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entitled 'Antidumping and Countervailing Duties: Management 
Enhancements Needed to Improve Efforts to Detect and Deter Duty 
Evasion' which was released on May 17, 2012. 

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United States Government Accountability Office: 
GAO: 

Report to Congressional Requesters: 

May 2012: 

Antidumping and Countervailing Duties: 

Management Enhancements Needed to Improve Efforts to Detect and Deter 
Duty Evasion: 

GAO-12-551: 

GAO Highlights: 

Highlights of GAO-12-551, a report to congressional requesters. 

Why GAO Did This Study: 

The United States imposes AD/CV duties to remedy unfair foreign trade 
practices, such as unfairly low prices or subsidies that cause injury 
to domestic industries. Examples of products subject to AD/CV duties 
include honey from China and certain steel products from South Korea. 
Importers that seek to avoid paying appropriate AD/CV duties may 
employ methods of evasion such as illegally transshipping an import 
through a third country to disguise its true country of origin or 
falsifying the value of an import to reduce the amount of duties owed, 
among others. AD/CV duty evasion can harm U.S. companies and reduces 
U.S. revenues. CBP, within the Department of Homeland Security, leads 
efforts to detect and deter AD/CV duty evasion. 

GAO was asked to examine (1) how CBP detects and deters AD/CV duty 
evasion, (2) factors that affect CBP’s efforts, and (3) the extent to 
which CBP tracks and reports on its efforts. To address these 
objectives, GAO reviewed CBP data and documents; met with government 
and private sector representatives in Washington, D.C.; and conducted 
fieldwork at three domestic ports. 

What GAO Found: 

U.S. Customs and Border Protection (CBP) detects and deters evasion of 
antidumping and countervailing (AD/CV) duties through a three-part 
process that involves (1) identifying potential cases of evasion, (2) 
attempting to verify if evasion is occurring, and (3) taking 
enforcement action. To identify potential cases of evasion, CBP 
targets suspicious import activity, analyzes trends in import data, 
and follows up on allegations from external sources. If CBP identifies 
a potential case of evasion, it can use various techniques to attempt 
to verify whether evasion is occurring, such as asking importers for 
further information, auditing the records of importers suspected of 
evasion, and inspecting shipments arriving at ports of entry. If CBP 
is able to verify evasion, its options for taking enforcement action 
include (1) pursuing the collection of evaded duties, (2) imposing 
civil penalties, (3) conducting seizures, and (4) referring cases for 
criminal investigation. For example, between fiscal years 2007 to 
2011, CBP assessed civil penalties totaling about $208 million against 
importers evading AD/CV duties. 

Two types of factors affect CBP’s efforts to detect and deter AD/CV 
duty evasion. First, CBP faces several external challenges in 
attempting to gather conclusive evidence of evasion and take 
enforcement action against parties evading duties. These challenges 
include (1) the inherent difficulty of verifying evasion conducted 
through clandestine means; (2) limited access to evidence of evasion 
located in foreign countries; (3) the highly specific and sometimes 
complex nature of products subject to AD/CV duties; (4) the ease of 
becoming an importer of record, which evaders can exploit; and (5) the 
limited circumstances under which CBP can seize goods evading AD/CV 
duties. Second, gaps in information sharing also affect CBP efforts. 
Although communication between CBP and the Department of Commerce 
(Commerce) has improved, CBP lacks information from Commerce that 
would enable it to better plan its workload and help mitigate the 
administrative burden it faces in processing AD/CV duties—an effort 
that diminishes its resources available to address evasion. 
Additionally, CBP has encouraged the use of larger bond amounts to 
protect AD/CV duty revenue from the risk of evasion, but CBP has 
neither a policy nor a mechanism in place for a port requiring a 
larger bond to share this information with other ports in case an 
importer withdraws its shipment and attempts to make entry at another 
port to avoid the higher bond amount. 

While CBP has made some performance management improvements, it does 
not systematically track or report key outcome information that CBP 
leadership and Congress could use to assess and improve CBP’s efforts 
to deter and detect AC/CV duty evasion. First, CBP cannot readily 
produce key data, such as the number of confirmed cases of evasion, 
which it could use to better inform and manage its efforts. Second, 
CBP does not consistently track or report on the outcomes of 
allegations of evasion it receives from third parties. As GAO reported 
in March 2011, the Government Performance and Results Modernization 
Act of 2010 underscores the importance of ensuring that performance 
information will be both useful and used in decision making. Without 
improved tracking and reporting, agency leadership, Congress, and 
industry stakeholders will continue to have little information with 
which to oversee and evaluate CBP’s efforts to detect and deter 
evasion of AD/CV duties. 

What GAO Recommends: 

To enhance CBP’s efforts to address AD/CV duty evasion and facilitate 
oversight of these efforts, GAO makes several recommendations, 
including that CBP create a policy and a mechanism for information 
sharing among ports regarding the use of higher bond amounts and 
develop and implement a plan to track and report on these efforts. CBP 
and the Department of Commerce generally concurred with GAO’s 
recommendations. 

View [hyperlink, http://www.gao.gov/products/GAO-12-551]. For more 
information, contact Alfredo Gomez at (202) 512-4101 or gomezj@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

CBP Uses a Three-Part Process to Detect and Deter AD/CV Duty Evasion: 

External Obstacles and Gaps in Information Sharing Hamper CBP Efforts 
to Address Evasion: 

CBP Has Made Some Performance Management Improvements but Does Not 
Systematically Track or Report on Its Efforts to Detect and Deter 
Evasion: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Comments from the Department of Homeland Security: 

Appendix III: Comments from the Department of Commerce: 

Appendix IV: GAO Contact and Staff Acknowledgments: 

Table: 

Table 1: Top 5 Countries with Most U.S. AD/CV Duty Orders in Place, as 
of March 2012: 

Figures: 

Figure 1: Key Steps in the Import Process: 

Figure 2: Methods Commonly Used to Evade AD/CV Duties: 

Figure 3: CBP Techniques for Attempting to Verify Evasion at Different 
Points in the Import Process: 

Figure 4: Boxes of Chinese Wood Flooring Brought into the United 
States through Evasion: 

Figure 5: Facility in Thailand Falsely Described as Honey 
Manufacturing Plant: 

Figure 6: Unliquidated Entries Subject to AD/CV Duties Stored in File 
Room at a U.S. Port of Entry: 

Figure 7: Missing Data on Civil Penalties CBP Imposed between Fiscal 
Years 2007 and 2011 for AD/CV Duty Evasion, as of February 2012: 

Abbreviations: 

AD: antidumping: 

CBP: U.S. Customs and Border Protection: 

CV: countervailing: 

Commerce: Department of Commerce: 

ICE: U.S. Immigration and Customs Enforcement: 

NTAG: National Targeting and Analysis Group: 

STB: single transaction bond: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

May 17, 2012: 

The Honorable Ron Wyden: 
Chairman: 
Subcommittee on International Trade, Customs and Global Competitiveness 
Committee on Finance: 
United States Senate: 

The Honorable Olympia Snowe: 
United States Senate: 

The United States imposes antidumping and countervailing (AD/CV) 
duties to remedy unfair foreign trade practices that cause injury to 
domestic industries. Importers that seek to avoid paying appropriate 
AD/CV duties may attempt to evade them through methods such as 
illegally transshipping an import through a third country to disguise 
its true country of origin or falsifying the value of an import to 
reduce the amount of duties owed, among others.[Footnote 1] Evasion of 
AD/CV duties undermines U.S. AD/CV duty laws--the intent of which is 
to level the economic playing field for U.S. industry--and deprives 
the U.S. government of revenues it is due. U.S. Customs and Border 
Protection (CBP), within the Department of Homeland Security, leads 
U.S. efforts to detect and deter AD/CV duty evasion. Congress and 
domestic industries have expressed concern that unscrupulous actors 
continue to find ways to evade duties, leaving U.S. industry at risk. 

In response to your request for a review of CBP's efforts to address 
AD/CV duty evasion, this report examines (1) how CBP detects and 
deters evasion, (2) factors that affect CBP's efforts to detect and 
deter evasion, and (3) the extent to which CBP tracks and reports on 
its efforts. 

To address these objectives, we reviewed a range of documents and data 
from CBP related to its efforts to detect and deter AD/CV duty 
evasion, such as annual planning and reporting documents; internal 
memos and other documents; and data on products subject to AD/CV 
duties, allegations of evasion from external sources, and enforcement 
outcomes. We also met with officials in CBP's Offices of International 
Trade, Field Operations, and Intelligence and Investigative Liaison; 
U.S. Immigration and Customs Enforcement (ICE); and the Departments of 
Commerce (Commerce) and the Treasury, as well as a coalition of U.S. 
industries affected by AD/CV duty evasion. Additionally, we conducted 
fieldwork at the ports of Miami, FL; Seattle, WA; and Los Angeles, CA; 
as well as the National Targeting and Analysis Group for AD/CV duty 
issues in Plantation, FL. See appendix I for a complete description of 
our objectives, scope, and methodology. 

We conducted this performance audit from June 2011 to May 2012 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

Background: 

The U.S. Import Process: 

The process for importing products into the United States involves 
several different private parties, as well as the U.S. government. 
These private parties include exporters, carriers, and importers, 
among others. Exporters are companies that sell goods manufactured or 
produced in foreign countries to the United States. Carriers are 
companies that transport the goods to the United States. Importers may 
be companies that purchase the goods from exporters or simply may be 
responsible for facilitating the importation of the goods.[Footnote 2] 
The importer of record is responsible for paying all estimated duties, 
taxes, and fees on those products when they are brought into the 
United States.[Footnote 3] Importers of record are also required to 
obtain a general bond to secure the payment of their financial 
obligations.[Footnote 4] CBP is responsible for, among other things, 
managing the import process (see figure 1); collecting the duties, 
taxes, and fees assessed on those products; and setting the formula 
for establishing importers' general bond amounts.[Footnote 5] 

Figure 1: Key Steps in the Import Process: 

[Refer to PDF for image: 3 photographs with associated information] 

Before goods leave the country of origin, the carrier submits 
documentation to CBP listing all goods on board destined for the 
United States.  

