GAO Reports on CBP's Application of Revised Continuous Bond Policy to Imports of Shrimp

According to the GAO, since 2003, U.S. Customs and Border Protection (CBP) has been unable to collect at least $480 million in antidumping (AD) and countervailing (CV) duties. In July 2004 CBP revised its policy on continuous bonds (CB) that importers post in order to reduce the risk of uncollected AD and CV duties. The policy significantly increases the amount of the bonds for affected importers.

The GAO examined why and how CBP revised its CB policy, how it implemented the revised policy, and the effects of the revised policy.

CBP Applied Revised CB Policy to Imports of Shrimp as a "Test Case"

The GAO explains that CBP developed the revised CB policy internally, and then conducted some outreach prior to applying it to imports of shrimp beginning in February 2005 as a "test case." Before implementing the policy, CBP conducted outreach, but some importers criticized CBP's outreach as insufficient. The GAO states that the revised CB policy significantly increased bond amounts for some shrimp importers.

GAO Finds Test Implementation Lacked Transparency and Consistency

In its report, the GAO states that CBP's implementation of the revised CB policy lacked transparency and consistency. According to CBP, many importers inquired about lowering their bond requirement, and CBP lowered bond requirements under certain circumstances.

However, CBP's procedures for adjusting bond requirements were not formally written and were not public. GAO's review of CBP and importer records showed that CBP set bond requirements on the basis of different data time periods for different importers and used inconsistent criteria when considering bond requests.

Following the application of the revised CB policy to imports of shrimp as a "test case," U.S. importers and trading partners initiated legal action to prevent CBP from continuing to apply the policy.

Revised CB's Policy's Successful Protection of Revenue is Unclear

The GAO explains that the revised CB policy is expected and reported to have a variety of effects on revenue protection, importers, and imports. CBP reports that the revised CB policy protects additional revenue, but the degree of success cannot be known yet.

The GAO also notes that importers report facing higher costs as a result of the revised policy, which they say leads them to change business practices and has reduced profitability. Trade data shows that some importer patterns shifted after the AD petition but before the revised CBP policy was announced.

GAO Recommends CBP Conduct Formal Review, Develop Guidance

As a result of its findings, the GAO recommends that the Commissioner of CBP: (1) conduct a formal review of the lessons CBP has learned from implementing the revised CB policy on shrimp imports, and (2) develop clear and consistent guidance for implementing the policy and take steps to inform covered importers of the basis upon which CBP will reduce importers' bond requirement.

The GAO adds that the Department of Homeland Security (DHS) agreed with GAO's recommendations and provided technical comments. The Department of Commerce also provided technical comments.

(See ITT's Online Archives or 07/13/04 news, 04071305, for BP summary of the July 2004 revisions to CB policy. See ITT's Online Archives or 08/15/05 news, 05081505, for BP summary of CBP's modification to its July 2004 CB policy guidelines.

See ITT's Online Archives or 11/01/06 news, 06110105, for BP summary of CBP's updated information (monetary guidelines) on setting continuous bond amounts for special categories of AD/CV merchandise.) These monetary guidelines appear to have been issued in response to the GAO report.

GAO Contact - Loren Yager (202) 512-4347

GAO Report (GAO-07-50, dated October 2006) available athttp://www.gao.gov/cgi-bin/getrpt?GAO-07-50