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entitled 'Antidumping and Countervailing Duties: Congress and Agencies 
Should Take Additional Steps to Reduce Substantial Shortfalls in Duty 
Collection' which was released on April 23, 2008. 

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Report to Congressional Requesters: 

United States Government Accountability Office: 

GAO: 

March 2008: 

Antidumping And Countervailing Duties: 

Congress and Agencies Should Take Additional Steps to Reduce 
Substantial Shortfalls in Duty Collection: 

GAO-08-391: 

GAO Highlights: 

Highlights of GAO-08-391, a report to congressional requesters. 

Why GAO Did This Study: 

U.S. Customs and Border Protection (CBP) has been unable to collect 
hundreds of millions of dollars in antidumping (AD) and countervailing 
(CV) duties. The Department of Commerce imposes these duties to remedy 
injurious unfair foreign trade practices (unfairly low prices or 
subsidies). The noncollection of AD/CV duties means that the U.S. 
government has not fully remedied the unfair trade practices and bears 
a substantial loss of revenue. 

GAO was asked to examine the (1) nature and extent of uncollected AD/CV 
duties, (2) factors contributing to uncollected AD/CV duties and steps 
taken to address these factors, and (3) options for aiding duty 
collections. To analyze these issues, GAO reviewed CBP data for fiscal 
years 2001 through 2007, agency documents and reports, and interviewed 
government officials and private sector representatives. 

What GAO Found: 

While over $600 million in AD/CV duties dating back to 2001 remain 
uncollected, they are highly concentrated among a few products, 
countries of origin, and importers. For example, four products account 
for about 84 percent of the total amount of uncollected AD/CV duties. 
Also, a relatively small number of importers owe the vast majority of 
these uncollected duties. In addition, half of the 23,000 unpaid AD/CV 
duty bills are less than $309, but the average duty bill is more than 
$26,000 due to a relatively small number of very large bills. According 
to CBP officials, prospects for collecting a sizeable portion of these 
bills are slim, because many of the importers have disappeared, have no 
assets, or have declared bankruptcy. CBP reporting on uncollected AD/CV 
duties has been critical to congressional and public oversight of CBPs 
efforts to collect AD/CV duties. However, the law generating this 
reporting has been repealed. Four key factors contribute to uncollected 
AD/CV duties, a few of which the U.S. government has partially 
addressed. First, because the U.S. AD/CV duty system involves the 
retrospective assessment of duties, the final amount of AD/CV duties an 
importer owes can significantly exceed the initial amount paid when the 
goods entered the country. Second, companies that did not previously 
export products subject to AD/CV duties, i.e., new shippers, pose two 
types of risks for collections. For example, new shippers can be 
assigned an AD/CV duty rate based on as few as one shipment, which can 
significantly underestimate the final duty rate. Also, importers 
purchasing from new shippers were able to provide a bond in lieu of a 
cash payment to cover the initial AD/CV duties assessed. Congress 
addressed this risk by temporarily requiring all importers to pay 
initial AD/CV duties in cash. Third, all importers must provide a 
general bond to secure the payment of all types of duties, but CBPs 
standard practice for setting the amount of this bond inadequately 
protects AD/CV duty revenue. CBP addressed this by revising its bonding 
formula for products subject to AD/CV duties, but the revision has been 
tested on only one product and faces domestic and international legal 
challenges. Fourth, CBP collects minimal information regarding 
importers and does not conduct background or financial checks, which 
creates challenges to locating importers and collecting AD/CV duties. 
Two sets of options exist for improving AD/CV duty collection, each of 
which involves potential advantages and disadvantages. One set of 
options involves revising U.S. law to eliminate the retrospective 
component of the U.S. AD/CV duty system by assessing final duties when 
the product arrives in the United States (i.e., a prospective system). 
But there would be trade-offs. For example, under a retrospective 
system, the amount of duties finally assessed reflects the actual 
amount of dumping by the exporter for the period of review. Under a 
prospective system, the amount of duties assessed may not match the 
amount of actual dumping or subsidization. However, in practice, a 
substantial amount of AD/CV duty bills are not collected under the U.S. 
retrospective system. The second set of options involves making 
adjustments within the existing system. For example, Congress could 
revise the standards for new shipper reviews and CBP could examine the 
option of revising bonding requirements to protect additional AD/CV 
duty revenue. 

What GAO Recommends: 

GAO suggests matters for congressional consideration to: improve 
reporting on uncollected duties; adjust requirements for new shipper 
reviews; and aid its consideration of options for improving the AD/CV 
duty system. GAO also makes recommendations for executive action, 
including reviewing CBPs standard practice for setting bond 
requirements for importers. The Departments of Commerce and Homeland 
Security generally agreed with our recommendations. 

To view the full product, including the scope and methodology, click on 
GAO-08-391. For more information, contact Loren Yafer at (202) 512-4347 
or yagerl@gao.gov. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

Uncollected AD/CV Duties Are Substantial and Highly Concentrated: 

Four Key Factors Contribute to Uncollected AD/CV Duties; the Government 
Has Addressed Some of These Factors: 

Although Improvements Made, Weaknesses in Interagency Communication 
Impede Processing of AD/CV Duties, but the Overall Revenue Effect 
Appears Minimal: 

Options for Improving the Collection of AD/CV Duties Have Potential 
Advantages and Disadvantages: 

Conclusions: 

Matters for Congressional Consideration: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Examples of the Calculation of AD/CV Duties in the United 
States, Australia, Canada, and the European Union: 

Appendix III: Illustration of the Process and Maximum Time Frames for 
Collecting AD/CV Duties: 

Appendix IV: Comments from the Department of Commerce: 

Appendix V: Comments from the Department of Homeland Security: 

Appendix VI: Comments from the Department of the Treasury: 

Appendix VII: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Distribution of Uncollected AD/CV Duties by Importer, as of 
September 2007: 

Table 2: International Trade Compliance Analyst Caseload, by Fiscal 
Year: 

Figures: 

Figure 1: Amount of Uncollected AD/CV Duties Owed for the Fiscal Year, 
as of September 30, by Fiscal Year: 

Figure 2: Illustration of the Process and Maximum Time Frames for 
Collecting AD/CV Duties: 

Figure 3: Uncollected AD/CV Duties, by Industry, Product, Country of 
Origin, and Exporter's New Shipper Status, as of September 2007: 

Figure 4: Distribution of Uncollected AD/CV Duty Bills, by Decile, as 
of September 2007: 

Figure 5: Uncollected AD/CV Duties, by Change in Rate (0-250 percentage 
points), as of July 2007: 

Figure 6: Percentage of Entries Subject to AD/CV Duties Liquidated from 
September 2000 through July 2007, by Number of Months Between Entry and 
Liquidation: 

Figure 7: Authorized vs. Actual Staffing Levels for International Trade 
Compliance Analysts (first quarter, fiscal year 2004 to January 2008): 

Abbreviations: 

ACE: Automated Commercial Environment: 
ACS: Automated Commercial System: 
AD: antidumping: 
CBP: U.S. Customs and Border Protection: 
CDSOA: Continued Dumping and Subsidy Offset Act of 2000: 
CV: countervailing: 
Commerce: Department of Commerce: 
Justice: Department of Justice: 
ITC: International Trade Commission: 
Treasury: Department of the Treasury: 
WTO: World Trade Organization: 

United States Government Accountability Office: 

Washington, DC 20548: 

March 26, 2008: 

The Honorable Robert C. Byrd: 
Chairman: 
The Honorable Thad Cochran: 
Ranking Member: 

Committee on Appropriations: 
United States Senate: 

The Honorable Max Baucus: 
Chairman: 
The Honorable Charles E. Grassley: 
Ranking Member: 

Committee on Finance: 
United States Senate: 

Since fiscal year 2001, U.S. Customs and Border Protection (CBP) has 
been unable to collect antidumping (AD) and countervailing (CV) duties 
imposed to remedy injurious unfair foreign trade practices totaling 
hundreds of millions of dollars.[Footnote 1] These include AD duties 
imposed on products exported to the United States at unfairly low 
prices (i.e., dumped) and CV duties on products exported to the United 
States that were subsidized by foreign governments. This substantial 
amount of uncollected duties has caused concern on the part of Congress 
and the domestic industries affected by the dumped or subsidized 
products. The noncollection of those duties means that the U.S. 
government has not fully remedied the unfair trade practices and has 
lost out on a substantial amount of revenue. 

The process for assessing and collecting AD/CV duties involves two key 
agencies and can take several years. The Department of Commerce 
(Commerce) is responsible for calculating the appropriate AD/CV duty 
rate.[Footnote 2] CBP is then responsible for completing the processing 
of duties (technically called "liquidating"), which may result in 
providing importers with a refund or sending an additional 
bill.[Footnote 3] 

To help reduce uncollected AD/CV duties, you asked us to examine the 
reasons why the duties are uncollected and what the U.S. government has 
done to address this problem. In addition, you asked us to identify 
options for improving the AD/CV duty system. Specifically, we examined 
(1) the extent and nature of uncollected AD/CV duties; (2) the key 
factors contributing to uncollected AD/CV duties and the steps taken to 
improve the collection of AD/CV duties; (3) interagency communications 
that affect the processing of AD/CV duties; and (4) potential options 
for improving AD/CV duty collections. 

To meet these objectives, we analyzed U.S. government data and reports 
and interviewed officials from relevant government agencies and the 
private sector. To describe the extent and nature of uncollected AD/CV 
duties, we reviewed CBP data on all open, unpaid AD/CV duty bills for 
fiscal years 2001 through 2007, as of September 2007.[Footnote 4] To 
identify the key factors affecting CBP's ability to collect AD/CV 
duties and the steps taken to improve collection, we analyzed CBP data; 
reviewed relevant statutes, regulations, and agency reports; and 
interviewed agency officials. We also analyzed CBP records documenting 
its efforts to collect AD/CV duties, reviewed agency reports and 
legislative changes, and interviewed agency and private sector 
representatives. To determine whether interagency processes inhibit the 
collection of AD/CV duties, we analyzed documentation related to 
interagency communications regarding AD/CV duties and interviewed 
agency officials. To identify and analyze potential options for 
improving AD/CV duty collection, we interviewed agency officials and 
private sector representatives and reviewed academic literature. In 
addition, we obtained information from several foreign governments to 
understand how their AD/CV duty systems operate. We determined that the 
data presented in this report are sufficiently reliable for the purpose 
for which they are presented. Appendix I provides additional 
information regarding our scope and methodology. We conducted this 
performance audit from June 2007 to March 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. 

Results in Brief: 

Over $613 million in AD/CV duties from fiscal years 2001 through 2007 
were uncollected as of September 2007, with the uncollected duties 
highly concentrated among a few industries, products, countries of 
origin, and importers. The agriculture/aquaculture industry represents 
87 percent of the total amount of uncollected AD/CV duties. In 
addition, four products are responsible for approximately 84 percent of 
the total amount of uncollected AD/CV duties.[Footnote 5] Also, 
importers purchasing products from China are associated with 90 percent 
of the total amount of uncollected duties. Further, a relatively small 
number of importers owe the majority of uncollected AD/CV duties. Of 
the nearly 27,000 importers subject to AD/CV duties since fiscal year 
2001, less than 2 percent have open, unpaid bills for AD/CV duties. 
Four companies account for more than one-third of the total amount of 
uncollected AD/CV duties, and 20 companies account for 63 percent of 
the total. Moreover, importers purchasing from companies undergoing a 
special "new shipper" review accounted for about 40 percent of 
uncollected AD/CV duties. Half of all uncollected AD/CV duty bills are 
less than $309; however, a relatively small number of much larger bills 
increases the average duty bill to over $26,000. The extent of 
uncollected AD/CV duties is affected by unresolved legal protests, 
which account for about 43 percent of the value of uncollected AD/CV 
duties. According to CBP officials, most of the nearly $290 million 
referred to its Office of Chief Counsel will be written off.[Footnote 
6] According to CBP officials, prospects for collecting these duties 
are slim, because many of the importers involved have disappeared, have 
no assets, or have declared bankruptcy. CBP's problems collecting AD/CV 
duties were first widely recognized following reporting based on the 
Continued Dumping and Subsidy Offset Act (CDSOA) of 2000.[Footnote 7] 
Private sector representative and congressional staff have found CBP's 
detailed reporting on uncollected AD/CV duties critical to conducting 
oversight of CBP's collection efforts. However, the law generating this 
reporting has been repealed.[Footnote 8] 

Four key factors contribute to uncollected AD/CV duties, a few of which 
the government has addressed. First, the retrospective component of the 
U.S. AD/CV duty system creates the risk of uncollected duties because 
the final amount of AD/CV duties an importer owes can exceed the amount 
it paid when goods entered the country. While AD duty rates typically 
stay the same (60 percent of the time) or decline (24 percent of the 
time), when they increase (16 percent of the time), they can go up 
significantly.[Footnote 9] While half of rate increases are 4 
percentage points or less, the average rate increase is 62 percentage 
points, and some increases exceeded 200 percentage points. The long lag 
times between the entry of goods and the assessment of final duties 
also increase the risk of uncollected duties. On average this process 
takes more than 3 years, during which importers could cease operations 
or become unable to pay additional duties. Second, Commerce's reviews 
of companies that did not previously export products subject to AD/CV 
duties ("new shippers") pose two risks. One risk is related to 
importers' ability to provide a bond in lieu of cash payment to cover 
the estimated AD/CV duties required at the time of importation. In 
response, Congress temporarily suspended the bonding privilege and 
required all importers to pay estimated AD/CV duties in cash.[Footnote 
10] The other risk is related to the low levels of exports necessary to 
be eligible for a new shipper review, which can lead to a significant 
underestimate of the amount of AD/CV duties owed. Third, all importers 
must provide a general bond to secure the payment of all types of 
duties, but CBP's standard formula provides little protection of AD/CV 
duty revenue because it often sets bond requirements at a low level. 
CBP addressed this by revising its standard bond formula, but the 
revision has been tested on only one product and has been challenged in 
domestic courts and internationally.[Footnote 11] Fourth, CBP collects 
minimal information regarding importers and does not conduct background 
or financial checks, which can contribute to challenges in locating and 
collecting AD/CV duties. 

Despite some improvements, weaknesses in interagency communications 
impede CBP's ability to process the appropriate amount of AD/CV duties 
within the required 6 months.[Footnote 12] In recent years CBP and 
Commerce have taken several steps to improve communication regarding 
AD/CV duties. For example, Commerce established a Customs Unit to serve 
as the focal point for CBP on customs issues. However, remaining 
weaknesses in the interagency liquidation process can impair CBP's 
ability to collect AD/CV duties. For instance, during the liquidation 
process, untimely action by Commerce and CBP's need to seek 
clarification from Commerce regarding liquidation instructions present 
challenges to completing the process within the statutory 6-month 
deadline.[Footnote 13] Many entries are not addressed in the time 
allowed, but the overall effect on revenue appears minimal. According 
to Commerce officials, human capital challenges affect the department's 
ability to effectively perform its role in the liquidation process. For 
example, as of January 2008, Commerce had less than half (103 of 211) 
of the staff authorized to perform responsibilities related to AD/CV 
duties. However, Commerce lacks a strategy or plan for understanding 
and addressing these human capital challenges. 

Two sets of options exist for improving AD/CV duty collection, each of 
which involves potential advantages and disadvantages. One set of 
options involves revising U.S. law to eliminate the retrospective 
component of the U.S. AD/CV duty system by assessing final duties when 
a product arrives in the United States. Other major U.S. trading 
partners have AD/CV duty systems that, although they operate 
differently from one another, are fundamentally prospective in that AD/ 
CV duties assessed at the time a product enters the country are 
essentially treated as final. The advantages and disadvantages of 
prospective and retrospective AD/CV duty systems differ and depend on 
specific design features, such as (1) timing for determining and 
collecting final AD/CV duties, (2) "accuracy" of AD/CV duties paid, and 
(3) administrative simplicity for customs officials. The second set of 
options involves making adjustments within the existing system and 
includes four types of changes. First, the process or standards for 
assigning AD/CV duty rates for "new shippers" could be revised. Second, 
the requirements for becoming an importer of record could be 
heightened. Third, CBP's bonding requirements could be revised. Each of 
these adjustments would impose additional costs on both legitimate and 
illegitimate companies. Fourth, U.S. law could be changed to lengthen 
the time that CBP has to liquidate entries subject to AD/CV duties. 
Such a change could reduce the amount of foregone revenue, but could 
make collections more difficult in some situations. 

