International Trade: Persistent Weaknesses in the In-Bond Cargo System Impede Customs and Border Protection's Ability to Address Revenue, Trade, and Security Concerns
GAO-07-561
Published: Apr 17, 2007. Publicly Released: May 17, 2007.
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Highlights
The U.S. Customs and Border Protection (CBP) must strive to balance its competing goals of facilitating trade, providing port security, and collecting trade revenues. CBP's in-bond system, which allows goods to transit the United States without formally entering U.S. commerce, must also balance these goals. In response to concerns that previously identified weaknesses in the in-bond system have not been remedied, GAO examined (1) the purpose of the in-bond system and the extent of its use (2) CBP efforts to ensure that revenues are collected and trade concerns are minimized, and (3) CBP efforts to ensure that security-related inspections are properly targeted. GAO examined audit reports and agency documents, interviewed officials at CBP headquarters and at 10 CBP port offices. GAO also discussed the in-bond system with trade groups impacted by the in-bond system.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| United States Customs and Border Protection | To improve management of the in-bond program through better informed decisions affecting trade, revenue collection, and security goals, the Secretary of Homeland Security, acting through the CBP Commissioner, should, with respect to collecting more detailed information on in-bond cargo, for all in-bond goods to be eligible for a consumption entry into the United States, require additional information on the in-bond form (CBP Form 7512) at the time of arrival. This information should include data elements that provide a more precise description of the cargo and that further identify the entities involved in the movement of these goods. As part of this effort, CBP should--6 months after implementation of new data requirements--report to Congress whether the enhanced data obtained are adequate to address security and trade concerns for in-bond transactions or whether current CBP authority should be adjusted. | While Customs and Border Protection (CBP) has not changed the information on the in-bond form, they do require additional information under the Importer Security Filing, known as 10+2, at the time of arrival. The information filed under 10+2 includes a more precise description of the cargo (the Commodity Harmonized Tariff Schedule of the United States number) and further identifies the entities involved in the movement of the goods. In addition, CBP indicated that in its new cargo system (ACE M1), they will eliminate the Form 7512 and link the in-bond application directly to the inward manifest, which means that all information related to that shipment will be fully available and visible... for the in-bond movement.
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| United States Customs and Border Protection | To improve management of the in-bond program through better informed decisions affecting trade, revenue collection, and security goals, the Secretary of Homeland Security, acting through the CBP Commissioner, should, with respect to collecting more detailed information on in-bond cargo, for all goods to be exported, revise the in-bond form (CBP Form 7512) to include the six-digit code from the Harmonized Commodity Coding and Classification System (Harmonized System). | While CBP did not require additional information for the in-bond form, it has taken steps to collect information on the cargo's HTS number at the arrival port (instead of port of entry). On November 25, 2008 CBP issued an interim final rule requiring both importers and carriers to submit additional cargo information to CBP before the before the vessel reaches the port of arrival in the United States. Among the additional information required is the cargo's HTS number at the 6-digit level (which may be provided up to the 10 digit level). The rule became effective on January 26, 2009. This additional information is collected as part of CBP's "Importer Security Filing" effort (also known as...
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| United States Customs and Border Protection | To improve management of the in-bond program through better informed decisions affecting trade, revenue collection, and security goals, the Secretary of Homeland Security, acting through the CBP Commissioner, should, with respect to collecting more detailed information on in-bond cargo, use information collected in the revised in-bond form to ensure that the new Automated Commercial Environment (ACE) system can generate reports useful to CBP management in making prioritized, risk-based management decisions related to revenue and security risks. |
The implementation of ACE is a long-term ongoing process expected to be finalized by 2011. Before GAO made this recommendation, CBP was not considering incorporating enhanced reporting capability in ACE to manage the in-bond system. However, in response to our recommendation CBP reported that it plans to establish requirements for ACE that include enhanced report capabilities that enable program managers to exercise more effective oversight over the in-bond process.
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| United States Customs and Border Protection | To improve management of the in-bond program through better informed decisions affecting trade, revenue collection, and security goals, the Secretary of Homeland Security, acting through the CBP Commissioner, should, with respect to collecting more detailed information on in-bond cargo, use information from the revised in-bond form as input to the Cargo Selectivity process at the arrival port instead of limiting this process to cargo that has made entry for consumption, to ensure that in-bond shipments are adequately tracked between the arrival and destination ports. | CBP explained that for technical reasons it is not possible to use the cargo selectivity functionality to improve tracking of in-bonds. Instead, it has addressed this recommendation by implementing a new security-filing proposal, commonly referred to as the "10 + 2," to obtain e-trade of advanced data for security and targeting purposes that will facilitate tracking in-bonds. The additional data will provide an enhanced informational profile of all imported cargo, including freight moved via in-bond procedures. Furthermore, the additional data (identifying the key parties to the transaction and the locations of specific events associated with the transaction) will also supplement the...
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| United States Customs and Border Protection | To improve management of the in-bond program through better informed decisions affecting trade, revenue collection, and security goals, the Secretary of Homeland Security, acting through the CBP Commissioner, should, with respect to collecting more detailed information on in-bond cargo, use information from the revised in-bond form to update Automated Targeting System (ATS) security scores for in-bond movements at the arrival port instead of delaying this process until after cargo has been transported through the United States to the destination port. | In the summer of 2008, as we recommended, CBP began collecting additional information and updating its Automated Targeting System (ATS) score to target in-bond cargo at the port of arrival, according to CBP Cargo Control officials. CBP changed procedures and began requiring in-bond importers to complete entry forms at the port of arrival rather than waiting to collect these forms at the port of entry. The data from the entry forms provided the additional data used to update the ATS score without the need for a revised in-bond form. In June 2008, CBP distributed guidance to field operations staff on how to use entry data in ATS for targeting in-bond and follow through with inspections....
