Antidumping and Countervailing Duties: CBP Action Needed to Reduce Duty Processing Errors and Mitigate Nonpayment Risk
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
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.
Recommendations
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.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| United States Customs and Border Protection |
Priority Rec.
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. |
Since July 2016, CBP has taken some steps to implement elements of this recommendation. CBP has issued guidance to collect and analyze data on some untimely antidumping and countervailing (AD/CV) duty liquidations and now regularly collects some data on these liquidations. CBP is also using its self-inspection process to identify why some liquidations are resulting in a loss of revenue. In addition, CBP reported that it is using technology to reduce processing errors. As of January 2022, CBP data showed that the actions it has taken to implement this recommendation have reduced the number of untimely liquidations but have not eliminated their occurrence. CBP has not reported on the revenue effects of untimely AD/CV liquidations because calculating this was too labor intensive, according to CBP officials. In August 2022, CBP officials stated that they plan to analyze annual entry summary data which could help determine the revenue effect of untimely liquidations, beginning with fiscal year 2022 data. They also stated that they plan to use this data to determine additional actions to reduce the effects of untimely liquidations. Fully implementing this recommendation would enable CBP to better track progress toward reducing untimely liquidations by determining the effects of its actions on revenue. GAO will continue to monitor the actions CBP takes to address the recommendation, including CBP's analysis of the fiscal year 2022 data.
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| United States Customs and Border Protection |
Priority Rec.
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. |
In response, CBP has developed several statistical models to assess the risk of importer nonpayment of AD/CV duties, taxes and fees. The latest one uses 11 factors, such as the importer's past payment history, to calculate an importer's "risk score." The "risk score" is then used by CBP to determine whether the importer will be required to purchase an AD/CV single transaction bond (STB). According to CBP, back testing shows that the model is 95 percent accurate in predicting importer bill payment behavior. CBP also plans to regularly update the model. The model should enable CBP to better predict the importers' likelihood of nonpayment. The model should also assist CBP in its decision on whether an additional STB is required to hedge against the possibility of revenue loss from delinquency on the payment of AD/CV duties, taxes and fees.
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| United States Customs and Border Protection |
Priority Rec.
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. |
From July 2016 to May 2021, CBP took steps to develop a risk-based framework, including the use of a risk-based single transaction bond (STB). In June 2021, CBP announced that it would not implement the risk-based STB due in part to the complexity of the framework in determining if an additional risk-based STB was needed and in what amount. CBP announced that it would instead incorporate risk-based principles into its current process by leveraging existing authorities and completing several initiatives. Among other things, using its existing bond formula and processes, CBP said that it would leverage its authorities to require the purchase of an additional STB by updating its internal guidance and procedures to better define when an STB is needed. CBP also said that it would fully automate its continuous bond sufficiency checks to ensure importers have sufficient coverage at all times. As of January 2022, CBP had issued guidance for determining when to use an STB for AD/CV entries. CBP had also issued guidance operationalizing a recent bond policy decision to revoke the authority of CBP officials to permit persons suspended or debarred by CBP from using a continuous entry bond to secure customs activities, except in circumstances when a continuous bond is the only type of acceptable bond. CBP officials said they were in the process of updating its Monetary Guidelines for Setting Bond Amounts. Additionally, CBP officials said they were in the process of updating their regulation to formally allow the use of an electronic customs bond. CBP officials also said they were in the process of fully automating bond sufficiency checks. CBP officials said the agency plans to complete all initiatives to update bond monetary guidelines and fully automate its bond sufficiency checks by the end of fiscal year 2022. The initiatives CBP has taken and plans to take could help CBP mitigate the risk of AD/CV duty nonpayment but the extent to which the initiatives use its data and risk analysis strategically is unclear at this point.
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