CBP Uses a Targeting Process to Identify Potential Textile Transshipment

CBP’s process for identifying potential illegal textile transshipments  depends on targeting suspicious activity by analyzing available data and  intelligence. With the expiration of the WTO global  textile quota regime in 2005, CBP will lose its authority to conduct TPVTs in  the former quota countries, and supplementing the enforcement  information provided to the ports will be important. Information from  overseas Customs Attaché offices and cooperative efforts with foreign  governments can provide additional important information for port  inspections. However, while the TPVT reports are an important part of the targeting  process, they are not always provided in a timely manner to CBP ports,  CITA, and the foreign governments. Weak Internal Controls Hinder Effectiveness of CBP’s In-bond System

CBP uses its in-bond system to monitor cargo, including foreign textiles,  transiting the U.S. commerce or being exported to a foreign country. However, weak internal controls in this system enable cargo to be illegally  diverted from the supposed destination, thus circumventing U.S. quota  restrictions and duties. This is merchandise “in  transit” through the United States. Seizure of the textile shipment. Moreover, CBP’s system for assessing liquidated damages does not provide  a strong deterrent against in-bond diversion. 107-210, Aug. 6, 2002),  Congress directed GAO to review U.S. Customs and Border Protection’s  (CBP) system for monitoring and enforcing textile transshipment and  make recommendations for improvements, as needed, to the Chairman and  the Ranking Minority Member of the Senate Committee on Finance and the  Chairman and the Ranking Minority Member of the House Committee on  Ways and Means. As discussed with Committee representatives, we have  focused on answering the following questions: (1) how CBP identifies  potential textile transshipment, (2) how well CBP’s textile review process  works to prevent illegal textile transshipment, (3) how effectively CBP  monitors foreign textiles transiting the United States in its in-bond system  before entering U.S. commerce or being exported, and (4) what challenges  CBP experienced in using penalties and other means to deter illegal textile  transshipment. To  review CBP’s foreign factory visits, we observed a Textile Production  Verification Team (TPVT) visit in El Salvador. Also, as quotas are  removed, a more competitive market may place increasing pressure on the  U.S. textile and apparel industry.
Why GAO Did This Study

U.S. policymakers and industry groups are concerned that some foreign textile and apparel imports are entering the United States fraudulently and displacing U.S. textile and apparel industry workers. Congress mandated GAO to assess U.S. Customs and Border Protection's (CBP) system for monitoring and enforcing textile transshipment and make recommendations for improvements, as needed. Therefore, GAO reviewed (1) how CBP identifies potential illegal textile transshipment, (2) how well CBP's textile review process works to prevent illegal textile transshipment, and (3) how effectively CBP uses its in-bond system to monitor foreign textiles transiting the United States.

What GAO Found

To identify potential illegal textile transshipments, CBP uses a targeting process that relies on analyzing available trade data to focus limited inspection and enforcement resources on the most high-risk activity. In 2002, CBP targeted about 2,500 textile shipments out of more than 3 million processed, or less than 0.01 percent. Given resource constraints at CBP ports, CBP's textile review process for preventing illegal textile transshipment increasingly depends on information from foreign factory visits that CBP conducts, based on the targeting results. However, CBP's foreign factory visit reports are not always finalized and provided to ports, other agencies, or the foreign governments for timely follow-up. Further, after the global textile quotas end in 2005, CBP will lose its authority to conduct foreign factory visits in former quota countries. U.S. overseas Attache offices and cooperative efforts by foreign governments can supplement information provided to the ports. Under CBP's in-bond system, foreign textiles and apparel can travel through the United States before formally entering U.S. commerce or being exported to a foreign country. However, weak internal controls in this system enable cargo to be illegally diverted from its supposed destination, thus circumventing quota restrictions and payment of duties. Moreover, CBP's penalties do not deter in-bond diversion. Bond amounts can be set considerably lower than the value of the cargo, and violators may not view the low payments as a deterrent against diverting their cargo.