008 report. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to the Departments of Commerce, 
Homeland Security, Justice, State, and the Treasury, as well as the 
Office of the U.S. Trade Representative. The Department of Commerce was 
the only agency to provide written comments, which are contained in 
enclosure III. The Department of Commerce agreed with our overall 
conclusion that strengthening international agreements would not 
substantially improve the collection of AD/CV duties. However, Commerce 
disagreed with our conclusion (based on our March 2008 report) that the 
retrospective nature of the U.S. AD/CV duty system is a key factor 
contributing to uncollected AD/CV duties. Commerce suggests that the 
issues faced by CBP in collecting AD/CV duties have unique factors that 
contributed to the problem, which could exist under either a 
prospective or retrospective AD/CV duty system. We continue to believe 
that the retrospective nature of the U.S. AD/CV duty system is a key 
factor contributing to uncollected AD/CV duties as we reported earlier 
because it allows situations where CBP must attempt to collect large 
amounts of duties from importers years after they import products into 
the United States. However, we have revised this report to provide 
additional context based on our March 2008 report. Specifically, we 
added material discussing each of the four key factors we identified as 
contributing to uncollected AD/CV duties and the two sets of options 
for addressing those key factors. In addition, we received technical 
comments from the Departments of Homeland Security, Justice, and State, 
as well as the Office of the U.S. Trade Representative. We have 
incorporated their comments as appropriate. 

We are sending copies of this report to interested congressional 
committees; the Secretaries of Commerce, Homeland Security, State, and 
the Treasury; the Attorney General; and the U.S. Trade Representative. 
We will provide copies to others on request. This report will also be 
available at no charge on GAO's Web site at [hyperlink, 
http://www.gao.gov]. 

If you or your staffs have any questions about this report, please 
contact me at (202) 512-4347 or yagerl@gao.gov. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. Other GAO staff who made key 
contributions to this report are Christine Broderick (Assistant 
Director), Jason Bair, Laura Erion, Ernie Jackson, Grace Lui, Karen 
Deans, Martin de Alteriis, Mitchell Karpman, and Marissa Jones. 

Signed by: 

Loren Yager:
Director, International Affairs and Trade: 

Enclosures (3): 

Enclosure I: Scope and Methodology: 

To determine agencies' views on strengthening international agreements 
related to collecting antidumping (AD) and countervailing (CV) duties, 
we interviewed officials from the departments with a role in the 
antidumping and countervailing duty process or in negotiating 
international agreements: Departments of Commerce, Justice, State, and 
the Treasury, the Department of Homeland Security's U.S. Customs and 
Border Protection (CBP) and U.S. Immigration and Customs Enforcement, 
and the Office of the U.S. Trade Representative. To identify 
international agreements that relate to the collection of AD/CV duties, 
we reviewed the agreements in the Department of State's Treaties in 
Force (2007), which lists international agreements to which the United 
States is a party.[Footnote 17] We then sent the list of agreements we 
believed were potentially relevant to agency officials to verify. 
Finally, we reviewed the full text of the 54 agreements deemed to be 
potentially relevant to determine the extent to which each agreement 
related to the collection of AD/CV duties from importers without assets 
in the United States. 

To determine agencies' views on the extent to which strengthening 
international agreements would improve duty collection, we interviewed 
relevant agency officials and reviewed prior GAO work analyzing 
uncollected AD/CV duties.[Footnote 18] To describe CBP's recent 
experiences attempting to collect AD/CV duties from importers located 
outside the United States, we reviewed CBP data on the cases referred 
to the Office of Chief Counsel since fiscal year 2003. CBP identified 
importers located outside the United States by using their unique 
importer number and address of record. We determined that these data 
are sufficiently reliable for the purposes of this report. 

We conducted this performance audit from April 2008 to July 2008 in 
accordance with generally accepted government auditing standards. Those 
standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. 

[End of enclosure] 

Enclosure II: Results of Cases Closed by CBP's Office of Chief Counsel: 

Table 2: Outcomes of the 21 Closed Cases Involving Importers Located 
Outside the United States Owing AD/CV Duties (since fiscal year 2003) 
(Dollars in thousands): 

Full amount of duty collected following demand on surety/importer[A]; 
Number of cases: 10; 
Number of bills: 43; 
Amount of bills: $120; 
Amount paid: $120; 
Loss: *. 