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| United States Customs and Border Protection | To improve management of the in-bond program through better informed decisions affecting trade, revenue collection, and security goals, the Secretary of Homeland Security, acting through the CBP Commissioner, should, with respect to improving monitoring of cargo moving within the in-bond system, conduct an analysis of the extent of use of the in-bond system and the patterns of shipments within the system. | In response to our recommendation, the U.S. Customs and Border Protection's (CBP) Office of Field Operations conducted a query using their Automated Commercial System to determine the total number of in-bonds and trends covering three fiscal years. According to a memorandum CBP provided to GAO, the results provided the total number of in-bonds by specific types (IT - immediate transportation, TE - transportation and exportation, and IE- immediate exportation). According to CBP, the data also show that in-bond usage is steady, and is an important part of international trade. The numbers also show that most in-bonds are IT which means that the goods are transported to another U.S. port of...
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| United States Customs and Border Protection | To improve management of the in-bond program through better informed decisions affecting trade, revenue collection, and security goals, the Secretary of Homeland Security, acting through the CBP Commissioner, should, with respect to improving monitoring of cargo moving within the in-bond system, assess the systemic problems causing open in-bond transactions and impeding their identification and make adjustments to ACE and provide appropriate tools to eliminate these problems and improve the capacity of CBP officers, importers, and shipping agents to track and close open in-bond transactions. | CBP conducted an assessment of the problems with the in-bond system in 2008 and determined that the reporting system for in-bond did not properly report closed in-bond shipments due to a flaw in the programming language. CBP made the necessary programming changes to improve its internal reporting on in-bond transactions, and communicated the changes in a memo to the directors of field operations in July 2008. CBP officials also told us that the new module for in-bond transactions in the Automated Commercial Environment (ACE) would provide more information about in-bond shipments and would help program managers exercise more effective oversight over the in-bond process. The memo also...
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| United States Customs and Border Protection | To improve management of the in-bond program through better informed decisions affecting trade, revenue collection, and security goals, the Secretary of Homeland Security, acting through the CBP Commissioner, should, with respect to improving monitoring of cargo moving within the in-bond system, revise in-bond regulations to reduce the time allowed for transporting cargo and to limit the ability of carriers to change the final destination for cargo without CBP knowledge. | In May 2008, CBP's working group developed proposed regulation changes to 19 CFR Part 18. These changes include (1) requiring importers to electronically notify CBP prior to diverting in-bond cargo to a new destination port and (2) reducing the transit period to 30-days for in-bond modes of transportation. The Assistant Commissioner of the Office of Field Operations submitted the working group's recommended regulation changes to CBP's Office of International Trade for internal review and considered the changes to be a high priority for the Office of Field Operations. Per a teleconference on August 21, 2008, CBP officials (Director of Cargo Control) and (In-bond Program Manager, Cargo...
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| United States Customs and Border Protection | To improve management of the in-bond program through better informed decisions affecting trade, revenue collection, and security goals, the Secretary of Homeland Security, acting through the CBP Commissioner, should, with respect to improving monitoring of cargo moving within the in-bond system, develop a more systematic enforcement strategy to increase bondholder compliance in closing out open in-bond transactions within required time frames. | CBP has taken several steps to increase compliance in closing out open in-bond transactions in a more systematic matter, which has significantly reduced the number of open transactions. According to a CBP report to Congress, the number of overdue in-bond shipments is shrinking due to increased reconciliation and investigations of open in-bond shipments by CBP. Moreover, CBP expects the enhancements to the overdue in-bond reports in Automated Commercial System (ACS) will help reduce the number of investigations needed into overdue in-bond entries. In July 2008, CBP's Office of Information and Technology completed significant programming changes to improve the performance of the MO2...
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| United States Customs and Border Protection | To improve management of the in-bond program through better informed decisions affecting trade, revenue collection, and security goals, the Secretary of Homeland Security, acting through the CBP Commissioner, should, with respect to improving monitoring of cargo moving within the in-bond system, prioritize closing in-bond records for shipments with high potential risks of security, law enforcement, and revenue loss, using updated information from the in-bond form. | CBP has taken several steps to increase compliance in closing out open in-bond transactions in a more systematic matter, which has significantly reduced the number of open transactions. In July 2008, CBP's Office of Information and Technology completed significant programming changes to improve the performance of the MO2 report, a report that assists CBP officers track and investigate overdue in-bond shipments. The improvements made to the MO2 reporting system have greatly enhanced CBP officer's ability to close open in-bonds target in a timely manner, inspect, and investigate overdue in-bond shipments. As a result of programming changes made to the MO2 reporting system, concerns about...
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| United States Customs and Border Protection | To improve management of the in-bond program through better informed decisions affecting trade, revenue collection, and security goals, the Secretary of Homeland Security, acting through the CBP Commissioner, should, to make the in-bond compliance measurement program a more effective tool for monitoring compliance with in-bond regulations, ensure that the current compliance measurement program (Tinman) or any updated commercial compliance tool is consistently conducted by the ports so as to inform CBP national and port management of needed corrective actions. |
CBP agreed with our recommendation and has taken steps to ensure that the Tinman program is consistently conducted by the ports. In June 2007, the Executive Director of Cargo and Conveyance Security sent a memo to the Directors of Field Operations citing our findings and directing all ports to complete the mandatory Tinman audits. Furthermore, the memo requires field office in-bond coordinators to submit monthly reports on the completion of Tinman audits to Program Manager of the Manifest and Conveyance Branch in headquarters.
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Data collectionHomeland securityImport regulationImportingInspectionInternal controlsInternational tradeMonitoringPort securityProgram evaluationRisk assessmentRisk managementTrade regulation