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.

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U.S. Customs and Border Protection (CBP) has been unable to collect hundreds of millions of dollars in antidumping (AD) and countervailing (CV) duties. The Department of Commerce imposes these duties to remedy injurious unfair foreign trade practices (unfairly low prices or subsidies). The noncollection of AD/CV duties means that the U.S. government has not fully remedied the unfair trade practices and bears a substantial loss of revenue. GAO was asked to examine the (1) nature and extent of uncollected AD/CV duties, (2) factors contributing to uncollected AD/CV duties and steps taken to address these factors, and (3) options for aiding duty collections. To analyze these issues, GAO reviewed CBP data for fiscal years 2001 through 2007, agency documents and reports, and interviewed government officials and private sector representatives

While over $600 million in AD/CV duties dating back to 2001 remain uncollected, they are highly concentrated among a few products, countries of origin, and importers. For example, four products account for about 84 percent of the total amount of uncollected AD/CV duties. Also, a relatively small number of importers owe the vast majority of these uncollected duties. In addition, half of the 23,000 unpaid AD/CV duty bills are less than $309, but the average duty bill is more than $26,000 due to a relatively small number of very large bills. According to CBP officials, prospects for collecting a sizeable portion of these bills are slim, because many of the importers have disappeared, have no assets, or have declared bankruptcy. CBP reporting on uncollected AD/CV duties has been critical to congressional and public oversight of CBP's efforts to collect AD/CV duties. However, the law generating this reporting has been repealed. Four key factors contribute to uncollected AD/CV duties, a few of which the U.S. government has partially addressed. First, because the U.S. AD/CV duty system involves the retrospective assessment of duties, the final amount of AD/CV duties an importer owes can significantly exceed the initial amount paid when the goods entered the country. Second, companies that did not previously export products subject to AD/CV duties, i.e., "new shippers," pose two types of risks for collections. For example, new shippers can be assigned an AD/CV duty rate based on as few as one shipment, which can significantly underestimate the final duty rate. Also, importers purchasing from new shippers were able to provide a bond in lieu of a cash payment to cover the initial AD/CV duties assessed. Congress addressed this risk by temporarily requiring all importers to pay initial AD/CV duties in cash. Third, all importers must provide a general bond to secure the payment of all types of duties, but CBP's standard practice for setting the amount of this bond inadequately protects AD/CV duty revenue. CBP addressed this by revising its bonding formula for products subject to AD/CV duties, but the revision has been tested on only one product and faces domestic and international legal challenges. Fourth, CBP collects minimal information regarding importers and does not conduct background or financial checks, which creates challenges to locating importers and collecting AD/CV duties. Two sets of options exist for improving AD/CV duty collection, each of which involves potential advantages and disadvantages. One set of options involves revising U.S. law to eliminate the retrospective component of the U.S. AD/CV duty system by assessing final duties when the product arrives in the United States (i.e., a prospective system). But there would be trade-offs. For example, under a retrospective system, the amount of duties finally assessed reflects the actual amount of dumping by the exporter for the period of review. Under a prospective system, the amount of duties assessed may not match the amount of actual dumping or subsidization. However, in practice, a substantial amount of AD/CV duty bills are not collected under the U.S. retrospective system. The second set of options involves making adjustments within the existing system. For example, Congress could revise the standards for new shipper reviews and CBP could examine the option of revising bonding requirements to protect additional AD/CV duty revenue.

Matters for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: GAO is not aware of any action taken by Congress in response to this recommendation. During a May 2011 hearing on the broader issue of uncollected antidumping and countervailing (AD/CV) duties, both the Chair and Ranking Member of the Senate Appropriations Subcommittee on Homeland Security asked the GAO witness about the process of requesting a new shipper review. After the witness described some of the vulnerabilities in the process, the Ranking Member stated that steps could be taken to improve the process. However, GAO is not aware of any subsequent action taken by Congress to introduce legislation or hold hearings on this issue.

    Matter: In order to help reduce the amount of uncollected AD/CV duties, Congress may wish to consider providing Commerce with the authority to establish, at its discretion, a minimum amount or value of exports from companies requesting a new shipper review.

  2. Status: Closed - Implemented

    Comments: In March 2008, we reported that over $613 million in antidumping (AD) and countervailing (CV) duties from fiscal years 2001 through 2007 were uncollected as of September 2007. In fiscal year 2003, Customs and Border Protection (CBP) began publicly reporting the amount of uncollected duties. This reporting included detailed data on the amount of AD/CV duties uncollected for each product subject to AD/CV duties. According to private sector representatives and congressional staff, such reporting has been critical to oversight of CBP's efforts to collect AD/CV duties. However, the law (Continued Dumping and Subsidy Offset Act) generating this reporting was repealed in February 2006. In March 2008, we suggested that Congress consider requiring CBP to publicly report on an annual basis regarding the amount of uncollected duties for that year for each AD/CV duty order. We also suggested that the report indicate the total amount of all open, unpaid bills for each AD/CV duty order. In June 2008, Congress required that CBP report on the amount of uncollected duties for that year for each AD/CV duty order and indicate the amount of open, unpaid bills for each order.