Goods arrive in the United States. CBP authorizes entry of the goods 
if no legal or regulatory violations are evident.  

After CBP authorizes entry of the goods, the importer submits additional
documentation to CBP and pays appropriate duties, taxes, and fees.
  
Sources: GAO analysis of CBP documentation; PhotoDisc and GAO 
(photos).  

[End of figure] 

The United States Imposes AD/CV Duties on a Variety of Imported Goods: 

The United States and many of its trading partners have established 
laws to remedy the unfair trade practices of other countries and 
foreign companies that cause injury to domestic industries. U.S. laws 
authorize the imposition of AD duties on imports that were "dumped" 
(i.e., sold at less than normal value)[Footnote 6] and CV duties on 
imports subsidized by foreign governments.[Footnote 7] As we reported 
in March 2008,[Footnote 8] the U.S. AD/CV duty system is 
retrospective, in that importers initially pay estimated AD/CV duties 
at the time of importation, but the final amount of duties, reflecting 
the actual amount of dumping or subsidization, is not determined until 
later.[Footnote 9] Commerce is responsible for calculating the 
appropriate AD/CV duty rate.[Footnote 10] CBP is then responsible for 
collecting the estimated AD/CV duties when goods enter the United 
States, and subsequently processing the final AD/CV duties (called 
"liquidation") when instructed by Commerce.[Footnote 11] Liquidation 
may result in providing importers with a refund or sending an 
additional bill. 

A wide range of imported goods are subject to AD/CV duties, such as 
agricultural, chemical, steel, paper, and wooden products. Each set of 
AD/CV duties--detailed in an AD/CV duty order--is for a type of 
product from a specified country. The written "scope" of each AD/CV 
duty order describes the specific type of product that is subject to 
the duties. The duty order also lists one or more Harmonized Tariff 
Schedule codes associated with the product.[Footnote 12] There are 
duty orders in place for some types of products from several 
countries. For example, there are currently AD duty orders on frozen 
warmwater shrimp from five countries--Brazil, China, India, Thailand, 
and Vietnam. For some other types of products, there is a duty order 
in place on only one country, such as saccharin from China. As of 
March 2012, there were 283 AD/CV duty orders in effect, with more duty 
orders on products from China than from any other country (see table 
1).[Footnote 13] 

Table 1: Top 5 Countries with Most U.S. AD/CV Duty Orders in Place, as 
of March 2012: 

Country: China; 
Number of U.S. AD/CV duty orders in place: 114; 
Examples of product types subject to AD/CV duties: Honey, saccharin, 
frozen warmwater shrimp, steel wire hangers. 

Country: India; 
Number of U.S. AD/CV duty orders in place: 23; 
Examples of product types subject to AD/CV duties: Mushrooms, 
matchbooks, frozen warmwater shrimp. 

Country: Taiwan; 
Number of U.S. AD/CV duty orders in place: 16; 
Examples of product types subject to AD/CV duties: Steel pipes, 
ribbons, plastic bags. 

Country: South Korea; 
Number of U.S. AD/CV duty orders in place: 14; 
Examples of product types subject to AD/CV duties: Steel pipes, steel 
plates, diamond sawblades. 

Country: Japan; 
Number of U.S. AD/CV duty orders in place: 13; 
Examples of product types subject to AD/CV duties: Steel bars, steel 
plates, cement. 

Source: GAO analysis of Commerce data. 

[End of table] 

Evasion of AD/CV Duties: 

Importers that seek to avoid paying appropriate AD/CV duties may 
attempt to evade them by using a variety of techniques. These 
techniques include illegal transshipment to disguise a product's true 
country of origin, undervaluation to falsify the price of an import to 
reduce the amount of AD/CV duties owed, and misclassification of 
merchandise such that it falls outside the scope of an AD/CV duty 
order, among others (see figure 2).[Footnote 14] According to CBP, 
importers sometimes use more than one evasion method at a time to 
further disguise the fact that they are importing goods subject to 
AD/CV duties. Because the techniques used to evade AD/CV duties are 
clandestine, the amount of revenue lost as a result is unknown. 

Figure 2: Methods Commonly Used to Evade AD/CV Duties: 

[Refer to PDF for image: illustration] 

Illegal Transshipment: 
Disguising a shipment's true country of origin by routing it through 
an intermediate country not subject to AD/CV duties. This may involve 
adding false markings and packaging to mimic legitimate production in 
other countries.  

Undervaluation: 
Falsifying the price of an import to reduce the amount of duties 
assessed. 
          
Misclassification: 
Falsely describing merchandise so that it falls outside the scope of 
an AD/CV duty order.  

Smuggling: 
Failing to declare goods on entry documents in order to avoid paying 
AD/CV duties.  

Sources: GAO analysis of CBP documentation; Map Resources (map). 

[End of figure] 

CBP Uses a Three-Part Process to Detect and Deter AD/CV Duty Evasion: 

CBP detects and deters AD/CV duty evasion through a three-part process 
that involves (1) identifying potential cases of evasion, (2) 
attempting to verify if evasion is occurring, and (3) taking 
enforcement action. 

CBP begins its detection of AD/CV duty evasion by identifying 
potential instances of evasion, using two primary sources of 
information: import data and allegations from external sources. Import 
data is generated from the documents submitted by importers as part of 
the import process. Allegations are collected electronically through e-
Allegations, an online system created by CBP in 2008. CBP also 
collects allegations via other means (such as telephone and e-mail, 
among others) and stores them in the e-Allegations system. As of 
September 2011, there were almost 400 allegations related to AD/CV 
duty evasion in the e-Allegations system, mostly from sources 
associated with affected industries.[Footnote 15] 

To look for anomalies that may be indicators of evasion, CBP personnel 
at both the local and national levels conduct targeting, analyze 
trends in import data, and follow up on allegations from external 
sources.[Footnote 16] Local targeting and analysis is conducted by CBP 
personnel stationed at more than 300 ports of entry, while national 
targeting and analysis is conducted by officials at CBP headquarters 
and its National Targeting and Analysis Group (NTAG) for AD/CV duty 
issues located in Plantation, FL. CBP officials explained that most of 
their targeting involves identifying entries filed under the 
Harmonized Tariff Schedule codes associated with a given product that 
is subject to AD/CV duties and then examining the import documentation 
for those entries for anomalies that may suggest evasion is occurring. 
Examples of such anomalies in import documents include, but are not 
limited to: 

* being filed under the same tariff code as a product that is subject 
to AD/CV duties but not being declared as subject to such duties, 

* listing a country of origin that is not capable of producing the 
goods (or the quantity of the goods) imported--a potential indicator 
of illegal transshipment, and: 

* showing a monetary value for the goods imported that appears to be 
too low for the quantity or weight of goods imported--a possible sign 
of undervaluation. 

Once CBP identifies a potential instance of evasion, it can use a 
variety of techniques at different points in the import process to 
attempt to verify if evasion is occurring. These include, but are not 
limited to, the following: 

* targeting additional shipments made by the importer of record and 
conducting further data analysis to look for other anomalies that may 
be evidence of evasion; 

* requesting that the importer provide further information, such as 
product invoices and other documents that can help CBP understand the 
transactions involved in producing and importing a good and ascertain 
if evasion occurred; 

* sending referrals to ICE to initiate criminal investigations and 
gather evidence of evasion from foreign countries, such as by visiting 
production facilities overseas and collecting customs documents from 
foreign counterparts; 

* performing cargo exams to inspect shipments arriving at ports of 
entry; 

* collecting samples of products potentially brought in through 
evasion and conducting laboratory analysis of these samples to attempt 
to identify their true country of origin and other technical details 
that can help CBP determine if the products should be subject to AD/CV 
duties; and: 

* auditing importers suspected of evading AD/CV duties by collecting 
company records (such as purchase orders, shipping documents, and 
payment records) and examining them for discrepancies. 

Figure 3 shows where in the import process CBP typically uses these 
techniques. 

Figure 3: CBP Techniques for Attempting to Verify Evasion at Different 
Points in the Import Process: 

[Refer to PDF for image: 3 photographs with associated information] 

Before goods leave the country of origin, the carrier submits 
documentation to CBP listing all goods on board destined for the 
United States.  

Goods arrive in the United States. CBP authorizes entry of the goods 
if no legal or regulatory violations are evident.  

After CBP authorizes entry of the goods, the importer submits additional
documentation to CBP and pays appropriate duties, taxes, and fees. 

CBP techniques to verify evasion: 

Across all 3 processes:    
Conduct targeting and data analysis; 
Request additional information from importer; 
Send referrals to ICE for investigative support. 

When Goods arrive in the United States: 
Perform cargo exams; 
Collect product samples. 

After CBP authorizes entry of the goods: 
Conduct audits. 

Sources: GAO analysis of CBP documentation; PhotoDisc and GAO (photos). 

[End of figure] 

In cases where CBP is able to verify evasion, its options for taking 
enforcement action to deter evasion include (1) pursuing the 
collection of evaded duties, (2) imposing civil penalties, (3) 
conducting seizures, and (4) referring cases to ICE for criminal 
investigation. As we discuss later in this report, CBP lacks complete 
data on the amount of evaded duties it has pursued and collected in 
cases of evasion. From fiscal years 2007 to 2011, CBP assessed 252 
civil penalties totaling about $208 million against 237 importers that 
evaded AD/CV duties.[Footnote 17] Over the same period, CBP also made 
33 seizures related to AD/CV duty evasion, with a total domestic value 
of nearly $4 million. In instances where CBP suspects that criminal 
laws may have been violated, it can refer cases to ICE for criminal 
investigation.[Footnote 18] Between fiscal years 2007 and 2011, ICE 
investigations of AD/CV duty evasion led to 28 criminal arrests, 85 
indictments, and 37 criminal convictions. 

