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
(202) 512-8612
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: 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 antidumping and countervailing duty (AD/CV) entries. The new handbook supersedes a previous one issued in March 1998 and provides detailed guidance for identifying and managing AD/CV 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 entry liquidation instructions.

    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: As of January 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 risk assessment model to use in conducting a risk analysis of factors related to AD/CV duty non-collection. 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.

    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: In January 2019, CBP stated it had begun developing a risk-based AD/CV bonding framework to use in conjunction with the development of an AD/CV 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 implement 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 risk assessment model

    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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