Full amount of bond collected from surety[B]; 
Number of cases: 5; 
Number of bills: 139; 
Amount of bills: $10,472; 
Amount paid: $450; 
Loss: $10,022. 

Bill determined to be legally unenforceable[C]; 
Number of cases: 4; 
Number of bills: 66; 
Amount of bills: $3,366; 
Amount paid: $27; 
Loss: $3,339. 

Bill referred back to Office of Finance[D]; 
Number of cases: 2; 
Number of bills: 3; 
Amount of bills: *; 
Amount paid: *; 
Loss: *. 

Total; 
Number of cases: 21; 
Number of bills: 251; 
Amount of bills: $13,958; 
Amount paid: $597; 
Loss: $13,361. 

Source: GAO analysis of CBP data. 

Note: * denotes amount less than $1,000. 

[A] In eight of these cases, the full amount of the duty was collected 
by the Office of Chief Counsel following demands upon the surety and/or 
importer, excluding interest accrual. In 2 of the 10 cases, the amount 
remaining after the importer made a majority payment was uneconomical 
to pursue (less than $100). 

[B] According to CBP, the amount owed under the surety bond was 
collected, but this amount was significantly lower than the total 
duties owed by each importer. 

[C] In these cases, the bills were determined to be legally 
unenforceable as a result of the Court of Appeals for the Federal 
Circuit's decisions in Int'l Trading Co. v. United States, 281 F.3d 
1268 (2002) and Int'l Trading Co. v. United States, 412 F.3d 1303 
(2005) because the entries were not liquidated within 6 months of the 
Department of Commerce's relevant Federal Register notice. According to 
CBP, in two of the four cases (totaling $5.2 million), CBP promptly 
liquidated the entries, but they were not legally enforceable because 
Commerce did not issue liquidation instructions in a timely manner. 

[D] These two cases were referred back to the Office of Finance because 
they were for an amount less than $100, which the Office of Chief 
Counsel generally does not handle because the cost of collection is 
significantly greater than any possible recovery. 

[End of table] 

Enclosure III: Comments from the Department of Commerce and GAO 
Evaluation: 

United States Department Of Commerce: 
The Under Secretary for International Trade: 
Washington, DC 20230: 

July 11, 2008: 

Dr. Loren Yager: 
Director, International Affairs and Trade: 
U.S. Government Accountability Office: 
Washington, DC 20548: 

Dear Dr. Yager: 

Thank you for providing us with the draft report on whether 
international agreements to which the United States is a party might be 
strengthened to improve the collection of antidumping (AD) and 
countervailing (CV) duties. We carefully reviewed the draft report, and 
agree with the overall conclusion that strengthening international 
agreements would not substantially improve the under-collection problem 
the United States has encountered with these particular types of 
duties. However, we disagree with the report's assertion that the 
challenges the United States faces in collecting unpaid AD/CV duties is 
largely due to the retrospective nature of the duty collection process. 
We strongly take issue with the implication that, unless we change to a 
prospective system of AD/CV duty assessment, the agencies responsible 
for duty collection would be unable to address this problem. [See 
comment 1] 

Despite indications in the report to the contrary, under both 
prospective and retrospective systems, the final determination of duty 
liability is made not at the border, but rather at a later date based 
on the results of any review or lack thereof. [See comment 2] The 
infrequency of reviews under prospective systems is the primary reason 
why duties tend to be assessed more quickly in such systems than in the 
United States' retrospective system. The main difference between the 
two systems is that prospective systems will never collect additional 
duties when dumping, pursuant to a review, is found to increase. [See 
comment 3] Further, we believe strongly that the under-collections at 
issue have unique factors that contributed to the problem, and that 
such factors could exist under either a prospective or retrospective 
system. Indeed, based on our analysis of the information presented in 
the GAO's March 2008 report on AD and CV duties, the key factors 
contributing to under-collection are most likely to be: I) the 
insufficient amount of continuous bonds and 2) minimal information 
regarding importers. [See comment 4] 

Thank you again for the opportunity to comment on the draft report. 
Enclosed is an attachment with specific technical comments relating to 
the text of the report. 

Sincerely, 

Signed by: 

Christopher A. Padilla: 

Enclosure: 

Comments on GAO Draft Report 08-8768: Agencies Believe Strengthening
International Agreements to Improve Collection of Antidumping and
Countervailing Duties Would Be Difficult and Ineffective: 

Page 1, Second Paragraph, Sentence 3: "A key factor we identified as 
contributing to these uncollected AD/CV duties is the retrospective 
nature of the U.S. AD/CV duty system." 

