GAO Recommends That Congress and Agencies Take Action to Improve Collection of Antidumping and Countervailing Duties
At the request of the Senate Appropriations and Finance Committees, the Government Accountability Office (GAO) was asked us to review the reasons why the duties are uncollected and what the U.S. government has done to address this problem. In addition, the Senate Committees asked GAO to identify options for improving the U.S. antidumping and countervailing duty system.
During its investigation GAO examined (1) the extent and nature of uncollected antidumping and countervailing duties, (2) the key factors contributing to risks for uncollected antidumping and countervailing duties and the steps taken to improve the collection of antidumping and countervailing duties, (3) interagency communications that affect the processing of antidumping and countervailing duties, and (4) potential options for improving antidumping and countervailing collections.
The GAO recently issued a report of its finding entitled "Antidumping and Countervailing Duties: Congress and Agencies Should Take Additional Steps to Reduce Substantial Shortfalls in Duty Collection". The report notes that U.S. Customs and Border Protection (CBP) has been unable to collect over $613 million in antidumping duties since 2001. These uncollected duties are concentrated among a few products, countries of origin, and importers. For example, GAO found that four products account for about 84% of the total amount of uncollected AD/CV duties. These four products, all from China, are crawfish tail meat ($354 million), garlic ($75 million), honey ($43 million), and mushrooms ($41 million).
The GAO also found U.S. importers purchasing products from China are associated with 90% of the total amount of uncollected duties and that a relatively small number of importers owe the majority of uncollected antidumping and countervailing duties. In fact, the GAO found that four companies accounted for more than one-third of the total amount of uncollected antidumping duties and 20 companies account for 63 percent of the total.
The report states that four key factors contribute to uncollected antidumping and countervailing duties, a few of which the U.S. government has partially addressed:
1. Because the U.S. antidumping and countervailing duty system involves the retrospective assessment of duties, the final amount of antidumping and countervailing duties an importer owes can significantly exceed the initial amount paid when the goods entered the country.
2. Companies that did not previously export products subject to antidumping and countervailing duties, i.e., "new shippers," pose two types of risks for collections. For example, new shippers can be assigned an antidumping and countervailing duty rate based on as few as one shipment, which can significantly underestimate the final duty rate. Also, importers purchasing from new shippers were able to provide a bond in lieu of a cash payment to cover the initial AD/CV duties assessed. Congress addressed this risk by temporarily requiring all importers to pay initial antidumping and countervailing duties in cash.
3. All importers must provide a general bond to secure the payment of all types of duties, but CBP's standard practice for setting the amount of this bond inadequately protects antidumping and countervailing duty revenue. CBP addressed this by revising its bonding formula for products subject to antidumping and countervailing duties, but the revision has been tested on only one product and faces domestic and international legal challenges.
4. CBP collects minimal information regarding importers and does not conduct background or financial checks, which creates challenges to locating importers and collecting antidumping and countervailing duties.
The report indicates that there are two sets of options for improving the collection of antidumping and countervailing duties, each of which involves potential advantages and disadvantages:
The first option involves revising U.S. law to eliminate the retrospective component of the U.S. antidumping and countervailing duty system by assessing final duties when the product arrives in the U.S. (i.e., a prospective system as in the European Union and Canada).
The second option involves making adjustments within the existing system. For example, Congress could revise the standards for new shipper reviews and CBP could examine the option of revising bonding requirements to protect additional antidumping and countervailing duty revenue.
A copy of the complete report can be found here: www.gao.gov/new.items/d08391.pdf.