Why Is Only Less Than a Third of the Amounts in Antidumping/Countervailing Duty Bills Issued by Customs Collected?

News & Insights
Aug 22, 2016

If you are a U.S. manufacturer with an interest in the country’s trade remedy laws, there is a single figure – Figure 3 – in the U.S. Government Accountability Office’s (GAO) recently released report regarding antidumping and countervailing duty collection (gao.gov/products/GAO-16-542) that sticks out. With access to non-public data maintained by U.S. Customs and Border Protection (CBP), the GAO calculated collection rates for bills issued for antidumping and countervailing duties on goods since fiscal year 2001. CBP generally issues bills when the final antidumping/countervailing duty rates determined by the U.S. Department of Commerce (Commerce) through an administrative review proceeding are higher than the estimated antidumping/countervailing duty rate applied on the imported goods upon entry into the United States.

In these circumstances, the GAO found that CBP was able to collect less than one out of every three dollars billed, as illustrated in Figure 3, reproduced below:
In order to establish a denominator for its calculation, the GAO’s methodology focused on import entries where the final liquidation rate was higher than the initial estimated duty rate applicable on the date of entry.

Accordingly, the agency’s review encompassed administrative review proceedings where foreign exporters were found to have increased their unfair trade during the period reviewed. The retrospective system of trade remedies administered under U.S. law means that the government responds to increased unfair trade both by (a) increasing the estimated (cash deposit) antidumping/countervailing duty rate imposed on future entries from the exporter and; (b) assessing additional duties on importers with regard to past entries from that exporter.

The GAO’s findings indicate that, in reality, the significance of higher assessment rates is substantially undermined by CBP’s inability to actually collect the additional duties assessed. In light of the legal costs incurred by a domestic industry in order to participate in an administrative review conducted by Commerce, the GAO’s findings are disconcerting. When a foreign exporter obtains lower assessment rates through an administrative review, there is little question that refunds will be made out of the U.S. Treasury to importers. But when a domestic industry demonstrates that a foreign exporter has increased its unfair trade practices, whether additional funds are deposited in the U.S. Treasury is contingent upon those importers paying amounts due. The GAO’s analysis demonstrates that the vast majority of these additional duties are never paid.

Fortunately, the thirty-one percent (31%) collection rate is not the whole story. As Figure 3 also shows ninety percent (90%) of the bills for antidumping/countervailing duties issued by CBP are paid. This implies that non-payment is limited to a small number (10%) of the total bills issued by CBP, but they are for unusually high amounts.

The GAO’s analysis demonstrates that in all but a small minority of cases, the retrospective system works as it is intended. But how can a small minority of incidents result in virtually seventy percent (70%) of antidumping/countervailing duties not being collected? The GAO found that where assessment rates are increased and the subsequent bills issued are paid, the average rate of increase is forty-eight percent (48%) and the median rate of increase is thirty-six percent (36%). But for unpaid bills, the average rate of increase is one hundred and ninety-eight percent (198%) and the median rate of increase is eighty-one percent (81%). Figure 8 from the GAO’s report, reproduced below, demonstrates how substantial increases in antidumping/countervailing duty assessment rates increases the risk of non-payment of bills:


As the figure shows, there is a substantially greater risk of non-payment where the assessment rate is much, much higher than the original estimated duty rate applicable at the time of entry. Where the final assessment rate was less than double the original estimated duty rate, there was only a minimal risk of non-collection. But if the assessment rate increased between one hundred and two hundred percent (100%-200%), then thirty-nine percent (39%) of the corresponding bills went unpaid. If the assessment rate increased between two hundred and five hundred percent (200%-500%), then seventy-nine percent (79%) of the corresponding bills went unpaid.

At first blush, the fact that only thirty-one percent (31%) of the amount of antidumping/countervailing duties assessed in bills issued by CBP were collected would seem to be a damning indictment of the U.S. retrospective system for trade remedies. But the fact that ninety percent (90%) of the bills issued by CBP were collected without incident indicates that the retrospective system is working just fine.

The GAO’s analysis points to the pressing need to address the small minority of cases where the system is not working. For U.S. companies that value the trade remedy laws and their counsel, the GAO’s findings point to a need for more nuanced conversations about the purpose and value of administrative reviews. Aggressively pressing Commerce to increase assessment rates to significantly higher multiples than the cash deposit rate in effect at entry, particularly through the application of adverse facts available in administrative reviews, requires the domestic parties to consider whether the elevated assessment rates will ever result in actual collections. Stated differently, tripling an antidumping duty rate in an administrative review is not, on its own, a meaningful objective. Instead, it is incumbent upon domestic industries to recognize the practical limitations in enforcing such duty increases and taking steps in advance to address those limitations.