Comment: In several places the report states that the retrospective 
nature of our AD/CVD system is a key factor in the under collection of 
duties. This is not true. The fact that our system is retrospective 
allows us to ascertain the specific extent of dumping on a sale-by-sale 
basis rather than merely accepting, as final, the estimated amount of 
duties determined based on past trading behavior and collected on the 
entries of the merchandise. A key difference between the prospective 
and retrospective systems is that under the retrospective system 
authorities are able to quantify the amount by which the estimated AD 
and CV duties i.e. cash deposits) are too low or too high. Therefore, a 
retrospective system does not, per se, cause under collection; it 
merely allows us to quantify the difference between estimated duties 
and the actual duties owed, where prospective systems do not. Despite 
indications in the report to the contrary, under both prospective and 
retrospective systems, the final determination of duty liability is 
made not at the border, but rather at a later date based on the results 
of any review or lack thereof. The infrequency of reviews under 
prospective systems is the primary reason why duties tend to be 
assessed more quickly in such systems than in the United States' 
retrospective system. The main difference between the two systems is 
that prospective systems will never collect additional duties when 
dumping, pursuant to a review, is found to increase. [See comment 5] 

Page 2, First Partial Paragraph, Last Sentence: "For example, we 
suggested Congress consider requiring the relevant agencies to perform 
an analysis and report to Congress on the relative advantages and 
disadvantages of the U.S. retrospective AD/CV duty system compared to 
other systems where the final amount of duties is known and paid when 
the goods enter the country." 
Comment: The underlying observation for this suggestion ("where the 
final amount of duties is known and paid when the goods enter the 
country") is factually inaccurate. in all systems (prospective or 
retrospective), parties have a right to request a review. The final 
determination of duty liability is made, not at the border, but rather 
at a later date based on the results of any review or lack thereof. 
Until that right under the WTO Agreement has been requested or waived, 
the final determination of duty liability cannot be made in a manner 
consistent with the WTO. [See comment 2] 

Page 3, First Bullet of Section Entitled "Results in Brief": "....other 
major trading partners have AD/CV duty systems that establish the final 
amount of AD/CV duties when goods enter the country." 

Comment: As mentioned above, this is factually inaccurate. [See comment 
2] 

Page 4, Bullet Entitled "Retrospective nature of the U.S. AD/CV duty 
system.": "....the final amount of duties owed may exceed the amount of 
cash deposits the importer paid at the time of entry, and CBP must 
attempt to collect from the importer long after the products enter the 
country. By the time CBP is able to take collection action, 
illegitimate importers (foreign or domestic) may have disappeared in 
order to evade the duties and legitimate importers may be financially 
unable to pay the duties." 

Comment: This problem would not appear to be tied to the retrospective 
nature of the U.S. system, but rather stems from the fact that certain 
parties have been successful at finding ways to abuse elements of our 
system (e.g.. the insufficient bonding problem identified on page 5 of 
the draft report). Also, illegitimate activities (e.g., the use of "fly 
by night" or "shell" companies) could occur in a situation where there 
was a short period between the time the products entered the country 
and efforts at final collection took place. [See comment 6] 

Page 7, Second Paragraph, Second Sentence: "Unlike the United States, 
other major trading partners have AD/CV duty systems that establish the 
final amount of AD/CV duties owed at the time goods enter their 
country." 

Comment: As mentioned above, this mischaracterizes prospective systems 
and implies that other major trading partners have AD/CV duty systems 
that establish the final amount of AD/CV duties owed at the time goods 
enter their country. [See comment 2] 

Page 11, Last Sentence of First Paragraph: "In addition, we suggested 
that Congress consider (1) requiring the relevant agencies to conduct 
an analysis of the relative advantages and disadvantages of different 
AD/CV duty systems, (2) requiring CBP to publicly report annually on 
uncollected AD/CV duties, and L3) providing Commerce with discretion to 
establish minimum thresholds for the amount or value of exports when 
conducting certain AD/CV duty investigations. (emphasis added)" 

Comment: With regard to item "(3)", the actual suggestion was to 
provide Commerce with such discretion for new shipper reviews. [See 
comment 7] 

Page 11, Section Entitled "Concluding Observations": "As long as the 
United States maintains a system that involves attempting to collect 
duties from importers years after they import products into the United 
States, it will have difficulties collecting the full amount of duties 
owed." 

