CBP Adapted Existing Mechanisms to Comply with the Verification Requirements under the Act

As required by the act, CBP has developed processes to verify the importer  declaration, which includes verifying that  the export price declared by the importer is the same as the export price  provided on the export permit, if any, issued by the country of export;  the estimated export charge is consistent with the applicable export  charge rate as provided by Commerce; and importers have “made appropriate inquiry, including seeking appropriate  documentation from the exporter,” and to the best of the importer’s  knowledge and belief that the exporter has paid or committed to pay all  applicable export charges. Agency Officials Believe That the Act’s Requirements Add Little to Their Efforts to Monitor Compliance with the Bilateral Trade Agreement; Requirements Are Likely to Continue after the Agreement Expires

CBP, Commerce, and USTR officials stated that the information produced  through the reconciliation and verification requirements under the act do  not directly help them monitor compliance with the 2006 Softwood  Lumber Agreement with Canada. The 2006 agreement with Canada  contains mechanisms for monitoring compliance, and, according to U.S.  government officials, the added reconciliation and verification  requirements of the Softwood Lumber Act of 2008 do not provide the U.S.  government with additional assurance of compliance with the bilateral  agreement. Similarly, CBP officials said the verification process for imports from  Canada does not provide the agency with additional information about  whether Canadian exporters are complying with the provisions of the  bilateral trade agreement, because the U.S. government does not have  access to the Canadian government’s tax records and therefore has no  means to confirm whether Canadian companies actually paid the export  charge. Some of the act’s requirements are to ensure the proper implementation  and operation of international agreements on softwood lumber and assist  in the enforcement of these obligations. The 2006 Softwood Lumber  Agreement is in force until 2013; however, the act does not have an  expiration date. CBP officials said they have not yet  determined how they will fulfill their requirements under the act when the  agreement expires, but assume that they will have to continue  implementing the verification and importer declaration requirements. Recommendation for Executive Action

To provide Congress with sufficient time to clarify the U.S. Customs and  Border Protection’s requirements under the Softwood Lumber Act of 2008,  we recommend that the Secretary of Homeland Security direct the  Commissioner of CBP to report to Congress on how the agency plans to  fulfill the requirements of the act upon the expiration of international  agreements related to softwood lumber. To better understand how the act’s requirements for reconciliations and  verifications contribute to U.S. monitoring of the 2006 Softwood Lumber  Agreement, we interviewed knowledgeable officials, and obtained  information from the Department of Commerce (Commerce), the Office of  the U.S. Trade Representative (USTR), and CBP. Appendix III: CBP Continues to Address Challenges to Reconciling Value Data under the 2006 Softwood Lumber Agreement

In June 2009, GAO reported on the challenges that U.S. and Canadian  officials identified in reconciling the U.S.-entered value and the Canadian  export price data. However, CBP provided us with data on U.S. imports from Canada at the  regional level. According to USTR and  Commerce officials, the United States is now reviewing and analyzing  these data and other information provided.
Why GAO Did This Study

In 2006, the United States and Canada signed the Softwood Lumber Agreement. The agreement, among other things, imposed export charges and quotas on Canadian lumber exports to the United States. To assist in monitoring compliance with the agreement, in 2008 Congress passed the Softwood Lumber Act, which imposed several data collection and analysis requirements on the Department of Homeland Security's U.S. Customs and Border Protection (CBP) and required two reports from GAO. This report discusses (1) CBP's processes for meeting the act's requirements and (2) how these requirements contribute to U.S. efforts to monitor compliance with the 2006 Softwood Lumber Agreement. GAO issued a report in June 2009 on U.S. agency efforts to monitor compliance with the 2006 agreement. This report includes an update on these efforts. GAO analyzed information from relevant U.S. agencies, interviewed knowledgeable officials, and discussed these issues with U.S. and Canadian industry representatives.

What GAO Found

CBP has developed processes to reconcile and verify data provided by the exporter and importer as required by the act, but officials acknowledge continuing issues with data quality. CBP reconciles aggregated export prices from the U.S. entry forms with aggregated export prices from Canadian export permits. To meet the act's verification requirement that the importer has correctly reported the export price, the tax to be paid by exporters to the Canadian government (the export charge), and other information, CBP has created a process within its existing data system to collect these data. However, CBP has acknowledged continuing problems with data quality. For example, CBP port officials manually enter data into this system, which could lead to miscoding. CBP reported that the initial implementation of the act required extensive effort for the agency, but officials stated that ongoing activities need fewer resources. According to CBP, Department of Commerce, and Office of U.S. Trade Representative officials, the information produced through the reconciliation and verification requirements under the act adds little assurance of compliance with the 2006 Softwood Lumber Agreement. Some of the act's requirements are to ensure the proper operation of international agreements on softwood lumber and enforcement of these obligations. The agreement with Canada contains mechanisms for monitoring compliance, and, according to U.S. government officials, the added requirements of the 2008 U.S. legislation do not provide the U.S. government with additional assurance of compliance with the bilateral trade agreement. Specifically, CBP officials told GAO the requirements under the act do not provide the United States with assurance that the Canadian exporter paid the export charge, because the United States does not have access to company-level tax data from Canada. While the agreement is scheduled to expire in 2013, the act does not have an expiration date. CBP officials said they have not yet determined how they will fulfill their requirements under the act when the agreement expires, but they would no longer have the estimated export charge data that are used in implementing the act.