In this report, we suggest three matters for congressional 
consideration and make three recommendations for executive action. We 
suggest that Congress require the Secretaries of Commerce, Homeland 
Security, and the Treasury to conduct an analysis and report to 
Congress on the relative advantages and disadvantages of prospective 
and retrospective AD/CV duty systems. We also suggest that Congress 
require CBP to publicly report on an annual basis on all uncollected 
AD/CV duties. We further suggest that Congress consider providing 
Commerce with the authority to establish, at its discretion, a minimum 
amount or value of exports from companies requesting a new shipper 
review. To increase the amount of AD/CV duty revenue protected by 
general bonds, we recommend that the Secretary of Homeland Security 
work with other relevant agencies to re-examine the current formulas 
for setting bond requirements. To improve the liquidation process, we 
recommend that the Secretary of Commerce work with the Secretary of 
Homeland Security to identify ways to improve the clarity of Commerce's 
liquidation instructions. To ensure that the Import Administration has 
sufficient human capital to issue timely and clear liquidation 
instructions to CBP, we recommend that the Secretary of Commerce 
develop a strategic human capital plan encompassing its AD/CV duty 
operational offices. 

We provided a copy of this report to the Departments of Commerce, 
Homeland Security, Justice, and the Treasury, as well as the United 
States International Trade Commission (ITC) and the Office of the U.S. 
Trade Representative. The Departments of Commerce, Homeland Security, 
and the Treasury provided formal comments. The Departments of Homeland 
Security and Commerce generally agreed with our recommendations and 
indicated a willingness to take steps to address them. 

Background: 

The process for importing products into the United States involves 
several different private parties as well as the U.S. government. 
Exporters are companies that ship goods manufactured or produced in 
foreign countries to the United States. Importers may be companies that 
purchase the products from exporters or simply may be responsible for 
the facilitation of the importation of the goods. Importers are 
responsible for paying all duties, taxes, and fees on those products 
when they are brought into the United States. Importers also are 
required to obtain a general bond to secure the payment of their 
financial obligations. CBP is responsible for, among other things, 
collecting the duties, taxes, and fees assessed on those products and 
setting the formula for establishing importers' bond amounts. 

The United States and many of its trading partners have established 
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 AD/CV duties to remedy these unfair trade 
practices, namely dumping (i.e., sales at less than normal value) and 
foreign government subsidies.[Footnote 14] While AD/CV duties are 
intended to protect U.S. industries and workers from unfair foreign 
trade practices, they also have become a substantial source of revenue 
for the U.S. government. CBP is the U.S. agency responsible for 
collecting all import duties, which amounted to over $98 billion from 
fiscal years 2003 through 2006.[Footnote 15] A portion of these duties 
are AD/CV duties, of which CBP collected $8 billion in cash deposits 
(or 7 percent of the total). A recent Department of the Treasury 
(Treasury) analysis estimated that for fiscal years 2003 through 2006, 
the overall collection rate for all duties exceeded 99 percent and the 
collection rate for AD/CV duties was somewhat lower (96 
percent).[Footnote 16] However, Treasury also reported that the 
collection rate for AD duties owed as a result of an administrative 
review by Commerce was less than 50 percent. Treasury estimated that 
approximately $589 million in total duties went uncollected during the 
period. Uncollected AD/CV duties represented 87 percent of that amount. 

Figure 1 shows the amount of uncollected AD/CV duties owed for entries 
liquidated during each fiscal year, as of September 30. For example, 
for fiscal year 2007, CBP reported $237 million in uncollected AD/CV 
duties for entries liquidated during the year, as of September 30, 
2007. The amount of uncollected duties for entries liquidated during 
fiscal year 2007 could decrease based on additional collections made in 
subsequent years. 

Figure 1: Amount of Uncollected AD/CV Duties Owed for the Fiscal Year, 
as of September 30, by Fiscal Year: 

This figure is a vertical bar graph showing the amount of uncollected 
AD/CV duties owed for the fiscal year, as of September 30, by fiscal 
year. The X axis is the fiscal year, and the Y axis is the amount of 
uncollected AD/CV duties (dollars in millions). 

Fiscal year: "2003"; 
Amount of uncollected: 130.403. 

Fiscal year: "2004"; 
Amount of uncollected: 260.072. 

Fiscal year: "2005"; 
Amount of uncollected: 93.254. 

Fiscal year: "2006"; 
Amount of uncollected: 146.391.

Fiscal year: "2007"; 
Amount of uncollected: 236.948

[See PDF for image] 

Source: CBP, CDSOA Annual Reports fiscal years 2003 through 2007. 

Note: The sum of these data exceeds the total amount of uncollected AD/ 
CV duties as of the end of fiscal year 2007 because these data 
represent a snapshot of the amount of uncollected AD/CV duties at the 
end of each fiscal year. As noted above, the amounts shown in this 
figure could decrease based on additional collections in subsequent 
years. 

[End of figure] 

According to government officials and private sector representatives, 
the substantial shortfalls in collecting AD/CV duties were first widely 
publicized after the enactment of CDSOA (also known as the Byrd 
Amendment) in 2001, which provided for the distribution of AD/CV duties 
to the injured domestic industries, instead of, as in the past, going 
to Treasury.[Footnote 17] Following the repeal of CDSOA in 2006 after a 
decision by the World Trade Organization (WTO) that the law violated 
WTO rules, AD/CV duties collected will again be paid to Treasury. 

The process for investigating, calculating, and assessing AD/CV duties 
can be a lengthy process and involves three key agencies. Commerce is 
responsible for determining whether the imports at issue are being sold 
at less than fair value (dumped) or are being subsidized by a 
countervailable subsidy.[Footnote 18] The ITC is responsible for 
determining whether an industry in the United States is being injured 
by the imports at issue.[Footnote 19] Both ITC and Commerce must make 
affirmative determinations in their respective investigations for AD/CV 
duties to be imposed.[Footnote 20] Commerce also sets the AD/CV duty, 
which is equal to the amount of dumping or subsidization. [Footnote 21] 
CBP is then responsible for collecting the AD/CV duties.[Footnote 22] 

At the completion of its investigation, Commerce issues an AD/CV duty 
order, which specifies the products for which importers must pay AD/CV 
duties, and indicates the rates applicable to several specific 
exporters and a catch-all rate for all other exporters that did not 
receive a specific rate.[Footnote 23] The AD/CV duty order also 
instructs CBP to collect cash deposits at the time of importation at 
those rates on all merchandise subject to the order. As shown in figure 
2, the merchandise also can be subject to an administrative review by 
Commerce 12 months after the issuance of the AD/CV duty order.[Footnote 
24] During the administrative review, Commerce analyzes previous 
imports to determine the actual level of dumping or subsidization for 
those imports. At the conclusion of the administrative review 
(typically about 18 months after the review's initiation), the 
liquidation rate (i.e., the final duty rate) for the merchandise is 
established. Commerce communicates the final duty rate to CBP through 
liquidation instructions and CBP instructs staff at each port of entry 
to assess final duties on all relevant entries (i.e., applying the rate 
to the value of goods imported). The liquidation process is complete 
when CBP refunds money (if the cash deposit rate was higher than the 
liquidation rate) or issues a supplemental bill (if the liquidation 
rate is higher than the cash deposit rate). If the cash deposit rate is 
equal to the liquidation rate, CBP does not issue a refund or a 
supplemental bill and the entry is liquidated "as entered." These 
actions must be completed by Commerce and CBP within 6 months.[Footnote 
25] (App. III provides additional information regarding the AD/CV duty 
collection process.) 

Figure 2: Illustration of the Process and Maximum Time Frames for 
Collecting AD/CV Duties: 

This figure is a flowchart showing the process and maximum time frames 
for collecting AD/CV duties. 

[See PDF for image] 

Source: GAO analysis of information from Commerce and CBP. 

Note: This figure depicts the maximum lengths of time allowed by law, 
regulation, or agency practice for specific steps in the AD/CV duty 
process. 

[End of figure]

To collect additional AD/CV duties an importer owes, CBP sends the 
importer a monthly bill. An importer has 6 months from the date of 
liquidation or reliquidation to protest the bill amount.[Footnote 26] 
After the protest period has expired, if an importer has not paid the 
bill, CBP requests payment from the surety (insurance) company that 
underwrote the bond the importer provided when the products entered the 
United States.[Footnote 27] According to CBP officials, if CBP does not 
receive full payment of the bill within 8 months of sending the first 
bill, it "sanctions" the delinquent importer. CBP officials also 
explained that importers that have not been sanctioned are allowed to 
have their merchandise released from the port of entry without paying 
all estimated duties, taxes, and fees so long as they commit to make 
such payment within 15 days.[Footnote 28] When importers are 
sanctioned, CBP revokes this privilege and requires the full payment of 
all estimated duties, taxes, and fees before products can leave the 
port of entry. If CBP does not receive payment within 1 year of issuing 
the first bill, CBP's Revenue Division (which is responsible for 
collecting payment) refers the case to CBP's Office of Chief Counsel, 
which determines the next course of action. In addition, the Office of 
Chief Counsel determines whether the bill should be written 
off.[Footnote 29] 

While the time frames for completing each step in the process for 
assessing and collecting AD/CV duties are established by law, AD/CV 
duties also are subject to judicial review, which is not subject to 
time frames. According to CBP and Commerce officials, importers and 
surety companies frequently obtain legal injunctions or file protests 
related to the application of AD/CV duties. In instances where 
litigation occurs, the process can take months or years longer than 
described here. 

Uncollected AD/CV Duties Are Substantial and Highly Concentrated: 

Uncollected AD/CV duties from fiscal years 2001 through 2007 amount to 
over $613 million and are highly concentrated among a few industries, 
products, countries of origin, and importers. For example, uncollected 
AD/CV duties are highly concentrated in four products from one country. 
In addition, a relatively small number of large AD/CV duty bills and 
unresolved legal protests accounts for a sizeable portion of the 
uncollected AD/CV duties. According to CBP billing records, about $350 
million worth of AD/CV duty bills are in various stages of the 
collection process. Of those bills, CBP officials expect that most of 
the nearly $290 million referred to its Office of Chief Counsel will be 
written off. Private sector representative and congressional staff have 
found CBP's detailed reporting on uncollected AD/CV duties critical to 
conducting oversight of CBP's collection efforts. However, the law 
generating this reporting has been repealed.[Footnote 30] 

Uncollected AD/CV Duties Are Highly Concentrated: 

Data on all open, unpaid bills for AD/CV duties as of September 2007 
(which amounted to more than $613 million) show that uncollected AD/CV 
duties are highly concentrated in five ways: by (1) industry, (2) 
product, (3) country of origin, (4) exporter's new shipper status, and 
(5) importer.[Footnote 31] In this report we use the phrase 
"uncollected AD/CV duties" to mean the sum of all open, unpaid bills 
for AD/CV duties issued by CBP, which includes those currently under 
protest.[Footnote 32] Nearly 100 percent of these uncollected duties 
are AD duties. [Footnote 33] 

As shown in figure 3, uncollected AD/CV duties are highly concentrated 
in four ways: 

* By industry. The agriculture/aquaculture industry accounts for 87 
percent of the total, and the steel industry accounts for 7 percent. 

* By product. Since fiscal year 2001, CBP has assessed AD/CV duties 
related to 597 AD/CV duty orders on specific products. Of those, as of 
September 2007, 120 duty orders have some amount of uncollected duties. 
Approximately 84 percent of the total amount of uncollected AD/CV 
duties is associated with four products, all from China: crawfish tail 
meat, garlic, honey, and mushrooms. 

* By country of origin. Importers purchasing from China are responsible 
for 90 percent of all uncollected AD/CV duties. 

* By exporter's "new shipper" status. Importers that purchased goods 
from companies undergoing a special "new shipper" review account for a 
substantial amount of uncollected duties. As will be discussed in more 
detail later in this report, under U.S. law, these importers were 
allowed, until recently, to pay estimated AD/CV duties by posting a 
bond instead of paying in cash as other importers are required to 
do.[Footnote 34] Importers that purchased goods from companies 
undergoing a "new shipper" review are responsible for approximately 40 
percent of uncollected AD/CV duties.[Footnote 35] 

Figure 3: Uncollected AD/CV Duties, by Industry, Product, Country of 
Origin, and Exporter's New Shipper Status, as of September 2007: 

This figure is a combination of four pie charts showing uncollected 
AC/CV duties, by industry, product, country of origin, and exporter's 
new shipper status, as of September 2007. 

By Industry: 

Dollars in millions. 

Agriculture/aquaculture ($531): 87%; 
Steel ($43): 7%; 
All others ($40): 7%. 

By Product: 

Dollars in millions. 

Crawfish tail meat from China ($354): 58%; 
Honey from China ($43): 7%; 
Mushrooms from China ($41): 7%; 
Garlic from China ($75): 12%; 
Other ($100): 16%. 

By Country of Origin: 

Dollars in millions. 

China ($551): 90%; 
Argentina ($11): 2%; 
Vietnam ($12): 2%; 
All others ($40): 7%. 

By Exporter's New Shipper Status: 

Dollars in millions. 

Not a new shipper ($198): 60%; 
New shipper ($130): 40%. 

[See PDF for image] 

Source: GAO analysis of CMB data. 

Note: The analyses by industry, product, and country of origin are 
based on a total of $613 million in uncollected AD/CV duties. The 
analysis by exporter's new shipper status is based on $328 million of 
uncollected AD/CV duties for which it was possible to determine the 
exporter's new shipper status. 

[End of figure] 

Uncollected AD/CV duties also are highly concentrated among a group of 
importers. CBP data show that from October 2000 through July 2007, 
about 27,000 importers were subject to AD/CV duties. Of those, 520 (or 
less than 2 percent) had uncollected AD/CV duties as of September 2007. 
Among those importers that owe AD/CV duties, the majority of the amount 
of uncollected AD/CV duties is owed by a relatively small number of 
companies. As shown in table 1, the top 4 importers that owe the most 
AD/CV duties account for more than one-third of the total amount of 
uncollected AD/CV duties, and the top 20 importers account for 63 
percent. For example, as of September 2007, "Importer 1" had 133 
outstanding AD/CV duty bills amounting to $122 million, which was 
secured by a bond of $700,000. 

Table 1: Distribution of Uncollected AD/CV Duties by Importer, as of 
September 2007: 

[See PDF for image] 

Source: GAO analysis of CBP data. 

Note: According to CBP, publishing the names of these importers is 
prohibited under both the Trade Secrets Act (18 U.S.C.  1905) and the 
Privacy Act (5 U.S.C.  552a). According to CBP, as of January 2008, 
none of the 20 companies were active importers. 

[End of table] 

Most AD/CV Duty Bills Are Small, but a Few Are Very Large: 

As shown in figure 4, most AD/CV duty bills are small, but a relatively 
few large bills skew the average bill amount. Our analysis of CBP 
billing records shows that for the approximately 23,000 open, unpaid 
AD/CV duty bills as of September 2007, the median bill amount was $309, 
which means that half of AD/CV duty bills were less than $309 and half 
of the bills were more. However, a relatively small number of bills for 
more than $1 million increased the average (mean) bill amount to more 
than $26,000. 

Figure 4: Distribution of Uncollected AD/CV Duty Bills, by Decile, as 
of September 2007: 

This figure is a vertical bar graph showing distribution of uncollected 
AD/CV duty bills, by decile, as of September 2007. The X axis 
represents the bill decile, and the Y axis represents the percentage of 
uncollected AD/CV duties. 

$1-$60: 0.02%; 
$61-$110: 0.03%; 
$11-$218: 0.06%; 
$219-$268: 0.09% 
$269-$309: 0.11%; 

Median bill amount ($309) is between deciles 5 and 6. 

$310-$560: 0.14%; 
$561-$1,921: 0.42%; 
$1,922-$6,969: 1.37%; 

Mean bill amount ($26,616) is in decile 9. 

$6,970-$46,455: 8.54%; 
$46,456-$7,167,653: 89.23%. 

[See PDF for image] 

Source: GAO analysis of CBP data. 

Note: Each bill decile includes 2,306 bills. 

[End of figure] 

Unresolved Protests Affect the Amount of Uncollected AD/CV Duties: 

Unresolved protests of AD/CV duty bills substantially affect the 
collection of AD/CV duties. After the completion of Commerce's 
administrative review, importers and surety companies can protest the 
amount of duties CBP has assessed. As of September 2007, approximately 
$265 million (or 43 percent) of the total amount of uncollected AD/CV 
duties was subject to protests. These protests affect the extent of 
uncollected AD/CV duties in two key ways. First, until the protest is 
decided, CBP does not take additional collection action. According to 
CBP officials, delays in its ability to take collection action can 
impair their ultimate ability to collect the full amount of duties 
owed. Second, if an importer or surety prevails in its protest, the AD/ 
CV duty bill is reduced or eliminated. 