Comment: As indicated above, we disagree with the report's assertion 
that the challenges the United States faces in collecting unpaid AD/CV 
duties is largely clue to the retrospective nature of the duty 
collection process. Further, we strongly take issue with the 
implication that, unless we change to a prospective system, the 
agencies responsible for duty collection would be unable to address 
this problem. Rather than concluding at this time that we "will have 
difficulties collecting" as long as we maintain a retrospective system, 
it would seem appropriate to first evaluate the effectiveness of 
implementing GAO's various recommendations in the March 2008 report. 
[See comment 1] 

GAO Evaluation: 

1. The Department of Commerce (Commerce) commented that they disagree 
with our report's assertion that the challenges the United States faces 
in collecting unpaid AD/CV duties are largely due to the retrospective 
nature of the duty collection process and that, unless changed to a 
prospective system, the agencies responsible for duty collection would 
not be able to address this problem. We did not draw this conclusion in 
this report or our March 2008 report (GAO-08-391). Rather, in our March 
2008 report we included a comprehensive review of the key factors 
contributing to uncollected AD/CV duties and concluded that the 
retrospective component of the U.S. AD/CV duty system was one of four 
key factors contributing to uncollected AD/CV duties. We also analyzed 
two sets of options for Congress and relevant agencies to consider: one 
that would eliminate the current system's retrospective nature and make 
it prospective, based on an analysis of the relative advantages and 
disadvantages; and a second that would involve adjusting aspects of the 
current U.S. AD/CV duty system while retaining its retrospective 
nature. In response to Commerce's comments, we revised the report to 
add this broader context from our earlier report. 

However, our analysis and other agencies' views indicate that the 
retrospective nature of the U.S. AD/CV duty system is a key factor 
contributing to uncollected AD/CV duties. 

* In our March 2008 report, we discussed the fact that uncollected 
AD/CV duties arise when the final amount of duties owed (as determined 
by an administrative review by Commerce) exceeds the amount of 
estimated duties paid by the importer when the goods entered the 
country. When this occurs, CBP must attempt to collect the additional 
amount from the importer. Our analysis showed that, on average, more 
than 3 years elapsed from the time goods entered the country to the 
time when the final AD/CV duty rate is determined. In addition, we 
found that when AD duty rates increase (16 percent of the time), the 
average increase was 62 percentage points. According to the Department 
of the Treasury (Treasury) and U.S. Customs and Border Protection 
(CBP), this creates significant collection problems. Illegitimate 
importers expect that their final assessment will exceed their cash 
deposit and plan to avoid their final duty obligation, according to 
Treasury and CBP officials, while other importers are unable to pay the 
additional amount because it exceeds their available assets. 

* In addition, in commenting on our March 2008 report, the Departments 
of the Treasury and Homeland Security provided additional insights 
regarding the challenges created by the retrospective component of the 
U.S. AD/CV duty system. In responding to that report, Treasury stated 
that, "If there were no retrospective component to the U.S. AD/CV duty 
law, we would expect the duty collection rate to be similar to that for 
other duties, over 99 percent." In addition, the Department of Homeland 
Security (which is responsible for collecting AD/CV duties) responded 
that eliminating the retrospective component of the U.S. AD/CV duty 
system would, among other things, "Alleviate the collection issues 
faced by CBP due to substantial rate increases since the amount of duty 
assessed at entry would be the final amount owed." 

2. We disagree with Commerce's characterization of how prospective 
AD/CV duty systems operate. In our March 2008 report, we examined the 
prospective AD/CV duty systems of major U.S. trading partners (European 
Union, Canada, and Australia) and noted that, while each country's AD/ 
CV duty system operates differently, their reviews have a prospective 
effect (i.e., the new duty rate/normal value that results from the 
review is applied to future imports). We also noted in our March 2008 
report that WTO members are required to allow importers to request 
reviews of the amount of AD duties they have paid if they believe they 
are owed a refund. 

3. We disagree with Commerce's assertion that the main difference 
between prospective and retrospective AD/CV duty systems is that 
"prospective systems will never collect additional duties when dumping, 
pursuant to a review, is found to increase." Our March 2008 report 
included analysis of other countries' prospective AD/CV duty systems, 
and explored the trade-offs in prospective and retrospective system, as 
well as a matter for congressional consideration to require additional 
analysis of the relative advantages and disadvantages of prospective 
and retrospective AD/CV duty systems. 

