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.

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Between fiscal years 2001 and 2004, the Continued Dumping and Subsidy Offset Act (CDSOA) provided over $1 billion funded from import duties to U.S. companies deemed injured by unfair trade. Some supporters state CDSOA helps U.S. companies compete in the face of continuing unfair trade. Some opponents believe CDSOA recipients receive a large, unjustified windfall from the U.S. treasury. Also, 11 World Trade Organization (WTO) members lodged a complaint over the law at the WTO. This report assesses (1) key legal requirements guiding and affecting agency implementation of CDSOA; (2) problems, if any, U.S. agencies have faced in implementing CDSOA; and (3) which companies have received CDSOA payments and their effects for recipients and non-recipients; and describes (4) the status of WTO decisions on CDSOA.

Congress enacted CDSOA to strengthen relief to injured U.S. producers. The law's key eligibility requirements limit benefits to producers that filed a petition for relief or that publicly supported the petition during a government investigation to determine whether injury had occurred. This law differs from trade remedy laws, which generally provide relief to all producers in an industry. Another key CDSOA feature requires that Customs and Border Protection (CBP) disburse payments within 60 days after the beginning of a fiscal year, giving CBP limited time to process payments and perform desired quality controls. This time frame, combined with a dramatic growth in the program workload, presents implementation risks for CBP. CBP faces three key implementation problems. First, processing of company claims and CDSOA payments is problematic because CBP's procedures are labor intensive and do not include standardized forms or electronic filing. Second, most companies are not accountable for the claims they file because they do not have to support their claims and CBP does not systematically verify the claims. Third, CBP's problems in collecting duties that fund CDSOA have worsened. About half of the funds that should have been available for disbursement remained uncollected in fiscal year 2004. Most of the CDSOA payments went to a few companies with mixed effects. About half of these payments went to five companies. Top recipients we surveyed said that CDSOA had beneficial effects, but the degree varied. In four of seven industries we examined, recipients reported benefits, but some non-recipients noted CDSOA payments gave their competitors an unfair advantage. These views are not necessarily representative of the views of all recipients and non-recipients. Because the United States has not brought CDSOA into compliance with its WTO obligations, it faces additional tariffs on U.S. exports covering a trade value of up to $134 million based on 2004 CDSOA disbursements. Recently, Canada, the European Union, Mexico, and Japan imposed additional duties on various U.S. exports. Four other WTO members may follow suit.

Matters for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: On February 1, 2006, Congress passed legislation phasing out Continued Dumping and Subsidy Offset Act by the end of fiscal year 2007. The President signed the legislation into law on February 8, 2006. The 2005 GAO report (International Trade: Issues and Effects of Implementing the Continued Dumping and Subsidy Offset Act, GAO-05-979, September 26, 2005) figured prominently in remarks made by, among others, the Chairman of the House Ways and Means and Senate Finance Committees.

    Matter: If Congress decides to retain and modify CDSOA, it may also wish to consider extending CBP's 60-day deadline for completing the disbursement of CDSOA funds. Meeting this deadline has been a problem in the past, and may be even more difficult in the future given that the program is experiencing a dramatic growth in its workload. For instance, extending the deadline for processing payments for another 30 days would give the program's staff additional time for processing payments and for pursuing additional internal control activities.

  2. Status: Closed - Implemented

    Comments: On February 1, 2006, Congress passed legislation phasing out Continued Dumping and Subsidy Offset Act by the end of fiscal year 2007. The President signed the legislation into law on February 8, 2006. The 2005 GAO report (International Trade: Issues and Effects of Implementing the Continued Dumping and Subsidy Offset Act, GAO-05-979, September 26, 2005) figured prominently in remarks made by, among others, the Chairman of the House Ways and Means and Senate Finance Committees.