CBP officials we met with during our review provided examples of how 
they had recently identified potential cases of evasion, verified that 
evasion was occurring, and then taken enforcement action. For 
instance, officials at one port described an effort they initiated 
following the imposition of CV duties on wood flooring from China. 
Through a targeting operation using the tariff code for wood flooring, 
the officials determined that, since the imposition of CV duties on 
Chinese wood flooring, only 15 of 165 importers with a history of 
bringing goods from China into their port under the tariff code for 
wood flooring had begun properly declaring their shipments as entries 
subject to AD/CV duties--a potential sign of evasion.[Footnote 19] 
Subsequently, by conducting cargo exams on several of the suspected 
importers, the officials were able to verify that the suspected 
Chinese goods were, in fact, wood flooring, and therefore should have 
been declared as subject to AD/CV duties (see figure 4). At the time 
of our visit, these officials stated that they had collected over 
$200,000 in unpaid duties from importers that had attempted to evade 
the AD/CV duties on wood flooring and were also preparing to assess 
civil penalties on 14 importers. 

Figure 4: Boxes of Chinese Wood Flooring Brought into the United 
States through Evasion: 

[Refer to PDF for image: photograph] 

Source: GAO. 

[End of figure] 

At another port we visited, CBP officials described a case that began 
with an anonymous fax alleging evasion of the AD duties on steel nails 
from China. After reviewing import data, the officials were able to 
confirm that the importer named in the allegation had brought an entry 
of steel nails into their port and that the importer's broker had 
filed the entry as not subject to AD duties. Because the AD duty order 
on steel nails from China provides an exemption for roofing nails, the 
port officials then sent a formal request for information to the 
importer to ask for a sample of the steel nails imported, which the 
importer provided.[Footnote 20] The port officials sent the sample to 
a CBP laboratory to determine if the nails provided were roofing nails 
or not. After the laboratory determined that the sample nails were not 
roofing nails, the port officials concluded that the steel nails were 
subject to the AD duty order and, consequently, should have been 
declared as such. The officials subsequently told us that this would 
result in a penalty against the importer and that 34 additional 
entries by the importer at six ports were also under review for 
evasion. 

External Obstacles and Gaps in Information Sharing Hamper CBP Efforts 
to Address Evasion: 

Two types of factors affect CBP's efforts to detect and deter AD/CV 
duty evasion. First, CBP faces several external challenges in 
attempting to gather conclusive evidence of evasion and deter parties 
from evading duties. Second, although interagency communication has 
improved, and CBP has encouraged the use of higher bonding 
requirements to protect revenue, gaps in information sharing with 
Commerce and within CBP may limit the effectiveness of these 
initiatives. 

CBP Faces Challenges Mostly Beyond Its Control in Proving Evasion Has 
Occurred and Taking Deterrent Action: 

Several challenges mostly outside of CBP's control impede its efforts 
to prove that evasion has occurred and deter parties from evading 
AD/CV duties. These challenges include (1) the inherent difficulty of 
verifying evasion conducted through clandestine means; (2) limited 
access to evidence of evasion located in foreign countries; (3) the 
highly specific and sometimes complex nature of products subject to 
AD/CV duties; (4) the ease of becoming an importer of record, which 
evaders can exploit; and (5) the limited circumstances under which CBP 
can seize goods brought in through evasion. 

Verifying Evasion of AD/CV Duties Is Inherently Difficult and Time-
Consuming: 

CBP officials we met with stated that verifying evasion of AD/CV 
duties is one of the agency's most challenging and time-consuming 
trade enforcement responsibilities. As these officials emphasized, 
proving that evasion is occurring is a key precondition for taking 
enforcement action against importers evading AD/CV duties. However, 
because AD/CV duty evasion is inherently deceptive and clandestine in 
nature, it can be extremely difficult for CBP to gather conclusive 
evidence to prove that evasion is occurring. According to CBP, not 
only can different methods of evasion be employed at once--often 
involving the collusion of several parties, including the 
manufacturer, shippers, and importer--but entities engaging in evasion 
are using increasingly complex schemes. In particular, CBP officials 
identified the growing use of illegal transshipment as a key concern, 
noting that the Internet has made it very easy for importers to find 
companies willing to transship goods subject to AD/CV duties through 
third countries to mask the goods' true country of origin. Because 
such schemes often involve adding false markings and packaging 
designed to mimic legitimate production in other countries, it can be 
very difficult for CBP to determine a product's country of origin 
through visual inspection or through reviews of shipping documents. 
Undervaluation can be similarly difficult to prove, according to CBP, 
especially if the producer and importer collude to create false values. 

In addition to being inherently difficult, verifying evasion of AD/CV 
duties can also be very time-consuming. According to CBP, it can 
easily take over a year or more to collect the evidence needed to 
verify a potential case of evasion. For example, CBP's ability to 
target additional shipments from an importer suspected of evading 
duties hinges on whether or not importation is ongoing. However, CBP 
documentation notes that shipments of some goods may be seasonal in 
nature, resulting in months of inactivity until the next shipment can 
be targeted. Additionally, in cases where CBP requests additional 
information from the importer, the importer has 30 days in which to 
respond to the request, but CBP can extend the deadline in additional 
30-day increments if the importer fails to respond or needs more time 
to gather the required information. Similarly, according to CBP, it 
typically takes up to 30 days to conduct a laboratory analysis of a 
product sample, but it can take up to 120 days if, for instance, new 
analytical methods need to be developed. CBP officials stated that 
their audits of importers suspected of evading AD/CV duties are also 
time-consuming in nature, taking nearly 8 months to complete on 
average. Given these timelines--and the fact that CBP may need to use 
several such verification techniques to successfully prove a single 
case of evasion--the process of proving evasion may become quite 
lengthy. 

Limited Access to Evidence of Evasion Located in Foreign Countries 
Hampers Efforts to Prove Evasion: 

According to CBP and ICE officials, they have limited access to 
evidence located in foreign countries that can be vital to proving 
that evasion has occurred, particularly in cases of illegal 
transshipment. These officials explained that collecting customs 
documents from foreign counterparts or gaining access to facilities in 
a foreign country listed as the country of origin for a suspicious 
entry can help them prove that the goods in question originated 
elsewhere. For example, ICE officials investigating a case concerning 
Chinese honey suspected of being illegally transshipped through 
Thailand helped determine that evasion occurred, in part by visiting 
the sites in Thailand where the honey was allegedly produced and 
determining that the facilities were not honey manufacturing plants 
(see figure 5). Similarly, CBP laboratory scientists explained that 
their ability to use chemical analysis to determine whether an 
importer falsely declared a good's country of origin is contingent on 
gathering reference samples from as many countries as possible for 
comparison purposes. 

Figure 5: Facility in Thailand Falsely Described as Honey 
Manufacturing Plant: 

[Refer to PDF for image: photograph] 

Source: ICE. 

[End of figure] 

To collect information located outside of U.S. jurisdiction, CBP and 
ICE need to obtain the permission of host nation governments. However, 
both CBP and ICE explained that the level of host nation cooperation 
varies. According to ICE, even when the United States has bilateral 
agreements in place to share customs information, the extent of 
information shared by foreign counterparts varies by country. For 
example, ICE officials stated that although most of their 
investigations of evasion involve goods from China--with which the 
United States has a customs cooperation agreement in place--they have 
never received permission to visit facilities in China as part of 
their investigations. Similarly, according to ICE officials, although 
the United States has bilateral agreements with several countries that 
are thought to be common transshipment points--such as Indonesia, 
India, and the Philippines--ICE's ability to visit these and other 
countries during the course of investigations depends on factors such 
as each country's political climate, the nature of its bilateral 
relationship with the United States, and the extent to which the host 
nation government has ties to the company or industry under 
investigation. CBP laboratory scientists have also had mixed results 
in gaining access overseas. They noted that the Indonesian government 
recently allowed them access to collect samples of shrimp from 
Indonesian producers. However, the Malaysian government initially gave 
them approval to visit honey and shrimp producers in their country but 
ultimately rescinded its approval without explanation. CBP officials 
also noted that although the U.S. free trade agreement with Singapore--
another country thought to be a common transshipment point--allows for 
cooperation on customs issues, the agreement explicitly excludes 
matters related to AD/CV duties. 

Specificity and Complexity of Products Subject to AD/CV Duties 
Complicate CBP Efforts to Identify Evasion: 

According to CBP officials, the highly specific and complex nature of 
some products subject to AD/CV duties can make it extremely difficult 
to identify evasion. As noted earlier, most of CBP's targeting for 
potential evasion involves examining entries that have the same 
Harmonized Tariff Schedule codes as products subject to AD/CV duties 
in order to look for any not filed as subject to AD/CV duties. For 
example, to target potential evasion of the AD duties on saccharin 
from China, CBP can examine entries from China that have the tariff 
code for saccharin and determine if any have been filed as not subject 
to AD/CV duties. However, in some cases, no unique tariff code exists 
for the specific products that Commerce investigated and issued a duty 
order for; rather, these products fall under the same tariff code as a 
broader category of products that are not subject to AD/CV duties. 
Consequently, the tariff codes listed on a given entry may be 
insufficient for CBP to determine if goods imported as part of that 
shipment are subject to AD/CV duties; additional information may be 
needed. An example is petroleum wax candles from China, which are 
subject to AD duties. Because there is no specific tariff code for 
petroleum wax candles--only one for candles--CBP cannot conclude, 
absent other evidence, that an entry from China under the tariff code 
for candles is petroleum wax candles, as it may be another type of 
candle that is not subject to AD duties. Instead, CBP has to turn to 
other means of verification to attempt to gather conclusive evidence 
that the entry is petroleum wax candles and, therefore, subject to AD 
duties. For example, CBP may decide to ask the importer for additional 
information, such as product invoices containing further details on 
the type of candles imported. CBP may also target additional shipments 
of candles and potentially collect a sample for laboratory analysis. 
However, as described earlier, each of these steps would take 
additional time, lengthening the verification process. 

