GAO: CBP should take holistic approach to FTZ oversight

The Government Accountability Office (GAO) has recommended that U.S. Customs and Border Protection (CBP) take a more holistic approach to its compliance oversight of the nation’s sprawling foreign trade zone industry rather than on a case-by-case basis.    A congressional watchdog agency has recommended that U.S. Customs and Border Protection (CBP) take a more holistic approach to its compliance oversight of the nation’s sprawling foreign trade zone (FTZ) industry, rather than conducting these activities on a case-by-case basis.
   In 2016, there were 276 authorized FTZs across the United States. FTZs allow importers and exporters to reduce, eliminate or defer duty payments on manufactured or stored goods prior to releasing them into domestic commerce or exporting them out of the United States.
   CBP is in charge of FTZ compliance and ensures the collection of duties, taxes and fees from these facilities. The agency conducts periodic compliance reviews of FTZs, which includes reviews of transactions, records, procedures and facility conditions. CBP also reviews FTZ operator bonds to ensure they are sufficient to cover duties and fees owed based on the value of the merchandise held in the facilities.
   While CBP has found that FTZs are generally low-risk for non-compliance, the Government Accountability Office (GAO) says the agency has not conducted a “program-wide risk analysis” of the FTZ industry.
   “Most of the compliance reviews that are analyzed did not identify compliance problems, but many did not contain sufficient information to verify CBP’s assertion that the program is low risk,” GAO said in a report released Monday.
   “CBP officials said that they had not conducted a program-wide risk analysis of the FTZ program because it would be too time-consuming and costly based on how compliance review and enforcement information is currently collected and stored, and because of their assertion that the program has a low risk of non-compliance,” the office added.
   GAO, however, disagreed with CBP’s low-risk for non-compliance standpoint regarding FTZs, primarily because CBP has not carried out a program-wide risk assessment.
   “Without a program-wide assessment of the frequency and significance of problems identified during compliance reviews, risk levels determined, and enforcement actions taken, CBP does not have reasonable assurance that the FTZ program is at low risk of non-compliance,” GAO said.
   GAO recommended that CBP “centrally compile” data from its FTZ compliance reviews and related enforcement activities to develop an overall compliance analysis of the industry. In addition, it recommended conducting a risk analysis of the FTZ program at large and “utilize the results of the program-wide risk analysis to respond to identified risks.”
   CBP agreed with most of the GAO’s recommendations, stating that it intends to “prepare and disseminate a summary template for compiling FTZ compliance reviews and internal control risks across the FTZ program,” as well as conduct a risk analysis across the FTZ program. In addition, CBP plans to update its internal guidance for conducting compliance reviews.