Summary
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
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 CBP's 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 However, the law generating this reporting has been repealed.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 CBP's 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.
Recommendations
Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director:
Team:
Phone:
Loren Yager
Government Accountability Office: International Affairs and Trade
(202) 512-4347
Matters for Congressional Consideration
Recommendation: In order to help reduce the amount of uncollected AD/CV duties, Congress may wish to 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 may wish to establish a specific date by which the report is to be delivered.
Status: Open
Comments: GAO is tracking Congressional actions related to this Matter. In comments on the report, Commerce stated it agreement with all Matters in the report, and CBP said it 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: In order to help reduce the amount of uncollected AD/CV duties, Congress may wish to 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.
Status: Closed - implemented
Comments: In March 2008, we reported that over $613 million in antidumping (AD) and countervailing (CV) duties from fiscal years 2001 through 2007 were uncollected as of September 2007. In fiscal year 2003, Customs and Border Protection (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, the law (Continued Dumping and Subsidy Offset Act) generating this reporting was repealed in February 2006. In March 2008, we suggested that Congress consider requiring CBP to publicly report on an annual basis regarding the amount of uncollected duties for that year for each AD/CV duty order. We also suggested that the report indicate the total amount of all open, unpaid bills for each AD/CV duty order. In June 2008, Congress required that CBP report on the amount of uncollected duties for that year for each AD/CV duty order and indicate the amount of open, unpaid bills for each order.
Recommendation: In order to help reduce the amount of uncollected AD/CV duties, Congress may wish to 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.
Status: Open
Comments: GAO is tracking Congressional action related to this Matter. Commerce said it agreed with all Matters for Congressional Consideration made in this report, and CBP noted that it supports increasing the requirements for new shippers to address the collection risk associated with exports from these companies.
Recommendations for Executive Action
Recommendation: In order to help ensure the full collection of AD/CV duties and improve the liquidation process, the Secretary of Homeland Security, should, in consultation with other relevant agencies, 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.
Agency Affected: Department of Homeland Security
Status: Open
Comments: DHS stated neither agreement nor disagreement with this recommendation but noted in its comments on the report that CBP remains committed to utilizing its bonding authority to address revenue risk. It said, however, that 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. GAO is monitoring agency actions to implement the recommendation.
Recommendation: In order to help ensure the full collection of AD/CV duties and improve the liquidation process, 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.
Agency Affected: Department of Commerce
Status: Open
Comments: In commenting on the report, Commerce said it 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. It noted that 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. Also, in comments on the report, DHS also stated that it agreed with this recommendation. DHS said the focus should be on improving both the clarity and timeliness of liquidation instructions. It said CBP and Commerce have taken steps to improve the clarity and timeliness and that CBP would continue to do so. GAO is monitoring agency steps to implement this recommendation.
Recommendation: In order to help ensure the full collection of AD/CV duties, improve the liquidation process, and 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 Affected: Department of Commerce
Status: Open
Comments: In commenting on the report, Commerce said it was not opposed to any of the report's recommendations and noted that a strategic human capital plan for Import Administration's AD/CVD Operations offices was already in the planning stages and would be developed as part of an upcoming independent review of Import Administration programs. It said that, given the potential role of limited human resources affecting other agencies' ability to implement the timely collection of AD and CVD duties, GAO might want to consider recommending similar human capital plans for other agencies involved in the collection of AD and CVD duties.