According to CBP officials, the complex nature of some products 
covered by AD/CV duty orders can also make it difficult for CBP 
personnel to visually identify the products during cargo exams. For 
instance, CBP officials stated that AD/CV duty orders on steel 
typically cover steel products with a certain chemical composition--an 
aspect that cannot be determined through visual inspection. Another 
example is the AD/CV duty order on honey, which applies not only to 
natural honey and flavored honey, but also to honey blends that 
contain more than 50 percent natural honey by weight--a characteristic 
that cannot be ascertained by sight alone. In such cases, CBP 
personnel can extract a sample from the shipment and send it for 
laboratory analysis. However, CBP laboratory scientists stated that 
chemical analysis does not always return a definitive judgment of 
whether or not a product sample analyzed should fall within the scope 
of an AD/CV duty order. For example, chemical analysis of a honey 
blend can return inconclusive results if certain additives are present 
in the blend. CBP officials stated that CBP cannot take enforcement 
action without conclusive proof of evasion. 

Evaders Can Exploit the Ease of Becoming an Importer of Record, 
Impeding CBP Efforts to Target and Deter Evasion: 

Entities engaging in evasion can exploit the ease of becoming an 
importer of record, impeding CBP's ability to target and take 
deterrent action against them. As noted earlier, importers of record 
are responsible for paying all estimated duties, taxes, and fees on 
products when they are brought into the United States. However, 
importers seeking to evade AD/CV duties can exploit the ease of 
becoming an importer of record in several ways. First, according to 
CBP officials, companies can easily adopt new importer names and 
identification numbers, making it difficult for CBP to track their 
importing activity and gather evidence needed to prove that they are 
engaging in evasion. CBP officials stated that they suspect some 
importers evading AD/CV duties set up new names and identification 
numbers in advance to have ready for use in anticipation of CBP 
targeting efforts. Second, as our prior work has noted, CBP collects a 
minimal amount of information from companies applying to be importers 
of record, which evaders can take advantage of to elude CBP efforts to 
locate and collect revenues from them.[Footnote 21] For instance, 
companies are not subject to any credit or background checks before 
being allowed to import products into the United States. Third, 
foreign companies and individuals are allowed to import products into 
the United States, but CBP can have difficulty collecting duties and 
penalties from foreign importers--especially illegitimate ones--when 
the importers have no attachable assets in the United States. For 
example, as of February 2012, CBP had collected about $5 million, or 
about 2 percent, of the approximately $208 million it assessed in 
civil penalties between fiscal years 2007 and 2011. CBP attributed its 
collection difficulties, in part, to challenges experienced in 
collecting from foreign importers of record.[Footnote 22] CBP 
officials stated that, due to this risk of noncollection, a factor 
they consider when deciding whether or not to impose a penalty against 
a confirmed evader is whether or not it has assets in the United 
States. 

As we have previously reported, CBP or Congress could heighten the 
requirements for becoming an importer of record; however, such action 
could lead to unintended consequences.[Footnote 23] Heightened 
requirements could include mandatory financial or background checks. 
However, performing these checks would create a significant new burden 
on CBP, which would need to conduct or oversee these financial or 
background checks. Additionally, it is possible that, to ensure 
fairness, the heightened requirements would be imposed on all 
importers. Given that the vast majority of importers comply with 
customs laws and pay their duty liabilities, such a broad approach may 
not be cost-effective and could potentially restrict trade. 

Circumstances under Which CBP Can Seize Shipments Brought in through 
Evasion Are Limited: 

CBP is able to seize goods imported through evasion under limited 
circumstances. CBP officials explained that unlike goods that are 
illegal to import, such as those violating import safety or 
intellectual property laws, goods imported through evasion are not 
necessarily illegal to import. Specifically, according to CBP, 
although misclassification and undervaluation are commonly used 
evasion schemes, U.S. trade law limits the seizure of shipments that 
are misclassified or undervalued.[Footnote 24] By contrast, CBP is 
permitted to seize shipments brought in through other forms of 
evasion, such as through falsifying the country of origin of goods 
(illegal transshipment) or failing to declare goods on entry documents 
(smuggling).[Footnote 25] Of the 33 seizures CBP made between fiscal 
years 2007 and 2011, at least 28 were related to false country of 
origin or smuggling. For instance, CBP officials at one port seized a 
shipment of plastic bags following a cargo exam that revealed the 
shipment's country of origin had been falsified. However, as CBP has 
testified before Congress, entities engaging in evasion often use 
false markings and packaging that make it very difficult to determine 
country of origin through visual examination alone, complicating the 
task of establishing grounds for seizure. Moreover, as noted earlier, 
verifying evasion is an inherently difficult and time-consuming 
process. CBP officials stated that, by the time CBP is able to verify 
an instance of evasion, the associated goods typically have already 
entered the United States and cannot be seized. 

Interagency Communication Has Improved and CBP Has Promoted Use of 
Higher Bonding Requirements to Protect Revenue, but Weaknesses in 
Information Sharing Remain: 

Communication between Commerce and CBP has improved since our 2008 
report on AD/CV duties, and CBP has encouraged port officials to use 
higher bonding requirements to protect AD/CV duty revenue when they 
suspect incoming shipments of evasion. However, CBP lacks information 
from Commerce that would enable it to better plan its workload and 
minimize the burden of the U.S. retrospective system on its efforts to 
address evasion. Additionally, CBP has neither a policy nor a 
mechanism in place for a port requiring a higher bond to share this 
information with other ports in case an importer attempts to "port-
shop," i.e., chooses to withdraw its shipment and attempts to make 
entry at another port in an attempt to avoid the larger bond 
requirement. 

Despite Improved Communication with Commerce, CBP Lacks Information 
Needed to Mitigate Burden of Retrospective System on Efforts to 
Address Evasion: 

CBP officials cited the administrative burden of the U.S. 
retrospective system as a factor that diminishes the resources they 
have available for detecting and deterring evasion of AD/CV duties. 
Under the U.S. retrospective system, importers that properly declare 
their products as subject to AD/CV duties (i.e., do not evade) pay the 
estimated amount of duties when products enter the United States, but 
the final amount of duties owed is not determined until later. The 
documentation for the entries remains at the ports while CBP awaits 
liquidation instructions conveying the final duty rate from Commerce. 
Commerce's review to determine the final duty rate--a process that 
culminates with the issuance of liquidation instructions--typically 
takes up to 18 months to complete and can take months or years longer 
if litigation is involved.[Footnote 26] At one port we visited, CBP 
officials stated that they had approximately 20,000 entries awaiting 
instructions to liquidate for food-related products alone. At another 
port, officials showed us the file room where they store entries 
awaiting liquidation instructions (see figure 6). Moreover, each of 
the thousands of entries subject to AD/CV duties must be liquidated 
through manual data entry, which is resource-and time-intensive and 
diverts CBP personnel from their efforts to detect and deter evasion. 

Figure 6: Unliquidated Entries Subject to AD/CV Duties Stored in File 
Room at a U.S. Port of Entry: 

[Refer to PDF for image: photograph] 

Source: GAO. 

[End of figure] 

Under U.S. law, CBP has 6 months to liquidate entries from the time 
that it receives notice of the lifting of suspension of liquidation. 
[Footnote 27] According to CBP officials, this 6-month deadline can be 
very difficult to meet, especially when a large volume of imports 
needs to be liquidated.[Footnote 28] In order to begin liquidating 
entries, CBP must first receive liquidation instructions from Commerce. 

Since our 2008 report, Commerce has taken steps to improve the 
transmission of its liquidation instructions to CBP. We found in 2008 
that, about 80 percent of the time, Commerce failed to send 
liquidation instructions within its self-imposed deadline of 15 days 
after the publication of the Federal Register notice. Furthermore, we 
reported that the instructions were sometimes unclear, thereby causing 
CBP to take extra time to obtain clarification.[Footnote 29] 
Consequently, we identified untimely and unclear liquidation 
instructions from Commerce as an impediment to CBP's ability to 
liquidate entries. In response to our recommendation to identify 
opportunities to improve liquidation instructions, Commerce took steps 
to improve the transmission of liquidation instructions to CBP. For 
instance, Commerce deployed a system for tracking when it sends 
liquidation instructions, which according to Commerce, has greatly 
improved its timeliness. Documentation from Commerce indicates that, 
in the first half of fiscal year 2012, Commerce sent liquidation 
instructions on a timely basis more than 90 percent of the time. In 
addition, Commerce and CBP jointly established a mechanism for CBP 
port personnel to submit questions directly to Commerce regarding 
liquidation issues. According to CBP officials, these steps have 
improved the ability of port personnel to ask Commerce to clarify its 
liquidation instructions. 

Despite these improvements, CBP officials stated that they lack 
information from Commerce needed to effectively manage their workload. 
Specifically, although CBP and Commerce both characterized their 
interagency working relationship as cooperative, CBP officials stated 
that Commerce does not provide them with advance notice on a regular 
basis before issuing liquidation instructions, impairing their ability 
to make workload decisions that could help mitigate the impact of the 
liquidation process on their efforts to detect and deter evasion. 
Similarly, we testified in May 2011 that, without advance notice from 
Commerce on upcoming liquidation instructions, it can be very 
difficult for CBP to make workforce planning and staffing decisions. 
CBP officials at headquarters and at ports we visited stated that 
liquidation instructions arrive with little warning but need to be 
acted on immediately due to the 6-month deadline for liquidating 
entries. They said that this sudden shift in workload diverts key 
personnel from efforts to address evasion to focus on manually 
liquidating thousands of entries instead. In the absence of advance 
notice from Commerce on upcoming liquidation instructions, CBP 
attempts to roughly estimate where its workload peaks will occur on 
the basis of the 18-month time frame within which Commerce typically 
completes liquidation instructions. However, CBP officials stated that 
no such estimation is possible in cases involving litigation, which 
are not subject to time frames. According to CBP, cases involving 
litigation are particularly burdensome because of the considerable 
length of time it can take to resolve some cases, during which an 
extremely large number of entries can accumulate at the ports--all of 
which CBP eventually has to attempt to liquidate within the 6-month 
deadline. However, Commerce does not currently inform CBP when a court 
reaches a decision on a case in litigation--information that would 
enable CBP to conduct some workload planning. According to CBP 
officials, since CBP is not a party to such cases, it would be helpful 
if Commerce provided them with some notification once decisions are 
reached. Commerce officials stated that they do not know when courts 
will reach decisions on cases in litigation, but said that they could 
work with CBP to identify opportunities to share information regarding 
the status of litigation. 

