Antidumping and Countervailing Duties:

CBP Action Needed to Reduce Duty Processing Errors and Mitigate Nonpayment Risk

GAO-16-542: Published: Jul 14, 2016. Publicly Released: Aug 15, 2016.

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Kimberly M. Gianopoulos
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gianopoulosk@gao.gov

 

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What GAO Found

GAO estimates that about $2.3 billion in antidumping (AD) and countervailing (CV) duties owed to the U.S. government were uncollected as of mid-May 2015, based on its analysis of AD/CV duty bills for goods entering the United States in fiscal years 2001–2014. U.S. Customs and Border Protection (CBP) reported that it does not expect to collect most of that debt. GAO found that most AD/CV duty bills were paid and that unpaid bills were concentrated among a small number of importers, with 20 accounting for about 50 percent of the $2.3 billion uncollected. CBP data show that most of those importers stopped importing before receiving their first AD/CV duty bill. As GAO has previously reported, the U.S. AD/CV duty system involves the retrospective assessment of duties, such that the final amount of AD/CV duties an importer owes can significantly exceed the initial amount paid at the estimated duty rate when the goods entered the country.

Importers with Unpaid Antidumping and/or Countervailing Duty Bills for Entries in Fiscal Years 2001–2014, as of May 12, 2015

Importers with Unpaid Antidumping and/or Countervailing Duty Bills for Entries in Fiscal Years 2001–2014, as of May 12, 2015 img  data-cke-saved-src=

CBP has undertaken efforts to improve its collection of AD/CV duties or to protect against the risk of unpaid final duty bills through bonding, but these efforts have yielded limited results. For example, CBP launched an initiative to reduce processing errors that result in CBP closing duty bills at the initial duty rate rather than the final duty rate, such that the initial duty paid may be significantly higher or lower than the final duty amount owed. Though the initiative has shown positive results, as of May 2016, its application had been limited. In addition, CBP had not collected and analyzed data systematically to help it monitor and minimize these duty processing errors. As a result, CBP does not know the extent of these errors and cannot take timely or effective action and avoid the potential revenue loss they may represent.

CBP's limited analysis of the risk to revenue from potentially uncollectible AD/CV duties (nonpayment risk) misses opportunities to identify and mitigate nonpayment risk. The standard definition of risk with regard to some negative event that could occur includes both the likelihood of the event and the significance of the consequences if the event occurs; however, CBP does not attempt to assess either of these risk components for any given entry of goods subject to AD/CV duties. GAO's analysis, applying standard statistical methods, demonstrates that a more comprehensive analysis of CBP data related to AD/CV duties is feasible and could help CBP better identify key factors associated with nonpayment risk and take steps to mitigate it.

Why GAO Did This Study

The United States assesses AD duties on products imported at unfairly low prices (i.e., dumped) and CV duties on products subsidized by foreign governments. Nonpayment of AD/CV duties means the U.S. government has not fully remedied unfair trade practices and results in lost revenue.

GAO was asked to review CBP's efforts to improve the collection of AD/CV duties. This report (1) examines the status and composition of uncollected AD/CV duties, (2) the extent to which CBP has taken steps to improve its collection of such duties, and (3) the extent to which CBP assesses and mitigates the risk to revenue from potentially uncollectible AD/CV duties. GAO analyzed CBP AD/CV duty entry data for fiscal years 2001 through 2014, AD/CV duty billing data as of mid-May 2015, and Department of Commerce data for fiscal years 2002–2015. GAO also reviewed agency documents, interviewed agency and private sector officials, and analyzed CBP data to assess the risk of duty nonpayment.

What GAO Recommends

GAO recommends that CBP (1) issue guidance to collect and analyze data on a regular basis to find and address the causes of AD/CV duty liquidation errors and track progress; (2) regularly conduct a comprehensive risk analysis that considers likelihood as well as significance of risk factors related to duty nonpayment; and (3) take steps to use its data and risk assessment strategically to mitigate AD/CV duty nonpayment consistent with U.S. law and international trade obligations. CBP concurred with all three recommendations.

For more information, contact Kimberly M. Gianopoulos at (202) 512-8612 or gianopoulosk@gao.gov.

Recommendations for Executive Action

  1. Status: Open

    Priority recommendation

    Comments: CBP concurred with this recommendation and said it would take steps to implement it. As of August 2018, CBP had not implemented this recommendation. In August 2018, CBP developed and implemented a new handbook for use in managing antidumping and countervailing duty entries. The new handbook supersedes a previous one issued in March 1998 and provides step-by-step guidance for identifying and managing AD/CV entries; however, it does not contain requirements for CBP to regularly collect and analyze data to identify the causes of liquidations that occur contrary to the process or outside the 6-month time frame mandated by statute. It also does not contain a requirement to track progress toward reducing such untimely liquidations and reporting on their effects on revenue. In August 2018, CBP officials stated that they do not currently collect and analyze data to identify the causes of untimely liquidations, nor are they tracking progress toward reducing and reporting on such liquidations and their effects on revenue. CBP officials said that their focus is on identifying and acting on liquidations before they are liquidated in an untimely manner. For this purpose, they said they had made improvements to their internal procedures and provided additional training to CBP staff. The internal improvements involve the use of ACE reports to identify AD/CV entries at risk for untimely liquidation. Because they are not collecting and analyzing data to identify the causes of untimely liquidations or tracking progress toward reducing and eliminating these liquidations, as of August 2017, CBP did not have any quantifiable data to show the extent to which they have made progress toward reducing or eliminating untimely liquidations in fiscal year 2018. In January 2018, CBP informed GAO that as of September 2017, it had estimated the revenue effect of untimely liquidations during fiscal year 2017 at about $16,000 in lost revenue.

    Recommendation: To better manage the AD/CV duty liquidation process, CBP should issue guidance directing the Antidumping and 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 statute, (b) track progress on reducing such liquidations, and (c) report on any effects these liquidations may have on revenue.

    Agency Affected: Department of Homeland Security: United States Customs and Border Protection

  2. Status: Open

    Priority recommendation

    Comments: CBP concurred with this recommendation and said it would take steps to implement it. As of June 2018, CBP had developed a risk-based model. CBP had also begun testing the model to determine its feasibility with members of the surety industry, as well as with members of the Commercial Customs Operation Advisory Committee. In addition, CBP had also begun taking steps to ensure that the model, when it is finally completed and fully implemented, automatically factors in new data for use in risk analysis. The model, when complete, could enable CBP to use data strategically by enabling it to identify entries that pose a heightened risk of nonpayment and target them with appropriate corresponding bonds. For example, according to CBP officials, it could be used 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. As of June 2018, CBP stated that it planned to begin use of the model around the end of October 2018.

    Recommendation: To improve risk management in the collection of AD/CV duties and to identify new or changing risks, 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.

    Agency Affected: Department of Homeland Security: United States Customs and Border Protection

  3. Status: Open

    Priority recommendation

    Comments: CBP concurred with this recommendation and said it would take steps to implement it. As of June 2018, CBP had partially addressed this recommendation. CBP will not be able to fully implement this recommendation until it has finalized and implemented the risk-based model that it plans to use to identify entries that pose a heightened risk of nonpayment and target them with the appropriate corresponding bonds. As discussed earlier, as of June 2018, CBP was in the process of testing this risk-based model and planned to begin use of the model around the end of October, 2018. Developing a risk-based model to use in mitigating antidumping and countervailing duty nonpayment 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 to avoid a legal challenge.

    Recommendation: To improve risk management in the collection of AD/CV duties, 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.

    Agency Affected: Department of Homeland Security: United States Customs and Border Protection

 

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