A Sizeable Amount of AD/CV Duty Bills Is Likely to Be Written Off: 

According to CBP billing records, about $350 million worth of AD/CV 
duty bills are in various stages of the collection process. 
Approximately $290 million of these unpaid AD/CV duty bills has been 
sent to CBP's Office of Chief Counsel to determine the appropriate 
legal action. The Office of Chief Counsel may take additional 
collection action such as sending importers and sureties formal demands 
for payment or referring the case to the Department of Justice 
(Justice) for litigation. In cases where at least one viable party is 
located, the case is referred to Justice for litigation unless the cost 
of collection is anticipated to exceed the amount recoverable. The 
Office of Chief Counsel reports that it is currently working with 
Justice to collect over $80 million in outstanding AD/CV duties from 
two sureties that are undergoing insolvency proceedings.[Footnote 36] 

CBP officials expect that most of the nearly $290 million referred to 
its Office of Chief Counsel will be written off after proper legal 
review. From fiscal years 2001 through 2007, CBP wrote off 
approximately $34 million in AD/CV duties, most of which ($28 million) 
was written off in fiscal years 2006 or 2007.[Footnote 37] The Office 
of Chief Counsel cited several reasons for writing off outstanding 
bills, including (1) CBP is unable to locate the debtor(s), (2) the 
importer has no assets, (3) the debt against the debtor has been 
discharged in bankruptcy, and (4) the cost of collection is anticipated 
to exceed the amount recoverable.[Footnote 38] 

Law Which Generated CBP Reporting on Uncollected AD/CV Duties Has Been 
Repealed: 

According to private sector representatives from industries receiving 
payments under CDSOA, the reporting required by CDSOA allowed them for 
the first time to easily identify the amount of money collected for 
each AD/CV duty order. Though not required by CDSOA, in fiscal year, 
2003 CBP began publicly reporting the amount of uncollected duties. 
This reporting included detailed data on the amount of AD/CV duties 
uncollected for each product subject to AD/CV duties. According to 
private sector representatives and congressional staff, such reporting 
has been critical to oversight of CBP's efforts to collect AD/CV 
duties. 

However, in February 2006, CDSOA was repealed.[Footnote 39] 
Nonetheless, ensuring that Congress and the affected domestic 
industries have access to detailed data on uncollected AD/CV duties is 
critical to the oversight of CBP's collection efforts. For example, 
representatives of the crawfish and steel industries (for which some 
imports are subject to AD/CV duties) indicate that detailed reporting 
on uncollected AD/CV duties is necessary to ensure that injured U.S. 
industries are receiving the full amount of protection intended by the 
imposition of AD/CV duties. 

Four Key Factors Contribute to Uncollected AD/CV Duties; the Government 
Has Addressed Some of These Factors: 

Four key factors contribute to uncollected AD/CV duties; the U.S. 
government has addressed some of these factors. First, the 
retrospective component of the U.S. AD/CV duty system creates the risk 
of uncollected duties because the final amount of AD/CV duties an 
importer owes can exceed the amount it paid when goods entered the 
country. Second, "new shipper" reviews pose two types of risks for the 
collection of AD/CV duties. Congress addressed one of these risks by 
temporarily suspending importers' ability to post bonds and requiring a 
cash payment to cover the estimated AD/CV duties owed at the time of 
importation when purchasing from a new shipper.[Footnote 40] Third, all 
importers must provide a general bond to secure the payment of duties, 
but CBP's standard bond formula provides little protection of AD/CV 
duty revenue because it sets bond amounts at a low level. CBP addressed 
this by revising its standard bond formula for imports subject to AD/CV 
duties, but the revision has only been applied to one product and faces 
challenges in domestic courts and internationally.[Footnote 41] Fourth, 
CBP collects minimal information regarding importers and does not 
conduct background or financial checks, which creates challenges to 
locating and collecting AD/CV duties. 

Retrospective Component of U.S. AD/CV Duty System Creates Risk for Duty 
Collection: 

Two aspects of the retrospective component of the U.S AD/CV duty system 
create risk for duty collection. First, under the U.S. AD/CV duty 
system, the amount of duties owed (determined through an administrative 
review by Commerce) can exceed the amount of estimated AD/CV duties an 
importer paid at the time of importation. Second, the long lag time 
between the time of importation and the time when final AD/CV duties 
are assessed creates a risk that CBP will be unable to collect the full 
amount of AD/CV duties owed. During this time, importers may disappear, 
cease business operations, or declare bankruptcy, which has created 
challenges to CBP's ability to collect AD/CV duties owed. 

Retrospective Calculation of Final Duties Creates Risk of Uncollected 
Duties: 

Under the U.S. AD/CV duty system, importers must pay estimated AD/CV 
duties at the time of importation,[Footnote 42] but the final amount of 
duties is not determined until later. [Footnote 43] As a result, after 
Commerce conducts an administrative review to establish final AD/CV 
duty rates, the final amount of duties owed can exceed the estimated 
amount of duties the importer paid 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. According to a 2007 Treasury 
report on major duty collection problems, these situations create the 
most significant collection problems.[Footnote 44] Some importers are 
unable to pay the additional amount because it exceeds their available 
assets. Others, such as illegitimate importers, expect that their final 
assessment will exceed their cash deposit and plan to avoid their final 
duty obligation, according to Treasury officials. 

Final AD duty rates are lower or the same as the estimated duty rates 
the vast majority of the time. However, in some cases, final duty rates 
are significantly higher. In analyzing more than 6 years of CBP data 
covering over 900,000 entries subject to AD duties, we found that duty 
rates went up 16 percent of the time, went down 24 percent of the time, 
and remained the same 60 percent of the time.[Footnote 45] In instances 
when rates increased, the median increase was less than 4 percentage 
points, meaning that half of the time the rate increased less than 4 
percentage points.[Footnote 46] However, because of some large 
increases, the average rate increase was 62 percentage points, and some 
exceeded 200 percentage points.[Footnote 47] When there was a rate 
decrease, the median decline was 7 percentage points, meaning that half 
of the time the rate decreases were less than 7 percentage 
points.[Footnote 48] However, some larger decreases caused the average 
rate decrease to be 21 percentage points.[Footnote 49] 

When these rate changes were applied to each entry, CBP provided 
refunds or issued supplemental bills to the importers. In part because 
there were more refunds than supplemental bills, on balance, the 
average result was a refund of $324. For the 24 percent of the entries 
that had a rate decrease, the average refund amount was $2,733. For the 
16 percent of the entries that had a rate increase, the average 
supplemental bill was $2,137, but one was more than $7 million. 
Notably, the majority (58 percent) of uncollected duty bills over 
$500,000 are attributed to rate increases greater than 150 percentage 
points. Figure 5 shows the amounts of uncollected AD/CV duties by 
various levels of rate increases. 

Figure 5: Uncollected AD/CV Duties, by Change in Rate (0-250 percentage 
points), as of July 2007: 

This figure is a dot graph showing uncollected AC/CV duties, by change 
in rate (0-250 percentage points), as of July 2007. 

[See PDF for image] 

Source: GAO analysis of CBP data. 

Note: This figure depicts the distribution of approximately 18,000 
open, unpaid AD/CV duty bills for which the estimated AD/CV duty rate 
was between 0 and 250 percentage points lower than the final AD/CV duty 
rate. It excludes 23 AD/CV duty bills with rate increases greater than 
250 percentage points, which accounted for $3.3 million in uncollected 
duties. This figure also excludes 22 AD/CV duty bills for more than 
$750,000--all of which were related to an AD order on crawfish tail 
meat from China--totaling $55.7 million. 

[End of figure] 

Long Lag Times Increase the Risk for Uncollected AD/CV Duties: 

Long lag times between initial entry of a product and final assessment 
of duties further increase the risk of uncollected duties, especially 
when dealing with illegitimate importers. According to CBP officials, 
the more time that elapses between the entry of goods and the 
assessment of final duties, the lower the likelihood they will be able 
to collect any additional duties owed because importers may disappear, 
cease business operations, or declare bankruptcy. As seen in figure 6, 
half of all entries subject to AD/CV duties took 29 months (about 2.4 
years) or less to liquidate (i.e., close the entry or issue a bill or 
refund). For one entry, however, more than 18 years elapsed between the 
entry of the goods and when the entry was liquidated. On average, this 
process took about 3.3 years. 

Figure 6: Percentage of Entries Subject to AD/CV Duties Liquidated from 
September 2000 through July 2007, by Number of Months Between Entry and 
Liquidation: 

This figure is a vertical bar graph showing percentage of entries 
subject to AD/CV duties liquidated from September 2000 through July 
2007, by number of months between entry and liquidation. The X axis 
represents months between entry and liquidation, and the Y axis 
represents percentage of entries. 

Months between entry and liquidation: "8"; 
Percentage of entries: 0.76. 

Months between entry and liquidation: "16"; 
Percentage of entries: 2.46. 

Months between entry and liquidation: "24"; 
Percentage of entries: 1.69. 

Months between entry and liquidation: "32"; 
Percentage of entries: 1.56. 

Months between entry and liquidation: "40"; 
Percentage of entries: 0.97. 

Months between entry and liquidation: "48"; 
Percentage of entries: 0.60. 

Months between entry and liquidation: "56"; 
Percentage of entries: 0.48. 

Months between entry and liquidation: "64"; 
Percentage of entries: 0.34. 

Months between entry and liquidation: "72"; 
Percentage of entries: 0.28. 

Months between entry and liquidation: "80"; 
Percentage of entries: 0.30. 

Months between entry and liquidation: "88"; 
Percentage of entries: 0.40. 

Months between entry and liquidation: "96"; 
Percentage of entries: 0.33. 

Months between entry and liquidation: "104"; 
Percentage of entries: 0.35. 

Months between entry and liquidation: "112"; 
Percentage of entries: 0.35. 

Months between entry and liquidation: "120"; 
Percentage of entries: 0.18. 

Months between entry and liquidation: "128"; 
Percentage of entries: 0.16. 

Months between entry and liquidation: "136"; 
Percentage of entries: 0.16. 

Months between entry and liquidation: "144"; 
Percentage of entries: 0.08. 

Months between entry and liquidation: "152"; 
Percentage of entries: 0.02. 

Months between entry and liquidation: "160"; 
Percentage of entries: 0.02. 

[See PDF for image] 

Source: GAO analysis of CBP data. 

[End of figure] 

According to CBP and Treasury officials, some importers attempting to 
avoid AD/CV duties take advantage of the long lag times created by the 
system to deliberately evade paying AD/CV duties. Since, on average, 
more than 3 years elapse between the entry of the goods and the final 
assessment of duties, importers can bring in a large volume of 
merchandise subject to AD/CV duties before final duties are assessed. 

New Shipper Reviews Enhance Risk for Uncollected AD/CV Duties; Congress 
Has Partially Addressed This Risk: 

U.S. law pertaining to the application of AD/CV duties to "new 
shippers" poses two types of risks related to the collection of these 
duties. The first risk is linked to the ability of importers purchasing 
from new shippers to post bonds instead of having to pay cash deposits. 
In the course of an AD/CV duty investigation, Commerce typically 
determines an AD/CV duty rate applicable to a good associated with 
several specific manufacturers and exporters as well as a rate for all 
those manufacturers and exporters of the good not individually 
investigated. After the conclusion of an AD/CV duty investigation, some 
exporters who are not individually investigated may request a review in 
order to receive their own rates because they believe they could 
receive a lower rate. A "new shipper" (a manufacturer/exporter) who did 
not export the subject merchandise during the initial period of 
investigation and is not affiliated with any exporter who exported the 
subject merchandise can request that Commerce conduct a review to 
establish the shipper's own individual AD/CV duty rate. Once Commerce 
initiates a new shipper review, importers purchasing from the 
manufacturer/exporter undergoing the review used to have the option of 
paying estimated AD/CV duties by providing a bond in lieu of paying 
cash. As discussed earlier in this report, importers that were allowed 
to provide bonds in lieu of cash deposits are responsible for about 40 
percent of the amount of uncollected AD/CV duties. 

Congress has partially addressed this risk of uncollected AD/CV duties 
associated with new shipper reviews. In August 2006, Congress 
temporarily suspended the "new shipper bonding privilege" that allowed 
importers who purchased from companies undergoing a new shipper review 
to provide a bond, instead of cash, to cover the estimated AD/CV duties 
due at entry.[Footnote 50] As a result, all importers must now provide 
a cash deposit to cover the estimated duties at entry until July 2009. 
This new policy eliminated the risk of uncollected AD/CV revenues when 
the final duty amounts were assessed at the cash deposit rate or less 
because CBP does not have to issue a bill for the bonded amount. 
However, supplemental duties due to rate increases remain unprotected. 

The new law also required CBP to apply the revised policy retroactively 
to April 1, 2006.[Footnote 51] Thus, those importers who already had 
obtained bonds for AD/CV duties on shipments from new shippers during 
the approximately 4.5 months preceding the legislation were required to 
make cash payments for these shipments. CBP identified $96 million 
worth of such bonds that needs to be replaced with cash. While CBP has 
taken steps to collect this money, as of January 2008, it had collected 
only approximately $100,000 in total.[Footnote 52] 

The second risk is linked to the level of imports required to obtain an 
AD/CV duty rate as a result of a new shipper review. U.S. law does not 
specify any minimum amount of exports or number of transactions that a 
manufacturer or exporter must make to be eligible for a new shipper 
review.[Footnote 53] As a result, an exporter can be assigned its own 
individual AD/CV duty rate based on a very minimal amount of exports. 
For example, a new shipper can purposely make one commercial shipment 
to the United States at a relatively high price for which the importer 
would pay a relatively high AD/CV duty rate,[Footnote 54] then request 
a review of that shipment. Commerce's review (based on the one 
shipment) will determine that the new shipper was not dumping the 
product in the United States and assigns a 0 percent AD/CV duty deposit 
rate. Once Commerce assigns the new shipper a 0 percent AD/CV duty 
rate, the AD/CV duties the importer paid on the one commercial shipment 
are refunded, with interest. In addition, no AD/CV duty deposits are 
collected on future shipments, but additional duties may be owed if 
those shipments are determined to have been dumped or subsidized when 
an administrative review is completed in approximately 12 to 18 months. 

CBP's Standard Bond Formula Provides Little Protection of AD/CV Duty 
Revenue; CBP Has Taken Steps to Address This Risk, but Faces 
Challenges: 

CBP's standard bond setting formula provides little protection for 
securing AD/CV duty revenue when the final amount of AD/CV duties owed 
exceeds the amount paid at the time of importation. To ensure payment 
of unforeseen obligations to the government, all importers are required 
to post a security, usually a general obligation bond, when they import 
products into the United States.[Footnote 55] This bond is an insurance 
policy protecting the U.S. government against revenue loss if an 
importer defaults on its financial obligations. CBP determines the 
appropriate amount of a bond required for each importer. In general, 
the importer is required to obtain a bond 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). 

As seen in table 1 earlier in this report, CBP's standard bond formula 
is insufficient to protect AD/CV duty revenue in some cases. Table 1 
presents data on the top 20 importers with uncollected AD/CV duties and 
their bond amounts, which are insufficient to protect AD/CV duty 
revenue for all 20 importers. When AD/CV duties are retrospectively 
increased, the standard bond formula can be insufficient to cover the 
importer's new obligation. If an importer fails to pay the supplemental 
AD/CV duties, CBP can collect from the surety, up to the amount of the 
bond that was provided at the time of importation. However, CBP 
frequently faces a lengthy process of trying to collect from bonding 
agents who can, and often do, protest CBP's decision to collect the 
bond amount. According to Treasury's analysis, if an importer defaults 
and the amount of the bond is insufficient to cover the importer's new 
obligations, duties due in excess of the bond coverage are often 
uncollected. 

In July 2004, in response to problems collecting AD duties, CBP 
announced a revision to its standard bond policy for bonds covering 
certain imports subject to AD/CV duties. The revised bond formula was 
intended to reduce the risk of uncollected duties, but CBP has tested 
it on only one product subject to AD duties. The revised policy 
requires importers to obtain a bond equal to 100 percent of the 
estimated AD/CV duties for items imported over the previous 12 
months.[Footnote 56] Essentially, the new requirement doubles the AD/CV 
duty revenue protected in that CBP now receives a cash deposit, plus an 
increased bond approximately equal to the cash deposit. In February 
2005, CBP applied the revised policy to imports of shrimp from six 
countries subject to AD duties as a "test case" before applying the 
policy more broadly. 