In response to a CBP request, Commerce recently provided CBP some 
information for the first time to help with workload planning. In June 
2011, Commerce officials provided their counterparts in CBP 
headquarters with a list of instructions planned for issuance over the 
next 6 months. CBP officials at headquarters acknowledged receiving 
the list from Commerce, stating that, although the list did not 
address their need to know when courts reach decisions on cases 
involving litigation, they found it useful for general workload 
planning purposes. They noted that they would like to receive this 
type of list from Commerce on a quarterly basis to have more up-to-
date information on hand to incorporate into their workload planning 
decisions. Commerce officials stated that they would be willing to 
work with CBP to develop a schedule for sharing this list on a regular 
basis. 

CBP Has Encouraged Use of Higher Bonding Requirements to Protect 
Additional Revenue from Risk of Evasion, but Gaps Exist in Information 
Sharing: 

CBP has encouraged the use of higher bonding requirements, called 
single transaction bonds (STB), to protect AD/CV duty revenue from the 
risk of evasion; however, it has not ensured that a port requiring an 
STB shares this information with other ports in case an importer 
withdraws its shipment and attempts to make entry at another port to 
avoid the STB. As noted earlier, all importers are required to post a 
security, usually a general obligation bond, when they import products 
into the United States.[Footnote 30] This bond is an insurance policy 
protecting the U.S. government against revenue loss if an importer 
defaults on its financial obligations as well as ensuring compliance 
with the law.[Footnote 31] However, given CBP's concerns that this 
general bond inadequately protects AD/CV duty revenue, CBP has 
encouraged port officials to protect additional revenue by requiring 
STBs for individual shipments they suspect of evasion.[Footnote 32] 
The amount of the STB is generally one to three times the total 
entered value of the merchandise plus duties, taxes, and fees, 
depending on the revenue risk. According to CBP officials, STBs serve 
as additional insurance in cases where CBP has not been able to 
collect enough evidence before a shipment's arrival to prove that 
evasion is occurring, but where enough suspicion exists about the 
shipment to warrant protection of the anticipated AD/CV duty revenue. 
An importer that is required to obtain an STB can either choose to 
post the bond in order to enter its shipment, or can opt against 
obtaining the bond and withdraw its shipment. If an importer decides 
to post the STB, and CBP later confirms that AD/CV duties are indeed 
owed, CBP first tries to collect from the importer. However, if CBP is 
unable to collect from the importer, it can collect significantly more 
money from the surety (insurance) company that underwrote the STB than 
it would typically be able to collect from the surety on a general 
bond, given the larger amount of revenue protected by the STB. 

While CBP has encouraged the use of STBs to protect revenue related to 
imports suspected of AD/CV duty evasion, vulnerabilities exist due to 
gaps in port-level information sharing. CBP gives each port the 
discretion to decide when to require an STB. However, CBP has no 
policy or mechanism in place for ports requiring such a bond to share 
this information with other ports in case an importer attempts to port-
shop, i.e., chooses to withdraw its shipment and attempts to make 
entry at another port in an attempt to avoid the larger bond 
requirement. Instead, CBP port officials currently rely on informal e-
mail and telephone communication to notify other port officials of 
importers potentially seeking to port-shop. Officials we met with 
cited specific instances where this informal approach had been 
ineffective in notifying other ports of suspected evasion before the 
importer could enter the goods at another port. For example, CBP 
officials at one port described a case where an importer that decided 
against posting an STB at their port was able to make entry in another 
port before they were able to e-mail a warning about that particular 
importer to other ports. In another case, an importer succeeded in 
entering a shipment of furniture in Newark after officials at the 
initial port of entry on the West Coast failed to notify other ports 
that the importer had decided to withdraw its entry instead of posting 
an STB. In both cases, CBP port officials suspected evasion but did 
not take additional action in time to warn other ports of entry about 
the potential for port-shopping. 

Although CBP is currently formulating policy to guide the use of STBs, 
the policy may not fully address the risk of port-shopping. In 
February 2012, CBP officials stated that they were in the process of 
completing a policy that will further encourage port officials to use 
STBs and provide them with guidance on circumstances under which the 
use of STBs is appropriate.[Footnote 33] Officials stated that the 
policy will also instruct officials at a port requiring an STB to 
review any other shipments from the importer in question before 
releasing them. They added that they had not yet decided whether or 
not to automatically instruct ports nationwide to conduct the same 
level of review. 

CBP Has Made Some Performance Management Improvements but Does Not 
Systematically Track or Report on Its Efforts to Detect and Deter 
Evasion: 

While CBP has improved its performance measures for addressing AD/CV 
duty evasion and enhanced its monitoring of STBs, it does not 
systematically track or report key outcome information that CBP 
leadership and Congress could use to assess and improve CBP's efforts 
to detect and deter AD/CV duty evasion. First, CBP cannot readily 
produce key data on AD/CV duty evasion, such as the number of 
confirmed cases of evasion, which it could use to better inform and 
manage its efforts. Second, CBP does not consistently track or report 
on the outcomes of allegations of evasion it receives from third 
parties. As we have previously reported, internal control is a major 
part of managing an organization and should be generally designed to 
assure that ongoing monitoring occurs in the course of normal 
operations.[Footnote 34] Furthermore, our prior work has noted the 
need for agencies to consider the differing information needs of 
various users, such as agency top leadership and Congress. 
Specifically, as we reported in March 2011, the Government Performance 
and Results Modernization Act of 2010 underscores the importance of 
ensuring that performance information will be both useful and used in 
decision making.[Footnote 35] 

CBP Has Improved Performance Measures and Began Monitoring the Use of 
STBs: 

In the past year, CBP has made enhancements in the following two areas 
to track its efforts related to combating AD/CV duty evasion: 

* CBP has taken steps to improve the performance measures for its 
efforts to detect and deter AD/CV duty evasion. CBP told us that in 
fiscal years 2010 and 2011, a majority of the performance measures for 
AD/CV duty enforcement either lacked sufficient data or were declared 
to be "not measurable." For example, CBP considered one measure for 
fiscal year 2011--"analysis completed and enforcement alternatives 
concurred"--too broad to collect data and report on, given the large 
number of CBP offices that conduct analysis and enforcement. In 
another example, CBP did not provide a response to the fiscal year 
2011 performance measure related to the results of cargo exams 
because, according to CBP officials, cargo exams are conducted at the 
local level and not tracked, creating a dearth of reportable data. In 
addition, CBP was unable to track and assess its efforts over time 
because its measures were inconsistent from year to year. 

By contrast, CBP's fiscal year 2012 action plan includes a new set of 
performance metrics with measurable targets consistent from fiscal 
years 2012 through 2017. For example, the performance measure for 
penalties issued has targets to increase the amount of penalties 
issued each year by 10 or 15 percent. There are similar measures with 
targets for increasing the percentage of AD/CV duties collected and 
the number of audits related to AD/CV duties. 

* CBP is working to improve its ability to track and report on the use 
of STBs. In June 2011, after finding that CBP could not determine the 
total number of STBs used at the ports, the Department of Homeland 
Security Inspector General recommended that CBP appoint a centralized 
office responsible for reporting STB-related activities and monitoring 
results.[Footnote 36] The Inspector General's report also recommended 
that CBP automate the STB process to provide enhanced tracking 
ability. CBP concurred with these recommendations, stating that it had 
begun the process of centralizing STB-related roles and 
responsibilities and developing a system to automate the STB process. 
Moreover, one of the new measures in the fiscal year 2012 action plan 
tracks the number of STBs used for AD/CV duty evasion. 

CBP Lacks Key Data to Effectively Manage Its Efforts to Detect and 
Deter Evasion: 

While CBP has reported anecdotes about its successes in addressing 
AD/CV duty evasion and collects some statistics on its efforts, it 
lacks key data that it could use to assess and improve its management 
practices and that could enhance congressional oversight. Over the 
past year, CBP has publicly reported anecdotes of successful efforts 
to detect and deter AD/CV duty evasion. For example, in testimony 
before Congress in May 2011, the Assistant Commissioner for CBP's 
Office of International Trade described five recent cases where CBP 
and ICE uncovered instances of evasion and penalized those 
responsible. Similarly, in a report to Congress on fiscal year 2010 
efforts to enforce AD/CV duties, CBP cited eight cases that led to 
enforcement action against parties engaging in evasion. CBP has also 
produced publicly available videos illustrating a successful case 
where CBP worked with ICE to arrest and convict an importer who evaded 
the AD/CV duties on wire hangers. 

CBP collects some statistics on its efforts to detect and deter AD/CV 
duty evasion but lacks other key data on these efforts. For example, 
CBP provided us with statistics on civil penalties and seizures 
related to AD/CV duty evasion. However, CBP lacks data on: 

* the total number of confirmed cases of AD/CV duty evasion; 

* the total amount of duties assessed and collected for confirmed 
cases of evasion; 

* the country of origin, product type, and method of evasion for each 
confirmed case of evasion; and: 

* the number of confirmed cases of evasion involving a foreign 
importer of record. 

CBP attributed this lack of data to the absence of a policy requiring 
officials to record confirmed cases of AD/CV duty evasion. CBP 
officials explained that although CBP has a database in which 
instances of evasion could be recorded, current policy does not 
require officials to record such instances. Consequently, CBP cannot 
conduct a simple data query to identify all confirmed cases of 
evasion. Without the ability to identify cases of evasion, CBP cannot 
easily access other related data on AD/CV evasion that could help 
improve management decisions and oversight. For example, CBP is 
currently unable to produce data on the total amount of duties 
assessed and collected for confirmed cases of evasion--figures that 
would provide CBP leadership and Congress visibility over some of the 
results of CBP's efforts to address evasion. Similarly, comprehensive 
data on the country of origin, product type, and method of evasion for 
each confirmed case of evasion could potentially help CBP identify 
trends and shifts in evasive activity and make adjustments accordingly. 