In our March 2008 report we indicated that prospective and 
retrospective AD/CV duty systems differ in a variety of ways, and the 
specific design features of each system influence their relative 
advantages and disadvantages. We discussed three characteristics which 
illustrate the trade-offs associated with prospective and retrospective 
systems: (1) timing for determining and collecting final AD/CV duties, 
(2) "accuracy" of AD/CV duties paid, and (3) administrative simplicity 
for customs officials. In addition, our prior report specifically 
addressed different systems' ability to address increased dumping. For 
example, we noted that under the Canadian system (which bases AD duties 
on the "normal value" of the product), "... the amount of duties owed, 
if any, varies based on the export price. The lower the export price, 
the greater the duties owed, and vice versa." We further added that, 
"Because the amount of the duty increases with the degree of dumping, 
the Canadian system provides a direct financial incentive for firms to 
reduce or eliminate dumping." 

4. In its comments to our March 2008 report and this report, Commerce 
suggests that two other factors identified in our March 2008 report-- 
insufficient bond amounts and minimal information regarding importers-
-are the "most likely" factors contributing to uncollected AD/CV 
duties. To address this comment, we revised this report's introduction 
to include a discussion of each of the four key factors contributing to 
uncollected AD/CV duties identified in our March 2008 report and 
outlined two sets of options for addressing those factors. 

We agree that CBP' insufficient continuous bond formula and minimal 
information regarding importers are key factors and recommended that 
the Secretary of Homeland Security, in consultation with other relevant 
agencies, should determine whether CBP can adjust its bonding 
requirements to further protect revenue. As we discussed in our March 
2008 report, however, addressing these factors is not without costs and 
other challenges. For example, we noted that increasing bond 
requirements increases costs for importers and has been challenged in 
U.S. courts and in the WTO. Further, increasing information 
requirements for importers would create a significant administrative 
burden on CBP and may not improve CBP's ability to collect AD/CV 
duties. We also observe that if the U.S. AD/CV duty system did not have 
a retrospective component (and therefore did not require attempting to 
collect additional amounts from importers years after products enter 
the country), uncollected U.S. AD/CV duties would be effectively 
eliminated. 

5. In commenting on whether the retrospective nature of the U.S. AD/CV 
duty system is a key contributing factor to uncollected AD/CV duties, 
Commerce states that: "The fact that the U.S. AD/CV duty system is 
retrospective allows us to ascertain the specific extent of dumping on 
a sale-by-sale basis rather than merely accepting, as final, the 
estimated amount of duties determined based on past trading behavior 
..." First, this statement (which implies that prospective AD/CV duty 
systems treat the duties paid when products enter the country as final) 
contradicts Commerce's earlier statement that, "...under both 
prospective and retrospective systems the final determination of duty 
liability is made not at the border, but rather at a later date based 
on the results of any review or lack thereof." Second, our March 2008 
report acknowledged that there are trade-offs involved in considering 
prospective and retrospective AD/CV duty systems. As a result, we 
suggested that Congress consider requiring the Secretaries of Commerce, 
Homeland Security, and the Treasury work together to conduct an 
analysis of the relative advantages and disadvantages of prospective 
and retrospective AD/CV duty systems. Among the trade-offs we 
identified in our March 2008 report are: 

* Timing for determining and collecting final AD/CV duties. In 
prospective AD/CV duty systems, the amount of AD/CV duties paid by the 
importer at the time of importation is essentially treated as final, 
which creates certainty for importers, enabling legitimate importers to 
plan their business operations. In a retrospective system, the amount 
of AD/CV duties owed is not determined until well after the time of 
importation, which generates the collection risks for the U.S. 
government created by the time lag. 

* "Accuracy" of AD/CV duties paid. Under a prospective AD/CV duty 
system, the amount of duties assessed may not match the amount of 
actual dumping or subsidization, but the government is able to collect 
the full amount of duties owed because they are paid at the time of 
importation. Under a retrospective AD/CV duty system, the amount of 
duties assessed exactly reflects the amount of dumping or 
subsidization, but, in practice, a substantial amount of retrospective 
AD/CV duty bills are not collected. 

* Administrative simplicity for customs officials. Retrospective AD/CV 
duty systems can create a substantial burden for customs officials; 
prospective systems create a smaller burden. 

