GAO questions application of CBP’s bond test on shrimp importers

GAO questions application of CBP’s bond test on shrimp importers    A congressional watchdog agency questioned U.S. Customs and Border Protection’s application of a recent bond test to help improve its collection of antidumping duties.
   CBP revised its continuous bond policy in July 2004. The policy change significantly increases the amount of the bonds required for certain importers.
   CBP made the change after incurring increased criticism from lawmakers for its duty collection shortfall. Since 2003, CBP has been unable to collect at least $480 million in antidumping and countervailing duties.
   The agency decided to test its new continuous bond policy on the country’s shrimp importers. CBP noted that it has traditionally had a difficult time collecting the full amount of duties owed by this industry.
   In conducting its investigation, the Government Accountability Office interviewed about 15 shrimp importers. These importers complained that they paid higher bond premiums and often have to post the 100 percent collateral required by surety providers before the sureties will write the larger bond amounts.
   “Importers with whom we spoke reported a range of effects arising from these higher costs on import flows, their sourcing patterns and their business practices,” the GAO said in its report to the House Ways and Means Committee, which it made public on Wednesday. “Many importers emphasized that the collateral requirement is particularly onerous because it restricts the funds available to operate the business, and that this constraint results in lost or forgone business opportunities.”
   The GAO also noted that the market leaders appear to be gaining a larger portion of the overall import business because they could more easily meet the new continuous bond requirements.
   “Moreover, some importers now require their foreign suppliers to ship on a delivered, duty-paid basis,” the GAO added. “This requirement makes the foreign-based supplier the U.S. importer of record and shifts the burden of higher bonds to them. CBP acknowledges that such importers without assets accessible to CBP represent a potential collection risk.”
   Some shrimp importers criticized the way CBP conducted its outreach about the bond changes, calling it “insufficient.”
   Shrimp importers complained that CBP failed to explain the criteria it considers when adjusting bond amounts. “Our review of CBP records confirmed this perception and showed that CBP lacks clear and transparent guidance for making bond adjustments, which led to inconsistent implementation,” the GAO said in its report.
   Currently the revised continuous bond policy only applies to shrimp imports from six countries that are subject to antidumping orders: Brazil, China, Ecuador, India, Thailand, and Vietnam.
   CBP stands by its new bond policy, citing in December 2005 that the change would ensure revenue collection of up to 85 percent in final antidumping duty rates, compared to the traditional bond formula, which would only cover a 28 percent increase.
   The GAO report recommends that CBP conduct a formal review of the lessons learned from implementing the new bond policy on shrimp importers, develop “clear and consistent” implementation guidelines, and do a better job at informing covered importers about the criteria it consider when reducing importers’ bond requirements.