CBP also lacks complete data on the country of origin and product type 
associated with the 252 civil penalties it imposed for AD/CV duty 
evasion between fiscal years 2007 and 2011 (see figure 7). CBP 
attributed these missing data items to CBP personnel not recording 
them in CBP's automated system for tracking penalties. Due to these 
missing data items, CBP lacks a complete picture of the countries and 
commodities involved in its penalty cases--information it could use to 
guide and improve its efforts. For example, CBP could identify which 
types of commodities have led to penalties most often and decide 
whether or not to focus more resources and detection efforts on those 
types of commodities. 

Figure 7: Missing Data on Civil Penalties CBP Imposed between Fiscal 
Years 2007 and 2011 for AD/CV Duty Evasion, as of February 2012: 

[Refer to PDF for image: pie-chart] 

Data available on country of origin and product type (173): 69%; 
No data available on country of origin (40): 16%; 
No data available on country of origin or product type (37): 15%; 
No data available on product type (2): 1%. 

Source: GAO analysis of CBP data. 

Note: Percentages do not add to 100 due to rounding. 

[End of figure] 

CBP Does Not Consistently Track or Report Outcomes of Allegations of 
Evasion: 

According to CBP officials, CBP addresses all allegations of AD/CV 
duty evasion it receives, including e-Allegations received online, but 
it does not routinely track or report on the outcomes of these 
allegations. As a result, Congress and industry stakeholders lack 
information about the outcomes of the allegations, which both parties 
have cited as a cause of concern. Data from CBP indicate that it 
generally assigns allegations to its national targeting staff for 
AD/CV duty issues (i.e., the NTAG) within 2 days of receipt. The NTAG 
then assesses the validity of the allegation using targeting and other 
analytical tools. If the NTAG determines that the allegation may be 
valid, it will typically refer the allegation to the appropriate port 
or to ICE for further investigation and possible enforcement action. 
As of September 2011, CBP had confirmed or referred nearly one-quarter 
of the approximately 400 allegations it received from 2008 to August 
2011. About half could not be validated, and another one-quarter were 
still under analysis. 

Although CBP has stated that it addresses all allegations of AD/CV 
duty evasion it receives, it has reported little information to date 
on the outcomes of its efforts to follow up on these allegations. For 
instance, CBP's report to Congress on AD/CV duty enforcement efforts 
in fiscal year 2010 mentions that CBP has received hundreds of 
allegations from the trade community, but the report includes no 
information on the outcomes of those allegations. In January 2011, in 
response to a congressional request, CBP produced a spreadsheet of the 
allegations it had received since June 2008. CBP officials told us 
that this spreadsheet was created upon request and is not something 
CBP updates or uses for management or policy purposes. While this 
document lists certain details, such as the source of each allegation, 
and identifies allegations of evasion that CBP confirmed as valid, it 
does not include any information on the associated enforcement 
outcomes. During the course of our review, CBP provided us with 
expanded versions of the spreadsheet in response to our request for 
details on the results of the allegations. However, these expanded 
versions provide little insight into the results of the allegations. 
For instance, the most recent version of the spreadsheet that we 
received, from September 2011, documents the enforcement outcome for 
only one of the 24 allegations labeled as "allegation confirmed." CBP 
was also unable to determine if the allegations referred to ports and 
ICE by the NTAG were subsequently confirmed as valid or resulted in 
enforcement outcomes. 

CBP's limited reporting on the outcomes of allegations is due, in 
part, to inconsistent, decentralized tracking of such information. CBP 
officials stated that once the NTAG has referred an allegation to a 
port or to ICE for further action, CBP considers the allegation to be 
closed and may or may not follow up to track its outcome. While CBP 
creates a record within its Commercial Allegation and Reporting System 
for each allegation it receives, there is no requirement for either 
the NTAG or the entity receiving the allegation referral to update 
these records with details on its enforcement outcomes. Instead, port 
officials and ICE store information on enforcement outcomes in other 
data systems that are not linked to the Commercial Allegation and 
Reporting System. CBP officials at headquarters told us that 
aggregating data from these various systems to link allegations with 
their associated outcomes would be difficult and time-consuming. 
Additionally, according to ICE, it does not specifically track cases 
generated as a result of allegations referred by CBP. Consequently, 
since ICE cannot identify which of its cases involve allegations 
referred from CBP, it also cannot identify the associated outcomes. 

An additional cause of CBP's limited reporting on the outcomes of 
allegations is legal restrictions on the types of information it can 
share. During our review, we met with representatives of a coalition 
of domestic industries affected by AD/CV duty evasion. Some of these 
representatives stated that they had submitted allegations of evasion 
to CBP and expressed frustration that although they had requested 
updates from CBP on the outcomes of the allegations they submitted, 
CBP had not provided them with the information requested. CBP 
officials attributed this, in part, to the Trade Secrets Act, which 
they said restricts their ability to disclose the specific kinds of 
information requested. Additionally, CBP officials stated that they 
cannot disclose information about allegations involving active ICE 
investigations. Furthermore, CBP does not report on the results of its 
efforts at an aggregate level, which would avoid divulging restricted 
information while keeping key stakeholders informed. CBP officials 
stated that they are currently exploring ways to legally share what 
information they can on allegations with the parties that filed them. 

Conclusions: 

Evasion of AD/CV duties undermines U.S. AD/CV duty laws--the intent of 
which is to level the economic playing field for U.S. industry--and 
deprives the U.S. government of revenues it is due. While CBP employs 
a variety of techniques to detect and deter such evasion, its efforts 
are significantly hampered by a number of factors primarily beyond its 
control. These include the inherently difficult and time-consuming 
process of uncovering evasive activity conducted through clandestine 
means, inconsistent access to foreign countries that limits CBP's 
ability (as well as ICE's) to gather necessary evidence, and the ease 
with which importers attempting to evade duties can change names and 
identification numbers to elude detection. Nonetheless, some 
improvements have been made since we last reported, including better 
communication between Commerce and CBP and CBP's encouragement of the 
use of higher bonding requirements to protect additional AD/CV duty 
revenue in instances where it suspects evasion. However, CBP lacks 
information from Commerce that it needs to better plan its workload 
and mitigate the impact of the time-and resource-intensive liquidation 
process on its efforts to address evasion. Further, CBP has no policy 
or mechanism for port officials to minimize the risk of port-shopping 
by notifying other ports about their use of higher bonding 
requirements. Unless these gaps in information sharing are closed, 
these recent initiatives may be compromised, thereby limiting the 
effectiveness of CBP's efforts to address AD/CV duty evasion. 

CBP has also made some improvements in managing its efforts to address 
AD/CV duty evasion, including by developing better performance 
measures and monitoring its use of higher bonding requirements. 
However, it lacks key data on AD/CV duty evasion, including on 
confirmed cases of evasion and penalties, which could help it assess 
and improve its approach to addressing evasion and also inform agency 
and congressional decision makers about its efforts. Moreover, CBP has 
neither tracked nor reported the outcomes of the allegations of 
evasion it has received from third parties. Without improved tracking 
and reporting, agency leadership, Congress, and industry stakeholders 
will continue to have insufficient information with which to oversee 
and evaluate CBP's efforts. 

Recommendations for Executive Action: 

To enhance CBP's efforts to address AD/CV duty evasion and facilitate 
oversight of these efforts, we make the following recommendations: 

First, to help ensure that CBP receives the information it needs from 
Commerce to plan its workload and mitigate the impact of the 
liquidation process on its efforts to address evasion, the Secretary 
of Commerce should work with the Secretary of Homeland Security to 
identify opportunities for Commerce to: 

* regularly provide CBP advance notice on liquidation instructions, 
and: 

* notify CBP when courts reach decisions on AD/CV duty cases in 
litigation. 

Second, to help minimize the risk of port-shopping by importers 
seeking to avoid higher bond requirements, the Secretary of Homeland 
Security should direct CBP to create a policy and a mechanism for 
information sharing among ports regarding the use of higher bond 
requirements. 

Third, to inform CBP management and to enable congressional oversight, 
the Secretary of Homeland Security should ensure that CBP develop and 
implement a plan to systematically track and report on: 

* instances of AD/CV duty evasion and associated data--such as the 
duties assessed and collected, penalties assessed and collected, and: 

* the country of origin, product type, and method of evasion for each 
instance of evasion--and: 

* the results, such as enforcement outcomes, of allegations of evasion 
received from third parties. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to the Secretary of the Department 
of Homeland Security, the Secretary of Commerce, and the Secretary of 
the Treasury for their review and comment. We received technical 
comments from the Departments of Homeland Security, Commerce, and 
Treasury, which we incorporated where appropriate. We also received 
written comments from the Departments of Homeland Security and 
Commerce, which are reprinted in appendixes II and III, respectively. 
The Department of the Treasury did not provide written comments. 

In commenting on a draft of this report, the Department of Homeland 
Security concurred with our recommendations addressed to the 
department that CBP (1) create a policy and a mechanism for 
information sharing among ports regarding the use of higher bond 
requirements and (2) develop and implement a plan to track and report 
systematically instances of AD/CV duty evasion and the results of 
CBP's enforcement actions. 

The Department of Commerce generally concurred with the recommendation 
addressed to the department to work with CBP to identify opportunities 
for Commerce to (1) regularly provide CBP with advance notice of 
liquidation instructions and (2) notify CBP when courts reach 
decisions on AD/CV duty cases in litigation. 