6. Commerce commented that the problem of illegitimate importers 
disappearing in order to evade the duties and legitimate importers 
being unable to pay the duties "would not appear to be tied to the 
retrospective nature of the U.S. system, but rather stems from the fact 
that certain parties have been successful at finding ways to abuse 
elements of our system (e.g., the insufficient bonding problem. . .) " 
As we recommended in our March 2008 report, we believe that the 
Secretary of Homeland Security, in consultation with other relevant 
agencies, should determine whether CBP can adjust its bonding 
requirements to further protect revenue without violating U.S. law or 
international obligations and without imposing unreasonable costs upon 
importers. However, the fact remains that, if the U.S. AD/CV duty 
system did not have a retrospective component (and therefore did not 
require attempting to collect additional amounts from importers years 
after products enter the country), uncollected U.S. AD/CV duties would 
be effectively eliminated. 

Commerce also commented that "...illegitimate activities (e.g., the use 
of "fly by night" or "shell" companies) could occur in a situation 
where there was a short period between the time the products entered 
the country and efforts at final collection took place." We believe 
that a time lag between when products enter the country and when final 
duty collection takes place creates a risk of uncollected AD/CV duties 
and is an important trade-off to consider in evaluating the relative 
advantages and disadvantages of prospective and retrospective AD/CV 
duty systems. In our March 2008 report, we indicated that under the 
U.S. retrospective system, this time lag, on average, exceeds 3 years. 
We also reported that under other countries' prospective AD/CV duty 
systems that we reviewed, the duties assessed at the time a product 
enters the country are essentially treated as final (allowing for 
importers to request a review if they believe they are owed a refund). 

7. We have revised the text to clarify that our recommendation related 
to "new shipper reviews." 

[End of enclosure] 

Footnotes: 

[1] 19 U.S.C.  1671, 1673. 

[2] This includes uncollected duties from fiscal years 2001 through 
2007, as of September 2007. 

[3] GAO, Antidumping and Countervailing Duties: Congress and Agencies 
Should Take Additional Steps to Reduce Substantial Shortfalls in Duty 
Collection, [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-391] 
(Washington, D.C.: Mar. 26, 2008). In that report, we used the phrase 
"uncollected AD/CV duties" to mean the sum of all open, unpaid bills 
for AD/CV duties issued by CBP, which included those under protest. We 
included the principal amount of the bill but not any accrued interest. 
This amount did not include revenue that is foregone when CBP is unable 
to issue duty bills within statutory deadlines. 

[4] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-391]. 

[5] Joint Explanatory Statement accompanying Consolidated 
Appropriations Act, 2008, Pub. L. No. 110-161 (directing GAO to 
undertake an investigation, as detailed in Senate Report 110-84). 

[6] See also Restatement (Third) of Foreign Relations Law of the United 
States  483 (1987). 

[7] For additional detail regarding the challenges posed by the 
retrospective nature of the U.S. AD/CV duty system, see GAO-08-391. 

[8] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-391]. 

[9] 19 C.F.R.  142.4. 

[10] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-391]. 

[11] See also Restatement (Third) of Foreign Relations Law of the 
United States  483 (1987). 

[12] Pasquantino v. U.S., 544 U.S. 349 (2005). 

[13] Customs mutual assistance agreements with Austria, China, Cyprus, 
Ireland, Norway, and Sweden exclude assistance related to collection of 
duties. 

[14] In March 2008, we reported that final AD duty rates increased 16 
percent of the time, with an average increase of 62 percentage points. 
Our analysis showed that, on average, more than 3 years passed between 
the time when imports entered the country and when the final AD/CV 
duties were assessed. See [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-08-391]. 

[15] CBP identified importers located outside the United States by 
using their unique importer number and address of record. 

[16] The other 10 cases (representing approximately $6 million in 
unpaid bills) are currently open, and CBP is continuing to pursue 
collection action. As of June 2008, CBP had collected approximately 
$121,000 as a result of those cases. 

[17] Treaties in Force uses the term "treaty" as defined in the Vienna 
Convention on the Law of Treaties--that is, an international agreement 
"governed by international law, whether embodied in a single instrument 
or in two or more related instruments and whatever its particular 
designation." 

[18] GAO, Antidumping and Countervailing Duties: Congress and Agencies 
Should Take Additional Steps to Reduce Substantial Shortfalls in Duty 
Collection, [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-391] 
(Washington, D.C.: Mar. 26, 2008). 

[End of section] 

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