	Background

		The U.S. AD/CV Duty Collection Process

The process for importing goods into the United States generally involves  at least two private parties (exporters and importers) as well as the U.S.  government. We Estimate $2.3 Billion in Unpaid AD/CV Duty Bills, but CBP Does Not Expect to Collect Most of That Amount

Our analysis shows that the total amount of unpaid AD/CV duty bills  issued for goods that entered the United States during fiscal years 2001  through 2014 was about $2.3 billion as of May 12, 2015. Our analysis shows that AD/CV duty bills with unpaid amounts are  concentrated among a small number of importers, with 20 importers  accounting for about 50 percent of the $2.3 billion owed. When the  final duty rate exceeds the initial estimated duty rate, importers are billed  for the additional duties owed. In  its Performance and Accountability Report for fiscal year 2015, CBP  reported that about $1.6 billion of AD/CV duty debt was uncollectible. Various CBP Efforts to Improve AD/CV Duty Collection and to Use Bonding to Mitigate Nonpayment Risk Have Produced Limited Results

CBP has undertaken several efforts to improve its collection of AD/CV  duties or to protect against the risk of uncollectible final duty bills through  enhanced bonding; however, these efforts had yielded limited results as  of May 2016. For example, CBP launched an initiative to reduce  processing errors that result in CBP closing duty bills at the initial  estimated duty rate rather than the final duty rate; in such cases, the initial  duty paid may be significantly higher or lower than the final duty amount  owed. Though the initiative has shown positive results, as of May 2016,  its application had been limited. In addition, CBP had not collected and  analyzed data systematically to help it monitor and minimize these duty  processing errors. As a result, CBP does not know the extent of these  errors and cannot take timely or effective action and avoid the potential  revenue loss they may represent. Insufficient Risk Analysis of Unpaid AD/CV Duties Has Resulted in CBP Missing Opportunities to Mitigate Lost Revenue

CBP’s limited analysis of the risk to revenue from potentially uncollectible  AD/CV duties (nonpayment risk) does not accurately assess country- and  product-associated risk or risks associated with other entry characteristics  and misses opportunities to identify and mitigate nonpayment risk. The  standard definition of risk with regard to a negative event that could occur  includes both the likelihood of the event and the significance of the  consequences if the event occurs; however, CBP does not attempt to  assess either of these for any given entry of goods subject to AD/CV  duties entering U.S. customs. As our  analysis demonstrates, a more comprehensive analysis of CBP data  related to AD/CV duties is feasible and could help CBP better identify key  risk factors associated with nonpayment risk. To improve risk management in the collection of AD/CV duties, CBP  should, consistent with U.S. law and international obligations, take  steps to use its data and risk assessment strategically to mitigate  AD/CV duty nonpayment, such as by using predictive risk analysis to  identify entries that pose heightened risk and taking appropriate action  to mitigate the risk. In its comments, CBP  concurred with all three of our recommendations. GAO staff who made key contributions to this  report are listed in appendix V.

Appendix I: Objectives, Scope, and Methodology

This report (1) examines the status and composition of uncollected  antidumping (AD) and countervailing (CV) duties, (2) the extent to which  the U.S. Customs and Border Protection (CBP) has taken steps to  improve its billing and collection of AD/CV duties, and (3) the extent to  which CBP uses and could further use its data to assess and mitigate the  risk to revenue from potentially uncollectible AD/CV duties. The first ACS dataset contained AD/CV duty  entry data; the second contained final assessed AD/CV duty rate data;  and the third contained importer AD/CV duty billing data. We also  reviewed CBP’s reports to Congress.
Why GAO Did This Study

The United States assesses AD duties on products imported at unfairly low prices (i.e., dumped) and CV duties on products subsidized by foreign governments. Nonpayment of AD/CV duties means the U.S. government has not fully remedied unfair trade practices and results in lost revenue.
GAO was asked to review CBP's efforts to improve the collection of AD/CV duties. This report (1) examines the status and composition of uncollected AD/CV duties, (2) the extent to which CBP has taken steps to improve its collection of such duties, and (3) the extent to which CBP assesses and mitigates the risk to revenue from potentially uncollectible AD/CV duties. GAO analyzed CBP AD/CV duty entry data for fiscal years 2001 through 2014, AD/CV duty billing data as of mid-May 2015, and Department of Commerce data for fiscal years 2002–2015. GAO also reviewed agency documents, interviewed agency and private sector officials, and analyzed CBP data to assess the risk of duty nonpayment.

What GAO Found

GAO estimates that about $2.3 billion in antidumping (AD) and countervailing (CV) duties owed to the U.S. government were uncollected as of mid-May 2015, based on its analysis of AD/CV duty bills for goods entering the United States in fiscal years 2001–2014. U.S. Customs and Border Protection (CBP) reported that it does not expect to collect most of that debt. GAO found that most AD/CV duty bills were paid and that unpaid bills were concentrated among a small number of importers, with 20 accounting for about 50 percent of the $2.3 billion uncollected. CBP data show that most of those importers stopped importing before receiving their first AD/CV duty bill. As GAO has previously reported, the U.S. AD/CV duty system involves the retrospective assessment of duties, such that the final amount of AD/CV duties an importer owes can significantly exceed the initial amount paid at the estimated duty rate when the goods entered the country.
CBP has undertaken efforts to improve its collection of AD/CV duties or to protect against the risk of unpaid final duty bills through bonding, but these efforts have yielded limited results. For example, CBP launched an initiative to reduce processing errors that result in CBP closing duty bills at the initial duty rate rather than the final duty rate, such that the initial duty paid may be significantly higher or lower than the final duty amount owed. Though the initiative has shown positive results, as of May 2016, its application had been limited. In addition, CBP had not collected and analyzed data systematically to help it monitor and minimize these duty processing errors. As a result, CBP does not know the extent of these errors and cannot take timely or effective action and avoid the potential revenue loss they may represent.
CBP's limited analysis of the risk to revenue from potentially uncollectible AD/CV duties (nonpayment risk) misses opportunities to identify and mitigate nonpayment risk. The standard definition of risk with regard to some negative event that could occur includes both the likelihood of the event and the significance of the consequences if the event occurs; however, CBP does not attempt to assess either of these risk components for any given entry of goods subject to AD/CV duties. GAO's analysis, applying standard statistical methods, demonstrates that a more comprehensive analysis of CBP data related to AD/CV duties is feasible and could help CBP better identify key factors associated with nonpayment risk and take steps to mitigate it.

What GAO Recommends

GAO recommends that CBP (1) issue guidance to collect and analyze data on a regular basis to find and address the causes of AD/CV duty liquidation errors and track progress; (2) regularly conduct a comprehensive risk analysis that considers likelihood as well as significance of risk factors related to duty nonpayment; and (3) take steps to use its data and risk assessment strategically to mitigate AD/CV duty nonpayment consistent with U.S. law and international trade obligations. CBP concurred with all three recommendations.