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Despite Efforts, Amount of Uncollected AD/CV Duties Sees Sharp Increase

Wednesday, November 13, 2019
Sandler, Travis & Rosenberg Trade Report

The amount of antidumping and countervailing duties that have gone uncollected by U.S. Customs and Border Protection since 2001 has increased from $2.3 billion to $4.5 billion in the last three years, according to new information from the Government Accountability Office. CBP and the Commerce Department continue to make efforts to address this problem but with apparently limited success.

The GAO states that as of May 2019 CBP had collected more than $20 billion in AD/CV duties for bills issued during fiscal years 2001 through 2018, including about $19 billion in initial estimated duties and another $1.6 billion as a result of retrospective upward adjustments of final duty rates. About 65,000 of the 544,000 bills issued as a result of such adjustments remained open and uncollected, up from 41,000 in August 2016, and the value of these bills was $4.5 billion, up from $2.3 billion. More than 80 percent of this value was accounted for by bills of more than $50,000, and 43 percent was owed by just 20 importers.

In an August 2016 report, the GAO identified several issues contributing to the large amount of uncollected AD/CV duties, and in April 2017 President Trump issued an executive order directing federal authorities to step up the collection of such duties. The current GAO report provides the following update on measures CBP and the DOC have taken or are taking in response.

Setting Duty Rates. DOC has taken steps to update and implement quality assurance processes for setting AD/CV duty rates, including improvements to its AD/CV questionnaire to collect more accurate and comprehensive information from exporters and foreign producers. However, the DOC’s duty calculation error rate rose from four percent for FY 2013-2015 to six percent for FY 2016-2018. The department attributed this increase to increased workloads (e.g., the number of AD/CV duty orders enforced grew from 280 to 457), high turnover of experienced staff, and little increase in overall staff levels (from 118 to 127).

Risk Models. CBP has developed and successfully tested two statistical models to identify key non-payment risk factors, including the type of goods, country of origin, and whether the importer is from a foreign country. One test demonstrated that CBP could have predicted more than 95 percent of the importers with delinquent AD/CV duty bills in FYs 2016 and 2017. CBP has requested $17 million in FY 2020 funds to make the updates to its information systems needed to facilitate the implementation of these models.

Bond Adjustments. CBP is developing a supplemental AD/CV duty continuous entry bond based on a new formula that incorporates the non-payment risk factors identified in its statistical models. An April 2018 test of this formula indicated that it would have yielded significantly higher collections in both number and value of bills during FYs 2007 through 2017. However, trade community members said the proposed formula would have resulted in over-insurance, which could increase importer costs, so CBP is working with them to refine its approach.

In addition, a CBP analysis showed that the use of single transaction bonds with an amount based on the results of its statistical model would have resulted in the collection of significantly more revenue in FYs 2007 through 2018. CBP is now working with the trade to test a risk-based application of single transaction bonds to historical entries to assess whether the bond would have reduced the amount of uncollected duties.

CBP is also considering a risk-based approach to mitigate revenue risks on all entries with no-payment risk.

Liquidation. CBP has taken steps to better manage the AD/CV duty liquidation process, including centralizing the processing of entries through its ten Centers of Excellence and Expertise. CBP has also developed information systems reports to help manage the review, administration, and oversight of AD/CV duties, which from FY 2017 to FY 2018 helped lower the number of deemed liquidations (those occurring outside the statutory six-month time frame) from 7,300 to 2,500 and increase compliance with this statutory requirement from 50 percent to 80 percent.

Collections Agencies. In a 2016 pilot project, two collection agencies experienced challenges similar to those faced by CBP in collecting unpaid AD/CV duties; i.e., lack of information on importers. CBP states that the project did not yield results and that neither agency opted to continue its collection efforts.

Other Efforts. CBP believes other initiatives currently underway could enhance its ability to assess risk and improve collection efforts, including the new importer identity form 5106 and a proposal to set minimum requirements for customs brokers to collect and verify information on their importer clients.

For more information, please contact customs and trade attorneys Lenny Feldman at (305) 894-1011 or Kristen Smith at (202) 730-4965.

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