    Matter: Given the results of our review, as Congress carries out its CDSOA oversight functions and considers related legislative proposals, it may wish to consider whether CDSOA is achieving the goals of strengthening the remedial nature of U.S. trade laws, restoring conditions of fair trade, and assisting domestic producers.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In September 2005, GAO recommended (International Trade: Issues and Effects of Implementing the Continued Dumping and Subsidy Offset Act, GAO-05-979, September 26, 2005) that the Secretary of Homeland Security direct the Commissioner of Customs and Border Protection (CBP) to enhance the processing of CDSOA claims and payments and the verification of these claims. Specifically, 1) GAO recommended that, to improve the processing of CDSOA claims, CBP should implement labor saving steps, such as working with ITC to formalize and standardize exchanges of electronic updates of the list of eligible producers, and requiring that company claims follow a standard form and be submitted electronically. According to CBP/CDSOA program manager, in response to GAO's recommendation, his program worked with ITC to develop an electronic list of eligible producers and now has a reliable list of potentially eligible producers; developed a standard, electronic form for filing this year's claims; acquired a full imaging system that helps program staff store, index, and retrieve program-related documentation; and adjusted reports generated off CBP's mainframe computer to eliminate the need for certain manual adjustments, which used to cause problems such as overpayments. 2) GAO recommended that, to further improve the processing of claims, CBP should provide additional guidance for preparing CDSOA certifications or claims. According to CBP/CDSOA program manager, in response to GAO's recommendation, his program has improved the guidance it provides to claimants by having a greater number of better trained people assigned to answer claimant questions--six people are working on this now. Supervisors having an in-depth knowledge are available on the spot to provide guidance on complex issues. CBP has also drafted major changes in its regulations. While these revised regulations were not issued in time for the 2006 distribution, the program manager indicated that much of the clarifying information they contain was included in the June 2006 Federal Register notice instructing producers how to make claims. 3) GAO recommended that, to enhance the processing of claims and payments in the face of a growing workload, CBP should develop and implement a plan for managing and improving its CDSOA program processes, staff, and technology. According to CBP/CDSOA program manager, in response to GAO's recommendation: CBP adopted new procedures, updated and streamlined processes, and provided extensive training to program staff. CBP has increased the number of staff available to assist in the program. The program has now 24 staff and the number will stay high during the program's peak period. All of these staff were on board and fully trained by June 2006, the start of the peak period. 4) GAO recommended that, to enhance accountability for claims, CBP should implement a plan for systematically verifying CDSOA claims. According to the CBP/CDSOA program manager, in response to GAO's recommendation, his program has conducted verifications and showed due diligence in making sure that the 2005 claims had a sound basis and supporting documentation. The program planned to complete 8 verifications by the end of September 2006 and 20 verifications by the February-April 2007 timeframe. It actually completed 8 verifications by the end of September 2006, as planned.

    Recommendation: To the extent that Congress chooses to continue implementing CDSOA, the Secretary of Homeland Security should direct the Commissioner of Customs and Border Protection to enhance the processing of CDSOA claims and payments, the verification of these claims, and the collection of AD/CV duties. Specifically, to enhance accountability for claims, CBP should implement a plan for systematically verifying CDSOA claims. This plan should aim to ensure that companies receiving CDSOA disbursements are accountable for the claims they make. CBP should also consider asking companies to justify their claims by providing additional information on their claims, such as an explanation of the basis for the claim, supporting financial information, and an independent assessment of the claim's validity and accuracy.

    Agency Affected: Department of Homeland Security: Directorate of Border and Transportation Security: Bureau of Customs and Border Protection

  2. Status: Closed - Implemented

    Comments: In September 2005, GAO recommended (International Trade: Issues and Effects of Implementing the Continued Dumping and Subsidy Offset Act, GAO-05-979, September 26, 2005) that the Secretary of Homeland Security direct the Commissioner of Customs and Border Protection (CBP) to enhance the processing of CDSOA claims and payments and the verification of these claims. Specifically, 1) GAO recommended that, to improve the processing of CDSOA claims, CBP should implement labor saving steps, such as working with ITC to formalize and standardize exchanges of electronic updates of the list of eligible producers, and requiring that company claims follow a standard form and be submitted electronically. According to CBP/CDSOA program manager, in response to GAO's recommendation, his program worked with ITC to develop an electronic list of eligible producers and now has a reliable list of potentially eligible producers; developed a standard, electronic form for filing this year's claims; acquired a full imaging system that helps program staff store, index, and retrieve program-related documentation; and adjusted reports generated off CBP's mainframe computer to eliminate the need for certain manual adjustments, which used to cause problems such as overpayments. 2) GAO recommended that, to further improve the processing of claims, CBP should provide additional guidance for preparing CDSOA certifications or claims. According to CBP/CDSOA program manager, in response to GAO's recommendation, his program has improved the guidance it provides to claimants by having a greater number of better trained people assigned to answer claimant questions--six people are working on this now. Supervisors having an in-depth knowledge are available on the spot to provide guidance on complex issues. CBP has also drafted major changes in its regulations. While these revised regulations were not issued in time for the 2006 distribution, the program manager indicated that much of the clarifying information they contain was included in the June 2006 Federal Register notice instructing producers how to make claims. 3) GAO recommended that, to enhance the processing of claims and payments in the face of a growing workload, CBP should develop and implement a plan for managing and improving its CDSOA program processes, staff, and technology. According to CBP/CDSOA program manager, in response to GAO's recommendation: CBP adopted new procedures, updated and streamlined processes, and provided extensive training to program staff. CBP has increased the number of staff available to assist in the program. The program has now 24 staff and the number will stay high during the program's peak period. All of these staff were on board and fully trained by June 2006, the start of the peak period. 4) GAO recommended that, to enhance accountability for claims, CBP should implement a plan for systematically verifying CDSOA claims. According to the CBP/CDSOA program manager, in response to GAO's recommendation, his program has conducted verifications and showed due diligence in making sure that the 2005 claims had a sound basis and supporting documentation. The program planned to complete 8 verifications by the end of September 2006 and 20 verifications by the February-April 2007 timeframe. It actually completed 8 verifications by the end of September 2006, as planned.