In its response, Commerce stated that both CBP and Commerce receive 
copies of injunctions from the U.S. Court of International Trade and 
attached a copy of a preliminary injunction to demonstrate how both 
agencies are generally served copies of the injunctions. However, when 
a court orders an injunction, such as the one Commerce provided, 
Commerce and CBP are enjoined[Footnote 37] from issuing liquidation 
instructions or otherwise causing or permitting liquidation of the 
entries that are the subject of the litigation. As a result, the 
injunction does not provide CBP with the information it needs to help 
with workload planning because it is not a court action that 
constitutes notice of the lifting of a suspension of liquidation, 
which would start the 6-month period in which CBP must liquidate 
entries. While an injunction can provide CBP information to help with 
workforce planning, it does not address CBP's concern for regular 
advance notice of forthcoming liquidation instructions. CBP needs 
information from Commerce on when final court decisions are reached to 
help enable the agency to better plan its workload and help mitigate 
the administrative burden it faces in processing AD/CV duties--an 
effort that diminishes the resources it has available to address 
evasion. 

We are sending copies of this report to the appropriate congressional 
committees, the Departments of Homeland Security, Commerce, the 
Treasury, and other interested parties. In addition, the report is 
available at no charge on the GAO website at [hyperlink, 
http://www.gao.gov]. 

If you or your staff members have any questions about this report, 
please contact me at (202) 512-4101 or gomezj@gao.gov. Contact points 
for our Offices of Congressional Relations and Public Affairs may be 
found on the last page of this report. GAO staff who made key 
contributions to this report are listed in appendix IV. 

Signed by: 

Alfredo Gomez: 
Acting Director, International Affairs and Trade: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

To examine how the Department of Homeland Security's U.S. Customs and 
Border Protection (CBP) detects and deters the evasion of antidumping 
and countervailing (AD/CV) duties, we examined agency documents that 
outline CBP's process and methods for identifying evasion of AD/CV 
duties; reviewed laws and other documents that identify the 
enforcement options CBP uses to deter evasion; and analyzed data from 
CBP and U.S. Immigration and Customs Enforcement (ICE) on deterrence 
activities such as civil penalties, seizures, criminal arrests, 
indictments, and criminal convictions. 

To identify factors that affect CBP's efforts to detect and deter 
AD/CV duty evasion, we examined CBP documents that highlight the 
challenges and the timeline associated with verifying evasion; 
analyzed data on the amount of civil penalties CBP has collected from 
importers evading AD/CV duties; and reviewed legislation governing 
CBP's use of seizures, internal memos on the use of single transaction 
bonds, and previous GAO reports on AD/CV duties. 

To assess the extent to which CBP tracks and reports on its efforts to 
detect and deter AD/CV duty evasion, we reviewed CBP annual plans that 
identify its performance measures for addressing AD/CV duty evasion; 
documents that show CBP's performance against these measures; CBP 
testimony and videos publicizing successful efforts to address 
evasion; a CBP report to Congress on fiscal year 2010 efforts to 
enforce AD/CV duties; and a report by the Department of Homeland 
Security Inspector General on CBP's bonding process, including its use 
and tracking of single transaction bonds. Additionally, we analyzed 
data on civil penalties CBP has imposed for AD/CV evasion and 
allegations of evasion received from third parties. 

Additionally, in the Washington, D.C., area, we discussed our 
objectives with officials in CBP's Offices of International Trade, 
Field Operations, and Intelligence and Investigative Liaison; ICE; and 
the Departments of Commerce and the Treasury, as well as a coalition 
of U.S. industries affected by AD/CV duty evasion. 

To obtain a more in-depth understanding of U.S. efforts to detect and 
deter AD/CV duty evasion, we conducted fieldwork at the ports of 
Miami, FL; Seattle, WA; and Los Angeles, CA. We selected the port of 
Miami due, in part, to its proximity to CBP's National Targeting and 
Analysis Group (NTAG) for AD/CV duty issues; the port of Seattle due, 
in part, to the high number of civil penalties it imposed for AD/CV 
duty evasion over the last 5 years; and the port of Los Angeles 
because it processed the most imports subject to AD/CV duties, by 
value, of any U.S. port. At each port, we met with officials from CBP 
and ICE to discuss the efforts they undertake to detect and deter 
AD/CV duty evasion at their port, the challenges they face in 
detecting and deterring evasion, and the process they use to track and 
report the results of these efforts. We also met with representatives 
of the NTAG for AD/CV duty issues in Plantation, FL, to discuss their 
methods for detecting evasion, both through their own targeting 
efforts and through analyzing allegations of evasion they receive from 
third parties. 

To determine the reliability of the data we collected on AD/CV duty 
orders, civil penalties, seizures, ICE enforcement outcomes (i.e., 
arrests, indictments, and criminal convictions), and allegations 
received from third parties, we compared and corroborated information 
from different sources; checked the data for reasonableness and 
completeness; and asked agency officials how the data are collected, 
tracked, and reviewed for accuracy. Based on the checks we performed, 
our discussions with agency officials, and the documentation the 
agencies provided to us, we determined that the data we collected were 
sufficiently reliable for the purposes of this engagement. 

We conducted this performance audit from June 2011 to May 2012 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: Comments from the Department of Homeland Security: 

U.S. Department or Homeland Security: 
Washington, D.C. 20525: 

May 14, 2012: 

Alfredo Gomez: 
Acting Director, International Affairs and Trade: 
U.S. Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 

Re: Draft Report GA0-12-551, "Antidumping and Countervailing Duties:
Management Enhancements Needed to Improve Efforts to Detect and Deter 
Duty Evasion" 

Dear Mr. Gomez, 

Thank you for the opportunity to review and comment on this draft 
report. The U.S. Department of Homeland Security (DHS) appreciates the 
U.S. Government Accountability Office's (GAO's) work in planning and 
issuing this report. 

The Department is pleased to note GAO's acknowledgment of the many 
external obstacles facing the U.S. Customs and Border Protection (CBP) 
and U.S. Immigration and Customs Enforcement (ICE) in enforcing 
antidumping and countervailing (AD/CV) duties evasion. The report also 
appropriately recognizes that these obstacles are mostly beyond DHS 
control in proving and determining evasion. In addition, we appreciate 
GAO's recognition that verifying evasion of AD/CV duties is inherently 
difficult and time-consuming. 

The draft report contained three recommendations designed to enhance 
CRP's efforts to address AD/CV duty evasion and facilitate oversight 
of these efforts. The first recommendation was addressed to the U.S. 
Department of Commerce and the second and third to DHS. Regarding
DHS, GAO recommended that the Secretary of Homeland Security: 

Recommendation 2: Direct CBP to create a policy and a mechanism for 
information sharing among ports regarding the use of higher bond 
requirements. 

Response: Concur. CRP's Office of International Trade (Cl) is 
including language in its guidance to field personnel on the use of 
single transaction bonds (STBs) for AD/CV duty evasion. Ibis guidance 
will direct that field personnel request national targeting criteria 
(input by the South Florida National Targeting Analysis Group) to 
alert officials at other ports when an sTF3 has been requested from an 
importer for suspected AD/CV duty evasion. Estimated Completion Date 
(ECD): May 30, 2012. 

Recommendation 3: Ensure that CBP develop and implement a plan to 
systematically track and report on: 

* instances of AD/CV duty evasion and associated data—such as the 
duties assessed and collected, penalties assessed and collected, and 
the country of origin, product type, and method of evasion for each 
instance of evasion—-and: 

* the results, such as enforcement outcomes, of allegations of evasion 
received from third parties. 

Response: Concur. CBI's OT will continue to improve the Automated 
Commercial Environment's (ACE's) Validation Activity (VA) module which 
serves as the primary repository for information on AD/CV duty 
noncompliance. OT will develop the automated tools necessary to record 
this additional information and issue revised policy to field 
personnel requiring this information be entered into the VA module. 

CBP's penalty data system, the Seized Asset Case Tracking System, is a 
case processing system and is not intended to track AD/CV duty 
evasion; rather, the ACE VA system tracks AD/CV duty and other trade 
noncompliance. In September 2009, CBP issued guidance to address data 
quality issues in several field offices, providing instructions to 
enter the specific missing country origin and commodity description or 
Harmonized Tariff Schedule classification related to penalties cited 
by the GAO. Additional guidance will he issued to field personnel this 
fiscal year re-emphasizing the importance of accurate data quality in 
penalty cases. 

OT and the CBP Office of Field Operations will immediately begin to 
coordinate enforcement outcomes of allegations assigned to the ports. 
OT will continue to monitor the status of allegations assigned to the 
ports until such time that all enforcement avenues have been resolved.
OT will keep allegations open until it receives a sufficient response 
from a port. Allegations will still be considered closed after their 
referral to Homeland Security Investigations/ICE because the analysis 
of the allegation is closed for CBP purposes. 

To better inform the public on its efforts to detect and deter AD/CV 
duty evasion, CBP will also develop a plan and explore opportunities 
for reporting aggregate data on AD/CV duty evasion to the public. ECD: 
September 30, 2012. 

Again, thank you for the opportunity to review and comment on this 
draft report. Technical comments for the report were previously 
provided under separate cover. Please feel free to contact me if you 
have any questions. We look forward to working with you on future
Homeland Security issues. 

Sincerely, 

Signed by: 

Jim H. Crumpacker: 
Director: 
Departmental GAO-OIG Liaison Office: 

[End of section] 

Appendix III: Comments from the Department of Commerce: 

United States Department of Commerce: 
International Trade Administration: 
Washington, D.C. 20230: 
  
May 9, 2012: 

Dr. Loren Yager: 
Director., International Affairs and Trade: 
U.S. Government Accountability Office: 
441 G. Street, N.W. 
Washington, DC 20548: 

Dear Dr. Yager: 

Thank you for providing us with the drat). report on Customs and 
Border Protection's (CBP) "Antidumping and Countervailing Duties, 
Management Enhancements Needed to improve Efforts to Detect and Deter 
Duty Evasion" (Draft Report). We find the Draft Report both timely and 
helpful. We are submitting the attached technical comments in the 
hopes of clarifying some of the observations noted in the Draft 
Report. In conjunction with these technical comments, we are attaching 
a copy of an injunction issued by the U.S. Court of International 
Trade, including its corresponding service list demonstrating that 
both Commerce and CBP generally are served copies of Court 
injunctions. We stand ready to continue to work with CBP in enhancing 
and improving its efforts to detect and deter AD/CV duty evasion.  