In October 2006, we reported on the implementation of the test case and 
its effects.[Footnote 57] We found that the revised bonding requirement 
achieved its goal of increasing the amount of AD duties secured. CBP 
data showed that the policy increased the amount of duty revenue 
protected by 85 percent, but that the costs imposed on shrimp importers 
as a result of the revised policy are substantial. For example, shrimp 
importers must pay higher premiums and often are required by sureties 
to provide 100 percent collateral. According to shrimp importers, this 
reduced the amount of funds available to operate their business, tied 
up collateral for several years, and strained the borrowing capacity of 
some importers. 

While the policy has protected revenue and had some negative impacts on 
importers, it is not possible to assess its full effects on AD/CV duty 
collections for three reasons. First, it has been applied to one 
product, shrimp, which has little history in terms of duty collections. 
Second, the domestic shrimp industry and over 100 shrimp exporters 
reached agreements to not request that Commerce conduct administrative 
reviews.[Footnote 58] In exchange for cash payments from exporters and 
the cooperation of the exporters on issues related to illegal 
antibiotics and circumvention, the domestic industry agreed not to 
request an administrative review of these exporters. This eliminated 
the possibility of duty rate increases which can result in uncollected 
duties. Thus, it is not possible to separate the effects of the policy 
from the effects of the agreements. Third, some U.S. importers and WTO 
members have challenged the legality of the policy.[Footnote 59] The 
U.S. Court of International Trade has issued an injunction on the 
implementation of the policy for some importers,[Footnote 60] and a WTO 
dispute settlement panel issued a report in February 2008 indicating 
that the revised policy as applied to imports of shrimp from India and 
Thailand is inconsistent with WTO rules.[Footnote 61] The policy is 
currently still being applied to most shrimp importers, but it has not 
been applied to importers of other products. 

CBP Collects Little Information Regarding Importers of Record, Creating 
Challenges to Locating Debtors and Collecting Duties: 

CBP collects a minimal amount of information from companies applying to 
be importers of record, which challenges its ability to subsequently 
locate and collect duties from delinquent debtors. Aside from basic 
information such as an importer's name and its mailing address, CBP 
requires one additional unique identifying number. This number can be 
an Internal Revenue Service Taxpayer Identification Number (for a 
company) or a Social Security number (for an individual). In addition, 
applicants can request that CBP assign them a unique number for CBP's 
tracking purposes. Companies seeking to avoid paying AD/CV duties can 
easily drop identification numbers and obtain new ones, making the 
numbers an ineffective tool for enforcement. Regardless of the type of 
unique identifying number the importer uses, the company (or 
individual) is not subject to any credit or background checks before 
being allowed to import products into the United States. With such 
limited information about importers, locating them can be difficult, 
especially if they are trying to evade duties. According to CBP 
officials responsible for attempting to collect delinquent AD/CV 
duties, their collection efforts often are ineffective because by the 
time they are able to attempt to collect, importers have ceased 
business operations. 

CBP officials pointed out that foreign companies and individuals are 
allowed to be importers, and that CBP's ability to collect from such 
importers, especially illegitimate ones, is very limited. According to 
CBP officials, the number of nonresident importers (i.e., foreign 
importers of record) seems to be growing and poses unique issues when 
it comes to collecting AD/CV duties. CBP officials indicated that if 
foreign importers of record do not pay supplemental duties, the cost of 
attempting to collect the duties would be high and would likely exceed 
the amount collected. 

Although Improvements Made, Weaknesses in Interagency Communication 
Impede Processing of AD/CV Duties, but the Overall Revenue Effect 
Appears Minimal: 

Despite some improvements, weaknesses in interagency communications 
impede CBP's ability to process the final amount of AD/CV duties within 
the required 6 months. In recent years, CBP and Commerce have taken 
several steps to improve communication regarding AD/CV duties, but 
untimely action by Commerce and CBP's need to seek clarification from 
Commerce during the liquidation process present challenges to 
completing the process in the time allowed. Many entries are not 
addressed within the statutory 6-month period,[Footnote 62] though the 
overall effect on revenue appears minimal. Human capital challenges at 
Commerce affect its ability to effectively perform its role in the 
liquidation process, but Commerce lacks a strategy for addressing these 
challenges. 

Agencies Have Taken Steps to Improve Communication: 

In recent years, agencies have taken steps to improve communication 
related to processing AD/CV duties. First, Commerce established a 
Customs Unit within the Import Administration in January 2005 that 
provides essential customer services and information to both government 
and private sector stakeholders involved in the AD/CV duty process. The 
Customs Unit serves as the focal point for CBP on customs issues, 
maintains a call center, and fosters communication daily with CBP via e-
mail and telephone. Both CBP and Commerce officials agree that the 
formation of the Customs Unit has improved their interagency 
communication. Commerce also has taken steps to improve the template it 
uses to guide the development of liquidation instructions. In addition, 
according to Commerce, officials from Commerce, CBP, Immigration and 
Customs Enforcement,[Footnote 63] and occasionally the Department of 
Justice or U.S. Attorney's Office attend a monthly trade enforcement 
meeting at which they discuss AD/CV duty collections, including open 
and potential fraud cases. 

CBP and Commerce also have taken steps to improve their handling of the 
protests filed by importers and surety companies regarding the amount 
of duties owed. For instance, according to Commerce officials, in 2006, 
Commerce increased the number of staff processing protests from one to 
five, enabling the agencies to reduce the backlog of 250 protests. In 
addition, CBP enhanced its tracking system to monitor the status of the 
protests it sends to Commerce for advice on how to resolve the protest. 
Also, CBP is in the process of clarifying instructions to its ports on 
procedures for handling AD/CV duty-related protests. 

CBP is undertaking steps to improve its data systems for processing AD/ 
CV duties, as part of the agency's larger project to replace its 20- 
year-old data system--called the Automated Commercial System (ACS)-- 
with the Automated Commercial Environment (ACE). CBP is building a 
separate AD/CV duty module within ACE, soliciting input from Commerce 
officials throughout the project. According to CBP officials, ACE will 
enhance its ability to handle more AD/CV duty tasks automatically. 
Currently, thousands of entries subject to AD/CV duties require manual 
entry for liquidation, which is resource and time intensive. According 
to CBP officials, the AD/CV duty module in ACE is expected to be 
completed sometime after January 2011. 

Weaknesses in Interagency Communication Create Impediments, Impairing 
CBP's Ability to Process AD/CV Duties: 

Communication weaknesses in the interagency process for liquidating 
entries subject to AD/CV duties impede CBP's ability to process AD/CV 
duties in a timely manner. This process involves action by both 
Commerce and CBP and is governed by statutory and self-imposed 
deadlines. However, untimely and unclear communication creates 
impediments to completing the process within these time frames. Many 
entries are not liquidated within the specified time frame, though the 
amount of revenue lost or gained appears to be minimal. Human capital 
challenges at Commerce contribute to these weaknesses, but Commerce 
lacks a strategy for addressing these challenges. 

Liquidation Process Involves Action by Commerce and CBP and Is Governed 
by Statutory and Self-Imposed Deadlines: 

Commerce and CBP must take several steps in order to liquidate an entry 
subject to AD/CV duties that has undergone an administrative review. 
Under U.S. law, this process must be completed (by sending a bill or 
refund or closing the transaction) within 6 months of Commerce 
publishing a notice in the Federal Register specifying (1) the final 
AD/CV duty rates or (2) a final court decision to liquidate entries 
that were enjoined subject to litigation, whichever comes 
later.[Footnote 64] There are three basic steps in the liquidation 
process. 

First, after concluding an administrative review, Commerce publishes 
the review's final results in the Federal Register, and commits to 
sending specific instructions to CBP within 15 days after the notice in 
the Federal Register or the lifting of any injunction. Commerce often 
prepares these liquidation instructions using a template. Commerce then 
sends the instructions to CBP headquarters to liquidate the covered 
entries at the final AD/CV duty rate determined by the administrative 
review. Second, CBP headquarters reviews the instructions sent by 
Commerce to ensure they are sufficiently clear. CBP headquarters then 
forwards the instructions to each port of entry. Third, CBP staff at 
ports of entry liquidate the entries in one of three ways: (1) 
refunding the difference to the importer when the final duty liability 
is lower than the cash deposit collected at the time of importation; 
(2) issuing a bill to the importer for the difference when the final 
duty liability is higher than the cash deposit collected at the time of 
importation; or (3) closing the entry when the cash deposit is the same 
as the final duty liability. 

Untimely and Unclear Liquidation Instructions Create Impediments to 
Liquidation: 

We identified two main impediments to CBP's ability to liquidate 
entries subject to AD/CV duties. One impediment is untimely liquidation 
instructions from Commerce. Specifically, we identified instances where 
Commerce failed to send the liquidation instructions within its self- 
imposed 15-day deadline. Since approximately January 2006, CBP has been 
documenting "message logs" for the purpose of tracking the timeliness 
of Commerce's delivery of liquidation instructions. In reviewing these 
logs for a 4-month period, we determined that Commerce sent the 
liquidation instructions to CBP headquarters within 15 days of 
publishing the relevant Federal Register notice approximately 20 
percent of the time.[Footnote 65] In addition, almost 30 percent of the 
instructions were sent more than 100 days after the Federal Register 
notice was published. After reviewing the instances we identified where 
instructions were sent more than 100 days after the Federal Register 
notice, Commerce officials determined that such a delay was often 
(about 70 percent of the time) beyond their control. For example, 
Commerce officials noted that some cases are subject to legal 
injunctions or North American Free Trade Agreement rules which allow 
longer time frames for the issuance of liquidation instructions. 
However, they also noted that some liquidation instructions are sent 
more than 100 days after the publication of the Federal Register notice 
or the lifting of any injunction because of administrative oversight 
due primarily to heavy workload. 

According to Commerce officials, they recognize the importance of 
sending liquidation instructions in a timely manner, but lacked a 
mechanism for ensuring that this occurred. After we made Commerce 
officials aware of the untimely liquidation instructions we identified, 
in December 2007, the Deputy Assistant Secretary for AD/CV Duty 
Operations sent a memo to each of the nine Office Directors responsible 
for AD/CV duty operations reiterating the need to ensure that 
liquidation instructions are timely. He also announced a plan for 
tracking the timeliness of liquidation instructions, including a 
requirement that each of the Office Directors report quarterly on their 
office's efforts to meet the goal of issuing instructions 15 days after 
the pertinent notice in the Federal Register or the lifting of any 
injunction. 

A second impediment to the timely liquidation of some entries subject 
to AD/CV duties is a lack of clarity in Commerce's liquidation 
instructions and the extra time taken by CBP to obtain clarification. 
CBP and Commerce officials acknowledge that liquidation instructions 
can be complicated and difficult to draft and may be very detailed. 
However, according to CBP headquarters officials, they are unable to 
send liquidation instructions to field offices to act upon in a 
significant percentage of cases because Commerce's instructions are 
unclear. 

Commerce communicates its instructions to CBP through ACS. If CBP needs 
to clarify or correct liquidation instructions, it will return the 
instructions back to Commerce through ACS. Our analysis of CBP's log of 
instructions returned to Commerce for clarification found that CBP 
sought clarification for approximately 21 percent of liquidation 
instructions that Commerce sent within the 7-month period we 
reviewed.[Footnote 66] Further, CBP's log noted that several 
instructions were sent back for clarification for a second or third 
time. 

Many Entries Not Liquidated Within 6-Month Deadline, but Revenue Lost 
or Gained Appears Minimal: 

We identified over 37,000 entries out of a total of approximately 3.1 
million entries (approximately 1 percent) subject to AD duties 
liquidated from October 2004 through June 2007 that were "deemed 
liquidated" (i.e., CBP failed to complete the liquidation process 
within the 6-month period). If CBP cannot complete the liquidation 
process within 6 months of Commerce's notice in the Federal Register, 
it may not collect the appropriate amount of AD/CV duties. When CBP 
fails to complete the liquidation process within 6 months, an entry is 
"deemed liquidated" and the entry is liquidated at the rate asserted by 
the importer at the time of entry (e.g., the cash deposit 
rate).[Footnote 67] This precludes CBP from attempting to collect any 
supplemental additional duties that might have been owed because of an 
increase in the AD/CV duty rate. Similarly, it means that CBP does not 
refund money owed to importers as a result of a decrease in the AD/CV 
duty rate.[Footnote 68] 

The potential revenue lost or gained on entries deemed liquidated 
appears minimal. In the vast majority of the 37,000 cases of deemed 
liquidation we identified, no revenue appears to have been lost or 
gained as a result of the deemed liquidation. We identified 507 entries 
which should have resulted in the collection of additional revenue, but 
were deemed liquidated. Our analysis showed that the United States did 
not receive approximately $106,000 in revenue for these entries. More 
significantly, we identified 171 entries which should have resulted in 
approximately $1.5 million of refunds to importers, but were deemed 
liquidated. 

Human Capital Challenges at Commerce Affect Liquidation Process, but 
Commerce Lacks a Strategy for Addressing the Challenges: 

Commerce officials acknowledge that human capital challenges limit 
their ability to draft clear and timely liquidation instructions in 
some cases, but they have no clear strategy for addressing these 
challenges. They attribute these human capital challenges to a hiring 
freeze that has been in place since January 2006, which affected the 
hiring of International Trade Compliance Analysts who are responsible 
for drafting AD/CV duty liquidation instructions. According to Commerce 
officials, the AD/CV duty operations offices have lost 46 International 
Trade Compliance Analysts since January 2006, and they had been unable 
to refill these positions due to the hiring freeze. As a result, as 
shown in figure 7, as of January 2008, the Import Administration had 
less than half (103 of 211) of the International Trade Compliance 
Analysts which it was authorized. 

Figure 7: Authorized vs. Actual Staffing Levels for International Trade 
Compliance Analysts (first quarter, fiscal year 2004 to January 2008): 

This figure is a combination vertical graph showing authorized vs. 
actual staffing levels for international trade compliance analysts 
(first quarter, fiscal year 2004 to January 2008). 

Fiscal year 2004: Q1; 
Number of analysts (actual): 159; 
Number of analysts (authorized): 7. 

Fiscal year 2004: Q2; 
Number of analysts (actual): 157; 
Number of analysts (authorized): 54. 

Fiscal year 2004: Q3; 
Number of analysts (actual): 162; 
Number of analysts (authorized): 49. 

Fiscal year 2004: Q4; 
Number of analysts (actual): 167; 
Number of analysts (authorized): 44. 

Fiscal year 2005: Q1; 
Number of analysts (actual): 170; 
Number of analysts (authorized): 41. 

Fiscal year 2005: Q2; 
Number of analysts (actual): 160; 
Number of analysts (authorized): 51. 

Fiscal year 2005: Q3; 
Number of analysts (actual): 156; 
Number of analysts (authorized): 55. 

Fiscal year 2005: Q4; 
Number of analysts (actual): 155; 
Number of analysts (authorized): 56. 

Fiscal year 2006: Q1; 
Number of analysts (actual): 150; 
Number of analysts (authorized): 61. 

Fiscal year 2006: Q2; 
Number of analysts (actual): 149; 
Number of analysts (authorized): 62. 

Fiscal year 2006: Q3; 
Number of analysts (actual): 140; 
Number of analysts (authorized): 71. 

Fiscal year 2006: Q4; 
Number of analysts (actual): 131; 
Number of analysts (authorized): 80. 

Fiscal year 2007: Q1; 
Number of analysts (actual): 127; 
Number of analysts (authorized): 84. 

Fiscal year 2007: Q2; 
Number of analysts (actual): 122; 
Number of analysts (authorized): 89. 

Fiscal year 2007: Q3; 
Number of analysts (actual): 114; 
Number of analysts (authorized): 97. 

Fiscal year 2007: Q4; 
Number of analysts (actual): 109; 
Number of analysts (authorized): 102. 

Fiscal year 2008: Q1; 
Number of analysts (actual): 102; 
Number of analysts (authorized): 109. 

Jan-08; 
Number of analysts (actual): 103; 
Number of analysts (authorized): 108. 

[See PDF for image] 

Source: GAO analysis. 

[End of figure] 

Despite the substantial decline in the number of staff, there has been 
only a slight decline in caseload since fiscal year 2004. As shown in 
table 2, the caseload per analyst has increased substantially since 
fiscal year 2004. According to Commerce officials, this growth in 
caseload for International Trade Compliance Analysts is a key reason 
that some liquidation instructions are not sent in a timely manner. 

Table 2: International Trade Compliance Analyst Caseload, by Fiscal 
Year: 

Number of analysts (3rd qtr); 
FY04: 162; 
FY05: 156; 
FY06: 140; 
FY07: 114; 
Estimated FY08: 114. 