    Recommendation: To the extent that Congress chooses to continue implementing CDSOA, the Secretary of Homeland Security should direct the Commissioner of Customs and Border Protection to enhance the processing of CDSOA claims and payments, the verification of these claims, and the collection of AD/CV duties. Specifically, to enhance the processing of claims and payments in the face of a growing workload, CBP should develop and implement plans for managing and improving its CDSOA program processes, staff, and technology. For instance, a human capital plan would help ensure that the CDSOA program has staff in place with the appropriate competencies, skills, and abilities.

    Agency Affected: Department of Homeland Security: Directorate of Border and Transportation Security: Bureau of Customs and Border Protection

  3. Status: Closed - Implemented

    Comments: In September 2005, GAO recommended (International Trade: Issues and Effects of Implementing the Continued Dumping and Subsidy Offset Act, GAO-05-979, September 26, 2005) that the Secretary of Homeland Security direct the Commissioner of Customs and Border Protection (CBP) to enhance the processing of CDSOA claims and payments and the verification of these claims. Specifically, 1) GAO recommended that, to improve the processing of CDSOA claims, CBP should implement labor saving steps, such as working with ITC to formalize and standardize exchanges of electronic updates of the list of eligible producers, and requiring that company claims follow a standard form and be submitted electronically. According to CBP/CDSOA program manager, in response to GAO's recommendation, his program worked with ITC to develop an electronic list of eligible producers and now has a reliable list of potentially eligible producers; developed a standard, electronic form for filing this year's claims; acquired a full imaging system that helps program staff store, index, and retrieve program-related documentation; and adjusted reports generated off CBP's mainframe computer to eliminate the need for certain manual adjustments, which used to cause problems such as overpayments. 2) GAO recommended that, to further improve the processing of claims, CBP should provide additional guidance for preparing CDSOA certifications or claims. According to CBP/CDSOA program manager, in response to GAO's recommendation, his program has improved the guidance it provides to claimants by having a greater number of better trained people assigned to answer claimant questions--six people are working on this now. Supervisors having an in-depth knowledge are available on the spot to provide guidance on complex issues. CBP has also drafted major changes in its regulations. While these revised regulations were not issued in time for the 2006 distribution, the program manager indicated that much of the clarifying information they contain was included in the June 2006 Federal Register notice instructing producers how to make claims. 3) GAO recommended that, to enhance the processing of claims and payments in the face of a growing workload, CBP should develop and implement a plan for managing and improving its CDSOA program processes, staff, and technology. According to CBP/CDSOA program manager, in response to GAO's recommendation: CBP adopted new procedures, updated and streamlined processes, and provided extensive training to program staff. CBP has increased the number of staff available to assist in the program. The program has now 24 staff and the number will stay high during the program's peak period. All of these staff were on board and fully trained by June 2006, the start of the peak period. 4) GAO recommended that, to enhance accountability for claims, CBP should implement a plan for systematically verifying CDSOA claims. According to the CBP/CDSOA program manager, in response to GAO's recommendation, his program has conducted verifications and showed due diligence in making sure that the 2005 claims had a sound basis and supporting documentation. The program planned to complete 8 verifications by the end of September 2006 and 20 verifications by the February-April 2007 timeframe. It actually completed 8 verifications by the end of September 2006, as planned.

    Recommendation: To the extent that Congress chooses to continue implementing CDSOA, the Secretary of Homeland Security should direct the Commissioner of Customs and Border Protection to enhance the processing of CDSOA claims and payments, the verification of these claims, and the collection of AD/CV duties. Specifically, to further improve the processing of claims, CBP should provide additional guidance for preparing CDSOA certifications or claims.

