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International affairs

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

Why Area Is Important

In March 2008 GAO reported that, as of September 2007, U.S. Customs and Border Protection (CBP) has been unable to collect more than $600 million owed in antidumping and countervailing duties imposed to remedy injurious unfair foreign trade practices. These include duties imposed on products exported to the United States at unfairly low prices (i.e., dumped) and duties on products exported to the United States that were subsidized by foreign governments. In addition to the substantial amount of lost revenue, the uncollected duties cause concern that the U.S. government has not fully remedied the unfair trade practices.

What GAO Found

Since 2005 GAO has reported several times on the U.S. government's inability to collect substantial amounts of antidumping and countervailing duties and in 2008 proposed a variety of options for improving the system for collecting these duties. Two key components of the antidumping and countervailing duty system have received particular attention. One key component of the system is its retrospective nature, which means that—though importers pay estimated duties at the time of importation—final duties are not assessed until after products enter the country. Another component is the "new shipper" review process that allows new manufacturers or exporters to petition for their own separate antidumping and countervailing duty rate. Despite other efforts by Congress and CBP, these components of the system have not been addressed and the collection of antidumping and countervailing duties remains a problem. While there are a variety of factors that affect the amount of antidumping and countervailing duties assessed, in 2008 GAO comprehensively reviewed the $613 million in uncollected antidumping and countervailing duties and identified the key factors contributing to the collections problems, including:

  • Retrospective component of the antidumping and countervailing duty system. Under the current retrospective system, importers pay the estimated amount of antidumping and countervailing duties when products enter the United States, but the final amount of duties owed is not determined until later. This creates a risk that the government will be unable to collect the full amount owed, which can be substantially more than the original estimate. In 2008 GAO reported that when they increased—because of some large increases—duty rates rose an average of 62 percentage points, and some increases exceeded 200 percentage points. The long time lags between the initial entry of a product and the final assessment of duties heightens the risk that the government will be unable to collect the full amount owed. In 2008 GAO found that, on average, this process took more than 3 years, though in one instance it took more than 18 years. During this time, importers may disappear, cease business operations, or declare bankruptcy, which creates challenges to the government's ability to collect antidumping and countervailing duties owed.
  • "New shipper" reviews. Under current law, "new shippers" (manufacturers/exporters whose costs were not previously reviewed) can request that the government conduct a review to establish an individual antidumping and countervailing duty rate. However, U.S. law does not specify a minimum amount of exports or number of transactions that a company must make to be eligible for a new shipper review, and according to Department of Commerce (Commerce) officials, they do not have the legislative authority to create any such requirement. As a result, a shipper can be assigned an individual duty rate based on a very minimal amount of exports, and can intentionally set a high price for this small amount of initial exports. This creates the possibility that companies may be able to get a low (or 0 percent) initial antidumping duty rate, which will subsequently rise when the exporter lowers its price, and puts the government in the position of having to collect additional duties. In 2008 GAO found that importers purchasing from companies undergoing "new shipper reviews" accounted for approximately 40 percent of the uncollected antidumping and countervailing duties as of fiscal year 2007.

Actions Needed

In March 2008 GAO identified several options for Congress to consider for improving the collection of antidumping and countervailing duties. GAO also indicated that these options have both potential advantages and disadvantages. By adjusting features of the antidumping or countervailing duty system that create the risk that companies can evade paying duties, Congress could further protect government revenue, while also minimizing incentives for companies to pursue unfair trade practices. For example, Congress could:

  • Eliminate the retrospective component of the U.S. antidumping and countervailing duty system. U.S. law could be changed to eliminate the retrospective component of the U.S. antidumping and countervailing duty system and, instead, treat the antidumping and countervailing duties assessed at the time the product enters the country as final. If the antidumping or countervailing duty rate is changed, it is applied only to future imports and has no effect on the amount of duties owed for previous imports. Other countries GAO reviewed did not determine their final antidumping and countervailing duties by calculating actual amount of duties owed after products enter the country. In 2008 GAO found that while each country's antidumping and countervailing duty system operates differently, major U.S. trading partners such as Canada, Australia, and the European Union have antidumping and countervailing duty systems that are not retrospective.
  • Adjust requirements for new shipper reviews. Congress could choose to provide Commerce the discretion to require companies applying for a new shipper review to have a greater volume of imports before establishing an individual antidumping and countervailing duty rate. According to Commerce officials, this could help mitigate the risks posed by establishing an antidumping and countervailing duty rate based on one shipment.

Following GAO's 2008 report, Congress mandated that the Department of Commerce review the relative advantages and disadvantages of prospective and retrospective antidumping and countervailing duty systems. In November 2010 Commerce released its report which, in addition to discussing the likely effects of each type of system on duty collection, also highlighted the administrative burden the current retrospective system places on both Commerce and CBP. This suggests the continuing need for action to reform the system for the collection of antidumping and countervailing duties.

Framework for Analysis

The information contained in this analysis is based on findings from the GAO reports listed under the "Related GAO Products" tab.

Area Contact

For additional information about this area, contact Loren Yager at (202) 512-4347 or YagerL@gao.gov.

Related GAO Products

International Affairs:

Antidumping and Countervailing Duties:

Congress and Agencies Should Take Additional Steps to Reduce Substantial Shortfalls in Duty Collection
GAO-08-391:
Published: Mar 26, 2008. Publicly Released: Apr 23, 2008.

International Trade:

International Trade:

Issues and Effects of Implementing the Continued Dumping and Subsidy Offset Act
GAO-05-979:
Published: Sep 26, 2005. Publicly Released: Sep 26, 2005.