With respect to the U.S. Government Accountability Office's 
recommendations in the Draft Report, Commerce generally concurs with 
the first recommendation that the Secretaries of Commerce and Homeland 
Security work to identify opportunities for Commerce to (1) regularly  
provide CBP advance notice on liquidation instructions and (2) notify 
CBP when courts reach decisions on AD/CV duty cases in litigation. We 
note, however, that, in AD/CVD litigation, CBP cannot liquidate 
entries covered by an injunction until there is a final and conclusive 
court decision and Commerce cannot know whether any given court 
decision will become final and conclusive until all appeals are 
concluded or the period for all appeals has expired. Regarding the 
Draft Report's two other recommendations, Commerce has no comment 
other than to state that our agency is available to work with CBP to 
implement these recommendations should CBP seek Commerce's input 
and/or assistance.  

We hope you find the technical comments to be helpful. We look forward 
to receiving the final version of the report. If you have any 
questions, please feel free to contact me at 202-482-5497.  

Sincerely, 

Signed by: 

Christian Marsh: 
Deputy Assistant Secretary for AD/CVD Operations: 

Attachments: 

[End of section] 

Appendix IV: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Alfredo Gomez, (202) 512-4101, or gomezj@gao.gov: 

Staff Acknowledgments: 

In addition to the individual named above, Christine Broderick 
(Assistant Director), Aniruddha Dasgupta, Julia Jebo, Diahanna Post, 
Loren Yager, Ken Bombara, Debbie Chung, Martin De Alteriis, Etana 
Finkler, and Grace Lui made key contributions to this report. Joyce 
Evans, Jeremy Latimer, Alana Miller, Theresa Perkins, Jena Sinkfield, 
Sushmita Srikanth, Cynthia S. Taylor, and Brian Tremblay provided 
technical assistance. 

[End of section] 

Footnotes: 

[1] In this report, we use the term "evasion" to refer to any activity 
whereby companies improperly declare goods that are subject to AD/CV 
duties to avoid payment of such duties. 

[2] See 19 U.S.C. § 1484, which identifies persons who have a right to 
make entry. 

[3] 19 U.S.C. § 1505. 

[4] In addition to paying estimated duties, taxes, and fees when 
products enter the country, importers also are generally required to 
provide a bond to help ensure that the government can recover 
additional duties, taxes, or fees that may be owed. See 19 C.F.R. §§ 
113.62 and 142.4 for CBP bonding requirements. In general, the 
importer is required to obtain a bond equal to 10 percent of the 
amount the importer paid in duties, taxes, and fees over the preceding 
year (or $50,000, whichever is greater). GAO and CBP both have 
expressed concern that this general bond inadequately protects AD/CV 
duty revenue. See GAO, Antidumping and Countervailing Duties: Congress 
and Agencies Should Take Additional Steps to Reduce Substantial 
Shortfalls in Duty Collection, [hyperlink, 
http://www.gao.gov/products/GAO-08-391] (Washington, D.C.: Mar. 26, 
2008). 

[5] Legal authority over customs revenue functions is vested in the 
Secretary of the Treasury and, under Treasury Order 165, was delegated 
to the U.S. Customs Service. In March 2003, the U.S. Customs Service 
was transferred to the Department of Homeland Security, and authority 
over customs revenue functions was delegated to the Department of 
Homeland Security. 68 Fed. Reg. 10777-01 (Mar. 6, 2003). 

[6] According to Commerce, the "normal value" is generally the price 
the foreign firm charges for a comparable product sold in its home 
market. Under certain circumstances, the normal value may also be the 
price the foreign firm charges in other export markets or the firm's 
cost of producing the merchandise, taking into account the firms 
selling, general, and administrative expenses, and profit. If the 
producer is located in a non-market economy country, normal value is 
based on producer's factors of production using values in a 
"surrogate" market economy country. 

[7] The legal authority for the imposition of these duties was created 
by the Tariff Act of 1930, June 17, 1930, c.497, Title VII. AD duties 
are authorized in 19 U.S.C. § 1673 and CV duties are authorized in 19 
U.S.C. §1671. 

[8] [hyperlink, http://www.gao.gov/products/GAO-08-391]. 

[9] The process and time frame for determining AD/CV duties is 
established by law in title 19 of the United States Code, sections 
1671-1677n. 

[10] 19 U.S.C. §§ 1671d, 1673d. 

[11] 19 U.S.C. §§ 1500, 1505. 

[12] The Harmonized Tariff Schedule of the United States is the 
primary resource used by CBP for determining tariff classification for 
goods imported into the United States. It classifies a good by 
assigning a 10-digit tariff classification number, based on such 
things as its name and use, providing CBP detailed information to 
identify items entering the United States. While tariff codes are used 
for convenience and customs purposes, the written description of an 
order is dispositive when determining which merchandise should be 
subject to AD/CV duties. 

[13] These 283 AD/CV duty orders include 234 AD duty orders and 49 CV 
duty orders. 

[14] Transshipment is the movement of goods from a country of origin 
to a country of ultimate destination through an intermediate country. 
According to CBP, transshipment is legal and commonly used in the 
ordinary course of business. However, transshipment of merchandise for 
the purpose of circumventing trade laws--including AD/CV duty laws--is 
illegal. 

[15] CBP received allegations from congressional sources, Commerce, 
and anonymous parties, among others. 

[16] In this report, we use the term "targeting" to refer to the 
synthesis and use of information from a variety of sources to identify 
shipments that may be a potential risk for AD/CV duty evasion. 

[17] Under 19 U.S.C. § 1592, irrespective of whether the United States 
is deprived of lawful duties, CBP can impose penalties against any 
person who, through fraud, gross negligence, or negligence, enters 
merchandise into the United States by a material and false act or a 
material omission. Alternatively, under 19 U.S.C. § 1595a, CBP can 
impose penalties against any person who directs, assists, or is in any 
way concerned in importation contrary to law. Importers can challenge 
the penalties assessed by petitioning CBP. The $208 million penalty 
amount cited here does not include penalties CBP imposed under 19 
U.S.C. § 1595a (importation contrary to law). 

[18] ICE officials told us that they may also initiate investigations 
on the basis of allegations of evasion received from industry parties. 

[19] As discussed later in this report, some products that are subject 
to AD/CV duties fall under the same tariff codes as other products 
that are not subject to AD/CV duties. Consequently, the tariff code 
for an entry may be insufficient for CBP to determine whether or not 
the entry is subject to AD/CV duties; additional information may be 
needed. 

[20] Port officials describing this case stated that since they 
requested a sample after the product had already made entry, the 
importer could have easily provided a fake sample instead of what was 
actually imported, but did not do so. 

[21] [hyperlink, http://www.gao.gov/products/GAO-08-391]. 

[22] As our prior work indicates, another factor that can lead the 
amount of penalties CBP ultimately collects to be lower than the 
amount initially assessed is successful petition by an importer. See 
GAO, Options for Collecting Revenues on Liquidated Entries of 
Merchandise Evading Antidumping and Countervailing Duties, [hyperlink, 
http://www.gao.gov/products/GAO-12-131R] (Washington, D.C.: Nov. 2, 
2011). 

[23] [hyperlink, http://www.gao.gov/products/GAO-08-391]. 

[24] Under 19 U.S.C. § 1595a, shipments imported contrary to United 
States classification or valuation law, where there are no issues as 
to the admissibility of the merchandise into the Unites States, can 
only be seized in accordance with 19 U.S.C. § 1592. 

[25] CBP can also seize goods suspected of evading AD/CV duties if it 
can prove that the goods violate other laws. For instance, CBP 
officials at one port we visited stated that they were able to seize 
shipments of honey suspected of evasion after a sample they sent to 
the Food and Drug Administration for testing was found to contain a 
carcinogenic substance, thereby violating import safety law--a 
legitimate reason for seizure. 

[26] During this review, which is known as an administrative review, 
Commerce analyzes previous imports to determine the actual level of 
dumping or subsidization for those imports and calculate the final 
duty rate. 

[27] 19 U.S.C. § 1504(d). Liquidation of entries subject to AD/CV 
duties is suspended until removed by statute or by court order. 

[28] When CBP is unable to complete the liquidation process within 6 
months, an entry is "deemed liquidated," and the entry is liquidated 
at the rate assessed at the time of entry. This precludes CBP from 
attempting to collect any supplemental additional duties that might 
have been owed because of an increase in the AD/CV duty rate. 
Similarly, it means that CBP does not refund money owed to importers 
as a result of a decrease in the AD/CV duty rate, absent a proper 
protest by the importer. 

[29] [hyperlink, http://www.gao.gov/products/GAO-08-391]. 

[30] 19 C.F.R. § 142.4. 

[31] 19 U.S.C. § 1623. In general, the importer is required to obtain 
a bond equal to 10 percent of the amount the importer paid in duties, 
taxes, and fees over the preceding year (or $50,000, whichever is 
greater). 

[32] During our review, CBP was unable to provide data on the number 
of STBs port officials have required. 

[33] Commerce officials stated that they would be willing to assist 
CBP with this policy. 

[34] GAO, Internal Control: Standards for Internal Control in the 
Federal Government, [hyperlink, 
http://www.gao.gov/products/GAO/AIMD-00-21.3.1] (Washington, D.C.: 
November 1999). 

[35] See GAO, GPRA Modernization Act Provides Opportunities to Help 
Address Fiscal, Performance, and Management Challenges, [hyperlink, 
http://www.gao.gov/products/GAO-11-466T] (Washington, D.C.: Mar. 16, 
2011). 

[36] Department of Homeland Security Office of Inspector General, 
Efficacy of Customs and Border Protection's Bonding Process, OIG-11-92 
(Washington, D.C.: June 27, 2011). 

[37] Enjoin means to legally prohibit or restrain by injunction. 
Black's Law Dictionary (7th ed., 1999). 

[End of section] 

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