Congress  noted in its accompanying findings that “continued dumping and  subsidization . CBP Faces Three Key Problems Implementing CDSOA

CBP faces three key problems in implementing CDSOA. First, despite some  recent improvements, CBP’s processing of CDSOA claims and  disbursements is labor intensive, and the agency is facing a dramatic  increase in its 2005 workload. Third, CBP disbursed only about half the funds that should  have been available in fiscal year 2004 because of ongoing problems  collecting AD/CV duties. Companies are not held accountable for the claims they file because CBP  does not require them to provide any supporting documentation for their  claims and does not systematically verify company claims. CBP has only verified the claims of a handful of claimants. CDSOA Payments Largely Concentrated on a Few Companies and Industries, with Mixed Effects Reported

Most CDSOA payments went to a small number of U.S. producers and  industries, with mixed effects reported. In  four of these industries—bearings, candles, crawfish, and pasta— recipients we contacted reported benefits, but some non-recipients said  that CDSOA payments were having adverse effects on their ability to  compete in the U.S. market. Retaliation Against U.S. Producers Underway for U.S. Failure to Comply with WTO Ruling on CDSOA

After finding the CDSOA inconsistent with WTO agreements and after the  United States’ failure to bring the act in compliance with the agreements, in  2004 the WTO gave 8 of the 11 members that complained about CDSOA  authorization to suspend concessions or other WTO obligations owed to  the United States. The total suspension authorized for 2005  could be up to $134 million based on the fiscal year 2004 CDSOA  disbursements. On May 1, 2005, Canada and the European Communities began the  imposition of additional duties on various U.S. exports. For instance, while trade  remedies such as AD/CV duties generally provide relief to all producers in a  particular market, the eligibility requirements of CDSOA limit relief to only  a subset of domestic producers—only those that petitioned for relief or  that publicly supported the petition by sending a letter to the ITC or filling  an ITC questionnaire while the agency was conducting its original  investigation and remain in operation. The  CDSOA program’s time frame for processing payments is already too tight  to perform desired quality controls. Specifically, we assessed (1) what  key legal requirements guide and have affected agency implementation of  CDSOA; (2) what problems, if any, U.S. agencies have faced in  implementing CDSOA; and (3) which U.S. companies and industries have  received payments under CDSOA and what effects these payments have  had for recipient and non-recipient companies; and described (4) the status  of the World Trade Organization (WTO) decisions on CDSOA. To determine which U.S. companies and industries have received payments  under CDSOA and what effects these payments have had for recipient and  non-recipient companies, we obtained and analyzed CBP’s annual  disbursement data for fiscal years 2001 to 2004 and collected information  from top CDSOA recipients and from recipients and non-recipients in seven  industries. Their views are not necessarily representative of all CDSOA  recipients.
Why GAO Did This Study

Between fiscal years 2001 and 2004, the Continued Dumping and Subsidy Offset Act (CDSOA) provided over $1 billion funded from import duties to U.S. companies deemed injured by unfair trade. Some supporters state CDSOA helps U.S. companies compete in the face of continuing unfair trade. Some opponents believe CDSOA recipients receive a large, unjustified windfall from the U.S. treasury. Also, 11 World Trade Organization (WTO) members lodged a complaint over the law at the WTO. This report assesses (1) key legal requirements guiding and affecting agency implementation of CDSOA; (2) problems, if any, U.S. agencies have faced in implementing CDSOA; and (3) which companies have received CDSOA payments and their effects for recipients and non-recipients; and describes (4) the status of WTO decisions on CDSOA.

What GAO Found

Congress enacted CDSOA to strengthen relief to injured U.S. producers. The law's key eligibility requirements limit benefits to producers that filed a petition for relief or that publicly supported the petition during a government investigation to determine whether injury had occurred. This law differs from trade remedy laws, which generally provide relief to all producers in an industry. Another key CDSOA feature requires that Customs and Border Protection (CBP) disburse payments within 60 days after the beginning of a fiscal year, giving CBP limited time to process payments and perform desired quality controls. This time frame, combined with a dramatic growth in the program workload, presents implementation risks for CBP. CBP faces three key implementation problems. First, processing of company claims and CDSOA payments is problematic because CBP's procedures are labor intensive and do not include standardized forms or electronic filing. Second, most companies are not accountable for the claims they file because they do not have to support their claims and CBP does not systematically verify the claims. Third, CBP's problems in collecting duties that fund CDSOA have worsened. About half of the funds that should have been available for disbursement remained uncollected in fiscal year 2004. Most of the CDSOA payments went to a few companies with mixed effects. About half of these payments went to five companies. Top recipients we surveyed said that CDSOA had beneficial effects, but the degree varied. In four of seven industries we examined, recipients reported benefits, but some non-recipients noted CDSOA payments gave their competitors an unfair advantage. These views are not necessarily representative of the views of all recipients and non-recipients. Because the United States has not brought CDSOA into compliance with its WTO obligations, it faces additional tariffs on U.S. exports covering a trade value of up to $134 million based on 2004 CDSOA disbursements. Recently, Canada, the European Union, Mexico, and Japan imposed additional duties on various U.S. exports. Four other WTO members may follow suit.