Antidumping and Countervailing Duties:
Management Enhancements Needed to Improve Efforts to Detect and Deter Duty Evasion
GAO-12-551: Published: May 17, 2012. Publicly Released: May 17, 2012.
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 CBPs 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 dutiesan 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 CBPs 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 CBPs efforts to detect and deter evasion of AD/CV duties..
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 CBPs 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 Recommends
To enhance CBPs 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 GAOs recommendations.
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Recommendations for Executive Action
Status: Closed - Implemented
Comments: With respect to the first part of this recommendation, in November 2012, Commerce provided CBP with a list of liquidation instructions planned for issuance by March 2013, adding that it planned to provide CBP with an updated list on a quarterly basis. CBP subsequently confirmed in July 2014 that it has continued to receive such a list from Commerce on a quarterly basis. With respect to the second part of this recommendation, CBP indicated to Commerce in August 2012 that it no longer believed it was necessary for Commerce to notify CBP when court decisions are reached on AD/CV duty cases in litigation. CBP explained that since Commerce's procedures are to issue liquidation instructions to CBP within 15 days of a final court decision, there is no real time advantage to receiving notification that a court decision has been reached. Given Commerce's action taken in response to the first part or our recommendation and CBP's belief, with respect to the second part of our recommendation, that it no longer needs notification from Commerce when court decisions are reached on AD/CV duty cases in litigation, we consider this recommendation to be closed as implemented.
Recommendation: To enhance CBP's efforts to address AD/CV duty evasion and facilitate oversight of these efforts, and 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 (1) regularly provide CBP advance notice on liquidation instructions; and (2) notify CBP when courts reach decisions on AD/CV duty cases in litigation.
Agency Affected: Department of Commerce
Status: Closed - Implemented
Comments: In commenting on the GAO report, CBP concurred with this recommendation and, in June 2012, provided GAO with a copy of its new single transaction bond policy. The policy states that, in order to avoid the possibility of port-shopping, any request for an STB should be accompanied by a request for national cargo criteria, which will automatically instruct ports nationwide to review any other shipments from the importer in question prior to release. Additionally, the policy identifies a multi-step process for port personnel to follow to submit such a request for cargo criteria.
Recommendation: To enhance CBP's efforts to address AD/CV duty evasion and facilitate oversight of these efforts, and 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.
Agency Affected: Department of Homeland Security
Comments: The Department of Homeland Security concurred with this recommendation. Subsequently, in order to improve its tracking efforts, CBP introduced a policy requiring field personnel to record instances of AD/CV duty evasion, along with details on related enforcement activity, including penalties. CBP issued this new policy to field personnel in July 2013. We continue to monitor agency efforts to address the second part of the recommendation.
Recommendation: To enhance CBP's efforts to address AD/CV duty evasion and facilitate oversight of these efforts, 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 (1) 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 (2) the results, such as enforcement outcomes, of allegations of evasion received from third parties.
Agency Affected: Department of Homeland Security