Uncollected AD/CV Duties Are Substantial and Highly Concentrated

Uncollected AD/CV duties from fiscal years 2001 through 2007 amount to  over $613 million and are highly concentrated among a few industries,  products, countries of origin, and importers. In addition, a relatively small number of large AD/CV duty bills and  unresolved legal protests accounts for a sizeable portion of the  uncollected AD/CV duties. However, the law generating this reporting has  been repealed. By product. However, a relatively small number of bills for more than $1 million  increased the average (mean) bill amount to more than $26,000. According to  private sector representatives and congressional staff, such reporting has  been critical to oversight of CBP’s efforts to collect AD/CV duties. First, the retrospective  component of the U.S. AD/CV duty system creates the risk of uncollected  duties because the final amount of AD/CV duties an importer owes can  exceed the amount it paid when goods entered the country. Congress addressed one of these risks by temporarily suspending  importers’ ability to post bonds and requiring a cash payment to cover the  estimated AD/CV duties owed at the time of importation when purchasing  from a new shipper. Third, all importers must provide a general bond to  secure the payment of duties, but CBP’s standard bond formula provides  little protection of AD/CV duty revenue because it sets bond amounts at a  low level. CBP addressed this by revising its standard bond formula for  imports subject to AD/CV duties, but the revision has only been applied to  one product and faces challenges in domestic courts and internationally. Fourth, CBP collects minimal information regarding importers and does  not conduct background or financial checks, which creates challenges to  locating and collecting AD/CV duties. However, in some cases, final duty rates are  significantly higher. New Shipper Reviews Enhance Risk for Uncollected AD/CV Duties; Congress Has Partially Addressed This Risk

U.S. law pertaining to the application of AD/CV duties to “new shippers”  poses two types of risks related to the collection of these duties. For example, a new  shipper can purposely make one commercial shipment to the United  States at a relatively high price for which the importer would pay a  relatively high AD/CV duty rate, then request a review of that shipment. CBP’s Standard Bond Formula Provides Little Protection of AD/CV Duty Revenue; CBP Has Taken Steps to Address This Risk, but Faces Challenges

CBP’s standard bond setting formula provides little protection for securing  AD/CV duty revenue when the final amount of AD/CV duties owed exceeds  the amount paid at the time of importation. Each set has both  potential advantages and disadvantages. Congress Could Eliminate the Retrospective Component of the U.S. AD/CV Duty System

U.S. law could be changed to eliminate the retrospective component of the  U.S. AD/CV duty system and, instead, treat AD/CV duties assessed at the  time the product enters the country essentially as final. Under a prospective AD/CV duty  system, the amount of duties assessed may not match the amount of actual  dumping or subsidization. Under a retrospective AD/CV duty system, the amount of duties assessed  reflects the actual amount of dumping by the exporter for the period of  review. However, in practice, a  substantial amount of retrospective AD/CV duty bills are not collected. This gap between the amount of duties assessed and the amount collected  means that the government is not fully remedying the unfair trade practice. Conclusions

The existence of a substantial amount of uncollected AD/CV duties  undermines the effectiveness of the U.S. government’s efforts to deter  unfair foreign trade practices and reduces the amount of revenue available  to the U.S. government. With more than $600 million in AD/CV duties  currently uncollected, a large portion of which is likely to be written off,  the U.S. government’s efforts to remedy injurious unfair trade practices  also has been seriously compromised. Specifically, we  examined (1) the extent and nature of uncollected AD/CV duties, (2) the  key factors contributing to risks for uncollected AD/CV duties and the  steps taken to improve the collection of AD/CV duties, (3) interagency  communications that affect the processing of AD/CV duties, and (4)  potential options for improving AD/CV duty collections.
Why GAO Did This Study

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

What GAO Found

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.