Number of AD/CV duty determinations; 
FY04: 308; 
FY05: 398; 
FY06: 359; 
FY07: 336; 
Estimated FY08: 380. 

Determinations per analyst; 
FY04: 1.9; 
FY05: 2.6; 
FY06: 2.6; 
FY07: 2.9; 
Estimated FY08: 3.3. 

Source: GAO analysis of Commerce data. 

Note: "Number of determinations" is a measure used by Commerce to 
assess workload. It included the number of AD/CV duty determinations 
issued within the statutory and/or regulatory deadline. 

[End of table] 

Commerce has taken some steps to improve its human capital, but lacks a 
clear strategy for addressing its human capital challenges. For 
instance, Commerce officials report that the agency released a job 
announcement for the International Trade Compliance Analyst position to 
support the nine AD/CV duty operational offices, and they have hired 
nine new analysts since September 2007. They also have requested 
additional funding to establish an additional office to focus on CV 
duty investigations involving nonmarket economies. However, according 
to Commerce officials, they have not conducted a comprehensive analysis 
to understand its human capital challenges and have no formal human 
capital plan to address these challenges. 

Options for Improving the Collection of AD/CV Duties Have Potential 
Advantages and Disadvantages: 

Congress and the relevant agencies face two sets of options to consider 
in attempting to improve the collection of AD/CV duties. Each set has 
both potential advantages and disadvantages. One set of options would 
be for Congress to fundamentally alter the U.S. AD/CV duty system by 
eliminating its retrospective component and making it prospective. The 
other set of options involves adjusting specific aspects of the current 
U.S. AD/CV duty system while retaining its retrospective nature. This 
set includes such options as adjusting the requirements for "new 
shippers," heightening the requirements for becoming an importer of 
record, revising the bond requirements for importers, and lengthening 
the statutory deadline for assessing final AD/CV duties. Consideration 
of any option should include analysis of whether the change would be 
consistent with international trade agreements, including WTO rules. 

Congress Could Eliminate the Retrospective Component of the U.S. AD/CV 
Duty System: 

U.S. law could be changed to eliminate the retrospective component of 
the U.S. AD/CV duty system and, instead, treat AD/CV duties assessed at 
the time the product enters the country essentially as final. Under the 
current U.S. AD/CV duty system, when Commerce issues an AD/CV duty 
order, it establishes estimated AD/CV duty rates. Commerce then 
instructs CBP to collect estimated duties at those rates from importers 
when products subject to the order enter the country. However, as 
discussed earlier, Commerce often conducts an administrative review, 
during which it analyzes additional imports (typically 1 year of 
entries) and calculates the final duty rates (and thus the amount of 
duties owed by the importer). In this way, the U.S. system is 
retrospective in nature, in that the final amount of duties is based on 
the actual amount of dumping or subsidization for that year. 

The Prospective AD/CV Duty Systems of Other Countries Present 
Alternatives: 

Other countries we reviewed do not determine their final AD/CV duties 
by calculating actual amount of duties owed after products enter the 
country. While each country's AD/CV duty system operates differently, 
major U.S. trading partners such as Canada, Australia, and the European 
Union have AD/CV duty systems that are fundamentally prospective. Under 
these countries' systems, the AD/CV duties assessed at the time a 
product enters the country are essentially treated as final.[Footnote 
69] App. II provides illustrative examples of the calculation of AD/CV 
duties under different scenarios. If and when the AD/CV duty rate is 
changed, it is applied only to future imports and has no effect on the 
amount of duties owed for previous imports.[Footnote 70] As a result, 
other countries reported that they have no major problems collecting 
AD/CV duties. 

Canada's AD duty system often is referred to as a prospective normal 
value system.[Footnote 71] Canadian officials conduct investigations to 
determine whether imports are being dumped or subsidized and whether 
they are causing injury to Canadian industry; if so, they impose AD/CV 
duties. According to Canadian officials, when the government finds that 
dumping is occurring, the Canadian government calculates a "normal 
value" for the product, which is used to calculate the amount of AD 
duties applicable on all future shipments to Canada.[Footnote 72] For 
all future imports, if the normal value of the goods exceeds the export 
price, the importer owes AD duties in an amount equal to the difference 
between the two prices. Thus, 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. If the export price is equal to or higher 
than the normal value, the importer owes no AD duties.[Footnote 73] 
Officials stated that this normal value is used until the Canadian 
government conducts a review to update it, which typically occurs 
annually. These reviews are initiated either by the government or at 
the request of an importer or exporter based on market or price 
changes. Following the completion of a review, the new normal value is 
used for all future imports, but is not used to recalculate the amount 
of duties owed on prior imports (unlike in the U.S. system). Officials 
further explained that under Canadian law, importers and certain 
exporters (for example, those from the United States and Mexico) also 
may request a redetermination of the normal value or export price after 
duties have been assessed on a transaction for the purpose of obtaining 
a refund. Any duties found to have been paid in excess as a result of 
the redetermination will be refunded to the importer. As of November 
2007, Canada imposed AD duties on 17 products and CV duties on 6 
products. In 2006, Canada collected approximately $24 million in AD/CV 
duties. 

Australia's AD duty system also is prospective and the duties are 
assessed based on the normal value calculated during an investigation 
of unfairly priced imports. However, as Australian officials explained, 
the AD duties owed may have two components: one fixed and one variable. 
The fixed component is the difference between the normal value and the 
export price during the AD duty investigation. This amount is assessed 
on all future imports on a per-unit basis. The variable component is 
the additional duties that will be assessed if an exporter lowers its 
price for an individual transaction below what it charged during the 
investigation. The additional duties will be assessed at an amount 
equal to the difference between the two prices.[Footnote 74] Like the 
Canadian system, Australia periodically reviews the normal value and 
makes any adjustments on a prospective basis. As of October 2007, 
Australia imposed AD duties on 35 products and CV duties on 1 product. 

The European Union's (EU) AD/CV duty system also is prospective, with 
the amount of the duties based on the amount of dumping or 
subsidization applied on an ad valorem (percentage) basis.[Footnote 75] 
EU officials stated that they conduct an investigation to determine 
whether imports are being dumped or subsidized and whether they are 
causing injury to a European industry. If so, they then establish the 
normal value for the product and compare this to the export price. 
Officials further explained that they calculate the percentage 
difference between these two prices and set this as the AD/CV duty 
rate. This rate is then applied to all future imports of the product. 
As a result, the amount of the AD/CV duties owed is a simple percentage 
the current export price. Thus, the lower the export price, the lesser 
the amount of duties owed; the higher the price, the greater the amount 
of duties owed.[Footnote 76] According to EU officials, EU regulations 
allow for the periodic review of AD/CV duties as well as for the refund 
of any duty paid determined to be in excess of the actual margin of 
dumping and/or subsidization of the exporter concerned. Officials 
stated that these periodic reviews have a prospective effect, that is, 
the new rate of duty will affect only future imports (contrary to the 
U.S. system, the amount of duty cannot be increased retrospectively). 
Separately, importers have the opportunity to request a refund review, 
which would concern past imports. As of December 2006, the European 
Union had 134 AD measures and 2 CV measures in force. The AD measures 
covered 59 products and 32 countries, while the CV measures covered 10 
products and 5 countries. 

Trade-Offs Involved When Considering Prospective and Retrospective AD/ 
CV Duty Systems: 

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.[Footnote 77] The types of trade- 
offs associated with each system can be illustrated by comparing three 
specific characteristics: 

* 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. 
This eliminates the risk of being unable to collect AD/CV duties. 
Establishing the final amount of AD/CV duties owed at the time of 
importation also creates certainty for importers. This enables 
legitimate importers to plan their business operations. In addition, 
some prospective AD/CV duty systems and retrospective systems assess 
AD/CV duties that increase or decrease as the degree of dumping or 
subsidization increases or decreases, which can provide exporters an 
incentive to eliminate or reduce dumping. For example, under Canada's 
"prospective normal value" AD/CV duty system, Canada's investigation 
results in establishing a normal value which is known to all parties. 
Exporters can then raise their prices up to that normal value, thereby 
eliminating their dumping and avoiding any AD/CV duties.[Footnote 78] 

In a retrospective AD/CV duty system, the amount of AD/CV duties owed 
is not determined until well after the time of importation. 
Importantly, our analysis showed that, in the U.S. system, final duties 
are assessed, on average, more than 3 years after importation. This 
time lag, which often is the result of the time required to conduct the 
administrative review necessary to calculate final AD/CV duties and any 
judicial review of the results of the review, has several potential 
implications. First, the threat of an administrative review can deter 
some companies from dumping. An administrative review could result in 
AD/CV duty rates being increased from the estimated rate paid at the 
time of importation, which could mean significant new duty liability 
for an importer. As such, since legitimate importers seek price 
certainty, they may be less inclined to purchase from exporters whose 
AD/CV duty rates fluctuate substantially over time. Second, the time 
lag creates collection risks for the U.S. government. As discussed 
earlier, the long lag times between entry and final duty assessments in 
the U.S. system increase the risk of uncollected duties, as importers 
may become unable or be unwilling to pay the final amount of AD/CV 
duties when they are assessed. Third, the time lag can result in "bad 
actors," those importers who intentionally avoid paying required 
duties, not being identified until they have been importing for a long 
time. Only after its collections efforts are unsuccessful does the 
government clearly know that duties owed by this importer are at 
serious risk for noncollection. During this time lag, the importer may 
continue to import dumped or subsidized products into the country, thus 
incurring additional duty liability and increasing the U.S. government 
risk for noncollection. 

* "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. Under some prospective systems, the 
amount of AD/CV duties an importer is assessed is based on dumping or 
subsidization that occurred in a previous period. As a result, if the 
amount of dumping or subsidization changes, the amount of duties paid 
in the current period may not equal the amount of dumping or 
subsidization that is currently occurring. However, the government is 
able to collect the full amount of AD/CV duties assessed because the 
duties are paid at the time of importation. 

Under a retrospective AD/CV duty system, the amount of duties assessed 
reflects the actual amount of dumping by the exporter for the period of 
review. The amount of the final AD/CV duty liability may not be 
established until the government reviews all the imports for a given 
period and calculates the amount of dumping or subsidization that has 
occurred. As a result, a retrospective system can assess duties that 
exactly reflect the amount of dumping or subsidization. However, in 
practice, a substantial amount of retrospective AD/CV duty bills are 
not collected. This gap between the amount of duties assessed and the 
amount collected means that the government is not fully remedying the 
unfair trade practice. This suggests that assessing a more accurate 
duty rate does not necessarily result in receiving more accurate duty 
amounts from importers. It also raises concerns about the equity of the 
system, as those who evade AD/CV duties gain a competitive advantage at 
the expense of those companies that pay the full amount of duties owed. 

* Administrative simplicity for customs officials. Both prospective and 
retrospective AD/CV duty systems may involve complex processes for 
determining appropriate AD/CV duty rates. However, they differ with 
respect to their simplicity for customs officials responsible for 
collecting AD/CV duties. 

Prospective AD/CV duty systems create a smaller burden for customs 
officials because the full and final amount of AD/CV duties is assessed 
at the time of importation. For example, according to Canadian customs 
officials, its AD/CV duty system places little burden on customs 
officials. Since all duties are paid when products enter the country, 
customs officials face little, if any, additional work to process 
imports subject to AD/CV duties. 

Retrospective AD/CV duty systems can create a substantial burden for 
customs officials. According to CBP officials, the U.S.'s retrospective 
AD/CV duty system places a unique and significant burden on its 
resources. For example, it creates a considerable amount of 
administrative duties related to identifying, tracking over time, and 
properly processing entries subject to AD/CV duties. When CBP needs to 
collect additional duties beyond those paid at the time of importation, 
additional resources also are needed to attempt to collect those 
duties, which can involve attempting to locate importers that have 
disappeared or collecting from importers that have declared bankruptcy, 
and may also necessitate working with other agencies such as Justice. 
According to CBP officials, the retrospective AD/CV duty system 
increases workload and diverts focus from other priority trade issues. 

Congress and Agencies Could Adjust Specific Aspects of the Current U.S. 
AD/CV Duty System: 

Adjustments to specific aspects of the U.S. AD/CV duty system could be 
made without altering its retrospective nature. We identified four 
types of changes. One type of change includes revising the requirements 
related to "new shippers." A second adjustment involves heightening the 
requirements for becoming a U.S. importer. A third type of change 
includes revising the bond requirements for importers. Each of these 
changes would impose additional costs on both legitimate and 
illegitimate companies. A final change includes lengthening the amount 
of time CBP is provided to make a final assessment of AD/CV duties. 
Such a change could reduce the amount of foregone revenue, but could 
make collections more difficult in some situations. 

Congress Could Make Adjustments to the Requirements for New Shipper 
Reviews: 

Requirements for new shipper reviews could be adjusted in two different 
ways. First, Congress could extend or make permanent its suspension of 
the new shipper bonding privilege. Doing so would require all importers 
to pay estimated AD/CV duties in cash at the time of entry, thus 
eliminating the need to attempt to collect from surety companies. 

Second, Congress could revise the level of exports required for 
exporters applying for "new shipper" status to potentially reduce the 
risk of uncollected duties.[Footnote 79] As discussed previously, under 
U.S. law, a company applying to be a new shipper is entitled to an 
expedited review of its exports for the purpose of establishing an AD/ 
CV duty rate to that company's exports in the future.[Footnote 80] 
According to Commerce officials, since such companies typically have 
exported only one shipment of the goods subject to AD/CV duties, which 
is almost always at a relatively high price, they typically calculate a 
cash deposit rate of 0 percent. As a result, importers purchasing from 
these companies pay no AD/CV duties at the time of importation. 
However, Commerce may later determine that the exports were dumped or 
subsidized, and therefore retrospective bills would be issued. As 
described earlier, these retrospective bills are a key factor 
contributing to uncollected AD/CV duties. To mitigate this risk, 
Congress could choose to provide Commerce the discretion to require 
companies applying for a new shipper review to have a greater volume of 
imports before establishing an individual AD/CV duty rate. According to 
Commerce officials, such discretion would be useful because it could 
help mitigate the risks posed by establishing an AD/CV duty rate based 
on one shipment. 

Revising the requirements for new shippers could reduce the risk of 
uncollected duties by making it harder for exporters to manipulate new 
shipper reviews and evade duties. However, a large volume of imports 
may be required to prevent some exporters from intentionally 
manipulating the new shipper review process. In addition, requiring a 
greater volume of imports could unfairly burden legitimate new shippers 
by requiring them to export more than they otherwise might before they 
could obtain an individual cash deposit rate. 

Requirements for Becoming an Importer of Record Could Be Heightened: 

CBP or Congress could heighten the requirements for a company applying 
to be an importer of record to potentially reduce the likelihood that 
importers would prove unable to pay their duty liabilities. As 
discussed previously, the requirements for becoming an importer in the 
United States are minimal and do not involve any financial or 
background checks. Heightened requirements might include mandatory 
financial or background checks. However, according to CBP officials, 
performing financial checks would provide a limited assessment of 
importers' future ability to pay additional AD/CV duties because their 
financial situations can change quickly. Additionally, a financial 
check does not address a company's willingness to pay additional AD/CV 
duties. It also would create a significant new burden on CBP, which 
would need to conduct or oversee these financial or background checks. 
For example, CBP data indicate that from fiscal years 2005 through 
2007, there was an average of over 350,000 importers of record. Of 
those, about 130,000, on average, were new importers each year. 
Moreover, these financial or background checks would need to be updated 
periodically, which would compound the resource requirements over time. 
In addition, it is possible that the heightened requirements would be 
imposed on all importers to be fair. Given that the vast majority of 
importers comply with customs laws and pay their duty liabilities, such 
a broad approach may not be a cost-effective way to improve the 
collection of AD/CV duties. 