    Agency Affected: Department of Homeland Security: Directorate of Border and Transportation Security: Bureau of Customs and Border Protection

  4. Status: Closed - Implemented

    Comments: In September 2005, GAO recommended (International Trade: Issues and Effects of Implementing the Continued Dumping and Subsidy Offset Act, GAO-05-979, September 26, 2005) that the Secretary of Homeland Security direct the Commissioner of Customs and Border Protection (CBP) to enhance the processing of CDSOA claims and payments and the verification of these claims. Specifically, 1) GAO recommended that, to improve the processing of CDSOA claims, CBP should implement labor saving steps, such as working with ITC to formalize and standardize exchanges of electronic updates of the list of eligible producers, and requiring that company claims follow a standard form and be submitted electronically. According to CBP/CDSOA program manager, in response to GAO's recommendation, his program worked with ITC to develop an electronic list of eligible producers and now has a reliable list of potentially eligible producers; developed a standard, electronic form for filing this year's claims; acquired a full imaging system that helps program staff store, index, and retrieve program-related documentation; and adjusted reports generated off CBP's mainframe computer to eliminate the need for certain manual adjustments, which used to cause problems such as overpayments. 2) GAO recommended that, to further improve the processing of claims, CBP should provide additional guidance for preparing CDSOA certifications or claims. According to CBP/CDSOA program manager, in response to GAO's recommendation, his program has improved the guidance it provides to claimants by having a greater number of better trained people assigned to answer claimant questions--six people are working on this now. Supervisors having an in-depth knowledge are available on the spot to provide guidance on complex issues. CBP has also drafted major changes in its regulations. While these revised regulations were not issued in time for the 2006 distribution, the program manager indicated that much of the clarifying information they contain was included in the June 2006 Federal Register notice instructing producers how to make claims. 3) GAO recommended that, to enhance the processing of claims and payments in the face of a growing workload, CBP should develop and implement a plan for managing and improving its CDSOA program processes, staff, and technology. According to CBP/CDSOA program manager, in response to GAO's recommendation: CBP adopted new procedures, updated and streamlined processes, and provided extensive training to program staff. CBP has increased the number of staff available to assist in the program. The program has now 24 staff and the number will stay high during the program's peak period. All of these staff were on board and fully trained by June 2006, the start of the peak period. 4) GAO recommended that, to enhance accountability for claims, CBP should implement a plan for systematically verifying CDSOA claims. According to the CBP/CDSOA program manager, in response to GAO's recommendation, his program has conducted verifications and showed due diligence in making sure that the 2005 claims had a sound basis and supporting documentation. The program planned to complete 8 verifications by the end of September 2006 and 20 verifications by the February-April 2007 timeframe. It actually completed 8 verifications by the end of September 2006, as planned.

    Recommendation: To the extent that Congress chooses to continue implementing CDSOA, the Secretary of Homeland Security should direct the Commissioner of Customs and Border Protection to enhance the processing of CDSOA claims and payments, the verification of these claims, and the collection of antidumping/countervailing (AD/CV) duties. Specifically, to improve the processing of CDSOA claims, CBP should implement labor savings steps such as working with the ITC to formalize and standardize exchanges of electronic updates of the list of eligible producers, and requiring that company claims follow a standard form and be submitted electronically. This would also reduce data entry-related errors.

    Agency Affected: Department of Homeland Security: Directorate of Border and Transportation Security: Bureau of Customs and Border Protection

  5. Status: Closed - Implemented

    Comments: In May 2007, CBP provided Congress a report entitled "Report to Congress on Continued Dumping and Subsidy Offset (CDSOA)" that discussed efforts CBP has taken to implement the GAO recommendations, including working with the other affected agencies and field offices to ensure improved coordination and collection of anti-dumping/countervailing duties. CBP noted in the report that further details of efforts and progress in this regard are included in a separate January 2007 report entitled "Report to Congress on Antidumping/Countervailing Duty." That report discussed CBP efforts to: better track single entry bonds (bonds that are posted to protect the anticipated federal revenue); assess the risk, or likelihood, of collecting AD/CV duties and adjust the method for determining bond amounts when collection is believed to be at risk; and train CBP personnel on AD/CV duty collections and the enforcement of AD orders, among other steps.

    Recommendation: To the extent that Congress chooses to continue implementing CDSOA, the Secretary of Homeland Security should direct the Commissioner of Customs and Border Protection to enhance the processing of CDSOA claims and payments, the verification of these claims, and the collection of AD/CV duties. Specifically, to better address antidumping and countervailing duty collection problems, CBP should report to Congress on what factors have contributed to the collection problems, the status and impact of efforts to date to address these problems, and how CBP, in conjunction with other agencies, proposes to improve the collection of antidumping and countervailing duties.

    Agency Affected: Department of Homeland Security: Directorate of Border and Transportation Security: Bureau of Customs and Border Protection

 

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