    Matter: In order to help reduce the amount of uncollected AD/CV duties, Congress may wish to require CBP to publicly report on an annual basis regarding the amount of uncollected duties for that year for each AD/CV duty order. In addition, the report should indicate the total amount of all open, unpaid bills for each AD/CV duty order.

  3. Status: Closed - Implemented

    Comments: In December 2009 in Conference Report 111-366, Congress responded by requiring the Departments of Commerce, Treasury, and Homeland Security to conduct such an analysis. Specifically, Congress directed them to conduct an analysis and report to the House and Senate Committees on Appropriations, within 180 days of enactment of this Act, on the relative advantages and disadvantages of prospective and retrospective anti-dumping and countervailing duty systems. The report is to address the extent to which each type of system would likely achieve the goals of remedying injurious dumping or subsidized exports, minimize uncollected duties, reduce incentives and opportunities for importers to evade anti-dumping and countervailing duties, effectively target high-risk importers, address the impact of retrospective rate increases on U.S. importers and their employees, and create a minimal administrative burden.

    Matter: In order to help reduce the amount of uncollected AD/CV duties, Congress may wish to require the Secretaries of Commerce, Homeland Security, and the Treasury to work together to conduct an analysis and report to Congress on the relative advantages and disadvantages of prospective and retrospective AD/CV duty systems. The report should address the extent to which each type of AD/CV duty system would likely achieve the goals of remedying injurious dumping or subsidized exports, minimizing uncollected duties, reducing incentives and opportunities for importers to evade AD/CV duties, effectively targeting high-risk importers, and creating a minimal administrative burden. To ensure the report is completed in a timely manner, Congress may wish to establish a specific date by which the report is to be delivered.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In February 2010, Commerce and CBP deployed a new component specific to AD/CV duty issues as part of CBP's automated system for processing commercial trade (the Automated Commercial Environment, or ACE) to improve the clarity of liquidation instructions by increasing the efficiency of communication between the two agencies. CBP personnel at the ports can utilize the new system to submit inquiries and seek clarification on Commerce's liquidation instructions and other AD/CV duty issues. In addition, Commerce deployed a system for tracking when it sends liquidation instructions. According to CBP officials, these steps have improved the ability of port personnel to ask Commerce to clarify its liquidation instructions. In April 2011, Commerce indicated that it would be submitting an update to Congress on the clarity of liquidation instructions. Subsequently, in May 2011, Commerce testified before Congress about the new component of ACE specific to AD/CV duty issues, noting that ACE allowed for more efficient communication between CBP and Commerce in the implementation and application of AD/CV duty rates.

    Recommendation: In order to help ensure the full collection of AD/CV duties and improve the liquidation process, the Secretary of Commerce should work with the Secretary of Homeland Security to identify opportunities to improve the clarity of liquidation instructions. The Secretary of Commerce should report to Congress within 1 year on the steps it has taken to improve the clarity of liquidation instructions.

    Agency Affected: Department of Commerce

  2. Status: Closed - Implemented

    Comments: According to CBP, it remains committed to utilizing its bonding authority to address revenue risk. However, the World Trade Organization?s Appellate Body ruled in July 2008 that CBP's enhanced bonding requirement, which was applied to the antidumping duty orders on shrimp as a test case, was inconsistent with its obligations under international agreements. In January 2009 CBP issued a Federal Register Notice soliciting public comments related to how it might adjust its bonding policies to comply with the ruling. After evaluating the comments, in April 2009 CBP determined that, in order to comply with international obligations it would terminate the application of the enhanced bonding requirement.

    Recommendation: In order to help ensure the full collection of AD/CV duties and improve the liquidation process, the Secretary of Homeland Security, should, in consultation with other relevant agencies, determine whether CBP can adjust its bonding requirements to further protect revenue without violating U.S. law or international obligations and without imposing unreasonable costs upon importers.

    Agency Affected: Department of Homeland Security

  3. Status: Closed - Implemented

    Comments: Commerce Department's International Trade Administration adopted a Human Capital/Workforce Management Plan for fiscal years 2011-2012 on February 24, 2011. This Workforce Management Plan covers each of its business units, including the Import Administration's antidumping and countervailing duty operations. The plan lists the Import Administration's objective as having flexibility to reduce staffing levels in the face of unplanned or unforeseeable fluctuations in appropriated funding. However, the plan specifically identifies the professional positions in the AD/CVD Operations offices as one of ITA's Mission Critical Occupations that may be heavily affected by early and regular retirements. The recruitment and retention of high performing individuals in these positions is considered ITA's greatest challenge. The plan further lays out four ITA-wide performance objectives, each of which has accompanying strategies, outcomes and metrics. The four performance objectives are talent management (which includes recruitment and retention), leadership and knowledge management, results-oriented performance culture, and accountability. The plan also notes that ITA uses an employee engagement scorecard to track its efforts at improving retention and morale.

    Recommendation: In order to help ensure the full collection of AD/CV duties, improve the liquidation process, and to ensure that the Import Administration has sufficient human capital to issue timely and clear liquidation instructions to CBP, the Secretary of Commerce should develop a strategic human capital plan encompassing its AD/CV duty operational offices.

    Agency Affected: Department of Commerce

 

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