CBP Could Revise Its Bonding Requirements: 

Bond requirements could be modified to provide additional protection in 
the case that importers are unable or unwilling to pay their duty 
bills. One option would be for CBP to expand the application of its 
revised bond policy for imports subject to AD/CV duties. As explained 
earlier, this policy was established in July 2004, and significantly 
increased the value of bonds required of importers. At the time it was 
initially implemented, CBP officials envisioned applying the policy to 
shrimp imports as a test case and subsequently applying the policy to 
additional imports they believe pose a significant risk for uncollected 
AD/CV duties. To date, the policy has been applied only to imports of 
shrimp from six countries subject to AD/CV duties. As we have 
previously reported, this policy effectively doubled the amount of 
revenue protected by requiring (in addition to the cash deposits 
required at the time of entry) a continuous bond essentially equal to 
the cash deposits.[Footnote 81] However, expanding the application of 
the policy entails substantial drawbacks. For example, some importers 
covered by the expanded policy would face a significant increase in 
their costs. Shrimp importers reported that they experienced increased 
costs due largely to substantial collateral requirements needed to 
obtain the bonds. According to importers, these costs reduced their 
profitability and forced some importers to exit the industry. In 
addition, the revised continuous bonding policy has been challenged in 
U.S. court and at the WTO.[Footnote 82] The U.S. Court of International 
Trade has issued an injunction on the implementation of the policy for 
some importers,[Footnote 83] and a WTO dispute settlement panel issued 
a report in February 2008 indicating that the revised policy as applied 
to imports of shrimp from India and Thailand is inconsistent with WTO 
rules.[Footnote 84] 

CBP also could set new bond requirements based on its assessments of an 
importer's likely ability to pay AD/CV duties. CBP could create a set 
of criteria to judge each importer's ability to pay and require larger 
bonds of companies judged to have a lower likely ability to pay, which 
would increase the amount of AD/CV duty revenue protected. Such an 
approach could allow CBP to target importers considered to be at high 
risk for uncollected AD/CV duties and require them to provide larger 
bonds. However, performing such analyses of individual importers' 
likely ability to pay retrospective AD/CV duties, like background and 
financial checks, would create a substantial administrative burden for 
CBP. Such analyses would create a substantial new workload because of 
the likely complexity of the analyses, the large number of importers 
(approximately 350,000), and the need to regularly update the analyses. 

CBP also could require importers to provide an additional bond for each 
entry subject to AD/CV duties in addition to the already required 
continuous bond. Some representatives from surety companies said that 
this requirement could protect additional revenue while creating only a 
minimal burden on CBP. They suggest that this type of requirement would 
allow surety companies to identify, in advance, when they are insuring 
the payment of AD/CV duties, which are at greater risk of nonpayment by 
importers. Since they face a greater risk of having to pay out on bonds 
related to AD/CV duties, surety companies would likely increase the 
cost to importers of obtaining the bond, perhaps through increased 
premium rates or collateral requirements. These increased costs could 
deter malfeasance by illegitimate importers by increasing the cost of 
importing merchandise subject to AD/CV duties. However, it may impose 
costs on legitimate importers that pose little risk of failing to pay 
retrospective AD/CV duties. At the same time, competition among surety 
companies could force them to offer better bond prices for lower-risk 
importers, reducing the costs for importers not at risk of uncollected 
duties. 

Congress Could Extend the Length of Time Allowed for CBP to Liquidate 
Entries Subject to AD/CV Duties: 

Congress could choose to extend the time frame allowed by law for CBP 
to liquidate entries subject to AD/CV duties.[Footnote 85] As discussed 
earlier, CBP has 6 months to liquidate entries subject to AD/CV duties 
from the time that Commerce publishes a notice in the Federal Register 
establishing (1) the final AD/CV duty rates or (2) the lifting of an 
injunction against liquidation, whichever comes last. According to CBP 
officials, this 6-month deadline can be very hard to meet, especially 
when a large volume of imports needs to be liquidated or a case is 
extremely complex. According to CBP officials, for most imports, the 
Harmonized Tariff System code for a product determines the applicable 
duty. However, in some AD/CV duty cases, no Tariff code exists for the 
specific products that Commerce investigated and imposed duties on. An 
example is wooden bedroom furniture from China. According to CBP 
officials, there is a Tariff code for wooden furniture, but there is 
not one for wooden bedroom furniture, for which there is an AD order in 
effect. As a result, CBP needs to examine the invoices for every entry 
of wooden furniture from China to see if it falls within the scope of 
the AD order. This is very labor intensive and creates an opportunity 
for companies to circumvent the duties. Extending the amount of time 
for CBP to liquidate entries subject to AD/CV duties could reduce the 
potential for entries to be "deemed liquidated," which can lead to 
foregone revenue if additional duties should have been paid. However, 
extending this time frame could delay refunds to some importers. As 
discussed earlier, the more time between a product's entry into the 
country and when entries are liquidated, the greater the chance duties 
will be uncollected. 

Conclusions: 

The existence of a substantial amount of uncollected AD/CV duties 
undermines the effectiveness of the U.S. government's efforts to deter 
unfair foreign trade practices and reduces the amount of revenue 
available to the U.S. government. With more than $600 million in AD/CV 
duties currently uncollected, a large portion of which is likely to be 
written off, the U.S. government's efforts to remedy injurious unfair 
trade practices also has been seriously compromised. This problem was 
first widely recognized after 2000, and has gained increased prominence 
and visibility based on annual public reporting by CBP. However, a 
recent change in U.S. law[Footnote 86] eliminated the legal requirement 
that generated CBP's reporting on uncollected AD/CV duties. 

While Congress and the relevant agencies have taken some steps in 
recent years, they have not yet fully addressed the factors 
contributing to uncollected AD/CV duties, and serious risks remain. 
Some of these factors stem from shortfalls in the capabilities and 
operation of the relevant agencies. For instance, human capital 
deficiencies at Commerce and untimely or unclear liquidation 
instructions have hampered the imposition and collection of AD/CV 
duties. Increased attention and interagency coordination in these areas 
could help ensure the steps in the AD/CV duty process are completed in 
a timely manner. 

Taking additional steps to mitigate the risk to AD/CV duty collections, 
however, requires consideration of additional options and evaluation of 
their relative advantages and disadvantages. Certain adjustments could 
be made within the existing framework of the U.S. AD/CV duty system to 
further protect AD/CV duty revenue. Adjustments such as altering 
importers' bond requirements would protect additional revenue, but also 
could have significant implications for the trade community and our 
trading partners, which would need to be carefully considered. 
Providing Commerce with the discretion to establish a minimum level of 
exports needed to qualify for a special new shipper review could reduce 
the possibility of uncollected AD/CV duties and would affect both 
legitimate and illegitimate importers and exporters. On the other hand, 
additional analysis is required to determine whether eliminating the 
retrospective aspect of the duty collection process could help achieve 
the AD/CV duty system's intended purposes more effectively. Such 
fundamental alteration of the system would entail weighing the 
implications for a variety of stakeholder groups including affected 
domestic producers, exporters, importers, and the relevant federal 
agencies. 

Matters for Congressional Consideration: 

In order to help reduce the amount of uncollected AD/CV duties, 
Congress should consider taking the following three actions: 

First, Congress should require the Secretaries of Commerce, Homeland 
Security, and the Treasury to work together to conduct an analysis and 
report to Congress on the relative advantages and disadvantages of 
prospective and retrospective AD/CV duty systems. The report should 
address the extent to which each type of AD/CV duty system would likely 
achieve the goals of remedying injurious dumping or subsidized exports, 
minimizing uncollected duties, reducing incentives and opportunities 
for importers to evade AD/CV duties, effectively targeting high-risk 
importers, and creating a minimal administrative burden. To ensure the 
report is completed in a timely manner, Congress should establish a 
specific date by which the report is to be delivered. 

Second, Congress should require CBP to publicly report on an annual 
basis regarding the amount of uncollected duties for that year for each 
AD/CV duty order. In addition, the report should indicate the total 
amount of all open, unpaid bills for each AD/CV duty order. 

Third, Congress should consider providing Commerce with the authority 
to establish, at its discretion, a minimum amount or value of exports 
from companies requesting a new shipper review. 

Recommendations for Executive Action: 

In order to help ensure the full collection of AD/CV duties and improve 
the liquidation process, we make the following three recommendations 
for executive action: 

First, 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. 

Second, the Secretary of Commerce should work with the Secretary of 
Homeland Security to identify opportunities to improve the clarity of 
liquidation instructions. The Secretary of Commerce should report to 
Congress within 1 year on the steps it has taken to improve the clarity 
of liquidation instructions. 

Third, to ensure that the Import Administration has sufficient human 
capital to issue timely and clear liquidation instructions to CBP, the 
Secretary of Commerce should develop a strategic human capital plan 
encompassing its AD/CV duty operational offices. 

Agency Comments and Our Evaluation: 

We provided a copy of this report to the Departments of Commerce, 
Homeland Security, Justice, and the Treasury, as well as the U.S. 
International Trade Commission and the Office of the U.S. Trade 
Representative. The Department of Commerce's comments are contained in 
appendix IV. The Department of Homeland Security's comments are 
contained in appendix V. The Department of the Treasury's comments are 
contained in appendix VI. The Departments of Homeland Security and 
Commerce agency generally agreed with our recommendations. In addition, 
we received technical comments from the Departments of Commerce, 
Homeland Security, and Justice, as well as the United States 
International Trade Commission and the Office of the U.S. Trade 
Representative. We have incorporated these comments as appropriate. 

As agreed with your office, unless you publicly announce the contents 
of this report earlier, we plan no further distribution until 30 days 
from the report date. At that time we will send copies of this report 
to the appropriate congressional committees as well as the Secretaries 
of Commerce, Homeland Security, Justice, and the Treasury, the Chairman 
of the U.S. International Trade Commission, and the U.S. Trade 
Representative. We will make copies available to others upon request. 
In addition, the report will be available at no charge on the GAO Web 
site at [hyperlink, http://www.gao.gov]. 

If you or your staffs have any questions about this report or need 
additional information, please contact me at (202) 512-4347 or 
YagerL@gao.gov. Contact points for our offices of Congressional 
Relations or Public Affairs may be found on the last page of this 
report. GAO staff who made major contributions to this report are 
listed in appendix VII. 

Signed by: 

Loren Yager: 

Director, International Affairs and Trade: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

To help reduce uncollected antidumping (AD) and countervailing (CV) 
duties, the Senate Appropriations and Finance Committees asked us to 
review the reasons why the duties are uncollected and what the U.S. 
government has done to address this problem. In addition, they asked us 
to identify options for improving the AD/CV duty system. Specifically, 
we examined (1) the extent and nature of uncollected AD/CV duties, (2) 
the key factors contributing to risks for uncollected AD/CV duties and 
the steps taken to improve the collection of AD/CV duties, (3) 
interagency communications that affect the processing of AD/CV duties, 
and (4) potential options for improving AD/CV duty collections. 

To analyze the extent and nature of uncollected AD/CV duties, we 
analyzed data received from U.S. Customs and Border Protection's (CBP) 
Office of Finance. They include all open, unpaid bills for AD/CV duties 
as of September 30, 2007. These data include key characteristics like 
the bill amount, whether or not the bill was under protest, and the 
importer number. The bill amount includes the principal amount of the 
bill, but not any accrued interest. While we include in our reporting 
uncollected AD/CV duties subject to ongoing protests, we also analyzed 
bills not subject to protests. The results from both analyses were 
similar. We assessed the reliability of the data by (1) performing 
electronic testing of required data elements, (2) reviewing existing 
information about the data and the system that produced them, and (3) 
interviewing agency officials knowledgeable about the data. Based on 
our data reliability assessment we deleted less than 1 percent of the 
original cases. Our analysis consisted of 120 unique AD/CV duty orders 
and more than 23,000 individual bills. We determined that these data 
were sufficiently reliable for the purposes of this report. 

To identify new shippers with open, unpaid bills; new shippers with 
bills under protest; and differences between estimated and final duty 
rates, we merged two data sets received from CBP. One data set included 
all open, unpaid AD/CV duty bills since fiscal year 2001, as of 
September 30, 2007, and indicated whether the bills were under protest. 
The other data set included all entries subject to AD/CV duties that 
were liquidated between October 2000 and July 2007, the AD/CV duty 
order date, and whether the estimated AD/CV duties paid at entry were 
secured using cash or a bond. We identified entries involving a company 
undergoing a new shipper review as those where the importer was allowed 
to post a bond to secure AD/CV duties after the AD/CV duty order was 
issued. In addition, we needed to select only those entries involving 
one entry line because CBP's data regarding open, unpaid bills do not 
separate out the amount attributable to individual AD/CV duty orders if 
multiple orders were involved. Our analysis of new shippers consisted 
of 559 orders and approximately 1.4 million entries. 

To analyze the differences between estimated and final AD/CV duty 
rates, we needed to select only those entries involving one AD/CV duty 
order because CBP's data do not separate out the liquidation rate 
applicable to each order if multiple orders were involved. Once we 
selected those records with only one AD/CV duty order, we calculated 
liquidation rates by dividing the liquidation amount by the line value. 
We are not reporting results related to changes in CV duty rates 
because one case (softwood lumber from Canada) accounted for the vast 
majority of entries in our data set, and thus would have unreasonably 
biased the results. We also excluded the AD order on softwood lumber 
from Canada from our analysis because the liquidation rate for those 
entries were set as a result of a binational political agreement, which 
is outside the typical practice. 

We assessed the reliability of the data by (1) performing electronic 
testing of required data elements, (2) reviewing existing information 
about the data and the system that produced them, and (3) interviewing 
agency officials knowledgeable about the data. We determined that these 
data were sufficiently reliable for the purposes of this report. 

To identify the key factors that contribute to uncollected AD/CV duties 
and the steps taken to improve the collection of AD/CV duties, we 
reviewed reports and documents related to AD/CV duty collections from 
CBP and the Departments of Commerce and the Treasury. We further 
reviewed reports from the Congressional Research Service as well as 
legal journals. To determine the length of time it took Commerce to 
send AD/CV liquidation instructions to CBP, we analyzed CBP's internal 
"message log" spreadsheets for the period of April 2007 through July 
2007. These spreadsheets indicated the dates CBP received and posted 
liquidation instructions from Commerce. To determine reasons why 
Commerce sometimes delayed sending instructions to CBP, we requested 
that Commerce analyze the circumstances of 63 entries where it took 
Commerce more than 100 days to send AD/CV duty liquidation instructions 
to CBP. We analyzed CBP's internal "reject log" spreadsheets from 
January 2007 through July 2007, which logged the instructions that CBP 
sent back to Commerce for clarification. We additionally analyzed data 
from Commerce related to the authorized versus actual staffing levels 
for the International Trade Compliance Analyst position from fiscal 
year 2004 through January 2008. We further examined Commerce data to 
assess caseload growth for this Analyst position. In addition, we 
interviewed a variety of Department of Homeland Security officials. 
This included officials from CBP's Offices of International Trade, 
Finance, and Field Operations. We interviewed officials from 
Immigration and Customs Enforcement's Office of Commercial Fraud 
Investigations. Additionally, we interviewed officials from the 
Departments of the Treasury, Justice, and Commerce. To obtain 
information on private sector views on the factors contributing to 
uncollected AD/CV duties, we interviewed officials from domestic trade 
industries as well as importer and surety associations. 

To determine the steps the U.S. government has taken to improve 
collection of AD/CV duties, we analyzed CBP policies and procedures for 
collection of duties. We interviewed CBP officials in the Office of 
Technology, Office of International Trade, and Office of Field 
Operations, as well as its Debt Management Branch in Indianapolis. We 
also interviewed officials at the Department of Commerce International 
Trade Administration's Customs Unit and the Department of the Treasury. 
We requested and reviewed documentation from the Department of Commerce 
and CBP regarding steps they have taken to improve the collection of 
AD/CV duties. In addition, we reviewed the Department of the Treasury's 
July 2007 report on major duty collection problems. We interviewed 
representatives of domestic industries and importers affected by AD/CV 
duties and trade lawyers and academics with expertise in AD/CV duty 
issues. We reviewed governmentwide guidance on debt collection, 
including OMB Circular A-129--Policies for Federal Credit and Non-Tax 
Receivables and segments of the Debt Management Improvement Act. Our 
analysis included reviewing our prior report on CBP's revised 
continuous bonding policy.[Footnote 87] 

To identify and analyze potential options for improving AD/CV duty 
collections, we reviewed academic literature regarding the operation of 
various countries' AD/CV duty systems and their relative advantages and 
disadvantages. Additionally, we obtained information from the 
governments of Australia, Canada, and the European Union regarding how 
their AD/CV duty systems operate and whether lessons could be learned 
from the operation of their systems. We did not independently analyze 
the laws and regulations of Australia, Canada, or the European Union. 
We also interviewed agency officials, including officials from CBP and 
the Department of Commerce's Trade Remedy Compliance Staff, which are 
responsible for helping U.S. exporters understand other countries' AD/ 
CV duty systems. We interviewed private sector representatives 
including both domestic producers and importers in a variety of 
industries such as steel and agriculture/aquaculture. In addition, we 
interviewed representatives from an association of retailers and the 
surety industry. 

We conducted this performance audit from June 2007 to March 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 section] 

Appendix II: Examples of the Calculation of AD/CV Duties in the United 
States, Australia, Canada, and the European Union: 

Table: Assumptions: Normal value calculated during investigation = 
$110; average import price calculated during investigation = $100: 

[See PDF for image] 

Source: GAO analysis of information from Commerce and the governments 
of Australia, Canada, and the European Union. 

