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GAO Finds $2.3 Billion in Uncollected AD/CV Duties; CBP Taking Steps to Remedy

Wednesday, August 17, 2016
Sandler, Travis & Rosenberg Trade Report

About $2.3 billion in antidumping and countervailing duties went uncollected over the past 15 years and U.S. Customs and Border Protection does not expect to recover most of that debt, according to a recent Government Accountability Office report. The report states that by not fully collecting these duties the U.S. government not only loses a substantial amount of revenue but also compromises its efforts to deter and remedy unfair and injurious trade practices. CBP responded that it is taking several steps in an effort to address this problem.

A GAO analysis of AD/CV duty bills for goods entering the U.S. in fiscal years 2001-2014 found that while CBP collects on about 90 percent of such bills it only collects, on average, about 31 percent of the dollar amount owed. For the approximately 41,000 unpaid bills during this time, the average was about $57,000 and the median was about $29,000. Unpaid bills were concentrated among a small number of importers (818 of about 33,000, or 2.5 percent), with 20 accounting for about 50 percent of the $2.3 billion uncollected, 17 of which stopped importing before receiving their first bill. About 95 percent of the total duties uncollected were associated with importers of goods from China.

GAO attributes the large amount of uncollected duties in part to the complex and retrospective U.S. AD/CV duty collection system. From FY 2001 through FY 2014, the report states, the time between entry of the goods and CBP issuing the AD/CV duty bill averaged about 2.6 years and about 10 percent of entries were liquidated at least 5.5 years or more after entry. The large differences between the initial estimated duty rate and the final assessed rate also contribute to unpaid bills, as importers receiving a large bill long after an entry is made may be unwilling or unable to pay. GAO’s analysis found that bills with a rate increase of between 100 and 200 percent went unpaid about 39 percent of the time, a figure that jumped to 79 percent if the rate increase was between 200 and 500 percent.

CBP has taken steps to improve AD/CV duty collections, but according to the report these efforts have yielded limited results. A five-person AD/CV duty collections team was created and has produced some positive results but has recently been hampered by staffing turnover and unfilled positions. Steps have been taken to centralize the management of bonds after bonding formulas were revised to better protect AD/CV duty revenue, although a World Trade Organization ruling could limit CBP’s ability to use bonding for that purpose. Agency officials said they are considering the feasibility of contracting with private collection agencies to pursue debts for which administrative efforts (including claims against applicable surety bonds) have been exhausted but are not sure if this measure will go forward.

Moreover, the report states, CBP faces a number of challenges in its efforts to improve its collection of AD/CV duties. For example, CBP does not know the extent to which it liquidates entries in an untimely manner or the effects such liquidations have on revenue. CBP has begun an initiative to centralize and improve oversight of liquidation processing at the ports, the report notes, but does not systematically collect and analyze data from this effort to identify trends or assess its impact on revenue. CBP has also not conducted a comprehensive risk assessment that examines the extent to which key entry characteristics other than country of origin and product type (e.g., size of final duty bill, dollar value of imported goods, and length of importer’s entry history) are associated with nonpayment risk. CBP already has access to these types of data, GAO states, and could develop more sophisticated models that use that data and incorporate the agency’s institutional expertise to improve risk prediction and mitigation.

To address these challenges, and in response to GAO recommendations, CBP said that its offices of Trade and Field Operations will be employing an annual self-inspection program to identify the causes of premature and deemed AD/CV duty liquidations and aim to complete an initial analysis by Sept. 30, 2016, and a final analysis by Sept. 30, 2017. GAO encouraged CBP to also track its progress on reducing such liquidations and report on any effects these liquidations may have on revenue. In addition, CBP has initiated a comprehensive statistical risk analysis that assesses both the likelihood and significance of risk factors and will use this analysis to develop a predictive model to identify, and take appropriate action to mitigate, the risk from specific entries that pose a higher likelihood of nonpayment of final AD/CV duties. GAO said CBP should ensure that such an analysis is conducted regularly.

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