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International Affairs: Antidumping and Countervailing Duties (2011-81)

Congress could pursue several options to improve collection of antidumping and countervailing duties.

Action:

Congress could eliminate the retrospective component of the U.S. antidumping and countervailing duty system and, instead, treat the antidumping and countervailing duties assessed at the time the product enters the country as final.

Progress:

As of March 2019, no legislation has been enacted. Congress has not enacted legislation to eliminate the retrospective component of the U.S. antidumping and countervailing duty system. In March 2008, March 2011, and May 2011, GAO identified elimination of the retrospective component as an option for Congress to pursue to reduce the risk of companies evading payment of antidumping and countervailing duties. Under the current retrospective system, importers pay estimated duties when products enter the United States, but the final amount of duties owed is not determined until later, a process that can take more than 3 years on average. This creates a risk that the importers may disappear, cease business operations, or declare bankruptcy before the government can collect the full amount owed. GAO reported in March 2008 that over $613 million in duties from fiscal years 2001 through 2007 went uncollected—a figure that a July 2016 GAO report found had grown to over $2.3 billion in uncollected duties from fiscal years 2001 through 2014, as of May 2015. Other major U.S. trading partners, such as Canada, Australia, and the European Union, have prospective duty systems that, while different from one another, treat as final the duties assessed when a product enters the country.

During the 114th Congress, House Bill 614 was introduced but did not pass out of committee. If enacted, this bill would have required the Department of Commerce (Commerce) to submit a report evaluating the merits and feasibility of converting to a prospective antidumping and countervailing duty system. The bill also stated that if Commerce recommends conversion to a particular prospective system, it shall include in its report an estimate of the costs to be incurred and the cost savings to be achieved as a result of the conversion. By changing U.S. law to eliminate the retrospective component and thereby treat the duties assessed at the time products enter the country as final, Congress could improve collections and increase revenues.

Implementing Entity:

Congress

Action:

Congress could choose to provide the Department of Commerce (Commerce) the discretion to require companies applying for a new shipper review to have a greater volume of imports before establishing an individual antidumping and countervailing duty rate.

Progress:

Addressed. In March 2008, GAO first suggested that Congress enact legislation to provide Commerce with the authority to establish, at its discretion, a minimum amount or value of imports from companies requesting a new shipper review. Companies apply for new shipper reviews to attempt to receive an individual duty rate that is lower than the rate they would otherwise have to pay. However, new shippers could be assigned an individual duty rate based on as little as one sale. Such limited sales volumes allow new shippers to construct artificial transactions in a way that eliminates dumping but would not be possible if they were required to make a larger number of sales. The limited number of sales required for a new shipper review thus could have allowed pricing behavior that leads to significant underestimation of the final duty rate. On February 24, 2016, President Obama signed Public Law 114-125, the Trade Facilitation and Trade Enforcement Act of 2015. The law requires that new shipper rates be based on bona fide sales. It also requires that Commerce, in determining whether a given new shipper’s sales were bona fide, consider, among other factors and depending on the circumstances surrounding the sales, whether such sales were made in commercial quantities. According to Commerce, with respect to new shipper reviews, the law eliminates the ability for a new shipper to receive its own individual antidumping or countervailing duty rate based on just one sale.

Implementing Entity:

Congress

Action:

To better manage the antidumping and countervailing (AD/CV) duty liquidation process, Customs and Border Protection (CBP) should issue guidance directing the Antidumping Countervailing Duty Centralization Team to (a) collect and analyze data on a regular basis to identify and address the causes of liquidations that occur contrary to the process or outside the 6-month time frame mandated by the statute, (b) track progress on reducing such liquidations, and (c) report on any effects these liquidations may have on revenue.

Progress:

As of January 2019, CBP had not fully implemented GAO’s July 2016 recommendation. In August 2018, CBP issued a new handbook for use in managing AD/CV duty entries. The new handbook supersedes a previous one issued in March 1998 and provides detailed guidance for identifying and managing AD/CV duty entries, but it does not contain a requirement to track progress toward reducing untimely liquidations and reporting on their effects on revenue. CBP officials stated that they do not track progress toward reporting on and reducing untimely liquidations and their effects on revenue. CBP officials said that their focus instead is on identifying and acting on untimely liquidations before they occur. They said that they improved their internal procedures and provided additional training to CBP staff.

Because they are not tracking progress toward reducing and eliminating untimely liquidations, CBP did not have or provide any quantifiable data to show the extent to which they made progress in reducing or eliminating untimely liquidations in fiscal year 2018. In January 2018, CBP informed GAO that it had estimated the net revenue effect of deemed liquidations during fiscal year 2017 at about $16,000 in lost revenue.  Deemed liquidations occur when CBP liquidates an entry after the 6-month time limit established by law. CBP did not calculate the revenue effect of premature liquidations, which occur when entries are liquidated before Commerce has issued its AD/CV duty entry liquidation instructions.   

Implementing Entity:

U.S. Customs and Border Protection

Action:

To improve risk management in the collection of antidumping and countervailing (AD/CV) duties and to identify new or changing risks, Customs and Border Protection (CBP) should regularly conduct a comprehensive risk analysis that assesses both the likelihood and the significance of risk factors related to AD/CV duty collection. For example, CBP could construct statistical models that explore the associations between potential risk factors and both the probability of nonpayment and the size of nonpayment when it occurs.

Progress:

As of March 2019, CBP was taking steps to conduct the type of risk analysis GAO recommended in July 2016. According to CBP officials, as of June 2018, CBP had developed a prototype AD/CV duty risk assessment model to use in conducting a risk analysis of factors related to AD/CV duty noncollection.  While CBP expected to complete and test the model by the end of October 2018, it encountered delays due to the complexity of the project. As of January 2019, CBP officials had not provided an expected completion date for testing and implementing the model. Regularly conducting a comprehensive risk analysis of factors related to AD/CV duty non-collection could enhance CBP’s capacity to collect additional revenue. For example, according to CBP officials, it could be used to assess a requirement for additional security in the form of bonds as part of an enhanced bonding requirement if carefully tailored in order to avoid a legal challenge.

Implementing Entity:

U.S. Customs and Border Protection

Action:

To improve risk management in the collection of antidumping and countervailing (AD/CV) duties, Customs and Border Protection (CBP) should, consistent with U.S. law and international obligations, take steps to use its data and risk assessment strategically to mitigate AD/CV duty nonpayment, such as by using predictive risk analysis to identify entries that pose heightened risk and taking appropriate action to mitigate the risk.

Progress:

As of March 2019, CBP was developing a risk-based AD/CV duty bonding framework to use in conjunction with the development of an AD/CV duty risk assessment model.  The development of the bonding framework should help in the implementation of GAO’s July 2016 recommendation. According to CBP, the proposed bonding framework consists of a continuous supplemental bond that would be required in the event an importer does not meet certain risk criteria once an importer begins to file entries subject to AD/CV duties. According to CBP, as of July 2018, CBP had taken actions to develop the new bonding framework, including drafting a bond formula and testing the formula with four sureties from the Commercial Customs Operations Advisory Committee’s Trade Enforcement and Revenue Committee’s Bond working group.  However, CBP will not be able to fully implement the bonding framework until it completes its AD/CV duty risk assessment model.

Implementing Entity:

U.S. Customs and Border Protection
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    • Kimberly Gianopoulos
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