[A] This reflects the amount of duties assessed under each system. As 
discussed in the body of the report, in the United States, there can be 
a substantial difference between the amount of duties assessed and the 
amount paid. 

[B] According to Australian officials, if the importer in this scenario 
made a duty assessment application, all other things being equal, it 
would be entitled to a $10 refund as the export price of $115 is above 
the normal value calculated during the investigation. 

[C] The United States would have refunded $11.50 to the importer. 

[End of table] 

[End of section] 

Appendix III: Illustration of the Process and Maximum Time Frames for 
Collecting AD/CV Duties: 

Figure: 

This figure is a flow chart of the illustration of the process and 
maximum time frames for collecting AD/CV duties. 

[See PDF for image] 

Source: GAO analysis of information from Commerce and CBP. 

[End of figure] 

[End of section] 

Appendix IV: Comments from the Department of Commerce: 

United States Department Of Commerce: 
International Trade Administration: 
Assistant Secretary For Import Administration: 
Washington. D.C. 20230: 

March 10, 2008: 

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

Dear Dr. Yager: 

Thank you for providing us with the draft report on under-collection of 
antidumping (AD) and countervailing duties (CVD), and recommended steps 
to reduce shortfalls in duty collection. Commerce finds the report both 
timely and helpful. The ability of AD and CVD duties to remedy unfairly 
traded imports that injure American companies and workers is obviously 
diminished if the duties are not fully collected. Moreover, significant 
public and private resources are expended to ensure the accuracy of AD 
and CVD duty rates, but the value of this accuracy is reduced if there 
is under-collection. 

Commerce carefully reviewed the report's analysis of the amount and 
causes of AD and CVD duty under-collection. Commerce agrees that the 
amount of AD and CVD duty under- collection is a problem that needs 
resolution. However, the cited amount of over $600 million in 
uncollected duties since 2001 may be overstated to the extent that this 
amount reflects duties currently under proper review through litigation 
or the protest process. In addition, the report found that uncollected 
duties are highly concentrated in a few industries, products, countries 
of origin, and importers, representing well over 80 percent of 
uncollected duties in almost all of those categories. Thus, while there 
are some systemic causes for under-collection, the fact that under-
collection is concentrated in a few circumstances indicates that 
factors unique to those cases are the cause of under-collection. 
Indeed, most likely only two of the four key factors identified in the 
report as contributing to under-collection, i.e., the insufficient 
amount of continuous bonds and minimal information regarding importers, 
apply to the circumstances representing the vast majority of under- 
collected duties. The GAO may want to recommend that further analysis 
be conducted on these cases to determine why they represent such a 
large portion of uncollected AD and CVD duties. 

Moreover, the report's limited analysis of why the vast majority of 
under-collection occurred in a few industries, products, countries of 
origin, and importers contrasts with the sections of the report devoted 
to other factors that are much smaller causes for under-collection. For 
example, the report analyzes in-depth how the issuance of untimely and 
unclear liquidation instructions can result in an import subject to AD 
or CVD duties being liquidated at a "deemed" rate less than the amount 
of the applicable AD or CVD duty rate. Commerce agrees that issuing 
timely and accurate liquidation instructions should be a priority, as 
demonstrated by Commerce's past and on-going efforts to improve its 
issuance of liquidation instructions to Customs and Border Protection. 
However, the report found that entries from September 2004 through July 
2007 that were "deemed" liquidated at a rate different from the 
applicable AD or CVD rate resulted in the relatively minimal under-
collection of $106,000. 

Commerce has no objections to the report's suggested three matters for 
Congressional consideration and three recommendations for executive 
action. Specifically, should the Congress so decide, Commerce is 
prepared to analyze and study the relative advantages and disadvantages 
of prospective and retrospective AD/CV duty systems. However, the GAO's 
recommendations on the scope of any Commerce study of prospective and 
retrospective systems appear to range far beyond an assessment of the 
problems and possible solutions specifically related to the under-
collection of AD/CV duties. Therefore, Commerce would want to consult 
closely with its Congressional oversight committees to establish an 
appropriate scope and purpose for any study of prospective and 
retrospective duty collection systems that the Congress may decide to 
request. Commerce agrees that requiring the annual public reporting of 
uncollected AD and CVD duties would be a useful metric to measure 
progress in minimizing under-collection. Commerce would also welcome 
working with the Congress in considering whether the requirements for 
requesting a new shipper review should be revised in a manner 
consistent with the United States' international obligations. 

Commerce would be willing to provide any relevant information or 
assistance to the Department of Homeland Security (DHS) and the 
Treasury Department if those Departments were to re-examine the current 
formula for setting bond requirements. Commerce would also continue to 
work with DHS to improve the liquidation process and the clarity of 
liquidation instructions. As the report points out, Commerce and DHS 
already work together closely to better the timeliness and accuracy of 
liquidation instructions, but both Departments need to take further 
action to improve the situation. Finally, Commerce notes that a 
strategic human capital plan for Import Administration's AD/CVD 
Operations offices is already in the planning stages and will be 
developed as part of an upcoming independent review of Import 
Administration programs. Given the potential role of limited human 
resources affecting other agencies' ability to implement the timely 
collection of AD and CVD duties, the GAO may want to consider 
recommending similar human capital plans for other agencies involved in 
the collection of AD and CVD duties. 

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: 

David M. Spooner: 

[End of section] 

Appendix V: Comments from the Department of Homeland Security: 

U.S. Department of Homeland Security: 
Washington, DC 20528: 
[hyperlink, http://www.dhs.gov]: 

Homeland Security: 

March 14, 2008: 

Mr. Loren Yager: 
Director, International Affairs and Trade: 
U.S. Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 

Dear Mr. Yager: 

RE: Draft Report GAO-08-391, Antidumping and Countervailing Duties: 
Congress and Agencies Should Take Additional Steps to Reduce 
Substantial Shortfalls in Duty Collection (GAO Job Code 320465) 

The Department of Homeland Security (DHS) appreciates the opportunity 
to review and comment on the draft report referenced above. We 
generally agree with the two recommendations that involve DHS. 

The report highlights two options to address the four factors 
contributing to uncollected antidumping and countervailing duties 
(AD/CVD). The four factors are identified as (1) the retrospective 
component of the United States AD/CVD system, (2) new shippers who only 
need to bring in one shipment to receive a separate rate, which is 
usually zero percent, (3) inadequate bond coverage to address large 
rate increases, and (4) importers of record for which minimal 
information is required. 

The first option, preferred by U.S. Customs and Border Protection (CBP) 
officials, would be for Congress to fundamentally alter the United 
States system by eliminating its retrospective component and making it 
prospective. This approach would: 

* Benefit importers (and by proxy consumers) who would know with 
certainty the cost of the goods they are selling at the time they are 
sold rather than at some point in the future after an administrative 
review of an AD/CVD order is conducted. 

* 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. 

* Substantially reduce the administrative burden on CBP resources 
associated with a retrospective system such as the processing of AD/CVD 
entries; the issuance and sufficiency review of bonds; review, posting, 
and processing of liquidation instructions; the collection or refund of 
monies resulting from rate fluctuations; the processing of protests 
arising from these activities; and the need for management oversight of 
these processes. 

Allow CBP resources to more fully focus on AD/CVD enforcement issues, 
such as circumvention of the AD/CVD law to avoid paying duties. 

The second option is to adjust specific aspects of the current 
retrospective system such as adjusting requirements for new shippers, 
heightening the requirements for becoming an importer of record, 
revising bond requirements for importers of goods subject to an AD/CV 
duty order, and lengthening the statutory deadline for assessing final 
AD/CVD. The majority of these options would perpetuate and exacerbate 
the shortcomings of the U.S. retrospective system, which burdens CBP 
resources with conducting manual processes and administrative tasks to 
the detriment of identifying and addressing circumvention schemes. They 
also would place an additional burden and cost on all importers and new 
shippers, not just those who intend to evade AD/CVD. 

A retrospective system is more accurate than a prospective system if 
all importers abide by the rules and pay bills issued to them resulting 
from rate increases. However, all importers do not abide by the rules 
as GAO's draft report highlights: 

However, in practice, a substantial amount of retrospective AD/CV duty 
bills are not collected. This gap between the amount of duties assessed 
and the amount collected means that the government is not fully 
remedying the injury caused by dumping or subsidies. This suggests that 
assessing a more accurate duty rate does not necessarily result in 
receiving more accurate duty amounts from importers. It also raises 
concerns about the equity of the system, as those who evade AD/CV 
duties gain a competitive advantage at the expense of those companies 
that pay the full amount of duties owed. 

As noted, moving to a prospective system would allow CBP to focus its 
resources more fully on identifying and addressing those seeking to 
circumvent the AD/CVD law, rather than the administrative tasks 
inherent in a retrospective system. 

The report highlights that uncollected duties are concentrated by 
country of origin (China), industry (agriculture/aquaculture), product 
(crawfish, honey, mushrooms, and garlic), exporter's new shipper status 
and importer of record. While in absolute amounts, the majority of 
uncollected duties are concentrated in these areas, tens of millions of 
dollars go uncollected from other areas as well. For example, GAO 
reported that $613 million in AD/CVD went uncollected as of September 
2007. However, $62 million did not pertain to imports from China; $82 
million were in industries other than agriculture/aquaculture; and $100 
million were in products other than the four mentioned above. In those 
instances where GAO could identify the exporter's new shipper status 
only 40% of uncollected duties ($130 of $328 million) were associated 
with new shippers. 

In addition, the danger with painting too narrow a picture of the non-
collection issue is that the countries, industries, products, and 
importers that pose a revenue risk currently may not be the same ones 
that will pose a revenue risk at some point in the future. CBP 
continues to refine its risk management techniques to ensure it is 
identifying and addressing the greatest risk of revenue loss before it 
occurs. 

The report contains three matters for Congressional consideration and 
two recommendations that are addressed to or otherwise involve the 
Department of Homeland Security. 

Recommendation for Congressional Consideration 1: GAO recommends that 
Congress require Commerce in consultation with DHS and Treasury to 
conduct an analysis and report to Congress on the relative advantages 
and disadvantages of prospective and retrospective AD/CVD systems. 

We agree with this recommendation. Specifically, CBP would welcome the 
opportunity to work with Commerce and Treasury to draft a report to 
Congress that highlights the relative advantages and disadvantages of 
prospective and retrospective AD/CVD systems. 

Recommendation for Congressional Consideration 2: Require CBP to 
publicly report on an annual basis on all uncollected AD/CV duties. 

CBP agrees with GAO's recommendation. Since 2003, CBP has made this 
information publicly available via its website even though it has not 
been required to do so. In addition, CBP provides this information to 
Congress to fulfill an annual Congressional reporting requirement. CBP 
will continue to publicly report on all uncollected AD/CVD on an annual 
basis by AD/CVD case number via its website. 

Recommendation for Congressional Consideration 3: Congress should 
consider providing Commerce with the authority to establish, at its 
discretion, a minimum amount or value of exports from companies 
requesting a new shipper review. 

Although the recommendation is not directed to the Department of 
Homeland Security, CBP supports increasing the requirements for new 
shippers to address the collection risk associated with exports from 
these companies. 

Recommendation for Executive Action 1: DHS in consultation with 
Treasury 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. 

CBP remains committed to utilizing its bonding authority to address 
revenue risk. However, a re-examination of the current formulas for 
setting bond amounts to address the risks associated with the United 
States' retrospective AD/CVD system will need to take into 
consideration the outcome of legal challenges before the Court of 
International Trade and the World Trade Organization. 

Recommendation for Executive Action 2: Commerce should work with DHS to 
identify opportunities to improve the clarity of Commerce's liquidation 
instructions. 

DHS agrees with this recommendation. The focus should be on improving 
both the clarity and timeliness of liquidation instructions. As the 
report highlights, CBP and Commerce have taken steps to improve the 
clarity and timeliness. CBP will continue to do so. 

Technical comments have previously been provided. These comments 
correct specific inaccuracies in the draft. We trust that they will be 
considered in finalizing the report. 

Sincerely, 

Signed by: 

Steven J. Pecinovsky: 
Director: 
Departmental GAO/OIG Liaison Office: 

[End of section] 

Appendix VI: Comments from the Department of the Treasury: 

Department Of The Treasury: 
Washington, D.C. 20220: 

March 13, 2008: 

Mr. Loren Yager: 
Director: 
International Affairs and Trade: 
Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 

Dear Mr. Yager:

Thank you for the opportunity to comment on the Government 
Accountability Office (GAO) Report on Antidumping and Countervailing 
Duties. The report is a thoughtful treatment of an important topic, 
with implications beyond tariff administration. 

Should Congress decide to follow your recommendation and ask for a 
report on the relative advantages and disadvantages of prospective and 
retrospective antidumping and countervailing (AD/CV) duty systems, the 
Department of the Treasury will he happy to participate. We also are 
planning to work with the Department of Homeland Security on reviewing 
bonding requirements for AD/CV duties. We would offer the following 
comments on the four key factors that GAO identified as contributing to 
uncollected AD/CV duties. 

First, we agree with the GAO conclusion that "the retrospective 
component of the U.S. AD/CV duty system creates the risk of uncollected 
duties." 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. 

Second, while we agree that "new shipper" reviews have posed two types 
of risks for the collection of AD/CV duties, we believe that the first 
type the GAO identified, the risk related to the former ability of new 
shippers to post bonds instead of having to pay cash deposits,[Footnote 
88] is minimal. The added risk is equal to the probability of default 
by a surety, which is low. 

We believe the second type of risk that you identified, that new 
shippers can take advantage of the current system, is more significant. 
As the report describes, new shippers "can purposely make one 
commercial shipment to the United States at a relatively high price," 
which can lead to a low or zero percent AD/CV duty rate being applied 
to subsequent shipments by that new shipper. If it is subsequently 
determined through administrative review that additional duties are to 
be retrospectively assessed on those shipments, a collection risk is 
created because the retrospectively assessed duties will not be secured 
(by bond, cash deposit, or other means). In sum, an unscrupulous new 
shipper can by design obtain a low AD/CV rate and then strip at that 
rate until additional duties are retroactively assessed through 
administrative review and then abscond when billed for retrospectively 
assessed duties. 

Third, with regard to the bond policies administered by Customs and 
Border Protection (CBP), we agree that "when AD/CV duties are 
retrospectively increased, the standard bond formula can be 
insufficient to cover the importer's new obligation." We note, however, 
that CBP's current enhanced bond policy, which was intended to address 
particular AD/CV duty collection problems, has been found by a World 
Trade Organization (WTO) dispute settlement panel to be inconsistent 
with our WTO obligations. Moreover, because there is no limit on the 
possible retrospective increase of AD/CV duties, no finite bond amount 
can be guaranteed to cover a final AD!CV assessment. 

Fourth, and finally, the report notes that CBP collects little credit 
or financial information about importers. Such information may well be 
useful in identifying those importers subject to AD/CV duties who are 
most likely to meet retroactively assessed obligations, and therefore 
may not need to post additional security in order to satisfactorily 
guarantee payment. However, requests for credit checks have not been 
needed to secure duties that are not retroactively assessed, and should 
not be required from the general importer population. 

Sincerely, 

Signed by: 

Timothy Skud: 
Deputy Assistant Secretary: 
Tax, Trade, and Tariff Policy: 

[End of section] 

Appendix VII: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Loren Yager (202) 512-4347or yagerl@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, Christine Broderick (Assistant 
Director), Jason Bair, Joseph Brown, Deborah Owolabi, Lisa Mirel, Karen 
Deans, Etana Finkler, Grace Lui, Michael Hoffman, and Ken Bombara made 
key contributions to this report. Stephen Caldwell, Thomas Costa, Lucia 
DeMaio, Ian Ferguson, Laurie Hamilton, Elisabeth Helmer, Evelyn Logue, 
Jackie Nowicki, Michael Rohrback, Ellery Scott, and Jena Sinkfield also 
contributed to the report. 

[End of section] 

Footnotes:  

[1] In this report we use the phrase "uncollected AD/CV duties" to mean 
the sum of all open, unpaid bills for AD/CV duties issued by CBP, which 
includes those currently under protest. We include the principal amount 
of the bill, but not any accrued interest. This amount does not include 
revenue that is written off or foregone when CBP is unable to issue 
duty bills within statutory deadlines. 

[2] 19 U.S.C.  1671d, 1673d. 

[3] 19 U.S.C.  1500. 

