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CBP Should Strengthen Ability to Assess, Respond to FTZ Compliance Risks, GAO Says

Monday, September 04, 2017
Sandler, Travis & Rosenberg Trade Report

U.S. Customs and Border Protection plans to take steps to improve its ability to assess and respond to compliance risks in the foreign-trade zone program in accordance with recommendations in a recent Government Accountability Office report.

FTZs are secure areas located throughout the U.S. that are treated as outside U.S. customs territory for duty assessments and other customs entry procedures. Companies operating FTZs may reduce, eliminate, or defer duty payments on goods manufactured or stored in FTZs before they enter U.S. commerce or are exported. In 2015, the total value of goods admitted to FTZs was approximately $660 billion, including about $245 billion in foreign goods (11 percent of total U.S. imports that year). Exports from FTZs grew from approximately $54 billion in 2011 to $85 billion in 2015.

CBP is responsible for FTZ oversight and enforcement and assessing the risk of noncompliance with laws and regulations. The report found that officials from CBP field offices conduct regular compliance reviews of individual FTZ operators and take a range of enforcement actions based on the violations found. However, the report adds, CBP does not centrally compile FTZ compliance and enforcement information to analyze and respond to compliance and internal control risks across the program. As a result, CBP cannot verify its assertion that the FTZ program is at low risk of noncompliance, which could impact program effectiveness and revenue collection (which totaled $3 billion in 2016).

In response to specific GAO recommendations to address these issues, CBP said it intends to take the following actions: (1) prepare and disseminate a summary template for compiling FTZ compliance reviews and internal control risks across the FTZ program, (2) conduct a risk analysis across the FTZ program, and (3) finalize a compliance review handbook for ACE that incorporates risk assessment tools and best practices for FTZ compliance review and risk categorization.

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