[4] Due to limitations in CBP data, we were unable to calculate the 
amount of AD/CV duties collected for bills issued during this time 
period. The numbers presented in this section of the report are based 
on data received from CBP's Office of Finance. They include all open 
unpaid bills for AD/CV duties as of September 30, 2007. These data 
include key characteristics like the bill amount, whether or not the 
bill was under protest and the importer number. We assessed the 
reliability of the data by (1) performing electronic testing of 
required data elements, (2) reviewing existing information about the 
data and the system that produced them, and (3) interviewing agency 
officials knowledgeable about the data. Based on our data reliability 
assessment we deleted less than 1 percent of the original cases. Our 
analysis consisted of 120 unique AD/CV duty orders and more than 23,000 
individual bills. We determined that the data we analyzed were 
sufficiently reliable for the purposes of this report. 

[5] These four products, all from China, are crawfish tail meat ($354 
million), garlic ($75 million), honey ($43 million), and mushrooms ($41 
million). 

[6] CBP data show that another approximately $21 million (in addition 
to the nearly $290 million referred to CBP's Office of Chief Counsel) 
are prepared to be written off. 

[7] 19 U.S.C.  1675c. CDSOA authorized the distribution of AD/CV 
duties collected to the domestic industries injured by the dumping or 
subsidization. 

[8] Pub. L. No. 109-171,  7601(a). 

[9] To perform the rate analysis, we needed to select only those 
entries involving one AD/CV duty order because CBP's data do not 
separate out the liquidation rate applicable to each order if multiple 
orders were involved. Once we selected those records with only one AD/ 
CV duty order, we calculated liquidation rates by dividing the 
liquidation amount by the line value. We are not reporting results 
related to changes in CV duty rates because one case (softwood lumber 
from Canada) accounted for the vast majority of entries in our data 
set, and thus would have unreasonably biased the results. We also 
excluded the AD order on softwood lumber from Canada from our analysis 
because the liquidation rate for those entries was set as a result of a 
binational political agreement, which is outside the typical practice. 

[10] Pension Protection Act of 2006, Pub. L. No. 109-208,  1632(a), 
120 Stat. 780, 1165. 

[11] Seafood Exporters Ass'n of India v. United States, 479 F. Supp. 2d 
1367 (2007); Nat'l Fisheries Inst., Inc. v. United States, 465 F. Supp. 
2d 1300 (2006); United States - Customs Bond Directive for Merchandise 
Subject to Anti-Dumping/Countervailing Duties, WT/DS345; United States 
- Measures Relating to Shrimp from Thailand, WT/DS343. 

[12] The liquidation process involves actions by Commerce and CBP and 
culminates in the assessment of final AD/CV duties. This process is 
required by statute to take no longer than 6 months. See 19 U.S.C.  
1504(d). 

[13] 19 U.S.C.  1504(d). 

[14] The authority for the imposition of these duties was created by 
the Tariff Act of 1930, June 17, 1930, c. 497, Title VII. AD duties are 
authorized in 19 U.S.C.  1673 and CV duties are authorized in 19 
U.S.C.  1671. 

[15] Legal authority over customs revenue functions is vested in the 
Secretary of the Treasury and, under Treasury Order 165, was delegated 
to the U.S. Customs Service. In March 2003, the U.S. Customs Service 
was transferred to the Department of Homeland Security, and authority 
over customs revenue functions was delegated to the Department of 
Homeland Security. 68 Fed. Reg. 10777-01 (Mar. 6, 2003). 

[16] Department of the Treasury, Duty Collection Problems FY2003-2006 
(Washington, D.C., 2007). 

[17] A provision repealing CDSOA, but providing for the distribution of 
"duties on entries of goods made and filed before October 1, 2007," was 
enacted in the Deficit Reduction Act of 2005, Pub. L. No. 109-171,  
7601(a). 

[18] 19 U.S.C.  1671, 1673. 

[19] 19 U.S.C.  1671, 1673. We use the term "injured" to encompass 
material injury, threat of material injury, or material retardation of 
the establishment of an industry. 

[20] 19 U.S.C.  1671, 1673. 

[21] 19 U.S.C.  1671d, 1673d. 

[22] 19 U.S.C.  1500. 

[23] 19 U.S.C.  1671e, 1673e. 

[24] An administrative review may be requested by exporters subject to 
the AD/CV duty order, importers, the U.S. domestic industry, and the 
government of producing or exporting countries if they believe the rate 
to be incorrect. 19 C.F.R.  351.213(b); 19 U.S.C.  1677(9)(B). If no 
administrative review is requested, the estimated AD/CV duties 
importers paid when merchandise entered the country become the final 
duties, and CBP liquidates the entry. 19 U.S.C.  1675. 

[25] 19 U.S.C.  1504(d). 

[26] 19 U.S.C.  1514. 

[27] In addition to paying estimated duties, taxes, and fees when 
products enter the country, importers also are required to provide a 
bond to help ensure that the government can recover additional duties, 
taxes, or fees that may be owed. See 19 C.F.R.  142.4. Most importers 
obtain continuous bonds, which are bonds used to secure all of an 
importer's shipments for the year. 

[28] For importers that participate in CBP's Periodic Monthly Statement 
program, this period may be as long as 45 days. 

[29] 31 U.S.C.  3711 provides CBP's statutory authority to write off 
duty bills. The statute provides several conditions under which CBP may 
write off duty bills. 

[30] Pub. L. No. 109-171,  7601(a). 

[31] The numbers presented in this section of the report are based on 
data received from CBP's Office of Finance. They include all open, 
unpaid bills for AD/CV duties as of September 30, 2007. These data 
include key characteristics like the bill amount, whether or not the 
bill was under protest, and the importer number. We assessed the 
reliability of the data by (1) performing electronic testing of 
required data elements, (2) reviewing existing information about the 
data and the system that produced them, and (3) interviewing agency 
officials knowledgeable about the data. Based on our data reliability 
assessment, we deleted less than 1 percent of the original cases. Our 
analysis consisted of 120 unique AD/CV duty orders and more than 23,000 
individual bills. We determined that the data we analyzed were 
sufficiently reliable for the purposes of this report. 

[32] We also analyzed bills not subject to ongoing protests. The 
results from both analyses were similar. 

[33] Of this amount, less than 0.1 percent ($280,000) is CV duties. 

[34] See 19 U.S.C.  1675(a)(2)(B) and Pub. L. No. 109-280,  1632(a). 

[35] To identify new shippers with open, unpaid bills and the amount of 
those bills identified by CBP as being under protest, we merged two 
data sets received from CBP. One data set included all open, unpaid AD/ 
CV duty bills. The other data set included all entries subject to AD/CV 
duties that were liquidated between October 2000 and July 2007, the 
order date, and whether the estimated AD/CV duties paid at entry were 
secured using cash or a bond. We identified entries as involving a 
company undergoing a new shipper review as those where the importer was 
allowed to post a bond to secure AD/CV duties after the AD/CV duty 
order was issued and the entry date was before April 2006. In addition, 
we needed to select only those entries involving one entry line because 
CBP's data regarding open, unpaid bills do not separate out the amount 
attributable to individual AD/CV duty orders if multiple orders were 
involved. Our analysis of new shippers consisted of 559 orders and 
approximately 1.4 million entries. Approximately 33 percent of the 
amount of uncollected AD/CV duties owed by importers purchasing from 
new shippers is currently under protest. We assessed the reliability of 
the data by (1) performing electronic testing of required data 
elements, (2) reviewing existing information about the data and the 
system that produced them, and (3) interviewing agency officials 
knowledgeable about the data. We determined that the CBP data we 
analyzed were sufficiently reliable for the purposes of this report. 

[36] CBP's Office of Chief Counsel reports that, over the past 5 years, 
it has received judgments or settlements in excess of $14 million 
through litigation and has collected additional money through the 
bankruptcy process. 

[37] The products with the greatest amount of AD/CV duties written off 
include crawfish tail meat from China (approximately $10 million), 
manganese metal from China (approximately $5 million), and carbon steel 
plate from Germany (approximately $4 million). 

[38] When the delinquent importer is a foreign importer of record, the 
option of pursuing litigation presents certain challenges. According to 
Justice officials, before pursuing litigation in a foreign country, 
they consider the ability to collect, the likelihood of success, and 
the cost of collection efforts versus the amount of debt. Justice also 
must consider whether the nature of the proposed action is one that can 
be the subject of a lawsuit in a foreign court. Because foreign courts 
generally do not enforce taxes or duties imposed by other countries, in 
the case of a collection action based upon delinquent duties owed by a 
foreign entity, Justice would have to be satisfied that the foreign 
court would be willing to hear such an action or enforce a judgment 
that might otherwise be obtained. In addition, it would be particularly 
challenging to bring any CV duty cases because, by definition, the 
foreign government caused the unfair trade by providing a 
countervailable subsidy. Justice officials stated that given those 
challenges, it is unlikely that collection actions based upon 
delinquent duties can be successfully brought in foreign courts. For 
that reason, Justice officials were not aware of any referrals from CBP 
to initiate legal cases brought in foreign courts against foreign 
importers of record that owed AD/CV duties. 

[39] Pub. L. No. 109-171,  7601(a). 

[40] Pub. L. No. 109-280,  1632(a). 

[41] Seafood Exporters Ass'n of India, 479 F. Supp. 2d 1367; Nat'l 
Fisheries Inst., Inc., 465 F. Supp. 2d 1300; United States - Customs 
Bond Directive for Merchandise Subject to Anti-Dumping/Countervailing 
Duties, WT/DS345; United States - Measures Relating to Shrimp from 
Thailand, WT/DS343. 

[42] 19 U.S.C.  1505. 

[43] 19 U.S.C.  1675. 

[44] Department of the Treasury, Duty Collection Problems FY 2003-2006 
(Washington, D.C., July 2007). 

[45] To perform the rate analysis, we needed to select only those 
entries involving one AD/CV duty order because CBP's data do not 
separate out the liquidation rate applicable to each order if multiple 
orders were involved. Once we selected those records with only one AD/ 
CV duty order, we calculated liquidation rates by dividing the 
liquidation amount by the line value. We are not reporting results 
related to changes in CV duty rates because one case (softwood lumber 
from Canada) accounted for the vast majority of entries in our data 
set, and thus would have unreasonably biased the results. We also 
excluded the AD order on softwood lumber from Canada from our analysis 
because the liquidation rate for those entries was set as a result of a 
binational political agreement, which is outside the typical practice. 
We further excluded those entries for which it was impossible to 
calculate the percentage change in the AD/CV duty rates because they 
had an initial rate of 0. 

[46] The median percentage increase was 3 percent; this reflects the 
difference between the estimated duty rate and the final duty rate, 
divided by the estimated duty rate. 

[47] The mean percentage increase was 8 percent; this reflects the 
difference between the estimated duty rate and the final duty rate, 
divided by the estimated duty rate. 

[48] The median percentage decrease was 1 percent; this reflects the 
difference between the estimated duty rate and the final duty rate, 
divided by the estimated duty rate. 

[49] The mean percentage decrease was 1 percent; this reflects the 
difference between the estimated duty rate and the final duty rate, 
divided by the estimated duty rate. 

[50] Pub. L. No. 109-280, 1632(a). 

[51] Pub. L. No. 109-280, 1632(a). 

[52] Because these entries were not liquidated by the end of fiscal 
year 2007, they are not included in the total amount of uncollected AD/ 
CV duties cited elsewhere. 

[53] According to Commerce officials, the new shipper review provisions 
do not provide them the discretion to create any such requirement. 19 
U.S.C.  1675(a)(2)(A)-(B)(i). 

[54] For that shipment, the importer must pay a cash deposit at the 
"all others" AD/CV duty rate if the entry is made before importers are 
allowed to post bonds in lieu of cash deposits. 

[55] 19 C.F.R.  142.4. 

[56] See Amendment to Bond Directive 99-3510-004 for Certain 
Merchandise Subject to Antidumping/Countervailing Duty Cases (July 9, 
2004). 

[57] See GAO, International Trade: Customs' Revised Bonding Policy 
Reduces Risk of Uncollected Duties, but Concerns about Uneven 
Implementation and Effects Remain, GAO-07-50 (Washington, D.C.: Oct.18, 
2006). 

[58] According to CBP officials, these exporters accounted for the 
majority of U.S. shrimp imports. 

[59] Seafood Exporters Ass'n of India, 479 F. Supp. 2d 1367; Nat'l 
Fisheries Inst., Inc., 465 F. Supp. 2d 1300; United States - Customs 
Bond Directive for Merchandise Subject to Anti-Dumping/Countervailing 
Duties, WT/DS345; United States - Measures Relating to Shrimp from 
Thailand, WT/DS343. 

[60] Nat'l Fisheries Inst., Inc., 465 F. Supp. 2d at 1337. 

[61] United States - Customs Bond Directive for Merchandise Subject to 
Anti-Dumping/Countervailing Duties, WT/DS345/R; United States - 
Measures Relating to Shrimp from Thailand, WT/DS343/R. Under WTO rules, 
any party to the dispute has the right to request that the Appellate 
Body review the case. 

[62] 19 U.S.C.  1504(d). 

[63] U.S. Immigration and Customs Enforcement, within the Department of 
Homeland Security, is the federal agency responsible for investigating 
alleged schemes by U.S. importers to avoid the payment of AD/CV duties. 
It works with CBP and Commerce to investigate and refer substantial 
violators for criminal and civil actions. 

[64] 19 U.S.C.  1504(d). 

[65] Commerce officials noted that CBP does not always review and act 
on Commerce's instructions in a timely manner. According to the 1988 
Memorandum of Understanding between Commerce and CBP, CBP agrees to 
"review and act on" instructions received from Commerce "within 24 
hours of receipt." According to Commerce, there are numerous instances 
where CBP did not review and act on Commerce's instructions within the 
agreed-upon time frame. For instance, beginning in October 2007, a 
number of the instructions sent to CBP were "backlogged." 

[66] Commerce officials acknowledged that some instructions are 
legitimately rejected by CBP because they are unclear or inaccurate; 
however, these officials also believe that CBP unnecessarily rejects 
some instructions. 

[67] 19 U.S.C.  1504(d). 

[68] According to CBP, in accordance with the decision of the Court of 
Appeals for the Federal Circuit--in Koyo Corp. of U.S.A. v. United 
States, 497 F.3d 1231 (Fed. Cir. 2007), CBP is granting properly filed, 
valid protests of deemed liquidations, filed by importers seeking 
refunds based on the final results rate, provided that the protests do 
not raise nonprotestable claims of errors by Commerce. 

[69] 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. WTO Antidumping Agreement Art. 9.3.2 

[70] According to Commerce officials, some U.S. exporters complain that 
other countries' prospective systems do not regularly conduct reviews 
to adjust AD/CV duty rates. 

[71] CV duties also are imposed prospectively, but are based on 
calculated amounts of subsidy rather than normal values. 

[72] The "normal value" is based on the price at which the exporter 
sells like goods for domestic consumption. 

[73] 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. 

[74] As such, the Australian system provides only limited financial 
incentive for firms to discontinue dumping. 

[75] If the European Union determines that the injury caused by the 
unfair imports can be remedied with a lesser amount of duties than the 
margin of dumping or subsidization, it imposes duties at a lower rate. 

[76] As such, the EU system provides no direct financial incentive for 
firms to discontinue dumping. 

[77] For ease of discussion, we have grouped together a variety of 
systems and categorized them as "prospective" systems. As discussed 
with regard to the Canadian, Australian, and EU AD/CV duty systems, 
each system is prospective, but the specific design characteristics of 
each system (and thus the relative advantages and disadvantages) vary. 

[78] The Australian and EU AD/CV duty systems, while eliminating 
uncertainty in duty rates, provide little or no direct financial 
incentive for firms to reduce dumping. 

[79] According to Commerce officials, they do not have the legislative 
authority to create any such requirement. 

[80] 19 U.S.C.  1675(a)(2)(B). 

[81] GAO-07-50. 

[82] Seafood Exporters Ass'n of India, 479 F. Supp. 2d 1367; Nat'l 
Fisheries Inst., Inc., 465 F. Supp. 2d 1300; United States - Customs 
Bond Directive for Merchandise Subject to Anti-Dumping/Countervailing 
Duties, WT/DS345; United States - Measures Relating to Shrimp from 
Thailand, WT/DS343. 

[83] Nat'l Fisheries Inst., Inc., 465 F. Supp. 2d at 1337. 

[84] WT/DS345/R; WT/DS343/R. Under WTO rules, any party to the dispute 
has the right to request that the Appellate Body review the case. 

[85] This time frame is set out in 19 U.S.C. 1504(d). 

[86] See Pub. L. No. 109-171,  7601(a). 

[87] GAO-07-50. 

[88] As the report notes, the option of providing a bond has been 
temporarily suspended. P.L. No. 109-280, I632(a).